Monday, 31 December 2012

Various links.

1.  Interesting article on Short Selling from the New York Fed, suggesting that it does not work.

2.  Interesting links from the FT

Apple: Innovator’s dilemma
Fast-evolving technologies provide a typical context for disruptive innovations. In this type of environment, diagnosing a company on being just an incremental innovator should unveil a red light.

A case remains for economic liberalism
Unethical economic liberalism in an unequal market structure might be as bad as social democracy without a culture of effort and a work ethic.

3. lots of fascinating ideas here on whether one should consume locally 

4. Marginal tax rates in the UK

I dont know if these graphs are true, there is no citation other than internal government sources

A quick look at the IFS website finds this

p.29 a selection of marginal particicipation and in work tax rates of near 53% on average. 

And more detail is here on page 15ff

A quote sum up participation tax rates. 

Figure 2.4 shows the cumulative distribution of PTRs for the whole adult
population below state pension age, including non-workers using
predicted earnings in work as described above. Reading across, we can see
that around 20% of adults under the state pension age have PTRs below
40%, and 30% have PTRs above 60%. This means that around half of
adults below the state pension age have PTRs in a relatively narrow band
from 40% to 60% – their earnings can buy them about half of what they
cost their employer. It is also clear that one of the reasons non-workers do
not work is that the incentive for them to work at all is, on average, weaker
– around 30% of non-workers have PTRs above 70%, compared to only
10% of workers.
Indeed, of those who have PTRs greater than 70%, 60%
do not work.

And effective marginal tax rates
There is a small but significant group of around 10% of workers who
would only keep between 17p and 27p of each additional pound they
earned. This is because they face steep withdrawal of tax credits or
housing benefit if they increased their earnings a little.

My reading of the graph is that 20% of workers face >60% marginal tax rates.

Remarkably, these burdens have hardly changed over time.

Friday, 28 December 2012

Various links

From cafe Hayek a marvellous and hostile review of Sandel. I liked this in particular in response to those who say "markets are not just let's find another way".

Sandel worries properly that the market can crowd out the sacred. A corporate market in, say, instruction in elementary classrooms can crowd out unbiased teaching about capitalism. Yet Sandel does not tell his own classroom that state schools can crowd out unbiased teaching about, say, the environment.
And what about crowding in? A society in which goods are allocated by race or gender or Party membership is not obviously superior in moral terms to one in which prices rule. Sandel declares that "we must also ask whether market norms will crowd out non-market norms" (p. 78). But he provides no philosophical analysis of how we would answer the opposite crowding, as when non-market norms of Jim Crow in the Sandelian golden age crowded out the market norm that a black person's money is as good at a lunch counter as a white person's. A market society is by no means contemptible ethically, if one actually looks into the ethical effects and thinks about them. The French spoke in the eighteenth century of doux commerce, the civilizing effect of markets introduced into societies of status or isolation.

Sunday, 23 December 2012

What sets economists and non-economists apart? Tax incidence.

An old post from the excellent Chris Dillow.

I say it merely to emphasise the importance of the idea of tax incidence - that taxes don’t necessarily fall upon the people that they are formally levied upon. An inability to grasp this point is one of the features that distinguishes economists from non-economists.

The full post is here.
Here's the key point. "
92% of any rise in corporation tax falls upon wages"

Various links

Fascinating links via Tyler Cowan.

  1. The power of arbitrage. 
  2.  More on bootleggers and baptists. Politics without the romance.
  1. Bob Gordon on slow growth.
  2. And from Chris Dillon, girls at science
  3. Raj chatty on public economics. Fantastic series of lectures

Wednesday, 12 December 2012

Why are there so many miners in Kensington and Chelsea?

It's partly Imperial College's fault according to the BBC who have a lovely piece on odd facts from the 2011 Census.  For data geeks like me, this is a cautionary tale about interpreting data....

More people in London's Kensington and Chelsea describe themselves as working in mining and quarrying than in Gateshead, according to the census. The figures - 207 and 151 individuals respectively - are not large.
 The decline of the coal industry in England and Wales has been well documented. About 2,000 people now work in coal mines, according to the National Union of Mineworkers, compared with the more than a million at the industry's height in the early 1900s.
 The mining and quarrying industry as a whole employs 46,478, according to the 2011 Census, down 12,913 on 2001.
The area with the highest concentration of workers - 2% (and 3.8% of men) - is Redcar and Cleveland, home of the giant Boulby Potash Mine.
 But there are surprising numbers of people in smart central London districts, such as Westminster or Kensington and Chelsea, who describe themselves as working in mining and quarrying.

They may work in management or for large international mining conglomerates such as Rio Tinto, which has its headquarters in London, says Paul Hardman of the NUM.
Another contributory factor may be the Royal School of Mines, part of Imperial College London. It is situated on the university's South Kensington campus and numbers about 350 undergraduates, 200 postgraduates, as well as lecturers. The majority live nearby, and some may class themselves as miners, a spokeswoman says.

Sunday, 9 December 2012

How to really think like an economist

Via Tyler Cowan here's Greg Ip economics editor of the economist

You need to think like an economist. Any time anyone says something is bad, the immediate question you should ask is: Relative to what? It’s very important, for example, in assessing the President’s economic program. So someone says, “The economy is bad.” Well, relative to what? Relative to what it would have been? Relative to another country? These are important questions to ask because they help you think through the implications of what you’re saying. Just to give another example: The President says, “Oil and gas production are at record highs.” Well, relative to what? Relative to what they would have been if you weren’t President? Then you realize it is mostly driven by private exploration and development on private land. If you look at production on federal land, it’s down. But then President Obama could himself say, “Relative to what?” Because as it turns out, some of the deposits on federal land are very old and are being tapped out. Also, because of the Macondo oil spill in 2010, there was a drilling moratorium. So, whenever someone asserts something – especially a partisan – the question is “Relative to what?” That is why when people say, “The debt is at a record level!”, you should ask that question. Economists know that you do not just look at the debt and say, “Well, it was $100 last year and it’s at $102 this year. It’s at a record level –that’s terrible!” That’s up 2 percent. If GDP grew 3 percent over the same period, then debt relative to GDP went down. And that is the metric we should be looking at.

Tuesday, 4 December 2012

Various links

  1.  The OECD Economic outlook is out. Pretty depressing stuff.  Here's what they say about the UK
 The government has committed to implementing a number of
reforms which, if implemented fully, will boost both short and long-term
growth. Increasing the state pension age in line with longevity will foster
long-term fiscal sustainability. Implementing the recommendations of
the Independent Commission on Banking will strengthen the financial
system. The Universal Credit will reduce disincentives to work, and government training and apprenticeship programmes will contribute to a better integration of young people into the labour market and enhance the availability of skilled workers. The planning reform and further support to the housing market and infrastructure should allow construction to grow.
    1.  I found this interesting. House price/rental ratios are not as low as I would have thought, note Ireland is very different.

     2. Tim Taylor has a great piece reviewing McKinsey's report on manufacturing.
    He has an interesting quote:

    "As economies mature, manufacturing becomes more important for other attributes, such as its ability to drive productivity growth, innovation, and trade. Manufacturing also plays a critical role in tackling societal challenges, such as reducing energy and resource consumption and limiting greenhouse gas emissions. ...Manufacturing continues to make outsize contributions to research and development, accounting for up to 90 percent of private R&D spending in major manufacturing nations. The sector contributes twice as much to productivity growth as its employment share, and it typically accounts for the largest share of an economy’s foreign trade; across major advanced and developing economies, manufacturing generates 70 percent of exports."
    3. Pharmaceutical innovation arguments