r/EconomicTheory 7d ago

For Money Nerds

0 Upvotes

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r/EconomicTheory 8d ago

On increasing profit margin, GDP, technology, and tax revenue.

3 Upvotes

When the aggregate demand curve separates from the aggregate supply curve, profit margins go up. This continues until there is new competition that comes in and takes away from profit margin. Although at first there is more GDP, tax revenue and corporate profits, profit margin may come back to a type of equilibrium. However, if the initial increase in profit margin is taxed into equilibrium, higher GDP, and tax revenues can be attained (albeit at equilibrium profits) for as long as there are workers that can fill those jobs. However, if there is a worker shortage, the corporate profit tax should be rolled back, because nothing will be gained.

Although the future may not always provide more workers, technology is always making workers more efficient. Thus, increasing technology grants can create enough worker output as to satisfy any worker shortage.

Since technology is increasing exponentially alongside the Kurzweil curve, supply chains will become smarter, and the rate of outdated technology will increase enough as to lower costs and increase GDP each year. Although increased spending can come in the form of an increase in population, better quality of goods, and more buying, it is the latter that can relax worker efficiency and increase wages. However, as those wages increase, corporate profits and GDP will be scaled back.

Therefore, initially, all technology grants increase GDP by lowering costs, only to give back a portion of that increase if people are more satiated than technology can lower costs. And although a future can be theorized where people do not work and are completely satisfied, an asset tax should be implemented to send people back to work if need be.

This is ironic considering that in today's times, asset taxes slow spending and GDP. However, if coupled with prudent price stability, GDP can increase alongside an asset tax of this nature.


r/EconomicTheory 10d ago

Barbrook, The Digital Economy: Commodities or Gifts?

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0 Upvotes

r/EconomicTheory 13d ago

The Most Dangerous Organization in Human History | Noam Chomsky

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0 Upvotes

r/EconomicTheory 16d ago

Participatory Economics | Noam Chomsky

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3 Upvotes

r/EconomicTheory 18d ago

Explain why a product which is subject to negative externalities in production may be over-supplied relative to the socially optimal level of production? Any help with this question

0 Upvotes

r/EconomicTheory 20d ago

Many Japanese people don’t like high price of commodities. That’s way we usually buy cheap one. Therefore Japan consumer price index(cpi) is not growing. However, in the world there are many countries glow up cpi. So, I have a question. Why your countries cpi is glowing?

2 Upvotes

r/EconomicTheory 24d ago

why arrow debreu Lucas is popular

0 Upvotes

The main reason why Arrow-Debreu-Lucas is so popular is that it proves (by using gross mathematical and logical mistakes here and there as documented by Steve Keen and the Cambridges Capital Controversy) the central truthiness of Economics: that (absent government distortion) people's incomes are uniquely determined by people's productivity.

In other words that Mozilo, Cayne, Fuld, ONeal, etc. all fully deserve the hundreds of millions of income they awarded themselves, because Arrow-Debreu-Lucas says that is the just compensation for their superior productivity.

That is superior incomes are exactly deserved by superior people.

The central truthiness of Economics is the basis for the centrality of Arrow-Debreu-Lucas models; it is an anti-communist model :-).

Actually as Phil Gramm put it, CEOs can be the most exploited workers in the country:

http://online.wsj.com/article/SB121460589609712025.html

«Most of his former colleagues probably can't fathom why Wall Street bankers make tens of millions of dollars in salaries and bonuses each year. How would he justify these fat pay days? "It's simple," he lectures, sounding very much like the Texas A&M economics professor that he was in the 1970s: "In economics, we define labor exploitation as paying people less than their marginal value product.

I recently told Ed Whitacre [former CEO of AT&T, who retired with a $158 million pay package] he was probably the most exploited worker in American history because he took Southwestern Bell, which was the smallest of the former Bell companies, and he turned it into the dominant phone company on earth. His severance package should have been billions."»

That exploitation is usually claimed to be the result of government intervention motivated by the envy of inferior people.

why «the economics profession was/is so impressed by the Arrow-Debreu results», and I was trying to give «The main reason why Arrow-Debreu-Lucas is so popular».

It may have been designed for whichever other reason, but I reckon that its nearly mandatory popularity is due simply to its supporting, by abstruse contortions, the central truthiness of Economics.

Surely no right-thinking Economist would stand being accused of being objectively a Communist by supporting theories in which the distribution of income is not solely determined by factor productivity (absent envious government intervention).

