• Does democracy disproportionately benefit the rich?

    Does the rich man derive more benefit from democracy than the ordinary man?
    Does the rich man derive more benefit from democracy than the ordinary man?
    8 answers · 2 days ago
  • I never believed Mexico would write a check for the wall but they will pay for it. Mexicans remit $26 billion/yr from the US to Mexico. If..?

    only a third of that is eliminated, the wall will pay for itself in three years. Do people really not have a clue of the sheer magnitude and complexity of this problem? Are they so in the dark on a topic they're fervent about that they don't even know the impact it's having on our economy? .
    only a third of that is eliminated, the wall will pay for itself in three years. Do people really not have a clue of the sheer magnitude and complexity of this problem? Are they so in the dark on a topic they're fervent about that they don't even know the impact it's having on our economy? .
    6 answers · 2 days ago
  • How do variable interest rate loans protect creditors from the effects of unexpected inflation?

    Best answer: If I loan 100,000 at 2% for 1 year and inflation is 2% then you give me 102,000 in return. The problem is the purchasing power of my 102,000 is no more than my purchasing power of the 100,000 a year ago, so I did not really build wealth by loaning the money. However, if I had a flexible interest rate and could... show more
    Best answer: If I loan 100,000 at 2% for 1 year and inflation is 2% then you give me 102,000 in return. The problem is the purchasing power of my 102,000 is no more than my purchasing power of the 100,000 a year ago, so I did not really build wealth by loaning the money. However, if I had a flexible interest rate and could have raised it to 4%, then the additional 2% above inflation would be a real return on my investment. I would have 2000 more real wealth.
    4 answers · 3 days ago
  • Why does it seem people in the U.S.have, for a large part, stopped buying used items at garage sales and thrift stores?

    Best answer: nnaybe they dont trust the used stuff and think the new stuff is better
    Best answer: nnaybe they dont trust the used stuff and think the new stuff is better
    6 answers · 6 days ago
  • Does oil count as physical capital?

    Best answer: Let me explain roughly how we, economists, proceed. Although your typical textbook only considers two types of input in any production function, nothing forces you to use only two. In principle, you could use three types of capital, four types of labor and even introduce intermediate goods as raw... show more
    Best answer: Let me explain roughly how we, economists, proceed. Although your typical textbook only considers two types of input in any production function, nothing forces you to use only two. In principle, you could use three types of capital, four types of labor and even introduce intermediate goods as raw material.

    However, there are problems with using many types of inputs. No matter how you work with your model, you operate with limited information (you do not always have all the relevant data), and your goal is to understand what is happening, which grows considerably in difficulty when you make the model more complicated. So, the problem is always to find the simplest possible way to capture what matters.

    This basically means you're going to forced to 'lump' stuff together. Maybe machines, trucks, tools and buildings are all taken to be one type of input and you differentiate between two types of labor (say, less skilled and more skilled, or hands-on and management). This 'lumping' corresponds mathematically to a constraint on the production function -- it is an assumption that basically expresses formally what it means to say a bunch of things are homogeneous. You DO LOOSE something by imposing things are treated the same way, but the question is whether you loose something important or not.


    So, is oil physical capital? Well, you have to look at the details of your model and ask where it fits best. For example, in most macroeconomic models, durable goods are more like capital. We usually exclude durable goods and housing to define consumption. And I say 'usually' because some people think about macroeconomic models are very high dimensional dynamic factor models -- and, in this light, no single consumption data corresponds exactly to the theoretical concept and all of them are proxies.
    5 answers · 5 days ago
  • Is capitalism a form of plutocracy?

    Best answer: that's usually the result yes.

    Capitalism (interest, dividend, setting wages and prices by supply-and-demand) ALWAYS makes a small group very rich by keeping many more poor. Just because those poor live outside your country doesn't mean you created your own wealth without them
    Best answer: that's usually the result yes.

    Capitalism (interest, dividend, setting wages and prices by supply-and-demand) ALWAYS makes a small group very rich by keeping many more poor. Just because those poor live outside your country doesn't mean you created your own wealth without them
    9 answers · 1 week ago
  • Is there a life without currency?

