Tag Archives: economics

best books of 2018 (Project Syndicate)

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Project Syndicate is one of my favorite sources of commentary on economics and geopolitics. In this post, their contributors each name some of their favorite books of 2018, which, perhaps not surprisingly, mostly cover economics and geopolitics. I would love to read almost everything on this list, but I’ll mention 10 just for brevity.

November 2018 in Review

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Most frightening and/or depressing stories:

  • Coral reefs are expected to decline 70-90% by mid-century.
  • The U.S. stock market is overvalued by about 40% by historic measures, and some economists think a major recession may be looming.
  • About half a million people have been killed in Iraq, Afghanistan, and Pakistan since the U.S. invasions starting in 2001. This includes only people killed directly by violence, not disease, hunger, thirst, etc.

Most hopeful stories:

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

  • New tech roundup: People in Sweden are barely using cash at all, and some are paying with microchips embedded in their fingers. New technology may allow screening of multiple airport passengers from 25 feet away with minimal disruption. This is great for airline passengers who are already expecting to be screened intrusively, but of course raises some concerns about potential uses elsewhere in the public realm. Amazon is hiring about 100,000 seasonal workers this year, compared to about 120,000 in past years, and the difference may be explained by automation. There is a new ISO standard for toilets not connected to sewers systems (and not just your grandfather’s septic tank.)
  • A unidentified flying object has been spotted in our solar system, and serious scientists say there is at least a plausible, if very unlikely, chance that it is an alien spacecraft.
  • People are taking micro doses of LSD on a daily basis, believing it boosts creativity, and there is some evidence for this although the science is not rigorous.

could Marxism make a comeback?

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Maybe, according to this Marxist professor writing on Truthout.org.

Within the broad Marxian tradition, some strands offer both analyses and policies that differ sharply from anything offered by either neoclassical or Keynesian economics. To take perhaps the clearest example, many Marxists focus on the undemocratic position of capitalists within enterprises (individual owners and corporate boards of directors). Their decisions on whether and how to invest net revenues determine the shape of the macroeconomy for all. A minority focused on enterprise profits as “the bottom line” makes decisions impacting the jobs, incomes, debts, etc. of a majority to which it is not democratically accountable. This minority’s expectations, desires and “animal spirits” (as Keynes put it) causes instability, in the Marxian view. The policy suggestion emerging from that view focuses on a program to “democratize the enterprise” as a solution to instability. Replacing hierarchical undemocratic capitalist enterprises with democratically organized worker cooperatives – where each enterprise member has one vote in deciding key matters, such as investment decisions – is a way forward that neither neoclassical nor Keynesian economists have yet allowed to be debated in public and academic forums. We will all be better off when the current narrowness of economics is opened up to include more basic proposals for change adequate to the depth and scope of capitalism’s current problems.

I’m not sure where I “stand”, except I’d like to see more empirical testing of economic theories and less ideology. Even if we figured out which of the major economics religions is actually “the right one”, we still couldn’t expect it to pick solutions for us. It could identify a range of reasonably economically efficient solutions to a problem (and reject a lot of clearly dumb ones), but we would still have to pick one to try moving ahead with that best represented our values. But maybe with all those dumb solutions tossed out and better information at our fingertips about the range of good solutions, our messy political system would have a better chance of making good choices.

October 2018 in Review

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Most frightening stories:

  • The Trump administration has slashed funding to help the U.S. prepare for the next pandemic.
  • I read more gloomy expert opinions on the stability and resilience of the global financial system.
  • A new depressing IPCC report came out. Basically, implementing the Paris agreement is too little, too late, and we are not even implementing it. There is at least some movement towards a carbon tax in the U.S. – a hopeful development, except that oil companies are in favor of it which makes it suspicious. There is a carbon tax initiative on the ballot in Washington State this November that the oil companies appear to be terrified of, so comparing the two could be instructive, and the industry strategy may be to get a weaker law at the federal level as protection against a patchwork of tough laws at the state and local levels.

Most hopeful stories:

  • There is no evidence that kids in U.S. private schools do any better than kids in U.S. public schools, once you control for family income. (Okay – I admit I put this in the hopeful column because I have kids in public school.)
  • Regenerative agriculture is an idea to sequester carbon by restoring soil and  protecting biodiversity on a global scale.
  • Applying nitrogen fixing bacteria to plants that do not naturally have them may be a viable way to reduce nitrogen fertilizer use and water pollution.

