True Socialism and Modern Technology

Permabear

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Flamed Diving

donegalfella wrote: »

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A small market, such as a farmers market (homogeneous goods, perfectish information, freedom of entry, etc) can satisfy some, if not most of the mathematical axioms required for unfettered markets to work efficiently. But even in these markets, some minor intervention is needed, in the form of rules/regulations, which Stiglitz, among others show in their paper below.

donegalfella wrote: »

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Ah, the classical school. The very reason why we are in the mess we are in right now. You know, it was Stiglitz and others who developed theories which showed that all the assumptions the classical school made in their models are total nonsense. Here is one example:

http://ideas.repec.org/a/tpr/qjecon/v101y1986i2p229-64.html

I wish people would move on from this von Mises, et al, nonsense. Most of its proponents have never even seen the models (and axioms) behind these theories. I am astonished that people still believe that markets somehow solve themselves, if left unfettered. This has been shown to fall apart time and again, especially so in the 1990's. Russia's transition alone should be a lesson in this.

donegalfella wrote: »

Reading newspapers can occasionally be useful for broadening one's intellectual horizons.

Newspapers are a waste of time. Manipulative, slanted tripe, imo. If you want an opinion on a topic, hand-fed to you, I guess they are useful.

donegalfella wrote: »

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Perhaps you should listen to your own advice.

Permabear

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Flamed Diving

**** me. I spent the past 20mins writing a response, and when I clicked post, I was brought back to the login page. The post is gone, methinks.

To the mods, is there any chance of digging that up?

EDIT: Just went through my browser history, and the ****ing thing is gone. It was quite a beauty. I'm gonna give it a day before I write that again.

Permabear

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Flamed Diving

donegalfella wrote: »

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If by dog, you mean Dell. Then yes.

Permabear

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Flamed Diving

Ok, my errands for the day took me a much shorter time than I thought. So lets try again. I will copy & paste before posting this time!

donegalfella wrote: »

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I think you are somewhat confused here. I was referring to microeconomic modelling, which is where the idea of markets solving themselves comes into play. Macroeconomics is the aggregate of these situations, although I find the neoclassical models for this field equally flawed.

donegalfella wrote: »

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No, because I was not discussing macroeconomics in the portion your quoted just there. You seem to be confusing the two fields. I recommend reading a entry-level economics textbook, in order to alleviate your confusion. But of course, you also seem to be assuming that the likes of von Hayek and Friedman rely on literal logic when they write the books you have been reading (Road to Serfdom, Freedom to Choose?). What you fail to realise is that the logic they use to construct these arguments are derived from the models they use. This is especially the case with Friedman. In their world, markets magically solve themselves because they do so in their models. It was only in the 80's and 90's that these assumptions were truely tested, and tragically, they failed.

donegalfella wrote: »

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Of course not, but you cannot develop economic policies for a country based on literal logic. Therefore economic models are developed for the purpose of understanding how the economy works, and how these can be used to create future economic policy. This is what economists do, after all. Unfortunately, the neoclassical school relied heavily on their outdated models, much to the detriment of emerging economies, in the 90's, and in the developed world today.

donegalfella wrote: »

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I have no idea what this means. But the problems we face today are a direct result of the process of deregulation which stretches back to the 1970/80's, which was very much the product of neoclassical thinking. Before then, the actions of banks was more restricted, and we had a far more stable system as a result. The neoclassicalist stormed in and asserted that by deregulating the market, we would arrive at some kind of pareto optimal solution, just like the maths suggested. Over the next quarter century the regulations were removed and the bubbles grew, leading us to where we are today. A burst bubble. People are still attempting free-market based solutions to the problem, but they are not working, and will continue to fail unless the problems of the way the system is set up are addressed.

donegalfella wrote: »

Actually I don't know that at all. And I'm loathe to accept your assertion that Stiglitz has exposed all of the assumptions made by entire schools of economic thought as "total nonsense."

