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Tuesday, November 21, 2017

Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe -- A Thanksgiving Preparatory Breakfast For the Hopeless

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Enlighten Radio Podcasts:Resistance Radio -- Giving Thanks to the Resistance

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Saturday, November 18, 2017

Artificial Intelligence Learns to Learn Entirely on Its Own

Artificial Intelligence Learns to Learn Entirely on Its Own

A new version of AlphaGo needed no human instruction to figure out how to clobber the best Go player in the world — itself.

A mere 19 months after dethroning the world's top human Go player, the computer program AlphaGo has smashed an even more momentous barrier: It can now achieve unprecedented levels of mastery purely by teaching itself. Starting with zero knowledge of Go strategy and no training by humans, the new iteration of the program, called AlphaGo Zero, needed just three days to invent advanced strategies undiscovered by human players in the multi-millennia history of the game. By freeing artificial intelligence from a dependence on human knowledge, the breakthrough removes a primary limit on how smart machines can become.

Earlier versions of AlphaGo were taught to play the game using two methods. In the first, called supervised learning, researchers fed the program 100,000 top amateur Go games and taught it to imitate what it saw. In the second, called reinforcement learning, they had the program play itself and learn from the results.

AlphaGo Zero skipped the first step. The program began as a blank slate, knowing only the rules of Go, and played games against itself. At first, it placed stones randomly on the board. Over time it got better at evaluating board positions and identifying advantageous moves. It also learned many of the canonical elements of Go strategy and discovered new strategies all its own. "When you learn to imitate humans the best you can do is learn to imitate humans," said Satinder Singh, a computer scientist at the University of Michigan who was not involved with the research. "In many complex situations there are new insights you'll never discover."

After three days of training and 4.9 million training games, the researchers matched AlphaGo Zero against the earlier champion-beating version of the program. AlphaGo Zero won 100 games to zero.

To expert observers, the rout was stunning. Pure reinforcement learning would seem to be no match for the overwhelming number of possibilities in Go, which is vastly more complex than chess: You'd have expected AlphaGo Zero to spend forever searching blindly for a decent strategy. Instead, it rapidly found its way to superhuman abilities.

The efficiency of the learning process owes to a feedback loop. Like its predecessor, AlphaGo Zero determines what move to play through a process called a "tree search." The program starts with the current board and considers the possible moves. It then considers what moves its opponent could play in each of the resulting boards, and then the moves it could play in response and so on, creating a branching tree diagram that simulates different combinations of play resulting in different board setups.

Video: David Silver, the lead researcher on the AlphaGo team, discusses how AlphaGo improves its Go strategy by playing against itself.


AlphaGo Zero can't follow every branch of the tree all the way through, since that would require inordinate computing power. Instead, it selectively prunes branches by deciding which paths seem most promising. It makes that calculation — of which paths to prune — based on what it has learned in earlier play about the moves and overall board setups that lead to wins.

Earlier versions of AlphaGo did all this, too. What's novel about AlphaGo Zero is that instead of just running the tree search and making a move, it remembers the outcome of the tree search — and eventually of the game. It then uses that information to update its estimates of promising moves and the probability of winning from different positions. As a result, the next time it runs the tree search it can use its improved estimates, trained with the results of previous tree searches, to generate even better estimates of the best possible move.

The computational strategy that underlies AlphaGo Zero is effective primarily in situations in which you have an extremely large number of possibilities and want to find the optimal one. In the Nature paper describing the research, the authors of AlphaGo Zero suggest that their system could be useful in materials exploration — where you want to identify atomic combinations that yield materials with different properties — and protein folding, where you want to understand how a protein's precise three-dimensional structure determines its function.

As for Go, the effects of AlphaGo Zero are likely to be seismic. To date, gaming companies have failed in their efforts to develop world-class Go software. AlphaGo Zero is likely to change that. Andrew Jackson, executive vice president of the American Go Association, thinks it won't be long before Go apps appear on the market. This will change the way human Go players train. It will also make cheating easier.

As for AlphaGo, the future is wide open. Go is sufficiently complex that there's no telling how good a self-starting computer program can get; and AlphaGo now has a learning method to match the expansiveness of the game it was bred to play.

John Case
Harpers Ferry, WV

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Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe -- HATS ARE COMING OFF THEIR HEADS!! -- SOME ADULT HUMOR INCLUDED

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Enlighten Radio Podcasts:Podcast: Resistance Radio -- The Fight Against the Tax Fraud, and Misogyny Gone Crazy

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Friday, November 17, 2017

Enlighten Radio Podcasts:Podcast The Moose Turd Cafe -- News from China Energy Colony #12

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Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe -- Feel Replaced by your Exact Duplicate?

