Enlightened Economics

Economics for an Enlightened Age

Posts Tagged ‘Economics’

• Jeffrey Sachs: ‘By separating nature from economics, we have walked blindly into tragedy’

Posted by Ron Robins on March 10, 2015

“We need a new way of thinking, one that tightly links the human-made world of economics and politics with the natural world of climate and biodiversity and with the designed world of 21st century technology. Consider my own home field of study, economics. Sometime in the 19th century, economics largely dropped its traditional attention to land, water and food, as industry replaced agriculture as the leading economic sector. Economists decided, by and large, that they could ignore nature – take it “as given” – and instead focus on market-based finance, saving, and business investment. Mainstream economists derided the claims of “limits to growth.”
— 
‘By separating nature from economics, we have walked blindly into tragedy’, by Jeffrey Sachs, March 10, 2015, The Guardian, U.K.

Commentary: Ron Robins
One main point from the above is how to economically and financially account for natural resources which have been taken “as given.” I read sometime ago of a libertarian economist who advocated that all such natural resources should go back into private hands and then markets would price them appropriately with most owners pricing in the cost of resource depletion, replenishment and so forth. I rather like this concept but it’s probably completely impractical and might well be unfair for most of the population. (Think the Russian “oligarchs!”)

What I would propose, as mentioned in my post of February 28, 2015, is the creation in each country of a sovereign wealth fund that would not only own stocks, bonds, etc., but also all those natural resources that are presently owned by governments. The fund would have a major goal of long-term resource guardianship and management. The fund would then allow bids from private or other public bodies for the use of those resources, and prices would be struck that might approximate a genuine market rate that also allows for the real costing of resource depletion and environmental degradation.

Many governments today already hold or auction off various natural assets or resources — from water to wireless frequencies — but too often without regard to their long-term economic and financial consequences. Also, the proceeds usually only go to help offset the government’s current year cash outlays. From the perspective of  fully accounting for the costs of resource depletion and degradation, this is wholly unsatisfactory.

Hence, I add the idea to my prior post that the sovereign wealth fund described there should now also hold the nation’s public resource assets. This would add to the financial ability of the fund to support the future incomes of the poor (as I wrote in my commentary for that post).

Thus, this proposal might solve both the issues of pricing in the full costing of resource depletion and degradation from an environmental/climate change perspective while eventually narrowing the wealth gap between the rich and the poor. Call this enlightened economics.

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Posted in Economics, Environment, News, Commentary | Tagged: , , , , , , , , | 1 Comment »

• 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: , , , , , , , | 1 Comment »

• Wall St. Wins a Round in a Dodd-Frank Fight

Posted by Ron Robins on December 14, 2014

“Wall Street won when the House of Representatives on Thursday passed a broad spending bill that contained a provision that rolls back a rule affecting derivatives, the financial product that helped cause the financial crisis of 2008. The Senate is expected to pass the budget legislation containing the repeal this weekend.”
— Wall St. Wins a Round in a Dodd-Frank Fight, by Peter Eavis, December 12, 2014, The New York Times, U.S.A.

Commentary: Ron Robins
The rule pertains to the U.S. government back stopping losses on certain derivative products that the Dodd-Frank legislation strongly said should not be law. From the perspective of free market economics — which Enlightened Economics espouses — using American taxpayers to backstop $250 trillion of derivative products, many of which are simply gambling bets, is unconscionable. Furthermore, U.S. politicians are again cowering to the power of the banks and the bankers behind this demonstrate a deep lack of personal morality. When businesses (or banks) have a backstop like this it assuredly leads to enhanced moral hazard and ensues its use in the years ahead.

Unfortunately, the losses with its use could bring the edifices of modern finance crashing.

Posted in Banking, Consciousness/Psychology, Finance & Investing | Tagged: , , , , , , | Leave a Comment »

 
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