Tagged: economics Toggle Comment Threads | Keyboard Shortcuts

  • feedwordpress 08:01:08 on 2018/07/29 Permalink
    Tags: , , economics, , , , , ,   

    “Apparently I lack some particular perversion which today’s employer is seeking”*… 

     

     

    Instead of looking at only the most common job in each state, I found the top five for a slightly wider view. You still see the nationally popular occupations — drivers, cashiers, and retail workers — but after the first row, you see more regional and state-specific jobs.

    The sore thumb in this picture is Washington, D.C., whose top five ordered by rank was lawyers, management analysts, administrative assistants, janitors, and, wait for it, chief executives…

    From Flowing Data: “Most Common Jobs, By State.”

    * John Kennedy Toole, A Confederacy of Dunces

    ###

    As we struggle to add the gainful to employment, we might recall that it was on this date in 1870 that America’s first asphalt pavement was laid in front of City Hall in Newark, N.J.  Edmund J. DeSmedt, the Belgian chemist who oversaw the work, had received a U.S. patent for this asphalt paving method two months earlier. Later that year, DeSmedt became the inspector of asphalt and cements for the District of Columbia, and oversaw wide application there.

    DeSmedt’s crews at work in D.C. in 1876

    source

     

     

     
  • feedwordpress 08:01:51 on 2018/07/10 Permalink
    Tags: , economics, Hand Rosling, , , Meghnad Desai, ,   

    “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.”*… 

     

    moving-mountains

     

    In America, average income has been basically flat for five decades as economic gains increasingly go to a tiny minority at the top of the income bracket. But American wage stagnation is only a small part of a larger global story — one that is summarized in a fascinating new graph. Swedish statistics professor Michael Höhle put together a fascinating visualization of the distribution of incomes, adjusted for inflation, in Africa, the Americas, Asia and Europe between 1950 and 2015.

    It’s rare to find a data visualization with so much information in it. You could watch this over and over and over again and notice a new thing every time. Two big trends, for instance, are the increase in population in Asia over time, and the huge improvements in real income for Asians since 1950. Another less obvious trend is that European incomes more or less stopped gaining ground in the 1990s. Then there’s the disturbing thickening of African incomes on the left side of the graph starting around 2000, representing so many people who’ve been left behind by global economic growth…

    Höhle is visualizing date from Factfulness, the last book from the late (and dearly missed) Hans Rosling (see here, here, and here).  Read more at “A Fascinating Visualization Of How Income Has Changed Around The World Since 1950” and learn more of Höhle’s method here.

    * Confucius

    ###

    As we deliberate on distribution, we might send inclusive birthday greetings to Meghnad Jagdishchandra Desai, Baron Desai; he was born on this date in 1940.  An Indian-born U.K. economist and Labour politician, he is the first non-UK born candidate to stand for the position of Lord Speaker in the British House of Lords.

    220px-Official_portrait_of_Lord_Desai_crop_2 source

     

     
  • feedwordpress 08:01:02 on 2018/07/07 Permalink
    Tags: bitcoin, blockchain, cryptocurrency, economics, , Mike Maples, , , tragedy of the commons,   

    “Organizing is a process; an organization is the result of that process”*… 

     

    28265398367_88db0c4057_z

    19th century railroad stock offers were the cryptocurrencies of their time: confusing, risky… but with the promise of converting “old” wealth (mostly land riches) into the wealth of the future

     

    Many crypto enthusiasts are looking at blockchains as a way to correct the sins of the past (government over-reach, lack of sound money, expensive middlemen, centralized businesses, etc.)

    The truly important question should be way bigger than this: How can crypto-powered businesses create new types of abundance? How will blockchains drive our standard of living forward exponentially? How will we see the creation of tens of trillions in new value like we did with the stock market in the last 150 years?

    The answer lies in how crypto can transform the tragedy of the commons into the wealth of the commons…

    “Midas List” V.C. Mike Maples traces the provenance of cryptocurrencies and the blockchain from the railroad IPOs of the 1870s (which helped launch an explosion of global economic growth) through the work of Nobel laureate Elinor Ostrum to argue for crypto’s promise as a remedy to the Tragedy of the Commons: “Crypto Commons.”

