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kaleberg
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I saw that in our local paper. We live on the Strait, not the Pacific, so we usually see river otters. We've seen sea otters a few times though. We assume they are young males out exploring.
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We've already been through this before at least once, though probably numerous times. If nothing else, the 1930s were all about obsolete labor and slack demand. In the short run it was addressed by increasing the demand for public goods like infrastructure and armed forces. In the long run it was addressed by increasing labor's power in the marketplace. (This involved unionization, education and kicking women out of the work force.) There's no reason we cannot apply the same solution and increase the supply of public goods and the power of labor. We don't have to do it exactly the same way, as long as the changes increase demand for labor and its negotiating power. This is necessarily inefficient. The most economically efficient population is one, something libertarians have recognized, though only Ray Kurzweil and his ilk have grappled with the implications.
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It isn't about racism, it's about economic development. Economic development requires industrial policy and protectionism. That's simple history. It isn't just tariffs either. It includes preferences for local firms, cross subsidies, special rules for foreigners operating in country and so on. In the late 19th century, the US was notorious for this. In the 1950s, Japan was notorious for this. Now it's China, Korea and Taiwan. (In the 18th century, of course, England was notorious for this, so notorious that thirteen north American colonies rebelled over it.) Replacing a $20 an hour job in one country with a $5 an hour job in another country decreases global demand in the short run. In theory, it is possible for all parties to benefit from tearing down trade walls, but that requires some mechanism for generating consumer demand. In the 1950s and 1960s, the US had massive subsidies to white middle class men. It ran a deficit and built all sorts of infrastructure including the suburbs. As long as the US saw itself as growing and improving, it could subsidize US and overseas development (e.g. in Europe). As soon as the reactionaries managed to create enough fear about the future, such forward looking policies came to an end. Unfortunately, this ideological victory about the future came at the same time as the ideological victory about trade. That meant we got the worst of both worlds. We had decreased global demand and no mechanism for increasing local demand. The 1930s were all about demand side economics. The 1980s were all about supply side. Given our abandoning of the policies that increased national demand, our adoption of policies that decreased global demand were a mistake. P.S. Sorry, this is not a lump of labor argument. Even if wages were the same everywhere, new factories tend to be more efficient in their use of labor which means they produce less demand.
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Before Uber and Lyft, getting a taxi in Seattle, except right in front of the Sheraton, was a serious challenge. I don't know how many times I'd call the dispatcher and be told "15 minutes" for the next hour. Now, the taxi often did arrive within 15 minutes, but there was massive uncertainty. The taxi could arrive in 15 minutes or an hour and 15 minutes. This, amazingly, was even after they started having GPS equipped taxis so that the dispatcher actually knew where the cab was physically located. Uber and Lyft can give me an arrival time that is rarely more than two or three minutes off. Once I had to wait an extra five minutes up in Ballard, but this was unusual, and it was often next to impossible to get a cab up in Ballard. I'm not 100% sure of what accounts for the difference, but I get the impression that there are more Uber and Lyft drivers than taxi drivers buying shifts from any particular taxi company. If there were N empty, or soon to be empty, taxis in my area, I eliminated 90 of them by choosing to call a particular taxi company. It hasn't been all smooth sailing. The city government does regulate Uber and Lyft, and there is a drivers' association that could, in theory, develop some political and economic power to push back. If nothing else, drivers play off Uber and Lyft. I often see both Uber and Lyft paraphernalia in the cars that take me from place to place. This may or may not last. On the other hand, if Uber and Lyft squeeze the drivers too hard, their technologies are no longer as advanced and exclusive as they once were. It might have cost $100M five years ago, but it would probably cost only $10M to build the same dispatch software today. Right now, it isn't worth anyone's while, but that is a wild card one has to consider when thinking about disruption.
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The real weakness in investment is the lack of wage growth which has limited consumer demand. Flat, or even shrinking, consumer demand means flat or shrinking demand for investment. When there is nothing to invest in, your best bet is the stock market.
