Re-Balancing Economics with Ethics

NH Retired Men’s Association. 20 September 2016

1.Pursuit of Individual Profit vs The Common Good of Society.

2. Maximizing Economic Growth & Overcoming Income Inequality

Paul H. Carr, Ph.D.

Re-Balancing Economics with Ethics

1. Pursuit of Individual Profit vs The Common Good of Society.

2. Maximizing Economic Growth & Overcoming Income Inequality

3. “Trickle-Up” Economics Better than “Trickle-Down”

ETHICS GOLDEN RULE: Do unto others as you would have them do unto you.

ECONOMICS GOLDEN RULE:

Whoever has the gold makes the rules.

10/9/15

I ask you to ensure that humanity is served by wealth and not ruled by it.Pope Francis. Message to the World Economic Forum 2014.

“This imbalance (between the rich minority and the rest) is the result of ideologies that defend the absolute autonomy of the marketplace and financial speculation… behind this attitude lurks a rejection of ethics and a rejection of God.Pope Francis “Evangelii Gaudium, pars 56,57.

ECONOMIC IMBALNCE• Belief in:• “Invisible Hand,” Adam Smith (1776), which

guided the pursuit of individual gain towards the public interest.

“The self-correcting power of the free market.” ( Alan Greenspan’s Laissez Faire Economics )

Ignoring:

• “Tragedy of the Commons,” William Forster Lloyd (1833), in which the pursuit of individual gain leads to negation of the common good.

Tragedy of the Commons William Forster Lloyd (1833), Garrett Hardin (1968) The pursuit of individual gain leads to abrogation of the common good.

Lloyd was familiar with herdsmen who all grazed their cattle on a common for free. Each individual gained by adding more cows to his own herd. As each pursued his individual gain, the commons became overgrazed, resulting in the tragedy malnourished cows.

TRADEGY OF THE COMMONS Individual desire to go everywhere gets you nowhere, while polluting.

SOLUTIONS:-Freeways aren’t free.

-$8/ gal in Europe

-PublicTransportation

Coal burning pollutes our common atmosphere for free.This is short term economic benefit for utility companies and customers.The negative effects of pollution are shared by all. THE LONG-TERM TOTAL COST OF BURING FOSSIL FUELS IS NOT INCLUDED IN WHAT WE NOW PAY. THE CO2 EMISSIONS WILL BE IN OUR ATOMPHERE FOR 100 YEARS.

Aerosol pollution from coal burning in Beijing Schools must sometimes be closed.

World Health Organization safe level: 25 mg/m3

Aerosol level in Beijing: 505 mg/m3http://scitation.aip.org/content/aip/magazine/physicstoday/news/10.1063/PT.5.4009?utm_source=Physics+Today&utm_medium=email&utm_campaign=5229780_Physics+Today%3a+The+week+in+Physics+12-16+January&utm_content=$LINK_KEYWORD$&dm_i=1Y69,343BO,E1O2I6,B5VQT,1

Long-TermCosts of Coal Burning

1. Fine particle pollution from U.S. power plants cuts short the lives of over 30,000 people/ year.

- Asthma attacks, cardiac problems and upper and lower respiratory problems associated with fine particles from power plants.

2. Deaths of many coal miners - None from nuclear reactors in the US.

3. Increasing carbon dioxide levels are warming our planet via the greenhouse effect, raising sea levels and increasing weather extremes.

Why Free Inhalers? Because COAL CARES. http://www.coalcares.org/index.html

Coal Cares™ is a brand-new initiative from Peabody Energy, the world's largest private-sector coal company, to reach out to American youngsters with asthma and to help them keep their heads high in the face of those who would treat them with less than full dignity. For kids who have no choice but to use an inhaler, Coal Cares™ lets them inhale with pride.Puff-Puff™ inhalers are available free to any family living within 200 miles of a coal plant, and each inhaler comes with a $10 coupon towards the cost of the asthma medication itself.

"There are a thousand hacking at the branches of evil (symptoms) to one who is striking at the root (cause).” Thoreau.

GOOD NEWS SOLUTIONS:

NO FREE POLLUTION

Sweden, one of the few countries that tax carbon, has reduced its emissions by about twenty-three per cent in the past twenty-five years.

During that same period, its economy has grown by more than fifty-five per cent.

10/9/15

www.CitizensClimateLobby.org

- Revenue neutral carbon fee with dividend.

-Dividend would be returned to everyone.

-Stimulating economy & creating 2 million jobs.

OUR ECONOMY IS THE STRONGEST IN THE WORLD

• Foreigners are buying our US Treasury Bonds that pay1.5% interest.

• Interest rates in Europe are negative.

20 30 40 50 60 70 80 900

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GDP/Capita vs. Economic Freedom

Index of Economic Freedom

GD

P/C

apita

($K

)

LAW……………………………………………….…LIBERTY………ANARCHY

Optimum Balance

US

Canada

Congo

Niger

UK France Germany, Japan

S. Korea

CubaChina

Russia

HERITAGE FOUNDATIONINDEX OF ECONOMIC FREEDOM (2009)

Ten Economic Freedoms for United States91.9 Business Freedom 80.0 Investment Freedom 86.8 Trade Freedom 80.0 Financial Freedom 67.5 Fiscal Freedom 90.0 Property Rights 59.6 Government Size 72.0 Freedom from Corruption 84.0 Monetary Freedom 95.1 Labor Freedom 80.7 AVERAGE

BAD NEWS:

INCOME

INEQUALITY

GINI INDEX IS A MEASURE OF ECONOMIC EQUALITYGINI = 00 Income completely equal GINI = 100 One person owns everything = INJUSTICE

Germany, Scandinavia, Japan, etc. have more income equality than the US.

