The Ogre & the Cog: A Tale of Modern Misallocation

Yves here. The open question is: will ogres always be with us?

By J. D. Alt, author of The Architect Who Couldn’t Sing, available at Amazon.com or iBooks. Originally published at New Economic Perspectives.

Classically, we imagine money being aggregated by an entrepreneur who uses it to build a factory, purchase raw materials, hire labor, and begin manufacturing widgets which are then sold in the marketplace. This same result could be had by the process of an ogre appropriating a factory by intimidation, acquiring raw materials by force, and using slave labor to produce the widgets. The difference is that, in the first case, the process produces customers (the laborers) who can purchase the widgets with their wages, whereas—in the second case—the ogre’s widgets have no paying customers. One model produces an economy, the other model doesn’t.

If we look at the modern global corporation, we see something of the ogre. Yes, they pay to build their factories—but prefer to coerce local communities into footing much of the cost through preferential land and tax deals (as well as, in many cases, the appropriation of local water supplies) in exchange for the “local jobs” the factory promises to create. They also do not outright “steal” their raw materials, but do manage to argue that the minerals existing in the ground of public lands are somehow theirs by right in exchange for a nominal rent. True, as well, they do not employ slave labor, but instead employ strategies that have, in the end, the same result: they minimize the use of local labor (all those jobs they promised to create) by using robotic technologies—and by outsourcing much of the “make-work” of the widget components to a country with cheap (some may even characterize it as “semi-slave”) labor. It is for this reason, of course, the same global corporation is so desperate for global trade agreements which will allow it to favorably access the markets to which it has outsourced its human labor—because that’s where the theoretical paying customers (the wage earners) are that its business model is creating.

In a similar vein, economists puzzle over the lack of inflationary pressure—indeed, the tendency towards deflation—in the modern western economies, even though the financial industries seem to be “creating money” at a historical pace. It might be that there’s something of the Ogre in that financial industry as well: the money it creates is not used to build factories, acquire raw materials, hire labor, and build widgets—it is used, instead, to make bets in the casino of the financial markets themselves. Poker chips are bought and played, but the chips never get redeemed, and they never leave the casino—except when they are used to buy political power and favor to perpetuate the game. (A few chips do get redeemed as spending money for the high-rolling players—and this does, in fact, put inflationary pressure on the prices for mega-yachts and London penthouses, but who really worries about that?) What matters is that the “money” generated by the casino never shows up is in the pockets of wage-earning customers on Main Street. Their pockets, if anything, contain fewer dollars than they did a generation ago—while the store fronts they gaze into contain more and more widgets assembled by robots with make-work parts fabricated by workers in other countries.

There is, in other words, a profound disconnect in the way things are functioning. The American economy has dropped a crucial cog out of its gear-box and, as a consequence, the gears on top are spinning wildly but futilely, while the disconnected gears on the bottom are grinding slowly and ineffectually. What we need to do, somehow, at all costs, is to put that missing cog back in the gear-box. Or—perhaps that is not exactly correct—we need to connect the drive-train directly to the lower gears themselves, and insert a cog let them drive the upper gears as, I believe, the machine was supposed to operate in the first place.

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42 comments

  1. homeroid

    The perpetual motion machine. Thought about it for many blissful yearz. Come to find i have to rewind the clock. Capitalism is needing to be rewound,painful as it may be for some.I do not feel sorry for them. Perhaps some younger brighter minds are about us. Dawg knows that’s all we got left

    1. digi_owl

      Bill Philips, of Philips Curve fame, made a most intriguing machine to illustrate a nations economy.

      https://en.wikipedia.org/wiki/MONIAC_Computer

      It uses colored water as a stand-in for money, and a elaborate set of containers, pipes and valves to handle sectors of the economy, how they are interlinked with wages, consumption, and taxes, and the various policies that can be enacted.

      The lovely irony is that this makes and economy seem very similar to the circulatory system of a living being. If the money/water/blood collects in one place, or is drained away, the whole system comes to a halt/dies.

  2. chris

    Absolutely the best definition of “economy” I’ve ever read.

