Meyerson sur la middle class américaine

Un témoignage de Meyerson sur la situation de la classe moyenne américaine

Meyerson sur la middle class américaine

Un témoignage de Meyerson sur la situation de la classe moyenne américaine

Pigouvian Taxes and Equity

Mark Thoma introduit la notion d'équité dans le débat sur la taxation des biens à externalités négatives. Je n'avais jamais pensé à cet aspect des choses, qui rejoint cependant mon interrogation plus générale sur les points où le politique et l'économique se confrontent dans la définition de ce qui est acceptable :

Pigouvian Taxes and Equity
In the debate over global warming and what to do about it, we often hear arguments such as:
In particular, we could go to Greg Mankiw, founder of the Pigou Club. He would no doubt argue that the proper way to handle the negative externalities ... would be to tax them. Then, there's no need to stamp out industry... Rather, we simply give the market an incentive to reduce the bad effects.. The idea is that larger social goals are perfectly compatible with the preservation of individual choice...
But yet, despite the economic superiority of taxes over mandates in terms of the efficiency properties, there is substantial public support for mandates such as CAFE standards over taxes, and mandates continue to garner enough votes in the legislature to pass and be signed into law.
Why might that be? In thinking about efficiency as the primary reason for promoting one policy over the other, I think we might be missing something important: equity. More choice is best most of the time, but when it's a matter of being constrained, of not being able to do something you want or need to do, people want that constraint on behavior to be shared equally - especially when it involves something as essential to daily life as energy. If we impose an energy tax (carbon tax), the wealthy will pay more for their fuel, but the jets will still fly. We know that if the price of gas goes up a dollar or two due to a carbon tax, many people at the upper end of the income distribution will hardly notice, they won't be constrained in the same way the average or poor household will be. They can still drive their cars, heat their pools and houses, and so on. Their savings might not accumulate quite as fast, but to what extent are they really paying the same cost as a poor person?
Progressive carbon taxes anyone?
That might work, but even with a progressive carbon tax many people toward the upper end of the income distribution would not be very constrained in what they can do. With CAFE standards at least there's a chance that the cost of the policy action will be shared more equally. I realize that people have found a way to evade the CAFE standards (e.g. classify an SUV as a truck and make trucks subject to different standards), and evasion is always a problem, but that's largely a matter of will and closing loopholes. With mandates, at least the perception that we are trying to distribute the costs more equally is there.
I don't think policies that allow certain segment of the population to "buy out" of the constraint will find much popular support. If the poor are passed by roaring, gas guzzling, sports cars on the freeway as they drive their gas saving, small hybrid, they won't feel that is fair, not unless our transportation infrastructure changes dramatically. We can promise that with a carbon tax the proceeds will be redistributed to the poor so they are left harmless, but credibility over the long-run is a problem (what if the next administration cuts the government transfers to the poor?), people won't necessarily believe it will be fair to them individually, and there remains the problem of certain groups buying their way around the constraint and the public perception that comes along with that.
Maybe I'm wrong about this, but I do think we should spend more time thinking about the equity of these proposals and how fairly the (utility) cost is distributed across the population. A mandate, done properly, may have poor economic properties, but I think people support them because at least there's a chance that a mandate will force the luxury cars to abide by the same mpg restrictions as the lower price cars driven by the typical household. If we are going to go the carbon tax route, touting the efficiency properties won't be enough, I think we will need to find a way to convince people that everyone will share the costs (approximately) equally before it will find popular support.
Posted by Mark Thoma on Monday, February 11, 2008 at 03:16 PM in

Recession watch

Le mot récession revient de plus en plus dans le discours général. A ce stade, même si les économistes de Wall St persistent à ne lui donner qu'une probabilité de 50%, les voix sérieuses (ie non irrémédiablement contaminées par les conflits d'intérêts de leurs employeurs) s'accordent à rejoindre Nouriel Roubini dans un diagnostic plutôt pessimiste. Ce dernier est évidemment le plus pessimiste des pessimistes, mais on aurait tendance à le luis pardonner dans la mesure où il a eu systématiquement raison depuis 2 ans (au moins, je ne suivais pas son blog avant 2006).

En France, le discours est en retard d'une guerre et se focalise encore sur les illusions d'une crise contenue, comme le nuage de Tchernobyl, à nos frontières. On nous explique que l'immobilier atterrit en douceur, les chiffres catastrophiques de la balance commerciale passent inaperçus (ou alors sont commentés en passant des habituelles excuses sur le méchant euro et les méchants vendeurs de pétrole) et, surtout, le gouvernement s'abstient soigneusement de traiter le sujet, ou s'accroche à des délires ayant trait, pour l'essentiel, à l'accession à la propriété.

