Entries associated with the tag "Economics":

Economist and blogger Brad DeLong talks about his favorite economist:

"Marx saw that the coming of capitalist economies destroyed all feudal, traditional, and patriarchal relationships and orders. [Joseph] Schumpeter saw farther: that market capitalism destroys its own earlier generations. There is, he wrote, a constant 'process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in, and what every capitalist concern has got to live in.'"

Not to mention its employees. 

I am not astonished at the existence of Dr. Vino's blog, but who knew there was an American Association of Wine Economists? (Thanks, Whet.)

Dr. Vino in a recent post waxes lengthy and eloquent on the carbon footprint of various wines, and reaches a conclusion I think somewhat similar to that of the omniscient Michael Pollan: local makes a lot of difference. A few tidbits:

"Shipping premium wine, bottled at the winery, around the world mostly involves shipping glass with some wine in it. In this regard, drinking wine from a magnum is the more carbon-friendly choice since the glass-to-wine ratio is less. Half-bottles, by contrast, worsen the ratio.

"Shipping wine in bulk from the source and bottling closer to the point of consumption lowers carbon intensity.

"Light packaging material such as Tetra-Pak or bag-in-a-box has much less carbon intensity...

"There’s a 'green line' that runs down the middle of Ohio. For points to the West of that line, it is more carbon efficient to consume wine trucked from California. To the East of that line, it’s more efficient to consume the same sized bottle of wine from Bordeaux, which has had benefited from the efficiencies of container shipping, followed by a shorter truck trip." 

And on and on. If you like this sort of thing, you'll want to read the whole thing, or better yet, the full study titled "Red, White and 'Green': The Cost of Carbon in the Global Wine Trade," (pdf), which is AAWE Working Paper no. 9.

But nerdliness has its limits. Speaking as someone who can lose all focus when confronted with the wonderful maps that show how many days it will take to ship something from La Porte to Laramie, I say stop it! Environmentalist wine connoisseurs shouldn't spend their time on such things. They should lobby Congress to impose a hefty carbon tax ASAP, so that we all get the message loud and clear from the price stickers on Ripple and everything else.

Nothing less will help, because nobody has time to go around calculating the carbon footprint of every damn thing they do/eat/drink. That's what markets are for.

The indispensable Christopher Hayes, now Washington editor of the Nation, puts an old book and a new one in perspective at In These Times:

"Written in exile, while Europe burned, The Road to Serfdom’s simple but powerful thesis was that the encroachment of the state into economic affairs inevitably leads to an encroachment in all spheres. For Hayek and his intellectual descendants -- from Friedman (Milton) to Friedman (Thomas) -- political freedom and economic freedom were inseparable and mutually reinforcing. And over the last 30 years, the adherents of the Friedman/Hayek School have pointed to two coincidental trends in global political economy to back this grand claim: First, the fall of command-and-control economies and the dismantling of welfare states. The second, the rise of democratic governance. With cunning aplomb, neoliberal writers and historians have packaged these two distinct phenomena together as one single story of progress and development. Look: Freedom’s on the march!

"[Naomi] Klein resurrects Hayek’s argument and inverts it, showing how time and again, the 'economic freedom' envisioned by Hayek and his ilk has been imposed at the expense of political freedom, often, Klein writes, 'midwifed by the most brutal forms of coercion.' From Chile to Iraq, majorities empowered to choose their own government don’t start clamoring for flat taxes, privatized post offices and an end to controls on foreign capital. Instead, they often form unions or call for increased social spending. The Shock Doctrine is an encyclopedic catalog of the tactics that governments, corporations and economists have used to impose -- usually over popular opposition -- what Klein calls the 'policy trinity' of the Chicago-School program: 'the elimination of the public sphere, total liberation for corporations and skeletal social spending.'"

Read the whole thing, because Hayes doesn't stop thinking when he finds a good book he agrees with, and he doesn't hesitate to explain how Klein's book overreaches -- a quality too rare at all ends of the political spectrum. The comments are intelligent too.

Senior economist Terry Fitzgerald of the Federal Reserve Bank of Minneapolis tries to figure out why different measures of the same thing -- individual incomes of average Americans -- look so different:

"In brief, it seems that individual workers and households have experienced stagnation, while the national economy has grown robustly. How can it be that these two sources of data -- microeconomic data on individual wages and household income, and macroeconomic statistics covering the national economy -- lead to such different conclusions? Since a nation comprises a group of individuals, these statistics would seemingly be compatible."

In the first of three articles on this subject, Fitzgerald finds that it helps if he uses the same correction for inflation in both sets of data, and it helps some more if he counts benefits as well as cash wages. Both adjustments tend to show that middle-American incomes have not stagnated in recent years.

To this non-economist, this looks like an admirable piece of scientific work, trying to figure out why different measurements of supposedly the same thing don't match up, and how to make them more accurate. Whether the end result is what I might prefer politically is irrelevant.

The existence of the discrepancy in the first place isn't all that surprising, since these measures were designed originally for different purposes. The discrepancy doesn't prove that economics is a fraud, nor that the creators of either data set were conspirators or tools of a capitalist conspiracy to deceive people. This rather obvious point should give pause to intellectually honest conservatives who take it for granted that economics is good science, while making up reasons to disbelieve climatology because they don't care for its well-established findings about our civilization's uncontrolled effects on the earth's climate.

Propagandist Don Boudreaux at Cafe Hayek is quick to jump to his own politically preferred conclusion -- that we're all much wealthier now than 30 years ago -- without waiting for Fitzgerald's next two articles. I think Boudreaux is probably right, but only by accident. I look forward to his thinking more clearly about other sciences in the future.

Hat tip to Kitry for pointing out this long, dispiriting article by Ben Elgin in Business Week:

"Hailed as an environmental pioneer, FedEx says on its Web site that it is 'committed to the use of innovations and technologies to minimize greenhouse gases.' [I didn't find these exact words there, but plenty like them.] With 70,000 ground vehicles and 670 planes burning fuel, the world's largest shipper is a huge producer of heat-trapping gases. Back in 2003, FedEx announced that it would soon begin deploying clean-burning hybrid trucks at a rate of 3,000 a year, eventually sparing the atmosphere 250,000 tons of greenhouse gases annually from diesel-engine vehicles. 'This program has the potential to replace the company's 30,000 medium-duty trucks over the next 10 years,' FedEx announced at the time. The U.S. Environmental Protection Agency awarded the effort a Clean Air Excellence prize in 2004.

