Fascinating article about addiction. It's not the drug that people are addicted to - it's the bond.
So by giving addicts the financial means to create other bonds, it doesn't finance their addiction - it actually helps them escape it.
https://medium.com/age-of-awareness/universal-basic-income-vs-addiction-9be994f6acc5
Friday 29 September 2017
Tuesday 19 September 2017
Keynes the Enigma.
Left or right?
I never thought of John Maynard Keynes as
particularly right-wing. He was, after all, one of the most prominent voices
calling for MORE government action during the Great Depression, not less.
But given his general support of free trade and
a more market-based exchange rate system (he called the Gold Standard a ‘barbarous
relic’), as well as his criticism of Russian Communism, I never saw him as
particularly left wing either.
However, I did more recently stumble upon one
of his papers ("National Self-Sufficiency", June 1933) that, in my
opinion, does push him dramatically to the left. While he does not abandon his free-market
sympathies, and does clearly qualify his opposition to unfettered
globalisation, he does appear to be advocating government support to the extent
of (though not in name) a universal basic income/ government services.
And in this transition, he appears more like
Adam Smith – less so an economist and more so a philosopher.
The whole paper is worth a read. But here is
one section in particular. It’s a fairly long read, but an interesting insight
into the man’s enigmatic perspectives.
“The decadent international but
individualistic capitalism, in the hands of which we found ourselves after the
war, is not a success. It is not intelligent, it is not beautiful, it is not
just, it is not virtuous – and it doesn't deliver the goods. In short, we
dislike it, and we are beginning to despise it. But when we wonder what to put
in its place, we are extremely perplexed.
…
There is one … explanation, I
think, of the re-orientation of our minds. The nineteenth century carried to
extravagant lengths the criterion of what one can call for short "the financial
results," as a test of the advisability of any course of action sponsored
by private or by collective action. The whole conduct of life was made into a
sort of parody of an accountant's nightmare. Instead of using their vastly
increased material and technical resources to build a wonder city, the men of
the nineteenth century built slums; and they thought it right and advisable to
build slums because slums, on the test of private enterprise, "paid,"
whereas the wonder city would, they thought, have been an act of foolish
extravagance, which would, in the imbecile idiom of the financial fashion, have
"mortgaged the future" – though how the construction today of great
and glorious works can impoverish the future, no man can see until his mind is
beset by false analogies from an irrelevant accountancy. Even today I spend my
time – half vainly, but also, I must admit, half successfully – in trying to
persuade my countrymen that the nation as a whole will assuredly be richer if
unemployed men and machines are used to build much needed houses than if they
are supported in idleness. For the minds of this generation are still so
beclouded by bogus calculations that they distrust conclusions which should be
obvious, out of a reliance on a system of financial accounting which casts
doubt on whether such an operation will "pay". We have to remain poor
because it does not "pay" to be rich. We have to live in hovels, not
because we cannot build palaces but because we cannot "afford" them.
The same rule of self-destructive
financial calculation governs every walk of life. We destroy the beauty of the
countryside because the unappropriated splendours of nature have no economic
value. We are capable of shutting off the sun and the stars because they do not
pay a dividend. London is one of the richest cities in the history of
civilization, but it cannot "afford" the highest standards of
achievement of which its own living citizens are capable, because they do not
"pay."
If I had the power today, I
should most deliberately set out to endow our capital cities with all the
appurtenances of art and civilization on the highest standards of which the
citizens of each were individually capable, convinced that what I could create,
I could afford – and believing that money thus spent not only would be better
than any dole but would make unnecessary any dole. For with what we have spent
on the dole in England since the war we could have made our cities the greatest
works of man in the world.
...
Today we suffer disillusion, not
because we are poorer than we were--on the contrary, even today we enjoy, in
Great Britain at least, a higher standard of life than at any previous period –
but because other values seem to have been sacrificed and because they seem to
have been sacrificed unnecessarily, inasmuch as our economic system is not, in
fact, enabling us to exploit to the utmost the possibilities for economic
wealth afforded by the progress of our technique, but falls far short of this,
leading us to feel that we might as well have used up the margin in more
satisfying ways.
But once we allow ourselves to be
disobedient to the test of an accountant's profit, we have begun to change our
civilization.
…
I bring my criticisms to bear, as
one whose heart is friendly and sympathetic to the desperate experiments of the
contemporary world, who wishes them well and would like them to succeed, who
has his own experiments in view, and who in the last resort prefers anything on
earth to what the financial reports are wont to call "the best opinion in
Wall Street." ”
Is it excessively leftist? Or does it simply
reinforce the nature of economics as the pursuit of value beyond mere financial
gains, to include culture, society and environment. Otherwise, what is
economics good for?
Sunday 17 September 2017
Congratulations Australia!
World record 26 consecutive years without recession. Take that, Netherlands!
