Neil de Grasse Tyson’s Intelligence-Priming Reading List

Neil de Grasse Tyson answered a recent post on Reddit that asked which books the whole world should read. printed his list here.

Tyson’s reading list is as follows:

1.) The Bible (eBook) - “to learn that it’s easier to be told by others what to think and believe than it is to think for yourself.”

2.) The System of the World by Isaac Newton (eBook) – “to learn that the universe is a knowable place.”

3.) On the Origin of Species by Charles Darwin (eBookAudio Book) - “to learn of our kinship with all other life on Earth.”

4.) Gulliver’s Travels by Jonathan Swift (eBookAudio Book) – “to learn, among other satirical lessons, that most of the time humans are Yahoos.”

5.) The Age of Reason by Thomas Paine (eBookAudio Book) – “to learn how the power of rational thought is the primary source of freedom in the world.”

6.) The Wealth of Nations by Adam Smith (eBookAudio Book) - “to learn that capitalism is an economy of greed, a force of nature unto itself.”

7.) The Art of War by Sun Tsu (eBookAudio Book) - “to learn that the act of killing fellow humans can be raised to an art.”

8.) The Prince by Machiavelli (eBookAudio Book) - “to learn that people not in power will do all they can to acquire it, and people in power will do all they can to keep it.”

I like the list a lot, but I think the commentary could use some tweaking. The Bible, for example, is far too complicated a work of literature to be summarily dismissed as a mind control tool, even though he’s right in observing that’s how it gets used more often than not.

The Wealth of Nations, for another instance, is a more fully  developed continuation of Smith’s earlier work, The Theory of Moral Sentiments, which deals much more fundamentally with the ethical and moral construction of modern industrial commerce than the later book does, which is one reason it’s less widely studied in business schools.

Similarly, Sun Tzu wrote The Art of War as a primer in how to defeat an opponent in any contest of power. Its principles apply to the political and commercial realms as well as to the battlefield.

Lastly, The Prince is widely thought of as an instruction manual for achieving and maintaining power, but there’s a school of thought that says Niccolo Machiavelli intended it to be a sarcastic screed against the machinations of the great houses of Europe.

Anyway, Paine, Darwin, and Newton are the three on this list I still need to actually read over a weekend. How about you?

Warren Mosler: The Economy is Just Bits in a Computer

When I was in the final stages of getting my BA from Queens College I took a class on essay writing. Not exactly surprising as I was an English major and necessarily took a bunch of writing classes. One assignment was to respond to an article in a popular magazine. I chose an article from BusinessWeek which reported on an article published in a national economics journal which supposedly proved that American students were abandoning classes in the hard sciences for classes in the Humanities (English in particular) due to rampant grade inflation. In other words, students who loved science loved easy grades even more.

I called bullshit.

I thought, awesome, I can respond to this in my sleep, and I pretty much did. I found the original article in the QC library and realized that the research only showed that the grade inflation had been a constant over the past 20 years. They failed to show that the enrollment of students in English classes had increased by a similar proportion to the decrease of enrollments in the hard sciences.* As far as I could tell, they never attempted to demonstrate either of those relationships. The guys at BusinessWeek merely had column space to fill and to do so, they basically made stuff up with the point of making Economics sound more authoritative than, say, English Lit.

Two valuable lessons here: first, English is not a science**, although it is a valuable discipline. Lesson two: Economics is in exactly the same boat, although I question its value. In my experience, Economics is more about method than result and the math rarely works as advertised.

You don't have to take my word on that; take Warren Mosler's instead.

Mosler is a self-taught economist with an extensive background in investing and teaching. He eschews complexity and thinks modern economics is so much nonsense while recognizing that modern finance is almost purely extractive in nature. Most importantly, he thinks that our ideas about economics are mired in sixty year old assumptions about debt, taxes, and spending, and our public policy is driven entirely be ideology. He thinks we can do better, so he wrote a book titled The Seven Deadly Innocent Frauds of Economic Policy to explain how. Better still, the book is free and available as a PDF on his web site. There is no excuse not to read it.

In simplest terms, Mosler thinks that modern economic policy is a garbage-in-garbage-out affair. Our assumptions about how things work are wrong and so we come up with fixes that are politically pleasing, but which cannot possibly work. His years working on Wall Street taught him at the operational level how things do work, and to him the disconnect between fact and policy couldn't be more clear.