"Four years later, FedEx has purchased fewer than 100 hybrid trucks, or less than one-third of one percent of its fleet. At $70,000 and up, the hybrids cost at least 75% more than conventional trucks, although fuel savings should pay for the difference over the 10-year lifespan of the vehicles. FedEx, which reported record profits of $2 billion for the fiscal year that ended May 31, decided that breaking even over a decade wasn't the best use of company capital. 'We do have a fiduciary responsibility to our shareholders,' says environmental director Mitch Jackson. 'We can't subsidize the development of this technology for our competitors.'"

If capitalism depends on short-term returns over long-term, we're in real trouble. Read the whole thing for a quick critique of Renewable Energy Credits as well.

When the male-female wage gap shrinks, do women become better-respected bargainers on household issues? Or do their male partners feel threatened and start hitting them?

As is often the case in social science, "common sense" says both things. Brown University economist Anna Aizer used improved measures of pay (relative to local standards) and of violence (hospital reports rather than self-reports), and found that the improved-bargaining model fits the facts better. "The improvement in labor market conditions faced by women over the period 1990-2003 explains ten percent of the decline in violence against women over this period." (Abstract here -- California data in both cases.)

"Given that we live in an economy in which virtually everything in our homes has been designed and built hundreds or thousands of miles from where we live, where's the sense in singling out food for this particular kind of analysis?"

 Brainiac rarely disappoints, and Christopher Shea throws some monkey wrenches into an annoying new dogma from the left side of the aisle: only eat local.

"This might be one area in which it makes sense to think like an economist (or at least like Columbia's Jagdish Bhagwati, whom I interviewed on the subject): If we were to raise taxes on gasoline (or petroleum, or carbon), that would discourage environmentally wasteful shipping throughout the economy. There would be no need to calculate how far the butterbean on your plate traveled to reach you..."

Few people will make those calculations, and those who do will likely spend so much time on them that they'll overlook other nongreen aspects of their lives. Young people and ideologues underestimate the value of setting things up so that they go right automatically most of the time. (And as ideologies go, localism is not going to do the work for this generation that socialism did for our grandparents'. It's more of an attitude than a set of ideas.)

Did Bush's tax cuts on dividends and capital gains help the economic recovery? Four years later, the Republicans say they did, and the Center on Budget and Policy Priorities argues rather persuasively that they didn't:

"The 1990s recovery provides a useful comparison.  Like the current recovery, the 1990s recovery was initially relatively weak, with investment growth in particular resuming only about eighteen months into the recovery.  But in the 1990s, investment growth recommenced without any tax cuts — and then strengthened modestly following a tax increase.  Moreover, overall investment growth during the 1990s business cycle, with its large tax increases in 1990 and 1993, was substantially stronger than during the current business cycle, with its large tax cuts in 2001 and 2003.  If major economic developments were generally attributable to tax policy, then the 1990s experience could lead one to conclude that tax increases provide more potent economic stimulus than tax cuts.  The more appropriate lesson to draw, however, is probably that weak recoveries tend to return to historical norms, whether taxes are cut, increased, or left unchanged."

I am inordinately fond of pundits who don't try to push the envelope. On the other side, Dominic Rupprecht, who blogs at Government Bytes for the far-right National Taxpayers Union (with which I sometimes agree), does his best to uphold the Bush side, sniping around the edges. I'm biased, but I note that he didn't deal with CBPP's quoting UC Nobel laureate Gary Becker, who supported the dividend tax cut but offered no comfort to Republican hacks: "Any short-run stimulus from eliminating the dividend tax would be too weak to have a significant benefit to the economy."

Tyler Cowen at Marginal Revolution is an economist blogger but not a wacko. He quotes a commenter...

"Why not open up a Medical Free Trade Zone in, say, Detroit?  Health care workers in the zone would not be required to get US visas or licenses, and any malpractice claims would be resolved in the courts of the worker's home country."

...and then comments himself:

"Of course in principle we could combine this with a single-payer system or other reforms.  That'll cure those rationing blues and those long waits for hip replacement surgery.  Or you might favor a single-payer system but be willing to do this in the meantime, for the many millions of uninsured, at least some of whom are waiting in agony.  How about it, people? But let's make it geographically central, I say Memphis not Detroit.  Or would you feel better if it were a floating pavilion in the Caribbean?  A floating pavilion in the Indian Ocean?  Bangalore?"

The point being that it's already happening, as people fly to places like Bangalore to get cheaper medical help than they can in the US.

Over at CounterPunch, Vijay Prashad quotes Alan Blinder: "We have so far barely seen the tip of the offshoring iceberg, the eventual dimensions of which may be staggering.... Eventually, the number of service-sector jobs that will be vulnerable to competition from abroad will likely exceed the total number of manufacturing jobs."

Alec Dubro at TomPaine.com reported on last month's "Taming the Corporation" conference and asked the question few reformers and social movements ever ask seriously: if we're so right, why aren't we winning? The answer in this particular case (my paraphrase) is that since the death of Marxism, the left has no systematic alternative to offer.

"The U.S. may be a police state," Dubro writes, "as anyone who protests against the WTO will find in out in short, ugly order – but it is not, for most people, a totalitarian state. People tolerate, or actively embrace, corporate rule not primarily because they’re cowed by the police, but because they aspire to the promised gifts of the program...

"We get from corporate culture: big homes, comfortable cars, investment counselors, Ruth’s Chris Steak House, personal watercraft, beachfront condos, hundreds of TV channels, central air conditioning, cheap airplane flights, cheaper electronic gear, and pizza on demand. You and I may not cherish these things, but millions do, and are not anxious to give them up for a new, uncertain economic system to be named later...

