I wish economists would make that point more often and more loudly. DeLong kind of gets the low skilled manufacturing part in his post criticizing the consensus around globalization hurting wages. There's a lot of talk about how bargaining (read: unions) has been actively killed by Republicans the past 30 years or so, and a mention that low-skilled blue collar jobs aren't really great jobs, but since he's criticizing Larry Summers omissions I'm feel I should criticize his: there is no mention of service industry jobs.
This is a glaring omission for a couple reasons. One goes to the whole globalization issue: outsourcing service industry jobs is harder than manufacturing. Yes, you can locate a call center in India, but you can't really staff a grocery store for St. Louis residents by hiring people in Tanzania, or move goods within the US with truck drivers in China or go to get a physical from a doctor in Cuba. Those jobs don't globalize the way manufacturing can. They may also be harder to mechanize due to our preference for human contact/interactions.
The other reason it is an omission has to do with the reduction of bargaining power. The reason that manufacturing jobs are perceived as better is because they have, historically, paid better, and the reason for that is unions and bargaining. Low-skilled service jobs (operating a cash register, or stocking shelves) often do not have unions to support the wages and benefits. If Wal-Mart had ended up unionized when it was started I think the jobs in this country would be very different today. Now I don't think that the big box stores would be nearly as prevalent were that the case, and that's an alternate reality with far reaching consequences, but we perceive manufacturing as better than service, not because it is, but because it is associated with unions.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Monday, February 20, 2017
Monday, October 31, 2016
In Which I Discuss Krugman and Economics
Short post this, as it's really a thought more than an actual discussion or criticism. Out of this post of Krugman's--a comment on transportation costs and technologies--is this bit:
The transportation cost of digital items is approaching zero--there is a bandwidth cost, so it's not = 0 but it's pretty damn close. Krugman doesn't seem to be able to envision a future where technological improvements could do something similar for physical items--odd for a sci-fi fan. There are people who thought that 3D printers might make the same thing happen for actual physical objects...and they still could, but only if they get a lot better--don't think 3D printers, think Star Trek replicators.
There a whole lot of economic questions/problems with this happening, but it isn't something that can't happen. We're already partway there with information related things (games, books, music).
As I see it, we had some big technological advances in transportation — containerization, probably better communication making it easier to break up the value chain; plus the great move of developing countries away from import substitution toward export orientation. (That’s a decline in tau and t in my toy model.) But this was a one-time event. Now that it’s behind us, no presumption that trade will grow faster than GDP.That sounds, at some level, right, but it is backwards looking only and seems to ignore the phenomenon that is the internet. Yes, if I order a good chef's knife from Amazon then that has to be transported to me. But if I order a book for Kindle/Nook or a digital video game off Amazon or Steam, then I'm still getting something, and that is a something that would have required transportation even 10 years ago (in most cases) because the digital online sales of those items just didn't really exist yet.
The transportation cost of digital items is approaching zero--there is a bandwidth cost, so it's not = 0 but it's pretty damn close. Krugman doesn't seem to be able to envision a future where technological improvements could do something similar for physical items--odd for a sci-fi fan. There are people who thought that 3D printers might make the same thing happen for actual physical objects...and they still could, but only if they get a lot better--don't think 3D printers, think Star Trek replicators.
There a whole lot of economic questions/problems with this happening, but it isn't something that can't happen. We're already partway there with information related things (games, books, music).
Tuesday, March 01, 2016
Not Sure That's a Good Thing
Mark Toma links a piece talking about negative interest rates (tl;dr). I don't really care about the headline question but in the conclusion (quoted) they state:
The two big things are: it shrinks the value of debts, and (related) it encourages growth to outrun it. If we can look forward to 4% inflation then that means any debt we take on today is smaller. This means that student loans are not as daunting, and that a large mortgage will become more managable (it also encourages buying over renting, which, when not overdone, is a huge part of our potential economy). It also means that businesses have a strong financial incentive to grow and build today: debt is better taken today than tomorrow, and even for debt free businesses, their giant piles of cash losing value at 4%/year doesn't look so good and should therefore be invested.
