Good financial advice from professionals (courtesy of Bloomberg):
https://www.bloomberg.com/features/2016-how-to-invest-10k/Attention Economy
Sunday, October 30, 2016
Adam Smith, Capitalism and the Profit Maximization Principle
Capitalism and the Profit Maximization Principle:
Martin Wolf (Financial Times Chief Economics Editor) gave
a brilliant speech a few years back:
“…what should be the goal of companies?
Unfortunately, we have accepted a simplistic answer to this question:
"maximisation of shareholder value ".
An obvious
difficulty is that if companies are allowed to make the maximisation of
shareholder value their sole goal, they can (and will) argue that they are not
just allowed, but even obliged, to do whatever they can expect to get away
with. But these are the values of a psychopath. They would destroy the trust on
which civilised society is built.
A company aiming
solely at maximising shareholder value might conclude it would be its duty to
cheat its customers, abuse its staff, or pollute the air and water if it is
allowed to do so (or at last not prevented from doing so). Such a company might
use its resources to obstruct an appropriate regulatory response to such (mis)
behaviour. The only check on such behaviour would be loss of reputation. But
that is a slender reed. If we believed this is how companies think, many
potentially valuable transactions would never be made.
Shareholder value
maximisation is at the least a radically incomplete goal. Ethical restraints
must be internalised, even if they are against the interests of shareholders, for
the good of society as a whole”.
Related:
Adam Smith on Capitalism and Competition –
http://www.theatlantic.com/business/archive/2008/08/adam-smith-on-csr/8665/---
I was inspired to post the above items after reading this extraordinary piece from the New York Review of Books:
Inside the Sacrifice Zone by Nathaniel
Rich
““The entire state
of Louisiana,” writes Hochschild, “had been placed into a sinkhole.” When
confronted with the contradictions in their political logic, Hochschild’s
subjects fall into “long pauses.” Cognitive dissonance reduces them to
childlike inanity. When asked about catastrophic oil spills that result from
lax regulation, one woman says, “It’s not in the company’s own interest to have
a spill or an accident…. So if there’s a spill, it’s probably the best the
company could do.” Madonna Massey says: “Sure, I want clean air and water, but
I trust our system to assure it.” Jackie Tabor, whom Hochschild describes as
“an obedient Christian wife,” says: “You have to put up with things the way
they are…. Pollution is the sacrifice we make for capitalism,” which is a
gentler way of saying that premature death is the sacrifice we make for
capitalism. Janice Areno, who worked at Olin Chemical without a facial mask as
an inspector of phosgene gas and suffers mysterious health ailments that she
believes are “probably related to growing up near the plants,” finds comfort in
an anthropomorphic analogy: “Just like people have to go to the bathroom,
plants do too.”Globalization is Not in Retreat
Globalization is not in retreat (despite the headlines):
Successful EU-Canada Trade Deal
Farm Exports Give the American Economy a Boost
World’s Two Largest Countries – India and China – Embrace
Globalization
“In contrast with the developed West, globalization
and economic integration remain popular in the world’s two largest developing
countries – India and China.”
Globalization Matters
Fallacies Associated with Globalization
Globalization Reader
http://vivekjayakumar.blogspot.com/2016/07/politics-and-globalization.htmlFacts versus Myths – Do Genetically Modified Crops Lead to Improved Yields?
Many assume that genetically modified (GM) crops are the
answer to the world’s food production problems. However, the science on the advantages of
GM crops is not settled.
According to a NYT report (that summarizes recent research findings):
According to a NYT report (that summarizes recent research findings):
Doubts About the Promised Bounty of Genetically
Modified Crops by DANNY HAKIM
“The controversy
over genetically modified crops has long focused on largely unsubstantiated
fears that they are unsafe to eat. But an extensive examination by The New York
Times indicates that the debate has missed a more
basic problem — genetic modification in the United States and Canada has not
accelerated increases in crop yields or led to an overall reduction in the use
of chemical pesticides.”
