AB: I like the way she reminds us of the importance of value, and urges us to consider what value really is. However, as I read the first dozen pages, I felt there was something missing. So I am putting down here my thoughts, as I read.
AB: Note: She uses the terms "value" and "wealth" almost interchangeably [p.6-7]
NRO: I believe this should be more precise. Value is subjective - as people come to things from different points of view and desires. However, if we want to build a 'measurement set' that will advance the reporting of our human condition and the earth's stake, we need to build a usable definition for 'wealth.' I will think on this more. But initially, it needs to conform to the idea of the 'commonweal,' at least in terms of societal import.NRO: Now, this brings to mind the recent discussion we had and Tim's comment about creating a 'stability measurement' or I prefer 'stability index.' More on this to come.
AB: + She begins by showing the major difference between value creation and value extraction, between making and taking, between wealth-creators and rent-seekers, between "productive" and "unproductive" economic activity. Taking refers to those who take money from others, e.g. in financial services.
NRO: This is a key thesis of her book. I agree with this view, but not as a Marxist would have it.NRO: The point I would make is that those who gain or play in the 'unproductive' spheres need to pay back at a higher rate to the communities.
AB: This fires up ire. Ire at those most-wealthy who have made their money by e.g. tax-avoidance. Example: Apple, even though their wealth was gained by innovations that had been publicly funded, they find ways of avoiding paying the public back via taxes. The most wealthy 62 people have as much as the 3.5 billion least wealthy [p.4].
NRO: I agree - outrageous and an illustration of the old axiom - them with the gold rules.NRO: This all goes to the fact that our financial and governmental structures [my word] are no longer adequate for our new era. (On that subject, our ERA, I would love to have your input in a longer discussion.)
NRO: However, I do not believe we can ever, or should, totally try and 'level' this outcome. There will always be the super-rich, to some extent, and this is good. It should inspire people to achieve the higher successes. However, the conduct of the super-rich should be more Christian!
AB: This ire against the inequality of wealthy 'takers' seems to be the main thread throughout her book so far. e.g., p.5, "I think we can go even further with these 'makers' versus 'takers' analyses of why our economy, with its glaring inequalities of income and wealth, has gone so wrong." Note the words used, like "glaring inequalities" and "so wrong".
NRO: You are correct - see comments above.
AB: She discusses three critiques of value extraction and ideas of how it comes about [p.4-5] and suggests a fourth [p.6]. IN these four there seem to be six reasons mentioned by which such inequalities of wealth come about: (a) overcharging, (b) predation, (c) inheritance, (d) blocking others from markets, (e) deregulation of laws, (f) income earned by moving money around.
NRO: Good summary - correct, but this is a list of symptoms. It does not address the root causes. The issues go to my view of the present inadequacies of our Structures - financial and governmental.
AB: Though I am appalled at what Mazzucato depicts as having happened, I wonder whether the quantitative amount of money we have is so absolutely important.
NRO: Good question. I believe it does matter, although how we can affect it today is another question.NRO: I am a throw-back, hard money believer. So I would like to see us deflate the currencies and go to a true convertible standard. We can get into a long discussion about this, but likely the horse is out of the barn.
NRO: The point to be made is the problem with large quantities of money in circulation. It leads to the following issues:
NRO: 1) Leakage - the more in play, the larger the 'lost and misused funds. In other words, you are funding a larger underworld!
NRO: 2) Misplaced incentives - the larger the money deals - $500 Million bonds, the larger the economic commissions paid to traders and commission agents. This is exactly what MM is complaining about! Why should a Bond trader in NY city earn a $100,000 bonus on one deal while a surgeon doesn't?
NRO: 3) Administrative abuse - larger budgets mean the politicians can horse trade influence easier - and the press rarely finds out. The abuses in this regard are countless...
AB: I remember Jesus' words, "These are things that the heathen run after; but your Heavenly Father knows you need all these things ahead of time. Do not run after them, but seed first God's kingdom and God's righteousness, and all these things will be added to you." [from Matthew 6] And "You cannot serve God and Mammon." Also various entreaties towards generosity, including Paul's urging that Jesus' followers should earn their own living, but not so that they will have their own wealth, but so that they will have some to give to the poor. There seems to be a theme that quantitative amounts of money are not really important - in God's eyes.
