#Neoclassical Economics

[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

[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)

[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

[anarkittyuwuuniverse]

"Like a state, an operating system “governs” the programs and applications under it and networked with it as well as, to some extent, the individuals who avail themselves of these tools and resources. It defines us in relation to itself, and each other, as “users,” and can reward us, reject our requests, or even bar us from access according to its needs. It can also monitor and surveil us. Referring to giant metaplatforms like Android and Apple, the German sociologist Philipp Staab observes, “Their own systems are continuously optimized for maximum convenience, to reduce the need to switch to another system. On the other hand, they make it as difficult as possible for users to use certain services outside their own ecosystem.” This is our starting point for understanding the State. Its central feature is the legal, administrative, and decision-making structure we refer to as government. But the State is a much larger, more complex phenomenon, a comprehensive means of organizing and exercising power that, once it’s launched, expands to cover more and more aspects of existence according to a direction and logic of its own. “The state could never be the means for any special or definite end, as liberalism conceived it to be,” the German anarchist Rudolf Rocker wrote in his classic, Nationalism and Culture ; “it was rather, in its highest form, an end in itself, an end sufficient for itself.” At the same time, and again like a computer operating system, the State is not a material object or entity. The various pieces of “hardware” we associate with it—big, imposing neoclassical buildings fronted by Greco-Roman columns quite often come to mind, along with military bases, roads, and monuments—are merely material containers and symbols of the immaterial reality. An operating system is soft ware, a collection of embedded commands that direct a machine called a computer. The State, too, is “software”: a collection of ideas, doctrines, commands, and processes that direct the deployment of human beings and their deployment of physical resources. The State is at once a political, social-cultural, and economic entity. Like an operating system, it networks together institutions, organizations, and less formal groups including government but also many others: corporations, banks, other financial institutions (state-chartered, as it happens), and other underpinnings of capitalism; eleemosynary (nonprofit and charitable) institutions; so-called civil society groups and political parties (especially “established” parties like the Democrats and Republicans in the United States, which have evolved into quasi-state institutions); and even basic units like families and households. Other institutions and groupings that form part of the State furnish cultural and even paramilitary support to the social order, strengthen organized religion, and reinforce racial and gender stratification: for instance, the extreme wings of the nativist Alternative for Germany; the Hindu nationalist Rashtriya Swayamsevak Sangh (RSS) in India; and the American Legion, the Ku Klux Klan, the National Rifle Association, militia groups, the Proud Boys, and the Southern Baptist Convention in the United States." -The operating system: An anarchist theory of the modern state

[racefortheironthrone]

Your list of Worst Prime Ministers has a lot of "I wish the populace had gotten mad enough to straight-up overthrow this guy for the bad stuff he did, which they didn’t". What would the reverse look like? Put another way - which historic British Prime Minister was most unfairly reviled by the public for stuff that turned out in the rearview mirror of history not to be his/her fault?

Well, to go back to the post that started this little run, the one that stands out to me is James Callaghan. He certainly was not my favorite Labour PM, and I think he made a lot of mistakes (the pound was always a self-inflicted injury for a generation of Labour politicians, devolution was badly mishandled, etc.), but he was also right about some important issues (the Social Contract and the Common Market most importantly) and the crisis that everyone hated him for was not really of his making.

Stagflation was something that no one dealt with well. Nixon, Ford, Carter, Reagan, Thatcher - it really didn't matter where you were on the ideological spectrum, none of the economic theories on offer in the 1970s had a viable solution to the problem. The left was hamstrung by the limitations of the neoclassical synthesis, but it's also true that monetarism was a fiasco everywhere it was tried, whether in the United States or the United Kingdom or Chile.

Speaking of alternate histories, I really do wonder what would have happened if Callaghan had called a snap election in September 1978 as people wanted him to do. 1979 would still have been a trainwreck regardless, because Callaghan didn't have a solution to the wage problem (should have read more Keynes!), but a storm that he could have ultimately weathered because North Sea oil was about to come online, which would have brought inflation down even faster without Thatcher's monetarist nonsense.

[mostlysignssomeportents]

FTC vs surveillance pricing

Support me this summer on the Clarion Write-A-Thon and help raise money for the Clarion Science Fiction and Fantasy Writers' Workshop!

In the mystical cosmology of economics, "prices" are of transcendental significance, the means by which the living market knows and adapts itself, giving rise to "efficient" production and consumption.

