Louis Proyect: The Unrepentant Marxist

March 11, 2016

Boom Bust Boom

Filed under: economics,Film,financial crisis,humor — louisproyect @ 9:13 pm

If I were to mention that a new film opened today that consisted pretty much of economists discussing financial crisis, your eyes would glaze over, right? But when such a film is directed by Monty Python alum Terry Jones, that’s a horse of another color. (It is co-directed by Bill Jones who directed a documentary on fellow alum Graham Chapman and Ben Timlett who produced a six-part TV tribute to the group.)

So what you get is a wickedly funny but mind-expanding analysis of 2008 by economists both famous (Paul Krugman) and famous only to their comrades (Nathan Tankus) that is driven by the proposition that the capitalist system is inherently unstable.

To give you an idea of how deep it gets into its material, it spends 15 minutes reprising Hyman Minsky’s Financial Instability Hypothesis using his son Alan and a cartoon representation of dad going back and forth on the ramifications. As someone who has delved somewhat superficially into Minsky over the years (I prefer the more hard-core Marxists obviously) but never quite understood him, this was an amazing segment that finally allowed his ideas to sink in. Put in a nutshell, crises are cyclical affairs that grow out of stability. When a system is stable as the American economy was after WWII, it is easier for a sense of euphoria to develop that leads to speculation of the sort that makes bubbles possible. Once the bubble bursts, the system goes into crisis and a sense of impending doom. Then, once again, the system drags itself out of the abyss and new round of stability ensues–leading once again to another round of instability.

Minsky is much beloved by a number of the interviewees including Randall Wray from the U. of Missouri (a department that tolerates dissidents opposed to neoclassical bunkum), New Yorker Magazine contributor John Cassidy, British journalist Paul Mason, and our boy genius Nathan Tankus from Naked Capitalism and PEN-L.

Screen Shot 2016-03-11 at 3.43.58 PM

We learn that Minsky decided to study economics in the 1930s because the pat answers being presented by academic experts and media pundits was so out of whack with the reality. As it turns out, it was the Great Recession and the Occupy Wall Street movement (events that can be understood as a somewhat less cataclysmic repeat of the 1930s) that inspired Nathan to study economics. How do I know? He told me so.

Using puppets, animation and Terry Jones’s inspired narration, the film makes economic history not only understandable but hugely entertaining. For example, in reviewing past bubble-bursting affairs, it starts with the Tulip Mania in Holland of 1637 in which the lovely but ultimately common bulb was sold as if it were gold until one morning sellers showed up at a marketplace to discover that all the buyers were gone. Terry Jones illustrates this with an animated caricature of a Rembrandt portrait of a Dutch burgher singing “I kiss thee tulips with my two lips”.

Towards the end of the film, there is a well-deserved assault on the economics profession from people like Nathan who are trying to use the discipline as a tool for social change. We hear from students in the postgraduate economic society at the University of Manchester who like him are organizing extracurricular activities to examine about the true cause of economic instability, a phenomenon that their own instructors have ignored. One student points out that economics department get funding based on the studies they produce for mainstream outlets that are inherently neoclassical. So there is an economic incentive to falsify economics.

This is an amazing film that I can’t recommend highly enough. That being said, I did have a problem with a segment that seems to express a bias of the men who made it, namely that financial crises arise out of some deeply rooted flaw in human psychology that fosters a get rich quick behavior. Indeed, the film begins with an explanation for the subprime crisis that veers a bit too much in the direction of poor people getting mortgages they really didn’t qualify for.

We hear from scientists involved with studying rhesus monkey behavior on an island near Puerto Rico. They trained them to gamble by choosing one of two options: the safe choice offered them at least a little food for sure, while a risky choice generally offered them a bigger amount of food but only a fifty-fifty shot of getting it. One of the scientists argues that given 35 million years of evolution, such behavior is very difficult to eradicate.

This is a little too close to Jared Diamond’s sociobiology for comfort. I don’t think that evolution has anything to do with this. Generally speaking, pre-capitalist society, especially among hunting and gathering peoples, is marked by an aversion to risk. People hunted collectively in order to provide food that would keep them fed for a given period without any desire to accumulate after the fashion of a banker buying collateralized mortgage obligations in 2006.

Whenever I hear about monkeys or chimps having anything in common with us, I am reminded of a silly business in Diamond’s “The Third Chimpanzee”. This exercise in sociobiology (an updated version of the 19th century social Darwinism) includes a chapter titled “The Golden Age That Never Was” where he argues that since monkeys and apes have an evolutionary imperative to pass on their genes, art must be a clever stratagem by men to lure women into bed. This led Tom Wilkie to drolly observe in the May 22, 1991 Independent that this lesson must have been lost on Tchaikovsky, Andy Warhol and other homosexual artists.

“Boom Bust Boom” opened today at the Village East in New York City. Don’t miss it. It is more fun than a barrel of monkeys.

3 Comments »

  1. 3rd paragraph from the end: don’t you mean “pre-capitalist society”?

    Comment by uh...clem — March 11, 2016 @ 11:16 pm

  2. **Blushes** thanks for this Louis. Completely agree about the monkey part. I cringed the first time I saw it. To be a bit fair to them (but only a bit) they cut in such a way to emphasize that this doesn’t explain **financial crisis** but some basic part of (perhaps) human psychology that financial crisis channels. Both Zvi and the researcher Laurie were quick to say that institutions channel these human intuitions in all sorts of “unnatural” ways. I wish they’d emphasized that point more. the problem of course is that if you emphasize that it’s institutions that define both “the game” and the results you get dangerously close to making a Marxian point that ultimately financial crises emerge from the stability legal institutions provide and the most fundamental of those is the legal institution of private property.

    On the relationship of Minsky to Marx, one of the things I like about Minsky is taking obscure elements in Marx that aren’t clear and are in “antiquarian” language and putting them in modern financial language and making them a central part of the analysis. It really is Marx for bankers. Reading Minsky through the lens of knowing Marx is a kind of amazing thing. To give one example among many, we get this definition of “gross profits” nearly 200 pages into stabilizing an unstable economy:

    “Gross profits are divided into gross retained earnings, taxes, dividends, interest payments, rents, and the wages of overhead labor; all of these are an allocation of profits.”

    For those who have read their Marx this jumps out as Marx’s description of how surplus value is “distributed” where “overhead labor” is “unproductive labor” in Marx.

    thanks again Louis

    Comment by Nathan Tankus — March 12, 2016 @ 7:03 am

  3. I am deeply troubled. The causes of the boom bust cycle have been documented for more than a century. Yet the same cycle keeps geting repeated. Are people diliberately trying not to learn these lesons? Ok the rich have a motive to repeat the process. But there have been plenty of people in positions to prevent this nonsense. Yet they have been failing for a very long time. With such a historical economic record how can a sane person not wonder if the sheep that the rich are fleecing have any capability to resist at all.

    Comment by Curt Kastens — July 4, 2017 @ 5:59 pm


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