Redeeming Economics (5) Mother's Task

In his book called Redeeming Economics, John D Mueller discusses the Mother's Task. He shows that economic theory cannot explain what mothers do.

The best way to learn economics, thought Philip Wicksteed, is to consider the daily activities of a typical mother. We’ve already seen that the word “economics” means “household management.” And who better understands how to manage a household than a mother? It wouldn’t do to begin with a typical father, because most of a father’s daily activity is at once too specialized and too far removed from its ultimate purpose to be understood easily. Even in households not run by a mother, household affairs are something that “every member of every family is more or less keenly interested in,” so it furnishes us with a “common ground, the exploration of which demands no special or technical information.”

This is why Wicksteed’s Common Sense of Political Economy, though now all but forgotten by economists, remains the best introduction to the meaning of modern economics by any of the economists who played a central role in forming it. Most economists, and perhaps most mothers, are under the impression that mothers need to learn from economists, not vice versa. This mistake underlies half of all serious errors in economic theory. (The rest are due to the ignorance of most economists about the 2,100-year history of their discipline before Adam Smith.) The job of the economist is not to tell the mother what to do, but to understand what she is doing. And the only way to learn this is to sit at her feet and watch.

Wicksteed’s Common Sense therefore begins with examples from the life of a typical English mother, circa 1910. We find her first shopping: weighing the advantages of new potatoes against old potatoes, the purchase of a piano against a bicycle (which will take her to piano recitals, among many other uses), whether to serve cod or chicken to her guests (in light of the couple’s social standing, the fact that all the women guests know the prices of cod and chicken, and their aspirations that the children will learn to speak French), and all of these against an urgent appeal to alleviate a famine in India. Then we observe her at home as she combines her market purchases with her own most important resources—her time and attention—in the combinations which will be most valuable to her family. Finally, we watch her distribute the household’s goods to the users she had in mind from the beginning: whether serving the milk and potatoes to family or guests, or distributing her time and attention among family members, an outside job, unpaid volunteer service, reading great literature or worship.

Today’s American mother spends much less time preparing food, more time in the labor market, and more time transporting family members from place to place in the family “wagon” than her British or American counterpart of a century earlier. Her family’s budget can purchase a much larger quantity, a higher quality, and a much larger variety, of goods and services. The particular objects of choice are therefore somewhat different: she and her husband would be considering the purchase of a minivan in the same light the couple of a century earlier viewed a bicycle, for example. And much of the food is at least partially prepared, to save on the mother’s time: the 24 hours in a day are one thing that has not increased, though the mother and other members of her family can expect to live 20 or 25 years longer. But even before allowing for these changes in income, “household technology,” and longevity, Wicksteed’s examples from the early 20th century remain perfectly intelligible to an American mother of the early 21st century. And they illustrate exactly the same lessons about life and economics.

“Her doings in the market-place and her doings at home are … parts of one continuous process of administration of resources, guided by the same fundamental principle; and it is the home problem that dominates the market problem and gives it its ultimate meaning,” says Wicksteed. The fundamental principle is that in all cases, “She is trying to make everything go as far as it will, or, in other words, serve the most important purpose that it can. She will consider that she has been successful if, in the end, no want which she has left unsatisfied appears, in her deliberate judgment, to have really been more important than some other want to which she attended in place of it. Otherwise there has been waste somewhere, for money, milk, potatoes, or attention has been applied to one purpose when they might better have been applied to another.”

Yet, when we turn to even the simplest of her daily tasks, we discover that the modern economist cannot fully explain what the mother is doing. Consider this example offered by Wicksteed: how the mother distributes the use of a single good, milk, which has alternate uses. “In the usual routine, milk may be wanted for the baby, for the other children, for a pudding, for tea or coffee, and for the cat,” notes Wicksteed. The quantity of milk on hand begins with the amount she purchased in the supermarket (or in Wicksteed’s day, from the daily delivery wagon), which was based on her expectation of its various uses and the price she found in the market. Normally, the baby gets to drink until she is full, before any milk goes to the older children. The older children’s cups in turn ordinarily take precedence over milk for the adults’ daily tea or coffee; and milk for the adults’ coffee or tea normally takes precedence over an occasional pudding or a saucerful as a treat for the family cat.

