Economic Rockstar

Connecting Brilliant Minds in Economics and Finance

152: David Kyle Johnson on Economics and Philosophy in Soylent Green

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152: David Kyle Johnson on Economics and Philosophy in Soylent Green

This is a 3rd instalment of my interviews with Professor David Kyle Johnson, an  Associate Professor of Philosophy at King’s College in Wilkes-Barre, Pennsylvania.

We catch up again after watching the 1973 dystopian movie ‘Soylent Green‘ and discuss some economics and philosophical themes that run through the movie.

In this Episode, we cover:

  • Scarcity
  • Choice
  • Over-population
  • Consumption
  • Inflation
  • Production
  • Automation
  • Altruism
  • Theft
  • Black market economy
  • Pricing
  • Equilibrium
  • The Invisible Hand

Social Issues Discussed Include:

  • Social class/status,
  • Feminism
  • Poverty

Philosophical Questions Addressed Include:

  • Should we resort to cannibalism to save the human race?
  • Should we have the right to die with dignity in the face of a terminal illness, the loss of hope or over our moral principles?
  • Is there a god?
  • And more.

Movies:

Other Episodes to Check Out:

146: David Kyle Johnson on Science Fiction as Philosophy and Finding Nietzsche’s Übermensch in Economics

151: Unreleased Bonus Episode with David Kyle Johnson

Books:

Patreon

If you’re a fan of the podcast and would like to show your support in anyway, please check out my Patreon page at www.patreon.com/economicrockstar where you can sign up for any of the awards for as little as $1 a month or you can simply follow me on the Economic Rockstar Facebook page or on Twitter or simply recommend the show to a friend, especially if they have never had the opportunity to study economics.

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085: Michael Roberts on Understanding Karl Marx and His Thinking on Capitalism

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085: Michael Roberts on Understanding Karl Marx and His Thinking on Capitalism

Michael Roberts

Michael Roberts has worked as an economist for over 30 years in the City of London. He is author of The Great Recession: Profit cycles, economic crisis A Marxist View and The Long Depression: Marxism and the Global Crisis of Capitalism.

Economics:

In this episode, Michael mentions: Marxism, capitalism, Austrian economics, GDP, multinationals, inflation, printing of money, booms, busts, profitability, recession, depression, inequality, wealth, means of production, private property, competition, externalities, unintended consequences, bailout, austerity and unemployment.

Economists:

In this episode, Michael mentions: Karl Marx, Friedrich Hayek, Adam Smith, John Maynard Keynes, Brad DeLong and Paul Mattick.

Links:

Books:

 

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082: Peter Boettke on Smith and Keynes and Why We Should Be ‘Living Economics’

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082: Peter Boettke on Smith and Keynes and Why We Should Be ‘Living Economics’

Peter Boettke is Professor of Economics and Philosophy at George Mason University, the BB&TPeter Boettke Economic Rockstar Professor for the Study of Capitalism, and the Director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University.

Peter is now the co-author, along with David Prychitko, of the classic principles of economics texts of Paul Heyne’s The Economic Way of Thinking.

Professor Boettke’s most recent book, Living Economics, provides a resource for how teachers and students can engage in many fascinating questions in economics and illuminates the core principles that should guide our thinking.

Peter’s efforts in the classroom have earned him a number of distinctions including the Golden Dozen Award for Excellence in Teaching from the College of Arts and Sciences at New York University and the George Mason University Alumni Association’s 2009 Faculty Member of the Year award.

Peter’s research has primarily been in the area of comparative political and economic systems and the consequences with regard to material progress and political freedom.

Economics:

In this episode, Peter mentions: Classical economics, Austrian economics, Keynesian economics, credit transmission, institutions, the invisible hand, mainline economics, mainstream economics, private property, public choice, rent-seeking, opportunity cost, scarcity, exchange, markets, negative externalities, laissez-faire, Coase theorem, Pigouvian tax, reciprocity, inflation, stagflation and Malthus’ theory of The General Glut.

Economists:

In this episode, Peter mentions: Adam Smith, F. A. Hayek, Ludwig von Mises, Milton Friedman, Paul Samuelson, John Maynard Keynes,Frédéric Bastiat, David Hume, Vernon Smith, Thomas Robert Malthus, J. K. Galbraith, Paul Heyne, Hyman Minsky, Thorstein Veblen, Steve Keen, Ben Bernanke, Arthur Pigou, Gordon Tullock, James Buchanan, Robert Coase, Elinor Ostrom, Vincent Ostrom and Major Douglas.

Papers:

Books:

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077: The Irish Economy 100 years on from the 1916 Easter Rising

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077: The Irish Economy 100 years on from the 1916 Easter Rising

This is a commemorative episode celebrating the 100 year anniversary of Ireland’s 1916 Easter Rising in which the Proclamation of the Republic was read by Padraig Pearse at four minutes past noon on Easter Monday, April 24th, from the steps of the General Post Office on Sackville Street (now known as O’Connell Street). The document proclaimed Ireland’s independence from Great Britain.

How was Ireland’s economy performing in 1916 and how far have we come 100 years on?

