The Zero Room

This week, I have been mostly reading:

• Demon-Haunted World — Cory Doctorow at Locus Online: The basic theory of cheating is to assume that the cheater is ‘‘rational’’ and won’t spend more to cheat than they could make from the scam: the cost of cheating is the risk of getting caught, multiplied by the cost of the punishment (fines, reputational dam­age), added to the technical expense associated with breaking the anti-cheat mechanisms. Software changes the theory. Software – whose basic underlying mechanism is ‘‘If this happens, then do this, otherwise do that’’ – allows cheaters to be a lot more subtle, and thus harder to catch. Software can say, ‘‘If there’s a chance I’m undergoing inspection, then be totally honest – but cheat the rest of the time.’’
• Widening inequality is largely a US and UK phenomenon – why? — by good lord, it's Vince Cable, new Lib Dem leader!: […] there is abundant cross-country evidence that too much inequality can harm economic performance, and that redistributive politics can do good. Studies suggest that higher levels of inequality are associated with unproductive rent-seeking; contribute to financial instability; feed asset bubbles rather than productive investment; weaken demand and encourage high levels of household debt; and lead to underinvestment in education and health.
• Nature Does Not Grade on a Curve — Ian Welsh: One of the problems with de-naturing (with living in almost entirely human made systems, and with pushing those bits we don’t control off into ghettos as we would illness), is that it means most people almost never experience a benchmark that isn’t set by other human beings. They feel, in their guts, that if only other people are convinced, any problem can be fixed or finangled. No. The bear doesn’t care that you can’t run fast enough because TV is funner than going for a jog, and nature doesn’t care that shareholders needed value and that oil barons didn’t want to be a little poorer (or whatever). And neither will those who suffer from climate changes due to our ethical monstrosity and sheer incapability.
• The Future of Work, Robotization, and Capitalism’s Ability to Generate Useless Jobs — Rutger Bregman: The time has come to stop sidestepping the debate and home in on the real issue: what would our economy look like if we were to radically redefine the meaning of “work”? I firmly believe that a universal basic income is the most effective answer to the dilemma of advancing robotization. Not because robots will take over all the purposeful jobs, but because a basic income would give everybody the chance to do work that is meaningful. I believe in a future where the value of your work is not determined by the size of your paycheck, but by the amount of happiness you spread and the amount of meaning you give. I believe in a future where the point of education is not to prepare you for another useless job, but for a life well lived. I believe in a future where “jobs are for robots and life is for people.”
• Ransom — Flea Snobbery:
  
• Even when wars end in the Middle East, superbugs and aggressive cancers caused by conflict fight on — Robert Fisk in the Independent: A Medecins Sans Frontieres analysis – presented at the conference by Abu-Sitta and Dr Omar Dewachi who co-direct a newly created Conflict Medicine Programme at the AUB supported by Jonathan Whittall of Medecins sans Frontieres – said that multidrug resistant [MDR] bacteria now accounts for most war wound infections across the Middle East, yet most medical facilities in the region do not even have the laboratory capacity to diagnose MDR, leading to significant delays and clinical mismanagement of festering wounds. Beyond the physical damage caused by weaponry, Whittall added, “destroyed or degraded sanitation facilitates the microbiological seeding of wounds. The body, weakened by the wound, is reinjured when it interacts with the harsh, physically degraded environment.”
• The bitcoin and blockchain: energy hogs — Fabrice Flipo and Michel Berne in the Conversation: In a 2014 study, Karl J. O’Dwyer and David Malone showed that the consumption of the bitcoin network was likely to be approximately equivalent to the electricity consumption of a country like Ireland, i.e. an estimated 3 GW. Imagine the consequences if this type of bitcoin currency becomes widespread. The global money supply in circulation is estimated at $11,000 billion. The corresponding energy consumption should therefore exceed 4,000 GW, which is eight times the electricity consumption of France and twice that of the United States. It is not without reason that a recent headline on the Novethic website proclaimed “The bitcoin, a burden for the climate”.
• The Varieties of Populist Experience — Robert Skidelsky: To be sure, support for a leftist program certainly exists in France. About 20% of voters backed the left-wing populist Jean-Luc Mélenchon in the presidential election’s first round. In the second round, one particularly illuminating Twitter hashtag was #NiPatronNiPatrie (“neither boss nor country”), reflecting many voters’ dissatisfaction with the election’s choice between neoliberalism and nationalism. The task of the left is to direct attention to the truly problematic aspects of global economic integration – financialization, the prioritization of capital over labor, of creditor over debtor, of patron over ouvrier – without lapsing into reactionary politics.
• I wrote ‘The Art of the Deal’ with Trump. His self-sabotage is rooted in his past. — Tony Schwartz in the Washington Post: The Trump I got to know had no deep ideological beliefs, nor any passionate feeling about anything but his immediate self-interest. He derives his sense of significance from conquests and accomplishments. “Can you believe it, Tony?” he would often say at the start of late-night conversations with me, going on to describe some new example of his brilliance. But the reassurance he got from even his biggest achievements was always ephemeral and unreliable — and that appears to include being elected president. Any addiction has a predictable pattern: The addict keeps chasing the high by upping the ante in an increasingly futile attempt to re-create the desired state. On the face of it, Trump has more opportunities now to feel significant and accomplished than almost any other human being on the planet. But that’s like saying a heroin addict has his problem licked once he has free and continuous access to the drug. Trump also now has a far bigger and more public stage on which to fail and to feel unworthy.
• Renegade Shorts - STEVE KEEN on Government Surplus:
  
