Archive for the ‘economics’ Tag

We Don’t Live in a Crap World   Leave a comment

Some believe it is only great power that can hold evil in check, but that is not what I have found. It is the small everyday deeds of ordinary folk that keep the darkness at bay. (Gandalf, The Hobbit)

World PovertySo after watching American liberals scream hate speech at each other for a few weeks, I (Brad) am reminded of why I don’t pay a lot of attention to politics. Lela does, but she has gotten so she thinks it’s all a bunch of hooey. I prefer not to pay much attention because I prefer not to be angry over things I can’t control. If you haven’t figured out that you don’t actually control politics yet … well, you don’t.

There’s this belief these days that politics is the only way to keep evil in line. We must confront power with power, right? I think Gandalf had it right when he suggested the opposite is true.

So, if you’ve been busy screaming shit about each other, maybe you missed these five human achievements while you were driving the poison koolaid of Washington politics.

  1.  The World Bank reported that the number of humans living in extreme poverty dropped below 750 million worldwide. The Wall Street Journal reported that this is the lowest figure since the World Bank began collecting such data in 1990. That’s GREAT news, but if you were busy trying to analyze the body language of Brett Kavanaugh, you probably missed it.
  2. Scientists found a way to use spit (yeah) to predict heart attacks and strokes. Researchers at Queen Mary University London and Imperial College London announced a breakthrough in gene research that will allow them to identify patients genetically predisposed to high-risk blood pressure conditions through a simple spit test.

“This is the most major advance in blood pressure genetics to date,” Professor Mark Caulfield, of QMUL told The Sun.

The technology will enable doctors to more effectively identify, educate, and treat high-risk patients, reducing the number of heart attacks and strokes.

3. Our oceans may be getting cleaner sooner. The Ocean Cleanup, a non-profit organization that uses new technologies to rid the oceans of plastic, announced the beginning of a two-week trial phase in preparation for its anticipated cleanup of the Great Pacific Garbage Patch.

“Consider it a final dress rehearsal before the main performance: cleaning plastic from the ocean,” said officials with Ocean Cleanup, a privately funded initiative.

Oceanographers claim plastic in the world’s oceans represents a “global threat” by carrying toxic pollutants into the food chain and endangering some 600 marine species. It also looks really gross (see below).

4. A big solar power breaththrough? I’m always skeptical of these because I live in Alaska where we experience a severe shortage of solar anything in the winter, but it sounds cool. Solar power has yet to become an affordable and efficient energy source. But there’s reason to believe that could change.

University of Cambridge scientists recently claimed they made a significant breakthrough in their attempts to find new ways to harness solar energy. The breakthrough reportedly involved splitting the elements in water—hydrogen and oxygen—”by altering the photosynthetic machinery in plants.”

Yeah, even as a master electrician, I won’t pretend to know what that means, but it sounds impressive. You can read more about it here.

5. New data show life expectancy is rapidly increasing in Africa. A new UN report shows that residents of sub-Saharan Africa are living much longer than they were a mere two decades ago.

People in the region, The Guardian reports, “can expect to live for 11 years longer than the generation that went before them, new statistics show.”

The increase in life expectancy in Africa is linked to the stunning growth of its middle-class in recent years, one of the greatest stories of our age.

It’s not that I don’t think the Supreme Court and the Brett Kavanaugh confirmation isn’t important, but that there is nothing you or I can do about it, so why are we wasting our time and raising our blood pressure freaking out over it. It just creates acrimony, bitterness, and antagonism. It’s a bunch of tyrants scrabbling for control of the monopoly of force (yes, Lela, I do so listen to you).

Contrast that government spectacle with free markets — people working together willingly, exchanging stuff each other, and solving problems.

Entrepreneurs are “ordinary folks” (to get back to our Gandalf metaphor) who go mostly unseen. They aren’t politicians, bureaucrats, or Supreme Court justices, but they are the ones who actually improve our world and really keep evil at bay.

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A Tale of Two Cities   Leave a comment

After World War 2, stark contrasts could be drawn between East and West Berlin.

