The Fictioning Horror Sale
 
 

Recently Viewed clear list


Powell's Q&A | September 3, 2014

Emily St. John Mandel: IMG Powell’s Q&A: Emily St. John Mandel



Describe your latest book. My new novel is called Station Eleven. It's about a traveling Shakespearean theatre company in a post-apocalyptic North... Continue »
  1. $17.47 Sale Hardcover add to wish list

    Station Eleven

    Emily St. John Mandel 9780385353304

spacer
Qualifying orders ship free.
$9.95
List price: $15.00
Used Trade Paper
Ships in 1 to 3 days
Add to Wishlist
Qty Store Section
2 Burnside International Studies- Trade
2 Hawthorne Economics- General

The Value of Nothing: How to Reshape Market Society and Redefine Democracy

by

The Value of Nothing: How to Reshape Market Society and Redefine Democracy Cover

 

 

Excerpt

PART ONE

Nowadays people know the price of everything and the value of nothing.

—OSCAR WILDE, The Picture of Dorian Gray

(ONE)

THE FLAW

Now I a fourfold vision see,

And a fourfold vision is given to me;

Tis fourfold in my supreme delight,

And threefold in soft Beulahs night,

And twofold Always. May God us keep

From Single vision, & Newtons sleep!

—WILLIAM BLAKE, "Poems from Letters"

If war is Gods way of teaching Americans geography, recession is His way of teaching everyone a little economics.

The great unwinding of the financial sector showed that the smartest mathematical minds on the planet, backed by some of the deepest pockets, had not built a sleek engine of permanent prosperity but a clown car of trades, swaps and double dares that, inevitably, fell to bits. The recession has not come from a deficit of economic knowledge, but from too much of a particular kind, a surfeit of the spirit of capitalism. The dazzle of free markets has blinded us to other ways of seeing the world. As Oscar Wilde wrote over a century ago: "Nowadays people know the price of everything and the value of nothing." Prices have revealed themselves as fickle guides: The 2008 financial collapse came in the same year as crises in food and oil, and yet we seem unable to see or value our world except through the faulty prism of markets.

One thing is clear: The thinking that got us into this mess is unlikely to rescue us. It might come as some consolation to know that even some of the most respected minds have been forced to puzzle over their faulty assumptions. Perhaps the most pained admission of ignorance happened in a crowded room in front of the House Committee on Oversight and Government Reform when, on October 23, 2008, Alan Greenspan described the failure of his worldview.

Greenspan was one of the acknowledged legislators of the worlds economy over the past nineteen years in his role as chairman of the Federal Reserve. A card-carrying member of the free market brigade, he used to sit at the feet of Ayn Rand who, although largely unknown outside the United States, remains influential long after her death in 1982. Her 1957 book Atlas Shrugged, in which heroic business moguls fight the scourge of government officials and union organizers, has once again scaled the best-seller lists. Regarding altruism as "moral cannibalism," Rand was the cheerleader for an extreme free market libertarian school of thought, which she called "Objectivism." Drawn into her circle by this heady philosophy, Greenspan earned himself the nickname "the Undertaker" for his jolly demeanor and dress sense. When Greenspan chose a career in government, it was rather like a hippie joining the marines, a lapse that his former friends could never forgive. Despite this, Greenspan remained largely faithful to Rands philosophy, continuing to believe that egoism would lead to the best of all possible worlds, and that any form of restraint would result in disaster.

At the end of 2008, Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Fed had been long and lauded, and Congress wanted to know what had gone wrong. As he began to read his testimony, Greenspan looked exhausted, his skin jowly and sagging, as if the vigor that once kept him taut had all been spent. But he came out swinging. In the first round, he took aim at the information hed been working with. If only the input had been right, the economic models would have worked, and the predictions would have been better. In his words,

A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.1

This is a garbage-in-garbage-out argument: The model worked just fine, but the assumptions about risk and data, based only on the good times past, were faulty and so the output was correspondingly wrong. Greenspans nemesis on the panel, Henry Waxman, pushed him to a deeper conclusion, in this remarkable exchange:

WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive—and this is your statement—"I do have an ideology. My judgment is that free, competitive markets are by far the unrivalled way to organize economies. We have tried regulation, none meaningfully worked." That was your quote. You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying the price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?

