Tuesday, January 23, 2018

Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe is NOT shutdown

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Blog: Enlighten Radio Podcasts
Post: Podcast: The Moose Turd Cafe is NOT shutdown
Link: http://podcasts.enlightenradio.org/2018/01/podcast-moose-turd-cafe-is-not-shutdown.html

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Monday, January 22, 2018

Dean Baker: Republicans Don't Understand: Tax Cuts Don't Spur Economic Growth [feedly]

Republicans Don't Understand: Tax Cuts Don't Spur Economic Growth
http://cepr.net/publications/op-eds-columns/republicans-don-t-understand-tax-cuts-don-t-spur-economic-growth

Republicans Don't Understand: Tax Cuts Don't Spur Economic Growth

Dean Baker
NBC News, January 21, 2018

See article on original site

In decades past, there was bipartisan support for policies that laid the basis for a long period of broadly shared prosperity. Unfortunately, this consensus seems to have been replaced by the narrow-minded greed of the very rich and, insofar as they can continue to get their way, the story is not likely to end well.

Take, for instance, the Republican tax plan, which passed in December and contained a potpourri of tax breaks for special interest groups and high-income households. Its centerpiece was a large cut in the corporate income tax; the plan lowered the rate from 35 percent to 21 percent.

The Trump administration claimed that this cut, coupled with various sweeteners like full expensing of new investments, would set off an investment boom. According to the administration, U.S. companies would bring back factories from overseas and foreign companies would rush to take advantage of low U.S. taxes, and this surge in investment would lead to more jobs and higher productivity growth, eventually translating into higher wages for workers.

It's a nice story, but there is little reason to believe that things will pan out as advertised.

The 1986 tax cut did not lead to an investment boom. In fact, investment actually fell relative to the size of the economy in the next two years.

First, we tried cutting corporate taxes to stimulate the economy before: Although it received little attention during this most recent debate, the corporate rate was lowered from 46 percent to 35 percent in 1986, roughly comparable to the current cut. If we consider the share of profits that firms get to keep, the 1986 cut meant that the share kept increased from 54 percent to 65 percent, a 20 percent increase. The latest tax cut increased the share of profits that companies get to keep by 22 percent, going from 65 percent to 79 percent.

The 1986 tax cut did not, however, lead to an investment boom. In fact, investment actually fell relative to the size of the economy in the next two years. So, it's hard to believe that the slightly larger tax cut in the new bill will have a more positive impact on investment.

Besides which, as a practical matter, tax rates have been shown to be a relatively minor factor in determining where companies invest – but they do affect where companies have their profits appear. For example, Apple reports that a huge share of its profits were earned in Ireland, where the corporate tax rate is just 12.5 percent, and Google claims to earn billions in the Cayman Islands, where the tax rate is even lower.

Tax rates have been shown to be a relatively minor factor in determining where companies invest, but they do affect where companies have their profits appear.

These companies do not invest vast sums nor create enormous numbers of jobs in these tax havens; they are just playing accounting games to minimize their tax liability. That can earn those countries some additional tax revenue, but it does not create the sort of jobs and growth for which most policymakers are looking.

In any case, even the new U.S. corporate tax rate is too high to qualify us for tax haven status, so we are not going to see European and Japanese corporations setting up fake operations in the U.S. in order to claim this country provides the basis for all of their profits. At best, we will see some more repatriation of income from companies, like Apple, that have been using tax havens – which, based on past history, will end up in the pockets of shareholders.

But what is perhaps most disturbing about the Republican tax plan is that it seems to steer the United States in the opposite direction of proven paths to growth. Looking back in the past, whether across states or across countries, low tax rates have never been the spur to growth. The spur to growth has been a well-trained and well-educated workforce, coupled with the infrastructure needed to support growth.

Today, the booming areas are not low-tax states like Arkansas and Mississippi, but relatively high-tax states like New York, Massachusetts and California.

