Chapter 11:  What economics really is and why normal people rarely understand it

Insofar as economics aspires to be a science…it has to model human behavior in a way that abstracts from the complexities of human life. It is assumed, for instance, that rational economic behavior involves the systematic pursuit of self interest trying to obtain whatever is most desired. Such abstraction may help to provide some explanation for the workings of society, but it will be folly to assume it portrays what humans are always like. It rules out altruism by definition.

– Roger Trigg, Beyond Matter

The economic invisible:  comprehending economics upside down

Elmore always gets intense when he speaks about economics. “Economics,” – he explained to me one day, at some length, as I hungered to go to lunch – “is in general an invisible subject that most non-economists (meaning virtually all of us) do not understand.

 

“Not understanding it, they therefore ignore it, virtually all the time and at their unknowing peril. This is their undoing. They pay no attention to economics until it causes something catastrophic and awful to happen – as it regularly does – such as the financial meltdown of 2007-08, the consequent loss of hard-earned pensions, loss of jobs and income leading to inability to buy subsistence food and clothing, loss of subsistence shelter over one’s head because of repossessed homes, and other deep economic miseries affecting most poignantly the already-poor, those made newly poor, and the ever struggling lower middle class, not to mention quite a few with formerly higher incomes and previously comfortable lives at the middle and upper end of the middle class.

 

“No, just as after the terrible Crash of 1929, everyone pays attention to economics for a while. But then, not understanding a word of it, they lose interest and get on with economic survival. Which means the barest subsistence needs of survival. Which means food, clothing and shelter, hopefully some health care, and, if one is lucky, a tad left over for a smattering of savings and once in a while a little fun.

 

“Ignored or not, invisible economics is at the foundation of everything else. Everything else. Think about it,” said Elmore in that pay-attention way of his. “Economists act as if economics is only about how to acquire wealth or become filthy rich – witness, the most famous economic text of all time was titled The Wealth of Nations. But in reality, economics as an academic field of alleged knowledge actually exists to address the bottom end of the scale: subsistence – meaning food, clothing and shelter, not to mention basic health care. Maybe a little fun like quaffing a beer while watching your very own TV – watching those endless in-your-face ads to go out and buy, buy, things you hadn’t even thought about but now wish you could afford. Demand stimulation they call it.

 

On being the American poor

“Economics is the science of being poor, though the poor don’t know it. Whether a native of Yonkers or a native of Borneo,” Elmore continued, “nobody can pursue or much enjoy anything else until they’ve first secured the basic means of staying alive. That means a roof over your head, a few groceries or greasy cheeseburgers every day, a few clothes washed or not. Food, clothing, shelter. Unless you’ve got these basic needs somehow assured, you’re not whole – you’re at best dependent on somebody else, maybe society, to give them to you as handouts. And then the welfare-hater nuts will blame you for being so disgustingly poor while they righteously pay you the minimum wage – or less if they think they can get by with it – and tell you where the welfare office is, advising you to go get on the welfare dole of the government they so love to hate. At worst you’re homeless and maybe you freeze or starve to death. People do, you know, even here in golden postmodern civilization – it’s called malnutrition, homelessness, abject poverty.

 

“Do you ever wonder why so few poor people bother to go to the polls and vote for the social-minded politicians – yes, there are a few left – who just might improve their sorry lot?  Do you imagine the poor spend much time reflecting on politics and philosophy? Pah! People whose very appearance shouts that they lack adequate food, clothing and shelter face difficulty getting access to restrooms in public places, much less find time to vote, run for political office or think much about science or religion – unless a Get Right With God sermon is imposed with the free grub at the soup kitchen.”

 

And that, according to Elmore, is what economics is really all about. Stripped of its bells, whistles, daily Dow and Fed mumblings on inflation and unemployment, economics concerns the art of staying alive, perchance to save a few bucks – with luck earn enough to rise above forever juggling bills, get a little bit comfortable even. Get wealthy? – probably not. Faux heroes like Horatio Alger and Andrew Carnegie are long dead, you know, and after reading Carnegie’s biography you wouldn’t want to be like him anyway.