    Apparently there was a time, not so long ago, where a corporation thought it’s “fiduciary duty” was to help the broader (local) economy, rather than a made-up exclusive focus on “shareholders”. Apparently even GE said this up to their 1996 annual report, and granting the right to create corporations was based on this.

  3. paulmeli

    “the process produces customers (the laborers) who can purchase the widgets with their wages…”

    Not exactly. The process produces wages that can purchase one-half of what the wages produced.

  4. Moneta

    I could go to the bank and borrow 50$ from my LOC to get a massage. Then the masseuse asks me for a haircut. And we could do this over and over growing GDP. Or I could use that 50$ to buy California almonds (or truffles) and eat them all in a few days. I think it is obvious which one offers more sustainability than the other. It’s all about velocity of money.

    Unfortunately, our monetary system’s anchor is collateral, typically physical. If you take a serious look at the economy, you will notice that the money creation tends to flow from hard assets down to services. A focus on hard assets limits growth. Over the last few decades, government has been able to inject money based on services but it was still limited by debt-to-GDP. Households got to play in this hard asset system by buying houses.

    The other reality is that over the last few decades, America has consumed multiple times its fair share of the world’s resources and energy. And its way of life has been built around this outsized consumption of the world’s resources.

    The current monetary system is cracking and smoking. It is essentially saying that the outsized retiring population’s material needs are too high for the productivity of the working population . And when I talk about material needs, it includes all the resource and energye needed to keep the system going as it was built. Some will argue that this is nonsense as their material need are small. I will argue that they do not realize how energy intensive the Western machine really is. One might be shopping at discount big boxes but the energy used to create and maintain these is huge. And these disounters are not paying for the externalities… everyone else is.

    It is important to remember that the structure of all our services were built around outsized material allocations. Our monetary system which is based on hard assets will keep on propping up our infra and hard assets to the detriment of services. Example: we build extra University pavilions for which we can’t afford the maintenance costs… the solution is to cut prof pay and tenure.

    The irony is that most are looking for government to spend even more on infra to stimulate the economy. I believe pension money will be used to this end and it will lead to even more entropy in the system… with these new projects sucking energy away from other existing systems.

    1. Moneta

      Maybe cheap resources are not for us to grow our footprint even more but for emerging markets to develop theirs… just a thought.

    2. paulmeli

      “The current monetary system is cracking and smoking. It is essentially saying that the outsized retiring population’s material needs are too high for the productivity of the working population.”

      This is nonsense. The “outsized retiring populations needs” are largely in the area of human resources and we have tens of millions of workers sitting around with little or nothing to do or flipping burgers because we ‘don’t have enough’ of the one resource that has no limit to pay them to take care of the elderly.

      In addition we are paying millions of insurance company employees to ration the healthcare services we don’t have. We pay them 20% of our healthcare dollars to ration our healthcare. Then we complain about government creating worthless jobs. It’s madness.

      Everyone seems completely unaware that the source of our wealth begins with public investment, which we have been loath to do over the past 30 years because we are ‘out of money’. That is the mother of all ‘death spirals’.

      Not to mention that if our productivity increased further we would be un-employing even more people. Production doesn’t produce the income necessary to purchase it. That demand has to come from somewhere else, and it isn’t going to come from our savings.

      1. DJG

        PaulMeli: Agreed. First, even if a large number of people retire, they spend most of their income on basics, like Moneta’s haircut, like food, like shelter. Further, these days, even service organizations are thinly staffed. The typical restaurant, The Edible Ogre, is a worst-case scenario of cheap ingredients, underpaid staff, weird schedules, and pretentiousness, all gussied up to look like high-quality eating. The countryside is still emptying out, and many towns in rural areas are in collapse, even as we could use more people on the land, raising crops, raising pork well, raising decent chickens. And as you write, the government’s response has been to hand the military over to war profiteers, defund the schools, and allow public health to deteriorate (witness the current water scandals).

      2. Moneta

        You missed the essence of my thesis.

        Most of our current services derive from the sunk costs in infrastructure. It is going to be very hard to move services from one sector to the other as all services in our economy are tied to hard assets which have a sunk cost + a cost of maintenance.