    [Readers looking for an on-ramp to understanding crypto-tech and the blockchain may want to start with Steven Johnson’s blissfully-clear “Beyond the Bitcoin Bubble.”]

    * Elinor Ostrum

    ###

    As we address asset allocation, we might recall that it was on this date in 1936 that Henry F. Phillips received several U.S. patents for the Phillips-head screw and screwdriver– a system in which a matching driver with a tapering tip conveniently self-centers in the screw head.  Phillips founded the Phillips Screw Company to license his patents, and persuaded the American Screw Company to manufacture the fasteners.  General Motors was convinced to use the screws on its 1937 Cadillac; by 1940, virtually every American automaker had switched to Phillips screws.

     source

     

     
  • feedwordpress 08:01:08 on 2018/07/05 Permalink
    Tags: economics, , financial markets, , , , ,   

    “Optimism is highly valued, socially and in the market; people and firms reward the providers of dangerously misleading information more than they reward truth tellers”*… 

     

    43073849241_23eaff519b_z

     

    It’s been 10 years since the beginning of the Great Recession…

    Some of the more pessimistic commentators at the time of the credit crunch, myself included, said that the aftermath of the crash would dominate our economic and political lives for at least ten years. What I wasn’t expecting – what I don’t think anyone was expecting – was that ten years would go by quite so fast. At the start of 2008, Gordon Brown was prime minister of the United Kingdom, George W. Bush was president of the United States, and only politics wonks had ever heard of the junior senator from Illinois; Nicolas Sarkozy was president of France, Hu Jintao was general secretary of the Chinese Communist Party, Ken Livingstone was mayor of London, MySpace was the biggest social network, and the central bank interest rate in the UK was 5.5 per cent.

    It is sometimes said that the odds you could get on Leicester winning the Premiership in 2016 was the single most mispriced bet in the history of bookmaking: 5000 to 1. To put that in perspective, the odds on the Loch Ness monster being found are a bizarrely low 500 to 1. (Another 5000 to 1 bet offered by William Hill is that Barack Obama will play cricket for England. I’d advise against that punt.) Nonetheless, 5000 to 1 pales in comparison with the odds you would have got in 2008 on a future world in which Donald Trump was president, Theresa May was prime minister, Britain had voted to leave the European Union, and Jeremy Corbyn was leader of the Labour Party – which to many close observers of Labour politics is actually the least likely thing on that list. The common factor explaining all these phenomena is, I would argue, the credit crunch and, especially, the Great Recession that followed…

    The always-illuminating John Lanchester ponders what happened, why, and what we have– and haven’t– learned: “After the Fall.”

    [image above: source]

    * “However, optimism is highly valued, socially and in the market; people and firms reward the providers of dangerously misleading information more than they reward truth tellers. One of the lessons of the financial crisis that led to the Great Recession is that there are periods in which competition, among experts and among organizations, creates powerful forces that favor a collective blindness to risk and uncertainty.”   – Daniel Kahneman, Thinking, Fast and Slow

    ###

    As we do our best to learn from our mistakes, we might wish a spectacularly happy birthday to Phineas Taylor (“P.T.”) Barnum; he was born on this date in 1810.

    A sharp observer of the human condition, Barnum wrote and spoke frequently of characteristics that made “promotions” of the sort in which he specialized both possible and profitable:

    Nobody ever lost a dollar by underestimating the taste of the American public.

    There’s a sucker born every minute.

    In what business is there not humbug?

    Barnum came by his wisdom the round-about way: he founded and ran a small business, then a weekly newspaper in his native Connecticut before leaving for New York City and the entertainment business.  He parlayed a variety troop and a “curiosities” museum (featuring the ‘”Feejee” mermaid’ and “General Tom Thumb”) into a fortune…  which he lost in a series of legal setbacks.  He replenished his stores by touring as a temperance speaker, then served as a Connecticut State legislator and as Mayor of Bridgeport (a role in which he introduced gas lighting and founded the Bridgeport hospital)… It wasn’t until after his 60th birthday that he turned to endeavor for which he’s best remembered– the circus.

