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Mindblowing inequality isn't just unfair but inefficient! McCain needs an e
2008-05-29 22:34:00
Many people beleive that there had to be a trade-off between social justice and efficiency; that the persuit of the former will inevitably have to come at the expense of the latter. Yet, social justice and efficiency tend to correlate highly. Now, let me explain why injustice and inefficiency correlate so strongly...First, let me explain social justice real quick: according to Miller (1999) it consists of three components: need, desert and equalty. Needs are just that: needs - in a just distribution of resoucres all basic needs neccessary for individual development are met; deserts are rewards for contributions to society - they should equal one's contributions, i.e. what you put in, is what you get out; equality here describes the idea that citizenship is to be distributed equally, i.e. no is to be degraded to the status of being a second class citizen.The distribution of household income in the U.S. lends itself as an example for why redistribution is necessary for the sake of ef...
More About: Unfair , Inequality

What is liberalism anyways?
2008-05-29 22:33:00
Contemporary political discourse commonly takes place in terms of liberal vs. conservative. The former is used synonymous with "left" and the latter synonymous with the "right." From time to time we hear of libertarians who are often see as left on social and right on economic issues. Yet, while modern liberals are left of center, there are other distinct ideologies on the left: social democracy, democratic socialism and Marxist socialism. Equating modern liberals with democratic socialists, as some libertarians or conservatives do, is little more than an extravagant display of what is either ignorance or an over-zealous attempt to show once ideological opponents in a negative light.So what is liberalism? Well there are two main kinds of liberalism: classical liberalism (think Friedrich Van Hayek, CATO Institute, etc...) and modern liberalism (what is simply called liberalism in the U.S.). Both classic and modern liberalism see the advancement of freedom as key to the perpetuation o...
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Bush's biggest nutjob
2008-05-29 22:30:00
Steven Pinker, the famous Harvard psychology professor, has a new article out in the TNR on Bush's advisory panel on bioethics. The article makes an interesting argument on the concept of dignity being misused to condemn a technology that could ease the suffering of millions. While I can only recommend this article (The Stupidity of Dignity), it is Leon R. Kass, the advisor of bio ethics to President Bush who stole my attention. I commonly do not refer to people as nutjobs, but considering the remarks by this far-right, well, nut, I can't help myself. Here's a taste of Mr. Kass' insight into the human condition. While you read this, please remember that President Bush appointed this man as one of his advisors and put him in charge of putting together his council on bioethics. These words were written by an advisor Mr. Bush actually listens to:Worst of all from this point of view are those more incvilized forms of eating, like licking an ice cream cone - a catlike activity that h...

Government: the anti-dote for poverty?
2008-05-29 22:28:00
To some extent, undoubtely. Government is not always the problem, more often than not it is the solution. Of course, these soundbites and reckless over-simplifcations are quite useless. Rather public policy should be based on a pragmatic, case by case apporach. The question here is, do taxes and tranfers acheive their goal of alleviating poverty. From the answer we can infer whether or not they are a) desirable and b) an expansion should be considered. Kenworthy (1999) found a significant difference between the pre-transfer, pre-tax and post-transfer, post-tax absolute poverty rates in sixteen affluent democracies. To facilitate a cross national comparison, Kenworthy used data from the Luxembourg Income Survey (LIS) and an absolute poverty threshold set at 40% of U.S. median household income. She used purchasing power parity rates from the OECD for currency conversion. Income figures were also adjusted for household size, with the standard equalization scale of 0.5 for each addition...
More About: Poverty , Anti