The Irish Economy 100 years on from the 1916 Easter Rising

Background:

Ireland in 1916, consisting of 32 counties, was ruled by Great Britain. The 32 county economy experienced a period of unprecedented prosperity mainly due to the positive economic effects of the First World War.

However, since the Great Irish Famine of 1846, Ireland experienced mass emigration and large numbers of deaths. The laissez-faire economic ideology was a failure. From the period 1851 to 1916, over 5 million Irish citizens emigrated reducing the population from a peak of approximately 8 million to 3 million.

The Irish economy was ruled by Great Britain and its economy became increasingly tied to trends in global markets. The cost of living increased and there were some rises in living standards. These were subject to sharp declines due to the recessions of 1859 to 1863 and 1877 to 1880. Poverty was widespread and tensions between landlords and tenant farmers escalated. Despite this poverty, Irish living standards were above most of Eastern and Central Europe but income levels remained below the UK and the US.

Ireland’s economy became increasingly reliant on four main industries: Agriculture, Linen production, Shipbuilding (where the Titanic was built) and Brewing and Distilling. However, agricultural exports were heavily dependent on Great Britain and Shipbuilding was dependent on an outdated industry. For example, it wasn’t long after the First World War that the Irish Shipbuilding industry collapsed.

The First World War of 1914 brought about a period of prosperity for Ireland, due to the increased demand for food, linen and ships that were directly linked to the war effort. However, this prosperity was not shared by all.

So what did the Irish economy of 1916 look like compared to its economy today 100 years on?

CSO 1916 - 2016 infographic

Source: Central Statistics Office

Population:

The population of Ireland in 1916 was one of the lowest recorded in its history. According to the population census of 1911, the population stood at just 3.14 million. It represented a country devastated by death caused by the famine over a half century previous and the subsequent mass emigration that ensued.

Today, Ireland’s population has recovered to 4.59 million, an increase of 46%. However, many have emigrated due to the financial crisis of 2007, most notably Ireland’s youth. We have reverted to being a net emigration population after a period of becoming a net immigration population, attracting workers from overseas as well as bringing Irish people home.

Emigration for the whole island of Ireland in 1916 was 7,366 or 17 per 10,000 of the population. This had fallen from a substantial level before the outbreak of the Great War. The latest data for 2015 shows emigration for the Republic of Ireland at 80,900 representing 175 per 10,000 of the population.

Emigration in 1916 consisted of 5,580 females and only 1,786 males. This I found surprising.

The four main destinations for Irish emigrants in 1916 were the US, the UK, Canada and then Australia.

In 2015, the UK was the main destination for Irish emigrants. Only 7% of emigrants went to the US in 2015 compared to 58% emigrating in 1916.

The Irish diaspora abroad is quite large. Despite being a small island off Western Europe, Irish smiles have been welcomed all over the world. Ancestry can be traced back to Ireland particularly for those living in the United States, the UK, Argentina, Australia and Canada.

Today, it is estimated that there are 80 million people of Irish descent living around the world today. Other that the Republic of Ireland and Northern Ireland, Montserrat in the Caribbean is the only other country where St. Patrick’s Day is a public holiday.

Montserrat is known as the Emerald Isle of the Caribbean and it’s Irish heritage dates back to the 17th century when the island became a safe haven for the Irish who were originally sent to the Caribbean as slaves by Great Britain’s leader Oliver Cromwell. A census in 1678 showed that more than half of the population on the island were Irish.

Life Expectancy:

According to records for 1911, the life expectancy for a male born in Ireland was 53.6 years and for a female 54.1 years. Today, a male born in Ireland has a life expectancy of 78.3 years and a female 82.7 years.

Despite the period of prosperity, Ireland remained divided in terms of the gap between wealth and poor. Much of rural Ireland in the west of the country lived as an agrarian society, dependent on agriculture for a living. Living standards were much lower relative to other parts of the country.

Urban areas did not escape the ravishes of poverty. Inequality was more prevalent in urban towns, particularly in Dublin city. Despite a boom in food and linen exports in 1916, the Irish poor remained hungry.

Henrietta Place, Dublin 1913. The flight of wealth to the suburbs often meant an escape from inner city squalor.

Henrietta Place, Dublin 1913. The flight of wealth to the suburbs often meant an escape from inner city squalor.

Poverty levels in Ireland today are at 8% with households consisting of one adult and one or more dependent children considered most at risk. Rural Ireland, including the West of Ireland, has a higher incidence of poverty than the rest of the country. As the saying goes, things change but always stay the same!

Many adults and children perished due to influenza, bronchitis and tuberculosis. These were the leading causes of death in Ireland along with heart disease. Today, heart disease is the leading cause of death in Ireland with few incidences of death from the other forms. The number of deaths by suicide that was officially recorded in 1916 were 68 compared to 459 for 2014, This represented 10 per 100,000 of the population compared to approximately 2 per 100,000 of the population.

