A (3:25)

Somebody else's lot without hurting somebody else.

B (3:28)

Correct. And basically, you know, our view and the purpose of this podcast is to show people the ways in which all of those assumptions about economic behavior and life and systems, those things are just not true. They were mostly just made up. There's a bunch of stuff in addition to that that was made up that's even more technical. And most of it was made up to make the math work so that you could mathematize the system and build models that you could use to represent the world. The sad part, of course, is none of the models work. They don't represent the world very well. They don't predict anything. And we have drawn a bunch of conclusions from neoclassical economics like raising wages kills jobs and tax cuts for rich people create growth, which are just objectively false.

A (4:12)

So neoclassical economics, this is what you are taught in Econ 101.

B (4:18)

Correct.

A (4:18)

And what we talk about here on our podcast, this is what you will be taught in econ 101 in about 15, 20 years.

B (4:27)

Yes, hopefully. Hopefully.

A (4:29)

So let's move on to one of the more contentious terms we use, and that is neoliberal.

B (4:37)

Right.

A (4:38)

It's used a lot as a pejorative from the left. What is a neoliberal? And what do we mean when we say neoliberal?

B (4:48)

So neoliberalism was a thing created by a bunch of, well, guys.

A (4:56)

Cabal.

B (4:56)

A cabal of guys. And it legitimately, and in a well meaning way, in response to communism and authoritarianism around the world. And these folks in the 30s and 40s legitimately believed that there were some very bad things happening in the world, that statism and collectivism were going to destroy freedom and destroy economies and destroy society. And so neoliberalism was a reaction against that and a commitment to free markets and freedom and a bunch of other things. And a lot of that is totally legitimate. They were absolutely correct to believe that market economies did and will always outperform non market economies. But neoliberalism as it evolved, got hijacked by a bunch of folks and became essentially an ideological framework that grew out of neoclassical economics. And it means a bunch of things to us. Specifically, it entails a particular definition of freedom which is that freedom from constraint is the only kind of freedom that matters. It asserts that the only legitimate organizing principle for an economy is competition and markets. It asserts that the source of growth in an economy is always capital and concentrated capital in particular. That what you are paid defines your worth and contribution to a society. And you know, among other things, the only legitimate purpose of the corporation is to maximize value to shareholders. And there's a bunch of other beliefs, but those kind of roundly summarize what was extracted from neoclassical economics. That makes up a bunch of the culture of economics that we live with today. And that's what neoliberalism is doing.

A (6:45)

That sounds like mainstream economic and political ideology for the past 40 years.

B (6:50)

It is. That's exactly what it is. And it's what most people accept, like gravity, that this is just how it is and there's nothing you can do about it.

A (7:00)

If it means that I make $7.25 an hour and you make a billion.

B (7:04)

Then that must be what we're worth, respectively.

A (7:07)

There's nothing we can do about it because it's a natural law.

B (7:10)

That's right. And all of that's bullshit.

A (7:13)

So to be clear then, to build on this conversation, neoclassical economics, that is a school of economic theory and neoliberalism, is a political and economic ideology and.

B (7:28)

Narrative built on top of that.

A (7:30)

Built on top of that, which is used to kind of define the set of policies that are available to us. Correct.

B (7:38)

And what sits on top of that is another term of art that we use a lot, which is trickle down economics. And trickle down economics is really a set of memes and political rationalizations for what you want to do. And we call trickle down economics. Tax cuts for rich people creates growth, deregulation for powerful people creates growth, and raising wages kills jobs. Those are the anchor claims of trickle, trickle down economics. And they are what has framed economic policy and politics in the United States for.

A (8:09)

Well, since like 1980. Yeah, since Reagan for the most part.

B (8:12)

Again, all of which is bullshit.

A (8:15)

Okay, so then let's move on to another term which we don't use as much, but people talking about the stuff we talk about use, and that is heterodoxy.

B (8:27)

Yeah, so this is a, an emerging term of art, but basically heterodox economic thinking is non orthodox economic thinking. It's economic, not neoclassical and not neoclassical. And it means an economic thinking which challenges these behavior, value growth and systems ideas. We are heterodox economic thinkers. We assert that humans aren't rational and selfish. We are reciprocal and heuristic that value isn't price, it's actually solutions and welfare. That growth is basically the evolution of fitness rather than factors of production. And that the systems aren't equilibrium systems, they're basically non equilibrium ecologies.

