General / Off-Topic Interesting news and perspectives on the economy
- Thread starter Surfinjo
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http://usuncut.com/world/iceland-sentences-26-bankers-to-a-combined-74-years-in-prison/
http://icelandreview.com/news/2015/02/12/icelandic-bankers-sentenced-prison
http://icelandmag.visir.is/article/26-bankers-already-sentenced-a-combined-74-years-prison
Enter search term in Google: Iceland sentences bankers and see the huge list of news outlets reporting this story.
None among the UK or US news media.
Yeah, I have this fantasy that one day people will wake up and realise it's all a load of cowpats. How many times does "economics" have to fail before we ditch it for a better system? If your car tried to crash 4 or 5 times you'd get a new one. If your car is named "economics" you just keep driving.
I'm not sure he knows what economics means.
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Railing against "economics", whilst it provides for some cynical guffaws, is like complaining that "mathematics" is why you can't afford the rent.
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Now, people use economics (and maths) to model what goes on in the fantastically complex world of day to day interactions between billions of people. Farmers deciding what crop to grow, shopkeepers deciding what to stock and how much to charge, people wondering if they should buy a new coat. All these chaotic decisions and actions interact and mix to form "the economy" which is studied by "economists" in the science of "economics".
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What we need is not throwing our hands in the air and saying "I don't understand", but to get involved understand "economics" then you can argue with the decisions coherently.
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Imagine going to a doctor, he says you need to amputate a leg, you do not understand what he is saying and would rather not cut off your leg. Do you go "I don't understand, therefore you must be wrong" or should you research and learn then you can either understand why he is recommending such a drastic action or argue what should be done instead.
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On the subject of bank CEO's gong to jail, hell yeah. LIBOR rigging was unknown to the higher ups? Yeah right, and Rebecca Brooks knew nothing about phone hacking either.....
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Railing against "economics", whilst it provides for some cynical guffaws, is like complaining that "mathematics" is why you can't afford the rent.
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Now, people use economics (and maths) to model what goes on in the fantastically complex world of day to day interactions between billions of people. Farmers deciding what crop to grow, shopkeepers deciding what to stock and how much to charge, people wondering if they should buy a new coat. All these chaotic decisions and actions interact and mix to form "the economy" which is studied by "economists" in the science of "economics".
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What we need is not throwing our hands in the air and saying "I don't understand", but to get involved understand "economics" then you can argue with the decisions coherently.
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Imagine going to a doctor, he says you need to amputate a leg, you do not understand what he is saying and would rather not cut off your leg. Do you go "I don't understand, therefore you must be wrong" or should you research and learn then you can either understand why he is recommending such a drastic action or argue what should be done instead.
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On the subject of bank CEO's gong to jail, hell yeah. LIBOR rigging was unknown to the higher ups? Yeah right, and Rebecca Brooks knew nothing about phone hacking either.....
The problem is not the science-like "let's get data and make statistics" part of economics, but the "let's see how we can promote our particular ideology" economics. Because, frankly, they are charlatans, not scientists genuinely trying to observe and understand, but politicians, lobbyists etc. who may or may not have an economics degree but are not doing any science at all.
Imagine if the field of biology were mostly full of people claiming to be scientists yet actively promoting intelligent design. That kind of lunacy is what is happening in economics, the actual scientists are vastly outnumbered.
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Exactly
The single minded interpretation that growth is somehow more important than keeping people out of poverty.
When growth slows, suddenly it becomes necessary to drive huge numbers into poverty and debt so an already wealthy minority can re-build their own capital and maintain their own standards.
Running the economy in this way is insane. It engenders resentment and division.
I agree, the issue is not "economics" it's the interpretation of the data to create a "model". Once you have a model you can start to make decisions to create the outcome you desire. For example in aerodynamics, we have excellent models of how air behaves around an aircraft. If we wish to lower the stall speed of our aircraft, we know exactly what things we need to do to achieve that aim.