Related:
National Academy of Sciences report –
https://www.nap.edu/catalog/23395/genetically-engineered-crops-experiences-and-prospectsThe “Superstar” Effect
Globalization and technological changes have allowed
popular sports team to access audience members worldwide. Consequently, popular
stars at the biggest clubs are paid far more than their predecessors. Latest
example:
“Gareth Bale will
earn £150m over the next six years in salaries and bonuses after signing a
contract extension with Real Madrid until 2022 that will make him the best-paid
player in the world…Negotiations over an extension have been continuing for
several months between Real and Bale’s representative, Jonathan Barnett, with
an agreement reached a few weeks ago. It is understood the contract is worth
more than £600,000 a week before tax with the buyout clause set at €1bn
(£900m). It is believed to be one of the biggest in the history of the sport.
That is the equivalent to around £350,000 a week after tax, more than the
estimated £288,000 Real pay Cristiano Ronaldo. Negotiations over a new deal for
the Portuguese have not yet been finalised.”
The Problem with For-Profit Colleges
Low graduation rates and high student debt default rates
plague for-profit colleges:
http://www.nytimes.com/2016/10/30/upshot/a-conveyor-belt-of-dropouts-and-debt-at-for-profit-colleges.htmlRethinking Political Risk
American and global investors need to seriously consider uncertainty
involving American politics. If you had radical populists/corrupt politicians
running for office in some other country, we would be far more concerned about
potential market turbulence. Apparently, investors are finally waking up to the
danger. According to the WSJ:
“Wall Street’s bet
against fear, a big winner this year, is starting to wane.
The relative calm
in the U.S. stock market has made wagering on a decline in the CBOE Volatility
Index, or VIX, a popular trade for much of this year. The two biggest
exchange-traded funds that short volatility, as betting on a decline in the VIX
is known among traders, are up 46% this year. Hedge-fund bets that the VIX will
decline reached a record in September, according to data from the Commodity
Futures Trading Commission.”
MIT economist Simon Johnson on the consequences of a US electoral surprise in November:
https://www.project-syndicate.org/commentary/economic-consequences-of-trump-victory-by-simon-johnson-2016-10
MIT economist Simon Johnson on the consequences of a US electoral surprise in November:
https://www.project-syndicate.org/commentary/economic-consequences-of-trump-victory-by-simon-johnson-2016-10
Related:
Why Financial Markets and Global
Corporations Need to Rethink Political Risk
http://vivekjayakumar.blogspot.com/2016/09/why-financial-markets-and-global.htmlSaturday, October 29, 2016
Will a Better Safety Net Boost Entrepreneurship?
An interesting piece from Bloomberg’s Noah Smith:
“…when it comes to
entrepreneurship, there’s another factor that’s probably a lot more important
than effort. It’s risk.
For a prospective
entrepreneur, the choice usually isn’t between starting a business and playing
video games -- it’s between starting a business and working for someone else.
The difference in effort between those two career paths probably isn’t that
big. But entrepreneurship is much, much riskier than holding a job. In general,
you’re a lot more likely to see your business fail than to be fired…
So if the risk theory is right, a stronger safety net should lead to more entrepreneurial activity, not less. Whatever negative effect public assistance has on effort will be more than canceled out by the greater risk-taking capacity of the poor and unemployed.”
So if the risk theory is right, a stronger safety net should lead to more entrepreneurial activity, not less. Whatever negative effect public assistance has on effort will be more than canceled out by the greater risk-taking capacity of the poor and unemployed.”
Parental Education and Earnings
An interesting piece of data from PEW Research Center:
“Indian-born mothers
of babies born in the U.S. are more likely than mothers from other countries to
have a college degree and high incomes…
The Indian mothers
were far more likely to be married – with just 1% of infants born out of
wedlock, compared with 42% of babies of U.S.-born mothers….The Indian mothers
were also more likely to have a college degree, with 87% holding one….Possibly
due to their educations, India-born mothers were also more likely to have a
high family income – their annual median income was $105,500. That is twice the
median income of the mothers born in the U.S.”
Friday, October 28, 2016
US Economic Update
After a weak first half, US real GDP growth perks up
in 2016Q3
Do economic expansions die of old age?
http://www.nytimes.com/2016/10/28/upshot/will-the-next-president-face-a-recession-dont-assume-so.htmlPopulism and Modern Democracy [Must Read]
Columbia University economist Andres Velasco on the rise of populism
“Populism rests on a
toxic triad: denial of complexity, anti-pluralism, and a crooked version of
representation….Viewed in this light, populism is not a useful corrective to a
democracy captured by technocrats and elites, as Marine Le Pen, Rafael Correa,
Recep Tayyip Erdoğan, or assorted Western intellectuals want you to believe. On
the contrary, it is profoundly anti-democratic, and hence a threat to democracy
itself.”