Of course modestly higher inflation does hurt one group of people: bankers/finance types. Because of that, it's likely off the table anyway, but this reasoning will make whatever chance a higher inflation target had vanish. That's not a good thing for our economy.
The bottom line: international experience suggests that negative interest rates...will become a permanent part of the monetary policy toolkit. If that’s right, we need not worry quite so much whether a 2% inflation target is too low. [my bold]That last part bothers me a lot. From an economics standpoint the main reason that a 2% inflation target is too low may be that it does not allow enough room for monetary accommodation in the face of severe shocks. The ability to use negative rates does, in fact, ameliorate that somewhat. From a human welfare perspective, however, that makes things worse because it will allow very low inflation to no longer be seen as much as a problem. Higher inflation (not 10%+ but more like 4.5%) has benefits beyond central bank monetary concerns.
The two big things are: it shrinks the value of debts, and (related) it encourages growth to outrun it. If we can look forward to 4% inflation then that means any debt we take on today is smaller. This means that student loans are not as daunting, and that a large mortgage will become more managable (it also encourages buying over renting, which, when not overdone, is a huge part of our potential economy). It also means that businesses have a strong financial incentive to grow and build today: debt is better taken today than tomorrow, and even for debt free businesses, their giant piles of cash losing value at 4%/year doesn't look so good and should therefore be invested.
Of course modestly higher inflation does hurt one group of people: bankers/finance types. Because of that, it's likely off the table anyway, but this reasoning will make whatever chance a higher inflation target had vanish. That's not a good thing for our economy.
Wednesday, May 28, 2014
Game Economics
I read--years ago--an article/document/paper on the economics of the many games out there (like Candy Crush Saga or, my current addiction, Dark Galaxy). It also dealt with the psychology of the users, and how those who do spend real money in these games do it. The thing is that most users spend nothing, and quite a few will spend from $1 to $10, but then there are a handful that spend hundreds, and even thousands. I am willing to purchase a game, but I won't spend anything in-game. Still I do enjoy some of the free games, but I am occasionally mystified at why anyone would spend real money on them. Take Dark Galaxy...
In the game you have weapons and ships that you supply allies and mercenaries. You also have your personal stats (tactics, attributes), and when you battle and complete missions you do better or worse based on these. If you want to be very powerful you will need to get 100 mercs, and 300 each special "LE" vehicles and weapons. You will also need to max your tactics. Mercs, LE items, and extra tactics points can be bought in game with artifacts (arts), and arts can be bought with real money.
But here's the thing: it takes a lot of artifacts to maximize, and artifacts aren't cheap. $5 gets you 27 artifacts but that will only buy you 1 merc (25 arts). LE items can cost less than 20 for weak ones on sale, but can also run to 60 arts (and those aren't the most powerful, just the best you can buy...you have to build the top ones). There are some price breaks but not much ($10 gets you 60, $100 gets you 750). One particular "Ultimate" LE ship requires 7 60 art ships to construct (ships which can be obtained in-game for the sufficiently dedicated and well equipped). That would cost a minimum of $60 real dollars to obtain...1 LE ship, leaving 299 ships and 300 weapons to go. Oh, and one really powerful ship doesn't make a huge difference. Add to that 100 mercs which will require 2500 arts as they can't be obtained otherwise, and that would run $350.
Now there are in-game available artifacts. A limited number from missions and extras from tournaments and bosses. But that waters down the value of those artifacts. If I can play the game occasionally and pick up a few hundred arts (which would cost $50 to buy) why would I purchase? When it isn't hard to see how expensive using cash is why does anyone do it? It's basically flushing money down the toilet. It doesn't give much advantage unless you spend hundreds or thousands, and the game isn't nearly that entertaining.
