adventures in teaching principles

I put a parabolic Marginal benefit of a wing schedule up, first rising and then falling. The MC of a wing is horizontal and starts above MB and intersects the latter twice, at 5 and 15 wings, respectively. The area between MC and MB from 0 to 5 wings is clearly less than the area between MB and MC from 5 to 15 wings. OK, class how many wings shall I eat if I want maximize net benefits?

Response: Don't eat the first 5!!

Economy: Lives of Quiet Desperation

This is a short post to celebrate the birthday (12th July) of writer Henry David Thoreau who was born in Concord Massachusetts USA in 1817.

An economics blog appears to be an appropriate forum for referring to Thoreau's first chapter in his book  'Walden'.  It is titled 'Economy' and explores concepts related to how time, life endeavours and objects are valued.  What is essential to life versus what is frivolous:

"Most men lead lives of quiet desperation..."
"At the present day, and in this country, as I find by my own experience, a few implements, a knife, an axe, a spade, a wheelbarrow, etc., and for the studious, lamplight, stationery and access to a few books, rank next to necessaries, and can all be obtained at a trifling cost.  Yet some, not wise, go to the other side of the globe, to barbarous and unhealthy regions, and devote themselves to trade for ten or twenty years, in order that they themselves may live, - that is, keep comfortably warm - and die in New England at last....Most of the luxuries, and many of the so-called comforts of life, are not only not indispensable, but positive hindrances to the elevation of mankind..."

Economists could read this book and it would be time well spent  ;-)

Pay for Oppression: Do Workers in Fairer or Safer Jobs Make Less Money?

The debate over worker rights on the job has taken an interesting turn with Tyler Cowen’s defense of the compensating wage differential argument.  This, for those who have not run into it before, says that workers, whether through bargaining or the labor market, get a certain amount of utility.  They can take that utility in money or in better working conditions, but the sum has to add up the same.  This means that workers in safe jobs, all other things being equal, will make less than workers in dangerous ones; workers subject to bosses’ sexual advances will make more than those in more respectful organizations; and so on.  There are four conclusions you would draw from this if it were true:

1. Dangerous or demeaning work is not a problem per se.  The workers in those jobs are just as well off as they would be in a better setting.  Don’t worry about them.

2. Employers have a financial incentive to make jobs better—safer, fairer, etc.  That way they have to shell out less cash.  In fact, they have just the right incentive, the amount of money workers are willing to give up in order to get better treatment.

3. Regulation can’t make anything better, but it can make things worse by taking away an option that would otherwise be available to workers.  Some workers would rather have the money and put up with the dangers and indignities of a crummy workplace.

4. You can measure the monetary value of such intangibles as the value of life, the value of not being harassed, of being able to pee when you want, etc.  It’s simply the difference in wages between jobs that offer more versus less, scaled by how much change in risk, harassment or whatever the worker is being compensated for.

Now it happens that this is a topic I know something about.  In fact, I wrote the book on it.  (OK, a book.)  For the full story, read the book.  Here I will make a few brief comments about the evidence.

I agree that fringe benefits that are essentially monetary in character, such as pensions and insurance, are subject to this sort of process.  Workers really do trade money in one form for money in another, and unions bargain explicitly over this.  It is also true that public insurance, like workers comp, is largely financed out of wages too, no matter how the laws are written.

It is not true that nonmonetary costs and benefits of work are compensated—not fully at any rate, and sometimes not at all.  For an empirical demonstration, see this old study I wrote with Paul Hagstrom that has, to my knowledge, never been rebutted.  Tyler links to a slightly less old Viscusi/Aldy lit review that cherry-picks shamelessly, not only in its selection of what counts as a valid study, but (especially) in which results of the authors they choose to report.

