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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
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The Schools of Economic Thought: a Hasty Overview
Kimball Corson
07/29/2016, Pago Pago, American Samoa

Three Schools of Economic Thought: a Hasty Overview

Neo-Classical economic thought is what is taught as mainstream economics. It focuses on micro economic thought about how price theory determines quantities and prices of factor inputs and outputs through competitive markets by supply and demand.

Consumers proceed by a hypothesized maximization of utility subject to income-constraints and firms maximize profits using competitively priced factors of production, both in accordance with rational choice theory. It is called Neo-Classical because Keynes is included in a rarefied way such that interest rates adjust to equalize savings and investment and have national income become equal to GDP. It is very tidy and wrong on too much, especially its Keynesianism.

Opposed to this orthodoxy are two dominate schools of heterodox thinking, the New Keynesians and the Post Keynesians. The new Keynesians believe wage and prices are sticky and don't adjust properly so income has to instead. Because income has to adjust where wages and prices don't, markets do not yield proper competitive results and the economy often fails to attain full output and employment. Therefore, New Keynesians argue that macroeconomic stabilization by the government (using fiscal policy) and by the central bank(using monetary policy) can lead to a more efficient macroeconomic outcomes than a laissez faire policy would.

The theoretical foundation of Post-Keynesian economics, on the other hand, is the principle of aggregate demand which has less to do with the market problems envisioned by the new Keynesians and more to do with problems of income distribution, liquidity preference and hoarding so that economy has no natural or automatic tendency towards full output and employment. Contrary to the views of new Keynesians, post-Keynesians do not think the economy tends to full output and employment because of rigid or sticky prices or wages but because of liquidity preferences which slow or stop velocity for some money and make saving very unequal to investment.

The contribution of Post-Keynesian economics has extended beyond the theory of aggregate demand to theories of income distribution, growth, trade and development in which money demand plays a key role, whereas in neoclassical economics these things are determined by the forces of technology, preferences and endowment.

Like the New Keynesians, Post Keynesians agree that macroeconomic stabilization by the government (using fiscal policy) and by the central bank(using monetary policy) can lead to a more efficient macroeconomic outcomes than the laissez faire policy of the Neo-Classical economics would.

Neoclassical economics lives in too much of a vacuum and is only a crude first order approximation to reality. I incline toward Post Keynesianism.
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There seems to be little interest in or understanding of economics in the media world of finance. Aside from a few, there is only a real interest in finance, as though that is the entire economy, instead of 15 percent of it (in lieu of what realistically should be about 4 % of it).

I must say in passing that economic understanding is very limited and poor in finance, and I also observe much such knowledge is displaced by financial doom and gloom and hand-wringing, and by misunderstandings about different kinds of debt and the different kinds of problems they pose or don't in conjunction with other factors.

Too many are being sucker punched by the financial media and its misunderstandings of economics. The world of economics is NOT at all just the world of finance or even close to it as this note should make clear. Indeed, much of the world of economics (mistakenly, I think) just ignores finance as a "bubble world unto itself," including too many economists.

The Central US Economic Problem We Can't Face
Kimball Corson
07/19/2016, Pago Pago, American Samoa

Larry Summers has resurrected the Depression-era phrase "secular stagnation" to describe a chronic deficiency of current investment relative to savings that has trapped the world in a state of low economic growth largely resistant to monetary policy. But is this just a pandering and political way of looking at just part of the problem. I think so.

It is not just reduced real investment as a percentage of savings or absolutely that is the problem, but reduced relative and current consumption as well (which drives investment), both due to massive hoarding from current income -- an extreme preference for liquidity by the rich -- coupled with massive income inequality, so our bottom half lives in recession and the top 10% hoards excessively, sticking such income, not held as cash, in other liquid assets off shore and in US financial secondary markets, instead of spending it on current real investment and for consumption.

This is what Keynes taught us that no one seems to realize in part because they don't understand Keynes and in part because it is politically incorrect to conservatives to say so, including for mainstream economists like Summers, who strikes me as being a bit slow and ignorant about it anyway, in addition to pandering.

