The Fraudonomics piece might be post-structuralist, but I have my
reservations about its reasonableness. The post-strucuturalist gloss seems
to be that (a) bankers peform fraud, (b) the rest of us perform
victimization.

Allen Scott



> This is quite a reasonable post-structuralist analysis....
>
> Fraudonomics
>
> Wednesday, April 28,2010
>
> By Mark Ames
> . . . . . . .
>
> There was a strange moment last week during President
> Obama’s speech at Cooper Union. There he was, groveling
> before a cast of Wall Street villains including Goldman
> Sachs chief Lloyd Blankfein, begging them to “Look into
> your heart!” like John Turturro’s character in Miller’s
> Crossing…when out of the blue, the POTUS dropped this
> bombshell: “The only people who ought to fear the kind of
> oversight and transparency that we’re proposing are those
> whose conduct will fail this scrutiny.”
>
> The Big Secret, of course, is that every living creature
> within a 100-mile radius of Cooper Union would fail “this
> scrutiny”—or that scrutiny, or any scrutiny, period. Not
> just in a 100-mile radius, but wherever there are still
> signs of economic life beating in these 50 United States,
> the mere whiff of scrutiny would work like nerve gas on
> what’s left of the economy. Because in the 21st century,
> fraud is as American as baseball, apple pie and Chevrolet
> Volts—fraud’s all we got left, Doc. Scare off the fraud
> with Obama’s “scrutiny,” and the entire pyramid scheme
> collapses in a heap of smoldering savings accounts.
>
> That’s how an acquaintance of mine, a partner in a private
> equity firm, put it: “Whoever pops this fraud bubble is
> going to have to escape on the next flight out, faster
> than the Bin Laden Bunch fled Kentucky in their chartered
> jets after 9/11.”
>
> And that’s why this SEC suit accusing Goldman Sachs of
> fraud is really just a negotiating bluff to give Obama’s
> people some leverage—or it’s supposed to be,
> anyway—according to the PE guy. He dismissed all the
> speculation that the fraud investigations would turn on
> other obvious villains like Deutsche, Merrill, Paulson &
> Co., the Rahm Emmanuel-linked Magnetar and so on.
>
> “You don’t get it, Ames. Even Khuzami, the SEC guy in
> charge of the Goldman case, is a fraud; the fucker was
> Deutsche’s general counsel when they pulled the same CDO
> scam as Goldman. You have no idea how deep this goes.”
>
> And it’s clear that a lot more people here are aware of
> how fundamentally rotten things are but they’re not
> willing to face the big fraudonomics bummer yet,
> preferring instead to stick with specific accusations.
>
> My position on this was, “Good, throw the book at those
> crooks too, I don’t see what the problem is here.”
>
> This was exactly what I argued a week ago, during a verbal
> slapfight with that acquaintance of mine. We were making a
> scene in a Midtown yuppie restaurant, arguing over just
> how much damage Wall Street had caused, and what to do
> about it.%u202F
>
> His position was indefensible, and he knew it, so he
> switch-
>
> ed tactics:
>
> “OK Ames, which bankers would you throw the book at?
> Because you’re arguing that they’re all guilty. So which
> ones do you go after? Two of them? Three? Half of them?”
>
> “Every last one of them. Lock ’em up in one of their
> private prisons.”
>
> “Not gonna happen, Che.”
>
> “Che? Me? Listen, Scarface, I’m about law and order. Don’t
> any of you PE degenerates believe in that anymore?”
>
> “OK, here’s the deal, Che. I’m going to walk you through
> this nice and slow so that even an agave-sweetened hippie
> like you can understand this. Stick with me, this is gonna
> be a little complicated. Ready?” And so he began.
>
> “Let’s say the government decides one day, ‘You know, we
> oughta listen to Che here, let’s throw the book at every
> firm and every executive that our people can make a case
> against. Because you know, gosh, it’s all about rule of
> law and blind justice, just like Che says.’ OK, so now
> this means indicting just about every serious player in
> finance, so they take down Goldman Sachs, they take down
> Citigroup, JP Morgan, BofA… and they also serve all the
> big funds who are at least as guilty, if not more. So they
> shut down Pimco, Blackrock, Citadel… maybe they indict
> Geithner and Summers, haul in some of Bush’s crooks…
> right?”
