Investing Curiouscatblog

Category: Economics

  • Copywrong

    In response to: Fair Use Rights by David Bradley

    Copyright is a taking of a public benefit for a private entity. This was put into law in order to increase the total public benefit. The idea was that taking from the public to provide the creator a limited-term, exclusive, government-granted, right to their work would encourage individuals to invest their time in creating works that would benefit society.

    So the debate is properly about how great the taking from the public should be. It seem to me the current situation is completely corrupt. Many of the actions are taking public benefit to provide to the private entity where no possible public benefit exists. Extending copyright periods of long ago created works, where obviously the public is harmed purely for private benefit. No possible argument can be made that their is a payoff to the public for this taking.

    If you wanted to take such an action and made it only for new work then their could be an argument that now a creator knows they have 100 years of government provided rights and therefore investing more time and effort in their work creates new and better work. I don’t believe this argument but at least it is possible. The current actions though are mainly about large companies using government to take from the public to provide themselves private benefit with no corresponding public benefit.

    Lawrence Lessig is the person who has the best insight in this area, in my opinion: The Value of the Public Domain.

    Dr. Deming published his seven deadly diseases of western management a couple decades ago. I would add 2 new diseases: Excessive executive compensation and a broken intellectual property system.

    Fair use is the right to reference (and quote limited portions of) works that have been granted government copyright protection. This is integral to the whole idea of creating the greatest public benefit (even while providing some government imposed limits on public rights to the creator). The large companies now are using lawyers to greatly increase the harm to society by expanding the taking of public benefit. They threaten and scare many into paying fees (or completely avoiding works that have been granted limited government granted copyright rights) where none are are rightly due (see Lawrence Lessig for examples). This causes great harm to society for the private benefit of a few. This is an obvious failure of government. Those countries that are successful at adopting more sensible systems are going to have a great advantage over those countries that chose to continue to increasingly bad practices of harming society to benefit a few private interests.

    Related: What is Wrong with Copyright Taking Public Good for Private Special Interests – Innovation and Creative Commons – Diplomacy and Science Research – More Government Waste – Crazy Watchmen – General Air Travel Taxes Subsidizing Private Plane Airports – China and the Sugar Industry Tax Consumers

  • The Girl Effect

    I believe in this model. Giving People the Opportunity to Succeed – Provide a Helping Hand – Creating a World Without Poverty

  • Forecasting Oil Prices

    Forecasting oil futures by Justin Wolfers (Wharton School, Univ. of Pennsylvania) on Marketplace (a great show by the way)

    In fact, Ron Alquist and Lutz Killian, two University of Michigan economists, recently assessed the forecasting performance of the no-change rule. Amazingly, this simple rule did better than the average of dozens of professional forecasters! In fact, the no-change forecast was 34 percent more accurate at predicting oil prices in three months time, and 18 percent more accurate at predicting prices in a year’s time. While professional prognosticators might argue that this difference isn’t statistically significant, it sure is embarrassing.

    Others ignore the professional forecasters and focus instead on what futures markets are saying. But it turns out that even futures prices are not as accurate as our simple formula. Even sophisticated econometric models don’t yield better forecasts than our simple no-change rule.

    The truth is that forecasting oil prices is so darn hard that complicated formulae add nothing but complexity. And so the simplest forecasting rule also turns out to be the best.

    This is another example of how tricky it is to predict financial markets. I am a bit surprised for relatively longer periods (like a year) the professionals do so poorly. My father, a statistician (among other things), challenged me to predict the movement of stocks on a daily basis better than his prediction (which was no change). I can’t remember the result – which makes me think I failed. I think I would be more likely to remember if I succeeded.

