Now obviously, when we talk of justice and compassion in economics, we are firmly in the camp of so-called “normative” theory. To those who may think that economics is all about objective observation and rational analysis, I would suggest that yes, it’s about these things, but what we are observing and analyzing is human behavior. We are humans observing humans (along with the world we live in), and if you honestly pursue that line of thought you will see that human values are inevitably involved. There is a profound level of existential cowardice at play when people avoid putting human values front and center in economics—or perhaps what is worse, dumbing down human values to the level of “more is better; it’s all about growth.” If we don’t avoid the normative question—if we take on the messier but more profound work of thinking in terms of human values—then at some point we start thinking about justice.

There is an interesting phrase in our Pledge of Allegiance: “...with liberty and justice for all.” That’s pretty juicy, isn’t it, when it comes to economics? Does individual liberty constitute justice? Certainly the principles of human freedom are a cornerstone of any kind of justice, not just the economic sort. But have we achieved it “for all?” And what would a complete picture of economic justice look like? Typically this discussion is framed in terms of the individual versus society as a whole. The individual likes freedom (and here we are leaving aside the question of whether we are talking about a healthy, sane individual or the sort of mere egomania that often passes for individualism). Society, on the other hand, needs and expects some limitations on individual behavior. If you leave it at that level, notice that the discussion is still centered on the individual. The tougher nut to crack is how to achieve justice for all individuals. And does “all” pertain to economic justice for those in the future who are yet to be born?

Now here’s another question: Why would anyone even wantjustice for all? If you think this one through, somewhere along the way the idea of compassion will come up. The idea of justice for all is linked to compassion for all. Why? Because to want justice for all means you have some sort of positive feeling for everyone, you believe in some kind of inherent equality, and furthermore you aspire for their wellbeing. That is compassion, and it also reminds us of the interesting point that for compassion to be real it has to be extended impartially. In this way, justice has something to teach us about compassion. Justice is not real if it is not universal. If it is not extended to everyone, there is injustice. In the same way, it has been taught that biased compassion is really not complete, because it contains the element of attachment to those we like and indifference (or worse) toward those we don’t.

These ideas of universal justice and universal compassion are amazing, because they show us something about the capacity of the human mind or spirit. We all have the capability of thinking this way. It is part of our inherent wisdom.

Now, as history has shown, the road from thought to action is not always easy. At the same time, we really have no choice but to keep trying. If we start with these principles, and go deeper into the details, we come to more questions. What are the ways we can enact compassion in economic life—as individuals, and at the macro scale of society? In a similar way, what are the details of justice? For example, are clean air, clean water, and a stable natural environment things that could be called rights? If so, what are we going to do to make good on those rights?

My work in economics is about exploring these questions. As always, I invite you to join in the conversation.

tongdrol@gmail.com 

Burning Our Current Oil Reserves Could Lead to Catastrophe

by Tod Westlake

We consume an awful lot of energy here in the US. As of 2008, this is one area in which we were still number one in the world, though more recent estimates suggest that, in the past couple of years, China has eclipsed us, with its industrial boom leading to huge growth in energy consumption. Of course, the European Union, when taken as a whole, isn't too far behind the US and its number-one trade partner. Japan, too, is a huge consumer of energy. Now we can add Russia and India into the mix as two countries with huge populations hungry for fuel. And every year more and more humans fall in love with the latest electronic gadget, putting even more pressure on our already-stretched-thin energy supply. The era of peak oil production, if it's not already upon us, will certainly be here presently.

Thus we've begun to start looking at new ways to produce energy, some of it good and some of it not so good. On the good side, Germany created national subsidies that provided residents and businesses with powerful incentives for renewable sources, so much so that the country now gets more than 20 percent of electricity from renewables. On the bad side, in the coal fields of the US, mining companies now level entire mountains in order to get at the anthracite buried within; and, it turns out that the "hydro-fracking bonanza" that has been touted as a savior of our energy needs comes with a number of dangerous downsides, including and especially long-term damage to water quality. To some folks, all of this might seem a bit like throwing not just the baby out with the bathwater, but also the tub, the house, the neighborhood, and the land on which it all sits.

