Friday 30 August 2013

Economath - what is it?

Sturgeon’s Law definitely applies to economics, and when it comes to elaborate mathematical models you probably want to up the percentage.

There was an old tradition arguing that increasing returns made the case for infant-industry protection, underlying this tradition was the intuitive notion that increasing-returns industries are the “good stuff” you want to get, and keep away from other countries.

But that was not at all the point of New Trade Theory, which ended up suggesting that concentration of production due to increasing returns is generally beneficial to importers as well as exporters of increasing-returns goods, that it generally reinforced the case for open trade, rather than undermining it.

All that said was, there is a lot of excessive and/or misused maths in economics, plus the habit of thinking only in terms of what you can model creates blind spots.

Thursday 29 August 2013

Hi Tech malarkey

I am not a tech industry maven, so I am busy coming up to speed on the implications of the Ballmer resignation. What I’m about to say may be obvious to many. Still, I think it is worth saying: there is, once you look past the surface, a remarkable symmetry between Microsoft’s strategy in its heyday and Apple’s strategy today.

The Microsoft story is familiar. This dominance persists to this day. But Microsoft missed the boat on mobile devices, while Apple got temporarily ahead of the curve.

Now, unlike Microsoft, Apple isn’t selling an inferior product. But it’s selling products that are little if any better than competitors, at premium prices. How can it do that? Again, network externalities, mainly a much deeper bench of apps, or so I’m told [I actually don’t use any].

So how do the prospects for Apple’s reign look compared with those of Microsoft? Let us not forget that Microsoft is actually an incredible success story, it maintained its PC lock for decades, and in fact still retains that lock today, it is just that the market is changing.

Wednesday 28 August 2013

Syria has consequences

Now we have a new situation as the west has decided on punitive action. We do not know what this action is to be yet, although we do know what some of the consequences might be.

One of the factions that has been attacking the Syrian government over the last two years is Al Qaeda and it is possible that the locals in the region [Middle East] will see the this punitive action as siding with the rebels. Now that cannot be good!

Also what exactly are they going to bomb?

Not civilians naturally, but then do military targets make sense, when we know have evidence of the Syrian government having chemical weapons. Surely if military targets are hit and include stock piles of these chemicals the reaction on the ground will be mayhem.

If parliament sanctions the hit and it takes place, then what next?

Tuesday 27 August 2013

Syria finally

A very strong statement from America yesterday seems to hint at aggressive action from the west is imminent. This has come about because of last Wednesday’s chemical attack.

Now, after more than two years of bombardment of domestic suburbs where hundreds of thousands of people have died, action is to be taken. My question is, why is it acceptable to the west to stand by and do nothing while hundreds of thousands of people die over two years where the protagonist is using traditional armaments?

Monday 26 August 2013

HS2

Ed Miliband is in a difficult place, if he stands against the outrageous rising cost of HS2 which has no evidence of producing the necessary gains claimed, his shadow cabinet will be a bit miffed as most of the constituencies affected are conservative and consequently will probably rebel during the 2015 election and if he goes with the flow he will be accused of falling into the high brow view of the outer class and have the short sighted view of someone out of touch.

I suppose he will stick with plan A and do nothing.

Heading deeper into the detail of HS2, where do the facts come from that extol the virtue of a project heading towards the unfathomable cost of 100 billion pounds sterling?

Friday 23 August 2013

Housing boom & bust

The new housing scheme I mentioned earlier

http://caldariborderzone.blogspot.co.uk/2013/08/new-housing-scheme.html


appears to have been more successful than expected as house prises are rocketing.

Is that a good thing? I think not!

What happens after booms, busts, exactly.

The bust will not happen before 2015 so the new housing scheme is a cynical short term short sighted plan by the coalition which just wants to extend it's own time in government.

Thursday 22 August 2013

Long term plans need better thought

Last week Mark Carney said that 0.5% base interest rates would continue until 2016, as that was the suggested date for below 7% unemployment, all I can say is oops.

The latest unemployment figures show a trend that suggests unemployment will be below 7% much quicker than that, so are rates fixed for three years or will there be some back peddling?

Inflation does not seem to be a priority any more, I wonder if that will change?

