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Inhumane Brexit January 11, 2017

Posted by larry in Brexit, democracy, social justice, social policy.
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“One German citizen, who has been in the UK for 10 years, didn’t take out English residency status, is now worried they will have to leave. She apparently loves England but “if the government starts throwing out EU citizens, I don’t want to live in this country any more”.

“Which is a cuious sort of reasoning. If the UK does act like that then what was there to love in the first place? But that is not the point anyway.” [From Bill Mitchell’s blog, billy blog.]

No, it isn’t the point. Yet it is. Her reasoning may be considered to be unusual, but her situation is not. There are many people in exactly her situation or more complex ones and have complicated reasons for wishing to continue to live in a country where they have lived for perhaps 30 or 40 years, which is true of many “deportables”. Many of those considered to be deportable have children and spouses who have a right to reside in the UK. To deport such a parent, and thereby potentially break up such a family, violates the UN convention on the rights of the child to which the UK is a signatory. The Home Office is either not aware of this, which is scandalous in itself, or doesn’t care, which may be more scandalous. And that spouse or child may not have an automatic right of residence in the country to which the parent in question is being deported.

My problems with Brexit have nothing to do with economics and everything to do with humanitarian issues, social justice, workers’ rights, the environment, the NHS, social care, security, and the like. Of course, any properly constituted government, whether in or out of the EU (but not in the Eurozone), could deal with these matters properly. But the UK does not have such a government, nor has it had one for some years. The UK currently has a government comprised of xenophobes, buffoons, and economic fanatics. To take one example, this government has already said that as soon as the UK is out of the EU, it will “address” workers’ rights, which effectively means to remove as many of them as it can get away with.

To take another, the NHS is currently facing a crisis, which the International Red Cross deems to be a humanitarian crisis. Whether one considers the language to be OTT or not, what the UK has is a health secretary who is going around and effectively saying, Crisis? What crisis?, and blaming A&E problems on the public. The former is despicable and the latter disgusting. But these are the sort of government ministers the public is faced with. The previous NHS crisis with which the current one is being compared took place during the nineties. Both have occurred after considerable periods of Tory rule. It appears as though Tory rule is bad for your health, physical or mental.

Is there any reason to think, given who is in charge, that these situations will be improved after Brexit? I don’t see why. There is every reason to think that they will worsen. As for whether the referendum vote is legitimate, I think the Guardian article over-eggs the pudding.

It can be argued and has been that a population deserves what government it happens to elect. I don’t think this is as simple as it looks. It is all too possible to believe you are voting for A but get B instead. Or get C in addition to A, which you didn’t vote for and didn’t know was part of the package. Because such scenarios take place all too often, and many times involve a tyranny of the majority, I consider the argument to be specious. Locke’s arguments are not always logically sound. A people do not always deserve what they get nor get what they deserve.

Getting back to the deportables, I know of families who are frightened for the reasons mentioned. And they don’t know what to do. The government could easily provide an amnesty to all those who are currently resident in the UK. But this is not on the table even though it would be the most humane action to take. There is every reason to think that the other 27 countries faced with citizens returning from the UK because they have been deported will do exactly the same thing to UK citizens, possibly violating the same UN convention. Some of these countries have already said that they will do exactly this.

Because of this situation, among others, a number of anti-Brexit groups have been popping up around the country. Membership of these groups is usually comprised of younger people. These groups are not anti-Brexit per se, but anti an awful Brexit, like the kind in question. Some of these groups present alternative Brexits that are worthy of consideration.

Is Brexit responsible for any of this? Of course not. What concerns me is that the Tories will attempt to get away with more inhumane policies than they have been able to heretofore. While the Eurozone features of the EU have been an unmitigated disaster, not everything EU has been disastrous. Maybe it CAN change.

It is true that the EU as presently constituted is ridiculous, but there are politicians in Europe, like Emmanuel Macron, who see what the problem is and see a need to address it. At present, there are not many Macrons, but I see no reason why they can’t proliferate and begin to alter the narrative. There is time. Not a lot, but there is some. Of course, nothing may happen. Then it will be bye-bye Eurozone, missing you already, Not, and perhaps the EU with it.

Is the UK Broke? – the recent report by Reed & Clark April 26, 2013

Posted by larry in economics, social policy.
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Howard Reed & Tom Clark, Britain is Broke – We Can’t Afford To Invest — NEF & Tax Justice Network

This is the new report by Howard and Tom. Many of you know Howard and he has given talks at our conferences in the past. I think this is an excellent report. But I have some qualms about it. My fundamental problem about the report is that it fails to go deeply enough. This can be interpreted as me wishing that they had written a slightly different report.

