Quotulatiousness

January 22, 2011

How many “rich people” are there?

Filed under: Economics — Tags: — Nicholas @ 12:12

The Economist tries to tally up the world’s rich people, and discovers there are more millionaires than Australians:

Credit Suisse [. . .] uses a less stringent (and more obvious) definition: a millionaire is anyone whose net assets exceed $1m. That includes everything: a home, an art collection, even the value of an as-yet-inaccessible pension scheme. The Credit Suisse “Global Wealth Report” estimates that there were 24.2m such people in mid-2010, about 0.5% of the world’s adult population. By this measure, there are more millionaires than there are Australians. They control $69.2 trillion in assets, more than a third of the global total. Some 41% of them live in the United States, 10% in Japan and 3% in China.

How did these people grow rich? Mostly through their own efforts. Only 16% of high-net-worth individuals inherited their stash, according to Capgemini. The most common way to get rich is to start a business: nearly half (47%) of the world’s wealthy people are entrepreneurs.

You do not have to be a genius to build a million-dollar business, but it helps if you are intelligent and extremely hard-working. In their book “The Millionaire Next Door”, Thomas Stanley and William Danko observed that a typical American millionaire is surprisingly ordinary. He has spent his life patiently saving and ploughing his money into a business he founded. He does not live in the fanciest part of town — why waste money that you can invest? And his tastes are so plain that you can barely tell him apart from his neighbours. He buys $40 shoes, and his car of choice is a Ford.

It shouldn’t need to be pointed out that a millionaire today isn’t the same sort of person as a millionaire 30 years ago: with rising housing costs, anyone living in a paid-off home in downtown Toronto is already well on the way to being a millionaire. A multi-millionaire of the 1970s occupied the lower end of the range of what today is probably the billionaire club. Today’s millionaire is a well-off professional or middle class person, not a globe-trotting plutocrat.

January 21, 2011

Remaking Red Dawn as a metaphor for US fear of China

Filed under: China, Economics, Media, USA — Tags: , , , , — Nicholas @ 12:59

David Harsanyi notes the remake of the 1980’s movie Red Dawn with the Chinese taking the place of the original film’s Soviet and Cuban troops:

Doubtlessly, the remake will be entertaining and offer a far more plausible plot line than the original — seeing that the Chinese, well, they have a proper army. Producers will almost certainly capitalize on a growing alarmism regarding China’s growth. Few issues, in fact, can bring right and left together in this polarized world of ours than a shared knowledge that China is bad news.

Now, the American populace can typically be divided into two categories: 1. Those who don’t care one whit about foreign policy. 2. Newspaper editors.

So before Chinese President Hu Jintao was here meeting with the president, Andrew Kohut of the Pew Research Center took to the pages of The Wall Street Journal and explained what we think about the topic.

Apparently, 47 percent of those he surveyed cited China as the world’s top economic power. (Only 31 percent properly identified it as the U.S., which has an economy nearly three times the size.) Another Pew survey from last year found that 47 percent of us consider China’s growth a “bad thing” for the United States. A new CNN poll found that 58 percent of us believe that China’s “wealth and economic power” are a threat to the U.S.

I’m certain our relationship with China is layered with international complexity and fraught with danger. But why would we fear the aspects of China’s ascendancy — its “wealth and economic power” — that pose the least threat to United States? Unlike ideological clashes, economic competition can be mutually beneficial. A country with real economic wealth is typically free and doesn’t look kindly on radical behavior. Suicide bombers rarely drive top-of-the-line BMWs.

I have a long history of doubting the stated size and growth of the Chinese economy and therefore feeling that the “threat” they pose is overstated. Overall, the economic growth in China is a good thing, both for China and for the world economy, but there’s still too much malignancy from the “bad old days” of the command economy that haven’t been properly dealt with. China is big, and getting bigger, but will face severe problems the longer these historical artifacts remain unexamined and unresolved.

Have you ever asked yourself if you should work for free?

Filed under: Economics, Humour, Randomness — Tags: , — Nicholas @ 08:38

If so, Jessica Hische can help you figure out the appropriate response:


Click to see full image (NSFW language)

H/T to Tim Harford for the link.

