Archive for September 25, 2011

Because the Problem with the Combustion Engine is Who’s Driving


Market forces take us in pretty peculiar directions. The technophile in me says this is way cool, but the environmentalist wishes the geniuses making robot cars were working on something else, like mass transit.

There is one potential environmental advantage to driverless automobiles:

‘This kind of car is actually perfect for car sharing,’ said [Raul] Rojas [the head of the university’s research group for artificial intelligence]. ‘There will be no more need for owning a car — once the automobile has dropped off its passenger it will drive on to the next passenger.’

The idea of having fewer cars on the road sounds great for a few reasons. First, it implies less congestion. Also, fewer cars implies less oil consumption and lower emissions — indeed, fewer resources overall (metals, batteries, etc). But the number of cars on the road isn’t the only factor when it comes to carbon consumption and emissions.

The real variable, all else being equal, is the time (vehicle hours) spent actually driving on the roads. So fewer cars getting used way more often isn’t necessarily a net gain in this respect.

In fact, what if the market strongly encouraged increased use of personal vehicles among people who otherwise would rely on public transportation? If owning a share of a vehicle or multi-vehicle cooperative meant a car was delivered to you on schedule regularly and took you to your destinations for a couple of thousand dollars a year plus mileage fees, might you think twice about packing into a crowded subway platform day after day?

My point isn’t to suggest there aren’t smart solutions, or that the worst is inevitable even if the market was left to its devices, but I think leaving outcomes up to the market could be tragic. A little urban planning could go a long way toward keeping driverless autos on the right track, or mitigating the demand for them altogether by making mass transit cheaper and more attractive than it is today.

As an aside, this was one of my favorite bits from the article:

‘However, all in all, one can definitely say that computer-controlled cars will be much safer than human drivers,’ said [Ferdinand] Dudenhoeffer, a professor for automotive economics. ‘Especially if you keep in mind that most of today’s accidents are caused by human error.’

An economist who peddles bizarre logical fallacies? Hard to believe, right? So the fact that human error causes most accidents in a world where there is literally just one robot car on the road (for just a few months) is evidence that robot cars will be safer when there are more of them on the road. I mean, right now the robot error rate is zero! This guy is a professor.


Linkage: Peak Oil, Symbolic Wealth, Class War, Externalities


I’ve been very busy lately and thus haven’t been able to post even links to all the terrific stuff I’ve been reading. I’m trying to use Twitter and Google+ a little more to share links to stories, but as usual the temptation to comment somewhat substantively is very hard to resist. I hope you find some of these interesting!

Getting Sober on Peak Oil

I think a lot of folks on both sides of the the debate over the concept of peak oil are drunk with ideologism. So I really appreciate, and essentially agree with, James Hamilton’s sober take.

‘Symbolic Wealth’

I’m not a fan of the style of Charles Hugh Smith’s blog; I think his peculiar presentation — in design and rhetoric — undermines his credibility. But I can’t help agreeing with him a significant portion of the time. Here he exposes the fallacy of wealth and equity as it corresponds to the real world. Nothing groundbreaking, but if you’re new to economic philosophy, this is something a lot of PhD economists can’t seem to grasp… yetI bet you’ll get it intuitively.

No War Like Class War

Richard D. Wolff drops knowledge on the history of class conflict and consciousness in America. It ain’t what’s being presented in recent debates.

Republicans claim, in Orwellian fashion, that Obama’s millionaire tax is ‘class war’. The reality is that the super-rich won the war.

Pollute for America?

Karl Smith over at Modeled Behavior makes a case that we need to suck it up and get polluting if we hope to escape our economic woes to the extent they’re driven by low cheap-energy supply. I read a lot of economists from across the spectrum, and I appreciate those who acknowledge climate change and resource limits as scientific truths, even if they conclude we shouldn’t worry so much in the short term.

Now in the long run something has to be done, if for no other reason than fossil fuels are not forever. In the short run there are many who are concerned about pollution, both C02 and the groundwater pollution from new fracking techniques.

I do not argue that these aren’t serious concerns. I do not dispute the science of global warming or the clear evidence of burning water, from natural gas contamination.