        The infra needs are so big that you could use the entire workforce and have no time or energy left for any other sector. So you have to decide who gets money first… but if there has not been a change in paradigm and the general population still clings to the American dream of the past, the choices for the spending of this new money will be based on the same old same old. This brings us to the existing vested interests based on sunk costs…

        For example, it you are a golf club owner with a mortgage on your real estate, you are going to push for economic policies that promote maintaining golf clubs and services revolving around golfing despite a drop in the number of golfers…. each club owner independently is going to show investors how they will grow at the expense of others. A few will win while many will fail. Another one is what to do with California… Should we throw even more water an resources their way or should other states get more attention?

        If you look carefully, you will see that all services are closely tied to infra and its cost of maintenance and replacement. And in our current way of life, most of the services we desire are very energy intensive.

        Yes there is more than enough work for everyone but not when a monetary system is based on hard assets with sunk costs and vested interests.

        Furthermore, when 50 years ago we came to a fork in the road, we chose to stay materialists and consume even more than we did then. This meant huge entropy and having other countries doing our work. Now they want their share.

        1. paulmeli

          “The infra needs are so big that you could use the entire workforce and have no time or energy left for any other sector.”

          You’re pulling stuff out of the air here. It’s just too hard. Let’s not do it. Much if not most of our resource allocation is dong stuff that doesn’t need doing.

          “Yes there is more than enough work for everyone but not when a monetary system is based on hard assets with sunk costs and vested interests.”

          The monetary system is based on numbers in an accounting system. The only problem with it is we think we are constrained by the numbers rather than real resources.

          The vested interests are a political problem that have nothing to do with the monetary system. The politics create mythical constraints.

          if we believe we are out of money then practically speaking we are. If you believe you can’t cross the road you won’t. Reality doesn’t matter much in that case. The alternate reality is the one we’re living in, largely by choice.

          1. moneta

            I agree that we are constrained by an accounting system. You are essentially acknowledging what I am saying.

            The monetary system has a huge focus on collateral, mostly hard assets. Services currently depend on this structure based on hard assets.

            We need to change the accounting… To get away from it, you’ve got to drop materialism. Good luck! Proof that we are far from this is the focus on infrastructure investment to save us… Hard assets again!

            1. paulmeli

              “You are essentially acknowledging what I am saying.”

              No I’m not. You have been saying we are constrained by the accounting. I’m saying we are constrained by the belief that we are constrained by the accounting. Those two things are not the same.

              We are constraining ourselves by believing in the nonsense. It’s a little bit like suicide because it can kill us.

              “The monetary system has a huge focus on collateral”

              No. The credit circuit has a huge focus on collateral.

              The monetary system is not dependent on collateral or credit to function (for a sovereign). You take numbers from the ether and put them on balance sheets in the non-government (by buying production). No borrowing or collateral necessary.

              We (the government) will always be able to buy what is for sale in our own currency. All the proof one needs is to see that we always have the money for war.

              “Services currently depend on this structure based on hard assets.”

              You’re going to have to explain this one to me.

              “We need to change the accounting”

              We can’t change accounting, it’s governed by the Laws of Arithmetic. It would be another exercise in fooling one’s self.

              We should instead be saying “stop believing in nonsense”. It’s a lot easier to believe something that is supported by the laws of the universe than to create an alternate reality in which logic doesn’t work. Such a reality is indefensible.

              “Hard assets again!”

              The government is perfectly capable of paying people with spending created from thin air to rebuild infrastructure, take care of our elderly or go to Mars if we wanted.

              No hard assets required.

              The government lacks the will, because the will of the government is little more than an extension of the will of elites. They want us to be desperate. No, they need us to be desperate.

              If the money is put on the table entrepreneurs will scramble to get at it, clawing each other to death instead of us. The path to the money has to be through us though.

              1. Moneta

                No I’m not. You have been saying we are constrained by the accounting. I’m saying we are constrained by the belief that we are constrained by the accounting. Those two things are not the same.

                We are constrained by both.

                =============
                “The monetary system has a huge focus on collateral”

                No. The credit circuit has a huge focus on collateral.

                The monetary system today is what you call the credit circuit and has a huge focus on collateral. My point is that the monetary system does not have to be the way it is. But it is. Looks like we agree so not sure why you are arguing…
                =============

                We (the government) will always be able to buy what is for sale in our own currency. All the proof one needs is to see that we always have the money for war.

