economics
stoat | September 18, 2008Scenario one: you borrow some money. You exchange the money for shares. The shares go up, you exchange the shares for more money than originally, and so pay back the loan and you have a profit. If you get it wrong, they go down and you lose instead.
Scenario two: you borrow some shares. You exchange the shares for money. The shares go down, you exchange the money for more shares than originally, and so pay back the loan and you have a profit. If you get it wrong, they go up and you lose instead.
Symmetrical, yes? Very pleasing.
Indulge in #1, and no-one cares. Indulge in #2, and everyone…
stoat | September 14, 2008Make an impact. Engage your passion. Realize your potential. Around the world, the Lehman Brothers team is growing. Explore these pages to learn how you can build a career with us, and experience Lehman Brothers for yourself.
Oops.
Update: now we know why they keeled over.
Update: Incidentally, the Lehman bankruptcy is apparently 10x the size of Enron. And HBOS has now gone. And MS or GS?.
mikethemadbiologist | July 22, 2008I'm working on a post about science communication, so I'll leave you with a juicy excerpt and link to a post by Matt Taibbi where he describes the intersection of crony capitalism and economic inequality (italics mine):
Here's the thing: nobody needs me or Bernie Sanders to tell them that it sucks out there and that times are tougher economically in this country than perhaps they've been for quite a long time. We've all seen the stats -- median income has declined by almost $2,500 over the past seven years, we have a zero personal savings rate in America for the first time since the Great…
mikethemadbiologist | July 18, 2008...at least in Houston, Texas. With non-automobile transportation options in the news, on of the interesting things is that the actual entire cost of automobile transportation infrastructure--that is, roads, is rarely discussed, while it is almost always raised with mass transit. But, by way of Ryan Avent, lookee what happens when the lifetime cost of highways is accounted for (italics mine):
The decision to build a road is a permanent commitment to the traveling public. Not only will a road be built, but it must also be routinely maintained and reconstructed when necessary, meaning no…
purepedantry | July 9, 2008One of the difficult things about economics is that you can't really see an economy develop from scratch. There is no visible State of Nature. All you see is the continuous process.
In that light, here is a very interesting article. R.A. Radford was an economist taken prisoner by the Germans and put in a POW camp. He witnessed the formation of a POW camp economy and wrote about his experiences in an article published in 1945. The economy included as a prominent feature the use of cigarettes as money. From the article:
The permanent camps in Germany saw the highest level of commercial…
purepedantry | July 8, 2008At least someone is benefiting from the economic stimulus package:
An unforeseen and surprising beneficiary of the Economic Stimulus Plan, a plan that George Bush contends will "boost our economy and encourage job creation," has surfaced this week. An independent market-research firm, AIMRCo (Adult Internet Market Research Company), has discovered that many websites focused on adult or erotic material have experienced an upswing in sales in the recent weeks since checks have appeared in millions of Americans' mailboxes across the country.
So I guess all porn-mongers should be Keynesians.…
mikethemadbiologist | July 3, 2008By way of Pandagon, we learn that the stimulus check isn't, well, stimulating 'values':
An unforeseen and surprising beneficiary of the Economic Stimulus Plan, a plan that George Bush contends will "boost our economy and encourage job creation," has surfaced this week. An independent market-research firm, AIMRCo (Adult Internet Market Research Company), has discovered that many websites focused on adult or erotic material have experienced an upswing in sales in the recent weeks since checks have appeared in millions of Americans' mailboxes across the country.
According to Kirk Mishkin, Head…
mikethemadbiologist | June 13, 2008So we know Ben Stein lies about evolution. Now, Stein is lying about economics (italics mine):
During the June 11 edition of Fox News' Fox Friends, conservative commentator and actor Ben Stein misrepresented Sen. Barack Obama's tax plan to raise the capital gains tax rate on the wealthiest earners. Stein stated, "I'm very worried about increasing the capital gains tax, unless you want to just increase it on people that are terribly wealthy," whom he defined as "people that have an income of $5 million a year or more." He added, "But people that have incomes in the hundreds and the low…
mikethemadbiologist | June 4, 2008A month ago, I told you the rebate was the wrong kind of stimulus plan, that the best thing to would to be to give the money to state and local governments. Why? Because the states and municipalities will have to cut spending as property and sales tax revenues plumet. And now, when it's too late (cuz we already gave out lotsa money), Wall Street wants to adopt the Mad Biologist's stimulus plan:
That share is gigantic. At $1.8 trillion annually in a $14 trillion economy, the states and municipalities spend almost twice as much as the federal government, including the cost of the Iraq war.…
purepedantry | June 3, 2008Haha! The Law of Demand works. Price goes up. Driving goes down.
Figure: NYTimes
I repeat: if you want to lower demand for and hence consumption of gasoline, this is the best thing that has ever happened for you. Prices are the most effective climate change abatement policy, and a gas tax holiday is a horrible idea.