>
> “Go on, I’m gonna order some hot, buttered popcorn for
> this. Don’t mind me.” I liked what I was hearing so far.
>
> “OK, now guess what you’ve just done? You’ve just caused
> the markets to completely tank. Remember what happened
> after the Lehman collapse? Remember how popular that made
> every politician in Washington? Still wondering why they
> coughed up a trillion bucks? They were scared for their
> lives; that’s why they voted for that bailout. You’d have
> done the same goddamn thing. But if we go after everyone
> guilty of fraud and theft, the market crash this country
> would see would make 2008 look like Sesame Street. Open
> that can of worms labeled ‘Fraud’ and the whole fucking
> economy collapses. You may as well prosecute people for
> masturbating. No one will know where the fraud
> investigation stops and who will be charged next—everyone
> will try to cash out, and the markets will tank to zero.
> And guess what happens when the markets tank to zero?
> Every fucking American with a retirement plan, or an
> investment portfolio, or a 401k—every state pension plan
> in the country, every teacher’s pension fund, every
> fireman’s pension—every last one of them will be wiped
> out. That’s what the Lehman collapse taught us.”
>
> “Us? It didn’t teach anything but that this country is run
> by maniacs.”
>
> “Jesus H. Christ, you’re even more clueless than the
> idiots who managed the Lehman collapse. I mean, didn’t
> everyone get it how badly those idiots screwed up with
> Lehman? It was the biggest screw-up this hemisphere has
> ever seen. You had Secretary Paulson and Fed Chief
> Bernanke scratching their asses not knowing what to do, so
> then they go, ‘OK, we’re supposed to be a free market
> economy, and we’re supposed to be the Republicans—let’s
> try something different for a change since nothing else is
> working. Let’s go out on a limb and actually give this
> “free market” thing a whirl. Who knows? Maybe the “free
> market” really works the way we always say it does.
> Nothing else seems to work, let’s let the free market
> decide Lehman’s fate. Maybe corporate-socialism isn’t the
> answer.’ So they hung Lehman out in the free-market, and
> BAM! The. Shit. Hit. The. Fan. No shit, dudes—the free
> market is for suckers, didn’t your daddy teach you idiots
> that? Not only did Lehman collapse—everything collapsed;
> confidence in the entire system collapsed. And here’s what
> I’m trying to explain to simpletons like you: Our economy
> is just a confidence game. Don’t ask me how it got this
> way, don’t care.”
>
> I tried saying something insulting to him, but he just
> talked right over me. He was on such a roll.
>
> “I’m sure you have the answer, you and Ron Paul and all
> the other pot-smoking libertarian do-gooders have it all
> figured out. But what I’m saying is, no confidence means
> end of the confidence game. That’s what Lehman showed.
> Every single player in finance suddenly had to face the
> fundamental problem—this whole fucking economy is built on
> fraud and lies and garbage. So when Lehman collapsed,
> every single player panicked, going, ‘If Lehman was
> nothing but a Ponzi scheme—and I know what I’m running is
> a Ponzi scheme—holy shit, that means everyone else is
> running a Ponzi scheme too! Run for the exits!’ No one
> trusted anyone else, everyone pulled out, and the entire
> global economy collapsed just like that. And that meant
> your parents, my parents, every teacher, every fireman,
> every person in the country going into retirement, every
> price on every asset—wiped out.
>
> “And here’s what I’m trying to get you to understand: In
> the grown-up world, when an entire country’s savings
> accounts are wiped out because of some do-gooder and his
> law books and his Thomas Jefferson ‘What about free and
> fair markets?’ crap, that is a big problem—people don’t
> give a fuck about Jefferson and ‘free and fair markets,’
> they just want their savings to be worth something. And
> people are right: Jefferson was an imbecile. He should
> have been a folk singer, not a Founding fucking Father.
> But that’s another issue that’s over your head—the point
> is, the guy who destroys this economy because it’s ‘the
> right thing to do’ will have to flee for his life, and
> whatever president or political party was in power when
> that decision was made will be out of power for the next
> 200 years. That’s why Washington panicked and passed ‘the
> bailout,’ they didn’t want to be the fools whom all the
> Ponzi victims blame for tanking the Ponzi scheme, so they
> broke the glass and pumped up a newer, bigger Ponzi
> scheme. It was an expensive 14 trillion dollar lesson in,
> ‘Stay the fuck away from free-market experiments,
> assholes!’ How naive are you people to actually believe
> that ‘free market’ crap? The problem is when people in
> power are stupid enough to listen to guys like you: all
> the do-gooder libertarians and the do-gooder free-market
> Republicans who forgot that they’re supposed to lie.
