Posts Tagged ‘free lunch’

Inflation Is Your Friend!

Saturday, April 6th, 2013

This view point has been recently propounded by Japanese Prime Minister Shinzo Abe and his protege (puppet?) Haruhiko Kuroda,  selected to be in charge of the Bank of Japan.  Japan is tired of two decades of stagnation and falling or at least not rising prices.  Mr. Abe has pushed for a 2% inflation target and Mr. Kuroda will provide $77 billion worth of monthly bond purchases to achieve that goal.  If that’s not enough, will more be forthcoming?  Is a little good and more better?

Inflation as a cure for economic ills is not new.  In fact, check out this 1933 video on the how inflation is good for everything and everyone.  Clearly, proponents of Neo-classical macro beg to differ.  Those in Econ 320 will have a chance to sort out the winners and losers.  Indeed there will be losers, as we know that there is no free lunch.  Who will the winners be?

1. lenders or borrowers

2.  savers or consumers

3.  labor or management

4. bond holders or stock holders

5.  renters or buyers

6.  government officials or Wall Street tycoons

Place your bets now or maybe just guard (cover?) your assets.

Whatever else you do watch the video?  It’s a hoot.

ZIRP: The New Free Lunch? Don’t Bet on It.

Wednesday, November 7th, 2012

The Federal Reserve Bank of the US has followed a zero interest rate policy (ZIRP) since fall 2008.  It has employed a variety of mechanisms to lower not only overnight loans between banks (the Federal Funds rate – its usual target) but also to lower the entire yield curve. (See the details at the Federal Reserve Bank of St. Louis.) Previous postings here and here have addressed some of the costs of this approach.

 

Yesterday’s Financial Times contains some historical evidence consistent with the idea that ZIRPS are not free.  John Plender argues that experience in Japan over two decades indicates that very low interest rate monetary policy did significant structural damage to the Japanese economy.   In addition to creating a very low cost of capital, excessive monetary ease tends to lock-in the existing industrial structure or as he argues

“…from the Austrian perspective of Von Mises, Schumpeter, and Hayek, the Japanese bubble that burst in 1990 fostered economic distortions they dubbed ‘malinvestments’ – credit driven investments in real capital that prove loss making when a credit bubble implodes.”

As a consequence, Japan impeded  “creatively destructive” economic activity since “zombie” companies were kept alive by cheap credit that was not available to new entrants.  Capital allocation became very distorted; hence, many profitable opportunities were foregone and low return (perhaps even negative return) activities remained in existence.

Of course, that was Japan.  Not the U.S.  That couldn’t happen here, could it?

 

The Ethics and Economics of “Free” Music

Monday, June 18th, 2012

Speaking of things that are “free,” David Lowery, indie rocker and now instructor at the University of Georgia, takes the current generation of music lovers to task for downloading songs on share sites, hence bilking the artists.  Here is his rather extensive post on the subject.

Here’s a taste:

The existential questions that your generation gets to answer are these:

Why do we value the network and hardware that delivers music but not the music itself?

Why are we willing to pay for computers, iPods, smartphones, data plans, and high speed internet access but not the music itself?

Why do we gladly give our money to some of the largest richest corporations in the world but not the companies and individuals who create and sell music?

This is a bit of hyperbole to emphasize the point. But it’s as if:

Networks: Giant mega corporations. Cool! have some money!

Hardware: Giant mega corporations. Cool! have some money!

Artists: 99.9% lower middle class. Screw you, you greedy bastards!

Congratulations, your generation is the first generation in history to rebel by unsticking it to the man and instead sticking it to the weirdo freak musicians!

I am genuinely stunned by this. Since you appear to love first generation Indie Rock, and as a founding member of a first generation Indie Rock band I am now legally obligated to issue this order: kids, lawn, vacate.

Lowery is an interesting guy, that’s for sure. Here is a previous post where he describes his role in Groupon.  And here are some of his musings on his forthcoming (?) book, “Highly Volatile: How Your Lame Band Taught You Everything You Need to Know about Economics and Finance.”

Well, let’s hope it didn’t teach you everything.

For more formal treatment of the economics of file sharing, you might head to the link at Stan Liebowitz’s homepage (of Liebowitz and Margolis fame).

Professor Liebowitz reviews the literature, which generally shows the significant hit file sharing has delivered too the industry. For some careful details, see “File Sharing: Creative Destruction, or Just Plain Destruction?” in the Journal of Law and Economics.

There is no free lunch

Monday, June 18th, 2012

But evidently there is free beer at the VR Tuesday night.

 

 

There is no such thing as a law in Economics?