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

  • New tech roundup: Artificial spider silk is an alternative to carbon fiber. Certain types of science, like drug and DNA experiments, can be largely automated. A “quantum internet” could mean essentially unbreakable encryption.
  • Modern monetary theory suggests governments might be able to print (okay, “create”) and spend a lot more money without serious repercussions. What I find odd about these discussions is they focus almost entirely on inflation and currency exchange values, while barely acknowledging that money has some relationship actual physical constraints. To me, it has always seemed that one function of the financial system is to start flashing warning lights and make us face the realities of how much we can do before we are all actually starving and freezing in the dark. It could be that we are in the midst of a long, slow slide in our ability to improve our physical quality of life, but instead of that manifesting itself as a long slow slide, it comes as a series of random shocks where one gets a little harder to recover from.
  • I read some interesting ideas on fair and unfair inequality. Conservative politicians encourage people not to make a distinction between alleviating poverty and the idea of making everybody equal. These are not the same thing at all because living just above the poverty line is no picnic and is not the same thing as being average. There is a strong moral case to be made that nobody “deserves” to live in poverty even if they have made some mistakes. And simply “creating jobs” in high-poverty areas sounds like a nice conservative alternative to handouts, except that there isn’t much evidence that it works.

fair vs. unfair inequality

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This interesting article in Vox talks about academic ideas on how to distinguish and measure a difference between fair and unfair inequality. The premise is that there is no moral justification for leaving anyone below the poverty line, even if they are there due to bad choices of their own making. But once out of poverty, there is a need for incentives for people to make effort, make good choices and take the kind of good risks that sometimes pay off for society. There is also a difference between people who are less well off because of bad luck (often the luck of who their parents are) and people who are less well off because they have made less effort or bad choices. Of course, people who are better off because of luck or breeding will tend to rationalize their success relative to others as being due to superior effort and good choices, when in fact they may not be the case. So having an objective way to measure this is an interesting idea. It suggests you could have policies that kick in automatically when some measure of “unfair inequality” gets to a certain level. I don’t quite understand the measure itself, but this is a blog post referring to an academic paper, and I didn’t dig into the academic paper itself.

September 2018 in Review

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Most frightening stories:

Most hopeful stories:

  • The Suzuki and Kodaly methods are two ways of teaching music to young children that may actually help them think later in life. Training in jazz improvisation may also be good for young brains in a slightly different way.
  • There are some bright ideas for trying to improve construction productivity, which has languished for decades. Most involve some form of offsite fabrication.
  • In energy news, there’s a big idea to produce half the world’s electricity from sunlight in the Sahara desert. Another idea for collecting solar energy in otherwise (ecologically) wasted space is solar roadways, and there are a few prototypes around the world but this doesn’t seem to be a magic bullet so far. Another big idea is long-term storage of energy to smooth out fluctuations in supply and demand over months or even years.

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

the mini-recession of 2015-16

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The New York Times has a nice piece of economics reporting on a downturn that affected the U.S. manufacturing, farming and energy industries in 2015 and 2016. I’ll see if I can summarize it, but really we have to admit to ourselves that spinning these narratives after the fact doesn’t mean we have the ability to predict the future.

  • China tried to slow down lending because it was worried about a bubble. The article doesn’t say how, but maybe they raised interest rates or put other requirements on banks.
  • This affected developing countries that export to China.
  • The U.S. Federal Reserve was also starting to raise interest rates because it thought growth and inflation were both starting to pick up.
  • Europe and Japan were decreasing interest rates due to low growth at time.
  • The disparity in interest rates caused a rise in the dollar, because investors pulled money out of other countries/currencies to invest in the U.S.
  • China’s currency is (partially?) pegged to the dollar, so this caused its currency to rise and hurt its exports.
  • China reduced its peg to the dollar in response to allow its currency to depreciate and help its exports. However, this caused more investors to shift money out of China and reduced growth even more.
  • Governments and companies in emerging markets had a lot of dollar-denominated debt, which was now more expensive to repay in their local currencies.
  • The slowdown in emerging markets reduced demand for oil, minerals and agricultural goods, which caused prices to drop and hurt those sectors in the U.S., along with manufacturing that serves those sectors. Some emerging countries are also active in energy, mining, and agriculture so they were also hurt.
  • This may have had political consequences both in terms of disgruntled voters in key states during the 2016 election, and the perception of increased growth following the election.

It’s pretty interesting how it is all connected, and even though it seems complex the reality is probably much more complex than the way I have tried to puzzle it out above. The lesson going forward seems to be that a slow down in China, coupled with a disparity in growth between the U.S., China, and other developed countries in Europe and Asia, can lead to recession conditions in the U.S., even if the U.S. economy is healthy at the beginning of the process. Put another way, global growth is clearly not a zero sum game as some politicians would like to try to convince us. The U.S. Federal Reserve is trying to gradually raise rates to give it some ability to respond to an event like this in the future, but it is clearly a balancing act.

bullshit jobs

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In David Graeber’s 2013 essay On the Phenomenon of Bullshit Jobs, a bullshit job is one where the person doing it doesn’t think it is necessary or important. The paradox is that many high-paying corporate jobs seem to fit this mold.