Anatole Kaletsky (Chief Economist and Co-Chairman of Gavekal
Dragonomics) notes:
https://www.project-syndicate.org/commentary/voting-data-show-little-economic-link-with-brexit-by-anatole-kaletsky-2016-10
“For starters, most populist voters are neither poor nor unemployed; they are not victims of globalization, immigration, and free trade. The main demographic groups behind the anti-establishment upsurge have been people outside the workforce: pensioners, middle-aged homemakers, and men with low educational qualifications receiving disability payments.”
“For starters, most populist voters are neither poor nor unemployed; they are not victims of globalization, immigration, and free trade. The main demographic groups behind the anti-establishment upsurge have been people outside the workforce: pensioners, middle-aged homemakers, and men with low educational qualifications receiving disability payments.”
Thursday, October 27, 2016
Canada – Still a Bright Light
The Economist
cover story on Canada –
http://www.economist.com/news/briefing/21709291-why-canada-still-ease-openness-last-liberals
http://www.economist.com/news/briefing/21709291-why-canada-still-ease-openness-last-liberals
Africa Economic Update
Commodity exposure affects economic performance –
http://www.economist.com/news/middle-east-and-africa/21709218-new-numbers-imf-tell-tale-two-africas-african-economies-are-growing
Nigeria’s Currency Woes
http://www.pbs.org/newshour/making-sense/column-currency-woes-will-nigeria-let-market-forces-job/
Solar power and Africa’s energy needs –
http://www.economist.com/news/middle-east-and-africa/21709297-small-scale-solar-power-surging-ahead-africa-unplugged
http://www.economist.com/news/middle-east-and-africa/21709297-small-scale-solar-power-surging-ahead-africa-unplugged
Wednesday, October 26, 2016
Fixing Obamacare
America’s dysfunctional healthcare system needs some urgent fixes:
Cassidy notes a fundamental problem with the Affordable
Care Act:
“One of the big
problems that insurers are facing is that too few healthy people, and too many
sick people, are signing up for the plans sold through the exchanges. For
insurers, that changes everything. Faced with higher claims per enrollee than
they expected, they seek to raise their prices, which makes healthy people,
especially young healthy people, even less likely to sign up the following
year. If unchecked, this process could lead to a spiral of rising prices and
falling enrollment.
An obvious way to
address this problem would be to drastically raise the fines that people face
if they don’t purchase insurance.”
Brexit Consequence – Great Britain to Little Britain
Mark Leonard (Director of the European Council on Foreign
Relations) notes:
“In just a few
months, May has launched attacks on “international elites” and decided to
prioritize immigration controls over single-market access in negotiating the
UK’s withdrawal from the European Union. At one point recently, companies faced
the threat of being compelled to furnish a list of their foreign workers. And
the 3.5 million European citizens who are settled in the UK were left to worry
about whether May’s government would guarantee their residence rights.”
Tuesday, October 25, 2016
Absurdities in a High Frequency Trading World
An interesting piece from Bloomberg:
“Patent application
no. 14/451,356 has one goal: to outrun the speed demons of Wall Street.
The 16-page document
was quietly published by the U.S. Patent and Trademark Office in February.
Replete with schematic drawings, the filing describes a novel way for
“executing synchronized trades in multiple exchanges.” The invention consists
of not only sophisticated algorithms and a host of computer servers, but atomic
clocks -- precisely calibrated to vibrations of irradiated cesium atoms -- to
sync orders to within a few billionths of a second.
And if it works as
advertised, one of the most illustrious names in the hedge-fund business could
gain exclusive U.S. rights to a weapon capable of thwarting even the most
predatory of high-speed traders.
The application
belongs to Renaissance Technologies, the ultra-secretive and highly profitable
$32 billion firm founded by mathematician and former code breaker Jim Simons.
And the lengths it’s been willing to go to build and patent its own
computer-driven technology -- at a potential cost of tens of millions of
dollars -- underscores just how big a threat high-frequency traders have become
to the industry’s largest and savviest players.”
