(PDF) Ladislav Kristoufek- What are the main drivers of ...

Lessons learned - Crypto and Divorce - In January I was a millionaire thanks to BTC, then my wife divorces me and now I have $30,000 AMA

Crossreferencing u/nanoissuperior He wrote earlier today: https://www.reddit.com/CryptoCurrency/comments/a3n6uw/in_january_i_was_a_millionaire_thanks_to_nano_now/
Title: In January I was a millionaire thanks to Nano, now I have $25,000 AMA

I was replying to his post, but my reply ended up being a bit too large as a reply and steered off-topic, albeit an interesting one. So I decided to make it its own post, because there may be a good lessons to be learned and hoping some will come forward with good information to be shared.
I hope it can help anyone on this sub avoid the costly mistakes that I made. Here it goes: FLAIR: LEGAL (not in the list)
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u/nanoissuperior are you who I think you are? I won't give out any further identifying clues, but I happen to know someone in the exact same position that could have written that exact same headline. If you read the first paragraph, you'll know if you know me.
The person I know bought Nano really early, based on a tip from a friend. I got in much later. By the time he told me it had already spiked to the $5 range, when I ended up buying. I then sold in the $20's so it was a good buy nonetheless. We were former colleagues at a large, large software company somewhere in the PNW, I left the company to venture out on my own and try to launch some projects I had in mind and relocated overseas for a few years. We lost contact with each other during my time away, but we connected again during the market runup and started exchanging coin information on a daily basis during the big bull run of late 2017. That was a crazy time.... the market trend was a few degrees short of vertical for pretty much all coins!

Hey, guess what? Now that I think about it, I could have written that same headline myself! In January 2018 I was a Millionaire too! Not with Nano, but thanks to purchasing a good chunk of Bitcoin in 2011 at $1.20 each. I ended up a single digit millionaire with what I had left in Bitcoin around January of 2018.
And, just like you, today, from all that wealth, I have about $30.000 left, with little to show for. Can we call that even? Although my disaster was not caused entirely by market fluctuation; Mine is a more complex story and I am going to mention it, because hopefully, it could serve as a lesson to be learned for any crypto holder out there, so they don't make the make mistake I made: Don't trust anyone. Always be skeptical and watch out for your own interests. Anyhow, here it goes:
After 5 years overseas, I had enough and wanted to come back to the States. My wife stated her preference to stay abroad, but eventually, she conceded albeit reluctantly. We chose a small town in CO to settle, and landed in November of 2017. We had plans to settle down and considered purchasing a home with my/our new fortune, based on the market price during that period. At the same time, I was also hesitant about the inherent tax payments due caused by such large liquidation. I was trying to have to pay taxes as far away as possible. So, I decided to wait till New Year's Eve and started liquidating my crypto on January 1st, 2018 right after midnight. This way, I would have 16 months (till April, 2019) to pay any capital gains taxes, and I was confident at the time that the market would give me that for free, especially at the pace that it was going. I have been an early adopter and have since then acquired the high levels of verification and trading limits per week, with many exchanges, but for a large sum like this, I needed several separate transactions, over the course of several weeks, especially wanting to do it with a US-based exchange that was linked to a US bank accounts, to avoid overseas wire transfers, meaning more fees. (Yes, I did look at all OTC options, but for reasons not relevant to the story, I couldn't make it happen, so I had to use the traditional Exchange channels for asset liquidation).
My wife and I, initially had some fundamental disagreements on the gross amount to be spent and the type of property we should be purchasing. I wanted a smaller place, with a denser, younger community, where there'd be kids our son's age for him to play. She insisted that we should go big; we had been traveling for so many years, and we had not been able to call any of our past residences our home. It was time to settle and nest; She convinced me that we should own a property of our own that we would be proud of living in for years. One that we could own outright and would not easily outgrow. We ended up splurging and purchased in cash two luxury cars for ourselves and set our sights on a large dream house in the city's Golf & Country Club, free and clear, for us and our two kids. I don't even play golf, nor do I even like it, but, if it makes her happy and it is within the safe margins of making it happen, I figured, why not? My concerns were largely financial and the numbers were adding up. It was a bit tight against my personal safe margins, but, at the same time, I was imagining to never have to make, or even have to think about, a car or home mortgage payment ever again! Bitcoin is on a roll and there is no sign of it stopping. Fine. Let's do it, before I change my mind.
Now, I admit I was extremely lucky with choosing the time of when to sell the assets. I had no clue the market would take a dive in February, and so it seemed to many that I had timed the market perfectly, selling most of my coins in the first two weeks of January of 2018. Many called me a genius for selling at the very top, as if I had some sort of wisdom to know when it would drop; the truth is much less flattering; it was nothing but dumb luck, based on me wanting to pay taxes in 2018 and defer to 2019. Awesome, well done! Yeah? well, slow down, son, not so fast.
So, I gather the 7-digit lumpsum in January 2018 and we write a check for the full amount at closing in February on the property of her dreams. A property that could easily be showcased on a luxury Real Estate magazine cover. Also, remember we had just moved back to the United States with just a few suitcases each from overseas. We had no furniture, kitchenware, curtains, TV's, bed sheets, winter clothing and so many other essential things that one usually purchases over time, but which we now had to purchase all at once. Not a problem, Bitcoin had dropped slightly but still well above $15k, I believe, at the time. And, earlier, in January, I had diligently taken this expense into account and effortlessly set aside a small fortune for equipping such a large house with everything we would ever need, brand new. It seemed we were protagonists of one of the Home Makeover Shows.
Finally, after working day and night, prepping the house non-stop for days and when every piece of furniture had finally arrived, been unpacked and carried to its corresponding room, it seemed most of the essentials were in place and the hard work was done. I longed for pouring myself a Scotch and to finally sit down and enjoy the fruits of my labor. I head downstairs to the dedicated walk-in, cigar-humidor / wine / Scotch cellar in the basement and grab the better bottle of Whisky of the few bottles of Scotch that I had bought earlier in the week. On my way up, I remember feeling a sense of calm, combined with a glow of excitement and this undescribable profound inner peace, all at once. This was such a rare, natural, non-drug induced high that I had never experienced. It felt so good! This sense of accomplishment of achieving that one thing I had been chasing and longing for my entire life. I had expected I would be chasing this goal for the next 15-20 years, and yet, here it was. No, where I was, was even better than expected! A place where not even my parents, who still have to make their monthly mortgage payments. I had done it! With a smile from ear to ear, I take a deep breath of relief and while looking around the property, I think to myself: "It's perfect, everything is in place and I can finally call this our home. We are so lucky and we are going to live a great life. A life that few can only dream of. So many concerns will be lifted and become redundant. Everything will be better. I'll start a fire in one of our two fireplaces and I am going to begin enjoying my semi-retired life with the first sip of my drink. That will be the official start of our new life".
I head over to the kitchen to get a glass and some ice cubes, while I struggle to find which one is the freezer among the many drawers in the kitchen. It was then when I notice a handwritten note placed front and center on the kitchen counter. It is from my wife and read: "There is no easy way to say this, so I am just going to say it..... I want to legally divorce [ ...]". It continued saying that she had taken our son, and had unequivocally decided to leave me. She had already filed the paperwork for divorce and that I should expect to be served in the morning.
