Wednesday, May 30, 2018

When Big Sur Met Silicon Valley: Remembering The Santa Cruz Nonlinear Dynamical Systems Collective

I spent Memorial Day weekend with extended family members in Santa Cruz, near where many of them live, but with none of them right there  It was most pleasant, but explaining the nature of the place and the University of California branch there led me to think more deeply about its real meaning and foundation.  I am not aware of anybody else saying this before, but it struck me that Santa Cruz is a place where some decades ago Big Sur met Silicon Valley.

The place remains a very pleasant Northern California beach town, where tourists like to go and long have.  It was fully crowded this past weekend, difficult to get to the Wharf and Boardwalk downtown and Natural Bridges State Park.  All of this has little to do with these other matters.  But sharp local  observers note that there is an "old" and a "new" Santa Cruz.  The old is symbolized by older wooden houses, some with funky sculptures in the yard and funny, often leaning, mailboxes. This all has a touch of Big Sur somewhat further south along the coast.  One can run into Air Bnb landlords who are cameramen for the Dalai Lama and talk about how well they knew Timothy Leary and own 41 acres in Big Sur and so on.  Yes, really.

The new Santa Cruz is symbolized by newer more expensive places, some with funky mailboxes, but they are not falling over.  Many of these people often earn their substantial money over the Coast mountain range in Silicon Valley a half an hour away.  Big Sur may have been there first, but Silicon Valley is fully there now, and the place is gentrifying fast,.

As it was, from the time that Silicon Valley first got itself going in the 1960s and 1970s, there was a parallel development in Santa Cruz that both fed off of that and in its own way fed into it, if not as much as Stanford University did.  This was the founding in 1966 and subsequent early history of UC-Santa Cruz, sitting on top of a hill northwest of the center of town.  From the beginning it combined an ideal of innovative and progressive education with a highly mathematical, scientific, and technical focus with much emphasis on computers, perfect for its proximity to the developing Silicon Valley.  The former fed off the nearby Big Sur with such places as the Esalen Institute, which was always about serious intellectual and philosophical matters (and still is) as well as the more famous artistic and beat/hippie carryings on there.  On the technical side a curious aid for UCSC upfront was the propitious proximity of the Lick Observatory on Mount Hamilton, then second only to Mount Palomar in size, which helped attract top astronomers, who helped bring in the physicists and the mathematicians and computer scientists.

This curious confluence had a special period in the late 1970s and early1980s, one of those serendipitous agglomerations.  Four physics grad students showed up who would had similar interests and would come to form the Santa Cruz Nonlinear Dynamical Systems Collective, also known as the Santa Cruz Chaos Cabal.  First in the door was Robert Stetson Shaw in 1975, who would receive a MacArthur Fellowship in 1988.  He was at the Institute for Advsanced Study in Princeton for awhile. In 1984 he published the book, The Dripping Faucet as a Model  Chaotic System.  According to James Gleick in his 1988 (pb in 2008) Chaos: Making a New Science, which has one of the longest discussions of this group available, Shaw was not just the first in the door at UCSC, but was the real intellectual star of the group.  However, googling him pretty thoroughly shows him basically disappearing after about 1988, no publications, no places of work, although it appears he is still alive, with a younger brother, Chris, a prominent documentary filmmaker.  I have never met him.

The rest of them came in around two years later.  Two already knew each other from high school in New Mexico, with J. Doyne Farmer, probably the best known of them and the one who has done the most work in economics and finance, a prominent econophysicist and co-founder of the journal, Quantitative Finance.  He is also the one I know the best and has by far the longest Wikipedia entry of the four, with many projects and activities under his belt.  After UCSC he would do a post-doc at the Los Alamos nuclear lab before moving to the Santa Fe Institute, where he remains an external professor, although now mainly based  at Oxford University in the math department where he runs the Complexity Economics Center associated with the Institute for New Economic Thinking (INET). He has also been more involved in various business enterprises than the others.

His old school friend is Norman Packard, now at the Center for Complex Systems Research at the University of Illinois and also maintaining a connection with the Santa Fe Institute. Illinois has long had among the most powerful of supercomputer systems of any university in the US, and Packard has been a major developer of cellular automata and artificial life modeling as well as coining the term "edge of chaos." He also spent time at the Institute for Advanced Study in Princeton and has worked a lot with Stephen Wolfram of Mathematica. He has been involved in some of the econophysics modeling of financial markets with Farmer, as well as some of his business enterprises. While I have not met him, I know much of his work well.

The final  of the four students is James P. Crutchfield, who would go to the physics department at UC-Berkeley after finishing at UCSC.  In the late 1990s he moved to the UC-Davis physics department where he established and leads the Center for Complex Modeling, and he also maintains a relationship with the Santa Fe Institute.  I have met him.  Although officially a physicist, much of his most influential work has involved modeling complex evolutionary dynamics as well as questions of computational complexity. I have probably drawn on his work more than that of these other three in my own work, a big fan of it I am.

Before they became the Santa Cruz Dynamical Systems Collective, they were Eudomaenic Enterprises.  (There is a book about this effort, The Eudomaenic Pie.) They set out to, and succeeded, in developing a system to beat roulette wheels in Las Vegas.  This involved carrying portable computers and a mechanism to measure subtle vibrations of the tables. However, despite a couple of successful trips in which they beat the House by 20% on average, they could not make serious money due to casino security people catching on to them.  Some of this would feed into the main company that Farmer founded, with Packard in tow, the Prediction Company, that did financial market investing.  He sold it in 1999 to the Swiss bank UBS. He has formed or been involved in several other companies since.  I have long found it interesting that while people often say to economists, "If you are so smart, why aren't you rich?" this dictum is taken seriously by the more serious econophysicists, including Didier Sornette and Jean-Philippe Bouchaud, who have also done very well with their own trading companies.

They had two professors who abetted their efforts and helped them get through UCSC to their PhDs, although at the time the physics department at UCSC really did not know how to handle them or fully appreciated what they were up to. The main person who got them through their dissertations was Michael J. Burke, who had been a student of Richard Feynman at Cal Tech and had some interest in nonlinear dynamics. He died in 1996. 

However their main intellectual mentor was a math professor, Ralph Abraham, now 82 years old and emeritus at UCSC, one of the giants of the field of nonlinear dynamics, chaos theory, and complex systems, still active.  He coined the terms "chaotic hysteresis" and "chaostrophe," among numerous other ideas, with his work influencing mine more than any of these others. He was very into visualizing through computer simulations multi-dimensional strange attractors, and some of those he discovered/invented have ended up on tie-dye t-shirts.  He looks like Jerry Garcia, and more than any of these others he is the one with the most serious Big Sur and counterculture connections, with these being encouraged by his even hipper brother, Fred, who wrote Chaos Theory in Psychology and runs the Blueberry Brain Institute in Vermont.  I know and deeply respect both of these brilliant and innovative intellectuals.  In any case, it may be that with his array of interests and discoveries and influence, Ralph Abraham may be the central figure in this weird but creative confluence of Big Sur and Silicon Valley that came to fruition in the late 1970s and early 1980s in Santa Cruz.

Barkley Rosser

Tuesday, May 29, 2018

Projection and Disavowal

I don't believe in intellectual property... I don't believe in compound interest...

Nobody believes in the lump-of-labor fallacy. Mr. Nadella is engaging in a game of projection and disavowal that is as old as capitalism. He is affirming the reality of an event that only happens in the imagination -- the production of something out of nothing. To perform this usurious hat trick, one must assume something one knows is not true -- that money is fertile. The attribution of a bogus "fallacy" to others is a device for distracting attention from the deception involved in simultaneously fetishizing and disavowing the "productivity" of a mere formal claim to entitlement.

Some Say the Earth Is Flat, British Austerity Edition

The New York Times has a mostly insightful article on the effect of almost a decade of austerity on economic and social conditions in England.  It focuses on Liverpool and provides example after example of savage cuts to the programs and institutions people have depended on all their lives: the National Health Service, income support, libraries, parks and recreation, police and fire departments.  It’s an important story, well told.

Except that it flubs the single most important piece, why austerity was imposed in the first place.  Not willing to take a side, the article quotes some Labour-identified people as saying austerity was a political choice and a bad one, while Conservative politicians get to argue that it was a simple matter of arithmetic.
“It’s the ideology of two plus two equals four,” says Daniel Finkelstein, a Conservative member of the upper chamber of Parliament, the House of Lords, and a columnist for The Times of London. “It wasn’t driven by a desire to reduce spending on public services. It was driven by the fact that we had a vast deficit problem, and the debt was going to keep growing.”
These are presented as equally valid perspectives, and the matter is set aside as an unresolved dispute.

