Class Warfare Blog

February 17, 2018

Misuses of Science?

Filed under: Economics,Science — Steve Ruis @ 9:37 am
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There is a term being bandied about, scientism, to describe the intrusion of science into fields where it is felt to be inappropriate (ethics, for example). I think this “defense” is unnecessary as science is experimental, it either proves useful or it does not. The real problem, I believe, lies in a misunderstanding of what science does and is useful for.

Obviously, science applies well in “scientific” fields: physics, chemistry, biology, etc. So well, in fact, that these areas of study are called “sciences.” The application of scientific methods to other areas is more “iffy” for a good reason. Take the analysis of financial markets, for example. In recent years, college graduates who used to go into scientific fields have been attracted into the financial world. They even have a nickname, “quants,” because of their application of quantitative tools previously only applied in scientific pursuits. The inherent problem here is, even though markets watchers refer to “the market” in phrases like “the market was calm today” or “the market was perturbed today” as if it were some sort of exotic animal, unlike the sciences, there may be no controlling behaviors built into the system. A physicist doing a scientific investigation believes there may well be a fundamental behavior of matter underlying the patterns he/she is studying. That belief is well-founded as such have been found so often in the past. In finance or economics, the belief there is some underlying structure or principles is an open question as such have not been established as fact.

It is a little like Disney’s The Sorcerer’s Apprentice; the apprentice waves a tool around and mutters incantations hoping to invoke powers he clearly doesn’t understand. He is not even aware what those powers are, except he has seen his master do similar things and get some results. So, in finance, people who mutter incantations and get results are the new masters (by seeming to understand things at a fundamental level others do not) and because it is assumed they have found the underlying structures that create success. Clearly they have not and their results are not attachable to any underlying truths, but they look good to those hoping to find success. (People are still talking nonsense about financial markets as if they were truths.)

Economics is another “science” (it is not) that has adopted the trappings of science without there being much, if any evidence, there are fundamental structures underlying economies. But, by making economics “scientifical,” it has the appearance of being more founded in reality, even though there is no evidence of that.

If the people applying scientific methods to their fields are serious, they need to establish whether there are, indeed, any underlying structures that can be discovered, that help us to understand their fields. Just waving scientific tools around in the air may make one’s studies look more prestigious, but in the end they will just look foolish.

The sad thing is the general populous can’t tell the difference between science rooted in reality and speculative science being employed in the hopes it will work. This, using science speculatively, seems to be a handle that the science deniers are using to discredit solid science. And that will not help us make progress.

December 18, 2017

Rigged, Rigged, Rigged … for the Elites, Of Course

The elites learned long ago that if you have to coerce people through physical threat, they were in jeopardy immediately. If a strong man in a tribe tried to bully all of the others, well all you needed were three people with clubs willing to take eight hour shifts and, well, the strong man has to sleep sometime and when he does … bam, his brains get used for decorations.

The elites learned that it is far easier to use another tool of oppression: culture. (Note Please do not think I am claiming that culture is only used to oppress. I am merely claiming it can be.) We use “tradition” to defend the status quo, for example. What is tradition but a claim that “we have always done it this way?” In more primitive times, when we didn’t have the ability to determine the best of a large number of options, sticking to the “tried and true” was a good strategy, but this strategy doesn’t allow for any positive innovations while disallowing negative changes. Religion is also a powerful coercive tool, being based on obedience … solely.

Consider the situation in the U.S. in which the elites have manipulated the system to their and only their advantage. For example, for the period 1950 to 2009, if you adjust the S&P 500 for inflation and account for dividends, the average annual return comes out to exactly 7.0%. This is a rough measure of what the wealth of the elites gets in the way of a “return on their investment” (ROI). Have you been getting 7% on your saving accounts? No? I get about 1.2% on mine because they are ordinary savings accounts. Even special savings accounts don’t get much more than 3%. So, is the elite’s money special or something? Yes, it is.