How to keep a UBI under control
An important contribution. A potentially effective way to prevent a universal basic income (UBI) from getting out of hand.
My concern is that it would reinforce economic cycles. One of the benefits of our current welfare system is that it acts as a counter-cyclical automatic stabiliser - during a recession, more people are unemployed so payouts to social welfare increase automatically, thereby boosting the economy; during a boom, fewer people are unemployed so social welfare payouts fall, thereby cooling the economy. Very Keynesian.
My concern is that it would reinforce economic cycles. One of the benefits of our current welfare system is that it acts as a counter-cyclical automatic stabiliser - during a recession, more people are unemployed so payouts to social welfare increase automatically, thereby boosting the economy; during a boom, fewer people are unemployed so social welfare payouts fall, thereby cooling the economy. Very Keynesian.
But this proposed fixed budget share for a UBI means social welfare payouts will fall during economic downturns and increase during booms, thereby reinforcing unemployment and inflationary problems.
Maybe a separate counter-cyclical mechanism - such as an infrastructure body - could fill this gap. Invest in public infrastructure during a slump, hold back during a boom.
So again, and important contribution.
http://aneconomicreality.blogspot.com.au/2017/01/universal-basic-income.html
Maybe a separate counter-cyclical mechanism - such as an infrastructure body - could fill this gap. Invest in public infrastructure during a slump, hold back during a boom.
So again, and important contribution.
http://aneconomicreality.blogspot.com.au/2017/01/universal-basic-income.html
WA Secession, Part 2
http://mobile.abc.net.au/news/2017-08-31/waxit-explainer-wa-liberals-to-debate-secession-motion/8858912?pfmredir=sm
https://www.theguardian.com/australia-news/2017/sep/03/wa-liberal-party-votes-to-look-into-state-seceding-from-federation?CMP=soc_567
Wow. Not so hypothetical anymore.
The only qualifier I would put on my original comments is that the GST debate is much more important than I previously acknowledged.
But I do think secession would only be a second best alternative. First best would be a federal government that is more responsive to Australia's two-speed economy. If not through the GST system, then through some other fiscal mechanism. But something!
https://www.theguardian.com/australia-news/2017/sep/03/wa-liberal-party-votes-to-look-into-state-seceding-from-federation?CMP=soc_567
Wow. Not so hypothetical anymore.
The only qualifier I would put on my original comments is that the GST debate is much more important than I previously acknowledged.
But I do think secession would only be a second best alternative. First best would be a federal government that is more responsive to Australia's two-speed economy. If not through the GST system, then through some other fiscal mechanism. But something!
Redistribution is not a dirty word
This interesting article covers a similar point to one I made a while ago.
Globalisation has actually been a stunning success at what it was designed to do - generate wealth.
Happily, it even helped drastically reduce global poverty.
The failure in recent decades to address inequality hasn't been globalisation's fault because it was never globalisation's job.
It has been a failure of government policy to adequately redistribute (not a dirty word) the gains of globalisation to the broader population, through, for example, the tax system.
So the solution is not to retreat from globalisation but for government to do its number one job - redistribution.
Globalisation has actually been a stunning success at what it was designed to do - generate wealth.
Happily, it even helped drastically reduce global poverty.
The failure in recent decades to address inequality hasn't been globalisation's fault because it was never globalisation's job.
It has been a failure of government policy to adequately redistribute (not a dirty word) the gains of globalisation to the broader population, through, for example, the tax system.
So the solution is not to retreat from globalisation but for government to do its number one job - redistribution.
Trumpcare vs. Obamacare, Part 2
If Republicans actually justified Trumpcare by saying that health care is not the role of government, but the responsibility of the individual, and that the risk of sickness, bankruptcy and death that comes from this is the inevitable price we should pay for our 'freedom', then I could respect it.
I wouldn't agree with it. Both socially and economically, public health care makes sense. But at least their policy narrative would be consistent with their ideology.
But from beginning to end, Republicans have claimed that Trumpcare will provide BETTER health care to MORE people at LOWER cost, when so much evidence (including the CBO and the insurance industry itself) seems to suggest WORSE, LESS and HIGHER.
So are they being dishonest about their ideology or ignorant about their policy?
I wouldn't agree with it. Both socially and economically, public health care makes sense. But at least their policy narrative would be consistent with their ideology.
But from beginning to end, Republicans have claimed that Trumpcare will provide BETTER health care to MORE people at LOWER cost, when so much evidence (including the CBO and the insurance industry itself) seems to suggest WORSE, LESS and HIGHER.
So are they being dishonest about their ideology or ignorant about their policy?
Trumpcare vs. Obamacare
If Trumpcare fails to improve upon Obamacare (and you would have to dazzle me to convince me it wouldn't), I worry that Trump - rather than taking responsibility for his failure - will somehow blame it on delayed effects of Obamacare, and on Democrats' lack of cooperation.
