Wednesday, June 6, 2012

Posts in Three Lines

I don't know what other peoples' experience is, blogging, but me, I find myself thinking about far more posts than I ever manage to put on electronic paper. Seems like if one can't write them, at least one should write down the idea of them. So here is some of what I wish I'd wrote.

The paranoid hypothesis on European austerity. Maybe the ruling class in Europe isn't so confused, maybe the crisis, like the Euro project in general, is an effort to do an end run around European national-democratic institutions, where social democracy is still stubbornly implanted. This is the thesis, mostly implicit, of Perry Anderson's The New Old World, and more explicitly of the NLR discussion of the same. Jerry Epstein offers some supporting evidence at Triple Crisis.

What's So Effective About Effective Demand? There's a conventional understanding that "effective demand" means demand backed by money; no, that's just demand. Keynes introduced the term specifically to call attention to the way actual expenditure depends on expected income, and the possibility of multiple self-consistent expectation equilibria. Think effect as in "in effect," not "having effect."

Margaret. It's a good movie, you should see it. It's dialectical. Best thing I've been to in a while.

Honest Signals: Thoughts Around Mary Gaitskill. Her stories are the best fiction I've read in the past couple years; she's attuned, like almost no one else, to the way we are both free reasoning selves and embodied social animals. Her collection Don't Cry is particularly attuned to the "honest signals" we use to communicate unconsciously, a kind of natural telepathy, and ways in which our moral and physical selves don't quite coincide. I've been writing this post in my head for the past year and change.

Larry Summers and the Anti-QE. He wants the government to take advantage of transitory low rates to adopt a more favorable financing position. Fine, except this is precisely the opposite of what quantitative easing is supposed to be doing. In general, sound finance for government is the opposite of Keynesianism; the Keynesian view is that government financing decisions should be taken with an eye to their effect on private, not public, balance sheets.

The Future Is Stasis. Everyone knows the Fermi paradox, almost everyone knows its updated version as the Great Filter. My opinion, this is almost certain proof that the future is socialism, or rather socialism or extinction. Humans will never live anywhere but Earth.

Low interest rates, really? My next project with Arjun Jayadev is a short paper arguing that, contrary to conventional wisdom, interest rates in the past decade were not historically low. The central bank does not set "the" interest rate. For business borrowers, in particular, changes in the Fed Funds rate have very little effect on credit conditions. 

The logic of business cycles. I'm still struggling with the monetarist/New Keynesian thesis that a less than full employment state of aggregate demand is just equivalent to an excess demand for money, or for some set of financial assets. Leijonhufvud argues that this is the case in the downturn, but that there is then an unemployment quasi-equilibrium in which all markets clear except for a notional excess supply of labor. Seems right.

Tobin's article, "Commercial Banks as Creators of Money." 1963. An old one, but a bad one. Sometimes it's worth reviving old arguments.

Crotty on Keynes on politics. One of the best things about studying economics at the University of Massachusetts was learning Keynes from Jim Crotty. What's tragic is that his book on Keynes' political vision has never been published, so no one who hasn't sat in his classroom knows Crotty's Keynes. I should disseminate some of it here.

Relitigating the ACA. Well, we are. Which means we need to revisit the individual mandate, a right-wing approach to health care that inexplicably migrated almost overnight to the liberal side. The economic arguments for it, IMO, remain bullshit; the ethical and political arguments are worse.

Adventures in Central Bank Independence. It's increasingly at least somewhat recognized that Bernanke's policies as a central banker in the face of an incipient depression fall more than a bit short of what he advocated as an academic. Best piece on this evolution I've seen is by Laurence Ball. Krugman's cited it, but he left out some sordid details.

Graeber's Debt. Don't care what anyone says, it's the best book I read last year. The final section -- on the last half century -- is weaker than the rest of it, but it's still got a higher rate of brilliancies per page than any other piece of social science I've read since I don't know when. Plus, the dude practically started OWS.

"Mortal Beings Cannot Hold Land to Maturity." The special place of very long-lived assets in our economy doesn't get the attention it deserves. (Hello Henry George!) It's arguable that most investment is technologically longer-lived than it optimally should be, and the rents from the "excess" assets (and of course land) constitute some of the most politically important classes under modern capitalism.

Classics: A Pattern Language. I'd like to write a bunch of posts on books you ought to read. This would be the first one. Utopian architecture theory from the 1970s: how the world should be, from the scale of cities down to the chairs in your kitchen.

One could write lots more hypothetical posts, I certainly won't write all of them. Maybe, with some luck, two or three. So I admit this exercise is a little pointless: Map is not territory. But if you're short on territory, it can be fun to draw maps.

UPDATE: It looks like this is now a thing.


  1. So many good things to respond to here. I'll just do one:

    JW: "I'm still struggling with the monetarist/New Keynesian thesis that a less than full employment state of aggregate demand is just equivalent to an excess demand for money, or for some set of financial assets."

