CapitalistImperialistPig

There are about 30 countries in the world that have net wealth greater than the market valuations of the richest corporations. The net wealth of the UK, the fifth richest nation, is about 15 times the market valuation of Apple or Amazon. The richest nation, the US, has a multiple of about 100. India, number 45 Peru, #44, on the country list, has a net wealth somewhat less than Tencent, Facebook or Berkshire Hathaway (each recently #5 on the corporate list). Wikipedia lists India twice, once at #45 and once at #12 - I think the latter, at 6-7 multiples of the largest corporations, is more likely, In terms technical expertise, no national government is competitive with these corporations, and in terms of data and information - the oil and steel of the modern age - there might be something like parity between the very most powerful states and the great information corporations, except that the corporations surely have it better organized. I was pretty shocked by these facts, but it...

There is a substantial body of observations that show that societies that are more unequal are more violent, have more crime, and dramatically less healthy.  Sometimes this exhibits itself in small but vivid ways.  Sapolsky has an example: The frequency of “air rage”— a passenger majorly, disruptively, dangerously losing it over something on a flight— has been increasing. Turns out there’s a substantial predictor of it: if the plane has a first-class section, there’s almost a fourfold increase in the odds of a coach passenger having air rage. Force coach passengers to walk through first class when boarding, and you more than double the chances further. Nothing like starting a flight by being reminded of where you fit into the class hierarchy. And completing the parallel with violent crime, when air rage is boosted in coach by reminders of inequality, the result is not a crazed coach passenger sprinting into first class to shout Marxist slogans. It’s the guy being awful to t...

The Stoat has a nearly impenetrably referential post on the subject as above. As usual, reading the post left me pretty much entirely clueless about what he was talking about, but because I had more important work that I wanted to avoid, I read a couple of the links. I discovered that a few years ago he seemed to be able to express himself more clearly, though even then he wasn't willing to give his stuff a descriptive title. His point, then and now, as I understand it was: So I’ll be more explicit, here, and argue for solving GHG emissions as a matter of economics, to be handled by taxation, rather than as a matter of morality, to be handled… somehow. Context: Eli wants to handle it as ethics. And a fair amount of the comments on Can global emissions really be reduced? are about this. Oddly enough, I agree with this, but I think that posing potential solutions as economics versus ethics is profoundly misleading, mostly because they are inextricably intertwined. Ethics i...

Yep, and it's not H. sapiens. It is the robots. Claire Cain Miller in the NYT: Who is winning the race for jobs between robots and humans? Last year, two leading economists described a future in which humans come out ahead. But now they’ve declared a different winner: the robots. The industry most affected by automation is manufacturing. For every robot per thousand workers, up to six workers lost their jobs and wages fell by as much as three-fourths of a percent, according to a new paper by the economists, Daron Acemoglu of M.I.T. and Pascual Restrepo of Boston University. It appears to be the first study to quantify large, direct, negative effects of robots. The paper is all the more significant because the researchers, whose work is highly regarded in their field, had been more sanguine about the effect of technology on jobs. In a paper last year, they said it was likely that increased automation would create new, better jobs, so employment and wages would eventually retur...

Great Caesar dead and turned to clay, could stop a hole to keep the wind away......WS, Hamlet. UPDATE: The following is a repost of something I wrote a few years ago. I thinks it's appropriate to the question of the utility of tariffs, which form a sort of wall against the outside, which is why political entities have nearly always liked them, to the distress of economists who like Ricardo's arguments. The real purpose of such walls, whether stone walls of farms and castles or tariff barriers, is to facilitate internal integration and external competition - to fight entropy. SOMETHING there is that doesn't love a wall .........................Robert Frost, Mending Wall Physicists call it entropy. But there are also lots of things that do love walls, including neighbors, cells, cultures, nations and firms. Which is to say, all those things that like to live in a state of relatively low entropy. We build fences to keep order in and disorder out. Matthew Yglesias, ...

Recent trouble in Big China is making everybody pretty jittery: The market turmoil in China spread around the world, as global investors grew more anxious about the country’s currency and the health of its economy. Chinese stocks plunged on Thursday, by more than 7 percent, forcing officials for the second time this week to halt trading for the day — in this case, after just 29 minutes. Krugman warned the Fed not to raise rates: Discuss and deride.

