Economics

At Quora

What is the value of money, and why?

Tim Worstall, Journalist (2004-present)
Answered just now

If people will accept it as money then it is money. If they won’t then it isn’t.

That all sounds a bit simple, possibly even tautological, but it is the truth of it. Everything else that is said about money – government issuance, that it can be used to pay taxes, that’s it’s useful in transactions, that it maintains value and so on, they’re all details.

Humans have used butter, copper sheets, cowrie shells, pieces of paper, gold, silver, government promises and all sorts of other things as money. The one unifying factor is that other people in the same society – and often beyond it – regarded the things being used as money, that this thing, whatever it was, had value. So, it did have value. QED.

A useful explanation for the crappy Spanish economy

Not a whole explanation but still useful:

even if they get legal status, they have to register as self-employed and pay a statutory monthly “quota” of €300, regardless of income, which they do not earn enough to pay.

That’s €3,600 a year in tax from Day I of self-employment. No, that’s not the assumption of what your income or profit is, that’s the payment you must make. Thus all of the lower end of the Spanish economy is off the books, not on.

Idiocy, of course it is.

Err, yes?

Buyer who spent $69M for digital art by Beeple may have profited from the sale

He gained something he valued at more than $69 million, that’s how transactions work.

Do what you’re least bad at then swapsies

Odd the things that a dog walk will have you thinking about. So, trying to get the entirety of Adam Smith’s division and specialisation of labour – the damn pin factory – plus Ricardo’s comparative advantage down into the one short nugget:

Do what you’re least bad at then swapsies

Any advances in conciseness anyone?

There are costs and benefits to everything – including the green transport revolution

Just a little reminder that there are costs everywhere:

The family of a man who died after an ambulance was delayed by road closures introduced as part of Grant Shapps’s “green transport revolution” has warned others will perish if emergency services are barred full access to streets.

The South Central Ambulance Service has launched an investigation after a crew struggled to reach a dying pensioner because its route was blocked by a bollard and two planters.

The “fixed bollard” in Cowley, Oxfordshire, is one of three barricades in the area which paramedics cannot unlock or collapse to drive past. It means emergency services have to rely on up to date satellite navigation systems to route them around the new barriers.

There are benefits, of course there are. Lower emissions in these areas for example. Less traffic noise. But everything also comes with costs. So, how many dead pensioners equals lower traffic noise?

Sure, that’s a crude question to ask. But it is the right one. As with everything else we’re looking for the optimal trade off of costs and benefits.

Sure, it’s lovely that we have more government to take care of stuff. But what’s the cost of the taxation to have it? No climate change would be nice but how many would die from not using fossil fuels?

Or, as economics keeps telling us, there are no solutions, only trade offs.

That is, Larry Summers was right

White House Weighs How to Pay for Long-Term Economic Program
After Covid-19 package, moderate Democrats may resist taking on more debt for infrastructure, clean energy and education; GOP opposes tax increases

If you go spend all the money then you’ve not got any money left to spend.

This is interesting

Now we health workers know how empty Boris Johnson’s ‘clap for heroes’ really was
Rachel Clarke

We’ve had a traumatic year and lost patients and colleagues. But all he offers us is a derisory 1% pay offer

So money does matter then?

How glorious!

Musk, who lost his briefly held title of the world’s richest person last month, has seen his paper fortune drop by $7.5bn so far this year to an estimated $162bn.

America is now a better place, right? Because it is inequality that makes it a bad one, less inequality makes it a better…..

This always annoys me

The 33-year-old founder of In The Style, an online fast fashion website, is in line for a bumper payday as it explores a £100m stock market listing.

Adam Frisby, who set up the retailer in 2013, currently owns 40pc of the firm. He is understood to be seeking to sell a small proportion of his shares in the float, likely becoming a millionaire in the process.

No.

Today he owns 40% of something worth £100 million. He’s a millionaire.

After the float he will own less than 40% of something worth £100 million and have some cash equal to the 40% minus x% of £100 million.

Yes, clearly, the float might increase the value of the company – liquidity – and all that. But it’s still clearly and obviously true that the swap – cash for shares – doesn’t make him a millionaire. It might crystallise it, recognise it, whatever, but the swap of one asset for another doesn’t make it.

Fair enough

However, this success in bringing people out of abject poverty is not simply down to the government, he says.

“Chinese people, by working extremely hard, lifted themselves out of poverty – in part because some of the stupidest economic policies ever created, by Chairman Mao, were abandoned in favour of versions of capitalism.”

There’s a solution here

The gurus aren’t just predicting that working from home is here to stay, they’re also prophesying that it’ll be great and cheap. Not only will commuting costs disappear, homeworking will make housing cheaper, as not living near the office will mean everyone is paying small-town rents while earning city-centre salaries. Back in the real world, new research shows that homeworking households actually spent about 7-10% more on housing compared with similar non-remote households in the same region. Why? Homeworkers need more space so have bigger houses. The only thing less fun than a pandemic spent at the kitchen table is a lifetime at one. Homeworkers also tend to live in more expensive areas. Maybe you care more which neighbourhood you live in if you never leave it.

We could stop building the smallest new housing in Europe perhaps….

Unimportant macroeconomic numbers

Rocketing fire safety costs are forcing leaseholders to accept up to £200,000 price discounts from cash buyers as the cladding scandal threatens the wider housing market.

