The Neo-Capitalism Theory Portal

Unfortunately it turned out that the Freeing Growth Foundation could not be registered as a charity in Ireland without a very significant amount of paperwork being submitted - so much so that it wasn't worth the effort. Therefore very shortly after its first filing of its accounts the FGF, as a company, will be put to sleep for the foreseeable future.

What is to come for Neo-Capitalism and the Freeing Growth book series et al? For now it looks like the whole lot will have to go on ice for perhaps an extended period of time. Much as I might like to continue work on the topic, firstly I need to strengthen its theoretical underpinnings in the academic literature hopefully though the publication of a PhD on thermodynamic imperatives for policy formation. Once I have accomplished this, a series of policy publications - hopefully in tandem with other notables in the field - will surely follow. These may, or may not, have the 'Freeing Growth' label on them depending on what is happening at that time.

Much as it may be hard to believe, there are plenty of highly competent people out there with lots of great realistic ideas for transforming our society for the better. Unfortunately, as very ably proven in the handling of the credit crunch, anyone considered too far from the centre tends to be ignored for the most part. Even with a peer reviewed doctoral thesis under my belt and a few hundred peer reviewed publications, I would still very much doubt that anything more than lip service would be paid to any of my ideas even by academics let alone policy makers. It's all far too 'far out' - for now at least.

I recently wrote a series of economics policy articles for a progressive think tank blog in Ireland. The first drew plenty of comment, the second drew none at all as I was clearly going into unwelcome places. However it was the third where I suddenly became ignored for no given reason. In the context of my wider thinking and proposals, what I proposed in the third was hardly radical, yet it was sufficiently 'far out' to be ignored rather than condemned.

Rather than waste the considerable amount of work I invested into writing these articles, I have republished them here complete with their comments by setting their dates at the time they were originally written - hence they will appear before this post. I hope you enjoy them and find them interesting, and maybe you might like to submit a comment or two!

Tackling Selfishness In Ireland (unpublished)

Author: Mr. Niall Douglas MBS MA BSc

Progressing onwards along the earlier themes of my posts – Progressive Conservative Economics (http://www.progressive-economy.ie/2009/10/guest-post-by-niall-douglas-progressive.html) and Taxing Sin, Never Good (http://www.progressive-economy.ie/2009/11/guest-post-by-niall-douglas-tax-sin.html) – I now come to another major item highlighted by the TASC conference: one way of tackling the selfish behaviour in Ireland which contributed to our Economic slump. As outlined in the last post, the proposed Economic stimulus must be revenue neutral and it ought to align taxation with morality.

It would seem that our present government has decided to more or less hold the current low taxation levels and to decrease public spending in order to balance our books. I gather that most of the other people posting to progressive-economy.ie would rather prefer a rise in taxation now or borrowing (i.e. a rise in taxation later) whilst leaving public spending more or less untouched. However, the perennial problem in arguing for any rise in taxation always is justifying it to people: witness how the National Health System in Britain is presently considered the most immune from the swingeing 15-25% spending cuts which much follow their next general election because of how successfully the British Labour Party argued prior to 2002 in favour of raising taxes in order to pay for its improvement.

If one is to similarly argue in favour of raising taxes or borrowing in Ireland, it cannot be justified by amoral or immoral arguments such as bailing out the sins of the wealthy and privileged or withdrawing benefits or income from the poor. If it is to be accepted by the electorate, it has to advance the cause of a progressive society in the minds of the taxpayers just as British Labour’s NHS argument successfully did in 2002.

Learning from the USA

Many countries around the world try to emulate the economic performance of the US: we here in Ireland have tried to import their entrepreneurial culture, their low taxation and their university-centred R&D structure and to date we have had mixed success. In my opinion one of the most important but overlooked generators of Economic growth in the US is Section 501 of their tax code. This specifies the conditions for exemption from tax on corporations, certain trusts, etc. where subsection (c) (http://www.law.cornell.edu/uscode/26/501(c).html) lists which economic activities are eligible for tax exemption. Its scope is surprisingly broad (Wikipedia has summarised it at http://en.wikipedia.org/wiki/501(c)) but its basic principle can be captured very simply: any economic activity which greatly benefits wider society is not to be taxed, including any non-profit business.

