Entries Tagged 'Government' ↓

Word of the Day – Comparative Advantage

Comparative Advantage is a bedrock economic theory of trade that says whenever nations vary in goods they grow or make, they gain when they trade with another nation that cannot grow or make those goods. This is a win-win situation. Both nations benefit when they sell another nation their main products that the other doesn’t have.

What makes nations different? Their locations around the globe, topographical geography, traditional cultures, their status in terms of being developed or less developed nations, education, values, and a host of other factors.

What comparative advantage relies heavily upon is weather. And that’s really a problem right now. Climate change is happening, no amount of denial can keep it from happening. Climate changes are affecting the comparative advantages of nations around the globe.

Capitalists are ignoring climate change at their peril. Donald Trump seems to have thrown out the whole theory of comparative advantage (if he every knew about it in the first place). He is using numbers instead of rational reasons to promote his trade wars.

Real trade is not based on using threats of gigantic monetary penalties to punish other countries – real trade is based on the comparative prices for which things of value are traded by countries who each need things others have. Continue reading →

Rent Seeking – A Note

This week I’m reading a book by Mariana Mazzucato, The Value of Everything: Making And Taking in the Global Economy (2018)

Finally! A book about economics that everyone can understand. I’ll review this book fully when I’m finished with it.

For now, I want to clarify the Word of the Day post I wrote in 2013, “What the Heck is Rent-Seeking?”

“Rent seeking” is a word that libertarian scholars, such as Gordon Tullock, appropriated during the last century, along with words such as “liberty,” “freedom” and heritage” from the ‘founding fathers’ of the United States.

Rent-seeking was a concept put forth by Adam Smith, a Scottish philosopher interested in economics, who wrote his famous book, The Wealth of Nations, a few months before the United States of America even existed. Smith published his book March 9th 1776. Continue reading →

Fault Lines – Part Three – They’re At It Again!

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram G. Rajan (Princeton University Press, 2010)

Authors’ Note: Recently several people have told me this series is depressing. That certainly wasn’t my intention. We are in a time of rising hopes in this country. That is great. But rising hopes don’t always come to fruition.

Raj’s chapters point out specific dangers that may impede our progress in this century.

We prepare for natural disasters, especially out here in California. So why not for man-made disasters? It’s just common sense.

Chapter Six “When Money is the Measure of All Worth”

Those of us who worry about derivatives will find this chapter useful.

We live in turbulent times, and the upcoming U.S. Presidential election is overshadowing financial changes that are going on here and abroad.

We’re in a time of high financial volatility that keeps dropping and then creeping upward. Our economy is good—for now. But we know that danger could lurk ahead in our future. Past history teaches us that.

Raj notes that Securitization goes back centuries – in the 1800s to the French monarchy sold annuities to wealthy men. Swiss bankers purchased these French government annuities and took out life insurance on “suitable girls” in Geneva.

Those annuities were then bundled and and resold at a higher price to investors. What happenened next ? The bubble burst. Sound familiar? Continue reading →