[pf] Repost: BRAIN FOOD THE POLITICS OF ECONOMICS

by Kaleopono

19 December 2000 23:48 UTC

----- Original Message -----
From: "Kaleopono" <ssa@ilhawaii.net>
To: "Positive Futures" <positive-futures@igc.topica.com>
Sent: Monday, December 11, 2000 6:49 PM
Subject: Fw: BRAIN FOOD THE POLITICS OF ECONOMICS


> Here's the latest from Jay Hanson.  Some will find it interesting and
> evocative.  Kaleopono
>
>
> ----- Original Message -----
> From: Jay Hanson
> To: xx
> Sent: Thursday, December 07, 2000 5:43 PM
> Subject: BRAIN FOOD THE POLITICS OF ECONOMICS
>
>
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>
>
> Energy Synopsis
>
>     Petroleum geologists have known for 50 years that global oil
production
> would "peak" and begin its inevitable decline within a decade of the year
> 2000.  Moreover, no renewable energy systems have the potential to
generate
> more than a tiny fraction of the power now being generated by fossil
fuels.
> In short, the end of oil signals the end of civilization, as we know it.
See
> the latest energy synopsis at http://dieoff.com/synopsis.htm
>
> --------------------------------------------------------------------------
--
> ----
>
>
> Recent Energy Articles of Note
> The Last Oil Shock
>     Britain faces the prospect of closed filling stations and empty
> supermarket shelves as the fuel protesters once again threaten blockades.
> Last time the problem went away within a week or two. The hope is that
this
> time too, the crisis will quickly evaporate. But there are scientists who
> believe that the recent problems are just a foretaste of what is to come -
> all the time and very soon. They predict that from 2005, the world will
face
> a permanent and deepening shortage of petrol and
>
esel.[ http://news.bbc.co.uk/hi/english/events/the_money_programme/newsid_1
> 014000/1014236.stm ]
>
> After Oil
>     The weightless economy still has dirty old oil pumping through its
> veins, as the recent fuel blockades demonstrated says David Fleming. In
the
> next ten years, the growing demand for oil will permanently overtake a
> shrinking supply -- playing havoc with price. Why are western governments
> doing nothing to prepare?
>  http://www.prospect-magazine.co.uk/highlights/essay_fleming/ ]
>
> Research Firm: Canadian Reserves May Not Fill US Demand Gap
>     Coad said: "Most forecasts show Canadian gas consumption rising at a
> steady 1.5% to 3%/year and show exports of Canadian gas rising from
> approximately 3 tcf a year today to something at or above 4 tcf  a year by
> 2010. In order to meet these requirements, Canadian gas  production would
> need to increase by 3 bcf/day over the 10-year  period.
>
> "Although not beyond the realm of possibility, recent supply trends
suggest
> that this is clearly a stretch target for supply. This  is particularly
true
> when we consider recent trends in well  productivity and decline rates.
> Although the WCSB [Western Canadian  sedimentary basin] resource base is
far
> from depleted, the challenge of increasing production is more significant
> than in past years.
>
> "Such figures bode ill for those who had looked to Canada for major
> increases," he said.
>
>
http://ogj.pennnet.com/Content/cd_anchor_article/1,1052,OGJ_7_NEWS_SUB_85916
> _1,00.html ]
>
> Natural Gas Is No Refuge from Oil
>     There won't be any relief from reduced or slower demand growth either.
> Essentially all new electricity capacity coming online in the foreseeable
> future will be fired by natural gas. Of all new homes being constructed,
70%
> are heated by natural gas. Also, a full 52% of current housing stock is
> fueled by natural gas. By virtue of the clean burning attributes of the
> fuel, any new environmental regulation of greenhouse emissions will only
> encourage even greater demand. Over the next five years, Energy Ventures
> Analysis expects growth of natural gas demand to outstrip production
growth
> by 0.7% per year, resulting in an increasingly tight market.
> All-in-all, slower investment in production capacity in past years is now
> accelerating the impact of a long-term structural supply constraints that
> given time, would have become increasingly noticeable regardless. Growing
> U.S. dependence upon natural gas has not been met with improved production
> capacity, and years will be needed to ameliorate the shortage. So the
upshot
> is that, unlike oil, there is not much hope of seeing natural gas retreat
> back to its pre-2000 prices any time soon. An annual average price of
around
> $2 or less for natural gas at the wellhead is a thing of the past.
>  http://www.dismal.com/todays_econ/te_112100.asp ]
>
>
> --------------------------------------------------------------------------
--
> ----
>
>
>
> (Permission to reprint is expressly granted!)
