Colorado Fires Highlight Climate-Change Risks
In May, I traveled to Colorado to learn more about a pine beetle epidemic and other environmental changes linked to climate change. The Coloradoans I met were already braced: lack of snowpack, dry weather, and millions of dead trees had created what many worried were ideal wildfire conditions. Within weeks of my trip, wildfire arrived.
More OECD: Income Inequality Is a Big Problem in the U.S.
In addition to tackling innovation in the United States, the most recent biannual survey of the U.S. economy, released on Tuesday by the Organization for Economic Cooperation and Development, also highlighted the country's growing income inequality.
OECD Outlines Troubles with Innovation in the U.S.
Innovation is a topic we often write about here at Restoration Calls, so I was pleased to see the Organization for Economic Cooperation and Development included a special section on innovation in its biannual survey of the U.S. economy, out this morning and packed with charts and policy recommendations.
America's Epic Market Failure: Climate Change
Addressing greenhouse gas pollution presents a deep political problem. As I'll explain in this week's National Journal Magazine, even as American landscapes start to exhibit symptoms of climate change, many Americans remain unconvinced that those symptoms are linked to a global warming trend. To many, the evidence just isn't sufficient, and the cost of action seems greater than the cost of watching and waiting. So the country is doing very little to combat a problem that is beginning to inflict real damage on its ecology and economy.
The inaction is not just a political failure. It's also an economic one.
Five years ago, the British government produced a comprehensive review of climate economics that labeled climate change "the greatest and widest-ranging market failure ever seen." Environmental economists describe climate change as a market failure for two reasons. Markets don't take the social cost of greenhouse gas emissions into account. And the costs of emissions are spread globally, meaning that nations that take action to reduce emissions will pay more in economic costs than they receive in social benefits.
"Markets do very, very well at efficiently dealing with situations when everything is internalized-- when you and I pay all the costs and get the benefits of our actions," said Robert N. Stavins, an economist who directs of the Harvard Environmental Economics Program at the John F. Kennedy School of Government. "If any of us don't pay all the costs, then we're going to do too much of it; if we don't get all the benefits, then we're not going to do enough of it."
When you or I fuel up the R.V. for a road trip, we don't face what economists call the "social cost" of our action, because the environmental cost of burning fossil fuels isn't included in the price we pay at the pump. Because carbon emissions are essentially free, there's no price signal to push consumers, businesses or governments to reduce activity that's altering the global climate.
But climate change isn't just an externality. It's also a global commons problem, Stavins said.
"It doesn't matter whether the emissions come from Beijing, from Calcutta, from London or New York. They have precisely the same effect," Stavins said. "That means that for any individual country that's going to take action, it's going to pay the costs of taking action, but the benefits of it taking action--that is, the reduced damages--are going to be spread globally."
The American economy runs on cheap fuel. It isn't just cars: our economy also depends on industrialized agriculture, energy-intensive manufacturing and products that contain fossil fuels, such as petroleum-based plastics. Other greenhouse gases, like methane, are also by-products of agriculture and industry. Incorporating the social cost of greenhouse gas emissions into prices--i.e., increasing them-- would be economically painful, and the impact would be immediate.
If the whole world were to take action to reduce greenhouse gases, the benefits would outweigh the costs: the economic pain would be distributed worldwide, and global emissions would start to slow. But if one nation were to take action alone, the cost would outweigh the benefit. If the United States moved to address greenhouse gas emissions tomorrow, consumers and American businesses would suffer, but the sacrifice would only put a short-term dent in global greenhouse gas emissions--and the benefit of that sacrifice would be spread worldwide, rather than locally.
Climate change unfolds over a long period of time, and affects different areas differently. For the Maldives, rising sea levels mean catastrophe: an entire nation of inhabited islands sunk beneath the sea. For coastal New England, rising sea levels mean more flooded basements. Lopsided costs and benefits make global collective action even more difficult.
Fortunately, economists agree widely on one simple solution to these market failures - stayed tuned to Restoration Calls this month to learn all about it.
A Complex Solution for the Middle Class
Eric Beinhocker is a complexity economist. He thinks about the economy as an ecosystem and the middle class as the "mass" at the center of its food web; middle-class families, he says, are the tall grasses of our economic savannah, providing the labor for production, the consumption for goods, and the savings that turn into investment. "If the middle class is doing well it creates a virtuous cycle of consumption, investment, and job growth rippling across the economic web," Beinhocker says. "If the middle class is not doing well, that cycle can go into reverse."
