Friday, May 10, 2019

Interest rate caps are widespread in credit markets; in Chile a 20pct lowering reduced the number of loans by 19%; consumer surplus decreased by 3.5% of average income (larger losses for risky borrowers)

Price Regulation in Credit Markets: A Trade-off between Consumer Protection and Credit Access. Jose I. Cuesta, Alberto Sepulveda. https://drive.google.com/file/d/1_toHlf2fvvtckCSrSi-zmnsexNGcDqrK/view

Abstract: Interest rate caps are widespread in consumer credit markets, yet there is limited evidence on its effects on market outcomes and welfare. Conceptually, the effects of interest rate caps are ambiguous and depend on a trade-off between consumer protection from banks’ market power and reductions in credit access. We exploit a policy in Chile that lowered interest rate caps by 20 percentage points to understand its impacts. Using comprehensive individual-level administrative data, we document that the policy decreased transacted interest rates by 9%, but also reduced the number of loans by 19%. To estimate the welfare effects of this policy, we develop and estimate a model of loan applications, pricing, and repayment of loans. Consumer surplus decreases by an equivalent of 3.5% of average income, with larger losses for risky borrowers. Survey evidence suggests these welfare effects may be driven by decreased consumption smoothing and increased financial distress. Interest rate caps provide greater consumer protection in more concentrated markets, but welfare effects are negative even under a monopoly. Risk-based regulation reduces the adverse effects of interest rate caps, but does not eliminate them.

The daily dose of digital inspiration 2: Encounters with eudaimonic memes, remembered topics, emotional and motivational effects with a focus on gender differences

The daily dose of digital inspiration 2: Themes and affective user responses to meaningful memes in social media. Diana Rieger, Christoph Klimmt. New Media & Society, April 17, 2019. https://doi.org/10.1177/1461444819842875

Abstract: Recent work on eudaimonic media entertainment has demonstrated that not only movies carry meaningful or inspiring topics but also content that is usually uploaded online, such as YouTube videos or memes in social media. Although past research found beneficial effects of eudaimonic movies for psychosocial well-being and motivational intentions, the daily audience of eudaimonic online fare has not been investigated yet. This article reports first findings from a survey (N = 2777), representative of German Internet users. Specifically, it addresses the question of (daily) encounters with eudaimonic memes, remembered topics, emotional and motivational effects with a focus on gender differences. The results reveal that many social media users consume “small doses” of eudaimonic content on a regular basis and experience similar, yet weaker, emotional consequences of such exposure. These findings are discussed in light of eudaimonic entertainment and positive media psychology.

Keywords: Entertainment, eudaimonia, inspiration, memes, positive media psychology, social media

Left-wingers are more skeptical & averse towards the very rich, which causes them to take the risk of punishing an honest high earner; although cheating is against the rules, rightists seem to want to review every case individually

Suspicious Success — Cheating, Inequality Acceptance, and Political Preferences. Felix Klimm. European Economic Review, May 10 2019. https://doi.org/10.1016/j.euroecorev.2019.04.008

Abstract: Supporters of left-wing parties typically place more emphasis on redistributive policies than right-wing voters. I investigate whether this difference in tolerating inequality is affected by suspicious success — achievements that may arise from cheating. Using a laboratory experiment, I exogenously vary cheating opportunities for stakeholders who work on a real effort task and earn money according to their self-reported performances. An impartial spectator is able to redistribute the earnings between the stakeholders, although it is not possible to detect cheating. I find that the opportunity to cheat leads to different views on whether to accept inequality. Left-wing spectators substantially reduce inequality when cheating is possible, while the treatment has no significant effect on choices of right-wing spectators. Since neither differences in beliefs nor differences in norms about cheating can explain this finding, it seems to be driven by a difference in redistributive preferences. These results suggest that views on redistribution will diverge even more once public awareness increases that inequality may be to a certain extent created by cheating.

