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    February 2011

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    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
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    I enjoyed the post (and not just because you link to me. And here is Adam Smith:

    From Chapter 11 of the Wealth of Nations:

    Good roads, canals, and navigable rivers, by diminishing the expense of carriage, put the remote parts of the country more nearly upon a level with those in the neighbourhood of the town. They are upon that account the greatest of all improvements. They encourage the cultivation of the remote, which must always be the most extensive circle of the country. They are advantageous to the town, by breaking down the monopoly of the country in its neighbourhood. They are advantageous even to that part of the country. Though they introduce some rival commodities into the old market, they open many new markets to its produce. Monopoly, besides, is a great enemy to good management, which can never be universally established but in consequence of that free and universal competition which forces everybody to have recourse to it for the sake of self-defence. It is not more than fifty years ago that some of the counties in the neighbourhood of London petitioned the Parliament against the extension of the turnpike roads into the remoter counties. Those remoter counties, they pretended, from the cheapness of labour, would be able to sell their grass and corn cheaper in the London market than themselves, and would thereby reduce their rents, and ruin their cultivation. Their rents, however, have risen, and their cultivation has been improved since that time.

    hey, it could be worse...the road im living on, which was once gravel, has deteriorated to dusty dirt, which is mostly mud in the spring...and one of the original dirt road accesses to the wetlands area that im in has already overgrown with bushes & small trees...

    I'm sitting in mid Michigan today, a few miles from dirt roads and a few miles from a sophisticated highway system.

    I'm just wondering if I can become an economist or a journalist and write about something I know nothing about.

    Paving roads that connect deer camps and fishing spots is hardly going to revitalize the economy of Michigan, or anywhere else for that matter.

    Michigan has a complex and convoluted tax system (although better than a few years ago) which punishs just about everyone and rewards only "chosen" companies and "chosen" workers (unions).

    I enjoyed the wisdom of this article. But there is a comment that I can't resist making.
    You said at the end:

    "Their taxes will be low...."

    Since taxes are a portion of income, if income is low, then taxes can become higher and higher as the income drops, as you know. So as the conditions are allowed that reverse the trend to greater potential for people to earn, their taxes never get lower. They are only taxed more and more by life.

    Thanks for the article.

    Economic surplus (in excess of the contribution of the factors of production) that is not taxed is parasitically extracted as economic rent (land rent, monopoly rent, and interest) by financial capitalism. This is the current parasitical role of FIRE in the US economy. It is eating the vital organs and the seed as well. See Michael Hudson for elaboration.

    ill bet a lot of old cities have this problem:
    "Key intersection at Public Square caves in"

    @save_the_rustbelt: Please go on a long vacation at a deer camp or Fishing spot on a dirt road. While you're there, please ponder what you'd prefer:

    1) improved infrastructure for all
    2) rewards for corporations, or
    3) "rewards" for unions, who by the way are the only organizations standing between the working class and the plutocracy.

    Know any union workers that are living large? Or, are you jealous because they still have benefits that were yanked out from underneath you 30 years ago?

    Please go on collecting your Social Security and Medicare. But in the meantime, STFU.

    Well said. I've been wondering lately when it might dawn on Americans (US variety) that they're destroying their economy, and their power, influence, greatness, etc. The great experiment initiated by Reagan, to vilify all government and shrink it until it can be drowned in the bath, isn't working.

    I lived in the US for 15 years before returning to my native Australia. I watch with concern. Not least because our governments mutely follow all the latest political/economic fashions.

    Have you ever driven on a chip-and-seal road? I live in the country and I would far rather ride on a chip and seal road than to smell them lay asphalt!

    The comments to this entry are closed.

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