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Around the ’50s a political ideology formed. I’m sure its ideas date back further but it was at this time that it crystalised into a coherent group. More than a political ideology, it was, and is, a worldview. This worldview has no explicit pop-culture presence. No-one preaches it overtly. So most people are unaware of it directly. However it was, and still is, insidiously influential on the thoughts of some important people.

One of the most basic assertions/assumptions of this worldview is what is technically called strong reductionism. This is the idea that any system is just the sum of the elements in the system. Put plainly: to understand a society you have to only understand individuals. So, for example, if crime increases by 10% then the explanation is that individuals like crime by 10% more than before. It is this idea that lead Thatcher to believe and proclaim that “there is no such thing as society.” What she meant is that society is a kind of academic myth. A mirage created by a bad understanding of the world.

I don’t know how but this worldview has filtered out into popular culture. The world is confusing right now, and confusion both inspires and demands analysis. Reading the never-ending stream of analyses of how we got here, on racism, on sexism, on equality, on social justice, I have noticed that the worldview I mention is encoded right into all of them, and it makes these analysis irrelevant because they’re blind to the biggest factors.

These analyses seem mostly to try to reduce behaviours of societies down to how individuals think and act. Attributing things to individuals is difficult, as there are billions of them, so this approach necessarily requires demographic segmentation i.e. stereotypical thinking (which is ironically often what the analysis is out to criticise.) You have to find the demographic group whose behaviour, or thoughts, or opinions can reasonably be said to contain the behaviour you are trying to explain. I say reasonably because these analyses are usually only opinions; what the writer thinks is a reasonable explanation is accepted, usually without any actual evidence, instead relaying on the reader liking the sound of the conclusion. How many “why Trump got elected” videos and articles have you seen? Few provide any causal evidence, most only provide demographics as data masquerading as evidence. These are plentiful and have, undoubtedly, already coloured peoples ideas of how the world works.

This approach to understanding the world is limited to specific types of conclusions. If the phenomena we are most concerned about are recent this type of analysis can only conclude that the difference in our society is obviously the fault of whichever group represents the biggest recent demographic change; millennials. Things like institutional racism or sexism are incomprehensible because those phrases don’t mean anything. How can an institution be racist if none of the individuals in the institution are guilty of overt racism? How can we even approach fixing a sexist education system if none of the parts of that system are being sexist? How can inhuman labour practices be an issue if everyone working in the factories chose to work there?

Strong reductionism is bullshit. It was shown, with actual maths, to be bullshit over 100 years ago. The hard sciences, you know, the people who put robots on comets millions of miles away, predict weather with miraculous precision, run optical cables across the ocean floor, create self-driving vehicles, use general relativity to account for transmission distortion in communication between machines in geo-stationary orbits, put the magic machine you are looking at in front of you, those people, dropped strong reductionism at that time and never looked back.

If you want to understand radical changes in the behaviour of our society in the last decade there is an elephant in the room: social media. Social media itself mediates the new social interaction. The important word there being interaction. Interaction is not a feature of individuals so strong reductionist worldviews are blind to it. For them interaction is effectively inert. It just transmits benignly, having no overall effect on behaviour. It can express behavioural traits, that’s it.

When the world, apparently in unison, listens to Gangnam Style then a month later ritualistically pours buckets of water over their heads, what does that tell you? That everyone woke up one morning and decided they like songs about Korean horse farming, then changed their mind and really wanted to pour whatever over their heads and social media was just there to record it? Or is it a more feasible explanation that those things went viral largely because of the nature of social media itself? So many variables in that process are obviously part of how social media and the internet themselves work and cannot be reduced to individuals at all. If social media didn’t exist, but every music shop in the world sold copies of Gangnam Style one day, would people have bought it? There is clearly another factor at play here that isn’t just peoples’ traits.

There is a motion that fake news, transmitted by social media, was a large factor in recent political events. You might think that this is an example of a break from the worldview above because it is laying blame at Zuckerberg’s feet. Maybe it is, but this analysis, again, seems to be about the content traveling around social media rather than the system itself. The system is at fault in that it contains this type of content. It is recognised that social media creates filter bubbles in which our view of the world is coloured to match our outlook, biasing our opinions. Again, this looks at the situation in terms of individuals. Social media biases the individual, or more accurately the individual biases themselves using social media, which manifests itself as a societal bias. Social media is just providing a way for individuals to do what they as individuals want to do, but if that is true there is no bias… ta da!

