Ideas and Vested Interests

How Could The Republican Party Plausibly Change And Not Go Extinct

What would a plausible Republican party look like in the future?  It would seem that the current course will lead them to oblivion, so I’m looking at key issues where they could evolve their positions on.

Social Issues - The more time goes on the less support they will get on this.  Most young republicans lament this (from what I’ve read).  They could go a few routes - A.)  Just ignore social issues.  B.)  Work on policies that might REDUCE the social ills they worry about - on abortion specifically they could work hard to make sure there is maternity leave, publicly funded child care, fair pay for women, publicly funded parenting classes etc, these would help to reduce the number of women who choose to have abortions while the choice would still exist.

Immigration - Regardless of where they move I believe this is the most important issue that they need to change their position on.  I would argue that a path to citizenship for illegal immigrants already here is necessary, and making it much easier to immigrate here legally as well.  This helps in a number of ways - when immigrant labor becomes legal many of the abuses towards them (low wages, hazardous work conditions etc) will vanish or be reduced.  Additionally most studies have shown that immigrants tend to boost economy opportunity for everyone.

Environment - It’s time to accept science.  It’s time to do something about climate change.  What could they plausibly do?  Tax carbon emissions would be most in line with “Republican principals”, in fact taxing all dangerous emissions would be.  This avoids strict restrictions, mandates, and bans that could hamper businesses but forces those businesses to account for the true social cost of production.

Welfare/Inequality - Whether conservatives like it or not, the welfare state is here to stay.  What Republicans should be focused on is making sure we get the most bang for the buck out of it.  I would start with replacing traditional welfare with an “Employer of Last Resort” program, where outside of the severely disabled workers who can’t find work elsewhere will be given jobs working for state and local nonprofits or on infrastructure projects.  The jobs would be determined at a local level based upon need.  They’d pay a living wage, and serve as a safetynet for when economic catastrophe hits.  Additionally Republicans should focus on improving equality of opportunity.  This means higher funding for universal preschool education which has been shown to pay the biggest dividends.  More investment in community colleges for those who may not be best suited for four year degrees.  And additionally some measures to control the cost of higher education (at public schools, leaving private schools to their own devices). 

Public Debt/Govt Spending - Republicans need to learn what they seemed to learn under Bush but have since forgotten - balanced budgets aren’t actually a good thing (necessarily) and surpluses are even worse.  Public debt isn’t the most important debt level it is private debt (the debt that caused the financial crisis was private not public) and work to control private debt better through better banking regulations.  Understand that fiscal and monetary policy can only “crowd out” or cause inflation in situations where the economy is running at full steam, in which case, sure reduce spending.

I understand that this is all a pipe dream and would basically require Republicans to become Democrats, but I honestly don’t see a viable alternative.

delong:

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Does President Obama Think You Didn’t Build Your Business? No.

tpmmedia:

Mitt Romney and an array of surrogates are mocking President Obama for remarks he made defending public investments in infrastructure, accusing him of arrogantly claiming credit for small businesses’ hard work and risk-taking. But it takes an Olympic-level gymnastic leap to make the attack work as advertised.

Read more…

I think the big take away is that your business can’t be successful without public support. No business can be. And in turn you owe something to the rest of society.

Licensing as a Barrier To Entry: Some Thoughts

State Licenses for certain occupations have long been a rallying cry for libertarians, and have recently been one of few areas where they find common ground with left leaning economists.  

The argument is that in many occupations, licenses merely restrict supply to give the insiders greater market power, and greatly increase the barriers to entry.  The argument those in favor of licenses argue is that there are generally real risks to a lot of these occupations that put consumers at risk.  The counter-argument is that licenses do not guarantee consumer safety, and have many poor side effects.

Yet there are an array of considerations to review before jumping to conclusions.

First the argument that due to licenses reducing competition they inherently must increase costs.  However, a monopolist/oligopolist doesn’t face the same market conditions that an individual firm faces.  Most monopolists happen to also be monopsonists, and therefore are likely to wield their greater bargaining power in the markets that they purchase their inputs, pushing costs down.  Therefore monopolists/oligopolists may face lower marginal costs and in turn may charge a lower price and supply a greater quantity than a highly competitive market.

The above scenario however only holds in occupations that require high levels of physical capital as opposed to mostly human capital to produce their goods or services.  In scenarios that are highly labor intensive licenses can have averse impacts.  Yet these can be the same scenarios where a lack of proper training can have dire consequences.  These are also the scenarios where an unfettered market may lead to decreased incomes for the most qualified workers as amateurs flood the market and drive down prices.  

