Human development in the age of globalisation — Leandro de la Escosura

The concept of human development views wellbeing as being affected by a wide range of factors including health and education. This column examines worldwide long-term wellbeing from 1870-2015 with an augmented historical human development index (AHHDI) that combines new measures of achievements in health, education, material living standards, and political freedom. It shows that world human development has steadily improved over time, although advances have been unevenly distributed across world regions.

VOX- CEPR Policy Portal
Human development in the age of globalisation
Leandro de la Escosura | Professor of Economic History, Universidad Carlos III, Madrid; Research Associate, CAGE; Honorary Maddison Chair, University of Groningen; and CEPR Research Fellow

Tazra Mitchell — Some House Leaders Ignore Evidence, Cite Flawed Reports to Justify Taking Basic Assistance Away From Needy Individuals

Some Republican policymakers continue to propose basing eligibility for assistance programs on participants’ ability to meet strict work requirements — most recently with House Agriculture Committee Chairman Michael Conaway’s proposal to reauthorize SNAP (formerly food stamps)[1] — despite a lack of credible evidence that the requirements would work as intended.[2]

To build support for work requirements that take away assistance from adults who cannot work a set number of hours per month, conservative policymakers are pointing to three methodologically flawed studies touting the policy’s alleged success in Kansas’s and Maine’s cash and food assistance programs. The three studies misrepresent or omit key findings, and in many instances, make inappropriate claims about the impact of work requirements on work and earnings that the facts do not support.

Our analysis of the same data sharply contradicts the studies’ findings. We found that many adults in these programs already worked or would likely work soon anyway, but many of them found it difficult to find steady work and had earnings far below the poverty line or would have otherwise still qualified for assistance after their exits from the program....

The studies have at least four key flaws....

Center on Budget And Plicy Priorities
Some House Leaders Ignore Evidence, Cite Flawed Reports to Justify Taking Basic Assistance Away From Needy Individuals
Tazra Mitchell

Dirk Ehnts — John Maynard Keynes: “I could create, I could afford” (Public Service Employment)

Here is a quote from John Maynard Keynes, writing in 1933:

If I had the power today I should surely set out to endow our capital cities with all the appurtenances of art and civilisation on the highest standards of which the citizens of each were individually capable, convinced that what I could create, I could afford – and believing that money thus spent would not only be better than any dole, but would make unnecessary any dole. For with what we have spent on the dole in England since the War we could have made our cities the greatest works of man in the world.

econoblog 101
John Maynard Keynes: “I could create, I could afford” (Public Service Employment)
Dirk Ehnts | Lecturer at Bard College Berlin

The quote is from National self-sufficiency (Yale Review, 1933).  See the whole of Section IV. It's brilliant.

Ramanan — More Free Trade Orthodoxies

Nice post on trade, citing Joan Robinson and Nicholas Kaldor.

The Case for Concerted Action
More Free Trade Orthodoxies
V. Ramanan

David Pilling — 5 ways GDP gets it totally wrong as a measure of our success

GDP's inventor Simon Kuznets was adamant that his measure had nothing to do with wellbeing. But too often we confuse the two. For seven decades, gross domestic product has been the global elite’s go-to number. Fast growth, as measured by GDP, has been considered a mark of success in its own right, rather than as a means to an end, no matter how the fruits of that growth are invested or shared. If something has to be sacrificed to get GDP growth moving, whether it be clean air, public services, or equality of opportunity, then so be it....

GDP is not a measure of “wealth” at all. It is a measure of income. It is a backward-looking “flow” measure that tells you the value of goods and services produced in a given period in the past. It tells you nothing about whether you can produce the same amount again next year. For that, you need a balance sheet - a measure of wealth. Companies have balance sheets as well as income statements. Nations don’t.…

Yes. GDP is an ingenious measure. It tells us something. It should definitely not be scrapped - it is still far too valuable a policy tool for that. And GDP growth can provide the wherewithal for the other things we want in life: health, education, security, opportunity, goods.

But we need to pay more attention to other measures to complete the picture, some of which already exist and some of which we may have to invent. Measures of wealth, equality, leisure, wellbeing and net domestic product, adjusted for negatives like pollution, are places to start.

Good post on GDP versus welfare. Worth reading in full.