America's middle class is not doing well. That's putting it mildly. As NJ documented in its cover story last week, its decline - worsening over decades but punctuated during the Great Recession and its aftermath - poses a serious threat to America's economic future. But what can we do about that?
Beinhocker's solutions start with changing how Americans think about the economy and how it works. He is a former McKinsey researcher, the executive director of the Institute for New Economic Thinking at the Oxford Martin School, and the author of The Origin of Wealth, a bible of sorts for the emerging field of complexity economics. In a series of emails this week with National Journal, Beinhocker laid out a straightforward plan for launching a middle-class turnaround in America, starting with changing our economic thinking.
NJ: If we start to think about the economy that way - with the middle class as the tall grass in the center of our food web - how should we then change our thinking about economic policy?
EB: Thinking of middle class as at the centre of a larger economic web creates a shift in perspective and raises some pretty challenging questions about the role of government.
Governments can't completely shelter or protect their middle classes from the changes being wrought by globalization and technology. But they can do more to help them navigate those changes and moderate the pace of change.
Chat with us: How to Save the Middle Class
The decline of the middle class is a serious and persistent threat to the American economy - on this, the evidence is convincing. We need to arrest that slide. But how?
That's the subject of a live chat here at the Roundtable at noon on Tuesday, May 22. I'll be joined by two top-notch economists: Heather Boushey of the liberal Center for American Progress, co-author of a new report on why the middle class matters so much for growth, and Kevin Hassett of the conservative American Enterprise Institute (and an adviser to Gov. Mitt Romney's presidential campaign) who made a big splash with a recent op-ed column he co-wrote in the New York Times decrying the "human disaster" of unemployment.
Kevin and Heather will field your questions about what's happened to the middle class and how policymakers can begin to set things right. Please join us and join the conversation.
Chat with us here:
Chat with us: How to Save the Middle Class
The decline of the middle class is a serious and persistent threat to the American economy - on this, the evidence is convincing. We need to arrest that slide. But how?
That's the subject of a live chat here at the Roundtable at noon on Tuesday, May 22. I'll be joined by two top-notch economists: Heather Boushey of the liberal Center for American Progress, co-author of a new report on why the middle class matters so much for growth, and Kevin Hassett of the conservative American Enterprise Institute (and an adviser to Gov. Mitt Romney's presidential campaign) who made a big splash with a recent op-ed column he co-wrote in the New York Times decrying the "human disaster" of unemployment.
Kevin and Heather will field your questions about what's happened to the middle class and how policymakers can begin to set things right. Please join us and join the conversation.
Chat with us here:
Power has Shifted From the Middle Class - Now What?
Jake Rosenfeld meets me during a sun break on a windy May afternoon, on the steps of the library at the University of Washington, where he is a sociologist. We grab a coffee and, and while in line, talk about how budget cuts have frozen his salary, jacked up tuition, and sent the university abroad recruiting foreign undergrads who can pay a subsidizing-freight tuition.
We settle at an outside table and watch students mill about the quad. "This feels idyllic," Rosenfeld says, especially compared to his hometown of St. Louis, or to any other of the "dying river cities" he is so fond of. "Seattle doesn't seem like a place I'd worry about."
But, as I write in a Restoration Calls narrative about the dangers of widening inequality, Rosenfeld does worry about Seattle - and the country.
In his research, he has tracked large and worrying trends in the U.S. labor market. One is the decline of the "job for life," like the one his grandfather had at DuPont after leaving the Navy. That's created an "enormous power shift" from workers to employees, he says. It used to be that companies would overpay you in your youth, when you were learning; underpay you in your prime, when you were most productive; and overpay you again as you neared retirement and slowed down a touch. In the end, it evened out.
Now, companies just want to grab you in your prime, for the same bargain rates. Productivity and wages have become decoupled - where once they rose in tandem, now productivity is rising and median wages have stalled. "You see it even at Boeing," Rosenfeld says, invoking the traditional economic jet engine of the Puget Sound area. "And if you see it at Boeing, it's gone."
Power has Shifted From the Middle Class - Now What?
Jake Rosenfeld meets me during a sun break on a windy May afternoon, on the steps of the library at the University of Washington, where he is a sociologist. We grab a coffee and, and while in line, talk about how budget cuts have frozen his salary, jacked up tuition, and sent the university abroad recruiting foreign undergrads who can pay a subsidizing-freight tuition.
