Ask an Economist
The short answer is, no. By law, the U.S Fed is an independent authority in charge of the monetary affairs of this nation. The White House cannot formally ask or force the Fed to do anything. If the Fed tried such a move, it would send panic...
It is common for industries to claim that they create jobs outside the industry, especially when they are seeking government subsidies. A few years back, a consultant for the Iowa ethanol industry claimed that ethanol was responsible for 90...
My best understanding is that the acquisition you indicated was completed in 2007, but Aramark retained its identity as a company. TARP was created in 2008, and a comprehensive list of companies that received “bailout” funds can be found at...
How very thoughtful and considerate a project you have in mind!
You are already exhibiting entrepreneurial behaviors by reaching out for advice. When starting anything new, you need to get questions answered for which you don’t know the...
I am assuming you have to keep the cell or wifi plan and you are just upgrading the fixed cost of a new router or cell phone. Let’s take the smartphone/cellular plan case.
Suppose you currently pay $100 per month for your cellular plan and...
The most correct way should be adjusting inflation according to each country's inflation data before converting the values to NZD if New Zealand is the baseline to compare with. The latter will not necessarily result in bad data as long as the...
1) The coronavirus is everywhere. It is not obvious it would affect the U.S. dollar differently than the Euro or Yen or Yuan. All the governments and economies are stressed, and so relative values will be unaffected.
2)...
When banks lend out money, they do so expecting repayment. If banks are not repaid, the value of the loan decreases. By law, banks are obligated to value their loans at the fair market value. Mandating that all repayment stop...
This question is predicated on five assumptions: first, that investors generally now prefer capital gains over dividends, a shift that occurred in the '60s or '70s; second, that this preference for capital gains encourages corporations seeking equity funds to appear to have potential for growth; third, that this appearance causes equity markets to overvalue such firms; fourth, that the second and third factors cause managers to make deceptive decisions, ultimately misallocating capital. This story is based on a couple essays I read defending short selling as a way to devalue overvalued firms.
Whether or not short selling is "encouragable", the story was convincing enough that I came to think it would be a good thing to push investor preferences back towards dividends, so that capital would be at least somewhat more allocated towards sustainable profitability instead of unsustainable growth.The policy that occurred to me to accomplish this was to raise the capital gains tax and lower corporate income tax.
What is your opinion of this story and policy proposal? Are either plausible? Where do these views sit in today's economic rhetoric?
Thank you for these interesting questions. As they indicate, you are already well aware of potential distortions associated with tax policies. It is quite possible that your suggested policy proposal would be associated with distortions and...
This is very confusing to me, as coming of age in a post-GFC United States I've always associated neoliberalism with things such as low interest rates. Any help on this would be greatly appreciated.
Thank you for your question! These ideological "definitions" and distinctions can be quite confusing and arbitrary. In the Latin American context, usually neoliberal is associated with policies that are orthodox, that is, based on notions of free...
While it is true that lower prices at the pump benefit consumers, stock markets also infer that low oil prices signal weak demand for oil, in this case from travel-related fears due to the corona virus. And weak demand for oil often indicates...
The adverse effects of the minimum wage depend on how high it is compared to the prevailing wage in the area. Because wages are higher in San Francisco than Des Moines, a $15 minimum wage in San Francisco, where the median wage is $25.11,...
The U.S. Bureau of Labor Statistics has an annual projection of employment and labor force growth. The most recent is Employment Projections: 2018-2028, available...
No, there is nothing preventing non-profit organizations from offering insurance. Indeed, this is quite common in health care, with non-profit health insurers accounting for over 60% of health plans with more than 100,000 people enrolled (...
A shorter way to ask this would be is if there is a true economic incentive to build roads when the government says that they will pay for it anyway.
Answer when you can. Thank you!
Private developers will identify profitable opportunities from constructing toll roads; the current road system may be too congested or outdated, or an undeveloped route may have potential to be lucrative. Typically, proposals made by individual...
I found a policy report that might be a little dated (2013) but I think is probably still relevant. You can find the report here: <https://fas.org/sgp/crs/misc/R41897.pdf>
The...
As many observers have noted, economists are not especially good at forecasting the future. Nonetheless, intellectual trends generally move slowly. So I would expect that the issues economists deal with in the next twenty years will look a...
value of securities held at central bank = amount of central bank money.