 

On obfuscational obstacles to comprehending economics

“You need to understand,” Elmore continued, quieter but still intense, “why economics is so damned hard for the average person to understand. Arcane and dismal at the outset, economics is rendered still more unattractive by economists, who make its language – let’s call it EconSpeak – needlessly hard to follow. They expropriate words that are familiar to you and me, then reassign them to unfamiliar economic ideas which require other words to explain. Nobody can remember all these words, not even other economists who are a pretty vague lot to begin with.” Elmore launched into examples, his enthusiasm leaving me uncertain whether his sentences ended with periods or commas.

 

“Take, for example, the term ‘factors of production,’ which logically could mean any of several nuances of the word “factors.” But no, EconSpeak uses it arbitrarily to define “the inputs to a production process” – which means that the “factors” of making pizza include flour and pepperoni but – inexplicably – not the stove, the kitchen or the chef. The familiar term “efficiency” gets used by economists to mean a particular allocation of resources that will produce the most “monetary value” – a meaning few people would think of when judging their own efficiency at washing dishes. But – most inconsistently – economists ignore their own meaning of monetary efficiency when referring to goods and services that are not traded on The Market – such as the vast monetary value of rain forests which serve us all as vitally important carbon sinks soaking up waste CO₂. The immense value of a rainforest is not counted – is literally ignored – by those who cut it down to make way for the “efficiency” of planting cane and grazing cattle.

 

“Such linguistic disutilities produce Greenspan-like mumbo-jumbo from even the more open-minded economists (there are a few) who say things like: “The marginal utility curve reflects the increasingly marginal cost of sacrificed natural capital and disutility of labor as more natural capital is transformed into manmade capital.”  …What?…

 

The study of money, above all other fields… is one in which complexity is used to disguise truth or to evade truth, not to reveal it.

– John Kenneth Galbraith (1908-2006), Economist

 

Externalities versus throughput

EconSpeak can even turn a word on its head to mean its diametric opposite. The word “external” for instance. To you and me, “external” means “outside of.” But to economists the word somehow connotes “dollars not spent.”      …Say again?…

 

Economists – like corporate lords in air conditioned offices high in skyscrapers – classify industrial waste (nasty chemicals, carbon dioxide, whatever) which pollutes land, water and air as an “externality” – which means they don’t put a monetary value on it. Just like those “useless” rain forests they cut down to make way for highly profitable palm oil plantations and beef cattle ranchland. The rain forests and CO₂ and chemicals are “external” to what we’re doing here, they say, thus it has no monetary value, they say.

 

“Notwithstanding that, you and I can plainly see,” Elmore explained, “that industrial wastes are undeniably internal to the continuous industrial throughput process which economists describe as 1) resource depletion, 2) production and 3) waste “emissions” – i.e., that vile brownish-green toxic stuff pouring out of some factory’s drain pipe into the nearest stream – normally upstream from you. Computer programmers say the same thing in different words: Input, Process, Output. They always go together, those three, so you logically wouldn’t stop at ‘process’ now would you. EconSpeak notwithstanding, we all understand that ‘output’ – aka ‘waste emissions’ which corporations and their apologist economists define as beyond their pale – are real, inevitable, and virtually always involve real monetary cost to somebody. That somebody typically is us taxpayers who bear the cost of cleaning up the mess they’ve left behind after they took their profits and ran.

 

“Just like the alimentary canal,” said Elmore, “1) stuff gets fed in, 2) gets processed, and then – step three – back out it comes. Smelly waste. Just a moment ago it was part of your internal process and had clearly added value to your body. Now, the briefest instant later, it has become ex-ternal. Did you really think it suddenly loses all that value when you call it ‘external’ as if it were never part of you? Did you not originally pay for its entire temporal value when it was food to be input? Did you not reap that food’s value as your internal process transferred its food energy into your bloodstream to feed all your trillions of cells, including those in your brain?