As Howard and Tom argue and as anyone who knows anything about the new economics knows, not only is Britain not broke, it can’t go broke. Howard and Tom are clear about that and document that well. What they don’t clarify very well is why this is the case. A related myth they attack is the idea that a sovereign state is like a household. It is not. Paraphrasing Sylvia Nasar who is paraphrasing Keynes, the state is the spender of last resort while the central bank is the lender of last resort. Neither of these functions have been implemented properly due to the austerity program that has been in place. And neither of these functions is available to any household. And if you think the Bitcoin constitutes an exception, I suggest a look at Varoufakis’s analysis here: http://yanisvaroufakis.eu/2013/04/22/bitcoin-and-the-dangerous-fantasy-of-apolitical-money/.

A real gem is their Figure 2, which shows that the debt to GDP ratio has been historically higher than it is now and no internal disasters generated by economic crises with this as the cause took place. They also show that the UK has never defaulted on its debts in the past 250 years. And the reasons for thinking that it would now? Specious. They also show that interest rates are quite low. What they fail to clarify is why this was, and continues to be, so. What is missing is a theory of interest rates. The government sets the basic interest rate and, as Keynes noted, this could and should always be as low as possible.

They could have been clearer on the economic differences between the Eurozone and the UK and other non-Eurozone countries. The latter are, as they note, countries with their own sovereign currencies. Comparing members of the Eurozone and the UK macroeconomically is worse than comparing apples and oranges. At least in the latter, you are comparing the same kind of thing, fruit. Macroeconomically, the differences among the Eurozone countries and the UK are very much greater than their similarities. It is like comparing fruits (sovereign currency countries) and vegetables (non-sovereign currency countries -those in the Eurozone) while not knowing in which group to place tomatoes (the UK). [ck Oxford dict..]

I would also have liked them to have done more about what was going on from the end of WW2 until the Nixon pronouncement, which acted like an exogenous shock to the world economic system. What had been taken for granted was now as sand, virtually overnight. While this period was characterized as being Keynesian, it was not. Samuelson had the best term to describe this period – neoclassical synthesis Keynesianism. Joan Robinson called it bastard Keynesianism. The currency system during this period, while being a fiat currency system identical to the one operating today, was viewed as being akin to a system on the gold standard. This view influenced economic decisions more than was possibly realized at the time.

The upshot of this is that the stagflation that took place in the later sixties and early seventies can not be laid at the door of Keynes’ doctrines as they were non-operational for the most part during the preceding period. While Keynes’ doctrines were seen as being used, they were so watered down that it is a travesty to contend that the doctrines implemented were Keynesian.

Take arsenic. You are a physician and you prescribe it as a treatment for a patient.  If you dilute it so much that hardly any arsenic is left, for the benefit of the patient of course, can it then be truly claimed that the patient received any arsenic at all? Moreover, if what is needed is for the patient to alter his/her behavior, prescribing what is effectively a placebo will surely not achieve that end. So, implementing non-Keynesian policies while calling them Keynesian will inevitably fail to bring about the desired result except under the most unlikely fortuitous circumstances. The consequence of the inevitable failure will likely lead to worse policies being implemented. Which is precisely what took place in the eighties in the US and the UK and what is taking place right now.

Mass Obsessive-Compulsive Psychosis & the Austerity program April 24, 2013

Posted by larry in economics, Psychology, social policy.
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Portugal vs the Joffrey Baratheon of economic policies

Revealed: George Osborne’s secret veto on fraud inquiries

For those of you who might just have missed this news. The corruption runs deep, in both the UK and in Europe. The austerity train just continues to run, irrespective of how many it runs over that get in the way in the process. The answer to Cui bono? is no longer going to go deep enough to get to the bottom of this. It is more than a matter of vested interests. What this type of thinking resembles most is a kind of mass obsessive-compulsive psychosis.

If the defining characteristic of a psychosis is a belief with a dramatic dislocation from reality, the truth is that we come across people who harbor one or another belief that has absolutely no relationship to reality every week if not every day. I don’t just mean the entertaining of a false belief. We all entertain one virtually every day, whatever we ourselves may think. I mean a belief that not only has no empirical evidence for it but that clearly has none and can be seen by a detached observer to have none.

