The Perverted Political-Economy of the Per-Capita Nominal Paradigm
The Perverted Political-Economy of the Per-Capita Nominal Paradigm
GangaPrasad Rao
Energy, Environmental and Mineral Economist
gpao64.blogspot.com
gprasadrao.blogspot.com
Writing about the per-capita paradigm is like conversing about the weather. It is so commonplace and unpopular that talking beer might evoke more interest. The per-capita is all around us; it’s what sustains the nominal expansion, and it isn’t at all personally inconvenient - certainly not as inconvenient as the not-so-cool early mornin’ breeze! But what about the unholy nexus between the per-capita nominal paradigm and the democratically-elected political government? Does one feed off the other? Are they necessary and essential to each other - each providing a cover to the other when accused of causing externalities in the Real? Yes, Yes, and YES ! The per-capita paradigm - a darling of nominal capitalists who aggrandize in the capital markets from benchmarking egalitarian lifestyles to per-capita resource consumption observed in developed nations, divides the masses in to ever-smaller familial or individual entities, each of whom seeks to live a privately-fulfilling, if resource- and externality-intensive lifestyle in social competition with their Joneses. Such atomization of lifestyle pursuits exploits the environmental commons and burdens it with a myriad production, transportation, and post-consumer disposal externalities. Global warming is a significant manifestation of the per-capita paradigm that has caused ambient CO2 concentrations to rise to unsustainable levels concomitant with a doubling of human population over a century1. These externalities of the Commons disproportionately impact the public which constitute the lower strata of the socio-economic pyramid. To make matters worse, the competitive-, profit-seeking nature of nominal markets, induces Capitalists to forge a ‘democratic nexus’2with the government, and seek a further enlargement of the per-capita economy, even if it implies turning a blind-eye to continued population growth3. In fact, the nexus ensures parties subscribed to the political compact have incentives similar those that face investors, capitalists, financiers, and businesses. This dovetailing of incentives across various socio-economic entities brings about a reinforcement of purposes, actions and responses, and an entrenchment of the per-capita paradigm across political cycles. Between the growth in lifestyle expectations of the bourgeoisie, and an expansion of the population across political cycles, the per-capita paradigm materially reduces the Commons, attenuated only by the societal willingness to pay for externality abatement.
The salient concern about the nexus is how Constitutional ‘rights and entitlements’ are leveraged to political and capitalist ends. True, a Political Government by the people, of the people, and for the people, must seek a paradigm that enlarges their welfare – by growing a job-creating economy, and offering to citizens a reasonable standard of living for the wages they obtain by liening their labor to rent-seeking Capitalists. But, would those obligations provide a cover for political parties, of all hues, to aggrandize of? The fear is, that it does, and it has. Notwithstanding the various political and governance systems around the world, one may safely assert, that for reasons societal stability, and conformance with long socio-economic cycles of opportunity, political parties, even antagonistic to each other, nonetheless subscribe to a common governance framework that offers them niches appropriate to their political thought and platforms. Participation in such ‘Political Compact’, regardless of whether they rule, or sit in opposition benches, obtains them their regime-varying share in the Political return that accrues the Political Government4. A political government, operating within a political compact, would then seek to expand its political return, if in conformance with people’s expectations, and market-determined techno-economic opportunities. In the context of those Political returns being substantially tied to the nominal Capital markets, and due pareto-alignments within the political compact that might offer politically-convenient hedges to social obligations imposed upon the Government, and realizing the fact feeding bourgeoisie impatience is a deemed political virtue, a Political Government would have little qualms in, overtly or covertly, pursuing a right-leaning, per-capita, nominal economy. Such bias opens the ambit of economic opportunities available to those subscribed to the Political Compact, and permits the political elite their private aggrandization within and beyond the nation. Hence, Governments, no matter elected on which platform, are nonetheless likely to pursue the per-capital Nominal paradigm. As participants with an axe-to-grind, Political Governments face attenuated incentives to restrain the consequent externalities in the environment and society. Such governments are likely to either ignore externalities, overlook lax implementation of regulations governing them, or ‘satisfice’ the public by offering alternative social resolutions that yet protect nominal private aggrandization. The question, then, is what options exist for the public, particularly those of the poor impacted by the per-capita paradigm, and those supporters of environmental justice and political prudence in the broader society, to modify the mal-incentives faced by the political Government.
