Oct 15, 2021Liked by Matt Stoller

This is what we get when a certain cult of economics coincides with the interests of plutocrats. In fact there are two cults arising from the same source: belief in 19th century equilibrium economics.

The first cult is the Austrian/libertarians. The second and more dangerous one is the neoclassical/New Keynesians whose roots are in Jevons, Walras, and Menger. They're more dangerous because they control most of the elite university economics departments and the Fed is lousy with them.

Man, I hate neoclassical economics so much. It is all utopian horseshit and the infuriating irony is how much they like to talk about "free enterprise" and "markets", when they are all university academics who have never had to make a payroll in their entire fucking lives. They don't know shit about business.

And their Austrian/libertarian cousins are worse. They worship "the Businessman" but their godfathers von Mises and Hayek never started a business, never hired an employee, never made a payroll, never competed in the marketplace and spent their entire professional lives scrounging for sinecures and professorships, getting paid to talk about business while never actually fucking DOING business.

They were like pre-Copernican astronomers refusing to learn Kepler's Laws of Planetary Motion. When you reframe their ideas—neoclassicals, Austrians, and libertarians alike—you realize THEY are the utopian idealists.

They accuse Keynesians and socialists as being unrealistic idealists but in fact it's their irrational belief in equilibrium that prevents them from seeing the world as it really is. They WANT equilibrium economics to be real because the theory is supposedly elegant but in fact it's just wrong, like Ptolemy's geocentric model of the solar system.

Consider this: https://www.nytimes.com/2021/10/01/upshot/inflation-economy-analysis.html

An economist at the fed, in 27 pages, basically says, "What we thought was true because our Monetarist blinders told us it was true, is in fact wrong, and our models can't predict fuck all."

And thirteen or so years ago fraudster Greenspan actually admitted his ideas about unregulated corporate officers behaving rationally and protecting shareholders were wrong. So there you have it: a neoclassical cleric (a Fed economist) and America's Grand Libertarian Fool both admitting what they believe is bullshit.

But because their bullshit implicitly condones monopoly they'll get cultivated, funded, and appointed at all the right places. And not one of these motherfuckers predicted what happened in 2008, despite their DSGE models. Consider a Bernanke speech from May 2007 (https://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm). He says at one point:

"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system." Uh, say what, now? Fool.

And a few months earlier (https://fraser.stlouisfed.org/title/statements-speeches-ben-s-bernanke-453/long-term-fiscal-challenges-economy-8955) he demonstrates conclusively that he doesn't actually know how our financial system works, how the Treasury pays for things, and what "deficits" really are.

But guess who did see 2008 coming? Institutionalists, heterodox economists, MMT economists (in particular Steve Keen), and a few actual traders in the markets.

We should never, never, never, never listen to any neoclassicals or libertarian economists about anything. Bernanke, Greenspan, Summers, Mankiw, the fools at Mercatus Center, CATO-Heritage-AEI charlatans...the lot of them.

Imagine if Apollo 11's orbits and trajectories had been calculated by Ptolemaic or Copernican astronomers/mathematicians.

Well, that's what is hegemonic in American university economics departments and the Fed.

I really do despise neoclassical economics.

Fuck, lunch is over. Back to work.

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"Imagine if Apollo 11's orbits and trajectories had been calculated by Ptolemaic or Copernican astronomers/mathematicians."

What about the astrologers? Armstrong was a Leo and Aldrin was Aquarius, and this partnership is typically "energetic and unstoppable". Furthermore, Collins was a Scorpio (incompatible with Leo) and that's why he was chosen to be left alone in the command module. The astrologers got that stuff right. If Apollo 11 had been launched towards the constellation Gemini (which is prominent in Armstrong's birth chart and preceded the Apollo missions) instead of the moon, its possible they would have run out of gas before reaching it.... or its possible they would have latched onto a river of fast moving hyperspace and everything would have worked out fine. Maybe that's what the economists are hoping for - a river of corporate bailouts and hyperinflation to save their stupid asses.

