Archive for the ‘economics’ Category
The Job Creation Myth
Today in Washington, there are two competing theories for how to gin up the economy and boost the employment rate:
1. Cut taxes for the rich and for businesses (see: Republican Party)
2. Use government spending as a stimulus (see: Democratic Party)
Let’s take a look at #1. The logic goes as follows: If I’m a business owner and my tax bill goes down, I will have more money to hire employees and will thusly create jobs.
There’s just one problem: in today’s economic reality, it’s pure fantasy. To illustrate why, consider a quote from a visionary businessman, Henry Ford.
“It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.”
Therein lies the rub. Businesses have shed jobs and are not hiring because demand is much lower. Regardless of how much or how little they pay in taxes, there is no incentive to hire any more employees than required to meet demand. Ford understood this, which is why he focused on reducing prices while simultaneously paying his workers higher than the prevailing wage–by increasing the number of potential customers (many of whom were also employees) he could grow the business.
This is the theory behind government spending, unemployment benefits, and tax cuts for the poor and middle class. Only by increasing demand can we expect to increase employment and grow the economy. Cutting taxes for the richest 2% is beyond foolish–it’s reckless.
Filed under economics, politics : Comments (0) : Aug 14th, 2010
The Richest 1%
In the midst of troubling economic times, it’s easy to lose sight of the big picture. The Global Rich List helps you put it back in perspective.
We hear a lot about the richest 1% in the U.S. What about in the world? Who are these fat cats?
I guess it’s me.
Two observations:
- The middle class in the U.S. is very wealthy relative to our global neighbors. Let’s not forget this as we talk about how to tackle global problems like climate change and resource scarcity.
- The wealthiest 1% in the U.S. are so astronomically wealthy compared to the rest of the world that it’s bordering on obscene. These are NOT the small business owners that politicians love to talk about while cutting taxes for the rich. These are the super-elite earning hundreds of millions of dollars per year. And after decades of successful political manipulation by the rich, they pay very little in taxes relative to their wealth. Does it make sense to anybody that a family earning $250,000/year and a multi-billionaire earning $250,000,000/year are in the same tax bracket? I didn’t think so.
Filed under culture, economics : Comments (0) : May 7th, 2010
A plea for reason
In the U.S., the raging debate over climate change continues to devolve. Throughout the winter, skeptics repeatedly reminded us that it was cold out, disproving “global warming”. When severe snow storms battered the east coast, a Senator Inhofe (R-OK) built an igloo and labeled it “Al Gore’s new home”. The discovery that a 3000 page report contained a transposed digit (that created an order-of-magnitude error for the year in which the Himalayan glaciers would melt) drew accusations of scientific malfeasance.
Never mind that zero climate change models predict the disappearance of winter in the northern hemisphere any time soon.
Never mind that climate change models explicitly predict increased precipitation like we’ve seen all year.
Never mind that the handful of errors discovered within the thousands of published studies represent immaterial corrections to the underlying models.
We’ve completely lost the distinction between science and politics; reason and faith; logic and emotion. Given the catastrophic economic and environmental consequences predicted by climate change models, it’s terrifying that so many Americans are willing to dismiss it outright as a scam or conspiracy. We need a national plea for reason.
There are two explanations for how we got to this unfortunate position:
A) A world-wide group of nefarious characters (lead by Al Gore) have created the largest and most convincing conspiracy in world history to convince thousands of scientists and most political leaders throughout the world that climate change is real and a major problem.
B) The very powerful industry lobby for carbon-intensive companies and their representatives in congress are waging a successful disinformation campaign to create doubt and obfuscation among the American public about the validity of climate change science.
Which of these two seems more plausible?
One of these groups is backed by billions of dollars in resources, an army of lawyers, PR firms, lobbyists, and sympathetic politicians.
The other group is infamously inept at PR, has no unifying organization to speak of, and defers to the norms of scientific inquiry that errs on the side of caution when publishing results or predictions.
