Four More Years of Economics #1 and #2 Cumulative causation / Time consistency

Between Year of Economics and 4 moreYears # 1: Cumulative Causation and Cognitive Frames.
Jan 31 2005

My dear Matthew

1.
The great economist Gunnar Myrdal attempted to replace the over-used and shallow concept of equilibrium with the concept of Cumulative Causation. Instead of variable A causing variable B to change, imagine a system where A influences B which in turn influences A and so on. There is no point of rest or equilibrium in such a model. When A and B both improve, we call that a positive feedback loop. When A and B are both worsening the Cumulative Causation is said to be in a negative feedback loop.

2.
A Cognitive Frame is a mental construct which layers and connects people, groups, situations, and events into a meaningful narrative. The most exciting application of the Cognitive Frame that I have come across is in an article by Anthony Oberschall published in Ehtnic and Racial Studies, vol. 23, no. 6. He applies this concept to convincingly explain the eruption of ethnic violence in Yugoslavia.

What Oberschall found happening in Yugoslavia on the brink of the ethnic massacre was the sudden development of and simultaneous holding of two very different Cognitive Frames. Interviews with Serb refugees revealed (Cognitive Frame #2) that the reason why they had fled their villages was that Muslims planned to take over and moreover that the Muslims planned to assign the Serb women to Muslim harems after the men had been killed. When asked whether any Muslim men in the village had ever harmed them they replied (Cognitive Frame #1) that not only had that never happened but that the Muslims in the village were always good, decent people. The people of Yogoslavia held Cognitive Frame #1 during normal times. This frame accurately reflected the experience of the average person. However in a time of crisis, people simultaneously held on to two Cognitive Frames. While they knew on some level that their experience clearly pointed to the accuracy of Cognitive Frame #1 and therefore their support was in favor of the moderates, the more the crisis mentality was escalated by the extremists, the more were people shifting to Cognitive Frame #2 even while holding on to Cognitive Frame #1. In the extreme crisis created by propaganda and through the use of mass communications people were frightened into acting on Cognitive Frame #2 even though they simultaneously held on to Cognitive Frame #1.

3.
Why 4 more years? Why has this happened?

From a political, economic, and social point of view the Presidency of George W. Bush has been a clear failure. However the American people have elected him to serve for another four years. Why?

I think the clearest explanation comes from an understanding of the concept of Cognitive Frames and applying the concept of Cumulative Causation to it.

I believe that the American people have a clear Cognitive Frame #1 that appreciates the interdependence among the peoples of the world and values an intelligent leadership at the helm of their country. I believe it was this frame that allowed the country to allow Bill Clinton to lead the country for 8 economically prosperous years.

But shortly into the presidency of George W. Bush a very different Cognitive Frame was promoted with tireless repetition: Cognitive Frame #2 which said that the world was a dangerous place divided into the “free world” and the “Muslim world.” But how could such an absurd notion catch on? Well I think the American people never let go of their Cognitive Frame #1 but were increasingly blasted by propaganda to shift emphasis to Cognitive Frame #2.

This was never an equilibrium. There is no such thing in the real world anyway. Instead, what the incessant fear mongering managed to accomplish over the first four years of George W. Bush’s being in office is a gradual launching of a negative Cumulative Causation loop. The stronger and starker was the presentation of Cognitive Frame #2, its cumulative effect was to weaken Cognitive Frame #1. The weaker Cognitive Frame #1 became, the stronger did Cognitive Frame #2 become.

The victory of George W. Bush may be ascribed to the operation of a negative feedback loop of Cognitive Frames.

§

FMYoE Part One: Difficult fact, easy myth

Part 1: The contract

January 17th, 2005
To: Lorraine Thelian
Senior Partner, North America
Ketchum Associates

Dear Ms. Thelian,

I am a teacher, and a taxpaying citizen. I am writing you with great concern regarding the role of Ketchum Associates in the Armstrong Williams case. I paid my taxes in good faith, expecting the funds to be used, in part, to fund educational programs for the children in my community. Instead, in the Williams case, with the assistance of your firm, my tax dollars paid for partisan propaganda in an election year. I am the victim of a fraud.

I read your statement in PR Week: “We would assume that the commentator/pundit would disclose. That’s an assumption that you make ... Whatever he did once that contract was put together, he did on his own.”