And, believe it or not, there is yet another controversial source of energy here in North America. If you follow the news, it's likely that you've heard the term "Keystone Pipeline" a few times. In a nutshell, Keystone is a 2,000-plus mile pipeline system that brings synthetic crude oil—which is refined from "tar sands," also known as bitumen—from northwestern Canada to refineries here in the US. As it is now configured, the pipeline runs from Hardisty, Alberta, east across the southern tier of Canada, until it turns southward into the US along the eastern end of the Dakotas and into Steele City, Nebraska. There it splits, with one section going eastward into Missouri and Illinois, and a second spur that heads south to Cushing, Oklahoma. There are also several proposed additions to the pipeline, one which will link up with the big refineries along the Gulf Coast in Houston and Port Arthur, Texas, and a second, much longer addition (known as Keystone XL) that would cut diagonally from Alberta, through northeastern Montana, across South Dakota and Nebraska, before linking up with the present pipeline in Steele City. When completed, the pipeline would encompass approximately 4,000 miles in total.

Local Problems

There are several major problems with the pipeline, according to critics. And those individuals whose land is, or will be, bisected by the pipeline are very concerned. Briefly, these folks have every right to be agitated. Pipelines rupture, sometimes with catastrophic results. Last month in July, for example, as cited by the Calgary Star newspaper, a pipeline owned by Ravenwood Energy (also in Alberta, interestingly) began to leak oil on the property of a local resident. While the company addressed and repaired the leak relatively quickly, the fact that just "75 to 80 percent" of the spill has been cleaned up thus far has made these residents very nervous. There were a total of four oil spills in Alberta in July alone. But these folks were relatively fortunate.

Here in the US two years ago there was a pipeline spill of epic proportion. On July 6, 2010, a pipeline owned by Enbridge Energy ruptured, spilling in excess of one-million gallons of bitumen crude oil into the Kalamazoo River. While initial fears that the oil would eventually make its way into Lake Michigan were unwarranted, the oil ended up contaminating a 40-acre stretch of river bottom, and the ongoing cleanup is currently the most expensive, and the longest, pipeline cleanup in US history.

Regional Concerns

Another aspect of the pipeline project that has environmentalists concerned is its location, particularly the section that will traverse Montana and Nebraska. As students of American geography know, this is the very heart of our breadbasket, some of the best agricultural land in the world. One of the big reasons for this is its easy access to large quantities of fresh water.

It's the source of this water that is so concerning. Beneath this fertility sits one of the world's great water sources, the Ogallala Aquifer, a vast underground lake that provides the region's farmers with an easy-to-reach, clean water source. Approximately 25 percent of the region depends upon water from this aquifer, and nearly a third of the nation's water for irrigation comes from this source.

Columnist Charles Pierce in Esquire magazine summed up its importance succinctly: "Make no mistake," he writes. "You screw with the Ogallala Aquifer and you screw with this nation's heartbeat.... Pumping the water from it is all that has kept the Dust Bowl from coming back, year after year. Any damage to it fundamentally changes the lives of the people who depend on it, their personal economies, the overall national economy, and what we can grow to feed ourselves."

And not just the lives of the farmers, mind you, but also those who rely upon its bounty, a population that extends to the coastal cities whose bakeries produce the daily bread for millions of people. It even goes well beyond that, as American grains are transported to far-flung regions around the world, helping to provide sustenance for millions more. Any significant disruption to this production would resonate globally, forcing grain prices to spike upward, with the poorest folks paying the heaviest price.

This concern is perhaps most acutely felt in a region of Nebraska known as the Sand Hills. The Keystone XL's route would bisect this environmentally sensitive area, a region with a soil that is highly permeable. A significant spill in this area, many fear, could have a dramatic impact on the quality of the water from the aquifer.

Thinking Globally

If the concerns listed aren't enough for you, which is understandable given that the region in question is far from our own, there are disturbing global implications when it comes to the source of the oil the pipeline carries. This source, the Athabasca Tar Sands, is one of the most carbon-intensive fuel sources currently being developed. And carbon, you are likely aware, is the main catalyst in the potential climate catastrophe unfolding.

