J. Bradford DeLong's Blog, page 92

These two are Equitable Growth's not-so-secret but very p...

These two are Equitable Growth's not-so-secret but very powerful intellectual weapon on issue of public finance: Greg Leiserson and Will McGrew: Taxing Wealth bu Taxing Investment Income: An Introduction to Mark-To-Market Taxation: "The sharp increase in U.S. wealth inequality in recent decades has spurred interest in increasing taxes on wealth. This issue brief introduces mark-to-market taxation, one approach to raising taxes on wealth by reforming the taxation of investment income.1 In a system of mark-to-market taxation, investors pay tax on the increase in the value of their investments each year rather than deferring tax until those investments are sold, as they do under current law. This issue brief first defines investment income and explains how mark-to-market taxation works. It then reviews the revenue potential of this approach to taxing investment income, explaining why a mark-to-market system can raise substantial revenues. Finally, it summarizes the distribution of the burden that would result, which would fall overwhelmingly on wealthy individuals...

#noted #2019-11-22

Karl Marx: Capital, Vol.3, Chapter 52: Classes: Weekend Reading

Karl Marx: Capital, Vol.3, Chapter 52: Classes https://www.marxists.org/archive/marx/works/1894-c3/ch52.htm: 'The owners merely of labour-power, owners of capital, and land-owners, whose respective sources of income are wages, profit and ground-rent, in other words, wage-labourers, capitalists and land-owners, constitute then three big classes of modern society based upon the capitalist mode of production...

...In England, modern society is indisputably most highly and classically developed in economic structure. Nevertheless, even here the stratification of classes does not appear in its pure form. Middle and intermediate strata even here obliterate lines of demarcation everywhere (although incomparably less in rural districts than in the cities). However, this is immaterial for our analysis. We have seen that the continual tendency and law of development of the capitalist mode of production is more and more to divorce the means of production from labour, and more and more to concentrate the scattered means of production into large groups, thereby transforming labour into wage-labour and the means of production into capital. And to this tendency, on the other hand, corresponds the independent separation of landed property from capital and labour,[58] or the transformation of all landed property into the form of landed property corresponding to the capitalist mode of production.

The first question to he answered is this: What constitutes a class?���and the reply to this follows naturally from the reply to another question, namely: What makes wage-labourers, capitalists and landlords constitute the three great social classes?

At first glance���the identity of revenues and sources of revenue. There are three great social groups whose members, the individuals forming them, live on wages, profit and ground-rent respectively, on the realisation of their labour-power, their capital, and their landed property.

However, from this standpoint, physicians and officials, e.g., would also constitute two classes, for they belong to two distinct social groups, the members of each of these groups receiving their revenue from one and the same source. The same would also be true of the infinite fragmentation of interest and rank into which the division of social labour splits labourers as well as capitalists and landlords-the latter, e.g., into owners of vineyards, farm owners, owners of forests, mine owners and owners of fisheries.

[Here the manuscript breaks off.]...

#politicaleconomy #weekendreading #2019-11-22

Yes, we are now in a manufacturing recession and have a ...

Yes, we are now in a manufacturing recession and have a profit recession too. Why do you ask? And it's not like we are having a big wage boom: Charlie Bilello: "With 90% of companies reported https://twitter.com/charliebilello/status/1195007972222676999, S&P 500 GAAP earnings down 5% over the past year, largest decline since Q4 2015...

#noted #2019-11-22

Yes, we know that job training programs can be very effec...

Yes, we know that job training programs can be very effective. But how to keep them effective as they scale up? Normally we rely on markets and the profit motive to incentivize preserving effectiveness with scale. But with social-insurance and other pro-poor programs, the beneficiaries do not have the social power to use the market to keep the programs that serve them on track: Paul Osterman: How to Turn Bad Jobs into Good Ones https://www.bostonglobe.com/magazine/2019/11/12/mit-economist-how-turn-bad-jobs-into-good-ones/H5z8xFljzvA8EFedkTeiNJ/story.html?event=event25: 'Research shows the benefits of retraining and raising wages outweigh the costs.... Part of the problem lies in low skill levels. In Massachusetts, 53 percent of workers who earn 15 an hour or less have no more than a high school degree. But we also know that most people can improve their skills. Effective job training programs, such as those offered by the workforce development organization JVS Boston, can make a real difference. As an example, in the past year, its 12-week pharmacy technician training program placed 45 people in better-paying jobs; graduates went from earning an average of 13 an hour before gaining new skills to 17 an hour after. We have good evidence that well-run job training programs, ones that include significant investments in training, support services (for example, help with small unexpected expenses), and coaching for participants, are effective in moving people into better jobs and raising their earnings. High-performing programs are also characterized by strong relationships with employers. We know how to make these work, but we face two big challenges: spreading the model to reach more workers, and providing the resources needed to pay for it... <!--more--</p>

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Alan M. Turing (1950): Computing Machinery and Intelligen...