For example, the long boom that followed World War II was associated with a huge increase in college enrollment and high school graduation rates, not tax cuts. We built the national highway system, which was the basis for the suburbanization of this period and was associated with the explosion of the automobile sector and a wide variety of related industries. In addition, publicly-funded research had massive spinoffs in everything from aerospace to the internet.

If we look across states today, the booming areas are not low-tax states like Arkansas and Mississippi. Rather, we see the greatest prosperity in relatively high-tax states like New York, Massachusetts and California. Businesses are attracted by the highly skilled workers in these states. And, while some of these workers are educated in these states, workers come from around the country and around the world because these are considered desirable places for highly educated people to both work and live.

The same is true comparing countries across the globe; in fact, the countries in which workers are most prosperous all have much larger government sectors than the United States. In Germany, whose workers enjoy high pay and long vacations, government spending accounts for 43.8 percent of GDP compared to just 37.6 percent in the United States, according to the OECD.

Instead of focusing on tax cuts, it would be good if the Republicans can look to the economic success stories of the present and recent past.

In France, where workers have enjoyed substantial wage gains over the last four decades and rank near the top in productivity per hour, the government accounts for 56.6 percent of the economy. There is a similar story for the prosperous Scandinavian countries: In Norway, President Trump's apparent preferred country of origin for new immigrants, government spending accounts for 48.8 percent of the economy.

Instead of focusing on tax cuts, it would be good if the Republicans can look to the economic success stories of the present and recent past. Spending more to promote clean technologies can help keep U.S. companies among the world leaders in the area. Additional support for installing solar or wind energy and buying electric cars would also help. And, new funding to make college tuition free and reduce the student loan debt of recent grads would also help to expand the supply of skilled labor, as would more support for community colleges and other forms of training.

This route might not be the current orthodoxy among Republicans, but, unlike tax cuts, it is a proven path to broadly shared prosperity, and not just short-term profits.



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Enlighten Radio:Back on the air! Moose Turd Cafe -- recognizing ESSENTIAL DIFFERENCES

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Blog: Enlighten Radio
Post: Back on the air! Moose Turd Cafe -- recognizing ESSENTIAL DIFFERENCES
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Sunday, January 21, 2018

Dan Little: Actors in historical epochs [feedly]

Actors in historical epochs
http://understandingsociety.blogspot.com/2018/01/actors-in-historical-epochs.html

I've argued often for the idea that social science and historical explanations need to be "actor-centered" -- we need to ground our hypotheses about social and historical causation in theories of the pathways through which actors embody those causal processes. Actors in relation to each other constitute the "substrate" of social causation. Actors make up the microfoundations of social causes and processes. Actors constitute the causal necessity of social mechanisms.

In its abstract formulation this is little more than an expression of ontological individualism (link). But in application it represents a highly substantive research challenge. In order to provide concrete accounts of social processes in various cultural and historical settings, we need to have fairly specific theories of the actor in those settings (link): what motivates actors, what knowledge do they have of their environment, what cognitive and practical frameworks do they bring to their experiences of the world, what do they want, how do they reason, how do they relate to other actors, what norms and values are embedded in their action principles?

Rational choice theory and its cousins (desire-belief-opportunity theory, for example) provide what is intended to be a universal framework for understanding action. But as has been argued frequently here, these schemes are reductive and inadequate as a general basis for understanding action (link). It has also been argued here that the recent efforts to formulate a "new pragmatist" theory of the actor represent useful steps forward (link).

A very specific concern arises when we think carefully about the variety of actors found in diverse historical and cultural settings. It is obvious that actors in specific cultures have different belief systems and different cognitive frameworks; it is equally apparent that there are important and culture-specific differences across actors when it comes to normative and value commitments. So what is needed in order to investigate social causation in significantly different cultural and historical settings? Suppose we want to conduct research on social contention along the lines of work by Charles Tilly, with respect to communities with widely different cultural assumptions and frameworks. How should we attempt to understand basic elements of contention such as resistance, mobilization, and passivity if we accept the premise that French artisans in Paris in 1760, Vietnamese villagers in 1950, and Iranian professionals in 2018 have very substantial differences in their action principles and cognitive-practical frameworks?

