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The Golden Age

September 27th, 2012

Since long before I started blogging, I’ve been planning a big article on the prospects for Utopia, starting off from Keynes’ essay Economic Possibilities for our Grandchildren. While I procrastinated, lots of others had the same idea, most recently Robert and Edward Skidelsky. But, with encouragement from Ed Lake at Aeon Magazine, I went ahead anyway and the article has just appeared.

This is also a good time to announce that our long-promised book event on Erik Olin Wright’s Envisioning Real Utopias is going ahead, with a target publication date of March 2013.

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  1. September 27th, 2012 at 22:22 | #1

    Had a great Italian dinner tonight with old friends.

    We came to agreement one one thing.

    Humans are hard-wired to be predatory selfish slime.

    Must be – what else can possibly explain things?

    Hard-wired.

    How’s any Utopia going to emerge from that?

    pop

  2. Mel
    September 27th, 2012 at 23:09 | #2

    Oily, does this mean you snuck off and left your friends to pay the bill?

  3. Freelander
    September 27th, 2012 at 23:27 | #3

    Interesting. No role in the story for “free trade”?

    Some might think that free trade immiserised, first the unskilled, and then progressively, higher skilled classes of labour by putting all the power into the hands of those with power over aggregated capital. Others, of course, wave their hands and recite the magic words, to explain it all, “technical change”.

  4. Freelander
    September 27th, 2012 at 23:40 | #4

    Libertarianism has been god awful, but without “free trade” would that anti-democratic revolution from above have been possible? Indeed, would the anti-democratic revolution from above of free trade have gotten the west in much the same mess even without the anti-democratic revolution from above of libertarianism?

  5. Ikonoclast
    September 28th, 2012 at 08:51 | #5

    I happen to have a copy of;

    “Looking Backward 2000-1887″ by Edward Bellamy.
    Publishers: The Socialist Labor Party of Australia,
    Headquarters: Marx-Hall, 107 Liverpool Street, Sydney,
    Reprinted, January 1942. Reprinted, September, 1943.

    I must admit that after a quick perusal I never read it. It clearly has no predictive value and almost as clearly has no literary value. Admittedly, its social impact at the time of publication was significant, so the book is no doubt important to social historians and in the history of ideas.

    Now, my copy is a sad little, tattered and yellowing paperback, redolent of failed idealisms and obsolete political catchcrys. Our utopianism too, like all fashions, will look quaint or even absurd to our descendents. The reason for this is simply that future possibilities are too complex and too indeterminate to permit prediction… but let me attempt it. I see, I see… a bevy of black sawns!

  6. Ikonoclast
    September 28th, 2012 at 08:53 | #6

    Curse of the Typo! “a bevy of black swans!”

  7. Hermit
    September 28th, 2012 at 09:36 | #7

    Somehow Keynes predictions need to be reconciled with those of the Club of Rome, thought by many to have broadly materialised. Some say we must consume less oil, water, electricity, meat you name it while maintaining a generous refugee policy. We should accept a lower protein diet, smaller houses and less personal mobility such as electric cars and public transport. However it seems to me too many people, perhaps a third of world population, aspire to more of those old ‘bad’ things not less.

    If due to resource limits the future world is one of either rationing or great inequality I can’t see Keynes vision coming to pass. Surely there will be conflict and resentment just like now but probably worse. Perhaps we instinctively know this since talk seems to have passed of global economic ills being temporary.

  8. wilful
    September 28th, 2012 at 09:38 | #8
  9. djm
    September 28th, 2012 at 10:14 | #9

    “Thus he concluded that the maintenance of a small upper class (clergymen, for example)”

    Managed to make me laugh out loud. Thanks.

  10. Freelander
    September 28th, 2012 at 12:13 | #10

    There are many factors that play an important role in explaining why we have not achieved the possibilities Keynes envisaged. Lack of an infinite supply of wet nurses not among them.

  11. Greg vP
    September 28th, 2012 at 12:38 | #11

    A wonderful, thought-provoking essay, John. Would that I could write half so well.

    Izabella Kaminska (FT Alphaville) is grappling with ideas of a post-scarcity society, too – want to invite her to guest in the event?

    In re the matter of presenting a plausible and enticing vision, Anat Shenker-Osorio’s new book “Don’t Buy It!” may be useful. (Shenker-Osorio is a communications consultant; the book is, ….paraphrased? … riffed from? on Al Jazeera. Worth a look.

