Morning Ed: Economics {2017.09.27.W}

[Ec1] Ninteteenth century Japan shows us the virtues of free trade.

[Ec2] Daniel Ben-Ami argues that behavioral economics actually undermines the Enlightenment.

[Ec3] How a Brazilian economist created fake money and made everybody happy. (Not really, but sort of.)

[Ec4] Jeffrey Tucker compiles a list of five anti-capitalist movies that “backfired.”

[Ec5] Sam Bowman reports that neoliberalism rocks, and also some books on Neo-Marxism.

[Ec6] When capitalism becomes an instrument of government oppression.

[Ec7] The “socialists” of the new left, according to Kristian Niemietz, actually socialists.

[Ec8] An argument that Black Buying Power is not only overestimated, but is actually an offensive concept.

[Ec9] John Matsusaka on democratizing corporations.


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Will Truman is a former professional gearhead who is presently a stay-at-home father in the Mountain East. He has moved around frequently, having lived in six places since 2003, ranging from rural outposts to major metropolitan areas. He also writes fiction, when he finds the time. ...more →

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75 thoughts on “Morning Ed: Economics {2017.09.27.W}

  1. Ec1 is erroneous. When Commodore Perry opened up Japan to trade in the 1859, Western powers imposed the same semi-colonial treaty port system that they did on China after the Opium Wars. Real Japanese modernization did not start until after the Meiji Restoration in 1867 and it was a government driven top down affair. It incidentally included tariffs when possible to protect nascent Japanese industries against cheaper foreign competition. The Meiji government also developed some enterprises themselves until they could find a private businessman willing to buy and take over the business.

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  2. Ec4 [anticapitalist movies]: I’ve actually seen only one of those movies (Wall Street), but Tucker’s analysis rings true, at least for me.

    Part of the problem is that the devil is more interesting than the saint. To the extent I remember Wall Street at all, I remember mostly Michael Douglas’s character and have to strain to remember the other plot line about Charlie Sheen and his blue collar union member father.

    Another part of the problem–something that Tucker doesn’t really get into–is that a lot of the people who view these movies are probably somehow in the mix already. By “a lot,” I can’t with confidence say it’s a majority. But I assume a certain number of the audience already has 401k’s or IRA’s or is counting on (or was counting on) a pension that’s somehow funded by investments. And if we delve even deeper, much of our survival is premised on keeping what’s ours even if that means denying other people opportunities. It’s easy to condemn greedy capitalists, especially when their actions seem to cause big recessions, but it’s less easy to look to ourselves.

    We’re all greedy. The problem, I don’t think, is “capitalism.” I have a hard time defining “capitalism.” It’s greed, and greed in the sense of which we’re all capable of being guilty.

    One movie I wish Tucker had considered, and one I believe is more effectively “anti-capitalist”–or better, anti-greed–is There Will Be Blood. Not only is Daniel Plainview not to be admired, I doubt the audience comes away wishing to be like him, even with all his wealth. Even before he murders the hypocritical minister and shouts “I’m finished,” all his wealth seems to make a lonely prison for him.

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    • Anti-capitalist movies suffer from Truffaut’s theorem on why pacifist movies are hard. Films are visual media and any attempt to go against something usually ends up glamorizing it. Most war movies make battle look exciting or even fun despite their best attentions. Sometimes glamorizing war is their attention. Gangster movies generally make the gangster life style look cool. Stylish clothing, fast cars, hot women, and good times. Same with anti-capitalist movies. The amoral business person always looks like he or she is having a smashing time making lots of money and spending it on parties and luxury.

      Its possible to create an anti-vice movie but its going to have a limited audience. Your going to have to find away to show that the vice your going against violence, greed, sex, or drugs really doesn’t bring even remote pleasure. A successful anti-drug movie would be about a person who is living a miserable life, turns to drugs for relief, and finds that their life gets more miserable. An anti-war movie would involve somebody really psyched up about the glory of battle and getting shot in the head instantly.

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      • That sounds right to me. I’m not prepared to say it’s limited to film, though. Paradise Lost seems to make a case for Satan, at least in my reading as a high schooler in 1991. (Maybe an adult reading it in ca. 1650 would have had a different view.)

        I hadn’t heard of Truffaut’s theorem before, so thanks for bringing it up. I googled it and found this site (among others). It reminds me of the anti-drug movies they used to show us in high school. I usually walked away from them thinking drugs were much more interesting than the filmmakers wanted them to seem.

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            • I’ve seen a few anti-drug movies that in my opinion were good at delivering the message. (I forget the names and am too lazy to search it. One was about Irish heroin addicts and the other had a very young Al Pacino and another famous person, who were also heroin addicts. Even in those examples, though, I see a certain excitement in at least some of the scenes.)