This is, I’m sure, a factor but it’s an incomplete story. Social media filters content based on two broad factors: the user’s interaction with it and marketing revenue. So if we like things that steers social media’s shaping of the filter bubble but what we like is a function of our social interaction, which is itself mediated by social media and distorted by our filter bubble. It might sound like I have added nothing to this analysis. The first says “A affects B”. Mine says “A affects B which affects A”. I’ve just pointed out a feedback loop made from the same elements, but that feedback loop is an important extra element. Put a feedback loop in a speaker-microphone system and you get a loud, shrill whine, right? That screechy noise isn’t a product of the singer, or the mic, or the speaker, or the cables; it’s a product of those things combined. It’s exact pitch is a product of the properties of all of those things and it’s volume is a product of their interaction. You can sing a different song but you’ll still get the same pitch. The only way to get rid of it is to get rid of the feedback loop.

We all see definite polarisation on most important issues. The standard analysis is, again, that two groups form, and the difference in opinion between the two sums to the outlook of the society. And again we are ignoring interaction. What people miss out is that both sides have a vested interest in portraying the other side as as crazy as possible. So most of the examples of either side are actually picked out by the other side. Those articles about air conditioning being sexist, a woman with 40 kids on benefits, people complaining about a movie poster, outrage about this and that, political correctness gone made, are in every case minor incidents involving a handful of people selected by the other side and made viral. Then the analysis that follows is based on data handed over by this process. Apparently the worlds leading experts on gender equality are all well-off white men who think that feminists are all men hating nut-cases; a conclusion based on a biased view of the world provided largely by a social media system designed to respond to those opinions by shaping its filters to make the world look more like that view!

In technical science systems with feedback loops have a mathematical property called non-linearity. They’re called complex systems because they have complex and often weird behaviours. The properties of these systems are well understood by people whose opinions no one cares about, and are unknown unknowns to a huge number of people whose opinions that shape our society. You probably aren’t aware of this but the idea of strong reductionism is axiomatic to all neo-classical economics, which includes all the ideas about how economies function in official practice right now. It’s embedded in the university curricula studied by many of our government ministers, although to be fair they probably didn’t pay much attention.

If you watched the party leaders’ debate you can see quite clearly how the parties fit on a spectrum. In political theory that spectrum would be the left-right spectrum, which is probably the case, but the left-right spectrum is generally to do with value judgments about style of governance. Traditionally it meant bottom-up versus top-down, dating back to the masses versus land owners. More recently it was more to do with being ‘progressive’ or ‘liberal’ versus ‘conservative’. Now if you are in favour of market regulation you are a liberal, which makes no sense. Anyway, whatever those words are supposed to mean they ostensibly referred to subjective ideas about approaches to governance.

More and more the spectrum we see seems, to me at least, to no longer be about abstract value judgments but about statements of facts that could be refuted or verified. The establishment holds to a dogma because they got to be the establishment thanks to the funding of those who benefit from that dogma. If the right of this spectrum was pro- and the left anti- then on this spectrum the Conservatives, the Liberal Democrats and UKIP are far-right. The green party somewhere on the far-left (I get the impression that they don’t accept this dogma at all). Plaid Cymru and the SNP seem to be somewhere towards the left. Labour is in a compatibilist position; trying to be in both groups.

The problem is that the dogma has such strong backing that to directly disagree with it in public would cost any political party too much, they’d be seen as mad, and the establishment parties would use the opportunity to attack that party and destroy some competition, rather than to allow any reality to leak into the political discussion. It is a monster created by the political class that even they can’t control.

The dogma is a series of lies concocted to stop the masses revolting against huge disparity of wealth and power. I think people understand and recognize this distinction but in most cases have head their heads filled with nonsense about how an economy functions and so can’t describe it explicitly, the words they would use just don’t fit together properly, but people can tell the ‘establishment’ parties from the outsiders along exactly the same lines as those above. People are starting to see austerity as a kind of con, but lack the economics theory to fully describe the nature of the con, although they can get, in most cases, very close. The dogma has the useful property that it aligns with common sense, and so is hard to fully disregard, but if you look at the details it doesn’t make sense at all.

The dogma is an assembly of political / economic theories that allow politicans to have prolonged discussions about the NHS, immigration, joblessness, infrastructure in which they make patently ridiculous claims, that are demonstrably false, and not just get away with it but earn political capital for saying it. They have to feed to monster. I’m not talking about cherry picking statistics to fit a preferred narrative, that’s bad enough; I’m talking about explicit and absolute claims about fundamental aspects of how our country’s economy functions that are obviously false.

