Posts Tagged ‘independence’

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René Magritte, “La clef des champs” (1936)

Plenty of illusions are being shattered these days, such as the idea that a successful recovery from the worst economic downturn since the Great Depression would keep the incumbents in power. A combination of lost jobs, stagnant wages, and soaring inequality put an end to that illusion. Much the same has happened to American Exceptionalism.

Noah Smith has just discovered another shattered illusion: the independence of supply and demand.

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Mainstream economists generally think about the world in terms of supply and demand—at both the micro and macro levels: supply and demand in the market for oranges or labor (which determine the equilibrium price and quantity), as well as aggregate supply and demand for the economy as a whole (which determine the equilibrium level of prices and output). Perhaps even more important, they think about supply and demand as acting independently of one another: a shift in supply or demand in individual markets (which lead to changes in equilibrium prices and quantities) as well as “shocks” to aggregate supply or demand in macro models (which determine changes in the equilibrium level of prices and output). The presumption is that a shift in demand (at the level of individual markets or the economy as a whole) does not cause a shift in supply (at either level), or vice versa.*

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As it turns out, the independence of supply and demand is just an illusion.

As I wrote back in 2009, it’s quite possible that at the micro level—for example, in the case of the labor market—both supply and demand are determined by something else, such as the accumulation of capital.

Thus. . .if the accumulation of capital leads to rightward shifts in both the demand for and supply of labor, wages may not increase (and quite possibly will decrease).

Therefore, supply and demand in individual markets aren’t necessarily independent.

And then, in 2013, I discussed the illusion of the independence of aggregate supply and demand.

In terms of the mainstream model, the collapse of aggregate demand leading to the crash of 2007-08 has also affected the aggregate supply of the economy—thereby shattering the illusion of the independence of the two sides of the macroeconomy. As the authors put it, “a significant portion of the recent damage to the supply side of the economy plausibly was endogenous to the weakness in aggregate demand—contrary to the conventional view that policymakers must simply accommodate themselves to aggregate supply conditions.”

Not only does the destruction of a significant portion of the future growth potential of the U.S. economy challenge the model mainstream economists use to analyze the macroeconomy and to formulate policy; it also forces us to question the rationality of a set of economic arrangements in which trillions of dollars of potential wealth (which might then be used to improve lives for the majority of the population) are sacrificed at the altar of keeping things pretty much as they are.

It represents the indictment both of an academic discipline and of economic system.

So, Smith is right: the shattering of the illusion of the independence of supply and demand means the way mainstream economists teach basic economics is fundamentally wrong.

What he forgets to mention, however, is that an economic system that is governed by supply and demand that are not independent of one another—and thus is subject to considerable instability on a regular basis, with the costs being shouldered by those who can least afford it—is also open to question.

Perhaps Tuesday’s results will serve notice that the time for challenging mainstream economics and the economic and social system celebrated by mainstream economists has finally arrived.

 

*There can, of course, be simultaneous shifts in supply and demand but the shifts themselves are considered independent of one another.

 

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Fred Block and Frances Fox Piven make a convincing case, from the Left, for a universal basic income.

In particular, they demonstrate an understanding that wage work has become one of the most elemental pillars of our civic religion,” past relief efforts (going back to Poor Laws) were mostly punitive, and employers will likely resist any attempt to undermine the so-called work ethic.

Not everyone will be on board to sever the age-old ties between poverty relief and tough demands on the poor. The basic-income approach will be resisted by employer interests because it violates that venerable principle, and will make workers more powerful over time by reducing their dependence on any one employer. A generous basic-income policy could, in other words, transform class relations.

There are however other obstacles, particularly problems of political language, that need to be overcome in any attempt to expand the “entitlement society” (a term that itself needs to be recaptured from the Right) through a universal basic income.

As I wrote back in 2012 (at the early stages of the previous presidential campaign), there are at least two issues we need to confront:

First, we need to contest the meaning of dependence. In particular, why is selling one’s ability to work for a wage or salary any less a form of dependence than receiving some form of government assistance? It certainly is a different kind of dependence—on employers rather than on one’s fellow citizens—and probably a form of dependence that is more arbitrary and capricious—since employers have the freedom to hire people when and where they want, while government assistance is governed by clear rules.

Second,. . .corporations have been successful in shifting the financing of government assistance programs from their surpluses to workers’ incomes. But the solution to the pressure on current workers’ standard of living is not to cut government programs but to change how they’re financed.

The campaign for a universal basic income will only be successful when we effectively contest the meaning of dependence (such that wage-labor is no longer viewed as a sign of independence) and change the way government programs are financed (such that the social surplus, not workers’ wages, can be utilized to satisfy social needs.)

Ultimately, then, a universal basic income points toward a new realm of freedom, including freedom from the need to work for the benefit of someone else and from the need to hand over a growing portion of one’s already-low individual income to finance a program that benefits society as a whole.

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This week marks the 100th anniversary of the world-historic Easter Rising in Ireland. And, here in the United States, we’re getting quite an education—first, with 1916 The Irish Rebellion, a big, lavishly produced slab of prestige television (with none other than Liam Neeson as the narrator), available on 120 television stations in the United States and on the BBC; then, on Sundance, with Rebellion, a soap-operaish version of the same events; and, finally,  A Full Life: James Connolly the Irish Rebel, a graphic remembrance of socialist agitator, editor, and author Connolly illustrated by artist Tom Keough.*

I’ve only seen the two television series, so I can’t comment on Keough’s book.

In my view, 1916 The Irish Rebellion does an excellent job of providing the necessary background (at least for those of us lacking the basic, Irish secondary-school-book knowledge of the events—although it tends to exaggerate the U.S. connection (highlighted in the trailer) and to downplay the egalitarian and socialist impulses in the Rising’s anti-imperialism (which, I presume, the Connolly book serves to correct). And while Rebellion is more an intimate recreation than a documentary (and does take historical liberties and shortcuts in dramatizing, I would say melodramatizing, the events), it does highlight the role of women among the forces for and against Irish independence.

Still, both television series serve to shine a spotlight on the short-lived and ultimately failed rebellion that showed to the rest of Ireland (beyond Dublin), the British Empire (for which this was the beginning of the end), and the rest of the world (in a wide variety of socialist, communist, and national-liberation movements) that the dream of making and changing history was embodied by and yet could not be contained within the “terrible beauty” of 1916.**

 

*Here’s the appropriate disclaimer: while 1916 The Irish Rebellion was largely financed by the University of Notre Dame and written by Notre Dame professor Bríona Nic Dhiarmada, I played no role in the creation or dissemination of the documentary.

**It is precisely that terrible beauty that is taken up in Ken Loach’s film, Jimmy’s Hall, which takes place in 1932 and focuses on the post-1916 political tensions among the Catholic church, the state, the landowners, and the republican movement.

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