Saturday, December 31, 2011

ANS -- What Peak Oil Looks Like

this is another one of those articles that makes economics easy (or easier) to understand.  but this one is about opening our eyes to that fact that we are already in the downward spiral that leads to the end of this epoch.  Very well done, except he doesn't see that solar will work, once we get the bugs out.  I should post something about it on his site: that we are inventing something that will make solar far more practical. 
Find it here:

Wednesday, December 07, 2011

What Peak Oil Looks Like

There are times when the unraveling of a civilization stands out in sharp relief, but more often that process makes itself seen only in the sort of scattered facts and figures that take a sharp eye to notice and assemble into a meaningful picture. How often, I wonder, did the prefects of imperial Rome look up from the daily business of mustering legions and collecting tribute to notice the crumbling of the foundations on which their whole society rested?

Nowadays, certainly, that broader vision is hard to find. It's symptomatic that in the last few weeks I've fielded a fair number of emails insisting that the peak oil theory­of course it's not a theory at all; it's a hard fact that the extraction of a finite oil supply in the ground will sooner or later reach a peak and begin to decline­has been rendered obsolete by the latest flurry of enthusiastic claims about shale oil and the like. Enthusiastic claims about the latest hot new oil prospect are hardly new, and indeed they've been central to cornucopian rhetoric since M. King Hubbert's time. A decade ago, it was the Caspian Sea oilfields that were being invoked as supposedly conclusive evidence that a peak in global conventional petroleum production wouldn't arrive in our lifetimes. Compare the grand claims made for the Caspian fields back then, and the trickle of production that actually resulted from those fields, and you get a useful reality check on the equally sweeping claims now being made for the Bakken shale, but that's not a comparison many people want to make just now.

On the other side of the energy spectrum, those who insist that we can power some equivalent of our present industrial system on sun, wind, and other diffuse renewable sources have been equally vocal, and those of us who raise reasonable doubts about that insistence can count on being castigated as "doomers." It's probably not accidental that this particular chorus seems to go up in volume with every ethanol refinery or solar panel manufacturer that goes broke and every study showing that the numbers put forth to back some renewable energy scheme simply don't add up. It's no more likely to be accidental that the rhetoric surrounding the latest fashionable fossil fuel play heats up steadily as production at the world's supergiant fields slides remorselessly down the curve of depletion. The point of such rhetoric, as I suggested in a post a while back, isn't to deal with the realities of our situation; it's to pretend that those realities don't exist, so that the party can go on and the hard choices can be postponed just a little longer.

Thus our civilization has entered what John Kenneth Galbraith called "the twilight of illusion," the point at which the end of a historical process would be clearly visible if everybody wasn't so busy finding reasons to look somewhere else. A decade ago, those few of us who were paying attention to peak oil were pointing out that if the peak of global conventional petroleum production arrived before any meaningful steps were taken, the price of oil would rise to previously unimagined heights, crippling the global economy and pushing political systems across the industrial world into a rising spiral of dysfunction and internal conflict. With most grades of oil above $100 a barrel, economies around the world mired in a paper "recovery" worse than most recessions, and the United States and European Union both frozen in political stalemates between regional and cultural blocs with radically irreconcilable agendas, that prophecy has turned out to be pretty much square on the money, but you won't hear many people mention that these days.

The point that has to be grasped just now, it seems to me, is that this is what peak oil looks like. Get past the fantasies of sudden collapse on the one hand, and the fantasies of limitless progress on the other, and what you get is what we're getting­a long ragged slope of rising energy prices, economic contraction, and political failure, punctuated with a crisis here, a local or regional catastrophe there, a war somewhere else­all against a backdrop of disintegrating infrastructure, declining living standards, decreasing access to health care and similar services, and the like, which of course has been happening here in the United States for some years already. A detached observer with an Olympian view of the country would be able to watch things unravel, as such an observer could have done up to now, but none of us have been or will be detached observers; at each point on the downward trajectory, those of us who still have jobs will be struggling to hang onto them, those who have lost their jobs will be struggling to stay fed and clothed and housed, and those crises and catastrophes and wars, not to mention the human cost of the broader background of decline, will throw enough smoke in the air to make a clear view of the situation uncommonly difficult to obtain.

Meanwhile those who do have the opportunity to get something approaching a clear view of the situation will by and large have every reason not to say a word about what they see. Politicians and the talking heads of the media will have nothing to gain from admitting the reality and pace of our national decline, and there will be a certain wry amusement to be had in watching them scramble for reasons to insist that things are actually getting better and a little patience or a change of government will bring good times back again. There will doubtless be plenty of of the sort of overt statistical dishonesty that insists, for example, that people who no longer get unemployment benefits are no longer unemployed­that's been standard practice in the United States for decades now, you know. It's standard for governments that can no longer shape the course of events to fixate on appearances, and try to prop up the imagery of the power and prosperity they once had, long after the substance has slipped away.

It's no longer necessary to speculate, then, about what kind of future the end of the age of cheap abundant energy will bring to the industrial world. That package has already been delivered, and the economic rigor mortis and political gridlock that have tightened its grip on this and so many other countries in the industrial world are, depending on your choice of metaphor, either part of the package or part of the packing material, scattered across the landscape like so much bubble wrap. Now that the future is here, abstract considerations and daydreaming about might-have-beens need to take a back seat to the quest to understand what's happening, and work out coping strategies to deal with the Long Descent now that it's upon us.

Here again, those scattered facts and figures I mentioned back at the beginning of this week's post are a better guide than any number of comforting assurances, and the facts I have in mind just at the moment were brought into focus by an intriguing essay by ecological economist Herman Daly.

In the murky firmament of today's economics, Daly is one of the few genuinely bright stars. A former World Bank official as well as a tenured academic, Daly has earned a reputation as one of the very few economic thinkers to challenge the dogma of perpetual growth, arguing forcefully for a steady state economic system as the only kind capable of functioning sustainably on a finite planet. The essay of his that I cited above, which I understand is scheduled to be published in an expanded form in the journal Ecological Economics, covers quite a bit of ground, but the detail I want to use here as the starting point for an unwelcome glimpse at the constraints bearing down on our future appears in the first few paragraphs.

In his training as an economist, Daly was taught, as most budding economists are still taught today, that inadequate capital is the most common barrier to the development of the so-called "developing" (that is, nonindustrial, and never-going-to-develop) nations. His experience in the World Bank, though, taught him that this was almost universally incorrect. The World Bank had plenty of capital to lend; the problem was a shortage of "bankable projects"­that is, projects that, when funded by a World Bank loan, would produce the returns of ten per cent a year or so that would be needed to pay off the loan and and also contribute to the accumulation of capital within the country.

It takes a familiarity with the last half dozen decades of economic literature to grasp just how sharply Daly's experience flies in the face of the conventional thinking of our time. Theories of economic development by and large assume that every nonindustrial nation will naturally follow the same trajectory of development as today's industrial nations did in the past, building the factories, hiring the workers, providing the services, and in the process generating the same ample profits that made the industrialization of Britain, America, and other nations a self-sustaining process. Now of course Britain, America, and other nations that succeeded in industrializing each did so behind a wall of protective tariffs and predatory trade policies that sheltered industries at home against competition, a detail that gets discussed next to nowhere in the literature on development and was ignored in the World Bank's purblind enthusiasm for free trade. Still, there's more going on here.

In The Power of the Machine, Alf Hornborg has pointed out trenchantly that the industrial economy is at least as much a means of wealth concentration as it is one of wealth production. In the early days of the Industrial Revolution, when the hundreds of thousands of independent spinners and weavers who had been the backbone of Britain's textile industry were driven out of business by the mills of the English Midlands, the income that used to be spread among the latter went to a few mill owners and investors instead, with a tiny fraction reserved for the mill workers who tended the new machines at starvation wages. That same pattern expanded past a continental scale as spinners and weavers across much of the world were forced out of work by Britain's immense cloth export industry, and money that might have stayed in circulation in countries around the globe went instead into the pockets of English magnates.

Throughout the history of the industrial age, that was the pattern that drove industrialism: from 18th century Britain to post-World War II Japan, a body of wealthy men in a country with a technological edge and ample supplies of cheap labor could build factories, export products, tilt the world's economy in their favor, and make immense profits. In the language of Daly's essay, industrial development in such a context was a bankable project, capable of producing much more than ten per cent returns. What has tended to be misplaced in current thinking about industrial development, though, is that at least two conditions had to be met for that to happen. The first of them, as already mentioned, is exactly the sort of protective trade policies that the World Bank and the current economic consensus generally are unwilling to contemplate, or even to mention.

