The Organization for Economic Cooperation and Development -- a pro-establishment, rock-ribbed bastion of pro-market thinking -- has released a report predicting a collapse in global economic growth rates, a rise in feudal wealth disparity, collapsing tax revenue and huge, migrating bands of migrant laborers roaming from country to country, seeking crumbs of work. They prescribe "flexible" workforces, austerity, and mass privatization. Read the rest
Ta-Nehisi Coates's The Case for Reparations is an important, compelling history of the post-slavery debate over reparations, running alongside the post-slavery history of US governmental and private-sector violence and theft from the descendants of slaves in America. Coates's thesis -- compellingly argued -- is that any "achievement gap" or "wealth gap" in American blacks is best understood as an artifact of centuries of racial violence and criminal misappropriations of black people, particularly visited upon any black person who expressed ambition or attained any measure of economic success.
As Coates demonstrates, a series of deliberate government policies, continuing to this day, ensured that unscrupulous American businesses could raid the savings and loot the accumulated wealth of black people. From the millions who were terrorized into indentured servitude in the south to the millions who were victimized by redlining and had every penny they could earn stolen by real-estate scammers in the north, the case for reparations is not about merely making good on the centuries-old evil of slavery. It's about the criminal physical and economic violence against black people in living memory and continuing to today.
This is a long and important read, and the "reporter's notebook" sidebars cast further light on the subject from unexpected angles. Coates makes a compelling case that the racist violence against black people in America is of a different character than other class war and other racist oppression, and deserves unique consideration. Read the rest
Financial Times economist Tim Harford writes about how "three sensible propositions from economics have somehow been crumpled into a mess of public relations and politics" -- how the misleading precision of economic forecasts can be used to paper over purely political decisions, making them seem to be objectively true: Read the rest
Though he's been dead for more than 20 years, Friedrich Hayek is the darling of the free market, practically a saint. But as Bill Black explains, Hayek's predictions -- used to justify and glorify unlimited enrichment of the ruling class -- never came true, and the states that followed his prescriptions most closely ended up the barbaric situation that he warned about in re-distributive democracies.
As the gap between the rich and the poor widens, as the proportion of GDP that goes to "guard labor" in our militarized police forces and our bulging private prisons, as the most corrupt captains of industry grow richer while the rest of us are faced with an old age in poverty -- and a working life dominated by caring for our own sick and elderly relations -- it's worth reviewing Hayek's record, and the greedy, selfish, corrupt world it produced. Read the rest
In Chimpanzee choice rates in competitive games match equilibrium game theory predictions, a paper in Nature by Colin Camerer and colleagues, researchers document the astounding performance of chimpanzees in classic game-theory experiments -- a performance that's substantially superior to humans who play the same games: Read the rest
Thomas Piketty's much-discussed economics bestseller Capital in the Twenty First Century prophesies a future where inherited wealth dominates the world, because the rate of return on capital outstrips the rate of growth in the economy, meaning the money your ancestors earned will always outstrip what you could earn. A new Boston Consulting Group report confirms Piketty's hypothesis, concluding that the share of wealth due to capital increased by 14% last year Read the rest
London's property bubble has got people energetically expanding their property, digging out sub-basements -- and the insane bubblenomics of London housebuilding are such that it's cheaper to just bury the digger and abandon it than to retrieve it. London's accumulating a substrate of entombed earthmoving machinery. Read the rest
Suresh Naidu analyzes Thomas Piketty's groundbreaking economics book Capital in the 21st Century (previously), disagreeing with one of Piketty's core assumptions: that the rate of profit is a given, not the product of things like trade union law, global treaties, and other political decisions. This is wonkier than last night's post about Piketty, but a lot more interesting, in my view. Read the rest
I've been writing about Thomas Piketty's magisterial economics bestseller Capital in the Twenty First Century for some time now (previously), and have been taking a close interest in criticisms of his work, especially the Financial Times's critique of his methods and his long, detailed response. I freely admit that I lack the stats and economics background to make sense of this highly technical part of the debate, but I think that Wonkblog's analysis looks sound, as does the More or Less play-by-play (MP3). Read the rest
Respected cryptographer and security researcher Ross Anderson has a fascinating new paper, Privacy versus government surveillance: where network effects meet public choice [PDF], which explores the "privacy economics" of mass surveillance, pointing out the largely overlooked impact of "network effects" on the reality of who spies, who is spied upon, and under what circumstances.
