Monday, May 1, 2017

Springtime in Chicago


Tony and I had a good reason to meet in Chicago last week. This is his home town and he offered to give me the "deindustrialization tour" of the Second City. So on a splendid spring day he drove me around while I observed. Not surprisingly, some parts of Chicago have absorbed the economic shock of globalism / neoliberalism far better than others.

Some observations:
  • The number of places to buy or eat good food seems limitless. The large ethnic populations like the Poles or Italians have their own supermarkets with an astonishing variety of offerings. While all this abundance of good eating appears to herald prosperity, the fact was that none of these establishments had many customers. The restaurant / supermarket business seems hopelessly overbuilt.
  • Even the high end retailers along the Miracle Mile seemed to lack sufficient customers.
  • Chicago built some pretty amazing public venues in recent years. One spanking new convention center looked to cover at least 5 city blocks. My guess is that the supply of convention space wildly exceeds the need world wide.
  • Considering all the talk of corruption in the Chicago construction business, some magnificent building has been done (see below). This pretty much validates Veblen theories in his Instinct of Workmanship.
  • The detritus of the South Side steel industry is gone. In its place are large empty fields covered in a lumpy soil that because it is spring, had a pretty good cover of grass. Some of the old industry remains. The Ford Torrence plants was still loading new Lincolns into rail cars. A solitary (but huge) Cargill grain elevator was still operating near the lakeshore—when we drove past it was maybe two miles away separated by a large expanse of grass waving in the wind. If you held your head so you could not see Lake Michigan, it looked astonishingly like North Dakota. One attempt at redevelopment produced a flat and treeless golf course with a overbearing clubhouse built on a hill that was probably the remains of a slag heap.
  • The South Side of Chicago where the housing is, is a scene of near hopeless devastation. Both the housing stock and people appear extensively damaged. The neighborhood businesses are in the beauty salon/tattoo parlor/small markets variety. The auto repair business seems safely in the hands of people advertising that they are Mexicans. Even though it was only 5:30 pm., many of those on the streets looked like they had gotten a head start on being wasted for the evening. Whatever it was, it conveyed an expression of profound aimlessness. What was so distressing was that this urban damage went on for miles.
  • Tony could not resist taking me back to the motel by way of Wrigleyville—the neighborhood surrounding the stadium where the long-hapless Cubs won the World Series of Baseball last fall. This is the North Side, home to an astonishing number of what we used to call Yuppies, and NO, I have no idea what supports such lifestyles. After eating at a sports bar maybe 50' from the entrance to the bleacher section of Wrigley Stadium, we found ourselves blocked in by a police SUV. I cringed a little but soon discovered the young cop was admiring my 21 yo Lexus. In my 67 years on earth, I have never been so kind and gracious to a cop before.
  • Tony stopped at one more sports bar because he has known the owner for years. There we got to watch the Preds-Blues game along with a handful of still-disappointed Black Hawk fans. In spite of the fact that Tony claims this bar serves one of the best pizzas in Chicago, it was also suffering from too few customers.
Chicago's economic ennui is likely shared across the world. But one thing is still abundantly clear—this was once a city of energy, distinction, and vast industrial power. This was a city built by folks of great imagination. Deindustrialization is the proximate cause of the widespread destruction of this city. But more importantly, most of the destruction demonstrates a failure of imagination. Of course, it requires SOME imagination to build a golf course on a slag heap but compared to what was once there, it demonstrates the imagination of a child playing grown-up. In my darker moments I am convinced that we are doomed because we have passed "peak imagination." I hope I am wrong.

On passing through the center of the city

Cloud Gate (the Bean) has some interesting neighbors. The building with the steeply pitched roof is officially the Crain Communications Building but the locals call it Vagina Tower because it is such a contrast to the phallic buildings that surround it.  If you look closely, that roof is being worked on by some crazy-brave people.



The Bean seems very popular in spite of the hassles to see it up close—including parking that costs $21 for the first 20 minutes. The main reason is that unlike most public art (which looks like it was constructed by metal shop troublemakers), its execution is so perfect, it borders on miraculous. Most of us cannot conceive of making stainless steel so shiny, much less shaped so perfectly that it becomes a very expensive fun house mirror. The trick is grind the plates and welds to 1000 grit and then polish everything with jewelers rouge. I get weary just thinking about it. The most interesting reflections are seen from underneath. Tony and I can be seen in several places in this shot.



The older skyscrapers on Michigan Ave. are in excellent shape—some are quite beautiful. Tony checks his smart phone.



The Chicago Cultural Center is housed in the old public library. It has been superbly restored and maintained. Shown here is the Tiffany dome.



Wherever you look, there are monuments to the instinct of workmanship. Not only did world-class artisans come to Chicago to build such magnificent structures, but it's obvious that some of their descendants must still work in the city.



Hard to remember when public libraries were accorded such respect.



And this is the new Public Library—a post-modernist monstrosity. Those sculptures on the corners are supposed to depict owls. And no, they are not made of aged copper—that is painted aluminum.



The First Impression is a tile header over the door to what was once an important print shop on Printers Row. It is fabulously maintained / restored.

Saturday, April 29, 2017

Tesla's growing pains


From 1974 until 2007, I drove a Saab. My last one had 296k on the odometer when it was destroyed in a tennis-ball-sized hail storm. So I know about driving a car from a niche manufacturer—it's an interesting trip. In 1974, Saab built arguably the most interesting car on the planet—roomy cabin, great driving position, a fold-down rear seat (which allowed me to avoid the dreaded pickup truck even during a major rehab project), good—if not great—mileage, four-wheel disc breaks, great suspension for bad weather and roads, and the big deal—front-wheel drive. In 1974, there were a tiny handful of cars with front-wheel drive and Saab's was easily the best.

Saabs are still being made by a Chinese company. And of course, they are FAR from the most innovative on the planet. In fact, almost every car maker makes some version of the Saab 99. Most are cheaper. Many are better built—the Toyota Camry, for example. It is quite easy to see a quite similar future for Tesla. Yes, Elon Musk has provided the world an enormous gift when he showed the rest of us how to design and build the very cool electric car. But this is manufacturing and there are others who have been making cars a whole lot longer than Musk and are perfectly capable of reducing Tesla to an interesting historical detail.