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Good one. :) Made my post-run coffee taste extra good this morning.

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The same thing happened in the pork industry 30 years ago. "Favorite Son" Sam Brownback from from small town Kansas, national Future Farmers of America president, KS state governor and US senator was apparently bought and paid to sell out his own people by allowing large corporate hog producers into the state which sold their product at minuscule margins only to the large packers situated nearby in the western part of the state. This drove out all the independent packers throughout the rest of the state, then all the independent hog buyers and, finally, the independent producers. I grew up on one of those independent farms. My father died soon after his entire life's work had to be scraped by bulldozers to avoid the property taxes on the derelict buildings and bins. There is clearly a top down policy initiative to drive out all independent business people of every kind in America. Wake up folks. America is on the brink of collapse into a neofeudal monopolistic hell if the oligarchs and the banksters that fund this industry consolidation/predation are not stopped.

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You make some valid points about the current system, but what we don't want is reversion to socialism or Keynesian economics (although the latter probably works better in certain areas like highly complex and integrated transport systems, like underground systems). Socialism doesn't work because you need a system which has capital in the hands of the those talented at creating more of it- government is terrible at allocating resources, and useless at eliminating waste, especially in terms of labour (or at least reallocating to meet current, rather than obsolescent needs).

But where most economics falls over is that it critically undervalues productive labour. Consider this- China's economic miracle was produced in capital terms, by contracts which were generally about 6% gross profit margin- that's barely enough to cover taxes, inflation and risk. Instead, almost all of the virtue in their economic cycle was generated through the money made available to textile workers and the like, who is turn spent their money on higher margin goods and services, which more often than not existed at the SME and more labour intensive end of the business ecosystem.

Where economics needs to catch up, is in understanding that successful economic systems need both capital and labour- they exist as a form of dynamic equilibrium, coupled system or ecosystem. And the best argument against neoliberals is that the incentives should stretch all the way down to the bottom. Year ago, the British Standards Institute calculated that PROPORTIONAL productivity pay systems generated 50% greater productivity on average, than flat rate managed systems (which also requite top heavy management and supervisors). I've personally worked in systems which are 400% more productive than typical for their sector- through front-end selection, method study, high morale and good pay (which with benefits, is generally twice as high as standard).

It sounds as though you have been reading Richard Wolff on economics. Might I suggest Mark Blythe- he is Left-leaning political economist at Brown who probably explained the 2008 crash better than anyone else. This is him ripping budget hawks in Congress, on the subject of austerity: https://www.youtube.com/watch?v=D2rXFNx37MA&t=216s . His view is that in 2008 we needed a fundamental change in our economic software- most systems seem to have a goal which arises from the interaction of politics and economics. In the Keynesian era, it was full employment- which eventually came at the expense of eroding capital (which however much one might despise it, is necessary). With Reaganomics it was fighting inflation- which over time erodes labour, ultimately breaking the natural distributor system, or water cycle, of the economic system.

We need a new economic system. The best I've seen is in Sweden from '91 onwards. It is friendly to capital (which prevents capital flight). It has higher income and consumption taxes, but has much better and larger social safety nets, which ultimately ends up saving costs, because you don't have to lock up large segments of you population, or pay the cost of repeated ambulance calls for OD's. It also creates a more technically advanced workforce, able to produce Unicorn businesses (Spotify, etc).

It's a free market capitalist society which is far more humane and caring. For those on the Left, it ranks very high on the Index of Economic Freedom, despite it's stronger worker protections. For those on the Right, they have no inheritance tax and a result gain far more revenue from corporation tax and CGT- the most anyone has been able to extract in inheritance tax is Belgium with 0.6% of government revenue. Sweden generated 2.75% of its revenue from corporation tax a few years back, compared to America's meagre 1.13%- and this is before one considers the far greater revenue they get from CGT, through domestic capital not being offshored.

