Charles l ballard department of economics michigan state university east lansing mi ballard@msu edu
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An Economic Paradigm for a Better Future: Something Old, Something New Presented to: “Re-Imagining Our Economic System: A Balanced and Sustainable Economy” March 25, 2013. Charles L. Ballard Department of Economics Michigan State University East Lansing, MI ballard@msu.edu.

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Charles l ballard department of economics michigan state university east lansing mi ballard@msu edu

An Economic Paradigm for a Better Future:Something Old, Something NewPresented to: “Re-Imagining Our Economic System: A Balanced and Sustainable Economy”March 25, 2013

Charles L. Ballard

Department of Economics

Michigan State University

East Lansing, MI

ballard@msu.edu


Charles l ballard department of economics michigan state university east lansing mi

I’ll get to environmental sustainability shortly, but I want to start with some remarks about income distribution.


Charles l ballard department of economics michigan state university east lansing mi
In the first half of the 20 want to start with some remarks about income distribution.th century, the distribution of income in the United States became dramatically more equal.


This did not happen by accident
This did not happen by accident: want to start with some remarks about income distribution.

1. Huge increases in educational opportunity.

2. Tighter regulation of financial services.

3. Stronger labor unions.

4. More progressive taxation.




This did not happen by accident1
This did not happen by accident: dramatically:

1. The supply of highly skilled workers increased less than the demand.

2. Deregulation of financial services.

3. Weaker labor unions.

4. Less progressive taxation.


Charles l ballard department of economics michigan state university east lansing mi

Rex LaMore: “…an economic model that does not satisfy our needs or meet our short- or long-term interests.”

But the current economic system does an astonishingly good job of serving the interests of hedge-fund managers and Wall Street executives.


Charles l ballard department of economics michigan state university east lansing mi

My view: our needs or meet our short- or long-term interests.”The increase in income inequality is largely the result of a set of values. To hold those values is to be comfortable with great disparities.

I call these values “verticalist”.


Charles l ballard department of economics michigan state university east lansing mi

I would characterize Jeremy Rifkin as more “ our needs or meet our short- or long-term interests.”horizontalist”, i.e., less comfortable with great disparities.

This includes income disparity, but also the disparity between the extent to which Planet Earth is habitable now, and the extent to which it may be habitable in the future.


Charles l ballard department of economics michigan state university east lansing mi

In my opinion, many our needs or meet our short- or long-term interests.”(but not all !) economists are very verticalist.

Some economists have been among the most ardent advocates of the policies that created the Great Divergence in incomes.


Charles l ballard department of economics michigan state university east lansing mi

In the 19 our needs or meet our short- or long-term interests.”th century, economists figured out the mathematics of maximization.

The easiest thing to maximize is the amount of stuff we consume.


Charles l ballard department of economics michigan state university east lansing mi

Economists’ greatest strength is in thinking about “efficiency”, which we usually define as maximizing something.

In other words, economists are better than the rest of the population at thinking about efficiency.


Charles l ballard department of economics michigan state university east lansing mi

But we realize that our values are not necessarily any better than anyone else’s values.

Perhaps that is why many

(but not all !) economists have values that I consider to be lousy.


Charles l ballard department of economics michigan state university east lansing mi

But please don’t write off all economists. We’re not all bad!!!

We can think about efficiently creating a sustainable world, just as well as we can think about maximizing the amount of stuff we consume.


Charles l ballard department of economics michigan state university east lansing mi

The economist’s instinctive approach to environmental problems is to create the right incentives.

The Clean Air Act of 1970 really did help to improve the environment.

The Clean Air Act Amendments of 1990 did even more, using ideas developed by economists.


Charles l ballard department of economics michigan state university east lansing mi

The problems is to create the right incentives.policy ideas of economists can continue to help create a more sustainable world economy.

But much will depend on the development of different values.


Michigan my michigan

A song to thee, fair State of mine, problems is to create the right incentives.

Michigan, my Michigan.

But greater song than this is thine,

Michigan, my Michigan.

The whisper of the forest tree,

The thunder of the inland sea,

Unite in one grand symphony

Of Michigan, my Michigan.

Michigan, My Michigan