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Economic Origin Stories and the State of the World

Published by Anonymous (not verified) on Tue, 29/06/2021 - 4:25am in

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Origin stories and creation myths pack a pretty hefty weight of import in human understandings of the world. Examples are too numerous to mention. What I’ve noticed in the field of economics is that such origin stories are often taken (mistakenly) to fully explain the current state of affairs. I’m going to discuss two examples here.

1. Why Money Has Value. The “double coincidence of wants” money-origin story, retailed by Adam Smith among many others, has been quite thoroughly debunked over the past century. But the better stories that have emerged continue to be seen by many economists — problematically in my opinion — as significant explanations of how things work right now.

One of those better stories is the tax-based origin of “fiat”-money value. A sovereign is collecting taxes in kind. They issue coins (necessarily if only implicitly pegged to an associated unit of account, which generally has same name as the coins — “The Shekel”), and declare that taxes must be paid using those coins. People need to accumulate those coins to pay taxes, so a consensus arises: everybody ascribes value to those coins, and they start using them in private exchange.

At that point there is consensus currency, which only achieved consensus value through the fiat imposition of taxes in that currency. That’s a plausible tale.

But once that consensus is achieved, taxes are no longer the only explanation for people’s ascription of value to the currency/coins. They’re valuable to people because of the consensus; it’s self-perpetuating. People in the private sector can exchange those coins with others for real goods/services, and to satisfy obligations from past provision of goods/services. And beyond “can”: sellers start demanding Shekels instead of bushels of corn, so buyers must use the consensus currency.

Now to be sure: That consensus is likewise maintained by another fiat mechanism: government enforcement of private contracts numerated in that currency. There’s a huge pyramid of legislative (or sovereign/autocratic), judicial, and enforcement machinery supporting the private-value consensus. But that’s separate from (and much larger than) the tax obligations, collections, and enforcement that originally bootstrapped and kick-started the consensus.

In the current state of the world, people can, really must, transfer USD-denominated assets to get what they want from, and fulfill their obligations to, other private actors — and also, yes, to pay their taxes. But the magnitude of US private-sector spending and obligations dwarfs tax obligations by a factor of roughly three to one. Given that magnitude, it seems misplaced to suggest that in the current state of the world, tax obligations are the only thing that impart value to the US consensus/fiat currency.

The tax story is a plausible and quite comprehensible (if somewhat stylized) understanding of how consensus currencies emerged and were ascribed value. But those currencies are seen as valuable today because…everyone agrees they have value, and demands them in exchanges and transfers, both private and public.

2. Financial Assets ≠ Liabilities. This supposed “accounting identity” belief is dismayingly widespread, even though a mere glance at the numbers shows it’s completely untrue, vastly incorrect. Just start with corporate equity shares, universally categorized as financial assets: The market asset value of those shares (ultimately in aggregate held on household balance sheets) is tens of trillions of dollars greater than the the related liabilities/shareholders’ equity on corporate balance sheets. The same pertains to bonds, even Treasuries, though the percentage disparity is far smaller.

Where did this notion come from? Another origin story: at the moment of issuance and sale, the issuers’ liability equals the holder’s asset. When a corporation issues $1,000 of new bonds or equity shares and sells them to households, the corporation has a new $1K liability, and households have a new $1K asset; the two are equal. (Yes, there’s also a $1K cash-asset transfer, households -> firms. Assets and liabilities increase, but ∆NW is zero for both parties, either individually or combined.)

But as soon as those bonds/shares start trading in the market, their market asset values change. Every brokerage in the world sees trades at different prices, and marks every holder’s account statement/balance sheet to market. The household assets no longer equal the firms’ liabilities. The origin story no longer explains the current state of the world — not even close.

Related posts:

  1. All Currency is “Fiat” Currency
  2. Platinum Currency: What’s The Fed’s End Game?
  3. Matthew Yglesias: Do Low Taxes Cause Inflation?
  4. Currency is Equity, Equity is Currency
  5. The Real Ponzi Scheme: Private Debt

How Functional Finance differs from Modern Monetary Theory (MMT)

Published by Anonymous (not verified) on Wed, 09/06/2021 - 6:57pm in

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I have been re-reading the Functional Finance and the Federal Debt paper this afternoon. There are crucial differences between Functional Finance Theory (FFT) and Modern Monetary Theory (MMT). Therefore, it (MMT) was not all in Lerner. Let me comment on FTT from an MMT perspective.

source: https://de.wikipedia.org/wiki/Abba_P._Lerner#/media/Datei:Abba_Lerner.jpg

The start of the paper is very promising:

“In recent years the principles by which appropriate government action can maintain prosperity have been adequately developed, but the proponents of the new principles have either not seen their full logical implications or shown an over-solicitousness which caused them to try to save the public from the necessary mental exercise.”