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My first big point is that all the three factors which lead to monopoly – network effects, low marginal costs and technical lock-in – are present and growing in the national-intelligence nexus itself. The Snowden papers show that neutrals like Sweden and India are heavily involved in information sharing with the NSA, even though they have tried for years to pretend otherwise. A non-aligned country such as India used to be happy to buy warplanes from Russia; nowadays it still does, but it shares intelligence with the NSA rather then the FSB. If you have a choice of joining a big spy network like America's or a small one like Russia's then it's like choosing whether to write software for the PC or the Mac back in the 1990s. It may be partly an ideological choice, but the economics can often be stronger than the ideology.
Second, modern warfare, like the software industry, has seen the bulk of its costs turn from variable costs into fixed costs. In medieval times, warfare was almost entirely a matter of manpower, and society was organised appropriately; as well as rent or produce, tenants owed their feudal lord forty days’ service in peacetime, and sixty days during a war.
Ben Ho is a behavioral economist who studies apologies. He presents an economic theory of apologies that predicts when apologies will change the outcome of disputes, and proposes policies to increase the frequency and sincerity of apologies. The best evidence for economics-driven apology policies are the laws that make doctors' apologies inadmissible in court; Ho cites research that claims that this leads to more physicians' apologies, which reduces patient grief and anger, and cuts down on malpractice suits. Read the rest
You'll remember Derek Khanna as the Republican House staffer who got fired for writing a paper that used careful objective research to argue for scaling back copyright. Now, Khanna is a volunteer fellow at R Street, where he's expanded on his early work with a paper called Guarding Against Abuse: Restoring Constitutional Copyright [PDF], which tackles the question of copyright terms from a market-economics approach, citing everyone from Hayek to Posner to the American Conservative Union.
There are lots of critiques of copyright term and scope from the left, but this is not a left-right issue. Khanna is a rigorous thinker, a clear writer, and someone who shows that whether you're coming at the question from a business/markets perspective or one of free speech and social benefit, limits on copyright make objective sense. Read the rest
I'm halfway through Thomas Piketty's magisterial Capital in the Twenty First Century, a vital, incredibly influential, brilliantly researched history of wealth concentration stretching back through several centuries and spanning the globe. Even Piketty's critics can't fault his methodologies, though there are critiques of his conclusions -- which propose that unregulated capitalism will produce a hereditary class of the super-rich -- on both the right and the left.
Here's a sharp critique from the left, published in American Prospect by Robert Kuttner. Kuttner takes issue with Piketty's conclusion that government intervention between WWI and WWII and after WWII had no real effect on the distribution of wealth; according to Kuttner, the shocks to hereditary wealth from WWI created a series of policies intended to restore old money fortunes, triggering a global depression. By contrast, the post-WWII period saw a series of pro-labor interventions driven by a strong trade union movement, and an ensuing flattening out of wealth distribution and a degree of unprecedented social mobility. Read the rest
In Post-Industrious Society: Why Work Time will not Disappear for our Grandchildren, researchers from Oxford's Centre for Time Use Research argue that there has been a radical shift in the relationship between leisure, work and income. Where once leisure time was a mark of affluence, now it is a marker for poverty. The richer you are, the more likely you are to work long hours; while the poorer you are, the fewer hours you are likely to work every week.
The researchers theorise multiple causes for this. Poor people are more likely to be underemployed and unable to get the work-hours they want (and need) to support themselves. Rich people are likely to work in jobs that disproportionately advance and reward workers who put in overtime, so a 10% increase in hours worked generates more than 10% in expected career-gains.
They also claim that rich workers are more likely to be satisfied with their jobs, but I'm skeptical of this -- I think that relative to unskilled workers doing at-will 0-hours temp work whose every move is constrained and scripted by their employers, this is probably true, but I don't think that the white-collar world is producing a lot of people who think that their work is meaningful and rewarding. Read the rest