How to fix a recession
2008-05-10 05:25:00
In a recession the government should reduce spending to avoid a costly deficit, whereas during boom times it should increase investment in the public sector to boost growth, efficiency and perpetuate the common good further. Right? Wrong! You just got a 0 on this quiz.It is during a recession that government increases spending and during boom times that the deficit incurred during the recession is paid of. In other words, when private sector spending goes down and economy slows, government increases spending. This is the time to build new colleges and universities, k-12 schools, highways, police stations, dispatch centers, parks, etc... Won't this create a deficit? Yes, it most likely will, as tax revenues decline during a recession. But, as any economist knows, not all deficits are created equal. First, investment in schools, infrastructure and the like is exactly that: an investment. Investments have returns, so does social sector spending. Part of the cost of a deficit derived f...
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Why markets fail
2008-05-10 05:23:00
Why not let the market provide second generation rights and an equitable distribution of resources? Because it cannot. There is little doubt that the market is the greatest tool humanity has found for the allocation of resources to date. Introductory economics textbooks tell students how efficiently the market can muster the complex task of adjusting the allocation of resources without any central management. Yet, these textbooks also tell students that "there is no question that government must be involved" (Case & Fair, 2007, p. 350). The market only distributes goods efficiently under certain conditions. As Stiglitz noted in his 1998 Lecture on Economics in Government,"Today, many of us look at the fundamental theorem not as a description of the world, but as an explication of the conditions under which a market equilibrium will be Pareto efficient... The importance of some of the more explicit assumptions-like the lack of externalities and the completeness of markets-has lon...
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Does being black still mean being poor?
2008-05-10 05:22:00
Unfortunately, yes, it still does to a considerable extent.While the welfare state lessens overall poverty, pockets of poverty still exist and are in need of further attention from the state. African Americans, especially African American women, are a good example. In 2006, roughly half of all African American children, 49.7%, and 44.5% of African American single mothers lived below the official poverty line set by the U.S. government at three times what is needed to sustain a nutritious diet. By comparison the overall national poverty rate was clocked at 11.7% (U.S. Census Bureau, 2007cd). One of the reasons for the high incidence of poverty among members of this group was lacking labor force participation. A plurality, 44.4%, of poor African Americans lived in households whose householder did not participate in the labor force. The most common reasons for not being able to work were illness of disability (34.9%), school (24.4%), "home or family reasons" (18.6), being retired (18.9...
More About: Black , Poor

What is social justice?
2008-05-10 05:21:00
American philosopher John Rawls (1972) stipulated that resources should be distributed in such a manner as to maximize benefit for the least advantaged members of society. Any inequality can only be justified if they are beneficial to the weakest members of society. A perhaps more familiar conception of social justice articulated by David Miller. According to Miller, social justice consists of three components: rights, deserts and needs. The first consists of largely of negative first-generation rights, such as equality before the law and freedom of speech. The second consists of "the recognition of each person's action and qualities," which implies proportional compensation for one's contributions to society. Any judgment on what constitutes due recognition for a given action or quality, will inevitably be made relative to other members of society (e.g. it is not possible to determine whether or not my income constitutes a just reward without comparing myself to others). The thir...
More About: Social , Justice , Social Justice

Why we are all supported by tax funds
2008-04-04 02:14:00
All rights, both negative (private property, abortion, etc...) and positive (education, health care, etc...) require government action financed by the taxpayer. In their great book The Cost of Rights (1999, W. W. Norton), political scientists Stephen Holmes (Princeton & NYU law) and Cass R. Sunstein (University of Chicago), explain why:"All rights are claims to an affirmative governmental response. All rights... amount to entitlements defined and safeguarded by the law" (p. 44).Thus all rights, even negative rights have direct budgetary costs; costs paid by the taxpayer, for these rights are created and maintained by government. Anyone who ownes so much as a bike or toothbursh is taking advantage of a government entitlement. Again I will let professors Holmes and Sunstain explain:"Staring hard at costs shatters the libertarian fiction that individuals who excercise their rights, in the classical eighteenth-century sense, are just going about their business, immaculately independ...
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The official UN chater on human rights
2008-03-27 07:34:00
In 1948 the leaders of the world agreed that the following constitute basic inalianable human rights to which every person is entitled. You are entitled to each of the following. As a some whose passion is political-economy my favorites are Articles 22 through 26. I beleive it is imperative that more people read this official charter on human rights which has been in effect for 60 years:Now, Therefore THE GENERAL ASSEMBLY proclaims THIS UNIVERSAL DECLARATION OF HUMAN RIGHTS as a common standard of achievement for all peoples and all nations, to the end that every individual and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote respect for these rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance, both among the peoples of Member States themselves and among the peoples of territories under their jurisdiction.Article 1.All hum...
More About: Human , Rights , Human Rights , Official

