Economics of War

21 08 2008

by Rizab

Last night I had a feverish discussion with tea on the prospective of a third world war. With U.S.,trying to put pressure on Russia, by trying to create a military base in Poland ( according to media sources in Russia ), and tense negotiations among the top political officials in the region.

It makes me wonder on how come the world just does not get enough of the anguish and pain of war. Even in times of peace the world economy spends most of its resources on preparing for war by investing in arms and ammunition in trillions of dollars .

 With majority of the people dyeing of hunger and many more of  getting deprived of a basic education, the G8 ( The worlds most economically advanced nations) and the BRIC ( The four emerging economic powerhouses, Brazil, Russia, India, China ) feel ashamed in putting 2-3% of their GDP’s on human resource development, and arrogantly invest in toys which destroy human lives. For some countries the world has become a play ground to display their sadist desire, by displaying destruction with their toys. 

What is driving this madness? is it profitability of the defence sector, which is able to see profit in making warheards for destroying peoples lives, or is it fear and insecuirty which exists even today after so many years of globalisation and claiming that planet earth is a homogenous and harmonious planet?


Rationality revisited

14 08 2008

By Economicsfairy

Just a quick question: How do they define “rationality” in economics again? Wasn’t it, very simply, a decision-making process based on what you perceive is better or best for yourself, according to your preferences? I’m not sure, maybe there are already models to incorporate altruistic behaviour, to be able to show that one could do something for someone else (which might be a “sacrifice”), but still behave “rational”.

If not, then the whole concept is a bit flawed, due to a very narrow worldview and also, to limitations on information as far as the long-run time horizon is concerned. Of course, a very “rational” action today (going to work by car because it is more convenient than the bus) can have very bad effects for me and others in the future (including the environment etc. etc.) So is it still rational to take the car?

But it doesn’t always have to be the environment. The game theory model “prisoner’s dilemma” shows that sometimes in a given situation, two players could both be better off by cooperating, but because they don’t trust each other (and behave according to “individual rationality” which would make each alone even better off, but both together worse), they end up in the worst possible situation. This is what happens in our societies at all levels, all the time. People defect because they think the others will do the same and so we end up worse off, altogether. But we are rational.

I think that the whole idea of being rational if you do something only according to how much it benefits yourself in the short-term, without realizing the detrimental effects on yourself in the long-run, other people or the environment, suffers (like many other ideas in world history) from the assumption that we are all separate individuals, separate entities who have to fight for themselves (against others) and are basically alone in this “cruel world”.

There are spiritual people who claim that the opposite is true: that we are not at all separated, neither from others nor from the Divine. They say this would just be a great illusion we all suffer from. So if we regarded the world like as if we were all one, wouldn’t our behavior change, little by little? Wouldn’t it become clearer that whatever good or bad we do to others would come back to us at some point?

And wouldn’t it be fun to think of “rationality” like that? Rational behaviour as a kind of behaviour that doesn’t distinguish too much between people anymore, but that tries to take into account the well-being of as many beings as possible?

Pubs and Churches

14 08 2008

By Teasome



I visited a friend of mine, a proper English gentleman, in Saffron Walden, Essex, a tiny pretty English village. First and foremost, of course, we had a glass of wine in the local Rose and Crown. My friend explained to me that there have traditionally two centres for a community: a local church and a local pub. So I find it highly ironic that pubs are being… Sorry, churches are being so successfully, as you say, converted into pubs. So instead of ‘church+pub’ we now have ‘church=pub’. I am not a big fan of the church as an institution, but frankly speaking, what an awful idea.








Is Money Bad for Your Soul – Discussion

14 08 2008

By Teasome




This pubs and churches theme goes well with this question. Is it really?


I fully agree with the author on this one: if it is a tool for a good goal, money is ok. Perhaps even good. But then this condition MUST HOLD: it must ONLY be the means, not the end in itself. So the agent who has the money must have higher values.


I guess this is where the trick lies. The trick with money is that it easily ‘re-qualifies’ from the category of ‘means’ to the category of ‘ends’.


This is perhaps where religion comes in. The purpose of religion is to educate people about true universal values. That’s why when religion says money is bad, it doesn’t really mean it literally. All it means is that there are higher values than money, and warns people against money becoming a burden on their heart, a constraint to spiritual growth. It tells us about freedom from money as a prerequisite to such growth. That is, being able to be happy without the money.


I also agree that’s it’s silly to always regard rich people with suspicion. Where did he/she get the money from? That’s something that has been very characteristic of people here in Russia, and it hasn’t helped a lot to build normal relationships in society. On the other hand, I understand this suspicion. Money IS indeed dubious, because there is always asymmetry of information. Exploitation IS really happening. Exploitation of resources, when oil, gas and other depletable resources have been used at criminal rates. Exploitation of the environment, which is appalling, shameful, murderous. Exploitation of people, who flock to the huge revolting cities and waste away their lives in stuffy plants and offices, murdering their souls and creativity. Exploitation is real, unfortunately. The world is so complicated these days and the asymmetry of information is such that we don’t realise sometimes that we are indirectly (if not directly) exploiting the nature, other people and ourselves in our struggle to maintain a certain lifestyle.