They also give a 30% rebate on debit interest on your taxes, which works out equally well if you are a student with borrowing from you accrued living costs, or a millennial homeowner with a mortgage. More generally, I'm beginning to believe that there might be a problem in economic terms with capital surplus in the system. It tends to create rigged speculative asset markets in areas like building land- which creates a form of front-end rentier economics and an Iron Triangle of Interest which includes the financial sectors greed for mortgage debt assets. Liam Halligan has written about it Home Truths https://www.bitebackpublishing.com/books/home-truths . Here in the UK, building land in the South now sells for £1 million an acre (enough for 5 to 6 houses or 18 rabbit hutches). It's effectively a form of oligopoly. The way many European countries deal with it, is with a planning uplift tax- which pays for infrastructure and schools, whilst releasing general revenue to be spent upon other priorities.

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Where do I begin? I’ll assume you write in good faith.

So, what, exactly, do you mean by “reversion to socialism or Keynesian economics”? What definition or model of socialism are you using? Do you mean British mid-twentieth century socialism with the NCB, British Rail, the NHS, etc?

Or do you mean the social democracies of Scandinavia? Or maybe the one-party socialism of Cuba? Or maybe the current partial socialism of French and German railways and French nuclear power electricity generation. Or how about the actual socialism of every country that has its own army and navy. The government owns the army, navy and air force. So I guess the military is socialist, right? RIGHT?

Do you see how the word “socialism" is useless? It’s nearly meaningless because in practice, for too many people, it just means “when the government does shit I don’t want the government to do.”

And why do you use “socialism" and “Keynesianism” as almost synonymous? Let’s assume you could offer a clear, unambiguous definition of socialism. That has nothing to do with Keynesianism. Keynesianism is a description of the dynamics of a capitalist economy that uses money. So did we ever actually have economic policy that could be called Keynesian? The question makes a category error. Keynesianism isn’t a policy or political philosophy. It is a description of the dynamics of a capitalist money economy.

It’s worth seeing what Keynes actually wrote. In Book 1, Ch. 3 The Principle of Effective Demand, he summarizes his theory and then summarizes again with eight propositions. This is found on pg 24 of the Palgrave edition of the General Theory, or pg 27 of the Cambridge Collected Writings of J.M. Keynes VII, or in this PDF: https://www.marxists.org/reference/subject/economics/keynes/general-theory/

What, exactly, do you object to in his eight propositions describing the dynamics of a capitalist money economy?

Again, what does “reverting to Keynesianism” even mean?

I’ll summarize his ideas even more.

—The level of employment depends on the level of investment, for investment requires labor. Employees must be paid and their paychecks are the source of effective demand for products and services.

—Moreover, the level of investment depends on several factors and one of the biggest is expectations of future demand. There is uncertainty in these expectations. Thus it is possible for the economy to be at an equilibrium with very high unemployment. This would happen because business owners have liabilities to pay with cash or credit and assets that must be financed with cash or credit. If receipts are reduced, liabilities are due, and cash or credit is scarce, there will be no money to invest in the productive capacity to meet future demand. No investment means no hiring, so the equilibrium state of high unemployment can persist. As in fact it did, during the Great Depression.

—Investment here doesn’t mean buying stocks or bonds to net a capital gain when you sell the stocks later or to make money by selling the bond later. That is mere speculation because it's more likely than not that you are buying the stocks from another person wishing to get liquidity. You are not buying a new stock issue directly from the firm. Thus, it's not "investment" in the firm for the firm to increase or improve productive capacity, or simply ‘capital’.

—And this point about the investment decisions of businesses is obvious to anyone who actually lends to businesses or does business. The small businesses I work with do not hire because their taxes are lowered. That produces a windfall that is usually used to pay off debt, add to the small business owner’s wealth (e.g. retirement accounts), or for consumption. Businesses hire because demand has increased and—importantly—expectations of future demand are optimistic. The only people who don’t understand this seem to be Ivy League neoclassicals and childish libertarians. Note well, they are not usually business owners who need to hire employees, sell services or products, and make a payroll.

So, again I ask, what do you MEAN by “reversion to Keynesianism”? What are your implicit assumptions?

