Tag Archives: Regulations

Why Don’t Free Markets Always Work?

By Peter Pham – Free markets are not always safe. If a state-run economy implements the free market, then it usually goes head over heels, and may even crash.

Over the last ten years, China’s state-controlled economy has been alleviating capital controls and freeing its market. Will the 1997 Asian financial crisis repeat itself?

After WW2 ended, savings and investment rates in most Asian nations were between 30 to 50 percent. That means governments were able to allocate as much funds as they pleased.

Japan, South Korea and other Northeast Asian countries preferred to invest in Asian Capital Development (ACD), where governments protect and control certain industries.

They funneled credit to sectors that are less profitable (in the short-run) such as agriculture and export-oriented manufacturing. The goal was to slowly and surely develop human capital. This process gave birth to globally competitive companies and increased foreign exchange reserves. more>

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>

Donald Trump and the Rule of Law

By Jeffrey Toobin – Richard Nixon earned eternal disgrace for keeping a list of his political enemies, but he, at least, was ashamed enough of the practice to know that he had to keep it secret. Trump, in contrast, is openly calling for the Department of Justice, which he controls, to put his political opponents in jail.

This kind of behavior is a trademark of the authoritarians he admires, like Vladimir Putin and Recep Tayyip Erdoğan.

Trump’s contempt for the rule of law infects his entire Administration, as illustrated by Jeff Sessions’s newly announced guidance on marijuana policy.

Under the new policy, in much of the country federal marijuana enforcement will be run by officials who are only accountable to Sessions and Trump, not to the broader public.

Senators have a right to ask prospective U.S. Attorneys how they plan to enforce federal law on marijuana, and, of course, the legislators have the right to vote these officials down if they don’t like their answers. But Sessions has installed acting U.S. Attorneys in much of the country—including in such high-profile locations as Manhattan and Los Angeles—and senators can’t exert any oversight of them.

This gesture of contempt for the Senate’s role in confirmations is reflected well beyond the Justice Department. Throughout the government, Trump has nominated many fewer officials to Senate-confirmed positions than his predecessors; instead, Cabinet secretaries have filled these crucial positions with acting or temporary officials who avoid scrutiny from senators. 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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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>

Required reading to understand the tax policy fight

By Vanessa Williamson – First lesson: the top-heavy tax cuts on the policy agenda today are not the natural outcome of a widely held antipathy to taxation, or an admiration for wealthy people that is sometimes ascribed to the American public. Americans are more willing to pay taxes and are more concerned about economic inequality, than you might think.

Martin’s key insight is explaining how wealthy people managed to build broader constituencies for their tax cuts: by channeling frustration about other aspects of the tax code into support for policies that mostly cut rates at the very top.

So, what’s the takeaway? We can’t explain the tax reform on the table in Washington by looking at the preferences of most Americans. Instead, the impetus for top-heavy tax cuts comes from organized interests working strategically to disguise the regressive effects of the policies they have proposed, or by connecting their big-business-friendly policies with cultural and ethnic resentments that continue to motivate large swathes of the voting public. more>

America Has a Monopoly Problem—and It’s Huge

The Nobel Prize winner argues that an economy dominated by large corporations has failed the many and enriched the few.
By Joseph E. Stiglitz – There is much to be concerned about in America today: a growing political and economic divide, slowing growth, decreasing life expectancy, an epidemic of diseases of despair. The unhappiness that is apparent has taken an ugly turn, with an increase in protectionism and nativism. Trump’s diagnosis, which blames outsiders, is wrong, as are the prescriptions that follow.

There is a widespread sense of powerlessness, both in our economic and political life. We seem no longer to control our own destinies. If we don’t like our Internet company or our cable TV, we either have no place to turn, or the alternative is no better.

Some century and a quarter ago, America was, in some ways, at a similar juncture: Political and economic power seemed concentrated in a few hands, in ways that were inconsonant with our democratic ideals. We passed the Sherman Anti-Trust Act in 1890, followed in the next quarter-century by other legislation trying to ensure competition in the market place. Importantly, these laws were based on the belief that concentrations of economic power inevitably would lead to concentrations in political power.

