Myths Of The Global Market

I forwarded the above with a big smile, because I've been writing on this subject since 1985, when I discovered that the currently used definition of economic efficiency was and still is a fraud.

Took me 6 years to come up with the correct definition, unbroken since then on many worldwide forums, used in PhD dissertations, but steadfastly ignored, as the cold reality of facts cuts into "wealth creation".

It is good to see big names starting to realize the fraud and crime wave of neoclassical market economics and so, there may still be hope for a big turnauround to save humanity ?

I sincerely hope so, even if I won't be around to see it.

Ed Deak.

I'm glad you posted it. This really caught my eye:

"Economics Paul Samuelson defines economic efficiency as "absence of waste". But like all economists of the dominant paradigm, Samuelson includes only wastes that cost private enterprises money. So as long as pollution and damages to others can be externalized, it is "more efficient" - even if it is supremely wasteful. That is why global depredation of the most basic means of human life - breathable air, water aquifers, ocean life-systems, and people's capacities to produce - are ignored in the economic models which governments use."

It totally explains why big business is behing 'carbon trading' and the 'environment'. Waste products that were cast off to the responsibility of others can now be a revenue generator.

As a wise man once said, 'The "real world" is a special case to an Economist'.

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"I think it's important to always carry enough technology to restart civilization, should it be necessary." Mark Tilden

It can take me a while to get around to reading some of these articles but I
earmarked this one as I knew it would be something of interest.

Great article.

"The street level of the great myth is that all commodities are “goods”, never
“bads”. "

I thought ya, why is that?

At any rate this is going to Tom d'Aquino asking him where he and his band
of do "gooders" stand on this view of economics?

Also will forward a copy to Harper, my MP and others.

Mr. 4Canada read it and the first thing he said was "this guy sounds like he's
from another planet". (and he meant that in a most hopeful way)

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"And those who were seen dancing were thought to be insane by those who could not hear the music." Friedrich Nietzsche

Thanks for the article, Ed.

I started on one of my usual long-winded ramblings then thought it might be best to provide a short response. However, I changed my mind and decided to go long-winded. Shouldn't be a problem because no one is likely to read it anyway.

As the article points out, we run into real problems with elaborate theories based on a 'baseline' 'fact' that were perhaps true or seemingly true or practical at one time but have been made irrelevant through changing circumstance or perhaps were never true and simply accepted or even if true were just one of many possible 'better' or 'worst' possible 'truths' available for selection.

Even if seen as 'true' in an earlier time, we run in to trouble when we forget the circumstances of the time in which the 'truth' was first conceived or accepted.

For example, when it was 'known' that the world was 'flat', a number of theories, hypotheses and 'facts' could be developed on that basis, i.e., because the world is flat this or that is also true. Got a problem with any of these...talk to the inquisition.

Obviously when it is proven that the original 'fact' was never true and as it turns out the world is round (or oval, as the case may be), all of the theories, hypotheses and 'facts' based on the flat world truth also come tumbling down.

Similarly, if the human body developed what were highly desirable fat storing abilities that served us well in earlier feast and famine times, these abilities might come back to bite us in the ass and be considerably less desirable in feast all the time times, as may perhaps be, fast food aside, part of the problem for some in NA today.

The original, and perhaps future, desirability of such a trait is not negated by the fact that it may not be desirable in current circumstances. It's just that times and circumstances change and what may have made perfect sense once or been senn as highly desirable in earlier times just doesn't or isn't now.

The Conference Board article above this one is a great example of elaborate facts and theories based on an assumption that a particular notion is true and/or the most desirable of possible alternatives.

Let's take a look at that old free trade champion, Adam Smith for example.

His thought was conceived within what was then a mercantilist British market based economy which protected certain industries. While the original notion behind the protection made sense, it stopped being so from a national perspective when the end result was simply to allow selected industries/individuals to charge exhorbitant prices simply based on their being protected from competition.

Obviously consumers who were forced to spend more than they should have for a product had less to spend elsewhere in the market, resulting in a stagnant economy in which jobs that might otherwise be created in the creation of other products were not as the consumer was unable to afford those products through having to pay an excessive price for 'protected' products.