There seem to be several different approaches we might take. One is to minimize the impact of cultural differences when it comes to material deprivation and oppression. Whatever else human actors want, they want material wellbeing and security. And when political or social conditions place great pressure on those goods, human actors will experience "grievance" and will have motives leading them to mobilize together in support of collective efforts to ameliorate the causes of those grievances.

Another possibility is to conclude that collective action and group behavior are substantially underdetermined by material factors, and that we should expect as much diversity in collective behavior as we observe in individual motivation and mental frameworks. So the study of contention is still about conflicts among individuals and groups; but the conflicts that motivate individuals to collective action may be ideological, religious, culinary, symbolic, moral -- or material. Moreover, differences in the ways that actors frame their understandings of their situation may lead to very different patterns of the dynamics of contention -- the outbreak and pace of mobilization, the resolution of conflict, the possibility of compromise.

Putting the point in terms of models and simulations, we might think of the actors as a set of cognitive and practical processing algorithms and who decide what to do based on their beliefs and these decision algorithms. It seems unavoidable that tweaking the parameters of the algorithms and beliefs will lead to very different patterns of behavior within the simulation. Putting the point the other way around, the successful mobilization of Vietnamese peasants in resistance to the French and the US depended on a particular setting of the cognitive-practical variables in these individual actors. Change those settings and, perhaps, you change the dynamics of the process and you change history.

*         *         *

Clifford Geertz is one of the people who has taken a fairly radical view on the topic of the constituents of the actor. In "Person, Time, and Conduct in Bali" in The Interpretation Of Cultures he argues that Balinese culture conceives of the individual person in radically unfamiliar ways:
One of these pervasive orientational necessities is surely the charac­terization of individual human beings. Peoples everywhere have devel­oped symbolic structures in terms of which persons are perceived not baldly as such, as mere unadorned members of the human race, but as representatives of certain distinct categories of persons, specific sorts of individuals. In any given case, there are inevitably a plurality of such structures. Some, for example kinship terminologies, are ego entered: that is, they denote the status of an individual in terms of his relation­ ship to a specific social actor. Others are centered on one or another subsystem or aspect of society and are invariant with respect to the perspectives of individual actors: noble ranks, age-group statuses, occu­pational categories. Some-personal names and sobriquets-are infor­mal and particularizing; others-bureaucratic titles and caste desig­nations-are formal and standardizing. The everyday world in which the members of any community move, their taken-for-granted field of social action, is populated not by anonymous, faceless men with­ out qualities, but by somebodies, concrete classes of determinate per­sons positively characterized and appropriately labeled. And the symbol systems which denote these classes are not given in the nature of things --they are historically constructed, socially maintained, and individu­ally applied. (363-364)
In Bali, there are six sorts of labels which one person can apply to an­other in order to identify him as a unique individual and which I want to consider against this general conceptual background: ( I ) personal names; (2) birth order names; (3) kinship terms; (4) teknonyms; (5) sta­tus titles (usually called "caste names" in the literature on Bali); and (6) public titles, by which I mean quasi-occupational titles borne by chiefs, rulers, priests, and gods. These various labels are not, in most cases, employed simultaneously, but alternatively, depending upon the situa­tion and sometimes the individual. They are not, also, all the sorts of such labels ever used; but they are the only ones which are generally recognized and regularly applied. And as each sort consists not of a mere collection of useful tags but of a distinct and bounded terminologi­cal system, I shall refer to them as "symbolic orders of person-defini­tion" and consider them first serially, only later as a more or less coher­ent cluster. (368)
Also outstanding in this field is Robert Darnton's effort to reconstruct the forms of agency underlying the "great cat massacre" in The Great Cat Massacre: And Other Episodes in French Cultural History; link.