NRO: Thank you, great reminders. Yes, Jesus was definitely about the quality of our lives. It was pointed out to me - I have not looked it up - that in the New Testament, the Greek word for New as in New earth and New Heaven - really meant 'new in quality,' not a new thing itself.
AB: Sadly, we have spiritualized that and thought that "in God's eyes" means for the spiritual, sacred life and the life of the New Earth and Heavens, but not for life here and now. I disagree. I believe that these things are directly relevant to here and now, including economics. The way Reality works, I see, is governed by laws of various aspects, including among them, economic, ethical and faith laws, all intended to work in harmony. The latter are about trust and generosity and attitude. And even the laws of economics respond to them.
NRO: Interesting comment! Truly what works on earth is different from heaven. The idea that we can affect the earthly world is tantalizing. The fact that Reality has harmony is very interesting, and I think true - for God is a god of order and natural law has a mandate to it. There is much more to be said about the harmony. However, my Calvinist friends and likely Luther would say that we and the world are beyond redemption. So our struggles for a more perfect union (to use Lincoln's words) may be a fool's joust. However, the Greek in me says we should try for the better. And even Calvinists and Lutherans believe we should live with Christian hearts and charities- not lie, cheat and steal.NRO: The idea that there is and should be harmony to financial measurements is a strong thought.
NRO: This, I believe, supports my desire to see new measurements and further reformations in finance and governments.
AB: So, that expands on feeling of concern about MM's focus on the disparity between the wealthy and the unwealthy, and that the wealthy are the takers.
AB: In Chapter 3, MM examines GDP. In an interesting section, she offers a good discussion on why housework has been excluded from GDP - for various silly reasons such as it would make it inconvenient, or it would be difficult to analyse or put precise quantitative measures on it. She cites the UN SNA 2008 document for reasons why they exclude household activity from inclusion in GDP. Here is the full text of the subsection The exclusion of most services produced for own use by households within the section The production boundary within households:
a. The cleaning, decoration and maintenance of the dwelling occupied by the household, including small repairs of a kind usually carried out by tenants as well as owners;
b. The cleaning, servicing and repair of household durables or other goods, including vehicles used for household purposes;
c. The preparation and serving of meals;
d. The care, training and instruction of children;
e. The care of sick, infirm or old people;
f. The transportation of members of the household or their goods.
6.29 In most countries a considerable amount of labour is devoted to the production of these services, and their consumption makes an important contribution to economic welfare. However, national accounts serve a variety of analytical and policy purposes and are not compiled simply, or even primarily, to produce indicators of welfare. The reasons for not imputing values for unpaid domestic or personal services produced and consumed within households may be summarized as follows:
a. The own-account production of services within households is a self-contained activity with limited repercussions on the rest of the economy. The decision to produce a household service entails a simultaneous decision to consume that service. This is not true for goods. For example, if a household engages in the production of agricultural goods, it does not follow that it intends to consume them all. Once the crop has been harvested, the producer has a choice about how much to consume, how much to store for future consumption or production and how much to offer for sale or barter on the market. Indeed, although it is customary to refer to the own-account production of goods, it is not possible to determine at the time the production takes place how much of it will eventually be consumed by the producer. For example, if an agricultural crop turns out to be better than expected, the household may dispose of some of it on the market even though it may have originally supposed it would consume it all. This kind of possibility is non-existent for services; it is not possible to produce a service and then decide whether to offer it for sale or not. [P.99]
b. The production account As the vast majority of household services are not produced for the market, there are typically no suitable market prices that can be used to value such services. It is therefore extremely difficult to estimate values not only for the outputs of the services but also for the associated incomes and expenditures that can be meaningfully added to the values of the monetary transactions on which most of the entries in the accounts are based.
c. With the exception of the imputed rental of owneroccupied dwellings, the decision to produce services for own consumption is not influenced by and does not influence economic policy because the imputed values are not equivalent to monetary flows. Changes in the levels of household services produced do not affect the tax yield of the economy or the level of the exchange rate, to give two examples.
