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Sunday, 27 March 2016 - 1:59pm

Published by Matthew Davidson on Sun, 27/03/2016 - 1:59pm in

This week, I have been mostly going to pieces, so only reading this much:

  • The Optimism Error — Robert Skidelsky proposes a British Investment Bank to fend off hysteresis: So we now have a situation in which the main tools available to government to bring about a robust recovery are out of action. In addition, sole reliance on monetary policy for stimulus creates a highly unbalanced recovery. The money the government pours into the economy either sits idle or simply pumps up house prices, threatening to re-create the asset bubble that produced the crisis in the first place. We already have the highest rate of post-crash increase in house prices of all OECD countries. This suggests that the next crash may not be far off. [Though I disagree vehemently with the view that "printing money to pay for public spending should only be a remedy of the last resort". Money creation through central-bank-funded fiscal deficits should be the norm for any government that does not want to hand responsibility for money supply to commercial banks, who are responsible for channeling money into the very bubbles Skidelsky is worried about.]
  • Australian copyright reform stuck in an infinite loop — Kathy Bowrey in The Conversation: For example, section 113M allows libraries and archives to make “preservation copies” of original material that is of historical or cultural significance to Australia, but they are not allowed to make these copies available to patrons except through a terminal on site. As a researcher I am not allowed to make an electronic copy of the material so I can use it in writing up my research. As is common practice in libraries I would probably be allowed to transcribe a document by hand. However transcribing by hand is, as a matter by law, no different to a digital reproduction. Why does this law require me to spend public research money to physically attend the institution, perhaps also requiring an airfare and accommodation expenses, so I can take out my quill?
  • Paul Krugman, Bernie Sanders, and Medicare for All — Dean Baker, CEPR via Econospeak: Ordinarily economists treat it as an absolute article of faith that we want all goods and services to sell at their marginal cost without interference from the government, like a trade tariff or quota. However in the case of prescription drugs, economists seem content to ignore the patent monopolies granted to the industry, which allow it to charge prices that are often ten or even a hundred times the free market price. (The hepatitis C drug Sovaldi has a list price in the United States of $84,000. High quality generic versions are available in India for a few hundred dollars per treatment.) In this case, we are effectively looking at a tariff that is not the 10-20 percent that we might see in trade policy, but rather 1,000 percent or even 10,000 percent.
  • SWEET HOLY F---!!!! — exclaims Brad DeLong:
  • Neoliberalism, public and private goods and the digital revolution: Part one — Nicholas Gruen at Club Troppo: […] if knowledge and digital artefacts are always and everywhere a potential public good, you’d expect that expressing the collective interest in that fact would lead to a role for collective institutions (not necessarily government) representing the public interest as a countervailing force against private interests. As Robert Kuttner argues, an identifying idea of progressives since the turn of the 20th century if not before that capital needs a counterweight – in the state and other collective institutions. An obvious agenda is IP, which is becoming progressively more unbalanced towards the interests of private IP holders (Will Mickey ever go free?). Likewise arrangements for the creation of knowledge about drugs is a big mess, incredibly poorly suited to the interests of lower income countries but also to economic efficiency more broadly.
  • The Citadel Is Breached: Congress Taps the Fed for Infrastructure Funding — Ellen Brown: Rep. Peter DeFazio (D-Oregon), ranking member on the House Transportation Committee, retorted [to Ben Bernanke], “For the Federal Reserve to be saying [deficit spending] impinges upon their integrity, etc., etc. — you know, it’s absurd. This is a body that creates money out of nothing. [I]f the Fed can bail out the banks and give them preferred interest rates, they can do something for the greater economy and for average Americans.”
  • The Remarkable Bernie Sanders Journey That Will Overcome the Crowning of Clinton — RoseAnn DeMoro of National Nurses United at Common Dreams:

    Enthusiasm for the Sanders campaign, the transformative program that he presents, which is really the program NNU and grassroots activists have long championed, is off the charts, and continuing to grow.

Sunday, 20 March 2016 - 4:25pm

Published by Matthew Davidson on Sun, 20/03/2016 - 7:25pm in

This week, I have been mostly reading:

  • Tools — xkcd: Tools
  • Impossible possibilities for Keynes’s grandchildren — David F. Ruccio: [W]hat Keynes did not understand is that workers don’t just produce wealth, which they can then enjoy by reducing the amount of work they do. They produce wealth that stands opposed to them, wealth in the form of capital, which is then used to render part of the working population superfluous, thus dragging down the wages of other workers, who are then employed to boost the profits of their employers. The workweek of the employed population doesn’t decrease, even as they are joined to new technologies and are transferred to new sectors of the economy.
  • Shortly after her death, Harper Lee's heirs kill cheap paperback edition of To Kill a Mockingbird — Cory Doctorow, Boing Boing: A court upheld the sealing away of Lee's will from public view, so it's impossible to say for sure what prompted the move, but this much is clear: schools that assign "To Kill a Mockingbird" -- one of the most commonly assigned books in US classrooms -- will have to pay a lot more for their books, and that money will not, and cannot, benefit the author.
  • The Story of Our Economy in 2015: A cocktail of household consumption, household consumption, and more household consumption — Frank Van Lerven at Positive Money: The OBR forecasts that real GDP growth will average 2.3-2.5% a year between 2016 and 2020. This growth is meant to take place despite the reduction in government expenditure. As we have suggested before, considering that the UK is not a net exporter, if the government decides to reduce its level of debt then the domestic private sector has to take on more debt for there to be any growth. Increasing levels of private sector debt, (business and household borrowing), will be called upon to drive growth in the years to come.
  • The co-option of government by transnational organisations — Bill Mitchell: The process of privatisation clearly transferred resources from the public sector to the private sector and reduced the public bureaucratic control of the organisations in question. Those processes are reversible. If we want a demonstration of that reversibility, then we need not look further than what happened to the banking sector in the early days of the GFC when many national governments effectively socialised the losses from the failed corporate strategies, protected depositors and nationalised the organisations. There was no hint then that the nation-state had lost its power or discretion to act to advance the national interest and largely disregard the interests of the private shareholders of these large transnational, financial entities.
  • Despair Fatigue — David Graeber in The Baffler: True, most mainstream economists are capable of seeing through obvious nonsense, like the justifications proposed for fiscal austerity. But the discipline is still trying to solve what is essentially a nineteenth-century problem: how to allocate scarce resources in such a way as to optimize productivity to meet rising consumer demand. Twenty-first century problems are likely to be entirely different: How, in a world of potentially skyrocketing productivity and decreasing demand for labor, will it be possible to maintain equitable distribution without at the same time destroying the earth? Might the United Kingdom become a pioneer for such a new economic dispensation?
  • A thought experiment for Tony Abbott and Malcolm Turnbull — Steve Keen in Business Spectator: Imagine that there is an economy where the money supply consists of a single dollar, which is exchanged 100 times per year among this economy’s inhabitants — thus generating a GDP of $100 per year. Then imagine that the government in this economy sets itself the target of running a surplus equivalent to 1 per cent of GDP. If the government achieves its objective, what will GDP be the following year? Zero. And, if the government debt ratio was more than 1 per cent beforehand, it will be infinite afterwards. Why? Because the economy had only one dollar of money in existence, and the government’s surplus took that $1 out of circulation, leaving the economy with precisely zero dollars for commerce the following year. The government budget affects GDP by changing the amount of money in circulation in the economy, and a government surplus effectively destroys money.
  • Are luxury condo purchases hiding dirty money? — Husna Haq at the Christian Science Monitor: In fact, using shell companies, or limited liability companies, to hide a buyer's identity is actually relatively common, and legal. But the practice could drive up real estate prices in some markets, and contribute to real estate booms. Federal authorities are also concerned that the practice enables foreign buyers to easily find a safe haven for illicit money in American real estate.
  • How does the 1 percent capture the surplus? — David Ruccio: The basic idea is that “pass-throughs”—businesses whose annual income is taxed at the owner-level (such as partnerships and S-corporations)—now account for more than half of all U.S. business income, thus passing traditional (so-called C) corporations. […] 54.2 percent of U.S. business income in 2011 was earned in the pass-through sectors, compared to only 20.7 percent in 1980.
  • "Neoliberalism" is it? — Jeremy Fox takes on Will Davies' challenge of a week earlier in openDemocracy: Compared with some other candidates, ‘neoliberalism’ does not seem to be an especially elusive abstraction. I take it to mean marketisation of the public realm as a political project. Its current popularity among political leaders of a certain hue is that it has the appearance of offering value-free decision-making because it allows market competition rather than ideological bias to determine value. They are thereby absolved, at least in theory, from responsibility for the provision of important public services.
  • Why you shouldn’t let your smartphone be the boss of you — Peter Fleming in the Guardian: According to an influential group of neoliberal economists working in the 1970s, people ought to see themselves as “human capital” rather than human beings. This sort of capital is a never-ending investment, continuously enhanced in relation to skills, attitude and even physical appearance. Work is crucial for building this capital, perhaps its defining source. This is where employment and life more generally slowly merge and become indistinguishable from each other. A job is no longer something we do to achieve socially productive goals in society. An activity among other pursuits. No, a job today is something we are … preferably 24/7. Working unpaid overtime therefore seems natural. Self-exploitation looks like personal freedom.
  • The return of public investment — Dani Rodrik: If one looks at the countries that, despite strengthening global economic headwinds, are still growing very rapidly, one will find public investment is doing a lot of the work.
  • Diane Coyle finds Minsky, but misses Keynes — Geoff Tily, Prime Economics: Now Keynes was no trivial figure. How can it not be “interesting” that one of the greatest economists of the twentieth century was misrepresented by the academic economics profession, and this misrepresentation has been denied ever since? How can what he actually said not be interesting, once we recognise that what we thought he said was wrong? How can his work not be interesting if it treats finance and the shortcoming of conventional macroeconomics is that it doesn’t treat finance?
  • Ultra-Rich 'Philanthrocapitalist' Class Undermining Global Democracy: Report — Sarah Lazare at Common Dreams: A study just out from the Global Policy Forum, an international watchdog group, makes the case that powerful philanthropic foundations—under the control of wealthy individuals—are actively undermining governments and inappropriately setting the agenda for international bodies like the United Nations. The top 27 largest foundations together possess assets of over $360 billion, notes the study, authored by Jens Martens and Karolin Seitz. Nineteen of those foundations are based in the United States and, across the board, they are expanding their influence over the global south. And in so doing, they are undermining democracy and local sovereignty.
  • 5 outrageous things educators can’t do because of copyright — Lisette Kalshoven in Medium: The current patchwork of copyright exceptions for education at the member state level can lead to absurd situations for teachers that want to utilize creative works. We asked friends from across Europe to submit examples showing where copyright and education do not mix. You can cry (or laugh) with us.