What, exactly, is the mother doing here? Not for some 70 pages after presenting and discussing this interesting problem does Wicksteed reveal that, in his opinion, the problem crosses the line of what he considers Pure Economics: “The widest definition of the scope of Economics would confine their scope to things that can be regarded as in some sense exchangeable, and capable of being transferred according to order and agreement. No one would regard the principles upon which I balance the claims of devotion [to God] against those of friendship, or of either against the indulgence of my aesthetic appetites, as within the range of economic science.”

And the mother’s activity is clearly a combination of the two: “For instance, the housewife’s administration of her stores amongst different claimants at home is not a series of acts of exchange, but is a series of acts relating to exchangeable things.” This leads to an enlightening discussion of what Wicksteed calls an “economic relation” (to which we will return after trying to figure out what the mother is doing)—but not a complete explanation of the mother’s actions. The important point is that Wicksteed has flagged to our attention that the mother, by dealing simultaneously with exchangeable things and with persons she loves, is doing something which cannot be reduced to a series of exchanges.

Paul Samuelson, considering a similar problem half a century later, shrinks from giving an explanation of what the mother is doing. The only theory he offers concerns what “must be a family of adults, or at least of very unusual children.” Even in that case, Samuelson says, there can be no straightforward explanation of what the mother is doing. He contents himself with trying to prove that the family can be treated as if it were a single consuming unit.

In the past few decades, economist Gary Becker claims to have explained what the mother is doing. Becker says she is always doing basically one thing: maximizing the “utility” to herself of various “commodities,” among which she includes her children. Becker’s explanation amounts to saying that everyone (even an “altruist”) treats other persons as things providing him- or herself with “utility.” But he never really explains what “utility” is, and as we will see, Becker cannot fully explain exactly how the mother administers the milk.

Mueller summarises the problem this way.

The mother's problem is simply to determine the amount of milk to allocate to each one. If all the alternatives were personal use, neoclassical economic theory could provide the solution. But the mother's problem is quite different and and answerable by neoclassical economic, since she is not only dealing with her own preferences, but also the preferences of several other users of the milk. Her problem is twofold: not only to estimate the preference of each use, but also to decide how much weight to give to those preferences (pp.87,88).

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Redeeming Economics (4) Augustine

In his book called Redeeming Economics, John D Mueller discusses Augustine's contribution to Economics.

A. Positive scholastic theory. To explain the Two Great Commandments, Augustine had started from Aristotle’s insight that “every agent acts for an end” and his definition of love — willing some good to some person. But Augustine drew an implication that Aristotle had not: every person always acts for the sake of some person(s). For example, when I say, “I love vanilla ice cream,” I really mean that I love myself and use (consume) vanilla ice cream to express that love (in preference, say, to strawberry ice cream or Brussels sprouts, which reflects my separate scale of utility). Augustine also introduced the important distinction between “private” goods like bread, which inherently only one person at a time can consume, and “public” goods (like a theater performance, national defense, or enforcement of justice) which, at least within certain limits, many people can simultaneously enjoy, because they are not “diminished by being shared.”

In other words, Augustine’s crucial insight is that we humans always act on two scales of preference — one for persons as ends and the other for other things as means: personal love and utility, respectively. Moreover, we express our preferences for persons with two kinds of external acts. Since man is a social creature, Augustine noted, “human society is knit together by transactions of giving and receiving.” But these outwardly similar transactions may be of two essentially different kinds, he added: “sale or gift.” Generally speaking, we give our wealth without compensation to people we particularly love, and sell it to people we don’t, in order to provide for those we do love. Since it’s always possible to avoid depriving others of their own goods, this is the bare minimum of love expressed as benevolence or goodwill and the measure of what Aristotle called justice in exchange. But our positive self-love is expressed by the utility of the goods we provide ourselves, and our positive love of others with beneficence: gifts. Hate or malevolence is expressed by the opposite of a gift: maleficence or crime.

That’s “positive” scholastic economics in a nutshell: describing what is, not necessarily what ought to be.

