Archives for category: Economics

Secretary of the Treasury Steven Mnuchin insulted environmental activist Greta Thunberg at the World Economic Forum in Davos, saying she should study economics. Although I’m no economist, it seems to me that the cost of intensified earthquakes, hurricanes, rising seas, and the health risks associated with extreme climate events far outweighs the profits of the fossil fuel industry. But then, I’m no economist.

The Washington Post consulted an economist:

Speaking to reporters at the World Economic Forum’s annual gathering in Switzerland, Treasury Secretary Steven Mnuchin was asked about calls from climate change activists such as Greta Thunberg for investors to pull their money out of fossil fuel stocks.

Mnuchin jokingly pretended to be unfamiliar with Thunberg, who even while still a teenager has become a leading global proponent of addressing the warming planet. Last year, she was Time magazine’s “Person of the Year.”

Is she the chief economist or who is she? I’m confused,” Mnuchin said of Thunberg. He questioned her credentials to offer solutions: “After she goes and studies economics in college, she can come back and explain that to us.”

The Washington Post contacted someone who did study economics in college and asked him to explain it to us. Gernot Wagner is an economist who has a joint A.B. in economics and environmental science in public policy from Harvard University, a master’s degree in economics from Stanford University, a master’s in political economy in government from Harvard, and a PhD in political economy and government from Harvard.

According to Wagner, Thunberg doesn’t need to go much further than Economics 101 to make her case.

Speaking specifically about calls to divest, Wagner pointed to a letter released this month by BlackRock chief executive Larry Fink. In it, Fink announced the asset management firm he controls will divest — move investments away — from companies like those that are centered on fossil fuels and contribute to climate change.

The evidence on climate risk is compelling investors to reassess core assumptions about modern finance,” Fink wrote in the letter, according to the New York Times. 

It’s precisely this scenario of having fossil fuels go the way of tobacco that makes fossil fuel execs the most nervous,” Wagner told The Post. He noted that Shell Oil Co. predicted the rise of activists focused on climate change — back in 1998.

But, again, the question is economics, not politics.

Wagner, who spent nearly a decade working for the Environmental Defense Fund, explained the economic argument for applying pressure on oil companies.
“It’s Economics 101 that tells us that when there is a difference between private costs and costs to society, that difference ought to be included in one’s decision-making,” Wagner said.

“And when I say ought, of course the private individual won’t; it’s up to somebody in a position of power — let’s say the secretary of Treasury — to want to guide economic policy in the right direction.”

Steven Singer writes here about how economic thinking has distorted the purposes of schooling and is wrecking our society by turning everything into a transaction.

Here is an excerpt, in which he defines the transactional view of teaching:

 

The input is your salary. The output is learning.

These are distinctly measurable phenomena. One is calculated in dollars and cents. The other in academic outcomes, usually standardized test scores. The higher the salary, the more valued the teacher. The higher the test scores, the better the job she has done.

But that’s not all.

If the whole is defined in terms of buying and selling, each individual interaction can be, too.

It makes society nothing but a boss and the teacher nothing but an employee. The student is a mere thing that is passively acted on – molded like clay into whatever shape the bosses deem appropriate. 

In this framework, the teacher has no autonomy, no right to think for herself. Her only responsibility is to bring about the outcomes demanded by her employer. The wants and needs of her students are completely irrelevant. We determine what they will become, where they will fit into the burgeoning economy. And any sense of curiosity or creativity is merely an expedient to make children into the machinery of industry and drive the gross domestic product higher to benefit our stock portfolios and lower corporate taxes.

And since this education system is merely a business agreement, it must obey the rules of an ironclad contract. And since we’re trying to seek our own advantage here, it’s incumbent on us to contain our workforce as much as possible. This cannot be a negotiation among equals. We must keep each individual cog – each teacher – separate so that they can’t unionize together in common causeand equal our power. We must bend and subject them to our will so that we pay the absolute minimum and they’re forced to give the absolute maximum.

 

Peter Greene writes here about an exceptionally silly “study” that Betsy DeVos is using to drum up fading public support for charter schools.

The study, by choice advocates Patrick  Wolf and Corey DeAngelis, attempts to measure “success” by return on investment, converting taxpayer dollars into NAEP scores.

Sounds crazy, no?

Greene writes:

This particular paper comes out of something called the School Choice Demonstration Project, which studies the effects of school choice.

A Good Investment: The Updated Productivity of Public Charter Schools in Eight U.S. Cities pretends to measure school productivity, focusing on eight cities- Houston, San Antonio, New York City, Washington DC, Atlanta, Indianapolis, Boston, and Denver. In fact, the paper actually uses the corporate term ROI– return on investment.