For those who don’t want to go to the sources, here are the two fundamental empirical problems with studies that claim to show wage compensation for things like occupational safety: (1) They use industry-based measures of which jobs are risky, but they ignore all the other industry-level determinants of wages, like concentration, capital intensity and percent unionized (usually).  (2) They show signs of potential publication bias, where specifications are selected that yield the “right” result.  What signs?  They don’t provide summary data on the full range of specifications tested (“taking the con out of econometrics”), so that the reader can determine whether the reported specifications are outliers or not, and the results are hardly ever tested on subsamples.  Think for a moment about this last point: if there are compensating wage differentials for women exposed to sexual harassment, this should apply to black women and white women, unionized women and nonunion women, women in blue collar jobs, white collar and pink collar, and other plausible breakouts.  If not, you would need to have a story to explain why some get it and not others.  (Or why some subsamples even have exacerbating differentials, which I found with occupational safety—the “sweatshop effect”.)  There is a small literature on subsamples in wage-risk regressions, and they are all over the map.

Note that the Joni Hersch study Tyler links to is vulnerable on all these counts.  It doesn’t consider interindustry differentials.  There is only one specification reported.  No subsamples.  Not convincing.

The bottom line is that skeptics have every reason to remain skeptical.  Actually, a world of compensating wage differentials would be better than the one we live in.  Some jobs are unavoidably difficult, dangerous or unpleasant, and they should pay more.  But there are also human rights, like freedom from abuse and freedom of expression, that shouldn’t be for sale, even when you’re on the clock.

Egypt's Economy Creates Power Vacuum

This week Bloomberg's Businessweek reports on how 'Egypt's power vacuum threatens the economy'. [1]  The author of this article, Alaa Shahine, quotes a number of economists who make the claim that it is the ensuing power struggle between political factions and doubt over the new president's ability to govern that may herald a 'disorderly devaluation' and big problems with Egypt's economy in general.


However, the basic question of how anyone could govern Egypt in its current economic context which is:
*  soaring and unsustainable borrowing costs, now at 16%
*  capital flight along with the abrupt disappearance of more than half of Egypt's foreign reserves
*  denial/delay of an IMF loan
*  massive privatisation of public assets
*  inflation of global food prices 


is never asked.


Egypt, alone, cannot stabilise its economy.   High levels of financial and commercial integration exist between it and the rest of the world.  It cannot, for example, choose its interest rate.  Egypt appears to have no means to enjoy a stable exchange rate and this nation also holds very little protection from capital flight by foreign investors.


An astute observer might say that it is the very structure of Egypt's economy that has created the basis for the power vacuum that exists there now.  Not the other way around, as this Bloomberg article asserts.


REFERENCE:
[1]  Egypt’s Power Vacuum Threatens the Economy

Bloomberg Businessweek, 2^nd-8^th July 2012.  Pages 37-39

Yet Again, Robert J. Samuelson Proves He Is No Economist

In today's Washington Post, the regularly execrable Robert J. Samuelson yet again proves that the only reason anybody thinks he is able to write anything intelligent about economics is because they mistakenly think he is related to the late Paul A. Samuelson.  He blames economic advisers of JFK in the 60s, one of whom unofficially was in fact the better Samuelson, for our economic problems today, pretty much all of them in fact, although in particular our high debt/GDP ratio and supposedly resulting inability to get our economy going again. It was those darned neo-Keynesians back in the 60s whispering in JFK's ears all their heresies about deficit spending being OK!

Now, our old friend Dean Baker does an excellent takedown of this remarkably silly column at http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelson-blames-the-60s-again .  Among other things he points out that the debt/GDP ratio continued to decline for more than a decade after JFK's tax cuts, and that it was with the Reagan presidency that it began to rise.  Also, it declined under Clinton, but rose again afterwards under Bush, Jr. and now Obama, although RJS somehow never mentions the names of either Reagan or Bush, Jr.  They are missing actors in his tragicomedy.

So, I want to pile on more, mostly by just pointing out some further absurdities in the column.  The first is that he does not recognize that those advising JFK were never of the "deficits don't matter" school.  They always argued that one should watch the debt/GDP ratio and the costs of servicing the debt as well.  They also tended to be of the "balance the budget over the business cycle" view, and indeed the column itself shows evidence of this.  It is in the citing of LBJ's income tax surcharge that came into effect in 1969, motivated by a desire to restrain emerging inflationary pressures, which led to a budget surplus that year.  This clearly reflected the views of this old group of neo-Keynesians who argued that one should use short-term fiscal fine tuning to control aggregate demand. 