My bliss had lasted less than 5 minutes and in less than two seconds, it turned dark, somber and I saw it all crumbling down in front of me. Like a long-awaited rocket launch, years in preparation, which then unexpectedly explodes on the launch pad during the countdown. My stomach, heart and everything in my body just sank and melted into one ball of poison in my core. I felt like throwing up. I was completely blindsided; she had played the game all along, not giving me the slightest hint of what was being concocted in the background. She had already engaged with her lawyers weeks beforehand. Her mother was already in town from another state to help out with I don't know what. I had been gaslighted and was threatened by her that I needed to see a psychiatrist due to a change in my temper that I had supposedly developed - my temper was awesome: with BTC at that price? Everything was perfect! But I obeyed and went anyhow (this would later fit her story that she had to leave with the child because she feared for her safety due to my supposed temper for which I was under treatment, therefore, I must have this temper problem, see?). Also, the purchase of the overpriced home also seemed clearly premeditated: Price was the main driver of the decision making; not location, demographics, taxes, etc. It was the wrong neighborhood for us (people much older than us, retired, golfers and no kids the same age as our son to play with). Our house happened to also be the most expensive in the neighborhood. I can see it all so clearly now.
See, your crypto coins on the blockchain, are not within the US court's jurisdiction (or, at least, it's quite debatable - a gray area - ask me for the seed and I can tell you that I may have the seed, or that I may not have the seed, I may have the wrong seed, I may have forgotten it, I may have lost it - you can't prove I did not forget, or lost it, etc). However, once it is in FIAT in a bank, or invested in a property, the courts can rule on the asset(s), freeze, disburse or order a sale of the property, etc. It's done all the time.
Also, the coins were technically mine, and by definition private property (not to be divided during the divorce) as they were acquired before the marriage. I could not prove its origins (I bought many of them via direct messaging members on Bitcointalk.org and mining rather than exchanges, so no records, receipts or nothing to prove otherwise: the big exchanges like BitStamp and Coinbase didn't start operations till 2013, if I m not mistaken. Instead, I would talk to one of the forum members offering coins we'd agree on a price, I'd send a check to wherever the individual seller instructed me to (Russia, Bulgaria, Japan, UK. etc) and the coins would be deposited to whatever address I provided. Yes, it was quite crude at the time.
However, once I converted my coins to cash and used that cash to buy a property for the benefit of the family, it became common property and thus she then had rights to a portion of it when divided between the two parties should a divorce occur - which ended up being almost 3/4 of all assets.
I was robbed in broad daylight. By the one person, I trusted with my life. The one you should trust with your life. Your life partner. And while I was in complete denial, trying to bargain, I waited too long to obtain good legal representation. When I finally ended up getting a lawyer, I was quite distraught and I clearly did not do the proper research and this resulted in a less than stellar performance and detrimental to me at many key steps in the process. I had to switch legal representation right before mediation and I can't blame my new lawyer either, as (s)he did not have the required time to catch up on all the details, (s)he did his/her best, but I was ultimately strongarmed into conceding my soon-to-be-ex-wife to let her return to the house, in exchange to obtain 50% of my son's custody, with serious and strict clauses I had to abide by. So, I had to move out, find a hole in the wall in a student apartment, pay my rent and pay our kids pre-school, while she lives grandiose, without monthly payments in the country club, till the house sells, which will likely be in the spring of next year. Nice!
Due to my delay, legal mishandling and somehow every other element in her favor, she inexplicably ended up with around 3/4 of the worth of all assets, free and clear, no taxes due. Mind you, she has never financially contributed, nor made a single $ during our entire marriage. She has never worked and had $0 in her pocket when we married. She didn't even have a checking account, well in her thirties. She is no dummy; she is street smart, knows how to manipulate people, get her way with flirting and charm, while I am more intellectual and book smart. and She beat me hands-down. She is walking away with a sum of, not quite 7 figures, but close.
With what I am left with from the sale of the house, I am responsible to pay for all the capital gains taxes from the liquidation to the IRS, which are due in April 2019. I don't expect there to be more left over than the estimated $30k mentioned above.
Hate the market all you want, I made peace with the market and am keeping busy at hating my ex for a while for putting me in the same situation. She tripped me 1 yard before the finish line and pushed me in the prickly bushes, to cross it by herself. Go figure. When I am done hating her, I'll get back to rebuilding my life again from scratch. I am not worried, I have done it before. Just pissed, I was so close and that I was so naive to not see it coming.
Sorry, I am not meaning to hijack the thread, just wanted you to know that others may have lost more than just "free" money; money we didn't really have to work for. We were the lucky ones. It is what I keep telling myself to stop me from jumping off a bridge.
PS - Woah: Sorry for the wall of text; I was just going to write the first paragraph and ended up venting about my current situation. I know, I should take this issue to /depressed, /exes or /whereisthenearestbridgeIcanjumpfrom.
Hopefully, this can be a lesson to those holding crypto and some can learn what NOT to do. I learned the hard way and was left with nothing. Don't be a nice guy. Don't trust anyone with your crypto. Anyhow, I am sure either our vigilant subreddit bot, or one of the mods will remove my post for not adhering to rule, and if not, I am sure that you fine people will downvote me to hell. Go ahead. Take away from me the little Karma I left too! Thanks!

I learned many lessons, but here are some key ones [IANAL - any crypto-educated AL opinion appreciated here, thanks] :
- Understand the concept of private property - property you acquire before getting married. INAL - this depends on the state legislation, but it is hard to prove with crypto, especially if you obtained your crypto through foreign exchanges, outside of legal jurisdictions, the petitioner might not understand or willing to invest in obtaining subpoenas and requests to businesses operating overseas, as this may result costly.
- Get a lawyer who understands, or is willing to understand crypto, its benefits of being somewhat unreachable and how that can work for you. Don't let them shortchange you with: "well, let's just convert the rest to cash, because that I understand" type of reasoning.
- If you do go to mediation, the above applies as well. This arbitrator or mediator needs to be one that understands the intrinsic details of crypto - for example, during the ATH, I bought 6 digits worth in $USD of Stellar. I used the very first version of the software, supporting Stellar on my hardware device, and put it all in a cold storage wallet somewhere around January. I routinely checked on my coins on the blockchain and they are there. A few months later, I try to access my account and the device returns a different public address, which contains 0 funds. I am still trying to debug this issue with the manufacturer, but the fact is that I was accused of hiding these coins or negligence and was demanded that I paid half of what was lost. or not lost, out of my pocket for money that I didn't have access either. I tried to explain it in the simplest terms, there are risks involved with using first come software. There is no 1800 number, mo tech support. no CEO, no, you can't call the BBB and complain, etc and no one seemed to be able to understand, nor willing to either. It became a huge roadblock for which I had to concede, not cash, but a concession, I was not wanting to concede. The petitioner leaned on the fact that I was either wilfully cheating or stupid enough to lose the coins and managed to create enough doubt in my character and integrity and there was nothing rational I could explain that she, or anyone else in the room would understand. Perhaps mutually contracting a seasoned crypto expert that can offer a neutral view and give his/her opinion might be worth considering. Andreas, where were you when I needed you? :)
- Other examples were some coins I had bought in 2012 and gifted to some of her family's kids. I was holding these, till they would turn 16 for them to pay themselves their college, or so I told them. These coins were demanded back by the petitioner. Ok, I suggested that I would send them, but with a CHECKLOCKTIMEVERIFY value with a block height of let's say,10 years from now, out of fear that she would spend the coins and the kids would never know (they are toddlers). No one understood what I was talking about, I was made out the crazy one, I gave up, sent her the coins, unlocked and, just as I expected, within 20 minutes of receiving them, she spent $1200 worth of it (for a flight, I think). If you are the only one speaking your language, no one is willing to listen or make an effort to understand you.
