Category: economics

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Ener Tech

The future energy lab in Berlin proposes valuable advice and guidlines for the „prosumer“ revolution in energy technology. From the own or home production of energy, the sharing of investments and infrastructure to the distribution network and finally consumption, the whole life cycle of energy is treated with a concern for environmental and financial sustainability Sharing is the way forward and many solutions build on this basic idea to move beyond the individualistic approach and fossil fuels cheap in the short term, but more expensive to society in the medium to long term. As most solutions make use of digital tools the issue of cyber security has to be a concern right from the beginning or even the planning phase. Joint production and consumption rely on people and communities reaching compromises. However, wholesale resourcing and averaging over households allows cost savings. The technology is available already, the skilled people to implement these solutions are currently the bottleneck. DIY will have to bridge the gap as neighbors learn from neighbors as yet another form of community building and engagement. (Image gamification of community decision making, SCCON Berlin 2024)

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Mobi Tech

There is much more to mobility and technology than new cars and bicycles. Innovative infrastructure provided by new public services allows new forms of mobility technology to strive. Charging points across a country are crucial to ensure smooth and smart mobility for example with e-cars and e-bikes. Software guides us to next or cheapest charging point in the surroundings. Public services provide the basic data on this and need trustworthy updating and repair of the infrastructure to avoid frustrations. Navigation systems need up-to-date info on areas with restricted mobility due to high emissions (diesel) or illegal parking of shared bikes and rollers to avoid a banning of share options in inner cities. Data allow the guidance of traffic and combinations of different modes of transport. Mobility tech is nowadays a largely data driven process and public services provide important basic services and information for innovation and reduction of emissions in the field of multimodal mobility.

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Start-up Winner

The SCCON 2024 has awarded one of its prizes for start-ups to „neuraflow“, which proposes the programming of chatbots for small communities or cities among other AI-applications. The test in multiple languages for the city of Bremerhaven is fun to test and shows that online public services can be witty and fun to use. The incorporation of local dialects gives the impression of a very personalized service. Moving the administration closer to the heart and the location of its citizens is achievable through shifting communication online. Prior information before a first contact speeds up information and administrative processes for everyone involved. Congratulations to the team involved and we look forward to many nice applications of the same technology in other cities. Admin can be fun, even in Germany 😉😂

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Digital public management

Countries with large public sectors also have specialized research called administrative science. More than 25 years ago the whole discipline has been hooked on the idea of so-called “new public management”, which introduced “management by objectives” and “benchmarking” as new tools into the field of public sector management. In Germany Naschold and Bogumil (2000) have been publishing extensively on the topic.  In 2024 the new public management is well established and the now new challenge is “digital public management”. Berlin just hosted a fair on this topic (SCCON 2024). This allows to speed up administrative procedures, increase the reach of public administration into remote areas and creates new challenges to counter the digital divide of society. The modern public sector may shift from being pushed by private sector companies in terms of digitalization to being a forerunner of digital provision of services. Tax declarations in Germany are a good example, where for many years it is a widespread practice to rely on digital forms of declaration and communication between the tax office and its clients.
Other countries, like Estonia, have taken already many more far reaching forms of digital public management and digital provision of services. The scope of such reforms is huge and the administration of persons in remote areas and aging societies give additional reasons to push ahead with digital public management.
At the time when even emails become outdated among youth, some administrations are proud to feature their latest innovation in digitalization. A machine is opening physical letters and scans the documents automatically and stores them in a secured cloud for example. It is indeed an important “bridging technology” for administrations dealing with a generation of older persons who are used to this form of communicationd by (snail)mail.
Many interesting new digital solutions (hard and software) were on display at the SCCON 2024 and many more are in the pipeline or pilots have been implemented already, well worth studying in more detail.

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Risk Takers

We are all risk takers of one form or the another. Those of us who ride motorbikes or enjoy rock climbing have an above average taste for risk taking. Since the publication of „The risk society“ we are aware that collectively as a society we have taken on additional risks like nuclear energy, atomic weapons or the risk associated with silent climate change with the persistent reliance on fossil fuels to a large extent. Holman W. Jenkins (WSJ) has added an additional perspective on risk takers which originates from government policies to encourage building homes in places subject to high risks of flooding. Several policies come to mind that encourage individuals to take high risks and construct and repair buildings in flood prone areas. Government grants, insurance policies and relocation subsidies are at issue here. Regulations like driving licenses try to build on competences to ensure „more rational risk taking“ in people. Teaching about nutrition might alleviate the obesity pandemic as much as awareness of an active lifestyle can avoid a large number of cardiovascular diseases. Risk taking should be to a large extent an individual’s choice with the consequence to live up to the consequences of the risks taken also more an individual’s responsibility. Collective solutions are a powerful way to encourage additional risk taking. The consequences of those well-defined solutions have to be funded collectively as well. A society-wide discussion and voting process on such issues has to be organized and updated from time to time. (Image Skateboard high and long jumps Brussels 2024-10)

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Ranking Enterprises

The Spanish economic newspaper has published on its front page an updated ranking of the top 10 Spanish companies using environmental, social and governance (ESG) criteria (see below). elEconomista.es on 2024-10-12 shows through this updated ranking that ESG criteria continue to be relevant information for investors. It is not just a nice to have information but gives important information on the sustainability record of a company. Continuous monitoring is key to show and reward the efforts and investments companies have made to improve sustainability. This information needs large distribution in order to keep up the awareness that there is more to a balance sheet than just turnover, profit margins, debts and investment. Churning of employees creates costs to society as a whole as well. Any early information on ESG indicators, therefore, allows a much broader assessment of the full impact of enterprises, 360 degrees and over time. Certainly a good example to follow up on.

