Finance and Economics - Page 5 of 6

January 12, 2023

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• Eggs are expensive right now, but they are actually less expensive than they were – according to Brighton Capital, the wholesale price for large conventional eggs has fallen from $5.10/dozen to $4.63.
• The eggconomy is emblematic of the broader economy – driven by the laws of supply and demand, and the hen/human ratio is at a 15-year low.
• The Federal Reserve is focused on a few things within their 2% inflation target – Fed cred, Fed recession goals, Fed beef, and 2% inflation.
• A soft landing would be when vacancies can decline substantially taking pressure off inflation without driving unemployment way up.
• The housing market is bonkers – housing inflation, consumers freaking out, and rents slowing down.
• Flight delays due to an ancient piece of technology is emblematic of a lot of American infrastructure.
• The debt ceiling debate is a stupid bargaining chip in a larger stupid circus.
• The economy is a fragile piece of technology that needs to be carefully managed.
• Hope is an ax you break down doors with in an emergency – it calls for action and is impossible without it.

Published January 12, 2023. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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The Poland/Malaysia model [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

January 10, 2023

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• Poland and Malaysia have both achieved impressive economic growth in recent decades, despite relying heavily on foreign direct investment.
• Both countries have built up world-class manufacturing sectors, with electronics and automotive goods forming the backbone of their exports.
• Malaysia has done this by creating special economic zones and offering incentives to foreign companies to invest there, while Poland has benefited from its proximity to Europe and its accession to the EU.
• Both countries have yet to move into higher-value-added activities, and are struggling to upgrade their productivity levels.
• Ha-Joon Chang and other industrial policy fans are suspicious of FDI due to potential crowding out of domestic companies, stunting of local growth, and potential for property value bubbles and crashes.
• Poland and Malaysia may now be running into this problem, with McKinsey citing Poland’s need to develop or acquire strong brands and Malaysia’s failure to build domestic champions.
• Poor countries may benefit from an FDI-centric strategy as it is simple and straightforward, and could potentially lead to escaping poverty.
• Poland and Malaysia may have found the secret to getting upper-middle-class quick, rather than getting rich quick.

Published January 9, 2023. Visit Noahpinion to read Noah Smith’s original post.

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Three economics happenings of note [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

January 7, 2023

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• The FTC has proposed a national ban on noncompetes, which are clauses in a worker’s employment contract that prevent them from working for a competitor for a set period of time.
• Evidence suggests that banning noncompetes can raise wages for low-wage workers by 2-3%, and for workers bound by noncompetes by as much as 14-21%.
• Businesses argue that noncompetes make them more willing to hire and train workers, and that they allow them to invest more in creating new technologies.
• Opponents argue that noncompetes quash innovation by preventing new companies from entering an industry.
• The debate is ultimately about the choice between a dynamic, competitive economy and one dominated by big, secure companies.
• Park et al. (2023) argue that papers and patents are becoming less disruptive over time, with a measure of disruptiveness (CD index) declining across a variety of fields.
• Alternative explanations for the decline include: low-hanging fruit hypothesis, burden of knowledge hypothesis, and cultural/institutional changes in academia.
• Pierre Azoulay’s analysis of life sciences papers suggests that the decline in disruptiveness may have halted in the 80s.
• Olivier Blanchard’s thread asserts that inflation is the outcome of a distributional conflict between firms, workers, and taxpayers.
• Paul Krugman’s “Football Game Theory of Inflation” likens the process to a football game in which everyone tries to stand up to see over everyone else.
• Ivan Werning’s model suggests that a wage-price spiral can occur even with falling real wages.
• Ricardo Reis argues that labor may not be the most important variable cost for companies, and thus wage demands may not be driving inflation.

Published January 7, 2023. Visit Noahpinion to read Noah Smith’s original post.

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Why Paul Ehrlich got everything wrong [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

January 6, 2023

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• Paul Ehrlich’s predictions in The Population Bomb were spectacularly wrong, but it is important to recognize that his warnings about environmental catastrophes should still be taken seriously.
• Ehrlich’s predictions were wrong due to countermeasures and adaptations that acted as a dampening force, slowing down the trend lines before catastrophe hits.
• These countermeasures and adaptations included the Green Revolution, lower fertility rates, and human ingenuity.
• The lesson from Ehrlich’s mistakes is that stabilization of global food supply was achieved via technological innovations by concerned scientists, which were then adopted by concerned governments.
• Paul Ehrlich’s predictions of population and resource scarcity in the late 1960s and 1970s have been echoed by degrowth advocates in the late 2010s and 2020s.
• Degrowth advocates often rely on aggregate measures of resource use and trend extrapolation, which are flawed metrics.
• Environmental catastrophes are a real possibility, and it would be dangerous to ignore the people warning about them.
• Alarmism about environmental catastrophes may be a useful counterweight to human callousness towards non-human life, and may help to keep habitat destruction in the public consciousness.

Published January 5, 2023. Visit Noahpinion to read Noah Smith’s original post.

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The Fed is Hiking Up That Mountain [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen

In Kyla Scanlon [Kyla's Newsletter]

January 5, 2023

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• The Fed is approaching economic switchbacks, which could make the overall endeavor of a soft landing easier, but could also make the climb more difficult if ignored.
• The Fed wants to slow down the labor market, but is cognizant of the potential for an unwarranted easing in financial conditions.
• Complacency is pervasive in the labor market, with workers not being respected and incentives leading to less disruption.
• The Fed is trying to bring the labor market back into balance, but there is a need for central bankers to not always rely solely on their econometric models and instead throw in some human nature common sense.
• Albert Camus said it best when he said “real generosity toward the future lies in giving all to the present.”