So what to do?  Licenses can insure that only qualified workers are providing their services, however licenses can reduce worker mobility, increase barriers to entry, and can increase barriers to entry.  This does not mean that licenses should be done away with.  Rather than having 50 different licenses for each occupation why not have one license for the entire country?  Rather than requiring costly education to receive a license why not subsidize the training (at the very least on a progressive scale) so as not to create barriers to entry for low income participants.

Additionally, if the desired impact is to reduce possible harmful outcomes, increasing fines, penalties, and regulations may be a better option as a way to disuade unqualified or dangerous “cost cutting” behavior among the occupation.

Monetary Policy in a Liquidity Trap and Long Run Fiscal Implications

Sorry for the long delay, however today I finally feel inspiration to start blogging again.

A lot of the “econ blogosphere” seems to be taking up the mantle of “the fed can do more to achieve full employment”.  Possibly, in a Twitter Exchange, Matt Yglesias points out that charging negative rates on excess bank reserves would increase bank lending.  This is true, however I wonder if this could actually lead to a larger and worse crisis.

The Fed starts charging banks for excess reserves (over a certain amount).  Banks start lending.  But there’s no guarantee that what the banks are lending for will be good investments.  Considering the structural problems with the economy - crumbling infrastructure, stagnated wages, public education’s dire predicament, labor that would be better utilized elsewhere being syphoned into the financial sector etc… I believe that there is high risk for investing in speculative measures rather than productive measures.  Even if banks do lend for productive endeavors, there are serious problems with our economy that the private sector will not fix, and will likely only exacerbate.  Long term growth will not be as strong as we would hope because our supply chain becomes more and more unreliable, demand must be kept up through credit, our worker’s ability to adapt to changes in the labor market will diminish, and important research and innovation will occur slowly as more and more skilled scientists and engineers are syphoned to Wall Street because we choose not to properly fund research. 

So sure, monetary policy will get us out of this rut, but ultimately the next rut will be worse without coordinated and strong fiscal policy.

Monetary Policy in a Liquidity Trap and Long Run Fiscal Implications

Sorry for the long delay, however today I finally feel inspiration to start blogging again.

A lot of the “econ blogosphere” seems to be taking up the mantle of “the fed can do more to achieve full employment”.  Possibly, in a Twitter Exchange, Matt Yglesias points out that charging negative rates on excess bank reserves would increase bank lending.  This is true, however I wonder if this could actually lead to a larger and worse crisis.

The Fed starts charging banks for excess reserves (over a certain amount).  Banks start lending.  But there’s no guarantee that what the banks are lending for will be good investments.  Considering the structural problems with the economy - crumbling infrastructure, stagnated wages, public education’s dire predicament, labor that would be better utilized elsewhere being syphoned into the financial sector etc… I believe that there is high risk for investing in speculative measures rather than productive measures.  Even if banks do lend for productive endeavors, there are serious problems with our economy that the private sector will not fix, and will likely only exacerbate.  Long term growth will not be as strong as we would hope because our supply chain becomes more and more unreliable, demand must be kept up through credit, our worker’s ability to adapt to changes in the labor market will diminish, and important research and innovation will occur slowly as more and more skilled scientists and engineers are syphoned to Wall Street because we choose not to properly fund research. 

So sure, monetary policy will get us out of this rut, but ultimately the next rut will be worse without coordinated and strong fiscal policy.

A thought on unionization, space, and market structure

Are unions only sustainable with firms/industries where there is a monopoly/oligopoly?  In these scenarios the firm has breathing room for costs to increase without becoming unprofitable.  However the larger the competition becomes the pressure to keep costs down becomes larger.  However, as competition increases (assuming this original firm’s production stays constant) this may also act to push wages not just down but also up.  While the firm now has stronger bargaining power in wage negotiations, laborers now also have a hand up as the demand for their labor has increased due to an increase in market size of the product they produce.  I suppose this then becomes a question of transportation costs and distance.  Using Paul Krugman’s 1991 article on transit costs as a foundation:  If the original industry was far away from the market it is selling in, and then local companies begin to produce geographically closer to the markets then the transit costs of the original industry will act as a negative push on the wages required to maintain profitability.  However, if the original monopolistic/oligopolistic industry is located near the markets it sells in, and the new firms open elsewhere, then their transit costs will put upward pressure on the wages of the original industry.  Finally in the (much more likely) scenario where the expanded industry is all in the same location then the increase in competition will have little to no effect on wages.

Quarter Life Crisis: DEAR MITT