Tuesday, August 4, 2009

A "New Scientist" article : "Falling out of love with market myths"


They sold us a myth and we believed it, so let's not make the same mistake again (Image: Rex Features)

MY STORY starts with a theory that Ronald Reagan and Margaret Thatcher sold us. It is called "supply-side economics", and it claims that economic growth depends, first, on the rich (not the poor) being rewarded with tax cuts; and second, on markets being freed from regulation........

This is not the only false theory around. While bankers were busy promoting models of market success, research-based enterprises were equally hard at work promoting their own false model of "market failure" to justify government subsidies for their endeavours. They are, in my book, as culpable as the bankers. Let me explain why.
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36 comments:

  1. vAugust 4, 2009 at 5:57 PM

    "Those who can make you believe absurdities can make you commit atrocities."
    Voltaire

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  2. vAugust 4, 2009 at 6:30 PM

    Uh oh, thisa sounds familiar, but the people I tossed it to are probably too dishonest to acknowledge it -

    "Once, like Bill Gates, they rejoiced in the free market, but today, banker-like, they want to nationalise the costs of their R&D but to privatise their profits."

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  3. thankgodimatheistAugust 4, 2009 at 6:56 PM

    Free market is to the economy what prostitution is to love...
    My take...

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  4. thankgodimatheistAugust 4, 2009 at 7:10 PM

    Free market is to the economy what porn is to love... 
    My take...

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  5. flemingAugust 4, 2009 at 7:14 PM

    What is the opposite of free market? A not-free market?  Why would not-free ever be better?

    Ohhhh, I see, you guys want a perfect system.  You know, where all the benefits of the free market system are still available, such as technological advancement, new medicines, upgraded living standards, etc.  BUT you want none of the downsides, such as income stratas, fierce competition and the possibility of failure. 
    Well, when you have figured out how to make that happen, do let us know.  Since we dont hang out in fairy tale land, you will have to come find us. 

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  6. anandAugust 4, 2009 at 7:19 PM

    When has any "not free market" been successful in human history?

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  7. thankgodimatheistAugust 4, 2009 at 7:58 PM

    fleming
    I POSTED AN ARTICLE WHICH IS MAKING CERTAIN POINTS...WOULD YOU BE KIND ENOUGH TO SAY WHERE HE/SHE IS WRONG!!! IT'S OPEN FOR A DEBATE!!!! Stop going after everyone and read the material before you jump!!! Don't worry, it's not a liberal leftie's rag...Go ahead!

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  8. thankgodimatheistAugust 4, 2009 at 7:59 PM

    Again...Did you read the article? Why do you think it's wrong?

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  9. thankgodimatheistAugust 4, 2009 at 8:01 PM

    Again...Did you read the article? Why do you think it's wrong?
    And I've deleted my comment because I'm sick and tired that you go after the comments and never after the articles!!

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  10. thankgodimatheistAugust 4, 2009 at 8:03 PM

    I wonder why we post articles?  Comments only should do!!

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  11. vAugust 4, 2009 at 8:03 PM

    Depends on who the market is free for fleming, but you're never going to figure that out...LOL

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  12. thankgodimatheistAugust 4, 2009 at 8:06 PM

    I wonder why we post articles?  Comments only should do!!
    If you have no time for the articles or you can't be bothered then why should we bother with comments on comments on comments...

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  13. thankgodimatheistAugust 4, 2009 at 8:09 PM

    I wonder why we post articles?  Comments only should do!! 
    If you have no time for the articles or you can't be bothered then we can only conclude that it's not what we post you have a problem with but what we say which is utterly ridiculous since I never pretended being an expert on anything...

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  14. thankgodimatheistAugust 4, 2009 at 8:12 PM

    Ohhhh, I see, you guys want a perfect system.
    ------------
    Oh boy oh boy oh boy!
    This is sureal! I'm out of here!!

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  15. MaracatuAugust 4, 2009 at 8:54 PM

    We scientists tend to find economics hard to penetrate because economists work in an unexpected way.

    The way I explain it to my students is that economics, at its core, is based on human behavior.  It is not a natural science, precisely because human behavior is impossible to model.  The only way you can manage to "model" human behavior is by introducing simplifying assumptions  -- such as the assumption that people behave rationally.  Human beings are notorious for breaking assumptions, so economics isn't nor will it ever be a natural science!  The smarter economists have moved on and embraced such approaches as game theory and strategic thinking, etc.

    My explanation is obviously oversimplified, but it is a beginning for longer discussion.