- It appears my coins were private property, which means, that I acquired them before the marriage and in case of divorce, if I have not moved them or used them for the common good of the marriage, then they remain mine. However, I liquidated them and cash ended up in my checking account to be used to buy groceries, cars and eventually a house, and it is then that they became common property. Only once they landed in my checking account on which she is named on. It appears that had I taken proper legal precautions with documentation, or a company/trust, where that money would have gone, instead of my checking accounts, elsewhere, I would have still been able to be the legal proprietor of the resulting cash. I can't quite remember the details, but it as something that was explained to me afterward, and I honestly think I just tuned it out, because it made me sick to know I could have held on to my wealth. Perhaps a lawyer can chime in? Again, much of the lack of information and every misstep taken was because of dealing with people that are accustomed to traditional assets and will not deviate from it. Crypto is different and is treated differently. It is so important to know the strengths and weaknesses when going into litigation about something that people don't understand.
- Some more I can think of, but this post is getting way out of hand in size. Feel free to comment/suggest your own and I'll add more to the comments.

Credits to: u/nanoissuperior Thanks for your post, it inspired me to write this one. Anyone, any karma you feels needs to go his way, for providing the source of inspiration, please give to O-OP.

TL;DR: Wife, having contributed $0 during entire marriage, waited until I cashed out all my crypto at the top of the bull market in January 2018, for a nice seven-figure amount, and then immediately divorced me for the money.

Edit: added TL;DR
submitted by mijalis to CryptoCurrency [link] [comments]

New NBER Papers - 12/19/2016

For access to gated papers, make a request on /Scholar. Most papers can also be found, ungated, on their author's website.
Feel free to discuss any of these papers in the comments section below. Please refrain from reposting any of these papers to this sub.
Learning, Confidence, and Business Cycles Cosmin L. Ilut Hikaru Saijo
We build a tractable heterogeneous-firm business cycle model where firms face Knightian uncertainty about their profitability and learn it through production. The cross-sectional mean of firm-level uncertainty is high in recessions because firms invest and hire less. The higher uncertainty reduces agents' confidence and further discourages economic activity. We characterize this feedback mechanism in linear, workhorse macroeconomic models and find that it endogenously generates empirically desirable cross-equation restrictions such as: amplified and hump-shaped dynamics, co-movement driven by demand shocks and countercyclical correlated wedges in the equilibrium conditions for labor, risk-free and risky assets. In a rich model estimated on US macroeconomic and financial data, the information friction changes inference and significantly reduces the empirical need for standard real and nominal rigidities. Furthermore, endogenous idiosyncratic uncertainty propagates shocks to financial conditions, disciplined by observed spreads, as key drivers of fluctuations, and magnifies the aggregate activity's response to monetary and fiscal policies.
Estimating market power Evidence from the US Brewing Industry Jan De Loecker Paul T. Scott
While inferring markups from demand data is common practice, estimation relies on difficult-to-test assumptions, including a specific model of how firms compete. Alternatively, markups can be inferred from production data, again relying on a set of difficult-to-test assumptions, but a wholly different set, including the assumption that firms minimize costs using a variable input. Relying on data from the US brewing industry, we directly compare markup estimates from the two approaches. After implementing each approach for a broad set of assumptions and specifications, we find that both approaches provide similar and plausible markup estimates in most cases. The results illustrate how using the two strategies together can allow researchers to evaluate structural models and identify problematic assumptions.
Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence Arik Levinson
Economists promote energy taxes as cost-effective. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring to set energy efficiency standards instead. I first show that in theory, regulations targeting energy efficiency are more regressive than energy taxes, not less. I then provide an example in the context of automotive fuel consumption in the United States: taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.
Agricultural Fires and Infant Health Marcos A. Rangel Tom Vogl
Fire has long served as a tool in agriculture, but this practice's human capital consequences have proved difficult to study. Drawing on data from satellites, air monitors, and vital records, we study how smoke from sugarcane harvest fires affects infant health in the Brazilian state that produces one-fifth of the world's sugarcane. Because fires track economic activity, we exploit wind for identification, finding that late-pregnancy exposure to upwind fires decreases birth weight, gestational length, and in utero survival, but not early neonatal survival. Other fires positively predict health, highlighting the importance of disentangling pollution from economic activities that drive it.
A Behavioral New Keynesian Model Xavier Gabaix
This paper presents a framework for analyzing how bounded rationality affects monetary and fiscal policy. The model is a tractable and parsimonious enrichment of the widely-used New Keynesian model – with one main new parameter, which quantifies how poorly agents understand future policy and its impact. That myopia parameter, in turn, affects the power of monetary and fiscal policy in a microfounded general equilibrium.
How Destructive is Innovation? Daniel Garcia-Macia Chang-Tai Hsieh Peter J. Klenow
Entrants and incumbents can create new products and displace the products of competitors. Incumbents can also improve their existing products. How much of aggregate productivity growth occurs through each of these channels? Using data from the U.S. Longitudinal Business Database on all non-farm private businesses from 1976–1986 and 2003–2013, we arrive at three main conclusions: First, most growth appears to come from incumbents. We infer this from the modest employment share of entering firms (defined as those less than 5 years old). Second, most growth seems to occur through improvements of existing varieties rather than creation of brand new varieties. Third, own-product improvements by incumbents appear to be more important than creative destruction. We infer this because the distribution of job creation and destruction has thinner tails than implied by a model with a dominant role for creative destruction.
Some Simple Economics of the Blockchain Christian Catalini Joshua S. Gans
We rely on economic theory to discuss how blockchain technology and cryptocurrencies will influence the rate and direction of innovation. We identify two key costs that are affected by distributed ledger technology: 1) the cost of verification; and 2) the cost of networking. Markets facilitate the voluntary exchange of goods and services between buyers and sellers. For an exchange to be executed, key attributes of a transaction need to be verified by the parties involved at multiple points in time. Blockchain technology, by allowing market participants to perform costless verification, lowers the costs of auditing transaction information, and allows new marketplaces to emerge. Furthermore, when a distributed ledger is combined with a native cryptographic token (as in Bitcoin), marketplaces can be bootstrapped without the need of traditional trusted intermediaries, lowering the cost of networking. This challenges existing revenue models and incumbents's market power, and opens opportunities for novel approaches to regulation, auctions and the provision of public goods, software, identity and reputation systems.
Interfirm Relationships and Business Performance Jing Cai Adam Szeidl
We organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. We randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a “no- meetings” control group. We find that: (1) The meetings increased firm revenue by 8.1 percent, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score; (2) These effects persisted one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (4) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (5) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching. (6) Firms whose managers discussed management, partners, or finance improved more in the associated domain, suggesting that the content of conversations shaped the nature of gains.