    “I am a showman by profession…and all the gilding shall make nothing else of me.”

    source: Library of Congress

     

     
  • feedwordpress 08:01:11 on 2018/06/28 Permalink
    Tags: economic impact, economics, , , interlocking alliances, military expenditures, , ,   

    “If we desire a society of peace, then we cannot achieve such a society through violence”*… 

     

    42909027092_7ace61a7cc_z

    We use data from the Global Peace Index 2018 report, which tries to put a figure on the expenditures and economic effects related to “containing, preventing and dealing with the consequences of violence”.

    According to the report, the economic impact of violence to the global economy was $14.76 trillion in 2017 in constant purchasing power parity (PPP) terms. This is roughly 12.4% of world gross domestic product (GDP), or $1,988 per person.

    While those figures themselves are quite staggering, how it all breaks down is even more interesting…

    42909027012_0bb016fb9f_z

    More chilling data at “The Economic Impact of Violence.”

    * Bayard Rustin

    ###

    As we pine for ploughshares, we might recall that it was in this date n 1914 that Archduke Franz Ferdinand of Austria and his wife Sophie were assassinated in Sarajevo… which precipitated Austria-Hungary’s declaration of war against Serbia… which triggered a series of interlocking alliances (that’s to say, which led the Central Powers, including Germany and Austria-Hungary, and Serbia’s allies to declare war on each other)…  starting World War I.

    42909027112_8423ea8028_o

    Franz Ferdinand, ca. 1914

    source

     

     
  • feedwordpress 08:01:12 on 2018/06/24 Permalink
    Tags: accounting, , economics, , , , , , ,   

    “A firm’s income statement may be likened to a bikini- what it reveals is interesting but what it conceals is vital”*… 

     

    41052602860_a889faa191_z

    A recent (Roughly) Daily noted (by way of a quote from James Surowiecki) that “the challenge for capitalism is that the things that breed trust also breed the environment for fraud.”  A painful recent example was, the failure of credit ratings agencies honestly to assess the risk of derivatives being traded against home mortgages, which contributed mightily to the crash that occasioned The Great Recession.

    But, as Richard Brooks argues, there’s a bigger and more pervasive problem still lurking:  accountancy used to be boring – and safe.  Today it’s neither.  Have the ‘big four’ firms become too cosy with the system they’re supposed to be keeping in check?  Are we in for Enron all over again, only this time on the financial system-wide basis?

    The demise of sound accounting became a critical cause of the early 21st-century financial crisis. Auditing limited companies, made mandatory in Britain around a hundred years earlier, was intended as a check on the so-called “principal/agent problem” inherent in the corporate form of business. As Adam Smith once pointed out, “managers of other people’s money” could not be trusted to be as prudent with it as they were with their own. When late-20th-century bankers began gambling with eye-watering amounts of other people’s money, good accounting became more important than ever. But the bean counters now had more commercial priorities and – with limited liability of their own – less fear for the consequences of failure. “Negligence and profusion,” as Smith foretold, duly ensued.

    After the fall of Lehman Brothers brought economies to their knees in 2008, it was apparent that Ernst & Young’s audits of that bank had been all but worthless. Similar failures on the other side of the Atlantic proved that balance sheets everywhere were full of dross signed off as gold. The chairman of HBOS, arguably Britain’s most dubious lender of the boom years, explained to a subsequent parliamentary enquiry: “I met alone with the auditors – the two main partners – at least once a year, and, in our meeting, they could air anything that they found difficult. Although we had interesting discussions – they were very helpful about the business – there were never any issues raised.”

    This insouciance typified the state auditing had reached. Subsequent investigations showed that rank-and-file auditors at KPMG had indeed questioned how much the bank was setting aside for losses. But such unhelpful matters were not something for the senior partners to bother about when their firm was pocketing handsome consulting income – £45m on top of its £56m audit fees over about seven years – and the junior bean counters’ concerns were not followed up by their superiors.