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My results complement the literature in several dimensions. First, in line with the literature on dishonesty (e.g., Abeler et al., forthcoming), I find that some subjects are cheating but not all of them to the full extent. Second, supporting the findings of Cappelen et al. (2016), the results of the Monitor treatment show that left-wing and right-wing supporters do not differ in their redistributive preferences when the sources of inequality are certain. Third, whereas Bortolotti et al. (2017) investigate a different experimental setupthanIdo(e.g.,cheating in the luck domain instead of performance cheating), they also document that suspicious success affects what people consider to be a fair distribution. In addition, subjects with different fairness views exhibit the same beliefs about cheating in their experiment. This is in line with my finding that cheating beliefs do not differ across political preferences.

One might think of several explanations for why left-wing spectators take a higher risk of redistributing away from an honest stakeholder than right-wing spectators. For instance, left-wingers might be more skeptical and averse towards the very rich in general, which causes them to take the risk of punishing an honest high earner. Alternatively, right-wingers typically put more emphasis on the rule of law than left-wingers and could therefore be more reluctant to judge somebody without having proof.24 Even though cheating is against the rules, right-wingers seem to want to review every case individually.

Revolutionaries in societies that used 1/4 as much energy as we do thought communism right around the corner; let's get the abundance that matters (everyone be free to pursue learning, play, sport, amusement, companionship, & travel)




We cannot legislate and spend our way out of catastrophic global warming. Jasper Bernes. Commune, Spring 2019. https://communemag.com/between-the-devil-and-the-green-new-deal/

From space, the Bayan Obo mine in China, where 70 percent of the world’s rare earth minerals are extracted and refined, almost looks like a painting. The paisleys of the radioactive tailings ponds, miles long, concentrate the hidden colors of the earth: mineral aquamarines and ochres of the sort a painter might employ to flatter the rulers of a dying empire.

To meet the demands of the Green New Deal, which proposes to convert the US economy to zero emissions, renewable power by 2030, there will be a lot more of these mines gouged into the crust of the earth. That’s because nearly every renewable energy source depends upon non-renewable and frequently hard-to-access minerals: solar panels use indium, turbines use neodymium, batteries use lithium, and all require kilotons of steel, tin, silver, and copper. The renewable-energy supply chain is a complicated hopscotch around the periodic table and around the world. To make a high-capacity solar panel, one might need copper (atomic number 29) from Chile, indium (49) from Australia, gallium (31) from China, and selenium (34) from Germany. Many of the most efficient, direct-drive wind turbines require a couple pounds of the rare-earth metal neodymium, and there’s 140 pounds of lithium in each Tesla.

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It’s not clear we can even get enough of this stuff out of the ground, however, given the timeframe. Zero-emissions 2030 would mean mines producing now, not in five or ten years. The race to bring new supply online is likely to be ugly, in more ways than one, as slipshod producers scramble to cash in on the price bonanza, cutting every corner and setting up mines that are dangerous, unhealthy, and not particularly green. Mines require a massive outlay of investment up front, and they typically feature low return on investment, except during the sort of commodity boom we can expect a Green New Deal to produce. It can be a decade or more before the sources are developed, and another decade before they turn a profit.

Nor is it clear how much the fruits of these mines will help us decarbonize, if energy use keeps climbing. Just because a United States encrusted in solar panels releases no greenhouse gases, that doesn’t mean its technologies are carbon neutral. It takes energy to get those minerals out of the ground, energy to shape them into batteries and photovoltaic solar panels and giant rotors for windmills, energy to dispose of them when they wear out. Mines are worked, primarily, by gas-burning vehicles. The container ships that cross the world’s seas bearing the good freight of renewables burn so much fuel they are responsible for 3 percent of planetary emissions. Electric, plug-in motors for construction equipment and container ships are barely in the prototype stage. And what kind of massive battery would you need to get a container ship across the Pacific? Maybe a small nuclear reactor would be best?

Counting emissions within national boundaries, in other words, is like counting calories but only during breakfast and lunch. If going clean in the US makes other places more dirty, then you’ve got to add that to the ledger. The carbon sums are sure to be lower than they would be otherwise, but the reductions might not be as robust as thought, especially if producers desperate to cash in on the renewable jackpot do things as cheaply and quickly as possible, which for now means fossil fuels. On the other side, environmental remediation is costly in every way. Want to clean up those tailings ponds, bury the waste deep underground, keep the water table from being poisoned? You’re going to need motors and you’re probably going to burn oil.