>
> THE POLITICS OF ECONOMICS
> by Jay Hanson -- www.dieoff.org
>
>     Milton Friedman is probably the best known and most widely respected
> free-market economist in the world. In 1976, Friedman won the Nobel Prize
> for economics. In 1989, Friedman's  FREE TO CHOOSE was the best selling
> nonfiction book in the United States and it was translated into most major
> languages.  Here Friedman identifies the origin of his free-market
political
> crusade: "Adam Smith's key insight was that both parties to an exchange
can
> benefit and that, so long as cooperation is strictly voluntary, no
exchange
> will take place unless both parties do benefit." [1]
>
>     Since economists do not explicitly define "benefit" -- let alone
measure
> it -- one might ask how Friedman could possibly know? In fact, he
doesn't --
> Friedman is imposing his personal values on others. It's the "politics of
> economics".
>
> NORMATIVE AGENDA
>     In the 1870s, William Stanley Jevons explicitly defined economics as
> normative: "... the mechanics of utility and self-interest ... to satisfy
> our wants to the utmost with the least effort -- to procure the greatest
> amount of what is desirable at the expense of the least desirable -- in
> other words, to maximize pleasure, is the problem of economics." [2]
>
>
> VALUE-LADEN TERMS
>     In pursuit of the normative agenda, economics adopted value-laden
terms:
>
>   "The vocabulary of physics is amoral -- not antimoral, but amoral. Mass,
> force, and velocity have no moral implications because the laws describing
> them have no alternatives. The vocabulary of economics, in contrast,
abounds
> in ethical terms. It is impossible to define 'good,' 'service,' or even
> 'utility' without making ethical judgments. Every object has mass, but not
> every object has utility. Moreover, some people may consider a certain
> object a good while others do not, but there can be no disagreement about
> the equivalence and direction of action and reaction. There is no other or
> better way for a body to fall in a vacuum than s=˝gt2; this is not because
> physicists don't happen to be interested in making this a better world.
> There is no unchanging price for a bushel of wheat; and this is not
because
> economists don't happen to be interested in a stable universe. The price
of
> wheat depends upon what people do, but bodies fall as they do regardless
of
> what people do or think.
>
>
>   "Economics is not value free, and no amount of abstraction can make it
> value free. The econometricians' search for equations that will explain
the
> economy is forever doomed to frustration. It is often said that their
models
> don't work, because, on the one hand, the variables are too many and, on
the
> other, the statistical data are too sparse. But the physical universe is
as
> various as the economic universe (they are, to repeat, both infinite), and
> Newton had fewer data and less powerful means of calculation than are at
the
> disposal of Jan Tinbergen and his econometrician followers. The difference
> is fundamental, and the failure to understand it reduces much of modern
> economics to a game that unfortunately has serious consequences." [3]
>
>
> THE METHOD
> The "scientific method" is the best way yet discovered for discovering
truth
> amid a world of lies and delusion. The simple version looks something like
> this:
>
> 1. Observe some aspect of the universe.
> 2. Invent a theory that is consistent with what you have observed.
> 3. Use the theory to make predictions.
> 4. Test those predictions by experiments or further observations.
> 5. Modify the theory in the light of your results.
> Go to step 3. [ http://www.xnet.com/~blatura/skep_1.html  ]
>
> But economists do not use the scientific method.  Economists use the "post
> hoc, ergo propter hoc (after-the-fact) reasoning" method. Here's how that
> method works:
>
> Suppose one were in a primitive jungle village somewhere. Further suppose,
> that a child became sick and the local witch doctor was charged with
> explaining the sickness. Perhaps he would say the child "must be" sick
> because someone offended the gods. That's the kind of method that
economists
> use -- the witch doctor method:
>
>   "Those who believe society can best be understood as a series of markets
> begin by positing a rational, calculating individual whose goal is to
> maximize 'utility.' This premise says everything and nothing, since it is
> true by definition in all cases. But it is a key aspect of the market
model,
> since it is the behavioral part of the logical argument that whatever the
> market decides must be optimal." [4]
>
>   "Economists enamored of pure markets begin with the theory, and hang
> models on assumptions that cannot themselves be challenged. The
> characteristic grammatical usage is an unusual subjunctive -- the verb
form
> 'must be.' For example, if wages for manual workers are declining, it must
> be that their economic value is declining. If a corporate raider walks
away
> from a deal with half a billion dollars, it must be that he added that
much
> value to the economy. If Japan can produce better autos than Detroit,
there
> must be some inherent locational logic, else the market would not dictate
> that result. If commercial advertising leads consumers to buy shoddy or