Note well the Keynes quote from Ch. 24 at the top of the PDF: 
“Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world.”

You say Keynesianism “eroded" capital. What exactly do you mean? Ford didn’t lose productive capacity in the 1970s because of Keynesianism. Boeing was still selling airliners to United, Pan Am, and British Airways. British steel production dropped from 1970 to 1980. Was this because of Keynesianism? Or were there other causes?

You say a free market capitalist society is far more humane. Given that no industrialized country has ever had a free market, I don’t know how you conclude this. Throughout the nineteenth and twentieth centuries all industrialized countries had subsidies, tariffs, duties, etc. to benefit whichever interest group had enough power to get them enacted by legislatures. And for owners it was a pretty free market, they did whatever they damn well pleased. Same here in the US. The only time things got better for employees was when they banded together precisely to constrain, not liberate, capitalists.

You’re right, we do need new economic ideas. Yes, I’ve read everything by Blyth and Wolff. Blyth’s austerity book and Great Transformations are an excellent takedown of neoclassical bullshit and a great introduction to institutional economics, respectively. Note well, Blyth is not an advocate of supposedly free market capitalism.

I would say the new economic ideas must come from two sources:

1. Incorporating thermodynamics into our economics. Infinite growth on a finite planet is absurd. As Steve Keen says, “Capital without energy is a statue; labor without energy is a corpse.” 
If an economic theory does not or cannot incorporate thermodynamics and its constraints, then it’s not worth a damn. Only the illusion of infinite resources allows neoclassical bullshit to exist.

2. Actually understanding economic dynamics. Neoclassical economics cannot ever explain economic dynamics because its fundamental assumption is there exists some equilibrium in which “markets clear.” Aristotle’s physics began with certain assumptions we now know to be wrong. Newtonian mechanics has the assumption that a body at rest will stay at rest, and a body in motion will stay in motion and move in a straight line unless acted on by an outside net force. And experiment bears this out. The assumptions matter. And predictions matter. And neoclassical predictions are worth fuck all. See: Everything said by Alan Greenspan when advocating for financial deregulation; everything said by Ben Bernanke in the years just before the financial crash in 2008, and every prediction about how QE would give us runaway inflation.

If you really do wish to think about a new economic paradigm you should start by understanding what Keynes actually said about economic dynamics. And there’s another guy, Michal Kalecki, who actually developed the theory of effective demand before Keynes, but no one in the anglo-sphere knew it because Kalecki only published in Polish. His book is Theory of Economic Dynamics and has the advantage of also being succinct, where Keynes was more verbose. They are tough to jump into unprepared and I struggled and did a lot of re-reading, but they are worth the work.

Then see Hyman Minsky’s paper on the financial instability hypothesis and Wynne Godley’s work on sectoral financial balances and stock-flow consistent modeling. You can find material on the internet or read Randall Wray's book on MMT or Stephanie Kelton's book on MMT, for succinct introductions to sectoral financial balances and stock-flow consistency.

Also, Minsky wrote a book about Keynes's General Theory. It’s titled John Maynard Keynes, but it’s not a biography. It’s about the General Theory.

Lastly, Steve Keen does an outstanding job of demolishing equilibrium economics in his book, Debunking Economics. I think it'll be out of print soon as he just published a new book, The New Economics. But Debunking is a great read; get any edition available secondhand. In his New book he incorporates thermodynamics in economic analysis.

Lastly, from Keen I learned about this Stanley Jevons quote from 1888: 
“We must carefully distinguish between the Statics and Dynamics of this subject. The real condition of industry is one of perpetual motion and change. …If we wished to have a complete solution of the problem in all its natural complexity, we should have to treat it as a problem of dynamics. But it would surely be absurd to attempt the more difficult question when the more easy one is yet so imperfectly within our power.” (pg. 93 in an edition of The Theory of Political Economy, from Elibron Classics, 2006) Throughout the book he talks about statics and dynamics and how we must develop a dynamic theory of the economy.