Alan M. Turing (1950): Computing Machinery and Intelligence: "The view that machines cannot give rise to surprises is due, I believe, to a fallacy to which philosophers and mathematicians are particularly subject. This is the assumption that as soon as a fact is presented to a mind all consequences of that fact spring into the mind simultaneously with it. It is a very useful assumption under many circumstances, but one too easily forgets that it is false...

#noted #2019-11-22

Kate Bahn: Domestic Outsourcing of Jobs Leads to Declinin...

Kate Bahn: Domestic Outsourcing of Jobs Leads to Declining U.S. Job Quality and Lower Wages: "One prototypical example is janitorial work, where most office cleaners today are employed by a janitorial services company that is contracted by the building owner where individual office places lease their space. These kinds of fissured employment patterns have led economists and other social science researchers to examine a variety of empirical research questions about what has caused domestic outsourcing, what the impacts have been and for whom, and what the future of the firm will be...

#noted #2019-11-22

Morgan Kelly and Cormac �� Gr��da: The Preventive Check i...

Morgan Kelly and Cormac �� Gr��da: The Preventive Check in Medieval and Preindustrial England: 'England's post-Reformation demographic regime has been characterized as ���low pressure.��� Yet the evidence hitherto for the presence of a preventive check, defined as the short-run response of marriage and births to variations in living standards, is rather weak. New evidence in this article strengthens the case for the preventive check in both medieval and early modern England. We invoke manorial data to argue the case for a preventive check on marriages in the Middle Ages. Our analysis of the post-1540 period, based on parish-level rather than aggregate data, finds evidence for a preventive check on marriages and births...

#noted #2019-11-22

A little bit aggressive and overcertain from the brillian...

A little bit aggressive and overcertain from the brilliant Esther Duflo, but only a little: Channel 4 News: _"'There is no reason to fear low-skilled migration' https://twitter.com/Channel4News/status/1194652089814855680. Nobel prize-winning economist Esther Duflo says 'the effect of low-skilled migration on low-skilled wages is zero'. Esther Duflo is... guest on this week's Ways to Change the World podcast... https://www.youtube.com/watch?v=i1pZfFY132Q

#noted #2019-11-22

Adam Smith (1776): On the Disturbances in the American Co...

Adam Smith (1776): On the Disturbances in the American Colonies https://www.econlib.org/archives/2012/07/adam_smith_on_u.html Wealth of Nations IV-7-152: "To propose that Great Britain should voluntarily give up all authority over her colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war as they might think proper, would be to propose such a measure as never was, and never will be adopted, by any nation in the world. No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expence which it occasioned. Such sacrifices, though they might frequently be agreeable to the interest, are always mortifying to the pride of every nation, and what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it, who would thereby be deprived of the disposal of many places of trust and profit, of many opportunities of acquiring wealth and distinction, which the possession of the most turbulent, and, to the great body of the people, the most unprofitable province seldom fails to afford. The most visionary enthusiast would scarce be capable of proposing such a measure with any serious hopes at least of its ever being adopted. If it was adopted, however, Great Britain would not only be immediately freed from the whole annual expence of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys. By thus parting good friends, the natural affection of the colonies to the mother country which, perhaps, our late dissensions have well nigh extinguished, would quickly revive. It might dispose them not only to respect, for whole centuries together, that treaty of commerce which they had concluded with us at parting, but to favour us in war as well as in trade, and, instead of turbulent and factious subjects, to become our most faithful, affectionate, and generous allies; and the same sort of parental affection on the one side, and filial respect on the other, might revive between Great Britain and her colonies, which used to subsist between those of ancient Greece and the mother city from which they descended...

