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The endowment effect and the taxation of wealth

The endowment effect and the taxation of wealth

As you may recall, I am reading the histories of a number of past Republics which have had various levels of success. Without getting too far ahead of myself, it appears that one constant is that, once plutocratic oligarchies are entrenched, they will refuse to yield power or money, even to the point of destroying democratic or republican institutions.  In other words, David Frum‘s observation that “If conservatives become convinced that they can not win democratically, they will not abandon conservatism. They will reject democracy” is true not just at the present, but across history.

I raise this in the context of Elizabeth Warren’s proposal for a “wealth tax.” Leaving aside its practicality or even Constitutionality, the above historical observation is probably at the root of the apoplexy with which plutocrats have reacted against it.

A further context to consider this issue is what psychologists and behavioral economists call “the endowment effect.” The endowment effect describes the consistent result that people would rather retain something that they have acquired – even if by charity, chance, or gift – than earn the  same thing when they do not own it. Put another way, people’s maximum willingness to pay to acquire something is typically lower than the least amount they are willing to accept to give it up, even when there is no cause for attachment, or even if the item was only obtained minutes ago, and was not in any way “earned.”

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Live-blogging the Fifteenth Amendment: December 7, 1868

Live-blogging the Fifteenth Amendment: December 7, 1868

In the Senate:

“Mr. Craving asked, and by unanimous consent obtained, leave to introduce a joint resolution proposing an amendment to the Constitution of the United States: . . .

“No State shall deny the right of suffrage or abridge the same to any male citizens of the United States twenty-one years of age or upwards except for participation in rebellion or other crime and also excepting Indians not taxed; but any State may exact of such citizen a specific term of residence as a condition of voting therein, the condition being the same for all classes.”

. . . .

“Mr. Pomeroy asked and by unanimous consent obtained, leave to introduce a joint resolution proposing an amendment to the Constitution of the United States: . . .

“The basis of suffrage in the United States shall be that of citizenship, and all native or naturalized citizens shall enjoy the same rights and privileges of the elective franchise; but each State shall determine by law the age of the citizen and the time of residence required for the exercise of the right of suffrage, which shall apply equally to all citizens, and also shall make all laws concerning the time, places, and manner of holding elections.”

——
In the House of Representatives:
“Mr. Kelley introduced a joint resolution proposing an amendment to the Constitution of the United States . . .

“No State shall deny to or exclude from the exercise of any of the rights or privileges of an elector any citizen of the United States by reason of race or color.”

. . . .
“Mr. Broomall introduced a joint resolution proposing an amendment to the Constitution of the United States . . .

“Neither Congress nor any State by its constitution or laws shall deny or restrict the right of suffrage to citizens of the United States on account of race or parentage of such citizens; and all qualifications or limitations of the right of suffrage in the constitution or laws of any State based upon race or parentage, are, and are hereby, declared to be, void.”

. . . .

“Mr. Stokes introduced a joint resolution proposing an amendment to the Constitution of the United States . . .

“No State shall make or enforce any law which shall deprive any citizen of the right of the elective franchise on account of race or color.”

[Source: Congressional Globe, 40th Congress, 3rd Session, pp. 6, 9, 11.]

In view of the gutting of portions of the Voting Rights Act in the Shelby County case, and the subsequent passage of numerous voter suppression laws, and also the ongoing crisis of extreme gerrymandering, for several years I have wanted to write a series examining those issues from the viewpoint of the Congress that passed the Fifteenth Amendment 150+1 years ago. Finding the debates in the record of Congress proved diabolically hard, which is why I didn’t undertake this task one year ago. Recently the index in Prof. Eric Foner’s book “The Second Founding,” which discussed the post-Civil War Amendments in great detail, proved very helpful in locating many (although not all!) of those debates in the record.
So – no promises, because this involves reading about 1000 pages of tiny script in the Congressional Globe (the forerunner to the Congressional Record)! – I hope to follow this post up with day-by-day highlights of that debate, on the dates the statements were made, many of which clearly set forth the Congressional intent, and anticipated many of the issues we face now, 150 years later.
Notice the difference between the two Senate proposals and the three House proposals. The Senate proposals would codify a broad right to vote, and allow certain exceptions or qualifications to that right. The House proposals, on the other hand, narrowly prohibit racial discrimination in the right to vote, while being silent on other qualifications and notably not conferring a Constitutional “right to vote.”
Of course, we know which version ultimately was enacted. The reasons why will become apparent as we watch the debates progress.