However, the next sentence contains the first “problem” (my highlighting):

“Many of our publicly minded men who have come to see that deficit spending actually works still oppose the permanent maintenance of prosperity because in their failure to see how it all works they are easily frightened by fairy tales of terrible consequences.”

“Deficit spending”? This is awkward from a MMT perspective. The government – often via its central bank – is the issuer of currency. It just spends. It cannot deficit spend just as it cannot surplus spend. Making payments, it is technically irrelevant whether the public budget is in deficit or surplus. The government spends by having the central bank mark up the accounts of the receiving banks, which then create bank deposits for their customers. That is it. There is no “plan B”. The government, however hard it tries, cannot “finance” itself.

It is wrong to believe that government spends differently when in surplus compared to spending while in deficit. There is no lever that is pulled when deficit spending begins. That should not be surprising. We don’t have real-time data on government spending and tax revenues. So, even central banks can’t say whether the government is in deficit or not when spending happens.

Lerner is correct to point out that fiscal policy “shall all be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound.” That is what Functional Finance is for him and in terms of macroeconomics, MMT agrees.

MMT also agrees with Lerner that “taxing is never to be undertaken merely because the government needs to make money payments.” And we agree with the idea “that the government should borrow money only if it is desirable that the public should have less money and more government bonds” and that “this might be desirable if otherwise the rate of interest would be reduced too low”. We would disagree with the idea that a low interest rate would “induce too much investment, thus bringing about inflation”.

Lerner states that “any excess of money outlays over money revenues, if it cannot be met out of money hoards, must be met by printing new money”. That is quite the opposite of MMT. As a Post-Chartalist theory, we believe that the government spends first and taxes later. So, taxes do not fund the government. Instead, tax revenues is money that returns (French: revenu) to the state. The government always spends and later taxes and sells bonds. Logically, there is no other way. Lerner did not read Georg Friedrich Knapp’s “The State Theory of Money” nor did he get it through Keynes Treatise on Money (1930), it seems.

Later in the paper, Lerner writes that “the interest can be paid by borrowing still more”. According to MMT, the government does not borrow. It issues currency (reserves) and then offers to swap them for interest-bearing securities (government bonds). Since an interest rate is paid on reserves anyway (at least today), there is no difference between the state paying interest on reserves (or clearing balances) or government bonds. The Fed offers different accounts where banks can move their money, and that’s it.

Another problematic sentence is this: “As long as the public is willing to keep on lending to the government there is no difficulty…”. However, the logic that follows is sound. If the public does not want to buy government bonds, they can keep the money or spend it. If they keep it, the government does not have to issue bonds (as long as the money does not find its way into the money market, that is). If they spend it there will be higher tax revenues and the public debt will be automatically reduced. MMT does agree with this macroeconomic logic.

Later in the paper Lerner writes that “the interest on debt can be met by borrowing or printing money”, which is incorrect as I have already discussed above.

Summing up, FFT and MMT have some similarities, but differ in crucial ways. Both theories agree on some (but not all!) of the macroeconomic issues. However, the ideas about how the monetary system works when it comes to government spending are very, very different. Lerner does not embrace Chartalism, which is crucial for MMT. Therefore, those who think that MMT is the same as FFT will find that any discussion of MMT will be frustrating because the MMTers will reject the monetary theory of Lerner, which is neoclassical. Lerner speaks about “printing the money” which MMT rejects in the context of government spending. (MMT does not reject it in the context of supplying the economy with cash in the form of bank notes and coins.)

I hope that this article has made clear that debating MMT while having read only FFT will lead to frustration on both sides. The same goes for reading “only” Minsky, or Godley, or Keynes – MMT started as a balance sheet approach to macroeconomics and is based on logic. Just like humans do not derive from monkeys but share common ancestors, MMT does not derive from FFT but shares some common ancestors.

