Enlightened Economics

Economics for an Enlightened Age

Archive for the ‘News, Commentary’ Category

• 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!

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Posted in Consciousness/Psychology, Economics, Labour Issues, News, Commentary | Tagged: , , , , , , , | 1 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 »

• Should we print money to fund green investments?

Posted by Ron Robins on January 13, 2015

“GQE [Green Quantitative Easing] builds on the logic of QE, but fundamentally changes its objectives. In a GQE programme, new money is created – literally out of thin air – and used to buy bonds, but in this case they would be bonds issued by [UK] government-owned Green Investment Bank, local authorities, housing associations and other similar organisations, such as drainage boards.”
— Why we should print money to fund green investments, by Richard Murphy, January 12, 2015, Finance, Guardian Sustainable Business, U.K.

Commentary: Ron Robins
What a provocative idea! It sounds wonderful in theory. But would it work in practice? So far, the effects of QE in the U.K. and the U.S.A. have been to save the financial system from an immediate collapse (though probably putting it off for a while) while spurring modest growth–if you can believe the weird changes in their statistical methodologies and seasonal adjustments. Furthermore, it’s probably only because of the massive debt in the system that has stopped it from galloping into an inflationary frenzy.

No numbers are mentioned in this article but I believe adding this GQE to the already existent QE could create a real danger of galloping inflation. For starters, most of the services and products required for such a massive increase in green development would be strained and could very easily develop significant inflationary pressures, impacting many other sectors of the economy.

Also, if GQE were to happen there would be many other groups (the National Health Service for one) demanding the same QE programme. So where would it stop? I can understand the feelings behind this move. We would all like to see a greener and sustainable world. But I believe the risks of the process getting out-of-control are too great. It could lead to another Weimar (German hyperinflation of the 1920s) experience. The German leaders of that period also believed they could control the inflationary process!

Additionally, also not considered in this article are the knock-on effects on exchange rates and interest rates. Effects, many known and unknown would rampage through the economy. In short, it’s a fascinating idea worthy of discussion. But, I for one, believe the risks are too great to adopt such a scheme on a large-scale.

Posted in Economics, Ethical Investing, Finance & Investing, Monetary Policy | Tagged: , , , , , , , , | Leave a Comment »

 
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