The elites money has an artificially inflated ROI in that they have created a new culture in the corporate world around “shareholder value.” Many corporations now claim that their sole reason for existing is to maximize shareholder value. If you had suggested this to corporation executives in the 1960’s, they wouldn’t have known what you were talking about. Corporations used to have a manifold of reasons they existed. Creating a return on the investments of their shareholders would be one of them, but not the most paramount. They might have listed expansion of the business No. 1, or a transformation of the business to serve a changing market as No. 1, or quality as No. 1, and they certainly would have had goals portraying the corporation as a steward of their properties and as good citizens in their communities. Many of these could have been lip service only, but at least they were there. Now, goal one is “shareholder value” and there is no goal two or three.

Gosh, who would this benefit? Obviously shareholders, but who are those people? Oh, they are the elites, right? They own the vast majority of the stocks. So, the stock market has been captured by the elites to serve the elites and now only the elites.

This was pulled off by a change in corporate culture. How was this pulled off? Well, you start with a leashed economist who produces a “theory” that corporations are more efficient/profitable/whatever if they have that goal and that goal only. This was not a theory by the way, but it was called one. The rest of us would call it a “guess,” or and “idea,” or an “argument,” at best an “hypothesis.” It was never proven, just used as support for a culture change that was driven by prominent “shareholders.” (Please note that CEOs are now the largest segment of the elites and that taking much of their remuneration in the form of stock options was not their idea, but once it was, they became more accepting of the “shareholder value” focus of their corporations.)

Now it is a matter of “normal” business that the elites get a 7% ROI on their much larger amounts of wealth and we get ca. 1% ROI on our saved wealth. They start with more money than us and get a higher ROI, so their wealth “lead” keeps expanding because of the rigged system (7% of a larger number grows much faster than 1% of a much smaller number).

And this is just one aspect of the rigging of our systems. The stock market, as a whole, no longer plays the role you were taught in school. It is basically a rigged speculation market now, one that extracts wealth from corporations and funnels it to the elites, who use that money to buy more political and cultural changes. And guess who those changes favor …

January 6, 2017

A Taste of Ian Welsh

Filed under: Economics,History — Steve Ruis @ 1:53 pm
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For the full post you click here, or just read the excerpt below. In either case you will probably be hooked by the brilliant mind of Ian Welsh.

A civilization ends when it can’t handle problems that are totally obvious, because its ideology won’t allow it to deal with them. In our case, the ideology is economics and capitalism, which insists that decisions must be made based on what maximizes profit. Our ideology doesn’t recognize that profit is a social construction, and doesn’t take into account all the upsides or downsides of doing anything. This, combined with our moral belief that money is ‘good,’ and that the more money you have the better you are, is killing our civilization.

I couldn’t agree more.

August 6, 2016

The NYTimes: On the Slippery Slope and Accelerating

Journalism is suffering or, rather, we are suffering from a steep decline in the quality of journalism. Schlock and shoddy journalism has always been with us and always will, because it is cheap. If I may quote an executive of the National Enquirer magazine in court, “Everybody knows we make this stuff up.”

High quality journalism, though, is expensive. And, unfortunately the funding base for high quality journalism has evaporated. First on TV, where news divisions were not expected to make money but now they do, to newspapers, which used to be somewhat profitable and now are marginal at best.

The result has been that a great many journalists have been fired and a great many good journalists have retired and been replaced by, well, poorer journalists.

I was reading a column in today’s Times (“We’re in a Low-Growth World. How Did We Get Here?” by Neil Erwin, Senior economic correspondent at The New York Times’ The Upshot column in which he refers to an interview with Larry Summers, economist and former Obama administration economic advisor:

Mr. Summers, in an interview, frames it as an inversion of ‘Say’s Law,’ the notion that supply creates its own demand: that economywide, people doing the work to create goods and services results in their having the income to then buy those goods and services.
In this case, rather, as he has often put it: ‘Lack of demand creates lack of supply.’”

Apparently the good reporter missed something in translation, because the “framing” is a bit upside down. Say’s law has been widely discredited (and in economics that means “doesn’t work” rather than it is flawed logically or whatever) and the fact that demand drives supply is long standing economic principle.