Consider then, a simple analytical expression for the incentives faced by the Political Government. Political (Monetary) return to Governance, POLRET, may be modeled as the proportional sum of two components: an ‘Unsustainable’ Nominal Return, and a ‘Sustainable’ Real Return – both deriving from NGDP Bond and SGDP Bonds vested with them by the Nation’s President in proportion Voter turnout5. Denoting the term-vested magnitudes of the two political endowments by NGDPBOND and SGDPBOND6, we have:
POLRETt0-T= k1*NGDPBONDt0(VOTRCOUNTt0)*NGDPDOTt0-T
+ k2*SGDPBONDt0(VOTRCOUNTt0)*SGDPDOTt0-T
(1)
SGDPDOT and NGDPDOT are the appreciation in the NAV of the respective bonds, and Voter Participation denoted by VOTRCOUNT, a function of Population Growth rate. In simple terms, political (monetary) returns to governance are comprised of an unsustainable nominal and a sustainable real component; both endowments enlarge for incremental voter-participation. If, as is not implausible in a competitive democracy, incentives faced by the Political Government were as in (1), the Political Government would encourage voter turnout in the short-run, turn a blind-eye, if not incentivize population growth in the long7, jumpstart the nominal economy with a resource-draining monetary stimulus, and direct those resources to nominally-profiting activities regardless of sustainability considerations. Given the high returns that obtain in PV-Equity markets, such incentives would, in the short run, cause an unbalanced society that leans to the Nominal. Such population-leveraging, PV-monetizing strategies, though aggrandizing to the Privates and the Political Government, are likely to exacerbate environmental and social externalities in the society. The paradigm then concentrates returns in Capitalists and the politically-connected, to the general disadvantage of the bourgeoisie voter group. It is to the attenuation of this mal-incentive that we turn to below.
If the issue surfaced due the political incentive to PV-aggrandize of the unsustainable, nominal paradigm, then and given the structure of governance incentives as in (1), a simple and straightforward resolution would involve a) modifying the rule that governs the issue of NGDP and SGDP endowments on which the Political party claims a term return, and b) forcing a monetary externality charge upon returns from holding externality-intensive NGDP Bonds. Consider first NGDPBOND vested with the Political Compact. One could propose that NGDPBOND endowment issued the Political Compact be independent of Voter Turnout at the elections, and further that NGDP Bond units counted toward determination of the pay-off at conclusion of the political term be proportional Labor share of aggregate Factor Income, LBRSHR. As concerns the externality charge, we could consider Gold-derivative as a catch-all environmental and social externality filter instrument manipulating which obtains us an instrument reflecting the scale of externalities cause by the Political Government pursuing a nominal economic path. Whereas the former would break the link to Voter turnout (population growth) and induce the Political Compact to bring about a ‘progressive’ division of aggregate factor income, the latter would induce the Political Government to promulgate policies that dissuade environment-using nominal (and real) activities. Between the two, the proposed palliatives would substantially correct the governance bias toward the nominal,
Now, Gold is a catch-all ‘Real Sustainability Mirror FF Monetize-Nominal Unsustainability PV Hedge’ for all the unsustainabilities and externalities heaped upon society by the per capita nominal paradigm. Gold, a hedge against Nominal growth, appreciates for cumulated nominal unsustainabilities and suffers volatility when confronted with sustainability enhancements. Bonds, on the other hand, react differently by tenure. If Long Bonds compete in returns with Gold, then inflation in Gold returns, in the wake of a nominal expansion, would imply a return-boosting fall in Long-Bond yields. Given this interpretation, one could pick Long Bond Yields as an Opposite Hedge variable to Gold prices. There are several aggregate indices that offer prices and yields for bonds of various tenures. If one computed GOLDHEDGE, the factor with which to discount unsustainable nominal political monetary returns, at any time, t between t0 and T, as:
GOLDHEDGEt= VSR*YLB, t+ VSL/Pgdott-T,
(2)
where YLB denoted Yield of long bonds, Pgdot, the prospective appreciation in the price of Gold, and VSR, VSL, the vote shares secured by the Right and the Left parties respectively, then, GOLDHEDGE would react by depreciating in response to an unsustainable nominal expansion. This factor would then discount the unsustainable Nominal political return, evaluated at time, t, as in (3):
POLRETt= GOLDHEDGEt*{k1*NGDPBONDt0(LBRSHRt)*NGDPDOTt0-t}
+ k2*SGDPBONDt0(VOTRCOUNTt0)*SGDPDOTt0-t
(3)
A simple discounting of unsustainable nominal political returns by GOLDHEDGE as computed in (2) attenuates, if not reverses the political incentive to create a ‘maximum economy’ - a shallow ‘democracy’ expanding in numbers, and a society eviscerated of its resources, and teetering on unsustainability. Political Governments offered a Political Compact that face a returns incentive similar (3) above, would be more likely to pursue a nominally-attenuated, environmentally and socially sustainable PQ-LQ paradigm that promotes and achieves balanced enviro-economic-social growth8. Thus de-fanged and de-incentivized of the nominal bait, the Political Government would attenuate the per capita–driven Nominal expansion, and lean to the left for its Political monetary returns, in the process, conserving on environment and resources.