    I’m not convinced about this post-scarcity thing, though. Preferences do not appear all by themselves out of nothing. Households choose the best of what is presented to them according to the situation as they see fit. If people are choosing to abandon the suburbs for the city, this is probably because they expect current trends to continue: the decline in car driving in the USA started a decade after the decline in real median income. Deciding that life in the city is desirable is a natural rationalisation of being unable to increase consumption of material goods and (mobility) services.

    Kaminska argues that we have already achieved a potential production capability in excess of our capacity to consume. In response one could say that there does seem to be a general glut of goods and services, but (at least) one major exception springs to mind.

    Elizabeth Warren has eloquently argued in “The Two Income Trap” and elsewhere that an increasing proportion of household incomes (in the USA, but the argument likely extends at least to the rest of the Anglophonosphere) is being expended on a competition to get the kids into a “good school”, by buying houses in a “good school’s” catchment. This competition has some zero-sum aspects, but also some aspects that are not zero sum.

    It seems to me that increasing the supply and spread of “good schools” would act to reduce the proportion of household income spent on Warren’s competition, increasing the funds available for other goods and services, and thereby cause some reversion in preferences. (Of course the USA, at least, is unlikely to test this hypothesis.)

    Nitpick: “Envisioning Real Utopias”. (Just as your book is not “Vampire Economics”. ;-) Fixed thanks. BTW, I pitched Vampire Economics to Princeton as a sequel to ZE, but they seemed to think they had done enough monster-themed social science

  12. Freelander
    September 28th, 2012 at 12:49 | #12

    Good point on two incomes.

    The liberation has morphed into an enslavement, and with assortive mating has probably, if anything, worsened the income distribution. Women’s liberation, has arguably, done little to liberated women who were not already elite.

    Still, that is hardly an argument for the good old days but all change brings unintended consequences.

  13. Graeme Bird
    September 28th, 2012 at 12:50 | #13

    “Libertarianism has been god awful, but without “free trade” would that anti-democratic revolution from above have been possible? Indeed, would the anti-democratic revolution from above of free trade have gotten the west in much the same mess even without the anti-democratic revolution from above of libertarianism?”

    There was no free trade from above. There were investor agreements from above. These were agreements with the international banker rather than the consumer in mind. Just because someone calls a government-to-government negotiated agreement a “free trade” agreement doesn’t make it so. I tried to bring in a $1100 wood gasification unit in to New Zealand. NZ was an alleged pioneer in the free trade era. They hit me up for $900 in duties. These are all big corporation and financier arrangements, they aren’t for me or for you.

    A utopian society will have to come out of a free market society which considers corporations an imposition on the free market, not part of the free market. And this they are. They are an intervention into free enterprise and property rights. They are essentially government intervention. If you look at the US Constitution it says “We the people” not we the “legal persons” or “We the corporations..” We need to get rid of fake persons, fake money, fake representations of wealth (derivatives and so forth) that represent an imposition on the price system.

  14. BilB
    September 28th, 2012 at 14:24 | #14

    Brilliant essay, JQ.

    It requires a novel of discussion, and I don’t have the time right now.

    In short, Keynes was 95% right.

    You are right when you say

    “Supposing a Keynesian utopia is feasible, will we want it?”

    I think, yes and no. Life is meant to be a struggle, but should we destroy the Earth in the process? By nature’s examples of swarms, yes. By natures examples of harmony, no.

    I have always used the raft people of the Euphrates river as my Utopian model. These people had an idealic life style an sustainable environment. So Ellen Hunt’s comment to your essay is particularly pertinent as it was the psychopath Saddam Hussein who drained the marshes that sustained these peoples simply so that he could march an army into Iran and be some sort of local conquerer.

    As a compulsive designer and problem solver I have examined this very same chanllenge all of my life from the consumer perspective, an I am 100 % certain that utopia is possible within Keynes time frame. But it won’t happen for precisely what Ellen Hunt outlines.

    Having said that is not only possible, it is happening all around us, only it is not fully sustainable.

    However it can be sustainable, but as you point out, is that what we really want?

    Women want the stability of Utopia, for their families, but they want to go “shopping” too.

    Men want what women want, but they want to go “hunting” too.

    The problem that we have is that there are insufficient Earth’s resources to support the shopping and the hunting for our global population size. So for that reason Utopia is only possible if humans can restrain their excesses.

  15. BilB
    September 28th, 2012 at 14:43 | #15

    Professor Quiggin,

    In a future essay can you please define from your perspective what a Utopia is?

    What as humans are we entitled to?

    What as humans can we Utopianistically achieve?

    How much is too much?

    How much is too little?

    How doe we resolve Utopian conflict?

    Without answers to these and other questions we cannot quantify Utopia, nor can we evaluate the probability of Utopian existence.