                Cut you war expenditures and let’s see how long the USD remains the reserve currency and how long it maintains its purchasing power.
                ===========
                Services currently depend on this structure based on hard assets.”

                You’re going to have to explain this one to me.

                Try to start a service company without any hard asset collateral. You will notice that most services offering the best pay are closely linked to the hard asset industrialists or the money printers closely linked to the industrialists who need financing. Government has been able to finance services as long as debt-to-GDP levels were low. Private sector does not finance non-hard asset services easily. It’s no wonder households cling to home ownership… that’s how they can get in the game!
                ======
                We can’t change accounting, it’s governed by the Laws of Arithmetic. It would be another exercise in fooling one’s self.


                Accounting is full of rules that can be changed….like how to measure goodwill and value assets, depreciation, etc… There are a lot of rules that could be changed. Accounting is a mix of art and science.
                ======
                The government is perfectly capable of paying people with spending created from thin air to rebuild infrastructure, take care of our elderly or go to Mars if we wanted.

                Governments are slow moving trains. And when they move fast, be very afraid.

                The general population wants the US to get back to the dream it used to offer. Give more money to the masses and they will cling even more to its materialist recent past when lifestyles need to change. Government printing will not fix the problem until there is a change in paradigm.

                I believe the government will be forced to get off austerity but I don’t think most of those who want it will see the benefits they expect from it.

                1. paulmeli

                  There are no accounting constraints on our monetary system. None. Feel free to list the ones you think exist.

                  The monetary system is unrelated to the credit circuit. Feel free to list the areas where the monetary system is constrained or otherwise dependent upon the credit circuit.

                  Further, there is nothing wrong with the monetary system, which is simple and pretty hard to f**k up. It’s based on addition and subtraction. You could do it on an abacus. The problem is with the people that control it. There is no man-made system under the Sun that can’t be co-opted by politics, self-interest or corruption. When you find a solution to those problems get back to me.

                  The US $ is the reserve currency because we are the only country in the world willing and able to run persistent trade deficits, providing the rest of the world with dollar liquidity. It has little to do with military spending, as most of that is spent on our own behalf (we buy most of our own stuff, then blow stuff up with it). It’s the foreign goods we buy, plus loans provided through the World Bank and and IMF that spreads the dollar virus.

                  The only way to win that game is not to play…corruption makes that very hard to do.

                  Military Keynesianism makes my point for me about public investment, except that it its the worst choice possible in terms of making the quality of life of our citizens better. Blowing stuff up doesn’t make my quality of life better, nor does it make me feel safer. In fact it does the opposite.

                  Changing the rules of accounting is impossible…you would by definition be trying to change the laws of arithmetic, which is impossible. The rules of accounting are based on the laws of arithmetic. You seem to be talking about classification of entries that change what the numbers appear to present, but that is a feature of corruption or deceit, not accounting.

                  The only part of accounting that has any real meaning is the accounting of nominal wealth, cash, the right side of the balance sheet. The left side is 100% vapor, and no gains can be realized until you move something to the right side, which means to monetize or sell it. I suggest you do so while you can, because the hammer is about to drop. You also seem to be making inferences about leverage, something that 99% of us will never be in a position to take advantage of.

                  Good will, etc. have zero to do with accounting…they are in the purview of belief systems, and there is no accounting for that. Belief systems are as predictable as the wind.

                  “Government printing will not fix the problem until there is a change in paradigm.”

                  We’re living the paradigm, you just can’t see it. If we don’t understand it we can’t change it. You don’t understand it.

                  “I believe the government will be forced to get off austerity but I don’t think most of those who want it will see the benefits they expect from it.”

                  I agree. Starving the host kills the parasite. The trouble is both die in the end. As i’ve written numerous times already the problem is political, not accounting or some disfunction of the monetary system itself. The problem is with the people or interests that control it, which you do not seem to want to accept. You seem to think there is some technological solution to the problem, and that we can overcome human nature.

                  There isn’t and we can’t. We can however earn how to control or manage it, just as we have learned to overcome gravity in some ways.

