Home > Uncategorized > Resolutions to improve debates on economic policy in 2019

Resolutions to improve debates on economic policy in 2019

from Dean Baker and WEA Commentaries

Okay, it’s that time of year when we are all supposed to commit ourselves to performing nearly impossible tasks over the next twelve months. I will play the game. Here is the list of areas where I will try to bring economics into economic policy debates in 2019.

1) Patent and copyright monopolies are government policies:

This one is pretty simple, but that doesn’t mean it is easy. It should be pretty obvious that these and other forms of intellectual property are government policies explicitly designed to promote innovation and creative work. We can (and have) make them stronger and longer, or alternatively make them shorter and weaker, or not have them at all. We can also substitute other mechanisms for financing innovation and creative work, including expanding those already exist. (Anyone hear of the National Institutes of Health?)

Incredibly, most policy debates, especially those on inequality, treat these monopolies as though they were just given to us by the gods. It is endlessly repeated that technology has allowed people like Bill Gates to get incredibly rich, while leaving less-educated workers behind. But that’s not true. It is our rules on patents and copyrights that have allowed people to get enormously wealthy from technological developments. With a different set of rules, Bill Gates would still be working for a living.

There are a few pieces on the topic herehere, and here (chapter 5).

2) Patent and copyright rents are equivalent to interest payments on government debt: read more

  1. Mike Ryan
    January 12, 2019 at 8:28 pm

    Sometimes if you back up a bit you can get a better view.

    Patents and such are specific legislation purchased by the wealthy. Recent laws extended the patents from 17 to 20 years. The legislation to accomplish this was passed in an expedited fashion preventing changes to the bill.

    The exorbitant prices we encounter in the healthcare field can be directly tied to patent protection. Add to that, re-capitilization (leveraged buyouts) of firms force the new firms to raise prices in order to fund the debt involved in the re-capitilzation. Just look at Mylan’s balance sheet. So much debt most firms would choke to death. The pharmaceutical field is notorious for finding sneaky ways to extend patents beyond the 20 years now allowed..

    Calls for deregulation should include removing patents where they have been abused. THAT would lead to lower drug prices.

  2. Robert Locke
    January 12, 2019 at 9:44 pm

    6) A large financial sector is a drain on the economy. Expand your coverage of the sustainability of firms, which is a major theme in manufacturing and business, all but ignored by post-autistic economists.

    • Craig
      January 13, 2019 at 12:08 am

      Very correct Robert. The truth is a fully constitutionally arms length publicly administered banking/central banking system can do everything constructive a private money creating system can….and as we saw before the GFC do a helluva lot less that is destructive. The Sparkassen are an excellent example of such and of German managerial intelligence. It’s just that they don’t finish the job because they haven’t recognized the economic and monetary paradigm changing nature of a policy like a 50% discount/rebate at retail sale which enables us to end private finance’s monopolistic paradigm of Debt/Burden/Additional Cost Only and which over the millennia has become such a titanic mental neurosis that economists can’t think outside of the box on.

  3. January 13, 2019 at 1:39 am

    Benjamin Franklin argued earnestly against patents and did not give up easily. He claimed the ideas we get are from public conversations we share in society; He challenged people to live alone as primitives and see how much inventing they do.

    • Robert Locke
      January 13, 2019 at 9:15 am

      Craig, in”Financialization, income distribution, and Social Justice: German and American Experience, (2014) rwer, 68, 74-89, I wrote

      “In the 1980s British and American banks and their European partners pushed, as they did in
      were strongly opposed to publicly owned banks. ” EU banking bureaucrats, who were educated in US financialization, joined in, since they thought public savings and cooperative banks old fashioned and
      outdated, because they did not conform to the “model” of how a good modern bank should be
      structured and operated.
      Reform occurred in Belgium, where savings and cooperative banks essentially disappeared,
      in the UK where public savings banks (TSB) were sold to Lloyds Banking Group, and several
      cooperative banks, the so-called building societies, sold to large private banks; in the
      Netherlands savings banks disappeared and independent cooperative banks were
      amalgamated one big national bank (Rabobank); in Sweden the former local savings
      banks were converted into joint stock corporations in the 1990s and most consolidated into a
      single national savings bank (Swedbank); in Spain local savings banks, the cajas, were
      privatized and localization abolished. They were permitted to provide a broad range of
      financial services in all parts of the country, becoming universal banks, which invested heavily
      in real estate loans, with the approval of pre-financial crisis reformers who believed that
      regional banks could not compete with other banks operating with large branch networks.