    Half a century earlier, economist JK Galbraith had ended his landmark history of the 1929 Great Crash by warning of the reluctance of “men of business” to speak up “if it means disturbance of orderly business and convenience in the present”. (In this, he thought, “at least equally with communism, lies the threat to capitalism”.) Galbraith could have been prophesying accountancy a few decades later, now led by men of business rather than watchdogs of business…

    A chilling, but important report: “The financial scandal no one is talking about.”

    * Burton G. Malkiel

    ###

    As we count beans, we might recall that it was on this date in 1873 that Samuel Clemens (the author known as Mark Twain) received a U.S. patent, his second, for a self-pasting scrapbook (No. 140,245).  His creation used a dried adhesive on its pages so that users need only moisten a page in order to attach pictures.

    In 1871, Clemens had scored his first patent, for “an Improvement in Adjustable and Detachable Straps for Garments”–an adjustable strap that could be used to tighten shirts at the waist that was later used on women’s corsets, and is considered by many to be the precursor of the adjustable bra strap.  He earned his third patent in 1875 for a history trivia game,“Mark Twain’s Memory-Builder Game.”

     source

     

     
  • feedwordpress 08:01:04 on 2018/06/18 Permalink
    Tags: economics, fiscal policy, , Modigliani, monetary fiscal debate, , national debt, tax policy,   

    “I’m living so far beyond my income that we may almost be said to be living apart”*… 

     

    The U.S. national debt is once again raising alarm bells. Federal borrowing from outside investors expanded rapidly over the past decade, totaling more than $15 trillion in 2018, and it is projected to grow even faster over the next ten years under current law. Major budget legislation signed by President Donald J. Trump, along with continued growth in entitlements and higher interest rates, will see the debt nearly double by 2028 [PDF], coming close to the size of the entire U.S. economy.

    If the debt continues to grow at an unsustainable level, it could expose the country to a number of dangers, economists say. In the extreme, the risk rises that Washington’s lenders, many of whom are foreign, could suddenly lose confidence, demand higher interest rates, and potentially trigger a fiscal crisis. Short of that, the rising debt could gradually squeeze discretionary spending and deny the country tools it needs for security and economic stability. Bringing the debt into check, experts say, will likely require politically difficult decisions to either curb entitlement spending, significantly raise taxes, or both…

    A backgrounder from the Council on Foreign Relations: “The National Debt Dilemma.”

    It should be noted that there are those who disagree with CFR (and the many others) who see the need to bring the deficit into balance via reduced spending and/or higher taxes: “The Radical Theory That the Government Has Unlimited Money.”

    * e e cummings

    ###

    As we parse “prudence,” we might send carefully-calculated birthday greetings to Franco Modigliani; he was born on this date in 1918.  An economist, he originated the life-cycle hypothesis, which attempts to explain the level of saving in the economy, suggesting that consumers aim for a stable level of consumption throughout their  lifetime (for example by saving during their working years and then spending during their retirement)– for which he was awarded the Nobel Prize in Economics in 1985.

    Among his other accomplishments, he initiated the Monetary/Fiscal Debate when he (and co-author Albert Ando) wrote a scathing critique of an early 1960s paper by Milton Friedman and David Meiselman.  Freidman and Meiselman had argued (in effect) that monetary policy was the only effective tool in managing an economy; Modigliani and Ando pointed out flaws in their analysis and made the case for fiscal measures (effectively, government spending) as equally-effective tools.  The debate– known by the antagonists’ initials as the AM/FM Debate– rages to this day.

     source

     

     
  • feedwordpress 08:01:48 on 2018/06/03 Permalink
    Tags: economics, , , mathematical economics, , merit, RGD Allen, , , wealth inequality   

    “Oh, I am fortune’s fool!”*… 

     

    The distribution of wealth follows a well-known pattern sometimes called an 80:20 rule: 80 percent of the wealth is owned by 20 percent of the people. Indeed, a report last year concluded that just eight men had a total wealth equivalent to that of the world’s poorest 3.8 billion people.

    This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?

    The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.

