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Speaker: Inequality: Too big to ignore

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  • BenWilson, in reply to Katharine Moody,

    Google “marginal cow”.

    OK, did that. I'm struggling to see where Marx and virtue ethics comes into it. It's an alternative way of working out how many cows to have in a herd, right? And the underlying methodology is entirely a profit maximization process, the only dispute being about how to calculate the costs. Ethically, it's utilitarianism, maximizing a good (in this case farm profit).

    Why? Apply a Marxian analysis to the choices made/actions of these elite (corporate and politico) classes… and (for me anyway) David Harvey’s accumulation by dispossession theory looks pretty spot on.

    But choices about how much stock to run is down to individual farmers, isn't it? Fonterra don't get to decide, do they?

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    Not true. Business courses teach students in the first year all about ethics.

    They are taught that ethics has no place in business and should be avoided at all costs.

    I also did a course called Business Ethics, again, as part an Applied Ethics course. I quite literally came away none the wiser to what the guy was on about at all, however entertaining he was as a lecturer. He clearly knew his Camus and Sartre, but I didn't really come away knowing what advice he'd be giving anyone about anything, when it came to conducting a business. I mean it's all about living the authentic life in existentialism. Well one can be an authentic first-rate hard-headed businessman bastard. Is that virtuous? Or is that counterbalanced if he's magnanimous? It's no wonder that business is practically conducted using laws, rather than ethical theories. He may be magnanimous, but he also fiddled his taxes, so now he can have an authentic white collar prison experience.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Katharine Moody, in reply to BenWilson,

    But choices about how much stock to run is down to individual farmers, isn’t it? Fonterra don’t get to decide, do they?

    Sure it is but read this;

    http://www.stuff.co.nz/business/farming/dairy/10373405/Marginal-return-on-milk-solids-argument-flawed

    and then this;

    http://www.agprodecon.org/node/29

    In particular, noting commentary from here downwards;

    Some farm sales are more in the nature of an exchange of property between the same bank’s clients. The result is the bank finances a new owner with higher equity and just recovers its exposure while the vendor is effectively wiped out. An argument could be made that such sales do not reflect a true market price.

    Rumour again suggests Rabobank tried to sell farms with excessive debt and abandoned the exercise. That is soon going to create problems. What happens if we project the high debt tritile group of dairy farms out 3, 5, or 10 years?

    Why you must ask, are Fonterra and those other ptb mentioned above, so resistant of the "marginal cow" analysis? Why, pray tell, would not profit maximisation be the first and foremost thing that they should be most concerned about for society?
    And did the Fonterra chaps comments focus at all on rebuttal of the economic science associated with the marginal cow analysis? Nope, not in my reading anyway.

    And having read those final few paragraphs in the second link - Google "accumulation by dispossession" - the wiki entry pretty much sums it up.

    As to answering how the analysis is virtue ethics in nature - will have to leave it for a later post - as gotta head off now.

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • Bart Janssen, in reply to BenWilson,

    If economics is not scientific enough

    I’m pretty hard on economists in general. Particularly those that get jobs as mouthpieces for banks. But I do think there is genuine quality science done in the economics field. I think your questions about this statement from the OECD are fine. But if you are going to go down the path of calling them unscientific then I really think you need to do the work to actually find the original references and do a thorough analysis of the methodology being used.

    If after that you conclude their findings are scientifically flawed, go for it with your criticism. But at the moment it feels like you are taking pot shots at this work without any basis for it other than your reacons about cause and effect. It may turn out that you are right and their conclusions are flawed but until you show that then you are essentially doing just what Key and English are do to any scientific result they don’t like – attacking the messenger to cast doubt on the message. I don’t think you mean to do that but it certainly feels that way to me.

    Auckland • Since Nov 2006 • 4461 posts Report Reply

  • 81stcolumn,

    I quite literally came away none the wiser to what the guy was on about at all, however entertaining he was as a lecturer. He clearly knew his Camus and Sartre, but I didn’t really come away knowing what advice he’d be giving anyone about anything, when it came to conducting a business.

    I think I may know who that is.... in his defense he's a nice guy.

    Nawthshaw • Since Nov 2006 • 790 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    But at the moment it feels like you are taking pot shots at this work without any basis for it other than your reacons about cause and effect.

    Can you give me an example of a "pot shot" I made? Since from the very outset I said that I actually agree with their conclusion?

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Katharine Moody, in reply to BenWilson,

    Can you give me an example of a “pot shot” I made? Since from the very outset I said that I actually agree with their conclusion?