B. Normative” scholastic theory. We naturally love ourselves, Augustine pointed out. All other moral rules are derived from the Two Great Commandments because these measure the degree to which our love is “ordinate”: rightly ordered. If a good were sufficiently abundant we could and should share it equally with everyone else. But with such goods as time and money, which are “diminished by being shared” (i.e., scarce), this is impossible. Therefore “loving your neighbor as yourself” can’t always mean equally with yourself: “All men are to be loved equally. But since you cannot do good to all,” Augustine concluded, “you are to pay special regard to those who, by the accidents of time, place, or circumstances, are brought into closer connection with you.”

Redeeming Economics (3)

In his book called Redeeming Economics, John D Mueller outlines the big developments in the history of economics.

Scholastic economics (c.1250-1776) began when Aquinas first integrated these four elements (production, exchange, distribution, and consumption) into an outline of personal, domestic, and political economy, both positive and normative, organizing Aristotle’s contributions according to Augustine’s framework.

The scholastic outline was taught at the highest university level for more than five centuries by Catholics and (after the Reformation) Protestants alike. Adam Smith himself was taught from Lutheran Samuel Pufendorf’s compendium On the Duty of Man and Citizen According to Natural Law, which as with Aquinas and the earlier scholastics, contains all four basic elements of economic theory, organized according to personal, domestic and political economy, and integrating normative with descriptive theory by the Two Great Commandments.

The fact that Pufendorf was a Lutheran who wrote a critical history of the Catholic Church and that his theories were taught at the generally Calvinist University of Glasgow, demonstrates that the scholastic outline of economic theory was broadly known and accepted by both Catholics and Protestants. Pufendorf was widely read in the American colonies and recommended for example by Alexander Hamilton, who had penned two-thirds of the Federalist papers and as first Treasury Secretary would reject Smith’s specific economic advice in the Wealth of Nations to the United States.

Classical economics (1776-1871) began when Adam Smith cut these four elements to two, trying to explain what he called “division of labor” (specialized production) by production and exchange alone. Smith was addressing the main drawback of scholastic economics, which lay not in the theory itself, but the routine assumption that the economy did not grow in the long run — which had been true on average for about two millennia. To explain growth, Smith and classical followers like David Ricardo undoubtedly advanced the two elements Smith retained. But it was on oversimplification.

Smith also dropped Augustine’s theory of utility (which is necessary to describe consumption) and replaced Augustine’s theory of personal distribution (gifts and their opposite, crimes) as well as Aristotle’s theory of domestic and political distributive justice with the mere (often false) assumption that “every individual…intends only his own gain,” as Smith put it in his famous “invisible hand” passage in the Wealth of Nations.

Neoclassical economics (1871-c.2000) began when three economists dissatisfied with the practical failure of Smith’s classical outline (William Stanley Jevons 1871 in England, Carl Menger 1871 in Austria, and Leon Walras 1874 in Switzerland) independently but almost simultaneously reinvented Augustine’s theory of utility, starting its reintegration with the theories of production and exchange. They abandoned Smith’s revised outline mostly for three related reasons: without the theory of utility classical economists were unable to answer some important questions (for example, why goods that can’t be reproduced with labor have value); made predictions about others that turned out to be spectacularly wrong (notably the “iron law of wages,” which predicted that rising population would prevent rising living standards); and directly fostered Karl Marx’s disastrously erroneous economic analysis. Though schools of neoclassical economics have since multiplied, all are derived from these three.

Thus Adam Smith’s chief significance is not what he added to, but rather subtracted from economics. As Joseph Schumpeter noted in his History of Economic Analysis, “The fact is that the Wealth of Nations does not contain a single analytic idea, principle or method that was entirely new in 1776.”

Neoscholastic economics (c.2000-). I argue that Neoscholastic economics is already and will continue to revolutionize economics in coming decades, by replacing its lost cornerstone, the theory of distribution.

Redeeming Economics (2)

In his book called Redeeming Economics, John D Mueller discusses What is economics about?

Jesus once noted — I interpret this as an astute empirical observation, not divine revelation — since the days of Noah and Lot, people have been doing, and until the end of the world presumably will be doing, four kinds of things. He gave these examples: “planting and building,” “buying and selling,” ‘marrying and being given in marriage,” and “eating and drinking” (Luke 18:27-28). In other words, we produce, exchange, give, and use (or consume) our human and nonhuman goods.

