Category Archives: Regulations

The Wounds Won’t Heal

By David French – We usually place outsized emphasis on elections that define our politics and too little emphasis on the values that define our culture.

But it was the nomination of Kavanaugh and the wrenching debate about core cultural and constitutional values that dominated American discourse these past few weeks. It’s a debate that illustrated the fundamentally different ways in which conservatives and progressives view the world, and it unlocked not just an intellectual response but an emotional response that has radicalized otherwise reasonable and temperamentally moderate individuals into believing that the other side hates even the good people in their own tribe.

And so when Ford came forward, it’s as if her allegations landed in two different countries. The good-faith residents of Redworld were skeptical and said, “Prove it.” The good-faith residents of Blueworld believed Ford and said, “Finally, she has a chance for justice.” The presumptions were diametrically opposite, and everything that followed turned on those different presumptions. more>

The Collapse Of European Social Democracy, Part 2

By Paul Sweeney – The privatisation of state assets in Europe has added little value and was a costly distraction from the proper management of public services and development of a strong public sector ethos, delivering excellent services. Despite the privatisation of hundreds of billions of asssets, the outsourcing of public services, and fresh privatised ways of funding public services, spending in the modern state has not shrunk, though the value of state assets has been reduced.

The public sphere, open spaces, public ideas and the scientific commons which are open to all are coming under threat of being fenced off, privatised by extensions and enforcement of Intellectual Property, trademarks, copyright laws etc.. This needs to be curbed. The state has been remiss in protecting its own assets from privatisation over the past four decades and, simultaneously, it has given away substantial parts of this public sphere to private interests. It has done this by being over-zealous in protecting the “rights” of major corporations, drug companies, tech and data companies and rich individuals through extended patent rights, and the like.

Patents serve the useful purpose of protection for inventors whose ideas should be rewarded in order to encourage further innovation. But the balance has shifted from protecting innovation to blocking it. It is the state which provides this protection through internationally agreed laws and through enforcement. The growth in patents, trademarks, copyrights and industrial designs has been very high. The state is now agreeing to renewing patents and granting extensions to the likes of branded drugs, thanks to lobbying. Many patents are acquired to build a monopoly and to act as a deterrent against rival innovations.

Some MNCs now troll and hoover-up patents and others exist to build major patent portfolios with the purpose of blocking others’ innovations, moving upstream to protect broad future possible inventions. more>

The Tragedy of the Commons: How Elinor Ostrom Solved One of Life’s Greatest Dilemmas

By David Sloan Wilson – As an evolutionary biologist who received my PhD in 1975, I grew up with Garrett Hardin’s essay “The Tragedy of the Commons,” published in Science magazine in 1968. His parable of villagers adding too many cows to their common pasture captured the essence of the problem that my thesis research was designed to solve.

The farmer who added an extra cow gained an advantage over other farmers in his village but it also led to an overgrazed pasture. The biological world is full of similar examples in which individuals who behave for the good of their groups lose out in the struggle for existence with more self-serving individuals, resulting in overexploited resources and other tragedies of non-cooperation.

Is the so-called tragedy of the commons ever averted in the biological world and might this possibility provide solutions for our own species?

Evolutionary theory’s individualistic turn coincided with individualistic turns in other areas of thought. Economics in the postwar decades was dominated by rational choice theory, which used individual self-interest as a grand explanatory principle. The social sciences were dominated by a position known as methodological individualism, which treated all social phenomena as reducible to individual-level phenomena, as if groups were not legitimate units of analysis in their own right. And UK Prime Minister Margaret Thatcher became notorious for saying during a speech in 1987 that “there is no such thing as society; only individuals and families.” It was as if the entire culture had become individualistic and the formal scientific theories were obediently following suit. more>

Updates from Chicago Booth – Are profits passé?

