80/20 Day: July 15, 1848, Vilfredo Pareto joined the human race

July 15, 2014

Happy 80/20 Day!

Italian economist, engineer and political activist Vilfredo Pareto was born on July 15, 1848, in Paris, where his father had fled due to political difficulties.

Pareto should be more famous, for his explanation of the 80/20 rule, and for his contribution to making better things, the Pareto chart.  Many economic texts ignore his work almost completely.  Quality management texts ignore his life, too — generally mentioning the principles they borrow, but offering no explanation.

Vilifred Pareto, Wikipedia image

Vilfredo Pareto, Wikipedia image

His contributions, as accounted at Wikipedia:

A few economic rules are based on his work:

And now you, dear reader, having just skimmed the surface of the pool of information on Vilfredo Pareto, know more about the man than 99.99% of the rest of the people on the planet.  Welcome to the tip-top 0.01%.

Resources:


What happens when “austerity” budget cutting blows up on the GOP? See Kansas

July 8, 2014

Kansas finds itself in a big, big pickle.

Republican Governor Sam Brownback managed to get the legislature to make massive tax cuts, claiming it would boost jobs in Kansas and stimulate the Kansas economy, thereby  paying for themselves.

Instead the Kansas economy is failing. Massive cuts have gutted Kansas’s once-revered public education system, and deeper cuts will be necessary to keep the state government afloat, unless there is some change in tax policy, or a massive, miraculous influx of business beyond what even the Koch Bros. could arrange.

Gov. Brownback is running for re-election, and finds himself behind in popularity in Kansas — behind even President Barack Obama.

Wow.

Full story at Vox, “Kansas was supposed to be the GOP’s tax-cut paradise, but now can barely pay its bills.”

And of course, there is comedy of the kind that you couldn’t make up:  Brownback blames Obama.

Oy.

Chart from Vox, showing what happened to Kansas's surplus revenues, promised to balloon with the tax cuts Gov. Brownback asked for, and got.

Chart from Vox, showing what happened to Kansas’s surplus revenues, promised to balloon with the tax cuts Gov. Brownback asked for, and got.

Turns out Americans, and especially the citizens of Kansas, want government that works.  They’d like taxes to be low, but low taxes won’t make voters happy when the roads are bad and the kids’ schools are crappy.

Wonkblog's chart showing job creation in Kansas is terrible, also.

Wonkblog’s chart showing job creation in Kansas is lagging, also, contrary to the GOP promises when tax cuts were instituted.

Government’s first job is to govern; just governments are established among men to secure human rights, old Tom Jefferson wrote.  Life, liberty and pursuit of happiness make a snappy line in a patriotic reading on July 4, but when the crowd drives home, they don’t want to be dodging potholes, and they don’t want their kids to complain from the back seat of the car that they don’t know what the Declaration of Independence is or what it says, “and who is Jefferson — I thought it was just a street in Dallas?”  When government fails to do basic jobs, voters may not be happy.

Will false advertising be able to bail Sam Brownback out?  Watch Kansas.

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Insta-Millard: In the new Gilded Age, the rich do not share the wealth

May 6, 2014

Have the GOP and the Über-wealthy set up the whole world for another Great Depression?  Should we expect a World War to follow?

Or, do we have time to make our societies more egalitarian, and more anti-poverty, and more stable?  Graphic from BusinessWeek:

Super wealthy have concentrated the wealth of the world in their personal control.  Capitalism run riot? Graphic from BusinessWeek

Super wealthy have concentrated the wealth of the world in their personal control. Capitalism run riot? Graphic from BusinessWeek

Opportunity to move up, economically, is stifled when so much wealth blocks access to the top economic rungs.

These figures come out of a clever analysis by economists Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics, who is a visiting professor at Berkeley. The Internal Revenue Service asks about income, not wealth, which is the market value of real estate, stocks, bonds, and other assets. Saez and Zucman were able to deduce wealth by exploiting IRS data going back to when the federal income tax was instituted in 1913. They figured out how much property different strata of society owned by looking at the income that was generated by that property, such as dividends and capital gains. To simplify, if a family reported $1 million in rental income one year and the market rate of return on rental properties was 10 percent, then Saez and Zucman concluded that the family must have owned property worth $10 million.

The message for strivers is that if you want to be very, very rich, start out very rich. The threshold for being in the top 0.1 percent of tax filers in 2012 was wealth of about $20 million. To be in the top 0.01 percent—that’s the 1 Percent club’s 1 Percent club—required net worth of $100 million. Of course, even $100 million is a pittance to Bill Gates, whose net worth, according to the Bloomberg Billionaires Index, is nearly 800 times that.

It will require great creativity to work our way out of this maldistribution without some sort of catastrophe.

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Can America afford to be great anymore? Many say, “no”

May 1, 2014

A friend posted this on Facebook:

“As of today our total national debt is roughly $17 1/2 trillion. Of that number nearly $12 1/2 trillion is publicly owed. Can you even get your mind around it?”

To which I responded:

As a portion of GDP, our national debt was much greater in 1946.

So, the Congress did what it had to do.

Congress borrowed money to educate millions of returning veterans, and to subsidize their homes. The greatest education aid and housing aid programs in history, both in the GI Bill.

Poster honoring the Marshall Plan, to rebuild Europe after World War II -- on borrowed money.

Poster honoring the Marshall Plan, to rebuild Europe after World War II — on borrowed money.

Congress borrowed money to give it away to our allies in World War II, to rebuild their industrial capabilities, on the assumption that an ally with a strong industrial base and good economy is stronger, and can come to our aid if and when we need it.

Congress borrowed money to give it away to our enemies in World War II, to rebuild their industrial capabilities, because a nation with a good economy and health trade tends to stay out of war. Those nations became our allies.

