Here we have the last Republican nominee sagavely attacking the current front runner. It suggests to me that Republican leaders are worried the general election may be a lost cause. Maybe it is time for a rational pro-growth, pro-business party to emerge and leave the intolerant fringe behind. A rational pro-growth, pro-business party could embrace policies like clean elections, a universal health care system that takes the burden off employers, investment in education rather than prisons, a rational guest worker program, and a revenue-neutral carbon tax.
Tag Archives: economic growth
February 2016 in Review
I’m going to try picking the three most frightening posts, three most hopeful posts, and three most interesting posts (that are not particularly frightening or hopeful) from February.
3 most frightening posts
- Collapsing oil prices played a big role in bringing down the Soviet Union, and now are likely to cause chaos in societies across Africa and the Middle East. On the other hand, oil prices just might come roaring back.
- 77% of jobs in China may be threatened by automation.
- Drought has become severe in some very populous areas of Southeast Asia.
3 most hopeful posts
- There are some practical ideas for how to develop potentially dangerous technologies more safely.
- There is some solid math behind Bernie Sanders’s economic plan. And a Sanders-Warren ticket just might save us from the next crippling financial crisis.
- A variable carbon tax could be phased in a way that takes advantage of upswings in the economy without exacerbating the downswings.
3 most interesting posts
- The U.S. election season certainly is getting interesting, although not really in a good way. ontheissues.org has a useful summary of where U.S. political candidates stand…what are the words I’m looking for…on the the issues. Nate Silver has an interesting online tool that lets you play around with how various demographic groups tend to vote.
- Fire trucks don’t really have to be so big.
- Titanium dioxide is the reason Oreo filling is so white.
Sander-nomics
This analysis of Bernie Sanders’s economic plan by Gerald Friedman at University of Massachussetts-Amherst has made quite a splash, suggesting it could lead to massive improvements in economic growth, unemployment, inequality, and productivity, all while investing heavily for the future in infrastructure, education, and climate change readiness. Bill Moyers.com has a long roundup of the criticism and support from all sides, finally concluding that it is actually plausible using standard, even conservative principles of economics. To me, even if it is only partially true, it just shows how unbelievably badly our economy has been managed over the past few decades, and how unready for the future we actually are.
Meanwhile, the Trump economic plan just doesn’t remotely add up using any known principles of arithmetic.
variable carbon tax
This post explains how a variable carbon tax could work. In summary, it automatically adjusts when oil prices rise or fall, damping out the effects of price fluctuations and raising more revenue when prices are low. It can be designed so that the overall, average tax increases over time, with those increases happening when the economy can best handle them.
The tax would decrease gradually as oil prices rise, and then increase again when prices eventually come back down.
If the adjustments are asymmetric – larger increases when prices fall, and smaller decreases when prices rise – this system would gradually raise the overall carbon tax, even as it follows a counter-cyclical pattern. Such an incremental increase is what most models for controlling climate change call for…
The key to this strategy’s political feasibility is to launch it while prices are very low. Once it is in place, it will become a little-noticed, politically uncontroversial part of pricing for gasoline (and other products) – one that produces far-reaching benefits. Some of the revenue could be returned to the public in the form of tax cuts or research support.
Other forms of environmental harm could be taxed in this way too – for example, building materials (pavement) that cause pollution and habitat destruction, emissions of air pollutants other than carbon, consumer packaging not designed to be reused or recycled. You could make the whole thing revenue-neutral by reducing taxes on hard work and productive investment.
oil prices and social unrest
This article reminds us that collapsing oil prices played a big role in bringing down the Soviet Union, and now are likely to cause chaos in societies across Africa and the Middle East. The list of countries predicted to “explode”: Nigeria, Angola, Kenya, Uganda, Egypt, and Libya.
January 2016 in Review
I’m going to try picking the three most frightening posts, three most hopeful posts, and three most interesting posts (that are not particularly frightening or hopeful) from January.
3 most frightening posts
- Paul Ehrlich is still worried about population. 82% of scientists agree.
- Thomas Picketty (paraphrased by J. Bradford Delong) says inequality and slow growth are the norm for a capitalist society. Joseph Stiglitz has some politically difficult solutions: “Far-reaching redistribution of income would help, as would deep reform of our financial system – not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs.”
- Meanwhile, government for and by big business means the “Deep State” is really in control of the U.S. In our big cities, the enormous and enormously dysfunctional police-court-prison system holds sway over the poor.
