This @AlanaSemuels piece on what exactly is involved in getting a stuffed giraffe toy from a Chinese factory to a house in the US is a smart and interesting way of thinking about inflation. time.com/6088033/why-in…
In general, I think tracking a single commodity along its path from production to consumption is a great and underused tool for clarifying all kinds of economic arguments. The documentary Mardis Gras: Made in China is one of my favorites. What are some other examples?
A big part of the story here is bilateral negotiations between the many different players: Amazon; Viahart, the "seller" (who neither manufacture the toy nor collect the money); the freight forwarder; shippers and carriers; port operators; and the manufacturer.
I think it's generically the case that there are many transactions along these chains where stuff trades for money, but (except for primary commodities) none of them looks like a textbook market with multiple buyers facing multiple sellers.
As a story about current inflation specifically, the piece is slightly off target, since - one stuffed giraffe notwithstanding - toy prices have been falling for a long time and are in fact lower today than before the pandemic. But it's still very worth reading.
Where the piece ends up is a point that is politically a bit uncomfortable but I think is right: Many of the prices that are rising now are for things that really need to get more expensive on the way to a better world.
One little wrinkle: The biggest component of the price increase isn't any cost, but the seller's profit. That plus Amazon's commission makes up the majority of the increase. Adam Smith thought of profits as a cost contributing to price - it's funny to see that reinvented today.
Meant to include: toy prices have fallen 25% over the past five years.
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The great thing about arbitrary authority is that after a while you don't even have to exercise it. People internalize that you are going to do whatever you want to do, and don't even try to challenge you.
Obviously, I don't know how the Supreme Court will rule in response to various measures to bypass the debt ceiling. But the only way find out where that constraint is, or the best path to overcoming it, is by pushing against it.
Mainstream economic theory and conventional wisdom in the policy/media worlds both have serious problems, but mostly very different ones. One thing they both get wrong is that "real" interest rates are more stable or more fundamental than nominal rates. ft.com/content/07a1b2…
Bond markets do not consist, in any way, of people trading present consumption good for future ones. The only link between interest rates and inflation, expected or otherwise, is the one deliberately created by central banks.
You might say: "Ok, Josh, but why are you so sure?" I could say, "because that's what Keynes says." But that might not be very satisfactory. After all, other people say other things.
Another point for the side saying that there was nothing unusual or particularly risky about SVB's assets, the problem was it's exceptionally flight-prone depositors. ft.com/content/33c0d6…
One way of looking at this is that the Federal Reserve is currently carrying out a program of rapidly reducing the value of the assets in the banking system, without any particular plan for what will happen as they fall below the level of banks' liabilities and then their deposit
It seems like many other banks would be objectively just as vulnerable to a run as SVB was, if their depositors were as socially connected and as given to chasing after the next shiny object as tech companies and their funders are.
We've seen plenty of polls showing that people dislike inflation, which is of course true. But when it's posed as a question of higher inflation vs higher unemployment, a large majority says that inflation is preferable.
Even without bringing in the unemployment tradeoff, most people do not see higher interest rates as an appropriate response to inflation.
I recall seeing an article a few years ago on green investment in industry, which unfortunately I can’t find right now, which quoted one executive saying that they were *delighted* to install new equipment to reduce carbon use - as long as it fully paid for itself in one year.
Here's a piece making the same point about investments in more energy-efficient offices - if it doesn't fully pay for itself in a year or two, businesses are not interested. ft.com/content/fe44ba…
I am not sure if this is a point about energy specifically, or about the fact that the hurdle rate for private investment in general is much higher than people often think.
Here's a talk on the Inflation Reduction Act and climate policy featuring @70sBachchan and @tedfertik. If you want an informed view of how much the IRA was a victory for the Green New Deal, they are the ones to listen to. Just started it, but looks great.
You can tell someone is an Adam Tooze student when they start out with a list of "megatrends".
Tim tells a very interesting story about how the IRA passed because it got a critical business interests on board. The opposition came from ideologues in Congress, not from their business constituents and their lobbyists.