However, there are things worse the pollution and we have them. We should take steps to mitigate the harm but our first duty should be to relieve suffering now where we can and lay the foundation for recovery in the immediate future.

I disagree completely, but it’s interesting. Karl incidentally does not show his math (seems to avoid it, in fact) in terms of demonstrating why he thinks opening protected reserves can affect the market.

Food Inc. Strikes Back

Agribusiness giants are fighting back against the Michael Pollans and Food, Incs of the new food movement. Food advocate Anna Lappé expplains why we definitely do not want the new U.S. Farmers & Ranchers Alliance influencing food policy debate in America. (And why you can count on them doing just that.)


The Robot Invasion


Okay, I know I like to talk about robots, especially to ask where the innovation/productivity dividend is for the workforce. While we’re waiting for that to pay off, check out this infographic from the Singularity Hub.

the rise of robotic labor in the workforce


Capitalism… Ugh… What Now?


One of the more disturbing examples of a prestigious economist foolishly phoning in his views on prospects for the future of economics came in the form of a recent interview with Nobel Prize winner Edmund Phelps. It serves to show us once again that a grasp of the real world or the ability to communicate effectively is not necessary for one to be academically successful in the field of economics. (Also not required: a heart.)

This barely coherent piece is so bad, I actually checked to see if it was a translation originally conducted in another language. I normally would never be moved to comment on something of such utterly poor quality. But a website I very much respect, The Browser, featured the interview, and a good friend cheered it on Google+, so I feel compelled to tear it to much-deserved shreds.

Questioned by the interview blog Thought Economics, the Phelps piece is called “Capitalism — What Comes Next?” The response, in case you couldn’t guess, is more capitalism. Interviewer Vikas Shah sets the stage early, lest we get up our hopes that what’s next is something not awful:

As the blinkers of egoism have been lifted, we (as a society) have realised that capitalism — while ostensibly responsible for the vast majority of our civilisation’s advances in the past quarter millennia [sic] — has also been responsible for creating vast inequality, conflict, and potentially irreparable damage to our planet. With no viable alternative to capitalism, however, the time has come to discuss “What happens next?….”

As is par for the “no alternatives” course, Shah doesn’t show his work, so we can’t evaluate how he’s assessed all the alternatives for viability, by what criteria, and so forth. These folks want us to consider their field a science of sorts, but they excuse themselves from the inconvenient duty of scholarly rigor. Bold assertions are allowed without scrutiny so long as they uphold accepted views that favor the privileged classes. And notice how open ended is the treatment of the future of capitalism — economists are encouraged to wildly speculate, and pretty much no one presses them on their pipe dreams, so long as they don’t challenge key facets of capitalism such as markets, hierarchies, and private ownership. Contrast this to the skeptical scrutiny any non-capitalist alternative faces, even from people who admit capitalism has been or has become a veritable train wreck.

So… since we can’t evaluate their no-doubt painstaking (if secretive) evaluation of all possible alternatives, let’s take a look at how Professor Phelps sees capitalism’s downsides.

The downside? Well… of course there’s always a downside to everything. Modern capitalism is a system in which some people are very lucky — they just happen to be at the right place at the right time… and can cash in big-time; while other people aren’t! Some people are very unlucky- they make decisions which turn-out to be ill-fated.

I guess I should be thankful that Phelps doesn’t say all advantages and disadvantages in capitalism boil down to merit, but I can scarcely imagine how he could otherwise present a worse understanding of the system. How could anyone be so out of touch as to suggest that the primary problem with capitalism is that some people are “unlucky”? How is “luck” even a concept acceptable in serious discourse? This guy won a Nobel Prize, but his view of inequity in capitalism is that it’s a matter of chance? Phelps implies that everyone has an opportunity, and some people have bad luck — he says their decisions are “ill-fated”. The supposition that everyone has an opportunity to roll the economic dice is reprehensible.

