Foriegn Financial UnProductivity responsible for US Trade Deficit?

June 24, 2005

A few posts back, I linked to an article that discussed the entirely dismal productivity of the retail sector in Japan and other foriegn countries and how that was an indicator that they were actually much poorer than we were here. Now MarginalRevolution points to this article by Glen Hubbard about foreign financial unproductivity and how it may be the reason why so many foreigners choose to place their wealth here. The only way they can get their wealth into US dollars is for them to maintain a trade surplus with us. This would explain why the dollar keeps such a high value despite substantial US tradedeficitis.

As an aside: it is likely that the same forces that prevent financial sectors from getting more productive (e.g. by foreclosing on bad loans) are also the forces that prevent companies like Walmart from entering. Small business.


Why the poor don’t raise taxes higher on the rich

June 22, 2005

In “Broad Ownership Needs Broad Taxpaying”, the PowerLine guys argue that:

Which leads to the question: What will happen if conservatives succeed, as part of their push for an Ownership Society, in redirecting much of the payroll tax from federal coffers into the personal accounts of workers? Most Americans would then be directly supporting the federal government only through the income tax and the few federal sales and excise taxes (e.g., on gasoline). The result: Most Americans would no longer be making any significant contribution whatever toward the maintenance of the federal government.
Any new programs that Congress might adopt would cost the average American little or nothing. He already pays scant income tax, and he would be getting much of his Social Security and Medicare taxes back in the expected personal accounts. So at that point the relatively small number of citizens who make significant income tax payments would be carrying our whole federal edifice.
And there’s the rub. “Rebating” a big chunk of payroll taxes back to workers in the form of personal accounts is devoutly to be wished for in most ways. But one troubling side effect of such a transformation would be to nakedly expose the tax burden that our personal income tax disproportionately lays on the top 5 percent of Americans.
Our Founders had no confidence that voters, unmoored from financial responsibility, would refrain from pillaging the wealth of their neighbors. If most of Washington’s costs end up piled on just a few backs, the only thing preventing a sharp ratcheting up of the income tax will be the decency and political principle of ordinary Americans.

This pessimism is unwarranted. The untaxes would refrain from raising taxes because they know that they benefit from revenue collection. A rational population that was untaxed would stil choose taxes that maximize revenue rather than taxes that maximize “justice”. Obviously if taxes are 100% no one would would bother to earn money. If taxes are 0% no revenue would be collected. The truth is somewhere in between and rational revenue beneficiaries would choose it. Actually they might choose something slightly lower corresponding to their hope that they themselves will eventually earn enough money to pay taxes.

Cooking made us human

June 21, 2005

Love this one

Critics of cooked foods, and there is a raw foods movement in the world, Wrangham pointed out, say “Look at chimpanzees. They eat raw and thrive.”

Chimpanzees, he re-emphasized, spend far more time eating than humans do and as a result don’t have time or energy to expand far beyond their range. In German research studies on the effects on humans of following a raw food diet, the results show that humans eating only raw food are hungry, experience weight loss and, in the case of women, quit having regular menstrual cycles, which means that the rate of reproduction is precariously lowered.

“It seems difficult for me to deny the evidence that the evolution of man came with the discovery of fire and cooking,” Wrangham said. “Cooking changed the biological design of humans, and that fact is the basis of paleo-gastronomy,” he added.

“Being able to spend a low percent of time eating made hunting possible and expanded the range of humans out of Africa and into Asia,” Wrangham said. Cooking also prompted the sexual division of labor: men, being bigger and stronger, hunted, and women provisioned and cooked.

Cooking created the human family or civilization, where humans not only assumed tasks suited to their skills but also put those skills to work in taking care of one another. You hunted for the group or family, as well as yourself. Or, you cooked for the hunter, as well as yourself.

Big government something only a rich country can afford

June 19, 2005

Great interview from Nick Shulz of William Lewis author of “The Power of Productivity, Wealth, Power, and the Threat to Global Stability.”about how poor countries become rich. Its all about productivity and productivity is all about protecting the rights of consumers against producers. Structuring a political system so that producer lobbyists don’t win control appears to be the key to success, but that turns about to be very difficult. If you are at interested in any of any of these things, I strongly recommend you read the whole thing.

How to become an early riser

June 13, 2005

Steve Pavlina says: Go to sleep when you are tired. But always wake up at the same time. And when you wake up, get up. Don’t snooze. Read the comments on his post as well as the followup.

Software Outsourcing Skepticism

June 13, 2005

Friends know that for a while I have been skeptical about the whole software outsourcing to India story. The real value in software is the connection with the customer/user and that can’t be outsourced. Now Half Sigma does a really good job of generalizing the point:

But what is left for the United States to do if both manufacturing and information jobs are moved overseas? The answer is marketing. Marketing is the craft of linking producers of goods and services with customers. And the customers exist in the United States because we are the world’s richest nation.

Only Americans know what other Americans want to buy. Only Americans know how to create the perception of value where none actually exists. Two days ago I wrote about an $88 t-shirt. The Chinese can manufacture a t-shirt for $1, but they will never be able to figure out how to get Americans to pay 88 times what it costs to manufacture.

Why Manhattan works: Its mostly narrow!

June 13, 2005

Ironman reviews public transport architecture and notes:

First of all, to really make public transportation really work, you need to make everybody live and work within easy access of it. From the public transportation standpoint, where today’s cities go astray is in their grid system. Once city streets extend beyond easy walking distance of a main street or transportation corridor, public transportation begins to become more difficult to provide. As the distance grows greater, public transportation service becomes more and more difficult to provide, and as a result, it becomes more costly, less efficient and less effective as a viable means of moving people from place to place.

So, to make public transportation viable as the primary means of transport for an entire city, cities themselves need to be designed to closely follow a single transportation corridor.

He doesn’t actually talk about Manhattan, but if you live there, you know he is making a really good point.