Blog posts on economics

Posts selected fromManagement Blog - Engineering Blog - Investing Blog and other blogs

• Chart of Net Government Debt from 1980 to 2013 by Country

  Bloomberg converted the data to look at debt load per person (looking at gross debt – estimated for 2014). Japan has ill-fortune to lead in this statistic with $99,725 in debt per person (242% of GDP), Ireland is in second with $60, 356 (121% of GDP). USA 3rd $58,604 (107%). Singapore 4th $56,980 (106%). Italy 6th $46,757 (133%). UK 9th $38,939 (95%). Greece 12th $38,444 (174%). Germany 14th $35,881 (78%). Malaysia 32nd $6,106 (57%). China 48th $1,489 (21%). India 53rd $946 (68%). Indonesia 54th $919 (27%).

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• There is No Such Thing as “True Unemployment Rate”

  As Dr. Deming said: “there is no true value” of any measured process. The results depend on the process which includes the operation definitions used.

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• Government Debt Held Within the Country Versus That Held Externally

  If you owe debts to other countries you have to pay that money outside the system. So it takes a certain percentage of production (GDP) and pays the benefit of that production to people in other countries. This is what has been going on in the USA for a long time (paying benefits to those holding our debt). Ironically the economic mess created by central banks and too-big-to-fail banks has resulted in a super low interest rate environment which is lousy for lenders and great for debtors (of which the USA and Japanese government are likely the 2 largest in the world).

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• Wealthiest 1% Continue Dramatic Gains Compared to Everyone Else

  The least trust-fund-baby favoring country cultures are Scandinavian countries. The USA has been moving to an increasingly trust-fund-baby favoring focus over the last few decades with the expected increase in kids incomes being more related to their parents income than any other factor. In the USA now nearly 50% of someone’s income can be “explained” by their parents income.

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• We Need to Consider Changing Conditions When Looking at Historical Stock Returns

  Just to over simplify the idea if lets say the market valued the average stock at a PE of 11 and everyone found stocks a wonderful investment. And so more and more people buy stocks and with everyone finding stocks wonderful they keep buying and after awhile the market is valuing the average stock at a PE of 14.

  Within the market there is tons of variation those things of course are not nearly that simple, but the idea I think holds. Well if you look back at historical data the returns will include the adjustment of going from a PE of 11 to a PE of 14. Now maybe the new few decades would adjust from PE of 14 to PE of 17 but maybe not. At some point that fundamental re-adjustment will stop.

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• Exploitation or Economic Support as a Tourist?

  People can still argue about the benefits and costs of chasing tourist money but when there are significant economic benefits that the people actually get (that are not taken by others) it is very hard for me to say it is wrong.
  
  I do get a bit annoyed at people from rich countries that downplay the importance of money. It is easy to say other things are more important when you have lots of cash.
  
  And that brings me back to a specific point about the quote "must be a very exhausting existence for them." While this may be true it doesn't mean that they would be better off without being bothered. It may well be without the botheration of tourists things would be even worse.

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• When You See the Problem as Capitalism Instead of Corruption You Seek to Solve the Wrong Problem.

  Capitalism has huge benefits and some issues. I am frustrated that we are allowing anti-capitalist ideas to be called capitalist. Those ideas are predominately about allowing huge businesses to subvert markets and corrupt the political process.
  
  Corruption in our political system which then allows corruption of free markets (as favors to those giving politicians cash) is not "Capitalism." It is corruption.
  
  Free trade is good. The secret TPP and other corporate-welfare/copywrong-cartel bill is not.

  ...

  A fundamental tenant of capitalism is free markets (based on the idea of perfect competition) in which no actor has the power to subvert the market. This was foreseen from the very beginning (in Wealth on Nations by Adam Smith) as an important criteria without which society would not benefit from capitalism as powerful interests would collude to prevent markets from functioning.

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• Medical Tourism

  Medical tourism (traveling overseas to get medical care) is growing and likely to continue to do so. The USA’s extremely high costs of medical care push people to find more reasonable health care solutions. Also in some countries the very rich seek out advanced treatments outside their country.

  Seeking more cost effective and more customer focused health care options are likely to lead to booming markets in catering to these customers. Many countries have seen this as a smart market to focus on. And I think they are right.

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• Profiting from Self Driving Cars

  I believe a huge amount of money will be made due to self driving cars. Figuring out who will make that money is not easy.

  The value of being able to use the time you are moving to your destination instead of concentrating on driving is huge. And the reduction in deaths, serious injuries, injuries, damages, frustration and waste of time caused by accidents will be a huge benefit to society.

  This innovation also dramatically shifts markets in ways that are predictable but also in ways that are not...

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• The Fed Should Raise the Fed Funds Rate (Sep 2015)

  The issue I see is that a .25% Fed Funds rate is adding gasoline to the economy via low interest rates. Many people are saying an increase is like taking away the gasoline and taking out a fire extinguisher. But it really isn’t. Raising the rate to .25% is slightly decrease the amount of gas you are adding to the fire.

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• A Wise Way to Subsidize Electricity Rates

  When I lived in Malaysia I learned that the residential electricity rates were very low for the low levels of use and climbed fairly rapidly as you used a lot of electricity (say running your air conditioner a lot). I think this is a very good idea (especially for the not yet rich countries).

  Effectively the rich end up subsidizing the low rates for the poor, which is a very sensible setup it seems to me. The market functions fairly well even though it is distorted a bit to let the poor (or anyone that uses very little electricity) to pay low rates.

  In a country like Malaysia as people become rich they may well decide to use a great deal of electricity for air conditioning.

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• The Worst Aspect of TPP That Gets Nearly No Attention

  Sadly among the worst aspects of the Trans-Pacific Partnership TPP (and also the TTIP) is the promotion of the copyright cartel's agenda along with very bad patent policy. Almost no one with political power is even talking about these huge problems with it.
  
  I support free trade. I don't support the politically motivated trade agreements that impose the USA political donors' wishes on citizens of the USA and other countries.

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• USA Health-Care System Ranks 50th out of 55 Countries

  None of these rankings are perfect and neither is this one. But it is clear beyond any doubt that the USA healthcare system is extremely costly for no better health results than other rich countries (and even more expensive with again no better results than most poor countries). It is a huge drain on the economy that we continue to allow lobbyists and special interests to take advantage of the rest of us...

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• Drug Prices in the USA

  There is the contention that without the ability to overcharge American’s the drug companies won’t invest in Research and Development. This is such a poor argument I can’t believe people can make it without suffering a big blow to any credibility they had. Obviously drug development has a very high cost (creating a high fixed cost) and often drug manufacture has a small marginal cost (though at times the marginal cost is also high). Right now the companies count on the American market to provide funds for much of the research, development, marketing and profits. Then they sell the drugs in other markets only looking to maximize profits looking at marginal costs. Obviously, if they no longer could count on excessive prices in the United States they would have to spread the fixed cost over the rest of the world. The argument that they won’t invest in research and development without excessive costs in America is false. They would adjust their pricing structures around the world based on losing the cash cow of the American consumer. That should be obvious to anyone who even took one economics course.

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• Price Discrimination in the Internet Age

  The argument that you need to cripple products by geographic area to cope with currency fluctuations is false. It might be that a company wants to practice Price Discrimination to charge more where they can get more and less where they can get less. In the view of such a company, the internet, and other factors, have made it increasingly easy for people to buy in the low cost region and resell the items in the region where the company wants to charge higher prices. If you want to keep practicing price descrimination as a company you have to erect barriers to the free trade of your products by your customers.

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