But you fail to acknowldge the implications that these new theories (it wasn't Stiglitz alone who arrived at these conclusions, but he is the most popular one) had. They removed two of the most fundamental axioms of the neoclassical microeconomic models. 1) Markets have perfect information. 2) There are no externalities. Of course these problems seem obvious, when you think about them, but the neoclassical school were using these models to create policy proposals. You take those two axioms away, and the whole thing falls apart, like a house of cards. To be fair, you do need an advanced degree in economics to see why this is, so I can understand why this is not clear, to some.

donegalfella wrote: »

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No, my arguments are based on theory and evidence. As far as I can see, your's are simply based on dogma.

donegalfella wrote: »

(Oh, by the way, I don't think "classical school" means what you think it means, either.)

You are wrong. I have a fuller understanding of their arguments than you could hope for. All you have is the coffee-table economics books you read. I have read the theories underlying those words.

donegalfella wrote: »

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But the project has failed. We have had a quarter century of neoclassical application of theory and it has led to nothing but instability. It destroyed most of the transition economies of the 90's, it destroyed the emergent economies of East Asia. It has created a world financial collapse. These models do not work.

donegalfella wrote: »

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Of course they model the theories, what else are you supposed to do with them? How can you test a scientific theory without modelling it? But, I repeat, the models have been tried, and they have failed. Just the example of Russia alone is enough to show this. The neoclassical ideal was attempted through the Washington Consensus. Their models were flawed, we knew that they were, but their dogma led them to implement them, regardless. They failed. This is called evidence. You seem to be relying entirely on arguments from authority. Do you think that just because a theory has some kind of history, that it should be above questioning? How far would science get if we took that approach? Everything is open to criticism, and if the evidence is overwhelming against them, and if new theories shed light on the fallacies of these theories, then they should either be updated or cast aside.

donegalfella wrote: »

Again, this is jejune and naive reasoning. Do you really think that free-market economists ignore the complex interconnectedness among economics, law, philosophy, science, religion, political theory, and so on...? :rolleyes:

Yes, they do. The Washington Consensus alone is a perfect example of this. One model fits all, irrespective of the culture of the recipient country. It failed, again and again. Here are more examples of empirical literature attempting to justify this:

http://www.fbird.com/assets/MancurOlson_on_Transition_Econ__732003152238.pdf

http://elsa.berkeley.edu/~chad/ajr2001.pdf

As far as neoclassicalists are concerned, culture, geography have little, if any role to play in development. Its all about 'institutions'. Which could be categorised under 'law'. But when you read about the involvement of the IMF/WB in the transition of Russia's economy, pay particularly close attention to role these institutions played in ensuring the correct laws/regulations were in place to ensure a desirable outcome. I will leave that up to the audience to decide. There is a wealth of literature out there on the topic. The question is: Did the Washington Consensus ensure that the correct laws were in place before they imposed unfettered capitalism, or did they simply apply outmoded economic models, where every outcome is optimal, and imposed lax regulations to allow a tiny cabal rape the country of its resources while the people suffered?

You decide.

donegalfella wrote: »

"Every time a newspaper dies, even a bad one, the country moves a little closer to authoritarianism; when a great one goes, like the New York Herald Tribune, history itself is denied a devoted witness." ~Richard Kluger

A blind man will not thank you for a looking-glass.

Thomas Fuller

Permabear

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brianthebard

You're both wrong. I'm not going to do a line by line quote off cause that's ghey, but I will say that the farmer's market example will not prove either of ye right. Its a very specific niche market, which has a virtual monopoly on its products and the lifestyle it is selling. It is quite unregulated, but it exists within the framework of a much larger grocery market as well, so it is not simply self regulating.

Donegal, I'm not going to go through all your post either, but the question about the US speculation bubble needs to be addressed. Yes its true that the US is not directly responsible for the Irish bubble, but the same speculative processes were at work in the US, Ireland, the UK, and other countries.

Permabear

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Flamed Diving

donegalfella wrote: »

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Christ almighty. You are tripping over yourself here. You are demanding examples, yet I have provided them. You ask me to document claims, yet I have provided examples of published literature. You don't even understand why I provided the example of the farmers market, and you insist that it is a macroeconomic example. You continually misrepresent what I am saying, its almost as if you are debating someone else! I'm really not sure what you are looking for. In fact, I'm not even sure you do. I did my best in the last post to address your queries, there isn't much more I can say without repeating myself.

Permabear

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Flamed Diving

ARRRRGH! The exact same thing happened to me, as earlier. ****ing hell!!!

I give up.