Bush's legacy of red ink
2008-03-23 06:53:00
The Bush administration has accumulated record amounts of debt, and most of it cannot be blamed on terrorists, but domestic economic policy. I do warn you, the topic of budget policy is one that involves numbers and percentages, and lots of them, so if you have a weak stomach for percentages and numbers, have a bottle of Bepto ready. Unfortunately it is this rather dry information, that is so essential to making wise policy decisions. While the Clinton administration managed to lower public debt, the Bush administration has reversed this trend and rivals the Reagan and first Bush administration for deficit spending. The Department of the Treasury releases a statement of public debt on the last day of each month. The most recent statement, issued on October 31st, puts the nation's current debt at roughly $9 trillion, 69% of GDP, or $29,964 per person; enough to purchase a new $45,000 Mercedes-Benz E-Class for each of the nation's 196 million licensed drivers (though that would not ...
More About: Legacy

Mind the opportunity cost!
2008-03-23 06:50:00
The reason I chose to study political economy is probably the same reason that few things get my blood boiling as much as the Bush tax cuts. I think it is a weird obsession with (in)efficiency that leads to this behavior - but perhaps I should consult a shrink, for no one with an interest in such a dull topic can be considered normal. Then again, I hope that self-depreciating humors is a sign of mental health. Anywho, my latest thoughts on that giant mother of all wastes of money: the Bush tax cuts:While, the Bush administration's tax cuts may not have produced the economic growth its proponents promised (I have writen about this before and won't again here; for some good info see Gale & Orzsag, 2004; Price, 2005 & Price & Ratner, 2005), they did leave American society with a large bill. As of December 2006, the Bush tax cuts have cost $1.16 trillion (Fielder & Kogan, 2006). For comparison, the 2006 gross domestic product of South Korea is the 13th largest in the w...
More About: Opportunity , Cost , Mind

It's no fun agreeing with Winston Churchill
2008-03-23 06:46:00
Democracy has been on my mind recently. Whether I like it or not, the more I think about it, the more I agree with Winston Churchill that, "that democracy is the worst form of government except all the others that have been tried." That is to say, that I embrace democracy on the same grounds as capitalism. Because there is no viable alternative to it.As much as I hate elitism and condescendence, I cannot help but come to the conclusion that democracy vests vast amounts of authority and power in the hands of those who may well lack the information required to use that power as well as humanly possible. Allow me to explain using an analogy:One would not consult a lawyer, if one becomes ill - one consults a physician. One would not, however, consult a physician for legal advice, nor would one consult a physician or an attorney for designing a bridge - one would consult a civil engineer. It is not that the attorney or the physician lack the mental capability to design a bridge; they sim...

How's the average Joe doin'?
2008-03-15 02:49:00
Over the past couple of years, the middle class squeeze has once again come to the fore-front of the public's conscious (it has made occasional appearances for over a century). In a recent research paper, still undergoing review for publication ,I examined loads of data and studies on the subject. My research supports Princeton economist Paul Krugman in his assertion that we have entered a second gilded age. That is, we are in an age where the middle class and the average Joe are rapidly falling behind the rich, with the average household not having seen an increase in average income since the late 1990s.According to Emmanuel Saez, professor of economics at the University of California, Berkley, "the economy is growing but only a few are enjoying the benefits" According to Janet Yellen, economist at UC Berkley and former CEO of the Federal Reserve in San Francisco, "the growth [in real income] was heavily concentrated at the very tip of the top, that is, the top 1 percent." Accordi...
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The morals of immigration
2008-03-08 01:45:00
The debate over immigration is nothing new. For well over a decade now, policy wonks, academics and ordinary citizens have been debating the topic. In my experience, few topics ignite as much passion (and anger) in my fellow citizens, as does immigration. So, recently I decided to look into the topic as part of my studies and ended up publishing a paper on U.S. immigration policy (published by a journal at Lethbridge Univeristy in Albert, Canada of all places - oh, the irony). While researching the topic, I felt the need to first determine on what philosophical basis immigration could be restricted:Reason dictates that a law must either protect or perpetuate the common good in order to be rational and just... John Stuart Mill articulated this idea in his book On Liberty in a concept named the harm principle. According to the harm principle, "the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to ...
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The morals of immigration
2008-03-08 01:45:00
The debate over immigration is nothing new. For well over a decade now, policy wonks, academics and ordinary citizens have been debating the topic. In my experience, few topics ignite as much passion (and anger) in my fellow citizens, as does immigration. So, recently I decided to look into the topic as part of my studies and ended up publishing a paper on U.S. immigration policy (published by a journal at Lethbridge Univeristy in Albert, Canada of all places - oh, the irony). While researching the topic, I felt the need to first determine on what philosophical basis immigration could be restricted:Reason dictates that a law must either protect or perpetuate the common good in order to be rational and just... John Stuart Mill articulated this idea in his book On Liberty in a concept named the harm principle. According to the harm principle, "the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to ...
More About: Immigration , Morals

