Matt Sebold, a Professor of Literature, writes in Aeon
Keynes believed that if businesses actually obeyed the prescriptions for rational behaviour upon which orthodox economic models are based, nobody would ever build, buy, barter or bankroll anything.
No. Keynes may have written bollocks from time to time. He wasn't stupid. The alternative to building and buying is to wander naked till you die of exposure. It is rational to do stuff which improves your chances of staying alive.
The human propensities towards hope, faith, even reckless gambling, have far greater effects upon enterprise than estimations of potential profit, which, in most cases, prove comically inaccurate.
An enterprise may make a loss. It may go bankrupt. But till it does so everybody involved draws a salary. A pessimistic guy who never takes a risk still gets a job. When, as he predicted, it goes bankrupt, he moves on to another job.
‘A large proportion of our positive activities depend upon spontaneous optimism rather than on a mathematical expectation,’ Keynes wrote.
No. They depend on induction based expectations. If you have been getting paid for the last ten years to do a particular job, chances are you will get paid this month as well. True, your firm may go bankrupt but then you get on your bike and find another job.
And if that optimism falters, ‘leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die’.
Lots of firms went bankrupt during the Great Depression, but more survived. Enterprise, quite obviously, didn't fade and die.
The automation of capitalist accumulation is economic apocalypse.
Fuck off. It is us having lots more cool shiny stuff than our ancestors.
For Keynes, the ‘state of confidence’ involves ‘assuming that the existing state of affairs will continue indefinitely’ even though ‘we know from extensive experience that this is most unlikely’.
We know we will die. So what? Tomorrow will be much like yesterday- till some virus gets you.
Confidence is what makes you continue to bet on black, even when you know you will inevitably see red.
But very few of us are gamblers. If you are constantly betting on black- you have an addiction. Get help.
It spurs an irrational appetite for risk-taking.
That's a pathological condition. Some people have an irrational appetite for their own boogers. Others may like eating dog turds. But that aint normal.
The ‘state of confidence’ aggregates many highly subjective and often only semi-conscious projections of the future.
The business confidence index is based on opinion surveys and information about order books and inventories.
It is an amorphous variable, impossible to quantify
yet it is quantified. People earn money by doing so and other people pay money for what they produce because they find it useful.
or reliably account for, but liable to be the determining factor in the success of any investment decision, since abrupt and unpredictable shifts in the state of confidence can unsettle any sector of the economy, or even the economy as a whole, almost instantaneously.
This is equally true of every aspect of life. Indeed, it is true of the type of tosh Professors of Eng Lit can get to publish on subjects- like economics- about which they know nothing.
What fascinates me about this enigma at the centre of economics
which this dude has not bothered to study
is that it is called confidence. It stands, simultaneously, as a synonym for certainty and uncertainty;
No it doesn't. Knightian uncertainty obtains. The business confidence index tells us whether firms think they should expand or contract. There is also a consumer confidence index which tells us whether people are going to put off buying cool stuff or if they are ready to splurge.
and, I’d argue, every invocation of confidence, in economics, politics or literature, should be read with this paradox in mind.
only if you have shit inside your head.
Proclamations of confidence are frequently used as substitutes for substantive action
no they aren't because guys who don't fix problems quickly go bust. A substitute has to be fit for purpose otherwise the guy using it dies. That's why eating your own shit is not a substitute for eating chocolate cake.
and healthy self-reflection by financiers such as Fuld,
whose firm went bust
who are incapable of disinterestedly evaluating any alternative to the outcomes they ask others to be confident in.
The guy failed to get a bailout. The truth is Bernanke, Paulson & Geithner underestimated the impact of Lehmans going under. They fucked up.
Their expertise relies on access to supposedly more, and better, information but in any given moment that information can be made irrelevant by public opinion.
Fuck had 'public opinion' to do with Bernanke fucking up? Once people understood that the Government would make a profit on the loans it made to companies like Lehmans they'd have been all for it. Still, there had to be a correction on house prices etc.
