More than 63,000 bridges across the United States are in urgent need of repair, with most of the aging, structurally compromised structures part of the interstate highway system, an analysis of recent federal data has found.
The report, released on Thursday by the American Road and Transportation Builders Association, warned that the dangerous bridges are used some 250 million times a day by trucks, school buses, passenger cars and other vehicles.
Overall, there are more than 607,000 bridges in the United States, according to the DOT’s Federal Highway Administration, and most are more than 40 years old.
The Transportation Department routinely inspects bridges and rates them on a scale of zero to nine. Bridges receiving a grade of four or below are considered structurally deficient, and now account for more than 10 percent of all bridges.
“The bridge problem sits squarely on the backs of our elected officials,” [chief economist at the American Road and Transportation Builders Association Alison Premo] Black said. “The state transportation departments can’t just wave a magic wand and make the problem go away.”
The American Society of Civil Engineers, which separately produces a report card on U.S. infrastructure every four years, gave it an overall “D,” or poor, grade. Bridges received a “C+” grade for mediocre.
The U.S. needs to invest $20.5 billion annually to clear the bridge repair backlog, up from the current $12.8 billion spent annually, the ACSE has said.
The civil engineers’ group estimates that the U.S. will need to invest $3.6 trillion by 2020 to keep its transportation infrastructure in a good state of repair.
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America the short-sighted, America the reactionary.
And we let our infrastructure fall into disrepair, setting ourselves up for who knows how many avoidable deaths (not to mention the economic arguments: high unemployment and low borrowing costs beg for stimulus spending, the long term economic costs of failing infrastructure). Nobody wants to be remembered as the person who “wasted” money on a bridge, and there is no accountability for allowing avoidable incidents to occur due to political inaction.
It is telling that investors around the globe seemingly believe in America’s growth and ability to repay our debts more than our own lawmakers do. America’s strength is derived from it’s people, our ingenuity and work ethic. If we continue to under-invest in our people and our infrastructure, we are undermining the very things which made America a global superpower (and “safe haven” for investment) in the first place.
This is not to say that we should not pursue tax reform, and demand oversight / review to ensure programs run efficiently and effectively. But America must more fully embrace the concepts of fiat money and Modern Monetary Theory; past debt cannot be a reason to forgo our current needs, or in the future we will not even have the option of affordable deficit spending. The U.S. Federal government has, in essence, a “blank check”, so long as it is used responsibly; systematic under-investment in the American people and infrastructure is irresponsible and shortsighted.
Issues like this remind me of a favorite Abaraham Lincoln quote: “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” Of course Lincoln was referring to Civil War, a more immediate threat. America seems to be able to deal with immediate/obvious threats. It is responses to impending threats to American prosperity that remain elusive, which is at the same time understandable and infuriating.
We wait for tragedy to strike, lament the dead and point fingers, instead of acting preventatively. Some tragedies are truly unavoidable; this truth should not be used as a free pass for saying all tragedies are unavoidable.
A number of longstanding impediments still stand in the way of a meaningful global climate change policy. There is the issue of who will shoulder the majority of the costs of a shift towards sustainable energy sources, countries who have the longest history of emissions / highest per capita emissions rates (developed countries such as the U.S.), or those who currently emit the most GHGs (such as China and India, with their heavy reliance on coal based electricity)?
Unhealthy smog in China and India have put more pressure on politicians to address national climate change agenda’s, but to this point have done little in terms of bridging a global climate change agenda.
A related issue is that the countries that are most susceptible to the negative impacts of climate change are small island states, which have a negligible influence on global policy matters. Organizations such as the UN’s Small Island Developing States (SIDS) and the Alliance Of Small Island States (AOSIS) attempt to overcome this issue by banding together to promote their mutual interests, but still face an uphill battle in compared to more influential global actors. Until the worlds most powerful nations start feeling strong adverse effects of climate change (which some would argue they already have), the needs of these smaller nations are likely to go unaddressed.
Perhaps the greatest impediment to global policy change is that the worlds most powerful nations house the most powerful energy companies, who have a vested interest in the status quo and hold immense political sway due to their roles as political donors and job providers.