Image result for image of the difference between east and west berlinIn West Berlin, a vibrant market-based economy had stimulated a material and economy recovery accompanied by respect for civil liberties. You’d almost not have thought the Germans lost the war, since there were no real consequences of actively or passively collaborating with the Nazi regime.

On the other side of the wall, East Berlin was drab and gray, wrapped in an omnipresent dictitorial system of secret police, directed from Moscow by Stalin and his successors. Much of the rubble of World War 2 still surrounded East Berliners.

It was hard to deny the contrast between these two worlds seperated by a wall, built to keep the captive communists in and the ideas and hopes of freedom out.

And, yet, the market-oriented economies of the West weren’t truly free markets. These economies were wrapped with and hampered by varying degrees of government regulatory intervention and redistributive welfare. The interventionist welfare states of Western Europe were more extensive and intrusive than what existed in the United States, but they were all managed, manipulated and partly planned societies within obstensibly democratic political regimes.

 

Posted September 25, 2018 by aurorawatcherak in History, Uncategorized

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Benefits of International Tax Competition for US Workers   Leave a comment

Romina Boccia & Julia Howe

Found on FEE

The Tax Cuts and Jobs Act is continuing to produce tangible benefits for Americans, growing the U.S. economy and making it more competitive for business investment and job creation.

Wages are rising, unemployment rates are declining, and there is more money in taxpayers’ pockets.

The larger economy materializes as significantly higher take-home pay for the typical American. According to a recent Heritage Foundation report, the average American will be $26,000 richer over the next 10 years, thanks to tax cuts and a larger economy.

There is even more good news: Tax reform has not only encouraged investment domestically but has fostered a more attractive investment climate on an international scale.

The corporate tax rate cut (from 35 percent to 21 percent) significantly improves America’s position in global financial markets. Businesses are more inclined to conduct and expand their operations within U.S. borders and employ American workers.

These critics fear countries will attempt to undercut each other with lower and lower tax rates.

Yet some have condemned the tax cuts on this very basis, arguing that they contribute to “unhealthy” international tax competition. These critics fear countries will attempt to undercut each other with lower and lower tax rates.

New York Times op-ed called international tax competition a “collective action problem,” suggesting that countries would benefit more from higher corporate tax rates and that they fail to cooperate in imposing higher rates because of incentives to compete for businesses and high-skilled labor.

The article claimed that the U.S. business tax cuts contribute to this problem by reducing tax revenue, thereby harming America.

That argument is flawed both in economic theory and in practice.

A recent paper authored by Assaf Razin and Efraim Sadka, published by the National Bureau of Economic Research, examines the implications of financial globalization, where mobile capital can easily respond to tax and regulatory conditions by moving across borders.

The paper uses a simple model to demonstrate that there are benefits from tax competition, and it shows that countries are better off when their corporate taxes are lower.

The high capital tax rate results in a less productive economy and smaller tax base.

The model assumes that as financial globalization increases, businesses can relocate to more competitive economic environments at a lower cost.

When tax rates in one country are consistently elevated, mobile capital moves to other jurisdictions. New investments in factories and research are made in countries with lower taxes.

Because the capital can move to other countries, workers are left with the tab through lower wages and fewer jobs. The “corporate tax burden” is shifted to labor or consumption in places with high capital taxes.

The high capital tax rate results in a less productive economy and smaller tax base. This combination causes revenue to decrease as there is overall less economic wealth generated and, therefore, less to be taxed.

In contrast, a lower corporate tax burden attracts businesses, creating an environment of greater innovation and prosperity, with benefits for all residents.

The model finds that workers at all skill and income levels are better off with lower business taxes. A bigger economy provides opportunities for greater financial security and income mobility, decreasing the need for government-provided assistance.

The U.S. previously had the highest corporate tax rate, at 35 percent, among the 36 OEC) countries.

A new job or a higher wage help people in need more than a welfare check ever could. Less government intervention and a lower corporate tax rate help residents, providing them with valuable earning opportunities to become wealthier and more financially independent.

