16 July, 2009

The Invisible Hand

The current global recession notwithstanding*, I have some major beef with economics in general. Economics exists to describe, regulate, and predict the markets, yet it inevitably fails to recognize reality and only perpetuates an unfortunately narrow self-interest in the majority of its participants. I posit:

1) The self-regulating "invisible hand" of the markets that supposedly guides consumers en masse to the best possible outcomes is nothing more than a foolish myth.

2) Economics pretends that it is uniquely exempt** from basic thermodynamic principles.

The invisible guiding hand is a convenient white lie that humanizes the volatility of markets, which amplify human indecisiveness and greed, and makes them seem comprehensible. This is pure fluffery at its least ingenious. The invisible hand's actions throughout history have, by and large, only served to increase the wealth of those who could afford to speculate within the markets, those who had money to risk and milk. It is entirely true that the invisible hand will guide consumers to purchase equivalent goods at lower costs and thereby benefit the producer who is able to manufacture those goods at the lowest marginal cost. But the same time this effect will not increase the purchasing parity or real wealth of the consumers themselves unless we insist on qualifying wealth by measurement of cheap plastic tchotkes. The invisible hand excludes benefit to the poor by marginalizing their purchasing to the necessities and using them as labor. The latter effect is especially apparent in third-world sweat shops churning out luxury items for industrialized nations' consumption. This disparity between benefit to the rich and cost to the poor is starkly visible in material trade and manufacturing between wealthy consumer nations and poor producer nations.

The North American Free Trade Agreement (NAFTA) effectively removed all barriers to trade between the United States of America, Canada, and Mexico. Large businesses in the USA and Canada have benefited from the cheaper labor available from Mexico even as their own working classes have suffered. Consumption intensive (defined as consumption relative to income) middle class families have certainly benefited from this with the rise of Walmart-type stores. But at the same time, large agricultural businesses, through chemical-heavy agricultural practices, can produce more corn per acre and do so more cheaply than Mexican farmers, and as such cheap USA grain flooded the North American market and dropped the bottom out of the smaller local markets that Mexican farmers depended upon. This bankrupted Mexican farmers, which in turn benefited large USA and Canadian businesses by providing hungry labor and mass immigration to urban centers (e.g., maquiladoras). Ironically enough, this has greatly increased the benefit to risk ratio of illegal immigration into the USA or Canada, something that the very politicians who championed NAFTA are now bemoaning and demonizing.

The invisible hand also fails to take into account individual greed. For the most part, most people will always hew true to one law and one law only: serve thy immediate needs! It is very difficult, sometimes even nigh impossible, to convince people to care about anything beyond their own immediate surroundings and even then it has to have a benefit to them. This is especially true in the relationship of the economy to the environment, and by proxy, peoples' apathy to caring about anything to do with the environment (or people far away, for that matter).

This brings me to my second point: economics acts as though it is independent of the physical laws that govern all things and organizations. The economy treats the environment, and the mineral, biological, and human resources contained therein, as infinite. Our entire global economic system is predicated on the assumption that infinite growth is posssible, practical, and inevitable. Barring the development of cost-effective space colonization and mineral extraction, this is only absolute madness! The Earth has a finite mass and a finite chemical composition and as such there is an absolute limit to the volume of materials we can extract and use. We can only move so much, and at that relatively little, amounts of stuff around before we start to poision our own garden. We've been quite tidily moving the carbon in fossil fuels to carbon dioxide in the atmosphere for the past 2 centuries, which is now incontrovertibly linked to global warming and ocean acidification.

Economics also ignores the very real and deadly costs of waste products. Manufacturing waste, whether steel slag, arsenic extractant for gold, or simple office paper trash, take up space and, because its toxic more often than not, poisons its immediate environment. Waste represents an energy sink, a huge cost that is magicked away from the accounting sheets because it is long-term and distant and will be someone else's problem before we are willing to take responsibility for it. Economics treats waste as just another commodity, pretending that the Earth contains infinite space for landfills, infinite fresh water to pollute, and infinite poor nations to dump toxic waste upon. While this does indeed maximize profits for the already-affluent shareholders, it does nothing to increase the average standard of living for the human race. If anything, it just makes it worse.

If nothing else, we can at least conclude that the invisible hand is not only invisible, but also blind, venal, and utterly unwilling to acknowledge its limitations. Funny how an invisible hand can look so hard at itself preening in the mirror.