But the economics of the situation is one-sided: governments facing a slump always have the option to borrow, at least if they can borrow in their own currency and have a central bank to support their bond issuance.  Both of these boxes are checked for England, so there is no validity at all to the Conservative position: it’s a pseudo-argument, good enough only for those who lack an introductory comprehension of economics.  Granted, that’s a large mob and obviously includes quite a few journalists, but we’ll never make progress unless we hold journalists accountable for a higher standard of performance.

Of course, just because a government can borrow doesn’t mean it should.  There are judgments to be made about the benefits of public programs, how much national income can be sustained through deficit spending (fiscal multipliers), and how large government debts can be before their sustainability is threatened (fiscal space), so I’m not saying economics mandates only one set of policies.  But not every argument is sound, and the argument that denies the very possibility of debt finance in the face of a recession doesn’t make the cut.  False equivalence is just bad journalism.

Monday, May 28, 2018

AIDS and the World of Work: A Global Report

What do I have to show for my sabbatical?  Among other things, this report on the economic and social impact of AIDS I prepared for the International Labor Organization.  It’s just been posted on their website, so it’s yours for the perusing.

Regulation: A Gut Check

How do we get the word out that our underlying conception of how regulations should be designed and enforced needs to change?

The New York Times has an ominous article about the overuse of antibiotics by the livestock industry and its risks for animal health and ours.  Flooding our digestive system with these drugs damages the gut microbiome we depend on for nutrition and waste processing, and it promotes the evolution of resistant strains of bacteria.  The upshot, according to this piece, is that 23,000 Americans die of antibiotic resistance each year, and it adds
A growing body of scientific research also shows that the antibiotics we take as medicine can disrupt our so-called gut microbiome, the bacteria that live happily in our stomach and intestines and that are the key to our ability to properly digest food and process fats. This disruption has been linked to the rise of noncommunicable diseases such as obesity, juvenile diabetes, asthma and allergies. Some researchers also believe that alterations in the gut microbiome have led to an increase in the incidence of autism, Alzheimer’s and Parkinson’s disease.
Ranchers lace their feed with antibiotics to speed up animal growth because it’s profitable.  The risks are difficult for the public to appreciate, and the externality of reducing the effectiveness of legitimate antibiotic treatment is unpriced.  This is a serious problem.

Regulation came to the rescue, sort of, in 2017 with the issuance of a rule by the Food and Drug Administration that requires livestock owners to get veterinary approval for administering antibiotics, with the criterion that the purpose has to be prevention of disease and not growth acceleration.  That sounds like it should have been a solution, right?  You don’t want to ban antibiotics altogether because sometimes there’s a valid reason for using them, so you require professionals to certify that only “good” uses are taking place.

The problem, as the article points out, is that it isn’t clear how much progress, if any, has been made in reducing the routine use of antibiotics in livestock feed.  Ranchers are under pressure to continue pumping up growth, and veterinarians are under pressure to give the ranchers what they demand.  An industry—any industry, including livestock—is an ecosystem, not a machine, with lots of unwritten rules and relationships, incentives, and local exigencies.  You can specify how it’s supposed to work, but it may not work that way.

Fortunately, we have a paradigm for this: adaptive management, which in this case means adaptive regulation.  Every regulation issued by an agency should have three components.  First, it should have a set of rules for people to follow, as all of them do.  But second, it should set up a system of data collection to assess how well the rules are working, and in what way.  And third, it should specify a regular cycle of review and revision to put accumulated knowledge into practice.

The FDA antibiotic regs did #1 but not #2 or #3.  It was a one-off, over-and-out performance, as most of our regulation tends to be.  Regulators did not set up a surveillance or sampling system to see how and where antibiotic use was changing, much less build in an ongoing process of evaluating and improving the regulation itself.  The upshot is that years have to go by, and the political forces for reform have to be assembled all over again to replace a defective rule by a better one.  The NYT article is part of that process, which is good, but it’s a lousy process.

So: how do we get the word out that our underlying conception of how regulations should be designed and enforced needs to change?

(Source for image:

Thursday, May 24, 2018

Iran Responds to Plan B

Juan Cole reports that Iran's supreme leader, Ayatollah Khameini has responded to Trump's withdrawal from the JCPOA and Pompeo's Plan B 12 demands with 6 demands for Europe: 1) condemn the US withdrawal, 2) stop pressing Iran on missile development, 3) criticize any further US boycotts, 4) undo damage to Iran economy of boycotts especially to buy any oil not able to be exported because of them, 5) support financing of Iran economy, and 6) respond rapidly to these demands.  According to Cole they are not optimistic the European nations will be able to withstand the US sanctions, with the impending withdrawal of France's Total a harbinger.  Macron may be key.

If demands not met, Iran will return to enriching uranium to 19.75%, enough for medical use and to fuel a nuclear submarine (Iran has none), but not to make a weapon.  Oh such fun.

Barkley Rosser

Tuesday, May 22, 2018

Gorz: "The Right to an Income and the Right to Work," part two

From "Orientations and Proposals -- The Reduction of Working Time: Issues and Policies" of Andre Gorz's Critique of Economic Reason (1989) translated by Gillian Handyside and Chris Turner. I am posting the section on "The Right to an Income and the Right to Work" in two parts (go to part one). This is part two:

The right to work, the duty to work and one's rights as a citizen are inextricably linked. 

In a Left conception, the point is therefore not to guarantee an income independent of any work; what must be guaranteed is both the income and the quantity of social labour corresponding to it. In other words, the point is to guarantee an income which does not diminish as socially necessary labour time is reduced. Income should not become independent of work itself, but of working time.
In this way, however intermittent work may become and however short the time spent on it, the income guaranteed to each person throughout their lives in exchange for a corresponding quantum of work will always be an earned income to which she or he has acquired a right by her or his labour.
I shall attempt to give a more precise account of this proposition in order to distinguish it from the forms of guaranteed minimum and universal grants.

(a) Guaranteed Income. Rightist Version 

The guaranteed minimum is an income granted by the state, financed by direct taxation. It starts out from the idea that there are people who work and earn a good living and others who do not work because there is no room for them on the job market or because they are (considered) incapable of working. Between these two groups, no lived relation of solidarity emerges. This absence of solidarity (this society deficit) is corrected by a fiscal transfer. The state takes from the one group and gives to the other.

The legitimacy of this transfer will always be more or less openly contested, since through it those who do not work appear to be making the others work in their stead. The state will therefore always be suspected of promoting parasitic behaviour and idleness. It will always tend to disarm that suspicion by spicing the right to a social income with more or less humiliating and harassing checks and controls. The recipients of these benefits will remain at the mercy of a taxpayers' revolt or a political change. And this will be the case even if the income guarantee takes the form of the universal, unconditional payment of a basic allowance, as the Charles Fourier collective and the German eco-libertarians have suggested. This basic income runs the risk, moreover, of serving as a pretext for the unchecked growth of low-grade and badly paid casual jobs, regarded by employers as a top-up income. It also runs the risk of serving as a justification for increased discrimination against women. There will be a tendency to confuse the guaranteed minimum with a 'wage for housework' or a maternal wage, justifying the confinement of women to the domestic sphere and (to borrow a formula used by Jacques Chirac in 1987) the official recognition of the 'profession of housewife and mother'.

The guaranteed minimum or universal grant thus form part of a palliative policy which promises to protect individuals from the decomposition of wage-based society without developing a social dynamic that would open up emancipatory perspectives for them for the future.

(b) Guaranteed income. Left version 

From a Left perspective, the guarantee of an adequate income to those whom society marginalizes must neither be the final goal nor the starting point of the political project. The starting point must be the diminution of the quantity of economically necessary labour; the objective must be to eliminate not only poverty and involuntary unemployment, but also the lack of time, harassing working conditions and the obligation to work full time throughout one's entire working life. The point is not to ensure that there are welfare benefits for those who are excluded from the production process, though these may have to be provided as a temporary measure. The point is to do away with the conditions which have led to the exclusion of those people.

This objective demands, as we have seen, a policy of redistribution of the economically necessary quantity of work. This will gradually, by stages, reduce the full-time norm from the current 1,600 hours per year to an average of 1,400, 1,200 and, finally, 1,000 in the space of some 15 to 20 years. These annual 1,000 hours will be considered the normal extent of full-time working and will entitle you to a normal wage which corresponds to your level of skills or qualifications, just as the current 1,600-hour year is considered the full-time norm and gives you the right to draw a full wage (which is four or five times greater in purchasing power than that received by a worker putting in some 3,200 hours per year at the beginning of the century).

I have demonstrated above that, as the length of annual working time decreases, work tends to become more and more intermittent. A thousand hours in a year may be done as two days' work a week, ten days a month, two fortnights every three months, one week in two, one month in two or sixth months a year, and so on, entitling you to a full wage (in the form of two cheques) throughout the year, just as you do today for 1,600 hours spread over two hundred days a year.