#noted #2019-11-21

Adam Smith: Society & the ���System of Natural Liberty���

2.3) Society & the ���System of Natural Liberty���: Adam Smith was a genius because he had a truly game-changing insight into how our societal division of labor should be organized. As far as the production and distribution of our collective material wealth is concerned, you see, most of what we need and want is both excludible and rival.

If something is ���excludible���, that means we can assign it an owner���some one of us can be designated to control it, and to decide on its use, or decide to transfer ���ownership��� of it to something else. If something is excludible, we can push the decisions about how it is to be used out to the periphery of society, to the people on the ground who know what is going on, rather than have the decision made by some centralized bureaucracy clueless because of its inability to reliably judge information conveyed to it at third- or fourth-hand. Having ownership makes sense if information about what is going on is dispersed and hard to assemble: giving control to people on the spot is then a very good idea.

If something is ���rival���, that means that one person's use of it forecloses the opportunities of others: if I am using this iPhone, you cannot be using the same iPhone. If a good is rival, that one of us is using it diminishes the opportunities and possibilities available to others. That makes them poorer. Thus it makes sense to charge a price for somebody using a rival commodity. That makes them feel in their gut the effects of their decisions on the opportunities open to others. Charging prices is a way to align individuals��� incentives about whether it is worth it for them to make use of a commodity with the effects of their decision on the overall well-being of the society.

Hence, Adam Smith argued in his Inquiry into the Nature and Causes of the Wealth of Nations, the wealth of nations is most greatly enhanced by following the dictates of what he named the System of Natural Liberty������liberty��� because it leaves people free to do what they wanted with their labor and their possessions, ���natural��� because it conforms with human nature, "system" because it can be and is extended to the status of a general principle. Let people decide what they want to do with their things and their labor, and they arrange themselves in a large highly-productive societal division of labor. Self-interest focuses people on creating value. Competition curbs any distracting focus of self-interest on accomplishing exploitation.

This ���System of Natural Liberty��� is, Smith argues, good. As Heilbroner summarizes:

Self-interest��� drives men to action���. [But] a community activated only by self-interest would be a community of ruthless profiteers. This regulator is competition, the socially beneficial consequence of the conflicting self-interests of all the members of society. For each man, out to do his best for himself with no thought of social cost, is faced with a flock of similarly motivated individuals who are in exactly the same boat���. A man who permits his self-interest to run away with him will find that competitors have slipped in��� will find himself without buyers in the one case and without employees in the other. Thus very much as in the Theory of Moral Sentiments, the selfish motives of men are transmuted by interaction to yield the most unexpected of results: social harmony���. The��� market is that it is its own guardian. If output or prices or certain kinds of remuneration stray away from their socially ordained levels, forces are set into motion to bring them back to the fold. It is a curious paradox which thus ensues: the market, which is the acme of individual economic freedom, is the strictest task master of all���

This leads to a fraught question: Is this a theological point? Is the fact that acting ���naturally��� in the sense of giving market exchange free rein produces good results evidence that there is a benevolent Providence out there? Is this a teleological point? Are, in some sense, money and gift-exchange aimed at creating prosperity? How is it that processes that are not human���that lead to consequences not desired directly by any human���have a mind of their own, and lead to good ends? It is indeed a marvel that, as Smith puts it, in his theory at least:

[While] every individual��� endeavours��� to direct that industry that its produce may be of the greatest value��� labours to render the annual revenue of the society as great as he can���. He��� neither intends to promote the public interest, nor knows how much he is promoting it���. He intends only his own security���. He intends only his own gain���. In this, as in many other cases, [he is] led by an invisible hand to promote an end which was no part of his intention������

It is a marvel. But what kind of a marvel is it?

It is not that Smith is opposed to government. Government is necessary to protect property, and to enforce contracts: people���most people���will respect others��� property and keep their own contracts, most of the time. But for the non-most people and at the non-most times we need the police, hence we need government. We need public works. We need public education. We need national defense. Adam Smith is very clear on all of these. In fact, Book V of the Wealth of Nations on what the government should do and how it should do it is the largest of the five parts of the book. But, Smith is certain, attempts of some centralized bureaucrat to undermine the System of Natural Liberty in its proper sphere���to direct who should do what when and where���were likely to produce not wealth and prosperity but poverty and misery.

Here the full files are���unfinished: https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

And the course slides:

https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA

#berkeley #books #highlighted #history #historyofeconomicthought #moralphilosophy #politicaleconomy #2019-11-21