Inequality has received a lot of attention lately, particularly in two arenas where it had not previously received as much: American public debate and the International Monetary Fund. A major driver is the observation in the United States that income inequality has now returned to the extreme levels of the Gilded Age. (The share of income held by the top 1% rose from 8% in 1980 to 19% in 2012, a level last seen in 1928, and probably the highest among advanced countries. The share held by the top 0.1% rose from 2% to almost 9% currently, a level least seen in 1916. And mobility remains as low as ever.) Inequality remains high in Latin America and has increased in many other parts of the world as well.
Category Archives: poverty
What Do Obamacare and the EITC Have in Common with Cap-and-Trade?
My preceding blog post described how market-oriented mechanisms to address environmentally damaging emissions, particularly the cap-and-trade system for SO2 in the United States, have recently been overtaken by less efficient regulatory approaches such as renewables mandates. One reason is that Republicans — who originally were supporters of cap-and-trade — turned against it, even demonized it.
One can draw an interesting analogy between the evolution of Republican political attitudes toward market mechanisms in the area of federal environmental regulation and hostility to the Affordable Care Act, also known as Obamacare. The linchpin of the program is the attempt to make sure that all Americans have health insurance, via the individual mandate. But Obamacare is a market mechanism, in that health insurers and health care providers remain private and compete against each other.
Food Security: Export Controls are Not the Cure for Grain Price Volatility, But the Cause
My last blog post listed some policies and institutions with which various small countries around the world have had success — innovations that might be worthy of emulation by others. Of course there are plenty of other examples of policies and institutions that have been tried and that are to be avoided. The area of agricultural policy is rife with them. Many start with a confused invoking of the need for “food security.”
The recent run-up in wheat prices is a good example. Robert Paarlberg wrote an excellent column in the Financial Times recently, titled “How grain markets sow the spikes they fear.” Grain producing countries point to the high volatility of prices on world markets and the need for food security when imposing taxes on exports of their own grain supplies, or outright bans, as Russia did in July. The motive, of course, is to keep grain affordable for domestic consumers. But the effect of such export controls is precisely to cause the price rise that is feared, because it removes some net supply from the world market. (The same could be said when grain importing countries react to high prices by enacting price controls, because that adds some net demand to the world market.)