purchasing power parity

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pages: 159 words: 45,073

GDP: A Brief but Affectionate History by Diane Coyle

Alan Greenspan, Asian financial crisis, Berlin Wall, big-box store, Bletchley Park, Bretton Woods, BRICs, business cycle, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, driverless car, en.wikipedia.org, endogenous growth, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, hedonic treadmill, income inequality, income per capita, informal economy, Johannes Kepler, John von Neumann, Kevin Kelly, Les Trente Glorieuses, Long Term Capital Management, Mahbub ul Haq, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, Phillips curve, purchasing power parity, Robert Shiller, Robert Solow, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

It did not take long for this problem to become clear as statisticians and economists constructed GDP figures for more and more countries in the 1950s and 1960s. The solution was to construct “purchasing power parity” (PPP) exchange rates, which use data on all prices in the economy to adjust the actual exchange rate to one that reflects living standards more realistically. These rates are applied to convert GDP for every country into PPP dollars in the tables of international comparisons. The idea of purchasing power parity dates back to the early twentieth century and Colin Clark was the first person to try to calculate PPP conversion rates, in 1940. Further work continued alongside the development of national accounts after the war.

Compared to converting every country’s GDP to one currency using the prevailing market exchange rate, the PPP conversion factors will raise the relative level of GDP of those low-income countries where nontraded goods and services are cheap. That was, after all, the point of devising the purchasing power parity concept. But many critics think the PPP conversion ends up overstating the income of poor countries. Recent research confirms suggestions that the PPP approach understates the differences in living standards among different countries.6 The governments of low-income countries were concerned, however, that any adjustment that increased the (apparent) level of their GDP would make it less likely that they would get aid and cheap loans from the World Bank.

To some extent the answer is obvious from the way everyday life in Chinese cities has visibly changed: there has certainly been a big increase in living standards for a large proportion of China’s urban population, and that’s enough to affect the global picture. Beyond that, though, the answer does depend on how the GDP of different countries is converted onto the same basis. The statistical controversy has immense practical consequence: purchasing power parities are widely used to measure and compare living standards and economic performance around the world. They are the basis of almost every economic study looking at how countries grow. They determine policy choices made by national governments and international agencies. To understand the issues, we need to go back to how the PPP conversion factors are worked out.


pages: 353 words: 148,895

Triumph of the Optimists: 101 Years of Global Investment Returns by Elroy Dimson, Paul Marsh, Mike Staunton

asset allocation, banking crisis, Berlin Wall, Black Monday: stock market crash in 1987, book value, Bretton Woods, British Empire, buy and hold, capital asset pricing model, capital controls, central bank independence, classic study, colonial rule, corporate governance, correlation coefficient, cuban missile crisis, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, European colonialism, fixed income, floating exchange rates, German hyperinflation, index fund, information asymmetry, joint-stock company, junk bonds, negative equity, new economy, oil shock, passive investing, purchasing power parity, random walk, risk free rate, risk tolerance, risk/return, selection bias, shareholder value, Sharpe ratio, stocks for the long run, survivorship bias, Tax Reform Act of 1986, technology bubble, transaction costs, yield curve

We start in section 7.1 with a survey of exchange rate behavior over the 101 years from 1900– 2000, followed in section 7.2 by a review of the evolution of the international monetary system. In section 7.3 we turn to evidence on long-run purchasing power parity, and discuss deviations from purchasing power parity in section 7.4. In section 7.5 we examine the volatility of real exchange rates. We then present real, common-currency returns on equities and bonds in section 7.6. We then summarize our discussion of exchange rates, purchasing power parity, and common-currency returns in section 7.7. 7.1 Long-run exchange rate behavior Figure 7-1 compares the exchange rates against the US dollar for our sample of countries.

To Helen, Steff, and our parents Contents Preface xi Part One: 101 years of global investment returns 1 Chapter 1 3 Introduction and overview 1.1 Need for an international perspective 3 1.2 The historical record 5 1.3 Inside the markets 7 1.4 The equity premium 1.5 Sixteen countries, one world Chapter 2 8 10 World markets: today and yesterday 11 2.1 The world’s stock markets today 11 2.2 The world’s bond markets today 14 2.3 Why stock and bond markets matter 18 2.4 The world’s markets yesterday 19 2.5 The US and UK stock markets: 1900 versus 2000 23 2.6 Industry composition: 1900 versus 2000 23 2.7 Stock market concentration 28 2.8 Summary 32 Chapter 3 Measuring long-term returns 34 3.1 Good indexes and bad 34 3.2 Index design: a case study 36 3.3 Dividends, coverage, and weightings 38 3.4 Easy-data bias in international indexes 40 3.5 Measuring inflation and fixed-income returns 43 3.6 Summary 44 Chapter 4 International capital market history 45 4.1 The US record 45 4.2 The UK record 48 4.3 Stock market returns around the world 50 4.4 Equities compared with bonds and bills 51 4.5 Investment risk and the distribution of annual returns 54 4.6 Risk, diversification, and market risk 56 4.7 Risk comparisons across asset classes and countries 59 4.8 Summary 61 vii viii Chapter 5 Inflation, interest rates, and bill returns 63 5.1 Inflation in the United States and the United Kingdom 63 5.2 Inflation around the world 65 5.3 US treasury bills and real interest rates 68 5.4 Real interest rates around the world 71 5.5 Summary 72 Chapter 6 Bond returns 74 6.1 US and UK bond returns 6.2 Bond returns around the world 79 6.3 Bond maturity premia 81 6.4 Inflation-indexed bonds and the real term premium 84 6.5 Corporate bonds and the default risk premium 87 6.6 Summary 89 Chapter 7 Exchange rates and common-currency returns 74 91 7.1 Long-run exchange rate behavior 91 7.2 The international monetary system 93 7.3 Long-run purchasing power parity 95 7.4 Deviations from purchasing power parity 96 7.5 Volatility of exchange rates 98 7.6 Common-currency returns on bonds and equities 100 7.7 Summary 103 Chapter 8 International investment 105 8.1 Local market versus currency risk 105 8.2 A twentieth century world index for equities and bonds 108 8.3 Ex post benefits from holding the world index 111 8.4 Correlations between countries 114 8.5 Prospective gains from international diversification 117 8.6 Home bias and constraints on international investment 120 8.7 Summary 123 Chapter 9 Size effects and seasonality in stock returns 124 9.1 The size effect in the United States 124 9.2 The size effect in the United Kingdom 126 9.3 The size effect around the world 129 9.4 The reversal of the size premium 131 9.5 Seasonality and size 135 9.6 Summary 138 ix Chapter 10 Value and growth in stock returns 139 10.1 Value versus growth in the United States 139 10.2 Value and growth investing in the United Kingdom 142 10.3 The international evidence 145 10.4 Summary 148 Chapter 11 Equity dividends 149 11.1 The impact of income 149 11.2 US and UK dividend growth 152 11.3 Dividend growth around the world 154 11.4 Dividend growth, GDP growth, and real equity returns 155 11.5 Dividend yields around the world and over time 157 11.6 Disappearing dividends 158 11.7 Summary 161 Chapter 12 The equity risk premium 163 12.1 US risk premia relative to bills 163 12.2 Worldwide risk premia relative to bills 166 12.3 US risk premia relative to bonds 169 12.4 Worldwide risk premia relative to bonds 171 12.5 Summary 173 Chapter 13 The prospective risk premium 176 13.1 Why the risk premium matters 177 13.2 How big should the risk premium be?

Exchange rate changes thus impact performance, and are critical for measuring and comparing the returns from different countries. In chapter 7, we report on the exchange rate fluctuations that were experienced by our sixteen countries over the course of the 101 years from 1900–2000. Chapter 1 Introduction and overview 7 Chapter 7 also examines the extent to which purchasing power parity has held over the long run. Purchasing power parity implies that goods and services will have a similar price experience in different countries, but this is a poor description of year-to-year foreign exchange fluctuations. Over the long run, however, we find that changing relative price levels do tend to be reflected in changes in exchange rates, and that real exchange rates are relatively stable.


pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, book value, Branko Milanovic, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, central bank independence, centre right, circulation of elites, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, Future Shock, German hyperinflation, Gini coefficient, Great Leap Forward, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, low interest rates, market bubble, means of production, meritocracy, Money creation, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, Paul Samuelson, pension reform, power law, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Robert Solow, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, Suez canal 1869, Suez crisis 1956, The Nature of the Firm, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, twin studies, very high income, Vilfredo Pareto, We are the 99%, zero-sum game

But according to the official International Comparison Program (ICP), European prices are about 10 percent higher than American prices, so that if this same European spent the same money in Europe, his or her purchasing power would be closer to an American income of $1,200. Thus we say that $1.20 has “purchasing power parity” with 1 euro. I used this parity rather than the exchange rate to convert American GDP to euros in Table 1.1, and I did the same for the other countries listed. In other words, we compare the GDP of different countries on the basis of the actual purchasing power of their citizens, who generally spend their income at home rather than abroad.25 FIGURE 1.4. Exchange rate and purchasing power parity: euro/dollar In 2012, 1 euro was worth $1.30 according to current exchange rate, but $1.20 in purchasing power parity. Sources and series: see piketty.pse.ens.fr/capital21c.

The dollar/euro rate went from $1.30 per euro in the 1990s to less than $0.90 in 2001 before rising to around $1.50 in 2008 and then falling back to $1.30 in 2012. During that time, the purchasing power parity of the euro rose gently from roughly $1 per euro in the early 1990s to roughly $1.20 in 2010 (see Figure 1.4).26 Despite the best efforts of the international organizations involved in the ICP, there is no escaping the fact that these purchasing power parity estimates are rather uncertain, with margins of error on the order of 10 percent if not higher, even between countries at comparable levels of development. For example, the most recent available survey shows that while some European prices (for energy, housing, hotels, and restaurants) are indeed higher than comparable American prices, others are sharply lower (for health and education, for instance).27 In theory, the official estimates weight all prices according to the weight of various goods and services in a typical budget for each country, but such calculations clearly leave a good deal of room for error, particularly since it is very hard to measure qualitative differences for many services.

The reality of inequality between countries is multidimensional, and it is misleading to say that it can all be summed up with a single index leading to an unambiguous classification, especially between countries with fairly similar average incomes. In the poorer countries, the corrections introduced by purchasing power parity are even larger: in Africa and Asia, prices are roughly half what they are in the rich countries, so that GDP roughly doubles when purchasing power parity is used for comparisons rather than the market exchange rate. This is chiefly a result of the fact that the prices of goods and services that cannot be traded internationally are lower, because these are usually relatively labor intensive and involve relatively unskilled labor (a relatively abundant factor of production in less developed countries), as opposed to skilled labor and capital (which are relatively scarce in less developed countries).28 Broadly speaking, the poorer a country is, the greater the correction: in 2012, the correction coefficient was 1.6 in China and 2.5 in India.29 At this moment, the euro is worth 8 Chinese yuan on the foreign exchange market but only 5 yuan in purchasing power parity.


pages: 337 words: 89,075

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio by Victor A. Canto

accounting loophole / creative accounting, airline deregulation, Alan Greenspan, Andrei Shleifer, asset allocation, Bretton Woods, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, commodity trading advisor, corporate governance, discounted cash flows, diversification, diversified portfolio, equity risk premium, financial engineering, fixed income, frictionless, global macro, high net worth, index fund, inflation targeting, invisible hand, John Meriwether, junk bonds, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low cost airline, low interest rates, market bubble, merger arbitrage, money market fund, new economy, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, Phillips curve, price mechanism, purchasing power parity, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolling blackouts, Ronald Reagan, Savings and loan crisis, selection bias, seminal paper, shareholder value, Sharpe ratio, short selling, statistical arbitrage, stocks for the long run, survivorship bias, systematic bias, Tax Reform Act of 1986, the market place, transaction costs, Y2K, yield curve, zero-sum game

See also benchmarks; indexing active management and, xx, 166-168, 180-182, 252-255 hedge funds, 235-239 reasons for, 164-166 size cycles active versus passive management during, 170-172, 175, 271-272 equal-weighted versus cap-weighted indexes, 175-180 performance of asset classes, 16-18 UNDERSTANDING ASSET ALLOCATION performance indicators, CEM (capitalized earnings model) and, 96-100 periodic table of asset returns, 6-11, 46 Phillips curve, 98 portable-alpha strategy, 256-257, 260-264, 269-270 portfolio volatility. See volatility portfolios, 3, 253 positive incentives, 81 PPP (purchasing power parity), 57, 97 free trade and, 185-187 violations, 191-192 price earnings ratio. See P/E ratio price rule, 90 price-rule targeting, 48-49 probabilities investor convictions calculations, 129-132, 137-142, 275-281 LJE quantitative model, 134-136 probability density function, 129 purchasing power parity. See PPP pure-alpha strategy, 256-257, 260-264, 269-270 Q-R qualitative method, investor convictions calculations, 132-137 quantitative method.

When the corporate scandals broke, and the stock market bubble popped, uncertainty crept back in and value stocks reigned once again. The Location Cycles Before I get into location cycles, I need to make some assumptions about exchange rates. In the long run (by this, I mean the economy will approach its equilibrium in the long run), purchasing power parity (PPP) will be restored. PPP is the point at which exchange rates have adjusted based on the purchasing power of currencies.7 If the world we live in were frictionless, all adjustments would be instantaneous. This is, unfortunately, not the case. Shocks give rise to temporary disturbances that push economies away from old equilibriums and into new ones.

The modified CEM’s equity-valuation formula (see Equation 2) also applies to foreign equities—with one caveat: If one uses foreign interest rates and inflation rates, the model’s results are denominated in foreign currencies. Hence, to translate these returns to domestic returns, one needs to know whether purchasing power parity (PPP)—the point at which exchange rates have adjusted based on the currencies’ purchasing power—holds or not. If PPP holds, the differential inflation rate between two countries matches exchange-rate fluctuations. If (on the other hand) PPP does not hold, real rates of return for the two countries match the exchange-rate fluctuations.2 We previously established a link between inflation and real GDP growth rates and the relative valuation of equities and fixed-income instruments.


pages: 296 words: 87,299

Portfolios of the poor: how the world's poor live on $2 a day by Daryl Collins, Jonathan Morduch, Stuart Rutherford

behavioural economics, Cass Sunstein, clean water, failed state, financial innovation, financial intermediation, income per capita, informal economy, job automation, M-Pesa, mental accounting, microcredit, moral hazard, profit motive, purchasing power parity, RAND corporation, randomized controlled trial, seminal paper, The Fortune at the Bottom of the Pyramid, transaction costs

. ∞ press.princeton.edu Printed in the United States of America 1 3 5 7 9 10 8 6 4 2 Contents List of Tables vii List of Figures ix Chapter One The Portfolios of the Poor 1 Chapter Two The Daily Grind 28 Chapter Three Dealing with Risk 65 Chapter Four Building Blocks: Creating Usefully Large Sums 95 Chapter Five The Price of Money 132 Chapter Six Rethinking Microfinance: The Grameen II Diaries 154 Chapter Seven Better Portfolios 174 v CONTENTS Appendix 1 The Story behind the Portfolios 185 Appendix 2 A Selection of Portfolios Acknowledgments Notes 243 247 Bibliography 265 Index vi 273 211 Tables Table 1.1 Purchasing Power Parity Comparisons Table 1.2 Hamid and Khadeja’s Closing Balance Sheet, November 2000 Table 2.1 Year-End Financial Asset Values and Annual Cash Flows through Financial Instruments for Median Households Table 2.2 Portfolio Summary for Subir and Mumtaz over the Research Year Table 2.3 Annual Income of the Median Diary Households Table 2.4 Regular versus Irregular Income Households, South Africa Table 2.5 One-on-One Interest-Free Borrowing and Lending Table 3.1 Most Frequent Events Causing a Financial Emergency, by Country Table 3.2 Stages in Holding a Funeral, South Africa Table 3.3 Thembeka’s Portfolio of Funeral Coverage Table 3.4 Sources and Uses of Funds for Xoliswa’s Mother’s Funeral Table 3.5 Sources and Uses of Funds for Thembi’s Brother’s Funeral Table 4.1 Nomsa’s Typical Monthly Budget Table 4.2 Lump Sums from a Single Instrument Spent in the Research Year, by Country vii 6 9 33 34 38 45 50 68 76 81 83 85 99 102 L I S T O F TA B L E S Table 4.3 Types of Instruments Used to Form Lump Sums Table 4.4 Primary Use of 298 Large Sums Table 4.5 Primary Use of 194 Large Sums Used for Opportunities Table 4.6 Where Large Sums Were Formed Table 6.1 Grameen II Diaries: Total Disbursed Value of Loans, by Source Table 6.2 Grameen II Diaries: Number and Disbursed Value of Microfinance Loans, by Use Category Table A1.1 Areas in Which Financial Diaries Households Resided Table A1.2 Average PPP Dollar Per Capita Daily Incomes for Selected Diary Households Table A1.3 Microfinancial Instruments, Services, and Devices Table A2.1–15 Sample Portfolios: Financial Net Worth at the Start and End of the Research Year viii 102 103 108 112 165 166 191 198 206 213 Figures Figure 2.1 Income-earning categories of financial diaries households Figure 2.2 Incomes of two Indian occupational groups, aggregated monthly Figure 2.3 Revenues and inventory expenses of a South African small businesswoman Figure 4.1 Cash-flow schematic for Nomsa’s saving-up club Figure 4.2 Cash-flow schematic for Nomsa’s RoSCA Figure 5.1 Monthly internal rate of return Figure 5.2 Accumulating savings with bank interest rate Figure 5.3 Accumulating savings with ASCA interest rate Figure A1.1 Margin of error in reported cash flows, South Africa ix 37 39 41 115 117 139 146 147 209 This page intentionally left blank This page intentionally left blank Chapter One THE PORTFOLIOS OF THE POOR P ublic awareness of global inequality has been heightened by outraged citizens’ groups, journalists, politicians, international organizations, and pop stars.

They are adjusted to capture the fact that the cost of living varies between countries; that is, a dollar goes farther in Delhi, Dhaka, or Johannesburg than it does in New York. The standard “market” exchange rates used at the bank or airport to convert between dollars and rupees, takas, or rand do not always adequately capture that fact. So adjustments are made by the UN using a set of conversion factors known as “purchasing power parity” (PPP) exchange rates. The PPP-adjusted dollars attempt to account for the greater purchasing power in the countries we study than market rates would imply. Calculating the PPP conversion factors has been a major research project in itself, housed at the World Bank International Comparison Program, and the numbers continue to be refined.6 5 CHAPTER ONE In our context, one limitation of the PPP factors is that they are based on lists of goods and services meant to reflect the consumption patterns of the entire population of each country, rich and poor.

The average market exchange rates at the time of the Bangladesh, India, and South Africa financial diaries were 50 Bangladeshi takas per US dollar, 47 Indian rupees per US dollar, and 6.5 South African rand per US dollar. To give a sense of how PPP-adjusted dollars would differ from the market rate dollars used in the book, table 1.1 provides two sets of conversion factors. Table 1.1 Purchasing Power Parity Comparisons Comparison year Sample (and study year) 1993 2005 Bangladesh (1999–2000) India (2000–2001) South Africa (2004–5) 2.67 3.69 1.96 2.88 3.75 1.72 Note: The ratio of the value of $1 in PPP terms relative to the value of $1 exchanged at market exchange rates. The top right cell of the table shows, for example, that when in the text we discuss $1 held by our Bangladeshi households, that $1 could actually buy what it would take $2.88 to buy in the United States (in the 2005 reference year).


pages: 436 words: 76

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

Alan Greenspan, Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, Bletchley Park, business cycle, California gold rush, Charles Babbage, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Dr. Strangelove, Dutch auction, Edward Lloyd's coffeehouse, electricity market, equity premium, equity risk premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, Fairchild Semiconductor, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, George Akerlof, George Gilder, Goodhart's law, Great Leap Forward, greed is good, Gunnar Myrdal, haute couture, Helicobacter pylori, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, junk bonds, Kenneth Arrow, Kevin Kelly, knowledge economy, Larry Ellison, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Michael Milken, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, Phillips curve, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, proprietary trading, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, Stuart Kauffman, telemarketer, The Chicago School, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, work culture , yield curve, yield management

But market exchange rates are subject to large short-term fluctuations, and in 2001 the value of the euro was extremely low, so the rankings by purchasing power parity (PPP) in Table 4.7 are a better overall guide to the underlying levels of productivity in the various countries. However measured, Norway has much the highest productivity of any country in the world. It combines large and profitable oil extraction with an efficient industrial sector. The range of productivity among the remaining countries at market exchange rates finds Japan at the top ($43 per hour) and Australia at the bottom ($23 per hour), but the less misleading purchasing power parity basis discloses a narrower range, from Belgium's $46 per hour to around $30 per hour in the still emerging Hong Kong and Singapore.

We buy and sell different currencies in foreign exchange markets; we exchange money at different dates in money markets. In chapter 4, I described how comparisons between countries could be made using either market exchange rates or purchasing power parities, which compare the cost ofbuying the same bundle of goods in different countries. If it costs less than a dollar in another country to buy goods that cost a dollar in the United States, then people will tend to do exactly that. Market exchange rates cannot therefore vary by too much, or for too long, from purchasing power parity. And they do not. The numbers in Table 4.8 show the cost of buying in dollars, in other countries, the goods that would have cost you one dollar in the United States.

Nathan Rothschild, probably the richest man in the world in 1836, died despite the best medical attention money could buy. The infection that killed him could today be cured by antibiotics available even to Sicelo for a few coins. 10 Isn't Sicelo, alive, better off than Nathan Rothschild, dead? Despite these difficulties, international agencies make estimates of "purchasing power parity" (PPP), the cost of maintaining a given material standard of living in different countries. 11 These comparisons suggest that international disparities in material living standards are less wide than international disparities in productivity. Services and property are generally cheaper in poor countries than in rich countries.


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

"World Economic Forum" Davos, Admiral Zheng, Alan Greenspan, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, full employment, G4S, George Akerlof, German hyperinflation, Gini coefficient, Great Leap Forward, guns versus butter model, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, junk bonds, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low interest rates, low skilled workers, market clearing, Martin Wolf, mass immigration, Meghnad Desai, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, Savings and loan crisis, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, We are all Keynesians now, women in the workforce, working-age population, Y2K, Yom Kippur War

On the most conservative estimates, which merely measure the size of each economy in dollars, low- and medium-income economies (which include all the emerging markets) are, collectively, about the same size as the US economy. If we pretend that the identical product should have the same cost across different countries and geographies (using either formal purchasing power parity calculations or The Economist’s Big Mac index), the emerging economies are, collectively, about twice the size of the US.10 The emerging economies have come a long way since the 1970s, a result of rapid economic growth year-in, year-out. Yet they still have a long way to go. Per-capita incomes are in some cases only a tiny fraction of those in the US or in the developed world more generally.

China’s expansion has, to date, been very commodity-intensive. China is now the second-biggest energy consumer in the world, behind the US but ahead of the European Union. In 1980 it was an economic minnow, with its national income only 7 per cent of America’s in dollar terms and only 9 per cent using purchasing power parity. Already, China’s expansion has had a huge impact on demand for basic materials. In the early years of the new millennium, China absolutely dominated the consumption of metals, accounting for almost all the increase in global demand for tin and nickel and more than all the increase in global demand for lead and zinc.

As noted in Chapter 1, simple back-of-the-envelope calculations suggest that, at current growth rates, China would be attempting to consume the equivalent of all of the world’s current oil production by the middle of the twenty-first century. As the IMF explained in the September 2006 World Economic Outlook, ‘historical patterns suggest that consumption of metals typically grows together with income until about $15,000–$20,000 per capita (in purchasing power parity adjusted dollars) as countries go through a period of industrialization and infrastructure building … So far, China has generally tracked the patterns of Japan and Korea during their initial development phase.’11 Meanwhile, like other countries before it, China’s economic success is prompting a shift to protein-based diets, which will have a major long-term effect on the demand for grain.


pages: 209 words: 53,236

The Scandal of Money by George Gilder

Affordable Care Act / Obamacare, Alan Greenspan, bank run, behavioural economics, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, Claude Shannon: information theory, Clayton Christensen, cloud computing, corporate governance, cryptocurrency, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, decentralized internet, Deng Xiaoping, disintermediation, Donald Trump, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, glass ceiling, guns versus butter model, Home mortgage interest deduction, impact investing, index fund, indoor plumbing, industrial robot, inflation targeting, informal economy, Innovator's Dilemma, Internet of things, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jeff Bezos, John Bogle, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, Law of Accelerating Returns, low interest rates, Marc Andreessen, Mark Spitznagel, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, obamacare, OSI model, Paul Samuelson, Peter Thiel, Ponzi scheme, price stability, Productivity paradox, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, reality distortion field, reserve currency, road to serfdom, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, secular stagnation, seigniorage, Silicon Valley, Skinner box, smart grid, Solyndra, South China Sea, special drawing rights, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, time value of money, too big to fail, transaction costs, trickle-down economics, Turing machine, winner-take-all economy, yield curve, zero-sum game

CHAPTER 4: THE CHINESE CHALLENGE 1.David Stockman, “The Great China Ponzi—an Economic and Financial Trainwreck Which Will Rattle the World,” David Stockman’s Contra Corner, August 16, 2015, http://davidstockmanscontracorner.com/the-great-china-ponzi-an-economic-and-financial-trainwreck-which-will-rattle-the-world/; and Stockman, “China’s Monumental Ponzi: Here’s How It Unravels,” David Stockman’s Contra Corner, March 31, 2014, http://davidstockmanscontracorner.com/chinas-monumental-ponzi-heres-how-it-unravels/. 2.George Gilder, “Let a Billion Flowers Bloom,” in David Boaz, ed., Toward Liberty: The Idea That Is Changing the World (Washington, DC: Cato Institute, 2002), 180–81. 3.Purchasing power parity calculations, widely criticized as inaccurate, showed China as the largest economy in 2014, though by per capita standards the United States remained more than 40 percent ahead in 2015. In a world with no reliable monetary standard, purchasing power parity is the only way to compare different economies. Economists evidently agree that currency prices fail to gauge actual values. 4.These statistics comparing foreign exchange market (forex) trading with total stock market and goods and services trade are calculated from the total of daily foreign exchange transactions published every three years by the Bank for International Settlements (BIS).

