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  •  nicely told story (10+ / 0-)

    and a particularly nice tie to a current issue. I've always thought that the tension between neo-cons and religious conservatives (especially Protestants) was significant, and this sketches out why - the neo-cons have a more or less gradualist approach, the religious conservatives absolutely depend on catastrophism (that's what salvation is, after all, which is the conservative Protestant answer to all human problems). The neo-cons are gradualist when they should acknowledge that the past doesn't always predict the future, and the conservative Protestants are catastrophists when they should acknowledge that God's work in the world is about "loving your neighbour as yourself", which absolutely has to involve the hard work of changing the structures of the world that promote disadvantage and inequity, and necessitate poverty. That's not a middle road, exactly, it's the recognition that there is no account that can "totalize", that has everything wrapped up in a nice neat bundle.

    If you meet the Buddha on the road, kill him.

    by mitumba on Sun Aug 02, 2009 at 08:11:51 AM PDT

    •  Gradualism explains the theology of the market (5+ / 0-)

      Well, sort of.
      The near-religious belief in the market and the demonizing effect, may I say catastrophic?, of government and the law is an overlay that brings comfort to people afraid of change.

      Teachers weave straw into gold and squeeze coal into diamonds.

      by algebrateacher on Sun Aug 02, 2009 at 08:37:45 AM PDT

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      •  Even folks who should know better... (16+ / 0-)

        get locked into that "groove" of seeing the world as being far more predictable than it really is. That's true in both academia and on Wall Street.

        There was a set of formulas (created by David Li) that supposedly allowed for valuing insurance instruments, like credit default swaps, without even considering past history. Instead the formulas assumed the market would self-regulate and impose value through some kind of mass-knowledge.

        It was a system that was dandy -- as long as the road was smooth. But fragile as spun sugar at the first sign of disaster.

        •  Even Einstein was uncomfortable with "random."nt (0+ / 0-)

          Teachers weave straw into gold and squeeze coal into diamonds.

          by algebrateacher on Sun Aug 02, 2009 at 09:20:11 AM PDT

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        •  There's a lot of comfort (6+ / 0-)

          in 19th century stories that wrap everything up neatly. The left had one - Marx's dialectical materialism. Hardly anyone actually believes that one anymore. But the right's version - classical economics, which supposes that the marketplace produces equilibrium - continues, despite the fact that economists, and especially historians of economic thought, hardly ever believe such a simple story. Since Frank Knight in the 20's and after, uncertainty has been an important topic for economists. But those who think that Ayn Rand is the most profound economic theory are the ones who really yearn for that 19th century certainty of a single, totalizing explanation for everything. Rand, remember, was in Soviet Russia before she made it to the US, and it's always seemed to me that that the style of her account is no different from the blind belief that dialectical materialism will produce inexorable forces of change of a particular sort. So, those formulas you mention are ones that good economists (and there are plenty of them) realize are always partial and never entirely predictive. The 19th century was about controlling the world, and the various accounts just amounted to different proposals to do that. But to turn Marx on his head, the point is not to control the world, but to live in it.

          If you meet the Buddha on the road, kill him.

          by mitumba on Sun Aug 02, 2009 at 10:09:39 AM PDT

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        •  Perhaps I am missing something in your (3+ / 0-)
          Recommended by:
          mitumba, bmcphail, annieli

          excellently written piece. While it is an extremely well-written piece, I found the argument debatable in its description of economics unless I have misunderstood what you are saying.

          From its inceptions,economics has certainly tried to understand the persistent regularities of the capitalist economic system; that has certainly been its goal as capitalism on its surface appears completely anarchic as compared to previous economics systems (e.g., feudalism, ancient slaves societies). The search for persistent regularities to enable the derivation of a theory does not prevent the examination of everyday random occurrences and their impact on the economic system of various durations. However, the difficulty of saying anything substantial and predicting transformations or alterations requires something persistent to which to compare these changes.

          However, that has never stopped it from deriving crisis theories either from within the
          persistent workings of the systems such as wage-profit squeezes (Ricardo), underconsumptionist crises (Malthus and Keynesian arguments), points of over-accumulation (Marx) and other falling rate of profits arguments (for example, in Smith arising from competition amongst capitals).

          Moreover, there is a massive literature in the context of cycle theory again discussing persistent movements that lead to various kinds of cycles (inventories, trade cycles, business cycles or long wave cycles) in more modern economic discussions. How could induced technological change
          have been discussed if endogenous as well as exogenous shocks to the system were not examined? How could we understand transformations in the manner of accumulation if these transformations were not examined.  Additionally, the majority of arguments on growth theory deal with either endogenous or exogenous induced transformations to the system. There are certainly things that occur at random and there are things that are more persistent. With respect to the stock market and pensions, there have always been economists who were not happy with the transformation in pension provision to be totally dependent on the stock market.

          No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

          by NY brit expat on Sun Aug 02, 2009 at 11:05:10 AM PDT

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          •  The drum beat of the last few decades (4+ / 0-)

            especially since the time of Black-Scholes is that the disasters can be hedged against. That with proper management of your investments you could not just lessen but actually entirely remove this risk. This, in hindsight, has turned out to be a load of horse feathers. See the near disaster results of their company in the wake of the '98 Asian market meltdown as evidence. The masters of the plan couldn't ride that tsunami.