GREENSPAN: Well, remember, though, what an ideology is. Its a conceptual framework with [sic] the way people deal with reality. Everyone has one. You have to. To exist, you need an ideology. The question is, whether it is accurate or not. What I am saying to you is, yes, I found the flaw, I dont know how significant or permanent it is, but I have been very distressed by that fact.

WAXMAN: You found a flaw?

GREENSPAN: I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working.

GREENSPAN: Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

The flaw, to be clear, wasnt a minor one of shoddy data. Nor was it the bigger Black Swan problem that writers like Nassim Taleb discuss, a problem of failing to account for highly unlikely events that, should they happen, involve catastrophic consequences. Greenspans flaw was more fundamental still. It warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the presidents senior economic advisor, has had to come to terms with a similar error—his view that the market was inherently self-stabilizing has been "dealt a fatal blow. "2 Hank Paulson, Bushs treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBCs Mad Money admitted defeat: "The only guy who really called this right was Karl Marx. "3 One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.

The extent of Greenspans admission has passed most of us by. If you trawl the op-ed pages of the financial press, youll find plenty of analysis that fits Greenspans first gambit, with pundits offering stories about how risk was incorrectly priced (which it was), how the lack of regulation allowed the panic to feed back into the financial system (which it has), how the incentive structures rewarded traders who were able to push financial risk far into the future (which they did) and how free market ideologues removed the sorts of circuit-breaking policies that might today have helped (and they did that too). But these are all it-could-have-been-fixed-if-wed-planned-better responses. I am not sure that were able to comprehend what Greenspans admission might really mean for us. It would be too big a shock to have the fundamentals of policy in both government and the economy proved wrong, and to have nothing with which to replace them.

Its as if one day, you were to wake up and find yourself transformed into a cockroach.4 This is the premise of Franz Kafkas novella Metamorphosis. In the first sentence, a young salesman named Gregor Samsa wakes up, after a night of bad dreams, to find that he has turned into an enormous bug. Gregor Samsas response is revealing, telling us a little bit more about ourselves than wed like. For what does Samsa do when he discovers hes a bug? He doesnt scuttle from his room screaming, or ponder how this happened, or what his transformation means, and what he might become tomorrow. His response is essentially this: "Poor me! How am I going to keep my job?"

Which is almost exactly how weve reacted to this economic crisis.

While no one has yet woken up in the body of a bug, we have all found ourselves in a world turned upside down, where everything we were told was to our advantage has turned out to be its opposite. Greenspans "flaw" has profound repercussions—to understand it fully would mean a complete reappraisal of the way we conduct our lives. We would need not only a new way of mooring our expectations of our society and our economy, one based on richer assumptions about human nature, but also a different ideology governing the exchange of goods and services.

Prices do some heavy ideological lifting in Greenspans world. They provide a way to see and know the collective wants and resources of our small planet. This is Friedrich Hayeks economic philosophy, in which prices are the tendrils through which wants and needs are communicated. Science fiction fans will already be familiar with what this looks like. In The Matrix, liberated humans (and the programs who hunt them) can see the world in its raw form, as a digital rain of symbols and signs. This is the science fiction that governs economic fact. Data pelting down monitors is what the masters of the universe on the global financial exchanges stare at, their eyes darting from screen to screen, trying to see through the world and profit from it. In The Matrix, the signs were a simulation of the real world, hiding more than they revealed. The trouble is that this unreliable digital ticker tape has now become a central prop in the drama of modern commerce.

Consider the fate of Volkswagen, which at the end of October 2008 managed briefly to become the worlds most valuable corporation without having to sell a single vehicle. With the economy still in free fall, traders on stock-market floors were taking a dim view of Volkswagen. They looked at their screens and concluded that, just like every other auto manufacturer, Volkswagen was heading for tough times. Imagine youre a trader who feels in your bones that the stock price can only fall. One way to cash your hunch in is to sell Volkswagen stock today, and buy it back when the price falls. Since you dont walk around with Volkswagen stock falling out of your pockets, youll turn to someone who does, like an institutional investor. You borrow their stock, for a price, and promise to return all of it very soon. The institutional investor is happy because they make money from lending out the stock, which they will get back in one piece. Youre happy because you can sell this stock, wait for the price to fall, buy it back and, with the profit, not only pay back the institutional investor, but make the next installment on your yacht in Monaco. This practice is called "shorting."

