Tag Archives: economics

house sale price premiums by month and city

Leave a reply

Zillow has some data on how much above average home prices are by month of the year and by US city. In general, prices are higher by about 1-3% in March-June. I assume this has something to do with the U.S. school year. It may be somewhat of a self fulfilling prophecy though. Last time I was in the home buying market, which was almost exactly 10 years ago, I started looking for listings in January, but there really was nothing to look at until March. So people in my city (Philadelphia) don’t start listing until March, and by the time you go through the process it seems like most closings are going to be in the May-June time frame (precisely when mine was). I wonder if refinancings show up as home sales in this data though, or if they have some way of knowing when the properties actually change hands. That could skew the data because people can refinance any time of year, and they are likely to refinance when interest rates are relatively low and prices therefore relatively high.

total factor productivity

Leave a reply

This is mostly a review for yours truly, partly as I am pondering whether there is any economic theory or strategy that could justify the Trump federal budget cuts and tariffs. My verdict: no, I don’t think so, I think they are based on simplistic ideas: linear, short-term, misguided thinking about the national debt and trade deficits. Anyway, here are a few quotes from the IMF:

It’s a measure of an economy’s ability to generate income from inputs—to do more with less. The inputs in question are the economy’s factors of production, primarily the labor supplied by its people (“labor” for short) and its land, machinery, and infrastructure (“capital”). If an economy increases its total income without using more inputs, or if the economy maintains its income level while using fewer inputs, it is said to enjoy higher TFP…

Recent IMF research shows that TFP growth has slowed around the world since the global financial crisis. In low-income developing countries, it has come to a virtual standstill in recent years…

TFP is higher in countries where the average worker has more years of schooling, the quality of education and training is better, and the workforce is healthier. These advantages enable the average hour of work to generate more economic value added—in addition to improving the quality of life more broadly…

So what can advanced economies do? First, they should “do no harm,” by avoiding policy mistakes, such as permitting a decline in market competition, with powerful firms using their monopoly positions to stifle entry and innovation, or reverting to costly trade protectionism. Beyond this, policymakers should craft regulations that tap the possible productivity benefits of recent innovations in green technology, information and communications technology, and artificial intelligence. They should also tackle remaining barriers restricting the opportunity for women and minorities to bring their talents and innovative potential to all sectors of the economy.    

So, a long-term strategy to boost productivity and national wealth could be to invest in childcare and education (the people who will come up with tomorrow’s innovations, and also their parents who can’t come up with today’s innovations because they are too busy), research and development. The current U.S. administration is cutting all these things. Investing in infrastructure and physical capital also helps if you have underinvested in it in the past – there is a diminishing return to these investments, but the U.S. can’t be anywhere near the diminishing return. It also makes sense to invest in a counter-cyclical strategy – more when private sector unemployment is higher and less when it is lower.

 

recession watch

Leave a reply

I’ve been worried about Trump causing a recession. First, he firing federal workers willy nilly, and even if we accepted the idea that these people aren’t doing anything useful, they spend their salaries on groceries, household goods, haircuts, restaurant meals, home improvement, etc. Second, he is cutting federal contracts suddenly. A chunk of the private sector and certainly the research sector relies on federal contracts in one form or another, so this uncertainty will tamp down hiring and lead to layoffs. Then there is all the money that flows from the federal government to state and local governments and economies. That won’t just get magically replaced by state and local programs overnight, if ever. Then you have the tariffs and reduction of trade on top of all that. It sounds like a recipe for a recessionary shock to me.

I’m not an economist, but Claudia Sahm is. Here’s what she has to say, backed up by some facts and figures.

Civilian federal employment (including the Post Office) is currently 3 million or less than 2% of the labor force… About 100,000 workers have either taken deferred resignation or been laid off so far. Even if the total reduction doubles by the end of the year, it would still fall far short of a recessionary shock.

In fiscal year 2023, there were about three times as many federal contractors and grant employees as civilian federal employees (including the Post Office). DOGE canceling or modifying federal contracts and grants put that employment at risk. Elon Musk has set a goal of $1 trillion in savings this year, which most budget experts consider unrealistic. Still, these efforts will lead to a reduction in employment in the private and nonprofit sectors.

But even if DOGE reduces federal employment by 200,000 and canceling contracts reduces contact and grant employment (by a proportional) 600,000, the total is below (though close to) a recessionary shock. Moreover, the reality of the net employment reductions from DOGE this year is likely to be considerably smaller.