Toyota could easily build a line of fine electric cars but so far, their big bet on hybrids has seemed to be paying off. They have also built a fuel-cell car so even their electric experiments have avoided the big battery packs. Volkswagen, on the other hand, bet big on "clean" diesels and have clearly lost that bet. They have a huge market in China which is mandating large fleets of EVs. The latest Geneva Auto Show saw Volkswagen's thinking on what their EV fleet will look like—and it just sparkled with innovative thinking. It is very possible that we have already seen "peak Tesla"—the era when the company was redefining parts of the transportation infrastructure may already behind us. From now on, Tesla will be trying to survive in a market where their competitors got his message and will now compete on execution—cost, build excellence, customer support, etc.

But right now Musk hopes to keep building the best cars. And as he is finding out, manufacturing is a LOT harder than it looks. Personally, I think Musk belongs on Mount Rushmore for what he has already accomplished. But the truth be told, he is going to find the going a lot harder when folks like VW start selling an electric Microbus.

Tesla's German Manufacturing Head Axed After 'Clash' With Elon Musk

Raphael Orlove, 28 APR 2017

“I definitely did not depart because I had lost interest in working,” Klaus Grohmann, the head of Tesla’s contentious but critical manufacturing arm in Germany, told Reuters. This is what happens when you butt heads with Elon Musk.

Up until this week, Grohmann was the head of Grohmann Automation, the designer of several of Tesla’s critical automated manufacturing systems. It was absorbed into Tesla before becoming a perpetual thorn in the California’s company’s side as its union demanded better wages, threatened to strike and, apparently, Mr. Grohmann got into it with Elon.

The problem is an easy one to understand, though probably not one that should get somebody fired. Reuters lays out the details in its exclusive as best it can:

Tesla planned to keep Grohmann on, and Grohmann wanted to stay, but the clash with Musk over how to treat existing clients resulted in his departure, the source said.

Grohmann disagreed with Musk’s demands to focus management attention on Tesla projects to the detriment of Grohmann Engineering’s legacy clients, which included Tesla’s direct German-based rivals Daimler and BMW, two sources familiar with the matter said.

Reached by phone, Klaus Grohmann declined to comment on the circumstances of his leaving, citing confidentiality clauses.

“I definitely did not depart because I had lost interest in working,” Grohmann said, without elaborating.

So the two sides of the issue are that Tesla wants Grohmann’s engineering work all to itself (Tesla did absorb the company, after all), while Grohmann wanted to continue working for a healthy variety of companies (Tesla is far from the mot stable member of the auto industry). Ultimately bossman Musk got his way, by the looks of things.

This all just reminds me that so, so many companies in the EV world have been formed by people who have been fired by Elon or quit after working with him. Faraday Future and Lucid are the biggest operations run by ex-Tesla people, but they’re working everywhere from startups like battery manufacturer Northvolt to holding jobs in Audi and Apple. But it’d be wrong to take away from all this that Elon is difficult to work with. Maybe he’s just, uh, demanding. more

Monday, April 24, 2017

Private banks create virtually all money


Do you want to shock, confuse, and probably alienate your friends? Probably the easiest way is to explain what really happens when they sign up for a home mortgage.
  • The bank will engage in a massive invasion of the borrower's privacy in the name of their financial interests. What is really happening is the bank is trying to ascertain if the borrower can actually service the debt—sort of like "hiring" a slave, when you think about it. This step is critically important because without performing loans, banks cannot exist.
  • The bank will then, after the signing of important-looking and expensive documents, create a new balance in the borrower's account. The bank has done nothing except reprogram some computer memory in the bank's electronic books. With a few keystrokes, the bank has put a customer on the hook for a large sum of money payable over 30 years. Roughly 40% of everything the borrower earns in those next 30 years will go to pay off the the creation of those few keystrokes.
This is what actually happens. But because of the massively unequal nature of this transaction, the banking industry has created an amazing body of lies to justify this rip-off. In fact, most of us who subscribe to the above explanation for how banking really works have faced the angry reaction from those who believe the big banking lies should we ever make the mistake of springing too many facts on the credulous.

But now, no less than the Bank of England has come clean and admitted that loans create deposits rather than the other way around. The story of BoE making this amazing admission follows (complete with video.)

Monday, April 17, 2017

The left is finally intellectually bankrupt


The election of 2016 proved to have at least one significant virtue—it fully exposed the corruption and ideological emptiness of the so-called "Liberal" class. None of this gives me a scintilla of joy. When I was young, being a good Liberal was actually something to aspire to—at least that was what I believed after I read Ken Galbraith's The New Industrial State. I believed we were the children of the Enlightenment who were responsible for the overwhelming majority of human progress.

As Thomas Franks and Chris Hedges have so excellently described, those kind of liberals only seem to exist in the memories of us aging coots. If Hillary Clinton and John Podesta are any example, liberals have become amazingly shallow, pathetically ignorant, and corrupt to the bone. Their political ideas are limited to schemes that enrich their friends. Their economic ideas can literally be found in the pages of the Economist. Debbie Wassermann Schultz, the Clinton campaign chair is a hired gun for the payday lending people. They seem to draw the line at actual slavery but that is about the only limit to depths of their neofeudal understanding of economic possibilities.

And in their latest excuse for the pathetic political performance of these thoroughly dislikable charlatans, today's liberals have resorted to actual McCarthyism. The claim that they lost because Russia is childish even by "the dog ate my homework" standards. But that's all they have so they are sticking to their fantasies even though it endangers world peace because in their pinched worldviews, it even makes sense. It made sense to Tailgunner Joe too. So there!

Wednesday, April 12, 2017

"If you build it they will come" and there goes the retailing bubble


One of the great pieces of economic nonsense from the age of Reagan was the "supply-side" notion "If you build it, they will come." The essential idea was that supply creates its own demand. This comforting little nostrum allowed the supply-siders to stop worrying about such "minor" matters as income stability and growth. Soon it also became quite fashionable to stop worrying about the health of local manufacturing. So long as there were goods to sell, who could possibly be concerned about where they came from?

But the ultimate disaster of supply-side thinking is still unfolding. If you actually believe that supply creates its own demand, what's to stop you from building a major mall out in the middle of a lot of nowheres? And so retail outlets multiplied to the point where virtually every person in the land is now near a major distribution of goods. The standard estimate is that we are 'blessed' with nearly 25 sq.' (2.3 sq meters) per capita of retail space (compared to less than 2 sq.' in Japan.)