Housing:

Ireland’s macro economy of 2016 is showing remarkable progress since it’s recession, bailout and financial crisis. The Irish have a love affair with housing. Perhaps it has its roots in history where many people were evicted from their homes during the Great Irish Famine.

During the boom from 1998 to 2007, Irish house prices soared only to come crashing down once the crisis hit. At its peak, over 90,000 houses were built but today only 11,000 houses were completed. The Irish housing market is under immense stress with demand outstripping supply. This shortage is resulting in much higher rents than what was recorded during the boom period. House prices are recovering but recent government legislation is making it difficult for landlords who are selling their property or evicting their tenants in order to capture the higher rental yields. Ireland is undergoing a housing crisis in today.

In 1916, Ireland experienced a severe housing crisis. Dublin and other cities became infamous for the living conditions of its citizens. The tenements, where many impoverished families lived, marked a bleak period in recent Irish history.

Multiple families shared large terraced houses with extremely poor sanitary and hygiene conditions. It was estimated at the time that 20,000 families in Dublin occupied single rooms and in some cases with other families. Family sizes of 8 or 10 children were not unusual. There were cases of 104 people occupying a single house built to accommodate one family.

A Tenement Room on Francis Street, Dublin in 1913

A Tenement Room on Francis Street, Dublin in 1913

Many evictions took place as families fell behind in rent. Facing starvation, children queued for bread which was handed out by religious orders. Many people in the West of Ireland emigrated due to food shortages and abandoned their homes. Despite many empty homes in the rural parts of Ireland, many families suffered homelessness, extremely poor living conditions and starvation.

Due to the housing crisis that Ireland is experiencing today in 2016, there are some echoes of the past. Homelessness has jumped 100% since January 2015. Over 700 families are living in emergency accommodation in hotels and guest houses. Evictions are up significantly and there are currently 17,000 people in the courts who are at risk of losing their homes. Food parcels are being handed out each week and the number queuing is rising.

Employment:

The Irish economy in 1916 was transitioning toward becoming an industrial nation. It was by no means considered backward and was in fact placed in the group of middle-ranking industrialised countries along with the Netherlands, the Scandinavian countries, Italy and Portugal.  26.8% of workers in 1911 worked in manufacturing jobs compared to 8.6% in 2011.

An estimated 150,000 men had joined the British army and many men and women went to the UK to find employment in munition factories and hospitals. Wages had increased during this time.

Almost 50% of the working population were employed in the Agriculture sector in 1911. This compares to just 4.9% in 2011.

In 1911, 8.8% of the labour force in Ireland worked in the professional group of occupations. By 2011, these workers now account for over 40% of the Irish workforce.

Ireland’s unemployment rate today is 8.8% coming from a recent high of 14.4%. It is unsure what the level was in 1916.

Exports:

Ireland in 1916 mostly consisted of indigenous industries. 85,000 workers were employed in linen production with over 18 million pounds (weight) of linen yarn and 112 million pounds (weight) of finished linen goods exported. Prior to the outbreak of World War I in 1914, about 70% of these exports were to the United States of America. However between 1914 and 1918, linen was in great demand for military purposes by the British Army for items such as tents, haversacks, hospital equipment and aeroplane fabric.

Today much of its traditional industry gone today. Very few linen manufacturers and weavers exist today. To bring my own personal family history into this story, my family remains one of a few linen weavers in Ireland today, producing the best Irish linen in the market with exports to countries that include Japan, the US and Italy. I’m personally proud of my father for what he has achieved and for extending the Irish tradition of producing the finest linen in the world.

Ireland is considered a small open economy and the UK still remains one of our largest trading partners. The Irish economy attracts many multinationals companies to locate here. In 2016, Ireland ranks among the top countries regarding industrial competitiveness and ease of doing business.

The Guinness brewery was the main brewery in Ireland and in 1916 it had the largest output of any brewery in the world, brewing more than two-thirds of all beer brewed in Ireland.

Cask Yard St. James' Gate Brewery 1906 - 1913

Cask Yard St. James’ Gate Brewery 1906 – 1913

The largest exporting sectors in Ireland during 1916 were woollens, brewing, butter, bacon, poultry, cattle, cotton goods and linen. The sectors that were in decline included horses, whiskey, pigs and sheep.

Ireland had a trade surplus of 1.5 million pounds (and a balance surplus of 11.1 million pounds) in 1916. For the latest data today, which is January 2016, Ireland is operating a trade surplus of 4.99 billion euro. Ireland’s largest exporting sectors are Medical and pharmaceutical products (representing 27% of total exports), Office machines and automatic data processing machines, and Food and live animals (representing 7.8% of our total exports).

The EU accounts for 56% of the total value of Irish goods exported. Belgium is Irelands largest export trading partner accounting for 15% of the total value of goods exported.

Great Britain remains Ireland’s single largest source of imports with 25% of the total value of goods imported to Ireland.

The USA remains Irelands largest non-EU destination for exports and imports.

GDP:

According to research by Kevin O’Rourke of the Department of Economics at University College Dublin a proxy measure for GDP per capita in Ireland was estimated to be 32.50 in 1913. This was based on a GDP estimate of 150 million. To put this into some context, the estimated GDP per capita in 1864 was 12.50 with GDP estimated at 60 million – over a 160% increase in nominal terms between the Famine and the Great War. Irish GDP per capita converged on the UK average during this time.