    I lately start to believe that in the nearest future our economy will change dramatically. My prophecy is that by the year 2050 (maybe earlier). There won't be any currency. In other words no monetary exchange. Instead of dollars, or any other currency, we'll have points in our iCloud, which we'll... show more
    I lately start to believe that in the nearest future our economy will change dramatically. My prophecy is that by the year 2050 (maybe earlier). There won't be any currency. In other words no monetary exchange. Instead of dollars, or any other currency, we'll have points in our iCloud, which we'll exchange for goods and services.
    6 answers · 7 days ago
  • What tools does the government use to control scarcity of money.?

    Best answer: As of April 2013, the monetary base was $3 trillion and M2, the broadest measure of money supply, was $10.5 trillion. The Federal Reserve Banks distribute new currency for the U.S. Treasury Department, which prints it. The Fed can influence the money supply by modifying reserve requirements, which are the funds... show more
    Best answer: As of April 2013, the monetary base was $3 trillion and M2, the broadest measure of money supply, was $10.5 trillion.

    The Federal Reserve Banks distribute new currency for the U.S. Treasury Department, which prints it.

    The Fed can influence the money supply by modifying reserve requirements, which are the funds that banks must hold against deposits in bank accounts.
    The Fed can also alter the money supply by changing short-term interest rates.
    5 answers · 1 week ago
  • Why do economists say that discrimination is inherently inefficient and therefore will not occur in general?

    Best answer: A business or institution that discriminates misses out on potential clientele. They do say that it does not occur in general because there is still that niche that can use their discrimination as a drive for profit.
    Best answer: A business or institution that discriminates misses out on potential clientele. They do say that it does not occur in general because there is still that niche that can use their discrimination as a drive for profit.
    5 answers · 1 week ago
  • Why Is Inflation so bad?

    Best answer: It causes prices to go up and people can't afford stuff.
    Best answer: It causes prices to go up and people can't afford stuff.
    5 answers · 1 week ago
  • To bring back jobs, should the rich class lower the wages of the common working class people?

    Best answer: Yes, to $0. Think of all the economic growth and shareholder wealth if companies don't have to pay their workers!

    Labor cost IS among the highest cost after all.
    Best answer: Yes, to $0. Think of all the economic growth and shareholder wealth if companies don't have to pay their workers!

    Labor cost IS among the highest cost after all.
    15 answers · 2 weeks ago
  • If I wanted to learn about economics, would reading the Wealth of Nations by Adam Smith be a good places to start?

    Best answer: Economic theory today differs to a very large extent from what Smith had in mind, so it would definitely not be a good start to understand current research. Where you should start largely depends on your mathematical background and the type of topic you would like to study. Depending on the topic you have in mind,... show more
    Best answer: Economic theory today differs to a very large extent from what Smith had in mind, so it would definitely not be a good start to understand current research.

    Where you should start largely depends on your mathematical background and the type of topic you would like to study. Depending on the topic you have in mind, we use specific mathematical tools and it's hard to follow an argument if you don't know how people move between equations. With that being said, it is not impossible to understand without the mathematics. I'll even point you to some articles that boil things down to simple stuff and tell you where to look to see what economic theory is really like.

    One thing I want to tell you before you start is how you should think about economic models. In macroeconomic theory, our models are self-contained artificial economies. In other words, once the model is solved, you can simulate events at your liking. By necessity, they are simplified versions of reality. The idea behind those models is that we're going to pick a few channels through which some things can influence human behavior. Not all of them will be there and the way we introduce those channels might be stylized, but the point is to put just enough in the model that we can talk about how much mechanisms contribute to some outcome.

    This is in fact very intuitive. If you ever talked about policy with people around you, you probably have in mind mechanisms that can change how the policy will affect people. Maybe you believe some smart people will leave the country if taxes are too high, maybe you think lots of people will respond sharply to changes in governmental spending because they can't easily smooth them out by borrowing or lending at their convenience, etc. All of those probably happen at once, with some partly or even entirely offsetting others. To put relative 'weights' on these intuitive mechanisms, we make a dynamic model, put all the ingredients inside and look if the resulting model reproduces what we see in the data.

    My suggestion would be to find a copy of VARIAN'S INTERMEDIATE MICROECONOMICS -- because it contains everything both with and without the mathematics. Everything readily transfers in modern macroeconomics, by the way. It has the intuitions, the graphics, the discussions and he also does the mathematics as a bonus.