*Seriously, who thought it'd be a good idea to sell debt around? That's like selling someone a cookie before the flour has even been ground, and if you sold me a cookie before you so much as even had the ingredients you'd have a very unhappy and possibly angry Toaster on your hands.
**Politics, however, does operate independently of thermodynamic principles.


Brittanicus said...

I think many Americans are naturally apprehensive of the sudden volume of activity, politicians supposedly enacting amendments to strengthen our immigration laws? But I suspect this is the lull before the storm, which they will throw into the bubbling cauldron of issues, like health care and cap and trade? Immigration reform is the toxic sediment rising to the surface of the pool. We cannot blame President Bush for the immigration debacle completely, nor Clinton as this complete and utter disregard for border enforcement, has been ignored long before any of these administrations. Illegal immigration really became finally a damaging problem to the United States after the CAFTA treaty. Small farmers in Mexico lost their livelihood, when the giant agricultural consortium's moved in. The (CFR) Council of foreign relations is a signature to an agenda, no borders between the US, Mexico and Canada.

Promoted by the globalists in the (EU) European Union whose planned agenda was the open border movement? Europe has suddenly woken up to the mass immigration which has become a scourge, which is just now being recorded with an adverse impact. The indigenous people have found themselves prioritized into a second class citizenship. In America this is becoming de-javu, as an Americans are hounded by debt collectors and bankruptcy, while illegal immigrants pay nothing for health care services. But then illegal immigrant families cannot be truly blamed for low income services, as they have been drawn across the borders, from other lands by exploiting employers who pay nothing for there settlement here. That remains the burden of the gullible American taxpayer.

Washington has absolutely ignored the millions of foreign laborers and families, who have arrived, now they have no choice but to exact punishment on the US taxpayer by legalizing those who are here. If their immigration reform is just a small fine, learn English and submit to a FBI background check, this will truly unfair to those sincere immigrants who wait for working visas in their country of residence. This to me is AMNESTY--by any other name. This goes against the essence of the US Constitution and our Rule of Law. It seems like Sen. Schumer, Reid, Speaker Pelosi adhere to our laws, when it suits them? The Democratic leadership de-funded E-Verify a while back, but the angry ire of voters appalled by the weakening of immigration laws, fired back with countless phone calls. We can now do the same with AMNESTY. How many realize the damage to our economy, by giving citizenship to over 20 plus foreign nationals in retirement benefits. Those legalized can be to our nation all their family members, known as chain migration.

Outside of complimentary legalization for all those people--mostly poorly educated, unskilled will be competition with US workers of the same status. It makes no any sense to process these people who pay little or no taxes, when we are looking at 11 percent jobless Americans. We can start deporting all these illegal families, the criminals by implementing permanent E-Verify. Not just for Federal Contractors but everybody as a mandatory law. Discrepancies will be dealt with at the Social Security offices. NO MATCH LETTERS--is a supplementary workplace law that shouldn't be rescinded? Don't be misinformed by the pro-illegal immigrant organizations. Call and demand a permanent, mandated E-Verify and NO MORE AMNESTIES! The1986 IMMIGRATION REFORM BILL DIDN'T WORK--NOR WILL THIS? It will take time, but enforced E-Verify with all its updates will remove illegal workers from the office, factory floor. Call your Senator or Congressman 202-224-3121

ATTENTION! Because of the massive payments to illegal immigrant benefits in California, their is now a petition to halt this travesty. Google--TAXPAYER REVOLUTION. Very few newspapers will mention this activist petition. For all the facts about OVERPOPULATION: CAPSWEB, NUMBERSUSA, FAIR & AMERICAN PATROL

quietandsmalladventures said...

politics follows th alaw of conservation of matter: neither cerated nor destroyed merely interconverted from one lame candidate to another :)

ps glog and pulla sounds magical!

Toaster Sunshine said...

"It seems like Sen. Schumer, Reid, Speaker Pelosi adhere to our laws, when it suits them?"

Please refer to the arguments given by Cheney et al in justifying the invasion of Iraq. The rest of your argument is steeped in similar dishonesty and foolish leaps of vacuous reasoning. It should also be noted that I'm none too partial to your vitriolic ranting against amnesty for immigrants. Unless you are Native American, STFU.

I'm going to try to make glög this winter, and perhaps I'll try pulla as well. If I find a successful recipe for them that ever I can cook, I'll try to remember to share with you.

Toaster Sunshine said...

*...that even I can cook...

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