Reddit Economics Network

If there are two businesses with identical land/capital/machines etc. but one is a worker co-op and the other is a traditional business, would their marginal product be roughly the same? Would the structure of ownership impact these values? Metastudies have concluded that worker co-ops are a little bit more productive than traditional companies, so would this mean the marginal product would be slightly greater, ceteris paribus? Thank you.

In 1890, wage-earning families spent an average 41% of income on food: https://libraryguides.missouri.edu/pricesandwages/1890-1899

In 1970 it was 14% of personal income and 15% of personal money income: https://www.econbiz.de/Record/us-food-spending-and-income-changes-through-the-years-manchester-alden-coe/10000875874

Foreign born share of the U.S. population since 1850, per the U.S. Census Bureau: https://i.imgur.com/ggUaV0x.jpeg

Why cant inflation be 0? I want the Price of rice to be 100Rs for the next 10years. Whats the issue here? If there is More demand for Rice, Price of Rice increases sure but then eventually when people dont have enough money to pay for high price there is an equilibrium found right? Only when Government keep printing more money people get to demand more and price rises. So why cant we fix the amount of money thst circulates in the Economy?

(Sorry if it's a stupid question I'm just a student and I'm Curious. )

If so, why didn’t it cause inflation when he imposed tariffs while in office and lowered interest rates? Inflation was caused by covid shutdown induced supply chain shocks no?

Please don’t give me partisan answers thank you. The question is not about that.

Hey everyone! I am currently an undergraduate junior studying finance and minoring in political science and international political economy. My short-term goal is consulting in high finance, but my long-term goal is 100% to pivot to macroeconomic policy reform because that is my true passion and something I do and consume a lot of academic research on in my free time. So far, I have done a decent job toeing the line between corporate and policy, as I am interning this upcoming spring at the Consumer Financial Protection Bureau and in M&A Consulting during the summer. I am also part of a policy fellowship and have done macroeconomic and a small microeconomic research project. Still, I realized quantitative econometric analysis wasn't very fulfilling or something I was adept enough in to pursue a PhD in.

With this in mind, I still want to take the right steps to pursue economic policy reform in the future while leveraging my finance degree. What would this possibly look like? Should I pursue law school and specialize in economic law? Are there any programs in economic policy or theory that are less quantitative-focused and more system/framework-focused? I understand I am pretty naive and lack a lot of knowledge, so I welcome any guidance or advice. Thank you!

Are Ingrid H. Kvangraven, Erik Reinert, and other academicians who criticize mainstream economics, particularly Acemoglu and Robinson's inclusive/extractive institutions theory, even scientific if they do not use mathematics and statistics to verify their hypothesis?

I have two scenarios I’m trying to imagine.

A. The government spends 1 trillion and takes in 500 billion in tax revenue.

B. The government spends 2 trillion and takes in 1.5 trillion in tax revenue.

How would you expect these two scenarios to compare in terms of inflation?

The deficit is the same so would you expect these scenarios to be similar for inflation or is there not enough detail?

Thanks in advance.

I see articles wondering if Elon Musk could cut US government spending by $2 trillion. What would be the actual impact if this were to happen? Would it be a net positive or a net negative on the economy as a whole?

For all my life I've been told "real estate is a good investment." Looking at housing prices over time this has seemed to be true. But it also seems like there are real, practical limits to this that are starting to cause economic problems.

In order for real estate to be a good investment, it must deliver a return over and above inflation, otherwise it's merely an inflation hedge. If real estate does deliver a long term inflation adjusted return it must necessarily become less affordable over time (at least if that return is greater than the growth rate of real incomes).

Here's an example roughly based on the US income distribution. A neighborhood is built that is affordable to the median US income. The value of the homes increase by 3% per year in real terms. That means in 24 years the real value of the homes has doubled, meaning the houses in that neighborhood are now only affordable to Americans that make 2x the median income, which would be roughly the 80th percentile in the US. Another 24 years pass and the value is now 4x what the median income can afford which now means only maybe the 95th percentile income can afford one of the homes in the neighborhood 48 years after it is built. Obviously the numbers will change depending on the rate of return, but as long as the returns are positive, the outcome is a mathematical inevitability.

This is clearly a problem. Eventually you have to run out of people who can afford homes in the nneighborhood. One thing that I have seen happen in neighborhoods like this is that the homes get purchased by investors and rented out at much lower rates than the cost of a mortgage, because people can only afford so much of their income going to housing. There also almost certainly must be negative macroeconomic impacts of rising housing unaffordability. People do have some ability to increase the share of their income going to housing, but if they do that's less money that they can spend on everything else, which should put a drag on aggregate demand.