Toggle Commented Jul 16, 2016 on Paul Krugman: Bull Market Blues at Economist's View
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It is interesting to compare the pre-antitrust trial and post-antitrust trial Microsoft operating systems. The anti-trust case made a major difference. Microsoft made a point of suborning industry standards. I knew a guy at Microsoft working on a Java system and specifically told not to look at the available standard so that Microsoft would create its own. Since the trial, Microsoft has been a lot more accepting of industry standards. They still provide the preferred operating system, but don't have the market power they used to. The current monopolists include players like Google, Facebook and Apple. They control large marketplaces and impose a lot of closed standards. It will be interesting to see if there will be any anti-trust action against them in the future.
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Sounds right to me. You don't hear the phrase 'natural monopoly' very much any more, but the concept is still important.
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And the problem with nationalism is ... ? I've been waiting for a good answer. So far, it has been a very successful system, far more successful than its alternatives. In fact, no nation has developed its economy without it. Nationalism is not the opposite of international cooperation. In fact, nationalism is necessary to get the benefits of international cooperation. It's hard to have win-win solutions when the interested parties are excluded from the negotiations.
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Leaving the EU implies the creation of a gradient where none existed before. That creates opportunities for arbitrage. If anything, I think the UK will do quite well out of leaving the EU.
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I think Blissex has the right of it. There really is no "interest rate" since access to credit depends on so many things besides credit-worthiness. If you were a woman in 1965, you couldn't get credit in your own name no matter what your income, assets and prospects were. Pretending that there is AN interest rate or even a set of rates based on any form of rational reasoning is, at best, silly. Since the economic crisis, I've made a number of loans outside of the general financial system. Many of these have involved being paid in kind. I financed new restaurants by buying gift cards at a discounted rate. I finance several local farmers by buying food credits at a discounted rate. I back projects on Kickstarter and at other sites. Why is there this preponderance of alternate credit schemes? It isn't the internet. One of the restaurant loans and all of the agricultural loans have been face to face with no internet involved at all. The answer is simpler than that. There has been a general seizure of the credit system in this country for all but the connected classes. Sovereign governments, large corporations and wealthy speculators can borrow through the banking system at delightfully low rates, while actual businesses and consumers, for that matter, pay at much higher rates or go around standard credit channels. If I were writing a PhD thesis in economics today, I'd strongly consider trying to estimate the size of this informal economy and its relative economic impact. There is a reason that micro-credit, for all its failures, struck a chord with the public. Our banking system has become more or less irrelevant to our economy.
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Have you considered Hackett-Fisher's 'The Great Wave' for the graduate European history course? The Europeans have done a lot of work on prices. The great wave of the title is the 200 year cycle of pricing stability and instability. The book covers the late Middle Ages to the late 20th century. It's rather interesting to connect economic history to political, military and intellectual history. Have you considered Berle & Means 'The Modern Corporation ...' for the American or 20th century history class? It provides a good history of the modern corporation as it developed along with American economic power. It raises all sorts of interesting questions about ownership, control and regulation. It was the manifesto for the laws that gave the US and its middle class decades of economic growth. I can appreciate why you are focusing on modern books, especially since you are trying to get your students to recognize blind spots, over-generalizations and biases. Still, you might consider some older sources. If nothing else, the blind spots, over-generalizations and biases will be more obvious. Even better, it is possible to find out just what happened next, something more difficult with recent works.
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This whole "accounted for in its equity and debt prices" is basically garbage. It lacks rigor and goes against the empirical evidence. Equity prices are determined by fashion and the relative returns of alternative investments. They are not priced in by individual entity, but by general category. This has always been the case, but modern financial technology, like sector analysis and mutual fund structuring, has further weakened individual equity pricing. Anyone investing in equities over the last 30 years realizes this. Debt prices are all about conventional wisdom and who is paying for the rating. Anyone actually following the business thinks those Road Runner cartoons where the coyote runs off the cliff and doesn't fall until he looks down are completely realistic. Skin color of the borrower probably makes more of difference than anything on the balance sheet or knowledge of the business. I think the big investment houses pay economists to spout nonsense like "accounted for in its equity and debt prices" as a ruse to increase their own profits at the expense of unsophisticated investors. Maybe I'm wrong. Maybe it's just the massive capital glut, but "accounted for in its equity and debt prices" just isn't how finance works.