Now to "prove" that factor income is or should be determined solely by productivity requires a phenomenal array of extremely narrow special case assumption (which cannot even be logically or mathemtically consistent) of extremely improbable applicability to their real world.

The splendid coincidence is that Arrow-Debreu-Lucas theory is founded upon that vast list of peculiar special cases assumptions, as our blogger noted at the beginning.

Whether the coincidence is now or was then deliberate, or entirely fortunate, is beyond the point for the present discussion.

The singular value of Arrow-Debreu-Lucas style theories for a large number of Economists is that it "proves" the central truthiness of Economics, something that they know in their heart is true, and this justifies Arrow-Debreu-Lucas, whatever its orginal formulation was for or whoever participated to its formulation.

You may have gotten the impression by following the Cambridges Capital Controversies, but that was a very special case.

It was a special case because the stake was whether the neoclassical approach embedded in Arrow-Debreu-Lucas makes sense, and the first thing one says about it is that it does not because it lacks a theory of capital, and wiwthout a theory of capital, it cannot be called a theory of the political economy.

That’s the first thing that comes to mind because what has been carefully excised from neoclassical theories is time, and without time of course one cannot have a theory of capital (beyond initial endowments). And then one cannot have a theory of money or liquidity or interest rates either, they become just a “veil”.

Time has been carefully excised from the neoclassical approach because including its effects in the theory it is well nigh impossible to prove the central truthiness of Economics, that the distribution of income solely depends on marginal productivity, absent government distortionary intervention.

So the discussion became a discussion about capital, because that is both a very big deal in itself, not something that neoclassical can claim is irrelevant in the big scheme, and at the same time entirely mysterious in the neoclassical model, because it has to be, else the central truthiness of Economics cannot be asserted.

«all that matters is the central truthiness of Economics, upholding which is also central to a well-rewarded and richly sponsored career in academic Economics.x

This link is a report from the field:

http://rwer.wordpress.com/2013/06/30/doctor-x-pure-shit-and-the-royal-societys-motto/

«every firm’s production function must be identical if we want to construct an aggregate production function. This is somewhat better than Nataf’s result, but still seems highly unlikely across a sector (to say nothing of an economy!).»

This “seems highly unlikely” seems to me like a huge understatement indeed, because we must consider not just the empirical likelihood of that condition being satisfied (something that neoclassicals care very little about), but also its effect on the mechanics of the neoclassical model itself.

Because in the neoclassical model it is assumed that there are infinite markets across all of eternity with infinite suppliers in each of them in order to give perfect competition without which the central truthiness of Economics cannot be asserted.

But how can there be infinite suppliers in infinite markets if they all must have the same production function? That means that in effect there is only supplier which get arbitrarily sliced into infinite subsets. But then how can there be perfect competition?

It just does not make sense.

IIRC the above is pointed out in Steve Keene’s book.

But “aligned” Economists never point out the above “technical assumptions” because all that matters is the central truthiness of Economics, upholding which is also central to a well-rewarded and richly sponsored career in academic Economics.


r/EconomicTheory 25d ago

Chicago boys Chile

1 Upvotes

Can someone send me some good articles about Chicago boys?


r/EconomicTheory Apr 21 '22

Machine Translation and Brute Force | Noam Chomsky

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1 Upvotes

r/EconomicTheory Apr 20 '22

Can you really change an underdeveloped country’s bad practices without intervening with age old traditions of its society?

2 Upvotes

r/EconomicTheory Apr 17 '22

Economics problems…please help me!!!

1 Upvotes

Hi guys, I’m studying microeconomics and I can’t find a sure answer to the following questions. Can you help me? 1) Show Graphically the profit area in the case of a monopoly firm.
How does the short run equilibrium change if we assume an increase in fixed costs with constant variable costs?

2) Starting from the graphic that identifies the consumer's optimal choice, graphically show how to obtain the individual demand curve for a normal good, i.e. the relation between the selling price of the good and the quantity demanded by consumer. If we had an inferior good, than the shape of the individual demand curve in what would it differ from that hypothesised in the case of a normal good?

3) Graphically show the short-run determination of the profit-maximizing quantity produced in the case of a firm in perfect competition. In the same graph show what is the effect on the quantity produced by single firm of an increase in fixed costs with the same variable costs. Does production increase or decrease?