There were two clear problems with this outdated view.  One was that people do not respond nearly as strongly to policies announced to be short term than to ones announced to be long term, particularly involving tax changes in either direction, although they do respond somewhat.  The other is that there is a political asymmetry regarding fiscal policy that has only gotten more extreme over time: it is much easier to engage in expansionary fiscal policy than to do the opposite.  That LBJ made his income tax increase a temporary surcharge was an early sign of this, which is now much more fully entrenched with the Grover Norquist-enforced total GOP opposition to any tax increases.

This shows up further in RJS's sneering remarks about the surpluses during the Clinton years of 1997-2001.  He says they only occurred because of high economic growth and were unexpected.  There is some truth to this, but it is way over-exaggerated and ignores the enormous efforts that Clinton made to move the budget towards balance.  His economists were projecting reaching a balanced budget by around the end of his presidency, which RJS should recognize, and that the balance did better and went into surplus was indeed due to high growth.  But, the cost of Clinton's efforts were that the GOP took control of Congress in 1993 after not a single one of them voted for the tax increases that Clinton implemented in order to undo the wild deficits of the Reagan era, with most of them loudly forecasting a major recession, which most certainly never happened, although none of them have ever admitted how totally wrong they were.

In any case, none of this is noted by RJS, and he certainly does not mention how we fell from the period of Clintonian surpluses into our current condition of a rapidly rising debt/GDP ratio.  It was the Bush wars and tax cuts, followed by our plunge into the worst recession since the 1930s, also somehow not mentioned by our wise columnist.  I remember the Bush team citing Reagan and his claims that tax cuts pay for themselves (although Cheney more honestly declared that "deficits do not matter"), not the long lost neo-Keynesian advisers of JFK.  Maybe today Obama is harking back to them a bit, but he has indeed inherited an awful situation, and saying that the fiscal problems he faces are due to JFK and his advisers rather than Reagan and Bush, Jr. and their advisers is really a scandalous distortion of history.

When Did the Great Recession Start?

Rick Gorka as spokesperson for the Romney campaign claimed:

Under this President, unemployment has risen to 8.2% and his administration has been unable to propose any new ideas that can turn around our economy. As President, Mitt Romney will reform our tax code, cut bloated government spending and promote pro-growth policies that will create jobs for middle class families.

Really? Our graph does show that the unemployment rate was 8.2% as of July 2012 but it also shows how its surge began well before Barack Obama became President. The President passed an initial stimulus that was too little and has turned unfortunately to austerity in part because Congress has not followed up on any of the other stimulus proposals from the White House. We can and should complain that this President has not pushed Congress harder but I’ve yet to hear anything from Team Romney other than the usual Republican spin, which alas in Gorka’s own words is a push for more austerity. So why does Team Romney continue with this spin? Maybe because they know the press isn’t going to call them on it.

Freedom and the Workplace

There has been a pas de deux going on between Crooked Timber and Marginal Revolution over whether libertarianism has a coherent and morally acceptable response to the problem of employer tyranny over workers.  My take is that there are a lot of complicated issues in ethical theory, but this is not one of them, at least not at a high level of abstraction.  The matter is subject to a universal cost-benefit test, one which libertarians, incidentally, are not well placed to make.  (But neither are doctrinaire socialists of the workers-should-be-in-charge-of-everything camp.)

In an interactive social setting, like a workplace, perfect liberty for everyone is impossible.  More liberty for some means more constraints for others.  There is no alternative to some sort of political process that balances the benefits of affording more liberty to A against the costs to B.

Start with a useful, paradigmatic case, sexual harassment.  In the absence of any constraint on employers, they are free to demand sex in return for the worker not being fired.  This infringes on the freedom of workers.  But a rule against sexual harassment also infringes on the freedom of the boss.  In some cases this could be unfortunate: there must be circumstances in which the lost freedom to try to start a sexual relationship is valuable.  (A useful sexual harassment rule cannot require an explicit threat, of course, so it will make some advances at least potentially illegal.)  But adding it all up, and considering the massive social problem of women in particular having to face unacceptable choices around sex and work, a rule against sexual harassment is amply justified.

