Sunday, 23 October 2016 - 6:00pm

Published by Matthew Davidson on Sun, 23/10/2016 - 6:00pm in

This week, I have been mostly reading:

  • There has to be a better way — Steve Keen: I knew Abbott and Turnbull in their Sydney University days: they were both active student politicians, while I was one of the leaders of the student revolt against the economics curriculum there. Abbott and Turnbull both tried to play a role in this “Political Economy” dispute—and their approach then mirrors their styles today. One believed he knew the word of God, while the other believed he was God.
  • Treasury analysis supports Labor’s negative gearing policy — Leith van Onselen at MacroBusiness: Now the ABC has received a document from the Australian Treasury, under Freedom of Information, which claims most of the windfall from negative gearing and the capital gains tax (CGT) discount goes to high-income earners: "The modelling said more than half of the negative gearing tax benefits go to the top 20 per cent of incomes in Australia."
  • What should the level of basic income be in 24 European & OECD countries? — Valerija Korošec for BIEN: We don’t want to make the system worse than it is. It’s logical, then, that the minimal level of BI should reach, at least, the level of current Social Assistance (SA): we could call this ‘partial’ BI. All BI proposals included in this analysis satisfy this condition. It follows that implementation of a BI close to the level offered by the current social security system (e.g., the SA level) implies budget neutrality in countries with a more universal system.
  • The Secret to the Incredible Wealth of Bill Gates — Dean Baker in Truthout: The story of Bill Gates' copyright protection, along with patent protection for prescription drugs and all sorts of other things, are a big part of the story of inequality. The key issue is that these protections are created by the government. They don't come from the technology. It is the protections that make some people very rich, not the technology. We grant patent and copyright monopolies in order to provide an incentive for innovation and creative work. It is arguable whether these mechanisms are the best way to provide these incentives. For example, in addition to making drugs very expensive, even when they would be cheap in a free market, patent protection also provides an enormous incentive for drug companies to misrepresent the safety and effectiveness of their drugs. But the key point for the inequality issue is that the strength and length of these monopolies is set by government policy.
  • Humans vs Houses: Australia’s perverse tax system — Cameron Murray in MacroBusiness: I often joke that my investment property earns more than I do. Thinking more about this led me to the realisation that my investment property has a privileged position in the tax system when compared to a measly old human being. […] our current system appears to be designed exclusively for the betterment of the property community, rather than the people community. It’s unreal.
  • Faking it: made up universities and degrees — Paul Greatrix at Wonkhe: It does seem to be a continuing problem and I was struck by this recent example reported in the Manchester Evening News. According to the paper the Manchester Open University claims to have a campus on Oxford Road with 2,000 students but was being investigated by the National Fraud Intelligence Bureau: "The Manchester Open University claims to have a campus based on Oxford Road with 2,000 students from 90 different countries – and offers degrees in history, English, and medicine. But education officials say they can’t find a single trace of the institution and that the IP address used by organisation’s website is hosted hundreds of miles away in France."
  • Smart cities wouldn’t let housing costs drive the worse-off into deeper disadvantage — Emma Baker, Andrew Beer and Rebecca Bentley: The relatively well-off and the upwardly mobile improve the areas in which they live over an extended period. The more economically vulnerable tend to make more frequent, multiple moves – living in slightly less advantaged areas each time. To put it in plain terms, the poor move to poor areas where they may become even more disadvantaged. Meanwhile, the middle classes move through our cities gradually climbing the housing ladder.
  • Straya: Strong on terror…unless you buy a house — Leith van Onselen, MacroBusiness: The Australia Government first agreed to implement the second tranche of AML [anti-money laundering] regulations in 2003. Yet 13 years later, these have been delayed indefinitely by the government. This indefinite delay comes despite the Paris-based Financial Action Task Force (FATF) last year releasing a scathing report highlighting that Australian residential property is a haven for international money laundering, particularly from China, and recommending that Australia implement counter-measures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are captured by the regulatory net.