            You want to be a 'secret' Muslim? Let me teach you the secret hand sheik

            by ontheleftcoast on Sun Aug 02, 2009 at 11:24:37 AM PDT

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            •  This is less of a problem of economics and more (3+ / 0-)
              Recommended by:
              mitumba, ontheleftcoast, yaque

              of the lies perpetuated by businessmen, stock market specialists and hedge fund managers. I agree it is certainly a lot of horsefeathers amongst other things; but that is less of a problem with economics unless we only treat economics as that advocated by only those people who actually think that crises are not possible as the system is always in an equilibrium, but most economists would recognise that crises are part and parcel of the economic system; even if they only consider them just small bumps in the road. The latter (small bumps in the road that will either re-equilibrate or require some correction) is the dominant view in economics. There are also economists who view crises as part and parcel of the system requiring serious regulation (I am an economist of this bent). That is why I am uncomfortable with this characterisation.

              No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

              by NY brit expat on Sun Aug 02, 2009 at 11:47:44 AM PDT

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              •  Fair enough and a good explanation of your (1+ / 0-)
                Recommended by:
                NY brit expat

                point of view. I just wish I wasn't trying to figure out how to live my life and manage with a wife and two kids during our country's equivalent of a financial KT event.

                You want to be a 'secret' Muslim? Let me teach you the secret hand sheik

                by ontheleftcoast on Sun Aug 02, 2009 at 12:16:59 PM PDT

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                •  This is not to deny that most economists are (2+ / 0-)
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                  ontheleftcoast, yaque

                  truly awful and that their theories are not politically apologetic or ideologically biased, but they are not solely to blame for the current mess; many of them certainly share a large amount of responsibility in terms of removal of regulations and the advocacy of their removal ... they have also provided justifications for the massive inequality of wealth and income and for the policies that enabled it; but to argue that it derives from the fact that they do not consider crises or even uncertainty in their arguments and theories is just not correct. Hold them responsible for what they have done to create this situation not for the wrong things ... no need to give false blame when there are real reasons for anger! :)

                  No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

                  by NY brit expat on Sun Aug 02, 2009 at 04:18:32 PM PDT

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              •  Right (1+ / 0-)
                Recommended by:
                NY brit expat

                in my comment above I was thinking about how to deal with uncertainty, but of course theories of cycles have been around forever as well. I do wonder, though, to what extent it's not just the hedge fund managers who propagate this market fundamentalism, but also some of the Chicago school as well. Frank Knight, who I mentioned earlier, was a member of this school, but a mostly ignored member, I think. I wonder if the idea that we could manage (that is, out-think) crises came from Friedman and company. My sense (and I'm not an economist, nor a historian of economic thought, although I've hung around with both) is that once uncertainty is on the table, you can either see it as a limit to knowledge, or as something to be managed in a "scientific" manner. The first means that we have to have some humility about what we think we know, but it limits being able to call economics a social science. The second seems to give answers, but the limit is that economists can end up with egg on their faces when a market crashes. As someone, I think Paul Samuelson but I could be wrong, had on his door, "Economics is the only discipline in which a person can have a successful career without ever once being right."

                If you meet the Buddha on the road, kill him.

                by mitumba on Sun Aug 02, 2009 at 12:42:48 PM PDT

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                •  We find it also clearly advocated by Hayek (1+ / 0-)
                  Recommended by:
                  mitumba

                  who argued back in the debate with Sraffa on the attempt to link the natural and money rates of interests to real economy fluctuations and crises (Hayek, like Keynes, is following Wicksell here from Lectures on political economy, vol 2). Essentially Hayek argued that interference in the system by governments following Keynes recommendations will actually lead to a longer period of disequilibrium and crisis and that we are better off letting the system come back on its own. This is of course adopted by Friedman and popularised by the Chicago school. This leads to debates on what policies are actually acceptable (if any) and the limits to fiscal policy based on whether the multiplier actually is responsive enough so that fiscal policy would be of any use at all (see the New Classical economics, especially Barro on that last point).

                  Uncertainty and expectations and the manner in which they are treated have been the topic of many discussions in the history of economics thought and modern economic discussions from many different perspectives including literally assuming them away due to specifications on expectations. They really do upset the applecart of certain theories given the manner in which the theories are actually structured and what they argue.

                  I would argue that contrary to the opinion of most economists, economics is a social science, some of the most important influences on economic decisions, choices and variables, (e.g., customs and habits) cannot really be properly modelled and we may not actually want to do so. Some things can be addressed quantitatively, others less so or not.

                  That is a great sign and unfortunately very true. "Economics is the only discipline in which a person can have a successful career without ever once being right." It is hard to think of another discipline where someone can be demonstrably wrong and still held in such high regard. :(

                  No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

                  by NY brit expat on Sun Aug 02, 2009 at 02:48:10 PM PDT

                  [ Parent ]

          •  I think the point is... (2+ / 0-)
            Recommended by:
            happymisanthropy, NY brit expat

            crisis and disequilibrium theory may be well integrated in the academic discussion of economics but seem to be mostly ignored in the mental outline of economics as actually internalized and applied by most non-economists.

            On a "common sense" level (i.e. peoples by and large unexamined mental prejudices) people have a hard time grasping dynamic systems.

            Baz

    •  I love this writing (8+ / 0-)
      A pleasure to read. The term "deep time" is simple and perfect. Reminds me of Rushdie, who can write on any topic under the sun, and one will enjoy reading. Thank you.

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