Consolidating scientific opinion, the most recent Intergovernmental Panel on Climate Change report projects that biofuels are going to be used in these cases—for construction, for industry, and for transport, wherever motors can’t be easily electrified. Biofuels put carbon into the air, but it’s carbon that was already absorbed by growing plants, so the net emissions are zero. The problem is that growing biofuels requires land otherwise devoted to crops, or carbon-absorbing wilderness. They are among the least dense of power sources. You would need a dozen acres to fill the tank of a single intercontinental jet. Emissions are only the most prominent aspect of a broader ecological crisis. Human habitation, pasture and industry, branching through the remaining wilderness in the most profligate and destructive manner, has sent shockwaves through the plant and animal kingdoms. The mass die-off of insects, with populations decreasing by four-fifths in some areas, is one part of this. The insect world is very poorly understood, but scientists suspect these die-offs and extinction events are only partially attributable to climate change, with human land use and pesticides a major culprit. Of the two billion tons of animal mass on the planet, insects account for half. Pull the pillars of the insect world away, and the food chains collapse.

To replace current US energy consumption with renewables, you’d need to devote at least 25-50 percent of the US landmass to solar, wind, and biofuels, according to the estimates made by Vaclav Smil, the grand doyen of energy studies. Is there room for that and expanding human habitation? For that and pasture for a massive meat and dairy industry? For that and the forest we’d need to take carbon out of the air? Not if capitalism keeps doing the thing which it can’t not keep doing—grow. The law of capitalism is the law of more—more energy, more stuff, more materials. It introduces efficiencies only to more effectively despoil the planet. There is no solution to the climate crisis which leaves capitalism’s compulsions to growth intact. And this is what the Green New Deal, a term coined by that oily neoliberal, Thomas Friedman, doesn’t address. It thinks you can keep capitalism, keep growth, but remove the deleterious consequences. The death villages are here to tell you that you can’t. No roses will bloom on that bush.

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Miners in Chile, China, and Zambia will be digging in the earth for more than just the makings of fifty million solar panels and windmills, however, since the Green New Deal also proposes to rebuild the power grid in a more efficient form, to upgrade all buildings to the highest environmental standards, and lastly, to develop a low-carbon transportation infrastructure, based on electric vehicles and high-speed rail. This would involve, needless to say, a monumental deployment of carbon-intensive materials like concrete and steel. Trillions of dollars of raw materials would need to flow into the United States to be shaped into train tracks and electric cars. Schools and hospitals, too, since alongside these green initiatives, the GND proposes universal health care and free education, not to mention a living-wage jobs guarantee.

Nothing new in politics is ever truly and completely new, and so it’s as unsurprising that the Green New Deal hearkens back to the 1930s as it is that France’s gilet jaunes revive the corpse of the French Revolution and make it dance a jig below the Arc de Triomphe. We understand the present and future through the past. As Marx notes in The Eighteenth Brumaire, people “make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.” In order to make new forms of class struggle intelligible, their partisans look to the past, “borrowing from them names, battle slogans, and costumes in order to present this new scene in world history in time-honored disguise and borrowed language.” The “new” of the Green New Deal must therefore express itself in language decidedly old, appealing to great-grandpa’s vanished workerism and the graphic style of WPA posters.

This costume-play can be progressive rather than regressive, insofar as it consists of “glorifying the new struggles, not of parodying the old; of magnifying the given task in the imagination, not recoiling from its solution in reality; of finding once more the spirit of revolution, not making its ghost walk again.” [...]

We would do well to keep these words in mind over the next decades, to avoid recoiling from real solutions and insisting on fantastic ones. The project of the Green New Deal is really nothing like the New Deal of the 1930s, except in the most superficial ways. The New Deal was a response to an immediate economic emergency, the Great Depression, and not a future climate catastrophe: its main goal was to restore growth to an economy that had shrunk by 50 percent and in which one out of every four people was unemployed. The goal of the New Deal was to get capitalism to do what it already wanted to do: put people to work, exploit them, and then sell them the products of their own labor. The state was necessary as a catalyst and a mediator, setting the right balance between profit and wages, chiefly by strengthening the hand of labor and weakening that of business. Aside from the fact that it involves capital outlays that are much larger, the Green New Deal has a more difficult ambition: rather than get capitalism to do what it wants to do, it has to get it to pursue a path that is certainly bad for the owners of capital in the long run.