Profile of Jim Simons – Mathematician Turned Billionaire
Hedge Fund Manager
Monday, October 24, 2016
Obsolete US Patent Regime is Hindering Innovation
Silly patents are harming American and global innovation
and creating monopolies:
“That’s what’s
going on now in the world of design patents, where the U.S. Supreme Court has
suddenly been forced to confront the fact that century-old laws governing
ownership of shapes, contours and curlicues are far out of step with modern
life. Unless modernized quickly, these outmoded rules could empower a wave of
opportunistic lawsuits that would suppress innovation.
The case at issue
is Samsung Electronics Co. v. Apple. In 2011, Apple brought a patent lawsuit
against Samsung, asserting that Samsung’s smartphones infringed upon Apple’s
patents on three design elements: rounded corners, a bezel on the rim and a
colorful, 16-icon grid. Odd as it may sound that anybody could claim ownership
of something as ubiquitous as rounded corners, designs like that are
patentable, and Apple was awarded $399 million in damages. That’s a significant
fraction of Samsung’s total profits from smartphone sales”
--
http://vivekjayakumar.blogspot.com/2016/04/do-patents-help-or-hinder-growth-and.html
WSJ article on the flawed American patent system –
“The U.S. patent
system has struggled to balance the goals of fostering innovation and reducing
abusive litigation that can be costly to business.
Recent changes in
the U.S. patent system have made it easier for companies with deep pockets to
combat claims. Shipping & Transit has turned its sights on scores of small
online retailers and logistics startups. It typically demands licensing fees of
$25,000 to $45,000, amounts just small enough to discourage a legal battle, yet
painful for businesses with only a few employees.”
--
Related:Sunday, October 23, 2016
International Economics - Interesting Items
Labor Mobility – US versus Europe
An interesting piece from The Atlantic:
Collapsing British Pound – Risk of a New Currency War?
The dramatic collapse of the British pound is stoking
global concerns:
http://www.theaustralian.com.au/business/opinion/alan-kohler/pounds-fall-fuels-new-bout-of-currency-wars/news-story/86e9e9c688b0ce116f1a1fad9f443b43
Britain – A Divided Country with Serious Economic
Problems
“Fault lines have
appeared in British society that are larger and more extreme than elsewhere.
The gap between the rich and poor is greater here than in almost any other
country in the EU and nowhere else do billionaires and the destitute live so
closely together. The per capita gross domestic product of London is 186
percent of the EU average, and yet several of the city's neighborhoods are
among the poorest in the country. In parts of Wales, some people earn less than
people in Sicily. Lots of societies are splintered, and the UK has never been
an exception, but these gaps have now become virtually unbridgeable.”
Globalization Challenges Facing China
An excellent essay by Andrew Browne:
“In the 1990s, much of
the global textile industry relocated yet again, to cities like Dongguan in
southern China, the world’s factory floor. Now, as Chinese wages soar, textiles
and apparel along with other labor-intensive export industries are on the move
once more, this time to inland China and, increasingly, to fast-growing
regional rivals such as Vietnam and Bangladesh.
Globalization is
shortening these cycles. Technology accelerates the churn. Like Lowell and a
more recent procession of U.S. manufacturing cities, Dongguan is emptying out,
and the economic and social shocks are triggering a political earthquake in
China just as they are in the U.S.
The political dynamics
in the two countries are very different, of course, but there are striking
parallels. The most obvious are the wrenching dislocations created by a world
of impatient capital, footloose labor and intricate cross-border supply chains.
Vulnerable workers in both countries are feeling the pinch.”
Saturday, October 22, 2016
The Minimum Wage Debate: Microeconomics versus Macroeconomics
A great piece - Doomsayers Keep Getting It Wrong on Higher
Minimum Wages by Barry Ritholtz:
“Blame a fundamental
misunderstanding of minimum-wage economics and, of course, good old-fashioned
political bias. There have been repeated attempts to misread the data and
conclude it has hurt employment, but so far none of this research has withstood
scrutiny….
Why did so many
economists get this wrong? They looked at the micro and ignored the macro. In
the basic model of supply and demand, an increase in the cost of something
reduces demand. This may be true in an isolated laboratory setting. But when
minimum wages went up in the real world, it affected not just the parties to
that transaction, but the regional economy. By considering only the
relationship between employer and employee, the dismal-science set was focusing
too narrowly. The critics failed to consider the impact of lower-wage employees
earning more money; these folks typically spends almost everything they earn,
which means that when they’re paid more it goes right back into the local
economy.”
