Tag Archives: economics

A Glittering Generality

Posted on by
Reply

This one is from Republican candidate for Ohio Governor, Vivek Ramaswamy:

Instead of viewing AI as competition, the next generation should own a stake in improving America’s economic productivity. If every child has $10,000 invested in the S&P 500, every one of them would be a millionaire well before retirement.

From where would that initial $10k stake come? If it’s handed to “every child” from outside (vis., government), that child would have no skin in that game, and he would not find himself at pains to protect that stake by actively participating in improving our economic productivity—for instance, by getting a job and working to his employer’s goals or starting his own business and working to make it grow and prosper. The money would just be found money of no personal value.

On top of that, Ramaswamy did not address another aspect of this “plan:” what does he think the value would be of those millions of dollars in the child’s end game of retirement after a long and fruitful life of doing…something? An increase of all that nominal wealth without a concomitant increase in the supply of goods and services, will simply drive up the cost of those goods and services, which is otherwise known as inflation. Those millions of dollars may well wind up with the purchasing value of today’s thousands of dollars.

This is a plan that sounds good in its base outline, but it badly wants cold, clear-eyed fleshing out with facts; hard logic; and clear, publicly measurable steps to be taken. Especially, but not exclusively, the steps needed to keep productivity growth up with S&P 500 growth in an environment where today’s and lots of prior year’s S&P 500 growth—its price to earnings ratio—has been outstripping goods and services—productivity–growth.

Yes and No

Posted on by
Reply

A letter-writer in Tuesday’s Wall Street Journal Letters section wrote,

As he [Joseph Schumpeter] wrote in Capitalism, Socialism, and Democracy: “Every successful corner may spell monopoly for the moment.” Yet technological change upends whole industries, creating new, previously unimaginable services and “goods, the new methods of production or transportation, the new markets, the new forms of industrial organization.” Each dislodges the monopoly position of incumbent firms wedded to the old ways of doing things.

Not entirely.

I submit that the real problem, the one of which the above is merely symptomatic, is the fact that the monopoly’s moat is as much a barrier trapping the monopolists inside, limiting their ability to innovate, as it is a barrier keeping competitors in the monopoly’s established, old ways, venue from getting started.

From this, other startups, in closely associated but not the same venues as the monopoly, not being stultified by the safety that moat seems to provide, easily can out innovate and bypass the both the monopoly’s moat and the monopoly.

Second Verse Same as the First?

Posted on by
Reply

The last time France tried a wealth tax, just a few years ago, it lost a lot of economic income, and the associated tax revenue on it, as the tax-targeted wealthy pulled up stakes and headed to other nations.

Now it looks like the French government is fixing to try that again.

France’s slide into political and fiscal dysfunction is generating a groundswell of support for a sweeping wealth tax that would represent a radical break from the pro-business agenda of President Emmanuel Macron.
The proposal is the work of French economist Gabriel Zucman, a former adviser to US Senators Bernie Sanders [I, VT] and Elizabeth Warren [D, MA]. He wants to impose a 2% tax on the assets of people with net wealth of 100 million euros, equivalent to $118 million, or more.

Here, though, it’s not just the politicians who have trouble even saying the words “cut spending.” The French unions continually demanding their cushy short work weeks and their even cushier pensions are actively aiding and abetting the government’s wastrelly profligate spending and those politicians who push that spending.

This is a tax that won’t end well for France.

A Compromise for the SEC?

Posted on by
Reply

A letter-writer to The Wall Street Journal‘s Wednesday Letters section offered a compromise for the SEC’s proposed change to company reporting from all of them reporting quarterly to all of them reporting semi-annually.

Large companies should continue to report quarterly so that stakeholders have timely signals for pricing and risk management. Micro-caps, by contrast, could move to semiannual reporting without leaving investors in the dark if a few safeguards stay in place. Material developments should still be disclosed promptly between reports; companies should provide a short, standardized mid-period update with such core metrics as sales trend, liquidity and interim financials. Whatever the frequency, they should retain a light auditor review to discourage aggressive accounting.

Aside from ignoring the myriad of companies whose sizes are intermediate between micro-caps and large, most of his suggestions are not materially different from the current quarterly reporting requirements. Quarterly reporting, after all, is quintessentially intermediate to semi-annual periods, and his standardized mid-period updates are those quarterly reports.

The only concrete suggestion, material developments reporting, already is required by law: that’s what Form 8-K is for.

And this from the letter-writer:

This approach targets the real pain point—fixed compliance costs that bite hardest at the smallest issuers….

Moving to semi-annual reporting would be a boon for all companies, large, micro, and intermediate. That large companies “can afford quarterly reporting” while smaller companies cannot is a tired and useless trope used to harry the rich and successful in too many milieus already. The trope doesn’t need to be expanded here.

Is He Worth the Money?

Posted on by
Reply

That’s the question the nattering Left is asking about Elon Musk’s new pay package on offer from Tesla—a package that could aggregate to a trillion dollars over 10 years. Of course, we’d expect such a question from the Left—and from too many Progressive-Democratic Party politicians who disparage free market capitalism.

Of course, in one sense—a sense at the core of free markets—is by definition, Musk is worth the money: all the parties to the package voluntarily and of their own accord agreed to it, each satisfied that they’re better off after agreeing than before.

What the natterers carefully ignore, though, is this:

…the Tesla CEO will get richer only if workers and shareholders do too. Oh, and only if consumers like what Tesla is selling.
Tesla’s board recently proposed a pay package for Mr Musk worth up to $1 trillion over 10 years, contingent on the company achieving ambitious milestones.

Musk has actually to perform in order actually to earn that pay. That’s another aspect at the core of free markets: folks must earn their compensation; they’re not entitled to money just because they think they’re special.