As the actions of Lehman executives testify, the experts know this, which creates an incentives problem, since managing public confidence with misinformation might be more effective than taking substantive action based on proprietary knowledge.
There is no incentive problem provided regulators and external auditors and ratings agencies aren't incompetent or corrupt.
This explains why the characters in Melville’s novel have been conditioned to believe that, merely by asking for confidence, you admit you don’t deserve it.
This fool doesn't get that 'confidence men' are cheating you. They are selling you something which doesn't actually exist. The stuff Lehman sold was genuine enough. The problem was that they had become insolvent because the price of some assets they owned had collapsed. Had they been bailed out, they'd probably have repaid with interest the loan they received.
Confidence becomes an essential consideration because prices respond to even the smallest changes in perception
But perceptions are based on the real determinants of supply and demand.
Keynes acknowledges the term’s peculiar malleability by regularly placing its technical and colloquial invocations in close proximity. He wants to make clear that confidence cannot be quantified, reliably controlled, or pinned down with equations.
So what? We have confidence indices which are good enough for practical purposes. Literature professors have no way of quantifying literary quality but they would agree that Shakespeare was a greater playwright than Francis Beaumont.
Econometrics, he insists, is blind to the ‘animal spirits’.
No it isn't. It has confidence indices.
It would seem that Keynes’s contribution to this discussion is mainly to confuse it and confound his successors who, on this matter, have elected mostly to ignore him.
Unlike this ignorant fool, Keynes's 'successors' knew him and worked with him or knew people who knew him &c. There is still a big Keynesian school of economics- indeed it has many variants.
But Keynes does clarify how the disruptive effects of swings in the state of confidence are magnified in economies dominated by large, concentrated financial centres – as was the case in the US in 1929, or 2008, or now.
No he doesn't. Like most economists he thought the Big Crash was a blip. What he hadn't counted on- because he was British, not American- was that there would be a big monetary contraction in the US and then that FDR would do crazy shit like forbid gold ownership or pay farmers to not sow crops while plenty of people were going hungry.
The volatility of the US economy, which has been rocked by financial crisis with disconcerting regularity since the founding of the New York Stock Exchange, is directly attributable to the taste, and talent, in the US for securitisation and speculation.
In the same sense that the fact that Americans have hands is directly attributable to the taste and talent Americans have for wanking. Does this cretin not get that all market economies have Financial Securities. Speculation, however, exists even in non-market economies. People acquire things on the off chance that it might turn out to be valuable.
As Keynes put it: ‘Americans are apt to be unduly interested in discovering what average opinion believes average opinion to be; and this national weakness find its nemesis in the stock market.’
Like other British toffs, Keynes thought Americans were far too democratic. They respected a guy who worked for a living more than a fucking parasite. Henry James took pains to explain to his British audience, that an American who had inherited great wealth gained even more prestige by becoming the top surgeon or top engineer or top pork packer or whatever.
Confidence enters macroeconomics through the Stock Exchange.
No. It enters it through investment and consumption decisions which affect the capital value of enterprises and impact on the rate of interest (if everybody wants to borrow so as to invest and consume, then savers get a bigger reward) and thus on the price of gilts (if the interest rate rises, then price you will pay for a given stream of future income falls)
‘In the absence of securities markets,’ Keynes explained, ‘there is no object in frequently attempting to revalue an investment to which we are committed.’
Nonsense! There is always a 'market maker'- e.g. a pawn broker or the wealthy guy everybody in the village goes to when they need to find out how much they can get for their assets at a pinch. 3
The farmer cannot ‘remove his capital from the farming business’ on a whim, then ‘reconsider whether he should return to it later in the week’.
Yes he can. He can sell his land and buy it back again. Obviously he loses out on the stamp duty and commission etc. Land is less 'fungible' than publicly traded stocks and shares. Still, you do lose a little money when you sell and buy back a security 'on a whim'.