The second, however, cuts far closer to the heart of our current predicament. The industrial economy as it evolved from the 18th century onward depended utterly on the ability to replace relatively expensive human labor with cheap fossil fuel energy. The mills of the English Midlands mentioned above were able to destroy the livelihoods of hundreds of thousands of independent spinners and weavers because, all things considered, it was far cheaper to build a spinning jenny or a power loom and fuel it with coal than it was to pay for the skilled craftsmen and craftswomen who did the same work in an earlier day. In economic terms, in other words, industrialism is a system of arbitrage.

Those of my readers who aren't fluent in economic jargon deserve a quick definition of that last term. Arbitrage is the fine art of profiting off the difference in price between the same good in two or more markets. The carry trade, one of the foundations of the global economic system that came apart at the seams in 2008, was a classic example of arbitrage. In the carry trade, financiers borrowed money in Japan, where they could get it at an interest rate of one or two per cent per year, and then lent it at some higher interest rate elsewhere in the world. The difference between interest paid and interest received was pure profit.

What sets industrialism apart from other arbitrage schemes was that it arbitraged the price difference between different forms of energy. Concentrated heat energy, in the form of burning fossil fuel, was cheap; mechanical energy, in the form of complex movements performed by the hands of spinners and weavers, was expensive. The steam engine and the machines it powered, such as the spinning jenny and power loom, turned concentrated heat into mechanical energy, and opened the door to what must have been the most profitable arbitrage operation of all time. The gargantuan profits yielded by this scheme provided the startup capital for further rounds of industrialization and thus made possible the immense economic transformations of the industrial age.

That arbitrage, however, depended­as all arbitrage schemes do­on the price difference between the markets in question. In the case of industrialism, the difference was always fated to be temporary, because the low price of concentrated heat was purely a function of the existence of vast, unexploited reserves of fossil fuels that could easily be accessed by human beings. For obvious reasons, the most readily accessible reserves were mined or drilled first, and so as time passed, production costs for fossil fuels­not to mention the many other natural materials needed for industrial projects, and thus necessary for the arbitrage operation to continue­went up, slowly at first, and more dramatically in the last decade or so.

I suspect that the shortage of bankable projects in the nonindustrial world that Herman Daly noted was an early symptom of that last process. Since nonindustrial nations in the 1990s were held (where necessary, at gunpoint) to the free trade dogma fashionable just then, the first condition for successful industrialization­a protected domestic market in which new industries could be sheltered from competition­was nowhere to be seen. At the same time, the systemic imbalances between rich and poor countries­themselves partly a function of industrial systems in the rich countries, which pumped wealth out of the poor countries and into corner offices in Wall Street and elsewhere­meant that human labor simply wasn't that much more expensive than fossil fuel energy.

That was what drove the "globalization" fad of the 1990s, after all: another round of arbitrage, in which huge profits were reaped off the difference between labor costs in industrial and nonindustrial countries. Very few people seem to have noticed that globalization involved a radical reversal of the movement toward greater automation­that is, the use of fossil fuel energy to replace human labor. When the cost of hiring a sweatshop laborer became less than the cost of paying for an equivalent amount of productive capacity in mechanical form, the arbitrage shifted into reverse; only the steep differentials in wage costs between the Third World and the industrial nations, and a vast amount of very cheap transport fuel, made it possible for the arbitrage to continue.

Still, at this point the same lack of bankable projects has come home to roost. A series of lavish Fed money printing operations (the euphemism du jour is "quantitative easing") flooded the banking system in the United States with immense amounts of cheap cash, in an attempt to make up for the equally immense losses the banking system suffered in the aftermath of the 2005-2008 real estate bubble. Pundits insisted, at least at first, that the result would be a flood of new loans to buoy the economy out of its doldrums, but nothing of the kind happened. There are plenty of reasons why it didn't happen, but a core reason was simply that there aren't that many business propositions in the industrial world just now that are in a position to earn enough money to pay back loans.

Among the few businesses that do promise a decent return on investment are the ones involved in fossil fuel extraction, and so companies drilling for oil and natural gas in shale deposits­the latest fad in the fossil fuel field­have more capital than they know what to do with. The oil boomtowns in North Dakota and the fracking projects stirring up controversy in various corners of the Northeast are among the results. Elsewhere in the American economy, however, good investments are increasingly scarce. For decades now, profits from the financial industry and speculation have eclipsed profits from the manufacture of goods­before the 2008 crash, it bears remembering, General Motors made far more profit from its financing arm than it did from building cars­and that reshaping of the economy seems to be approaching its logical endpoint, the point at which it's no longer profitable for the industrial economy to manufacture anything at all.

I have begun to suspect that this will turn out to be one of the most crucial downsides of the arrival of peak oil. If the industrial economy, as I've suggested, was basically an arbitrage scheme profiting off the difference in cost between energy from fossil fuels and energy from human laborers, the rising cost of fossil fuels and other inputs needed to run an industrial economy will sooner or later collide with the declining cost of labor in an impoverished and overcrowded society. As we get closer to that point, it seems to me that we may begin to see the entire industrial project unravel, as the profits needed to make industrialism make sense dry up. If that's the unspoken subtext behind the widening spiral of economic dysfunction that seems to be gripping so much of the industrial world today, then what we've seen so far of what peak oil looks like may be a prologue to a series of wrenching economic transformations that will leave few lives untouched.

ANS -- How to Talk to Kids about the Principles (without all the big words)

This is a really short, really interesting article about explaining "the principles" to your kids.  Now, I don't know what principles they are talking about, but you don't really need to know to understand the article.  And isn't THAT interesting? anyway, it's good advice and a neat little window into how we think and how to explain it to kids. 
Find it here:

How to Talk to Kids about the Principles (without all the big words)

Posted on December 29, 2011 by Erika Bugbee


Kids learn everything faster than we do and learning about the way our thinking works seems to be no exception. Sometimes the biggest obstacle for parents in sharing the principles is that they think they have to use words like principles and consciousness. Just like us, however, kids live in their own thinking all day long, and have plenty of moments when they have registered on the fact that it can be illusory and misleading, so they have their own first-hand experience and it doesn't involve big academic terms. As a parent, I have found myself talking to my kids about the invisible forces that are happening inside of us, because I know it will help my kids make sense of life when they are having a hard time. Let me give an example that happened a few days ago with my daughter.

Here is the scenario: my seven-year-old got out of bed twice one night after I tucked her in, once to get a Band-Aid for a hangnail, and once because she remembered she'd left her coat on the playground. She never gets out of bed. My son, on the other hand, gets out of bed chronically, using one of a thousand random, almost entirely fictional reasons. Because I'm so used to hearing fictional excuses, I just automatically got impatient with her.

My daughter is sensitive and fell apart, and I wanted to make things right. I knew if she could see that people are living under the influence of their own thinking, it would help her see that my impatience was not personal. Here is how the conversation went: I said I was sorry for getting upset for no good reason and my grouchiness had nothing to do with her at all. It had to do with me. We talked about how sometimes her cousin comes over and only wants to play with her older brother. The last time her cousin came over, before he even walked in, she got upset thinking he was going to leave her out. She went off by herself and felt left out without every actually seeing him. Eventually she came around and things were fine. Her cousin was into playing with her, and she had just made the whole thing up in her head. Once she had made it up in her head that he was not going to play with her, she felt sad. Her mind tricked her and told her something that wasn't true, and she believed it.

And that is exactly what I did. My mind tricked me and told me she had some made-up reason to get out of bed like her brother usually has and I got mad before I even heard the reason. That is what our minds do all day long. They make up stories and trick us and we don't even know the stories are not real. Eventually, seemingly out of nowhere, things turn around in your head and you feel different – my daughter realized she was not actually being left out and I realized I had gotten mad without a valid reason.

I was trying to show her two things in our conversation:

1. The way you feel at any moment comes from the thinking you are having and not from whatever situation you're in.

2. Your thinking changes all by itself and gives you a different set of feelings about the exact same situation.

These are the principles in plain language. My daughter was amused and comforted by the fact that I get tricked too, and did not feel bad anymore that I got mad at her. As our kids realize that their parents get tricked all the time, it becomes easier for us to talk to them about anything, big or small, and they will start to see how we all get lost. It is a sharing moment, not an educational moment. It is a "Here is what happened to you, and that very same thing just happened to me" conversation.