The solution is obvious but too abhorrent to many. A 100% tax on liquid hoards from current income not spent on current consumption or invested currently in real productive assets, with such tax revenues so raised being redistributed to the bottom half in proportion to their relative poverty.

A real jolt cola for the economy -- but dare I say it with so many conservatives about? We aren't even supposed to think, much less talk this way. And then we wonder why our stock market is so high and our economy is in the toilet on real growth. Silly, ignorant us.

Wheel Spinning in an Theoretical Economic Void.
Kimball Corson
07/17/2016, Pago Pago, American Samoa

Huge quantities of data are regurgitated and churned in the financial press, but aside from only some, to what good and useful end is all of it?

The end certainly can't be prediction or forecasting, because the track record here is a largely a huge disaster for most all of it. Uselessness prevails almost always as to what matters.

It is a turgid exercise of the financial media awaiting a falling sky. Sitting on one's hands is almost as useful, given what they know about economics and data,

Worse, uselessness also prevails almost always as to what matters when we look at aggregated data with no sense at all of its distribution or variance. We blithely and typically assume that if the numbers are high or rising that all is well.

An example is household income. If we have three data points of say $1,000,000,000, $1,000 and $100, the total of $1,000,001,100 looks very good (especially if the total grew by say 10% because the largest number did even better). The average of $333,333,700 still looks great, too, even if the $1,000 median doesn't. We are in the dark about what is really going on looking only at the aggregate numbers.

We are also clueless about bad data, with aggregate unemployment data being a key example.

The truth is we just don't understand data or economics or how to use them, and are just throwing misused and bogus numbers around in the financial media all the time, to no good or useful end.

Why Not the Scandinavian Model for the US?
Kimball Corson
07/14/2016, Pago Pago, American Samoa

The viewpoint is often posited that, as to the success of the Scandinavian countries, their political and economic systems have very little to do with it. Scandinavian countries are homogeneous, high-trust societies with a high degree of social cohesion. This view is proffered as to why the US should not bother adapting the reforms of those countries, that is, impliedly because we are not homogeneous, are a distrustful society and we lack social cohesion or a high regard for each other. But is this assessment and viewpoint true?

If we look at what makes Scandinavian societies successful, we can see that several factors are involved. First, in government and their personal lives, it is clear they understand and value transparency more than we do. They have learned, as we have not, but certainly can, that honesty and transparency not only clarify and negate secrets, but also circumscribe undesirable behavior and make for social cohesion.

But for our arrogance and unwillingness to learn from others, there is no reason we cannot learn that lesson as well and have it taught in our schools. There is no imperative for dishonesty and opacity except to get away with what we shouldn't. We can learn that nationally if we decide it is important to do so and believe in the virtues of transparency and honesty -- although we are admittedly behind the ball on this one and don't realize its fuller implications. But then there is the question of so what or does it matter that much? Reform always requires change. We can change here, I submit.

Consider what else is required.

Second, the Nordic countries have single payor national health care systems like most of the advanced countries in the world except the USA. Together with markedly higher personal income taxes and the massive savings they gain by hugely lower public health care costs, the Nordic countries fund free higher education for those qualified, a well maintained and modern infrastructure and a broad array of social services available to all requiring them. By virtually all measures of success, these countries surpass us because we tell ourselves they are more homogeneous, trusting and have more capable government than we do and therefore we can't do it.

I suggest this is patent nonsense by and large. 1) We don't have higher income taxes because our oligarchy doesn't want higher taxes and its republican and conservative patronizing minions fight higher taxes at every turn, and forever push for lower taxes on the supply side theory of "trickle down" and more needed growth.

2) We are being strangled by stratospherically high healthcare costs because our oligarchy and its patronizing republican and conservative minions fight against a single payor national healthcare system, with their typical 2 to 3 % overheads and zero profits, to protect the US healthcare, health insurance and pharmaceutical industries with their typical 20 % overheads and comparable or greater profit margins. Hugh dollars are involved here. We pay double and get less doctor hours of care and worse out comes. Our losses here are staggering. We spent $3.0 trillion in 2014 just for health care, not counting health insurance or drugs, which was 17.8% of our GDP.

