Published on 2 Jan 2015
In this video, we’ll review equilibrium in the adjustment process, showing that the equilibrium price is the only stable price. Then we’ll take a look at equilibrium quantity, where quantity demanded is equal to quantity supplied, and how this plays out in a free market economy that seeks to maximize gains from trade.
April 16, 2015
Exploring Equilibrium
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Measuring productivity in the modern economy
Tim Worstall on how our traditional economic measurements are less and less accurate for the modern economic picture:
… in the developed countries there’s a problem which seems to me obvious (and Brad Delong has even said that I’m right here which is nice). Which is that we’re just not measuring the output of the digital economy correctly. For much of that output is not in fact priced: what Delong has called Andreessenian goods (and Marc Andreessen himself calls Mokyrian). For example, we take Google’s addition to the economy to be the value of advertising that Google sells, not the value in use of the Google search engine. Similarly, Facebook is valued at its advertising sales, not whatever value people gain from being part of a social network of 1.3 billion people. In the traditional economy that consumer surplus can be roughly taken to be twice the sales value of the goods. For these Andreessenian goods the consumer surplus could be 20 times (Delong) or even 100 times (my own, very controversial and back of envelope calculations) that sales value.
We are therefore, in my view, grossly underestimating output. And since we measure productivity as the residual of output and resources used to create it we’re therefore also grossly underestimating productivity growth. We’re in error by using measurements of the older, physical, economy as our metric for the newer, digital, one.
In short, I simply don’t agree that growth is as slow as we are measuring it to be. Thus any predictions that rely upon taking our current “low” rate of growth as being a starting point must, logically, be wrong. And that also means that all the policy prescriptions that flow from such an analysis, that we must spend more on infrastructure, education, government support for innovation, must also be wrong.
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An alliance of monsters – Hitler and Stalin, 1939-1941
In The New York Review of Books, John Lukacs reviews a new book from Roger Moorhouse documenting the brief alliance between the Nazi and Soviet regimes:
In the vast literature about Stalin and Hitler during World War II, little is said about their being allies for twenty-two months. That is more than an odd chapter in the history of that war, and its meaning deserves more attention than it has received.
Two factors were involved in this neglect. One was that after Hitler chose to conquer Russia he did not succeed; Stalin emerged as one of the supreme victors of World War II. The other was the Western Powers’ relative lack of interest in Eastern Europe. Yet the war broke out in 1939 because of Eastern Europe, as a result of the British (and French) decision to oppose the German conquest of Poland. The political earthquake of the Nazi–Soviet Pact of August 23, 1939, nine days before the outbreak of war on September 1, did not deter Britain and France from declaring war on Germany upon its invasion of Poland. This is one of the few—very few—decisions in their favor at the time. That they were reluctant in the months that followed to wage war seriously against Germany is another story.
Three quarters of a century have now passed since 1939. A fair amount has been written about the Nazi–Soviet Pact since then, mostly by Eastern European writers and historians. The Devil’s Alliance is a good account by the British historian Roger Moorhouse of what the pact meant for Hitler and Stalin—and, worse, for its victims. Perhaps the book’s most valuable part deals with the immediate consequences of the pact in 1939. Before then, obviously and stridently, Nazism and communism were outright enemies. From the very beginning of his political rise Hitler described Judaism and communism as his principal enemies. Stalin, by that time, was less of an ideologue. Like Hitler, he was a nationalist; he had little interest in international communism.
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QotD: Emperor Franz Joseph
At the heart of the grandeur was a man who liked plain food, predictable routines, and, for relaxation, hunting and shooting. He was a good Catholic without thinking much about it. Like his fellow sovereigns Nicholas II and Wilhelm II, Franz Joseph loved the military life and almost always appeared in uniform. Like them too he was sent into a rage when the details of army uniforms were wrong. Apart from that, he was invariably courteous to everyone although always conscious of rank. He only shook Margutti’s hand once, to recognize that he had been promoted. (Margutti regretted ever after that no one else at court had seen this momentous gesture.) Franz Joseph found modern art puzzling but his sense of duty took him to public art exhibitions and the opening of important new buildings, especially if they were under royal patronage.” His taste in music ran to military marches or Strauss waltzes and, while he liked the theater and from time to time the prettier actresses, he preferred the old favorites. He did not like unpunctuality, loud laughter or people who talked too much. He had a sense of humor, of a rather basic sort. He had climbed the Great Pyramid in Egypt, he wrote to his wife, Empress Elisabeth, with the help of Bedouin guides. “As they mostly only wear a shirt, when they are climbing, and that must be the reason why English women so happily and frequently like to scale the pyramids.”
Margaret MacMillan, The War That Ended Peace: The Road to 1914, 2013.
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