Economics for Jane Austen

December 27, 2005 § Leave a comment

And, from a fascinating article on the economics of Jane Austen novels
http://www.economist.com/finance/PrinterFriendly.cfm?story_id=5323633

Lady Denham, the doyenne of Sanditon, laid out the social order of the time:

But heiresses are monstrous scarce! I don’t think we have had an heiress here, or even a co-heiress, since Sanditon became a public place. Families come after families, but as far as I can learn, it is not one in an hundred of them that have any real property, landed or funded—an income perhaps, but no property. Clergymen maybe, or lawyers from town, or half-pay officers, or widows with only a jointure. And what good can such people do anybody?

There is bitter humour in Lady Denham’s dismissal of her author’s own class. As the daughter of a clergyman, who spent her later years living on the generosity of relatives, Miss Austen knew all too well that wealth was the only real source of security.

Where did that wealth come from? The answer lies in the combination of Britain’s growing commercial riches and its government’s continuing poverty. There was really only one kind of investment from the South Sea Bubble of 1720 to the railway boom of the 1840s: government debt. British government debt was the only security traded on the Stock Exchange at its foundation in 1801, and remained so until 1822. Thanks to luck and skill, the government managed to finance a century’s worth of horrendously expensive wars in a way that not only did not cripple commerce but mobilised commercial resources for new challenges.

The key piece of skill was the mechanism of “funding” that secured interest payments. When William and Mary re-established the Protestant monarchy in 1688, Parliament wanted both to shore up the royal finances and establish its control over them. Funded borrowing did both. Parliament passed taxes sufficient to pay interest on a certain amount of debt—just over £1m in the first instance—then tacked on a bit more tax to pay down the principal gradually. The monarch could borrow against this “funded” amount fairly easily, but found it hard to borrow more, which gave British debt unparalleled stability. In 1715-70 France reneged on the terms of its debt five times; Britain never missed an interest payment.

————- The wealthy get the interest and the interest comes from general taxes, and kids go off to fight wars.

Society is, so far, an ensemble of such mechanisms. I’d contrast it with Robert Wright’s view (Beyond zero sum) that complexity requires us to be more tolerant, moral and empathetic.

113553262615494895

December 25, 2005 § Leave a comment


Ah to be in Norway at Christmas, a few single malts and…

I find I am more interested and puzzled by Christmas and the Christian background this year than ever before. This year i hacked my way through the new testament in Greek (I found a great text with English printed in small underneath the Greek text, line by line and wanted to work on the Greek). So curious that this eastern religion got imported into the heart of the west. It first appealed to those left behind by the Roman empire, and then, when it was taken by Constantine as he ideology of a revitalized roman empire, those folks got left behind again, and Mohammad organized these left behind, marginalized, in Islam – and this is still going on. How to respond? Is science and secular thought sufficient to organize a human world?

Draconian drink/drive laws, as in Norway, would hurt the poorer more than the rich. The poor are more dependent on driving for work, and drink is itself the result of complex motivation – to be able to afford the good life, and to escape the world all together. For a law to work it has to meet social standards. For driving to be so severely regulated (I am in favor) would require some complex social cost thinking. (I am in favor).

Change

December 23, 2005 § Leave a comment

As a psychoanalyst I tend to think slow about change, but realize it also takes challenge. First do no harm. But when something seems to pass all the tests of unwise attitude or behavior, make sure to give the client a choice.

The other side of not doing too much is from The Leopard, the famous line “Things have to change in order to remain the same.” I think at times that our problem is that he call for change is too much, and the lack of it creates no energy. The real purpose of this site is to determine – do folks like us have a mission? I for one would be happy if our mission was centered around major change that was understood to be the minimum necessary to get some significant differences away from the curves we currently are riding. I also would be happy if our mission was a real exploration of issues through reading and analysis. If neither of these are the mission, what could be?

Living in the shadow of china could be pretty good. If they get smart enough to manage us. The Chinese tradition is fairly benign toward outlying countries. (Tibet is too close). What if we were hong kong?

But in the meanwhile, the one thing I would want to change is corporate charters in so far as they give advantages of the larger against the smaller. Those advantages include (but not limited to) lower interest rates, access to congress, access to foreign country leadership, and much more. The details count, and the test is “advantage” through the use of the charter.
I am for a high entrepreneurial, high tech, high educational, high aesthetic, regional and local focus activity. Lets meet human needs with business, but not force consumer goods to be the only way to gain a life.

