Breaking News

/ , / , , , , /

Follow up on Clinton

Let me be brief.

One of the fascinations in the current presidential election campaign is that both parties are being challenged by relative outsiders. Let’s set aside just how ‘outside’ some of the challengers are, and focus on why this challenge is getting the traction it is.

From my point of view it is quite obvious: neither party is delivering, or has delivered, what its base or core voters want.

One the one side Republicans are being challenged because they have failed to bring about the downfall of large scale government. This is a serious flaw for their more committed right wing supporters. Not only this, but those supporters must surely feel badly betrayed since none of their efforts, going all the way back to Reagan, have accomplished the goal of slashing government programs. Worse: those programs have not only survived, but in some cases have been augmented by Republicans – e.g. Bush and the expansion of Medicare, not to mention the failure to overturn Obamacare.

I don’t want to dwell on the Republicans because they have had vastly more success than the Democrats have since 1980, but I can easily understand why some of their more vocal supporters are at their wits end. We don’t have a ‘small government’, and are highly unlikely to have one any time soon: modern complex and democratic economies need a mix of public and private action, not just one or the other.

Now this Republican failure is not because of the Democrats. Why? Because, with the exception of Obamacare, the Democrats have stuck with their own variant of neoliberalism since the 1980’s. Look at the legislative record rather than at the rhetoric. After the Reagan revolution the Democrats have had two successful eight year presidential administrations during which they could have pushed back against the neoliberal intellectual edifice and prevented the further rightward drift we ended up experiencing.

They didn’t try. Indeed Clinton simply tracked a little to the left of wherever the Republicans were and advocated policies that are, in retrospect at least, more moderate Republican than moderate Democrat. Free trade treaties, financial deregulation, absence of support for unions, and welfare reform could all be characterized as right of center. They certainly are not part of an effort to reverse Reaganism.

The Obama years promised more, and the adoption of Obamacare is a small step towards a better health care future, but the bitterness of the partisan opposition since 2009 engulfed that promise and left the country tired and angry at the lack of progress. At least when viewed from a left of center perspective.

So both parties have failed their core constituencies. No wonder this election is so contorted.

Which brings me to Hillary herself.

Her supporters, which include pretty much the entire Democratic party establishment, are in a bit of a huff because she polled so badly amongst younger voters. Her performance was pitiful. She has been completely unable to create a message that resonates with younger people.

One story I have heard her supporters tell is that this is because she has been at work in the ‘progressive’ cause so long that all these younger folk weren’t around to see it. Her efforts on health care and family issues are cited as being sufficient to earn her progressive credibility, but the young are simply too young to know about it.

Or not.

And this is what the establishment is missing.

The United States lags a long way behind the kind of progress that most western nations have made on exactly those issues that Hillary has supposedly been beavering away at all these years. So, we can surmise, her efforts have either been inept or insufficient. Why, then, would younger people give her their support? She ranks as failure not as a success. Forty years of incrementalism is hardly a rallying cry for the future. But that’s what Hillary offers. It’s what her friends and supporters offer.

And I find that decidedly uninspiring.

In many ways Hillary represents her age cohort perfectly: technocratically gifted; ambitious but in a bureaucratic way; policy wonkish and thriving on detail; willing to compromise endlessly to achieve minor victories; willing also to drift wherever the tide goes; and, crucially, lacking a grand vision to provide coherence to her work. She is the perfect insider. The perfect technician. The perfect empathetic articulation of small scale effort.

What she is not is a leader.

She has no post-Reagan vision. She cannot envisage America as a social democracy. So she cannot lead us there. Yet social democracy is the antidote to Reagan. It is the cure to neoliberalism. Without this vision Hillary is trapped and can offer only pragmatic resistance within a framework she accepts as irreplaceable, but which offends her sense of right. She is conflicted and worn down by her inability to rally behind post-Reagan notions of society, so she, instead, plods along tinkering with Reaganism rather than replacing it.

And younger people want to replace it.

She and her supporters in the Democratic party establishment ought not patronize the young. Embittered by the decades of infighting and social schism that is the experience of her generation, she and they ought listen to the young.

For there is another way.

/ / , , , , /

Post-Iowa

So where are we?

Nowhere further forward. Except, perhaps, that we now know about half of the Democrats in Iowa think Clinton is an extension rather than a repudiation of the past.

And I think that matters.

The time has come for us all to assess just where we are. There is way too much confusion and anger in the air for this bizarre election simply to be an oddity. I think it has meaning. Deep meaning that we need to understand if we are to venture into the future with anything other than bemused silence.

