The Ritual of Capitalization (2021)(economicsfromthetopdown.com) |
The Ritual of Capitalization (2021)(economicsfromthetopdown.com) |
The thing about economics is that you can keep studying and studying and get none the wiser. All the low hanging fruit are still there to pick but nobody is interested in that research because it is the equivalent of going from geocentrism to heliocentrism.
The "obvious" conclusions you can derive from a continuous neoclassical model make no sense the moment you add multiple goods because at that point you now need to run NP hard optimization algorithms to get an equivalent answer. Yes, the proverbial corn economy works if all you care about is corn.
From my perspective neoclassical economics is just a disguised form of centrally planned communism so that capitalists can claim the supposed benefits of communism for themselves, while they do something different behind the scenes. Communism should be rejected because it is not possible to implement it and so should neoclassical economics. This leaves us with a lot of research opportunities that nobody is willing to take.
You mean that in a "what is free will anyway" form? Or is there something definable that you contest?
> The "obvious" conclusions you can derive from a continuous neoclassical model make no sense the moment you add multiple goods because at that point you now need to run NP hard optimization algorithms to get an equivalent answer.
I don't think many economists would disagree with that equivalence. They seem to always hint very strongly at it, but never actually articulate it. Exactly why do you think it's a problem?
Overall, I have some strong criticism of modern economics. You seem to be bothered by the same kind of thing, but I can only sympathize with your complaint about continuous models.
I really would like to know. I read a recent theory that late stage capitalism does naturally morph into socialism, as a way for the rich to quell dissent in the poor. But not sure that is what you are going for here.
I don't know why you think the existence of this game needs to be proven when it's a game people play all the time? It's very unlikely that you've never shopped for anything.
Not every purchase is entirely voluntary. Some purchases happen under pressure. The amount of pressure varies quite a bit.
But then, these navel-gazing critiques of capitalism only work in a vacuum. Why do these men in suits assemble in these temples of finance to perform these arcane rituals, to utter these numerical incantations? It's weird, right? They must be searching for god, or maybe they never got enough love growing up. Couldn't have anything to do with actual human experience telling us that the market is the most resilient and efficient (if not always the most fair) way of deciding, as a society, how to employ our scarce resources in a useful way. The people who buy and sell abstract claims on collective human endeavours must do so out of some deep-rooted spiritual malaise and it can't be related in any way to their own very mundane desire to put food on the table and maybe even spend a couple of weeks a year in a tropical location with people they love.
No, we should probably get rid of all this weird ideological baggage. (What do we replace it with? Oh, that's not my department...)
Diamonds are worth a fraction of what Debeers wants for them, but people still pay it because those are the only prices they've ever seen. On the other hand, printers are worth far more than they sell for, yet nobody would consider paying the actual price for them.
Namely they define value = future earnings / discount rate, and then when showing the example with Amazon use past earnings.
Clarification: typically[1] future earnings = sum of all future cash flows, which is different than profits. Businesses (or a music catalog) keep making money and don’t just pay out once.
It’s an arbitrary formula too, but they’re not staying consistent with their arbitrary formulas.
And there is some effort to find a mathematical basis for the discount rate, e.g. CAPM [2]. Actual asset prices often are inconsistent with this and other models of the discount rate. Lots of hand wringing ensues and nobel prizes in economics are dolled out.
[1] https://en.m.wikipedia.org/wiki/Discounted_cash_flow [2] https://en.m.wikipedia.org/wiki/Capital_asset_pricing_model
Like the discount rate itself, this seems am arbitrary rhetorical choice.
I agree, at a very high level of abstraction, insofar as both a community of faith and finance are about rendering the future "somewhat predictable", though, in that sense, the future resembles the weather.
you can get away just fine writing in all lowercase characters, as i've just done.
That is exactly the way things worked in feudal Europe. Nobles were interested in acquiring, for example, rights to a demesne lands not because they were interested in how much food they could produce or whatever, but because it was an income stream. At first, that meant in-kind income. Towards the later Middle Ages, it was monetized into cash income.
I don’t have a larger point, except to say that the person is so focused on their critique of capitalism that their explanation of what is essential to capitalism is wrong.
