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October 10, 2015

Latest Posts from Economist's View

Posted: 07 Oct 2015 12:15 AM PDT
Robert Stavins:
The Papal Encyclical and Climate Change Policy: ...I'm inspired by a marvelous essay by Yale professor William Nordhaus, "The Pope & the Market,"... However, my thoughts are completely independent from his...
With that preamble out of the way, here are the reactions of one environmental economist, yours truly, to Laudato Si'...
The Pope is to be commended for taking global climate change seriously, and for drawing more world attention to the issue. There is much about the encyclical that is commendable, but where it drifts into matters of public policy, I fear that it is – unfortunately – not helpful.
The long encyclical ignores the causes of global climate change: it is an externality, an unintended negative consequence of otherwise meritorious activity by producers producing the goods and services people want, and consumers using those goods and services. ... There may well be ethical dimensions of the problem, but it is much more than a simple consequence of some immoral actions by corrupt capitalists.
The document also ignores the global commons nature of the problem, which is why international cooperation is necessary. If the causes of the problem are not recognized, it is very difficult – or impossible – to come up with truly meaningful and feasible policy solutions.
So, yes, the problem is indeed caused by a failure of markets, as the Pope might say, or – in the language of economics – a "market failure". But that is precisely why sound economic analysis of the problem is important and can be very helpful. Such analysis points the way to working through the market for solutions...
Should Carbon Markets be Condemned?
In surprisingly specific and unambiguous language, the encyclical rejects outright "carbon credits" as part of a solution to the problem. It says they "could give rise to a new form of speculation and would not help to reduce the overall emission of polluting gases". The encyclical asserts that such an approach would help "support the super-consumption of certain countries and sectors".
That misleading and fundamentally misguided rhetoric is straight out of the playbook of the ALBA countries, the small set of socialist Latin American countries that are opposed to the world economic order, fearful of free markets, and have been utterly dismissive and uncooperative in the international climate negotiations. Those countries have been strongly opposed to any market-based approaches to climate change...
By incorporating the anti-market rhetoric of the ALBA countries, the encyclical [is] emphasizing a perspective that is not progressive and enlightened, and would – I fear – ultimately work against meaningful climate policy at the international, regional, national, and sub-national levels.
That is why I said that although there is much about the encyclical that is commendable, where it drifts into matters of public policy it is – unfortunately – not helpful.
Posted: 07 Oct 2015 12:06 AM PDT
Posted: 06 Oct 2015 09:09 AM PDT
I have a new column:
Economic Growth vs. Social Insurance—Why Can't We Have Both?: Why do Republicans on the campaign trail tend to emphasize policies that are focused on enhancing long-run economic growth while Democrats tend to focus more on immediate problems such as high unemployment? Republicans have a Club for Growth that grades politicians on their support of "free-market, limited government" policies they believe are the key to economic growth. Democrats are more likely to pay attention to institutions such as the Economic Policy Institute where "policies that protect and improve the economic conditions of low- and middle-income workers" are promoted. In general, Democrats seem much more focused on short-run economic problems than Republicans. Is there any basis within economics for this difference in emphasis on which type of policy is most important?
As I'll explain shortly, there is, or more precisely, there was.
Some Republicans use the promise of economic growth as a ruse for their real goal, lower taxes on the wealthy. For them, it's really a "Club to Lower Taxes and Cut Social Programs." But today I want to focus on the economics rather than the politics.
What is the source of the idea that we cannot address both long-run growth and problems such as high unemployment and rising inequality at the same time? Why have economists and politicians chosen sides on which of the two is most important? There are two reasons for this. ...
Posted: 06 Oct 2015 09:07 AM PDT
Ezra Klein:
Why Marco Rubio is insisting that his massive tax cuts will pay for themselves, explained: On Tuesday, Marco Rubio told CNBC's John Harwood that his massive tax cuts — which estimates have found would blow a roughly $4 trillion to $5 trillion hole in the deficit — creates a surplus "within the 10-year window."
It is worth slowing down to make clear exactly what Rubio said there. Rubio's plan cuts corporate taxes, capital gains taxes, taxes on the rich, taxes on the middle class — it cuts taxes on everyone. The cuts are so large that the New York Times called it "the puppies and rainbows plan." And what Rubio is saying is that his massive tax cut is actually going to mean more tax revenue for the government — that two minus one will equal four. ...
Rubio's assurance will, to most tax analysts, sound like nonsense. And it is nonsense. A plan that massively cuts taxes isn't going to lead to budget surpluses. But it's nonsense that has been validated by an important conservative tax group, that shows the kind of candidate Rubio is looking to be, and that speaks to why the debate over taxes in Washington has become so dysfunctional. ...

Posted: 06 Oct 2015 09:03 AM PDT
Paul Krugman:
TPP Take Two: I've described myself as a lukewarm opponent of the Trans-Pacific Partnership; although I don't share the intense dislike of many progressives, I've seen it as an agreement not really so much about trade as about strengthening intellectual property monopolies and corporate clout in dispute settlement — both arguably bad things... But the WH is telling me that the agreement just reached is significantly different from what we were hearing before, and the angry reaction of industry and Republicans seems to confirm that.
What I know so far: pharma is mad because the extension of property rights in biologics is much shorter than it wanted, tobacco is mad because it has been carved out of the dispute settlement deal, and Rs in general are mad because the labor protection stuff is stronger than expected. All of these are good things from my point of view. I'll need to do much more homework once the details are clearer. ...
Posted: 06 Oct 2015 09:00 AM PDT
Chris Dillow:
Demand deniers: The Tories seem ... oblivious to problems of weak demand. ...
Jeremy Hunt tries to justify cutting tax credits by claiming that he wants to create a culture of hard work.
Let's leave aside the fact that working long hours is often a sign a economic failure - of low productivity - and ask: what would happen if people offered to work longer?
The answer is that, in many cases their employers would reject their offers. There are already 1.28 million people who are working part-time because they cannot find full-time work. This tells us that, for very many people, the problem isn't a lack of culture of hard work but a lack of demand for their services. ...
These ... examples raise the question: why are the Tories demand-deniers? Alex offers one answer: it's because they still believe that poverty is the fault of the individual - they are committing the fundamental attribution error.
The counterpart to this is a perhaps willful failure to see that there are also systemic reasons for low pay - not just bad policy, but fundamental properties of the capitalist economy.

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