#Neoclassical Economics

[mostlysignssomeportents]

The cod-Marxism of personalized pricing

Picks and Shovels is a new, standalone technothriller starring Marty Hench, my two-fisted, hard-fighting, tech-scam-busting forensic accountant. You can pre-order it on my latest Kickstarter, which features a brilliant audiobook read by Wil Wheaton.

The social function of the economics profession is to explain, over and over again, that your boss is actually right and that you don't really want the things you want, and you're secretly happy to be abused by the system. If that wasn't true, why would your "choose" commercial surveillance, abusive workplaces and other depredations?

In other words, economics is the "look what you made me do" stick that capitalism uses to beat us with. We wouldn't spy on you, rip you off or steal your wages if you didn't choose to use the internet, shop with monopolists, or work for a shitty giant company. The technical name for this ideology is "public choice theory":

https://pluralistic.net/2022/06/05/regulatory-capture/

Of all the terrible things that economists say we all secretly love, one of the worst is "price discrimination." This is the idea that different customers get charged different amounts based on the merchant's estimation of their ability to pay. Economists insist that this is "efficient" and makes us all better off. After all, the marginal cost of filling the last empty seat on the plane is negligible, so why not sell that seat for peanuts to a flier who doesn't mind the uncertainty of knowing whether they'll get a seat at all? That way, the airline gets extra profits, and they split those profits with their customers by lowering prices for everyone. What's not to like?

Plenty, as it turns out. With only four giant airlines who've carved up the country so they rarely compete on most routes, why would an airline use their extra profits to lower prices, rather than, say, increasing their dividends and executive bonuses?

For decades, the airline industry was the standard-bearer for price discrimination. It was basically impossible to know how much a plane ticket would cost before booking it. But even so, airlines were stuck with comparatively crude heuristics to adjust their prices, like raising the price of a ticket that didn't include a Saturday stay, on the assumption that this was a business flyer whose employer was footing the bill:

https://pluralistic.net/2024/06/07/drip-drip-drip/#drip-off

With digitization and mass commercial surveillance, we've gone from pricing based on context (e.g. are you buying your ticket well in advance, or at the last minute?) to pricing based on spying. Digital back-ends allow vendors to ingest massive troves of commercial surveillance data from the unregulated data-broker industry to calculate how desperate you are, and how much money you have. Then, digital front-ends – like websites and apps – allow vendors to adjust prices in realtime based on that data, repricing goods for every buyer.

As digital front-ends move into the real world (say, with digital e-ink shelf-tags in grocery stores), vendors can use surveillance data to reprice goods for ever-larger groups of customers and types of merchandise. Grocers with e-ink shelf tags reprice their goods thousands of times, every day:

https://pluralistic.net/2024/03/26/glitchbread/#electronic-shelf-tags

Here's where an economist will tell you that actually, your boss is right. Many groceries are perishable, after all, and e-ink shelf tags allow grocers to reprice their goods every minute or two, so yesterday's lettuce can be discounted every fifteen minutes through the day. Some customers will happily accept a lettuce that's a little gross and liztruss if it means a discount. Those customers get a discount, the lettuce isn't thrown out at the end of the day, and everyone wins, right?

Well, sure, if. If the grocer isn't part of a heavily consolidated industry where competition is a distant memory and where grocers routinely collude to fix prices. If the grocer doesn't have to worry about competitors, why would they use e-ink tags to lower prices, rather than to gouge on prices when demand surges, or based on time of day (e.g. making frozen pizzas 10% more expensive from 6-8PM)?

And unfortunately, groceries are one of the most consolidated sectors in the modern world. What's more, grocers keep getting busted for colluding to fix prices and rip off shoppers:

https://www.cbc.ca/news/business/loblaw-bread-price-settlement-1.7274820

Surveillance pricing is especially pernicious when it comes to apps, which allow vendors to reprice goods based not just on commercially available data, but also on data collected by your pocket distraction rectangle, which you carry everywhere, do everything with, and make privy to all your secrets. Worse, since apps are a closed platform, app makers can invoke IP law to criminalize anyone who reverse-engineers them to figure out how they're ripping you off. Removing the encryption from an app is a potential felony punishable by a five-year prison sentence and a $500k fine (an app is just a web-page skinned in enough IP to make it a crime to install a privacy blocker on it):

