Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
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Today's topics include:
New U.S. state boundaries
Why U.S. Oil Production Remains High
Effect of New York $15 Minimum Wage
TPP to Optimize Global Supply Chains?
The Fed is Anti-Labor?
Rapid Rise of Pass-through U.S. Business
Global Disaster Unlikely
Infinite Growth in a Finite World
Faux Fraud at Princeton
Articles about events, conflicts and disease around the world
Why global economic disaster is an unlikely event (Financial Times) Hat tip to Rob Carter. Martin Wolf says what matters is not whether the world will be well managed but whether calamity will be avoided. He concludes that the most probable scenario does not have a global meltdown.
The New Geo-Economics (Joseph E. Stiglitz, Project Syndicate) See also next article. Prof. Stiglitz is very critical of the approach taken in developing the TPP (Trans Pacific Partnership):
... the way Obama argued for the new trade agreement showed how out of touch with the emerging global economy his administration is. He repeatedly said that the TPP would determine who – America or China – would write the twenty-first century’s trade rules. The correct approach is to arrive at such rules collectively, with all voices heard, and in a transparent way. Obama has sought to perpetuate business as usual, whereby the rules governing global trade and investment are written by US corporations for US corporations. This should be unacceptable to anyone committed to democratic principles.
The TPP as a Set of International Economic Rules (Lambert Strether, Naked Capitalism) LS has contributed to GEI. Lambert includes the full paper with the same title by Tsuyoshi Kawase, Professor, Faculty of Law, Sophia University, Tokyo from Voxeu.org. Lambert says:
I like the (re)framing that TPP, rather then being a “trade deal” is designed to optimize global supply chains (though who those chains enchain is another matter). However, I’m wondering if the claim in the summary that “the success or failure of the 12-country pact rests ultimately on the dispute settlement procedures” is over-sold, or not, and I thought the ISDS discussion lacked depth. Then again, given that the author is Japanese, there may be something unstated, though obvious, that I’m missing. Readers?
The Fed Doesn’t Work For You (Jacobin) The author (J. W. Mason, assistant professor of economics at John Jay College, City University of New York and a fellow at the Roosevelt Institute) summarizes this essay:
What’s behind the Fed’s recent interest rate hike? A desire to keep workers insecure and wages depressed.
National Labor Board takes McDonald’s to court (Al Jazeera) Current and former McDonald’s workers who accuse the fast-food giant of illegal union-busting will get their day in court on Monday, when an administrative law judge is expected to begin hearing arguments in a major unfair labor practice suit. The Obama administration's National Labor Relations Board (NLRB) will represent the workers in a case that could have wide-ranging consequences for the McDonald’s franchising model.
Who Owns U.S. Business? How Much Tax Do They Pay? (NBER) The importance of pass-through business entities has soared in the past three decades. Over the same period, the amount of pass-through business income flowing to the top 1 percent of income earners has increased sharply, according to Business in the United States: Who Owns It and How Much Tax Do They Pay? (NBER Working Paper No. 21651). A strong motivation for this is the lower average tax rates compared to C-corporations.
Fraud chief calls for tougher corporate prosecution laws (Evening Standard) Prosecutors should have US-style powers to punish big business and root out financial crime in the City, the head of the Serious Fraud Office said today. David Green said legal reforms inspired by the American system of "vicarious liability" would make it easier to hold banks and other large corporations criminally responsible for wrongdoing carried out by their staff.
Afghan forces retake northern district from Taliban (Reuters) Afghan security forces have retaken a district in the north of the country, killing 30 Taliban fighters and capturing vehicles and weapons from the insurgents, the defense ministry said on Sunday. The recapture is a welcome piece of good news for government forces, which have struggled to contain the spreading Taliban insurgency since international troops wound up most combat operations at the end of 2014. Combined army, police and special forces units took back Darqad district, on the border with Tajikistan.
Mexico Moves Toward Extraditing Drug Kingpin ‘El Chapo’ to U.S. (Bloomberg) Mexico began preparing to extradite drug kingpin Joaquin Guzman to the U.S. even before he was recaptured, the nation’s government said, signaling a new willingness to cooperate internationally in prosecuting the world’s most-wanted trafficker. The foreign ministry, attorney general and judges in 2015 took initial steps to honor U.S. extradition requests for the crime boss known as “El Chapo” while he was still on the run, Mexican President Enrique Pena Nieto’s office said Saturday in an e-mailed statement.
The U.S. Map Redrawn as 50 States With Equal Population (Mental Floss) Neil Freeman redrew the state borders to get a visual sense of what it would take for the electoral college votes to match the popular vote. That is to say, for each state to be weighted evenly. "The largest state is 66 times as populous as the smallest," Freeman explains on his site, "and has 18 times as many electoral votes." His map is based on 2010 Census data, which records a population of 308,745,538 for the United States. Divided up among 50 states, that's a population of a little over six million people per state. The names of new states are mostly taken from geographical features.
The Map With Only 38 States (Mental Floss) In 1973, California State University geography professor George Etzel Pearcy suggested that the U.S. redraw its antiquated state boundaries and narrow the overall number of states to 38. Pearcy's proposed state lines were drawn in less-populated areas, isolating large cities and reducing their number within each state. He argued that if there were fewer cities vying for a state's tax dollars, more money would be available for projects that would benefit all citizens. Because the current states were being chopped up beyond recognition, part of his plan included renaming the new states by referencing natural geologic features or the region's cultural history. Econintersect: The proposal never went anywhere in Washington. We suggest that few in Congress would vote themselves out of a job.
Other Economics and Business Items of Note and Miscellanea
Central to the problem is the level of indebtedness. Debt accelerates consumption, as borrowed funds are used to purchase something today against the promise of paying back the money in the future. Spending that would have taken place normally over a period of years is squeezed into a relatively short period because of the availability of cheap borrowing. Business overinvests misreading demand, assuming that the exaggerated growth will continue indefinitely, increasing real asset prices and building significant overcapacity.
Around 85% of the debt incurred over the last 30-35 years funded the purchase of existing assets or consumption rather than being used for creating new businesses or productive purposes which build wealth.
The world is remarkably unprepared for the crisis that is unfolding. During the last half-century each successive crisis has increased in severity, requiring progressively larger measures to ameliorate its effects. Over time, the policies have distorted the economy. The effectiveness of instruments has diminished.
In an energy market struggling from oil price declines and anemic financial returns, the Permian basin is the only U.S. unconventional liquids resource seeing significant year-over year, per-well productivity gains. The Permian is single-handedly helping to sustain activity and has caused the region to become a hotbed of consolidation, according to new analysis from IHS.
According to the IHS Energy North America Supply Analytics report entitled The Permian Basin—Need for Improved Economics and Opportunities Drive Consolidation, peak productivity in the Permian basin has improved by more than 40% since third-quarter 2014, led primarily by the Bone Spring play. This performance has not gone unnoticed by either operators or the markets, the IHS report noted, with the markets showing a preference for Permian deals. In 2015, more than 35% of deals were focused on the Permian basin.
Economics and ORFE independent work advisers found not to exist* (The Daily Princetonian) Fraud is rampant even in the hallowed halls of the Ivy League. Princeton University has been found to be using fictitious faculty members (represented as people in the forefront of economics research) who were listed as professors for courses and who were advising graduate students. They have turned out to be virtual personages existing only in cyberspace.
*This article was part of The Daily Princetonian's annual joke issue.
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