The New Scientist on Economics

Economy Boat
Economy Ahoy (Photo by Kerstin)

Last year a strange bit of ‘neoliberal’ propaganda surfaced in the New Scientist of all places. In what purported to be a report of recent research, Washington University psychologist Pascal Boyer has written of how the ‘human mind is designed to misunderstand the mass-market economies we have created’.

He says ‘evidence from psychology and anthropology…reveals that people have an intuitive mental template for how exchange…should occur’, and that these are evolutionary in origin. This template has arisen because, Boyer argues,

humans evolved to be highly co-operative…[a]nd our ancestors shared resources, especially when it came to goods with highly variable availability… Trade mostly took place between people who knew each other, or between groups that shared repeated exchanges. Technology was simple enough that they could track how much effort was involved in making most things, and verbal communication…was used to select the most co-operative partners with whom to do business. As a consequence, ‘we have a strong sense of fairness, and intuitively expect and prefer that the proceeds of a joint effort be shared in proportion to each participant’s contribution’. Moreover ‘we intuitively consider it beneficial to extend small favours to trading partners rather than exploiting their weak positions, because of expectations of long-term interactions.

Continue reading The New Scientist on Economics

A Second Brexit Referendum?

Returns to Scale in Frankfurt's business district
Returns to Scale in Frankfurt’s business district ©www.diarmidweirphotography.co.uk

In my last piece on Brexit I somewhat underplayed the role of a second referendum – suggesting that it would only probably come into play after a further general election, probably one that Labour won.

Things have moved on from then in that the negotiations have coalesced into a deal with which, rather remarkably, neither the desires of the ultra-Brexiteers for a clean break with Europe, nor those of the DUP for the guaranteed absence of Irish Sea trade barriers, are satisfied. This took some doing, and now gives Labour the potential role of maintaining a Conservative government that otherwise might fall – one they will not, and effectively cannot, play.

Continue reading A Second Brexit Referendum?

David Andolfatto on Money and Banking

David Andolfatto recently constructed a model intended to ‘reconcile’ (or I think more accurately to distinguish between) ‘mainstream’ and ‘heterodox’ views of the macroeconomic importance of money and banking. More specifically, he wants to answer the question: does the ability of banks to ‘create money’ when they issue loans give bank lending a greater impact on aggregate demand than other forms of leverage? His conclusion is that in general it does not. I believe his model is wrongly specified to determine this question – it essentially pre-decides by its structure. To demonstrate this, I have identified the features that he omits from his model and attempted to incorporate them within the structure of the model he himself uses. My full response is in the form of a downloadable pdf. Continue reading David Andolfatto on Money and Banking

Trump in Scotland – Let’s Protest for Mary

Mary Anne Macleod Trump in 1935. By Source, <a href="//en.wikipedia.org/wiki/File:Mary_Anne_Trump.jpg" title="Fair use of copyrighted material in the context of Mary Anne MacLeod Trump">Fair use</a>, <a href="https://en.wikipedia.org/w/index.php?curid=52325059">Link</a>
Mary Anne Macleod Trump in 1935. By Source, Fair use, Link

Donald Trump is coming to Scotland. He claims a special link to this country due to his Lewiswoman mother, Mary Anne Macleod. How should we respond to his visit – is it really an unacceptable violation of our liberal democratic culture for this American President to visit the UK and Scotland in particular? Is it right to think we should protest against him?

Trump is a unique figure among – modern at any rate – US Presidents. He pays no lip-service whatsoever to the norms of civility, respect, presidential communications and policy-making that have generally been accepted by holders of the office in living (and earlier) memory. He is a man with a reputation for dubious moral conduct, shoddy business practices and multiple bankruptcies. In setting up ‘Trump University’ he was guilty of outright fraud, for which he was required to pay a $25 million legal settlement. Continue reading Trump in Scotland – Let’s Protest for Mary

Brexit Endgames

Chequers - photo by Stephen Simpson (Public Domain)
Chequers – photo by Stephen Simpson (Public Domain)

Today Theresa May’s Cabinet are meeting at Chequers (the UK Prime Minister’s out-of-town residence) in an attempt to thrash out a final Brexit negotiating position with the European Union. As they do so, the biggest threat to Brexit seems not to be a realisation of its purposelessness, although that will surely come soon enough, but the process difficulty. This difficulty is entailed by a government reliant for its parliamentary majority on Northern Irish members who as extreme Unionists will not accept any further differentiation between rules and regulations applying between the UK mainland and their own country, as well as on extreme Brexiteers who will not stomach any residual taint of the EU single market and customs union. This sets up an irreconcilable clash with the EU’s shared commitment with its member, Ireland, who are adamantly opposed to any agreed additional barriers between the north and south parts of the island.[1] This opposition is both a matter of historical principle, as well as a practical concern over a reinstated ‘hard’ border being a focus for re-emerging intercommunity violence. Indeed Ireland and the EU both believe, a belief that implicitly is currently shared by the UK government, that the Good Friday Agreement (GFA) of 1998 commits all involved parties to the status quo in regard to the Irish border. Continue reading Brexit Endgames

The EU, Democracy and Brexit – Part 2

The Path to Brexit

David Cameron: Hapless Architect of Brexit (Apex via Daily Mirror)
David Cameron: Hapless Architect of Brexit (Apex via Daily Mirror)

At the root of the ‘Brexit’ mess is a possibly unprecedented act of self-serving recklessness by the leader of a government in a democracy. It is in large part one which lays bare the sham of the UK’s primary democratic process – its system for electing representatives to its governing Parliament. For some years the electoral prospects and the cohesion of the UK Conservative party have been threatened by a relatively small, but vociferous and unscrupulous cabal of individuals and groups opposed to the idea of mutually beneficial co-operation with other European countries – either because it was a proxy for a mixing of UK (read English) ‘culture’ with that of ‘foreigners’ of different ethnic or religious identity or it was a plutocratic rejection of the co-operation for setting anti-exploitation rules as a basis for national and economic competition, or in quite a few cases – both.

In the winner-takes-all electoral system created by First-Past-the-Post (FPTP) the leaking of Conservative Party support (and even Parliamentary personnel) toward the United Kingdom Independence Party (UKIP) led by Nigel Farage was not an incremental risk but an existential one. The party risked being out of power perhaps indefinitely and even being reduced to a rump of MPs with little compensatory chance of UKIP allies, as the right of centre vote became split, allowing more EU-friendly left of centre parties to dominate. The Conservative Party, having little in the way of clear principles or ideas to bind it, requires the prospect of power and career advancement above all else to unite its members – particularly its Parliamentary contingent.[1] Continue reading The EU, Democracy and Brexit – Part 2

The EU, Democracy and Brexit – Part 1

This is the first of three blog posts examining the past, present and future of the UK’s decision to leave the European Union.

The Role and Nature of the European Union

Winston Churchill (Imperial War Museum)
Winston Churchill (Imperial War Museum)

The great divide in politics (and perhaps human affairs in general) is between co-operation and competition – whether between individuals, businesses or countries. The role of co-operation is to pool decision-making for a greater shared benefit, including the benefit of avoiding foreseeable future conflicts. The role of competition is to pit resources, techniques and organisational structures against each other to find the ones that work best. The degree to which one or other is favoured – even to the extent of fetishisation – tends to define political outlooks.

There are two main arguments for the pre-eminence of co-operation, all else equal. Firstly, it is potentially less wasteful – all resources, techniques and structures are focussed on common goals, whereas under competition the losing approaches may have consumed much with little useable output. Secondly any worthwhile competition requires a co-operative base – to determine the winning criteria, and to set the framework of rules that makes the result meaningful. (Note that this latter even applies to the ultimate competitive scenario – that of war; conventions generally exist to avoid the destruction of the civilisations and the planet that are being fought over.) Continue reading The EU, Democracy and Brexit – Part 1

Harry Frankfurt Gets It Wrong On Inequality

Protesters against the impact of wealth on American politics - New York City 2015
Protesters against the impact of wealth on American politics – New York City 2015 ©www.diarmidweirphotography.co.uk

The eminent philosopher Harry Frankfurt has issued a small book comprising parts of two essays written some decades ago (On Equality, 2015, Princeton University Press). The stimulus to this publication is the recent work of Thomas Piketty on economic inequality in the developed countries, and Frankfurt’s view that

It is, I believe, of some considerable importance to get clear about these matters. Appreciating the inherent moral innocence of economic inequality leads to an understanding that it is misguided to endorse economic egalitarianism as an authentic moral ideal. Further, it facilitates recognition of why it may actually be harmful to regard economic equality as being, in itself, a morally important goal.

We will see however, that Frankfurt strips the concept of ‘economic inequality’ so bare as to render it meaningless more or less by definition, and that what he does regard as important inevitably brings us back to economic inequality as a highly significant issue as it manifests in the real world. Continue reading Harry Frankfurt Gets It Wrong On Inequality

The Production of Money: How to Break the Power of Bankers – by Ann Pettifor

New York City Financial District ©www.diarmidweirphotography.co.uk
New York City Financial District ©www.diarmidweirphotography.co.uk

Ann Pettifor is a director of Prime Economics, which advocates for a more Keynesian view of macroeconomics, and has been involved in development and environmental economics for many years. In The Production of Money: How to Break the Power of the Bankers (Verso, 2017) she correctly identifies that ‘money enables us to do what we can within our limited natural and human resources’, and so ‘creates economic activity’ rather than being a result of it. It does this by creating the finance needed for productive employment and investment. Bank finance ensures that there is never a ‘shortage of money’ and so we are only limited by humanity’s capacity and the physical ecosystem. Yet when 95% of the money in existence has been created by the commercial banking system, whose aim (quoting Michael Hudson) ‘is not to minimise the cost of roads, electric power, transportation, water or education, but to maximise what can be charged as monopoly rent’, this power must be rigorously regulated. So much should be uncontroversial today and I have written about this here. Continue reading The Production of Money: How to Break the Power of Bankers – by Ann Pettifor

‘Poverty Safari’ by Darren ‘Loki’ McGarvey

Glasgow, old and new  ©www.diarmidweirphotography.co.uk
Glasgow, old and new ©www.diarmidweirphotography.co.uk

Darren McGarvey’s Poverty Safari (Luath Press, 2017) is a very honest and powerfully written account of growing up and surviving amid poverty, addiction and violence in Glasgow. Darren draws from these experiences to make insightful observations about poverty, social deprivation, their causes and potential solutions. Of particular impact on his life was the addiction and violence of his mother, who died of alcoholism at the age of 36. He has escaped economically, if not emotionally, from these circumstances by turning a talent with words into a career as a writer and rap artist.

Violence both inside and outside the home affected the way he thought and behaved, and Darren outlines the role chronic stress, particularly emotional stress, leads to poor lifestyle choices and behaviours in the seeking of brief emotional reprieve. As he says:

A vulnerable family living in constant economic uncertainty, job insecurity or subject to an inhuman sanctions regime often lacks the capacity to absorb, process and practically address life’s unpredictable adversities.

Continue reading ‘Poverty Safari’ by Darren ‘Loki’ McGarvey