New Douglas Adams book

Published by Anonymous (not verified) on Thu, 03/06/2021 - 3:05pm in

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Since his passing 20 years ago on 11 May 2001, Doctor Who writer and script-editor Douglas Adams has lived on through various publications, including the novelisations of his Doctor Who stories City of Death and Pirate Planet and even his lost story Doctor Who and the Krikkitmen. While these novelisations have been co-credited to writers working from the original scripts, a new book promises to contain all new material direct from the brain of Adams himself. 42: the wildly improbable ideas of Douglas Adams is to be a full colour, large format hardcover book, featuring never-seen-before extracts drawn from Douglas… Continue reading

The FIRE and the ashes: Rekindling Democratic Socialism

Published by Anonymous (not verified) on Fri, 28/05/2021 - 9:33pm in

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My new book is now available from BTL.

The Fire and the Ashes – Between the Lines (btlbooks.com)

The Fire and the Ashes

In The Fire and the Ashes, long-time union economist and policy analyst Andrew Jackson looks back on a fascinating career in the labour movement, the NDP, and left politics, combining keen historical analysis with a political manifesto for today.

As one of the few trade union economists in Canada, Jackson brings a unique insider perspective and decades of experience to bear on his critical reflections on the history and changing fortunes of the NDP, the failures of neoliberalism, and the waning and recent renewal of the democratic socialist tradition.

What plays out is a battle of ideas fought by Jackson and the wider left—one meant to rekindle both political veterans and a new generation of activists who believe that a true democracy cannot exist with great inequalities of wealth and political power, and that social ownership and public investment must be brought squarely into the mainstream.

Standard Packaging Blu-rays… but not for Australia

Published by Anonymous (not verified) on Thu, 27/05/2021 - 8:48pm in

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BBC America released them back in 2018 and now BBC UK have announced that Doctor Who: The Collection Blu-rays will be released in standard packaging following the initial limited edition release. As with the US version, the disc content won’t change, but the packaging will be slightly different. The standard packaging rereleases will be sold in a plastic Blu-ray case with a condensed 12-page booklet featuring the disc-breakdowns and all the same content and special features that was in the original release. New releases within the Collection range will now be marketed as Doctor Who: The Collection Limited Edition Packaging,… Continue reading

PEF Student Essay Contest Deadline Extended to May 11

Published by Anonymous (not verified) on Tue, 04/05/2021 - 5:36am in

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To allow the maximum number of quality student essays to join the already promising submissions we have received, PEF is extending the deadline for our 2021 PEF Student Essay Contest to May 11, 2021.

Calling all Canadian students anywhere in the world and all post-secondary students in Canada who are working on papers taking a critical approach to the functioning, efficiency, social, and environmental consequences of unconstrained markets. The winning essays will receive a cash prize of $1,000 for the graduate student category and $500 for the undergraduate student category.

You can download a poster in English or Français. Please help us spread the word and share with your networks and on social media.

Essay submissions should be made to PEFEssayContest2021@gmail.com and must be accompanied by a signed scanned file of the completed PEF Essay Contest Submission Form or fiche d’inscription pour le concours de textes du PEF. The deadline for submitting an essay for the contest is now May 11, 2021.

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2021 PEF ESSAY CONTEST RULES

ELIGIBILE ENTRANTS

  • Open to all Canadian students, studying in Canada and abroad, as well as international students presently studying in Canada. All entrants receive a complimentary 1-year membership in the Progressive Economics Forum.
  • The definition of “student” encompasses full time as well as part time students.
  • Students eligible for the 2020 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2020 – May 2021.

LEVELS OF COMPETITION

There are two levels of competition:

  • One for undergraduate students;
  • One for graduate students*.

*Note: Those who have previously completed an undergraduate degree or a graduate degree, and are returning to do a second undergraduate degree will only be considered for the graduate student competition. The same holds for students who spend part of the academic year in a graduate program.

CONTENT OF THE ESSAY

Entries may be on any subject related to political economy, economic theory or an economic policy issue, and should reflect a critical approach to the functioning, efficiency, social and environmental consequences of unconstrained markets.

ELIGIBLE SUBMISSIONS

Eligible entries will be:

  • sent by email at the latest on May 11, 2021, to: PEFEssayContest2021@gmail.com
  • the only submission by the author(s) (i.e., one submission per person);
  • between 20-40 pages in length, and typed in 12-point font, double spaced;
  • referenced to academic standards (including any data);
  • written in either English or French;
  • original, single-authored essays that do not infringe upon the rights of any third parties;
  • accepted on re-submission once;
  • accompanied by a signed scanned file of the completed PEF Essay Contest Submission Form.

