“As a species we’re fundamentally insane. Put more than two of us in a room, we pick sides and start dreaming up reasons to kill one another. Why do you think we invented politics and religion?” — Stephen King. Well that is Americans for you.
Our ancestors before they learnt how to make tools for catching animals for food worked co-operatively to catch those animals. Because we could sweat to get rid of heat from our exertions we could keep after animals until they were so exhausted we could catch then. We needed plenty of food because our big heads were high consumers of energy. We were naturally pack animals that could achieve common goals because of ability to work as a team. Our modern creations are the result of very large groups that do not know each other, work together to build them. Americans have adopted a philosophy of individualism that goes against our co-operative instincts. To day they are full of friction with each other, are impolite with each other, and seek faults in each other. They are consumed by the ‘other’ that they do not know and even fight wars to destroy them.
This is also seen in the American antagonism to the idea of taxes. They cannot see that taxes are the way to finance common goals and rather proclaim that taxation is theft. They do not see that high tax societies are the ones that are happiest and well adapted. Taxation is the way that we collect resources to create things to benefit the community as a whole. The most efficient use of resources is when everyone benefits equally.
People also combine their resources to benefit just themselves by a system of capitalism whereby the collection of assets is used to create goods or services to sell and enrich just themselves. Governments assist this process through a legal fiction of a limited liability company which can walk away from a business failure with consequences for those that do not benefit from the proceeds. The operation of such a company for the exclusive benefit of the shareholders encourage the business to exploit local conditions to withhold benefits from workers, suppliers, customers, and their local community. Harm that falls on the local community is called an externality cost which they like to ignore from their finances. The more these costs can be avoided, the greater the benefit to the shareholders. This attitude can extend to the practice of selling goods and services that are not in any way beneficial to the deluded consumer. When it comes to making a profit by commercial capitalism, any care or morality can be dispensed with.
Taking a scientific view of this system of capitalism which is only for the benefit of the capitalist, it can be seen not to provide benefits for everybody. The theory of a beneficial system of capitalism is falsified by many failures. The capitalists that continue to profit from selling harmful and addictive cigarette products are immoral because they know their goods are harmful.
The awareness of capitalism’s faults has led to many efforts to rehabilitate capitalism with books and language such as ‘compassionate capitalism’, ‘conscious capitalism’, ‘ethical capitalism’, ‘ecological capitalism’, ‘progressive capitalism’, etc. While capitalists say they love democracy, there is no promotion of democratic capitalism where everybody connected with the business has a democratic say in its management affairs such as determining where the profits will be distributed. That is the co-operative form of a business enterprise. It contains the essence of human instincts to co-operate for the benefit of all.
The extension of basic capitalism from the early days of the formation of limited liability into the ‘neo-liberal’ form of capitalism has accelerated the relative impoverishment of those who have been excluded from the rentier economy. The ideas of minimizing government activities, the deregulation of business activities, and the privatisation of government activities has been proven by multiple failures to scientifically falsify those theories.
If business is not democratised, then capitalism must go and its faults overcome by a new system of co-operatively achieving a more egalitarian and economically efficient way of satisfying human needs.
Science fiction aficionados and techno-freaks have deluded themselves into seeing a future in space travel for humans. Some see it as necessary for the survival of the human race. Disagreeing may seem to be a being a spoilsport but we should turn away from these unrealistic endeavours. We have to face the unpalatable fact that the Earth will become unlivable one day and our descendants will all die off. Each of us do die off even though we fantasize about living on somehow while our bodies fail to continue living. We will die. The earth will die too.
We have to recognise that we are consuming the resources of the earth at an unsustainable rate as if we occupy multiple worlds. The pollution of our atmosphere is seen as the most immediate threat because our polluting gases will lead to an unlivable climate and sea level rise will consume most of our capital infrastructure. If we are going to delay our demise we must stop the pollution of our atmosphere with gases that reduce the emissivity of our planet which leads to global unlivable climate change. The plans for rocketing people to the Moon to prepare a base, continuing to Mars, and one day voyaging out to find another habitable planet (not yet discovered) are grandiose and counter our immediate survival needs. There is a need to do the arithmetic on the engineering and victualing of such a plan. The idea of engineering Mars to suit us is refuted by those who would see the need to make the Earth habitable instead.