    Interesting that you agree with the conclusion - as I assume that is largely based on your own observation of society generally? Or is it for some other reason?

    Again, if we relate this back to Aristotle's thinking, he uses the term phronesis which is normally translated in English to "practical wisdom" - the knowledge of experience. All very simple thinking, of course, but we have all but discounted such knowledge in respect of our 'sources of authority' in this positivist (post-Enlightenment) era. Those with such phronesis (a knowledge of the particular) are largely viewed as non-experts, or lay persons in respect of our modern institutions. Hence, we seek the analyses of experts, and weight that much more highly when making social choices than such knowledge of experience or, the particular.

    I'm guessing you might have used phronesis to come to the conclusion you have with respect to the OECD conclusions. And the question is, why should this knowledge of yours need to be subject to expert 'testing' or analyses?

    My point being, most people in society can see injustice and inequality, but they end up questioning the validity of it, or the reasons for it, or the solutions to it .. largely because the powers-that-be similarly challenge such conclusions outside the current paradigm and hence, call for more 'science' (i.e., investigation and 'proof').

    You seem to be over-trying at the 'testing' of what you fundamentally know the likely answer to anyway.

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • steve black, in reply to Bart Janssen,

    If after that you conclude their findings are scientifically flawed, go for it with your criticism. But at the moment it feels like you are taking pot shots at this work without any basis for it other than your reacons about cause and effect. It may turn out that you are right and their conclusions are flawed…

    Ben is off the hook.

    This was nicely done by an interview with Tim Hazeldine (economist of the left) and Eric Crampton (economist of the right) and they were agreement that the methodology was as dodgy as I suspected in my first response to Ben (far above). However, in their critique they came up with a number of new sorts of dodgy which I hadn’t guessed at beyond using ecological correlations (without reading the methodology myself).

    I tried to link to the audio of this earlier but it wasn’t visible to me. Now I feel I should post this even though I haven’t found the link.

    sunny mt albert • Since Jan 2007 • 116 posts Report Reply

  • Ian Dalziel, in reply to steve black,

    I tried to link to the audio of this earlier but it wasn’t visible to me. Now I feel I should post this even though I haven’t found the link.

    is this the one?
    Economics experts on OECD report from this morning...

    Christchurch • Since Dec 2006 • 7953 posts Report Reply

  • steve black, in reply to Ian Dalziel,

    Yes thank you Ian. I do like to get the link in there.

    So here we have an economist from each end of the spectrum (if you believe that the left/right distinction is a sophisticated enough model) who agree: bogus methodology. I too always point out bogus methodology even for conclusions I agree with because for me if bogus methodology is allowed to stand unchallenged than we don't have a chance to lift our game. We deserve better.

    sunny mt albert • Since Jan 2007 • 116 posts Report Reply

  • Sacha,

    General note: the RNZ website lets us stream or download any audio story. When you go to the page for a show (eg: Morning Report), the best link to bring back here is the one marked "Share" which then gives visitors options about how they listen. The main heading for a story links to its streaming option only.

    Here's the Share link for that OECD story, for example.

    Ak • Since May 2008 • 19745 posts Report Reply

  • BenWilson, in reply to Katharine Moody,

    I assume that is largely based on your own observation of society generally? Or is it for some other reason?

    My reason was in my first post on this thread. GDP growth means a lot more goods and services being produced, which also means more being consumed. If less people can't consume them because they can't afford them, then GDP growth is negatively affected.

    That was my story anyway, and it's not really from phronesis so much as from hearing economists say it before and thinking it sounded plausible. But also plausible is that stalling growth could be putting less money in people's pockets in a climate of high inflation (and I think property values should be counted in this statistic as the single biggest cost in most people's lives), something that would affect wage and salary earners much more than capitalists, and thus inequality could rise. Indeed property inflation makes the rich richer and the poor poorer automatically, if incomes are not keeping pace with it.

    So plausible mechanisms in both directions exist, and I'm left wondering how to choose between them. I'm not being disingenuous at all, it's a genuine confession that I don't know the answer, and I'd like input from as many people as possible as to how this even could be answered scientifically*.

    It's definitely NOT the only question of interest here, but any question that has an answer carrying the strength of institutional scientific approval is always noteworthy by itself, so naturally I want to get an idea of what kind of strength that really is, and also how it could be improved. Of course I think we should take measures to reduce inequality anyway regardless of the answer, because that goes to the kind of society that I want to live in. But that doesn't make it unimportant to answer. If it genuinely were to turn out that higher equality costs growth, that's pretty important, because we might want to make the choice between being all poor and equal or some poor and some well off and some rich. However, this study contradicts that point, as Max pointed out in the blog itself, and that might be the main thing it achieves, even if we actually don't 100% trust the finding that increasing equality will probably improve growth.