The trouble was that Volkswagens rival, Porsche, had started quietly buying Volkswagen stock, aiming to secure 75 percent of the company. When the scale of Porsches buying spree came to light, it became rapidly clear that there was little of the company left to trade. With Porsche sucking up all the shares, the price for Volkswagen didnt drop. Traders were selling borrowed stock to Porsche, and when Porsche announced its intentions to hold the stock, traders panicked. This led to a "short squeeze," a flocking of investors looking to cover the ill-conceived bets that theyd paid for with stock that they didnt own. Theyd wagered that Volkswagens price, like that of any other car company in a recession, would fall. When it became clear that even if Volkswagen wasnt doing well in the car market, its share price was nonetheless defying gravity, the speculators rushed to buy before the price went any higher.

Their combined purchases drove the price of shares up further. So high did the price rise that Volkswagen entered the DAX 30 index of the largest corporations on the German bourse. This triggered another buying spree, driven not by stock-market gamblers, but by their polar opposites—conservative institutional investors. Pension funds, for instance, invest with an eye to long-term returns; they prefer a slow and certain accumulation of wealth rather than risky bets. One way that they keep their portfolio on an even keel is to buy shares in nothing but blue chip corporations, ones that are guaranteed to be least susceptible to the shocks that stocks are heir to, ones that are in the top, say, thirty corporations traded in the open market. When Volkswagen joined the ranks of the DAX 30, a flock of institutional investors automatically wanted in. So they bought Volkswagen shares at whatever price they could find them. The result? The price per share went from €200 to €1,000 in a week—an increase in company value of €300 billion (£244 billion; $386 billion). It made Volkswagen, briefly, bigger than Exxon-Mobil (with a book value of a mere $343 billion). And for this, the company didnt raise a finger.

In the end, the rules on the DAX were changed, the price settled down and, in 2009, Volkswagen bought Porsche. It is easy enough to tell this story as one where institutional investors got caught with their pants down, where there was imperfect information about the size of the market, where the rules of different short-run and long-run games tangled. But look more closely. Underwriting this version of the story is a conceptual structure that lies beneath every story of excess and crash. The very notion of a bubble relies on the premise that when the bubble pops, things return to a normal state, a situation of price reflecting value more accurately. This is the story told after every boom and bust, from the South Sea Bubble of 1720 to the housing catastrophe of 2008. Theres a widely shared opinion that normality will ultimately return to the world economy—but its a consensus view that rests on a story where bubbles are exceptions to the standard (and successful) procedures of market valuation. If those procedures themselves were flawed, as Greenspan suggests, then our faith in a gentle return to earth is misplaced, for there is and never has been any solid ground beneath our feet.

Excerpted from The Value of Nothing by Raj Patel.

Copyright © 2009 by Raj Patel.

Published in January 2010 by Picador.

All rights reserved. This work is protected under copyright laws and reproduction is strictly prohibited. Permission to reproduce the material in any manner or medium must be secured from the Publisher.

What Our Readers Are Saying

Add a comment for a chance to win!
Average customer rating based on 3 comments:

Walt Ron, January 3, 2011 (view all comments by Walt Ron)
Great explanation of the 2008 Recession and great ideas to end our dependence on capitalism.
Was this comment helpful? | Yes | No
Natalie Aldern, March 23, 2010 (view all comments by Natalie Aldern)
"We know the cost of everything and the value of nothing." I have zero background in economics but Patel makes his discussion of modern markets easy to understand. The book is fascinating and uses current examples to explain why we need to reevaluate the prices we pay in order to address broader global issues. Mind blowing!
Was this comment helpful? | Yes | No
(3 of 3 readers found this comment helpful)
eevans, January 7, 2010 (view all comments by eevans)
This book is needed to be 'consumed' by everyone who gives a damn about our planet's sustainability. It is pinnacle journalism and should be 'shared' knowledge worldwide. I genuinely wish Mr. Patel the best promoting his book and I will be first in line congratulating him when he comes to Portland on January 19th!
Was this comment helpful? | Yes | No
(7 of 9 readers found this comment helpful)
View all 3 comments

Product Details

ISBN:
9780312429249
Author:
Patel, Raj
Publisher:
Picador USA
Author:
Patel, Rajeev Charles
Subject:
Political Ideologies - Nationalism
Subject:
Development - Business Development
Subject:
Economic Conditions
Subject:
Democracy
Subject:
Economics
Subject:
Politics - General
Copyright:
Edition Description:
Trade Paper
Publication Date:
20100131
Binding:
TRADE PAPER
Grade Level:
General/trade
Language:
English
Illustrations:
Includes 2 bandw photos
Pages:
256
Dimensions:
8.28 x 6.59 x 0.77 in