The tax burden is one of the 12 factors in The Heritage Foundation’s Index of Economic Freedom affecting the level of economic freedom that citizens can enjoy. Without accounting for the new tax law, the U.S. had a tax burden score of 65.1 in the index. The U.S. was nearly 12 points below the world average score of 76.6 and ranked as 153rd out of the 180 countries whose economic freedom the index assesses.

While the U.S. previously had the highest corporate tax rate, at 35 percent, among the 36 Organization for Economic Cooperation and Development (OECD) countries, the new 21 percent rate is below that of 19 OECD countries.

The U.S.’s index score is likely to improve with the next iteration and demonstrates that the U.S. was in need of tax reform to be more globally competitive.

In addition to the corporate tax rate, the base of what’s taxed matters as well.

The tax law’s changes to expensing rules have important economic effects. Full expensing allows businesses to deduct all investment expenses from taxable income at the time the investments are made. This change encourages more investment in productive capital.

Everyday Americans are enjoying greater wealth and freedom, thanks to the tax cuts. It’s time to make them permanent.

These expensing provisions, which begin to phase out after 2022, should be extended permanently for even greater economic growth.

According to sound economic theory, the tax cuts are benefiting our economy through encouraging investment by domestic and international businesses, and there is ample evidence this theory holds true in practice.

There has been rapid growth in capital spending, with many examples of both small and large businesses investing in expanded operations. This is increasing worker productivity and wages.

Everyday Americans are enjoying greater wealth and freedom, thanks to the tax cuts. It’s time to make them permanent.

Capitalism vs. Socialism   Leave a comment

Several recent polls, plus the popularity of Sen. Bernie Sanders, demonstrate that young people prefer socialism to free market capitalism. That, I believe, is a result of their ignorance and indoctrination during their school years, from kindergarten through college. For the most part, neither they nor many of their teachers and professors know what free market capitalism is.

Found on Lew Rockwell

Free market capitalism, wherein there is peaceful voluntary exchange, is morally superior to any other economic system. Why? Let’s start with my initial premise. All of us own ourselves. I am my private property, and you are yours. Murder, rape, theft and the initiation of violence are immoral because they violate self-ownership. Similarly, the forcible use of one person to serve the purposes of another person, for any reason, is immoral because it violates self-ownership.

Tragically, two-thirds to three-quarters of the federal budget can be described as Congress taking the rightful earnings of one American to give to another American — using one American to serve another. Such acts include farm subsidies, business bailouts, Social Security, Medicare, Medicaid, food stamps, welfare and many other programs.

Free market capitalism is disfavored by many Americans — and threatened — not because of its failure but, ironically, because of its success. Free market capitalism in America has been so successful in eliminating the traditional problems of mankind — such as disease, pestilence, hunger and gross poverty — that all other human problems appear both unbearable and inexcusable. The desire by many Americans to eliminate these so-called unbearable and inexcusable problems has led to the call for socialism. That call includes equality of income, sex and race balance, affordable housing and medical care, orderly markets, and many other socialistic ideas.

American Contempt for …Walter E. WilliamsBest Price: $11.23

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Let’s compare capitalism with socialism by answering the following questions:

In which areas of our lives do we find the greatest satisfaction, and in which do we find the greatest dissatisfaction? It turns out that we seldom find people upset with and in conflict with computer and clothing stores, supermarkets, and hardware stores. We do see people highly dissatisfied with and often in conflict with boards of education, motor vehicles departments, police and city sanitation services.

What are the differences? For one, the motivation for the provision of services of computer and clothing stores, supermarkets, and hardware stores is profit. Also, if you’re dissatisfied with their services, you can instantaneously fire them by taking your business elsewhere. It’s a different matter with public education, motor vehicles departments, police and city sanitation services. They are not motivated by profit at all. Plus, if you’re dissatisfied with their service, it is costly and in many cases even impossible to fire them.

A much larger and totally ignored question has to do with the brutality of socialism. In the 20th century, the one-party socialist states of the Union of Soviet Socialist Republics, Germany under the National Socialist German Workers’ Party and the People’s Republic of China were responsible for the murder of 118 million citizens, mostly their own. The tallies were:

No such record of brutality can be found in countries that tend toward free market capitalism.

