Louis Proyect: Boom Bust Boom

By Louis Proyect, who has written for Sozialismus (Germany), Science and Society, New Politics, Journal of the History of Economic Thought, Organization and Environment, Cultural Logic, Dark Night Field Notes, Revolutionary History (Great Britain), New Interventions (Great Britain), Canadian Dimension, Revolution Magazine (New Zealand), Swans and Green Left Weekly (Australia). Originally published at Louis Proyect: The Unrepentant Marxist

If I were to mention that a new film opened today that consisted pretty much of economists discussing financial crisis, your eyes would glaze over, right? But when such a film is directed by Monty Python alum Terry Jones, that’s a horse of another color. (It is co-directed by Bill Jones who directed a documentary on fellow alum Graham Chapman and Ben Timlett who produced a six-part TV tribute to the group.)

So what you get is a wickedly funny but mind-expanding analysis of 2008 by economists both famous (Paul Krugman) and famous only to their comrades (Nathan Tankus) that is driven by the proposition that the capitalist system is inherently unstable.

To give you an idea of how deep it gets into its material, it spends 15 minutes reprising Hyman Minsky’s Financial Instability Hypothesis using his son Alan and a cartoon representation of dad going back and forth on the ramifications. As someone who has delved somewhat superficially into Minsky over the years (I prefer the more hard-core Marxists obviously) but never quite understood him, this was an amazing segment that finally allowed his ideas to sink in. Put in a nutshell, crises are cyclical affairs that grow out of stability. When a system is stable as the American economy was after WWII, it is easier for a sense of euphoria to develop that leads to speculation of the sort that makes bubbles possible. Once the bubble bursts, the system goes into crisis and a sense of impending doom. Then, once again, the system drags itself out of the abyss and new round of stability ensues leading once again to another round of instability.

Minsky is much beloved by a number of the interviewees including Randall Wray from the U. of Missouri (a department that tolerates dissidents opposed to neoclassical bunkum), New Yorker Magazine contributor John Cassidy, British journalist Paul Mason, and our boy genius Nathan Tankus from Naked Capitalism and PEN-L.

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We learn that Minsky decided to study economics in the 1930s because the pat answers being presented by academic experts and media pundits was so out of whack with the reality. As it turns out, it was the Great Recession and the Occupy Wall Street movement (events that can be understood as a somewhat less cataclysmic repeat of the 1930s) that inspired Nathan to study economics. How do I know? He told me so.

Using puppets, animation and Terry Jones’s inspired narration, the film makes economic history not only understandable but hugely entertaining. For example, in reviewing past bubble-bursting affairs, it starts with the Tulip Mania in Holland of 1637 in which the lovely but ultimately common bulb was sold as if it were gold until one morning sellers showed up at a marketplace to discover that all the buyers were gone. Terry Jones illustrates this with an animated caricature of a Rembrandt portrait of a Dutch burgher singing “I kiss thee tulips with my two lips”.

Towards the end of the film, there is a well-deserved assault on the economics profession from people like Nathan who are trying to use the discipline as a tool for social change. We hear from students in the postgraduate economic society at the University of Manchester who like him are organizing extracurricular activities to examine about the true cause of economic instability, a phenomenon that their own instructors have ignored. One student points out that economics department get funding based on the studies they produce for mainstream outlets that are inherently neoclassical. So there is an economic incentive to falsify economics.

This is an amazing film that I can’t recommend highly enough. That being said, I did have a problem with a segment that seems to express a bias of the men who made it, namely that financial crises arise out of some deeply rooted flaw in human psychology that fosters a get rich quick behavior. Indeed, the film begins with an explanation for the subprime crisis that veers a bit too much in the direction of poor people getting mortgages they really didn’t qualify for.

We hear from scientists involved with studying rhesus monkey behavior on an island near Puerto Rico. They trained them to gamble by choosing one of two options: the safe choice offered them at least a little food for sure, while a risky choice generally offered them a bigger amount of food but only a fifty-fifty shot of getting it. One of the scientists argues that given 35 million years of evolution, such behavior is very difficult to eradicate.

This is a little too close to Jared Diamond’s sociobiology for comfort. I don’t think that evolution has anything to do with this. Generally speaking, procapitalist society, especially among hunting and gathering peoples, is marked by an aversion to risk. People hunted collectively in order to provide food that would keep them fed for a given period without any desire to accumulate after the fashion of a banker buying collateralized mortgage obligations in 2006.

