18.1% of all children born on this planet in 1960 died before they could celebrate their fifth birthday
18 Apr 2016 Leave a comment
in development economics, economic history, health economics Tags: infant mortality, The Great Escape
@StatModeling @ryanmcmaken Europe sub-Reddit just can’t handle the truth about how poor they are!?
17 Apr 2016 Leave a comment
in applied welfare economics, economic history, economics of media and culture, politics - USA Tags: European Union, living standards, rational ignorance, rational irrationality, Reddit
The future should sue today’s climate activists for slowing The Great Escape
16 Apr 2016 Leave a comment
in development economics, economic history, economics of media and culture, energy economics, environmental economics, global warming, growth miracles, law and economics Tags: climate activists, climate alarmism, extreme poverty, The Great Enrichment, The Great Escape, vexatious litigation
The growth of passive investment funds continues
16 Apr 2016 Leave a comment
in economic history, entrepreneurship, financial economics Tags: active investing, efficient markets hypothesis, Index linked funds, passive investing
Source: These Charts Show the Astounding Rise in Passive Management – Bloomberg.
https://twitter.com/pmarca/status/718341190123458560
Source: The Financial Industry Is Having Its Napster Moment – Bloomberg.
Are you keeping up with the Commodore?
14 Apr 2016 Leave a comment
in economic history, economics, economics of media and culture
The sources of low carbon energy since 1965
14 Apr 2016 Leave a comment
in economic history, energy economics, environmental economics Tags: atomic energy, hydroelectric power, nuclear power, solar power, wind power
@CFigueres seriously mistaken on carbon emissions and global poverty
13 Apr 2016 Leave a comment
in applied welfare economics, development economics, economic history, energy economics, environmental economics, global warming, growth disasters, growth miracles, Public Choice, rentseeking Tags: climate alarmism, extreme poverty, global poverty, The Great Escape
@FairnessNZ NZ leads world in closing the gender pay gap #equalpayday @greencatherine
13 Apr 2016 Leave a comment
in discrimination, economic history, gender, human capital, labour economics, labour supply, politics - Australia, politics - New Zealand, politics - USA, poverty and inequality Tags: Australia, British economy, gender wage gap
Creative destruction of camera sales is not yet complete
13 Apr 2016 Leave a comment
in economic history, economics of media and culture, financial economics, industrial organisation, survivor principle Tags: camera phones, cameras, cell phones, creative destruction, mobile phones
Source: A Few Thoughts About the Camera Market via Paul Kirby
Healthcare Triage: Antibiotics and Resistance | The Incidental Economist
12 Apr 2016 Leave a comment
in economic history, health economics Tags: The Great Escape
A century ago, the top three causes of death were infectious diseases. More than half of all people dying in the United States died because of germs.
Source: Healthcare Triage: Antibiotics and Resistance | The Incidental Economist
Taxpayers Alliance mistaken about tax revenues as a stable % of GDP @the_tpa
12 Apr 2016 Leave a comment
in applied price theory, economic history, public economics Tags: British economy, British taxes, growth of government, Margaret Thatcher, size of government, taxation and entrepreneurship, taxation and investment, taxation and labour supply, Taxpayers Alliance
The British Taxpayers Alliance got carried away a bit when it said taxes as a share of British GDP have not varied much over the last 50 years or so. Margaret Thatcher would be turning in her grave.
A stable tax take is more the case in the USA. Federal tax receipts stay within the range of 18-20% of U.S. GDP as shown in the charts below and above.
There were large cuts in the top tax rates in the USA without any fall in tax revenues as a percentage of GDP because of base broadening.
Margaret Thatcher really did make a dent in taxes as a share of GDP in the 1980s. They fell by 5% of GDP but then went back up again in the 1990s as is shown in the Centre for Policy Studies chart below.
That 5% drop was a big variation as a share of GDP which is also shown in the Taxpayers Alliance chart if you look closely at the 1980s. That sharp drop in taxes as a share of British GDP is clearer in the Centre for Policy Studies chart because it magnifies the data.
There are also big changes in the British tax mix in the 1970s and 1980s. The large rise in tax in personal income in the 1970s as a percentage of GDP, also shown in both British charts above as well is the one below, coincided with the rise of the British disease and British economy becoming widely known as the sick man of Europe.
Source: OECD Stat.
The large decline in taxation in personal income under Thatchernomics was followed by an economic boom. The UK grew at above the trend annual real GDP growth to 1.9% for most of the period from the early 1980s to 2007 as shown in the detrended data in the chart below.