    But there is a problem with this idea: while wealth distribution follows a power law, the distribution of human skills generally follows a normal distribution that is symmetric about an average value. For example, intelligence, as measured by IQ tests, follows this pattern. Average IQ is 100, but nobody has an IQ of 1,000 or 10,000.

    The same is true of effort, as measured by hours worked. Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else.

    And yet when it comes to the rewards for this work, some people do have billions of times more wealth than other people. What’s more, numerous studies have shown that the wealthiest people are generally not the most talented by other measures.

    What factors, then, determine how individuals become wealthy? Could it be that chance plays a bigger role than anybody expected? And how can these factors, whatever they are, be exploited to make the world a better and fairer place?…

    A new computer model of wealth creation confirms that the most successful people are not the most talented, just the luckiest. Learn more at: “If you’re so smart, why aren’t you rich? Turns out it’s just chance.

    * Shakespeare, Romeo and Juliet

    ###

    As we muse on merit, we might send carefully-calculated birthday greetings to a forbearer of the researchers who did the work recounted above, Sir Roy George Douglas Allen; he was born on this date in 1906.  A mathematician and statistician turned economist, he was a leader in the field of mathematical economics, writing a number of influential texts including  Mathematical Analysis for EconomistsStatistics for Economists, and Mathematical Economics.

     source

     

     
  • feedwordpress 08:01:01 on 2018/05/31 Permalink
    Tags: Allais, , economics, , , John Hicks, , Samuelson, , Yannis Varoufakis   

    “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it”*… 

     

    As you grow up and experience more of the ups and downs of the economy, you will notice a piece of mindbending hypocrisy: during the good times, bankers, entrepreneurs—rich people in general—tend to be against government. They criticize it as a “brake on development,” a “parasite” feeding on the private sector through taxation, an “enemy of freedom and entrepreneurship.” The cleverer among them even go so far as to deny that government has any moral right, or duty, to serve society, by claiming that “there is no such thing as society—there are just individuals and families,” or “society is not well defined enough for the state to be able to serve it.” And yet, when a crash occurs that is brought on by their actions, those who have delivered the fieriest of speeches vehemently opposing substantial government intervention in the economy suddenly demand the state’s aid. “Where is the government when we need it?” they yelp.

    This is not a new contradiction[**]…

    Yannis Varoufakis, the motorcycle-riding economist who served as Greece’s Minister of Finance through the depths of their recent financial crisis, offers some plain speaking on economics in general and banking in particular: “A letter to my daughter about the black magic of banking.”

    See also this.

    * John Kenneth Galbraith, Money: Whence it came, where it went

    ** Indeed: “Since those who rule in the city do so because they own a lot, I suppose they’re unwilling to enact laws to prevent young people who’ve had no discipline from spending and wasting their wealth, so that by making loans to them, secured by the young people’s property, and then calling those loans in, they themselves become even richer and more honored.”   – Plato, The Republic

    ###

    As we contemplate capital, we might send neoliberal birthday greetings to Maurice Félix Charles Allais; he was born on this date in 1911.  He won the 1988 Nobel Prize in Economics “for his pioneering contributions to the theory of markets and efficient utilization of resources.”  Indeed, the Nobel Committee suggested that Allais might be considered (with Paul Samuelson and John Hicks) ” the principal architect of the neoclassical synthesis” (in large measure because they formalized the notion of self-regulating markets).

    Samuelson said “had Allais earliest writings been in English, a generation of economic theory would have taken a different course” and the Nobel Prize should have been awarded to him much earlier.  John Maynard Keynes, whose ideas the trio very selectively used, thought that Allais and the emerging neo-liberal idea were dangerously wrong.

     source

     

     

     
  • feedwordpress 08:01:35 on 2018/03/30 Permalink
    Tags: Communist Manifesto, economics, Engels, Franz Oppenheimer, , , , ,   

    “All that is solid melts into air”*… 

     

    As a partner in a corporate advisory firm and a professor of law and finance, we are true believers in free-market capitalism — hardly natural latter-day communists, let alone successors to Marx and Engels. But we do believe the time is ripe for a rewrite of their Manifesto. Like the inhabitants of mid-19th century Europe, we live, according to Oxford University’s Professor Alan Morrison, “in the wake of a calamitous financial crisis and in the midst of whirlwind social change, a popular distaste of financial capitalists, and widespread revolutionary activity”. We have imagined what Marx and Engels would have written in 2018, naming the new, updated version “The Activist Manifesto”…