According to the International Geary-Khamis dollars, Ireland’s GDP per capita in 1913 was $2,736 whereas the US GDP per capita was $5,301 and the UK’s at $4,921, almost twice that of Ireland’s. This seems to suggest that incomes had yet to converge with those in Great Britain.

Eden Quay displays the bustle of turn of the century Dublin city life

Eden Quay displays the bustle of turn of the century Dublin city life

Ireland would have been considered one of the poorest Western European countries along with Greece, Italy, Portugal and Spain – yes there’s that familiar acronym of the financial crisis.

Today, Ireland is considered one of the richest countries in the world with GDP per capita of just under $49,000, placing the country in 10th position, with the US in 9th and the UK in 19th according to the World Bank.

GDP for Ireland was $11.9 million but this collapsed to $7.8 million by 1921 perhaps due to the Irish civil war. It was only in 1960 that Ireland recovered to pre-1916 levels.

There were 9,850 cars registered in Ireland in 1915 with now over 2 million registered today.

F_Horse, bicycle, Car_Stephen'sGreen_clar21t

Inflation:

Due to the outbreak of the First World War in 1914 and the resulting scarcity of goods, inflation in Ireland increased considerably by 200% over the wartime period as measured by the wholesale price index.

Unless wage inflation was outpacing price inflation in 1916, which is very unlikely, families must have experienced a real reduction in the purchasing power of their £.

These increases in prices were also due to Government policy which increased taxes and duties on various products.

The retail price of butter, tea and eggs were expensive in 1916. For example, the price of a pound of butter then would have cost 7 euro 35 cent updated to today’s consumer price index compared to today’s price of 2 euro 79 cent.

Links:

Family History Research:

  • Ireland’s Census: Search for your Irish Heritage for the following Census years: 1911, 1901, 1851, 1841, 1831 and 1821.
  • National Library of Ireland: www.nli.ie

Images:

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048: Steve Hanke on Currency Boards, Moral Hazard and the Benefits of Privatization

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048: Steve Hanke on Currency Boards, Moral Hazard and the Benefits of Privatization

Steve Hanke is a Professor of Applied Economics, specializing in currency boards. He is Co-Director of the Institutesteve hanke for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

Steve is a Senior Fellow and Director of the Troubled Currencies Project at the Cato Institute in Washington, D.C. and a member of the Charter Council of the Society of Economic Measurement and the Financial Advisory Council of the United Arab Emirates.

Previously, Professor Hanke was a Senior Economist on President Reagan’s Council of Economic Advisers and was also an Advisor to the Presidents of Bulgaria, Venezuela, and Indonesia.

He played an important role in establishing new currency regimes in Argentina, Estonia, Bulgaria, Bosnia-Herzegovina, Ecuador, Lithuania, and Montenegro. Professor Hanke has also advised the governments of many other countries, including Albania, Kazakhstan and Yugoslavia.

In 1998, Steve was named one of the twenty-five most influential people in the world by World Trade Magazine.

Professor Hanke is a well-known currency and commodity trader and serves as Chairman of Hanke-Guttridge Capital Management, LLC.

Steve Hanke’s most recent books are Zimbabwe: Hyperinflation to Growth (2008) and A Blueprint for a Safe, Sound Georgian Lari (2010).

Influencers:

Friedrich Hayek, Kenneth Boulding of the University of Colorado  and Bob Mundell

Economics:

In this interview, Steve mentions and discusses: currency boards, monetary policy, inflation, hyper-inflation, interest rates, currency reserves, optimum currency area, common currency, fiscal policy, moral hazard, eurozone, ECB, the World Bank, property rights, investment, central bank, dollarisation, interventionist policy, privatisation, hedging, Chicago Mercantile Exchange, futures contract and bitcoin.

Economists:

In this interview, Steve mentions and discusses: Kirk Schuller, Milton Friedman, Friedrich Hayek, Adam Smith, Robert Mundell and Kenneth Boulding.

There have only been 56 hyper-inflations in world history and I think I’ve stopped more of them than any living economist – Professor Steve Hanke

In this episode, you will learn:

  • what is a currency board and the reason why a country should resort to one.
  • about Bulgaria’s currency crisis in 1997, how hyper-inflation hit 142 percent per month and what Steve Hanke did to solve the problem.
  • the successful use of currency boards in Bulgaria in 1997 to significantly reduce inflation and interest rates.
  • why Bulgaria has one of the lowest fiscal deficits of any country.
  • about Yugoslavia’s hyper-inflation of 313 million percent in 1994.
  • why Montenegro dumped the Yugolsav Dinar for the Deutschmark during Slobodan Milosevic’s presidency of Yugoslavia.
  • how Montenegro will join the euro currency without having to do a currency changeover.
  • if it makes sense to leave a currency board to join a monetary union and giving up fiscal autonomy.
  • why it’s best for Bulgaria to stay outside the eurozone due to the issue of moral hazard.
  • why Greece ran up a fiscal deficit of 12.7% of GDP when the Maastricht Treaty stated a strict adherence to a maximum level of 3%.
  • about the Greek bailout of $472 billion and how it amounts to almost $43,000 for every man, woman and child in Greece.
  • how a currency board removes the moral hazard of a unified currency area by financing spending with current taxes or the private bond market.
  • if Greece should abandon the euro and set up a currency board and pegging their currency with the euro.
  • how a Greek currency board would operate if Greece left the eurozone.
  • about the success of the Hong Kong currency board and how it operates without a central bank.
  • if we are heading toward a one world currency.
  • why most small countries should abandon their currency and anchor it to the euro, dollar, yen or yuan.
  • whether Greece should sell off its ports, lands and other property to private investors just as Hayek proposed and Ronald Reagan did in the US in the 1980s.
  • about Ronald Reagan’s privatisation programme in the US in the early 1980s.
  • about the Bureaucratic Rule of Two and why privatisation is an optimal outcome for government, enterprise and society.
  • what Hayek was like as a person and what he thought of Ronald Reagan, The Intellectual.
  • about candling in the old days when grading eggs for futures contracts.

On Currency Boards:

A currency board system is a system in which you issue a domestic currency, which is anchored to a sound currency at a fixed exchange rate that’s fully convertible. The local currency is backed up with a 100% anchor currency’s reserves. So the local currency really becomes a clone of whatever the anchor currency happens to be.

The currency board is not allowed to emit credit to the government. If the government needs money for fiscal expansion, the only way to get this finance (in the form of your local currency) is to take hard currency in (like the euro) and exchange it for the local currency. Bulgaria has been doing this since 1997. The government cannot sell bonds to raise finance. They convert the euro (previously the Deutschmark) into their local currency, the lev, and can then carry out fiscal stimulus. Consequently, Bulgaria has one of the lowest fiscal deficits in Europe.

On Bulgaria and Why It Should Not Join the Eurozone:

“With the currency board, they (Bulgaria) ‘clone’ the euro, so they’re in a unified currency area with the eurozone but they’re not formally part of the eurozone itself. I’ve counselled the Bulgarians, and the best thing to do is to stay with that arrangement. And the reason why is that the eurozone, the common currency area, has a huge moral hazard associated with it. That is, something that creates bad behaviour encourages bad behaviour and Greece is a perfect example.” – Professor Steve Hanke

On the Greek Deceit and Its Fiscal Deficit:

“Greece entered the eurozone in 2001 on false pretences. They cooked the books and got in. They were allowed in the club even though the club knew the Greeks were lying in terms of their economics statistics.”

“The Greeks calculated that they could spend like drunken sailors, which they did and ran a completely irresponsible fiscal operation.”

“The moral hazard is you join a club and if you think the club won’t enforce its rules and won’t force you to tow the line, you will just go on your merry way spending and deficit spending and knowing, or at least thinking that, in this case the eurozone, would bail you out.”

Greece ranks 151 out of 189 countries for the ability of doing business. If you make a contract in Greece, the probability of having that contract enforced is very low by international standards. It’s like being in Zimbabwe. Greece is supposed to be part of the European Union and a modern country but it isn’t.

Greece should leave the eurozone, set up a currency board and re-introduce the Drachma. This would create fiscal discipline just like the situation in Bulgaria.

Quotes by Steve Hanke in Episode 048 of the Economic Rockstar Podcast:

I was hedging and trading when I was 14 years of age. I was trading with my grandfather – @steve_hanke

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Hong Kong was aways a unilateralist free trader. That encourages competition, entrepreneurship and productivity. The countries with open trade tend to be more free market in general and they grow more rapidly. – Steve Hanke

“About 90 Central Banks should just be done away with completely and either a currency board be put in or a stronger foreign currency like the dollar, the euro or the yen.” – Steve Hanke

“If you want lower fiscal deficits, lower inflation and higher rates of growth you adopt with a currency board system or dollarize” – Steve Hanke

If you want to reduce corruption you privatise. But the potential gains in terms of economic prosperity are enormous – @steve_hanke

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Europe’s lands are “a mere waste and loss of country in respect both of produce and population.” – Adam Smith

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Bitcoin has a unit of account problem – @steve_hanke

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On Hayek:

“He was delightful and charming and very interesting, particularly for Mrs Hanke and myself. One of Mrs Hanke’s Great Aunts was one of Hayek’s earlier loves of his life.”

Recommended Books:

Resources:

Where to Find Steve Hanke:

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040: Rebecca Harding on Trade Finance and How Delta Economics Can Help Identify Growth Opportunities World-wide

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040: Rebecca Harding on Trade Finance and How Delta Economics Can Help Identify Growth Opportunities World-wide

Dr Rebecca Harding is CEO of Delta Economics, which specialises in the area of Trade Finance. Rebecca is an independent economistRebecca Harding with an extensive background in modelling economic growth, trade, productivity, innovation and enterprise.