https://pluralistic.net/2024/08/15/private-law/#thirty-percent-vig

Large vendors love to sell you shit via their apps. With an app, a merchant can undetectably change its prices every few seconds, based on its estimation of your desperation. Uber pioneered this when they tweaked the app to raise the price of a taxi journey for customers whose batteries were almost dead. Today, everyone's getting in on the act. McDonald's has invested in a company called Plexure that pitches merchants on the use case of raising the cost of your normal breakfast burrito by a dollar on the day you get paid:

https://pluralistic.net/2024/06/05/your-price-named/#privacy-first-again

Surveillance pricing isn't just a matter of ripping off customers, it's also a way to rip off workers. Gig work platforms use surveillance pricing to titrate their wage offers based on data they buy from data brokers and scoop up with their apps. Veena Dubal calls this "algorithmic wage discrimination":

https://pluralistic.net/2023/04/12/algorithmic-wage-discrimination/#fishers-of-men

Take nurses: increasingly, American hospitals are firing their waged nurses and replacing them with gig nurses who are booked in via an app. There's plenty of ways that these apps abuse nurses, but the most ghastly is in how they price nurses' wages. These apps buy nurses' financial data from data-brokers so they can offer lower wages to nurses with lots of credit card debt, on the grounds that crushing debt makes nurses desperate enough to accept a lower wage:

https://pluralistic.net/2024/12/18/loose-flapping-ends/#luigi-has-a-point

This week, the excellent Lately podcast has an episode on price discrimination, in which cohost Vass Bednar valiantly tries to give economists their due by presenting the strongest possible case for charging different prices to different customers:

https://www.theglobeandmail.com/podcasts/lately/article-the-end-of-the-fixed-price/

Bednar really tries, but – as she later agrees – this just isn't a very good argument. In fact, the only way charging different prices to different customers – or offering different wages to different workers – makes sense is if you're living in a socialist utopia.

After all, a core tenet of Marxism is "from each according to his ability, to each according to his needs." In a just society, people who need more get more, and people who have less, pay less:

https://en.wikipedia.org/wiki/From_each_according_to_his_ability,_to_each_according_to_his_needs

Price discrimination, then, is a Bizarro-world flavor of cod-Marxism. Rather than having a democratically accountable state that sets wages and prices based on need and ability, price discrimination gives this authority to large firms with pricing power, no regulatory constraints, and unlimited access to surveillance data. You couldn't ask for a neater example of the maxim that "What matters isn't what technology does. What matters is who it does it for; and who it does it to."

Neoclassical economists say that all of this can be taken care of by the self-correcting nature of markets. Just give consumers and workers "perfect information" about all the offers being made for their labor or their business, and things will sort themselves out. In the idealized models of perfectly spherical cows of uniform density moving about on a frictionless surface, this does work out very well:

https://pluralistic.net/2023/04/03/all-models-are-wrong/#some-are-useful

But while large companies can buy the most intimate information imaginable about your life and finances, IP law lets them capture the state and use it to shut down any attempts you make to discover how they operate. When an app called Para offered Doordash workers the ability to preview the total wage offered for a job before they accepted it, Doordash threatened them with eye-watering legal penalties, then threw dozens of full-time engineers at them, changing the app several times per day to shut out Para:

https://pluralistic.net/2021/08/07/hr-4193/#boss-app

And when an Austrian hacker called Mario Zechner built a tool to scrape online grocery store prices – discovering clear evidence of price-fixing conspiracies in the process – he was attacked by the grocery cartel for violating their "IP rights":

https://pluralistic.net/2023/09/17/how-to-think-about-scraping/

This is Wilhoit's Law in action:

Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.

https://en.wikipedia.org/wiki/Francis_M._Wilhoit#Wilhoit's_law

Of course, there wouldn't be any surveillance pricing without surveillance. When it comes to consumer privacy, America is a no-man's land. The last time Congress passed a new consumer privacy law was in 1988, when they enacted the Video Privacy Protection Act, which bans video-store clerks from revealing which VHS cassettes you take home. Congress has not addressed a single consumer privacy threat since Die Hard was still playing in theaters.