Sunday, 13 March 2016 - 5:11pm

Published by Matthew Davidson on Sun, 13/03/2016 - 5:11pm in

This week, (actually posted a day late, but back-dated) I have been mostly reading:

  • Older Students Learn for the Sake of Learning — Harriet Edleson at the "Well, d'uh!" desk of the New York Times: For lifelong learners the focus is outward. At Osher, classes are not specifically skill-based, like learning a language or weaving. Instead, students generally delve into subjects they may have been interested in for years but simply didn’t have time to study.
  • Report From the Student Privacy Frontlines: 2015 in Review — Annelyse Gelman, Electronic Frontier Foundation: This year the fight to protect student privacy hit a boiling point with our Spying on Students campaign, an effort to help students, parents, teachers, and school administrators learn more about the privacy issues surrounding school-issued devices and cloud services. We're also working to push vendors like Google to put students and their parents back in control of students’ private information.
  • Japanification Revisited — Ian Welsh: In choosing the method we chose to do the bailouts, we also made the choice to have a shitty economy. Employment has never recovered, in terms of the percentage of the population, and will not (we’re about to hit a recession), wages are down for much of the population, and all the gains of the last economic cycle have gone to the top three to five percent. Mind you, there was an historic stock bubble. The rich are even richer than they were in 2007. Obama and Bernanke’s policy has done what it was intended to: It has preserved, and then increased, the wealth of the rich.
  • The corporate university and its threat to academic freedom — Sean Phelan in openDemocracy: It would be simplistic to suggest that the corporate university represents an ideological vision spontaneously brought into being by a managerial class. As recent changes to the governance of New Zealand university councils – rescinding the guaranteed representation of both students and staff – suggests, the desire for a corporate university is often a state-led political project, pushed by governments who want to reduce public funding to universities, and reconfigure the university as little more than an engine of economic growth.
  • Neoliberalism and its forgotten alternative — David Ridley, openDemocracy: Sociologists and social scientists need to be a part of an active process of giving back social inquiry to the public, emancipating this deeply human and social activity first and foremost from the elitism, specialisation and instrumentalism of academia. We may need to reduce the working week even further to enable people to have time for community activities and public research. We certainly need to prevent education from being turned towards a class-based, narrowly vocational process of training people to be profit-making machines.
  • Because you can never have too many charts on the economics of credit cards — Harold Pollack in The Reality-Based Community: [P]rofit margins are really high for the small group of borrowers with low FICO scores in the range of about 550. Amazingly, the industry made about $0 in cumulative profits on the top 80% of accounts that have FICO scores exceeding 630. The bottom 10% of accounts account for the majority of total industry profits. It’s also striking that the industry actually seems to lose money on consumers near the median of the distribution with FICO scores around 700, and then makes profit again on the best credit risks.
  • Why Minsky Matters: An Introduction to the Work of a Maverick Economist — Victoria Bateman reviews Randy Wray's new book about the work of his mentor: As 2008 so clearly showed, we simply cannot have our cake and eat it. Financial crises are not just events that happened a long time ago in history – or far, far away in distant and much poorer lands. They are hard-wired into the capitalist system. Minsky was one of the valiant few who tried to draw attention to this fact, and one of the few to predict the global financial crisis decades before it actually hit. Unfortunately, his warnings fell on deaf ears. Like many a great artist, his popularity soared only after his death and only once the crisis hit – in what came to be known as a “Minsky moment”.
  • #ResistCapitalism — Cameron K. Murray: [S]ome kind of welfare state is essential for maintaining the dynamism of the capitalist part of the economy. Without this cushion against failure, who would risk their life savings on inventing and investing in new products and innovations? Essentially we all want a mixed economy, a level of safety net that reflects the wealth of the country, and basic services provided in an equitable manner. […] But when the political power of a select few capitalists overwhelms the system to the extent that the other non-capitalist parts of the mixed economic suffer, there are obvious and genuinely satisfying moral grounds for protest.
  • Facebook is no charity, and the ‘free’ in Free Basics comes at a price — Mark Graham in The Conversation isn't keen on Zuckerberg's reboot of Compuserve: In much the same way that Nestlé offered free baby formula in the 1970s as development assistance to low-income countries – leaving nursing mothers unable to produce sufficient milk themselves – Free Basics is likely to impede commercial alternatives.
  • The Procrustean Economy — Neil Wilson: The data collected from [neoliberal] economies will resemble the data you would expect from the [neoliberal] model. It really can't do much else - since the policies are there to prevent deviation from the norm. Therefore when you do empirical studies what you are actually using as data is the output from a system rammed into an inappropriate model. The data is tainted and what the taint means has to be understood.
  • The Fed Doesn’t Work For You — J. W. Mason in Jacobin: A rising wage share supposedly indicates an overheating economy — a macroeconomic problem that requires a central bank response. But a falling wage share is the result of deep structural forces — unrelated to aggregate demand and certainly not something with which the central bank should be concerned. An increasing wage share is viewed by elites as a sign that policy is too loose, but no one ever blames a declining wage share on policy that is too tight. Instead we’re told it’s the result of technological change, Chinese competition, etc. Logically, central bankers shouldn’t be able to have it both ways. In practice they can and do.
  • Globalisation and currency arrangements — Bill Mitchell: The thesis advanced by many analysts is that globalisation has reduced the capacity of the nation-state and forced governments to adopt free market policies at the microeconomic level and austerity at the macroeconomic level, for fear that capital flight will destroy their economies. It is a neatly packaged thesis that the political Left has imbibed, and, in doing so, has undermined the progressive basis of these institutions and left voters with little choice between right-wing parties and the social democratic parties who formally represented the interests of workers and acted as mediators in the class conflict between labour and capital. The major distinguishing feature these days between these two types of parties, who were previously poles apart in approach and mandate sought, is that the so-called progressive side of politics now claims it will implement austerity in a fairer way. These austerity-lite parties, buying into the myth that globalisation has undermined the capacity of the state to pursue full employment policies with equitable income distribution, do not challenge the basis of austerity, but just quibble over who should pay for it.
  • In 2016, let's hope for better trade agreements - and the death of TPP — Joe Stiglitz via the Guardian: In place of global trade talks, the US and Europe have mounted a divide-and-conquer strategy, based on overlapping trade blocs and agreements. As a result, what was intended to be a global free trade regime has given way to a discordant managed trade regime. Trade for much of the Pacific and Atlantic regions will be governed by agreements, thousands of pages in length and replete with complex rules of origin that contradict basic principles of efficiency and the free flow of goods. […] Obama has sought to perpetuate business as usual, whereby the rules governing global trade and investment are written by US corporations for US corporations. This should be unacceptable to anyone committed to democratic principles.
  • ObamaCare’s Neoliberal Intellectual Foundations Continue to Crumble — Lambert Strether via Naked Capitalism: Obama gives an operational definition of a functioning [health insurance] market that assumes two things: (1) That health insurance, as a product, is like flat-screen TVs, and (2) as when buying flat-screen TVs, people will comparison shop for health insurance, and that will drive health insurers to compete to satisfy them. As it turns out, scholars have been studying both assumptions, and both assumptions are false. […] the population studied reduces costs, not by comparison shopping, but by self-denial of care. […] it looks like ObamaCare has replaced a system where insurance companies deny people needed care with a system where people deny themselves needed care; which is genius, in a way.
  • Mainstream macro and Minsky the maverick — Diane Coyle reviews, perhaps too briefly, Randy Wray's new book: The second chapter was to me the most interesting. It’s called ‘The Road Not taken’ and sets out the broad mainstream approach against which Minsky developed his arguments. This is the neoclassical synthesis, whose foundations were laid by John Hicks and Alvin ‘Secular Stagnation’ Hansen in the early years after Keynes’s death, then by both ‘Keynesians’ like Patinkin and Tobin and ‘Monetarists’ such as Friedman. Wray argues that these camps disagreed largely over parameter values, and that they essentially bowdlerised Keynes by ignoring his emphasis on investment, finance and uncertainty. [I admit to some satisfaction, bordering on relief, at finding somebody confirming that new Keynesians and neoliberals "disagreed largely over parameter values", having just this morning confidently asserted on a uni discussion board that there has long been "broad agreement within mainstream economics over what the appropriate policy levers are, but disagreement about where these levers should be set".]