              In my experience, though, those aren’t the kind of anti-drug movies shown in high school. Also, the drugs in my two examples were heroin whereas the high school message tended to be a vague “all drugs and alcohol are always bad and wrong or will get you in trouble.”

              I realize, of course, that you’re arguing it’s not impossible to create an effective anti-drug movie. So I’m not directly answering your point.

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      • I don’t know, Saving Private Ryan was a pretty good anti-war movie, for me, anyway.

        If you can finish watch the D-Day scene and still think, “Hell yeah, I want to get me some of that!”, you need serious help.

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    • Tucker’s more elemental mistake, the reason why there’s no There Will Be Blood nor Norma Rae, is that he’s equating ‘capitalism’ with ‘fianance’ – and ‘anti-capitalism’ with ‘movies of varied intentions and methods that critique the financial industry’

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    • I didn’t like Wall Street at all. I found Michael Douglas to be playing a cartoon character. I couldn’t get angry at him or admire him. The movie was heavy-handed in its anti-capitalism, but it didn’t fire for me, back- or forward-.

      I think Tucker nailed it with Other People’s Money. The movie was anti-capitalist, and the main character was a lout, but the momentum of its anti-capitalism was dissipated by that one speech. Not because of its greed-is-good-ness, but because of its market analysis. The movie falls apart at the words “fiber optics”.

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    • I’m not sure I agree that Wall Street necessarily backfired; it seems like the reviewer is mainly pointing out that Gecko was a great character, with a great speech and excellent acting, all of which survived as a piece of culture beyond the framework of the movie story. And Randian types became Gecko fans.

      Wall Street was a Puritanical tale about excess — Satan tempts Sheen through the avenues of greed and fear, Sheen tries to repent, but is pulled back in and commits worse misdeeds until confronted with their fruits by his father. He repents, but must still face his punishment because justice will ultimately catch up.

      I would also emphasize this statement from Gecko: “Ever wonder why fund managers can’t beat the S&P 500? ‘Cause they’re sheep.” This is an indictment of active trading and when Sheen tries to go back to picking quality stocks for his client, he loses money. The message is that you either get ahead with criminal activity or you invest money is some boring S&P 500 fund; the middle ground doesn’t exist.

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      • I think we are know in a debate about what it means for art “to fail.” I’m not a fan of Swan Lake, neither are a lot of so-called sophisticates. The general consensus among people like me is that Swan Lake is “failed art” because the emotions are unearned and the the ballet swings in tone too suddenly from comedy to romance/tragedy. Plus the whole thing about the Prince falling in love with a swan is risible.

        But lots of people love Swan Lake and look at people like me as being killjoys even though my criticism is because I want art to be good and the ballet to be earned.

        It seems to me that more people look at Gecko and say “Fuck yeah, that is who I want to be” rather than see the morality tale.

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        • Art can fail in several ways. Years ago I read an article on how the Nut Cracker Suite is more popular with Americans than Russians. Tchaikovsky most likely intended it to be Christmas fun for the entire family late 19th century Russian style. Americans get the family fun aspect. Russians really don’t. IIRC correctly, the article states that the Russians like to emphasize the romance and erotic nature of the Nut Cracker, i.e. little girl suddenly grows up to be a beautiful young woman with a handsome prince because magic, than Americans. The implication that the Nut Cracker fails in its’ native Russia because they don’t get it and that it succeeds in the United States because the audience gets it.

          Wall Street failed because the audience mainly came to a different conclusion that Oliver Stone wanted. At the same time, Oliver Stone succeeded because he created a work of art and characters that entrenched itself in popular culture. Most moderates and liberals saw Red Dawn as a joke but it still resonated with millions of people and became part of collective modern pop culture.

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          • The ETA Hoffmann novella on which the ballet is based has some creepy, erotic elements, which Freud interpreted in an essay. It may be that because Hoffmann was born in a part of Prussia that is now labeled “Russia,” this context is more familiar. Tchaikovsky is the one that kind of made the story into a pageant spectacular. The ballet didn’t fail though, I failed it. It just seems like an excuse to play classical music, invent colorful costumes and cast precocious children in supporting roles.

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          • When I was in elementary school, once a year (most years) they dragged us to a performance of the Nutcracker Suite. Sometimes beforehand they gave us the back story. I don’t remember the story, but I remember thinking it was interesting. But when we actually went, it was just a bunch of people dancing to music.

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        • I agree with this point in that I don’t think movies should be judged primarily outside of the intent of the work, albeit there is often room to argue. To sort of paraphrase Roger Ebert, when I watched Wall Street, I was only me at the time and I thought Gecko was a seductive and dangerous character, he is slowly revealed to be a crook and a thug, and I didn’t want be him. I don’t know anyone who wanted to be him.