Corporate bullies adore a regulatory vacuum. The sleazy data-broker industry that has festered and thrived in the absence of a modern federal consumer privacy law is absolutely shameless. For example, every time an app shows you an ad, your location is revealed to dozens of data-brokers who pretend to be bidding for the right to show you an ad. They store these location data-points and combine them with other data about you, which they sell to anyone with a credit card, including stalkers, corporate spies, foreign governments, and anyone hoping to reprice their offerings on the basis of your desperation:

https://www.404media.co/candy-crush-tinder-myfitnesspal-see-the-thousands-of-apps-hijacked-to-spy-on-your-location/

Under Biden, the outgoing FTC did incredible work to fill this gap, using its authority under Section 5 of the Federal Trade Commission Act (which outlaws "unfair and deceptive" practices) to plug some of the worst gaps in consumer privacy law:

https://pluralistic.net/2024/07/24/gouging-the-all-seeing-eye/#i-spy

And Biden's CFPB promulgated a rule that basically bans data brokers:

https://pluralistic.net/2024/06/10/getting-things-done/#deliverism

But now the burden of enforcing these rules falls to Trump's FTC, whose new chairman has vowed to end the former FTC's "war on business." What America desperately needs is a new privacy law, one that has a private right of action (so that individuals and activist groups can sue without waiting for a public enforcer to take up their causes) and no "pre-emption" (so that states can pass even stronger privacy laws):

https://www.eff.org/deeplinks/2022/07/federal-preemption-state-privacy-law-hurts-everyone

How will we get that law? Through a coalition. After all, surveillance pricing is just one of the many horrors that Americans have to put up with thanks to America's privacy law gap. The "privacy first" theory goes like this: if you're worried about social media's impact on teens, or women, or old people, you should start by demanding a privacy law. If you're worried about deepfake porn, you should start by demanding a privacy law. If you're worried about algorithmic discrimination in hiring, lending, or housing, you should start by demanding a privacy law. If you're worried about surveillance pricing, you should start by demanding a privacy law. Privacy law won't entirely solve all these problems, but none of them would be nearly as bad if Congress would just get off its ass and catch up with the privacy threats of the 21st century. What's more, the coalition of everyone who's worried about all the harms that arise from commercial surveillance is so large and powerful that we can get Congress to act:

https://pluralistic.net/2023/12/06/privacy-first/#but-not-just-privacy

Economists, meanwhile, will line up to say that this is all unnecessary. After all, you "sold" your privacy when you clicked "I agree" or walked under a sign warning you that facial recognition was in use in this store. The market has figured out what you value privacy at, and it turns out, that value is nothing. Any kind of privacy law is just a paternalistic incursion on your "freedom to contract" and decide to sell your personal information. It is "market distorting."

In other words, your boss is right.

Check out my Kickstarter to pre-order copies of my next novel, Picks and Shovels!

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2025/01/11/socialism-for-the-wealthy/#rugged-individualism-for-the-poor

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[economicsinaction]

Economics is getting reduced to data analysis 

Increasingly, the theory or `thinking’ is missing in economics, and the research in the discipline is getting limited to data analysis.  One reason is the doubts on the usefulness of theoretical frameworks of the discipline. It started with macroeconomics. Macroeconomic behaviour cannot be modelled as that of individuals and firms. It is a system wherein the behaviour all individuals, firms and…

[alanshemper]

So what is modern economics about? It seems to be, mainly, about itself: The AEA meets to celebrate the importance of its members, their presence in high public positions, their influence in foreign lands, and the winning of the Nobel Prize. Female and black members have won the right to organize sessions about gender and race--thus domesticating some of those who might otherwise complain. Radicals and Keynesians, on the other hand, appeared only on panels organized separately, by an alphabet soup of splinter associations. What was therefore most conspicuously missing from this meeting of America's premier social science organization, was any actual discussion of economic ideas.

But what am I thinking? Of course they don't want to discuss ideas. Would you, with the record of this professorate? Consider what has happened, in recent years, to five of the leading ideas of modern economics.

19 December 2001

[transroadwarrior]

taking Ecological Economics and all the neoclassical economics students are losing their minds at the idea that it’s really weird to assign monetary value to things in nature and that infinite growth is physically impossible. They are SO uncomfortable when the profs are like “there are two billion people living on less than $US3 a day and that is Wrong”. They define “benefit” and “harm” in terms of only money and consider losing money in any context to be “harm”, irrespective of collective benefits and without considering wealth disparity. Now, they are trying to understand. But holding a civil tongue in my head is becoming increasingly difficult. I want to shake them like a box full of fragile glass stemware and shatter everything upon which they build their personal paradigms.

[i-swear-its-only-ironical]

Every time I have important exams coming up, a new hyperfixation arises. And sadly, it's never idk something academically useful but always some flavour of found family with one character or ship that owns my life for like 2 months and makes me want to write extensive analysis about. BUT NO, MY DEAR BRAIN, THIS HASN'T GOT ANYTHING TO DO WITH STATISTICS OR POLITICAL SCIENCE SO FUCK YOU.

I'm fine it's fine it's okay I'm fine.