The idea of determining the number of working hours that entitles a person to receive a full income not over a year but over a five or ten year period follows logically from this new organization of time. This idea is not as 'utopian' (in the pejorative sense) as is commonly thought in France. The Swedish economist, Gosta Rehn, was the first to propose it on the occasion of the 1960 reform of the Swedish old-age-pension system: he proposed that everyone should be free to take an extended period of leave at any age which would be counted as an instalment of their retirement, the beginning of which would be correspondingly delayed. This "drawing right," he explained to me, "means the right to exchange one form of life for another during selected periods ... For me this means freeing man [woman] from the obligation to be 'economically productive' all the time."

It is precisely such a liberation which the determination of working hours on a yearly or five-yearly or career scale at last allows, when the norm for full-time working has greatly diminished. Just as 1,000 hours a year will be a normal full-time quota and will entitle you to a full income throughout the year, 3,000 hours over three years or 5,000 hours over five years will be a normal full-time quota entitling you to a full income for three or five years, even if the work concerned has been performed in a discontinuous fashion with breaks of six months of even two years. Your income during these breaks will be your normal income, sometimes paid in advance, sometimes in arrears, the income to which normal work entitles you, in no way different in principle from the income you are entitled to today during paid holidays for example, though the mode of financing it will be different. This possibility of periodically interrupting your working life for six months or two years at any age will enable anyone to study or resume their studies, to learn a new occupation, to set up a band, a theatre group, a neighbourhood cooperative, an enterprise or a work of art, to build a house, to make inventions, to raise your children, to campaign politically, to go to a Third World country as a voluntary worker, to look after a dying relative or friend, and so on. And the same reasoning which applies over the three-year or five-year period holds good over the period of one's entire life with its twenty or thirty years of work (20,000 to 30,000 hours): there is no reason not to envisage these being spread out over forty or fifty years of one's life or concentrated into ten or fifteen years. There is also no reason not to let people plan their lives or a second (or third) start in life.

One could elaborate endlessly upon this type of system, refine it and make provision for bonuses or penalties and for fiscal incentives or disincentives to work either uninterruptedly or intermittently. One could stipulate whether there would or would not be a ceiling to the amount of the second cheque, whether it would or would not be reduced if your break from work lasted beyond a certain time, and so forth. And one might also raise a whole host of objections: some may fear that this will require excessively cumbersome bureaucracy (quite wrongly, since the management of a work-time account is no different from the management of a pension fund, family allowances or a current bank account); or others might be concerned about 'those who just don't want to work at all' fearing that a guaranteed income linked to the right (and obligation) to work, however intermittently, will bring about 'compulsory labour', as if the right to be paid for doing nothing were a well-established constitutional right which I had somehow had the bad taste to violate. This last objection ('what will you do about those who don't want to work at all') could be raised in respect of any type of obligation (paying your restaurant bill, stopping at a red light, taking a shower before entering a swimming-pool). It is a particularly specious objection in this case since the compulsion in question is merely alleviated; it is not something new that would require new forms of surveillance or repression. If someone got particularly into arrears with his working hours, he would receive a first and possibly a second warning letter informing him that his right to receive his second cheque would expire on such and such a date. The letter would be sent by the computer managing the social account of the person concerned, which regularly sends him a statement just as one receives a monthly or bi-monthly statement for a bank account. Everyone knows the rules: you can't have an unlimited overdraft at your bank, nor could you at the social fund paying the second cheque. The openness and fairness of this rule mean that it cannot be considered oppressive and authoritarian. It is the rule for everybody. It seems to me greatly preferable to the blind constraints of anarcho-liberal non-society and to the social-statism which grants a 'civic income' to everyone and then leaves them to 'slug it out'.

The essential aspect of an obligation to work in exchange for a guaranteed full income is that this obligation provides the basis for a corresponding right: by obliging individuals to produce by working the income which is guaranteed to them, society obliges itself to guarantee them the opportunity to work and gives them the right to demand this. The obligation it imposes on them is the basis for the right they have over it, the right to be full citizens, individuals like any other, assuming their -- increasingly light -- share of the burden of necessities and free, by that very token, to be unique persons who, during the rest of their time, may develop their multiple capacities, if such is their desire. I do not claim here to have responded to all the questions and objections that may be raised. I do not know if there is a need to set an age limit for entry into active life; or whether the person who at 35 has already done all the work that is due must be discouraged from continuing at the same rate nor whether one should continue to advocate, as Gunnar Adler Karlsson does, a division into two economic sectors, a socialized sector ensuring that all necessities are provided in the most economical conditions for workers and users, and a free sector providing the optional goods and services and so on, but I know that the vision of a society where each person may earn their living by working, but by working less and less and increasingly intermittently, in which each person is entitled to the full citizenship which work confers and to a 'second life', whether private, micro-social or public, enables workers and the unemployed, the new social movements and the labour movement to join together in a common struggle.

Unlike the 'universal grant' or social assistance to non-workers, which depend entirely on central government, a project for a society in which everyone may work, but work less and less while having a better life, may be carried through by a strategy of collective action and popular initiatives. Unlike the formulas of the 'guaranteed minimum' or 'universal grant', this project does not break with the traditional logic of trade-union struggle, since full payment during occasional and annual holidays and during maternity or paternity leave and training periods or sabbaticals, and so on is prefigured in a number of collective agreements. And lastly, I know that a policy of a staged reduction in working hours, accompanied by a guaranteed income, cannot fail to enliven thinking, debate, experimentation, initiative and the self-organization of the workers on all the different levels of the economy and therefore to be more generative of society and democracy than any social-statist formula. This is the essential point: that control over the economy should be exercised by a revitalized society.
Here then is the reasoning behind my proposals. They are not the only possible proposals. You could make other ones based on other reasoning, but you could not avoid, in the name of realism, all debate about the future society which will no longer be a work-based society. Evading the issue and. the need for radical innovations and change implies that you simply accept the fact that society, as it decomposes, will go on engendering increasing poverty, frustration, irrationality and violence. 'If you don't want Gorz's model or mine', said Gunnar Adler Karlsson at a recent trade-union seminar, 'then build your own models. But please suggest something new. If you gave me one hundredth of the staff and the economists who are working on conventional employment theories to work out my theories and Gorz's, we would find solutions to a whole host of problems.'

Gorz: "The Right to an Income and the Right to Work," part one

From "Orientations and Proposals -- The Reduction of Working Time: Issues and Policies" of Andre Gorz's Critique of Economic Reason (1989) translated by Gillian Handyside and Chris Turner. I am posting the section on "The Right to an Income and the Right to Work" in two parts. This is part one:

The Right to an Income and The Right to Work 

When the production process demands less work and distributes less and less wages, it gradually becomes obvious that the right to an income can no longer be reserved for those who have a job; nor, most importantly, can the level of incomes be made to depend on the quantity of work furnished by each person. Hence the idea of guaranteeing an income to every citizen which is not linked to work, or the quantity of work done.

This idea haunts all the industrialized capitalist world of today. It has as many supporters on the Right as on the Left. To look only at recent history, it was (re)launched in the USA at the end of the 1950s by left Democrats and libertarians on the one hand and by neo-liberals (principally Milton Friedman) on the other. Since the end of the 1960s, several local experiments with a local basic income guarantee have been conducted in the USA. Richard Nixon tabled a bill to introduce a measure of this kind in 1972 and it was narrowly defeated. In the same year, George McGovern, the Democratic presidential candidate, included the guaranteed income in his programme. The object was to find a cure for poverty, which showed up more in the USA than elsewhere on account of the absence of a nationwide statutory social insurance system. The guaranteed income was meant as a substitute for such a scheme. European neo-liberals now dream of substituting such a basic income guarantee for the existing welfare-state institutions.

In Europe, discussion of an income dissociated from work revived in the early eighties. The Netherlands, Denmark and Great Britain had already implemented the idea. It was in the Federal Republic of Germany that the most sophisticated debate developed, after 1982, at the instigation of the Greens, who were soon joined in the debate by conservatives and social democrats. Everyone was agreed on the principle, formulated in these terms by Claus Offe: 'We must break with a development which has led the majority of the population to depend for their subsistence on the labour market.' The labour market, quite obviously, could no longer guarantee to everyone the possibility of earning their living. In other words, the right to an income could no longer be equated with the right to a wage. It was to be decided, however, whether the right to an income was also to be dissociated from the right to work (in the economic sense).

It was on this latter question that the Right/Left dichotomy gradually reappeared, at least in Germany. In France, where the guaranteed basic income was still being rejected, even in 1983, as utopian (in the pejorative sense of the term), the greater part of the Left, Right and centre suddenly found themselves in agreement on the necessity for it (if not on the form it should take): Aide a Toute Detresse, the abbe Pierre, the 'Restaurants du Creur' and the increasing spread of begging and poverty had made their mark. There were men and women who had never worked, and others at 45 who would never work again; there were the handicapped, the sick, the unstable, single-parent families of varying sizes, and so on. They could not simply all be allowed to sink; something would therefore 'have to be done' and, since it was an emergency, one would have to attack the effects without trying to locate the causes.