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          • I didn’t have a strong reaction when I saw the movie, which was probably in the late 2000s? (I had of course heard of it since it had come out in 1987.) I’m a fan of Michael Douglas, so I like his acting. But I thought the movie kind of boring. I probably came into to it knowing that I agreed with what I assumed the movies (“anti-capitalist”) message was. But the movie itself just didn’t hit me one way or the other.

            The huge cell phones, however, were something.

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  3. Ec4: I agree regarding Wall Street and possibly Wolf of Wall Street (haven’t seen it) but I don’t agree with the Big Short and Margin Call because this just seems like a libertarian listicle at that point. Margin Call is very different in tone and atmosphere than Wall Street or Wolf of Wall Street. There are scenes of very nice apartments and bankers going to strip clubs but it is all background and done to prevent or try and prevent a serious economic collapse. In the end of Margin Call, a bunch of characters are given hush money essentially and they take it and the film shows them as moral weaklings. The Big Shot seemed like a really good critique of the greed and idiocy that caused the most recent fiscal crisis.

    Now of course, Margin Call was an arthouse flick seen by very few (3.5 million budget, 19.5 million box office) and Wall Street is a mega Hollywood pic.

    This seems like more of Jeff Tucker saying “Capitalism can’t fail. It can only be failed.”

    Ec5: This is doing some serious revisionism. An undiscussed aspect of neo-liberalism is the idea that as many government functions should be outsourced to the private sector and/or the creation of programs that allegedly push for progress but just create bad incentives. Rahm Emmanuel’s selling off of Chicago parking meters is neo-liberalism. As is the charter school movement. I’ve noticed that a lot of New Labor types and DLC types are having a really hard time of it in the Age of Trump and increased polarization. TNR ran an article called “What do moderate Democrats even stand for?” and it had a bunch of Clintonian Democrats in dismay that some of Sanders welfare-state positions were becoming important to the Democratic Party base or that they had to take stances on social issues. A lot of them had attitudes of “Can we please talk about jobs and growth and really boring things because I would rather eat my own foot than discuss universal access to healthcare and police brutality.”

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  4. The author of [Ec2] starts off by disclaiming appeals to @jaybird’s “Odious Conclusion”, as well he should:

    It is important to recognise that such claims should not be rejected simply because they lead to objectionable conclusions. If the assumption of irrationality is true then, whether we like it or not, it should be accepted. The key question is whether it is indeed correct. There are at least three reasons to question it.

    Then he goes on to list the three reasons to question it, which is all well and good, but somehow by the end, we’ve gone from “this may be wrong or overstated” to, well, this:

    Behavioural economics should be seen as part of a broader assault on reason that goes back to at least the nineteenth century. It attacks the primary liberal value of individual freedom on the spurious grounds that people are incapable of thinking clearly for themselves. On this basis is opens the way for both illiberal policy conclusions and flawed economics.

    That’s some impressive base-stealing!

    There are other problems with the piece (it looks like he’s providing a misleading caricature of bounded rationality, but what do I know), but for any economist to attack any subfield of economics on the grounds that it sometimes exaggerates or oversimplifies things is… pretty bold.

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    • There’s a valid point buried in Ben-Ami’s article, but he’s way overstating it.

      Behavioural Economics is based on more than a few anecdotes. Some of the phenomena identified by Kahnemann and Tversky (framing effects and anchoring in particular) are blatantly irrational and defy the sorts of explanation that Ben-Ami gives for taxi drivers.

      That said, he’s right that there are dangers with treating people as irrational. Thomas Carlyle used a behavioural justification for slavery and the refusal of the early economists to accept his logic was what got our discipline labelled “The Dismal Science”.

      Once you treat the people you’re trying to help as irrational, you give yourself free licence to discount their complaints if what your doing is actually hurting them. That makes it harder to notice your own mistakes, which is especially dangerous in people who wield government power.

      The solution is not to assume people are rational because it’s easier – we have to do policy with the people we have, not the people we wish we had. But behavioural interventions have to be handled with care and subjected to intense scrutiny.

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  5. Ec8: Rarely does someone miss the point by such a large margin, but when they do, they’re usually a zombie Marxist who overhears someone talk about money.

    The black buying power argument is about why makeup isn’t available in enough different darker shades, or why studios are just making excuses as to why POC can’t star in more movies. It’s partly an easy Woke hot take on every pop culture event and an outgrowth of the Coates-Afripessimist view that nothing in America can’t be explained by racism. To call it capitalist propaganda is to misunderstand the meaning and deployment of the BBP argument entirely.

    BBP does have some indirect tension with other strains discourse, including the “plunder” posture. You can either burnish your arguments by highlighting poverty or by highlighting how there’s have nowhere to spend ample funds, but probably not both.

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  6. Ec7: I’ve never liked the word “socialist”. I prefer “statist”. I don’t know the politics of the UK well enough to know if the more statist politicians support government ownership, but I’m not sure that Niemietz makes the case that the distinction is meaningful.

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