  • Negative gearing: Myths and facts — John Haly, Independent Australia: Between July 1985 and 1987, the Hawke Government abolished it and rent prices fell everywhere except in Perth, and to a lesser extent, in Sydney. This was not due to the absence of negative gearing but the very low “available” vacancy rates and competition from inflated rent prices (Grattan Report, p 34-34). Thereafter through, a less quarantined negative gearing was reinstated. Housing and rent prices rose but not at the rate they have since 1999. What mitigated the potential effects on the economy of unchecked negative gearing, was the 1985 introduction of a CPI indexed Capital Gains Tax. In 1999, the Howard Government removed indexing and introduced a 50% discount for capital gains for individuals. From that point on, housing prices (and rent) skyrocketed an average of 7.3% annually (Grattan Report, p 31).
  • Who Will Accept It? Currency-Issuing Governments are Constrained by Resources, Not Money — Peter Cooper: When it comes to Modern Monetary Theory (MMT), I think a simple but central point to get across is that for currency-issuing governments the hard policy constraints relate to real resources, not money. We need to convey that money is not the constraint but in almost the same breath call for the focus to be on real resources when pondering questions of economic policy.
  • It’s Time to Base Economics on Human Nature, Not Homo Economicus — Jonathan Rowe in Evonomics: To an economist [Wikipedia] doesn’t make sense. People don’t work for free. Readers are “consumers,” not producers; and consumers do not produce what they consume. Yet they are doing so; and this kind of social co-production is flourishing not only on the Web, but in the society at large. In the U.S. and elsewhere, people are turning their backs on everyday low prices and choosing the social cohesion and productivity of their local Main Streets instead. Researchers and software designers are foregoing property rights – i.e. patents — to their work and are releasing it over the Web for free. So doing they are enriching the public domain that sustains their own work and also that of others. All of this – and more – defies the supposed “laws” of economics.
  • The Economist as...?: The Public Square and Economists — Brad DeLong; an intelligent and honourable mainstream economist muses on the responsibilities of his profession: Of course to provide someone with knowledge of the consequences may be simply to give them the kind of freedom that is necessity: the freedom to do what is the right thing. The old Cold War joke was of the strategist who would offer the president three possible options: immediate surrender to the Russians, total thermonuclear war, and his preferred policy. To the extent that there is no grave disagreement about what the good is and what the ends are, control is exercised not by the one who chooses the ends but rather the one who chooses how the means are evaluated.
  • Economists as public intellectuals — Antonio Callari, guestblogging for David F. Ruccio, picks apart DeLong's piece above: Curiously absent from DeLong’s history are important intellectual thresholds, most notably in late (European) medieval times (e.g., Ibn-Khaldun, Thomas Aquinas) , at which the legal, institutional, and even (and profoundly) cultural foundations were laid out for markets: the general discussions about the nature of property and the embeddedness of prices/incomes in social contexts. It’s not just whole schools of thought (i.e., the Sraffa-Smith tradition) that drop out of DeLong’s purview, but also whole interesting episodes of philosophical and intellectual history that get taken out. This can’t be because DeLong doesn’t know about them: he makes sure we know he reads beyond “economics” (he knows figures I grew up with, Homer and Cicero; figures I know of, Leon Trotsky and Alasdair Macintyre; and figures I frankly don’t know, St. Benedict). So, what is it that makes him, as such a well-read person, neglect the intellectual episodes others (e.g., Schumpeter) found important in the history of economics? A complacent, and problematic, view of the “economist” as “scientist”? A complacent, and problematically orthodox, definition of the core of “economics” as a study of “exchange”?
  • Universal Basic Income, Job Killing Robots, and the Washington Post — Dean Baker addresses robophobia, or Grimwade's Syndrome, as it is known in some parts of the galaxy: What possible difference can it make if a job is displaced by a robot or a more efficient assembly line? We have seen whole industries, like photographic film, wiped out by digital technology. Would the former workers at Kodak somehow be worse off if they had lost their jobs to robots than to digital cameras? The point is that robots are productivity growth. Say that a few thousands times until it sinks in. The impact of robots on the economy is nothing more or less than any other innovation that produces the same amount of productivity growth.