Here’s an experiment for you. List countries according to whether they are closer to the free market capitalist or to the socialist/communist end of the economic spectrum. Then rank the countries according to per capita gross domestic product. Finally, rank the countries according to Freedom House’s “Freedom in the World” report. You will find that people who live in countries closer to the free market capitalist end of the economic spectrum not only have far greater wealth than people who live in countries toward the socialistic/communist end but also enjoy far greater human rights protections.

As Dr. Thomas Sowell says, “socialism sounds great. It has always sounded great. And it will probably always continue to sound great. It is only when you go beyond rhetoric, and start looking at hard facts, that socialism turns out to be a big disappointment, if not a disaster.”

Why Worry about Income Inequality?   1 comment

I’m not rich by Alaska standards. I make less than the median Alaska income. That means I’m wealthier than 99% of the world’s inhabitants.

Image result for image of a snap recipient indulgenceIs that unfair? Hmm ….

Well, I can tell you that living at less than the median Alaska income presents challenges for my family. We aren’t as rich as some of our neighbors. There’s a man in this town who makes millions of dollars a year.

Is that unfair? Hmm ….

If I were to make somewhat less … let’s say so I’m in the 1% worldwide, I couldn’t afford to live in Alaska. So if you took the income of the people who live here and distributed it to all the “poor” people in the world, what would happen? People in Alaska would starve and freeze without shelter or fuel.

Would that be fair? Hmm ….

I make a whole lot more money and live in a nicer home than my working class parents did.

Is that fair? Hmm ….

My parents were always able to feed me. My mother’s parents, at the height of the Depression, struggled with that.

Is it fair that I grew up without going hungry, but my mom got rickets as a child? Hmm ….

So, then I think about all the “poor” people in the US who own cars, live in nice apartments, are able to buy food with SNAP benefits, and afford $100 a month smart phones, but they don’t actually work for their living.

Is that fair? Hmm ….

We have to careful not to confuse income inequality and poverty. Standards of living are increasing, albeit unequally, in most of the world. Developing countries are particularly benefiting handsomely from declining barriers to trade and movement of capital. That’s why inequality between countries is actually shrinking. As for inequality within countries, enrichment at the top has not caused mass impoverishment.

The market economy is not a zero-sum game, where someone’s gain must come at someone else’s expense. “The rich get richer and the poor get poorer” is a synopsis of the socialist critique of the market system, implying the perceived inevitability of what Marx called the Law of Increasing Poverty.

But, guess what? It’s a myth unsupported by empirical evidence. Absent government interference in the marketplace, the poor in most developing nations are gaining ground even as those at the top end of the income spectrum are also amassing greater fortunes. Poverty is reducing all across the world.

So what difference does it make if  your neighbor has a million dollars he won’t share with you if you’re making a real income far in excess of your basic needs?

Oh, right, fairness …. It’s not fair. Why can’t he give up some of it so I can be even richer?

Maybe because I didn’t earn it, but also maybe because he’s going to take that money and provide a job that will someday make my kid far wealthier than I ever hoped to be. But if I rob him of that money he earned, he won’t create that job because: a) without resources nobody can create jobs, and b) why should the victim feel beholden to the one who robbed him?

Have We Lost Our Minds?   2 comments

I like my house. When we first bought it, it was painted grey, which I didn’t like so much because on rainy days or winter days (and we have a lot of winter days), it just looked sad and depressed. Besides, the previous owners had messed up on the application so it was peeling less than two years after they painted it. So we power washed off the grey, re-primed and painted the house a kind of dark peach with green trim and it now looks more cheerful no matter what month of the year you see it. I am told by a neighbor who knows the folks we bought the house from that the wife doesn’t like our color choices and that’s okay because she no longer owns the house and we do. She can paint the house she owns any color she likes and I won’t critique it — though I was awfully glad when the new owners of the house across the street painted their black house (with red trim) a nice brown with white trim. I complimented them on the paint job, though I never said word one about the red-on-black scheme to the previous owners, because it was their house and not mine.