Before securities trading was common practice, the farmer’s confidence, the shipper’s confidence and the realtor’s confidence had no impact on the simple supply-and-demand logic that set the prices for their goods.
No. It had a much bigger impact. Farmers didn't want to take a chance that they would be left with a crop it was uneconomic to harvest. Once there was a futures market, they could hedge on it and 'lock in' a price. Similarly, shipping could burgeon because there was greater certainty as to the outcome. This meant cheaper shipping and cheaper food.
Financial markets are about pooling risk so that more productive activity is possible. Stupid cunts who think Stock Exchanges are evil coz money is the devil's dung can, it is true, cause Society to do crazy shit that destroys the economy. But then people get tired of listening to stupid cunts and tell them to fuck off.
‘But the Stock Exchange revalues many investments every day, and the revaluations give a frequent opportunity to the individual … to revise his commitments.’
But a guy who keeps buying and selling the same stock will lose money. Smart peeps buy and hold based on fundamentals. That's why Warren Buffet is rich while skittish investors end up in the poor-house.
At the Exchange, one can buy corn, even when corn is not in season, or a stake in a building, even when no tenants are moving in or out.
You can do that anyway. People have been buying corn out of season- coz granaries exist- for thousands of years. Similarly, there has never been a problem with buying a stake in a building or an enterprise. What a well developed financial market does is pool associated risks and bring down the cost of transactions and increase transparency so you can see the 'spread'- i.e. the commission taken by the market maker.
Securities can be invented, amalgamated, contracted or split.
Because contracts have those properties. Securities are just a very cheap and fungible type of contract. This cretin thinks they are some sort of evil magic.
Under the pressure of constant negotiation, confidence becomes an essential consideration because prices respond to even the smallest changes in perception, changes that can be based on reliable information, compelling narratives or abject rumours about specific companies, whole industries or the entire economy.
This fool doesn't get that market makers profit by the skittish behavior of fools. But similar behavior can be found in any field.
When corporations are motivated by and reliant upon stockholders, small changes in the state of confidence towards a single company can produce butterfly effects through the whole economy.
No they can't. Politicians can fuck up the economy by telling people they should keep buying property or keep getting university degrees even if that property, those degrees, are over-priced shite.
Eighty years before Keynes published The General Theory, Melville stated plainly: ‘Confidence is the indispensable basis of all sorts of business transactions. Without it, commerce between man and man, as between country and country, would, like a watch, run down and stop.’
But we all know better. An effective legal system which enforces contracts and punishes fraud is the basis of business transactions. Without such a legal system, there may still be transactions between a small ethnic or religious group but the rest of the population will be at the subsistence level.
The Confidence-Man was equal parts experimental fiction, political economy and prophecy. Via a series of loosely connected vignettes set aboard a Mississippi steamboat, Melville, at the height of his powers, demonstrated how confidence could be made to mean everything and nothing. It could lubricate the gears of commerce or grind them to a halt; sweep up the individual in the ‘cosmopolitan and confident tide’ of ‘that multiform pilgrim species, man’ or leave him ‘in the dark’ with nothing but his own doubts, and possibly the devil, for company.
So, Melville- even at the 'height of his powers' could achieve nothing. Whatever he showed wasn't worth seeing then or now.
The novel drove Melville to the brink of madness. Upon its completion, he told his friend, the fellow American novelist Nathaniel Hawthorne, that he had ‘made up his mind to be annihilated’, and he abandoned his craft. The author of Moby-Dick lived another 34 years, but never published another novel.
Hopefully, this cretin will never publish another article. The problem with getting hold of the wrong end of the stick and writing bollocks is that the next step is either madness or silence.
He contracted the crisis of confidence that his novel was designed to discourage and, soon thereafter, so did the nation. Six months later, Melville’s publisher was bankrupted in the Panic of 1857, and its warehouse burned to the ground with the unsold copies of his novel inside. For close to a century, almost nobody read it.
