Tag Archives: economic growth

anti-monopoly politics

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This Intercept article talks about an anti-monopoly message some Democrats are trying out. I like the idea in principle. Productivity growth has been stuck in second gear for close to 50 years now, and yet we hear about record corporate profits and stock market returns. These things happen at the same time only if big business is able to make unfair profits by rigging the system unfairly in its favor. That way their profits can grow while wages and innovation both stagnate. This is not a recipe for long-term growth for the economy as a whole.

Big business has been able to hijack the “free market” message for a long time now. Of course, a truly free market is about a truly level playing field for businesses of all sizes, and one where innovators can compete with established big businesses. I would argue that it is also about an economy where entrepreneurs and small business owners can take chances and innovate against a backdrop of health care, childcare and retirement security. But maybe that should not be the focus – one appeal of an anti-monopoly message could be to give the devisive social issues a rest for awhile and focus on inclusive economic growth.

The author gives several examples of monopoly power hurting both rural and urban interests:

FRERICK TALKS ABOUT running a Teddy Roosevelt-style campaign. In rural towns in southwest Iowa, he has challenged the merger between Monsanto and Bayer, which would give two companies (the other is Dow/DuPont) control of 75 percent of the U.S. corn seed supply. Add the company created by the merger of ChemChina and Syngenta, and three companies would sell 80 percent of all seeds. Farmers have no ability to bargain for corn seed, which has doubled in price over the last decade, even while crop prices have dropped…

But Frerick has a broader case to make on monopolies. In urban areas of Des Moines with less connection to farm life, he’s talked about cable companies who take hours to answer customer service calls, or shrinking local newspapers due to Facebook and Google’s capturing of prized eyeballs for advertisers. In older communities, he’s condemned pharmaceutical companies that funnel patients to expensive drugs with little or no competition. A separate 2016 paper Frerick wrote while at Treasury explained how drug companies use corporate charity as a profit center, by paying discounts for individuals so insurers and government plans have to pay exorbitant rates for medications…

Most hospitals buy supplies in bulk through group purchasing organizations (GPOs) which carry a “90/10” requirement. Hospitals must continue to purchase at least 90 percent of their supplies from inside the GPO to qualify for discounts and avoid millions of dollars in penalties. This contractual obligation fortified BD’s monopoly, despite selling a more dangerous, more expensive product.

U.S. home prices highest in riskiest areas

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According to Bloomberg,

The chart comes from Attom Data Solutions’ natural hazard index, which matches geographic areas to government data on risk of flood, earthquake, tornado, wildfire, hurricane, and hail.

The riskiest 20 percent of U.S. counties have the most homes, the highest average home values, and the greatest price appreciation in recent years. Why? Buyers who pay premiums for ocean views and mountain lookouts may be getting some additional disaster risk as part of the bargain, said Daren Blomquist, senior vice president at Attom. Those kinds of geographical attributes are likely secondary factors in driving price appreciation, though. More importantly, Attom’s list of disaster-prone areas overlaps with engines of economic activity.

This makes sense to me – it is probably just that the big, vibrant U.S. cities are in hurricane and flood prone coastal areas, in fire-prone Mediterranean climates, or both. Climate change is not going to reduce these risks. Having the earthquake risk thrown on top is kind of just bad luck.

Treasury Secretary warns against banking deregulation

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According to Project Syndicate, the U.S. Treasury Secretary made a recent statement warning against any rollback of regulations that were put in place following the 2007 financial crisis.

He argued that the United States’ political system “may be taking us in a direction that is very dangerous.” Referring to moves to roll back elements of the new regulatory order established in response to the debacles of 2008-9, he lamented that “everybody wants to go back to the status quo before the great financial crisis.” And he declared that “one cannot understand why grown intelligent people reach the conclusion that you should get rid of all the things you have put in place in the last ten years.”

The article goes on to argue that deregulation is actually not likely because academics and the press are against it. But the statement is not about academics and the press, it is about “the political system”. And who has control over the political system? The finance industry. And of course they want deregulation to boost short-term profits, even though it is not in their long term interests to destroy the world economy they depend on to operate.

 

inequality and carbon emissions

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A paper in Ecological Economics explores the links between inequality and carbon emissions.

The Trade-off Between Income Inequality and Carbon Dioxide Emissions

We investigate the theoretically ambiguous link between income inequality and per capita carbon dioxide emissions using a panel data set that is substantially larger (in both regional and temporal coverage) than those used in the existing literature. Using an arguably superior group fixed effects estimator, we find that the relationship between income inequality and per capita emissions depends on the level of income. We show that for low and middle-income economies, higher income inequality is associated with lower carbon emissions while in upper middle-income and high-income economies, higher income inequality increases per capita emissions. The result is robust to the inclusion of plausible transmission variables.