Wednesday 21 August 2013

Egypt aftermath

Violence is never good or the right answer, so what is?

Let us take a step back, 18 months ago an allegedly democratic election was held and one party won. 12 months later the country as a whole rebelled against that democratically elected government, and the army "was invited" to remove it.

First and foremost this is not how we do things in the west, so we are struggling to fully understand the situation. Secondly how does a party win an election, by having the most votes. If the people who voted for them have changed their mind, why not vote for someone else? An extremely simplistic question whish I feel does not currently have an answer.

If we go back to the election we can see something striking that was not enlarged on at the time, and that is there was only two parties running. The Muslim Brotherhood led by Mohamed Morsi and the national party led by Ahmed Shafik who happened to be the Prime Minister under Hosni Mubarak, so perhaps the people did not have a choice as you and I know it as they did not want Mubarak’s regime back, so they voted for the only available option. With hind-site we can see that it will not end well, and if we look at the media we can see in Egypt today on the streets it is not ending well.

More importantly why has the military government now decided that the Muslim Brotherhood is a terrorist organisation? To please the people allegedly. This does not bode well for the future.

Tuesday 20 August 2013

Myths about fracking

I have just come back from the Balcombe protest which is just round the corner from me and I am not sure that I agree with what is being said there.

Claim 1: Fracking will contaminate the underground water supply. Subsurface contamination from fracking is “almost” impossible. Fracking involves the injection of liquid 7,000 to 15,000 feet underground, far deeper than drinking water aquifers, which are often about 300 feet below the surface.

Claim 2: Fracking does lots of damage to the land surrounding a drilling rig. Drilling operations involve trucks, heavy equipment, and facilities to store waste and other by-products. However, any impact on the surface is easily remedied, and waste products are carefully disposed of. Increasingly, waste products are recycled for use in other wells or converted to distilled water.

Claim 3: Fracking causes earthquakes. Last year in America, Congress asked the National Research Council to study the relationship between fracking and earthquakes. Every year, there are about 14,450 naturally occurring earthquakes worldwide of magnitude 4.0 or greater. According to the National Research Council, just 154 earthquakes over the past 90 years have been the result of manmade activity. Of those, only 60 were in the United States, and nearly all were moderate to small. The council concluded that fracking is extremely unlikely to cause earthquakes.

Claim 4: Fracking needs to be regulated. Since it was introduced in the 1940s, fracking has been used to extract oil and gas in America more than a million times. During that time, fracking has been regulated at the state level and has an unimpeachable safety record. A study in 2004 by the Environmental Protection Agency confirmed fracking was safe.

Monday 19 August 2013

Britain on the way to the EU poorhouse

News of the "cost of living crisis" is spreading beyond these shores.

There was much irritation among the Tories last week at the attention devoted by the BBC and others to the finding that UK average hourly wages have fallen by 5.5% since mid-2010, a faster rate of decline than every EU country except Portugal, the Netherlands and Greece. "It's a Labour story!", they cried, to which the BBC reasonably replied by pointing out that the figures were collated by the House of Commons library.

But despite the Conservatives' best efforts, the story has spread beyond these shores. As Ed Miliband's chief strategist Stewart Wood noted on Twitter, German newspaper Die Welt ran a piece on the figures  headlined "Britain on the way to the EU poorhouse". As CCHQ boasts that growth over the last year (1.4%) has outstripped that of the Euro zone (0.7%) and matched that of the US, it's an inconvenient reminder that not all are sharing in the recovery.

If Labour is to win the election, it won't be enough for it to convince voters that they are worse off under the Tories. It will also need to convince them that they'd be better off under Labour. In the 2012 US election, Mitt Romney similarly resurrected Ronald Reagan's famous line, "Are you better off now than you were four years ago?" but the electorate stuck with Obama because the numbers were moving in the right direction and they doubted Romney could do any better. The Tories hope and expect UK voters will take the same view of Labour in 2015.

Friday 9 August 2013

Today's figures don't add up

If you think of the world in a certain way, and someone disagrees with you, it’s natural to try to interpret their views using your mental framework.  But often the frameworks are incommensurable, and it just won’t work. The long fruitless Keynesian / monetarist debate of the 1950s is one such example.