[halflingcaravan]

Tim "Smashed Avo" Gurner

Hey Folks,

If you're wondering where this bell-end comes from in the world, he is unfortunately an Aussie. He is also one of our more loathed form of capitalist jerkwads: The Property Developer. Plus he's the wangrod who decided that...

When talking about property prices 3 years before the pandemic was responsible for the equally out of touch shit-take of... "The young folks shouldn't be buying avocado toast if they want to buy a home..."

So yeah, he's just full of shit takes.

The more amazing thing about this kind of shit take is that Gurner is basically saying the 'Neoclassical/Neoliberal Quiet Part Out Loud'.

Unemployment is the only way neoclassical economics thinks to control inflation. And it's a bit Rube Goldberg at the same time.

Buckle in folks, we're going for a deep dive into a land of wild fantasy and nonsense: mainstream macroeconomics.

But how do we stop the inflations?!

In the Neoclassical pattern, you need to remember the fantasy starts with how they describe the economy already as it is and how prices happen.

Step 1: The economy will already be producing everything it can and prices are directly linked to the amount of Government Money.

Yep, you read that right... the main pile of economic thinking says that economies around the world are already making as much stuff as they could. They're importing everything they could, and the people who are here are already making as much as they possibly could.

This gets glued into the next thing which is The Equation of Exchange; MV = PQ. You'll see this bandied around and from a maths sense this is the most boring mundane crap of an equation possible but once you start trying to make it match RL goings on makes zero sense. M = the government money out there, V = Velocity of money (put a pin in this one! Oh boy!), P = prices, Q = the number of times people pay those prices.

It has variations where the PQ will be "P = Average Price, Q = All transactions in the average" or "PQ is actually the sum of every price P and the Q times that price was paid". They work out to be the same in the long run: the total of all the things people bought/sold. Now, remember the first half... we are already making the most stuff we can which means that Q is basically 'fixed' (we don't have more stuff to buy and sell) for any given period of time. They also tend to assume that 'Velocity of Money is constant' (which yeah oh boy... just oh boy). So if you change M (government money) there's only one thing that can happen: Prices move. If you spend more government money, then Prices have to go up. That's part of the logic, which is why they keep scaring you with Spending More Government Money Will Make The Inflations.

(Velocity of Money is meant to represent some kind of how often the money moves between people, but this is bonkers because everything is done on spreadsheets now and editing values is spreadsheets creates and destroys stuff constantly, so how fast is money moving? Also, banks settle net transaction not every single transaction. If your bank needs to send $10m to another bank, but that bank needs to send $11m to your bank, then the other bank sends $1m to your bank... that's it job done. They don't pass all the millions back and forth. So this whole idea of the velocity of money as a thing is nonsense, and then on top of it if you're at all scientifically inclined... try do a unit-substitution on MV=PQ, notice the units for V and realise what that would mean if you were doing that in Chem or Physics... let your brain melt on that one).

Step 2: But the Wage Price Spirals! Supplies and Demands!!!

Supply-and-Demand curves have something super wild going on. It gets glossed over a lot, but...

Supply and Demand curves assume the whole economy has only one thing in it, and everyone wants that one thing exactly the same as each other.

Yep. A supply and demand curve assumes everyone in Australia likes Victoria Bitters beer as much as everyone else AND that the only beer available in this fine nation of indigenous folks, migrants, forced migrants, and colonialist fucks, is Victoria Bitters. There is one beer: VB, and everyone wants it exactly the same amount. Welcome to Neoclassical/Mainstream economics.

What does this mean for inflation? If people have more money to buy stuff, then they'll push up prices! The demand (wanting a thing PLUS having the cash to buy it) will beat supply (which remember is already maxxed out) and push up prices!!!

How do we stop this? Make sure people don't have as much money to spend on things. Yep, you stop this by making people broke.

What is a great way to make people broke? Increase unemployment.

How do you go about doing that?

Central Bank Interest Rates... it's all a bit Rube Goldberg, but this is the monetarist solution to everything in the economy... fuck with the rates.

If you push up rates, loan costs go up, people and businesses have to spend more to cover their loans. That means people can't buy as much stuff. That means their rents potentially go up. That means food prices go up. And businesses can't afford to keep on as many staff. Unemployment goes up. That's the trick. Rates go up (insert bowling balls playing pianos to knock a switch to drive a remote control car) and then unemployment goes up.

Then when people aren't buying, inflation slows down. Then they drop rates.