Other books you might like

  1. Confessions of an Economic Hit Man
    Used Hardcover $5.50
  2. Volcanoes: Crucibles of Change Used Trade Paper $17.00
  3. The Autobiography of Fidel Castro Sale Hardcover $1.00
  4. And Another Thing... (Hitchhiker's... Used Hardcover $3.50

Related Subjects

Business » Business Plans
Business » Marketing
Business » Strategy
Featured Titles » Staff Picks
History and Social Science » Economics » General
History and Social Science » Economics » Global Economics
History and Social Science » Politics » General

The Value of Nothing: How to Reshape Market Society and Redefine Democracy Used Trade Paper
0 stars - 0 reviews
$9.95 In Stock
Product details 256 pages Picador USA - English 9780312429249 Reviews:
"Staff Pick" by ,

Raj Patel's remarkable and ambitious new book asks some basic economic and political questions and comes up with surprising solutions. Patel explores ways we might more accurately value the world, arguing that our current market system is deeply flawed. The Value of Nothing is a powerful and relevant work.

"Review" by , "A pleasing invitation to act on our most benign impulses to create a sustainable future."
"Review" by , "Bracingly written and full of surprises, The Value of Nothing is itself invaluable, showing us a path out of the darkness of the economic woods."
"Synopsis" by , Economics is about choices, but who gets to make them? Patel shows how free market fundamentalism has distorted how consumers value their world.
"Synopsis" by ,
Raj Patel, the author of Stuffed and Starved, is an activist and an academic who has been hailed as "a visionary" for his prescience about the food crisis and solutions to it.
"Synopsis" by ,
"A deeply though-provoking book about the dramatic changes we must make to save the planet from financial madness."--Naomi Klein, author of The Shock Doctrine
 
Opening with Oscar Wilde's observation that "nowadays people know the price of everything and the value of nothing," Patel shows how our faith in prices as a way of valuing the world is misplaced.  He reveals the hidden ecological and social costs of a hamburger (as much as $200), and asks how we came to have markets in the first place.  Both the corporate capture of government and our current financial crisis, Patel argues, are a result of our democratically bankrupt political system.
 
If part one asks how we can rebalance society and limit markets, part two answers by showing how social organizations, in America and around the globe, are finding new ways to describe the world's worth.  If we don't want the market to price every aspect of our lives, we need to learn how such organizations have discovered democratic ways in which people, and not simply governments, can play a crucial role in deciding how we might share our world and its resources in common.
 
This short, timely and inspiring book reveals that our current crisis is not simply the result of too much of the wrong kind of economics.  While we need to rethink our economic model, Patel argues that the larger failure beneath the food, climate and economic crises is a political one.  If economics is about choices, Patel writes, it isn't often said who gets to make them.  The Value of Nothing offers a fresh and accessible way to think about economics and the choices we will all need to make in order to create a sustainable economy and society.
Raj Patel, the author of Stuffed and Starved, is an activist and academic who has been hailed as "a visionary" for his prescience about the food crisis.  Raj has worked for the World Bank and the World Trade Organization and has protested against them on four continents.  He is currently a visiting scholar at UC Berkeley's Center for African Studies, an Honorary Research Fellow at the School of Development Studies at the University of KwaZulu-Natal and a fellow at the Institute for Food and Development Policy, also known as Food First.
Opening with Oscar Wilde's observation that "nowadays people know the price of everything and the value of nothing," Patel shows how our faith in prices as a way of valuing the world is misplaced.  He reveals the hidden ecological and social costs of a hamburger (as much as $200), and asks how we came to have markets in the first place.  Both the corporate capture of government and our current financial crisis, Patel argues, are a result of our democratically bankrupt political system.
 
If part one asks how we can rebalance society and limit markets, part two answers by showing how social organizations, in America and around the globe, are finding new ways to describe the world's worth.  If we don't want the market to price every aspect of our lives, we need to learn how such organizations have discovered democratic ways in which people, and not simply governments, can play a crucial role in deciding how we might share our world and its resources in common.
 
