Category: Economics

How to summarize half a dozen developmental economics books in one sentence

You want to boil down hundreds of pages from several books? I came across one sentence that does a good job:

…poverty is a symptom— of the absence of a workable economy built on credible political, social, and legal institutions.

I’ve been reading a lot of economics books lately. (Okay, okay, you can pray for me – a CPA reading economics books for relaxation and learning and growth.)

(Cross-post from my other blog, Nonprofit Update.)

If we can figure out how we on this planet have gotten to the place where we have the highest wealth, best health, and longest life expectancy in history, we can keep going on the same path. Likewise, we can maybe figure out how to bring along those people groups that don’t share in the abundant bounty.

Here is the ache in many hearts:  How do we ‘solve’ poverty and suffering?

Continue reading “How to summarize half a dozen developmental economics books in one sentence”

How does this thing called creative destruction, or people losing their jobs, actually create more jobs, expand the economy, and make everyone better off?

Creative video from Prof. Bryan Caplan explains Make Progress, Not Work.

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=fEbdgpIQ7n4]

 

A few highlights:

Continue reading “How does this thing called creative destruction, or people losing their jobs, actually create more jobs, expand the economy, and make everyone better off?”

The minimum wage made unemployment worse during the Great Depression

Minimum wage laws also extended the Depression. That from Amity Shlaes, in The Minimum Wage Makes Depressions Worse.

In a lousy economy, forcing wages above the value of the output makes employment worse. When there is currency deflation the effect is compounded. Adding another layer of minimums every couple of years and slowly gathering more employers into the minimum wage rules further compounds the effect.

If you can’t afford the staff you have, and you can’t reduce wages, then what options are left? Lay off more employees. Shrink your company.

Continue reading “The minimum wage made unemployment worse during the Great Depression”

What strange, mysterious, magical force is loose that increased US production of both oil and gas by one-third in six years?

Is it targeted federal subsidies?  Breakthrough law from the Congress?  Socialist industrial policy?  Keynesian monetary policy?  Blockbuster documentary from Hollywood that changed minds across the country?  More support for college loans? A landmark special on network TV? Quantitative Easing?

No. It’s none of those things.

Barron’s is pondering the question as well:  The Secret of U.S. Energy Success.

Federal subsidies have produced a substantial increase in some things. The editorial provides a partial list. Subsidies have given us…

..our national surpluses of grain, milk, unemployment, nonprofit companies, disabilities, and mortgage debt.

Those subsidies didn’t produce the massive increase in oil production in Bakken and Eagle Ford. 

The best paragraph from the editorial: Continue reading “What strange, mysterious, magical force is loose that increased US production of both oil and gas by one-third in six years?”

If you are still scratching your head over the recovery, here’s a graph to explain why

The recession ended way back in 2009. Sitting here in California is doesn’t feel like it is over.

Check out the graph at Carpe Diem for a visual explaining my confusion:  The current state of the US Economy explained in one chart.

Compared to the peak at the start of the recession, GDP has now increased about 5.6% and employment is down about 1.4%.  GDP is at record high with less jobs that the start of the recession.

Continue reading “If you are still scratching your head over the recovery, here’s a graph to explain why”

Where is the inflation?

It’s hiding. It is taking place outside those things measured by the CPI.

There’s not any inflation in the CPI. The annual inflation rate for the preceding 12 months was 1.2% in November ’13.  Notice something odd in the monthly inflation rates from January through November?  0.0%, 0.7%, (0.2%), (0.4%), 0.1%, 0.5%, 0.2%, 0.1%, 0.2%, (0.1%), 0.0%.

Three things jump out. First, three months had a decrease. Second, only one month had a large increase and it was followed by two declines. Third, the numbers are really small.

The ever-expanding Fed balance sheet

I’ve been scratching my head for years about the really low inflation shown in the CPI measurements. Why the head scratching?

Check out the ongoing explosion in the Fed’s balance sheet. Continue reading “Where is the inflation?”

Is life far better than years ago?

Absolutely yes. In most measures, most people are better off than 30 or 100 or 250 years ago.

Life just keeps getting better and better when we look at things like life expectancy, health care, standard of living, number of people living in abject poverty (the portion of people world-wide living on inflation-adjusted $1 a day dropped from 42% in 1981 to 14% today), availability of air travel, astounding technology, and the rapidly dropping cost of that astounding technology.