Permabear

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Red Hand

donegalfella wrote: »

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The Russian economy in the early 90's.

brianthebard

donegalfella wrote: »

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The culmination of this would be the present financial situation.

SkepticOne

Jeremiah 16:1 wrote: »

The Russian economy in the early 90's.

Though in fairness this was most likely due to problems arising from the previous failed system.

asdasd

The culmination of this would be the present financial situation.

at the very very worst 5% will be dropped off world GDP. Meanwhile North Korea starves, whilst China is 10,000% richer than when it followed the strict Marxist model.

Frankie Lee

Just thought this would be relevant:

By Noam Chomsky

The Washington Consensus

The neoliberal Washington consensus is an array of market oriented principles designed by the government of the United States and the international financial institutions that it largely dominates, and implemented by them in various ways-for the more vulnerable societies, often as stringent structural adjustment programs. The basic rules, in brief, are liberalize trade and finance, let markets set price ("get prices right"), end inflation ("macroeconomic stability"), privatize. The government should "get out of the way"-hence the population too, insofar as the government is democratic, though the conclusion remains implicit. The decisions of those who impose the "consensus" naturally have a major impact on global order. Some analysts take a much stronger position. The international business press has referred to these institutions as the core of a "de facto world government" of a "new imperial age."

Whether accurate or not, this description serves to remind us that the governing institutions are not independent agents but reflect the distribution of power in the larger society. That has been a truism at least since Adam Smith, who pointed out that the "principal architects" of policy in England were "merchants and manufacturers," who used state power to serve their own interests, however "grievous" the effect on others, including the people of England. Smith's concern was "the wealth of nations," but he understood that the "national interest" is largely a delusion within the "nation" there are sharply conflicting interests, and to understand policy and its effects we have to ask where power lies and how it is exercised, what later came to be called class analysis.

The "principal architects" of the neoliberal "Washington consensus" are the masters of the private economy, mainly huge corporations that control much of the international economy and have the means to dominate policy formation as well as the structuring of thought and opinion. The United States has a special role in the system for obvious reasons. To borrow the words of diplomatic historian Gerald Haines, who is also senior historian of the CIA, "Following World War II the United States assumed, out of self-interest, responsibility for the welfare of the world capitalist system."

***

... There have been many experiments in economic development in the modern era, with regularities that are hard to ignore. One is that the designers tend to do quite well, though the subjects of the experiment often take a beating.

The first major experiment was carried out two hundred years ago, when the British rulers in India instituted the "Permanent Settlement," which was going to do wondrous things. The results were reviewed by an official commission forty years later, which concluded that "the settlement fashioned with great care and deliberation has unfortunately subjected the lower classes to most grievous oppression," leaving misery that "hardly finds a parallel in the history of commerce," as "the bones of the cotton-weavers are bleaching the plains of India."

But the experiment can hardly be written off as a failure. The British governor-general observed that "the 'Permanent Settlement,' though a failure in many other respects and in most important essentials, has this great advantage, at least, of having created a vast body of rich landed proprietors deeply interested in the continuance of the British Dominion and having complete command over the mass of the people." Another advantage was that British investors gained enormous wealth. India also financed 40 percent of Britain's trade deficit while providing a protected market for its manufacturing exports; contract laborers for British possessions, replacing earlier slave populations; and the opium that was the staple of Britain's exports to China. The opium trade was imposed on China by force, not the operations of the "free market," just as the sacred principles of the market were overlooked when opium was barred from England.

In brief, the first great experiment was a "bad idea" for the subjects, but not for the designers and local elites associated with them. This pattern continues until the present placing profit over people. The consistency of the record is no less impressive than the rhetoric hailing the latest showcase for democracy and capitalism as an "economic miracle"-and what the rhetoric regularly conceals. Brazil, for example. In the highly praised history of the Americanization of Brazil that I mentioned, Gerald Haines writes that from 1945 the United States used Brazil as a "testing area for modern scientific methods of industrial development based solidly on capitalism." The experiment was carried out with "the best of intentions." Foreign investors benefited, but planners "sincerely believed" that the people of Brazil would benefit as well. I need not describe how they benefited as Brazil became "the Latin American darling of the international business community" under military rule, in the words of the business press, while the World Bank reported that two-thirds of the population did not have enough food for normal physical activity.