At its most basic level, the metaphysics of pricing goes like this: if there is less of something for sale than people want to buy, the seller will raise the price until enough buyers drop out and demand equals supply. If the disappointed would-be buyers are sufficiently vocal about their plight, other sellers will enter the market (bankrolled by investors who sense an opportunity), causing supplies to increase and prices to fall until the system is in "equilibrium" – producing things as cheaply as possible in precisely the right quantities to meet demand. In the parlance of neoclassical economists, prices aren't "set": they are discovered.

In antitrust law, there are many sins, but they often boil down to "price setting." That is, if a company has enough "market power" that they can dictate prices to their customers, they are committing a crime and should be punished. This is such a bedrock of neoclassical economics that it's a tautology "market power" exists where companies can "set prices"; and to "set prices," you need "market power."

Prices are the blood cells of the market, shuttling nutrients (in the form of "information") around the sprawling colony organism composed of all the buyers, sellers, producers, consumers, intermediaries and other actors. Together, the components of this colony organism all act on the information contained in the "price signals" to pursue their own self-interest. Each self-interested action puts more information into the system, triggering more action. Together, price signals and the actions they evince eventually "discover" the price, an abstraction that is yanked out of the immaterial plane of pure ideas and into our grubby, physical world, causing mines to re-open, shipping containers and pipelines to spark to life, factories to retool, trucks to fan out across the nation, retailers to place ads and hoist SALE banners over their premises, and consumers to race to those displays and open their wallets.

When prices are "distorted," all of this comes to naught. During the notorious "socialist calculation debate" of 1920s Austria, right-wing archdukes of religious market fundamentalism, like Von Hayek and Von Mises, trounced their leftist opponents, arguing that the market was the only computational system capable of calculating how much of each thing should be made, where it should be sent, and how much it should be sold for.

Attempts to "plan" the economy – say, by subsidizing industries or limiting prices – may be well-intentioned, but they broke the market's computations and produced haywire swings of both over- and underproduction. Later, the USSR's planned economy did encounter these swings. These were sometimes very grave (famines that killed millions) and sometimes silly (periods when the only goods available in regional shops were forks, say, creating local bubbles in folk art made from forks).

Unplanned markets do this too. Most notoriously, capitalism has produced a vast oversupply of carbon-intensive goods and processes, and a huge undersupply of low-carbon alternatives, bringing the human civilization to the brink of collapse. Not only have capitalism's price signals failed to address this existential crisis to humans, it has also sown the seeds of its own ruin – the market computer's not going to be getting any "price signals" from people as they drown in floods or roast to death on sidewalks that deliver second-degree burns to anyone who touches them:

https://www.fastcompany.com/91151209/extreme-heat-southwest-phoenix-surface-burns-scorching-pavement-sidewalks-pets

For market true believers, these failures are just evidence that regulation is distorting markets, and that the answer is more unregulated markets to infuse the computer with more price signals. When it comes to carbon, the problem is that producers are "producing negative externalities" (that is, polluting and sticking us with the bill). If we can just get them to "internalize" those costs, they will become "economically rational" and switch to low-carbon alternatives.

That's the theory behind the creation and sale of carbon credits. Rather than ordering companies to stop risking civilizational collapse and mass extinction, we can incentivize them to do so by creating markets that reward clean tech and punish dirty practices. The buying and selling of carbon credits is supposed to create price signals reflecting the existential risk to the human race and the only habitable planet known to our species, which the market will then "bring into equilibrium."

Unfortunately, reality has a distinct and unfair leftist bias. Carbon credits are a market for lemons. The carbon credits you buy to "offset" your car or flight are apt to come from a forest that has already burned down, or that had already been put in a perpetual trust as a wildlife preserve and could never be logged:

https://pluralistic.net/2022/03/18/greshams-carbon-law/#papal-indulgences

Carbon credits produce the most perverse outcomes imaginable. For example, much of Tesla's profitability has been derived from the sale of carbon credits to the manufacturers of the dirtiest, most polluting SUVs on Earth; without those Tesla credits, those SUVs would have been too expensive to sell, and would not have existed:

https://pluralistic.net/2021/11/24/no-puedo-pagar-no-pagara/#Rat

What's more, carbon credits aren't part of an "all of the above" strategy that incorporates direct action to prevent our species downfall. These market solutions are incompatible with muscular direct action, and if we do credits, we can't do other stuff that would actually work:

https://pluralistic.net/2023/10/31/carbon-upsets/#big-tradeoff

Even though price signals have repeatedly proven themselves to be an insufficient mechanism for producing "efficient" or even "survivable," they remain the uppermost spiritual value in the capitalist pantheon. Even through the last 40 years of unrelenting assaults on antitrust and competition law, the one form of corporate power that has remained both formally and practically prohibited is "pricing power."