But notice the funny thing... generating more unemployment requires the prices of stuff to go up because the rates go up. They make inflation to stop inflation... it's so fucking bonkers. We will crash this car into a tree faster now so we don't maybe crash into that cliff wall up ahead.

So yeah, Tim "Smashed Avo" Gurner isn't lying because that is the goal: to crush inflation by crushing employment.

[halflingcaravan]

Why it’s almost like treating people humanely at work makes them interested in working for you…

spoiler: the weird trick was "offering more pay and benefits"

[probablyasocialecologist]

Today, we know from the research of Jason Hickel and his colleagues that in 2021 the Global North was able to extract from the Global South 826 billion hours in net appropriated labor. This represents $18.4 trillion measured in Northern wages. Behind this lies the fact that workers in the Global South receive 87–95 percent lower wages for equivalent work at the same skill levels. The same study concluded that the wage gap between the Global North and the Global South was increasing, with wages in the North rising eleven times more than wages in the South between 1995 and 2021. This research into the contemporary global labor arbitrage is coupled with recent historical work by Utsa Patnaik and Prabhat Patnaik that has now documented the astronomical drain of wealth during the period of British colonialism in India. The estimated value of this drain over the period of 1765–1900, cumulated up to 1947 (in 1947 prices) at 5 percent interest, was $1.925 trillion; cumulated up to 2020, it amounts to $64.82 trillion. It should be emphasized that the Global North’s contemporary drain of economic surplus from the Global South, via the unequal exchange of labor embodied in exports from the latter, is in addition to the normal net flow of capital from developing to developed countries recorded in national accounts. This includes the balance on merchandise trade (import and exports), net payments to foreign investors and banks, payments for freight and insurance, and a wide array of other payments made to foreign capital such as for royalties and patents. According to the United Nations Conference on Trade and Development (UNCTAD), the net financial resource transfers from developing countries to developed countries in 2017 alone amounted to $496 billion. In neoclassical economics, this is known as the paradox of the reverse flow of capital, or of capital flowing uphill, which it ineffectively tries to explain away by various contingent factors, rather than acknowledging the reality of economic imperialism. With respect to the geopolitical dimension of imperialism, the focus this century has been on the continuing decline of U.S. hegemony. Analysis has concentrated on the attempts of Washington, since 1991, backed by London, Berlin, Paris, and Tokyo, to reverse this. The goal is to establish the triad of the United States, Europe, and Japan—with Washington preeminent—as the unipolar global power through a more “naked imperialism.” This counterrevolutionary dynamic eventually led to the present New Cold War. Yet, despite all of the developments in imperialism theory over the last century, it is not the theory of imperialism so much as the actual intensification of the Global North’s exploitation of the Global South, coupled with the resistance of the latter, that has stood out. As Sweezy argued in Modern Capitalism and Other Essays in 1972, the sharp point of proletarian resistance decisively shifted in the twentieth century from the Global North to the Global South. Nearly all revolutions since 1917 have taken place in the periphery of the world capitalist system and have been revolutions against imperialism. The vast majority of these revolutions have occurred under the auspices of Marxism. All have been subjected to counterrevolutionary actions by the great imperial powers. The United States alone has intervened militarily abroad hundreds of times since the Second World War, primarily in the Global South, resulting in the deaths of millions. In the late twentieth and early twenty-first centuries, the primary contradictions of capitalism have been those of imperialism and class.

3 November 2024

[m-0-renna]

In the 1990s, John Williamson, a British economist and senior fellow of the Peterson Institute for International Economics, coined the term Washington Consensus to describe the neoliberal agenda to privatise state-owned enterprises (SOEs), commodify public goods, and liberalise capital accounts and trade. These policy choices, driven by the IMF and World Bank in alignment with the US Treasury, find much of their theoretical justification in neoclassical economics and the works of thinkers like Friedrich Hayek and those associated with the neoliberal Mont Pelerin Society. The Washington Consensus paradigm is perhaps most famous for its role in the so-called structural adjustment programmes (SAPs), which led to a lost decade on the African continent.

