Posts Tagged 'Alan Greenspan'

Crossroads: We Dare Not Call Its Name

It’s time to drag a beast out of it’s cave—it’s time for a national dialog about the most vicious and most pernicious of the so-called Animal Spirits, the one that has for millennia sunk into oblivion every society and civilization afflicted by it. The expression, “Born on third base and thinks he hit a triple,” has been around for a long time to define the attitudes and demeanor of certain people. When these people buy secondnd base and then first it becomes their ballgame, they make the rules, and they always win. This analogy well represents what is happening in the US and in the world today. Even the pope has taken notice and has expressed dismay over what he calls “unfettered capitalism.” A bad case of pleonexia, the ruthless and arrogant assumption that others exist for one’s own benefit, with complete disregard for any considerations of common humanity. Doesn’t sound good, does it?

 Do complex societies collapse? Of course they do and have from the dawn of history. The story of civilization is littered with failed states.  When societies become excessively extractive in nature— when wealth has been redistributed unequally between the many and the few, collapse has inevitably followed. This is the story of extractive overreach.

In their book, “Animal Spirits”, Nobel Prize winning economists George Akerlof and Robert Shiller explain the dynamics which drive the world of economics from pillar to post but never name the “beast.” I will venture to say that it wasn’t because they don’t know the beast, rather that it must not be spoken of. Lying at a comfortable remove from the name we dare not say, “Animal Spirits” is their euphemism of choice. (Alan Greenspan gave us “irrational exuberance.”)

Denial has become a style—don’t actually call things what they are but find ways to sanitize or neutralize them. Orwell called this “newspeak.” There are very good reasons for this: if we called some things what they really are, the social consequences would be dire. For example, Rebecca M. Blank, a first-rank candidate to serve on the Obama Council of Economic Advisors, was rejected for having said several years earlier, “A commitment to economic justice necessarily implies a commitment to the redistribution of economic resources, so that the poor and the dispossessed are more fully included in the economic system.” For having used the term “redistribution,” Ms Blank was not appointed.

It’s going to be a rough ride for this country as we establish just what kind of society we are becoming, what we are being driven to, against what we want to be. From Wisconsin to Texas, from one coast to the other, legislation to restrict voting rights, health care, even a simple resolution in Wisconsin to honor the children and teachers who were shot to death at Sandy Hook, could not pass the partisan legislature. Heartless, yes, and heartlessness of the sort that beggars the imagination—callow heartlessness that serves no purpose other than to attend a depraved, mean-spirited social agenda. The intellectual and moral polarization this represents is stark. Sadly we haven’t had leadership in recent years that measures up to the task at hand, to staunch the bleeding of social commitment, to truthfully explain to the country what is happening and why. Neoliberals are no more prone to truthfulness than Neoconservatives, and the rest of us are stuck in the middle.

It is, at times, impossible to grasp the many fronts in the assault on the American social contract. For example, the pawns and agents of the Animal Spirits are attacking society’s commitment to educate children. Schools are but one pawn in the game; there are many others: middle-class Americans who are in the process of becoming lower-class Americans are fair game. Like wolves, the Animal Spirits are circling with the scent of money in their snouts. Republican/Tea Party loyalists are howling about health care, unemployment, veterans’ health care, Social Security, Medicare, Medicaid, and other social programs. Our Neoliberal president seems willing to throw those to the curb to achieve his “Grand Bargain.” The beast wants to tear down this edifice of civilized regard for others that has been built over the years to provide aid and comfort, food and medical care for the part of society that isn’t wealthy and never will be. The beast wants to maintain low wages so low that employers like Walmart will, out of the goodness of their hearts, sponsor food drives for their underpaid employees who can’t afford groceries enough to feed their families. The American middle class is fast becoming what an 18th-century Dutch economist called “the laborious poor.”

The Animal Spirits rise again and again. They are indefatigable. Economists offer euphemisms and technical terms because it is safer to frame the question as an economic abstraction when, actually, it is concretely moral. Greed is what we are talking about here. Greed has always been a moral question.