Regardless of what you are trying to discuss with your kids, if you are like most parents (myself included), you have about 30 seconds before you lose your audience. Their eyes will glaze over if we lecture or teach at them. Since we are caught in the very same tricks they are, however, conversations about the principles have a much better chance of going somewhere because we are talking to them from one novice to another. As a result, you are much more likely to intrigue them. That is the point of the principles: to shine a light on the fact that life as you know it is coming from these forces inside you and we are all asleep to that fact a good percent of the time. The fact that these forces are invisible is the biggest challenge, and my job as a parent is to share what little I've learned about this unseen factor using any moment that I have been thrown by my own thinking. Fortunately for my kids, that happens daily.

Friday, December 30, 2011

ANS -- Small Investors Flee Stocks, Changing Market Dynamics

For more than a year I have been posting variations of
1)Take your money out of Wall St.
2)Support local businesses, especially democratically-run, worker-owned cooperatives.
3) Elect progressive candidates
in various places all over the internet. 
Now we heard this on the radio:

Find it here:   If you want to look at it do it soon, as they only leave them up for a few days.

Small Investors Flee Stocks, Changing Market Dynamics

more in Markets »


Many individual investors were tiptoeing back into stocks in the spring. Now, they're running for cover again.

Karen and Roger Potyk, a comfortably retired couple in San Antonio, Tex., had clung to some stock mutual funds despite their anxiety following the financial crisis of 2008. But the renewed market volatility following the "flash crash" of May 6 proved too much to bear.

Enlarge Image
Karen and Roger Potyk.

Karen and Roger Potyk sold the last of their stock mutual funds after May's market volatility.

"We just didn't want to put up with it any more," says Karen Potyk. She and her husband sold the last of their stock holdings on May 20, moving the money to bonds, certificates of deposit and bond-like annuities.

Small investors' faith in stocks, which surged in the 1990s, has collapsed since the technology-stock debacle and the Enron and WorldCom scandals of 2000-2002. The 2007-2009 financial crisis only made things worse. Now, the pullback among ordinary investors means they are a declining force in a market that is increasingly dominated by professionals.

Some were tantalized by equities during the 70% rally that began in March 2009 and ran through April. But mutual-fund data and other clues suggest that that brief infatuation has ended.

In 2002, investors withdrew more money from mutual funds that invest in U.S. stocks than they put in. Then from 2007 through 2009 they withdrew money for three consecutive years. That marked the first three-year period of withdrawals since 1979-1981, according to the Investment Company Institute, a mutual-fund trade group. This year, U.S.-stock funds saw inflows in January, March and April, but net withdrawals resumed in May.

Investors talk of a growing disillusionment with big institutions, including corporations, government, banks and political parties­as well as fears about the nation's heavy debt. Some people's confidence in stocks was seriously shaken by the volatility that returned in May. They worry that the May 6 flash crash, when the Dow Jones Industrial Average fell 700 points in eight minutes before rebounding, is a sign that ordinary people are increasingly at the mercy of anonymous companies that trade with powerful computers.

Individual investors were important market pillars in the 1990s, but their flight from stocks is changing the market dynamic. By adding money to mutual funds, individuals helped push stocks higher in the 1990s and to a lesser extent from 2003 through 2006. Now they are moving money out again on balance, making them a drag on the market.

Ordinary investors are returning to the cautious mentality they developed during the 1970s. That was the last extended period of stock weakness, after which it took many people a decade or more to get comfortable with stocks again.

"I feel like the tail of the dog that is being wagged by institutional investors who are taking a lot of risk, playing a lot of games and just have these computerized orders that affect me a lot," says Simeon Thibeaux, a semi-retired businessman from Alexandria, La.

History suggests that individuals eventually will return to stocks, as they did in the 1980s and, even more strongly, in the 1990s. But rebuilding their confidence could take time, says Brian Reid, chief economist of the Investment Company Institute. Historically, it has taken an extended period of stock success to lure individuals back after long periods of disaffection.

Rebounding after a two-month slump, the Dow Jones Industrial Average jumped 511 points, or 5%, to 10198.03 last week, its biggest weekly gain in almost a year, although it remains down 9% since topping out on April 26.

"We have gone through two of the worst bear markets since the Great Depression, and it has given investors a better sense of the risks and dangers of investing" in stocks, Mr. Reid says, referring to the bear markets of 2000-2002 and 2007-2009.

The gradual dissipation of investor confidence can be seen in mutual-fund investing patterns.

After getting hurt in the 2000 tech-stock crunch, individuals came back to U.S.-stock funds in 2003, as stocks were entering a new bull market, ICI data show. But the buying proved tepid and turned to net selling in the latter part of 2006, even before the bull market ended in 2007. Despite occasional periods of inflows to U.S.-stock funds, the selling trend has continued since then. Individuals removed a net $7 billion from stock funds in the seven days ending May 12 and $13 billion two weeks later, eclipsing the deposits from earlier in the year.

Recent volatility has certainly shaken the Potyks' confidence. Mr. Potyk, a 68-year-old pharmacist, spent 25 years as an army officer and 11 years with Pfizer before retiring. His wife, 63, is a retired real-estate broker.

The Potyks stuck with their stocks through the tech wreck, the Sept. 11 attacks and Enron. They were willing to take risks to get stock-market returns. By 2006, he and his financial adviser say, the Potyks' portfolio was 50% stocks and 50% bonds and other fixed-income investments.

The big blow to their confidence was the 2008 collapse of brokerage-firm Lehman Brothers, in which they lost $75,000 on a Lehman bond. Although it was a bond that hurt them, the Potyks' faith in all potentially risky investments was shattered.

"In the military, you learn that you want people you can respect, trust­who have integrity," Mr. Potyk says. "Over the last five years or so, I find that our financial institutions have no shred of the character I describe."

The last straw was the May market volatility, accompanied by widespread fears about European government debt. On May 20, the Potyks asked their financial adviser to sell the last of their stock mutual funds.

Now that their portfolio consists entirely of fixed-income investments, "I won't make 8% on my money. I will make 4% or 5%, but the money will be there," says Mr. Potyk.

Stocks had developed an almost cult-like following in the 1980s and 1990s, when they were among the best investments available. But in the past decade, big U.S. stocks have had the worst performance of nine major investment classes tracked by investment research firm Morningstar.

The Standard & Poor's 500 stock index has fallen at an annualized rate of 3% a year over the past 10 years, including dividends and controlling for inflation. Long-term Treasury bonds show a gain of 5% a year during that same period, after inflation. Gold is up 10% a year and real-estate investment trusts 8% a year. The S&P 500 index itself, without adjusting for inflation and dividends, is stuck today at a level it first reached 12 years ago, meaning it has gone nowhere in more than a decade, scaring a legion of people in the process.

Reflecting their flight from risk, individual investors appear to be losing faith in an investment strategy called buying on the dips. In times of stock strength, people learn to buy stocks after a decline, when they are cheaper, because the stocks have a tendency to recover. Lately, investors have been reversing that behavior, selling on dips for fear the declines will continue.

The Yale School of Management maintains an index, designed by Professor Robert Shiller, that tracks individuals' willingness to buy on dips, based on a monthly survey of wealthy investors. The index topped out in 2002. While it has moved up and down since then, it has been falling since the start of 2009.

Some investors, haunted by the continuing credit crunch and unemployment fears, are being driven to pull money out of stock funds to make up budget shortfalls.

Also eating away at risk tolerance is demographics: Baby boomers are aging, making them think more about preserving their holdings' value. This is only part of the story, however: The Investment Company Institute data show lower risk tolerance among younger people, too.

In surveys of mutual-fund owners, the ICI found that just 30% said in 2009 that they were willing to take above-average or substantial risk in the stock market, down from 37% in 2008. The number willing to take only below-average risk or no risk at all rose to 20% from 14%.

Mr. Thibeaux of Alexandria, La., sold one-third of his stock mutual funds late in April at the suggestion of an investment adviser, who warned him that stocks were due for a pullback.

The problem was where to put the cash. A money-market fund at his mutual-fund company or a short-term certificate of deposit at his bank would yield almost nothing, he says. He finally decided simply to pay off the mortgage on a second home, on which he was paying 5% interest.

"I think there is no investment strategy now except to buckle up and hope that you don't get hit too hard," Mr. Thibeaux says.