I find most "free" games with in-game purchases to be similarly worthless. You get so little for the $ you put in, that I feel ripped off for the people who do buy (and I know people do). In most games the money you spend essentially buys you time: you don't have to wait for recharges or things to finish. But for games like these, I appreciate the time. It's a built in "you're done playing now" point; "go do something else" (like loading up another game).
Mostly, however, games like this seem to me to be further proof that we are not rational actors when it comes to how we spend money. If we were then companies relying on in-game income like this would all be bankrupt.
In the game you have weapons and ships that you supply allies and mercenaries. You also have your personal stats (tactics, attributes), and when you battle and complete missions you do better or worse based on these. If you want to be very powerful you will need to get 100 mercs, and 300 each special "LE" vehicles and weapons. You will also need to max your tactics. Mercs, LE items, and extra tactics points can be bought in game with artifacts (arts), and arts can be bought with real money.
But here's the thing: it takes a lot of artifacts to maximize, and artifacts aren't cheap. $5 gets you 27 artifacts but that will only buy you 1 merc (25 arts). LE items can cost less than 20 for weak ones on sale, but can also run to 60 arts (and those aren't the most powerful, just the best you can buy...you have to build the top ones). There are some price breaks but not much ($10 gets you 60, $100 gets you 750). One particular "Ultimate" LE ship requires 7 60 art ships to construct (ships which can be obtained in-game for the sufficiently dedicated and well equipped). That would cost a minimum of $60 real dollars to obtain...1 LE ship, leaving 299 ships and 300 weapons to go. Oh, and one really powerful ship doesn't make a huge difference. Add to that 100 mercs which will require 2500 arts as they can't be obtained otherwise, and that would run $350.
Now there are in-game available artifacts. A limited number from missions and extras from tournaments and bosses. But that waters down the value of those artifacts. If I can play the game occasionally and pick up a few hundred arts (which would cost $50 to buy) why would I purchase? When it isn't hard to see how expensive using cash is why does anyone do it? It's basically flushing money down the toilet. It doesn't give much advantage unless you spend hundreds or thousands, and the game isn't nearly that entertaining.
I find most "free" games with in-game purchases to be similarly worthless. You get so little for the $ you put in, that I feel ripped off for the people who do buy (and I know people do). In most games the money you spend essentially buys you time: you don't have to wait for recharges or things to finish. But for games like these, I appreciate the time. It's a built in "you're done playing now" point; "go do something else" (like loading up another game).
Mostly, however, games like this seem to me to be further proof that we are not rational actors when it comes to how we spend money. If we were then companies relying on in-game income like this would all be bankrupt.
Tuesday, May 20, 2014
Economic Bicycle
Growth, and the sustainability of said is very important to [modern] economics and economies. But "sustainable growth" is an oxymoron. Growth is inherently unstable, primarily due to scarcity concerns. Now, economists, so far as I can tell, generally consider this argument irrelevant because either the time-frame over which it becomes a problem is considered too long to be of consequence or because they assume that the economy is dynamic enough to have growth move through other channels, bypassing whatever current scarcity is limiting.
I don't disagree with that--well with the latter argument--but it seems to me that if growth is required, and that growth can come through changing dynamics rather than brute force, then population growth is unnecessary. That isn't, however, how things seem to work.
If the population is the terrain over which the proverbial bicycle rides then population growth is like moving downhill, slowing growth is leveling off. The bicycle can still run on level ground, and even uphill, it just requires more work and the titans of finance just don't want to pedal.
I don't disagree with that--well with the latter argument--but it seems to me that if growth is required, and that growth can come through changing dynamics rather than brute force, then population growth is unnecessary. That isn't, however, how things seem to work.
To have more or less full employment, we need sufficient spending to make use of the economy’s potential. But one important component of spending, investment, is subject to the accelerator effect: the demand for new capital depends on the economy’s rate of growth, rather than the current level of output. So if growth slows due to a falloff in population growth, investment demand falls — potentially pushing the economy into a semi-permanent slump.I recognize that Dr. Krugman is making a rather nuanced point seem much simpler than it is, but it seems to me that this is yet another indictment of our financial system and its influence and effect on the broader economy. Population growth shouldn't matter this much. The economy should be able to grow with plenty of speed to keep upright.