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People tend to distrust the experts when their share of the pie keeps shrinking. People will put up with fairly corrupt experts if some of the graft trickles down to them. Whole cities, even nations, were run on that principle. Corruption, of course, is one of the charges made when the experts fail, but it is only part of the story. Look at Europe in the 14th century. The whole area was run by an international elite, an aristocracy divorced from location and a church similarly without roots. When the plagues, famines and political instability started, that international elite lost its credibility and we saw nationalism, rooted in location, language and ethnicity, on the rise in Scotland, Switzerland and Flanders. By the 16th century, Europeans were ruled by local elites and international religious authority much weakened.
Toggle Commented Jun 30, 2016 on The Real Lesson From Brexit at Economist's View
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Are they using height as an indicator of food supply? In modern Africa, farmers are taller than hunter gatherers. It is perfectly possible to have a well fed society of people shorter than the modern Dutch. If you are looking at heights, you have to consider that there is more than one reason someone might be short or tall. Granted, height requires both a genetic propensity to grow tall and adequate food to enable such growth, but lack of height may be a result of genetic propensity or lack of adequate food. It is quite possible that there was one group of tall hunter gatherers after the ice age, but then a group of shorter farmers moved into the area. There seems to be an implicit argument that persistent food shortage selected for shorter people who were more likely to have children survive in the face of a straitened food supply. This implies that a genetic propensity to be taller is also associated with a requirement to be taller in order to reproduce. That is, someone capable of growing to 6' in height would have a lower chance of reproductive success than someone capable of growing only to 5'6" in the face of the same food shortage. Without adequate food, neither party will grow to his or her potential height, but it is not clear that this failure to achieve potential height would have the necessary differential effect on their ability to have their children reproduce. It is quite possible that someone of Dutch ancestry given only some fraction of optimal nutrition would have more problems reproducing than someone of Nepali ancestry similarly deprived, but the biology is not there. We don't know, and we aren't going to do the experiment necessary to find out. (At least I hope we aren't.) I'm guessing that the genetic propensity for height is driven by all sorts of factors and has limited impact on reproductive success.
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The reason US workers were once doing so well was simply that they had unions with political and economic clout. Most of those unions were in the manufacturing sector, and it is those unions that have been hurt the most. Globalization allowed manufacturers to move production offshore without worry about tariffs and other non-tariff restrictions like those in China, Korea, Taiwan and Japan. Needless to say, wages and benefits in what remains of manufacturing in the US have collapsed. Immigration helped prevent unionization in other sectors, the low end services industry and agriculture. There was an able and ready supply of workers who would accept lower salaries and lacked any political rights or recourse when wages were stolen or work was unsafe. Since the focus of enforcement was against immigrant workers and not their employers, they never developed the clout of earlier generations of immigrants.
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This might be a reference to Thatcher and her heirs' anti-union policies. There's also the crummy school system which is now making it harder for anyone to even get A-levels which has to be great for economic mobility. There's immigration which does hurt wages at the lower end of the wage scale. There has been a lot of outsourcing. There's the London Only approach to prosperity where nothing is being done for any place but the nation's economic center. Nine out of ten of the poorest areas in northern Europe are in England, and that's not because England is full of goof offs and the like.
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I suppose it is a pity that London can't remain in the EU, but let England leave. That would be more true to the vote. Given how poorly England has done compared to London, I doubt most people will notice any particular increase in impoverishment.
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I wonder if anyone outside of London will even notice that structural recession. Most of England has been in a structural recession since the late 70s. Nine out of ten of the poorest areas in northern Europe are in England. Will Brexit really make them poorer? Is it really going to do more damage than fiscal austerity? Ironically, London is going to do very well out of this. As others have noted, Brexit weakens any EU attempt at increasing regulation of London's financial industry. The losers will be Panama and the Cayman Islands. Worries about manufacturing seem rather odd. Does this mean less outsourcing to the poorer regions of the EU? That will be a real blow to Manchester and Leeds. I do understand the gut revulsion against many of the racist backers of Brexit. They are loathsome scum. I just can't see 55% of England and Wales as simply loathsome scum. I just see desperation in the face of a destructive ideology.
