Microeconomics: IB Economics

An interesting perspective on climate change is offered in this article: the biggest carbon emitters aren't divisible by where they live but how rich they are. And if, as the article suggests, the rich generate half of greenhouse gas emissions, shouldn't the pay more to tackle the issue? It would seem to be a simple application of the Pigouvian principle that the polluter pays. Levying higher taxes on aviation fuel, for example, would be a start, whereas in many developed economies aviation fuel is tax-free.

One of my favourite topics - executive pay is highlighted in the annual High Pay Centre investigation into the extent to which CEOs do better than the rest of us. 

In short, the bosses of the UK's largest public companies on average earn 86 times more than the average worker: some earn considerably more. You might think about the reasons for this and whether such a disparity is justified. 

This is going to be a controversial post - it looks at trophy hunting and the possibility that it can help conserve African wildlife. 

It's a fantastic reminder about the power of incentives and the perverse nature of those incentives in conservation. It's not a straightforward watch, but the reality is that it has funded conservation and reduced poaching in Namibia.

And are firms going to be made to reveal their ethnicity pay gaps too? It seems that this is on the cards, and it is to be hoped that this forces some firms to rethink a number of their employment policies as regards racial discrimination. 

The traditional start of year reminder of the divergence between executive pay and that of the average worker: by lunchtime today, the High Pay Centre calculates that Britain's FTSE 100 bosses will have earned that same as the average worker will do in a calendar year.

Is this fair? Is it just reward? Or is it symptomatic of a dysfunctional economy? Before you leap to conclusions you might like to think about what factors have driven up executive pay, and whether or not any form of regulation could do anything about this in a way that doesn't come at the cost of lower growth and less efficient markets.

However, I think that it is quite a staggering statistic.

This just strikes me as an instance where the EU has got things horrible wrong, with their being talk of an EU-wide minimum wage, equivalent to 60% of the median salary in an EU member state. 

The Nordic economies argue that such a move would undermine the existing collective bargaining within their economies, as well as lowering the wages of some of the lowest paid, which would seem to be counter-intuitive. 

It's one of those instances where you just wonder what is the incentive to intervene in such a cack-handed fashion? 

A Guardian editorial that rather implies that I've caught the mood of the moment. Is the theory of the firm the theme 'du jour'?

This article looks at the notion of increased worker ownership of firms - with the Left looking at the idea in both the UK and the US. Of course, European firm ownership is already predicated upon a different ownership model and perhaps this accounts for lower inequality to some extent.

There's lots to ponder - why might worker-ownership enhance productivity? But if it was self-evident that this was the case, why aren't there more worker-owned firms? And how might this also constrain executive pay?

However, I'm sceptical - it seems unlikely that such a policy is suited to simultaneously tackle all of these issues. So is it good economics?  

The Observer highlights an interesting story - it's believed to be the case that the Chancellor is contemplating a significant rise in the national minimum wage, to the highest level in the developed world. 

It is believed that the NMW might be increased to £9.61, 66% of median earnings, but there are concerns that this might cost around 140,000 jobs. That said, it is also argued that this might be an effective way of reducing in-work poverty. 

More excellence from the Guardian: Larry Elliott argues that, contrary to what the World Bank might think, automation is going to keep wages depressed and not be the boon that some predict. As a consequence, he argues that this is going to worsen inequality. 

This is the crux of climate change - how do the richest members of society compensate the poorest for the adverse effects of climate change? And how can we compensate for historical emissions? 

It seems that the developed world has fallen short in this regard. 

This Guardian clip looks at an interesting market failure - air pollution from incinerators - with the issue also being one that emphasises inequality. The bulk of the incinerators are located in low income areas, damaging the quality of life for those people who live there. 

The Guardian editorial makes it clear that the government needs to be clear that "We're All in This Together" when it comes to the coronavirus recovery, and ensure that existing inequality is not firmly entrenched in the aftermath of the pandemic.

I'm not holding my breath: what with well-connected providers of PPE doing well, and many of the most vulnerable members of society losing out. One wonders what the difference is between misspending on PPE and the cost of extending the 'temporary' £20 increase in Universal Credit. I suspect that the former is larger than the latter. 

This is a fascinating story in the Guardian suggesting that the government is contemplating increasing the price of diesel and petrol cars to subsidise electric cars and encourage their take up. 

Whilst the latter is a noble intention, the road to hell - irrespective of whether it has the necessary electric car infrastructure - is paved with plenty of these.

Furthermore, I think that there's a worrying distributional angle to this: electric cars are currently more expensive than petrol cars, so it rather smacks of the bizarre situation where lower income earners are going to subsidise the consumption of the better-off something that the Society for Motor Manufacturers and Traders (SMMT) has picked up on.

That said, perhaps the lack of objections to the 'Eat Out to Help Out scheme have signalled the willingness of the British public to back give-aways to the middle-classes.

A theory of the firm aside - the Trades Union Congress has revealed that the last five years have seen shareholder payouts increasing five times more rapidly than wages. This raises all sorts of questions about the distribution of factor incomes. Does it seem apt that investors get a greater share of returns than those people working to generate those returns. I'm not entirely convinced. 

Richard Reeves is more of a historian than economist, but this is a fantastic read about the nature of market capitalism that echoes Marx's view that capitalism, ultimately, sows the seeds of its own destruction.

It is a great piece of writing and really gets you thinking about what it is that capitalism is really about.

The former governor of the Indian central bank, and top economist, Raghuram Rajan, sounds the alarm for capitalism, arguing that the ideology is under threat because it's stopped "providing for the many".

Of particular concern to him is the lack of equality of opportunity and the threat of protectionism to global trade.

Ofgem is concerned about rising fuel poverty in the UK; it should be. Fuel costs have outstripped average earnings in the recent past, particularly for the poor who pay more for their energy via pre-payment meters.