And finally, using money for change is great. I think it’s a great idea to invest money in education, for example; your own or someone else’s. Invest it in people so that they become knowledgeable, independent, understand what is needed for sustainable life, courageous to follow their calling. It’s great to have money in order to give people creative and interesting jobs, give them opportunities to understand their true potential and find ways to apply it, invest money in art, environment, help the helpless. But you always have to ask: where does my money come from? I have earned it working day and night, it’s my clean, hard-won money – but how exactly clean is it? Perhaps if I got this job, someone lost it. I paid for the electricity and the petrol I used in the process of going to work and working, I paid for the paper, I paid the taxes so that the government takes care of the unprivileged and the environment – true, but is it enough? Does my work really pay off, is my earning really fair? What if, like with a butterfly effect, the fact that I am working and earning this salary, causes, through a whimsical and intrinsic chain of effects, someone else to die somewhere on the other side of the globe? How do I know it doesn’t? I probably never will.


So in the end, money is good as a tool, but it is only through a radical and irreversible change of lifestyle and priorities that a true change for a more sustainable living is possible. I suppose.

Sit You Down Father, Rest You

14 08 2008

By Teasome




About calming down the economy. When Katkins was talking about it in Glasgow, I found her conversations erm… strange. In fact; she was asking questions like ‘Do we need economic growth’ etc. For the then blue-eyed economist in me it sounded almost blasphemous. No, perhaps simply strange. Not any more, of course. Now, Katkins, I would agree. To hell with economic growth.


I was just thinking, as I mentioned earlier, about renewable energy. I will extend on this one. Say, we build wind turbines. One doesn’t make them out of wood or stone. One makes them out of materials which are essentially petrochemicals. So how is that renewable?


A TEMPORARY answer to that would be: use less petrochemicals right now for other things, and make wind turbines instead. Instead of coca-cola bottles and ugly Chinese dolls. And other trash. Alright, I thought. But millions people, supposedly, are employed in producing and marketing all that trash, mainly in materially worse-off countries. However, come to think of that, do we really need that much employment? Suppose there is a global change in values. People choose a different lifestyle. They work less (globally), produce less, consume less. Demand falls, prices fall, wages fall, employment should be just about right! Katkins, was that what you were saying?


I don’t know though what to do with this issue long term. How will we receive energy in the future, once we have recycled and reused all our petrochemicals? Back to wooden mills? Hah. This is when I get Malthusian.







Galbraith and Schumacher

14 08 2008

By Teasome

It’s so curious: I’m reading two books at a time, Galbraith: The Age of Uncertainty and Schumacher: Small is Beautiful. They are the exact opposite of each other. Galbraith holds conservative, reactionist views. Schumacher at his time was, perhaps, a revolutionary. Galbraith praises Economic Thought. Schumacher scathes it. Both books were written a couple of decades ago. And both are brilliant!

“Ethics is not enough for me – I’m an economist”

12 08 2008

By Economicsfairy


It just came back to my mind: Once in an “Aid and Development”-class, a lecturer made a comment about debt relief (it was all about the pros and cons etc.), and he said something like, well, of course, there is a moral argument for debt relief, but that wouldn’t be enough for him, because he was an economist. Therefore, he had to ask himself: Where (in which country?) does debt relief pay most? I think that idea makes perfect sense, but please note the separation: moral arguments – economic arguments. How can we bridge the gap between the two at least a wee bit?


In this context, it shouldn’t be forgotten that Adam Smith, the Godfather of Economics, wrote his “Theory of Moral Sentiments” before the “Wealth of Nations”. He was a (social) philosopher after all. Economics has to be quantified with the help of mathematics and statistics, no doubt – but it is more than that. It is not a pure natural or mathematical science. It is inextricably linked with politics and so there always has to be some kind of judgement. Many countries have accounted for that fact in some way or other by their constitutions, rules of law, social systems, protection of minorities etc.


But on a global scale, this kind of thinking (and acting!) is absolutely lacking. Don’t get me wrong: I don’t want a world government (really not, just imagine the horrible bureaucracy, the red tape and the opportunities for corruption!) but we need a reliable framework to make the global economy truly work – concerning trade, debts, labour, social security, migration – a framework backed by the people and by more than economic calculations. What power does the UN have? Is the WTO democratic? Who can effectively fight global pollution? So much needs to be done – we shouldn’t leave it to economists and their limited worldview alone.