3 most hopeful posts
- The new Michael Moore visits other countries and collects their best ideas on policies that work well and we just don’t know about.
- Urban transportation is evolving. Self-driving vehicles might travel slower, and we might be okay with that. The economics of commuting and parking also seem to be favoring denser urban living.
- The science of wildlife corridors is progressing, potentially allowing us to preserve/restore more ecological function in less space amid human disturbance. Eric Toensmeier has articulated nicely a vision that human-altered landscapes could be positive rather than negative.
3 most interesting posts
- There are some arguments in favor of genetically modified food – they have increased yields of some grains, and there is promise they could increase fish yields. 88% of scientists responding to a Pew survey said they think genetically modified food is safe, but only 37% of the U.S. public thinks so. In other biotech news, Obama’s State of the Union announced a new initiative to try to cure cancer. In other food news, red meat is out.
- Not only is cash becoming obsolete, any physical form of payment at all may become obsolete.
- The World Economic Forum focused on technology: “The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.”
the fourth industrial revolution
Reporting fro Davos…er…Philadelphia – the theme of this World Economic Forum is “the fourth industrial revolution”.
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.
The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.
George Soros
George Soros is worried that the China stock market crash could trigger a new financial crisis, or the next phase of the ongoing financial crisis:
China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world, Soros said in Colombo. A return to positive interest rates is a challenge for the developing world, he said, adding that the current environment has similarities to 2008.
Global currency, stock and commodity markets are under fire in the first week of the new year, with a sinking yuan adding to concern about the strength of China’s economy as it shifts away from investment and manufacturing toward consumption and services. Almost $2.5 trillion was wiped from the value of global equities this year through Wednesday, and losses deepened in Asia on Thursday as a plunge in Chinese equities halted trade for the rest of the day.
“China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”
Joseph Stiglitz on “The Great Malaise”
Joseph Stiglitz is calling the current world economic slump “The Great Malaise”.
The economics of this inertia is easy to understand, and there are readily available remedies. The world faces a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity. Those at the top spend far less than those at the bottom, so that as money moves up, demand goes down. And countries like Germany that consistently maintain external surpluses are contributing significantly to the key problem of insufficient global demand.
At the same time, the US suffers from a milder form of the fiscal austerity prevailing in Europe. Indeed, some 500,000 fewer people are employed by the public sector in the US than before the crisis. With normal expansion in government employment since 2008, there would have been two million more.
Moreover, much of the world is confronting – with difficulty – the need for structural transformation: from manufacturing to services in Europe and America, and from export-led growth to a domestic-demand-driven economy in China. Likewise, most natural-resource-based economies in Africa and Latin America failed to take advantage of the commodity price boom underpinned by China’s rise to create a diversified economy; now they face the consequences of depressed prices for their main exports. Markets never have been able to make such structural transformations easily on their own.
His solutions sound familiar – “Far-reaching redistribution of income would help, as would deep reform of our financial system – not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs.”
Thomas Picketty
This column by J. Bradford Delong is meant to criticize Thomas Picketty, but in the process he has a good summary of Picketty’s work:
Our reversion to the economic and political patterns of the Gilded Age is to be expected as the economies of North America and Europe return to what is normal for a capitalist society.
In a capitalist economy, Piketty argues, it is normal for a large proportion of the wealth to be inherited. It is normal for its distribution to be highly unequal. It is normal for a plutocratic elite, once it has formed, to use its political power to shape the economy in a way that enables its members to capture a large chunk of a society’s income. And it is normal for economic growth to be slow; rapid growth, after all, requires creative destruction; and, because what would be destroyed would be the plutocrats’ wealth, they are unlikely to encourage it.
Later Delong talks about how Keynes might rebut this argument:
Unequal wealth distribution, in this view, produces what Keynes called “the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital.” The result is an economy with relatively equal income distribution and a polity in which the wealthy have a relatively small voice.
So as the rich corral more and more of the wealth, they become more and more of a minority. Initially the 1% preys on the 99%, then the 0.1% on the 99.9%, and so on. At some point, there is not enough wealth or economic energy remaining for everyone else that the 0.001% need in order to keep accumulating wealth. At that point, they can try to employ some combination of propaganda and force to stay in power. When that breaks down, the balance of the force is restored (sorry, I just saw Star Wars today.) But what happens when the means of production and economic activity is almost entirely automated, and lies in the hands of a tiny minority? What if there is no limit to the force they are able to employ?