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Archive for the ‘Society’ Category

A few articles on the economy that were sent my way recently.

The Good: After Capitalism (Geoff Mulgan)

The era of transition that we are entering will be disruptive—but it may bring a world where markets are servants, not masters.”  I urge you to read this entire article, and leave your ideological biases at the door.  Despite the title, this is no polemic.  Here’s the punchline:

Contemporary biology and social science has confirmed just how much we are social animals—dependent on others for our happiness, our self-respect, our worth and even our life. There is no inherent contradiction between capitalism and community. But we have learned that these connections are not automatic: they have to be cultivated and rewarded, and societies that invest large proportions of their surpluses on advertising to persuade people that individual consumption is the best route to happiness end up paying a high price.

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Kevin started an interesting discussion that included a thoughtful proposal for the problem of major medical care costs risk mitigation.  You should read that here before reading my proposal below.

Part 1: Major Medical Annuities. Federally mandated/funded (similar to SSI/Medicare), with a specific initial lifetime value that is the same for everyone. The concept is that you pick a number slightly bigger than the average expected lifetime major medical bill and set aside that pot of money for everyone individually. At some point (e.g. 65) you can choose to start drawing down from your pot as taxable income. Prior to then, the only way the fund can be used is for major medical expenses not covered by other insurance you may have. Such payments go directly to providers and are tax-exempt. When you die, any leftover amount gets transferred to the MMA accounts of your heirs (per your desired breakdown, or according to probate law in the absence of a will).

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Dan Ariely had an interesting idea on NPR’s Marketplace today.  Here’s the audio of the segment.  The idea is to get tax payers thinking about how their tax dollars should be spent, thus getting them more civilly engaged.  His research and that of others suggests that such activity would reduce the propensity to cheat on one’s taxes, and may even get people to pay more than they would otherwise.

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I don’t like the Republican or Libertarian parties. But I’m also no fan of the Democratic party. In fact, I dislike all political parties and think they should be done away with.  And while I’m not naive enough to think that this will happen, it makes me glad to see that the “post partisan” utopia is closer today than it was a year ago.

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Steven Gjerstad and Vernon Smith have published a really nice article that starts out with bubbles in general and goes on to explain why the bursting of this particular bubble hurt the economy so much.  It echoes a lot of themes that I’ve covered before, but is obviously much more soundly though out.

The short version is that the effect of a bubble on the economy is determined by its effect on consumer spending.  The Dot Com Bubble didn’t have much of an effect because it primarily affected institutions and already relatively wealthy consumers. However, the Fed’s attempt to shorten the resulting recession created a loose monetary policy which forced dollars into the most attractive asset class: homes.  This attractiveness stemmed from relaxed lending standards and tax-free capital gains on homes, which created more buyers. But asset appreciation in this class is fundamentally limited by the ability of consumers to repay loans from income, which was not growing fast enough. As the institutions insuring mortgages reached their limits, they slowed the issuing of policies, which dried up the market for new mortgages, which dried up the ability of people to buy, which decreased prices, which sent home equity under water, which further decreased the flow of insurance policies.

Because home equity and home ownership help drive consumer spending, this burst bubble then affected the real economy.  Cool.  Fortuitously, Vernon Smith’s Rationality in Economics is the next book in my pile.

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One of things I object to about mainstream environmentalists is that they act as if there are no tradeoffs.  For example, they simultaneously promote organic farming, argue for biodiversity , and lobby for more open space. Personally, I think the second and third are very important.  In my value system, they are are very close to terminal goals. Which is why I avoid organic foods.

Reason has a short interview with Norman Borlaug that nicely sums up the tradeoffs required by organic farming.  There is literally nobody who understands modern agriculture better. The bottom line is that if the US tried to produce today’s agriculture output with 1960s era technology, we would need on the order of 1 million square miles of additional farmland (assuming that the marginal productivity of the land decreases somewhat as you bring less productive ares into play).  That’s a swath 1000 miles by 1000 miles.  That’s about 1/3 the land area of the contiguous 48 states.

Replicate this calculation all over the world and you’d have massive deforestation and habitat destruction.  Remember the unintended slashing and burning rainforests to plant oil palms for subsidized biodiesel?  Now multiply that by 10.  No thanks.

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Tribes are hot.

Kevin has referred more than once to the famous Dunbar number for limits on optimal human tribe size.

One of my favorite books recently is Seth Godin’s book on leadership, called — you guessed it — Tribes.

Yesterday I heard a great talk by David Logan, co-author of Tribal Leadership.

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