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Is Conventional Economics a Form of Brain Damage?

Economists are led to believe that conventional economics is a science and that natural resources and our environment are merely externalities in the economic equation. http://www.youtube.com/watch?v=4NiauhOCfsk

To be fair, capitalism was created under the assumption of scarcity, but we have learned today that scarcity is in fact not an issue. A World Hunger Education Service report (http://www.worldhunger.org/articles/Learn/world%20hunger%20facts%202002.htm) "reveals" that "the world produces enough food to feed everyone." and that "The principal problem is that many people in the world do not have sufficient land to grow, or income to purchase, enough food."

This brilliant video shows the unsustainable mindset we've created in order to keep our economy going: http://www.youtube.com/watch?v=9GorqroigqM&feature=plcp (Viewer discretion, for free-market capitalists, is advised...)

So, is conventional economics truly a sustainable and sane value system that is perpetuating sustainability, caring for our environment and the needs and happiness for the inhabitants?

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  • Sep 26 2012: Modern economics belies the wisdom of Adam Smith. It applies one small subsection of John Nash and Ayn rand in the most narrow sociopathic interpretation. It has been used to the detriment of us all. People argue one theorist over another as if they were the word of god and thus must be chosen between. Nonsense!

    I choose Dan Ariely. Humans are not "rational" and markets reflect humans..... What the US currently has is the worst of all economic models: Privatized profits (with no regard whatsoever to the loss of resources) and socialized losses (with no regards to the loss to the people). If I told you you could take my credit card to Vegas and gamble to no limit, that you cold keep all of your winnings but that I would pay the losses, would you gamble wisely? Of course not!

    The quants and computers took the market into a whole new direction. The consequences must be dealt with. You cannot have infinite growth. That is called cancer. The entire field needs to take a serious hard look at itself and consider starting from scratch.
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      Sep 27 2012: The only thing that needs to be changed in the market place is to get government out of it. Sorry but it really is that simple.

      The other more important thing is to shrink goverment a lot. The rest will take care of itself, but only if it is allowed to.
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        Sep 27 2012: have you forgeted the30' ecnomics crisis. you need too much of freedom .you develope as yo like ,you develope regardless of the scientic way .that government should do something about the economic .
        while i admit that government shouldn't do much about it but we also can't let it developed in a nature way . because we have the lessions isn it
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          Sep 27 2012: The 30's crisis was created by government. So no that is not true. Your government has changed the economy as well and will regret it.

          The lesson has been skewed by politicians who benefit from lies.
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        Oct 2 2012: Sorry Pat, I disagree. In ANY mechanism or system (that actually functions) there are always 2 (two) feed-back cycles (or loops). One is a positive feed back and one is a negative feed-back. Our banking and stock systems have lost the negative feed-back loop (actually had it removed by Congress over the last 30 years). The result is the system we now have which is oscillating faster and faster until it self destructs, because there is only the positive feedback loop.....
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          Oct 2 2012: Are you saying that they are not accountable?, if so I agree. But it is the central banks buying up the bad loans from Freddy and Fannie that has allowed banks to continue that should not.

          Anyway yes shrinking government is what needs to occur I will agree to disagree.
        • Oct 3 2012: Fannie and Freddy have nothing to do with. Yes, government do bail out banks but you are mistakenly believing that bankers fear their banks collapsing, they don't fear anything as long as they get rich. Even if the banks were accountable the bankers themselves wouldn't be. The sad reality is that when you are a hotshot banker or CEO you can make much more money by blowing up your company through reckless risk taking and then pillaging the pension fund and cashing in your severance check when the company comes crashing down.

          This is not 1902, companies are not run by liable owners anymore and that has nothing to do with the federal reserve.
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        Oct 2 2012: hi Pat,

        Let me just stir with my spoon here, and take whatever fire i deserve for it. I remember us talking about our memes and how they shape our discourse in these debates, yet i hear a lot the meme of "big government is bad" without much willingness to split the issue in parts that might be more palatable to others... I am with you... i am not fan of the government and it should definitely stop sticking its nose in so many areas where we can decide better.

        But is it not a bit of a jump to keep saying as a blank statement that "big government is bad"?
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          Oct 2 2012: The definition of a meme:

          An element of a culture or behavior that may be passed from one individual to another by nongenetic means, esp. imitation.

          I am not regurgitating a meme. I am quite well read on the subject. My answers are not glib. I don't think unless someone has been in business they have a full appreciation of what I'm talking about and even then there are plenty of business owners who are ignorant on this subject.