Urbanomics 2024 wrap-up

Leave a reply

I like the Urbanomics blog. It is India-focused but also covers international and U.S. topics. Here are a few things that caught my eye:

  • a chart showing the average global temperature in 2024 surpassed 1.5 degrees C of warming. I don’t know exactly how the IPCC threshold is defined, for example if it is a multi-year average, but nonetheless this ship is setting sail right about now.
  • a chart showing the incredible run for the U.S. stock market this year. As I enter the 10-15 years to retirement window, I can’t help thinking whether this is my last bubble during working years and what the timing means for me personally when it pops or deflates. And given the first bullet, how does the real geophysical overreach bubble we find ourselves in, which it seems might be springing a leak, relate to this financial bubble?
  • a chart showing that China imported the largest share of U.S. goods and services a decade ago but has dropped sharply as the #1 destination for U.S. exports. Canada and Mexico are the other 2 in the top 3. Still, a chart like this tells us only the relative position and doesn’t tell us whether the overall value of U.S. exports has increased in this time, or whether the composition has changed (for example, how much is food and energy vs. high-tech products like electronics or military equipment.) For that matter, when the U.S. governments gives foreign governments aid consisting of cash that they are required to use to buy things from U.S. corporations, does this count as an export? I am thinking it probably does.
  • Embedded in this 2024 roundup is another entire 2024 roundup, the World Bank’s 2024 Key Development Challenges. The trend in extreme poverty around the world is still down, but gains have slowed since the pandemic and are projected to continue to be slow. Huge numbers of people still lack access to modern sanitation, electricity, drinking water, and education. Climate hazards such as floods, heat waves, droughts and tropical storms are a headwind to further gains. Generally, debt burdens have increased and economic growth has slowed in developing countries since the pandemic. As much as we are complaining about inflation in the developed world, it has been much worse in developing countries, where inflation in food prices has been about double that in developed countries. Overall, commodity prices are about 30% higher than before the pandemic.
  • Embedded within the World Bank’s roundup is the “Business Ready 2024” ranking of developing economies based on business environment. This suggests specific policies developing countries (and likely, many developed countries, cities and regions) can take to encourage the private sector. Many of these are relatively straightforward and do not require large amounts of money, which does not mean of course that they are politically or administratively easy to implement.

Belarus

Leave a reply

This might seem like a random topic, but Peter Turchin got me interested in Belarus. By his telling, sure, Lukashenko is a thug who has tortured and disappeared his political rivals, but he is a thug who has delivered some economic success and quality of life for his people. He has blocked potential oligarchs and maintained something along the lines of the original vision of Soviet state-owned means of production. In Russia (again by Turchin’s telling), the oligarchs got the upper hand in the 1990s and early 2000s, after which Putin crushed them and at least partially restored economic and political power to the bureaucratic government. In Ukraine, the oligarchs completely got the upper hand after the fall of the Soviet Union, took over the country and the political revolutions and counter-revolutions since then are oligarchs fighting amongst each other.

Numbers below are from the CIA World Fact Book and rounded by me. It’s a little unfair to look at the numbers for Ukraine right now, but we can compare Belarus to Poland, Russia, and Germany. Belarus is the poorest among these, but the distribution of wealth is significantly more equal (similar to a Scandinavian country in fact). Life expectancy is significantly higher than Russia and similar to Poland. So you might say yes, Belarus appears to be the closest thing to a Soviet workers paradise where nobody is rich but people have jobs, put food on the table, and get medical care. Russia is richer but strikingly unequal, and some combination of poor nutrition, poor mental and/or physical health, substance abuse, violence and/or poor health care holds down life expectancy. Germany is wealthy and healthy, although fairly unequal.

BelarusUkraineRussiaPolandGermany
GDP per capita at PPP$20,000$9,000 ($12,000 pre-war)$28,000$35,000$54,000
Ginni Index2427363032
Unemployment Rate5%9%5%3%4%
Average Life Expectancy (years)7570727682
CIA World Fact Book

December 2023 in Review

Leave a reply

Most frightening and/or depressing story: Migration pressure and right wing politics create a toxic feedback loop practically everywhere in the world.