A similar story can be told about racial discrimination.  America has a long history of vicious discrimination at work and just about everywhere else, and the Civil Rights Act was a victory for elementary justice.  Nevertheless, there is a cost.  Suppose I have a company and Fred applies for a job.  I despise Fred and consider him deceitful, unreliable and just real bad karma.  But if Fred is black, it is much more difficult for me to prevent him from being hired.  If the law permits a robust Fred defense, then actual racists will use it to keep any and all blacks out.  On balance, in a society with such a history of racism, the benefits of civil rights statutes outweigh their costs.

Peeing?  My instant response is that it is very painful, especially for some people, to have to wait to pee, and so the cost of allowing employers to set peeing rules unilaterally is great, much greater than the cost to the enterprise under most circumstances.  But should airplane pilots have to wait to pee until a copilot can take over?  I hope so.  There the calculus comes out differently.

And so on down the line.  There is no general principle about who should have the freedom to do whatever they want in a social situation; it depends on a balancing test.  The problem in the US is that labor is so institutionally weak in most parts of the economy that a massive invisible thumb weighs down the employer’s side of the scale.

The only plausible libertarian position I can see is this one: the employment relationship is voluntary, so there can be no such thing as employer tyranny in principle.  Rather than argue against it (which I would be happy to do), I think it is enough to ask, so what about the sex-or-you’re-fired business?  If employment is a truly, completely voluntary relationship, getting fired is no big deal.  If you want the job enough to sleep with the boss, that’s your decision.  And the same goes for dangerous work, long hours, child labor, the whole nine yards.  That’s consistent.  But once you allow for an infringement, like rules against sexual harassment or racial discrimination, you have to explain why the rule doesn’t always hold.  And then, like it or not, you are in the world of balancing.

Hat tip to John Dewey.

Postscript: It’s important to remember that, when freedom for some goes up against freedom for others, the costs to those whose freedom ends up being diminished does not cancel out.  It remains and should be acknowledged.  In my mind there is no contradiction whatsoever between being in favor of a freedom-reallocating rule, like the ban on sexual harassment, and sympathizing with those who have lost something that, in some way, diminishes our world.  Social theory should be generous.  (This is also in Dewey.)

Lack Of Market Reaction To SCOTUS Ruling On Obamacare Sends Opponents Into Frenzy

The day before yesterday, former Obama advisor Austan Goolsbee published a column in the Wall Street Journal entitled "The Supreme Court Rules, The Market Yawns," noting only a small drop in the stock market (about 26 points on the DJIA) on June 28, 2012, the day the SCOTUS ruled most of the ACA to be constitutional.  A nice link can be found on Economists View for "Links for 07-05-2012" at http://economistsview.typepad.com/ .  Commentary on Mark Thoma's link was limited and restrained, mostly discussing fine points of mandates versus taxes and how long the new system might last (which I have many criticisms of, for the record, not my first choice for a reform).

OTOH, when Tyler Cowen made the same link without almost no commentary at http://marginalrevolution.com/marginalrevolution/2012/07/from-austan-goolsbee.html , many of his commenters simply went bananas.  Besides the name-calling and usual ranting, the substantive point argued was that the market did fall in the immediate aftermath of the announcement (which overturned the strong forecast on intrade, much revered by readers of MR), only to rally later in the day after positive news about European bonds (and to be followed by major gains the following day, supposedly on the bond news as well).  Certainly there were hysterians who think Obamneycare is the end of the world who sold immediately, but it did not take much for others to leap in and start buying and move right on past the decision.  One individual denouncing Goolsbee provided a link, but this one rather sensibly noted that stocks in the healthcare sector went in different directions, with hospital ones generally going up and health insurance ones generally going down.

While Goolsbee perhaps should have noted the initial market drop after the announcement, he was basically right.  There really is no sound basis for thinking that Obamneycare is going to tank the economy.  Many critics say it increases uncertainty, but in fact a negative decision would have increased uncertainty as many would be losing new gains from the law (children under 26 on their health insurance to name one) without knowing what might come next.  That the GOP continues to oppose the law means that there remains uncertainty, although those ranting about uncertainty somehow never notice that their opposition to the law is aggravating this uncertainty "problem."