I find your insistence that Williams bear the entire responsibility for disclosure disingenuous and unacceptable. I am not a lawyer, but the whole arrangement seems to me in violation of the Publicity and Propaganda Act. Given that is the case, Ketchum’s assumption defense seems to me legally untenable, and is certainly, at the very least, ethically unsound. Please stop passing the blame around. I would like an answer as to whether this arrangement was intentionally not disclosed. It seems to me the entire political value of Williams’s commentaries rests on the non-disclosure of the arrangement, since it is only in appearing impartial that Williams opinions as a media commentator have any public authority.

I would like reassurance from you that Ketchum Associates will from now on, where public funds are involved, contractually require full disclosure in such cases. I would like reassurance that Ketchum Associates will from now on itself disclose such arrangements publicly.

Furthermore, as a taxpayer, I would like my money back – meaning, I would like the $240,000 that Armstrong Williams received returned to The Department of Education so that it may go to the use I and other responsible taxpayers thought it was going to: the education of America’s youth. I would like some reassurance from you that Ketchum will assist in the return the $240,000 to The Department of Education.


Thank you,
Matthew Goulish


Part 2: The myth machinery

Dear Abhay,

It is now March 20th, and Lorraine Thelian has not yet replied to my correspondence. I cannot, however, use her silence as an excuse for my tardiness in writing my first installment of FMYoE (Four More Years of Economics). Since returning from my writing retreat in Marfa, Texas, I have been a bit overwhelmed with schoolwork and the demands of performances. Now that I have a minute to collect my thoughts, I realize that your letter puts the Bush Administration’s fake news policies in an economic context. Since I wrote the above letter of protest in response to the Armstrong Williams scandal (I expect you heard about how he received $240,000 from The Department of Education for seemingly impartial pro-Bush policy television commentaries during the election months), many more instances of such journalistic deceit have made the news. Your essay has prompted me to think about these as cases of the formation of the secondary Cognitive Frame that you describe: not “news” at all, not the reporting of fact, but rather the “tireless repetition” of myth.

I prefer to think of the material of this secondary Cognitive Frame not as propaganda, but as myth. The distinction may be subtle, but I think it is important. The term propaganda has come to suggest information that has fact at its core, but that has been “spun” to support one or another side in a political struggle. Myth, however, contradicts fact, and follows the pattern of appealing to a heroic and grandiose sense of self, which may furthermore consider itself endangered and even victimized. The Bush Administration, as you suggest, has put into place an elaborate machinery for such constant myth reiterations. Contradictory facts can even be acknowledged briefly, without seriously impeding the myth machinery, or threatening the role of myth in public decision-making. As your tragic example of pre-war Yugoslavia demonstrates, we the public, in a time of crisis, tend to act not on what our minds tells us is fact, but on what our nervous systems respond to as myth. We do this to reinforce our grandiose self, which feels threatened by the time of crisis. Your letter has led me to wonder whether we can even define a time of crisis as a period in which fact and myth come into intense conflict.

In the post-Williams months, the case of Jeff Gannon (a pseudonym for James Guckert) has been even more alarming. Gannon, White House “reporter” for Talon “News,” had been granted access to press briefings for two years. At a press conference on January 26th, President Bush, when asked about the Armstrong Williams case, repudiated the practice of secretly hiring journalists, and said, “Our agenda ought to be able to stand on its own two feet.” Moments later, he called on Gannon. Gannon then asked the President, in reference to Democratic senators, “How are you going to work with people who seem to have divorced themselves from reality?” The question could hardly raise the conflict between fact and myth more directly. Yet Gannon has attributed the mythic cognitive frame to his political opponents, claiming factuality for his own mythology. How can we believe that the President, taking part in this bizarre interchange, did not know that he was following his repudiation of the Williams contract with a question to an artificial journalist? Granted, the question led to Gannon being unmasked and driven out of the White House Press Room. But perhaps his return to obscurity only helps to bury the more significant, and far less examined, questions about Gannon’s activities during the previous election, apparently in (illegal) coordination with the Bush campaign.

Dotty Lynch, Senior Political Editor for CBS News, reported on February 18th on these activities, and a possible link to Bush strategist Karl Rove.


One of Gannon’s first projects was an attempt to discredit the South Dakota Argus Leader, South Dakota’s major paper, and its longtime political writer, David Kranz. According to the National Journal, which reported on this last November, Gannon wrote a series of articles in the summer of 2003 alleging that Kranz, who went to college with Democratic Sen. Tom Daschle, was not only sympathetic to him but was an actual part of the Daschle campaign. These articles then got a huge amount of play on the blogs of John Lauck and Jason Van Beek, and were picked up by other conservative sites and talk radio. The paper was bombarded with messages about its bias and acknowledges that these had an impact on its coverage.

