[FRIAM] What would be the goals of a large state?

[David Eric Smith]

Thanks Glen,

I also will try to keep to short notes.  Your list below is very appealing.  (Easiest to lard.)

> --- notes on "Capitalism After the Pandemic"---
> 
> • "long-term growth opportunities"
>  · What is growth? The only sustainable application of the concept of "growth" is in a non-zero sum context where manipulation of the system/market changes the space so that more degrees of freedom are available after the intervention than before. But does that actually exist? If so, where does it exist? Which domains are (nearly) zero sum and which aren’t

So Herman Daly is the grand old man of steady-state and ecological economics.  More recently co-authored with Joshua Farley (textbook level and also some technical stuff).  
There is a guy at Los Alamos, Rajan Gupta
https://cnls.lanl.gov/~rajan/ <https://cnls.lanl.gov/~rajan/>
who I think did a kind of energy-denominated versus money-denominated cost analysis of technologies.  Somehow I associate him with a statistical analysis showing that any time money GDP has increased, extractive resource use has also increased, even if there were some increases in efficiency at the same time.  So I don’t think we have any records of true, end-to-end reduction in resource use as economies grow.  Sadly, I don’t think I can count the Scandinavians’ local reduction, good as it is, because a lot of what they buy is just purchased from damaging production elsewhere.

> • real estate vs infrastructure
>  · The article distinguishes. But I think many consider real estate to be infrastructure. How "derived" does a real estate investment need to be to become non-infrastructure?

It’s funny.  I read that part and wondered: are we going back into a Neo-Ricardian age when fixed land becomes a scarce wealth measure?
I wonder, too, when they say it is going into real estate, how much of that is just re-building fancier on land that was already occupied, or upgrading space in cities?

> • long-term investments vs short-term gains
>  · What are the appropriate scales? Is 1 year long-term? 100 years?
>  · What spatial scales correlate with the temporal scales? Is, e.g., a water table sized manipulation (like drawing more water out of rivers for irrigation to the detriment of fish populations) correlated with 1 year or 100 years?
> 
> • government as a partner in creating value
>  · e.g. Boeing moving from union shop to non-union shop, despite tax breaks
>    - How/who thinks of government as a (n actual) partner as opposed to a victim to be exploited? What does that look like?

There is a Swedish economist named Gunnar Eliasson, who specialized in histories of cases like the SAAB venture which started in military aircraft, and spun off Volvo as a car company and (I think later) Saab under its own name.  But his general specialization was how government can design early investment with public goals in mind.  He was one Shubik introduced me to.

>    - B Corporations maybe? But, e.g. my hosting company used to be a B-Corp, but sold out to a non-B-Corp. Now what?
>    - Corporate/government intertwining has been called a hallmark of ur-fascism. What does well-regulated capitalist corp/gov intertwining look like? It sounds like routing public capital into the pockets of capitalists to me. (E.g. subsidized oil industry.)
>  · e.g. drug pricing mentioned in the article -- Are NIH investments into drugs corporations carry to market simply routing public money into capitalists' cumulative treasuries? Or is such investment a crypto-subsidy trying to prop up US R&D capabilities?
>  · "entrepreneurial state" -- "it's share of the upside" -- "an equity stake"
>    - How is this different from ur-fascist couplings of the state with corporations?

I assume this all turns on whether the government is actually accountable to the public, and not just another power structure under the control of the same minority as the businesses.  Not unconnected to your concerns about fascism above, which sounds right to me, but still in principle a distinct problem to solve (?).

> • Rethinking Value
>  · E.g. We Are Over-Preventing Covid https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fwww.overcomingbias.com%2f2020%2f10%2fwe-are-over-preventing-covid.html&c=E,1,7AJRAjZFR7aARsypyOcOAy4PHtYMwQVqsDYCh9_aJ9GqXuIjIh_DcgCHY8e3yhqZ4O6lLiRG9VUGpWoz0_JDNcu8dWXe7Iv0dTu-HnZVkEOCjGQ,&typo=1 <https://linkprotect.cudasvc.com/url?a=https://www.overcomingbias.com/2020/10/we-are-over-preventing-covid.html&c=E,1,7AJRAjZFR7aARsypyOcOAy4PHtYMwQVqsDYCh9_aJ9GqXuIjIh_DcgCHY8e3yhqZ4O6lLiRG9VUGpWoz0_JDNcu8dWXe7Iv0dTu-HnZVkEOCjGQ,&typo=1>

Thank you for this.

