So, Japan and Germany have huge trade surpluses. Despite their workers being the best paid in the whole world. In both absolute and relative terms. Among the major economies, anyway.
Meanwhile, the US has a humongous trade deficit. Yet the American CEO-s are ‘compensated’ as if they were the best in the world…
Interesting, right?
More ideas about the same subject here:
“Survival of the fittest“.
Evolution is not about survival of the fittest but about the demise of those unable to adapt. Even if the difference seems trivial this approach has vast consequences. As Ernst Mayr explains it What evolution is, (Basic Books, New York, 2002) one can never know what “best” may mean, in any situation. First of all because (Werner Heisenberg, Herbert Simon, Dan Ariely) you can never have a complete picture of anything and secondly because in the real world ‘situations’ are changing constantly – Panta Rhei.
So the only relevant test is survival, being able to cope with whatever comes along and not the brilliance with which one might be able to solve a very particular problem, at a particular moment in time.
“Division of labor”
After understanding ‘survival’, it’s a lot easier to figure why social strategy functions better than sheer individualism: by creating the right environment for its members to become specialists a complex team will cope better when confronted with different complex situations than a mob composed of identically qualified members.
With the caveat that this arrangement works only as long as every member of the team realizes that it’s better for him to belong than to get out and only as long as all the members of the said team act consistently as if ‘one for all and all for one’. Otherwise put, complex teams where each has it’s own more or less indispensable role work properly only as long as most of the members continue to be ‘socially intelligent‘.
For those who feel there is an apparent contradiction here please note there are two levels of analysis/interaction.
Individually, each of us has to take care of him/herself (and his/hers immediate family).
Socially, each of us has the duty to evaluate the other members of the group and to exchange information with them about the well being of the whole group.
This can be taken even further. Whenever a subgroup becomes too ‘specialized’ – as is in ‘becoming so preoccupied with it’s own well being as to stop caring about the rest’, its own survival is in danger. Time and time again, history shows us that those who become estranged from the rest of the society end up badly. Creating problems for the entire society, true, but ultimately their behavior amounts to a form of suicide. Callous royals end up on the chopping block, seemingly indestructible dictators end up at the hands of angry mobs… Erstwhile top of the feeding chain (too big to fail?!?) companies end up broke or bailed out by the government…
“Politics versus Economics”
I’m constantly amazed by the fact that politics and economy have grown so apart from each other and each of them so disconnected from reality.
Politics has become a constant struggle for administrative power while economy has ‘metastasized’ into a battle field where the foot soldiers struggle to survive while the big brass gorge themselves with ‘money’.
Nowadays, too many politicians have forgotten that their job is to figure out, in close cooperation with the rest of the society, how to solve the various problems which challenge us on a daily basis. Too many of them do nothing but fight among themselves, each of them attempting to impose their particular vision on all of us.
In the same time, the economic mechanism is no longer geared towards ‘making the ends meet’ – the original meaning of the Greek word oikonomia.
Our not so distanced ancestors have invented a self governing mechanism which very efficiently allocated the available resources to those who were able to put them to good use. Adam Smith described this mechanism as ‘the free market’.
Presently, we’ve corrupted this previously self leveling mechanism into a collective MMA arena where the heavier knock the wind out of the weaker in the name of ‘king profit’.
All this because we mistakenly believe free market capitalism to be an ideology when it is nothing but a mechanism for allocating resources.
The best to date, admittedly, but only as long as we’re wise enough to preserve the freedom of the market.
And as soon as we’ve mistakenly ‘anointed’ profit as the most important goal of any economic venture… the market had ceased to be free! You see, profit is the best measure for efficiency – which, in its turn, is the best indicator for economic survivability, yet efficiency itself is pointless if the needs of the market are not met. Smith’s famous characters – the baker, the brewer and the butcher, went to the market to meet the needs of their customers. They became comfortably well off because they were successful in meeting those needs in an efficient manner, not because they were successful in cornering the market… as some of the present day tycoons are teaching us…
Why do I maintain that a ‘profit obsessed’ market is no longer free?
Well, simply because the participants to such a market are just as free as those addicted to heroin. Both kind of addicts think of nothing but the object of their addiction and are oblivious to everything else. As in blind to everything else!