Whereas the New Deal needed only to restore growth, the Green New Deal has to generate growth and reduce emissions. The problem is that growth and emissions are, by almost every measure, profoundly correlated. The Green New Deal thus risks becoming a sort of Sisyphean reform, rolling the rock of emissions reductions up the hill each day only to have a growing, energy-hungry economy knock it back down to the bottom each night.

Advocates of green growth promise an “absolute decoupling” of emissions and growth, where each additional unit of energy adds no CO2 to the atmosphere. Even if such a thing were technologically possible, even if it were possible to generate zero- or low-emissions energy not only adequate to but in excess of current demand, such decoupling would require far greater power over the behavior of capitalists than the New Deal ever mustered.

FDR and his coalition in Congress exerted modest control over corporations through a process of “countervailing power,” in the words of John Kenneth Galbraith, tilting the playing field to disempower capitalists relative to workers and consumers, and making new investment more appealing. The state did undertake direct investment—building roads, bridges, power stations, parks, and museums—but did so not in order to supplant private investment but to create “forever a yardstick against extortion,” in FDR’s high-toned phrasing. Government power plants would, for example, disclose the true (lower) price of electricity, barring energy monopolies from price gouging.

Green New Dealers flag this aspect of the New Deal, since it’s ostensibly so close to what they propose. The Tennessee Valley Authority, a public power company still in operation eighty years later, is the most famous of these projects. Public infrastructure, clean energy, economic development—the TVA brought together many of the elements essential to the Green New Deal. Building dams and hydroelectric power stations along the Tennessee River, it provided clean, cheap electricity to one of the most economically depressed regions of the country. The hydroelectric plants were, in turn, linked up to factories producing nitrates, an energy-intensive raw material needed for both fertilizer and explosives. Wages and crop yields rose, power costs fell. The TVA brought cheap energy, cheap fertilizer, and good jobs to a place previous known for malaria, poor soil quality, incomes less than half the national average, and alarmingly high unemployment.

The problem with this scenario as a framework for the Green New Deal is that renewables are not massively cheaper than fossil fuels. The state cannot blaze the trail to cheap, renewable energy, satisfying consumers with lower costs and producers with acceptable profits. Many once thought that the depletion of oil and coal reserves would save us, raising the price of fossil fuels above that of renewables and forcing the switch as a matter of economic necessity. Unfortunately, that messianic price point has drifted farther into the future as new drilling technologies, introduced in the last decade, have made it possible to frack oil from shale and to recover reserves from fields previously thought exhausted. The price of oil has stayed stubbornly low, and the US is, suddenly, producing more of it than anyone else. The doomsday scenarios of “peak oil” are now a turn-of-the-millennium curiosity, like Y2K or Al Gore. Sorry, wrong apocalypse.

Some will tell you that renewables can compete with fossil fuels on the open market. Wind and hydroelectric and geothermal have, it’s true, become cheaper as sources of electricity, in some cases cheaper than coal and natural gas. But they’re still not cheap enough. That’s because, in order to bankrupt the fossil capitalists, renewables will need to do more than edge out fossil fuels by a penny or two per kilowatt-hour. There are trillions of dollars sunk into fossil energy infrastructure and the owners of those investments will invariably choose to recoup some of that investment rather than none of it. To send the value of those assets to zero and force energy capitalists to invest in new factories, renewables need to be not only cheaper but massively cheaper, impossibly cheaper. At least this is the conclusion reached by a group of engineers Google convened to study the problem. Existing technologies are never going to be cheap enough to bankrupt coal-fired power plants: we’d need stuff that is currently science-fiction like cold fusion. This is not only because of the problem of sunk costs, but because electricity from solar and wind is not “dispatchable” on demand. It is only available when and where the sun is shining and the wind is blowing. If you want it on demand, you’re going to have to store it (or transport it thousands of miles) and that’s going to raise the price.