The emergency thus served as an alibi for avoiding any debate on the societal implications' that are involved here: will the guaranteed minimum be a temporary palliative whilst we wait to see the policies of redistributing work come to fruition? Is it to begin the transition towards a society where work (in the economic sense) will become intermittent for all and where the second cheque will ensure a normal standard of living during the periods when one is not working? Or will it be the 'opium of the people which allows a third of the population to be reduced to inactivity and silence so that the other two thirds can between them enjoy society's wealth in peace'? Will it serve to render an extension of unemployment and marginality socially tolerable, these things being considered inevitable consequences (if not indeed conditions) of economic rationalization?

The question is as old as the industrial revolution itself or, in other words, as the disintegration of society by capitalism. For the first forms of guaranteed minima reach back as far as the beginnings of industrialization: to the Speenhamland decision in 1795 followed by the Poor Laws which took a great variety of forms over the years and the traces of which are still discernible in British social legislation today. These Poor Laws, introduced from the end of the eighteenth century onwards, were supposed to ensure each inhabitant of the rural parish received a minimum subsistence income indexed to the price of bread. Just like certain forms of social minimum envisaged by today's neo-liberals, the Speenhamland decision was accompanied by the suppression of the forms of social protection which the landless workers in the rural areas had enjoyed up to that point. They had in the past always had the right to grow a little grain and some vegetables on the common land and to graze a few sheep here. This right was taken away from them when common property was abolished and lands were enclosed and allotted to landowners. This measure had a dual objective: to develop commercial farming at the expense of the growing of foodstuffs for one's own consumption and to force the landless countryfolk to sell their labour to the landowners.

These latter had no need, however, to employ a permanent additional labour force. The Poor Laws would relieve them of the need to do this and, by ensuring the survival of the unemployed, spare them any bad conscience. There was an even worse side to it: whereas in the past the landowners had maintained a labour force that was large enough so that they would not be short of hands during ploughing or harvesting, the Poor Laws would allow them to replace their permanent workers with journeymen whom they packed off back home once the harvest was in to live on the subsistence minimum which the parish was required to pay to the poverty-stricken. We can see the parallel with the present situation. Today, too, the reduction of the proportion of permanent waged workers and the increase in the number of casual or temporary workers, consigned to unemployment for part of the year, presuppose that a subsistence minimum be paid to those men and women who cannot find work for long enough periods to qualify for unemployment benefit.

This is why the debate on the amount of the guaranteed minimum, however important it may be in the short term for the victims of 'rationalization', masks the deep significance of the very principle of this form of guarantee. It is not, in fact, paid out of solidarity, but as an act of institutional charity. And like every charitable institution, it is conservative in intention: instead of combating the segmentation and South Africanisation of society, it tends to make these things more acceptable. The guaranteed minimum functions as the wages of marginality and social exclusion. Unless it is explicitly presented as a transitional measure (and the end situation to which the transition was directed would have to be clearly specified), the guaranteed minimum is a Right-wing idea.
From this we may discern what the Left's alternative must consist of. It will not accept the growth of unemployment as something inevitable and will not accept that its goal must be to make this unemployment and the forms of marginalization it entails tolerable. It must be based on the rejection of a splitting of society into one section who are by rights permanent workers and another which is excluded. It is not therefore the guarantee of an income independent of work that will be at the centre of a Left project, but the indissoluble bond between the right to an income and the right to work. Each citizen must have the right to a normal standard of living; but every man and woman must also be granted the possibility (the right and the duty) to perform for society the labour-equivalent of what she or he consumes: the right, in short, to 'earn their living'; the right not to be dependent for their subsistence on the goodwill of the economic decision-makers. This indissoluble unity of the right to an income and the right to work is the basis of citizenship for every man and woman.

In effect, as I have shown in relation to work in the economic sense as emancipation, one belongs to society (more exactly to modern democratic and not slave-owning society) and one has rights in that society or is partially excluded from it according to whether or not one participates in the process of production organized on the scale of the whole society. The work one exchanges not with society as a whole but with the members of a particular community (one's family, habitat, village, district) remains particular work, subject to particular rules, which are themselves the result of a particular relation of forces, interests or particular bonds. Conversely, work in an economic sense, socially determined and remunerated, is governed by universal rules and relations which liberate the individual from particular bonds of dependence and define her or him as a universal individual, that is, as a citizen: her or his paid activity is socially recognized as work in general having a general social utility. I can sell this work to an indefinite number of enterprises without having to form any personal and private relationship with those who are paying me. They pay me for the general social utility of my skills and not for a personal service I am rendering. They are, in a sense, merely the intermediaries between an impersonal demand on the part of society as a whole (whether it be expressed through the market, the plan or an order from a public body) and the work by which I can contribute to satisfying that demand.

The emancipatory character of work in the economic sense derives from this: it confers upon me the impersonal reality of an abstract social individual, as capable as any other of occupying a function within the social process of production. And precisely because what is involved is a function which is impersonal in its essence, which I occupy as an interchangeable person among others, work does not, as is generally claimed, confer a 'personal identity' upon me, but the very opposite: I do not have to engage the whole of my person, the whole of my life in it; my obligations are circumscribed by the nature of my occupation, by my work contract and by social legislation. I know what l owe to society and what it owes me in return. I belong to it by virtue of social capacities which are not personal, during a limited number of hours specified by contract and, once I have satisfied my contractual obligations, I belong only to myself, to my own family, to my grassroots community.

We should never lose sight of the dialectical unity of these two factors: work in the economic sense, by its very impersonal abstractness, liberates me from particular bonds of dependence and reciprocal belonging that govern relations in the micro-social and private sphere. And this sphere can only exist as a sphere of sovereignty 'and voluntary reciprocity because it is the obverse of a clearly circumscribed sphere of clearly defined social obligations. If I am relieved of any social obligation and more precisely of the obligation to 'earn my living' by working, be it only for a few hours, I cease to exist as an 'interchangeable social individual as capable as any other': my only remaining existence is private and micro-social. And I cease to experience this private existence as my personal sovereignty because it is no longer the obverse of compelling social obligations. The customary balance of living in a macro-socially organized society is upset: I no longer negate myself as private individual by my 'work in general' nor do I negate myself as an individual in general by my private activity. My existence collapses into the private sphere where, being subject to no general social obligation, to no socially recognized necessity, I can only be or do or not do what I have decided myself, without anyone asking anything of me: 'Excluded from every group and every enterprise, a pure consumer of air, water and other people's labour, reduced to the boredom of living, an acute consciousness of my contingency', I am a 'supernumerary of the human species'.

This is the condition of those who are involuntarily unemployed; and the guarantee of a social minimum will do nothing to change that (nor indeed will giving him or her an unreal job, a job which is not needed by society, but which has deliberately been created to occupy people for whom there are no real jobs and to justify the allowance allocated to them). Whatever the size of the guaranteed minimum, it can do nothing to alter the fact that society expects nothing of me, thus denies me a reality as a social individual in general. It pays me an allowance without asking anything of me, thus without conferring any social rights upon me. By this payment, it holds me in its power: what it grants me today, it can take away bit by bit, or altogether, tomorrow, since it has no need of me, but I have need of it.

It is for all these reasons that the right to an income and the right to macro-social work must not be dissociated or -- which amounts to the same thing -- that the right to an income must be linked to the duty to work, however little, to produce that income. I do not propose this in order to save 'work-based society', the work ethic or biblical morality, but to maintain the indispensable dialectical unity between rights and duties. There can be no rights without corresponding obligations. My duty is the basis of my rights and to relieve me of all duties is to deny me the status of a person having rights. Rights and duties are always two sides of the same coin: my rights are the duties of others towards me; they imply my duty towards these others. In so far as I am one of them (one among others), I have fights over them; in so far as I am one of them, they have rights over me. It is through these rights -- and therefore through the duties they give me -- that they recognize me as one of them. In so far as I belong to society, it has the right to ask me to do my appropriate share of social labour. It is through the duties it gives me that it recognizes me as belonging to it. If it asks nothing of me, it rejects me.

The right to work, the duty to work and one's rights as a citizen are inextricably linked. 