Alfred Kahn, godfather of deregulation

Filed under: Bureaucracy, Economics, USA — Tags: , , , — Nicholas @ 08:17

An obituary at The Economist for one of the key players in the deregulation of American business that was critical to solving the economic malaise of the 1970s:

WHEN everyone else at the airline counter for the flight from Hicksville to Washington was sighing, checking their watches and using their elbows on their neighbours, Alfred Kahn would be smiling. And later, cramped in his seat between some 20-stone wrestler and a passenger whose “sartorial, hirsute and ablutional state” all offended him, snacking from a tiny packet of peanuts that had cost him a dollar, he would sometimes allow the smile to spread under his Groucho Marx moustache into a big, wide, gloating grin.

For Mr Kahn had made this crowd and packed this aircraft. His deregulation of America’s airlines in the 1970s opened up the skies to the people, for better and worse. And though, being an economist, he could not help muttering about the imperfection of societies and systems and the absurdity of predictions—and though, being an inveterate puncturer of himself, he would demand a paternity test if anyone called him the father of the deregulated world—his adventures with airlines led on to the freeing of the trucking, telecoms and power industries, and heralded the Thatcherite and Reaganite revolutions.

When he took over the Civil Aeronautics Board for President Jimmy Carter in 1977 air travel was regulated to the hilt, with prices, routes and returns all fixed and aircraft, which could compete only on the number of flights and the meals they served, flying half-full. Mr Khan, furiously resisted by companies, pilots and unions, removed the rules. As an academic, author of “The Economics of Regulation” in two stout volumes, he was eager to see those elusive and fascinating things, marginal costs, brought into play: to let prices follow the constantly shifting value of an aircraft seat as demand changed or departure time loomed, or indeed as shiny new jet planes depreciated above him, just “marginal costs with wings”.

January 20, 2011

In case you weren’t worried enough about the rise of China

Filed under: China, Economics, Government, Media, USA — Tags: , , , — Nicholas @ 16:23

The Wall Street Journal rounds up the leading indicators of the current “USA sliding down the ladder” worries:

Of all the differences between dictatorship and democracy, probably none is so overlooked as the ability of the former to project strength, and the penchant of the latter to obsess about its own weakness.

In 1957 the Soviets launched Sputnik and the U.S. went into a paroxysm of nerves about our supposed backwardness in matters ballistic. Throughout the 1980s Americans lived with “Japan as Number One” (the title of a book by Harvard professor Ezra Vogel, though the literature was extensive) and wondered whether Mitsubishi’s purchase of Rockefeller Center qualified as a threat to American sovereignty.

Now there’s China, whose President is visiting the U.S. this week amid a new bout of American hypochondria. In an op-ed last week in these pages, Andrew Kohut of the Pew Research Center noted that a plurality of Americans, 47%, are under the erroneous impression that China is the world’s leading economy. News reports regarding Chinese military strides, or the academic prowess of Shanghai high school students, contribute to Western perceptions of Chinese ascendancy. So does the false notion that Beijing’s holdings of U.S. debt amounts to a sword of Damocles over Washington’s head.

Oh, we nearly forgot: Tough-as-nails Chinese mothers are raising child prodigies (a billion of them!) while their Western counterparts indulge their kids with lessons in finger-painting.

There you go, more than enough to keep you up late tonight worrying about the inevitability of China’s rise to top economic dog in the pack. Of course, most of it is misinterpretation of the facts, but you can worry about it if you want.

H/T to Jon, my former virtual landlord, for the link.

January 19, 2011

NFL not yet serious about negotiating with player union

Filed under: Economics, Football, Media — Tags: , — Nicholas @ 12:25

Well, all signs are still pointing toward a lockout, as Len Pasquarelli reports:

“I’m just talking for myself, but, sure, I’m (dismayed) by the progress,” Carolina owner Jerry Richardson, who recently had sounded a note of pessimism on the lack of movement toward a collective bargaining extension, told The Sports Xchange. “To me, it’s baffling. It’s really baffling.”

Equally confounding was the disparate nature of assessing the condition of the negotiations from owners who spent nearly four hours listening to commissioner Roger Goodell and league vice president and lead negotiator Jeffrey Pash review the talks with the NFL Players Association. Unless the commissioner recently mastered the art of speaking in tongues, he and Pash delivered the same message to everyone at the assemblage.

But that doesn’t mean all the owners heard the same thing, because interpretation of the commissioner’s words was certainly diffuse.

