Comments on: Economic and political disconnects (and the sociology of knowledge) http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/ Blogging politics, culture, sociology and life from Brisvegas Fri, 19 Mar 2010 13:22:01 +0000 hourly 1 By: Katz http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-573222 Katz Thu, 04 Dec 2008 21:55:38 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-573222 <blockquote>Current events are underlining the fact that economies rely on the creation of shared realities and that the “laws” of economic behaviour are shaped and varied through perception and sentiment.</blockquote> This is the Wile E. Coyote hypothesis of economics. You'll recall that for so long as that disaster-prone canine succeeded in his struggle not to look down after he ran off the cliff overlooking the canyon, he remained magically suspended in mid-air. Only an acknowledgement of the absense of terra firma precipitated his plunge into the abyss. Unfortunately for most of us who live in the world not dictated by cartoon physics. The important shared reality is the collapse of credit markets. That reality lives like a canker worm in the brains of bankers. There is no wishing and hoping that will prevent severe consequences of widespread insolvency, lack of liquidity, and deep suspicion that debtors will be capable of keeping up payments. Thus, banks have lowered nominal interest rates but are now <a href="http://www.smartcompany.com.au/Free-Articles/The-Briefing/20081120-Deflation-is-our-new-risk-Kohler.html" rel="nofollow">rationing credit</a>. The bank manager smiles upon only those deemed to be very good risks. Gone are the days when teenagers could get credit card access to thousands of dollars. This may be a good thing. But let's not forget that those gormless teenagers and their equally improvident elders drove much consumer demand during the good ol' days. Moreover, lower nominal rates don't mean much in a deflationary environment. Debtors will be compelled to pay off old debts with new, scarce money that has appreciated in value. Once deflation becomes part of the new shared reality, the wheels of the economy will lock up because deflationary expectations recommend deferral of discretionary purchases.

Current events are underlining the fact that economies rely on the creation of shared realities and that the “laws” of economic behaviour are shaped and varied through perception and sentiment.

This is the Wile E. Coyote hypothesis of economics.

You’ll recall that for so long as that disaster-prone canine succeeded in his struggle not to look down after he ran off the cliff overlooking the canyon, he remained magically suspended in mid-air. Only an acknowledgement of the absense of terra firma precipitated his plunge into the abyss.

Unfortunately for most of us who live in the world not dictated by cartoon physics. The important shared reality is the collapse of credit markets. That reality lives like a canker worm in the brains of bankers. There is no wishing and hoping that will prevent severe consequences of widespread insolvency, lack of liquidity, and deep suspicion that debtors will be capable of keeping up payments.

Thus, banks have lowered nominal interest rates but are now rationing credit. The bank manager smiles upon only those deemed to be very good risks. Gone are the days when teenagers could get credit card access to thousands of dollars. This may be a good thing. But let’s not forget that those gormless teenagers and their equally improvident elders drove much consumer demand during the good ol’ days.

Moreover, lower nominal rates don’t mean much in a deflationary environment. Debtors will be compelled to pay off old debts with new, scarce money that has appreciated in value.

Once deflation becomes part of the new shared reality, the wheels of the economy will lock up because deflationary expectations recommend deferral of discretionary purchases.

]]> By: Adrien http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572795 Adrien Thu, 04 Dec 2008 07:30:47 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572795 Mark - <i>If employment holds up reasonably</i> . Don't you think that could be a big 'if'? . Apart from the fact that, despite our wonderfully functional financial system, we still have heaps of people in debt. There've been a significant number of foreclosures already and another reason we're small fish in the global economy is that a lot of the companies that we work for belong to America, (or Korea, or France, or China, or the UK, or Japan, or Botswana, or el Salvador). . Whatddyareckon? Mark – If employment holds up reasonably
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Don’t you think that could be a big ‘if’?
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Apart from the fact that, despite our wonderfully functional financial system, we still have heaps of people in debt. There’ve been a significant number of foreclosures already and another reason we’re small fish in the global economy is that a lot of the companies that we work for belong to America, (or Korea, or France, or China, or the UK, or Japan, or Botswana, or el Salvador).
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Whatddyareckon?

]]> By: j_p_z http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572702 j_p_z Thu, 04 Dec 2008 04:27:47 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572702 Interesting, thoughtful post, Mark. I don't really have anything to add, just wanted to say something complimentary. Interesting, thoughtful post, Mark.

I don’t really have anything to add, just wanted to say something complimentary.

]]> By: Patrick B http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572689 Patrick B Thu, 04 Dec 2008 04:09:56 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572689 "It’s almost a relief to sink into this weeks idiocy from Miranda." What the hell is a "conservative student" anyway is it just a synonym for stupid? Sorry for the OT outrage. “It’s almost a relief to sink into this weeks idiocy from Miranda.”