The scale of rocketry for these ideas requires an enormous collection of energy fuels for this plan. This requirement for energy must involve the production of an excessive amount of greenhouse gases. We need to quantify this to grasp the enormity of this mis-allocation of our depleting resources. The materials required for the rockets and the rocket fuels necessary imply such large enterprise must automatically mean too much consequential polluting byproducts.
Human physiology is not suited for space travel. We have an inbuilt need to learn about our cosmos but we now have the ability to use robots to do that work much more efficiently. There is no need to send scientists into space when robotic technology can do a much better and more efficient job.
The scientist, engineers, and technicians working on this space nonsense must be diverted to attack the problems facing us with the continuance of consumptive polluting activities. I have a thought that this would be a better path to our limited future.
Individual Americans met here in NZ are virtuous, but the country as a whole isn’t. They are voracious in the way they vastly consume and pollute beyond their share. They are violent; with any reflection vitiate all around them, they construct a war, war on poverty, cancer, drugs, terrorism, to no effect. They are vain, ventose, and vacuous in their belief that they are ‘special’ while revealing their stupidity and ignorance. Their business model is based on vice and corruption being vital for the rich because for them, money is all. They are vandals because they use bombs and violence before diplomacy. When countries are victorious over US invasions and domination they are vindictive, vengeful, and will pursue a vendetta for ever. In their way of communicating they are vulgar and vitriolic. Their use of torture is vile. They are venal in the way they do not keep promises and treaties. They would rather pay more for private business services than vindicate a public service available to all. We must avoid being a vassal and give them a valediction and go our own way with independent valour.
In the ideology of capitalism and the free market idea, it is seen as economically justified and efficient provided that external costs be absent or made an internalised cost on the enterprise. There must be no externalities. The externalised costs of the small tinkers, tailors, cobblers, etc were never great. A bit of local social pressure could take care of it. But nowadays the externalised costs on the public who are not benefitting from the industry can be enormous. This is so when we have such large and remote corporations having such a large influence on economics. We only have to think of the Bhopal disaster and the evasion of responsibility to recognise this. In obvious doubtful situations we are encouraged to take a precautionary approach. I see a need for the public that might be on the receiving end of significant externalities to have some influence in avoiding it. I conceive of an option a bit like legal injunctions but without the high legal cost. People should be able to put the business that is seen to avoid taking care of such externality on a formal notice that they are responsible for the foreseen problem. Then the managers will not be able to avoid being labeled as reckless and be individually responsible for damaging consequences. There should then be no escape for being responsible for the consequences.
Most teachers of economics only concern themselves with capitalism as the economic model of interest. They support with enthusiasm the form generally known as neo-liberal economics. The features include the worship of what they call the free market. It includes the idea that in the name of freedom there should be minimalist government and deregulation. The privatisation of government assets is the most important way of making progress because the belief that free markets always result in more efficiency in business than state run activities.
Economists consider themselves as scientists, but that is false. They do not use data that they ought to establish, but depend on assumptions and assertions. The idea of markets that reach an equilibrium where supply and demand naturally meet, is claimed to give economic stability, yet the experience of booms and bust belie that prediction. This economic hypothesis is falsified convincingly by recent experience. The orthodox economists did not foresee the global financial crisis of 2008.
The ideology that desires minimum government demands tax cuts so the state is forced to reduce social support. The propaganda that the retention of money by capitalists will mean that they will create jobs so that wealth will trickle down to the working non-capitalists. This has not happened, falsifying that hypothesis. The ability of capital to borrow more capital is a positive feedback mechanism that causes inequality to grow in favour of those who have capital. Mathematically, the most efficient distribution of wealth and income is an egalitarian one.