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Thursday, November 16, 2017

Millions fewer would get overtime protections if the overtime threshold were only $31,000 [feedly]


Federal law requires that people working more than 40 hours a week be paid 1.5 times their rate of pay for the extra hours, but exempts salaried workers who make above a certain salary threshold and are deemed to have "executive, administrative, or professional" duties. The salary threshold is meant to help protect salaried workers with little bargaining power—for example, low- or modestly-compensated front-line supervisors at fast food restaurants—from being forced to work unpaid overtime. But, at $455 per week (the equivalent of $23,660 per year), the overtime threshold has been so eroded by inflation that it is now less than the poverty rate for a family of four. If the rule had simply been adjusted for inflation since 1975, today it would be well over $50,000.

In 2016, the Department of Labor published a highly vetted, economically sound rule that would have increased the threshold to $913 per week ($47,476 per year). However, a district court judge in Texas ruled that the new overtime threshold is invalid. While the Trump DOL plans to appeal the judge's flawed ruling, they will not defend the $47,476 threshold. Instead, they intend to propose a new threshold, and have asked the court to stay the appeal while they engage in new rulemaking.

DOL officials have repeatedly indicated that they would prefer a salary threshold far below $47,476—rolling back protections for millions of workers. It is likely that they are considering proposing a new threshold of around $31,000.

Where does that number come from?  In 2004, under George W. Bush, DOL increased the overtime threshold, but fell far short of fully adjusting it for inflation since its prior increase almost 30 years earlier, in 1975. The $31,000 figure is the 2004 threshold adjusted for inflation. Meanwhile, if the 1975 threshold had been adjusted for inflation, it would be well over $50,000. Labor Secretary Alexander Acosta has suggested that simply adjusting the weak 2004 threshold for inflation might be appropriate. Additionally, in a July Request for Information, DOL specifically asked for public comment on whether updating the 2004 salary level for inflation would be an appropriate basis for setting the salary level, further suggesting that that level is under strong consideration by the department.

EPI estimated that the 2016 rule, with a salary threshold of $47,476, would have provided new or strengthened overtime protections to 12.5 million workers. Using that same data, we find that a threshold of $31,000 would provide new or strengthened protections to only 3.4 million workers. In other words, 9.1 million workers—close to three-quarters of the 12.5 million—would be left out. The table below shows how many people in each state would not get new or strengthened overtime pay protections if the threshold were set at $31,000 instead of $47,476. Setting the salary threshold below the 2016 level would roll back a long overdue wage increase for American workers across the country.

Table 1
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Tuesday, November 14, 2017

Dissecting the $250 Billion China Deals Trump Got for U.S.

Dissecting the $250 Billion China Deals Trump Got for U.S.

Bruce Einhorn
November 9, 2017, 2:54 AM EST Updated on November 9, 2017, 7:09 AM EST

Pacts include imports to China spanning helicopters to beef
Many agreements are tentative, involve existing partnerships

How does $250 billion in deals get sliced?

The White House has unveiled a slew of agreements with China as President Donald Trump seeks to address an imbalance in trade. While Commerce Secretary Wilbur Ross boasted a total of $250 billion in business deals, getting to that figure may require some fuzzy math. 

Many of the deals weren't broken out into separate valuations, while a large number were in the form of non-binding memoranda of understanding or involved agreements with existing Chinese partners.

Boeing Co.'s $37 billion aircraft order consists mostly of previously agreed deals, according to officials with knowledge of the matter. An agreement involving Cheniere Energy Inc. was presented at the signing ceremony as worth $11 billion, though neither company involved announced the value. Other pacts are stretched over lengthy periods, such as a 20-year shale gas and chemical project in West Virginia.

Still, the wave of deals signals the potential for an easing of tensions between the two countries, in addition to an increase in trade for products ranging from helicopters to beef. Here are highlights of what's been disclosed so far:


Alaska Gasline Development Corp.: a joint agreement to advance a liquefied natural gas project in Alaska, involving the state of Alaska, Sinopec, China Investment Corp. and Bank of China Ltd. The $43 billion project has been in discussion for years, and Alaska Gasline applied for federal approval for the development in April. Exxon Mobil Corp., ConocoPhillips, BP Plc and TransCanada Corp. have been involved in the effort, but have distanced themselves since estimating in 2012 that it would cost as much as $65 billion and take more than a decade to construct.