When the world reaches a point where the pope feels compelled to speak out about greed it is certain we have turned a significant corner in the human condition and the civil society. If we never call things what they are we will never deal with them. The arc of greed throughout history has only ever led to the collapse of every society so afflicted. Let’s call it what it is—pure, simple, old-fashioned, down-and-dirty greed. It should have been a four-letter word.

December 6, 2013

Animal Spirits

Animal Spirits -reviewed

George A. Akerlof

Robert J. Shiller

Princeton University Press (2009)

I turned the last page of this book and, as is my habit with books just finished, put it on the arm of my rocking chair, and considered what I had just read. The consideration found me puzzled as do most books on or about economics. I am NOT an economist you understand (and so do I)  but a mathematician by training and education. My sense of what makes sense is, I realize, vastly different from that of economists. Mathematicians do what they do to understand the “why” of things and, it seems to me, economists do their magic to describe the obvious. What economists prove, in my opinion, is generally not profound except to each other perhaps nor is it immutable. What is true this year about the influence of quantitative easing will most assuredly not be true next year making it not much of a help but rather a palliative with an out-date for some given moment; a patch applied but never a cure. Moreover, you can be assured the next economic crisis will caused by the same factors that have caused previous crises. It is forever and always the same deja vu over and over again.

Economists like Akerlof and Schiller, both Nobel Prize laureates, write profoundly but with no real effect on economic behavior or even public policy for that matter. People continue to do the same stupid things over and over again. The economy plunges from one new height to the bottom of the next trough, up and down, calm and crisis. Is it because, like other economic pundits, something is missing from their equations? When I saw the title, Animal Spirits, I thought, “Ahaaa, these guys are going to nail it.” But, in the end, they didn’t. Every manifestation of animal spirit was mention and detailed except the one that causes and has caused most if not all economic crises.  I wholeheartedly agree with their assessment, “Failing to incorporate animal spirits into the model can blind us to the real sources of trouble.” The authors go on to enumerate the animal spirits as: confidence, fairness, corruption, money illusion, and stories. The “big one”, the biggest in fact, has gone missing in this taxonomy. In fact the “big one” is gone missing from nearly every discussion of economics I have read. However I have to give Alan (Mr. Irrational Exuberance) Greenspan credit for taking a swing at it. In a November 4, 2013, TIME magazine fluff piece he mentions, “… what we now call animal spirits”, promoting “fear” as being, “far more potent” than euphoria or greed. Close but no kewpie doll for Alan ever the apologist for the world as he knows it.

So how is it that economists can’t get to first base with this issue? One has to wonder what planet these folks occupy when they can make such a statement as: “Since wages are determined largely by considerations of fairness, …”. Apparently they haven’t heard about the McDonalds’ McPay scale and how their employees have to apply for public assistance to feed their families. That is not, in my estimation, “fairness”. In fact, it doesn’t even approach “fairness”. And McDonalds is not an isolated instance by any means or measure. It is as though Akerlof, Shiller, Greenspan and other notables have some conception of “workers” as being from another planet – extraterrestrials seldom encountered.

I would also point out that in spite of the authors’ assessment, Harvard is NOT the pinnacle of world universities. Sorry boys that just doesn’t work. Another point of amusing contention is their evaluation of Larry Summers “excellence” as an economic thinker for his observation that: “… when workers move from industries with high pay to industries with low pay, they tend to take a wage cut; when they go in the opposite direction they tend to get a raise.” No, I’m not making that up – it appears on page 103 and the kudos on page 188. Really!

The bottom line (this is, after all, about economics so bottom lines are appropriate fashion statements) is that the book provides clear explanations and definitions of the terms used by economists such as money illusion, lending at the discount window, and so forth. In that sense it is a good book and one I am glad to have read for the information it provides as much as for the insight it gives into the thinking of two world-class, Nobel laureate economists. What you will not get from Akerlof and Schiller is a discussion of the number one cause of irrational exuberance, property and stock “flipping”, political ambition, ad nauseum – the dominant animal spirit with credentials reaching to the dawn of civilization, greed.

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