What the hell is a “conservative student” anyway is it just a synonym for stupid? Sorry for the OT outrage.

]]> By: Patrick B http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572668 Patrick B Thu, 04 Dec 2008 03:43:05 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572668 Nixon always said the public doesn't give a toss about inflation, it's a recession that spells political death. He was pressuring his Fed chief Arthur Burns to drop interest rates during 70-71 to stave off a rise in unemployment. Burns wasn't exactly taken with the idea and I think the administration did something with the postal service that pumped billions into the system. Deficits, inflation, who cares so long as we have a job. Nixon always said the public doesn’t give a toss about inflation, it’s a recession that spells political death. He was pressuring his Fed chief Arthur Burns to drop interest rates during 70-71 to stave off a rise in unemployment. Burns wasn’t exactly taken with the idea and I think the administration did something with the postal service that pumped billions into the system. Deficits, inflation, who cares so long as we have a job.

]]> By: Lloyd http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572427 Lloyd Wed, 03 Dec 2008 20:49:29 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572427 The Australian is at it again this morning. Another desperate attempt to shape the narrative "Rate rises smashed the economy" screeches the headline. "It's Rudd's fault" intones Malcolm. "A rethink of Fair Work is warranted" dribbles the editor. It's almost a relief to sink into this weeks idiocy from Miranda. Those poors sods that are right wing students are too scared to put their heads above the parapet. The Australian is at it again this morning. Another desperate attempt to shape the narrative

“Rate rises smashed the economy” screeches the headline. “It’s Rudd’s fault” intones Malcolm. “A rethink of Fair Work is warranted” dribbles the editor.

It’s almost a relief to sink into this weeks idiocy from Miranda. Those poors sods that are right wing students are too scared to put their heads above the parapet.

]]> By: grace pettigrew http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572400 grace pettigrew Wed, 03 Dec 2008 19:42:16 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572400 You are so right about the "disconnect" Mark, and its lethal effects on public discourse. Just look at the way the media reports endless reams of financial market information that is simply double dutch to most ordinary listeners and viewers. Its either aimed at the high fliers (what are they listening to the radio for?) or at those illusory "mum and dad shareholders", a fantastic creation of the Howard hegemon. At ground level, lower interest rates, lower petrol prices, and Rudd's chrissy cheque in the mail, are right now cheering the voters up no end, but the news media tell us that the financial wizards and the politicians are very depressed and gloomy about the future. Big deal and a shrug of the shoulders, nothing to do with me... For the past decade the media in this country has lost its way in assuming the interests of the financial markets are the same as the interests of their own readers and listeners (and its much easier just to read off a set of numbers). A dumbed down media is now unable to straddle the divide intelligently and so the "news" is not the news for most of us any more. No wonder newspapers are dying. You are so right about the “disconnect” Mark, and its lethal effects on public discourse. Just look at the way the media reports endless reams of financial market information that is simply double dutch to most ordinary listeners and viewers. Its either aimed at the high fliers (what are they listening to the radio for?) or at those illusory “mum and dad shareholders”, a fantastic creation of the Howard hegemon.

At ground level, lower interest rates, lower petrol prices, and Rudd’s chrissy cheque in the mail, are right now cheering the voters up no end, but the news media tell us that the financial wizards and the politicians are very depressed and gloomy about the future. Big deal and a shrug of the shoulders, nothing to do with me…

For the past decade the media in this country has lost its way in assuming the interests of the financial markets are the same as the interests of their own readers and listeners (and its much easier just to read off a set of numbers). A dumbed down media is now unable to straddle the divide intelligently and so the “news” is not the news for most of us any more. No wonder newspapers are dying.

]]> By: zorronsky http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572152 zorronsky Wed, 03 Dec 2008 09:55:04 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572152 looked in on Kerry tonight expecting more of the same and instead watched the Woody Allan interview. Like he said 'life's random'. The expanded interview is on the ABC site. looked in on Kerry tonight expecting more of the same and instead watched the Woody Allan interview. Like he said ‘life’s random’. The expanded interview is on the ABC site.