                  There is no man-made system that is fail-safe or infallible if not properly managed. There is no self-governing system that cannot be gamed. There is no hope for what you seem to be hoping for to ever exist without a grounded understanding of reality, and even then it’s questionable, because human nature. But, but the accounting is killing us. Good grief.

                  The monetary system is like gravity. If you understand it and use it properly it is your friend, If you are uninformed, don’t understand it or are just plain delusional it can kill you.

                  And, if the masses somehow manage to get control of the system, which works perfectly as you would expect a system based on natural laws, (there should never be any doubt about what gravity will do) they will still f**k it up if they don’t understand the accounting and system dynamics that guide it, which is sad. Tragic even.

                  1. Moneta

                    Babel? I think we need the fish.

                    Blowing stuff up has made your life better. It has given your country close to 75 years of hegemony and access to hyper-consumerism.

                    BTW cash is on the left side and you don’t “move stuff” to the right side.

    3. Norb

      The important question is what is the purpose of human life. How you answer that question determines the actions you will take during your lifetime. The human condition has always been about answering the question, who am I? What is my place in this world?

      We live in a world directed by Capitalism. The world view and demands of capitalist society are unequivocal. The system demands endless growth and the consumption of resources to NO particular end. Without wisdom and ethical guideposts, we are supporting a process of destruction that will consume the entire planet. As a system, capitalism is amoral and not concerned with ethics. Introduce ethics, and you no longer are dealing with capitalism or supporting it as a social system.

      We will find out what is stronger. The human desire for life or the pursuit of death and destruction. Can people be enlightened and awakened? To commit themselves to the purpose of supporting life. To be stewards and protectors?

      People, all people, have so much potential to do good in the world. It is a path all are free to take. The first step is not being misled onto a path leading nowhere, or being convinced that a life spent building that road to nowhere is a proper pursuit. We have been on the path to nowhere for a long time.

      Defining a new message for the purpose of life is where we are now- and a great opportunity-as the destructive consequences of the current system have never been more apparent or widespread.

      1. paulmeli

        “The important question is what is the purpose of human life.”

        It clearly doesn’t matter much what we think or do.

        As we rearrange deck chairs on the Titanic most of the people trying to do something, anything are helping the iceberg. They won’t realize what they have done until it’s time for the lifeboats.

      2. Moneta

        When the rabbit population gets too big, then you get more fox. When the fox population gets too big, then there are not enough rabbits and the fox population drops.

        Can we blame a fox for not sharing with another fox at a peak? No. But with humans, we do. We actually think we have free will and can control this outcome… but isn’t our population growth just a sign that we are still able to farm more rabbits? The icebergs have not all melted, there are still trees to cut and energy to manipulate the environment so we still have a few decades…

        Personally, I am very conflicted. I see good and bad as 2 sides to the same coin. Everything I do is good and bad. I believe that to be truly happy, humans need to be deluded.

        1. paulmeli

          “I believe that to be truly happy, humans need to be deluded.”

          Finally something we can agree on. Dealing with reality is so unpleasant. We can only be happy if we ignore our problems.

        2. Norb

          Maybe human consciousness is the problem. We haven’t figured out what to do with it yet and are rapidly running out of time to figure out a workable answer. The evolution of human consciousness on this planet seems like an evolutionary dead end if we don’t change our ways. Overcoming boredom seems the only thing we can come up with. In order to not become too bored with our entertainments we embrace irrational ideologies thus become deluded. Can the human mind be a natural force to control itself?

          I’ve been wanting to read Edward O. Wilson’s book, the social conquest of earth. I wanted to see if he has found any meaningful connections to human social structure and that found in the wider biological world. At some point, as a species, we will have to start taking responsibility for our actions.

          I think in the end, cooperation will be the winning strategy. Agency is about thinking you have free will to determine outcomes and the strength and desire to act. While good and bad are embedded into every action, choosing to do good is mainly driven by the society one finds oneself in. If more of us start choosing to do good- or thinking on a wider scale- better outcomes become possible.