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Title of thepresentationInequality of capital

Thomas Piketty, Professor of Economics,

Paris School of Economics

19 December 2014

www.slideshare.net

You will soon see data from this source.

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Data from Capital in the 21st century (Harvard University Press, March 2014) This book studies the global dynamics of income and wealth distribution since 18c in 20+ countries; I use historical data collected over the past 15 years with Atkinson, Saez, Postel-Vinay, Rosenthal, Alvaredo, Zucman, and 30+ others; I try to shift attention from rising income inequality to rising wealth inequality

•The book includes four parts:

Part 1. Income and capital Part 2. The dynamics of the capital/income ratio Part 3. The structure of inequalities Part 4. Regulating capital in the 21st century

•In this presentation I will present some results from Parts 2 & 3, focusing upon the long-run evolution of capital/income ratios and wealth concentration (all graphs and series are available on line: see http://piketty.pse.ens.fr/capital21c)

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1929 Recession

2008Recession

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Taxes higherThan US

A RISING TIDE FLOATS ALL BOATS ? TRICKLE-DOWN ECONOMICS The objective of the top tax cuts from 70% in 1980 to 28% in 1988 was to stimulate the economy, ie increase GDP. It was expected to result in an increase in the tax revenue to the government. 1. No GDP increase. 2. Increased income inequality. 3. Increased our national debt.

YACHT, NEWPORT, RI

The Reagan Tax Cuts, 1980-1987 decreased growth from 3.5% to 3.0% GDP growth peaked at 4% per year in 1959 and has decreased to 2% at present

Reagan Tax Cuts70% to 28%

OUR NATIONAL DEBT INCREASED IN 1980

WWII Ends

Won Cold War

Recession from deregulation of Banks

WWII POSTER

How we defeated Hitler Germany and Japan’s Rising Sun (1945).

Paid off WWII, Korean and Vietnam Wars debt (1980), Landed Man on the Moon (‘69)

Patriotism against enemies is theSocial Capitalthat bound us together.

  "The Moral Equivalent of War (MEOW)" “One of the classic problems of politics: how to sustain political unity and civic virtue in the absence of war or a credible threat...and ...sound a rallying cry for service in the interests of the individual and the nation." 

American psychologist and philosopher William James, 1906,

COMPETITIONWe had a dedicated national effort to land a man on the moon in 1969, because the Russians were adhead of us in space.

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Conclusions • The history of income and wealth inequality is always political, chaotic and unpredictable;

it involves national identities and sharp reversals; nobody can predict the reversals of the future

• The ideal solution: progressive wealth tax at the global scale, based upon automatic exchange of bank information

• Other solutions involve authoritarian political & capital controls (China, Russia..), or perpetual population growth (US), or inflation, or some mixture of all.

TRICKLE-UP ECONOMICS MORE SUCCESSFUL THAN TRICKLE-DOWN

• The top 1% now pay 70% of our US Taxes, Comparable to 1970 before Reagan Tax Cuts.

• Ordinary family- median income rose 5.2% last year for the first time in decades. This income will “trickle-up” increasing growth.

• Median income people spend on goods and services in the US stimulating our economy, which “Trickles Up.”

• Decline in poverty rate last year.

• Number with medical insurance increased last year.

FEDERAL DEFICIT INCREASE:Committee for Responsible Budget

Clinton Tax Proposals: $ 0.25 Trillion

Trump Tax Proposals would lower the top income tax bracket, eliminate inheritance tax, increasing deficit by $ 11. 5 Trillion

“It is difficult to get people to understand something, when their salary depends on their not understanding it.” Upton Sinclair 1934 didate for Governor: And How I Got Licked by Upton Sinclair 1934

“

• Wages of those with education beyond a bachelor’s degree has doubled since 1964.

High school dropouts are earning less now than in 1962

Average US Income in 2012 dollars.

Top 10% $254,449

Bottom 90% $ 30,439

PHILIP KOTLERhilip Kotler is the S. C. Distinguished Professor of International Marketing at the Kellogg School of Management. He has been honored as one of the world's leading marketing thinkers. He received his M.A. degree in economics (1953) from the University of Chicago and his Ph.D. degree in economics (1956) from the Massachusetts Institute of Technology (M.I.T.), and has received honorary degrees from twenty-one foreign universities. He is the author of over 57 books and over one hundred and fifty articles.

• He has been a consultant to IBM, General Electric, Sony, AT&T, Bank of America, Merck, Motorola, Ford, and others.

• The Financial Times included him in its list of the top 10 business thinkers. \

10/9/15

Bill Gates Recommends this.

ECONOMIC IMBALNCE• Belief in:• “Invisible Hand,” Adam Smith (1776), which

guided the pursuit of individual gain towards the public interest.

“The self-correcting power of the free market.” ( Alan Greenspan’s Laissez Faire Economics )

Ignoring:

• “Tragedy of the Commons,” William Forster Lloyd (1833), in which the pursuit of individual gain leads to negation of the common good.

SOLUTIONS TO:

1. Tragedy of the Commons

-Pay for the use of freeways with higher gasoline taxes.

-Pay for the total social cost of polluting our common atmosphere.

2. Income Inequality

- A progressive wealth tax

- Less expensive education

3. “Trickle-up” economics more successful than “trickle-down.”