That’s the usual order in our action. But as St. Augustine first explained, the order is different in our planning. First we choose For Whom we intend to provide; next What to provide as means for those persons. Finally, Thomas Aquinas latter added, we choose How to provide the chosen means, through production (always) and exchange (almost always), both of which Aristotle had described.

So, economics is essentially a theory of providence: it describes how we provide for ourselves and the other persons we love, using scarce means that have alternate uses. Human providence is a synonym for the cardinal virtue of prudence. Aristotle had divided moral philosophy into ethics and politics. But he also aptly described humans as “rational,” “matrimonial,” and “political animals.” So Aquinas redivided moral philosophy into three, distinguishing personal, domestic, and political prudence — or equivalently, “economy” — according to the social unit described.

Redeeming Economics (1)

I have just finished reading a book called Redeeming Economics (Rediscovering the Missing Element) by John D Mueller.

I found it very thought provoking. He claims that Adam Smith made some serious mistakes in his Economics, which set back the development of the discipline. I have always understood this. Smith pushed the labour theory of value, which is flawed. This theory sent economics down many false trails.

Modern universities teach that economics began with Adam Smith. I have always known this is wrong. In his two-volume History of Economic Thought, Murray Rothbard shows that there was nothing new in Adam Smith’s economic thought. Rothbard describes the development of economic thought by scholastic theologians and He claims that Smith was a plagiarist who stole ideas from other economists without acknowledging them.

Mueller goes further in his criticism. He claims,

The first revolution in economics had occurred five centuries before Smith, when Thomas Aquinas (1225-74) set forth the basic elements of economic theory. Synthesizing the work of Aristotle (384-322 BC) and Augustine of Hippos (AD 354-430), Aquinas offered a comprehensive view of human economic actions. All such actions fall into four categories: humans produce, exchange, distribute, and consume goods (human and nonhuman). Thus the theory Aquinas outlined―known as “Scholastic Economics” economics―had four key elements: the theory of production, which explains which goods (and how many of them) we produce; the theory of justice in exchange, which accounts for how we are compensated through the sale of goods for our contributing to their production; the theory of final distribution, which determines who will consume our goods; and final, the theory of consumption (or utility), which explains which goods people prefer to consume (p.1).

I knew from reading Rothbard that the scholastic theologians had developed a most of the components of economics. However, I was not aware of the achievements of Aquinas. Rothbard is negative towards him because of his treatment of interest. I knew that Augustine wrote on politics, but I did not realise that he had made such important contributions to economics.

Mueller explains,

Adam Smith sparked the second economic revolution when he drastic simplified the Scholastic economics he had been taught. He dropped not one, but two elements of the four that Aquinas had outlined. He eliminated the Scholastic theories of consumption and final distribution, launching “classical economics with production and exchange alone. At the same time, he claimed that Aristotle’s theory of production could be pared to a single factor: labour. Most complications in comics result from the fact that Smith's revision was an oversimplification (p.2).

A century later, the neoclassical economists, recognised one of the shortcomings of Smiths approach. They restored one of the elements that he had dropped: Augustine’ theory of utility, which describes consumption. But they did not restore the other.

Capitalism without Guilt

I recently listened to a podcast of a talk called Capitalism without Guilt given by Yaron Brook at the London School of Economics. I was interested, because I did not expect the Director of the Ayn Rand Institute to be speaking at the LSE. He said that the fundamental objection to capitalism is not economic, but moral.

People operate in the market to make money. Some will have a passion for what they do, but their basic drive is to make their own life better. The businessperson’s motivation is not the “common good” or “social utility”, but to make their lives better. The market is a place where people meet to fulfil their self-interest. Buyers and sellers both want to make their lives better.

We are taught that to be good or virtuous is to be selfless and to sacrifice to others. We were taught to think of others first and yourself last. According to philosophers, morality is about being selfless and caring for others. The more you sacrifice, the more noble you are. The more you give the better you are. According to most moral teaching self-interest is wrong. People honour philanthropy and community service, but denigrate business, profit seeking and entrepreneurship.

We tend to assume that all businessmen are evil. We feel safe because an elevator has been checked by a bureaucrat. We sleep at night because Ben Bernanke is in charge of a monetary system.