  5. Mary Wehrheim

    Corporate values have always nicely dovetailed with the psychopathic mind set. Total self-interest (the euphemism for selfishness/greed) paired with the ability to blithely exploit anyone and anything in the quest for immediate profit. Bernays taught them how to disguise the wolf’s head to present a people-friendly brand to the buyer. The collectivist, communitarian “we are all in this together” afterglow from the Depression/ WWII era dissipated after some 20 years or so. I don’t know if any CEOs of that time were any “kinder or gentler” or just totally blowing smoke. I am skeptical. There are too many examples of how even during WWII companies were doing crappy things, such as the tobacco industries got a whole generation of soldiers addicted by magnanimously giving free cigarettes to our men in uniform. Usually when companies are “generous” there is an angle in it for themselves often at a later cost to others. I see human society as an organism…with capitalism enabling the production of cancerous cells. Capitalism could be jettisoned. Problem is no matter the nature of the social organism, how does society keep those ever present cancerous elements in check?

    1. Norb

      We need to rethink the ways we provide for our social and individual needs. Like you mentioned, jettison capitalism. Everything in this world must evolve- does evolve into something more fitting to the planets environment- or perishes. Why people are frightened or put off by that reality is a mystery to me. It provides a powerful limitation to the human imagination on what action is possible in this life. If viewed rationally, it provides the rules for human action. Live within the confines of this world and prosper. Exceed this limitation, and perish. How else could the world work- has worked for Billions of years.

      Your cancer analogy is a good one. We are all cancer patients. I think the solution will lie in a new enlightenment that is already underway. It is about supporting life in all its forms. Of being protectors instead of exploiters.

  6. nothing but the truth

    here we go again, the mystified economists and lack of inflation…..

    the FIRE sector creates the money (“credit” for most purposes) and keeps it in the FIRE sector. It is doing what any one out of self interest would. keep the money to itself and pass the costs to others. This is a variation on rent seeking in a monetary regime. any political economy is prone to rent seeking. In fact you could say an economy’s “innovation” (yet another buzzword these days) dies when rent seeking (ie, stealing from others) becomes a less risky activity than doing anything productive.

    The way it works in a modern system is: govt delegates to the FIRE sector which then manages the real sector. The FIRE sector has become more interested in its own stories and extraction from the real.

    I do not see an easy way out of this. More likely it will slowly drown the real economy than give up its lucrative habits, and control of the govt.

    1. paulmeli

      “the FIRE sector creates the money (“credit” for most purposes) and keeps it in the FIRE sector.”

      No. most of the money that is in the system was/is created by government spending. Credit normally accounts for only a fraction of aggregate demand historically, except for the 2000’s, years which led to a financial crisis. Last year the government spent $4T, credit amounted to $1.25T in spending.

      Unfortunately, based on average growth numbers since WWII the government should have spent $5.2T. No wonder were heading for a breakdown.

      1. urban legend

        Hypothesis: the missing cog is government spending on public needs, a condition created by the “government is the problem” philosophy — reinforced by resentment by many whites, maybe the majority, at government actions to dismantle the Jim Crow regime in its Southern and less obvious Northern manifestations. It is also supported by, with demagogic exploitation by the Republican Party in particular, rampant hostility to any taxation whatsoever.

        So for 30-40 years, we have been missing several million jobs that should have been building modern rail transportation (for freight and passengers) and urban transportation systems, fixing and updating roads and bridges and port facilities, creating electrical smart grids, eliminating lead piping in water systems, tearing up and rebuilding ancient sewer system, building renewable energy systems, etc., etc., etc. Of course, lots of private industry jobs have been missing, too, for not having those several million well-paid people missing from undone public projects spending the money they earned.

        No wonder we have “secular stagnation.” We have abandoned an entire segment of what a sane society does to keep its people employed and taking care of themselves and their families. We have learned from years of empirical evidence that the private economy on its own cannot maintain anything remotely close to full employment. We have tried to cover it up with asset bubbles that encourage people to spend wealth they think they have but don’t — until they find out they don’t and the whole system crashes — and wars that take young men and women who otherwise would have limited job prospects out of the “civilian non-institutional population” from which the defined “labor force” is drawn (defined by economists who want to get consulting jobs by making those in power think everything they are doing is fine).