Are corporations evil psychopaths?
2008-03-06 03:10:00
Corporations have been hailed as machines of progress by free-marketers and evil psychopathic institutions by environmentalists and many academics. Both statements are true. While corporations are legally treated as individuals, they are not. Corporations do drive progress, largely by creating jobs and conducting R&D. Yet, they also degrade the environemnt, exploit workers and manipulate consumers as well as government policy in their favor. This seemingly paradox effect on society should not come as a suprise. Few human institutions fit neatly into a balck & white - good vs. evil framework. Corporations are both evil pyschopaths and economic godsends. The good news is that with the right type of policy the negative effects of corporate behavior can be minimized and the positive effects maximized.So why are corporations psychopaths? Because they are not people, but institutions who act only - as a matter of fact they have a legal obligation to - in their own interest. In a l...
More About: Evil , Corporations

Why we need unions?
2008-03-03 04:43:00
Because of the way markets work. The market is a great tool for the allocation of resources. It is arguably the best tool we have for the distribution of most, though not all, resources, despite its shortcomings. The market sets prices through a negotiation, a "tug of war" if you will, between consumers (demand) and suppliers. Both sides are completely antagonistic - each party's desires are completely opposites. The market price represents the price where suppliers are willing to supply a given quantity and consumers are willing and able to purchase that given quantity of the good in question. Simple so far, right? (remember that this is, of course, a simplified neoclassical explanation, but it suffices).If both sides in this "tug of war" are equally powerful the market price would be a perfectly fair compromise, assuming that both sides negotiate effectively. If, however, one side has more power, the outcome would be unfair, as that side would be able to push its demands further....
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It's not culture that causes the real inequality.
2008-03-01 01:55:00
So, The New Republic, flagship magazine of the center-left (though the American Prospect, founded by the likes of Robert Reich and Paul Starr no less, certainly fits that category as well), featured a guest column by libertarian Brink Lindsey, an attorney who is now vice president for research at CATO institute. In Culture of Success, he attempt to tackle the inequality riddle, but examining “what is holding back lower-income Americans from going to college.” His analysis of why working class kids are so much less likely to go to college as middle and upper middle class kids is factually accurate and does a reasonable job of explaining the “education gap” (pretty good for an attorney covering a sociological issue). His analysis of income inequality, however, completely misses the point.According to Lindsay, the rising college costs are not the sole reason why lower income Americans aren’t going to college (I do have to give credit him with acknowledging the facts that coll...
More About: Real , Inequality

Saving the Academy
2008-02-28 08:26:00
The word "university" has become rather cheap these days, thanks to various post-secondary institutions, such as the University of Phoenix dubbing themselves "universities." Yet, are they really universities?What is a Univerity anways? A university is not simply a post-secondary school. It is an institution where students learn not merely job skills, but also the way in which society works, how their environment, social, economic, political and physical, is structured as well as the ability to think critically. It is also an institution whose faculty conducts research and widens the horizons of society. Community colleges are like universities in the sense that they too teach students about the working of the world they live in and be better prepared for participation in the grand social experiment that is modern day society. The difference is that they concentrate on the first two years, that is laying the essential framework for a university education. Their focus and purpose, how...
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How current inequality is shattering the American Dream
2008-02-27 11:44:00
Social justice, as manifested in the American Dream , compromises two socio-economic principles. One is the belief that if people work hard, attain an education and make the most of their skills they can become successful. The other is the belief that everyone ought to have a chance at self-actualization and economic success. Both beliefs are undermined by excessive income inequality. The difference in compensation between the members of the upper class and upper middle class simply does not match the difference in qualifications and societal contributions. The gap between the rich and the bottom 99% has grown out of proportion, especially when compared to the much smaller gap between the upper middle and working class. If upper middle class professionals hold the highest educational attainment and most prestigious positions within society, how can the gap between the capitalist class and professional class be so much larger than the gap between the working and professional class?The...
More About: The American Dream , Current , American Dream