"The vision of a post-corporate America put forth at the conference was one in which security and equality reigned. But that left out what corporate state traffics in: the possibility of success. It’s what the conservatives misleadingly call freedom, but it’s not entirely a fraud. Lots of people want to do better, and we need their support."

The other day I heard on the radio that tuition at the University of Illinois has gone up -- again -- in part because of three consecutive years of reduced state funding. Then I read this from the new book Urban Meltdown by Clive Doucet, "the first poet ever elected to Ottawa [Canada] City Council":

"North American communities have just lived through two of the most prosperous decades the planet has ever seen, but where are the new public investments which reflect those wealthy years?"

Everyone's jumping on the environmentalist bandwagon these days, and they all want to steer.

Harvard economist Edward Glaeser, writing in the Boston Globe, says "Smart environmentalism has three key elements. First, policies should be targeted toward the biggest environmental threat: global warming. Second, our resources and political capital are limited. This means we must weigh the benefits of each intervention against its costs. Third, we must anticipate unintended consequences, where being green in one place leads to decidedly non green outcomes someplace else."

I love the way economists think. If every policy wonk were legally required to reflect on trade-offs and unintended consequences, the world would be a better (and quieter) place. But when you're good with a hammer, everything looks like a nail. Glaeser adds, "The most effective way to reduce emissions [of greenhouse gases] is to charge people for the social costs of their actions with a carbon tax."

Unfortunately he stops there. Like today's generation of best-selling atheists, who repeat David Hume and Bertrand Russell without noticing that their arguments persuaded few, Glaeser repeats the standard economic prescription without acknowledging its political difficulty. Everyone hates traffic congestion too, and it's been well known for years that the way to cure traffic congestion is to tax it by charging time-of-day tolls, but it never gets done.

What's the second-best strategy when you know perfectly well that the best one's a nonstarter? Remember, Ed, you're an environmentalist now, so shrugging your shoulders and going off to teach your next class is not an option.

(Good discussion on some points at Mark Thoma's Economist's View. And George Monbiot's new book Heat popularizes and refines a potentially nifty idea for a carbon-rationing system. I don't know if Monbiot's right, but the last writer I read who made it seem so easy to combine deftness, personality, and sheer intellectual energy was named George Orwell.)

Good news you may not have heard:

"In the last quarter-century far more people have been pulled out of poverty than ever before in the history of the world. Largely that's because of the economic success of Asia, and it should give pause to critics of globalization," writes Nicholas Kristof in the New York Review of Books. "In fact, it's precisely because of globalization that hundreds of millions of Chinese, Indians, Indonesians, and Malaysians are moving into the middle class. ... the part of the world that has most withstood the forces of globalization (or simply been ignored) is Africa, where the number of poor people doubled."

Meanwhile, William Greider in the Nation has dug up another critique of globalization. This one admits that trade is win-win as long as it's between poor nations (with cheap labor) and rich ones, but it's not so great for the rich ones once the poor nations succeed in upgrading their situation. (The original arguer's easy-to-Google name is Ralph Gomory; the book is Global Trade and Conflicting National Interests.) Solution: cap imports and tax outsourcing heavily. This sounded dubious to me, and Julian Sanchez at Notes from the Lounge saved me the trouble of identifying the fishy smell on my own:

"It's the old Marxist-Leninist horror story about how capitalism and international trade supposedly worked already, giving workers just enough to subsist upon and continue producing, but never enough to permit them to get in the game themselves as competitors. So, to recap, now that we know capitalism doesn't actually function in the way described in Marx's dire predictions, The Nation demands a national industrial policy to make it work that way."

When it's not an emergency but you need medical help and your doctor can't see you for two weeks, who ya gonna call? A freestanding "convenience clinic," AKA McClinic, something Wal-Mart will soon be getting heavily into -- a walk-in place where you can be seen by a nurse-practitioner and get a prescription if needed.

Jonathan Gardner at Health Affairs links to a lot of debate over these things. I don't debate, I use them, but it's interesting to see what people have to say -- especially Clayton Christensen, who gives an in-depth interview in the actual magazine Health Affairs (free online until May 22).

Christensen's a BYU product now ensconced at Harvard Business School. He has an abiding interest in "disruptive innovation," a special case of what Joseph Schumpeter called "creative destruction" -- something capitalism's got that no other economic arrangement in human history has ever had.

The personal computer is a disruptive innovation -- compared to the mainframe, it's incredibly cheap and easy for a nonexpert to use. "When I was first out of school," says Christensen, "if I needed a computer, I had to take my punch cards to the corporate mainframe center and give them to an expert there who ran the job for me. Because computing was so expensive and required so much skill, we just didn't compute very often." The disruption in this case was the encoding of that expertise into personal computers -- but, of course, for most of us it has been anything but a disruption.

Christensen, a diabetic, has benefited from the same kind of thing in managing his chronic disease: first handheld personal blood-glucose meters, then mail-order blood tests and urine tests that make sure his daily management is sustainable long-term. "And so I actually have no need ever to see a physician.... With a chronic disease, so much of the information that's required to provide care actually arises on a day-to-day and hour-to-hour basis in the life of the patient."

McClinics are an institutional version of this process, since most of the medical care most people need most of the time doesn't require a physician's expertise any more than running a spreadsheet requires a PhD in computer science. Having knowledge partly automated and partly distributed to nurses or (as in the diabetes case) patients themselves isn't the same thing as providing top-of-the-line conventional medical care for everyone. But it may work better in the long run, thinks Christensen: "You can either try to replicate the costly system for the people who do not have access to it and somehow find a way to pay for it, or you can say, Let me just create a very different system. And in other industries, the second answer historically has provided higher quality and greater access with lower cost to more people."

Make no mistake -- this is also about "de-skilling." Here's a doctor with that kind of misgiving about McClinics. But aren't we better off with PCs than we would've been with a federal program for accessibility to mainframes?

Lots of old fogeys, including famous social scientist Robert "Bowling Alone" Putnam, have said that TV may be ripping up our social fabric, on the grounds that time spent with Tony Soprano is time not spent with friends and neighbors. It's hard to test this hypothesis because in the US the spread of TV coincided with other trends, like suburbanization, so the other trends might be at fault and TV an innocent bystander. But Harvard economist Benjamin Olken found a way, in Indonesia. The availability of TV in 600 villages in eastern and central Java there isn't related to other social trends as far as he can tell, making their experience a reasonable test case.