We could dig down to the details here, look at details of methodology, break down the eight cities, examine the grade levels represented, consider their use of Investopedia for a definition of ROI. But that’s not really necessary, because they use two methods for computing ROI– one is rather ridiculous, and the other is exceptionally ridiculous.

The one thing you can say for this method of computing ROI is that it’s simple. Here’s the formula, plucked directly from their paper so that you won’t think I’m making up crazy shit:

Cost Effectiveness=Achievement Scores divided by Per-Pupil Revenue.

The achievement scores here are the results from the NAEP reading and math, and I suppose we could say that’s better than the PARCC or state-bought Big Standardized Test, but it really doesn’t matter because the whole idea is nuts.

It assumes that the only return we should look for on an investment in schools is an NAEP score. Is that a good assumption? When someone says, “I want my education tax dollars to be well spent,” do we understand them to mean that they want to see high standardized test scores– and nothing else?? Bot even a measure of students improving on that test. The paper literally breaks this down into NAEP points per $1,000. Is that the whole point of a school?

It gets worse, and Greene explains why.

I am reminded of a fad in the 1920s to compute the dollar value of different subjects. The curriculum experts of the day calculated that teaching Latin was a total waste of time because it was expensive and produced no return on investment.

The whole thing called “education” got left out of the calculus.

 

Katie Porter is a freshman in Congress. She ran for Congress in the 45th District in California, which has not elected a Democrat since the District was created in 1953. Porter was born in Iowa and had an elite education, studying at Phillips Academy, Yale University, and Harvard Law School (where Elizabeth Warren was one of her professors). She is a consumer advocate and a master of complex financial transactions. She co-authored a book with Warren titled The Law of Debtors and Creditors. 

She has fought the abuse of mortgage holders by banks. She has planted herself firmly on the side of the little guy, the public interest, and the victims of the powerful.

In her role on the House Financial Services Committee, she has challenged some of the most powerful people in the nation. She does it with facts, logic, and subtlety. She quietly sets a trap, and then it snaps.

Watch her take apart Jamie Dimon, CEO of J.P. Morgan Chase, who received a salary of $31 million this year. She explains the difficulty of a teller in his bank in her district who is paid $16.50 an hour. Better than the minimum wage, but watch her quietly pin him to the wall. 

The video went viral.

Paul Waldman of the Washington Post says that Porter has framed the most important issue for the 2020 election: Inequality. 

He writes:

“Congratulations are in order to JPMorgan Chase, the largest bank in the United States. It just reported that in the first quarter of 2019 it made a record profit of $9.18 billion on $29.9 billion in revenue. Truly, we are living in an age of boundless prosperity.

“Well, some of us are. Jamie Dimon, the CEO of JPMorgan Chase, made $31 million last year. Which led to an interesting exchange between him and first-term Rep. Katie Porter (D-Calif.) this week in a Capitol Hill hearing, when Porter asked Dimon to consider the financial situation of a teller working at Dimon’s bank in Irvine, Calif., the location of her district.

”A video of Porter questioning Dimon is spreading, and it’s an excellent reminder of something with profound implications for next year’s presidential campaign:

“Rep. Katie Porter (D-Calif.) grills JPMorgan Chase CEO Jamie Dimon, who made $31 million last year, on how a low-paid bank teller is supposed to pay the bills.

“Porter is uniquely situated to do this kind of questioning. A law professor with deep expertise in topics such as bankruptcy, she is quickly becoming one of the financial services industry’s most formidable critics on Capitol Hill. And she was doing more than making Dimon uncomfortable. She was obviously trying to make a larger point not just about JPMorgan Chase or even just about the banking industry, but about the American economy in general.

“That point is this: If you have a bank that’s making $9 billion in profit in a single quarter, with a CEO who makes $31 million a year, and yet people who work for that bank can’t possibly make ends meet, something is very, very wrong. And that should be at the center of the campaign of every Democrat running for president…

”Speaking of which, we just learned that as a result of that tax cut, twice as many of the largest corporations in the United States paid no taxes in 2018 as had the year before, despite making billions of dollars in profit. In many cases they even got large refunds, which means your taxes went right into their bank accounts. To take just one example, Chevron made a $4.5 billion profit and got a refund of $181 million. The banks did particularly well; the tax law increased bank profits by $28.8 billion. You’re welcome, Mr. Dimon…

”JPMorgan Chase could give every one of its 250,000 employees a $25,000 raise, and it would cost the bank only about two-thirds of the profit it made just in the first quarter of this year. But of course, it is not going to do that. We can’t rely on the generosity of corporations to tackle inequality. That’s the government’s job. Democrats just need to decide to do it, and to make clear to voters that it will be their top priority as president.”

