This week, I have been mostly reading:

• The political aftermath of financial crises: Going to extremes — Manuel Funke, Moritz Schularick, Christoph Trebesch at VOX, CEPR’s Policy Portal: The bottom line is that financial crises stand out. They are followed by significantly more political instability than other types of economic crises. This raises the question – why are financial crises different? One explanation is that financial crises may be perceived as endogenous, ‘inexcusable’ problems resulting from policy failures, moral hazard and favouritism. In contrast, non-financial crises could be seen as ‘excusable’ events, triggered by exogenous shocks (e.g. oil prices, wars). A second potential explanation is that financial crises may have social repercussions that are not observable after non-financial recessions. For example, it is possible that the disputes between creditors and debtors are uglier or that inequality rises more strongly. Lastly, financial crises typically involve bailouts for the financial sector and these are highly unpopular, which may result in greater political dissatisfaction. [Also:]
• Right-wing political extremism in the Great Depression — Alan de Bromhead, Barry Eichengreen, Kevin Hjortshøj O’Rourke at VOX, CEPR’s Policy Portal: Our statistical results […] show that that the Depression was good for fascists. It was especially good for fascists in countries that had not enjoyed democracy before 1914; where fascist parties already had a parliamentary base; in countries on the losing side in WWI; and in countries that experienced boundary changes after 1918. […] Importantly, it shows that what mattered was not the current growth of the economy but cumulative growth or, more to the point, the depth of the cumulative recession. One year of contraction was not enough to significantly boost extremism, in other words, but a depression that persisted for years was.
• Can philosophy survive in an academy driven by impact and employability? — Simon Blackburn (et al.) in the Times Higher Education: One of the most potent causes of mistrust of philosophy is that it provides no answers, only questions, so that to many it does not seem to have progressed since its very beginnings in Plato, or even in pre-Socratic Greece (or China or India). Of course, one might similarly ask whether other human pursuits, such as music, literature, drama, architecture, painting or politics, have “improved” (and by what measure this judgement is supposed to be made), and if the answer is at best indeterminate we might query whether this reflects badly on those practices, or whether perhaps it indicates a problem with the question.
• Changing private investment activity requires higher fiscal deficits — Bill Mitchell: So if non-financial corporations are themselves increasingly becoming net lenders to the rest of the economy then the idea that household saving provides the investment funds for firms has to be questioned. Further, this shift in behaviour implies a serious new leakage to aggregate demand has developed, which if left unchecked would bias the economy to recession. The mainstream alternative is that growth is maintained by rising consumer spending by households driven by increased credit. In other words, the lenders and the borrowers have swapped seats. Of course, such a growth scenario is unsustainable because households cannot cope with ever-increasing levels of debt, as we learned in 2008.
• IMF forgives Ukraine’s Debt to Russia — Michael Hudson: [O]n Tuesday, the IMF joined the New Cold War. It has been lending money to Ukraine despite the Fund’s rules blocking it from lending to countries with no visible chance of paying (the “No More Argentinas” rule from 2001). When IMF head Christine Lagarde made the last IMF loan to Ukraine in the spring, she expressed the hope that there would be peace. But President Porochenko immediately announced that he would use the proceeds to step up his nation’s civil war with the Russian-speaking population in the East – the Donbass. […] By doing so, it announced its new policy: “We only enforce debts owed in US dollars to US allies.”
• House Prices and Job Losses — Emma Lyonette and Gabor Pinter, Bank Underground: This blog summarises the findings of recent research by Pinter (2015) that emphasises the role of real estate as an important determinant of firms’ borrowing capacity. This is because real estate is widely used by corporates as collateral when trying to obtain external financing. Fluctuations in real estate prices may therefore cause fluctuations in firms’ borrowing capacity, which then affects firms’ decisions to undertake new investment, to create new jobs and to destroy existing jobs. The paper shows that this so-called collateral channel is important in understanding not only the recent Great Recession but historical UK business cycles in general.
• Simpson, PL, Guthrie, J, Lovell, M, Doyle, M and Butler, T 2015, 'Assessing the Public’s Views on Prison and Prison Alternatives: Findings from Public Deliberation Research in Three Australian Cities', Journal of Public Deliberation, Vol. 11, No. 2: Despite decreasing crime victimisation rates in Australia, incarceration rates have doubled over the last thirty years. Australia’s use of imprisonment has major economic and social equity costs, especially given the over-representation of Indigenous Australians and other socially disadvantaged groups in prison. Evidence increasingly points to the limitation of incarceration as a tool for effective offender rehabilitation suggesting that a new policy agenda on responses to offending is warranted. Yet, public opinion is generally assessed and perceived to hold punitive views towards offenders.
• Sorry, but Your Favorite Company Can’t Be Your Friend — Josh Barro in the New York Times: As social psychologists describe it, there are two broad categories of human relationships: exchange relationships, in which we trade for mutual benefit; and communal relationships, which are based on mutual caring and support. Normally, you are supposed to have the former with people you do business with and the latter with your friends and relatives. But sometimes, companies try to blur the lines, insinuating themselves into your friend zone.