Daschle opponent John Thune’s campaign manager was Dick Wadham, an old political crony of Karl Rove’s; the kind of pal Rove could ask to hire his first cousin, John Wood, a few years back. Wadham put the bloggers on the campaign payroll and the symbiotic relationship between the campaign, the bloggers and “reporter” Gannon continued. On September 29, Gannon broke the story that Daschle had claimed a special tax exemption for a house in Washington and the bloggers jumped all over it. According to a November 17 posting on South Dakota Politics – a site that Van Beek, who has become a staffer for now-Sen. Thune, has bequeathed to Lauck – “Jeff Gannon, whose reportage had a dramatic impact on the Daschle v. Thune race (his story about Sen. Daschle signing a legal document claiming to be a D.C. resident was published nearly the same day Thune began to run an ad showing Daschle saying, “I’m a D.C. resident”) has written an analysis of the debacle.”

Daschle aides told Roll Call, “This guy (Gannon) became the dumping ground for opposition research.” The connections are so strong that there is an FEC challenge which could be a test case on the limits of the use of the Internet in federal campaigns.


Here again, Gannon has accused his opponents of the crimes he himself has committed: supplanting factual journalism with a less trustworthy alternative. We can see in these events a very direct example of what you describe as a weakening of Cognitive Frame #1 and a strengthening of Cognitive Frame #2. More than propaganda, the magnitude, intensity, and toxicity of the Gannon (Bush) mythology establishes, as you point out, a foundation on which one may construct the absolute eradication of opposition. This eradication has in some countries accelerated into acts of genocide – a phenomenon which, I would venture to say, has never occurred in the modern world without such a myth-journalism foundation. The ubiquitous anti-Tutsi radio broadcasts so astutely rendered in the recent film Hotel Rwanda comprise exactly such a myth-journalism foundation. Now we see our own version under rapid construction, with one fundamental similarity: fact is difficult, and myth is easy.

The Bush Administration Fake News scandal has continued to unravel in recent weeks, but as with all scandals over the past four years, no structural changes have resulted, and political fallout for the administration has remained minimal. I continue to believe citizens must respond until real change occurs. But what form should such a response take?

Part 3. The Just for Men boycott

One January night, toward the end of my solitary weeks in Marfa, inspired by a rereading of Martin Luther King Junior’s last speech, which I found on the internet on the anniversary of his birth, I resolved to exercise my economic strength as a consumer. I would return to the original revelation of the myth-journalism machinery, the Armstrong Williams case, and I would focus on the part of the machinery most susceptible to pressure, the enabling middle infrastructure: Ketchum Associates. I wrote the above letter, and not expecting a response in a timely fashion, I imagined myself, as a next step, Gandhilike, initiating a boycott to raise public awareness and leverage change. Ketchum Associates has not responded to my letter, nor have they, to my knowledge, publicly disclosed whether they have any other Williams-like myth-journalists under contract. I researched their Case Study Library, and found they have designed publicity campaigns for the following corporate clients.

Carlsburg Beer
Chlorox
Cingular Wireless
Frito-Lay
Just for Men
Mattel
Pepsi
Procter & Gamble: Fairy Liquid
Wendy’s salad

At first I considered initiating a boycott of all the above products. But on second thought, I decided a more focused approach might get better results. Of this list, the choice was obvious. I would take up George Akerlof’s challenge to economists to enact civil disobedience against the administration. I would boycott Just for Men hair coloring products, as advertised by Ketchum Associates, until Ketchum meets my demands: 1) disclose any other Williams-like myth-journalists currently under contract, and 2) take steps to repay Williams’ $240,000 fee, not only to the Department of Education, but directly to the poorest public school in the country. I am raising the stakes as retribution for the silence of Lorraine Thelian.

Will you join me in my crusade, Abhay? Your participation will certainly lend gravity to the boycott, since, unlike me, you 1) are a real economist, and 2) have hair.

I have one more question, perhaps more pertinent to this discourse: does my response to the myth-journalism Cognitive Frame formation make economic sense?

I await your thoughts.

Thanks as always,
Matthew

March 20th, 2005

Four More Years of Economics #2

Time Consistency and the problem of hair.
July 31, 2005

1.
S1: I am beautiful. I love getting green modeling clay entangled in my curly black hair. Well the clay comes in many colors but I always end up mixing them all together. They turn green then. That is the way to bliss.