We settle at an outside table and watch students mill about the quad. "This feels idyllic," Rosenfeld says, especially compared to his hometown of St. Louis, or to any other of the "dying river cities" he is so fond of. "Seattle doesn't seem like a place I'd worry about."
But, as I write in a Restoration Calls narrative about the dangers of widening inequality, Rosenfeld does worry about Seattle - and the country.
In his research, he has tracked large and worrying trends in the U.S. labor market. One is the decline of the "job for life," like the one his grandfather had at DuPont after leaving the Navy. That's created an "enormous power shift" from workers to employees, he says. It used to be that companies would overpay you in your youth, when you were learning; underpay you in your prime, when you were most productive; and overpay you again as you neared retirement and slowed down a touch. In the end, it evened out.
Now, companies just want to grab you in your prime, for the same bargain rates. Productivity and wages have become decoupled - where once they rose in tandem, now productivity is rising and median wages have stalled. "You see it even at Boeing," Rosenfeld says, invoking the traditional economic jet engine of the Puget Sound area. "And if you see it at Boeing, it's gone."
The Case for the Middle Class
The Center for American Progress is a liberal think tank in Washington, but its latest economic opus draws from compelling research across the political spectrum to make a powerful case: that the strength of the U.S. economy depends on the health of the middle class.
I quote the paper, by economists Heather Boushey and Adam Hersh, in my Restoration Calls piece on Nick Hanauer and his fight to convince the innovative class that its fate is tied to the middle class. The report is worth a read in its entirety; notice how much of the research it relies upon comes from the University of Chicago Booth School of Business, among other high-powered institutions that are not roundly considered bastion of liberalism. The bulk of Boushey and Hersh's sources aren't partisan in any way - just detailed, data-driven analysis from top economists.
Here's how Boushey and Hersh summarize their argument:
The economy grows when technological improvements or investments in human or physical capital boost productivity, when the labor force increases, or when investment in physical capital adds to the economy's productive stock--and thus total output expands.
But this begs the question: What boosts productivity or creates incentives to invest? Economists differ in their specific answers to these questions, but the different theories point to five primary factors:• The level of human capital and whether talent is encouraged to boost the economy's productivity
• Cost of and access to financial capital, which allow firms and entrepreneurs to make real investments that create technological progress to use in the economy
• Strong and stable demand, which creates the market for goods and services and allows investors to plan for the future
• The quality of political and economic institutions, including the quality of corporate governance as well as political institutions and a legal structure that enforces contracts
• Investment in public goods, education, health, and infrastructure, which lays the foundation for private-sector investment
Strong empirical evidence in economics and other social sciences suggests that the strength of the middle class and the level of income inequality have an important role to play for each of these five factors boosting productivity and spurring investment.
Read the report for yourself, then come back here to the Roundtable on May 22, at noon, to chat about how to save the middle class with Boushey and Kevin Hassett, an economist at the conservative American Enterprise Institute. We'll take your questions and see if we can't find some common ground on how to end America's middle-class slide.
The Case for the Middle Class
The Center for American Progress is a liberal think tank in Washington, but its latest economic opus draws from compelling research across the political spectrum to make a powerful case: that the strength of the U.S. economy depends on the health of the middle class.
I quote the paper, by economists Heather Boushey and Adam Hersh, in my Restoration Calls piece on Nick Hanauer and his fight to convince the innovative class that its fate is tied to the middle class. The report is worth a read in its entirety; notice how much of the research it relies upon comes from the University of Chicago Booth School of Business, among other high-powered institutions that are not roundly considered bastion of liberalism. The bulk of Boushey and Hersh's sources aren't partisan in any way - just detailed, data-driven analysis from top economists.
Here's how Boushey and Hersh summarize their argument:
The economy grows when technological improvements or investments in human or physical capital boost productivity, when the labor force increases, or when investment in physical capital adds to the economy's productive stock--and thus total output expands.
But this begs the question: What boosts productivity or creates incentives to invest? Economists differ in their specific answers to these questions, but the different theories point to five primary factors:• The level of human capital and whether talent is encouraged to boost the economy's productivity
• Cost of and access to financial capital, which allow firms and entrepreneurs to make real investments that create technological progress to use in the economy
• Strong and stable demand, which creates the market for goods and services and allows investors to plan for the future
• The quality of political and economic institutions, including the quality of corporate governance as well as political institutions and a legal structure that enforces contracts
• Investment in public goods, education, health, and infrastructure, which lays the foundation for private-sector investment
Strong empirical evidence in economics and other social sciences suggests that the strength of the middle class and the level of income inequality have an important role to play for each of these five factors boosting productivity and spurring investment.