West Virginia: the state signed an MOU with China Energy Investment Corp. The Chinese company plans to invest in West Virginian shale gas development and chemical manufacturing projects over two decades, according to the state's Department of Commerce, which did not offer details. The size of the proposed investment is $83.7 billion, larger than the state's gross domestic product last year of $73.4 billion.

Cheniere Energy: signed an MOU with China National Petroleum Corp. The companies will "continue in-depth discussions" regarding liquefied natural gas projects, according to a press release from the U.S. Department of State.

Air Products & Chemicals Inc.: the industrial gases company and state-owned Yankuang Group Co. intend to form a joint venture to build and operate an air separation, gasification and syngas clean-up system for a $3.5 billion coal-to-syngas production facility. Air Products is currently a supplier to the first phase of the project. Earlier this year, Air Products scrapped its plan to acquire China's Yingde Gases Group Co. after a private-equity firm swooped in.


Boeing: China Aviation Supplies Holding Co. agreed to buy 300 aircraft worth about $37 billion. An official with knowledge of the matter said the order is mostly for jets that have been agreed upon since 2013 and set to be delivered through 2020. Representatives of Chicago-based Boeing declined to say whether the contracts are new, or rather, old acquisitions that are sometimes made public during heads-of-state visits. China Aviation didn't respond to phone calls seeking comment.

Chinese airlines have been on a plane-buying spree amid a projection for the country to overtake the U.S. as the largest air-travel market possibly in as soon as five years. The state has previously placed large orders through a centralized buyer before dividing them up among its airlines and leasing companies.

General Electric Co.: Juneyao Airlines ordered GEnx engines for its Boeing 787 fleet and ICBC Leasing ordered LEAP-1B engines for Boeing 737 MAX aircraft. The list prices for the two deals totaled $2.5 billion. GE also said it signed a cooperation agreement with China Datang Group to provide the Chinese company with gas turbines and other products and services.

Honeywell International Inc.: contract with Spring Airlines Co., the Chinese budget carrier that flies over 130 routes with a fleet of Airbus A320 planes. The U.S. company is a supplier for the C919, a new single-aisle plane being produced by state-owned Commercial Aircraft Corp. of China Ltd.

Bell Helicopter: the subsidiary of Textron Inc. signed an agreement to sell 50 of its helicopters to Reignwood International Investment Group Co. The company had already ordered 60 choppers, according to Bell Helicopter.


Beef and Pork: Inc. agreed to buy $1.2 billion of beef from the Montana Stock Growers Association and pork from Smithfield Foods Inc. over the next three years, as part of a deal by the Chinese online retailer to import $2 billion of U.S. goods over that period.

The beef portion, about $200 million, would signal a big increase in the appetite for red meat among Chinese consumers, as shipments remain low due to the limited supply that meets requirements. According to China's Customs General Administration, the country imported 2.3 billion yuan of beef last year.

The pork deal may not be much help creating jobs at Smithfield's U.S. factories: The company can't sell made-in-America sausage, ham and bacon to Chinese consumers because China prohibits imports of processed meat, CEO Kenneth Sullivan said in an interview in March. Smithfield parent WH Group opened an 800 million-yuan factory in central China in 2015 to produce American-style packaged meat products.

Archer-Daniels-Midland Co.: memorandum of understanding with state-owned COFCO Group for the export of U.S. soybeans into China. The U.S. Soybean Export Council said in an email that Chinese companies signed letters of intent to buy 12 million tons of U.S. soybeans valued at $5 billion.


Goldman Sachs Group Inc.: China's sovereign wealth fund and Goldman Sachs announced a fund to help invest as much as $5 billion in American companies that have existing or potential business connections with China. State-backed China Investment Corp.'s role in the fund could complicate investments in American companies, after the Trump administration in September rejected a China-led takeover of a U.S. chipmaker on national-security grounds. Moreover, Goldman Sachs may only be able to contribute 3 percent of the fund because of U.S. rules regarding banks' private-equity investments.


Qualcomm Inc.: non-binding MOUs with Chinese smartphone vendors Xiaomi, Oppo and Vivo - all of them current customers - to sell approximately $12 billion in semiconductors over three years. The San Diego-based chip company's China sales of $14.6 billion accounted for 65 percent of its revenue for the fiscal year ended Sept. 24.


DowDuPont Inc.: memorandum of understanding between Dow Chemical and Beijing Mobike Technology Co. to cooperate on developing lighter-weight and more environmentally friendly bicycles. The two companies began working together last year, the official China Daily reported Tuesday.

