Ancient Economic Thought: Money

Name of Movement:  Ancient Economic Thought, the origins of money Principle subscriber & other followers:  The Babylonians and other ancient peoples Main Thesis (4 or 5 sentences "be concise"):  The concept of money and interest rates Context:  post-Agrarian Societies

"Economic organization in the earliest civilizations of the fertile crescent was driven by the need to efficiently grow crops in river basins. The Euphrates and Nile valleys were homes to earliest examples of codified measurements written in base 60 and Egyptian Fractions. Egyptian keepers of royal granaries, and absentee Egyptian landowners reported in the papyri. Historians of this period note that the major tool of accounting for agrarian societies, the scales used to measure grain-inventory, reflected dual religious and ethical symbolic meanings. The Erlenmeyer tablets give a picture of Sumerian production in the Euphrates Valley around 2200-2100 BC, and show an understanding of the relationship between grain and labor inputs (valued in "female labor days") and outputs and an emphasis on efficiency. Egyptians measured work output in man-days. The development of sophisticated economic administration continued in the Euphrates and Nile valleys during the Babylonian Empire and Egyptian Empires when trading units spread through the Near East within monetary systems. Egyptian fraction and base 60 monetary units were extended in use and diversity to Greek, early Islamic Culture, and medieval cultures. By 1202 AD, Fibonacci's use of zero and Vedic-Islamic numerals, motivated Europeans to apply zero as an exponent, birthing modern decimals 350 years later.

The city-states of Sumer developed a trade and market economy based originally on the commodity money of the Shekel which was a certain weight measure of barley, while the Babylonians and their city-state neighbors later developed the earliest system of economics using a metric of various commodities, that was fixed in a legal code. The early law codes from Sumer could be considered the first (written) economic formula, and had many attributes still in use in the current price system today: codified amounts of money for business deals (interest rates), fines in money for 'wrong doing', inheritance rules, laws concerning how private property is to be taxed or divided, etc.

Earlier collections of (written) laws, just prior to Hammurabi, that could also be considered rules and regulations as to economic law for their cities include the codex of Ur-Nammu, king of Ur (ca. 2050 BC), the Codex of Eshnunna (ca. 1930 BC) and the codex of Lipit-Ishtar of Isin (ca. 1870 BC)."

Discussion Points:

The concept of money has been around for some time, and it wasn't started by the Jews (although likely expanded and improved). It does appear that money has been around nearly as long as civilization itself. Is it possible to have a society without money? What is the impact of money on the interactions between individuals and then relating to the society as a whole? I think we'd like to believe a society without money is possible, but it probably is not. Money afterall, is a measure of consequences, and on some basic level, a great deal many people need to be threatened by consequence to be motivated into useful endeavors.

I am going to propose that we split the remaining sections of unit 1 (Ancient Economic Thought) among the other three bloggers. Indian Concepts, Muslim Concepts, and Chinese Concepts remain. After that we can move onto Greco-Roman, the Republic, and Aristotle. Use this article as reference:

http://en.wikipedia.org/wiki/Ancient_economic_thought#Ancient_Near_East

Is college worth the costs?

Original Post by Papa TaggartRR (e-mail correspondence)
Posted here via TaggartRR
Feel free to join the conversation.

Interesting. I have thought this for a while. If parents took the same $80-90k that the spent on college and invested it in the child's name and the child learned some trade, would they be better off at 50 years old?

Is it worth it to go to college?
For people considering college, perhaps the greatest lesson of the Great Recession is not that you shouldn't go to college but that you should make sure the investment will pay off.

Source:
http://www.msnbc.msn.com/id/38561562/from/toolbar

Google to potentially pull out of China

In case you haven't read yet, apparently Google had some Gmail accounts hacked into (or at least it was attempted) of Chinese human rights activists. As a result, Google may stop filtering their searches for Chinese citizens.

http://googleblog.blogspot.com/2010/01/new-approach-to-china.html

So a few questions:

What is the potential profit loss for Google in this scenario?

Should they have filtered the internet for China originally?

What kind of company steps into their void (American, Chinese, another country; established, new, something in between)?

How does this affect Chinese citizens in the short and long run?

