Thursday, April 24, 2014

The New Abolitionists

The exchange value of a particular commodity is a matter of property rights.  Exchange value is not an immutable fact, but rather an artifact.  Change the rights and it changes exchange values.  An existing exchange value cannot be used to justify the property rights that produced it.  Rather it is a moral question about what kind of world we want to live in.
Chris Hayes writing in The Nation (May 12) draws a parallel between the loss of wealth of slave holders after the Civil War and the potential loss of the value of coal and petroleum reserves if we reduced mining and pumping.  He calls supporters of carbon regulation “The New Abolitionists.”  Before we shed crocodile tears for the dramatized losers, let’s ask what would have happened if humans had had the right to be free of slavery and now carbon emissions.  What compensation would you require to become a slave?  The cotton plantation owners could not afford to buy out these humans. 
Likewise, what compensation would environmentalists require to sell the right to pollute?  The oil companies and the strip miners could not afford to buy them.  Hayes calls our attention to the losses to them and assumes they own the right to pollute and drive people and their earth support system to extinction.  Property rights are the issue to be decided and no dollar signs that are produced by assuming one side owns are relevant.  It is ultimately a moral question and cannot be deduced from any exchange values.

Tuesday, April 15, 2014


Why would a people who got free of Russia now want to join the dictatorial Putin?  Is it just to have access to Russian oil?

Friday, April 4, 2014

Technology Screws the Little Guy

"The US stock market is rigged in favor of high-speed electronic trading firms, which use their advantages to extract billions from investors, according to the acclaimed author Michael Lewis.
In his new book Flash Boys: A Wall Street Revolt, Lewis says that firms are using their speed advantage to profit at the expense of other market participants to the tune of tens of billions of dollars.
"They are able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price," Lewis, whose book is available on Monday, said on the television program 60 Minutes on Sunday." Source: The Guardian UK 4 April 2013
      The fiscal reform act outlawed some of the egregious practices banks were using.  I thought this would reduce bank earnings, but it did not.  They are back to their old (and equally egregious) tricks.

Tuesday, April 1, 2014

Minimum Wage

President Obama is making a push to raise the minimum wage.  Many economists using simple supply and demand analysis are sure this will hurt low income people by destroying jobs.  Some states and cities have defied economists and passed higher minimum wages laws. Michael Reich and Ken Jacobs of the University of California Berkeley have found that the $13 minimum wage in San Francisco has not had the predicted ill effects.  "Our studies show that the impact of these laws on workers' wages (and access to health care) is strong and positive."  They says supply and demand analysis" is not the whole story though.  A full analysis must include the variety of other ways labor costs might be absorbed, including savings from reduced worker turnover and improved efficiency as well as higher prices and lower profits.  Modern economics therefore regards the employment effect of a minimum-wage increase as a question that is not decided by theory, but by empirical testing."
    Reich and Jacobs say that there is a moral value as well.   I used to tell my students, "You are not paying enough for your burgers. The workers need to eat too."

Quantitative Easing

Quantitative Easing, don’t you love that term?  It is meant to be psychic balm.

The idea behind it is that the central bank can buy Treasury Notes and mortgage-backed  securities and thus increase their prices and drive down long term interest rates. The low rates are supposed to enable firms to borrow and provide employment.
      In 2012, the Bank of England (BOE) issued a report that said that the Bank of England’s policies of quantitative easing (QE)– similar to the U.S. Fed’s – had benefited mainly the wealthy.
Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.
        Many said the BOE's easing added to social anger and unrest. Dhaval Joshi, of BCA Research  wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it."
     "The question is whether putting more profits into the hands of the top 5 percent will really generate jobs for the rest of America. So far, the evidence is not promising."
Robert Frank, CNBC

According to an article in Wikipedia, “Central banks in most developed nations (e.g., the United Kingdom, the United States, Japan, and the EU) are prohibited from buying government debt directly from the government and must instead buy it from the secondary market. This two-step process, where the government sells bonds to private entities which the central bank then buys, has been called 'monetizing the debt' by many analysts.  The distinguishing characteristic between QE and monetizing debt is that with QE, the central bank is creating money to stimulate the economy, not to finance government spending."  Got that distinction?
     This is double-speak, as if government spending in recessions does not stimulate the economy. The term “monetizing the debt” is meant to be a take-out stopping further thought. Young economists are taught that monetizing the public debt is bad.  Further, they are taught that helping banks is good and helping people without jobs is bad.  It makes labor lazy, but not bankers.  Got that?