Austerity programs initiated in the past have been shown empirically not to work. The current austerity program has been shown empirically not only not to work but to have contra-predictive effects, that is, it is inducing the opposite effect it was predicted to bring about. As a consequence, it is difficult if not impossible not to conclude that the thinking underlying austerity appears to involve a kind of psychotic dislocation from reality with a strongly attached obsessive-compulsive component.

The question now is, if this is what we are dealing with, how do we dislodge it? The standard solution, sequestration in an asylum, will not suffice for a mass induced psychotic belief. Direct confrontation has not worked and can be seen not to have worked. This is common with psychotic belief systems. Because they have no connection with reality, confrontation with reality will not dislodge them. The only other option open to those who wish to dislodge this particular belief system, which is having such a devastating effect on so many, is a kind of flanking movement, involving I would suggest the fundamental presuppositions underlying the belief system that is helping to keep this program alive. This is a lot easier to say than to do, partly because core political functions are inextricably involved.

I may be wrong and it may be simply a matter of vested social interests. If that is so, then the solution is relatively straightforward. But if it isn’t that, there is no easy solution. The consequence of the latter is that we let capitalism “cure” itself by allowing it to bring the debt down, in its own inimitable way, which may take another 20 years and leave incredible damage in its wake, including increasingly grotesque inequalities.

Addendum: I have ignored a dimension in the discussion above. This is partly because it involves only a subset of the people who are advocating austerity. The people I have left out are the psychopaths or sociopaths (I have defined them differently in posts previously.) who are in positions of authority. The behavior of sociopaths can be altered by altering the reward-punishment pathways. The behavior of (true) psychopaths, on the other hand, can never truly be altered other than incidentally and temporarily. They have to be physically or functionally removed from whatever positions they hold in order to eliminate the deleterious effect they continually have on those around them. Before they can be removed, of course, they have to be recognized for what they are. While this is difficult to do, it is not impossible. Outside assistance, from say a properly trained industrial psychologist, is one way. The reason I left these people out of this discussion is that they are not psychotic in any way. They know exactly what they are doing. They may entertain false beliefs like the rest of us, but if anyone is finely tuned to reality, especially the psychological states of others, it is the psychopath.

Zoellick’s imbecilic recommendations August 15, 2011

Posted by larry in economics, social justice, social policy.
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Zoellick might as well be singing if lovin’ you is wrong, I don’t wanna be right with respect to his neoclassically motivated advocacy of cutting welfare and social security as part of a solution to the economic crisis.  Not only is this recommendation not part of the solution, it is part of the problem.  Cutting government spending in a recession can only make the situation worse.  The danger zone as Zoellick refers to it has been largely brought about by government ineptitude following upon bank ineptitude.  In a sovereign country with sovereign control over its own currency, there is no way, short of political ineptitude, that such a country could never meet its welfare and social security obligations. To suggest otherwise is to engage in bullshit* (not know what you are talking about) or  lie.

* See Harry Frankfurt’s brilliant essay, On Bullshit either here or here.

Austerity, economic inequality, & social unrest dance together in an intertwined destiny August 15, 2011

Posted by larry in economics, interpretation, Justice, social policy.
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There have been a number of discussions on the possible relations there might be among economic inequality, social unrest, and the economic austerity programs that are so popular with Western governments. Let me begin by listing articles that take slightly different interpretations to this complex issue so that there is a shared information base on the relationship between austerity and social unrest.

Hutton & Porter: On the UK riots in Sunday’s Observer;

Washington’s blog: Austerity and runaway inequality lead to violence;

Polly Toynbee: Moral outrage at rioters fixes nothing;

Larry Elliott: We”ve been warned: the system is ready to blow.

All of the above provide an explanatory context for the riots that are not embedded in an explicit political-economic context. Elliott, as economics editor of the Guardian, states explicitly that

“Lesson number one is that the financial and social causes are linked. Lesson number two is that what links the City banker and the looter is the lack of restraint, the absence of boundaries to bad behaviour. Lesson number three is that we ignore this at our peril.”

Bill Mitchell (a proponent of Modern Macroeconomic Theory (MMT), which is a descendant of Keynes-Kalecki, Lerner, Kaldor, and Minsky, with a little Marx thrown in) provides the basic outlines of an explanatory context for the discussions of Elliott and the others by means of a question he asks and the answer he provides in a recent Saturday quiz.  I wish to explore the context of Mitchell’s question and answer in some detail in respect of the relationship between the economy and social unrest.