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Mapping the Land

I looked at this at first, wondered what it depicted, thought it might be a piece of art, and puzzled over it a bit. It is a topographical depiction (Lidar) of the Mississippi River. If you look closely, you can see roads and various plots of land in addition to the movement of the river bed over time and the various elevations.

One of the key techniques used in modern cartography has its beginnings in 17th century map-making. Relief shading techniques as shown by the darker and lighter areas give dimensions such as height (lighter) and depth (darker) areas to maps so a viewer of the map could understand the terrain. For a hiker, an army, someone buying a piece of land, or building a fence, etc. could understand the area depicted and prepare for and not be surprised by it upon coming upon it. Today, GIS specialists can use applications like Photoshop and other digital software to create relief shading online.

 

What is this and how is this done? “Vibrant maps from aerial laser data — known as Lidar — show the position and elevations of the Mississippi river. This stretch shows historical movement and shape-shifting across three counties in Mississippi.” If you click on the link, you can also see the hand drawn topographical maps charted by Harrold Fisk in 1944 using aerial photography. In themselves, these  skillfully drawn maps are pieces of art which would depicting the same.

The National Geographic article shows similar topography maps of  “The Mississippi River, it’s hidden history, as uncovered by lasers” The laser depicted images are done by Daniel Coe a cartographer for the Washington Geological Survey using Lidar, a system of laser pulses also sent from aircraft to measure topography.

So, why the interest? Prior to leaving the Marine Corp, I had an opportunity to study surveying and also topography mapping as a way to a head start in finding a job once discharged. When I left the Corp, jobs were not plentiful, and I went to college instead. Even so, I was prepared for the transition by doing something in which I had an interest.

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The End Of Decades Having Identities In The USA?

The End Of Decades Having Identities In The USA?

We are closing on the centennial of the beginning of decades having identities in the USA, the “Roaring 20s” of the 20th century.  It may be that this centennial will clearly mark the end of this odd phenomenon that we had been used to, but which was always a bit odd.  Why did this start and why might ibe ending?  I have a few thoughts on this.

My theory oon why it started in the 1920s is that this was the first appearance of national news media in the form of radio, which was the first time we could really have aunified discusson and consciousness in a way not possible previously.  Certainly there were decades earlier that had the potential for having identities. The 1860s had arguably the most dramatic event of US history, the Civil War, but nobody has ever talked about “the 60s” meaning the 1860s rather than the 1960s. Likewise, there serious economic downturns through most of both the 1870s and 1890s, but nobody has ever talked about the 70s or 90s referring to those decades.

Indeed this continued into the beginning of the 20th century, with many dramatic events in the first decade and, of course, WW I in the second, although the US was in that war for less than two years.  But it was the 1920s that got an identity for the first time in US history.  Maybe it is not the spread of radio, maybe it is the spread of automobiles, which became the dominant form of personal transport in that decade, which helped increase social mobility and communication.  So add the auto to radio, and maybe some other things, jazz, although we also got the spread of records and movies also.  So, there we had that roaring decade.

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The Rise and Fall of the Roman Republic: part 4 of 4: the Empire as hegemonic “Banana Republic” ruled by caudillos

The Rise and Fall of the Roman Republic: part 4 of 4: the Empire as hegemonic “Banana Republic” ruled by caudillos

As we have seen, the Roman Republic was brought down by an escalating series of acts of political violence, from murders to organized political mobs, to private legions, to four military marches over a period of 40 years on a Rome which had no permanent  defense force whose loyalty was to the Republic. The violence and military takeovers occurred in part because senior magistrates were also expected to be generals in command of legions.