Rebecca is the author of nine books and has written over 250 articles on economic issues. She has held senior positions in leading academic, think-tank and corporate organisations, including roles at the London Business School, Deloitte and the Work Foundation.

Rebecca has advised the European Union and regional governments and agencies in the UK and Germany on innovation and enterprise policy.

Rebecca is a Board Member of the Society of Business Economists and a Board Member and Trustee of the German British Forum. In 2013, she was elected as a national representative of the European Movement UK.

Rebecca holds a BA in Economics and German and an MSc and PhD in the economics of Science and Innovation from the University of Sussex and writes on her blog rebeccanomics.com.

How Rebecca First Discovered Economics:

Rebecca was taught economics as a kid by her father who was a sociologist. “An economist who’s taught by a sociologist is quite an unusual thing. He started off with the fundamental principle that economics is wrong because people aren’t rational. So the first lesson in economics I had was my father telling me that the subject was wrong”.

I have a very eclectic background. I was taught by a sociologist. Some of my big influences when I was in university were in geopolitics and international relations. I’ve done a lot of political science and a lot of philosophy as well. And then, of course, I have an economics, mathematics and language background. So I’m a bit weird. I call myself a hybrid.

Find Out:

  • about Dr Harding’s company DeltaEconomics.
  • about the data used by DeltaEconomics and why it has developed its database of statistics.
  • what is Trade Finance and how it has experienced phenomenal growth in recent years.
  • how companies bridge the finance gap between the time they export goods to the time they receive payment.
  • what the challenges are with long-term growth in trade.
  • if there are inherent risks associated with the trade finance market as more sophisticated derivative and credit markets emerge.
  • about the inherent risks that may appear in the derivatives markets for trade finance.
  • if a market collapse could be the outcome of a non-compliant and unregulated trade finance securities market.
  • if could an implosion in trade finance is possible with large defaults in payments due mainly to the development of a derivatives and securities market.
  • if sovereign risk will become prominent if trade finance risk increases.
  • if enough data exists for trade finance to allow it to mature into a fully functioning wholesale and derivatives market.
  • about some risks to the global supply chain.
  • about the pioneers of innovation and productivity in economic theory.
  • how productivity and trade finance could be correlated.

Economics:

In this interview, Rebecca mentions and discusses: trade finance, credit, exports, growth, derivatives, securitisation, risk aversion, sovereign risk, business risk, contagion, commodities, inflation, fiscal policy, monetary policy, foreign direct investment, demographics, innovation and total factor productivity.

Economists:

In this interview, Rebecca mentions and discusses: Joseph Schumpeter, Christopher Freeman, Carlota Perez, J. K. Galbraith and Frances Coppola.

Influencers:

Karl Marx, Christopher Freeman, Carlota Perez, Joseph Schumpeter, J. K. Galbraith,

On Delta Economics:

“For trade data, it’s the best platform in the world – it’s corrected, it’s clean, it’s comprehensive and it covers continents like Africa all on one platform. It gives clients information on what the trading opportunities are” – Rebecca Harding, CEO of Delta Economics.

“We view the world from a trade perspective. Trade is important because it’s how businesses interact with one another.”

Delta Economics – It’s macroeconomic big data! – Rebecca Harding

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What we’ve done is pioneer the way in which big data is used in economics – Rebecca Harding

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What is Trade Finance?

Trade Finance is everything that drives trade itself. From a financial perspective, if you look at the value of world trade, about 80% of that is financed by banks or backed up by big insurance companies or finance through export credit agencies. It’s a huge market and grew very quickly in the from 2000 to 2007. The reason being was due to emerging markets entering into global trade in a very much aggressive way. Banks saw huge opportunities for financing trade.

Essentially, if you are trading with another company in another country, then what you need is some kind of bridging finance between the gap from when you put your goods onto a ship or an aeroplane and when it’s received by the person in the other country and paid for. So what this company needs is some kind of financing gap between those two points. That’s what trade finance is.

By including trade finance data into forecasting, you get much more accurate forecasts as to what’s going to happen to trade. In 2007, there was a tightening of credit available to businesses since the credit in the financial markets of developed countries had locked up. Subsequently, much of the trade finance went to emerging Asia and emerging Latin America and financed huge growth there.

The whole Trade Finance market is largely driven through very large finance houses such as JP Morgan, HSBC, Barclays, Bank of America, Merrill Lynch and BNP Paribas. These very big global banks are the ones that are involved on a day-to-day basis with the trade-receivables, the credit lines, the letters of credit, the open account and the working capital.

What’s also interesting about Trade Finance is that you also have quasi-government agencies and export credit agencies, which are part of the private sector and which are sometimes supported by the public sector. There is also a massive insurance market and legal sector attached to it. With such growth in the Trade Finance market, there is interest now coming from private sector private equity companies who see an opportunity to buy the debt and securitise it and actually use it as an asset class. What Delta Economics also do is it allows the data user to understand trade finance as an asset class. Companies can securitise the debt and trade that securitisation. The derivatives market will be an important component of this.