And I’m sure you all agree with me that being blind is detrimental to being able to stay alive. Specially so for those unaware of their blindness!
Or unaware of their addiction…
“Between 1970 and 2010, the number of administrators in health care grew more than 3000%, while the number of physicians grew about 200%, according to the Bureau of Labor Statistics. During that same 40 years, U.S. health-care spending rose 2300%. Doctors’ fees account for only 8 cents of the health care dollar. Where do you think the other 92 cents are going?” (Marni Jameson Carey, Focus on Health Coverage Misses the Point, Forbes.com, Oct 24, 2017)
A few years ago I was arguing that profit was overrated.
It seems that Forbes, a magazine which cannot be accused of any socialist tendencies, has reached a somewhat similar conclusion.
Even more interesting is the solution proposed by Forbes to the health care problem.
A return to the free market!
Free from what? Who says the American health care market is not free?
Well, click on the quote above and see what Forbes has to say about this…
But what happened? How did we get here?
Well, the free market described by Adam Smith was an environment where people used to fulfill their needs by selling their wares.
The butcher sold meat and bought everything else he needed, the brewer sold beer and bought everything else he needed, the baker… and so on!
OK, there was a certain kind of competition which kept the things in check. The butchers competed against other butchers, the brewers…
And because of this competition, all traders – those who wanted to survive, anyway – streamlined their operations and became more and more efficient. Hence profitable.
I mentioned the link between the survival of a commercial enterprise and its ability to generate profit.
Apparently, it doesn’t make much sense to elaborate on this. Bear with me, please.
The whole point of the free market is the division of labor. Besides its freedom, of course.
Each of us does what he knows better and then we trade our respective wares. This way all of us fare better than if each of us would have had to produce everything each of us needs to survive.
In this scenario, competition – between ‘bakers’, for example – is actually a tool which makes it so that the market, as a whole, doesn’t waste resources. When the less efficient bakers are ‘encouraged’ to find something else to do, the entire market is better off. And so on.
In this sense, profit is only one indicator – and a very good one – of how able to survive is a certain commercial venture. But not the only goal of the entrepreneur who started/runs the enterprise. What he wants is to make an as good as possible living by doing what he knows best, in close collaboration with the other participants to the free market.
Adam Smith had written his books some two and a half centuries ago.
And the free market had served us well, for a while.
Just look at what we’ve accomplished in these two and a half centuries.
But, just as Forbes points out, things are no longer going in the right direction.
Why?
Simply because the market is no longer free!
Not only because some of the participants have become ‘heavy’ enough to crush all competition. This is only the lesser part of the problem.
The really big one, and so well hidden that it’s almost invisible, is that too many of us have become obsessed with the same thing. Money!
Profit has become THE absolute goal of everything we do. Too many of those who participate in the free market no longer want to collaborate with the others but simply want to get rich. By any (legal) means.
Some say this is a good thing.
They invoke Adam Smith’s words as a justification for their beliefs.
I beg to differ.
The simple existence of our current obsession has profoundly altered the very nature of the market. Which is no longer free.
Because WE are no longer free. When too many of us are obsessively concentrated on the same thing, they will necessarily disregard all other options. And the rest have no other option but to follow.
This is not freedom!
Mesmerized people can not be described, by outside observers, as being free.
Regardless of how they consider themselves.
I’ve reached the conclusion that thinking and digesting have very much in common.
We can’t do it by our own. Those of us who don’t cooperate/speak with those around them, don’t have what to eat or what to think about.
Both processes imply three stages. Identification, absorption, use.
We use cultural models to identify both our food and the important issues.
Absorption – through our gut/conscience, is both highly specific to each individual and governed by our common DNA/shared cultural traditions.
The ‘products’ of the digesting/thinking process are, again, used both in public as well as in private. Part of the energy we get from our food is consumed ‘cooperatively’ with our ‘coworkers’ while most of our thoughts end up either verbally expressed or put in practice.
Both processes, digesting as well as thinking, increasingly change the environment where we, and others, live.