I really think this matters.

Let me venture to say that Clinton’s lost gloss – a truly accepted ‘presumptive’ nominee would not have lapsed into a tied race in Iowa – is cause for reflection amongst all those who profess to be well versed in American politics and government. She simply cannot resonate with a message for the future. She has no message of the future. In one of her last rallies before last night’s caucus she waxed lyrical about pressing on with the current agenda. Yet, surely, the electorate is no mood for continuation. The post recession muddle and thirty years of neoliberal economics have eroded voter’s confidence in our economic institutions, in our leadership, and even in our capability to get anything done. The electorate is losing both its nerve and its patience. Bad things happen when that occurs. Bad things like Donald Trump.

The problem with Clinton is that she cannot project an upbeat image. She cannot tell a grand story or sell a vision people can be excited about. Her idea of a great speech is an endless monotonous recitation of technocratic graft and detail the end result of which is a series of supposed minor steps forward. There is no leap. No great imagination. No hoopla. There’s just stolid in the weeds committee meeting boredom wrapped as policy. And all such policy is tentative.

Paul Krugman attacks – yet again – Bernie Sanders for selling an illusion. The illusion, apparently, is that in these dark days of gridlock no one is supposed to imagine a better way. Imagination is not the ally of action, it is the precursor to action. Clinton’s problem is that all her imagination has been blunted by forty years of grind and infighting. She no longer believes in transformation. She believes in nudging. And the people need more than nudging.

Nudging will not undo the decline in our middle class. Nudging will not re-invent a future of prosperity. Nudging will not combat climate change. And nudging will not inspire our younger people to aspire or explore or achieve beyond what now seems like ever hardening limitations.

Nudging is inadequate.

Which means that Clinton is inadequate. No matter how ‘realistic’ she appears to the likes of Paul Krugman.

And that we confirmed last night.

Let’s see how she reacts. Because a tie with Sanders was as good as a defeat.

/ / , , , , /

An Actual Election?

Well kind of. If you count a caucus as an election. So here we go, the 2016 presidential election gets under way with something more than hyperbolic news reporting. Sometime in the next twenty-four hours we will have hyperbolic reporting tinged with actual voter information.

All the preamble, which feels as if it began in 2008, is now over. People, rather than telling pollsters who they like or dislike, are having to pin their colors to the proverbial mast.

Which is what is known as a ‘good thing’.

One reason, the reason for chatting about it today rather than tomorrow, is that I am tired of the so-called experts telling me who is and who is not electable. I think that’s for us to decide.

Electability is always tossed into election races when someone with some momentum behind them is seen as threat to the establishment. This year that means people like Trump or Cruz on the right and Sanders on the left. Such people are branded as extremists or populists – I cannot quite tell which it is worse to be – and are then lampooned as being incapable of implementing their oft derided extreme or popular agendas.

In Sanders case this ‘electability’ issue blurs into a ‘implementability’ issue. We need to unpack this problem:

First, the notion that Sanders would have a problem implementing his programs is a great compliment. It implies that the serious analyst making the charge is, at least, capable of contemplating that Sanders could win. After all no one can have an ‘implementability’ problem if they aren’t in the position to try. So score one for Sanders’ momentum. He apparently has the establishment worried. And no one is more establishment than Clinton. She actually sings the praises of current policy. She affirms we are on the right course. She says we just need a steady hand. Her hand of course.

Second, let’s digest this implementability thing a bit. Surely one of the reasons this election is packed with so-called extremists and populists is that voters have a hard time perceiving that anything has been implemented in recent years. Or at least, anything that matters to them. The establishment needs to take a good hard look at its own record: what has the combined might of the serious people who think they know everything managed to achieve since 2008?

Not much.

Gridlock.

Non-Implementation on a grand scale. Obamacare being a major exception. An exception that managed to be implemented because it was a total fudge. So the critics of someone like Sanders hardly have a triumphant record as a basis for their criticism of him. Far from it.

It gets worse.

Third, and related to the last point, is the idea that extremists and populists are articulating programs that are impractical on their face. In Sanders case this is the charge leveled at his health care and Wall Street reform programs. To make matters worse those leading that critical charge are amongst the leaders – or used to be – of the liberal intelligentsia. Astonishingly, such folk as Paul Krugman have morphed from lambasting the attitudes and platitudes of ‘establishment’ people to being advocates of caution and incrementalism. Whereas once Krugman could scarcely contain himself with respect to the insider so-called serious crowd, he has now jumped onboard and embraced their position openly.