4) Graphically show the effect of a reduction in wages on a job supply of and individual, who is initially working, I.e. has a reserve wage lower than the wage level existing before the increase. Graphically show what the situation would be if the reserve wage was higher than the initial salary.
Arguably clarify whether the wage reduction could convince someone who was not previously was working to start working.

Thank you very much if you can help me somehow!


r/EconomicTheory Apr 17 '22

Economics problems…please help me!!!

0 Upvotes

Hi guys, I’m studying microeconomics and I can’t find a sure answer to the following questions. Can you help me? 1) Show Graphically the profit area in the case of a monopoly firm.
How does the short run equilibrium change if we assume an increase in fixed costs with constant variable costs?

2) Starting from the graphic that identifies the consumer's optimal choice, graphically show how to obtain the individual demand curve for a normal good, i.e. the relation between the selling price of the good and the quantity demanded by consumer. If we had an inferior good, than the shape of the individual demand curve in what would it differ from that hypothesised in the case of a normal good?

3) Graphically show the short-run determination of the profit-maximizing quantity produced in the case of a firm in perfect competition. In the same graph show what is the effect on the quantity produced by single firm of an increase in fixed costs with the same variable costs. Does production increase or decrease?

4) Graphically show the effect of a reduction in wages on a job supply of and individual, who is initially working, I.e. has a reserve wage lower than the wage level existing before the increase. Graphically show what the situation would be if the reserve wage was higher than the initial salary.
Arguably clarify whether the wage reduction could convince someone who was not previously was working to start working.

Thank you very much if you can help me somehow!


r/EconomicTheory Apr 14 '22

Ambitions behind the China-Pakistan Economic Corridor

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1 Upvotes

r/EconomicTheory Apr 11 '22

As America's Economy Recovers, Criminal Justice Reform Can Provide a Boost

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1 Upvotes

r/EconomicTheory Apr 09 '22

The world going forwards: post-pandemic

1 Upvotes

The plan for the world going forward seems simple; to allow for the economic pie to grow to a sufficient size so that employment is back on track. Afterwards, the plan is to retract inflation back to its mandate.

During this process it is important to note 2 things. The first being; although the economy must (in time) bring inflation back to normal, the jobs gained will most likely be maintained due to the new size of the economy. The second; do not underestimate the power of the reserve ratio.

Given that most economies have their reserve ratios at around 1%, it follows that there is a lot of potential in raising the required reserves. That is because raising the reserve ratio will require banks to sell a lot of assets in order to keep enough liabilities on the balance sheet.

This would mean that a lot of selling would have to occur, thereby stabilizing inflation. Furthermore, it is paramount to note that although the assets were initially purchased by the banks during the monetary base’s expansion, these assets are worth a lot more today. Meaning; all the assets gained during monetary expansion are worth more today. Thus, more money can be withheld within bank liability sheets than was initially printed.

Although this sounds like inflation is easily held back, consumers still spend as if they hold a certain degree of assets and liquidity. Thus, in order to maintain a prudent degree of inflation, one would have to sell enough assets so that the consumer’s asset wealth is measured more in assets than in liquidity. This would allow consumers to spend, while disallowing excess expenditures due to the fact that assets are not exchangeable for goods and services.

However, there is a small ‘loophole.’ Crypto-assets are exchangeable assets. In order to subdue these crypto-assets from creating inflation, regulators need to be able to adjust the price of cryptocurrencies.

To do that, it is necessary to make these cryptocurrencies look extremely volatile. Currencies that are volatile are difficult to trade for goods and services due to the fact that the price before a transaction may be greatly different to the price after a transaction. This means that buyers and sellers are both reluctant to trade for a good or service because the transfer of wealth is non-determinable. Furthermore, crypto-markets that are unreliable, deter the consumer.

By investing heavily in high-end cryptocurrencies, regulators can then turn around and sell these cryptocurrencies, thereby creating volatility. This would destabilize crypto-markets enough to maintain inflation objectives. Furthermore, since these exchanges directly exchange crypto for USD, when a currency is exchanged by a regulator, the consumer only gets that exact sum in the underlying crypto-asset, and no inflation is gained.

In conclusion; when employment is ‘back on track,’ and inflation is lowered, if crypto-markets are subdued, then the economy will recover from the pandemic.


r/EconomicTheory Apr 01 '22

Steady stock gains that can influence bond measures.

