Short Term Thinking–Wrong for the Environment and the Economy

Here is a good article on the foolishness of Keynesianism. Not only is this short-term thinking damaging to the future economy it is ultimately damaging to the environment. As the writer notes:

Our unquestioned belief that the world’s resources are the raw materials of our prosperity is a peculiar condition induced by the very narrowing of our temporal horizon which Tocqueville predicted would be a hallmark of modern democracy. Our simultaneous consumption of the world’s goods – including our insatiable thirst for its limited supplies of potable water, our limitless craving for non-renewable quantities of fossil fuel, and our foolish destruction of precious topsoil – along with our production of copious amount of waste, pollution and limitless belief in our own entitlement, is the result of systemic and societal-wide narrowing of our temporal horizon.

Keynesianism, along with other factors, creates the very short-term mind-set that has wrecked our environment. It legitimizes an immediate gratification sensibility that will always work against a sound economic policy as it considers the environment. It is the same philosophy held by the type of father who upon doing some odd jobs and finding money in his pocket decides to stop at the local bar and drink it away rather than going home and putting some in the jar so his kids can have new shoes. Here is a glimpse of a better way.

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2 Responses to Short Term Thinking–Wrong for the Environment and the Economy

  1. Burk Braun says:

    Hi, Darrell-

    “.. socialism is the theory that there should be no private property, while distributism is the theory that property ought to be spread as broadly as possible; the two are precisely opposite.”

    Funny how that works, really. The Soviet Union also was a “dictatorship of the proletariat”, where the workers “owned” the means of production. But somehow, when everyone owns everthing, no one ends up owning anything. Even in the ideal ESOP where the workers really do own the means of production, there are inevitable conflicts between labor and management, since both have to deal with basic market mechanisms and resource scarcity. Managing working capital takes special skills and constitutes a distinct role vs other actors in an economic system, like bankers and workers.

    All that said, it is nice to see a little more meat put on the bones of distributism.

    “It is government which fosters the accumulation of property into fewer and fewer hands.”

    I'm sorry, but this is completely false. What happens in the stateless society, like in Somalia or in Afghanistan, which rank lowest on scores of functioning government? It works like the Mafia, where the rich get richer and the poor get poorer. Only the system is so badly run and screwed up that no one gets particularly rich because so little wealth is produced at all.

    “It is quite legitimate to break up such companies and to distribute them either to the local or regional banks or to the employees. The same principle applies to the failed industrial giants that require public life support.”

    There, I agree- especially in terms of banks- but the author seems not to realize that the UAW now owns a very large stake in GM, for better or worse. But if the workers were put in complete charge of GM to serve their own interests in terms of wages and pensions, the company would probably head downhill even faster than it is already. Because, for one thing, it is imperative for them to shed workers and expenses to get in line with their market. See the link I had to market valuation of companies.

    “Further, we must tax that which has no economic value, that is, the tax should fall primarily on economic rent and externalities”

    I completely agree with the latter, not so much with the former. All forms of taxation slow economic activity. So there is no free lunch in the way of taxes. Indeed it is much better to tax things we want less of (pollution, tobacco, crime), than what we want more of. But there are only so many things we want less of- that is not always where the money is. If we taxed gasoline at $10 per gallon, which would be quite beneficial in policy terms, (yet would seem extreme to many), that would net $1.4 trillion per year. I guess that would be quite a helpful chunk, though the conservation it induces would quickly reduce it.

    It is quite difficult to determine what economic rent is in an operational sense. It may just boil down to profits. And while it is great to tax profits, there are limits here as well, in terms of being able to hide profits in various ways, and in terms of retaining incentives to make jobs in the first place.

    From a good government perspective, the best tax system is the most even one- that does not skew economic incentives unduly (other than with regard to externalities and public goods that are subject to commons effects.) Farmers, industries, capital, wealth, and labor, should all pay their fair share, and they all will then have an interest in the system. The VAT is widely regarded as relatively even and fair tax, on consumption, for instance. I don't think that the writer's land tax is fair at all, though I know very little about it.

    cont…

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  2. Burk Braun says:

    In sum, I'd have to say that this program is premised far more on big-government-is-evil than on any kind of rational economic or justice or community proposition. And I would directly disgree with the core position by saying that our mix of strong federal government and modest lower levels have worked very well in practice to advance the nation culturally and morally. The Jim Crow South was a prime example of local control, and look where that got us.

    The evils of big government are in large part illusory, with the exception of military adventurism, which I agree is an issue with our vast expenses and bases abroad. But replacing them will take a better world government to take over from pax Americana, not free-for-all mayhem on the international scene, which would plunge us into far worse conditions.

    Debt: The debt does not involve time travel of money. It is simply engaging in a set of promises to give holders of bonds future payments from future taxes. Assuming that bondholders are relatively rich and taxpayers are relatively poor, then it represents the future transfer of wealth from the poor to the rich. This is onerous if the economy has failed to grow enough to mitigate the value of the debt. it is not clear whether the US economy is going to grow much any time soon, so this debt may well grow quite difficult to bear. But at the moment, it is simple Keyensianism to prevent deflationary freefall by running some excess debt. Which your writer seems to know nothing about. For a serious discussion, read Krugman's NYTM piece. Indeed the writer seems to know little or nothing about monetary/financial policy. Or macroeconomics in general (Or trade theory). I mean, doing away with bankers… how is the government going to sensibly become a general lender of money to those who need capital? I'm as communist as the next left winger, but isn't this something of a big government issue? And this proposal in a country where practically anyone can open a bank today.

    “In Chapter XVI, we noted the problems and inefficiencies of the current system, a system that is highly dependent on subsidies and externalized costs. Once these subsidies are removed, it is unlikely that the current production model could actually produce anything at a profit. Localized production will follow in the wake of the demise of the subsidies.”

    This is classic crack-pottery. All economic profits result from externalized costs. We only clear a profit when we do not fairly pay for all the factors of production- by definition, and as per Marx and others. But there are good and bad externalities. Pollution is bad, innovation and creativity is good. Government subsidies are bad (I agree). Labor is good, but has to be underpaid if capital is to be accumulated and society at large benefit from that labor.

    Anyhow, nothing is going to seriously collapse in the absence of government subsidies alone (other than a stable and wasteful farming system, perhaps). But if one were to cost in ALL externalities, that would be a different story, representing huge intrusions into all aspects of business and essentially sending us back to the stone age. That would be localism!

    Alright- a fun read in vague and well-intentioned economic theory, and I wish you and them the best!

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