Related:
Does a minimum wage increase lead to a fall in employment?
Survey of Economists – Impact of Minimum Wage Hike
An interesting take on the minimum wage debate
http://www.pbs.org/newshour/making-sense/column-claim-wages-go-jobs-will-go-isnt-theory-scam/
http://www.pbs.org/newshour/making-sense/column-claim-wages-go-jobs-will-go-isnt-theory-scam/
Friday, October 21, 2016
A 21st Century Factory Town – Modern Manufacturing and the Labor Market
An illuminating piece - Learning to Prosper in a Factory Town: Greenville, South Carolina,
has bet its future on high-tech manufacturing. Who wins and who loses in this
increasingly automated economy? by Nanette Byrnes
“In some ways
Greenville exemplifies the future for communities built around advanced
manufacturing. The changes in factories and factory work under way in
manufacturing centers across the U.S. and Europe, and even beginning to
accelerate in once low-cost manufacturing meccas such as China, are boosting
local economies, but they’re also demanding that workers make the transition to
jobs that require far more computer and technical skills.”Related:
Robots and Jobs
Benefits Arising from Free Trade Far Outweigh Costs [Must Read]
Bjorn Lomborg on Free Trade:
Related:
http://vivekjayakumar.blogspot.com/2016/07/politics-and-globalization.htmlDealing with Economic Problems in an Intelligent Manner
An intelligent and well-informed op-ed written by
President Obama in The Economist:
“Decades of
declining productivity growth and rising inequality have resulted in slower
income growth for low- and middle-income families. Globalisation and automation
have weakened the position of workers and their ability to secure a decent
wage. Too many potential physicists and engineers spend their careers shifting
money around in the financial sector, instead of applying their talents to
innovating in the real economy. … So it’s no wonder that so many are receptive
to the argument that the game is rigged. But amid this understandable
frustration, much of it fanned by politicians who would actually make the
problem worse rather than better, it is important to remember that capitalism
has been the greatest driver of prosperity and opportunity the world has ever
known.
Over the past 25
years, the proportion of people living in extreme poverty has fallen from
nearly 40% to under 10%. … This is the paradox that defines our world today.
The world is more prosperous than ever before and yet our societies are marked
by uncertainty and unease. So we have a choice—retreat into old, closed-off
economies or press forward, acknowledging the inequality that can come with
globalisation while committing ourselves to making the global economy work
better for all people, not just those at the top.”
Thursday, October 20, 2016
Private Equity - The Good and the Bad
The Economist on the impact of private equity:
http://www.economist.com/news/briefing/21709007-private-equity-has-prospered-while-almost-every-other-approach-business-has-stumbled
http://www.economist.com/news/briefing/21709007-private-equity-has-prospered-while-almost-every-other-approach-business-has-stumbled
Are Americans Better Off?
An interesting piece from Ben Bernanke and Peter Olson:
Are Americans better off than they were a decade or two ago?
https://www.brookings.edu/blog/ben-bernanke/2016/10/19/are-americans-better-off-than-they-were-a-decade-or-two-ago/
“…Americans enjoy a high level of economic welfare relative to most other countries, and the level of Americans’ well-being has continued to improve over the past few decades despite the severe disruptions of the last one. However, the rate of improvement has slowed noticeably in recent years, consistent with the growing sense of dissatisfaction evident in polls and politics.”
“…Americans enjoy a high level of economic welfare relative to most other countries, and the level of Americans’ well-being has continued to improve over the past few decades despite the severe disruptions of the last one. However, the rate of improvement has slowed noticeably in recent years, consistent with the growing sense of dissatisfaction evident in polls and politics.”
Wednesday, October 19, 2016
Is the Euro Responsible for European Economic Woes?
John Lanchester reviews two major works on the European
common currency project:
“Who wanted a united
Europe? Who were the people who saw this process as both inevitable and
something to be schemed and strived for? The answer was the pan-European
political élite of people like Jean Monnet and his peers. There has never been
a popular appetite for the idea of Europe: it was always an élite project.
