Seems to me that those in the field of economics ought to be doing more of that, because I've been increasingly suspecting over the last few years that there is a crisis of confidence going on with respect to the understanding of some of the very basic concepts in the whole field.
I don't know that John Quiggin would agree, but I take support for my gut feeling from his recent post: The End of Interest. Some extracts:
Amid all the strange, alarming and exciting things that have happened lately, the fact that real long-term (30-year) interest rates have fallen below zero has been largely overlooked. Yet this is the end of capitalism, at least as it has traditionally been understood. Interest is the pure form of return to capital, excluding any return to monopoly power, corporate control, managerial skills or compensation for risk.I await his further posts with interest.
If there is no real return to capital, then then there is no capitalism. In case it isn’t obvious, I’ll make the point in subsequent posts that there is no reason to expect the system that replaces capitalism (I’ll call it plutocracy for the moment) to be an improvement.....
In thinking about the future of the economic system, interest rates on 30-year bonds are much more significant than the ‘cash’ rates set by central banks, such as the Federal Funds rate, which have been at or near zero ever since the GFC, or the short-term market rates they influence. These rates aren’t critical in evaluating long-term investments.
The central idea of capitalism is, as the name implies, that of capital. Capital is accumulated through saving, then invested in machines, buildings and other capital assets to be used by workers in producing goods and services. Part of the value of those goods and services is paid out as wages, and the rest is returned to capital, as interest on loans and bonds or as profits for shareholders. Some of the return to capital is saved and reinvested, allowing growth to continue indefinitely. Workers, on this account, can become capitalists too, by saving and investing some of their wages. At a minimum, they should be able to save enough, while working, to finance a decent standard of living in retirement.
Thats a typical post from the Professor. His own take on matters is probably hopelessly wrong but he is always opening up such fertile ground. He's got the giant intuition of a female goddess. He has more the mind of the observer and the artist than the serious social scientist. Its like his training and his nature don't quite fit right.
ReplyDeleteI saw this conservative on television thanking John "for the provocation." and I knew exactly what this conservative was saying. Quiggin is crazy as a bag of rabbits when he's surrounded by his leftist minders. But he's a class act when he's being more careful and he's in mixed company. A real asset to the dry continent. Even when the ideas he accepts are often very damaging to the country. The ideas. Not the man.
Its what I've been telling you. Economic science has built up a fantastic system of thought, but one exquisitely designed to ignore the problems of parasitism through land and fractional reserve usury. And of the "joint stock company" by the way. Adam Smith wrote very bad things about the "joint stock company". This idea of making fake persons. Thats not such a good thing and ought to be limited.
ReplyDeleteBut if you don't meet Henry George half way you are just playing silly-buggers.