I used to think that it might be a good idea for the federal government to guarantee everyone a universal basic income, to combat income inequality, slow wage growth, advancing automation and fragmented welfare programs. Now I'm more skeptical.Bloomberg View
For centuries, outside the business context, we have heard about the power and virtue of love. Within most religious and spiritual traditions, there is a cornerstone reference to love. Psychologists extol its importance for human flourishing. Artists and philosophers explore its depths.
Given this, here is my question: If just about every person on the planet has at some point spoken about the centrality of love to well-being, why do we hear so little about it in the context of work? It seems we have collectively agreed that this universal “good” is somehow not appropriate in the place where we spend the bulk of our waking hours.
This seems a thoroughly crazy expectation; thus I have been conducting research with Linda Robson to explore this phenomenon.
The good news is that love isn’t as absent from our organizations as one might think.…Conversely, I would ask whether it is really possible to power an organization without love. It really isn't.
But if we take seriously the incentives behind innovation, then it isn’t simply the genius of the individual that matters for growth. The scale of the economy is equally relevant.I would say that scale is much more relevant than innovation. Innovation is not new. What is new is population size and mass markets that serve either the entire market or major segments. There is still significant innovation in niche markets, but the innovators are not rewarded anywhere near like those who can capture market share in a mass market. It's the existence of mass markets (scale) that results in the level of inequality that prevails and promises to be become the norm as more an more niches are absorbed into conglomerates and smaller less efficient firms merged and consolidated. You know, "the economies of scale." Do we need unlimited inequality to incentive innovation in this environment? Why? Most of the gains are simply rents that are extracted because they can be.
Thomas Piketty's book "Capital in the Twenty-First Century" documents the increase in inequality in recent decades, and it has rekindled an old debate about the effects of income redistribution on economic growth. Until recently, most economists believed there's a trade-off between equity and efficiency and that the redistribution of income would lower economic growth.CBS News Money Watch
Several reasons account for this, such as the economic distortions that taxes imposed to redistribute income and wealth can cause. However, the main reason is that taking income away from the wealthy reduces the incentive to implement innovative ideas. In its most extreme form, where redistribution is used to ensure that everyone has the same income, why bother to work hard, or work at all?
But as the recent paper "Redistribution, Inequality, and Growth" by Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides of the International Monetary Fund explains, there are also reasons to believe the redistribution of income can enhance economic growth in some cases....
Economics does not tell us what the distribution of income ought to be. That involves a value judgment, and individuals will differ on what is fair and equitable. But economics can tell us about the consequences of redistribution, and the best evidence we have suggests that modest redistribution, if anything, enhances growth.
What surprised you most while reporting on the crisis?
The realization that it had actually paid for everyone to behave the way they behaved. Working on The Big Short, I first thought of it as this bet, and there were winners and losers on both sides of the bet. In one sense there was—but on Wall Street, even the losers got rich. So that was the thing I couldn’t get out of my head: that failure was so well-rewarded. It wasn’t that they’d been foolish and idiotic. They’d been incentivized to do disastrous things.
Henry Paulson, the man behind the bank bailouts, recently said, “The root cause of every financial crisis is flawed government policies.” Is that fair?
Some of the government’s policies have been idiotic. But the idea that the story begins and ends with government policy is insane. Wall Street, all by itself, orchestrated the crisis by a web of deceit that was breathtaking. If Wall Street continues to operate in that spirit, I would argue that there’s almost nothing the government can do to prevent them from doing bad things. Incentives are at the bottom of it all. At the gambling end of Wall Street, the people who are making decisions are making decisions not with their money, but with other people’s money, [so] they themselves are not personally responsible.
The modern monetary theory movement proposes that the government should act as an employer of last resort,guaranteeing a job to anyone who needs one at some minimum wage.
There’s a lot to be said for the idea. Working is a necessary component of living a life of dignity for most people. Joblessness breeds all sorts of social pathologies and extended joblessness is a huge source of economic waste—skills go unused and deteriorate, human resources sit idle, and bringing someone back “online” after a long time out of the workforce can be very difficult.
One of the strongest objections to the idea of the Job Guarantee, however, is that it may distort the economy is unpredictable ways. The loss of a job for someone is often the spark that ignites the flames of entrepreneurialism. High unemployment reduces the opportunity cost of starting your own venture, for example. If you can’t find work, sometimes you make it.Read the rest at CNBC NetNet
The idea that it is necessary for a sovereign government to stockpile financial resources to ensure it can provide services required for an ageing population in the years to come has no application. It is not only invalid to construct the problem as one being the subject of a financial constraint but even if such a stockpile was successfully stored away in a vault somewhere there would be still no guarantee that there would be available real resources in the future.Read it at Bill Mitchell — billy blog
The claims that welfare entitlements will be unsustainable because governments will run out of money are equally flawed.
The best thing governments can do at any point in time is to ensure that incomes are maximised in the economy and a necessary condition for that is the achievement of full employment. This requires a vastly different approach to fiscal and monetary policy than is currently being practiced and proposed by the conservatives.
If there are sufficient real resources available in the future then their distribution between competing needs (income claimants) will become a political decision which economists have little to add.
Long-run productivity growth that is also environmentally sustainable will be the single most important determinant of sustaining real goods and services for the population in the future.
Principal determinants of long-term growth include the quality and quantity of capital (which increases productivity and allows for higher incomes to be paid) that workers operate with. Strong investment underpins capital formation and depends on the amount of real GDP that is privately saved and ploughed back into infrastructure and capital equipment.
Public investment is very significant in establishing complementary infrastructure upon which private investment can deliver returns. A policy environment that stimulates high levels of real capital formation in both the public and private sectors will engender strong economic growth.
Reducing inequality also can play an important role in keeping the claims on real resources commensurate with their availability.