When it comes to climate change, the burden of proof is on the “accuser”, a reality climate change deniers have used to their advantage; these companies have virtually limitless resources to challenge claims that climate change is a man made phenomenon, or that it is linked to their activities. To quote Nick Naylor in the satirical comedy “Thank You For Smoking”; “These guys realized quick if they were gonna claim cigarettes were not addictive they better have proof. This is the man they rely on, Erhardt Von Grupten Mundt. They found him in Germany. I won’t go into the details. He’s been testing the link between nicotine and lung cancer for thirty years, and hasn’t found any conclusive results. The man’s a genius, he could disprove gravity.” In other words, if you pay a scientist / economist / expert enough money, they can disprove / refute any claim.
While the costs of addressing climate change are quantifiable (difference in costs between competing energy sources, jobs / economics output lost, etc.), the benefits tend to be more abstract(ex: the costs of addressing climate change will be “greater in the future”, we can stave off natural disasters with untold economics costs, the effects on global food security, etc.). In a world of budget constraints and high unemployment, the quantifiable and immediate costs of addressing climate change tend to overpower the necessary reforms. Factoring in power asymmetries (those arguing for action are much “weaker” than those arguing against it), and the future of global climate policy becomes even bleaker.
In the long run, the Post-2015 Development Agenda is being developed alongside Sustainable Development Goals (SDGs), which seem poised to be agreed upon in a Global Climate Treaty in 2015.
There are also immediate economic and geopolitical reasons to be optimistic about the future of renewable energy proliferation:
The Intergovernmental Panel on Climate Change, which pools the efforts of scientists around the globe, has begun releasing draft chapters from its latest assessment, and, for the most part, the reading is as grim as you might expect. We are still on the road to catastrophe without major policy changes.
But there is one piece of the assessment that is surprisingly, if conditionally, upbeat: Its take on the economics of mitigation. Even as the report calls for drastic action to limit emissions of greenhouse gases, it asserts that the economic impact of such drastic action would be surprisingly small. In fact, even under the most ambitious goals the assessment considers, the estimated reduction in economic growth would basically amount to a rounding error, around 0.06 percent per year.
What’s behind this economic optimism? To a large extent, it reflects a technological revolution many people don’t know about, the incredible recent decline in the cost of renewable energy, solar power in particular.
The climate change panel, in its usual deadpan prose, notes that “many RE [renewable energy] technologies have demonstrated substantial performance improvements and cost reductions” since it released its last assessment, back in 2007. The Department of Energy is willing to display a bit more open enthusiasm; it titled a report on clean energy released last year “Revolution Now.” That sounds like hyperbole, but you realize that it isn’t when you learn that the price of solar panels has fallen more than 75 percent just since 2008.
Thanks to this technological leap forward, the climate panel can talk about “decarbonizing” electricity generation as a realistic goal — and since coal-fired power plants are a very large part of the climate problem, that’s a big part of the solution right there.
It’s even possible that decarbonizing will take place without special encouragement, but we can’t and shouldn’t count on that. The point, instead, is that drastic cuts in greenhouse gas emissions are now within fairly easy reach.
So is the climate threat solved? Well, it should be. The science is solid; the technology is there; the economics look far more favorable than anyone expected. All that stands in the way of saving the planet is a combination of ignorance, prejudice and vested interests. What could go wrong? Oh, wait.
SO the latest news is that President Vladimir Putin of Russia has threatened to turn off gas supplies to Ukraine if Kiev doesn’t pay its overdue bill, and, by the way, Ukraine’s pipelines are the transit route for 15 percent of gas consumption for Europe. If I’m actually rooting for Putin to go ahead and shut off the gas, does that make me a bad guy?
Because that is what I’m rooting for, and I’d be happy to subsidize Ukraine through the pain. Because such an oil shock, though disruptive in the short run, could have the same long-term impact as the 1973 Arab oil embargo — only more so. That 1973 embargo led to the first auto mileage standards in America and propelled the solar, wind and energy efficiency industries. A Putin embargo today would be even more valuable because it would happen at a time when the solar, wind, natural gas and energy efficiency industries are all poised to take off and scale. So Vladimir, do us all a favor, get crazy, shut off the oil and gas to Ukraine and, even better, to all of Europe.Embargo! You’ll have a great day, and the rest of the planet will have a great century.