  16. Freelander
    September 28th, 2012 at 17:05 | #16

    You’re quite right that free trade has been selective and not really free trade. In the west, though, the changes have immiserised labour, starting first at the unskilled end by forcing them to compete with unskilled elsewhere earning magnitudes less. Simultaneously there have been very uncompetitive forces at work in consumer markets.

  17. Chris Warren
    September 28th, 2012 at 20:26 | #17

    A very good piece, and as Hermit notes, evokes the 1972 Limits to Growth from the Club of Rome. So we all knew what we needed to do decades ago. According to New Scientist The Club of Rome perspective has been confirmed by the CSIRO in 2008. Similar concerns are in the Royal Society’s “People and the Planet” (2012).

    And of course the underlying dilema of a supposed need for growth is all consistent with Marx, not Keynes.

    When the world wakes up to the fact that the present level of development is unsustainable then degrowth will force itself onto humanity. Unfortunately when this realisation hits, it will be too late. But it is gratifying that a range of commentators are beginning to move in this direction.

  18. Freelander
    September 29th, 2012 at 00:51 | #18

    @Chris Warren

    That their are limits to growth would seem undeniable. The question is not if but when. When is a hard question, but the course we are on is quickly resolving it.

  19. Graeme Bird
    September 29th, 2012 at 07:55 | #19

    I see the problems as coming from the finance side of this deal, and not from the concept of direct labour-to-labour competition that you are explaining here. If we have too much physical capital goods for the number of people on the lower rungs, then wages will be strong. So if all this international finance came in and the banks directed the funding at wealth-creating capital goods and infrastructure, then we might still be doing okay.

    But instead they take these bank-to-bank loans and use them for consumer-finance addiction and turning over existing assets. Neoclassicals equate foreign loans being absorbed as the equivalent of savings going directly to wealth-creating investment. But this is lunacy and you cannot shake them out of it. Because the banks simply do not direct the funds with that sort of wealth-creating fidelity. Look at the business pages and the “news” is seldom about the improvement of operations. Its all about moving around existing assets.

  20. September 29th, 2012 at 08:13 | #20

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  21. Freelander
    September 29th, 2012 at 08:32 | #21

    Diet pills. Key to a Golden Age?

  22. Graeme Bird
    September 30th, 2012 at 11:22 | #22

    “When the world wakes up to the fact that the present level of development is unsustainable ..”

    Not under all circumstances. For example if we had hundreds of Thorium reactors around the world, we could eventually escape the Malthusian conditions we might expect over the next few decades, and be back on a growth path. Good ore grade mining opportunities on land may be diminishing, but with plentiful energy it would be possible to source from the oceans or eventually even from the asteroid belt. For sure we are locked into a point far closer to the Malthusian end of the spectrum, then towards the Julian Simon end of the spectrum, for the next few decades. But theoretically, if we could get better policy going, we could move further and further towards the Simon end of things as time went on….. technically speaking.

    I’m expecting famines next decade, but in the longer run it really doesn’t have to be that way. One of the key pre-requisites to continuing per capita improvement in living standards is to move to paternalism in banking. We need for the banks to redirect loanable funds to wealth creation instead of to rubbish and asset-grabbing.

  23. Freelander
    September 30th, 2012 at 19:33 | #23

    I think you are quite correct, in theory. But to avail ourselves of the real possibilities that do exist, for example, the plentiful clean energy we can have if we so choose, would require humanity to work together in a way that seems unlikely. The problem can be solved, and the possibilities envisaged by Keynes, grasped, but the real problem to be solved is, and always has been, human.

    That said, lets hope.

  24. Graeme Bird
    September 30th, 2012 at 19:54 | #24

    Right.

  25. Chris Warren
    October 1st, 2012 at 01:41 | #25

    Graeme Bird Unfortunately advocacy of thorium does not resolve climate change (ie co2 emissions).
    Economic growth using plastics, jet travel, concrete and etc. will drive the ecosystem off a cliff. Population pressure will aggravate this.
    We all knew this from at least 1972 when the Club of Rome published their report.
    The problem is that Keynesianism cannot produce a viable economy without growth because growth is needed for successful Keynesian stimulus.
    Thorium and fusion may be cleaner alternatives than uranium, but the real problem will continue.
    In fact we ned “degrowth” in the OECD to allow the less well developed to catch up. And I notice that these ideas may be sprouting…. see:
    tinyurl.com/steady-state-econ

  26. Graeme Bird
    October 3rd, 2012 at 18:43 | #26

    I want to ignore some of what you are saying here because I don’t agree with the watts-per-square-metre, back-radiation model when it comes to climate science. However it is NOT true that a reliance on thorium, Tesla towers, and dyson-harrop satellite enhancement of Tesla towers …. it is not true that these would not EVENTUALLY lead to reductions in CO2 output.