What am I missing? Why is this not considered an obvious problem?

The recent appointments of Elon Musk and the Department of Efficiency Bureau have me wondering whether it is even logically or mathematically possible for them to succeed in their goal to pay down our over $35T debt.

Whenever money is created through a debt arrangement, that debt arrangement comes with the expectation that more money will be paid back than was created. So for example, if a loan of $500,000 is made from a bank, then $500,000 of new money is created, but because of interest, more money is owed than what exists. Therefore the money can never actually be paid back, right?

Here's a long form quote from a book that I read recently (https://www.amazon.com/Usury-Money-Nothing-Leaving-Debt/dp/B0DBFPGDPB) that speaks to this in more detail:

"Remember, money is nothing but debt, so any money the borrower earns must have originated with a corresponding debt somewhere else. Since the debt that generated the money that the borrower earned to pay back his loan would also come with the expectation of interest, then this just makes matters worse. What you have is a good old-fashioned pyramid scheme where the fulfillment of each debt obligation that sustains the system depends upon recruiting additional participants into the system. Whenever a loan is made that creates money with the expectation that interest is paid on the loan, the system becomes unsustainable as the expectation of money to be received is greater than the existing money in the system. The only way to create more money to pay off a loan is to have additional participants in the system take on more debt. Since their debt will also require the repayment of interest, the only way to pay off that debt is to have someone else take on debt so there is new money in the system, hence more interest, etc. It’s a mathematical impossibility for everyone to pay off their loans, as the collective amount of money owed is greater than the money that exists, and the amount of new debt that must be added to sustain the system grows exponentially every day."

I was watching something about how modern countries and nationalism came to be, and it turns out this isn't actually that old. As regions industrialized, they often organized into unified countries.

This makes sense.

But does the reverse apply as well? If the structures of government that manage infrastructure for commerce eventually become unnecessary, would we still have countries?

Is this the decay we're seeing in many advanced industrial economies?

https://youtu.be/AXz0kbMKPu0?si=lm_Gx6scRt3aEqf1

If so, why are people not choosing it and instead major in Finance?

The city I live in has legislated monopolies for both water and electricity providers at a residential level, however both of the providers run constant TV and radio advertisements.

Considering these services are essential, where the option to simply opt out of water or power provision isn’t feasible, what purpose does advertising play, when theoretically these monopolies already hold 100% of the achievable market?

A central tenant of many policies is assuming that statistical differences in income, representation, etc measure discrimination. If not for discrimination, then income, representation, etc would be equal given the population of the area.

However, it's hard to find statistics that clearly do measure discrimination. Racial makeup of NBA and Hockey are quite different, but I don't expect anyone would argue that is because of discrimination. When you separate men and women income differences into married and unmarried men and women income differences, it turns out unmarried men make the same as unmarried and married women, which makes you question what kind of discrimination is being measured at the very least. (https://www.stlouisfed.org/on-the-economy/2018/december/married-men-outearn-single-men)

One statistic I believe clearly demonstrates measuring discrimination is the rate of wrongful imprisonment and DNA exonerations by race.

My question is this. What kind of circumstances are necessary in order to be sure your statistical difference is measuring discrimination?

sorry for the title mess up, but yeah are they the same concept?

I'm studying intermediate level micro. How often do businesses go around doing things like calculating the marginal cost of something? I had a microeconomics question about the number of actions an electronic store owner should take given the values of marginal benefit and a constant marginal cost. But is that marginal benefit even calculable in any realistic mathematical sense? How often do businesses go around determining the level of competition and deciding if P=MC or MR=MC?

A question arose in my economics class today which the teacher could not answer. What happens if two countries fix their exchange rate to each other. So say Canada fixes their exchange rate down as 0.50 US dollars and the US fixes their currency as 2 canadian dollars. Could this happen, and what would happen if it did.

My thinking is they would become functionally one currency, just being traded around functionally as one currency, which would quickly devalue because this sort of irregular action would spook the markets.

The Atlanta Fed has a wage growth tracker that tracks median wage growth instead of instead of the growth of the median wage.

I can't really explain why the bottom 25% of wage growth isn't ever positive. In fact, it's looks very much like it can't go over 0% at all. I'm pretty sure it's a methodology thing, but I can't really think of a reason why it would be that way.

EDIT: So I think I initially misread the chart. The 25th percentile isn't referring to the bottom 25% of earners, but the 25th percentile in wage growth.

But I'm still not sure why it seems to have a ceiling of 0.

China continues to steal billions in US IP. IP is very hard to create = innovation/risk. Does anyone have a way of addressing this in the West without some financial pain felt by the West?