Why we’re all impact investors now
By Chana R. Schoenberger – For nearly 50 years, many have been guided by the idea, laid out most famously by Milton Friedman, that the most appropriate way to create social change is to give profits to investors, and taxes to the government, and use that money to make an impact. For just as long, other investors have argued in favor of divesting from companies to make a political or social point—dumping shares of gun manufacturers or fossil fuel companies, for example.

But with the rise of index funds, divesting from individual company stocks has become more difficult, even though there are some funds that try to do this by designing a basket that tracks an index while excluding “sinful” stocks. It can even be counterproductive.

Investing with a social motivation has moved from divesting from certain companies based on values or preferences to a more regular form of seeking alpha, by investors who hope their stakes will generate returns as well as save the world.

Like financial philanthropists trying to affect specific social issues, these investors are often using markets and investing tools to shift behavior and create change. As a result, there are big shifts in thinking about the role of investors, who have had the luxury of worrying primarily about profits. Some prominent managers and investors are advocating for joining other stakeholders to push for change. more>

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Four Lessons (Not) Learned From The Financial Crisis

By John T. Harvey – That’s fantastic. Good work, Presidents Bush, Obama and Trump. But just because we bailed the water out of the sinking ship doesn’t mean we patched all the holes. And while the former is a necessary first step, without the latter we won’t remain upright for long.

So what didn’t we fix that could still potentially cause a catastrophic leak? Too much. Here’s a short list of what we should have learned but didn’t.

  1. If you are going to bail someone out, bail out the debtor and not the creditor
  2. Financial institutions should be very closely supervised
  3. The market is not always right
  4. Deficit spending doesn’t cause inflation or bankruptcy

Most people assume that what financial institutions do is loan out other people’s money. That is, of course, part of what they do, but what is far more significant is the fact that they create money. I don’t just mean the intro-econ, money-multiplier story where banks make loans after the Federal Reserve injects new funds. In fact, that view is so wrong that economics professors are beginning to eliminate it from their curriculum (not nearly fast enough, but it’s getting there).

Rather, the standard scenario is one in which banks increase the money supply first by making loans to customers and then the Federal Reserve steps in second to supply the necessary reserves. Financial institutions make money out of thin air, not from someone’s savings, and if that leaves the system short of reserves then the Fed buys securities from banks. They do this to prevent interest rates from rising above their targeted rate and therefore the central bank accommodates rather than dictates when it comes to the supply of money. more>

Updates from ITU

Advocacy Target 4: Digital Skills & Literacy
ITU – Effective education systems are essential for meeting future challenges and delivering on the SDGs. Although rapid technological change has taken place over the last thirty years, education systems in many countries have remained largely unchanged over the last century. Education is about much more than merely providing people with the skills and knowledge to work, and must create a framework through which people can lead diverse and fulfilling lives. People of all ages should have opportunities to learn about their own cultures, in their own languages.

There is broad agreement that education needs to ensure that people gain four main skills: creativity, communication, collaboration, and critical thinking. Alongside skills such as literacy and numeracy, people should now also gain basic digital skills. They need to have a comprehensive understanding of the rapidly changing world in which they live, as well as their roles and responsibilities within it. ITU’s Global ICT Development Index (IDI) includes a measure of digital skills and capabilities.

There is considerable debate as to what proficiency in digital skills and an ‘adequate’ level really mean. Digital skills have been broken down into three categories:

  1. the basic digital literacy needed for all workers, consumers and citizens in a digital society;
  2. the advanced ICT skills (coding, computer science and engineering) which are needed to develop innovative ICT products and services; and
  3. e-business skills or the specific know-how needed for digital entrepreneurshipn. Figure 15 shows how global averages for digital skills vary from 5.2% (using a programming language) to 43.7% (transferring files).

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Is Silicon Valley’s giant foundation just hoarding money?

By Ben Paynter – In late July, the Institute for Policy Studies warned that one of the fastest growing ways of giving to charity could be manipulated to benefit super-rich donors instead of those most in need.