> Hello!”
>
> “Libertarian, me? Since when was I ever a libertarian?”
>
> “That’s my point: Fools like you don’t even know who you
> are anymore. They forgot that they’re supposed to lie
> about all that libertarian free-market shit, keep it far
> the fuck out of policy. But instead of just lying about
> free-markets while secretly propping up Lehman, the idiots
> actually tried pulling off a ‘free-market’ miracle, and we
> had to pay $14 trillion just to find out what I could have
> told them for no fee at all, which is: ‘Hey, assholes,
> you’re supposed to be hypocrites, OK? You’re supposed to
> be two-faced free-market liars, not libertarian Quakers!
> You’re not supposed to believe in anything—your job is to
> get up in front of the public and lie about free markets
> and the rest. Period.’
>
> “That’s it, how fucking hard is it? Look, watch my face:
> Say one thing out of one side... and do the other out of
> the other side. Got that? Let everyone else whine and cry
> about, ‘Ooh, that’s not fair, ooh, that’s a bailout,
> that’s socialism, that’s corruption.’ That’s what losers
> do—they whine. You, for example, Che—you whine all the
> time, and look at you... Can you pay the bill for this
> meal? Is there a libertarian on earth who can afford to
> buy a decent meal in Manhattan? And now, look at me: I’m a
> hypocrite. Hell yes I am! I lie every day of my life, I
> lie to myself in my sleep. Hell, I’m lying to you right
> now, in fact I don’t even know what the fuck I’m saying
> anymore because I’m so used to lying. And yet—who’s the
> guy with the black card? Who’s the one who’s going to pick
> up the check tonight? Guys with power, guys like me, we
> lie. You got that? ‘Lie’ as in ‘My Lai’ the massacre—as
> in, ‘My Lai you long time, me so free-markety.’ You
> distract the dumbshits with free-market B.S. because hey,
> for whatever reason, that’s what the public likes to hear,
> it doesn’t really matter what lie you feed them so long as
> it’s the lie that puts them in a trance. And then behind
> the scenes, you do the very opposite: You fix the game,
> you cover up this problem here with those funds there, you
> move shit around, you skim budgets and you subsidize the
> system, you cover up the bad shit and once in a while
> throw a has-been to the wolves to keep the public
> entertained—that’s the way the system works, and anyone
> who’s an adult understands that. And everyone who doesn’t
> understand that can go form an online libertarian chat
> group and complain with all their little libertarian
> friends about free markets and Jekyll Island and ‘Wahhh!
> It’s not not fair, waahhhh!’”
>
> “What’s with the libertarian accusation?”
>
> “It’s just that you all sound the same to me.
> Libertarians, hippies—is there really a difference? You
> all whine alike: ‘It’s not fair, man! Ooh! You can’t do
> that, it’s fraud, it’s corruption, ooh no!’ Or: ‘It’s the
> income inequality, man; Goldman Sachs controls us all man;
> it’s socialism for the rich; it’s all too scary for my
> retarded 5-year-old libertarian brain!’ Seriously, anytime
> I meet libertarians like you—”
>
> “Listen—I’m not a fucking libertarian, OK? I want free
> handouts. How clear do I have to make this? Me—handouts.
> Me—Big Government. I want to collectivize your productive
> cash, because I am a resentful parasite. Are you capable
> of processing a single word of what I’m saying to you,
> Spaz?”
>
> “Uh-huh, sure, whatever. Here’s the thing: I think it’s
> great that you and your friends memorized Road to Serfdom
> in between Star Trek episodes—no really, I’m happy for
> you. Yeah, we’re all so proud. But here’s the thing: We
> grown-ups are really, really busy now trying to sort out
> the free-market mess you made with that Lehman move of
> yours. Yeah, so why don’t you run along to your
> libertarian chat rooms and have your little debates about
> Jekyll Island and the gold standard, because it really
> means a lot to us. And report back to me as soon as you
> have it all figured out, m’kay? Just get the fuck out of
> my face and leave the adults alone.”
