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Posts Tagged ‘economics

“There’s nothing in the world so demoralizing as money”*…

 

The beginning of a MUCH longer infographic

This infographic was initially created to show how much money exists in its different forms. For example, to highlight how much physical cash there is in comparison to broader measures of money which include saving and checking account deposits.

Interestingly, what is considered “money” depends on who you are asking.

Are the abstractions created by Central Banks really money? What about gold, bitcoins, or other hard assets?

Since we first released this infographic in 2015, “All the World’s Money and Markets” has taken on a different meaning to us and many others. It’s a way of simplifying a complex universe of currencies, assets, and other financial instruments in a way that people can understand.

Numbers represented in the data visualization range from the size of the above-ground silver market ($17 billion) to the notional value of all derivatives ($1.2 quadrillion as a high-end estimate). In between those two extremes, we’ve added many other familiar measures, such as the GDP of California, the value of equities, the real estate market, along with different money supply metrics to give perspective…

See the infographic in its entirety– and ponder such take-aways as that the total of all derivatives outstanding today exceeds the total before the crash of 2008 the led to the Great Recession— at “All of the World’s Money and Markets in One Visualization.”

* Sophocles, Antigone

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As we batten down the hatches, we might send careful-calculated birthday greetings to Amartya Kumar Sen; he was born on this date in 1933.  A polymathic economist and philosopher, he has made material contributions to welfare economics, social choice theory, thinking on economic and social justice, economic theories of famines, and indices of the measure of well-being of citizens of developing countries.

Sen’s revolutionary contribution to development economics and social indicators is the concept of “capability” developed in his article “Equality of What”.  He argues that governments should be measured against the concrete capabilities of their citizens. This is because top-down development will always trump human rights as long as the definition of terms remains in doubt (is a “right” something that must be provided or something that simply cannot be taken away?). For instance, in the United States citizens have a hypothetical “right” to vote. To Sen, this concept is fairly empty. In order for citizens to have a capacity to vote, they first must have “functionings”. These “functionings” can range from the very broad, such as the availability of education, to the very specific, such as transportation to the polls. Only when such barriers are removed can the citizen truly be said to act out of personal choice. It is up to the individual society to make the list of minimum capabilities guaranteed by that society. For an example of the “capabilities approach” in practice, see Martha Nussbaum‘s Women and Human Development. [source]

Called the “conscience of his profession,” Sen was awarded the Nobel Memorial Prize in Economic Sciences in 1998; India’s Bharat Ratna in 1999 for his work in welfare economics; and in 2017, the Johan Skytte Prize in Political Science.

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Written by LW

November 3, 2017 at 1:01 am

“if we’re measuring the wrong thing, we’re going to do the wrong thing”*…

 

Money and markets have been around for thousands of years. Yet as central as currency has been to so many civilizations, people in societies as different as ancient Greece, imperial China, medieval Europe, and colonial America did not measure residents’ well-being in terms of monetary earnings or economic output.

In the mid-19th century, the United States—and to a lesser extent other industrializing nations such as England and Germany—departed from this historical pattern. It was then that American businesspeople and policymakers started to measure progress in dollar amounts, tabulating social welfare based on people’s capacity to generate income. This fundamental shift, in time, transformed the way Americans appraised not only investments and businesses but also their communities, their environment, and even themselves.

Today, well-being may seem hard to quantify in a nonmonetary way, but indeed other metrics—from incarceration rates to life expectancy—have held sway in the course of the country’s history. The turn away from these statistics, and toward financial ones, means that rather than considering how economic developments could meet Americans’ needs, the default stance—in policy, business, and everyday life—is to assess whether individuals are meeting the exigencies of the economy…

Eli Cook explains how America pioneered a way of thinking that puts human well-being in economic terms: “How Money Became the Measure of Everything.”

* “GDP is not a good measure of economic performance; it’s not a good measure of well-being.  What we measure informs what we do. And if we’re measuring the wrong thing, we’re going to do the wrong thing.”    – Joseph Stiglitz

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As we muse on metrics, we might spare a thought for Henry George; he died on this date in 1897.  A writer, politician and political economist, George is best remembered for Progress and Poverty, published in 1879, which treats inequality and the cyclic nature of industrialized economies, and proposes the use of a land value tax (AKA a “single tax” on real estate) as a remedy– an economic philosophy known as Georgism, the main tenet of which is that, while individuals should own what they create, everything found in nature, most importantly the value of land, belongs equally to all mankind.