6.30 Thus, the reluctance of national accountants to impute values for the outputs, incomes and expenditures associated with the production and consumption of services within households is explained by a combination of factors, namely the relative isolation and independence of these activities from markets, the extreme difficulty of making economically meaningful estimates of their values, and the adverse effects it would have on the usefulness of the accounts for policy purposes and the analysis of markets and market disequilibria.
6.31 The exclusion of household services from the production boundary has consequences for labour force and employment statistics. According to International Labour Organization (ILO) guidelines, economically active persons are persons engaged in production included within the boundary of production of the SNA. If that boundary were to be extended to include the production of ownaccount household services, virtually the whole adult population would be economically active and unemployment eliminated. In practice, it would be necessary to revert to the existing boundary of production in the SNA, if only to obtain meaningful employment statistics."
MMz: "6.28 The production of services by members of the household for their own final consumption has traditionally been excluded from measured production in national accounts and it is worth explaining briefly why this is so. It is useful to begin by listing those services for which no entries are recorded in the accounts when they are produced by household members and consumed within the same household:
It is good that MM has drawn our attention to this.
However, in the first dozen pages I found three things lacking in MM.
AB: Critique 1. p.4-5. MM seems to treat Value in terms of money, at least as semi quantitative in its nature such that one can say "more", "less" even if not give a precise count. This underlies her ire at the inequalities; they are inequalities of quantitative money rather than of, for example, love or psychological wellbeing.
NRO: True. She is an economist...and seems to have a Marxist bend.
AB: Critique 2. p.6-7. MM sees Value (Good) only in terms of the economic system. Even though she sometimes seems to allow for non quantitative value, she still sees value only from the perspective of the economic aspect of life. e.g. [p.6], "Also crucial is whether what it is that is being created is useful: are the produces and services being created increasing or decreasing the reslience of the productive system." Note: Not resilience of the entire Creation, or even of human living, but of the "productive system".
NRO: Agreed.
AB: Critique 3. p.10-11. MM treats making as Good, i.e. productive value-creation as Good. Unproductive taking is Bad, to her. But is not much production of things actually harmful? Harmful, for example, to the environment, climate, biodiversity etc. and even other things like human health and mental health, and animal dignity.
NRO: Yes, but - see her footnote 17, I will quote the sentence and footnote...MMz: Why Value Theory Matters - pp11
MMz: "First, the disappearance of value from the economic debate hides what should be alive, public and actively contested. (fnt 17)"
MMz: Footnote 17 states that - "It is fundamental not to interpret this statement as meaning that other forms of discussion of value in economics are not critical. [NRO: she goes on to cite a bunch of articles and studies - one to get? Value and Justification: The Foundations of Liberal Theory (NY: Cambridge Press, 1990).] She continues, "But the thesis of this present book is specific to the way that economic measurements of value in production have fundamentally changed the ability to differentiate value creators from value extractors, and consequently the distinction between rents and profits which, as we will see in Chapter 2, affects GDP in a different way from the problems identified in Stiglitz." [Bold is NRO's emphasis]
NRO: I think the other issue is not the primary focus of the book.
AB: Critique 4. One thing that seems to greatly concern MM is that in economics the role of the public sphere has been overlooked and devalued. I do find her arguments about this convincing (e.g. that much of the innovation that lies behind wealth creation was paid for by the public purse, and that the assumption that public spending is purely unproductive taking is false). However, her arguments only gain meaning within the narrow confines of the conflict between public and private, between too much and too little government. It places here firmly on one side of a battle, a war, that is being waged in the USA, namely on the side of public finance and a sizeable role for government in the economy. This has two downsides. (a) As an outsider to that conflict, it makes me wonder whether all her other arguments require one to take the public side. (b) Is it likely to inflame those who are committed to a minimum government regime? Since I don't believe that that conflict is the Absolute one, I would like to see a framework for understanding value and economic activity that can embrace both views.
