Renormalizing Economics & Politics

by: Paul Rosenberg

Sat Aug 29, 2009 at 10:30

(1)  In mathematical physics, renormalization is a process of getting rid of infinite quantities that would make various equations physically non-sensical.  Inifinite growth on a finite planet is very definition of "physically non-sensical."  

(2) "Norms" also refer to values. "Renormalizing" economics in this sense means putting values back into the equation.

(3) In a third sense, "renormalizing" simply means "getting back to normal"-whatever that is!  And I'd suggest that it's at least a 3-fold thing.  First, it means getting back to an economic order that's not based primarily on plundering, one in which prosperity is broadly shared, not hoarded by the few.  That would take us back to New Deal economic order, which continued up through the early 1970s.  At second level, it means getting back to where the market economy was seen as the servant of society, not the master.  That's what the market signified to early market theorists like Adam Smith and Condorcet. At a third level, it means getting back to where we live in a sustainable relationship with our environment.  The original model for this was our 50,000 years or so of primarily nomadic existence as hunter-gatherers.  It's possible to restore that sort of equilibrium with a much higher level of technology and material well-being-but not without seriously rewriting the economic code we live by.

If this all sounds a bit abstract, well, that's to be expected.  It is abstract without concrete things to talk about.  And I'll be writing about those as well this weekend, starting with the housing crash, and a comparison of income growth under Bush and Clinton.  But first, I want to fill in a bit of detail in what I've written above.  And to help me do that, I've got a couple of Nobel Prize-winning economists lurking in the shadows on the flip, sort of like Marshalll McLuhan in Annie Hall.

Peeling the layers of $1 to $2 Trillion _More_ for the Banks

by: fairleft

Thu Jan 29, 2009 at 15:34

While arguing over the $815-825 billion stimulus grab bag and what it contains and should contain, the real big picture continues to be the massive bailout of America's massively incompetent bank executives and the massively foolish chumps who bet on them, bank shareholders. The WSJ reports that Obama/Geitner/Summers will throw these two constituencies $1 to 2 trillion more of our money. Yup, this is in addition to the $700 billion already committed to the banks (emphasis added):

New Bank Bailout Could Cost $2 Trillion:
Deborah Solomon et al
JANUARY 29, 2009

Government officials seeking to revamp the U.S. financial bailout have discussed spending another $1 trillion to $2 trillion to help restore banks to health, according to people familiar with the matter.

President Barack Obama's new administration is wrestling with how to stem the continuing loss of confidence in the financial system, as it divides up the remaining $350 billion from the $700 billion Troubled Asset Relief Program launched last fall. . . .

The administration, which could announce its plans within days, hasn't yet made a determination on the final shape of its new proposal, and the exact details could change. Among the issues officials are wrestling with: How to fix damaged financial institutions without ending up owning them.

((Why!? They're insolvent otherwise. We should own them and fire their execs and give their fool investors nothing! Or not help them and invest in solvent banks with competent management, even if we have to start those up from scratch. More on the obsequious concern for the financier class from Barry Ritholtz and Josh Marshall further down.))

. . . The administration is expected to take a series of steps, including relieving banks of bad loans and distressed securities. The so-called "bad bank" that would buy these assets could be seeded with $100 billion to $200 billion from the TARP funds, with the rest of the money -- as much as $1 trillion to $2 trillion -- raised by selling government-backed debt or borrowing from the Federal Reserve.

[Other options are then discussed, including the government buying common shares of bank stock (and so propping up the banks' share prices and helping out shareholders)] . . .

Here's Josh Marshall, and no, Josh, you aren't missing anything important:

Towards an Economic Revolution

by: Daniel De Groot

Thu Jan 31, 2008 at 07:10

The broad sweep of economic history for the past century has been a tug of war between unrestrained capitalists and constrained capitalists.  It may surprise some that liberals used to be the former and are now the latter, and conservatives were the latter but are now the former. 

More importantly, the constrained capitalists are losing and the consequences of that are severe.