Writing in 1989, Haines describes "America's Brazilian policies" as "enormously successful," "a real American success story." 1989 was the "golden year" in the eyes of the business world, with profits tripling over 1988, while industrial wages, already among the lowest in the world, declined another 20 percent; the UN Report on Human Development ranked Brazil next to Albania. When the disaster began to hit the wealthy as well, the "modern scientific methods of development based solidly on capitalism" (Haines) suddenly became proofs of the evils of statism and socialism-another quick transition that takes place when needed.

To appreciate the achievement, one must remember that Brazil has long been recognized to be one of the richest countries of the world, with enormous advantages, including half a century of dominance and tutelage by the United States with benign intent, which once again just happens to serve the profit of the few while leaving the majority of people in misery.

The most recent example is Mexico. It was highly praised as a prize student of the rules of the Washington consensus and offered as a model for others-as wages collapsed, poverty increased almost as fast as the number of billionaires, foreign capital flowed in (mostly speculative, or for exploitation of cheap labor kept under control by the brutal "democracy"). Also familiar is the collapse of the house of cards in December 1994. Today half the population cannot obtain minimum food requirements, while the man who controls the corn market remains on the list of Mexico's billionaires, one category in which the country ranks high.

***

How Countries Develop

... In the eighteenth century, the differences between the first and third worlds were far less sharp than they are today. Two obvious questions arise

1. Which countries developed, and which not?

2. Can we identify some operative factors?

The answer to the first question is fairly clear. Outside of Western Europe, two major regions developed the United States and Japan-that is, the two regions that escaped European colonization. Japan's colonies are another case; though Japan was a brutal colonial power, it did not rob its colonies but developed them, at about the same rate as Japan itself.

What about Eastern Europe? In the fifteenth century, Europe began to divide, the west developing and the east becoming its service area, the original third world. The divisions deepened into early in this century, when Russia extricated itself from the system. Despite Stalin's awesome atrocities and the terrible destruction of the wars, the Soviet system did undergo significant industrialization. It is the "second world," not part of the third world-or was, until 1989.

We know from the internal record that into the 1960s, Western leaders feared that Russia's economic growth would inspire "radical nationalism" elsewhere, and that others too might be stricken by the disease that infected Russia in 1917, when it became unwilling "to complement the industrial economies of the West," as a prestigious study group described the problem of Communism in 1955. The Western invasion of 1918 was therefore a defensive action to protect "the welfare of the world capitalist system," threatened by social changes within the service areas. And so it is described in respected scholarship.

The cold war logic recalls the case of Grenada or Guatemala, though the scale was so different that the conflict took on a life of its own. It is not surprising that with the victory of the more powerful antagonist, traditional patterns are being restored. It should also come as no surprise that the Pentagon budget remains at cold war levels and is now increasing, while Washington's international policies have barely changed, more facts that help us gain some insight into the realities of global order.

... the question of which countries developed, at least one conclusion seems reasonably clear development has been contingent on freedom from "experiments" based on the "bad ideas" that were very good ideas for the designers and their collaborators. That is no guarantee of success, but it does seem to have been a prerequisite for it.

Let's turn to the second question How did Europe and those who escaped its control succeed in developing? Part of the answer again seems clear by radically violating approved free market doctrine. That conclusion holds from England to the East Asian growth area today, surely including the United States, the leader in protectionism from its origins.

Standard economic history recognizes that state intervention has played a central role in economic growth. But its impact is underestimated because of too narrow a focus. To mention one major omission, the industrial revolution relied on cheap cotton, mainly from the United States. It was kept cheap and available not by market forces, but by elimination of the indigenous population and slavery. There were of course other cotton producers. Prominent among them was India. Its resources flowed to England, while its own advanced textile industry was destroyed by British protectionism and force. Another case is Egypt, which took steps toward development at the same time as the United States but was blocked by British force, on the quite explicit grounds that Britain would not tolerate independent development in that region. New England, in contrast, was able to follow the path of the mother country, barring cheaper British textiles by very high tariffs as Britain had done to India. Without such measures, half of the emerging textile industry of New England would have been destroyed, economic historians estimate, with large-scale effects on industrial growth generally.