We have a morality that is inconsistent with capitalism. Very few people live a selfless life. They pursue self-interest. When you live one life, but believe you should be living another, you get guilt. Guilt is a powerful emotion. It is an amazing mechanism for controlling people. It is why rich people cote for increases in taxes. They need to redress their guilt, because they have this unrealistic morality.

We will continue to move away from capitalism, as long as our current morality is maintained. Brook does not agree with it. We need a new morality with the objective of making a human life as good as possible. Goodness lies in the pursuing self-interest. Ayn Rand said that the number one value is self-interest.

Capitalism is a moral system, because it allows each one of us to pursue our self-interest. This is good. Brook says that we need to reject to morality of living for others, and live instead for our own flourishing. I disagree, but his talk got me thinking. Capitalism has lifted economic well being in an amazing way, but capitalistic economic theory requires people to pursue their self-interest. Yet this does not fit well with Christian morality.

This is a conundrum that has puzzled me for a while. I found the answer in another book that I am reading. I will post on it in the next few days.

Employment Contracts

All exchanges in a free market are legitimate, provided:

• there is not deception;
• the seller owns the thing be sold:
• there is not coercion;

and the buyer and seller freely agree on the price.

Labour market transactions are different. Once a person becomes an employer of labour, they take on additional responsibilities. They are not free to pay what the market will bear. They cannot just pay the lowest wage rate that they can get away with. Employment contracts are different from other market transactions.

God’s Instructions for Economic Life set some boundaries on employment contracts. Employees are neighbours, and should be treated as such. A critical part of being a good neighbour is to pay generous wages. God's people should not be satisfied with paying the minimum wage. God expects more than that. They should pay the person enough for them to live on.

The employer should not just think about their convenience. They must do what is best for the employee. If the person were really poor, they would not be able to wait until the end of the week for their money, because they would be without food. Even though it is inconvenient for the employer, the poor person should be paid each day. They have done the work, so they are entitled to the pay. In the modern world, weekly or fortnightly pay has become the standard, but that makes life really hard for some people.

Do not defraud or rob your neighbour. Do not hold back the wages of a hired worker overnight (Lev 19:13).

God's guidance for economic life says that holding back the wages of a hired worker overnight is the same as defrauding them. Employees are not disconnected people. They are neighbours that employers must love and care for.

Jesus told employers that they should be considerate in the parable of the workers in the vineyard (Matt 20:1-16). The employer promised to pay the employees who only worked for part of a day "what is right"(v 4,7). The Greek word is dikaion, which means righteous. This employer wanted to do the right thing. For Jesus listeners, what is right would be what is specified by the law. The workers who were employed for the whole day were offered a denarius. That was the standard pay for a day's work at that time.

The employer paid every worker a denarius, even though some had only worked for a few hours, while others had worked for a whole day. The reason was that a person needed a denarius to buy a day's rations. These people were on the poverty line, living from one day to the next. The employer was considerate. He decided to pay each person enough to buy food for the day. This was a generous application of the command to pay employs each evening (Deut 24:15). An employer has an obligation to give his neighbour enough food that he will be strong enough to work the next day.

Don't I have the right to do what I want with my own money? Or are you envious because I am generous (Matt 20:15).

Being considerate and providing for a neighbour is more important than being fair.

Legal Minimum Wage

According to the economic theory, an increase in the minimum wage increases unemployment, because employers stop employing people whose productive capacity is less worth than the increased legal minimum. This is only true, if employers actually know exactly how much a potential employee is worth to their business. This is almost never the case. If a business has several employees and uses capital equipment, it is almost impossible to determine accurately how much an individual employee contributes to the income of the business. Accounting tools for determining this do not exist.

The result is that most employers do not know what a potential employees is worth to the business. Therefore, they do not know if they are worth more or less than the legal minimum. (The television program Under Cover Boss shows that most bosses do not have a clue about what their employees are worth).

Most employers of unskilled staff just take the easy way out. They do not bother trying to work out how much a potential staff member is worth, they just pay them the minimum wage instead. Some will pay a few dollars above the minimum wage, so that they feel better. The minimum wages does not just affect the poor, it has also corrupted employers, causing them to stop thinking about what their employees are worth. They just take the easy way out and pay what the state dictates.