Contrast this with the state of charity legislation in Ireland at present where one must comply with Section 207 of the Taxes Consolidation Act (1997). Firstly, one must form a special legal entity called a “Company Limited by Guarantee and Not Having a Share Capital” which in Ireland must have no less than seven non-family “arms-length” Directors[1]. Secondly, this entity must exclusively do one or more of the following: (i) The Relief of Poverty (ii) The Advancement of Education (iii) The Advancement of Religion (iv) Other works of a charitable nature beneficial to community but not including community activities such as sport or taking care of neighbours. Thirdly it cannot remunerate its Directors nor can it share its profits and it must have a “Charitable Governing Instrument” which is a complex legal document heavily restricting its powers drawn up at some length by legal experts. Fourthly, it and its Directors must have an established track record and auditable paper trail of charitable behaviour before tax exemption will be granted – in the case of granting tax-deductible donations this is at least two years – which means that initially the charity gets no tax exemption at all! Put simply, there is a very high standard for receiving and keeping official charity status (denoted by an official CHY registration number).

If you might think that setting up a charity is both costly and inconvenient to operate in Ireland, then you would be entirely correct: in most cases involving charity it is simpler and cheaper just to pay for things out of your own pocket. In my own personal experience, there is a presumption by Revenue against altruistic behaviour in Ireland and they feel a need for very ample and ongoing documentary proof of unselfish behaviour which implies that it is somehow unusual. This, in my opinion, is a very sad state of affairs as it assumes such a negative view of the Irish citizen – not that I blame Revenue, but I do blame our political masters for doing nothing about it because it is extremely easy to remedy AND simultaneously provide a large economic stimulus for our economy.

What to do about it

If there can be any definite economic stimulus through increasing income taxation, it is this: copy the spirit of charity law in the US and allow income tax deductions at the higher of the individual’s marginal rate[2] or the standard rate (currently 20% in Ireland) for ALL non-profit, community-serving or widely beneficial economic behaviour under the same headings as Section 501(c) of the US tax code. To help prevent tax evasion and to help ensure that people are publicly recognised for their service, local newspapers and media ought to also be able to tax deduct the costs of publishing the details of the hours being reclaimed for all local citizens in addition to the claimant filing receipts with Revenue.

To explain this it is easiest to give examples, so let us start with a married University Professor who in Ireland earns approximately €145,000 per annum and will pay a total of €44,426 in income tax which gives him or her a marginal rate of 30.64% or €22.21 per hour[3]. Let us say that this University Professor donates four hours of their time each weekend coaching at the local G.A.A. club: this allows the deduction of 4 x €22.21 = €88.84 per week from income tax, or a reduction in annual income tax of €4,442 which is an increase in take home pay of 5%.

So much for the wealthy, but what about those of middle income? Let us take an unmarried male Sales Manager on an income of €35,000 paying income tax of €3,340 (a marginal rate of 9.5%) who decides to improve themselves through a three year part time Open University Masters Degree costing €2,000 per annum. Currently in Ireland one can deduct university fees from income tax at 20% which is worth €400, but let us now include the 800 hours of study recommended by the OU. As this person has a marginal rate of 9.5% which is less than the standard rate of 20%, we use a deduction rate of 20% which is €3.50 per hour which comes out at 800 x €3.50 = €2,800 per annum. When combined with the relief from fees, this Sales Manager is now €3,200 better off per year which is an increase in take home pay of approximately 11.1%. Just for comparison, were the University Professor to similarly invest 800 hours into socially beneficial activities per year, they would increase their take home pay by 20% which makes sense given their much higher marginal Economic productivity.

One great concern under this plan is the plight of the poor. Ireland’s income tax is so highly progressive (see graph below) that the poor pay no income tax at all in Ireland when earning less than €9.15 per hour (€18,300 per year) and so this proposal effectively has no effect on anyone earning less than €23,000 a year. It is a perverse thing in this country that the poorest are already the most charitable with their time and while I would very much like to see their incomes topped up, they themselves would almost certainly find such an idea insulting. In the end, we are targeting those who are the least generous with their time precisely because they earn so much in the first place.