Entrants consent to having the Progressive Economics Forum publish essays from winners and those receiving honourable mention. Each applicant will submit a valid email and postal address for correspondence.

ADJUDICATION

  • A panel of judges selected and approved by the Progressive Economics Forum will judge entries.
  • Entries will be judged according to the following criteria: substance and originality, writing style, composition, and organization.
  • The Progressive Economics Forum reserves the right not to award a prize or any prizes where submissions do not meet contest standards or criteria.

WINNING SUBMISSIONS

  • The winning essays will be announced at the Annual General Meeting of the PEF at the Canadian Economics Association.
  • A cash prize of $1,000 will be awarded the winner of the graduate competition; and $500 will be awarded to the winner of the undergraduate competition.
  • The winning essays will be published on the PEF website.
  • Judges’ decisions are final.

*******

Concours de textes étudiants – édition 2021

Qui peut participer?

  • Ouvert à tous les étudiants canadiens, qui étudient au Canada ou à l’étranger, ainsi qu’aux étudiants étrangers étudiant au Canada. Tous les participants deviennent gratuitement membres du Progressive Economics Forum pour un an.
  • Le terme « étudiant » couvre les étudiants à temps plein et les étudiants à temps partiel.
  • Pour être éligible à l’édition 2021 du concours, un étudiant doit avoir été ou être inscrit dans une institution post-secondaire à un moment donné pendant la période allant de mai 2020 à mai 2021.

Niveaux de compétition

Il y a deux niveaux de compétition:

  • Un pour les étudiants prégradués;
  • Un pour les étudiants gradués*.

*NB: Ceux qui ont déjà complété un programme prégradué ou un programme gradué et qui retournent faire un deuxième programme prégradué ne peuvent participer au concours qu’au niveau gradué. C’est la même chose pour tout étudiant ayant passé une partie de l’année dans un programme gradué.

Contenu du texte

Les textes peuvent porter sur tout sujet relié à l’économie politique, la théorie économique ou une problématique en lien avec des politiques économiques, qui reflète une approche critique sur le fonctionnement, l’efficience, et les conséquences sociales et environnementales des marchés libéralisés.

Pour être accepté, un texte doit:

  • être envoyé par courriel, au plus tard le 11 mai 2021, à l’adresse suivante: PEFEssayContest2021@gmail.com;
  • être le seul texte envoyé par le(s) auteur(s) (un texte par personne);
  • avoir entre 20 et 40 pages, tapé dans une police de taille 12 points, à interligne double;
  • avoir des références écrites selon les standards académiques (incluant les données);
  • être écrit en anglais ou en français;
  • être un texte original, avec un seul auteur, qui n’enfreint pas les droits d’auteurs d’une tierce-partie;
  • n’avoir été soumis au maximum qu’une fois auparavant (donc un texte peut être soumis un maximum de deux fois);
  •  être accompagné par une fiche d’inscription pour le concours de textes du PEF complétée, signée et numérisée.

Les participants acceptent que le Progressive Economics Forum publie les textes des gagnants et de tout autre participant recevant une mention d’honneur. Tout participant devra soumettre une adresse courriel qui fonctionne, ainsi qu’une adresse postale pour fins de correspondance.

Jugement

  • Un panel de juges choisis et approuvés par le Progressive Economics Forum va juger les textes soumis.
  • Les textes seront évalués selon les critères suivants : substance, originalité, style, ainsi que l’organisation et la cohérence de l’ensemble.
  • Le Progressive Economics Forum se réserve le droit de ne pas décerner un prix, ou quelque prix que ce soit, si aucun texte ne remplit les critères ou n’atteint les standards.

Textes gagnants

  • Les gagnants seront annoncés à l’Assemblée générale annuelle du PEF.
  • Un prix de $1,000 sera attribué au gagnant du concours pour les étudiants gradués et $500 sera attribué au gagnant du concours pour les étudiants prégradués.
  • Les textes gagnants seront publiés sur le site internet du PEF.
  • Les décisions des juges sont sans appel.

Canada’s Secret Weapon in Fighting Climate Change: Great Trade Unions

Published by Anonymous (not verified) on Tue, 04/05/2021 - 4:21am in

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U.S. President Joe Biden has been pushing the envelope in bringing America back into the Paris Accord process, setting more ambitious targets for reducing U.S. emissions, and committing to very big investments in renewable energy infrastructure and other climate-friendly measures. This is very encouraging, and will reinforce (and up the ante) for Canada to do better.