Monday, May 21, 2018

Plan B on Iran

Earlier today ne US Secretary of State, Mike Pompeo, presented this administration's "Plan B" at the Heritage Foundation on how to deal with Iran following the US's withdrawal from the nuclear deal, the  JCPOA.  Pompeo presented 12 demands and threatened to impose "the strongest economic sanctions in history."  The Trump administration may wish to do the latter, but the  refusal of all the other parties to the JCPOA to go along with this effort will certainly guarantee that even if the sanctions are strong, they will not match what preceded the negotiation of the JCPOA.  As it is, Jeffrey Sachs (as reported by Juan Cole) has argued that if Trump tries to sanction European companies dealing with Iran through non-dollar currencies, the  EU should take the US to the WTO as well as the UN Security Council and General  Assembly. After all, this extraterritorial action would violate international trade agreements, and given that the JCPOA is an officially recognized agreement by the UN Security Council, the US is in fact in violation of international law with its withdrawal, not that those supporting this recognize this.

As it is, the 12 demands are chock full of hypocrisy and nonsense, some of it unacceptable even to a government that would be secular and pro-US.  I shall not go through all of them, but will note just three that will not be accepted by Iran, to the extent the are even possible to be carried out. One is for Iran to "cease threatening its neighbors."  Well, the problem with this is that it is largely in the minds of such neighbors as Saudi Arabia and UAE that Iran is "threatening" them.  KSA has the third highest level of military spending in the world, but somehow Iran is "threatening" it. KSA has called for the military overthrow of the Iranian government.  I am unaware of the Iranian government doing the same regarding KSA.  Of course many of the demands involve Iraq and Syria, but last time I checked the governments of those nations have invited what Iranian military units are in their nations, with them in Syria battling against rebels backed by KSA and UAE attempting to overthrow that government.  Really, this is just ridiculous, although  Bahrain might  have a complaint about Iran providing some military aid to majority Shia elements in that nation opposed to its dominant Sunni  government, but Bahrain has had a problem with this for a long time.

Another is for Iran to  stop  providing military aid to the "Huthis" in Yemen.  Yikes!  While KSA and US and UAE have loudly claimed Iran is arming the Houthis, most sources say that most of their arms are US ones.  The one thing they may have gotten from Iran are their missiles they have fired off periodically into  KSA.  Certainly KSA is unhappy about this, but none of these has caused any damage or injuries so far.  In contrast, the Saudis with support from the US (and also  UAE) have been massively bombing and embargoing Yemen for several years, with thousands killed and famine and cholera endemic in poverty-stricken Yemen.  Really, it is the Yemenis who have grounds to be making demands here, in contrast to the US and its allies.

Finally we have a demand to halt (forever) all uranium enrichment.  It is clearly the case that what uranium enrichment Iran is engaging in is for its civilian reactor program, which is allowed to Iran, not only under the JCPOA, but also the Nuclear Non-Proliferation Treaty, of which Iran is not only a signatory, but in good standing, with the  IAEA saying they are in conformance with it, as well as the JCPOA.  As it is, while pursuing nuclear weapons and various foreign activities are not popular in Iran, the civilian nuclear program is and has been highly popular in Iran. It was popular with the dissident Green movement in 2009, and no democratically elected government would shut it down.  This demand will only be accepted by a government installed after an invasion by the US and its allies, which this set of demands may be the prelude to.

Barkley Rosser

Is the Job Guarantee a Ponzi Scheme?

“The basic idea is that the government can’t run out of money. It creates money just by spending.” -- Stephanie Kelton
This is true. Government cannot run out of its own money. But what is money? It is a token or pledge that can be redeemed for something of value. If government creates much more money than there are things of value to redeem it for the prices of those things go up. Not to worry, Zach Carter assures us:
But even inflation doesn’t impose a hard limit on policy options. The Federal Reserve can raise interest rates to deal with it, Congress can raise taxes to pull money out of circulation or even impose price controls.
Hyman Minsky expanded on this explanation in his financial instability hypothesis:
The first theorem of the financial instability hypothesis is that the economy has financing regimes under which it is stable, and financing regimes in which it is unstable. The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.
In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values. 
The financial instability hypothesis is a model of a capitalist economy which does not rely upon exogenous shocks to generate business cycles of varying severity. The hypothesis holds that business cycles of history are compounded out of (i) the internal dynamics of capitalist economies, and (ii) the system of interventions and regulations that are designed to keep the economy operating within reasonable bounds.
See? If "the authorities" decide to "exorcise [the demon of] inflation" through taxation or higher interest rates, it won't be the government that goes belly up. It can't run out of money. It will just be those speculative and Ponzi units whose net worth will evaporate. No problem!

It remains a mystery to me why job guarantee proponents point to Minsky as the patron saint of the job guarantee idea. It was, after all, Leon Keyserling who drafted the Full Employment Act of 1946, The Freedom Budget (1966) and job guarantee provisions of Humphrey-Hawkins (1976). Good old "siphoning off the increment to pay for the excrement" NSC-68 Leon. 

Mr. Keyserling was a big fan of spending that "paid for itself" by augmenting growth in the gross national product. His 1966 Freedom Budget was also touted as being financed through an "economic growth dividend." The idea was that economic growth of five percent over a ten year period would generate the revenue to pay for the program.

If it wasn't the government doing it, the method of financing that Keyserling advocated would be a Ponzi scheme because it relied on revenues that would presumably arise solely from disbursements and not from the sales of value-added goods or services. Fortunately, a government cannot operate a Ponzi scheme because "it creates money just by spending."

So, technically speaking, a job guarantee is not a Ponzi scheme. It's only a wee bit Ponzyish.

Jobs, Jobs, Jobs: GUARANTEED! -- May 20 update

Class war? What class war?
Stephanie Kelton Has The Biggest Idea In Washington 
"Everybody wants a piece of Kelton these days because a simple, radical idea she has been workshopping her entire career is the next big thing in Democratic Party politics. She calls it the job guarantee... "
  • "Once an outsider, her radical economic thinking won over Wall Street. Now she's changing the Democratic Party."
  • "A onetime college dropout at California State University in Sacramento, Kelton has managed to earn the esteem of both Sanders and an oddball clique of multimillionaire Wall Street traders."
  • "If you listen to Kelton long enough, you notice that she never refers to “bankers” or “Wall Street” with the derisive tone common among her political allies. She talks instead about “the financial community.”
  • "After all, Wall Street took her under its wing before Democrats took her seriously." 
  • "Her career had changed tracks. She wasn’t just a clever economist with some quirky ideas anymore. Her credibility with Wall Street began to register as academic clout."
  • "There are thousands of left-wing economists. But it’s hard for the economically inexpert to distinguish brilliant creativity from quackery. Kelton’s social credentials with Wall Street helped her stand out."
I dunno what that's about. Something about Wall Street?

Saturday, May 19, 2018

Jobs, Jobs, Jobs -- GUARANTEED!

The current mania for "job guarantee" policies is making the Sandwichman anxious. I've been on the full employment beat for over 20 years so I think I have a pretty good grasp of the terrain. First principle is that there are no panaceas. My favorite policy option -- reduction of working time -- is not a panacea. Neither is yours.

Like my learned friend Max B. Sawicky, I am in favor of a job guarantee -- provided it meets MY criteria. The proposals currently being shopped around don't. That should not be a fatal flaw. Inadequate policy proposals can serve as the starting point for dialog that can lead to better proposals. From the left, Matt Brunig, and from the center?, Timothy Taylor have offered constructive critiques of the current proposals. I would like to offer a bit of critique from history.

Friday, May 18, 2018

The So-called Labour Fund

Note: there was no fully correct answer to the Sandwichman's quiz, 200 Years, 200 Dollars! An anonymous commenter came tantalizingly close but missed on a technicality. The Adam Smith quote was correct but the Karl Marx quote was not a passage from Capital, which is what the question asked for. Below is the passage from Capital: 


It has been shown in the course of this inquiry that capital is not a fixed magnitude, but is a part of social wealth, elastic and constantly fluctuating with the division of fresh surplus-value into revenue and additional capital. It has been seen further that, even with a given magnitude of functioning capital, the labour-power, the science, and the land (by which are to be understood, economically, all conditions of labour furnished by Nature independently of man), embodied in it, form elastic powers of capital, allowing it, within certain limits, a field of action independent of its own magnitude. In this inquiry we have neglected all effects of the process of circulation, effects which may produce very different degrees of efficiency in the same mass of capital. And as we pre-supposed the limits set by capitalist production, that is to say, pre-supposed the process of social production in a form developed by purely spontaneous growth, we neglected any more rational combination, directly and systematically practicable with the means of production, and the mass of labour-power at present disposable. Classical economy always loved to conceive social capital as a fixed magnitude of a fixed degree of efficiency. But this prejudice was first established as a dogma by the arch-Philistine, Jeremy Bentham, that insipid, pedantic, leather-tongued oracle of the ordinary bourgeois intelligence of the 19th century. Bentham is among philosophers what Martin Tupper is among poets. Both could only have been manufactured in England.  In the light of his dogma the commonest phenomena of the process of production, as, e.g., its sudden expansions and contractions, nay, even accumulation itself, become perfectly inconceivable.  The dogma was used by Bentham himself, as well as by Malthus, James Mill, MacCulloch, etc., for an apologetic purpose, and especially in order to represent one part of capital, namely, variable capital, or that part convertible into labour-power, as a fixed magnitude. The material of variable capital, i.e., the mass of the means of subsistence it represents for the labourer, or the so-called labour-fund, was fabled as a separate part of social wealth, fixed by natural laws and unchangeable. To set in motion the part of social wealth which is to function as constant capital, or, to express it in a material form, as means of production, a definite mass of living labour is required. This mass is given technologically. But neither is the number of labourers required to render fluid this mass of labour-power given (it changes with the degree of exploitation of the individual labour-power), nor is the price of this labour-power given, but only its minimum limit, which is moreover very variable. The facts that lie at the bottom of this dogma are these: on the one hand, the labourer has no right to interfere in the division of social wealth into means of enjoyment for the non-labourer and means of production. On the other hand, only in favourable and exception al cases, has he the power to enlarge the so-called labour-fund at the expense of the "revenue" of the wealthy.