A ce stade, où la profondeur de la crise qui nous attend est encore incertaine, il faut admettre que les arguments des pessimistes sont beaucoup plus convaincants que ceux des optimistes. C'est en particulier le cas de celui selon lequel il faudra bien que l'excès de crédit accumulé sur ces dernières années se résorbe. Je n'ai pas encore vu de description crédible d'un mécanisme de résorbption qui n'entraîne pas d'ajustements douloureux.

update : via Thoma, W. Poole, gouverneur de la Fed de Saint Louis et optimiste, a un argument intéressant : selon lui, ce qu'il voit aujourd'hui est une inquiétude des entreprises face à leur profitabilité, pas face à leur survie. Se pourrait il que l'amélioration récente de la profitabilité des entreprises, sur le dos d'un crédit pas cher et de la globalisation, ait un effet positif en agissant comme un amortisseur des effets récessionnistes ? C'est en tout cas une interrogation valable, à suivre...

the kuznets curve

Brad sur la courbe de kuznets.
On voit de plus en plus d'articles de ce genre, ou en tout cas les arguments des économistes de l'école de pensée de Brad sont de plus en plus visibles (et si le FT s'y met...). Les débats d'écnonomie politique de la décennie qui vient promettent d'être passionnants (via mark thoma).

Brad says that "over the past generation, confidence in the 'Kuznets curve' has faded":
Would Marx say rising tide today lifts all boats?, by J. Bradford DeLong, Project Syndicate: A century and a half ago, Karl Marx both gloomily and exuberantly predicted that the modern capitalism he saw evolving would prove incapable of producing an acceptable distribution of income.
Wealth would grow, Marx argued, but would benefit the few, not the many: the forest of upraised arms looking for work would grow thicker and thicker, while the arms themselves would grow thinner and thinner.
Ever since, mainstream economists (in the West) have earned their bread and butter patiently explaining why Marx was wrong. Yes, the initial disequilibrium shock of the industrial revolution was and is associated with rapidly rising inequality as opportunities are opened to aggressiveness and enterprise, and as the market prices commanded by key scarce skills rise sky-high. But this was - or was supposed to be - transient.
A technologically stagnant agricultural society is bound to be an extremely unequal one: by force and fraud, the upper class pushes the peasants' standards of living down to subsistence and takes the surplus as the rent on the land they control.
By contrast, mainstream economists argued, a technologically advancing industrial society was bound to be different.
First, the key resources that command high prices and thus produce wealth are not fixed, like land, but are variable: the skills of craft workers and engineers, the energy and experience of entrepreneurs, and machines and buildings are all things that can be multiplied.
As a result, high prices for scarce resources lead not to zero- or negative-sum political games of transfer but to positive-sum economic games of training more craft workers and engineers, mentoring more entrepreneurs and managers, and investing in more machines and buildings.
Second, democratic politics balances the market. Government educates and invests. It also provides social insurance by taxing the prosperous and redistributing benefits to the less fortunate.
Economist Simon Kuznets proposed the existence of a sharp rise in inequality upon industrialization, followed by a decline to social-democratic levels.
But, over the past generation, confidence in the "Kuznets curve" has faded. Social-democratic governments have been on the defensive against those who claim that redistributing wealth exacts too high a cost on economic growth.
The consequence has been a loss of morale among those of us who trusted market forces and social-democratic governments to prove Marx wrong about income distribution in the long run - and a search for new and different tools of economic management.
Increasingly, pillars of the establishment are sounding like shrill critics. Consider Martin Wolf, a columnist at The Financial Times.
Wolf recently excoriated the world's big banks as an industry with an extraordinary "talent for privatizing gains and socializing losses ... (and) get(ting) ... self-righteously angry when public officials ... fail to come at once to their rescue when they get into (well-deserved) trouble ... (T)he conflicts of interest created by large financial institutions are far harder to manage than in any other industry."
For Wolf, the solution is to require that such bankers receive their pay in installments over the decade after which they have done their work. But Wolf's solution is not enough, for the problem is not confined to high finance.
The problem is a broader failure of market competition to give rise to alternative providers and underbid the fortunes demanded for their work by our current generation of mercantile princes. [Cartoon with article]Brad says that "over the past generation, confidence in the 'Kuznets curve' has faded":
Would Marx say rising tide today lifts all boats?, by J. Bradford DeLong, Project Syndicate: A century and a half ago, Karl Marx both gloomily and exuberantly predicted that the modern capitalism he saw evolving would prove incapable of producing an acceptable distribution of income.
Wealth would grow, Marx argued, but would benefit the few, not the many: the forest of upraised arms looking for work would grow thicker and thicker, while the arms themselves would grow thinner and thinner.
Ever since, mainstream economists (in the West) have earned their bread and butter patiently explaining why Marx was wrong. Yes, the initial disequilibrium shock of the industrial revolution was and is associated with rapidly rising inequality as opportunities are opened to aggressiveness and enterprise, and as the market prices commanded by key scarce skills rise sky-high. But this was - or was supposed to be - transient.
A technologically stagnant agricultural society is bound to be an extremely unequal one: by force and fraud, the upper class pushes the peasants' standards of living down to subsistence and takes the surplus as the rent on the land they control.
By contrast, mainstream economists argued, a technologically advancing industrial society was bound to be different.
First, the key resources that command high prices and thus produce wealth are not fixed, like land, but are variable: the skills of craft workers and engineers, the energy and experience of entrepreneurs, and machines and buildings are all things that can be multiplied.
As a result, high prices for scarce resources lead not to zero- or negative-sum political games of transfer but to positive-sum economic games of training more craft workers and engineers, mentoring more entrepreneurs and managers, and investing in more machines and buildings.
Second, democratic politics balances the market. Government educates and invests. It also provides social insurance by taxing the prosperous and redistributing benefits to the less fortunate.
Economist Simon Kuznets proposed the existence of a sharp rise in inequality upon industrialization, followed by a decline to social-democratic levels.
But, over the past generation, confidence in the "Kuznets curve" has faded. Social-democratic governments have been on the defensive against those who claim that redistributing wealth exacts too high a cost on economic growth.
The consequence has been a loss of morale among those of us who trusted market forces and social-democratic governments to prove Marx wrong about income distribution in the long run - and a search for new and different tools of economic management.
Increasingly, pillars of the establishment are sounding like shrill critics. Consider Martin Wolf, a columnist at The Financial Times.
Wolf recently excoriated the world's big banks as an industry with an extraordinary "talent for privatizing gains and socializing losses ... (and) get(ting) ... self-righteously angry when public officials ... fail to come at once to their rescue when they get into (well-deserved) trouble ... (T)he conflicts of interest created by large financial institutions are far harder to manage than in any other industry."
For Wolf, the solution is to require that such bankers receive their pay in installments over the decade after which they have done their work. But Wolf's solution is not enough, for the problem is not confined to high finance.
The problem is a broader failure of market competition to give rise to alternative providers and underbid the fortunes demanded for their work by our current generation of mercantile princes. [Cartoon with article]

