Economics @ ITT

California car dealers go crying to DMV about Tesla Motors’ website

Posted in economics, Regulation by ittecon on September 26, 2013

Auto dealers have been dealing with disruption just about as well as any other legacy industry has. Instead of attempting to compete, dealers have chosen to respond to Tesla’s refusal to cut them in on the middleman action by throwing up as many regulatory roadblocks as possible. Sadly, this antagonistic attitude toward both their competition and the car-buying public somehow makes sense to them, and they seem very willing to bury both the upstart and their last remaining shreds of goodwill at the same time.

California car dealers go crying to DMV about Tesla Motors’ website | The Raw Story.

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.

Is Capitalism Dying?

Posted in economics, externalities, Policy Issues, Regulation by ittecon on May 8, 2013

It’as not very often that I agree with a large part of an article published by Forbes, but here is one.

Capitalism has been the dominant economic system in the Western world for, give or take, 400 years. And in that virtual eye blink in the grander scheme of things it has produced more wealth than all the prior economic systems put together.

via Is Capitalism Dying? – Forbes.

The Supreme Court Has the Constitutional Power to Hike Medicine Prices to 5x Their Cost?

Posted in antitrust, economics, Policy Issues, Regulation, Taxation by ittecon on March 30, 2013

U.S. pharmaceuticals get a very good deal from the federal government. For every new drug they produce, they get rewarded with long-term patents that grant them exclusive rights to market and sell the product for as much as 20 years – which guarantees them billions in profits and no competitors in the marketplace. Drug companies claim that they must be allowed to profit off of products they nurtured with expensive research and development. In reality, taxpayer-funded research from academia or the National Institutes of Health account for the vast majority of vital drugs brought to market every year, and R&D is a small fraction of the overall drug company budget. What’s more, drug companies routinely use their monopoly power to jack up pharmaceutical prices, which cost far more in the U.S. than anywhere in the world.

via Where Does It Say the Supreme Court Has the Constitutional Power to Hike Medicine Prices to 5x Their Cost? | Alternet.

Joseph Stiglitz: Innovation should focus on quality of life, not just productivity

Posted in economics, employment, environment, externalities, Policy Issues, Regulation by ittecon on March 16, 2013

“We have a lot of unemployment and yet firms are investing in machines to replace unskilled workers,” he said. “Do we want to create more unemployment of unskilled workers? No. We want to focus our innovation on saving our planet, resources, the environment and the quality of life.”

via Joseph Stiglitz: Innovation should focus on quality of life, not just productivity | Bangkok Post: business.

Why Should Taxpayers Give Big Banks $83 Billion a Year?

Posted in economics, Income Redistribution, macroeconomics, Moral Hazard, Policy Issues, Regulation by ittecon on February 22, 2013

On television, in interviews and inmeetings with investors, executives of the biggest U.S. banks—notably JPMorgan Chase & Co. Chief Executive Jamie Dimon—makethe case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

via Why Should Taxpayers Give Big Banks $83 Billion a Year? – Bloomberg.

3 Approaches to Curbing Gun Violence Using Economics

Posted in economics, Policy Issues, Regulation, Taxation by ittecon on December 19, 2012

Undoubtedly, there are more economic incentives to employ, and I don’t want to get mired in the politics of this gun ownership issue, but these are decent ideas.

What if anything can the government realistically do to decrease gun violence in America? We’ll surely hear a number of proposals this week, but here are three that attack the problem as an economist would: through incentives.

via 3 Approaches to Curbing Gun Violence — Using Economics |

Another approach is to make the manufacturers and vendors civilly liable for any damage caused by the product—sort of like making a bartender liable for serving an inebriated patron alcohol after s/he gets into an accident. This takes the argument out of the constitutional realm into the domain of economics. People in the US might have the right to bear arms, but the liability would increase the cost to these parties, and so  based on classical economic theory, supply would decline and prices would increase.

Tax the Traders! It Would Solve Economic Crisis

Posted in economics, Policy Issues, Regulation, Taxation by ittecon on December 4, 2012

A tax of less than half a percent on every $100 of stock sales or sales of other financial instruments including bonds, derivatives, and options. The tax could raise anywhere from $170 billion to $350 billion per year depending how it was applied.

via Eliot Spitzer: Tax the Traders! It Would Solve Economic Crisis and Stop Reckless Activity | Alternet.

Conservatives Are Not Against Big Government

Posted in economics, Income Redistribution, Policy Issues, Regulation, Taxation by ittecon on June 19, 2012

Conservatives just want to distribute income upwards instead of downwards.

[An] example of big government that conservatives support, highly paid professionals e.g. doctors, dentists and lawyers use licensing restrictions to limit both foreign and domestic competition. While the government has been using the banner of “free trade” to drive down the wages of manufacturing workers, it has simultaneously been increasing the protection afforded doctors in order to prevent any similar downward pressure on their wages.

If doctors in the United States were paid the same as doctors in Western Europe, it would save us more than $80 billion a year. The big government subsidy to doctors alone is close to two times the money involved in Bush’s tax cuts to the wealthy.

via Dean Baker: Liberals Working for the Right.

A Big Enough Soda Tax Could Have Legs

Posted in economics, microeconomics, Regulation by ittecon on June 18, 2012

When the USDA crunched the numbers PDF on a 20 percent increase in cost of sugared beverages in 2010 study, it found that more expensive drinks could spur an average loss of 3.8 pounds a year for adults and 4.5 pounds a year for kids.

via A Big Enough Soda Tax Could Have Legs | Mother Jones.