S2: I use VI Extra Protein green hair liquid (contains no oil!) on my hair. I carry a cylindrical nylon brush in the back pocket of my new super-tight jeans tailored by Kachins, tailors to the stars of Bollywood. A note of explanation: I went to school in Bollywood.

S3: Ramtirth Brahmi coconut oil. Coconut oil infused with the Ayurvedic brahmi herb. It is green in color. My dad was bald. And so was my grandpa! Maybe another dab of the green oil.

S4: And before he went completely bald, his hair was grey! Just for Men you say? Hmmm…

S5: I am completely bald.

My dear Matthew,

S1-S4 is my life journey with hair broken down into 4 segments in chronological order. S5 is in the future.

Ever since I received your most interesting and timely letter I have been contemplating your invitation to join you in your crusade against Just for Men hair products. You want me to join you in your crusade. That much is clear. But would my joining you be Time Consistent? This question has been uppermost on my mind.

2.
John Maynard Keynes was possibly the greatest economist who ever lived. In the preface to his revolutionary General Theory of Employment, Interest and Money (1936), he explained that the ideas he was trying to convey, although new, were not difficult to understand. The difficulty arose from our habitual modes of thinking on such matters, meaning the classical economic dogma that to this day economics students everywhere in the world, and particularly so in America, are brought up on.

3.
Your letter to Ms. Thelian. Does it matter? Your boycott. Does that matter?

4.
The question of time consistency is often discussed with relation to matters of politics. The Government swears it will not hold discussions nor negotiate with terrorists. But faced with an actual hostage crisis for instance, the same Government may secretly negotiate with those same terrorists. Or consider the reaction of the world leaders to India developing nuclear capabilities a few years ago. India was warned of sanctions, of being economically snubbed, if it were to test its nuclear weapons. India went ahead anyway. Now the talk is about India being invited to be part of the UN Security Council.

5.
An action is time consistent if it is consistently the course of action chosen not only at the beginning of a path but also at every point along the path. Imagine deciding at point A that you would like to move to point C. Now you move along the path to C. At B, if you still want to move to C, your original action is time consistent.

However it is entirely possible that at point A, moving to C is the preferred course of action. But having decided to move towards C, you come to point B. At point B now moving to C may not be your best option. You may decide to move to point Z instead. In that case your original action is time inconsistent.

6.
In the prime of his life and the height of his influential career, John Maynard Keynes found the economic writings of Karl Marx to be ridiculous and contrary to what he knew about the economy. It was only on his deathbed, after he had watched in despair his own revolutionary ideas being watered down and misrepresented in the form of Keynesian Economics (and eventually absorbed by classical economics as a special case of depression economics), that he reread Marx and found his economic writings to contain not only genius but also revolutionary modes of thinking about economic issues.

Keynes escaped habitual modes of thinking right before death. Fifty years later most economists have not made this escape.

7.
At S1 I agree to join you on your crusade against Just for Men hair products. Modeling clay is the only product my hair comes in contact with. I can have all the green modeling clay I want you say? That‘s all I care about!

8.
Classical economists like to explain the functioning of the economy in terms of the circular flow model: C – M – C where C = commodities and M = money. The standard explanation is that commodities are produced and exchanged for money. Money is simply a unit of exchange that serves society well because while barter requires the double coincidence of wants money does not. But surprisingly money is then seen by classical economics as flowing back to financing an exactly equivalent set of other commodities. Capitalist production, according to this model, is a simple flow from commodity to commodity with money simply playing the role of facilitator.

Essentially, commodities translate themselves into other commodities of equivalent value. Markets remain in equilibrium.

9.
At S2 I am happy with my VI Extra Protein hair conditioner. I am living in India. Indira Gandhi, the Prime Minister, has thrown Western multinational companies out of the country. I have no need for American hair products. Sure, I will join your crusade!

10.
As John Maynard Keynes lay dying, he was extremely excitable. One insight he had was that he had not consumed enough Champagne in his living years. The other was his realization that Karl Marx‘s replacement of the circular flow model with the accumulation model was a brilliant achievement. Keynes is widely reputed to have regretted the first bitterly. If he were alive today he would have felt the same about the absolute ignorance of classical economics with regard to the second.

11.
S3. I have been trying to reclaim my roots. My mother comes from a long line of Ayurvedic doctors and healers. Her grandfather was a famous vedic scholar and healer. I have been reminded of the beautifully fragrant brahmi oil of my childhood recently and I have no interest in the artificial, contrived hair products of Western science. I will not only join you in your crusade but ask that we expand it to include all hair products that are made from formulae created less than 2500 years ago.