If the population is the terrain over which the proverbial bicycle rides then population growth is like moving downhill, slowing growth is leveling off. The bicycle can still run on level ground, and even uphill, it just requires more work and the titans of finance just don't want to pedal.
Tuesday, February 25, 2014
Minimum Wage and Jobs
It's one of those things that seems to be taken more on faith than evidence: higher minimum wage means fewer jobs. But the evidence just doesn't seem to be there. It seems like it should so people assume it does, but cities, states, and countries with higher minimum wages than the US just don't generally show higher unemployment (there are other social welfare issues that change and probably do lead to fewer jobs).
This article discusses states and cities in the US, referencing side by side county comparisons. I wish I could find the link, but Austrailia has a much higher minimum wage than us, and pretty damned low unemployment.
Pure economics wouldn't get you here, but maybe a bit more thought does. Higher minimum wage means more impetus to work, plus more income for those who do. More workers making more money will then spend more money meaning an increase in the demand for goods and services, which must be provided by employing more people. Moreover, if you have a business you want to succeed, you can't just fire everyone because their wages must go up. You can't succeed with zero employees. Maybe you can pass on some of the cost to customers, but only in a colluding society can that be guaranteed to work. Most likely the people on top (owners, executives) will end up with less profits, which, I suspect, is the real reason that business leaders oppose raising the minimum wage.
[Note: I would actually guess* the lower profit thing to be an immediate effect in terms of total $ and long term in terms of % profit.]
*Not an economist, and not doing the maths...which in this case are hard even for economists--too many variables--which I further suspect to be one of the reasons why they all "know" that higher min wage reduces jobs: that's what their maths tell them.
This article discusses states and cities in the US, referencing side by side county comparisons. I wish I could find the link, but Austrailia has a much higher minimum wage than us, and pretty damned low unemployment.
Pure economics wouldn't get you here, but maybe a bit more thought does. Higher minimum wage means more impetus to work, plus more income for those who do. More workers making more money will then spend more money meaning an increase in the demand for goods and services, which must be provided by employing more people. Moreover, if you have a business you want to succeed, you can't just fire everyone because their wages must go up. You can't succeed with zero employees. Maybe you can pass on some of the cost to customers, but only in a colluding society can that be guaranteed to work. Most likely the people on top (owners, executives) will end up with less profits, which, I suspect, is the real reason that business leaders oppose raising the minimum wage.
[Note: I would actually guess* the lower profit thing to be an immediate effect in terms of total $ and long term in terms of % profit.]
*Not an economist, and not doing the maths...which in this case are hard even for economists--too many variables--which I further suspect to be one of the reasons why they all "know" that higher min wage reduces jobs: that's what their maths tell them.
Monday, February 17, 2014
Another Must Read
Really, just about everything Matt Taibbi writes, but this one is the latest. Depressing, but stuff that everyone needs to know if we're to have any hope of stopping the next global financial meltdown.
Tuesday, February 11, 2014
No More Brand Loyalty
I think the article should have made clearer that this is really only true of consumer goods, and maybe small businesses--large corporations/businesses have lots of brand loyalty on the items they buy (sometimes for good reason, other times not so much). Still, broadly, this is a good thing for society.
Tuesday, January 14, 2014
Interesting Historical Note
England had, for a brief period of time, something much resembling a basic guaranteed income. It seems like it worked quite well, though it had some issues--mostly to do with how it was implemented, though other marginal ones as well. It was then and is now the moralistic argument against this that seems to resonate strongest and it is one that isn't easy to push back against rhetorically--experience, on the other hand pushes back nicely, but people like anecdotes over data and you can always find the anecdote that proves your side right.
Thursday, December 05, 2013
Waiting for a "Let Them Eat Cake" Response...
