Economics/Finance

It’s obvious enough by now that support for Trumpism in the US and elsewhere is motivated primarily by racial and cultural animus, and not (or at least not in any direct way) by economic concerns. Still, to the extent that Trumpism has any economic policy content it’s the idea that a package of immigration restrictions and corporate tax cuts[1] will make workers better off by reducing competition from migrants and increasing labor demand from corporations. The second part of this claim has been pretty thoroughly demolished, so I want to look mainly at the first. However, as we will see, the corporate tax cuts remain central to the argument.

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A quick rule of thumb is that when someone seems to be acting like a jerk, an economist will defend the behavior as being the essence of morality, but when someone seems to be doing something nice, an economist will raise the bar and argue that he’s not being nice at all.

I’ve spotted two instances already on Twitter since seeing this post this morning. See how many you can find!

I’ve been arguing for a while that a Guarantee Minimum Income (or Universal Basic Income) ought to be combined with a Jobs Guarantee to would make paid work a genuine choice for everyone. To spell this out, the GMI/UBI would make it possible to live decently without paid work, while a Jobs Guarantee would ensure that paid work was available to everyone. As a medium term policy, the best form of GMI would, I think, be the participation income advocated by the late Tony Atkinson. That is, a payment conditional on some form of social contribution, including voluntary work, study and childcare. Support for such a policy entails a direct confrontation with the punitive attitudes behind policies like Work for the Dole, while still maintaining the widely-held principle of reciprocity.

I was going to write more about this, but I just received an article by Felix FitzRoy and Jim Jin, in the Journal of Poverty and Social Justice which presents the argument very well. So, I’ll just recommend that to anyone interested in the issue.

Henry’s recent post on the irrelevance of conservative intellectuals reminded me of this one from 2013, which concluded

Conservative reform of the Republican party is a project that has already failed. The only question is whether the remaining participants will choose hackery or heresy.

Overwhelmingly, the choice has been hackery (or, a little more honorably, silence).

The case for hackery is put most clearly by Henry Olsen. Starting from the evident fact that most Republican voters are white nationalists who don’t care about small government, Olsen considers the options available to small government conservatives. He rapidly dismisses the ideas of challenging Trump or forming a third party, and concludes that the only option is to capitulate. Strikingly, the option of withdrawing from party politics, and arguing for small government positions as an independent critic isn’t even considered.

As Paul Krugman has observed recently, conservative economists (at least, those who comment publicly). are a striking example for the choice of hackery over heresy. Krugman, along with Brad DeLong, has been particularly critical of a group of economists (Robert Barro, Michael Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence Lindsey, Harvey Rosen, George Shultz and John. Taylor) who’ve made dishonest arguments in favor of corporate tax cuts.

Recently, an overlapping group (Boskin, John Cochrane, Cogan, Shultz and Taylor) have taken the hackery a significant step further.

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My latest Guardian article is headlined https://www.theguardian.com/commentisfree/2018/jan/29/privatisation-is-deeply-unpopular-with-voters-heres-how-to-end-it. The core of the argument is that, to make a success of renationalisation, we need to do more than buy back privatised enterprises, and run them as publicly owned corporations. We need a different model. A starting point would be the statutory authority model used in Australia with great success, before the Hawke-Keating government adopted the corporatised model as a step towards privatisation.

That’s the title of my latest piece in Inside Story. Nothing that will surprise anyone who’s been paying attention to what I’ve written on this, so I’ll just cite the conclusion

Since bitcoins are not useful as a medium of exchange, or desirable in themselves, their true value is zero. The highest price at which bitcoins have traded is around $20,000. At the time of writing, the market price is halfway between that level and zero. Pay your money (or not) and take your chances.

International Studies Quarterly has just published a symposium responding to a paper by Henry and me, which has been released from behind the paywall for the occasion. Our paper has the fairly self-explanatory title “Consensus, Dissensus, and Economic Ideas: Economic Crisis and the Rise and Fall of Keynesianism ” In our paper we looked at the resurgence of fiscal Keynesianism in the immediate aftermath of the Global Financial Crisis and of the successful counterthrust leading to the adoption of austerity policies in the US and Europe.

The symposium has comments from a multidisciplinary group of political scientists, sociologists and economists: Abraham Newman, Andrew Baker, Elizabeth Popp Berman, Paul Krugman, Stephen K. Nelson along with a response from us. It’s great to get these different disciplinary perspectives all in one place, since they all have key pieces of the puzzle, and we are very happy they have chosen to engage with us.

I’ve written here before about the research I’ve been developing on ‘limitarianism’ – the view that we put upper limits or caps on how much of some valuable resource people can have or use. One thing that struck me when giving talks about limitarianism of financial resources/wealth, is that there’s always someone in the audience shouting: “Give me a number!” If the claim is that there should be an upper limit to how much income and wealth someone can have, people want to know what those limits are. Also, I’ve noted that whether or not someone finds the financial limitarian view plausible depends, among other things, on where exactly that ceiling would be put.

One question one could ask, is whether within a political community, there is something of a shared view (or dominant view), of where that ceiling should be (assuming people hold that there should be such a ceiling in the first place, obviously). So I decided to team up with a colleague from economic sociology who has ample experience with conducting surveys, and try to measure, among the Dutch population, whether they hold the view that there should be an upper limit to wealth, and if so, where they would put the cut-off line between ‘rich’ and ‘extremely rich’. Is there a level of material affluence at which we find that people are having not just a lot, but too much? [click to continue…]

I’m working with Troy Henderson from the University of Sydney on a book chapter looking at union responses to the idea of a universal basic income (UBI),which have covered a range from supportive to strongly hostile, with the latter view predominant in Australia. Here’s a draft of my section of the chapter. Comments much appreciated.

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With the huge upsurge in the price of Bitcoin recently, I’ve been getting a lot of demand for articles putting forward my point of view: Shorter JQ: It’s an environmentally destructive Ponzi scheme that isn’t usable as a currency even for believers.

My observations on the electricity demand associated with Bitcoin made it into the ABC (Australian equivalent of BBC) News Quiz last week, which is a kind of fame, I guess.

Meanwhile, I had another piece in the Guardian, this time looking at the fact that, despite being called a “cryptocurrency”, Bitcoin is used even less as a currency now than it was several years ago. The core problem is that the system is so overloaded by miners creating new coins that processing transactions is slow, costly or both I mentioned the fact that game company Steam had stopped accepting coins and that the list of merchants accepting Bitcoin is small enough to fit on one page. Checking further I concluded that this list is out of date, but not in a good way. Lots of those included, such as Expedia, no longer accept Bitcoin, if indeed they ever did. Here’s one person’s experience. Bitcoin is now a “crypto asset” which is even more obviously a Ponzi fantasy than the original currency story.

One response I got was that transaction speed would soon be greatly improved by something called Lightning. Checking on this it appears that this is software in an alpha (very early) stage of development, which would allow any two parties to set up a transactions account separate from the main Bitcoin blockchain, and only occasionally update the main account. An analogy, for readers of a certain age, is the era before Bankcard, when, if you wanted to do something other than paying cash, you maintained a separate credit and debit account with every store you dealt with. This does not seem like the dawn of a new era to me.

So, folks, here it is, my book on the capability approach that has been in the works for a very long time. I’m very happy that it is finally published, I am happy that you can download the PDF for free at the publisher’s website, and that the paperback version is also about half the price of what a book with a university press would cost (and a fraction of the price it would cost if published by one of the supercommercial academic presses whose names shall not be mentioned here).

I am not going to sell you my book – in a literal sense there is no need to sell you anything since you can download the book (as a PDF) for free from Open Books Publishers’ website (and I have no material interest in selling you hardcopies since I will not receive any royalties). And in a non-literal sense I should not sell this book either, since it is not up to me to judge the quality of the book. So I’ll only make three meta-comments. [click to continue…]

If you’re looking for a passive-aggressive Christmas gift for your upper middle class friends, whatever their politics, you could do worse than Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It. I have to admit that, despite the fact that my poverty-researcher friends have been recommending Richard Reeves to me for a long while, I read it sooner than I might have otherwise because of this Observer piece, drawn from the book, which discusses one of the arguments in my and Swift’s book Family Values. I’ll be giving it to my recalcitrant (and definitely not liberal) father-in-law, along with The Color of Law.

Reeves isn’t interested in the 1%, but in the 20%. The starting point is Obama’s aborted plan in January 2015 to abolish 529 plans. For those of you who don’t use them, 529s are tax sheltered college funds. The funds grow tax free. They are a complicated enough instrument that (almost) no one outside the top 20% uses them and, like all tax-shelters and deductions, are more valuable the higher your tax rate. Ted Cruz inserted a provision to the Senate bill which expands 529s so that rich people can pay for elite private k-12 schools with tax-exempt savings. A particularly wicked feature is that anyone – grandparents, uncles and aunts, family friends, etc – can contribute. So the more relatives with large amounts of disposable income you have, the more your college fund will grow, and the greater the cost to the taxpayer. In 2009 23% of households in the top quartile of the income distribution hold 529s, with an average balance of $32,000; just 2% of households in the bottom quartile had 529s, with an average balance of less than $1k. 529s are estimated to cost the federal government only about 5.8 billion in the next 5 years, but almost all of that will benefit families in the top quartile of the distribution (and those estimates do not account for the possibility that 529s will be useable for private k-12). And its not just that 529s effectively reduce the cost of college for affluent families but not for lower-income families: by increasing the higher education spending power of the affluent they, presumably, raise the price at the more selective end of higher education; thus rendering it less accessible to less affluent families.

Obama’s plan to abolish 529s, and replace them with a stronger and broader version of the American Opportunity Tax Credit, a credit for educational spending which is unavailable to families earning over $180k, was defeated not by Republicans, but by Democrats.
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I’m doing some work on privatisation and wanted to look at recent UK experience with the Private Finance Initiative. So, I Googled for PFI in the last year (as Google personalizes searches, your mileage may vary). The result is a surprising degree of unanimity. Across the political spectrum, there is agreement that

* PFI is a disaster, enriching private firms at the expense of the public
* The other side is (mostly) to blame

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I’ve just given a couple of talks focusing on inequality, one for the Global Change Institute at UQ, following a presentation by Wayne Swan and the second at a conference organized by the TJ Ryan Foundation (including great talks by Peter Saunders, Sally McManus, and others), where I was responding to a paper by Jim Stanford from the Centre for Future Work. Because I was speaking second in both cases, I didn’t prepare a paper or slides, but tailored my talk to complement the one before. That can be a high risk strategy, but in this case, I think it worked very well.

It led me to a new, and I hope improved, statement of the case against ‘trickle down’ theory. As always, the most important part of a refutation is a clear statement of the theory you propose to refute, so that it can be shown where it falls down. After the talks I wrote this up, and it’s over the fold. Comments and constructive criticism much appreciated.

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