The Lost Science of Classical Political Economy

neweconomicperspectives.blogspot … tical.html

Lovely article.

We’re all ‘artists’ now…

Good article. I look foward to economic debate eventually reverting back to these vital and most important questions.

"]the two key features of today’s economic crisis: the “magic of compound interest” multiplying debts owed by the bottom 90 percent of the population to savers among the top 10 percent, while industrial capitalism is turned into a “tollbooth economy” by privatizing rent-extracting privileges on what used to be the public domain.“Rent-extracting” and debt interest is all Hudson ever talks about. He totally ignores the fact that rents paid to the “capitalist elite” are a relatively small part of the economy today. And furthermore we are recipients of those rents through our pension funds and other equity shareholdings. And everyone who has a savings account is themselves a creditor receiving interest from the indebted.

The low level of economic rents is in contrast to the very high level of tax that everyone has to pay to the socialist bureaucrat class. These taxes are what keep poor people poor. Tax is 40% of the economy. And its tax that keeps an army of bureaucrats in very comfortable employment.

Hudson never gives the full picture as he is a socialist. Although I will admit Ive learnt a hell of a lot from listening to him.

Ah, but the point is that we should be debating on the terms you disagree with him, not on mathematical terms. We should be deciding what we want the economy to ‘do’ for us, rather than the economy deciding what it wants to ‘do’ with us…

Listen to any interview with Hudson and this is all he talks about.

Sure, rentiers are out there and always have been. But theyre a small part of my outgoings, compared to the amount of tax the state takes from me to pay for the huge pensions and other lavish remuneration packages of the bureaucrats.

Hudson is currently advising the new government in Iceland and has also advised Latvia recently. Thats could be one reason theyre being so belligerent about paying back the poor Icesave depositors.

Is he not primarily talking about ‘rents’ in terms of a broad spectrum of economic rents that accrue according to special privilege enforced by law including but not limited to land rents, professional privileges, banking privileges, the rezoning of land, monopoly rights, patent rights etc…

EDIT - which constituted a very large part of boom time western economies I would have thought.

Nope.

aud1.kpfa.org//data/20081015-Wed1300.mp3

Some more on the failure of mathematics or not, this time from Steve Keen:
businessspectator.com.au/bs. … 0economics
(Courtesy of Naked Capitalism)

Exactly. This is the traditional, classical economic definition of “rent”. And Ireland is rife with economic rents in almost every single industry and market you care to mention - special privileges, artificially constricted supply, barriers to entry, cosy cartels, legalised banditry, legalised monopolies and oligopolies, blind eyes being turned, favours for incumbents - everywhere you look this croney capitalism is rife.

And this CORRUPTION gives rise to artificial rents, pushing up the cost base all through the economy, which in turn leads to even further increased rents fpr the connected and privileged.

To think of “rent” in the narrow colloquial sense of payment for the use of a building is both typically Irish and fundamentally misses the point of what Hudson is saying.

I think he paints an unfair caricature of mathematical economics. A huge amount of mathematical economics is devoted to the study of “market failure”. Simple mathematical logic can demonstrate very powerfully the inevitability of exploitation, rent-seeking, corruption, etc., within a market economy. Those guys in Chicago are not the alpha and omega of mathematical economics.

Oh dear, you can’t start arguing from first principles YM.

I was told I was being too cryptic… :wink:

Nobody on this thread has missed that point. We all know what Hudson means by economic rents.

Heres another Hudson article bashing on about rent extracting capitalists being the reason for all the worlds problems.

Real Estate, Technology and the Rentier Economy: Pricing in excess of Value, producing Income without Work

Funny how Hudson completely ignores the enormous growth in tax extraction by the socialist bureaucrat class, post WWII. How the hell can anyone write an article entitled “Producing Income without Work” without mentioning once the public sector bureaucrats? Michale Hudson is not a balanced or fair commentator.

You’re going on about taxes but is much of the problem not just with how much tax money ends up being channeled towards such ‘economic rents’? In addition to non-tax money.

For example, favoured companies (eg. construction and consultancy) are funnelled large amounts from tax revenues where they extract very lucrative profits.

You could say to a significant extent that our armies of public servants need to be paid large amounts so that they in turn can pay out the exorbitant economic rents demanded by banks, professional services etc.

Not to mention that you’re paying taxes towards quangos and bodies like Fas who are in existence not for the public good but to feather their own nests and the nests of associates and lackeys. Or, towards the county councils to build expensive speed bumps everywhere which are designed to make it look like the local councillors are of some use. Also, to help the car dealers sell more cars. Which is all economic rent seeking in their own ways.

I mean, you wouldn’t mind paying taxes if you could see that you were getting something proportionate, worthwhile, valuable and good for your money, would you?

No. The taxes are doled out to the bureaucrats and other insiders in salaries pensions expenses and other benefits.

Look, I completely agree that economic rents are an insidious form of legalised theft. I agree with Hudson on that. But its only one form of legalised theft. The tax extracting public sector is the elephant in the living room, that Hudson persistently ignores in his explanations for why poverty, and low living standards persist.

suspicious

Is this going down the “all government is evil, let’s abolish the State entirely” ultra-libertarian road?

Just so’s we’re clear before the debate kicks off…

Debate? You’re having a laugh! :wink:

No, not really.

But keeping the state directly accountable by means of regular swiss style voting is the best way of keeping rentiers, whether they be private or public, from siphoning off our meagre wealth.

Fair 'nuff, I just wanted to be sure :smiley:

I lived in Switzerland for a while, there’s nothing like a good dose of direct democracy to keep the populace on their toes and thinking about their vote. When I was there they were having a referendum on whether or not to abolish the army entirely! And it was a huge topic of debate. Can you imagine such a thing in any other country? And bureaucracies need a good shake-out every once in a while before they become self-serving empire-building wealth-sucking wastes of space.

Corruption and inertia within the State apparatus are problems that need tackled directly…but there is always a role for the State in providing public goods, there are always natural monopolies, there are always industries that need a close regulatory eye for the good of the public, yes? A strong respected efficient State sector that delivers is necessary, there are always market externalities here and there that need to be sorted.

Waste and corruption on the other hand needs to be ruthlessly eradicated. And a State that exists primarily to siphon cash into the pockets of its supporters deserves no respect or support at all.

Absolutely, I think citizens should have the power to vote on the performance of entire government departments, and disband them if they are not serving the public interest sufficiently well. A collection of say 150,000 signatures should be enough to require a referendum on anything.

Agreed. Natural monopolies should not be in private hands.