]]> By: Adrien http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572072 Adrien Wed, 03 Dec 2008 07:45:25 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572072 <i>I don’t ever get a meaningful response from simple questions of import. </i> . Of course not. They're professionals. . <i>I don’t think he has the skills or experience to do the job well.</i> . Swan has excellent skills at his <a href="http://images.businessweek.com/ss/06/10/scary_coworkers/image/slide8.jpg" rel="nofollow">job</a>. There's no-one better. :) I don’t ever get a meaningful response from simple questions of import.
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Of course not. They’re professionals.
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I don’t think he has the skills or experience to do the job well.
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Swan has excellent skills at his job. There’s no-one better. :)

]]> By: JohnL http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572056 JohnL Wed, 03 Dec 2008 06:58:15 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572056 Just another point that suggests there could be more disposable income to spend – petrol prices. I have a car with a fuel tankf capacity of around 60 litres and about 4-5 weeks ago it was costing $80 to fill (I don't let it get too empty). As of today (using the same amount of petrol) it was about $50. That saving of $30 (weekly for some, fortnightly for many) is money that will probably be spent rather than saved. Just another point that suggests there could be more disposable income to spend – petrol prices. I have a car with a fuel tankf capacity of around 60 litres and about 4-5 weeks ago it was costing $80 to fill (I don’t let it get too empty). As of today (using the same amount of petrol) it was about $50. That saving of $30 (weekly for some, fortnightly for many) is money that will probably be spent rather than saved.

]]> By: Peterc http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572053 Peterc Wed, 03 Dec 2008 06:53:48 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572053 I think politics is becoming increasingly disconnected at both federal and state levels. I don't ever get a meaningful response from simple questions of import. They are too busy watching polls and engaging in biffo. I don't really care if Julie Bishop is a lightweight. The problem is teh system that put here there. On the other side, I get the impression Swan is just bluffing his way through a portfolio like treasury. I don't think he has the skills or experience to do the job well. Hence the personal attacks on the other side. The best form of defence is offence . . . The adversarial system is failing us. They don't represent their constituents in any meaningful or real way. Elections are a charade when they suddenly pretend they do. Not sure what the alternative is though. There needs to be more accountability on delivery and real representation. I think politics is becoming increasingly disconnected at both federal and state levels. I don’t ever get a meaningful response from simple questions of import. They are too busy watching polls and engaging in biffo. I don’t really care if Julie Bishop is a lightweight. The problem is teh system that put here there.

On the other side, I get the impression Swan is just bluffing his way through a portfolio like treasury. I don’t think he has the skills or experience to do the job well. Hence the personal attacks on the other side. The best form of defence is offence . . .

The adversarial system is failing us. They don’t represent their constituents in any meaningful or real way. Elections are a charade when they suddenly pretend they do. Not sure what the alternative is though. There needs to be more accountability on delivery and real representation.

]]> By: Adrien http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-572044 Adrien Wed, 03 Dec 2008 06:34:11 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-572044 I'm not sure what this has to do with the sociology of knowledge but anyway. . The <strike>annual nefarious feeding frenzy of greedy seagull like suburbanite jerks</strike> Christmas Season is upon us again and, apart from the fact that the Myer Xmas window display is a bit on the cheap I don't see much difference. Lots of lard in lycra gettin' around goin' me-first, me-first, get out of my way granny you bitch and gimme, gimme, gimme. . <i>It’s hard to know whether to blame the pollies or the press gallery </i> . How about the stupid fat twerps that pass for the citizenry? They just don't get it and won't til they get booted out there job and lose their car and their house,. And painful as this is I can't help feeling they have it coming. :) . . Merry Xmas and goodwill to all retailers. I’m not sure what this has to do with the sociology of knowledge but anyway.
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The annual nefarious feeding frenzy of greedy seagull like suburbanite jerks Christmas Season is upon us again and, apart from the fact that the Myer Xmas window display is a bit on the cheap I don’t see much difference. Lots of lard in lycra gettin’ around goin’ me-first, me-first, get out of my way granny you bitch and gimme, gimme, gimme.
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It’s hard to know whether to blame the pollies or the press gallery
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How about the stupid fat twerps that pass for the citizenry? They just don’t get it and won’t til they get booted out there job and lose their car and their house,. And painful as this is I can’t help feeling they have it coming. :) .
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Merry Xmas and goodwill to all retailers.

]]> By: Mark http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-571999 Mark Wed, 03 Dec 2008 05:31:09 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-571999 What is 'real', hannah's dad? On what basis do people individually decide to spend or not spend or what to spend on (etc.) such that it has a collective effect on the economy? What I'm suggesting is that there's a dimension here that goes beyond individual calculation and is created by (among other things) mediated news and the formation of public opinion. It's far more than the aggregation of individual choices. Politicians know that really well, and it's one of the things - in governing - they try to shape and act on. I'm unable to expand more at the moment because I'm about to head out, but following the link in the last para of the post will give you a good idea of how such "creation of shared realities" works in the economic domain. What is ‘real’, hannah’s dad? On what basis do people individually decide to spend or not spend or what to spend on (etc.) such that it has a collective effect on the economy? What I’m suggesting is that there’s a dimension here that goes beyond individual calculation and is created by (among other things) mediated news and the formation of public opinion. It’s far more than the aggregation of individual choices. Politicians know that really well, and it’s one of the things – in governing – they try to shape and act on. I’m unable to expand more at the moment because I’m about to head out, but following the link in the last para of the post will give you a good idea of how such “creation of shared realities” works in the economic domain.