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The problem with economic models is that there is much more room for disagreement.
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To switch back to the medical analogy we are at a similar place to the middle ages. We know there is something wrong but there is disagreement about what to do. "We must bleed him to reduce the ill humours!", "No we must keep his vital fluids intact and feed him sustenance!", "No! a fast is required to purge the bowels!".
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Ultimately what "model" you subscribe to is a matter of ideology.
I agree that using "growth of GDP" as the measure of how well our country is doing is a poor choice. It does have the advantage of being relatively easy to measure, but the disadvantage of being only loosely coupled to "everyday experience". If you've just lost your job, have to move to a smaller flat and are struggling to get by, you're not going to think that things are going well regardless of GDP or any other measure. On the other hand if you have just got a pay rise, prices are falling and things are on the up, you think things are going well regardless of any "recession".
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Growth can be a good thing, China's growth has dragged millions out of real poverty (not 1st world poverty) into modern housing, modern healthcare, education etc. The drive to grow China's economy has had negative effects (e.g. environmental issues) but also positive ones.
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The primary issue I have with the current system is it's instability, boom & bust seems to be built in to the system.
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During the boom times great progress is made but then undone in the busts. Sort of two steps forward, one step back.
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I would be really interested to see if the "dash forward, then hop back" approach we seem to have taken yields better increases in living standards over time than a more measured approach.
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We do seem to have got to a point where the wealth gap is widening again and this, as you say, creates resentment and division.
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There is hope though. Studies (UN maybe) show that the % of the world population who are of working age peaked in 2010 and is starting to decline.
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This means that since the war, the supply of labour (worldwide) has been rising, thus driving down the price of labour relative to capital. This has had a negative effect on the wealth gap as the "poor" only have their labour whilst the "rich" by definition have capital.
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Now the supply of labour is reducing this should increase the price (relative to capital) allowing the "poor" to do better and reduce the wealth gap. Of course robotics and automation are working in the opposite direction but I suspect that over time demographics will win.
Did it, or was Chinese poverty a consequence of several thousands years of a succession of imposed policys designed around the paranoid belief that if the people at the top are not running everything then the people at the bottom will become the people at the top?
Not sure I get your point. I'm not disputing that Chinese poverty was the result of a couple hundred years (and the last 70, under communism in particular) of poor leadership.
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But the increase in living standards has been as a result of (and to some extent the cause of) the huge growth (incidentally piloted by a few people at the top) china experienced. There is literally no other way to move several hundred million people out of a subsistence agrarian existence and into houses with heat, toilets, light and provide hospitals, schools, roads etc than to increase the growth of the economy (or the growth of the economy is a consequence of that activity) either way growth and increased living standards go hand in hand.
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As an aside for all but the last few of centuries, going back several thousand years, the apex of human civilization (in terms of governance, science, technology, industry and even average living standards) on Earth has been in China. The last few centuries have been the anomaly.
No. Try to stick to the issue at hand.
Growth is not the issue. Growth will happen regardless in a free society. The reason China and most other societies in the world were trapped in relative poverty for thousands of years was because the ruling classes believed they needed to keep the masses under control. England has been the wealthiest nation in Europe for hundreds of years. It was only in the 18th century when governmental controls were eased, that the economy began to grow naturally. Most people wandering around now, waving titles are not aristocrats. They assumed these titles in the 18th and 19th century because their accrued wealth led to improved social status and the awarding of titles.
France was also a wealthy nation where most lived in dire poverty, until social controls were finally eased. Russia was exactly the same. One of the wealthiest nations on the planet in terms of its natural resources. yet huge numbers were and are in poverty, simply because their right to individual freedom is being curtailed.
The issue is priorities. The priority should be, must be the welfare of the masses. Growth will occur regardless. The only stimulus it needs is a free society which we have. he turbo-boost, (to coin an expression), that is induced by monetarism increases that growth but at enormous social cost. A social cost which I do not believe anyone has a right to impose upon the majority.