You can read all 44 pages of details here (PDF) if you want to quarrel with the methodology, but here's the gist:

"Reception of an extra channel of television is associated with a decline of about 7 percent in the total number of social groups in the village, and with the typical adult in the village attending 11 percent fewer group meetings. The effects are particularly strong among community self-improvement activities, neighborhood associations, school committees, and informal savings groups. These declines in social participation represent a net decline in social activity, rather than a shift from formal social groups to informal gatherings."

More TV also leads to "substantially lower self-reported levels of trust" in the villages, writes Olken, but did not seem to affect the level of corruption in ongoing road projects.

Is it too early to ask whether YouTube will bring us all back together again?

A gross receipts tax would also encourage Illinois businesses to economize by buying from out-of-state vendors. (Buy plants from an Illinois vendor who bought them from an Illinois grower and they're taxed twice.) This is bad news even if you don't care about buying locally: the best taxes don't distort economic activity beyond the minimum necessary.

Giertz's assessment hasn't garnered much attention. The Illinois Farm Bureau did reprint part of the press release but strategically omitted Giertz's positive proposal:

“For the last five years," he points out, "continuing state revenue sources have failed to cover expanding state spending.”  As a result, Illinois "cannot pay all its current obligations with continuing revenues"--hence Blago's repeated attempts at one-shot fixes--"and revenue growth in the future will likely not keep pace with expenditure needs because of the relative unresponsiveness of the state’s tax system. . . .  A modest rate increase in the income tax (individual and corporate), accompanied by an increase in the exemption level to protect low-income taxpayers and the expansion of the sales tax base to include consumer services, would generate sufficient funds for the state to address its fiscal imbalance if the extra funds were accompanied by spending discipline.” 

For the record, Giertz did serve on Republican Jim Edgar's transition team. But he also has fingered Edgar's political godfather, James R. Thompson, as the original culprit in the state's ongoing failure to properly fund state employee pensions: "Gov. Thompson and the General Assembly chose to direct available state resources to other state programs rather than to pensions" back in the 1980s, Giertz said in 2005. "This was not an oversight, but a conscious policy decision," and an expensive one.

On April 4, Illinois' lieutenant governor communicated with his boss and colleague the governor via press release. 

"(SPRINGFIELD) -- On Wednesday, Lt. Gov. Pat Quinn called on Governor Blagojevich to convene a special session of the Illinois General Assembly to solve Illinois’ Electric Rate Crisis, give ratepayers immediate relief from unfair electricity prices, and....once the immediate problem is solved, we need a long-term, thoughtful plan that will increase utility companies’ use of renewable fuel sources while increasing our energy efficiency and cutting back on the emission of greenhouse gases that threaten the future of our entire planet."

But forget the odd-couple relationship between Quinn and Blago. That's an MSM inside-politics soap-opera-of-the-day thing. The really strange coupling here won't make pretty pictures on TV: the desire for lower energy prices AND lower emission of greenhouse gases. Quinn wants cake now, and he wants a long-term plan to control obesity. Good luck with that.

Some environmental problems are hard to grasp. Some aren't. Giles Slade nails it in the new Mother Jones:

"Yes, the secret is out. After 13 months of heavy use, the lithium-ion battery of the iPod can lose more than half of its functionality. You'll find that even though you recharge more often, your iPod can fade out by the end of a long day. Simply put, even though an iPod can cost you $350, these digital music players are designed to be disposable.

"Then why not get a new battery? Good idea. But Apple deliberately seals the battery inside the iPod. Replacement costs $65 (a new 1-gig iPod shuffle costs $79), takes several weeks, and worst of all—because the new battery comes in a refurbished and wiped-clean iPod—you'll lose all your songs."

I'd love to see someone YouTube a parody of those Mac and PC commercials with this in mind. And it'll be even better when someone figures out how to make money without ripping off the customers and filling up the landfills.

"Never eat at a place called Mom's. Never play cards with a man named Doc. And never lie down with a woman who's got more troubles than you."

That was Nelson Algren's advice to a young man. Let's add one:

Never believe a politician who says, "I can get you this tax cut, Olympics, or war without your having to pay for it."

Some folks locally and nationally have got the message -- no free lunch. With referendums approaching April 17 in these three Chicago collar counties the open-space movement is telling taxpayers what they'll get and what they'll pay for it. And four DC lobbying groups -- the wonkarific Center on Budget and Policy Priorities, the Concord Coalition, the Committee for Economic Development, and the Committee for a Responsible Federal Budget -- on March 21 announced their support for "a budget resolution that would reinstate a pay-as-you-go rule in the Senate requiring any expansion  in mandatory programs  or any tax cut — including initiatives assumed in reserve funds — to be paid for with reductions in other mandatory spending or increases in other taxes."

Ummm, does this make me a Republican? Should it? 

Not only does Judge Richard Posner define plagiarism in his little book thereon, he explains at least one reason why the concept changes and evolves. Writers used to be supported by patrons (usually wealthy aristocrats), who would know them personally, so it didn't hurt them much if someone copied their work. Plagiarism became more of an issue once writers came to depend upon sales to a mass market. Those customers didn't know them and might well be duped into paying someone who'd simply copied their work. "Creative imitation cannot have as capacious a scope or as positive a connotation in a modern commercial society of commodified intellectual works as it did in Shakespeare's time."

Is it possible that the desire to downplay plagiarism or even define it out of existence -- which took most of the stage time at the Art Institute recently, as I report in this week's Reader -- is somehow connected with nostalgia for an earlier, less modern, less individualistic era?

Tyler Cowen at Marginal Revolution and the Economist magazine explain why buying "carbon offsets," like paying someone to plant trees to make up for your airplane flights or electricity usage, aren't as wonderful an idea as they may sound. (von at Obsidian Wings refutes wingnut attempts to exaggerate the point.)

