Saturday, April 19, 2014

Running out of time with climate change

Although the last report of the Intergovernmental Panel on Climate Change has been criticized by The Economist because of too optimistic cost calculations about climate change mitigation, its message is clear once more: unless we act now, the rise in temperatures in our planet by the end of this century may be catastrophic and completely change life as we know it. If The Economist is wrong and the report is right, the costs of acting now are affordable, which means that the global economy may keep growing without causing lasting damage. That is in principle possible: economic growth, as Paul Krugman explains, is not incompatible with respecting the environment. We may grow without consuming material resources, but grow in valuable services, ideas and knowledge. As long as the cost of mitigation is lower than the cost of adaptation without mitigating, which everybody assumes that would be prohibitive, the things to be done demand the creation of institutions adapted to the challenge. These include international cooperation and cooperation at unprecedented levels and the setting up of an international carbon price, be it through taxation, through the exchange of emission permits, or both. These issues will increase in importance in our lives in the next years and decades, and everybody should become knowledgeable about them. Understanding is the first step for action.

Monday, April 14, 2014

Olof Palme interviewed by David Frost

The Internet has remarkable treasures. In this wonderful interview from 45 years ago, the late British TV journalist David Frost talks to the Swedish politician Olof Palme, who was tragically assassinated years later. Towards the end of the interview, Palme is asked about what we are on earth for, what is the purpose of our presence in this life. He says that "leaving aside the metaphysics of the issue, as we are doomed to be in this earth, we should try to make life as decent as possible. To achieve that we need some common values, such as equality and community. That is the basis of my political ideology." It is difficult to come up with a better definition of social democracy. Besides this, the interview uncovers a very honest politician, very different from the artificial characters that have led western politics in the recent decades. It is not that I subscribe to the idea that politicians are always worse (Obama is clearly better than Bush, for example), but one cannot avoid thinking that some authenticity has been lost.

Friday, April 11, 2014

More reviews of Piketty's book: Krugman, Galbraith...

Important economists and commentators have contributed new reviews of the book by Thomas Piketty "Capital in the Twenty-First Century," to be added to the review of Branko Milanovic published some months ago. Of all the reviews, the most critical is the one by James K. Galbraith, who takes issue with the notion of capital used by Piketty. Galbraith argues that the French economist confuses a physical notion of capital with a financial notion of it. He also questions the originality of using data on inequality different from survey data. Finally, he deems Piketty's proposal of a global wealth tax "futile," although he says nothing of the more feasible one of a European version of a progressive tax on capital. Overall, I don't think that the criticisms of Galbraith question the idea that capital is becoming increasingly and dangerously concentrated and that this can and should be dealt with by international policies that go beyond the nation state. Although Paul Krugman fails to emphasize the important international federalist dimension of Piketty's proposal, he is much more positive about the book. His only criticism is that the book has no deep explanation about the increasing inequality of salaries in the US due to incredibly high executive pay. The last words of Krugman's review are these: "Piketty has transformed our economic discourse; we'll never talk about wealth and inequality the same way we used to."

Tuesday, April 8, 2014

Romario keeps scoring goals

The former Brazilian soccer player and current member of Parliament in his country, Romario, has spoken at BBC World about corruption in the organization of the World Cup in Brazil. He was a legend on the pitch and he is not disappointing off the pitch. During his brief spell at FC Barcelona in 1993-94 he marvelled with his goals and the transparency of his behaviour and his ideas. Once he was asked if he was under stress, and he answered "how can I be stressed with the money I make?" After one and a half years in Barcelona, following the 1994 World Cup, he decided he had had enough of Barcelona, said it, and left for his country, where he has lived ever since. In the interview with the BBC, besides denouncing rampant corruption, he says that he wishes that the standards that are required for FIFA demands would be applied to things such as hospitals, schools and other public goods. When asked about his opinion about Pelé, the other soccer legend in Brazil and famous for his cronic proximity to power, Romario says that he respects him but that he is an imbecile because he does not respect peaceful demonstrators who are against corruption and in favour of social policies.