That's why the DoJ was able to block tech companies and major movie studios from secretly colluding to suppress their employees' wages, and why those employees were able to get huge sums out of their employers:

https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation

It's also why the Big Six (now Big Five) publishers and Apple got into so much trouble for colluding to set a floor on the price of ebooks:

https://en.wikipedia.org/wiki/United_States_v._Apple_(2012)

When it comes to monopoly, even the most Bork-pilled, Manne-poisoned federal judges and agencies have taken a hard line on price-fixing, because "distortions" of prices make the market computer crash.

But despite this horror of price distortions, America's monopolists have found so many ways to manipulate prices. Last month, The American Prospect devoted an entire issue to the many ways that monopolies and cartels have rigged the prices we pay, pushing them higher and higher, even as our wages stagnated and credit became more expensive:

https://prospect.org/pricing

For example, there's the plague of junk fees (AKA "drip pricing," or, if you're competing to be first up against the wall come the revolution, "ancillary revenue"), everything from baggage fees from airlines to resort fees at hotels to the fee your landlord charges if you pay your rent by check, or by card, or in cash:

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

There's the fake transparency gambit, so beloved of America's hospitals:

https://pluralistic.net/2024/06/13/a-punch-in-the-guts/#hayek-pilled

The "greedflation" that saw grocery prices skyrocketing, which billionaire grocery plutes blamed on covid stimulus checks, even as they boasted to their shareholders about their pricing power:

https://prospect.org/economy/2024-06-12-war-in-the-aisles/

There's the the tens of billions the banks rake in with usurious interest rates, far in excess of the hikes to the central banks' prime rates (which are, in turn, justified in light of the supposed excesses of covid relief checks):

https://prospect.org/economy/2024-06-11-what-we-owe/

There are the scams that companies like Amazon pull with their user interfaces, tricking you into signing up for subscriptions or upsells, which they grandiosely term "dark patterns," but which are really just open fraud:

https://prospect.org/economy/2024-06-10-one-click-economy/

There are "surge fees," which are supposed to tempt more producers (e.g. Uber drivers) into the market when demand is high, but which are really just an excuse to gouge you – like when Wendy's threatens to surge-price its hamburgers:

https://prospect.org/economy/2024-06-07-urge-to-surge/

And then there's surveillance pricing, the most insidious and profitable way to jack up prices. At its core, surveillance pricing uses nonconsensually harvested private information to inform an algorithm that reprices the things you buy – from lattes to rent – in real-time:

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

Companies like Plexure – partially owned by McDonald's – boasts that it can use surveillance data to figure out what your payday is and then hike the price of the breakfast sandwich or after-work soda you buy every day.

Like every bad pricing practice, surveillance pricing has its origins in the aviation industry, which invested early on and heavily in spying on fliers to figure out how much they could each afford for their plane tickets and jacking up prices accordingly. Architects of these systems then went on to found companies like Realpage, a data-brokerage that helps landlords illegally collude to rig rent prices.

Algorithmic middlemen like Realpage and ATPCO – which coordinates price-fixing among the airlines – are what Dan Davies calls "accountability sinks." A cartel sends all its data to a separate third party, which then compares those prices and tells everyone how much to jack them up in order to screw us all:

https://profilebooks.com/work/the-unaccountability-machine/

These price-fixing middlemen are everywhere, and they predate the boom in commercial surveillance. For example, Agri-Stats has been helping meatpackers rig the price of meat for 40 years:

https://pluralistic.net/2023/10/04/dont-let-your-meat-loaf/#meaty-beaty-big-and-bouncy

But when you add commercial surveillance to algorithmic pricing, you get a hybrid more terrifying than any cocaine-sharks (or, indeed, meth-gators):

https://www.nbcnews.com/news/us-news/tennessee-police-warn-locals-not-flush-drugs-fear-meth-gators-n1030291

Apologists for these meth-gators insist that surveillance pricing's true purpose is to let companies offer discounts. A streaming service can't afford to offer $0.99 subscriptions to the poor because then all the rich people would stop paying $19.99. But with surveillance pricing, every customer gets a different price, titrated to their capacity to pay, and everyone wins.

But that's not how it cashes out in the real world. In the real world, rich people who get ripped off have the wherewithal to shop around, complain effectively to a state AG, or punish companies by taking their business elsewhere. Meanwhile, poor people aren't just cash-poor, they're also time-poor and political influence-poor.