“Clean energy is at an inflection point,” explains Hal Harvey, C.E.O. of Energy Innovation. “The price reductions in the last five years have been nothing less than spectacular: Solar cells, for example, have dropped in cost by more than 80 percent in the last five years. This trend is underway, if a bit less dramatically, for wind, batteries, solid state lighting, new window technologies, vehicle drive trains, grid management, and more. What this means is that clean energy is moving from boutique to mainstream, and that opens up a wealth of opportunities.”
We are closer to both irreversible dangers on climate and scale solutions on clean tech than people realize. Just a little leadership now by America — or a little scare by Putin — would make a big difference.
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To be sure, all of the impediments discussed in this article still remain; power asymmetries, a sluggish global economy, different views about who should pay the costs of “greening” the planet. However, no impediment can withstand a well informed and empowered public; the science, technology, economics and geopolitics of climate change have aligned, the time for change is now (I hate making blanket statements like this, but for the reasons discussed in this blog, I truly believe it in this instance).
All that remains is the political will to stand up to vested interests and the public support to finance the shrinking cost gap between traditional and renewable energy sources (which could be further closed with some form of carbon taxation–again an issue of political will).
When the issue at hand is the fate of our planets ecosystems, with costs that are both unpredictable and rising, how can we not rise to this challenge?
Under Social Security’s “Old-Age, Survivors and Disability Insurance” program, an annual limit based on changes to the national average wage index determines the maximum amount of taxes that can be taken out of an individual’s salary for Social Security.
For 2014, the cap is 6.2 percent of $117,000, or a little over $7200. Once that amount has been reached, an individual has satisfied the annual requirement and will no longer pay into the country’s Social Security trust fund.
There are 9.63 million U.S. households with a net worth of $1 millon or more, according to a recent study by financial firm Spectrum Group. Many will reach the tax cap before the majority of working-class Americans.
“Most workers have Social Security contributions withheld from their paychecks every week for 52 weeks of the year,” said Nancy Altman, co-director of Social Security Works. “If you’re a millionaire, you stop paying right around now. For someone like Warren Buffett, you’re done paying Social Security taxes in January.”
When the cap was established in 1937, 90 percent of annual salaries were subject to paying Social Security tax year round.
But in recent years, pay has risen faster for wealthy Americans than it has for the working class. In some instances, workers have seen their salaries decrease. Today, only about 70 to 75 percent of annual salaries are subject to paying the tax year round.
Marilyn Moon, senior vice president of the American Insitutes for Research, said that the Social Security tax cap will eventually need to be lifted in order to keep the system afloat.
It’s not unprecedented, she said. In 1993, the federal government lifted the cap for Medicare.
“Social Security and Medicare are two of the most successful federal programs and I don’t think that we will let it lapse,” she said. “Most of us are not wealthy enough to make it through the rest of our lives without some form of help from either program,” so eventually the cap will have to be lifted or modified she said.
Altman agrees, arguing that requiring wealthy Americans to pay year round is an issue of fairness.
“Social Security works extremely well, but its benefits should be increased and expanded. A fair way to pay for benefit improvements is to require millionaires and billionaires to pay Social Security contributions on every dollar of their salaries, just as typical Americans do.”
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Lifting the social security cap and restricting benefits to those who need them is sure to be a divisive idea; it stops those who have contributed the most into the Fund (the wealthiest) from receiving any benefits. The threshold for not receiving benefits would have to be a very high level of wealth, to ensure people who have worked hard and are fiscally prudent (yet still need social security benefits to enjoy their retirements) are not penalized for such laudable lifestyles.
However, if the goal is to ensure that social security funds exist for those who need them, to the benefit of individuals and the economy as a whole, then lifting the cap and restricting benefits to the richest people is an idea worth exploring.
I have not attempted to put any exact numbers to this proposal, as it is more of an ideological question at this point. Is the purpose of Social Security to get out (part) of what you pay in, or is it to ensure people can survive their latter years in dignity and comfort? Is Social Security an investment (a retirement account), or is it a safety-net?
