The Zero Room

This week, I have been mostly reading:

• Bank lending, quick macro recap — Warren Mosler: Unsold output = rising inventories = cutbacks output = reduced income = reduced sales = reduced income = reduced sales = pro cyclical downward spiral, etc. as income reductions in one sector ‘spread’ to cuts into reduced sales in the rest. And it reverses only after deficit spending- public or private- gets large enough to offset desires to ‘save’/not spend income.
• Freedom and Intellectual Life — Zena Hitz in First Things (via Eric Schliesser): It is removal of intellectual life from the world that accounts for its true inwardness—an inwardness distinct from the narcissistic inner tracking of one's social standing. It is the withdrawn person's independence from contests over wealth or status that provides or reveals a dignity that can't be ranked or traded. This dignity, along with the universality of the objects of the intellect—that is, that they are available to everyone—is what opens up space for real communion.
• We’re All Free Riders. Get over It! — Nicholas Gruen in Evonomics: In addition to the free rider problem, which we should solve as best we can, there’s a free rider opportunity. And while we whine about the problem, the opportunity has always been far larger and its value grows with every passing day. […] We’re not paying royalties to the estates of Matthew Bolton and James Watt for their refinements to the piston engine. But we’re still free riding on their work. In other words, free-riding made us what we are today.
• Stop this cynical attack: Corbyn, anti-semitism and the right — the Jewish Socialists' Group, reposted in Counterfire: The attack is coming from four main sources, who share agendas: to undermine Jeremy Corbyn as leader of Labour; to defend Israeli government policy from attack, however unjust, racist and harmful towards the Palestinian people; and to discredit those who make legitimate criticisms of Israeli policy or Zionism as a political ideology. As anti-racist and anti-fascist Jews who are also campaigning for peace with justice between Israelis and Palestinians, we entirely reject these cynical agendas that are being expressed by: • The Conservative Party • Conservative-supporting media in Britain and pro-Zionist Israeli media sources • Right-wing and pro-Zionist elements claiming to speak on behalf of the Jewish community • Opponents of Jeremy Corbyn within the Labour party.
• Ed Balls — Britney Summit-Gil muses on the significance of #EdBallsDay in Cyborgology: Something that has struck me throughout this election season is the work that Bernie Sanders supporters have done digging up old video clips and transcripts to write narratives that are lacking in major news outlets. The fact that no millennial remembers a speech Sanders made before the Senate in 1992 does not preclude their ability to find it, watch it, and use it to make a political argument. This becomes all the more important when these narratives are lacking from other vehicles of mediated memory. In other words, if mainstream news sources are failing to remember important historical moments and contexts, the affordances of digital media offer an alternative.
• Leaked 2015 Memo Told Dems: 'Don't Offer Support' For Black Lives Matter Policy Positions — Julia Craven at the HuffPo: “Presidential candidates have struggled to respond to tactics of the Black Lives Matter movement,” reads the memo, sent by a Democratic Congressional Campaign Committee staffer in November. “While there has been little engagement with House candidates, candidates and campaign staff should be prepared. This document should not be emailed or handed to anyone outside of the building. Please only give campaign staff these best practices in meetings or over the phone.”
• The national economic implications of a taco truck on every corner — Philip Bump at the Washington Post: "My culture is a very dominant culture, and it's imposing — and it's causing problems," Marco Gutierrez of Latinos for Trump told Joy Ann Reid. "If you don't do something about it, you're going to have taco trucks on every corner." […] If you assume that three people work in each truck, that's 9.6 million new jobs created. The labor force in August was 159.4 million, with 144.6 million employed. Adding 9.6 million taco truck workers would help America reach nearly full employment — and that's just the staffing in the trucks. Think about all of the ancillary job creation: mechanics, gas station workers, Mexican food truck management executives. We'd likely need to increase immigration levels just to meet the demand. [Personally, I'd prefer kebabs, though I suppose for Trumpists that would be even worse.]
• Billionaire Nike Co-Founder Confuses His Net Worth with U.S. Economic Growth — Jon Schwarz, the Intercept : For the GDP to triple in size in 22 years would require an average annual growth rate of over 5 percent — but the U.S. economy didn’t grow that fast, year over year, even once from 1994 to 2016. So how has Knight latched onto this blatantly wrong factoid? Possibly because there is something that’s tripled in size in the past 20 years: Knight’s own net worth. According to Forbes, Knight’s net worth in 1996 was, adjusted for inflation, about $8 billion; today it’s $25 billion. You can understand why he’d be convinced the economy is in great shape.
• The problems with Bitcoin — Richard Murphy delivers a devastating chartalist smackdown to the techno-utopian gold standard: A blockchain where the extraction of value (the credit transactions) is not identified but where it is said that the supply of debits is finite (as the Bitcoin algorithm must imply) has at least three important economic characteristics that pose difficulties. One is that it attempts to mirror the operations of the gold standard, which proved to be little short of an economic disaster during its period of use in the twentieth century. Secondly, because of its opacity, the system is at best inherently risky. And third, it would appear that the arrangement could, because of its opacity, be exploited. I am not saying it is: I am saying that based on my initial review I have that concern.
• The American Jewish scholar behind Labour’s ‘antisemitism’ scandal breaks his silence — Jamie Stern-Weiner interviews Norm Finklestein on openDemocracy: Compare the American scene. Our Corbyn is Bernie Sanders. In all the primaries in the US, Bernie has been sweeping the Arab and Muslim vote. It’s been a wondrous moment: the first Jewish presidential candidate in American history has forged a principled alliance with Arabs and Muslims. Meanwhile, what are the Blairite-Israel lobby creeps up to in the UK? They’re fanning the embers of hate and creating new discord between Jews and Muslims by going after Naz Shah, a Muslim woman who has attained public office. […] It’s time to put a stop to this periodic charade, because it ends up besmirching the victims of the Nazi holocaust, diverting from the real suffering of the Palestinian people, and poisoning relations between the Jewish and Muslim communities.