• Australians don’t loiter in public space – the legacy of colonial control by design — Aaron Magro in the Conversation: While towns and new suburbs in the young colony were deeply influenced by European urban design, a key feature was excluded – the piazza. Governor Richard Bourke made very clear to surveyors that new towns in New South Wales (which at the time encompassed present-day Victoria) must not include public squares as these could promote rebellion.
• Free Time and the Pressures of Employability — David Frayne at Zed Books: The notion of employability has risen to remarkable prominence in the early part of the twenty-first century, where it forms the lynchpin of a neoliberal political philosophy, in which the state and employers are no longer committed to, or deemed responsible for, providing citizens with lasting and secure jobs. Those politicians who champion neoliberal policies have glorified paid employment, whilst at the same time dismantling the social protections that have traditionally insulated citizens against the uncertainties of the labour market. Within this context, the capacity of individuals to work relentlessly at their employability has come to be understood as the crux of national and individual prosperity.

This week, I have been mostly reading:

• Review of Steve Keen’s “Can we avoid another financial crisis?” — Michael Hudson: Mainstream models are unable to forecast or explain a depression. That is because depressions are essentially financial in character. The business cycle itself is a financial cycle – that is, a cycle of the buildup and collapse of debt. Keen’s “Minsky” model traces this to what he has called “endogenous money creation,” that is, bank credit mainly to buyers of real estate, companies and other assets. He recently suggested a more catchy moniker: “Bank Originated Money and Debt” (BOMD). That seems easier to remember.
• Education Can’t Fix Poverty. So Why Keep Insisting that It Can? — Jennifer Berkshire interviews Harvey Kantor in the Have You Heard blog: One of the consequences of making education so central to social policy has been that we’ve ended up taking the pressure off of the state for the kinds of policies that would be more effective at addressing poverty and economic inequality. Instead we’re asking education to do things it can’t possibly do. The result has been increasing support for the kinds of market-oriented policies that make inequality worse.
• Three radical ideas to transform the post-crisis economy — Martin Sanbu in the AFR: If private management of the money supply is a recipe for instability, the radical alternative is to nationalise the money supply. This is do-able today: central banks can offer accounts to all members of the public (or make central bank reserves available to everyone). Banks could be restricted to allocating existing savings to investments, rather than creating new credit. Another imperative is that of economic security. Previous radicals created safety nets where none existed. Today we have ample welfare states, but they still leave large groups in precarious conditions. Sometimes they trap them there, as generous benefits for low earners are withdrawn with rising incomes, creating prohibitive effective marginal tax rates for the modestly paid. The radical solution is a universal basic income, the proposal to pay an unconditional benefit to all citizens, financed by tax rises. The idea is rediscovered by every other generation; the time to put it into practice may now have come.
• Can Trump Deliver on Growth? — James K. Galbraith in Dissent Magazine: As things stand, the financial sector neither serves a public purpose nor does it deliver the growth it once did, until it broke down nine years ago. While there are people who feel obliged to borrow, and there will always be new generations of suckers, boom-and-bust banking credit isn’t a viable model for growth any more. What should be done about the banks? These are institutions with high fixed costs and with technologies and transnational legal structures that are designed to facilitate tax evasion and regulatory arbitrage. They face very limited prospects for sustained profitability in activities that correspond to social need. Their entire structure isn’t viable in a world of slow growth, except by fostering short-lived booms (of which the shale rush was the most recent example), followed by busts and bailouts. In short, the financial sector as a whole is a luxury we cannot afford.
• Savings are an Export Product — Neil Wilson: Foreign entities are holding your currency as savings. Similarly, financial products denominated in your currency are held as savings. Savings are, in effect, an export product of your currency area. Once you look at it this way, then savings are very similar to a barrel of oil in stock, or an aircraft engine. If your country relies upon oil exports and people stop wanting oil then you may have a problem. If you rely on aircraft engine exports and there are no orders for new aircraft, you may have a problem. If you rely upon people taking your savings (because they had an export-led policy — which implies a savings-import policy) and that changes (the export-led policy moves to a domestic-led policy, as we’re starting to see in China) then you may have a problem.