Higher taxes and a single payor national health care system would pay for the free higher education, great infrastructure and extensive social services as needed, that the Nordic countries have and we don't. Now why is it our non-homogeneous population prevents this, or our relative lack of trust of each other prevents this which is reparable as I have explained, or our lack of social cohesion does as well. Indeed, the very lack of these programs and the greed of our oligarchy significant promotes, I contend, our relative lack of trust and lack of social cohesion, if not our homogeneity. Opponents are getting much backwards here in terms of causation, I submit.

What conservatives and republicans contend on these points is nothing more than a shabby apologist position for their patron saints, I think, little better than their "trickle down" economic theory. Transparency is not their strong suit. Neither is honesty. Worse, our millionaires and billionaires care only for themselves and more money. Those in Scandinavia care more about others and honesty and transparency.

Anyone want to proffer geography as the reason the Scandinavia model can't work here?

The Important Implication of the Cambridge Capital Debate
Kimball Corson
07/06/2016, Pago Pago, American Samoa

(economic wonk alert - tough subject matter at the edge)

The debate was between economists at Cambridge University and some at MIT or Cambridge, Massachusetts from about 1950 to about 1970. It related to the nature of capital, its remuneration and how to aggregate it for macro production functions. Was it a fluid money input (US) or was it a wild array of different manufacturing equipment and techniques that has no common denominator and could not be aggregated for use in a production function(UK)?

Nearly everyone accepts that the UK technically won the debate on the aggregation point, something Paul Samuelson acknowledged early on. In the short run, capital is fixed as an aggregate pile of dissimilar equipment. In the long run, capital is a fluid, variable money input, not fixed at all and relative unlimited in supply, unlike the case for other factor inputs. In my view, this has serious implications and consequences for the marginal productivity factor remuneration of capital and indeed labor.

The capital debate goes to the very idea of capital and its remuneration. Classical political economy authors, from William Petty to Karl Marx, including Quesnay, Smith and Ricardo, treated the process of production as a circular one. In this view, capital is "a produced means of production," rather than a factor of production fixed in supply, at least in the short run, used to produce final goods.

The most important result of the debate is that, once capital is defined as a produced means of production, there is now no direct relation between the relative abundance or scarcity of capital (relative to say labor) as a means of production and thus the marginal productivity theory of value for its remuneration becomes compromised by political intervention, at least in the long run when plant and equipment are variable. Distribution to factors of production becomes not governed by supply and demand and relative scarcities because of such political intervention to negate capital's naturally low remuneration due to its relative abundance.

Typically, it is assumed that the capital debates relate simply to problems of aggregation, and whether the use of aggregate production functions and aggregative measures of capital were still justifiable, even for simplicity's sake. However, contrary to this viewpoint, in my view, the capital debates did not rest just upon the possibility of building aggregate measures, but on more important issues.

Since the Marginalist Revolution, and the rise of the so-called neoclassical school, the notion that relative prices are determined by supply and demand, and that these reflect the relative abundance or scarcity of all goods and services - including factors of production - became consensual. As a result, the supply and demand for capital became the determination for the remuneration of capital. The more abundant is capital, the lower its remuneration, and vice versa if it is scarce. Conflict had no role to play in the determination of distribution, and political and social issues vanished entirely from analysis.

Because the supply of money is substantially unlimited, because capital formation entails multiple factors of production being used, because of multiple substitution effects exist for those factors and because of the technological effects of innovation, the supply of capital itself in truth is substantially unlimited, unlike other production factors, especially in a low interest rate environment. Relative scarcity is less a concern for capital than it is for other factors, especially labor at full employment.This relative super abundance of capital should lead to its relatively less remuneration under marginal productivity factor pricing, but that is not what we now observe.

Instead, we observe US corporate management misappropriating by fiat most of labor's increased marginal productivity gains to capital since about 1973, due to the fact it can and management controls the corporate revenue stream, This is a counter and political move due to capital's reduced marginal factor productivity because of its relative super abundance, destroying marginal productivity factor pricing for capital and for labor, substituting corporate political muscle instead. Little consensual is left.