The charitable vehicle in question is called a donor-advised fund (DAF), which allows donors to give money and non-cash assets, including public stock, to charity to receive an immediate tax benefit, but then wait to distribute the money. It’s a clever incentive that’s particularly en vogue among the 1%, in part because it allows for contributions of non-cash assets, such as stock, private company shares, and real estate, to avoid capital gains tax.

The issue is that there isn’t any formal timetable for that money to flow back out again, or necessary guidance on how particularly large sums might effectively be spent. Both issues appear to affect the Silicon Valley Community Foundation, a $13.5 billion cause fund that has received donations from Mark Zuckerberg, among other tech elite.

Among the 80% of charities that have tried to expand in recent years, half have exceeded their sustainable budgets, a precarious position for any organization that relies on (hard to access) grant money to remain afloat. Per Open Impact’s report, the region’s tech elite may be giving billions to philanthropy annually, but community groups have historically received next to nothing. more>

Are Stock Buybacks Starving the Economy?

By Annie Lowrey – Stock buybacks are eating the world. The once illegal practice of companies purchasing their own shares is pulling money away from employee compensation, research and development, and other corporate priorities—with potentially sweeping effects on business dynamism, income and wealth inequality, working-class economic stagnation, and the country’s growth rate. Evidence for that conclusion comes from a new report by Irene Tung of the National Employment Law Project (NELP) and Katy Milani of the Roosevelt Institute, who looked at share buybacks in the restaurant, retail, and food industries from 2015 to 2017.

Buybacks occur when a company takes profits, cash reserves, or borrowed money to purchase its own shares on the public markets, a practice barred until the Ronald Reagan administration.

The regulatory argument against allowing the practice is that it is a way for companies to manipulate the markets; the regulatory argument for it is that companies should be able to spend money how they see fit.

In recent years, with corporate profits high, American firms have bought their own stocks with extraordinary zeal.

Federal Reserve data show that buybacks are now equivalent to 4 percent of annual economic output, up from zero percent in the 1990s. Companies spent roughly $7 trillion on their own shares from 2004 to 2014, and have spent hundreds of billions of dollars on buybacks in the past six months alone. more>

American power at stake in great innovation race


By Peter Engelke – Americans like to think of themselves as the most innovative people in the world. At least since 1945, they have had good reason to believe so. During the Cold War, the United States built the most formidable technology-producing innovation system the world has ever seen.

Coordinated action by the U.S. government, the private sector and academia, combined with America’s unique postwar culture, crafted this system.

But the American system has seen better days. America’s leaders, at federal and state levels, have failed to maintain this system much less upgrade it.

As a result, America’s long list of difficulties includes falling public investment in research and development (R&D, a critical and under-appreciated factor in national innovativeness), an under-skilled workforce, flagging support for public higher education, decaying infrastructure and much more.

The global tech-innovation economy therefore is more than a just crowded place. It is also crowded where it counts: at the very top, where it no longer can be said that the U.S. stands alone. Several of the countries listed here, plus others, routinely score higher than the United States in global innovation rankings.

The U.S. will not long remain the global leader in innovation unless it takes decisive action across several fronts. more>

Why The Only Answer Is To Break Up The Biggest Wall Street Banks

By Robert Reich – Glass-Steagall’s key principle was to keep risky assets away from insured deposits. It worked well for more than half century. Then Wall Street saw opportunities to make lots of money by betting on stocks, bonds, and derivatives (bets on bets) – and in 1999 persuaded Bill Clinton and a Republican congress to repeal it.

Nine years later, Wall Street had to be bailed out, and millions of Americans lost their savings, their jobs, and their homes.

Why didn’t America simply reinstate Glass-Steagall after the last financial crisis? Because too much money was at stake. Wall Street was intent on keeping the door open to making bets with commercial deposits. So instead of Glass-Steagall, we got the Volcker Rule – almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.

Now those loopholes and exemptions are about to get even bigger, until they swallow up the Volcker Rule altogether. If the latest proposal goes through, we’ll be nearly back to where we were before the crash of 2008. more>