The Eco-Nomics of Eco-Activism

Have you ever noticed that the prefix, Eco, in Eco-Activism is the same as the prefix in Eco-Nomics. “Duh!”, you are probably saying, "but the Eco in Eco-Activism actually stands for Ecology. "

Well, economy and ecology are very similar words. The origins of the two words stem from the Greek words oikonomia for economy and from oikologia for ecology. The “nomia” in “oikonomia,” for economy, means management. The “logia” in “oikologia,” for ecology, means “the study of.”

The common Greek root word, or prefix, in both economy and ecology is “Oikos,” which means household or dwelling place. Thus, economy translates literally into “household management” and ecology translates literally into the study of houses, dwelling places or habitation. In Ecology we try and understand the household and in economics we attempt to manage it. However, the focuses of the two fields of study differ dramatically.

In Ecology, the dwelling place we are studying is the entire planet Earth. Ecology is a study of the whole system, called the biosphere, and attempts to study how different physical systems in the biosphere interact with each other. There are plant, animal, fungi and microbe kingdoms. These kingdoms exist in oceans, on land and in the soil, and in the atmosphere. Then there are various cycles that are studied in Ecology that track the movement of various Elements through the different kingdoms and systems in the process of living and breathing organism as they go through life from birth to death to decay. One such cycle is the carbon cycle that studies how carbon recycles through the entire system from plants to animals to soil and the atmosphere. Other important cycles studied by ecologists are the nitrogen and the sulfur cycles which study similar interactions between Earth systems including plants, animals, soil, oceans and atmospheres. All of these systems are contained in the biosphere that contains the entire cycle of life on our planet Earth and for the most part have been relatively stable over thousands of years.

Economics, which is the study of “household management,” has a much more narrow focus than ecology. Economics focuses on the human household and doesn’t account for how the human households interact with other life-forms on the planet.

Economics is split into two distinct fields, micro and macroeconomics. Microeconomics focuses on individual households and firms and their interactions in marketplaces. Microeconomics focuses on the choices households and firms make in markets. This is where we find the demand and supply curves describing different markets.

Macroeconomics studies our entire economy when all households and firms in the economy are added together. When looking at all the firms and households as they interact with each other in Markets, we can get snapshot views of the entire economy. This can tell us the size and the health of the economy through its size, which is measured by Gross Domestic Product (GDP). GDP can be measured in a number of different ways.
First, it can be measured by the total revenue of all firms. Firms produce goods and services to be sold in the market for which they receive Revenue. The total revenue all firms receive is equal to GDP. Second, GDP can be measured by total household spending. Household purchase the goods and services produced by firms by spending in the market for goods and service.. Total household spending is equal to total revenue received by firms and is also equal to GDP. In economics we always balance our accounts and total spending by households has to equal total Revenue of firms. Likewise, in the market for the factors of production. The Factors of production are Land, labor and Capital. Households supply land, labor and Capital to be sold in the market for the factors of production. Households receive Income from this market. And so we come to the third way to measure GDP which is that total household income also equals GDP. Firms purchase the land, labor and capital from the market for factors of production and pay wages, rent and interest for each of these factors. The fourth measure for GDP is through adding the total wages, rent and interest paid by firms in the market for factors of production which also must equal GDP. Total household income is comprised of all wages, rent and interest received from firms and thus the two measures must be equal.

This picture of the economy is self-contained. By balancing all the accounts it appears that it is sustainable and can go on forever as the flow of goods and services and the flow of dollars circulate between households and firms and the market for Goods and Services and the factors of production. The place for ecology in this snapshot view of the economy is off in the corner in the factors of production where it is represented by an endless supply of Land or resources.

The way economists manage the entire household represented by the entire human economy is by making it grow. All this is fine and dandy as long the economy remains small in comparison to the entire household or dwelling place for all of Earth’s inhabitants. But when the economy increases in scale or size, it eventually starts having an impact on the ecology, or the larger household called the planet. Eventually, the size of the human economy begins to have dramatic impacts on the systems studied in ecology, such as the carbon cycle, and on other plants and animals.

If we wish to grow the economy, we have to use more resources. We are presently in the midst of a recession. Unemployment hovers around 10% and most forecasts don’t predict significant improvements in the unemployment rate this year and perhaps not until beyond 2011.

To grow an economy we have to increase GDP. Increasing GDP means more jobs for people and greater incomes. Many things can increase GDP including cleaning up after an environmental disaster such as Chernobyl, Bhopal or Exxon Valdez oil spill. The ironic thing about keeping our economy healthy is that the current crisis that we are experiencing from the large oil spill in the Gulf of Mexico caused by the explosion of an off-shore British Petroleum drilling site, will actually increase the size of the GDP. Cleaning up environmental messes produces jobs and puts people to work.

To put more people to work, we have to create goods and services to trade in marketplaces and this is impossible to do without using more resources or factors of production. We will need more coal, minerals, food, fossil fuels, etc. And from the increased use of these resources, in addition to producing more goods and services, we will produce more pollution, or what we call negative externalities in economics. These pollutants include greenhouse gases such as CO2. Thus the economy has a significant effect on the carbon cycle in the biosphere. As our economy grows we also destroy more habitat contributing to the disturbing increase in extinction rates we are currently facing on the home or dwelling place we call Earth.

Eco-activism pits environmentalists against economists. The dilemma we face is the tradeoff we make as a society between protecting the environment and growing the economy. Our economy requires us to use resources as a factor of production, so we need to manage the use of these resources in a more sustainable way

Sometimes we hear economists and politicians refer to the “Green” economy as an alternative to the traditional economy. The hypothetical green economy will produce less negative externalities, or pollution, and proposes a solution for how can we grow our economy without producing more carbon that contributes to greenhouse gases causing climate change or global warming. The only means for doing this is to use less fossil fuel. One way is to make our economy more efficient. We need to produce more goods and services using less factors of production, specifically fossil fuels. We could have a fleet of vehicles with higher mpg, more mass transportation and less use of personal vehicles, better insulated houses, etc. However, Hybrid and electric vehicles come with batteries made with heavy metal pollutants such as lead and mercury and will need to be recharged on the electric grid requiring the use of more coal to power our electrical power plants. For our electrical power-plants we can find substitutes for coal or fossil fuels that don’t produce carbon such as nuclear, wind and solar. However, each of these substitutes comes with a new set of pollutants that, in some cases, such as nuclear, may be even more harmful than the production of CO2.

What this shows us is that even a “green” economy doesn’t necessarily remove us from the tradeoff between protecting the environment and growing the economy. One of the most perplexing problems we face in the world today is how do we continue with our present lifestyles while allowing more people to join the standards of livings that are common in affluent developed countries around the world, such as the United States, how we can do this while protecting our environment from more harm.

An honest economist would tell you that we cannot, that we need a new model for “household management.” There is a tradition of this in economics. Economics used to be referred to as the dismal science, because Thomas Malthus and David Ricardo proposed such concepts as the law of diminishing returns and studied population growth in relation to a fixed set of resources. Malthus and Ricardo were answering social utopians of their day who proposed that human society could live in harmony with each other without all the poverty that existed in the world at the time. What Malthus and Ricardo did not predict or understand was the ability of the economy to grow.

The question we need to ask now is how much further can the economy grow and how much impact can the biosphere take in regard to the various cycles affected by the growing human economy. I think most of us know intuitively that we are near the limits of this growth.

Most economists today, however, are not in the tradition of Malthus and Ricardo. Instead, they believe in the Utopian vision of modern economics represented by the self-contained and sustainable system found in economic theory that demonstrates a healthy economy. Unemployment? No problem, grow the economy. There is debate for how we should grow economy among economists (should we increase government spending, or cut taxes? print more money or raise interest rates?).

A requirement for Eco-Activism should be to understand not only Ecology or the study of our dwelling place planet Earth, but also economics and household management. But, this also means expanding economics narrow focus of the human economy into a wider focus of the human economy in relation to all other living systems in the biosphere.

