A few interesting observations/conclusions/events this week:
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“Keynesian” policies that make public investments should be highly effective at restoring economic growth when the economy is running below “full employment.” Otherwise, such policies should have little or no effect, being marginally positive in the long run if the returns to public investment is greater than returns to the resources remaining for investment after consumption, and marginally negative in the long run if the crowding out effect results in generally lower rates of technical progress.
Given the general assumption that entrepreneurship and technical innovation is more likely in private markets (regardless of whether they receive public support), I conclude that “Keynesians” may generally be more right than wrong in hard times and more wrong than right in good times.
(quotation marks used because what is generally called “Keynesian” economics is barely true at all to the actual works of Keynes, and is used as a blanket term to describe all economic arguments that favour public spending, often referred to in conjunction with the 1970s crises to discredit such approaches)
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Consumption taxes should, in sum, after counting for other effects, be marginally effective at stimulating investment, since savings (which are then invested, in some manner or another) become relatively more valuable in relation to consumption.
This realization makes me happy for several reasons:
a) I have long argued for a revenue-neutral increase in consumption taxes, in order to fund lower income taxes. I like this because lowering taxes on labour improves the relative value of returns to investments in productivity, while increasing consumption taxes similarly increases the relative returns to investments in productivity,
b) productivity growth is the only basis for long term growth, and such an approach both improves private returns to productivity growth and acts as a disincentive to excessive consumption, a cause of significant environmental damage as well as enormous long-term fiscal disequilibria for private and public consumers,
c) there no is question whatsoever that the savings rate must rise in the medium term in most Western economics, and such a policy can accomplish a) and b) while simultaneously providing governments with the financial resources to provide services and improving the savings rate,
d) I have an ideological preference for taxing consumption rather than income (presuming that transfers are tweaked accordingly, such that real income remains unchanged), since it offers greater freedom for consumers to decide whether to save or spend their income. An income tax offers no choice on the matter, whereas a consumption tax allows the consumer to make the choice between savings and consumption. This is consistent with the micro-economic principle that the greater the portion of income that consumers are left to allocate independently, the more they are able to maximize their satisfaction according to their preferences, yielding a net improvement in the social outcome and consumer satisfaction, and
e) Finally, I’m happy about this because such a policy was just announced in Quebec. I have long railed against Harper and friends for being knobs for using an increase in income taxes to pay for a decrease in consumption taxes (the GST), and have hoped that provinces would take this chance to undo this move, either as a tool to improve public finances (the case for Quebec) or to decrease income taxes.
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I was shocked to receive a grade of 0% on an essay exam written about the cancellation of the re-enactment on the Plains of Abraham. (and rest assured, it's not going to stay that way).
In general, I find that the people I meet in Quebec are quite respectful of various cultures, more so than I had supposed given the legal status of non-French rights in Quebec, as well as the media attention given to a handful of attempted xenophobic measures in certain municipalities. However, this is the first time that I have submitted something that was critical of the potential dark sides of Quebec nationalism (except for this article , which has been read by not a soul, to my knowledge). As such, I am left to conclude, for now, that I have been correct to express my concern in many-a-conversation over the years that Quebec nationalism risks becoming a negative vent for frustrations rather than a channel whereby the history and culture of this region can become a meaningful source of pride and identity.
My parody of an informative essay, which itself played with words and events surrounding this contentious re-enactment, was designed to be inflammatory on the one hand, but largely as an exploration of how the challenge of maintaining an strong, unique and independent culture in Quebec such that the act of celebration can itself become an effective cultural ambassador for the Quebecois.
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An interesting example of journalistic manipulation on Radio-Canada I heard this morning: the first announcement of a $100 million dollar federal project to repair tourist destinations in Quebec City is immediately followed by a complaint that they didn’t even spend more money on some other project, then, an immediate a rapid switch, with barely the pause of a breath in between to… Four soldiers killed in Afghanistan, eight injured, including plenty of mentions of war and suffering.
The following program is about a francophone author from Manitoba, Gabriella Roy, who is presented as perhaps the best Canadian writer ever. Fine. Dandy. Second mention of $100 million of federal funding coming to Quebec City, immediately followed by complaints that they didn’t even provide more funding for some other projects, then, with a half a second pause … 15 year-old child killed in scooter accident. Awful, terrible. Suffering. War… goes on.
Already, after the first ploy, the immediate image that came to mind as they mentioned the project for the second time was the four dead soldiers that were tied to the project in the first announcement. I am readily susceptible to association by suggestion, but am typically being well aware of it when it happens.
I support journalistic freedom as a bedrock principle or a free society, but it seems to me that some of the producers and/or announcers at Radio-Canada in Quebec City are abusing their privilege of access to a large audience promote bad sentiment towards anything to do with any federal project or politician. This is something I had already noticed with the morning announcer (who is my alarm in the morning), who cuts off anyone who is on the verge of saying something that has positive connotations for anything federal, and then goes on to mock the argument or comment that was about to be said.
That would all be fine and dandy on a private network, but the notion of announcers, paid with federal money, using their access to manipulate an audience against all things federal, just rings wrong to me. In the interests of national unity, it is certainly not a smart idea to cut funding for the programs, but perhaps some directives of more objective reporting and commentary would be nice.
