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What We Read Today 24 September 2016

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.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Topics today include:

  • A 100 MPG Car?

  • Economists Make Up Competing Straw Men While Ignoring Reality

  • Economists Have a Litany of Rationalizations

  • Should You Cover Your Webcam?

  • Bank of Japan is Testing Romer's Hypothesis

  • The Private Debt Crisis

  • Privatization of Public Services

  • The World Order Plot to Prevent Remunicipalization

  • The New Feudalization

  • Black Cops Can Be Biased Too

  • Basis of Trump's Populism

  • Court Rules Against Ohio's Disenfranchisement

  • Jeremy Corbyn Wins Big

  • Assad Increases Grip on Aleppo, Now Out of Water

  • The Trillion Dollar Treasure in India is Being Stolen

  • Ecuador Hopes to get Its London Embassy Back from Assange

  • And More

Articles about events, conflicts and disease around the world

Global

  • TISA and the Privatization of Public Services (CounterPunch)  There is a movement underway to bring services that have been privatized back under public control by local governments.  We are talking about things like water, sewer, street and public area maintenance, snow removal, etc.  (See next article.)  The provisions of the so-called "trade deals" [TPP (TransPacific Partnership), TTIP (TransAtlantic Trade and Investment Partnership) and CETA (Canada-EU Comprehensive Economic and Trade Agreement)] include provisions to promote privatization of public services and to make remunicipalization of those services impossible.  While the "trade deals" have received much publicity, there is another international effort underway to implement TISA (Trade In Services Agreement) that will implement the local services privatization regulations contained in the "trade deals" should they fail to be implemented.  The author of this article is Joyce Nelson who says the processes underway would implement a new system of feudalism under the financial oligarchy.  Her book: Beyond Banksters: Resisting the New Feudalism. 

  • The real story behind outsourcing local government services (Columbia Institute)  The Columbia Institute says that across Canada and around the world public services that were once outsourced are now finding their way back in house to municipalities, mainly because using in-house services saves money. That means the expected benefits from privatizing services are not as significant as expected.  Charley Beresford, Executive Director of the Columbia Institute says:

“Back in House” debunks the myth that it’s cheaper to contract out public services in order to save money and produce a better product.  This report is full of examples that show that the initial expected cost savings and quality improvement through outsourcing aren’t necessarily happening.” 

U.S.

trump.jennifer.flowers

  • Keith Lamont Scott Shooting Shows Black Cops Can Be Biased Too (The Daily Beast)  According to tracking data released by Pro Publica, black officers pull the trigger in only 10% of all fatal incidences.  This is close to the 12% representation in U.S. police departments.  But, when they do, eight out of 10 of the suspects are black. This is much higher than the overall proportion of police shootings of blacks (26%).  In Charlotte, Keith Scott was black—an allegedly unarmed, black husband and father, living with disabilities. He had a traumatic brain injury, sustained in a 2015 motorcycle accident. The officer who shot him was black too, but the demonstrators would have been no less prone to believe the shooting was unjustified if he had been white. 

  • Clinton’s Samantha Bee Problem (Ross Douthat, The New York Times)  Douthat says that Trump's success is a reaction to a "swing toward social liberalism among younger Americans" and  "activist energy" creating an "overtly left-wing party line".  In other words Trump is successful because of a swing of the country to the left.  Econintersect:  Ross Douthat is showing his age (or, rather, lack of it).  Trump's strength is greatest among the over-60 crowd which has seen far greater social liberalism activism in the 1960s and a much further-to-the-left Democratic Party as recently as 28 years ago.  No, we ascribe Trump's strength to quite the opposite:  a failure of the Democratic party (and Republicans, too, of course) to deal with the economic degradation of the lower 6- to 7-deciles of the population.  Trump's popularity comes from a revolt against the vast financial-corporate-government complex that has moved Washington away from addressing the issues of a majority of the people.  An aside, we do agree with his assessment that Hillary Clinton is unable to connect with the the new left.  

  • Sixth Circuit Rules Against Disenfranchisement, Making Ohio Just a Bit Bluer (Washington Monthly)  The Ohio Secretary of State Jon Husted, a Republican, has been scrubbing the names of tens or even hundreds of thousands of people from the voter rolls who haven’t engaged in “voter activity” for the last six years, even if there’s no evidence the person moved or was deceased.  That’s more stringent than in most other states, and the court wisely decided that, while six years does seem like a long time for a voter to be inactive, there are many people who only vote every four years at best, and may for one reason or another have missed the 2012 election. And, of course, those people tend to be poorer and more Democratic-leaning.  This means the scrubbing of names must stop.  This article opines that the Supreme Court is unlikely to overturn the decision.

UK

  • Labour leadership: Jeremy Corbyn wins convincing victory over Owen Smith (The Guardian)  Jeremy Corbyn has pledged to “wipe the slate clean” after winning a convincing victory in Labour’s bitter leadership battle, securing 62% of the vote.  Speaking after the result was declared in Liverpool, Corbyn thanked his rival,Owen Smith, and urged the “Labour family” to unite after the summer-long contest.  Corbyn secured 61.8% of the vote to Smith’s 38.2%. The victory strengthens his hold on a party that has expanded dramatically since the 2015 general election and now has more than 500,000 members. In last year’s contest, he won 59.5% of the vote.

