Quote of the Day…

…is from Coyote Blog:

By the way, it strikes me that regulatory compliance issues set a minimum size for business viability.  You have to be large enough to cover those compliance issues and still make money.  What I see happening is that as new compliance issues are layered on, that minimum size rises, like a rising tide slowly drowning companies not large enough to keep their head above water.  We are keeping up, but at times it feels like the water is lapping at our chin.

Income equality as a proxy for a non-quantifiable social good, in this case SES

From Joseph Heath at In Due Course:

Many of our outstanding social problems remain outstanding because they occur in areas that are outside the immediate jurisdiction of the state: either because they occur in the private sphere (e.g. the gendered division of labour within the family), or because they involve an exercise of individual autonomy, (e.g. students dropping out of high school). As a result, there is no obvious “policy lever” than can be pulled to solve the problem, because the state simply lacks the authority (and sometimes even the power) to intervene directly in these areas.

As a result, when people who would like to see these problems solved analyze them, there can be an enormous temptation to believe that they are causally connected to some other area, in which the state does have an effective policy lever. The case in which I have seen this most clearly is the tendency to overestimate the causal effects of inequality – because the distribution of wealth is something that the state does have the ability to control. So if “intractable social problem A” can be shown to be caused by “poverty of group B,” then that gives the state leverage over the intractable social problem, because it can always redistribute wealth to B.

To take a concrete example, one hears a lot these days about the “social health gradient” — basically, the strong correlation between various health outcomes and SES (“socio-economic status”), which remains surprisingly strong despite the relatively egalitarian distribution of health care resources. Now SES is an explicitly hybrid concept, designed to represent relative inequality of wealth and social status. But of course, while the state can quite easily redistribute wealth, social status is a much trickier thing, and the state’s ability to intervene, much less modify, these status hierarchies is pretty close to zero (except perhaps indirectly, by redistributing wealth, but even then that often backfires, as the recipients of those transfers find themselves losing status precisely for being in receipt of those transfers). So to the extent that the social health gradient is related to inequalities of status, there is practically nothing the state can do about it. As a result, I can’t count the number of presentations on public health I’ve heard that start out talking about SES and then just subtly shift toward talking about wealth inequality, in order then to recommend some form of income redistribution.

Political plans all contain contradicting elements

More from the list that could go on for a thousand miles, these examples from A Force for Good blog:

Robert Reich has put on quite a show lately demonstrating the pervasiveness of economic ignorance in political and general discourse.  He does an excellent job showing why economic education is needed.  Unfortunately, his plans, and their flaws, are not unique to him…

From Stalin’s Five-Year Plans to the New Deal to the Great Society, etc etc.  [Political plans] all contain contradicting elements.  Earlier, I discussed how Reich goes from demanding raising wages to demanding falling wages (within a day of one another).  In the past, I’ve talked about his confused case both against and for automation.  But this can be seen in other economic policies: green energy (the federal government subsidizing green energy, yet imposing tariffs on solar panels to make them more expensive), War on Poverty (imposing minimum wage, which harms employment, and the EITC, which supports employment), consumer debt (keeping interest rates low to discourage saving in safe assets but providing non-taxed retirement plans), the list goes on.

Music sales hit 40 year low in 2013, but we have more music than ever

Mark Perry discusses consumption in the information age:

From 1973 to 2013, using data from the Recording Industry Association of America and available here from Minnesota Public Radio. Music sales have collapsed from almost $20 billion in 1999 to less than $6 billion in 2013, the lowest in more than 40 years. Measured by final sales of recorded music for GDP purposes, it would look like the “music well-being” of Americans was at the lowest level in at least several generations, maybe longer. And yet, most Americans (including myself) would probably agree that their access to music today is greater than ever before, and their “music well-being” is at an all-time high – in direct contradiction to what standard GDP statistics would tell us.

Bottom Line: Perhaps all of the discussions about GDP being below potential GDP and fretting about sub-par economic (GDP) growth are really simply a reflection of the fact that GDP is really no longer the best measure of economic performance, economic growth and economic well-being in the Information Age?  Thanks to the advances in computer technologies, the Internet and smartphone apps, consumers are getting more and more services like GPS for free (or at a significantly reduced cost compared to the past) today and displacing services that used to get accounted for as market-based production (maps and road atlases). In past decades like the 1950s, maybe economic output measured by GDP was a pretty good measure of both economic performance and Americans’ economic well-being. In 2015, that may no longer be the case.