Save for Retirement? ahh shit

I'm not that good with money. I can be impulsive even. Sometimes I might as well just throw it away. My relationship with money has never been one of reverence. What's a dollar. Spend it on pleasure or to avoid pain. Fuck! you get much deeper into thinking about it and you might as well just call it quits. Money, Money, Money... I won’t bore you with all the details and instead will concentrate on my portion of the household income. My wife works too. She makes a bit more than I do. We keep our finances separate, but share household expenses. Anyway…

I make approximately $50K per year. I have approximately $62,000 in total debt from student loans. I contribute $1,100 per month toward the mortgage payment and other household expenses. I put $400 per month into deferred compensation for retirement. I’m 45 years old. I don’t presently have a car payment and I don’t have any credit card debt.

I am required to make payments for approximately $450 per month toward my student loan debt. I have limited misc expenses; mostly gas, gardening, a clothing budget, dogfood, entertainment, and other expenses. Let’s say I spend approximately $250 toward such personal misc. expenses.

My net paycheck each month, after deductions including deferred compensation is approximately $2300 per month. Minus $1,100 mortgage/household leaves $1200. Minus $450 leaves $850. Minus $250 leaves $600. $250 for personal expenses is very conservative, but let’s stick with it. Now, I want to pay off my student loans faster. $450 per month will pay the loans off in 30 years, approximately (I think I have been paying for approximately 3-4 years, so actually its about 27 more years). I’d like to take all $600 and put it toward my student loan debt. This would pay off all my student loan debt in under 10 years. But, I need to put some money into savings for an emergency. Plus, I’ll need to get a car some day. Plus, my son goes to a private school and each August we have to pay tuition for approximately $10,000 dollars. Any savings I have helps towards this payment. Once I get my student loans paid off that’s an extra $450 dollars per month. If my salary keeps going up on schedule, in 15 years or so I should be making a bit more money and taking home an extra $500 or so a month.

I think about this a lot. I keep track of my budget. I have begun making extra payments toward my student loans. My goal is to pay off the entire amount before I am 55. Then I can really begin to save for retirement. But my son is 8. He’ll be 18 then and getting ready for college. More debt. Damn, what is this all about?

I keep thinking I’ll be able to not work someday and really begin to live. Put more time in the garden and take more vacations. Go camping and hiking in the woods. I’ll have so much fun once I get my shit together and by shit I mean once my finances are in order. Fuckin’ A, this is really all bs. Who the hell am I foolin? . What kind of life is this? Pleasure and suffering. There is no escape, man – just pleasure and suffering and getting absolutely no where. There are no special insights. There is no understanding. Age reveals little if you walk the path laid out to us by those who pave the way. None of it makes any sense. Work until you die. Your money means nothing. Pretty sure this means they own us. Pretty sure this is some form of slavery. Pretty sure nothing much has changed. Pretty sure happiness is not related to paying all the bills, because they will never all be paid and if they are, somehow this won’t lead to fulfillment either.

What is the choice? There is no choice but acceptance and there is no way to persevere but to endure.

Ecological Economics

Although there are other alternatives to neoclassical economic, it is hard not to talk about the economy without referring to this model in some form or another. Understanding neoclassical economics is important for gaining insight into our current financial crisis to understand how markets operate. Neoclassical economics offers a very simple and elegant model for understanding markets. As I've indicated before, the problemwith neoclassical economics is believing these models are natural systems or laws that provide us guidance into how our economic system must be run. I want to talk about neoclassical economics to give some insight into our economic system and why we are in a crisis and what restructuring has to take place if we are going to put ourselves on a sustainable path. But first I want to talk about some alternatives to neoclassical economics.

There have been many proposed alternatives to neoclassical economics. Critics of neoclassical economics often criticize from these alternative positions. Marxists are the most well-known example. My contention is that Marxists and neoclassical economists suffer from the same affliction. They are both based upon scientific thought and what economics needs more than anything is an ethic that goes beyond objective valuation – which is the key ingredient for and economics school of thought to be labeled scientific. One of the latest alternative schools of thought to neoclassical economics is ecological economics and two of its founders and leaders are Herman Daly and Robert Costanza.

According to Herman Daly, Ecological Economics “seeks to ground economic thinking in the dual realities and constraints of our biophysical and moral environments” while promoting “truly transdisciplinary research in which practitioners accept that disciplinary boundaries are academic constructs irrelevant outside of the university.” With Robert Costanza and others, Daly has launched this bold new discipline seeking to displace the standard economic theory known as neoclassical economics. Although well-intentioned, Daly and Costanza are only the latest in a long line of academics attempting to make economics a more exact science.

Costanza’s contention that economists versed in the natural sciences would have a greater appreciation of the biosphere is correct, but ecologists should be wary about versing themselves in the seductive jargon of neoclassical economics which treats the biosphere as a commodity. Costanza’s 1997 $33 trillion estimate of the values of environmental services is one example of the folly of linking ecology with economics.

In the history of economics there have been many attempts at creating a theory that is rational and objective emulating the standards set in the natural sciences. Philip Mirowski has thoroughly documented these attempts and trends in his two seminal works More Heat than Light and Machine Dreams: Economics Becomes a Cyborg Science. Mirowski describes three waves of immigrants from the natural sciences during the 200 year history of economics. The first wave occurred during the mechanistic era of physics from 1870 to the turn of the century. The second phase of immigrants occurred during the operation management era of the cold war. The final phase is happening right now and is characterized under the heading of inter- or trans-disciplinary studies. Mirowski says in Machine Dreams:

The ubiquitous contraction of physics and the continuing expansion of molecular
biology has not only caused sharp redirections in careers, but also redirection
of cultural images of what it means to be a successful science of epochal
import. In many ways, the rise of the cyborg sciences is yet another
manifestation of these mundane considerations of funding and support;
interdisciplinary research has become more akin to a necessary condition of
survival in our brave new world than merely the province of a few dilettantes or
renaissance men; and the transformations of economic concepts…is as much an
artifact of a newer generation of physicists, engineers, and other natural
scientists coming to terms with the traditions established by a previous
generation of scientific interlopers dating from the depression and World War
II, as it is an entirely new direction in intellectual discourse.”

Ecological economics is part of the latest interdisciplinary push that has united the natural sciences and economics within the confines and constructs of neoclassical economics. Daly demonstrates his devotion to the “scientific method” as the only means for reforming neoclassical economics by offering objective valuation criteria for our resources at the expense of all other intellectual pursuits with his admonishment to other thinkers using alternative methods to “keep silent.” He states in his Ecological Economics textbook:

“…many members of the intelligentsia deny either nondeterminism, nonnihilism, or
both, yet they engage in a policy dialogue. It is not just that we
disagree on exactly what our alternatives are in particular instances, or about
what our value criterion implies for a concrete case—that’s part of reasonable
dialogue. The point is that determinists who deny the effective existence
of alternatives, and nihilists or relativists who deny the existence of a value
criterion beyond the level of subjective personal tastes, have no logical basis
for engaging in policy dialogue—and yet they do! We cordially and
respectfully invite them to remember and reflect deeply upon their option to
remain silent—at least about policy.”

Even if you agree with Daly that we should do more to protect our resources and opt out of a consumerist and materialist culture, he wishes for you to remain silent if you are unable to adhere to a nondeterminist program for discovering real and objective valuation criteria. Daly, like most scientists, believes we cannot act until we frame our arguments within objective, scientific rhetoric. It is as if we cannot trust our senses and argue for the nonproliferation of nuclear armaments, the reduction of CO2 emissions and the preservation of our air, water and wilderness areas because we just think (or God help us, believe) that this is the best course for the future of humanity. If we cannot come up with a reasonable valuation criterion demonstrating irrefutably that clean water is better than a high GDP and job growth, we should remove ourselves from the discussion. If we cannot play the economist game then Daly wishes we would all just shut up—respectfully, of course.