Although Jiang is not Christian himself, his son Jiang Mianheng conditioned his launch of a microchip foundry in Shanghai, called Grace Semiconductor, on the willingness of local authorities to allow a Christian church to be built on the premises. Back in 1988 I anticipated none of this. But I said that a Chinese revival of freedom would make China the world’s largest economy by 2015, the year in which I am now writing. By measures of purchasing power parity (PPP), this prediction has come true.3 So what does this success have to do with monetary policy? China’s success is a major empirical rebuke to Friedman’s monetarism. China never adopted Friedman’s monetarism or belief in floating currencies. Instead, it fixed the value of the yuan on the dollar, much to the chagrin of American monetarists, and adopted as its favorite economist Milton Friedman’s intellectual foe and fellow Nobel laureate Robert Mundell.

It takes armies of accountant-economists, in several branches of the U.S. government and similar entities at the Organisation for Economic Co-operation and Development, the United Nations, the World Bank, and other institutions, to track all the price movements in the market. Pursuing the calculation of “purchasing power parity,” they try to gauge which changes signify the “real” level of prices. MIT includes literally millions of prices around the world in its comprehensive index called “Beta.” Giving up on all these perplexities, the Economist sometimes throws up its hands and resolves on a global “Big Mac” index.


The Ages of Globalization by Jeffrey D. Sachs

Admiral Zheng, AlphaGo, Big Tech, biodiversity loss, British Empire, Cape to Cairo, circular economy, classic study, colonial rule, Columbian Exchange, Commentariolus, coronavirus, cotton gin, COVID-19, cuban missile crisis, decarbonisation, DeepMind, demographic transition, Deng Xiaoping, domestication of the camel, Donald Trump, en.wikipedia.org, endogenous growth, European colonialism, general purpose technology, global supply chain, Great Leap Forward, greed is good, income per capita, invention of agriculture, invention of gunpowder, invention of movable type, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John von Neumann, joint-stock company, lockdown, Louis Pasteur, low skilled workers, mass immigration, Nikolai Kondratiev, ocean acidification, out of africa, packet switching, Pax Mongolica, precision agriculture, profit maximization, profit motive, purchasing power parity, rewilding, South China Sea, spinning jenny, Suez canal 1869, systems thinking, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, Turing machine, Turing test, urban planning, warehouse robotics, Watson beat the top human players on Jeopardy!, wikimedia commons, zoonotic diseases

China’s growth has been roughly 3–4 percentage points per year higher than that of the United States (6 percent per annum in China compared with 3 percent in the United States most recently). Note that China’s overtaking of the United States is in aggregate terms. China’s per capita GDP is still only around one-third that of the United States in purchasing-power-parity terms, and roughly one-fifth the U.S. level at market exchange rates and prices. Because China’s per capita income is still far lower than that of the US and other high-income countries, China still has the opportunity for rapid “catching-up” growth, albeit at a pace that is slower than during 1978–2015.

As China continues to narrow the relative gap in GDP per capita with the US, China’s economy will become significantly larger than the US economy in absolute size, given that China’s population is roughly four times larger. 8.7 Changing Places: Chinese and U.S. Shares of World Output, 1980–2018 Source: International Monetary Fund. “China: Gross domestic product based on purchasing-power-parity (PPP) share of world total (Percent)”, World Economic Outlook (April 2019). One of the key reasons we should expect China’s continued vitality and rapid economic growth is that China has moved from being an importer of technologies from the United States and Europe to becoming a major technology innovator and exporter in its own right.

Extreme poverty signifies a level of deprivation at which basic human needs (nutritious diet, safe water, sanitation, clothing, shelter, and so forth) are not ensured. The World Bank has regularly established metrics to measure extreme poverty. The World Bank’s current poverty line is per capita consumption at or below $1.90 per day measured in 2011 prices using purchasing-power parity (PPP) exchange rates. Academic studies of poverty throughout history propose their own respective poverty lines for coherence with the recent World Bank data. 5. For the scale of forager communities, see Tobias Kordsmeyer, Pádraig Mac Carron, and R. I. M. Dunbar, “Sizes of Permanent Campsite Communities Reflect Constraints on Natural Human Communities,” Current Anthropology 58, no. 2 (2017): 289–94. 6.


Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, creative destruction, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, public intellectual, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus, zero-sum game

Of course, such 170 Institutional Factors in Latin America’s Development Log PPP GDP Per Capita in 2000 Constant USD 12 11 10 ARG CHL CRI URY BRA DOMPAN COL VEN PER SLV PRY GUY GTM NIC ECUJAM HND BOL MEX 9 8 HTI 7 6 5 0 1 2 3 4 5 6 7 8 1990 – 2003 Average Constraints on the Executive Index (Polity IV) Log PPP GDP Per Capita in Constant 2000 USD figure 7.4 Log Gross Domestic Product (GDP) Per Capita (2004 Purchasing Power Parity) vs. Constraints on the Executive. Source: Polity IV Project on Political Regime Characteristics and Transitions, 1800–2004, Center for Global Policy, George Mason University and Center for International Development and Conflict Management, University of Maryland (dynamic dataset by subscription). 12 11 10 PAN PER JAM 9 CHL URY ARG MEX BRA VEN ECU DOM COL BOL 8 7 6 5 0 5 10 15 20 25 Number of Procedures to Create a Business figure 7.5 Log Gross Domestic Product (GDP) Per Capita (2004 Purchasing Power Parity) vs. Number of Procedures Needed to Create a Business.

In addition, as indicated in table 4.3, teachers with 15 years of experience in primary schools in Brazil receive salaries that are less than half table 4.3 South Korea Spain United States OECD Thailand Argentina Chile Malaysia Colombia Mexico Brazil Enrollment in Secondary Education and Public Primary School Teacher Salaries, 1995–1998 % Net Enrollment in Secondary Education, 1995 Public Primary School Teacher Salary ($), 1998 96 94 89 nd nd 59 55 nd 50 46 19 39,921 29,590 33,973 28,441 15,759 9,442 15,233 10,876 nd 12,450 6,451 Notes: nd = no data available The salary is for a teacher with 15 years experience, in U.S. dollars, expressed as per the purchasing power parity (better known by its acronym in English, PPP). The enrollment figure shows enrollment as a percentage of the secondary school–age population. OECD = Organisation for Economic Co-operation and Development. Source: Partnership for Educational Revitalization in the Americas, Lagging Behind: A Report Card on Education in Latin America, 2001 (Washington, DC: Inter-American Dialogue, 2001), pp. 29, 42, based on UNESCO and OECD data.

Sokoloff, “The Evolution of Suffrage Institutions in the New World: A Preliminary Look,” in Crony Capitalism and Economic Growth in Latin America: Theory and Evidence, edited by Stephen Haber (Stanford: Hoover Institution Press, 2002), pp. 75–107. Angus Maddison, The World Economy: Historical Statistics (Paris: OECD, 2003). Unless otherwise noted, all figures are in U.S. dollars and are Geary-Khamis (G-K) index 1990 purchasing power parity dollars. While this is the most comprehensive income series available, Maddison’s figures are not universally accepted by historians. Indeed, at times they constitute only rough guesses. Abhijit Banerjee and Lakshmi Iyer, “History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India,” unpublished manuscript, Department of Economics, Massachusetts Institute of Technology, Cambridge, 2002, p. 1.


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The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, Big Tech, bitcoin, blockchain, book value, business cycle, business process, buy and hold, Cambridge Analytica, carbon tax, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, driverless car, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, flag carrier, Ford Model T, gig economy, Glass-Steagall Act, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, opioid epidemic / opioid crisis, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, robo advisor, Ronald Reagan, search costs, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, stock buybacks, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, vertical integration, Vilfredo Pareto, warehouse automation, zero-sum game

If we are interested in measuring the global clout of a country—its gross domestic product (GDP), for example—then overall growth is what matters. For instance, when comparing the relative worldwide influence of the US and China, we would want to use total Chinese GDP versus total US GDP. But if we want to understand how the average Chinese consumer feels, we would want to use per-capita GDP estimated at purchasing power parity (PPP). Chapter 7 explains how PPP exchange rates are computed and how to use them. And sometimes GDP itself is not the right measure. In the case of Russia, for instance, there is a large discrepancy between its semiglobal influence and its relatively small economy because of the hypertrophy of its armed forces.

As it turns out, however, even seemingly concrete concepts like “getting richer” or “getting poorer” have very different meanings, depending on context. To compare incomes around the world, we need to convert them from local currencies into a common currency, using either foreign exchange market rates (FOREX) or purchasing power parity exchange rates (PPP). The FOREX exchange rate is the one that you read about in the newspapers or online. It is the rate that says, for instance, that 1 euro equals 1.2 dollars. The PPP exchange rates are more complicated and more interesting. PPP rates are defined in such a way that one unit of currency can purchase the same amount of goods and services everywhere.

If Pierre lives in France, he pays $35 per month for his broadband internet connection, and Karen pays $80 per month in the US. With his income, Pierre can buy more internet access than Karen. In that sense, we would say Pierre is richer. A more useful way to assess who is richer, then, would be to compute income at purchasing power parity (PPP) rates, i.e., income divided by the price of a common set of goods and services. This is easier said than done, as you can imagine. For a start, Pierre and Karen consume many goods and services, not just goods and services accessed on the internet. When we make international comparisons of real income, we need to look at the prices of the items that people actually consume.


Capitalism, Alone: The Future of the System That Rules the World by Branko Milanovic

affirmative action, Asian financial crisis, assortative mating, barriers to entry, basic income, Berlin Wall, bilateral investment treaty, Black Swan, Branko Milanovic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, dematerialisation, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, ghettoisation, gig economy, Gini coefficient, global supply chain, global value chain, Great Leap Forward, high net worth, household responsibility system, income inequality, income per capita, invention of the wheel, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, low skilled workers, Lyft, means of production, new economy, offshore financial centre, Paul Samuelson, plutocrats, post-materialism, purchasing power parity, remote working, rent-seeking, ride hailing / ride sharing, Robert Solow, Silicon Valley, single-payer health, special economic zone, Tax Reform Act of 1986, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, uber lyft, universal basic income, Vilfredo Pareto, Washington Consensus, women in the workforce, working-age population, Xiaogang Anhui farmers

Estimated global income inequality, 1820–2013 IR = Industrial Revolution; ICT = information and communication technologies. Data source: Data for 1820–1980 are based on Bourguignon and Morrisson (2002), with their GDPs per capita replaced by new data from the Maddison Project (2018). Data for 1988–2001 are based on Lakner and Milanovic (2016) and my own update. All incomes are in 2011 PPP dollars (purchasing power parity) (the latest round of International Comparison Project at the time of writing in 2018). For additional technical details, see Appendix C. After the end of World War II, global inequality stood at its highest level ever, at about 75 Gini points, and it remained at that high plateau until the last decade of the twentieth century.

Performance of socialist versus capitalist economies in Europe, 1950–1989 Country abbreviations: Socialist countries: BUL Bulgaria, CZ Czechoslovakia, GDR German Democratic Republic, HUN Hungary, POL Poland, ROM Romania, USSR Soviet Union, YUG Yugoslavia; Capitalist countries: AUT Austria, BE Belgium, CH Switzerland, DK Denmark, ESP Spain, FIN Finland, FRA France, GER West Germany, GRE Greece, IRL Ireland, ITA Italy, NL Netherlands, NOR Norway, POR Portugal, SWE Sweden, UK United Kingdom. GK dollars are Geary-Khamis PPP (purchasing power parity) 1990 dollars. Data source: Vonyó (2017, 255). Reproduced with permission. A comparison between capitalist and socialist (that is, communist-run) countries is extremely important not only because it shows the inferior performance of socialist countries, but because it enables us to decompose the inferior performance of the richer socialist countries into two parts: (1) the part due to economic convergence (that is, the non-system-specific part which exists whether we compare the performance of the United Kingdom to that of Spain, or of Czechoslovakia to Bulgaria), and (2) the part that is system-specific and is reflected in the much worse performance of the richer socialist countries than the richer capitalist countries.

But we do not know if it would slow down all the way to the level of today’s rich countries, or if the slowdown would—despite the truly remarkable journey of these countries, which have gone in the span of a couple of generations from very poor to very rich—make them less of a model for others to follow. FIGURE 3.2. Growth rates of GDP per capita in China, Vietnam, and the United States, 1990–2016 Growth rates are in real terms, based on 2011 PPP (purchasing power parity) dollars. Data source: World Bank World Development Indicators, 2017 version. 3.2c Is China Capitalist? But is China really capitalist? This is a question that is often asked—sometimes rhetorically and sometimes genuinely. We can dispose of it quickly if we use the standard Marx-Weber definition of capitalism introduced in Chapter 2.


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The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality by Branko Milanovic

Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

See Citizenship Plato Poland Political parties Poor education and global inequality and government spending and investment and redistribution and social arrangements and taxation and Poor countries globalization and migration from technology and trade and Portugal Poverty alleviation of PPP. See Purchasing power parity dollars Prices Pride and Prejudice (Austen) Principles of Political Economy (Ricardo) Private property Production of goods Proletariat Provence Purchasing power parity (PPP) dollars Rawls, John Reagan, Ronald Reciprocity Redistribution beneficiaries of fiscal interpersonal inequality and justice and middle class and poor and voting and Rentiers Republican Party, Republicans Ricardo, David Rich investment and savings and social arrangements and Rich countries, migration to Rockefeller, John D.

This is the same thing as saying that to each haircut in China, to each meal eaten in a cafeteria in Hunan, we attach not their actual prices but international prices—thereby valuing each haircut in China the same as a similar haircut in the United States. The end product is that the Chinese and American GDPs per capita will now be expressed neither in yuan nor in U.S. dollars, but in what is called PPP (purchasing power parity) dollars, an imaginary currency that in principle has the same purchasing power in China and the United States. The same calculation is, of course, performed for each and every other country that participates in the International Comparison Project: When we say $PPP 1, we mean that a unit of such imaginary currency can buy the same basket of goods in India as in China as in France, Argentina, or Zambia.

This was estimated by Branko Milanovic, Peter Lindert, and Jeffrey Williamson in “Preindustrial Inequality” (Economic Journal, forthcoming; previous version published as Measuring Ancient Inequality, National Bureau of Economic Research Working Paper 13550 [National Bureau of Economic Research, October 2007]) to have amounted to a GDP per capita in 1990 international prices of $PPP 633 (PPP stands for “purchasing power parity”; see Essay II). Angus Maddison’s estimate is somewhat lower, $PPP 570 (Contours of the World Economy, 1-2003 AD [Oxford: Oxford University Press, 2007], chap. 1). 6 This is simply given as an example. The Colosseum was built under Titus, more than one hundred years after Crassus died. 7 According to the New York Times obituary from 1937 and Wikipedia.


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Social Democratic America by Lane Kenworthy

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, barriers to entry, basic income, benefit corporation, business cycle, carbon tax, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, off-the-grid, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

FIGURE 3.2 Low-end household incomes and material deprivation P10 household income: posttransfer-posttax income of households at the tenth percentile of the income distribution. Measured in 2005 or as close to that year as possible. Incomes are adjusted for household size (the numbers shown here are for a household with three persons) and converted into US dollars using purchasing power parities (PPPs). Data sources: Luxembourg Income Study, www.lisdatacenter.org, series DPI; OECD, stats. oecd.org. Material deprivation rate: share of households experiencing one or more of the following: inability to adequately heat home, constrained food choices, overcrowding, poor environmental conditions (e.g., noise, pollution), arrears in payment of utility bills, arrears in mortgage or rent payment, difficulty in making ends meet.

Household incomes are posttransfer-posttax, adjusted for household size (the amounts shown are for a household with four persons). The income data are averages for households in the lower half of the income distribution. Household incomes and GDP per capita are adjusted for inflation using the CPI and converted to US dollars using purchasing power parities. “Asl” is Australia; “Aus” is Austria. Ireland and Norway are omitted; both would be far off the plot in the upper-right corner. Data sources: OECD, stats.oecd.org; Luxembourg Income Study, www.lisdatacenter.org. What are the prospects for earnings going forward? Household earnings can rise in two ways: higher wages and more employment.

From the 1940s through the mid- to late-1970s, much of the growth in household incomes for working-age Americans came from rising wages.52 But as figure 3.7 shows, since the late 1970s inflation-adjusted wages in the bottom half have barely budged. FIGURE 3.6 Change in lower-half households’ earnings and net government transfers, 1979–2005 Earnings and net transfers are adjusted for inflation using the CPI and converted to US dollars using purchasing power parities. Data source: Luxembourg Income Study, www.lisdatacenter.org. FIGURE 3.7 Wages Hourly wage at the fiftieth (median) and tenth percentiles of the wage distribution. 2011 dollars; inflation adjustment is via the CPI-U-RS. Data source: Lawrence Mishel et al., The State of Working America, stateofworkingamerica.org, “Hourly wages of all workers, by wage percentile,” using Current Population Survey (CPS) data.


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The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

active measures, affirmative action, An Inconvenient Truth, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, classic study, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, disruptive innovation, Dutch auction, Ford Model T, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, Great Leap Forward, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Jon Ronson, Joseph Schumpeter, knowledge economy, knowledge worker, low skilled workers, manufacturing employment, market bubble, market design, meritocracy, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shared worldview, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, tacit knowledge, tech worker, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, vertical integration, winner-take-all economy, working poor, zero-sum game

Indeed, an overall decline in global economic inequalities is the flip side of widening social inequalities in affluent economies.41 Nevertheless, various attempts have been made to assess the growth of a global middle class, which depends on how the middle is defined, such as by income level preferred by economists or occupation preferred by sociologists. Invariably, studies attempting to assess the growth of the global middle class treat the world as a single country and use income data ranging somewhere between the rich and poor. High Skills, Low Wages 129 These definitions are also based on purchasing power parity (PPP) that offers a better indication of what you can buy with your dollars in different countries; a far lower level of income is required in China to achieve purchasing parity with people living in the United States. Given wildly different definitions of middle-class income, it is unsurprising there is little agreement about the size of the global class.42 Maurizio Bussolo and colleagues at the World Bank define the global middle class as those living between the per capita incomes of Brazil and Italy.43 Using this definition, they calculate that it will expand from 7.6 percent in 2000 to 16.1 percent in 2030, which includes over a billion people in emerging economies able to buy cars, enjoy international tourism, and demand world-class products and quality higher education.44 Figure 8.4 reveals the dominant role of the Chinese economy in explaining the rise of this new class.

See Manjeet Kripalani and Josey Pullyenthuruthel, “India: Good Help Is Hard to Find,” Business Week, February 14, 2005. Notes to Pages 50–59 171 19. World Bank, Global Economic Prospects. Managing the Next Wave of Globalization (Washington, D.C.: World Bank, 2007), 41. These figures are based on a measure of purchasing power parity (PPP). 20. UNCTAD, World Investment Report, 2006, 92. 21. This is based on figures for 2002; see Dieter Ernst, Why Is Chip Design Moving to Asia? http://www.eastwestcenter.org/research/research-projects/?class_ call=view&resproj_ID=182 22. Accenture, “The Kindest Cuts: The Vital Role of Cost Optimization in High Performance Financial Services,” The Point, 9, no. 2 (2009): 3. 23.

See also knowledge wars; knowledge workers 194 labor arbitrage, 97, 99, 106–7, 111, 159 Index Brazil, 182n43 China, 2, 130 corporate profits, 110 downward mobility, 138 emerging economies, 130–31 erosion of benefits, 121–22 financial crash of 2008, 6 global, 128–29, 130, 131 Nike, 102 global poverty, 182n43 globalization, 47–48 growth of, 18 income inequalities, 9, 118–19, 120 income stagnation, 5 Obama, Barack, 3, 23, 27, 147 OECD (Organisation for Economic Co-operation and Development), 31, 35, 91, 109, 149, 168n2 office management, 72, 127 India, 2, 30, 34, 130 Italy, 130, 182n43 mechanical Taylorism, 81 offshoring, 109, 152 offshoring, 8, 46, 51–52, 55–56, 60, 73, 75, 77–78, 90–93, 99, 107–11, 119, 129, 152, 170–71n2, 180n17 Ohmae, Kenichi, 104–5 opportunity bargain, 132 opportunity gap, 141 opportunity bargain American Dream, 27, 132 oasis operations, 64 opportunity trap, 143 politics of more, 186n16 positional conflict, 134 bidding wars, 183–84n22 corporate profits, 124 credentials, 184–85n2 prosperity, 2 purchasing power parity (PPP), 129, 131 development of, 4–6 digital Taylorism, 65, 155 quality-cost revolution, 59 salaries, 118–19, 120 soft currencies, 140–41 economy of hope, 148–49, 164 education and, 4–6, 27–28 and the global auction, 132 war for talent, 84, 91, 96–97 Mills, C. Wright, 83 globalization, 99 government, 25, 27, 154–57 minimum wage, 160 minorities, 118, 119, 138 The Mismanagement of Talent, 143 high-skill, low-wage workforce, 13–14, 112, 147 human capital, 132, 152 mobility, 23, 138, 146 modernization, 157 income inequalities, 151–52 innovation, 65 modular corporation, 76–79, 99–100, 102–3, 174n33 Morgan Stanley, 43 knowledge economy, 25 knowledge wars, 23, 164 middle class, 132 Motorola, 42, 54 Muzio, Daniel, 85 nationalism, 4 neoliberalism, 6, 14–15, 24, 98, 151–52, 164 Nanjing Automotive, 42 nanotechnology program, 44–46 new untouchables, 114 opportunity trap, 12, 133, 135–36 path dependency, 185n5 A Nation at Risk, 27–28 national debt, 150–51, 154 National Health Service, 122 National Science Foundation, 38 nationalism, 4, 151 Nature, 145–46 political policy, 149 productivity, 163–64 prosperity, 152 remaking of, 154–57, 163–64 renewal of, 13–14 shareholders, 98 neoliberalism, 4–6, 12, 14–15, 23–24, 30, 35, 98, 149–52, 158, 160, 164 New Deal, 125 new untouchables, 114 niche skills, 154 social conflict, 13, 146 social justice, 152 transnational companies, 98 war for talent, 90, 96 winner-takes-all, 160 Index 195 opportunity gap, 133–35, 141 opportunity trap, 12, 131–33, 135–38, 141–44, 146 purchasing power parity (PPP), 59, 129, 131 purists’ tactics, 143 O’Reilly, Charles, 97 outsourcing, 8, 56, 60, 103–4, 115 over-the-counter (OTC), 73 Oxford University, 134 quality standards, 103, 105 quality-cost revolution, 8, 46, 49–64, 103, 105, 170–71n2 R&D (research and development), 36, 39–40, 196 paper chase, 139, 162 patents, 45, 58 paternalism, 19 path dependency, 63, 185n5 42–45, 44, 52–53, 56–57, 99, 101, 107–8, 153, 157, 163 race to the bottom, 112, 159 racism, 89, 117–18, 133 pensions, 7, 25, 114, 121–22, 180n25 permanent employability, 142 Reagan, Ronald, 4, 24, 125 real estate, 148 personal capital, 140, 142–43 personal freedom, 135–36, 156 Peterson, Peter, 180n25 recessions, 4, 24, 31, 38, 47, 89, 103, 106, 111, 117–18, 121, 144, 148, 151, 169n24 re-engineering, 73, 77 Pfeffer, Jeffrey, 97 pharmaceutical industry, 56–57 Reich, Robert, 15, 20 resentment, 34 Philippines, 92–93 platform architecture, 76–77, 174–75n34 players’ tactics, 143–44 Retirement USA, 121 return on investment (ROI), 149, 160 reverse auction, 6–8, 55, 104–5, 114, 119, Poland, 35 political policy, 149 121, 137, 157, 159 reverse engineering, 41–42 politics of more, 186n16 populism, 13 portfolio careers, 79 The Revolt of the Elites, 161 Ricardo, David, 20 Rifkin, Jeremy, 163 positional conflict, 134 positional goods, 136 riots, 10, 41, 47 The Rise of the Meritocracy, 133 post-industrial society, 18 poverty, 10, 47, 133–34, 163, 178n21, 182n43 PPP (purchasing power parity), 129, 131 Ritalin, 145–46 Roach, Stephen, 111, 178n21 ROI (return on investment), 149 Prasad, G.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, book value, Bretton Woods, business climate, capital controls, carbon tax, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, Cornelius Vanderbilt, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, foreign exchange controls, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, low interest rates, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price elasticity of demand, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, Tragedy of the Commons, transaction costs, universal basic income, urban sprawl, vertical integration, working-age population

If per capita growth were 7 per cent a year, then high-​quality growth would require that the incomes of poor people also rise by at least 7 per cent a year (or preferably by quite a lot more). Secondly, by high-​quality growth, I mean growth that is environmentally friendly. If India were to maintain 7 per cent a year per capita growth until 2040, India’s per capita income at purchasing power parity (PPP) would rise from its current level of about $5600 to five times its current level, i.e. to about $28,000. (All the income figures in this paragraph are in constant 2011 PPP dollars.)3 This would make India firmly a high-​income country by today’s standards, with a per capita income comparable to countries such as Greece and Portugal that are at the top of the lowest quartile of high-​income countries today.4 If, in addition, growth was inclusive, the incomes of the poorest Indians would also increase by at least a multiple of five and probably a lot more, a change that would obviously make a huge positive difference to their lives.

However, just before it went to press, some footnotes were added in the last chapter to comment on some relevant events in the first three months of 2016, such as the Central government budget for 2016/​17. NOTES 1. India is the third-​largest economy, behind only the United States and China, in terms of ‘purchasing power parity’ (PPP) dollars, and the ninth largest economy in current dollars. But its per capita income rank is 123rd in PPP dollars and 143rd in current dollars, among 185 countries. These are all World Bank figures. Measurement in PPP dollars provides a rough comparison of standards of living across countries.

It would be idle to pretend that rapid improvement in the living standards of poor people could be secured without rapid growth. Growth is not a sufficient condition for widespread prosperity but it is in practice a necessary condition. Only if growth is rapid does it become politically feasible to make it inclusive. 3. The most recent World Bank figures for cross-​country incomes at purchasing power parity are in constant 2011 PPP dollars, and relate to the year 2014. I have taken the liberty of adopting these figures as representative of 2016. 4. Though the World Bank provides per capita income data for countries in both current and PPP dollars, it classifies countries into ‘low-​income’, ‘lower-​middle-​ income’, ‘upper-​middle-​income’, and ‘high-​income’ on the basis of per capita income in current dollars, not PPP dollars.


pages: 221 words: 55,901

The Globalization of Inequality by François Bourguignon

Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, Glass-Steagall Act, income inequality, income per capita, labor-force participation, liberal capitalism, low interest rates, minimum wage unemployment, offshore financial centre, open economy, Pareto efficiency, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

However, since the prices, in dollars, for the same goods differ from one country to another, the numbers this would give us would not be truly comparable in terms of purchasing power; $100 does not buy the same volume of goods in New York that it does in Delhi when converted into rupees. We therefore need to adjust official exchange rates so that the conversion into dollars takes into account differences in the price of the same bundle of goods in various countries. International price comparisons make it possible to fine-­tune indicators of “purchasing power parity,” which in turn enable us to express standard of living in different countries in dollars and the purchasing power of a dollar in the United States in a given year. This adjustment is smaller for developed countries than for developing countries because prices are relatively similar and not too far from prices in the United States in the former.