What silly tautology results from the attempt to represent the capitalistic limits of the labour-fund as its natural and social limits may be seen, e.g., in Professor Fawcett. "The circulating capital of a country," he says, "is its wage-fund. Hence, if we desire to calculate the average money wages received by each labourer, we have simply to divide the amount of this capital by the number of the labouring population."  That is to say, we first add together the individual wages actually paid, and then we affirm that the sum thus obtained, forms the total value of the "labour-fund" determined and vouchsafed to us by God and Nature. Lastly, we divide the sum thus obtained by the number of labourers to find out again how much may come to each on the average. An uncommonly knowing dodge this. It did not prevent Mr. Fawcett saying in the same breath: "The aggregate wealth which is annually saved in England, is divided into two portions; one portion is employed as capital to maintain our industry, and the other portion is exported to foreign countries... Only a portion, and perhaps, not a large portion of the wealth which is annually saved in this country, is invested in our own industry."

The greater part of the yearly accruing surplus-product, embezzled, because abstracted without return of an equivalent, from the English labourer, is thus used as capital, not in England, but in foreign countries. But with the additional capital thus exported, a part of the "labour-fund" invented by God and Bentham is also exported.

Wednesday, May 16, 2018

Intercompany Guarantee Fees and Trump’s Lido City Loan

Matthew Yglesias notes:
Trump stands to gain from an Indonesian project that got a $500 million loan right before he flip-flopped on ZTE… But it also happened the same week a Chinese state-owned company came through with hundreds of millions of dollars in loans, some of which will go to facilitate the construction of Trump-branded properties in Indonesia.
Does anyone know what the interest rate will be on this loan? After all, it is highly unlikely that the lender has given Trump’s business an interest fee loan. Let’s speculate that the interest rate is 4% per annum so Trump’s business would be paying $20 million per year in interest expenses. But how would that compare to market rates? The yield on 10-year Chinese government bonds is just over 3.7% according to this source. If Trump’s business got a 4% interest rate on a ten-year loan denominated in RMB (to be fair I do not know the currency of denomination or the term either), then the lender was assuming a AAA credit rating for this business, which sounds incredible to me. Of course it is entirely possible that the lender was receiving some sort of guarantee from the Chinese government in case Trump’s business defaults. Some tax accountant defines intercompany guarantee fees as:
With guarantees between affiliated group companies, the question arises of whether a guarantee fee must be paid to the company giving the guarantee. The credit rating of the company receiving the guarantee is also important when answering this question.
What would be a reasonable credit rating on a standalone basis for Trump’s business? Let’s also speculate that this credit rate would be no better than BB, which would likely imply that a loan on a true arm’s length basis would command an interest rate closely to 7%. In that case, the value of the loan guarantee is 3% or $15 million per year in interest savings. OK – I admit this is all speculative guesses but it does pose a reasonable means for evaluating the extent of the kick back Trump’s business got from deal.

ZTE and the Iran Nuclear Deal

The whiplash that many observers have felt on learning of President Trump's about-face on China's ZTE telecom company from condemning it as violating US national security and violating sanctions rules by selling to North Korea and Iran has been pretty easily explained by our soon thereafter learning that China has provided a mere half a billion dollars to a project in Indonesia where Trump interests are deeply involved.  This is probably the most blatant violation of the Emoluments Clause of the US constitution yet, but do not hold your breath that anything formal will come of it, despite widespread outrage.  Rather his backers will accept that this is necessary for obtaining Chinese support in dealing with Kim Jong-In in the possible forthcoming summit.  This is supposed to trump all other considerations.

Of course the supposed forthcoming summit and related events, such as the  recent release of hostages held by North Korea, have been trumping Trump's withdrawal from the JCPOA nuclear deal with Iran, which has been praised by his supporters as an action that "fulfills a campaign promise" and thus just simply wonderful.  However, a little noticed aspect of this in the US is triggering considerable reverberations abroad. It is the hypocrisy that while Trump seems to be blithely forgiving ZTE for breaking already in-place sanctions against Iran, he and members of his administration such as John Bolton have been unyielding to the Europeans that all of their companies must cease any economic dealings with Iran ASAP now that Trump has scuttled US participation in the deal, even though it is widely accepted in Europe that Iran is in full compliance with the deal.  The spectacle of the freshly arrived US ambassador issuing an immediate "order" to German companies to immediately comply with US demands on this has raised especial hackles.

Pretty clearly the Europeans need to identify some budding Trump Organization project somewhere on the planet that they can dump a pile of money into so that their companies can get exemptions like ZTE has from having their markets in the US cut off if they continue to operate in Iran.

Barkley Rosser

Tuesday, May 15, 2018

The Overhyping of _The Happiness Curve: Why Life Gets Better After 50_

Jonathan Rauch of the Brookings Institution has just published The Happiness Curve: Why Life Gets Better After 50, which seems to be getting a major media push from a bunch of completely uncritical reviewers and commenters, some of whom really should know better.  It is not that this book is totally wrong or bad, but that it way overstates its case, cherry picking data and the views of people he has interviewed, with only the slightest of caveats.  Among those falling all over themselves to unequivocally praise the book are NYU Journalism Professor, Pamela Newkirk, in a review in the Outlook section of the Washington Post this past Sunday (May 13), and Tyler Cowen, who plugged it on Marginal Revolution and also provided a blurb on its back cover (the only professional economist doing so).  Here is back cover blurb, which shows the nature of this hype, as well as indirectly revealing one of the major weaknesses of this book, its personally anecdotal quality.

""Do you wish to understand the arc of your life?  And why you are likely to end up happier than you are right now?  If so, The Happiness Curve is the place to start.  And I write this as someone who can vouch that the upper part of the happiness life curve is very glorious indeed." (Tyler Cowen blurb)

OK, I am glad that Tyler is happier now than he was when he was in his forties, and I am also glad that a bunch of people Rauch interviews also report this as well, with Rauch himself making it clear that he himself experienced this.  His affective happiness, his momentary mood, was generally pretty good, but his evaluative happiness, his broader life satisfaction, was not good.  But now after turning 50, his life has turned all roses pretty much. This is all very nice, and the personal stories recounted in the book, as well as a lot of general philosophizing in its later sections ("old people are wise!"), will probably lead to high sales, especially given the hype it is getting from various people publicly, with almost nobody noting that it has some problems and exaggerates the scholarly consensus on this.

Oh, I guess I should state the main premise of the book.  It is that in general there is a U-curve of happiness related to age.  On average people's life satisfaction declines from age 20 to somewhere in middle age (depending on which country they are in), and then rises after that. Rauch very slightly notes some caveats.  This is a "tendency," not a universal law (although at times he seems to suggest that is almost a universal law).  Individuals might be happy at 45 but miserable at 60, but they are the exceptions with their weird personal circumstances (maybe lost a job, a spouse, or got cancer). 

So let us start with the biggest problem with this book: its main premise as stated is false, or at least  not at all clearly true.  The problem is that this result derives from multiple regression studies that have one of the several competing measures of happiness or life satisfaction as the dependent variable, with some long list of variables on the right hand side that are widely thought to be connected to happiness, such as income, employment, marital status, health, and others.  In such regressions for many nations, especially high income ones, the identified coefficients for age support the finding of the U-curve as described above, people tending to be less happy in middle age than when younger or older.  We then have all these personal anecdotes to support this, a bunch of people recounting how miserable they were in their forties, only to be so much happier later.