Monnet hadn’t ever stood for political office. “Ever closer union,” the phrase
in the foundational document of the E.U., the 1957 Treaty of Rome, is just
stated as a goal, without any explanation either of what it means or of why it
would be a good thing for most Europeans. It was an end in itself.”
Technology, Traditional Craft and Modern Life
Will people continue to buy traditional watches in the
digital age?
“These days, no one
requires a Swiss watch to tell the time – or a watch from any country. The time
displayed on our mobile phones and other digital devices will always be more
accurate than the time displayed on even the most skilfully engineered
mechanical watch, yet the industry has a visual presence in our lives like few
others. The storefronts of the world’s big-money boulevards glow with the
lustre of Rolex and Omega; newspapers and magazines appear to be kept in
business largely by watch adverts; airports would be empty shells without them.
The export value of the Swiss watch trade fell by 3.3% last year, due primarily
to a downfall in demand from the east Asia. But it is up 62.9% compared with
six years ago. In 2015 the world bought 28.1m Swiss watches valued at 21.5
billion Swiss francs.”
Tuesday, October 18, 2016
A Detailed Breakdown of US Foreign Aid Programs
America’s foreign aid programs:
Related:
http://vivekjayakumar.blogspot.com/2016/09/where-does-american-foreign-aid-go-not.htmlChina, India and the 21st Century Economic Order
World’s Two Largest Countries – India and China – Embrace
Globalization
“In contrast with
the developed West, globalization and economic integration remain popular in
the world’s two largest developing countries – India and China.”
Related –
A thought-provoking piece from Gideon Rachman:
“The emerging strategic logic was clear. As China
rose, so India, Japan and the United States were drawing perceptibly closer
together. It was not quite the policy of ‘containment’ that China feared, but
it was clearly a conscious effort to balance the power of a more assertive
China on the global stage. By 2015, however, India also increasingly mattered
in its own right, not simply as part of a strategic balancing act with China.
Eclipse author Arvind Subramanian is certainly right to dismiss the idea that
India will catch up with China in the next twenty years; but look ahead a
little further, to 2050, and it is possible to envisage a world in which India
could be both the world’s most populous country and its largest economy. While
the last years of the twentieth century and the beginning of the twenty-first
century had been shaped by the emergence of the Pacific Rim as the new core of
the global economy, by the mid-twenty-first century, the rise of the Indian
Ocean Rim—linking India with a fast-growing African continent—could well be the
next centre of global economic dynamism.”
Easternisation: War and Peace in the Asian Century by
Gideon Rachman is likely to become one of the most influential books on
international affairs.
The Scramble for Global Talent
(Highly) Skilled workers are sought after around the
world:
From WSJ –
“Despite efforts of
non-English-speaking nations to attract high quality workers, almost 75% of the
total OECD highly skilled workforce in 2010 lived in the four main Anglo-Saxon
countries—almost 40% in the U.S. alone. Around 70% of engineers in Silicon Valley
and 60% of doctors in Perth, Australia, were foreign-born in 2010.
“The U.S. has
received an enormous net surplus of inventors from abroad, while China and
India have been major source countries,” the study noted. In the last third of
the 20th century, for instance, immigrants won 31% of all Nobel prizes—of whom
more than half of these were at U.S. institutions. It’s not clear
whether these trends will continue. Rising standards of living in developing
countries will curb the appeal of emigrating”
The Future of Technology (and Jobs)
Is there a Slowdown in the Pace of Tech Progress?
Skills Delusion
https://www.project-syndicate.org/commentary/education-less-valuable-than-believed-by-adair-turner-2016-10
https://www.project-syndicate.org/commentary/education-less-valuable-than-believed-by-adair-turner-2016-10
Sunday, October 16, 2016
Should Corporations Pay Attention to Macroeconomic Trends?
The experience of equipment maker Caterpillar highlights
the need for understanding/forecasting long-term global macroeconomic trends:
How Caterpillar’s Big Bet Backfired – WSJ
“Doug Oberhelman
spent his first years as Caterpillar Inc.’s chief executive plowing billions of
dollars into factories to build more of its familiar yellow machines and move
the company deeper into mining equipment. It was a bold bet, spectacularly
mistimed.
The world was
gripped by a global commodities boom in 2010 when he took charge, along with
strong post-recession demand from developing markets and the energy industry.
The world was ordering excavators and bulldozers and giant dump trucks at a
rapid clip….