The determinists and nihilists Daly is referring to are the poets, novelists, artists, philosophers, and others in our society creating a culture valuing aesthetic beauty, peace, clean air, wilderness, and solitude over a consumer and materialist culture. Many of these individuals value inter-subjective agreement over discovering an objective valuation measure existing in its own right.
Daly has a strong attachment to the theology of “universal truth” and feels economics is tainted by its devotion to determinist Darwinism, which believes that historical contingencies play a greater role in the evolution of human society than the ultimate design by some universal entity. He misplaces the faults in neoclassical thinking by noting that this leads one to believe that “the natural world is just a pile of instrumental accidental stuff to be used up in the arbitrary projects of a purposeless species.”

A belief in ultimate ends does not guarantee one will also hold a belief in the importance of the stewardship over our environmental resources. Perhaps believing in a creator of this Earth will help one develop an environmental ethic and perhaps not. Regardless, Daly’s diatribe against determinists and nihilists needlessly isolates allies in a liberal agenda for preserving our planet from the excesses of modern consumerist culture.

One can believe that there is no purpose to human existence and still advocate a future for protecting the environment over a future of material gain and a buying culture. Environmental destruction and an accelerated pace towards extinction for the human race is as likely a future as one promoting stewardship and solving the many large environmental catastrophes currently facing us. The only way to ensure the latter choice is by changing culture through persuasive argument and convincing the majority of humans on our planet that a culture promoting wanton destruction of our planet in order to support a materialistic culture for a minority of inhabitants will lead to misery for the rest of us. I believe a search for an “ultimate truth” revealing the “real value” of our environmental resources is a fruitless and ultimately wasteful endeavor.

The problem with Daly and most ecological economists is not that they don’t feel strongly about the need to change the direction of our economy through reforming how economists think about valuation. The problem is they think, like scientists about truth, that a valuation criterion still exists out there in the real world somewhere and the economist’s job is to discover what this objective measure is and where it is at. In addition, ecological economists follow the example of others in scientific circles believing truth is discovered and not made through inter-subjective agreement among humans. This is a problem because, instead of using all means of persuasion available for changing culture around the world from aims toward consumerism and rising GDPs to one promoting an ethic of stewardship, ecological economists wish to replace neoclassical economics as the only game in town by discovering the one and only ultimate end which they propose falls under the rubric called ecological economics.

We would be better served if we realized price is a human creation but value is unknowable. Value defies scientific thought and is impossible to model accurately no matter what economic system we create. We need to rely on ethics and morality as the means for valuing natural resources. Accounting for them in a national accounting system will never provide the protections we need for the world we live in. Such an accounting system may have some desirable effects, but it is bound to have flaws which can be exploited by savvy entrepreneurs in search of profits.

What we should be striving for is not an amalgamation of economics with ecology, but rather the reduction of the role economists play in policy making and a greater emphasis upon the role ecologists, artists, novelist, poets and communities make in policy decisions. Both ecologists and economists need to open up their ears to the opinions and arguments of all members of the human race, rather than beseeching some to “remain silent.”

What is economics

So far, my posts on economics have been fairly general if not lame. I have been trying to come up with an approach to talking about the economy that is unique or that would provide insight into its workings that are not available elsewhere. During the current economic crisis there are many cogent examples of intelligent analysis that one can turn to for insight. Paul Krugman, James K. Gailbraith, Amartya Sen, and Joseph Stiglitz are a few of many people I turn to for wisdom regarding the global financial system and the roots of the current crisis as well as proposed solutions. I agree with much of their analysis.

But, it is also true, that I disagree fundamentally with each of these economists in regard to their approach to their field. Economists are trained to do a particular analytical type of analysis that has a heavy reliance upon statistics and mathematics. There is nothing wrong with turning to statistics (or econometrics) or mathematics when doing economic analysis and looking for some insights into how economies function. However, over the last 60 years, as econometrics and neoclassical economics—with heavy reliance upon mathematical analysis and modeling—have increased in importance, economic analysis relying upon rhetoric and storytelling has been shunted aside and the field of economics has become increasingly hermetic and unintelligible to the average person.

My goal is to tell a story about economics that brings this trend toward mathematics into sharp focus, but does not veer away from the ultimate story about what the economy does and how it allows us to live in the world. To do this we have to start from the beginning and describe what economics is.

When I was a graduate student in economics, I taught an introductory level undergraduate course in economics. On the first day of class, I asked all my students to define what economics was. There were as many definitions as there were students. Most of the definitions said something about money. After going through my students answers I told them that Economics is the study of the economy, which begs the question, “what is the economy?”

Lets begin with the standard neoclassical definition of Economics. Lionel Robbins provides the modern definition of economics as “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses.” This differs markedly from Alfred Marshalls turn of the century definition that states economics as “a study of mankind in the ordinary business of life.” Marshalls definition is much more general and allows much more to fall under the rubric of economics and what it is that economists study. Marshal elaborates further to say that economics “examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on one side a study of wealth; and on the other, and more important side, a part of the study of man.”

What Marshall was one of the fathers of welfare economics and Robbins did not think economics should be concerned with concepts that were not measurable. Thus, Robbins became the father of a more rigorous economics that tried to study only what was measurable. The influence of Marshall and Robbins was enormous among modern economics known as neoclassical. However, in Marshalls time there were still economists, such as Thorstein Veblen, who relied upon rhetorical analysis and focused on the “more important side, a part of the study of man.” Robbins definition refined Marshalls Welfare analysis, which created supply and demand curves with the Lagrangian equations behind them, and cast aside all analysis from economics that could not be appropriately measured.

Robbins definition of economics as “the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses,” restricts the study of human behavior to relationships. These relationships are all measured using price as the common metric. The given ends are what is produced for consumption and the means are the resources we use to produce them. The alternative uses refer to the choices we make for both production and consumption. All of this is captured inside of equations describing relationships between ends and means with price as the common metric tying them together. Price is the quantity of money, so we can see how the influence of money to the study of economics became the dominating focus of economics until it becomes difficult to think of the economy without thinking of money.

We compare products and make choices based upon price and the amount of money we have. When the price of a product goes up, we demand less of that product, ceteris paribus. When price goes up, producers also wish to produce more to that product, ceteris paribus. The result of all this economic analysis is the false impression that we can measure and predict our choices. No other social sciences come close to economics lofty ambitions for predicting human behavior, although many, such as psychology, are trying very high. Because of this, economics is often referred to as the queen of the social sciences and is said to be closer to a science than all other social sciences – even offering a yearly Nobel prize to economists for their contributions to the science.

I want to go back to describing the economy using rhetoric and focus more on the study of humanity by observation and not necessarily by measurement and relationships. Rhetoric is often called the art of persuasion and many people think it is inferior to science or mathematics because it does not reveal a truth or essence, but rather is capable of tricking or fooling someone into believing a false conclusion. Although it is true that some one may be able to lead a person to the wrong conclusion, rhetoric also requires one to make a compelling argument and allows the reader to come to their own conclusions based upon the evidence provided from the author.

In rhetorical economics, the author (me) is not trying to prove an economic insight or accurately predict the future. It the author could do either of these things he most assuredly would. However, the author believes that neoclassical economics with its overreliance upon mathematics and econometrics is also engaged in rhetoric. Neoclassical rhetoric operates under a false rubric that defines itself as science and claims to be offering proofs instead of evidence.
But, the main drawback of neoclassical economics is that it has become a field in which only a few are baptized and allowed the keys for understanding and then truths are revealed from the high priests above in which we all are supposed to accept without question. If Economics is a part of the study of humanity we should all be able to engage in this discussion.

Economics: Crisis

First of all, I just want to say, I predicted this current financial crisis a long time ago. I have been saying it for years. Everyone who knows me personally as heard me say it is all a house of cards and one day it will all come down. I said it would inevitably happen, the only question was when. So, is this it?