• The University Does Not Think — Simon Cooper in Arena: If we look at the various levels of university activity, from undergraduate teaching to academic research, to the relationship between the university and the wider social realm, it becomes quickly apparent how the university has been captured by instrumental logic since the expansion of the system in the 1980s. The increasing dominance of knowledge as a commodity (as opposed to other modalities of knowledge—critique, interpretation, wisdom and so forth) has played out across various domains. Starting with undergraduate education, we can see how the introduction of fees and debt systems creates a shift around the meaning of education towards a more narrowly instrumental one for both the student and the institution. As G. L. Williams remarks, ‘students have been metamorphosed from apprentices into customers and their teachers from master craftsmen to merchants’. University education as vocational training has become an increasingly central way of framing the student’s relation to knowledge, with a consequent decline in less ‘market-friendly’ subjects. The atrophy of the pure sciences, philosophy, social theory, literature etc. within many tertiary institutions is well established. In some cases, humanities departments have closed, replaced by ‘creative industries’ centres whose rationale is to marketise skills generated by an applied-humanities model, discarding all others.
• The Rock-Star Appeal of Modern Monetary Theory — Atossa Araxia Abrahamian at the Nation: According to this small but increasingly vocal cohort of economists, including Bernie Sanders’s former chief economic adviser, once we change the way we think about money, we can provide for everyone: We don’t have to “find” the money to “pay” for universal health care by “cutting” the budget elsewhere. In fact, our government already works that way: Spending must precede taxation, or there would be no dollars in the economy to tax. It’s the political will to spend on certain things, not the money to afford it, that’s lacking.
• Immiseration Revisited: The four phases of working time — Sandwichman at Angry Bear: The four phases of working time can be labeled cooperation, exploitation, immiseration and ruin. The incentive for employers is to progress inexorably toward the last phase unless regulated by legislation or collective bargaining.[…] In conclusion, yes, there is a neo-classical immiseration theory. The economists who propounded it apparently were unaware that it was such a theory. By extension, that immiseration theory is a crisis theory. There is no built-in mechanism of negative feedback from prices that militates against the passage from the immiseration phase to the ruin phase. Hicks assumed that a “very moderate degree of rationality on the part of employers will thus lead them to reduce hours to the output optimum as soon as Trade Unionism has to be reckoned with at all seriously [emphasis added].” But by the time exploitation has progressed to the immiseration phase, trade unionism doesn’t have to be “reckoned with at all seriously” by employers.
• What is human capital? — Peter Fleming in Aeon Essays: Friedman had discovered in human capital theory more than just a means for boosting economic growth. The very way it conceptualised human beings was an ideological weapon too, especially when it came to counteracting the labour-centric discourse of communism, both outside and inside the US. For doesn’t human capital theory provide the ultimate conservative retort to the Marxist slogan that workers should seize the means of production? If each person is already his own means of production, then the presumed conflict at the heart of the capitalist labour process logically dissolves. Schultz too was starting to see the light, and agreed that workers might actually be de facto capitalists: ‘labourers have become capitalists not from the diffusion of the ownership of corporation stocks, as folk law would have it, but from the acquisition of knowledge and skill that have economic value.’

Via MacroBusiness, here's the TL;DR of the Business Council of Australia's submission to a 2012 Senate inquiry into social security allowances:

• "The rate of the Newstart Allowance for jobseekers no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment.
• "Reforming Newstart should be part of a more comprehensive review to ensure that the interaction between Australia’s welfare and taxation systems provides incentives for people to participate where they can in the workforce, while ensuring that income support is adequate and targeted to those in greatest need.
• "As well as improving the adequacy of Newstart payments, employment assistance programs must also be reformed to support the successful transition to work of the most disadvantaged jobseekers."

