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Ha-Joon Chang - The Ex-Communicator

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January 13th, 2011


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10:36 am - Ha-Joon Chang
I recommend the Cambridge heterodox economist Ha-Joon Chang. He's the most readable of the new economists (in my opinion). He's probably not massively original, but I think he consolidates a coherent sensible economic position and makes it accessible. He isn't biased against the developing world.

ETA - re-reading that, it might come across as faint praise. In fact I am very enthusiastic. Just trying to give a rounded view.

Here is a short article by him in The Guardian arguing that drastic cuts in bonus pay-outs to 'bankers' would not damage the UK economy.

I am working my way through his 23 Things They Don't Tell You About Capitalism (published last March) which is a straightforward debunking of modern free-market ideology. Chang argues, I think quite rightly, that every market is structured and limited (in a sense it is the existence of an agreed structure which makes any activity a 'market') but some structures are treated as invisible or natural, and others as an assault on freedom.

Compared to my views, he is much more pro-capitalist. However, my attitude is, we live in this system now, it has good and bad features, and our best chance is to try to keep it going as long as possible, and minimise the bad sides. If I were a die-hard anti-capitalist I would welcome the spiral of global idiocy we are experiencing at present, and the mistakes of our Government.

So, really, a critical pro-capitalist like Chang, and a worried anti-capitalist like me have a lot of common ground, because we feel that intervention and redistribution will make us more prosperous than current more bloodthirsty policies.

(13 comments | Leave a comment)

Comments:


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From:andrewducker
Date:January 13th, 2011 12:12 pm (UTC)
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I totally agree with him that shareholders should be allowed to set the wages. The question, then, is whether it is in the shareholders interests to pay these bonuses.

And that comes down to whether the bankers make more money than they are costing, and whether they could be replaced by people who would make just as much money, while being paid less.

If they believe that the investment bankers are making money based more on luck than skill, and that they can lose them to their competition, then it's in their interests to drop the pay. If they believe that losing their top-ranked bankers will cause their profits to drop then it's in their interests to pay them enough to keep them.

Personally, I don't know enough about investment banking to know which of these two cases are true.
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From:communicator
Date:January 13th, 2011 12:21 pm (UTC)
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Do they generate value, would they stop generating value (ie piss off to Geneva) if paid less, and would it be impossible to replace them with equally effective people working for less? Answers to each question are probably mixed yes/no for different subgroups of bankers, but the only loss to UK income would be associated with the subset of a subset for whom the answers are yes/yes/yes. I don't think there are many of those.

A person defending the status quo would have to argue that the marginal benefits delivered by this subgroup are enough to carry the excess costs of entire banking sector. I think when you analyse it down this way, it looks less impressive as an argument, evne before you begin to quantify.
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From:andrewducker
Date:January 13th, 2011 12:52 pm (UTC)
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There are two questions there:
1) Is it in the interests of the banks? And the answer there depends on whether they can find people who are as effective for less.
2) Is it in the interests of the country? And that depends on whether large bonuses cause more dangerous behaviour, and whether that dangerous behaviour can be limited so that it only affects the bank, and not the rest of the country.

Personally, I favour breaking up the big banks so that the investment part and the local-bank part are entirely separate. And then I don't care what happens to the investment banks, because they're free to go bust if they mess up. I'm also fine with big bonuses, so long as we have a 50% tax rate so that half of it goes straight to the government.
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From:communicator
Date:January 13th, 2011 01:20 pm (UTC)
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I think when people are paid huge bonuses it increases their feeling of belonging to an exclusive community, and makes the rest of the country into an out-group. I don't have a cite for that, I read a study a few weeks ago. It chimes with my intuition.
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From:andrewducker
Date:January 13th, 2011 01:28 pm (UTC)
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Frankly, I'd be shocked if that wasn't the case.

But I can't see a solution to that without moving to a system where everyone is paid the same, which isn't something I support.
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From:communicator
Date:January 13th, 2011 02:53 pm (UTC)
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There's a lot of room between 'some get huge bonuses' and 'everyone paid the same'.
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From:communicator
Date:January 13th, 2011 12:24 pm (UTC)
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Also, I think the issue of setting wages by shareholders is complicated because we now have a professional class of shareholding upper management who determine their own collective value. I'm certainly not the only person to think they are very ready to be convinced of their own worth: 'I think we all deserve a raise', 'I agree!'
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From:andrewducker
Date:January 13th, 2011 12:54 pm (UTC)
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Yup - that's definitely a problem. And lots of the biggest shareholders in large companies are actually things like pension schemes, because they all buy into FTSE100 indexes. And frankly, my pension scheme doesn't want to be an active shareholder, because that would be a lot of work. Which causes all sorts of other problems.
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From:del_c
Date:January 13th, 2011 12:34 pm (UTC)
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If they believe that losing their top-ranked bankers will cause their profits to drop then it's in their interests to pay them enough to keep them.

I think you're making an unproven link between what they believe to be true and what's actually in their interests. I would recast those sentences as either

- If X, then Y is in their interests

or

- If they believe X, then they believe Y is in their interests
[User Picture]
From:andrewducker
Date:January 13th, 2011 12:48 pm (UTC)
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Good point. I'd go with the latter :->
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From:communicator
Date:January 13th, 2011 01:13 pm (UTC)
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Yes. And the relationship between belief and wishes is complicated isn't it.
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From:altariel
Date:January 13th, 2011 12:57 pm (UTC)
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This is an egregiously shallow response to your post, but I think this guy could be my new crush. Anyway, clicked on Kindle and bought the book. I might have to take back everything I ever said about economists.
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From:communicator
Date:January 13th, 2011 01:16 pm (UTC)
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Yes. He's not my type really, but that's a very fine list of writers. I must check out Victor Pelevin and Sergei Lyukianenko,neither of which I have read.

And he likes gourmet food too.

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