Caterpillar Inc.: cooperative framework agreement with newly formed China Energy Investment Corp. -- a combination of Shenhua Group Corp., the nation's largest coal miner, and China Guodian Corp., one of its top-five power generators. The pact "outlines future agreements" for sales and rentals of Caterpillar mining equipment and other products and services, the U.S. company said in a statement.

Honeywell International: an MOU with Oriental Energy Co. to cooperate on five propane dehydrogenation projects in Chinese cities. Honeywell announced in May that two Oriental Energy subsidiaries had licensed its technology to begin producing propylene.

American Ethane Co.: the Houston-based exporter of liquid ethane entered into a $26 billion, 20-year contract with Nanshan Group, according to a statement on AEC's website.

— With assistance by Hui Li, Dong Lyu, Peter Martin, Yan Zhang, Haze Fan, and Ramsey Al-Rikabi

John Case
Harpers Ferry, WV

The Winners and Losers Radio Show
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Finance Has Become the Dominant Force in Shaping the Global Economy [feedly]

Finance Has Become the Dominant Force in Shaping the Global Economy

Lynn Fries of The Real News—reporting from the 2017 launch of the United Nations Conference on Trade and Development's Trade and Development Report—interviews the report's main author, Richard Kozul-Wright, Director of UNCTAD's Globalization and Development Strategies Division. In the interview, Kozul-Wright addresses the problems of a "hyperglobalized world … in which finance has essentially gained the upper hand in policy making." And he discusses the prospects for building alternatives to neoliberalism and austerity, up to and including a "Global New Deal."

Full text below the jump.

Lynn Fries: Welcome to The Real News. I'm Lynn Fries reporting from the UN Geneva on the 2017 launch of UNCTAD's flagship report, The Trade and Development Report as its main author, Richard Kozul-Wright, is given the floor at the UNCTAD Trade and Development Board meeting. Here is a clip of that meeting.








Richard Kozul Wright: A pleasure to be here.



Lynn Fries: In the current debate over what is at the source behind the problems like rising inequality in today's globalized world, you do not point the finger at trade or technology, the usual suspects. Comment on that and more broadly on what differentiates the direction of your report from that of most other international institutions.








There isn't an international governance system separately from the nation states that make up that system. And therefore you have to be talking, you have to persuade nation states that they need to change if the international governance system is going to change. That's clear. So you are pitching an argument not at some airy fairy level about the independence of multilateralism. It's how can governments … what do national level governments particularly the systemically important governments have to do to change the system in a way that we can begin to see improvements in the area that we are outlining in the report.


Lynn Fries: Richard Kozul-Wright, thank you.

Richard Kozul-Wright: Thank you


Originally published at The Real News Network.
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 -- via my feedly newsfeed

Taking a Crack at Neoliberalism [feedly]

Taking a Crack at Neoliberalism

Here is the back story for my new piece "Rescuing Economics from Neoliberalism," just out in the Boston Review.

I have never been a fan of the term "neoliberal." It has never been quite clear what it means. Nor is it obvious who today's neoliberals are. Thatcher, Reagan, Pinochet in their day, yes. But today?

Nevertheless, the term is widely used by its many critics to condemn in quite broad brush terms a certain way of thinking of the role of the market in society. There are more careful exegeses that give neoliberalism a more precise meaning and a specific historical trajectory (see here and here). But in public discourse the term has become a loose cannon – or to use perhaps a more appropriate metaphor -- a spray gun directed at one's intellectual opponents.

I was happy to keep myself out of the ring on what neoliberalism is or isn't. Then a few months ago Leon Wieseltier wrote to me out of the blue, and effectively cajoled me to write to a piece on the subject for what was going to be his new journal. He had seen the galleys of my new book which had apparently convinced him that I was the man for the job. So I set myself upon the task.

As it turned out, Wieseltier's new journal was cancelled before its first issue came out. (In case you have missed it, here is the story). His publishers were kind enough to release the rights for the piece, and Josh Cohen was nice enough to want to publish it in the Boston Review.

Here is the core of it:

That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that center-left politicians—Democrats in the United States, Socialists and Social Democrats in Europe—enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatization, financial liberalization, and individual enterprise? Much of our contemporary policy discussion remains infused with norms and principles supposedly grounded in homo economicus.

But the looseness of the term neoliberalism also means that criticism of it often misses the mark. There is nothing wrong with markets, private entrepreneurship, or incentives—when deployed appropriately. Their creative use lies behind the most significant economic achievements of our time. As we heap scorn on neoliberalism, we risk throwing out some of neoliberalism's useful ideas.