>
> It got a lot more vicious and personal than this, but when
> our verbal slap-fight ended—and he paid the bill—I thought
> about what he said, and it made a lot more sense. Fraud
> has become so endemic in this country that it’s woven its
> way into America’s DNA, forming a symbiotic relationship
> that can’t be undone without killing off the host. If they
> push it just a little too hard, the entire American
> economy could crash, asset values could tank, and that
> means tens of millions of extremely pissed off retirees
> and Baby Boomers. As the Wall Streeter put it: “Whoever is
> responsible for bursting this latest bubble by exposing
> all the fraud—and tanking all the markets—will not only be
> out of power for at least a generation, but they’ll all
> have to get radical reconstructive surgery on their faces
> and seek political asylum somewhere remote. No one wants
> to be that guy, and that’s why it’s not going to happen.”
>
> That may be true, but all bubbles to eventually burst, all
> Ponzi schemes do collapse. The only question is when. For
> those of us not on the verge of retiring, the sooner we
> have this day of reckoning and get it over with, the
> better.
>
>
>
>
>
> --
> Dr Jon Cloke
> Lecturer
> Geography Department
> Loughborough University
> Loughborough LE11 3TU
>
> E-mail: [log in to unmask]
> Tel: 00 44 07984 813681
>
>
> On Thu, 29 Apr 2010 18:19:17 +0200
>  wengraf <[log in to unmask]> wrote:
>> I think Allen Scott's warning of the dangers of 'pure
>>algebraic economics'
>> on the one hand and 'pure consumer-psychologistic
>>economics' on the other is
>> very important, as is the remark about the removal of
>>'economic history' as
>> something that economists have to study.
>>
>> Two points:
>> 1) The study of non-strategic individuals and groups is
>>one thing.
>>
>> 2) The behaviour of pseudo-regulatory and corporate
>>elites -- as they are
>> affected by personal and corporate elite interests -- is
>>another. They are
>> capable of being studied by institutional-historians,
>>looking at the
>> behaviour of political policy- and structure- affecting
>>groups in  their
>> strategies for obtaining more 'leverage' and improving
>>their balance of
>> power/advantage in particular conjunctures. These will
>>differ in time and
>> place, and so 'potentially-useful abstractions' have to
>>be subordinated to
>> understanding particular political conjunctures.
>>
>> 3) The structural conditions of preponderantly 'short
>>term' and 'long-term'
>> perspectives in different dominant social categories and
>>in different
>> categories of economic personnel (short-term dealers,
>>longterm institutional
>> strategists) are capable of investigation, as are the
>>interests and
>> ideologies that limit their realism.
>>
>> 4) It may be that heterodox social research (for example
>>Green Economics,
>> and radical economics and political economy) can
>>contribute to thinking
>> harder and above all more historically and more
>>category-specifically about
>> structure and agency. The various work-groups to whom
>>this email is
>> addressed might usefully learn of each other's
>>existence!
>>
>> -----Original Message-----
>>From: A forum for critical and radical geographers
>> [mailto:[log in to unmask]] On Behalf Of AJ
>>Scott
>> Sent: 20 April 2010 20:48
>> To: [log in to unmask]
>> Subject: Beyond post structuralism???
>>
>> The following article appeared in "The Guardian" on
>>April 5th. Like many
>> other critical commentaries on economics and economists
>>today, it makes
>> several well-taken points about the unrealistic and
>>over-formalized
>> abstractions of the economics discipline and its
>>increasing inability to
>> say anything sensible about the state of the world.
>>However, a rather
>> worrying point (for me) about this and most other
>>similar commentaries
>> that I have seen is that the critics tend to see the way
>>to salvation
>> primarily by means of incorporating more subtle
>>behavioral/psychological
>> insights into economics. This, of course, is fine as far
>>as it goes. The
>> neoclassical assumptions of perfect information, perfect
>>rationality,
>> optimal decision-making, and so on, certainly do need to
>>be relaxed and
>> more realistic-cum-flexible approaches adopted. Even so,
>>any conceptual
>> improvement along these lines still leaves us with an
>>essentially
>> behavioral, individualistic, and in the end
>>micro-economic "science."
