Wednesday, January 25, 2012

Systems: Economic and Ecological

Two items worth contemplating:
  1. Simon Johnson in The Libertarian and the Lobbyists explores the role of government regulation (or lack thereof) on the recent financial crash. Of particular interest is the discussion of the findings from two recent IMF reports by Prachi Mishra analyzing lobbying practices in the US.
    Legislators, of course, have different preferences about what kinds of laws to support, which can make it hard to study mechanisms of political influence precisely. But Igan and Mishra approach the problem in a clever way – they look for instances when elected officials switched their position on legislative proposals that surfaced more than once. And they devote a lot of effort to figuring out what caused this switch. ...
    A big increase in lobbying expenditures helps to persuade legislators to switch their votes. And “whether any of the lobbyists working on a bill also worked for a legislator in the past sways the stance on that bill in favor of deregulation.” It is deregulation, of course, that financial firms want – fewer rules and less oversight of any kind. And it really is all about whom you know, and how you know them. In particular, your value as a lobbyist seems to depend very highly on whom you worked with in the past. Igan and Mishra find “spending an extra dollar is almost twice as effective in switching a legislator’s position if the lobbyist is connected to the legislator compared to the case where the lobbyist is unconnected.” ...
    Essentially, financial firms have been buying the right to take on more risk. When things go well, executives in these firms get the upside – mostly in terms of immediate compensation, because few executives are compensated on the basis of risk-adjusted returns. That means that when the risks materialize and the firms suffer losses, the costs fall on taxpayers.
    Ron Paul is right to point to imbalances of power and massive distortions within the financial sector. He is also correct that many government policies favor relatively few big firms – and favor them in a way that encourages excessive and dangerous risk-taking.
    But Paul and others are wrong to argue that the government is the ultimate cause of all financial evil. Executives in financial firms want to take big risks. They like arrangements under which they win even when they lose.
    Big financial firms can more readily buy the necessary political protection (in the form of deregulation), enabling them to become even bigger and more dangerous. This incentive structure has only become more extreme since the financial crisis of 2008.
  2. Erle Ellis describes the findings of his most recent publication, All is Not Lost: Plant Biodiversity in the Anthropocene, as:
    the first spatially explicit global assessment of contemporary patterns of terrestrial plant biodiversity (native loss + exotic species gain) at regional landscape scales.The main result: humans have caused a net increase in plant species richness across two-thirds of the terrestrial biosphere, mostly by facilitating species invasions. In most regional landscapes, native species losses were significantly lower than exotic species gains, with agriculture species causing minor increases, but ornamental species sometimes play a large role that is still hard to assess.

    While I'm not convinced Ellis's focus on the shift from biomes to anthromes captures the most fundamental characteristics of the Anthropocene, the work is both provocative and, as a result of his heavy use of maps, visually interesting. A number of relevant links are contained in this post by Andrew Revkin.

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