Published January 5, 2023. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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Inequality might be going down now [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

January 1, 2023

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• Thomas Piketty’s 2013 book, Capital in the Twenty-First Century, argued that capitalism would naturally lead to greater and greater inequality unless extraordinary forces intervened.
• This year, stocks crashed, disproportionately affecting the wealthy, and wealth inequality has plateaued or declined since Piketty’s book was published.
• Wage inequality has also plateaued or declined, with the bottom 10% of earners seeing real wage gains, and job switching increasing since the pandemic.
• Total income inequality has plateaued, but government benefits have boosted the incomes of the poor relative to others.
• The drops in inequality are modest, and it is unclear why they are happening, but it suggests that predictions of an imminent crisis of capitalism were overdone.

Published January 1, 2023. Visit Noahpinion to read Noah Smith’s original post.

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The third magic [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

December 31, 2022

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• Humans have achieved greater living standards than other animals due to two great meta-innovations: history and science.
• History is about recording knowledge in language, while science is about discovering generally applicable principles about how the world works.
• Science is often done in a lab, but can also be done by observing nature. Mathematics is a powerful tool for expressing laws of the universe.
• Despite the success of science, some complex phenomena have so far defied the approach of discovering si1mple, generalizable laws, leading to the idea that some domains of human knowledge may never be described by such principles.
• Leo Breiman’s essay “Statistical Modeling: The Two Cultures” demonstrated that algorithmic models (early machine learning techniques) were yielding better predictions than data models, even though the former were far less easy to interpret.
• Alon Halevy, Peter Norvig, and Fernando Pereira argued that in the cases of natural language processing and machine translation, applying large amounts of data was effective even in the absence of simple generalizable laws.
• AI may always be powerful yet ineffable, performing frequent wonders, but prone to failure at fundamentally unpredictable times.
• Natural experiments are a different tool than science and history, as they allow us to verify causal links.
• Khachiyan et al. used deep neural nets to look at daytime satellite imagery, in order to predict future economic growth at the hyper-local level, with astonishing accuracy.
• AI may revolutionize fields of endeavor where traditional science has run into diminishing returns, leading to a leap in human power and flourishing.

Published December 31, 2022. Visit Noahpinion to read Noah Smith’s original post.

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Mind the Cup [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen

In Kyla Scanlon [Kyla's Newsletter]

December 29, 2022

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• This year was a year of uncertainty, with many systems being fragile and the promise of “This is How It Will Be” being broken.
• The Federal Reserve’s job is to manage expectations and to make sure that inflation expectations do not become unanchored.
• Causes of inflation include deglobalization, tightness in labor markets, sky high energy and commodity prices, WFH trends, and supply bottlenecks.
• The Fed’s tools are ambiguous in the context of real world narrative, and their treatment plan should be bolstered by additional toolsets.
• On a micro level, uncertainty can be a fuel as we navigate new normals, and individual actions are what shape the world that we live in.
• Love is an action, a way that we exist in the world rather than a relationship, and this year was a year to recognize that the world does react to us.

Published December 29, 2022. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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Repost: Why immigration doesn’t reduce wages [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

December 27, 2022

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Immigration does not reduce wages for native-born Americans, except in a few special circumstances.
Immigration increases labor supply and labor demand, which tends to cancel out the downward pressure on wages.
Economists have done a lot of research on the question of whether immigration lowers wages, and have found very small or no labor market impact.
Studies on refugee waves have found no negative effect on native-born wages, and some studies have even found that immigration increases native-born wages in the long run.
Other studies have looked at internal migration in the U.S. and found that inflows of internal migrants cause a boom in housing construction, which supports local labor markets.
George Borjas wrote a paper claiming to find negative effects for a very small slice of less-educated minority workers, but other economists found that even that drop was actually the result of a change in measurement.

Click HERE for original. Published December 27, 2022

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Repost: I will never get to go to Hong Kong [Noah Smith, Noahpinion]

By Spencer Chen

In Noah Smith [Noahpinion]

December 26, 2022

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Noah Smith recounts his experience visiting Hong Kong during the height of the protests in October 2019.
He and his friend, BB, attended a peaceful protest in a small urban park and witnessed a tense standoff between protesters and police.
The next day, they found themselves in Salisbury Garden, surrounded by thousands of protesters, and witnessed a fight between protesters and police.
They then moved to Nathan Road, where they heard the protest song “Glory to Hong Kong” for the first time.
Noah realized that the protesters were fighting for national self-determination, but that Hong Kong would make a tiny country and had no chance for independence.
He observed the steady Chinese pressure that had led to a loss of economic opportunity and sky-high rents, fueling the anger of the protesters.
He and BB experienced tear gas and witnessed protesters beating a man they said was a “Chinese spy.”
They eventually escaped the protest zone and returned to their hotel.
Noah ends the story with a warning to China that the culture of Hong Kong lives on in the minds of a generation of Hong Kongers, and the more they integrate Hong Kong into China, the more pieces of that culture will have a chance to spread.

Click HERE for original. Published December 26, 2022

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CategoryFinance and Economics

The Eggconomy [kyla scanlon, Kyla’s Newsletter]

The Poland/Malaysia model [Noah Smith, Noahpinion]

Three economics happenings of note [Noah Smith, Noahpinion]

Why Paul Ehrlich got everything wrong [Noah Smith, Noahpinion]

The Fed is Hiking Up That Mountain [kyla scanlon, Kyla’s Newsletter]

Inequality might be going down now [Noah Smith, Noahpinion]

The third magic [Noah Smith, Noahpinion]

Mind the Cup [kyla scanlon, Kyla’s Newsletter]

Repost: Why immigration doesn’t reduce wages [Noah Smith, Noahpinion]

Repost: I will never get to go to Hong Kong [Noah Smith, Noahpinion]

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