Tag Archives: Regulations

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

The flaws a Nobel Prize-winning economist wants you to know about yourself

BOOK REVIEW

Nudge: Improving Decisions about Health, Wealth and Happiness, Authors: Richard Thaler and Cass Sunstein.

By Eshe Nelson – Sorry to say it, but you’re not perfect. We like to believe that we are smart, rational creatures, always acting in our best interests. In fact, dominant economic theory these days often makes that assumption.

What was left of this illusion was further dismantled by the The Royal Swedish Academy of Sciences, who awarded the Nobel prize in economics to Richard Thaler, an American economist at the University of Chicago, for his pioneering work in behavioral economics, which examines humanity’s flaws—namely, why we don’t make rational economic decisions.

People can make bad economic choices based on something Thaler dubbed the “endowment effect,” which is the theory that people value things more highly when they own them. In other words, you’d ask for more money for selling something that you own than what you would be willing to pay to buy the same thing.

People experience the negative feeling of loss more strongly than they feel the positive sense of a gain of the same size. This is also impact by anchoring: If you are selling an item, your reference point is most likely to be the price you paid for something. Even if the value of that item is now demonstrably worth less, you are anchored to the purchase price, in part because you want to avoid that sense of loss.

This can lead to pain in financial markets, in particular. more> https://goo.gl/eR1B2B

The next financial crisis is probably around the corner—we just don’t know from where

By John Detrixhe – The German bank’s study of developed markets uses this criteria to define a financial crisis: on a year-over-year basis, a 15% drop in stock markets, 10% decline in foreign-exchange, 10% fall in bonds, 10% increase in inflation, or a sovereign default.

Deutsche Bank argues that crises have been increasingly frequent since the breakdown of the Bretton Woods system, which, after World War II, fixed exchange-rates and essentially linked them to the price of gold. That coordination ended in the 1970s when the US broke the dollar’s peg to the yellow metal. The link to a finite commodity helped limit the amount of debt that could be created.

As strategists at the Frankfurt-based lender see it, the resulting fiat money system has encouraged rising budget deficits, higher debts, global imbalances, and more unstable markets. At the same time, banking regulations have been loosened. In the US, the industry may soon have fewer restrictions and less oversight, a mere 10 years since the last worldwide crisis. more> https://goo.gl/vDnQ2w

Why nation-states are good

BOOK REVIEW

Straight Talk on Trade: Ideas for a Sane World Economy, Author: ani Rodrik.

By Dani Rodrik – A principled defense of the nation-state would start from the proposition that markets require rules.

Markets are not self-creating, self-regulating, self-stabilizing or self-legitimatizing, so they depend on non-market institutions.

Anything beyond a simple exchange between neighbors requires investments in transportation, communications and logistics; enforcement of contracts, provision of information, and prevention of cheating; a stable and reliable medium of exchange; arrangements to bring distributional outcomes into conformity with social norms; and so on.

Behind every functioning, sustainable market stands a wide range of institutions providing critical functions of regulation, redistribution, monetary and fiscal stability, and conflict management. These institutional functions have so far been provided largely by the nation-state. more> https://goo.gl/yjmnyK

Parasites, Security, and Conflict: The Origins of Individualism and Collectivism

By Daniel Hruschka – Ferdinand Tonnies, German sociologist and political activist, outlined two primary forms of sociality.

The first social form, Gemeinschaft or community, people worked together for collective goals and where individual wishes were subordinated to those of the group.

The second form, Gesellschaft or civil society, turned this relationship between individuals and the group on its head. Exemplified by modern nation-states, corporations, and voluntary clubs, Tonnies’ civil society existed to serve its members needs and wishes—not the other way around.

Often framing the distinctions in different terms, such as collectivism vs. individualism, embeddedness vs. autonomy, or particularism vs. universalism, these investigators discovered striking and reliable cross-population differences in how people endorse a group’s interests over their own goals, how people value personal relationships over impartial rules with strangers, and how they define themselves in terms of their social relationships rather than their own individual qualities and accomplishments.

Researchers have also found that a basic element of Tonnies’ Gemeinschaft—in-group loyalty—hitchhikes with a suite of other “traditional” values and behaviors.

Notably, people who are more concerned about loyalty are also more likely to value obedience to authority, to conform to group norms and to avoid impure, unnatural, unchaste and ungodly acts. more> https://goo.gl/Q3GXQj

Who Needs Washington?

On healthcare and climate change, governors step in where Congress can’t – or won’t.

By Susan Milligan – Congress may be unable or unwilling to pass major legislation.

Governors and states, lauded as laboratories of democracy at best and recalcitrant junior players at worst, are stepping up to fill the power void.

And while governors are more empowered to stop federal policies or legislation than to force their enactment, the state players can have a great deal of influence over how the whole nation – and not just their constituencies – live, experts say.

On climate change, too, governors in both parties are implementing environmental policies Trump has rejected as too onerous on business.

The sheer size and economic influence of states can push national policy and trends as well. Texas, with its big buying power in school textbooks, has an outsized influence on details such as questioning evolution in science textbooks.

And while California’s greenhouse emissions standard might not be much liked by industry, which one would refuse to do business with the Golden State, which has the sixth-biggest economy in the world? And when states can’t stop Washington from passing policies, they can slow-walk their implementation or scream so loudly Washington is forced to regroup. more> https://goo.gl/zU7ruc