Wednesday, November 30, 2011

Mazi's Link O' the Day

Not a very encouraging post for those of us who are fighting for income equality and... um... "justice?":

Tuesday, November 29, 2011

Mazi's Link O' the Day

Two "Marios" have risen to prominent positions in this eurozone saga. Mario Monti, Italy's new prime minister, is charged with saving that country (and thereby stopping contagion). Mario Draghi is the new president of the European Central Bank, and it is up to him to decide to put aside the ECB's old mandates to pursue extreme rescue measures or not. Are these our new heros?

Sunday, November 27, 2011

Playing the Market

All this chit-chat about Greece and Italy has caused another notable debtor to fly largely uncriticized recently: Ireland. So, I'll take care of that briefly and give a scoop of that country's situation. According to Paul Krugman (via Phillip Lane), this is how I read what happened there.

Aside from Luxembourg, which doesn't really count (because it's, well, Luxembourg), Ireland has the largest amount of external debt as a percentage of GDP, 1,165%! (Thank you World Factbook). What did they do?!

Not only did they borrow a lot of money (just like Greece... just like Italy... just like the U.S... wait, what?), but they also made risky investments abroad. That last bit is the proverbial "kicker." On one hand, the U.S., for example, borrows a great deal, but that money gets invested back in the economy. Ireland took a lot of that money, sent it out, and put it in "bets," so to speak. Sound like any sort of financial firm to you? And wouldn't you know it, Paul Krugman's article was called, "Hedge Fund Ireland." Now you learned something about hedge funds, too.

And now, the Irish people are taking the brunt of austerity measures (whatever the hell THAT means these days) because their government had an identity crisis and thought it could be a highly leveraged investment firm. Whoops... I'd be mad if I was you, laddie...

Mazi's Link O' the Day

Brand loyalty and how it relates to your iPhone:

Tuesday, November 22, 2011

Mazi's Link O' the Day

Professor George Schiller believes a new branch of economics is on the rise: neuroeconomics:

Monday, November 21, 2011

Sunday, November 20, 2011

Bridge the Gap

Well, the Keystone XL pipeline was delayed, to much applause from environmentalists and local farmers. The supporters of oil tube claim we've just thrown away a hefty number of jobs. Both sides have a point here, and quite frankly, neither is wrong. If you're sane, you can't really argue against environmentalists (I mean their overarching goals, not their means of implementation). And yes, this pipeline would have created jobs, at a juncture when said jobs are quite badly needed.

Let me clarify the point about environmentalists. Perhaps we all don't advocate attacking tune fishing ships in the middle of the Atlantic Ocean, but most of us agree that we should be vigilant about "protecting the Earth" and the climate change is a real issue that needs to be contended with. Just because most of us (sane) people agree with those claims, doesn't mean we're all environmentalists, or, more specifically, that we were all overjoyed at the blocking of this pipeline. So, why not?

This is all about ideology, not science. There's no point in discussing the critics who refute the science, since they probably don't believe in evolution either, and they're idiots. But there is a "time-horizon" difference in ideologies that does create this gap. In a gross generalization, I'll say that the environmentalists among us have a rather far-reaching view of the world. Their concerns lie in "tomorrow and after." What will the natural state of the planet be like in 50 years? This is a good question, and if the answer doesn't look so appealing, then yes, it's time we took measures to better the world. The critics take a much more "here today" viewpoint (another generalization). Mostly, their favorite tune is, "The costs of implementing too many pro-environmentalist changes are too high. We'll be hurting people NOW." (E.g.- No jobs from the pipeline).

I agree with the blocking, in this case. Being of a liberal bend, I'm all for protecting the environment whenever possible. And, from an economic point of view, I don't think sustained job growth comes from one-off projects like the pipeline. I do, however, get surprised when people on both sides of this argument appear to be dumbfounded by the fact that there is any opposition to their viewpoints. This battle over climate change has become so vicious and has involved so much teeth-gnashing, that at this point compromise seems very difficult to foresee.

I understand, critics and supporters, that you are all fervent and devoted, but you must practice tact if you want to make any progress in winning over the other side.Pointing at people who drive SUVs and degrading them does not win you any favors. Back down your dogs of war if you want bridge this ideological gap.