In 2008 the world economy was almost destroyed by the actions of a tiny group of people called the financial sector. It followed an almost worldwide shift in policy as our best and brightest economists ensured us all that their Efficient Market Hypothesis showed that opening up our financial systems to the market by deregulation they would work better for everyone. The banking sector profits by getting people into debt, obviously, so any idiot can see what happens when you let them do that: they generated more debt than there is means to pay it back. The interlinked nature of and speed of trade between banks meant that once confidence in those schemes disappeared it collapsed practically instantly. Those economists watched the debt grow and, even in the last minutes, ensured us that such a debt can have no macroeconomic effects. The more liberal economists argued that markets know best while the right wing economists argued the same and that we should be more mindful of ‘government debt’, a message that became a strong part of the dogma.

If you cast your mind back to 2005-2008 you will remember all of those ‘consolidate your debt’ schemes and mortgages with tiny deposit requirements, these were part of a huge Ponzi scheme. Banks had found a way to profit from issuing mortgages even if the mortgages could never possibly be paid, so called toxic assets. They also subscribed to a method for measuring risk (based on the idea that financial assets can be combined to improve their yield while not aggregating their risk proportionately) that significantly undervalued it, bloating their confidence.

After the crash happened there was a kind of quiet chaos. The top 1% had to scramble to protect their fortunes. The newspapers ran with stories telling us what had happened in black and white: bankers had almost brought the world economy down.

When the dust settled the establishment kicked back in and stories of banking system’s economic crimes and the question of regulation almost disappeared from the press and were replaced with a new narrative: it was the benefits! The problem was clear: private debt had blown up but the establishment can’t tell people not to get into debt. So a strange, and in my opinion intentional, chimera was created. The word ‘debt’ was turned into a Frankenstein’s monster of mish-mashed econometrics. Was this monster our credit card debts? Or our mortgages? Something to do with our pensions? Was it the same as the government debt? We were told we were “living beyond our means”. It had something to do with government spending…right? Sacrifices had to be made to the Gods of the Markets else they would send their monster to destroy everything. At least when ancient civilization sacrificed people to the gods it didn’t make things worse. This monster’s confusing anatomy allowed any discussion of the 2008 crash to easily transition into how bad government spending is. The Conservative Party pushed the benefits story for maybe a year but it started to backfire because most of the population are on benefits. As, it would turn out, are most of the Conservative party, but that doesn’t count. Half of benefit claimants are in work. Also, most benefits are paid to old people. The story was alienating the party’s popular support so it had to be replaced with a new narrative: the monster is attracted to immigrants! This was pushed through the news media and backed by the Conservatives. Remember the ‘Go Home’ vans?

The immigrant story was perfectly in sync with the relatively unknown UKIP ideology. The government was now funding UKIP’s campaign; a strong factor in their rise. Later the BBC would join UKIP’s funding stream by giving bewilderingly disproportionate and free coverage practically ever day, while completely ignoring other comparable parties. UKIP would, without hint of irony, complain of “liberal bias” and would later spin this to imply that their coverage was proof that they are the voice of the masses, rather than that they were popular because of the efforts of the Conservative party and the BBC’s bad coverage choices.

Seven years later political leaders are having discussions about how to fix the economy while, as far as I can tell, nothing has been done to stop a repeat of 2008 and all of it’s effects (banks are just waiting for confidence / recklessness to return), which are all the things the government is taking responsibility for fixing. The crimes of the financial sector were whittled down to the real but minor issue of banker’s bonuses while the story of the monster is still wreaking havoc. Worrying about banker’s bonuses after 2008 is like worrying about the cleanliness of an axe murderer’s axe, but even that issue hasn’t been resolved. Meanwhile we are seeing the return of tiny deposit mortgages and weird debt schemes, while the financial sector functions along the same governing principals as in 2006. The problem of affordable housing means that if banks start to offer low deposit mortgages this is seen (and I’m sure would be claimed) as a cost of living victory, a way to get on the property ladder, rather than the onset of another debt bubble. Every time a political party does whatever it can to claim an unjustified victory over something, even if it seems harmless to do so, our political domain moves one step further from reality and the dogma gets stronger.

‘Balance’ had to be the most overused word in the Party Leader’s debate although most of the time it wasn’t clear what had to be balanced with what. The dogma holds that the government must balance it’s books, the debate had this idea built into it. A youngster in the audience demanded to know how leaders would balance the books. Is that really what troubles the average 15 year old? Those books, wherever they are, have never been balanced. In fact if they had to be unbalanced to exist.

The Conservatives, the Liberal Democrats, Labour and UKIP all accept that the books must be balanced. Plaid Cymru and SNP seem to hold that the books must be balanced but will tend to balance themselves if the government prioritises properly. I’ve seen no evidence that the Greens accept the need to balance the books, so I’m beginning to think the don’t subscribe to it, but they are being very careful, for reasons mentioned above, to not say it explicitly.

The story is that the government must borrow off someone if it wants to fund spending when it can’t gather enough in taxes. The simple fact that the treasury is the only entity in the universe that can create pounds fundamentally contradicts that story. If the government is to get pounds off anyone it had to have given them those pounds in the first place. When the creator of pounds creates new pounds we call that the “deficit.” It’s pretty easy to see that if the thing that issues a currency issues it they are by definition running a deficit, although I’ve had discussions with people who have read a lot about economics and can’t get their head around that. If the treasury created pounds and kept them all they wouldn’t run a deficit but would have issued zero pounds. If they were getting back as much as they issued then they wouldn’t be issuing any, right? Basic accounting. 1 – 1 = 0. When someone else tries to create pounds we call that “counterfeiting” and throw them in prison.

We have been trained to think that it is ‘common sense’ that the government must borrow pounds in order to spend more than it taxes but it is more fundamental common knowledge that the treasury creates those pounds. And what’s more it’s actually true.

That same ‘common sense’ makes us all think that more people can be employed if people just work harder. If we work harder we will earn more money that we can spend on hiring more workers… but if everyone is earning more, who is paying for it? For you to take more someone else has to give more. If the money supply is fixed how can everyone take more? Again, more fundamental common sense applies. One company’s success of increased revenue is another companies failure of increased expenditure. One person’s saved spending is another person’s lost revenue. It doesn’t matter how clever, enterprising or industrious we are, or how strong our work ethic is or how big big society is. 1 – 1 = 0.

More work-hours means more money in circulation. So how can money get into circulation?

First you have to see that pounds are a type of money, but there are other types. Anyone can create money, but in most cases not many people would accept it. The trick of banking is that they don’t need anyone else to accept it. Each bank keeps it all to itself. If you have a pound coin in your pocket that was created and issued by the treasury without a doubt. If you have a pound in a bank account you don’t really have a pound, you have an account containing your banks’ own denomination of money. The bank promises a 1:1 exchange rate with the pound. When you move money between accounts in the same bank the bank just has to alter it’s own internal records. Banks each have an account at the Bank of England (BoE). If you transfer money to an account in another bank, since your bank can’t alter another banks accounts, they have to transfer pounds to that bank before it will update the other persons account. They ask the BoE to transfer pounds from their account to the other bank’s account. BoE accounts contain BoE money, and because the BoE and the Treasury are branches of the same thing, they can always give you 1:1 exchange for pounds, so those accounts contain, by definition, pounds.

The economy tends to want to expand if it can. It wants to do more. Whether what it wants to do is beneficial is, of course, another matter. If expanding requires new labour (which isn’t guaranteed but generally the case) it needs to put more money into circulation. There are only three ways from which that new money can come: from the treasury, from savings or from banks. Note that I said ‘money’ i.e. not necessarily pounds. If it wants pounds then the banks can’t help.

If the government is obsessed with Austerity or Monetarism or Fiscal Responsibility or whatever the current looters call it then the government is actively trying to stop flow of new pounds from the treasury into the economy. In this situation the economy can only get money by either raiding savings or asking banks to lend. Depleting savings at an economic level is probably a terrible idea for obvious reasons, it’s like a starving animal burning off all of it’s fat; it’ll keep it alive but a single bad winter would kill it. The other option is bank lending.

Banks lending is a delicate game. It can be perfectly benign and useful or cataclysmically destructive. If those that borrow can afford the interest payments and the shareholders profiting from that interest are spending the money back into the economy (i.e. it is circulating wages to shareholders to wages etc.) bank lending can expand the money supply in a stable way… to a limit. If this creates no social problems then it’s all win-win. If the banks generate more debt than the economy can service then the process itself demands more money beyond what the economy can create internally: i.e. pounds. If the treasury refuses to intervene and supply those pounds (or it supplies them at too low a rate) then there will probably be a serious credit crunch or crash. Further, austerity rules will actually force the government to be part of this process, going to banks to borrow, rather than act to remedy it.

