Paul Krugman in Sunday’s NYT has an article entitled “How Did Economists Get it so Wrong?” It’s fine as far as it goes, I think, but it misses so much, since it just focuses on financial economics. No mention of the growing wealth inequality in the US and its effects, such as forcing people to buy on credit, or using their homes a piggy banks (as long as the price was supposedly rising). No mention […]
In earlier posts I noted that even if “Wall Street” is temporarily saved and more carefully regulated, it will be difficult to prevent a meltdown similar to the current one from happening soon again. The reason is that it will be impossible to prevent new risky ways of playing tricks to obtain high returns by manipulating digital money streams. This is under way already. Banks have found apparently legal ways to cook their books to […]
To continue my study of the causes and possible cures of the meltdown, I want to discuss how there have seemed to be three different routes to making money. I do this in the context of my general prediction for over a decade, which has been that the attention economy will eventually replace the money-industrial economy, in all variants, including capitalism. This means that money will eventually be outmoded. For an early version of this […]
[Note: this is another entry in my attempt to make sense of the crash and see how it is tied to the Attention Economy. Some earlier entries are here, here, here, here and here.] I attended an informative, thought-provoking and amusing talk by Prof. Brad DeLong of UC Berkeley on Tuesday on the financial crisis “of 2007-2009” (he expects the crisis to have diminished by the end of this year). (The talk was part of […]
In ancient Athens’s Agora, in medieval Venice’s Rialto neighborhood, and in small village market squares everywhere, the marketplace for ideas — that is where attention was exchanged —commingled with the market for goods. Socrates wandered around the Agora talking with his disciples and enemies, according to Plato. But he and they spent little time trying out or examining the wares, or in bargaining over goods. Others, say in Cairo’s souks up until today, spend much […]
A couple of years ago, I pointed out that in some ways money was losing its hold on reality. Routine activities and producing things to which can be assigned some relatively stable amount of money now occupy far less than majority of human effort — while more and more energy goes into the new attention economy, which is only loosely connected with money or markets. At the same time, the growing financial sector takes on […]
Having discussed the new strangeness of money as such, I will now turn the most money-dependent sector— finance. But before getting into details, let me make a point about banks and attention. Money flows in the same direction as attention does, and so, right now stars — that is, large scale attention getters — generally have high monetary incomes. But having money incomes doesn’t lower the net attention they have, because attention itself can be thought of […]
In the previous post, I pointed out that money is of great importance only when the world is dominated by standardized goods and services. One essential of standardization is that goods or services of a certain type are interchangeable. This ton of wheat equals that one, this 100 watt lightbulb equals that one, this kwh of electricity equals that one, and so on. In some cases (actually even in these cases) one has to specify […]
SUCCESS REACHES ITS LIMITS In my previous post on the crisis, I claimed that we are suffering from too much savings and not enough consumption. The worldwide pool of money seeking growth investments is too large to be sensibly invested in any sort of production or service-providing corporation. The reason for that is that consumption is just too low, and is not likely to be able to rise to the levels needed to sustain such […]
As I write, the stock market is flatlining, credit has seized up, no one seems to know what to do, and bad times seem in store. What caused it? Not what you think. Not, basically, greedy Wall Streeters, ordinary consumers taking on loans they could not pay off, bad accounting requirements, faulty credit ratings, failures of regulators to regulate, nor a formerly too rosy outlook from the Fed. These were all surface phenomena. What lay […]