 

“Furthermore, to handle the output with appropriate caring, did you not pay out pretty pricey monetary value for your bathroom, your commode, your drain pipe leading down, out and away to the septic tank or city sewer? These appliances and their connections to the nether world rather protected your planetary neighbors from the ill effects of your so-called external waste, did they not? If you pay the cost they represent, then – bingo – you don’t think of them as having no monetary value. Do not most of us have the ongoing cost of a monthly sewer tax bill to pay for the waste that is an integral – not external – part of our bodily throughput?

 

“Can you actually deny that step three has real monetary value? Or would you rather go back to sixteenth-century London when, all over town each and every morning, the chamber pot contents were simply flung out the window onto the street below, infectious diseases were rampant and life expectancy was short indeed? Do you get the cost accounting?” I noticed early on that Elmore could be real sarcastic when he was in his stride.

 

“But where is comparable cost accounting of step three for the smelly waste of collapsing piles of waste coal ash from the alimentary rear ends of coal fired power plants? Of corporate anal chemicals spilled into the beautiful Kanawha River, thence polluting the once-clear waters and once-edible fishes all the way down the beautiful Ohio and Father Mississippi rivers clear to New Orleans? Where do we find cost accounting of the green habitats destroyed by heavy metals from blowing off whole mountaintops? They call these “externalities” and don’t pay a dime. Well, whose cost is it when your holding pond leaks cancerous toxic goop into my creek, my well water and the aquifer that I, my livestock, my children and their dog all depend on? Do you get the cost accounting yet?

 

“You’ll find the three-part throughput cycle symbolized as three little circular arrows molded into the bottom of trillions of plastic water bottles, with presumed intent to encourage recycling, theoretically. By dumping wastes into our environment and calling them ‘externalities,’ industrialists (and economists) avoid accounting them as costs they would have to pay themselves. ‘Pay for cleanup? Oh no, it’s not our cost – it’s external.’

 

“I’m sure Freud and Jung, not to mention Adam Smith and Karl Marx, would agree that economics, with its serene twisting of word meanings, can be said to represent yet one more way of denying reality. If nobody can understand what economists are talking about, then what is real in this odd-ball field that so influences ordinary peoples’ lives?

 

“The confusion they needlessly create with their silly word games plays straight into the hands of corporate lords and the money barons who own the lords, all fervently denying that global warming is real. They’re not fools, much as we might suspect it. If they admitted the reality, then they’d have to admit that it’s their out-of-control economic system, extreme capitalism – and their predatory corporate way of attaining wealth at the expense of everybody else – that are slowly ruining our planet for civilized life, and quite possibly for any oxygen-breathing life at all just a few centuries down the road, which is much, much farther than these greedy bastards show any capacity to see.

 

“Nor can the planetary disaster they’re building up be called ‘slow’ anymore, as its deadly accumulation speeds up exponentially each year. Notice:  in just the past thirty years, the energy sector has emitted as much CO₂ into the world’s atmosphere as all humans emitted over the previous ten thousand years since we invented agriculture. These are the people who want to keep on burning coal, and oil, and gas – business as usual – because, they say, it’s cheaper. In other words, they do it for the money. Money is obviously their foremost value. And since they control the fossil fuel industry, they do their best to kill or delay developing any sustainable energy sources that don’t spew CO₂.

 

“When they’ve sucked in all the wealth from everybody else,” said Elmore icily, “I suppose they’ll turn to eating each other. If it was 1941 and Pearl Harbor had just been attacked, these are not the people I’d ask to put the nation on an emergency wartime footing within one year. One must wonder:  do they really not care about the future they’ll hand to their own grandchildren, as well as ours? Where is the compassionate empathy which is given such emphasis for the inmates to learn at Poverty School?”

 

The fossil-fuel age must inevitably end, and with its end will come an end to the concentration of power in the hands of fossil fuel corporations. These corporations are fighting for their life – and our death – right now. It is extraordinary and appalling to consider that we, and they, know that what we are doing is devastating the world, and that we, and they, nevertheless continue to do it anyway.

– Rebecca Solnit (in Harper’s Magazine)

 

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