Unbelievably, much of this retail space was built after it had become blindingly obvious that the internet was going to utterly change the way goods are marketed. It is hard to imagine the staying power of an idea that is mathematically ridiculous but here is the textbook case. Of course the real estate speculators were all excited about turning "empty" land into palaces of greed and envy, but let's not forget the "smart" money like teacher's pension funds that plowed rivers of cash into the idea that there cannot be too many malls.

So now the realization is finally dawning that there is at least 10x too much retail space (and that is even before Amazon eats everyone's lunch.) It it hardly beyond belief that a 2008-style bubble-crash in commercial real estate is virtually inevitable. We still have not figured out how to avoid these bubbles driven by mass stupidity. We are no better off than in 2008.

Sunday, April 9, 2017

Constitutional Foundation of the US Economy: Powers are Implied Not Enumerated


Almost every major advance of the US economy has been nurtured or facilitated at some point by the active involvement and encouragement of the national government. It's been a partnership—sometimes uneasy, sometimes close, but most definitely a partnership—between government and free enterprise, that has led the development of the US economy. This role of the national government was deliberately written into the Constitution, and touches directly on Constitutional issues that the left has ignored, but which the wrong-wing (conservatives and libertarians) have long waged a smear campaign against.

These issues go to the heart of the question: What is the role and purpose of government? They include such specific issues as the General Welfare clause, states rights, implied versus enumerated powers, and the reach and scope of the Commerce clause. Contrary to the idealized wrong-wing myth of the U.S. economy being founded on the principles of laissez-faire, the framers of the Constitution deliberately set out to create a central government strong enough to force the thirteen states into one national economy. To do this, the national government undertook a number of programs and policies to build and strengthen the national economy by encouraging and protecting manufactures and commerce, establishing a national banking system, and promoting and directly assisting the development of transportation.

The first Act of Congress established the administering of oaths of office for federal officials, but the second Act was the imposition of the Hamilton Tariff to protect domestic industry and raise revenue. In 1791, Congress chartered the First Bank of the United States. The Patent Office was created in 1802. Direct federal involvement in the building of transportation infrastructure included projects authorized under the 1807 Coast and Geodetic Survey, and other measures to improve river and harbor navigation, which were formalized and put on a more permanent footing by the 1824 Rivers and Harbors Act. Various Army expeditions to the west, beginning with Lewis and Clark's Corps of Discovery in 1804 and continuing into the 1870s, gathered and disseminated geographical and scientific knowledge that was crucial to opening the West to settlement (see for example, the careers of Major Stephen Harriman Long, Major General John C. Frémont, and Brigadier General Randolph B. Marcy). These expeditions were almost always under the direction of an officer from the Army Corps of Topographical Engineers, an organization that has been almost completely written out of American history, but which comprised the elite of U.S. Army officers. Pursuant to the General Survey Act of 1824, Army officers were assigned to assist or direct the surveying and construction of the early roads, railroads and canals -- whether they were private or state projects did not matter.

Our national government has also played a crucial role in the development of metal-cutting and metal-forming machine tools and mass mechanical assembly, which form the basis of modern industrial economies; the building of a trans-continental railroad system; the application of science to agriculture, and the mechanization of farming; improvements of steam propulsion for maritime transport; development of radio; creation of a nation-wide electricity power grid; creation of a national system of paved roads; development of aviation; development of frozen foods; development of electronics; creation of nuclear power; the creation of computers, and development of the internet.
It is no accident that our national government has played this role of nurturing and facilitating the development of the economy. Such a role was clearly the intent and desire of the Founders—contrary to all the wrong-wing lies about small government and free enterprise. This review of the creation of the Constitution shows that an activist role for government was clearly intended all along. The Republicans and conservatives (I prefer to call them the wrong-wing because so little of what they believe and proclaim about American history is correct) have a directly contrary view of this history.

Monday, April 3, 2017

More on fake news


Perhaps the most interesting story to emerge from the efforts to restore the Veblen farmhouse in Minnesota was the discovery that the Joseph Dorfman biography Thorstein Veblen and His America, long considered the definitive account of Veblen's life and scholarship, was very unreliable. The man who was paying for the restoration had promised, in writing, to the Minnesota Historical Society that he intended to use Dorfman's biography as the definitive word when it came to restoration decisions. But it soon became apparent that the spectacular house that Veblen's father had built on the edge of USA civilization with hand tools did not enhance the narrative that Dorfman was trying to sell. He wanted to Thorstein Veblen to have grown up in a log cabin among barely literate immigrants only to be rescued by the westward advance of Congregational educational institutes like Carleton College. So this monument of ingenuity became a log cabin in his telling.

Needless to say, calling this primo pioneer dwelling a log cabin did not provide much information on how to proceed with the repairs. Fortunately, Dorfman had sent out advance copies to some Veblen family members probably hoping for some sort of endorsement. Older brother Andrew was incensed at the portrayal of the Veblen's economic and social circumstances and wrote several pointed letters trying to get the account changed. Dorfman did NOT want to change his narrative because so much of his bio revolved around the idea that Veblen had miraculously emerged from an impoverished and primitive childhood. After several increasingly exasperated letters where Andrew described in detail the Minnesota farmhouse, he finally sent Dorfman pictures of the house and barn. Not surprisingly, when those letters and pictures were found in the Columbia library, they proved to be VERY helpful in making the restoration as authentic as possible.

But what of the Dorfman biography? The restoration seriously discredited it yet because it hangs around in university collections like so much toxic waste, serious scholars continue to be misled by it to this day. Dorfman was a full professor at Columbia so we  have a situation where someone in a position of trust has seriously poisoned the debate about early 20th-century political thought—mostly because he couldn't be bothered to get the story straight. Personally, I find the real story about Veblen's childhood development at least 100 times more interesting and informative than Dorfman's fairy tale. Dorfman built a comfortable career out of being the go-to expert on Veblen—that he couldn't be bothered to get it right is very troubling to me.

It is clear that fake news has consequences. The kind being retailed for premium prices in academe is especially harmful. It is utterly impossible to make progress or solve problems unless one has a crystal-clear understanding of what's happening. If you have been misled by an Ivy academic, you are really in trouble. You spent a great deal of money and effort to get bogus information so questioning it is especially difficult. Then you must unlearn that bad information in order to replace it with better information. It can take years just to get back to square zero.