Stiglitz sur le credit crunch

Stiglitz résume la situation actuelle. Noter le paragraphe sur la question de la corrélation, principe de base du risk management qui semble avoir été largement oublié ces dernières années (ha, les articles expliquant sentencieusement que la diversification et la distribution du risque avaient mis un terme à la volatilité...)

Central banks need to act pre-emptively, not reactively, by Joseph E Stiglitz, Project Syndicate: Not surprisingly, the atmosphere at this year’s World Economic Forum was grim. Those who think that globalisation, technology, and the market economy will solve the world’s problems seemed subdued. Most chastened of all were the bankers. ... And it was not just the bankers who were in the Davos doghouse this year, but also their regulators – the central bankers.
Anyone who goes to international conferences is used to hearing Americans lecture everyone else about transparency. There was still some of that... I heard the usual suspects – including a former treasury secretary who had been particularly vociferous in such admonishments during the East Asia crisis -– bang on about the need for transparency at sovereign wealth funds (though not at American or European hedge funds).
But this time, developing countries could not resist commenting on the hypocrisy of it all. ... Had America really told others to bring in American banks to teach them about how to run their business? Had America really boasted about its superior risk management systems, going so far as to develop a new regulatory system (called Basle II)? Basle II is dead...
Bankers – and the rating agencies – believed in financial alchemy. They thought that financial innovations could somehow turn bad mortgages into good securities, meriting AAA ratings. But one lesson of modern finance theory is that, in well functioning financial markets, repackaging risks should not make much difference. ...
There might be some money in repackaging, but not the billions that banks made by slicing and dicing sub-prime mortgages into packages whose value was much greater than their contents. It seemed too good to be true – and it was.
Worse, banks failed to understand the first principle of risk management: diversification only works when risks are not correlated, and macro-shocks (such as those that affect housing prices or borrowers’ ability to repay) affect the probability of default for all mortgages.
I argued at Davos that central bankers also got it wrong by misjudging the threat of a downturn and failing to provide sufficient regulation. They waited too long to take action. Because it normally takes a year or more for the full effects of monetary policy to be felt, central banks need to act preemptively, not reactively.
Worse, the US Federal Reserve and its previous chairman, Alan Greenspan, may have helped create the problem, encouraging households to take on risky variable-rate mortgages by reassuring those who worried ... that there was at most a little “froth” in the market.
Normally, a Davos audience would rally to the support of the central bankers. This time, a vote ... supported my view by a margin of three to one. ...
It was interesting to see the different cultural attitudes to the crisis on display. In Japan, the CEO of a major bank would have apologised..., and would have refused his pension and bonus so that those who suffered as a result of corporate failures could share the money. He would have resigned.
In America, the only questions are whether a board will force a CEO to leave and, if so, how big his severance package will be. ...
This is the third US crisis in the past 20 years, after the Savings & Loan crisis of 1989 and the Enron/WorldCom crisis in 2002.
Deregulation has not worked. Unfettered markets may produce big bonuses for CEOs, but they do not lead, as if by an invisible hand, to societal well-being. Until we achieve a better balance between markets and government, the world will continue to pay a high price.