No, Prof. Phelps, capitalism ensures that most people are born in the wrong place at the wrong time. Most people have less than the average share of wealth and opportunity; the vast majority live in the same poverty they were born into and that all their neighbors live in. This isn’t making a decision that turns out unlucky. Billions have no turn at rolling the dice; the dice were long since rolled for them. They suffer deprivation induced by markets that shift material well-being — including necessities such as food, shelter, health care, and education — to those who can place valued economic demand on those resources, irrespective of moral influences. And let’s not forget, the resources are only scarce in the first place because the prevailing economic system allows some people to accumulate and horde vastly more wealth than they and their children and their children’s children’s children could ever hope to spend, while others languish in squalor for generations, including huge swaths of people condemned by class or geography to have no real opportunities.

Phelps admits that “there is naturally a huge amount of inequality within capitalism” (emphasis added). That is in response to a question about why there is poverty (not just inequality). He goes on to advocate a solution:

Capitalism can, to a degree, address that inequality by subsidizing — in one or more ways — the employment of workers at the bottom… low wage workers. It also helps to pull up their wages.

It is not at first clear what Phelps means about subsidizing low-wage work, or what “it” is in the second sentence that is so helpful to raise wages. But later he seems to be suggesting traditional subsidy in the form of government intervention. (Phelps never lists the “more” ways capitalism can address inequality.) It’s very weird to suggest a government subsidy is capitalism addressing the inequality it causes. The economy gets the credit for requiring government intervention to stave off poverty; how clever of capitalism.

So what good are these subsidies?

This helps increase economic inclusion and reduce inequality so that low-wage participants in an economy can feel that they’re not receiving unnecessarily low-wages and low-rewards… that society has addressed their situation and done something about it.

You see, it makes people feel like they’re not being screwed over. They are receiving “unnecessarily low wages”, because capitalism suggests employers keep the largest possible share of revenues, but the government can come in and make people feel like society has addressed this inequity. Phelps offers no concrete suggestion as to the form these subsidies should take, but he does at least advocate higher taxes to pay for them.

Then Phelps gets crude on a kind of magnificent level:

That will, of course, leave the Bill Gates’ of the world who are very rich because, besides being very bright and driven, they got extraordinarily lucky. Wealth inequality of that sort doesn’t cause me concern- It doesn’t matter to me that the Rockefeller’s may own half of Maine (for example) or that Ted Turner may own half of Montana… What does it matter? I think Ted Turner did a great thing with CNN and he’s very rich! so what? I just don’t get it. I just never understood why there was such an aesthetic revulsion to outsized rewards for people who had a big idea and- generally speaking- worked their heads off to develop that idea. I don’t have any problem with it. [SIC!]

So the revulsion to outsized remuneration is aesthetic, not moral or ethical? A single family owning or controlling massive amounts of property, thus restricting everyone else to share the remaining portion among themselves, is not a moral matter? It’s not immoral to deprive vast numbers of people of the basics in order to permit some to accumulate and horde extreme amounts of wealth? My objection to that is just a matter of personal taste?

And we see again that there’s nothing wrong with an economy valuing luck, perhaps because we all had an equal chance of being born a Rockefeller, and it’s tough luck if we were not.

Phelps then states that “there are plenty of leftist billionaires”. This is a curious claim. I wonder what he means by “plenty” and “leftist”. He does at least admit there are more on the Right. But that kind of calls into question, since the issue is political influence of capital, how one side having fewer can still have “plenty”.

When the conversation turns to the Arab Spring, Phelps staggers boldly into the land of the bizarre, redefining capitalism to suit his peculiar slant. This part is barely coherent, so read carefully:

I think Egypt and Tunisia were examples of yet-another economic system… namely the system which, for a lack of a better word, we call ‘Corporatism’. This system has private ownership… one of the things that Egypt did, for example, in the last ten or fifteen years was privatise a lot of enterprises. Those enterprises became owned by people in the military. Corporatism doesn’t mean social ownership… that’s socialism. Corporatism means that there is a great deal of central control, directed by the government, of the private sector. A great deal of regulation… a great deal of two-way communication occurs with the private sector seeking favours from the government and the government seeking the same from the private sector…. In Egypt and Tunisia, you had a very rudimentary corporatist system which was being exploited all-out by the rulers who took advantage of their powers to put their cronies in place as managers and owners of various enterprises. The bulk of the population, many of whom who- by this time- have college or university degrees of some sort.. cannot break into the system! They can’t get jobs in those enterprises.. they are strictly for the insiders. They can’t even sell their fruits on the streets without a license- and there aren’t very many of those [licenses] distributed. It’s a very closed system… a system that’s about as far from modern capitalism as you can get! Well functioning modern capitalism allows anybody to start-up a company, to go into business for himself, and start coming up with new ideas, and working on their development.