I recently shared this meme on my FB wall:
This is what happened next:
“No two people are the same.“”That’s why I prefer equal opportunities instead of equality.”
“No two opportunities are the same. What you might consider an opportunity I might pass up. It’s a very diverse world we live in, a wide one in which hopefully everyone can be accommodated.”
‘Can be’ or ‘will be’?
And who is the real looser here?
Let’s see what the broad picture looks like:
Meanwhile
And what’s wrong with that?!?
Everyone has the right to do what ever he wants with his money and why should anyone expect to be educated for free?!?
OK, let me put it differently.
Every society is like a big community, even if its members do not share an intimate knowledge of each-other.
At least theoretically an overwhelming majority of any nation share the same set of values and the same goal – the long term survival of both the population and the afore mentioned set of values.
Now please consider which society would be better at the game of survival:
One which would make it easier for as many of its members to develop as much of their individual potential as possible or one that would make it easier for a small number of its members to spirit away so much wealth that the rest would remain crippled?
One which would use the very concept of a ‘free market’ as broadly as possible – make sure that as many as possible of its members enjoy the widest possible autonomy – or one that would allow the ‘never as free as advertised’ market to degenerate into the ‘winner takes it all‘ situation we are bound to reach if we continue on our present course?
How could enough people afford to ‘wander around’ for long enough to find the opportunities that would fit them if they are saddled at birth with a huge burden – the ever burgeoning national debt?
Would enough people risk to take on any additional debt (in order to prepare themselves to make better use of the opportunities they might find) if too many of those opportunities, even if met diligently, do not pay enough to ‘eat’ AND pay back the debt?
How is a society going to survive, let alone thrive, if a lot of ‘opportunities’ (social needs) end up being ‘plugged’ by unfitting/under-skilled/’less than enthusiastic’ individuals? Or not at all?
On the ‘supply side’, what do you think of those who choose to dodge paying taxes?
On the ‘demand side’, what do you think of those who squander public money as if there is no tomorrow?
So what should we be talking about? Equality or Equal Breadth of Opportunity?
About the Bed of Procrustes or about a ‘Free Market’ where all participants are simultaneously autonomous and fully aware of their responsibility for their children’s future?
The current spate of dissent on this subject has been spurred by this guy, Angus Deaton, being presented with “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel“
I’m afraid that the author had been so disgusted by the obvious mistakes that have been committed by so many of the supposedly reputable economists of this world that he has become amenable to throwing out the baby along with the bath water.
First of all we must remember that “Science is wrong. By definition.” All theories are imperfect and there is no such thing as ‘timeless truths’.
Ever since Karl Popper introduced the idea of ‘falsifiability’ as the litmus test for determining if any piece of information has any scientific value and Berger & Luckmann noticed “The Social Construction of Reality” it had become apparent both that science is being updated constantly – hence always ‘wrong’, or at least incomplete – and that people are ‘doing science’ on purpose – hence any discussion about reality being ‘described and understood in neutral terms’ is unrealistic, to say the least.
Coming back to Popper, Hermann Bondi had declared that ‘There is no more to science than its method, and there is no more to its method than Popper has said.’
True enough but as any ‘scientific declaration’ this is highly ‘updatable’.
In fact Science is, above all, a human enterprise. It’s a human that picks up – or devises – which method to use in a certain situation when he wants to find out something about a certain subject. Furthermore that method is applied by human individuals, not by robots. The same as those who had chosen it or by others, doesn’t make much difference. And, at the end of the cycle, some other people will evaluate – and sometimes try to replicate – the results.
So the mere fact that a certain set of results could not have been replicated by a certain team of evaluators doesn’t mean that much, by itself. This has been silently acknowledged by Andrew C. Chang and Philip Li in a paper published by the Federal Reserve in 2015: “Is Economics Research Replicable? Sixty Published Papers from Thirteen Journals Say ”Usually Not””. The couple admitted they needed some help from the original authors to replicate the results in a few instances and in some-others they didn’t have access to the same computer software as the first publishers.