Why?

After all it’s not as if the serious insider crowd have delivered a sparkling economy, rising prosperity, social harmony or any such thing. And, to put it bluntly, the very grist of Krugman’s own intellectual milieu – equilibrium based economics – is hardly a realistic fact based rock solid planets earth type of thing.

No. I think it’s more that the establishment Democrats fear that Sanders might stir up emotions and ideas that the neoliberal consensus finds alien. So the establishment closes ranks, and deploys the ‘implementability’ word.

The way I look at things implementability is derived from two sources: willpower and cooperation, with so-called political realities heavily influenced by the former. And willpower can be sourced from the voters. This is a democracy isn’t it?

Which is the central issue in this election.

For a few decades now we have drifted steadily away from democracy towards a plutocracy managed by technocrats. The will of the people, indeed the wellbeing of the people, has been largely secondary throughout this long era in which an ever smaller cadre of businesses and wealthy people co-opted government for themselves.

The extremism and populism so disliked by the media is exactly a rejection, by the voters, of the results of this long era. The desire for change is in the air. Which the serious insider folk are trying to forestall. Why wouldn’t they? It’s been their era.

The next might not be. Hence the fear.

In any case, the first votes will be cast tonight, and we can then start to see whether the momentum for change has enough power to break the self-satisfied and self-congratulatory grip of the establishment. An establishment that has failed and is in sore need of being tossed aside.

/ / , , /

GDP and Other Complex Numbers

When investment advisors want to justify their expensive and ineffective advice they look for red herrings to batter their clients with. One such example surfaced in, of all places, Pieria last week. It was an article sourced from Schroders about how misleading GDP is  as a measure of economic wellbeing. The article is one of three dedicated to telling investors that they ought to ignore GDP as an indicator worthy of informing their investing. Instead, presumably, they ought to pay Schroders lots of money for its ‘value-investing’ based advice.

Well, I happen to agree that GDP is a bit of a farce. It ignores all sorts of useful stuff and includes all sorts of silly stuff. It totally ignores domestic work as if it didn’t exist, and puts the consequences of socially negative events – the reconstruction after an earthquake – on an equal footing with activity generated by socially positive events.

The problem, at heart, with GDP is that it includes only things that are easy to measure. Easy, that is, being described as having a market price or a convenient cost that the economists and accountants compiling the numbers can identify.

Since the economy is vast and complicated getting hold of even this kind of information can take months. This means that GDP figures are pretty much always revised. The so-called first release is never where the final numbers end up, so no one ought get too excited over it.

But people do.

We live in a short term society, where numbers of various kinds flood our attention, and where we are inured to using them as the basis for conversation, argument, and even policy action.

But they are invariably inaccurate.

This is what the Pieria article bases its argument on. The economy is too complex to be banged into one number. The number always shifts about providing no bedrock on which to stand, and, besides, who can trust numbers that consume and army of technicians to compile?

And tinker with: clearly the author gets upset over technical ideas like ‘chain weighted’ indices and ‘hedonic pricing’. I get that. They are a tad complicated and are easily attacked. But they are also useful. They help add to the numbers. They make things a little more consistent. And consistency is the great goal of all number crunchers.

Being written by someone steeped in the private sector, in finance and investing no less, the article – actually all three in the series – smells a bit of anti-government sentiment. Those GDP numbers cannot be trusted because the economy’s complexity eludes the government simpletons, all thousands of them, trying to distill it into GDP releases.

This is very Hayekian. The essence of Hayek’s extreme position was that the economy is essentially inscrutable. It is unknowable. It is so vast and difficult that it lays beyond our ability to comprehend, calculate, and thus manage. Central planning, under such circumstances, is thus a fool’s errand. At best it has no effect, at worst it makes things a lot worse. It is, therefore, better to leave the economy to itself and the so-called self-adjusting capabilities of the marketplace. If you believe in such magic of course.

To anyone who has striven away in the bowels of big business this exact same notion will sound familiar. The accounts of a large bank are only loosely related to the actual economic position that the bank occupies. Likewise any business. The accounts are simply an indication of what’s going on, their relevance is useful only in the context of skillful interpretation. They are no more or less ‘real’ than any of the numbers we see for the national economy. All such accounting, even with the best intentions, is a vague representation of reality. And, as such reality will always elude us. It isn’t measurable. Besides we can’t even agree on what to count.