Watch Katie Porter take on the CEO of Wells Fargo. (Ignore the misspelling on the placard she holds up. (Somebody goofed but not her.)

Watch her eviscerate the clueless head of Trump’s Consumer Financial Protection Bureau, explaining basic rules of consumer finance.

I love AOC.

I love Katie Porter.

These are two amazing and powerful people. They give me hope for the future.

 

 

 

Many of us on this blog criticize economists because it often seems that the only thing they value is scores on standardized tests. If they can’t measure a thing without precision, it doesn’t matter. They think they can measure teacher quality by student test scores, they can measure schools by test scores, they can measure students with test scores. As Daniel Koretz showed in his book The Testing Charade: Pretending to Improve Schools, the tests are misused and abused to make these judgments. They aren’t good enough to label students, teachers, or schools, and their misuse distorts the measures (Campbell’s Law).

Now a group of scholars seeks to rescue schools from the iron grip of standardized testing. (Among the authors is my favorite economist of education, Helen Ladd of Duke University.) They argue that test scores are not the only things that matter in education. They say that schools should be informed by evidence, not driven by it. 

Decisions should be driven by what we value, what our goals are, not simply by test scores.

They write:

Although evidence clearly contributes to thoughtful policy-making, evidence cannot and should not drive policy decisions. When we make decisions, or policies, we are driven by a desire to achieve a set of goals. The role of data is to provide evidence on how our choices are likely to affect the realization of our goals. Evidence informs decisions so that, if the evidence is good and we interpret it well, the results of our decisions align better with what we value.

A challenge for many decision makers is to think clearly about the values they are seeking to realize. In education, decision makers are often motivated by the desire to improve student outcomes and increase educational equity. Yet both “student outcomes” and “equity” are vague terms. Which student outcomes, or combination of outcomes, are most valuable? Do we care about students’ understanding of trigonometry or their ability to run fast? Do we want to work towards all students having more equal cognitive skills or to increasing the skills of the least well off? Without more precise understandings of which outcomes we care about and which distributions of those outcomes are fair, decision makers lack orientation. Their decisions may end up relying on data about outcomes that happen to be available rather than about outcomes that align with their goals.

In a new book, Educational Goods: Values, Evidence, and Decision-Making (University of Chicago Press, 2018), we seek to spell out a set of educational values and distributive principles and to illustrate how they, along with a small number of non-education values, can be combined with the relevant evidence to improve education decision making. Two of us (Ladd and Loeb) are social scientists who bring a familiarity with the use of evidence, and two (Brighouse and Swift) are philosophers who operate in the realm of values.

This group of scholars is thinking differently. For example:

While educational goods and their distribution are central to education policy decisions, other values come into play as well. While it may at first seem like these additional values are too numerous and ill-defined to specify, in fact, only a small set of values—we identify five of them—typically come into play in education decision making. Think again of the possibility that equalizing educational goods would require extensive intervention in the family. Respect for parents’ interests limits the pursuit of distributive goals. Think of another independent value – what we term childhood goods. Childhood goods are the experiences that students have in childhood that contribute to their flourishing even if they do not build their capacities. These goods may include purposeless play, as well as the joys of learning or laughing. We may be unwilling to undertake an educational approach that develops students’ educational goods if it, in turn, makes the students miserable in the process. The other independent values—respect for the democratic process, freedom of residence and occupation, and other goods (e.g. heath care or housing)—may also put a brake on what should be done to pursue educational goods and their valuable distribution.

 

 

 

Steven Singer takes issue with a libertarian economist who thinks that education is a waste of time. His post is actually titled “Economists Don’t Know Crap About Education.” Actually, I know some economists who are very knowledgeable about education, such as Helen F. Ladd of Duke University.

Singer writes:

I hate to be blunt here, but economists need to shut the heck up.

Never has there been a group more concerned about the value of everything that was more incapable of determining anything’s true worth.

They boil everything down to numbers and data and never realize that the essence has evaporated away.

I’m sorry but every human interaction isn’t reducible to a monetary transaction. Every relationship isn’t an equation.

Some things are just intrinsically valuable. And that’s not some mystical statement of faith – it’s just what it means to be human.

Take education.

Economists love to pontificate on every aspect of the student experience – what’s most effective – what kinds of schools, which methods of assessment, teaching, curriculum, technology, etc. Seen through that lens, every tiny aspect of schooling becomes a cost analysis.

And, stupid us, we listen to them as if they had some monopoly on truth.