One news story about the Biden program, however, got me thinking about Canada’s climate debates. The story cited a statement of public support for Biden’s plan from the United Mine Workers of America – the largest union in the U.S. coal sector. The UMWA endorsed Biden’s proposal to accelerate the phase-out of coal use, so long as strong guarantees were provided for new job opportunities in renewable energy and reclamation activities, support for health insurance and pensions for affected workers, and other sensible transition measures.

This is, of course, a very positive and overdue position for the UMWA (and other U.S. unions) to adopt, and it attracted considerable media attention. Superficially it might seem contradictory for a coal miners’ union to endorse policies that will accelerate the disappearance of its major industry. But the devastation being wrought by the unplanned, unsupported closure of coal mines – which only accelerated after Donald Trump came to power promising to ‘bring back coal’ – is proof positive that doing nothing, or worse yet trying to resist the accelerating energy transition, is not a good way to protect your members. Anyone who cares about fossil fuel workers (and we all should) must acknowledge this entails supporting the energy transition and protecting workers and communities as it happens – not pretending it can somehow all be stopped.

What struck me about media coverage of the UMWA statement, however, is how it highlighted something we often take for granted in Canada. Canadian unions (including those representing coal miners and other energy workers) have been saying the same things here for many years. Indeed, for decades Canadian unions and union leaders have taken generally visionary, principled and ultimately effective positions in favour of a supported, fair, gradual transition away from fossil fuels. A union endorsing climate policies and the phase-out of coal would not generate headlines in Canada: it would definitely be a ‘dog bites man’ story, not the other way around. So as the U.S. union movement (and those in other countries) moves forward, and mobilizes its members, in favour of a supported, fair energy transition, perhaps we should take a moment to acknowledge and thank Canadian unions for their often unsung role. Canadian unions have advanced the debate here in many important ways: negotiating practical but important details of transition, and refusing the bait of fossil fuel lobbyists that jobs and sustainability are somehow incompatible.

There are many outstanding examples of leadership from Canadian unions on climate and transition issues. When strong and representative worker voices reject the false dichotomy between saving jobs and saving the environment, the fossil fuel industry and their allies in politics are prevented in their quest to divide the labour movement from the climate movement. While the debate over the economic effects of climate policy is still smouldering in some quarters (just pick up any issue of the National Post), on the whole I think the Canadian discourse has accepted there is no trade-off between climate policy and economic and employment performance. And the careful, constructive positioning of Canadian unions has been an important factor in that success.

There are many examples over recent years of Canadian unions and union leaders whose efforts to defend energy workers have helped us avoid the jobs vs. environment trap that has bedeviled labour movements in the U.S. and some other countries.

For example, it is significant that one of the first uses of the phrase ‘just transition’ was by a Canadian union activist, Brian Kohler: a member of the former CEP who coined the phrase in 1998 to refer to the needed combination of planned energy transition, alternative job-creation, and income supports and transition assistance.

The CEP (which helped found Unifor in 2013, along with the former CAW) remained very active in advocating emissions reduction initiatives in the energy industry, campaigning for more value-added energy refining and petrochemical activity in Canada, and opposing more exports of raw energy. They showed, for example, that more pipelines and raw bitumen exports could never provide a base for stable, decent, value-added jobs.

Unifor also represents members in several industries with a stake in ensuring that the transition to renewable energy is managed effectively and fairly. One high-profile example is the auto industry, which is now restructuring to produce electric vehicles. Unifor’s success in winning major EV investments in Canadian auto plants (often putting more pressure on company investment decisions than Canadian governments do, by making investment an issue in collective bargaining) has reinforced the public’s appreciation of the economic and employment opportunities associated with the energy transition.

The Canadian Labour Congress has also played a crucial role in advancing a positive vision of planned, fair transition – and then fighting effectively for those principles in federal policy-making. For example, the CLC played a vital role in the federal task force on phasing out coal-fired power, that has become an international example for how to achieve this critical environmental step without undue dislocation of workers and communities.