      Only in Germany did the other two pillars of banking (423 savings banks and 1,116
      cooperative banks) remain a “special case in which no substantial changes [occurred] during
      the last decades” (Bübül et al, 3). The savings banks have remained local and public and
      cooperative banks have not become essentially profit oriented institutions seeking to enhance
      shareholder value; nor has either been turned into centrally located stock-exchange listed
      corporations. Since each sector had a system of joint and several liability even before the
      financial crisis began, no individual member bank was allowed when it came to go bust. They
      came through the crisis with barely a scratch and, their spokesmen argue, their business
      model, working for the public or mutual good rather than for shareholders, has proved to be
      well-suited to the mixture of households and small companies (known as the Mittelstand) that
      they serve (Gerada & Netessine,1).

      This statement is borne out by their lending record since 2007. Private German commercial
      banks reduced their medium- and long-term lending to companies and households between
      2007 and 2012 in favor of short-term loans, while the German savings and cooperative banks
      did the reverse. The savings banks and cooperative banks currently provide about two-thirds
      of all lending to Mittelstand companies and 43% of lending to all companies and households.
      Most people now agree that “the amazing resilience of the German economy” can be
      attributed to its reliance on the small to medium size enterprises of Mittelstand companies:
      Seventy percent of Germans are employed by them in the private sector. Inasmuch as private
      and cooperative banks have financed these flourishing Mittelstand firms, judgments about
      these two pillars of German banking have changed from those of the pre-financial crisis era.
      Petra Dünhaupt notes that locally rooted banks “compared to private commercial banks,”
      performed well before and after the crises, (18) and that the modern view that “capital
      markets, in which banks are large, private, purely shareholder-oriented and exchange-listed
      corporations has been severely discredited by experience from the recent financial crisis.” p.

      The best business model, she writes, is “being firmly rooted in the local economy and
      aspiring to strike a balance between the need to make a profit and the aim of serving
      members and clients, and the appropriate institutional structure is being embedded in a
      decentralized and dense network of affiliated financial and non-financial institutions” (19).”

      • Craig
        January 13, 2019 at 8:12 pm

        Yes. Have heard of Ellen Brown and her Public Banking Movement here in America? It’s a very similar perspective to what you posted above. I’m in full agreement with her idea of public banking. The only thing lacking is “upping their game” to perception of the current and new monetary and economic paradigms, simplifying things structurally by creating a national banking system/central bank and tie it all together with the imminently workable and ethical paradigm changing discount/rebate policy and a few regulations to keep the unethical in line.

  4. January 15, 2019 at 3:51 am

    RL – Great comment content! Thanks. Now, imagine an AI enhanced & monitored global version, sponsored & supported by a global community development alliance (GCDA), owned by individual and communal members, members of local/regional & national mutual benefit associations.

  5. Helen Sakho
    January 16, 2019 at 2:34 am

    The list of wishes mentioned in the original post is indeed very long. Good luck to anyone who wishes to quit smoking and to lose so much wait, etc. Personally, I think there is a greater chance of quitting heroine than GREED. Economists should start thinking about the real issues that now surround us and at the cost of repeating myself: morbid obesity, climatic mayhem, unbridled greed, rise of fascism, the arms trade, war and conflict everywhere, poverty and destitution, GLOBALLY.

    • January 16, 2019 at 4:36 am

      Thank you for being so specific. Your points deserve to be repeated. Increased quality of life brings a gradually declining population. Add gradual decrease in consumption per person. Replace free market with an efficient democracy to focus distributed intelligence of cosmic powered biology manifest as human and from here economists can design reality instead of models.

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