Archive for May, 2010

As Nick is traveling, I’m covering the Friday Links today. This week, we covered the BP oil spill, our love and hate of cars, the future of small scale slaughethouses, the worker suicides in China, deficit debates, the movement for a separation of corporation and state, and Hilary Clinton’s misinformation.

Serious Links

Oil flow appears to have stopped!

Bill Easterly on the poverty conundrum

Frank Ackerman on the need for a new energy economics

Richard Alford on why we need a new macroeconomics

Mark Fiore delivers a Message from BP

Some thoughts on macro by Rajiv Sethi

More thoughts on macro from Mark Thoma

Keynes’ 1933 essay on national self-sufficiency

Stephen Leahy on involving women with UN Biodiversity


A Parent’s Guide for a New College Graduate [ht:ck]

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Hillary Clinton gave a speech at Brookings yesterday on the Obama admin’s national security strategy. During Q&A, the issue of deficits came up. Leaving aside the implicit deficit confusion issues, she also made a lie, and the state department left it in the transcript:

This is a very personally painful issue for me because it won’t surprise any of you to hear that I was very proud of the fact that when my husband ended his eight years, we had a balanced budget and a surplus. And that was not just an exercise in budgeteering; it was linked to a very clear understanding of what the United States needed to do to get positioned to lead for the foreseeable future, far into the 21st century.

And when President Obama came into office, he inherited a very different situation. And I watched this as a senator from New York. I voted against tax cuts that were never sustainable, wars that were never paid for, and now we’re paying the piper. And it’s unfortunate that this president has to take the necessary and difficult steps, which he clearly is committed to doing, that are not politically easy.

The main reason I supported Obama over her in the primary (once John Edwards, who I mistakenly voted for, bowed out), was because of her foreign policy hawkery. Now, she’s the secretary of state and seems much more dovish than Obama, what with the CIA drone strikes and lack of timetable in Afghanistan. In any case, unless I’m missing something, some sort of cognitive dissonance has deluded her into thinking she voted against the Iraq War.

Update: She did vote against the surge in 2007, but that was a completely political move to match Obama’s vote in the lead-up to their primary.

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The 28th Amendment

The Blame Game surrounding the oil spill has BP blaming Transocean, the owner of the drilling rig, who in turn blames Halliburton’s cement work to cap the well. And of course, this is also a failure of the Minerals Management Services to evaluate and regulate the drilling operation, so many are blaming the “revolving door” between the MMS and industry. Without catering to corporate influence, the argument goes, the MMS would have acted more in favor of the public interest.

This “revolving door” reappears as a factor in every crisis, it seems. The financial crisis could have been averted had Washington not been in Wall Street’s pocket.  Close the revolving door. The environmental and health problems surrounding food are due to agribusiness influence on the USDA, FDA, and food policy. Close the revolving door. Why do we fight? Washington is a key player in the military-industrial complex. Some even talk about an academic-industrial complex with is corrupting American higher education.

The Citizen’s United Supreme Court ruling was a step in the wrong direction. One can only hope that these recent tragedies give a renewal of vigor to movements such as the 28th Amendment Movement, which seeks an amendment to the US constitution called the Separation of Corporation and State, or the Move to Amend, which is part of the “Campaign to Legalize Democracy.”

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Paul Krugman finds a gem in the OECD Economic outlook, which argues that the Fed should start increasing interest rates by the end of 2010. This, he notes, is in spite of the OECD’s own outlook for low inflation and high unemployment through 2011. Krugman writes,

The only explanation seems to be at the beginning of that passage: some people, the report claims, are starting to think there might be inflation, so even though they’re wrong according to our forecasts, see, we need to head off this phantom threat and slow the economy’s recovery … what?

What’s so scary about this is that the OECD virtually defines conventional wisdom; it’s a numbered-paragraph sort of place, where a committee has to sign off on everything, policing the nuances as they say. So what we get from this is that among sensible people the idea that you should undermine recovery to appease those who think there might be inflation even though actually there isn’t has become conventional wisdom — so conventional that it’s treated as self-evident.

This is really, really bad.