That federal coal transition plan was heavily influenced by the previous experience of the off-coal transition plan negotiated in Alberta, with crucial input and support from the Alberta Federation of Labour. Indeed, the AFL has been a consistent and innovative force for pragmatic regulation of greenhouse gas emissions from energy production, limits on new energy developments, and defending wages and working conditions for energy workers. This is especially important since Alberta has the largest reliance on fossil fuel industries of any province (direct fossil fuel jobs account for around 7% of employment in Alberta). This makes it harder for unions to reject the false choice presented by fossil fuel lobbyists between employment and the environment, but the Federation has done so consistently and effectively. Its 12-point plan, released in 2019, is an excellent example of the labour movement getting on the front foot on the climate and jobs debate. And the AFL’s President, Gil McGowan, has been an outstanding and visionary leader in the fight for decent, sustainable jobs. He pushes back effectively against the onslaught of right-wing, anti-labour attacks from the provincial UCP government and its big business backers – calling out the hypocrisy of Jason Kenney and his backers, who claim they are standing up for Alberta’s workers while stripping away their overtime benefits, workers’ compensation, and job security. Many individual unions in Alberta have also taken very positive approaches on climate issues, showing their members and the broader public that petroleum and mining companies are not actually interested in stable, secure jobs for workers.

Many other unions in Canada have used their voices, their bargaining clout, and their political influence to advance progressive climate and jobs policies in their workplaces and industries. This database, compiled by the York University-based ACW research project, catalogues many innovative contract provisions negotiated by Canadian unions to improve environmental practices at workplaces, educate union members and employers about climate policy, and implement concrete provisions and supports (like job security and notice, retraining, and adjustment assistance) as energy transitions occur. It confirms that Canadian unions are very much ahead of the curve on these issues: playing a vital role in both winning the broader political debate over climate change, but then demanding and winning concrete measures (not token statements) to ensure that the energy transition is fair and inclusive.

Of course, the approach of Canadian unions to climate issues has not been perfect or uniform: there have been tensions and debates, and at times some unions have supported further fossil fuel developments on the faint hope that the insecurity facing their members could be solved by approval of just one more mega-project. But in general the Canadian union movement has been a consistent and progressive force in climate debates. The idea of a Canadian union endorsing a pro-jobs climate plan (like Biden’s) wouldn’t be news at all here. And that has undoubtedly helped us move the policy needle forward in Canada.

I have worked with unions in several countries around climate, employment and transition planning issues. In my experience, Canada’s trade union movement sets a very high standard with its positive and pro-active approach to these issues. Our campaigns for both sustainability and workers’ rights are stronger, thanks to our union movement’s activism, vision, and courage.

The Muddled Speech of Numbers: Blood clots, COVID-19 vaccines, and statistical risk

Published by Anonymous (not verified) on Tue, 20/04/2021 - 2:38am in

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Earlier this week, the CDC paused the roll-out of the Johnson & Johnson COVID-19 vaccination after 6 women experienced serious blood clots. Their caution has merit, given that the FDA has been approving vaccinations in advance of the typical large-scale evaluations because speed is seen as so crucial. Reasonably, there is a desire to know more about these blood clots before more might appear. Yet, there was also sheer frustration from many in the medical community because the choice to pause the roll-out suggested that there was a serious issue, that the vaccine was dangerous. In a context in which vaccine hesitancy is likely to undermine herd immunity, any suggestion that the vaccine might have consequences can be twisted and contorted. 

Across many mailing lists and Twitter streams, I kept seeing data points trying to ground the seriousness of the blood clots in the J&J vaccine. Most referenced the frequency of blood clots that women experience while taking the birth control pill, roughly 1/1000. People also highlighted how common blood clots are for those who are in the throes of COVID-19. These were meant to highlight just how rare and statistically insignificant blood clots are when taking the J&J vaccine. 

Yet, as these attempts to ground the conversation unfolded, a different kind of outrage formed. A handful of people highlighted women they knew who had died of blood clots most likely related to birth control. Many more women who took hormonal birth control expressed frustration that they had no idea that they were at increased risk of a blood clot. Sure, it’s part of the fine print of that printout you get from CVS when picking up your pill, but this wasn’t something doctors emphasized. Unlike the J&J vaccine situation, the relationship between birth control and blood clots – or even COVID-19 and blood clots – hasn’t been front page news.