Long-term investors have been showing a distinct change in behavior since 2008. Jay Pestrichelli, who monitors client behavior at online brokerage firm TD Ameritrade, has noted a change in the traditional buy and hold strategy. "People who once made few changes to their accounts have begun trading more frequently," he says. He saw the trend especially clearly on May 6, when there was an uptick of selling.

"A higher percentage of our trading was coming from our longer-term investor base," he says. People who might log into their accounts regularly, but not necessarily trade, were selling heavily that day, he says.

"The next day, those clients were all buying back in," he says, often losing money on a trade where they had sold low and bought higher. "To see that kind of a move in such a short period of time, it certainly can shake their trust."

James Rotenstreich, a businessman in Birmingham, Ala., says the May flash crash damaged his confidence in stocks as a store of wealth.


"I was just dumbfounded. The whole thing could have melted down, and I wouldn't have had much to do with it one way or the other," he says.

Mr. Rotenstreich has received offers for some real estate he owns in the Birmingham area, but so far has been reluctant to sell, he says, in part because he doesn't know what he would do with the money. He notes that corporate bonds and other alternatives also suffered severely in the market decline.

Reflecting on his options, he says that if he sold the real estate, "I really think I would put it in the bond market. So maybe I have lost some faith in the future of the stock market."

Some investment advisers are telling clients that, for long-term investors, this summer will turn out to have been a great time to buy stocks on the cheap. So far, not many clients are listening.

Write to E.S. Browning at

Thursday, December 29, 2011

ANS -- Can a molecule make us moral?

This great article was sent to me by one of our readers.  Read it.  Watch the videos too; there's more info there that's not in the text.  It's about a molecule that makes us behave morally.  It increases empathy.  Psychopaths don't have it....
find it here:

[]  [] [] [] []

Can a molecule make us moral?

By Paul Zak, Special to CNN
updated 7:36 AM EST, Tue December 27, 2011
Paul Zak: Trust, morality and oxytocin
  • Paul Zak: Experiments show the presence of a chemical promotes moral behavior
  • He says oxytocin makes people more willing to help a stranger
  • Those who release the most oxytocin are the most satisfied with their lives, he says
  • Zak: Aristotle was right in saying that the reason to be virtuous is that it makes us happy

Editor's note: Paul Zak is professor of Economics and Department Chair and director of the Center for Neuroeconomics Studies at Claremont Graduate University. He's the author of "The Moral Molecule: The Source of Love and Prosperity." Zak spoke at the TED Global conference in July in Edinburgh. TED is a nonprofit dedicated to "Ideas worth spreading" which it makes available through talks posted on its website.

(CNN) -- The longest debate since humans have been having debates is whether we are good or evil. It underlies the stories of Adam and Eve, Cain and Abel, Jesus and Judas.

What is our human nature? Of course, the answer is we can be both good and evil. But what determines which part of our character emerges?

About a decade ago, my lab made an unexpected breakthrough in the understanding of good and evil. We discovered that the neurochemical oxytocin makes people trustworthy. We then found oxytocin was responsible for many other moral behaviors, from being generous to sacrificing to help a stranger.
[] An interview with Paul Zak

Wait -- morality is chemical? In my TED talk, I describe how I made the unlikely discovery of the moral molecule, how I was roundly discouraged from even looking for such a chemical, and what drove me to persist in my search.

In these experiments, we tempt people with virtue and vice using money (share with others: virtue; selfishly keep everything for yourself: vice). Using money to understand how and why humans make decisions is a field now called neuroeconomics.

Money gives us a convenient way to measure how much someone cares about another person. For example, in one experiment we randomly matched strangers in the lab by computer and put $10 in an account for each of them. In each pair there was a decision-maker 1 (DM1) and a decision-maker 2 (DM2).

All participants got these instructions: DM1 can give up some or all of his or her $10 and transfer it to DM2 by computer but cannot talk to, or meet, the other person. Whatever is transferred is removed from DM1's account but is tripled in DM2's account.

Then, DM2 gets a computer message identifying how much has been received from DM1 and a reminder of the total in his or her account. Next, the software asks DM2 if she or he wants to send some of this larger pot of money back to DM1.

The amount sent back comes out of DM2's account one for one and is not tripled -- it's a pure loss to DM2. For example, if DM1 transfers $8, he or she would keep $2 and DM2 would receive $24 (=3 x $8). The total in DM2's account would be $34 ($24 + $10).

If you were DM2, what would you do -- keep it all or share some back with DM1? We found that 90% of DM1s send money and of the DM2s who receive money, 95% return at least some of it. Usually both DMs in a pair leave the lab with more than $10, sometimes much more.

The DM1 to DM2 transfer is understood to be a measure of trust, while the DM2 to DM1 transfer measures trustworthiness. By taking blood from participants, we found that the more money denoting trust DM2 received, the more oxytocin his or her brain made. And, the more oxytocin on board, the more money was returned to DM1. All this happened without any face-to-face interactions, revealing how easily the oxytocin system activates. How we read each other's minds

Morality has traditionally been the domain of theologians and philosophers, often providing prescriptions of what we must do. But in the past decade, neuroscientists have started analyzing brain activity while people think about, and engage in, moral or immoral acts. These findings have changed the inquiry into morals from prescriptive to descriptive. As I discuss in my talk, I have even done studies that have manipulated brain chemistry in human beings to show that oxytocin directly causes people to be moral.

I also talk about what having a chemical that affects morality means for individuals, organizations and entire societies. For example, does "my chemicals made me do it" absolve people from legal or moral responsibility? If we have a moral molecule, where does evil come from?

By the way, oxytocin doesn't only cause morality in a laboratory setting -- I've done studies in churches, on sports fields and among indigenous people to show that the biology of morality is a human universal. The battle between your present and your future self

While neuroscience has provided new insights into our human nature, the philosophy of morality has not gone away. My talk identifies the philosophers whose insights and arguments are consistent with the way oxytocin works in the human brain. Two hit the mark: Aristotle and Adam Smith. Aristotle claimed that the reason to be a virtuous person is because it makes us happy. I found the same thing: Those who release the most oxytocin in the lab are more satisfied with their lives (watch the talk to find out why).

And then there is Adam Smith. Yes, the same Adam Smith who is considered the "father" of economics was a moral philosopher. In 1759, Smith published a book called "The Theory of Moral Sentiments" that nearly perfectly anticipated my findings. Smith's book caused a sensation when it came out because of his radical claim that morality comes from humans' social nature, not from God.

Sociality, said Smith, means we inevitably share the emotions of others. This is just what I found: When the brain is flooded with oxytocin, people feel empathy for others. It is this emotional connection that causes most of us, most of the time, to behave well toward each other.

I've also found that societies that are more moral (for example, more trustworthy and more tolerant) also have higher standards of living. Smith understood why: Morality undergirds economic exchange, opening up more opportunities for the creation of wealth that individuals in a transaction can share. And, prosperity (perhaps surprisingly) can make societies more moral. All this occurs as part of our human nature, our brains adapting to evolving social environments.

So, this ancient and tiny molecule, oxytocin, has taken us from being social creatures to, increasingly, being tolerant, empathic and prosperous ones. Quite a nice trick for a tiny molecule that traces its lineage back at least 400 million years.

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The opinions expressed in this commentary are solely those of Paul Zak.

Wednesday, December 28, 2011

ANS -- Occupy Wall Street, Swarm Behavior & Self-Organized Criticality

This is another pretty intellectual article about how systems change.  I have an especial affection for this because we studied Self-Organizing Criticality in a theoretical physics class i accidentally took in grad school.  I even wrote a paper on it. 
Find it here:  

Occupy Wall Street, Swarm Behavior & Self-Organized Criticality

by Joe Brewer on October 15, 2011 in News , Social Movements

If you've been watching the Occupy Wall Street protests these last few weeks, you may be surprised by how quickly it spread from a small group of disgruntled youth in New York to a planetary mobilization that is now active in more than 100 cities – all in a few short weeks.  This is an unprecedented ripple of change in local conversations, media coverage, global consciousness, and international solidarity.

My friend and fellow observer of global patterns, Timothy Rayner, describes the Occupy protests as a "swarm movement", suggesting that we may be in the midsts of an unprecedented pattern of self-organization that wasn't possible before the internet.  I am inclined to agree with his core thesis and want to suggest that we are observing what complexity researchers call self-organized criticality, defined in the following way:

A point at which a system changes radically its behavior or structure, for instance, from solid to liquid. In standard critical phenomena, there is a control parameter which an experimenter can vary to obtain this radical change in behavior. In the case of melting, the control parameter is temperature.