A contemporary analog is the energy on which advanced industrial economies rely. The "golden age" of postwar development relied on cheap and abundant oil, kept that way largely by threat or use of force. So matters continue. A large part of the Pentagon budget is devoted to keeping Middle East oil prices within a range that the United States and its energy companies consider appropriate. ... one technical study of the topic ... concludes that Pentagon expenditures amount to a subsidy of 30 percent of the market price of oil, demonstrating that "the current view that fossil fuels are inexpensive is a complete fiction," the author concludes. Estimates of alleged efficiencies of trade, and conclusions about economic health and growth, are of limited validity if we ignore many such hidden costs...

asdasd

Just thought this would be relevant:

It wasnt. Chomsky is a half-wit. His followers are morons. Its a cult. Every line there is nonsense. Let me just give some examples

But its impact is underestimated because of too narrow a focus. To mention one major omission, the industrial revolution relied on cheap cotton, mainly from the United States. It was kept cheap and available not by market forces, but by elimination of the indigenous population and slavery.

There is a non-sequitor if ever I heard one. The US certainly exterminated the native americans but market forces for cotton are not related to that. The cotton was produced by slave labour, indeed, but this tells us nothing about capitalism in general but a specific part of it where workers cant compete for wages - a system exactly like communism ( except, under communism, the Communist commisar takes the role of the Slave owner or aristocrat)

There were of course other cotton producers. Prominent among them was India. Its resources flowed to England, while its own advanced textile industry was destroyed by British protectionism and force.

Chomsky is saying that the British Empire alowed American cotton to flow freely but not cotton within the British Empire. Jesus Wept. Why would an industrialist care who produced cotton, but rather the price? In fact US was subject to far more restirctiction than India as India was inside the Empire. The whole economic history of Britian in the 19th century is the history of the reduction of British protectionism vis-a-vi America. The conservatice opposed such restricitions.

Another case is Egypt, which took steps toward development at the same time as the United States but was blocked by British force, on the quite explicit grounds that Britain would not tolerate independent development in that region

Britian attacked Egypt for other reasons related to piracy etc. Again, why would it care where it's cotton came from? Britian cant produce cotton ( and what has any of this got to do with if we enslave people under socialism, or not?)

Not that I am a defender of the British Empire. Since it is an genocidal empire in Ireland why would I be? And Ireland's linen industry was certainly destroyed by Britain, as a concerted effort but in that case Britain was a competitor for the industry - it didnt produce cotton. And couldnt.

( Notice that chomsky demands that his acolytes never think about Ireland, because that would ruin the other rhethoric about nasty Yurups being responsible for colonialism elsewhere - all Europeans are to blame for that, seemingly. His acolytes concur).

The only grain of truth in chomskys trivial, or moronic, analysis is that protectionism is a good thing where applied surgically. Of course Chomsky is arguing that we bad westerners should not be protectionist, and the East and other countries should be. Nonsense. Ireland for instance was colonized for far longer than African and anywhere else.

But protectionism is not necessarily a abd thing. Reducing Chinese imports would be a start and my man Obama is going to do that.

( and boy are Marxist academics going to hate him in eight years)

Frankie Lee

Sorry I should have known Chomsky is a half wit, who would you recommend as a better read on current affairs so?

( Notice that chomsky demands that his acolytes never think about Ireland, because that would ruin the other rhethoric about nasty Yurups being responsible for colonialism elsewhere - all Europeans are to blame for that, seemingly. His acolytes concur).

Chomsky often discusses Ireland, he illustrates the famine as an example of the dangers of laissez-faire economics.

Your also missing the point in relation to the cotton example.

Permabear

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Kama

at the very very worst 5% will be dropped off world GDP.

Per annum?

And correct me if I'm wrong, I'm sure your quant forecasting skillz are well leet, but weren't overly-optimistic risk analyses a factor in our current predicament? Most folks are being a mite more humble in their economic prophecies of late, possibly just because credibility has dropped off somewhat.

While you may disagree with Chomskys analysis, 'moron' or 'socialist' doesn't really cut it, nor does 'hesa linguist kk?'. No doubt its occassionally pleasant to think others are all deluded idiots, repeating mindlessly their unreflective ideological preconceptions. That blade cuts both ways though, whether we are talking about 'disproven neoliberal nonsense' or 'mindless anti-American socialism'.