Mazi's Link O' the Day

In defense of the liberal arts:

Saturday, November 19, 2011

Mazi's Link O' the Day

The threat of a Eurozone break-up is causing people to hold more cash. Cash, as a percentage of M2, is up from 8.9% in 2009 to 9.7% right now:

Friday, November 18, 2011

Wednesday, November 16, 2011

Mazi's Link O' the Day

Middle-class neighborhoods are vanishing as the income distribution in the United States becomes more polarized:

Sunday, November 13, 2011

Bye-Bye Bunga Bunga

There goes Silvio Berlusconi off into the sunset (but might he return? Rumors abound).

Mario Monti will be Italy's new PM, and he will almost certainly appoint Guido Tabellini as the economics minister. Prof. Tabellini is known for his work on constitutions and political economy (notably: politicians do not always act with the best interests of their constituents in mind... Shocking). He was also the president of the European Economic Association. He seems to be the right man for the job, as both Monti and he are conservatively leaning (economically speaking). And, to be frank, conservatism is what Italy needs to show investors right now.

There's also a lot of chatter about the other government posts to be appointed. It is true that Italy's political system, in general, could do with a little tidying up, the debt worries should be at the forefront of Monti's mind. I'm pretty sure they are, since you could argue that the debt crisis is what finally did old Berlusconi in. However, perhaps because he thinks it best to move quickly, Monti is looking to replace a whole host of ministers (justice, cultural, etc..).

I say, leave that till later. Replace the ministers who are key in fixing the economy first. Obviously, it's not gonna get better over night, so I'm not saying wait till all the problems are solved. Just get the damn country away from the edge of the proverbial cliff. The political malpractice that led to this crisis is a REAL problem that needs to be dealt with right away. The rest of the political corruption was created to, frankly, keep Berlusconi from being a felon. Let's give him a few more bunga bunga parties...

Mazi's Link O' the Day

It can be done! We can breach the NY Times comment filter. Go, my children! Attack!

Monday, November 7, 2011

Sunday, November 6, 2011

I Can't Picture This

The Mises Institute now has a Spanish site. For those of you who are unfamiliar with that institute, it is a hyper-conservative (economically speaking) think-tank.

Yes, can you see it now? Some Mexican worker sitting at his computer, while his country is being raped by drug gangs, reading, "Less government is better."

Or maybe somebody in Spain reading about opposition to bailouts...

As for Latin America, well they haven't had the best of luck economically or politically for a while (Brazil excluded)...

Something tells me that libertarianism might take a while to catch on...

Mazi's Link O' the Day

Berlusconi out?

Thursday, November 3, 2011

Wednesday, November 2, 2011

Tuesday, November 1, 2011

Tale of Two Incentives

In 2010 36.2% of public employees were union members. Whereas private sector, only 6.9% of employees were members of unions (Bureau of Labor Statistics). Numbers like these, and they are part of a trend, beg the question, "Why?" The answer comes both from a theoretical and empirical perspective.

First, let's see why, theoretically, this shouldn't be surprising. Many of you are familiar with a "monopoly." Perfect monopoly exists when there is one firm in some goods market. Therefore, the firm's individual demand curve is the same as the market demand curve. The firm then picks whatever price and quantity on the demand curve satisfies the "marginal revenue = marginal cost" optimization condition. That's all technical and whatnot, but the point is "They have pricing power over their goods." There also exists something called a "monopsony." This is the analog of monopoly in the labor markets. That means, there is one employer who, therefore, has power over the prevailing wage. Naturally, it should be no surprise that, when there is no competition, the employer can pay lower wages and still find people to work there.

In many markets (e.g. public schooling), the government has monopsony power. Having unions to "fight back" and prevent the government from taking away benefits and lowering wages (not that the government would EVER be unfair!!!), takes away some of this monopsony power.

The empirical argument is much more obvious. You're the governor. You would like to be re-elected. And a large part of your constituents are blue-collar, union employees. In what world would you try to raise the retirement age, or lower wages, or cut pensions?

Actually, I'll tell you which world: this one. And you can thank the recession for that. Cash-strapped states are looking to raise finances. Now, we see the titular "two incentives." You're the governor again. You have your blue-collar, union constituents. But this time, you've got a state in dire economic straits. Lower pensions? Infuriate the unions, but become the "recession fighter?"

That questions will be answered as states take up these issues. So keep your eyes open and watch the tug-of-war...

Mazi's Link O' the Day

Altucher talks about the importance of being proactive in business and life: