Tagged: economics

Notable Linkage: Canadian Inequality: Recent Developments and Policy Options [PDF]

Excerpt:

Our analysis of income inequality in Canada has produced several important findings that should guide any policy developments in this area. First, income inequality at the family level has increased substantially over the past few decades, and policy developments since the mid-1990s have likely reinforced rather than countered this trend. Second, the share of total income going to the top 1 percent has increased dramatically since 1980, mirroring trends in the United States. These high earners are mostly male and highly educated, and while many financial industry workers and executives can be found in the top 1 percent, so too can many professionals such as doctors. Third, the forces driving inequality are varied, ranging from technological change and off-shoring to institutional factors such as the role of unions and minimum wages. Fourth, we find that the experience of women is notably different from that of men; in particular, women have suffered less of the “hollowing out” of th…

Canadian Inequality: Recent Developments and Policy Options [PDF]

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On the field of economics…

I find that I spend a considerable amount of my time spent on the ‘net talking economics. As such I usually find myself talking to two different types of people: Those who hold the field of economics in high esteem, and those who think it’s snake-oil designed to keep our elites in power and rolling in the dough.

Not that anyone asked, but here’s what I think. I view it through two lens:

Economics is the study of complex systems

As such it’s helpful to think of it as akin to big physics (with a caveat so important it’s my second point). Like physics, our understanding of economics has progressed significantly over the centuries. We can state with certainty specific things, state with high confidence other things, and have a pretty good hunch on a lot more. But there’s still a lot we don’t know. And in fact, we might not even know what we don’t know.

Economics is not the study of a natural system

Unlike physics, economics is the study of a complex system created by human hands. As such, for all the attempts at empiricism, it’s ultimately beholden to the whims of follies of human nature. Why is gold so valuable? It has some interesting physical properties, but its industrial value is limited. It doesn’t shelter or feed us. It’s [elevated] value is solely the product of the legacy that ancient humans thought it valuable.

Economics does not operate independently, but is subject to constant rational – and irrational – political considerations that stand apart from the economic system.  A recent example is the policies of austerity being employed in Europe. As constantly pointed out by Paul Krugman & others, austerity goes not only against past understanding of economics but the data that clearly shows it to be a failure. So why does austerity continue to be pushed? Because the economic outcome is not primary concern. Whether it’s the Shock Doctrine being deployed or that it stems from some more primitive impulse1 – the economic system is a system beholden. Why do North Americans insulate their agricultural industry when economic orthodoxy makes the strong case that dropping tariffs & subsidies will bring the best outcome for the North American consumer?

Because agriculture is about national security, not economics. A nation that cannot feed itself is incredibly vulnerable.

So while the one side of me appreciates the field of economics and I love to peruse and cite economic data, I’m also aware on another level we are dealing with, basically, voodoo.

1For many see economics as a morality play. One is poor not because of vast & complicated socio-economic factors, but because one is a lazy motherfucker…who deserves to rot.

 

Notable Linkage: How the Case for Austerity Has Crumbled by Paul Krugman | The New York Review of Books

Excerpt:

It’s also worth noting that while economic policy since the financial crisis looks like a dismal failure by most measures, it hasn’t been so bad for the wealthy. Profits have recovered strongly even as unprecedented long-term unemployment persists; stock indices on both sides of the Atlantic have rebounded to pre-crisis highs even as median income languishes. It might be too much to say that those in the top 1 percent actually benefit from a continuing depression, but they certainly aren’t feeling much pain, and that probably has something to do with policymakers’ willingness to stay the austerity course.

How the Case for Austerity Has Crumbled by Paul Krugman | The New York Review of Books

Compare and contrast: Corporate vs. Human Development Edition

Canada has slipped out of the top 10 countries listed in the annual United Nation’s human development index — a far cry from the 1990s when it held the first place for most of the decade…When the numbers are adjusted for gender inequality, Canada slumps to 18th place.

Toronto Star, March 14, 2013

Outgoing Bank of Canada governor Mark Carney famously chided corporate Canada this summer for sitting on mountains of “dead money,” the idle dollars on balance sheets that could instead feed economic growth…The running tally of “dead money” in Canada? About $600 billion, or a bracing 32% of Canada’s GDP, according to an estimate quoted in January by RBC Global Asset Management chief economist Eric Lascelles. To put that big number into context, he noted that U.S. cash reserves account for just 9% of the domestic economy. Yet even the U.S. figures are staggeringly large.

Canadian Business, February 12, 2013

Canada’s Economic Action Plan in, er, action.

Time for more corporate tax cuts.

 

Notable Linkage: Dutch disease is dead, long live Dutch disease! | rabble.ca

Excerpt:

In the hyper-polarized context of Canadian energy policy debates, even suggesting that there might be a downside to the untrammeled energy boom centred in northern Alberta is enough to get you labelled a traitor or an economic illiterate — or both. But what do the actual facts indicate? Bitumen boosters like to pretend there is a "consensus" among hard researchers that the Dutch disease hypothesis is false. In fact, the overwhelming weight of empirical evidence confirms that surging oil prices and exports have indeed contributed to the rise of the Canadian dollar, which in turn has indeed contributed to the decline of Canadian manufacturing.

Dutch disease is dead, long live Dutch disease! | rabble.ca

Notable Linkage: Why Does the Minimum Wage Have No Discernible Effect on Employment?

Excerpt:

The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage.

The report reviews evidence on 11 possible adjustments to minimum-wage increases that may help to explain why the measured employment effects are so consistently small. The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners; and small price increases.

Given the relatively small cost to employers of modest increases in the minimum wage, these adjustment mechanisms appear to be more than sufficient to avoid employment losses, even for employers with a large share of low-wage workers.

Why Does the Minimum Wage Have No Discernible Effect on Employment?

The Conservative Party of Canada’s worldview, in one sentence

Last Friday,  Human Resources Minister Diane Finley outraged the opposition and organized labour in a response to Chris Charlton (Hamilton Mountain, NDP), who condemned the Conservatives for reducing EI eligibility at a time of widespread job cuts.

“With respect to the employment insurance program,” Finley replied, “It is very important to note that, once again, the NDP is supporting the bad guys.”

Got that? Forget fluctuations in world markets & the business cycle. If you lose your job it’s not only your fault, you are also a moral failure and may in fact be evil. And you deserve to be punished.

And your children.

Because economics is a morality play of good guys vs. bad guys.

This was a common 19th century worldview, if not an 18th century one.

Notable Linkage: The Decline of Unions is Your Problem, Too | TIME.com

Excerpt:

First, the fact is that when unions are stronger the economy as a whole does better. Unions restore demand to an economy by raising wages for their members and putting more purchasing power to work, enabling more hiring. On the flip side, when labor is weak and capital unconstrained, corporations hoard, hiring slows, and inequality deepens. Thus we have today both record highs in corporate profits and record lows in wages.

Second, unions lift wages for non-union members too by creating a higher prevailing wage. Even if you aren’t a member your pay is influenced by the strength or weakness of organized labor. The presence of unions sets off a wage race to the top. Their absence sets off a race to the bottom.

Unfortunately, the relegation of organized labor to tiny minority status and the fact that the public sector is the last remaining stronghold for unions have led many Americans to see them as special interests seeking special privileges, often on the taxpayer’s dime. This think…

The Decline of Unions is Your Problem, Too | TIME.com

Notable Linkage: World Economic Forum: Global Risks 2013

Excerpt:

The nature of global risks is constantly changing. Thirty years ago, chlorofluorocarbons (CFCs) were seen as a planetary risk, while threat from a massive cyber attack was treated by many as science fiction. In the same period, the proliferation of nuclear weapons occupied the minds of scientists and politicians, while the proliferation of orbital debris did not. We see a similar story with asbestos then and carbon nanotubes today, and the list goes on. With new information, the perceptions and realities of risks change, and often in unforeseen directions. Consider that in some circles the threat from greenhouse gas emissions made nuclear energy seem less hazardous than fossil fuels over the long run. Yet the nuclear catastrophe in Fukushima, Japan, not only changed public perceptions there but also energy policy, almost overnight, in some parts of Europe.

The global risk that respondents rated most likely to manifest over the next 10 years is severe income disparity…

World Economic Forum: Global Risks 2013

Notable Linkage: Highway Robbery: Public-Private Infrastructure Partnerships | Dollars & Sense

Excerpt:

It is a rebranding of privatization. The phrase purposefully evokes a win-win scenario involving equal “partners” working toward a common goal. Government leaders have been sold this new kind of privatization as a solution to declining tax revenues and borrowing capacity, while private companies claim to be offering their expertise and capital in a spirit of public service.

It is the result of a long ideological campaign against public-sector unions and “big government,” which conservative think tanks, pundits, and politicians blame for growing deficits and crumbling infrastructure. This worldview, meanwhile, hails private companies and the private profit motive as the bearers of efficiency and fiscal discipline.

Finally, P3 is obviously a money-making opportunity. It is propelled by an infrastructure-industrial complex actively pressing for new laws to expand the types of public infrastructure from which they can extract profits, and in recent years they have been quietly succeeding

Highway Robbery: Public-Private Infrastructure Partnerships | Dollars & Sense