So, a more 'free' market in which competition (with other nations) led to more realistic prices for products made sense from a national economic perspective because it left the consumer with more money to spend on other products and in doing so supported the creation of more jobs, which resulted in more people having more money to spend, which resulted in more jobs, ad infinitum.

Still, Adam was starting from the perspective of there being a market economy at the time and how this could operate in the most efficient and productive manner from an overall consumer and national economic perspective.

He wasn't starting from a position of questioning whether the market economy was the best way to go, as at the time it may have been the only possible or conceivable economic system.

The other reality of the time was that the citizens of various 'free trade' nations would be pretty similar living standard wise, i.e., Joe Englishman industrial worker would be living pretty much the same as Joe Frenchman industrial worker, so lower costs for a product produced by either would be achieved from innovative efficiencies rather than so-called 'competition' between Joe Englishman being paid a living wage and Joe Frenchman receiving a starvation wage.

But again, one would think there had to be limits because it wasn't in the British, or any, national interest to engage in lop-sided or phony competition situations, e.g., allow wool produced by unpaid slaves in a nation to 'compete' with that produced by paid British labourers, with the end result being lost British jobs and money in the foreign slave owner's pocket and Adam wasn't totally averse to importation tariffs entering the equation when desirable.

Zoom foward a couple of hundred years and this is pretty much what we're dealing with in the so-called 'global economy', which I doubt is what Smith had in mind a couple of centuries ago, the only difference being the the foreign slaveowners have been replaced by multi-national corporations, which due to their multi-national status are actually foreigners in respect of every nation, having no unbreakable ties with any.

At any rate, my point is that Smith's and his peer's theories arose from the economy of the time and addressed what was the best way of handling that economy to provide the maximum benefit from a national perspective. Unlike later economic theorists, Smith wasn't questioning the overall desirability of the particular economic system, just dealing with what he had.

Digressing back to the Conference Board article, it's pretty easy to see that what we've in fact done is involved ourselves in a trade-off with less developed nations, i.e., they accept parts from us that they may not yet have the technological capacity or be able to cost-effectively produce themselves from us and we accept products from them that we could produce ourselves but, at a higher cost, given the Canadian workers unreasonable desire for something approximating a decent standard of living.

What's actually being 'traded' is jobs, with our giving up many in the lower tech areas to have fewer in higher tech industry.

At the end of the day, we have increased 'prosperity' for the fewr workers creating the more technologically advanced parts however, have decreased 'prosperity' for ten times that number in the lower tech manufacturing industries we've sacrificed in the name of Candu reactor sales and the like.

Is this desirable from a national perspective? Guess it depends on who you ask.

Getting back to this article, all of the inevitability, desirability and benefits of free trade and globalization, etc. are based on a foundation of 'fact' and 'assumption' that are accepted to by many to be 'true', if only because no alternatives are presented. Obviously if the foundation for these 'facts' is shaky or non-existant, e.g., it turns out that most people aren't made 'happier' by being able to indulge in rampant consumerism, particularly is the price of participation is ten hour workdays, etc., or the 'happier' people become less and less as the jobs required to participate vanish for most, then all of the facts based on that particular foundation also come tumbling down.

It seems to me some of our basic problems arise from the reality that we're still dealing with seventeenth century, or earlier, theory that may or may not have been 'true' in the first place and is at any rate perhaps not relevant to our current circumstances and future needs at, to boot, has been twisted in some instances to fit the desires of a 'few'.

This doesn't differ from what's been true throughout known history, i.e., small groups promoting various religious, ideological or nationalistic beliefs primarily benefitting themselves and stifling to the greatest extent possible questioning of the 'truth' by whatever means possible, i.e., inquisition, mainstream media...whatever fits with the times.

Another major problem is that we all accept living in a manner that just doesn't make sense and, at present, is inherently insane, i.e., on one hand talking about 'sustainability' and the 'environment' while on the other spending our time in often pointless, beyond earning a living, work activities creating products nobody should really need, whether this be insurance, fast foods, crappy software or whatever; exhausting non-renewable resources to getting ourselves to work to do so and further destroying our environment and diminishing our resources each day in the process...then spending to 'fix' an environment that we damaged in the process of creating our needless crap.

Geez, talk about your inefficiency. It would be a heck of a lot more 'efficient' in a long-term sense simply if most people stayed home rather than using up resources trundling themselves off to to do meaningless tasks generally associated with marketing created 'needs'.

