the rise of American authoritarianism

July 25th, 2018

More than two years ago Amanda Taub, a journalist and former human rights lawyer, published an amazing article that I somehow missed. Drawing on the work of several political scientists, Ms Taub explains why Donald Trump was elected, and why we can expect US voters to elect authoritarian figures similar him in the future. In other words, Trump is not a passing phenomenon. Read the rest of this entry »

factor investing vs hedge funds

July 22nd, 2018

In 1992 Eugene Fama and Kenneth French, two professors at the University of Chicago Booth School of Business, published a paper that showed how investors could beat the stock market’s returns … by taking advantage of two simple factors: the tendency of small or cheap companies to outperform over time.

… [T]he Fama-French paper was a bombshell, largely because Prof Fama is the father of the “efficient markets hypothesis”, which argues that investors cannot consistently beat the market.
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robots and jobs

July 6th, 2018

Tim Harford, the FT’s ‘undercover economist’ has written a superb column explaining why it makes no sense to tax ‘robots’. In part this is because robots do not exist, at least not yet. What threatens employment is automation of specific tasks, not whole jobs. Should we, then, tax automation, which drives increases in productivity? Mr Harford thinks that this is a bad idea, though he acknowledges “In a world of mass technological unemployment we are certainly going to need to tax something other than labour income alone”.

He illustrates his point brilliantly with the example of spreadsheets, an accounting process that a few decades ago was very labour-intensive. Read the rest of this entry »

immigration policies of Republican presidents

June 25th, 2018

FT columnist Edward Luce, in an op-ed last week, highlighted the rise of anti-Americanism in the world. “US pollsters”, he wrote, “routinely find that more of the world trusts China to uphold global stability than America”. What caught my attention, though, was Luce’s point that Trump’s treatment of immigrants is so different from that of his Republican predecessors:

Both Reagan and Bush junior were keen to create new citizens. Reagan gave amnesty to 3m [3 million] illegal immigrants. Mr Bush said if Mexicans could make it across the border, “hell we want ‘em”. Mr Trump called African countries “shitholes” and uses words such as “animals”, “infest” and “criminals” when talking of Central America.

Edward Luce, “The rise of a new generation of anti-Americans“, Financial Times, 22 June 2018 (gated paywall).

Adam Smith for our troubled times

June 23rd, 2018

An old joke is that a classical book is one that everyone cites, but no-one reads. By this measure, each of the two books that Adam Smith wrote are classics. If his followers today took time to read then, they would disagree with much of what he wrote. Read the rest of this entry »

Italy’s economic woes

June 20th, 2018

Martin Wolf’s Wednesday column provides an excellent explanation this week of why Italy is in trouble. Italy should never have joined the euro. In theory, countries can avoid devaluation by increasing productivity and lowering wages. In practice, this is politically difficult. In the case of Italy, it is impossible. If Italy had kept the lira, it could easily devalue its currency and regain competitiveness with other countries of the euro zone (primarily Germany). Read the rest of this entry »

New Zealand’s universal pension is in danger

June 16th, 2018

New Zealand has a universal pension scheme that is the envy of the world. It is simple, affordable, and eliminates poverty in old age. When a qualified resident reaches the state pension age, he or she receives a basic, flat pension, regardless of income, wealth or employment history. This benefit, called ‘Superannuation’, is financed from general government revenue. Earmarked taxes are not levied to support it, but benefits are taxable as regular income, so net benefits are lower for pensioners who have income from work or from savings. Read the rest of this entry »

expanding old age pensions in Bangladesh

May 30th, 2018

A daily newspaper in Bangladesh reports that the finance ministry has announced “plans to introduce a universal pension system for both public and private sector employees”. Reading the column, however, shows that the scheme is not universal. It is contributory, and private. If there are no contributions, there will be no old age pension. Government involvement will be limited to matching grants equal to 25 to 50% of the contributions of low-income savers.

The scheme seems to have been promoted by the World Bank. Read the rest of this entry »

the source of US power

May 28th, 2018

FT columnist Wolfgang Münchau explains that acceptance of the US dollar as a global currency gives the country extraordinary power. The United States alone can impose and enforce extraterritorial sanctions. This privilege is not available to other countries because no currency exists to replace the US dollar. Read the rest of this entry »

old age pensions in the Philippines

May 27th, 2018

In January 2017, the government of the Philippines increased social security pensions by 1,000 pesos (19 US dollars) a month without any increase in contributions. Simultaneously, the government reduced income taxes. A young Philippine economist writes that this was bad policy first because it increases government deficits and second because it helps the wealthy at the expense of the poor.

Fewer than a third of the country’s workers have access to any retirement pension at all. The vast majority of pensions are from the social security system, and the beneficiaries are not exactly poor. Increasing their pensions by increasing deficit spending does not help those who do not participate in the social security system, so have no entitlement to a pension in old age.

It would be much better, this economist believes, for government to introduce a universal pension, payable to all residents from the age of 60. I agree, and am pleased to see this call for a simple, universal pension in a country with so much poverty.

All in all, the yawning gaps of the country’s social pension system require bold, comprehensive, and forward-thinking solutions like universal social pension – not simplistic, superficial, and short-sighted ones like [Rodrigo] Duterte’s pension hike. ….
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