But what do you expect from a society that worships wealth? Just as money is our god, the economists are our clergy.

How else can you explain something as monumentally stupid as Bryan Caplan’s article published in the LA Times “What Students Know That Experts Don’t: School is All About Signaling, Not Skill-Building”?

Singer goes on to lacerate Bryan Caplan’s lack of knowledge or understanding about education. Why should someone with a Ph.D. tell us that education (his, for example) was a waste of time?

What Singer doesn’t stress is that Caplan is an economist at George Mason University, which is funded by the Koch brothers. Please read Nancy MacLean’s “Democracy in Chains,” and you will learn everything  you need to know about the economics department at George Mason University, which is famous for ideas that involve privatizing Social Security, eliminating Medicare, and getting rid of almost every government function.

 

 

 

A friend suggested I subscribe to Andrew Tobias’ Blog, and I did. He mostly writes about economics, and I enjoy his clear explanations. You can subscribe for free at Andrewtobias.com.

I have strongly disagreed with him only once, when he raved about the test scores at Eva Moskowitz’s test prep Academies and suggested that she had created a new model. We have been engaged in a discussion on this issue since then.

This is his latest. If you want to read the links, go to his website.

A Republican touting the much-criticized tax bill recently told viewers to go to fairandsimple.gop to see the truth about it.

So I did.

The bill has three goals:

More Jobs. The bill will “make America the jobs magnet of the world.”

Maybe. But the Wall Street Journal (here) and the Financial Times (here) worry it could cost jobs.
Bigger Paychecks. “Americans’ taxes are too high, so we are lowering individual tax rates for low- and middle-income Americans.”

No mention is made of “high-income” or “obscenely-high-income” Americans — yet they will get by far the biggest reductions. You might get a thousand bucks, they might get a hundred thousand or a million. Is that adequately disclosed on the website?

And, by the way? Why are “Americans’ taxes too high?” Is it because we’re running a surplus, collecting more than we need? (No, we’ve already run up $20 trillion in accumulated deficits and will now, thanks to this tax cut, be growing that debt faster than the economy as a whole, just as Reagan, Bush, and Bush did.)

Is it because our infrastructure is in such awesome shape we can now cut back on maintaining it? (No, it’s in truly rotten shape — we desperately need to spend more.) Is it because we pay more than workers in other countries? (No, according to this, our workers pay a lower rate than those in Belgium, Austria, Germany, Hungary, Italy, France, Finland, Czech Republic, Sweden, Slovenia, Portugal, Slovak Republic, Spain, Greece, Estonia, Turkey, Luxembourg, Norway, Denmark, Holland, Poland, Iceland, or Japan.)

Fairer Taxes. The bill will “make filing taxes so easy that you can use a form as simple as a postcard.”

First off, what does that have to do with fairness? Is it fair to give the lion’s share of the tax cut to people and corporations who don’t need it . . . and to do so at the expense of millions of lower-income Americans who will either lose their health insurance or see premiums increase? And at the expense of a higher National Debt whose consequences will hurt average Americans disproportionately?

But since the postcard aspect of this is what Republicans seem to mean by “fairer” — no, people will not be filing on postcards. Start with the “simplification” of the child tax credit, as per this 1,100-word explanation in Forbes. In part:

. . . Under tax reform, part of the Child Tax Credit remains nonrefundable but the “old” Additional Child Tax Credit, which was refundable, has essentially been merged into the new credit. I know that sounds confusing but what it means is that the Child Tax Credit is just one credit worth up to $2,000 per child and includes a refundable piece of up to $1,400 per child. To be clear, the $1,400 refundable piece is included as part of the $2,000 Child Tax Credit and is not an additional credit (unlike before).

A refundable credit means that you can take advantage of the credit even if you do not owe any tax. Unlike with a nonrefundable credit, if you don’t have any tax liability, the “extra” credit is not lost but is instead refunded to you. To claim the refundable portion, you must have earned income (generally, wages, salary, tips, and net earnings from self-employment). For purposes of the new Child Tax Credit, the refundable portion is equal to 15% of your earned income which exceeds $4,500 up to the maximum credit.

. . . If you have three or more qualifying children, you can use an alternative formula to determine the refundable portion. Under the alternative formula, the refundable portion is equal to the amount by which your Social Security taxes (those taken out of your wages or paid out as self-employment taxes) exceed your earned income credit (sometimes called EIC or EITC).

I know that this tax reform was supposed to be about simplification, but not when it comes to the Child Tax Credit. In order to claim the credit, you must file a federal form 1040, federal form 1040A, or a federal form 1040NR. You cannot claim the child tax credit using form 1040-EZ.