But imagine how I would feel if I came home one day and discovered that a renowned artist whose paintings were considered art treasures by experts had graffitied my house. Imagine if it were your house and that happened.

It’s my property, so — unless I really, really liked the graffiti, I’d immediately start cleaning the images from my house. So would you, I suspect. If they didn’t ask my permission, I’d want to sue them for whatever it cost me to restore my house to its preferred condition. You would too.

Then imagine that a few days later, you find you are being sued for breaking a law that protects public art of “recognized stature”. Because the artist who tagged your house is considered by someone to be a great artist, you must pay $6.7 million for whitewashing graffiti from your home.

That’s exactly what happened to Jerry Wolkoff, a Queens real estate developer, when he whitewashed dozens of graffiti murals at the 5Pointz complex, violating the Visual Artists Rights Act, “which has been used to protect public art of “recognized stature” created on someone else’s property.”

Wolkoff purchased the 200,000 square-foot former factory buildings in the 1970s for $1 million. Graffiti artists approached him in the 1990s, asking if they could display their art on the vacant five-story building. Wolkoff agreed. He wasn’t using the buildings and it seemed like a community-friendly thing to allow. In November 2013, Wolkoff decided to demolish the building in favor of new stores and apartments. He contracted painters to whitewash the decades of graffiti away under the cover of night to avoid conflict.

“It’s like a Band-Aid, I just wanted to take one rip off in one time. I felt it was best for them and I,” Wolkoff said. “I had tears in my eyes when I painted this morning.”

Okay, he probably shouldn’t have sneaked behind folks’ backs, but given them a chance to photograph and otherwise document what is ordinarily considered temporary works of art, but he knew what would happen — a long, drawn-out battle over the demolition which would harm his company’s bottom line. Twenty graffiti artists filed a lawsuit against the developer and in March 2017, Judge Frederic Block of U.S. District Court in Brooklyn ruled that their case could go to trail.

The New York Times declared this a great victory for the New York artist community and, indeed artists everywhere. I’m going to mea culpa here and admit that my daughter is a graffiti artist. After a close encounter with an angry building owner when she was 18 that resulted in having to clean his building to avoid jail, our beautiful anarchist renaissance woman now asks permission, often taking suggestions from willing participants, and then takes photos because she knows such art is temporary and adhered to other people’s property. When she travels back through a town, she looks for her murals and is always pleased when she finds them, but she also accepts that one day they may be gone. I haven’t had an opportunity ask her what she thinks of this. If she agrees with the artists, I expect her to change her mind after we’ve discussed it.

Wolkoff contended the graffiti artists knew that it wasn’t a permanent thing and one of them even admitted that in the press. Wolkoff granted only temporary permission. As the area around the complex was redeveloped, it should have been obvious to everyone that he was going to redevelop it and make some money from his investment. After all, it was his private property and he should be able to maintain his property as he sees fit. The fact that he knew announcing demolition would cause a court battle with the people he’d been so generous to for decades says he’d been thinking about how to resolve this issue for a long time before he took action. He had provided them with a place to legally do their particular kind of art and his decades-long willingness to provide that blank canvas for them helped to shift perceptions about graffiti and establish it as a celebrated folk art. Maybe they should have thanked him for that opportunity. Instead, in November 2017, a jury found the developer had violated the Visual Artists Rights Act in 45 cases and awarded the artists $6.7 million — the maximum damages possible.

Have we lost our minds?

 

It is essential for society to have a legal framework that doesn’t undermine private property rights. This happened in the United States where we are supposedly protected by the Fifth Amendment.  This wasn’t communist China where the government has granted itself the author to violate the liberties of its people. This is the United States where we’re supposed to be secure in our persons, property and papers. And a federal judge handed down this ruling.

Some people would argue that this is just a minor inconvenience to a rich developer. We all have to follow certain rules to live in society. He held onto those buildings for years without making substantial money from them, renting them to artists and small manufacturers. He could have developed the interiors and left the graffiti in place. People like graffiti … or if they don’t, they should recognize it as folk art that must be protected … Right?