In other words, even using calculus and some basic differential equations, the nineteenth century marginalists did not fully understand how a capitalist money economy works even when you assume it moves toward some equilibrium. And the contemporary equilibrium neoclassicals are no better than their equilibrium marginalist forebears.

But this has been a long diversion from the main point of Stoller’s article, which is: Don’t listen to neoclassicals. Ever.

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Keynesianism, is a theory, and a bad one at that. The theory is that push spending by government, is good at jump starting the economy when it is broken. This hasn't worked, ever. Socialism, is really the next step from Keynes, where a central authority through voting will run the economics of an economy. Eventually the problem of bad investments by either method of those not involved in the development of capital and growing businesses, will cause a boom/bust cycle over and over.

The "boom" in beef prices from packers, is due to regulatory hurdles that strangle competition, forming monopolies that control prices. Austrians correctly predict this over and over. They recommend that government get out of the way, and the markets will correct themselves, which they would.

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Simple question

Have you worked in China, Thailand, the Philippines, etc. Have you engaged in international trade? What is the Labor content in product today?

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The problem with capitalism is that you eventually run out of other people's labor. Capitalism requires cheap labor and there can be no cheap labor in a wealthy society. Capitalism therefore seeks to impoverish society rather than to enrich it. It is a myth that capitalism will generate widespread wealth because that would be counterproductive to profits, the capitalists are incentivized to create widespread poverty. Despite increasing productivity rates due to massive innovations in computers and software over the last 50 years the standard of living has been flat. Where did all the wealth go? It was removed. The innovations were created by small software and computer startups working out of their garages, not by monopoly capitalists. The free market (and labor) produces wealth whereas capitalism consumes it (and destroys it if necessary to maintain poverty). Its not an equilibrium, its production, consumption and destruction. Capitalism is not a necessary or desirable component of a healthy economy any more than a cancer is necessary to the body. It must be removed carefully however because the arteries have been rerouted to feed it.

Most people cannot distinguish the free market from capitalism but they are opposites. The free market is a wonderful thing, a relatively new innovation to encourage competition, whereas "capitalism" is just repackaged greed and corruption which has been around for thousands of years. Capitalism kept us in the dark ages, the free market helped get us out of it.

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China has a uniquely socialist version of slave labor in the plants reporting to China Inc. Your last paragraph could be a middle of the road critique of Mars Inc. and its pantheon of companies, Dove, Calcan, Whiskas, Uncle Bens, and M&M among others. They also grow rice, wheat and other crops on 5 million plus acres in various countries along with traders on the CBOE. It is different when a option trader sends shipping instructions to short seller. All done w/o issuing stock and controlled by the family. I was a contractor in their new data center in 1988 so my information is most likely outdated. Final rejoinder is 2008 crash began with the inability of too many mortgage payers losing the ability to pay. That will over time become invisible when the population growth numbers become are apparent. There just won't be enough people buying homes to sustain the market in most areas. Is an uplift tax similar to building permit fees that run up to 10usd sq foot? Generally grouped under school funding if memory serves on my last development project.

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Simple and the same question to you

Have you worked in China, Thailand, the Philippines, etc. Have you engaged in international trade? What is the Labor content in product today?

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"They also give a 30% rebate on debit interest on your taxes, which works out equally well if you are a student with borrowing from you accrued living costs, or a millennial homeowner with a mortgage."

But as usual does crap for renters?

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Hilarious. All this blathering about economic theories, and the word "immigration" doesn't appear once.

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Lord you are a thick one. Oerhaps there is a clue in there for you, sigh.

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That is _exactly_ it.

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I looked up the economist mentioned in the article, Koontz. His 1991 Ph.D. dissertation is titled "Meatpacker Conduct, Oligopsony Power, and Live Cattle Price Dynamics". https://webdoc.agsci.colostate.edu/cv/srkoontz.pdf

Note the word "oligopsony." If you're familiar with Stoller's work you know what it means. If not, note it is analogous to an oligopoly. So you have the dichotomy monopoly-oligopoly vs. monopsony-oligopsony.