Paris: OECD Development Centre. 1995). The recent data represent an update of the article by Fran'JOis Bourguignon. 'A Turning Point in Global Inequality ... and Beyond; in Rm arcb ()1J ResfXJnrihility. Reji«lions on Our Common FUlUrt. ed. Wilhem Krull (Leipzig: CEP Euro paische Verlagsanstalp. 2011). The indexes of purchasing power parity that Angus Maddison used for the historical data referenced the year 1990. The data for the recent period usc purcha.singpower parity data based on price statistics that were collected in 2005. which sometimes resulted in significant revisions to the parity indexes. Thisexplains much of the discontinuity between the two series in 1990.

The Gini coefficient in 1820 was around 0.5, similar to a relatively unequal country today. By 1980 it was 0.66, higher than any existing level of national inequality. The second striking point that this graph shows is a sharp d ecline beginning in 1990 (the "recent period " in fig- 28 Chapter 1 ure 1). Changes in datasets and purchasing power parity measurements resulted in a change in the estimation of global inequality—hence the discontinuity in the series shown in figure 1. Nonetheless, in relation to the historical series, the drop in inequality is both undeniable and sizable. In the last twenty years, the Gini coefficient and even the relative gap between the two extreme deciles decreased almost as much as they had increased since 1900.


pages: 374 words: 114,660

The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, carbon tax, clean water, colonial exploitation, Columbian Exchange, compensation consultant, creative destruction, declining real wages, Downton Abbey, Easter island, Edward Jenner, end world poverty, financial engineering, financial innovation, Ford Model T, germ theory of disease, Gini coefficient, Glass-Steagall Act, Great Leap Forward, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, off-the-grid, Paul Volcker talking about ATMs, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, Tragedy of the Commons, very high income, War on Poverty, zoonotic diseases

See also global poverty; incomes poverty lines: absolute, 183–84; global, 220, 223–24, 249, 256; in India, 223, 248, 254–55, 256–57; national, 220, 248–49; relative, 184; in United States, 181–84, 185–86, 197, 256–57; of World Bank, 223, 248–49 poverty reduction: in China, 44, 46, 247, 250–51, 253; economic growth and, 41–42, 273, 312; global, 44–46, 45f, 167, 247, 249–51; government programs, 184–85, 186, 306; in India, 44, 46, 247, 250, 253–55; recommended strategies for, 312–13, 318–19, 321–22, 323–24. See also foreign aid PPP. See purchasing power parity exchange rates prehistory: agriculture in, 78–80; hunter-gatherers, 73–79; life expectancies in, 77, 79, 80 President’s Emergency Plan for AIDS Relief (PEPFAR), 307, 309 Preston, Samuel, 29, 41, 98, 106–7 prices: commodity, 286–87, 297–98; of drugs, 319, 320; as incentives, 246. See also purchasing power parity Princeton University, 98 Pritchett, Lant, 167, 310 progress: inequality and, xiii, 1, 4–6, 10–11; knowledge and inventions, 9–11, 41; measuring, 15–16; technological, 327–28.

In fact, according to the latest estimate, the price level in India is only about 40 percent of the price level in the United States, so that, if we take a typical bundle of things people buy, the bundle in India costs only 40 percent of what it costs in the United States. Put another way, prices would be the same in both places if the exchange rate were 20 rupees to the dollar, not 50 rupees. This “correct” exchange rate, the one that would make a dollar worth the same in both places, is called, appropriately enough, the purchasing power parity exchange rate or, for short, the PPP exchange rate. The PPP rate is the exchange rate from dollars into rupees that would give the same purchasing power in both places. If the price level is lower in Delhi than in New York, as it is in most poor countries, the PPP rate will be lower than the foreign exchange rate.

Quoted in Thomas Nagel, 2005, “The problem of global justice,” Philosophy and Public Affairs 33(2): 113–47, p. 120. CHAPTER SEVEN: HOW TO HELP THOSE LEFT BEHIND 1. These numbers and calculations are from the World Bank’s website for poverty calculations, http://iresearch.worldbank.org/PovcalNet/index.htm?3. 2. Angus Deaton and Olivier Dupriez, 2011, “Purchasing power parity exchange rates for the global poor,” American Economic Journal: Applied Economics 3(2): 137–66. 3. http://www.givingwhatwecan.org/. 4. Richard Attenborough, “17p to save a child’s life,” The Observer, March 4, 2000, http://www.guardian.co.uk/world/2000/mar/05/mozambique.theobserver. 5.


pages: 312 words: 91,835

Global Inequality: A New Approach for the Age of Globalization by Branko Milanovic

Asian financial crisis, assortative mating, Berlin Wall, bitcoin, Black Swan, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial exploitation, colonial rule, David Ricardo: comparative advantage, deglobalization, demographic transition, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, Francis Fukuyama: the end of history, full employment, Gini coefficient, Gunnar Myrdal, income inequality, income per capita, invisible hand, labor-force participation, liberal capitalism, low skilled workers, Martin Wolf, means of production, military-industrial complex, mittelstand, moral hazard, Nash equilibrium, offshore financial centre, oil shock, open borders, open immigration, Paul Samuelson, place-making, plutocrats, post scarcity, post-industrial society, profit motive, purchasing power parity, Ralph Nader, Robert Solow, Second Machine Age, seigniorage, Silicon Valley, Simon Kuznets, special economic zone, stakhanovite, trade route, transfer pricing, very high income, Vilfredo Pareto, Washington Consensus, women in the workforce

This second building block relies on an exercise called the International Comparison Project (ICP) that is conducted at irregular intervals (the last three rounds were done in 1993, 2005, and 2011) and whose objective is to collect price data in all countries of the world and to use these data to calculate countries’ price levels. The ICP is the single most massive empirical exercise ever conducted in economics. Its final products are the so-called PPP (purchasing power parity) exchange rates. The PPP exchange rate is the exchange rate between, say, the US dollar and the Indian rupee, such that at that exchange rate a person could buy the same amount of goods and services in India as in the United States. To give an example, consider the results for 2011. The market exchange rate was 46 Indian rupees for 1 US dollar.

Estimates of the level of global inequality from these sources are higher than estimates by Bourguignon and Morrisson (2002) (see Figure 3.1) because the new data include many more countries (some 120 countries vs. 33 geographical areas in Bourguignon and Morrisson) and many more income groups within each country (often 100 percentiles or at least ventiles [20 groups of 5 percent each] obtained from microdata vs. 11 income fractiles in Bourguignon and Morrisson). In addition, the underlying purchasing power parity exchange rates (PPPs) are different. The availability of PPP exchange rates, which adjust for the differences in price levels between countries, is absolutely indispensable for the calculation of global inequality (see Excursus 1.1). Without PPPs, we would be assuming that people in India face the same prices as people who live in the United States.

See also income convergence; inequality among countries; inequality within countries; subsistence level poorer people: omission from data and, 16; underestimation of, 16; high globalization period and, 20; absolute measures and, 28–29; poverty lines, 43; preindustrial period and, 50; technological progress and, 55; migration and, 152; equity and, 184; politics and, 189–190, 194; democracy and, 194, 200; false consciousness and, 201–202; social mobility and, 202; US student achievement and, 260n24. See also mobility, upward population, global, 50–51, 63–64, 95. See also migration populations, national, 21, 51, 55, 94, 248n23, 262n38. See also epidemics; Malthusian considerations populism, 7, 204–211, 233. See also global governance Posner, Eric, 152 PPP (purchasing power parity) exchange rates, 15–16, 17, 18, 33–34, 121, 244n24 Prados de la Escosura, Leandro, 59, 62, 63, 81 predictions, 5–6, 21, 28, 155–161, 257n1. See also twenty-first and twenty-second centuries preindustrial period: Piketty and, 48–49; Kuznets cycles and, 50–51, 58, 76, 98; rich countries and, 53; benign/malign forces and, 55–57; catastrophic events and, 56, 57, 62–65, 69, 98; borderline of, 58; Kuznets hypothesis and, 59–61, 70–73; Spain (1326–1842), 60; plague and, 62–64, 247n16, 247n18; Italy and Low Countries, 62–63, 65, 247n16; inequality increases and, 65–66, 69–70; output per capita and, 247n15 pre-transfer and pre-tax income.


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

accelerated depreciation, activist fund / activist shareholder / activist investor, air freight, ASML, barriers to entry, Basel III, Black Monday: stock market crash in 1987, book value, BRICs, business climate, business cycle, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable:, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, currency risk, discounted cash flows, distributed generation, diversified portfolio, Dutch auction, energy security, equity premium, equity risk premium, financial engineering, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, low interest rates, market bubble, market friction, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, proprietary trading, purchasing power parity, quantitative easing, risk free rate, risk/return, Robert Shiller, Savings and loan crisis, shareholder value, six sigma, sovereign wealth fund, speech recognition, stocks for the long run, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, two and twenty, value at risk, yield curve, zero-coupon bond

Global CAPM The disagreement between investors about the return and risk of international investments disappears if purchasing power parity (PPP) holds across all currencies. In that case, changes in exchange rates perfectly match differences in inflation between currencies:2 ( Xt = Xt−1 where 1 + iA 1 + iB ) Xt = exchange rate of currency B expressed in units of currency A at time t iA , iB = inflation rate for currency A, B As a result, the expected return and risk in real terms for any asset will be the same for all investors, regardless of their domestic currency. In this 2 Technically, this is so-called relative purchasing power parity, referring to changes in prices and exchange rates.

For instance, make sure that the same inflation rates underlie the financial projections and cost of capital estimates for the company. Exchange rates are one parameter that deserves special attention. Although exchange rates converge to purchasing power parity (PPP) in the long run,3 3 For an overview, see A. M. Taylor and M. P. Taylor, “The Purchasing Power Parity Debate,” Journal of Economic Perspectives 18, no. 4 (Fall 2004): 135–158. 708 EMERGING MARKETS EXHIBIT 31.1 ConsuCo: Key Historical Financial Indicators reais, million 2004 2005 2006 2007 2008 Invested capital Current operating assets Current operating liabilities Net operating working capital 4,769 (2,650) 2,119 4,833 (2,953) 1,880 5,194 (3,596) 1,598 5,936 (4,051) 1,885 6,133 (4,304) 1,829 Net property, plant, and equipment Other net operating assets Operating invested capital (excluding goodwill) 6,322 3,427 11,868 5,517 3,683 11,080 6,059 5,006 12,662 6,886 5,258 14,028 7,059 5,756 14,645 Goodwill plus cumulative goodwill written off Operating invested capital (including goodwill) 2,067 13,935 2,104 13,184 1,940 14,602 2,221 16,249 2,319 16,964 Excess marketable securities Other nonoperating assets Total investor funds 1,326 818 16,079 2,061 652 15,897 1,434 449 16,485 1,094 451 17,795 1,807 518 19,289 Total interest-bearing debt and operating leases Other nonoperating liabilities Adjusted equity Total investor funds 8,299 1,318 6,462 16,079 7,662 1,538 6,697 15,897 8,127 1,728 6,630 16,485 8,965 1,737 7,093 17,795 9,664 1,774 7,851 19,289 NOPLAT Sales Cost of goods sold Other operating costs EBITDA 17,950 (12,702) (3,864) 1,384 19,162 (13,483) (4,119) 1,560 19,829 (14,233) (4,349) 1,247 21,290 (15,321) (4,523) 1,447 25,762 (18,971) (4,933) 1,858 Depreciation and amortization Adjusted EBITA (498) 886 (631) 929 (442) 805 (447) 1,000 (588) 1,269 Cash taxes NOPLAT (43) 844 (207) 722 (324) 481 (179) 821 (329) 940 Nominal indicators, % Sales growth Adjusted EBITA/sales NOPLAT/sales Invested capital (excluding goodwill)/sales Invested capital (including goodwill)/sales ROIC (excluding goodwill) ROIC (including goodwill) 16.3 4.9 4.7 58 69 7.1 6.1 6.8 4.8 3.8 64 74 6.5 5.5 3.5 4.1 2.4 66 76 3.8 3.3 7.4 4.7 3.9 57 66 5.9 5.1 21.0 4.9 3.6 54 62 6.4 5.5 Approximate real indicators, % Sales growth (inflation-adjusted) Gross profit/sales EBITDA/sales Sales/store (reais million) Sales/square meter (reais thousand) 1.4 29.2 7.7 32.7 15.8 0.1 29.6 8.1 32.5 15.0 –3.1 28.2 6.3 31.9 14.4 3.0 28.0 6.8 31.3 13.5 16.8 26.4 7.2 35.2 15.5 Key financial ratios FORECASTING CASH FLOWS 709 EXHIBIT 31.2 Economic and Monetary Assumptions % 2006 2007 2008 2009E 2010E ... 2014E Real GDP growth Brazil United States 4.0 2.7 5.7 2.1 5.1 0.4 –0.7 –2.7 3.5 1.5 ... ... 3.7 2.1 Inflation (consumer prices) Brazil United States 4.2 3.2 3.6 2.9 5.7 3.8 4.8 –0.4 4.1 1.7 ... ... 4.5 2.2 Source: International Monetary Fund World Economic Outlook.

Since company values in emerging markets are often more volatile than values in developed markets, we recommend triangulating the scenario DCF results with two other valuations: one based on discounting cash flows developed in a business-as-usual projection but using a cost of capital that includes a country risk premium, and another valuation based on multiples. REVIEW QUESTIONS 729 REVIEW QUESTIONS 1. Define purchasing power parity. What is the importance of purchasing power parity when you are trying to establish value for a company located in an emerging market? 2. Identify four risks associated with emerging markets that affect enterprise discounted-cash-flow (DCF) valuation. How should these risks be treated within the enterprise DCF model?


pages: 386 words: 122,595

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

affirmative action, Alan Greenspan, Albert Einstein, Andrei Shleifer, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Boeing 747, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Cass Sunstein, central bank independence, classic study, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, Great Leap Forward, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, libertarian paternalism, low interest rates, low skilled workers, Malacca Straits, managed futures, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, seminal paper, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, tech worker, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

In theory, rational people would continue to sell dollars for pesos until there was no longer any economic advantage in doing so; at that point, $100 in the United States would buy roughly the same goods and services as $100 worth of pesos in Mexico—which is also the point at which the exchange rate would reach purchasing power parity. Here is the strange thing: Official exchange rates—the rate at which you can actually trade one currency for another—deviate widely and for long stretches from what PPP would predict. If purchasing power parity makes economic sense, why is it often a poor predictor of exchange rates in practice? The answer lies in the crucial distinction between goods and services that are tradable, meaning that they can be traded internationally, and those that are not tradable, which are (logically enough) called nontradable.

So, in theory, we ought to be willing to exchange $1 for however many yen or pesos or rubles would purchase roughly the same amount of stuff in the relevant country. If a bundle of everyday goods costs $25 in the United States, and a comparable bundle of goods costs 750 rubles in Russia, then we would expect $25 to be worth roughly 750 rubles (and $1 should be worth roughly 30 rubles). This is the theory of purchasing power parity, or PPP. By the same logic, if the value of the ruble is losing 10 percent of its purchasing power within Russia every year while the U.S. dollar is holding its value, we would expect the ruble to lose value relative to the U.S. dollar (or depreciate) at the same rate. This isn’t advanced math; if one currency buys less stuff than it used to, then anyone trading for that currency is going to demand more of it to compensate for the diminished purchasing power.* I learned this lesson once—the hard way.

I found a currency trader right away and made an opening hardball offer—which the trader accepted immediately. He didn’t even quibble, let alone bargain. It turned out that my guide book was old; the Chinese currency had been steadily losing value ever since publication. I had swapped my $100 for the Chinese equivalent of about $13.50. Purchasing power parity is a helpful concept. It is the tool used by official agencies to make comparisons across countries. For example, when the CIA or the United Nations gathers data on per capita income in other countries and converts that figure into dollars, they often use PPP, as it presents the most accurate snapshot of a nation’s standard of living.


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Free World: America, Europe, and the Surprising Future of the West by Timothy Garton Ash

"World Economic Forum" Davos, Albert Einstein, battle of ideas, Berlin Wall, BRICs, British Empire, call centre, centre right, clean water, Columbine, continuation of politics by other means, cuban missile crisis, demographic transition, Deng Xiaoping, Doha Development Round, Eratosthenes, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), James Watt: steam engine, Kickstarter, Mikhail Gorbachev, Nelson Mandela, Peace of Westphalia, postnationalism / post nation state, Project for a New American Century, purchasing power parity, reserve currency, Ronald Reagan, shareholder value, Silicon Valley, Suez crisis 1956, Thomas Malthus, trade liberalization, Washington Consensus, working poor, working-age population, World Values Survey

The oldest symbolic meanings of West and East are now revived: the West as the evening country, where the setting sun goes in search of Elysium, the East as the realm of the rising sun. Just how quickly that sun will rise is disputed. How big are the economies of China and India, and how fast are they likely to grow? Depending on your level of distrust in official statistics, and whether or not you use “purchasing power parities,” you can put China as the sixth or the second largest economy in the world today, India as the eleventh or the fourth.56 You can have the Chinese economy growing at an average of 9.5 percent between 1979 and 2001, or much less than that.57 These varying assessments imply important differences in timescales; none casts doubt on the basic direction.

Quoted by Martin Walker, UPI’s Chief International Correspondent, in a UPI report from Washington, D. C., February 4, 2003. 4. Charles A. Kupchan, “The End of the West,” Atlantic Monthly, November 1, 2002. 5. Robert Kagan, Of Paradise and Power: America and Europe in the New World Order (New York: Alfred A. Knopf, 2003), p. 3. 6. Note that these rankings are based on purchasing power parities. See the table, based on 2002 World Bank figures, in Strategic Audit: Discussion Document, November 2003, prepared by the British government’s Strategy Unit, and available on http://www.strategy.gov.uk. At market exchange rates, it would be first (America) and fourth (Britain) against third (Germany) and fifth (France). 7.

Stated with some authority by a former head of the Joint Intelligence Committee, Sir Rodric Braithwaite, in Prospect, May 2003, pp. 20–23, at p. 21. 30. James Woolsey, quoted on the BBC Today program, and in The Economist, April 29, 2000. 31. The fourth largest at market exchange rates, but only the seventh using purchasing power parities. See the table, based on 2002 World Bank figures, in Strategic Audit: Discussion Document, November 2003 prepared by the British government’s Strategy Unit, and available on http://www.strategy.gov.uk. 32. “Aber dieses groteske Österreich ist nichts anderes als ein besonders deutlicher Fall der modernen Welt.”


pages: 306 words: 78,893

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

"World Economic Forum" Davos, accounting loophole / creative accounting, affirmative action, Alan Greenspan, AOL-Time Warner, Asian financial crisis, barriers to entry, Benchmark Capital, book value, borderless world, Branko Milanovic, Bretton Woods, business cycle, California energy crisis, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, digital divide, electricity market, emotional labour, ending welfare as we know it, feminist movement, fulfillment center, full employment, gender pay gap, George Gilder, glass ceiling, Glass-Steagall Act, Gordon Gekko, government statistician, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, Larry Ellison, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, manufacturing employment, Mary Meeker, means of production, Michael Milken, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, PalmPilot, pets.com, post-work, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rewilding, Robert Gordon, Robert Shiller, Robert Solow, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, stock buybacks, structural adjustment programs, tech worker, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, warehouse automation, women in the workforce, working poor, zero-sum game

Ireland Sweden Denmark Spain UK Japan Hong Kong Singapore Taiwan Portugal Korea Thailand GDP per hour worked 0 200 400 600 800 1,000 1,200 1,400 1,600 +71% +80% +72% +63% +20% 9-+60% D +66% ^ +76% ^ +111% w +94% i +180% g +155% ON +262% +53% +229% _+?9% 0 5 10 15 20 25 30 35 Work hours per person are the number of paid hours worked in a national economy for the entire year divided by the population. GDP per hours worked is expressed in international dollars—converted at so-called purchasing power parity (PPP) exchange rates, which attempt to equalize buying power across borders, rather than depending on volatile market rates of exchang—divided by the total number of hours worked. Numbers at the right of the second graph show the real change betweeen 1 973 and 1 996. Source: Crafts 1999. The mysticism begins with defining output.

Urdike the Luxembourg Income Study (of which more in a bit), which makes an effort to massage national data into an internationally comparable form, Milanovic had to take what was on offer. Price levels also vary around the world—and within countries, too; an income of $20,000 would mean very different things in Manhattan and rural Mississippi, as would $20,000 converted at market exchange rates into Russian rubles. 131 Milanovic uses purchasing power parity (PPP) exchange rates, which attempt to equalize buying power across borders, ignoring the distortions frequently introduced by financial market fashions.^^ PPP rates typically boost the incomes of poor regions compared to market rates, since prices are generally lower in poorer countries than in rich ones (the same effect is responsible for the differences in buying power between Manhattan and rural Mississippi).

The report and supporting data can be gotten from <wv^rw.foreignpoUcy.com/issue^an-feb_2003/data.zip> and <www.atkearney.com/main.taf?site=l&a=5&b=4&c=l&d=64> (visited February 26, 2003). 3.The controversy is very nicely reviewed for the nonspecialist by Laura Secor (2003). 4. These measures use so-called purchasing power parity (PPP) exchange rates rather than market rates; PPP techniques attempt to estimate the actual living standards that money incomes can buy, which are often quite different from what happens on foreign exchange markets. 5. The precise measure used for labor costs is relative unit labor costs (RULC), the cost per unit of output valued in a common currency.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

This is often called purchasing power parity.7 Just as the price of goods in Walmart stores must be roughly the same as the price of goods in Target, so the price of goods in Ruritania when converted into dollars must be roughly the same as the price in the United States: Purchasing power parity implies that any differences in the rates of inflation will be offset by a change in the exchange rate. For example, if prices are rising by 1.0% in the United States and by 11.1% in Ruritania, the number of pesos that you can buy for $1 must rise by 1.111/1.01 – 1, or 10%. Therefore purchasing power parity says that to estimate changes in the spot rate of exchange, you need to estimate differences in inflation rates:8 In our example, Interest Rates and Inflation Rates Now for the fourth leg!

Clinton, “Transaction Costs and Covered Interest Arbitrage: Theory and Evidence,” Journal of Political Economy 96 (April 1988), pp. 358–370. Purchasing power parity K. Froot and K. Rogoff, “Perspectives on PPP and Long-run Real Exchange Rates,” in G. Grossman and K. Rogoff (eds.), Handbook of International Economics (Amsterdam: North-Holland Publishing Company, 1995). K. Rogoff, “The Purchasing Power Parity Puzzle,” Review of Economic Literature 34 (June 1996), pp. 667–668. A. M. Taylor and M. P. Taylor, “The Purchasing Power Parity Debate,” Journal of Economic Perspectives 18 (Autumn 2004), pp. 135–158. ● ● ● ● ● PROBLEM SETS Select problems are available in McGraw-Hill’s Connect Finance.

According to the expectations theory, what is the expected spot rate for yen in three months’ time? g. According to purchasing power parity theory, what then is the expected difference in the three-month rate of price inflation in the United States and Japan? 2. Terminology Define each of the following theories in a sentence or simple equation: a. Interest rate parity. b. Expectations theory of forward rates. c. Purchasing power parity. d. International capital market equilibrium (relationship of real and nominal interest rates in different countries). 3. Purchasing power parity In March 1997 the exchange rate for the Indonesian rupiah was R2,419 = $1.


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, Alan Greenspan, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, full employment, Glass-Steagall Act, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, Les Trente Glorieuses, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen, Tyler Cowen: Great Stagnation, vertical integration, very high income, winner-take-all economy, zero-sum game

From 1950 to 2007, it jumped to 2.3 per cent. Since 2007, the growth rate has looked more like the pre-Second World War trend. This had not changed by 2014, despite the recovery, since productivity growth remained worryingly absent. Figure 49. US GDP per Head (purchasing power parity, at 1990 Geary Khamis dollars) Source: Maddison project and the Conference Board Figure 50. UK GDP per Head (purchasing power parity, at 1990 Geary Khamis dollars) Source: Maddison project and the Conference Board Thus, even when financial crises cause huge recessions, financial crises need not leave permanent marks on the level of output, even though it will take a substantial number of years to return to the prior trend.

Over the same period, the real GDP of the emerging countries grew by 31 per cent and those of India and China by 39 and 56 per cent respectively. Such a speedy transformation in relative economic weight among important countries has no precedent. It is plausible that China’s economy already is the biggest in the world, at purchasing power parity, in the middle of this decade, and will be the biggest in market prices by the early part of the next decade. The crisis has accelerated the world economy towards this profound transition. The coincidence of a huge financial and economic crisis with a prior transformation in relative economic power also occurred in the 1930s.

In the cases of the US and the UK, GDP and GDP per head both went back above their pre-Great Depression trends in the post-Second World War period, despite the vast output losses of that time. Figure 49 shows that the US fully recovered its long-term trend level and rate of growth of GDP per head at purchasing power parity (which was 1.9 per cent a year from 1870 to 2007) after the Great Depression and the Second World War. Since the 2007–09 crisis, however, it has been below that rate. Figure 50 shows that the UK did far better than recover its growth trend after its desperately poor interwar performance.


pages: 665 words: 146,542

Money: 5,000 Years of Debt and Power by Michel Aglietta

accelerated depreciation, Alan Greenspan, bank run, banking crisis, Basel III, Berlin Wall, bitcoin, blockchain, Bretton Woods, British Empire, business cycle, capital asset pricing model, capital controls, cashless society, central bank independence, circular economy, collapse of Lehman Brothers, collective bargaining, corporate governance, David Graeber, debt deflation, dematerialisation, Deng Xiaoping, double entry bookkeeping, energy transition, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, forward guidance, Francis Fukuyama: the end of history, full employment, German hyperinflation, income inequality, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, joint-stock company, Kenneth Arrow, Kickstarter, land bank, liquidity trap, low interest rates, margin call, means of production, Money creation, money market fund, moral hazard, Nash equilibrium, Network effects, Northern Rock, oil shock, planetary scale, plutocrats, precautionary principle, price stability, purchasing power parity, quantitative easing, race to the bottom, reserve currency, secular stagnation, seigniorage, shareholder value, special drawing rights, special economic zone, stochastic process, Suez crisis 1956, the payments system, the scientific method, tontine, too big to fail, trade route, transaction costs, transcontinental railway, Washington Consensus

Expectations on the exchange market are guided by a focal point ēt with the effect that log êt = Et log et+1 = a + β log ēt The demand for money is And to differentiate the demand for money: In a hyperinflationary process, nominal developments are much greater than real variations. We can overlook these latter and focus on relative purchasing power parity (PPP): It is the exchange market that guides the revision of expectations for inflation. From this we deduce the inflation dynamic: Depending on whether β < 1+1/α or β > 1+1/α we find two diferent inflationary regimes: one is directed by monetary expansion, and the other is self-referential.