The main thing, of course: HAVE A WONDERFUL NEW YEAR.

Drive safely!

David Safier writes in the Tucson Weekly about well-funded efforts by the billionaire Koch Brothers to promote their anti-government, free-market libertarian views into local high schools.

“The course was created by the University of Arizona’s Center for the Philosophy of Freedom, which designed the curriculum, wrote the textbook and offers workshops for high school teachers instructing them on how to teach the class. The Freedom Center, which has been at UA since 2011, gets a majority of its funding from the Koch Brothers and a wealthy Arizona donor couple who are big contributors to and play an influential part in the Koch network.

“The course is also being offered in the Amphitheater, Vail and Sahuarita school districts and at least seven private and charter schools in Pima and Maricopa counties.

“The Center for the Philosophy of Freedom at the UA and similar centers at ASU are the latest in a continuing effort by the Koch Brothers to infuse institutions of higher education with their libertarian-fueled philosophy. The Koch’s long term goal is for their economic and political views to filter down from the university into mainstream public opinion, and to use their influence with politicians to create legislation favorable to their ideological and economic interests.

“A part of that effort is to create curriculum, class materials and entire courses to be used in high schools around the country.

“In the 1980s, the Koch Brothers began buying their way into universities by setting up departments and think tanks. The Koch-funded centers lend scholarly credibility to the brothers’ libertarian philosophy by teaching courses, writing papers for academic journals and conducting seminars for like-minded academics. The first serious funding venture began in the mid-1980s at Virginia’s George Mason University. At the time the university wasn’t known for the quantity or quality of its scholarship. Since then, it has grown, due to the Koch’s money and influence, into the largest research university in the state.

“Ground zero for the Koch’s efforts at George Mason University is the Mercatus Center. The Washington Post described it as a “staunchly anti-regulatory center funded largely by Koch Industries Inc.” A fellow at the Cato Institute, which was founded and funded by the Koch Brothers, referred to it as a “libertarian mecca.”

“Over the years, the Koch Brothers expanded their academic reach until they were subsidizing programs at more than 300 institutes of learning. From 2005 to 2015 alone, the Koch Foundation gave $145 million to universities, including $95 million to George Mason University and the Mercatus Center. Unlike most major university donors, the Kochs often maintain direct or indirect control over the departments their money creates and the professors they hire.

“Scholarly work tends to be too detailed and complex for public consumption, so the Koch Brothers also fund institutes and organizations outside of universities to shape the academic material into more easily digestible form (the Cato Institute and the Heritage Foundation are two well known examples). Members of their staff generate position papers, write articles for magazines and newspapers, and appear on television news programs. They also work with sympathetic politicians to formulate and draft legislation.

“University of Arizona’s Center for the Philosophy of Freedom began in 2011. The Koch Brothers put in a million dollars to help start the center, though the largest portion of the funding came from Ken and Randy Kendrick, as well as another donor who remains anonymous. Ken Kendrick is the owner of the Arizona Diamondbacks. Randy Kendrick is a lawyer who is deeply involved in right wing causes. Because of their million-dollar-plus donations to the Koch’s donor network, including support for the Mercatus Center, the Kendricks are charter members and influential players in the Koch network.

“From its inception in 2011, UA’s Freedom Center had its eye on Arizona’s high schools. That year David Schmidtz, the founding director of the Center, spoke of his plans with Tim Vanderpool of the Tucson Weekly: “Schmidtz says the center plans to offer a degree program in economic instruction for high school teachers, and to generate texts for K-12 education. ‘We aim not only to produce the teachers, but the materials that are getting taught.'”

“Schmidtz is one of the three co-authors of ‘Ethics, Economy, and Entrepreneurship’, the textbook used in the high school course.

“The Koch Brothers began their efforts to make inroads into high school education with Youth Entrepreneurs, which was founded by Charles Koch and his wife Elizabeth in 1991 as a program to teach basic business skills to young people. It expanded its mission in 2009 when it created what the organization referred to as “a high school free market and liberty-based course,” complete with course materials and training for teachers. By 2014, more than 1,000 students were taking the course in Kansas and Missouri. YE has expanded into other states as well. It has a regional office in Phoenix.”

The goal of the Koch brothers is to install their free-market ideology in high schools across the country.

Today is Labor Day. What better time to recognize the importance of unions in giving working people a voice and “unrigging” our economy. There was a time when most people understood the importance of creating a balance between the power of corporations and the rights of workers.

A generation of pro-corporate propaganda has eroded public support for unions and left most workers on their own, at the mercy of corporations.

The Economic Policy Institute explains here why unions matter and why they should be revived.