As all of us have experienced truth of the old 25% of the people do 75% of the work, or at least those of us doing the 75% have experienced, the economy really wouldn't take that big a hit if the 75% who do 25% of the work simply stayed home.

But then, how could they make a 'living'?

When you get down to basics, before economic 'theory' became so necessary, the average person's daily concern was acquiring what they needed, e.g., shelter, sufficient food, etc.

As we progressed into more specialized occupations, e.g., I herd goats and you make sandals, we didn't necessarily have the time to obtain everything we required from our own efforts and it may have been more 'efficient' for me to trade you some of my goat milk and meat for a pair of your sandals rather than me or my goat herding family spending time trying to make our own, which, as we weren't sandal specialists, doubtless wouldn't be as good as the ones made by you.

But, if I don't live beside you, where do I find sandals? Well, enter the friendly merchant, who of course needs to take a cut from both of us to make his or her own living.

But, my herd has grown so big I need help from outside the family and my new hires don't like goat meat or milk, preferring the cow, and don't want to be hauling around goat meat and milk to traded for cow related products.

This new money thing is really great!!! I can now trade my effort (and life) in exchange for currency with can easily be carried around and traded for whatever my needs may be.

And so on, and so on.

Pretty simplistic, I grant you. But should make the point.

Interestingly enough, pretty efficient way to get what I need. I grow what I need and a bit more to trade for items I need but either can't create myself or would be an inefficient use of my time to create. Along the way, everyone gets what they need. Does anyone have any 'wealth'?

The definition of 'wealth' from Princeton wordnet includes:

<<an abundance of material possessions and resources>>

So, what's an 'abundance'?

From the same source:

<<the property of a more than adequate quantity or supply; "an age of abundance">>

So, if everyone in the system has exactly what they need, no one has 'wealth' because no one has anything over and above, or an 'abundance', of what they need.

Of course, at times I may have an 'abundance' stored away because I know the future will bring a lack however, for the most part, why would I have an 'abundance' or feel the need to work harder to get it?

As has often been pointed out in terms of 'less sophisticated' hunter/gatherer cultures, the goal seems to be, for males at least, to acquire what's needed with a little time/effort as possible or, to put it more simply, do the minimum amount of work required so as to have more time for other pursuits, e.g., socializing, relaxing, hob-nobbing with the spirit world, what have you.

Given that all of our ancestors were there at one point in time or another, it's not outrageous to think that at one time all humans saw the most efficient use of time being that involving the least amount of 'work', defined as something we may have to do but is not at the top of our list of preferences. In this view, more 'work' creates greater inefficiency from an overall perspective.

As time is our most valuable 'possession' as it were, I can see were a view that spending the least amount of it on unenjoyable activities might have made sense.

Obviously this notion, if it ever existed, has been turned topsy-turvy through the centuries as people have had to spend increasing amounts of time to 'working' to provide for their basic needs. Of course, any questions we Christian types might ever have had re: why am I working so hard to get what I need or work hard but still don't get what I need while the guy in the castle sits on his fat ass, when he's not off on a crusade he expects me to work and pay for, were neatly answered by the Protestant work ethic and other religious doctrines concerning our particular place in 'God's' world.

If we didn't have as much as the next guy it was because God's 'plan' we all got what we deserved and/or we weren't working as hard as God's 'plan' would have us do. Either way, it was God's plan or our own fault...no way to get around it. While God's influence may havc waned, for some, in the intervening centuries, the 'it's our own fault' (are jobs are going to Mexico, our country is in debt, etc.) is still going strong.

Anyway, if one accepts that 'work' is an inefficient use of time and as such should be limited to what's required to meet our daily needs, barring natural disasters and such the only thing that might have made me work harder than I needed to meet my needs is the introduction of inefficiency into the system that resulted in my having to work more to have the same as I did before.

Now if I introduced this myself because I desired more than I needed and was willing to work longer to get it, it's not really inefficiency...just a trade-off of my time.

Otherwise, the introduced inefficiency will probably be the result of someone else's attempt at 'wealth creation' at my expense.

As indicated in the article:

<<The Economist explains that many "goods" can be "only enjoyed if others don't". The falsehood of the first principle is diverted from by a nudge-nudge that some can only enjoy at others' expense.>>

Let's say the 'good' in question is whatever passed for 'Ferrari' in Babylonian days, i.e., more than I need but exactly what I for whatever reason want.