Hat-tip: Greg Mankiw
mikethemadbiologist | June 1, 2008In an interview (in which I think Huckabee was trying to ensure he wouldn't be chosen as the Republican vice presidential nominee), Mike Huckabee critiques conservative economic thought (italics mine):
The greatest threat to classic Republicanism is not liberalism; it's this new brand of libertarianism, which is social liberalism and economic conservatism, but it's a heartless, callous, soulless type of economic conservatism because it says "look, we want to cut taxes and eliminate government. If it means that elderly people don't get their Medicare drugs, so be it. If it means little kids go…
mikethemadbiologist | May 29, 2008Even using conservative measures, the Bush economy has underperformed. Mind you, I prefer measures like the real unemployment rates, various measures of economic equality, the median wage, and other Dirty Fucking Hippie statistics. But if you're the kind of person who thinks the economy is best described by the rise and fall of stock indices, well, it sucks to be you too. The Dark Wraith summarizes the markets' from January 22, 2001 through March 2, 2007:
The striking results were that real (that is, inflation-adjusted) returns on investment in standard, well-balanced index portfolios had…
purepedantry | May 19, 2008An team of economics all-stars -- including a couple Nobel laureates -- advocates in Science for the removal of legal barriers to establishing low stakes predictions markets in the US:
Several researchers emphasize the potential of prediction markets to improve decisions. The range of applications is virtually limitless--from helping businesses make better investment decisions to helping governments make better fiscal and monetary policy decisions.
Prediction markets have been used by decision-makers in the U.S. Department of Defense, the health care industry, and multibillion-dollar…
purepedantry | May 17, 2008Zimbabwe is in the midst of skyrocketing inflation (check out this chart in the Economist), so this story -- while amusing -- is not entirely unexpected:
I had lunch in Mutare yesterday, a town in Zimbabwe on the Mozambique border.
To give you a benchmark -- bread is currently over 110 million a loaf; on 22nd April it was 40 million per loaf.
The lunch bill: soup -- 50 million, oxtail -- 600 million, coffee -- 50 million, with no charge for the pink ice cream.
During the meal, one of my mates was drinking beer -- 750ml bottles of Castle Lager (fondly called bombers). He ordered a fifth one,…
purepedantry | May 16, 2008The WSJ has a fascinating article on the economics of bubbles and why it might be rational to support a bubble until it bursts:
Bubbles often keep inflating despite cautions such as Mr. Greenspan's famous warning of "irrational exuberance." Tech stocks rose for more than three years after he said that, in late 1996. Markus Brunnermeier, 39, thinks he understands why this happens.
Growing up near Munich, Germany, he expected to become a carpenter like his father. A building slump dissuaded him, and after stints in a tax office and the army he enrolled at the University of Regensburg.
He had…
purepedantry | April 29, 2008Paging Kara (or some other economist).
I have an economics question. We were discussing monopolistic competition in micro today. So I get how because the quantity produced under monopolistic competition is less than the efficient scale there is some dead weight loss on the level of the firm. The quantity is less than where the marginal cost and the demand curves cross.
Here is my question:
Is there a dead weight loss on the level of the market? Does monopolistic competition result in a dead weight loss as compared to perfect competition? Is it sort of like a tax that way, or am I just…
kcontreary | April 19, 2008The occasional 7-dwarf orgy notwithstanding (and you cannot convince me it never happened--I just know there was a night with a full moon and an opportunistic bottle of peach schnapps...), when most Western fairy tales end with "and they all lived happily ever after", they mean a prince and a princess. The ideal of one man and one woman united in marital bliss is so pervasive in the developed world that sometimes it takes an egghead (or a pervert) to question why.
That is exactly what three researchers (so eggheads it is) at Hebrew University have done. In a paper in this month's AER, Eric…
purepedantry | April 19, 2008Tyler Cowen breaks down the thinking that a carbon cap with dividends is better than a carbon tax:
A broader question is whether the carbon dividends in fact make the citizenry better off. First there is the question of the incidence of the initial carbon tax, which of course falls on individuals one way or another. Second, does just sending people money, collectively, make the populace better off? Aggregate demand effects aside, will the fiscal stimulus make the citizenry as a whole better off? No. Will printing up more money and sending it to everyone, even if that is popular, make…
mikethemadbiologist | April 13, 2008I've never understood why so many liberals and progressives think the Democratic field is strong. Yes, the candidates aren't insane, but neither of them are particularly good on economic issues. There is nothing in either Clinton's or Obama's records or speeches that suggests that they will do anything significant to reduce income inequality, other than perhaps letting the Bush tax cuts expire (and Obama has even been waffling on that).
And keep in mind, that income inequality isn't just a matter of economically integrating more people into society. That's not some gushy, "it's not fair"…
mikethemadbiologist | April 4, 2008Today, in 1968, Martin Luther King was assassinated in Memphis. This is why he was in Memphis.