The real trouble is that mainstream economics shades too easily into ideology, constraining the choices that we appear to have and providing cookie-cutter solutions. A proper understanding of the economics that lies behind neoliberalism would allow us to identify—and to reject—ideology when it masquerades as economic science. Most importantly it would help us develop the institutional imagination we badly need to redesign capitalism for the twenty-first century.

For the full piece, go here.

PS. Many thanks by the way to Adam Kirsch and Lev Mendes for their work on the original piece.

 -- via my feedly newsfeed

Dani Rodrik Indicts Neoliberalism -- both the term, and the reality

Our wisest economist, IMO, speaks up!

Rescuing Economics from Neoliberalism


As even its harshest critics concede, neoliberalism is hard to pin down. In broad terms, it denotes a preference for markets over government, economic incentives over social or cultural norms, and private entrepreneurship over collective or community action. It has been used to describe a wide range of phenomena—from Augusto Pinochet to Margaret Thatcher and Ronald Reagan, from the Clinton Democrats and Britain's New Labour to the economic opening in China and the reform of the welfare state in Sweden. 

The term is used as a catchall for anything that smacks of deregulation, liberalization, privatization, or fiscal austerity. Today it is reviled routinely as a short-hand for the ideas and the practices that have produced growing economic insecurity and inequality, led to the loss of our political values and ideals, and even precipitated our current populist backlash.

As we heap scorn on neoliberalism, we risk throwing out some of its useful ideas.

We live in the age of neoliberalism, apparently. But who are neoliberalism's adherents and disseminators—the neoliberals? Oddly, you would almost have to go back to the early 1980s to find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of The Washington Monthly, published an essay called "A Neo-Liberal's Manifesto." It makes for interesting reading thirty-five years later, since the neoliberalism it describes bears little resemblance to today's target of derision. The politicians whom Peters names as exemplifying the movement are not Thatcher and Reagan, but Bill Bradley, Gary Hart, and Paul Tsongas. The journalists and academics whom he lists include James Fallows, Michael Kinsley, and Lester Thurow. Peters's neoliberals are liberals (in the U.S. sense of the word) who have dropped their prejudices in favor of unions and big government and against markets and the military.

The use of the term "neoliberal" exploded in the 1990s, when it became closely associated with two developments, neither of which Peters mentions. One was financial deregulation, which would culminate in the 2008 financial crash—the first that the United States had experienced since the interwar period—and in the still-lingering euro debacle. The second was economic globalization, which accelerated thanks to free flows of finance and to a new, more ambitious type of trade agreement. Financialization and globalization have become the most overt manifestations of neoliberalism in today's world.




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 Neoliberalism is typically understood as based on key tenets of mainstream economic science. To see those tenets, without the ideology, consider a thought experiment.

A well-known and highly regarded economist lands in a country he has never visited and knows nothing about. He is brought to a meeting with the country's leading policymakers. "Our country is in trouble," they tell him. "The economy is stagnant, investment is low, and there is no growth in sight." They turn to him expectantly: "Please tell us what we should do to make our economy grow."

The economist pleads ignorance and explains that he knows too little about the country to make any recommendations. He would need to study the history of the economy, to analyze the statistics, and to travel around the country before he could say anything. But his hosts are insistent. "We understand your reticence and we wish you had the time for all that," they tell him. "But isn't economics a science, and aren't you one of its most distinguished practitioners? Even though you do not know much about our economy, surely there are some general theories and prescriptions you can share with us to guide our economic policies and reforms."


The economist is now in a bind. He does not want to emulate those economic gurus he has long criticized for peddling their favorite policy advice. But he feels challenged by the question. Are there universal truths in economics? Can he say anything valid (and possibly useful)?

So he begins. The efficiency with which an economy's resources are allocated is a critical determinant of the economy's performance, he says. Efficiency, in turn, requires aligning the incentives of households and businesses with social costs and benefits. The incentives faced by entrepreneurs, investors, and producers are particularly important when it comes to economic growth. Growth needs a system of property rights and contract enforcement that will ensure those who invest can retain the returns on their investments. And the economy must be open to ideas and innovations from the rest of the world.

But economies can be derailed by macroeconomic instability, he goes on. Governments must therefore pursue a sound monetary policy, which means restricting the growth of liquidity to the increase in nominal money demand at reasonable inflation. They must ensure fiscal sustainability, so that the increase in public debt does not outpace national income. And they must carry out prudential regulation of banks and other financial institutions to prevent the financial system from taking excessive risk.

Now he is warming up to his task. Economics is not just about efficiency and growth, he adds. Economic principles also carry over to equity and social policy. Economics has little to say about how much redistribution a society should seek. But it does tell us that the tax base should be as broad as possible and that social programs should be designed in a way that does not encourage workers to drop out of the labor market.