Given that the payment system is the operator of value, finality of payment must be established across the ensemble of international exchanges for the macroeconomic coherence of these exchanges to be established. What Is an Efficient International Monetary System (IMS)? For the ‘standard’ theory of financial efficiency, there is no complication. It is necessary and sufficient that the prices of all goods equalise across all their sites of sale (at purchasing power parity) and that the expected yields on all assets equalise. This amounts to an equalisation of anticipated real capital yield rates, wherever in the world this capital is invested. It is as if capital were everywhere homogeneous! We find, here, the same aporia as in the theory of pure economics, highlighted in Chapter 1.

This means that the exchange rate variations observed on forward markets are unbiased estimates of anticipated variations in these rates. It follows from this that the forward markets offer the best possible forecasts of future exchange rates. - The nominal prices on goods markets, corrected by exchange rates, must be the same for all baskets of goods and for all currencies. Purchasing power parity is the name for the general integration of markets and goods, meaning that there is a single world price for each good or service. It goes without saying that, in empirical terms, these conditions are never realised. But this is not what is at stake here. The essential thing is that, in theoretical terms, this definition of economic and financial integration outlines a world without money, for it does not take account of what is exclusive about money and what distinguishes it from financial assets: namely, liquidity.


Super Continent: The Logic of Eurasian Integration by Kent E. Calder

"World Economic Forum" Davos, 3D printing, air freight, Asian financial crisis, Bear Stearns, Berlin Wall, blockchain, Bretton Woods, business intelligence, capital controls, Capital in the Twenty-First Century by Thomas Piketty, classic study, cloud computing, colonial rule, Credit Default Swap, cuban missile crisis, deindustrialization, demographic transition, Deng Xiaoping, disruptive innovation, Doha Development Round, Donald Trump, energy transition, European colonialism, export processing zone, failed state, Fall of the Berlin Wall, foreign exchange controls, geopolitical risk, Gini coefficient, high-speed rail, housing crisis, income inequality, industrial cluster, industrial robot, interest rate swap, intermodal, Internet of things, invention of movable type, inventory management, John Markoff, liberal world order, Malacca Straits, Mikhail Gorbachev, mittelstand, money market fund, moral hazard, new economy, oil shale / tar sands, oil shock, purchasing power parity, quantitative easing, reserve currency, Ronald Reagan, seigniorage, Shenzhen special economic zone , smart cities, smart grid, SoftBank, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, Suez canal 1869, Suez crisis 1956, supply-chain management, Thomas L Friedman, trade liberalization, trade route, transcontinental railway, UNCLOS, UNCLOS, union organizing, Washington Consensus, working-age population, zero-sum game

Driving the recent transformation from an Atlantic to a Eurasian-centered global political economy has been an even broader transcontinental dynamic, spearheaded by Chinese growth, Soviet collapse, logistical advances, and European transformation. The People’s Republic of China (PRC) in 1973 accounted for less than 5 percent of global GDP in purchasing power parity (PPP) terms. That share more than tripled to 17 percent in 2015, by which time China had already passed the US as the world’s largest economy. Together with the twenty-eight independent, mostly advanced members of the European Union, as well as China’s Asian neighbors, the collective GDP of the Eurasian continent in 2015 had climbed to almost 70 percent of the global total, as Figure 1.1 suggests.

The mathematics of its formidable population size, multiplied by its modest but rising per capita consumption, especially in the east of the continent, clearly drive this simple equation. With energy consumption and GDP levels that are both much lower in nominal terms than those of the United States, it is only a matter of time before China and possibly India will surpass America along both dimensions—in the calculus of nominal GDP as it already has in the scales of purchasing-power parity. What do these historic economic changes concretely signify for the world in broader terms? If a more interactive Eurasian playing field is emerging, what does that mean for the profile of world affairs? These are the central questions that we confront. It is important to remember that the question is not developments in any one country alone.

China also gained acclaim from influential Western financiers, including Tim Geithner, Hank Paulson, and Roger Altman, for its role in stabilizing the world economy as a whole.53 China’s day as a major global player, and as the principal driver of Eurasian continentalism, had arrived, with its GDP in purchasing-power parity terms passing the US in 2013. The Ukraine Crisis and the Making of Eurasia Kiev is a long way from Beijing, Tokyo, Seoul, and New Delhi. One might legitimately wonder what Ukrainian developments have to do with Eurasian integration, especially as the Ukraine has shrunk economically under the ­impact of domestic political uncertainties and the protracted conflict with Russia.


pages: 272 words: 71,487

Getting Better: Why Global Development Is Succeeding--And How We Can Improve the World Even More by Charles Kenny

agricultural Revolution, Berlin Wall, British Empire, Charles Lindbergh, clean water, demographic transition, double entry bookkeeping, Edward Jenner, experimental subject, Fall of the Berlin Wall, germ theory of disease, Golden arches theory, Great Leap Forward, Gunnar Myrdal, income inequality, income per capita, Indoor air pollution, inventory management, Kickstarter, Milgram experiment, off grid, open borders, public intellectual, purchasing power parity, randomized controlled trial, Robert Solow, seminal paper, structural adjustment programs, The Wealth of Nations by Adam Smith, total factor productivity, Toyota Production System, trade liberalization, transaction costs, Tyler Cowen, very high income, Washington Consensus, X Prize

Using market exchange rates will give you a misleading picture of what an income per capita of $1,000 will buy you—143 bowls of noodles in Washington compared to 1,666 bowls in Laos. The question, then, if we want to perform a proper comparison, is how to align the numbers so they come close to matching. The GDP and income figures used in this book are based on an idea known as “purchasing power parity” and adjusted for inflation. In other words, they are meant to account for the difference in the power of a dollar to purchase goods and services in different countries at different times. But such an adjustment, as necessary as it might be, adds an additional source of uncertainty. People in poor countries buy less stuff than people in rich countries, but also different stuff.

difficulties in models for “Do no harm” principle for education’s impact on effect of political reforms on Harrod and Domar’s theory of Lewis’s model for measuring success with neo-Malthusianism and unsustainable New Institutional Economics theory of relation to quality of life setting governmental policies for Solow’s theory of Tolstoy and Smith’s vision of war’s effect on Washington Consensus See also Economic stagnation; GDP; Global development Economic stagnation applying concept of failed search to cure quality of life and role of aid in Economist, The Education Africa’s literacy and conditional cash transfers supporting cultural views on women’s demand-side influences on economic growth and ensuring affordable global progress in improving quality of increasing primary enrollments Millennium Development Goals for offering scholarships to girls other trends influencing promoting community sanitation radio-disseminated teaching health treatments TV’s effect on in wealthier vs. poorer countries Ehrlich, Paul Eichmann, Adolf Elections, establishing free Empathy Ends of the Earth, The (Kaplan) Engels, Freidrich Engerman, Stanley Environment demand for safe water misleading product ads neo-Malthusian concerns about quality of life’s effect on supporting sustainability of Essay on the Principle of Population, An (Malthus) European Convention for the Protection of Human Rights Exogenous growth model Expeditions Lewis and Clark’s Mungo Park’s West Papua Farewell to Alms, A (Clark) Fay, Marianne Felipe, Jesus Ferguson, Niall Fertility effect of cable TV on rates of global declines in linking lower child mortality and lower Malthus’ view of poor’s reproductive health practices Filmer, Deon Fink, Carsten Food and Agriculture Organization Food production Green Revolution health gains with improved increasing quality of life and output increases of See also Malthusian trap Frankel, Herbert Freeman, John Friedman, Thomas Gartner, John D. Gates Foundation Gates, Jr., Bill Gates, Sr., Bill GDP (gross domestic product) defined East Asian Miracle and income divergence revealed by linking to quality of life Malthusian trap and measuring mortality rates and per capita income in Africa purchasing power parity and relation to quality of life technology central to Gender equality Millennium Development Goals for quality of life and Western vs. Muslim views on See also Women Germ theory Glaxo SmithKline Global colonization climate’s effect on development effects on quality of life Malthusian trap and Mungo Park’s expeditions patterns of disease and wealth in Global development climate’s effect on costs of first contact divergence in income growth economic growth vs.

See Richest-poorest gap; Poverty Population consumption and sustainability of declining fertility of increases in life expectancy links between lower child mortality and family size Malthus’s linking of income and growth in See also Food production; Malthusian trap Population Bomb, The (Ehrlich) Poverty advantages of poor in wealthy countries effect on quality of life fear of illnesses resulting in health effects of Malthusian model of birth rate and Millennium Development Goals for trends reversing See also Global income; Richest-poorest gap Preston, Samuel Pritchett, Lant Prizes PROGRESA Purchasing power parity Putnam, Robert Quality of life balancing with economic growth cause for optimism colonial history’s effect on improved costs of improving East Asian Miracle educational quality and environmental effects of good gender equity and getting cheaper global health improvements government’s role in improvements in income and limits to progress in lower rates of violence measuring improvements in need for global development policies policies supporting economic Polity scores and poverty’s effect on progress in political and civil rights promoting demand for reasons for caring about for rich and poor countries stagnant economies and technologies improving technology lowering cost of See also Changes in quality of life; Happiness Quarterly Journal of Economics Rajan, Raghuram Ravallion, Martin Realistic optimism Rede Globo network Renelt, David Report card of citizen services Reproductive health practices Reynol-Querol, Marta Richest-poorest gap advantages in wealthy countries divergence between Britain and India global divergence in income health care and sustainability and consumption of rich and poor Robinson, James Rodriguez, Francisco Roland, Gerard Romer, Paul Russia.


Growth: From Microorganisms to Megacities by Vaclav Smil

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, agricultural Revolution, air freight, Alan Greenspan, American Society of Civil Engineers: Report Card, Anthropocene, Apollo 11, Apollo Guidance Computer, autonomous vehicles, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Boeing 747, Bretton Woods, British Empire, business cycle, caloric restriction, caloric restriction, carbon tax, circular economy, colonial rule, complexity theory, coronavirus, decarbonisation, degrowth, deindustrialization, dematerialisation, demographic dividend, demographic transition, Deng Xiaoping, disruptive innovation, Dissolution of the Soviet Union, Easter island, endogenous growth, energy transition, epigenetics, Fairchild Semiconductor, Ford Model T, general purpose technology, Gregor Mendel, happiness index / gross national happiness, Helicobacter pylori, high-speed rail, hydraulic fracturing, hydrogen economy, Hyperloop, illegal immigration, income inequality, income per capita, industrial robot, Intergovernmental Panel on Climate Change (IPCC), invention of movable type, Isaac Newton, James Watt: steam engine, knowledge economy, Kondratiev cycle, labor-force participation, Law of Accelerating Returns, longitudinal study, low interest rates, mandelbrot fractal, market bubble, mass immigration, McMansion, megacity, megaproject, megastructure, meta-analysis, microbiome, microplastics / micro fibres, moral hazard, Network effects, new economy, New Urbanism, old age dependency ratio, optical character recognition, out of africa, peak oil, Pearl River Delta, phenotype, Pierre-Simon Laplace, planetary scale, Ponzi scheme, power law, Productivity paradox, profit motive, purchasing power parity, random walk, Ray Kurzweil, Report Card for America’s Infrastructure, Republic of Letters, rolodex, Silicon Valley, Simon Kuznets, social distancing, South China Sea, synthetic biology, techno-determinism, technoutopianism, the market place, The Rise and Fall of American Growth, three-masted sailing ship, total factor productivity, trade liberalization, trade route, urban sprawl, Vilfredo Pareto, yield curve

Between 1993 and 2013, the percentage of obese males doubled and that of obese women rose by nearly half, and in 2013 67.1% of British men, and 57.2% of women, were overweight or obese, rates only slightly lower than in the US (HSCIC 2015). And China’s rapid post-1980 economic advances—making the country the world’s largest economy (in terms of purchasing power parity) and lifting its average daily per capita food availability above that in Japan (FAO 2018)—have resulted in notable increases of childhood and adolescent overweight and obesity, from just 4.4% for the cohort born in 1965 to 9.7% by 1985 and 15.9% in the year 2000 (Fu and Land 2015). The first global analysis of trends in BMI looked at 28 years of data (1980 to 2008) for adults 20 years of age and older in 199 countries, and it found an increase in male BMI in all but eight countries, with the global mean rising by 0.4 kg/m2/decade, and female BMI rising slightly faster at 0.5 kg/m2/decade (Finucane et al. 2011).

Then, after 27 years of Maoist orthodoxy and economic misery, Deng Xiaoping set China on a reformist course that boosted GDP (in constant 2010 dollars) from about $0.3 trillion to $10.2 trillion between 1980 and 2017 (World Bank 2018), making the country the world’s largest economy in terms of purchasing power parity and leading to the adoption of many policies strongly resembling ancient imperial practices (Frank 1998; Bergsten et al. 2009; Morrison 2017). China, once again, has strong and unyielding central control over 9.6 million km2 (slightly larger than the US) and its leadership, once again, refers to millennia of imperial history in superlative terms.

Figure 5.29 Growth and logistic outlook of GDP (expressed in international $2011) in four major economies—France, Japan, and the US since 1870, and China since 1950. Data from World Bank (2018). In order to appraise actual standards of living, international comparisons of these achievements are now commonly done in values converted to purchasing power parity (PPP). If comparisons based on exchange rates mislead (they may work well for financial flows but not for food or nontraded goods), those based on PPP—relating one currency to another by buying the same amount of goods and services—are far from perfect either. In order to be meaningful, a comparative basket must be fairly capacious but that means that it cannot be made identical: if so, it would ignore, or at least greatly distort, too many specific and qualitative differences that reflect national dietary and consumption peculiarities, expectations, and preferences.


pages: 370 words: 112,602

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit Banerjee, Esther Duflo

"World Economic Forum" Davos, Albert Einstein, Andrei Shleifer, business process, business process outsourcing, call centre, Cass Sunstein, charter city, clean water, collapse of Lehman Brothers, congestion charging, demographic transition, diversified portfolio, experimental subject, hiring and firing, Kickstarter, land tenure, low interest rates, low skilled workers, M-Pesa, microcredit, moral hazard, purchasing power parity, randomized controlled trial, Richard Thaler, school vouchers, Silicon Valley, The Fortune at the Bottom of the Pyramid, Thomas Malthus, tontine, urban planning

They do the exercise using the Indian rupee as the benchmark and use a price index in India compared to the United States to convert this poverty line into dollars, adjusted for the purchasing power parity. They propose the 16-rupee poverty line as the average of the poverty line of fifty countries where the vast majority of the poor live, weighted by the number of poor in those countries. They then use the exchange rate, adjusted for the price index between India and the United States, to convert the 16 rupees into a figure in dollars, which comes to 99 cents. Throughout this book, we present all prices in local currency and in 2005 Purchasing Power Parity–adjusted dollars (which we will note as “USD PPP”), using Deaton and Dupriez’s numbers.

Our editor at PublicAffairs, Clive Priddle, was wonderful to work with: The book came to life when he took charge. Notes Foreword 1 Throughout the book, we use the collective “we” whenever at least one of us was present in an interview. 2 The key reference we follow for our definition of poverty is Angus Deaton and Olivier Dupriez, “Purchasing Power Parity for the Global Poor,” American Economic Journal: Applied Economics, forthcoming. How do we know how much prices need to be adjusted to reflect the cost of living? The ICP project, led by the World Bank, has collected a comprehensive set of price data in 2005. Deaton and Dupriez have used those to calculate the cost of a basket of goods typically consumed by the poor in all the poor countries for which they have data.

Chapter 1 1 United Nations, Department of Economic and Social Affairs, The Millennium Development Goals Report (2010). 2 Pratham Annual Status of Education Report 2005: Final Edition, available at http://scripts.mit.edu/~varun_ag/readinggroup/images/1/14/ASER.pdf. 3 Deborah Small, George Loewenstein, and Paul Slovic, “Sympathy and Callousness: The Impact of Deliberative Thought on Donations to Identifiable and Statistical Victims,” Organizational Behavior and Human Decision Processes 102 (2007): 143–153. 4 Jeffrey Sachs, The End of Poverty: Economic Possibilities for Our Time (New York: Penguin Press, 2005). 5 William Easterly, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (Oxford: Oxford University Press, 2006); and William Easterly, The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics (Cambridge: MIT Press, 2001). 6 Dambisa Moyo, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (London: Allen Lane, 2009). 7 Everywhere in the book, whenever we present an amount in a country’s local currency, we give the equivalent amount in dollars, adjusted for the cost of living (see Endnote 1 in the Foreword). This is denoted by USD PPP (USD at purchasing power parity). 8 Todd Moss, Gunilla Pettersson, and Nicolas van de Walle, “An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa,” Working Paper No. 74, Center for Global Development (January 2006). Still, eleven countries out of forty-six received more than 10 percent of their budget in aid, and eleven got more than 20 percent. 9 Peter Singer, “Famine, Affluence, and Morality,” Philosophy and Public Affairs 1 (3) (1972): 229–243. 10 Amartya Sen, Development as Freedom (New York: Knopf, 1999). 11 Nicholas D.


pages: 264 words: 76,643

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations by David Pilling

Airbnb, Alan Greenspan, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, Branko Milanovic, call centre, carbon tax, centre right, clean tech, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, Deng Xiaoping, Diane Coyle, Donald Trump, double entry bookkeeping, Easter island, Erik Brynjolfsson, falling living standards, financial deregulation, financial engineering, financial intermediation, financial repression, Gini coefficient, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google Hangouts, Great Leap Forward, Hans Rosling, happiness index / gross national happiness, Higgs boson, high-speed rail, income inequality, income per capita, informal economy, invisible hand, Jeremy Corbyn, job satisfaction, Mahatma Gandhi, Mahbub ul Haq, market fundamentalism, Martin Wolf, means of production, military-industrial complex, Monkeys Reject Unequal Pay, mortgage debt, off grid, old-boy network, Panopticon Jeremy Bentham, peak oil, performance metric, pez dispenser, profit motive, purchasing power parity, race to the bottom, rent-seeking, Robert Gordon, Ronald Reagan, Rory Sutherland, science of happiness, shareholder value, sharing economy, Simon Kuznets, sovereign wealth fund, TED Talk, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, Tragedy of the Commons, transaction costs, transfer pricing, trickle-down economics, urban sprawl, women in the workforce, World Values Survey

And after my speech, the minister of education said, ‘This professor shows that Cubans are the healthiest of the poor.’ And everyone applauded,” Rosling said, chuckling quietly at the minister’s false logic. “On the way out, a very bright, brave young statistician whispered in my ear, ‘We are not the healthiest of the poor,’ he said. ‘We are just the poorest of the healthy.’ ” * So-called purchasing-power parity is a way of comparing income per capita—or GDP per capita—across nations by making adjustments for the fact that prices vary from country to country. A haircut in Mumbai is likely to cost less than a haircut in New York—partly because the hairdresser will earn less—which means that a dollar in India goes farther than a dollar in the US.

,” Centre for Economic Performance, April 2015: cep.lse.ac.uk. 9. John F. Helliwell, et al., World Happiness Report, 2012: worldhappiness.report/​download. 10. World Happiness Report, 2016, chapter 2, “The Distribution of World Happiness”: worldhappiness.report/​download. 11. IMF data for 2015, with GDP per capita expressed in purchasing-power parity terms. 12. Ibid. 13. Results cover 90,000 people in 46 countries. Richard Layard, Happiness, Penguin Books, 2005, p. 65. 14. Ibid., p. 64. 15. Ibid., p. 79. 16. “Carrie Fisher’s ashes carried in Prozac-shaped urn,” January 7, 2017: www.bbc.co.uk. 17. Author interview with Richard Layard. 18.

Richard Layard, “Paul Ormerod Is Splitting Hairs,” Prospect Magazine, June 2007. 23. Cited in World Happiness Report, 2012, p. 111. 24. Gardiner Harris, “Index of Happiness? Bhutan’s New Leader Prefers More Concrete Goals,” New York Times, October 4, 2013. 25. Ibid. 26. According to 2016 IMF figures, it has a GDP of just over $8,227 in purchasing-power parity terms, which adjust for local prices. 27. All figures from Unesco. 28. Bill Frelick, “Bhutan’s Ethnic Cleansing,” New Statesman, February 1, 2008: www.hrw.org. 29. Bhutan’s 2015 Gross National Happiness Index, Centre for Bhutan Studies and GNH Research, November 2015: www.bhutanstudies.org.bt.


pages: 192

Kicking Awaythe Ladder by Ha-Joon Chang

Asian financial crisis, business cycle, central bank independence, classic study, clean water, colonial rule, Corn Laws, corporate governance, creative destruction, David Ricardo: comparative advantage, fear of failure, income inequality, income per capita, joint-stock company, joint-stock limited liability company, land bank, land reform, liberal world order, moral hazard, open economy, purchasing power parity, rent-seeking, scientific management, short selling, Simon Kuznets, tacit knowledge, The Wealth of Nations by Adam Smith, trade liberalization, Washington Consensus

This means that today's developing countries need to impose much higher rates of tariff than those Used by the NDCs in the past, if they are to provide the same degree of actual protection to their industries as that once accorded to the NDC industries.245 In other words, given the greater productivity gap they face, today's developing countries need to use much higher tariffs compared to the NDCs in earlier times, just to get the same protective effects. Before we show this, we must admit that it is not simple to measure international productivity gaps. Per capita income figures are obvious, although rough, proxies, but it is worth debating whether to use incomes measured in current dollars or in purchasing power parity (PPP) terms. Incomes measured in current dollars are arguably better reflections of the productivity gap in the tradeable sector, which is more relevant in determining tariff levels. However, they are subject to the vagaries of exchange-rate fluctuations that may have nothing to do with productivity differentials.

For example, per capita incomes measured in 1990 dollars in Japan and Finland in 1820 were $704 and $759 respectively, while those in the UK and the Netherlands were $1,756 and $1,561 - a ratio of less than 2.5 to 1. By 1913, the gap between Japan ($1,334) or Portugal ($1,354) and the UK ($5,032) or the USA ($5,505) increased to a ratio of around 4 to 1. For further details from Maddison's historical income estimates, see table 3.7 in Chapter 3 of the present volume. 248. In purchasing power parity terms (in 1999 dollars), per capita income in the USA, Switzerland, and Japan were $31,910, $28,760, and $25,170 respectively, whereas those in Tanzania and Malawi were $500 and $570 respectively. In terms of current dollars, the gap is in the region of 100 or 400 to 1. In current dollars, 1999 per capita incomes were $38,380 in Switzerland, $32,030 in Japan, and'$31,910 in the USA, while they were $100 in Ethiopia, $180 in Malawi, and $260 in Tanzania. 249.