Okay, for starters, I think Phelps’s assessment of the situations in Egypt and Tunisia are generally sound, if a bit elementary. That’s not where my gripe is.

I’m slightly more concerned with the near-useless label “corporatism” for a heavily regimented private-ownership economy. It sounds like fascist corporatism in the European sense, but in the US, corporatism is understood to be when private enterprises dominate society, not when the government strong-arms corporations. Basically, the term is close to meaningless, even as Phelps defines it. (The Thought Economics blog appears to be UK-based, but Phelps is an American US-based economist.)

Yet this semantic gripe pales compared to how odd it is that Phelps describes a model that is essentially identical to that of the US in structural description — the US being an economy he says is truly capitalist, not “corporatist”. Phelps basically describes the US “modern capitalist” system (when describing Egypt/Tunisia), then says it’s as far from modern capitalism as an economy can get. Jobs for insiders only, licenses required for fruit vendors, private sector and government in bed with each other — how is this not precisely what we have here, let alone the farthest thing from it? While I think it’s safe to say corporate influence on government is far stronger than the reverse in the US, that hardly makes it the polar opposite of a scenario where the reverse is true but the effect on everyday people is nearly identical.

Granted, in Tunisia and Egypt, these noted obstacles are in some ways much more severe, but the difference is one of degrees, not fundamental or structural. What a strange way to make a case that an economic system is not like that of the United States.

Finally, skipping lots of other weirdness that’s simply too depressing/obtuse to critique, we get to the big question of interest to Shah asks Phelps, “What is the future of economics as a discipline?” After prattling on about his own past contributions to the field of economics, which I won’t comment on here because I’m admittedly unfamiliar with them, Phelps provides his response:

Economics has contributed to the march away from these principles by reducing economies to ‘stochastic steady-state models‘ in which prices are the entire interest. Prices, in these models, ‘vibrate’ in some way. I find this incredible…. This thinking began seeping into the financial sector so then the banks started importing French mathematicians to work out how to price various assets as if anyone could possibly know what these assets are worth? We live in an uncertain world… not just a vibrating one! Economics will (and should) always have a scientific side… but it has to remember that no piece of evidence is ever decisive on its own… we have to understand that our subject is human creativity. That will be a very different kind of science from what we have had before. There hardly is any science of creativity yet- yet alone a science of individual or societal creativity which understands the interactions of people- that’s the next giant-step.

Now, I admit I don’t really have a clue what he’s talking about. I could guess, but I don’t think I should have to. He should just explain it, or his interviewer should if he thinks it’s worth publishing at all. Excluding the ironic polemic on the importance of science in economics, I want to focus on the one real declarative statement that I can at least understand syntactically.

Phelps says the field has reduced economies to “stochastic steady-state models”. I think perhaps this is a somewhat astute observation about the world of finance. Wall Street and its in-house economists and consultants and analysts seem to have done this. And you’ll notice, Shah has linked to the Wikipedia entry for “steady state”, the scientific modeling concept, not the economic concept, which is also referenced in that entry.

Now, if you think about it, the academic and broader field of economics has really done the opposite with regard to everything outside of Wall Street. Almost nobody is looking at the US or global economies as “steady state”. They’re instead hanging onto the ages-old notion of infinite growth. A steady-state economy is fundamentally different from a dynamic growth economy. Have you seen a trend among economists to declare that consistent growth is no longer (or even should not be) desirable and possible? For the most part, liberal and conservative economists fully agree that growth is the way forward; their only dispute is over how to grow the economy (and to some much lesser extent, for whom). Only a few people are talking about steady-state economies that are fixed to population size and do not grow via fiat currency and financial leveraging.

The almost hilarious paradox here is that, in answering what needs to happen next for economics, the field, Phelps misses an opportunity to say we should be entertaining the school of steady-state economics because we live on a steady-state planet. Instead, he offers a vague prescription about how economics needs to get “creative” in looking at human capacities (at least, I think that’s what he’s saying).