For the past several decades, the IMF has enforced a combination of austerity (what they call a ‘balanced budget’ agenda), privatisation, and trade liberalisation on decolonising nations. This has stripped states in the Global South of the capacity to drive their development processes and protect their infant industries. In order to deal with the resulting imbalances, the IMF has frequently encouraged underdeveloped countries to borrow from private capital markets, leading to more debt traps. Meanwhile, the World Bank has historically followed an agenda of recommending anything but large-scale industrialisation for the Global South. In the early post-World War II era, this manifested in its recommendations for countries to stick to their ‘comparative advantage’ in exporting raw materials. By the 1990s, the World Bank was promoting ‘financial deepening’, code for encouraging financial deregulation as a panacea for mobilising resources for development. More recently, the World Bank has shifted its focus to promote development in the service sector and investment in small and medium-sized enterprises (SMEs), both recipes for continued debt bondage on the national and household level. The service sector is often dominated by multinational corporations (MNCs) with monopolistic structures, making states that focus their development on this sector susceptible to the whims of MNCs in the Global North. SMEs, which typically lack the resources (including government subsidies) to compete with MNCs and do not have the advantages of scale of MNCs, end up absorbed into these larger monopoly-dominated networks. Indeed, the combination of financial liberalisation and the promotion of SMEs locks countries into what Samir Amin called generalised monopoly capital, with both upstream (raw materials, technology, and capital) and downstream (distribution, marketing, and consumer access) networks of control.

One of the main outcomes of the Washington Consensus has been an almost religious belief in the power of foreign direct investment (FDI) to drive economic growth and structural transformation. The FDI mindset drives Global South states towards a narrow focus on opening up their labour and natural resource markets to Western monopolies, thereby linking their agendas to the rent-seeking needs of financiers rather than the developmental aspirations of their populations. Empirical evidence of FDI’s transformative capacity, however, is limited at best: this form of investment fails to promote integrative growth that could pave a pathway out of indebtedness and towards national sovereignty, instead promoting unproductive sectors of the economy. Three characteristics of FDI are important to note:

FDI flows are declining. FDI peaked in 2007, the year that the Third Great Depression took hold in the major capitalist countries, and has decreased in the years since. Indeed, according to the United Nations’ Conference on Trade and Development (UNCTAD), both FDI and project finance (long-term infrastructure or industrial funding) have experienced a gradual decline. From 2022 to 2023, for instance, developing countries saw a 7% decrease in FDI flows to developing countries.

FDI flows are non-productive. Over the past few years, UNCTAD’s annual investment reports have shown the changing character of FDI. While in the past it was concentrated in the manufacturing and industrial sectors as well as natural resource extraction, FDI has increasingly been channelled into the financial and service sectors, where it does not generate integrated or transformative development that could help transcend colonial underdevelopment.

FDI flows do not drive growth or investment. According to a 1999 UNCTAD report, large FDI inflows to developing countries in the 1990s had little impact on increasing investment patterns. More recent studies by UNCTAD have shown a clear divergence between FDI flows and GDP growth since the Third Great Depression. This means that economic growth is increasingly independent of FDI flows.

The Washington Consensus has only reinforced the colonial pattern of underdevelopment, producing debt burdens that cannot be easily serviced. With bondholders mercilessly seeking repayment and interest regardless of a country’s economic situation, the debt spiral eats into precious revenues that could otherwise be spent on health care, education, and productive industry and infrastructure. Countries borrow and go into debt. When they cannot repay their debt, they borrow more to pay off their existing debt, and the spiral continues. As Raghuram Rajan, the IMF’s chief economist from 2003 to 2007, wrote in his book Fault Lines (2010), the IMF’s policies are a ‘new form of financial colonialism’.

[moleshow]

I am a stupid person. Where should I begin reading about economics.

where you should begin depends on what you want to know. my response is long so i'm putting it under a readmore

if you want to know about economic theory, that's one thing; if you want to know about economics in practice (i.e. the way economies operate), that's another. these things are related, but they're often in separate books.

if there's something you want to know about specifically feel free to ask--i may or may not be able to provide a suggestion on what you should read. my wheelhouse is mainly international economics and political economy so my recommendations are not the end-all-be-all of the field.

i've uploaded all of these here: https://gofile.io/d/gbocnf

(i wasn't able to find a pdf of the 2020 edition of the Frieden but i was able to find the 2017 edition.)

the first recommendation i have is unfortunately a textbook. theoretical foundations are important 😔

1. An Introduction to International Economics: New Perspectives on the World Economy by Kenneth Reinert

this book's focus is primarily on neoclassical economic theory (which is often what people mean when they say "economics"), but it provides a strong foundation for thinking about markets, trade, and currencies.

i also want to note here that economic theories are best thought of as lenses through which to look at phenomena. all of these lenses illuminate some things and obfuscate others. so the utility of a given theory is dependent upon what you're trying to examine.