There is, stressed many of the owners and club representatives present at the one-day caucus, and reinforced Goodell, unwavering unanimity of purpose among the NFL’s stewards. What is more scattered, however, is the subjective view of where things stand less than two short months before the existing CBA expires. The CBA between owners and players expires on March 4.

The players are being advised by their union reps to expect a lockout before training camps would be due to begin, and the owners have indicated they’re willing to keep the players locked out as far as the fourth week of the season.

The two sides, Pash reported, haven’t conducted a substantive negotiating session since before Thanksgiving. Despite reports to the contrary, there are no meetings scheduled. The union a week ago filed a collusion lawsuit, at least its third court action (there is an action before special master Stephen Burbank concerning the re-negotiation of television contracts that guarantees the league an income stream even in the event of a work stoppage, and an OSHA-type request on safety/injury issues) in the negotiations.

It can’t be in anyone’s interest to have another strike-shortened NFL season, but both sides appear to be willing to risk taking it that far. The league has floated the idea of moving to an 18-game season (up from 16 currently) while reducing the pre-season from four games down to two. The players are against that move, as they believe it will expose more players to the risk of injury during meaningless late-season games.

One of the big issues is expected to be the way drafted players are compensated: first round picks are being paid huge salaries before they’ve even stepped on their first NFL field. Both sides are probably willing to come up with some kind of cap for rookies (who, obviously are not represented in the negotiations), the owners to avoid paying millions of dollars to players who don’t live up to their reputations, and the union to try to redirect some of those big salaries to their existing members.

Dire Straits not suffering due to CBSC ban

Filed under: Bureaucracy, Cancon, Economics, Media — Tags: , , , — Nicholas @ 12:20

Dire Straits may need to send a nice gift basket to the Canadian Broadcast Standards Council after they banned the song Money for nothing:

Britney Spears’ return with “Hold It Against Me” say 37,000 downloads, which is the best-ever first week performance ever since SoundScan started tracking digital sales six years ago. Avril Lavigne also did all right with 16,000 downloads of “What the Hell.”

But here’s my favourite stat: what with all the hoopla of the Canadian Broadcast Standards Council ruling on the unworthiness of Dire Straits “Money for Nothing,” digital downloads of that track went from 167 last week to about 2,700 this week. That number represents a full 10% of all downloads of that song since tracking began in February 2005. Meanwhile, Brothers in Arms, the album from whence the song came, saw its digital sales spike 406%. It’s now the fifth-best selling catalogue album in the nation.

H/T to Paul “Inkless” Wells for the link.

Pack of feral states now circling fallen Illinois

Filed under: Economics, Politics, USA — Tags: , , — Nicholas @ 07:48

The plight of Illinois just seems to get worse and worse:

As Illinois tax rates shoot up, nearby states are fluffing their feathers in an attempt to catch the eye of businesses looking to leave the Land of Lincoln.

Governor Pat Quinn (D) and the slim Democratic majority that passed the rate hike claim it was necessary to keep the state afloat: Considering Illinois’ comptroller already spends much of his time apologizing to creditors for missing payments, it’s more likely that businesses will start fleeing the flattened wreckage. Illinois now boasts the highest corporate income tax in the world when all charges are taken into account, and is heading into 2011 with a 40 percent budget shortfall. The tax hike drops the state 13 places in the Tax Foundation’s State Business Climate rankings.

[. . .]

Other state governors took their shots at Illinois’ duncery: Daniels compared the state to The Simpsons, saying “Oh you guys are nothing if not entertaining over there.…you know the dysfunctional family down the block?” Wisconsin Gov. Scott Walker (R) repeated his promise to lower his state’s tax rates and hinted business should heed the old tourism bumper sticker motto: “Escape to Wisconsin.” New Jersey’s Chris Christie (R) was making plans for an Illinois salesmanship trip before the legislation was even signed.

I remember hearing about the massive tax increase in Illinois, with reports about 50-60% hikes, and I thought it was pretty bad. However, even after this massive increase the Illinois state tax level would still be a rounding error compared to Ontario provincial taxes.