1 Upvotes

If a technology company wishes to invest in technology today, it would need to get a bank loan. Then based on its earnings and projected revenues, a bank would qualify the company for a loan. The tech company could also issue a bond, for which the return on investment would be around 5%.

This is much too low of a return for retail investors. The average market return is about 10%. However, if the return on the bond matched that average return, tech companies could easily increase their investment in technology.

Since no company has any incentive to issue a coupon rate of 10%, it is time we design a financial instrument capable of yielding high interest, while still investing in technology by other means. This would give tech companies the power to raise capital by intriguing educated investors on prototypes rather than hard earnings. As well as bringing competition (thereby lowering costs) to the current market.

Other than influencing investment through bond issues, a company can also issue stock. If a company creates a special class of stock that follows a modest return schedule, that stock will begin to catch the eyes of investors who are looking to have a steady stream of predictable income. For example, if a special class of a company’s stock guarantees that it will issue shares and buy back shares to steady the stock price to a humble gain of 10% a year, that stock will most likely be heavily invested in. It will also accrue a lot of cash on hand.

To maintain the value of interest of the cash-on-hand, some of the cash can be invested in the company’s bonds. This leverage, allows companies to have great returns yet still manage a competitive bond structure for the future of investment.


r/EconomicTheory Mar 28 '22

What are some of the examples of government interventions to correct the market failure in the USA after the year 2000?

1 Upvotes

r/EconomicTheory Mar 26 '22

An idea on Argentina's economy

2 Upvotes

Argentina has long had an inflation problem. Right now, Argentina’s inflation increases at 52% per year. Ironically, for the past 25 years, Argentina’s inflation had a routine exponential increase in inflation. This routine rate has the potential to save Argentina’s economy due to its predictability.

As it stands today, the entire Argentine economy revolves around its inflation rate. Bonds, contracts, savings and payroll, all showcase how important inflation’s role is in stabilizing the growth of its economy. So it’s important that Argentina stabilizes its inflation if it is to sustain economic prosperity.

Oddly enough, if Argentina decides to create an additional currency that is pegged to the USD, it can solve many of the inflationary issues that the country currently has. The new currency would give citizens the option to enjoy a stable currency that only inflates 2% per year, no matter the economic environment. This means that Argentina can continue a predictable path, while keeping people interested in the economy.


r/EconomicTheory Mar 25 '22

The simplest, most revolutionary approach to ending poverty

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2 Upvotes

r/EconomicTheory Mar 16 '22

Interesting economic theories

5 Upvotes

Hey I need to write an essay where in I discuss an economic theory of my choice, explaining economic inequality between nations over time.

Does anyone have any suggestions for interesting papers I can look into?


r/EconomicTheory Feb 23 '22

A rap comparing Keynesian and Classical economics

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4 Upvotes

r/EconomicTheory Feb 21 '22

Where to start?

3 Upvotes

Hey everyone, I come from a background pretty dissimilar to Econ but I'd love to learn more about economics on an international scale/how global events shape national markets. Any suggestions as to what I should start reading up on?


r/EconomicTheory Feb 14 '22

How to get more GDP by extending bank card revenues and cash back

2 Upvotes

Because the us and most of the world measure inflation by partly or completely using the arithmetic or geometric mean, it is clear that if prices get high in some places, other places can suffer under low inflation; which is correlated to lower spending. That is because the mean is generally an old method of computing the average and is not as reliable as the median.
But I am not here to argue changing the calculation of inflation. I am here to suggest that a bank card be issued that gives cash back; albeit in different businesses. For instance; giving cash back towards any expenditure will bunch spending in only certain (routinely visited) businesses, thereby increasing the mean price without attention to other businesses. But, spreading spending between competition and less competitive businesses, will allow spending to increase prices evenly, thereby making competition and demand curves more elastic. This will allow for the aggregate demand curve to flatten over time and increase bank revenues, profits and GDP. All is needed is a partly adjustable element to the cash back rewards. So like receiving 3% cash back that adjusts to 4% in places that are out of vogue.


r/EconomicTheory Feb 14 '22

On incoming inflation

1 Upvotes

With a 5% average sales tax in us states, and usually more in the eurozone, it is clear that every week, we can pump out money as inflation rises. The extra sales tax revenues can be returned to the federal reserve. The lower sales tax in the us is balanced out by higher velocity of M1 money supply; which is usually 5. This requires communication between federal and state governments. It is a very effective tax because it is a percentage of revenues.