2. The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade by Pietra Rivoli

this book is a lot of fun, and falls pretty squarely into the "political economy" camp. Rivoli takes as her subject a t-shirt from a walgreens in florida (if memory serves), and follows the chain of production, to find out how it got there--as well as where shirts like it might go after being purchased. along the way she looks at the dynamics of production in practice, so she looks at the role of labor, firms, governments, brokers, etc.

i would recommend starting with this one or reading it alongside the Reinert so you aren't raw-dogging a textbook.

3. Global Capitalism: Its Fall and Rise in the Twentieth Century and Its Stumbles in the Twenty-First by Jeffry Frieden

for this one, you'll want to read the 2020 edition because the 2007 edition doesn't talk about the global financial crisis of 2008. this is a book that really is what it says on the tin--a history of global capitalism. it's particularly useful for understanding the origins and consequences of the postwar economic order. it contains some good discussions of keynesian economics and the neoliberal school of thought that followed.

4. World-Systems Analysis: An Introduction by Immanuel Wallerstein

this one's not a crucial read, but it covers a different way of thinking about basic economic units in international economics (i.e. not limiting one's economic analysis to nation-state units but instead thinking about the global economy as a system).

5. Running Steel, Running America by Judith Stein

i've put this book here because the latter half of the book essentially goes through how and why american production changed in the latter half of the 20th century, focusing chiefly on the production of steel. (this is another political economy book.) Stein illustrates the consequences of US foreign policy for the domestic economy, particularly during the 1970s--a crucial period. the whole book is worth reading, but the first half deals more with labor and politics so it's not directly related to your question.

bonus: Politics and Economics in the 1970s - lecture by Judith Stein

feel free to reach out if you have more questions or need clarification on something here👍

[fashionsfromhistory]

Afternoon Dress

c.1821

England

By the 1820s, multicolor, patterned garments had begun to replace the gossamer white of the century's first decade, due in large part to new developments in printing technology. Textile manufacturers were able to mechanize and economize production using engraved rollers rather than traditional wood blocks or copper plates. This dress, with its soft-colored zigzag pattern embellished by ruffles and braid, is very much a transitional piece that illustrates the move from the neoclassical mode to the more romantic styling of the 1820s and 1830s. From the previous decade, the dress retains the elevated waist. Other features - the blousy sleeve and the pelerine collar - are fashion points that would become increasingly prevalent and exaggerated in the 1830s. (Museum at FIT)

Museum at FIT (Object number: P83.32.2)

[magnetictapedatastorage]

The French term autisme has an older meaning than the English term autism and signifies "abnormal subjectivity, acceptance of fantasy rather than reality". However, post-autistic economists also "assert that neoclassical economics has the characteristics of an autistic child".

[edwad]

so many socialists are committed to a self-serving history of economics where the whole thing since 1870 has actually been an elaborate plot to undermine the contributions of marx (or whoever their favorite 19th century socialist is, but it's usually marx in this story). this particular telling of events is so important to them that they will get irrationally angry if you tell them that it isn't true and that their guy (whoever it was) didn't actually have that much influence on economic conversations at the time. even worse, lots of early marginalists were specifically concerned with constructing a kind of model of socialist distribution or using the new economics to center the needs of individuals rather than leaving it up to the disinterested circuitry of classical economics which always ended in calls for free trade, often at the expense of the people on the ground. this is untenable for contemporary socialists because it destroys the image of neoclassical economics as a kind of evil class project, which is the basis of their critique of it since they don't meaningfully engage with it at all otherwise.

[gepgep2]

One reason that actual proletarians were very suspicious of socialists in many cases is because their immediate enemy isn't actually the capitalist, who he rarely meets, but the annoying administrator upstairs. To a large extent, traditional socialism means giving that guy more power rather than less.

So I think we need to look at what's really going on in a hospital, in a school... In most cities in America now hospitals and schools are the two largest employers- universities and hospitals. Essentially work has been reorganized around working on bodies and minds of of other people, rather than producing objects. And the class relation in those institutions are not- you can't use traditional Marxist analysis. You need to actually reimagine what it would mean: Are we talking about the production of people? If so, what are the class dynamics involved in that? Is "production" the term at all? Probably not.

That's why I say that we need to reconstitute the language we're using to describe this, because we're essentially using 19th century terminology to discuss 21st century problems. Both sides are doing that. The right wing's using like neoclassical economics which is basically Victorian, it's trying to solve problems that no longer exist. But the left is using the 19th century Marxist critique of that which also doesn't apply!

https://m.youtube.com/watch?v=MN9S0HD8VH8

[beardedmrbean]

Traditionally incoming Argentinian presidents give an inauguration speech inside of Congress to other politicians. Javier Milei, a former “tantric sex instructor” turned libertarian economist, symbolically gave his speech with his back to the Congress facing towards the people. 