It could be that as developing countries develop, greener technologies become available to the working and middle classes faster than their household incomes actually increase. I am thinking of a switch from biomass and coal to electricity and natural gas, for example. These will lower people’s ecological footprint without necessarily costing them a lot more money. Once they start to get more money, they may start to transition to higher-impact behaviors, like driving instead of bicycling, and eating more meat and less grain.

You certainly wouldn’t want to promote income inequality as a policy measure to help the environment. There are social and tax policies that could be pursued instead, for example keeping communities walkable and mixed use even as incomes rise, and pricing meat at its true cost to the environment. These aren’t easy things to do politically in developing countries or anywhere else, of course, because they would require a political system willing to take on corporate power such as the oil, automobile, highway, and agriculture industries which tend to be immensely powerful and intertwined with political, bureaucratic and military elites.

June 2017 in Review

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Most frightening stories:

  • The Onion shared this uncharacteristically unfunny observation: “MYTH: There is nothing mankind can do to prevent climate change. FACT: There is nothing mankind will do to prevent climate change”. It’s not funny because it’s probably true.
  • Water-related hazards including flood, drought, and disease have significant effects on economic growth.
  • There were 910 deaths from drug overdose in Philadelphia last year. Interestingly, I started writing a post thinking I might compare that to car accidents, and ended up concluding that the lack of a functioning health care system might be our #1 problem in the U.S.

Most hopeful stories:

Most interesting stories, that were not particularly frightening or hopeful, or perhaps were a mixture of both:

  • Tile is a sort of wireless keychain that can help you find your keys, wallet, and those other pesky things you are always misplacing (or your significant other is moving, but won’t admit it).
  • “Fleur de lawn” is a mix of perennial rye, hard fescue, micro clover, yarrow, Achillea millefolium, sweet alyssum, Lobularia maritima, baby blue eyes, Nemophila menziesi, English daisy, Bellis perennis, and O’Connor’s strawberry clover, Trifolium fragiferum.
  • Traditional car companies are actually leading the pack in self-driving car development, by some measures.

decoupling

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Here’s a new article from Ecological Economics on the idea of decoupling human progress from energy use. In other words, the idea that we can continue to improve the quality of our lives and society without continuing to produce and consume ever more energy, materials, and stuff. To do this requires distinguishing needs from wants, which goes against the grain of mainstream economics.

A Framework for Decoupling Human Need Satisfaction From Energy Use

Climate change poses great challenges to modern societies, central amongst which is to decouple human need satisfaction from energy use. Energy systems are the main source of greenhouse gas emissions, and the services provided by energy (such as heating, power, transport and lighting) are vital to support human development. To address this challenge, we advocate for a eudaimonic need-centred understanding of human well-being, as opposed to hedonic subjective views of well-being. We also argue for a shift in the way we analyse energy demand, from energy throughput to energy services. By adopting these perspectives on either end of the wellbeing-energy spectrum, a “double decoupling” potential can be uncovered. We present a novel analytic framework and showcase several methodological approaches for analysing the relationship between, and decoupling of, energy services and human needs. We conclude by proposing future directions of research in this area based on the analytic framework.

value added tax

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Here is a Fresh Air interview with T.R. Reid explaining how great the VAT is.

This is the most important innovation in taxation in the last 60 years. This is a tax that’s like a sales tax on steroids. It’s a tax – our sales tax is called a retail sales tax. The tax is only collected when the retailer sells you the book. But on a value-added tax, a tax is collected when the paper mill sells the paper to the publisher and when a publisher buys ink from an ink company and then the publisher sells it to a wholesaler and a wholesaler sells it to a distributor, distributor to the bookstore and the bookstore to you.

That tax is collected at every level, and every time you pay the tax to the other guy, you report it to the government to get a credit for the tax you paid which means every penny of tax that’s paid is reported to the government. So the VAT turns out to be a very easy tax for government to collect and a very hard tax for taxpayers to avoid. And so if you put in a value-added tax, they’re very steady collections, and it’s hard to cheat on.

And you could use that money to reduce the rate of the corporate or the personal income tax. So 176 countries have adopted this innovation. It’s a great idea. The only countries that don’t have it are a bunch of countries so poor they have no taxes and the United States of America. So I say in my book in taxation, Americans are still banging out letters on a typewriter and dropping them in a mailbox, and everybody else is texting and using Instagram.