Whenever I hear about monkeys or chimps having anything in common with us, I am reminded of a silly business in Diamond’s “The Third Chimpanzee”. This exercise in sociobiology (an updated version of the 19th century social Darwinism) includes a chapter titled “The Golden Age That Never Was” where he argues that since monkeys and apes have an evolutionary imperative to pass on their genes, art must be a clever stratagem by men to lure women into bed. This led Tom Wilkie to drolly observe in the May 22, 1991 Independent that this lesson must have been lost on Tchaikovsky, Andy Warhol and other homosexual artists.

“Boom Bust Boom” opened today at the Village East in New York City. Don’t miss it. It is more fun than a barrel of monkeys.

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43 comments

  1. John Merryman

    Life is unstable. A true happy medium would also be a flatline. What they think of as stability is an expanding economy and that is not stable in a world of finite resources. What we have to learn in such a dynamic is how the system recycles and sustains stability, through creative destruction. Biology does this by having individuals die, as the species resets to another generation. What goes up, comes back down and what goes round, comes round.

    Rather than trying to store notional wealth, i.e., these excess vouchers, as public debt, the government issuing them should threaten to tax them back out of the system, then people will have to invest directly into larger social needs, the commons, not store personal wealth as a mathematical construct.

    We treat money as both medium of exchange and store of value, but as a very good analogy, in the body, blood is the medium and fat is the excess store of energy. Capitalism has mutated from the effective transfer of value around the economy, to the creation of capital as an end in itself and so actual value is being destroyed to perpetuate it.

    We just can’t continue to mine all value out of community relations and the environment, to store as fictional value. As a tool, capital is very useful, but as a God, it is very destructive.

    It has become a vortex, pulling everything into it.

    1. OpenThePodBayDoorsHAL

      Life may be unstable but human society is not necessarily so, the Muisca in present-day Colombia managed a 1000-year run, their society had no concept of private property and was based around communal feasts, people contributed goods and produce to the feast, the leaders just organized the constant cycle of feasting, payback, road and public works maintenance, and trade. Leaders were not hereditary, had no official power over people, and were only able to keep their roles by demonstrating organizational competency and by being able to arrive at and manage the consensus “will of the people”.

    2. Nortino

      I think we’re on the same wavelength as I believe the desire to “store wealth” is what essentially causes the boom/bust cycle. People want to save their “wealth” but there are limited ways to actually truly save it.

      Malinvestment happens after profitable and realistic investment opportunities are exhausted. “Speculation bubbles” and unsustainable debt are just symptoms of overinvestment.

      In an economy which overinvests, production inevitably exceeds consumption and the correcting mechanism is for production to be cut. That is what explains the business cycle.

      I’ve heard the savings rate in China is 30%. That is simply unsustainable. Look where they are directing that savings towards. How exactly can a society “save” 30% of its production?

      Social security was established after the Great Depression not because people weren’t saving for their retirement, but because the “savings” went up in smoke with the stock market and real estate crash.

      Thank goodness we have the social security system today because think where we’d be if we didn’t have it.

    3. susan the other

      JM, this is such a good comment. I love it, and yes it would prevent our irrational swings. We need an expiration date on every dollar bill or digital bill. But first, or along side, we need security. Which might happen on its own but probably not fast enough. We know what we need: food, housing, medical, education, employment, and sustainability and a cleaned-up planet. We can take care of feasts and celebrations on our own. I wonder if the captains of capitalism can find a niche when capital goes time-restricted. You’d think so because we have evolved into super producers on a real-time basis, which ironically brings us to a screeching halt – but so far capitalism hasn’t found the solution to itself.

  2. Synoia

    Not amention of ergodoc or chaos theory.

    In the hunter gatherer analogy no mention of the transition of hunter gatherers behaviour change after the settle into villagers as the Sun (Bushmen) people of Bootswana have in the last 50 years.

    Grade: F – do over.