When the dollar store duopoly forces all the mom-and-pop grocers in your town out of business with predatory pricing, and creating food deserts that only they serve, no one cares, because state AGs and politicians don't care about people who shop at dollar stores. Then, the dollar stores can collude with manufacturers to get shrunken "cheater sized" products that sell for a dollar, but cost double or triple the grocery store price by weight or quantity:

https://pluralistic.net/2023/03/27/walmarts-jackals/#cheater-sizes

Yes, fliers who seem to be flying on business (last-minute purchasers who don't have a Saturday stay) get charged more than people whose purchase makes them seem to be someone flying away for a vacation. But that's only because aviation prices haven't yet fully transitioned to surveillance pricing. If an airline can correctly calculate that you are taking a trip because you're a grad student who must attend a conference in order to secure a job, and if they know precisely how much room you have left on your credit card, they can charge you everything you can afford, to the cent.

Your ability to resist pricing power isn't merely a function of a company's market power – it's also a function of your political power. Poor people may have less to steal, but no one cares when they get robbed:

https://pluralistic.net/2024/07/19/martha-wright-reed/#capitalists-hate-capitalism

So surveillance pricing, supercharged by algorithms, represent a serious threat to "prices," which is the one thing that the econo-religious fundamentalists of the capitalist class value above all else. That makes surveillance pricing low-hanging fruit for regulatory enforcement: a bipartisan crime that has few champions on either side of the aisle.

Cannily, the FTC has just declared war on surveillance pricing, ordering eight key players in the industry (including capitalism's arch-villains, McKinsey and Jpmorgan Chase) to turn over data that can be used to prosecute them for price-fixing within 45 days:

https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-issues-orders-eight-companies-seeking-information-surveillance-pricing

As American Prospect editor-in-chief David Dayen notes in his article on the order, the FTC is doing what he and his journalistic partners couldn't: forcing these companies to cough up internal data:

https://prospect.org/economy/2024-07-24-ftc-opens-surveillance-pricing-inquiry/

This is important, and not just because of the wriggly critters the FTC will reveal as they use their powers to turn over this rock. Administrative agencies can't just do whatever they want. Long before the agencies were neutered by the Supreme Court, they had strict rules requiring them to gather evidence, solicit comment and counter-comment, and so on, before enacting any rules:

https://pluralistic.net/2022/10/18/administrative-competence/#i-know-stuff

Doubtless, the Supreme Court's Loper decision (which overturned "Chevron deference" and cut off the agencies' power to take actions that they don't have detailed, specific authorization to take) will embolden the surveillance pricing industry to take the FTC to court on this. It's hard to say whether the courts will find in the FTC's favor. Section 6(b) of the FTC Act clearly lets the FTC compel these disclosures as part of an enforcement action, but they can't start an enforcement action until they have evidence, and through the whole history of the FTC, these kinds of orders have been a common prelude to enforcement.

One thing this has going for it is that it is bipartisan: all five FTC commissioners, including both Republicans (including the Republican who votes against everything) voted in favor of it. Price gouging is the kind of easy-to-grasp corporate crime that everyone hates, irrespective of political tendency.

In the Prospect piece on Ticketmaster's pricing scam, Dayen and Groundwork's Lindsay Owens called this the "Age of Recoupment":

https://pluralistic.net/2024/06/03/aoi-aoi-oh/#concentrated-gains-vast-diffused-losses

For 40 years, neoclassical economics' focus on "consumer welfare" meant that companies could cheat and squeeze their workers and suppliers as hard as they wanted, so long as prices didn't go up. But after 40 years, there's nothing more to squeeze out of workers or suppliers, so it's time for the cartels to recoup by turning on us, their customers.

They believe – perhaps correctly – that they have amassed so much market power through mergers and lobbying that they can cross the single bright line in neoliberal economics' theory of antitrust: price-gouging. No matter how sincere the economics profession's worship of prices might be, it still might not trump companies that are too big to fail and thus too big to jail.

The FTC just took an important step in defense of all of our economic wellbeing, and it's a step that even the most right-wing economist should applaud. They're calling the question: "Do you really think that price-distortion is a cardinal sin? If so, you must back our play." Support me this summer on the Clarion Write-A-Thon and help raise money for the Clarion Science Fiction and Fantasy Writers' Workshop!

https://clarionwriteathon.com/members/profile.php?writerid=293388

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/2024/07/24/gouging-the-all-seeing-eye/#i-spy