Most will tell you that the answer to this problem is taxation of dirty energy or an outright ban, alongside subsidy of the clean. A carbon tax, judiciously applied, can tip the scales in favor of renewables until they are able to beat fossil energy outright. New fossil sources and infrastructure can be prohibited and revenue from the taxes can be used to pay for research into new technology, efficiency improvements, and subsidies for consumers. But now one is talking about something other than a New Deal, blazing the way to a more highly productive capitalism in which profits and wages can rise together. There are 1.5 trillion barrels of proven oil reserves on the planet, according to some calculations—around $50 trillion worth if we assume a very low average cost per barrel of thirty-five dollars. This is value that oil companies have already accounted for in their mathematical imaginings. If carbon taxes or bans reduce that number tenfold, fossil capitalists will do everything they can to avoid, subvert, and repeal them. The problem of sunk costs again applies. If you slaughter the value of those reserves, you might, perversely, bring down the cost of fossil fuels, encouraging more consumption and more emissions, as oil producers scramble to sell their excess supply in countries without a carbon tax. For reference, there is about $300 trillion of total wealth on the planet, most of it in the hands of the owning class. The global Gross Domestic Product, the value of all the goods and services produced in a year, is around $80 trillion. If you propose to wipe out $50 trillion, one-sixth of the wealth on the planet, equal to two-thirds of global GDP, you should expect the owners of that wealth to fight you with everything they have, which is more or less everything.

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If you tax oil, capital will sell it elsewhere. If you increase demand for raw materials, capital will bid up the prices of commodities, and rush materials to market in the most wasteful, energy-intensive way. If you require millions of square miles for solar panels, wind farms, and biofuel crops, capital will bid up the price of real estate. If you slap tariffs on necessary imports, capital will leave for better markets. If you try to set a maximum price that doesn’t allow profit, capital will simply stop investing. Lop off one head of the hydra, face another. Invest trillions of dollars into infrastructure in the US and you’ll have to confront the staggeringly wasteful, slow, and unproductive construction industry, where laying a mile of subway can be twenty times as expensive and take four times as long. You’ll have to confront the earthen monsters of Bechtel and Fluor Corp., habituated to feeding at the government trough and billing fifty dollar screws. If this doesn’t chasten you, consider the world-historical inefficiency of the US military, the planet’s biggest oil consumer and, unsurprisingly, also the planet’s main oil cop. The Pentagon is an accounting black hole, into which the wealth of the nation is ploughed and from which no light emerges. Its balance sheet is a blank.

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I suspect many advocates of the Green New Deal know all this. They don’t really think it will happen as promised, and they know that, if it does happen, it won’t work. This is probably why there’s so little concrete detail being offered. Discussion so far has largely revolved around the question of budgeting, with the advocates of Modern Monetary Theory arguing that there is no upper bound on government spending for a country like the US, and tax-and-spend leftists firing back with all sorts of counter-scenarios. The MMT advocates are technically correct, but they discount the power that owners of US debt have to determine the value of the dollar, and therefore prices and profits. Meanwhile, critics of the Green New Deal confine their discussion to the least problematic aspects. Don’t get me wrong, budget items on the order of tens of trillions of dollars are a big deal. But securing the bag is hardly the biggest problem. Implementation is where it really dies, and few advocates have much to say about such details.

The Green New Deal proposes to decarbonize most of the economy in ten years—great, but no one is talking about how. This is because, for many, its value is primarily rhetorical; it’s about shifting the discussion, gathering political will, and underscoring the urgency of the climate crisis. It’s more big mood more than grand plan. Many socialists will recognize that mitigation of climate change within a system of production for profit is impossible, but they think a project like the Green New Deal is what Leon Trotsky called a “transitional program,” hinged upon a “transitional demand.” Unlike the minimal demand, which capitalism can easily meet, and the maximal demand which it clearly can’t, the transitional demand is something that capitalism could potentially meet if it were a rational and humane system, but in actuality can’t. By agitating around this transitional demand, socialists expose capitalism as an extraordinarily wasteful and destructive coordinator of human activity, incapable of delivering on its own potential and, in this case, responsible for an unimaginable number of future deaths. So exposed, one might then safely proceed to do away with capitalism. Faced with the resistance of the capitalist class and an entrenched government bureaucracy, officials elected around a Green New Deal could safely, with the support of the masses, move to expropriate the capitalist class and reorganize the state along socialist lines. Or so the story goes.