How to Fund this Proposal

As indicated earlier, this is a revenue neutral proposal: in order to fund this change, one increases the rate of tax. I estimate that this proposal could approximately halve the income tax collected by the government which is likely to be approximately €6bn next year. Here’s the breakdown of income tax paid per earnings bracket in Ireland in 2008 (source: http://www.ronanlyons.com/2009/07/28/a-little-quiz-on-irelands-income-tax/):

Raising the lower rate to 25% and the higher rate to 48% ought to balance the books: this also has the major side-effect of considerably improving still further the available tax deductions for charitable behaviour outlined above. Seeing as two thirds of Irish workers pay less than 10% of their gross income as income tax (as compared against an OECD average of 20%), one can justify the tax increase through moral argument just like Britain did with the NHS in 2002. Just as in that case, people have a very simple explanation which isn’t complicated nor unfair, so psychologically this is an acceptable tax increase because it clearly is intended to substantially improve society.

The Economic Stimulus

The change to income tax might be revenue neutral, but its effects on the Irish Economy most certainly would not be so. Obviously the effects of such a dramatic reallocation of income tax according to an individual’s merit are hard to predict, but I shall do my best to outline my thoughts on the matter.

Firstly, most Irish small business stands to benefit greatly from this proposal. Small Business Owners tend to perform quite a lot of unpaid socially beneficial activities anyway as part of interacting with their suppliers and customers, and most especially as part of the general business ecosystem in sponsoring events and working with the local Chamber of Commerce. For example, I recently completed the respected Masters in Business Information Systems at U.C.C. where the students are mentored by local business leaders at significant cost and expense to themselves, yet they receive no direct remuneration for their service. What they do obtain is a valuable insight into the next generation of business people and new contacts and opportunities which could contribute to their bottom line in the future. If you would like to deliver a strong dose of sustainable growth into the best of Irish small business, this sort of long-term visionary altruism needs to be strongly encouraged by the tax system rather than punished as at present.

Secondly, Education gets a major boost from this proposal by helping Irish citizens to keep themselves educated and skilled which is essential to sustainable Economic growth. In fact, from my personal experience of the Education system, this proposal alone would accomplish far more for Education than maintaining teacher’s salaries or school budgets because as any teacher knows, most of your effort in teaching is expended on those students who don’t want to be there. If one wants to seriously improve the efficiency of delivering Education, one should consider how the Open University delivers high quality education to 150,000 students each year at a fraction of the cost per student of the publicly-funded Irish education system precisely because its students want to study. If one feels that the OU is not up to a sufficient academic standard, I should add that Harvard University in the US operates one of the largest distance learning programmes in the world and no one would claim that their courses are substandard. In my opinion, public investment in education should be allocated according to the best return on investment – but I shall say no more for now as this precise topic is due in a future article.

Thirdly, cooperative ventures such as credit unions, crèches and organic food outlets all receive a boost – cooperatives which anyone may join are uniquely allowed to return profits to their members under the US tax code and applying this principle to crèches alone would do much to firstly reduce the cost of childcare, secondly to increase the quality of childcare and thirdly to save the €2bn or so a year currently mostly wasted in Ireland on universal child benefits. I shall return specifically to the topic of very substantially improving child care in a future article where I will show how when better allocated that €2bn could provide us with a Danish-style universal crèche system where every child under the age of five in Ireland is guaranteed a world-leading education.

Fourthly, philanthropic activities by the super-rich of Ireland get a very major boost. Too often we here in Ireland forget just how much the super-rich of America have donated heavily into Ireland throughout the last twenty years thanks to the US tax code: the contributions of Chuck Feeney alone exceed one billion euro[4], 63% of which went into Irish universities. Ireland has produced a host of its own super-rich in recent years none of whom are exactly encouraged by our tax code to be philanthropic, and I think this very short sighted in the long term.