Capital or corporate management does not like the consequence of marginal productivity pricing for capital and if confronted would argue why should the costly supply of more capital increase labor's remuneration and reduce capital's. There is no economic justice in that. This is why in the US since 1973, we see corporate management misappropriating labor's increased productivity remuneration, tossing marginal productivity pricing for capital and labor out the window and also rewarding themselves more handsomely at the same time. We have political intervention in factor pricing.

Few seem to grasp the real implications and relevance of the key aspect of the Cambridge capital debate itself.

Misconceptions About Japan
Kimball Corson
07/05/2016, Pago Pago, American Samoa

"Japan is in such a deep hole. Their bigger and bigger stimulus efforts are producing less and less economic effect. I believe that Japan is example # 1 of why out of control public debt does matter." A blogger

Japan is not in a deep hole from debt. This is nonsense for several reasons and wrong at several levels. Japan's problem is not high or unsustainable public debt, much of which is held by the government itself. Its problems are a shrinking and rapidly aging population, with many in retirement requiring support. Working age Japanese are very productive.

This is more public debt nonsense, by people who pay attention only to surface financial issues without understanding real economics or demographic issues. First, most of Japanese debt -- which according to deficit hawks and those spooked by high public debt should have long ago precipitated a huge financial crash -- is held by the Bank of Japan and the Japanese government itself by various agencies and departments.

Second Japan's debt is well managed and not at all out of control.

Third, Japan's debt could all be converted to redeemable stock in Japan, Inc, paying dividends and Japan's debt would totally disappear and debt worry warts would have nothing to talk about.

Fourth, Japan's real problem is the age distribution of its population. Japan's economy is not under performing - its population is getting too old and it is not growing. The Japanese population is shrinking and aging fast. There are now 7.7 million fewer people of working age than there were just 10 years ago.

Shrinking population is one problem which means after a while there are fewer of working age. And an aging population is another which leads to a higher percentage of non-working retired people in the current population. Japan has both problems in spades.

Those are Japan's problems, not high public debt.

On Income Inequality
Kimball Corson
07/04/2016, Pago Pago, American Samoa

Like most matters in economics, there are optima involving trade-offs and countervailing considerations. Income inequality is such a matter. If all income were distributed equally, there would be no person or group capable of assuming the risk and making large investments. Banks only lend when borrowers can get along without borrowing. They are seriously risk adverse. A country needs a class of entrepreneurs willing to take real investment risks with large dollar sums and a stable economic environment so as to minimize those risks. Income equality pretty much excludes that class of businessmen.

At the same time, excessive income inequality results in too much reduced aggregate demand, our current problem. The very rich do not spend most of their income, but hoard much of it in cash, off shore and in secondary financial markets which provide liquidity but little real investment. They take the hoarded income out of circulation against real goods and services and so reduce the aggregate demand for such goods and services. If such income were redistributed to those with much less income, most of it would be spent and aggregate demand would increase and so would national income or GDP.

This analysis posits an optimal inequality of income, which is the case. Unfortunately, we are very far removed from it and are suffering huge income inequality and a great deficiency of aggregate demand that is holding us back and in a new "lower low" of GDP or national income. Inasmuch as today's income consists of yesterday's expenditures on goods and services many are pressed out of the labor market altogether (about 42 percent of the U.S. working age population is unemployed) and into relative poverty because excessive income inequality requires some households have too little income for others to have too much or enough to hoard it and take it out of circulation against goods and services.

Why do we have excessive inequality of income? There are several key reasons. One is the labor market matured to become worldwide last century and, being too highly priced by world standards, American jobs and business moved overseas to take advantage of comparable but cheaper labor. Some became very rich from the higher profits resulting from such cheaper labor and others here became without jobs and became much poorer. Income inequality increased. If I were forced to make a guesstimate of what percentage of the excess inequality is due to this cause, I would say 20%

Second, many entrepreneurs and businessmen are very well educated, smarter than most and much more resourceful than most. They truly "earn" some of their higher incomes relative to those less smart, less educated and less resourceful. That too contributes to income inequality. This is the only cause Univ. of Chicago economists will admit to, as good servants of the oligarchy like many republicans. My forced guesstimate here is 10%.