Targeting Policies: Multiple Testing and Distributional Treatment Effects Steven F. Lehrer R. Vincent Pohl Kyungchul Song
Economic theory often predicts that treatment responses may depend on individuals’ characteristics and location on the outcome distribution. Policymakers need to account for such treatment effect heterogeneity in order to efficiently allocate resources to subgroups that can successfully be targeted by a policy. However, when interpreting treatment effects across subgroups and the outcome distribution, inference has to be adjusted for multiple hypothesis testing to avoid an overestimation of positive treatment effects. We propose six new tests for treatment effect heterogeneity that make corrections for the family-wise error rate and that identify subgroups and ranges of the outcome distribution exhibiting economically and statistically significant treatment effects. We apply these tests to individual responses to welfare reform and show that welfare recipients benefit from the reform in a smaller range of the earnings distribution than previously estimated. Our results shed new light on effectiveness of welfare reform and demonstrate the importance of correcting for multiple testing.
Leveling the Playing Field: How Campaign Advertising Can Help Non-Dominant Parties Horacio A. Larreguy John Marshall James M. Snyder, Jr.
Voters are often uncertain about and biased against non-dominant political parties. By reducing the information gap with dominant parties, political advertising may thus disproportionately benefit non-dominant parties electorally. We test this argument in Mexico, where three main parties dominate many localities. To identify the effects of exposure to partisan advertising, we exploit differences across neighboring precincts in campaign ad distributions arising from cross-state media coverage spillovers induced by a 2007 reform that equalized access to ad slots across all broadcast media. Our results show that ads on AM radio increase the vote shares of the PAN and PRD, but not the previously-hegemonic PRI. Consistent with our model, campaign advertising is most effective in poorly informed and politically uncompetitive electoral precincts, and against locally dominant parties of intermediate strength.
Understanding Inflation in India Laurence Ball Anusha Chari Prachi Mishra
This paper examines the behavior of quarterly inflation in India since 1994, both headline inflation and core inflation as measured by the weighted median of price changes across industries. We explain core inflation with a Phillips curve in which the inflation rate depends on a slow-moving average of past inflation and on the deviation of output from trend. Headline inflation is more volatile than core: it fluctuates due to large changes in the relative prices of certain industries, which are largely but not exclusively industries that produce food and energy. There is some evidence that changes in headline inflation feed into expected inflation and future core inflation. Several aspects of India’s inflation process are similar to inflation in advanced economies in the 1970s and 80s.
Growth Policy, Agglomeration, and (the Lack of) Competition Wyatt J. Brooks Joseph P. Kaboski Yao Amber Li
Industrial clusters are promoted by policy and generally viewed as good for growth and development, but both clusters and policies may also enable non-competitive behavior. This paper studies the presence of non-competitive pricing in geographic industrial clusters. We develop, validate, and apply a novel test for collusive behavior. We derive the test from the solution to a partial cartel of perfectly colluding firms in an industry. Outside of a cartel, a firm's markup depends on its market share, but in the cartel, markups across firms converge and depend instead on the total market share of the cartel. Empirically, we validate the test using plants with common owners, and then test for collusion using data from Chinese manufacturing firms (1999-2009). We find strong evidence for non-competitive pricing within a subset of industrial clusters, and we find the level of non-competitive pricing is about four times higher in Chinese special economic zones than outside those zones.
How Large Are the Gains from Economic Integration? Theory and Evidence from U.S. Agriculture, 1880-1997 Arnaud Costinot Dave Donaldson
In this paper we develop a new approach to measuring the gains from economic integration based on a generalization of the Ricardian model in which heterogeneous factors of production are allocated to multiple sectors in multiple local markets based on comparative advantage. We implement this approach using data on crop markets in approximately 2,600 U.S. counties from 1880 to 1997. Central to our empirical analysis is the use of a novel agronomic data source on predicted output by crop for small spatial units. Crucially, this dataset contains information about the productivity of all units for all crops, not just those that are actually being grown—an essential input for measuring the gains from trade. Using this new approach we find substantial long-run gains from economic integration among US agricultural markets, benefits that are similar in magnitude to those due to productivity improvements over that same period.
Distributional National Accounts: Methods and Estimates for the United States Thomas Piketty Emmanuel Saez Gabriel Zucman
This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.
Globalization and Wage Inequality Elhanan Helpman
Globalization has been blamed for rising inequality in rich and poor countries. Yet the views of many protagonists in this debate are not based on evidence. To help form an evidence-based opinion, I review in this paper the theoretical and empirical literature on the relationship between globalization and wage inequality. While the initial analysis that started in the early 1990s focused on a particular mechanism that links trade to wages, subsequent studies have considered several other channels, and the quantitative assessment of the size of these influences has been carried out in multiple studies. Building on this research, I conclude that trade played an appreciable role in increasing wage inequality, but that its cumulative effect has been modest, and that globalization does not explain the preponderance of the rise in wage inequality within countries.
Dominant Currency Paradigm Camila Casas Federico J. Díez Gita Gopinath Pierre-Olivier Gourinchas
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer's currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) terms of trade are stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports and export expansions following depreciations are weak. Using merged firm level and customs data from Colombia we document strong support for the dominant currency paradigm and reject the alternatives of producer currency and local currency pricing.
Older Peoples' Willingness to Delay Social Security Claiming Raimond Maurer Olivia S. Mitchell
We have designed and fielded an experimental module in the 2014 HRS which seeks to measure older persons’ willingness to voluntarily defer claiming of Social Security benefits. In addition, we evaluate the stated willingness of older individuals to work longer, depending on the Social Security incentives offered to delay claiming their benefits. Our project extends previous work by analyzing the results from our HRS module and comparing findings from other data sources which included very much smaller samples of older persons. We show that half of the respondents would delay claiming if no work requirement were in place under the status quo, and only slightly fewer, 46%, with a work requirement. We also asked respondents how large a lump sum they would need with or without a work requirement. In the former case, the average amount needed to induce delayed claiming was about $60,400, while when part-time work was required, the average was $66,700. This implies a low utility value of leisure foregone of only $6,300, or under 20% of average household income.
Business Cycles, Investment Shocks, and the "Barro-King" Curse Guido Ascari Louis Phaneuf Eric Sims
Recent empirical evidence identifies investment shocks as key driving forces behind business cycle fluctuations. However, existing New Keynesian models emphasizing these shocks counterfactually imply a negative unconditional correlation between consumption growth and investment growth, a weak positive unconditional correlation between consumption growth and output growth and anomalous profiles of cross-correlations involving consumption growth. These anomalies arise because of a short-run contractionary effect a positive investment shock on consumption. Such counterfactual co-movements are typical of the "Barro-King curse" (Barro and King 1984), wherein models with a real business cycle core must rely on technology shocks to account for the observed co-movement among output, consumption, investment, and hours. We show that two realistic additions to an otherwise standard medium scale New Keynesian model – namely, roundabout production and real per capita output growth stemming from trend growth in neutral and investment-specific technologies – can break the Barro-King curse and provide a more accurate account of unconditional business cycle comovements more generally. These two features substantially magnify the effects of neutral technology and investment shocks on aggregate fluctuations and generate a rise of consumption on impact of a positive investment shock.
Sanitation, Disease Externalities, and Anemia: Evidence From Nepal Diane Coffey Michael Geruso Dean Spears
Anemia impairs physical and cognitive development in children and reduces human capital accumulation. The prior economics literature has focused on the role of inadequate nutrition in causing anemia. This paper is the first to show that sanitation, a public good, significantly contributes to preventing anemia. We identify effects by exploiting rapid and differential improvement in sanitation across regions of Nepal between 2006 and 2011. Within regions over time, cohorts of children exposed to better community sanitation developed higher hemoglobin levels. Our results highlight a previously undocumented externality of open defecation, which is today practiced by over a billion people worldwide.