Sunday, 6 March 2016 - 5:38pm

Published by Matthew Davidson on Sun, 06/03/2016 - 5:38pm in

This week, I have been mostly driving between home and the hospital as my dear lady wife waited (and waited, and waited…) for surgery, so the few most interesting things I've read are:

  • Intellectual property and the decline of the U.S. labor share — Nick Bunker, Wahington Center for Equitable Growth: According to the paper, the decline [in the US labor share] starts in 1947, which would mean the labor share was declining throughout the period it was famously stated to be constant. But not only does the decline start earlier than previously thought—it’s also much larger. It’s actually twice as large. And the increase in intellectual property products explains the entirety of the decline.
  • George Obsorne says its austerity, whether it busts us or not — Richard Murphy: At the precise moment when the economy needs investment more than anything else, in flood defences and onwards, and at a time when we do as a nation not only have the capacity to deliver that investment because there is a shortfall in demand for other goods and services, but also have the means to fund that investment because borrowing costs are, for the government, little above zero per cent in real terms right now, George Osborne is saying he will not make any effort to help the UK economy by undertaking that essential investment programme. He is instead saying that when demand is weak he will make it weaker. And that when investment is needed he will not undertake it.
  • The mass consumption era and the rise of neo-liberalism — Bill Mitchell: The research I have been doing in the last few days continues the theme that globalisation has not rendered the nation state impotent. The thesis, as outlined in the introduction, is that the nation state has just changed its role and now uses its power to advance more narrow interests than previously.
  • The Best Paid People in Our Societies Are the Worst People — Ian Welsh: Private bankers and financial execs make almost all of the investment decisions in our society. They decide what will be built, what jobs will be created, etc. They are the people who decide if something will happen and they make terrible decisions–even based on their own valuation system. […] Do not speak of “salary” and “merit” in the same sentence except with scorn. When the CEO doesn’t show up, so what? When the janitor doesn’t show up, though, hey! We find out who really matters.
  • Who Are The Prominent Academics Who Advocate A Different Type of QE? — Frank Van Lerven, Positive Money: In a recent post Positive Money showed that there is a strong intellectual body of history behind the various alternative proposals for QE. Both John Maynard Keynes and Milton Friedman proposed a style of Quantitative Easing (QE) that was aimed at the real economy. Today, these types of proposals are commonly referred to as “QE for People”, “Sovereign Money Creation”, “Strategic QE” and “Helicopter Money” amongst others.

Sunday, 28 February 2016 - 8:35am

Published by Matthew Davidson on Sun, 28/02/2016 - 8:35am in

This week, I have been mostly reading:

  • The Helicopters already exist. If you know where to look — Neil Wilson braves the slippery slope from advocating for central bank independence to…: And then you move onto the question of war. If parliament can't be trusted with money, or social security, why should it be trusted in sending people to their deaths. […] Of course if the generals are in charge and are able to deploy troops independently of parliament, then we would rightly call that a military dictatorship. Therefore the notion of an independent central bank should be called out for what it is - an economic dictatorship ruled over by a class of individuals who look after the interests of the bankers and creditors and want to prevent government having first access to the resources of the country. Those supporting the idea are excuse makers for that destructive regime.
  • The difficulty of ‘neoliberalism’ — Will Davies, Political Economy Research Centre: The reason ‘neoliberalism’ appears to defy easy definition (especially to those with an orthodox training in economics or policy science) is that it refers to a necessarily interdisciplinary, colonising process. It is not about the use of markets or competition to solve narrowly economic problems, but about extending them to address fundamental problems of modernity – a sociological concept if ever there was one. For the same reasons, it remains endlessly incomplete, pushing the boundaries of economic rationality into more and more new territories. […] The dramatic rise of student indebtedness in the UK makes little economic sense for anyone (even the government) but it succeeds in placing higher education in a quantitative framework, linking past, present and future.
  • Keywords for the Age of Austerity 24: Sullen — John Patrick Leary: The problem is not just that education is vocational here, because there’s nothing wrong with vocational education per se, nor is “critical thinking” or moral education or whatever you want to call it necessarily un-vocational anyway. Rather, it is the way “academic entrepreneurship” encourages students and others to see education, a public service subsidized to great extent by the people, as a publicly-funded adjunct of private business, useful for research, development, and employee training. Lesson number 1 of entrepreneurship class: Why take a financial risk when you can just outsource it to someone else?
  • The Great Malaise Continues — Joseph Stiglitz: The obstacles the global economy faces are not rooted in economics, but in politics and ideology. The private sector created the inequality and environmental degradation with which we must now reckon. Markets won’t be able to solve these and other critical problems that they have created, or restore prosperity, on their own. Active government policies are needed. That means overcoming deficit fetishism.
  • New Research. Inequality of Wealth Makes Us Short and Dead — Peter Turchin in Evonomics: So, the life expectancy of white middle-aged males has declined, and the average height of black women has also declined. Is this the beginning of a more broadly based trend, in which the biological well-being of the “other half”—the 50 percent of the poorer Americans—will decline?
  • ‘Helicopter tax credits’ to accelerate economic recovery in Italy (and other Eurozone countries) — Biagio Bossone and Marco Cattaneo at Tax Credit Certificates (TCCs) […] are assigned to households in inverse proportion to their income, both for social equity purposes and to incentivise consumption. TCC allocations to enterprises are proportional to their labour costs, and act as labour-cost cutting devices, immediately improving their competitiveness, as any internal or external devaluation would do. Greater export and import substitution following price reductions not only create more output and employment, they also offset the impact of increased demand on the external trade balance. Smaller amounts of TCCs can also be issued and used by the government to pay for public infrastructure initiatives and social welfare programs.
  • The DWP is trying to psychologically 'reprogramme' the unemployed, study finds — Jon Stone, The Independent: A study backed by the Wellcome Trust found that people without jobs were subject to humiliating “reprogramming” by authorities designed to change their mental states. The researchers said the new approach, which forced upon the unemployed a “requirement to demonstrate certain attitudes or attributes in order to receive benefits or other support, notably food” raised major ethical issues.
  • Economists Don't Know Much About the Economy, #46,523: The Story of the Robots — Dean Baker in HuffPostBiz: Patent and copyright protection are not laws of nature, they come from the government. And in recent years we have been making them stronger and longer. […] In the absence of these protections, we might all look forward to paying a few dollars for the robots that will clean our houses, cook our food, and drive us wherever we want to go. Low cost robots would make almost all of us richer. Only if the government imposes patent monopolies that keep robots expensive do we have to worry about a redistribution from the rest of us to those who "own" the technology.
  • Huge currency zones don’t work – we need one per city — Mark Griffith in Aeon: In the 1970s, the American/Canadian economist Jane Jacobs reached a radically simple insight. Her lifelong interest in urban history convinced her that cities, not countries, drive economics. Cities are messy, unplanned places where people who otherwise would never meet devise joint projects. Hence, Jacobs argued, all innovation happens in cities. It made sense, then, that each city’s currency should follow its business cycle. Forcing two or more cities to share one currency slowly pumps up one city and sickens the others.
  • Designer nights out: good urban planning can reduce drunken violence — Kees Dorst in The Conversation: It is easier said than done, but we need to think away from knee-jerk reactions - where branding an incident as “alcohol-related violence” naturally puts the focus on policies around alcohol service restriction. There is so much more that can be done to keep young people safe at night.
  • Why bullshit is no laughing matter — Gordon Pennycook in Aeon: It is now very common for proponents of alternative medicine to emphasise ‘open-mindedness’. Unfortunately, this can entail disregarding empirical evidence. For example, many anti-vaxxers do not appear to care that Andrew Wakefield’s infamous article in the Lancet in 1998 drawing a link between the MMR vaccine and autism has long been discredited and retracted. Indeed, straight-up explanations of this fact do little to dissuade those who have fallen prey to anti-vaxxer bullshit. Diseases such as measles and mumps are making a comeback in the US and, according to at least one website, there have been more than 9,000 preventable deaths due to failures to vaccinate in the US since 2007. Bullshit is indeed no laughing matter.
  • Saturday Morning Breakfast Cereal by Zach Weinersmith [Yes, education really works like this]:

Sunday, 21 February 2016 - 11:51am

Published by Matthew Davidson on Sun, 21/02/2016 - 11:51am in

This week, I have entirely caught up on 2015! Next week will be January and February 2016, before uni starts the week after.