Then cretins started getting jobs as Professors of Literature and felt obliged to talk bollocks about shite texts.
The increasing centrality of finance
which represents about 7 or 8 percent of GDP. Tech is ten percent or lower because its price keeps going down
to the US economy in recent decades, just as during Melville’s lifetime, coincides with an explosion of accessible, inexpensive publications.
This cretin hasn't noticed that the internet has fundamentally changed how we get and disseminate information.
Following Keynes’s logic, I do not view this as a coincidence.
An evil confidence-man is behind all this. Also, the Post Office is a front for an elite pedophile ring and Biden is actually a shape shifting lizard from Planet X.
The greater the proportion of macroeconomic activity that depends on securitisation, the more the volatility (incumbent to securities markets) permeates the larger economy.
Financial markets smooth volatility. There can be asset bubbles without financial markets- e.g. the Dutch tulip boom
Under these conditions, any person or institution with the capacity to persuade the populace to alter their economic behaviour has the power to radically unsettle the marketplace.
So, it is important that we have proper economists who can explain why that person or institution shouldn't be trusted so much. It is better than there is a lot of competition in this respect.
When Fuld proposed a publicity barrage with the intention of ‘restoring confidence’ in Lehman Brothers, he was conceding that a persuasive fiction, widely disseminated via the media, could relieve the firm of pressures from creditors, regulators, analysts, hedge funds and investors more effectively than substantive strategies to reorganise and raise liquidity.
The guy should have been lobbying Bernanke & Co. The firm was insolvent. There was no other 'substantive strategy'.
A century and a half earlier, Melville had recognised confidence as a shorthand for the emerging codependence of finance and mass media in antebellum America.
But there was also a codependence between crazy Commie shite and the mass media they controlled in the Soviet Union. Why does this cretin not mention the codependence between eating and talking shite?
He thinks he has learnt something from Keynes which much smarter people than him have forgotten.
The forgotten lesson of Keynes’s General Theory is that movements of metrics such as securities indexes, interest rates and GDP – presented in periods of stability as the very substance of the economy (Wow! Look at the Dow!) – are really only symptoms of the ‘animal spirits’ and, especially, their expressions.
Fuck off! Either these indices are in line with fundamentals or they are over or undervaluing things. Keynes didn't foresee the coming War. Smart people should have been buying property in neutral countries- like Brazil. On the other hand, a lot of people were patriots. They preferred to die or get poor with the rest of their nation rather than run away to live in luxury.
Levels of consumption, investment and employment depend on the contagion of ‘spontaneous optimism’.
This simply isn't true. Keynes did exaggerate things but then he was writing for economists- not Literature professors.
While it remains hard to predict how individuals will interpret ‘what average opinion believes average opinion to be’,
this is the Keynesian Beauty Contest. But research shows we all have a biological reason to prefer certain traits- e.g. facial symmetry. Indeed, the Keynesian Beauty Contest is likely to, by the Condorcet Jury theorem, produce better results then a panel of Judges some of whom have been promised beejays by the sluttier contestants. Anyway, that's how P. Chidambaram got his start. Not that he isn't naturally gorgeous.
we can be certain that those interpretations will be disproportionately driven by viral media.
But guys who bother with viral media don't have a pot to piss in. Finance is now globalized, even if locals get skittish, global money will flow in or out on the basis of fundamentals.
Studying television trends, political messaging, pop music, internet memes, video games, advertising, bestsellers, social-media influencers, core curriculums and demographics is now as productive an approach to economic analysis as tracking prices, wages and unemployment.
No it isn't. That's why guys with degrees in Media Studies aint pulling in big bucks on Wall Street.
In other words, in the spirit of Marshall McLuhan’s aphorism, the media is the market.
But it isn't really. Literature aint Economics anymore than it is Theoretical Physics. Would Aeon publish an essay by this cretin about how Jules Verne's forgotten lesson is keeping us from vacationing on the moon?