> harmful products, they must be 'maximizing their utility' -- because we
know
> by assumption that consumers always maximize their utility. How do we know
> that? Because to do anything else would be irrational. And how do we know
> that individuals always behave rationally? Because that is the premise
from
> which we begin. The truly interesting institutional questions -- the
> disjunctures between what free-market assumptions would predict and the
> actual outcomes -- are dismissed by the tautological and deductive form of
> reasoning. The fact that the real world is already far from a perfect
market
> is ignored for the sake of theoretic convenience. The dissenter cannot
> challenge the theory; he can only describe the real world." [5]
>
>   "There is at the core of the celebration of markets a relentless
> tautology. If we begin, by assumption, with the premise that nearly
> everything can be understood as a market and that markets optimize
outcomes,
> then everything else leads back to the same conclusion -- marketize! If,
in
> the event, a particular market doesn't optimize, there is only one
possible
> inference: it must be insufficiently marketlike. This epistemological
> sleight of hand is an astonishing blend that blurs the descriptive with
the
> normative. It is a no-fail system for guaranteeing that theory trumps
> evidence. Should some human activity not, in fact, behave like an
efficient
> market, it must be the result of some interference that should be removed
or
> a stubborn human refusal to appreciate markets. It cannot possibly be that
> the theory fails to specify accurately how human behavior works." [6]
>
> THE POLITICS OF ECONOMICS
>     What do get if you combine a normative agenda, value-laden terms, and
> the witch doctor method? The politics of economics:
>
>   "No other discipline attempts to make the world act as it thinks the
world
> should act. But of course what Homo sapiens does and what Homo economicus
> should do are often quite different. That, however, does not make the
basic
> model wrong, as it would in every other discipline. It just means that
> actions must be taken to bend Homo sapiens into conformity with Homo
> economicus. So, instead of adjusting theory to reality, reality is
adjusted
> to theory." [7]
>
>
> [1] pp. 1-2, FREE TO CHOOSE, Milton and Rose Friedman; Harvest, 1980;
> http://www.amazon.com/exec/obidos/ASIN/0156334607/brainfood.a
> [2] p. 25, ADAM SMITH'S MISTAKE, Kenneth Lux; Shambhala, 1990;
> http://www.amazon.com/exec/obidos/ASIN/087773593X/brainfood.a
> [3] pp. 38-39, THE END OF ECONOMIC MAN, George Brockway; Norton, 1995;
> http://www.amazon.com/exec/obidos/ASIN/0393313522/brainfood.a
> [4] p. 41, EVERYTHING FOR SALE, Robert Kuttner; Knopf, 1997;
> http://www.amazon.com/exec/obidos/ASIN/0394583922/brainfood.a
> [5] p. 9, Kuttner.
> [6] p. 6, Kuttner.
> [7] p 21, DANGEROUS CURRENTS, Lester Thurow; Random, 1984;
> http://www.amazon.com/exec/obidos/ASIN/0394723686/brainfood.a ;
> http://dieoff.com/page162.htm
>
>
> --------------------------------------------------------------------------
--
> ----
>
> NO TECHNICAL SOLUTIONS
> by Beryl Crowe (1969)
>
> "There has developed in the contemporary natural sciences a recognition
that
> there is a subset of problems, such as population, atomic war, and
> environmental corruption, for which there are no technical solutions.
>
> "There is also an increasing recognition among contemporary social
> scientists that there is a subset of problems, such as population, atomic
> war, environmental corruption, and the recovery of a livable urban
> environment, for which there are no current political solutions. The
thesis
> of this article is that the common area shared by these two subsets
contains
> most of the critical problems that threaten the very existence of
> contemporary man." [p. 53]
>
> ASSUMPTIONS NECESSARY TO AVOID THE TRAGEDY
> "In passing the technically insoluble problems over to the political and
> social realm for solution, Hardin made three critical assumptions:
>
> (1) that there exists, or can be developed, a 'criterion of judgment and
> system of weighting . . .' that will 'render the incommensurables . . .
> commensurable . . . ' in real life;
>
> (2) that, possessing this criterion of judgment, 'coercion can be mutually
> agreed upon,' and that the application of coercion to effect a solution to
> problems will be effective in modern society; and
>
> (3) that the administrative system, supported by the criterion of judgment
> and access to coercion, can and will protect the commons from further
> desecration." [p. 55]
>
> ERODING MYTH OF THE COMMON VALUE SYSTEM
> "In America there existed, until very recently, a set of conditions which
> perhaps made the solution to Hardin's subset possible; we lived with the
> myth that we were 'one people, indivisible. . . .' This myth postulated
that
> we were the great 'melting pot' of the world wherein the diverse cultural
> ores of Europe were poured into the crucible of the frontier experience to
> produce a new alloy -- an American civilization. This new civilization was
> presumably united by a common value system that was democratic,
> equalitarian, and existing under universally enforceable rules contained
in
> the Constitution and the Bill of Rights.
