…solving climate change is going to require energy. What if that energy came from an energy company? Chevron. Harnessing the power of human energy.

And then:

Bank of America. Helping America out of the financial crisis.

Apparently it was “corporations pretending to solve the problems they helped create” night for NewsHour sponsors.

On the micro-scale, this is true in many ways. The individual decisions of millions of businesses, communicating through prices, add up to a system that satisfies most people’s wants with a dizzying array of constantly-improving products. We don’t need a giant bureaucracy to set the price of raisin bagels or determine how many electric lawnmowers should be built.

However, what I’m now discovering is that there is no “invisible hand” analogy on the macro-scale. The “natural” macroeconomic outcome of an entirely free market is abhorrent. Devastating cycles of boom, bubble, and recession; ever-more concentrated wealth; terrible working conditions for the poor; and, perhaps, resource depletion and collapse. It’s entirely up to the government (and, in some cases, labor unions), to guide the market with fiscal policy (government spending), monetary policy (mainly the interest rate), and human rights protections, and to clean up after the market with social welfare programs.

The hands are quite visible. So how much do you trust your government? They’ve been doing a bang-up job lately. Poor monetary policy (years of super-low interest rates, among other problems), contributed greatly to the housing bubble and our current Great Recession.

I just think it’s important to remember when certain pundits and Wall Street executives plead for small government and financial deregulation, that there is no reason to believe that would help in macroeconomic terms.

On the micro-level — when you are talking about things like price tariffs, subsidies, restrictions on trade, product standards — there is a justification, at least in theory, to call for “smaller government” or deregulation. Because here the market allocates resources more efficiently than the government would (again, at least in theory). But we already know what happens to the macroeconomy, left to its own devices, and that is everyone but the fabulously rich and very lucky gets smacked around by the invisible hand.

First, the economy supports repetitive, continuous flows of expenditures and income through which dollars spent by Smith are received as income by Chin, then spent by Chin and received as income by Gonzales, and so on.

Notice how this apparent attempt at multiculturalism implies an income hierarchy reinforcing ethnic stereotypes and supports a paternalistic, trickle-down theory of wealth creation at the same time?

Over recent years, women have greatly increased their productivity in the workplace, mostly by becoming better-educated and professionally trained. As a result they can earn higher wages. Because those higher wages have increased the opportunity costs — the forgone wage earnings — of staying at home, women have substituted employment in the labor market for more “expensive” traditional home activities. This substitution has been particularly pronounced among married women.¹

This passage implies that the reason women were not working before is that they weren’t valuable workers (being untrained and uneducated) and without the prospect of high wages, they preferred to stay home. The section goes on to give a number of additional explanations, none of which give any reference to social factors, e.g. the women’s movement (just as a random example).

Certainly economic explanations are important to understanding broad social and demographic changes. But only an economist would not put social or cultural factors among the reasons for women’s rise in the workplace. And this goes to a fundamental problem with neoclassical economists: they believe economics can explain far more about the world than it does. And then they make policy recommendations based on that conceit, and we keep listening to them.

1. McConnel, Campbell R. and Brue, Stanley L. Macroeconomics: Principles, Problems, and Policies (15th ed). McGraw-Hill. New York, 2002.

Desire to be online as a function of time online

One thing that has surprised me about unemployment so far: some things that used to seem hopelessly tedious are somewhat satisfying, such as practicing scales and reading bottom-of-the-stack, good-for-you books like “People’s History of the United States” and a macroeconomics textbook (after the financial crisis, I figured I should understand macro econ better).

Well, back to not working…

The point of the rule is to collect greenhouse gas emissions data from facilities in order to support future regulations and climate policy development. It is an exciting first step toward controlling emissions from the majority of sources across the economy. Many of the issues that have to be hammered out about who is in or out of the system and what kinds of emissions are included are the same for the reporting rule as for a cap-and-trade system. In this way, the reporting rule may very well set the groundwork and the boundaries of a cap-and-trade system or other regulation. Cap-and-trade, however, will not be enough to solve the climate problem.

Our major point in the paper is that the reporting rule can be easily augmented to collect more data to support a wider array of future policies and regulations. We also discuss the choice of reporting thresholds (the proposed rule did not use any objective criteria to set the threshold of 25,000 tons CO2e/yr across the board) and basically recommend a lower threshold than what was chosen.

I encourage interested members of the pubic to (read our paper and) submit a comment on the rule.

Of course you can find many people, even people in prominent or powerful positions, who believe carbon dioxide is not a pollutant (e.g. Senator James Inhofe), or who don’t characterize current economic conditions as a recession. But that does not justify presenting a widely-held and generally-accepted fact as a fringe belief. Waterboarding is widely and generally accepted to be torture, not “likened” to torture and not only by “critics”, just as carbon dioxide is not merely “likened” to pollution and not only by “critics”.

I wrote a letter to the editor of the Post about this; I’ll let you know what happens.