George’s ideas were widely-discussed in his time and into the early 20th century, and admired by thinkers like Alfred Russel Wallace, Jose Marti, and William Jennings Bryan; Franklin D. Roosevelt sang his praises, as did George Bernard Shaw.  But with the rise of neoclassical economics, George’s star began to recede.  Still, more modern thinkers like Albert Einstein and martin Luther King were fans.

In a sequence that mimicked George’s arc of influence, it was George’s work that inspired Elizabeth Magie to create The Landlord’s Game in 1904 to demonstrate his theories; ironically, it was Magie’s board game that became in the 1930s (as recently noted here and here) the basis for Monopoly.

In 1977, Joseph Stiglitz showed that under certain conditions, spending by the government on public goods will increase aggregate land rents/returns by the same amount. Stiglitz’s findings were dubbed “the Henry George Theorem,” as they illustrate a situation in which Henry George’s “single tax” is not only efficient, it is the only tax necessary to finance public expenditures.

Henry George

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Written by LW

October 29, 2017 at 1:01 am

“I went to a restaurant that serves ‘breakfast at any time.’ So I ordered French Toast during the Renaissance.”*…

 

Casual dining chains — industry parlance for economical sit-down restaurants like Fridays, Applebee’s, Chili’s, and Buffalo Wild Wings — have subsisted in a dismal and persistent state of decline for about a decade. But in the last two years, things have gotten worse, with the number of people eating at casual dining chains overall falling every single month since June 2015; they are now the worst-performing segment of the entire restaurant industry. In recent months, Applebee’s has said it will close 135 locations this year; Buffalo Wild Wings will shed at least 60. Ruby Tuesday closed 109 restaurants last year, and put the whole company up for sale in MarchFriendly’sBennigan’sJoe’s Crab Shack, and Logan’s Roadhouse have all filed for bankruptcy.

Whatever your feelings about casual dining chains, they have been a vital part of the way that many Americans eat since the 1930s, when Howard Johnson began blanketing the highways with his trademark orange-and-teal restaurants — temples to affordable, quality fare in a wholesome setting. After plodding along for some 50 years, the genre exploded during the 1980s, as America entered a period of sustained economic growth and chains like Fridays, Olive Garden, and Applebee’s saturated suburban landscapes with their bland, softly corporate vision of good times and good food. While the brands and the fads have changed — RIP fried-clam sandwich, hello baby back ribs and buffalo sliders — the formula has remained more or less unchanged over the decades: middlebrow menu, solid value, and friendly service, consistently executed, from Pasadena to Tallahassee. Until recently, it was a formula that worked across cuisines, state lines, and demographics…

TGI Fridays and Applebee’s and their ilk are struggling as the American middle class and its enormous purchasing power withers away in real time, with the country’s population dividing into a vast class of low-wage earners who cannot afford the indulgence of sit-down meal of Chili’s Mix & Match Fajitas and a Coke, and a smaller cluster of high-income households for whom a Jack Daniel’s sampler platter at Fridays is no longer good enough. At the same time, the rise of the internet, smartphones, and streaming media have changed the ways that consumers across the income spectrum choose to allocate our leisure time — and, by association, our mealtimes. In-home (and in-hand) entertainment has altered how we consume casual meals, making the Applebee’s and Red Lobsters of the world less and less relevant to the way America eats.

As casual dining restaurants collapse in on themselves, TGI Fridays remains — unfortunately for it — an emblem for the entire category: In 2014, after years of slipping sales, the chain was sold to a pair of private equity firms, Sentinel Capital Partners and TriArtisan Capital Advisors, which swiftly began offloading company-owned restaurants to franchisees, essentially stripping the business for parts. Meanwhile, the chain’s beleaguered management has attempted to turn things around with a series of highly publicized initiatives, like delivering booze. Most notably, last year, Fridays unveiled a new concept restaurant in Texas — a stunning reversal from the tchotchke-laden image savagely memorialized in Mike Judge’s 1999 cult classic Office Space — that’s heavy on neutral tones, pale wood, brick walls, and exceedingly mellow, indistinct furniture; it looks like a neglected airport lounge in Helsinki…

A fascinating consideration of a restaurant that is both an avatar and a bellwether of the American middle class: “As Goes the Middle Class, So Goes TGI Fridays.”