Most hopeful story: I mused about ways to create an early warning system that things in the world or a given country are about to go seriously wrong: “an analysis of government budgets, financial markets, and some demographic/migration data to see where various governments’ priorities lie relative to what their priorities probably should be to successfully address long-term challenges, and their likely ability to bounce back from various types and magnitudes of shock. You could probably develop some kind of risk index at the national and global levels based on this.” Not all that hopeful, you say? Well, I say it fits the mood as we end a sour year.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: Did an AI named “Q Star” wake up and become super-intelligent this month?

November 2023 in Review

Leave a reply

Most frightening and/or depressing story: An economic model that underlies a lot of climate policy may be too conservative. I don’t think this matters much because the world is doing too little, too late even according to the conservative model. Meanwhile, the ice shelves holding back Greenland are in worse shape than previously thought.

Most hopeful story: Small modular nuclear reactors have been permitted for the first time in the United States, although it looks like the specific project that was permitted will not go through. Meanwhile construction of new nuclear weapons is accelerating (sorry, not hopeful, but I couldn’t help pointing out the contrast…)

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: India somehow manages to maintain diplomatic relations with Palestine (which they recognize as a state along with 138 other UN members), Israel, and Iran at the same time.

The inflation numbers from 2022

Leave a reply

FiveThirtyEight has a simple rundown of the inflation and interest rate numbers from 2022:

One of the most important numbers of 2022 was 9.1 percent. That was the inflation rate in June — the highest yearly increase since 1981…

Inflation has since cooled a bit, but as of November, consumer prices were still 7.1 percent higher than they were at the same time last year. And that’s affected the way families are celebrating the holidays. In a poll from before Christmas, 57 percent of those surveyed said that it was harder to afford the gifts they wanted to buy, up from 40 percent the year before. And 11 percent of respondents in another poll said they anticipated taking on some amount of debt for their holiday shopping…

To control this high inflation, the Federal Reserve raised its benchmark interest rate more than 4 percentage points over the course of the year, to the highest point in 15 years. Most observers agree that’s likely to cause a recession. What’s less clear is how bad it will be, and whether it curbs inflation as it’s intended to do. These are the unknown questions 2023 is poised to answer, and why the inflation rate is one of the most important numbers of the past year.

FiveThirtyEight

I found myself dipping into what are supposed to be emergency funds to cover my family’s normal living expenses toward the end of 2022, so yes I can understand that people who were barely making ends meet at the beginning of the year might be in trouble at the end of it. The good news is that almost anyone who wants a job should be able to find one, at least for now, and maybe not at the level of pay they prefer. The real pain comes if unemployment spikes while inflation is still high. The hope for 2023 would be that inflation continues to tick down toward a “normal” level of say 2-3%, while unemployment stays in its low range of say 3-5%. If that is where we are a year from now, our economy and society will feel more stable although of course we will still have serious inequality and social problems to work on.

And by the way, does “growth” really matter if people are employed and are able to buy the things they need and a reasonable amount of the things they want? I don’t see why, it seems like a very indirect measure.

a ship being built

Leave a reply

It’s fun to watch construction cameras in fast forward. This is a ship being built at Philly Shipyard Inc. (and by way, you can argue whether it is lazy to use the abbreviation for Philadelphia and whether “ship yard” should be one word or two, but this is the actual name of the company.

Youtube

I learned from this (paywalled) Philadelphia Inquirer article that U.S. shipyards are not competitive in the market for international oceangoing cargo vessels. However, there is something called the Jones Act that requires domestic trade to be done on U.S.-built and U.S.-crewed ships. So this includes trade between the U.S. mainland, Hawaii, and Guam for example. This seems a bit inefficient to me, but I can also see an argument to maintain the ability to build technology domestically with obvious military use. The shipyard also has military and government contracts which, and so sorry I just can’t resist the terrible pun, keep it afloat. I am a dad after all, and I have to keep my dad jokes at the ready.

eeney miney mini max

Leave a reply

This article talks about using “mini max regret” in climate planning. Basically this sounds like a form of cost-benefit analysis incorporating uncertainty of key inputs including the discount rate. They conclude that 2% is a reasonable intergenerational discount rate.

Note that discounting is one way of handling that issue of the needs of the present population vs. all the teeming trillions who might exist in the future. It doesn’t quite work for existential risks though, because if no humans are around there are by definition no costs or benefits until the cockroaches develop economics.