Monday, September 5th, 2011

In an anecdote recounted in some economics books, Vilfredo Pareto is giving a presentation, only to be interrupted repeatedly by an indignant Gustav von Schmoller with this provocative question: “But are there laws in economics?” The next day, Pareto, dressed like a beggar, approached Schmoller in the street. We turn to Organizations and Markets for the rest of the story:

“Please, sir,” Pareto said, “can you tell me where I can find a restaurant where you can eat for nothing?” “My dear man,” replied von Schmoller, “there are no such restaurants, but there is a place around the corner where you can have a good meal very cheaply.” “Ah,” said Pareto, laughing triumphantly, “so there are laws in economics!”

Could this be the origin of the famous “law” about free lunches? Not likely, based on a quick look at Wikipedia. The history there, confirmed by Google searches of contemporary books, does raise a different question, though: Had Pareto and Schmoller been at a conference in New Orleans rather than Geneva, would they have had to revise their notions of certain economic laws? Because in that case, Schmoller’s answer would have had to be something like: “Why, in just about any public house you can eat for nothing this time of day! Try the one around the corner, they serve oyster stew! All you need to do is buy a drink for fifteen cents.” If the drinks are not overpriced at 15 cents, is the lunch still free? Some sources suggest that the whole “free lunch” custom was, in fact, a relief program, a socially necessary outcome of high unemployment and poverty. This would merit (and require) more than a superficial Google search, so I’ll leave it as an exercise to the interested reader.

First Fall Economics Tea, Monday at 4:30

Sunday, September 19th, 2010

Is there something funny about this picture?

We will hold the Economics TeaBAs this term on Mondays at 4:30 p.m. in Briggs 217.

The EconTBA is a great opportunity for you to take a break from your studies to come and chat with your favorite economics professors and students. Last year we had a vibrant guest list, ranging from professors in other departments to visiting speakers to emeritus faculty. And even if you don’t like us, there are always the “free” tea and cookies for you to enjoy.

This was formerly called “Economics Tea,” but we decided it was too risky to lock in to one beverage, given potential for changes in prices and income. Hence, Economics TeaBA.

See you Mondays.

Economics Tea with Corry Azzi, Today at 4 p.m.

Monday, February 15th, 2010

Rumor has it that Professor Azzi will be stopping by for tea and conversation.

More than likely, “subtle” is one of the last adjectives that springs to mind when a description of economics professor and alumnus Corry Azzi is needed. In a world fashionably attired in grays, Azzi, ’65, prefers going through life dressed to the nines in blacks and whites.

….

A willing combatant on the academic battlefield, he revels in the good fight. He doesn’t suffer fools easily and spouts sentences that sound like a talk radio host audition: “We’ve put such a value on open-mindedness that we think the uneducated and the ignorant are sophisticated.”

Peek beyond the bluster, however, and you will find an award-winning teacher, loyal friend, and most importantly, a nurturing mentor.

Who knew?

We will also be discussing the Bjorklunden weekend, the winter Olympics, and whether 4 p.m. is too late for “morning thunder.”

See you there!

Don’t Forget the Monday Economics Tea, 4 p.m.

Sunday, February 7th, 2010

Following the success of the inaugural Economics TBA, we will be breaking out the hot beverages and cookies once again this coming Monday at 4 p.m. (Caffeine available upon request).

This should work out splendidly for you with classes running until 4:20, as I’m certain that both the water and the conversation will be heated by that point.

See you there!

Shine a Light… Life After Lawrence Edition

Thursday, February 4th, 2010

It’s never too early to think about what you are going to do after you leave Lawrence. In fact, thinking about what you might do after graduation could well open up some exciting opportunities whilst you are still here in the friendly confines of Appleton.

A week from Sunday, February 14, St. Valentine’s Day, and the last day of the reading period, 25 alumni will be on campus for the Shine Light, More Light on Your Future conference. I strongly recommend that you seize the opportunity to meet our alumni and discuss their career paths and experiences. They are here because they love Lawrence and want to help folks just like you.

Looks like a really solid lineup, including my mentor, Alan Parks! And, there’s probably free food, too.

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Give Me a “TEA”

Monday, February 1st, 2010

Don’t forget, the Economics Tea kicks off today at 4 p.m. in Briggs 217. “Free” cookies and discussions of maximizing behavior. If you are reading this, presumably your attendance indicates a well-specified objective function, whereas your absence is due to high marginal costs rather than an information problem.

If you find that amusing, then this will definitely be your kind of crowd.

Hockey Night in Appleton

Friday, January 29th, 2010

The esteemed economics faculty is planning to crash the mighty Vikings men’s hockey game Saturday evening. My bet is that the professors will spring for cocoa if you tell them you have a “liquidity constraint.”

See you there.