Forbes, the Financial Times and Reuters have all picked up on the story but Google won't give up the links without a little fiddling with the filters for some reason. Conspiracy!
Reading through both our posts, are we not arguing the same thing?
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That, unimpeded by "the man" the masses will create growth and move forward, improving their standard of living and as a consequence creating growth.
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But does there not need to be some form of social construct to ensure that the proceeds are shared out? After all, totally unrestrained capitalism would result in a very unequal society (say Victorian Britain). On the other hand if "government" is too overbearing then the natural march of "the masses" to improve their living standards is curtailed.
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Somewhere there has to be a happy medium. I would say communist russia, china, N Korea are too far towards government control. On the other hand the USA, Putin's Russia, contemporary China are all too far towards unrestricted capitalism, albeit the last two are odd examples of a hybrid aristocracy (cloaked as a people's communist government) with unrestricted capitalism (money always trumps rule of law).
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I would argue western Europe has it about right(ish), maybe France is a bit too socialist, maybe the Uk a bit too right wing, but we're about there.
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The current argument in the uk is essentially about the size of the state.
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I have some sympathy with Osbourne position on tax credits, why does someone in full time work need state support? Essentially the state is subsidising low wage employers. There is something incongruent about that. Conceptually it would be better if the minimum wage was high enough to lift a person out of poverty with no assistance from the state.
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That said the "collateral damage" would appear too high.
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That, unimpeded by "the man" the masses will create growth and move forward, improving their standard of living and as a consequence creating growth.
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But does there not need to be some form of social construct to ensure that the proceeds are shared out? After all, totally unrestrained capitalism would result in a very unequal society (say Victorian Britain). On the other hand if "government" is too overbearing then the natural march of "the masses" to improve their living standards is curtailed.
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Somewhere there has to be a happy medium. I would say communist russia, china, N Korea are too far towards government control. On the other hand the USA, Putin's Russia, contemporary China are all too far towards unrestricted capitalism, albeit the last two are odd examples of a hybrid aristocracy (cloaked as a people's communist government) with unrestricted capitalism (money always trumps rule of law).
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I would argue western Europe has it about right(ish), maybe France is a bit too socialist, maybe the Uk a bit too right wing, but we're about there.
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The current argument in the uk is essentially about the size of the state.
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I have some sympathy with Osbourne position on tax credits, why does someone in full time work need state support? Essentially the state is subsidising low wage employers. There is something incongruent about that. Conceptually it would be better if the minimum wage was high enough to lift a person out of poverty with no assistance from the state.
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That said the "collateral damage" would appear too high.
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This^^^^
I'd love to think we are.
But the current emphasis is based upon an obsessional reduction of taxes in the belief that it allows those individual who earn the highest incomes to decide for themselves how they will spend their wealth. Essential services are being reduced to a minimum in the belief that people will work harder so they can afford to make up any shortfall for themselves.
In practice it simply means some accumulate more personal wealth while the greater part of society looses essential services so their ability to accumulate wealth is diminished as the wealthier become more so.
It is leading to concentration of capital and inadequate provision. Both are counter to the interests of society and the encouragement of productive work, hence individual profits.
Society must take official responsibility for the essential services because it is in the interests of the whole of society that these exist.
The accumulation of wealth is not the priority. The provision of social services is. Because when the majority have adequate social security the majority can better accumulate their own wealth.
But the current emphasis is based upon an obsessional reduction of taxes in the belief that it allows those individual who earn the highest incomes to decide for themselves how they will spend their wealth. Essential services are being reduced to a minimum in the belief that people will work harder so they can afford to make up any shortfall for themselves.
In practice it simply means some accumulate more personal wealth while the greater part of society looses essential services so their ability to accumulate wealth is diminished as the wealthier become more so.