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Urban Institute: Shocking drop in life expectancy shows the US is still in bad health [feedly]

Shocking drop in life expectancy shows the US is still in bad health
https://www.urban.org/urban-wire/shocking-drop-life-expectancy-shows-us-still-bad-health

This post was originally published by New Scientist.

Five years ago, a groundbreaking report showed people in the US in worse health and dying younger than people in other rich nations. And recently, despite the alarm the report generated, we learned that US life expectancy declined for a second year in a row—astonishing by any standard.

The original report, released by the US National Research Council and Institute of Medicine and subtitled "Shorter Lives, Poorer Health," documented a large and growing US "health disadvantage." As my New Scientist commentary at the time explained, widespread evidence showed that compared with people in other wealthy democracies, people in the US under age 75—men and women, rich and poor, of all races and ethnicities—die younger and experience more injuries and illnesses.

Even a cursory look at developments over the past five years reveals why the country is still so unwell. Public policies and poor living conditions all play a part.

The US is also in the midst of one of the worst drug epidemics in the nation's history. It is a public health crisis that has been unfolding over two decades but only recently garnered urgent national attention. Drug overdoses, often from opioid use, now surpass road accidents as the leading cause of death from injury (as opposed to disease), for people in the US ages 25 to 64. More than 175 people die every day as a result of overdoses, the equivalent of two full 747 jumbo jets crashing every week somewhere in the country.

Along with deaths attributable to alcohol and suicide, the overdoses have been branded "deaths of despair." Compared with other rich nations, the US also continues to experience higher rates of infant mortality and gun deaths.

Taken together, such trends have led to a US life expectancy that stagnated after 2012, dropped for the first time in two decades in 2015, and dropped again in 2016. All this is taking place against a backdrop of growing inequality in income, wealth, and health.

Despite these dismal health outcomes, the US outspends other countries on health care. In 2016, it spent $9,364 per person compared with $4,094 in the UK. US spending on social welfare programs is comparable with that of other rich nations. What distinguishes the US from other countries is how that money is spent: it is less redistributive, with less going to children, families, and people with low incomes.

As the "Shorter Lives" study argues, a key barrier to improvements in health is "limited political support among both the public and policymakers to enact the policies and commit the necessary resources." On this front, too, the US is slipping. Despite its imperfections and needed reforms, the Affordable Care Act (ACA) was a landmark piece of legislation that by 2016 was providing millions of uninsured people access to health insurance for the first time.

Under the Trump administration, Congress has repeatedly tried to repeal the ACA and is poised to weaken it through its recently passed tax bill. It has even allowed the less controversial Children's Health Insurance Program, which provides low-cost health insurance to 9 million children across the country, to go unfunded.

As Americans continue to debate policies in an increasingly divided and polarized country, a health disadvantage decades in the making continues to grow. Until the country bridges some of these divides and acts on the evidence, its people will continue to pay a steep price: shorter lives and poorer health.



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DeLong: Should-Read : Why hasn't globalization reduced inequality in emerging markets over the past generation? Jeffrey Frankel... [feedly]

Should-Read : Why hasn't globalization reduced inequality in emerging markets over the past generation? Jeffrey Frankel...
http://www.bradford-delong.com/2018/01/should-read-jeffrey-frankel-does-trade-fuel-inequalityhttpswwwproject-syndicateorgcommentaryglobalizatio.html

Should-Read: Why hasn't globalization reduced inequality in emerging markets over the past generation? Jeffrey Frankel wants to say that it is because the HO-SS theory is misleading and unhelpful for inequality issues. I think that is not right. HO-SS says economic integration will reduce inequality if it raises the relative demand for factors of production controlled by the poor. But the most important shift in relative factor abundance has been the ability to plug yourself into the world economy: that is controlled by the rich in emerging markets, and that has become much much scarcer relative to demand: Jeffrey Frankel: Does Trade Fuel Inequality?: "Trade has been among the most powerful drivers of... the convergence between the developed and developing worlds...