This behaviour makes the minimum wages the benchmark for many low paid people, not just those who are at the minimum. It means that the minimum wage will have to be increased from time to time, because that is the only way that wage rates benchmarked to it will change. Employees cannot rely on employers to work out what they are worth and pay them more when they deserve it, so they need an adjustment in the minimum wage rate to give them any increases that they may deserve.

While we have a minimum wage and high level of inequality, regular increases in the legal minimum will be needed. Arguing that the minimum wage increases unemployment is irrelevant, because though in theory it should, in practice it does not. This has been confirmed by statistical studies.

The only argument against the minimum wage is that is immoral. The government should not be intervening in wage contracts. That will only be realistic, if employers get much better at working out what their employees word, and pay those at the bottom a margin to allow for the potential errors in their assessment.

Five Stages of Collapse (6)

In his book called The Five Stages of Collapse, Dimitry Orlov suggests that lack of personal virtual could be disastrous during a time of social collapse.

Personal virtues are all but destroyed in Western society, but for the time being their absence is being masked by the impersonal institutions of finance, commerce and government. In the wake of financial, commercial, political and social collapse will we become ruthless and vicious?

The civilized world is a cold world. Its citizens are theoretically expected to fend for themselves, but in reality, they can only survive thanks to the impersonal services of finance, commerce and government. What will happen to us once these impersonalised services are longer available? Will we have our humanity to fall back on, or will we go the way of ruthlessness and viciousness (229).

Good question.

Five Stages of Collapse (5)

In his bookcalled The Five Stages ofCollapse, Dimitry Orlov suggests that the western world is not ready for social collapse.

To my mind, social collapse is not a political or economic or technological problem for the elites to solve, but a cultural one (196)

All of the coping mechanisms that exist to deal with societal are designed to treat it as the exception rather than the norm; there is no safety net designed to catch entire societies as they fall. International aid, charity, disaster management, peacekeeping efforts and military interventions are designed to handle singular, localized limited crises and cannot be expected to be useful within an international landscape of constant and accelerating collapse. Few places are likely to remain sufficiently insular to escape the onslaught of internationally displaced groups driven from their land by a variety of forces from political unrest to economic dislocation caused by globalization to habitation destruction created by rapid climate change.

Some who see the inevitability of this onslaught react by attempting to isolate themselves by building a well-stocked “doomstead” in a remote area. This may work for a few people; for the rest, it might be better to abandon the idea of finding a safe place to be, and to concentrate instead on discovering a safe way to be-in company with others. (197)

I describe a safe way for Christians to be in the company of others in Being Church Where We Live.

Monarch Emerging

Thirty minutes later.

Five Stages of Collapse (4)

In his book called The Five Stages of Collapse, Dimitry Orlov suggests that we should not be afraid of anarchy.

In the face of political collapse it is quite reasonable to expect that the good people of almost any nation will cower in their homes and, al themselves to be herded like domesticated animals, because their worst fear is not despotism-it is anarchy. Anarchy! Are you afraid, of anarchy? Or are you more afraid of hierarchy? Colour me strange, but I am much more afraid of being subjected to a chain of command, than of anarchy (which is a lack of hierarchy).

A bit of hierarchy may be temporarily justified while facing down a specific, temporary threat or while an ambitious task that requires a big, coordinated team effort. But once that is over, it's back to anarchy. Few of us enjoy taking orders from the sorts of characters who enjoy ordering people, be they numbnuts who rose through the ranks, or pampered children of privilege, but to realise that there is an alternative we need to overcome our fear of anarchy (125)

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Five Stages of Collapse (3)

In a book called The Five Stages of Collapse, Dimitry Orlov explains that political collapse is more dangerous than financial collapse.

Commercial and commercial collapse are already potential lethal. People lose their bearing and their sense of purpose, or decide to take advantage of those in distress, or fail simply through and inability to adapt to radically altered circumstances, and when that happens people get hurt. Financial and commercial collapses tend to be hard on those who failed to prepare by putting aside objects that hold their value when the national currency hyperinflates and banks close and by stockpiling the necessary supplies to tide them over during the uncertain transition period, when the old ways of doing things no longer work but the new ones have not yet evolved. Both of these causes of potentially lethal circumstances can be avoided first, by choosing the right kind of community second, by laying in supplies or securing independent access to food, water and energy and third, by generally finding a way to bide your time and ignore the world at large until times get barter.

