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Musk again? a lesson in inefficiency and ambiguity

  Originally published on Language and Philosophy, September 1, 2023 A friend, explaining why he admires Elon Musk, describes the efficiency of Musk’s auto-transport tunnel: subway train cars are expensive because they can’t be mass-produced, they require large tunnels the boring of which require exponentially greater energy for every increment of diameter, and trains must support rush hour capacity even on off hours, whereas autos are mass-produced cheaply on the assembly line, they require little tunnel space, and on off hours, only the occupied ones run. He concludes that the Musk tunnel is efficient. Well not so fast, pun intended. And there’s an important linguistic and conceptual lesson to be learnt from that lack of speed. The carrying capacity of a packed subway/metro car is about 250 people. The average train is eight cars, so about 2000 people running, in NYC, every two to five minutes in rush hour. Off-loading that efficiency onto autos would require about 2000 autos every f
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A note on the Great Stagnation

  Originally published on Language and Philosophy, July 12, 2022 It’s ironic that The Great Stagnation was coined by a libertarian, since the problem seems to be one of market incentives. In the private sector, we get the innovations that make money easiest. Even more ironic to hear a Peter Thiel place blame on the university, the one institution where those cheap incentives are least present and most easily overcome and where the structures are in place to overcome those cheap incentives. The university is not without structural flaws, and private sector incentives have found a place in it. But non private incentives are also encouraged, and inquisitive minds looking beyond private incentives justifiably seek the university as a home for their research. In any case, the private sector is not well equipped to overcome market incentives and the history of the last half century tells us that it increasingly finds ways to bury itself in those incentives until it can’t dig itself out of it
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the new libertarian, overcome by bias

  Originally published on Language and Philosophy, July 12, 2022 If Adam Smith’s Wealth of Nations is the core text that defines libertarianism, then today’s libertarian isn’t libertarian. The argument against government intervention today is as much a defense of possession — property and the unlimited acquisition of property — as it is an argument that markets are more efficient than legislation. And the fiercest argument over legislative meddling is about wealth distribution — appropriating property. Possession again. Opposing taxation has become the central principle of the new libertarian, whether because it is an easy electoral issue, or because Americans have lost trust in their government or become remote from it, or simply fail to understand their government, what it does and gives them or fails to give them and for what reasons, yet they understand the tax bill well enough. Taxation has become the issue to argue against, and freedom, easily embraced by American mythology since
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Piketty and immigration

Originally published on Language and Philosophy, July 15, 2014 Just finished Piketty’s Capital in the 21st Century. His central claim is that the ratio of capital/labor increases as economic growth decreases because the rate of return for capital remains constant, and, he claims further, the growth rate will decline through the rest of the century as the population rate (the rate, not the absolute population) declines. He recommends a tax on wealth/capital. But if he’s right that the rate of growth will decline ceteris paribus, seems to me his wealth tax is not the only option: opening the borders should slow wealth inequality. Open borders w/naturalization would also counterbalance the political influence of wealth, Piketty’s underlying complaint against wealth accumulation. His tax could happen in Europe, but not likely here in the US. How would a push for immigration fare as a means to grow the economy? With an alliance of business with immigrants? After all, Piketty’s prediction i
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China's economy

  Originally published on Language and Philosophy, December 28, 2013 I’m reading Beardson’s new book on China’s economy. He observes that when the RMB rose against the dollar (2005-8), exports increased faster than imports, counterintuitively (and contrary to US wishes). Beardson attributes it to squeezing more productivity out of labor. He also reports that the Chinese banks, government controlled, lend mostly to government enterprises, devoting itself to infrastructure in the recession, far more than to the private sector, yet the private sector throve. It’s a picture of a resilient private sector independent of the political superstructure. A young economy grows despite parental constraints. Reminds me of a passage in Smith comparing England’s aging economy with the American colonies’ youthful growth, except that colonial growth included high wages and full employment. That would change dramatically in industrialization and the immigration it depended on. China has the rough equiva
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fear of the Fed

  Originally published on Language and Philosophy, July 7, 2013 At a recent Occupy Alt Bank (Occupy’s Alternative Banking think tank) there was this exchange. ‘Banks find ways to skirt any regulation whatsoever,” said one member. “Jailing the CEOs will curtail their risk behavior,” replied another. I wondered: “They can’t be jailed for skirting the law unless they break it. But there is a way to curtail risk outside regulation and law entirely — the Fed.” Both Barry Eichengreen and George Cooper, independently and from different political perspectives, came to the same conclusion, and even Greenspan in effect admited this: the Fed encourages risk through stabilizing the economy, broadcasting its intentions to keep the money flowing. If the Fed (I know, I know, it’s counterintuitive and sounds just awful) were less transparent, played its cards closer to its chest, and threatened to tighten money suddenly and by surprise, letting a few excessively risky institutions fall off the cliff,
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at what price?

  Originally published on Language and Philosophy, June 7, 2013 It’s supposed to be well-established that commodity prices are the inverse of interest rates. Interest rates are as low as they can be and luxury housing prices in NYC are high, for example, and the stock market is flying too. But the rest of the economy is not wildly inflated. Why? Easy money (low interest rates) flows into commodity inventories (we saw that leading up to the Arab Spring), on the one hand, and on the other, it curbs extraction of new resources and commodities because the low interest rates reduce their monetization, or so the theory goes. Yves Smith posted on it back in 2008: https://www.nakedcapitalism.com/2008/03/falling-interest-rates-explain-rising.html Here are the originals: http://www.hks.harvard.edu/fs/jfrankel/CP.htm Click to access CampbellM&CPnberNov.pdf Click to access ifdp1065r.pdf That easy money/low interest rates leads to inflation has been orthodoxy since Friedman at least. It was Vol
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