Wednesday, May 2, 2012

Is the U.S. Economic System Pareto-Compromised?

In previous blogs I have shown the basis for how and why our economic system has been perverted, e.g.


Most of this (note the content from the first two links especially) is based on the "Pareto Distribution" which mandates the objective of economic "efficiency" over all else. This efficiency is gauged in "utils" an abstract measure formulated by Wilfredo Pareto, and now adopted as the sine qua non of modern economics by most of the high priests who practice that trade.

For example, having people get colonoscopies is "Pareto inefficient" because the person getting them is usually not paying the full cost, to hire the professional talent, resources to carry them out. If half or more of the cost is being defrayed by an insurance company, then it makes more sense to pay the person just under that half NOT to go for the screening than to go and tie up resources that could otherwise be allocated to a person who could afford the full price on his own.

In the same way, rent -subsidized apartments are "Pareto inefficient" because the government is paying for or subsidizing rents what might easily be paid in toto by those who can actually afford the apartments.

Ditto, with Social Security, which is why Alan Greenspan in a well-known (2003) appearance before the Senate Banking Committee, suggested that "Social Security benefits need to be cut to pay for Bush’s tax cuts."   Greenspan surmised-  in terms of Pareto Efficiency – that the Bush tax cuts poured more money into the hands of the better off each year,  and would use those higher -valued ("util-wise") dollars to invest or purchase high end goods.   Greenspan obviously reasoned, that it made more fiscal sense to let these wealthy keep their ill-gotten gains from the tax cuts, than to preserve Social Security and reward the unproductive (and mostly non-investors) with unearned compensation- wherein people reeived income merely for breathing and not doing anything productive.

Now, evidence suggests that the toxic memes from Pareto efficiency have dramatically degraded our morals, ethics as well as our financial system. Michael J. Sandel's book, What Money Can't Buy, shows the hell we are in for if we don't soon check the insidious growth of Pareto-ism and its fetish for economic efficiency over almost all other values. What most worries Sandel, is that during the past 30 years (effectively from the time of the Reagan administration) economic "imperatives" have begun displacing all other national values. While Republicans often raise their moral clarion calls and pointed to class-based moral deficiencies (e.g. in Charles Murray's new book, Coming Apart) they have failed to perceive that the paramountcy of their own "market efficiency" has been the primary eroder of national moral vision.  As Sandel observes in his book: we are steadily seeing our moral ideals pushed aside in favor of the view that economic efficiency must always prevail.

In other words, such efficiency in the engrained, perverted Pareto -Capitalist system has become a pseudo-moral value in its own right - as well as trumping all others.Author Charles Reich poignantly describes the perversity of this system in his book, Opposing the System, Crown Books, p. 103:

"When society itself comes to be modeled on economic and organizational principles, all of the forces that bind people together are torn apart in the struggle for survival.

Community is destroyed because we are no longer 'in this together' because everyone is a threat to everyone else. "

This quote summarizes all that is wrong with capitalist-Pareto efficiency economics. Examples, apart from those I already gave,  of how traditional mores have shifted toward a market "morality" are abundant:

- Flyers can purchase their way out of having to stand in line for TSA screenings at select airports

- More cash flush customers can purchase their way out of waiting in line at many amusement parks.

- Many schools now "incentivize" student performance by paying students if they read books, or do well in courses.

- Cities routinely sell advertising space on public property, ranging from parks and municipal buildings to police cars.

- Many large sports stadiums have now been "corporatized" with their original names removed in place of corporate names or logos. (Even sport performance in many places has been reduced to corporatist bunkum, i.e. announcers for the Arizona Diamondbacks baseball team are required to refer to any home runs by the team as "Bank One Boomers")

In nearly all of these, as Sandel documents, long held concepts of ownership and inherent worth have been subjugated to the simple "morality" of the market, except the market has no morality. It operates within an amoral vacuum and the only guide is efficiency. Thus, to the Pareto-based market, it is more "moral" to allow people who can't afford decent apartments to remain homeless, rather than remove the apartments from market share competition. It is also more  "moral" to allow children to starve or go to bed hungry each night, than to provide a family with food stamps to cover food costs they can't meet with their meager income. The reason? Food stamps remove purchase power from the purview of "free" market choices.

None of these moral imbeciles appears to have ever heard of FDR's famous words:

"Necessitous men cannot be free men".

The above is not the extent of how marketism -Pareto-ism has wrecked true American moral values. Sandel recounts, for example, how life insurance was once used as a safety net for families, in case the main bread winner died. It has now mutated, under Pareto imperatives, to become a ghoulish investment vehicle. Thus, life insurance policies can now be bundled or sold separately as "viaticals" from the "life settlement industry"  and then converted into bonds to be sold to investors. The payoff depends on how soon the policy holder croaks. Hence, there is an unspoken pressure for the aged insurance holders to kick the bucket sooner rather than later, to maximize returns.

Beyond this, there is the "dead peasants' insurance" market- wherein companies (nearly 90% of them now) take out life insurance policies on their employees, in most cases without informing them. They do so because Pareto efficiency economics dictates it. The policies then provide an excellent side revenue stream (especially usseful when sales are falling) whether traded or held until collection, when the worker croaks from too many overtime hours (only paid at the regular wage rates).  Companies basically can't lose. And there are always ten or more workers standing in line waiting for the same overworked jobs, to replace the ones that die early.

Sandel's look into market amorality is chilling. What becomes more obvious on reading it is the very slippery slope that can go from paying to cut in line, to betting on an oldster's premature death to collect more money from a death bond. Most horrific is how the market efficiency meme can intrude into our politics and even history to attempt to either reshape them, or exclude other competitors from the idea marketplace. Application of such efficiencies to historical tragedies, such as the Kennedy assassination, can even lead to the dominance of simplistic propaganda ("Oswald don' it") because it is more "efficient" to articulate or explain than a putatively complex conspiracy. In a similar fashion, the U.S. incursions into Afghanistan and Iraq are simplified (in the name of efficiency) to "wars" when they are in fact extended military occupations which haven't been paid for by taxes as other wars (WWII).

The preceding perversions of history via market efficiency also dictate market -money advantages to some projects, media vehicles for instance, over others. Thus, it is almost an axiom of corporate media now, that a simplistic retelling of history will get preference over a more complex thoughtful one. Hence, Tom Hanks 'Playtone' PR propaganda piece likely trumped any alternative proposals on the Kennedy assassination, which might have portrayed the conspiracy side. (Even Oliver Stone's 'Secret History of the U.S.' Showtime series seems to have been put on hold).

The point here is we need to appreciate how far and wide Pareto efficiency- market incursions have reshaped not only our ideals, and morals, but the way we think of our primary historical events too.

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