Third, beginning in 1973, corporate management began misappropriating to itself and its corporations by fiat the gains from increased labor productivity that prior to then had gone to labor, keeping labor's wage and compensation about constant in real terms. Before 1973, the gains in labor productivity had strictly gone to labor. Marginal productivity pricing of labor went out the window then. American corporations did this because they could, no one would stop them, and they controlled the corporate revenue streams. Most acted with conscious parallelism, understanding what those who started doing it were doing very quickly. My guesstimate here is 35%

Fourth, since about 1965 or so, the rich have bribed politicians to pass laws and regulations to rig the economy in their favor and against the middle and lower classes to get much more income for themselves and less for everyone else. Economic Nobel Laureate Joseph Stiglitz, with many other economists helping him with background studies, has written a book outlining how to repair this rigging of the US economy, to derig it and level the playing field so the economy may once again work for all and not against most and just in favor of a few. The book is available below. My guesstimate here is the balance of 35%.

More could be said, but what I have written accurately captures the heart of the matter, without making this note too long or complex.

https://www.amazon.com/Rewriting-Rules-American-Economy-Prosperity/dp/0393353125/ref=sr_1_3?ie=UTF8&qid=1467684824&sr=8-3&keywords=stiglitz

So What Is Wrong with the TPP?
Kimball Corson
07/03/2016, Pago Pago, American Samoa

Much, I am afraid. The good part of it, or the bait, is the free trade provisions, as a friend argues. An analysis by the World Bank found that if ratified by signatories, the TPP "agreement could raise GDP in member countries by an average of 1.1 percent by 2030. It could also increase member countries' trade by 11 percent by 2030. An analysis by economists Peter A. Petri and Michael G. Plummer of the Peterson Institute for International Economics projects that the TPP would increase incomes in the U.S. by $131 billion annually, or 0.5 percent of GDP. Exports from the U.S. would increase by $357 billion annually, or 9.1 percent, as a result of the agreement.

So it is all hunky dory and a no brainer, right, right? Not at all. The TPP assures the triumph of global capitalism over national interests in the most heavy handed fashion.

The free trade aspects of TPP are good, although I think they are a bit overstated because tariffs are already very low, but actually they are a minor part of the TPP. In truth, the TPP has several Trojan horses slipped into it which are disastrous because they compromise on our sovereignty, move signatories nations toward world corporate governance in compromise of our own, will worsen income inequality and they will undermine social and domestic commercial justice. Those are the rubs.

Otherwise, why should negotiations and drafts have been kept so secret for so long? Why should "just free trade issues" be kept secret? Obviously, there is more. We are being pushed to bite on the bait of free trade and its benefits, without knowing or understanding the rest of TPP and what the Trojan horses in it entail.

One Trojan horse of the TPP pertains to investment, not trade. The investment provisions in it make it much more attractive for American businesses to move jobs and production offshore and away from the US which would then be stopped by treaty law from doing anything about it. It ties our hand here.

Another Trojan horse is the TPP defines a bad set of rules for globalization and dominating world corporate governance. World corporate courts would have exclusive jurisdiction to arbitrate economic disputes under the treaty and US federal courts would lose jurisdiction, a provision of questionable constitutionality. Any member nation could be sued for damages in world corporate courts for enacting any law which results in reduced corporate global profits for a company.The so-called Investor-State Dispute Settlement (or ISDS) clause allows private corporations to seek arbitration against national laws and regulations that affect their profits. Decisions could potentially cost taxpayers gigantic sums. They are not appealable.

The TPP is sweeping in its scope and covers and controls everything from fishing rights and fisheries, to auto parts, to labor laws, environmental laws and to intellectual property laws, removing a member nation's sovereignty to address those matters. Critics believe that an expansion of the U.S. IP regime will become entrenched, unchangeable and the dominant position of multinational corporations, handing them even more power than they already have and stifling innovation. IP law already hugely over reaches and is due for a hair cut now to be precluded.

The TPP will extend the life of copyrighted material for an additional 20 years, on top of the existing 50 years after the end of the author's life. The provisions are quite stringent and one-sided: they run the gamut from copyright extension for content owners and patent owners (especially drug companies) to the criminalization of ignored digital protection (even without any intent to distribute).