Congress borrowed to build the greatest road system in history, connecting nearly every corner of America — under the pretense that such a road system would allow us to move troops and armaments quickly from coast to coast in event of a defense emergency.

Congress borrowed to finance space exploration, to go to the Moonbecause, you know, it’s hard.

Congress borrowed to build a library in every county in America, and fill it with books — so that if there were ever nuclear war, everybody who survived would be close to the information necessary to rebuild civilization.

Congress borrowed to build the world’s greatest air transportation system, with airports for sport, business and commercial aviation all over the place.

Congress borrowed to build sewer systems and water systems, doubling down on public health service spending, to prevent disease and make health people.

Funny things happened. Our economy boomed. The world economy boomed. Millions of new jobs were created, filled by people who paid whopping taxes. And the debt sorta melted away.
___________

When I hear people complain about our national debt, and how we as Americans must stop spending money, I hear them saying, “We cannot afford to be great anymore. Our time as the world’s leading economy and leading democracy has passed. It will be a lot cheaper for the nation to curl into a national fetal position, and then taxes won’t be so high.”

That’s what I hear the GOP saying, when they urge tax cuts for the rich, while taking away food stamps from the families of our military deployed overseas.  (Can you imagine anything like that happening during World War II? Not even “interned” families of soldiers went hungry.)

In 1946 — and in 1948, 1950, 1952, 1956, 1960, 1962, 1964, 1968, and other election years — there were plenty of Americans who said “we can’t afford the Marshall Plan; we can’t afford foreign aid; we can’t afford to build all these roads; we can’t afford to go to the Moon; we can’t afford to pay for college (or other schooling) for all these veterans/students.”

What would America look like, had leaders listened to those people, and then NOT borrowed the money to build America?  What would the world look like?

I don’t think George Washington spent 8 years at war to curl into the fetal position and give up.

Am I wrong?

The future of an America that is afraid to be great, even if we need to borrow money to do it? (Image from Brogan Knight)

The future of an America that is afraid to be great, even if we need to borrow money to do it? (Image from Brogan Knight)


Insta-Millard: Greenspan explains why and how Fed is accountable

April 30, 2014

A group of people, including a lot of the acolytes of Ron Paul, claim the Federal Reserve Bank system is a renegade organization, unaccountable to anyone.

Alan Greenspan, by the late, very great David Levine

Alan Greenspan, by the late, very great David Levine

Turns out that Ron Paul actually had the guts to ask Fed Chair Alan Greenspan about that.  Greenspan’s answer is worth watching, and hearing.

It was on CSPAN-2, so you probably didn’t see it.  Not the sort of thing Fox likes to run over, and over, and over again, to distraction.

Still looking for  video of Greenspan explaining the annual Fed audits that Ron Paul claims don’t exist . . .

 


Hey, Congress! Fix the roads!

April 24, 2014

Just a crazy idea, I know: But do you think Congress could pass a bill to help the states fix potholes in federal highways, make the thousands of decrepit bridges, safe, and put a few thousands of people to work?

Economist wrote:

ONLY the drunk, they say, drive in a straight line in Chicago. The sober zigzag to avoid falling into the city’s axle-breaking potholes. This year the craters, caused by continual freezing and thawing, are worse than ever, and the spring thaw has brought three times the usual number of complaints from citizens.

As winter retreats, holes in roads and budgets are being revealed—especially in midwestern states, which were hit hard by the polar vortex. Those states with money have made emergency appropriations for repairs; those without will have to cut summer programmes. This means not mowing the grass in parks or picking up litter. It also means delaying resurfacing of highways or fixing guard rails, and putting off capital spending.

Looking after America’s roads is a persistent headache. Although $91 billion is spent on them every year, that is nowhere near enough to keep the country’s 4.1m miles (6.6m km) of public roadways in good nick. The Federal Highway Administration estimates that $170 billion in capital investment is needed every year. Last year a report from a civil-engineering group said that 32% of America’s major roads were in poor or mediocre condition. Main roads through cities were in worst shape: almost half the miles travelled over urban interstates in 2013 were a bumpy ride. Ray LaHood, a former transport secretary, thinks the roads are probably in the worst shape they have ever been.

Is it too big a stretch to go back to the hopes in 2009, that we might get a jobs bill to fix this stuff?  Yeah, it’s 2014 — and the roads, and the American people, need a jobs bill more than ever.

Photo from The Atlantic

Photo from The Atlantic

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A lot of people reading Piketty — the right ones? Enough to matter?

April 23, 2014

An article in the Washington Post calls Thomas Piketty’s book, Capital in the Twenty-first Century, a “runaway best seller.”

Have you read it?

Thomas Piketty - Professor of Economics, Paris School of Economics; photo from The Next Deal

Thomas Piketty – Professor of Economics, Paris School of Economics; photo from The Next Deal

Are you aware of the contents?

Are the right people reading it — especially GOP Members of Congress whose minds need to be changed?  Or, are enough people reading it to make a difference in American politics?

There are presses cranking it out in the United States, India and Britain, and the book is in at least its fourth run. Even though the book was already a hit in its native France, it’s now taking off among English readers around the world, said Donnelly. She expects that sales in China, Hong Kong and Japan will also soon follow.

Piketty, already widely cited for his work on income inequality, has clearly touched a nerve. The book argues that the underlying mechanisms of capitalism tend towards massive inequality. Piketty argues that the era between 1930 and 1975 — often hailed for the way in which wealth was broadly shared — was actually a departure from the norm. That period of economic growth, he says, was the result of unusual circumstances like World War II, a global depression and the government’s actions in the aftermath of those events: strong policies raising taxes and increasing regulation. But now, with many of those policies rolled back, societies are reverting back to extreme inequality.

What do you think, read it or not?

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