    I continue to feel decidedly skeptical about the "demand for money" notion. But I haven't been able to formulate anything cogent, nor have I felt confident discussing it cause for all I know it has in fact been convincingly theorized. But I kind of doubt it.

    My discomfort has to do with the following disorganized pieces. In my dream world JW would organize all these for me into a coherent body of thinking.

    o Clower's thinking on stock supply vs flow supply.

    o The fact that financial assets are all about stock supply. The quantity of production is miniscule relative to transaction volume.

    o The fact that money can be created out of thin air -- no production inputs needed.

    o With real goods, increased demand/transaction volume must drive production -- with the associated resource demands/drag on supply. Not true for financial assets/"goods".

    o Real goods are consumed, financial assets aren't. One flows from production to consumption/entropy. The other seems just circular.

    o Higher transaction volume in financial assets is just as likely (?) to be associated with lower prices as higher prices. For real goods, quantity or price must (?) go up.

    o Real-goods market as a treadmill driving a generator. Financial-assets market as a free-wheeling squirrel cage.

    o My notion of "money" being exchange value *as embodied in financial assets.* Just as "music" doesn't exist except as embodied in performance, money doesn't exist except as embodied in financial assets. (And the asset that it's embodied in actually determines how much money is embodied -- a euro embodied as a deposit in a greek bank versus a german one.) Not perfect, perhaps, but a useful definition within a larger theoretical context?

    There's a big mess for you. Do with it what you will (including nothing).

    1. Oops one correction:

      the asset that it's embodied in actually determines how much *value* is embodied

  2. I'd like to see your posts on all the topics... that said, I'm a sucker for the front-page media relevant, and I haven't had anyone properly describe why the ACA mandate is bullshit, economic theory wise. Convincing arguments don't come directly to my own mind (though, alas, that's nothing new in my personal history of trying to make sense of the world). Thanks dood.

  3. Did you know that "A Pattern Language" has had more influence among software developers (lots) than architects (almost none)? The amazon sales rank for "Design Patterns: Elements of Reusable Object-Oriented Software" is 5,327 vs 10,599 for "A Pattern Language". The first wiki was invented by a couple of pattern language enthusiasts to document software patterns.

    1. Chirs,

      I did not know that. Fascinating.

      It makes sense, tho, doesn't it? Partly, I suppose, because the modular, hierarchical approach of pattern languages is suited to software design, but more, I'd guess, because there was an inevitably utopian character to the first couple generations of programmers, given that they were essentially creating a new profession from scratch. What I love about A Pattern Language is the spirit of stepping back and saying, if we were building our society fresh, what would it look like?, but obviously nobody -- certainly not architects -- actually gets to do that. But with software development, especially I suppose in those first generations, you kind of do.

      Do people still read it?

    2. If we were starting fresh we'd wind up with Houston or Brasilia. The genius of "A Pattern Language" was that Alexander and his grad students were just observing patterns of solutions people had come up with over the centuries. That and its overall humanism and dimensionality. Big scale, tiny scale, children, old folks, work, play, everything is in there.

      Design patterns are still big in software. It's just how competent/experienced programmers talk now. And you're right about starting from scratch. Software is always starting from scratch. That's the permanent state of software development. That's what programmers do when they get bored.

      This seems like the kind of thing you'd enjoy. It's written by one of the software design pattern pioneers. If I was smart I'd write something clever about Hayek or "Seeing Like a State"

    3. Yes, people still read it -- or at least buy it, or at least talk about it. When I worked in bookstores in the 90s (okay, so my anecdotal evidence for "still" is a bit outdated), it was a slow-but-steady mover. Today, on the permaculture listserv I'm on, I commonly see reference to it among permaculture designers -- true, a small niche, but anywho... The highly influential (in the field) two-volume EDIBLE FOREST GARDENS has a long section devoted to a "pattern language" for forest garden design, explicitly inspired by A PATTERN LANGUAGE. I think that's helped to promote the original in the this particular niche community.

  4. Re your "The Future is Stasis" thought, I disagree with your last point. I do think human life on other planets is feasible; very, very, VERY hard to achieve, but there's nothing in theory that stops us from doing so. However, like you I think we need an economic system beyond capitalism in order to achieve feats of that magnitude. David Graeber makes a similar point in an essay he wrote for the Baffler:

    1. That's a great essay, which I happen to have read an early draft of months ago. (I'm super connected that way.) The point, tho, which would be developed in the hypothetical post, is that we have some very important additional information on the possibility of interplanetary colonization, namely that nobody, among all the uncountably many planets out there, has ever managed to do it.

