If your email inbox is anything like mine, they list what to watch for in 2022 and the biggest risks to investors/economic growth/world peace. Be sure to check out my colleague’s year-end newsletter – like Unhedged on what will affect the market, the energy in Three energy themes 2022, or about Trade Challenge Minefield This year awaits us.

I am not imposing my own list on you. Part of the reason is that there is little added value to repeat the same possibilities that everyone has already thought about (inflation accelerating! inflation falling, monetary policy getting too tight! Ukraine war! Taiwan war! Worsening energy crisis! US coup!). Part of the reason is that the biggest risk is that most of us, at least myself, turn a blind eye.

Instead, it may be useful to detail larger structural changes in the way our economies are managed and how anyone with money should think about them. To me, today feels like 1945 or 1979-81—a turning point in history where our entire thinking about how to manage the economy (and more) changed radically in a short period of time. The social contract has been rewritten again.

The way I’ve described it in the past is that the old Washington Consensus is giving way to New Washington Consensus (and a New Brussels-Berlin Consensus may also appear). Back then, the role of the state was at best to set traffic rules and redistribute the rewards of the free market, but beyond that it ignored the economy.Now, economic planning and state-led economic activity came back.

For a good overview of the many ways in which policy making has shifted, see Special Report on Neo-Interventionism In this week’s edition of The Economist, dedicated to industrial policy, competition policy, regulation and corporate taxation, all four of these articles show that governments are more willing to get their nails dirty when dealing with the economy.

The Economist is The Economist, it warn The tools of economic interventionism have previously been “the dust settles for a reason”. But there are also good reasons for the government to opt for a less hands-off approach. One is the apparent failure of the past 40 years, with slow productivity growth, low investment, and the exclusion of too many people from prosperity. Public policy fails to prevent value creation from being distorted into rent extraction.

Another reason for neo-interventionism is that the economy of the 21st century will require some massive structural shifts that only the state is capable of making. Most importantly, all parts of the economy need to coordinate to move to low- and zero-carbon solutions simultaneously, including huge investments in new infrastructure. In addition, the role of public goods is increasing – as economies increasingly rely on tech-savvy and well-connected populations, and frontier activities increasingly involve intangible goods and digital services that require smart regulation.

Finally, a variety of geoeconomic factors—fears of strategic dependence on China, Europe’s reluctance to undercut its decarbonization efforts by polluting trading partners, the growing amount of trade involving politically sensitive services—suggests an era of pure trade liberalization it’s over.

How should investors view these shifts? First, admit that they’re big, and things won’t go back to the way they were. If anything, these changes are likely to be exacerbated.

Second, consider that while individual companies may feel that they are freer to pursue profit, the less the government is involved in the economy, the collective private sector is not. Prevent abuse of market power, control “externalities” (the actions of one company affecting the profitability of another), reduce consumer uncertainty about product quality, and ensure that companies that want to align with decarbonization are not Weakening of those unwanted companies – all of these things that both increase economic efficiency and require state action. The fact that the economy is changing suggests that efficiency needs to be in a more positive (if not necessarily greater) state than it has been in the past.

Third, it means that the private sector and its investors may benefit from the new interventionism. If it makes the economy more efficient, there will be more economic surplus from which to pay the profits (the benchmark is not the status quo, but economies that are at greater risk of climate change). Enlightened self-interest is real, as opposed to narrow maximization.

This also applies to investors. They may want to consider how lobbying against or otherwise resisting these epoch-making stubborn companies hurts other investments in their portfolios. They may also want to be open to companies that align themselves with broader goals rather than short-term profits (or even just long-term profits). In fact, they may even prefer corporate leaders who support the right countries to participate in the economy.

As a result, the role of the investor is also changing. Passive investors—I mean passive investors here, one that passively allocates capital based on an index, and one that doesn’t exercise shareholder rights to influence management decisions—is a free-rider for active investors. But as the social contract is rewritten to be less laissez-faire, it becomes increasingly important how investors can positively influence the companies they own. This means that the free-rider for passive investors has also become increasingly alarming.

other readings

• As many will tell you, U.S. inflation is at its highest level in 40 years, with Consumer prices rose 7% Year-on-year growth in December. What most people won’t tell you, however, is that month-over-month change fell for the second month in a row, but remains high at 0.5%.

  as i have written before, year-over-year variance is not a good guide for rapidly changing price dynamics. In the months to December, US food price inflation moderated (adjusted for seasonal patterns, of course). Services inflation slowed. Energy prices are falling outright now. A subcomponent of inflation that did not slow was commodities other than food and energy, which picked up strongly at the end of the year. Could Christmas have something to do with it?

• I’ve gotten a lot of reader comments on recent pieces – let them come!Before Christmas, I offered a Back Cover Costing universal basic income to complement our film about the UBI case. Nikhil Woodruff shared a pointer online calculator This is done more thoroughly – try it yourself! I was relieved to find that while it estimated the cost of my example a bit more than I did, it was in the same (expensive but affordable) range.Also, a friend reminded me of the bizarre story of the then-president of the United States Richard Nixon pushes for UBI.

• The iPhone is 15 years old, and its maker worth 3 tons. but what it does to our brain?

digital news

• U.S. unemployment rate in the last quarter of 2021 look for a job The Conference Committee said (see table below). This is the high-pressure economic inflation that the hawks want to control.