Vaclav Smil’s Growth – He Gets The Economics Wrong You Know

One of the joys of being a public intellectual (ahem) is that publishers send you freebie books. As the MIT Press has just done with Vaclav Smil’s “Growth” for which I thank them.

In which we find this:

“Although economists have a long history of ignoring energy, all economic activities are, in fundamental physical (thermodynamic) terms, simple or sequential energy conversions aimed at producing specific products or services.”

No, they’re not. And if you start off like this, as he does in his consideration of the economy, you’re not going to get to the right answer either.…

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Larry Elliott Sorta Misses What Thatcherism Was – A Radical Reboot Of The UK Economy

That you might not like what Thatcherism was is one thing – perhaps you’d have preferred a continued gradual decline both relatively and in real terms. That you applaud it equally, matter of opinion. But it really does help if you understand what Thatcherism was. An incomplete but radical attempt at rebooting the British economy. Which is where this from Larry Elliott fails:

His cabinet is stuffed with Thatcherite true believers who will hardly be inclined to undertake a vital reboot of the economy

We’ve had two attempts at reboots post WWII.…

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Drinking Brine

Tom Sowell said that the problems of today are the result of the solutions of yesterday.

Which got me thinking about a very important solution of a very different type – water.

Bear with me.

As an economy thrives and entrepreneurs spring up and businesses invest, the money being deployed becomes more scarce – more and more ideas are chasing fewer and fewer dollars.

And so the cost of the money rises – the rate of interest demanded by savers for the money which will be lent, goes up.…

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Why We Need Rising Productivity – It’s The Only Way To Pay For The Old

As has been pointed out many a time, Japan is a vision of the future for most countries. What happens when the dependency ratio – the number of old compared to those young and working – rises and rises? The answer being that those still working must become more productive – or divert every more of their production to supporting those elderly. Working better being a much more attractive proposition than working for ever less reward:

Fiscal sustainability in Japan: What to tackle
Selahattin İmrohoroğlu, Sagiri Kitao, Tomoaki Yamada 07 June 2019

Japan leads the advanced economies in the speed and magnitude of demographic ageing and has the highest debt-to-output ratio.…

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Democracy Works – Its Appearance Increases Economic Growth By 10%

Something that we should think on with respect to Brexit. We all, the plurality of us which is how democracy works, decided that we’d like to leave the European Union. Those who rule us are decidedly against this democratic will and are subverting that process. Their argument being, in public at least, that Brexit will be economically costly. And yet not-democracy is also costly. As this paper shows:

Revisiting the causal effect of democracy on long-run development
Markus Eberhardt 28 April 2019

Recent evidence suggests that a country switching to democracy achieves about 20% higher per capita GDP over subsequent decades.…

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Trade Wars Are Political, Obviously – Voters Get Targeted

We might think that the Chinese, as Commies, are wrong, or deluded. But no one is ever going to claim they’re stupid. Which brings us to the political nature of trade wars. In their retaliation to Trump’s trade tariffs the Chinese have been trying to target heartland voters, the Trumpistas, and they’ve largely succeeded too. They have, obviously, for this is what tariffs do, harmed their own citizens as well. But, you know, commies will do that, it’s never been known to be of benefit to the people, the communist system, has it?

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Does The WA Pass The Ronseal Test – Can We Do Trade Deals?

May’s WA apparently allows the UK to sign new trade deals. Does it do what it says on the tin?

No, not really.

Not for 4 years
During Transition the UK is broadly treated as an EU member state. Therefore no new UK only trade deals can come into effect. Transition lasts for 2 years plus the highly likely 2 year extension.  Any external trade deals we negotiate would thus need to be dated as “from 2021 or maybe 2023 we really don’t know which”.…

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Bankruptcy Is Important – It Clears Out The Zombie Firms

I’ve long – and often – said that bankruptcy is one of the most important parts of any capitalist or market based system. Sure, experiments go wrong. So, they need to be closed, the assets distributed to other experiments some of which might go right. And it’s the failure to clear out, close down, liquidate, that dead wood which leads to slow growth in both hte economy and productivity – therefore also wages.

Zombie firms, weak banks, and depressed restructuring in Europe
Dan Andrews, Filippos Petroulakis 04 April 2019

Europe’s productivity problem is partly due to the rise of zombie firms that crowd out growth opportunities for others.…

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Jamie Dimon, JPMorgan CEO, Is Only Fashionably Wrong About The US Economy

Jamie Dimon says that the US economy should have grown perhaps 40% in the recent recovery rather than the 20% it did. He also goes on to tell us what is wrong with the US economy as a whole, what has caused this gap in recovery. He’s wrong and he’s not even interestingly wrong, just fashionably so. He’s just muttering half recalled things that are splattered over the newspapers rather than actually describing that real economy out there.…

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Make It Easier For Foreign Companies To Come And More Foreign Companies Will Come

Just another repeat of that economic classic – incentives matter. If it’s easier for foreigners to offshore production into an economy then more foreigners will offshore production into an economy:

The role of regulations and immigration in firms’ offshoring decisions
Simone Moriconi, Giovanni Peri, Dario Pozzoli 24 February 2019

Firms’ offshoring decisions depend on the size of entry costs in target countries. But the institutional and policy determinants of these costs have received little empirical attention.…

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