The problem is that in the book itself, the broadest measure of the relation between age and happiness at the global average level does not support this at all.  I am talking about the raw relation, not that imputed after taking account of all these other variables. So, there it is on p. 68, a figure entitled "Average life satisfaction by age (unadjusted world estimate, 2010-2012)" with Gallup World Poll and the Brookings Institution the source.  It shows a mildly oscillating line that slowly trends upwards from age 20 to a peak at about 64, after which it drops a bit to hold steady to about age 80, after which it goes back up a but with no reporting beyond age 85.  That's right, just plain old unadjusted happiness does not decline as one moves into middle age: it gradually rises according to this huge global data set.  Of course on the next page, we have the adjusted figure, which shows a smooth U-curve bottoming out around age 50.

But what then is the point or meaning of all these personal tales of woeful misery in the forties but joy and happiness afterwards?  Nothing.  They are irrelevant and go against the evidence reported in this figure on p. 68.  not a single one of these is a report of "taking into account your income, employment, marital status, health, and other variables such as your social relations, how happy were you at different ages?"  No, these are accounts of the unadjusted states of happiness of these individuals.  And indeed, without dragging through particular persons' accounts (some of whom I know personally and have even heard these accounts), I note that quite a few of them involve people having something bad going on with one or another of these other variables, in several cases marital breakups or personal unhappiness related to personal relationships, with this being overcome one way or another after the person hits 50.  But that is not what this is supposed to be about.

Indeed, the not so clearly mentioned point is that in middle age most people are doing well on these other variables.  They are near their maximum income for life.  They are employed.  They are married. And while their health may not be what it was when they were 25, it is not too bad and better than it will be ever again.  In short, on lots of things, most people are doing pretty well on most of the things that are associated with happiness and life satisfaction,so, big surprise that on average around the world we see them being at least slightly happier than they were when younger overall on average.  The people in the book recounting their woeful forties and their rapturous fifties are the exceptions, the people who had one or another of those other variables go bad on them in their forties, but then get better in their fifties.

There is also serious distortion and misreporting of the data for different countries and regions around the world.  The key figure is on p. 79, where we see purported happiness curves (adjusted, of course) for US, UK, Latin America and Caribbean, China, Germany, and Russia, all of this supposedly again from the Gallup World Poll..  Aside from identifying a low point for each, this also shows life expectancy.  A relation is claimed to be found that in the generally happier countries the low turning point is at an earlier age,  Only in Russia does the low point hit just after life expectancy in the late 60s.  Rauch quotes a wisecrack, "Don't be Russian."  Latin America, whose curve looks quite flat (as does Germany's), has a supposed low point just under 50, with a life expectancy just under 75.  So, it is admitted that the happiness curve is not quite universal, almost, but "don't be Russian."

Oh, except there have been serious competing studies that dispute some of this.  A 2014 paper in The Lancet by Andrew Steptoe and Angus Deaton, "Subjective wellbeing, health and ageing," shows strictly declining age lines not just for Russia but all of the former Soviet Union and Eastern Europe. Ah ha, we can dismiss them as just whiny old people who liked communism and got unhappy when their health care and old age pension systems collapsed!  But in fact Steptoe and Deaton (yes, Nobel Prize winner, Deaton) find a clearly declining line all the way for Latin America and the Caribbean, in contrast to what Rauch reports with no hint that his report is not universally accepted.  Maybe these nations are suffering from lack of old age health care and pension systems like Russia, but in contrast to Russia, this region tends to do better compared to what its income is than does Russia and neighbors, who tend to do worse. Also, sub-Saharan Africa simply has a flat line, no relation with age at all. I may have missed it, but Rauch simply never mentions this region of the world, which tends to have low levels of reported life satisfaction anyway.*

Having dumped pretty hard on this book let me say it makes a good read.  The anecdotes are generally interesting. Much of the philosophizing has a feel good character to it.  I do not think anybody is actually misquoted, although I know that some people he quotes about other matters disagree with his main point, and he carefully does not quote them on it.  But vague philosophizing with anecdotes does not prove much. My late ex-mother-in-law claimed she was happiest in her early thirties.  She had youthful vigor and good health (middle age officially starts at 35), but was mature enough to be taken seriously by others and to understand life and be somewhat established.  It all sounded pretty reasonable to me, and still does.

Along those lines it is curious that the first figure Rauch shows (p. 65) agrees with my late ex-mother-in-law  It is a figure from 2014 of apparently unadjusted happiness numbers by age from the UK.  This one shows not a U-curve or a gradually rising while fluctuating one, but a distinct M-curve.  Happiness rises from 20 to peak at the 30-34 age range.  It then falls to 50-54, then rises to another peak at 65-69, after which it declines.  None of this long-increasing misery in the early 30s that Rauch at times talks about, although he mostly focuses on people unhappy in their forties.  In any case, this figure fits pretty well with one in a paper I recently published based on longitudinal studies across several western European nations, "Experience life cycle satisfaction in Europe," by Robson Morgan and Kelsy J.O'Connor, Review of Behavior Economics, 2017, 4(4), 371-396.  They find the earlier peak to be more in the late 20s, and the later peak more about 70, however with lots of variation across individual nations (they do find a low point in middle age for all of them).

Anyway, maybe this book will help depressed Gen-Xers feel better.  Or maybe it will depress older people who are mysteriously unhappy.  I do not know. I know that when I turned 50 two decades ago I saw an article in a newspaper or magazine (not a scholarly one, but then Rauch claims his book is "reportorial" not "scientific") that claimed that 50 was the age of maximum happiness. I felt pretty happy at the time, so I liked it, although vaguely worried about my impending decline of happiness.  Now I can look at this book and other studies and figure out whether I am now at the peak of happiness with a downturn coming, or maybe it is up, up, and away all the way (at least to 85) as Rauch suggests.  I guess I shall find out, :-).

Addendum:  Another oddity about the personal anecdotes in this book: several of those telling them are active happiness economics researchers now in their fifties or early 60s.  When they were in their forties, such research was not getting much attention, and they were professionally frustrated.  Now it is hot stuff, as seen by the publicity about this book (and the attention they get in it personally).  Their careers have done much better after 50 than happens with most people, who are supposed to deal with the failure of their professional dreams as they see themselves reaching their highest level job and are comparing themselves with others of their age who are doing better, but, after 50 they wisely learn to accept the end of their dreams.  OTOH, this group has done much better than their dreams; they are exceptional weirdos on the upside, thus not models for the average wannabe reader.  I note this holds for Tyler Cowen as well, who "personally vouches" for how great it is to be over 50, but like these now renowned happiness researchers in the book, he has done exceptionally well with his career since 50.  His personal vouchsafing is of limited use to the more average possible reader of the book.

*Second Addendum: At one point Rauch discusses a carefully done and econometrically sophisticated longitudinal study of South Africa by Powdthavee.  This one does find a low point in middle age for the adjusted estimate.  Of course, South Africa is not a typical sub-Saharan African nation.

Barkley Rosser

Monday, May 14, 2018

Again, Top 100 Economics Blogs


I have received a message from Prateek Agarwal at that Econospeak has again been selected as a top 100 economics blog.  We reportedly cover news items well and are not for people who do not know some economics.  We also are still in the financial sub-group.

Barkley Rosser

Friday, May 11, 2018

Thoughts I am Not Allowed to Think in the Totalitarian World of PC

I read with interest the article in the New York Times on the Intellectual Dark Web (IDW), a cyber-salon of commentators and intellectuals who are described as fearless opponents of the politically correct thought police.  Two of their number are ex-colleagues of mine at Evergreen, Bret Weinstein and Heather Heying; I even co-taught a course a number of years ago with Heather.

Let’s just say the article is a bit thin in the area of critical judgment and leave it at that.  I did resonate, however, with the plight of Sam Harris, one of the luminaries it profiles.  Harris apparently got into trouble for the unspeakable claim that some cultures are inferior to others, which of course violates relativist orthodoxy.  But what if he’s right?  For instance, imagine a culture that routinely sends its missiles and planes to bomb innocent people in other countries to impose its political order, sets up secret torture chambers around the world, and persists in sabotaging any attempt to respond to urgent, civilization-impairing environmental threats.  Why not just say—oh wait, wrong culture.

Everything You Would Learn about Marxism If You Were Subjected to Two of My Lectures

On this 200th anniversary of Karl Marx’s entry into the world there have been a lot of summings up.  Inspired by Brad DeLong, who posted slides from his lectures on Marx and Marxism, here are mine in the form of two Google Doc files, Historical Materialism and Marxist Economics.  They were the basis of a pair of lectures I gave last winter.  If it seems like there are way too many of them it’s because a lecture period at Evergreen can run as long as three hours.*

*Yes, I know students aren’t supposed to retain much after about 20 minutes, but I break up the lectures into chunks, classes are small, and we have lots of discussion.  That could just be my ideology speaking, of course.

Thursday, May 10, 2018

Economics: The View from 35,000 Feet

Air travel offers an opportunity to catch up on one’s reading.  In my case, this means Marion Fourcade’s “Economics: A View from Below”, which had been sitting in my pile for at least two long weeks.  For those wondering about her title, she has been toying for several years with the actual/mock inferiority felt by other disciplines, such as her own sociology, in the face of the pretensions, authority and worldly success of economics.