          Consider this simple point, the standard of living we enjoy today was created by individuals not governments. Anything to the contrary is a meme that is exposed with the most perfunctory examination. Was it Edison or Tesla or the government that brought us electricity, was it Bill Gates or Steve Jobs or the government that brought us the computer, was it Henry Ford or the government that brought us the automobile, was it Orville and Wilbur Wright or the government and Samuel Pierpont Langley who brought us the airplane?

          Consider this simple point government regulates individuals at a cost that does not have to or does respond to the market place. As a consequence the cost has no constraint and becomes extremely onerous on the individual both financially and culturally. This prompts me to say that the smaller the government the more the individual will prosper which has been proven the only 2 times government has been reduced in cost under President Reagan and Under President Coolidge and Harding, both times there was big prosperity for all the citizens.

          I have always found the truth to be simple which may sound obtuse but it is not.
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        Oct 3 2012: I stand corrected... I know that you are well read on the subject, and i can see that you are not regurgitating somebody else's idea here

        So indeed not a meme... more of a generalization i would say then. There are many points in which i agree with you. For example, in the fact that it is people, and specially creative people, who has contributed to the standard of living we enjoy today. Or the fact that government is a blocker rather than promoter of advancements. But challenging the generalization that all big government is bad does not mean I give the government credit for any of that.

        At the same time, equating business to creative people is another generalization that i do not buy. Business is not the source of creative people, it is certainly an enabler, but most cases it's the other way around.

        Now, is the government too big? of course it is! Believe me, i see it in the chunk of my paycheck that goes away as taxes every payday. I see it in the thousands of useless pieces of legislations that are passed year after year and serve very little to advance that very same standard of living

        But any analysis of the economic prosperity in the USA that does not take into account the wars that were being fought at the same time, or the economic impact on other countries around the world at the same time, is bound to be an incomplete analysis, no matter how good the theoretical models may be
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          Oct 3 2012: I did not say creative people, I said created by individuals.

          When you are the most successful, people will attack you it is the nature of this sort of thing.
          Wars do not bring prosperity they cost in inflation and they cost in goods that are expended without any lasting benefit. I think the military industrial complex is a form of crony capitalism.

          I don't know what you mean by an incomplete analysis?

          But there is no question that the United States has brought the standard of living of the entire world up more than any country in history.
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        Oct 3 2012: I think it was me who said creative people. Even though creative people are a subset of individuals, it is the former and not the latter the group I was referring to. A private investor (another individual) may enable creative people to come up with ways to apply their ideas (by providing resources) and the application of these ideas is what will eventually translate in prosperity for many. I do not intend to take away from the credit the investor deserves, but i think that attributing the prosperity to the investor is a bit of a misattribution

        Not sure if your comment about being attacked because of being successful is at all related to my comment on war.

        But wars indeed are excellent business for some people, they cost you and me in taxes and they cost the attacked countries even more than they cost us, but someone pockets those dollars. Yes indeed, the military industrial complex is a form of crony capitalism!

        By incomplete analysis i mean that economic prosperity does not happen in isolation. Cheap oil from countries like Kuwait ,Saudi Arabia, Iraq and others has also contributed to sustain the economic prosperity that we enjoy here in the USA

        All i am saying is that we must recognize that there are more aspects to analyze than just the technological advances exported out of this country
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          Oct 3 2012: It is the investor that creates jobs, your disposition on investors is irrelevant. The reason this country is in a recession is because the investor has been scared off by the current POTUS. The reason that the great depression lasted so long was FDR (a vampire type personality) scared the investors for about 15 yrs. Investment makes the economy boom over investment makes it crash. The sun sun may or may not come up tomorrow, but this is just a fact. I suppose you might have a hard time with such a broad statement but get over it, it just is.

          The comment about being successful was in reference to the United States.

          The free market connects everyone in the world we are inextricably connected which is a good thing. The sheiks then get to drive around in Roll Royce s and buy those stinger missiles they are so fond of etc.

          There are plenty of valuable goods and services exported by every country.
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        Oct 3 2012: When talking about investors and creators, I was basically thinking about the examples you gave of individuals who have contributed to our current standard of living. Edison, Tesla, Gates and Jobs, Orville and Wright versus the state. And I agreed with your assessment. I would never give the credit to the government, but i would also not give the credit to Rockefeller or Morgan or the Lehman Brothers, FDR, Reagan, Obama or Bernanke.

        Investors create jobs when there are creative people whose ideas can be invested in. Rarely do investors come up with the ideas themselves

        The free market theory provides us with a fantastic framework to model how economies work (or should work), but in some regards i find it very idealistic. It does neglect the human aspect of both producers and consumers, and it does not capture all the costs of production.

