Ph.D. Octopus

Politics, media, music, capitalism, scholarship, and ephemera since 2010

The Skimmer Economy

with 8 comments

Atrios points out that there is essentially a “skimmer economy.”

Some day I hope more people realize that large segments of our economy don’t actually do anything (health insurance, much of finance/real estate), they simply position themselves in the middle of transactions and take their cut. That isn’t to say there are no transactions which legitimately require skilled middlemen, or that there is no legitimate function for the finance and banking industries, but to a great degree the skimmers just don’t do anything productive at all. Except take our money.

Or, as Walt Whitman wrote:

Here and there with dimes on the eyes walking,
To feed the greed of the belly the brains liberally spooning,
Tickets buying, taking, selling, but in to the feast never once going,
Many sweating, ploughing, thrashing, and then the chaff for payment
receiving,
A few idly owning, and they the wheat continually claiming.

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Written by Peter Wirzbicki

April 28, 2010 at 08:20

8 Responses

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  1. Someday I hope more people realize that just because they don’t understand what someone does doesn’t mean that those people don’t do anything productive.

    You can’t call something an “economy”, tag it ask “economics”, and then baldly claim something so antithetical to basic economics without any sort of evidence whatsoever. Well.. you can, but you come off sounding like an idiot.

    Sticking with Whitman, in a paraphrase

    “You must not know too much or be too precise or scientific about [economics and commerce]; a certain free-margin, and even vagueness – ignorance, credulity – helps your enjoyment of these things.”

    PLW

    April 28, 2010 at 11:23

    • Atrios is an economist – and if I recall, one of the few who saw the crash coming.

      My own first blog post was plagiarized from his first post (with due credit!).

      It was “Is this thing working?”

      I always thought it a perfect launch.

      Moe

      April 28, 2010 at 14:33

    • Do you have a particular argument PLW? Besides, “I think Atrios is stupid.”

      And Moe is right, Atrios is an academic economist. That doesn’t necessarily makes him right, but does challenge your comment, which, to the degree it makes any sense, seems mostly based on an appeal to the authority of the economics discipline.

      Wiz

      April 28, 2010 at 20:07

      • I don’t think Atrios is stupid. There is a whole framework of theory and piles of empirical work about what determines how resources are allocated in a capitalistic economy. Much of this indicates that labor and capital flows, as well as wages and profits, are very strongly determined by productivity. The idea that there are “large segments of our economy don’t actually do anything” flies in the face of this enormous body of research. Someone who wants to make such a fantastic claim should provide evidence.

        It’s like if I claimed that I could levitate, despite the fact that everything everyone knows about physics tells us that I probably cannot. If I claim it without any evidence, I sound like a kook, because the burden is on me to prove such a seemingly implausible thing.

        And FYI, Atrios used to be an academic economist. Maybe he got tired of being required to provide evidence.

        PLW

        April 28, 2010 at 23:34

  2. I think you revealed a little more than you intended by comparing economics to physics. This has long been the conceit of the classical economists– “we simply describe the ‘natural’ workings of the economy”– when more than any discipline around, economics is laden with ideological assumptions and normative discourse (as appeals to “nature” almost inevitably are). In other words economics, despite what some of its ideologues think, is not a matter of simply accumulating more evidence and more fact, but rather of essential value judgements.

    I’m not going to get into Atrios’ head, to explain what he meant. But I do know there are some pretty smart people who think that the tremendous growth of rentier-class institutions over the last 20-30 years, has not been a boon for the economy and that they have not been allocating capital in an efficient way. In fact, given the last 5 years of history, it seems like the burden of evidence would be on you to show that the type of financial service economy that he was criticizing was performing any sort of useful public service. They were allocating capital to a real estate bubble, rather than socially necessary industries. And instead of spreading out risk, they concentrated it.

    Finally, there seems a fundamental difference between a company which, at the end of the day, produces profit by selling a commodity that fulfills some human need, however manufactured that need may be- shoes, T.V.s, ipads, etc…- and companies that produce wealth by essentially gambling, as the big banks were, or extracting rent from capital they lend out.

    Health Insurance is the classic example of this. It is absolutely parasitic, producing no innovations or new products of any worth. Instead it acts as a middleman, spreading out risk, which would be too high for an individual. Which would be fine, were the insurance companies not, as Atrios points out, skimming a significant amount of that money away from your health and towards the CEO’s yacht. Thus socially owned insurance organizations are able to do the same service, in a far more efficient and just manner.

    Wiz

    April 29, 2010 at 00:30

    • I think an odd tendency has developed in recent years to align robber barons with those who profit from producing good or sevices.

      The former only abuse capitalism for personal profit, the latter strengthen and sustain it.

      Moe

      April 29, 2010 at 11:16

  3. Middlemen do matter a lot for the smooth functioning of the economy in terms of allocating capital, matching buyers with sellers, etc. But incumbent middlemen, as in any other sector of the economy, can then lobby for regulation that protects them and increases their profits. It may be easier than in other sectors, because they are less well understood. This in turn creates outrage, and a demand for more government regulation, which usually also gets corrupted, and creates more profits, and the cycle continues, unless anyone wakes up and stops it.

    DRDR

    April 30, 2010 at 12:14

  4. […] to my Octopus son for this […]


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