January 15, 2011

Fine wine as an investment

Filed under: Economics, Wine — Tags: , — Nicholas @ 09:54

While I personally think wine is a terrible choice for an investment vehicle, I’m at odds with a lot of people with more money than sense who choose to diversify their investments to include fine wine. However, it may not be the best kind of diversification:

The search for safe investments and risk hedging has apparently led some in recent years to start investing in fine wines. “In the past, one of the attractions of fine wine as an asset was its non-correlation with mainstream financial markets,” wrote the Financial Times‘ John Stimfig in 2009. “This provided investors with valuable portfolio diversification.” What could be less closely linked to the Fed funds rate than whether or not it was a good year for Bordeaux? But now the FT reports that a new paper by two IMF economists, Serhan Cevik and Tahsin Saadi Sedik, says that if this were ever true, it’s not anymore. Fine wine prices are just like oil, they find: they go up or down depending on how the rest of the economy is doing.

January 14, 2011

Waters starting to recede in Brisbane

Filed under: Australia, Economics, Environment — Tags: , , — Nicholas @ 08:53

Roger Henry sends another update:

Flood waters have receded far enough today that some serious cleaning up can commence. A semi-organised army of volunteers descended on the various suburbs that they could get access to and just started helping home and shop owners clean up. Tomorrow, an organized army will be available. Some 50,000 people, in two shifts, will be bussed into various efforst to do some serious cleaning. On Sunday it is expected they will do it again. An amazing community effort.


Photo from The Australian


Photo from The Australian

In the long run though things are still serious. Everyone is going to have to pay for the damage and loses, and this includes you guys. Due to earlier bad weather in Oz, global wheat prices are at record levels, the current flooding has almost destroyed the sugar crop thus global sugar prices have almost doubled. Coal shortages will be sending steel prices up so your imports are going to be that much dearer, and so on an do on.

Individuals here have some heart-breaking decisions in front of them. One middle-aged couple we saw, had lost their rented house, their entire possessions, the car — with payments owing — and their jobs. They both told the camera that they were all right. What the Hell. How can they be all right? They are sleeping on the floor in a Church hall wearing donated clothing. Sure, they seemed fit and determined and, one hopes, they will get going again, but they were not all right. There are lots more like them.

Sadly, some looters have come out of the shadows. 18 people have been arrested so far and the cops have reminded potential perps that there is a possible ten year sentence for looting.

Roads and rail are badly damaged. Some pics of exposed rail tracks where miles of it has been washed out. Some major bridges are also damaged. One large, steel structure was visibly out of alignment.

By and large, much like any community does when it has had a kick in the teeth, people are regrouping and getting order restored. It might take awhile, but it will all work out.

It will be very useful if we don’t have to do it all again in the near future.

Some humour in it all. A liquor store had about 500 bottles of wine that had lost their labels. The owner was proposing a lucky dip sale or a blind auction. He had about two dozen volunteers washing, drying, and re-stacking his stock. Didn’t seem to be much fear of any of it ‘walking’.

Update: Here’s an image from the Brisbane City Council, showing the extent of the flooding (flooded areas in yellow, river banks in darker yellow):

Additional information on the flood history of Brisbane at the New Scientist website.

January 11, 2011

It’s not your imagination, Toronto area commuters

Filed under: Cancon, Economics — Tags: — Nicholas @ 13:00

Canadians often have a disturbing eagerness to see themselves coming out atop various world rankings. Let a UN agency or a big NGO list Canada in the top five of any kind of list and they practically declare a national day of celebration . . . it’s kinda pathetic, actually.

Andrew Coyne finds a list that nobody in Canada will find as a source of national pride:

Indeed, for sheer mind-numbing, soul-destroying aggravation, traffic in our largest cities can compete with any in the developed world. A Toronto Board of Trade report earlier this year looked at commuting times in 19 major European and North American cities. Toronto’s ranking? Dead last: worse than New York or London, worse than Los Angeles. But other Canadian cities were scarcely better. Montreal was 18th, Vancouver 14th, Calgary 13th, Halifax 10th.

So, what’s the answer? Ban private vehicles and load everybody into mass transit? If anything would turn Canadians away from their “peace loving” self-image, that might well do it. Canadians love their cars as much as any other western country and more than most. There’s also the fact that for most commuters, taking public transit would increase, not decrease their commuting time.

The reason is simple: it’s quicker by car. As bad as the commute is for drivers, it’s much worse for public transit users: 106 minutes, versus 63 minutes by car. Granted, part of the reason it takes so long to get anywhere by transit is because of all the cars blocking the way. But you’d have to persuade an awful lot of those drivers to give up the comfort and convenience of their cars to put much of a dent in that. And they’d still take longer to get to work even then.

So, what’s the answer? Toll roads.