Has the house of cards finally fell? Yes and no.

What I was saying was two things. On the one hand I said that the US could not continue to mount a debt and have other countries finance it. Eventually, those holding the debt would come calling. It was no secret that U.S. households as well as the U.S. government were living beyond its means. The only thing of value that the US exported to the rest of the world was its military might and why would countries continue to finance our bullying around the world.

So, I said that house of cards would fall soon and this is what appears to be underway right now. I thought it would come sooner, but with each passing year as the debt mounted and the cards stacked higher, I predicted the crisis would be that much greater. I was Chicken Little. I told those that listened that eventually our troops would be stranded in Iraq, because we would be too broke to bring them home. Hmm… I am certainly a nutjob at times. But, my point was still that we could not continue on the pace we were going at. What is troubling is that Obama’s plan to get us out of this mess is still too much of the same thing that got us into this mess. While the debt mounted, the wealth distribution in this country was increasingly being divided between the haves and have-nots. Under Obama’s plan this will continue. The consolidation of wealth and power has never been in so few hands and the ones in the Obama administration writing the plans to get us out of the present financial crisis are the ones who got us into trouble in the first place.

In a way it can’t be any other way. I always said that to get where he is, Obama had to shake hands with a lot of dirty players. The financial sector paid for Obama’s campaign by and large and the deal that was cut was that they would be in charge of certain operations, one of them being any bail-outs or regulations of the finance industry. What else do people make these large donations for, but to further their own interests? Obama’s hands are tied.

But, that does not mean he can’t or won’t do something to make life better for those who actually voted for him, if not the ones who paid his way. Its just that his options are limited.

But, there is another way that our economy was doomed that is much more fundamental and structural than the finance industry and the fact that there were risky investments made by large financial institutions with unregulated derivatives and hedge funds that would some day crash just as every other bubble has done before it. Even if we can get out from under this financial crash, we are still up against another wall or limit. The other crisis I was always warning of to anyone who would listen were limits to growth. Something here would eventually give as well. We could not grow our economy forever. Sooner or later we would come up to a limit that had nothing to do with wealth distributions and debtors/creditors. This limit was with out environment and ecology as well as our own technological limits. We would not be able to solve all our problems with technology, because each technological solution to an environmental problem creates a larger problem waiting down the road. In a way this is similar to the financial crisis where we have been offering temporary solutions time and time again over the last half century as we moved from one crisis to the next forestalling the next bigger crisis until we arrive at where we are today where the solution being offered is again only temporary.

With the ecological crisis (and I am not talking about climate change which is really a small and irrelevant problem compared to other environmental limits imo) we can grow no more without causing more hardship. There are no technological solutions. Human ingenuity has reached its environmental limits. The Earth just becomes too small to support our entire economy and we are forced to adjust through various measures including famine, death and disease until our present means of living and economy are long gone and we learn to once again live day to day with little surplus to carry over and barter with others. That day has not come, yet, but it still awaits us in the future. This present financial crisis says nothing about how close we are to the true economic crisis which will end our civilization as we know it. I’m not sure we can avoid it and if our reaction to this financial crisis is any indicator, we will almost certainly not. We will continue to march right up to our doom.

Introductory Economics: Foundations

Before I get into simplifying the economy for clarification purposes by talking about households, I think I should address something I brought up in my previous post on economics. I said that the reason I studied economics was to answer certain questions I had about the world. What were these questions?

My first questions were not necessarily economic questions. The questions I had in my mind as a young and impressionable undergraduate were philosophical ones. What is the meaning of life? Why is there injustice in the world? Who has power? What is democracy? Why is there war and hate in the world? What should I do with my life? With my limited experience and understanding of the world, the best answers I could come up with any for any of these questions had to do with money, as in the instruction – follow the money. In other words, my intuition told me that if I could understand how the economy worked, I would be much closer to having answers to all the above philosophical questions that plague many a young and inquisitive mind.

My first college economic course was taught by a raving free market economic lunatic who would later host a conservative economic blog that brought him national prominence. He was a fascinating teacher and he instilled in me the economic notion that people operate according to what is in their best interest. This is a basic assumption in economics. Assumptions are important to economic thought and theory. Most of the underlying assumptions for economics, such as people make decisions based upon what is in their best interest, are not only conceivable, but are not overly objectionable. The assumptions that are taught in introductory economics are important because they form the mathematical foundations of a theory that is taught in upper level and graduate economic courses. I will go into these assumptions in greater detail in another post. Suffice it to say that the final outcome of this assumption of individuals making decisions according to what is in their best interests is homo-economicus or economic man.
Economic theory postulates a society populated by economic man; an entire population of identical actors making decisions that will maximize each of their happiness and the result of this is a society that is the most well off. The fin de siècle economist and social critic, Thorstein Veblen, described these economic actors called homo-economicus as “homogeneous globules of desire.”

Some of this may be familiar to those of you who have suffered through the introductory economics course while you were an undergraduate student. The mere mention of introductory economic classes to most individuals can bring a sense of insecurity. I have often heard statements such as, “the only course that I got a C in was Intro to Econ,” or “I don’t remember much from the class except how incomprehensible it was.”

Introductory Economics provides the first exposure to concepts such as supply and demand curves, general equilibrium, consumer and producer surplus, price elasticity, gains from trade, comparative advantage, prisoner dilemmas, externalities, perfect competition and other economic concepts that can be a trying and forgetful experiences. However, what often sticks in peoples minds from these courses are certain counter intuitive concepts that were apparently proved to the young student using the economic model introduced in these classes; i.e., minimum wage actually will end up hurting young and poor wage earners, restrictions on trade are detrimental to economy, or that taxes from the government will undoubtedly lower the overall welfare in society. The actual details of the proof are lost to most of us, but the enthusiasm of the instructor who introduced these concepts to many people remains and are vehemently trotted out as absolute proofs daily around the blogosphere today.

As we are bombarded with news reports about the falling stock market, unemployment figures and bank failures, I don’t think an understanding of economic theory is necessarily going to help us understand exactly why our economy has failed this time around, because there are no simple answers and economic theory is a simplification of a very complex process. However, there is a very important reason for getting a handle on exactly what the economic theory says and that is the fact that we should know enough to know when economists are basing their opinions on a theory that is a simplification and the conclusions drawn from these theories are not always applicable or helpful when dealing with real world problems. A famous economist from the past, Joan Robinson, once said, “the purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.
Simplifying for the sake of understanding concepts is a very good thing, but we should also understand all the assumptions that underlie these models of simplification. The result of many people’s exposure to a limited set of neoclassical economic ideas is often fundamentalist maxims such as “government is awful and cannot do anything worthwhile,” “restrictions on trade are always bad for both importing nations and exporting nations,” and/or “raising the minimum wage will always lead to lowering the welfare of the least well off people in society.” People often believe they have discovered a Truth about the world after sitting through the introductory courses on economics and then want to go out and change the world to conform to the simple models they were introduced to in these classes often with the encouragement of professors or entire economic universities or think tanks espousing similar ideas at the expense of intellectual honesty.

Whenever you hear the cry from people or pundits that the we must have “free markets” or “lower taxes” or call any government program “socialist,” you can be sure that these people or pundits are informed by these simplified models in economics and are using them to their advantage. For there is one truth from economics that we can take away introductory economics that does provide light on individuals who describe themselves as “capitalists” and “free market activists” while calling those of us who criticize such fundamentalist beliefs “socialists.” These individuals are doing what we all do; they are operating according to what is in their own best interest because there is a hell of a lot of money at stake in the economy. I sometimes think we should all carry around certain moral assumptions when we are in possession of objective models that we are told provide us with scientific proof. Moral assumptions such as “power corrupts and absolute power corrupts absolutely,” and that wealth is the surest means for obtaining power, because there is nothing objective about those who ask for the freedom to do whatever they wish to do with their wealth regardless of the negative effects this may cause society. These people want money and power and they will do what ever it takes to obtain it and to hold on to it. This is the meaning and motivation behind many large and historical events we witness in the world that we place the label “evil” upon.