As it is, the best evidence we have on how the law might work is to look at its predecessor in Massachusetts, RomneyCare implemented in 2006.  According to a January article in Forbes (not  a left wing publication at all), http://www.forbes.com/sites/kerapoza/2012/01/romney-care-massachusetts-healthcare-reform , not only is 99% of the population now with health insurance, but the law is so popular that no Massachusetts Republicans are remotely talking about repealing it.  Small business people were quoted as supporting it, the group supposedly most likely to suffer under Obamacare (aside from those who expect to get free medical care from emergency rooms even if they have never paid a cent for any kind of health insurance or care).  The current issue in MA is that there are efforts to reduce the costs of the program, but no movement at all to repeal it.  It is a clear success, even if its prime author now opposes its nationwide application.

I cannot resist posing a point that has bothered me for some time.  Much has been made of the fact that the individual mandate was originally proposed by a Republican think tank in 1989, the Heritage Foundation.  It was supported by numerous GOP pols since then, with the implementation by a Republican in MA, Romney, simply the obvious highwater mark of this.  This support only came to an end the minute Obama came out for it (rather than single payer) in an open attempt to have a bipartisan bill.  Of course, in the end, not a single Republican in Congress voted for it, not one, without a single one professing the slightest embarrassment about jumping from supporting it to denouncing it as "unconstitutional socialism" not to mention even greater idiocies such as opponents shrieking in town hall meetings about "death panels" that went on for some time (where are those anyway?).

So, it is my observation that this is the biggest mass shift of the views of a political party on a major issue since the US Communist Party did so regarding Hitler in 1939 and back again the other way in 1941.  I have asked numerous people to name any other shift by any US party on any issue since then that beats or even matches this one by the GOP.  Nobody has come up with one. 

My final observation on this is that at least back in 1939 there were enough members of the CPUSA who had principles and honor to resign from the party when it made its pro-Hitler shift in the wake of the Mototov-von Ribbentrop Pact.   I have seen not a single member of the recent US Republican Party about whom the same could be said, and the public repudiations of their own views by Stuart Butler of Heritage and Mitt Romney are astoundingly pathetic by comparison.

How the global financial system operates now

"Insolvent central banks are lending money to insolvent banks who buy government debt from insolvent governments who lend money to the IMF which then lends it to insolvent governments to pay back insolvent banks."

A beautiful summation given by 'Escritor' today as the British Telegraph reports on the Bank of England (BOE) boosting the supply of pounds by 50 billion in its latest round of quantitative easing (QE).  The BOE "owns 40% of [British] Government debt".  One irony is that QE is expected to impact on pension and annuity rates by lowering them, and this in turn could cancel out at least part (if not all) of the stimulus effect on the British economy.

Hundreds of billions of pounds are printed that appear to be staying completely within the financial sector of the economy rather than being translated into forms of real wealth and production.

Austerity – French Style

Steven Erlanger reports on the fiscal proposals of the new French government:

France’s new Socialist government announced on Wednesday billions of euros in tax increases and new taxes, to be borne by businesses and the wealthy, in a revision of the 2012 budget designed to meet promised deficit targets in a period of nearly stagnant growth. The government needs to make up a gap of 6 billion to 10 billion euros, or $7.5 billion to $12.5 billion, this year to bring the budget deficit down to 4.5 percent of gross domestic product, according to the national audit office, the Cour des Comptes. To meet a 3 percent target in 2013, an additional $41.2 billion in tax revenue and spending cuts will have to be found, the auditors said. For this year alone, the government announced about $9 billion in higher taxes, with about $7.6 billion more to come next year. A freeze on government spending is expected to save $1.8 billion ... The auditors urged the government to cut spending more than raise taxes, because the latter hurts economic growth, but the prime minister, Jean-Marc Ayrault, insisted that the key to growth was investment, not austerity. Still, spending cuts would seem to be inevitable to meet the 2013 target.

Ayrault’s general statement that investment not austerity was the key to growth is simply good Keynesian economics. Which is why he should have just ignored these auditors. Imposing taxes on the well to do is likely to have the least damage to aggregate demand but wouldn’t a temporary increase in government spending been an ever better policy for restoring full employment? But I guess for some reason – even this socialist government has to obey the auditors and ignore the economists. Ahem!

Socialism and Democracy

I am in Paris for a big alternative-economics shindig, and I just had a short conversation that reminded me about the heading of this post.  Can the relationship between socialism and democracy be similar to the one between capitalism and democracy?  Let me explain.