I submitted an essay on the due date. That almost never happens. As I was doing so, I saw this announcement on Blackboard:

Given the amount of requests for extensions […] I have extended the due date for assignment one by one week for everyone.

My rant took the following form:

Posted 5pm on the day it's due. Seriously? I've another essay due this week that could have benefited from the extra time had I known I could set this one aside for a bit.

It's nine thirty and I've just submitted the butchered abomination that fits within the word limit, rather than the essay I would have liked to submit. Word limits aren't about the discipline of writing to a limit; they're about limiting the time that it takes to mark essays, or rather the cost of paying someone to do it. Marking criteria aren't about transparency or equity; they're about turning academic staff into interchangeable box-ticking robots with no latitude for exercising professional judgement.

Call it "emancipatory teaching and learning" or "flexible converged delivery", the take-all-comers "demand-driven system" of higher education in Australia ultimately boils down to underpaid casual staff unable to take the time to properly deliver what is in any case a curriculum dumbed down for the benefit of students who can't read or write (because the income for every enrolment is the same) and don't know why they're at university, or that they're not really at a university but at a sleazy commercial vocational college whose business model is exploiting gullible youth.

At this point I'm just going through the motions because my friends and family insist that although they know and I know I'm not deriving anything of value from "the student experience", more people than I would expect take an Australian university degree very seriously. Why I should want to impress idiots in the first place is left unexplained.

I have every sympathy with students who struggle. I am one. I've almost never submitted an essay on time. I have to do the mental arithmetic to work out the gross mark I was awarded from the net mark after late penalties. (A pointless exercise anyway because "Did I meet the marking criteria?" is a completely different question to "Is this good work?") The problem with a semi-marketised system of higher education is that when a large proportion of students regularly receive low marks, or have difficulty submitting work on time, nobody asks "What is it about these students, or the conditions of their lives, that is generating this outcome? And what can we do about it?" The commercial imperatives force the question "How can we keep them enrolled, at whatever cost to the integrity of the system?"

This week, I have been mostly reading:

• Olivier Blanchard Is Worried About Inflation In Japan — Dean Baker, master of the political economy punchline, at CEPR (US): Debt is just one way in which governments obligate their public to future payments. Patent and copyright monopolies commit the public to paying rents that greatly exceed the free market price for the protected products. In the United States these payments are approaching 2.0 percent of GDP ($360 billion a year) for prescription drugs alone. It is remarkable that public finance economists seem to almost completely ignore rents for patents and copyrights when considering the financial burdens of various governments.
• Young Iraqis Overwhelmingly Consider U.S. Their Enemy, Poll Says — Murtaza Hussain at the Intercept:
  