There's a lot of wonkery involved, but here's the gist:

"Many readers profess puzzlement as to how carbon offsets could fail to reduce one's carbon footprint.  The answer is that they probably do reduce one's carbon footprint, but by nowhere near the one-for-one ratio that seems to be implied by the extraordinarily low price of carbon offsets.  Unless they are implemented under a cap-and-trade system [where there are legal limits on the total amount of carbon emitted], these sorts of environmental efforts are plagued by something called the rebound effect, which is to say that using more efficient technologies causes the price to fall, which causes people to use more of the carbon-emitting substances in question." (Economist)

It gets worse:

"Furthermore if you simply buy less of a non-storable good such as electricity, price to other demanders will go back down and social quantity consumed will not change." (Cowen)

There really is no substitute for some kind of collective action to start reducing carbon consumption. That can take either command-and-control forms like regulating and subsidizing, or market-based forms like cap-and-trade systems or a carbon tax. That discussion is about to heat up on both federal and state levels, as David Greising reports in Friday's Tribune.

Joel Makower at Two Steps Forward treats Wall Street Journal columnist Kimberley Strassel with amused contempt. I'm just pissed.

Last week the Climate Action Partnership -- including corporate giants BP, Caterpillar, DuPont, and General Electric -- called for a national limit on carbon dioxide emissions to combat climate change. (Their report, "A Call for Action," is here [PDF].) Strassel says they'll make money on the deal -- and therefore it must be a Bad Thing:

"The cap-and-trade climate program these 10 jolly green giants are now calling for is a regulatory device designed to financially reward companies that reduce CO2 emissions, and punish those that don't.... DuPont has been plunging into biofuels, the use of which would soar under a cap. Somebody has to cobble together all these complex trading deals, so say hello to Lehman Brothers. Caterpillar has invested heavily in new engines that generate 'clean energy.' British Petroleum is mostly doing public penance for its dirty oil habit, but also gets a plug for its own biofuels venture.... What makes this lobby worse than the usual K-Street crowd is that it offers no upside. At least when Big Pharma self-interestedly asks for fewer regulations, the economy benefits."

Strassel appears to be criticizing what economists, using 18th-century verbiage, call "rent seeking," which is trying to make money by influencing legislation rather than by making better products. An honest argument from this point of view would propose that all lobbying and political contributions by for-profit entities be universally banned. But Strassel isn't making an honest economic argument. She's OK with some companies' rent seeking and not others, because she assumes -- without even attempting to provide any evidence -- that deregulating Big Pharma has no downside and cutting CO2 emissions has no upside.

Strassel's column is considerably less intelligent than this summary makes it sound, veering wildly from the above "point" to criticizing proposals that CAP hasn't made, then criticizing what she predicts will be the inaction of the Congressional Democrats on this issue.

Makower, by contrast, is well worth reading in full. He includes links for investors smart enough to want to make money from a runaway climate train, as opposed to standing on the tracks claiming it'll never come. 

Match U.S. states with the foreign countries that are their rough economic equals and you get this map (from Norwegian blogger Carl Stormer, who credits it to the York Group International -- maybe it's my deficient searching skills, but I didn't find it on their site). It's pretty approximate--I checked out a couple of the matches using these gross national product numbers for nations and these gross domestic product numbers for states. The map matches Illinois with Mexico, but we're actually a closer match to the Netherlands. If you combine all six New England states, they match up pretty well with Mexico.

Emily Oster, a newly minted economics PhD at the University of Chicago, has written a quick overview of her research on AIDS in Africa in Esquire. She's asking good questions and getting answers that may mean the difference between life and death.

Yet her work seems founded on a monumentally naive notion common to economists: "Disciplines [like sociology or anthropology] believe that cultural differences -- differences in how entire groups of people think and act -- account for broader social and regional trends.... Economists like me don't trust that argument. We assume everyone is fundamentally alike; we believe circumstances, not culture, drive people's decisions, including decisions about sex and disease."

But doesn't culture shape how we see our circumstances? Isn't economics itself is rooted in a culture where we take for granted that people usually act in calculated, informed, individualistic, self-interested ways?

Other reporting on AIDS in Africa suggests there's more in the world than crude utilitarian calculation. In the New York Review of Books in 2005 Helen Epstein reported that a locally developed strategy called "Zero Grazing" appeared to do much better at controlling the spread of the disease than either abstinence-only education or condom promotion. The "Zero Grazing" campaign recognized that polygamy, having several concurrent long-term sexual relationships -- standard in Ugandan culture -- facilitates the spread of the disease. The campaign urged men to at least avoid short-term encounters with bar girls and prostitutes. "During the Zero Grazing campaign, the proportion of Ugandan men and women with casual partners fell by 60 percent."

The Zero Grazing campaign was abandoned -- not because it didn't work, but because it didn't fit into either of the well-funded campaigns for abstinence and for condoms. If economics is really the study of human choices, how can it ignore different cultures when they play a part?

Colin Dunn at Treehugger reports that "Discardia is a cyclical, floating holiday (it happens several times per year).... [It's a] time to get rid of things (by recycling, FreeCycling & giving away, rather than pitching it, of course) that no longer add value to your life, shed bad habits, let go of emotional baggage and generally lighten your load.... The holiday is particularly fitting this time of year, when much of the developed world gathers to celebrate through giving while consuming too much: eggnog, new stuff, and the list goes on. The latest Discardia started December 21 (with the winter solstice) and continues through January 18 (the next new moon)."

The original Discardian appears to be metagrrrl, who posted a tip a day during the past year on things you probably don't need, ranging from the highly ideological (suburbs) to the practical (printed phone books).  The December index is here.

Like other culture jammers, metagrrrl can't avoid quoting capitalists in her exhortations. "Maybe you feel guilty about getting rid of that 'perfectly good' toy you don't like anymore. Stop. It may be perfectly good for someone, but that someone isn't you. There's nothing inherently wrong with you getting rid of it. Who are you worried about offending? (As the Ikea ad says 'Many of you feel sorry for this lamp. You are crazy. It has no feelings.')"