By the time the economist stops, it appears as if he has laid out a full-fledged neoliberal agenda. A critic in the audience will have heard all the code words: efficiency, incentives, property rights, sound money, fiscal prudence. Yet the universal principles that the economist describes are in fact quite open-ended. They presume a capitalist economy—one in which investment decisions are made by private individuals and firms—but not much beyond that. They admit—indeed they require—a surprising variety of institutional arrangements.

So has the economist just delivered a neoliberal screed? We would be mistaken to think so, and our mistake would consist of associating each abstract term—incentives, property rights, sound money—with a particular institutional counterpart. And therein lies the central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic principles map onto a unique set of policies, approximated by a Thatcher–Reagan-style agenda.  

Consider property rights. They matter insofar as they allocate returns on investments. An optimal system would distribute property rights to those who would make the best use of an asset and afford protection against those most likely to expropriate the returns. Property rights are good when they protect innovators from free riders, but they are bad when they protect them from competition. Depending on the context, a legal regime that provides the appropriate incentives can look quite different from the standard U.S. style regime of private property rights.

This may seem like a semantic point with little practical import; but China's phenomenal economic success is largely due to its orthodox-defying institutional tinkering. China turned to markets, but did not copy Western practices in property rights. Its reforms produced market-based incentives through a series of unusual institutional arrangements that were better adapted to the local context. Rather than move directly from state to private ownership, for example, which would have been stymied by the weakness of the prevailing legal structures, the country relied on mixed forms of ownership that provided more effective property rights for entrepreneurs in practice. Township and Village Enterprises (TVEs), which spearheaded Chinese economic growth during the 1980s, were collectives owned and controlled by local governments. Even though they were publicly owned, entrepreneurs received the protection against expropriation they needed. Local governments had a direct stake in the profits of the firms and hence did not want to kill the goose that lays the golden eggs.


China relied on a range of such innovations, each delivering the economist's higher-order economic principles in unfamiliar institutional arrangements. Dual-track pricing, which retained compulsory grain deliveries to the state but allowed farmers to sell excess produce in free markets, provided supply-side incentives while insulating public finances from the adverse effects of full liberalization. The so-called Household Responsibility System gave farmers the incentive to invest in and improve the land they worked on, while obviating the need for explicit privatization. Special economic zones provided export incentives and attracted foreign investors without removing protection for state firms (and hence safeguarding domestic employment). In view of such departures from orthodox blueprints, calling China's economic reforms a neoliberal turn, as critics are inclined to do, distorts more than it reveals. If we are to call this neoliberalism, we must surely look more kindly on the ideas behind the most dramatic poverty reduction in history.

One might protest that China's institutional innovations were purely transitional. Perhaps it will have to converge on Western-style institutions to sustain its economic progress. But this common line of thinking overlooks the diversity of capitalist arrangements that still prevails among advanced economies, despite the considerable homogenization of our policy discourse.

What, after all, are Western institutions? The importance of the public sector, for example, in the club of rich Organization For Economic Cooperation and Development (OECD) countries varies from a third of the economy in Korea to nearly 60 percent in Finland. In Iceland, 86 percent of workers are members of a trade union; the comparable number in Switzerland is just 16 percent. In the United States firms can fire workers almost at will; French labor laws require employers to jump through many hoops first. Stock markets have grown to nearly one-and-a-half times national income in the United States; in Germany, they are only a third as large, representing one-half of national income.

The idea that any one of these models of taxation, labor relations, or financial organization is inherently superior to the others is belied by the varying economic fortunes that each of these economies have experienced over recent decades. The United States has gone through successive periods of angst in which its economic institutions were judged inferior to those in Germany, Japan, China, and now possibly Germany again. Certainly comparable levels of wealth and productivity can be produced under very different models of capitalism. We might even go a step further: today's prevailing models probably come nowhere near exhausting the range of what might be possible (and desirable) in the future. 

The visiting economist in our thought experiment knows all this and recognizes that the principles he has enunciated need to be filled in with institutional detail before they become operational. Property rights? Yes, but how? Sound money? Of course, but how? It would perhaps be easier to criticize his list of principles for being vacuous than to denounce it as a neoliberal screed.

Still, these principles are not entirely content free. China, and indeed all countries that managed to develop rapidly, demonstrate their utility once they are properly adapted to local context. Conversely, too many economies have been driven to ruin courtesy of political leaders who chose to violate them. We need look no further than Latin American populists or Eastern European communist regimes to appreciate the practical significance of sound money, fiscal sustainability, and private incentives.

