I’m generally unimpressed with Krysten Sinema, whose failure to support Democratic initiatives has generally been harmful. However, I kinda like the tax changes she’s forced into the climate package.

Fundamentally, I like dividends and I hate stock buybacks. So a tax on stock buybacks—even a small one—makes things better.

Now, most economists would have you believe that the two are equivalent. This is false.

Economists can gin up a model that suggests that owning a slightly larger share of a slightly smaller company is “equivalent” to getting paid a share of the company’s profits. Or that getting cashed out completely (by taking the buyback), and then finding a place to invest almost all of that cash in some new company is somehow equivalent. I don’t think either of those things is true even in an economic sense, but I think both are clearly false in a larger societal sense.

New York Stock Exchange

The way things used to work was that a company earned a profit, reinvested an appropriate amount of that profit in growing the business, and then paid out the balance to shareholders to do with as they pleased. (They could reinvest the money by buying more stock, they could spend it on luxuries—or necessities, they could invest it in some other company, they could donate it to charity—the possibilities are literally endless.)

This situation produces a sort of virtuous circle. A company that earns a reliable profit—and shares it with its stockholders—becomes more valuable, because people will pay more for a company that pays a reliable dividend. It’s good for the owners (their stock is worth more), it’s good for the employees (both line workers and managers), it’s good for the community (a profitable company pays taxes, their employees have money to spend, their shareholders have money to spend, etc.).

The non-dividend situation lacks all these dynamics. Instead of wanting to produce a profit, the company has all sorts of weird incentives—to maximize “growth” or “revenue” or “earnings” according to whatever weird metric appeals to Wall Street that week. Owners don’t get cash that they can spend. Instead they get the option to cash out at random intervals. The weird incentive structure encourages companies to make weird decisions regarding investing in growth (or dumping cash into buybacks). Shareholders who would otherwise be living on dividends are constantly having to make difficult decisions about selling small amounts of shares in this or that company for money to live on.

Maybe there’s some technical economic sense in which buybacks and dividends are equivalent, but they are very much not equivalent in a societal sense, producing very different results for ordinary investors and their communities.

The only reason any ordinary person would think a stock buyback was even close to equivalent is because capital gains have been tax-advantaged over dividends. So, something that reduces that tax advantage is all to the good.

Details: Krysten Sinema Agrees to Climate and Tax Deal – The New York Times

A long tedious pdf from those Davos guys. Only of interest because the topic is near to my heart. I may yet manage to plow through the whole thing, looking for the good bits. Via @bruces.

“The report also sets out how public and private urban leaders can utilise nature to both reduce the impact of their cities on biodiversity, increase their climate resilience, and secure significant economic benefits.”

Source: BiodiverCities by 2030: Transforming cities’ relationship with nature | World Economic Forum

Some decades back I read a pretty good book that advocated for a “guaranteed job” for anyone who wanted one as a better solution to poverty than a “citizen wage” (or any sort of welfare assistance). I don’t remember all the details in the book, but the advantages primarily had to do with preserving the existing social structures around employment.

One question I always struggled with had to do with the strength of the guarantee. Suppose a few percent of the people with such jobs have (as I do) seasonal depression such that they cannot be productive during the winter months. Would the job guarantee permit them to simply show up and get paid, even though they can’t get any work done until spring?

This particular for-instance matters to me, as one who suffers from SAD, but it’s a broader problem—lots of people have some sort of condition, medical or otherwise, that makes them unproductive for long stretches of time. Do they get to keep their guaranteed job? How can you tell them from malingerers? Does it matter? How do you deal with workplace tensions when many perceive their coworkers as not doing their fair share of the work?

These sorts of issues are why I’ve always come down on the side of a universal basic income as a better way to reduce both poverty and the abuses that come along with having a few rich people and a vast class of precarious workers. But I’m willing to give alternatives serious consideration, as long as they work for people like me.

In the latest issue of the agricultural-economics journal “Duh!”

Climate change is a known long-term risk to crops like coffee, chocolate and wine grapes that require specific conditions to thrive.

Source: Coffee bean price spike just a taste of what’s to come with climate change | Coffee | The Guardian