Of course Discardia, like environmentalism, isn't really anticapitalist; it just opens a new realm of profitable opportunities, like California Christmas Tree Recycling. (Hat tip to environmental economist Matthew Kahn at Environmental and Urban Economics.)

Riverbend, a "girl blog from Iraq," lists nine ways to tell if your country's in trouble, starting with "the UN has to open a special branch just to keep track of the chaos and bloodshed, UNAMI," and  "the abovementioned branch cannot be run from your country."  (Hat tip to Sam Smith's Progressive Review.)

Gristmill lists the ten most bizarre environmental events of 2006, including, "When Chevy offered net surfers the opportunity to edit their own Chevy Tahoe ads online, enviros grabbed the opportunity to match slick, soaring shots of SUVs rolling over mountainous terrain with titles like 'Gas Guzzler!'" Joel Makower has a more sober list, on which Wal-Mart's green makeover ranks #1.  [CORRECTION FROM COMMENTS:  Wal-Mart was one of ten; the list was not prioritized.]

Dan Gilmoor at the Center for Citizen Media makes ten predictions about blogging and journalism in 2007, in the form of a multiple-choice quiz. For instance, "5. Most newspaper executives will: A. Continue to downsize their newsrooms without any real plan for the long term. B. Complain incessantly about competition from online advertising competitors. C. Remain suspicious of citizen media except as a possible way to save money. D. Innovate at the edges, not in the core functions."

At Guardian Unlimited Tim Radford lists the 11 most interesting science books coming out in the next few months. Best title:  How Many Light Bulbs Does It Take to Change a Planet? Best synopsis: the book about various "gloriously implausible but not necessarily impossible ideas ... including, of course, the proposition that we will all be reassembled as cyber-identities in a cosmic computer and experience a subjective eternity in the last crushing seconds of time." See ya there. (Hat tip to Butterflies and Wheels.)

Dean Baker at Beat the Press offers ten resolutions for writers on economics, for instance: "Unless a reporter can identify the cause of a run-up in stock prices, he/she cannot say whether it indicates good news for the economy as a whole. Therefore, it should not be reported as good news."

Dahlia Lithwick at Slate ranks the ten most outrageous civil liberties violations of 2006. Guantanamo was only #9. Be afraid, speak out anyway, and don't forget the ACLU.

What should economists do when things don't turn out the way their model predicted? Admit it publicly and ask why. NAFTA promoter Brad DeLong offers a role model (PDF):

"Success at creating a stable, property-respecting domestic environment [in Mexico] has not delivered the rapid increases in productivity and working-class wages that neoliberals like me would have confidently predicted when NAFTA was ratified. Had we been told back in 1995 that Mexican exports would multiply fivefold in the next 12 years we would have had no doubts that NAFTA was going to be, and would be perceived as, an extraordinary success."

Several factors worked against Mexico: its own deficiencies (corruption, crime, and low education levels), competition from cheap Chinese exports, and competition from the midwest (described by DeLong as "a gigantic and heavily subsidized corn and pork producing machine").

"We can no longer repeat the old mantra that the neoliberal road of NAFTA and associated reforms is clearly and obviously the right one," he concludes. "Would it have been better to have urged President Carlos Salinas de Gortari to focus his efforts on investments in education and infrastructure and on trying to clean up corruption rather than on free trade?  Perhaps." 

Aaron Chatterji and Siona Listokin think lefty efforts to persuade corporations to do the right thing aren't working very well. (He teaches at Duke's business school; she works at the Center for American Progress.) 

Writing in Democracy: A Journal of Ideas, they explain that when globalization made it hard for U.S. legislators to pass business regulations, activists began negotiating with large corporations, often getting them to sign codes of conduct. How's the new strategy working?

"Reexamining the Nike battle over labor standards in the 1990s -- viewed as one of the premier successes of the CSR [corporate social responsibility] movement -- offers a concrete example of this dilemma. As a result of that mobilization, there are several codes of conduct for apparel factories, including codes created by the Workers’ Rights Consortium (WRC), the Fair Labor Association (FLA), and the Worldwide Responsible Apparel Production (WRAP) accord. The differences between these codes are significant, especially on such central but complex issues like the 'living wage,' the independence of monitors, and the right to organize. But do consumers know the difference? Probably not.... As long as the company can claim that it is complying with some pleasantly named code of conduct, most consumers are likely to be pacified, even if the code lacks any real teeth."

That's a problem with more than just privately negotiated agreements. For instance, anyone who's followed the effort to pass federal organic food standards (covered in the Reader July 16, 2004, but you'll have to use the paid archive to read it) knows there are problems when government's involved too. (The latest news on this ongoing fiasco is at the underappreciated New Standard.)

Eternal vigilance and all that.  So why do Chatterji and Listokin single out the activists' efforts, especially since they offer no solution to the globalization problem that drove activists in this direction in the first place?

If you were working yesterday when All Things Considered featured Florida's minimum-wage hike of two years ago, check out the transcript and audio links at National Public Radio. Reporter Frank Langfitt replayed the campaign ads in which opponents of the measure predicted economic disaster and proponents predicted great things, then went looking for evidence. Businesses that slashed jobs? Employees whose lives were greatly improved? He found neither.

Bottom line:  both sides oversold the measure. Modest increases in the minimum wage, especially in tight labor markets, have such small effects it's hard to sort the noise from the signal. On the other hand, they don't do much to reduce inequality or poverty, because so many minimum-wage earners are teens who aren't supporting families and often aren't poor.

A recent panel of economists from both sides of the issue at the American Enterprise Institute came, at greater length and with a lot more detail, to a roughly similar conclusion. (The video's an hour and a half, so normal people will prefer the NPR version.)

Tyler Cowen is one of the best economics bloggers around. He recently took on ace environmental writer Michael Pollan's new book, The Omnivore's Dilemma: A Natural History of Four Meals in Slate, and it was like watching Brian Urlacher try to take down Tom Brady, and almost as rare. Money quote:

"Pollan makes much of the energy costs incurred by the long food-supply chains of American grocery stores. It may look like we are eating Chilean grapes, he argues, but in fact, once we consider transportation costs, we are guzzling petroleum.

