The Radical Anti-Government, Anti-Regulation Revolution Quietly Continues

Political policies that try to reduce unneeded regulation and increase efficiency of needed regulations is rational and probably appealing to most people. Of course, the pragmatic concern about deregulation is that it tends to happen behind closed doors or otherwise flies under the public’s radar. Such deregulation is typically designed to reduce government regulation for the purpose of bolstering private profit, arguably at the expense of the public interest most of the time. That accords with the fact that American two-party politics is a pay-to-play system. Most of the payers are players who want more money and power. Regard for the general welfare or public interest are usually an impediment, not a priority.

It’s a matter of morals - the public interest is subversive

Nobel laureate and economist Milton Friedman, believed that anything that needlessly reduces profits for a business is immoral. He argued that the best type of CEO was not one with an enlightened social conscience. Instead, he saw CEOs with an enlightened social conscience as “highly subversive to the capitalist system.” There’s not much room for ambiguity in language like that.

An interesting instance of how toxic that rational, pro-public interest regulation appears to be to most businesses merits mention.

The 737 Max airplane story

An article in the New York Times discusses a fairly new law, the F.A.A. Reauthorization Act of 2018. That law further cripples the ability of the FAA (Federal Aviation Agency) to evaluate new aircraft for safety and other aspects of new aircraft operations. The safety of the now grounded Boeing 737 Max airplanes were evaluated under older less restrictive laws. That limited led to the failure of regulators to spot flaws in the safety system of 737 Max aircraft. The planes were grounded after two fatal crashes some months ago that killed a total of 346 people.

In the drafting of the 2018 law, Boeing and allied interests were able to insert a couple of paragraphs that gave companies more power to challenge regulator safety concerns. Companies had been lobbying the federal government for many years to get regulators out of the airplane evaluation process as much as possible. They has significantly succeeded even before the new 2018 law was passed. The new law makes it yet harder for government regulators to counteract companies’ power to reject regulator concerns.

Under older law, the FAA did not fully analyze the automated safety system. Boeing played down its risks. Then, late in the plane’s development, the system was made to be more aggressive. Those changes that were not even submitted in any safety assessment to the FAA. The newer law shifts even more power to companies.

The NYT investigation for this article included reviewing documents from a group representing safety inspectors. The group argued that the new 2018 law would allow regulatory intervention only after a plane crashed “and people are killed.” That is precisely how it played out on two occasions. While the 2018 bill was being written, the FAA criticized the law would because it would “not be in the best interest of safety.”

Since the law passed in 2018, at least some democrats in the House had to vote for it. Also, most democrats in the Senate supported the bill, which passed there by a 93-6 vote.

This situation exemplifies the persistence and stealth that modern pay-to-play deregulation looks like and what it can lead to. In essence, ‘deregulation’ is cover for corruption and quiet passage of laws that harm the public interest more than they help it. In the case of the 2018 law, the further gutting of FAA review authority was probably embedded in other measures that were seriously needed for the FAA to function properly. That is how special interests leverage their campaign contributions (free speech rights) to get what they want. And, if special interests backed by money don't get what they want one year, they will keep trying for decades to get what they want sooner or later.

Estimating Global Warming Costs

A short article in the current issue of Scientific American, Warming Will Cost Rich and Poor Countries Alike, discusses modeling results on the cost of global warming under two scenarios. In one scenario, terms of the Paris Agreement are met and in the other that does not happen. The data was generated by the National Bureau of Economic Research.

NBER projects that about 7% of global GDP will be lost by 2100 if greenhouse gas emission growth continues unchanged. The study included analysis of how warming has affected 174 countries since 1960. That was then projected to estimate future effects. Staying on the current path, estimated US cost is 10.5% of GDP, and Canada's loss is projected to be 13%. But if terms of the Paris Agreement are met now, GDP loss would be less than about 3% for the US and Canada.

The researchers believe the GDP loss estimates are conservative because their model because it does not consider increased climate extreme variations that are expected in the future.

It is reasonable to expect that models of economic cost will be refined as more information about the effects of global warming continues to accumulate.

Why Voter Turnout Is So Low in the United States

AN INTERVIEW WITH

ALEXANDER KEYSSAR

INTERVIEW BY

Adele Oltman

From the very founding of the United States, elites have worked to disenfranchise and suppress voters — because they know a mobilized electorate of workers and poor people would transform the country.

In recent years, states around the country have passed numerous laws restricting the right to vote. But this effort to contract the franchise — a fundamental assault on political democracy — is not unprecedented. Since the founding of the United States, elites have used their power to disenfranchise and suppress the vote of those they’d rather not see at the ballot box.

