This and that for your Sunday reading. – Lana Payne offers a reminder (with reference to Lars Osberg’s new book) that extreme and growing inequalityContinue reading
This and that for your Thursday reading. – Ed Finn discusses how employment and unemployment rates are among the economic indicators which are all tooContinue reading
Miscellaneous material for your Monday reading. – Ed Finn laments the lack of labour coverage in today’s media landscape. But David Climenhaga points out thatContinue reading
Assorted content to end your week. – Ed Finn offers a reminder that Canada’s social safety net is leading to the perpetuation of poverty despiteContinue reading
This and that for your Sunday reading. – Ed Finn writes that we shouldn’t believe claims that Canada lacks money for social benefits when LibContinue reading
Assorted content to end your week. – Ed Finn reminds us that ending child poverty makes good economic sense in addition to being a moralContinue reading
Miscellaneous material for your mid-week reading. – Rick Smith writes about the Filthy Five loopholes taking the most money out of Canada’s public coffers forContinue reading
Miscellaneous material for your mid-week reading. – Ed Finn reminds us that Canada has ample resources to bring about positive social change – just asContinue reading
Miscellaneous material to start your week. – Ed Finn comments on the massive amounts of public money being funneled toward Canada’s wealthiest corporations: When itContinue reading
This and that for your Tuesday reading. – Tom Parkin writes that the Trudeau Libs and Bill Morneau have taken the side of wealthy shareholdersContinue reading
This and that for your Tuesday reading. – Ed Finn discusses how corporate giants exert far more influence than we generally know – or shouldContinue reading
Miscellaneous material for your Labour Day reading. – Ed Finn offers a reminder of the rights and benefits we now take for granted which wereContinue reading
Assorted content for your weekend reading. – Larry Elliott is optimistic that the UK’s election result will lead to an end of destructive austerity. JamesContinue reading
Miscellaneous material to start your week. – Ed Finn reminds us how the economy as a whole – including the private sector – suffers whenContinue reading
Assorted content to end your week. – Mainly Macro offers a useful definition of neoliberalism, while highlighting its relationship to austerity. And Ed Finn writesContinue reading
Assorted content for your Sunday reading.
– Tim Harford discusses how insurance and other industries are built on exploiting people who are risk-averse due to the inability to absorb substantial costs as “money pumps” for those who have more than they need:
(L)et’s step back and ask ourselves what insurance is for. Classical economics has an answer: people are risk-averse, which means that they will pay good money to reduce the variability of outcomes they face. If home insurance guards against the loss of a million pounds when my house burns down, I’m happy to buy the insurance even though the insurance company expects to make a profit from it.
But this risk aversion emerges from the fact that money is worth more to poor people than to rich people. Gaining a million pounds would make me rich but losing a million pounds would make me poor. I should not gamble a million pounds on the toss of a coin, because the million pounds I might lose is more precious to me than the million pounds I might gain.
As so often with classical economics, this is an excellent description of how we should behave. It is not such an excellent description of how we actually do behave. Risk aversion can only explain why we insure large risks. It cannot explain why we insure small ones.
A money pump is a person whose irrationalities can be systematically exploited for financial gain. The simplest money pump is a person who prefers an apple to a doughnut, prefers a doughnut to a chocolate bar, and prefers a chocolate bar to an apple. Just offer them an apple in exchange for their doughnut plus a penny. They will accept. Then offer them a chocolate bar for their apple plus a penny. Then offer them a doughnut for their chocolate bar plus a penny. They end up with their original doughnut and are three pence poorer. Repeat for ever.
Money-pump arguments are sometimes deployed to object that people cannot be irrational, otherwise they would be bankrupted by money pumping. But economists are increasingly coming to realise that, instead, we should be looking for money pumping in action.
Given our anxiety about small risks, what would the money pumping look like? It would be an insurance policy focused on the narrowest possible slice of risk. It would be sold alongside another product or service, often at the last moment. It would be marketed by creating anxiety and then offering the product to make the anxiety go away. In short, it would look like the collision damage waiver, the extended warranty, and PPI. These bespoke slices of insurance are among the largest money-pumping projects in the modern economy. No wonder the banks abandoned their principles to join in.
– Jared Bernstein and Lori Wallach highlight (PDF) the need for an international trade regime which serves the public interest, not only the greed of the people who already have the most. And Yves Smith theorizes that the public backlash against corporate-centered trade deals may lead both to changes in how international trade is managed, and the identity of the countries at the forefront of developing the standards to be pursued.
– Needless to say, the Libs’ devotion to the current trade model figures to exclude Canada from that group for the foreseeable future. And the Alberta Federation of Labour laments the Libs’ determination to exploit foreign labour at the expense of both easily-abused temporary workers, and the Canadians who would otherwise fill the positions.
– Derek Thompson makes the case for a long-overdue round of trust-busting to reduce corporate power over innovation and economic development.
– Finally, Ed Finn writes that our health system should focus far more on maintaining wellness rather than responding only once an illness develops.Continue reading
This and that for your Thursday reading.- Ed Finn discusses how to fight for needed alternatives to neoliberalism in the face of seemingly daunting odds and structural barriers. – Noah Smith points out how most economic analysis omits important social …Continue reading
Assorted content to end your week.- Ed Finn reminds us that “free trade” agreements have always served to increase the wealth and power of those who already have the most at the expense of social interests. And Scott Sinclair and Angella MacEwen each o…Continue reading
Assorted content for your weekend reading.- Eric Reguly highlights the growing possibility of a global revolt against corporate-centred trade agreements:(A) funny thing happened on the way to the free trade free-for-all: A lot of people were becoming …Continue reading
Assorted content for your weekend reading.- Ed Finn comments on the history of neoliberalism – but notes that while the public is rightly skeptical of corporate spin, that awareness hasn’t yet translated into a strong alternative:(S)cores of well-known…Continue reading