Africa 133, 136t, 138t see also individual countries agriculture 52 Denmark 109, 112-13 France 38 Germany 23, 33 Sweden 39, 40 UK 4, 13, 23, 61 USA 5, 26, 29, 30 aid 140 America see USA 'American System' 28, 32 anti-trust regulations 11, 93-5, 117 Argentina 79t auditing 91-2, 115, 117, 121t, 123t Australia income, per capita 79t, 124,126t, 127t, 134, 135t social welfare institutions 106t, 117, 122t suffrage 75t, 76, 116 Austria 17, 49, 85 child labour 108,110c, 122t income, per capita 79t, 124,126t, 127t, 135, 135t intellectual property rights 57, 86, 114 protectionism 43, 60 social welfare institutions 106t suffrage 75t tariffs 17t Bangladesh 79t, 124, 126t banking 16, 95-9, 114-16, 117, 121t, 123t see also central banking bankruptcy laws 89-91, 114, 115, 121t, 123t, 124 Belgium 19-21, 23, 42-3, 44, 56 banking 48, 96, 97-8, 99t bureaucracy 81-2 child labour 109, llOt, 116 income, per capita 79t, 126t, 127t, 135t intellectual property rights 86 limited liability 89,115 social welfare institutions 106t suffrage 75t tariffs 17t, 60 tax, income 103 Bhagwati 2, 15, 29 'big push' theory 15 Brazil 15, 68, 79t, 102, 116, 124, 127t Britain see UK Bulgaria 79t bureaucracy 1,73,78-82,114,115,120,121t UK 80, 124 USA 80-2, 103, 116-17 Burma 79t, 126t Canada income, per capita 79t, 126t, 127t, 134, 135t intellectual property rights 121t social welfare 106t, 117, 122t suffrage 75t cartels 66, 93, 94, 117 East Asia 49-50 Germany 14, 35, 117 Sweden 40 central banking 1, 3, 10, 11,16, 96-9,119, 1231 Italy 117, 124' note issue monopoly 114, 115 Sweden 121t UK 118, 121t, 124 USA 117, 118, 121t, 125 child labour 107-10, 114, 116, 118, 122t, 123t, 124-5 Chile 79t, 104 China 133, 141 . income, per capita 124, 127t unequal treaties 16, 54 Classical economics 32 Clay, Henry 28, 32 Cobden, Richard 23,38,52, 61 Cobden-Chevalier treaty (1860) 23, 38 Colbert, Jean-Baptiste 36, 62 Colombia 68, 79t, 116, 124, 127t colonialism 16, 21, 22, 25, 52-3, 139-40 Communism 15, 72, 89, 99, 133 Competiton law see anti-trust regulations copyrights 52, 84, 86-7, 121t, 123t, 125 Corn Laws Belgium 43 UK 13, 16, 23, 29, 43, 52, 61 Cote d'lvoire 124, 126t Defoe, Daniel 20-1 democracy 1, 71, 73-8, 84, 121t, 124, 141 Denmark 56, 95 child labour 109, llOt income, per capita 79t, 126t, 127t, 135t labour regulations 111, 112-13 social welfare institutions 106t, 117 suffrage 75t, 115 tariffs 17t, 68-9 tax, income 103, 114 deregulation 1 dirigisme 4, 14, 62 disclosure of corporate information 91-2, 115, 117, 121t, 123t East Asia 15, 22, 25, 41, 46-51, 61, 64 see also individual countries East India Company British 43, 88, 118 Dutch 43 economic growth 2, 8, 9, 132-3, 134-8, 142-3, 144 and property rights 84-5 and social welfare institutions 104 education 18, 104 East Asia 51 France 37 Germany 34 Japan 48, 64 Netherlands 45 Sweden 41 USA 30-1 Edward III 19-20, 61, 130 Egypt 79t, 124, 126t Elizabeth I 20-1 employment 14, 48, 105, 106t England see UK espionage, industrial 18, 34, 36, 41, 56, 65 Ethiopia 68, 79t, 126t exports 2, 18, 66 East Asia 50 France 38 Prussia 33 Sweden 39 UK 19-23, 52, 55, 61 USA 32 Finland 40 income, per capita 68, 79t, 124, 126t, 127t, 135t social welfare 106t, 117 suffrage 75t, 76, 77 First World War 14, 28-9 foreign investment 46, 51, 99, 140-2 France 8, 10, 16, 23, 35-9, 56 bankruptcy law 90 banks 95, 97, 99t bureaucracy 80, 81 child labour 108, llOt competition law 93 free trade 33, 62 income, per capita 79t, 124,126t, 127t, 135t intellectual property rights 57,86,114 interventionism 1, 2,13 judiciary 83 labour regulations 112 limited liability 89, 115 nationalization 85, 135 social welfare 105, 106t, 117, 122t subsidies 38 suffrage 74,75t, 76,77,115,116,118, 121t tariffs 17t tax 80 Frederick the Great 33^1, 56, 82, 130 Frederick William I 33, 81-2 free trade 1, 7-8, 53, 65-6, 131, 144 Belgium 42 France 36-7 Germany 37 Netherlands 44 Sweden 39 Switzerland 46 UK 3-5, 13-14, 16, 23-4, 61 USA 2, 27-8, 29, 32, 62 GATT (General Agreement on Trade and Tariffs) 14 GDP (Gross Domestic Product) 30, 40, 132-3, 138t German Historical School 6, 105 Germany 3-4, 14, 24, 32-5, 40, 65, 129 see also Prussia, Saxony, Wiirttemberg banks 96, 98, 99t, 115 bureaucracy 80-2, 114 child labour 107, 108, llOt competition law 94, 117 income, per capita 45, 79t, 124,126t, 127t, 135, 135t intellectual property rights 46, 58-9, 85, 87, 115 judiciary 83 labour regulations 111 limited liability 89 social welfare 105-6, 106t, 122t subsidies 33, 35, 63 suffrage 75t, 116 tariffs 17t, 49, 61, 63, 66 zollverein (customs union) 4, 32-3 Ghana 79t, 124, 126t Gladstone, William 24, 103 globalization 15, 99, 140 Gold Standard 14 Great Depression 1, 14, 29, 49, 94, 98 Greece 126t Gross Domestic Product see GDP Hamilton, Alexander 25, 26, 61, 98, 130 health see social welfare institutions Henry VII 20-2, 61 Holland 109, llOt see also Netherlands Hong Kong 43, 50 Hungary 79t, 133 IDPE (international development policy establishment) 71, 131, 134, 138, 140, 142-4 banks 95 democracy 74, 141 IMF 104, 140, 145 imports France 37 Sweden 39 UK 19-20, 21, 22, 37, 52, 61 USA 25, 26-7, 28 income, per capita 67-9, 79t, 120, 124, 126-7t, 134-5 India 15, 22-3, 53, 137, 142 income, per capita 68, 79t, 124, 126t tariffs 68 Indonesia 79t, 124, 127t industrial espionage 18, 34, 36, 41, 56, 65 Industrial Revolutions 8, 60 Belgium 42 Switzerland 45 UK 21, 22 industrial, trade and technology policies see ITT policies industrialization 7, 54, 105, 113-18 France 36, 37, 39 Japan 47 Netherlands 43-5 Sweden 42 Switzerland 45 UK 21 USA 52 infant industries 130 protection of 2,3,10,15,18,61,67,131 France 62 Germany 32, 63 Japan 48-9, 60 Sweden 40, 60 Switzerland 46 UK 3, 20, 21, 65 USA 5, 24-6, 28, 30, 31, 62 inflation 11 infrastructure 18 Belgium 43 France 37 Japan 47 Netherlands 45 Sweden 40, 64 USA 31, 62 insurance, social 105,106,112,116-7,119, 122-3t Germany 105, 116 USA 112 intellectual property rights 1, 2, 57, 84-7, 115, 121t see also copyrights; patents; trademarks international development policy establishment see IDPE International Monetary Fund see IMF interventionism 3, 15, 16-18, 130-1, 132 see also tariffs; protectionism, infant industries France 1, 2, 13, 36, 62 Germany 34-5, 63 Japan 64 Netherlands 45 UK 19 investment planning 16 IPR see intellectual property rights Iran see Persia Ireland 79t, 106t, 117, 126t, 127t Italy 3, 4, 50, 124 banks 96, 98, 99t, 114, 115, 117 bureaucracy 81 child labour 109, HOt, 116 income, per capita 79t, 126t, 127t, 134, 135, 135t intellectual property rights 121t judiciary 83 labour regulations 112 social welfare 106t suffrage 74, 75t tariffs 17t I T T (industrial, trade and technology) policies 9, 59-60, 66-7, 130-2, 144 Belgium 43 East Asia 50, 51 Japan 61, 64 UK 18, 61 USA 18 Japan 8, 14, 22, 46-51, 100 banks 16 cartels 14, 49-50 income, per capita 68, 79t 126t, 135 intellectual property rights 86 ITT policies 61 judiciary 83 property rights 85 subsidies 47, 64 suffrage 75t, 121t tariffs 17t, 44, 54, 66 joint stock companies see limited liability judiciary 1, 71, 82-3, 121t Kenya 79t, 124, 126t Keynes, John Maynard 99-100, 135 Korea 16, 50, 51, 61, 65, 79t, 85 tariffs 22, 39, 54 labour regulations 72, 111-13, 114, 118— 19, 122t laissez-faire 13-16, 65-6 France 36, 37 Germany 33, 63 Netherlands 44-5 Switzerland 46 UK 1, 14, 19, 24, 61-2 Latin America 15,16, 54,132-3, 136t, 138t see also individual countries liberalism 3, 13-14, 15, 29, 37-8 liberalization of trade 1,14,15,16,23-4,69 limited liability 3,10, 88-9,114,115,118, 121t, 123t France 37 UK 92,117 Lincoln, Abraham 27-8, 32 List, Friedrich 3-6,25,32,44,52,61,129-30 Low Countries 19, 20, 42 see also Belgium; Netherlands Malawi 68 manufacturing 18 France 38 Germany 33 Japan 48 Sweden 39 UK 20-4, 26, 52, 61 USA 25, 26, 28-9, 52, 62, 89 Marxism 15 McCulloch, John 88,103 mercantilism 13-14, 23, 33, 43 Mexico 15, 79t, 116, 124, 127t monopolies 66, 87, 93, 94-5 banknote-issue 97, 98, 99, 114, 115 East Asia 50 Germany 33 Netherlands 44 UK 85 USA 31 Morocco 124, 127t NAFTA (North American Free Trade Agreement) 15 Napoleonic Wars 8, 39, 60, 103, 114 nationalization 16, 47, 85, 135 see also state-owned enterprises Neoclassical economics 6, 7 Neo-liberalism 15, 59, 132-3 Netherlands 43-5, 60, 131 banks 97, 99t bureaucracy 80 income, per capita 68, 79t, 126t, 127t infant industry protection 18 intellectual property rights 9, 57-8, 86-7, 121t social welfare 106t, 117 subsidies 44, 45 suffrage 75t tariffs 17t tax 80 technology 55-6 New Zealand income, per capita 79t, 124, 127t social welfare 105, 106t, 117 suffrage 75t, 76, 116, 121t Nicaragua 68 Nigeria 79t, 124, 126t Norway 17, 56, 92, 94-5 child labour 109, llOt, 116 income, per capita 79t, 126t, 127t, 135t labour regulations 111 social welfare 106t, 117 suffrage 75t, 76, 77 Ottoman Empire 16, 54 see also Turkey Pakistan 79t, 124, 126t patents 2, 18, 57-8, 65, 85-7, 114-15, 121-2t see also intellectual property rights Netherlands 9, 44 Switzerland 9, 46 pensions 105, 106, 106t, 117, 119, 122t Persia 16, 54 Peru 79t, 124, 127t Philippines 79t, 124, 127t Poland 5,133 Portugal banks 95, 97, 99t child labour 109, llOt, 122t income, per capita 79t, 126t intellectual property rights 86 limited liability 89,115 social welfare 106t, 117 suffrage 75t tariffs 67 tax, income 103 PPP (purchasing power parity) 68-9 property rights 1, 2, 83-5, 114, 139, 141 see also intellectual property rights protectionism 15, 16, 59, 67, 107, 130-1 see also infant industries Belgium 43 France 37, 38 Japan 46, 48-9 Netherlands 60 Sweden 39 Switzerland 60 UK 4 - 5 , 1 3 , 24 USA 1, 5, 24-5, 27-31, 62 Prussia 8, 17t, 32-5, 47, 56, 62 see also Germany banks 95 bureaucracy 80-2, 114, 115, 121t child labour 108, llOt, 116, 122t intellectual property rights 86 suffrage 75, 77 tariffs 32 quotas 29 R & D see research and development race 75, 76, 77, 124 railways 16, 27, 40, 47, 112 Raymond, Daniel 25, 31, 61 research and development 18, 56, 66 East Asia 51 France 37 Sweden 40, 41, 64 USA 30-1, 62 resources 11 Ricardo, David 13-14, 32 Roosevelt, Theodore 78, 93-4 Russia 17t, 28, 39, 56, 67, 86 Saxony 75-6, 85-6, 89, 108, llOt see also Germany Schmoller, Gustav 105 Second World War 8, 39, 60,103, 114 securities 99-102, 114, 116-17, 121-3t slavery 27-8, 142 Smith, Adam 4, 5, 13-14, 24, 88 Smoot-Hawley Tariff 1-2, 14, 29 social welfare institutions 72, 103-6, 114, 116-17, 122t, 142 Soviet Union 133,140 Spain auditing 93 banking 97, 99t bureaucracy 81, 116 child labour 109, llOt income, per capita 126t, 127t intellectual property rights 86, 121t labour regulations 112 limited liability 89 social welfare 106t, 117 suffrage 75t, 76 tariffs 17t, 67 tax, income 103 state-owned enterprises 39, 40, 47-8 see also nationalization stock market see securities structural adjustment 72 structuralism 15 suborning 55 subsidies 2, 18, 63, 66, 67, 130, 145 East Asia 50, 51, 61 France 38 Germany 33, 35, 63 Japan 47, 64 Netherlands 44, 45 Sweden 39, 40 UK 22, 52, 61 USA 26, 29, 31 suffrage 74-8,79t, 105,113,115,116,121t see also democracy Sweden 39-42, 56, 60, 66 banking 95, 97, 99t, 121t child labour 107, 108-9, llOt, 116 income, per capita 79t, 126t, 127t, 135t intellectual property rights 86 labour regulations 111, 112 limited liability 88, 115, 121t social welfare 106t, 117 suffrage 75t tariffs 17t, 38, 63-4 tax, income 103 Switzerland 10, 18, 23, 45-6, 60, 131 banks 98, 99t, 115 child labour llOt income, per capita 68, 79t, 127t intellectual property rights 2 , 9 , 5 7 - 8 , 86, 87, 121t patents 2, 9, 58, 87 social welfare 106t, 117, 122t suffrage 75t, 76, 118, 119, 121t tariffs 17t Taiwan 16, 22, 50, 51, 61, 79t, 85 Tanzania 68, 79t tariffs 3, 9, 17t, 53, 54, 65-6, 67-9 Belgium 43 East Asia 57 France 38 Germany 33, 35, 63 Japan 46-7, 48-9, 50-1 Netherlands 44 protection 3, 59,130 Sweden 39, 40, 64 UK 22-4 USA 1-2, 14, 16, 25-7, 62 tax 16, 19, 28, 43, 80, 101, 120 income 102-3, 104, 122t, 141, 142 technology 7, 18, 55-7, 60, 65 Belgium 42 France 36, 39 Germany 34 Japan 48, 50 Sweden 40, 41 Switzerland 45-6 UK 20, 22, 23, 54, 55 USA 31 Thailand 16, 54, 116, 124, 127t trade-related intellectual property rights (TRIPS) 57, 86, 87 trade sanctions 29, 107 trade unions see unions trademarks 58, 65, 84, 86, 87, 121t TRIPS (trade-related intellectual property rights) 57, 86, 87 Turkey 16, 54, 79t, 116, 127t see also Ottoman Empire UK 1, 19, 24, 51-9, 121-3t, 132 anti-trust regulations 94 auditing 92, 117 banking 95-6, 97, 99t, 114, 118, 121t bankruptcy law 90-1, 115 and Belgium 19-21, 23, 42 bureaucracy 80, 82 child labour 107-8, llOt, 116, 122t and East Asia 22, 50 and France 23, 36, 37t, 38, 39, 55, 56 free trade 3-5, 7 - 8 , 1 3 - 1 4 , 1 6 , 61, 62 income, per capita 68, 69, 79t, 124, 126t, 127t, 135t and India 22-3, 53 and Ireland 22, 53 infant industry protection 65 intellectual property rights 85-6,114, 121t judiciary 83 labour institutions 111 limited liability 88, 115, 117 and Netherlands 43, 44 property rights 85 securities 100-1, 116, 117 social welfare institutions 106t suffrage 74, 75t, 77 and Switzerland 45-6 tariffs 17t, 39 tax 80, 102 income 103, 114, 122t technology 18, 20, 22-3, 54-5 unemployment see employment unions 41, 94, 105, 107 and the USA 5, 23-6, 28, 32, 52-3 USA 1-2, 3, 24-32, 102, 115-18, 121-3t banking 96, 98, 99t bankruptcy laws 90-1 bureaucracy 80-1, 82, 119 child labour 107, 109-10, llOt civil war 2, 25, 27-9 competition law 93-4 disclosure 92 free trade 7-8, 65 income, per capita 68, 79t, 124, 126t, 127t, 135t, 142 industrialization 52 infant industry protection 5,61-2,66, 131 intellectual property rights 57, 58, 114 judiciary 83 labour regulations 111-12, 113 limited liability 89 securities 99-100, 101 social welfare 104, 106t subsidies 26, 29, 31 suffrage 75t, 77-8 tariffs 16, 17t, 47, 66, 67 tax, income 103 Venezuela 79t Vietnam 133 voting see democracy; suffrage Walpole, Robert 21, 25, 52, 61,130 wars 102, 103 America Civil War 2, 25, 27-9 War of Independence 26 First World War 14, 28-9 Napoleonic War 39, 60 Second World War 8,14,17, 49 Washington consensus 1, 13 Weber, Max 6, 80, 82 welfare state see social welfare institutions women 111-12, 116, 118, 124 workers, migration of 54-6, 57, 65 World Bank 71, 104, 136t, 138t, 140, 145 tariffs 17t, 53-4, 67 World Trade Organization 2, 15, 71, 107, 131-2, 140, 145 intellectual property rights 57, 86, 87 tariffs 67, 68-9, 145 Wiirttemberg 86, 89 see also Germany Zaire 79t Zimbabwe 68 zollverein (German customs union) 4, 32-3


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Open: The Progressive Case for Free Trade, Immigration, and Global Capital by Kimberly Clausing

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, active measures, Affordable Care Act / Obamacare, agricultural Revolution, battle of ideas, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, climate change refugee, corporate social responsibility, creative destruction, currency manipulation / currency intervention, David Ricardo: comparative advantage, Donald Trump, fake news, floating exchange rates, full employment, gig economy, global supply chain, global value chain, guest worker program, illegal immigration, immigration reform, income inequality, index fund, investor state dispute settlement, knowledge worker, labor-force participation, low interest rates, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, meta-analysis, offshore financial centre, open economy, Paul Samuelson, precautionary principle, profit motive, purchasing power parity, race to the bottom, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, Tax Reform Act of 1986, tech worker, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transfer pricing, uber lyft, winner-take-all economy, working-age population, zero-sum game

Japan’s industrialization proceeded at an even quicker pace, South Korea and Singapore accelerated from there, and China has been the fastest of them all. Figure 3.5: Growth in China Results in Huge Falls in Poverty Headcounts Note: The poverty line used is the current standard, $1.90 per day in 2011 purchasing-power-parity adjusted dollars. Data source: World Development Indicators, World Bank. Figure 3.6: Economic Growth in China and India Has Been Spectacular Data source: World Development Indicators, World Bank. How Do Countries Compete? The gains from trade have been recognized for centuries.

Even before the tax cuts of 2018, there was no need to ease tax or regulatory burdens to attract investment or economic activity. For example, across fifteen years of Forbes Global 2000 rankings, the United States is consistently home to a disproportionate share of the world’s largest corporations. Our economy is about one-fifth the size of the world economy—16 percent in purchasing power parity (PPP) terms and 22 percent in US dollar terms—yet we have larger fractions of the world’s top two thousand firms: 28 percent by count, 33 percent by sales, 37 percent by profits (consolidated worldwide), 24 percent by assets, and 44 percent by market capitalization (fig. 7.9).34 Some observers caution about the threat of corporate inversions, which occur when companies restructure to change their headquarters locations for tax purposes.

See Market power Most favored nation status, 315n13 MSCI, 277 Multinational Companies: benefits of, 145–147; effects on competition, 145–149; effects on labor bargaining power, 149–152; headquarters, 143; importance of, 141–142; international trade of, 141–143; and offshoring, 155–156; and tax avoidance, 157–159 Murray, Alan, 332n20 National Academy of Sciences, 184 National Institutes of Health (NIH), 236 National Science Foundation (NSF), 236 Negative income tax, 247, 327n2 Net international investment position, 134 New products, 22 New Zealand, 269 Nike, 272 Nontraded goods, 129–131 North American Free Trade Agreement (NAFTA), 78, 95–98; effects on US economy, 96–97; and peso crisis, 103; and relations with Mexico, 103 North Carolina Growers Association, 197 Obama, Barack, 332n19 Obama Administration, 78, 169–170, 214, 256, 274 OECD, 226–227 Outsourcing, 151–152, 280 Paris Agreement on Climate Change, 161, 225, 299 Patrimonial capitalism, 253 Perot, Ross, 96 Piketty, Thomas, 254 Pittsburgh, 233 Place premiums, 189, 220 Polarization, 288–293 Political power, 25–26 Population growth, 185–188 Populism, 25–26 Postel, Hannah, 196 Pre-K education, 235 Prisoner’s dilemma, 226 Profit shifting, 158–159, 166–174, 250–252, 276–278 Public Law, 115–97. See Tax Cuts and Jobs Act Public opinion, 292–293 Purchasing power parity (PPP), 320n34 Race to bottom, 154–155 Reagan Administration, 265 Reemployment Trade Adjustment Assistance (RTAA), 228–229 Regulation, 164, 273–275 Reinventing Government, 273–274 Relocation assistance, 229–230 Remittances, 206 Reputation Institute, 277 Research and Development, 176, 235 Ricardo, David, 70 Rising-tide tax system, 247 Robinson, James, 64, 189–190 Rules of origin, 315n12 Sanders, Bernie, 25, 76 Savings glut, 151 Secular stagnation, 40, 151 Showdown at Gucci Gulch, 264–265 Silicon Valley, 181–182 Smith, Adam, 284, 316n1 Social Norms, 42–44, 276–278, 282 Social Security, 241–242 Stateless income, 159 Statue of Liberty, 212 Summers, Lawrence, 151, 307n29 Sunshine labor report, 278–283 Sunshine tax report.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

accounting loophole / creative accounting, affirmative action, Alan Greenspan, An Inconvenient Truth, bank run, banking crisis, behavioural economics, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, carbon tax, Cass Sunstein, central bank independence, classic study, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, general purpose technology, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Paradox of Choice, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Robert Solow, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, social contagion, South Sea Bubble, Steven Pinker, tacit knowledge, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, the strength of weak ties, Tragedy of the Commons, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, vertical integration, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

Besides, as Steven Pinker has written: “When psychologists say ‘most people’ they usually mean ‘most of the two dozen sophomores who filled out a questionnaire for beer money.’ ” Pinker (2008). 5 List (2008). 6 Haidt (2006). 7 Trivers (1971). 8 Dawkins (1976). 9 Pinker (2008). 10 De Waal (2008), 18. 11 Ibid., 162. 12 Sigmund et al. (2002). 13 Hume (1739). 14 Sala-i-Martin (2002a, b). 15 Heshmati (2006). 16 Milanovic (2005). 17 Bourguignon and Coyle (2003). 18 Milanovic (2005). 19 These updated figures convert local currencies to dollars (so they can be compared) at purchasing power parity exchange rates, which differ significantly from earlier estimates, and the effect is to reduce the figures in “PPP dollars” for incomes in countries such as India and China. So whereas earlier figures suggested global income distribution had changed little in the late twentieth century, they now point to increasing inequality.

., 127–28 Calculus of Consent, The: Logical Foundations of Constitutional Democracy (Buchanan and Tullock), 242 call centers, 131, 133, 161 Cameron, David, 288 capitalism: China and, 234; communism and, 96, 182–83, 209–13, 218, 226, 230, 239–40; community and, 27, 51, 65, 117–18, 137, 141, 152–54; cultural effects of, 25–29, 230–38; current crisis of, 6–9; democracy and, 230–38; Engels on, 14; fairness and, 134, 137, 149; growth and, 268, 275, 290, 293, 297; happiness and, 25–29, 33, 45, 53–54; historical perspective on, 3, 6, 14; institutions and, 240; market failure and, 226–30; Marx on, 14; measurement and, 182; mercantile economy and, 27–28; nutrition and, 10; profit–oriented, 18; Protestant work ethic and, 13–14; protests against, 211–13; rethinking meaning of, 9; social effects of, 25–26; values and, 209–13, 218, 226, 230–32, 235–36; well-being and, 137–39 carbon prices, 70–71 celebrities, 33 charitable giving, 33, 141 Checkpoint Charlie, 147 China, 161, 262, 280; capitalism and, 234; carbon emissions and, 63; changed demographic structure of, 90; convergence and, 122; declining population in, 98; energy use in, 63, 65; global manufacturing and, 149; inequality and, 125–26; Mao and, 10; middle class of, 125–26; as next major power, 94; one–child policy and, 95–96; population growth and, 95–96; purchasing power parity (PPP) and, 306n19; rise in wealth of, 81, 122–23, 125, 212; savings and, 87, 94, 100, 108; wage penalties and, 133; World Bank influence and, 163 cities, 308n29; face-to-face contact and, 165–68; size and, 165–66; structural changes in, 165–70; urban clustering and, 166 City of London, 147, 221 Clemens, Michael, 81 climate change, 5–7, 17, 24, 90, 238; carbon prices and, 70–71; Copenhagen summit and, 62, 64–65, 68, 162, 292; domestic dissent and, 66–71; future and, 75–83; geological history and, 69; global warming and, 57, 64, 66, 68; greenhouse gases and, 23, 29, 35, 59, 61–63, 68, 70–71, 83; Himalayan glaciers and, 66–67; incandescent light bulbs and, 59–60; InterAcademy Council and, 66–67; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; Kyoto Protocol and, 62–64; lack of consensus on, 66–71; Montreal Protocol and, 59; policy dilemma of, 58–62; policy recommendations for, 267, 280, 297; politics and, 62–65; social welfare and, 71–75; technology and, 59–60, 198 Coachella Value Music Festival, 197 Cobb, John, 36 Coca Cola, 150 coherence, 49 Cold War, 93, 112, 147, 209, 213, 239, 252 Collier, Paul, 77–78, 80, 82 Commerzbank, 87 Commission on the Measurement of Economic Performance and Social Progress, 37–38 communism: Berlin Wall and, 182, 226, 239; capitalism and, 96, 182–83, 209–13, 218, 226, 230, 239–40; Cold War and, 93, 112, 147, 209, 213, 239, 252; fall of, 209–13, 226, 239–40, 252; Iron Curtain and, 183, 239, 252; Leipzig marches and, 239; one-child policy and, 95–96; Velvet Revolution and, 239 community: civic engagement and, 140–41; globalization and, 148–49; intangible assets and, 149–52, 157, 161 (see also trust); public service and, 295; Putnam on, 140–41, 152–54 commuting, 45–47 Company of Strangers, The (Seabright), 148–49, 213–14 comprehensive wealth, 81–82, 202–3, 208, 271–73 consumerism, 22, 34, 45, 138 consumption: conspicuous, 11, 22, 45, 236; consumerism and, 22, 34, 45, 138; cutting, 61; downgrading status of, 11; downshifting and, 11, 55; Easterlin Paradox and, 39–44; global per capita, 72; of goods and services, 7, 10, 24, 35–36, 40, 82, 99, 161, 188, 191, 198, 214, 218, 228–29, 282; green lifestyle and, 55, 61, 76, 289, 293; growth and, 280, 295; happiness and, 22, 29, 40, 45; hedonic treadmill and, 40; increasing affluence and, 12; institutions and, 254, 263; Kyoto Protocol and, 63–64; measurement and, 181–82, 198; missing markets and, 229; natural resources and, 8–12, 58, 60, 79–82, 102, 112, 181–82; nature and, 58–61, 71–76, 79, 82; posterity and, 86, 104–5, 112–13; reduction of, 105; Slow Movement and, 27; trends in, 138; trilemma of, 13–14, 230–36, 275; values and, 229, 236 convergence, 5, 122 Copenhagen summit, 62, 64–65, 68, 162, 292 Crackberry, 205 Crafts, Nicholas, 156–57 credit cards, 2, 21, 136, 138, 283 Csikszentmilhalyi, Mihaly, 45–49 Cultural Contradictions of Capitalism, The (Bell), 230, 235–36 Czechoslovakia, 239 Daly, Herman, 36 Damon, William, 48 Dasgupta, Partha, 61, 73, 77–78, 80, 82 David, Paul, 156 Dawkins, Richard, 118 debit cards, 2 decentralization, 7, 159, 218, 246, 255, 275, 291 defense budgets, 93 democracy, 2, 8, 16, 312n19; capitalism and, 230–38; culture and, 230–38; fairness and, 141; growth and, 268–69, 285–89, 296–97; institutions and, 242–43, 251–52, 262; nature and, 61, 66, 68; posterity and, 106; trust and, 175; values and, 230–35 Denmark, 125 Dickens, Charles, 131 Diener, Ed, 48, 49 Discourse on the Origin and Basis of Inequality among Men (Rousseau), 114 distribution, 29, 306n22; Asian influence and, 123; bifurcation of social norms and, 231–32; consumerism and, 22, 34, 45, 138; Easterlin Paradox and, 39–44; fairness and, 115–16, 123–27, 134, 136; food and, 10, 34; of goods and services, 7, 10, 24, 35–36, 40, 82, 99, 161, 188, 191, 198, 214, 218, 228–29, 282; income, 34, 116, 123–27, 134, 278; inequality and, 123 (see also inequality); institutions and, 253; measurement and, 181, 191–99, 202; paradox of prosperity and, 174; policy recommendations for, 276, 278; posterity and, 87, 94; trust and, 151, 171; unequal countries and, 124–30; values and, 226 Dorling, Danny, 224, 307n58, 308n34 Douglas, Michael, 221 downshifting, 11, 55 downsizing, 175, 246, 255 drugs, 44, 46, 137–38, 168–69, 191, 302n47 Easterlin, Richard, 39 Easterlin Paradox, 39–44 eBay, 198 Economics of Ecosystems and Biodiversity project, The (TEEB), 78–79 economies of scale, 253–58 Economy of Enough, 233; building blocks for, 12–17; first ten steps for, 294–98; growth and, 182; happiness and, 24; institutions and, 250–51, 258, 261–63; living standards and, 13, 65, 78–79, 106, 113, 136, 139, 151, 162, 190, 194, 267; Manifesto of, 18, 267–98; measurement and, 182, 186–88, 201–7; nature and, 59, 84; Ostrom on, 250–51; posterity and, 17, 85–113; values and, 217, 233–34, 238; Western consumers and, 22 (see also consumption) Edinburgh University, 221 efficiency, 2, 7; evidence–based policy and, 233–34; fairness and, 126; Fama hypothesis and, 221–22; happiness and, 9, 29–30, 61; institutions and, 245–46, 254–55, 261; limits to, 13; nature and, 61–62, 69, 82; network effects and, 253, 258; productivity and, 13 (see also productivity); trilemma of, 13–14, 230–36, 275; trust and, 158–59; values and, 210, 215–16, 221–35 Ehrlich, Paul, 70 e-mail, 252, 291 “End of History, The” (Fukuyama), 239 Engels, Friedrich, 14 Enlightenment, 7 Enron, 145 environmentalists.