Kondratiev Waves

An explanation:

In this paper, it is claimed that the effective causality of long-term macroeconomic rhythms, most commonly referred to as long waves or Kondratieff waves, is founded in our biological realm. The observed patterns of regularity in human affairs, manifest as socioeconomic rhythms and recurrent phenomena, are constrained and codetermined by our natural human biological clocks, themselves the result of instructions impressed in the human genome and human cognitive capacity by the physical regularity of fixed cosmic cycles. Considering that a long wave can be conceived as an evolving learning dissipative structure consisting of two successive logistic structural cycles, an innovation cycle and a consolidation cycle, and applying considerations from population dynamics, chaos theory and logistic growth dynamics, a Generational-Learning Model is proposed that permits comprehension of the unfolding and time duration of the phenomenon. The proposed model is based on two kinds of biological constraints that impose the rhythm of collective human behavior - generational and cognitive. The generational consist of biologically based rhythms, namely, the Aggregate Virtual Working Life Tenure and the Aggregate Female Fecundity Interval, both subsets of the normative human life span or human life cycle. The cognitive consist of a limiting learning growth rate, manifest in the alternating sequence of two succeeding learning phases, a new knowledge phase and a consolidation phase. It is proposed that the syncopated beats of succeeding effective generational waves and the dynamics of the learning processes determine the long-wave behavior of socioeconomic growth and development. From the relationship between the differential and the discrete logistic equations, it is demonstrated that the unfolding of each structural cycle of a long wave is controlled by two parameters: the diffusion-learning rate and the aggregate effective generation t_G, whose product maintained in the interval 3<t_G<4 (deterministic chaos) grants the evolution and performance of social systems. Moreover, it is speculated that the triggering mechanism of this long-term swinging behavior may result from the cohesion loss of a given technoeconomic system in consequence of reaching a threshold value of informational entropy production.

This is a bit complicated, but I have noticed that this article in wikipedia has been changed several times in the last month or so (more attention focused on it for obvious reasons). I believe these kondratiev waves are real and that they correspond with the human lifespan not the 2 generations cited in wikipedia. They correlate with the human lifespan in this way: humans live a certain amount of time and society is a collection of humans which are demographically divided to young, middle, old. The lessons taught by the old (elders) to the new generations are lost when they die and therefore history is to repeat itself. This may be a key part of the equation for the recent and ongoing economic crisis. The question is can technology dampen or perhaps even eliminate these economic fluctuations. If people use it like we do, then probably, but most people don't (as addressed in a previous article by Taggart). So we may continue to see these economic cycles for years to come. Also, the artificiality of markets may play a role which I can't yet comment on (as in, power centers may influence markets to create boom-bust cycles or potentiate them at least as this would mean quite a bit of profit for those power centers).

1) Devezas, Tessaleno. A wikipedia article. http://en.wikipedia.org/wiki/Tessaleno_Devezas

2) Devezas T.C.¹; Corredine¹ J.T. Technological Forecasting and Social Change, Volume 68, Number 1, September 2001 , pp. 1-57(57)http://www.ingentaconnect.com/content/els/00401625/2001/00000068/00000001/art00136"

The World According to Monsanto

I watched a documentary on topdocumentaryfilms.com last night about Monsanto (a food company which was scrutinized in Food Inc.). (1) This company, using only that documentary to judge mind you, appears to be the most evil corporation perhaps ever. The most amazing thing is that this company is not simply working within our borders, but it seems to have supplanted itself as a powerhouse for food (their soybeans in particular) all over the globe. The documentary makes the claim that they are trying to control all of the food across the world.

I'd strongly suggest watching that documentary, in the meantime I'll post some of the wikipedia article:

It's 10 pages long and mostly about various corruption cases and scandals. The most interesting part is this:

"Corporate governance

Current members of the board of directors of Monsanto are: Frank V. AtLee III, John W. Bachmann, Hugh Grant, Arthur H. Harper, Gwendolyn S. King, Sharon R. Long, C. Steven McMillan, William U. Parfet, George H. Poste, Robert J. Stevens.