Many conclude the TPP will rewrite global rules on intellectual property and its enforcement for the new global corporate world and its courts of arbitration. Critics also claim that TPP provisions regarding drug data and drug patents will be harmful to health care policy worldwide, preventing countries from developing cheaper and generic drugs and their own such policies.

I could go on, but the outline is clear enough.

On a Major Economic Folly
Kimball Corson
06/29/2016, American Samoa

In a modern country with a sovereign fiat currency, more public debt is not a problem until the spending of the revenue from it begins to generate inflation. This is a key lesson of modern monetary theory (MMT) and of history. Another is public debt in a country that honors and services it has never caused a financial crisis or recession. Interest can always be paid by printing more money, if that is necessary, subject again to the inflation limitation.

Private debt is a different matter and the problem. Where it cannot be serviced, rolled over or repaid in large dollar volumes, financial crises ensue and recessions follow. This happened in 1929, in 2007 and at other times, too. This is also a lesson of economic history. But people confuse the two and rail on against debt generally, and many, against the public debt as well. Some even ignore private debt. They misunderstand economics and its history.

Often they are republicans, permabears, conservatives and some democrats who do not understand that a government with such a currency is not subject to a budget restraint like households, individuals and businesses are. They refuse to learn.

Here is a typical full blown nonsense rant:

"The public debt is not a problem (they say) until it is, but analysts project the U.S. will spend $880 billion per year to finance its debt in 2024. That is the equivalent of all federal revenue in 1987. The U.S. currently owes $60,000 per citizen.The federal debt now exceeds our national gross domestic product. Only 10 nations in the world, including Greece and Japan, have debt to GDP ratios worse than the U.S. The federal debt is projected to increase 50 percent--to $29.3 trillion--in a decade. All of these debt projections use "cash accounting" instead of "accrual accounting," which ignores unfunded liabilities to government entitlement programs such as Medicare and Social Security. Using accrual accounting, which is lawfully required by corporations, the current debt would be closer to $100 trillion.

"Our current Federal Debt conventionally measure is fast approaching $20 trillion?"

That is pretty much the unabridged rant. So what else is wrong with it beside what I have explained above. Two things, I submit.

First, it is a testament to MMT that such debt has risen to almost $20 or 100 trillion and NOT precipitated a SINGLE financial crisis or recession. Those who make this rant miss that point altogether.

Second, the contention that the debt "isn't a problem until it is" can be said or made at every dollar point along the way from $0 to $20 or 100 trillion. At some point one saying so should get tired of being wrong so frequently, or 20 or 100 trillion times, and should seriously wonder if "until it is" will ever come. Crazy is continuing to be wrong so often and and still making the rant, or perhaps that is just a chronic learning disability instead.

Regardless of which, many republicans, conservatives, permabears and not a few democrats still have the problem in spades, but then too few of them have a very good or decent understanding of economics. On matters economic, they flay about, like tall grass in the wind.
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MMT is not taught in top economics departments in the US because it offends the conservative and oligarchical controlled corporations and foundations that fund the research at such institutions. It is therefore a taboo subject. However econ students at such universities, knowing their educations are being slighted, not infrequently fly leading MMT scholars in from other universities to give guest lectures. This has happened several times at Harvard and other universities.

The Price of Folly
Kimball Corson
06/28/2016, American Samoa

Many leading Brexiters now have serious pause. Dan Hannan, for example, has tempered his victory glee with acknowledgement that they need to respect the 48% who wanted to stay and should want a compromise, perhaps some sort of "associated member" status for Britain, which would preserve access to the single market if not more.

That is sensible enough but overlooks the fact it will be hard to sell to a shocked EU leadership which feels it is essential to demonstrate that departure is not a pain-free option. Nigel Farage's insults afterward to the EU Parliament also won't help. Brexiters will discover leaving is not any solution to their discontents, but only an new and augmented set of headaches and grievances to those they already have. Estimates are the British economy will shrink by from 3 to 7 percent starting sooner than later. The pain to the Brexiters, who wanted a Tory poke in the eye, will be significant. They and everybody else will pay for it.