The underlying causes were the festering inequality between Romans and their Italian allies, and between the landed oligarchs and the urban and rural plebeians. Over the long term, rather than compromise their power, the oligarchs in the Senate in particular were willing to play “constitutional hardball” and do away with the limitations on power set by the Republic. In this way the downfall of the Roman Republic is very similar to the process described in Levitsky and Ziblatt’s “How Democracies Die.”

This brings us to Barry Strauss’s “Ten Caesars.” It is not so much a history of the Roman Empire, but rather brief biographies of ten Emperors from Augustus to Constantine, with Augustus, as the founder, being the longest. What I ultimately learned was that the Empire was an ancient, hegemonic version of what we would call today a “banana republic,” where there is rule by caudillo. Forms of succession varied: sometimes a dynastic succession worked, sometimes there was a succession chosen by the Senate, sometimes the most powerful general of the legions simply took over, and sometimes there was a palace coup by the Praetorian Guard acquiesced to by the armies and ratified by the Senate.

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The Rise and Fall of the Roman Republic: part 3 of 4: the final hammer-blows

The Rise and Fall of the Roman Republic: part 3 of 4: the final hammer-blows

“The Republic is nothing, a mere name without body or form.” – Julius Caesar

This is part 3 of my four part look at why the Roman Republic, which was successful and stable for nearly 4 centuries, ultimately fell into tyranny. In part 1 I described the structure of the Republic and the underlying reasons for its fall. In part 2 I described the first 4 episodes of civil war that left the Republic dead on its feet in 78 BC. This part describes the final hammerblows.

5. Pompey and Caesar

The final blows were administered by the “first triumvirate” of Pompey, Crassus, and Julius Caesar, after one last “Indian summer” for the Republic between the death of Sulla in 78 BC and 50 BC. Among other things, much of the power of the Tribunes and the plebeians was restored by 62 BC. But successful generals with privately raised armies whose loyalty was to them personally, together with the lack of a permanent defensive force near the city of Rome loyal to the Republic finally did it in.

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The Rise and Fall of the Roman Republic: part 2 of 4: the first hammer-blows

The Rise and Fall of the Roman Republic: part 2 of 4: the first hammer-blows

This is part 2 of my four part look at the Roman Republic and subsequent Empire. In part 1, I described the structure of the Republic, and its several centuries of stability and success, as well as the underlying causes of its ultimate downfall.

The hammer-blows that rained down on the Republic from the existential dispute between Senatorial oligarchs on the one hand, and Roman plebeians and Italian allies on the other, came in five episodes:

1. The Gracchus brothers – in the 130s and 120s
2. Saturninus – approximately 100 BC
3. Marius and the Italian civil wars 90 BC
4. Marius, Cinna, and Sulla 90-80 BC
5. Pompey the Great and Julius Caesar 50-40 BCIn this part I make a *brief* summary sketch of the first four of the above five episodes. The fifth will be described in the next part.

As each of the above five episodes occurred, there were further and further deviations from the “mas maiorem,” or customs, that underlay the Republic, and increasing problems with legions or private “brownshits” giving their allegiance to their military leader rather than to the Republic itself.

1. The Gracchus Brothers

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From Intellectual to influencer

Interesting stuff from the One Handed Economist

From Intellectual to influencer: “In the case of the public intellectual, the institution was the academy and the role was thinking. In the case of the public influencer, the institution is the corporation and the role is marketing. The shift makes sense. Marketing, after all, has displaced thinking as our primary culture-shaping activity, the source of what we perceive ourselves to be.”

How true does this seem?

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“Trump’s Call With the Ukrainian President”

The White House released this document on Wednesday, September 25, 2019. It details a July call between President Trump and President Zelensky of the Ukraine. About midway through it, there is a warning of the contents not being a “verbatim transcript.” I have taken some time to include the notes (red) which are found at the end of the post and have notated the particular passages to which the notes are detailing. If you need direction other than the notation at the end of the sentences, I can do so. I did not want to alter this more than what I did in adding the word “note.”