In order for society to achieve economic prosperity there must be a legal framework that doesn’t undermine property rights. Take a look around the world and you find that the wealthiest nations have strong private property rights protection while the poorest nations do not. If I can come home tomorrow and there’s graffiti all over my house that undermines not only my resale value, but my neighbors’ property values, and I’m not allowed to correct the defacement of my property, that’s a problem … not just for me, but for everyone who owns a home or building or anyone who might want to in the future. One man’s folk art is another woman’s defacement and it is our property, not the graffiti artists’.

But in America today, you can actually find people who have no understanding of what private property rights mean. There’s three dimensions.

  1. The exclusive use of a resource
  2. The right to services or utilities rendered by it
  3. The right to exchange it at any price one considers appropriate.

Here’s a nice link for a deeper discussion of the topic. What happens when these rights are somehow restricted, limited or flagrantly violated by law?

The answer is found in the incentives those laws have created. From an economic point of view, an incentive is a potential pecuniary reward that moves someone to do something. When economists say that incentives matter, they mean that a legal framework that establishes the right incentives will result in economic growth and prosperity while the wrong incentives can lead a country into inescapable poverty. If you think this is just economic theory divorced from reality, Venezuelans might beg to differ since they’re living in the real-life consequence of price controls that violated their property rights..

There are many ways to violate property rights and governments do it a lot. Excessive tax burdens, regulations limiting the right to use your property (as happened to Jerry Wolkoff) or asset seizures by government are blatant violations of private property rights that end up depriving economic agents of incentives to create wealth, thereby demolishing one of the most fundamental pillars of prosperity.

Private property rights are incredibly important for any kind of prosperity … or for that matter, liberty … to exist.

So, again, I ask the question – have we lost our minds?

Electric Car Math   5 comments

These are Fairbanks, Alaska figures.

According to Plug In America, a quality electric car (a Tesla) uses 32 kwh to go 100 miles. For the record, 100 miles is less than one-third of the way to the nearest city in Alaska. I am so looking forward to stopping overnight on my way to Anchorage since the Tesla only has a 300 mile range.

Coincidentally, my car needs to be filled about every 300 miles. $2.38 a gallon for gasoline. I know, we produce the oil, so why is gasoline so expensive here. Nobody can give us an adequate answer. Economies of scale are the explanation given, but we produce the oil, so you’d think we’d get a break on reduced shipping, but apparently not.

Image result for image of tesla carElectricity is 27 cents a kilowatt hour in Fairbanks. So to travel 300 miles in a Tesla would cost me $26.00.

My car holds 18 gallons and can take me 300 miles. That’ll set me back $43. Oh, the cost is half, so get an electric car. But ….

BUT … I need a heater or I’ll die in Alaska’s frigid temperatures. Running a heater in a gasoline engine hardly reduces the gas mileage because it’s excess heat off the engine. Running a heater in a Tesla does reduce the range … by 50%. If I wanted to drive to Anchorage, 380 miles away, I’d have to stop for gasoline in Wasilla. That would take 15 minutes (half an hour if I decide to grab some food and use the facilities) and I’d be on the road again. I would not stop to sleep along the way as it only takes about seven hours to drive 380 miles.

Image result for image 2005 ford taurus covered in snowIf I was driving a Tesla in the winter, with only 150 mile range, I’d have to stop in Healey and Wasilla and sleep overnight – $120 per night for the hotel, $60 a day for meals, and two nights of my time since it takes a Tesla 9.5 hours to achieve a full charge (assuming it can do that when it’s -30 out). So what I save in gasoline over driving electric, I more than make up in other costs.

A $400 trip to Anchorage (round-trip – gasoline, meals and assuming a decent hotel) would become a $1300 trip in an electric car, plus add four days onto my trip.

So please stop telling me about how much money I would save with an electric car versus my gasoline car. Yes, commuting to and from work in a warm climate saves you money, but those savings evaporate in a cold climate and become a liability if you need to travel any distance.

 

Posted February 8, 2018 by aurorawatcherak in economics, Uncategorized

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