Antitrust policy was not based on a finely honed economic analysis, resting on concurrent advances in economics. It was really about the nature of our society and democracy.

But somehow, in the ensuing decades, antitrust was taken over by an army of economists and lawyers. They redefined and narrowed the scope, to focus on consumer harm, with strong presumptions that the market was in fact naturally competitive, placing the burden of proof on those who contended otherwise. more> https://goo.gl/VPfvdC

Are Internet companies complicit in promoting hateful and harmful content?

By Hany Farid – In 2016, Facebook, Google, Microsoft, and Twitter announced that they would work together to develop new technology to quickly identify and remove extremism-related content from their platforms. Despite some progress, serious problems remain.

First, we need a fast and effective method to remove content. Once content has been identified, reported, and determined to be illegal or in violation of terms of service, it should be immediately removed (Prime Minister Theresa May is calling for a maximum of two hours from notification to take-down).

Fourth, we need to invest in human resources. While advances in machine learning hold promise, these technologies – as technology companies will admit – are not yet nearly accurate enough to operate across the breadth and depth of the internet. There are more than a billion uploads to Facebook each day and 300 hours of video uploaded to YouTube each minute of the day.

This means that any machine-learning based solution will have to be paired with a significant team of human analysts that can resolve complex and often subtle issues of intent and meaning that are still out of reach of even the most sophisticated machine learning solutions. more> https://goo.gl/X2ACdL

It’s Time to Rewrite the Rules of Our Economy

By Tim O’Reilly – Business leaders making decisions to outsource jobs to low-wage countries or to replace workers with machines, or politicians who insist that it is “the market” that makes them unable to require companies to pay a living wage, rely on the defense that they are only following the laws of economics. But the things economists study are not natural phenomena like the laws of motion uncovered by Kepler and Newton.

The political convulsions we’ve seen in the United Kingdom and in the United States are a testament to the difficulties we face. We are heading into a very risky time. Rising global inequality is triggering a political backlash that could lead to profound destabilization of both society and the economy. The problem is that in our free market economy, we found a way to make society as a whole far richer, but the benefits are unevenly distributed. Some people are far better off, while others are worse off.

Why do we have lower taxes on capital when it is so abundant that much of it is sitting on the sidelines rather than being put to work in our economy?

Why do we tax labor income more highly when one of the problems in our economy is lack of aggregate consumer demand because ordinary people don’t have money in their pockets? more> https://goo.gl/2DioyZ

When Wall Street Owns Main Street — Literally

BOOK REVIEW

Makers & Takers: How Wall Street Destroyed Main Street, Author: Rana Foroohar.

By Rana Foroohar – Made up primarily of San Bernardino and Riverside counties, the Inland Empire was at the heart of the subprime mortgage crisis and has yet to fully recover.

In the early 2000s, predatory lenders flocked to the area, offering dicey deals to the largely minority and lower-middle-class white populations who, unable to afford housing on the coast, still craved the American Dream of homeownership. It ended, as it did in so many neighborhoods and cities across America, in tears and massive foreclosures, turning entire cities into ghost towns of derelict properties.

Private equity funds like Blackstone are giant financial institutions that operate largely outside the scrutiny of governmental regulation, since they are officially designated “nonbanks” or “shadow banks”—never mind that many of them are bigger than the better-known institutions that are subject to regulation.

Most people rightly associate private equity with offshore bank accounts (remember Mitt Romney and Bain Capital?), big corporate buyouts in which formerly healthy firms are loaded up with debt and stripped of their assets, mass layoffs, and an utter lack of transparency in their financial dealings.

But these days, the big news about private equity is that it is at the heart of the country’s housing rebound.

Private equity investors have become the single largest group of buyers in the residential housing market, purchasing $20 billion worth of steeply discounted properties between 2012 and 2014 alone and reaping huge rewards as housing prices have slowly risen from their troughs. more> https://goo.gl/P6fcNA