Capitalism is a resilient system, based on institutions of property and the operation of markets that are deeply rooted in capitalist societies.  Capitalist countries can have governments that are led by socialists who denounce the operation of this system.  They can pass a plethora of laws controlling prices or giving workers or renters more rights or even nationalizing a few prominent enterprises.  When they are eventually voted out of office, as occurs to all governments in all democratic countries sooner or later, the system “springs back” to the extent that it was ever repressed: it continues to be fundamentally capitalist.  Thus, a believer in the virtues of capitalism can be politically opposed to anti-capitalist parties but consent to their having periodic majorities.

Of course, this is what is possible, not what normally happens.  In real life, strong supporters of capitalism tend to use all means at their disposal to suppress movements against it, up to and including imprisonment, assassination and exile.  I don’t dispute this, but at a theoretical level it is not an oxymoron to be a democratic capitalist.

Now what about socialism?  If socialism is understood to be a politically-organized arrangement in which the economy is under the control of state institutions, it cannot exist without government by socialists.  This is known to socialists, of course, whose movements in support of left-wing governments often appeal to the need to “save socialism”.  This imperative notwithstanding, socialists in democratic countries generally have a record of being relatively tolerant toward conservative parties.  But the theoretical point remains: if socialism depends on who’s in power, it cannot be compatible with democracy.

Thus the only way one can be both a socialist and a democrat is to envision and support a version of socialism that is as deeply and nonpolitically rooted as capitalism is, a system that can survive bouts of right-wing government relatively unscathed.  The term “democratic socialism” is fairly restrictive in the sort of socialism it can refer to.

Contributions through compulsion: 'The Market' in Australia

Admittedly, not all superannuation contributions made by workers in Australia are involuntary but the vast majority would be.  There's been loss of wealth on the Australian stock market since 2010 by the way:

"...Super fund investments accounted for nearly 30 per cent of total market capitalisation of the ASX in the 2009-10 financial year. Super funds are the largest contributor to managed funds. As at the June quarter 2011, super funds accounted for around 70 per cent of all consolidated assets in managed funds..."  *

Speech to the Financial Services Council Breakfast, Sydney

Australian Prime Minister, Julia Gillard

WED 31 AUGUST 2011

http://www.pm.gov.au/press-office/speech-financial-services-council-breakfast-sydney

The cursed Chinese ‘savings’ glut

Richard Fidler with the Australian Broadcast Commission interviewed Michael Casey, an economist who works for the Wall Street journal, yesterday. [1] 

Casey spoke about his belief that the underlying cause of the Global Financial Crisis was the existence of a giant pool of money in China.  He states that this money came into being from the wages of the ‘floating population’ of workers who hold rural passports and move to work in factories in the coastal cities. [2]

Casey says that these internal migrants are compelled to save because they are denied access to basic services under Chinese law.  And “they’re saving more than they need”, he says, with this money ultimately being invested in US Treasury bonds that fund the national and private debts of Americans.

The problems with this story are quite numerous.  First, Casey informs his listener that genuine wealth was being created in China through access to jobs and the monetary savings that went with them. However, the first decade of the new millennium witnessed global resource wealth per capita actually decreasing at an alarming rate. Resources were said to be declining at ~2% annually and population increasing at 1.4%.  Therefore, per capita wealth was reported (in 2001) to be decreasing at 3.4%. [3] How, I wonder, did China manage to escape global limits to growth?

Another question:  how much of this new so-called ‘wealth’ was actually ‘Chinese’ in nature? “Wal-Mart [an American firm] is responsible for approximately 10 percent of the United States' trade deficit with China” for instance.[4]  There are many, many US firms in China heavily involved in intra-corporate trade between China and America.  In fact, the emergence of this giant pool of money in China coincides with China becoming a member of the World Trade Organization (WTO).  The WTO, in turn, was “designed to stimulate foreign direct investment and the movement of factories around the world, especially from the United States to low-wage locations such as China and Mexico (Scott 2003).” [5]

So, just at the time the world’s depletion of energy and other critical resources kicks in (on a scale it may never have done so before) US factories move to China.  US factories then sell Chinese-made goods to the US and largely to their own retail outlets.  