This question touches on a larger point about “contributing” and “taking” in America’s social welfare model. In the context of widening inequality and a disconnect between wages and productivity, in a country where money = free speech = political influence = exorbitant wealth, is it so unfair to ask those who milk this system to fund a dignified life for those who make it run with their hard work (at least until a more radical re-democratization of America’s political economy takes root)?
On The Global Day of Action On Military Spending (4/14), Special Rapporteur Alfred de Zayas Urged a reduction in military expenditure and greater investment in sustainable development programs (Original Article):
Marking the Global Day of Action on Military Spending, the United Nations independent expert on the promotion of a democratic and equitable international order called on all governments to boost transparency and cuts in military expenditures, and increase investments in nutrition, health, environmental protection and other major sustainable development challenges.
“Every democracy must involve civil society in the process of establishing budgets, and all sectors of society must be consulted to determine what the real priorities of the population are,” Special Rapporteur Alfred de Zayas said in a statement. “Lobbies, including military contractors and other representatives of the military-industrial complex, must not be allowed to hijack these priorities to the detriment of the population’s real needs.”
“Tax revenue must be reoriented toward the promotion of civil, political, economic, social and cultural rights, for research into sustainable sources of energy and for the promotion of sustainable development,” Mr. de Zayas stressed.
“In a world where millions of human beings live in extreme poverty, die of malnutrition and lack medical care, where pandemics continue to kill, it is imperative to pursue good faith disarmament negotiations and to shift budgets away from weapons production, war-mongering, and surveillance of private persons, and devote available resources to address global challenges including humanitarian relief, environmental protection, climate change mitigation and adaptation, prevention of pandemics, and the development of a green economy,” he said.
Mr. de Zayas highlighted that such a shift in States’ spending habits is key to achieving the UN post-2015 development agenda.
“I am surprised that in the current context of global socio-economic crisis, few have voiced indignation regarding the disproportionate levels of military spending. The place to exercise austerity is in wasteful military expenditures, not in social protection,” he insisted.
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In theory, I wholeheartedly support Mr. de Zayas’ position. Every dollar of military expenditure is one dollar that cannot go towards public goods and services which are essential for sustainable human development. However, I would question Mr. de Zaya’s assertion that “…in the current context of global socio-economic crisis, few have voiced indignation regarding the disproportionate levels of military spending.” In America, at least, military spending is a very contentious issues.
Mr. de Zayas’ call for global demilitarization also glosses over two major issues that make slashing military spending much more difficult in reality than in theory:
1) Peace and Security Are Prerequisites For Sustainable Human Development:
If a government cannot defend it’s people from extremists and outside threats, how can people be expected to have the foresight to make investments in their future? Armed conflict can reverse decades of economic development, and results in human rights violations of its own. Insecurity cannot be a shield for military impunity (as it is in places like Egypt), but threats cannot simply be wished away either. Furthermore, the balance between security and freedom is not only a quantitative one, it also depends on the balance of power between peoples rights and the armed forces, which are generally enshrined in a country’s constitution.
The global economy runs on peace and stability; all countries have an obligation to contribute to the global security commons. Based on their current contributions, some countries (such as the U.S.) should reduce their military expenditures, while others (such as Germany and Japan) should increase their contributions. Furthermore, member states fund U.N. peacekeeping operations, which are, if anything, stretched too thin.
2) Not Everybody Believes in Human Rights:
Lets take stock of countries that generally support U.N. concepts of human rights, sustainable human development, and democratic governance, and those that do not. If “outlier countries” (notably Russia, China, Iran, North Korea, Syria, Egypt) are increasing their military investments, is it at all responsible for countries that champion U.N. concepts to reduce their military expenditure? (again, this is a country by country question, based partially on current levels of military expenditure)
Non-democratic states are naturally more insulated from public pressure, as their leaders do not rely on reelection to remain in power. While standards of living and are almost assuredly higher in effective democracies, undemocratic governments have greater discretion over military spending, as they can more freely disregard the needs of their citizens when a geopolitical opportunity presents itself.