“For more than 100 years, politicians have insisted on defending a model that only produces poverty, stagnation, and misery,” President Milei said. “A model that assumes that citizens exist to serve politics, not that politics exists to serve citizens.” He also promised an “end a long and sad history of decadence and decline” and promote a new era based on peace, prosperity, and freedom.

Since his headline-making election victory last month, media portrayal of Milei has ranged from dismissive to condescending, often depicting him as an eccentric “far-right populist.” Yet, since taking office, Milei has shelved many of his campaign’s more contentious proposals and begun implementing a radical but, by international standards, orthodox reform plan to revitalize Argentina’s faltering economy.

Milei inherited a challenging situation. Argentina’s economy has shrunk by 12 per cent over the last decade, annual inflation reached an extraordinary 160 per cent in November, while the poverty rate increased to 40 per cent in the first half of 2023.

Argentina has a fascinating economic history that led up to this point. In the 19th century post-independence Argentina adopted a liberal constitution that helped deliver an impressive economic expansion.

By the early 20th century, Argentina was one of the world’s richest countries, driven by agricultural exports. Real wages were comparable to Britain and only slightly below the United States. Millions fled destitution in southern Europe for a new life in Argentina. Buenos Aires has been labelled the “Paris of South America” because of spectacular neoclassical architecture built during this era.

This turned to disaster over the subsequent decades because of collectivist rule – from military dictatorships to avidly socialist leaders. Argentina nationalised industries, subsidised domestic production, limited external trade, and introduced an unaffordable welfare state. This has become known as the Peronism, named after 20th century president Juan Domingo Perón, a leftist populist leader who supressed opposition and controlled the press.

This agenda accelerated in recent decades under self-identifying Peronist leaders, turning Argentina into one of the world’s most closed and heavily regulated countries. The latest Human Freedom Index places Argentina at 163rd in the world for openness to trade and 143rd for regulatory burden. This has culminated in an economy on the precipice of economic disaster.

Not wasting any time, Milei has proposed a mega package of over 350 economic reforms to open the economy and remove regulatory barriers. This includes privatising inefficient state assets, eliminating rent controls and restrictive retail regulations, liberalising labour laws, lifting export prohibitions, and allowing contracts in foreign currencies.

There has been a notable absence of some of most radical ideas – such as legalising organ sales or banning abortion. He has also put on hold plans to dollarise the economy and abolish the central bank. Instead, at least by international standards, the agenda contains several orthodox economic reforms.

Many of the measures – such as cutting spending to get the deficit (currently at 15 per cent of GDP) under control, opening the country up to international trade, and liberalising the airline industry through ‘open skies’ policy – would be required to join the European Union. The government is eliminating capital and currency controls and allowing the peso to devalue – measures that the IMF’s managing director Kristina Georgieva said these are important to stabilise the economy.

There are undoubtedly significant challenges ahead and some darker elements to agenda.

Milei has been, uncharacteristically for a politician, honest that “in the short term the situation will get worse”. The removal of price controls, for example, will increase inflation until demand and supply can stabilise to end shortages. But, he says, “then we will see the fruits of our efforts, having created the foundations of a solid and sustainable growth over time.”

The government is facing significant opposition, with the union movement organising mass protests and threatening a general strike. The government has responded by proposing questionable new anti-protest laws, that include lengthy jail sentences for road-blocking and requirements to seek permission for gatherings of more than three people in a public place. Milei, who could struggle to get much of his agenda through Argentina’s Congress, is asking for sweeping emergency presidential powers until the end of 2025. This raises serious questions about democratic accountability.

Nevertheless, there are some positive early signs. Since Milei’s election Argentina’s flagship stock index has risen by almost one-third and the peso’s value has not collapsed. Argentina could soon benefit from a major new shale pipeline pumping one million barrels of crude a day (helped along by reforms that allow exports of oil and sales at market prices) and the mining of the second largest proven lithium reserves in the world.

Argentina has long served as a solemn reminder that prosperity is neither inevitable nor unassailable. Misguided policies can transform mere challenges into a profound crisis. Milei is offering a glimmer of hope: redemption may just be possible. Let’s also hope that Britain’s leaders can similarly take the path of reform, ideally before things get as bad as Argentina.

Matthew Lesh is the Director of Public Policy and Communications at the Institute of Economic Affairs