The way it is stated it appears that Say’s Law is the operative principle, but in these unusual times it has been inverted (“In this case, rather …”). So, “normal” is declared to be an aberration.

Do realize that many folks still quote Say’s Law as if it were valid because it supports the fiction that is supply-side economics (which has also been thoroughly discredited (aka doesn’t work), just look at the last 35 years as evidence).

So this piece implies that Say’s Law is valid and an unwary reader would have that “factoid” reinforced.

Only a savvy journalist would note that either Mr. Summers misspoke or he was speaking ironically or was actually trying to counter the zombie idea of Say’s Law (zombie ideas are those that refuse to die because they are propped up for various reasons).

In any case, we lose when the quality of journalism declines and decline it has. We are on the slippery slope and accelerating. Soon, someone on the N.Y. Times staff is going to say “Everybody knows we make this stuff up.”

August 3, 2016

The Wisdom of Ordinary People

A comment made regarding a post on the Naked Capitalism blog (Brexit Realism: Maybe Voters Were Not Dumb by David Miles, Imperial College Business School) shows a great deal of wisdom and the danger associated with the current states of our economies. The comment was in regard to the Brits exiting the European Economic Union (Brexit):

When people say the ‘economy’ will be harmed by an action, I’ve taken to asking – and it applies to Brexit – whose economy ? Before neoliberalism allowed Capital to hoover up all the gains in productivity and keep it, wages and productivity were at least loosely coupled. If I don’t get any more of the pie, why should I care if the pie is bigger? Most if not all economists only talk about the economy of Capital, giving scant regard to the economy of Labour. I think some Brexiters couldn’t see how dewealthing some rich people was going to hurt them – especially if they are on social welfare or benefits.

The commenter used a tag rather than his/her name so it is hard to give credit. (Why do people hide behind a nom de plume? Fear of retribution?)

The danger is those left out of the “gains of the economy” have no vested interest in its general welfare. Clearly capitalism has no checks and balances built it (as are so often claimed as in phrases like “But a corporation would not do that as it would harm their reputation …”) to restrain greed and greed has brought us to the point that a vast majority of Americans (and Brits and …) couldn’t care less about the “economy” because they are not part of it. They have been excluded by those seeking wealth by any means. Soon, throwing another plutocrat on the fire to stay warm is going to sound like a good idea.

July 30, 2016

Why the Inequality?

Well, bubbie, it wasn’t by accident!

From How ‘Competitiveness’ Became One of the Great Unquestioned Virtues of Contemporary Culture by William Davies, a Senior Lecturer at Goldsmiths, University of London (Posted on July 30, 2016 by Yves Smith)

“I suggest that we need to understand how competition, competitiveness and, ultimately, inequality are rendered justifiable and acceptable – otherwise their sustained presence in public and private life appears simply inexplicable.

“And yet, this approach also helps us to understand what exactly has broken down over recent years, which I would argue is the following: At a key moment in the history of neoliberal thought, its advocates shifted from defending markets as competitive arenas amongst many, to viewing society-as-a-whole as one big competitive arena. Under the latter model, there is no distinction between arenas of politics, economics and society. To convert money into political power, or into legal muscle, or into media influence, or into educational advantage, is justifiable, within this more brutal, capitalist model of neoliberalism. The problem that we now know as the ‘1%’ is, as has been argued of America recently, a problem of oligarchy.

“Underlying it is the problem that there are no longer any external, separate or higher principles to appeal to, through which oligarchs might be challenged. Legitimate powers need other powers through which their legitimacy can be tested; this is the basic principle on which the separation of executive, legislature and judiciary is based. The same thing holds true with respect to economic power, but this is what has been lost.