NRO: You are correct - one issue is big vs. small government. More precisely, it is the issue of distance vs. local government. At least, this is my view of our USA issues - often mischaracterized by our media.NRO: The role of public finance should be subject to outcome measurements, just like the academic world, I would add. However, the conflict is not Absolute; I agree. I think it is Structural and can be fixed.
NRO: The value that Government funding adds is lost because we don't properly measure outcomes and the community benefits those just investment engender.
NRO: She presents the problem but is weak on solutions, I think.
AB: Critique 5. p.14. Concerning the need to choose which activities are important, MM writes [p.14], "ascribing value, or the lack of it, has always involved malleable socio-economic arguments which derive from a particular political perspective," for example, "particular views about how society ought to be constructed." She makes the point that these perspectives are "sometimes explicit, sometimes not." So far so good. But she does not recognise what this is in the way I do, as a functioning (of both society and individuals) in the pistic aspect. She happens to give a nice example of how this works, just before that text [p.13-14],
NRO: Agreed - your letter to the Head of Statistics - says this well.
MMz cited by AB: "... those activities thought to be more important in achieving particular objectives have to be increased and less important ones reduced. We already do this. Certain types of tax credits, for, say, R&D, try to stimulate more investment in innovation. We subsidize education and training for students because as a society we want more young people to go to university or enter the workforce with better skills. Behind such policies may be economic models that show how investment in 'human capital' - people's knowledge and capabilities - benefits a country's growth by increasing its productive capacity." [my italics]
I have italicized words that make a chain of causality or rationality, and it leads ultimately to growth in productive capacity. The objectves are innovation, education and training, which are seen as important because human capital is important, which itself is seen as important because of the overriding Value or Norm of productive capacity and its importance is emphasised by wanting it to grow.
NRO: I think we agree. The issue is the methods of these incentives and measurement of outcomes are now archaic.
So, all this is underlain by a presumed Norm that is meaningful in the economic aspect (rather than for example the ethical, lingual, aesthetic, biotic, etc.). MM recognises the directing nature of "perspectives" and "views", but I don't think she explores their nature. [===== check later in the book].
NRO: More later.
Critique 6. p.14. Our pistic functioning is our treating something as of ultimate What we treat as important gains its importance from one or other aspects (spheres of meaningfulness and law). Insofar as, for example, in "... statements such as 'I am a wealth creator' measured credible ideas about where that wealth comes from" [p.14]. the phrase "credible ideas" implies a diversity of ways of being meaningful, MM is recognising that there are differences of target of pistic functioning. However, if does not mean that at all, then she seems to have no recognition of any need to separate out different target aspects, and is joining the subjectivists whom she criticises.
I wondered whether these points of criticism occur only because I have not yet read the whole book, and that they will be dealt with satisfactorily later in the book. However, I can see no evidence of that in the chapter and section headings in the Contents. And, when I read the final chapter, I find them reinforced in pages 270-274.
NRO: True.NRO: I conclude with this thought - MM says -
NRO: "To create a fairer economy, one where prosperity is more broadly shared and is therefore more sustainable, we need to reinvigorate a serious discussion about the nature and origin of value."
NRO: What is the definition of 'prosperity? How can it be more broadly shared without a new generational view and attending new longitudinal measurements? I posit that these two elements are needed to provide the sustainability desired. The nature of value, to be resolved, is tied to more than prosperity and more than to makers and takers. It must be fundamentally tied to the nature of a person and tied to their better end. Therefore, we need to establish some agreed metaphysics and principles. This also means it must resolve the issue of individual rights vs. community in at least terms of key economic constructs. This leads us to the 'commonweal' and 'rights of man' and our government.
NRO: "We must reconsider the stories we are telling about who the value creators are, and what that says to us about how we define activities as economically productive and unproductive."
NRO: The story we need to tell is first about the fundamental nature of man and the desired telos. From this, we can talk about the methods and actors - but this only from the broadest view (ref Dhammapada quote of awareness of the wise monk sitting on a mountain top). This means we need to view the 'value' and 'net worth' of people, communities, and states from the view of life cycles. Longitudinal views (measurements) will be for current and future generations. In this regard we cannot be so arrogant as to formulate decisions and plans without a method to allow future generations to change key elements as technologies and measurements are improved. Our abilities to affect the future are limited compared to what is on the innovator's workbench today. And this is the number two macro goal - to allow for the development and distribution of applied technologies that improve the human condition. The number one applied goal is the education and development of a wise and healthy populous such that they live with eleutheria and under their own autonomia.