It looks like I will have to wait for households and a simplified model of economics for another day. Don’t worry, we will get to it. I’m not sure if will be the next post or one further down the line. Actually, I have no idea what the structure of format for all these posts on economics will look like. But, we will get to the nitty-gritty sooner of later.

Introduction to Economics

As the banks fail and our economy suffers, there are many who think the recession we now find ourselves in will be much worse than any previously for most of our previous histories. Most of us did not live through the Great Depression and this recession has a feel that is closer to a depression than any recession that we all have lived through. What happened?

In many ways it is not hard to explain. I have wondered for years when the house of cards would collapse. But, of course, the economy is much more complex than any simple explanation, but economists thrive upon simplifications. I was trained as an economist, so I will attempt to start with simple explanations.

First, I want to say that I hope to write a series of posts on the economy as an exercise for myself. I hope these posts can be of some benefit to others, but mostly I am trying to formulate thoughts that have been swimming around my mind since I was an undergrad trying to form into a coherent economic theory that I was convinced would explain much of what I experience in the world. I abandoned this pursuit while striving to complete a PhD in economics while in graduate school, partly because I had become disillusioned by the framework within which all PhD in economics are written. When it became obvious to me that my dissertation would not explain much about the anything I was experiencing in the world, I provoked a fight with my advisor that led eventually to me spending the last year of my grad school experience taking philosophy and mathematical courses while nixing economics as a field worthy of further investigation.

The framework in economics has been called the neoclassical theory of economics and usually demands statistical analysis of some segment in the economy with a large enough data set to make some sort of judgment on a particular sector or segment in the economy based upon the neoclassical theory. Although, some will argue that there are alternative theories to neoclassical economics that can be found in graduate programs under the heading of heterodox, these schools still have a neoclassical basis and are some variation of the neoclassical model. Even the behavioralists that have been getting much recent attention merely provoke minor criticisms of the rational actor called homo-economicus by study actual human behavior that demonstrate a more complex and varied human that underlies the assumptions of the neoclassical model. However, these variations in human behaviors have not produced a coherent of workable model for understanding the economy.

I never came up with a theory or model for economics that would have been a better alternative to the neoclassical model used in all university graduate programs in economics. If I could have developed an alternative theory to present for a dissertation it would have never been approved by a committee in my graduate university economics department nor would it have been accepted in any other economic department at any other university in the world. Because any alternative I could have come up with as an alternative to the neoclassical model would have been outside the scope of economics as it is studied in economic departments around the world today, although it may have begun to answer many of the economic questions I came to my graduate studies with.

This series of posts on the economy will be an attempt to work outside the boundaries of neoclassical theory and answer economic questions that I, and I hope others, have had for many years. It will stumble from topic to topic, but I hope, in the end, to have a coherent theory or explanation of our modern economic system and prescriptions for many of the ailments in our economy that have befallen us. And, if not, well…I suppose it will be still fun to try, although it may be painful for you to read. Also, bear in mind, that most of these posts will come unedited and will be the result of the free flow of thoughts as they leave my mind and make their way to my fingers upon the keyboard. The fruitful results, if any, may someday be formed into a more coherent whole. All right, lets begin.

Our economy collapsed or is in the process of collapsing, because we have become a nation of consumers purchasing from a very few select producers often referred to as the corporations. Wait, that is only part of the story (I warned you there were going to be some if not many simplifications). Actually, those suffering from the current collapse are consumers who no longer can afford to purchase from the producers and also large producers who can’t find consumers who will purchase what they produce. How did we get to this stage?

We have to begin by asking what an economy is and what we want an economy to do. An economy is a distribution mechanism. It distributes goods throughout society by some means. One of these means is a market where people come together to buy and sell these goods. Markets are efficient ways to distribute goods. Markets are also human inventions that operate according to rules written by humans. There is no such thing as a free market that operates outside of these written or agreed upon rules. Sometimes the rules are written to be favorable to some groups or individuals. Sometimes rules are written to exclude individuals from participating as either a consumer of producer in a market. Sometimes the reasons behind these types of rules are fair and sometimes they are not. The presence or absence of these rules has no bearing on whether a market is free or not, because, of course, there is no such thing as a free market. Markets would not exist unless they were invented by humans and these inventions require rules of participation and operations.

Sometimes individuals, groups or governments extract a price for participating in the market. There are an infinite variety of rules for the operation of a market and the market for some products requires a different set of rules than the market for other products. The first understanding or notion of an economy that we should begin with is the banishment of the idea that there exists anywhere in the world an entity that could be called a free market. Markets are not free, they are invented. And the people who invent them write the rules. Often the ones who have written these rules write them to benefit themselves. This is human nature and is at the core of understanding market economics. We are all motivated by self-interest, even those who have made the rules for the operation of certain markets.

Again, let’s begin with a simple example, the household. What does the household need from an economy? Lets save that for another post.

A New Kind of Power

There is a comfort in capitalism and knowing the motives of its participants. Adam Smith is famous for his metaphor of the invisible hand. He argued that if we all acted in our own best interests, then society's greater interests would be served as well. In capitalism, self-interests are described by the profit motive as each of us seeks to achieve the greatest profit. We have learned since the days of Adam Smith that although the economy works this way, in real life humans are motivated by a wide variety of factors of which self-interests and the profit motive play a small part.

In politics we can see the economic incentives playing out as corporate interests hedge their bets between parties and candidates, so they can receive the greatest benefit. Even if they know a candidate does not fully support the issues that benefit the donor's interests the most, they may still contribute to the candidates campaign so they may benefit from the candidates success in an election. In a strange way, this incentive gives us comfort knowing that corporations can still support candidates with interests that favor the majority and not the market, because they realize the people who vote are not in full support of their profit-driven agenda. Thus, we see the corporations and large donors filling the campaign vaults of the democratic candidates for the 2008 election in full knowledge that after eight years of the Bush administration, there is little chance the American people will choose another term for a Republican administration.

Although far from perfect, in some ways it is better than the alternative. Many people like to point out that economics and capitalism fail to portray the more beneficial aspects of human behavior. Any human that was only motivated by their own self-interest and strictly made decisions based on the profit motive would be institutionalized as a sociopath. Corporations, which legally are treated as individuals, are described as psychologically unstable and a danger to society because of its single-minded devotion to profits over all other motivations. However, human nature also has even a darker side than the profit seeking individual oblivious to the greater interests of humanity. The profit seeking corporation can be seen as standing in the way of power to these darker forces.

During Eric Prince's testimony to Congress he described himself as not interested in finances and anyone who knew him well could testify to this. Aside from the fact that as a man who comes from big money he never had to worry about finances, we can see that this also reveals a man who represents the darker forces of humanity. Eric Prince has never hedged his bets. He is from a wealthy family tied to other families of wealth who only support radical right wing neoconservative and radical Christian objectives. As an observer of American politics, Prince is not satisfied with the slow shift to the right resulting from corporations hedging their bets while prefering candidates that will put money in their pockets at the expense of the peoples. Prince sees a danger of a populace that will feel disenfranchised and will never be fully immersed in the Radical Christian ideology that sees the world in terms of good and evil.

Under Princes views there can be no hedging. We are in a war with the dark forces of the world represented primarily by the Muslim ideology. Previously, it was a war with the communist forces of Satan, but no matter, Satan frequently shapeshifts and can reveal himself under new guises depending on the times. There is no time to hedge your bets under Princes ideology and we must be prepared to meet the darker forces and battle these forces in the name of Good and fundamentalist Christianity. A military that is at the mercy of congress is a military that will never be fully prepared for this battle. I joked about this being the plot of a great science fiction novel, previously. I am not one to make predictions and I am humble enough to know that random events are much more influential to the forces of history than any other conditions. However, this trend towards the privatization of the military that has created a private military capable of overflowing the majority of governments in the world and that continues to grow, has the necessary ingredients for disastrous results.

