Why can’t the government just print more money?
That’s a pretty obvious question, and I feel it’s not often answered satisfactorily. This book discusses the way money works from the viewpoint of Modern Monetary Theory (MMT), which seems to make a lot of sense. As I understand it, here’s how things should work.
I think everyone agrees that riding is always safer with a helmet. But here’s a (the?) argument for making helmets optional:
1. If helmets are optional, then more people will cycle.
2. And there will initially be more cycling casualties
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This slim volume sets out some pretty radical proposals for fixing New Zealand’s monetary and financial systems. These systems are not working as well as they should, and Kent’s ideas could improve society and help deal with climate change. I can’t see them happening anytime soon, but the future is a very long time…
A hundred or so years ago, the English working classes had terribly rough lives.They spent half their time working under harsh conditions and the other half desperately looking for work. They never had enough food or clothing. But despite their ragged clothing they were content to spend their lives working for the betterment of their fellow men — in particular, their employers, who did no productive work themselves but instead spent their time cheating and exploiting their clients and employees.
“Freddie” Hayek is, of course, famous for the epic rap battles
between him and his arch-nemesis, the maverick economist and Bloomsbury groupie John Maynard Keynes. Keynes may have been more charismatic, but Hayek had the edge in writing. The Road to Serfdom
is a compelling and passionate defence of free-market economics and is much more readable than Keynes’s dense The General Theory of Employment, Interest and Money
. Even the title is snappier. (The General Theory
wasn’t written for a popular audience, though — Essays in Persuasion
is a better read, although maybe less influential.)
Hayek does come across as a bit of a Cassandra, terrified that a bit of well-meaning socialism is just the first step on the slippery slope to fascism, totalitarianism and, well, serfdom. The shrillness of his warnings is explained by the context: he was writing during the second world war, and saw echoes in contemporary American society of Germany in the interwar years. He grew up in Austria before living and working in the USA and England, so he was well-placed for this comparison.
A taste for paradoxical reasoning is common among economists, to the point where it is a job requirement in some circles.
— Zombie Economics, p112
That’s a good summary of this book. It argues that a lot of the foundations of current economic thinking are outdated, and have in some cases been entirely disproved, and yet they still influence policies to everyone’s detriment.
Trickle-down economics has now been thoroughly discredited. An IMF discussion paper says, “The poor and the middle class matter the most for growth via a number of interrelated economic, social, and political channels.” It’s easier and easier to find similar views, even from authorities like the World Bank. Yet we still hear people saying that tax cuts for the rich will benefit the rest of us.
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This short but thought-provoking book describes a way that New Zealand’s economy could be reorganised to focus on the wellbeing of all its citizens, defined as
The ability to lead the kinds of lives that they value and have reason to value.
There’s a lot of NZ-specific information, but the ideas are universally applicable. The approach is a bit different from the ideas put forth by the usual suspects across the political spectrum. Paul Dalziel and Caroline Saunders believe a market economy is essential, but recognise that it must be managed to allow the markets to deliver their maximum benefit. Even the most free markets are still heavily regulated, most obviously by contract and property law, and this helps us see that regulation is not antithetical to free markets — it is essential.
As for the Big Government versus Small Government debate, Dalziel and Saunders argue that government should be big enough. Government’s job is to do the things that citizens cannot do individually or collectively, and to help them add value to the things they choose to do. But the onus is on citizens to initiate this process and to use this support for their own individual and communal wellbeing. This is a shift from the old welfare state to what Dalziel and Saunders call the wellbeing state.
Historian Ian Morris argues that in the evolution of human culture, changes in ethical values have been driven by energy. He thinks that in any given epoch, the dominant energy source sets limits on the kinds of societies that can succeed, and each society in turn rewards specific values.
As far as it goes, there may be some correlation, but he gets it backwards when he tries to base a grand theory on it. That’s my impression after listening to his talk at the RSA.
In the evolution of human culture from pre-history to the present, changes in ethical values have been driven by the most basic force of all: energy.
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The title describes the book: 23 things, some counterintuitive, some perhaps contentious, they you may not have realised about the economic system that the world runs on.
The presentation and organisation of this book is inspired partly by Dr Seuss, which is almost reason enough to buy it. There’s also a rather clever and useful section suggesting how to read the book with particular issues in mind: for example, if you don’t know what capitalism is, or if you think politics is a waste of time.
One of the most important points is that “capitalism” does not necessarily mean free-market capitalism; there are other kinds. This insight allows Chang to explain a lot of the issues with the current world economy, and to suggest ways of fixing problems like gross inequality and third-world poverty.
The Undercover Economist is full of useful explanations of many orthodox economic concepts. It explains why free markets are so powerful and what economic efficiency means. It also contains the most accessible explanation of the subprime mortgage crisis as I have ever read. But when all you have is a hammer, everything looks like a nail. For Mr Harford, like many others, markets are that hammer. He does a decent job of trying to address possible difficulties with market-based solutions, but he ignores some fundamental problems.
Economists call free markets “efficient”. This just means that nobody can be made better off without also making somebody else worse off. For example, 10 billionaires having all the money while a million paupers starve to death could be an efficient system, since we can’t give a crust of bread to a pauper without making a billionaire worse off (by the price of a crust of bread). Obviously, this sort of efficiency doesn’t say anything about whether the economy is at all desirable. Hartford briefly points out that we tend to value things like fairness too.