From Richard Rorty

December 22, 2005 § Leave a comment

On radical thinking, forgive the long quote, from the American Philosopher Richard Rorty.. (see dissent magazine current issue)

The picture is dismal, maybe realistic, and important, given who is saying it.
excerpts

Once they could no longer believe in the immortality of the soul, many Westerners substituted the project of improving human life on Earth for that of getting to Heaven. Hoping for the achievement of Enlightenment ideals took the place of yearning to see the face of God. Spiritual life came to center around movements for social change, rather than around prayer or ritual.
Most of those who made that switch took for granted that the West would retain its hegemony long enough to bring liberty, equality, and fraternity to the rest of the planet. But that hegemony is over. The West has reached its acme; it is as rich and powerful as it is going to get. Even the United States of America can deploy military power only by risking bankruptcy. The American Century has ended, and the Chinese Century has begun. America, while in the saddle, did more good than harm. Nobody knows what China will do—least of all the Chinese.

Yet economic and military decline is not the only problem for the West. It may be frightened into renouncing its ideals even before it loses its influence. Suppose a dirty nuclear bomb, hidden in the bowels of a container ship, were exploded in San Francisco Bay. Could a free press and an independent judiciary survive martial law? Would Germany remain a constitutional democracy if such a bomb went off at the Hamburg docks? The first terrorists to containerize a stolen nuclear warhead may be able to preen themselves on having demolished institutions that took two centuries to build.

In the course of those centuries, Western idealists swung back and forth between exuberance and desperation. The first is captured by Alfred Tennyson in “Locksley Hall”:

Not in vain the distance beacons. Forward, forward let us range. Let the great world spin forever down the ringing grooves of change. Thro’ the shadow of the globe we sweep into the younger day: Better fifty years of Europe than a cycle of Cathay.

But when things go badly we reread Matthew Arnold’s “Dover Beach”:

. . . we are here as on a darkling plain Swept with confused alarms of struggle and flight Where ignorant armies clash by night.

In early 1914 it was still possible to be confident that, given another fifty years of Europe, the world would be transformed, and greatly improved. But as the twentieth century piled up its catastrophes, more and more writers told us it would be foolish to hope. “It is closing time in the gardens of the West,” Cyril Connolly wrote just before the Second World War, “and from now on an artist will be judged only by the resonance of his solitude or the quality of his despair.” But Connolly was wrong. The war turned out better than he had any reason to expect. Even Auschwitz did not stop successive postwar generations from thinking that the world might still, under Western guidance, sweep forward into a younger day.

But the postwar impetus has faltered, and the attacks of September 11, 2001, have made us realize how unlikely it is that the West will be able to determine the world’s future. It is dawning on non-Western nations that their fates will rest with Beijing rather than with Washington. How long Europeans and Americans have to stroll the gardens depends upon how long keeping them open remains in the interests of Cathay.

The tragedy of the modern West is that it exhausted its strength before being able to achieve its ideals. The spiritual life of secularist Westerners centered on hope for the realization of those ideals. As that hope diminishes, their life becomes smaller and meaner. Hope is restricted to little, private things—and is increasingly being replaced by fear.

From Ian McEwan’s novel Saturday, One of the characters—Theo, the eighteen-year-old son of Henry Perowne, the middle-aged neurosurgeon who is the novel’s protagonist—says to his father,

When we go on about the big things, the political situation, global warming, world poverty, it all looks really terrible, with nothing getting better, nothing to look forward to. But when I think small, closer in—you know, a girl I’ve just met, or this song we are doing with Chas, or snowboarding next month, then it looks great. So this is going to be my motto—think small.
The book does not have a politics. It is about our inability to have one—to sketch a credible agenda for large-scale change.

Saturday has an epigraph from Saul Bellow’s Herzog that speaks of “the late failure of radical hopes.”

The problem for good-hearted Westerners is that they seem fated to live out their lives as idiots (in the old sense of “idiot,” in which the term refers to a merely private person, one who has no part in public affairs). They are ingrates and dilettantes—ingrates because their affluence is made possible by the suffering of the poor and dilettantes because they are no longer able to relate thought to action. They cannot imagine how things could be made better.
How restful it must have been, in another age, to be prosperous and believe that an all-knowing supernatural force had allotted people to their stations in life. And not to see how the belief served your own prosperity . . . . Now we think we do see, how do things stand? After the ruinous experiments of the recently deceased century, after so much vile behavior, so many deaths, a queasy agnosticism has settled around these matters of justice and redistributed wealth. No more big ideas. The world must improve, if at all, by tiny steps. People mostly take an existential view—having to sweep the streets for a living looks like simple bad luck. It’s not a visionary age. The streets need to be clean. Let the unlucky enlist.