A monopsony is when you have a single buyer for a product, or when one buyer has effective control by being the largest buyer. The meaning of "oligopsony" follows from that.

In other words, this asshole has known since at least 1991 the problems a monopsony will create for producers (the ranchers)...but he doesn't fucking care because he is bamboozled by the efficiency fairy (or he gets consulting fees).

The explanation is probably superfluous in this newsletter's comments, but just in case.

But wait, there's more. One of his dissertation advisors is Michael A. Hudson, who wrote this https://legacy.farmdoc.illinois.edu/irwin/archive/books/Futures-Regulatory/Futures-Regulatory_chapter6.pdf in 1985

which was funded by...you guessed it...the American Enterprise Institute.

Koontz's dissertation is even cited as a source for a 1990 Senate subcommittee hearing titled Economic Concentration in the Meatpacking Industry. https://books.google.ca/books?id=u0DrSMR3bm4C&pg=PA145&lpg=PA145&dq=Stephen+R.+Koontz+university+of+illinois+ph.d.&source=bl&ots=y3Uc_qF5dd&sig=ACfU3U2s41u1yaDTy__efBMuHglV9is3qw&hl=en&sa=X&ved=2ahUKEwio9KD9sc3zAhWSm-AKHZlrAs8Q6AF6BAgQEAM#v=onepage&q=Stephen%20R.%20Koontz%20university%20of%20illinois%20ph.d.&f=false

You can't make this shit up.

These neoclassicals and libertarians KNOW their cult produces monopoly and monopsony, but they don't fucking care because none of them actually run businesses. They get paid by think tanks and universities.

They are all frauds. All of them.

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Your curses were appropriate.

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I was wondering where the politics and payola came into play since beef is just following the exact same gameplan and patsys that chicken used. Thanks for finding it so quickly. It is all really gross.

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Oct 15, 2021Liked by Matt Stoller

Thanks for this. It's not just about monopoly pricing, it's about the threat industrial ag represents to the health of the land, the animals and ourselves when smaller, more innovative and flexible farmers are forced out of business. Not to mention that, though ranchers can't afford to be sentimental, downright cruelty is a feature of suits farming by spreadsheet.

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Not to mention that, though ranchers can't afford to be sentimental, downright cruelty is a feature of suits farming by spreadsheet. --> 100% agree!

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My wife's grandparent's pigs were allowed to roam a large fenced area that included part of the nearby forest - the natural home of pigs. How many farmed pigs these days have ever even seen a tree?

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Oct 15, 2021Liked by Matt Stoller

It has been clear for decades that economists are nothing more than shills.

Economics, as is practiced by the leading economists, is neither science nor credible.

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Oct 15, 2021Liked by Matt Stoller

Terrific piece, Matt. Thanks for tackling both ag monopolization and economists, both of whom I've been trying to bring down a few notches for years! Anthony

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Oct 15, 2021Liked by Matt Stoller

Having seen 'Inside Job' I've been distrustful of all economists working at policy levels, and this article supports my skepticism. I'd be curious to see how the $$$ got moved around at the University level that bought these guys off.

I have to commend them though. They built in those escape hatches within the footnotes you quoted which pretty much maintains their patina of credibility, but at the same time gave the packers and more importantly the politicians enough in the body of their work to point to that justifies this disgusting setup.

It reminds me of that opinion rendered by the Intel community over the Hunter Biden laptop. The authors said 'we don't know if we're right, but this 'could' be a Russian op' and that was enough for Legacy Media to shelve the issue.

As a kid back in the day we'd call BS b/c they're talking out of both sides of their mouths.

I'd love to see the grant monies paid to these economic 'scientists' in the back room. I'll put $$ down that you'll see the same dynamic that was uncovered in 'Inside Job'.

Lastly, when I was an undergrad, we used to laugh at the Sociologists, Economists and Psychologists. All three disciplines suffered from 'Science Envy'. They all wanted to be held in as high esteem as the 'Hard' sciences (Chem/Phys/Math/Bio and the mother of all Eng).