  “For years, many have argued that Muslims and Arabs, like other humans, don’t appreciate being bombed or occupied,” says Haroon Moghul, a fellow at the Institute for Social Policy and Understanding. “Finally, we have a study to confirm this suspicion.”
• What’s so Bad about the Gold Standard? — David Glasner: The gold standard did play a major role in spreading the Depression. But the role was not just major; it was dominant. And the role of the gold standard in the Great Depression was not just to spread it; the role was, as Hawtrey and Cassel warned a decade before it happened, to cause it. The causal mechanism was that in restoring the gold standard, the various central banks linking their currencies to gold would increase their demands for gold reserves so substantially that the value of gold would rise back to its value before World War I, which was about double what it was after the war. […] The Great Depression was caused by a 50% increase in the value of gold that was the direct result of the restoration of the gold standard. […] the problem with gold is, first of all, that it does not guarantee that value of gold will be stable. The problem is exacerbated when central banks hold substantial gold reserves, which means that significant changes in the demand of central banks for gold reserves can have dramatic repercussions on the value of gold. Far from being a guarantee of price stability, the gold standard can be the source of price-level instability, depending on the policies adopted by individual central banks.
• Did Capitalism Fail? Looking Back Five Years After Lehman — Roman Frydman and Michael Goldberg at INET. As the title suggests, an oldie but a goody: Market instability is thus integral to how capitalist economies allocate their savings. Given this, policymakers should intervene not because they have superior knowledge about asset values (in fact, no one does), but because profit-seeking market participants do not internalize the huge social costs associated with excessive upswings and downswings in prices. It is such excessive fluctuations, not deviations from some fanciful “true” value – whether of assets or of the unemployment rate – that Keynes believed policymakers should seek to mitigate. Unlike their successors, Keynes and Hayek understood that imperfect knowledge and non-routine change mean that policy rules, together with the variables underlying them, gain and lose relevance at times that no one can anticipate.
• The Market Fairy Will Not Solve the Problems of Uber and Lyft — Ian Welsh nails it: These business models are ways of draining capital from the economy and putting them into the hands of a few investors and executives. They prey on desperate people who need money now, even if the money is insufficient to pay their total costs. Drivers are draining their own reserves to get cash now, but, hey, they gotta eat and pay the bills. The model generalises to any low-paid insecure work. You can't afford to say no to even the worst job. I did it for nearly ten years, working harder than I'd ever worked in my life, and am now massively in debt, for the first time in my life.
• The Zombie Doctrine — George Monbiot delivers some sublime ranting: It’s as if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you’ll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is?
• Who do faculty “work for?” — Historiann: There’s nothing like stupid from the central administration to bring a faculty together. I told my colleagues that I have a rule when it comes to any technology or software: it works for me, I don’t work for it. End of story.
• A British Bridge for a Divided Europe — Robert Skidelsky: The eurozone has weakened the nation-states comprising it, without creating a supranational state to replace the powers its members have lost. Legitimacy thus still resides at a level of political authority that has lost those attributes of sovereignty (such as the ability to alter exchange rates) from which legitimacy derives. […] The EU has tried to achieve political union incrementally, because it was impossible to start with it. Indeed, barely hidden in the “European project” was the expectation that successive crises would push political integration forward. This was certainly Jean Monnet’s hope. The alternative – that the crises would have the opposite effect, leading to the breakup of the economic and monetary union – was never seriously confronted.
• Patently Absurd Logic On Budget Deficits and Debt — Dean Baker at the Huffington Post: As much as folks may love the private sector, it was not going to make up the demand lost when the housing bubble crashed, or at least not any time soon. If we wanted to prevent a long and severe downturn like the Great Depression, it was necessary for the government to run large deficits. These deficits were not impoverishing our kids - they were keeping their parents employed. […] The fact that the deficit hawks can scream endlessly about the horrible interest burden on our children, but don’t even seem to notice the costs being imposed by patent and copyright monopolies, suggests that they are not really concerned about our children’s well-being. Alternatively, they may have a very poor understanding of economics. Either way, their whining does not deserve the public’s attention.
• Where Hope Goes to Die — Ted Rall:
  

This week, I have been mostly… I don't know what I've been doing. Meanwhile, this happened in my sharply curtailed idle reading:

• Economic Rationality Explains Everything and Nothing — Geoffrey Hodgson, Evonomics: Utility maximization can be useful as a heuristic modelling device. But strictly it does not explain any behavior. It does not identify specific causes. It cannot explain any particular behavior because it is consistent with any observable behavior. Its apparent universal power signals weakness, not strength.
• Everyone But the Media Saw Trumpism Coming — Ted Rall: “We were largely oblivious to the pain among working-class Americans and thus didn’t appreciate how much his message resonated,” [New York Times journalist Nicholas] Kristof wrote. Most Americans are working-class. In other words, Kristof and his colleagues admit they don’t cover the problems that affect most Americans. Again: why does he still have a job?
• Is an Aussie debt crisis around the corner? — Leith van Onselen, Macro Business: Admittedly, the real concern is that 40% of all mortgages are interest-only mortgages, which are more vulnerable […] Whether or not Australia is likely to experience some kind of financial crisis within the next three years is a moot point. But having one of the world’s most overvalued housing markets, combined with overly indebted households and an extreme reliance on offshore funding, is hardly a good situation to be in and the opposite of prudence. And…
• The seven countries most vulnerable to a debt crisis — Steve Keen, Real World Economics Review Blog: They are, in order of likely severity: China, Australia, Sweden, Hong Kong (though it might deserve first billing), Korea, Canada, and Norway. […] Timing precisely when these countries will have their recessions is not possible, because it depends on when the private sector’s willingness to borrow from the banks—and the banking sector’s willingness to lend—stops. This can be delayed by government policy—as it was in Australia in 2008, via a strong government stimulus, the restarting of the housing bubble by a government grant to first home buyers, and the boom in investment and exports set off by China’s own stimulus program. But the day when credit growth stops can’t be put off indefinitely. When it arrives, these countries—many of which appeared to avoid the worst of the crisis in 2008—will join the world’s long list of walking wounded economies.
• Are We Facing a Global “Lost Decade?" — Steve Keen, for the Private Debt Project [tl;dr: Yes.]: The tragedy is that although there are methods by which we could escape the global private debt trap into which we have fallen we are nonetheless prisoners of an economic orthodoxy that will prevent us from employing them... The main barrier here is simply the ignorance of the supposed experts on economics about the nature of money. While mainstream economists continue to spout naïve arguments about money and banking, the politicians who rely upon them for guidance are unlikely to attempt anything other than the poorly targeted and largely ineffective policies that Japan has persisted with for the last quarter century. A global “Lost Decade” is entirely probable.