Journalist and environmental activist Bill McKibben, one of the most diligent critics of the Keystone pipeline, has stated that to fully tap this resource could make reversing climate change all but impossible (short of some unknown miracle technology that would allow us to scrub excess carbon from our atmosphere).

As of right now, scientists have estimated that our atmosphere can handle about 565 million more tons of carbon before the effects of climate change would push the average global temperature up beyond the threshold of two-degrees Celsius, a sort of climate point-of-no-return.

"The 565-gigaton figure was derived from one of the most sophisticated computer-simulation models that have been built by climate scientists around the world over the past few decades," wrote McKibben in a recent (and highly recommended) article in Rolling Stone magazine. "And the number is being further confirmed by the latest climate-simulation models currently being finalized in advance of the next report by the Intergovernmental Panel on Climate Change." In other words, this number is currently just about the best scientific estimate we have going.

Now the bad news: The Athabasca Tar Sands will only add to the nearly five times this amount (or nearly 2,800 million tons of carbon) that currently sits in oil company reserves. "This number is the scariest of all," McKibben writes. "[One] that, for the first time, meshes the political and scientific dimensions of our dilemma." And quite a dilemma it is, with the world's oil companies already counting on these assets. Needless to say, they won't be quick to back down from this fight.

"If you told Exxon or Lukoil that in order to avoid wrecking the climate, they couldn't pump out their reserves, the value of their companies would plummet," McKibben writes. "[Those] 2,795 gigatons of carbon emissions are worth about $27 trillion. Which is to say, if you paid attention to the scientists and kept 80 percent of it underground, you'd be writing off $20 trillion in assets. The numbers aren't exact, of course, but that carbon bubble makes the housing bubble look small by comparison."

For now, however, through the intensive efforts of McKibben and other environmental activists, the Keystone XL portion of the pipeline has been put on hold. But money is like water. It always manages to find the cracks in any bulwark. And the short-term drive for profits often has a tendency to miss significant long-term implications. But, if these scientists are right, coming up with renewable, clean energy sources could become to be the most important global imperative humanity has ever faced.

One of the viral jokes being posted on Facebook in recent weeks goes like this: Three people are sitting at a table—an executive, a union representative, and a worker. There are ten cookies on the table. Suddenly, the executive grabs eight of the cookies, leaving one each for the other two. He then points to the union rep and says to the worker, "Look out for this guy. He wants to steal your cookie."

This joke encapsulates what many are feeling these days, that the economic playing field has been tilted too far in one direction. The Occupy Wall Street (OWS) movement, for example, has spent quite a bit of time talking about what has become known as the "1%," that group of individuals at the top of the income scale who seem to have the vast majority of the cookies. With annual incomes in the millions of dollars, this upper strata of earners are the ones who call the economic shots—often at the expense of the rest of the 99% who are left to fight over crumbs.

And there's no doubt that the huge disparities between the haves and the have-nots is a significant part of the angst many are feeling. For those sympathetic to the Occupy Wall Street movement, income disparity is just another symptom and sign that something in this country has gone terribly amiss. We work longer hours, see fewer benefits, make less money in real dollars, and see our already inadequate social safety net being slowly dismantled.

But how do we quantify this? In other words, just how far has the playing field tilted? According to an article by Dave Gilson and Carolyn Perot published in Mother Jones magazine earlier this year, one percent of Americans currently account for 34.6 percent of the net worth in this country. That's one person in a hundred wielding over one third of the economic power. When you extend this outward a bit further, to 10 percent of the richest Americans, the numbers are even more startling. Currently, 10 percent of Americans control a staggering 73.1 percent—or nearly three-quarters—of this nation's wealth.

Income, too, shows huge disparities between the top and bottom tiers. According to the Congressional Budget Office, the top one percent of Americans have seen their income increase nearly fourfold in the past 30-plus years (adjusted in 2007 dollars). Meanwhile, the bottom 20 percent hasn't had a raise. Translated another way, the top one percent have seen their share of the nation's income more than double, while the bottom fifth have seen their piece of the pie shrink by nearly a third. Numbers like these should give pause to even the most ardent free marketeer.

