Beware models

Economist Dean Baker was interviewed on TRNN about the Federal Reserve raising interest rates. He mentions economic models and their predictions: 

So, first off, I'd just point out they've been wrong in the past. The other point I'd make is that to my view there's very little risk in probing, in the sense, let's get the unemployment rate lower, and we don't have any models that say inflation just shoots up. So, let's say they're right. 4.7% is the right number, and they foolishly listened to me and let the unemployment rate fall to 4.3% or something like that. Well, the models say that inflation would rise very gradually. We're currently at 1.7% by the measure they use. It might rise after six months, a year, to 2%. That's not a big deal.

The points I want to illustrate is (1) the existence of economic models and (2) they are used to drive economic policy. But the usefulness of any model is predicated on the accuracy of its predictions and based on how poorly the economy functions for most workers, these models are terribly ineffectual. 

[Warning: I am not an economist. The following are my opinion only.]

One major flaw of the most popular economic models is they presume capitalistic principles. And as anyone who ever listens to Richard Wolff would know, capitalism is notoriously unstable, prone to repeated boom and bust cycles. I prefer to liken it to simple predator-prey relationships whose models have a similar boom and bust trend with the distinct possibility of complete bust in that both predator and prey species die out. If my hypothesis is true and economic models are based on predator-prey dynamics, then the underlying assumptions of these models are just plain wrong! It is well past time for the economics discipline to determine the universal rules of economics so they and we can actually have accurate models.

See my earlier writings for more of my thinking on this matter.

Bernie should not start a political party

Comment at a TRNN story discussing the attempt to recruit Bernie to start a new political party:

The notion of creating another political party with the intent of advancing progressive policy through electoral success is silly on its face. 

The raison d'etre of the Republican and Democratic parties is to raise enormous amounts of money from big donors so between the two parties, the interests of big donors are always the forefront of all policy/regulations. The minor differences in social issues serve as icing on the cake to distract voters from the real underlying transfer of economic and political power to the big donor class. These are essentially political corporations. 

The raison d'etre of lesser political parties is either (1) express/disseminate 'non-standard' ideology that is ignored by the extremely limited options offered by the two major parties and/or (2) attract enough voters to achieve automatic ballot access. They are most often limited by campaign funds and media access. 

Any new party would have all the disadvantages of lesser parties with the risk of big money take over should any lesser party achieve any degree of electoral success. The problem with the system is too much power/money concentrated in too few hands. Another political party doesn't change that equation.

Trump's backer

Robert Mercer is the secretive hedge fund billionaire who backed DJT's election - he's responsible for the addition of Kellyanne Conway and Steve Bannon to Trump's team. Jane Mayer said this on a Democracy Now segment about Robert Mercer:

...And what he's done is he has tried to take this fortune and reshape, first, the Republican Party and, then, America, along his own lines. His ideology is extreme. He's way far on the right. He hates government. Kind of -- according to another colleague, David Magerman, at Renaissance Technologies, Bob Mercer wants to shrink the government down to the size of a pinhead. He has contempt for social services and for the people who need social services...

From the Mercer perspective, government is not legitimate. A non-legitimate government cannot be betrayed... so colluding with Russian interference to elect DJT would not be treason. DJT's tagline is 'Make America great again'. He's never defined 'America' or 'American' or 'great'. His major backer, Mercer, doesn't believe in American people or government. Trump's policies - anti-immigrant, anti-climate, anti-healthcare, anti-poor, etc. - indicate a complete disregard for a large segment of the American public. It appears the political ambitions of Trump and Mercer are to blow up America as we know it and profit as much as possible in the process. To apply DJT to himself - 'bad hombres'.

I disagree with the model of large scale nation-states; they concentrate too much power in too few individuals. But the Trump/Mercer intent appears to concentrate power in a few rich and power people without the state as a legal safeguard. This is much, much worst than large nation-states. I fear for the country and the world.

State of organized crime

A number of former Russians have been targeted in what appears to be state sponsored assassins:

Former Russian Lawmaker Is Shot To Death Outside Hotel In Kiev

twice-poisoned Russian dissident

Alexander Litvinenko: Profile of murdered Russian spy

Vladimir Putin was for all intents and purposes, the head of Russia when these events took place. And there's evidence Putin interfered with the U.S. presidential election on behalf of the current POTUS, DJT. Now watch as the authoritarian state takes hold with ever increasing deportations and invasion of Americans' privacy by customs agents. I fear for this country.

'deaths of despair'

There's a story on NPR which discusses the research concluding that the disturbing increasing death rate amongst white Americans are due to economic despair. This is further sign of a non-functioning economy. Our current economy is so poor at providing for its people, its causing a shift demographics! Economy needs to be redefined to include human wellbeing: production, consumption and exchange of capital to support the sustained wellbeing of people.

'Keep America safe'

Comment at Truthout in response to editorial regarding Trump's proposed budget:

'Keep America safe' doesn't seem to apply to safety from starvation; safety from climate disruption; safety from consumer products; safety from instigated conflicted. 

Real safety would protect/defend from self-serving politicians and capitalists. A good place to start is increase transparency.

March-in rights

Who knew?... Apparently the federal government has some rights to the intellectual property developed from publicly funded research:

Here's how it works. When the federal government — through an agency like the National Institutes of Health — pays for medical research that leads to an invention that can be patented, federal law gives the government a license to use that intellectual property.

According to the NPR story,  Rep. Lloyd Doggett of Texas has requested the U.S. exercise these rights to decrease drug prices. Not only has NIH refused to do so, they've also refused to hold hearings. Supposedly one reason is fear that:

... lower prices could also make drug companies less eager to invest lots of money in new medications.

...

"Perhaps we as a country would rather have lower drug prices and a little less innovation," Ellison said.

Stupid argument. Right now, big pharma uses their huge treasuries to strong arm competition out of the market - they lobby for trade agreements that protect their intellectual property and regulations that keep smaller firms out of the market. If big pharma decides to not invest in research, this opens business opportunities for small firms. So not only would drug prices come down due to competition from government licensed production, they would likely be more competition from newly invented products.

Transparency of information is good economics. Even as little as permitting more than one institution (a pharma and the government) to make use of it has the potential to improve the market for consumers.

BTW, taxpayers paid for the research on drugs under discussion. Right now, taxpayers pay to invent the drugs (researchers earn a living) and taxpayers pay to buy the drugs (big pharma makes astronomical profits). My preference would be to give the inventors a significant bonus and allow any pharma to produce and sell it under safe conditions. The drug information is freely available to all taxpayers and the drugs are available at very competitive prices.


Update: NPR story suggests U.S. government buy a drug company to lower drug price. Effectively, this is another way for the public to buy intellectual property. Owning the rights to a drug allows makers to control how much they can charge - it's a monopoly on that item. These two stories are varients of transfering intellectual property from private control to public control - increasing transparency.