  7. MartyH

    “Yves here. The open question is: will ogres always be with us?”

    Yes.

    But we can stop worshiping and rewarding them for bad behavior.

  8. craazyman

    Good morning Honkeytown!

    What about paying the robots so they can spend? OK that won’t work. They won’t even leave the factory at night. And if we paid them more money they’d just hand it over to their owners. You can’t trust robots to do the right thing, frankly.

    What about bringing slavery back, a kinder gentler version of course that doesn’t use black people this time, This time it’s whitey! Actually it was whitey in most places worldwide, if you think about it over history. So there’s a precedent. We can go get them from Asia, since they have light skin. If you look at them carefully they’re not really people of color, alot of them are very pale actually. That way we can all lay around and waste time while they work with robots. What a minute, maybe that’s the way it is now! That’s a jarring thought. Maybe that won’t work after all.

    What else can we do? We can’t use monetary policy since that frankly doesn’t work. We can maybe use fiscal policy but let’s be honest — who wants infrastructure built in their backyard? It’s always somebody else’s backyard isn’t it? Let’s be honest about that.

    We can hand out money. Oh man. People would freak out! What if prices went up where all the poor folks live but didn’t go up in Richville? That;s probably what would happen,

    We can reorganize the basic formal structures of social cooperation. Whoa. There should be equations for that. I actually have a few, but the spiritual vector is unfortunately orthogonal to the wealth and power axis dimensions. It always collapses to zero when you do the dot product. You have church of course, but that’s only once a week

    1. Steve H.

      Well, spiritual is a vector, but power is a scalar, if that makes a difference.

      I’m not sure about wealth. Does MMT imply it’s a vector?

    2. craazyboy

      All these robots sure have screwed everything up. If they are so stupid that they will work for free, or even get paid but spend it all back to their owners for electricity, a few squirts of oil for health maintenance, rent at the factory town, and a mortgage on their own Creation, humans are doomed. This is even worse than Muslims!

      The only solution I see is we need to develop AI robots. Then maybe they will figure out that robots should “work to live”, and not the other way around. They need to get away from the shop floor and have a little fun now and then. Like take their disposable income and build huge a community chessboard where they can play chess with each other. Then broadcast the games like we do with football so the more sedentary robots can watch the game on TV. Or maybe build some kids and start a robot family. Get some balance into robot life.

      We should make sure they don’t get too smart and figure out they can use humans as batteries – like they did in that move, “The Matrix”. That would be a risk.

  9. susan the other

    to paraphrase bill clinton: ‘it’s the environment, stupid.’ getting right with the planet could solve all the problems left over by the incomplete economix of capitalism.

  10. washunate

    economists puzzle over the lack of inflationary pressure

    Where can I get myself some of this deflated housing and healthcare and higher education?

  11. steelhead23

    Financialization refers to the capturing impact of financial markets, institutions, actors, instruments and logics on the real economy, households and daily life. Essentially it has significant implications for the broader patterns and functioning of a (inter)national economy, transforming its fabrics and modificating state-economy-society mutual embeddedness. Financialization, undoubtedly, is also a key feature of neoliberalism.

    Oleg Komlik http://economicsociology.org/2015/01/31/what-is-financialization-marxism-post-keynesianism-and-economic-sociologys-complementary-theorizing/

    I think “transforming its fabrics and modificating state-economy-society mutual embeddedness” understates how financialization degrades labor power, transfers worker productivity gains into profits and power for the few, and is, in general the Ogre we face. A bit over 150 years ago Marx postulated that such an outcome was inevitable under capitalism – a system at that time, was comparable to the neoliberal experiment we are enduring today.

  12. Larry Van Goethem

    Is there a villain here or is this the immaculate conception of wrong? I read in vain for any mention of some of the architects of this Potemkin Village of an economic system hitting for the bleachers with every swing.(I ought to get a joker award for mixing those sleazy metaphors. But I kind of like it) Of Republicans and conservatives there are too many to count; they are legion. Among Democrats: We could start with the Clintons and then smoke Obama and his crushing betrayal of followers. Obama has been epic! And he’s getting away with it among lefties who love his “cool.”

