Greg Manikiw on the Yin and Yang of Economics

December 15, 2007 at 8:50 am | Posted in competition, corporations, economics, economy, escher, free market, government, income dostribution, individual freedom, individual rights, liberty, market, market forces, Michael Kruse, MNC. economics, monopoly, poverty, right and left, selfish, socialism, taxation, trickle down, wealth distribution, world GDP | 2 Comments
Tags: , , , , , , , , , , , , ,

How do the right and left differ?

ambidextrous-escher-quills-2.jpg

ambidextrous-quills.jpg

The conclusion of today’s ec 10 lecture:

In today’s lecture, I have discussed a number of reasons that right-leaning and left-leaning economists differ in their policy views, even though they share an intellectual framework for analysis. Here is a summary.

  • The right sees large deadweight losses associated with taxation and, therefore, is worried about the growth of government as a share in the economy. The left sees smaller elasticities of supply and demand and, therefore, is less worried about the distortionary effect of taxes.
  • The right sees externalities as an occasional market failure that calls for government intervention, but sees this as relatively rare exception to the general rule that markets lead to efficient allocations. The left sees externalities as more pervasive.
  • The right sees competition as a pervasive feature of the economy and market power
  • ambidextrous-brain.jpg
  • as typically limited both in magnitude and duration. The left sees large corporations with substantial degrees of monopoly power that need to be checked by active antitrust policy.
  • The right sees people as largely rational, doing the best the can given the constraints they face. The left sees people making systematic errors and believe that it is the government role’s to protect people from their own mistakes.

      ambidextrous-escher-peeled-faces.jpg

  • The right sees government as a terribly inefficient mechanism for allocating resources, subject to special-interest politics at best and rampant corruption at worst. The left sees government as the main institution that can counterbalance the effects of the all-too-powerful marketplace.

    There is one last issue that divides the right and the left—perhaps the most important one. That concerns the issue of income distribution. Is the market-based distribution of income fair or unfair, and if unfair, what should the government do about it? That is such a big topic that I will devote the entire next lecture to it.

    Greg Manikiw on himself: “… a professor of economics at Harvard University, where I teach introductory economics (ec 10) among other courses.”
    Thanks to Michael Kruse for posting this up on his own exciting blog: Kruse Kronicle and that’s also a link to his excellent new series on “Living Simply in Abundance”.
Advertisements

How to be a Good Lemming

November 30, 2007 at 4:12 pm | Posted in communism, culture, developing economy, economy, fairness, filthy lucre, free market, global evils, God's kingdom, goods and services, human-performed, industrial evolution, justice, kingdom ethics, kingdom of God, mammon, market, MNC, multinational corporartion, per capita, poverty, real value, redundancy, socialism, trickle down, value addition, wealth distribution, world GDP | Leave a comment
Tags: , , , , , , , , , , , , , , , , , , , ,

‘Tis the season to be jolly… would be quite frivolous if it were not at the same time also so profoundly real.
The Christmas season in the West is a time especially set aside for spending, purchasing, buying, gifting, and generally being very, very, jolly.

25k.jpgIn the U.S. the spending season kicks off with a bang at Thanksgiving, but all over the world, common sense will lead us to suspect that the jolliest of traditional seasons will begin soon after the annual harvest. Give a couple weeks or a month for all that excess to start getting distributed, and then them holidays, and that spending will ensue – it makes good sense.

In India we have that grand ‘festival of lights’, Diwali, that is strategically placed after the first harvest in October or November and then, in the South of India, there is a second celebration (Pongal) that comes right after the second monsoon season in mid-January and that forms the very exciting and satisfying climax to our times of splurging.

Economies and spending cycles that keep them vibrant have to be based on the presence of excess, and most times that excess is only available for a short while right after the harvest. Holidays are also timed to help to distribute all that ‘excess’ and just as efficiently as possible! Any great delay between when the excess arrives and the application of peak marketing pressure to get people to spend may result in that excess getting channeled into savings accounts – economists don’t like that at all. When we have plenty, and so much that we can even think in terms of excess, the purse strings will be at their loosest. Marketing has to strike while the iron is hottest but that is not the end of the story. We too help out by apparently just temporarily choosing to collectively forget that the upcoming year may hard and long.

Marketing the world over, is geared to maximise its hype just at these times. Spend – buy – purchase – CHARGE IT – or the ubiquitous EMI with 0% interest!

This year, the absolutely essential gadget is…

Everybody simply HAS to have this!

The teaser SAAALE! drags you out, ‘pushes’ you over that last little hump of caution, and then…inflation US

Insidiously, we also might not notice that we will really have to shell-out just a bit more this year than we did last year to get that ‘absolutely essential’ something. Economic cycles rely on the feeding frenzy to slip into the inflation mode too, for this is the one time of year that folks will be blithely unaware that the essentials just got a bit dearer. The small incremental adjustments will slip quietly into place in the corners of our subconscious even before we have time to register them, for there is so much else of an exciting nature to capture and hold our collective consciousness in thrall.

banknote-euro-usdollar.jpgValue addition is one culprit, but the yen for bigger profits is certainly another. For the corporates, turnover should increase, and so too should the return on investment, the profit margin. Balance sheets will be anxiously prepared as the financial year draws to a close. At stake is the size of the share price pie for that depends on ‘the figures’.