    2. I get stuck on the part of the formula that assumes "intelligent" life as being intelligent in the technologically oriented way that ours is. Even if roughly similar in so many other ways, why expect intelligence to result in radios and rockets? Why not months-long opera performances or lifelong hypnotic trances? And, given the number of close calls we've been experiencing in just the short time we've had interplanetary technologies, maybe the odds are that similar such intelligences extinctify themselves 9 times out of 10 before they can establish the first off-planet colony. There are any number of reasonably possibilities that correlate a multiply intelligent universe with interstellar silence.

    3. I have misgivings about that Graeber piece on why capitalism has deprived us of miracle technologies like flying cars.

      I’m sympathetic to his arguments about stultifying managerialism, but he takes them to an extreme, with many insupportable assertions tossed off amid much sloppy reasoning. To write, as he does, that managerialism run amok “pretty much answers the question of why we don’t have teleportation devices or antigravity shoes,” is to ignore the near certainty that those technologies are physically impossible.

      Like a lot of left utopians who lack a good grasp of science and technology, he assumes that if you just pour research in one end of the pipeline you can get any technology you want coming out the other end. So if we don’t have flying cars or cancer cures it must be because capitalists didn’t want them—they would be too disruptive to the capitalist order, you see--and therefore refused to research them. Unfortunately, there’s nothing to back up this notion except hoary conspiracy theories like, “We cannot know how many synthetic fuel formulae have been bought up and placed in the vaults of oil companies, but it’s hard to imagine nothing like this happening.” His view is essentially magical: the universe is infinitely responsive to our desires through technology, unless technology is thwarted by the dark arts of corporations.

      Of course, a pillar of modernist science is that the laws of physics are in fact not responsive to our desires, and indeed contain insuperable constraining principles like entropy or the relativistic light-speed limit, which poses a serious obstacle to galactic settlement.

      And Graeber isn’t attuned to the practicalities of technology, which are all-important. Come to think of it, we do have reasonable approximations of flying cars in the form of helicopters; there are even small personal helicopters that are not much bigger or pricier than a luxury car. Why haven’t they caught on? Well, they guzzle a lot of gas, they’re much harder—and scarier!—to pilot than cars are, they take more room to park, air-traffic control would be a nightmare, etc. (I’m terrified of heights, so I would never buy a flying car.) There’s just not really a convenient and needful transportation niche in between road cars and existing commercial aircraft for a private flying car to fill. We don’t have them because we wouldn’t have much use for them.

      Capitalism an impediment to technology? I’m not convinced.

    4. @ Juan and Josh:

      I do agree with the premise of the “Future Stasis” postlet that economic and especially social factors, rather than technological constraints, are the real barrier to significant space settlement.

      European colonization of the New World is an instructive example. There you needed lots of superfluous aristocratic second sons, landless yeomen, convicts and orphans to man speculative colonizing ventures that were usually one-way tickets to death by indenture, starvation and fever. A colonizing mission to Mars or beyond would face comparable rigors, and would require similar forces of over-population and dubious prospects to goad people into it. (I myself would volunteer to go to Mars since I have no prospects on this planet, but not too many others would.)

      A liberal society of low birth rates, material abundance and adequate life chances therefore will be unable to undertake a substantial project of space colonization. If we assume that every technologically advanced civilization is liberal, that explains the Fermi paradox—space-faring species lack the material incentives and collective social discipline to spread beyond their homeworlds.

      Some scenarios that might change the picture: 1) A looming catastrophe that makes Earth uninhabitable; 2) Resource scarcity that compels us to mine the asteroid belt or elsewhere (although space mining would probably be done by robots); 3) A resurgence of illiberal natalist religions, like Mormonism, that compel women to produce many children to sacrifice to the stars.

    5. Will, I like your take but I gotta wonder... you say you have no prospects here on Earth. What, exactly, would your prospects be on a Mars colony? And given that you are afraid of heights, why choose to live on a planet where gravity is weaker and every time you take a jump you rise 20 feet into the air? :)

    6. Indeed, jte, indeed, but I might go for the cheap rent and better dating opportunities.

  5. "the Keynesian view is that government financing decisions should be taken with an eye to their effect on private, not public, balance sheets."

    not sure its every self described keynesians view
    but it appears to be the correct one

    the private debt ratios ..non financial sector ...
    need management thru credit rationing
    but public debt
    -and more controversially financial sector debt --
    are as different from household and regular firm debt
    as marley's ghost from scrooge

    you have done a fine job dispelling the public debt "ratio fraud"
    both its make believe ceiling debt to gdp ratio
    and that same ratios simple
    completely control-able long run dynamics

    1. "the crisis..... is an effort to do an end run around European national-democratic institutions, where social democracy is still stubbornly implanted."
      purpose pruine the state transfer systems
      and preserve
      the over valued euro

      ".. the Euro project in general, is an effort to do an end run around European national-democratic institutions, where social democracy is still stubbornly implanted."

      that grander thesis however has to share
      the motivation role
      with several other MNC objectives

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