Enlightened Economics

Economics for an Enlightened Age

• Can income redistribution help fight depression?

Posted by Ron Robins on February 28, 2015

“The average poor person has about two and a half times the level of painful emotions as the average rich person… the decline in painful emotions with [increasing] income, both on average and at the mood-disorder level, is actually caused by changes in income. This means depression is a consequence of poverty. Further, the causal effect of income on emotional pain is much stronger at low incomes than high ones… Opponents of shifting the tax burden back to high earners often argue that doing so will hurt economic growth. We needn’t be too worried. Compared to the past 35 years, U.S. economic growth was actually higher under the more progressive tax regime of 1950 to 1980.”
—  
Can income redistribution help fight depression? By David Clingingsmith, February 25, 2015, Corporate Knights, Canada

Commentary: Ron Robins
This is an important study. However, I’d argue that the real problem of poverty and its deleterious effects for psychological health relative to those with higher incomes, can be reduced with poor people participating in the financial benefits that accrue with corporate ownership. (And I’m not talking about socialism or communism!)

I believe an enlightened approach would be for the wealthy — and for corporations themselves — in each country to entrust a certain percentage of their profits in the form of company stock to a ‘sovereign wealth fund.’ Over time, some of the dividends and stock gains could be cashed and used to directly increase the incomes of the poor. Higher taxes for the rich (which is becoming popular), advocated in the above article, could be introduced now but would probably have to be quite onerous to significantly improve the income of the poor and ameliorate their emotional distress to any great degree.

Furthermore, as it’s proving in France which imposed very high taxes on high incomes, the wealthy become very adept in finding ways to avoid the higher taxes — and many even moving themselves to other jurisdictions!

Posted in Consciousness/Psychology, Economics, Labour Issues, News, Commentary | Tagged: , , , , , , , | Leave a Comment »

• Currency Battle Is Tethered to Obama Trade Agenda

Posted by Ron Robins on February 17, 2015

“If members of Congress are to be believed, unless the president’s trade negotiator includes strict, enforceable prohibitions on policies to intentionally hold down the value of currencies, any completed trade accord will die on Capitol Hill. But, administration officials say, demanding the inclusion of such prohibitions would kill the trade deals before they were completed… Some 230 members of the House have pledged in writing to oppose future trade deals without action on currency, more than enough to stop the president’s agenda.”
– Currency Battle Is Tethered to Obama Trade Agenda , by Jonathan Weisman, February 16, 2015, The New York Times, U.S.A.

Commentary: Ron Robins
Many astute observers in the financial world are deeply concerned about ‘currency wars.’ I share their concern. Furthermore, I have long argued that central bank activities such QE and interest rate manipulations — though seemingly a relatively easy antidote to immediate economic ills — eventually lead to the breakdown of the very economic system it seeks to preserve. And one of the main reasons for that will be their knock-on effects on currencies.

To gain economic advantage or even just to maintain one’s present standing, nations are being forced into QE of various types as well as manipulating lower their interest rates, thereby increasing monetary aggregates and forcing down their currency values. Competitive currency wars are ensuing and economic distress is spreading. In the end, most, if not all nations will be forced to agree to abandon QE and interest rate manipulations.

Nature itself, is cyclic. So it seems is economic thinking with regard to manipulating or not economic activities. At this time the cyclic pendulum’s return to either truly free enlightened trading between nations, or to one that’s highly restrictive, is in our future. I believe in and hope for the former!

Posted in Economics, Monetary Policy | Tagged: , , , , | Leave a Comment »

• Stronger Environmental Policies Do Not Hurt Economic Growth

Posted by Ron Robins on January 16, 2015

“Studies of individual environmental laws, such as the Clean Air Act, have found that they have little impact on employment and productivity… Now, there is hard data showing that more, and more stringent environmental policies do not harm economic growth.

That’s the finding of researchers at the Organisation for Economic Co-operation and Development who have compiled the first comprehensive set of data on environmental strictness and its effect on productivity. The figures cover 24 OECD countries from 1990 to 2012, and draw on the ORBIS database of information on 44 million companies. The report’s conclusion contradicts what governments and companies often believe: that green regulations may be justified in the long run, but that they come with immediate, substantial economic costs. One interesting point: stricter environmental policies may encourage businesses to invest more in efficiencies and innovations than they would have otherwise.”
– John Howell for 3BL Media.

Commentary: Ron Robins
That such a respected economic body like the OECD finds that environmental laws do not hurt economic growth should be become a major plank in the platform of political parties everywhere. That way the idea can be embedded in public consciousness and spur governments and businesses to not be afraid of environmental regulations.

However, I believe a superior way to accomplish this goal would be based on market-based pricing mechanisms that allow for full product costing that includes societal health and environmental costs. I would propose a scaling up over time of the inclusion of such costs and that all trade agreements be amended to account for them. Presently, this is probably impractical, but from a free market perspective might be preferable to government imposed regulations and laws. Such a market-based mechanism might also be less expensive to administer. Just a hunch though…

Posted in Economics, Environment, News, Commentary | Tagged: , , , | Leave a Comment »

 
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