The Trade Finance market is estimated to be worth $7.4 trillion annually. There are many companies , like Lloyds, who will be putting security behind the money they are backing up.

It was seen as a way of fuelling long-term economic growth through trade.

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037: Noah Smith on Austrian Theory Being a ‘Bad Joke’, Heterodox Models and Efficient Markets

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037: Noah Smith on Austrian Theory Being a ‘Bad Joke’, Heterodox Models and Efficient Markets

Noah Smith is Assistant Professor of Finance at Stony Brook University, New York where he is also a member of the Center for Behavioral Noah SmithFinance research team. Noah’s research Interests include Experimental Finance, Behavioral Finance and Macroeconomics Noah was panel discussant for the Institute for New Economic Thinking Task Force and has received numerous research awards and fellowships. 

Noah is a regular contributor to Bloomberg View where he writes extensively on economics and finance related topics. He also writes at his fantastic economics blog Noahpinion.

Noah received his PhD in economics from the University of Michigan, graduating in 2012. His dissertation examined expectation formation in financial markets. Noah majored in physics as an undergraduate at Stanford University, and spent three years working in Japan, where he still returns from time to time to do research.

Everyone who meets in the public sphere, unless you’re extremely dry and technical, is going to piss people off. Econ is one of those fields where everyone has their own opinion and position and their models that they like. Traditionally, it was this very closed discipline. Econ was for economists and they didn’t often interface with the outside world except through official policy advice and the occasional op-ed. People start talking in the public sphere and I think that disturbs a lot of people. So all the blogs are bad boys really – Noah Smith.

Economics:

GDP, inflation, Central Bank, consumption, microeconomics, macroeconomics, behavioral economics, DSGE, game theory, decision theory, supply, demand, time series, interest rates, linear regression, forecasting, Quantitative Easing, money, gold, Federal Reserve, efficient markets hypothesis, extrapolative expectations, hedge funds, adverse selection, random walk, fat tails and volatility.

Economists:

Paul Samuelson, Brad DeLong, Steve Keen, Greg Mankiw, John H. Cochrane, Jack Schwager, Josh Angrist, Steve Pischke, Ed Phelps, Robert Lucas, Ed Prescott, Paul Volcker, Ludwig von Mises, Friedrich Hayek, Hyman Minsky, Andrei Schleifer, Alok Kumar, Kelly Schuh,  Jonathan Burke, Burton Malkiel, Marcus Brunnermeier, Mark Thoma, Tyler Cowen and Alex Tabarrok.

Find out:

  • whether economists suffer from ‘Physics Envy’.
  • if we should remove mathematics from economics.
  • how math took over economics.
  • if there is a connection between economics and physics.
  • how economics is becoming a more data-driven field.
  • about the micro foundations to macro theory and why these models don’t work.
  • why theory and math-focused economics papers are waning in the academic publishing field.
  • how to approach teaching micro and macro when the theoretical models may not explain much.
  • about whether Economics is moving away from the orthodox method of teaching toward a heterodox method.
  • about the difference between Heterodox and Orthodox teaching in Economics.
  • why Noah considers Austrian Economics to be a bad joke.
  • where Noah falls within the economic spectrum.
  • why Noah believes that heterodox economics is not the future.
  • Noah’s recommended economics blogs to follow.
  • why the Efficient Market Hypothesis is a good starting model for finance students to understand.
  • and much much more

Physics Envy and the Mathematisation of Economics:

At one point economics was a literary discipline. It was philosophical. It was people writing down verbal description of how they thought things worked. Then people started writing down equations. At first it was just a couple of people doing it who were obscure and then, with Paul Samuelson, they really started putting everything in terms of equations and mathematising everything. It was at that point people started to mention that economists had ‘Physics Envy’ because physicists write everything in equations. Maybe that was true as Samuelson had also studied Physics. This was probably a misnomer.

There were new mathematical tools and people were just trying to apply them to things. Math really took over economics and the style of math they did was sometimes similar to physics. Mathematicians are very rigorous. They start with axioms and they have this really formal proof structure. A physicists approach to working with equations is a lot more ad hoc and informal. So in economics, you see both styles. Noah doesn’t think there’s a lot of connection between economics and physics. He also doesn’t believe there is any particular pieces of math in economics that were inspired by physics.

Math helps you organise your thoughts. It makes your economic theory more internally consistent because math always has to work out perfectly and all the logic has to work out. But in practice it rarely does that. What usually happens is that people usually end up sticking in the assumptions they need to get the conclusions they want to see in the theories. So there’s essentially no discipline provided by math on theory, but math is useful when you want to get actual numbers.

Economics is becoming a more and more data-driven field. Now that we have information technology, we have so much data. We have macro data and industry-level data that we can keep track of with electronic records. Government can easily keep track of statistics on all kinds of variables on the economy. We have a lot more financial data. It is easier to get people surveyed so you have a lot more survey data. So you have huge amounts of data that is easily transferable and easily manipulatable in statistics programs. Economists are basically rolling in data. What we’ve seen from that is that data and empirics has become so much central  to the economics field in recent years. The number of published papers that are data and empiric-focused has soared, whereas the percent that is just theory and math-focused has gone down in the last twenty years.