There is a realization that we cannot keep funding the Iraqi war or even our bloated military forever. There are rivalries between the branches of the military over the funding of new weapons systems as well as the role each branch will play in the future battlefields across the board. We have heard concerns over the growing influence of radical Christians at focal positions in the Air Force and the Army. As these rivalries grew, it became obvious to some that the military needed restructuring. This restructuring has be done by neocons over the past eight years and has left the military power in new private hands with an ideology that is not represented by the majority of Americans.

Some may want to point out the forces on the left that have contributed strictly to liberal and democratic candidates such as Unions or Moveon.org. I concede that these forces used to be a counter force to the forces on the right devoting their financial contributions strictly to right-wing and republican candidates. But, these powers on the right now have there own military that should bring cause for concern to all. Can you imagine if a similar force was funded and led by the left. What ff George Soros started his own security firm and began to get contracts under the next Clinton Administration? What would the right wing be saying and how long would it be before he was tied to terrorism and the war broke out between Blackwater and Soros firm [See, it is a great plot]? A more likely scenario will be a General on the battle field voicing the concern that Blackwater has made American soldiers larger targets for insurgents. This General might also feel slighted by his diminsished pay compared to Blackwater employees. A back alley war between Blackwater and American forces might result through the withholding of intelligence, funding of insurgents, negligence of duty, etc. Then it is only a matter of time before this war spreads home.

Obviously, my imagination is too active and this is likely to play out over a longer period of time for us to notice this drift toward Tyranny in America we are presently in. But, as unsettling as many of the impacts of the Bush administration has been on Democracy in the US, the privatization of military services is the most concerning and should be the red flag to us all that the empire will soon turn its violent hand against the citizens on the mainland as these armies increasingly come rushing to aide in disaster relief and urban unrest that is likely to increase over the coming years. I think I might prefer the profit-motive to these darker forces on the horizon.

Krugman, Economies and the Next Civil War

When I was in graduate school pursuing a PhD in Economics, I was assigned to teach an Introductory Economics course for my assistantship requirements. I assigned my students twice-weekly readings of Paul Krugman's column in the New York Times editorial page. Of course, his column were political and I risked being accused of endorsing a Liberal agenda and swaying young minds, but Krugman was also an economist and his columns often gave a political perspective from an economic point of view. I was careful to focus in on the economic aspects of his columns and left the political portion open to discussion without criticizing or endorsing his opinions.

Upon leaving graduate school, the New York times began offering a paid service called Timeselect and Krugman's column was temporarily beyond my reach. I was ecstatic to learn the Timeselect was being cancelled a week ago and I could access Krugman's column and blog once more at the New York Times online page.

Krugman has a new book coming out with the same title as his blog "The Conscious of a Liberal." In the Introduction to his Blog, Krugman describes the growing inequities of income in the US. There is little doubt that the current disparities in income between the haves and the have-nots in our society - as well as around the globe - is troubling, to say the least. But Krugman appears to endorse a view that the recent trend, beginning with the Reagan administration, is a return to the previous days in America described as the Gilded age when robber barrens controlled the wealth of industry and had vast influence over political discourse in the US. Under this view, the depression era and post-war build-up of Government infrastructure supporting liberal agendas created an aberration in US history where wealth was distributed more equitably among the members of out society. This was the result of investment in public education, liberal legislation supporting unions and working families, and many other government programs and initiatives. Generally, I am in support of this view - but I also think it only tells part of the story leading to the solution of returning to more government run programs.

While income was distributed more evenly in American society during the great achievements of the post war liberal era, there was also a continuing migration from rural areas to urban and suburban areas as many Americans left income poor, yet self-reliant, households in rural America. This left vast rural areas in the control of large agricultural conglomerates with no ties to the people in these previously resilient communities.

These thriving rural communities may have been populated by households that were described as low income, but as my Grandma said of life on the farm, “We didn’t have no money, but we were never hungry.” The economies in these rural areas were kept aloft through the informal economy that could not be described with income. It can be better illuminated in the oownership records with many small farms owned by individuals with little income, still living pleasant and comfortable lives through their interconnected relationships and economic transactions with the community that were not pecuniary in nature. These transactions can be described as bartering, work-sharing, cooperatives, gifts and neighborliness. What makes the inequality in America today much more daunting than the inequality of the past is the reliance upon income over relationships amongst our neighbors.

In effect, although this postwar liberal era can be seen as a panacea through many lenses - the result of large government projects and initiatives - the liberal policies also contributed (and continue to contribute) to the loss of our rural communities and economies to the economic incentives of greater profits through the capture of economic transactions that previously were not part of the formal economy. Today we see the same trends in privatization in security, warfare, disaster relief and education. A closer look at Krugman's analysis might reveal a coup whereby liberal policies built up large government infrastructures through tax payer dollars enticing waves of Americans from rural areas to abandoned their communities and self-reliant lifestyles for the income supported lives of our modern era. Now the government (which is vastly subservient to corporate agendas) has began the process of selling (giving away) this infrastructure to the wealthy few - leaving in place a huge and much more chilling corporate/military infrastructure designed to serve the money interests while leaving citizens without income, property or the means to sustain themselves.

All of this leads to the current situation with the Eric Prince lead Blackwater along with other security firms. Imagine a future where the Generals are competing with CEO's for government funds. We may be witnessing the onset of the second civil war if congress begins the process of reducing these private mercenary companies. Eric Prince and his family have given vast sums of money to Republican campaigns with radical Christian and nonconservative agendas. He has given zero dollars to democrats. He is in control of the worlds largest private military and is being questioned by a democratic congress. It has the makings of a great Science fiction novel at the very least.

Sell out.

There was a term we used for bands that had gained commercial appeal by sacrificing their integrity. It was something we all realized was necessary to some degree, but some bands managed to pull it off more gracefully than others. For a local scene, if a band made the transition to a more national audience, there was no greater scorn than for a band that sold out.

What exactly does it mean to sell out?

In our society today, everything is measured by price. The only recognized value is price. Even our time has a price on it - time is money. Some people's time is worth more than others. My time is not worth quite as much as my bosses, but more than our office secretary. Yet, intuitively, we all know that some things in life our priceless. We sell our time to pursue some things that cannot be valued in a marketplace. Eight hours a day, five days a week buys us a few precious hours a week for such pursuits if we can make all of our payments necessary to maintain our lifestyles. Sometimes we dream about combining our priceless pursuits with our work. We think about making our hobbies into profit-making adventures. What would it take to profit off of our hobbies?

Selling out, of course.

This is the dilemma. As many jobs I have had, I have also had hobbies, dreams or goals. Each time my hobby has run up against the market, it has evaporated into a fine mist and blown away with the wind. For anything to have integrity and value that is long lasting it has to be motivated by something close to the heart and not by what can be obtained in the market.

This does not mean that anything that has sold for a price in the market is automatically crap and of no value. There are many examples of successful artists who have made a good living off of their art. However, their chosen craft would still be the same whether they made money or not off of it - for they are motivated by something that comes from within.

Right now I garden when I am not working. Someday I would like to farm, but this notion of value and markets has me worried. I can see what happens to farmers and the economics of agriculture. There is an incentive to get into organic farming because right now there is a large demand for organic products. Walmart, Target, Sam's club and many other retail stores are devoting several aisles to organic products. However, farmers should never forget that these outlets and buyers of their production are forever in search of selling at the lowest price to their consumers and generating profits for their shareholders. When agricultural products are in large supply, the market place will lower the price. Eventually, the market for organic products will bottom out and farmers will get lower and lower prices for their ever-increasing yields.

