Category Archives: Economics

The Housing Bubble Bursts

In Shanghai:

Shanghai’s housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation. With China’s economy booming and Shanghai at the center of worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30% to 40% of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai.

This is bad news, because it could be the first stage of a collapse of the Chinese economy, with potentially very dire results for all of us.

False Promises

No, Thomas, your experience is not atypical, at least going by me. I’ve never, ever received a rebate.

I no longer take them seriously, or even bother to send them in. If it worked once in a while, I might bother, but it’s gotten to the point that it’s not worth the time and hassle on an expected-value basis, even when it’s fifty bucks or so. If the price is worth it without the rebate, I buy it, if not, then I don’t. But I never factor in the rebate any more in the purchase decision, unless it’s instant in the store. I wish that they’d stop this fraud.

The Intangible Wealth Of Nations

Ron Bailey has an interesting piece at Reason about why the US is wealthy, exploding many leftist myths about exploitation and overconsumption of resources, slavery, etc. One point that I think should be added is that, while rule of law is important, if many of the laws are dumb and economically counterproductive, it’s probably better to have less adherence to them than more.

I’d be interested to see a take on this from an Anglosphere perspective.

Intergenerational Wealth Transfer

At 2.3% per capita real income growth, real income doubles every thirty years. That is, we can expect our kids to be roughly twice as rich as we are. In particular, we should stop worrying about them supporting twice as many retirees per capita. We should also stop worrying about their environmental legacy. They will have twice as many billions to devote to environmental cleanup and upgrade even if population remains constant.

One thing that would cause the social security crisis to come back in spades would be if, as is proposed in the UK, that social security is indexed to wages instead of prices. If wages are used, social security payments will double when wages double and longevity and early retirement will bear down on workers.

How much do we owe retirees? Is it the same absolute standard of living as they had when they were working? Their same relative position in the economy? These are expensive moral questions. But recognize a promise of a wage indexed gain for what it is: it is a heavy tax on the working to give more real dollars to the retirees than they gave to the retirees while they were working.

I am still in favor of privatizing government pensions, but that would in effect be a huge cut in subsidization of government borrowing. That is, without the whole social security trust fund invested in government bonds, it will be more expensive to finance government borrowing. That will either require higher taxes, increased borrowing or reduced spending to offset.

One thing I can say about that is that my daughter’s generation will be twice as able to deal with it as mine per capita.

It’s Not Tax Cuts

Listening to the “Beltway Boys” on Brit Hume’s show brings to mind an ongoing frustration with the debate.

Look, tax-rate cut fans (both libertarian and conservatives).

Expunge completely from your vocabulary the phrase “tax cuts.” There’s no sensible way to talk about this concept, because it’s an impossible task. The government has no power to reduce taxes, at least when it comes to income. All that it can do is to reduce tax rates. Reducing tax rates doesn’t necessarily result in reduced taxes, and increasing tax rates doesn’t necessarily result in increased taxes.

It’s like the video games that allow you to control velocity, but not position. Actually, it’s not even like that, because physics is physics, and you can learn how to get somewhere with a velocity controller, but economics is unpredictable.

Those of us who want to promote economic growth have to change the vocabulary, and get people to stop talking about “tax cuts,” because there’s no such thing in any predictable way. Doing so may make it easier to persuade people to support lower rates, and an increase in wealth for everyone.

It’s Not Tax Cuts

Listening to the “Beltway Boys” on Brit Hume’s show brings to mind an ongoing frustration with the debate.

Look, tax-rate cut fans (both libertarian and conservatives).

Expunge completely from your vocabulary the phrase “tax cuts.” There’s no sensible way to talk about this concept, because it’s an impossible task. The government has no power to reduce taxes, at least when it comes to income. All that it can do is to reduce tax rates. Reducing tax rates doesn’t necessarily result in reduced taxes, and increasing tax rates doesn’t necessarily result in increased taxes.

It’s like the video games that allow you to control velocity, but not position. Actually, it’s not even like that, because physics is physics, and you can learn how to get somewhere with a velocity controller, but economics is unpredictable.

Those of us who want to promote economic growth have to change the vocabulary, and get people to stop talking about “tax cuts,” because there’s no such thing in any predictable way. Doing so may make it easier to persuade people to support lower rates, and an increase in wealth for everyone.

It’s Not Tax Cuts

Listening to the “Beltway Boys” on Brit Hume’s show brings to mind an ongoing frustration with the debate.

Look, tax-rate cut fans (both libertarian and conservatives).

Expunge completely from your vocabulary the phrase “tax cuts.” There’s no sensible way to talk about this concept, because it’s an impossible task. The government has no power to reduce taxes, at least when it comes to income. All that it can do is to reduce tax rates. Reducing tax rates doesn’t necessarily result in reduced taxes, and increasing tax rates doesn’t necessarily result in increased taxes.

It’s like the video games that allow you to control velocity, but not position. Actually, it’s not even like that, because physics is physics, and you can learn how to get somewhere with a velocity controller, but economics is unpredictable.

Those of us who want to promote economic growth have to change the vocabulary, and get people to stop talking about “tax cuts,” because there’s no such thing in any predictable way. Doing so may make it easier to persuade people to support lower rates, and an increase in wealth for everyone.

Energy Intensity

The amount of energy used in the economy per real dollar of GDP, “Energy Intensity”, has been steadily dropping and is now about half what it was in 1950. So a barrel’s worth of oil in 1950 now stretches to two barrels worth of work.

This is before the coming hybrid capital turnover in the transportation sector to double the efficiency there. So I guess prices will have to nearly double again to curb energy use like the 1970s oil shocks.