Syria

  • Assad’s troops tighten grip on Aleppo as 2 million left without water (The Guardian)  A siege of the Syrian city of Aleppo has intensified after the end of the weeklong ceasefire, with little hope of reviving US-Russian backed talks. A barrage of bombs has been dropped on the city since Thursday when Assad, along with his Russian backers, abandoned a shaky ceasefire and government forces launched a new assault on the city that was Syria’s largest before the war.  The attack has left US policy on Syria in disarray, with diplomats pursuing a halt in hostilities even as Assad’s forces on the ground ramped up fighting using Moscow’s air power as back-up.  The intensity of the attack and the power of some of the larger bombs are unprecedented even for a city that has endured some of the most brutal fighting of Syria’s long civil war, including years of notoriously imprecise barrel bombs.

India

  • Indian royals in row over missing temple treasures (The Guardian)  Only a handful of people have laid eyes on the treasure of the Padmanabhaswamy temple in the city of Thiruvananthapuram, formerly Trivandrum, capital of Kerala in southern India.  An official tally of the treasure has not been taken, but the worth has been estimated to be worth as much as $1 trillion or more.  There are now charges that  there have been significant thefts from the temple.

Ecuador

  • Ecuador hopes hearing marks 'beginning of the end' of Assange saga (Reuters)  Ecuador hopes that the October questioning of Wikileaks founder Julian Assange, holed up in the country's London Embassy since 2012, will mark the "beginning of the end" of the legal deadlock over case, Ecuador's foreign minister said.  Wikileaks burst onto the world scene in 2010 when it collaborated with media organizations to release U.S. State Department diplomatic cables. The leak opened a global debate over the proper limits of journalism and state transparency.  A Swedish appeals court last week upheld an arrest warrant for Assange, clearing the way for him to be questioned in Ecuador's London embassy on Oct. 17.

Canada

  • Canadian and US tribes band together to fight Alberta oil sands pipelines (The Guardian)  Aboriginal tribes from Canada and the northern United States have signed a treaty to jointly fight proposals to build more pipelines to carry crude from Alberta’s oil sands, saying further development would damage the environment.  The treaty came as the politics around pipelines have become increasingly sensitive in North America, with the US justice department intervening last week to temporarily delay construction of a contentious pipeline in North Dakota.  The Treaty Alliance Against Tar Sands Expansion was signed by 50 aboriginal groups in North America, who also plan to oppose tanker and rail projects in both countries, they said in a statement.

Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea

  • 100 MPG on Gasoline: Could We Really? (Do the Math)  This article considers only internal combustion engines and the limits imposed by air resistance and rolling friction.  The author finds the "theoretical" limit for an "ideally" designed car is less than 100 mpg. 

  • Romer follows up his critique (Lars P. Syll)  This short blog post contains two epic takedowns.  The first is excerpted from a quote of Paul Romer and the second from David Freedman listing typical excuses for why demonstrably bad economic models are useful.

If we know that the RBC model makes no sense, why was it left as the core of the DSGE model? Those phlogiston shocks are still there. Now they are mixed together with a bunch of other made-up shocks.

Moreover, I see no reason to be confident about what we will learn if some econometrician adds sticky prices and then runs a horse to see if the shocks are more or less important than the sticky prices. The essence of the identification problem is that the data do not tell you who wins this kind of race. The econometrician picks the winner.

We know all that. Nothing is perfect … The assumptions are reasonable. The assumptions don’t matter. The assumptions are conservative. You can’t prove the assumptions are wrong. The biases will cancel. We can model the biases. We’re only doing what evereybody else does. Now we use more sophisticated techniques. If we don’t do it, someone else will. What would you do? The decision-maker has to be better off with us than without us … The models aren’t totally useless. You have to do the best you can with the data. You have to make assumptions in order to make progress. You have to give the models the benefit of the doubt. Where’s the harm?

  • The FBI recommends you cover your laptop's webcam, for good reason (engadget)  FBI director James Comey recently recommended that we all cover our webcams with tape for security reasons. Comey believes that doing so is a simple step for people to "take responsibility for their own safety and security".  Apparently Comey doesn't want to be spied on. In questions during a conference at the Center for Strategic and International Studies, Comey revealed that cam-covering is commonplace at the FBI and other government offices.  There’s a thriving market for illicitly obtained stills and video.

  • The Bank of Japan is testing Romer’s hypothesis (Eric Lonergan, The Philosophy of Money)  As the Bank of Japan "goes to the wall" with monetary base expansion, the "theory of rational expectations" may be "taken to the mat".

... something changed in the last 30-years. The focus on expectations has become much more deeply ingrained in modeling and policy-thinking. When Samuelson, Solow, Friedman, Phelps thought about expectations, they were pragmatic, and skeptical. Expectations were not always and everywhere the heart of the matter, either. Rational expectations was also heavily critiqued in the mainstream when I was taught economics. What has happened in the last thirty years is that inflation expectations and the real policy rate, which is simply the nominal interest rate less expected inflation, dominate models.

Never before in economic history did the entire macroeconomic framework hang on these three premises:

1. Economic agents have inflation expectations.

2. The policy rate, adjusted for these expectations, determines demand.

3. Central banks (or in the case of the FTPL, central banks and the fiscal authorities) control these expectations.

  • The Private Debt Crisis (Democracy Journal)  In the years since the 2008 global crisis, when the world’s growth rates tumbled, the IMF has dutifully printed forecast after forecast predicting rebounding growth rates. But in reality, rates have fallen well short of these predictions.  The author asserts that the reason is lack of recognition of the burden of too much private sector debt.  The modern financial history of the world is presented in one of the graphs:


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