The temptation to produce one crop on a farm is huge. Even local organic farms selling their produce at Farmers Markets are in search of products that will sell. If a farmer just follows the seasons and sells only what is in season, they will always have competition from other area farms and the price for their products will be driven down. Everyone loves tomato season, but it is the farmer that brings the first tomatoes to market that gets the highest prices. Tomatoes in the fall are going to sell for much less. So, one farmer begins growing tomatoes in January in a greenhouse, so they have ripe tomatoes in May or June. Soon everyone has a greenhouse and is selling tomatoes in June. This is wonderful for tomato lovers, but works contrary to what the farmer seeks - high prices.

This is where farming for the love of farming comes in. The first priority of the gifted farmer is producing good food to eat, while taking care of the soil and land. The wonderful thing about farming and gardening is that cornucopias amounts of produce are generated during the season. It is an awesome task to put all the tomatoes, green beans, lettuce, carrots, potatoes, garlic, onions, etc. to good use before it spoils and must be returned to the compost heap. The kitchen is filled with activity this time of the year - cooking, canning, freezing and fermenting. The same goes for dairy, meat and poultry production. What throws all this out of balance is when the farm is devoted to the market and yields of selected crops are emphasized over more diversified production using holistic practices. Of course, farms require land and land costs money that often necessitates debt owed to banks that only care about the profits of the farm. What this means for me is that I can't think of farming as a livelihood, but must instead devote my energies to a garden that produces vegetables and fruits for seasonal consumption of my family and friends. An expanding garden can never come at the expense of "selling out," or the next in my line of hobbies will dissipate into thin air.

Speaking of Faith

I had a long and fulfilling day in the Garden yesterday. There were weeds to be pulled, composts to be turned, fruits and vegetables to be harvested, second round of plants to be planted, and organic fertilizer to be applied. I woke of this morning sore, but completely refreshed.

Sundays are a great day for gardening. I don't belong to an organized church, so my spiritual time could not be better spent than working with soil and plants. Often, I will set up the radio and turn it to a baseball game - the Minnesota Twins - since Sundays usually mean a day game. Yesterday the Twins lost to the California Angels, 7 -2, but not even this could spoil my mood.

After the game I turned the radio to NPR and tuned into Barbara Kingsolver being interviewed on Speaking of Faith. The segment was called The Ethics of Eating. Kingsolver and her family went one year with trying to raise all the food necessary for their living on their own property. THey supplemented what they could raise with trips to the local Farmers Markets and, if they had to, purchases of organic food from the grocery store. What they were attempting to accomplish was to live off of food that was raised in or near their locality and not support our international corporate food supply. She made several interesting points about questions people don't ask about where our food comes from.

Of course, all of this is just confirmation of my own views and was perfectly accommodating to my afternoon spent in the garden. I share similar goals to Kingsolver and have to echo her statement that purchasing your food locality and tending a garden has benefits that go beyond financial and is not that hard to do. It is a choice available to us all that has many spiritual and ethical benefits.

Harry Potter

I was reading in my daily scribe, which isn’t much of a daily scribe anymore with the takeovers by Wall Street investment groups and profit speculators and the sell-offs and the layoffs, about what makes Harry Potter a success. It seems there is a formula for the hero that the series follows that has proven effective. I didn’t read it closely, but I was struck by the observation that Harry was orphaned and raised in a school without parents – apparently a common theme for the protagonist of successful tales.

I hate when I have these ideas about family values that make me think the adage about being a liberal when you are twenty and having a soul, while being a conservative when your 40 and having a brain seem true, because I still identify as a liberal. I am not talking about family values though. I am an independent person who is not particularly close to my parents. I appreciate my parents for their role in raising me and bringing me into the world. I just wonder if there is something deeply and inherently wrong with our culture and if there is, since I am a part of this culture, then I can discover it by looking deeply at myself.

My Grandfather left the small town and moved to California during the depression. His family stayed home on the farm. He was part of the first major exodus from small towns to urban areas. Eventually, he returned to the community, but not as a farmer. He ran a small grocery store. My father left the small town and raised our family in the suburbs of Minneapolis. He was part of the last exodus that doomed small towns for good. But, as a child, I made many trips to visit my grandparents grocery store in the small town. It was a four hour drive and I have many cherished memories of time spent with my grandparents and small town living in an agricultural community – albeit a dying one at that. These trips required a 4 hour drive one-way, but still we made frequent weekend drives.

I live less than 30 minutes from my parent’s townhome. My son visits my mother and father about 3-4 times a year at their home. This is much less than I spent with my grandparents. His other grandparents operate the beautiful hay and alfalfa farm near us as well. My son cannot get enough of spending time with my father-in-law and his tractors.

Part of the appeal is the land, I am sure. But, I wonder how long this will last. Eventually, the farm will be associated with work for my son and without a love for work and the time spent with loved ones working together this love for the farm will dissipate as it has over and over again amongst rural families.

My friend is a sixth-grade teacher and he tells me that he tells his students on the first day of class every year that he is going to be spending more time with them than their parents. Public schools have taken over the role of raising our children. Who needs parents anymore? Public schools in rural communities educate the children to be productive members of our economy. This has nothing to do with preserving the community these schools are in. Graduates like my father left the community to work in the cities rather than toil away on the farms in the area.

Myths like Harry Potter only add to this message that parents and families are not needed for the development and maturation of our children. All we need to do is send them to school. I have recently come to believe that sustainable economies can only be found in small rural communities where wealth is produced from taking care of the land and community and not by speculative ventures where profits are made through buying and selling commodities. This wealth has not been appreciated in our present economy, but it will eventually be necessary to return to our rural roots if we wish to live in harmony with our environment and in a sustainable manner.

For this to happen we are going to need new ways of educating our youth and alternatives to Harry Potter for myths to raise our children on.

Why I am a Luddite?

I promised to answer this question in a post last month. Well, Wendell Berry offers a pretty good explanation.

I rely on technology to navigate in this world. I am fully indoctrinated into American culture with a Masters degree in Economics. I can find my way around the computer quite well without being information systems technician. I know just enough to stay employed in this pecuniary economy.

It is my belief that most of the people I encounter everyday are not happy in their roles each one plays in this same economy. We each feel something is missing or we should be doing something else. Out connection to each other via electronic media, cell phones and text messaging leaves all of us feeling incomplete. I believe the primary component missing in our lives is a connection to place and community - culture. Contrary to the diversity specialists and multi-cultural advocates, culture is not tied to self-esteem or an individual's identity. Culture is attached to place and when we can buy culture through the mail and identify with images we see on television or on our computer, we lose a connection to our community and history. This loss is much greater than most people realize, for without this history we cannot function as citizens. We are no longer responsible for a place and neighborhood, but are rather concerned only with ourselves and our families. To be successful is to be mobile and if the community surrounds us is in danger of collapse, the successful ones will move their families to a new community. This lack of responsibility to a place is what is driving America to forget its glorious past and focus instead on its perilous future and each of our escapes.

All of this is driven by our new technologies and the only way to salvage our past is to begin taking care of a piece of land, however small at the expense of a pension, insurance, mobility, pecuniary gain. All wealth derives from material resources. The pecuniary wealth holders among the professional classes hold on the wealth is precarious at best as our collapsing housing market currently foreshadows. Buying and holding property cannot bring a return on an investment that is subject to exponential laws, unless it becomes speculative. However, these returns do not increase the real value of the land. Only stewardship and community building can raise the real return on the land.

The real return comes with a sense of place that is received from becoming part of a social network that depends on this place for its survival. We no longer have many places left in the US that are locally dependent as we rely more and more upon foreign imports of inferior products. These products are not inferior because they are produced by an inferior foreign people, but rather because they are not produced with care. They are produced with only one goal in mind -- profit. A local producer cares about what happens to the products he or she sells within the community because these products reflect on his or her reputation in the community. Multi-national global corporations have no such cares, outside of how they effect their bottm-lines. All this brings me back to the only permanent solution to the disease that infects our global culture, for lack of a better term describing our current condition.