Source: Computed from OECD Stat Extract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015,http://www.conference-board.org/data/economydatabase/.
In the above chart, a flat line is growth at the same rate as the USA for the 20th century, which was 1.9% for GDP per working age person on a purchasing power parity basis. The USA’s trend growth rate in the 20th century is taken as the trend rate of growth of the global technological frontier.
A falling line in the above chart is growth in real GDP per working age person, PPP at less than the trend rate of 1.9% per annum while a rising line is real growth in GDP per working age person in excess of the trend rate.
Global energy use by source
12 Apr 2016 Leave a comment
in economic history, energy economics, environmental economics, global warming Tags: coal prices, hydroelectricity, Oil prices, solar power, wind power
Is America racist?
11 Apr 2016 Leave a comment
in discrimination, economic history, economics Tags: racism
Deposit insurance
11 Apr 2016 Leave a comment
in applied price theory, business cycles, economic history, economics, economics of regulation, global financial crisis (GFC), macroeconomics, monetary economics, Public Choice, rentseeking Tags: bank runs, banking crises, banking panics, deposit insurance, Thomas Sargent
Many of the key issues about what modern macroeconomics has to say on global financial crises and deposit insurance are discussed in a 2010 interview with Thomas Sargent
Sargent said that two polar models of bank crises and what government lender-of-last-resort and deposit insurance do to arrest or promote them were used to understand the GFC. They are polar models because:
- in the Diamond-Dybvig and Bryant model of banking runs, deposit insurance and other bailouts are purely a good thing stopping panic-induced bank runs from ever starting; and
- in the Kareken and Wallace model, deposit insurance by governments and the lender-of-last-resort function of a central bank are purely a bad thing because moral hazard encourages risk taking unless there is regulation or there is proper surveillance and accurate risk-based pricing of the deposit insurance.
In the Diamond-Dybvig and Bryant model, if there is government-supplied deposit insurance, people do not initiate bank runs because they trust their deposits to be safe. There is no cost to the government for offering the deposit insurance because there are no bank runs! A major free lunch.
Tom Sargent considers that the Bryant-Diamond-Dybvig model has been very influential, in general, and among policy makers in 2008, in particular.
Governments saw Bryant-Diamond-Dybvig bank runs everywhere. The logic of this model persuaded many governments that if they could arrest the actual or potential runs by convincing creditors that their loans were insured, that could be done at little or no eventual cost to taxpayers.
In 2008, the Australian and New Zealand governments announced emergency bank deposit insurance guarantees. In Bryant-Diamond-Dybvig style bank panics, these guarantees ward off the bank run and thus should cost nothing fiscally because the deposit insurance is not called upon. These guarantees and lender of last resort function were seen as key stabilising measures. These guarantees were called upon in NZ to the tune of $2 billion.
- 1. The Diamond-Dybvig and Bryant model makes you sensitive to runs and optimistic about the ability of deposit insurance to cure them.
- The Kareken and Wallace model’s prediction is that if a government sets up deposit insurance and doesn’t regulate bank portfolios to prevent them from taking too much risk, the government is setting the stage for a financial crisis.
- The Kareken-Wallace model makes you very cautious about lender-of-last-resort facilities and very sensitive to the risk-taking activities of banks.
Kareken and Wallace called for much higher capital reserves for banks and more regulation to avoid future crises. This is not a new idea.
Sam Peltzman in the mid-1960s found that U.S. banks in the 1930s halved their capital ratios after the introduction of federal deposit insurance. FDR was initially opposed to deposit insurance because it would encourage greater risk taking by banks.
Late on Friday afternoon, Stuff posted an op-ed piece calling for the introduction of a (funded) deposit insurance scheme in New Zealand. It was written by Geof Mortlock, a former colleague of mine at the Reserve Bank, who has spent most of his career on banking risk issues, including having been heavily involved in the handling of the failure, and resulting statutory management, of DFC.
As the IMF recently reported, all European countries (advanced or emerging) and all advanced economies have deposit insurance, with the exception of San Marino, Israel and New Zealand. An increasing number of people have been calling for our politicians to rethink New Zealand’s stance in opposition to deposit insurance. I wrote about the issue myself just a couple of months ago, in response to some new material from the Reserve Bank which continues to oppose deposit insurance.
Different people emphasise different arguments in making the case for New Zealand to…
View original post 1,963 more words
Utopia, you are standing in it! 
Recent Comments