Theme: Incentives

http://www.bradford-delong.com/2015/04/things-i-probably-will-have-time-to-say-rethinking-macro-policy-iii-conference-washington-dc-april-15-16.htmlA DEEPER RETHINKING OF MACRO POLICY. MUCH DEEPER.

I’d like to posit a broader generalization that not only keeps up with current events but looks past them.

Political behavior since the beginning of this correction – particularly the expression of moral intuition as austerity – is evidence that all human organizations, at all scales, act to advance their interests, and those interests remain heterogeneous and irreconcilable. The optimum economic performance in any political order is determined by the homogeneity of their interests – not the maximum velocity under the assumption of common interests. As such, we must construct any science of economics – the study of cooperation that is predictive, within those constraints – or it is ideology: meaning persuasive, not science: meaning descriptive.

I believe we could argue that – as we did in 1913 – we have reached the maximum tolerable homogeneity in both the country, and the world. And with that maximum tolerable homogeneity, the limit of the generalization of the principles of the 1930’s. And the limit of the origins of those principles in the generalization of the Anglo, German and Jewish enlightenment visions of man, in which each group attempted to advance its group strategy as a universal good. All theories fail at some scale, but we never know in advance, that limit. All those theories persist today unmodified and irreconcilable. And to their visions of the future we have now added the economic, political, demographic and military force of other civilizations once again. We call this effect ‘globalization’. Which is in itself the implication of homogenous universal interest among those who cooperate.

Yet, man cooperates because it is a more beneficial means of competition, not a de-facto good. But in the end, within and without, intra and inter, we compete. Cooperation is only as sustainable as it is beneficial. Its benefit has limits, and those limits are political.

Without the abandonment of the myth of a monopoly of interests, and the introduction of polycentric morality, and political reality, into economics, we will remain unable to forecast, or even describe events.

But that said, Braid is right: without reforming the financial system we will not stop the unnecessary privatization of the commons endemic to the distribution of liquidity through an unnecessary distributor.

So I think the necessary reformation of our thought is the one in which we bypass the financial system, instead of one in which we attempt to improve it. I think the discourse then becomes one of fiscal policy and not one of monetary policy. I think we then avoid the monopoly of interests assumed in monetary policy, and conduct exchanges between the interests of heterogeneous classes, rather than manipulate those classes in an attempt to conquer the middle and upper by the lower. And that world is likely the only one that can marginally improve on the universalist model of the 20th century, which is an institutional expression of the anglo enlightenment, and our friends Smith and Burke.