Friday Morning Links

Assorted content to end your week.

- Paul Krugman offers a response to the assertion that accumulated wealth should be considered as costless capital:

(I)f there’s one thing I thought economists were trained to do, it was to be clear about opportunity cost. We should compare accumulation of dynastic wealth with some alternative use of resources – not assume, as Mankiw in effect does, that if not passed on to heirs that wealth would simply disappear. Maybe he’s assuming that the alternative would be riotous living by the current rich, but that’s not a policy alternative.

In fact, what we’re really talking about here is taxation of wealth., and the question is what would happen to that revenue versus what happens if the rich get to keep the money. If the government uses the extra revenue to reduce deficits, then all of it is saved – as opposed to only part of it if it’s passed on to heirs. If the government uses the revenue to pay for social insurance and/or public goods, that’s likely to provide a lot more benefit to workers than the trickle-down from increased capital.

The point is that you can only justify Mankiw’s claim that inherited wealth is necessarily good for workers by insisting that the government would do nothing useful with the revenue from inheritance taxes. I’d call that assuming your conclusions; in any case, it’s a claim that deserves to be made openly, not smuggled in on the pretense that you’re just doing economic analysis.

...
(C)onservative economists are well aware of the danger of “regulatory capture”, in which public institutions are hijacked by vested interests, yet blithely dismiss (or refuse even to mention) the essentially equivalent problem of democratic institutions hijacked by concentrated wealth. I take regulatory capture quite seriously; but I take plutocratic capture equally seriously. And this is not an issue you can deal with by claiming that the benefits of capital accumulation trickle down to workers.

- And it's worth noting that precisely the same argument applies to tax cuts or privatization of services promoted on the basis that any good done by the public sector doesn't count, while anything measurable done by the private sector is good. Which brings us to PressProgress' debunking of an inane C.D. Howe Institute report which purports to show the importance of private-sector investment, but in fact proves nothing other than that profiteers will indeed make money off of public services if handed the opportunity to do so.

- Meanwhile, Mike Marqusee discusses what happens when vital interests are left in the hands of the corporate sector by pointing out prime examples of Big Pharma holding patients' lives hostage in the pursuit of disproportionate profits. And Roger Annis looks in detail at how a combination of corporate greed and negligent regulation killed 47 people in the Lac-Mégantic rail explosion.

- Ricardo Acuna offers up a well-deserved "I told you so" to a government which is now backtracking on a P3 scheme which can't be seen as remotely palatable no matter how the PCs cook the numbers. And of course, Saskatchewan citizens will want to file the experience away for future reference:

In 2007...the Canadian Union of Public Employees contracted economist Hugh Mackenzie to conduct an in-depth review of the Alberta government’s plans to build 18 new schools as P3s. What Mackenzie found was that the P3 would cost so much more, that building in the traditional way would have allowed the government to build 10 more elementary schools for the same amount of money. Likewise, a 2013 paper published by University of Toronto professors Matti Siemiatycki and Naeem Farooqi in the Journal of the American Planning Association found that using P3s adds, on average, 16 percent to the cost of infrastructure projects. There have been similar studies, reports and articles released over the past 10 years from the Parkland Institute, the Canadian Centre for Policy Alternatives, academics from around the world and numerous other organizations and unions.

Despite all this information, the Alberta government has held steadfast in its defence of P3s, and in its policy of defaulting to P3s for infrastructure projects. They have claimed all along that this method saves money, but they have never provided a shred of evidence that this is the case. What P3s actually do is facilitate the transfer of public money and private infrastructure to their friends in the private sector, padding their profit margins and bottom lines at our expense.

Now, for the first time ever, the government has admitted that building these schools through a P3 would cost more and is therefore not a good use of public dollars. Once again, however, we will not be allowed to see the full details of the accounting and calculations that led to this assessment. You can be certain that if the government is publicly owning the $14 million extra costs and actually backing off the P3 because of it, the real figure is significantly higher. Using Siemiatycki and Farooqi’s 16-percent figure, for example, would result in the traditional procurement method costing some $78 million less than the P3.

- Finally, Janelle Vandergrift writes that the familiar right-wing refrain of "just get a job!" is utterly counterproductive as a response to poverty.