House prices have so far been largely insulated from the fire safety crisis that has trapped hundreds of thousands of flat owners because they are unable to sell on the open market. But as ballooning insurance premiums and waking watches escalate even before remediation works begin, leaseholders are being pushed to breaking point.

Stephen McPartland, the Conservative MP for Stevenage who has pressed the Government to free leaseholders from remediation costs, said: “This is a £20bn issue, and that is going to play through the system somewhere – that £20bn could come off house prices.”

£20 billion is real money and £200k is an issue for most households. A crippling one for many. But as a macroeconomic number?

UK property is worth some £6 trillion (number from memory but that’s of the right order). We’re talking of 0.3% o0ff the top of property values.

Sure, it’s a problem in detail but it’s not a macroeconomic problem.

Oh dear Carrie

Regulatory capture

Hmm:

The hate group is the Alliance Defending Freedom, which you may remember from its campaign against Scotland’s hate speech laws, or its witnesses in the case that banned puberty blockers for trans teenagers.

The ADF is viciously anti-LGBT+, as its its fellow Christian Right organisation the Heritage Foundation. That has its hooks in the UK government too: in the same month equalities minister Liz Truss decided to ignore public support for GRA reform, she was a guest speaker at a Heritage-funded event. Both groups have pretty obvious links to the highest profile anti-trans groups here too, and are often deeply involved in the legal cases aimed at removing trans people’s healthcare and human rights.

Ah, no, that’s not what regulatory capture means. Rather, it means that those who should be regulated end up controlling the regulatory system.

As and when Mermaids controls the regulation of kiddies getting their knackers cut off then that is regulatory capture. When people object to Mermaids gaining that control this is known as “free speech”.

Whether either side is right or wrong about what the policy should be is irrelevant to the point being made here. Regulatory capture means that those who should be regulated control the regulation.

ADF International’s UK office has publicly opposed protest-free ‘buffer zones’ around abortion clinics, supported calls for “freedom of conscience” provisions to enable medical staff to independently object to providing legal abortion services

And that second? That’s the law. Working for the NHS does not mean that you must perform abortions. That’s actually right there in the law right now.

Purchasing power parity

Prices differ across geography. So, in order to compare living standards we fiddle with our unit of currency to try to equate prices. Thus we can compare living standards using our now fiddled currency – that’s purchasing power parity.

An example of prices differing. In Bangladesh right now:

Each cabbage and cauliflower are being sold at Tk15-20, white radish, carrot and brinjal at Tk10-15, Tk15-30 and Tk10-25 per kg respectively.

Fine rice is available at Tk58, medium-quality rice at Tk52 and coarse rice at Tk48.

1Tk is about once pence UK or even, at this level of accuracy, 1 cent US.

50 pence a kilo for rice isn’t far out of the Costco or the like price range. This makes sense, rice is a globally traded item, the law of one price comes into effect. Fungible items will be about the same price, including the costs of transport, across geography. This isn’t because they ought to be but because arbitrage through trade across those geographic price differences will make them so. Brinjal is aubergine/eggplant. That’s not so much an internationally traded item. Ten to twenty pence/cents a kilo is pretty damn cheap.

Which is why we use PPP and also how it is calculated.

Surprise!

Shoppers who do their weekly food shops at supermarket convenience stores pay £320 more a year than at big branches, a study by Which? found.

The consumer group tracked prices for an average basket of goods at Tesco Express and Sainsbury’s Local stores for five months and compared them to the prices for the same items at their bigger counterparts.

The Sainsbury’s shopper would have paid £6.18 extra a week equating to £322 a year, while the Tesco customer would have paid an additional £5.37 a week, or £279 a year.

Err, yes?

Sir Partha

In Chapter 13 we show that inclusive wealth increases if and only if aggregate consumption is
less than net domestic product (NDP), that is, GDP less the depreciation of all capital assets. We
will also show that to be the criterion that should be used to check that development has been,
or is expected to be, sustainable. So, one is naturally led to ask: Is GDP growth compatible with
sustainable development?
The question can be answered only within the context of complete macroeconomic models of
the long run, in which natural capital plays an essential role – from source to sink. The model we
construct here contains those features and so can serve as a prototype of the kind governments
and international organisations should now construct. As the model economy is bounded,
unbounded growth in output, consumption and inclusive wealth is not possible. Nevertheless,
one may ask whether, while keeping consumption at politically acceptable levels it is possible for
both GDP and inclusive wealth to grow indefinitely even as they tend to finite limits. The answer
is “yes”, provided the stock of natural capital is large.

Or, as we might put it, infinite growth is possible on a finite planet.

Not read it yet but yes, obviously

The Dasgupta review urged the world’s governments to come up with a different form of national accounting from GDP and use one that includes the depletion of natural resources.

It should be net national income, not gross domestic product. This is well known enough that – for I think it was he – Dan Davies was making jokes about it more than a decade back.

Cretin

Ms. Malik:

In a country already riven by economic and class inequality, Trump proved how easily such divisions could be exploited to benefit rightwingers promising economic prosperity for some at the cost of the rest.

The final pre-covid Trump year saw the lowest unemployment rates in two generations, the lowest black unemployment rate ever recorded, significant real wage growth, a fall in the poverty rate…….those rightwing bastards profiting from everyone else, eh?