  • ‘On the first day of Christmas, my true love gave to me’ … a bunch of econ charts! — Jared Bernstein and Ben Spielberg in the Washington Post. My pick of these:
  • The Melting Away of North Atlantic Social Democracy — Brad DeLong in Talking Points Memo: Supply-and-demand tells us that when the economy's wealth-to-annual income ratio varies, the rate of profit should vary in the opposite direction. But history tells us that the rate of profit sticks at 5% per year, across eras with very different wealth-to-annual-income ratios. Piketty, however, does not tell us why. Perhaps this is because at a technological level capital does not empower and complement but rather competes with and thus substitutes for labor. Perhaps this is because of successful rent-seeking by the rich who control the government and get it to award them monopoly rents. Perhaps it is because of a social structure that leaves wealth holders believing that a 5% per year is the "fair" rate of profit and are unwilling to underbid each other.
  • The road to the workhouse — Frances Coppola is rightly outraged by punitive sanctions imposed on UK benefit claimants: The workhouse ethic was that work is a moral imperative: people who have no work are morally defective and must be forced to work as a "correction". If they refuse to work, they must be severely punished. The DWP's sanctions regime looks uncomfortably similar. The sick, disabled, mentally ill and unemployed are treated like criminals even though they have committed no crime. A strict penal regime is imposed on them, with extremely harsh punishments for minor transgressions of unfair and arbitrary rules. These punishments affect not only their own health but the health of those dependent on them. Not unlike workhouses, really.
  • AIPE: 8000 students in limbo as Sydney college has its registration cancelled — Eryk Bagshaw, Sydney Morning Herald: A former student of the college, Helen Fielding, told Fairfax Media she was coached over the phone by agents to sign up for a $19,600 diploma of Human Resources Management. The 21-year-old grew up in foster care and has an obvious intellectual disability. "I'm not good at reading," she said at her housing commission flat outside Newcastle.
  • Home is where the cartel is — Steve Randy Waldman: If you buy a home in San Francisco today, the last thing you want to happen is for the housing affordability problem to be solved next year. If apartment prices become reasonable, you’d find yourself with a huge financial loss and an underwater mortgage. […] High rents are like poverty at the Brookings Institution, a problem we claim we desperately want to solve but don’t really want to solve because the things we would have to do to solve it would be costly and disruptive to the people whose interests get termed “we” in a sentence like this one.
  • The Sneaky Way Austerity Got Sold to the Public Like Snake Oil — Lynn Parramore of the Institute for New Economic Thinking interviews Orsola Costantini of same: How do we stop powerful players from co-opting economics and budgets for their own purposes? Our education system is increasingly unequal and deprived of public resources. This is true in the U.S. but also in Europe, where the crisis accelerated a process that was already underway. When children don’t get good educations, the production of knowledge falls into private control. Power gets consolidated. The official theoretical frameworks that benefit the most powerful get locked in.
  • Why Philanthropy Actually Hurts Rather Than Helps Some of the World’s Worst Problems — George Joseph, In These Times: Zuckerberg can legally offer the bulk of his "philanthropy" to any for-profit recipients he wants and still receive public acclaim for "gifting" his fortune. We're seeing the rise of a new, horizontal philanthropy - the rich giving directly to the rich - at a level that's completely unprecedented.
  • It's official — benefits and high taxes make us all richer, while inequality takes a hammer to a country's growth — Lee Williams, the Independent: Thanks to the OECD report, we find that the very thing that the sacrifices of austerity were made to preserve – the growth of the economy – is the very thing they are destroying. Neo-liberal, laissez-faire capitalism extends inequality, we already knew that. But now we have the evidence that inequality harms, rather than encourages growth.
  • 'Free Basics' Will Take Away More Than Our Right to the Internet — Vandana Shiva, Common Dreams: The Monsanto-Facebook connection is a deep one. The top 12 investors in Monsanto are the same as the top 12 investors in Facebook, including the Vanguard Group. The Vanguard Group is also a top investor in John Deere, Monsanto’s new partner for ‘smart tractors’, bringing all food production and consumption, from seed to data, under the control of a handful of investors. […] Smart Tractors from John Deere, used on farms growing patented Monsanto seed, sprayed and damaged using Bayer chemicals, with soil and climate data owned and sold by Monsanto, beamed to the farmer’s cellphone from Reliance, logged in as your Facebook profile, on land owned by The Vanguard Group. Every step of every process right up until the point you pick something up off a supermarket shelf will be determined by the interests of the same shareholders. More here.
  • Why Are Universities Fighting Open Education? — Elliot Harmon at Common Dreams: Though universities tout [patented] technology transfer as a way to fund further education and research, the reality is that the majority of tech transfer offices lose money for their schools. At most universities, the tech transfer office locks up knowledge and innovation, further expands the administration (in a sector that has seen massive growth in administrative jobs while academic hiring remains flat), and then loses money.

Sunday, 14 February 2016 - 1:24pm

Published by Matthew Davidson on Sun, 14/02/2016 - 1:24pm in

This week, I have been mostly reading:

  • The Guantánamo in New York You’re Not Allowed to Know About — Arun Kundnani, The Intercept: Mahdi Hashi, a young man of Somali origin who grew up in London, had never been to the United States before he was imprisoned in the 10-South wing of the Metropolitan Correctional Center in lower Manhattan in November 2012, when he was 23. For over three years, he has been confined to a small cell 23 hours a day without natural light, with an hour alone in a slightly larger indoor cage. He has had no physical contact with anyone. Apart from occasional visits by his lawyer, his human interaction has been limited to brief, transactional exchanges with guards and a monthly 30-minute phone call with his family.
  • Full employment is a tenet of classic social democracy – but is it still applicable? — Nick Srnicek and Alex Williams in the New Statesman: While Jeremy Corbyn’s opponents have presented him as a throwback to an old-left style of politics, in fact he has been the only one to recognise the changed realities of the UK in the 21st century. Creating a mental health position in his shadow cabinet, questioning the utility of the Trident nuclear programme and NATO, calling for social support for the self-employed – all these reveal a politics that is very aware of contemporary Britain and its discontents. Meanwhile, his opponents’ prevailing thinking appears mired in the past: a cold-war fascination with obsolete security communities, fond nostalgia for the 1990s, and increasingly punitive attempts to create good workers when good jobs no longer exist.
  • Trying to simulate the human brain is a waste of energy — Peter Hankins in Aeon: It’s as though we decided to build a Tardis immediately, on the basis of the knowledge we have about it now – call it the ‘Blue Box’ project. We know it’s blue, squarish, probably uses electricity for some purposes, makes a whooshy noise, travels in time and is bigger on the inside; let’s get started! Of course, we have no idea how the last two things (the time travel and the strange geometry) are done, but then the brain also does things – subjective experience, intentionality, personhood, to name three – that currently seem to be beyond the reach of either science or philosophy.