Lastly, and most obviously, charities themselves would benefit from extra manpower and resources. Currently working for a charity even when unpaid is treated as any other job by the system: for example, those receiving social welfare payments are banned from all unpaid work (including improving oneself through part-time study) which has always seemed highly counterproductive to me. However, not just charities benefit but so do ALL non-profit organisations which are open for public membership, including all amateur sporting and even special interest groups such as bell ringing or bird watching. And perhaps, out of all of the benefits afforded by this proposal, this latter benefit is THE most important for economic growth, and this is why:

What this proposal sums up to is a publicly funded stimulus investment into people meeting one another and forming informal organisations. Too much of Ireland’s current economic malaise is simply people not networking by getting out and about meeting new people. Hence they lack the opportunity to initiate the generation of new ideas and possibilities within the Irish economy. This proposal does much to address this. No Economist can quantify the likely effects on Economic growth caused by such a proposal – Econometrics requires the system to not fundamentally change – but every single Economic theory out there from Communism right through to Anarchism views people forming new bonds with other people as core to Economic development. It is this we must stimulate, and in so doing simultaneously make Ireland a better and more humane place to live.

This week it was Income Tax. Next week I shall address reallocation of VAT as a method of applying further stimulus to the Irish Economy whilst trying to keep inside the EU rules for VAT. I look forward to your comments and I hope you will join me again in next week’s article.

Tax Sin, Never Good

Author: Mr. Niall Douglas MBS MA BSc

One of the major themes of the TASC conference was the need for a stimulus plan for Ireland – and it got my mind thinking about what shape such a stimulus plan should take. Encouraged by the comments to my last post (http://www.progressive-economy.ie/2009/10/guest-post-by-niall-douglas-progressive.html) which suggests there is an interest in progressive conservative economics, I thought I might try applying one of their most important mantras to the current poorly state of the Irish Economy and see what happens. That mantra is simple: Tax Sin, Never Good.

To quickly explain, orthodox Economics holds that taxation – which it views as an evil made necessary only by the requirement to provide public goods – ought to be placed upon goods and services which are the most “inelastic” (which is the Economic jargon for “insensitivity of consumption to price changes”). In other words, the reason why petrol, cigarettes, alcohol, new cars (in the form of VRT) and your income are much more heavily taxed than other items is because Economists have determined that people are most likely to continue to buy these items no matter their cost: one therefore biases taxation towards necessities rather than luxuries. Because the maximisation of production of stuff is the single most important thing in Neo-Classical Economics, taxes placed on inelastic goods are inferred to have the least effect on output maximisation, and therefore on employment maximisation because it requires people to make all that stuff.

That sounds sensible, but note firstly how amoral such a proposal is: on the one hand most people would agree that petrol, cigarettes and alcohol ought to be heavily taxed because none of these are good for you or society at large, so economic theory and morality coincide. However there is considerably less moral alignment with the taxation of work: how can it be morally right that living off of Jobseeker’s Allowance is not taxed, yet the first step into legal work is immediately taxed at 5-10% (this the total cost to society i.e. it includes Employer’s PRSI) after which it rises rapidly to consume some twenty-five percent of the average worker’s earnings before all taxes? This sends a signal to society that, rationally speaking, working and self-reliance is to be punished and that indolence and helplessness is to be rewarded. It is this viewpoint of that situation, and the logical reaction to it, which underpins the anger felt towards the welfare system in general by conservative parts of society.

The second logical problem with inelastic taxation is this: inelastic goods are, by their very definition, the most important to society and therefore they are the most utilised by society i.e. they are the fundamental building blocks of an economy from which economies of scale are most possible. Maximising total output, as orthodox Economics would do, assumes the equivalence of a single luxury product costing €100 and one hundred necessities costing €1. When viewed like this rather than through output maximisation, any emphasis of taxation upon necessities such as a person’s income is not only morally unjust but also the most economically retarding and taxation regressive of any economic policy because it severely punishes the most impoverished and weakest in our society. Therefore, the social conservative with a strong moral conscience has particular issue with taxation as the damnation of the poorest and weakest – which if you are religious as say most Americans are, means that taxation is sinful.