I think one of the things that a national income could very conceivably do is increase (not decrease) wages for lots of folks. Think about the protesting fast food workers. Now imagine that they all got $15k/year national income (roughly the equivalent of $7.50/hr). On the one hand, it may seem like they would be fairly happy with only $5/hr for working, but that isn't quite right. We have placed a value on non-working life of $7.50/hr, and have given those people the opportunity to reject working for wages that are insufficient. Many people, could now afford to look into better opportunities, including going into business for themselves. The pool of individuals willing to work for the current $8/hr mentioned may actually go down, while the number of customers, and the need to fill slots goes up. This would mean that McDonald's would need to pay higher salaries in order to fill enough spaces to deal with their business.
Wednesday, September 18, 2013
Brit Humor
I think this apology would be even better if delivered while being held out a window, upside-down, by Herr Schäuble.
Monday, September 16, 2013
The Euro
I do enjoy reading Krugman, and I understand his continued hammering on the Euro (note: NY Times article link), but it kind of seems like shouting at the wind. No matter how bad an idea the single currency was, and no matter how imperfectly it was implemented, unwinding it seems nearly unthinkable. There was a moment of opportunity to do so when interest rates were all over the map, but it has mostly passed (of course it is likely to come again), and it passed because no one in the Euro-zone wants to go back. I would rather hear ways to make the Euro function, than continued harping on why it was such a bad idea/implementation.
The US does [fairly] well with a single currency (yes, I know, we have a fiscal union as well) and our states have a fair amount of autonomy, so it seems like the Euro could be made to work without complete fiscal integration. e.g. Implement some baseline values--min wage, max retirement age, min retirement income, min unemployment benefits--that the various nation-states would be able to go above and beyond if they wished. All of this would be covered by a Euro-zone tax that would be a % of GDP, with the individual nations able to determine how to levy that tax on their citizens.
The US does [fairly] well with a single currency (yes, I know, we have a fiscal union as well) and our states have a fair amount of autonomy, so it seems like the Euro could be made to work without complete fiscal integration. e.g. Implement some baseline values--min wage, max retirement age, min retirement income, min unemployment benefits--that the various nation-states would be able to go above and beyond if they wished. All of this would be covered by a Euro-zone tax that would be a % of GDP, with the individual nations able to determine how to levy that tax on their citizens.
Wednesday, June 19, 2013
I Don't Really Believe Greg Mankiw is Stupid
But his "Defending the One Percent" makes me seriously question that belief. It has some pretty glaring shortcomings and reads more like something I would expect of a new graduate student in political science than a Harvard professor of economics.
The problem isn't that he has written anything in particular that is wrong, but that the whole thing is not even wrong. It's mostly arguing against a series of straw men. There isn't a single argument he puts forward that can't be demolished with 5 seconds of actual thought. It's like Newt Gingrich wrote it: it sounds smart to stupid people, but any actual smart person would consider it a joke.
He seems to go back and forth between economic and moral notions of what is and what should be that leaves a confused mess. In the end his "just desserts" theory sounds like a moral judgement and is couched in such terms, but the moral is: every one gets their marginal economic contribution, and that's just a load of crap.
I haven't the inclination to do a complete tear down on it but there are two things that pretty much kill off whatever he is saying:
1. People who think that current trends and levels of inequality are bad are not, as far as I have seen, arguing that we should do away with inequality entirely. We will and should always have a 1% (and a 0.01%), it isn't their existence, but rather the yawning gap separating them from the rest of us that is the problem, and that Mankiw never addresses.
2. The marginal utility of $1 vs. the marginal economic contribution is a serious discussion which Mankiw just ignores, though he states conclusions as though it was obvious (basically how would his "just desserts" get applied in reality?).
Further to point 2. Say someone creates something that provides $10 of good to everyone on the planet. This person has certainly created something of immense value, but how do you reward that justly? Mankiw's "just deserts" theory would imply something close to $70 billion, but there is approximately zero effective difference between giving that person $1 billion and the total $70 billion. Really, there probably isn't a difference down to below $100 million. So at what point is that person no longer benefiting justly, and just hurting the broader economy by depriving others of capital?