Specifically, democratic revolutions could become even more vulnerable. “Outlier nations” would likely come to the aid of their autocratic allies, while “Western” countries would have less resources to offer (think Russia and Syria, or UAE / Saudi Arabia and Egypt). If a country’s civil society considering a democratic revolution knows that it will not receive much outside support, while the regime in power (which probably already has a military advantage) is poised to receive significant outside support, this may deter said revolution from taking place. Since democratic revolutions result from civil society initiatives, just this knowledge could slow the global democratization movement.
If every nation that cooperates with the U.N. cut military expenditures, and none of that outlier states did (which they wouldn’t, and would likely do the opposite), we could very well end up with a deterioration in the global democratic / human rights landscape.
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I am by no means a “war hawk”. I dream of a utopian world where no military spending is necessary; this is not the world we currently live in. While social spending to fulfill domestic human rights obligations must not be compromised (and in many places should be increased), this cannot come at the cost of abandoning extraterritorial human rights concerns. Achieving these two goals may indeed require greater levels of taxation and public spending–sorry small government people.
Some re-balancing of global military expenditure certainly is in order; however, this cannot be a shift in spending from pro-human rights to anti-human rights countries (those are oversimplifications of countries human rights records–the world is not black and white–but certain countries openly oppose human rights rhetoric while others tend to support them).
Taking the above quote to the extreme, defending something because it is “how we currently do it” is an even more “dangerous” way of thinking.
America’s public college and prison systems are currently flawed. Prison reform has gained traction because it is a cost saving measure. Providing free public higher education, as we used to do in this country, has not gained similar traction, because it would require additional funding.
IN February, Gov. Andrew M. Cuomo of New York announced plans to underwrite college classes in 10 state prisons, building on the success of privately funded and widely praised programs like the Bard Prison Initiative. Mr. Cuomo pointed out that inmates who got an education had a much better chance of finding a job and were much less likely to menace their neighbors after release. He noted that the cost — $5,000 per inmate per year — would be a bargain compared with the $60,000 it costs to incarcerate a prisoner for a year.
The punch lines of the opposing politicians (mostly Republicans, but some Democrats) all struck the same theme: How dare the governor offer taxpayer money to educate convicted criminals when decent citizens skimp and borrow to send their kids to college? “It should be ‘do the crime, do the time,’ not ‘do the crime, earn a degree,’ ” said George D. Maziarz, a state senator from western New York. “It is simply beyond belief to give criminals a competitive edge in the job market over law-abiding New Yorkers who forgo college because of the high cost.” In other words, let criminals be criminals.
The bureaucracies that run prisons are called departments of “corrections” for a reason. This is at least as important as the first two purposes, because nearly 95 percent of the incarcerated are eventually released back into society.
Alas, nearly half of those released are returned to prison within three years for committing new crimes. Clearly we are not doing a good job of “correcting.”
This is not a bleeding-heart cause. Leading conservatives and red-state politicians have supported prison college programs as a matter of public safety and fiscal prudence. A RAND meta-analysis of 58 studies concluded that inmates who participated in these programs were 43 percent less likely to return to a life of crime; even assuming that the most redeemable inmates are the likeliest to sign up, this is an incredible return on a modest investment.
Experts who have studied the American way of crime and punishment far longer than I have tell me, to quote Michael P. Jacobson, a veteran corrections official who heads a public policy institute for the City University of New York, that they see “almost a complete disconnect between what we know and what we do.”
“The influence of high-profile crimes, fear of crime, issues of race, the acquisition of cheap political capital — all have had far more influence on criminal justice policy than what we know works, or what is fair or just,” Mr. Jacobson told me.
America has greatly reduced access to college and graduate degree programs for prison inmates. Coinciding with mass incarceration, this policy change has effectively turned prison into a uniquely American poverty-trap.
People correctly argue that law abiding citizens should not have to pay exorbitant college tuition rates, while prisoners receive a free college education. However, this argument misses the point; a free public college education should be available to everyone!