It is upon these two fundamental arguments that progressive conservative economic policy rests: perhaps you now understand why the right is always so concerned with income tax cuts and why progressive conservatives such as Milton Friedman were so adamant that taxation of income hurts the poor the most – which of course is in direct and total contradiction to the position of the left which regards progressive income taxation as a tool to help reign in the growing inequalities in income. The truth is that both positions have merit, and the economics effects of both positions are amply covered even in the reduced worldview of the Neo-Classical Economic model.

In my next posts I shall identify a set of good and bad behaviours – as according to the Economic Literature – in the Irish Economy and then proceed to investigate what might happen should we eliminate all taxation on the good things and make up the shortfall by taxing bad things. I shall try wherever possible to provide figures and links to research for my proposals. In so doing, I hope to lay out one possible revenue-neutral stimulus plan for Ireland in as much detail as I am able. I look forward to reading your comments.

0 comments:

Progressive Pluralistic Economics or Left-Wing Economics?

Author: Mr. Niall Douglas MBS MA BSc

I attended the "TASC Autumn Conference - Towards a Progressive Economics" conference and managed to make it through from start to finish despite having woken at 3.30am in order to travel to Dublin. I found it most illuminating and I offer my thanks to its organisers and speakers for a most welcome discourse.

Much was spoken of the failings of Neo-Classical Economics and Neo-Liberal Economics – the two not being the same I might add as the former is the (supposedly) apolitical collection of theories and models and the latter is the avowedly political application of those theories. Suggestions for improvement seemed to me to centre around the need for the reintroduction of pluralism within Economic discussion and the transfer of power from “the markets” to political control which could be more rationally and humanely directed than the necessarily chaotic, and often psychopathically selfish, free market. This, it seemed to be implied, is the only form of “progressive” that there is.

This is simply untrue: there are progressives on the right just as much as there are on the left – indeed throughout human history one finds that which side is the more progressive alternates across the decades. From inspecting the last century I would personally say that both left and right wings politics have enacted just as much progressive legislation across the world as the other: and human rights and welfare have without doubt been improved dramatically since the 19^th century, and both sides can take credit.

Most people know of the great suffering presently endured by far too many in our planet, and anyone humane feels angered and motivated to create change by their plight. What makes a person politically progressive is a profound and deep-seated belief that it IS possible to improve the state of our world and that the Thomas Malthus’ of our world are wrong (I should hasten to mention that Rev. Malthus did not believe that humankind was doomed, and ascribing such negativity to the man does him an historical injustice). Every progressive is united by a burning desire to enact social and environmental justice, to bring equality of both opportunity and outcome to all, to provide a better world for our succeeding generations and to instil freedom and democracy at every level of our world.

If TASC is a think-tank dedicated to progression, then in my opinion it needs to bring the progressive right into its debate as well – most especially its economic debate. Much of last weekend’s conference had (in my opinion) those speaking to the already converted which is surely nothing like as progressive as advocating progressive ways ahead to a politically mixed audience. For example, the progressive religious right in the USA are just as appalled with the events of recent years as anyone on the left: they have been instrumental in withdrawing the support of the religious right away from the Republican Party which so failed them. Without their efforts – and their progressive ideas – Obama would never have become elected, nor would he be expending so much political capital on bringing the Republican Party on board with his legislation in health, climate change and so many others still to come. One cannot but conclude that the progressive right are instrumental to the near-term future of this world.

A good start would be to add a few voices of the progressive right to this blog – I don’t doubt that the comments will wonder who I would suggest, so I will freely admit that I have no idea as I am profoundly ignorant of the current political scene: I do look forward to seeing who commentators might suggest. I am extremely sure that, by providing a counterfoil to left-wing arguments, the quality of the overall debate would become greatly improved and intellectually more robust: so much so that government, business and the markets would find it hard to ignore the arguments for progressive change.

In the end, pluralism is a double-edged sword: if you truly believe in it, you have to let it cut you from time to time, and in so doing hopefully become better and stronger than before.

6 comments:

tgmac said...

I too would like to find out who resides in the progressive right wing of politics. I can imagine such a person or organisation, and I'd imagine their political-economic outlook to be shaped by popular neo-liberal capitalist doctrine. In fact, I would like someone to broadly define the doctrine in somewhat concrete terms.