In the following interview, historian Alexander Keyssar, author of The Right to Vote: The Contested History of Democracy in the United States, discusses the long history the franchise fights in the United States with historian Adele Oltman. The interview has been edited for length and clarity.

TO READ THE ENTIRE INTERVIEW:

https://www.jacobinmag.com/2019/10/voter-turnout-disenfranchisement-suppression-alexander-keyssar

Wealth Inequality is Inherent in Markets

A recent Scientific American article, The Inescapable Casino, discusses models of wealth flow in markets. Depending on the model the results vary from significantly different from reality to amazingly close to exact reality over at least the last 30 years. The results have important implications for both political policy and political ideologies.

For all tested models, accurate or not, wealth invariably flows to a top few, with most people winding up with less or even in poverty unless government steps in and diverts wealth flow to the top. What wealth distribution models finally show depends on what assumptions are built into them. The accurate models give a very good measure of (1) current wealth inequality, (2) the reasons for the degree of inequality and (3) the chances of winding up at the top or bottom. The fundamental insight is this: Markets are like casinos that we cannot leave and it is a proven fact that the longer a person stays and plays in a casino, the higher their chances of losing. That is the reality of market economies for everyone.

The basic wealth flow model points to a situation where, for each economic transaction a person, company, group or nation makes, both parties to the transaction are equal in all respects, including power, knowledge, ability, intelligence, social situation and everything else. Obviously that does not come close to reflecting reality, e.g., poor people have less power and usually less information than most or nearly all companies and rich people. The end result of the pristine "libertarian" model (my term, not anyone else's) is pure oligarchy where rich people have almost all the wealth and power. That seems to accord with semi-current (2010) data.

Refined market models & three truths about them

The researchers refined their model by incrementally including three factors. Including each factor one at a time made the models outputs more and more accurate until they were essentially the same as reality. That is about as good as it can get for models of reality.[1]

If you add to the model three factors, it predicts reality about as close as mathematical models can get. The three factors account for:

1. Taxes, subsidies and inherent advantages that wealthy people and entities have over regular people, e.g., lower cost of borrowing and more knowledge for wealthy people and legal entities compared to regular people;

2. Initial wealth advantage, e.g. a person inherits at least $400 million from dad or any other source; and

3. Negative wealth, which reflects the drag on upward economic mobility from a person owing more than their assets are worth.

With all three factors in the model, the researchers describe their results like this:

Moreover, only a carefully designed mechanism for redistribution can compensate for the natural tendency of wealth to flow from the poor to the rich in a market economy. Redistribution is often confused with taxes, but the two concepts ought to be kept quite separate. Taxes flow from people to their governments to finance those governments' activities. Redistribution, in contrast, may be implemented by governments, but it is best thought of as a flow of wealth from people to people to compensate for the unfairness inherent in market economics. ..... Any single agent in this economy could have become the oligarch—in fact, all had equal odds if they began with equal wealth. In that sense, there was equality of opportunity. But only one of them did become the oligarch, and all the others saw their average wealth decrease toward zero as they conducted more and more transactions. To add insult to injury, the lower someone's wealth ranking, the faster the decrease. ..... In the long run, all participants in this economy except for the very richest one will see their wealth decay exponentially. ..... In fact, these mathematical models demonstrate that far from wealth trickling down to the poor, the natural inclination of wealth is to flow upward, so that the “natural” wealth distribution in a free-market economy is one of complete oligarchy. It is only redistribution that sets limits on inequality. The mathematical models also call attention to the enormous extent to which wealth distribution is caused by symmetry breaking, chance and early advantage (from, for example, inheritance).

If the models are correct, wealth tends to trickle up and various factors weigh against against most people, including being born poor, i.e., markets are not fair, and success is not based on just hard work. 

That raises questions: 
1. Are the models just baloney and of no relevance to the real world, e.g., increasing wealth of rich people and entities does not necessarily cause wealth to trickle down?
2. If the models are right, should government help to distribute wealth down to counteract it's innate mathematical tendency to trickle up?
3. Are the scientists right that it is only redistribution by government that sets limits on inequality, or would wealthy interests limit inequality on their own, e.g., in the name of fairness and/or something else?

Footnote:

1. In real life, there's usually or always a caveat(s) or exception(s). In this case, the caveat is the fact markets are a complex adaptive system, discussed here before. That means there necessarily is inherent unpredictability and even models that give great results now can, and must be, be wrong sometime in the future. That does not negate all of the value of (a) short-term predictions, or (b) modeling of data based on the past.  It just injects some caution.