"Economics offers a clearer view of what is going on. We do need to save energy, but it is difficult for a central planner (or for that matter a food commentator) to identify what is waste, relative to the costs of eliminating it. We should rely on higher market prices, if need be with the assistance of taxes, to increase conservation. If fuel becomes more expensive, we'll likely adopt peak-load energy pricing, and drivers may scrap their SUVs for hybrids. But we probably won't plant grapes in our backyards. While we must conserve energy, we cut back where it makes the most sense; grape-shipping is not the place to start. Global trade does involve transportation costs, but it also puts food production where it is cheapest, again saving energy by economizing on costs of labor, irrigation, and fertilization, relative to the alternatives."(Read the whole thing.)

This isn't the last word, of course. Economists are prone to assume that the product being shipped is like a bunch of unbreakable billiard balls. Farmer/researcher Frederick Kirschenmann, writing in the Science and Environmental Health newsletter, "The Networker," suspects that long-distance food may be one of the reasons why fruits, vegetables, and wheat have declined five to thirty-five percent in nutritional value in the last fifty years: "While fruit and vegetables may be genetically altered to retain their appearance during this long trip, vitamins are lost over time and protein breaks down. So the trip not only adds a 'fuel tax' to the cost of food, it may also deliver food with reduced nutritional value."

[BTW, peak-load energy pricing is already happening in Chicago: check out the Center for Neighborhood Technology's Community Energy Cooperative, which may be taking new members next year.]

Judge Richard Posner is surprisingly skeptical about the late Milton Friedman's theories. He writes at the Becker-Posner Blog:

"I think his belief in the superior efficiency of free markets to government as a means of resource allocation, though fruitful and largely correct, was embraced by him as an article of faith and not merely as a hypothesis. I think he considered it almost a personal affront that the Scandinavian nations, particularly Sweden, could achieve and maintain very high levels of economic output despite very high rates of taxation, an enormous public sector, and extensive wealth redistribution resulting in much greater economic equality than in the United States. I don't think his analytic apparatus could explain such an anomaly.

"I also think that Friedman, again more as a matter of faith than of science, exaggerated the correlation between economic and political freedom. A country can be highly productive though it has an authoritarian political system, as in China, or democratic and impoverished, as was true for the first half-century or so of India's democracy and remains true to a considerable extent, since India remains extremely poor though it has a large and thriving middle class." 

Read the whole thing, and the intelligent criticism in the comments. The idea that good things go together dies hard, and Posner's a good person to drive a stake through its heart.

Dean Baker has a slightly more barbed personal reminiscence:

"About a decade ago, I stumbled into the wrong session at the American Economics Association Convention. Milton Friedman was . . . pointing out that many measures of considerable economic importance often get little scrutiny. The particular example I remember him discussing was the Americans With Disabilities Act, which requires businesses to make reasonable efforts to make their places of business accessible to employees and customers with disabilities. I stayed long enough to hear Mr. Friedman argue that this act imposed enormous costs on 'normal people.'"

Slog takes a look at the afterlife, version 2.0: "Relatives of the fantastically named Hyman Victor connected his tombstone via satellite to his real immortal resting place -- several Internet sites with information about his life and family."

Sure you want to write a blank check for the Olympics? Ask London about 2012. Lynne Kiesling of Northwestern University, writing at Knowledge Problem, has Friedmanesque thoughts about why Chicago should fear 2016.

Fred Clark at Slacktivist reads the Left Behind books so we don't have to, complete with their "weird disconnect . . .   absence of consequences, [and]  . . .  apathy and incuriosity toward the victims of the story."

The last and best 2006 election maps: from Hodas & Associates via Rich Miller, maps of Illinois, Cook County, and suburban races. From Mark Newman via the Swamp, cartograms of congressional races nationwide, with districts sized by population rather than land area.

Strange Maps knows that, in DVD world, Guyana, South Africa, and Japan are in the same place.

Jimmy Carter makes what would be called a gaffe if he were running for office (IOW, he states the obvious but unsayable truth): "There's no open debate in this country if it involves any criticism of the policies of the Israeli government, even though many people in Israel debate and condemn some of the policies of the right wing governments under Sharon and Netanyahu and others." The question is, why?

San Francisco Federal Reserve Bank president Janet Yellen warns that income inequality in the U.S. may be so severe that it's "intensifying resistance to globalization, impairing social cohesion, and could, ultimately, undermine American democracy."

The Heartland Institute misrepresents her statement, en route to regurgitating the libertarian party line that relative inequality never matters as long as everyone gets a crumb. The chair of a university economics department is too busy setting up straw men to grasp the point.

Meanwhile, actual discussion is occurring in some surprising places. Andrew Leonard at Salon (brief ad viewing required) notes that even the editorial page of the Wall Street Journal understands what Yellen is talking about.

For a reality-based approach to this issue, Chris Bertram's post at Crooked Timber is a good place to start, not because he's necessarily right, but because he lists some of the arguments and where to find more. For instance, "Amartya Sen goes through some of them in his well-known essay 'Poor Relatively Speaking': if wealthier people come to have access to new technologies, and if access to important goods get mediated through access to those technologies, then the poor who lack such access will find it harder and more expensive to supply their needs."

Is Hyde Park the most influential neighborhood in America? Christopher Hayes writes in the Chicago-based leftist monthly In These Times that he audited Allen Sanderson's Econ 101 at the University of Chicago to learn how neoclassical economics is packaged and sold to smart undergraduates as something you can't disagree with, only fail to understand.  The process ran pretty smoothly until the last few class sessions:

"Sanderson argues that liberalized trade creates more jobs than it destroys.  'Free trade creates winners and it also creates losers.  It turns out that winners are quantitatively larger than the losers.'  A student asks, flat out, 'Why are we to believe that?'  Sanderson restates his point, but the student holds his ground, saying he's read that there simply doesn't exist an accurate measure to figure out how many jobs are being created and destroyed.  Sanderson concedes that this is true, but insists that it 'must' be a net positive."

Read the whole thing (PDF) and consider subscribing.  Lots of discussion at Economist's View.