    Since ore grade materials are increasingly difficult to find, with abundant energy, eventually carbon fibres would be a normal building block of all sorts of structures, from large parts of industrial machinery to high-rise buildings. Our success in any undertaking must ultimately be pinned on abundant energy. And abundant energy in nature is there for the taking. Abundant energy will naturally lead to human race to eventually take CO2 OUT of the biosphere rather than the other way around. Given the extreme flexibility of carbon-based materials.

    I did a paper in energy economics, and the key finding of the whole thing was that substitution away from primary energy sources was quite stable and notoriously slow. It was completely different from consumer products and energy economics is completely different to the rest of economic science. The answer to this dilemma was therefore to do as Caesar advised …. and “Make Haste Slowly.”

    We’ve got to get away from this big corporate version of government projects where we line up billions of dollars of debt with international financial criminals in the room, and we try and rush things. Why not start canal-building in South Australia, and Thorium on the East Coast on 5000 dollar a day budgets? Start it now. No enquiry. No legislation. No mucking about.

    Let me give you an example from the past. Before Telecom was privatised there was this expert with a funny accent on the ABC. His name was Paul Budde (as in Buddha). Anyway he said that the way to privatise was by way of analogy to a trucking company. Of course if you are a communist country, and you want to offload some of your responsibilities, then you may wish to offload your trucking companies.

    Now do you sell the trucking companies and the roads together? To the same outfits? “No” said Paul Budde. You deal with the two different categories of properties separately. And until you know exactly what you are doing you keep the roads in government hands, and you sell off the trucks and on the trucking side, and you let big business grow out of small business success.

    So Paul had the right answer all that time ago. And so had we proceeded with Pauls way, we would have had a much sounder industry. We wouldn’t have Mexicans running away with 70 million dollar severance packages for doing next to nothing. And best of all we could have started, on the strength of Paul’s argument, a 5000 dollar-a-day optical fibre program. We could have started it more than 20 years ago. Now of course projects of this sort don’t have to stay at 5000 dollars a day in their budget. But cost-effectiveness takes time and you can increase the budget 1% per day when you know (not THINK, but know) that you will be getting value for money.

    We could have a dozens of these little projects on the fly, decades before we could plausibly start anything under our current system, and everyone would know when it was time to increase their budget. “Make Haste Slowly.”

    Make has slowly, now if you imagine that there is a near and present danger of a tipping point with CO2, then you have a quandary. Because there is literally no way around it from our starting point. Cost-effective substitution is simply too slow. Even the best of ideas can be rendered cost-ineffective by the Steve Conroy approach.

    I take issue with your word “unfortunate” with regards to my attitude towards Thorium. That is high-browed anti-scientific silliness on your part. Its true that it would take twenty years for us to get cost-effective thorium-based electricity, and another 30 years for such an endeavour to make headway on CO2 output, if you think that this is important. I don’t, everyone else here does. But nonetheless its true that seeking a Thorium (and Tesla Tower, and Dyson-Harrop satellite) future is not going to make headway on CO2 output in under 50 years. 50 years minimum. So if you don’t like that you have a problem. And the answer to the problem you have is to bring back Malthusian values. And Malthusian values can only lead to fascism. As if we don’t have enough of the fascism around the place already.

    Now I take issue with another thing. I don’t like deficit spending. Nonetheless you are blaming Keynesianism for a problem that really must rest on the feet of fractional reserve parasitism. Under the fractional reserve, central banking model, all money is created as debt. So there is always more money then debt. Attempts to pay off debt generally therefore lead to monetary contraction. Therefore the debts are permanent, and not a matter of individual choice. The debts are therefore a sneaky form of slavery. And so its this private banking, central bank, fractional model that is the real problem that you ought to be addressing. Anyone wanting a new source of funding for infrastructure ought not back down from this most timely of issues.

    If you want to reduce CO2 output quickly the way to do this, and I approve, is to increase royalties on coal. Get rid of the company tax on coal miners, but put royalties through the roof, and then refund that part of the royalties for local coal consumers, so that at least we can have cheap energy here. The only way to realistically reduce CO2 output is for Australia to start pricing its coal out of the export market. If its an emergency you’ll do it, and reverse the policy only as appeasement against intimidation coming out of North Asia.

    Is it an emergency or not? If its an emergency lets start reducing exports slowly in this way. Or quickly in this way. I’m happy about that, and I would support that sort of strategy, though I’m a denialist bigtime.