On Teaching Micro and Macro When Theoretical Models Fail:

Economics is not data-free. You can use data to help you teach. But in terms of giving students a hands-on thing where they can predict some outcome something, well for lower-level students, there’s not much you can do. But for upper-level students there are some things you can do with linear regression that help you make a prediction or forecast. Certainly with graduate-level students you can do things with time series econometrics. Then you can have them make forecasts and see how well their forecasts come out. There’s things you can do but it doesn’t work as beautifully as it does in Physics – Noah Smith

Noah Smith on Why He Considers Austrian Economics to be a Bad Joke and Why Heterodox Economics is Not the Future:

The idea that economics is substantially divided between the orthodox and the heterodox is wrong. That’s just not the way it is. There’s only a very few people in the world who call themselves heterodox. For any science you’re going to get some people somewhere who are doing something totally different. There’s probably somebody out there using physics models that look nothing like quantum mechanics or Newton’s Laws or any of the core physics models we think of as real physics. There’s probably someone out there doing some model of a type you and I never heard of and will never hear of. And that’s basically what the heterodox economics guys are.

The people who call themselves heterodox in economics, include some people who are nakedly political. All they really are is political, well I could say hacks but they’re not paid by parties, but they’re trying to make economics into a politicised discipline. So, the most prominent group of these is people who call themselves Austrians.

There were these guys, called the Austrians, who wrote some ideas down. All of those ideas were later taken up by the mathematical economists and put into math language. Most were tested in some way. They were developed further on. But then what happened was there was a tribe of people who declared that all the mathematical economics was bullshit and that what we had to do was pay attention to the wisdom of the ‘Old Masters’. So they spend a lot of time reading the old wisdom of Mises and Hayek and those guys. And the only way this group could survive when economics itself had moved on was to take donations from political people who agree with their politics.

So they politicise themselves in order to survive. And in the wilderness where they deserve to be, their method of analysis they use are a joke. A lot of mainstream normal economics might also be a joke but the Austrian stuff is definitely a joke. And the problem is with the addition of politics to the mix, it really becomes a bad joke.

Most of what they do is advocating through their version of free markets or advocating for various conservative policies and politics. And that’s what they spend most of their time doing. It’s clear that what they really want to do is just turn economics into a mouthpiece for conservative ideas.

I haven’t spent hundreds of hours reading Mises because that would be robbing me of many many valuable hours of my life-span and I’m mortal and my life-span is ticking away and I can’t spend my time reading Mises. I’ve read a little bit. It was obviously silly. It was like reading Jacques Derrida.

It’s so dense and confusing and self-referential and full of neologisms and just, frankly, badly written that what it descends into this infinite recursion where you have people who read the ‘Old Master’ and write some interpretation of the ‘Old Master’ and then someone reads what that person wrote and mis-interprets that and then writes their own interpretation of that. Then you just have this infinite recurring commentary where nobody really knows what the hell anyone else is talking about and they all just sort of talk about their own distorted, twisted perception of what these other people talk about. It gives no insight and no understanding. People ‘parrot’ the words of the ‘Old Masters’ without understanding what the ‘Old Masters ‘ were necessarily meant or what those ideas would even imply.

If you criticise the ‘Old Masters’ or criticise this paradigm of relying on the ‘Old Masters’, They say “Oh, you have to go read everything the ‘Old Masters’ wrote before you are qualified to comment on this. How dare you comment on this when you haven’t read this and this and this. I’ve spent time reading this.” What do you say to that. That’s not scientific. That’s scholastic.

Sometimes you look at Minsky and you look at Hayek and you say these guys aren’t saying such different things after all actually. But the thing is you have the right-wingers in the modern day who think that Hayek and Mises are gods and left-wing guys who think Minsky is a god and they fight like cats and dogs.

The mere fact of these kind of battles is one thing that convinces me that so-called heterodox economics is not the future at all.

Austrians have a lot of blogs. They have a big mouth-piece; much bigger than their academic footprint. Austrians took a huge hit in 2011 and 2012. Those are absolute critical years for this sort of ‘pop-Austrianism’ that has become very popular on sites like zerohedge. All the Austrians are saying is the Fed is printing all this money doing Quantitative Easing. There’s going to be big inflation. And this never happened. That was like a thunderbolt that really discredited Austrians. They were saying things were going to happen by gold now. There was a gold bubble and gold is quite a bit off its peak. A lot of people lost some of their savings on that. People are not happy to lose their savings. If you bought gold collectibles in 2011, well you were a sad puppy when it crashed. That’s God’s punishment. That’s the market’s punishment anyway. It’s the markets punishment for making bets on silliness.

Where does Noah Fall within the Economic Spectrum:

I really don’t know. I suspect something that would look like demand is responsible for most recessions. And I suspect something that they call a limit cycle is going on where something in a boom actually causes a bust to become more likely. So booms lead to busts. Austrians said that, absolutely. The ‘Old Masters’ definitely said that and Minsky said that too – Noah Smith

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