Mitchell asks whether the claim that in the UK, unemployed youthful rioters on income benefit are living off the hard work of taxpayers is a valid one, and answers in the affirmative.

Importantly, Mitchell refers to Abba Lerner’s The Economics of Employment (1951) where Lerner employs the metaphor of the economic steering wheel as part of his argument against laissez-faire conceptions of the economic system. Lerner’s economic steering wheel refers metaphorically to an automobile going down the road where, in a laissez-faire attitude to driving, the driver takes his hands off the wheel, whereas where more control is needed, such as in a contemporary complex economy, the driver needs to keep his hands on the wheel.

In his preface, Lerner emphasizes that – contrary to expectations of his friends and colleagues – his book does not focus on unemployment or on full employment per se. As he explains,

“I was expected to write a book devoted to attacking the evil of unemployment or to write a book indicating how one could achieve the desirable state of full employment. I think I have done both of these things, but neither can be done properly if primary attention is directed at what we want to avoid or at what we want to achieve. Primary attention must be directed at understanding and explaining the way things work [my emphasis]. Understanding comes first. Only when we understand the nature of the machinery that determines any level of employment can we hope to be able to avoid what we do not like and achieve what we do like.” (1951: vii)

This is precisely Mitchell’s epistemic position; it is also mine. And it is explanatorily the most effective for understanding what has been happening the past few years. I am emphasizing Mitchell’s contention in some detail, both because Mitchell’s argument poses such a good counterpoint to the other articles I have listed and it presupposes a certain view of economic processes that may not be widely understood.

The most important point that Mitchell makes here is that non-workers on benefit obtain command over real goods and services and that because these are finite at any given time, this leaves fewer resources left for those working to have command over themselves.  The arguments against providing such benefits to the poor rely on confusions between the nominal resources implemented by the government accounting system and real goods and services.  This is related to another essential point: where the funding for those on benefit comes from.  The answer is: nowhere.  In other words, workers do not lose out as a consequence of non-workers receiving this kind of funding.

How does this work? The funding is created ab initio by the Treasury and placed in the accounts of those receiving such benefits.  This enables them to have access to real goods and services, notably food, clothes, and housing.  It does not mean that they can thereby afford luxuries such as yachts.  Since this funding is created ab initio by the Treasury, it does not come out of worker taxes.  So, in a real sense, workers are not paying for the benefits provided to non-workers. The conservative position can be summed up in this way: what the lazy get the industrious must forego, or put another way, what the industrious create the less privileged can access to the advantage of all. As Lerner and Mitchell would be keen to point out, this is not how the system actually works:

Except in the case of full employment, government funding for non-workers has no economic effect on workers, however psychologically affected workers might be by what appears to be a disproportionate disparity between the two groups, which is a consequence of the group members accepting some type of neoclassical orthodoxy.  To contend that such funding of non-workers does have an economically deleterious effect on workers and their working environment is to implicitly assume that this activity is in effect a zero-sum game, which is to implicitly imply that what one group gets the other gives up.

Were a societal system able to provide work for everyone who wants to work but is under a serious resource constraint, such as limitations of a finite resource, the provision of benefits to certain groups of non-workers might cause social problems.  But we are not living in such a generally resource constrained system. So this putative causal link has no general application.  In general, any resource constraints that exist are politically created, and thus not a consequence of economic principles.

Another important issue here is the function of taxes. Taxes are not used by governments to fund programs.  They are used to constrain spending.  So, a large tax on the rich will mean that fewer hundred million dollar yachts will be purchased and a lesser degree of malicious speculation might take place as well.  This can only be a good thing.  Since taxes are not used to fund spending, they are not used to finance benefit payments. Hence, the workers are not paying for the benefits accorded to non-workers through their taxes.  It would be equally correct to say that they are not paying for them at all.  All that the system is doing is decreasing the economic inequality between the rich and the poor.  Only in a societal system with seriously constrained resources would benefitting the poor effectively disadvantage the better off.

A question arises.  If the rich are not effectively disenfranchised by helping the poor, why are they so opposed to it taking place?  This requires a deeper response than I can provide here. But let me say this. The issues Mitchell raises provide an economic context for assessing the social and psychological impacts of inequality and austerity. They allow a differentiation between what is and is not relevant in the assessment of putative social policies designed to deal with economic crises.  One conclusion that could be drawn is that the gross inequities enjoyed by the rich are so socio-culturally divisive that a more equitable redistribution of economic resources would be best for society as a whole, and that would include the rich.