I suggest the following approach for the “journalist” to imbue their bias into today’s announcement: $100 million for repairs of tourism destinations in Quebec. The announcer, if he were up to date with local opinion surveys, could then accomplish his goal by alluding to the fact that these reconstructions will take place not far from the proposed site of the Plains of Abraham, leaving listeners to colour the story with their own preconceptions. However, the way that this was brazenly carried out this morning was certainly in breach of journalistic ethics, in the way that it overtly manipulated listeners’ mental associations with this sizeable public investment in tourist facilities in Quebec City.
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I have long preferred to think of “problems” as “solutions waiting to happen.” However, there are numerous cases where this outlook is naïve, with complete solutions being unlikely or impossible. As such, I am generally a proponent of managing many kinds of problems rather than supposing that we can eradicate them.
The first application of this concept resulted from readings on the strategies to deal with criminality over the ages. One theme seems to be separating the deviants from society and the other is the idea that criminals can be rehabilitated, or at least forced to conform to social norms. In the absence of any convincing evidence that severity of punishment is an effective deterrent for most crimes (possibly because most offenders think they will get away with it), and ignoring the proclivity towards punishment as an animalistic reaction of vengeance rather than any sort of genuine solution towards deviant behaviour, I am left with segregation and rehabilitation as the dichotomous approaches. In the end, I reject this dichotomy in preference of managing deviance rather than abolishing or healing deviants.
This led to a months long project to evaluate GPS monitoring bracelets for non-dangerous offenders as a way to save money, improve inmates freedom and privacy (which could hardly be more impaired than it is in a prison), improves a societies productive potential, reduces the damaging effects that some criminality may have on children due to a ‘lost’ parent, and as a way to deter many types of crimes (just think, would you rather spend a month behind bars or three being tracked with a GPS bracelet.
This is only a minor technical modification of the conditional sentence, but one that makes conditional sentences rather than prison term practical for a greater number of cases. The costs and benefits, however, are hard to pin down, and it may be a politically difficult program to implement. Ironically, my laptop was stolen before I completed the project. Since then, I have never gone more than a few days without making a backup copy of all my work.
In any case, I only mention this project because it is where I came across the general notion that, given an enormous variety of behaviours among humans and differing views of what is acceptable, we should look to “manage deviants, rather than suppose that we can eradicate deviance.”
The main logic that drives this conclusion is that it is easier to influence (or even control) deviant or risky behaviours if they are in the open than if they are driven underground, outside public view. Of course, there are concerns on the outside limits that such a program could be abused to Orwellian proportions, which makes me hesitant to endorse GPS monitoring of criminal offenders on a large scale.
The logic that I came across is hardly original (although it was to me at the time). The most I can say is that it repackages common intuition from risk-management in enterprise and in finance into a language that may make it seem more applicable to other social or security problems.
A handful stand out to me, the last two of which are the main reason I jotted this down…
Given: we cannot eliminate risk in international financial systems, so we should look to regulatory systems that manage levels of systemic risk rather than trying to eliminate it.
Given: the production and consumption of drugs will not be eliminated any time soon, as evidenced by the near-total failure of incredibly expensive and draconian war on drugs, as well as thousands of years of experimentation with drugs across nearly all societies over history. Therefore, we should manage or regulate the production and consumption of drugs, bringing this social issue within the scope of public influence rather than driving it into the black market where the public has little or no influence.
Given: the risk of terrorism cannot even be eliminated entirely therefore we should look to manage the problem by reducing incentives for terrorism. This probably means taking measures to enhance education and economic opportunities among the populace in regions that tend to export terrorists. It also sensibly points to the need for some domestic security measures (roughly in proportion to the risk), but the impossibility of completely eradicating the risk implies that we rapidly reach a point where it is not worth it to allow our government to usurp ever more control and surveillance over the citizenry.
Given: the nascent Afghan state will not be a replica of American, British, German or Swiss democracy. Therefore, resolving the insurgency implies that any central authority in Afghanistan will have to manage the realities of shifting inter-tribal linkages and alliances, traditional preferences among many Afghani civilians and the fact that radical groups of Islam are a part of the present-day social milieu in Afghanistan. Economic development will not happen without security, but security will remain uncertain as long as Kabul is unable to manage the reality that political self-determination in Afghanistan has always (or at least for a very long time) been something that happens on a very localized level. Trying to supplant these traditional political structures gives local leaders something to fight for, so we must recognize that law develops as a combination of “what is” and “what ought to be”. Refusing to recognize the first of these phrases is a sure recipe for failure.
In short, manage reality wherever imposing the ideal “solution waiting to happen” is bound to fail.
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Finally, a few short words of strategy in negotiating with terrorists in any case where a ransom is being considered at all: never, ever, consider a policy that directly or indirectly funnels money into terrorist hands. That’s nothing new (but points to an amazing absurdity in international drug laws).
However, I suggest that we should be prepared to give ground and carry out negotiations where militant groups are willing to specify their constituency, with the idea that engaging in public works for such a constituency acts as both an act of good faith and exposes the falsity of any claim to representing a constituency when a militant group is unwilling to engage in said style of negotiation.
Not always appropriate, but managing a conflict in such a manner may almost be consistent with the principle of viewing the world as a place that is full of “solutions waiting to happen.”
Saturday, March 21, 2009
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