As I was processing the back-and-forth about statistical risk and who was responsible for sharing what with whom, and at what level of amplitude, I couldn’t help but think about all of the scholarship into the politics of numbers. We’re living at a time when politicians are simultaneously espousing the need for “evidence-based policymaking” and working to diligently undermine, contort, or weaponize evidence. This is what scholars of “agnotology” mean when they talk about the manufacturing of ignorance through the seeding of doubt. Or what other scholars highlight as the “weaponization of transparency.” 

I couldn’t help but feel empathy for the scientists at J&J and the FDA who have been working around the clock trying to make a vaccine available to the public, trying to be responsible stewards of information and statistical risk in a context where their desire for caution can be turned on its head to undermine the legitimacy of their work. I also found myself feeling empathy for journalists who recognize the importance of reporting on this development, even as they know that their reporting is easily evolving into misinformation that’s undermining the vaccine roll-out. Working with numbers is itself political.

To work in the world of medicine and science, statistics and probabilities is to grapple with trade-offs at a macro level, which present ethical conundrums even in the best of times. After all, that one terrible death from a blood clot could perhaps have been prevented by not taking the vaccine. But this is where we enter into the world of trade-offs, of unknowns, of morality. Without a vaccine rollout, many more people will die of blood clots from COVID-19. Had that woman been infected with COVID-19, she might have still succumbed to a blood clot. Medicine alters the dimensionality of risk. So how do ethics get negotiated? And by whom? This is the story of public health. 

Those complexities underpinning the advancement of science are complicated further by a politicized context such as that which surrounds the COVID-19 vaccine. Each act of communication can be twisted and contorted to convey different agendas, different values, different goals. Amplified transparency of risk is itself a political act. Sprinkle in the expectation in our current society that individuals are expected to make informed decisions for themselves, their families, and their communities, and we have a recipe for disaster. This is what the production of ignorance – aka misinformation, information disorder, agnotology, etc… – looks like in practice. The very acts of scientific transparency, which are intended to help inform decision-making, are twisted on their head, serving to undermining the legitimacy of scientific work and the coordination of a public that must work together to address a deadly disease. 

I keep wondering what it will take for the public to trust scientific information. But, perhaps, a better question might be: What kind of information is needed to help a fragmented public work together to solve societal-level challenges?

Note to the reader: These are questions that I’m struggling with. If you have thoughts, ideas (or even reading recommendations!), don’t hesitate to reach out: zephoria [at] zephoria [dot] org.

Behind every algorithm, there be politics.

Published by Anonymous (not verified) on Mon, 19/04/2021 - 3:07am in

In my first class in computer science, I was taught that an algorithm is simply a way of expressing formal rules given to a computer. Computers like rules. They follow them. Turns out that bureaucracy and legal systems like rules too. The big difference is that, in the world of computing, we call those who are trying to find ways to circumvent the rules “hackers” but in the world of government, this is simply the mundane work of politicking and lawyering. 

When Dan Bouk (and I, as an earnest student of his) embarked on a journey to understand the history of the 1920 census, we both expected to encounter all sorts of politicking and lawyering. As scholars fascinated by the census, we’d heard the basics of the story: Congress failed to reapportion itself after receiving data from the Census Bureau because of racist and xenophobic attitudes mixed with political self-interest. In other words, politics. 

As we dove into this history, the first thing we realized was that one justification for non-apportionment centered on a fight about math. Politicians seemed to be arguing with each other over which algorithm was the right algorithm with which to apportion the House. In the end, they basically said that apportionment should wait until mathematicians could figure out what the “right” algorithm was. (Ha!) The House didn’t manage to pass an apportionment bill until 1929 when political negotiations had made this possible. (This story anchors our essay on “Democracy’s Data Infrastructure.”)

Dan kept going, starting what seemed like a simple question: what makes Congress need an algorithm in the first place? I bet you can’t guess what the answer is! Wait for it… wait for it… Politics! Yes, that’s right, Congress wanted to cement an algorithm into its processes in a feint attempt to de-politicize the reapportionment process. With a century of extra experience with algorithms, this is patently hysterical. Algorithms as a tool to de-politicize something!?!? Hahahah. But, that’s where they had gotten to. And now the real question was: why? 