I should perhaps add that I experienced the American dream at the age of twenty -two, when I was hired by a university near Boston just after finishing my doctorate. This experience proved to be decisive in more ways than one. It was the first time I had set foot in the United States, and it felt good to have my work recognized so quickly. Here was a country that knew how to attract immigrants when it wanted to! Yet I also realized quite soon that I wanted to return to France and Europe, which I did when I was twenty-five. Since then, I have not left Paris, except for a few brief trips. One important reason for my choice has a direct bearing on this book: I did not find the work of US economists entirely convincing. To be sure, they were all very intelligent, and I still have many friends from that period of my life. But something strange happened: I was only too aware of the fact that I knew nothing at all about the world’s economic problems . My thesis consisted of several relatively...

Thomas Piketty states his principal conclusions early in his book, Capital in the Twenty-First Century: What are the major conclusions to which these novel historical sources have led me? The first is that one should be wary of any economic determinism in regard to inequalities of wealth and income. The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms. In particular, the reduction of inequality that took place in most developed countries between 1910 and 1950 was above all a consequence of war and of policies adopted to cope with the shocks of war. Similarly, the resurgence of inequality after 1980 is due largely to the political shifts of the past several decades, especially in regard to taxation and finance. The history of inequality is shaped by the way economic, social, and political actors view what is just and what is not, as well as by the relative power of those actors and the collective choices tha...

Thomas Piketty begins his book, Capital in the Twenty-First Century , with a look at some prophets of economic doom: Malthus, Ricardo, and Marx. Their points of view were very different: Malthus and Ricardo feared the social upheaval caused by increasing inequality while Marx cheered it on, but there was a common thread - seemingly ineluctable forces in demography and capitalism that immiserated the poor while increasing the concentration of wealth at the top. All of them ultimately proved wrong - at least in the medium run - for somewhat related reasons: the industrial revolution and the rapid progress of technology. Of course Marx did ultimately get his revolution, only, as Piketty points out it only happened in the most backward nation in Europe, while the advanced countries found other ways to deal with increasing capital accumulation. Piketty makes the point that all three were severely limited by the paucity of good data on what was happening and what had happened. The cent...

One argument that Prof Harari likes to make is that while capitalism has produced enormous growth, it also requires economic growth, growth that can only be powered by technological advance.  Is that true?  Is steady state capitalism impossible?  What if it were? The basic logic goes like this: borrowing and lending are at the heart of capitalism, but borrowing and lending at interest only make sense when there is an expectation that the investment will lead to net profit.  In a zero sum economy, the average net profit is zero.  Thus, on average, investing becomes a losing strategy or at best, a pure gamble. By contrast, in a growing economy, investment buys a piece of the larger future pie.  Of course most growth inevitably hits limits imposed by resources.  Can our ingenuity continue finding more forever?  I have my doubts.

Tyler Cowen, Isaac Asimov, and Our Libertarian Future. Interesting throughout, but FWIW, I don't buy his takeaway. In Asimov’s tale, set in November 2008, democratic elections have become nearly obsolete. A mysterious supercomputer said to be “half a mile long and three stories high,” named Multivac, absorbs most of the current information about economic and political conditions and estimates which candidate is going to win. The machine, however, can’t quite do the job on its own, as there are some ineffable social influences it cannot measure and evaluate. So Multivac picks out one “representative” person from the electorate to ask about the country’s mood (sample query: “What do you think of the price of eggs?”). The answers, when combined with the initial computer diagnosis, suffice to settle the election. No one actually needs to vote. Asimov was on to something: American political campaigns have indeed become extraordinarily sophisticated data-mining operations driven by smar...

So much for capitalism's good deed. Now Prof Harari looks at the downsides of completely free markets. Another segment hard to summarize, but some examples may help. By the end of the middle ages, slavery had nearly disappeared in Europe. The mines and plantations of the Americas and elsewhere needed labor, and the Atlantic Slave trade was created to supply that. Slave trading companies were traded on the European stock exchanges and were highly profitable. The Atlantic slave trade was a capitalist creation. Another crime of equal scale was the Great Bengal famine of 1770. This famine killed ten million Bengalis and was largely the creation of the British East India company and its disastrously greedy policies. These events illustrate a key problem with unregulated free markets: money has no conscience or morality. The more powerful actors in markets have great power to oppress the less powerful. Capitalists, says Harari, have two answers to that: First, mistakes were mad...

Trying to distill Prof Harari's insights into capitalism and its intimate link to science is a challenge that I will doubtless flunk, but let me mention a few ideas I found striking: Capitalism depends on growth. It makes little sense in a zero sum world. Capitalism depends on credit and credit depends on faith in a more prosperous future. Growth comes ultimately from scientific progress, which explains the intimate link between capitalism and science. Industry and governments fund science to promote growth. The sacred law of capitalism is that profits of production must be reinvested in more production. Capital and wealth are not the same thing. Capital must be invested in production. Wealth can be frittered away in conspicuous consumption. If growth stops, the edifice collapses. This last is hardly obvious to me, and I think at least arguable. I suspect that future arguments may hinge on this.