Does this invalidate the positions of the other authors I have listed above?  Not at all.  It complements them via a deeper interpretive and explanatory political-economic framework.  In the case of the social unrest with which we began, the perspective set out by MMT enriches the explanatory scenarios developed by the other authors.  In particular, MMT principles imply that greater equity in a less divisive socio-cultural context should lead to a decrease in the probability of social unrest of the sort we have recently witnessed.  After all, the distinction between haves and have nots becomes more a question of having a little less vs. having a little more, where the socio-economic distance between the various groups can be significantly diminished.  History shows that nicely equable distributions such as these are highly unlikely to take place or, if they do take place are inherently unstable, unless the government puts its hands on the economic steering wheel and exerts some degree of control over the dynamic system that is the political economy.

Two intellectually lame commentators August 13, 2011

Posted by larry in economics, social policy.
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Recent comments on the riots and their social and political consequences have shown some of the country’s more prominent commentators to be intellectually limited in their ability to provide relevant incisive analysis.  Two that failed last night on Newsnight were Gavin Esler and David Starkey.  Starkey was shown up by a young author who was both more incisive and more insightful about what was going on than Starkey.

Esler, in a report on the riots of the past few days, singularly failed to provide a socio-political context that would facilitate an intellectually reasonable framework that would enable placing the events in a viable interpretive context.  By contrast, Hari Kunzru achieved this in the first paragraph in an article that came out in today’s Guardian.  While Esler moaned about how we have seen how we may not be able to rely on the police and politicians in general and basing his comments on the delay in the police response and political posturing, Kunzru wrote this:

The riots have shown Britain some unpalatable truths about itself, making it impossible to hold on to a certain Whiggish story about social progress which, in the teeth of the evidence, we have persisted in telling about ourselves.”(These riots reveal some unpalatable home truths)

David Starkey’s sound bite of the evening was to characterize the riots as “shopping with violence”.  While there may be some truth in this, his attempt to explain the events as somehow a consequence of black culture, including rap, infiltrating white working class neighborhoods received short shrift from the other two contributors, notably the young author of Chavs, Owen Jones.  Jones, when Starkey allowed him to speak, ably undermined Starkey’s interpretation of the events, an interpretation that showed him to be out of touch not only with reality but with a reasonable explanatory framework.  His familiarity with historical analysis failed him utterly here.

Neither Starkey not Esler mentioned the elephant in the room, which is the austerity program initiated by Osborne and the coalition in the context of bankers robbing their clients, many of whom are regular taxpayers, and getting away with it while awarding themselves bonuses in the process.  Starkey thought it important that no one broke into the banks or government buildings.  While this is of some importance, his slant on it was completely improbable, suggesting that it showed that general discontent about social inequality was not a root cause of the rioting but simple criminality and a desire to acquire consumer goods.

Criminality was the abiding message of Cameron’s response to the rioting as well.  While there was a good deal of criminal behavior involved, and hundreds of people have been arrested and charged, the implicit context which is being presupposed in this simple characterization fails to distinguish the looting  that has taken place during the past few days and professional criminality.

Polly Toynbee, like Kunzru, provided an excellent counter argument to the bankrupt mainstream characterizations that have filled the airwaves (Moral outrage at rioters fixes nothing: the only remedies are liberal). She argues that the only realistic solution that will work, in the long term, is a liberal social approach that takes into account the deep causes of the malaise that has been evident on the streets of the UK in the past week and a half.  She is only one of many to point out that consequences of the austerity cuts, leading to removal of the EMA and social council cuts are one of the real causes of the social unrest.

These are only the most recent clash of comments devoted to the social problems and its evident repercussions that have been aired.  Osborne claims general support for his austerity program, but this support is largely from those who benefit from this program.  He is certainly losing support from anyone who can disentangle themselves from the ideological framework, neoclassical economic theory, that informs his stance.  Unfortunately, I must defer comments on this issue to another time.

