‘American Dream’ Film: Communicating Economic Ideas Dramatically

I’m interested as much in the way ideas get communicated as the ideas themselves. What brings this to mind is the animated film I saw today called The American Dream. This is the most creative expression I’ve seen of the more non-mainstream view of economics — the idea that the Federal Reserve is an evil conspiracy against America.

Some of the film’s explanations are less controversial — how banks manipulate the economy and create what amounts to a house of cards that is supposedly too big to fail. But the film does move into some uncomfortable areas, almost advocating violent revolution — patriotic language and images are used to whip up sentiments. Still, as I said, the most interesting thing to me is the innovative presentation of the creators’ arguments.

By the way, I also like Chris Martenson’s “Crash Course in Economics” — kind of a ‘chalk-talk’ approach — as another example of creative presentation of economics ideas.

The American Dream is a half-hour film available in two parts on YouTube.

AB — 25 January 2011

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The annoying thing about The Big Oligarchy

The annoying thing about The Big Oligarchy …

the banks

the insurance companies

the government

the giant firms

and their privileged controllers

… is that you pay into It all your life through premiums, taxes, and the money It makes from the float on your cash …

but then when you ask for the promised (or implied) benefits, It begrudges paying you and does Its best to stonewall.

AB — 26 March 2010

How Can Local Economies Transition to a Petroleum-Scarce World?

Today I read an interview in New Scientist with Rob Hopkins, a key figure in the Transition Towns movement — see “Rob Hopkins: Getting over oil, one town at a time.” He writes about how communities can transition to a more sustainable economy at Transition Culture.

Hopkins describes the Transition Towns concept as follows:

A Transition Town is formed when a group of individuals gets together to ask how their community can mitigate the effects of a potential reduction in oil and drastically reduce their carbon emissions to offset climate change. The scheme has become so successful we now have 250 official Transition Towns and Cities worldwide, with many more interested in becoming involved.

One of the strategies being used to help communities transition to a petroleum-scarce economy is EDAP (Energy Descent Action Plan). Here’s a Slideshare presentation that explains how this process is working for some communities:

AB — 7 February 2010

Haiti Disaster: Housing for When the Bubble Pops

Seeing the devastating effects on the lives of the people in Port au Prince, Haiti, in the wake of the recent earthquake emphasizes the potential value of emergency housing solutions for recovery.

In such a disaster, survivors are thrust into chaos and forced to live in unstable, unsanitary conditions, seeking out housing any way they can. It seems to me this suggests a need and opportunity for emergency housing solutions that can be quickly and massively deployed by governments or NGOs.

An article in Wired from October 2007 includes a gallery of interesting designs for such situations — see “Instant Housing and Designing for Disaster.”

Just having the housing technology, though, isn’t enough, as demonstrated by the difficulties of getting medical and food assistance to the people in Port au Prince. The problem isn’t necessarily getting relief resources in the first place, but in getting them implemented and distributed.

Deploying emergency housing for potentially hundreds of thousands of people would require a tremendous amount of advance expenditure and organizational infrastructure. So the solution that’s called for is more along the lines of an urban-planning project rather than just an architectural problem.

Suppose it were possible to manufacture in advance the components of a massive portable community that could be stored in advance and deployed rapidly anywhere in the world?

Just thinking out loud — see my previous article, “Where Will People Live After the Big Bubble Pops?

AB — 19 January 2010

Pumping up the Big Bubble

From the Bubbleconomics point of view, the U.S. government’s efforts over the past year can be seen as an attempt to keep the Big Bubble pumped up. The current economic design requires a strong and powerful system of banking and investment, which is why the government has focused so much on propping up the banking system. The hope is that the banking bubble can stay inflated long enough for the real sectors of the economy to recover.

With that background in mind, we thought it was interesting to see this comment on Monday from RiverFront Investment Group (see “2010 Outlook — Reflation and Beyond: A Delicate Balancing Act“):

The Great Reflation experiment has achieved its objective of engineering an economic recovery through government spending, credit creation, and lower interest rates for both corporations and mortgage buyers. As the Federal Reserve contemplates removing monetary accommodation, it faces a delicate balancing act: We think the Fed will continue to err on the side of reigniting inflation rather than risking a return of deflation and will not hesitate to extend its program of purchasing government debt beyond its scheduled termation in March if it deems necessary.

To clarify what is meant by “reflation,” here is how it is defined on Wikipedia:

Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes. It is the opposite of disinflation. It can refer to an economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country’s output. This can possibly be achieved by methods that include reducing tax, changing the money supply, or even adjusting interest rates. Just as disinflation is considered an acceptable antidote to high inflation, reflation is considered to be an antidote to deflation (which, unlike inflation, is considered bad regardless how high it is).

AB — 23 December 2009

Did “animal spirits” mess up the economy?