Not only did the BCA's confederacy of Scrooges suffer unaccustomed pangs of sympathy, the Liberal Party senator chairing the inquiry also agreed that Newstart is excessively miserly. However, he failed to recommend raising the allowance, saying:

"There is no doubt the evidence we received was compelling. Nobody want's [sic] to see a circumstance in which a family isn't able to feed its children, no one wants to see that in Australia. But we can't fund these things by running up debt."

Sigh. (Here we go…) There is no need to "fund these things", whether it be by "running up debt" or any other means. The Federal Government creates money when it spends. We, as a country, run out of the capacity to feed our children when we run out of food. We cannot run out of dollars, since we can create the dollars without limit.

The government does however, at the moment, have a purely voluntary policy of matching, dollar-for-dollar, all spending with government bond sales. There's no good reason for this; as Bill Mitchell says, it's just corporate welfare. Even so, selling bonds is not issuing new debt. Bonds are purchased with RBA credits (or "reserves", if you prefer). The purchasing institution simply swaps a non-interest-bearing asset (reserves) at the RBA for an interest-bearing one (bonds), still at the RBA. It's just like transferring some money from a savings account to a higher-interest term deposit account at a commercial bank; do we say that this is a lending operation? Of course not.

There is no fiscal reason why the government should punish the unemployed to the extent that they become an unemployable underclass. Even if we are generous and assume the good senator and his colleagues on the inquiry are just ignorant about how the economy works, we are still bound to conclude that there must be some (not so ignorant) people in government, who do want to see people suffering for no just reason.

This week, I have been mostly reading:

• Toronto Housing Bubble Pops. “Genuine Fear” of Price Collapse — Wolf Richter: “Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” said [Toronto Real Estate Board] President Tim Syrianos. Alas “psychology” is precisely what causes house price bubbles – not fundamentals, such as 2.3% annual wage increases. And when that “psychology” turns, it pricks those bubbles.
• Housing bubble is now official, commence arse-covering (panic)! — Matt Ellis: We look to be approaching the final panic stages of the last blow off in this epic bubble, as the kitchen sink is thrown at the market in a desperate attempt to avoid the inevitable. But it will only do further damage, and ultimately prove futile. This is the cost that we all have to pay for those beloved property prices – that illusory “wealth effect” that simply amounts to a pile of household debt as large as the difference between the total nominal value and the total fair value of the housing market.
• Explainer: shadow banking and where it came from — Huon Curtis in the Conversation: Australia can’t do much to remedy global uncertainty. However, policies it pursues do link into shadow banking practices in multiple ways. Policies that erode the standard employment relation and cut pay rates increase consumer demand for short-term credit products. This increases private debt for consumers, but feeds its attractiveness into an asset class for institutional investors.
• I See What Google Did There… — Adam Croom: Today Google announced what is, again, a fun and intriguing tool called AutoDraw. You draw some squiggly lines and it uses AI to guess what you meant to draw. […] Does Google really want to improve drawing everywhere? Did Google find a specific weakness within the human race and thus felt compelled to solve a world problem? Or is Google creating a product that meets a market need of designers who need quick icons? Nah, none of those. Does it want to improve machine learning? Hell yes it does.
• British Labour has to break out of the neo-liberal ‘cost’ framing trap — Bill Mitchell: Statements such as the ‘nation cannot afford the cost of some program’ are never made when the military goes crazy and launches millions of dollars of missiles to be blasted off in the dark of the night. But when it comes to public health systems or the nutritional requirements of our children, the neo-liberals have their calculators out toting up the dollars. However, the actual cost of a government program is the change it causes in the usage of real resources. When we ask whether the nation can afford a policy initiative, we should ignore the $x and consider what real resources are available and the potential benefits. The available real resources constitute the fiscal space. The fiscal space should then always be related to the purposes to which we aspire, and the destination we wish to reach. British Labour needs to learn those basics fast and to break out of the neo-liberal ‘cost’ framing it is trapped within.
• With or without edtech — Jonathan Rees: Can you live without edtech? [You just knew I had to get around to edtech here eventually, right?] Shockingly enough, there were actually good schools in the United States long before Bill Clinton and Al Gore decided to put a computer in every classroom. Plenty of teachers and professors offer great classes of all kinds without anything more sophisticated than their voices and a chalkboard. Weirdly enough, just this morning, right after I read that article, I was pitching our dean on starting a digital humanities program in our college. “What about the professors who don’t want to use technology?,” he asked me. I said I would never in a million years force any teacher to use technology if they don’t want to, but it’s a actually a good thing if students have a wide range of classes in which they can enroll, some of which use educational technology and some of which don’t.