    1. Louis Proyect

      As it happens, I just reviewed another film about what you call the “Sun”. They are the San and are desperately trying to preserve their language as profiled in the film “Silent Tongue” that is part of the 2016 Socially Relevant film festival (https://louisproyect.org/2016/03/08/2016-socially-relevant-film-festival-previews-part-two/). The San speak Afrikaner and are named Jan, Henrietta, etc. So how did that come about? Through their conscious will to assimilate? No, because their way of life was brutally destroyed by the Boers. That’s what capitalism does. It reproduces itself not because of its superiority but because it has the guns. As Thomas Friedman put it:

      “The hidden hand of the market will never work without the hidden fist—McDonald’s cannot flourish without McDonnell Douglas, the designer of the F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies is called the United States Army, Air Force, Navy and Marine Corps.”

      1. Massinissa

        Hot damn, Friedman said something that wasn’t word salad for once!

        Of course, I assume he worships that Fist, but oh well, at least his statement was accurate for once.

  3. Synoia

    Not a mention of ergodic or chaos theory.

    In the hunter gatherer analogy no mention of the transition of hunter gatherers behaviour, the change after they settle into villages as the Sun (Bushmen) people of Bootswana have in the last 50 years.

    Grade: F – do over.

    Do the research.

  4. Steve H.

    “Neurologist Robert Sapolsky explores the genetic differences between humans and chimps, and describes the few genes that make our species unique. Our two species share over ninety-eight percent of the same genes, with only one major trait separating us from other primates: an abundance of neurons in the brain.

    “Take a chimp brain fetally and let it go two or three more rounds of division and you get a human brain instead,” says Sapolsky. “And, out come symphonies, ideologies and hopscotch.”

    And bullshit social and economic theories.

    youtube.com/watch?v=AzDLkPFjev4

      1. Steve H.

        “Yet, while it may well be true that chimpanzees do not conceptualize, this could indicate human biases as to what conceptualization should resemble in another species rather than an actual lack of continuity.”

        Brilliantly put.

    1. James Levy

      Yes, the author forgot one thing Marx said that stands the test of time: a lion is what a lion does. Unless he wants to argue that capitalists are not humans but Martians he’s got to live with the fact that they act like people. He also ignores the fact that of course hunter-gatherers didn’t hoard things–they had no capability to do any such thing until baskets, pottery, and salted and/or dried meat were invented. I’m sure the author is happier with Engel’s uninformed speculations though, because they fit the theory, just the way the Rational Optimizer nonsense buttresses capitalist theories of human behavior. Heaven forefend we actually go from observation to theory. It’s much neater and more convenient to work it the other way around.

      1. Bas

        Sherlock Holmes

        “There is nothing more deceptive than an obvious fact. … It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”

        I got a lot of comfort from Sherlock Holmes growing up, especially as he always admitted when he had been wrong.

      2. Banana Breakfast

        While it’s certainly true that storage of food has advanced over time, it’s also worth remembering that all the technologies you mention – pottery, salting, smoking, sun drying, basketry – and more predate agriculture and ingrained sedentism. In my semi-professional judgement as an archaeologist, the most important thing archaeology teaches us about the biological basis of social organization is that there almost certainly isn’t any, apart from there being social organization at all.

        1. Praedor

          Ah, you err. The biological basis of social organization is obvious. It is obvious in the fact that all societies of humans organize repeatedly and always in the same ways that are always clearly recognizable today. They organize in a clearly human way which is also very similar to the way other animals do so.

          If there was no biological basis to human society, ultimately, then you would actually find some truly “alien” societies. You would find those that are truly unique and never repeated. But you don’t. They are ALL repeats with slight variations given local conditions, over and over and over.

          You are your biology. You biology is a bunch of biochemical reactions. You cannot control your biochemical reactions, they ARE you. You cannot separate anything you do from your biology because that is what makes all things you do happen. You are not an occupant of your biological body. You do not occupy your brain. You ARE your body and you ARE your brain…and all those are are networked cells, each following a defined biochemical rules and cycles. There is no ghost in the machine because there are no ghosts.

    2. diptherio

      As Sapolsky discovered, however, it’s possible for even baboons to create radically different (and radically egalitarian) ways of living together. See anything he’s written/said about “Forest troop and Garbage Dump troop”.

  5. Steve

    Out of the entire crisis did anyone else predict their life would become a ‘ read the book, see the movie’. The voiceless poor can produce all the evidence in the world demanding justice but the media will make its profit calling it a study.

    1. diptherio

      Think tank researchers make a lot of moolah wrapping obvious truths up in flowery verbiage and footnotes…along with suggestions for specious solutions, which also get footnotes.

