Archive for February, 2012

February 22, 2012

The Crisis of the Commons

Written by: Dennis Shen

The crisis of the natural commons – our forests, our waterways, our skies, our marine fisheries, our biodiversity – is rooted in an existing failure of the international economic and regulatory system to internalize a critical externality. It reflects a system deficiency to place a price and regulate the use of the earth’s depletable and valuable natural ecosystems in a time in which continued freedom to over-use may pose real risk to the sustainability of these natural systems and in turn, the sustainability of our long-term economic path.

In 1776, Adam Smith, in the Wealth of Nations, stated that an individual, by pursuing his own interest, will be “led by an invisible hand to promote an end which was no part of his intention.” And in the case of private, tradable goods – the invisible hand of competitive markets has, in testament, done wonders to foster the efficient exchange of assets and maximize the product of human labour. But the marketplace works under assigned boundaries and if the current rules state the goal to be maximum short-term exploitation at the cost of long-term consequences, then that is exactly what the markets will institute into practice.

The reason a sustainable architecture to our global economy (that internalizes the price of common goods) has been difficult to come by is in part due to the historical misconception that the natural ecosystems are so vast that they cannot possibly be significantly influenced by man – a misconception founded on a history of people in which exploitation of nature has seemingly taken place without boundary or repercussion.

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February 19, 2012

Parallel Attitudes Towards Transfer Payments in America & Greece

Written By: Matthew Oxenford

I’ve been struck by two stories running at low intensity on either side of the Atlantic for the last several months. At first, they don’t seem related. First, there is a notable uptick in anti-German sentiment that has been documented Greece and in several other countries that may need to be bailed out by the wealthier EU countries if the Euro project is to survive (See Reuters article from 16 February: “Greece-Germany tension rises, reflects wider European rift“). Secondly, the Republican Presidential primary in the United States has taken turn towards attacking the social safety net, even though the most reliably Republican regions of the United States are indeed the poorest, and most in need of the safety net (Paul Krugman’s recent article in the New York Times, “Moochers Against Welfare” is a good encapsulation of the trend). These seem unrelated, but they really have the same ultimate cause, one that has profound implications for both the United States and Europe.

The trend in the United States has been going on for longer, so let’s look at it first. Republican political rhetoric has been dominated by the trope that government should not be in the business of redistributing money to undeserving people even while the poorest of the U.S. States are the most reliably Republican. Every year, rich states, like Massachusetts, Connecticut and New York receive less than a dollar in federal spending for every dollar they pay in taxes.

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February 1, 2012

Capitalism and Corporatocracy: Money in Politics in the United States

Written By: Dennis Shen

Capitalism and democracy are often characterized as the twin virtues that have defined America’s modern history and success.  But capitalism and democracy do not exist in uniformity: to be more capitalistic does not invariably make us more democratic.  Instead, there has always existed an intricate balance between free market principles and strong democratic governance, oftentimes counterbalancing one another, that has determined the long-run health and sustainability of a political and economic system.  America’s past success in becoming the world’s leading nation was founded and sustained by its managing this balance between private markets and government better than perhaps any other country in history.  The ingenuity and allocative efficiency of free markets in partnership with the vision and moral leadership of a strong American government helped design the modern world and make it in the image of a fair and decent people.

But this balance between markets and government can break down if not very carefully maintained.  At the core of America’s problems today is an existing imbalance of too much dependence on unregulated, free market capitalism and too little government oversight and leadership.

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