A (9:13)

And one of the reasons why it's referred to as heterodoxy is rather than just drawing from economics, it is actually a synthesis of the latest science in a broad number of disciplines.

B (9:27)

Physics, biology, evolutionary theory, psychology, sociology, anthropology.

A (9:36)

You know, a huge information theory, network theory. All of that coming together, converging and being mixed into this new way of viewing the economy.

B (9:47)

Correct. What's our next term?

A (9:50)

Let's go for our favorite word recently, which is monopsony.

B (9:54)

Yeah. Monopoly's evil twin. What is it, Goldie?

A (10:00)

Actually, it's very much like monopoly. Everybody knows a monopoly, strictly monopoly, is when you have 100% control of a market, but really in reality it's when you have a dominant share of a market. Often it's like duopolies. But a monopoly is when you have dominant control of the market so that you can set the price of things. Monopsony is when you have dominant control of a market from the perspective of the buyer, you can control the cost of things. I think one of the best examples of monopsony, Nick, is the plight of chicken farmers in America where essentially in most parts of the country there's only one or two, usually one customer who's buying their product.

B (10:50)

Yeah, One huge agribusiness, Tyson or Purdue.

A (10:54)

And they set all the terms. As a chicken farmer, you're not really an independent business anymore. They make you buy the chicks from them, they give you standards on how to raise them, and they set the price per pound. So chicken farmers in America, same with a lot of pork farmers. Farmers, they've really been impoverished over the.

B (11:12)

Last couple decades and all of the value of that supply chain has been sucked out of it by those giant agribusinesses from ordinary farmers and workers and essentially is aggregated into the earnings, bonuses and stock price of these big companies.

A (11:32)

Right. So the next time you get your chicken nuggets on the dollar menu, remember it's not just the chickens who were suffering, it's the chicken farmers.

B (11:40)

It's exactly right.

A (11:42)

And finally, let's close on one of our little pet issues. Yeah. What's a stock buyback?

B (11:48)

So what a stock buyback is, is when a public company uses its cash or cash flow to buy its own shares of stock. Why would you do that?

A (11:57)

Why would you explain that?

B (11:59)

Idiotic. So why would you do that? Well, when you do it, you reduce the number of shares outstanding, and two things happen. Often the price of the stock will go up because there's fewer available and you're putting buying pressure on it. If you're an owner of the stock, that's very, very good. And also, the earnings that the company makes are divided by the number of shares outstanding.

A (12:23)

Eps.

B (12:24)

EPS per share. Right. And as the number goes down, the EPS goes up, which means that the.

A (12:30)

Stock price will go up because Wall street loves eps.

B (12:33)

And so this is a way to make the stock price of a company go up without the pesky burden of having to make better products and services.

A (12:44)

Wow. That's like magic. You don't even actually be good at your job.

B (12:48)

You don't. You can make shit products and all you do is, you know, at least in the near term, you buy more shares and stock price goes up. And it's a very pernicious practice. And it is one of our pet peeves because it is so huge, because stock buybacks now represent about 5% of GDP. About a trillion dollars a year.

A (13:10)

A trillion dollars a year.

B (13:11)

And as we think through all the things that we need to do with money to get the economy back on track, pay people more, invest in education, secure people's retirement, pay for health care, all of those things address climate change. Yeah. A trillion dollars that does nothing in the economy but make a few rich people richer is a remarkable source of money for all those things.

A (13:35)

Okay, so there you have it. A quick refresher on a lot of the terms.

B (13:40)

Defining our damn terms, right?

A (13:42)

Defining our terms. A lot of the words we toss around here on Pitchfork Economics. If you're listening, and there are any more terms that you think we missed that you'd like us to. To explain a little more in depth, please send an email to pitchitchitchfork economics.com and let us know.

B (14:02)

Awesome.

C (14:10)

Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to follow, rate and review us wherever you get your podcast. Find us on other platforms like Twitter, Facebook, Instagram and Threads. Itchforceconomics. Nick's on Twitter and Facebook as well. Ickhanhauer. For more content from us, you can subscribe to our weekly newsletter, the Pitch, over on Substack. And for links to everything we just mentioned, plus transcripts and more, visit our website, pitchfork economics.com as always, from our team at Civic Ventures, thanks for listening. See you next week.