  • The Basic Income Guarantee: what stands in its way? — Tom Streithorst guestblogging for Frances Coppola: Fear of scarcity is built into our DNA. For the Basic Income Guarantee to seem viable for most people, they need to learn that demand, not supply, is the bottleneck of growth. We need to recognise that money is something humans create, not something with fixed and limited supply. With Quantitative Easing, central banks created money and gave it to the financial sector, hoping it would stimulate lending. Today, even mainstream figures like Lord Adair Turner, Martin Wolf and even Ben Bernanke recognize that “helicopter drops” of money into individuals’ bank accounts could have been more effective. Technocrats are beginning to recognise the practicality of Basic Income. […] The Basic Income Guarantee solves the problem of demand, stimulates the economy, increases corporate profits, gives workers more freedom, and provides a safety net to the most vulnerable. It is economically sound and politically savvy. But the very rich don’t fear unemployment, they fear redistribution and they will be the most significant force against the implementation of the Basic Income Guarantee.
  • The Fed Raises Rates--by Paying the Banks — Marty Wolfson in Dollars & Sense: Under current Chair Janet Yellen, the Federal Reserve has shown a genuine concern about unemployment, but it is still trapped in its assumptions: There is a “maximum feasible” level of employment. Above that level (or below the corresponding rate of unemployment) inflation will exceed its 2% target. The conclusion from these assumptions is that the Fed should raise interest rates to prevent employment from exceeding the “maximum feasible” level. Instead, the Fed should adopt a real full- employment target: a job for everyone who wants to work. It should adopt a “minimum feasible” target for inflation: the lowest possible rate compatible with full employment. We need a policy perspective in which economic justice for workers is a higher priority than paying the banks.
  • Working Paper: The Upward Redistribution of Income: Are Rents the Story? — Dean Baker from CEPR says yes: This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.
  • Good things happen at full employment — Jared Bernstein in the Washington Post: Dean Baker and I have long contended that at full employment, pressures from labor costs […] mean that firms either have to find new efficiencies, raise prices or start cutting into profit margins. Since they’d generally rather avoid the latter two, full employment can lead to higher productivity growth.
  • A Missed Opportunity of Ultra-Cheap Money — Peter Eavis, NYT: [William A. Galston, a former adviser to President Bill Clinton and now a senior fellow at the Brookings Institution] in particular lamented the failure to set up a government-backed infrastructure bank in recent years. “This will go down as one of the great missed opportunities,” he said. Public investment spending as a share of overall economic activity has fallen to lows not seen since the 1940s, according to an analysis by James W. Paulsen of Wells Capital Management.
  • Beyond social mobility — Chris Dillow: A simple thought experiment will tell us that social mobility is nothing like sufficient. Imagine a dictator were to imprison his people, but offer guard jobs to those who passed exams, and well-paid sinecures to those who did especially well. We'd have social mobility - even meritocracy and equality of opportunity. But we wouldn't have justice, freedom or a good society. They all require that the prisons be torn down.
  • CEO pay still out of control and diverging again from workers’ earnings — Bill Mitchell: Two things caught my attention among other things last week. The Australian Tax Office (ATO) released the – 2013-14 Report of Entity Tax Information – which tells us about the total income and tax payable was for 2013-14 tax year for 1539 Australian and foreign companies operating in Australia with incomes above $A100 million. The rather startling revelation is that 579 of the largest Australian companies including Qantas did not pay any tax at all in that financial year. The second (unrelated but pertinent) report was released last week by the British Chartered Institute of Personnel and Development (CIPD) – The power and pitfalls of executive reward: a behavioural perspective – which found that the increasing gap between British CEO earnings and their employees is unrelated to company performance and reflects “self-serving tendencies”.
  • Dear Parents: Everything You Need to Know About Your Son and Daughter’s University But Don’t — Ron Srigley in the Los Angeles Review of Books: First, [sessional contract staff] are not scholars but employees. They think of administrators as people they work for rather than people who work for them by supporting their teaching and research. Second, they are vulnerable and therefore remain mostly silent about critical matters. If a sessional instructor complains publicly about her institution or its declining standards, she will do so only once. […] Finally, the very act of employing, empowering, and often elevating such people denigrates real scholars and scholarship by definition. If a person who knows next to nothing of what you know can do what you do just as well as you do it, then what is the value of what you know?
  • Finland's hugely exciting experiment in basic income, explained — Dylan Matthews in Vox: The idea is to see what happens to a community under a basic income, rather than just to individual people. Having a whole town get benefits could have cascading effects as households escape poverty, as some people use the income guarantee as insurance so they can take risks and form companies, as universities see increased enrollment from people better able to afford supplies, etc. "If people in a smaller area are getting the benefits, their behavior vis-a-vis other people will change, employers and employees will change their behavior, encounters between clients and their street-level bureaucrats (social workers, employment offices, etc.) will change, and the interplay between different bureaucracies will change," Kangas says.
  • Love from mom and dad … but who gains from Mark Zuckerberg’s $45bn gift? — Linsey McGoey in the Guardian: As if sensing that our newfound effervescence had fizzled rather abruptly, a crack team of management scholars and business journalists took up arms, manning airwaves and TV stations and the open-planned domiciles of new media startups funded by tech entrepreneurs based in Hawaii – and tried to cheer us with a single message. You’re right, they conceded. It’s not charity. But here’s the thing: it’s better than charity. It’s a new, radical movement that we like to call “philanthrocapitalism” – and it’s going to make you all rich. How, you might ask? By giving more philanthropy to the wealthy.
  • The IMF Changes its Rules to Isolate China and Russia — Michael Hudson: A nightmare scenario of U.S. geopolitical strategists is coming true: foreign independence from U.S.-centered financial and diplomatic control. China and Russia are investing in neighboring economies on terms that cement Eurasian integration on the basis of financing in their own currencies and favoring their own exports. They also have created the Shanghai Cooperation Organization (SCO) as an alternative military alliance to NATO. And the Asian Infrastructure Investment Bank (AIIB) threatens to replace the IMF and World Bank tandem in which the United States holds unique veto power.
  • The world of threats to the US is an illusion — Stephen Kinzer in the Boston Globe: I recently asked a United States Navy officer what threats he believed the United States might confront in the future. To my astonishment, he answered, “Venezuela.” The South American country is in political crisis and careening toward bankruptcy. Its combat navy counts six frigates and two submarines, none of them seaworthy. Yet last month President Obama designated Venezuela an “extraordinary threat to US national security.” The search for enemies can lead to odd places.
  • Piketty and the Australian exception — John Quiggin at Crooked Timber: Australia’s relatively equal distribution of income and wealth depends on a history of strong employment growth and a redistributive tax–welfare system. Neither can be taken for granted. […] The move towards a patrimonial society already happening in the US is evident at the very top of the Australian income distribution. As in the US, the claim that the rich are mostly self-made is already dubious, and will soon be clearly false. Of the top 10 people on the Business Review Weekly (BRW) rich list, four inherited their wealth, including the top three. Two more are in their 80s, part of the talented generation of Jewish refugees who came to Australia and prospered in the years after World War II. When these two pass on, the rich list will be dominated by heirs, not founders.

