Quotulatiousness

April 28, 2015

Another misleading statistical quirk about US corporate profits

Filed under: Business, Economics, USA — Tags: , — Nicholas @ 07:02

Earlier this month, Tim Worstall explained why the huffing and puffing over the increased share of corporate profits in the US GDP figures is misdirected:

There’s all sorts of Very Serious People running around shouting about how the capitalist plutocrats are taking ever greater shares of the US economy. This might even be true but one of the pieces of evidence that is relied upon is not actually telling us what people seem to be concluding it is. The reason is that we’re in an age of increased globalisation. This means that large American companies (we mostly think of the tech companies here, Apple, Google, Microsoft) are making large profits outside America. However, when we measure the profit share of the US economy we are measuring those offshore profits as being part of the US economy. But we’re not also measuring the labour income that goes along with the generation of those profits. It’s thus very misleading indeed to be using this profit share as an indication of the capitalist plutocrats rooking us all.

[…]

It’s possible that that rise in the profit share is actually nothing at all to do with the US domestic economy. If American corporations are now making much larger foreign profits than they used to then that could be the explanation. No, it makes no difference about whether they repatriate those profits, nor whether they pay tax on them: those foreign profits will be included in GNP either way. Note also that measuring the profit share this way is rather misleading. Yes, it does, obviously because this is the way we calculate it, mean that the profit share of GNP is rising. But we’re not including the labour income that goes along with the generation of those profits. That’s all off in the GNP (or GDP) of the countries where the sales and manufacturing are taking place. The only part of this economic activity that we’re including in US GNP is that profit margin.

[…]

Now to backpeddle a little bit. I do not in fact insist that this is the entire explanation of the increased profit share. It wouldn’t surprise me if it was but I don’t insist that it’s the entire explanation. I do however insist that it is part of the explanation. The sums being earned offshore by large American companies are large enough to show up as multiple percentage points of the US economy. So some of that change in the profit share is just because American companies are doing well elsewhere in the world. It’s got very little to almost no relevance to the American economy itself that they are. At least, not in the sense that it’s being used here, to talk about the declining labour share. Because these profits simply aren’t coming from the domestic American economy therefore they can’t have any influence upon the percentage of that American economy that labour gets.

This does, of course, have public policy implications. If the above is the whole and total reason for the fall in the labour share of GNP then obviously we can raise the labour share of GNP just by telling American companies not to make profits in foreign countries. Which would be a completely ridiculous thing to do of course. But given that that would indeed solve this perceived problem, and also that it’s a ridiculous thing to do, means that the worries over the problem itself are also ridiculous. So, we don’t actually need a public policy response to it.

Professor: New UK railway signalling system is hackable … while he’s also selling anti-hacking gear

Filed under: Britain, Railways, Technology — Tags: — Nicholas @ 04:00

At The Register, John Leyden offers a bit of doubt that Professor David Stupples can really be said to be an impartial observer:

The rollout of a next generation train signalling system across the UK could leave the network at greater risk of hack attacks, a university professor has claimed.

Prof David Stupples warns that plans to replace the existing (aging) signalling system with the new European Rail Traffic Management System (ERTMS) could open up the network to potential attacks, particularly from disgruntled employees or other rogue insiders.

ERTMS will manage how fast trains travel, so a hack attack might potentially cause trains to move too quickly. UK tests of the European Rail Traffic Management System have already begun ahead of the expected rollout.

By the 2020s the system will be in full control of trains on mainline routes. Other countries have already successfully rolled out the system and there are no reports, at least, of any meaningful cyber-attack to date.

Nonetheless, Prof Stupples is concerned that hacks against the system could cause “major disruption” or even a “nasty accident”.

ERTMS is designed to make networks safer by safeguarding against driver mistakes, a significant factor historically in rail accidents. Yet these benefits are offset by the risk of hackers manipulating control systems, Prof Stupples, of City University London, warned.

Fever dream meets DOOM

Filed under: Gaming — Tags: — Nicholas @ 03:00

Ever have one of those fever dreams where you’re moving through the terrain of a video game? Want to recreate that experience for some reason? You’ll want to download Doomdream:

doomdream

Ever play a video game so often that it shows up in your dreams?

That’s the idea behind Doomdream, an interactive experience created by Ian MacLarty to simulate what his own dreams look like after he’s been playing the classic 1993 shooter Doom all day.

Although there are no enemies, no combat or really any plot, it generates a labyrinth of pixelated gray tunnels and bloody stalagmites for you to wander in forever, recreating the nightmare of so many players who got lost in the purgatory of Doom‘s looping levels, searching fruitlessly for an exit sign.

H/T to BoingBoing for the image and story.

Tax credits that benefit almost nobody

Filed under: Business, Government, Media — Tags: , , , — Nicholas @ 02:00

Last week, Michael Geist pointed out that the tax credits and other inducements offered by state and provincial governments to attract TV and movie business are a bad deal for everyone except the media companies:

The widespread use of film and television production tax subsidies dates back more than two decades as states and provinces used them to lure productions with the promise of new jobs and increased economic activity. The proliferation of subsidies and tax credits created a race to the bottom, where ever-increasing incentives were required to distinguish one province or state from the other.

In recent years, governments have begun to rethink the strategy. States such as Arizona, Michigan, New Mexico, and Iowa suspended or capped their programs. Louisiana found that it lost $170 million in tax revenue in a single year. In Canada, the Quebec government’s taxation review committee recently admitted that its provincial film production tax credit was not profitable and that numerous studies find that there is little economic spinoff activity.

But the most notable Canadian study on the issue has never been publicly released and is rarely discussed. The Ontario government’s Ministry of Finance conducted a detailed review of the issue in 2011, delivering a sharply negative verdict on the benefits associated with spending hundreds of millions of dollars each year in tax credits. It recommended eliminating a 25 per cent tax credit for foreign and non-certified domestic productions that would have saved $155 million per year.

QotD: Pursuit of truth

Filed under: History, Humour, Quotations, Science — Tags: , — Nicholas @ 01:00

Truth, indeed, is something that is believed in completely only by persons who have never tried personally to pursue it to its fastnesses and grab it by the tail. It is the adoration of second-rate men — men who always receive it at second-hand. Pedagogues believe in immutable truths and spend their lives trying to determine them and propagate them; the intellectual progress of man consists largely of a concerted effort to block and destroy their enterprise. Nine times out of ten, in the arts as in life, there is actually no truth to be discovered; there is only error to be exposed. In whole departments of human inquiry it seems to me quite unlikely that the truth ever will be discovered. Nevertheless, the rubber-stamp thinking of the world always makes the assumption that the exposure of an error is identical with the discovery of the truth — that error and truth are simple opposites. They are nothing of the sort. What the world turns to, when it has been cured of one error, is usually simply another error, and maybe one worse than the first one. This is the whole history of the intellect in brief. The average man of to-day does not believe in precisely the same imbecilities that the Greek of the fourth century before Christ believed in, but the things that he does believe in are often quite as idiotic. Perhaps this statement is a bit too sweeping. There is, year by year, a gradual accumulation of what may be called, provisionally, truths — there is a slow accretion of ideas that somehow manage to meet all practicable human tests, and so survive. But even so, it is risky to call them absolute truths. All that one may safely say of them is that no one, as yet, has demonstrated that they are errors. Soon or late, if experience teaches us anything, they are likely to succumb too. The profoundest truths of the Middle Ages are now laughed at by schoolboys. The profoundest truths of democracy will be laughed at, a few centuries hence, even by school-teachers.

H.L. Mencken, “Footnote on Criticism”, Prejudices, Third Series, 1922.

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