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Study Wages

There is a remarkable study of sectoral minimum wages in California. It deals with minimum wages that have been raised set to start from a floor of $20 per hour in the fast food sector. The first indications after 6 months show that the wage increases due to the regional and sectoral minimum wage in California were about 18% per hour. The wage rises did not have a negative effect on employment so far and are not expected to happen. The first indications suggest that price rises absorbed 2/3 of the wage increases. Consumers of the fast food chains and on special event locations do not react strongly on the price increases to reduce demand. As overall the turnover achieved in the restaurants increased even franchising chains were able to increase their profits. It is an interesting example that an increase in minimum wages can create a win-win-win situation starting with a substantial pay rise. A second round effect not mentioned in the study could consist in the narrowing of the price differential between healthy food and fast food. The option of a healthy meal might no longer appear to be so much more expensive.

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Happy Time

“The times are a changing”, so is happiness. This is the spice of life we might add as well. Trajectories of happy life run not as flat lines simply on different, but largely parallel levels. Curves of different persons intersect. Even the focus of what determines personal happiness is different from one person to other. A job-focused person deviates substantially from a person deriving happiness mainly from her/his private life. The time dimension of happiness is yet another puzzle. Some persons have a focus on now and today, others consider a future time perspective for a happy life as less, equally or more important. Even the retrospective experience of happiness or unhappy childhood experiecences can override current emotions and oveall satisfaction with life. Economists apply a so-called discount rate to benfits or costs that accrue in future, which means that 1000 € in future, usually are estimated to have a lower value than 1000 € now. Happiness at some point in time in the future is likely to “suffer” from the same rationale. Satisfaction now is valued higher than even the same satisfaction at a later point in time. This probably explains a large deal why fewer people are concerned with their retirement benefits early on in their professional career and their job satisfaction trajectory. Many artists, apparently have a deviating time horizon. They endure economic hardship now for some recognition in future, but still have a happy time now.
(Image: Jorge Carrasco, Church Painting, France)

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Patient Capital

There is something cultural about capital. Different cultures use different narratives when they commonly talk about capital. In Western capitalist societies it is common practice to cite “capital is a fugitive dear”, meaning that people who command sizeable amounts of capital tend to flee places once they become to agitated, especially by politicians. The Eastern narrative surrounding capital is more focused on “patient capital”. The newspaper “China Daily” has more than 6.000 entries referring to this term. On 2024-9-26 (p.9) the Japenese economist Kazuyuki Motohashi praised the Japanese economic system and its specific form of patient capitalism as based on” long-term, stable investment, which enables companies to achieve sustainable growth in the long run”. The Chinese economy suffers as Western capitalism from excessive focus on short-term profit seeking and this causes huge market flucturations shifting quickly from shortages to oversupply and back again. Short-term rent seeking is driving whole industries into fluctuations that are hard to attenuate through other economic (fiscal and monetary) as well as labour market policies (training, re-locations, internal migration).
It is interesting to witness that recently in Germany an example of a bank that had benefited from a patient capital approach of the German government for more than a decade (Commerzbank) is now prone to a bit of a hostile takeover from another bank probably more interested in the short-term rent-seeking. After all, banking and the varieties of capitalism approach highlight that at the very heart of economic rationale there remains a little bit of a cultural twist to understand what is happening in international economics and competition.(Image: Musée Rodin Paris 2024, Le Penseur”)

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Fiscal Union

European Integration is slow and hard to come by. For others it is moving too fast (Brexit). Cultural diversity is a real asset of the EU. The economy or the economies are powerful on an international scale. Nevertheless, the diversity concerning the tolerance of fiscal deficits is still widely spread across the Member States of the EU (see image below). Some states seem to play it cool and run relatively high deficits compared to the EU averages. In OECD comparisons most of the above average fiscal deficits are closer to or even below OECD averages over time (link to pdf-file OECD, 2024). Within the EU differences in government expenditure as % of GDP or the indicator of Gross public debt according to the Maastricht Criteria range from 20% to 160% as percentage of GDP. This entails a different level of resilience to future crises. After we managed to leave the previous 3 crises (financial, Covid-19, energy) it is time to prepare for what might come next in terms of challenges. Preparing public deficits to be able to soften economic shocks is essential to be able to sustain yourself and support others. We seem to be a bit off-target to coordinate fiscal deficits across the Union. Eastern and Northern countries have suffienct scope to support expansionist fiscal policies, be it in the realm of a defence union or to address climate change. Southern Europe will find it more difficult to raise additional funds to prepare now for future challenges. Fiscal deficits might even be not only an economic phenomenon, but a cultural one as well. If we compare Japan with a deficit running at 240% with South Korea with 50% Asia is showing even larger diversity in terms of fiscal preparedness.
An economist’s stance on fiscal policy and fiscal union might depend much more on her/his region or country of origin than economists might want to believe.
Images: OECD Economic Surveys: Belgium 2024, OECD Publishing, Paris, https://doi.org/10.1787/c671124e-en. p.17.