So if the bank’s lending practices are kept within the obvious limits of not creating debt beyond what the economy can sustain or destroying the social order it can be stable. There is, however, a far simpler and less toxic way of getting money into the economy: the treasury can just issue pounds.

The treasury can do that in three ways: give it, spend it or pay interest. It can also lend it but that is only short term because, assuming it charges positive interest, it will get more back than it lent, so the net is negative (unless it just spends the interest earned back out). The government gives pounds away through things like benefits and tax breaks. It spends it, obviously, when it buys stuff. It pays it as interest to anyone that is holding treasury bonds, which are bought when people open savings accounts, which is why talk about government debt is mostly nonsense. All of the above add up. If they add up to a deficit then the government is a net issuer of pounds.

Which of these seems like the best approach to getting pounds into circulation? The good thing about spending is that it kills two birds with one stone: it gets pounds out into the economy that can be re-spent and circulated, and it gets specific stuff done. When the government buys, say, roads we get pounds to circulate and we get some roads. Since the government is the buyer it can request whatever it wants. It can demand bombs or hospitals or whatever. The government creates demand for whatever it offers to buy. The people who worked on those things will now have money to spend, adding to someone else’s income allowing greater employment  and creating new supply chains each link of which being a possible employer. The pounds either remain in circulation or they end up being paid as tax back to the treasury (or sit in a savings account waiting to be spent).

So austerity is an attempt to stop a perfectly healthy and effective means of expanding the money supply, which is necessary to increase employment, forcing the economy to resort to bank lending and savings raiding to finance expansion. If the government implements policies to stop dangerous bank lending then it intrinsically limits the extent to which banks can expand the money supply, which could stop that expansion from resulting in full employment, assuming that those running banks would allow full employment at all (and it will likely mean raiding savings as well). If, however, the government gives banks freedom to meet all expansionary demand for new money the result could include full employment and probable catastrophic failure of the banking system (and probably raiding of savings as well). We can assume this failure is very likely given that we have already seen it happen when we gave banks freedom while also running a bigger deficit, in other words when the treasury and the banks were sharing the demand for new money it crashed and we didn’t achieve close to full employment. Leaving money creation to banks and having the government not run a deficit and take part in bank lending will likely fail faster and harder and not get close to full employment either. So we’ve got that to look forward to. It is likely that the current government won’t be in power when this happens, they’ll be in opposition blaming whoever is in power. And probably insisting that governments don’t create jobs.

In response to: http://alittleecon.wordpress.com/2014/09/13/objections-to-a-job-guarantee/

Actually this isn’t really a response; it’s more of an elaboration. Some common objections to a theoretical Job Guarantee are listed in the post. I wanted to add that the objections really highlight what I think is a muddling of what unemployment actually is, and what solving it as a problem actually achieves.

The most important detail, that is easily missed, is that employment is a purely financial construct. It is an aspect of the monetary system, which is financial, and not part of the ‘real’ economy, and solving unemployment has nothing to do with solving any real output problem.

We tend to think of jobs as, pretty much just, doing stuff. This is incomplete. You could do whatever you do as a job, right now, without anyone paying you to do it. No-one can really stop you pursuing whatever you think the work content of jobs are. So what’s difference between driving a bus around and being employed as a bus driver? Simple: you get paid. If you are seeking to be paid to do something you are unemployed. If you are seeking to just fill your time and not get paid you are not unemployed. Unemployment is the problem that there are people seeking to be paid, not that they are seeking to do stuff. People may well be seeking to do stuff, people work for reasons other than to get paid, but that is not unemployment.

Solving unemployment is a financial solution to a financial problem. You can solve unemployment by hiring people to do useful things, by hiring them to do pointless things, or by hiring them to do something terrible like kill each other*. All of these policies would, by definition, solve unemployment, and that’s that. The confusion is mixing the solution to unemployment with the solution to the problem of useful real output. They are not related. As the above example shows it’s possible to affect real output in whatever way you want, from terribly to brilliantly and everything in between, while eliminating unemployment. It’s also theoretically possible to have perfectly adequate real output (by whatever standard you want) without everyone being employed. You could even imagine a science fiction world in which no-one is employed but everyone is perfectly happy.

Talking about ‘non-jobs’ while discussing job guarantee is like discussing a balance sheet and just imagining what real assets the numbers represent, and then concluding the activity producing that sheet must be non-assets. Those numbers could represent anything, a balance sheet is just a financial description and doesn’t track real assets, let alone their qualitative value.

*all of which happen right now.