After the ruinous experiments, after the late failure of radical hopes, it has become hard to find inspiration in a vision of a just, free, global community. It remained a visionary age, and an intense spiritual life remained possible for secularized Westerners, only as long as it seemed possible to take more than tiny steps. Even if we have some middle-sized ideas about how to make things better—narrowing the income gap between gray-haired neurosurgeons and gray-haired gutter-sweepers, for example—we have no plausible ideas about how to alleviate “the political situation, global warming, world poverty.”

Even if we got some new big ideas, it seems unlikely that we would have time to implement them. For our cities are vulnerable.

We sicken for self-punishment because of the guilt that comes from being able to do little and being unable to imagine doing more, either for gutter-sweepers in London or for children in Guatemalan sweatshops. We feel that our world does not deserve to last, because it is so irredeemably unjust.

There will be other planes and other thugs. The world outside the West is full of both. Some non-Western thugs may be fobbed off with the beauty of an eighteenth-century dream, but hardly all. The mood of some may change, but others will stay the course.

Islamic terrorism will settle into place, alongside recent wars, climate changes, the politics of international trade, land and fresh water shortages, hunger, poverty and the rest.”

It makes vivid both our uneasiness about the future and our queasy, debilitating agnosticism about matters of justice and redistributed wealth.

Social change strategy

December 22, 2005 § Leave a comment


The failure of larger plans (socialism, fascism) in the last century tend to make people skiterish about anything but piece by piece “reforms” now. But that tends to assume “capitalism”, in the bush sense of corporations plus open markets plus democracy (media controlled populations serving corporations) as the normative model. But this keeps us in the rut. Creating an alternative but not falling into social planning (Creighton’s concern) is not easy, but we have to make the attempt or be meaningless.

On the current difficult situation

December 21, 2005 § Leave a comment


Here analysis would be important. The Bill of Rights is vulnerable because people think that security is more important, especially if security from violence and security from economic disruption are closely linked. The people might prefer a tough police state approach. i believe we are in that situation and the new anger at Bush 9from his old supporters, not those who have been deeply oposed for years) is because of incompetence in his delivery of the things he promised. The crucial question is, how will the country react when there is some kind of fairly severe terrorist attack in the US?

This leads me to think that the systemic question is how the US functions as a declining empire amidst the rise of china, Russia, Europe, etc..? We have spent, through Bush policy, most of our soft capital of being the good guy country, an image we held on to as the hope of mankind, despite our actions in Latin America, Vietnam, ME. Note that the world is much like it was before WW2, the same powers in the same potential conflicts.
Getting the US to align with its own best values is competing, as an agenda, with the need of the corporate, wall street, energy folks and tax cut beneficiaries, to control the agenda for their own strong tendency now to write off America and take as much cash with them as they can. I am talking about big money, those with a hundred million up. But that tendency is moving downward, and the outflow of US money into foreign property and stock markets is accelerating.

If this is right what we need is real leadership around a vision of what a revitalized America could be like. And my view is, its a longshot. tyhe put ’em in jail crowd is winningn and will only accelerate. I thought that Schwartenger has an opportunity to lead with the williams execution, indicating that redemption and rehabilitation more than revenge were the emerging guiding principles. he missed the opportunity. The cusp of the country is captured in this specific issue, where leadership for a humane society could, issue by small issue, win out over leadership towards a polic state. At this point I am very oessimistic. y local county for example is losing children in school because families can’t afford to live here. To build any size house requires permits that cost about 50k. That means that a small house, absorbing these costs, is financially stupid. The pressure from the new rich to tke land for large houses (what they think of as meer market forces) is making this place, with its expanded homelessness, unliveable. The grocery store customers look like an army in retreat.

I can foresee a kind of movement with half a dozen principles that would move us in a better direction, not vague values, but specifics of corporate chartering, environmental regulation, revitalizing food, education, health, foreign policy, income sharing. and get people to sign up, across class lines, one by one…

In the meanwhile note that the NY strike involves those who are losing income in a city where costs are rising. This is actually rather dangerous. It is not just the transit workers. It is a tectonic plate of disadvantaged colliding with the city.