And my biggest fear is that his supporters will believe him.
And my biggest fear is that his supporters will believe him.
Rewriting the history of economics
It's fascinating to think that Adam Smith, the 'father' of modern economics, may have been beaten to the punch by almost half a millennium.
Arab scholar and politician Ibn Khaldun wrote about very similar ideas all the way back in the 14th century.
Arab scholar and politician Ibn Khaldun wrote about very similar ideas all the way back in the 14th century.
He created a labour theory of value and noted the division of labour as the source of individual, societal, national and global wealth, using the example of grain production, compared to Smith's pin factory example.
He discussed the relationship between supply and demand.
He even wrote about the important role of government in maintaining economic activity - something that John Maynard Keynes didn't cover until the 1930s.
Modern economics is much older than we thought.
http://evonomics.com/amazing-north-african-scholar-beat-adam-smith-half-millennium/
He discussed the relationship between supply and demand.
He even wrote about the important role of government in maintaining economic activity - something that John Maynard Keynes didn't cover until the 1930s.
Modern economics is much older than we thought.
http://evonomics.com/amazing-north-african-scholar-beat-adam-smith-half-millennium/
The Thucydides Trap
In the last 500 years, a rising global power has threatened the position of the existing ruling power 16 times – 12 of these times ended in war. This is known as the “Thucydides Trap”. And guess which country has been involved in the most of these wars between rising and ruling powers – France!
But today, the rising/ ruling powers are China and the US, with China having already overtaken the US as the world’s largest economy. How easily could events in Taiwan, the South China Sea, North Korea, or just some more careless comments about trade, currency manipulation or debt obligations trigger a war between these two? Especially when you consider the leader of at least one of these powers.
But today, the rising/ ruling powers are China and the US, with China having already overtaken the US as the world’s largest economy. How easily could events in Taiwan, the South China Sea, North Korea, or just some more careless comments about trade, currency manipulation or debt obligations trigger a war between these two? Especially when you consider the leader of at least one of these powers.
I wrote it first, I swear!
I once compared Donald Trump’s attacks on NATO - and demands that other member nations pay their fair share - to the mafia threatening to beat up a local shopkeeper for protection money.
It seems I’m not the only one who drew such a parallel. Paul Krugman made a similar observation about his behaviour regarding health care:
“Instead [of taking responsibility for the failure of Trumpcare, Donald Trump] has decided to blame Democrats for not cooperating in the destruction of their proudest achievement in decades. And in an interview with The Wall Street Journal, he openly threatened to sabotage health care for millions if the opposition party doesn’t give him what he wants.
In that interview, the president of the United States sounded just like a mobster trying to extort protection payments from a shopkeeper.”
I wrote it first, I swear!
It seems I’m not the only one who drew such a parallel. Paul Krugman made a similar observation about his behaviour regarding health care:
“Instead [of taking responsibility for the failure of Trumpcare, Donald Trump] has decided to blame Democrats for not cooperating in the destruction of their proudest achievement in decades. And in an interview with The Wall Street Journal, he openly threatened to sabotage health care for millions if the opposition party doesn’t give him what he wants.
In that interview, the president of the United States sounded just like a mobster trying to extort protection payments from a shopkeeper.”
I wrote it first, I swear!
Good Debt vs. Bad Debt
I actually like the Australian government’s idea of classifying its debt as either “good debt” or “bad debt”, rather than just total debt. While I appreciate the potential for debt classifications to be manipulated for political means, it is an important distinction. Especially for a country like Australia that could use a debt-financed infrastructure boost.
Debt is acceptable when incurred to finance one-off productive investments that will pay for themselves in the longer term via financial, economic and/ or social returns. This can include public transport, roads, bridges, schools, hospitals, etc. It can also be acceptable as a means of stabilising a short term crisis if pre-existing savings aren’t available – though ideally, this debt too could be spent on “good” investments, killing two birds with one stone.
Debt is less acceptable when used to finance ongoing expenditures such as wages and social welfare. This doesn’t mean these expenditures aren’t worth pursuing – they are often essential. But unless there is a crisis or a one-off productive investment, it must be financed with a similarly ongoing revenue source – taxes, not debt.
Debt is acceptable when incurred to finance one-off productive investments that will pay for themselves in the longer term via financial, economic and/ or social returns. This can include public transport, roads, bridges, schools, hospitals, etc. It can also be acceptable as a means of stabilising a short term crisis if pre-existing savings aren’t available – though ideally, this debt too could be spent on “good” investments, killing two birds with one stone.
Debt is less acceptable when used to finance ongoing expenditures such as wages and social welfare. This doesn’t mean these expenditures aren’t worth pursuing – they are often essential. But unless there is a crisis or a one-off productive investment, it must be financed with a similarly ongoing revenue source – taxes, not debt.
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