Could “animal spirits” explain the unpredictability of economies and the emergence of economic bubbles? Economists George A. Akerlof and Robert J. Shiller believe so, as they explain in their recent book Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.

Their use of the term “animal spirits” does not derive from animism or from its cousin sociobiology, but from a statement by John Maynard Keynes in his 1973 book The General Theory of Employment, Interest and Money (pp. 161-2, boldface mine):

Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits — a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.

In an excerpt from their Animal Spirits book in The McKinsey Quarterly, Akerlof and Shiller describe these animal spirits as irrational forces that can cause volatile market fluctuations, often contrary to the rationality that should guide markets under classical economic thinking.

While acknowledging that markets are indeed influenced by people’s rational self-interested behavior, Akerlof and Shiller maintain that

they are also guided by noneconomic motives—“animal spirits”—which Adam Smith and his followers largely ignore. Sometimes people are irrational, wrong, shortsighted, or evil; sometimes they act for action’s sake; and sometimes they uphold noneconomic values like fairness, honor, or righteousness.

In the excerpt, they lay out five aspects of animal spirits that affect the economy:

  1. confidence and the feedback mechanisms that amplify disturbances
  2. the setting of wages and prices, which depend largely on attitudes about fairness
  3. the temptation toward corrupt and antisocial behavior
  4. the “money illusion,” or confusion between the nominal and real level of prices (so that people, for example, often miss the fact that conservative investments may be risky in times of inflation)
  5. the story of each person’s life and the lives of others—stories that in the aggregate, as a national or international story, play an important economic role

The authors believe a new regulatory regime is needed that takes into account the animal spirits that drive markets. New regulations could help prevent volatility and collapse of markets, as well as the need for crippling public bailouts.

But interestingly, they also highlight the need for a new “story” about the economy:

For decades, the dominant story about the economy maintained that all the fluctuations described previously had a rational basis. During the bubble years, the story also held that any risk arising from assets such as houses and subprime mortgages could be managed through complex financial devices like securitization and derivatives, which were largely unregulated.

Then the story changed. The new one suggested that all this complexity was just a novel way of selling snake oil. As the new story about Wall Street and its products took hold, the life drained out of financial markets. Housing prices sank, the demand for exotic products collapsed, and the credit crunch began.

Now, they stress, “there must be a new story about markets — a story that doesn’t always predict sunshine.” This story acknowledges “that animal spirits play a significant and largely destabilizing role.”

Although regulation takes place at the level of government, stories or narratives play out in the public forum and in the media — as well as in people’s own minds and their interactions with others. The need for a new story has implications about how people set personal goals and what they strive for in life.

AB — 20 April 2009

Would they really hack the planet to sustain economic growth?

President Obama’s science advisor John Holdren tells the Associated Press that he has brought up geoengineering as a possible alternative in the fight against climate change in discussions with Cabinet-level U.S. officials, as well as with heads of agencies such as NASA and the Environmental Protection Agency (see AP’s article “Obama looking at cooling air to fight warming“).

Although Holdren is not advocating geoengineering right now — he believes reducing greenhouse gases is the right solution to global warming — he is concerned that “temperatures should be kept from rising more than 3.6 degrees,” writes AP science writer Seth Borenstein.

This will require that “the U.S. and other industrial nations … begin permanent dramatic cuts in carbon dioxide pollution by 2015, with developing countries following suit within a decade.”

Holdren’s concern is that such efforts are “racing against three tipping points,” according to Borenstein:

Earth could be as close as six years away from the loss of Arctic summer sea ice, he said, and that has the potential of altering the climate in unforeseen ways. Other elements that could dramatically speed up climate change include the release of frozen methane from thawing permafrost in Siberia, and more and bigger wildfires worldwide.

Wikipedia’s entry on “Geoengineering” defines the concept broadly as “the idea of applying planetary engineering to Earth,” involving “the deliberate modification of Earth’s environment on a large scale to suit human needs and promote habitability.”

One example example of geoengineering, Holdren told AP, would be:

Shooting sulfur particles (like those produced by power plants and volcanoes, for example) into the upper atmosphere … “basically mimicking the effect of volcanoes in screening out the incoming sunlight.”

This approach might be used to “try to produce a cooling effect to offset the heating effect of carbon dioxide and other greenhouse gases,” Holdren says.

Go here to see an interesting illustration from the New York Times of some possible solution geoengineering solutions (if you think “solutions” is the right word).

One statement in the Wikipedia article particularly caught my attention — it cited one “body of opinion that supports geoengineering because it may avoid or delay the difficult and expensive transition to a low carbon economy.”

From the Bubbleconomics perspective, I would suggest that governmental and economic interests might choose the geoengineering route as an effort to keep the Big Bubble inflated. In other words, environmental damage might be treated, whether consciously or unconsciously, as the price that has to be paid to maintain the overall economic bubble.

AB — 9 April 2009