George Osborne’s statement to the House on the global economy, 11 August 2011 August 11, 2011

Posted by larry in economics, social policy.
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Osborne has just finished his statement to the House on the state of the global economy and the UK’s position within it.  Fundamentally, his argument rested on five pinions.  One was that no one, such as any other government, would ever lend money to a government that had abandoned its commitment to deficit reduction.  A second was that Obama has just put forward a deficit reduction proposal that was in essential respects like his own.  A third was that an abandonment of deficit reduction would lead to unsustainable interest rate rises, not just in the general markets but also with respect to UK gilt bond issues.  The fourth was that every other responsible government, particularly in the EU (meaning Germany and France) agreed that his approach was the right one.  The fifth was that the rating agencies had removed the UK from their negative watch and that the US had been downgraded.

Balls’ riposte was not really very good.  He did not seem to have command of his material and failed to make telling points.  This might have led Osborne to say later on during the question time, more than once, that should Balls bring the Labour plan for dealing with the financial crisis to a G20 meeting, without saying what Balls’ plan was, he would be “laughed out of the meeting”.

Osborne’s justification rested on that fact of others following his lead, especially Obama and financial EU leaders (such as Trichet though Trichet’s name was not mentioned), and invoking the household analogy of government fiscal responsibility, though households were mentioned only once.  Osborne claimed that he was “ahead of the curve”, and that the primary reason the US was having difficulties was due to it being behind the curve, though trying to catch up to him.  Osborne’s reliance on the attitudes of the rating agencies was undermined by himself later on in response to a question about the influence of the rating agencies.  He initially set out what he saw as the sensible function of such agencies and then told the questioner how he and others within the EU were in the process of setting out some kind of framework for “regulating” these agencies, not seeming to appreciate that this very activity indicated a degree of serious dissatisfaction in the EU with the ways in which the rating agencies have been acting.

Part of Balls’ problem in responding to Osborne is that his ideas of how to deal with the financial crisis are almost as flawed as Osborne’s.  He also believes in deficit reduction of a sort not much different from that of Osborne.  While he would place a greater emphasis on job creation, he does not seem to have any good ideas on how these might be created.  Osborne explicitly rejected any role for government in such job creation, thus implicitly repudiating the Roosevelt experiment of the thirties.  Balls, in his riposte, set out no alternative scenario, even in outline.

Osborne’s statement occasioned no surprise, as his position has not altered at all.  The only significant change was an improvement in the confidence exuded in his style of presentation.  One could perhaps put it as a triumph of style over substance; but this would be misleading.  There was substance albeit substance unsubstantiated by empirical data other than stating that other government and those advising these governments agreed with his stance.  For evidentiary purposes, such “data” is notoriously weak. Yet it seemed to be virtually all he had to offer.  And none of them were evidentially worth the emphasis he placed on them, functioning as they did solely for rhetorical/propagandistic purposes.

You can read Osborne’s entire statement here: http://www.hm-treasury.gov.uk/statement_chx_110811.htm .  Unfortunately, I do not have Balls’ statement and it is not on his web site.

MTA = Poverty Trap: It IS happening to you August 10, 2011

Posted by larry in economics, social policy.
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You may notice that they get the lyrics wrong toward the end, noticed by Nick Reynolds, confusing poor Charlie with the politician, George O’Brien. The electronic card used for the MTA (now the MBTA) is called a CharlieCard, so embedded in Boston cultural consciousness is the song.

It is not far-fetched to consider the subway fare increase to be analogous to Osborne’s and others’ austerity programs.  In the song, Charlie is trapped in such a way that he is unable to help himself, not unlike, I would argue, the situation facing many stuck in poverty, even in so-called advanced industrial democracies.  As an adjunct to the song, readers should avail themselves of the extract that Barbara Ehrenreich has provided of the Afterword in the new edition of her book, Nickel and Dimed (August 2011).  You can find it here: http://www.guar dian.co.uk/commentisfree/cifamerica/2011/aug/10/america-poverty-criminalised.

Another apt quote by Ehrenreich relevant to our times is this: “[M]odern welfare states, inadequate as they may be, are in no small part the product of war — that is, of governments’ attempts to appease soldiers and their families.” — Blood Rites

Bill Mitchell on destructive economic myths February 10, 2011

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Mitchell comments on a piece by Richard Rahn of the right-wing Cato Institute – Mitchell views Cato as “dangerously right-wing” and so do I.  He takes apart Rahn’s argument piece by piece.  It is a tour de force.  Here is the link should you wish to read further.