More importantly, how do you deal with things provided by workers in non-profits and government agencies? Scientists and researchers create things that have immense value to our lives and societies, but are almost never compensated at anything approaching their contributions. I don't care how much of an ass you are, you can't tell me that Steve Jobs gave more to humanity (morally or economically) than Jonas Salk. Further, there is a serious question as to who did "create" the things that make people wealthy. iPods are great, but there is a shit-ton of prior research and development that were required before that last step was taken, Steve didn't do all that, but he (well, Apple) got to reap the rewards anyway without haveing to go back and pay for the prior research.
Maybe Mankiw is stupid.
Update: Lots of others hammering on the idiocy. Here is one with lots of other details, and here is one that does a much more thorough job than I do on the "just desserts" moral economics issue.
The problem isn't that he has written anything in particular that is wrong, but that the whole thing is not even wrong. It's mostly arguing against a series of straw men. There isn't a single argument he puts forward that can't be demolished with 5 seconds of actual thought. It's like Newt Gingrich wrote it: it sounds smart to stupid people, but any actual smart person would consider it a joke.
He seems to go back and forth between economic and moral notions of what is and what should be that leaves a confused mess. In the end his "just desserts" theory sounds like a moral judgement and is couched in such terms, but the moral is: every one gets their marginal economic contribution, and that's just a load of crap.
I haven't the inclination to do a complete tear down on it but there are two things that pretty much kill off whatever he is saying:
1. People who think that current trends and levels of inequality are bad are not, as far as I have seen, arguing that we should do away with inequality entirely. We will and should always have a 1% (and a 0.01%), it isn't their existence, but rather the yawning gap separating them from the rest of us that is the problem, and that Mankiw never addresses.
2. The marginal utility of $1 vs. the marginal economic contribution is a serious discussion which Mankiw just ignores, though he states conclusions as though it was obvious (basically how would his "just desserts" get applied in reality?).
Further to point 2. Say someone creates something that provides $10 of good to everyone on the planet. This person has certainly created something of immense value, but how do you reward that justly? Mankiw's "just deserts" theory would imply something close to $70 billion, but there is approximately zero effective difference between giving that person $1 billion and the total $70 billion. Really, there probably isn't a difference down to below $100 million. So at what point is that person no longer benefiting justly, and just hurting the broader economy by depriving others of capital?
More importantly, how do you deal with things provided by workers in non-profits and government agencies? Scientists and researchers create things that have immense value to our lives and societies, but are almost never compensated at anything approaching their contributions. I don't care how much of an ass you are, you can't tell me that Steve Jobs gave more to humanity (morally or economically) than Jonas Salk. Further, there is a serious question as to who did "create" the things that make people wealthy. iPods are great, but there is a shit-ton of prior research and development that were required before that last step was taken, Steve didn't do all that, but he (well, Apple) got to reap the rewards anyway without haveing to go back and pay for the prior research.
Maybe Mankiw is stupid.
Update: Lots of others hammering on the idiocy. Here is one with lots of other details, and here is one that does a much more thorough job than I do on the "just desserts" moral economics issue.
Tuesday, June 18, 2013
But Teh Markets!!!
I actually do like free markets, but some people's obsession over them is kind of creepy. Not all markets can be free without government intervention. That shouldn't be a controversial statement.
Friday, June 07, 2013
Odd Buisness
During the Broad Street Run there were cameras set up in a few locations taking pictures. Now those pictures are available for purchase. The absolute lowest price option available is $14 for a single 5x7 print. They charge $16 for a .jpg copy (of a single image) and $70 for a USB drive with copies of all the images that are tagged with your bib number (~20 images for me, though I'm not in all of them).