Former Monsanto employees currently hold positions in US government agencies such as the Food and Drug Administration (FDA), United States Environmental Protection Agency‎ (EPA) and the Supreme Court. These include Clarence Thomas, Michael Taylor, Ann Veneman, Linda Fisher, Michael Friedman, William D. Ruckelshaus, and Mickey Kantor.^[19] Linda Fisher has even been back and forth between positions at Monsanto and the EPA." (2)

1) The World According to Monsanto. A documentary on topdocumentaryfilms.com http://topdocumentaryfilms.com/the-world-according-to-monsanto/

2) Monsanto. A wikipedia article. Accessed December 8, 2009.
http://en.wikipedia.org/wiki/Monsanto

Open Source Voting

Gregory Miller and John Sebes are making a case for something called 'open source voting'.

“Currently two vendors impact 80 percent of the vote” nationwide, Miller said, referring to Premier/Diebold and Election Systems & Software, which recently merged in a sale. But if all the states that have expressed interest in adopting the open source system follow through with implementing it, about 62 percent of the nation’s electorate would be voting on transparent, fully auditable machines he said." (1)

Apparently these companies make it very difficult for us to have standardization of practice (for reasons which are not obvious, we can extract and dissect in the discussion). Miller purports, "If they simply sold the machines to all the precincts, they would have three million sales and that would be the end of their business." So what do we see instead? Machines which frequently and according to Miller, malfunction, planned obsolence, long-term Draconian-termed contracts and continual "updates".

1)Zetter, Kim, "Nation’s First Open Source Election Software Released" Accessed November 4, 2009, -http://www.wired.com/threatlevel/2009/10/open-source/-published in Wired online magazine October 23, 2009

Top Tax Bracket: A brief history

Brent and I were discussing this Saturday night. Scroll down near the bottom of this page to see the history of the top tax bracket.

http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

How fiscally “responsible” of us to have rates at 80-90% between 1940-1945 when we were funding a war. I’m guessing this was just (i.e., justice) because the top earners were probably those associated with the military-industrial complex and benefiting the most due to the war (probably needs fact checked). Compare that to what Reagan did in 1981 (70% down to 50) and then in 1986 (50% down to 35%) then Bush did in 2003 (Bush: while funding two wars). Fiscally “Conservative”? Someone needs to define this for me, because I don’t get it.

Internet Freedom Restrictions (Brent's nightmare)

Under the clever guise of the Internet Freedom Act of 2009, John McCain recently introduced a bill into senate that would drastically change how the internet functions (1). In its current form, the internet has an infinite number of sites and given an infinite amount of time an individual could visit each of them, regardless of his/her internet provider (e.g., Comcast). The IFA ’09 has the potential to treat internet sites like DirectTV, Comcast, Qwest, and Time Warner treat cable channels. For instance, if you have DirectTV you may have HBO and the Big Ten network, however, if you have Comcast you may have Showtime and the NFL Network. This could be the future of the internet. Let's keep an eye on this.

Telecommunications donated over 3 million dollars to McCain during his campaign (2). Interesting for someone who is a self-proclaimed internet illiterate.

Sources:
1) http://mccain.senate.gov/public/index.cfm?FuseAction=PressOffice.PressReleases&ContentRecord_id=7ccc25b5-9d63-321c-0238-805ed7bafc6b

2) http://www.opensecrets.org/politicians/industries.php?cycle=2010&cid=N00006424&type=I

Free Market System?

I recently read that more than 20 of the Fortune 100 companies in 1993 would not exist as independent companies without government intervention at some point in their company history (i.e., government subsidy). Here is the list of Fortune 100 companies in 1993:
http://money.cnn.com/magazines/fortune/fortune500_archive/full/1993/

My search was cursory at best, only looking for evidence for the companies that jumped off the page (i.e., Oil Companies, military). A simple search on google of “Company Name” + Government subsidy was all that was required to find the results I needed:

Lockheed Martin, ConocoPhillips, GM, ExxonMobil, Ford, Boeing, ConAgra Foods, Chevron, Shell, Marathon Oil, Honeywell, Monsato, Texaco, ADM, and Occidental Petroleum. That’s 15 out of 100; I found in just 15 minutes.

So, next time someone tries to tell me that the “free market” determines which companies succeed or fail I will call their ignorance out, and so should you.

Noam Chomsky points out “that the modern corporation is almost completely totalitarian.”

Do we agree?