Michael Casey admits that China has accepted a regime that sees millions of low-paid individuals living and working under painful conditions, in order to find jobs for them.  Casey doesn’t mention, however, that China does not have sufficient rural land available for the ‘rice bowl’ guarantee the Chinese Revolution granted.   Chinese expansion of exports under this unfavorable WTO compact could be viewed as method to simply feed and clothe a desperate nation.  Chinese funding of US debt might merely be the ‘tribute’ it pays to the world’s hegemonic power in order to achieve this challenging task.

Han Suyin wrote in 1976 that China’s industrialization was only made feasible by China’s “one great asset:  oil.”

“The fact that she is not only self-sufficient but will become an oil exporter of magnitude, paying her way as she has done so far, without running into debt, is also part of the strategy of plenty which is now being put into action…” [6]

In 2005, China became a net energy importer. 

What now for China?

Brenda Rosser.  3^rd July 2012

REFERENCES:

  

[1]  CONVERSATIONS WITH RICHARD FIDLER.

Michael Casey interviewed

Broadcast date: Monday 2 July 2012

http://www.abc.net.au/local/stories/2012/07/02/3537053.htm#.T_FIrbGT9jg.email

[2]  Under Chinese law personal legal identity is constructed on the basis of where you were born and where you live.  If you’re not living at your place of birth you’re denied eligibility to services.  So, when rural workers move away they are denied services such as health care, social security, and education.

[3] 'Thermohaline feedback loops and Natural Capital' Tom Sawyer Hopkins, Dept. MEAS, Box 8208, NCSU, Raleigh, North Carolina, 27695, USA.

Sci.Mar., 65 (Supl. 2): 231-256. Scientia Marina 2001

A Marine Science Odyssey into the 21^st Century. J.M. Gili, J.L. Pretus and TT Packard (eds)

http://scientiamarina.revistas.csic.es/index.php/scientiamarina/article/viewFile/698/713

[4]  Wal-Mart's 'China Price'

By Joshua Holland, AlterNet. Posted November 7, 2005.

http://www.alternet.org/workplace/27829

[5]  U.S.-China Trade, 1989-2003 - Impact on jobs and industries,  nationally and state-by-state

 A Research Report Prepared for the U.S.-China Economic and Security Review Commission.  By Dr. Robert E. Scott, Director of International Programs,  Economic Policy Institute. January 2005 

EPI Working Paper #270

  http://epi.3cdn.net/c523ff01bec5bc1c25_7nm6i278j.pdf

[6]  ‘Wind in the Tower – MaoTsetung and the Chinese Revolution 1949-1975’, Han Suyin.  1976.  Pages 391, 392.

The Individual Mandate and A Bush 2007 Proposal

Greg Mankiw is reminding us of a post from over four years ago:

A mandate is only as effective as the penalty backing it up. No one, as far as I know, is ready to make failure to be insured a criminal act punishable by jail time. Instead, if a person fails to follow the mandate, he merely pays a penalty. So the mandate is really just a financial incentive to have insurance. To continue with this logic, consider two proposals: 1. A person is required to have health insurance. If a person is in violation, he pays a $1000 fine. The revenue from the fines is rebated lump-sum to all taxpayers. 2. A person is not required to have health insurance, but those with health insurance receive a $1000 tax credit. The cost of the tax credit is financed with a lump-sum tax on all tax payers. Notice that there is no economic difference between these two scenarios.

He later noted similar logic from Len Burman, Jason Furman, and Roberton Williams in their review of a 2007 proposal from President Bush. While this review critiques the distributional consequences of the Bush proposal, which are different from the distributional consequences under the current law that was just found to be Constitutional in the opinion of Chief Justice Roberts and the four “liberal” justices, it is interesting that not only is ObamaCare = RomneyCare but as these authors note:

the administration’s proposal is very much like the Massachusetts mandate—in effect everyone would get a $7,500 or $15,000 deduction and the “punishment” for not getting health insurance would be to lose the deduction.

Odd – I don’t recall conservatives as exercised over Bush’s proposal or Romney’s legislation.

The missing link

http://samirchopra.com/2012/06/26/david-brooks-went-to-a-springsteen-concert-and-all-i-got-was-this-stupid-op-ed/#comments