NRO: Thank you for allowing me to offer some comments.
NRO: I would be glad to continue to develop an approach and solution to the issues commented herein.
The overall idea in this book seems to be that the 1960s mission to land a human being on the moon may be taken as an exemplar for how to "reinvent government" to act with the economy to fulfil the needs of the 21st Century, especially with the climate crisis and pandemics in mind.
Mariana Mazzucato's main concern, it seems, is about how government relates to business, the nature of the public-private partnership, and especially that government should act with a purpose bold purpose of the order of the Moon Mission. The background context and motivation of her book seems to be hostilities, especially in the USA, between those who want to reduce government control of the economy and those who want government to manage the economy. She seems to want to bring some peace.
She says we need three things: to reinvent government, to put purpose at the core, and a new kind of public-private partnership (PPP). She asks "What is government for?"
AB comment: I would also ask "What is the economy for?" What is the proper role and mandate of economic activity in the whole or Reality? Mazzucato seems to presuppose the economy as the important and central reality.
Chapter 2 briefly outlines two reasons why capitalism is in crisis: a warming planet (climate change) and that "governments are tinkering, not leading." [AB: No comment here, except that perhaps there is a wider range of problems, such as biodiversity - but it is a short introductory chapter, so her brevity may be excused.]
Mazzucato discusses "five myths that impede progress", but which small-government advocates tend to assume. Myth 1: Whereas businesses take risks and create value, governments de-risk and facilitate. "Government's job is to set the rules of the game, regulate, redistribute, and fix market failures." [p.27]. She argues that governments too can create value. Myth 2: "The purpose of govenrment is to fix market failures." Government has more purpose than that. Myth 3: "Government needs to run like a business." It shouldn't. Myth 4: "Outsourcing saves taxpayer money and lowers risk." Not true, especially when, for example, the companies that governments outsource to (e.g. Carillion) cares more about "how to remunerate executives rather than what is actually going on the business." Myth 5. "Governments shouldn't pick winners." If fact, she criticises both sides of the debate, that governments should pick winners versus should just subsidise all. She argues (later) that governments should pick the willing.
AB Comment: Though she seems to take sides against the small-government lobby, I sense that she does not entirely do so, and is no fan of big-government either. There are some good insights in what she says, though they are sometimes difficult to extricate from the plethora of cases she cites.
AB Critique: She fixates on the relationship between government and 'industry', rather than thinking about the economy as a whole, and in relation to other things too. Hence, her book cannot be taken as about 'the economy' in general. What we need is to rethink the whole of economics, not just the issue of public v private.
Chapter 4 takes metaphor from the Apollo mission.
Chapter 5 sets out what we should aim for, such as UN Sustainable Development Goals, and how to involve citizens in such a mission.
Chapter 6 suggests seven pillars of a successful political economy, with new approaches to:
AB Comment: It is hard to disagree with those. They speak of the economy seeing itself as embedded among other spheres of society rather than being detached from, or served by, them. But (a) Is anything missing? (b) How are they going to be achieved, given that most of them have been desiderata for decades and there is no sign of achieving them? It says nothing about how to deal with human hubris, selfishness, injustice or other sins.
RG Comment: Are we speaking of a partnership between the govt and every other economic actor in the economy? But given that the other actors include individuals, companies, other incorporated groups like charities and other groups like families, this is so complicated that I don't see how it could be meaningful to speak of partnership. Also, is it right to privilege government as one "partner", when the government also has multiple organs and functions? Government is not the only regulatory body in society: every family and every business also has regulatory duties, for example.
Created 25 June 2021: Last updated: 21 July 2021 spelling error. 18 April 2022 Mission Economy. 23 May 2022 mission purpose. 4 July 2022 RG comment.