Will you join me, dear Matthew?

12.
Marx‘s accumulation model of capitalist production looks as simple as the classical circular flow model but is in fact a deeply revolutionary way of looking at the economy. That is, if you were trained as an economist, your habitual modes of thinking would undoubtedly prevent you from understanding this model.

Luckily you are an amateur economist, my dear friend, in the best sense of the word. And an excellent one I might add. So you should be able to make sense of this model without any difficulty (It took me about ten years to understand it. That is when I quit my Economics Ph.D. program).

The accumulation model is:

M – C – M+

Marx describes the capitalist system as one that starts with money. Money is not the neutral medium of exchange as it is in the classical model. The capitalist starts with money (we will explore the psychoanalytical implications of that in a future letter) and produces commodities. The commodities are merely a means to the creation of a greater sum of money than the capitalist started out with. While the classical model is devoid of any concept of time and exists in an imaginary equilibrium situation, Marx‘s model forces us to deal with time-based, dynamic laws that allow most importantly for our present purpose the existence of disequilibrium.

13.
I am at S4 at present. My hair is thinning a little. My forehead seems larger than it was a year ago. I do not think it is only from all the thinking your economics letters have provoked. While the Ayurvedic formulae are wonderful in their own way, perhaps the demands of a Western lifestyle are so much more than the Ancients could have ever imagined and as an American Citizen it is my natural and inalienable right to the use of products that the best thinking in Western science (the science of my adoptive land!) without inappropriate interference from well meaning folk.

Er, Matthew.could you not pick some other product for your crusade? No, you say? Well, I would like to help you but…

14.
According to the classical circular flow model of the economy your action of boycotting Just for Men hair products would have no impact on the general equilibrium system of the American economy, whether or not I joined you in it. The C – M – C model would allow for an excess supply (what classical economists confusingly call negative excess demand) in the market for Just for Men hair products as a result of your crusade. After all, many people know you and respect you and many more know of you through your books and lectures. They would all probably join you in your boycott. So supply will exceed demand in this market resulting in excess supply. However, the logic of the C – M – C model requires that an excess supply in one market be balanced by an excess demand in another in order to maintain the overall general equilibrium.

Your well meaning actions would simply create even more demand for some other products produced by companies with similar value structures and corporate behavior!

Why not simply enjoy the products of this capitalist economy? Your actions are futile.

15.
At S5, I have no hair on my head. I am also more mature and caring about the kind of world I am to leave to future generations. I join your crusade wholeheartedly.

16.
That classical economics would predict that your actions would be completely ineffective is no great surprise. We may owe the near-complete complacency of our people to generations faithfully taught the rudiments of classical economics in college courses.

However, using Marx’s M – C – M+ model to analyze your crusade gives us some interesting results. Firstly, in this model, there is constant accumulation and hence no equilibrium! Something can not be growing and still at one and the same time. Secondly, an excess supply in one market need not create an excess demand in another. For instance, if the labor market is experiencing a situation of excess supply, commonly understood by the working classes as unemployment, there will be no corresponding excess demand in another market for the simple reason that an unemployed person is unable to spend his or her earnings in another market!

So using Marx‘s economic model that John Maynard Keynes, the so-called savior of capitalism, so admired in the last days of his life, we see that your action of boycotting the Just for Men hair products is a strategy that can impact the economic system. And that is the third lesson here. Because you would be disrupting the end chain C – M+, reducing the accumulation of the capitalists, your actions would be likely to result in a reevaluation of corporate strategy not only in the concern you are fighting but also more broadly.

17.
So we finally come to the reason why your letter to Ms. Thelian remains unanswered and probably will for some time to come. We agree that your strategy is an effective one. You will find many others to join you. And your actions will disrupt the profits of the capitalists as the accumulation model clearly demonstrates. But here is the thing, my dear friend. How time consistent will your support be? As we have seen I join you at S1, S2, S3, and S5. However, it is only at S5 that you have my clear and considered support.

If your letters to the likes of Ms. Thelian remain unanswered is it not likely that your support would become increasingly time inconsistent? Your supporters are with you day 1 and day 2 and day 3 and so on. But on day 365?

18.
All buddhist monks are bald. But all bald men are not buddhist monks. However much they may have once wanted to be. Time, we are told, is not always consistent.

At least that is what the enemy hopes for.

Much love,

Abhay

PS Of course I will join you in your crusade!