>
> "In the United States today, however, there is emerging a new set of
> behavior patterns which suggest that the myth is either dead or dying.
> Instead of believing and behaving in accordance with the myth, large
sectors
> of the population are developing life-styles and value hierarchies that
give
> contemporary Americans an appearance more closely analogous to the
> particularistic, primitive forms of 'tribal' organizations in geographic
> proximity than to that shining new alloy, the American civilization." [p.
> 56]
>
> "Looking at a more recent analysis of the sickness of the core city,
Wallace
> F. Smith has argued that the productive model of the city is no longer
> viable for the purposes of economic analysis. Instead, he develops a model
> of the city as a site for leisure consumption, and then seems to suggest
> that the nature of this model is such is such that the city cannot regain
> its health because the leisure demands are value-based and, hence do not
> admit to compromise and accommodation; consequently there is no way of
> deciding among these value- oriented demands that are being made on the
core
> city.
>
> "In looking for the cause of the erosion of the myth of a common value
> system, it seems to me that so long as our perceptions and knowledge of
> other groups were formed largely through the written media of
communication,
> the American myth that we were a giant melting pot of equalitarians could
be
> sustained. In such a perceptual field it is tenable, if not obvious, that
> men are motivated by interests. Interests can always be compromised and
> accommodated without undermining our very being by sacrificing values.
Under
> the impact of electronic media, however, this psychological distance has
> broken down and now we discover that these people with whom we could
> formerly compromise on interests are not, after all, really motivated by
> interests but by values. Their behavior in our very living room betrays a
> set of values, moreover, that are incompatible with our own, and
> consequently the compromises that we make are not those of contract but of
> culture. While the former are acceptable, any form of compromise on the
> latter is not a form of rational behavior but is rather a clear case of
> either apostasy or heresy. Thus we have arrived not at an age of
> accommodation but one of confrontation. In such an age 'incommensurables'
> remain 'incommensurable' in real life." [p. 59]
>
> EROSION OF THE MYTH OF THE MONOPOLY OF COERCIVE FORCE
> "In the past, those who no longer subscribed to the values of the dominant
> culture were held in check by the myth that the state possessed a monopoly
> on coercive force. This myth has undergone continual erosion since the end
> of World War II owing to the success of the strategy of guerrilla warfare,
> as first revealed to the French in Indochina, and later conclusively
> demonstrated in Algeria. Suffering as we do from what Senator Fulbright
has
> called 'the arrogance of power,' we have been extremely slow to learn the
> lesson in Vietnam, although we now realize that war is political and
cannot
> be won by military means. It is apparent that the myth of the monopoly of
> coercive force as it was first qualified in the civil rights conflict in
the
> South, then in our urban ghettos, next on the streets of Chicago, and now
on
> our college campuses has lost its hold over the minds of Americans. The
> technology of guerrilla warfare has made it evident that, while the state
> can win battles, it cannot win wars of values. Coercive force which is
> centered in the modern state cannot be sustained in the face of the active
> resistance of some 10 percent of the population unless the state is
willing
> to embark on a deliberate policy of genocide directed against the value
> dissident groups. The factor that sustained the myth of coercive force in
> the past was the acceptance of a common value system. Whether the latter
> exists is questionable in the modern nation-state." [pp. 59-60]
>
> EROSION OF THE MYTH OF ADMINISTRATORS OF THE COMMONS
> "Indeed, the process has been so widely commented upon that one writer
> postulated a common life cycle for all of the attempts to develop
regulatory
> policies. The life cycle is launched by an outcry so widespread and
> demanding that it generates enough political force to bring about
> establishment of a regulatory agency to insure the equitable, just, and
> rational distribution of the advantages among all holders of interest in
the
> commons. This phase is followed by the symbolic reassurance of the
offended
> as the agency goes into operation, developing a period of political
> quiescence among the great majority of those who hold a general but
> unorganized interest in the commons. Once this political quiescence has
> developed, the highly organized and specifically interested groups who
wish
> to make incursions into the commons bring sufficient pressure to bear
> through other political processes to convert the agency to the protection
> and furthering of their interests. In the last phase even staffing of the
> regulating agency is accomplished by drawing the agency administrators
from
> the ranks of the regulated." [pp. 60-61, THE TRAGEDY OF THE COMMON
> REVISITED, by Beryl Crowe (1969), reprinted in MANAGING THE COMMONS , by
> Garrett Hardin and John Baden,  W.H. Freeman, 1977; ISBN 0-7167-0476-5
> http://www.amazon.com/exec/obidos/ASIN/0253211530/brainfood.a ].
>
> Jay -- www.dieoff.com
>
>
> --------------------------------------------------------------------------
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