But the most interesting fact is that in no instance the authors have been able to positively determine that the results published in any of the analyzed papers are inconsistent with the data presented by the original authors and/with the method invoked. In all instances when they failed to replicate the original results that happened because the original authors didn’t present at all the initial sets of data, they were incomplete or the method/sofware used to process that data was incomplete, altogether missing or proprietary. And all this despite in some cases the papers being published by journals specifically requesting that all data/methods/software being made available at the moment of publication.
In this situation I find the conclusion reached as being both correct and highly objectionable. And above all lacking any scientific value.
“Because we successfully replicate less than half of the papers in our sample even with assistance from the authors, we conclude that economics research is usually not replicable.”
Yes, it seems that too many papers published by presumably reputable journals are not replicable. But that is due exclusively to the journals themselves not observing their own rules or by some of the authors acting less than ‘over the table’. This phenomenon has nothing to do with ‘economics’ being less of a science than, say, physics and everything to do with humans being… well… human!
Let me go back to where I started, to Joris Luyendijk claim that “Don’t let the Nobel prize fool you. Economics is not a science.”
The author ‘illustrates’ his claim by remembering the infamous LTCM – a hedge fund set up by, among others, a couple of economists who had received a … you guessed it… a ‘Nobel prize for economics’ less than a year before the hedge fund went bust. Kind of ironic, isn’t it?
But the problem remains. The fact that LTCM went bust doesn’t prove anything except the fact that its management was completely inadequate.
The point is that trying to assert that ‘economics’ is not a science only because some guys used a couple of economic theories and failed, abysmally, is akin to claiming that physics is not a proper science because no weather bulletin is 100 percent accurate. Or that biology is not a full blown science because medicine has not yet found a cure for cancer. Or to claim that chemistry is bogus simply because Big Pharma is ripping us off.
At the end of their paper Chang and Li offer some very pertinent advice about how things could be vastly improved. Their main idea being that everything must be ‘above the table’ – both the raw data and the method/software used to process it must be made available for whomever wants to replicate the results. In fact this exactly what science, real science, is about. People have to be able to check thoroughly whatever the proponents of a theory are trying to ‘peddle’. This is the only way for a theory to be proved true or false. Or incomplete so further research might be declared necessary.
Similarly, at the end of his article Joris Luyendijk points his finger at the real culprit.
In reality economics, as a space where people try to gather information, is different from, say physics, only because we, the people, approach them with different attitudes.
Time has taught us, repeatedly, that every-time we’ve tried to deny the obvious we ended up with a bloody nose. The problem is that not all of us are, yet, able to recognize the obvious.
No one in his right mind will pretend, nowadays, that the Earth is flat. Meanwhile some people still pretend that vaccines may induce autism. They don’t. But some of the ‘anti-Vaxxers’ continue to pretend this even after a study partly funded by themselves demonstrated that there is no link between the two.
As suggested by Luyendijk and demonstrated by these examples the real culprit for what is going on, not only in the economic field, is our arrogance.
Arrogance that has led to the survival of what is known as ‘tehnocratic thinking’ despite more and more people learning of the role ideology plays in our decision making.
After all what can be more arrogant than pretending that you have ‘scientific reasons’ for what you do, despite the obvious fact that every one of us acts according to his own ideology?
I’m not going to pretend now that there are good and bad ideologies. I obviously think they can be classified but I cannot pretend that my classification is the correct one.
But I can pretend, and you should too, along with Joris Luyendijk, Andrew C Chang and Philip Li, that each of us should honestly state its point of view along with his opinion when ever discussing something.
After all each of us having an ideology is a reality while pretending that any of us can act as if it doesn’t is a rather pathetic lie.
To conclude I’ll have to keep the promise I’ve made at the beginning of all this and ‘update’ Bondi’s statement about Popper:
‘There is no more to science than its method and there is no more to its method than Popper has said’ but we should always bear in mind that science is exclusively ‘performed’ by human individuals.
Taking the mic. Varoufakis. Yves Herman/Reuters Varoufakis in conversation with leading academics as Syriza splinters and election beckons in Greece
The strangest thing of all that happened in Greece is not that ‘the emperor has been naked for sometime already’ but the fact that this has been public knowledge.
Yet everybody still pretends everything is OK.
Click on the picture and read the article in The Conversation.
You can also check my previous post on this subject here.
nicichiarasa 