Suppose someone told you that real business cycles models were just AS / AD [Aggregate Supply / Aggregate Demand]. Would you agree? I sure hope not, as the speaker would clearly be inferring some sort of acceptance of the AS / AD model that you see in textbooks. The one with sticky prices. And yet it would certainly be possible to explain the RBC model [Real business cycle] using the AS / AD graph, just assume a vertical AS curve.

If you assume the AS curve is always vertical then you have no business using the AS / AD model, and if you think tight money usually leads to low interest rates, then the model is basically useless. You need a different framework. Now if tight money always led to low interest rates, I suppose you could make IS [investment saving] slope upward.

Can someone tell me the difference between assuming the IS curve slopes upward, and assuming that a shift to the right in the LM [liquidity preference money] curve causes the IS curve to shift far enough to the right so that you end up with higher interest rates and higher output?

Thursday 8 August 2013

New housing scheme

Just a couple of years before a general election, as we are now, the Government will strive to convince us that its plans for the future are designed for the good of the country and, most especially, for our own good since it cares for us deeply.

That is why we need to scrutinise its proposals even more closely than usual and that brings us to Chancellor George Osborne's Help To Buy scheme which, he claims, is designed to revive the housing market.

In effect, the Government is underwriting part of the plan since would-be property buyers need find only a five per cent deposit, with 20 per cent being provided by a government loan and 75 per cent coming from a bank or building society. So, assuming all that financial help becomes available, we are looking at a scheme under which a potential buyer can purchase, let us say, a £100,000 property with a deposit of just £5,000.

What guarantee of credit status and ability to repay will have to be provided by the prospective property purchasers to whom the Government is proposing to lend our money and how much Government pressure will be applied to banks and building societies to take similar gambles with our money?

Recent statistics indicate house prices are rising at their fastest rate for more than three years and I am certain we shall see that trend continue, fuelled by Government-contrived low interest rates. This may achieve the Chancellor's political objective of making house owners feel good and therefore more inclined to vote Conservative. Unfortunately, it may also produce another house price bubble, falsely inflating property prices and making it even more difficult for first-time buyers to get on the house-buying ladder.

We must also remember that, although over time property values usually rise, sometimes they fall. For instance, in the United States some properties fell 40 per cent from their 2007 peak prices. Land is a long term investment.

The Chancellor's feel good proposals are politically very clever and may even play a part in helping the Tories win the next general election but two old and well-founded sayings come to mind. The first is that if something looks too good to be true it probably is. The second is Caveat Emptor, or Buyer Beware.

Wednesday 7 August 2013

Zero hours contracts

The use of zero-hours contracts by some retailers such as Sports Direct is a growing area of concern. Despite this, some employers still believe that zero-hours contracts can represent a good solution for all concerned and over a million British workers are thought to be employed on such contracts.

While zero-hours contracts have attracted considerable criticism, it is worth noting that they can bring specific benefits for employees. In particular, the flexible working arrangements provided by such contracts can appeal to students who value the choice they are given about when and how much they work because this means they can fit it around their studies. Working parents may also choose to work under such arrangements, simply because the flexibility of the contract means that they can manage their hours to fit around their home circumstances. The other benefit of a zero-hours contract is that it means people in full-time employment elsewhere can potentially supplement their income with a second job.

However, the fact that a growing number of retailers are choosing not to use zero-hours contracts may be an indication of the public concerns now being raised about their use. In most cases, these concerns stem from having workers on ‘standby’ to cover busy trading periods, which may make the system susceptible to abuse.

The other risk to employers is that they may mistakenly believe the contract with the employee is ‘casual’ when it is actually a zero-hours contract. In such cases, the employer may not be aware that the zero-hours contract gives the employee more benefits and employment rights.

What should be looked at is the huge amount of people who are on these zero-hours contracts and do not know they are on them!

Tuesday 6 August 2013

Death threats

This Needs to Stop

The recent talk of the internet is a series of reminders that humans are still social primates, a species known for pack behaviour and escalating aggression against outsiders. The internet gives you a broader range of outsiders to reach and the digital equivalents of punches to throw.