It is a surprising transcript showing Trump’s boldness.

The President: Congratulations on a great victory. We all watched from the United States and you did a terrific job. The way you came from behind, somebody who wasn’t given much of a chance, and you ended up winning easily. It’s a fantastic achievement. Congratulations.

President Zelenskyy: You are absolutely right Mr. President. We did win big and we worked hard for this. We worked a lot but I would like to confess to you that I had an opportunity to learn from you. We used quite a few of your skills and knowledge and were able to use it as an example for our elections and yes it is true that these were unique elections. We were in a unique situation that we were able to achieve a unique success. I’m able to tell you the following; the first time, you called me to congratulate me when I won my presidential election, and the second time you are now calling me when my party won the parliamentary election. I think I should run more often so you can call me more often and we can talk over the phone more often.

The President: [laughter] That’s a very good idea. I think your country is very happy about that.

President Zelenskyy: Well yes, to tell you the truth, we are trying to work hard because we wanted to drain the swamp here in our country. We brought in many many new people. Not the old politicians, not the typical politicians, because we want to have a new format and a new type of government. You are a great teacher for us and in that.

More of the transcript after the leap plus the notes concerning intent and meaning.

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Three Mile Island to Close

Eighty year old retired salesman John Garver the morning of March 28, 1979 remembers the acrid odor permeating Harrisburg as he walked out of a restaurant in Pennsylvania’s capital city.

“We had this smell in the air, wondering what it was. Well it didn’t take us long to find out … that the accident started.”

Fourteen miles away, the “accident” was unfolding in Unit 2 at the Three Mile Island Nuclear Power Plant, triggering panic, confusion, and within days an evacuation order.

The partial meltdown sparked national protests, prompted increased safety standards for the nuclear power industry, and largely stymied the industry’s momentum for decades until recent alarm over climate change has made some begin to embrace expanding carbon-free nuclear power.

Today, the remaining reactor (Unit 1) will generate its last kilowatt of energy and close. Three Mile Island was not a victim of the anti-nuclear movement; but rather, it lost out to simple economics. Even though the plant is licensed to operate until 2034, Exelon Generation is ceasing operations after the state of Pennsylvania earlier this year refused to throw the company a financial lifeline to keep it open.

The plant’s four cooling towers will remain a part of the landscape for now as foreboding concrete tombstones seemingly out of place in the bucolic Susquehanna Valley of central Pennsylvania and a reminder of what happened March 28, 1979.

Taking a Second Look

Senator Cory Booker; “Right now, nuclear is more than 50% of our non-carbon causing energy. People who think we can get there without nuclear being part of the blend just aren’t looking at the facts.”

Economic factors such as cheap natural gas and increasingly affordable renewable sources are slowly driving nuclear power out of business. Additionally, diminished demand has also hurt profitability in addition to rising operational costs. The closure of the Three Mile Island facility will leave 97 commercial reactors at 59 plants, scattered across 30 states, remaining in operation.

According to U.S. Energy Information Administration, the Watts Bar Unit 2 in Tennessee was the last nuclear power plant to come on line in 2010. Two more reactors are under construction in Georgia (Nuclear Regulatory Commission [NRC]). No more are planned as of yet.

Pro-industry group, World Nuclear Association: “Public confidence in nuclear energy in the US declined following the Three Mile Island accident. It was a major cause of the decline in nuclear construction through the 1980s and 1990s.”

Harrisburg resident and Chair of the Three Mile Island Alert organization Eric Epstein: “If there is a good thing that happened because of TMI, it had ignited a fierce debate on the viability of nuclear power being safe, reliable, economical, etc.”

It still remains to be seen if more reactors will be built to supplement US energy needs.

Three Mile Island closes: meltdown changed nuclear energy in America,” USA Today, Ledyard King, September 20, 2019

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