Why did Keynes’ promised utopia—still being eagerly awaited in the ’60s—never materialise? The standard line today is that he didn’t figure in the massive increase in consumerism. Given the choice between less hours and more toys and pleasures, we’ve collectively chosen the latter. This presents a nice morality tale, but even a moment’s reflection shows it can’t really be true. Yes, we have witnessed the creation of an endless variety of new jobs and industries since the ’20s, but very few have anything to do with the production and distribution of sushi, iPhones, or fancy sneakers…

But rather than allowing a massive reduction of working hours to free the world’s population to pursue their own projects, pleasures, visions, and ideas, we have seen the ballooning of not even so much of the ‘service’ sector as of the administrative sector, up to and including the creation of whole new industries like financial services or telemarketing, or the unprecedented expansion of sectors like corporate law, academic and health administration, human resources, and public relations. And these numbers do not even reflect on all those people whose job is to provide administrative, technical, or security support for these industries, or for that matter the whole host of ancillary industries (dog-washers, all-night pizza delivery) that only exist because everyone else is spending so much of their time working in all the other ones…

This is a profound psychological violence here. How can one even begin to speak of dignity in labour when one secretly feels one’s job should not exist? How can it not create a sense of deep rage and resentment. Yet it is the peculiar genius of our society that its rulers have figured out a way, as in the case of the fish-fryers, to ensure that rage is directed precisely against those who actually do get to do meaningful work. For instance: in our society, there seems a general rule that, the more obviously one’s work benefits other people, the less one is likely to be paid for it. Again, an objective measure is hard to find, but one easy way to get a sense is to ask: what would happen were this entire class of people to simply disappear? Say what you like about nurses, garbage collectors, or mechanics, it’s obvious that were they to vanish in a puff of smoke, the results would be immediate and catastrophic. A world without teachers or dock-workers would soon be in trouble, and even one without science fiction writers or ska musicians would clearly be a lesser place. It’s not entirely clear how humanity would suffer were all private equity CEOs, lobbyists, PR researchers, actuaries, telemarketers, bailiffs or legal consultants to similarly vanish. (Many suspect it might markedly improve.) Yet apart from a handful of well-touted exceptions (doctors), the rule holds surprisingly well.

I’m not quite so sure. I think that as we have become wealthier, things our grandparents would have thought of us “wants” are now classified as “needs”. I think air conditioning is one good example. My grandparents would have considered it an unimaginable luxury, but I consider it somewhat of a necessity that improves my life and my family’s life, and I am willing to work a little extra to have it. I can think of a lot more examples that don’t fit this though, starting and ending with all the junk in my house. I would gladly give up most of it in exchange for working a little less. So what is stopping me? That’s actually a hard question to answer. My life style is calibrated to my income and vice versa in an endless cycle that is hard to break, kind of like popping a balloon with your bare hands – how do you get a grip so you can apply pressure? The cable bill might be a start – in fact, I just bought a digital antenna and cancelled my cable. I kept my internet connection though, and somehow Verizon figured out a reason that saves me only a little money (some “discount for bundled services” that no longer applies). So now I could theoretically work maybe 5 minutes less a week, but that would be a weird conversation to have with my employer, and is not going to happen. And of course I am not giving up my internet, because that is a necessity for me and my family, which my grandparents could not even have conceived of existing, but which I am willing to work a little extra to pay for…

best performing urban economies

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Here are the world’s 10 best-performing urban economies according to Brookings.

  1. Dublin, Ireland
  2. San Jose, USA
  3. Chengdu, China
  4. San Francisco, USA
  5. Beijing, China
  6. Delhi, India
  7. Manila, Philippines
  8. Fuzhou, China
  9. Tianjin, China
  10. Xiamen, China

Here is a brief explanation of the methodology:

This Global Metro Monitor employs several key variables to assess the economic performance of metropolitan areas: gross domestic product (GDP), employment, population, and GDP per capita, all from 2000 to 2016. For static analysis and cross-border comparison, this study employs nominal GDP at purchasing power parity rates. For trends analysis, it uses GDP data at 2009 prices and expressed in U.S. dollars. Data availability and comparability at metropolitan level precluded expanding the economic analysis to other indicators of interest, such as housing prices, employment rates, unemployment rates, and income distributions.

Clearly, there is no consideration of health, ecosystem services, or sustainability here.

U.S. housing bubble starting to deflate?

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This Reuters article suggests the current U.S. housing bubble may be starting to deflate, if not pop. I don’t quite follow the logic, because it seems to suggest at the same time that the rate of housing starts is not sufficient to meet demand, and that the cost of construction is rising due to rising material, land, and labor costs. In basic economics 101 class, if there is an unmet demand, prices are supposed to rise until supply equals demand. But maybe people are just not willing or able to buy houses they want at the current market prices. What do they do instead? Again in textbook economics land, they should move to less expensive locales, buy smaller houses, live with roommates, rent extra rooms on AirBnB, etc. I guess there are all sorts of legal and cultural reasons these things don’t happen enough or fast enough for the market to equilibrate. Still, even knowing that the real world is not the textbook economic world, it’s hard to buy the argument that developers aren’t building houses because there aren’t as many houses for sale as people who want to buy houses.