See also markets goodwill, 150 Google, 195, 291 Gore, Al, 60, 74 governance: definition of, 16; growth and, 270, 275, 288, 292; institutions and, 242, 247, 255–58, 261–62; measurement and, 183, 186; sense of, 18; technology and, 17; trust and, 151, 162–65, 173–77; values and, 211, 217, 238; wider crisis of, 255–58 government: bailouts and, 1, 88, 91, 99–100, 145; communism and, 96, 182–83, 209–13, 218, 226, 230, 239–40; debt and, 3–4, 11, 84–86, 89–94, 98–105, 108, 150, 248, 271, 275, 286–87, 294; decentralization and, 246; defining, 15–16, 269; distrust of, 150, 157, 162, 172, 175–76, 247; failure of, 183, 240–44, 257; fairness and, 121, 123, 131, 136; first ten steps for, 294–98; growing challenge to authority and, 245–46; growth and, 268–72, 275–89, 293–97; happiness and, 22–26, 29–32, 38–40, 43–45, 50–54; higher social spending and, 243–44; influence of over social norms, 280–84; infrastructure spending and, 93; institutions and, 240–63; interest groups and, 242–43, 285; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; intrusive regulatory practices and, 244; market control and, 14–15; measurement and, 182–88, 191, 193, 196, 202–3, 206; nature and, 58–62, 65–71, 82–84; New Public Management and, 245–47; OECD countries and, 4, 11, 38, 52, 60, 68, 87, 93–94, 97–99, 112, 125–26, 160, 171, 201, 212, 243–44, 246, 273–74, 281, 283, 287, 291, 293; online access of, 287–88; as organizing economy, 218–19; police service and, 5, 35, 163, 193, 200, 247; policy and, 2 (see also policy); posterity and, 85–95, 98–113; as shareholder, 88; stimulus packages and, 91, 100–103, 111; values and, 14, 210–11, 215–20, 225–26, 229–30, 234 government debt, 3–4, 84, 150, 248; cradle-to-grave social systems and, 104; credibility and, 101; default on, 110–12; deficit spending and, 101, 203, 287; demographic implosion and, 95–100; Gross on, 287; higher retirement age and, 106–7; importance of, 100–104; increased saving and, 105–6; legacy of, 90–92; less leisure and, 106–7; migration and, 108–9; policy for, 104–12, 271, 275, 286–87, 294; posterity and, 85–86, 90–94, 98–100, 105, 108; productivity improvements and, 107–8; reduced consumption and, 105–6; retirement age and, 98; as social issue, 113; Stein’s Law and, 104; as time bomb, 104 Great Crash, 28 Great Depression, 3, 28, 35, 61, 82, 109, 150, 208, 281 Greece, 3, 260, 276, 287, 295 greed, 248; bankers and, 277–78; fairness and, 129; happiness and, 26, 34, 54; high salaries and, 130, 143–44, 193, 223, 277–78, 286, 296; option pricing theory and, 222; policy recommendations for, 277–79; posterity and, 88; trust and, 150; values and, 221–23 Green, Stephen, 279 greenhouse gases, 23, 29, 35, 59, 61–63, 68, 70–71, 83 green lifestyle, 55, 61, 76, 289, 293 Greenspan, Alan, 129 Gross, Bill, 287 gross domestic product (GDP), 10, 12; Easterlin Paradox and, 39–44; fairness and, 127; growth and, 270, 274, 281, 294; happiness and, 22–23, 28, 32–42, 51–53; logarithm of, 41–42; measurement and, 41–42, 187–91, 198, 201–8; nature and, 56–60, 75–76, 80–82; policy recommendations for, 270, 274, 281, 294; posterity and, 91–94, 98–99, 103, 108, 111; trust and, 157, 160; values and, 212, 218, 232 Gross National Happiness, 36, 40 growth: antigrowth alternative and, 39–44; capitalism and, 268, 275, 290, 293, 297; Commission on the Measurement of Economic Performance and Social Progress and, 37–38; community and, 27, 51, 65, 117–18, 137, 141, 152–54; comprehensive wealth and, 81–82, 202–3, 208, 271–73; consequences of inequality and, 135–36; consumption and, 280, 295; cultural suspicion of capitalist, 26–29; democracy and, 268–69, 285–89, 296–97; downgrading consumption and, 11; fairness and, 114–16, 121, 125, 127, 133–37; governance and, 270, 275, 288, 292; government and, 268–72, 275–89, 293–97; gross domestic product (GDP) and, 270, 274, 281, 294; happiness and, 9–12, 22–29, 32–44, 51–53; increasing affluence and, 12; Industrial Revolution and, 27, 149, 290, 297; of information, 205, 291; innovation and, 201–7, 271–73, 281, 290–92; institutions and, 258, 261, 263; limits to, 13, 190, 231; Manifesto of Enough and, 267–98; measurement and, 181–85, 188–90, 194, 201–5, 208; mercantile economy and, 27–28; morals and, 275–76, 279, 293, 295, 297; nature and, 56–59, 62–66, 69–72, 76, 79–82; new conventional wisdom on, 23–24; paradox of prosperity and, 174; as policy goal, 22; politics and, 33; population, 29, 63, 70, 81, 89, 95–96, 108, 168; posterity and, 90, 95, 97, 99, 102, 105–8, 111; productivity and, 189–90, 194, 199–201, 206–7 (see also productivity); public goods and, 185–86, 190, 199, 211, 229, 249, 261; statistics and, 270–74, 290–94; sustainability and, 240, 244, 248 (see also sustainability); trust and, 152–56, 160, 174; values and, 13, 210–13, 222, 231–36; welfare and, 9–12 Groysberg, Boris, 143 Gutenberg press, 7 Haidt, Jonathan, 45–49, 117 Haldane, Andrew, 174 Hall, Peter, 140–41 Hamilton, Kirk, 81 handcrafting, 11, 55 happiness: absorbing work and, 10, 48–49; anomie and, 48, 51; anxiety and, 1, 25, 47–48, 136–38, 149, 174; capitalism and, 25–29, 33, 45, 53–54; charitable giving and, 33; choice and, 10–11; coherence and, 49; Commission on the Measurement of Economic Performance and Social Progress and, 37–38; commuting and, 45–47; conflict in relationships and, 47; consumer electronics and, 36–37; consumption and, 22, 29, 45; as correct guide for life, 29–32; cultural suspicion of growth and, 26–29; Easterlin Paradox and, 39–44; efficiency and, 9, 29–30, 61; emotional response to, 21; fairness and, 53; formula for, 46; freedom and, 10, 13, 26, 42–44, 50–53; globalization and, 24; government and, 22–26, 29–32, 38–40, 43–45, 50–54; gross domestic product (GDP) and, 22–23, 28, 32–42, 51–53; Gross National Happiness and, 36; growth and, 9–12, 22–29, 32–44, 51–53; health issues and, 24, 33–38, 42–43, 48, 50; Human Development Index (HDI) and, 36; inequality and, 25, 36, 42, 44, 53; innovation and, 37; lack of control and, 47; literacy and, 36; measurement and, 35–39; mercantile economy and, 27–28; morals and, 22, 26, 30, 34, 43, 48–49; more money and, 56; movement of, 10; nature and, 56–59, 75–76, 80–84; new conventional wisdom on, 23–24; noise and, 47; philosophy and, 21, 27, 31–32, 49–50; politics and, 22–30, 33, 43–44, 50–54; productivity and, 27, 38, 42, 51; psychology of, 44–50; religion and, 32–33, 43, 50; sense of flow and, 48–49, 51; shame and, 47; Slow Movement and, 27–28, 205; social engagement and, 10; social welfare and, 25–26, 30–32, 35, 39–42, 50–53; statistics and, 35–42, 51–52; technology and, 24–25, 35–37, 44, 53–54; unemployment and, 56; utiltariansim and, 31–32; volunteering and, 46–49 Happiness: Lessons from a New Science (Layard), 39 Happy Planet Index, 36 Harvard, 100 Hayek, Friedrich von, 215–16 health care, 4–5, 11; fairness and, 137–43; happiness and, 24, 33–38, 42–43, 48, 50; institutions and, 247, 252–53; measurement and, 181, 188–93, 200, 207; Obama administration and, 285; policy reform and, 285, 290, 293; politics and, 269; posterity and, 89, 93–94, 97–99, 103, 106, 111–13; trust and, 172 hedonic treadmill, 40 Henderson, David, 68 Himalayan glaciers, 66–67 hippies, 27 Hirsch, Fred, 190, 213 Hobbes, Thomas, 114 HSBC, 279 Hugo, Victor, 131 human capital, 81, 203–4, 282 Human Development Index (HDI), 36 Hume, David, 120 Hungary, 239 hybrid cars, 61 hyperinflation, 110–11 Idea of Justice, The (Sen), 43 illegal downloading, 196–97 incandescent light bulbs, 59–60 income. See distribution Inconvenient Truth, An (Gore), 60 Index of Sustainable Economic Welfare (ISEW), 36 India, 212; emerging middle class of, 125; fairness and, 122–26, 133; inequality and, 125–26; nature and, 63, 65, 81; posterity and, 108; purchasing power parity (PPP) and, 306n19; Satyam and, 146; trust and, 146, 149, 163, 172; wage penalties and, 133; World Bank influence and, 163 Industrial Revolution, 27, 149, 290, 297 inequality, 4–5, 11, 17, 84, 306n19, 308n34; Bush and, 127–28; consequences for growth, 135–36; decline in trust and, 139–44; dramatic increase in, 126–27, 131; extraction ratio for, 124; fairness and, 114–16, 122–43; fractal character of, 134; Gini coefficient and, 126; globalization and, 122–24, 127, 131, 155; happiness and, 25, 36, 42, 44, 53; high salaries and, 130, 143–44, 193, 223, 277–78, 286, 296; historical perspective on, 126–27; institutions and, 116, 127–31, 141; measurement of, 126; policy recommendations for, 267, 276, 295–97; poverty and, 43, 55–56, 100, 125, 128, 138, 142, 168–69, 261, 267; reduction of, 276–77; Republican administrations and, 127–28; social corrosiveness of, 139–44; structural causes of, 131–35; superstar effect and, 134; taxes and, 115–16, 123, 127–28, 131, 135–36; trends in, 125–30; unequal countries and, 124–30; United Kingdom and, 125–30; United States and, 122, 125–31, 135, 276; values and, 223–24, 234–36; well-being and, 137–43; within/between countries, 123–24 inflation, 37, 43, 61, 89, 102–5, 110–11, 189, 281, 305n17 information and communication technology (ICT), 6–7, 15, 17; data explosion and, 205, 291; decreased cost of, 254; fairness and, 133; happiness and, 24–25; institutional impacts of, 252–53; structural effects of, 194–98; trust and, 156–60, 165–67, 174 innovation, 6–7, 12; consumer electronics and, 36–37; fairness and, 121, 134; growth and, 271–73, 281, 290–92; happiness and, 37; institutions and, 244, 258, 263, 290–91; measurement and, 183, 196, 201–8, 273–74; musicians and, 195; nature and, 69–70, 81; policy recommendations for, 290–91; posterity and, 102; statistics and, 201–7; trust and, 157; values and, 210, 216, 220, 236 In Praise of Slowness, 27 institutions, 18; anomie and, 48, 51; balance and, 12–17; blindness of to financial crises, 87–88; broad framework for, 249–52; capitalism and, 240; consumption and, 254, 263; decentralization and, 246; democracy and, 242–43, 251–52, 262; downsizing and, 175, 246, 255; economies of scale and, 253–58; efficiency and, 245–46, 254–55, 261; extinction crisis and, 288; face-to-face contact and, 7, 147, 165–68; failures of, 240–44, 257, 262–63, 267, 289–90; fall of communism and, 226, 239–40, 252; freedom and, 244, 262; globalization and, 244; governance and, 242, 247, 255–58, 261–62; government and, 240–63; growth and, 258, 261, 263; health care and, 247, 252–53; high salaries and, 130, 143–44, 193, 223, 277–78, 286, 296; impact of new technologies and, 252–54; importance of, 261–63; inequality and, 116, 127–31, 141; innovation and, 244, 258, 263, 290–91; legitimacy and, 8, 16, 50, 66, 68–69, 162–63, 213, 226, 269, 274, 292, 296–97; managerialism and, 259; morals and, 254; nature and, 66–69, 82–84; New Public Management and, 245–47; outsourcing and, 159, 161, 175, 219, 287; policy recommendations for, 269, 284–91; politics and, 239–48, 251, 256–63; pollution and, 15, 35, 228; productivity and, 244–47, 257, 263; public choice theory and, 242–43; public deliberation and, 258–60; reform and, 245–48, 256, 285, 288–91, 296–97; responsibility to posterity and, 296; shareholders and, 145, 248, 257–58, 277; statistics and, 245; technology and, 244–46, 251–54, 257–63 (see also technology); values and, 240–42, 246–47, 258–60 intangible assets: measurement and, 199–201, 204–6; satellite accounts and, 38, 81, 204–6, 271; social capital and, 149–52, 157, 161, 199–201 InterAcademy Council, 66–67 interbank market, 1–2 Intergovernmental Panel on Climate Change (IPCC), 59, 66–69, 82, 297 International Monetary Fund (IMF), 90, 101–3, 111, 162–64, 176, 211, 287, 297 International Price Comparison, 124 International Telecommunications Union, 219 Internet, 155, 195, 245, 260, 273, 287–89, 291, 296 invisible hand, 209 iPods, 195 Ipsos Mori poll, 66, 247 Ireland, 172 Iron Curtain, 183, 239, 252 Italy, 95, 97–98, 146, 152 Jackson, Michael, 198 Japan, 42; debt of, 102; equal income distribution in, 125; fairness and, 125–26, 140–41; inequality and, 126; lost decade of, 102; posterity and, 91–92, 95, 97–98, 102; savings rates in, 280; trust and, 169, 175; voter turnout and, 175 Jazz Age, 127 Jefferson, Thomas, 184, 253–54 Johns, Helen, 41 Johnson, Simon, 256–57 Johnson, Steven, 187 Justice (Sandel), 237 Kahneman, Daniel, 215 Kamarck, Elaine, 247–48 Kay, John, 139, 245–46, 257 Kennedy School of Government, 247 Keynes, John Maynard, 101, 183–84, 190 Kleinwort, Dresdner, 87 knowledge economy, 191 Kobayashi, Keiichiro, 102 Korea, 126 Krugman, Paul, 100–103, 127–29, 232, 282 Kyoto Protocol, 62–64 labor: absorbing work and, 10, 48–49; call centers and, 131, 133, 161; creativity and, 166–68, 205–7; downsizing and, 175, 246, 255; global cities and, 165–70; globalization and, 131, 149 (see also globalization); human capital and, 81, 203–4, 282; measurement and, 189–99; migration and, 108–10, 172; outsourcing and, 159, 161, 175, 219, 287; pensions and, 4, 25, 85–86, 90, 92–100, 103–7, 111–13, 174–76, 191, 203, 243, 269–71, 275, 280, 286, 289–90, 293; Protestant work ethic and, 13–14, 236; retirement age and, 94, 97–99, 106–7, 112; skilled, 132–33, 159, 166–67, 276; specialization and, 160–61; technology and, 131–33; unemployment and, 3, 10, 43, 51, 56, 89, 107, 169, 207, 212–13, 243; unions and, 15, 51, 224, 249; unskilled, 132–33, 158, 172, 193; well-being and, 137–39; Whitehall Studies and, 139 lack of control, 47, 138–39 Lawson, Neal, 26 Layard, Richard, 31, 39–40, 43 Lehman Brothers, 1, 85, 87–88, 145, 211, 275–76 Leipzig marches, 239 Leviathan (Hobbes), 114 light bulbs, 59–61 Linux, 205 Lipsky, John, 102, 111 List, John, 117 literacy, 36 Live Nation, 197 living standards, 78–79, 106, 113, 136, 151, 162, 190, 194, 267 lobbyists, 15, 71, 247, 257, 276, 285, 289, 296 Lolapaloozza, 197 Louis Vuitton, 150 Luxury Fever (Frank), 40 Mackenzie, Donald, 221 Madonna, 194 Malthusianism, 95 Mama Group, 197 managerial competence, 2, 16, 150, 209, 259 Manzi, Jim, 231–32 Mao Zedong, 10 markets: asymmetric information and, 17, 186, 214, 219–20, 229, 248, 254, 262–63; black, 225; boom–bust cycles and, 4, 22, 28, 93, 102, 106–9, 136–37, 145, 147, 213, 222–23, 233, 277, 280, 283; capitalism and, 182, 230–38 (see also capitalism); culture and, 230–38; declining population and, 86, 89–90, 95–99, 103, 113; democracy and, 230–38; deregulation and, 7, 212; evidence–based policy and, 233–34; exchange advantage and, 214; externalities and, 15, 70, 80, 211, 228–29, 249, 254; failures of, 226–30, 240–44, 257, 262–63, 267, 289–90; Fama hypothesis and, 221–22; flaws of, 215–16; fractal character of, 134; free market model and, 14, 121, 129, 182–83, 210–11, 218–24, 232, 240, 243, 251; fundamentalism for, 213; gift economy and, 205–7; interbank, 1–2; international trade and, 110, 148, 159, 163; invisible hand and, 209; mathematical models of, 214; merits of, 211–17; missing, 229; moral, 210, 213, 220–25, 230–33; music, 194–98; network effects and, 253, 258; options, 222; as organizing economy, 218; performativity and, 224–25; Protestant work ethic and, 13–14, 236; public choice theory and, 220, 242–45; public domain and, 196; rational calculation and, 214–15; satellite accounts and, 81; shorting of, 86; social, 217–20; stability issues and, 2–4, 25, 70, 101, 124, 135, 140–41, 174, 176, 218, 296; trilemma of, 230–38; values and, 209–10 (see also values); winner take all, 134 Marx, Karl, 14, 28, 131, 221 McDonalds, 27 McKitrick, Ross, 68 Mean Fiddler Group, 197 Measuring Australia’s Progress, 274 measurement: asymmetric information and, 17, 186, 214, 219–20, 229, 248, 254, 262–63; Australian model and, 271, 274; balance and, 12–17; bankers and, 193, 200; capitalism and, 182; challenges of, 188–93; consumption and, 181–82, 198; distribution and, 191–99; evidence–based policy and, 233–34; GDP, 10 (see also gross domestic product [GDP]); Gini coefficient and, 126; governance and, 183, 186; government and, 182–88, 191, 193, 196, 202–3, 206; growth and, 181–85, 188–90, 194, 201–5, 208; happiness and, 35–39; health issues and, 181, 188–93, 200, 207; hedonic techniques and, 274; importance of, 184–85, 187–89; of inequality, 126; innovation and, 183, 196, 201–8, 273–74; intangible assets and, 199–201, 204–6; labor and, 189–99; less publication of, 271–72; living standards and, 13, 65, 78–79, 106, 113, 136, 139, 151, 162, 190, 194, 267; Measuring Progress exercise and, 294; policy recommendations for, 270–74; politics and, 182–84, 191, 193, 203, 208; productivity and, 189–90, 194, 199–201, 206–7; resources for, 294; social capital and, 154; statistics and, 187–89, 198–208; technology and, 181–85, 188–91, 194–201, 204–6; time constraints and, 204–7; trust and, 152–57; uncertainty of accuracy and, 273; unmeasurable entities and, 187; values and, 209, 212–13, 224 Medicare, 93–94 Meek, James, 26 metrification, 184 Metropolitan Museum of Art symposium, 100–101 Mexico, 226 Microsoft, 253, 258 migration, 108–10, 172 Milanovic, Branko, 123–24 Mill, John Stuart, 31–32 Minsky, Hyman, 226 monopolies, 196, 245, 252, 254 Montreal Protocol, 59 Moore’s Law, 156 morals: bankers and, 90, 277–78; criticism of poor and, 142; fairness and, 116–20, 127, 131, 142, 144; greed and, 221 (see also greed); growth and, 275–76, 279, 293, 295, 297; happiness and, 22, 26, 30, 34, 43, 48–49; institutions and, 254; nature and, 55, 70–72, 76, 78; performativity and, 224–25; posterity and, 90; trust and, 149, 174; values and, 185, 210, 213, 220–25, 230–33 MP3 players, 195 music, 11, 194–98, 204, 208, 229, 254 nature: Brundtlandt Report and, 77; carbon prices and, 70–71; climate change and, 57–84 (see also climate change); consumption and, 58–61, 71–76, 79, 82; Copenhagen summit and, 62, 64–65, 68, 162, 292; democracy and, 61, 66, 68; efficiency and, 61–62, 69, 82; environmentalists and, 29, 55–59, 69–70, 99; freedom and, 79; future and, 75–83; global warming and, 57, 64, 66, 68; government and, 58–62, 65–71, 82–84; greenhouse gases and, 23, 29, 35, 59, 61–63, 68, 70–71, 83; green lifestyle and, 55, 61, 76, 289, 293; gross domestic product (GDP) and, 56–60, 75–76, 80–82; growth and, 56–59, 62–66, 69–72, 76, 79–82; happiness and, 56–59, 75–76, 80–84; health issues and, 81; hybrid cars and, 61; innovation and, 69–70, 81; institutions and, 66–69, 82–84; InterAcademy Council and, 66–67; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; Kyoto Protocol and, 62–64; light bulbs and, 59–61; Montreal Protocol and, 59; morals and, 55, 70–72, 76, 78; natural capital and, 79–81, 151, 271, 273; philosophy and, 69–70; plastic and, 61; politics and, 57–71, 75, 77, 82–84; population issues and, 99; productivity and, 78, 82; satellite accounts and, 81; self-interest and, 65; squandered natural wealth and, 181–82; statistics and, 66, 81–82; stewardship and, 78, 80; technology and, 69–72, 76–77, 80, 84; TEEB project and, 78–79 network effects, 253, 258 New Deal, 129 New Economics Foundation, 36 New Public Management theory, 245–47 Newton, Isaac, 214–15 Niger, 122 Nobel Prize, 18, 60, 102, 215, 220, 236, 250, 261 noise, 47 No Logo (Wolf), 34 Nordhaus, William, 37, 70, 73, 156 North, Douglass, 261 Northern Rock, 1, 146 Obama, Barack, 62–63, 87, 173, 260, 285, 288 Oberholzer-Gee, Felix, 197 obesity, 137–38, 279 Office for National Statistics, 274 Olson, Mancur, 242 opinion formers, 61 option pricing theory, 222 Orchestra of the Age of Enlightenment, 194 Organization for Economic Cooperation and Development (OECD), 4, 11, 201, 305n11; happiness and, 38, 52; inequality in, 125–26; nature and, 60, 68; policy recommendations for, 273–74, 281, 283, 287, 291, 293; posterity and, 87, 93–94, 97–99, 112; trust and, 160, 171; values and, 212, 243–44, 246 organized crime, 277 Ormerod, Paul, 41 Orwell, George, 56 Ostrom, Elinor, 17, 220, 250–51, 261–63 Pakistan, 81, 226 Paradox of Choice, The (Schwartz), 10–11, 40 Parmalat, 146 partisanship, 2, 16, 101, 128, 269, 285 Peake, Mervyn, 9 pensions, 4, 25, 243; burden of, 92–95; Chinese savings and, 94; measurement and, 191, 203; policy recommendations for, 269–71, 275, 280, 286, 289–90, 293; posterity and, 85–86, 90–100, 103–7, 111–13; retirement age and, 92, 97–99, 106–7, 112; trust and, 174–76 performativity, 224–25 Persson, Torsten, 136 Pew surveys, 140 philanthropy, 33 philosophy, 16; fairness and, 114–15, 123; freedom and, 237; happiness and, 21, 27, 31–32, 49–50; nature and, 69–70; utilitarian, 31–32, 78, 237; values and, 237–39 Pickett, Kate, 137–40 Piereson, James, 183 Piketty, Thomas, 127, 129 Pimco, 287 Pinch (Willetts), 98–99 Pinker, Steven, 118, 305n4 Poland, 239 police service, 5, 35, 163, 193, 200, 247 policy: Commission on the Measurement of Economic Performance and Social Progress and, 37–38; deregulation and, 7, 212; errors in standard, 8; evidence–based, 233–34; first ten steps for, 294–98; future and, 75–83, 291–98; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; legitimacy and, 8, 16, 50, 66, 68–69, 162–63, 213, 226, 269, 274, 292, 296–97; measurement and, 187–89; OECD countries and, 4, 11, 38, 52, 60, 68, 87, 93–94, 97–99, 112, 125–26, 160, 171, 201, 212, 243–44, 246, 273–74, 281, 283, 287, 291, 293; population growth and, 95–100; practical recommendations for, 269–91; reform and, 8, 82–83, 85 (see also reform); stability issues and, 2–4, 25, 70, 101, 124, 135, 140–41, 174, 176, 218, 296; stimulus packages and, 91, 100–103, 111; sustainability and, 57 (see also sustainability); tradition and, 9; transparency and, 83, 164, 288, 296; trilemma of, 13–14, 230–36, 275; World Forum on Statistics, Knowledge, and Policy and, 38 political correctness, 173, 231 political economy, 27–28 pollution, 15, 35, 228 Population Bomb, The (Ehrlich), 70 population issues: aging, 4, 95–100, 106, 109, 206, 267, 280, 287, 296; baby boomers and, 4, 106, 109; declining population and, 86, 89–90, 95–99, 103, 113; demographic implosion and, 95–100; environmentalists and, 99; global cities and, 165–70; Malthusianism and, 95; migration and, 108–10; one-child policy and, 95–96; posterity and, 89–90, 94–95, 105–6, 109, 112–13; retirement age and, 94, 97–99, 106–7, 112 Porter, Roy, 184 Portugal, 126, 287 posterity, 298; aging population and, 89–90, 94–95, 105–6, 109, 112–13; bankers and, 85–91, 94, 99–102; consumption and, 86, 104–6, 112–13; current generation’s debt to, 90–92, 112–13; declining population and, 86, 89–90, 95–99, 103, 113; default and, 110–12; democracy and, 106; demographic implosion and, 95–100; freedom of investors and, 108; globalization and, 108; government and, 84–95, 98–113; gross domestic product (GDP) and, 91–94, 98–99, 103, 108, 111; growth and, 90, 95, 97, 99, 102, 105–8, 111; health issues and, 89, 93–94, 97–99, 103, 106, 111–13; higher retirement age and, 94–98, 106–7, 112; innovation and, 102; institutional responsibility and, 296; less leisure and, 106–7; Medicare and, 93–94; migration and, 108–9; morals and, 90; pensions and, 85–86, 90, 92–100, 103–7, 111–13; politics and, 86–94, 98, 101–8, 111–13; poverty and, 100; productivity and, 88, 97–99, 102, 105–8, 112; public debt and, 85–86; reform and, 85–86, 98, 111–12; savings and, 86–87, 94, 98, 100–101, 105–8, 112; Social Security and, 93–94; social welfare and, 85, 100, 112; sustainability and, 79 (see also sustainability); taxpayer burden and, 85–91, 94, 99, 103–5; technology and, 107; welfare burden and, 92–95 poverty, 261, 267; desire to spend and, 55–56; fairness and, 125, 128, 138, 142; happiness and, 43; posterity and, 100; trust and, 168–69 printing press, 7 productivity, 16; balance and, 268, 271, 273–76, 281, 287; bureaucratic obstacles to, 285–86; Commission on the Measurement of Economic Performance and Social Progress and, 37–38; fairness and, 131, 135; globalization and, 131 (see also globalization); governance and, 173–77; happiness and, 27, 38, 42, 51; improvements in, 107–8; institutions and, 244–47, 257, 263; measurement and, 189–90, 194, 199–201, 206–7; nature and, 78, 82; posterity and, 88, 97–99, 102, 105–8, 112; public services and, 257; Soviet method and, 246; technology and, 107–8, 157–59, 268; trilemma of, 13–14, 230–36, 275; trust and, 156–59, 162, 166–67, 170, 174 property rights, 80, 174, 195–96, 261 Protestant work ethic, 13–14, 236 psychology: altruism and, 118–22; anomie and, 48, 51; anxiety and, 1, 25, 47–48, 136–38, 149, 174; behavioral economics and, 116–17, 121, 282; choice and, 10–11; coherence and, 49; commuting and, 47; conflict in relationships and, 47; Easterlin Paradox and, 39–44; face-to-face contact and, 7, 147, 165–68; freedom and, 237 (see also freedom); game theory and, 116–18, 121–22; gift economy and, 205–7; greed and, 26, 34, 54, 88, 129, 150, 221–23, 248, 277–79; happiness and, 9–12, 44–50 (see also happiness); lack of control and, 47; noise and, 47; paradox of prosperity and, 174; positive, 9–10, 49–50, 303n51; public choice theory and, 220, 242–45; rational choice theory and, 214–15; shame and, 47; Slow Movement and, 27–28, 205; thrift education and, 283–84, 294–95; well-being and, 137–43 Ptolemy, 274 public choice theory, 220, 242–45 Public Domain, The (Boyle), 196 public goods, 185–86, 190, 199, 211, 229, 249, 261 purchasing power parity (PPP), 306n19 Putnam, Robert, 140–41, 152–54 Quiet Coup, The (Johnson), 256–57 Radio Corporation of America (RCA), 195 Rajan, Raghuram, 136 Rank, Robert, 40 rational choice theory, 214–15 Rawls, John, 31 Reagan, Ronald, 93, 121, 127, 211, 240, 243, 247–48 recession, 9, 11–12, 275; happiness and, 22, 24, 41, 54; nature and, 55–56, 66; plethora of books following, 55; posterity and, 85, 88, 91–93, 100–101, 108, 110; recovery from, 3, 103; trust and, 182; values and, 209–10, 213, 222 reciprocal altruism, 118–22 reform, 8; benchmark for, 218; bankers and, 277–79; bonus taxes and, 278; collective assent to, 269; courage needed for, 203; first ten steps for, 294–98; health care, 285; improving statistics and, 271; institutions and, 245–48, 256, 285, 288–91, 296–97; nature and, 82–85; New Public Management and, 245–46; politics and, 287–88; posterity and, 98, 111–12; public sector, 288–90; trust and, 162–64, 176–77; values and, 218, 233, 275–78, 295 Reinhardt, Carmen, 111 religion, 10; happiness and, 32–33, 43, 50; nature and, 76, 78; Protestant work ethic and, 13–14, 236; trust and, 147 Renaissance, 7 retirement age, 94, 97–99, 106–7, 112 revalorization, 275 Road to Wigan Pier, The (Orwell), 56 Rodrik, Dani, 136 Rogoff, Kenneth, 111 Romantic Economist, The (Bronk), 28 Romanticism, 27 Rothschilds, 147 Rousseau, Jean–Jacques, 114 Royal Bank of Scotland, 146 runs, 1 Ruskin, John, 27–28 Russia, 97–98, 123; Cold War and, 93, 112, 147, 209, 213, 239; Iron Curtain and, 183, 239, 252; production targets and, 246; as Soviet Union, 228, 246 Saez, Emmanuel, 127, 129 salaries: high, 130, 143–44, 193, 223, 277–78, 286, 296; measurement and, 191–99; paradox of, 193; superstar effect and, 134; technology and, 2, 89 Sandel, Michael, 224–25, 237 Sarkozy, Nicolas, 37, 202, 274 satellite accounts, 38, 81, 204–6, 271 Satyam, 146 savings, 1, 280–82, 293; China and, 87, 94, 100, 108; necessary increasing of, 105–6; negative, 105; policy recommendations for, 280–84; posterity and, 86–87, 94, 98, 100–101, 105, 108, 112; thrift education and, 283–84, 294–95 savings clubs, 283 Schumpeter, Joseph, 14 Schwartz, Barry, 10–11, 40 Seabright, Paul, 148–49, 170, 213–14, 228 self-interest: fairness and, 114–22; greed and, 26, 34, 54, 88, 129, 150, 221–23, 248, 277–79; moral sentiments and, 119–20, 142, 221; nature and, 65; reciprocal altruism and, 118–22; values and, 214, 221 Selfish Gene, The (Dawkins), 118 Sen, Amartya, 18, 37, 43, 82, 202, 237, 274, 310n25 shame, 47 shareholders, 88, 145, 248, 257–58, 277 Silicon Valley, 166 Simon, Herbert, 249–50, 254, 261, 270 Simon, Julian, 70 Singapore, 126 Sloan School, 256 Slow Food, 27 Slow Movement, 27–28, 205 smart cards, 252–53 Smith, Adam, 119–20, 209, 221, 255 Smith, Vernon, 215 social capital, 8, 12, 17; definition of, 152–53; fairness and, 116, 121, 139–43; intangible assets and, 149–52, 157, 161, 199–201; measurement of, 154, 185; policy recommendations for, 267, 271, 273, 276; Putnam on, 152–54; trust and, 5, 151–57, 168–74, 177; values and, 223–25, 231, 257 social justice, 31, 43, 53, 65, 123, 164, 224, 237, 286 Social Limits to Growth, The (Hirsch), 190, 231 social markets, 217–20 social networks, 260, 270, 288–89 Social Security, 93–94 social welfare.


