Ah yes, transaction costs. The costs of lawyers and consultants that are
needed to solve problems can be huge. I once got into serious trouble by
arguing, in a Policy Options article, that the Northwest Territories should not
become self-governing because the transactions costs would be huge. I was
"named" in the NWT legislature, and had I appeared in Yellowknife at the time,
I would have been shot.
Ed
----- Original Message -----
From: Sandwichman
To: RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION
Sent: Thursday, September 22, 2011 2:01 PM
Subject: Re: [Futurework] Professional Ethics (of economists)
Our current paradigm has exhausted itself. I blame Pigou's Economics of
Welfare for enshrining the myth that externalities ("uncharged incidental
disservices") were the typical form of market failure. Ronald Coase's Problem
of Social Costs continued the tradition of focusing on externalities.
The paradigm is flawed because what is viewed by the Pigovian tradition as
"market failure" is endemic to the process of production and exchange. It's the
transaction costs, stupid!
On Thu, Sep 22, 2011 at 9:40 AM, Arthur Cordell <[email protected]> wrote:
Ed,
The few decades following WWII were the best the western world has ever
seen and the new world we thought we had is now slipping away.
Me,
The question is why? Or are there multiple answers many of which we have
touched on on this list. And if we know some of the answers is what is lacking
is political will?
Or has our current paradigm exhausted itself?
From: [email protected]
[mailto:[email protected]] On Behalf Of Ed Weick
Sent: Thursday, September 22, 2011 9:24 AM
To: Keith Hudson; RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION
Subject: Re: [Futurework] Professional Ethics (of economists)
Keith, I do appreciate what you were trying to do, and yes indeed things
were much tougher in historic times than they are now. But we do live in the
here and now, a time of very high sovereign debt, growing unemployment and
changing wealth and power relationships. It is a time in which vital economic
information can be passed around secretively at lightening speed and be made to
work to the good of the few and the harm of the many. A book on the collapse
of Lehman Brothers, "The Devil's Casino", illustrates the latter point. And
yes, things will sort themselves out eventually, whatever the world will be
like then. But I do mourn the passing of the times we've had. The few decades
following WWII were the best the western world has ever seen and the new world
we thought we had is now slipping away.
Ed
----- Original Message -----
From: Keith Hudson
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION ; Ed Weick
Sent: Thursday, September 22, 2011 1:09 AM
Subject: Re: [Futurework] Professional Ethics (of economists)
Ed,
I appreciate that you were describing the modern scene. I was putting the
present income/wealth gap in historical context. When the present credit crunch
is over with I think we'll find that the decreasing differential will have
resumed. The FIRE sector will have paid off its debts (or, hopefully, parts
will be allowed to go bankrupt), it will have dispensed with a great deal of
the present load of ultra-sophisticated derivatives that have yet to play
themselves out, and it will be nearer to its traditional size vis-a-vis total
GDP (that is, around 5-10%). But still, that's years away yet, and it's the
present that's important as regards the social reaction to hard times and
whether Western governments will survive in their present form.
Keith
At 20:56 21/09/2011, you wrote:
Keith, I wasn't referring to the 19th Century or medieval times, but to
what has happened since WWII, especially to America, where there has been a
growing gap between the income of the very rich and the rest of the population.
Jacob Hacker and Paul Pierson, two political scientists, write about this in
"Winner Take All Politics" as does journalist Chris Hedges in "Death of the
Liberal Class". A table in Hacker and Pierson (published 2010) shows a very
large increase in the income share of the wealthiest 1% of the American
population. Its share of total income moved from about 8% to about 16% between
1975 and 2000. Similar surges have taken place in Canada and the UK, though
they were not nearly as large as the US surges. Income shares of the
wealthiest in Germany, France and Japan have generally remained static or have
fallen a little.
Several factors would account for the very rich getting very much richer.
One would be the growth of the FIRE (finance, insurance and real estate)
sector, in which a great deal of money has been made. Another would be the
rising control of politicians by the very wealthy. For example, in the US
there is currently no limit in the amount individuals or corporations can
contribute to political campaigns, a thing that could mean the conversion of
democratic representatives into corporate lobbyists: Obama currently wants to
raise the inequitably low taxes of the wealthiest American individuals and
corporations, but there's no way the Republicans will let him. Yet another
factor is the demise of unions, a very strong force in the maintenance of the
middle class in the 1950s to 70s, but now virtually hardly on the scene at all.
And of course the fact that a significant proportion of production for the US
market has been moved abroad is not helpful in providing ordinary Americans
with jobs and a living.
I'm not arguing that super-rich Americans aren't good people, and I know
that people like Bill Gates, Warren Buffet and others have done some very good
things with their money. Nevertheless the situation of the US and probably
Canada too is one of hollowing out, with the wealthy getting wealthier, the
middle class fading and the poor sinking into ever deeper poverty.
Ed
----- Original Message -----
From: Keith Hudson
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION ; Ed Weick
Sent: Wednesday, September 21, 2011 10:55 AM
Subject: Re: [Futurework] Professional Ethics (of economists)
Ed,
But the relative gap between the rich and the poor (in the advanced
countries) is nowhere near the relative gap between the rich and the poor a
century ago. J.P. Morgan was as rich as Warren Buffet, Bill Gates and several
more combined. So was Carnegie, so was Rockefeller. In modern day terms each of
them was probably a trillionaire. Going back further, Morgan and Co were not as
rich in relative terms to the poor as the great landowners of the Middle Ages.
Henry VIII (with 49 palaces) and about a dozen more owned half of England.
It's true that there has been a recent surge in the gap, but come the
double dip the rich are more than likely going to take a relatively larger
bashing, too. The gap has only become really outrageous since the credit surge
of the last 30 years. It's more than likely that the present gap will be
greatly reduced to the long-term historical trend once the present currency
catastrophe finally sorts itself out. All in all, the main difference today is
a perceptual one. We know a great deal more about the rich than ever before,
nor do we have scruples about being envious these days. Previously it was
considered a sin to be envious in order to keep us in our place. Today,
probably proportionately more money is being left by the rich to foundations
and charities -- hundreds of them in recent decades -- than to families. Most
of the medical innovations of the last 50 years have been due to research paid
for by private foundations, not government-backed science. Just the Rockefeller
Foundation and the Howard Hughes Medical Institute alone have probably produced
as many new therapies than all US government research spending. Think of the
Gate's and Buffet's present and future contributions to medical research and
future eradication of some diseases such as malaria all round the world.
Meanwhile we in the advanced countries devote less than 1% of our GDPs to
the Third World.
Keith
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