On finances

December 19, 2005 § Leave a comment


Indeed all the predictions are coming true: Spengler’s that the West declines into fascism, the club of Rome and Donnella Meadows that the environment is over stretched and population the main cause, along with energy prices and the peak all thesis. The there is Malthus and his dire predictions about food and population. For most of us these have not happened, but for those millions who have already died from these effects the predictions were true enough. As has been said, the purpose of industry is “remove consumers from the consequences of production.” (Dee Hock)

The trouble has been that the time frame has been off for most of us. The reason is, as things get worse, human initiative to cope is forced to reinvent itself. the result is that the curves, while still moving in the same direction, are a little slower, a kind of slow motion collapse which gives time for local coping.

Y2k taught us that major coping within institutions can occur if there is local authority to do so and accountability for failures. This was clear for Y2k. But if the effects, the causes, or the authority are not local, then we cannot expect much coping to have a significant impact.

I’Ve been reading to day from

http://www.morganstanley.com/GEFdata/digests/20051216-fri.html>

China’s problems stem in large part from excess foreign exchange
reserve accumulation. With its official reserves now around $770 billion —
up 50% from a year ago and rapidly closing in on Japan’s $840 billion — China is
forced into massive buying of dollar-denominated assets in order to prevent the
renminbi from rising too rapidly and jeopardizing its export
competitiveness.

The risks are equally disturbing from
America’s point of view. To the extent that foreign purchases of
dollar-denominated assets represent the functional equivalent of a subsidy to US
interest rates, asset markets enjoy artificial valuation support. The
result is a surge in housing values that many Americans now perceive to be a new
and permanent source of saving. This, in turn, has had a profound impact
in reshaping saving and spending strategies of US consumers. In essence,
the income-based consumption models of yesteryear have been replaced by
asset-driven frameworks. The repercussions of this transformation are
profound:

That is, we are told that we
have low inflation, but for the things we are actualy spending money: houses –
inflation is very high.
Through 3Q05, fully 40 major metropolitan areas were
still experiencing year-over-year house price inflation of at least 20%; at the
state level — a broader geographic unit — residential home prices for 25 states
plus the District of Columbia were still rising in excess of 10%.

Specifically, I think there is a much greater chance that world
GDP growth could slip back into the 2.5% to 3.0% danger zone rather than cruise
at or above our nearly 4% projection.

Crucual question: why is low GROTH problem? If we are doing as well this year as last, aren’t we doing just fine? That is, we have the same amount of stuff (mild population increase correction, but that percentage is smaller). Te answer is that the financial types who write the reports and make the policies, like running the Fed, are only making big bucks if there is growth. Growth is also necessary to back interest because, with debt remaining the same, interest on that debt increases the debt.

If German firms continue to be effective in their dealings with the labour
unions, I would not be surprised if we see a similar recovery in Germany to the
one witnessed in Japan this past year.

What this means is, Germany does well, but German workers do poorly. What then is Germany? (This line of questioning fits most countries, certainly the US.)

The federal budget deficit narrowed to $319 billion in FY2005 (September) from
$413 billion in the prior year — slashing federal government dissaving by a full
percentage point to -2.6%, or close to the historical average. The entire
improvement, however, came from a record 14.6% surge in tax receipts that has
little chance of being repeated. In line with job and wage growth,
withheld income and payroll taxes (which make up about three-quarters of overall
tax receipts) rose a solid 6.4%. But it was huge spikes in two smaller
categories that led to the record overall increase — individual nonwithheld
(+31.9%) and corporate (+47.0%) taxes. The nonwithheld surge reflected the
upswing in the stock market and rising home prices that drove higher capital
gains realizations, as well as a pickup in options, bonuses, and other
non-standard wage and salary income after the post-bubble collapse.
Meanwhile, the spike in corporate taxes came on top of a 43.3% surge in the
prior year and pushed corporate tax receipts as a share of GDP to a 25-year
high, with the upside in the past two years reflecting both the surge in
underlying business profits as well as some tax changes, including the
expiration of bonus depreciation incentives that depressed earnings in prior
years and the Homeland Investment Act, which encouraged repatriation of overseas
profits to be taxed at temporarily lower rates.

Despite a
FY2005 budget that authorized negligible growth in new budget authority for
nondefense discretionary spending, carryover from the spending spree of prior
years and continued elevated growth in defense and entitlement outlays left
overall spending growth in FY2005 up a hefty 7.8% — a major acceleration from
the 6.4% average growth in the first four years of the Bush
Administration.

Where Am I?

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