    By the way, Dani Rodrik, an up and coming economist said (sorry, I lost the link): "we now confront a rare historic opportunity. The softening of convictions on both sides presents an opening to fashion an agenda for economic policies that takes an intelligent intermediate stand between the two extremes cited above. Market forces and private entrepreneurship would be in the driving seat of this agenda, but governments would also perform a strategic and coordinating role in the productive sphere beyond simply ensuring property rights, contract enforcement, and macroeconomic stability.
    This paper is a contribution to one component of such an agenda, focusing on policies for economic restructuring. Such policies have been called in the past “industrial policies,” and for lack of a better term, I will continue to call them as such. I will use the term to apply to restructuring policies in favor of more dynamic activities generally, regardless of whether those are located within industry or manufacturing per se    ."

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  16. MaracatuAugust 4, 2009 at 9:08 PM

    Aside from what I said above about human behavior, the concept of "perfect competition", discussed in the article you posted, is thoroughly unreal, and that fact is acknowledged by everyone in the field; yet, strangely, it is the first standard "model" that economics students everywhere encounter in introductory courses.

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  17. anandAugust 4, 2009 at 9:18 PM

    Dani's protectionist views are extremely unpopular among economists.

    I wouldn't call him up and coming. He has been around forever. He is a well known face at conferences; {I might have written reviews of his articles.}

    Mara, governments are dangerous because they are often captured by stodgy old money interests, rather than new emerging industries.

    For example the Auto industry has more influence than the technology industry even though the auto industry is a fraction the size of the tech industry. Which is more important for global innovation and living standards?

    This said, I would like the government to do more to facilitate innovation; but am skeptical of Washington. {The lobbies really have a powerful and negative influence there.}

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  18. vzaAugust 4, 2009 at 9:38 PM

    TGIA, sorry, I know this is off topic, but are you familiar with the blog of the Syrian ambassador to the U.S?  He seems like a sweet guy who absolutely loves music and art. He posts the works of Syrian artists. I thogught oyu might be interested in taking a look.

    http://images.google.com/imgres?imgurl=http://imad_moustapha.blogs.com/my_weblog/images/dsc04535.jpg&imgrefurl=http://imad_moustapha.blogs.com/my_weblog/2006/05/index.html&usg=__Ihzwe6Rz8IRvDKXzyiDBkfQYfD4=&h=247&w=330&sz=53&hl=en&start=14&um=1&tbnid=WH3EmmYs9nYNvM:&tbnh=89&tbnw=119&prev=/images%3Fq%3Dadonis,%2Bsyrian%2Bpoet%26hl%3Den%26sa%3DN%26um%3D1

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  19. vzaAugust 4, 2009 at 9:45 PM

    TGIA, Sorry this is off topic, but are you familiar with the blog of the Syrian ambassador to the U.S.? He seems like a really nice guy and is a great lover of music and art and often posts works by Syrian artists.

    http://imad_moustapha.blogs.com/my_weblog/artists_from_syria/

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  20. VAAAugust 4, 2009 at 11:42 PM

    vza
    It's great thanks, i love it. :)

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  21. VAAAugust 4, 2009 at 11:43 PM

    tgia
    let's get an expert opinion , what do you think ?

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  22. thankgodimatheistAugust 5, 2009 at 2:28 AM

    Thanks for this link..I just discovered some great artists and I'm specifically bown away by Ahmad Moualla...I knew some very interesting Syrian artists but this is absolute world class. I'm going to display his and other's works as soon as possible.
    As for Imad himself he's obviously a man of impeccable taste and high education. Great taste as well  in art and literature, finely dressed (his Gucci loafers!) and a beautiful wife!!...I bookmarked his blog and will use some of his references ASP.
    Thanks for this..

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  23. thankgodimatheistAugust 5, 2009 at 2:29 AM

    Thanks for this link..I just discovered some great artists and I'm  blown away by the artist  Ahmad Moualla...I knew some very interesting Syrian artists but this is incomparable, absolute world class. I'm going to display his and other's works as soon as possible. 
    As for Imad himself he's obviously a man of impeccable taste and high education. Great taste as well  in art and literature, finely dressed (his Gucci loafers!) and a beautiful wife!!...I bookmarked his blog and will use some of his references ASP. 
    Thanks for this..

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  24. thankgodimatheistAugust 5, 2009 at 2:46 AM

    Talking of Gucci loafers..Isn't it just a curious coincidence that I just had them next to me planning to give them a bit of brushing?

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  25. thankgodimatheistAugust 5, 2009 at 2:53 AM

    Any thing wrong with just reading and discussing the article anand ..Since I read it myself and found it interesting I;'d be curious to hear opinions but obviously you prefer to go after me or Mara! Why?