(It’d be of further academic interest to econometrically disaggregate GOLDHEDGE, as computed in (2) in to all relevant variables of the Nominal per-capita economy, including those that describe the per-capita paradigm. Thus, and if the per-capita strategy were described by such variables as Family size, FAMILYSIZE, per-capita income, INCOME, per-capita automobile ownership, AUTO, per capita power consumption, POWER, per-capita living space, LIVSPACE, percent unemployed, UNEMPLYD, and per-capita consumption of various durables and commodities (DURABL), then a quantitative econometric relation such as:
GOLDHEDGEtg(NGDPdott, FAMILYSIZEt, INCOMEt, AUTOt, POWERt, LIVSPACEt, UNEMPLYDt, DURABLt, ...)
(4)
obtains the partial impact of the various components within the per-capita strategy upon GOLDHEDGE, and facilitates a pincer-tip resolution of nominal unsustainabilities. For example, if GOLDHEDGE displayed the largest elasticity to AUTO as computed from the regression in (4), then the political government, reacting to monetary incentives in (3), would de-emphasize the transportation sector in its Nominal stimulus, and thus avoid, or attenuate, a per-capita exacerbation of externalities)
A ‘Foo’ Words of Caution
A nation is only as good as its system of governance, and those who lead it. Though Democracy has been hailed as a hallmark of human evolution, it has since been subverted by per-capita Nominal economic paradigm. Welding the per-capita lifestyle philosophy to globally-equilibrated Capital markets, the Nominal economic paradigm hastens and monetizes all nominal future to the present, economically stratifies and expands inequity in the society, and eviscerates the real society of its environmental and social assets. The per-capita nominal paradigm, built around maximal exploitation of natural resources, tears asunder the environmental and societal balance in umpteen ways that are costly in the time and resources it takes to resolve them. That affront would be exacerbated when the Political Government of the land, in a nexus with Capitalists and Businesses, strategizes consciously to dovetail its goals with the per-capita-exploiting Capital market to maximize its political return. The divisiveness of the Nominal paradigm is all too evident in the sharp contrast it brings about between Capitalists and the Bourgeoisie, and between the private lifestyles of urban residents (‘haves’), and rural life (‘have nots’) in the Real society. The dichotomy is all the more evident in poorly-governed developing nations of the East where popular democracies have been subverted to serve narrow capitalist and political ends.