Pluralism is indeed a great idea. It's just too bad that discourse in the MSM media about economics and the economy is so warped by so-called free-market analysis. The language, terminology and thesis of all economy activity and polity is steeped in a non-pluralistic framework. The current doctrine is that capitalism, whatever its form or name, is the only game in town. Historical economic polity is now a montionless entity according to popular thinking.

Nor does pluralism, in and of itself, gaurantee that a meaningful exchange of ideas will occur or that common ground is or should be found. More often than not, imo, neo-classical/neo-liberal analysis (I don't make a distinction between the two as I don't buy the idea that neo-classical analysis is natural and therefore immune from political discourse) often isn't interested in finding commonality but in highlighting what it considers to be the unalienable proof of its own tenets. The US version is particularly evangelical in its approach.

 However, if you find TASC progressive ideas to be too leftist in orientation, I would be interested in seeing some alternatives. To my mind, while I fully support TASCs remit, I would find generally or broadly that their approach is rather tame and already significantly couched in classical economic thought. This is not a criticism but just a personal viewpoint. In fact I hope TASC, just because it is familiar with the classical economic excercise(s), is successful in their efforts to open up economic discourse in its entirety.

October 13, 2009 3:10 PM

Aidan R said...

I really enjoyed the conference, and credit to TASC for providing a forum to discuss alternative (and practical) approaches to our current crisis.

I agree with the above comment that it is neccessary to bring progressive thinkers across the political-economic spectrum into the debate on how to reconceptualise the organisation of our economy. One way to do this is through real empirical social research. We should take as our starting point a skepticism toward deductive type economic modeling, as such deduction is, more often than not, based upon ideological conviction than empirical reality.

I am 100 per cent confident that in a rational discussion, premised upon empirical research on how to organise our economy, that most neo-classical deductive models would be shown up for what they are: empty logical constructs. Political economy grounded in social science is more than a methodological tool. It makes explicit its normative-institutional framework and grounds its methodology in empirical reality (involving real actors and real institutions, with real interaction).

In this regard, labour markets are examined not through the perfect comeptition hypothesis, but as an instituional ensemble that attempts to minimise income inequality, because it has been shown that this leads to optimal outcomes in citizen health and social well being. The question is what institutional configuration (centralised wage bargaining or sector led bargaining etc) produces these 'normative outcomes' (as opposed to competitive mathemathical equilibrium).

Also, to a poiltical economist, examining how best to organise the production and distribution of a public good like 'communications' (given our attempt to create an export led knowledge based economy), it would become obvious (through basic empirical research) that leaving it to the private market leads to inefficient outcomes. The comparative example of Eircom would prove this. The same could be applied to a whole host of other public goods.

Thus, regardless of whether one is left or right (politically), it should be obvious that the organisation of certain sections of the economy cannot be left to pure market forces (which is what deductive models would conclude, and is in-itself hypothetical). This political-instituional approach can provide a platform against the deductive consensus.

The battle against the current ideological consensus is certainly a battle of ideas (politicaly). But, it should also be a battle of concrete material evidence. It is the latter that will convince those on the 'right' as well as the 'left' that the prevailing consenus is defunct. This can be a rallying call for all economists, social scientists, activists and policy makers alike. A paradigm shift is required.

October 13, 2009 3:27 PM

tgmac said...

Nice post Aidan R. Research based on concrete evidence is obviously a methodology worth considering and pursuing. I do wonder, however, at humanity's ability to take concrete evidence and "bend" it to its own interpretation(s); nor do I think it particularly apt to exclude philosophical inspection and theory from the exercise as this addresses the aspirational/ethical side on the human condition and is every bit as important as empirical inspection.

I also have a tendency to think that the a-political approach is often used as a veneer or cover for the neo-classical assertion that economics is a natural and immutable scientific pursuit that can be summed up in a few neat formulas or mathematical equations. Nevertheless, I do find, from time to time, that some semi-mathematical/empirical data do pop up which shed light on the poltical economy such as Pareto's work. Also, I'm finding Madlebrot's works on markets (the easy stuff) to be illuminating.