If there's a good market for my goats milk and meet, I can just choose to work harder and produce more to accumulate whatever 'abundance' I need for my neolithic status symbol. In this case, the cost in on me.

Of course, I can also ask for more in trade to rapidly increase my 'abundance'. In this case, those purchasing from me now have to work harder than previously to get what they need, i.e., the same amount as before and my 'abundance' can only be increased at my customers' expense.

Still, the 'value' of my milk and chees is no different than it was before...it just costs more.

Of course, my customers can tell me to take a hike and visit the goat herder down the road, assuming he and I aren't in cahoots and fixing the price, leaving me without my bronze age babe magnet and perhaps worse off than I was before because I lost some of the customers I was counting on to get my basic needs.

Works better if I'm the merchant and can shave a little more off all my 'trades' to give me my 'abundance'. This works particularly well if I've cornered the sandal and goat product market, and involves no extra 'work' or time 'working' on my part.

Again, nothing has changed in the value of the product, which for everything is created in the buyer's mind only, e.g., what specific use justifies the 'value' of a diamond...well, whatever it means in my mind.

As Ed points out, value never changes. What does change is how we perceive the difference between a sheaf of wheat and a loaf of bread for our particular purpose.

So only cost, not inherent' value' can change.

If everyone in the chain is content to take out of it only that which they need, everything should pretty much balance out.

However, when 'wealth creation' generated by increased cost enters the picture, the only end can be that some 'profit' at the expense of others.

And if in fact 'working' is an inefficient use of time, a significant amount of inefficiency enters the system through 'wealth generation' based on increased cost, or rather cost which is in excess of that needed by the seller to meet their own needs because it requires more work from others to support the creation of the seller's 'abundance'.

At any rate, one has to wonder why at this stage in our history one needs economic theory at all, particularly those supported by assumptions either proven invalid or simply by reason of simple observation, e.g., number of western culture people dependant on anti-depressants, morbid obesity, stress related problems, etc.

As you've pointed out, the holy grail of 'trade' trumpeted through the past few centuries has kind of run its course for any provable reason, given that we have the technology to make us pretty much self-sufficient in an everything in a manner that would probably contain less 'inefficiency' than is true in the current environment.

And we could be self-sufficient without millions of people occupying freeways everyday to get to and from their largely meaningless and unecessary tasks. We could pretty much provide all that's needed with only a resonably small percentage of the population working.

Not that I'm looking for any arguments here from the free trader types as to why people 'must work' or why those who in their own eyes 'work harder' deserve more or the usual drivel.

I guess I just don't see how 'efficiency' can enter any discussion of an economic system that at its core is based on inherent inefficiency and waste, e.g., unproductive use of most participants' time, the need to make uneeded products to create 'wealth' for some, planned obsolescence, not to mention the 'externalized costs' (let someone else pay for something that should never have happened) referenced in the article.

If our current economic system ever made any sense, which I doubt as it seems more a 'just happened' thing, it doesn't now. My or anyone else's lack of a bright idea to replace it doesn't change the fact that it's simply counter-productive and 'inefficient' to continue with this system in any human society that would like to have a long-term. I don't see how in our little finite boundary world anyone from any point of the political or economic spectrum could feel otherwise. Maybe I'm just dense.

Except of course various well paid and esteemed economists who wish to stay that way, and to hell with how they're judged in the future.

And given what I've seen of participation in the open source community, volunteerism and the like, I'm pretty sure most people could find far more productive pursuits for themselves than the nonsense most are forced to perform eight or more hours a day to survive if the 'how do I make a living and pay the mortgage ' sword were removed from their necks. And our society would be far more 'sustainable' in the long term because we'd be more efficiently using the resources we now waste simply so some can continue to pursue their 'wealth creation' dreams.

Sorry if my rant turned into Marxism 101 and a long recitation of what we all know anyway. Wouldn't know myself re: Marxism 101 because I've read about as much economic theory (not much) as I have astrology books (not many), both of which seem to me in many ways similar.

Just in a surly mood expressing my uninformed view.



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"When we are in the middle of the paradigm, it is hard to imagine any other paradigm" (Adam Smith).