But these numbers aren't chosen by economists or any other individual. If prices aren't arbitrary then neither are discount rates.
Is it right that this long essay is saying (roughly) that share prices are not really related to future earning expectations, but to future share price expectations? Well, blow me down with a feather. I'd never have guessed that stock markets were mainly about speculation.
https://books.google.de/books/about/Volkswirtschaftliche_Sal...
I think it's usually called corporatism, or literally called fascism (the Italian version, not whatever liberal Democrats mean when they say it.)
For me, the test hypothetical is how one would like literal chattel slavery if laws and diligent inspections limited slave work hours to 6 hours a day with a max of 24 hours a week, slave quarters looked like fancy college dorms, families were given the right to stay together, and slaves all had iPhones and Netflix. If slavery starts to sound more appealing, you might lean towards corporatism or national syndicalism.
I think this is a quite old theory, and well, who knows on the scale of history, but I am pretty skeptical about it over the last 50 years.
Citation needed™
> if you think that these predictions are wrong, you can make yourself a lot of money.
The market can remain irrational much longer than you can demain solvent
As Keynes summarized it in his “beauty contest” thought experiment, it's not about getting the “real” price that matters, it's about guessing what price the group is going to assign. Being “right” against the crowd gives you no point.
For one person getting away with the big short, there are a thousand that just miss the timing of the crash even though they were right on the underlying analysis.
Quoting the Bible is one of the more common methods of arguing against it or beliefs [purportedly] based on it, and certainly a better way of arguing against the coherence of the Christian model of salvation than writing an article about "the ritual of salvation" that makes a lot of disparaging comparisons to sun gods and talks a lot about Abraham but seems unaware that the Christian model of salvation actually revolves around Jesus
I do often think the best way to convince people to not be Christian is to have them read the Bible. Most Christians have no idea what they believe in, and don't know what is in the Bible (like in US where they think Jesus was pro-Gun, kill thy neighbor). Just reading the Bible is enough to convince people to not be Christian.
So, if I take this reasoning back to Economics. Maybe people do have a lot of false beliefs about Economics, and if they would study it, they would realize it is bunk, and turn away from it?
[EDIT POST] Changing bit more. Because it really is where the person is at in their learning. There are plenty of Christians that want to persecute Trans Kids, and reading the Bible is not going to convince them they shouldn't (even though Jesus). But maybe when they learn more about Jesus they will stop wanting to kill people.
It is about the learning. If you indoctrinate kids into a cult at Bible School, how are they supposed to know it is wrong? They a fresh young minds to be imprinted.
Same with Econ 101. Freshman, just starting out, they are learning. They are not already experts, so going to study Economics and immediately see through it all as bunk.
So guess you need some expertise in the bunk, to refute the bunk. But that all takes a lot of energy.
My interest, at the halfway point through The Famous Article, is whether the relative sizes of the firms (in employees) fit in there somewhere.
Money is used as a sort of analytic "low common denominator" in all of this work, but that seems a narrow window for viewing life in general.
You don't need to take an undergraduate course to understand basics like capitalization (i.e sometimes people value stuff now because they think it will make them more money in future, and people will be willing to sell it for less because they have different expectations, risk tolerance or investment opportunities available to them.. its not exactly one of the more controversial or less practically applied parts of economic theory). But you probably want to read an introductory text, not the guy who pronounces that it's part of the heresy of "economics" and then constructs a straw man version of the theory that actually misses the most important bits.
Indeed, except it not how most eco 101 goes, at all …
> It's a bit like if you want to learn the limitations of models predicting weather, you probably want a meteorology
Except one is actually science, whereas the other is political philosophy which pretends to be science in order to justify its perspective. Studying theology isn't necessary to be able to criticize religion. It can ne useful if you want to give theoligical criticism of religion but that's it.
Ans I say that as someone who's spent 5 Yeats studying economics for the exact reason you mention. It turns out it's ideology all the way down…
And the author is also very familiar with econ 101, he's just not reusing these concepts from the canon, because in fact they're mostly ideological ans not very helpful to understand the real world.