January 10, 2011

Fighting pirates, privately

Filed under: Africa, Economics, Military — Tags: , , , — Nicholas @ 09:42

Strategy Page reports on a new initiative to combat the problem of piracy off the coast of Somalia:

A major British insurer (Jardine Lloyd Thompson) is organizing a private armed escort service for ships operating off Somalia. Called the Convoy Escort Programme (CEP), the 18 small patrol boats will offer armed escort through the Gulf of Aden, and reduce overall security and insurance costs for ships using the service. It’s all about money, as the insurance companies don’t like the spiraling ransom costs, and especially the unpredictability of the pirates. While the insurance companies can pass the costs onto those who buy their insurance, the pirates could rapidly increase the number of ships their steal, and force the insurance companies to incur losses, not to mention the risk of more ships foregoing insurance and using increased shipboard security and armed guards.

The CEP is not a done deal yet. A country has to sign on to allow the patrol boats to fly their flag (and thus provide a national legal system to operate under). The patrol boats will carry heavy machine-guns (12.7mm/.50 cal), armed crews (all former military) and small boats to check suspected pirates. CEP will coordinate with the anti-piracy patrol, and let the larger warships spend more time pursuing the pirates that are now operating much farther from the Somali coast.

This may not be the answer, but it shows that creativity isn’t dead in the insurance industry.

An introduction to ecoNOMNOMNOMics

Filed under: Economics, Education, Humour — Nicholas @ 09:17

A painless and amusing introduction to some economic concepts:

H/T to Tim Harford for the link.

January 6, 2011

Orders of magnitude, US dollar version

Filed under: Economics, Randomness, USA — Tags: — Nicholas @ 07:53

Page Tutor provides a very useful visual reference to the terms Million, Billion, and Trillion:

Believe it or not, this next little pile is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag and walk around with it.

H/T to Tim Harford for the link.

December 29, 2010

Recycling: it’s not economics, it’s control

Filed under: Bureaucracy, Economics, Environment, Government, Politics — Tags: , , — Nicholas @ 00:03

Gregg Easterbrook points out the stupidities of many municipal recycling programs:

Freeze! Drop That Discarded Dishwasher or I’ll Shoot! The New York Times recently reported that unwanted appliances — old washing machines and so on — placed on the curb for disposal in New York City have been “disappearing.” With scrap metal prices strong, what the article calls “thieves” have been driving along streets scheduled for used-appliance pickups — in New York City, this happens by published schedule — and taking away the unwanted junk before the city’s officially approved recycler arrives. The “thieves” then sell the unwanted junk as scrap metal.

Set aside whether it’s theft to take an unwanted item that has been discarded in a public place. New York City bureaucrats think so; they’ve instructed police to ticket anyone engaged in recycling without government sanction. Twenty years ago, New York City bureaucrats were demanding that citizens recycle whether they wished to or not, and imposing fines for failure to comply. Now if the average person is caught recycling, it’s a police matter.

This issue is not the cleanliness of streets or the environmental benefits of recycling — it’s control of money. The New York City Sanitation Department pays a company called Sims Municipal Recycling about $65 million annually to pick up and recycle metal, glass and aluminum. Notice what’s happening here? Recycling is supposed to make economic sense. If it did, then the recycling company would be paying the city. Instead the city is paying the company. Montgomery County, Maryland, my home county, imposed recycling rules saying they made economic sense. Now the county charges homeowners $210 annually as a recycling tax. If recycling made economic sense, government would pay homeowners for the privilege of picking up their valuable materials. Instead New York City, Montgomery County and many other government bodies charge citizens for something they claim makes economic sense.

Recycling of aluminum makes good economic sense, given the energy cost of aluminum and the high quality of recycled aluminum. Depending on where you are in the country, recycling of newspapers may make sense. Recycling of steel and copper usually makes sense. But recycling of glass, most plastics and coated paper is a net waste of energy. Often the goal of government-imposed recycling program is to use lack of understanding of economics to reach into citizens’ pockets and forcibly extract money that bureaucrats can control.

Notice what else is happening here — New York City pays a company millions of dollars to do something “thieves” will do for free. The “thieves” harm no one, and could save New York City taxpayers considerable money. But then bureaucrats wouldn’t be in control. And surely no-show jobs and kickbacks have nothing, absolutely nothing, to do with New York City sanitation contracts.

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