Mosler's precepts take his knowledge of operational finance (aka, accounting) and applies them to the structure of the economy as is exists in the twenty-first century. Computers handle everything, and they use proven standards of book keeping: debits on the left, credits on the right. All transactions must be recorded in a pair of matching entries. Everything must balance out in the end. Simple.

Most importantly, he says, our insistence of thinking in terms of stuff–cash, gold, and physical notes–has blinded us to the truth that money is now entirely electronic. Bits in a computer, numbers on a screen. Debt is imaginary and the main difference between taxation and spending is in whose bank accounts the transfers appear. Changing policy is no more complicated than swapping out entries in computers.

Anyway, Mosler's seven deadly frauds–the stuff that he says everyone gets wrong–are as follows:

1. The government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.

Bushwah, says Mosler. Taxation is merely how the government regulates aggregate demand. As such, taxation should increase during good times and decrease in bad times.

2. With government deficits, we are leaving our debt burden to our children.

 Nonsense, he says. In the collective sense no such burden can exist. Debt or not, our children will consume as much or as little as they produce.

3. Government budget deficits take away savings.

 Not true, Mosler tell us. Federal government budget deficits actually add to savings.

4. Social Security is broken.

 No, it's not. Mosler says. Federal government checks do not bounce–they never have and they never will.

5. The trade deficit is an unsustainable imbalance that takes away jobs and output.

Incorrect, is the response. "Imports are real benefits and exports are real costs. Trade deficits directly improve our standard of living. Jobs are lost because taxes are too high for a given level of government spending, not because of imports."

6. We need savings to provide the funds for investment.

 Balderdash, says Mosler. Investment adds to savings.

7. It’s a bad thing that higher deficits today mean higher taxes tomorrow.

Madness, says Mosler: this is really a good thing. Taxes reduce aggregate demand, and if taxation increases it's because the economy is about to blow the roof off.

  I'm the first to admit that although I like the way Mosler thinks, I'm not entirely on board with his proposed policy solutions.

His first proposed fix is a "payroll tax holiday" where employers and employees would be exempt from paying the payroll tax for an undetermined length of time. In Mosler's description this would be a situation "whereby the U.S. Treasury makes all FICA, Medicare and other federal payroll tax deductions for all employees and employers." In other words the government would be borrowing these funds for its own use.

It makes a certain amount of sense, and it would give everyone getting a W-2 form a substantial (on the order of 8%) pay raise. Hell, it'd give employers the same raise. Unfortunately, there's no indication that this would increase hiring: increases in revenue is what does that, not a decrease in tax rates.

His second idea, that of a $500 per capita revenue sharing plan from the federal government to each state government, I like very much. Unfortunately, his thinking is too small: 500 dollars for three hundred million Americans still averages out to only three billion dollars per state. Yes, I comprehend that New York, with 20 million people would get ten billion dollars while New Mexico, with only two million would get one billion. That's not the point. The point is that Mosler is thinking way too small in this plan. The states taken together have something on the order of trillions of dollars of infrastructure repairs and delayed maintenance that need to be done; power plants, roads, bridges, waterways, sewers, etc. 150 billion won't come close to making a dent in that, although it might scratch the paint. But if everything is really just bookkeeping, then Mosler has no reason not to blow up the numbers to match the need. Make it  ten or  twenty trillion dollars and we'd have something to look twice at.

There's a great deal more to consider. Mosler is very much into a national jobs program and universal government supplied health care. Children should be considered investments rather than expenses in financial terms. He believes that there is such a thing as public purpose and economic policy needs to be restructured to reflect that fact. (All the stuff that the talking heads on Fox love.)

There's plenty to argue with as well. Classical Kenesians won't think much of this work, and libertarians will like it even less. That said, I've read enough policy proposals from both crowds to understand that new thinking isn't exactly their strong suit.

What I do like about this tome is the fact it's different. There's no ideology to defend. There's no insistence that we somehow live in the same world (or even the same structured economy) we had in 1945. There is a tacit acknowledgement that our current system is broken and the only way we can to begin to fix it is to admit that fact to ourselves.

There are only debits and credits, bits in a computer.

Happy Labor Day.


*If X number of students had abandoned the hard sciences in favor of English, you'd expect a proportional increase in the latter and decrease in the former as the lure of easy A's enticed physics students to change their majors.

**Science: a rigorously self-regulating model of discovery wherein hypotheses are created through observation of events and tested through experimentation. Repeated results are considered valid. Unique results are not. Economics rarely provides this level of rigor in the pursuit of knowledge. It's a discipline, not a science.

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