Category Archives: Economics

CONVERSABLE ECONOMIST: Why Experts Buy Generic

Need to show this to the mrs.

 

The overall pattern is clear: those who are less knowledgeable are more likely to buy brand names, presumably because they feel that there is quality difference in doing so. Those who are more knowledgeable are more likely to go with generic equivalents, because they feel comfortable making their own judgements about quality–and then going with the lower price.

via CONVERSABLE ECONOMIST: Why Experts Buy Generic.

The secret to the Uber economy is wealth inequality – Quartz

The new middlemen

There are only two requirements for an on-demand service economy to work, and neither is an iPhone. First, the market being addressed needs to be big enough to scale—food, laundry, taxi rides. Without that, it’s just a concierge service for the rich rather than a disruptive paradigm shift, as a venture capitalist might say. Second, and perhaps more importantly, there needs to be a large enough labor class willing to work at wages that customers consider affordable and that the middlemen consider worthwhile for their profit margins.

Uber was founded in 2009, in the immediate aftermath of the worst financial crisis in a generation. As the ride-sharing app has risen, so too have income disparity and wealth inequality in the United States as a whole and in San Francisco in particular. Recent research by the Brookings Institution found that of any US city, San Francisco had the largest increase in inequality between 2007 and 2012. The disparity in San Francisco as of 2012, as measured (pdf) by a city agency, was in fact more pronounced than inequality in Mumbai (pdf).

Of course, there are huge differences between the two cities. Mumbai is a significantly poorer, dirtier, more miserable place to live and work. Half of its citizens lack access to sanitation or formal housing.

Another distinction, just as telling, lies in the opportunities the local economy affords to the army of on-demand delivery people it supports. In Mumbai, the man who delivers a bottle of rum to my doorstep can learn the ins and outs of the booze business from spending his days in a liquor store. If he scrapes together enough capital, he may one day be able to open his own shop and hire his own delivery boys.

His counterpart in San Francisco has no such access. The person who cleans your home in SoMa has little interaction with the mysterious forces behind the app that sends him or her to your door. The Uber driver who wants an audience with management can’t go to Uber headquarters; he or she must visit a separate “driver center.”

via The secret to the Uber economy is wealth inequality – Quartz.

Apologizing to Japan – NYTimes.com

TOKYO — For almost two decades, Japan has been held up as a cautionary tale, an object lesson on how not to run an advanced economy. After all, the island nation is the rising superpower that stumbled. One day, it seemed, it was on the road to high-tech domination of the world economy; the next it was suffering from seemingly endless stagnation and deflation. And Western economists were scathing in their criticisms of Japanese policy.

I was one of those critics; Ben Bernanke, who went on to become chairman of the Federal Reserve, was another. And these days, I often find myself thinking that we ought to apologize.

Now, I’m not saying that our economic analysis was wrong. The paper I published in 1998 about Japan’s “liquidity trap,” or the paper Mr. Bernanke published in 2000 urging Japanese policy makers to show “Rooseveltian resolve” in confronting their problems, have aged fairly well. In fact, in some ways they look more relevant than ever now that much of the West has fallen into a prolonged slump very similar to Japan’s experience.

via Apologizing to Japan – NYTimes.com.

Econ::The Stabilization of the Mark | Angry Bear – Financial and Economic Commentary

Those people were mostly speculators who had borrowed marks. Since the stabilization wasn’t absolutely believed, the nominal interest rate was 20% per day. Making people wait a few days for their promised dollars is a way to bankrupt them. Bankrupting all the people betting against the stabilization is a way to make it work.

via The Stabilization of the Mark | Angry Bear – Financial and Economic Commentary.

rePost::UK, Not OK – NYTimes.com

April 27, 2011, 9:18 AM

UK, Not OK

The bad GDP number for the UK isn’t a surprise — in fact, judging from market response, investors seem to have expected something even worse. Still, if you step back and look at what has been happening, it’s doubleplusungood: zero growth over the past 6 months, with every reason to be worried on the downside looking forward, as Cameron’s austerity bites deeper.

Jonathan Portes gets to the nub of it:

On fiscal policy, the message is that we should listen to economists, not credit rating agencies. Most mainstream economists argued that the impact of the government’s fiscal consolidation on confidence and consumer demand would be negative; so it has proved.

Meanwhile, the argument that fiscal overkill was necessary to appease the credit rating agencies has again been disproved by market reaction – or the lack of it – to the Standard & Poor’s outlook warning last week in America, where US Treasury yields hardly budged.

In short, there is no confidence fairy; and S&P can call invisible bond vigilantes from the vasty deep, but they won’t actually come when called.

Portes hits, in particular, on a point I’ve tried to make a number of times, here and more recently here: right now, we’re living in a world in which basic economics points to conclusions utterly at odds with what Very Serious People are supposed to believe, in which radical outsiders base their views on standard economics while orthodox types turn to heterodox, highly dubious speculations.

Econ 101, buttressed if you like by fancier New Keynesian models, says that contractionary fiscal policy is, well, contractionary. Yet much of the world of movers and shakers bought into the exotic notion that expectational effects — the confidence fairy — would make contractionary policy expansionary. And they clung to this belief even as the supposed historical evidence in favor of expansionary austerity was thoroughly debunked.

via UK, Not OK – NYTimes.com.

rePost:: There is now substantial evidence that the health and schooling of children can be raised by empowering women, and this is precisely what Tunisia did when it raised the minimum age for marriage, revoked the colonial ban on imports of contraceptives, instituted the first family planning programme in Africa, legalized abortion, made polygamy illegal, and gave women the right to divorce as well as the right to stand and vote for election. :: Dani Rodrik’s weblog: The unsung development miracles of our time

I score this one against the moralist forces in our country. They are basically against what other countries find successful.

What was their secret? Determined policies to expand educational opportunities and access to health along with a willingness to depart from the conventional wisdom of the day and experiment with their own remedies. Even though all three North African countries are Moslem, empowering of women seems to have played an important role as well:

There is now substantial evidence that the health and schooling of children can be raised by empowering women, and this is precisely what Tunisia did when it raised the minimum age for marriage, revoked the colonial ban on imports of contraceptives, instituted the first family planning programme in Africa, legalized abortion, made polygamy illegal, and gave women the right to divorce as well as the right to stand and vote for election.

What is somewhat puzzling, as Rodriguez and Samman also note, is that these countries have not made nearly as much progress in democratization.

These new “facts” substantially enrich our understanding of the development landscape over the last four decades.

via Dani Rodrik’s weblog: The unsung development miracles of our time.