The leaders of Leave have shocked the world, unleashed profound economic instability and prolonged uncertainty, exploded relations with the UK's closest allies, toppled a prime minister only recently elected and imperiled the very unity of the United Kingdom. Economic misery is sure to come for all, including the Brexiters.

This explains why as woeful as Cameron was in defeat, Boris Johnson and Michael Gove look even grimmer in victory.

Chicago Economics is Disgusting
Kimball Corson
06/27/2016, American Samoa

I get the University of Chicago Magazine, the College magazine (although I took only one course in the College), the Social Science Division magazine, the Law School Quarterly and recently now the quarterly Economics Department magazine. I could whine about the amount of work I do, reading them, but I have a bigger complaint.

Taking just the current issue of the Econ Department magazine, I learn see they have a lot of money for fancy new econ buildings and facilities and learn that selected faculty are singled out for the spot light and particular honor.

Robert Lucas, who during the depths of the Great Recession said all employment was voluntary because his models told him so, was awarded the Social Science Division Phoenix Prize "for changing the trajectory of research in the social sciences" presumptively for his work leading to and on Dynamic Equilibrium Stochastic Models, which are much criticized as being too incomplete, too ridge and to impractical, in contrast to general economic forecasting models, still very much in use.

Then comes Magne Mogstad, a full professor at Chicago, was highlighted for receiving the Fridtjof Nansen prize (don't ask) for his work seeking to show disability insurance has grown excessively, undermines work and results in future family members being on DI. Finally, Assistant Professor, Manasi Deshpande, received the APPAM Ph.D Award (again, don't ask) for taking the baton on her work showing how social insurance and public assistance programs "affect individual decisions about work, education and family formation," which is to say how it undermines all three. All three people are very Chicagoan.

But this is not all. "Summer Schools" on "Price Theory" and "Socioeconomic Inequality" are offered. Nothing on "Macro Theory" per se which has been displaced at Chicago by micro (read price theory) foundations being aggregated up into DESM macro models. The Inequality Summer School will focus on the educational and psychological differences between rich and poor people which is what lead to income and wealth inequality.

Pardon me while I wretch and throw up at the obvious bias. Even Milton Friedman would turn over in his grave. He believed informed guesstimates by good economists were better than aggregate macro models. Also, such work, even if well done, can be easily misused in the wrong republican hands.

Chicago Economics, founded and now very much funded by the oligarchy, is the groin kicker of the bottom half and the apologist for the one percent. Its motto should be, "Our research finds what they want."
_______

You see, the trick is to do a technically correct study with perhaps some good and humane normative program corrective suggestions that can then be read by stupid conservatives and republican congressmen to support axing, for example, the DI and social insurance programs. That way, you serve your patrons and the goals of scholarship at the same time while you get your take home pay.

One tip off is always what is studied. Conservatives pet peeves and concerns are at the top of the list, while some other topics or conclusions are strictly taboo. Another tip off is the supply side or productivity goal orientation of the study, when in truth demand side problems are the real issues.

That is how to get tenure at Chicago. That message is loud and clear in this econ dept quarterly journal. The full professor is leading the young female assistant professor along the way and indeed she is out doing him.

Scholarship without true integrity.

Ill-informed Democracies Are Unmanageable
Kimball Corson
06/27/2016, American Samoa

The Republican Party is an amalgam of know nothings. Ted Cruz wanted to and did shut government in the USA down briefly, at a cost of $25 billion dollars, in an effort to block Obamacare. Attending Republican threats to default on the public debt shook financial markets. Now, Trump's popular base is furious, too, but it is also spectacularly ignorant and ill-informed on most issues, like Trump himself. The British populace is mad as well, but its spectacular ignorance was on display when a voluminous and key Google search AFTER the Briexit vote by Brits was "What is the EU?" And the US and Britain are among the advanced nations with democracies.

Increasingly, the populations of too many advanced nations are mad, economically injured, hateful of their leadership and extremely ignorant about their plight and matters in general. This is not a workable formula for any viable democracy or for domestic stability.