Sunday, 7 February 2016 - 12:59pm

Published by Matthew Davidson on Sun, 07/02/2016 - 12:59pm in

This week, I have been mostly reading:

  • The political aftermath of financial crises: Going to extremes — Manuel Funke, Moritz Schularick, Christoph Trebesch at VOX, CEPR’s Policy Portal: The bottom line is that financial crises stand out. They are followed by significantly more political instability than other types of economic crises. This raises the question – why are financial crises different? One explanation is that financial crises may be perceived as endogenous, ‘inexcusable’ problems resulting from policy failures, moral hazard and favouritism. In contrast, non-financial crises could be seen as ‘excusable’ events, triggered by exogenous shocks (e.g. oil prices, wars). A second potential explanation is that financial crises may have social repercussions that are not observable after non-financial recessions. For example, it is possible that the disputes between creditors and debtors are uglier or that inequality rises more strongly. Lastly, financial crises typically involve bailouts for the financial sector and these are highly unpopular, which may result in greater political dissatisfaction. [Also:]
  • Right-wing political extremism in the Great Depression — Alan de Bromhead, Barry Eichengreen, Kevin Hjortshøj O’Rourke at VOX, CEPR’s Policy Portal: Our statistical results […] show that that the Depression was good for fascists. It was especially good for fascists in countries that had not enjoyed democracy before 1914; where fascist parties already had a parliamentary base; in countries on the losing side in WWI; and in countries that experienced boundary changes after 1918. […] Importantly, it shows that what mattered was not the current growth of the economy but cumulative growth or, more to the point, the depth of the cumulative recession. One year of contraction was not enough to significantly boost extremism, in other words, but a depression that persisted for years was.
  • Can philosophy survive in an academy driven by impact and employability? — Simon Blackburn (et al.) in the Times Higher Education: One of the most potent causes of mistrust of philosophy is that it provides no answers, only questions, so that to many it does not seem to have progressed since its very beginnings in Plato, or even in pre-Socratic Greece (or China or India). Of course, one might similarly ask whether other human pursuits, such as music, literature, drama, architecture, painting or politics, have “improved” (and by what measure this judgement is supposed to be made), and if the answer is at best indeterminate we might query whether this reflects badly on those practices, or whether perhaps it indicates a problem with the question.
  • Changing private investment activity requires higher fiscal deficits — Bill Mitchell: So if non-financial corporations are themselves increasingly becoming net lenders to the rest of the economy then the idea that household saving provides the investment funds for firms has to be questioned. Further, this shift in behaviour implies a serious new leakage to aggregate demand has developed, which if left unchecked would bias the economy to recession. The mainstream alternative is that growth is maintained by rising consumer spending by households driven by increased credit. In other words, the lenders and the borrowers have swapped seats. Of course, such a growth scenario is unsustainable because households cannot cope with ever-increasing levels of debt, as we learned in 2008.
  • IMF forgives Ukraine’s Debt to Russia — Michael Hudson: [O]n Tuesday, the IMF joined the New Cold War. It has been lending money to Ukraine despite the Fund’s rules blocking it from lending to countries with no visible chance of paying (the “No More Argentinas” rule from 2001). When IMF head Christine Lagarde made the last IMF loan to Ukraine in the spring, she expressed the hope that there would be peace. But President Porochenko immediately announced that he would use the proceeds to step up his nation’s civil war with the Russian-speaking population in the East – the Donbass. […] By doing so, it announced its new policy: “We only enforce debts owed in US dollars to US allies.”
  • House Prices and Job Losses — Emma Lyonette and Gabor Pinter, Bank Underground: This blog summarises the findings of recent research by Pinter (2015) that emphasises the role of real estate as an important determinant of firms’ borrowing capacity. This is because real estate is widely used by corporates as collateral when trying to obtain external financing. Fluctuations in real estate prices may therefore cause fluctuations in firms’ borrowing capacity, which then affects firms’ decisions to undertake new investment, to create new jobs and to destroy existing jobs. The paper shows that this so-called collateral channel is important in understanding not only the recent Great Recession but historical UK business cycles in general.
  • Simpson, PL, Guthrie, J, Lovell, M, Doyle, M and Butler, T 2015, 'Assessing the Public’s Views on Prison and Prison Alternatives: Findings from Public Deliberation Research in Three Australian Cities', Journal of Public Deliberation, Vol. 11, No. 2: Despite decreasing crime victimisation rates in Australia, incarceration rates have doubled over the last thirty years. Australia’s use of imprisonment has major economic and social equity costs, especially given the over-representation of Indigenous Australians and other socially disadvantaged groups in prison. Evidence increasingly points to the limitation of incarceration as a tool for effective offender rehabilitation suggesting that a new policy agenda on responses to offending is warranted. Yet, public opinion is generally assessed and perceived to hold punitive views towards offenders.
  • Sorry, but Your Favorite Company Can’t Be Your Friend — Josh Barro in the New York Times: As social psychologists describe it, there are two broad categories of human relationships: exchange relationships, in which we trade for mutual benefit; and communal relationships, which are based on mutual caring and support. Normally, you are supposed to have the former with people you do business with and the latter with your friends and relatives. But sometimes, companies try to blur the lines, insinuating themselves into your friend zone.
  • Working Until It’s Time for Your Grave — Tiffany Williams, Common Dreams: My [Institute for Policy Studies] colleagues recently released a report on the retirement gap between CEOs and workers. They found that nearly half of working age Americans have no access to retirement plans through their jobs. When I asked my mom about her own retirement savings, I learned she had nothing at all.
  • The Potential of Debtors’ Unions — the Debt Collective in ROAR Magazine: Experienced alone, debt is isolating, frightening and morally laden with shame and guilt. Indebtedness is being afraid to open the mail or pick up the phone. But as a platform for collective action, debt can be powerful. Consider oil tycoon JP Getty’s adage: “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Student debt alone stands today at $1.3 trillion. Together, we can be the banks’ problem.
  • Humans vs Houses: Australia's perverse tax system — Cameron K. Murray: It is certainly now time for the government to end these tax concessions for investment property. Raising the GST, the current government’s preferred tax policy, is probably the worst choice in terms of both equity and efficiency compared to the low-hating fruit of removing these property tax advantages which currently cost the budget about $11billion a year. Obviously removing them would change incentives, reduce prices, and so forth, meaning that actual budget gains from their removal will be lower. But even so, the shift of incentives across the economy would be hugely advantageous in terms of both efficiency, and equity, as these tax incentives primarily benefit the wealthy.
  • How George Osborne exploited our psychological biases to secure his cuts — Ben Chu in the Independent: Mr Osborne’s July Budget proposed to save £4bn a year by 2020 by freezing all working age benefits in cash terms for the next four years, meaning a deep cut after inflation for recipients. And that was actually a bigger saving than the one generated from the cuts to tax credits. But unlike the tax credit cuts, the benefit freeze prompted no outcry. Why? Because the immediate cash losses loomed far larger than the forgone gains of benefits rising in line with inflation.
  • Education and Equality in the 21st Century — Danielle Allen, Crooked Timber: The preparation of citizens, through education, for civic and political engagement supports the pursuit of political equality, but political equality, in turn, may well engender more egalitarian approaches to the economy. An education that prepares students for civic and political engagement brings into play the prospect of political contestation around issues of economic fairness. In other words, education can affect income inequality not merely by spreading technical skills and compressing the income distribution. It can even have an effect on income inequality by increasing a society’s political competitiveness and thereby impacting “how technology evolves, how markets function, and how the gains from various different economic arrangements are distributed.”
  • Nobody's home: Housing boom leaves swathe of empty properties — Angus Whitley in the Age on a new report from the Henry Georgists at Prosper Australia: Sudden property price declines or an economic slowdown risk unmasking the vacant supply. Owners would start to sell up or look for rental income to cushion the blow from falling prices, [Catherine Cashmore, author of the Prosper report] said. "Suddenly, you find there's no one there to buy it or nobody to rent it. That's a common pattern in a housing crash," Cashmore said. "What we're trying to do is it to make it visible before it happens."
  • Corbyn – after Oldham — Geoffrey Heptonstall, openDemocracy: The headlines should have read: ‘Big Swing to Labour Boosts Corbyn at Critical Time.’ The fact is that the phrase ‘swing to Labour’ was suspiciously absent. The affirmation of Jeremy Corbyn’s position was conceded with something close to a snarl.
  • In support of a Universal Basic Income – introducing the RSA Basic Income Model — Anthony Painter, RSA: A couple of years ago, I was told of two young mothers who were studying for a qualification in nursing care. Towards the end of their studies a local Job Centre Plus insisted that they make themselves available for work or face sanction. They left their course and failed to qualify. They lost out and their time had been wasted. They were locked in the same oscillation between benefits and poor quality work. And society lost too - we need nursing care workers.
  • Donald Trump and the ugliness in Las Vegas — Michael A. Cohen, Boston Globe: But there is another side to Trump that merits greater attention — fear. This is not the fear of “others” — immigrants, Muslims, etc. There is plenty of that, but in talking to Trump’s supporters, a different kind of fear emerges — a sense that the country is falling apart, that the nation’s safety and security are at risk, and that America needs someone who is strong, decisive, and unafraid to say what he thinks must be done to fix things.
  • This week, the US government will take action to slow the economy and prevent wage growth — Matt Yglesias at Vox: The Federal Reserve is structured as an independent agency precisely on the theory that for the long-term good of the economy we sometimes want the central bank to slow the pace of job creation in order to avoid inflation, even though standing in front of a podium and saying, "I want to slow the pace of job creation" sounds terrible. But the weird thing about this week's push for higher interest rates is that there's no inflation problem to solve.
  • Australian government fiscal outlook – irresponsible and will fail — Bill Mitchell: Basically, the Outlook shows that the federal fiscal deficit is larger than previously estimated (in the May 2015 Fiscal Statement aka ‘The Budget’) and this demonstrates the automatic stabilisers in operation to put a floor under the slowing economy. This counter-cyclical movement is something that we should be comforted by because as private spending contracts and the economy slows the expansion of the deficit limits, to some extent, the job losses and the number of businesses that might become insolvent. However, the mainstream reaction has been hysterical (as in hysteria) with all sorts of predictions about national insolvency, credit rating agencies downgrading us, and “deficits for as long as you can see”. The problem is that the so-called average Australian believes all this nonsense and doesn’t understand that the rising deficit is a good thing in the context of poor developments in private spending. […] A career of reading this junk leads me to wish I’d become an anthropologist or something else like that.