Despite the Nobels, for Econ, it's not.

The so called 'soft' sciences are more schools of Philosophy than 'science'.

And look how actual science has degraded over the last year and a half. Hard questions being avoided or misrepresented (see Rogan) is but one example.

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Oct 15, 2021Liked by Matt Stoller

The scam used by Koontz is identical to other major ones (like the one involving temperature): do science, but then summarize something else entirely in the cliff notes to policy makers.

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When so called experts can be bought so relatively cheap no wonder the world is going mad.

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Oct 25, 2021Liked by Matt Stoller

The collusion between the packers is even worse than indicated in this Article. If you want to see it in action all you need to do is attend any Cattle Auction (Cash Market) and watch what happens. Not only are the "Buyers" in collusion w hand signals, nods, and breakfast conversations but the Owners of the Auction Houses are often involved as well. They all know each other and seem to key off the moves of the other buyers and Auction house owners. I have been buying and selling my own cattle for years and have been literally robbed by this collusion on several occasions. Its a scandal and these monopolies and systems of collusion need to be broken up and reformed. If not the American Rancher, folks invested in maintaining the environment and quality, will be exterminated and all the beef you get will be from the Cruel, anti-natural, chemical laden industry that is BIG BEEF

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I'm sending this on to a rancher who has a significant EeewTube following on his well-versed and agri-socioeconomics-oriented channel, 'Yanasa TV.' And who fell under the Reagan mythos/spell. (Swelling music, flags a'fluttering, rich-getting-richer, uh-huh.) He seems fairly bright, (he is) and like so many Americans, just needs to get out more. (That's an inside/outside joke, he does most of his vids outdoors accompanied by an obnoxious rooster much of the time.)


And no, this is NOT an endorsement of ANY Presidents or their significant wanna-be opposites who lost in the years following R.R.

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Matt will find that the Koch brothers started moving into the university economic's departments while the government withdrew funds. I live two blocks from a university where all the business departments have the names of the local oligarchs. The board is loaded by Republicans and they're part of the "state policy networks" and ALEC, etc. David mentioned Austrian economics--which also fits well with the Ayn Rand cult in Washington. ;)

It's all connected with the dark money network of the Koch's.

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My uncle is a cattle rancher, my cousin is a brand inspector, and I used to do cowboy work back in the day. Thank you for your reporting. I will be sure to share this with them.

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Thanks! Let me know how they respond.

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My uncle loved your article. Here are a couple of points that came up when we were talking about it that you might be interested in.

• In the 1950’s a rancher could sell ten calves and buy a truck these days he could sell a whole herd and still not afford a new one.

• The fact that processors are concentrated in a few specific geographical areas, means there is great expense shipping cattle to and from the processors. The shipping and fuel costs get passed down to consumers.

• As far as my uncle can tell, auction prices for his cattle are the same this year as last year, even though the market price of beef has gone up.

• Inflation in general makes it more difficult to run a business where you have so many various expenses. Ranchers are simply stuck buying the things they need for their business. As my uncle put it “you either pay or you go without.”

• Ranches make for good tax write offs for the wealthy while still being a massive expense to those who try to make a living ranching.

• Having more smaller processors spread around the country would reduce the cost to ranchers and allow them to sell their cattle for more.

• You cannot hold out for a better price when it comes to cattle, because you still must feed them.

• The industry is pretty much unsustainable at this rate and there is almost no economic incentive for the next generation to become ranchers.

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I guess all those articles proclaiming the death of Economics were wrong or premature. The Grey Lady deserves to die; Economics never was a 'science' and the sooner we get wise to that, the better for reality to rule our thinking.

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Neoclassical economics is embedded in so many of our institutions as the default framework for decision-making.

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All the more reason to ditch it! It isn't science, it's just a bunch of guys (yes guys) who sit around and create dubious 'models' of reality that were and are false. Remember how the saintly economist Allan Greenspan admitted under questioning that he had 'no idea' how the system that produced the 2008 crash could have failed. Our hysterical times are perfect for lifting the curtain on these nefarious actors. Thanks for the article; really fascinating, and I hope some of your politicians pay attention.