That de-regulation is the harbinger of freedom is a noxious idea. Time and again de-regulation has resulted in deaths and injury to workers and the decrease in financial ethics. This is another falsification for those who think scientifically.
The idea that privatisation will bring efficiency to industrial and social activities is another hypothesis that is falsified. Many times the state must intervene in some way from failures of this hypothesis.
There is a significant faith in the idea that by businesses acting selfishly all will benefit (the trickle down idiocy again). Time and again the selfish actions harm others. The adulteration of food and the production shortcuts have not benefitted the consumer with safety and product reliability. Where public assets are used for profit, then the assets are over-exploited and everyone loses (the Tragedy of the Commons).
Humans are naturally social beings. By working together for a common outcome, advantages for everyone accrue. Competition as seen as good ignoring that it tends to produce more losers than beneficiaries. The goal of competition is to win by taking over the losers to create a monopoly and have a free rain to exploit that position. Co-operation bypasses the need to create losers. True co-operation benefits all.
Many activities of the state have a social purpose. The direction of these activities on a commercial basis has proven many failures. Rather than put business graduates in charge of these operations, we need people whose careers have been in progressing the social intentions to advance into leadership. It is nonsense to put some fancy economist in charge of education for instance.
Economics theory in textbooks is conducted on the basis of nice graphs. They are usually not given quantity graduation on the axes. Often a table of economic relations is used which are not based on actual measurements but imagined up to show a theoretical point. The supply ‘curve’ is an example. Often a nice straight line that sometimes intersects the origin of the graph and even occasionally indicates a quantity of supply when the price is zero. The graph shows a relation that the price is determined by a fixed amount plus a factor multiplied by the quantity of supply. Reverse engineering this, the total cost of production is based on the price multiplied by the quantity of production so it becomes the sum of the fixed amount multiplied by the quantity of supply and the production factor multiplied by the square of the quantity of supply. That the cost of supply depends on the square of the supply quantity seems nonsensical.
A different graph is presented in the chapters on marginal costing in competitive markets with a curve that is close to a parabola of average costs price against quantity. When I reverse engineer to get the total cost of production the first part of the downward part of the curve gives a cost curve close to reality with the cost being the sum of a fixed cost and a variable cost multiplied by the quantity of production. But then reverse engineering the rest of the upward trending curve gives a sharply rising variable cost. One graph I have just reverse engineered shows the variable cost rising to about eight times the initial variable cost. As the material resource and services cost part of the variable costs should not change, there is an exaggeration of the labour part of the variable costs. Economic textbooks depend on believing that the productivity of labour declines at scale but surely not by a factor over eight.
The cost structure of producers is something that a scientist could obtain but economists depend on assumptions rather than a scientific approach.
I have a thought that economics is more like a religion than a science.
Most economic textbooks take on a similar form. They start with an introduction that proposes a “production possibility” advantage to an economy. They make the assumption with two alternatives of production graphed with a convex curve and assume a better result than just specialising in either one. They justify this with an assertion that there are diminishing returns to labour and therefore avoiding specialising stops this.
They overlook the efficiency gains of large capital investments when specialising. Capital costs of manufacturing plant usually follow a power law which means the capital costs do not expand at the same rate as the plant capacity expands. In chemical plant the index of the power law varies. For aluminium production plant the power index is 0.80 meaning that to double the production capacity, the plant will cost 75% more. A caustic soda manufacturing plant will cost only 30% more for a plant of twice the capacity. Other chemical plants are in between these extremes. Doubling the plant size does not always mean doubling the labour force.
Do economists exaggerate the diminishing returns to labour? They depend on assumptions rather than collecting data. They never seem to know that in some cases larger material costs can receive a discounted cost. My thought is that they do not have experimental backing for their assertions. And this is only an introductory assertion. If economists are going to pretend to be scientific they had better do more measurements, stop assuming, and test their theories with real data.
When it comes to trade they produce the idea of “comparative advantage” which supports specialisation rather than the production possibility theory contradicting this phoney theory.