So if a Schroders customer cannot trust GDP, and ought not invest on the basis of the numbers, then they ought not trust any other number compiled by armies of technicians. Such as corporate balance sheets and income statements. That means we would be left with nothing but the guesswork of ‘experts’.

And chicken entrails perhaps? That’s an interesting twist on ‘value investing’.

 

 

/ / , , /

Lamppost Afterthoughts

Notes from the cutting room floor:

Lest anyone be mistaken I am aware that we live in a world of models. Everything we do can be described at some level of abstraction as a model. Our entire ability to live is based upon modeling. Our various systems and bodily functions are models. That is these things are solutions to problems, and those solutions are encoded some way so as to allow that code to cause behavior that, within our environment, is efficacious,

Models are simply a way of testing and examining a specific solution to a problem. Sometimes they begin life in a rather ad hoc fashion, as guesswork, or heuristic. Other times they are the result of prior thought, in which case they represent a point along a line of modeling stretching back a long time. Perhaps so far back that their origins are forgotten. Or perhaps only so far back as the last test of an older model.

In any case models are small packages of our ideas spliced together towards some end. That end being a solution. A problem solved.

Evolution, of course, is the greatest problem solver of all, so the processes of evolution give us insight into modeling. We create models. We test them. We select, as successful, those that survive when let loose into our environment.

That environment might be the economy. That model might be some theory of how the economy behaves.

When you and I enter the marketplace to participate in exchange we expect certain things to be there and that certain things will occur. Those expectations exist because we have a model of the economy in mind. For most of us that model is opaque. It is hidden from our conscious expression of what will happen. All economists have done is to explore such models and eliminate the opaqueness. In so doing they have convinced themselves that they understand, at least partially, how an economy works.

My criticism of the use of models in economics is then not one of a denial of the value of models. It is directed at the selection of them. More to the point it is directed at the severity of the exclusion of zones of our experience that fall outside of our theoretical study because those zones are less tractable to our modeling technique. We have become monotheistic in our beliefs. Polytheism is frowned upon.

This is despite one of the great lessons of evolution: that diversity of approach gives the greatest chance of the location of solution. Economists have limited their options by reducing their subject to that set of issues most easily modeled according to the discipline’s self-referential code of modeling. And, further, they describe the problems they set out to solve in such a way as to produce results from their tests that conform to a prior code of acceptability.

So the code of modeling limits the usable technique, and the code of acceptability limits the range of problem. This duality then combines to define the discipline. Economics thus becomes defined as the subject that theorizes about problems tractable to the preferred technique.

Since the preference for techniques has moved through time, becoming steadily more formal as it goes, the subject itself has shifted about a bit. Nowadays it is easily mistaken for being applied mathematics or the mathematics of maximization. In order to arrive at this point a great deal of what was economics has had to be jettisoned or left to one side as being no longer of interest. Other topics have simply been ignored because they didn’t fit easily within the technical purview of economics thus described.

Interestingly economists have become so enamored of their maximization techniques and their mathematical mastery of things such as efficiency that they have begun to describe a whole host of topics as being capable of economical modeling. They have thus muddled themselves up. Instead of arguing that applied mathematics may shed light on some problems, they have come to believe that economics has something to say about those problems. Economists themselves have conflated subject and technique.

By so doing they have spread their error far and wide.

In finance, for example, much of modern financial theory traces its roots back to standard microeconomics. The problem is that the conditions needed to make microeconomics work the way standard theorists would like it to work aren’t very sensible in the closer-to-reality world of finance. In fact they rarely apply at all. Which means much of modern finance is little better than guesswork. Much like much of modern microeconomics.

In any case I don’t mean to go on too much. I am simply saying that I am aware of the universal presence of models. As Karl Popper once said: “All life is problem solving”. So economics is hardly unique. Where economics fails is in the conflation of subject and technique I noted above and in its monotheism. It thus commits a grave sin in the eyes of evolution. It has committed so much to its method and its beliefs that further movement in the economy, new problems or new topics of interest, are more likely to sit outside its self-selected purview than within. It is always tempted, therefore, to bang such problems into bizarre shapes in order to attempt to redefine them for analysis, hence the blind spots and contortions over the recent crisis and over inequality.

It has become too specialized. Like the dinosaurs.

And just for reference: I sit on the side of disequilibrium. The cultural, social, economic, and political worlds are complex. Why ignore that when we model?

«< 49 50 51 52 53 >»