I’ve always despised the transitional program concept. I think, for starters, that it’s condescending, presuming that the “masses” need to be told one thing in order, eventually, to be convinced of another. I also think it’s dangerous, with the potential to profoundly backfire. Revolutions do begin, often, where reforms fail. But the problem is that the transitional demand encourages you to build institutions and organizations around one set of goals with the hope that you can rapidly convert them to another when the time comes. But institutions are tremendously inertial structures. If you build a party and other institutions around the idea of solving climate change within capitalism, do not be surprised when some large fraction of that party resists your attempt to convert it into a revolutionary organ. The history of socialist and communist parties is reason for caution. Even after the Second International betrayed its members by sending them to slaughter each other in the First World War, and even after a huge fraction split to form revolutionary organizations in the wake of the Russian Revolution, many members of the party and its network of unions continued to support it, out of habit and because it had built a thick network of cultural and social structures to which they were bound by a million and one ties. Beware that, in pursuit of the transitional program, you do not build up the forces of your future enemy.

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Let’s instead say what we know to be true. The pathway to climate stabilization below two degrees Celsius offered by the Green New Deal is illusory. Indeed, at present the only solutions possible within the framework of capitalism are ghastly, risky forms of geo-engineering, chemically poisoning either the ocean or the sky to absorb carbon or limit sunlight, preserving capitalism and its host, humanity, at the cost of the sky (now weatherless) or the ocean (now lifeless). Unlike emissions reductions, such projects will not require international collaboration. Any country could begin geo-engineering right now. What’s to stop China or the US from deciding to dump sulfur into the sky, if things get hot enough and bad enough?

The problem with the Green New Deal is that it promises to change everything while keeping everything the same. It promises to switch out the energetic basis of modern society as if one were changing the battery in a car. You still buy a new iPhone every two years, but zero emissions. The world of the Green New Deal is this world but better—this world but with zero emissions, universal health care, and free college. The appeal is obvious but the combination impossible. We can’t remain in this world. To preserve the ecological niche in which we and our cohort of species have lived for the last eleven thousand years, we will have to completely reorganize society, changing where and how and most importantly why we live. Given current technology, there is no possibility to continue using more energy per person, more land per person, more more per person. This need not mean a gray world of grim austerity, though that’s what’s coming if inequality and dispossession continue. An emancipated society, in which no one can force another into work for reasons of property, could offer joy, meaning, freedom, satisfaction, and even a sort of abundance. We can easily have enough of what matters—conserving energy and other resources for food, shelter, and medicine. As is obvious to anyone who spends a good thirty seconds really looking, half of what surrounds us in capitalism is needless waste. Beyond our foundational needs, the most important abundance is an abundance of time, and time is, thankfully, carbon-zero, and even perhaps carbon-negative. If revolutionaries in societies that used one-fourth as much energy as we do thought communism right around the corner, then there’s no need to shackle ourselves to the gruesome imperatives of growth. A society in which everyone is free to pursue learning, play, sport, amusement, companionship, and travel, in this we see the abundance that matters.

Perhaps breakthrough decarbonizing or zero-emissions technologies are almost here. One would be a fool to discount the possibility. But waiting for lightning to strike is not a politics. It’s been almost seventy years since the last paradigm-shifting technology was invented—transistors, nuclear power, genomics, all date from the middle of the twentieth century. Illusions of perspective and the endless stream of apps notwithstanding, the pace of technological change has slowed rather than accelerated. In any case, if capitalism suddenly finds it within its means to mitigate climate change, we can shift to talking about one of the other ten reasons why we should end it.

We cannot keep things the same and change everything. We need a revolution, a break with capital and its killing compulsions, though what that looks like in the twenty-first century is very much an open question. A revolution that had as its aim the flourishing of all human life would certainly mean immediate decarbonization, a rapid decrease in energy use for those in the industrialized global north, no more cement, very little steel, almost no air travel, walkable human settlements, passive heating and cooling, a total transformation of agriculture, and a diminishment of animal pasture by an order of magnitude at least. All of this is possible, but not if we continue to shovel one half of all the wealth produced on the planet into the maw of capital, not if we continue to sacrifice some fraction of each generation by sending them into the pits, not if we continue to allow those whose only aim is profit to decide how we live.