World Economic Forum
5 ways GDP gets it totally wrong as a measure of our success
David Pilling | Africa Editor, The Financial Times

Benjamin Lascia — The American Enterprise Institute releases a proposal for a universal basic income

The paper’s proposal is a budget-neutral form of a UBI, meaning instead of implementing a basic income in addition to the existing American social welfare system; most existing programs like Medicaid, Veteran’s Benefits, and Social Security for the elderly over 65 are repealed and replaced with a UBI. Using data from the Federal government’s budget outlays from 2014, the paper finds that the repeal of large programs in America would yield about $2.54 trillion dollars. In addition to this, the proposal repeals 23 different tax benefits like the Student Loan interest deduction and Earned Income Tax credit, bringing in more revenue and freeing up a grand total of about $3.21 trillion for a UBI.

With additional taxes coming in from the UBI itself, and increased tax liabilities on all income tax brackets, the proposal finances and prescribes a basic income of $13,788 for individuals over the age of 18 and $6,894, or half the income of adults, for individuals under the age of 18.

Using Federal government tax data, the paper analysis the net benefit gain or loss by tax bracket and age. Using the parameters described, the findings show that some of the most adversely affected by this system are in the lowest tax bracket ($0-$10,000). This is unsurprising, because many of the programs this proposal had repealed to finance the basic income are concentrated on this tax bracket.

Another group adversely affected by this proposal are individuals 65 and older, also because their benefits, such as Social Security, have been repealed and distributed among the rest of the population. When excluding age groups of 65 and older, however, nearly all tax brackets see a net benefit in this proposal, with the brackets seeing the greatest benefits being those in the middle.…

The important findings in this proposal from the American Enterprise Institute show that, if a UBI were to merely replace the existing social welfare system in the United States, by repealing existing welfare programs and tax benefits, there would be an overall redistributive impact from the old to the young, and from the poor to the middle class; though there would be a gain in efficiency overall.

BIEN

UNITED STATES: The American Enterprise Institute releases a proposal for a universal basic income

Benjamin Lascia

Ariel Ezrachi and Maurice Stucke —

In a series of papers published in the last two years, Ezrachi and Stucke explored the world of big data and artificial intelligence and argued that network effects can raise barriers to entry, enabling big platforms to engage in behaviors such as collusion, tacit collusion, and price discrimination, to the detriment of consumers. Their recent book Virtual Competition (Harvard University Press, 2016) explores the changing nature of competition in the age of big data and algorithms.

In a brief interview with ProMarket, Ezrachi and Stucke shared some thoughts on market power and the digital economy.... 

ProMarket
“Our New Economy Enables the Winners to Capture Much More of the Welfare”

Ariel Ezrachi, Slaughter and May Professor of Competition Law, a Fellow of Pembroke College, Oxford, and Director of the University of Oxford Centre for Competition Law and Policy; and Maurice Stucke, a co-founder of the law firm the Konkurrenz Group and law professor at the University of Tennessee

Xinhua— China issues five-year plan for poverty alleviation

China's cabinet, the State Council, has released a poverty alleviation plan for the 13th Five-Year Plan period (2016-2020). 

Poverty alleviation is the most difficult task for China to realize the goal of building an all-round moderately prosperous society, of which rural poverty is the weakest link, said the document released Friday....

China plans to lift all of its poor out of poverty by 2020, especially those who live in the nation's 128,000 poor villages and 832 poor counties, where poverty has become a regional issue, according to the document.

Major tasks for the next five years include ensuring people have enough to eat and wear, and that they have adequate education, health services and housing, it said.

The plan is critical to achieving the country's ambitious goal of stamping out poverty by 2020....

A series of special programs will be launched to create more jobs for the poor, and improve education, health care and ecological environment in poverty-stricken areas, said the document.

Besides, the government will guarantee basic living standard for people unable to work, it added.

China.org.cn

China issues five-year plan for poverty alleviation

Xinhua

Branko Milanovic — In defense of equality (without welfare economics)

Important in the current debate about policy, political economy and politics with respect to the rising significance of economic (income and wealth) distribution.