To end on a positive note, let’s take Phelps’s advice: what could be more creative than exploring — with a firm grasp on the relevant science — ideas for steady-state non-capitalist economics? I’m going to try to do more of that here in coming weeks.


‘The First Economist’


economist fails but says the theory is still sound

Nonsequitur cartoon by Wiley Miller.


Linkage: Ecuadorian ‘Utopia’, CEO Pay vs. Taxes, Corps vs. Unions, School ‘Reform’, ‘Overpopulation’


Okay, remembering that these “linkage” posts are really just supposed to be for me to get some recommended reads out without doing my usual (admittedly often overwrought) analysis… trying hard to keep it short and resist extensive comment…

1/4 of Big Corp CEOs Get Bigger Cut than Uncle Sam

That’s right: 25 of the top 100 US corporations pay their CEOs more than they pay in income taxes. In these cases, one guy is benefiting from corporate profits more than the entire public. Also noteworthy, the pay collected by top executives in 2010 was 325 times that of the average worker in that company, up from a factor of 263 in 2009!

A ‘New Economic Utopia’ in Ecuador?

I’m going to have to take a better look at what NEF’s Saamah Abdallah is calling a kind of “utopia” in the remote Intag Valley of Ecuador. Very interesting engagement of localism and alternative economics by villagers.

‘Crisis of Advanced Capitalism’

I just found this unorthodox writer Charles Hugh Smith (what’s up with economists named “Smith”?). I really don’t know what to make of him yet, and wish I could give this piece on “Marx, Labor’s Dwindling Share of the Economy and the Crisis of Advanced Capitalism” a thorough critique. But it’s an interested read.

‘Workers of the World, Good Night’

This short piece from Rick Bookstaber (via EconoMonitor) gets off to a slow start, but I enjoyed reading it (and wish I had time to tear it apart, but alas…).

Labor Unions vs. Corporations

I found this mildly anti-union commentary to be informative in terms of how many “libertarian”-leaning economic observers view unions, especially as compared to corporations. It’s kind of amazing that solidarity and cooperation as principles per se seem like foreign concepts even to economists who acknowledge that these are a key aims of unions in a strictly economistic/functional sense. As the author Adam Ozimek puts it:

If, however, you see anti-competitive behavior as a reason that unions exist, then the comparison [to corporations] falls apart.

I guess from my perspective, it’s funny to consider that “anti-competitive behavior” is not the raison d’etre of labor unions. “Anti-competitive” sounds so much more dastardly than “cooperative”.

Update: I can’t help myself (which means moving on to my real work of the day rather than reading/blogging economics). A few more links:

Latest from EPI

The Economic Policy Institute has a couple of new contributions. One is a study on the “lasting damage” of high joblessness on “wages, benefits, income, and wealth”. No big surprise, but some important research. Also some doozies like “Roughly 31% of U.S. workers experienced unemployment or underemployment at some point in 2009″, and “To fill the [net jobs shortfall] by mid-2014 … 400,000 jobs would need to be created each month.”

Also from EPI, this much-needed decimation of a new book by education pseudo-reform champion Stephen Brill (Waiting for Superman). Called Class Warfare, the book is reportedly even more brazen in its ignorance of educational reality than the documentary. The review pulls no punches in exposing the odd mix of liberal/conservative/”libertarian” figures of this new anti-union “reform” movement:

These crusaders now are the establishment, as arrogant as any that preceded them.

‘Overpopulation’ Bogey Man Haunts Times Square

I will take any chance to lash out at the overpopulation myth, but I’d much rather let others do it for me better. Betsy Hartmann does this in Common Dreams (via Climate and Capitalism). Hartmann is jumping on a new video playing in Times Square that apparently tries to terrify tourists about growing human populations. Hartmann makes short work of this idiocy:

Instead of blaming overpopulation, Americans need to get serious about climate policy, conservation, the transition to renewable energy, and mass transport.  And we need to challenge the grotesque and growing inequality of wealth and power in our nation that fuels conspicuous consumption and weakens the government’s commitment to environmental regulation. It’s also high time for environmentalists to stop turning a blind eye toward the role of the military in environmental degradation.