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Relative Oil Prices and Differential Oil Profits
No full textIf you thought that oil profits are about producing oil, think again. The enclosed chart, updated from our 2015 Real-World Economics Review paper, ‘Still About Oil?’, shows that the main determinant of oil profit — and specifically of differential oil profit — is not output, but prices
Making Culture Rational ... with Power
No full textWhy business cannot capitalize culture without changing it, usually for the worse
Does Hierarchy Drive Income Inequality? Liberal Arts & Professional Studies Postcoctoral Fellowship Proposal
Full text linkThe York Faculty of Liberal Arts & Professional Studies (LA&PS) awards three postdoctoral fellowships annually, of which no more than one can go to a former York PhD. For 2021-2022, this fellowship went to former York PhD Dr. Blair Fix. The award is for one year, with a possible one-year extension. The project’s advisor is Jonathan Nitzan.
PROJECT SYNOPSIS
Income inequality has, over the last 4 decades, increased dramatically in the United States and Canada. It is a concerning trend. Not only is inequality objectionable ethically, it also seems to be corrosive to human welfare. As inequality grows, human well-being worsens. But while the extent and effects of inequality are well-studied, the cause(s) of growing inequality remains poorly understood. My research attempts to address this deficiency.
I propose that hierarchy — the rank ordering of individuals within a chain of command — is central to how humans distribute resources. The idea is that individuals within a hierarchy tend to use their power to accumulate resources. The result is that income tends to grow with hierarchical rank.
I have assembled a variety of evidence that confirms (at static points in time) this hierarchy-income hypothesis. My post-doctoral research will attempt to extend the evidence to understand how hierarchy relates to the growth of inequality. I propose that the recent growth of top incomes (in the United States and Canada) has been caused by a hierarchical redistribution of income. The idea is that income has been taken from those at the bottom of the corporate hierarchy and given to those at the top.
To investigate this hypothesis, I will extend a large-scale numerical model developed during my PhD studies. This model is the first (to my knowledge) to rigorously connect the distribution of income at the macro-level to the fine-scale, hierarchical structure of firms. I have previously found that this model accurately predicts key features of the US distribution of income. In my post-doctoral research, I will extend the model to study income redistribution — changes in income distribution over time.
By studying how growing income inequality (in the US and Canada) relates to the hierarchical structure within firms, I hope to illuminate new ways to combat inequality
Reconsidering Systemic Fear and the Stock Market: A Reply to Baines and Hager
Full text linkThis article responds to Baines and Hager’s recent critique of the capital-as-power model of the stock market. Proposed by Bichler and Nitzan, this model seeks to explain how financial crises are tied to the concept of ‘systemic fear’. Bichler and Nitzan tested their initial model on US data, finding a strong correlation between capitalist power (as they measure it) and systemic fear. However, when Baines and Hager extended the model to four other countries, they found conflicting results. I respond to Baines and Hager, and argue that they were perhaps too quick to dismiss systemic fear as a useful concept. I re-examine systemic fear in twelve countries, and find that (with a few exceptions), it correlates with capitalist power. These results suggest that the notion of ‘systemic fear’ is useful for studying both capitalist crisis and national diversity in capitalist development
Tim Di Muzio on 'Sabotage'
No full textIn a series of essays published in 2013 and 2014 on capitaspower.com, political economist Tim Di Muzio explored the concept of ‘sabotage’ as it applies to capitalist power. I recently rediscovered these essays and was so impressed by them that I have reposted them here as a single piece.
About the author: Tim Di Muzio is a researcher at the University of Wollongong. He is the author of numerous books, including Debt as power, Carbon capitalism, and The 1% and the Rest of us
From Commodities to Assets: Capital as Power and the Ontology of Finance
Full text link* Winner of the 2021 RECASP Essay Prize *
Assets are a crucial concept of the practice and mindset of the capitalist class. Critical analyses of capitalism, however, tend to admit that the exchange of commodities is the foundation of the analysis of capitalism. This article takes a different approach. I claim that assets offer a solid starting point for a scientific research of capitalism. The analysis of assets allows us to elaborate a general description of economic transactions and, to that extent, it lays the groundwork for reconceptualizing the field of finance. These two issues are closely related. The answer to the question, ‘what are assets?’, will give us the coordinates to address the question: ‘what is finance?
Living the Good Life in a Non-Growth World. Investigating the Role of Hierarchy
Full text linkHumanity’s most pressing need is to learn how to live within our planet’s boundaries — something that likely means doing without economic growth. How, then, can we create a non-growth society that is both just and equitable? I attempt to address this question by looking at an aspect of sustainability (and equity) that is not often discussed: the growth of hierarchy. As societies consume more energy, they tend to become more hierarchical. At the same time, the growth of hierarchy also seems to be a key driver of income/resource inequality. In this essay, I review the evidence for the joint relation between energy, hierarchy and inequality. I then speculate about what it implies for achieving a sustainable and equitable future.
NOTE: This essay was written for and supported by the Seoul Platform for Initiating Discourses on an Equitable and Resilient Society
The Rise of Human Capital Theory
Full text linkToday, human capital theory dominates the study of personal income. But this has not always been so. In this essay, I chart the rise of human capital theory, and compare it to the rise (and fall) of eugenics. The comparison, I argue, is an apt one. Eugenics and human capital theory both focus on isolated traits of individuals. By doing so, both theories neglect the social nature of human behavior
Defending Microeconomics?!
No full textI was sent a link to this article by a colleague, who was concerned with the boldness of the central claim – that standard economic theory explains nothing about market behaviour. I thought I might as well share the outline of my response here. I’m far from being a defender of the foundations of mainstream microeconomics. But this attack goes much too quickly, in my view. I find myself in the odd position of defending something I don’t believe in from an attack I think is unfair – indeed counterproductive
Ignorance is Strength
Full text linkColin Harrison's novel The Finder (2008) uncovers the hidden hierarchy of differential information. We live in a knowledge economy, or so they say. And in the world of finance, knowledge is power: the power to buy assets before their price appreciates. This knowledge-as-power, though, is profitable only when exclusive. Common knowledge – no matter how sophisticated and complex – is never profitable. Only differential knowledge – i.e., knowledge that is unavailable to others or superior to what they have – can yield a ‘return’.
This differential prerequisite explains why every entity in the pyramid of financial information – whether a person or an organization – has no more than a partial vista, with the remaining view blurred by enforced opaqueness and power-backed misinformation. The different vistas are also deeply formative. Individual ‘actors’ may feel empowered by what they know, but in practice, what they know serves to frame their thoughts and direct their actions – usually without them ever knowing it. Even those at the very top – indeed, especially those at the very top – are slaves to their knowledge, however superior