  6. Bas

    HuffPost review says it “falls prey to the big problem it addresses.” The trailer was so depressing to me–it was like a boulder sitting on my chest saying ” More of the same, no escape” from the old white men and I felt that scream coming that came at the end of the trailer.
    A quote from the article

    But there is a long list of people — who aren’t white men — who would have made great interview subjects for the filmmakers.
    Where was Christina Romer, who wrote a paper in 2015 examining the impact of financial crises on advanced economies? Where was Brooksley Born, who warned against the danger of unregulated derivatives — which ended up creating the 2008 financial crisis — when she was head of the Commodity Futures Trading Commission in the 1990s? Where was Harvard economist Carmen Reinhart, who literally wrote a book called This Time is Different: Eight Centuries of Financial Folly? Where was Raghuram Rajan, India’s top central banker, who warned of a potential financial crash way back in 2005, when he was working at the International Monetary Fund?
    If the world is to develop a framework for thinking differently about economics, it might help to start with more diverse sources.

    1. Nathan Tankus

      with the exception of Born all those people are mainstream establishment economists who don’t do a good job of focusing how financial crises work and have come out with plenty of mainstream hackery that this site has focused.

      Agreed there were other people they should have talked to that weren’t white men. Anwar Shaikh, Christine Desan, Katrina Pistor, Pavlina Tcherneva among others.

    2. Plenue

      Seems like a non sequitur to me. It’s certainly true that the millions of poor and middle-class people who were the victims of the crisis are never given much voice, but to complain that the academic talking heads aren’t sufficiently diverse seems to just be searching for something to complain about. I’m certainly all for diversity, but just because the experts interviewed are white and male doesn’t magically make them not worth listening to. The Huffington Post then undermines itself by naming several people who are thoroughly establishment and not particularly worth paying attention to, but happen to be women. Not exactly an improvement.

      Though to be fair, Carmen “Austerity is great! Whaddya mean spreadsheet error?” Reinhart is sufficiently intellectually bankrupt that she would fit right in with Thugman, who was allowed in this movie for some reason.

  7. washunate

    Sounds like an interesting project.

    I would add my little angle on the ‘capitalist system’ that I hope a thoughtful examination would address the fact that we don’t have a capitalist system. We have a system run by secretive control freaks that protects connected insiders while preying upon the general public.

    There are other words for that, like fascism.

    1. Massinissa

      Oh please. The problem I have with the “We don’t have a capitalist system” folks, is usually, according to their definitions of capitalism, then capitalism has never existed ever and probably never will. So whats the point of defining it that way?

      1. washunate

        The point of using a word other than capitalism is to more accurately describe the present state of political economy.

        You are smoking some strong stuff to describe the national security state and the drug war and IP law and the two-tiered justice system and bank bailouts and on and on as capitalism. Or did I miss when the people of Iraq greeted us as liberators?

        What is the point of using the word capitalism to describe a domestic totalitarian state and a global empire?

        1. Massinissa

          Please tell me, when is the last time ‘real capitalism’ was practiced anywhere? Its a unicorn. Youre describing Capitalism-In-Theory, not Capitalism-In-Practice.

          Communism in theory was great too, but when applied, less than wonderful… Capitalism is little different. It wasn’t much better or even much different 120 years ago either. Centralization of wealth and power were still the name of the game.

          1. washunate

            Can you help me understand your point? You seem to be saying that capitalism is an overarching term for bad government. My question is, how is that a useful description? What does it tell us about why social problems exist and persist?

            Advocates of market-based economics stress the importance of rule of law. What we actually have is a two-tiered justice system. Advocates of market-based economics stress the importance of competitive markets. What we actually have are government protected oligopolies. Advocates of market-based economics stress the value of a balance between central authority and decentralized decision making. What we actually have is the increasing concentration of large bureaucracies in both the public and private sectors. Advocates of market-based economics caution that legislating morality is difficult. Yet what we actually have is a system where government claims the power to regulate virtually every aspect of human life. Advocates of market-based economics point out the benefits of trade. What we actually have are corporate trade pacts and global military bases. Advocates of market-based economics stress the importance of government serving as a neutral arbiter. What we actually have is a government increasingly involved in picking individual winners and losers, socializing private losses onto the public. Advocates of market-based economics desire a clear distinction between public activity and private ownership. What we actually have are increasingly close public-private partnerships. Advocates of market-based economics suggest that wages should reflect the value of the work performed. What we actually have is a system of patronage where wages are directed to people who enable and protect the growing looting and authoritarianism. Advocates of market-based economics highlight the central role of transparency and voluntary exchange. What we actually have is a system built on secrecy and coercion.