Political collapse is a different animal altogether, because it makes the world at large difficult to ignore. The potential for chaos is still there, but so is the potential for organized action of a very damaging sort, because the ruling class and the classes that serve them (the police, the military, the bureaucrats) generally refuse to go softly into the night and allow the people to self-organize, experiment and come together as autonomous new groups adapted to the new environment in the composition and patterns of self-governance. Instead, they are like to spontaneously hatch a hare-brained new plan and initiative to restore national unity, in the sense of restoring the status quo ante, at least in regard to preserving their own power and privilege, at others expense. In a situation where every person and every neighbourhood should be experimenting on their own to find out what works and what does not, the politicians and the officials are apt to introduce new draconian crime fighting measures, curfews and detentions, allowing only certain activities-ones that benefit them-while mercilessly putting down any sign of insubordination.

To deflect the blame for their failure, the ruling elite usually also does its best to find an internal or external enemy. Those who are the weakest and the least politically connected- the poor, the minorities and the immigrants are accused of dragging everyone down and singled out for the harshest treatment. This is conducive to creating a climate of fear and suppressing free speech. But nothing causes people to band together like an external threat, and, for the sake of preserving national unity, a failing nation state often looks for an external enemy to attack, preferably a weak, defenceless one, so that it poses no risk of reprisal. Putting the nation on a war footing, makes it possible for the government to commandeer resources, reallocate them to the benefit of the ruling class, further restrict movements and activities, round up troublesome youths and ship them off to battle and lock up undesirables.

Financial and commercial collapse creates an opening for those inclined toward the most miserable despotism. Once a despotic regime is established, the weak, demoralized, disoriented population almost inevitably finds itself incapable of rising in opposition to it, and the new despotism may become entrenched and quite durable, lasting for an extended period of time during which the country is hollowed out and traumatized before collapsing through internecine strife or a battle of succession, or through increasing weakness that causes it to succumb to foreign occupation. The spectrum of possible responses to financial and commercial collapse stretches from despotism to chaos. There is sweet spot of autonomous, anarchic social cooperation, with many small skirmishes and standoffs, but well short of armed conflict (124)

My book called Times and Seasons explains how political collapse could become an issue in our time and how Christians will find their way through the chaos.

Hydrangea

Five Stages of Collapse (2)

In a book called The Five Stages of Collapse, Dimitry Orlov suggests that communities and extended families will important during seasons of financial collapse.

What I am laying out here may be starting to sound hopelessly idealistic. After all, strong extended families that pool all their resources and are presided over by elders, of the sort could band together form a community and achieve self-governance via a council of elders, may seem like something from a century long gone. But they aren't there are plenty of communities of this sort still to be found around the world. They just happen to be those families and communities that have not become addicted to economic growth, either because of their conservatism or their adverse circumstances, or both. They will be around following the collapse. But families and communities of this sort may be rather difficult to reconstitute within a western European or a North American context of atomic families, parents who can hardly wait until their children grow up and “become independent”, alienated children who yearn to grow up and abandon their parents, elders not worthy of the name, who only care about preserving their independence, for which they have neither savings, nor the mental fortitude-an anonymous crowd of pseudo-rugged individualists abjectly dependent on the consumer economy and government services for survival. This gaping chasm between what should exist and what does exist is going to be very difficult to bridge (41).

Far from sketching out some sort of financial utopia, I am describing a successful human cultural universal: a family is three generations at a minimum, living together, pooling resources and allocating them in the best interests of the whole. A community is a band of such families capable of self-governance. The traditional form of self-governance, for the reasons outlined above, is a council of elders (42)

Orlov doubts that people of the West are capable of forming communities that could survive and grow during troubled times. In my book Being Church Where We Live, I explain how Christians can achieve this goal. This model of church is recession and persecution proof.

I am amazed at the number of pastors who are warning their people of troubled times ahead, but are doing nothing to reorganize their church to be ready. They seem to think they will be able to carry on a model of church that is designed for prosperous times, without any consequences. This seems unwise.

Fuschia

Five Stages of Collapse (1)

I have just finished a book called The Five Stages ofCollapse by Dimitry Orlov. He has some strange ideas, about the functioning of capital and markets, but some parts of the book are really interesting. He says that the collapse of a society comes in five stages.