In this context, the incentives that face political governance turn critical. Political governments, if socially obliged to the public, or otherwise incentivized financially to maximize public good (as defined by objectives of the SGDP Bond), would pursue common cause with the people. Conversely, if political parties are drawn in to a trap, wherein they must new sources of funding to retain electoral credibility, then financial incentives around political governance turn critical. Should those incentives be tied to the capital market (as when parties are vested with NGDP Bonds in proportion Voter participation), the fear of a tri-partite nexus between politics, capitalists and businesses around the expansion of per-capita society cannot be ruled out, as the Political government leans right to placate them in the capital markets. The former obtains a sustainable society that balances the Real and the Nominal; the latter exploits governance mal-incentives built in to its funding sources, exacerbates the divide between the Capitalists and the Bourgeoisie, and leads to environmental and social redux. To repeat, Political returns to governance that are implicitly or explicitly correlated to capitalist-friendly per-capita policies and consequent PV-aggrandization of privates, drains the nation of its resources, reduces the environment, and exacerbates social inequity9. It is for these reasons that society should critically re-examine the structure of political financing and the governance incentives facing parties within a political government. The proposal above is a first stab at resolving the issue, but it is no panacea. Electoral system, political funding mechanisms and governance incentives vary across nations, even over time, and there can be no universal magic pill. Though the proposal is contingent upon a presumed structure of governance incentives, and neglects the many competing, non-monetary substitutes, it nonetheless suggests a potential over-arching strategy to sustainably re-orient monetary incentives facing governance within a political government.
As the war on Commons extends beyond national boundaries to global warming and the oceans, and risks reducing our entire orb, the per-capita nominal paradigm must come under focussed scrutiny, its nexus with political parties explored further, its social, political and financial hedges traced, and anticipatory, if not pre-emptive policies implemented. Examining governance incentives facing political parties that are subscribed to the per-capita nominal paradigm would be a very prudent first step.
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1A continued growth in population and the social imperative to raise standards of living to those prevalent in advanced economies implies exacerbations of many environmental externalities.
2The ‘democratic nexus’ refers to an implicit understanding between businesses, capitalists, financiers and the political government, to offer an ‘Impenured Group Subsidy – Bourgeoisie LQ Bakey-Reich Per capita LQ’ to participants in the nation’s democracy. The ‘Offer’ implies a certain neglect of the social impacts (albeit post offering, to various degrees, the constitutionally-enshrined minimal rights and entitlements) and an exacerbation of environmental externalities, beyond a denial of ‘Bakey LQ’ to the impenured, and limiting the middle-class to an LQ Compromise. Broad acceptance of the offer at the Ballot implicitly incentivizes the per-capita nominal paradigm, thus inducing a further expansion of per-capita perpetuating, population expansion.
3 The sustainability of Population growth in a society is a function of its resources endowment, the efficiency of production technology, and indeed, the state of the Commons. A 1% growth in population in a sparsely-populated, advanced, sustainable society with resources aplenty does little damage to sustainability relative the same growth in an already populous society stretched to its resource- and environmental limits.
4That political return could be the term- or cycle appreciation in SGDP Bonds vested with the political Government. Certain politico-governance systems might, explicitly, or implicitly, permit the ruling party to financially leverage the nominal economy that they direct (perhaps in the mirror of the vested SGDP Bonds). Political return could also include political gains, whether incremental participation from hitherto disaffected non-Voters, or partisan gains to the ruling party from voters switching their allegiance.
5For a more detailed discussion of political incentives within a macroeconomic framework, check out: ‘Cause Bond-based Political Cycle Government, NGDP optimization and Budgeting’ at gprao64.blogspot.com.
6Note, NGDPBOND and SGDPBOND refer total valuations of respective bonds. Bond prices, PNGDPBOND and PSGDPBOND, would be determined in trading amongst unit holders, including and beyond political parties.
7Population expansion incentives are covert and indirect; they extend from an expanded set of rights and entitlements, free or subsidized consumer goods and public services, and include subsidized agricultural, educational, housing and transportation loans, as well as a social security net.
8The influence of VOTRCOUNT on sustainable political return, POLRET, in (3) may be ignored for reasons the obvious sustainability represented by SGDPBOND. A sustainable world may be safely replicated.
9Over the long run, perverted governance incentives risk dividing the society in to minority of ‘haves’ and a majority of ‘have-nots’, the former consuming the largest share of natural resources, and the latter suffering the brunt of ESH, social and pecuniary impacts from the splurge by the ‘haves’. And when the Commons are so defiled that it is necessary to restrict lifestyle to avoid a total breakdown of societal life, it is likely the ‘per-capita numbers-inflated’ group of ‘have nots’ turn willing victims of cap-and-trade permit schemes by curtailing their activities and consumption, perhaps, for a penny.
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