Category Archives: Regulations

The danger in deregulation

By Samantha Gross – In the United States and around the world, energy production depends on support from local communities, what the industry calls “social license to operate.” Especially in a democracy, public opposition can make life very difficult for energy producers. Public support for energy resource development depends on trust—in the companies doing the development and in the regulatory structure that governs their activities.

When the Trump administration dismantles energy regulation, it runs the risk of undermining the trust that underpins domestic energy development. U.S. oil and gas production has grown dramatically in recent years, but we have also seen a public backlash.

The proposal to open nearly all U.S. offshore waters to drilling is an opening salvo in a battle likely to go on for some time. Many governors, even Republicans, are vehemently opposed to drilling in waters off their states.

But the hard push toward deregulation is likely to have consequences for public trust, not just in companies, but in government itself. If the public feels that the government is being run by and for the energy industry, accomplishing many important societal goals—like modernizing infrastructure and preventing the worst impacts of climate change—become much more difficult. more>

Is the next financial crisis looming

By Ross Barry -The strong performance of many share markets around the world has led many to speculate that another major correction may not be too far away. History has shown us, over the past 300 years or so, that major corrections have occurred every nine to 10 years, on average, albeit some have come closer on the heels of the one before, while others have been more than 20 years apart.

History has also shown us that financial manias and crashes are almost always an outworking of three things – an accumulation of large volumes of idle capital (savings), financial innovation and leverage. Most have also occurred following a strong, speculative surge in markets and a few years into a new phase of higher interest rates.

The less opportunities there are to deploy savings to create new wealth, the more they accumulate in safer stores of wealth. And the more wealth is stored rather than used creatively, the more the return on idle savings declines. The fact that yields on cash and bonds around the world are currently at, or below, zero per cent in real terms, tells us that there is a lot of storing going on right now.

We have seen this throughout history in the shadowy practice of “melting debt” in the 1860s, the proliferation of margin lending by Wall Street firms in the 1920s, the development of futures, options and “repo” markets in the late-1980s, and again with the mass production of highly leveraged CDOs built from sub-prime mortgages in the mid-2000s.

Too often, unfortunately, when productive risk-taking in an economy dries up, clever agents turn to new and resourceful ways to repackage riskier assets and promote them as something seemingly safer.

What makes investors succumb to the lure of such things is a whole study unto itself. more>

Economics is quantum

BOOK REVIEW

The Money Formula: Dodgy Finance, Pseudo-Science, and How Mathematicians Took Over the Markets, Author: David Orrell.
Quantum Mind and Social Science, Author: Alexander Wendt.
Laws of Media: The New Science, Author: Marshall McLuhan.

Money and brains are both quantum phenomena – so it’s not surprising that economics is overdue for a quantum revolution
By David Orrell – In recent years there have been many calls for economics to reinvent itself, most noticeably from student groups such as the Post-Crash Economics Society, and Rethinking Economics. In 2017, the United Kingdom’s Economic and Social Research Council announced that it was setting up a network of experts from outside economics whose task it would be to ‘revolutionize’ the field. And there have been countless books on the topic, including my own Economyths (2010), which called for just such an intervention by non-economists.

But progress has been slow.

One problem is that, while there have been many demands for a revolution, the exact nature of the revolution is less clear. Critics agree that the foundations of economics are rotten, but there are different views on what should be built in its place.

But what if the problems with economics run even deeper?

What if the traditional approach has hit a wall, and the field needs to be completely reinvented?

What if, as with 19th-century physics, the problem comes down to ontology – our entire way of thinking and talking about the economy? more>

Updates from Chicago Booth

Never mind the 1 percent Let’s talk about the 0.01 percent
By Howard R. Gold – Since the Great Recession, America’s wealthiest 1 percent have been demonized as fat cats who have grown ever richer while the middle class has stagnated. While protesters have called for the 1 percent to be taxed more heavily, economists have been digging into data to develop a better understanding of who the top earners are.

These economists have been seeking to measure income inequality and wealth inequality, and to understand the nature of the 1 percent’s income and assets.

But the data also reveal disparities within the 1 percent. The 1 percent, it turns out, have their own 1 percent. more>

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Brookings experts on Trump’s National Security Strategy

Brookings Institution – The United States was born of a desire for life, liberty, and the pursuit of happiness—and a conviction that unaccountable political power is tyranny.

For these reasons, our Founders crafted and ratified the Constitution, establishing the republican form of government we enjoy today. The Constitution grants our national government not only specified powers necessary to protect our God-given rights and liberties but also safeguards them by limiting the government’s size and scope, separating Federal powers, and protecting the rights of individuals through the rule of law. All political power is ultimately delegated from, and accountable to, the people.

We protect American sovereignty by defending these institutions, traditions, and principles that have allowed us to live in freedom, to build the nation that we love. And we prize our national heritage, for the rare and fragile institutions of republican government can only endure if they are sustained by a culture that cherishes those institutions.

We are committed to protecting the rights and dignity of every citizen. And we are a nation of laws, because the rule of law is the shield that protects the individual from government corruption and abuse of power, allows families to live without fear, and permits markets to thrive.

Our founding principles have made the United States of America among the greatest forces for good in history.

The United States will respond to the growing political, economic, and military competitions we face around the world.

China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.

These competitions require the United States to rethink the policies of the past two decades—policies based on the assumption that engagement with rivals and their inclusion in international institutions and global commerce would turn them into benign actors and trustworthy partners. For the most part, this premise turned out to be false. more>

Ignoring the Will of the People

By Susan Milligan – The $1.5 trillion tax bill, hailed with glee and relief by Republicans eager to appease donors and desperate for the year’s first major legislative win, is the most unpopular major piece of legislation to pass in decades.

“It has a lot to do with money,” says Lee Miringoff, director of the nonpartisan Marist Institute for Public Opinion in Poughkeepsie, New York, pointing to the “Citizens United” Supreme Court case which allowed corporations and interest groups to spend massive amounts of money to influence elections.

“We see the tremendous impact of the lobby community in the tax bill. Lobbying interests were very much dominant in drafting and creating this approach.” And that means public opinion, so painstakingly quantified by pollsters candidates themselves hire, is often disregarded.

On several major issues in the news, the views of the public at large appear to have no effect on Congress.

As for the tax bill, “the Republicans are betting that by the time people realize what a turkey this bill is, it will be somebody else’s problem,” Stan Collender says. And that problem may be dumped onto the tax bill-hating Democrats, should they succeed in wresting control of Congress. more>

If work dominated your every moment would life be worth living?

BOOK REVIEW

The Good Life and Sustaining Life, Author: Andrew Taggart.
Leisure: The Basis of Culture, Author: Josef Pieper.

By Andrew Taggart – ‘Total work’ is the process by which human beings are transformed into workers and nothing else.

By this means, work will ultimately become total, I argue, when it is the center around which all of human life turns; when everything else is put in its service; when leisure, festivity and play come to resemble and then become work; when there remains no further dimension to life beyond work; when humans fully believe that we were born only to work; and when other ways of life, existing before total work won out, disappear completely from cultural memory.

We are on the verge of total work’s realization.

What is so disturbing about total work is not just that it causes needless human suffering but also that it eradicates the forms of playful contemplation concerned with our asking, pondering and answering the most basic questions of existence. more>

A goal realized: Network lobbyists’ sweeping capture of their regulator

By Tom Wheeler – “Here’s how the telecom industry plans to defang their regulators,” a September 12, 2013 Washington Post headline announced. “[T]elecom giants including Verizon, AT&T and Comcast have launched multiple efforts to shift regulation of their broadband business to other agencies that don’t have nearly as much power as the FCC,” the article explained.

The companies’ goal: to move regulatory jurisdiction from the Federal Communications Commission to the Federal Trade Commission (FTC). Strategically, it is a brilliant sleight of hand since the FTC has no rulemaking authority and no telecommunications expertise, yet the companies and the policymakers who support them can trot out the line that the FTC will protect consumers.

With this vote, the FCC walked away from over a decade of bipartisan efforts to oversee the fairness and openness of companies such as Comcast, AT&T, Charter, and Verizon. These four companies control over 75 percent of the residential internet access in America, usually through a local monopoly. Henceforth, they will be able to make their own rules, subject only to very limited after-the-fact review.

The assertion that the FTC will be able to provide that protection adequately is an empty promise. The people at the FTC are good people, but they have neither network expertise, nor the authority to make rules. more>

Updates from Chicago Booth

Lost money? Reinvest!
By Erik Kobayashi-Solomon – Investors sometimes play a psychological trick on themselves when they lose money, research suggests—and that mental accounting trick may help improve their investment performance.

According to Cary D. Frydman and David H. Solomon at the University of Southern California and Chicago Booth’s Samuel Hartzmark, investors who sell a losing investment often avoid the psychological pain by immediately reinvesting in another stock. By doing so, instead of thinking of the action as realizing a loss, they frame it as rolling capital into a related investment. The reference point used to compute gains and losses is linked to the amount paid for the original asset.

That mental accounting trick may help them avoid an often-made mistake. A key insight of behavioral finance is that investors, to avoid the pain of realizing a loss, fall prey to the disposition effect: they tend to be more likely to sell winners than losers. But the act of reinvesting makes investors more willing to sell a losing stock and realize a loss sooner. more>

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Network Neutrality Can’t Fix the Internet

The FCC is poised to dismantle common carriage for broadband and wireless providers. That’s bad, but the internet itself is worse.
By Ian Bogost – It makes sense to construe broadband and wireless providers as common carriers, like telephone companies and utilities. And a majority of Americans, no matter their affiliation, support regulating internet providers in this manner.Security breaches, privacy violations, election meddling, wealth inequality, and a host of other concerns have sullied the tech sector’s reputation.

A public darling during the Obama years, when net neutrality won out, the tech industry has effectively become Big Tech, an aggressor industry along the lines of pharmaceuticals, oil, or tobacco.Local retailers have to manage their searchability on Google, or pay for ads to compete with big companies like Amazon. Restaurants must make sure they’re listed on Google Maps and Yelp and OpenTable.

Creating a mobile app requires payment of registration fees for listing products on the Google or Apple app stores, and a substantial commission on every sale or subscription.

If the internet is to remain a public utility, it must also become a public utility worth using, and one that doesn’t dismantle the society that would use it through neglect and deceit and malice.

It’s time to stop treating the internet as a flawless treasure whose honor must be protected from desecration. It hasn’t been such for a long time, if indeed it ever was. more>