It is leading to concentration of capital and inadequate provision. Both are counter to the interests of society and the encouragement of productive work, hence individual profits.
Society must take official responsibility for the essential services because it is in the interests of the whole of society that these exist.
The accumulation of wealth is not the priority. The provision of social services is. Because when the majority have adequate social security the majority can better accumulate their own wealth.
No, not at all. That is not the problem. First there is the scientific discourse: which data is relevant, how to interprete it, which model is a useful description of reality etc. This is not even a problem at all, just the way science works (has to work).
Second, there are a large number of widely shared and rarely questioned assumptions based on tradition and/or ideology, and not scientific insight (for example: the idea that any economy must forever grow). Any disagreement about these is usually limited to niches far outside mainstream economics.
The problem with economic models is not in the models themselves. The problem is that there are people, lots in fact, who treat the models as a means to an end, and that end is to promote ideologies and achieve or maintain a status quo that is to be upheld at all cost. Which is basically a more elaborate version of what I already said: economics is full of charlatans who abuse (and often simply ignore) the science who merely want to promote their ideologies. I write that in plural even though there is a singular dominating ideology today. So the fundamental problem is not "room for disagreement", but the very things about which little disagreement exists at all!
Cue inevitable eye-rolling by some people at the mere mention of the word which is at the heart of it all:
Capitalism.
To those who are disappointed I did not say neoliberalism: that particular ideology itself is a mere set of beliefs and tool derived from those beliefs, to uphold the central concept of capitalism forever. That is quite literally what is going on right now, all around us: the (so far frighteningly successful) attempts to imbue all levels and aspects of human existence in the spirit of capitalism, so that it cannot ever be abolished without destroying civilization itself. And this only works when in the end, each of us regards themselves and the world through the eyes of the capitalist that they themselves will have become. Not just us personally, as human beings, but on all the many fractal levels of human organization, all the way up to governments and nations which will only serve the purpose of greasing the machinery of capitalism, no more and no less.
And we are so far along this route already that one may even question my use of the future tense in the above paragaph.
Not just to decide themselves. But most importantly, to not spend it on "them" (substitute with any economically or socially disadvantaged, oppressed or marginalized group: the poor, the unemployed, the disabled, the refugees). This mindset where taxes are regarded as "theft". Where health insurance ought to give you money back if you don't get sick and/or raise the premium if you do - because otherwise someone else's treatment could be paid for by your money. In other words: mild forms of social darwinism.
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Some areas of human endeavour benefit from "capitalism" and the free market, video games, restaurants, theme parks, consumer goods. All these spheres benefit from competition. Can you imagine if the smartphone industry had been a government controlled industry? I suspect we'd still be using brick phones.
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Other areas are clearly not the place for ruthless competition, healthcare, education, transport infrastructure to name a few. These areas should to be managed "for the greater good" but even then there is a need for the inventiveness and efficiency that competition brings.
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It shouldn't be a choice between privatization of everything or nationalisation of everything.
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Other areas are clearly not the place for ruthless competition, healthcare, education, transport infrastructure to name a few. These areas should to be managed "for the greater good" but even then there is a need for the inventiveness and efficiency that competition brings.
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It shouldn't be a choice between privatization of everything or nationalisation of everything.
That I'm afraid, is a sophistry often claimed by those supporting capitalism.
Innovation comes through necessity. The necessity of profit is as significant and important to innovation as any other necessity.
Socialism doesn't preclude profit as a necessity. That would be stupid and ridiculous.
I'm not sure I follow, I wasn't "supporting capitalism" or claiming that socialism precludes profit.
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I was arguing that some areas are clearly better suited to the more "cut throat" aspects of capitalism and some areas clearly shouldn't be operated on those principles.
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However even in areas where "the market" is not appropriate, some form of competition will always improve things.