  27. Freelander
    October 3rd, 2012 at 23:22 | #27

    @Graeme Bird

    Good post, providing the average punter much to think about. Much infrastructure, like roads, ought to stay in government hands. That said, government still has a long way to go to start managing infrastructure responsibly, whether within government hands or in the hands of others.

  28. Freelander
    October 3rd, 2012 at 23:34 | #28

    Moder strange. Utterly bizarre.

  29. Freelander
    October 4th, 2012 at 00:34 | #29

    Humans individually and collectively suffer the “hand in the cookie jar” syndrome. There is so much we could achieve but we frequently fall well short due to greed.

    The child in us has that big cookie in our grasp. And we can get it and our hand out of the jar. We could release, tip the jar over, and have it all. Or break the cookie and withdraw our hand with some now, and the rest for latter. Instead we choose to remain fixed with within our grasp but foolishly kept out of reach of our mouths.

  30. Chris Warren
    October 4th, 2012 at 03:46 | #30

    Graeme Bird

    How does anything you posted there ensure that the amount of plastics, concrete, jet-travel, hydrocarbon products will not increase – even with thorium.

    What data are you using to claim that there is more money than debt. Debt is around 100 trillion.

    Fractional Reserve banking is not related to the Keynesian need for growth and stimulus. Even without any central bank, Keynesians would still demand stimulus.

  31. Freelander
    October 4th, 2012 at 05:31 | #31

    Every debt is an asset to someone. When total debt is subtracted from total assets the result is unfailingly positive. Net total assets exist!

    But so does aggregated and aggravating twaddle.

  32. Graeme Bird
    October 4th, 2012 at 17:30 | #32

    “Every debt is an asset to someone. When total debt is subtracted from total assets the result is unfailingly positive. Net total assets exist!”

    Brilliant! You must be the discoverer of double-entry accounting.

    “How does anything you posted there ensure that the amount of plastics, concrete, jet-travel, hydrocarbon products will not increase – even with thorium.”

    Nothing I said does this. As I said, expansion of energy under thorium, would not lead to reduced CO2 output, this side of 50 years. Quite the contrary. The construction projects needed to get Thorium reactors, Dyson-Harrop satellites, and Tesla Towers into place would INCREASE CO2 output, all that time during the intervening 50 years minimum. There are some solar projects that could make a contribution particularly in Australia, where you have cheap desert land outside of small towns. But the construction of these projects would also INCREASE CO2 output, in the intervening 50 years, minimum.

    There is something about plastics that I don’t like, but you have to admit that plastic is quite the utilitarian substance? What exactly is your problem with it? Leaving my anti-plastic bigotry aside my main problem with plastic is that its getting into the ocean. Its getting broken down into tiny pieces, and it appears to be working its way through the food chain, in a situation where almost all fishing geographies are highly stressed, perhaps with the Antarctic alone excepted.

    You must understand how frustrated I am with the CO2 business, because I don’t believe in it, and I think its stealing all the oxygen from this immense drama to do with fish-stocks, inadequate vertical development, the coming food stress, loss of biodiversity, and this sort of thing.

    I don’t believe in the CO2 story but if you DO BELIEVE …… you ought console yourself with the information that the 20th century has had stronger solar action then at any time in at least 1000 years, and more likely any time for 8000 years. So that we are due for cooling, and so that if you are right about CO2, we would presumably have a second stay of execution, and enough time to put the Thorium, the canals, and the other energy-efficient investments into place, and maybe only deal with a tropical world for a few centuries, even in your own scientific estimate. Why ought we not grasp this second stay of execution (your science not mine) with both hands?

    We’ve got to get away from this instant gratification meme. We ought to be moving forward on the basis of us working for posterity. There are but a few things we need to get the government to do now, that are for you or for me. We ought to be looking at things that are not for you or for me. If you believe that low-CO2 output is a worthy goal, then look to the long term. Let our generation put up with too much heating, and too much sea rise, and concentrate on generations yet unborn.

    But if its an emergency lets reduce our coal exports. Is it an emergency or not? I’m predicting hard times for the next few decades so I want a lot easily accessible coal on-hand. If you want to reduce coal exports you will have a friend in me. Is it an emergency or not? And what are you prepared to do?

  33. Chris Warren
    October 5th, 2012 at 23:12 | #33

    Graeme Bird

    Plastics is just an example of the many carbon products we get from petrochemicals. As you do not beleive in the CO2 analysis you have not thought much about the problems society has to confront when seeking a decrease in CO2 emissions.

    The focus is not on plastics but on the petrochemical input into plastics (ie don’t get confused with other plastcs).

    What data did you use to claim there is more money than debt?

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