We must place an emphasis on community and our local environments over technological advancements. Any technology that breaks apart a local community or harms a local habitat, should be restricted if not banned. Without such restrictions, we will continue down the path of individual pursuits of financial rewards at the expense of everything that is necessary for the pursuit of human freedoms and dignity in each of our lives.

What is Wealth?

The three basic needs of humanity are food, clothing and shelter. If these basic needs are met, then what constitutes wealth? Is it anything over and above these needs? In addition to these needs we might also include security. Most humans want some assurance that their basic needs will be met not only right now, but also in the future. Thus, humans store a surplus to make sure they have food, clothing and shelter in the future. If that is all wealth is, what are we all these shenanigans, or those things we call jobs, we are presently doing?

Credit cards, debts, savings accounts, investments and retirement. We buy things we want and accumulate debt and then start worrying about retirement. Our parents used to approach debt much more cautiously and began saving as soon as they had an income. We are much more comfortable with debt and many of us will have a negative savings until the day we retire – even with the uncertain knowledge that social security will be there when we do.

Economic theory divides people between producers and consumers. In the past almost all humans were producers and households only consumed what they produced. If an individual was a skilled craftsperson, he or she could trade whatever he or she produced for the goods and services he or she needed for the survival of the household.

I do not mean to glorify life in the past or ignore the hardship inherent in producing for the survival of the household. However, modern individuals and households have given up something in the transition from strictly producers to strictly consumers as the age of agriculture gave way to industry and now, finally, information.

Wealth is now strictly a number, in financial terms, and the larger the number the more influence one has over the events in the world. Take back ownership of the land that is the ultimate producer of wealth if you wish to redistribute wealth in this country and the world from the primary holders of pecuniary wealth to the masses or majority. It is a fools errand to get distracted by obtaining money. Money merely represents wealth in our society, but it does not create wealth.

Here is an interesting link on something called the L-curve. Check it out.

Economics-Neoclassical vs. the Heterodox

Recently I was sent an article in The Nation Magazine called Hip Heterodoxy. It was an interesting read for someone who was once on track to earn a PhD in economics and join the world of the academics. The article makes the distinction between Ortodox and Heterodox economics in this way.

The term "heterodox"--like, say, "infidel"--is necessarily imprecise; it categorizes people by what they don't believe rather than what they do. In the case of heterodox economists, what they don't believe is the neoclassical model that anchors the economics profession.

I was in a department that was considered Heterodox,. In fact, my adviser is quoted in this article. It is strange to be defined by what you don't believe. I suppose heterodox are sort of like atheists - in their belief in the Truth of Not believing they suddenly sound exactly like the people that don't believe in.

The common definition of Neoclassical economics taken from Lionel Robbins is the science which describes human behaviour as a relationship between (given) ends and scarce means which have alternative uses. What Neoclassical Economics proposes is that we are all Utility Maximizers and Rational-decision makers with access to Perfect information. Behind these definitions are, what is called, Consumption and Production Functions that make up Supply and Demand Curves that determine something else called General Equilibrium. Neoclassical Economics proposes that markets tend toward Equilibrium, except in the case of market failure. There are many agreed upon instances of Market Failure, such as Monopoly power, Externalities, Public goods and Common resources, but for most markets, this model accurately describes how markets work and price is determined.

Graduate school in economics involves coursework that revolves around the mathematical equations that produce these terms in real values. Thus Price is Value and is a Real term represented by a number we can compare to other numbers or value. All of this reveals economics to be different from all the other social sciences because it has Mathematical validity and equations that support its theory and is thus considered by most economists and many others to be a Science. There is an elegance behind these equations that reveal Truth or Value in such real terms. It is very easy to be enamored by them. Heterodox economists are no less enamored by them than Orthodox economists.

There are many assumptions underlying the Neoclassical model and Utility Maximizer and Rational Decision makers with Perfect information are among the ones that Heterodox economist focus upon. What if humans are not Utility Maximizers (We're not)? What if we are not Rational Decision makers (We aren't)? And what if we do not have access to Perfect information (We don't)? Heterodox economists focus on these questions and spend their time doing empirical studies revealing that these assumptions and others are false.

They then tweak the model and attempt to write equations that more closely resemble how humans make decisions and come up with alternative equations for consumption and production functions so they can still determine General Equilibrium and their work will still be considered Science by their peers in economics and fit under the ever increasing rubric called Neoclassical Economics. The problem with their work is that the equations get increasingly complex and the heterodox economist loses the elegance that was the main attraction to Orthodox economics in the first place.

Milton Friedman, the orthodox economists figurehead, long ago admitted that many of the assumptions underlying neoclassical economics were false. In his essay The Methodology of Positive Economics, he argued that it was not important that humans were rational, but rather that they behaved as if they were rational in the aggregate and that the model should not be judged on the accuracy of its assumptions but rather on how well its performs. The problem with heterodox economists is that none of their models perform as well as the orthodox model.

So what is the problem with economics? Economics by itself is not the problem. Neoclassical economists proposed a model that is dominant within the field and now, to do economics, one must be adept at mathematics. Alfred Marshall, who first coined the term neoclassical economics, defined economics as a study of mankind in the ordinary business of life. This definition is much less specific and accurately describes how economists approached their discipline around the fin de siecle. Economists were located in philosophy departments and their papers were filled with rhetoric instead of equations as they tried to determine how humans attained happiness in life and the role that markets and money played in this pursuit.

The problem with orthodox and heterodox economists is their treatment of economics as a science, instead of a discpline that is searching for the answers to some fundamental questions such as "What are humans for?" and whether or not our quest for profits at the expense of our physical and mental healths is really in our best interests. Economics should have rhetorical arguments on the nature of our modern existence and whether or not we are really achieving any success in terms of freedom and happiness, as we go about our ordinary business in life. Neither Heterodox or orthodox economists are asking the right questions as they focus on how we make decisions by describing agents in abstract models taking their influence and formulation directly from the physical sciences, instead of what decisions we should be making that best preserve and benefit humanity and its future here or anywhere on the planet.

Getting Smaller

I used to be a habitual reader of Paul Krugman in the New York Times. As a graduate student I taught an introductory Economics course to undergraduates and required the students under my tutelage to read and write their comments on Krugman's two columns a week. Now, that the New York Times Websites charges to read his column online, I no longer am able to read each one of his columns. This weekend my local daily ran a Krugman column in its editorial section. I learned that Americans are getting smaller.

Apparently a new study is out revealing that Americans are now on average three inches shorter than their European counterparts. We are also the shortest among the 18 top industrial countries despite having the largest per capital GDP. Thirty years earlier we were the tallest and three inches taller than our European counterparts. That is quite a switch.

Things do not look good for America. We are a dying nation. Everywhere we look around us we can see doom. Even our myths (television, games, Internet, etc.) are all about death and destruction. 9-11 was just a foreshadowing of our eventual collapse.

Krugman, ever the economist, explains our declining height on socioeconomics. Although partially right, he only alludes to the specific problems. Our bodies are made of the earth. We are destroying the earth that we are living upon. As the quality of our environment deteriorates, our bodies follow suit.

We have been consuming oil, coal and chemicals for so long we have forgotten we are nourished by the soil. We flush our soil away to the oceans and our bodies are a reflection of the meager shape of the topsoil we grow our food upon and the modified foods we pump into our bodies without the slightest notion or reverence for the Earth that provides for us.

Over time we slowly wilt away as cancers and disease consume our weakened flesh. For this to be happening physically before our eyes without our conscious acknowledgment can only be explained by minds that have become increasing numbed and slowed as a collective Alzheimer's disease slowly eats away a memory of our more glorious past while we operate under the continual disillusionment that we are an all-powerful and giant people, even as we verifiably shrink from existence.