In Dan’s newest piece – “House Arrest: How an Automated Algorithm Constrained Congress for a Century” – Dan peels back the layers of history with beautiful storytelling and skilled analysis to reveal why our contemporary debates about algorithmic systems aren’t so very new. Turns out that there were a variety of political actors deeply invested in ensuring that the People’s House stopped growing. Some of their logics were rooted in ideas about efficiency, but some were rooted in much older ideas of power and control. (Don’t forget that the electoral college is tethered to the size of the House too!) I like to imagine power-players sitting around playing with their hands and saying mwah-ha-ha-ha as they strategize over constraining the growth of the size of the House. They wanted to do this long before 1920, but it didn’t get locked in then because they couldn’t agree, which is why they fought over the algorithm. By 1929, everyone was fed up and just wanted Congress to properly apportion and so they passed a law, a law that did two things: it stabilized the size of the House at 435 and it automated the apportionment process. Those two things – the size of the House and the algorithm – were totally entangled. After all, an automated apportionment couldn’t happen without the key variables being defined. 

Of course, that’s not the whole story. That 1929 bill was just a law. Up until then, Congress had passed a new law every decade to determine how apportionment would work for that decade. But when the 1940 census came around, they were focused on other things. And then, in effect, Congress forgot. They forgot that they have the power to determine the size of the House. They forgot that they have control over that one critical variable. The algorithm became infrastructure and the variable was summarily ignored.

Every decade, when the Census data are delivered, there are people who speak out about the need to increase the size of the House. After all, George Washington only spoke once during the Constitutional Convention. He spoke up to say that we couldn’t possibly have Congresspeople represent 40,000 people because then they wouldn’t trust government! The constitutional writers listened to him and set the minimum at 30,000; today, our representatives each represent more than 720,000 of us. 

After the 1790 census, there were 105 representatives in Congress. Every decade, that would increase. Even though it wasn’t exact, there was an implicit algorithm in that size increase. In short, increase the size of the House so that no sitting member would lose his seat. After all, Congress had to pass that bill and this was the best way to get everyone to vote on it. The House didn’t increase at the same ratio as the size of the population, but it did increase every decade until 1910. And then it stopped (with extra seats given to new states before being brought back to the zero-sum game at the next census). 

One of the recommendations of the Commission on the Practice of Democratic Citizenship (for which I was a commissioner) was to increase the size of the House. When we were discussing this as a commission, everyone spoke of how radical this proposition was, how completely impossible it would be politically. This wasn’t one of my proposals – I wasn’t even on that subcommittee – so I listened with rapt curiosity. Why was it so radical? Dan taught me the answer to that. The key to political power is to turn politicking into infrastructure. After all, those who try to break a technical system, to work around an algorithm, they’re called hackers. And hackers are radical. 

Want more like this?

  1. Read “House Arrest: How an Automated Algorithm Constrained Congress for a Century” by Dan Bouk. There’s drama! And intrigue! And algorithms!
  2. Read “Democracy’s Data Infrastructure” by Dan Bouk and me. It might shape your view about public fights over math.
  3. Sign up for my newsletter. More will be coming, I promise!

Who is lending to the British government?

Published by Anonymous (not verified) on Tue, 06/04/2021 - 5:53pm in

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The Guardian has published a question and invited other readers to answer it:

The chancellor has borrowed an unprecedented amount of money. Who is lending it to him, and where did they get it?
Sean Boyle, London

The answer from Andrew, Richard and Neil is a genuine MMT answer and I recommend reading it. It was also published in the newspaper.

Here is my answer:

The question as to who lends the UK government money and where they get it from can only be answered by looking at the balance sheets of the involved parties. The short answer to the question is this: The money that the government spends is created by the Bank of England (BoE) at the time of spending. It is credited to the bank of the receiver, which then has more £s in their account at the BoE. The money does not come from anywhere. It is just created in a spreadsheet managed by the BoE and entries are made with the help of a computer (which is where and how “they get it”). This means that the government creates money when it spends. It therefore does not borrow to spend. Political rules force the government to issue government bonds (gilts) that carry an interest rate that is higher than the banks receive when holding funds at the BoE. This means that banks find it profitable to use their reserves to buy gilts. 

The consequence of this is that government spending does not influence the rate of interest. This ensures that the BoE is at the same time executing payments for the government and able to control the interest rate in the money market. Tax revenues are what the name implies – the state’s money is returned (French: revenu). This means that the view that government borrows our money is factually wrong. It is the opposite: we need £s to finance our tax payments (and other expenditures), but the government has a monopoly on £s. It has chosen to let the BoE, which belongs to the state, be the issuer of currency. As the issuer of currency, it is impossible to “run out of money” whereas we as users of currency struggle to obtain what we cannot produce:  £s.

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