        It is evident to me that everyone in the world is connected, but it is well beyond the free market... if you see the rolls royces in the street and cannot make a connection between that and hundreds of people who lost land (or was paid pennies) to oil well drilling, then we are definitely talking about two very different kinds of connection
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          Oct 3 2012: Rockefeller did give people lower energy costs, Morgan financed Edison, FDR was a ..., Reagan gave the country 20+ yr of prosperity and broke USSR Reagan was the man, O and B should be take out and ...

          Doesn't matter the creative would not do anything without the investors.

          Fantastic = bizarre or crazy?

          It absolutely is the antithesis of neglecting the human costs, it has the ultimate respect for the individual and his accomplishments and liberty. The free market captures all of the costs of production. If the consumer requires that the diamonds are not blood diamonds, that the company is green, that the company does not use sweat shops then the company will change or perish. If on the other hand the consumer does not really care they will go ahead and buy the I phone produced in the swear shop because what they really care about is being the first kid on their block to have a I phone 5.

          If the people sold the land they were happy with the transaction or they would not have mad the exchange. If the worker agreed to work for pennies, he considered this a better deal than subsistence farming or he would not agree to do the job.

          No kidding this is what has brought the standard of living up for the whole world. And before you feel bad for these people realize that they do not feel bad for them selves they are damn happy to get the opportunity to improve themselves. Realize that 10 years ago that the per capita GDP in China was $500 today it is $7500. These are the facts that I'm talking about, screw conjecture.
        • Oct 3 2012: Extremely wealthy individuals claiming that extremely wealthy individuals are necessary for investment are shams. There is no reason to assume banks, corporations and pension funds can't make the same investments with less overhead cost and more expertise.
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        Oct 3 2012: I meant fantastic as a compliment, not bizarre or crazy.

        Regarding investors and creators i guess we will have to disagree... i see both as necessary to foster prosperity, whereas you seem to be of the opinion that it is investors who matter and should be catered to.

        "If the consumer requires that diamonds are not blood diamonds the company will change or perish". Well, in a completely de-regulated market, it is easier for the consumer to remain oblivious to the fact of where his diamonds come from. Who would force the producer to disclose such information?

        I was lucky enough to have visited some sweatshops in Mexico way before the clothing industry moved manufacturing overseas. And i can tell you first hand that it was not conscious or green consumers who forced producers to change their labor practices. I think you are giving free market way too much credit there.

        Have you ever seen people being displaced to make room for "progress"? I hope that you are not serious when you are assuming that they had the option of "not making the exchange" if they were not happy with the transaction (native americans were not happy with the "purchase" of their land either... did they have a choice?)

        Before telling me that i should not feel bad for these people, i should tell you that i have seen them first hand, not through references or theories... and with all due respect to you Pat... to say that they do not feel bad for themselves shows your ignorance about their real condition
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          Oct 3 2012: Consumers do force the market place to change, they have the car companies making eco friendly cars, furniture that is made using green certified wood (way more expensive), and boycotting chicken restaurants whose owner spoke out against gays.

          People get displaced all the time in this country in the name of progress, for instance those jobs in Mexico came from American workers, remember the jingle about American union sewers in the 70s?

          However many hours the person works in a factory it is less than what they work on a farm with a great deal more certainty.

          Have you ever seen someone starve to death? I'm going to guess that whatever you have seen is a damn sight better.
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        Oct 3 2012: Yes Pat, consumers can make the market place to change, i agree with that statement. But their impact is limited, many other factors have changed the market place in the last century, including those annoying worker unions. All i am saying is that one should not try to attribute that "invisible hand" of the market powers it does not have

        People has been displaced in the name of progress, but the theory does not agree with the practice, Pat, here in the usa, a percentage of the original textile workers went to other more skilled industries, another percentage moved down the ladder, and some never found jobs again. The same cycle happened when those who moved to computer manufacturing lost their jobs to Mexico. Some got better jobs in services, many moved down the ladder, and some never found a job again. The theory is beautiful, but new markets never make room for all the displaced workforce, it is no surprise that more and more people starts sucking from a paternalist government in order to survive

        And since the same cycle repeats in Mexico, and later in China at an ever lower cost, i do not see this as a virtuous cycle, but as a slow downward spiral. The problem is that out of 10 people who worked in a farm, 3 get jobs and 7 lose them (that was a guess estimate i heard from people living in mainland china, not from calculating back from their country's GDP) And no, their job certainty didn't really go up much, as shown by the massive layoffs in 2009 that we don't hear much about here

        I have seen kids starved to death that were abandoned by mothers that probably were close to starving to death too. My problem with that is that there is barely any relation between these mothers and the "invisible hand" of the market.. most of the people that i have seen survive in such condition are not saved by penny paying jobs, but by altruistic help from others. But please don't tell me that they should give all the credit for their survival to an investor
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          Oct 3 2012: Those annoying unions are particularly annoying here is Calf and are driving the state broke. The government is the number one influence that negates the invisible hand.

