Economics @ ITT

Weather cost the world $85 billion so far this year.

Posted in economics by ittecon on July 28, 2013

Wild weather has already taken an $85 billion toll on the world so far in 2013. Believe it or not, that’s actually a pretty typical sum for the first six months of the year. In fact, the tally of expensive disasters—that includes flooding in central Europe $22 billion, a 6.6-magnitude earthquake in China’s Sichuan Province $14 billion, tornadoes and other severe weather in the US $4.5 billion from May 18-22 alone, and droughts in Brazil $8.3 billion, China $4.2 billion, and New Zealand $1.6 billion—is actually 15% lower than the 10-year average.

via Weather cost the world $85 billion so far this year. Only 1/4 of that was insured – Quartz.

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The Revolving Door of Wall Street

Posted in economics by ittecon on July 24, 2013

When he left his role as Wall Street’s top federal enforcer, Robert S. Khuzami began a long courtship with a who’s who of the legal world.

The calls rolled in from financial giants like Visa and Bridgewater, and from white-shoe law firms, like WilmerHale. Some offered outsize paydays, others promised an office not only in New York but also in Washington, where his family lives. They all wanted the benefit of his experience as a terrorism prosecutor and enforcement chief at the Securities and Exchange Commission.

Six months later, lawyers briefed on the matter say, Mr. Khuzami has accepted a job that pays more than $5 million a year at Kirkland & Ellis, one of the nation’s biggest corporate law firms. In doing so, he is following the quintessential Washington script: an influential government insider becoming a paid advocate for industries he once policed.

via A Legal Bane of Wall Street Switches Sides – NYTimes.com.

Amazon Unpacked – Why the UK is Less than Thrilled with Amazon.com

Posted in economics by ittecon on July 23, 2013

As online shopping explodes in Britain, helping to push traditional retailers such as HMV out of business, more and more jobs are moving from high-street shops into warehouses like this one. Under pressure from politicians and the public over its tax arrangements, Amazon has tried to stress how many jobs it is creating across the country at a time of economic malaise. The undisputed behemoth of the online retail world has invested more than £1bn in its UK operations and announced last year that it would open another three warehouses over the next two years and create 2,000 more permanent jobs. Amazon even had a quote from David Cameron, the prime minister, in its September press release. “This is great news, not only for those individuals who will find work, but for the UK economy,” he said.

via Amazon unpacked – FT.com.

The Problem with Price Gouging Laws

Posted in economics by ittecon on July 23, 2013

Many states have anti-gouging laws that curb price increases during disasters. In California, for instance, the maximum that retailers can raise prices after an emergency is 10%. Since this minimal upcharge wont effectively temper demand, limited supplies end up being rationed on a first-come, first-serve basis. While many view this policy as “fair,” gouging laws have two key drawbacks…

via The Problem with Price Gouging Laws – Rafi Mohammed – Harvard Business Review.

Upward Mobility Is a Lot Easier in Some US Cities

Posted in economics, employment by ittecon on July 22, 2013

A major new study by academic economists show that it’s still possible to get ahead in America but a great deal depends on where you’re trying to do it. As is the case with many socio-economic indicators, the northeast, and mountain and ocean west come out shining while the southeast and rustbelt lag behind.

via Upward mobility is a lot easier in some cities – Salon.com.

Putting China’s Low Household Consumption in Perspective

Posted in economics, International Economics by ittecon on July 22, 2013

It is widely known that China needs to rebalance its economy to rely more on consumption, but the extent of China’s imbalance between consumption and investment is not fully appreciated.  Comparisons to other emerging markets and countries like Japan, Taiwan, and Korea that pioneered the East Asian growth model show that China’s low levels of consumption are unparalleled.

via Putting China’s Low Household Consumption in Perspective | NewAmerica.net.

 

This is an article from 2011, but it was mentioned by Paul Krugman’s latest post.

The Big Lie Behind Food Stamps

Posted in economics by ittecon on July 22, 2013

Walmarts wages and benefits are so low that many of its employees are forced to turn to the government for aid, costing taxpayers between $900,000 and $1.75 million per store…

via Daily Kos: The big lie behind food stamps.

Is Econ 101 Killing America?

Posted in economics by ittecon on July 9, 2013

I have commented on this before. It is difficult for me to teach Econ 101 when many of its fundamentals are specious dogma, if even that. This being said, this Salon article treats economics as some monolithic entity. The authors are not wholly informed, but they make some points, primarily against the mainstream, corporate flavoured economics. Heterodox economists have known many of these concepts for years.

In the Middle Ages, people looked to the Church for certainty. In today’s complex, market-based economies, they look to the field of economics, at least for answers to questions concerning the economy. And unlike some disciplines, which acknowledge that there’s a huge gap between the scholarly knowledge and policy advice, economists have been anything but shy about asserting their authority.

Read the full article here: Econ 101 is killing America – Salon.com.

Without touching on each assertion, the economics is not a science bit is a nonstarter.  Economics is a social science in the same manner that psychology, sociology, and anthropology are social sciences. The authors assert that it is not a science and make some tangential commentary, but they never articulate their position.

Big Unemployment, the New Normal?

Posted in economics, employment, macroeconomics, Policy Issues, Regulation, Taxation by ittecon on July 9, 2013

I tried to respond to a post by Don Peppers responding to this article, but LinkedIn limits the character count. I quote Don’s post here for context.

It’s common knowledge that LESS government, LESS regulation, and LOWER marginal tax rates will all improve employment. Unfortunately, the politics of envy is irresistible to some, and there are very few politicians on either side of the aisle who will vote for less of anything related to the government.

It may be common knowledge that less of these things might increase employment, but this favours a local maxima at the expense of a global maxima. It is the typical short-term benefit with a long-term detriment. Still, this argument and its subarguments are specious. I won’t even give any more attention to the dubious official unemployment figure definition and methodology.

Less government is a vague term. What government? Fewer dog-catchers? Interesting how, ad reductio, this becomes an argument for anarchy.

As for regulations, business favours regulations that shield it from the public and markets; intellectual property “rights” come to the top of my mind. Government (or a quasi-government acting entity) are necessary so as not to devolve into a situation where warlords rule. Afghanistan comes to mind. I could imagine a football match with no rules or regulations. Even rugby and UFC have rules, as do wars.

In economic terms, the lower marginal taxes argument is patently false (without even delving into marginal verse effective territory). Laffer’s concept is not false in and of itself, but it fails on two accounts. First, we can agree that at some point lowering marginal tax rates will create positive incentives, but it doesn’t follow this is true at all levels. Empirically, we can easily determine that we are below that point. On a practical level, this not only means that a reduction with not have positive effects; there will be negative effects. Second, the primary driver to hiring is demand for products or services (or at least the prospect thereof). A marginal tax rate of zero has no impact if no one is purchasing what I am offering.

Wages Fall At Record Pace

Posted in economics by ittecon on July 2, 2013

Hourly wages fell 3.8 percent in the first quarter, the biggest drop since the BLS began tracking compensation in 1947. Productivity rose half a percentage point. The result was that what economists call “labor unit costs” fell 4.3 percent.

via Wages Fall At Record Pace.