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Of course economics goes beyond a list of abstract, largely common sense principles. Much of the work of economists consists of developing stylized models of how actual economies work and then confronting those models with evidence. Economists tend to think of what they do as progressively refining their understanding of the world: their models are supposed to get better and better as they are tested and revised over time. But progress in economics happens differently.

Economists study a social reality that is unlike the physical universe of natural scientists. It is completely man-made, highly malleable, and operates according to different rules across time and space. Economics advances not by settling on the right model or theory to answer such questions, but by improving our understanding of the diversity of causal relationships. Neoliberalism and its customary remedies—always more markets, always less government—are in fact a perversion of mainstream economics. Good economists know that the correct answer to any question in economics is: it depends.

The economists who let their enthusiasm for free markets run wild are in fact not being true to their own discipline.

Does an increase in the minimum wage depress employment? Yes, if the labor market is really competitive and employers have no control over the wage they must pay to attract workers; but not necessarily otherwise. Does trade liberalization increase economic growth? Yes, if it increases the profitability of industries where the bulk of investment and innovation takes place; but not otherwise. Does more government spending increase employment? Yes, if there is slack in the economy and wages do not rise; but not otherwise. Does monopoly harm innovation? Yes and no, depending on a whole host of market circumstances.

In economics, new models rarely supplant older models. The basic competitive-markets model dating back to Adam Smith has been modified over time by the inclusion, in rough historical order, of monopoly, externalities, scale economies, incomplete and asymmetric information, irrational behavior, and many other real world features. Yet the older models remain as useful as ever. Understanding how real markets operate necessitates different lenses at different times.

Perhaps maps offer the best analogy. Just like economic models, maps are highly stylized representations of reality. They are useful precisely because they abstract from many real world details that would get in the way. Realistic full-scale maps would be hopelessly impractical artifacts, as Jorge Luis Borges described in a short story that remains the best and most succinct explication of the scientific method. But abstraction also implies that we need a different map depending on the nature of our journey. If we are traveling by bike, we need a map of bike trails. If we are to go on foot, we need a map of foot paths. If a new subway is constructed, we will need a subway map—but we wouldn't throw out the older maps.      

Economists tend to be very good at making maps, but not good enough at choosing the one most suited to the task at hand. When confronted with policy questions of the type our visiting economist faces, too many of them resort to "benchmark" models that favor laissez-faire. Knee-jerk solutions and hubris replace the richness and humility of the discussion in the seminar room. John Maynard Keynes once defined economics as the "science of thinking in terms of models joined to the art of choosing models which are relevant." Economists typically have trouble with the "art" part.


This professor is rather different from the one the journalist encountered previously. On the record, he exudes self-confidence, not reticence, about the appropriate policy. There is one and only one model, at least as far as the public conversation is concerned, and there is a single correct answer regardless of context. Strangely, the professor deems the knowledge that he imparts to his advanced students to be inappropriate (or dangerous) for the general public. Why?

The roots of such behavior lie deep in the sociology and the culture of the economics profession. But one important motive is the zeal to display the profession's crown jewels in untarnished form—market efficiency, the invisible hand, comparative advantage—and to shield them from attack by self-interested barbarians, namely the protectionists. Unfortunately, these economists typically ignore the barbarians on the other side of the issue—financiers and multinational corporations whose motives are no purer and who are all too ready to hijack these ideas for their own benefit.

As a result, economists' contributions to public debate are often biased in one direction, in favor of more trade, more finance, and less government. That is why economists have developed a reputation as cheerleaders for neoliberalism, even if mainstream economics is very far from a paean to laissez-faire. The economists who let their enthusiasm for free markets run wild are in fact not being true to their own discipline.

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How then should we think about globalization in order to liberate it from the grip of neoliberal practices? We must begin by understanding the positive potential of global markets. Access to world markets in goods, technologies, and capital has played an important role in virtually all of the economic miracles of our time. China is the most recent and powerful reminder of this historical truth, but it is not the only case. Before China, similar miracles were performed by South Korea, Taiwan, Japan, and a few non-Asian countries such as Chile and Mauritius. All of these countries embraced globalization rather than turn their backs on it, and they benefited handsomely.


