Re: Economic reform policy: Some views and proposals

[Trond Andresen <trond.andresen@xxxxxxxxxxx>]

At 10:32 26.04.03 -0700, William F Hummel wrote:
>My general reaction to Trond Andresen's proposals is that they
>deal mainly with ends rather than means.

I partly disagree with that interpretation of what I wrote.
For instance: An automated industry is a means to an end:
A society where people can use their time for more meaningful
activity -- work or free time.

>I have a hard time
>visualizing how a democratic republic with an entrepreneurial
>free market economy could implement his proposals.  Private
>interests would have to somehow converge on policy objectives,
>and legislation would be required to create the framework under
>which the system would evolve toward his ends.  Perhaps in a
>small country with far more homogeneity than in the US, a
>political consensus could be developed favorable to those ends.

The bigger the country, the more difficult it is. And the more hostile
to macroeconomic reform, regulation and legislation, the more difficult it is.
So, yes, the U.S. is not what I had foremost in mind.

>Considering the proposals individually, first the automation of
>manufacturing goal is proceeding naturally as the result of free
>market competition.

It is of course proceeding, but could proceed more smoothly with political
consensus about the means and goals I described in my "program
proposal".

> It is already far along in the more
>industrialized countries.  The relative size of the manufacturing
>sector has been steadily shrinking and will continue to do so.
>The services sector is now far larger.

But as long as these "services" to a large degree means low-utility
low-quality jobs, society as a whole is worse off.

>An even more dramatic
>example of automation is seen in US agriculture where the
>fraction employed has dropped over the last century from well
>over 50% to only a few percent of the total population.  Even so,
>the US is a major exporter of agricultural goods.

I deliberately avoided talking about agriculture in my first message not to
introduce to many threads ar once. I believe that agriculture should be
treated differently form manufacturing because of its ecological and
environmental aspects. In the future society I sketched, agriculture is
*more* labour-intensive than today. Food is therefore relatively more
expensive, but it is to a larger degree ecologically sound and more locally
produced.


>Second, more exchange of recipes rather than goods involves
>primarily cross-border issues, and appears to require a rather
>altruistic stance of those involved.

Altruism is no prerequiste here. If a corporation receive a license fee
for a unit locally produced and sold in another country, this may in fact be
preferable to trying to export the same unit to the country and hoping to
profit by this.

>........
>
>Third, damping the stock market long wave assumes that there is
>in fact such a long wave and that we understand what causes it.
>This is a controversial assumption.  I personally doubt that the
>historical record is long enough to demonstrate the existence of
>a long wave with any reasonable degree of confidence.  So I have
>no further comment on this proposal.

I think that f.inst. Robert Shiller has good evidence of this.
See figure 1.2 in "Irrational Exuberance", accessible on
<http://www.amazon.com/exec/obidos/tg/detail/-/0767907183/ref=lib_dp_TFCV/002-5827033-7237605?v=glance&s=books&vi=reader#reader-link>.

For a probable mechanism behind it, I modestly point to
http://csf.colorado.edu/authors/Andresen.Trond/stockmodel.pdf

>Fourth, paring down the financial sector is in my opinion
>potentially the most fruitful of Trond's proposals, although
>private economic interests would make it exceedingly difficult to
>achieve.  The Fed has the power to do much more than it does
>toward reining in the excesses, especially in regard to bank
>loans to purely speculative ventures..  However the Fed reflects
>the will of the Congress who created it, and we have seen how
>easy it is to buy Congressional legislation.  There is a direct
>functional relation between financial wealth and political power.
>This is a positive feedback loop that has no clear equilibrium
>point, and therefore cannot be considered long-term stable.
>
>The existence of huge trading floors with literally thousands of
>dealers buying and selling an ever-growing number of financial
>instruments suggests nothing so much as a giant casino.  CHIPS
>now settles about 250,000 transactions a day that total about
>$1.2 trillion dollars.  Surely most of this must be a zero sum
>game, and almost totally unproductive in economic terms.  I
>confess a bit of nostalgia for the days when bankers worked from
>9 to 3, and most of the credit market debt consisted of bank
>loans.

Seconded!!

Trond Andresen