So let’s do it. There are actually some signs the Trump administration might consider it. But instead of eliminating income tax, they may be thinking of going after the Social Security payroll tax.

David Fleming

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Today is the first time I heard of the late David Fleming, but he appears to have been a sort of new age steady state economy theorist. His seminal work is Lean Logic: A Dictionary for the Future and How to Survive It, which is notable for being written in a sort of encyclopedia format that can be read in any order. Here’s the Amazon description:

Lean Logic is David Fleming’s masterpiece, the product of more than thirty years’ work and a testament to the creative brilliance of one of Britain’s most important intellectuals.

A dictionary unlike any other, it leads readers through Fleming’s stimulating exploration of fields as diverse as culture, history, science, art, logic, ethics, myth, economics, and anthropology, being made up of four hundred and four engaging essay-entries covering topics such as Boredom, Community, Debt, Growth, Harmless Lunatics, Land, Lean Thinking, Nanotechnology, Play, Religion, Spirit, Trust, and Utopia.

The threads running through every entry are Fleming’s deft and original analysis of how our present market-based economy is destroying the very foundations―ecological, economic, and cultural― on which it depends, and his core focus: a compelling, grounded vision for a cohesive society that might weather the consequences. A society that provides a satisfying, culturally-rich context for lives well lived, in an economy not reliant on the impossible promise of eternal economic growth. A society worth living in. Worth fighting for. Worth contributing to.

The beauty of the dictionary format is that it allows Fleming to draw connections without detracting from his in-depth exploration of each topic. Each entry carries intriguing links to other entries, inviting the enchanted reader to break free of the imposed order of a conventional book, starting where she will and following the links in the order of her choosing. In combination with Fleming’s refreshing writing style and good-natured humor, it also creates a book perfectly suited to dipping in and out.

The decades Fleming spent honing his life’s work are evident in the lightness and mastery with which Lean Logic draws on an incredible wealth of cultural and historical learning―from Whitman to Whitefield, Dickens to Daly, Kropotkin to Kafka, Keats to Kuhn, Oakeshott to Ostrom, Jung to Jensen, Machiavelli to Mumford, Mauss to Mandelbrot, Leopold to Lakatos, Polanyi to Putnam, Nietzsche to Næss, Keynes to Kumar, Scruton to Shiva, Thoreau to Toynbee, Rabelais to Rogers, Shakespeare to Schumacher, Locke to Lovelock, Homer to Homer-Dixon―in demonstrating that many of the principles it commends have a track-record of success long pre-dating our current society.

Fleming acknowledges, with honesty, the challenges ahead, but rather than inducing despair, Lean Logic is rare in its ability to inspire optimism in the creativity and intelligence of humans to nurse our ecology back to health; to rediscover the importance of place and play, of reciprocity and resilience, and of community and culture.

March 2017 in Review

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Most frightening stories:

  • La Paz, Bolivia, is in a serious crisis caused by loss of its glacier-fed water supply. At the same time we are losing glaciers and snowpack in important food-growing regions, the global groundwater situation is also looking bleak. And for those of us trying to do our little part for water conservation, investing in a residential graywater system can take around 15 years to break even at current costs and water rates.
  • Trump admires Andrew Jackson, who I consider a genocidal lunatic and the worst President in U.S. history.
  • Fluoridated drinking water could eventually be looked back on as a really stupid idea that damaged several generations of developing brains, like leaded gasoline. Or not…I’m not sure who to believe on the issue but caution is clearly warranted.

Most hopeful stories:

  • A new political survey says there is a chance that a majority of Americans are not bat-shit crazy. Which suggests they might not be too serious about Steve Bannon, who believes in some bat-shit crazy stuff. There are a number of apps and guides out there to help sane people pester our elected representatives when they fail to represent our interests.
  • South Korean women are projected to be the first to break the barrier of an average life expectancy of 90, with a 50% probability of this happening by 2030.
  • Advanced power strips can reduce the so-called “vampire loads” of our modern electronic devices that are never really off.

Most interesting stories, that were not particularly frightening or hopeful, or perhaps were a mixture of both:

  • This long NASA article first gets you excited about the possibility of life on eight new planets it has just discovered, and then throws cold water (actually, make that lethal X-rays) all over your excitement.
  • Bill Gates has proposed a “robot tax”. The basic idea is that if and when automation starts to increase productivity, you could tax the increase in profits and use the money to help any workers displaced by the automation. In related somewhat boring economic news, there are a variety of theories as to why a raise in the minimum wage does not appear to cause unemployment as classical economic theory would predict.
  • CRISPR could be used to create new crops out of the wild ancestors of our current crops.