“Regulators, accountants, tax collectors, lawyers, public institutions, have been drawn into the economic contest, and become available to buy. To use the sort of sporting metaphor much-loved by business leaders; it’s as if the top football team has bought not only the best coaches, physios and facilities, but also bought the referee and the journalists as well. The bodies responsible for judging economic competition have lost all authority, which leaves the dream of ‘meritocracy’ or a ‘level playing field’ (crucial ideals within the neoliberal imaginary) in tatters. Politically speaking, this is as much a failure of legitimation as it is a problem of spiralling material inequality.

“The result is a condition that I term ‘contingent neoliberalism’, contingent in the sense that it no longer operates with any spirit of fairness or inclusiveness. The priority is simply to prop it up at all costs. If people are irrational, then nudge them. If banks don’t lend money, then inflate their balance sheets through artificial means. If a currency is no longer taken seriously, political leaders must repeatedly guarantee it as a sovereign priority. If people protest, buy a water canon. This is a system whose own conditions are constantly falling apart, and which governments must do constant repair work on.”

December 11, 2013

Will We Ever Learn . . .

I have written before about Massive Open Online Courses having been touted as a major innovation in how we educate college students. I argued that there is a long history of such innovations and they have all failed. I argued, and continue to argue, that education is a social activity and any barrier put between the human beings involved will diminish success. I do not mean that under extraordinary circumstances, a few students can’t succeed fabulously using some form of distance learning, just that such things make the process much harder for the bulk of students.

Consider the following from today’s New York Times:
A study of a million users of massive open online courses, known as MOOCs, released this month by the University of Pennsylvania Graduate School of Education found that, on average, only about half of those who registered for a course ever viewed a lecture, and only about 4 percent completed the courses.

Four percent! Wow, what a success rate! Now consider what students and other adults do with “social media.” There is frantic activity to share what the participants are doing socially. Huge amounts of time and effort are spent sharing social activities, but not face-to-face. How effective do you think those actions are in improving the social lives of the participants? Do you think those efforts are worthwhile or closer to what I call a GWOT or a Giant Waste of Time?

So, my question is, why take an intense social activity like education and insert the same barriers to success that social media do?

May 17, 2013

China is the New Texas

Filed under: Economics,Politics — Steve Ruis @ 12:05 pm
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In April a 7.0 earthquake in Sichuan Provence in central China killed over 100 people. This earthquake was small potatoes compared to the 2008 earthquake about 100 miles away on the same fault line that killed something like 80,000 people.

Seems like the people there can’t get a break.

Oh, but the Chinese government is planning a new plant for the region. Jobs and security are coming. PetroChina started building plant with a 200,000 barrel per day petroleum refining capacity and 800,000 ton per year ethylene output in Pengzhou city . . . right on the very same fault line.

Protestors of this decision have been repressed by the secret police. And, in case you weren’t aware: petroleum distillates, petroleum, and ethylene are all highly flammable. Should be able to see it burn from space.

February 8, 2013

Republicans Can’t Have It Both Ways

Recent actions by Republicans, especially at the state level, have made it very clear that as far as they are concerned: a woman’s place is in the home, submitting to her husband’s will. Their actions have picked up the tag of “The War on Women.” This is not surprising in that the current state of fundamentalist Christian conservative ideology began in the late Victorian era focusing heavily on the dominant positions of men vis-à-vis women in the Bible and on the “separate spheres doctrine.” The separate spheres doctrine held that men and women had separate spheres over which they held sway. For men this was the world of work, business, and politics and for women it was the home. (She is a queen . . . in her home! they shouted. Apparently they hadn’t heard of spousal abuse or maybe didn’t care. Many assumed that if a husband beat his wife, she must have deserved it. Amazing!)

Modern Republicans haven’t changed much from those conservative men of a hundred years ago, but they have created a bit of a conundrum for themselves. Women should be at home under the thumb of their men, they think, but Republican policies have so eroded the wages of working people that no one can afford to do this anymore.

A study indicated that a married couple in the 1950’s, with but one wage earner, had more disposable income than a comparable couple have now. The Republicans have been pushing more and more of the tax burden onto “individuals” and off of corporations. The Republicans have been writing legislation to disempower unions which depresses wages. The Republicans have been busy creating tax breaks for the wealthy and sticking it to the working man so much that he can’t afford an “at home wife” even if she were interested in being one.