Since 1500, the world's total economic production has increased by a factor of about 240. Per capita production has increased by a factor of roughly 16. Capitalism, says Prof Harari, was the key ingredient in this growth, and in particular credit. Availability of credit made possible the vast economic expansion in the past six centuries. Loaning money is not a new invention, though - it goes back at least to Sumer, 5000 years ago. Such credit, he argues, was short term and high interest. So what was the special ingredient that made longer term, lower interest credit available? Faith in the future. Faith that the future would be more prosperous than today. Traditional societies, he said, tended to believe either in a static world or a golden age in the past. If one thinks that the world is a zero sum game, loaning money is just a gamble. On the other hand, if you believe that that money can produce new additional prosperity it makes excellent sense to invest.

"Behind every great fortune is a great crime" is a memorable line, but it would be more accurate to to say that behind every great fortune is a great rent. Exclusive control of some valuable resource - land, another means of production, a patent or copyright. One of the oldest and most fundamental businesses of government has always been the guarantee and enforcement of these exclusive controls. Paul Krugman blogs today that one of the biggest changes in the global economy of recent decades has been ...the much larger role of rents on intangible assets. He explains: What do I mean by the role of rents? Consider the changing identity of the most valuable company in America. For a long time, it was GM, then Exxon, then IBM. These were companies with huge visible production activities: GM had more than 400,000 employees, which was amazing when you consider that the overall national work force was much smaller than the one we have today, Exxon had oil refineries. IBM w...

I've noticed that many of my commenters are reluctant to consider economics to be a "science" whatever that may mean. Of course one posssible theory is that that means that they just prefer to clinging to whatever prejudices they've accumulated rather than study the results of economics. In any case, I decided to subject myself to a conventional course in Macroeconomics , taught by Nilss Olekalns of the University of Melbourne, on Coursera. I have a few other irons in the fire, so I'm not sure how far I will get, but so far so good. I would say that he has a reasonable defense of the science and its importance.

Economists, especially macro economists, are forced to rely on natural experiments for the study of various theories. Europe, and to a lesser extent the US, are currently conducting big experiments in fiscal austerity. The results have been catastrophic at the human scale for many of the Southern economies but Germany and friends remain dedicated to that old Castor Oil purge. Meanwhile, Japan, after decades of somnolent deflation, has chosen a monetarist/Keynesian try to pump up inflation in order to stimulate the economy. We shall see how it works.

Paul Krugman has got to be one of the favorite demons of Republicans, billionaires, right-wingers, Eurocrats, Chicago School economists and no doubt others. Why so? How did this happen to a highly respected economist. Well there is the fact that he is acerbic, sarcastic, and really good at mockery. Moreover, he is fiercely mocking while managing to keep his critiques substantive, unlike his critics who flail and resort to childisn name-calling - yes, I'm talking about you, John Cochrane and you, Niall Ferguson. That's probably a minor point though. Another factor is his bully pulpit as an NYT Op-Ed writer.. The real problem, I think, is that he has been so infuriatingly right. He was, as he reminds us, one of the few public figures to call "Bullshit!" on the Bush administration's justification for the Iraq War, and almost certainly the most important single critic. He did so from a newspaper and editorial page dominated by pro-Iraq-war propaganda. Then there...

Econobots we know and love. Part of a great New Republic book review/analysis by Michael Lewis: The giant Wall Street firms have taken on lives of their own, beyond human control. The people flow into and out of them but have only incidental effect on their direction and behavior. The firms may not be intent on evil; they aren't intent on anything except short-term profits: they're insensible. If anyone attempted to seize control of one of these strange machines and impose upon them a clear moral direction, the machine would hit its own button and he would be ejected. Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system. In other places, or at oth...

I think it was Banerjee who asked me to write something about engineering, so that the engineers could beat me up. Here is my first try. It stems from the class in Control of Mobile Robots that I am taking from Coursera and Georgia Tech. One of the most common control strategies for simple systems is so-called PID control, where the P stands for proportional, the I for integrating, and the D for derivative. The essence of the strategy is that you measure an error in your system behavior, and generate a correction control signal that is proportional to the error, its integral over time, and its derivative. My quasi-philosophical question is this: does the value of this strategy have anything to do with the fact that so many laws of physics take the form of second order differential equations? UPDATE: Second question. Suppose we replaced the Fed's Open Market Committee with a PID control robot which attempted to maintain a 2% inflation rate. What do think would happen?