Defenders of the existing economic order will quickly point to these examples when globalization comes into question. What they will fail to say is that almost all of these countries joined the world economy by violating neoliberal strictures. China shielded its large state sector from global competition, establishing special economic zones where foreign firms could operate with different rules than in the rest of the economy. South Korea and Taiwan heavily subsidized their exporters, the former through the financial system and the latter through tax incentives. All of them eventually removed most of their import restrictions, long after economic growth had taken off. But none, with the sole exception of Chile in the 1980s under Pinochet, followed the neoliberal recommendation of a rapid opening­-up to imports. Chile's neoliberal experiment eventually produced the worst economic crisis in all of Latin America. While the details differ across countries, in all cases governments played an active role in restructuring the economy and buffeting it from a volatile external environment. Industrial policies, restrictions on capital flows, and currency controls—all prohibited in the neoliberal playbook—were rampant.

By contrast, countries that stuck closest to the neoliberal model of globalization were sorely disappointed. Mexico provides a particularly sad example. Following a series of macroeconomic crises in the mid-1990s, Mexico embraced macroeconomic orthodoxy, extensively liberalized its economy, freed up the financial system, sharply reduced import restrictions, and signed the North American Free Trade Agreement (NAFTA). These policies did produce macroeconomic stability and a significant rise in foreign trade and internal investment. But where it counts—in overall productivity and economic growth—the experiment failed. Since undertaking the reforms, overall productivity in Mexico has stagnated, and the economy has underperformed even by the undemanding standards of Latin America.

These outcomes are not a surprise from the perspective of sound economics. They are yet another manifestation of the need for economic policies to be attuned to the failures to which markets are prone, and to be tailored to the specific circumstances of each country. No single blueprint fits all.

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Before globalization took a turn towards what we might call hyper-globalization, the rules were flexible and recognized this fact. Keynes and his colleagues viewed international trade and investment as a means for achieving domestic economic and social goals—full employment and broad-based prosperity—when they designed the global economic architecture in Bretton Woods in 1944. From the 1990s on, however, globalization became an end in itself. Global economic arrangements were now driven by a single-minded focus on reducing impediments to the flows of goods, capital, and money across national borders—though not of workers, where the economic gains in fact would have been much larger. 

This perversion of priorities revealed itself in the way trade agreements began to reach behind borders and remake domestic institutions. Investment regulations, health and safety rules, environmental policies, and industrial promotion schemes all became potential targets for abolition if they were deemed to stand in the way of foreign trade and investment. Large international firms, rendered footloose by the new rules, acquired special privileges. Corporate taxes had to be lowered to attract investors (or prevent them from leaving). Foreign enterprises and investors were given the right to sue national governments in special offshore tribunals when changes in domestic regulations threatened to reduce their profits. Nowhere was the new deal more damaging than in financial globalization, which produced not greater investment and growth, as promised, but one painful crash after another.

Neoliberalism must be rejected on its own terms for the simple reason that it is bad economics.

Just as economics must be saved from neoliberalism, globalization has to be saved from hyper-globalization. An alternative globalization, more in keeping with the Bretton Woods spirit, is not difficult to imagine: a globalization that recognizes the multiplicity of capitalist models and therefore enables countries to shape their own economic destinies. Instead of maximizing the volume of trade and foreign investment and harmonizing away regulatory differences, it would focus on traffic rules that manage the interface of different economic systems. It would open up policy space for advanced countries as well as developing ones—the former so they can reconstruct their social bargains through better social, tax, and labor market policies, and the latter so they can pursue the restructuring they need for economic growth. It would require more humility on the part of economists and policy technocrats about appropriate prescriptions, and hence a much greater willingness to experiment.

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As Peters's early manifesto attests, the meaning of neoliberalism has changed considerably over time as the label has acquired harder-line connotations with respect to deregulation, financialization, and globalization. But there is one thread that connects all versions of neoliberalism, and that is the emphasis on economic growth. Peters wrote in 1982 that the emphasis was warranted because growth is essential to all our social and political ends—community, democracy, prosperity. Entrepreneurship, private investment, and removing obstacles (such as excessive regulation) that stand in the way were all instruments for achieving economic growth. If a similar neoliberal manifesto were penned today, it would no doubt make the same point.

Critics often point out that this emphasis on economics debases and sacrifices other important values such as equality, social inclusion, democratic deliberation, and justice. Those political and social objectives obviously matter enormously, and in some contexts they matter the most. They cannot always, or even often, be achieved by means of technocratic economic policies; politics must play a central role.

But neoliberals are not wrong when they argue that our most cherished ideals are more likely to be attained when our economy is vibrant, strong, and growing. Where they are wrong is in believing that there is a unique and universal recipe for improving economic performance to which they have access. The fatal flaw of neoliberalism is that it does not even get the economics right. It must be rejected on its own terms for the simple reason that it is bad economics.

John Case
Harpers Ferry, WV

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