Stacy Mitchell clinches her case against big-box stores with an anti-imperialist cameo from American history:

"When American colonists forced their way onto three ships docked in Boston harbor in 1773 and dumped more than 90,000 pounds of tea into the sea, their actions were as much a challenge to global corporate power as they were a rebellion against King George III.  The ships were owned by the East India Company, a powerful transnational corporation . . . [seeking] to undercut small competitors . . . and drive them out of business. . . . Our communities are fast becoming colonies once again." 

She'll be in town Wednesday, November 8, to talk about her new book, Big-Box Swindle. I have a brief review of it in this week's Reader, but what struck me about this particular passage has nothing to do with Wal-Mart.  Notice how naturally this anti-imperialist rhetoric comes to us. After 233 years of repetition and counting, Mitchell doesn't have to explain that being a colony is just about the worst thing in the world. We take it for granted that "empire" = "exploitation."

So when a couple of Dartmouth economists come up with some evidence going the other way, it's hard to process:

"Using a new database of islands throughout the Atlantic, Pacific, and Indian oceans, we examine whether colonial origins affect modern economic outcomes. The number of years spent as a European colony is strongly positively related to the island's GDP per capita and negatively related to infant mortality. This basic relationship is also found to hold for a standard dataset of developing countries."

Abstract here. A journalistic summary at Slate, followed by numerous highly critical and intelligent comments.  (Whatever its other flaws, the study does examine a random sample, because colonization was determined by wind currents in the days of sail, not by the amount of resources or other economic promise.)

The notion that empires might be OK is, of course, what historian Niall Ferguson is all about. (Not that I am a fan.)  It has also recently crept (in more and less sophisticated versions) onto blogs as different as Pseudo-Polymath and Marginal Revolution. Blip or trend? Threat or menace?

Check out all the worst political web sites, from "campaign dogs" to a screen of raw HTML, here.

Emergency Kindness provides emergency contraception for women in need, thus helping to prevent abortions.  (Hat tip to Feministing, which has some good commentary.)

Those of us who worship at the New Yorker shrine need to know that their reporters and editors can screw up their stories badly -- for example, implying there's some kind of "Democratic orthodoxy" on gay marriage.

BerkShares are a local currency in western Massachusetts (170,000 currently in circulation) -- one often-talked-about method of building up a local or regional economy. They're no wackier than frequent flyer miles or credit card cash-back programs, and they might do some good.

Geoffrey Stone at the University of Chicago Law School Faculty blog remembers back when the school's first Gay Law Students Association convened: "One of my faculty colleagues was outraged, comparing it to a Heroin-Users Law Students Association."

Not just another day at the office: scientists at the University of Colorado at Boulder find that dinosaurs had stomach worms. "This research is exciting because it provides evidence for the movement of tiny, soft-bodied organisms inside the gut cavity of a dinosaur."

Lindsay Beyerstein at Majikthise explains why Cheney admitted on a right-wing talk show that U.S. interrogators practice waterboarding:  "That's right folks, we're destroying our constitution for the sake of a marketing campaign."

Ezra Rosser of American University Washington College of Law has a forthcoming law-review paper online, "Obligations of Privilege," in which he asks a forbidden question:

"The contrast between the deserving and undeserving poor is found in hundreds of law review articles, but the rich are not subjected to such categorization. The deserving poor are thought to be those who are married, work hard, and limit the size of their families. The poor who are unmarried, are unemployed, and need help supporting their children are considered undeserving. But, as commonly conceived, the rich are considered deserving regardless of what they do or the characteristics of their families.  . . .

"While conservatives tend to demonize and vilify the poor, liberals' welfare discourse 'seeks to avoid blaming . . . poor people themselves,' and consequently, stories of a poor person's laziness or other undeserving traints are 'simply ignored.' But with very few exceptions conservatives and liberals alike take for granted the moral worth and desert of the rich."

Rosser is prying at the weakest point of the libertarian edifice by calling attention to the egregious lie Americans tell themselves: "I did it myself with nobody's help." Of course, nobody does it all by themselves -- we all benefit from inheritances and luck of all kinds, from education (for which nobody pays the full cost), and from growing up in a society that isn't unendurably polluted or unstable. If anybody ought to "give back" because of this, shouldn't everybody?

You can download the whole thing here, or see some critical discussion here.

Some days all you can do is laugh.

(1)  A Congressman has spent the last two years studying Waukegan's local zoning policies. When 10th district congressional challenger Dan Seals aired commercials criticizing President Bush's policies, incumbent North Shore Republican Mark Kirk's office told the Daily Herald that he’ll just be focusing on local issues. Kirk has run radio spots promising to work for stem cell research, without mentioning that Bush takes the exact opposite position. (Hat tip to Archpundit.)

(2)  You have to be able to say "Innovation comes from the top down" three times without breaking up.  Next Tuesday, October 24, at IIT the Chicagoland Chamber of Commerce will cosponsor the Chicagoland Innovation Summit, which CEO Jerry Roper expects "will likely go down in history as one of the most important meetings in shaping the future of our economy and our competitive standing in the 21st century global marketplace."  Cosponsors include the Council on Competitiveness, a D.C. outfit that bills itself as "the only national organization whose membership is comprised exclusively of CEOs, university presidents, and labor leaders." 

Hear leading innovators like Bush's Secretary of Energy. Learn new buzzwords: "Senior leaders discuss how the region can develop its innovation ecosystem to be more competitive in the global economy." Just in case you doubt the cutting-edgeness here, according to one release, "An initial area of focus for the innovation initiative will be manufacturing." Earth to innovators: number of manufacturers in the top twelve of Crain's recent list of the fastest-growing public firms in Chicago? One, and it's actually Canadian. (Hat tip to Planetizen Radar.)

(3) The more things change, the more those who have the gold make the rules. 

1896: "The most effective tactic used to defeat [William Jennings] Bryan was the coercion of productive labor.  Orders labeled 'Cancel if Bryan Wins' and 'Double this Order if [William] McKinley Wins' or made 'contingent' upon McKinley's election directly affected industrialists and workers alike. . . . The Eastern insur