Book Review: The Undercover Economist

Title
The Undercover Economist

Author
Tim Harford

Date of Publication
2005

Reason for reading
As I’ve mentioned before, I’m trying to learn more about economics in order to better understand the current financial climate, as well as to be a more informed voter. Josh Miller (Ryan’s old roommate) recommended the book, in addition to a textbook, and I have to say it was a good recommendation.

Karen Ho: One ho worth mentioning

She's an University of Minnesota anthropologist with a new book (see http://www1.umn.edu/news/features/2009/UR_CONTENT_119895.html if you're interested but it's not entirely necessary for the question I want to ask).

She proposed an idea of untangling main street from wall street by removing social safety net programs from the grasp of the bankers/wall street. I don't have one of these 401k or pension plans or various mutual funds, but is there another option? If we assume that wall street is corrupt and if I had to guess I'd say popular sentiment would overwhelmingly support this idea, then do people give their money to these institutions simply because they have no other choice (monopoly)?

Tim Geithner doesn't want to audit the Federal Reserve

Tim Geithner questioned about the Ron Paul (R-TX) bill that would require the Federal Reserve to be audited had a most unusual reply.

"I'm sure people understand that you want to keep politics out of monetary policy." When Geithner is again pressed on the issue, he makes the stunning assertion that conducting an audit of the Federal Reserve—something never before done in its 96 year history—is a "line that we don't want to cross," proclaiming that such a move would be "problematic for the country."

http://digg.com/dialogg/Timothy_Geithner_1

On one hand this increases the mystery surrounding the Federal Reserve and on the other it really increases the public’s desire to want to audit the Federal Reserve. What are we being sheltered from? What is so bad that it is better to be ignorant about?

Let's look at Google

Can we take a look at what Google has done since its creation?

Google's corporate philosophy embodies such casual principles as "you can make money without doing evil," "you can be serious without a suit," and "work should be challenging and the challenge should be fun."^[90]

As a motivation technique (usually called Innovation Time Off), all Google engineers are encouraged to spend 20% of their work time (one day per week) on projects that interest them. Some of Google's newer services, such as Gmail, Google News, Orkut, and AdSense originated from these independent endeavors.

^{I'm going to research this a bit more, but this might be a good company. I need to look more closely at its founders and current leadership (Eric Schmit?) because all I know now is they seem to be behind things that make it easier for the common man to inform himself.}

Book Review: The Ascent of Money

Title

The Ascent of Money (book review is reposted from previous blog)

Author
Niall Ferguson

Date of Publication

November, 2008

Reason for reading

I felt I needed a better understanding of finance, and this appeared to be a logical starting point.

Synopsis
The book has just six chapters, with each focusing on the origin of different areas of finance - money & credit, bond markets, stock markets, insurance, housing, and international finance.

Review
In the introduction to the book, he cites a few studies that reveal the ignorance of people in regards to money, whether it's the difference between 401(k) and social security or how compound interest works, so the goal is to give people the origin of these things in order that they may be better able to grasp the concepts and terminology in place today.

It doesn't have the most in-depth history of any individual topic, but each of those I'm sure could cover books (or volumes) themselves. A couple things he could have done a little more on are wages/salaries and taxes (the latter especially), but he may have left those out specifically because people are at least a bit knowledgeable about those already.

For his stated objective, I'd give the book an 8 on a 10-point scale.

Quotes (italics are mine)

"Politicians, central bankers and businessmen regularly lament the extent of public ignorance about money, and with good reason."
page 12
-This quote caught my eye looking for a summary of the chapters since I have my doubts about some politicians' knowledge of money.


"The Rothschilds had decided the outcome of the Napoleonic Wars by putting their financial weight behind Britain. Now they would help decide the outcome of the American Civil War - by choosing to sit on the sidelines."
page 91

-This one is more notable to summarize a large section dealing with the Rothschild dynasty, which I had never heard of before this, and to learn what power they had is staggering.