The same conventional wisdom predominates with deficit hawkery, and of course, even a liberal like Obama feels compelled to buy in to this rhetoric and make salutary cuts. Beliefs from the 70s are now so firmly entrenched that all must pay homage to them or be discredited. We desperately need more folks of Jamie Galbraith’s stature to become much more strident in their deficit falconry- not just arguing, as Krugman and many in the mainstream have, that deficits are okay now. They must also argue that the deficits, at least as we’re used to them, are never harmful absent full employment (assuming fiscal and monetary sovereignty et al.).

Update (2:30 PM): Either I read Krugman’s mind or he read mine…he just put up a new post pointing out the stupidity of 90% debt/GDP as some big red line:

So what’s happening is that the idea that Really Bad Things happen when debt crosses 90 percent of GDP is being treated as a solid fact, when it’s nothing of the sort. And if the Obama commission feeds that false perception, right there it’s doing a lot of harm.

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As an owner of several Apple products, I’ve been tracking the disturbing story of working conditions inside the Foxcomm factory in China, where the iPad is assembled. People tend to forget that the relative low cost of our electronics are not just the result of technology, but also of the continued exploitation of labor. According to an undercover report,

Liu had his most interesting chats with other workers during meals. Some told him that they envied workers who are sick. They get leave approvals and can get some rest. They also discussed about accidents in the factory: One worker got his finger cut-off during production. A few workers think that the machines are cursed. They believe it’s dangerous for them to use the machines.

Another worker spoke about one of the favorite activities in the factory lines: He likes to drop stuff on the floor. Why? Workers spend achingly up to eight hours standing up, so they feel that squatting down to grab a fallen object is the most restful moment of their working day…

According to one worker, they can’t live without these dreams. They dream of becoming rich one day. Some spend part of their salaries buying lottery tickets and betting on horse races.

Of course, these working conditions would be no news if it weren’t for the wave of suicides in the factory.

Apple as well as Foxcomm executives are responding as one would expect, with stress counselors, psychiatrists, and false promises. Oh, they’re even installing a nets as deterrents.

It’s obvious to anyone that these are band-aids and aren’t addressing the root problem. Of course, wage increases or better working conditions wouldn’t accomplish that either. The fundamental problem is that in industrial capitalism, workers are alienated from the fruits their labor. These psychological damanges should surprise no one, as Karl Marx saw this alienation as a systemic part of capitalism. The exploitation that inherently occurs along with it certainly reduces the workers’ material standard of living, but that’s only half the problem. The idea that these conditions are unique to Apple, Foxcomm, or China is simply naive.

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In an attempt to protect the safety of consumers, the USDA is actually making things worse. Changes in food production in the United States, to large scale farming and feeding operations, have created new and formidable public health challenges. An E. coli outbreak, now more common due to the fast-paced and high volume slaughter houses, can spread across the country before it can be detected and traced to the source. In an attempt to protect consumers, the USDA has been piling on new layers of regulation. Ironically, this is only making it more difficult for small-scale farms and slaughter houses to survive. As Joe Cloud writes, [ht: Marion Nestle]

For small meat businesses in America, catastrophic events result from changes high up in the regulatory food chain that make it very difficult for small plants to adapt. The most recent extinction event occurred at the turn of the millennium, when small and very small USDA-inspected slaughter and processing plants were required to adopt the costly Hazard Analysis and Critical Control Point (HACCP) food safety plan. It has been estimated that 20 percent of existing small plants, and perhaps more, went out of business at that time. Now, proposed changes to HACCP for small and very small USDA-inspected plants threaten to take down many of the ones that remain, making healthy, local meats a rare commodity.

These small scale operations, just like the ones that used to be common across the country, are the ones that are most resilient to outbreaks:

Small, local meat processors have always supported food safety. At our plant, we have had a functioning HACCP plan since 1999, and it works. We undergo extensive E. coli testing every year, and we have never had a positive result—ever.

To seriously deal with the issues surrounding food safety, the USDA needs to write rules that accommodate small scale operations. This involves distancing itself from the corporate influence of US agribusiness. Only then will small scale farmers be able to meet the growing demand for local, ecologically smart meat.