Now, on the continent, will other nations seek to leave the EU? Will the Scots vote for Scottish independence? Will they renew military skirmishes with England? What will America's lower and lower middle classes do as they continue to be hammered? It likely won't be very democratic. Immigration from the Middle East into Europe cannot help the cause of democracy there. The Middle East and it migrants are angry as well and have no heritage of or appreciation for the needs of democracy.

It seems matters are slowly slipping out of control in democratic countries worldwide. People are mad about what is happening to them and they don't understand why. They become enraged at their political leadership more quickly. Leaders become heat sinks for rage. America is arming itself. A few but growing number of psychotics are reaping havoc and mass murdering with guns. Can more chaos not be far behind? Each country has its own brand or contour of imminent chaos and bedlam.

The world's democracies are in trouble at the top and democracy worldwide is largely failing. Ignorance is King.

Economic Doldrums and its Pain Flow Down Hill
Kimball Corson
06/27/2016, American Samoa

The bottom half of the US population fairs poorly in economic matters. So do the bottom halves of the populations of Great Britain, France, Italy and Spain.Those reading the media of these countries think all is well albeit controlled by national leaders and policy makers, but that simply is not the case. The media only focuses on and addresses the top half. This is why Trump, as a rouser of the US bottom half, fairs so well and why Briexit happened. The bottom ends are rebelling and this is just the start of it.

The elite worlds of finance and monetary policy have much less impact on the larger world of the real economy and its bottom populations in most circumstances than is supposed, especially to those with their noses glued to the small world of finance. The bottom halves of populations in most countries are often hurting, but the top halves of those populations are geared and policy-targeted to fair much better, if not well by the politicians and the oligarchies of those countries. Economic pain flows almost exclusively down hill, but the aggregate economies can continue to look good or adequate because dollar growth in the top halves can swamp no or little growth in the bottom halves when simple averages are used.

This fact aids ignoring the bottom halves and proclaiming the totals really do reflect aggregate successes. A blind eye and a little thoughtlessness also helps. The American economy is doing wonderfully many proclaim, ignoring who is getting what of the pie and who gets nothing more or even less of it. Other countries are fairing even less well with their data aggregates and numbers games, but everywhere the bottom end populations are beginning to hate, roar and howl. Their destructive urge is growing and their propensity for self injury is too. Witness Briexit.

Almost no one looks at how things could and should be for all to do much better relative to the status quo. Anger and hate, and isolationism and retrenchment are not useful for thinking about or considering these matters. They are preludes to rebellious, disruptive and destructive activity modeled theoretically on republican (congressional) behavior in the US. If I cannot have a good life, I won't let you or anyone have one either is the growing sentiment in bottom populations. Common threads and causes are emerging worldwide.

Change is coming in the form of a ground swell around the globe. The French revolution, our republican congress and oligarchical behavior almost everywhere have developed overlapping and angry sensibilities. We are just getting started.

Yours truly, taking a photograph
Kimball Corson
06/27/2016, American Samoa

And don't ask me what kind of tree that is. I am a botanical ignoramus.

IQ and the Wealth of Nations Are Substantially Correlated
Kimball Corson
06/25/2016, Pago Pago, American Samoa

IQ and the Wealth of Nations is an interesting book written by
Richard Lynn and Tatu Vanhanen. The authors argue that differences in national income (in the form of per capita gross domestic product) are correlated with differences in the average national intelligence quotient (IQ). They further argue that differences in average national IQs constitute one important factor, but not the only one, contributing to differences in national wealth and rates of economic growth.

National IQ correlates with gross domestic product per capita at 0.82, and with the rate of economic growth from 1950-1990 at 0.64, both noteworthy. This explains why the pacific rim countries and those in Europe do so well and those in Africa and the Middle East, except obviously for Israel, do so poorly.

Major migrations -- blacks being brought to the US and middle easterners immigrating into Europe alter indigenous IQs. Indeed, native Americans were overwhelmed in the north Americas by European immigration. There is much moving about, but if a country wishes to do well economically, it would do well to consider the IQ of those it permits to immigrate. The USA has substantially cherry picked the world of top brain power by that means but those numbers are dwarfed by those already here because they are so small a percentage.

IQ or g matters whether people like it or not.

 

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