Read the report for yourself, then come back here to the Roundtable on May 22, at noon, to chat about how to save the middle class with Boushey and Kevin Hassett, an economist at the conservative American Enterprise Institute. We'll take your questions and see if we can't find some common ground on how to end America's middle-class slide.
TED's Curator Responds on Inequality
"Today TED was subject to a story so misleading it would be funny... except it successfully launched an aggressive online campaign against us."
Thus begins a blog post from TED curator Chris Anderson, responding directly to NJ's reporting on the decision not to post Nick Hanauer's talk on income inequality. (A talk which, incidentally, Anderson has now posted on YouTube.) Anderson had previously only responded to NJ's questions with a written statement.
In his blog post, Anderson writes that "a non-story about a talk not being chosen, because we believed we had better ones, somehow got turned into a scandal about censorship. Which is like saying that if I call the New York Times and they turn down my request to publish an op-ed by me, they're censoring me.
"For the record, pretty much everyone at TED, including me, worries a great deal about the issue of rising inequality. We've carried talks on it in the past, like this one from Richard Wilkinson. We'd carry more in the future if someone can find a way of framing the issue that is convincing and avoids being needlessly partisan in tone."
Read the whole Anderson post here.
TED's Curator Responds on Inequality
"Today TED was subject to a story so misleading it would be funny... except it successfully launched an aggressive online campaign against us."
Thus begins a blog post from TED curator Chris Anderson, responding directly to NJ's reporting on the decision not to post Nick Hanauer's talk on income inequality. (A talk which, incidentally, Anderson has now posted on YouTube.) Anderson had previously only responded to NJ's questions with a written statement.
In his blog post, Anderson writes that "a non-story about a talk not being chosen, because we believed we had better ones, somehow got turned into a scandal about censorship. Which is like saying that if I call the New York Times and they turn down my request to publish an op-ed by me, they're censoring me.
"For the record, pretty much everyone at TED, including me, worries a great deal about the issue of rising inequality. We've carried talks on it in the past, like this one from Richard Wilkinson. We'd carry more in the future if someone can find a way of framing the issue that is convincing and avoids being needlessly partisan in tone."
Read the whole Anderson post here.
More on TED: 'Entrepreneurs Would Feel Insulted'
NJ's report Wednesday that a "TED talk" on widening income inequality was too controversial to be posted on Ted.com has created a modest stir on the Internet. Change.org has launched a petition urging organizers to publish the speech by Seattle venture capitalist Nick Hanauer. News outlets have offered to film the talk and post it. Several political and business blogs have picked up the story.
We'll have much more to tell you very soon about Hanauer, his message, and the powerhouse research that supports his radical idea that the middle class is essential to economic growth. In the meantime, here's a little more clarity on why TED curator Chris Anderson chose not to air Hanauer's talk.
It's the full text of an email Anderson sent Hanauer on May 7, explaining why he'd decided not to publish the talk. In it, Anderson takes issue with several of Hanauer's claims about inequality and the economy in his talk - read the full text here - including Hanauer's statement that middle-class consumers, and not businesspeople, are the real job creators in an economy. To Hanauer's statement that businesses only hire as a "last resort," Anderson replies, "I think a lot of business managers and entrepreneurs would feel insulted by that statement as given."
Here's the full email.
More on TED: 'Entrepreneurs Would Feel Insulted'
NJ's report Wednesday that a "TED talk" on widening income inequality was too controversial to be posted on Ted.com has created a modest stir on the Internet. Change.org has launched a petition urging organizers to publish the speech by Seattle venture capitalist Nick Hanauer. News outlets have offered to film the talk and post it. Several political and business blogs have picked up the story.
We'll have much more to tell you very soon about Hanauer, his message, and the powerhouse research that supports his radical idea that the middle class is essential to economic growth. In the meantime, here's a little more clarity on why TED curator Chris Anderson chose not to air Hanauer's talk.
It's the full text of an email Anderson sent Hanauer on May 7, explaining why he'd decided not to publish the talk. In it, Anderson takes issue with several of Hanauer's claims about inequality and the economy in his talk - read the full text here - including Hanauer's statement that middle-class consumers, and not businesspeople, are the real job creators in an economy. To Hanauer's statement that businesses only hire as a "last resort," Anderson replies, "I think a lot of business managers and entrepreneurs would feel insulted by that statement as given."
Here's the full email.
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