Category Archives

Archive of posts published in the category: Economics

Capitalism is Cooperative

“We free-market types like to talk about competition—and competition is important—but capitalism is profoundly cooperative: This marvelously productive worldwide economy is something we all do together. “

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Overstating Economic Influence

“But history doesn’t wait for anybody to vote on it. That affects everything, including the economy.”

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The Coolidge Tax Cuts

“Thus, total individual tax receipts ballooned by 70% from 1924 to 1928; and, throughout the 1920s, the share of income taxes paid by earners of over $100,000 a year doubled. Meanwhile, Coolidge held spending constant, allowing him to eliminate nearly a quarter of the national debt and leave it fully 29% smaller than it was when Harding took office.”

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Gray Swans

Small firewalls that contained corrections were being dismantled, leading to larger, far more damaging crashes.  Part of this was the result of greater connections from travel and communications, but a great part is the result of central powers believing they can control macro markets when they cannot. There is just too much dispersed and unarticulated knowledge for anyone or any administrative bureaucracy to accomplish this.

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Frozen Contract Terms

In an effort to make housing more affordable federal regulators have done the opposite, but this cost is hidden by the lack of innovation which has locked the market for housing. To paraphrase Glenn Reynolds, by subsidizing the markers of success they have raised the cost in ways even they do not understand.  If you cannot afford a house one would be better served to rent than to add debt you cannot handle.  Somebody pays.

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Monetization vs Debt

If the deficits are not monetized then they are added to the debt.  While this does not add to the current inflation pressures, at what point and how will this affect our monetary balance?  Inflation historically has been a seductive solution to excess debt.

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Sir John Cowperthwaite

“But no computer has yet been devised which will produce accurate results from a diet of opinion and emotion.”

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The Limits of Good Intentions

“Good intentions are fine, but good intentions and a $27 trillion economy will get you a lot farther than good intentions alone.”

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Economic Thoughts 2023 01 08

Firewalls serve to restrain complex and tightly coupled systems; small recessions are preferable to systemic failures.  The political wish to avoid recessions by neutering small corrections only paves the way for greater failures.

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Seduced by Numbers

“Science cannot tell us how to value things,” Ms. Thompson says. “The idea of ‘following the science’ is meaningless.”

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Bagehot and the Fed

“The Federal Reserve and other central banks have done the opposite. They take any form of collateral and charge little to no interest, thus prolonging the presence of bloated and ill-managed enterprises, denying savers the benefits of prudence, destroying productivity, and burdening public balance sheets with the debts of functionally dead organizations.”

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Radical Omnipotence

“I care less about whether the top personal income-tax rate is 39 percent or 36 percent than I do about whether we can pick one and stick to it for a few decades at least, and, more generally, about ensuring that we do not undertake big and disruptive changes to the policy environment without real consensus and careful deliberation. But instead of that conservative approach, every time a party achieves a temporary majority in Congress or control of the White House, its leaders promise revolution and a radical reordering of taxes, regulations, incentives, terms of trade, and everything else they can think of. “

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Covert Spending

“Subsidized credit is the coward’s way of spending money on friends and cronies, because spending-by-lending allows you to list these subsidies as “assets” on your books rather than characterizing them as spending.”

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Policies and Outcomes

“That is the great Democratic tax strategy: create tax subsidies for businesses and then, two elections later, complain that businesses take advantage of tax subsidies. “

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Biden has Become a Scapegoat

Our political elite took supply for granted.  They confused dollars with goods.  Demand stimulus is a very short term and limited tool.  If we get into debt to stimulate demand, what happens when we pay it back?  Debts are always repaid – one way or another- even if you are not a Lannister.

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Normalizing Luxury

There is the unplanned and unintended benefit of making luxuries into ordinary items. Such spending primes the pump on some items, but it is not an essential element for progress.  When wealth is generated to provide consumers with products and services they want we all benefit; when wealth is generated by rent seeking behavior most of us lose.

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Remembering the Yacht Tax

Progressives think the Constitution is organic and the economy is mechanical; in reality it is the reverse.  Thinking you can tax an isolated segment without affecting others ignores the dispersed nature of knowledge that no central authority can emulate.

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Vichy Capitalism

The regulatory burden rarely get the coverage of tax policy because it is complicated, hard to measure and reporters are lazy- yet the combination is the total friction cost on business.  Increasing the regulatory burden while stimulating the money supply may be the simplest and best definition of stagflation.

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Economic Nationalism

“For the politician, jobs are not a means to some end — Cadillacs, bales of cotton, iPhones — but an end in and of themselves.”

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Expunging Guilt from Affluent Liberals

“Human history for these guys is just an endless rotation of oppressor and oppressed, a revolving door of masters and slaves in Hegel’s view, proletariat and bourgeoisie for Marx, privileged white people vs. marginalized people of color in Critical Race Theory. “

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