10 Lesser Known Economic Issues Politics While not an economist in the traditional sense, I am very interested in the study of economics. While not everyone shares this level of interest, I believe people should have an understanding of economics as the field is so important to understanding the world that we live in. Though this list contains ideas that are controversial, it is not intended to promote anger or controversy. Rather, these entries were chosen to shed some light on lesser known, yet important economic issues facing our world, and give readers something to ponder. Also known as the Diamond-Water Paradox, the paradox of value is the contradiction that while water is more useful, in terms of survival, than diamonds, diamonds get a higher market price. This paradox can possibly be explained by the Subjective Theory of Value, which says that worth is based on the wants and needs of a society, as opposed to value being inherent to an object. Khazzoom–Brookes Postulate Economics has many categories for “goods”.
MILLIONAIRE'S ISLAND: A Simple Example Of Why 'Rich People' Don't Create Jobs wikipedia commons An unspoiled wilderness with no poor people. Paradise! As everyone in this country keeps blaming everyone else for our high unemployment rate, one assertion gets repeated so often that it is now regarded as fact: Rich people create jobs. Specifically, the argument goes, entrepreneurs and investors create jobs. So if we want to create more jobs, the argument continues, we need to cut taxes on entrepreneurs and investors--to increase their incentive to create jobs. Now, I'm an entrepreneur, and Business Insider employs about 75 people, up from zero four years ago. Unfortunately, as I explained in detail here, this assertion is wrong: Entrepreneurs and investors actually don't create jobs, at least not by themselves. Without our generous readers and sponsors and dedicated team, all the jobs I "created" at BI would immediately cease to exist (including mine). To illustrate this, let's run through a simple example. Let's allow the 1% to take their savings with them. wikipedia
Of the 1%, by the 1%, for the 1% | Society It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. Some people look at income inequality and shrug their shoulders. First, growing inequality is the flip side of something else: shrinking opportunity. None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided.
Raise Taxes on Rich to Reward True Job Creators: Nick Hanauer Dec. 1 (Bloomberg) -- It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop. Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. I’m a very rich person. Even so, I’ve never been a “job creator.” That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. Theory of Evolution When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. That’s why our current policies are so upside down. And that’s what has been happening in the U.S. for the last 30 years. More Shoppers Needed
Goodbye to All That: Reflections of a GOP Operative Who Left the Cult | Truthout Barbara Stanwyck: "We're both rotten!" Fred MacMurray: "Yeah - only you're a little more rotten." -"Double Indemnity" (1944) Those lines of dialogue from a classic film noir sum up the state of the two political parties in contemporary America. But both parties are not rotten in quite the same way. To those millions of Americans who have finally begun paying attention to politics and watched with exasperation the tragicomedy of the debt ceiling extension, it may have come as a shock that the Republican Party is so full of lunatics. It was this cast of characters and the pernicious ideas they represent that impelled me to end a nearly 30-year career as a professional staff member on Capitol Hill. The debt ceiling extension is not the only example of this sort of political terrorism. The only thing that can keep the Senate functioning is collegiality and good faith. John P. The media are also complicit in this phenomenon. This constant drizzle of "there the two parties go again!" 1.
Income Inequality and the Death of Trickledown By Hugh, who is a long-time commenter at Naked Capitalism. Originally published at Corrente. On September 12, 2012, the Census issued its report on Income, Poverty, and Healthcare Coverage in the United States: 2011. One feature that jumps out at you are how relatively flat mean income has been for the bottom 80% over the last 45 years and how much it has grown for the top 20%, from an already high baseline. If you look at the far left, in 1967, the income difference between the quintiles of the bottom 80% was remarkably similar, less than $17,000 between each group ($16,679 between the 1st (lowest quintile) and 2nd; $15,572 between the 2nd and 3rd; and $16,631 between the 3rd and 4th). In the succeeding decades, difference between the 4 lower quintiles showed some moderate spreading. What is interesting is that the mean income of the top 20% increased $73,100 from 1967 to 2011. For the bottom 20%, their average mean income was $11,618. Now compare these to the 2011 mean income numbers.
How Banks Create Money The money that banks create isn’t the paper money that bears the logo of the government-owned Bank of England. It’s the electronic deposit money that flashes up on the screen when you check your balance at an ATM. Right now, this money (bank deposits) makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of cash that you can touch. Banks can create money through the accounting they use when they make loans. In the video below Professor Dirk Bezemer at the University of Groningen and Michael Kumhof, an IMF Economist explain where money comes from in less than 2 minutes: Every new loan that a bank makes creates new money. “Commercial [i.e. high-street] banks create money, in the form of bank deposits, by making new loans. Sir Mervyn King, the Governor of the Bank of England from 2003-2013, recently explained this point to a conference of businesspeople: Sir Mervyn King, Governor of the Bank of England 2003-2013 (Speech)
Wealth doesn't trickle down – it just floods offshore, new research reveals | Business | The Observer The world's super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy. James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system. Comedian Jimmy Carr became the public face of tax-dodging in the UK earlier this year when it emerged that he had made use of a Cayman Islands-based trust to slash his income tax bill. "These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network.
Land and Money, the Siamese Twins | The New Economics Party Land and Money, the Siamese Twins When there are two separate movements each claiming that they have the solutions to the world’s economic problems, we have an intellectual challenge. Rational beings might conclude each group of reformers has a key part of the truth. The two groups I refer to are the monetary reform movement and the Georgist movement. The monetary reformers come in several varieties, but in common they believe the creation of money should be without interest and should be a public function. So what do Georgists want? Both arguments seem reasonable. Some, like me, find themselves in both camps. Within the monetary reform movement there are two main camps. Let’s reflect for a moment on the historical connections between land and money and go back to the Italian goldsmiths. Now Jews couldn’t lend to Jews at interest, Gentiles were forbidden from lending out money at interest. In Fiji Indians can’t own land. Now let us go back to the type of monetary reform Type B.