If you are pursuing empirical studies, the best of luck. The more I pursue a sceptical/critical approach to the political economy the more I find myself crossing over the boundries of economics, philosophy, biology, physics, psychology just to name a few.

October 13, 2009 4:08 PM

John Barry said...

Niall, Good post and you of course raise an excellent point that pluralism and debate about 'progrssive economics' cannot be confined to the 'left' as conventionally understood. I would take issue with your distinction between 'Neo-Classical Economics and Neo-Liberal Economics' - with the latter being an ideologically corrupted implementation/interpretation of the 'objective/scientific' teachings of the former. As I hope I made clear in my contribution to Saturday's conference (and in postings to this site) it is an illusion and just plain wrong to think that there is such a thing as a 'value-free', 'neutral' and 'objective' theory of the economy. All accounts/theories of the economy are normative, political and are based on and express clear value judgements - including 'neo-classical economics'. Pluralism in economics in my view must begin from the view that all theories of the economy are forms of 'political economy' and what is required is for all competing or complementary forms of political economy to be honest and explicit about their normative bases and assumptions. That's all. This does not mean the automatic 'rejection' of neo-classical economics, but it does mean its removal from its self-assigned position of authority as somehow non-political, non-normative while 'progressive economics' are not objective, neutral etc. What does neo-classical economics have to lose from being up-front about its own normative principles and assumptions?

October 14, 2009 9:21 AM

Niall Douglas said...

Firstly my apologies for such a late reply - we had a guest here this week and I also had to move email servers for my company as the old server expires tomorrow as well as a full work load. I'll split the replies by person.

tgmac:

Much as it might be anathema to many reading here, the Neo-Conservative movement in the US began as a progressive movement in the right before going on to eclipse the "old right" much as the "new left" has eclipsed the "old left" in politics in Britain. One of the most fascinating political stories of the next half century will surely be about how Neo-Conservatism corrupted itself from within such that it eventually turned itself into everything it hated in the world: Godless, big government, high deficit spending and opposed rather than welcomed by the rest of the world who views it as retrograde rather than progressive.

Regarding economic discourse being limited by its own terminology, I don't personally think that this is a limit of Economics or anything to do with Economics. The world since WW2 is one of technocrats trying to enforce rational behaviour on a world underpinned by chaos: very desirable when nuclear war could happen at any moment, but terribly costly in terms of humanity because now all scope for individual behaviour must be stamped out, rules must dictate all human interaction and selfish (i.e. rational) behaviour enforced - though, curiously, simultaneously we must encourage consumption at all costs which is highly irrational!

October 17, 2009 1:43 PM

Niall Douglas said...

Aidan R:

What "a market" is is entirely defined through historical precedent and convention. When one argues whether intervention is appropriate or not one sadly usually tends to skip arguing whether the market should simply be changed to perform tâtonnement on something more desirable instead. Those on the right would tend to argue that government's sole purpose is to manage and enforce the rules for the market(s), whereas those on the left view that as too chaotic, unpredictable and wasteful and feel a centralised direction of human effort is superior.

This debate by the way is extant since Babylonian times for a good ten thousand years now. They rather sensibly placed it at the core of their society as they recognised that they couldn't answer the dilemma of which is the best choice for a given circumstance. Unfortunately we have veered somewhat off into splinterised subdivisions of belief since, and we waste far too much effort on validating our own particular sub-belief.

The truth is that both approaches have very significant merit, that both are also non-ideal and that it is the "perfect" combination of the two which is as ideal a solution as possible. The Neo-Classical model actually does recognise its own failings here even if most Economists don't realise it: furthermore externality theory has made significant progress in the last few decades. Of course, one is still calling the pot black: Economics ought to be taught in terms of dimorphism of solution rather than in terms of one glove fitting all comers.

John Barry:

I do agree with you that all Economics - indeed all of everything - must absolutely be treated as based on a series of ideological assumptions. However I disagree that the theory part should not be held as separate - and supposedly at arm's length - from the interpretation.

