Tuesday, October 30, 2012

When is a Stalinist not a Stalinist?

Last Saturday a serious kerfuffle blew up in the Czech press. It seemed there was a Facebook post from a young fellow named Jaromír Petelík, an assistant to an important Communist Party representative and himself a newly elected representative of Prague's 8th district. And it wasn't a nice Facebook post, either, something along the lines of, "Look at the email my cat just sent your dog."

The Facebook post talked about "hanging all right-wingers," and forcibly nationalizing property.

The Czechs just had local elections, and the Communists did relatively well. The country has a right-wing government that's been in place since elections in May, 2010. People are heartily fed up with the government's corruption, and it has an approval rating in the teens. Part of that may be that, as the governing party, it has more opportunity to be corrupt, so the Communists and Social Democrats are only clean by comparison, and even that may be only by virtue of not being in power. Still, the conservative ODS and TOP 09 parties are in power, and they're a coming off as a pretty nasty bunch of operators, and one of the reactions is for people to vote for the leftist parties.

So the Communists did well in the recent local elections, triggering a national freakout.

Monday, October 29, 2012


Back in June I got into a game of blog tennis with my Hartwick colleague Jason Antrosio, including this from me and this from him . That was June, and I am way overdue. This may be something of a response.

Here's the gist of the story so far. Jason and I agree that there are various infrastructure projects that would be really good to undertake, because we've already got a foot in a world where a combination of climate change and lack of easy oil means we need to be burning less fossil fuel. So we have these projects where, if we spend money on them, we'll be a lot better off than if we don't spend the money.

Under normal circumstances, borrowing for such things is a no-brainer. If we don't spend, our economy will grow at 1%; if we do spend, the economy will grow at 2%. A faster-growing economy provides more output for the government to tax, and the bonds can easily be repaid. But there's a catch.

Sunday, October 28, 2012

Every tax is a value-added tax

I've got to do something about that title, but it's what I've got.

I'm just coming off of the 4th Annual Biophysical Economics Conference in Burlington, and there was an exchange from a session on Friday that I wanted to follow up on.

Josh Farley, from the conference host, UVM's Gund Institute for Ecological Economics, gave an interesting talk about money in the context of an economy dealing with shrinking availability of natural resources to drive economic growth. Among the potential policies he mentioned was the very reasonable idea of taxing degradation of natural resources.

This would raise some potentially tricky issues of measurement (What will you use as an index of natural resource degradation, and how will you determine the impacts of specific actions on that index?), but it is sound in principle: tax the things you don't want, in order to discourage them, rather than taxing the things you do want, like labor. And one huge piece of an environmental-degradation tax is actually farily simple to implement: a carbon tax. (Simple in technical terms of how would the tax be specified in in law and collected in practice; from a political perspective, of course, it looks well nigh impossible.)

In the following Q&A I mentioned something that had occurred to me a few days earlier, which is that every tax, whether you call it a tax on capital, a tax on labor, a tax on environmental degradation, or explicitly a value-added tax, is in fact a tax on value added.

Josh disagreed, pointing to activities like financial manipulation, which plausibly add no value at all, but which are taxable. (I don't know that I'm getting his reply exactly correct, since I'm going from memory, but I'm pretty sure that was the gist of it.)

Monday, October 22, 2012

Picking nits with smart people.

Paul Krugman is understandably exasperated: Steve Williamson is saying some things about money that ... don't quite add up. Krugman does a nice job of explaining the problems with Williamson's position (and Noah Smith does as well, from a slightly different angle), so there's no point in me rehashing the whole argument. (Though if you find yourself thinking that you're just not spending enough hours in the day reading about money, you could wander through my more folksy take on the subject.)

Found here

But as the title of the post suggests, I do have one nit to pick with Krugman, based on his stemwinder of a finish:
A final thought: the notion that there must be a “fundamental” source for money’s value, although it’s a right-wing trope, bears a strong family resemblance to the Marxist labor theory of value. In each case what people are missing is that value is an emergent property, not an essence: money, and actually everything, has a market value based on the role it plays in our economy — full stop.

Sunday, October 7, 2012

The gold standard of freedom

This is a follow-up to an earlier post on the issue of whether the government has—or should have—a monopoly on money, and how libertarian advocates of freedom in money are either asking for something that already exists, or asking for something that makes no sense to have.

This Part II is about the gold standard (to the extent there’s a libertarian position on this, they’re for it) and fractional reserve banking (libertarians tend to be against). When I wrote Part I, I thought I had some original observations on the matter, but it turns out that others were on the case at about the same time and I was beaten to the punch by Brad DeLong, Paul Krugman, and Noah Smith. They have much much longer CVs than mine, and much bigger megaphones, so just go read them if you want the full blow-by-blow. (And while it was disappointing to be less original than I thought, it was reassuring to be in good company.) For my part, I’ll just highlight the angles on the issue that seem to me particularly worth emphasizing.

First, fractional reserve banking is a creature of private choice. It’s true that the Federal Reserve supports the operation of the fractional reserve banking, but the practice isn’t a scheme thought up by “the bankers” to rip us off. At root, it’s a voluntary transaction among banks and borrowers: you make a promise to pay later, and we’ll vouch for you.

So what to make of the idea that we should get away from fractional-reserve banking? The only way to do it is to empower the government to interfere in a kind of voluntary contractual arrangement. As I said in a slightly different context in Part I, that position isn’t very … libertarian.