]]> By: hannah's dad http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-571987 hannah's dad Wed, 03 Dec 2008 05:15:25 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-571987 "I’m sort of a Gillard fan." Me too. And Penny. But I'm not so sure about the ALP policies for which they are the mouthpieces. Oh and Mark, I love the phrase "creation of shared realities" and the following line " “laws” of economic behaviour are shaped and varied through perception and sentiment." Sounds terribly unscientific to me, almost like saying mob belief in mumbo jumbo equals mumbo jumbo being 'real'. Care to elaborate on this theme a bit or have I read into your words an implication of my own and not yours? “I’m sort of a Gillard fan.”
Me too. And Penny.
But I’m not so sure about the ALP policies for which they are the mouthpieces.

Oh and Mark, I love the phrase “creation of shared realities” and the following line ” “laws” of economic behaviour are shaped and varied through perception and sentiment.”
Sounds terribly unscientific to me, almost like saying mob belief in mumbo jumbo equals mumbo jumbo being ‘real’.
Care to elaborate on this theme a bit or have I read into your words an implication of my own and not yours?

]]> By: Mark http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-571986 Mark Wed, 03 Dec 2008 05:15:24 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-571986 Agreed, dk.au - I think the sundering of "information" from "behaviour" and "economic decision making" might have some advantages in variable construction, but the reification of these concepts has a huge cost in, well, actually understanding how stuff works! Agreed, dk.au – I think the sundering of “information” from “behaviour” and “economic decision making” might have some advantages in variable construction, but the reification of these concepts has a huge cost in, well, actually understanding how stuff works!

]]> By: Paul Burns http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-571969 Paul Burns Wed, 03 Dec 2008 04:54:04 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-571969 I noted on another thread Julie Bishop's explanation of why she did a cat's claw before I read this post. And now she's giggling about it and daring journalists to ask her to do it again, Such spontaneity! Meanwhile, while we're under the threat of fallout from the GFC the Government gets on with the job. The catsclaws and the name-calling (Malcolm on Gillard - " She's viscious, OMG she's viscious." But he doesn't answer questions about whether the Opposition would go into deficit under the same circumstances. Indeed, I'm wondering if this bunch of Liberal Party has-beens have any thoughts on what to do about the economy, apart from launching irrelevant personal attacks on the ALP front bench. (as you might guess, I'm sort of a Gillard fan.) Meanwhile, Labor gets on with the job, sort of. I noted on another thread Julie Bishop’s explanation of why she did a cat’s claw before I read this post. And now she’s giggling about it and daring journalists to ask her to do it again, Such spontaneity! Meanwhile, while we’re under the threat of fallout from the GFC the Government gets on with the job. The catsclaws and the name-calling (Malcolm on Gillard – ” She’s viscious, OMG she’s viscious.” But he doesn’t answer questions about whether the Opposition would go into deficit under the same circumstances. Indeed, I’m wondering if this bunch of Liberal Party has-beens have any thoughts on what to do about the economy, apart from launching irrelevant personal attacks on the ALP front bench. (as you might guess, I’m sort of a Gillard fan.)
Meanwhile, Labor gets on with the job, sort of.

]]> By: dk.au http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-571967 dk.au Wed, 03 Dec 2008 04:43:49 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-571967 Good post, Mark. Neoclassical economists rarely seem to acknowledge that 'information' is a two way street - instead it's just the Baconian assumption that dumb data hits the senses which is processed. Though the Austrians probably provide the richest account of the trouble of 'macro' management, there are still plenty of (dumb) assumptions built in about information processing. The cluster of terms around 'performance' ('economics performance'/performativity) and 'interest' (disinterestedness/interest rates) needs much more attention from the social sciences than it has received. Good post, Mark.
Neoclassical economists rarely seem to acknowledge that ‘information’ is a two way street – instead it’s just the Baconian assumption that dumb data hits the senses which is processed. Though the Austrians probably provide the richest account of the trouble of ‘macro’ management, there are still plenty of (dumb) assumptions built in about information processing.

The cluster of terms around ‘performance’ (‘economics performance’/performativity) and ‘interest’ (disinterestedness/interest rates) needs much more attention from the social sciences than it has received.

]]> By: Howard C http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/comment-page-1/#comment-571955 Howard C Wed, 03 Dec 2008 04:31:05 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-571955 I agree totally with everything Mark has said about the second disconnect. The lived experience will have the greatest effect, and this event will look very good compared to the lived experience of the early 1990s. I agree totally with everything Mark has said about the second disconnect. The lived experience will have the greatest effect, and this event will look very good compared to the lived experience of the early 1990s.

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