See also: “Applebee’s Deserves To Die,” which explores the millennial dimension of this phenomenon:

The media-created meme that’s arisen about millennials killing things — beer, napkins, Hooters, cereal, casual dining establishments, and motorcycles, and golf, to name a few — is fascinating, again, because of what it reveals. Young people’s generally decreased standard of living and the preferences they have developed as a result are destroying established industries, and older people don’t like it. But these are rational responses to economic anxiety. Everything from high rates of homeownership to Hooters came out of a middle-class prosperity that doesn’t really exist anymore, because the middle class doesn’t really exist in America anymore, especially not for the millennials who had to grow up without the comfort of the American Dream. Chains united America, but things were different then, and for millennials at least, they’re irreparably broken now…

* Steven Wright

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As we avail ourselves of the Endless Appetizers, we might recall that it was on this date in 1945 that a self-taught engineer named Percy Spencer applied for a patent for a “microwave cooking oven”; he had been working in a lab testing magnetrons, the high-powered vacuum tubes inside radars.  One day while working near the magnetrons– which produced microwaves– Spencer noticed a peanut butter candy bar in his pocket had begun to melt — shortly after, the microwave oven was born.

In 1947, Raytheon introduced Spencer’s invention, the world’s first microwave oven, the “Radarange”: a refrigerator-sized appliance that cost $2-3,000.  It found a some applications in commercial food settings and on Navy ships, but no consumer market.  Then Raytheon licensed the technology to the Tappan Stove Company, which introduced a wall-mounted version with two cooking speeds (500 and 800 watts), stainless steel exterior, glass shelf, top-browning element and a recipe card drawer.  It sold for $1,295 (figure $10,500 today).

Later Litton entered the business and developed the short, wide shape of the microwave that we’re familiar with today. As Wired reports, this opened the market:

Prices began to fall rapidly. Raytheon, which had acquired a company called Amana, introduced the first popular home model in 1967, the countertop Radarange. It cost $495 (about $3,200 today).

Consumer interest in microwave ovens began to grow. About 40,000 units were sold in the United States in 1970. Five years later, that number hit a million.

The addition of electronic controls made microwaves easier to use, and they became a fixture in most kitchens. Roughly 25 percent of U.S. households owned a microwave oven by 1986. Today, almost 90 percent of American households have a microwave oven.

Today, Percy Spencer’s invention and research into microwave technology are still being used as a jumping off point for further research in radar and magnetron technologies.  Different wavelengths of microwaves are being used to keep an eye on weather conditions and even rain structures via satellites, and are able to penetrate clouds, rain, and snow, according to NASA.  Other radar technology use microwaves to monitor sea levels to within a few centimeters.

Police are also known to use radar guns to monitor a vehicle’s speed, which continually transmit microwaves to measure the waves’ reflections to see how fast one is driving.

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Written by LW

October 8, 2017 at 1:01 am

“Whoever said crime doesn’t pay is an idiot. It pays great, which is why there is so much of it.”*…

 

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Low-level criminals in the US make an average of $900 per week, according to an estimate published in the academic journal Criminology.

So, people who commit small crimes, like robberies, forge checks, and deal drugs, are making more money per week than the average US worker ($885).

Low-level criminals are also making more money per week than high school dropouts ($504) and college dropouts ($756).

That might be in part because wage growth (in the formal economy) is so sluggish in the US, even though unemployment is low, at 4.4%. Wages grew only 2.5% between mid-2016 and mid-2017. While some analysts would expect it to be growing at 3.5%

More at Quartz Index.

* Jay Crownover

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As we sigh from the straight and narrow, we might send well-organized birthday greetings to Joseph Michael “Joe Cargo” Valachi; he was born on this date in 1904.  A member of Lucky Luciano’s mob family from the 1930s through the 1950s, Valachi was primarily involved in rackets and gambling– until his racketeering conviction in 1959, for which he was sentenced to 15 years in a federal prison.

Valachi attained his notoriety– and historical significance in 1963, when he was the star witness in a government inquiry into the Mob (the McClelland Committee).  He provided the Committee with graphic details of Mob life, and named six New York are Crime families.  The first member of the Italian-American Mafia to publicly acknowledge its existence, he is credited with popularization of the term “Cosa Nostra.”

After returning to prison, Valachi teamed with appointed writer Peter Maas to craft his memoirs, The Valachi Papers, which were published in 1968.

Valachi testifying

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Written by LW

September 22, 2017 at 1:01 am

“Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution”*…

 

What can a 19th-century rebellion against automation can teach us about the coming war– the robots are coming!– in the job market?

Clive Thompson, an author and journalist at the New York Times Magazine and Wired, revisited Luddite’s history in an article for The Smithsonian to see what it could teach us. As machine learning and robotics consume manufacturing and white-collar jobs alike, the 200-year-old rebellion’s implications for automation are more relevant than ever, says Thompson:

“The lesson you get from the end of the Luddites is: Do the people that are profiting off automation today want to participate in distributing their profits more widely around the population, or are they going to fight just as hard as they did back then?”