Self-organized critical phenomena, by contrast, is exhibited by driven systems which reach a critical state by their intrinsic dynamics, independently of the value of any control parameter. The archetype of a self-organized critical system is a sand pile. Sand is slowly dropped onto a surface, forming a pile. As the pile grows, avalanches occur which carry sand from the top to the bottom of the pile. At least in model systems, the slope of the pile becomes independent of the rate at which the system is driven by dropping sand. This is the (self-organized) critical slope.  Read more…

I wrote about this a few weeks ago when describing the importance of phase transitions for the study of social change.  We have passed a tipping point (also called a critical threshold, inflection point, regime change, or paradigm shift) and the patterns are changing quickly.  Pressure has been growing for years now with the following trends indicating that the status quo is increasingly unstable and therefore unlikely to persist much longer:
  • Growing income inequality in the United States and around the world;
  • A shift from investments in productive capital (e.g. manufacturing) toward financial capital (e.g. making money off of money ­ derivatives, hedge funds, etc.);
  • Ongoing unemployment and widespread economic insecurity since the 2008 financial meltdown;
  • The collapse of a particular life narrative that builds from childhood to college to career and homebuilding and culminating in retirement.  This life arc no longer feels viable to the mainstream youth generation;
  • Increasing awareness about and severity of environmental damage, especially that having to do with global climate disruption;
  • Decades of decline in public confidence regarding government, corporations, and the banking system;
  • Rapid depletion of many raw materials that now drive innovation in life cycle design for new products;
  • Emergence of popularity for social entrepreneurship, novel corporate forms for promoting social good, and mainstream business strategy incorporating sustainability at top management levels.

These trends (and many more) suggest that the old models for building civilization have become obsolete.  It is now a mainstream view that our government is fundamentally corrupted by corporate influence.  And we are beginning to see the capacity for the younger generations (both Gen X and Millennials) to develop and deploy technologies for mass mobilization.

So what does self-organized criticality have to do with the Occupy Wall Street movement?  In a word ­ Everything.

This is a movement that has no elevated leader.  It is not making demands to authorities with decision-making power in the old institutions.  It is being organized locally by each group and built as a fractal pattern of small groups setting plans through general assemblies, orchestration of networks of groups through hub websites (like the one at Occupy Together linked to above), and coordinated branding through meme propagation of the "We're the 99%" slogan.

The key thing to keep in mind about self-organizing systems is that their unfolding dynamic is the source of group intelligence.  There are no puppeteers pulling the strings.  It isn't possible to orchestrate nested networks in a centralized manner.  Instead what we're seeing is the emergence of structure and social order through the conversations themselves, starting at the small scale and spiraling upward.  Occupy Wall Street is a swarm that ­ like a flock of birds or school of fish ­ has burst into action as individuals finding resonance with one another only to discover that a coherent group flow has emerged.

I cannot say how far this movement will go, although the trends just mentioned suggest that monumental change is imminent.  If this doesn't lead to fundamental change, it will at least be part of the gathering momentum for future attempts to be more bold and effective.  If you are cheering Occupy Wall Street onward (or concerned that it may unseat you from a comfortable position in the old political order), you'll want to familiarize yourself with the laws of self-organization and swarm behavior in order to grasp what is going on.

For my part, I'll continue to shed light on the dynamics at play to assist in our global transition toward social justice and sustainability… fluttering along as part of the swarm!

Cognitive Policy Works specializes in providing organizations and individuals with frame analysis, policy briefs, strategic advising, and training.

ANS -- A Change Maker’s Guide to Economic Paradigms

Here's an article describing the boom and bust cycles that are characteristic of Capitalism. It's from the successor to the Rockridge Institute, the thinktank formed by George Lakoff, the famous linguist. 
I'm afraid the graphs didn't come through completely -- if not, go to the site.
find it here:   

Chaotic Ripple

A Change Maker's Guide to Economic Paradigms

In Economic Patterns, Social Change on April 1, 2011 at 9:48 pm

We are in the midst of a collapsing economic paradigm.  This is evident in the widespread wealth inequality, absence of strong civic institutions, corrosive infusion of money into our broken democracy, and a deteriorated environment ravaged by a profound blindness to our impacts on the larger world.

As Change Makers, it is our job to understand the patterns of economic systems so we can participate in the creation of the next economy ­ one that must embody ecological principles if we are to survive on the Earth.

I want to help you understand:
  • How economic paradigms come into being;
  • The role of financial capital in driving boom-bust cycles; and
  • The ascension of a new paradigm that pulls society out of collapse.

We Change Makers need to understand this entire process if we want to transition to a sustainable form of civilization in the coming decades.

The Governing Dynamics of Capitalism

Every complex system has a governing dynamic – the signature pattern that gives it a unique character.  For capitalism, the defining pattern is Boom-Bust Cycles set on top of a growth curve.  These cycles of growth and collapse that recur in market economies are what economist Joseph Schumpeter described as the tendency for "creative destruction" to cascade through economic systems.  This pattern builds on an exponential growth curve… which I'll come back to below.

This schematic view (overly simplified), depicts the basic structure of a Boom-Bust Cycle:


There are periods when the economy hits a plateau and becomes stable.  Sometimes called "Golden Ages" these periods are defined by widespread prosperity, a growing middle class, and general peace and stability.  Golden Ages are preceded (and typically followed) by "Recessions" created by destabilizing economic conditions ­ indicators include dramatic wealth inequality, lost confidence in societal institutions, and speculative bubbles where large sums of money vanish in a short period of time.

What this graphic conceals is the fundamental shift that happens with each new pulse.  The continuous line suggests that the same economy can be found on either side of a recession. Yet, each pulse entails deep structural changes to the economy.  Every cycle is the destruction of the old economy followed by the birth of a new one.

In other words, it is a normal part of capitalist systems to go through paradigm shifts.  This is very good news for all of us Change Makers working to build a sustainable global economy.  We can leverage the natural evolution of market economies to disrupt and create anew.

Digging Deeper

To really understand Boom-Bust Cycles, we'll need to take the work of Carlota Perez (especially, her book Technological Revolutions and Financial Capital) and see how economic paradigms rise and fall.

Carlota Perez set out to explain an interesting phenomenon ­ that every 50 years or so there have been new economic structures that forced the collapse of what came before.  She identified five economic paradigms (or "Great Surges") throughout this period:
  1. Industrial Revolution in Britain (~1770-1830)
  2. Age of Steam and Railways (~1830-187o)
  3. Age of Steel, Electricity, and Heavy Engineering (~1870-1920)
  4. Age of Oil, Automobiles, and Mass Production (~1920-1975)
  5. Age of Information and Telecommunications (~1975-20??)

Each of these periods represents a major technological breakthrough that resulted in a fundamental restructuring of the economy.  Each period has its own paradigms for wealth-generation, institutional structures, regulatory environments, and desired trajectories for society.  The technologies themselves are but one piece in an array of vital inputs that ultimately defined each era.  It is the overarching perspective or worldview that captures the core of each paradigm.

Perez's major contribution to economics is the model for how paradigm shifts occur, as depicted in this graphic:


There are four phases of each economic paradigm ­ Irruption, Frenzy, Synergy, and Maturity.

Each economic paradigm begins with a technological breakthrough capable of generating entirely new modes of production.  In the Age of Steam and Railways, this was the dual invention of steam engines and a manufacturing process for producing cheap, high-quality steel.  These breakthroughs made it possible to build vast transportation networks (railways) that were durable when exposed to the elements and could carry vehicles powered by steam engines (trains) over long distances.

During the Irruption Phase, breakthrough technologies became recognized as "game changers" for economic development.  They may have been discovered earlier without their latent potential being recognized.  Very little money was invested during this period, until a catalyzing event captured the imaginations of investors and entrepreneurs.

After such a catalyzing event, the Frenzy Phase unfolds.  During this period, a large pool of investors jump on the bandwagon to support a wave of entrepreneurs in the creation of new business models that exploit the benefits of the new technologies.  This leads to the emergence of entirely new economic sectors that build on legacy institutions from the previous paradigm.

The convergence of business applications into new sectors occurs during the Synergy Phase.  Mainstream investors start to recognize the profitability of businesses that have proven themselves as "winners" in the highly competitive space of entrepreneurial activity during the Frenzy Phase.  These business models are expanded and consolidated to create "economies of scale" that maximize profits in the emerging new economic sectors.