• Working Until It’s Time for Your Grave — Tiffany Williams, Common Dreams: My [Institute for Policy Studies] colleagues recently released a report on the retirement gap between CEOs and workers. They found that nearly half of working age Americans have no access to retirement plans through their jobs. When I asked my mom about her own retirement savings, I learned she had nothing at all.
• The Potential of Debtors’ Unions — the Debt Collective in ROAR Magazine: Experienced alone, debt is isolating, frightening and morally laden with shame and guilt. Indebtedness is being afraid to open the mail or pick up the phone. But as a platform for collective action, debt can be powerful. Consider oil tycoon JP Getty’s adage: “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Student debt alone stands today at $1.3 trillion. Together, we can be the banks’ problem.
• Humans vs Houses: Australia's perverse tax system — Cameron K. Murray: It is certainly now time for the government to end these tax concessions for investment property. Raising the GST, the current government’s preferred tax policy, is probably the worst choice in terms of both equity and efficiency compared to the low-hating fruit of removing these property tax advantages which currently cost the budget about $11billion a year. Obviously removing them would change incentives, reduce prices, and so forth, meaning that actual budget gains from their removal will be lower. But even so, the shift of incentives across the economy would be hugely advantageous in terms of both efficiency, and equity, as these tax incentives primarily benefit the wealthy.
• How George Osborne exploited our psychological biases to secure his cuts — Ben Chu in the Independent: Mr Osborne’s July Budget proposed to save £4bn a year by 2020 by freezing all working age benefits in cash terms for the next four years, meaning a deep cut after inflation for recipients. And that was actually a bigger saving than the one generated from the cuts to tax credits. But unlike the tax credit cuts, the benefit freeze prompted no outcry. Why? Because the immediate cash losses loomed far larger than the forgone gains of benefits rising in line with inflation.
• Education and Equality in the 21st Century — Danielle Allen, Crooked Timber: The preparation of citizens, through education, for civic and political engagement supports the pursuit of political equality, but political equality, in turn, may well engender more egalitarian approaches to the economy. An education that prepares students for civic and political engagement brings into play the prospect of political contestation around issues of economic fairness. In other words, education can affect income inequality not merely by spreading technical skills and compressing the income distribution. It can even have an effect on income inequality by increasing a society’s political competitiveness and thereby impacting “how technology evolves, how markets function, and how the gains from various different economic arrangements are distributed.”
• Nobody's home: Housing boom leaves swathe of empty properties — Angus Whitley in the Age on a new report from the Henry Georgists at Prosper Australia: Sudden property price declines or an economic slowdown risk unmasking the vacant supply. Owners would start to sell up or look for rental income to cushion the blow from falling prices, [Catherine Cashmore, author of the Prosper report] said. "Suddenly, you find there's no one there to buy it or nobody to rent it. That's a common pattern in a housing crash," Cashmore said. "What we're trying to do is it to make it visible before it happens."
• Corbyn – after Oldham — Geoffrey Heptonstall, openDemocracy: The headlines should have read: ‘Big Swing to Labour Boosts Corbyn at Critical Time.’ The fact is that the phrase ‘swing to Labour’ was suspiciously absent. The affirmation of Jeremy Corbyn’s position was conceded with something close to a snarl.
• In support of a Universal Basic Income – introducing the RSA Basic Income Model — Anthony Painter, RSA: A couple of years ago, I was told of two young mothers who were studying for a qualification in nursing care. Towards the end of their studies a local Job Centre Plus insisted that they make themselves available for work or face sanction. They left their course and failed to qualify. They lost out and their time had been wasted. They were locked in the same oscillation between benefits and poor quality work. And society lost too - we need nursing care workers.
• Donald Trump and the ugliness in Las Vegas — Michael A. Cohen, Boston Globe: But there is another side to Trump that merits greater attention — fear. This is not the fear of “others” — immigrants, Muslims, etc. There is plenty of that, but in talking to Trump’s supporters, a different kind of fear emerges — a sense that the country is falling apart, that the nation’s safety and security are at risk, and that America needs someone who is strong, decisive, and unafraid to say what he thinks must be done to fix things.
• This week, the US government will take action to slow the economy and prevent wage growth — Matt Yglesias at Vox: The Federal Reserve is structured as an independent agency precisely on the theory that for the long-term good of the economy we sometimes want the central bank to slow the pace of job creation in order to avoid inflation, even though standing in front of a podium and saying, "I want to slow the pace of job creation" sounds terrible. But the weird thing about this week's push for higher interest rates is that there's no inflation problem to solve.
• Australian government fiscal outlook – irresponsible and will fail — Bill Mitchell: Basically, the Outlook shows that the federal fiscal deficit is larger than previously estimated (in the May 2015 Fiscal Statement aka ‘The Budget’) and this demonstrates the automatic stabilisers in operation to put a floor under the slowing economy. This counter-cyclical movement is something that we should be comforted by because as private spending contracts and the economy slows the expansion of the deficit limits, to some extent, the job losses and the number of businesses that might become insolvent. However, the mainstream reaction has been hysterical (as in hysteria) with all sorts of predictions about national insolvency, credit rating agencies downgrading us, and “deficits for as long as you can see”. The problem is that the so-called average Australian believes all this nonsense and doesn’t understand that the rising deficit is a good thing in the context of poor developments in private spending. […] A career of reading this junk leads me to wish I’d become an anthropologist or something else like that.