    Related: Prediction Markets at Google – Illusion of Explanatory Depth – 30 Year Fixed Mortgage Rates Graph – Randomization in Sports

  • Inflation Up 1.1% in USA Last Month

    U.S. Consumer Prices Jumped in June by the Most in 26 Years

    The cost of living soared 1.1 percent, more than forecast, after a 0.6 percent gain the prior month, the Labor Department said today in Washington. Excluding food and energy, so-called core prices climbed 0.3 percent, also more than anticipated.
    …
    Prices increased 5 percent in the 12 months to June, the most since May 1991. They were forecast to climb 4.5 percent from a year earlier, according to the survey median. The core rate increased 2.4 percent from June 2007, also more than forecast.

    Energy expenses jumped 6.6 percent, the biggest gain since the aftermath of Hurricane Katrina in September 2005. Gasoline prices soared 10.1 and fuel oil jumped 10.4 percent.
    …
    Rents which, make up almost 40 percent of the core CPI, also accelerated. A category designed to track rental prices rose 0.3 percent after a 0.1 percent gain in May. Today’s figures also showed wages decreased 0.9 percent in June after adjusting for inflation, the biggest drop since August 1984, and were down 2.4 percent over the last 12 months. The drop in buying power is one reason economists forecast consumer spending will slow.

    The continued increase of inflation is a serious problem. Eventually the federal reserve needs to take serious action (raising the discount rate). And the politicians need to stop raising taxes on the future to spend more and more every year. Their continued financial irresponsibility is a large part of the reason for the declining value of the dollar – along with the voters that keep electing those proposing large increases in spending while pushing off paying for that spending to future tax increases.

    Related: inflation investment risk – Food Price Inflation is Quite High – Bernanke warns of inflation – Politicians Again Raising Taxes On Your Children – USA Federal Debt Now $516,348 Per Household
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  • Food and Energy Costs

    Energy and food prices have obviously been increasing dramatically. The economist has a nice chart showing where people spend most on food and fuel. In the USA, Canada, Western Europe and Australia people spend less than 25%. In Brazil, India, China, Mexico, South Africa, Turkey… they spend 25-40%. In Argentina, Saudi Arabia, Russia, Pakistan… they spend 40-50%. And in Mongolia, Nigeria, Iran, Kenya, Madagascar… they spend over 50%.

    The data is from the IMF. As with any economic data there are issues to consider about comparing across countries. Still this is a stark illustration that the impacts those in the wealthy countries feel from rising energy and food prices are felt to a greater degree in poor countries (that already have economic difficulties).

    Related: Food Price Inflation is Quite High – Helping Capitalism Make the World Better

  • Oil Consumption by Country

    The largest oil consuming countries (and EU), in millions of barrels per day:

    Country consumption % of oil used % of population % of World GDP
    USA 20.8 25.9 4.5 21.0
    European Union 14.6 18.1 7.4 21.9
    China 6.9 8.6 19.9 10.7
    Japan 5.4 6.7 1.9 6.5
    Russia 2.9 3.6 2.1 3.2
    Germany 2.6 3.3 1.2 4.3
    India 2.4 3.0 17.0 4.6
    Canada 2.3 2.9 0.5 1.9
    Korea 2.1 2.7 0.7 1.8
    Brazil 2.1 2.6 2.9 2.8
    Mexico 2.1 2.6 1.6 2.1

    All data is from CIA World Factbook 2008 (downloaded Jun 2008). GDP calculated using purchasing power parity.

    Related: Top 10 Manufacturing Countries 2006 – Country H-index Rank for Science Publications – Best Research University Rankings (2007)

  • Failing Infrastructure in the USA

    The cracks are showing

    For the past few years it has been hard to ignore America’s crumbling infrastructure
    …
    Even worse is the influence of the pork-barrel. Only around 20 states use cost-benefit analyses to evaluate transport projects; of these, just six do so regularly. Alaska’s “bridge to nowhere” is an infamous result of this sort of planning. But it is not exceptional. Two months after the bridge collapsed in Minneapolis, the Senate approved a transport and housing bill that included money for a stadium in Montana and a museum in Las Vegas.
    …
    Such plans stand in stark contrast to the federal government’s strategy today. America invests a mere 2.4% of GDP in infrastructure, compared with 5% in Europe and 9% in China, and the distribution of that money is misguided.

    I think they underestimate our ability to ignore. For example we have over $500,000 in federal government debt per household and continue to raise taxes on future generations without any guilt. I think our capacity to ignore is pretty large and certainly large enough to ignore the decision to spend money on things other than infrastructure repair.

    I think those that don’t somehow manage to remain ignorant all know that China has taken the lead in investing in infrastructure and that the USA has chosen to elect politicians that are gutting infrastructure investments (and still spending far beyond the resources they have available). I can’t imagine many who understand economics have any trouble seeing which country is investing in the future and which country is selling out its future. It is not the choice I wish was being made in the USA but it is obviously the choice we are making.

    Related: USA Infrastructure Needs Improvement – Politicians Again Raising Taxes On Your Children – Manufacturing Takes off in India – True Level of USA Federal Debt

  • Japan to Add Personal Solar Subsidies

    Japan to Cut the Cost of Solar 50% Creating Greater Self-sufficiency (site broke the link so I removed it, sigh, sites can’t even manage to avoid breaking 10 year old web usability guidelines, when will they learn?)

    The country however is the 2nd largest global market for solar energy, and is home to some of the largest solar component manufacturers, including Sanyo, Kyocera, and Sharp. The Japanese government will introduce tax credits and subsidies to encourage household use of solar energy starting next year.
    …
    The incentive will decrease the cost of a solar photovoltaic system by an estimated 50% within 3 to 5 years. This initiative will make solar energy especially appealing because the cost of electricity in Japan is already over $.20 a kWh. This is roughly double the rate of electricity found in many areas of the US.

    Germany is the largest solar market (due to government policy encouraging solar development).

    Related: Large-Scale, Cheap Solar Electricity – Solar Energy: Economics, Government and Technology – Wind Power Potential to Produce 20% of Electricity Supply by 2030 – solar energy posts on the Curious Cat Science and Engineering blog

  • Corporate and Government Bond Yields

    graph of 10 year bond rates

    Over the last 2 months the yields on bonds have increased the discount rate has continued to decline.

    The spread between corporate bond yields and government bonds has decreased a bit as treasury yields have increased 37 basis points compared to just 4 and 6 basis point increased in corporate bond yields.

    Data from the federal reserve – corporate Aaa – corporate Baa – ten year treasury – fed funds

    Related: Bond Yields 2005-2008 – 30 Year Fixed Mortgage Rates versus the Fed Funds Rate – Initial Retirement Account Allocations

  • Monopolies and Oligopolies do not a Free Market Make

    Pretty much everyone (certainly the vast majority of regulators and politicians) have no clue about capitalism. The concept that a “free market” should be allowed to operate is theoretical, based on “perfect competition” (which essentially means zero barriers to entry). Obviously the politicians support, not capitalism (which would require regulation of imperfect markets (and certainly not support consolidation past the point of many competing companies), but the idea that those with the gold make the rules. Natural monopolies (like gas distribution, electricity, likely internet infrastructure…) should be fully regulated companies which then have the infrastructure accessed by multiple competitors (none of which own the natural monopoly – of course).

    With some market that is even remotely in the area where a capitalist free market was in place, it is very simple to not have to deal with companies that treat customers horribly (like Verizon, Comcast, Time Warner Cable…) you just chose another company to deal with.

    But these companies want to have the government allow them to create a monopoly (or something extremely close) and then claim to be in favor of capitalism (and further make ludicrous claims about what capitalism would suggest about regulation in oligopolistic markets). These ideas is so laughable that if politicians had even a sense of economic understanding they would adopt the appropriate capitalist response (for government).

    Obviously, regulation is required as the market moves away from the area of “perfect competition.” When some huge company wants to buy some other huge company (say creating greater than 10% of the market combined) this would be rejected. If the market is a natural monopoly where the free market is not the proper capitalist market (such as one where the government would allow the proper capitalist response to players in the market attempting to break the free market by gaining to much control), then, of course a regulated natural monopoly would take on that economic task. This is not really complicated stuff.
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