That’s the overarching point of a new book, The Great Escape: Health, Wealth, and the Origins of Inequality, by Angus Deaton. The New York Times has a great review: A Cockeyed Optimist.

Continue reading “Is life far better than years ago?”

A Christmas wish list – “An End to Quantitative Easing”

All I want for Christmas….

 

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=PhgGixOLn_Q]

 

(Cross-posted from my other blog, Attestation Update.)

A few of the many funny lines –

Continue reading “A Christmas wish list – “An End to Quantitative Easing””

The Great Recession just sort of happened. The Fed had absolutely nothing to do with it.

A long article from the Federal Reserve on the housing bubble and recovery from the great recession doesn’t mention the fed’s role in anything other than generating the recovery. See:  Subprime Mortgage Crisis. Absolutely no mention of the massive role played by easy money and Congressional policy pumping up the housing market.

The first part of the article is called How and Why the Crisis Occurred.

The short paraphrase is the runup in housing prices, increased demand for homes, surge in subprime loans, collapse of prices, and mass of foreclosures kinda’ sorta’ just happened.

No cause mentioned, especially no role assigned to the federal government in general or the Fed in particular.

Let’s look at the article in more detail.

Continue reading “The Great Recession just sort of happened. The Fed had absolutely nothing to do with it.”

Happy Thanksgiving! – “The true patron of this holiday feast – property rights”

The story of how the Pilgrims went from starving to plenty that I didn’t hear in school. In William Bradford’s own words:

 

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=66QdQErc8JQ#t=135]

Continue reading “Happy Thanksgiving! – “The true patron of this holiday feast – property rights””

Scary simple explanation of externalities

That’s the idea that you push off on other people the negative costs of what you do.

Steve Landsburg gives a wonderfully simple explanation of the idea of externalities at his post RIP, Ronald Choase, reflecting on the Nobel prize level contributions of an economist that passed from this world last week.

Continue reading “Scary simple explanation of externalities”

“How Many Servants Do You Have?”

That is the question posted by Joy Pullman in her post of that title at Values & Capitalism.

She explains:

In “The Wealth of Nations,” Smith points out that the number of people under your command is a measure of power and wealth. Continue reading ““How Many Servants Do You Have?””

200 years of economics history in one editorial, which explains how we got into our current mess

World War I generated most of the horrible disasters we’ve seen in the last 100 years.

With the possible exception of the decline of the Roman Empire, World War I was the greatest disaster in human history.

It contributed mightily to the Great Depression, which fed the Nazi revolution. That in turn led to WWII.

The war unleashed the totalitarian ideologies of communism, fascism and Naziism, which very nearly destroyed Western civilization. Their poisonous legacy lives on in radical Islamic extremism. 

Continue reading “200 years of economics history in one editorial, which explains how we got into our current mess”

Lots of blame for the financial crisis of ’08 falls on the federal government

There is a huge amount of blame to be spread for the Great Recession that started in 2008. While the recession technically ended four years ago back in June of 2009, most people in California and lots of charities here are still feeling the effects.

I see exquisitely little discussion of how intentional federal policies created the distortions that led to the financial crisis. An op-ed in the Wall Street Journal by Phil Gramm and Mike Solon help explain why much of the blame belongs to the federal government:  The Clinton-Era Roots of the Financial Crisis.

To make this non-partisan, I’ll point out that the flawed policies from the Clinton administration were ratified, continued, and extended by the Bush administration. Not to worry, both parties have worked lots of overtime to earn their share of blame.

While you can argue on the proportionate blame between the two parties, I’ll point out that regardless of the allocation you determine, 100% of that particular allocation falls on deliberate federal policy.

Initial efforts to persuade private pension plans to fund low-income housing failed. The administration forced Continue reading “Lots of blame for the financial crisis of ’08 falls on the federal government”

What caused the radical change in the graph of GDP over the last 1,000 years?

(Cross-post from my other blog, Freedom is Moral.)

You really need to check out the graph of GDP per person for the last 1,000 year in the U.S., Europe, and the rest of the world.

AEI – The most important economic chart in Western civilization – and how it happened.

Then you need to ask yourself why everyone on the planet had a horrible income level since forever until around 1800.

Continue reading “What caused the radical change in the graph of GDP over the last 1,000 years?”