My issue here is mostly one of historical precedent: most fields of human endeavour in the West have performed this mind-body split of theory and practice with a bias placed on the theory (mind). When it works well, it does work very well indeed as the last few centuries have shown; equally when it goes pathological then it can be very difficult to untangle in a short period of time as our collective reaction to climate change is showing.

Were Economics to mend this split, I personally think that it would become unacceptable to the vast majority of people. Economics *has* to be conservative, and it *has* to appear to have the definitive word on Economic matters because as any politician is well aware, the populace get extremely upset if they even get a hint of economic mismanagement.

Put another way: we as a society are not yet ready to include doubt in Economic matters. We may become so in a few generation's time, but not yet. Sadly this in effect means that we must seek to replace the one single truth of Neo-Classical Economics with the one single truth of a pluralist treatment of Economics!

October 17, 2009 1:45 PM

I just spent the last day or so of my life tracking down what the fuck was wrong with Plone v3.1.7's portal_javascripts (part of Plone's resource registries). I had tried replacing Plone 3.1's default jQuery v1.2.6 with v1.3.2 in order to use the latest jQuery UI which has fixes for IE8 (plus, it's a LOT faster). I did the usual: customise 3rd_party/jquery.js and upload the new content.

It all worked fine in portal_javascripts debug mode i.e. with compression, merging and caching turned off. Unfortunately it certainly didn't work when debug was off - it would merge the first file only and forget the rest in its merge group. Needless to say this completely wankered this website.

The fix which most people on the internet use for this problem is to permanently disable caching and merging - with the obvious performance penalties for end users. Needless to say, I wasn't happy with that idea, so after MUCH trial & error it turns out that there is a bug in Zope's file upload mechanism. If you choose a javascript text file and upload it, something subtly breaks inside Zope such that the resource registries silently die during parsing - you can tell this because if you turn on compression in portal_javascripts and then choose the "Merged JS Composition" tab and open the keycache file, you'll see that the one single file in there hasn't been compressed. I don't think it is UTF-8 (a common Python 2.x problem) nor Windows format CR/LF as I tried stripping these before file upload. Who knows?

Anyway, the workaround is as follows: simply don't upload the file and just create an empty one, then open it up in the web browser view where it gives you a textarea to type into, and now simply copy and paste the javascript into the textarea and save.

And voila! Plone works! I hope this saves some of you lots of heartache like me. I have submitted a bug report to Plone at http://dev.plone.org/plone/ticket/9087

As you have almost certainly noticed by now if you are watching (and according to Google Analytics, no one is :)), the Neo-Capitalism Wiki is very slowly gaining content. As soon as I am freed from this albatross which is university study, I am very much looking forward to finally getting some of what is in my head into the wiki - for now, I grab an hour or two when I can in between the pointless labour of gaining yet more unnecessary bits of academic qualification.

Something of interest: in the process of hacking the DTML in ZWiki to show the children of the pages as well as their ancestors, I had need to deflatten a list i.e. to convert ['a', 'b', 'c', 'd'] into ['a', ['b', ['c', ['d']]]] and worse still, I needed to do it as an inline function because of how DTML works (ok, I could define a DTML function I know, but that sounded like hassle when there was an opportunity for some truly nasty Python scripting!). What I have come up with is truly appalling: a recursive lambda function:

Python 2.4.5 (#2, Aug  1 2008, 02:20:59)
[GCC 4.3.1] on linux2
Type "help", "copyright", "credits" or "license" for more information.
>>> x=['a', 'b', 'c', 'd']
>>> print (lambda f, a: f(f, a))(lambda x, y: (lambda:[y[0], x(x, y[1:])], lambda:y)[1==len(y)](), x)
['a', ['b', ['c', ['d']]]]
>>>

Horrible eh! I have used lambda's to implement both recursive lambda's and a ternary operator - nevertheless, it works, though passing it much of a long list would quickly exhaust the stack due to the use of a double trampoline.

As always, there never seems enough time to do anything in life especially with so many other things to be doing. However, after what seems like forever there is finally some content up on neocapitalism.org though admittedly not a lot as yet.