Global Inequality
In defense of equality (without welfare economics)
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

Bill Mitchell — The capacity of the state and the open economy – Part 1

Wolfgang Merkel wrote in his recent Op Ed (February 5, 2016) – Economy, Culture And Discourse: Social Democracy In A Cosmopolitanism Trap? – that “we are dealing with a partially deliberate, partially careless surrender of the state’s capacity to regulate and intervene in an economy that structurally creates socio-economic inequality and erodes the fundamental democratic principle of political equality”. I highlight, the “partially deliberate, partially careless surrender” description of what has occurred over the last several decades as neo-liberalism has gained traction. Today’s blog continues my series that will form the content for my next book (due out later this year) about the impacts of globalisation on the capacities of the nation state. Our contention (I am writing this with Italian journalist and author Thomas Fazi) is that there has been no diminuition in the power of the state to impact on the domestic economy. The neo-liberal era has seen many commentators deny that proposition, yet, knowingly advocate use of these powers to further advantage capital at the expense of labour. The state is still central to the picture – it just helps capital more and workers less than it did during the full employment period in the Post World War II decades.…

Bill Mitchell – billy blog
The capacity of the state and the open economy – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Diane Coyle — The weirdness of economists

I open at random to an essay by Daniel Hausman and Michael McPherson, which sets out the (usually implicit) framework of normative economics: economics appraises outcomes (not processes), using a single appraisal perspective, looking at the consequences for individuals (not groups or ‘society’) in terms of their welfare (not freedom or rights), welfare being defined as the satisfaction of preferences and assessed in terms of market outcomes and the Pareto criterion. We economists are early socialized into this approach and forget how weird it seems to others.

Bonkers in the eyes of many philosopher. 

This is especially true of traditional social and political philosophers that accept the fundamental issue of social and political debate as the meaning of living a good life in a good society and approach this not only as a speculative question but also as a social and political objective that promotes optimal unfolding of the potential of human nature inherent in all, along with expressing individual uniqueness and diversity.

Of course, this issue is approached differently by various economists and the above characterization is of the conventional approach. However, it is this approach that is dominant in the profession and is largely taken for granted in teaching economics. That's what's weird, especially when it is claimed that there is no alternative worth discussing since the matter is now settled.

The Enlightened Economist
The weirdness of economists
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

James Mackenzie — Pope Francis attacks ‘throw-away’ economic globalization

Pope Francis launched a fresh attack on economic injustice on Saturday, condemning the “throw-away culture” of globalization and calling for new ways of thinking about poverty, welfare, employment and society. 

In a speech to the association of Italian cooperative movements, he pointed to the “dizzying rise in unemployment” and the problems that existing welfare systems had in meeting healthcare needs. 

For those living “at the existential margins” the current social and political system “seems fatally destined to suffocate hope and increase risks and threats,” he said.
The Argentinian-born pope, who has often criticized orthodox market economics for fostering unfairness and inequality, said people were forced to work long hours, sometimes in the black economy, for a few hundred euros a month because they were seen as easily replaceable. 

“‘You don’t like it? Go home then’. What can you do in a world that works like this? Because there’s a queue of people looking for work. If you don’t like it, someone else will,” he said in an unscripted change from the text of his speech. 

“It’s hunger, hunger that makes us accept what they give us,” he said..

“When money becomes an idol, it commands the choices of man. And thus it ruins man and condemns him. It makes him a slave,” he said. 

“Money at the service of life can be managed in the right way by cooperatives, on condition that it is a real cooperative where capital does not have command over men but men over capital,” he said [addressing the cooperative movement].

One America News Network
Pope Francis attacks ‘throw-away’ economic globalization

James Mackenzie

Matias Vernengo — A brief and dispassionate note on 'GDP'

Short summary of GDP (and NIPA) as the basis of macro.

Naked Keynesianism
A brief and dispassionate note on 'GDP'
Matias Vernengo | Associate Professor of Economics, Bucknell University

Peter Dorman — Utility and Happiness

The question, after all, is whether the economic choices people make maximize their well-being. To test this we go out and gather various independent measures of well-being. When we find out they diverge in significant ways from revealed preferences, it is weird to use this as a demonstration that the evidence can’t really show what it seems to show, since our hypothesis about utility maximization has to be right. And for “weird” you can also substitute “ideological”.

Rational choice based on utility maximization is essentially the same as Ludwig von Mises axion of human action. It's a priori and unfalsifiable.

Among logicians, the economic definition of utility is called a circular definition. It provides no useful information.

From Wikipedia/Utility:

Cambridge economist Joan Robinson famously criticized utility for being a circular concept: "Utility is the quality in commodities that makes individuals want to buy them, and the fact that individuals want to buy commodities shows that they have utility"[9]:48 Robinson also pointed out that because the theory assumes that preferences are fixed this means that utility is not a testable assumption. This is because if we take changes in peoples' behavior in relation to a change in prices or a change in the underlying budget constraint we can never be sure to what extent the change in behavior was due to the change in price or budget constraint and how much was due to a change in preferences.[10] This criticism is similar to that of the philosopher Hans Albert who argued that the ceteris paribus conditions on which the marginalist theory of demand rested on rendered the theory itself an empty tautology and completely closed to experimental testing.[11] In essence, demand and supply curve (theoretical line of quantity of a product which would have been offered or requested for given price) is purely ontological and could never been demonstrated empirically. 