Below John McMurtry has written a stunning indictment of fake news and its consequences. He actually believes the problem has become so serious it could even topple the USA empire. Think of it as the consequences of Dorfman's BS multiplied by, oh, a million.

Monday, March 27, 2017

Deaths of Despair


In what is perhaps the least surprising story of the last 40+ years has gotten a bit of traction. Apparently, people object to being thrown on the social scrap heap so much that after awhile, they just give up and do things that lead to their premature deaths. Meanwhile the economics profession actually has the temerity to congratulate themselves on successfully managing the economy and churn out reams of phony, misleading, and ultimately irrelevant statistics to support their claims. That's pretty much their job, after all—to keep the unhappy peasants from hanging the financial classes from the lampposts.

So now we have rising death statistics to refute the claim that everything is just fine out there. So the new answer is to somehow trivialize these stark realities. The essay below from Business Insider has its moments but mostly its an attempt to cover death-inducing hopelessness with some psychobabble and some quotes from Emile Durkheim (please!)

As for me, I always revert to the Institutionalist response to terminal hopelessness—PUT THESE PEOPLE TO WORK at decent jobs that have meaning and purpose. You know, like rebuilding the infrastructure to meet the specifications of a fire-free future. I also believe in the Instinct of Workmanship as described by Veblen and am still swayed by my Lutheran upbringing that taught work was a form of devotion. Regular readers cannot be surprised by any of this.

'Deaths of Despair' are more than a sign of neoliberal incompetence, it demonstrates these fools are also heartless and cold-blooded killers. The ONLY way they can possibly sleep is to comfort themselves with the rationalization that the dying are mostly victims of their failure to 'learn' the principles and 'virtues' of Leisure Class uselessness.

Sunday, March 26, 2017

Moore's law for sustainables?


It's WAY past time to get serious about climate change. Any serious effort will have as its primary goal, the elimination of fire. It's more complicated than that, of course, but in theoretical terms, not much. The real complications will come from trying to implement that strategy.

The worst possible policymaking error was in play when drafting the Paris agreements of 2015. Problem ONE was setting the emission reduction targets for 2050. In most minds, a goal 35 years away says there is plenty of time to organize the project and do it right. This is nuts, of course. We took roughly 6-10,000 years to build and perfect the fire-based civilizations we live in and so we have less than 1/200th the time to replace global energy structure. NO! There is NOT a lot of time for goofing off.

In this piece from Deutsche Welle, a new policymaking framework is being proposed that if nothing else, would at least pump some urgency into the matter. As we know, arguing from analogy is usually a hazardous venture, but here we have some serious thinkers arguing that we should address this HUGE problem by trying to replicate Moore's "Law" with sustainable infrastructure. While this may sound a little pie-in-the-sky it actually makes a great deal of sense. After all, the same innovation path that gave us cheap flat-screen TVs is behind those incredibly cheap solar panels.

The folks who argue that the computer industry set the example for best practices when it comes to innovation certainly have a point.

Wednesday, March 22, 2017

Trump as a Fascist?


Historical illiteracy is so common here in USA that it is usually a good idea to just react like the Animal House brothers who listened as Bluto ranted, "Was it over when the Germans bombed Pearl Harbor?" Otter turns to Boon and asks incredulously, "Germans?" Boon's response was, "Forget it, he's rolling." And mostly I can do just that. I usually only get wound up for two subjects—the misuse of the word Populism and any thoroughly ridiculous statement about WW II and the German role in making it happen.

Lately I have gotten increasingly upset by the careless comparisons lefties are drawing between Trump and Hitler. Now President Trump has a multitude of flaws but Hitler he most certainly is not. For example, from the time Hitler assumed power on 30 JAN 1933 and the opening of the Dachau concentration camp on 22 MAR 1933 was only 51 days. My guess is that the Donald will not have a full cabinet 51 days into his administration. The Nazis were highly organized and had a wide-ranging political philosophy. Where's Trump's Mein Kampf? Where is his political experience? Where is his war-hero record? Where are his willing-to-die followers?

Calling Trump the next Hitler is just plain idiotic. I wish folks would stop it because it is not at all helpful.

Monday, March 20, 2017

The Limitations of Marginal Utility


Marginal Utility is an economic idea that unfortunately refuses to die—mostly because it does have some narrow applications where the theory works.

According to wikipedia, marginal utility is defined as:
In economics, utility is the satisfaction or benefit derived by consuming a product, thus the marginal utility of a good or service is the change in the utility from increase or decrease in the consumption of that good or service. Economists sometimes speak of a law of diminishing marginal utility, meaning that the first unit of consumption of a good or service yields more utility than the second and subsequent units, with a continuing reduction for greater amounts. Therefore, the fall in marginal utility as consumption increases is known as diminishing marginal utility.
The problem isn't that marginal utility has no useful applications, it's that there are those who believe the concept of marginal utility can be applied to everything from labor relations to romantic decisions. The first of the economists who believed that was, arguably, an academic named John Bates Clark. He became a favorite of the Gilded Age rich for these teachings. In 1947, they began to award an economic prize named for him.
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge".[1] According to The Chronicle of Higher Education, it "is widely regarded as one of the field’s most prestigious awards, perhaps second only to the Nobel Memorial Prize in Economic Sciences."[2] The award was made biennially until 2007, but is being awarded every year from 2009 because many deserving went unawarded.  Named after the American economist John Bates Clark (1847–1938), it is considered one of the two most prestigious awards in the field of economics, along with the Nobel Prize.
A glance at the list of winners shows that not surprisingly most of them were conservative / reactionary when they won. Clark himself was a known reactionary so why not? A couple, like Joseph Stiglitz and Paul Krugman have now evolved into something a bit more progressive and interesting but were doctrinaire neoliberals when they won in 1979 and 1991.

But there was one student of Clark who was appalled with his blatant misuse of marginal utility—Thorstein Veblen. Clark taught Veblen economics at Carleton College—so of course, Veblen decided to spend a lot of his intellectual horsepower attacking the problem of Clark and his really absurd ideas about marginal utility. Below is his most famous effort.