Further reading:
(these aren't books I've read, rather ones I've come across that I think need to be read and I intend to soon)

The House of Rothschild: Volume 1: Money's Prophets: 1798-1848
Niall Ferguson
November, 1999

The House of Rothschild: Volume 2: The World's Banker: 1848-1999
Niall Ferguson
September, 2000

The General Theory of Employment, Interest, and Money
John Maynard Keynes
1953

Capitalism and Freedom
Milton Friedman1962

Book Review: The Return of Depression Economics and the Crisis of 2008

Title

The Return of Depression Economics and the Crisis of 2008

Author
Paul Krugman

Date of Publication

2009

Reason for reading

The author is a recent nobel laureate in economics, and the book is an update of an earlier version from ~1998, so I felt it was a good book to read on the topic of the recent financial events in which the author had written on the topic previously, rather than some other books where I get the impression the authors had no foresight of the coming problems, yet somehow feel compelled to write an explanation of what happened within a couple months of it happening.

Synopsis
The book doesn't necessarily attempt to explain the current situation, though offers a lot of insight into some of the factors that contributed. Rather, the author starts by saying that many people thought fundamental problems that lead to depressions had been eliminated, and that people/governments had essentially learned their lesson. However, in the 1980's and 1990's, a lot of the significant factors (or symptoms) of depressions had started showing up in other economies (Argentina, Mexico, Japan, Thailand/Asia, etc.). He discusses each country's economic situation individually, as well as the responses made by the respective government. Additionally, he ties these things into the current global crisis.

Review
I have a tough time reviewing things on a 4 or 5 point scale. I require a 10 point scale. I would give it 7 out of 10. I'm not sure if this should be referred to as points, stars, or anything else (blogos?). I thought it was good background information that didn't try to put the financial crisis into a cookie cutter situation and say it was easily explainable.

Quotes (italics are mine)
"The standard response to a recession is to cut interest rates. . . Japan was slow to cut interest rates after the bubble burst, but it eventually cut them all the way to zero, and it still wasn't enough. Now what?
The classic answer, the one that has been associated with the name of John Maynard Keynes, is that if the private sector won't spend enough to maintain full employment, the public sector must take up the slack. Let the government borrow money and use the funds to finance public investment projects-if possible to good purpose, but that is a secondary consideration-and thereby provide jobs, which will generate still more jobs, and so on. The Great Depression in the United States was brought to an end by a massive deficit-financed public works program, known as World War II. Why not try to jump-start Japanese growth with a more pacific version of the same?"
page 71


"If government spending is one standard response to a stalled economy, pumping up the banks is another. One widely held view about the Great Depression is that it persisted so long because the banking crises of 1930-31 inflicted long term damage to credit markets. According to this view, there were businessmen who would have been willing to spend more if they could have gotten access to credit, and who would in fact have been qualified borrowers. But the bankers who could have made those loans were themselves either out of business or unable to raise funds because the public's confidence in banks had been so shaken."
page 72


This is more of an excerpt than a quote:
"The financial crisis has, inevitably led to a hunt for villians.

Some of the accusations are entirely spurious, like the claim, popular on the right, that all our problems were caused by the Community Reinvestment Act, which supposedly forced banks to lend to minority home buyers who then defaulted on their mortgages; in fact, the act was passed in 1977, which makes it hard to see how it can be blamed for a crisis that didn't happen until three decades later. Anyway, the act applied only to depository banks, which accounted for a small fraction of the bad loans during the housing bubble.

Other accusations have a grain of truth, but are more wrong than right. Conservatives like to blame Fannie Mae and Freddie Mac, the government-sponsored lenders that pioneered securitization, for the housing bubble and the fragility of the financial system. The grain of truth here is that Fannie and Freddie, which had grown enormously between 1990 and 2003-largely because they were filling the hole left by the collapse of many savings and loans-did make some imprudent loans, and suffered from accounting scandals besides. But the very scrutiny Fannie and Freddie attracted as a result of those scandals kept them mainly out of the picture during the housing bubble's most feverish period, from 2004 to 2006. As a result, the agencies played only a minor role in the epidemic of bad lending.

On the left, it's popular to blame deregulation for the crisis-specifically, the 1999 repeal of the Glass-Steagall Act, which allowed commercial banks to get into the investment banking business and thereby take on more risks. In retrospect, this was surely a move in the wrong direction, and it may have contributed in subtle ways to the crisis-for example, some of the risky financial structures created during the boom years were the "off balance sheet" operations of commercial banks. Yet the crisis, for the most part, hasn't involved problems with deregulated institutions that took new risks. Instead, it has involved risks taken by institutions that were never regulated in the first place.