Another criticism comes from the assertion that neither cardinal nor ordinary utility is empirically observable in the real world. In the case of cardinal utility it is impossible to measure the level of satisfaction "quantitatively" when someone consumes or purchases an apple. In case of ordinal utility, it is impossible to determine what choices were made when someone purchases, for example, an orange. Any act would involve preference over a vast set of choices (such as apple, orange juice, other vegetable, vitamin C tablets, exercise, not purchasing, etc.).[12][13][14] 

An evolutionary psychology perspective is that utility may be better viewed as due to preferences that maximized evolutionary fitness in the ancestral environment but not necessarily in the current one.[15]

Rational choice based on maximizing utility simply states that people choose based on what motivates them to choose but gives no empirical or operational way of determining this, which is required in technical definition in the sciences. It's like the Latin terms  medieval philosophy and medicine that were meant to impress rather than inform, which were roundly satirized after the Renaissance. Conventional economics is stuck in that rut, and conventional economists are too stuck other themselves to realize that look like Scholastic theologians and philosophers. The new Latin used to impress while concealing vacuity is math.

Of course, it is possible to construct formal models of cardinal and ordinal utility as neoclassical economists and game theorists have done, but the question is whether such models are representational, and that requires hypothesis formulation and testing, which in turn requires interpreting the model wrt to what is modeled. That's what technical definition does. Without anchoring a model to what it purportedly represents, it is unfalsifiable.

The Empirical Evidence Against Utility Maximization
ABSTRACT
Current Economics Textbooks and Economists justify a theory of consumer behavior based on utility maximization on a priori grounds. This methodology follows Lionel Robbins’ idea that economic theory is based on logical deduction from postulates which are “simple and indisputable facts of experience.” Strong evidence has emerged from many different lines of research that these “simple and indisputable facts of experience” are contradicted by human behavior. In this article, we summarize some of main contradictions between predictions of utility theory and actual human behavior. Efforts to resolve these contradictions continue to be made within orthodox frameworks, but it appears likely that a paradigm shift is required.

In addition, a model that purports to be causal must demonstrate a basis of causality in terms of some transmission mechanism.  Utility theory says no more than that rational choice is motivated but not how it motivated, which is the issue. Saying that rational choice is motivated just distinguishes the meaning of "rational choice" from say, a whim. It's about the model and not what is modeled.

Econospeak
Utility and Happiness
Peter Dorman | Professor of Economics, Evergreen Stat College

Randy Wray — How to Eliminate the Scourge of Unemployment: Jobs Now at a Living Wage

As Hyman Minsky put it a half-century ago, providing welfare rather than jobs is “a conservative rebuttal to an ancient challenge of the radicals, that capitalism necessarily generates ‘poverty in the midst of plenty’”. 

Rather than paying people not to work, Minsky proclaimed we must pursue an alternative: ““We have to reverse the thrust of policy of the past 40 years and move towards a system in which labor force attachment is encouraged. But to do that we must make jobs available; any policy strategy which does not take job creation as its first and primary objective is but a continuation of the impoverishing strategy of the past decade.” 

Here’s an idea: why not create jobs with decent pay? Now, why didn’t anyone ever think of that before? 

Put people to work doing socially useful things. Take workers as they are, design jobs that they are able to do. Offer a high enough wage with good, supportive working conditions so that no one would take the demeaning and low paying jobs that the private sector creates. If the private sector wants to compete, it will have to pay more and provide more interesting and fulfilling work. 

Here are three links to recent posts.…

Economonitor — Great Leap Forward
How to Eliminate the Scourge of Unemployment: Jobs Now at a Living Wage

L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Travis Gettys — Charles Koch’s plan to fix the economy: Destroy minimum wage and ‘addictive’ welfare

Same old, same old. Government is the problem, not the solution.