Sunday, 31 January 2016 - 5:57pm

Published by Matthew Davidson on Sun, 31/01/2016 - 5:57pm in

This week, I have been mostly reading:

  • Beyond ISIS: The Folly of World War IV — Andrew Bacevich at TomDispatch: A de facto collaboration of four successive administrations succeeded in reducing Iraq to what it is today: a dysfunctional quasi-state unable to control its borders or territory while serving as a magnet and inspiration for terrorists. The United States bears a profound moral responsibility for having made such a hash of things there. Were it not for the reckless American decision to invade and occupy a nation that, whatever its crimes, had nothing to do with 9/11, the Islamic State would not exist. Per the famous Pottery Barn Rule attributed to former Secretary of State Colin Powell, having smashed Iraq to bits a decade ago, we can now hardly deny owning ISIS.
  • Men at work — Allison J Pugh, in Aeon: Most Americans might expect very little from their employers – as one layoff survivor told me: ‘Just a paycheck and a certain amount of respect, I would say.’ They might shrug their shoulders about job insecurity as the inevitable cost of doing business in a globalised economy (even though some economists have found that layoffs usually end up costing firms rather than boosting stock prices or productivity). At home, however, working‑class men expect more of their intimate partners, and brittle yearning turns those expectations into betrayal if they fall short. Abandoned by both employer and wife, Gary aims his ire at just one of these.
  • Twitter Wants You To Feel Bad — Britney Summit-Gil in The Society Pages: The analytics don’t teach you how to tweet better, how to reach a broader audience, or how to make a bigger impact. For example, last month the tweet on my account that got the most impressions also had zero engagement. People saw it and breezed by, not even clicking on it. And, of course, Twitter isn’t interested in making you a better tweeter, it’s interested in selling you promotional services.
  • QE for People – Neither Right nor Left, Just the Way Forward — Frank Van Lerven, of Positive Money, and some notable quotables: In sum, there is a strong intellectual body of history behind the various alternative proposals for QE. That this body of history is composed by some of most important economists of our time, on both sides of the political spectrum, should show that these types of ideas are credible and merit more consideration. Ultimately, People’s QE types of proposals are nether right nor left, they are simply the way forwards!
  • Racism: the achilles heel of middle class liberalism — Kevin Ovenden: Anti-Semitism – the socialism of fools, as the great German socialist August Bebel so brilliantly put it – had a special corrupting effect. It provided an alternative world view – what we might now recognise as a “clash of civilisations” – with The Jew representing both international finance and international Marxism. It glided the path from socialist opposition to the capitalist system towards all sorts of reactionary positions, including fascism, which had a pseudo-antiestablishment veneer. Islamophobia is the Jewish Question of our day. It is not simply one reactionary idea among many, which all principled socialists oppose. It plays a particular corrupting role across politics and society as a whole.
  • How to Be an Anticapitalist Today — Erik Olin Wright, Jacobin: If you are concerned about the lives of others, in one way or another you have to deal with capitalist structures and institutions. Taming and eroding capitalism are the only viable options. You need to participate both in political movements for taming capitalism through public policies and in socioeconomic projects of eroding capitalism through the expansion of emancipatory forms of economic activity.
  • Five things we learned from the Bank of England this week — Christine Berry at the New Economics Foundation: Seven years on from the crisis of 2008, the Bank acknowledges that we are still seeing “relatively tight credit conditions” for small and medium-sized enterprises (SMEs). In other words, banks are still reluctant to support the real economy, despite all the subsidies that have been thrown at them. In that respect at least, the post-crisis period seems to be far from over. […] At the same time, lending for mortgages and consumer spending is starting to recover some of its pre-crisis exuberance: consumer lending increased at an annualised rate of 8.2% in October, the highest level since before the banking crisis.
  • Do Not Be Impressed by Mark Zuckerberg’s Phony Generosity — Ted Rall: If you’re a conservative who thinks government can’t do anything right, let me show you a charity that’s worse. The Gates Foundation wants to destroy teachers’ unions to take away their benefits and drive down their wages — hardly a way to attract the best and brightest young college graduates into the profession. And it has poured millions into the disastrous Common Core, which has created today’s “teach to the test” culture in public schools. Given Zuckerberg’s previous involvement in public schools, a $100 million fiasco in Newark, New Jersey that declared war on teachers, fetishized standardized testing and led to so many school closures that kids wound up walking miles through gang territory to new schools chosen for them by, really, an algorithm — it isn’t a stretch to guess that Chan Zuckerberg will look a lot like Bill and Melinda Gates.
  • How can you help Flint? Do not send us bottles of water. Instead, join us in a revolt. — Michael Moore: This is a catastrophe of unimaginable proportions. There is not a terrorist organization on Earth that has yet to figure out how to poison 100,000 people every day for two years – and get away with it. That took a Governor who subscribes to an American political ideology hell-bent on widening the income inequality gap and conducting various versions of voter and electoral suppression against people of color and the poor.
  • Elizabeth Warren Challenges Clinton, Sanders to Prosecute Corporate Crime Better Than Obama — David Dayen, The Intercept: In virtually all the cases she cites — from Standard & Poor’s delivering inflated credit ratings to defraud investors during the financial crisis, to Novartis giving kickbacks to pharmacists to steer customers to their products, to an explosion at a Bayer CropScience pesticide plant that killed two employees — the Department of Justice declined to prosecute individual executives or the corporations themselves, resorting to settlements with minuscule fines that barely disrupt the corporations’ business models. […] Warren also published an op-ed in the New York Times on Friday discussing her report.
  • Unreasonable expectations and unpalatable truths — Frances Coppola: Now, the supply of deposits vastly exceeds the demand for loans, interest rates are on the floor, and payments have become a vital (and largely free) public service. And this […] creates a problem. Customers - including asset managers, apparently - want banks to provide a deposit-taking service regardless of whether banks have a productive use for the money. Banks may of course provide such a service, but if they can't use the money to fund profitable activities, they will not pay customers for it. Why should they borrow money at interest when they have no profitable use for it? It would be wholly irrational, and probably a failure of fiduciary duty towards their shareholders. [To my mind "a world of excess money" which is simultaneously a world of high un/underemployment requires intervention via fiscal policy, rather than fatalistic accommodation to the new normal.]
  • How bad were the good old days of Hawke/Keating? — Paul Frijters at Club Troppo: In hindsight, I am simply not sure whether to call the Hawke/Keating years the glory days of de-regulation, or the disaster years of a regulatory explosion. I do know that inequality increased a lot following those reform years, in part because of the tax changes then introduced. And the interest groups then created are among the biggest obstacles to a fairer society now.
  • US jobs recovery biased towards low-pay jobs — Bill Mitchell: On average, the US labour market has added 237,000 net jobs per month over the last 12 months. What I was curious about was whether these were predominantly low paid jobs or not. I found that the jobs lost in low-pay sectors in the downturn have more than being offset by jobs added in these sectors in the upturn. However, the massive number of jobs lost in above-average paying sectors have not yet been recovered in the upturn. In other words there is a bias in employment generation towards sectors that on average pay below average weekly earnings.
  • Defining austerity — Simon Wren-Lewis: I want to define austerity as “fiscal consolidation that leads to a significant increase in involuntary unemployment, or perhaps more formally but less colloquially as leading to a noticeably more negative output gap.”
  • When Inequality Kills — Joe Stiglitz at Project Syndicate: The median income of a full-time male employee is lower than it was 40 years ago. Wages of male high school graduates have plummeted by some 19% in the period studied by Case and Deaton. To stay above water, many Americans borrowed from banks at usurious interest rates. In 2005, President George W. Bush’s administration made it far more difficult for households to declare bankruptcy and write off debt. Then came the financial crisis, which cost millions of Americans their jobs and homes. When unemployment insurance, designed for short-term bouts of joblessness in a full-employment world, ran out, they were left to fend for themselves, with no safety net (beyond food stamps), while the government bailed out the banks that had caused the crisis.
  • The Politics behind Piketty — Elizabeth Anderson at Crooked Timber: Ideology matters for politics. Once people have acquired income or wealth through the market, they feel strongly entitled to it. In the U.S. and increasingly in the rest of the OECD, the population at large, taken in by such representations, is reluctant to tax. Redistributing income and wealth by means of taxation, as Piketty proposes, becomes harder once people have it in their hands. We need to scrutinize the rules by which income and wealth get generated through the market, before it is taxed. They have been changing in a plutocratic direction for the past 45 years. The rule changes have not only increased r (at least for the top 1%), but also depressed g, by increasing monopoly power, shifting savings from real investment to speculation and scams, shifting top talent from production to value-extraction, and depressing aggregate demand.
  • Liberal, Nationals and Labor combine to increase Australian students' debt up to 33% — Mid North Coast Greens: Until now, the $1025 Student Start-Up Scholarship went to all eligible students twice a year. It was a modest amount of money that provided relief at critical times of year for uni students, allowing them to cover bills for textbooks, laptops, internet access and other necessities. Taking away scholarships and turning them into loans means an extra $6000 of debt for the average Bachelor student upon graduation.
  • Reward is better than punishment: A Work for the Dole alternative — Jade Manson, Independent Australia: The main argument for Work for the Dole is that it benefits community organisations and job-seekers themselves, by providing them with a chance to contribute and a daily routine. However, it also takes away people’s ability to decide who they will volunteer for. This goes against the spirit of volunteer work and the benefit it brings people knowing they are working for a cause they believe in. Although anecdotal reports have suggested Work for the Dole provides participants with a sense of purpose and "something to do", this assumes that they would not have found something better to do had they not been forced to participate in Work for the Dole.
  • Delusion Regarding the Fall of Neoliberalism and Globalization — Ian Welsh: Corbyn is not wrong to say “make the necessary adjustments so it will work today, and go back to post-war policies.” It failed, yes, but it was the last economy which spread money evenly through the economy. Make sure it’s not sexist and racist, update it for new energy technology, and try it. […] Until the developed world’s sanctioned intellectuals (as opposed to pariahs like myself and my ilk) and their masters come to grip with these facts, the population will continue to turn elsewhere. They may turn to sane and reasonable people like Corbyn, or they may turn to people like LePen and Trump, but people will not put up with “it’s going to get worse for the forseeable future” forever.
  • Who should be responsible for creating money? — Duncan McCann at New Economics Foundation: Currently commercial banks create 97% of the UK money supply. However the ultimate decision on whether to change the monetary system rests with our elected politicians who are in no rush to understand how it could work better, let alone change it. A recent survey revealed that only 10% of MPs understand the UK’s monetary system.
  • No more nudges – only an entrepreneurial state can give us a green revolution — Mariana Mazzucato in the Green Alliance Blog: Signals and nudges to the private sector will not get us where we need to go. If we are to have a green revolution, characterised by the kind of sweeping and widespread technological changes that characterised the IT revolution, then we need to learn the right lessons. More nudging is fudging it. Instead, states around the world must act boldly and courageously to tilt the playing field in the right direction.
  • Donald Trump’s “Ban Muslims” Proposal Is Wildly Dangerous But Not Far Outside the U.S. Mainstream — Glenn Greenwald, The Intercept: No matter how extreme and menacing Trump becomes, that’s all one can expect from large sectors of the U.S. media: cowardly neutrality, feigned analytical objectivity (how will Trump’s fascism play with New Hampshire independents?) as an excuse for not taking any sort of stand. We are indeed a long, long way away from Edward R. Murrow’s sustained, continuous, unapologetic denunciations of Joseph McCarthy.

Sunday, 24 January 2016 - 9:30pm

Published by Matthew Davidson on Sun, 24/01/2016 - 9:30pm in

This week, I have been mostly reading:

  • Beyond neoliberalism: Universities and the public good — Ravinder Sidhu in the Australian Review of Public Affairs reviews Learning under Neoliberalism: Ethnographies of Governance in Higher Education: Writing almost twenty years ago, Clare O’Farrell made the prescient observation that: ‘the State has become educationally out of date. [It] must necessarily fall behind those institutions whose job it is to keep abreast with and create new developments in specialised fields [such as] universities’ (1996, p. 8). O’Farrell highlighted the need for academics to find alternative ways of self-governing. Her compelling argument, in favour of winding back the intrusion and displacement wrought by various accountability audits to restore ‘the scholarly balance’, retains its urgency. A small step towards this end is by attending to professional and democratic accountability in university governance. Such changes are necessary if universities are to continue to be relevant to public life.
  • Iceland, Ireland, and Devaluation Denial — Paul Krugman, New York Times: When big adjustments in a country’s wages and prices relative to trading partners are necessary, it’s much easier to achieve these adjustments via currency depreciation than via relative deflation — which is one main reason there have been such big costs to the euro.
  • Review: Another “Minsky moment” may be on the way — Edward Chancellor for Reuters reviews Randy Wray's new book on the work of his late mentor: Prudent financial arrangements give way to what he called “Ponzi finance,” which describes the situation when borrowers are unable to service their debts or repay principal from their current income. Ponzi borrowers depend on refinancing against the collateral of rising asset prices to maintain solvency. Long before former Fed Chairman Ben Bernanke and other economists hailed the “Great Moderation” of low inflation and stable growth, Minsky elaborated the “Financial Instability Hypothesis.” This is expressed in his trademark comment – “stability is destabilizing” – since, as Minsky argued, people respond to good times by changing their risk preferences.
  • Who’s the most efficient of them all: income tax or GST? — Peter Davidson Holy cow, this is comprehensive — and worth memorising in order to quote from it at length at the next high-society soiree you attend, assuming you don't want to be invited to any more: In short, the equity impacts of a change in the tax mix from personal income to consumption are quantifiable and negative, while any economic efficiency gains are uncertain and hard to quantify. Alternative tax reform options, such as broadening the income tax base by removing inefficient tax shelters, would improve equity and efficiency at the same time.
  • Jeremy Corbyn 'Systematically' Attacked By British Press The Moment He Became Leader, Research Claims — Louise Ridley, the Huffington Post: News articles, in which the media ostensibly do not editorialise, were actually the most critical of Corbyn, the report says. Out of 292 news pieces, 181 were judged negative, while 92 were 'neutral' and just 19 'positive', the report found. 'One might expect news items, as opposed to comment and editorial pieces, to take a more balanced approach but in fact the opposite is true.' It's more a tally than a report, but the appendix on themes ("Them and Us - Extremism Vs. Moderation", "What will happen to Labour and the Left?", "Personal Character") is bang-on.
  • Challenging the Oligarchy — Paul Krugman in the New York Review of Books ah, reviews a book, in New York. A finer fulfillment of a publication's mandate you will search for in vain. Specifically, he reviews Robert Reich's new one.: Modern technology, or so it was claimed, reduced the need for routine manual labor while increasing the demand for conceptual work. And while the average education level was rising, it wasn’t rising fast enough to keep up with this technological shift. Hence the rise of the earnings of the college-educated and the relative, and perhaps absolute, decline in earnings for those without the right skills. […] But while one still encounters people invoking skill-biased technological change as an explanation of rising inequality and lagging wages—it’s especially popular among moderate Republicans in denial about what’s happened to their party and among “third way” types lamenting the rise of Democratic populism—the truth is that SBTC has fared very badly over the past quarter-century, to the point where it no longer deserves to be taken seriously as an account of what ails us.
  • Hungover Bear and Friends: Flying Solo — Ali Fitzgerald in McSweeney's Internet Tendency:
  • 'Poor internet for poor people': India's activists fight Facebook connection plan — Cory Doctorow in The Guardian: Since the spring of 2015, Indian activists have built ferocious momentum against Facebook’s bid to take charge of the nation’s internet through a program called Free Basics. […] Free Basics’s pitch has been: we’ll get “the next billion internet users” (that is, poor people in developing nations) connected by cutting deals with local phone companies. Under these deals, there will be no charge for accessing the services we hand-pick. We will define the internet experience for these technologically unsophisticated people, with our products at the centre and no competition. It’s philanthropy!
  • Against School — the late lamented Aaron Swartz in New Republic: A group of bold entrepreneurs find they can make cloth more efficiently by building large mills. The girls who staff them keep causing strikes and other trouble, so they require their employees go to school from a young age and learn to behave themselves. But obviously most people won’t be thrilled to go to school so that they can learn to accept lower wages without complaint. So the bosses develop a cover story: schools are about teaching people the things they need to know to survive in the world of business. It’s not true, of course—there’s no connection between the facts memorized in school and the skills needed on the job—but the story is convincing enough.
  • Are luxury condo purchases hiding dirty money? — Husna Haq at the Christian Science Monitor: An investigation conducted by The New York Times in 2015 revealed that nearly half of homes that sold for more than $5 million across the country were purchased by shell companies. That figure would probably be higher in high-end real estate markets like New York and Miami. In fact, using shell companies, or limited liability companies, to hide a buyer's identity is actually relatively common, and legal. But the practice could drive up real estate prices in some markets, and contribute to real estate booms. Federal authorities are also concerned that the practice enables foreign buyers to easily find a safe haven for illicit money in American real estate.
  • Six Responses to Bernie Skeptics — Robert Reich practically endorses Bernie. This is huge, because Reich is very influential and used to work for… ah… Clinton… Bill Clinton, the president who… I'll get me coat.
  • In Late 2007, Obama Trailed Clinton By 26 Points. Bernie Sanders Is 2016's Barack Obama — H.A. Goodman, Huffington Post: [I]t's difficult to generate enthusiasm when you're a Democratic nominee who voted for Iraq and is funded by prison lobbyists, but alas, Clinton supporters base their vote upon the perception of political power. This viewpoint ignores the fact that Democrats lose elections when voter turnout is low, and only Bernie Sanders can ensure a high voter turnout in 2016. Between an expanding FBI investigation, Clinton's negative favorability ratings, and her longstanding ties to Donald Trump, Republicans would win the White House with a Clinton nomination.
  • 'Australia headed for recession': Yanis Varoufakis, former Greek finance minister — Mark Mulligan, Australian Financial Review: He said after nearly 25 years without recession, Australia was caught up in the same global pattern of weak aggregate demand and excessive corporate savings, which are being handed back to shareholders via buybacks and dividends instead of being re-invested in additional capacity or productivity enhancement. Taking issue with Varoufakis is:
  • Recessions are always a problem and can always be avoided — Bill Mitchell: Recessions are incredibly costly and totally unnecessary. The claims that they offer a bush-fire type “cleansing” to drive higher productivity in the future and increased material living standards are often made but not very strongly evidenced in the research literature. Governments can always maintain full employment if they choose and should do so given the highly damaging effects that recessions have on individuals, which span many generations as a consequence of the inheritance of disadvantage by children in jobless households. I am surprised that a progressive economist (so-called) is buying into the mainstream myth that recessions are not a problem.
  • IMF continues with its wage-cutting line — Bill Mitchell: Now if we took the [IMF's logic] one could easily argue that with inflation so low in the Eurozone, these results would suggest that an across-the-board wage increase in the Eurozone would have strong positive impacts on growth without undermining any relative competitiveness for any particular nation. The IMF, of course, doesn’t take the reader down that interpretation of their results because the paper is really designed to justify the existing policy of wage cutting and so-called ‘structural reforms’, which are really about undermining working conditions, job security, Occupational Health & Safety regulations, and other things that make work more tolerable.
  • German wage moderation and the EZ Crisis — Peter Bofinger at VOX, CEPR's Policy Portal: An EZ Crisis narrative that does not that does not account for the effects of the German wage moderation is incomplete. Germany is by far the largest EZ economy and it is a very open economy with strong trade links to all other EZ member states. It would be difficult to explain why such a strong internal devaluation, which is regarded as a key determinant of Germany’s success story in the 2000s (Dustmann et al. 2014), did not have significant repercussions for the rest of the EZ.
  • Secular stagnation and the financial sector — John Quiggin: [T]he financial sector benefits from an evolutionary strategy similar to that of an Australian eucalypt forest. Eucalypts are both highly flammable (they generate lots of combustible oil) and highly fire resistant. So eucalypt forests are subject to frequent fires which kill competing species, and allow the eucalypts to extend their range.
  • This might be the most controversial theory for what’s behind the rise of ISIS — Jim Tankersley, The Washington Post: Piketty is particularly scathing when he blames the inequality of the region, and the persistence of oil monarchies that perpetuate it, on the West: "These are the regimes that are militarily and politically supported by Western powers, all too happy to get some crumbs to fund their [soccer] clubs or sell some weapons. No wonder our lessons in social justice and democracy find little welcome among Middle Eastern youth." Terrorism that is rooted in inequality, Piketty continues, is best combated economically.
  • Corbyn - what's a leader really for? — Jeremy Gilbert: One perspective basically thinks that politics is about selling your party to consumers; the other thinks that it’s mainly about building up a coalition of social groups with common interests. Spoiler alert: it’s the second one that’s right, mostly.
  • The New Supply-Side Economics — Mark Thoma in The Fiscal Times: During the period of mild fluctuations in output and employment from 1982 through 2007 known as the Great Moderation monetary policy could do the job by itself, and to a large extent we forgot about fiscal policy as a stabilization tool. But the Great Recession made it clear that monetary policy can only do so much, and fiscal policy has an important role to play in deep economic downturns. We didn’t fully exploit the potential of fiscal policy during the Great Recession, and the turn to austerity in 2010 was a mistake that worked against the recovery, but the lesson is there to be learned for those willing to take off their ideological blinders and see it.
  • Chart of the day — David F. Ruccio:

    Consumer spending isn’t growing because, face it, most people’s incomes (whether measured in terms of real wages or median incomes) are stagnant. Whatever spending they are doing (e.g., on cars and higher education) is fueled by taking on more and more debt. What about investment? While profits (especially from domestic sources) continue to grow, corporations are using those profits not for investment, but for other uses, including stock buybacks, mergers and acquisitions, and CEO salaries.
  • Going down the same old road: driverless cars aren’t a fix for our transport woes — Curtin's peter Newman in The Conversation: Autonomous trains have been around for 30 years and have a very good track record. That’s because they don’t require humans suddenly being able to intervene. Nor do they have a chance of harming others as they are completely isolated on separate tracks. But autonomous cars present both these problems.
  • Jeremy Corbyn and the Syrian Bombing Vote — Ian Welsh: Corbyn has always said he would bring more democracy to Labour, and this is in line with that promise. This is a case of one principle “no war” going against another principle “more democracy.” Also, letting Labour MPs vote against bombing Syria, when the majority of Labour party members are for it, may be very smart politics. Smoke the pro-war MPs out, let them run up their flags, and when the time comes for candidate selection, well, everyone will know who is for war. The majority of voters selecting candidates are free to use the next election to ensure that Corbyn has a party of MPs who are anti-war.
  • Woody Guthrie, ‘Old Man Trump’ and a real estate empire’s racist foundations — Will Kaufman, The Conversation: For Guthrie, Fred Trump came to personify all the viciousness of the racist codes that continued to put decent housing – both public and private – out of reach for so many of his fellow citizens.