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Wow, well said. That's more or less what I've been thinking as well. 2) Right. It was a bad day at the dog track. Ignored in all this was the soaring US dollar. Eventually, all that capital sloshing around is going to realize that it has to get invested in something, so prices will recover. Of course no one is sitting down, the music is still playing. 3) I like your diminishing returns fast food franchising metaphor. The EU started as a way for the more developed European nations to compete with the US. I read 'Le Defi Americain'. Then it started putting its name on cheap steaks and bogus real estate investment courses. (Wait, that was Donald Trump.) 5) That was the first thing I thought of when I heard that London was going to be destroyed as a financial center. Why? It's going to be an even better place to stash one's stolen billions. 7) Globalization never made much sense to me. At least colonialism was about ripping off colonies and letting colonizing nationals make a profit. Globalization is fairer in the way it rips off everyone, but that leaves it with a diminishing constituency. As Uranus found out, if you eat all your children, you don't have anyone to buy you a neck tie on Father's Day.
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"The small-minded burghers of rural England have managed to destroy trillions of dollars of value ..." Yes, but they haven't been getting any of that value. I can't imagine why they would care. It's all other people's money. It's not like they've been noticing anything that looks like a recovery since maybe 1975. Remember, England has 9 out of 10 of poorest regions in northern Europe, and the EU has not been covering itself with glory these days. Personally, I expected a tight vote with remain winning, but in England and Wales, it was a 55-45 blowout for leave. It wasn't even the traditional north and south thing with the old Bronze Age dividing line. It was London against just about everywhere else. I was surprised at this. I expected East Anglia to vote leave, but not Kent. Clearly the financial sector has not spread its largess much outside the city. I think London is going to remain a financial center, if only because it is lightly regulated. Like the Cayman Islands, London is a great place to park one's stolen billions and will remain so. With global instability, this will become even more important. I doubt it will do all that much good for the typical English citizen not connected with the financial sector. None of the parties are able to look past the existing power structure to find a place for developing the rest of the nation. A dominant financial center is a lot like a massive oil reserve. It makes a nation lazy and stupid.
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Given who funds so much economic "research", do you imagine that this is intentional?
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That's another good point. What I find interesting is how the income line at which the economy is working in your favor keeps rising. For a while, we just had the poor doing poorly. Then we blew out the working class / lower middle. Then we blew out the middle middle. Now, people making $300K are starting to get the shaft.
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Good point! I was wondering about that.
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My main thought about the Microsoft-Linkedin deal is that it reminds me of the various HP-Compaq/DEC/and so on deals. Microsoft doesn't seem able to boost revenue or profits by producing better technology, so they are doing deals like this instead. It is all about using clever accounting to make the bottom line look better for a while, that is, until they have to write off $100B in goodwill. (Look at all the newspaper companies falling apart. You'd actually think that the internet had something to do with it unless you read the 10Ks and realize it was just revaluation after all the mergers. Mergers are the finance equivalent of magic.) If I remember correctly, companies do have to account for stock options given to employees. There was a stink about this a decade or two back, and CEOs swore it would destroy Silicon Valley and innovation forever. They also swore that the increased accounting cost alone would quintuple to size of the accounting sector in the US. (I looked this up at the BEA.) Instead, it led to the modern practice of issuing stock options, then buying back stock to effectively pay for them. If you look at all the stock buybacks over the last ten years, they are surprisingly close to the stock options issued. I'm not exactly sure of the bookkeeping on this, but I doubt it is a coincidence, and as a satisfied investor, I don't plan on looking more closely than I have to.
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I think this effect is overstated. People tend to react the way one expects more often than not. Do you really expect poor people to not spend any increased income? Do you really expect businesses to invest when customers are buying less? Do you really expect rich people to give away all their money? Do you really expect businesses to reject revenue when consumer spending rises? They are called empirical expectations for a reason. It's like mathematics. There are all sorts of interesting holes in the theory at the edges, but in general mathematics is pretty solid. Despite Godel's theorem placing limits on provability, things like calculus, group theory, complex analysis and so on have held up remarkably well.
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