    And the question is, why should this knowledge of yours need to be subject to expert ‘testing’ or analyses?

    Does my last paragraph answer that? The reason I want testing and analyses is because trusting my judgement on a matter of national economics is highly suspect and it's about something really important too. It really doesn't matter how old, virtuous or experienced I am, I can still be totally wrong.

    *There have been an interesting range of answers, so I don't consider it to have been a waste of time. Bart thought that it was probably scientific already to the weak extent that any economic claim can be, Matthew thought it could barely be scientific at all, that the difficulties of conducting economic experimentation meant that it could only be very, very dubious, steve thought that it was probably quite unscientific because it was likely to have committed the ecological fallacy, but also that it is possible to be more scientific, and you appear to think that its scientific validity is not very important anyway.

    And the main thing that I was actually wanting to elicit came at the end, an answer from qualified people who had actually studied the report. I'm yet to listen but steve's reporting they think it's dodgy. So I'm at eironea and falling back on my phronesis after all :-)

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • BenWilson,

    Soz, read I'm at aporia and feeling phronetically challenged.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Katharine Moody, in reply to BenWilson,

    Indeed your last para does answer that question of mine .. but the Marxian student in me would say to this:

    because we might want to make the choice between being all poor and equal or some poor and some well off and some rich.

    (Quoting Marx) The history of all hitherto existing society is the history of class struggles

    Was then, and is now .. but, is capitalism responsible, and anyway, what are the alternatives? I suspect that's challenging a lot of economists (and philosophers).

    Point is, you are much better read in Greek philosophy than me .. so thanks, it's been really interesting. Don't forget to read some David Harvey (sorry, I just can't help myself) ;-).

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • Katharine Moody, in reply to Bart Janssen,

    The issue is scientists are wrong ALL THE TIME. Generally we try and be wrong in private but sometimes … Our response to being wrong is to say “we were wrong, lets try something else with the aim of being right”.Politicians are also frequently wrong. Their response is to blame the data or the person providing the data.

    +1.

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • BenWilson, in reply to Katharine Moody,

    Point is, you are much better read in Greek philosophy than me

    Don't count on that! I'm most interested to hear how virtue ethics can give insight into economics. My challenge for you is to show how it isn't subsumed into the consequentialist alternatives, when you actually get down to nuts and bolts.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Caleb D'Anvers,

    Is it just me, or is this report being held to much higher evidential standards by the Very Serious People than supply side economics itself ever was, or “austerity” is now? The Laffer Curve was a freaking napkin doodle, and it continues to hold sway. To see the appalling smugness and unexamined assumptions of the comfortable elites who admire and deploy the Curve, have a read of this. It’s truly a different world if you’re arguing on the side of money.

    London SE16 • Since Mar 2008 • 482 posts Report Reply

  • tussock,

    The fundamentals of it all is you get a large number of people get 15% poorer so a small number of people can get 45% richer, and then the economy grows by 15% less and you have large numbers 30% worse off in real terms so small numbers can be 30% better off. Hurray.

    Only the few right at the top are about 1000% better off in real terms and they also own the government. So that thing where most people are 10k a year short of where they should be? That's not going to change. The people appointed to your news programs by ex-ministers of state for the National party will not be banging on about this. Newspaper editors under the control of very rich men will find something else to worry you with.

    Expect reports very soon of more te'rism and war and the need for strict monitoring of everyone's communication for security reasons and what are you, some sort of communist terrorist, anyway. We torture people, you know. It's a thing. Doesn't work and we do it anyway. Lock people up for years just for talking about it. Just say'n.

    Since Nov 2006 • 611 posts Report Reply

  • tussock, in reply to Caleb D'Anvers,

    Pfft. The Laffer curve's fine. It's just you get maximum tax take at 70%, rather than 30%.

    It's not about tax anyway, it's about shut up, rich people work harder than you.

    They don't, their life is a literal cruise, but it's not about how hard you work anyway, it's about shut up, they're just smarter and more deserving.

    They're not, it's not even correlated, once you correct for how much they spend trying to look smart, but it's not about smart, it's about shut up, you're just jealous.

    Studies show that isn't true either, feelings vary greatly but tend toward a love of what you have and dread of richer and poorer lifestyles alike, but it's not about that, it's about shut up, you can't change the system.