Asymmetric Effects of Non-Pecuniary Signals on Search and Purchase Behavior for Energy-Efficient Durable Goods J. Scott Holladay Jacob LaRiviere David M. Novgorodsky Michael Price
We report the results of a field experiment where we exogenously vary the use of social comparisons "nudges" and subsidies for participation in an in-home energy audit program, and follow subjects through to the subsequent purchase of durable goods. We therefore can compare the causal effect of financial incentives and nudges along two margins, audits, which we liken to search, and purchase of durables. Using data on nearly 100,000 households, we document an asymmetry; nudges increase audits, but lead to lower rates of purchase. We find no evidence of a differential response for those offered a financial incentive. These differences suggest heterogeneity in the motives of the marginal consumer induced by nudges versus prices.
Improving the Measurement of Earnings Dynamics Moira Daly Dmytro Hryshko Iourii Manovskii
The stochastic process for earnings is the key element of incomplete markets models in modern quantitative macroeconomics. We show that a simple modification of the canonical process used in the literature leads to a dramatic improvement in the measurement of earnings dynamics in administrative and survey data alike. Empirically, earnings at the start or end of earnings spells are lower and more volatile than the observations in the interior of earnings histories, reflecting the effects of working less than the full year as well as deviations of wages due to e.g. tenure effects. Ignoring these properties of earnings, as is standard in the literature, leads to a substantial mismeasurement of the variances of permanent and transitory shocks and induces the large and widely documented divergence in the estimates of these variances based on fitting the earnings moments in levels or growth rates. Accounting for these effects enables more accurate analysis using quantitative models with permanent and transitory earnings risk, and improves empirical estimates of consumption insurance against permanent earnings shocks.
A Tale of Two Tails: Commuting and the Fuel Price Response in Driving Kenneth Gillingham Anders Munk-Nielsen
The consumer price responsiveness of driving demand is central to the welfare consequences of fuel price changes. This study uses rich data covering the entire population of vehicles and consumers in Denmark to find a medium-run price elasticity of driving of -0.30. We uncover an important feature of driving demand: two small groups of much more responsive households that make up the lower and upper tails of the work distance distribution. The first group lives close to work in urban areas. The second group lives outside of major urban areas and has the longest commutes. Access to public transport appears to be the force behind the existence of the tails, enabling the switch away from driving. We find that a fuel price increase of 1 DKK/liter implies an average deadweight loss of 0.66 DKK/liter, but there is considerable heterogeneity and the tails bear a larger share of the loss.
Commitment vs. Flexibility with Costly Verification Marina Halac Pierre Yared
We introduce costly verification into a general delegation framework. A principal faces an agent who is better informed about the efficient action but biased towards higher actions. An audit verifies the agent’s information, but is costly. The principal chooses a permissible action set as a function of the audit decision and result. We show that if the audit cost is small enough, a threshold with an escape clause (TEC) is optimal: the agent can select any action up to a threshold, or request audit and the efficient action if the threshold is sufficiently binding. For higher audit costs, the principal may instead prefer auditing only intermediate actions. However, if the principal cannot commit to inefficient allocations following the audit decision and result, TEC is always optimal. Our results provide a theoretical foundation for the use of TEC in practice, including in capital budgeting in organizations, fiscal policy, and consumption-savings problems.
Recent Flattening in the Higher Education Wage Premium: Polarization, Skill Downgrading, or Both? Robert G. Valletta
Wage gaps between workers with a college or graduate degree and those with only a high school degree rose rapidly in the United States during the 1980s. Since then, the rate of growth in these wage gaps has progressively slowed, and though the gaps remain large, they were essentially unchanged between 2010 and 2015. I assess this flattening over time in higher education wage premiums with reference to two related explanations for changing U.S. employment patterns: (i) a shift away from middle-skilled occupations driven largely by technological change (“polarization”); and (ii) a general weakening in the demand for advanced cognitive skills (“skill downgrading”). Analyses of wage and employment data from the U.S. Current Population Survey suggest that both factors have contributed to the flattening of higher education wage premiums.
Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation Rafael Di Tella Juan Dubra Alejandro Luis Lagomarsino
We analyze the role of people’s beliefs about the rich in the determination of public policy in the context of a randomized online survey experiment. A question we study is the desirability of government-private sector meetings, a variable we argue is connected to State capacity. Survey respondents primed with negative views about business leaders want fewer meetings, as well as higher taxes to the top 1% and more regulation. We also study how these effects change when subjects are (additionally) primed with positive/negative views about government officials. Distrust in the government increases the preferred tax rate on the top 1% only when business legitimacy is low. A model with multiple equilibria helps interpret these findings. In one of the equilibria, meetings are allowed, business legitimacy is high, and people set a low income tax rate for businesspeople. In the other, meetings are forbidden, business legitimacy is low, and people set high taxes to punish the businesspeople for their corrupt behavior.
Projections and Uncertainties About Climate Change in an Era of Minimal Climate Policies William D. Nordhaus
Climate change remains one of the major international environmental challenges facing nations. Yet nations have to date taken minimal policies to slow climate change. Moreover, there has been no major improvement in emissions trends as of the latest data. The current study uses the updated DICE model to present new projections and the impacts of alternative climate policies. It also presents a new set of estimates of the uncertainties about future climate change and compares the results will those of other integrated assessment models. The study confirms past estimates of likely rapid climate change over the next century if there are not major climate-change policies. It suggests that it will be extremely difficult to achieve the 2°C target of international agreements even if ambitious policies are introduced in the near term. The required carbon price needed to achieve current targets has risen over time as policies have been delayed.
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[Table] I am Antony Davies, associate professor of Economics at Duquesne University, columnist, and sometime tech entrepreneur. AMA!

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Date: 2013-05-22
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Questions Answers
What say you about the Austrian School of Economics? As an econometrics guy, you don't seem to have that in common, but you have seemingly come to largely the same conclusions, i.e. free markets, free trade, etc. I am new to Austrian economics. I got all the way through undergraduate and PhD work and had never heard of Hayek, Mises, or Rand. When I finally heard the Austrian perspective, I was amazed -- using philosophical tools, the Austrians reach the same conclusions that I reached using econometric tools. I believe economics should be taught, at the undergraduate level, from an Austrian perspective. The graphs and equations that populate the standard undergraduate texts speak only to small subset of students. The Austrian approach, however, speaks to a broad audience and provides a solid intuitive understanding of economics that is very difficult to get from a picture.
What specific public policy change in the US do you think would most benefit society in the short and long term? What the US needs to do is something like the following (I've run the numbers, so what I'm about to say is approximately correct)...
(1) Cut federal spending by 10%. If you want to avoid cutting something (e.g., Social Security), then cut something else by more, but the total must come out to a 10% cut. (2) Hold spending constant (no adjustments for inflation) for four years. (3) At the end of year 5, we'll have a balanced budget. From that point forward, the growth in government spending must not exceed the growth in real GDP.
Why would getting a balanced budget help us in the short term? The problem is the debt. As it continues to grow, we approach a point at which the interest payments eat so much of our tax revenue that there is little money left to do the things government needs to do.