This short, timely and inspiring book reveals that our current crisis is not simply the result of too much of the wrong kind of economics.  While we need to rethink our economic model, Patel argues that the larger failure beneath the food, climate and economic crises is a political one.  If economics is about choices, Patel writes, it isn't often said who gets to make them.  The Value of Nothing offers a fresh and accessible way to think about economics and the choices we will all need to make in order to create a sustainable economy and society.
“With great lucidity and confidence in a dazzling array of fields, Patel reveals how we inflate the cost of things we can (and often should) live without, while assigning absolutely no value to the resources we all need to survive. This is a deeply thought-provoking book about the dramatic changes we must make to save the planet from financial madness—argued with so much humor and humanity that the enormous tasks ahead feel both doable and desirable. This is Raj Patel's great gift: he makes even the most radical ideas seem not only reasonable, but inevitable. A brilliant book.”—Naomi Klein, author The Shock Doctrine

“Patels accomplishment with The Value of Nothing should not be understated. He has written what is very likely the greatest introductory economics text that has ever been written, a stunning defense of democracy, and a plausible how-to guide for the social justice activists of the next century.”—Zach Carter, YES! Magazine

“With great lucidity and confidence in a dazzling array of fields, Patel reveals how we inflate the cost of things we can (and often should) live without, while assigning absolutely no value to the resources we all need to survive. This is a deeply thought-provoking book about the dramatic changes we must make to save the planet from financial madness—argued with so much humor and humanity that the enormous tasks ahead feel both doable and desirable. This is Raj Patel's great gift: he makes even the most radical ideas seem not only reasonable, but inevitable. A brilliant book.”—Naomi Klein, author The Shock Doctrine

"As we confront the crisis in the worldview of orthodox economics, Raj Patel offers us a whole new way to think about price and value.  Bracingly written and full of surprises, The Value of Nothing is itself invaluable, showing us a path out of the darkness of the economic woods."—Michael Pollan, author of In Defense of Food and The Omnivore's Dilemma

“With The Value of Nothing, Raj Patel has done something of great value: in language utterly clear, concise, literate, and engaging, he takes readers through the murk and mess of the economy's collapse. He shows the hows and whys, how we seem bent on a repeat (no real substantive changes to the practices that got us where we are, at the policy level), but also how we, in our communities, if not larger concerted efforts, have some power to right the course. What Raj Patel did so brilliantly with food in Stuffed and Starved, he now does so with money and the economy.”—Rick Simonson, Elliott Bay Book Company

“In this riveting eye-opener of a book, Patel dismantles with great fluidity and precision the reigning theory of the free market and its applications: how it creates in our global society deep inequalities of power, based solely on the diktat that our fundamental  needs (water, decent food, housing, health care) are worthless because not profitable, and thus leading to economic chaos and a loss of community empowerment. But there is also hope in the emergence of social groups around the world who are insisting and reclaiming ‘the right to have rights through their democratic engagement. Patel brilliantly shows us how both a fairer society and a sustainable economy are possible as long as we are willing to seize back our freedom to choose from colluding governments and corporations.  The Value of Nothing should be required reading for any self-respecting citizen of the world.”—Marie du Vaure, Vromans Bookstore

“Its only January 2010, and we already have a candidate for the most important book of the year. Raj Patels The Value of Nothing takes aim at the conservative orthodoxy that has dominated American politics and economics for the last several decades, and he scores a direct hit.”—Bill Petrocelli, Book Passage

"Patel lays bare the social, political, and environmental damage caused by free markets and the commoditization of every facet of any market society. Such commoditization allows corporations to despoil the earth for short-term profit and has encouraged at least one economist to argue that antibigamy laws restrain the economic rights of ugly people by eliminating them as second spouses in the marriage marketplace. Markets, Patel declares, are a human construct and can be overthrown by humans; social rights to political participation, democratization, and popular control over the 'commons'—air, soil, and water—offer the only viable alternative to the rape-and-pillage mentality of the market. Patel debunks the myth that markets are the perfect form of social organization, effectively arguing that the tyranny they exert can and must be replaced by strategies benefiting all humanity and ensuring our very survival. This work is written calmly and sensibly enough that it could change some readers' minds, although it will leave free-market apologists spluttering. Highly recommended."—Duncan Stewart, University of Iowa Libraries, Iowa City, Library Journal (starred review)

spacer
spacer
  • back to top
Follow us on...




Powell's City of Books is an independent bookstore in Portland, Oregon, that fills a whole city block with more than a million new, used, and out of print books. Shop those shelves — plus literally millions more books, DVDs, and gifts — here at Powells.com.