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For example, that may mean awarding the responsibility of running hospitals to groups who have achieved higher patient satisfaction scores than others rather than the lowest bidder. Money is only one of many ways of keeping score.
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Apologies if I came across as aggressive. I'm in soap-box mode today and you know how good that feels!
Anyway, I see no reason why any of these things cannot happen under a socialist economy.
I take the view that most innovations will happen eventually as necessity dictates.
Incentives promote innovation. That is a good thing.
As someone who formally worked as a medical professional in the NHS I can't argue with the notion of contracting out services or management. I dislike private medicine simply because it implies some can buy survival, but that is a personal view and there is no reason why a private health care system cannot thrive under socialism. But it cannot ever replace state health care simply because state health care is an essential service.
There is no reason we cannot have a thriving class system, a strong monarchy, inheritance, aristocrats and titles. Personally I dislike each of these institutions but none is incompatible with socialism.
Socialism is about making the economic priority, the welfare of society. The state supplies the essential services, Fire brigade, Police, health care, Social work, Education, Coast guard. It does so because these are essential to the welfare of all. They give to all equal freedom to pursue their goals and ambitions and achieve what they are capable of.
Capitalism is about making the economic priority the accumulation of capital.
I favour the former
no problemApologies if I came across as aggressive. I'm in soap-box mode today and you know how good that feels!
It's not so much about the rate of innovation, man is an inventive animal and individuals are always coming up with easier, faster, "better" (for whatever parameter "better" is) ways of doing things.
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It's about the way these "innovations" are "filtered".
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The market is one method of identifying what is better, in the sense that what is "better" will do well in the market. As the old saying goes "build a better mousetrap and the world will beat a path to your door". But the market is essentially "the wisdom of the crowd" and money the method of scoring. Reddit is essentially a market but with up/down votes rather than money. The most voted for rises to the top and the theory is that the most voted for comments are the best.
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Humans will always try to win within the rules of the game. If you tell piece workers they are judged on quantity alone, you get high quantity, low quality. If you tell them they will be judged on quality alone, you get low quantity, high quality (this was an actual psychological study). If you tell hospital managers to hit a 4hour waiting target in A&E you get all sorts of odd things like checking people in at 3h50min then dumping them in a corridor, because the managers are just trying to hit the targets. This means you have to be extremely careful how you set your measuring system and your goals. Money is just one measuring system. You tell a bunch of traders that they will be purely judged on profit and they will move heaven and earth to do that.
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The mistake many "capitalists" and "free market" types (let's be honest the current gov) make is think that the scoring system (money) is the game. If you introduce free markets into healthcare that will improve the services because a monetarily efficient healthcare system must also be one that is best for the patient - so goes the thinking. I don't believe that Cameron or Osbourne hate the NHS or want to destroy it (Cameron's personal circumstances would indicate not) but I do think their belief that te best way to a better NHS is to use the market with money as the scoring system is incorrect (it comes down to models in people's heads). they are the well meaning physicians who insist the patient needs bleeding with leeches not because they wish te patient ill, but because the model they have in their head is incorrect.
I agree the state should be providing those essential services (I'm shocked that private fire brigades are actually a thing in some parts of the US, they will literally watch your house burn!) and that the benefits of human progress should be spread about, but I think that history has shown that when the state takes too much of a controlling hand in things, it tends to cork things up. As I mentioned it is all about the happy medium between the areas the state should absolutely be involved in and those it should keep out of.
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For example banking, I think the bankers have shown they aren't half as clever as they think they are, we don't need financial innovation, we need a stable, solid system that help the real economy to function. It should be boring like supplying gas or running a sewage system, something out of sight that just works.
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On the other hand can you imagine how terrible the push bike markets would be if what designs and products were decided by a committee in Whitehall?! No mountain bikes, no suspension, no folding bikes, no BMX's no carbon fibre, just Gentleman's bike mk4, ladies bike type 2 and Childs bike pattern 7 in any colour as long as it's black or red.