Nobody can guess the future but I assume some more knowledgeable people might have an idea of where Trumps policies are headed.

For example tarrifs would cause a huge amount of inflation, it will only get worse since US doesnt have the manufacturing to just produce it themselves, and especially in affordable prices. So that would require either huge pay cuts, removing minimum wage or huge product costs.

That is obviously political suicide, so it either wont happen or it will but in combination with something else related to the dollar, maybe an attempt to hyper inflate the dollar which would also help the debt explosion?

Would they start tinkering with crypto in some way?

So I was just thinking about tariffs, and all the issues with them, when an idea just hit me. Why not just place tariffs on imports and then use that funding to subsidize the domestic markets? Theoretically it seems like all that we would need to do is place a tariff exactly half the size (or greater) of the difference between foreign and domestic prices and then domestic products would be able to compete with foreign goods, bringing jobs back to the United States, maintaining the same price level (no inflation), and foreign countries actually would be paying the tax burden. The only issue I can think of is the increase price of foreign goods would result in a decreased imports which would reduce the funding in the short term, but mathematically there is an equilibrium that can be reached. However, tax revenue would also increase as the countries income does.

Im hoping someone can put a little more thought into this and tell me what issues I might be missing with this/why countries don't already do this. What do y'all think about this?

I was thinking about this randomly today and was unable to draw any conclusions myself confidently.

I am thinking possibly it could show how “fair” an economy is to its median worker as they are getting paid most inline with their average output but wasn’t fully confident.

This will be a little lighter hearted post, with all the election stuff going on.

Ok, xbox and PS5 have been out for 5 years now and both are around the same price. PS5 is over 60 million units sold, while xbox sits at around 30 million. Yet the price of the Xbox does not reflect this demand. Why is that?

Today at work I had a discussion with some coworkers about weather a liberal, more progressive income tax would reduce the deficit better than a more conservative, flatter income tax. After some back and forth we were all concerned that the current economy seems solid, but we're still in a significant deficit in the US and both tax approaches seem to essentially keep revenue flat and just shift who pays more of it. When we googled things a bit, I found a recent article from Jerome Powell saying that that US fiscal policy is unsustainable.

Given our current tax policy, deficit, interest on debt, and spending are we wrong in thinking that there needs to be a major shift or increase in tax revenue? Is this something that could be solved my incremental change like increasing tax revenue by a few percent or by long term GDP growth, or is this something that would require a fundamental change to fiscal policy?

Here’s my proposal: The federal government can create a new GSE that has no asset and no revenue, solely for the purpose of issuing this bond.

The bond(s) would have a duration from 6 weeks to many years, callable five weeks before maturity. The bond itself is obviously not backed by the US Treasury.

However, there is a separate law requiring the Treasury to accept such bonds with less than 30 days from maturity, and redeem it with cash for the full face value, or exchange it with a Treasury bill of the same maturity date. Normally, such redemption (or exchange) would never happen, because the bond would be called five weeks before maturity, so no such bond exists that has less than 30 days from maturity. As you can probably tell, I’m an amateur. If rephrasing the whole arrangement as the bond has a five-week grace period past its official maturity date, and any such bond past due for more than a week can be redeemed from the Treasury, I think would have a similar effect. I guess my point here is, normally the bond would not be eligible for redemption (from the Treasury) but in case the GSE defaults, the Congress needs to urgently pass an amendment to this law to prevent the (unpaid) debt from becoming the federal government’s obligation.

Further, whenever the auction of this bond results in an interest rate higher than the comparable US treasury bond plus one hundred basis points, the excess interest will be paid in the form of non-transferable non-refundable tax credit, for foreigners, non-natural person entities (e.g. corporations), and high income individuals. The point here is that, the arrangement can increase the federal government’s financing cost on paper, but really the money is arguably well spent, as it would be paid back to US taxpayers, and incentivize middle class Americans to save.

Ultimately, the goal here is to turn the debt problem into more of a (domestic) political problem rather than a global financial problem, and create a path way for a soft default, if needed due to a unforeseen crisis. Another way to think of it, is that it creates an opportunity for a future (one-time) wealth tax, if needed.

So what do you think?

I just wondered down a little rabbit hole and read a little bit on MEFO Bills and how they were a large part in helping Germany get out of the economic depression of the 1920s and 30s while also rearming the country under the treaty of Versailles.

I don't have any background in economics so my main question is how did this work and why was it used? What were the negative consequences of using something like this? I read that they were able to print money but avoid inflation.

I apologize if this ain't the right sub for this but I was interested in learning a little bit more.

I’m curious how retirement accounts would look- or frankly work with the purposed removal of Federal income taxes and addition of blanket tariffs??