    I mean, you can, obviously, just change the system. A 70% top tax rate does give the state the maximum amount of money for health and education and justice and infrastructure and real safety initiatives and transforming the economy before the looming oil crash in a world of rapid climate change, but it's not about that, it's just that rich people love their life and dread becoming a little less rich.

    So they buy governments and have laws passed to protect their wealth, and spend their days setting the poor against the even poorer so they'll all vote for it.

    Since Nov 2006 • 611 posts Report Reply

  • Bart Janssen, in reply to BenWilson,

    Bart thought that it was probably scientific already to the weak extent that any economic claim can be

    More importantly without actually reading the methods and being knowledgeable enough in that field I was willing to trust those who were in the field rather than some mere politician who didn't like what was being concluded.

    Steve has found experts in the field who have concluded the methodology was bollocks, something he suspected from his expertise and experience in that kind of statistical analysis.

    Which is great.

    The thing for me is, from outside a field, I am really cautious about finding reasons to distrust conclusions from people in a field. The whole climate change debate has been filled with non-experts mistrusting the experts without ever actually testing their methodology (because in most cases they weren't equipped with the background knowledge to test it).

    Auckland • Since Nov 2006 • 4461 posts Report Reply

  • Katharine Moody, in reply to BenWilson,

    My challenge for you is to show how it isn’t subsumed into the consequentialist alternatives, when you actually get down to nuts and bolts.

    Interesting challenge (posit) but my thinking is early stages; to further what is only a hypotheses in the making, I need to find a collaborator with expertise in economic modelling, as my present assumptions about the body of knowledge in that discipline could be quite off the mark.

    What got me thinking a bit more seriously about it was this statement from Sec of Treasury, Makhouf, in the speech linked earlier:

    Economists have various tools and models to help them think in a disciplined way about the effectiveness of these different mechanisms, and how to select and use them to this social end. All public policy is about the choice of groups of such interventions and the design of institutions that will give effect to them. Economics helps us identify and analyse relevant trade-offs in making these choices.

    Technological advances have led to significant improvements in the economist's toolkit over the years. The availability of data, the power of modern computing, the greater access to ideas and information, the speed of that access, have all helped to increase our understanding of economics in ways that we couldn't really imagine in my school days. I warmly welcome and embrace these developments and urge our economics teachers to stay abreast of them. We want their students to be equipped with the latest available tools that will help them analyse and try to solve economic problems.

    But we also need to make sure that we all understand what these tools represent. Problems arise when the simple models developed to think systematically about the economic problems and the relative effectiveness of alternative solutions to them, are confused with the reality we are trying to address. That risks confusing a moral science for a natural one.

    He seems to be saying the existing 'toolkit' isn't necessarily up to the job and relying solely on these commonly used tools, "risks confusing a moral science with a natural one". I find that a very interesting statement. And the question that came to mind for me relates to whether most of these analytical 'tools' have been developed with a bias (whether intentional or not) toward a utilitarian/consequentialist ethical approach. Makhlouf demonstrates this ethical bias/approach himself when 'framing' the purpose of economic work as ".. identify[ing] and analys[ing] relevant trade-offs.."

    Following from that thought, then my question is, if so, what would alternative tools look like if they were instead developed with a virtue ethics or a deontological bias?

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • Kumara Republic, in reply to Ian Dalziel,

    is this the one?
    Economics experts on OECD report from this morning…

    In that interview, it was observed that participation in tertiary education is much higher than it was a generation ago. What wasn't mentioned was how many people actually completed their studies, which is a far more reliable indicator of participation than the actual number of students.

    The southernmost capital … • Since Nov 2006 • 5446 posts Report Reply

  • BenWilson, in reply to tussock,

    Pfft. The Laffer curve’s fine. It’s just you get maximum tax take at 70%, rather than 30%.

    Well the main problem is "Who knows what the curve actually looks like?" It's only real purpose is to show that it's conceptually possible that a situation could exist where lowering tax raises revenue. It never really makes any claim about where that local maximum point is, nor does it give a method by which it could be found.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Ian Dalziel,

    Attachment

    from the other John Key(nes)...

    Christchurch • Since Dec 2006 • 7953 posts Report Reply

  • Ian Dalziel, in reply to BenWilson,

    curve dare...

    It never really makes any claim about where that local maximum point is, nor does it give a method by which it could be found.

    Maybe they're just having a laffer...
    ;- )
    <hat/door>

    Christchurch • Since Dec 2006 • 7953 posts Report Reply

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