Green Economics: An Introduction to Theory, Policy and Practice by Molly Scott Cato

Albert Einstein, back-to-the-land, banking crisis, banks create money, basic income, Bretton Woods, Buy land – they’re not making it any more, carbon footprint, carbon tax, central bank independence, clean water, Community Supported Agriculture, congestion charging, corporate social responsibility, David Ricardo: comparative advantage, degrowth, deskilling, energy security, food miles, Food sovereignty, Fractional reserve banking, full employment, gender pay gap, green new deal, income inequality, informal economy, intentional community, Intergovernmental Panel on Climate Change (IPCC), job satisfaction, land bank, land reform, land value tax, Mahatma Gandhi, market fundamentalism, Money creation, mortgage debt, Multi Fibre Arrangement, passive income, peak oil, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, reserve currency, Rupert Read, seminal paper, the built environment, The Spirit Level, Tobin tax, tontine, University of East Anglia, wikimedia commons

Its emphasis is not on competition for the cheapest but on cooperation for the best.’5 As Jeremy Seabrook writes, ‘It is time to rescue what true internationalists have always worked for from the clutches of a rapacious, expansive, colonising globalization,’ a task in which he is joined by Doreen Massey.6 The following opinion 142 GREEN ECONOMICS 35 30 25 20 15 10 5 0 Germany Canada US France UK Japan South Korea Brazil Mexico Figure 9.2 Comparison of wage rates in a selection of countries, based on purchasing power parities, 2005 (Hourly manufacturing wages in US dollars) Note: Purchasing power parities are a way of comparing the value of money in different economies in terms of their ability to buy goods, by removing the distortions caused by fluctuations in exchange rates. Source: Data from the Jus Semper Global Alliance: www.jussemper.org. from J.

Citizens’ Income and people’s pensions A health service, not an illness service 171 171 173 176 179 181 183 12 Land and the Built Environment Land and economics Taxing land Building on land Growing on the land 187 187 190 193 197 13 Summary and Further Resources 205 Index 219 List of Photographs, Figures, Tables and Boxes PHOTOGRAPHS 1.1 2.1 The men who devised the existing financial system 4 James Robertson with his wife and co-worker Alison Pritchard 22 2.2 Richard Douthwaite 28 3.1 The author modelling a ‘bioregional hat’ 43 3.2 The convivial economy: Stroud farmers’ market 44 4.1 Crests of the London livery companies associated with textiles 67 5.1 Labour note as used at Owen’s Equitable Labour Exchange in 1833 73 5.2 Chiemgauer note, showing the stamps that have to be added to preserve its value over time 82 6.1 Conviviality: Building the bread oven at Springhill co-housing, June 2008 100 9.1 Stroud farmers’ market 144 9.2 The Cuban ‘camel’: Improvised urban public transport in Havana 153 12.1 Springhill Co-housing, Stroud 197 12.2 Stroud Community Agriculture: Weeding in the cabbage path 200 FIGURES 1.1 2.1 2.2 3.1 3.2 3.3 5.1 Widening the consideration of economics beyond the classical economists’ ‘circular flow’ Hazel Henderson’s illustration of the love economy The relationship between economic activity and carbon dioxide emissions Three is a magic number: Re-imaging the relationship between society, economy and environment Permaculture flower Rainwater harvesting system for a domestic property Total debt service of low- and middle-income countries, 1990–2005 6 27 29 37 47 49 76 x 5.2 6.1 7.1 7.2 7.3 7.4 8.1 8.2 8.3 9.1 9.2 9.3 9.4 10.1 11.1 11.2 11.3 12.1 12.2 12.3 12.4 GREEN ECONOMICS Growth in broad money (M4) compared with growth in the economy (GDP), UK, 1970–2001 The carbon cycle The Passivhaus Illustration of the contraction and convergence model for global CO2 emissions reductions Sharing of ‘universal dividend’ from sale of carbon permits and its impact on incomes in different groups of the US population A comparison of GDP and ISEW in the UK, 1950–2002 Fair trade sales in the leading consumer countries in 2006 and 2007 Relationship between growth in trade and growth in CO2 emissions Production grid illustrating trade subsidiarity Trade gap in agricultural products in the UK, 1990–2005 Comparison of wage rates in a selection of countries, based on purchasing power parities, 2005 NEF’s image of the ‘leaky bucket’ local economy Margaret Legum’s design for building prosperity globally Revenues from environmentally related taxes as a percentage of GDP in various OECD countries Relationship between infant mortality and carbon dioxide emissions Human well-being and sustainability: Ecological footprint and Human Development Index compared, 2003 Illustration of the ability to provide for one’s individual needs over the productive life-course Equity creation through a CLT Agricultural and economic systems of sustainable agriculture Percentage of energy used in different aspects of food production and distribution The turning of the year: The annual cycle of growing and celebration on the land source 79 99 108 111 112 118 129 130 132 141 142 146 154 167 175 178 183 196 198 199 201 TABLES 1.1 1.2 1.3 3.1 Comparison of different strands of economics with a concern for the environment Ecological footprinting and shadow pricing compared The negative consequences of economic growth for quality of life Comparison between the HE (hyper-expansionist) and SHE (sane, humane, ecological) possible futures 8 9 10 41 LIST OF PHOTOGRAPHS, FIGURES, TABLES AND BOXES 3.2 3.3 6.1 7.1 7.2 7.3 7.4 8.1 10.1 10.2 10.3 10.4 10.5 10.6 12.1 Indicators of consumption and population in different regions of the world Valuation of activities and functions within the patriarchal economy Success of various sectors within a low-carbon economy Percentage of firms engaged in various waste-management activities in UK and Germany, 2001 Comparison of costs to society of various psychological ‘escape routes’ compared with spending in various areas, UK c. 2001 Additions and subtractions from GDP to arrive at the ISEW HDI and HPI rankings for the G8 countries and other nations with high gross GDP Changes in the terms of trade of some country groups, 1980–1982 to 2001–2003 Share of UK wealth owned by different sectors of the population Impact of the congestion charge on traffic in London Examples of environmental taxes and charges Types of installations resulting in tax credits for Oregon citizens in 2006 Examples of ecotaxes in a range of EU countries Revenue from environmental taxes in the UK, 1993–2006 Experiences with LVT in various countries xi 45 46 99 109 116 118 120 127 160 163 165 166 166 167 192 BOXES 1.1 3.1 3.2 4.1 4.2 4.3 5.1 5.2 5.3 5.4 6.1 6.2 6.3 6.4 Inequality in the UK, 1994–2004 Sustainability values Douthwaite’s criteria for ‘green’ growth Creating a million extra jobs through a green industrial revolution Policies to encourage voluntarism and self-help The expansion of worker cooperatives in Argentina Traditional money in Vanuatu The parable of the South African talents The Chiemgauer local currency in Chiemgau, Germany New Zealand’s complementary currencies Shell and CSR: A cynical view Cooperation for sustainability: The alternative food economy in the UK Principles of production to match the metabolism of the natural world Principles for achieving sustainability according to the Natural Step 3 36 40 58 64 65 77 81 82 84 93 95 97 100 xii 7.1 7.2 8.1 8.2 8.3 9.1 9.2 9.3 9.4 9.5 10.1 10.2 10.3 11.1 12.1 12.2 12.3 12.4 12.5 GREEN ECONOMICS The European Union Packaging Directive Norway’s experience with national resource accounting Trade and inequality The fight-back: Trade-related direct action in India Key provisions of the General Agreement on Sustainable Trade Provisions of the UK’s Sustainable Communities Act (2007) Essential features of a sustainable territory The Thames Gateway Development as an example of a non-self-reliant community A sufficiency economy in Thailand Kirkpatrick Sale’s essential elements to guide a bioregional economy The London congestion charge Energy tax credit programme in Oregon, US Pesticide taxation in Scandinavia Enduring terrors: The war against terror in global context MST: The land rights campaign in Brazil Land tax in Australia Co-housing in Denmark The principles of permaculture Stroud Community Agriculture 109 119 127 133 135 145 147 148 149 151 163 166 167 179 189 192 197 199 200 Acknowledgements My first and deepest gratitude must be for all those, named and unnamed, who have taxed their minds and spirits to clear the path towards a way of living more comfortably within our environment.


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23 Things They Don't Tell You About Capitalism by Ha-Joon Chang

accelerated depreciation, affirmative action, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, borderless world, business logic, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, deskilling, digital divide, ending welfare as we know it, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, full employment, German hyperinflation, Gini coefficient, Glass-Steagall Act, hiring and firing, Hyman Minsky, income inequality, income per capita, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market fundamentalism, means of production, Mexican peso crisis / tequila crisis, microcredit, Myron Scholes, North Sea oil, offshore financial centre, old-boy network, post-industrial society, price stability, profit maximization, profit motive, purchasing power parity, rent control, Robert Solow, shareholder value, short selling, Skype, structural adjustment programs, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, Toyota Production System, trade liberalization, trickle-down economics, women in the workforce, working poor, zero-sum game

