Economics @ ITT

Economic Value of a Human Life: $0.57

Posted in economics by ittecon on April 3, 2014

Read here: Should GM Get the Death Penalty for 57 Cent Premeditated Murder?.

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Conspicuous Consumption: A(nother) Cautionary Tale

Posted in economics, environment by ittecon on January 27, 2014

Unfettered capitalism is a road to extinction, and, sadly, not just a metaphor.

At first the frenetic pace of the killing didn’t matter: there were so many seals.  On one island alone, Amasa Delano estimated, there were “two to three millions of them” when New Englanders first arrived to make “a business of killing seals.”“If many of them were killed in a night,” wrote one observer, “they would not be missed in the morning.”  It did indeed seem as if you could kill every one in sight one day, then start afresh the next.  Within just a few years, though, Amasa and his fellow sealers had taken so many seal skins to China that Canton’s warehouses couldn’t hold them.  They began to pile up on the docks, rotting in the rain, and their market price crashed.

To make up the margin, sealers further accelerated the pace of the killing — until there was nothing left to kill.  In this way, oversupply and extinction went hand in hand.  In the process, cooperation among sealers gave way to bloody battles over thinning rookeries.  Previously, it only took a few weeks and a handful of men to fill a ship’s hold with skins.  As those rookeries began to disappear, however, more and more men were needed to find and kill the required number of seals and they were often left on desolate islands for two- or three-year stretches, living alone in miserable huts in dreary weather, wondering if their ships were ever going to return for them.

“On island after island, coast after coast,” one historian wrote, “the seals had been destroyed to the last available pup, on the supposition that if sealer Tom did not kill every seal in sight, sealer Dick or sealer Harry would not be so squeamish.”  By 1804, on the very island where Amasa estimated that there had been millions of seals, there were more sailors than prey.  Two years later, there were no seals at all.

via Noam Chomsky is right: It’s the so-called serious who devastate the planet and cause the wars – Salon.com.

We’re Addicted to Economic Growth and It Will Be the Death of Us

Posted in economics by ittecon on October 7, 2013

I think the American people right now have been so focused, and will continue to be focused on our economy and jobs and growth, that if the message is somehow were going to ignore jobs and growth simply to address climate change, I don’t think anybody is going to go for that. I wont go for that.

via Were Addicted to Economic Growth and It Will Be the Death of Us | Alternet.

Crack Addicts Make Surprisingly Rational Decisions

Posted in economics by ittecon on September 18, 2013

And now for something completely different. File this under Economics of Crime or The Marketing of Poor Social Policy.

“There is a belief, for example, that crack cocaine is so addictive it only took one hit to get hooked, and that it is impossible to use heroin without becoming addicted,” he said. “There was another belief that methamphetamine users are cognitively impaired. All of these are myths that have have been perpetuated primarily by law enforcement, and law enforcement deals with a limited, select group of people—people who are, in many cases, behaving badly.”

Hart’s work to understand addiction and addicts tackles common misconceptions about several forms of drug addiction and addicts. He conducted similar studies around methamphetamine addicts in the past, as the Times article points out, and “found that when he raised the alternative reward to $20, every single addict, of meth and crack alike, chose the cash. They knew they wouldn’t receive it until the experiment ended weeks later, but they were still willing to pass up an immediate high.”

via Crack Addicts Make Surprisingly Rational Decisions, Fascinating Study Reveals | Alternet.

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.

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.

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.

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

Posted in economics by ittecon on June 21, 2013

The top five banks—JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc.—account for $64 billion of the total [US government tax] subsidy [of $83 billion], an amount roughly equal to their typical annual profits see tables for data on individual banks. In other words, the banks occupying the commanding heights of the U.S. financial industry—with almost $9 trillion in assets, more than half the size of the U.S. economy—would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

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

California To Wal-Mart: No More Taxpayer Subsidized Profits For You

Posted in economics by ittecon on June 5, 2013

For years, Wal-Mart—and other large retail operators—have been piling up huge profits by controlling their labor costs through paying employees sub-poverty level wages. As a result, it has long been left to the taxpayer to provide healthcare and other subsidized benefits to the many Wal-Mart employees who are dependent on Medicaid, food stamp programs and subsidized housing in order to keep their families from going under.

via California To Wal-Mart: Enough! No More Taxpayer Subsidized Profits For You – Forbes.