Monday, April 7, 2014

Scientists for Europe and against nationalism

I just signed a manifesto promoted by Italian scientists in favour of progress and the United States of Europe. I encourage you to sign it. Among other things, it says this:
"The world is changing rapidly. The status quo, once considered established, has been greatly redesigned by society and the economy of knowledge. Economically depressed areas have acquired, in short time, great potential of development and growth. Knowledge, culture and innovation represent today, more than ever, the push toward the future.
To the contrary, the West and some aspects of its development model, have entered into a deep crisis. In particular, Europe appears to be not only affected by serious problems, such as unemployment, crisis in productivity and substantial reduction in welfare, but it is also apparently incapable of solving them. After only a few years from the official birth of the common currency, there is now the danger that the dream of a Europe made of people devoted to the idea, not only of a new larger Nation, but one also more open to civil rights, intrinsic human values and widespread opportunities, will be shattered. Walter Laqueur, the American historian, has spoken about “the end of the European dream”.
The responsibilities for this situation are many and varied including, to be sure, the excessive timidity in facing the process of creating a European political entity. The future should be built on the basis of political, cultural and social horizons rather than adhering to the bookkeeper’s aspiration to keep “accounts in order”. Hence, we have now a Europe of merchants and bankers, of limitations and inflexibility, a sort of gendarme that imposes often-foolish rules rather than widen horizons and promote future development.
Because of this, we are witnessing, in connection with the present crisis, an alarming growth of provincial egotisms, based on narrow self-interests, if not real outright nationalism. These phenomena often are intentionally created for exploiting real unhappiness and suffering, with the risk of causing reactions that would be directly opposed to what Europe needs."

Sunday, April 6, 2014

An article on the economics of nationalism by Albert Breton, 50 years later

In 1964, the Public Choice Canadian economist Albert Breton published a classical article on "The Economics of Nationalism." The main thesis of the article is that nationalism is an investment in nationality or ethnicity that has a very low or negative social return but that has significant distributive implications in favour of the elites or leaders of a particular national or ethnic group. His examples come from the case of Quebec, where in those times a nationalist movement that later became secessionist was becoming more and more powerful. One of the sub-themes of the article is that the left was an ally of this movement, because one of the expressions of nationalist governments in the province of Quebec was the nationalisation of electricity companies and the creation of other "national" public structures. The article has all the flavour of the public choice: the assumption that all economic agents are rational and self-interested (both market participants and policy makers), and a bias against the left. Policy makers are not benevolent agents who act to promote social welfare, but individuals that have individualistic preferences like everybody else. Therefore, most initiatives of governments are self-interested, which is the origin of a distrust of interventionist doctrines in general. What has changed today? Today, the public choice dogma has been replaced by a more balanced (not necessarily anti-left) political economy, where certainly there are no intrinsic differences between different economic agents, but where some improvement can be achieved through collective action by governments or communities. Additionally, agents are recognized to be not always rational, but affected by biases and behavioural anomalies, both in the market and in the political domain. On nationalism, the left in democratic countries will hardly benefit from selfish policies that do not address the international dimension of social problems such as inequality, financial instability or climate change. What survives today from the insights of Breton is the idea that nationalism in democratic countries is a strategy (today accompanied by all kind of behavioural tricks) that has a low or negative social return, but that benefits the elites of some national or ethnic groups.

Monday, March 31, 2014

Pierre Trudeau, against de current

The book of selected writings (between 1939 and 1996) by Pierre Trudeau, the father of Canadian federalism, with the title "Against the Current," provides many lessons for those who think that nationalism should not be opposed. For example (p. 204):
"It is possible that nationalism may still have a role to play in backward societies where the status quo is upheld by irrational and brutal forces; in such circumstances, because there is no other way, perhaps the nationalist passions will still be found useful to unleash revolutions, upset colonialism, and lay the foundations of nation-states; in such cases, the undesirable consequences will have to be accepted along with the good.
But in the advanced societies, where the interplay of social forces can be regulated by law, where the centres of political power can be made responsible to the people, where the economic victories are a function of education and automation, where cultural differentiation is submitted to ruthless competition, and where the road to progress lies in the direction of international integration, nationalism will have to be discarded as a rustic and clumsy tool."