Aside from the obvious socioeconomic benefits associated with greater access to higher education (both in and out of prison), such a policy would also help reign in increasing tuition costs at private Universities. Make these institutions compete with a free alternative, and the price of college tuition should drop for those who still desire a private education.
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This “us vs. them” mentality is indicative of public policy discourse in America, and it is a shame. Instead of debating the costs and benefits of policy reforms, we are stuck in a circle of spite; “I didn’t have this benefit, why should someone else!”.
This “argument” misses the point of policy reform–whether or not people believe they would have been better off with said reform (spiteful responses suggests that people do, on some level, believe that said reform would have helped them)? It precludes truly progressive policy reforms, such as providing everyone with access to free public higher education. Of course this would require a greater public investment (although it doesn’t necessarily have to increase the deficit); the questions are whether the benefits outweigh the costs, and how those costs will be financed.
American politics has become a class battle between those below the poverty line and those barely above it. All the while, inequality increases and the American Dream becomes just that, a dream.
According to his army psychiatrist, Fort Hood shooter Ivan Lopez showed “no sign of likely violence, either to himself or to others.” While it may be possible for someone to “snap” and go on a shooting spree without warning, I have trouble believing this was the case in this incident.
“We have very strong evidence that he [Lopez] had a medical history that indicated an unstable psychiatric or psychological condition,” Lt. Gen. Mark Milley, head of the Army’s III Corps at Fort Hood, said of Lopez. “There was no indication that he was targeting specific people.”
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3 people are dead 16 more are wounded. The questions we as a nation now face are:
1) Could this tragedy have been prevented? (were there warning signs?)
2) How can we prevent similar tragedies from happening in the future?
These two questions are obviously related. If there were warning signs, then recognizing these signs can help prevent similar tragedies from happening.
The warning signs, beyond Lopez’s mental health record, came in the form of Facebook posts:
1) On March 1, the same day he purchased the .45-caliber semiautomatic pistol he used in the attack, Specialist Lopez wrote an especially angry and vaguely threatening post. “My spiritual peace has all gone away, I am full of hate, I believe now the devil is taking me. I was robbed last night and I’m sure it was two flacos. Green light and thumbs down. It’s just that easy …”
2) In a Facebook post, Specialist Lopez said of the Newtown massacre: “For me, the direct responsibility for this situation is with the psychiatrist, who didn’t uncover Adam’s level of dangerousness so that he could be restricted.”
Read posthumously, these posts depict someone who was unable to grasp the concept of personal accountability. On the other hand, hindsight is always 20-20; these posts were separated by over a year, during which time Lopez probably made many posts which are irrelevant to his mental state.
Taken separately, each of these pieces of “evidence”; a questionable mental health history, delusional Facebook posts, and a gun purchase; could not be considered a red flag–it would be impossible to police all social media platforms. But taken together, they form the profile of an individual who is very likely a risk to himself and others.
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What someone posts on social media can get them fired or (if a public figure) publicly ridiculed–American’s clearly take social media postings seriously. What can we do when someone writes about hurting themselves or others on social media? At what point does protecting a persons right to privacy prohibit the ability to protect another persons right to life? As a social scientist, I am constantly looking for “information”; is it possible that we are overlooking a valuable source of information in social media posts?
I already alluded to the need for stronger background checks for gun purchases, another preventative measure is greater access to mental healthcare, which I believe should be a human right (it is currently viewed as a luxury for the wealthy). Specialist Lopez was covered as an Army employee; what about people out there without mental health coverage? Obamacare has gone a long way in rewriting insurance guidelines to cover mental healthcare, and subsidizes plans for those who cannot afford insurance on their own, but what about people who are still not covered? Given the various ramifications of untreated mental illness (crime, poverty, etc.), is it time to consider investing more tax dollars into walk-in mental health clinics?
These issues, privacy and security, lend themselves to heated debates. I leave my readers with these loaded questions to ponder.
Micheal Lewis’s new book, “Flash Boys”, (re)focuses the spotlight on the controversial practice of high-frequency trading (HFT) (original article):
Already, officials at the Federal Bureau of Investigation’s New York office are investigating whether such firms traded ahead of other players in the market, in what may amount to insider trading or other fraud, according to an agency spokesman. Regulators in Washington and in New York State have opened their own inquiries.