Clark and Veblen were said to have professionally cordial interactions throughout life but as you can see, Veblen thought him completely wrong. And the reason this is interesting is that Veblen was right about this. Even more interesting, the touch of spectacular error seem to fall on those who are awarded the Clark Medal—something to keep in mind when it becomes obvious that while a Krugman can occasionally sound quite progressive, deep down he is the neoliberal swine the folks at Clark Medal so highly prized.

The Limitations of Marginal Utility

Thorstein Veblen
Journal of Political Economy, volume 17. 1909

The limitations of the marginal-utility economics are sharp and characteristic. It is from first to last a doctrine of value, and in point of form and method it is a theory of valuation. The whole system, therefore, lies within the theoretical field of distribution, and it has but a secondary bearing on any other economic phenomena than those of distribution -- the term being taken in its accepted sense of pecuniary distribution, or distribution in point of ownership. Now and again an attempt is made to extend the use of the principle of marginal utility beyond this range, so as to apply it to questions of production, but hitherto without sensible effect, and necessarily so. The most ingenious and the most promising of such attempts have been those of Mr. Clark, whose work marks the extreme range of endeavor and the extreme degree of success in so seeking to turn a postulate of distribution to account for a theory of production. But the outcome has been a doctrine of the production of values, and value, in Mr. Clark's as in other utility systems, is a matter of valuation; which throws the whole excursion back into the field of distribution. Similarly, as regards attempts to make use of this principle in an analysis of the phenomena of consumption, the best results arrived at are some formulation of the pecuniary distribution of consumption goods.

Within this limited range marginal utility theory is of a wholly statical character. It offers no theory of a movement of any kind, being occupied with the adjustment of values to a given situation. Of this, again, no more convincing illustration need be had than is afforded by the work of Mr. Clark, which is not excelled in point of earnestness, perseverance, or insight. For all their use of the term "dynamic", neither Mr. Clark nor any of his associates in this line of research have yet contributed anything at all appreciable to a theory of genesis, growth, sequence, change, process, or the like, in economic life. They have had something to say as to the bearing which given economic changes, accepted as premises, may have on economic valuation, and so on distribution; but as to the causes of change or the unfolding sequence of the phenomena of economic life they have had nothing to say hitherto; nor can they, since their theory is not drawn in causal terms but in terms of teleology.

Thursday, March 16, 2017

Better than the Li-Ion Battery?


Recently I tried to write a small survival guide for finding the good stuff on the internet. I called it Epistemology in the age of "fake news." Considering I spent most of my adult life composing that little essay, that was a remarkably lame title—I tend to forget that epistemology is not everyone's pet idea and to combine that with a trendy notion like "fake news" means that I am open to any better suggestions.

But the idea of fact-bricks is sound and I just found a pretty good example of how they can be used to evaluate a news story like the one below. Essentially the news is that one of the co-inventors of the lithium-ion battery has discovered (invented) a major improvement. The new battery will replace the li-ion's liquid / gel electrolyte with glass—which would be a major improvement in safety. Lithium would be replaced with sodium which is almost infinitely cheaper and easier to access.

Cheaper? safer? Wait there's more! The new batteries supposedly will charge much faster and be three times as energy dense. This means a car with a 200 mile range with Li-ion would have a 600 mile range with a similar-sized pack of the new batteries. This last claim is the most significant and also the one that triggered my BS sensors.

Here are the relevant fact-bricks as I see them.
  1. Historically, batteries have gotten better in small steps. A 300% improvement is an enormous leap. Show me. The producer class is about demonstration.
  2. 94 year-old guys tend to be well past their significant accomplishments in life.
  3. What works in theory or even in a lab is difficult to translate into a mass-produced consumer device. And even those products that make the leap take significant time to work out the kinks—17 years for the fluorescent bulb, for example.
On the plus side.
  1. This is an example of evolutionary improvement. Basically the only kind there is.
  2. It IS possible that someone who has devoted his life-energy to a subject just might have a final creative burst in his chosen field—even at 94.
  3. Storage is the key to making solar energy useful. If the funding is there, commercialization of this technology could happen in a much shorter time-frame than usual.
My conclusion: I will withhold judgment on the validity of the basic idea but because the chemistry is possible I will continue to follow the story. I don't expect to see these batteries for sale at Costco or Home Depot in less than five years even if everything goes right.

Monday, March 13, 2017

Mark Ames explains US / Russia relations


Around 1993, I met an interesting old codger who was living with his wife in a old converted one-room schoolhouse. Almost immediately he got on my good side by expressing his belief that the Vietnam War had been a vicious con on USA's young men. Not long after that, I discovered that in his younger days of employment, he had been a professor of Russian / USSR studies. Russian history is a favorite hobby but living in the middle of the North American continent, I don't meet many people who know anything about the subject. I was quite excited.

Soon the thrill of exchanging ideas was replaced by the disappointing realization that he thought USSR's conversion to "democracy" was going swimmingly, that Boris Yeltsin was a brave patriot who was doing everything in his power to prevent Russia from sliding back into Communism, and that reports of corruption could be easily dismissed as the growing pains of the new order. The fact that USA flew in 88 yo heart surgeon Dr. Michael DeBakey to manage Yeltsin's heart treatment was simply a sign of our willingness to help. About this time someone told me not to be shocked because virtually all Russian Studies profs in USA have significant links to CIA. I have NO idea if this is true in this case but he was pretty steadfast in defending that party line. We lost touch shortly thereafter.

Of course, none of his beliefs about Russia were remotely true. The neoliberals from Harvard who landed the fat contract to re-engineer the USSR were so corrupt that eventually they lost the contract and some were charged with corruption by the Justice Department. Jeffrey Sachs, the w√ľnderkind who had caused major disasters in Bolivia and Poland led their charge. The most serious results of this economics of Predation was that average male life expectancy dropped from 64 to 57 between 1990 and 1994.

Mark Ames, who was living in Moscow during this chaos, relates the story of what happened in the video below. The numbers of those in the USA who know this story is essentially zero. And yet, since the outcome was the rise to power of Vladimir Putin—the current public enemy #1—this is NOT a trivial story. It is also a story that virtually every Russian knows in great detail.

Saturday, March 4, 2017

Epistemology in the age of "fake news"


Being accused of peddling fake news by the New York Times or the Washington Post is like being called smelly by a hog.
Me

I love the internet. Never before in human history has it been so easy to access accurate and helpful information. And when folks assure me that 99% of what is on the internet is pure BS, I can only smile and say "but the good news is that the remaining 1% is so vast and comprehensive it defies meaningful comprehension." Of course that leads to the BIG PROBLEM: How does one tell the difference between the 99% BS and the 1% good stuff?

Not long ago a bright young man asked me that very question with a look of panic on his face. What good is an infinity of information without an accurate way to tell which factoid will lead to a lifetime of confusion and wasted effort, and which will assist in finding answers that make life's journey more understandable, fulfilling, and productive?

Quite honestly, I was taken aback by his excellent question. Mostly it's because I almost never think about it anymore. My "rules" for separating the wheat from the chaff were formulated one summer night over 35 years ago while driving a sports car on some moonlit back roads at extralegal speeds. A college roommate who had gotten a philosophy degree was along for the ride and we were discussing the essential failures of philosophic thought. His take was that the big-name philosophers all tried to create a huge, all-encompassing world-view. The problem with this approach is that as humanity acquired more information, these newly discovered details tended to rip huge holes in some grandiose descriptions of how the world works. Poor Aristotle—his sweeping philosophy that acted as a lodestar for the last 2300 years has been filled so full of factual holes that nothing is left. Even his logic, which is still taught, has been made hopelessly obsolete. So the question becomes, "when you cannot even trust Aristotle, how exactly do you find your way?"

Like a lightening bolt it came to me. Instead of searching for the big answers, why not concentrate on those little answers that cannot be refuted. Think like a builder! Treat your irrefutable facts like bricks or timber. They may be plain and simple yet with enough of them, you can build a beautiful and mighty structure. Even better, if you are sure about the quality of the parts, the likelihood increases dramatically that the final edifice built from those parts will be sound. Moreover, if someone comes to you with an idea that contradicts one or more of your fact-bricks, you can be certain that the whole idea is nonsense and will fail.

Tuesday, February 28, 2017

Shell knew about climate change


Because I have been known to hang out with lefties, my position that the oil guys are not the enemy is quite a minority one. Part of this is personal—I have relatives who have devoted their careers to the difficult proposition of finding, transporting, refining, and selling the most interesting fuel source humanity is ever likely to find. In Tioga North Dakota, I went to high school with the children of the geologists and engineers that found oil in DEEP locations and ran the local refinery. So I KNOW these people are not monsters. I also know they are not stupid. My two lab partners in high school chemistry were sons of working refinery chemists and were amazingly comfortable and graceful around the subject.

There are two blindingly obvious truths associated with the oil business.
  1. The modern world is so reliant on liquid fuels that if one major oil company shut down for a month, there were be lines and buyer's panics like in 1973. If ALL of them shut down, life as we know it would come to an end. We NEED these folks.
  2. Of course we need to prepare ourselves for the end of the Age of Petroleum by building systems that do not need oil. This will be harder and more expensive than almost anyone admits. This absolutely necessary project will be most certainly powered by liquid fuels. We need petroleum to build the society that does not need it.
See. Making an enemy of the oil business is not only stupid, it demonstrates amazing ingratitude for some of the people that keep the rest of us alive. And here is a remarkable demonstration of my basic point. In 1991, Shell produced an accurate and informative film on the dangers of climate change. My guess is that if the crazy neoliberal political-economic zeitgeist had not been in its ascendency during that exact moment in history, Shell might have led the march into the post-petroleum economy. But the Euro was approved at Maastricht in February 1992 so neoliberalism was nearing one of its greatest triumphs. Unfortunately, neoliberalism is perfectly incapable of financing the kind of economy that can build the infrastructure necessary to eliminate the need of fossil fuels. So Shell went back to business as usual. Not very brave or imaginative, but under the circumstances, absolutely understandable and predictable.

‘Shell knew’: oil giant's 1991 film warned of climate change danger


Public information film unseen for years shows Shell had clear grasp of global warming 26 years ago but has not acted accordingly since, say critics

Damian Carrington and Jelmer Mommers, Tuesday 28 February 2017

The oil giant Shell issued a stark warning of the catastrophic risks of climate change more than a quarter of century ago in a prescient 1991 film that has been rediscovered.

However, since then the company has invested heavily in highly polluting oil reserves and helped lobby against climate action, leading to accusations that Shell knew the grave risks of global warming but did not act accordingly.

Shell’s 28-minute film, called Climate of Concern, was made for public viewing, particularly in schools and universities. It warned of extreme weather, floods, famines and climate refugees as fossil fuel burning warmed the world. The serious warning was “endorsed by a uniquely broad consensus of scientists in their report to the United Nations at the end of 1990”, the film noted.

“If the weather machine were to be wound up to such new levels of energy, no country would remain unaffected,” it says. “Global warming is not yet certain, but many think that to wait for final proof would be irresponsible. Action now is seen as the only safe insurance.”


Saturday, February 25, 2017

How the radical left shaped the New Deal


Last Sunday there were dueling diaries that reached the recommended list on DailyKos: History Tells Us The Extreme Left Cannot Beat Trump and What History Really Tells Us About Defeating Trump.

I did not agree with either one.

I am not a historian, but I have read a lot of American history. I am, after all, a frigging book dealer, so I should read a lot of books, right? And I don’t think it is conceit on my part, as I shuffle past the three-score mark in this mortal veil, to assert that I know a bit more about American history than a lot of other people appear to know.

For example, neither one of the two dueling diaries mentioned what, to my mind, is the obvious role played in American history by the leftist populist movements of the late 1800s. Nor did either of the diarists discuss the crucial role of the radical left in shaping the New Deal.

I was going to write a comment outlining some of what I knew, mostly by cutting and pasting from a diary I posted in December 2015, but realized there was not enough detail there about what I wanted to write about. So I went traipsing down various corridors of The Tubez, and came upon a truly wonderful article by Van Gosse, a history professor at Franklin & Marshall College in Lancaster, Penn. Professor Gosse co-founded Historians Against the War in 2003, and focuses on the African American struggle for full citizenship since the American Revolution, the New Left as a "movement of movements," and the Cold War in Latin America. The article by Gosse I found is entitled, What the New Deal Accomplished, and I will excerpt liberally (ha-ha) from it.

Even better, Professor Gosse has agreed to be my first subject of an interview-by-email, an approach I’ve been cogitating for quite a while now.

In What the New Deal Accomplished, Professor Gosse writes:
Three movements stand out as directly influencing the key New Deal programs. First was the radical movement of the unemployed which surfaced in early 1930. Through "hunger marches," constant lobbying and local protest, it forced the issue of relief for the unemployed onto the national policy agenda. Second was the movement to provide pensions for the aged, led by a California doctor named Townsend, which made the idea of universally-available government pensions so popular that Democrats adopted it. Finally, and most important, was the movement for industrial unionism embodied in a new labor federation, the Congress of Industrial Organizations (CIO).
Professor Gosse then proceeds to examine each of these three movements, beginning with the unemployed.

Sunday, February 19, 2017

India's war on cash: who and why


On 8 November 2016, the government of India announced its intent to demonetise large denomination currency. It is one of the most baffling economic actions taken by a government in recent memory, but a few weeks ago, the Indian news website Scroll carried an excellent three part series explaining what was going on and why. It seems some economic ideologues have joined forces with large financial institutions to force demonetisation on the citizens of India. What could go wrong?

Note the role of Harvard economics high priest Kenneth Rogoff, the deficit scold whose April 2013 book warning that disaster inevitably resulted when a nation surpassed a specific ratio of debt to GDP, was found to contain computation errors.

Understanding demonetisation: The problem with the war on cash Force marching unprepared citizens towards a cashless utopia that has little space for the informal sector is callous and indefensible.

Part I: Understanding demonetisation: Why there’s a war on cash (and you are in the middle of it)

Part II: Understanding demonetisation: Who is behind the war on cash (and why)

Part III: Understanding demonetisation: The problem with the war on cash

Another Indian news source described the "bewildering pain and desperate hope" the real economy has been plunged into after two months of demonetization. The article includes timetable of demonetization in India.
Fast-moving consumer goods (FMCG) firms have reported lower sales, especially in rural areas. Some 90% of the FMCG market in India comprises small mom-and-pop stores, heavily reliant on cash sales. And 60% of small traders have already seen a drop in sales post-demonetisation, according to market research firm Nielsen.

In rural areas, where internet penetration is limited, cash is often the only mode of payment. People in the hinterlands have struggled to access cash—there are 7.8 bank branches per 100,000 persons in rural India—and this, in turn, has affected wage and loan disbursal in these areas.

Monday, February 13, 2017

Mark Blyth refuses to let Democrats off the hook


Mark Blyth is a Scottish political scientist and a professor of international political economy at Brown University. Blyth first came to my attention when his prediction of Trump's electoral victory, and how it was tied to the vote for Brexit, was widely shared after the USA election.

I very rarely urge people to watch an entire video. This is that rare one. Blyth is merciless in his critique of the Democratic Party's acceptance of neoliberalism, and absolutely refuses to let the Democrats escape their responsibility for Trump's being elected because of that acceptance of neoliberalism.

This was part of a panel discussion, Trending Globally: Politics and Policy, held by the Watson Institute on January 25, 2017.



Update (JL, 21 FEB 17)
Anyone who has tried to watch this YouTube lately has discovered it has been taken down and replaced by the following message: "Mark Blyth--"Liberalisms' g..." This video is no longer available due to a copyright claim by Watson Institute, Brown University. Anyone who actually got to watch the video will probably agree that this is quite a loss. Blythe analysis was accurate, sophisticated, and nuanced. One would think that the Watson Institute would be thrilled to have this thing go viral.

But they are not and my only speculation is that the Watson Institute is run by establishment Democrats who are anything BUT thrilled to see an analysis that is quite critical of their efforts.

Sunday, February 12, 2017

How the Dutch build a tunnel under a highway in one weekend

Ingenious!

Once Wall Street and the City of London are forced back into their proper role of subservience to the rest of the economy, we are going to be doing a LOT of this kind of work. Think of building rail mass transit systems in Los Angeles and Mexico City and Cairo and Lagos and all other cities, with the same densities of route miles and stations as the systems in Paris, Moscow, and Tokyo.



Here is a nice list, for North America only, of Openings and Construction Starts Planned for 2017. This is probably around only one or two percent of what we will end up doing in the next half century.

Monday, February 6, 2017

Well, that was interesting—Trump takes on the establishment


When during his inaugural speech, Donald Trump came out swinging at the political / economic establishment that has created and enforced the neoliberal Washington Consensus for at least 35 years, one could almost hear the gasping and pearl-clutching in the formerly smug and self-satisfied salons where the rich go to celebrate their brilliance. Mostly, because he was attacking the very schemes that had enriched them.

And let's not forget that neoliberalism is also a theological belief system. One must block out a serious chunk of reality to come to the conclusion that the neoliberals have good ideas. And the best way to do that is worship at the "commandments" of free trade. The most faithful are given prizes, mislabeled Nobels, by the Swedish Central Bank. And in their further delusions, they call what they do "science." For this crowd, what Trump said was blasphemy—a good sign that he was boorish and ill-mannered. Claim you want to renegotiate NAFTA on the stump in some rust-belt ghost town is one thing. Actually promising to do the unthinkable on the Capital steps is a bridge too far (gasp, clutch).

The inaugural address quote below was taken from an interesting article on Populism and Trump. The definitions of populism are all over the map these days so it is best not get too strict about definitions (too Protestant!). Just so you know, my definition of Populism grew out of an effort to understand the implications of the Peoples Party of 1892. They were the first people to call themselves Populists so they pretty much define the historical origins of the movements that were spawned by the educational efforts of the People's Party (and ITS precursors.)
“What truly matters is not which party controls our government, but whether our government is controlled by the people. January 20th 2017, will be remembered as the day the people became the rulers of this nation again. The forgotten men and women of our country will be forgotten no longer. Everyone is listening to you now.

“…At the center of this movement is a crucial conviction: that a nation exists to serve its citizens. Americans want great schools for their children, safe neighborhoods for their families, and good jobs for themselves. These are the just and reasonable demands of a righteous public.

“But for too many of our citizens, a different reality exists: Mothers and children trapped in poverty in our inner cities; rusted-out factories scattered like tombstones across the landscape of our nation; an education system, flush with cash, but which leaves our young and beautiful students deprived of knowledge; and the crime and gangs and drugs that have stolen too many lives and robbed our country of so much unrealized potential.

