“The tapeworm of American economic competitiveness”
Today’s quiz:
- What rose from 5% of U.S. GDP in 1960 to 17% today?
- What fell from 4% of U.S. GDP in 1960 to 2% today?
Answers:
- Health care costs.
- Corporate taxes.
Extra credit question: Which one’s a drag on the competitiveness of the U.S. economy?
Here’s Warren Buffett’s answer:
“Medical costs are the tapeworm of American economic competitiveness,” Mr. Buffett said, using a metaphor he has employed in the past to describe the insidious and parasitic costs of our health care system….
Mr. Buffett is a Democrat, but his business partner, Charles T. Munger, is a Republican — and a rare one who has advocated a single-payer health care system. Under his plan, which Mr. Buffett agrees with, the United States would enact a sort of universal type of coverage for all citizens — perhaps along the lines of the Medicaid system — with an opt-out provision that would allow the wealthy to still get concierge medicine.
Read more here.
Thinking about groupthink
Conventional economics has long oversold individual rationality as the basis for how the economy works. Here’s one of the ways:
Humans rarely think for themselves. Rather, we think in groups…. Most of our views are shaped by communal groupthink rather than individual rationality, and we cling to these views because of group loyalty.
This poses a conundrum worth thinking about – individually and together:
Bombarding people with facts and exposing their individual ignorance is likely to backfire. Most people don’t like too many facts, and they certainly don’t like to feel stupid. If you think that you can convince Donald Trump of the truth of global warming by presenting him with the relevant facts — think again.
See this review of The Knowledge Illusion: Why We Never Think Alone.
Arms race – children’s version 1.0
More than three decades ago, the classic American television show “Mister Rogers” explained the “logic” of arms races – and their social cost – to children. The tapes, lost for years, just resurfaced:
Last week, someone mysteriously uploaded a series of lost episodes of Mr. Rogers’ Neighborhood to YouTube. The episodes, called the “conflict series,” originally aired on PBS at the height of Cold War tensions in 1983 and sought to teach children about the dangers of stockpiling weapons.
Sound timely?
Read more here. (The “Neighborhood of Make-Believe” clip begins at the 15:25 mark in the YouTube video embedded in the story.)
Check it out, kids.
The economics hammer
How narrow-gauge economics leads to narrow-gauge policies:
Walk half a city block in downtown Washington, and there is a good chance that you will pass an economist. People with advanced training in the field shape policy on subjects as varied as how health care is provided, broadcast licenses auctioned or air pollution regulated….
They say when all you have is a hammer, every problem looks like a nail. And the risk is that when every policy adviser is an economist, every problem looks like inadequate per-capita gross domestic product.
Read more here.
Crazy subsidies
In a stunning display of how political clout trumps (excuse me) common sense, nations of the world spend trillions every year subsidizing fossil fuels. It’s like paying people to drink poison. Check out one of the latest estimates:
A fossil fuel subsidy is any government policy that lowers the cost of fossil fuel production, raises prices received by producers, or lowers prices paid by consumers: they can consist of tax breaks and direct funding for fossil fuel companies. But subsidies can also consist of loans, price controls, or giveaways in the form of land or water at below market-rates, and many other actions.
They have been so high across the world, finds Dr. Radek Stefanski—an economist at the University of St. Andrews in Scotland— that they are nearly four and a half times higher than previously believed.
So what’s the damage? It’s pretty colossal. For the last year in his model, 2010, Stefanski found that the total global direct and indirect financial costs of all fossil fuel subsidies was $1.82 trillion, or 3.8 percent of global GDP. He also found that the subsidies meant much higher carbon emissions released into our atmosphere.
Remarkably, the International Monetary Fund puts the price tag even higher:
In 2015, the International Monetary Fund (IMF) calculated that global fossil fuel subsidies amounted to a monumental $5.3 trillion, which is 6.5% of global GDP—up from $4.9 trillion in 2013. The IMF even had to revise its old figure for 2011, which originally estimated the global subsidies at 2 trillion dollars. The real figure for 2011, the fund concluded, was $4.2 trillion.
Read more here.
Questioning econocracy
From a review of the new book, The Econocracy:
The most devastating evidence in this book concerns what goes into making an economist. The authors analysed 174 economics modules … making this the most comprehensive curriculum review I know of. Focusing on the exams that undergraduates were asked to prepare for, they found a heavy reliance on multiple choice. The vast bulk of the questions asked students either to describe a model or theory, or to show how economic events could be explained by them. Rarely were they asked to assess the models themselves. In essence, they were being tested on whether they had memorised the catechism and could recite it under invigilation.
Full review here.
Read more about the book here.
Do we need a federal job guarantee?
Economist Mark Paul makes the case for guaranteed employment in an interview with Tucker Carlson:
Bullshit 101
A timely addition to the curriculum from the University of Washington:
The world is awash in bullshit. Politicians are unconstrained by facts. Science is conducted by press release. Higher education rewards bullshit over analytic thought. Startup culture elevates bullshit to high art. Advertisers wink conspiratorially and invite us to join them in seeing through all the bullshit — and take advantage of our lowered guard to bombard us with bullshit of the second order. The majority of administrative activity, whether in private business or the public sphere, seems to be little more than a sophisticated exercise in the combinatorial reassembly of bullshit.
We’re sick of it. It’s time to do something, and as educators, one constructive thing we know how to do is to teach people. So, the aim of this course is to help students navigate the bullshit-rich modern environment by identifying bullshit, seeing through it, and combating it with effective analysis and argument.
Inequality undermining Social Security
The upward redistribution of income in the U.S. is undermining the nation’s Social Security:
if you’re a millionaire, February 16th is the last day that you will pay into the social security for the entire year. That’s because the Federal payroll tax cap is set at $127,000, so any money made beyond this point, is not subject to taxation that would fund this very crucial Federal social program.
See Real News Network interview with Dean Baker of the Center for Economic Policy Research here.
The people’s park service
U.S. National Park Service employees defend the people’s commons:
Read about it here.