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  26. thankgodimatheistAugust 5, 2009 at 4:16 AM

    Thanks for this link..I just discovered some great artists and I'm  blown away by the artist  Ahmad Moualla...I knew some very interesting Syrian artists but this is incomparable, absolute world class. I'm going to display his and other's works as soon as possible.  
    As for Imad himself he's obviously a man of impeccable taste and high education. Great taste as well  in art and literature, finely dressed and a beautiful wife!!..I bookmarked his blog and will use some of his references ASP.  
    Thanks for this..

    ReplyDelete
  27. thankgodimatheistAugust 5, 2009 at 6:11 AM

    Thanks for this link..I just discovered some great artists and I'm  blown away by the artist  Ahmad Moualla...I knew some very interesting Syrian artists but this is incomparable, absolute world class. I'm going to display his and other's works as soon as possible.   
    As for Imad himself he's obviously a man of impeccable taste and high education. Great taste as well  in art and literature, finely dressed and a beautiful wife( from the  Kayali family of artists and intellectuals)!!..I bookmarked his blog and will use some of his references ASP.   
    Thanks for this..

    ReplyDelete
  28. vAugust 5, 2009 at 6:52 AM

    "Mara, governments are dangerous because they are often captured by stodgy old money interests, rather than new emerging industries. " Anand

    Listen you stupid little putz, these enclaves Latin America are created by the neoliberal thrust. The USA likes having a small elite they can control as the people suffer, want an example? Look at Honduras.

    However, you totally ignore or absolve foreign interest from the equation, you are a fucking nitwit - you have no grasp of "economics" in reality.  You have no grasp of history, you make up fairy tales - that is why, whenever you say anything in regard to either, form this time forward, if I feel like it I am going to give you a fairy tale or nursery rhyme award.

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  29. vAugust 5, 2009 at 6:53 AM

    "Mara, governments are dangerous because they are often captured by stodgy old money interests, rather than new emerging industries. " Anand 
     
    Listen you stupid little putz, these enclaves Latin America are created by the neoliberal thrust. The USA likes having a small elite they can control as the people suffer, want an example? Look at Honduras. 
     
    However, you totally ignore or absolve foreign interest from the equation, you are a fucking nitwit - you have no grasp of "economics" in reality.  You have no grasp of history, you make up fairy tales - that is why, whenever you say anything in regard to either, from this time forward, if I feel like it I am going to give you a fairy tale or nursery rhyme award.

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  30. Jemmy HopeAugust 5, 2009 at 7:51 AM

    " You have no grasp of history, you make up fairy tales." Spot on, v. He's Hans Krishnan Anandson.

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  31. mollyAugust 5, 2009 at 10:19 AM

    lol!

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  32. vzaAugust 5, 2009 at 3:25 PM

    Your're welcome, gentlemen. I started reading his blog a couple of years ago. I think he is a great ambassador for his country.

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  33. thankgodimatheistAugust 5, 2009 at 4:47 PM

    A good find...Thanks...
    In one of his posts he talks about an exhibition of Syrian artists in the US..He says many Americans used to ask him.."Do you mean those works of art were MADE in Syria?".
    It highlights the thinking that many Americans have of this country, a desert with camels for transport system..

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  34. anandAugust 5, 2009 at 5:29 PM

    I read the article, at last. I would offer many technical critiques to him. I am not sure how much everyone here understood all the issues he discussed however?

    One issue he dicusssed is that it takes signficant resources to replicate an invension someone else made. True. There is a wealth of literature on the subject.

    The field of "growth" economics is a large and exciting field. How to accelerate technological innovation is an extremely difficult and contriversial subject. The author is right that a lot of government R&D grants are erroneously used. So how to boost technological innovation, since it is the cause of living standards for people over time?

    On the idea that markets are imperfect, I wouldn't take that too far. Most people, including poor people, are far smarter and more rational than most give them credit for.

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  35. anandAugust 5, 2009 at 5:36 PM

    "Supply Side economics" as I understand it is that by increasing the incentives to work and innovate (lowering marginal rates and getting rid of all exeptions), reducing and simplifying regulations, and letting market prices express themselves; that this maximizes aggregate supply of goods and services (by maximizing technological innovation.)

    To a degree this is widely accepted by the economic profession. 50% marginal rates result in more innovation than 60% marginal rates. But when you get below 50%, what is the sensitivity of technological innovation to marginal tax rates? For example, I don't believe 30% to 20% marginal rates has a huge affect on technological innovation.

    However, the economics profession as a whole are "supply siders" in the sense that they seek to maximize aggregate supply which increases incomes and lowers prices.

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  36. anandAugust 5, 2009 at 6:14 PM

    What is so funny? V, today Brazil is more free market and pro business than America. Brazilian firms are global market leaders in so many areas, including light attack COIN aircraft.

    The rise of Latin America is because of neoliberalism. Brazil is doing far better than it did during the socialist era 1970s to 1993.

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