Through the rush of consolidations and mergers of the Synergy Phase, new markets become saturated and it becomes more difficult to keep profit returns high.  This constitutes the Maturity Phase as a period when investments decouple from productive forces in the mature economy and financial tools arise to "make money from money."  This phase often leads to widespread income inequality, corrosion of regulatory environments by the corrupting influence of money, and a stagnation in profitability.

The stage is now set for the next economic paradigm to arise.  The old economy becomes unstable and lurches into decline or collapse, depending on which environment it unfolds into.

Where "Speculative Bubbles" Come From

This unfolding process reveals why capitalist economies go through Boom-Bust Cycles.  The role of money changes in each phase of the evolving market system, creating instabilities along the way.

This is how it works:


Investment pools are scarce during the Irruption Phase.  The new wave of business leaders is tinkering away in their garages without financial support (or in corporate research labs without obvious pathways to commercialization).    The absence of finance defines this period.  Revolutionary ideas are unable to scale upward because they don't fit with the institutional or investment cycles that still dominate under the maturing economy of the previous era.

Then a shift happens allowing the new technologies to rise quickly.  A central driver of the Frenzy Phase is the flood of money invested in the new that accompanies rapid growth of agile companies whose success could not be predicted by the common sense of established players (Facebook and Google are two recent examples of the new arising seemingly out of nowhere to define a new paradigm for business).

The massive profitability of these shining stars gets the attention of mainstream investors.  And the new business practices require changes in the regulatory environment to pull investments away from the old way of doing business.  Corrupting influences often arise as established power players resist such fundamental changes in their effort to maintain control over the economy.  This is where anti-innovation tendencies creep into the system.  All of these activities unfold in the Synergy Phase of the new paradigm, making it very difficult to predict how the economy will grow and change.

And finally, the investors who made a killing on the meteoric rise of the Frenzy wave become hungry for larger returns.  This introduces corrupting influences into the mix, largely arising through the creation of financial tools for generating money from money itself ­ decoupling the wealth-creation process from activities that produce real value for society.

As money decouples from real value, a speculative bubble emerges.  As financial capital feeds on itself the bubble grows, until it consumes the entire system and drives it into decline (or collapse, as we saw in 2008).

Putting All the Pieces Together

By now it should be clear that the fundamentals of capitalism can be studied and understood by Change Makers.  I have sketched the core dynamic elements of a very complex web of processes to give you a sense that this can truly be learned and made use of as part of our tool set for creating change.

I want to tie together the loose end left hanging at the beginning ­ the Growth Curve that keeps the system going through each wave of creative destruction.  Each Boom-Bust Cycle sits on top of a trend of economic expansion, as the total value of the market system increases with time.

Real data is more messy than the pure theory, but the patterns I've described are easy to see in the Dow Jones over the last 100 years:


(This graph was found here.)

Notice how the size of the economy grows with 50 year pulses that match the paradigms discussed by Perez.  This growth pattern reveals our salvation along with a profound threat.  The good news is that civilization remains robust in the face of Boom-Bust Cycles.  The achievements of the previous era are built upon to increase the general wealth of humanity (as measured in economic terms).

What's missing from this picture is the depletion of many different invisible forms of wealth that are destroyed as profits rise.  Every economy is grounded in the physical reality of our biological existence as human beings.  We require food, water, land, shelter, and other vital physical inputs for our survival.  As market economies have grown in their ability to "produce" goods and services, they have simultaneously depleted the capacity of the world's ecosystems to provide these fundamental needs.

And so the Growth Curve is untenable for the long haul.  We cannot grow the size of our economy indefinitely because physical limits exist that are more fundamental than economic laws.  This creates the context for the next wave of Change Makers.  Not only must we cultivate a new economic paradigm, we must also replace the fundamentals of human economic systems to align them with our ecological nature as living beings.

This is why I've taken the time to share this knowledge with you, so we can work together to create a New Epoch of Ecological Economics for the survival of the human species.  I encourage you to take the insights presented here and expand them to discover new modes of social organization that profoundly redefine what we mean by a healthy economy.

And, of course, feel free to ask me questions if you'd like more clarification on this very complex evolutionary process.

ANS -- And By Raging I Mean Flailing, And By Light I Mean Relevance

This is a little article about how far away from a moral universe business people have traveled.  Their "Overton Window" has moved so far to the "business can do no wrong" side that they have no idea how immoral they sound. 
Americans have gone crazy. 
Find it here: 

« Astrophysics //

And By Raging I Mean Flailing, And By Light I Mean Relevance

Posted on December 27th, 2011 by mhoye

A friend of mine points me to this incredible New York Times article in which publishers lay out the fact that they are fundamentally opposed to public libraries, detailing their struggles as they take up arms against these nefarious institutions promoting such injustices as culture, literacy and the greater public good.

Ms. Thomas of Hachette says: "We've talked with librarians about the various levers we could pull," such as limiting the number of loans permitted or excluding recently published titles. She adds that "there's no agreement, however, among librarians about what they would accept."

It's really a great article, full of these little turns of phrase that seem to come out of publisher's mouths without them even realize how evil they sound. "There's no agreement among librarians to bend themselves, the public and the greater good over this barrel we've offered to sell them at a very reasonable rate", they don't quite say.

HarperCollins was brave to tamper with the sacrosanct idea that a library can do whatever it wishes with a book it obtains.

This sacrosanct idea is better known as the First-Sale Doctrine; those crafty librarians, always falling back things like "established law" and "century-old Supreme Court decisions" to make their case. Crazytimes, right?

But that's not the best bit:

David Young, Hachette's chief executive, says: "Publishers can't meet to discuss standards because of antitrust concerns. This has had a chilling effect on reaching consensus."

Mr. Young lays it flat out: that laws prohibiting anticompetitive collusion and price-fixing are having a "chilling effect" on major publishers' attempts to collude, fix prices and thwart competition.

I can't imagine a functioning adult saying this with a straight face, but there it is. "Laws against doing evil things are having a chilling effect on the efforts of aspirant evildoers." I'm sure it's a problem for somebody, but as far as I'm concerned, mission accomplished, gold stars all 'round, well done laws and keep up the good work.

As has been noted many times, by many people, we've juiced up the entirely artificial copyright laws of the world to the point that if libraries weren't already a centuries-old cultural institution, there's no chance they'd ever be able to come into existence today. And here in this miraculous age of free-flowing information, that's sad as hell.

Tags: books, business, digital, doom, fail, future, interfaces, losers, vendetta // 2 Comments »

2 Responses to "And By Raging I Mean Flailing, And By Light I Mean Relevance"

  1. Jamie // Dec 28, 2011 at 5:24 am I like the various points they make about the "inconvenience" of physical books vs. ebooks. Of course, one of those inconveniences is requiring an author to use a publisher in order to get a physical book produced and shipped out to sellers, a problem that is avoided if an author were to put out an ebook on their own.
  2. gah // Dec 28, 2011 at 11:03 am Grey on dark grey? Dark grey on black? Are you *trying* to make us go blind?
    A little common sense in color schemes will go a long way.

Discussion Area - Leave a Comment

Monday, December 26, 2011

ANS -- Tim Harford: Trial, error and the God complex

Here's a link to a really good video about trial and error and
complex systems and God Complexes.

ANS -- The Sifted Books of 2011: Rethinking Economics

Here is Doug Muder's summary of the book reviews he did this year.  If you are looking for some good reading, you might want to see what he says here. 
Find it here:  

The Sifted Books of 2011: Rethinking Economics

I don't have a book-review strategy on the Sift. In deciding what to read and what to write about, I usually just follow my nose and figure out later what it all means. So I don't know why I reviewed exactly half as many books in 2011 as in 2010: 8 instead of 16.

In retrospect, it's interesting to note that more than half of the 2011 books were about economics: Debt: The First 5,000 Years by David Graeber, The Seven Deadly Innocent Frauds of Economic Policy by Warren Mosler (reviewed in two parts: first, second), Why Marx Was Right by Terry Eagleton, The Lights in the Tunnel by Martin Ford, and Consumed by Benjamin Barber.

There's a strong contrast here with last year's economics books. Then I was often telling you about books by economists from the liberal mainstream, like Robert Reich and Paul Krugman. But these five are more radical start-over-from-scratch books.