The Raw Story
Charles Koch’s plan to fix the economy: Destroy minimum wage and ‘addictive’ welfare
Travis Gettys

Also Koch Brothers Reach Out To Hispanic Voters

British government getting ready to use water cannons against the very citizens it's stealing from

Britain has purchased a bunch of  water cannons to use on its citizens should they decide to protest the dismantling of their social safety nets or otherwise wholesale looting of their wages, pensions, education, health care and housing.

(Here in the U.S. law enforcement doesn't pussy foot around with water cannons. Police departments have tanks.)

This would be the first time ever that Britain has employed these devices. More humane, perhaps, than teargas and rubber bullets or outright head smashing with batons some would say. What's not humane or moral or just is the  policy of granting massive welfare benefits to the rich and big business in the form of tax breaks, privatizations and interest payments.

Let's also not forget the total immunity that is given to the financial predators (i.e. the entire class of finance capitalists) who are routinley caught rigging markets, trading on inside information or, blowing up the economy with outrageous speculative bets, leaving poor stiff working class British taxpayers on the hook. (Some of the very same taxpayers who will be on the receiving end of those water cannons.)

And, yes, the spending cuts and austerity "needed" to make the predators whole are nothing more than tax increases on the working class and poor.

But, hey, at least those downtrodden masses won't be dirty. They'll get a nice shower from the water cannons.

Mollie Reilly — Vast Majority Of Conservatives Think The Poor 'Have It Easy,' Poll Finds

Pew Research Center has released a massive study detailing the American public's deep-seated political divisions, analyzing not just the ideological disunity between the left and right wings but also the issues dividing the large political center.

Rather than just defining voters as liberal or conservative, the study breaks up voters into groups "based on their attitudes and values." Liberals, for example, could be "next generation left" or "solid liberals," while voters on the right are broken down as "steadfast conservatives," "business conservatives," or "young outsiders."

Among the survey's most striking findings is that about 80 percent of conservatives agree that "poor people have it easy because they can get government benefits without doing anything." Meanwhile, over half of conservatives believe that an individual's poverty is based on "lack of effort on his or her part," rather than circumstances beyond their control:...

The survey found similar divisions over whether government programs help or harm society. More than 80 percent of conservatives in all three groups agreed that "government aid to the poor does more harm than good, by making people too dependent on government assistance," while a majority of left-leaning respondents said the government does more good because "people can't get out of poverty until their basic needs are met."

The Huffington Post
Vast Majority Of Conservatives Think The Poor 'Have It Easy,' Poll Finds
Mollie Reilly

K. A. Hamid and A. Duraiappah — The GDP-Wellbeing Gap

The link between economic growth and human wellbeing seems obvious. Indeed, as measured by gross domestic product, economic growth is widely viewed as the ultimate development objective. But it is time to rethink this approach. 

In fact, there is a rising disconnect between countries’ per capita GDP and their citizens’ wellbeing, as rapid output growth exacerbates health challenges and erodes environmental conditions. Given this, people increasingly value non-material wealth just as highly as monetary wealth, if not more.

But persuading policymakers and politicians of GDP’s limitations is no easy feat. After all, it is far simpler to defend a well-understood, long-accepted framework than it is to champion a new worldview.

Again, quantity versus quality.

Project Syndicate
The GDP-Wellbeing Gap
Zakri Abdul Hamid, a member of the UN Secretary-General’s Scientific Advisory Board, Science Adviser to the Prime Minister of Malaysia, and co-chair of MIGHT, and Anantha Duraiappah, Executive Director of the International Human Dimensions Program on Global Environmental Change, hosted by UN University in Bonn

Peter Cooper — Some Reasons for Guaranteeing Both an Income and Job

Two policy proposals receiving increasing attention are the job guarantee (JG) and basic income guarantee (BIG). The first would provide everyone of working age with the option of a guaranteed job. The second would introduce an unconditional income payment. To be clear, I would support either of these as standalone programs, whichever happened to be on the policy agenda. Nevertheless, I think there are a few reasons to prefer a combined policy that integrates elements (perhaps all positive elements) of both programs. In its leanest form, a 'job or income guarantee' (JIG) could provide everyone with the option of accepting a job-guarantee position or, by opting out of the labor force, a means-tested but otherwise unconditional income payment. In expansive form, a JIG could provide a universal and unconditional basic income as well as the option of a guaranteed job for anyone who wanted one. Other intermediate variations on the theme would, of course, also be possible. The expansive form would be ideal, but even the lean version seems to offer some advantages over a standalone JG or BIG.

heteconomist
Some Reasons for Guaranteeing Both an Income and Job
Peter Cooper