I'm not sure what the idea here is, because I can't even begin to imagine paying any of those prices. The only option that I would even begin to consider is the .jpg copy of one of the images (pick the best) which I could email to friends/family and post online, but the dollar value for that to me is approaching zero, and at most a couple bucks. I know there are lots of things like this where you get a small fraction that will buy something for sentimental reasons, but it seems like they are leaving a huge market of people like me untapped. I would bet that nearly every one of the 40k people in the race would like to have an .jpg for the same reason as me, and at some price that would become tempting for a large number, but I can't believe that it $16 is even close to the right price to capture it (maybe $2-$5).
They've already taken the pictures and processed them to the extent that I can see my images. The marginal cost to provide me a .jpg is near zero (well, it's really whatever their overhead on payment processing is, which is probably the problem).
...This is the second email they have sent me, which kind of implies that they didn't get enough takers the first time around and they are looking to interest a few more people, but it's the same crappy deal.
I'm not sure what the idea here is, because I can't even begin to imagine paying any of those prices. The only option that I would even begin to consider is the .jpg copy of one of the images (pick the best) which I could email to friends/family and post online, but the dollar value for that to me is approaching zero, and at most a couple bucks. I know there are lots of things like this where you get a small fraction that will buy something for sentimental reasons, but it seems like they are leaving a huge market of people like me untapped. I would bet that nearly every one of the 40k people in the race would like to have an .jpg for the same reason as me, and at some price that would become tempting for a large number, but I can't believe that it $16 is even close to the right price to capture it (maybe $2-$5).
They've already taken the pictures and processed them to the extent that I can see my images. The marginal cost to provide me a .jpg is near zero (well, it's really whatever their overhead on payment processing is, which is probably the problem).
...This is the second email they have sent me, which kind of implies that they didn't get enough takers the first time around and they are looking to interest a few more people, but it's the same crappy deal.
Thursday, April 25, 2013
Of Course Krugman is Right
It's been obvious to anyone with half a brain for years. Unfortunately the horrible people who rule us are too stubborn to admit they have been wrong, in large part because they would have to own up to the consequences of their mistakes--which have been devastating. It's been clear for some time that having knowledge, facts, history, and objective correctness on your side has no value in the debates taking place (in Washington or the Euro). Our supposedly smart, supposedly Democratic president has endorsed cutting Social Security, for gawd sakes!
Monday, April 22, 2013
Really Stepping In It
On a pure theory of economics basis, I suppose there is some merit to this Matt Yglesias post. But it's more than a little bit of a mess, conflating several disparate things into some argument that isn't there.
On the one hand we have investors buying distressed properties to rent them out to occupants who cannot buy them because, a. their credit scores are too low to qualify for loans that are granted by people in the investor class and b. they are being outbid by those same investors who come with cash. The resulting rents are necessarily higher than would be the mortgage payment (it would be a really crappy investment otherwise), meaning the poor sub-prime market segment is in fact losing out to the monied class.
The other thing he is arguing is kind of a non-sequitor: housing isn't a great investment so most people would be better off renting and investing in index funds. But since, as he states early on: you have to live somewhere, you have to pay for renting, so you can't compare housing as investment to total stock market index fund as investment. You have to compare housing as investment plus other available investments to: renting as money hole but some other investments. If the case is that renting is more expensive than buying would be: you get the worst of both worlds: money hole, plus less $ left over to invest. This isn't hard, and yet it is routinely fucked up by people advocating for more renting.
There are good reasons to rent, and good reasons to buy, but this investor push to buy distressed housing and rent it out is nearly prof in itself that renting (on average, particularly for long terms) is a sucker's bet: your rent is someone else's profit, so you must be able to do better by buying...even factoring interest on the mortgage.
As an aside, one of the problems with this, that really only gets voiced by Atrios is that there is a lot of reason to be skeptical of this type of investing with respect to treatment of tenants. Renting from an organized apartment complex and renting from some guy who owns a couple rental houses nearby are both different animals, and it's not a bad bet to say that renting a house from one of these hedge funds will mean you have a hell of a time getting a leaky faucet fixed.