Princeton economist and Nobel laureate Paul Krugman has spent quite a bit of ink on this phenomenon. Writing on his NY Times blog, The Conscience of a Liberal, Krugman identifies three key periods in the 20th century when it comes to wealth distribution in the US. After what he refers to as the Long Gilded Age (the late 19th and early 20th centuries), the nation underwent what Krugman refers to as a Great Compression (late 1930s through mid-1940s). During these decades economic disparity dropped considerably. And from the late 1940s onward, things were much more equitable, according to Krugman.

"It was a society without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality," he writes. "That’s the country I grew up in."

But the late 1970s came along and things started to skew back in the other direction. Slowly, inexorably, we've managed to get back into a situation in which wealth continually creeps upward, while poverty continues to roll downhill with increasing velocity. Krugman calls this, the period in which we are now living, the Great Divergence.

"Between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent," Krugman writes.

And things have only gotten worse in the past several years.

This has led to a situation in which the fruits of living in the world's largest economy have for many become all too bitter. There are currently 42.6 million Americans living in poverty, which is defined as a family of four earning less than $22,350. Stop and think about this for a minute. This is 15.1 percent of the population who are attempting to live, and raise two children, on a sum that would barely support a single person here in Ulster County.

So, these are the numbers. We can massage them all we want, but it won't change the fact that these statistical abstractions have embedded in them the lives of real people. In another example of how far off the economic rails we've gone, the advocacy group Wider Opportunities for Women (WOW) recently released a report entitled: Living Below the Line: Economic Security and America's Families. The report concludes that, currently, 45 percent of Americans "struggle to make ends meet." These are the folks who live just above the poverty line, a group of people for whom even the smallest unexpected expense—car repair, a doctor's bill—can mean months of hardship.

The folks in this segment of the population have become what is known as "the working poor," people who have jobs, sometimes several jobs, none of which pay a living wage, provide good benefits, or offer any kind of long-term economic security.

College graduates do fare much better in the current economic climate, according to WOW. But even this group is beginning to feel the relentless creep of poverty. Currently, 21 percent of households headed by someone with a college degree lack economic security.

"In the past, threats to economic security were supposedly clear—dropping out of high school, being a single parent, or having a large family. In today's economy, we cannot assume we know who lacks security," the WOW report states.

So, where do we go from here? Many have advocated for a modest adjustment on the top-tier tax rate. This will happen automatically at the beginning of 2013, when the Bush Tax Cuts expire and the top marginal rate moves from 35 percent up to 39 percent on income in excess of $250,000 per year. Deficit hawks will also be pleased to know that this automatic adjustment will close the nation's debt by $3.6 trillion dollars over the next ten years.

But won't an increase in marginal tax rates stifle economic growth? If history is any guide, the short answer is "no". Throughout most of the 20th century, the top tax bracket was actually much higher than it is at present. The fact is, we have to go all the way back to the era prior to WWI to see a period in which marginal rates are lower than they are now. In 1916, the top tier paid 10 percent of its income over $250,000 in taxes. This was changed two years later, in 1918, when the top rate jumped to 72 percent! Yes, you read that number correctly. The rate was more than double what it is now. This actually peaked in 1952, when the top bracket paid a staggering 92 percent. From 1942 through 1962 marginal rates never dipped below 88 percent. Those who are a bit older will remember these two decades as being among the most prosperous in this nation's history, an era in which our government had the resources to take care of its own—and a one-income household could afford to purchase a home and send its kids to college.

Whether we can ever return to the prosperity that our parents and grandparents knew remains an open question. In the interim, we need to be keenly aware that many of our neighbors continue to struggle. And now that the holidays are upon us, we should also remember that this is the season when poverty really hurts. Whether it's a senior citizen neighbor, a down-on-his-luck member of the family, or a complete stranger, we as individuals can make a big difference in the lives of the less fortunate. And if our government can't, or won't, provide a strong safety net, it's up to the rest of us to make this holiday season one that is remembered not for what we received, but what we gave.

Resources

wowonline.org

krugman.blogs.nytimes.com

Food Pantries in Ulster County

nyconnects.ulstercountyny.gov (click "emergency food pantries" in the left column)