...The HO-SS theory, which dominated international economic thinking from the 1950s through 1970s, predicted that international trade would benefit the abundant factor of production (in rich countries, the owners of capital) and hurt the scarce factor of production (in rich countries, unskilled labor).... Then... Paul Krugman and Elhanan Helpman introduced... imperfect competition and increasing returns... Marc Melitz... shift[ing] resources from low-productivity to high-productivity firms.... Not all of the HO-SS theory's predictions have come true.... Pinelopi Goldberg and Nina Pavcnik.... "There is overwhelming evidence," they write, "that less-skilled workers in developing countries "are generally not better off, at least not relative to workers with higher skill or education levels."... Ten years later, inequality continues to worsen within developing countries, including the so-called BRICS.... This does not mean that the forces described by the HO-SS theory are irrelevant. But there is clearly more to current inequality trends than trade.... Inequality is clearly a serious problem that merits political attention. But focusing on trade is not the way to resolve it...

VISIT WEBSITE

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Dani Rodrik: More on distinguishing ideas and interests -- an exchange with Peter Hall [feedly]

More on distinguishing ideas and interests -- an exchange with Peter Hall
http://rodrik.typepad.com/dani_rodriks_weblog/2018/01/more-on-distinguishing-ideas-and-interests-an-exchange-with-peter-hall.html

My recent post on ideas versus interests elicited some comments from Peter Hall, my Harvard colleague who has done probably more thinking on this issue than any other scholar I know. With his permission, I am attaching these comments below, along with the brief subsequent exchange we have had.

________________________________

Dani,

A few quick thoughts inspired by your recent blog post on ideas and interests.  As you know, this is a topic that has long interested me.  These are rather cryptic thoughts (ars longa, vitae brevis) but I pass them along in case they are stimulating.

You are, of course, right to observe that interests are always interpreted (by ideas), i.e. they do not arise unambiguously from the material world.  And I think you are on the right track when you contrast the 'ex ante' account from interests with an ideas account of outcomes. 

But one might put even more emphasis (than I gather you do?) on the implication, which is that people always act based on both their ideas and their interests.  That is to say it is impossible to have perceptions of interest without ideas (and it is those perceptions of interest rather than the interests in themselves that motivate actors). 

Thus, claims that people are acting on their 'interest' are, in effect, claims that they are acting in line with some conventional set of ideas about what those interests are.  The classic example would be analyses that attribute to actors a set of interests that a conventional understanding of neoclassical economics would ascribe to anyone in their socioeconomic position.  The implicit claim of such analyses must be that those actors understand their position in that way, i.e. in line with these conventional ideas.

On my reading, this is what you mean when you associate interest-based arguments with a 'parsimonious' account of the attributes of the actors.  I do wonder whether parsimonious is the correct characteristic to highlight here (ie thinness vs thickness) since the ideas that underpin such action can be rather 'thick' (in the sense of depending on a relatively elaborate worldview).  The more important point, I think, is that these actors operate out of a worldview that can readily be seen as 'conventional' (in the sense of that term that it is widely-accepted as orthodox).

Now, there may be small sets of actors who in certain circumstances act against their 'interests' in the sense that they realize, by virtue of the ideas they hold, that they will lose something they value (material goods, power, etc.) by so acting.  And those actors might do that as a result of holding (other) sets of ideas, eg. of the sort associated with some sort of 'altruism'.  Soldiers who sacrifice themselves in battle might fall into that category.  However, I suspect that this is a very small category of people and, in many instances, as your argument intuits, such people could be said to have an unconventional view of their interest which dictates their action.