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Economics is as much a science as any anthropological discipline. Unfortunately it's filled with motivated partisans who are motivated not by the discoveries of economics, but by ideologically chosen models that they force-fit the data to.

A bad statistical scientist force fits data to a normal curve. A good statistical scientist plots the data and then derives the actual curve of the data, and and tries to figure out the causes of the data fitting that curve.

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Read a history book. When the time comes, it will be easier to nationalize a monopoly than thousands of family businesses.

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which is why the best antidote to that particular brand of "socialism" is to break up the monopolies making it very difficult for the state to nationalize their industry.

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"What the extreme socialist favors, because of his creed, the extreme capitalist favors, because of his greed." - former Supreme Court Justice Robert Jackson

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The cattle prices crash chart end in Nov-2020.... is there a more updated one that shows the most recent gap trends?

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You mentioned the barriers to starting a processing facility. But you seemed to gloss over it, as if it were made up by economists or some school/cabal of economists. Seems like the most potent question is: if this massive profit opportunity exists, then let’s open one. The same cabal might say that profit would incite market entry unless there is some reason entry is not possible (capital, not as good an opportunity as claimed, profit margin doesn’t always equal good returns). So, why can’t it happen and can you address those? Will I be threatened or killed if I start one? Will unions shut me down? Will no one sell to me? Also, you get blips of profit in the short run, but what about big picture long run? Computer chips weren’t a good business, but now they are a great business and that sends the signal to the right part of the bottleneck… but it takes time. No one can predict the future. Third, some of the companies you mention that are doing so well don’t seem to be doing so well. If the management is serving shareholders so well and has a free pass to take money from customers and suppliers, then why aren’t these companies massively more valuable? Lastly, seems like something similar happened in lumber last year too.

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"But you seemed to gloss over it, as if it were made up by economists or some school/cabal of economists. Seems like the most potent question is: if this massive profit opportunity exists, then let’s open one."

I didn't gloss over it, the dominant packers will simply dump product at below cost until they kill the competition. Or they'll close up the market with exclusive contracts.

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Exclusive contracts make sense. So, no one will sell to me then. Not a monopsony, but something else (coercion, lack of flexibility, lack of staying power). You’d think sellers would love having new processing capacity and be willing to support it, but maybe they are scared or too self-interested themselves? I know nut farmers start co-ops for processing hulls and shells. Dumping makes sense too, and this would also explain why the companies you speak of aren’t massively successful (but may be in the future). FWIW, I’m not sure I’d be quoting CEOs from earnings calls - they wish for and predict a lot of things that don’t come true as opposed to being a smoking gun, but you could be right. As to oligopolies, the biggest sources seem to be patents and regulatory burdens. Its hard to meet rules and regulations, even good ones and many startups just sell out or don’t bother. If you want more supply, then an easy place to start is to make it easier for small companies to add it. Easier said than done, I know. Trying to fix it from a conference room can make the problem worse. And I see people talking about margins all the time. Margins matter, but there are plenty of dominant businesses without them (Wal-mart, Amazon) and many high margin businesses that are terrible (jewelry, t-bills). Thanks for the thought-provoking piece. Value chains are fun. Value moves around. Look at IBM, Microsoft, Intel, NVIDIA, Google… all different parts of the value chain in computing/Internet that have risen and fallen through time.

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Interesting. For years, French dairy farmers have been complaining of low milk prices / prices too low for them to live beyond bare subsistence level. Many of them have claimed that competition is too strong in a VERY strongly regulated European agricultural market. Often, they bring up 'the Danes' as being a big source of problems: said Danes 'invested in their production [and processing?] facilities and outcompete the French on the Europewide market".

The same goes for fruit and vegetables, which French farmers claim are subject to big greenhouse-based producers in Spain.

Makes me wonder if concentration isn't the main main problem in Europe.

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