This essay is another dancing, enigmatic exploration of this apparently stable dominance, one that survives public embarrassment, like the backwash against its claimed expertise after 2008, and internal fissures.  She plays with Hayek, who denounced economists for their empty pretense of knowledge, and sports with contemporary eminences such as Ricardo Caballero, who have similar objections to the intellectual simulacrum that passes for economic insight.

To cut to the chase and save you from a more detailed reading if you’re not so inclined, Fourcade goes part of the way with Hayek, but recognizes that the critique of pretense is a gun that points in all directions, since there is no position of “postense” from which to aim it.  She, like many others, sees the shared worldview and methodology of economics as the source of its strength, the reason why the discipline can prosper and expand its influence even as it hosts bitter debates among its practitioners; in fact, its capacity to cohere despite apparent fracturing is exactly its greatest asset.  She also sees the discipline’s internal discord reflecting a dialectic between altering the world as a significant participant in it and interpreting it as a reflective bystander—not so different from a priesthood if one recognizes both aspects of what it means to be priestly.  Economics does not converge on consensus because of the dynamic relationship between particular understandings of economic and political life and the ensuing events created by those understandings that themselves become objects of study.

Along the way, Fourcade demonstrates a tendency to be conventional.  Foucault is invoked in a big way, for instance, even though it is now becoming apparent he profoundly misread classical and more modern political economy—a trajectory that ended up as utterly deluded cheerleading for neoliberalism.  We also read that Keynesianism is a response to economic disorder stemming from fixed prices (getting JMK’s critique of his orthodox opponents exactly backwards) and German ordoliberal macroeconomics reflects the country’s experience with hyperinflation (rather than the hyper-austerity that ushered in Hitler).  I get the impression that Fourcade’s method is to critique the conventional wisdom of particular academic specializations by juxtaposing them with the conventional wisdom of others.

On the main point, I think Fourcade gets half the story right: economics has established itself at the pinnacle of academic prestige because its subject matter and data pertain to the core institutions and practices of the modern, capitalist world.  Experts on banks are going to have a lot more sway in this society than experts on pre-schools.  That’s not a deep observation, and Fourcade is hardly the first to have voiced it, but it deserves repeating.

The half she misses is the extraordinary practical force that derives from conjoining positive and normative analysis, something economists do better than anyone else.  Like many others—maybe Fourcade and maybe you—I was misdirected for years by the standard economic protestation that positive analysis is one thing and normative something altogether different.  Analyzing how markets work is an entirely different project from arguing how they should work, or so it was said.

I now see this disclaimer hides exactly its opposite in plain sight.  Economists use modeling and empirical techniques to explain and forecast, spottily in some topic areas and impressively well in others.  The point is, positive claims can be given quite a load of legitimacy by the sophistication of these methods, creating the kind of expectations that fostered disillusionment in the wake of the 2008 financial crisis.  You economists are so clever and have so many sources of data to work with; how come you blew it this time?  The rest of us thought we had reason to expect much better.

But the remarkable thing about the normative side of economics, the welfare interpretation of markets, is that its sole role is to enable positive analysis to yield normative conclusions.  Once you accept the welfarist framework, there is no longer any wall between the two.  Economists can conduct detailed, empirically dense studies of particular markets or policies, and their results can be applied directly to determine the “optimal” actions that ought to be taken by decision-makers.

I realized this in a single epiphany.  I was debating a particular aspect of welfarism with another economist, someone I agreed with on many issues, and after I had (I thought) demolished any defense of providing a welfare interpretation for a set of results we both accepted, he replied, “But how then do we tell the agencies what to do?”  Implied is that it is our job to do this, and there will be a hole in the universe if we don’t.  At that moment it became clear that protestations that positive analysis is over here and normative over there are just window dressing: economists take their core job to be the application of the techniques of positive investigation, predictive modeling and empirical estimation of model parameters, to adjudicating questions of policy.

If I can play that game too, I’d say that welfare economics, which claims to derive judgments of what decisions to take directly from market analysis without any substantive input from other realms of knowledge—like philosophy, psychology, sociology, public health or ecology—is the intellectual basis for Fourcade’s economic “superiority”.  And it would be optimal for society if it could be lopped off from the rest of economic theory and safely disposed of.

Wednesday, May 9, 2018

Blowing Up The Iran Nuclear Deal

This is probably Donald Trump's biggest mistakes, his refusal to certify Iran's compliance with the JCPOA nuclear deal with Iran and his fullout abrogation of it by announcing the reimposition of full economic sanctions against Iran, although we had not fully undone those sanctions anyway.  An immediate victim in the US of this action will be Boeing workers who were to benefit from a $3 billion contract Boeing had with Iran, now cancelled by order of the US government.  Needless to say, Trump has simply lied repeatedly about this matter, claiming the Iranians are not in compliance, when the IAEA and all other parties to the agreement say they are.  Trump has strutted some reports stolen by Israeli intelligence, but those show almost nothing we already did not know, most particularly that Iran did have a covert nuclear weapons program prior to 2003 that it shut down.

I have posted on this topic regularly over a long period of time, going back all the way to the predecessor of this blog, MaxSpeak.  I shall not reiterate all that I have said over those years, although I think my track record has been pretty good.  I have long heavily relied on Juan Cole's Informed Comment for information on what is going on in Iran, and his track record on that has been excellent.

Two conflicting points come out, one suggesting bad things happening, one suggesting maybe not so bad.  The bad is that Trump appears by all reports to simply have no plan beyond reimposing sanctions.  Apparently he and his advisers think they can topple the regime, that economic unhappiness by Iranian citizens frustrated at failing to get much in the way of economic benefits from the JCPOA will rise up and overthrow the regime. But the more likely reaction will be for Iranians to move to support the regime against this clearly unwarranted and hostile act by the US.  Of course apparently the Israeli and Saudi governments might like to have us engage in military action against Iran, which would be truly disastrous, but that does not seem to be in the works anytime soon.  Anyway, it appears that aside from undoing yet another thing Obama did (lots of criticizing Obama and Kerry in his announcement), he really seems not to know what to do next.  What I really wonder is if he truly believes his own lies that the Iranians have not been keeping to the deal.

The more positive fact is that all of the other participants of the deal: Russia, China, UK, France, Germany, and the EU, have all openly criticized Trump for this action and are not reimposing sanctions.  Indeed, they seem to be acting so they can get around the effects through banking by the US to keep doing business with Iran, such as by using the euro instead of the dollar.  This means that while Iranian leaders made noises about exiting the deal themselves and starting up their centrifuges again, maybe they can be talked out of doing that by the other parties to it. That would simply leave the US alone with its unemployed Boeing workers paying the price for this rank stupidity of Trump's.  Let us hope for the best at this bad moment.

Barkley Rosser

Active Measures against the Spectacle

Passivity is a key term in Guy Debord's Society of the Spectacle:
12. The spectacle presents itself as something enormously positive, indisputable and inaccessible. It says nothing more than “that which appears is good, that which is good appears. The attitude which it demands in principle is passive acceptance which in fact it already obtained by its manner of appearing without reply, by its monopoly of appearance.
13. The basically tautological character of the spectacle flows from the simple fact that its means are simultaneously its ends. It is the sun which never sets over the empire of modern passivity. It covers the entire surface of the world and bathes endlessly in its own glory. 
96. The ideology of the social-democratic organization gave power to professors who educated the working class, and the form of organization which was adopted was the form most suitable for this passive apprenticeship.
144. The commodity society, now discovering that it needed to reconstruct the passivity which it had profoundly shaken in order to set up its own pure reign, finds that “Christianity with its cultus of abstract man ... is the most fitting form of religion” (Capital). 
219. One who passively accepts his alien daily fate is thus pushed toward a madness that reacts in an illusory way to this fate by resorting to magical techniques. The acceptance and consumption of commodities are at the heart of this pseudo-response to a communication without response.
What, then, constitutes activity? Debord's reply to this crucial question is inadequate -- rhetorical slogans about an amorphous "revolution." I would suggest instead two things, the autonomous disposal of disposable time and the labor strike (work stoppage or job action).

As should be clear, capital seeks to colonize disposable time with commodity consumption and "The Spectacle." How, then, does one distinguish between active use of disposable time and passive commodity consumption during one's free time? The distinction can be based on the criterion of whether what one does in one's free time will contribute to one's ability to withstand an interruption of income.  Disposable time should be used to prepare for the struggle to obtain more disposable time!

Because, "there is, thank God! no means of adding to the wealth of a nation but by adding to the facilities of living: so that wealth is liberty-- liberty to seek recreation--liberty to enjoy life--liberty to improve the mind: it is disposable time, and nothing more."