On the one hand we have investors buying distressed properties to rent them out to occupants who cannot buy them because, a. their credit scores are too low to qualify for loans that are granted by people in the investor class and b. they are being outbid by those same investors who come with cash. The resulting rents are necessarily higher than would be the mortgage payment (it would be a really crappy investment otherwise), meaning the poor sub-prime market segment is in fact losing out to the monied class.
The other thing he is arguing is kind of a non-sequitor: housing isn't a great investment so most people would be better off renting and investing in index funds. But since, as he states early on: you have to live somewhere, you have to pay for renting, so you can't compare housing as investment to total stock market index fund as investment. You have to compare housing as investment plus other available investments to: renting as money hole but some other investments. If the case is that renting is more expensive than buying would be: you get the worst of both worlds: money hole, plus less $ left over to invest. This isn't hard, and yet it is routinely fucked up by people advocating for more renting.
There are good reasons to rent, and good reasons to buy, but this investor push to buy distressed housing and rent it out is nearly prof in itself that renting (on average, particularly for long terms) is a sucker's bet: your rent is someone else's profit, so you must be able to do better by buying...even factoring interest on the mortgage.
As an aside, one of the problems with this, that really only gets voiced by Atrios is that there is a lot of reason to be skeptical of this type of investing with respect to treatment of tenants. Renting from an organized apartment complex and renting from some guy who owns a couple rental houses nearby are both different animals, and it's not a bad bet to say that renting a house from one of these hedge funds will mean you have a hell of a time getting a leaky faucet fixed.
Streaming
NPR was saying that Netflix accounts for (iirc) over 30% of internet usage evenings in the US. That is a huge number. Then there was discussion about exclusive titles in the competition between Netflix, Amazon Prime, and Hulu. In the end I suspect one will survive (either by buying the others or driving them into bankruptcy). Netflix has the early lead, but Amazon probably has the edge in the long run due to their much deeper pockets (due, in large part to shareholders that don't seem to care about profitability).
There is a limited amount of time and a huge amount of programming available on any one of them, so I see no need to pay for more than one. It probably doesn't matter much to consumers who wins: we get excellent value while the competition is on, and that will likely go away somewhat once the winner is decided. Still, Amazon does seem to be taking over the world, and I would like to think that there is room for other people selling things on/over the internet...but they really do have the best overall deal, provided you order other things from Amazon.
There is a limited amount of time and a huge amount of programming available on any one of them, so I see no need to pay for more than one. It probably doesn't matter much to consumers who wins: we get excellent value while the competition is on, and that will likely go away somewhat once the winner is decided. Still, Amazon does seem to be taking over the world, and I would like to think that there is room for other people selling things on/over the internet...but they really do have the best overall deal, provided you order other things from Amazon.
Friday, March 29, 2013
Rich Moochers
I think this point needs to be made more often and forcefully: a large swath of the wealthy in this country (particularly the anti-tax assholes) are, in reality, our Moocher Class. Working poor who pay lots of taxes in the form of sales, payroll, state and local contribute a larger share of their income to government than do people like Mitt Romney.
Thursday, February 14, 2013
Great, Let's Do It
Naturally, I agree strongly with Martin Wolf here. Commenters there don't seem to agree as much, but it always strikes me whenever I read an article in a financial section/magazine/paper that the comments are overwhelmingly right wing (and generally hacks at that: "Fiat currency is a fraud!").
I'm not sure why this is exactly, but I suspect that most of the people who read such articles are the same as the people who blew up the economy for everyone, but that are doing quite well now (while others continue to suffer). It's kind of a shame, because most people do not and will not understand economics well enough to figure out that we are being screwed over for no good reason. The things that will fix the economy sound outrageous to most people, but that's only because our economic system itself sounds (or would sound) outrageous to most people.
I'm not sure why this is exactly, but I suspect that most of the people who read such articles are the same as the people who blew up the economy for everyone, but that are doing quite well now (while others continue to suffer). It's kind of a shame, because most people do not and will not understand economics well enough to figure out that we are being screwed over for no good reason. The things that will fix the economy sound outrageous to most people, but that's only because our economic system itself sounds (or would sound) outrageous to most people.
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