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A new book by historian Brian Ladd explores love and hate in the automobile age:

From the Model T to the SUV, Autophobia reveals that our vexed relationship with the automobile is nothing new—in fact, debates over whether cars are forces of good or evil in our world have raged for over a century now, ever since the automobile was invented. According to Brian Ladd, this love and hate relationship we share with our cars is the defining quality of the automotive age.

But what is most impressive to me is how Ladd understands that cultural, political, and economic forces inform one another through history. He does not, as many economists do, simply assume that preferences are given, but instead builds a richer understanding of the role of the car  in our society. From the synopsis: “Eisenhower, Hitler, Jan and Dean, J. G. Ballard, Ralph Nader, OPEC, and, of course, cars, all come into play in this wide-ranging but remarkably wry and pithy book.”

Also from the synopsis, some thoughtful words on the car:

Cars are the scourge of civilization, responsible for everything from suburban sprawl and urban decay to environmental devastation and rampant climate change—not to mention our slavish dependence on foreign oil from dubious sources abroad. Add the astonishing price in human lives that we pay for our automobility—some thirty million people were killed in car accidents during the twentieth century—plus the countless number of hours we waste in gridlock traffic commuting to work, running errands, picking up our kids, and searching for parking, and one can’t help but ask: Haven’t we had enough already? After a century behind the wheel, could we be reaching the end of the automotive age?

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Boston.com has a depressing series of photos from the BP oil spill, which may now equal 13 Exxon Valdez spills. Just remember that criticizing British Petroleum is un-American.

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I’ve got some weekend homework, reading and reviewing Paul Collier’s book. Meanwhile, you need to catch up on what you may have missed this week on this blog: Brian Williams’ commencement address at ND; the Rise and Fall of GDP; Happiness, Norms, and Discount Rates; Galbraith and MMT; and Panera’s name-your-price store.

Serious Links

Chris Hayes on some recent direct action- The Nation

Lant Pritchett on competing ontologies of economic development- CGD blog

Edmund Andrews likes the FinReg bill that passed the Senate- Capitals Gains and Games

Nick Rowe on the “silent shift” in macro though- Worthwhile Canadian Initiative

Mark Weisbrot on “success” in the EU periphery- MRZine

Wynne Godley has passed away- RWER

Robert Skidelsky on the language barrier and financial crises- Project Syndicate

Ted Rall says oil companies should be nationalized- Common Dreams

Will BP’s low oil spill estimate save it money?- McClatchy

David Roberts says to focus on outcomes, not mechanisms, for climate change- Grist

David Ruccio says that Rand Paul’s attitudes about discrimination are thoroughly neoclassical- Anti-capitalism

Rodger Malcolm Mitchell on what debt hawkery means in practice- Federal Debt is Money


This xkcd comic hits close to home:

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Panera Bread logo

Panera Bread is trying something new at a St. Louis location:

Panera Bread Co. has reopened a downtown Clayton location as a nonprofit where customers can pay what they can afford.

“Take what you need, leave your fair share,” says a sign at the entrance of the Saint Louis Bread Company Cares Café. Patrons who can’t pay are asked to volunteer their time.

The café, which reopened Sunday as a nonprofit, has cashiers who provide receipts with suggested prices and direct customers to the store’s five donation boxes. The menu is the same, except for the day-old baked goods brought in from sister stores in the area.

Okay so not exactly a free lunch, but this does throw a wrench into neoclassical theory’s law of one price.  There is no equilibrium price here; instead, people pay different amounts depending on what they have or want to spend. And some can even pay by volunteering their time. It’s not clear that general equilibrium analysis is at all useful for this type of market.

In addition, this model calls into question the conventional understanding of economic man, as even the CEO observers:

“I’m trying to find out what human nature is all about,” Ron Shaich, who stepped down as Panera’s CEO last week but remains as chairman, told USA Today. “My hope is that we can eventually do this in every community where there’s a Panera.”

Lastly, a nonprofit restaurant whose main goal is to cover costs is quite different from the profit-maximizing firm that we learn about in our economic theory classes. Maybe, economists also need alternative theories of the firm.

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