>> This leaves the way open, for example, to explaining the
>>recent economic
>> crisis in terms of "short-sighted greed." In contrast to
>>this kind of
>> unsatisfactory short-cut, I believe that we need a much
>>more
>> thorough-going structural analysis that pays attention
>>to the underlying
>> systemic features of capitalism as an expressive set of
>>socio-economic
>> dynamics. I suppose I need to add the cautionary note
>>that this can
>> indeed be done without falling into determinism in the
>>strict sense of
>> invoking a causal link from social relations to mind.
>>It's a long time
>> since geographers last openly debated what we used to
>>call the
>> "structure-agency" problem. It seems to me that the
>>current crisis
>> raises this issue again (in spades), and that we as a
>>discipline need to
>> recover some of the ground that we have lost in this
>>regard as a result
>> of various "post-structuralist" turns. Any reactions out
>>there? Allen Scott
>>
>> *
>> *
>>
>> *
>> *
>>
>> *Rescuing economics from its own crisis*
>> *Economists must admit they don't have all the answers
>>and learn from
>> firefighters, psychologists - and history
>> *
>>
>> *By Larry E**lliott*
>>
>>For economics, it's like Glastonbury only with better
>>food and no mud.
>> King's College, Cambridge will host the biggest
>>happening for the dismal
>> science's counterculture in decades when it hosts the
>>inaugural
>> conference of the George Soros funded Institute for New
>>Economic
>> Thinking this weekend.
>>
>> It's a big gig, spread over four days and with plenty of
>>headline acts.
>> Joe Stiglitz, George Akerlof, Michael Spence and Sir
>>James Mirrlees are
>> the four Nobel prize winners performing, along with
>>Dominique
>> Strauss-Kahn, managing director of the International
>>Monetary Fund, Lord
>> Adair Turner of the Financial Services Authority and
>>Bill White, who as
>> the former chief economist at the Bank for International
>>Settlements
>> presciently identified the flaws in the Great Moderation
>>(the apparent
>> decline in economic volatility in the years before the
>>credit crunch).
>>
>> The choice of venue is symbolic and deliberate. The
>>great and the good
>> believe that what has happened over the past three years
>>is both an
>> economic crisis and a crisis in economics. They want to
>>see new thinking
>> of the sort provided by Keynes the last time there was
>>such a systemic
>> shock to the global economy. King's was Keynes's
>>college.
>>
>> The crisis has yet to throw up a new Keynes and is
>>unlikely to do so,
>> according to my friend and fellow commentator, David
>>Smith of the Sunday
>> Times, who has just published a thought-provoking book
>>on the crisis and
>> its likely consequences*.
>>
>> In reality, though, there is no need to reinvent the
>>wheel. It's more
>> important to strip away the layers of complexity that
>>gave big-picture
>> economics a spurious and dangerous exactitude in advance
>>of the crisis.
>> The big lesson in economics from Keynes is that we know
>>less than we
>> think we do, and that there is a vast difference between
>>the output of
>> economic models and the actual behaviour of individuals.
>>
>> "Our basis of knowledge for estimating the yield 10
>>years hence of a
>> railway, a copper mine, a textile factory, the goodwill
>>of a patent
>> medicine, an Atlantic liner, a building in the City of
>>London amounts to
>> little and sometimes to nothing," Keynes wrote. He was
>>unimpressed by
>> the argument that decisions were "the outcome of a
>>weighted average of
>> quantitative benefits multiplied by quantitative
>>probabilities".
>>
>> This, though, is where mainstream economics has ended
>>up. It is possible
>> to construct beautifully precise models if you start
>>from the assumption
>> that rational economic agents with perfect information
>>are operating in
>> free markets that always return to equilibrium. But
>>since none of these
>> assumptions holds true in the real world, this is a
>>classic case of
>> "rubbish in, rubbish out".
>>
>> Even more worryingly, there has been no room in this
>>view of the world
>> for the heterodox. The prestigious economics journals
>>have been cleansed
>> of all but the purveyors of highly technical algebra.
>>Economic history
>> has been removed from the syllabus, because those who
>>yearn for
>> economics to be a hard science believe the past can
>>teach them nothing.
>> Truly, the lunatics have taken over the asylum.