Why do conservatives love the rich?
2008-02-27 01:16:00
Quite frankly I can only guess. Of course my field of political-economy does not deal with why many Americans love the rich; it deals with inequality, it's (negative) effects and possible remedies. I have recently noticed however, how many conservatives argue against higher taxes for the rich, despite most economists supporting such measures on the grounds of overwhelming evidence that the rich are undertaxed and the growing gap between the top 1% and bottom 99% is indeed a problem, as though they love the rich. Are they the hardest working demographic? No, that's the middle class. Census data shows that the percentage of those who work more than 50 hours is lower among the top 5% than among those between the 80th and 95th percentile. Are they more educated or cultured? No, that's the middle class too. The percentage of college graduates among the top 5% is once again lower than among those between the 80th and 95th percentile. Professors & professionals, the most educated wo...
More About: Love , Rich , Conservatives

Is Gen-X conservative & Gen-Y liberal?
2008-02-25 00:29:00
Yes. A study published in the Journal of General Internal Medicine (just about the last place I would expect to find data on political attitudes) found that U.S. medican students are considerably more likely to be liberal than young adults overall, who in turn are considerably more liberal than Generation X-ers. Not only is it interesting that those wishing to become doctors are more likely to be liberal, the study also confirms the notion that the mellenium boomers are more liberal than the Generation-Xers (data regarding the young in general & Gen-Xers is taken from Gallup surveys). The difference among those identifying as conservative between Gen-Xers & millenium boomers is a whopping ten percentage points. According to the sudy political-identification among these demograhics breaks down as follows:Overall, age 18-25Moderate: 39%Liberal : 30%Conservative : 29%Overall, Generation X, age 25-38Conservative: 39%Moderate: 36%Liberal: 23%Medical Students:Liberal: 40%Moderate: 3...

GOP vs. fairness
2008-02-17 06:51:00
The Republican Party exhibits an incredible disregard for the concept of fairness and justice there days. Case in point: California's budget deficit. As if it wasn't enough that they got Democrats to agree to cutting social services, rather than increasing taxes on the rich (those making $1 million/yr. or more), they have blocked a bill in the state assembly that would have closed a loophole in the state sales tax on luxury yachts and super high-end conspicuous consumption. In other words, California's Republicans favor burdening children, the sick and the elderly with the burden of the current deficit rather than the super-rich. Why tax the conspicuous consumption of multi-millionaires when you can deprive children of a better education and health care? At this point I am going to seriously question the moral judgment of these lawmakers, for it seems that common sense and the concept of fairness elude these Republican lawmakers (note that some GOP assemblymen did vote in favor o...
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Let's add a story to the figures
2008-02-13 07:51:00
This short video portraits current injustice certainly in a more interesting manner than my 20+ page research papers, tables, bar and pie charts. Here are some of the figures to back the above up: The share of after-tax income of top 1% went from 7.5% to 14% between 1979 and 2004, after having remained below 8% from the late 1930s to the late 1970s.The Bush tax cuts have not spurred growth but cost $1.2 trillion.The average income of the top 1% has increased by 176% between 1979 and 2004, while median household income has increased by a mere 23% (largely as a result of more households with 2+ earners) and wages for fully employed men are now slightly lower than in 1973.The vast, vast majority of economists support government redistribution of income, something our government has been involved in since 1917 (with the initial success of reducing inequality, cutting the top percentile's share of income by more than half under FDR). In recent decades, however, the political right has g...
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The Bush legacy
2008-02-13 03:09:00
The following developments constitute the Bush policy (good & bad):The Bad:Rising inequality: The top 1% pulled ahead of the bottom 99%, with its share of income as large as in 1928 and twice as high as in 1979. Between 2004 & 2005 the mean after-tax income of the top 1% increased by $146,000, while income for the average American remained stangnant (see below).Stagnant incomes: Median household and personal income remained stagnant. Meidan household income was at $48,000 in 2006, compared to $48,000 in 1998 (when adjusted for inflation).Rising poverty: Poverty & the percentage of uninsured rose slightly, the fromer from 10.2% in 2000 to 12.3% in 2006 and the latter from 13.7% in 2000 to 15.8% in 2006.Waste: Tax cuts cost $1.2 trillion but didn't spur growth, accounting for 51% of all new debt that created the record deficit. He also created the Dept. of Homeland Security, which wasn't needed; the funds could have been put to better use if given to the FBI & CIA di...
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Tax & Grow
2008-02-12 08:22:00
So, high taxes on the rich bring economic growth to a grinding halt, or at least slow it down considerably, while a decrease will spur growth. I have written on that topic before; indeed two of my last three journal publications and several of my blog entries have been on the topic. Not only has Scandinavia and Ireland seen as much growth as the U.S. in recent years (graph 2), but the U.S. saw its strongest growth rates when top tax rates were at their highest level - in the 50s & 60s (graph 1). Today consensus is that the Reagan tax cuts did not spur enough growth to pay for them (not even close) and the Bush cuts just plainly failed to considerably affect growth rates (cutting an already low rate isn't going to have much of an effect) and simply wasted $1.2 trillion so far. Grow th in the U.S. (blue) & top marginal tax rate (pink), between 1950 and 2005. GDP growth in high tax countries and post-Bush tax cut America.Oh yeah, did I mention that the top percentile's share ...