> • "shape the market"
>  · What is a market? What does it mean to shape such a thing?

I would tend to answer in technical terms rather than aspirational ones, thinking the technical is not empty.  I would say a market is distinguished from either firms or governments because of the singular role of money.  What money you own completely determines the permissions or authority you have.  Everything else is reconfigurable.  That makes markets very flexible and fast, but terrible with multi-factor optimization, since everything gets driven down to the marginal exchange rates for money.

It seems that, because of their internal integration, both firms and governments can potentially have much higher-dimensional decision criteria.  That reduces their flexibility and speed, but can in principle avoid certain distortions.  The place where I feel like one can learn the most about this is on the moving edge, where firms continually re-balance what they do vertically and what they do in markets.  I remember the introduction of just-in-time supply chaining into the US from Japan in the 1970s as an enlightening case, because it was nominally a market, but it only worked if companies trusted each other for predictability, which was a non-monetized consideration.

>    - To me, a market is bottled uncertainty, where you can't know/derive some optimum, you allow a market to wiggle around and find its own optimum. I.e. no markets are "free", they're wrapped in a fairly rigid boundary. But capitalism, as vernacular, talks of freely wiggling complex markets. So to most capitalists, "shape the market" is NOT capitalist. And if it's not capitalism, don't call it "capitalism", even if you're qualifying it with "stakeholder" or whatever.

Dunno.  This seems like an Eric Maskin, mechanism-design question.  To what extent can the role of the polity that designs the game be clearly separated from participation in the game, without too much power leaking across the boundaries?

>  · "This is not about socialism; it is about understanding the source of capitalistic profits."
>    - But what is "capitalism" if not a decoupling of the source of profits from the profits?

I think my colleague Duncan Foley would say that capitalism is really all defined in the structure of what property rights it protects.  Prior even to how that feeds over into problems of rent-collecting or ownership of “means of production”, which I know were discussed here at length a few months ago.

> The very concept of profit is leveraging a source into a decoupled product ... and a product which *accumulates* at least somewhat passively ... the accumulation of capital.

But I agree with you here: that passive accumulation seems to be the nut of what matters.

> Requiring a feedback, back into the source, from the product is non-capitalist. You don't have to call it "socialism". But it is very SOCIAL. Why not call it socialism?

Many thanks,

Eric


> 
> 
> On 10/26/20 8:01 AM, David Eric Smith wrote:
>> There’s an article in Foreign Affairs that discusses this question from a perspective that mirrors very many dimensions of what I have come to think is right over the years:
>> https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fwww.foreignaffairs.com%2farticles%2funited-states%2f2020-10-02%2fcapitalism-after-covid-19-pandemic&c=E,1,RPB62ssqks8UCas33ZR79gncoE96YhB7cxTPJX2kkZaQreoQ_EOa4kXDuX-5r9Htf-gPXjhpsedEuLjOHNbu4TfKO5DS8R9La7yrFjBH4EJliqeYSw,,&typo=1 <https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fwww.foreignaffairs.com%2farticles%2funited-states%2f2020-10-02%2fcapitalism-after-covid-19-pandemic&c=E,1,R-FYktnWNzuNSE0SfwZZ1K4gIOnVzEGHetvTYbtzr9IqWubkwZrgHe6N8Xn0r3P2VrrZANRU8WKDFUTj5p0k3sL-Flz_gPgiORDmeu120osb7iDwH8iI7L1j0Ug,&typo=1>
>> Shame if there weren’t anybody to whom I could forward it.  
>> 
>> To talk about big or little state as an abstraction seems to lead to unhelpful conversation.  But an operational study of what jobs need doing, who can do them, and how they are being done wrongly now, grounds that discussion much better. 
>> 
>> I am struck that she uses several after-the-fact evaluations of what would be good to do, which I think reflect a quite distributed effort by investigative journalists, academics, lawyers and agencies.  To have made those decisions correctly on the input end looks very knowledge-intensive.  But it is knowledge of a kind we actually have, and this list likes to envision using.  The limiting factor really has been coordination among the many sectors that would need to interact to support really good decision-making by a state.  Envisioning what that might look like, and how it could be built, sounds worth-while.
>> 
>> Eric
> 
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