Data Analysis & Interpretation and the emergency budget July 1, 2010

Posted by larry in budget, economics, Institute for Fiscal Studies, Osborne, social policy.
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It has been common currency among a certain group of philosophers and scientific analysts that data do not “speak for themselves”, as it were.  This means specifically that data, in order to be meaningful, must be interpreted.  So much is obvious.  But there is another aspect to this perspective.  And this is that data must be collected under an interpretation.  Unguided by any interpretive framework, collected data has as much utility as an unordered list of telephone numbers.

Before any data is collected, you have to know what you are going to collect and for what purposes.  Otherwise, what you will end up with will be worthless.  So, before you begin, you need to know the kind of information you wish to collect and the sorts of things it might tell you.  That is, you introduce an interpretive framework, with its attendant assumptions, into the data collection process.  The assumptions of the interpretive framework underlying the data collection process are often not spelled out explicitly.  Nevertheless, they are present, and they influence both collection and analysis.

Before the data are collected, you need to have set out your program of analysis.  That is, you ought to have a very good idea of what analytical procedures you are going to use before you see the data.  This is to avoid any contaminating influence that might be brought about by the data on the investigator’s interpretation and analysis.

Once the data is collected, a detailed and extended version of the initial interpretive framework needs to be employed in order to assess what the data “say”.  Although an interpretation may appear to be quite straightforward, this is not usually the case for economic data.  Such data invariably carry political implications and these need to be made explicit.  A lack of transparency here can suggest a nonexistent degree of objectivity of analysis and interpretation.

Channel 4 news does not always appear to appreciate either this distinction or its two prongs.  Every time the channel introduces some analysis or comment, for instance, by the Institute for Fiscal Studies or its director, Robert Chote – if you didn’t know better, you might think that no one else worked for this organization – accompanied by a hyperbolic introduction, such as the “highly regarded” …, as if interviewing the institute itself were not encomium enough. (Although in so doing, the channel may be seeking to preempt criticisms of bias on its part, this is not the most salubrious way to exhibit lack of bias, which is impossible anyway.)

Such introductions give the impression that the analysis which is being presented is the most objective that it is possible to obtain (I will touch upon on the notion of objectivity another time – let me only say here that the notion of objectivity itself is the product of a long social and cultural history and is itself part of a set of ‘subjective’ interpretative frameworks.).  That is, the impression is given that the analysis is independent of any controversial interpretations and that the analysis follows relatively straightforwardly from the data set itself.  Such an impression is quite misleading.  Not only can a single data set yield differing and incompatible interpretations, it can lead in economics to the promulgation of social policies that are massively differentially detrimental to different social groups that the empirical evidence does not really justify.  This is no small matter.

Sometimes, the assumptions within the data collection framework are essential for understanding any assessment of the data collected.  Let me take the homelessness figures once produced by the Thatcher government.  The government wanted to show that as a consequence of their economic policies that homelessness had been reduced.  The data they showed seemed to reflect this.  It was only when it was noted how “homelessness” had been (re)defined that the real significance of the data became clear.  Not only had homelessness not been reduced, it had increased.  How did the Thatcher government manage this sleight of hand?  By redefining the nature of homelessness.  In their new definition of homelessness, anyone living in a box that did not move location for at least a week was viewed as having a home.  I.e., they were not homeless.  Anyone not aware of this new definition would assume that the data showed that the number that were homeless had been reduced and that this reduction had been brought about, as stated or implied, by innovative economic initiatives.  Of course, nothing was further from the truth.

Such alterations have occurred when the FBI has published its crime figures.  By altering the definitions of what constitutes a particular crime, the figures can be made to show that the crimes in question have either increased or decreased in a given year, independently of the events themselves.  Altering definitions in this way is not inherently dishonest, so long as the given alteration is transparent.

Something similar seems to be happening in the emergency budget.  Osborne has contended that the poor are not worse off as a consequence of his budget, but in order to assess this, we need to see what assumptions guided the selection of the data sets he used and the manner in which he analyzed them.  We need him to be more transparent than he has been so far. None of this is trivial.  And the fact that others appear to agree with his stringent budget cuts is not a valid justification of his claim that he is right and his detractors wrong.  They could all be wrong.  What is needed is an overarching framework, independent of the ones Osborne has utilized, which can be applied to the data that has been gathered and which can confirm or disconfirm the relevance of the data used and/or the analysis employed.  Blanchflower, among others, has said that he intends to do just this.

(For a deep and enlightening discussion of the complex relations between theory and data, consult Patrick Suppes’ “Models of Data“.)

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