The worries are hardly new. Over the past five years or so, high-speed computers have increasingly taken over Wall Street, and trading has migrated from raucous trading floors in Lower Manhattan to far-flung electronic platforms.
Critics argue that Mr. Lewis broke no new ground(link inserted, not part of article). And a number of executives at the firms mentioned in the book said that Mr. Lewis did not double-check the facts.
High-frequency trading is almost impossible to avoid today. By some estimates, it accounts for half of all shares traded in the United States. Supporters argue that it has made the markets more efficient by creating a cadre of traders willing to buy or sell at any time.
Others are more skeptical. The New York attorney general, Eric T. Schneiderman, has put high-frequency trading on his list of top priorities. He seized the moment on Monday to discuss his yearlong investigation into the practice.
“Look, the problem here is — and I’m a fan of the markets, but I think Michael is right,” Mr. Schneiderman told Bloomberg Television. “We’ve lost a lot of credibility. A lot of investors do not have confidence in the markets and it’s up to those of us who believe in them, who enforce the law and regulate them, to restore that confidence.”
Mr. Narang, the [IEX] high-frequency trading executive, said he hoped the attention surrounding the book would quickly die down. He said that while he had turned down requests to appear on TV, he couldn’t help speaking out against the book.
“There’s no unfair advantage to using your brain, last time I checked, in a capitalist society,” he said.
A program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. High-frequency trading uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds will be more profitable than traders with slower execution speeds. As of 2009, it is estimated more than 50% of exchange volume comes from high-frequency trading orders.
“But there is one feature in particular which deserves our attention. It might have been supposed that competition between expert professionals, possessing judgment and knowledge beyond that of the average private investor, would correct the vagaries of the ignorant individual left to himself. It happens, however, that the energies and skill of the professional investor and speculator are mainly occupied otherwise. For most of these persons are, in fact, largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public. They are concerned, not with what an investment is really worth to a man who buys it “for keeps”, but with what the market will value it at, under the influence of mass psychology, three months or a year hence. Moreover, this behaviour is not the outcome of a wrong-headed propensity. It is an inevitable result of an investment market organised along the lines described. For it is not sensible to pay 25 for an investment of which you believe the prospective yield to justify a value of 30, if you also believe that the market will value it at 20 three months hence.
Thus the professional investor is forced to concern himself with the anticipation of impending changes, in the news or in the atmosphere, of the kind by which experience shows that the mass psychology of the market is most influenced. This is the inevitable result of investment markets organised with a view to so-called “liquidity”. Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that it is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of “liquid” securities. It forgets that there is no such thing as liquidity of investment for the community as a whole. The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future. The actual, private object of the most skilled investment to-day is “to beat the gun”, as the Americans so well express it, to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow.”
Now, take the “professional investor and speculator” out of the equation and replace them with a computer algorithm. Remove many of the financial sector regulations put in place after the Great Depression. Change the hypothetical thee month time horizon to fractions of a second.
In Keynes day, at least there was some work going into speculation (besides creating and refining an algorithm). If traditional investment is speculative, as Keynes suggests, we need a new word for high frequency trading.
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The indisputable role the financial sector played in the financial crisis has shaken confidence in the financial system. Furthermore, the deregulation of commodities markets and subsequent commoditization of traditionally non-financial assets (food, fuel, housing, etc.) has left the “real economy” much more susceptible to fluctuations in financial markets / high frequency trading.
Therefore, it is not surprising that high frequency trading has garnered the attention of regulators. As New York attorney general Eric Schneiderman correctly states, it is the job of these regulators to restore confidence in a system that many see as a potentially destabilizing tool for the rich. There are undeniably positive aspects of financial services, but these positive aspects have been largely overshadowed by speculative and predatory practices.
We cannot wind back the clock on technology to stop high frequency trading. We can, however, curb the arbitrage / rent-seeking potential of high frequency trading with financial transaction taxation (FTT), reducing its prevalence. A FTT would raise tax revenues while also restoring confidence in financial markets (potentially without any negative impact on overall economic growth).
Normative Narratives 