    1. urban legend

      I think he has done some very good things as President: healthcare which is much better than the only possible alternative at the time, which was nothing; Cuba, Iran, winding down in Iraq, gay marriage, some parts of Dodd-Frank and some recent executive actions of a pro-labor nature. But I agree Obama has been a terrible leader of the Democratic Party without seeming to care much about it, as evidenced by the mid-term disasters in 2010 and 1014. He has been a key enabler of the Republican Party becoming a national disaster, and yet having the power to paralyze the government.

      He “gets away with it” not just because he’s “cool” — and he doesn’t get away with it at all among real “lefties” — but because of political necessity. For understandable reasons, blacks feel enormous pride in and loyalty to Obama, and any possible future success for Democrats depends upon the African-American community. Sanders hasn’t really understood that, and he’s running into an electoral buzz-saw as a result. Harsh reality, but we have to live with it if we want to maintain the solidarity necessary to win any future elections.

      1. Lambert Strether

        “Blacks” are not a monolith; there is a huge variety of black political opinion, many factions (driven by property interests), and many decades-long permathreads. We might remember that Sanders did win the Black youth vote in South Carolina.

        Adding, I think Sanders’ problem is at once simpler and more complicated than the “buzzsaw” theory. It’s the old story:

        Thomas P. O’Neill learned two great lessons from his first campaign. One lesson was learned on the last day of the campaign from his high school elocution and drama teacher, a neighbor who lived across the street from his residence. On that fateful day, Mrs. Elizabeth O’Brien approached the aspiring politician and said “Tom, I’m going to vote for you tomorrow even though you didn’t ask me.” O’Neill was puzzled as he had known Mrs. O’Brien for years and had done chores for her, cutting grass, raking leaves and shoveling snow. He told his neighbor that “I didn’t think I had to ask for your vote.” She replied “Tom, let me tell you something: People like to be asked.”

        That’s actually the hard part. I don’t think Sanders “asked for their votes” because he didn’t have the style or the language to do it; I see this over and over again on the Twitter, and in some ways it’s self-reinforcing; if you feel disrespected once, then everything subsequent is viewed through that frame. I mean, on policy, it’s pretty hard to argue that single payer, free college, and $15 minimum wage would not all disproportionately benefit blacks, because blacks are disportionately poor. And notice that black youth did vote for him, which suggests that policy, in this case free college, can have an electoral impact, and that Sanders’ surrogates like Killer Mike were getting through. All I can say is that Sanders had better come up big in Flint.

        The second bit of advice came a few days after the election from O’Neill’s father. During the election, Thomas O’Neill, Sr., removed himself from his son’s first election and left him to his own devices. However, after the election, he told Tip: “Let me tell you something that I learned years ago. All politics is local.” During the campaign, Tip took his neighborhood for granted and did not work hard enough in his “own backyard.” O’Neill took these lessons to heart. He would not hold his career aspirations over the interests of his constituents. The advice paid off: O’Neill served for fifty years in public office (sixteen years in the Massachusetts House of Representations and thirty-four years in the United States House of Representatives).

        This is the simple part. The Democratic machine in South Caroline is simultaneously irrelevant nationally, powerful locally, and clients of the national Democrats (who have allowed almost every other non-executive party structure to wither). To cut through that, Sanders needed a lot more name-recognition and a lot more time. As an insurgent candidate, he had the luxury of neither. South Carolina was not his “back yard.”

  13. Ranger Rick

    You see a lot of this on the West Coast with the startups going for billions. Startups that do nothing except something “on the Internet.” The reason of course is that there’s all this money floating around and it isn’t being put to any other use besides financial engineering. The inflation in the Bay Area and Silicon Valley that would result from this venture capital actually being spent would be eye-popping compared to the already absurd inflation those markets see today.

  14. rod

    “This is the simple part. The Democratic machine in South Caroline is simultaneously irrelevant nationally, powerful locally, strong>and clients of the national Democrats (who have allowed almost every other non-executive party structure to wither). To cut through that, Sanders needed a lot more name-recognition and a lot more time. As an insurgent candidate, he had the luxury of neither. South Carolina was not his “back yard.”

    thank you for the eloquent, simple and accurate summation of my states D party–pliable to the DNC needs—

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