One of these groups has spent the better part of a century investing in technologies, infrastructure, and business models that will do not fit in the carbon-constrained world required to slow the effects of climate change.
The other group predicts a future in which we must radically change our technology, infrastructure, and human habitation models to fit a carbon-constrained world.
One of these groups appeals to the large swath of Americans who are falling behind due to a shifting global economy and see their standard of living stagnating or even decreasing.
The other group finds broad appeal internationally and strong support within the American upper-class who are educated and affluent enough to allow a graceful transition to a carbon-constrained world.
Only one explanation can survive a serious test of logic and reason; unfortunately the opponents of climate change don’t care much for either.
Filed under climate change, culture, economics, energy, politics : Comments (2) : Mar 20th, 2010
Credit card disclosure rules
The new credit card disclosure rules went into effect this month with a few interesting changes to our statements. It’s a little shocking when you see the cost of carrying a balance spelled out in plain text:
It will take me 17 years to pay off my balance if I make only the minimum payment. 17 years!
Increasing the payment by a modest $20/month (by, say, skipping a fancy coffee one a week) would bring that payoff period down to 3 years and save me almost $1400 in interest charges.
Behold, the power of compound interest.
(Don’t worry, I pay off my full balance every month. They probably hate me as a customer.)
Filed under economics : Comments (2) : Feb 28th, 2010
This one’s a little dark. You’ve been warned.
I’m amazed at how little attention is paid to climate change in the U.S. Sure, we talked about the Copenhagen summit for a news cycle, and we loved chirping about the dastardly U.K. scientists and their suspicious emails. But given the potential costs of climate change, it’s alarming how little attention it gets. Future historians will be utterly bewildered as they sift through the clues we leave behind and wonder how we so willingly brought collapse upon ourselves. We have completely failed at weighing the relative costs and benefits and have likely sealed our own fate.
Climate change critics generally start by [drastically] overstating the level of disagreement within the scientific community regarding the anthropogenic causes of climate change. I won’t waste much text here, but to be clear, there is no disagreement. Climate change is happening and humans are causing a large part of it; the only debate remaining is whether our share of the blame is 95% or 96%.
Once the seed of doubt is placed, the critics then scare us with dire predictions of a possible future. Dealing with climate change would require significant changes to the way we live, it would require significant investment in new infrastructure and technologies, and would alter the institutions we’ve been familiar with for the past century. Therefore, the theory goes, we should do nothing.
For the sake of argument, let’s assume there is a legitimate debate within the scientific community (remember, there’s not). I’ll even be so generous as to assume a 50/50 split. If that were the case, how should we respond?
The costs of unmitigated climate change are immense. The path we are on leads to massive population displacement, food shortages caused by flooding and draughts, accelerated species extinction, and (eventually) economic and civilization collapse. Yes, collapse.
What about the costs of attempting to stem the tide of climate change? These, too, would be large. The standard of living for developed nations would be altered forever. Air travel would no longer be available to the public. Nor would personal automobiles. Meat would be a luxury instead of a staple. Our cities and towns would contract and the massive suburban developments would transition back to agricultural land. The number of farmers would increase 10-fold (at least). Many industries would cease to exist and those that remained would look completely different. Our national wealth would have to go into buying things like wind turbines and solar panels instead of HDTVs and fancy cars. Make no mistake, life would be very very different. But we would have a real fighting chance at staving off the total collapse of our civilization.
When presented in these terms, is there really any question of which path to take? I’m so tired of hearing about the “energy tax” and the costs of transitioning to a carbon neutral energy mix. Money won’t buy you much if the global economy fractures under the strain of climate change.
[ . . . ]
Easter Island (the place with the giant stone heads) was once covered in thick forrest. Poor resource management and fanatical obsession with erecting the giant stone heads lead to 100% deforestation of the island. At some point, some one cut down the very last tree left standing. What do you suppose that felt like?
Soon, we all will know.
Filed under climate change, culture, economics, energy, politics : Comments (0) : Feb 27th, 2010