If you follow the links in some recent collections of stories about incidents, you will find an indie developer driven from the market, death threats for changing reload times in FPSes or advocating cosmetic changes to currency, and add rape threats if the target in question is female.

I would prefer to discuss what is a reasonable level and form of negative feedback to deliver online, but we as a society do not seem to have reached a sane place yet. We have yet to craft an enforceable consensus that death threats are not acceptable. One police agency arrested someone for “terroristic threats” that no reasonable person would interpret as threats, while another suggested that Twitter should address the direct threats to specific victims rather than having police treat them as a criminal matter. I imagine the same approach is taken in asking Verizon to stop people from phoning in bomb threats.

I do not think it is possible to have too many voices condemning violent threats. I do not know how much good it does adding a voice here, given our readership.

Monday 5 August 2013

Detroit a twist

Detroit's bankruptcy filing last month brought a double-barrelled bonus for lawyers - lots of much-needed work, and, due to a quirk of municipal bankruptcy law, no apparent need to disclose the fees they charge.

However, before lawyers from big-name firms could start totting up their billable hours, Judge Steven Rhodes made clear he wasn't happy with the lack of transparency. He said he wants to appoint an examiner to make sure fees charged to the city are fully disclosed and reasonable.

In reality, it is unlikely lawyers will object to added oversight given that they are being paid from taxpayer funds. In the overheated political atmosphere surrounding the case, having an independent examiner approve fees could give a degree of cover to lawyers who often bill as much as $1,000 an hour.

The outcome of Detroit's bankruptcy could set important precedents that will impact how other cities deal with billions of dollars in pension and bond obligations. With so much at stake, Detroit and its bond insurers and unions are likely to splash out on the best legal help.

Friday 2 August 2013

Bradley Manning

The 25-year-old was found guilty earlier in the week of espionage and more than a dozen other charges which together could result in a jail sentence of more than 100 years for the largest leak in US history.

However, in a blow for the American government, he was acquitted of aiding the enemy, the most serious charge against him. Prosecutors had argued that Osama bin Laden used the leaked documents to hatch plots against America!

The soldier waived his right to a jury trial and his fate was decided by Col Denise Lind, the military judge who presided over his court martial at Fort Meade, a military base outside Washington.

She cleared Manning of aiding the enemy, but convicted him of six counts of violating the Espionage Act, five counts of theft and several other minor counts. The 20 charges of which he was convicted or pleaded guilty could result in a total of up to 136 years in prison.

Now lets get this into perspective.

Jordan Robertson footballer, 21, pleaded guilty to causing death by dangerous driving at Leicester Crown Court given 32 months.

Marcus Barney absconder, 27, handed a seven year sentence for causing the death of Carol Tegg in a car accident in New South Wales.

Daniel Forshaw unemployed, 22, was given a four year sentence for killing Sandra Bullock with a motor bike in Liverpool.

Just three of the hundreds & thousands of examples of today's justice hand outs, the question is telling the public about government lies worth over 100 years?

Thursday 1 August 2013

Bedroom Tax court ruling

Inevitably, there will be a great deal of smoke and noise about the government's victory in the courts over what Labour [and the BBC] call the "bedroom tax". This decision does not mean necessarily that the Court believes the DWP [Department of Work & Pensions] was morally right to restrict housing benefit to a certain number of rooms per family. Nor does it make that policy immune to other political challenges.

What it did rule was that a separate bedroom for a disabled family member could not be regarded as a human right. That is, that the disabled were not being discriminated against by the refusal of the government to provide sufficient housing subsidy to guarantee them separate bedrooms.

That the court would have decided this should have been a foregone conclusion.

It would create unworkable and even absurd demands on the benefit system if anyone with a special need could claim that government provision for that need was his legal right. How about all the disabled or ill people now on housing waiting lists who have no adequate home at all? How about people whose temporary physical or mental illness might qualify for exceptional consideration?

It might be morally desirable [or not, depending on your outlook] to have all these personal variations of need catered for, and the government does make discretionary funds available to local councils for just that purpose, but it cannot be a legally binding "right".

This is just another example of how the notion of civil rights, with all their attendant legalistic implications is being misused. What is good or kind or compassionate, is not necessarily a matter of law.