Archive for December 1st, 2013

Future Economics Was Seen Before

December 1, 2013

Paul Krugman says in “New Thinking…”: “We’ve had a couple of centuries of economic thought at this point, and quite a few smart people doing the thinking.”

Excuse me: economics was named and conceptualized by Xenophon, 24 centuries ago. Differently from physics, that was practiced only partly and primitively, economics was already highly advanced, 25 centuries ago.

For example, the 200 trireme Athenian Navy that later defeated the monster Persian plutocracy was built, at huge ecological cost, with a public-private partnership system.

Adam Smith himself went to learn his stuff at the feet of French “physiocrats” who flourished 240 years ago (the head of that school was the top surgeon in France).

As I have argued, the sort of public-private government sponsored technologically progressing economy we need today was fully, and self-consciously, in command of France in 1600. Hence Henri IV’s slogan “workers ought to have a chicken in every pot”. A cursory inspection of history show that, from dams in Yemen, thousands of years ago, to the Roman army building roads, to Caesar’ draining the swamps to the construction of China or Europe’s canal systems in the Middle Ages, the biggest picture, in economics, is from the government.

At this point there is plenty of evidence that, in the USA, government disfunctionality is bringing the real economy down.

The main actors and agents in today’s economics originated in government. Look at, say lasers. They were made possible by Kastler’s discovery of Optical Pumping in the Normale Sup lab 100% financed by the French government.

More recently, the same lab, still funded 100% by the French government, found how to count photons, without destroying them (that was also rewarded with a Nobel). Nothing that interests private, for profit entrepreneurs, today, but, no doubt, one of the pillars of the future sci-fi economy.

Economics will continue to be dismal as long as we don’t focus on the scientific understanding of growth and innovation.

Imperial Rome went down because of a deliberate effort against elite innovation; leaving the field to be dominated by simple generals such as Diocletian… Instead of the top-notch intellectuals the best regimes throughout history surrounded themselves with.

In physics one studies, to start with, friction-less trains of mass zero, to teach basic dynamics. Similarly fans of economic theory as taught in USA schools say that economics is like other sciences: economics starts with simplified, basic formulas.

They opine that basic market theory assumes that goods are available as needed to be purchased by consumers with “perfect knowledge.” As one advances to higher-level classes, one learns the corrections for effect of advertising, imperfect knowledge, and externalities such as polluting air and water.

Nice. And that’s indeed what is taught as “economics” in the USA and all and any organization that advocates the economic system thriving in the USA (complete with a for-profit, “marketplace“, Obamacare).

But this is all wrong.

Reducing economics to the market’s inner guts, assumes a plutophile vision of economics. It assumes that economics is all about, and only about, the “free market”. But there is no such a thing. A market is never “free”. What looks “free” is actually government regulated. Even ‘deregulation’ is government regulated.

What looked like financial deregulation under Clinton was actually the regulation of providing the largest financial actors with a number of advantages on smaller actors and over the rest of the socioeconomy.  

Even more fundamentally, giant economies, such as the Inca empire, or (a large part of) Late Rome did without free market, and thrived. Economically (that Rome thrive economically until overrun by savages is a recent and surprising discovery in 21 C archeology).

Stalin’s “free-market”-free economy thrived enough to vanquish Hitler. Nazi economists were so sure of the superiority of their free market, they thought there was no way it would not take more than a few months to destroy the “command and control” USSR. That illusion did not survive contact with Soviet made and conceived T34 tanks. To add injury to insult, the Soviets were then able to out-produce the Nazi style free market.

The UK and the USA used a command and control economic model similar to the one used by the Soviets to out-produce the Nazis. Mass production concentrated on very few types, decided from above. The USA effort was headed by a young Canadian economist, Galbraith.

Nowadays, the People’s Republic of China’s economy, which uses a lot of command and control of the economy, has been persistently doing much better economically than the “free market” West.

So “economics” is a much larger subject than just what American economists call the “free market”.

That the biggest picture, in economics, is from the government is the perspective that eludes persistently American economists. In economy, God is not the market. God is the (hopefully democratic) government.

If the government is democratic, most people will profit from the economy beyond mere subsistence, and so more minds will partake in the society, making the civilization smarter. A virtuous circle of involvement.

And what economic science ought to guide the government? Not the free market, assuredly, as this is the creature of the government. The government needs to be guided by real, all-encompassing economic science.

What could be a proper foundation for the whole science of economics? Energy. Just as in physics. Just as what is desperately in need of regulation now. See fracking, and the just uncovered fact it’s about 50% of USA greenhouse emissions right now.

Of course that will tell Obama nothing: he is not really the guy governing right now. It’s rather the creature down below that is governing, a magma of a few thousands plutocrats with crocodilian aspirations. They govern the jungle that feed them, complete with economists perched on the highest branches, eying the scraps left by the kills they gorge on. 

***

Patrice Ayme

***

Henri IV used the word “laboureurs” (from the Roman word, laborare, to work). That, of course gave the English “laborers”, and “labor”. So, three centuries before Henry Ford, Henri argued that workers ought to be paid enough to be well fed. Something denied to 50 million citizens of the USA (many of them working, see preceding essay). Today.


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