“This American carnage stops right here and stops right now. We are one nation – and their pain is our pain. Their dreams are our dreams; and their success will be our success. We share one heart, one home, and one glorious destiny. The oath of office I take today is an oath of allegiance to all Americans.

“For many decades, we’ve enriched foreign industry at the expense of American industry; subsidized the armies of other countries while allowing for the very sad depletion of our military. We’ve defended other nation’s borders while refusing to defend our own. And spent trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay.

“We’ve made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon. 

“One by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left behind. The wealth of our middle class has been ripped from their homes and then redistributed across the entire world.
President Trump

You are 70 years old. You have an amazingly beautiful wife. Your kids seem capable of taking over the family business. You have a tricked-out 757-200 so you'll never fly coach again. Your meals are prepared by award-winning chefs. And while your digs are WAY too garish for my taste, they are very nice and probably well-built—and you have more than one.

So why in god's name do you want to spend your declining years picking fights with the establishment? Why do you want to get into pissing matches with media monopolies? Why do you want to take down the cultural insanity represented by mindless Russia-bashing? I mean, do the math—figure out how much money has been spent to demonize USSR / Russia over the years and decide if any cultural meme is more deeply embedded. You had trouble selling steak—selling the idea that we should be allies (again) with Russia will make that problem seem trivial. Anyway, you get the idea. This is a life considerably more hazardous and uncomfortable than being a wealthy property developer with a trophy wife.

Yes I know—silly questions. The country was founded by revolutionaries who in many cases were extremely successful. Jefferson had nice digs (Monticello), Washington was a very successful property speculator, Franklin was a rich celebrity writer / scientist / inventor who spent a lot of his energy chasing women, etc. They also had more comfortable things to do than to pledge "their lives, their fortunes, and their sacred honor" (final sentence of the Declaration of Independence) to a revolution that most certainly meant death if they failed. So history does hold examples of people who risk a lot for ideas.

And who knows, maybe your motivations are not exactly lofty. Perhaps it is something merely annoying like the fact that USA airports don't seem so nice compared to well, almost anywhere else in the world. Not only does your airplane not get petted properly, but its just plain embarrassing to folks who believe the USA should be good at things—especially things associated with aviation. Or maybe it's just a need for attention. But it's who you are so lets work with that.

The other night, I saw a brief interview with Melania. She claimed that 10-year-old son Barron liked to build things, then take them apart so he could build something else. She called him "little Donald" because of that. I got pretty excited. I know kids like Barron exist because I was clearly one of them myself. Finished projects rarely lasted more than a week because the whole point of construction sets is construction (well, duh!) So if you want to keep playing, you must simply move on to the next project. And if indeed you are like that yourself, you possess an important quality that this nation desperately needs.

So from one compulsive builder to another, I think we should discuss how you could end up on Mount Rushmore.

The MOST pressing problem facing humanity is climate change. Yeah I know you have called it a hoax. But you have also made some more enlightened comments that have been caught on tape. Besides, we all saw how well you got along with Elon Musk and he is arguably the most articulate spokesman out there when it comes climate change. Perhaps you liked him so much because he is also a serious builder.

Climate change is an interesting problem. It's a problem defined by what Musk deems his intellectual lodestar—physics first principles. Climate change is a fact whether anyone believes it to be true or not because it conforms to the laws of physics first principles. But those who seemingly cannot understand physics first principles do not understand the nature of the problem so resort to pseudo-religious responses. Think about it. They have meetings. They pass laws mandating better outcomes. They try to raise our awareness of the serious nature of the problem in the hope that their rah-rah speeches will inspire their listeners to change. And the CO2 levels climb.

There are a lot of ways that humans produce CO2 but far and away the most important is our all-time favorite invention—fire. Yes there are frivolous uses for fire—example, a 757-200 with only one important passenger. But by far, the biggest uses of fire are for heating our homes, growing and preparing our food, commuting to work, etc. We live in a world that was designed and built to run on fire. And because of climate change, this world can no longer exist. The world's infrastructure is, with a few exceptions, obsolete. Hopelessly obsolete.

Replacing the global fire-based economy with a renewable-energy economy will be, by FAR, the greatest building project in human history. And anyone who can pull this of will be remembered as the greatest builder in history. Mostly, it must be a builder who isn't afraid of big numbers. So think about this one—the serious people who have tried to assemble an honest bid for this project seem to believe it will cost $100 TRILLION spread over 30+ years. So that's the price tag for actually Making America Great Again.

Just a reminder, $1 trillion spent on salaries will create 20 million $50,000 / year jobs for one year. You think that creating that many jobs for people who would love to build the new and improved America will satisfy your supporters? I do.

So we have a BIG problem that can only be solved by builders with vision and imagination. The planet is awash in people who would love to be part of some global-scaled project that makes their world a better place—many are unemployed and most of the ones with jobs are underemployed. So we have projects that clearly need doing and people who want to do them. So what's the hold-up? That's easy. We cannot seem to figure out where the $3-4 Trillion a year will come from.

And here is where your expertise is really needed. Anyone who has ever financed a big real estate project has dealt with the moneychangers. After watching them create almost unlimited amounts of money to finance such utterly useless ventures as mortgage-backed securities in the run-up to the crash of 2007-8, it must be blazingly obvious that there should never be a shortage of money because the ability to create it is infinite.

So what is needed is for the moneychangers to get on board with the biggest project in human history. Get the big hedge funds guys, the TBTF bankers, the Fed, and whoever else is relevant in one room and say "I am going to need at least $3 Trillion per year to Rebuild America. It is your job to ensure that the money is there when we need it. If you cannot do this job, I will institute plan B—take the ability to create money away from you and return it to where the Constitution explicitly claims that power should reside—with the Treasury Department of the US government. You can play or watch—it's up to you.

And hey, if you fold in the great climate-change question into the bigger project of rebuilding the nation's infrastructure, you don't even have to take a public stand on the issue. I think the questions you really want to ask your self are these: Do I want to go down in history as the greatest builder of all time? or; Do I want to be known as the builder who when faced with the largest development opportunity in human history, chose to take a pass because upscale hotels and golf courses are much more your speed?

The ball's in your court, Mr. President. Do you want to remembered as a great man or as one of history's sad jokes? You may be some ways from sinless perfection, but you are gifted in the very skills most necessary to build a better future. That's close enough. In fact, there are deeply religious people who believe you are an answer to their prayers.