  • Brexit: Clearing Up the Economic Nonsense — David L. Glotzer wields a mean hypothetical (but is wrong about Maastricht; the UK is a signatory): Take the EU “membership fee.” For arguments sake assume that all of it is wasted, on let’s say muffins. What actually happens when over the course of a year £13bn is sent to the EU? What is the impact of this on the British economy? First Parliament instructs George Osborn to send money to the European Commission. George Osborn tells someone who works for him to type a number into a computer (here British Pounds are literally ‘keystroked’ into existence) transferring a certain amount of money to a British bank account held by the European Commission. Since the British Pound is only used as a currency within the British economy the EC can only buy muffins from British Bakers, thereby boosting the demand for British baked goods and increasing British GDP.
  • Basic Income Revisited — Robert Skidelsky in Project Syndicate: The ethical case for [UBI's…] source is the idea, found both in the Bible and in classical economics, that work is a curse (or, as economists put it, a “cost”), undertaken only for the sake of making a living. As technological innovation causes per capita income to rise, people will need to work less to satisfy their needs. Both John Stuart Mill and John Maynard Keynes looked forward to a horizon of growing leisure: the reorientation of life away from the merely useful toward the beautiful and the true. UBI provides a practical path to navigate this transition.
  • Money for Nothing: Confessions of a Payday Lender: “I Felt Like a Modern-Day Gangster” — Gary Rivlin, the Intercept: Spending time with Locke in Michigan often meant listening to long rants about the lack of gratitude among the partners he had brought into the payday business, despite all the money he had made them. “Friends screwing me over,” Locke said. “Business partners screwing me over. People who begged me to get them into the business — screwing me over.” He’s kind of a human Eeyore who wears his disappointment as an outer garment. Of his customers, Locke said, “I feel bad for these people.” But he seemed to feel sorry mainly for himself.
  • Math Education — Saturday Morning Breakfast Cereal, by Zach Weinersmith:
  • Basic Income, Job Guarantees and the Non-Monetary Value of Jobs: Response to Davenport and Kirby — Kate McFarland, Basic Income Earth Network (BIEN): To take just one example, Zipcar CEO Robin Chase spoke of her research on “passion jobs” a recent White House roundtable discussion on automation an UBI. She has interviewed individuals from a cab driver who wrote music that made autistic children happy (but could not afford to pursue this passion full-time) to a computer programmer who slept on friends’ couches while writing open source software for 3D printers. In her informal research, she has encountered many people who are unable to pursue socially valuable and personally gratifying projects, simply because these projects are not financially lucrative; instead, these people are stuck in “crummy jobs”, detached from their passions. Chase herself supports a UBI as a way to allow individuals to pursue vocations that would give their lives much more meaning than the jobs to which they must resort for income.
  • The Greater Happiness for the More Workers: Basic Income vs Job Guarantee Pt 2 — Kate McFarland at BIEN continues: Neurodivergent individuals, and others who do not fit neatly in the mold of society, can be stifled and inhibited by traditional work environments. Such individuals are better able to flourish personally–and, in turn, become more valuable contributors to society–if they are able to working outside of traditional jobs, or perhaps take the time to a job that is a better match.
  • Socrates on Debt and Ibn Khaldun on the Cyclical Rise and Fall of Societies — Michael Hudson in Naked Capitalism: In Book I of Plato’s Republic (380 BC), Socrates discusses the morality of repaying debts. Cephalus, a businessman living in the commercial Piraeus district, states the typical ethic that it is fair and just to pay back what one has borrowed or received. Socrates replies that it would not be just to return weapons to a man who has turned into a lunatic. Because of the consequences, paying back the debt would be the wrong thing to do. At issue is not the micro-economic morality of paying a debt, but how this act affects society. If a madman is intent on murder, returning his weapon to him will enable him to commit unjust acts. The morality of paying back all debts is not necessarily justice. We need to take the overall consequences into account.