Recommended Readings This Week- 7/6/2014

These are all articles that the Mutualist has read this week that have been of particular interest. Unlike last weeks,  a commentary will be given on what was interesting with them. The order in no way reflects a ranking of these articles in terms of preference.

1. The Guardian | Five myths about Ukip … that should make the Conservatives happy – Peter Kellner. 

Contrary to conventional wisdom, it appears that not only are UKIP becoming more unpopular among the electorate but voters are more willing to remain within the EU.

This first fact seems completely contradictory to the contemporary political landscape in the line of the recent local and European elections. However, the share of those who perceive UKIP in a good manner have declined since 2009. While the excellent result at the recent elections can be explained away that it was a success with only 36% of those eligible to vote bothering to turn up at all.  Most of those turning out would be much more highly motivated to vote UKIP than

This latter fact may discourage the ardent Eurosceptics within the party, such as Daniel Hannan. It is good news for the Conservatives though as the anti European sentiment seems to be focussed upon European institutions rather than wanting to leave outright. This suits the Conservatives on Europe more than any party.

I’ll let you read the article to find out what the other three myths are.

2. Vox | 7 reasons why America will fail on climate change- Ezra Klein.

Ezra Klein’s article is a brilliant reminder about how it is nearly impossible politically to succeed in ensuring that climate change over the next century or two will be managed to a safe level for humans.

He cites the limitations of the political system, the nature of the problem of climate change,  the historically unprecedented level of international cooperation needed, the lunacy of the GOP and questioning whether the US has left it too late to be able to minimise the risk of climate change.

My only criticism of this article is that it lacks an eighth reason. That is that far too many Americans, along with the citizens of the world, lack the individual responsibility necessary to tackle climate change. It looks increasingly like a bottom-up approach alongside a top-down approach will be necessary to tackle climate change.

Without a bottom-up approach, it will be impossible for the country to establish a culture in which a green economy is a viable way to protect the integrity of the environment from human actions while ensuring that the economy can work for the people. Without a top-down approach, it will be impossible for the radical supply side reforms in energy production and consumption needed to significantly reduce carbon emissions on time. The first graphic in Klein’s article shows how urgent it is that we begin to make these supply side reforms now.

3. Reason | Governments Constantly Tap Your Calls, Warns International Telecom- J.D. Tucille.

Vodafone’s Law Enforcement Disclosure Reports demonstrates  that government surveillance is rife within the telecom industry. Not only that but it is very difficult for companies to either object to the demands of government authorities to be given access to materials, the report also states how surveillance can be carried out without the knowledge of companies within the telecom industry.

The report is scary in that companies we supposedly trust to operate our phone networks do not even know when governments are interfering in such networks.

It is also very worrying that some countries legislate to allow authorities to survey networks with differing concerns to human rights.

4. Project Syndicate | Unjust Deserts- Brad De Long

While Piketty attributes the rise of inequality onto the rates of capital return and accumulation exceeding the growth rate of the economy, De Long emphasises the role that “tournaments” play in the higher levels of the corporate structure.

In economics, a tournament is a market that offers big prizes to act as an incentive for participants to choose to enter the particular market in question. In the higher levels of the corporate structure, this huge prize is an extremely high wage with an added on “performance related” bonus.

As the incentive to earn more money as growth for the company expands, the larger the winnings or compensation need to be. This creates a cycle in which very high wages become ridiculously larger.

The problem De Long associates with tournaments in that they offer perverse incentives to those who wish to participate ion one.  The tournament encourages behaviour that will cause self-harm overall.

Ultimately, though, to win the tournament is more a matter of luck or chance. It is luck to just to be able to enter a job in the market that pays for the marginal product to society. Let alone be paid for a job earning you well above the level of the marginal product of society.

Even though de Long’s case cannot be treated as a general theory of the rise of inequality, for it fails to take into account land inequality, the Mutualist does think it does give a very good explanation as to the role corporate governance and corporate structure plays in the role of inequality. The Mutualist believes that an economy in which cooperatives are the primary corporate structure would likely solve these difficulties.

5. VOX | Reconciling Hayek’s and Keynes’ views of recessions – Paul Beaudry, Dana Galizia, Franck Portier

The article argues for the Hayekian liquidation theory of a recession. This theory states that when a recession occurs, this is due to the liquidation of over accumulated capital with in the economy. Essentially, the recession acts as cleanser for those who have accumulated too much of the wrong sort of capital in the economy.

The article though disagrees with the Hayekian implication that government intervention would interfere negatively with this liquidation. Instead, it is argued that allowing the recession to develop laissez-faire will encourage the conditions described by the Keynesian analysis of recessions.

A recession in Keynesian analysis is a lack of aggregate demand in the economy. The aggregate demand is effected as market participants fear that their economic conditions may change for the worse. So the market participants start saving in case the worst case scenario occurs. When this occurs throughout the economy, we have a lack of aggregate demand.  This lack of demand will raise unemployment because businesses will stop producing as many goods thereby needing to lay off workers to make costs meet income. This becomes a vicious cycle though as more market participants enter the paradox of thrift.

Keynes argued that government intervention in the economy was necessary to stimulate aggregate demand within the economy to stop the paradox of thrift occurring.

So the analysis argues that government intervention is necessary in a recession to stop the recession liquidating so much capital that the recession no longer acts as a cleanser but a source of difficulty to the economic and social fabric of the economy in question.

The Mutualist believes such an analysis on recessions has a huge amount of potential. However, a more detailed examination of the process is necessary for research purposes. Given that the description of the nature of recessions has changed from Hayekian and Keynesian theories, it is also important that the analysis can give prescriptive account of the nature of government intervention. In particular, the following question must be asked: how can government intervention occur in such a manner that the benefits of the liquidation process are maximised while ensuring that the ensuing paradox of thrift effect on the economy is minimised?

Gareth Mawer
I consider myself a left libertarian committed to promoting the philosophy of liberty, even though I do not always support proposals that are normally considered libertarian. Georgism and mutualism have had profound influences over my beliefs, though I'm not afraid to digress from them were necessary. My mains interests are politics, economics and philosophy.