- On Capitol Hill
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- Policy Reform Work
Our projects are designed to empower policy makers to create positive change. With a focus on collaboration and outreach, we provide original, standards-based research on key policy issues.
SCEPA joined with the Economic Policy Institute on Capitol Hill to brief congressional staff and policy experts on tax expenditures, or incentives given through the tax code without scrutiny by Congress.
SCEPA economists are working on the prospects for a more progressive economic order to emerge from the shock of the recession. They have published papers and documents that place current events in a longer-term context as well as policy proposals to deal with short-term concerns. They are also documenting the emerging discussion of how the discipline of economics is reacting to the Great Recession and the questioning of conventional economic analysis.
Lance Taylor, a SCEPA Faculty Fellow, presents an overview of his new book, Maynard’s Revenge, in a Google Tech Talk.
The book, published this November by Harvard University Press, is a timely analysis of mainstream macroeconomics, posing the need for a more useful and realistic economic analysis that can provide a better understanding of the ongoing global financial and economic crisis.
The government spends $143 billion through tax breaks in an effort to expand pension coverage and security. Yet, over half of the American workforce does not have a pension. Retirement insecurity hurts business plans, workers’ lives and retiree well-being. Reform is needed.
SCEPA’s Guaranteeing Retirement Income Project, sponsored by the Rockefeller Foundation and in collaboration with Demos and the Economic Policy Institute, has a plan to guarantee safe and secure retirement income for all Americans.
by Arkady Gevorkyan and Willi Semmler
A cheap alternative to imported fossil fuels, shale energy was considered revolutionary when it hit the market in the late 20th century. As a result, the shale industry thrived in the early 2000s, playing a major role in the energy sector. But early in mid2014, the industry began to falter due to market forces and high debt levels, leaving it to face an uncertain future. However, the bust of the shale industry opens the door to the next revolutionary player in the energy sector: renewables.
The shale industry’s poor market position is due to both external market forces and questionable business practices, as documented in a recent SCEPA paper and published in Economic Modeling. First, an EIA report documents how shale companies engaged in excessive borrowing, incurring an unprecedented level of debt from 2010 to 2014. Second, 2014 ushered in an unexpected drop in crude oil prices that undercut shale’s competitive price in the market. Third, many of the larger energy companies that had been investing in small and midsize shale oil companies substantially increased their borrowing after the 2014 price plunge.
Unfortunately, experts predict that crude oil prices will remain low, extending shale’s “bust” cycle and offering the industry little chance at redemption. Instead, smaller shale companies that overleveraged during the “boom” years will likely have to downsize production and liquidate capital to repay debt. Rather than inspiring confidence in potential and necessary investors, this could reinforce shale companies’ reputation within the energy industry for making misguided investments and lead to a sector shakeout that forces some companies to restructure and some to fold.
Should shale collapse, what comes next? While some argue that low crude oil prices will simply revert the market back to a high demand for fossil fuels, others believe this “bust” among traditional market players is an opportunity for the emerging renewable sector. In fact, renewable energy companies could find U.S. consumers more open to green energy as a viable alternative to fossil fuels, just as they once learned to embrace shale energy.
New School Economics Professor Sanjay Reddy is known for his multidisciplinary approach to economics, looking at the mathematical and philosophical underpinnings of economic theories and policies. It’s no surprise, then, that his new INET blog post, “Externalities and Public Goods: Theory OR Society?,” investigates these two concepts from all angles.
The essay is part of Reddy’s “Reading Mas-Colell” blog series, for which he and New School PhD student Raphaele Chappe provide critical commentary on the widely used microeconomics textbook “Microeconomic Theory” by Andreu Mas-Colell, Michael Whinston, and Jerry Green. In this installment, he explores the historical development and competing definitions of the concepts of externalities and public goods.
Many economists view externalities and public goods as technical concepts with precise definitions, but Professor Reddy reminds us that social issues are generally subjective. “The extent to which public goods are provided depends on who we see as part of ‘ourselves’ and what we see as ‘ours.’” Policy responses to simple externalities, such as congested roads or localized pollution, are relatively straightforward. But solutions to epochal challenges like climate change require social, political, and institutional perspectives. In these cases, the “right” answer is more elusive.
It’s well known that the causes of the crash of 2008 and the subsequent Great Recession were a housing bubble and a financial crisis. But what were the long-term trends that brought the American economy to the edge of the cliff?
In the November 24th seminar hosted by SCEPA and The New School Economics Department, UCLA Professor of Urban Planning Matthew Drennan named income inequality as the decisive factor behind the crisis. In a talk based on his recently released book, “Income Inequality: Why it Matters and Why Most Economists Didn’t Notice,” Drennan argued that growing inequality directed income gains to the top sliver of the income distribution, leaving middle-class workers experiencing stagnant or falling incomes. To keep up with consumption, these households took on unsustainable debt, often leveraged through home equity. As we know, the collapse of the housing market then caused indebted households to default at unprecedented rates, setting off a massive global financial crisis.
Drennan focused on the average propensity to consume (APC), an economic statistic that measures the ratio of total consumption to total income. When the APC rises, workers are either saving less or going into debt. Many mid-twentieth century economists had predicted that the APC would remain constant. Instead it rose quickly, as income gains accrued mostly to the wealthy, and middle- and low-income earners spent more of their take-home pay to keep up. For Drennan, this was because stagnant or falling wages forced most Americans to reduce savings rates or take on the unsustainable debt that was the root cause of the financial crisis.