            On and on, what is the point of referring to American political economy as capitalism?

  8. Minnie Mouse

    Yes an un compartmentalized Titanic is inherently unstable too. It takes only a minor freak accident to destabilize, capsize and sink it.

  9. lightningclap

    I would love to take Cusack’s suggestion and pelt Kruggers with rotten produce. Alas, it only happens metaphorically from the NC peanut gallery.

  10. two beers

    Typo in tenth paragraph, “procapitalist” is the antithesis of “precapitalist” (I don’t think you meant to say that capitalism is more cooperative than early agrarian economies).

    And now for something not entirely different: resistance is feudal

  11. Don Lowell

    There was mention of people buying homes who couldn’t afford them.

    My wife was a mentor to a single mom who had lots of problems. One of them was not being able to hold a steady job. She was a nice person but………..

    During the binge she was hounded many times to buy a home. By mortgage maker’s I presume. It got so bad one time that my wife took her by the ears and screamed in her face she couldn’t buy a home. Luckily she got thru to her.

    A friend of hers bought and lost a home. It was a crazy time.

  12. Rojo

    Kudos for pointing out the monkey b.s. If there’s a headline descriptor for our age, it’s “reductive”. Class is reduced to demographics, politics is reduced to markets, art and love are reduced to mating strategies, humans are reduced to jump-up apes.

    Maybe because we live in an age where information is reduced to ones and zeros?

  13. Plenue

    “the film begins with an explanation for the subprime crisis that veers a bit too much in the direction of poor people getting mortgages they really didn’t qualify for.”

    Well, didn’t they? I know there’s a lot of reasons for it, not least of which is decades of propaganda about how everyone should own a home as part of the ‘American Dream’. But in the end no one held a gun to anyone’s head and forced them to get a loan, so far as I know anyway (just as no bank was forced to give out loans, which is a popular claim on the right). These people are fundamentally victims, no doubt, but they had a degree of agency in their own right.

    1. Louis Proyect

      “But in the end no one held a gun to anyone’s head and forced them to get a loan, so far as I know anyway (just as no bank was forced to give out loans, which is a popular claim on the right).”

      In the USA, advertising is much more effective than violence.

      https://www.youtube.com/watch?v=Ei5OrV-CmHg

      1. Knute Rife

        And money talks. How many buyers were financed above 100%? “We can put you in your own home AND put money in your pocket.” That pitch is hard to say “No” to, especially if you’re already behind. Why not take the deal? Even if you lose the house, you’re better off than you were.

  14. craazyman

    are there any naked women in this movie or is just a bunch of guys yacking it up? I would hate to go pay the money and then sit there in the dark for over an hour and not see even one tit or even a hot butt, even fully clothed. Fukkk. Couldn’t they have found a few hot economist women to interview? There must be some out there. So what if they don’t know as much or aren’t as laser-beam smart as the ugly old fat guys. Who cares? It’s all nonsense anyway, they should have put a few of them in the movie, especially if people have to buy a ticket. Talk about a financial crisis hahahahahahahahhahahaha. Sorry. Movies are a lot these days, what is this one, like $20 bucks? Oh man, this is the kind of movie that might be best if you watch it on YouTube. That way if you get tired thinking or your mind wanders you can rest for a while watchhig some Rhianna videos then surf back to the movie and keep chugging. You can’t do that in the thee-ate-er

  15. Vatch

    Jared Diamond’s sociobiology

    Don’t you mean E.O. Wilson’s sociobiology? Or maybe both?

  16. Adam1

    “…since monkeys and apes have an evolutionary imperative to pass on their genes….”

    LOL!!! I usually come here to have my mind expanded about economics and finance, but then this. It’s basic confusion of causation versus correlation. Evolution has a bias to correlate reproduction with other highly enjoyable experiences. However we don’t necessarily seek out the enjoyed behavior because of reproduction.

  17. JohnB

    Nice :) I’ve been waiting for this to be released, for a long time. Steve Keen should be in it too.

    They should get it screened/released in more places – the documentary seems to be having an extremely slow release, but they seem to be trying to build up a movement alongside it, so that makes some sense (clever idea in a way – just wish I could get to seeing it sooner ;)).

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