To the economist, inflation is a godsend. Deflation, when prices actually drop, (do you see red in the diagram above?) is an absolute disaster and must come straight out of hell. Modern economies rely on inflation to create the space in which value addition creates levels of work both in manufacturing/marketing and in services/marketing. More jobs, more earning, more spending, more money – MORE

Those little entries on corporate balance sheets called profit (net after taxes) quietly also rely on inflation. The trend is paradoxically opposed by innovation and new technologies! The whole complex process works together to keep standards of living on a slow rise that is slightly worse than what the actual inflation level would lead us to expect.

At some point people do question whether this all adds up. Of course it doesn’t, not nearly, but it sure looks good while it’s flowing along. Pension plans will be the most obvious harbingers of the bad news that eventually inflation catches up with you.banknote-rupee.jpg Other painful reminders include the cost of health-care, health insurance, and medicines. Long term savings plans and incremental investments will yield something but much less than they should when compared to the damage that inflation has quietly been inflicting.

Money and easy credit are the end of a very long road that has separated our spending from the realities of our actual contributions to life. Think about it, as it is you’re just the last stop between the ATM and the corporation that owns the store that you’re heading to with the plastique in hand!

What would happen if inflation were to stop? What would happen if our governments printed just enough notes to maintain a fixed amount of money in circulation? What would happen if value addition were to be replaced by true value? What would happen if the purchasing power of a dollar or of a rupee were to become rock steady?

Have you thought about it this year-before you start (or at least finish) spending that bonus?

What will this Christmas/Pongal bring I wonder? Is it perhaps even possible to have fun and fellowship with friends and without money? Will anyone believe that you love them anyway even though you didn’t push your plastic a few thousand more over its already strained limit?

GOLD > Coins > Bills of exchange > CREDIT Þ Transactions

The Culture of Fear

June 11, 2007 at 5:40 pm | Posted in avoidance, colosseum, culture, fear, John Doyle, ktismatics, market, munera, noxii, PTSD, reality TV, Rome, strand, suppression, trait, venationes | 6 Comments

Talking of PTSD led me to think about the ubiquitous nature of fear. Fear is all around us. Fear is within us. Yet we rarely acknowledge our fear.

What are our fears? Why are we afraid of fear?

Looking at my own little self and asking these questions I get a number of answers.

I am afraid of the future.
I am afraid of losing my job.
I am afraid of losing my health.
I am afraid that my relationships are too fragile.
I am afraid that those I love are getting into trouble.
I am afraid of doing something wrong and getting myself into trouble.
I am afraid of the changes in nature and environment that are taking place around me.
I am afraid that my country may lose its political and economic stability.
I am afraid of market forces controlling and spoiling the economy.
I am afraid of the rapid changes in Indian culture.
I am afraid of certain things in my past.
I am afraid of dependence.

These are generic fears, fears that perhaps most Indians would identify with.

But there are other fears. Fears of what is inside of me. Fears of my own inadequacy. Fears of my ignorance. Fears of my personality traits. Fears of my inability to hold together relationships. Fears of my inability to share. Fears of my neediness. Fears of my inability to love, fears of untruth, and the list could go on…

The way I deal with fear is basically to try to ignore it. I do my job. I spend time with my family. I spend time with friends. I watch TV. I blog. I read the newspaper. I read a novel. I go for walks in the woods. When I think, I try to focus on objective ‘stuff’. I sleep.

During each of these avoidings, I carry my fears with me. The fears cause all sorts of turmoil, all the worse for being ignored!

Fear, the fear of fear, eventually drives me to face the fear. I recognise that fear. I recognise that the fear may be justified. I recognise that I may be causing the fear. I recognise that I have to change.

The conscious fear is also an indicator (the tip of the iceberg) of a trouble spot, a trend, a trait, or as John Doyle would perhaps term it, a strand. It is something that has to be dragged out, identified, and faced. Like the pain of a real wound, fear indicates that action is required.

Being ‘frozen in fear’ is an expression of our response to something sudden and terrifying. We have perhaps not even had time for a ‘fight or flight’ response to kick in. But, most of our fears do not fall into this category. They are insidious and if they are ignored they will prove debillitating!

Fear causes stress. If there is enough fear and enough continuous stress, you may not get PTSD, but depression and anxiety are probably already knocking on your back door.

The market dislikes fear. Fearful people will not be big spenders! The culture is supported by the market. Market forces and culture cooperate to keep the whole machine smoothly running. Therefore the market, supported by culture, actively suppresses fear. One way of suppressing fear is to revel in the fears of others. Reality TV, the News, and images of Iraq, are today’s equivalent of the Roman Colosseum which boasted three types of gruesome ‘entertainment’; the venationes, noxii, and munera. Another market-friendly way is to sell you a pill or two!

If you look at the map of ancient Rome, you will notice that the Colosseum is called the Amphitheatrum Flavium or Flavian Amphitheatre. it is suitably situated (territorialised) outside the main city but not too far away (I wonder why malls come to mind?). The analogy is perhaps just a part of life in any civilisation. But, in order to really deal with fear, the territory that it has staked out within one’s soul will have to be identified and then reterritorialised!

Real fear is not talked about. Fear is the enemy. Let’s suppress those fears!

The title link takes you to the “Rome Reborn” website. Check out the video clips under the gallery, especially the Colosseum in 3D!

Digg!

Blog at WordPress.com.
Entries and comments feeds.