Opportunity cost

Quiz 4 the day: Who said this?

Every gun that is made, every warship launched, every rocket fired signifies in the final sense a theft from those who hunger and are not fed, those who are cold and not clothed.

 

Answer: President Dwight D. Eisenhower in 1953.

Bonus question: What was his political party?

Quoted in Jill Lepore’s short history of the military-industrial complex in this week’s New Yorker. Read it here.

The student debt trap and inequality in America

Nobel laureate Joe Stiglitz writes:

In 2010, student debt, now $1 trillion, exceeded credit-card debt for the first time.

Student debt can almost never be wiped out, even in bankruptcy. A parent who co-signs a loan can’t necessarily have the debt discharged even if his child dies. The debt can’t be discharged even if the school — operated for profit and owned by exploitative financiers — provided an inadequate education, enticed the student with misleading promises, and failed to get her a decent job.

Instead of pouring money into the banks, we could have tried rebuilding the economy from the bottom up…. We could have recognized that when young people are jobless, their skills atrophy. We could have made sure that every young person was either in school, in a training program or on a job. Instead, we let youth unemployment rise to twice the national average. The children of the rich can stay in college or attend graduate school, without accumulating enormous debt, or take unpaid internships to beef up their résumés. Not so for those in the middle and bottom. We are sowing the seeds of ever more inequality in the coming years.

Read his dissection of how economic and political inequality are poisoning opportunity in America here.

What a deal

The fiscal cliff deal was a “crony capitalist blowout,” in the words of the Wall Street Journal. Bill Moyers explains why:

Source: http://billmoyers.com/segment/bill-moyers-essay-the-crony-capitalist-blowout/.

Development: beyond aid and trade

Dani Rodrik explains how rich countries could promote development overseas:

First, a new global compact should focus more directly on rich countries’ responsibilities. Second, it should emphasize policies beyond aid and trade that have an equal, if not greater, impact on poor countries’ development prospects.

A short list of such policies would include:

• carbon taxes and other measures to ameliorate climate change;
• more work visas to allow larger temporary migration flows from poor countries;
• strict controls on arms sales to developing nations;
• reduced support for repressive regimes; and
• improved sharing of financial information to reduce money laundering and tax avoidance.

Notice that most of these measures are actually aimed at reducing damage—for example, climate change, military conflict, and financial crime—that otherwise results from rich countries’ conduct. “Do no harm” is as good a principle here as it is in medicine.

Read his piece here.

Health care: where profits warp incentives

Echoing our recent Econ4 statement, Eduardo Porter explains in the New York Times why our healthcare-for-profit system means that Americans pay too much and get too little:

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.

By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Read his piece here.

The austerity fallacy

Austerity policies are founded on a fallacy of composition: the mistaken notion that if something is true of the part (in this case, households), it must be true of the whole (in this case, the nation’s economy). Paul Krugman, writing in the Times, explains the difference:

An economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar….

The crisis in Greece [from 2010] was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that “the idea that austerity measures could trigger stagnation is incorrect.”

Well, someone was incorrect, all right.

Read his piece here.

Race to the bottom

Econ4’s Jerry Epstein breaks downs the fallacy of ‘tax incentives’ as a lure to investment:

Source: The Real News Network.

Read the New York Times story on corporate tax giveaways here.

New narrative for a new economy

John Cavanagh and Robin Broad write on the new economy movement:

If the Occupy movement popularized the call to end extreme inequality, Hurricane Sandy is popularizing the call to rebuild our nation’s infrastructure in a green and resilient manner. Weaving these themes together can make for a gripping narrative.

Read more here.

Local business: Not just a smaller version of big business

Stacey Mitchell of the Institute for Self-Reliance says changing where you shop is only the first step:

Source: http://www.ilsr.org/

20,000 People a Year Die From Effects of Fossil Fuel Generation

Econ4’s own James Boyce calls out fossil fuel companies’ “low-level terrorism”, responsible for 20,000 American deaths every year.

From The Real News