After that, I'd argue, is the core of what happened. As the shadow banking system expanded to rival or even surpass conventional banking in importance, politicians and government officials should have realized that we were re-creating the kind of financial vulnerability that made the Great Depression possible-and they should have responded by extending regulation and the financial safety net to cover these institutions. Influential figures should have proclaimed a simple rule: anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank.

In fact, the Long Term Capital Management crisis, described in Chapter 6, should have served as an object lesson of the dangers posed by the shadow banking siystem. Certainly many people were aware of just how close the system had come to collapse.

But this warning was ignored, and there was no move to extend regulation. On the contrary, the spirit of the times-and the ideology of the George W. Bush administration-was deeply antiregulation. This attitude was symbolized by a photo-op held in 2003, in which representatives of the various agencies that play roles in bank oversight used pruning shears and a chainsaw to cut up stacks of regulations. More concretely, the Bush administration used federal power, including obscure powers of the Office of the Comptroller of the Currency, to block state-level efforts to impose some oversight on subprime lending.

Meanwhile, the people who should have been worrying about the fragility of the system were, instead, singing the praises of 'financial innovation.' 'Not only have individual financial institutionsbecome less vulnerable to shocks from underlying risk factors,' declared Alan Greenspan in 2004, ' but also the financial system as a whole has become more resilient.'

So the growing risks of a crisis for the financial system and the economy as a whole were ignored or dismissed. And the crisis came."
Pages 163-4

The First Book Review: Confessions of an Economic Hitman

Where the fuck is the book review format

Title

Confessions of an Economic Hitman

Author

John Perkins

Date of Publication

2004

Reason for reading

I thought I remembered him on the daily show but when I went to their site I couldn't find him. I still don't know how I heard of this book.

Synopsis

The book is the story of its author who worked as an economic consultant for international consulting firms. Specifically, he would work in less developed countries to convince their officials in adopting huge loans (from the IMF oftentimes) for big infrastructure projects which these countries couldn't really afford. After these countries would fail on their loans, as a special sort of repayment of debt, companies like Haliburton, Bechtel, Brown and Root would come in and "lay waste" to the country.

Review

If it's true, 5/5 stars for bravery (although the writing was average). If it's a lie, 0/5 stars for greed.

Quotes

I forgot to write these down so I'll just take one from wikipedia:

I was initially recruited while I was in business school back in the late sixties by the National Security Agency, the nation’s largest and least understood spy organization; but ultimately I worked for private corporations. The first real economic hit man was back in the early 1950’s, Kermit Roosevelt, the grandson of Teddy, who overthrew the government of Iran, a democratically elected government, Mossadegh’s government who was Time‘s magazine person of the year; and he was so successful at doing this without any bloodshed—well, there was a little bloodshed, but no military intervention, just spending millions of dollars and replaced Mossadegh with the Shah of Iran. At that point, we understood that this idea of economic hit man was an extremely good one. We didn’t have to worry about the threat of war with Russia when we did it this way. The problem with that was that Roosevelt was a C.I.A. agent. He was a government employee. Had he been caught, we would have been in a lot of trouble. It would have been very embarrassing. So, at that point, the decision was made to use organizations like the C.I.A. and the N.S.A. to recruit potential economic hit men like me and then send us to work for private consulting companies, engineering firms, construction companies, so that if we were caught, there would be no connection with the government.

Campaign Contributions

Two topics here which may be related: campaign financing and bank bail outs.


We need to find a way to track the campaign contributions made to major political officials. Can we find out who gave money to Obama and other past presidents and see if it made an impact on the decisions made during their term? This shit with the banks is still confusing me. As I see it, the logical thing to do to, as Geitner would say, a bank that is "too big to fail" is to save it first (we can argue about how this should be done in a different post) and then bust it afterward (trust-bust that is).

Historically, I don't know of anything ever done like this before - referring to the 'bank bail outs'.
I tell you, the more I learn about the financial sector, the more I think these people are going to ruin the whole show. Let's discuss it here, let's post on sciforums if the three of us can't think of anything, and then let's write to our Congressman once we're better informed. We might even want to include Josh on this one.