>>
>> The financial crisis has provided Stiglitz, Akerloff and
>>the others with
>> an opportunity to strike out in a new direction. As
>>Smith puts it in his
>> book: "Economists, like bankers, discovered they were
>>more fallible than
>> they thought and for some that was a humbling
>>experience. Occasionally,
>> that is no bad thing."
>>
>> There are plenty of suggestions for where the profession
>>should be
>> heading once it has backed out of its blind alley.
>>Speaking at a Greater
>> London Authority conference last month, economist Paul
>>Ormerod said a
>> lesson from physics is that there is kudos to be had
>>from empirical
>> discoveries. In other words, you don't have to construct
>>an elaborate
>> model of the economy to be considered good; you could
>>draw important
>> conclusions from the available data.
>>
>> An empirical assessment of 250 years of industrial
>>capitalism showed
>> that violent movements in asset prices and credit
>>markets of the sort
>> seen in 2007 and 2008 were relatively frequent; those
>>who used models to
>> assess risk said the chances of a crash were
>>infinitesimal.
>>
>> Nick Parsons, head of strategy at National Australia
>>Bank, says he
>> learns a lot by talking to his bank's clients and by
>>simply observing
>> what people are up to. Sir Alan Budd, chief economic
>>adviser to the
>> Treasury during the recession of the early 1990s, once
>>said that he had
>> been surprised at how poor the official figures were for
>>consumer
>> spending given that the shopping malls appeared to be
>>full of people.
>> Only when he looked more closely and saw that most were
>>empty-handed did
>> he realise the truth: people were reluctant to part with
>>their money but
>> still liked to window-shop.
>>
>> The Bank of England also sees the merits of the
>>economics of walking
>> around. It has a model of the economy (which is being
>>updated and
>> simplified) but interest rate decisions are also
>>influenced by the
>> reports from a string of regional agents who act as the
>>eyes and ears of
>> the monetary policy committee and provide top-class
>>information about
>> what is happening on the ground.
>>
>> At the same GLA conference, Neil Stewart, a psychologist
>>at Warwick
>> University, said that people make economic decisions
>>using
>> general-purpose psychological tools. He used the example
>>of the minimum
>> payments required by credit card companies. The idea
>>behind these is to
>> protect the minority who otherwise would make no
>>repayment, but Stewart
>> said there was evidence that they made other consumers
>>less likely to
>> pay off their bills in full. The perception of consumers
>>was that the
>> minimum payment reduced the chance of them getting
>>seriously into debt,
>> and increasing the minimum payment from 2% to 5%
>>resulted in fewer and
>> fewer people paying off their bills in full.
>>
>> As the Bank of England governor, Mervyn King, noted in a
>>recent lecture,
>> economists can learn about how to cope with instability
>>from other
>> disciplines, such as ecology or epidemiology. The
>>approach of engineers
>> to limiting the damage caused by avalanches or forest
>>fires could be
>> imitated to make economies more resilient to shocks.
>>Questioning the
>> idea of a rational "homo economicus", he added that
>>there was evidence
>> that perceptions of risk were affected by recent
>>experience; actions
>> were influenced by what other individuals were doing;
>>and that people
>> had excessive faith in their own judgments.
>>
>> Like those gathering in Cambridge on Thursday, King is
>>wary of the
>> notion that economics can be boiled down to hard and
>>fast rules.
>> "Beliefs adapt over time in response to changes in the
>>environment; and
>> this in turn affects how economic systems behave," he
>>said. "Because the
>> surrounding environment can affect economic
>>decision-making, there are
>> probably few genuinely 'deep' (and, therefore, stable)
>>parameters or
>> relationships in economics. In contrast, in many
>>settings in the
>> physical sciences there are stable 'rules of the game'
>>(for instance,
>> the laws of gravity are as good an approximation one day
>>as the next)."
>>
>> Is it worrying that the governor of the Bank of England
>>freely admits
>> that economists don't have all the answers? Not a bit of
>>it. There are
>> things we know and things we don't. Understanding that
>>there is a
>> difference is the path to wisdom.
>>
>> --
>> Allen J. Scott,
>> Distinguished Professor,
>> UCLA,
>> Los Angeles, CA., 90095.
>>
>> Tel.: 310 825-7344
>>Fax: 310 206-5976
>