If the value of the securities rise, then the Fed needs to increase the amount of central bank money, which it does by passing its "profits" to the US treasury. Normally, the securities held at the Fed are US Treasury Notes, but starting with the Great Recession, the Fed began accumulating mortgage backed securities as well. Ultimately, these securities gave a profit, and these were passed on to the US treasury like always. However, what if that was not the case? What if these securities defaulted, and the Fed incurred a "loss"? Would it have to pass the loss onto the US Treasury as well? What would that look like? Would the US treasury simply give the Fed US Treasury Notes without getting central bank money in return?
The following FEDS Note by Bonis, Fiesthumel, and Noonan (2018) provides detailed answers to your questions: https://www....
There is a large body of research that shows that peers matter for later academic and economic success. A prominent study in which children were randomly placed in kindergarten classes showed that children who were placed in schools with...
Here are some quotes from her book: “He took no pity on local companies and removed even more trade barriers; the result was the loss of 177,000 industrial jobs between 1973 and 1983”
“Pinochet had deliberately sent his country into a deep recession, based on the untested theory that the sudden contraction would jolt the economy into health”
“In the first year of Friedman-prescribed shock therapy, Chile’s economy contracted 15 percent, and unemployment- only 3 percent under Allende— reached 20 percent, a rate unheard of in Chile at the time”
“He calculated what it meant for a Chilean family to try to survive on what Pinochet claimed was a ‘living wage’. Roughly 74 percent of its income went simply to buying bread... by comparison, under Allende, bread, milk, and bus fare took up 17 percent of a public employees salary”
“In 1974, inflation reached 375 percent- the highest rate in the world and almost twice the top level under Allende”
So I’d like to ask;
1) are there any statistics/ data that contradict these claims, or maybe give more context to them
2) was Pinochet’s “neoliberal experiment” really an example of neoliberalism? And if it was, was it a failure?
Also,
1) was the economy under Pinochet really that terrible
2) if it was, was it due to the pushing of neoliberal ideals by the Chicago boys (those educated at the Chicago school of economics)
3) is Chile proof of the failures of neoliberalism
My name is Marcelo Oviedo and used to work as Assistant Professor at Iowa State University. My ex-colleagues in the Department of Economics have invited me to answer your questions posted in the Ask An Economist section in that...
I have a few questions;
1. Will canceling my debt negatively impact my credit score?
2. Will I be able to get future student loans if I want to go to graduate school?
(The process states that I WILL be able to get those loans if I waive some stuff and agree to have my old loans reinstated). But my question is more basic:
will anyone give me a loan?
References;
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/disability-discharge
https://www.insidehighered.com/news/2019/08/22/trump-administration-grant-disabled-veterans-automatic-loan-forgiveness
1. The most common credit score is of the form used by FICO (Fair Isaac Corporation). The calculation has five components, payment history, amount owed, length of credit history, new credit, and type of credit used. The first two...
For such a strategy to work at the least following two conditions must hold:
- each time you transact, you need to correctly pick a stock that would eventually rise in price by enough to offset the bid-ask spread and transaction fees you...
Does economics provide any model by which one can infer anything about actual selling prices for something, based only on data obtained from published asking prices? For example, if we had a data set of ~3000 sales over 20 years, and we knew that asking prices in real dollars were basically flat, would that tell us anything about the selling prices? Would they also be flat? Or maybe instead would they be gradually approaching the asking price? I have no idea.
Thank you.
The question you are asking is about the bid-ask spread. The bid is what a buyer wants to pay for an item. The ask is what the seller wishes to receive. You know the ask, you want to know the bid. The bid would be demand, the...
Thaler and Sunstein in their book define nudge as “any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives.”
...Purchasing a vehicle from an American car company that is mostly manufactured overseas with foreign parts (list for reference: https://www.motorbiscuit.com/3-american-cars-that-are-barely-made-in-america/)
Or,
Purchasing a vehicle from a foreign car company that is mostly manufactured in the US with US made parts (list for reference: https://www.usatoday.com/story/money/cars/2018/06/22/american-cars/724724002/)
This question addresses an important debate in the current economic climate in which global production network and offshoring are prevalent. Economic research on this topic from both theoretical and empirical aspects is vast and is still ongoing...
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