In retrospect, here's what I think that means: For a long time now, I have doubted the conservative conventional wisdom that the market can solve any and all problems. But lately I've also begun to doubt the liberal conventional wisdom that we can achieve a fair and vibrant economy by tinkering with interest rates, regulations, and government spending. This year's books reflect my search for a new way of thinking about the economy.

Both Graeber and Mosler are telling us that money isn't what we think it is. Mosler's book examines the nuts-and-bolts of how the banking system creates money, while Graeber takes a long anthropological look at where this whole idea of money comes from and how it changed society.

Eagleton challenges the capitalism-has-won narrative of the post Cold War world, and shows how our "victorious" capitalism is displaying the flaws that Marx predicted a century and a half ago. And Ford goes back to the Luddite claim that machines destroy jobs, arguing that even if it wasn't true then, it is now.

Barber's book is on the boundary between economics and politics, arguing that if capitalism is allowed to run wild it will destroy democracy. Consumer and citizen are two very different roles, and the more we identify with our consumer role, the less we will be able to perform our duties as citizens.

Barber presents a different side of the scene portrayed by Ford. I summarized Barber's point like this:

The root of the problem Barber presents is capitalism's success in satisfying all the genuine needs of people who have money, creating a situation in which "the needy are without income and the well-heeled are without needs."

Here's the Ford/Barber connection: In our mechanized world, the one thing the well-heeled don't need is more labor, which is all the needy have to sell.

Given this theme, there are two books that I should have written about but didn't. Race Against the Machine by Erik Brynjolfsson and Andrew McAfee, and the 1944 classic The Great Transformation by Karl Polanyi. Both are woefully short of effective prescriptions, but they add important ideas to the diagnosis.

Brynjolfsson and McAfee bring in this arresting image from a book I haven't read, A Farewell to Alms by Gregory Clark: In 1901, the British economy found jobs for more than 3 million horses. All those jobs are done by machines now, and horses are purely recreational.

There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.

How many human workers will go the way of the horse?

Polanyi's book is a hard read, but fascinating. He tells the story of how the market economy was created in the 1800s. That statement is already radical, because so many people believe that the market economy is natural and goes back into deep antiquity.

In fact, Polanyi says (and Graeber agrees), markets used to be only a small part of the economy. In order to have what we now think of as a market economy, markets had to be created for what Polanyi calls the three "fictitious commodities": labor, land, and money.

Labor is only another name for a human activity that goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power which, as a rule, is not produced at all, but comes into being through the mechanisms of banking or state finance. None of them is produced for sale. The commodity description of labor, land, and money is entirely fictitious.

My hunch is that the re-thinking of economics has to start there.

A related question is why our political system can't adjust to our new economic realities. That led me to look at So Damn Much Money by Robert Kaiser, which is a history of lobbying.

The possibility of another way of functioning entirely led me to Reality is Broken by Jane McGonigal. McGonigal starts with the observation that the multi-player computer games like World of Warcraft and Halo soak up vast amounts of human time, effort, and ingenuity. What makes these invented worlds so much more engaging than reality?

Part of the answer is that successful games appeal to aspects of the human character that have been left out of the homo economicus model of human nature. In other words, we aren't all trying to get as much stuff as we can for as little effort as possible ­ at least not all the time. Sometimes we want to achieve self-respect and honor even if it costs us effort and money.

McGonigal describes the widespread perception among gamers that their game persona is a better human being than their work persona. Something can be done with that. (One fictional view of how that could work is the Daemon/Freedom™ series by Daniel Suarez.)

Another book I should have reviewed made a similar point looking backward rather than forward: The Honor Code by Kwame Anthony Appiah. Major social changes, he claims, come not from self-interest but from a sense of honor. Society changes because our ideas about what is honorable change.

Appiah looks at societies that ended dueling, slavery, foot-binding, and honor killings of sexually activity female relatives. In each case, he finds that the cause is not economic and not fundamentally rational; in fact, the rational arguments against the practice were well known long before they became convincing. Instead, change happens via an invisible shift in the community's honor code: Practices that once defended honor suddenly become dishonorable.

Two books I should have reviewed that deserve more than a paragraph here are 23 Things They Don't Tell You About Capitalism by Ha-Joon Chang and The Myth of Individualism by Peter Callero. Maybe next year.

The one book I reviewed that doesn't fit this pattern is The Hour of Sunlight by Sami al Jundi, which is one Palestinian's attempt to envision peace between his people and the Israelis. Interestingly, that review was an afterthought: The article I wanted to write fell through at the last minute, and I needed something to fill the space.

ANS -- How to Frame Yourself: A Framing Memo for Occupy Wall Street

This is George Lakoff's answer to the Occupy Movement, who did ask for his opinion. 
I have also linked this on my Facebook page.  If any of you want to Friend me on Facebook, let me know by email that you have requested to be friended, so I will accept the invitation, as I generally ignore most of them. 
find this here:  

How to Frame Yourself: A Framing Memo for Occupy Wall Street

Posted on December 11, 2011

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By George Lakoff

I was asked weeks ago by some in the Occupy Wall Street movement to make suggestions for how to frame the movement. I have hesitated so far, because I think the movement should be framing itself. It's a general principle: Unless you frame yourself, others will frame you ­ the media, your enemies, your competitors, your well-meaning friends. I have so far hesitated to offer suggestions. But the movement appears to maturing and entering a critical time when small framing errors could have large negative consequences. So I thought it might be helpful to accept the invitation and start a discussion of how the movement might think about framing itself.

About framing: It's normal. Everybody engages in it all the time. Frames are just structures of thought that we use every day. All words in all languages are defined in terms of frame-circuits in the brain. But, ultimately, framing is about ideas, about how we see the world, which determines how we act.

In politics, frames are part of competing moral systems that are used in political discourse and in charting political action. In short, framing is a moral enterprise: it says what the character of a movement is. All politics is moral. Political figures and movements always make policy recommendations claiming they are the right things to do. No political figure ever says, do what I say because it's wrong! Or because it doesn't matter! Some moral principles or other lie behind every political policy agenda.

Two Moral Framing Systems in Politics

Conservatives have figured out their moral basis and you see it on Wall Street: It includes: The primacy of self-interest. Individual responsibility, but not social responsibility. Hierarchical authority based on wealth or other forms of power. A moral hierarchy of who is "deserving," defined by success. And the highest principle is the primacy of this moral system itself, which goes beyond Wall Street and the economy to other arenas: family life, social life, religion, foreign policy, and especially government. Conservative "democracy" is seen as a system of governance and elections that fits this model.

Though OWS concerns go well beyond financial issues, your target is right: the application of these principles in Wall Street is central, since that is where the money comes from for elections, for media, and for right-wing policy-making institutions of all sorts on all issues.

The alternative view of democracy is progressive: Democracy starts with citizens caring about one another and acting responsibly on that sense of care, taking responsibility both for oneself and for one's family, community, country, people in general, and the planet. The role of government is to protect and empower all citizens equally via The Public: public infrastructure, laws and enforcement, health, education, scientific research, protection, public lands, transportation, resources, art and culture, trade policies, safety nets, and on and on. Nobody makes it one their own. If you got wealthy, you depended on The Public, and you have a responsibility to contribute significantly to The Public so that others can benefit in the future. Moreover, the wealthy depend on those who work, and who deserve a fair return for their contribution to our national life. Corporations exist to make life better for most people. Their reason for existing is as public as it is private.

A disproportionate distribution of wealth robs most citizens of access to the resources controlled by the wealthy. Immense wealth is a thief. It takes resources from the rest of the population ­ the best places to live, the best food, the best educations, the best health facilities, access to the best in nature and culture, the best professionals, and on and on. Resources are limited, and great wealth greatly limits access to resources for most people.

It appears to me that OWS has a progressive moral vision and view of democracy, and that what it is protesting is the disastrous effects that have come from operating with a conservative moral, economic, and political worldview. I see OWS as primarily a moral movement, seeking economic and political changes to carry out that moral movement ­ whatever those particular changes might be.

A Moral Focus for Occupy Wall Street

I think it is a good thing that the occupation movement is not making specific policy demands. If it did, the movement would become about those demands. If the demands were not met, the movement would be seen as having failed.

It seems to me that the OWS movement is moral in nature, that occupiers want the country to change its moral focus. It is easy to find useful policies; hundreds have been suggested. It is harder to find a moral focus and stick to it. If the movement is to frame itself, it should be on the basis of its moral focus, not a particular agenda or list of policy demands. If the moral focus of America changes, new people will be elected and the policies will follow. Without a change of moral focus, the conservative worldview that has brought us to the present disastrous and dangerous moment will continue to prevail.