          The number of jobs in the U.S. has gone from 24 million in 1900 to today around a 140 million if no one got a new job how is that possible?

          Maybe that is the problem your information is anecdotal?

          First of all that altruistic help is more often that not from the investor. Also how much of it actually makes it to the victims without being intercepted by the warlords or corrupt government officials?

          What does work is something like this:

          http://www.ted.com/talks/lang/en/jessica_jackley_poverty_money_and_love.html

          Is this what you picture when you think of an investor? I see your point she is clearly insidious?

          They should give all the credit for their survival to the investor.
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        Oct 3 2012: Ah, if you think you have it bad in california, you should have seen the ones in Mexico back in the 70's Pat... If it wasn't because Mexico had lots of oil reserves, those unions and the government would have taken the country down the drain in a matter of a few years.

        I stand corrected, 24 million jobs in 1900 to around 140 million today, compared to a population growth from 76 million to 314 million according to the anecdotes from the US census bureau. Meant that in 1900 there were 32% of the population in the workforce, compared to 45% today. Sad thing is that other 55% not working today suck up many more tax dollars (in percentage) than the 68% did back in 1900. And, by the way, what does the free market theory say about that 55% not in the workforce today (kids and elderly and disabled and actual unemployed)?

        Completely agree with you, most of altruistic help is lost on the way, specially when the organizations handling those funds grow too big. But not all that help flows through governments or warlords.

        I loved the presentation on microfinancing, thanks for sharing it, and yes it is indeed a great project and something to support. I have also seen it work when the help is not requested back as payment, but when the recipient in turn passes their own help to someone else to help them started. Would you say that since the second example is not investment, it is bound to fail? Is it corrupted?

        When i say an investor does not deserve all the credit, I think that you are falling pray to a black and white definition. I have worked in the private industry for almost twenty years. Not all investment is born equal, i don't think investors are like satan, something that must be fought. Nah. Leave that to extremists. I think that some investors help more people than others, and some investors screw more people than others. No reason why we could just support the former and screw the latter
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          Oct 3 2012: That is interesting about Mexico, that explains some things, they are damaged.

          It doesn't say anything other than the high unemployment rate, calif being higher than most states. The only real correlation that there is is a bench mark is the investors have withdrawn from the loco government.

          Yea no kidding look at the salaries for the executives at the red cross.

          It is just not a good idea, giving someone something makes them dependent on someone else and from a humanitarian aspect it has a bad effect on them it does not empower them which is what is so beautiful about Kiva. At the end of the day that is all I'm saying empower the individual.

          I think the way to judge someone is to look at what they do not what they say. In the case of the investor that is what I think is workable. The amazing thing about this is no matter what the intention of the investor he raises the standard of living for all he comes in contact with willy nilly. From that aspect it is black and white. Remember the investor is taking a chance, for what ever reason, it will be a period of time before he realizes any profit, so he is going to do what ever he can to make it happen.

          There is a dark side to capitalism that you did not bring up but should be mentioned. That is when the entity profits with no exchange through inflation or banking manipulations or crony capitalism as with the FED and QE3 which will keep big bank insulated from there own transgressions and thereby forestall economic improvement.

          Nice Dialectic conversation btw. a rare phenomenon here on TED.
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      Sep 27 2012: let me guess that you are no economist. adam smith is so so. they use some of his theories. nash is mathematician, what he said is unquestionable. rand has very negligible influence.

      only they remembered smith! but they don't. they subscribe to keynesian views.
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        Sep 27 2012: hello pat gilbert
        maybe what yu said is alright.
        my queation is that .how can you prove it
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          Sep 27 2012: Krisztián

          I listened to your link on fractional banking good speaker but he did not talk about changing the fractional reserve rates, that I heard?

          In your above 1st two reference they don't say much about the money supply being held back. Milton Friedman and Ben Bernanke both say this was a major factor?

          The other factor they do cover was Hoover's Smoot Hawley act which was absurd.

          Apparently the Mises institute puts most of the blame on FDR keeping the investors nervous, which is always the case with any recession. This is eerily prophetic of the current POTUS.

          PS

          the video at the 3rd link in Krisztians post is in 2 parts he doesn't start talking about the great depression until part 2. But I'm probably the only one who will watch this? But the second part is very worth watching. My take is that things are caused they don't just "happen". What was great about this was just how far you know who went in causing the great depression. PJ O'Rourke made the comment that when they came out with a FDR postage stamp that it confused people because they didn't know which side to spit on.

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