    So how did the two of us come to take on the renovation of the Manifesto? The answer, improbably perhaps, is our interest in a linchpin of modern free-market capitalism: shareholder activism. We have published academic studies on the phenomenon. We have advised many of the largest hedge funds as they take substantial stakes in hundreds of comp­anies, shaking up complacent boards and advocating for changes in corporate strategy and capital structure. And we have advised companies that themselves have pursued change. These activists may not be what Marx and Engels had in mind, but they are revolutionaries of a kind…

    In our redrafting, we have had to go far beyond merely substituting “communism” with “activism”. The “Pope and Tsar, Metternich and Guizot, French Radicals and German police-spies” and others in Marx’s and Engels’ sights have gone. We have introduced their modern counterparts: “the corporate Haves, the elites, the billionaires, the establishment politicians of the Republican and Democratic parties, Conservatives and Labour, the talking heads at Davos, the echo chambers of online media and fake news.” But we have kept much of the rhetoric along with Marx’s and Engels’ relentless focus on economic inequality. Two centuries after Marx’s birth, and however much communism has rightly been discredited, a great deal of the argument is as relevant now as it was then. The Manifesto’s theories about the problems of capitalism and the capitalist mode of production continue to be cited in critiques of unfettered markets, and the document’s historical analysis is cited by modern scholars and taught in universities today. Some historians have cited it as the most influential text of the 19th century. Its reverberations are still felt today…

    The original Manifesto’s top 10 “pretty generally applicable” proposals wouldn’t get a passing grade today in any setting. Left and right alike reject its arguments on labour and property. Even leaders of so-called communist states embrace markets and decentralisation. Take North Korea, the country that has most resisted capitalism: since 2012, it has started to encourage entrepreneurship and a formal (if reluctant) acceptance of brand-led marketplaces. However, one aspect of the original still resonates: the document was, fundamentally, an attack on inequality. We think it is obvious that Marx and Engels would be appalled by the present-day distribution of wealth. We imagine they would write something like this. “By the start of our 21st century, we are faced with the extraordinary fact that the top one per cent of the world’s population own the same resources as the remaining 99 per cent. Those at the bottom are less upwardly mobile than in previous generations; entrance to wealthy gated communities is blocked, not only by private security forces, but also by the increasingly prohibitive costs of healthcare, technology and education. There is the dominant force of mass incarceration, with millions of poor, minorities and powerless walled off from the rulers they might threaten. The Haves have never in history held so much advantage over the Have-Nots.”…

    Two champions of capitalism, Rupert Younger (co-author of The Reputation Game and director of Oxford University’s Centre for Corporate Reputation) and Frank Partnoy (a writer and professor of law and finance who is joining the faculty at UC Berkeley this summer) explain their redrafting: “What would Karl Marx write today?

    Read their revised manifesto in full (and use the “rollover” function to compare it to the original) at activistmanifesto.org.

    * Karl Marx and Friedrich Engels in Chapter One of The Communist Manifesto  (also the title of a wonderful book by Marshall Berman)

    ###

    As we reckon with revolution, we might send Hobbesian birthday greetings to Franz Oppenheimer; he was born on this date in 1864.  An economist and sociologist, we wrote prolifically (40 books and 400 essays) and influentially on political organization and the idea of the nation.   His best-known work is probably Der Staat (The State) which reflected his rejection of the concept of the “social contract” and his “conquest theory of the state.”  Like Marx, Oppenheimer considered capitalism a system of exploitation, and capital revenues the gain of that exploitation; he saw the state as the original creator of inequality.  So not surprisingly, his thinking has been influential among libertarians, communitarians, and anarchists.

     source

     

     
c
compose new post
j
next post/next comment
k
previous post/previous comment
r
reply
e
edit
o
show/hide comments
t
go to top
l
go to login
h
show/hide help
esc
cancel