(np) a smidge more of Michael Hudson's words

[Michael Bailey]

a much, much, much better analysis than my jaundiced little screed a
few posts ago...I blench and turn scarlet simultaneously from
shame...who is this Hudson dude anyway?  turns a nice phrase...like to
see him or people inspired by him as sectreas, speaker of house,
president of senate...
implement the Obama campaign trail rhetoric...

-----------------------------

Post-classical economics as a reassertion of special rentier interests
– by ignoring them

The classical distinction between earned wealth created by one’s own
labor, and unearned or socially created wealth obtained without one’s
own effort or cost – by inheritance or special privilege appropriating
what nature, the public sector or asset-price inflation provides –
points to an economic policy of taxing away income not necessary for
production and distribution. This fiscal reform triggered a reaction
by vested interests receiving such gains.

In a political analogy to Newton’s Third Law of Motion (every action
has an equal and opposite reaction) they sought to rationalize
un-taxing and deregulating finance, real estate and monopolies. It was
to provide such logic that post-classical theory began to emerge in
the 1880s.

Rather than describing how economies worked, the new doctrine was
based on hypothetical reasoning more akin to science fiction than
descriptive of the real world. It avoided dealing with unearned wealth
and economic parasitism by assuming that all income was earned
productively.

Everyone was “worth what they got,” so there was no “unearned
increment” to be un-taxed. And to avoid discussion of structural and
legal reform, this post-classical economics focused on merely marginal
changes in supply and demand. Marginal changes are by definition tiny
– so small as not to affect the economic environment.

Changes in the existing political context are treated as “exogenous”
to economic analysis, so the status quo is assumed as a “given.” This
narrowing of scope effectively excludes discussion of property, free
credit creation by banks and unearned income as “exogenous.”

It also portrays government spending, subsidies and taxes only as
deadweight, inherently unproductive. Yet throughout most of history
the public sector has provided basic infrastructure investment in
roads, railroads and bus systems, education, research and development
to enable economies to obtain basic services most efficiently at
minimum cost and on fair terms.

The largest capital investment in nearly every economy consists of
public infrastructure and enterprises such as have been privatized on
credit since 1980 under “free market” carve-ups of the public domain.
Economies have been turned into “tollbooth” opportunities for the
buyers of hitherto public monopolies to extract access
(“rent-seeking”) charges in what is, from the overall economic vantage
point, a zero-sum set of transfer payments.

Marginal utility theory leaves no room to analyze this appropriation
of wealth from the public domain. It depicts consumers as choosing
from an existing menu, without discussing the advertising, deception,
rent extraction and price fixing involved in real life. The resulting
model is based on a crudely quantitative analysis of satiation of food
or other commodities – but not wealth addiction to monetary and
property aggrandizement.