The year 2012 would
prove to be a peak for Caterpillar. Soon after, miners began shelving
equipment-buying plans as commodity prices fell. China’s growth slowed. Then
oil prices fell, along with demand for related equipment. Caterpillar now faces
its fourth straight year of falling sales, the longest decline in its history.
Its stock is up 29% this year—the best-performing in the Dow Jones Industrial
Average—but trades 25% below its 2012 peak.”
Saturday, October 15, 2016
America’s Addiction to Pharmaceutical Drugs
One reason why America spends 16-18% of GDP on healthcare
(twice as much as Japan or UK):
“Six in 10 American
adults take prescription drugs, creating a vast market for new meds to treat
the side effects of the old ones.
Opioid
prescriptions alone have skyrocketed from 112 million in 1992 to nearly 249
million in 2015, the latest year for which numbers are available, and America’s
dependence on the drugs has reached crisis levels. Millions are addicted to or
abusing prescription painkillers such as OxyContin, Vicodin and Percocet.
Statistics from the Centers for Disease Control and Prevention show that, from
1999 to 2014, more than 165,000 people died in the United States from
prescription-opioid overdoses, which have contributed to a startling increase
in early mortality among whites, particularly women — a devastating toll that
has hit hardest in small towns and rural areas.
The pharmaceutical
industry’s response has been more drugs. The opioid market — now worth nearly
$10 billion a year in sales in the United States — has expanded to include a growing
universe of medications aimed at treating secondary effects rather than
controlling pain.”
Related:
Big Pharma and America's Opioid Crisis
http://vivekjayakumar.blogspot.com/2016/10/big-pharma-and-americas-opioid-crisis.htmlTrade Policy and Basic Economics
A Basic Lesson in Economics:
“Trade deficits,
you see, do not just disappear and tax revenues soar because you block imports.
When the trade deficit goes down, capital inflows from abroad go down with it.
And since foreign capital fills the gap between savings and investment at home,
savings must rise or investment must fall. This is a basic principle of
national income accounting, which all students learn in introductory
macroeconomics classes.”
The Age of the Diminished Attention Span
Frequent claims that “free services” provided by internet
and technology companies are an unalloyed benefit for consumers often ignore a
fundamental truth:
“Facebook promotes
video, plays publisher-generated content up or down in relation to
user-generated content, and tinkers continually with the algorithm that
determines what appears on its News Feed; it does this not out of any inherent
high- or low-mindedness, but in an effort to harvest an ever greater quantity
of our time. If the written word happens to fall out of favor, or if journalism
becomes economically unworkable as a consequence, these results, so far as
Facebook is concerned, are unintentional. They’re merely collateral damage from
the relentless expansion of the most powerful attention-capture machine ever
built.
The economist
Herbert A. Simon first developed the concept of an attention economy in a 1971
essay. Taking note of the new phenomenon of “information overload,” Simon
pointed out something that now seems obvious—that “a wealth of information
creates a poverty of attention.” In recent years, thinking about attention as a
scarce resource has come into vogue as a way to appraise the human and
psychological impact of digital and social media.”
Long-Run Economic Growth – Getting Used to the New Normal
An excellent Saturday
Essay from the WSJ:
Why the Economy Doesn’t Roar Anymore
By MARC LEVINSON
“The U.S. presidential
candidates have made the usual pile of promises, none more predictable than
their pledge to make the U.S. economy grow faster. With the economy struggling
to expand at 2% a year, they would have us believe that 3%, 4% or even 5%
growth is within reach.
But of all the promises uttered by Donald Trump and Hillary Clinton over the course of this disheartening campaign, none will be tougher to keep. Whoever sits in the Oval Office next year will swiftly find that faster productivity growth—the key to faster economic growth—isn’t something a president can decree. It might be wiser to accept the truth: The U.S. economy isn’t behaving badly. It is just being ordinary.”
But of all the promises uttered by Donald Trump and Hillary Clinton over the course of this disheartening campaign, none will be tougher to keep. Whoever sits in the Oval Office next year will swiftly find that faster productivity growth—the key to faster economic growth—isn’t something a president can decree. It might be wiser to accept the truth: The U.S. economy isn’t behaving badly. It is just being ordinary.”
Related:
Northwestern University economist Robert Gordon on US long run economic growth prospects:
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