To continue then with the main account, if my view is correct, it becomes interesting to inquire about the role of ideas when there is (some kind of) contestation about precisely what is in the interest of the actors.  In your terms, these are cases in which ideas become salient to action And it turns out that is a relatively-common occurrence.  Thus, ideas often have influence over action, and the key problem is to explain (make claims about) why some ideas become influential in specific contexts while others do not.

With regard to that problem, it must surely be the case that a specific set of ideas (relative to other ideas) are more likely to become influential when they bear directly on the interests of the actors (understood as gains/losses of power or goods that the actor values).  Actors usually gravitate toward ideas that seem to them to serve their interests, understood in this stripped-down fashion. This is why interests and ideas typically bear together on action. 

What sorts of implications follow from this?

  • The Germans are probably not acting out of 'interest' independently of ideas. They are influenced by (Hayekian) ideas that tell them that their current posture is in the national interest as they construe it.  And, if we want to think of the latter as some sort of stripped-down 'material' interest, we have to bear in mind, first, that this conception of material interest is itself underpinned by an explicit set of ideas and, second, that there are other ways to interpret national interest and even material national interest.  For instance, policies that provoke a second Euro crisis might not ultimately be in that interest.  In other words, your initial point that all 'interests' must be interpreted by 'ideas' means that we cannot claim that interests trump ideas in instances such as this.
  • Although ideas are, on this view, important in all cases, we can detect, as you argue, instances that are distinctive by virtue of something about the prominence of the role that ideas play in them, such as the case of the Reagan tax cut. The issue is: what is distinctive about such instances?  I would argue it is not that ideas are somehow more important than interests in such instances.  After all, making the tax cuts was very much in the political interest of the Reagan administration.  What is distinctive is that there was contestation, with significant numbers of partisans on each side, about how to interpret (in this case) the economic interests of the populace.  It is the presence of contestation, rather than the importance of ideas, that distinguishes this case.
  • My bottom line is that the analytical way forward is not to ask: 'can we distinguish cases in which ideas were more important or influential from cases in which they were not?' but rather to ask: 'how might we best distinguish between situations in which ideas play a somewhat different role in the interaction between interests and ideas that underpins all action?'.

Don't hold me to this.  These are difficult issues and I find my views on them changing over time.  But I hope this is stimulating.

Peter

____________________________

Dear Peter

Thank you very much for this. It is incredibly helpful, and I agree with much of it.

I am all for pursuing the agenda you set out at the very end – tracing out the different ways in which ideas affect interests and their interaction with prevailing ideational environment. But I would like to resist the formulation where interests are always subservient to ideas, which this approach presumes. There is a sense in which this is true, and you put it very well yourself in your note. A statement of the form, "the industry pursued its interest" must have some meaning, even though at the end of the day what we really mean to say is "the industry pursued its interest, as it perceived its interest to be."

We are often concerned with explaining changes. Why did an actor change its behavior? There is substantive difference, it seems to me, between two sort of explanations:

  • an explanation that relies on behavior in the context of an unchanged understanding of what the actor's interests are. The actor's utility function and its understanding of how the world works stay the same, but there are changes in the world it confronts. For example, the constraints it faces are altered.
  • An explanation that relies on a change in the actor's understanding of what its interests are. The actor's utility function changes or its understanding of how the world works is altered.

The distinction I would like to make is that case (a) is what many realists have in mind in IR or rational choice political economists tend to focus on. And I think it is OK to call these cases interest-driven cases.

Case (b) would fall in my ideational category.

Just like you, I am not sure about any of this. But we should try to figure out a way of thinking these issues more.

Best

Dani

______________________________

Dani,

What you say makes excellent sense.  Focusing on cases of change is very promising.  And the distinction you draw between (a) and (b) a compelling one.  I agree that ideas do not trump interests.  The latter are just as important to be sure.

Of course, some of the most interesting cases are ones with features of both (a) and (b), i.e. constraints/opportunities in the world change and (partly by virtue of that) there is consideration, albeit not always adoption, of new ideas.  But the distinction strikes me as an excellent starting point.

Peter



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