Balancing the budget would cause the debt to stop growing.
The CBO estimates that in the next decade, interest payments as a percent of GDP will be no higher than it was during the Bush years. Tell me again why getting a balanced budget will help us in the short term? I've done an analysis of historical CBO forecasts. Of the available 170+ times they have forecasted, they overestimate tax revenues 75% of the time, underestimate spending 80% of the time, and underestimate the debt 90% of the time.
Thank you for all the work you do over at Learn Liberty and for doing this AMA. I don't agree. Sometimes, the economy is like a tube of toothpaste. The government can push down on one end and all that happens is that the other end bulges. In this case, there is no question that the bailout saved jobs in Detroit and saved us the immediate pain of car companies and their suppliers and finaciers going bankrupt.
Today, the conventional wisdom seems to be that the financial and automotive industry bailouts bailouts averted an even worse crisis and saved us from an awful depression. However, what the bailout ultimately did was to keep a large chunk of our scarce resources tied up in industries that have demonstrated their inability to use those resources in the best possible way. So, a decade or two or three from now, we're going to be right back to the dealing with the same problem because we didn't address the disease. We addressed the symptom.
What is your position on the bailouts? And what do you believe would have happened if they had not been implemented? Think of it as a law of conservation of economic pain. The government can't make the pain of wasted resources go away -- it can only shift the pain to the future.
I've seen some of your videos concerning the national debt/budget deficits. What's your prediction on the outcome? Will we see any policy changes before it's 'too late'? And what does it look like when it is, in fact, 'too late'? High inflation? Hyperinflation/currency crisis? A major change in the way government works? I'll give you my personal prediction, though I'm not yet comfortable enough in it to write about it in the press.
I predict the following sequence of events: (1) The economy begins to pick up and the Fed, fearing inflation, starts to let interest rates rise; (2) The federal government -- the largest borrower in the U.S. -- can't afford higher interest payments, so it puts pressure on the Fed to hold interest rates low; (3) Some compromise is reached and the result is a mix of some increase in interest rates and some inflation; (4) Let simmer for a while; (5) Government spending reaches a point that there is no option left by monetizing the deficit (i.e., the Fed prints money to fund deficit spending); (6) The dollar ceases to be the global reserve currency; (7) We start to talk about replacing the dollar with a New Dollar.
As a liberal type of guy I often look at talk of hyperinflation and debt crises in general as a lot of hot air. However, I also understand theoretically how extreme debt can cause a number of problematic issues, including high levels of inflation. What are some real world examples of Western/Industrialized economies that succumbed (or almost succumbed) to hyperinflation in the post-WWII era? Think of borrowing and saving as moving consumption and income across time. When I borrow, what I am really doing is consuming now money I will earn in the future. When I save, what I am really doing is consuming later money I earn now.
When a country does this, it is transferring the consumption and income of the taxpayers across time. So, by accumulating $16 trillion in debt, what the US has really done is to take $16 trillion of consumption away from future taxpayers and give it to today's taxpayers. IMHO, that's an extreme example of taxation without representation.
How would you look at the returns on that $16 trillion dollar consumption? Like surely our military spending, infrastructure or any spending now, has a return for the citizens down the road. You are correct, sometimes it is better to borrow and buy things now because the benefit we get from having the things now outweighs the cost of paying for them later. For an individual, college loans are a good example. For a country, military spending is probably a good example. There are probably others.
There is a serious difference, however, between the decision the individual faces and the decision the country faces. The individual compares the benefit of consuming now to the cost of paying later and judges whether to borrow or to save. At a country level, we can't do the same thing because the people who borrow are not the people who are paying back. It would be like your neighbor deciding whether he should borrow to buy a new car, knowing that he would be able to use the force of law to require you to pay back the money he borrowed.
Professor Davies, Thanks for taking time to do this AMA! What do you think current Federal monetary policy & financial law says about citizenship in America today? Duties? Expectations? Allowed Behavior? It seems to me that the duty of an American citizen is to respect other people's property rights (I use the term "property" broadly to include not just people's objects but their lives and well-beings). To that end, anyone who is willing to come here and so live should be considered a citizen.
If you could automatically remove one United states policy what would it be and why? Also if you could make one United states policy what would it be and why? As a homerun, I would remove the Commerce Clause and the Necessary and Proper Clause. As a second best, I'd repeal the 17th Amendment so that Senators would be appointed by the state legislatures. A third idea I've been wondering about recently is how things would be different if the states appointed the Supreme Court Justices -- e.g., election by the fifty state governors.
A freshman econ major here, just so you know. I've noticed in some of your articles you've been critical of Obama's economic policies, notably his stimulus package. However, it seems you fail to address some of the benefits of the stimulus, such as its investment in human capital and the effect it had on aggregate demand and consequently the recession as a whole. Taking these into account, doesn't it lend some merit to Obama's decision? Furthermore, do you believe that the economy would be better off now if Obama had gone with austerity instead? The question is never does a policy have positive effects (which is the way politicians describe policies), but rather, do the positive effects of a policy outweigh the negative effects of that policy. I tell my students that economists don't care about individuals. What I mean by that is, economic policy is not designed for individuals but for the economy as a whole. So, when an economist thinks about policy, he has to think about the effect on the economy as a whole.
If people measured one's preferred form of governance on a scale of 0 to 100 (0= anarchy, 100= dictatorship), what would be your number? My preference is 0, though I could live comfortably with the 1 to 10 range.
On a scale of one to ten, how dumb are you? On a scale of one to ten, how badly do you need me to pay your phone bill this month?
Do you think that financial crisis like the fall of the banks is an intrinsic part of a growth based economy, or was that just a hiccup that we can fix? And if we can fix it, what steps should we take to make sure that doesn't happen again? The financial crisis was very much the result of government intervention. Since the 1970s, Congress has been pressuring banks to extend loans to low-income and risky borrowers. The banks (because they had to bear the cost of failed loans) largely resisted. That all changed when Congress ordered Fannie Mae and Freddie Mac to ramp-up.
The way it is supposed to work is that banks have a profit motive to loan money and a loss motive to avoid loaning money to people who won't pay it back.
Here's how it did work. Banks would lend money to people. FM and FM would immediately buy the mortgages from the banks. End result: The banks had still had a profit motive to loan money to people, but they no longer had the loss motive to avoid loaning money to risky people. By purchasing the loans, FM and FM took the risk away from the banks. Since FM and FM were backed by the US government, that risk got foisted on taxpayers.
The end result was predictable. Notice that the problem wasn't greed. Banks were greedy before. The problem was that the government removed the penalty for greed (loan defaults) so as to encourage banks to make loans that they otherwise would not have made.
What do you think about the role of "Bitcoin" in society? Bitcoin is absolutely the right idea. It is an easily stored and exchanged currency that can't be inflated. It also has the astoundingly beautiful property of being untraceable. If bitcoin (or something like it) takes hold, it will be a huge blow to government controls everywhere.
As far as I know, it isn't strictly untraceable. Also, the exchange rates can still wildly fluctuate, as we have recently seen with the popping of a bitcoin bubble. How do we know that it is the value of the bitcoin that is wildly fluctuating or the value of the dollar? :)
Do you view taxation as a necessary evil? Wow. That's a hard question. Any tax that pays for something that could otherwise be provided by the private sector is probably an evil tax. So, school taxes are evil. Transportation taxes are probably evil.
So, I suppose the question boils down to, "is there anything the government does that could otherwise be provided by the private sector?" I don't know. I think of myself as a "soft anarchist." By that, I mean, while I'm not ready to say that we can survive without government, I haven't yet heard a compelling argument as to why we do need government.
Do you count the national defense as something that could otherwise be provided by the private sector? Private companies already can fulfill many if not most functions of our military. Probably not. However, the "we need government because we need national defense" argument ends up being circular. (1) I need government because I need an army. (2) But, I only need an army to protect me from your army. (3) You are able to have an army because you have a government. Conclusion: The purpose of government is to protect you from government.
What would you say is the book that everyone should read to understand economics? I always recommend The Armchair Economist (Landsburg, Freedom Press) and Eat the Rich (O'Rourke). The former can be read as individual chapters; the latter is a narrative. Both are excellent.
Will the dollar collapse? And if so, when and why? Also, what are your thoughts on the origin of natural rights?? Most explanations I've read from people like Locke tend to explain it through God which seems like a cop out to me. There are good arguments for the origin of natural rights that don't invoke God. Being a theist, I find the ones that do invoke God more satisfying. I find the philosophical discussion fascinating, but I'm not adept enough to be able to reproduce it.
1) Do you think Keynesian multipliers ever exceed 1? I haven't done the calculations myself, but I've seen estimates in studies that range all the way down to less than one. I'm not a fan of the multiplier, but in its defense, it has been abused by politicians. Politicians quote Keynes' prescription for increasing government spending so as to spur economic growth. But they don't quote Keynes' next statement which is, after the economy picks up, return government spending to its original level.
2) What are your thoughts on the Chicago School vs. the Austrian School? I dislike the idea of "schools." It gives the impression of mutually exclusive sets. There's a lot in the "Chicago school" that is good, so too in the "Austrian school." There's also error in both. My tendency is to approach economics from the Austrian school because the Austrians begin with a first principle (people own themselves), and then construct subsequent principles by applying logic to the first principle. I like that approach.
3) There is quite a bit of derision in the /Economics sub about the Austrian school as being outdated and not quantifiable. What would you say in response to that criticism? I disagree. My training is in econometrics and I find a wealth of quantifiable stuff in Austrian economics.
Do you think cutting entitlement spending could ever be politically viable? There seems to be entire blocks of voters who base their entire vote on 'don't touch my medicare'. The interesting thing here is that whether it becomes politically viable is moot. We are going to reach a point (my guess is not sooner than 5 years nor later than 20) at which it becomes mathematically impossible to continue entitlement spending as it is now. At that point, it won't matter whether there is a political will to cut spending any more than it matters whether there is a political will for gravity to pull downward.
What single math principle would you want all politicians to understand? I believe the problem isn't understanding but communication. I would want no politician to offer something to voters without clearly defining the costs. For example, to ask, "Do you want the government to provide you with health insurance?" is (to many people) a no-brainer. But the question doesn't capture the reality of what's being asked. What's really being asked is, "Do you want the government to provide you with health insurance in exchange for lower quality health care and increased unemployment?"
What got you into economics? My mother. She told me to study it. Always listen to your mothers.
What is the most mind-blowing economic fact/theory that you know? Link to www.antolin-davies.com
Have any post WWII Western/post-industrial economies collapsed as a result of debt or inflation? Not to my knowledge, though Cyprus and Greece might become the first examples.
Hello Dr. Davies, what are your thoughts on the Gold Standard? Any system that holds the supply of money relatively constant is good. It doesn't have to be gold. A water standard or a land standard might work just as well. Many advocates of the gold standard go awry when they claim that we need a gold standard because gold is inherently valuable and we need something with inherent value to back the dollar.
This is incorrect. The reason a gold-backed dollar has value isn't because it is backed by gold. It has value because you can hand it to a bartender and he'll give you a beer.
Would prosecuting the ring leaders of the biggest banks, or breaking the too big to fail banks up have a significant impact on the economy? Or is Holder just lying...again? The ring leaders were Congress and the Federal Reserve. Absolutely, banks were acting like corner drug pushers. But it was Congress and the Fed that were the drug cartel.
Do you think the national debt can be repaid without heavy inflation to reduce its effective size? No. For the moment, it is political impossible. In about five or ten years, it will become mathematically impossible.
Which economic school do you lean towards more? Chicago? Austrian? Austrian -- no question.
Whose your favorite George Mason Economic Professor and why? Rob Raffety. He adjuncts in the law school and was a student of mine as an undergrad.
What do you like best about your job? Variety. It's most of the joy of being self-employed without the risk. Probably only half of the educating I do now is done in the classroom. The rest is via videos, opeds, invited lectures, and venues like this. It's gotten even more interesting in the past couple of years as people seem to be waking up to classical liberal thought.
Regarding public policy, what is your stance on immigration? What is your utopia with respect to immigration, and then what kinds of reforms should Congress seek that are practical with today's government and/or society? Peaceful people should be allowed to cross boarders freely. Immigration is really a violation of your economic freedom. Suppose I own a house and a person from Mexico wants to buy it. Were it not for immigration law, we could come to an agreement and freely transact the exchange. When the government prevents the person from coming into the country, it has the same effect as telling me to whom I can and cannot sell my property.
If you had the chance to scrap our tax system, would you? what system would you go to? Absolutely. I'd replace it with an 18% consumption tax -- no exceptions. I'd also accompany it with a Constitutional amendment requiring a balanced budget. Historically, regardless of tax rates, the government collects total revenue equal to about 18% of GDP. So this tax would generate the same revenue as the government has now. The balanced budget amendment would force politicians to make tradeoffs among spending rather than tradeoffs between spending and tax increases.
What is your response to criticisms of the Austrian School of economics? Also, should children be a part of the free market? Do infants have self-ownership? I would also like to know if you have any responses to this or this. To my knowledge, no philosophical system has yet been able to deal with the "children" question. A philosopher friend of mine once said that parents don't own children, they own the right to parent the children. The way I explain it to my own children is that I make for them the decisions I believe they would make for themselves if they had my knowledge and experience.
Professor I have a question for you. I'm Braziliand and we have a conditional assistance program. We don't give welfare to everyone, in fact the only welfare people get is through work, but we do have free healthcare. Technically, you don't have free healthcare. Rather than paying hospitals for healthcare, you pay the government and the government pays the hospitals.
Anyway we have a program that distributes between 20-80 dollars per family below the poverty line, which is substantial for many of them, and costs a bit more than our outrageous senate. I'm usually skeptical of inequality concerns though not of poverty concerns. No one every died of inequality, but far too many people die of poverty.
Link to en.wikipedia.org. I believe that every person has a moral obligation to care for the poor. But to coerce action is to remove the moral component. If a government forces its people to care for the poor, then you have indeed fed the poor, but the feeding is not a moral act since moral actions require free will.
As it turns out these people spend this money in their local environment, local stores, local markets, in the poorer neighborhoods. So, while I can think of several effective ways the government could use its coercive power to fight poverty, I could not say that any of them are legitmate.
Isn't this a legitimate tool for social mobility and a mini-stimulus package which does wonders for the people? I am quite fond of Hayek's theories but in my country we have such an absurd social inequality that initiatives like these make perfect sense to me. One effective way is a negative tax. That is, everyone pays a fixed percentage of their income and everyone receives a fixed check from the government. For example, suppose we all paid 10% of our incomes in tax and received $10,000 from the government. A person with no job would pay $0 in taxes and receive a $10,000 check. A person who earned $200,000 would pay $20,000 and receive a $10,000 check.
econometrics? I've just started a job in econometric modeling so I would love a good reference! The gold-standard is Econometrics by William Greene, but it is extremely heavy mathematically. You need a solid background in linear algebra to get through it.
What do you think of the transaction tax? specifically Link to thetransactiontax.org. One great danger with a tax like this is that if we don't amend the Constitution to get rid of the income tax at the same time that we enact a transactions tax, we will end up with both.
A potential problem is that a transactions tax (as opposed to a sales tax) might require the government to monitor transactions as opposed to sales. I'm not overly comfortable with that.
So let's say we must cut government spending. IMO we should cut off federal funding for states that vote against spending, since they want smaller government. This would probably start with farm subsidies to mid-western states like OK. The free market will provide America with enough food right? What would you cut first? If you're concerned that we won't have enough food because we aren't subsidizing farmers, fear not. We are already paying a lot for our food, but we pay in two forms. One is payment to the farmers when we buy stuff. The other is payment to the government so it can subsidize farmers. Without the subsidies, farmers would get less money from the government and so might have to charge us more. But we would not be paying the government to pay farmers and so our total cost might not be that different. IOW, removing subsidies is less about how. Much we pay farmers than how we pay farmers.
Glad to catch ya mr. davies! Just quick question: If America were to legalize every drug and regulate said drugs, how do you think this would effect the economy? Putting aside drugs that are instantly addictive (they are a problem because they call into question whether the person has freedom of choice), the government would spend a lot less because we wouldn't have a huge portion of our society locked up. Those people who are locked up for drug offenses would then be free to work -- that would be a huge increase in a valuable resource. All told, I believe that economic growth would accelerate.
What are your thoughts on Distributism? I don't know much about it. I understand that it derives from Catholic social thought. CST is often (IMHO) abused by statists. For example, the directive that we have a responsibility to care for the poor is usually interpretted as a call to government intervention. But the Church doesn't say the government has a responsibilty to care for the poor. It says we have a responsibility to care for the poor.
One way to find common ground between Catholic social thought and classical liberal thought is to think of CST not as recipe for how to fix society but as a description of how a fixed society would look.
As someone who just graduated with a bachelors in Economics/ Int'l Business, what do feel is the current atmosphere for new hires? Any specific sector standing out to you? I have an interview with a company in ATL this coming August. I tell my students that employers don't need you to know how to do things. They'll teach you what you need to do. Employers need you to know how to think clearly and communicate concisely. To that end, emphasize your skills in mathematics, statistics, logic, speaking, and writing, and you'll find employers across a broad range of industries will be interested in you.
Where are the checks and balances on deregulated capitalism? At what point does the free market and the desire to maximize profit influence unethical behavior that may impede on the personal liberties of others (i.e. prison profiteering, military contractors, disaster capitalism)? "Deregulated" is a misnomer. All industries are regulated. The question is whether they are regulated by consumers freely choosing to hand over their dollars for the things the industry produces, or regulated by bureaucrats and politicians.
Is it true that this year’s deficit is greater than the total taxable income of Americans earning more than $100,000? Not greater than their taxable income, but about equal to the amount of taxes they paid. This year's numbers are still in flux. I believe that last year's deficit was around $1.1 trillion. The latest breakdown of federal tax receipts by income group was for 2009. In that year, everyone earning $100,000 and up paid a combined (approximately) $1.2 trillion in federal income, payroll, capital gains, estate, etc. taxes.
I'm confused by your philosophy on too big to fail. You seem to think congress is to blame for our current economic crisis. But I see congress as more of a symptom of institutions being to big to fail. Congress is paralyzed because the institutions have become so powerful that they control congress. If the institutions were smaller they would not have as much clout over congress. Can you comment on this? I believe you have the causality backward. The problem isn't that institutions are so large that they can control Congress. The problem is that Congress has become so powerful that it is worth controlling.
What's your opinion on the Rogoff/Reinhart situation, and did it cause you to change your philosophy? I haven't read the paper. My understanding is that it was a calculation error that changed the results quantitatively but not qualitatively.
Who do you think was the most handsome economist in history? Lord Acton had a rockin beard. Jeffrey Tucker has a rockin tie.
Y...you think that it's a good idea to repeal the 17th amendment? The point (prior to the 17th) was to encourage separation of power between the federal government and the states by making the Senate answerable to the states.
Hello Mr.Davies, As someone who knows nothing about economics and business (I am a welder), what is the best way to break into such fields of work? Education is a must I assume, but are certain universities more valued? Which degrees or majors are more in demand? Are there specific things to learn, do, or specialize in to stand out? How do mentor ships work? How can I meet a mentor and build a relationship with them? Normally, you'd need a bachelors degree in economics at the least. Typically jobs that carry the title "economist" (as opposed to "analyst") require a minimum of a masters degree. If you want to try and break in without getting the formal degrees, you'd need to be extremely good at higher level statistics (e.g., I'd recommend two semesters of stats, one of econometrics, one of advanced econometrics), mathematics (e.g., minimum calculus II), and basic economic theory (e.g., intermediate micro, intermediate macro). Your writing skills would also have to be top notch. Without the degree, you'd also need a goodly piece of luck because it will be hard to convince an employer to take a chance.
Dr. Davies: Given the the United States has previously held a price floor on wages slightly higher than 30% of GDP/hour worked with no significant disemployment effects, (late 1960s) and Canadian minimum wages are currently in the 20-23% range, and yet manages a higher 16-64 employment rate than that of the United States, can you tell me if you believe that an increase in the minimum wage from 12% to 15%, as the President proposed, would have significant disemployment effects, and if so why? I don't know what "no significant disemployment effects" means. The right way to measure the effect of the minimum wage is to compare the unemployment rate at various points in time with the relative minimum wage (i.e., the minimum wage as a ratio of the average hourly wage) at those points in time.
You can see that comparison here: Link to www.antolin-davies.com
Why do you feel comparing the minimum wage to the average hourly wage is correct? Won't that make attempts to suppress wages generally appear as though the minimum wage is higher in real terms than it would otherwise be? It's the correct measure because what is important is the degree to which the minimum wage is distorting the price of labor. For example, if the average free market wage is $10 an hour, I would expect that a minimum wage of $11 an hour won't have much effect. However, if the average free market wage is $5 an hour, I would expect that a minimum wage of $11 an hour would have a huge effect. Conclusion: What matters is the ratio of the minimum wage to the average wage.
Why would you refer to the labour market, a market characterized by weak monopsony and employer-enforced information asymmetry, as a free market? You are correct. I am using the average market wage as a proxy for the free market wage. It's not perfect, but for our purposes isn't a bad proxy.
Is it pronounced "Du-shane" or "Dju-kane"? Du-Kane.
Is Grove City College a good school? I have no first hand knowledge of the college. I know some of their students and faculty and none has ever failed to impress me as good and intelligent.
I think he's saying that there is still an inflection point where debt/GDP ratio causes negative growth. It might not be at 90%, but it will certainly still exist at some point. You are correct.
Last updated: 2013-05-26 17:05 UTC
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Why Does Cryptocurrency Price Fluctuate So Much? - YouTube

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