1. Financial Collapse
   Financial institutions become insolvent. Savings are wiped and access to financial capital is lost.

2. Commercial Collapse
   Faith that the market will provide what we need is lost, as supply chains breakdown. Widespread shortages will be common.

3. Political Collapse
   Faith in the government is lost. The political establishment loses legitimacy and relevance.

4. Social Collapse
   Trust in other people is lost. Social institutions run out of resources and fail through internal conflict.

5. Cultural Collapse
   Faith in the goodness of humanity is lost. Families disband and compete as individuals. People lose the capacity for kindness, generosity, compassion, hospitality, honesty, charity. Every man for himself, in a dog-eat-dog world.

I am not sure about the order of the stages that he outlines. He says that financial collapse leads to commercial collapse. He suggests that when the financial systems breaks down, importers and exporters will be unable to get loans, so international trade will come to a halt and international shipping will be laid up everywhere.

I am not sure that this is correct. The financing of international trade through letters of credit was one of the first forms of financial activity to develop. I expect that if existing financial institutions collapse, traders and merchants will find other ways to finance their activities and make international exchanges.

I expect that international trade is more likely to be disrupted through wars and other political struggles.

Orlov also describes the challenges that will occur during each stage of collapse. This is probably more important than the causal connections between the various stages of collapse.

Gladioli

America Unhinged

John J. Mearsheimer has an article called America Unhinged at The National Interest. Here are a few disconnected quotes.

The United States is a remarkably safe country, which is what allows it to behave foolishly without jeopardizing its security. The “unipolar moment,” coupled with America’s geographical location and nuclear arsenal, creates a permissive environment for irresponsible behavior, which its leaders have been quick to exploit.

One harmful consequence of America’s interventionist foreign policy is that it creates numerous situations where presidents and their lieutenants have a powerful incentive to lie, or at least distort the truth, when talking to the public. This is due in part to the fact that the United States is an unusually secure country and thus it is difficult to get Americans to support unnecessary wars.

One could easily point to other cases where policy makers—including President Obama—have been less than honest with the American people. Pervasive obfuscating and lying, however, inevitably creates a poisonous culture of dishonesty, which can gravely damage any body politic, but especially a democracy. Not only does lying make it difficult for citizens to make informed choices when they vote on candidates and issues, but it also undermines the policy-making process, because government officials cannot trust each other, and that greatly increases the transaction costs of doing business. Furthermore, the rule of law is undermined in a world where distorting the truth is commonplace. There has to be a substantial amount of honesty and trust in public life for any legal system to work effectively. Finally, if lying is pervasive in a democracy, it might alienate the public to the point where it loses faith in democratic government.

Another consequence of America’s policy of global dominance is that the government inevitably violates the individual rights that are at the core of a liberal society and tramples the rule of law as well. The taproot of the problem is that a democracy constantly preparing for and fighting wars, as well as extolling the virtues of using force, will eventually transform itself into a national-security state.

An unchecked executive, however, does not simply accumulate great power. It also engages in behavior that involves breaking the law or operating in secrecy, largely to avoid public scrutiny and judicial or congressional review. In this regard, the checks and balances built into the U.S. system encourage executives to act in secret, because that may be the only way to get things done quickly. Leaders do not act this way because they are evil, but because they believe the country’s security demands it. In the tradeoff between security and civil liberties, they almost always come down on the side of security. After all, a country’s highest goal has to be its survival, because if it does not continue it cannot pursue its other goals. Given the exaggerated fear of foreign threats that permeates the American national-security establishment, it is unsurprising that Presidents Bush and Obama have pursued policies that endanger liberal democracy at home.

What makes these policies even more alarming is that the national-security elites who execute and support them fervently believe in “American exceptionalism.” They are convinced that the United States is morally superior to every other country on earth. It is, so the story goes, the “light of the world,” a shining city on a hill. Americans stand tall and see further than other peoples, as Madeleine Albright put it. These elites obviously do not look in the mirror. But, if they did, they would understand why people all around the world think hypocrites of the first order run American foreign policy.

The full article is long, but is worth a read for anyone who cares about American foreign policy.

Begonia

Our begonias are beginning to flower.