econ geekery
Feb. 11th, 2007 10:47 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
guslI just had dinner with ![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
techstep and killerandy over at Gullifty's, and we did some serious econ-geeking while listening to the Grammy's.
Stocks
There are apparently instances of stocks for the same company being listed in both the Shanghai and Hong Kong stock markets, for which the prices don't agree: in fact, Chinese stocks are supposed to be overvalued (bubble). It seems like an explicit demonstration of the markets' irrationality (at least one of them). There are no arbitrage opportunities because you can't cover a Chinese short-sell with Hong Kong stocks. Astechstep said, the best you can do is bet that they will converge at some point in the future.
This seems like a "perfect" experimental control (just like twin studies). Maybe this way we can see 2 different ways markets could respond to news (it's like having 2 shots at the random number generator).
Saving vs consuming
killerandy showed me that, for the world, saving is better than consuming (from Hazlitt's Economics in One Lesson), contra Keynes. This is because the money saved gets lent and used productively by capitalists.
I wonder how dynamically this works in practice. If I deposit $500 at my checking account, does this mean that capitalists can immediately get more loans (by lowering the interest rate), or is there some friction in the system?
Taxes
Later, I made an argument that taxes trickle down identically whether you tax sales or income: since all income is meant to be consumed, the two systems (pure income tax, pure sales tax) produce the exact same incentives. So the puzzle then is: in practice, would they really have the same effect?
When you choose save (i.e. loan money to capitalists), does their capital spending count as consumption? Saving is something you can do more of under a 100% sales tax system, but said sales taxes will make the prices go up by just as much, making no difference at the end. So I think my argument stands, regardless of the answer to this question.
So maybe taxing only unproductive products (i.e. non-capital) would be a better system? i.e. no sales tax on tools. OTOH, this should make a small difference since, according totechstep, most of the cost in almost any capitalist enterprise is labour.
But remember that VAT stands for value-added tax: we try to avoid double-taxation. But how does this work in practice? If you buy a crate of coke bottles and sell the bottles individually, do you pay sales tax on both transactions? If not, how do you avoid paying taxes for the crate (incoming)?
What about land taxes (Georgism): how do they trickle down? I can definitely see how this would incent people to use land more efficiently.
techstep and killerandy over at Gullifty's, and we did some serious econ-geeking while listening to the Grammy's.Stocks
There are apparently instances of stocks for the same company being listed in both the Shanghai and Hong Kong stock markets, for which the prices don't agree: in fact, Chinese stocks are supposed to be overvalued (bubble). It seems like an explicit demonstration of the markets' irrationality (at least one of them). There are no arbitrage opportunities because you can't cover a Chinese short-sell with Hong Kong stocks. As
techstep said, the best you can do is bet that they will converge at some point in the future.This seems like a "perfect" experimental control (just like twin studies). Maybe this way we can see 2 different ways markets could respond to news (it's like having 2 shots at the random number generator).
Saving vs consuming
killerandy showed me that, for the world, saving is better than consuming (from Hazlitt's Economics in One Lesson), contra Keynes. This is because the money saved gets lent and used productively by capitalists.I wonder how dynamically this works in practice. If I deposit $500 at my checking account, does this mean that capitalists can immediately get more loans (by lowering the interest rate), or is there some friction in the system?
Taxes
Later, I made an argument that taxes trickle down identically whether you tax sales or income: since all income is meant to be consumed, the two systems (pure income tax, pure sales tax) produce the exact same incentives. So the puzzle then is: in practice, would they really have the same effect?
When you choose save (i.e. loan money to capitalists), does their capital spending count as consumption? Saving is something you can do more of under a 100% sales tax system, but said sales taxes will make the prices go up by just as much, making no difference at the end. So I think my argument stands, regardless of the answer to this question.
So maybe taxing only unproductive products (i.e. non-capital) would be a better system? i.e. no sales tax on tools. OTOH, this should make a small difference since, according to
techstep, most of the cost in almost any capitalist enterprise is labour.But remember that VAT stands for value-added tax: we try to avoid double-taxation. But how does this work in practice? If you buy a crate of coke bottles and sell the bottles individually, do you pay sales tax on both transactions? If not, how do you avoid paying taxes for the crate (incoming)?
What about land taxes (Georgism): how do they trickle down? I can definitely see how this would incent people to use land more efficiently.