    All you really need, is an idea of how preferences and production lead to demand and supply functions, an idea of what an equilibrium is, and an idea of what elasticities tell you. Then, other ideas that are relevant depend on the topic you want to study.


    TWO ARTICLES FOR WHEN YOU WANT TO TAKE A LOOK
    Here comes an example -- a very interesting example:

    http://www-bcf.usc.edu/~quadrini/papers/...

    This is a wonderful article by Vincenzo Quadrini about how entrepreneurship influences income distribution AND social mobility in the US. You probably will not understand sections II and III. However, you will understand the introduction, section I and section IV on results. On page 25, he shows how his model compare for wealth and income distribution with the US data. On page 26, he gives the transition matrix for his simulated model.

    The gist of what he does:
    1. Previous models that explicitly account for differences across people didn't feature enough factors to drive differences in wealth accumulation across people. Generally, they lead to distributions that are way less concentrated than the one seen in the data;
    2. He introduces entrepeneurship. Borrowing limitations to engage in business projects and more volatile income for entrepeneurs make them likelier to save more -- which helps his model generate more inequality;
    3. He talks about a stationnary distribution: this is a dynamic model, but there exists a point where the distribution of people in terms of wealth no longer changes. Individuals move across wealth classes, but the distribution is unchanged. This is the point for which he solves and simulate the model.

    The reason this is so interesting is that it offers a possible explanation of inequalities. Moreover, with that kind of model, you can answer a very deep question: suppose I introduce a policy to encourage entrepreneurship, what happens? What we do is: solve the model before the policy, after the policy and, then, force a transition between both solutions. All economic models use preferences: households rank different sequences of consumption and leisure and, given the constraints they face, they pick the best feasible sequence. So, if I have a transition simulation and a no transition simulation, I can aks who would prefer the transition and who would not. All you have to do is pick any type of household in the model. Then, in the no-transition case, you find what is the constant fraction of consumption you would need to give or take away from it so that he is exactly indifferent between the transition and no-transition cases... If you do this for everyone, you have put a dynamically consistent price on the transition for every single type of household -- in other words, you can answer the question who benefits, who looses and who doesn't care.

    How about we pick another topic?

    https://www.newyorkfed.org/medialibrary/...

    That is a paper by Eggertsson on the topic of the zero lower bound. You will not understand every detail, but Eggertsson shows what happens in a simple dynamic model graphically. Basically, in modern DSGE models, if you assume central banks do nothing, you CAN consistently get extremely puzzling results. For instance, technological progress worsens the recession, tax breaks can worsen the recession, wide spread desires to save can make aggregate savings fall, wide spread desires to work more can worsen the recession.

    Of course, you need specific conditions to make it work -- but I like his article because he keeps things simple and tells you how and why each curves move.
    4 answers · 1 week ago
  • Can someone explain this statement "If gas prices decrease then the demand tends to rise."?

    Best answer: We in Economics would say "the quantity demanded" rises. Just following along on a typical demand curve.

    You can just think of it like if something goes on sale. People are more likely to buy something on sale, or more of something on sale.
    Best answer: We in Economics would say "the quantity demanded" rises. Just following along on a typical demand curve.

    You can just think of it like if something goes on sale. People are more likely to buy something on sale, or more of something on sale.
    8 answers · 2 weeks ago
  • Should food, healthcare, housing and education be made affordable for all?

    Best answer: Slavery has been made illegal in America.So since you are making the food, health, real estate and education industries non-viable - that is they can no longer support themselves, who will be left to pay for all this "free" stuff? I'll guarantee you that if the government dictates how much I can... show more
    Best answer: Slavery has been made illegal in America.So since you are making the food, health, real estate and education industries non-viable - that is they can no longer support themselves, who will be left to pay for all this "free" stuff? I'll guarantee you that if the government dictates how much I can charge for my rentals I will sell them so there will be fewer rentals available.
    9 answers · 2 weeks ago
  • Will Trump's Tariffs and the Republican policy of "flooding the market" and ignoring the Paradox of Thrift cause another Recession?

    Best answer: Guys, we are in a war.
    Best answer: Guys, we are in a war.
    5 answers · 2 weeks ago