Mirror, mirror on the wall, what's the most developed country in the world?
2008-02-12 07:10:00
Iceland. For the first time in a couple of years it's not Norway or Canada. The Human Development Index (HDI) is the currenly most comprhensive and best measure for prosperity. According to the measure, which includes GDP per capita, life expetancy, infant mortality and literacy, the following are the most developed countries: IcelandNorwayAustraliaCanadaIrelandSweden SwitzerlandJapanNetherlandsFranceFinlandU nited StatesSpainDenmarkAustriaWe are now officially the 12th most developed country, third among large countries (50 million pop +), behind Japan and France (one could also say #4, if one considers Canada to be a populous nation). I am always fascinated by the fact that those countries bordering the artic circle, save for Russia, are commonly among the world's most developed - just remeber that Iceland, Ice-land, is the most developed nation. Overall, Scandinavia is once again the world's most developed region, followed by North America. Other large countries include the UK (...
More About: Country , World , Wall , The World , Mirror

Obama on McCain's embrace of tax cuts for the rich
2008-02-02 02:09:00
McCain opposed both Bush tax cuts, i.e. he voted against them in the Senate, becuase he beleived they disporportinately favored the rich (so he said back then). Considering the statements made in the "Economists Statement Opposing the Bush Tax Cuts " (not the mention the near universal conclusion among most analysists that the Bush tax cuts did not help spur the growth needed to pay for them & simply increased inequality), that might have been a good idea. But now, like George Bush Sr. & Bob Dole before him, McCain has had a miracolous aphiany: that most social scientsits & economists are wrong, that the overaboundend evidence suggesting the tax cuts didn't work is so flawed as to be ignored and that the Bush tax cuts should be made permanent. Obama offered this great insight: "I respect that John McCain, in the first two rounds of Bush tax cuts, said [they are] irresponsible... [but] somewhere along the line, the `Straight Talk Express' lost some wheels and now he is i...
More About: Rich , Embrace

Four Left
2008-01-31 05:27:00
Even before Super Tuesday, only four candidates are left. Many analysts expected that it would be a couple of months until we see the field shrink to this point. It seems that what John Stewart described as a "cluster%#$@ to the White House" is now a 2 on 2 race, even before Super Tuesday. Among Democrats only Clinton and Obama are left; among Republicans only McCain and Romney remain (true Paul & Huckabee are still running but neither has a realistic shot). While the Democratic outcome: Clinton & Obama was no surprise, the Republican field has changed considerably - who would have expected Giuliani’s and Thompson's too drop out before Huckabee! I suppose Super Tuesday will pick the winner for each. While I personally voted for Clinton, I am quite certain Obama would make a good president as well (what we really need is a Democrat in the White House to stop or at least slow (as Clinton did) the ascendency of the new right that has characterized the political landscape sin...
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