We Love America. We're Here to Fix It

I see OWS as a patriotic movement, based on a deep and abiding love of country ­ a patriotism that it is not just about the self-interests of individuals, but about what the country is and is to be. Do Americans care about other citizens, or mainly just about themselves? That's what love of America is about. I therefore think it is important to be positive, to be clear about loving America, seeing it in need of fixing, and not just being willing to fix it, but being willing to take to the streets to fix it. A populist movement starts with the people seeing that they are all in the same boat and being ready to come together to fix the leaks.

Publicize the Public

Tell the truth about The Public, that nobody makes it purely on their own without The Public, that is, without public infrastructure, the justice system, health, education, scientific research, protections of all sorts, public lands, transportation, resources, art and culture, trade policies, safety nets, … That is a truth to be told day after day. It is an idea that must take hold in public discourse. It must go beyond what I and others have written about it and beyond what Elizabeth Warren has said in her famous video. The Public is not opposed to The Private. The Public is what makes The Private possible. And it is what makes freedom possible. Wall Street exists only through public support. It has a moral obligation to direct itself to public needs.

All OWS approaches to policy follow from such a moral focus. Here are a handful examples.

Democracy should be about the 99%

Money directs our politics. In a democracy, that must end. We need publicly supported elections, however that is to be arranged.

Strong Wages Make a Strong America

Middle-class wages have not gone up significantly in 30 years, and there is conservative pressure to lower them. But when most people get more money, they spend it and spur the economy, making the economy and the country stronger, as well as making their individual lives better. This truth needs to be central to public economic discourse.

Global Citizenship

America has been a moral beacon to the world. It can function as such only if it sets an example of what a nation should be.

Do we have to spend more on the military that all other nations combined? Do we really need hundreds of military bases abroad?


We are part of nature. Nature makes us, and all that we love, possible. Yet we are destroying Nature through global warming and other forms of ecological destruction, like fracking and deep-water drilling.

At a global scale, nature is systemic: its effects are neither local nor linear. Global warming is causing the ferocity of the monster storms, tornados, floods, blizzards, heat waves, and fires that have devastated huge areas of our country. The hotter the atmosphere, the more evaporated water and the more energy going into storms, tornados, and blizzards. Global warming cannot be shown to cause any particular storm, but when a storm system forms, global warming will ramp up the power of the storm and the amount of water it carries. In winter, evaporated water from the overly heated Pacific will go into the atmosphere, blow northeast over the arctic, and fall as record snows.

We depend on nature ­ on clean air, water, food, and a livable climate. And we find beauty and grandeur in nature, and a sense of awe that makes life worth living. A love of country requires a love of nature. And a fair and thriving economy requires the preservation of nature as we have known it.


OWS is a moral and patriotic movement. It sees Democracy as flowing from citizens caring about one another as well as themselves, and acting with both personal and social responsibility. Democratic governance is about The Public, and the liberty that The Public provides for a thriving Private Sphere. From such a democracy flows fairness, which is incompatible with a hugely disproportionate distribution of wealth. And from the sense of care implicit in such a democracy flows a commitment to the preservation of nature.

From what I have seen of most members of OWS, your individual concerns all flow from one moral focus.


The Tea Party solidified the power of the conservative worldview via elections. OWS will have no long-term effect unless it too brings its moral focus to the 2012 elections. Insist on supporting candidates that have your overall moral views, no matter what the local issues are.

A Warning

This movement could be destroyed by negativity, by calls for revenge, by chaos, or by having nothing positive to say. Be positive about all things and state the moral basis of all suggestions. Positive and moral in calling for debt relief. Positive and moral in upholding laws, as they apply to finances. Positive and moral in calling for fairness in acquiring needed revenue. Positive and moral in calling for clean elections. To be effective, your movement must be seen by all of the 99% as positive and moral. To get positive press, you must stress the positive and the moral.

Remember: The Tea Party sees itself as stressing only individual responsibility. The Occupation Movement is stressing both individual and social responsibility.

I believe, and I think you believe, that most Americans care about their fellow citizens as well as themselves. Let's find out! Shout your moral and patriotic views out loud, regularly. Put them on your signs. Repeat them to the media. Tweet them. And tell everyone you know to do the same. You have to use your own language with your own framing and you have to repeat it over and over for the ideas to sink in.

Occupy elections: voter registration drives, town hall meetings, talk radio airtime, party organizations, nomination campaigns, election campaigns, and voting booths.

Above all: Frame yourselves before others frame you.

Saturday, December 24, 2011

ANS -- If You Want To Attack The Volt, Try To Get Your Math Right

Now, why would the far right be attacking the Volt electric car?  And inaccurately at that....  /sarcasm
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If You Want To Attack The Volt, Try To Get Your Math Right

By John Voelcker John Voelcker
23 2,704 views December 23, 2011

2011 Chevrolet Volt drive test, March 2011

2011 Chevrolet Volt drive test, March 2011
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Few things seem to set off a certain part of the political spectrum like the Chevrolet Volt, the extended-range electric car from General Motors.

It's been on sale exactly one year, so we think it's rather too early to deem the Volt a success or a failure, though that hasn't stopped its critics.

When criticizing anything, however--the Volt included--it's usually incumbent on the critic to get the math right.

Off by a factor of 10,000

Yesterday, The Street posted a lovely takedown of the math offered by a critic who claims Volts carry quarter-million subsidies. The Street's contributor Anton Wahlman gently points out that the calculations were slightly off.

In fact, he suggests they were wrong by a factor of 10,000--or four orders of magnitude. That's what you would call an embarrassing error.

It's worth pointing out that Wahlman emphasizes that he is against government subsidies to industry, calling himself "somewhere way to the right of Rush Limbaugh" on that topic. Which makes his analysis all the more trenchant.

He also notes that, "the idea that the Volt was somehow a government invention is about as accurate as the idea that Al Gore invented the Internet. It has no relation to the truth whatsoever." He liked the Volt he tested, by the way.

2011 Chevrolet Volt

2011 Chevrolet Volt

Here's the story. Four days ago, we dissected in some detail Matt Drudge's uninformed war against the Volt. He promptly posted two more anti-Volt headlines the next day.
One of them linked to an article on Michigan Capital Confidential citing a study by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

A quarter of a meeeeellion dollars !!

The report claims that every Chevrolet Volt is the beneficiary of a quarter of a million dollars of state and Federal subsidies. Yes, the car with a 2012 retail price of $39,995 carries $250,000 of Your Tax Dollars in its load bay.

Hohman added up all the known state and Federal incentives to obtain a "total value offered to the Volt," not only for General Motors but also its suppliers.

A total of "18 government deals that included loans, rebates, grants and tax credits" are included. The total loan amounts are apparently listed in full, even though the loans are intended to be be paid back with interest.

Hohman then divided the sum by the number of Volts sold as of November 30. The result prompted him to call the Volt "the most government-supported car since the Trabant," the East German plastic-bodied two-cylinder minicar.

The denominator problem

As Wahlman notes, the egregious flaw in this calculation is "the denominator problem"--to what base of cars do you apply the analysis?

2011 Chevrolet Volt Production Line

2011 Chevrolet Volt Production Line

Dividing the number of Volts sold to date ( 6,468 as of November 30) into the total incentives that apply to all Volts past, present, and future is either dopey or intellectually dishonest.

You could as easily say that on December 15 last year, the day the first Volt was delivered to a retail buyer, it carried a stunning, incredible, unconscionable $1.5 BILLION in subsidies. You'd be doing the same thing: dividing by the number of Volts sold, or 1.

More reasonably, fast-forward to the end of next year, by which time the two-year total of Volt sales is likely to be about 60,000. The number plummets to $25,000. And so on.

Actual number: $25

Wahlman instead divides the supposed $1.5 billion in incentives by a projected total of 60 million cars over the next 25 years that will use elements of the Voltec range-extended electric drive technology in today's Volt. That calculation puts the amount at, ummm, $25. Or a dollar a year.

Slightly different, eh?

We personally tend to think that a dollar a year is a reasonable amount to subsidize a domestic battery-electric car industry. Reasonable minds may differ, however.

We can address the question of whether the $1.5 billion total in state and Federal incentives is valid another time. Critic Hohman notes that depending on various factors, it could vary from $300 million to $3 billion.

We recommend reading Wahlman's entire article on The Street (note that there are four pages, but the links are tiny).


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