That economic and political question is hanging over western democracies coping with a wave of populism seemingly tracking a widening gap between stagnant wages and ballooning wealth at the top. While automation eventually tends to create new jobs even after it destroys old ones, that’s little consolation for millions of workers whose skills and experience are obsolete…

More on this all-too-relevant history in a interview with Thompson: “Luddites have been getting a bad rap for 200 years. But, turns out, they were right.”

And do read Thompson’s original article: “When Robots Take All of Our Jobs, Remember the Luddites.”

Then, check out “Robots don’t have to take over jobs in order to be a problem for workers.”

* Stephen Hawking

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As we heft our hammers, we might we might send thoughtful birthday greetings to José Ortega y Gasset; he was born on this date in 1883.  A philosopher and essayist, he is perhaps best known for The Revolt of the Masses, which characterized 20th-century society as dominated by masses of mediocre & indistinguishable individuals– a conception tha converged with other “mass society” theorists like Karl Mannheim, Erich Fromm, and Hannah Arendt.  (Lest his view be seen as too grim and judgmental, he is memorialized in what has become known as “the Ortega hypothesis,” based on a quote in The Revolt of the Masses, that states that average or mediocre scientists contribute substantially to the advancement of science.)

In exile during the Spanish Revolution, he refused to support either side or to hold academic office under Franco.

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Written by LW

May 9, 2017 at 1:01 am

“There are people in the world so hungry, that God cannot appear to them except in the form of bread”*…

 

We stand at the precipice if we don’t re-evaluate our understanding of poverty and inequality. The narrative in the neo-liberal west is that if you work hard, things work out. If things don’t work out, we have the tendency to blame the victim, leaving them without any choices. Brexit, Le Pen, and the defeat of Hillary Clinton are examples of the cracks that result from inequality and poverty, symptoms of my childhood experience writ large. The Piketty pitchforks are out, and the march to global disorder can only be arrested by adopting measures that begin to price in the stacked deck that I and anyone else born into deep poverty sees, and resents.

I believe we will see the Italian Five Star Movement submit a referendum to leave the EU this year, and that Marine Le Pen has better than even odds of winning the French election. The EU is in danger of buckling under a globalist defeat and may exist in name only two years from now.

These trends are being accelerated by the blind belief that the poor have failed to seize the opportunities that the market or globalization has created. This myth deserves to be taken off life support—and the emerging, empirical, and carefully observed science of poverty can help us do so if we pay it the attention it deserves…

A powerful plea for a fundamental re-understanding of the economic inequality that vexes our society, and of the myth of meritocracy that has helped sustain it: “Why Poverty Is Like a Disease.”

* Mahatma Gandhi

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As we agree with FDR that “the test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little,” we might recall that this date in 1907 was “Bloody Tuesday.”  The San Francisco streetcar strike, which had begun two days earlier, erupted into violence when armed strikebreakers fired into an angry crowd of strike supporters.  Soon armed strike sympathizers returned fire.  2 died; 20 were injured.

Armed strike breaker, left, shoots into the crowd on Bloody Tuesday, May 7, 1907. The original caption in The San Francisco Examiner said that “Photographer Coleman” took the picture “the moment before the man running beside him was fatally shot.”

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Written by LW

May 7, 2017 at 1:01 am

“If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid”*…

 

Economists have a name for this

There are plenty of economics terms regular people would find not only very interesting, but useful for thinking about policy. Sadly, the most commonly used econ words tend to be the ones with the vaguest meanings — “rational,” “equilibrium” and “efficient.” Instead, here are some of my suggestions:

• Endogeneity

Everyone knows that correlation doesn’t equal causation, but somehow people seem to forget. Endogeneity is a word that can help you remember. Something is endogenous when you don’t know whether it’s a cause or an effect (or both). For example, lots of people note that people who go to college tend to make more money. But how much of this is because college boosts earning power, and how much is because smarter, harder-working, better-connected people tend to go to college in the first place? It’s endogenous. The media is full of stories about how which kind of people stay married, or what diet is associated with better health. Whenever you see these stories, you should ask “What about endogeneity?”…

Noah Smith suggest four other useful concepts in “5 Economics Terms We All Should Use.”

* John Maynard Keynes

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As we get dismal, we might send fancy birthday greetings to Sir Frederick Henry Royce; he was born on this date in 1863.  An engineer and car designer, he founded (with Charles Rolls and Claude Johnson) the Rolls-Royce company, which introduced the first successful luxury cars in the emerging automotive industry.

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Written by LW

March 27, 2017 at 1:01 am

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