The tipping point for this came during the administration of that icon of Republican virtue, Ronald Reagan. Women went to work in droves during his years in office, in an attempt to defend working people’s standard of living and to provide good educations for their children. It was noticed at the time. (Boy, was it!)

As usual, Republicans have barely noticed the tides of history as their boat just bobs along, ignoring the currents. There are fewer men than women in college (and graduating from them, too). The whole profession of real estate agent seems to have been completely taken over by women. Women more and more are becoming business people and have lives that are not totally focused on home, nor are they subject to any man in their life.

Occasionally Republicans notice these changes and stand up in their boat and yell “Stop!” They should be grateful that the metaphor is the tides of history and not the train of history, because were history a train, they would have gotten run over decades ago. Now their boat merely bobs along with a full complement of occupants looking dazed and confused and wondering “What happened?”

(If you want to know more about the roots of this ideology, read “Ungodly Women” by Betty A. deBerg (1990).)

December 12, 2012

We Need Infrastructure Spending Now

Filed under: Economics,Politics — Steve Ruis @ 11:14 am
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Walking to the store yesterday I saw yet another intersection getting wheelchair accessibility modifications. This is not an uncommon occurrence in a city the size of Chicago. And it does bring up a basic fact about infrastructure: the costs of maintenance do not go up linearly with the amount of infrastructure.

To make this clear, think about the cost of putting in a sidewalk to a local government. You already have title to the land, so you just need architects and engineers to determine what to do and how to do it, then you have to contract with a construction company to build the thing and then you need to inspect the work, do all of the paperwork and voila, you have a new sidewalk. The maintenance on that sidewalk is minimal, at first, so you go off and build roads, highways, power poles and lines, whatever your community needs.

But sidewalks do not last forever, they do need maintenance and replacement from time to time, but in the case of this intersection in a Chicago residential neighborhood, those sidewalks were in fine condition, but here they were being torn up and replaced. Now, the cold-hearted might just say that people in wheelchairs just need to cope, but collectively we have decided that it is only fair to redesign the pedestrian accesses to the sidewalks to make them wheelchair friendly. Now think of every intersection in the city of Chicago. The cost of retrofitting them is immense. Our needs change, so the old no longer serves and it must be replaced. So infrastructure upkeep is not just a simple fraction of the cost of construction.

Think about our antiquated electric power grid. It needs to be replaced. Think about whole stretches of our highways and the hundreds of unsafe bridges needing repair. We have fallen behind significantly in the upkeep of our infrastructure, partly because the cost of “maintenance” doesn’t cover the cost of upgrades, etc. We have been budgeting assuming that maintenance is a constant fraction of the cost of the installation and that is woefully underestimating the real cost. Then on top of that we have “deferred” the maintenance, in other words we put it off until a later day because, well, we just don’t have the money right now. And we continue to do so.

Now is the time to act to bring up the level of repair of our infrastructure. The reasons?
• the cost of borrowing the money to do this is approximately 0%. We will never get a better deal.
• the number of out-of-work construction workers is huge which has depressed the cost of labor.
• the money paid to the architects and engineers and laborers and suppliers of raw materials and truck drivers will be spent almost immediately by those folks which will stimulate the economy. Plus there is time for the money those folks spend to be spent again (by the subsequent recipients) before the next year is out, amplifying the effect. (Economists call this the multiplier effect. In this case $1 spend on construction creates well over $1 of economic activity.)
• the problems with our infrastructure will only get worse and will cost even more as time goes on. It is not like they will “heal themselves” like a cold will if you just wait.
• all of the expenditures will go to Americans and American companies. The jobs cannot be “outsourced.”

If China is willing to lend us the money to make this nation stronger, creating jobs that generate more than enough tax revenue to pay off those loans, we will be fools if we don’t act. The more we wait the more it costs us in the long run.

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