Index active economic citizenship xvi, xvii Administrative Behaviour (Simon) 173–4 Africa see Sub-Saharan Africa AIG 172–3 Air France 131 AOL 132–3 apartheid 214–16 Argentina education and growth 181 growth 73 hyperinflation 53–4 Austria geography 121 government direction 132 protectionism 70 balance of payments 97–100, 101 Baldursson, Fridrik 235 Bangladesh entrepreneurship 159–60 and microfinance 161–2, 163, 164 Bank of England 252 (second) Bank of the USA 68 Bank for International Settlements (BIS) 262 bankruptcy law 227–8 Barad, Jill 154 Bard College 172 Bateman, Milford 162 Baugur 233 Baumol, William 250 Bebchuk, Lucian 154 behaviouralist school 173–4 Belgium ethnic division 122 income inequality 144, 146 manufacturing 70, 91 R&D funding 206 standard of living 109 Benin, entrepreneurship 159 Bennett, Alan 214 Besley, Tim 246 big government 221–2, 260–61 and growth 228–30 see also government direction; industrial policy BIS (Bank for International Settlements) 262 Black, Eugene 126 Blair, Tony 82, 143, 179 borderless world 39–40 bounded rationality theory 168, 170, 173–7, 250, 254 Brazilian inflation 55 Britain industrial dominance/decline 89–91 protectionism 69–70 British Academy 246–7 British Airways 131 brownfield investment 84 Brunei 258 Buffet, Warren 30, 239 Bukharin, Nikolai 139 Bunning, Senator Jim 8 Burkina Faso (formerly Upper Volta) 121, 200 Bush, George W. 8, 158, 159, 174 Bush Sr, George 207 business sector see corporate sector Cameroon 116 capital mobility 59–60 nationality 74–5, 76–7 capitalism Golden Age of 142, 147, 243 models 253–4 capitalists, vs. workers 140–42 captains of industry 16 Carnegie, Andrew 15 Case, Steve 132–3 Cassano, Joe 172–3 CDOs (collateralized debt obligations) 238 CDSs (credit default swaps) 238 CEO compensation see executive pay, in US Cerberus 77–8 Chavez, Hugo 68 chess, complexity of 175–6 child-labour regulation 2–3, 197 China business regulation 196 communes 216 economic officials 244 industrial predominance 89, 91, 93, 96 as planned economy 203–4 PPP income 107 protectionism and growth 63–4, 65 Chocolate mobile phone 129 Chrysler 77–8, 191 Chung, Ju-Yung 129 Churchill, Winston 253 climate factors 120–21 Clinton, Bill 143 cognitive psychology 173–4 collateralized debt obligations (CDOs) 238 collective entrepreneurship 165 communist system 200–204 Concorde project 130–31 conditions of trade 5 Confucianism 212–13 Congo (Democratic Republic) 116, 121 consumption smoothing 163 cooperatives 166 corporate sector importance 190–91 planning in 207–9 regulation effect 196–8 suspicion of 192–3 see also regulation; transnational corporations Cotton Factories Regulation Act 1819 2 credit default swaps (CDSs) 238 Crotty, Jim 236–8 culture issues 123, 212–13 Daimler-Benz 77–8 Darling, Alistair 172 de-industrialization 91 balance of payments 97–100, 101 causes 91–6 concerns 96–9 deflation, Japan 54 deliberation councils 134 Denmark cooperatives 166 protectionism 69 standard of living 104, 106, 232–3 deregulation see under regulation derivatives 239 Detroit car-makers 191–2 developing countries entrepreneurship and poverty 158–60 and free market policies 62–3, 71–3, 118–19, 261–2 policy space 262–3 digital divide 39 dishwashers 34 distribution of income see downward redistribution of income; income irregularity; upward redistribution of income domestic service 32–3 double-dip recession xiii downward redistribution of income 142–3, 146–7 Dubai 235 Duménil, Gérard 236 East Asia economic officials 249–50 educational achievements 180–81 ethnic divisions 122–3 government direction 131–2 growth 42, 56, 243–4 industrial policy 125–36, 205 École Nationale d’Administration (ENA) 133 economic crises 247 Economic Policy Institute (EPI) 144, 150 economists alternative schools 248–51 as bureaucrats 242–3 collective imagination 247 and economic growth 243–5 role in economic crises 247–8 Ecuador 73 Edgerton, David 37 Edison, Thomas 15, 165, 166 education and enterprise 188–9 higher education effect 185–8 importance 178–9 knowledge economy 183–5 mechanization effect 184–5 outcome equality 217–18 and productivity 179–81 relevance 182–3 Elizabeth II, Queen 245–7 ENA (École Nationale d’Administration) 133 enlightened self-interest 255–6 entrepreneurship, and poverty 157–8 and collective institutions 165–7 as developing country feature 158–60 finance see microfinance environmental regulations 3 EPI (Economic Policy Institute) 144, 150 equality of opportunity 210–11, 256–7 and equality of outcome 217–20, 257 and markets 213–15 socio-economic environment 215–17 equality of outcome 217–20 ethnic divisions 122–3 executive pay and non-market forces 153–6 international comparisons 152–3 relative to workers’ pay 149–53, 257 US 148–9 fair trade, vs. free trade 6–7 Fannie Mae 8 Far Eastern Economic Review 196 Federal Reserve Board (US) 171, 172, 246 female occupational structure 35–6 Fiat 78 financial crisis (2008) xiii, 155–6, 171–2, 233–4, 254 financial derivatives 239, 254–5 financial markets deregulation 234–8, 259–60 effects 239–41 efficiency 231–2, 240–41 sector growth 237–9 Finland government direction 133 income inequality 144 industrial production 100 protectionism 69, 70 R&D funding 206 welfare state and growth 229 Fischer, Stanley 54 Ford cars 191, 237 Ford, Henry 15, 200 foreign direct investment (FDI) 83–5 France and entrepreneurship 158 financial deregulation 236 government direction 132, 133–4, 135 indicative planning 204–5 protectionism 70 Frank, Robert H 151 Franklin, Benjamin 65–6, 67 Freddie Mac 8 free market boundaries 8–10 and developing countries 62–3, 71–3, 118–19, 261–2 labour see under labour nineteenth-century rhetoric 140–43 as political definition 1–2 rationale xiii–xiv, 169–70 results xiv–xv, xvi–xvii system redesign 252, 263 see also markets; neo-liberalism free trade, vs. fair trade 6–7 Fried, Jesse 154 Friedman, Milton 1, 169, 214 Galbraith, John Kenneth 16, 245 Garicano, Luis 245 Gates, Bill 165, 166, 200 General Electric (GE) 17, 45, 86, 237 General Motors Acceptance Corporation (GMAC) 194, 237 General Motors (GM) 20, 22, 45, 80, 86, 154, 190–98 decline 193–6 financialization 237 pre-eminence 191–2 geographical factors 121 Germany blitzkrieg mobility 191 CEO remuneration 152–3 cooperatives 166 emigration 69 hyperinflation 52–4 industrial policy 205 manufacturing 90 R&D funding 206 welfare state and growth 228–9 Ghana, entrepreneurship 159 Ghosn, Carlos 75–6, 78 globalization of management 75–6 and technological change 40 GM see General Motors GMAC (General Motors Acceptance Corporation) 194, 237 Golden Age of Capitalism 142, 147, 243 Goldilocks economy 246 Goodwin, Sir Fred 156 Gosplan 145 government direction balance of results 134–6 and business information 132–4 failure examples 130–31 and market discipline 44–5, 129–30, 134 share ownership 21 success examples 125–6, 131–4 see also big government; industrial policy Grameen Bank 161–4 Grant, Ulysses 67 Great Depression 1929 24, 192, 236, 249, 252 greenfield investment 84 Greenspan, Alan 172, 246 Hamilton, Alexander 66–7, 69 Hayami, Masaru 54 Hennessy, Peter 246–7 higher education 185–8 Hirschman, Albert 249 History Boys (Bennett) 214 Hitler, Adolf 54 home country bias 78–82, 83, 86–7 Honda 135 Hong Kong 71 household appliances 34–6, 37 HSBC 172 Human relations school 47 Hungary, hyperinflation 53–4 hyperinflation 52–4 see also inflation Hyundai Group 129, 244 Iceland financial crisis 232–4, 235 foreign debt 234 standard of living 104–5 ICT (Information and Communication Technology) 39 ILO (International Labour Organization) 32, 143–4 IMF see International Monetary Fund immigration control 5, 23, 26–8, 30 income per capita income 104–11 see also downward redistribution of income; income inequality; upward redistribution of income income inequality 18, 72–3, 102, 104–5, 108, 110, 143–5, 147, 247–8, 253, 262 India 99, 121 indicative planning 205 indicative planning 204–6 Indonesia 234 industrial policy 84, 125–36, 199, 205, 242, 259, 261 see also government direction Industrial Revolution 70, 90, 243 infant industry argument 66–8, 69–70, 71–2 inflation control 51–2 and growth 54–6, 60–61 hyperinflation 52–4 and stability 56–61 Information and Communication Technology (ICT) 39 institutional quality 29–30, 112–13, 115, 117, 123–4, 165–7 interest rate control 5–6 international dollar 106–7 International Labour Organization (ILO) 32, 143–4 International Monetary Fund (IMF) 54–5, 57, 66, 72, 244, 262 SAPs 118 International Year of Microcredit 162 internet revolution 31–2 impact 36–7, 38, 39 and rationality 174 investment brownfield/greenfield 84 foreign direct investment 83–5 share 18–19 invisible reward/sanction mechanisms 48–50 Ireland financial crisis 234–5 Italy cooperatives 166 emigrants to US 103 Jackson, Andrew 68 Japan business regulation 196 CEO remuneration 152–3 deflation 54 deliberation councils 134 government direction 133–4, 135, 259 indicative planning 205 industrial policy 131, 135, 242–5 industrial production 100 production system 47, 167 protectionism 62, 70 R&D funding 206 Jefferson, Thomas 67–8, 239 job security/insecurity 20, 58–61, 108–9, 111, 225–8, 247, 253, 259 Journal of Political Economy 34 Kaldor, Nicolas 249 Keynes, John Maynard 249 Kindleberger, Charles 249 knowledge economy 183–5 Kobe Steel 42–3, 46 Kong Tze (Confucius) 212 Korea traditional 211–13 see also North Korea; South Korea Koufax, Sandy 172 Kuwait 258 labour free market rewards 23–30 job security 58–60 in manufacturing 91–2 market flexibility 52 regulation 2–3 relative price 33, 34 Latin America 32–3, 55, 73, 112, 122, 140, 196–7, 211, 245, 262 Latvia 235 Lazonick, William 20 Lenin, Vladimir 138 Levin, Jerry 133 Lévy, Dominique 236 LG Group 129, 134 liberals neo-liberalism xv, 60, 73 nineteenth-century 140–42 limited liability 12–15, 21, 228, 239, 257 Lincoln, Abraham 37, 67 List, Friedrich 249 London School of Economics 245–6 LTCM (Long-Term Capital Management) 170–71 Luxemburg, standard of living 102, 104–5, 107, 109, 232–3, 258 macro-economic stability 51–61, 240, 259, 261 Madoff, Bernie 172 Malthus, Thomas 141 managerial capitalism 14–17 Mandelson, Lord (Peter) 82–3, 87 manufacturing industry comparative dynamism 96 employment changes 91–2 importance 88–101, 257–9 productivity rise 91–6, 184–5 relative prices 94–5 statistical changes 92–3 Mao Zedong 215–16 Marchionne, Sergio 78 markets and bounded rationality theory 168, 173–6, 177, 254 conditions of trade 5 and equality of opportunity 213–15 failure theories 250 financial see financial markets government direction 44–5, 125–36 government regulation 4–6, 168–9, 176–7 participation restrictions 4 price regulations 5–6 and self-interest 44–5 see also free market Marx, Karl 14, 198, 201, 208, 249 Marxism 80, 185, 201–3 mathematics 180, 182–3 MBSs (mortgage-backed securities) 238 medicine’s popularity 222–4 Merriwether, John 171 Merton, Robert 170–71 Michelin 75–6 microfinance critique 162 and development 160–62 Microsoft 135 Minsky, Hyman 249 Monaco 258 morality, as optical illusion 48–50 Morduch, Jonathan 162 mortgage-backed securities (MBSs) 238 motivation complexity 46–7 Mugabe, Robert 54 NAFTA (North American Free Trade Agreement) 67 National Health Service (UK) 261 nationality of capital 74–87 natural resources 69, 115–16, 119–20, 121–2 neo-liberalism xv, 60, 73, 145 neo-classical school 250 see also free market Nestlé 76–7, 79 Netherlands CEO remuneration 152–3 cooperatives 166 intellectual property rights 71 protectionism 71 welfare state and growth 228–9 New Public Management School 45 New York Times 37, 151 New York University 172 Nissan 75–6, 84, 135, 214 Nobel Peace Prize 162 Prize in economics 170, 171–2, 173, 208, 246 Nobel, Alfred 170 Nokia 135, 259–60 North American Free Trade Agreement (NAFTA) 67 North Korea 211 Norway government direction 132, 133, 205 standard of living 104 welfare state and growth 222, 229 Obama, Barack 149 OECD (Organization for Economic Cooperation and Development) 57, 159, 229 Oh, Won-Chul 244 Ohmae, Kenichi 39 Opel 191 Opium War 9 opportunities see equality of opportunity Organization for Economic Cooperation and Development (OECD) 57, 159, 229 organizational economy 208–9 outcomes equality 217–20 Palin, Sarah 113 Palma, Gabriel 237 Park, Chung-Hee 129 Park, Tae-Joon 127–8 participation restrictions 4 Perot, Ross 67 Peru 219 PGAM (Platinum Grove Asset Management) 171 Philippines, education and growth 180, 181 Phoenix Venture Holdings 86 Pigou, Arthur 250 Pinochet, Augusto 245 PISA (Program for International Student Assessment) 180 Plain English Campaign 175 planned economies communist system 200–204 indicative systems 204–6 survival 199–200, 208–9 Platinum Grove Asset Management (PGAM) 171 Pohang Iron and Steel Company (POSCO) 127–8 pollution 3, 9, 169 poor individuals 28–30, 140–42, 216–18 Portes, Richard 235 Portman, Natalie 162 POSCO (Pohang Iron and Steel Company) 127–8 post-industrial society 39, 88–9, 91–2, 96, 98, 101, 257–8 Poverty Reduction Strategy Papers (PRSPs) 118 see also SAPs PPP (purchasing power parity) 106–9 Preobrazhensky, Yevgeni 138–40, 141 price regulations 5–6 stability 51–61 Pritchett, Lant 181 private equity funds 85–6, 87 professional managers 14–22, 44–5, 166, 200 Program for International Student Assessment (PISA) 180 protectionism and growth 62–3, 72–3 infant industry argument 66–8, 69–70, 71–2 positive examples 63–5, 69 PRSPs see Poverty Reduction Strategy Papers purchasing power parity (PPP) 106–9 R&D see research and development (R&D) Rai, Aishwarya 162 Rania, Queen 162 rationality see bounded rationality theory RBS (Royal Bank of Scotland) 156 real demand effect 94 regulation business/corporate 196–8 child labour 2–3, 197 deregulation 234–8, 259–60 legitimacy 4–6 markets 4–6, 168–9, 176–7 price 5–6 Reinhart, Carmen 57, 59 Renault 21, 75–6 Report on the Subject of Manufactures (Hamilton) 66 The Rescuers (Disney animation) 113–14 research and development (R&D) 78–9, 87, 132, 166 funding 206 reward/sanction mechanisms 48–50 Ricardo, David 141 rich individuals 28–30, 140–42 river transport 121 Rogoff, Kenneth 57, 59 Roodman, David 162 Roosevelt, Franklin 191 Rover 86 Royal Bank of Scotland (RBS) 156 Rubinow, I.M. 34 Ruhr occupation 52 Rumsfeld, Donald 174–5 Rwanda 123 Santander 172 SAPs (Structural Adjustment Programs) 118, 124 Sarkozy, Nicolas 90 Scholes, Myron 170–71 Schumpeter, Joseph 16, 165–7, 249 Second World War planning 204 (second) Bank of the USA 68 self-interest 41–2, 45 critique 42–3 enlightened 255–6 invisible reward/sanction mechanisms 48–50 and market discipline 44–5 and motivation complexity 46–7 Sen, Amartya 250 Senegal 118 service industries 92–3 balance of payments 97–100, 101 comparative dynamism 94–5, 96–7 knowledge-based 98, 99 Seychelles 100 share buybacks 19–20 shareholder value maximisation 17–22 shareholders government 21 ownership of companies 11 short-term interests 11–12, 19–20 shipbuilders 219 Simon, Herbert 173–6, 208–9, 250 Singapore government direction 133 industrial production 100 PPP income 107 protectionism 70 SOEs 205 Sloan Jr, Alfred 191–2 Smith, Adam 13, 14, 15, 41, 43, 169, 239 social dumping 67 social mobility 103–4, 220 socio-economic environment 215–17 SOEs (state-owned enterprises) 127, 132, 133, 205–6 South Africa 55, 121 and apartheid 213–16 South Korea bank loans 81 economic officials 244 education and growth 181 ethnic divisions 123 financial drive 235 foreign debt 234 government direction 126–9, 133–4, 135, 136 indicative planning 205 industrial policy 125–36, 205, 242–5 inflation 55, 56 job insecurity effect 222–4, 226, 227 post-war 212–14 protectionism 62, 69, 70 R&D funding 206 regulation 196–7 Soviet Union 200–204 Spain 122 Spielberg, Steven 172 Sri Lanka 121 Stalin, Josef 139–40, 145 standard of living comparisons 105–7 US 102–11 Stanford, Alan 172 state owned enterprises (SOEs) 127, 132, 133, 205–6 steel mill subsidies 126–8 workers 219 Stiglitz, Joseph 250 Structural Adjustment Programs (SAPs) 118, 124 Sub-Saharan Africa 73, 112–24 culture issues 123 education and growth 181 ethnic divisions 122–3 free market policies 118–19, 262 geographical factors 121 growth rates 73, 112, 116–19 institutional quality 123 natural resources 119–20, 121–2 structural conditions 114–16, 119–24 underdevelopment 112–13, 124 Sutton, Willie 52 Sweden 15, 21–2 CEO remuneration 152 income inequality 144 industrial policy 205 industrial production 100 per capita income 104 R&D funding 206 welfare state and growth 229 Switzerland CEO remuneration 152–3 ethnic divisions 122 geography 121 higher education 185–6, 188 intellectual property rights 71 manufacturing 100, 258 protectionism 69, 71 standard of living 104–6, 232–3 Taiwan business regulation 196 economic officials 244 education and growth 180 government direction 136 indicative planning 205 protectionism 69, 70 Tanzania 116 TARP (Troubled Asset Relief Program) 8 tax havens 258 technological revolution 31–2, 38–40 telegraph 37–8 Telenor 164 Thatcher, Margaret 50, 225–6, 261 Time-Warner group 132–3 TIMSS (Trends in International Mathematics and Science Study) 180, 183 Toledo, Alejandro 219 Toyota and apartheid 214 production system 47 public money bail-out 80 trade restrictions 4 transnational corporations historical debts 80 home country bias 78–82, 83, 86–7 nationality of capital 74–5, 76–7 production movement 79, 81–2 see also corporate sector Trends in International Mathematics and Science Study (TIMSS) 180, 183 trickle-down economics 137–8 and upward distribution of income 144–7 Trotsky, Leon 138 Troubled Asset Relief Program (TARP) 8 2008 financial crisis xiii, 144, 155–6, 171–2, 197–8, 233–4, 236, , 238–9, 245–7, 249, 254 Uganda 115–16 uncertainty 174–5 unemployment 218–19 United Kingdom CEO remuneration 153, 155–6 financial deregulation 235–6, 237 NHS 261 shipbuilders 219 see also Britain United Nations 162 United States economic model 104 Federal Reserve Board 171, 172, 246 financial deregulation 235–8 immigrant expectations 103–4 income inequality 144 inequalities 107–11 protectionism and growth 64–8, 69 R&D funding 206 standard of living 102–11 steel workers 219 welfare state and growth 228–30 United States Agency for International Development (USAID) 136 university education effect 185–8 Upper Volta (now Burkina Faso) 200 upward redistribution of income 143–4 and trickle-down economics 144–7 Uruguay growth 73 income inequality 144 USAID (United States Agency for International Development) 136 vacuum cleaners 34 Venezuela 144 Versailles Treaty 52 Vietnam 203–4 Volkswagen government share ownership 21 public money bail-out 80 wage gaps political determination 23–8 and protectionism 23–6, 67 wage legislation 5 Wagoner, Rick 45 Wall Street Journal 68, 83 Walpole, Robert 69–70 washing machines 31–2, 34–6 Washington, George 65, 66–7 Welch, Jack 17, 22, 45 welfare economics 250 welfare states 59, 110–43, 146–7, 215, 220, 221–30 and growth 228–30 Wilson, Charlie 192, 193 Windows Vista system 135 woollen manufacturing industry 70 work to rule 46–7 working hours 2, 7, 109–10 World Bank and free market 262 and free trade 72 and POSCO 126–8 government intervention 42, 44, 66 macro-economic stability 56 SAPs 118 WTO (World Trade Organization) 66, 262 Yes, Minister/Prime Minister (comedy series) 44 Yunus, Muhammad 161–2 Zimbabwe, hyperinflation 53–4

When it comes to internationally traded things such as TVs or mobile phones, their prices are basically the same in all countries, rich and poor. In order to take into account the differential prices of non-traded goods and services across countries, economists have come up with the idea of an ‘international dollar’. Based on the notion of purchasing power parity (PPP) – that is, measuring the value of a currency according to how much of a common consumption basket it can buy in different countries – this fictitious currency allows us to convert incomes of different countries into a common measure of living standards. The result of converting the incomes of different countries into the international dollar is that the incomes of rich countries tend to become lower than their incomes at market exchange rates, while those of poor countries tend to become higher.


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, asset allocation, Basel III, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamond, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, fear index, financial engineering, financial innovation, Flash crash, forward guidance, Garrett Hardin, Gini coefficient, Glass-Steagall Act, global reserve currency, high net worth, High speed trading, hindsight bias, hype cycle, income inequality, inflation targeting, interest rate swap, inverted yield curve, Isaac Newton, Jaron Lanier, John Perry Barlow, joint-stock company, joint-stock limited liability company, junk bonds, Kodak vs Instagram, Kondratiev cycle, Large Hadron Collider, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, low interest rates, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, negative equity, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, plutocrats, Ponzi scheme, precautionary principle, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tragedy of the Commons, trickle-down economics, two and twenty, Two Sigma, Tyler Cowen, Washington Consensus, wealth creators, working poor, yield curve

Since currencies, living costs, food, rents, wages, and many other factors vary so much from place to place, how can you reliably compare the cost of living? The magazine’s answer: by using the price of something that is in essence the same everywhere, the Big Mac. In economics, the thing they’re trying to measure is called purchasing power parity, or PPP, i.e., how much you can buy in different places with a given amount of money. (That might sound an easy thing to measure, but establishing agreed figures for PPP in fact involves a huge international survey in which thousands of economists fan out all over the world collecting and collating data.)

It is a measure of how rich the country’s citizens are on average—though it is a very very rough measure of that, since a country’s wealth is often very unevenly distributed. Also, a country’s population could be rising sharply so that its GDP in total is going up even as each individual citizen is becoming poorer. The list of countries in order of total GDP and GDP per capita is interestingly different. Data are from the IMF for 2012, adjusted for purchasing power parity (which is why it’s different from the G8 list above): GDP per capita GDP total 1. Qatar 1. EU 2. Luxembourg 2. USA 3. Singapore 3. China 4. Norway 4. Japan 5. Brunei 5. Germany 6. Hong Kong 6. France 7. United States 7. UK 8. United Arab Emirates 8. Brazil 9.

Still, the United States had very rocky banks before Glass-Steagall was brought in, and has had very rocky banks since Glass-Steagall was repealed, so maybe it’s right to draw the obvious conclusion—that the period when Glass-Stegall was in force was safer for banks. GDP world The total GDP of the world—so that would be all the economic activity on Earth—is $71,830 billion, or $71.83 trillion. This is according to the CIA, so it must be true.41 Note that the number adjusted for purchasing power parity is $83,120 billion. Planetary GDP per capita is $12,700, the unemployment rate is 8 percent, the employment balance is 35.3 percent work in agriculture, 22.7 percent in industry, and 42 percent in everything else, or, in economist-speak, “services.” The world’s total burden of debt, government and personal and corporate all added together, is 313 percent, or $223.3 trillion.


pages: 421 words: 125,417

Common Wealth: Economics for a Crowded Planet by Jeffrey Sachs

agricultural Revolution, air freight, Anthropocene, back-to-the-land, biodiversity loss, British Empire, business process, carbon credits, carbon footprint, carbon tax, clean water, colonial rule, corporate social responsibility, correlation does not imply causation, creative destruction, demographic transition, Diane Coyle, digital divide, Edward Glaeser, energy security, failed state, Garrett Hardin, Gini coefficient, global pandemic, Global Witness, Haber-Bosch Process, impact investing, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of agriculture, invention of the steam engine, invisible hand, Joseph Schumpeter, knowledge worker, labor-force participation, low skilled workers, mass immigration, microcredit, ocean acidification, oil shale / tar sands, old age dependency ratio, peak oil, profit maximization, profit motive, purchasing power parity, road to serfdom, Ronald Reagan, Simon Kuznets, Skype, statistical model, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, Tragedy of the Commons, transaction costs, unemployed young men, War on Poverty, women in the workforce, working-age population, zoonotic diseases

Of course, this scenario is highly optimistic in that it assumes the world avoids any prolonged crisis, that the United States grows at the historical average, and that all other countries achieve convergent growth. Figure 2.2(a): The Convergence of Global Income per Capita through 2050 Source: Calculated using data from World Bank (2007) Note: Vertical axis on logarithmic scale. Income is measured in purchasing power parity (PPP) to adjust for difference in price levels across countries. More People and Higher Incomes Not only will most of the world be richer, but there will be a lot more people around enjoying those higher incomes. The world’s population continues to grow rapidly, even though the proportional rate of population growth (each year’s increase relative to the size of the global population) has declined.

China, the recipient of about $60 billion in aid from all donors since 1980, has already graduated from grants and subsidized loans from the World Bank because it has become too rich to need them. Any new credits come at market terms. Here is a rule of thumb: an economy can generally graduate from the need for aid when the national income has reached around $4,000 per person, measured at purchasing power parity (PPP) or roughly $1,000 at market prices. China’s income in 2003, for example, had reached $5,000 per person (PPP). This graduation point compares with current incomes in sub-Saharan Africa of roughly $1,400 per person (PPP). Africa needs, roughly, to triple its per capita income per person to graduate from aid.

GATT General Agreement on Tariffs and Trade GDP gross domestic product GEF global environmental facility GFATM Global Fund to Fight AIDS, Tuberculosis and Malaria GNP gross national product GROCC Global Roundtable on Climate Change GWP gross world product HDI Human Development Index HIPPO habitat destruction, invasive species, pollution, population increase, and overharvesting ICPD International Conference on Population and Development IMF International Monetary Fund I= P × A × T or I-PAT equation: Environmental impact = population × per capita income × the environmental impact per dollar of income IPCC Intergovernmental Panel on Climate Change MDGs Millennium Development Goals MENA Middle East and North Africa MVP Millennium Village Project N2O nitrous oxide NGO nongovernmental organization NRR net reproduction rate PAI Population Action International ppm parts per million PPP purchasing power parity PPPs public private partnerships R & D research and development RD & D research, development, and demonstration TFR total fertility rate UN United Nations UNCCD United Nations Convention to Combat Desertification UNDP United Nations Development Program UNEP United Nations Environment Program UNFCCC United Nations Framework Convention on Climate Change UNFPA United Nations Population Fund (formerly UN Fund for Population Activities) UNICEF United Nations Children’s Fund USAID United States Agency for International Development WHO World Health Organization WTO World Trade Organization Notes CHAPTER 1: COMMON CHALLENGES, COMMON WEALTH 4 social insurance and transfer schemes: Peter Lindert, Growing Public: Social Spending and Economic Growth since the Eighteenth Century, vol. 1 (New York: Cambridge University Press, 2004). 10 “For peace is a process”: John F.


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

activist fund / activist shareholder / activist investor, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Black-Scholes formula, book value, Brownian motion, business cycle, buy and hold, buy low sell high, buy the rumour, sell the news, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, currency risk, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, financial engineering, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, global macro, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, junk bonds, late capitalism, law of one price, Long Term Capital Management, low interest rates, managed futures, margin call, market clearing, market design, market friction, Market Wizards by Jack D. Schwager, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, Phillips curve, price discovery process, price stability, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Thaler, risk free rate, risk-adjusted returns, risk/return, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, short squeeze, SoftBank, sovereign wealth fund, statistical arbitrage, statistical model, stocks for the long run, stocks for the long term, survivorship bias, systematic trading, tail risk, technology bubble, time dilation, time value of money, total factor productivity, transaction costs, two and twenty, value at risk, Vanguard fund, yield curve, zero-coupon bond

Empirically, exchange rate changes over time are hard to predict, and therefore the foreign interest rate gives a simple measure of the expected short-run return of the currency.10 This idea forms the basis of the currency carry trade, as discussed further below. To get an idea of the long-run return of a currency, note that purchasing power parity (PPP) holds approximately in the long run. That is, while the real price of a car is not exactly the same in different countries, the prices tend to converge in the long run. This happens more quickly for items that are easy to ship, like an iPhone, and more slowly for goods that are hard to ship.

One simple measure is the price-to-book ratio for the overall market (or other valuation ratios). Hence, one macro value trade is to buy “cheap” equity indices in countries with low price-to-book ratios while shorting equity indices with high ones. • Currency value trade: For currencies, one measure of value can be derived using purchasing power parity (PPP). PPP says that goods should cost the same in all countries. Hence, if a burger (or a diversified basket of goods) costs more in euros than in US$, then the euro should fall in value going forward, resulting in a short-euro value bet.4 A simpler way to trade on currency value is to trade on long-term reversal, betting that currencies that have experienced large real appreciation (over five years, say) will eventually see a partial reversal of this move

See also asset allocation portfolio insurance, trends and, 212 portfolio optimization, 56–57; Asness on, 164; Harding on, 229 portfolio rebalance rule, 47–48, 50. See also rebalancing of portfolio portfolio sort, as predictive regression, 51–53 position limits, 55, 60 post–earnings-announcement drift, 41 PPP. See purchasing power parity (PPP) predatory trading, 83–84 predictive regression, 50–53 preferred habitat theory, 249 present value model. See dividend discount model price. See market price price-dividend ratio, 176–78 price manipulation, 108, 123 price surplus, 178, 178n6, 179 price-to-book (P/B) value, 99, 104, 139; for overall market, 197 pricing period, of floating exchange ratio stock deal, 301, 302f prime brokers (PBs), 25f, 26; of cash instruments, 80; hedge fund balance sheet and, 76; margin call from, 79; of OTC derivatives, 80; predatory trading by, 84; profit earned by, 78–79 Prince, Chuck, 201 private equity, 293; illiquidity of investments in, 170.


pages: 462 words: 129,022

People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, antiwork, barriers to entry, basic income, battle of ideas, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Big Tech, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, carried interest, central bank independence, clean water, collective bargaining, company town, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crony capitalism, DeepMind, deglobalization, deindustrialization, disinformation, disintermediation, diversified portfolio, Donald Trump, driverless car, Edward Snowden, Elon Musk, Erik Brynjolfsson, fake news, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, Firefox, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, gig economy, Glass-Steagall Act, global macro, global supply chain, greed is good, green new deal, income inequality, information asymmetry, invisible hand, Isaac Newton, Jean Tirole, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, labor-force participation, late fees, low interest rates, low skilled workers, Mark Zuckerberg, market fundamentalism, mass incarceration, meta-analysis, minimum wage unemployment, moral hazard, new economy, New Urbanism, obamacare, opioid epidemic / opioid crisis, patent troll, Paul Samuelson, pension reform, Peter Thiel, postindustrial economy, price discrimination, principal–agent problem, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Robert Bork, Robert Gordon, Robert Mercer, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, search costs, secular stagnation, self-driving car, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, South China Sea, sovereign wealth fund, speech recognition, Steve Bannon, Steve Jobs, surveillance capitalism, TED Talk, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, two-sided market, universal basic income, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, War on Poverty, working-age population, Yochai Benkler

For all these sources, the most recent versions and the most recent data points available when the book went to press were used. 6.Source: United Nations, for the latest year available, 2017. Based on IMF and World Bank data, the United States ranks 7th in per capita income. These compare incomes using market exchange rates. Using purchasing power parity, the US ranking, according to the IMF and World Bank, slips to 11th. 7.World Bank Human Capital Index, available at https://www.worldbank.org/en/data/interactive/2018/10/18/human-capital-index-and-components-2018. 8.Source: PISA (Program for International Student Assessment) tests for the year 2015, the latest year available.

“Hours Worked,” OECD, 2017 or latest available, available at https://data.oecd.org/emp/hours-worked.htm. 11.US total growth in productivity over the period was 2.3 percent, while the average for the OECD was 4.9 percent. Source: OECD, available at https://data.oecd.org/lprdty/gdp-per-hour-worked.htm#indicator-chart. 12.In terms of purchasing power parity (PPP). This measure takes into account that different goods cost different amounts in different countries. China’s GDP overtook that of the US in 2015. Comparisons are also often done on the basis of current exchange rates, which can fluctuate a great deal. In these terms, China’s GDP is still below that of the US.

., 56 perfect price discrimination, 318n17 Petersen, Matthew Spencer, 17 Pew Mobility Project, 45 pharmaceutical companies, See Big Pharma Phishing for Phools: The Economics of Manipulation and Deception (Akerlof and Shiller), 63–64 Piketty, Thomas, 278n38 place-based policies, 187–88 Pledge of Allegiance, 202 polarization, of job market, 119 political action committees (PACs), 169, 171, 172 political manipulation, 128 political opinion, 75 political parties, public disenchantment with, 174 political power, market power and, 77 politics failures of, 5–7 to manage economic consequences of innovation, 121 power of financial sector in, 116 reforming rules of, xxvi pollution, 143; See also environment population growth, 9, 11 populism, 26 postindustrial world, facilitating transition to, 186–88 poverty education and, 200 and inequality of opportunity, 44–45 intergenerational transmission of, 200 life expectancy and, 41 power abuses of, See abuses of power competition vs., 22, 23 market, See market power PPP (purchasing power parity), 272n12 predatory behavior, 145 predatory pricing, 69 pre-distribution, xxv, 198 preemptive mergers, 60–61, 70, 73 price discrimination, 57, 64, 125 pricing power, 48, 50 principal agent problem, 291n58 prisons, See incarceration privacy, 127–30, 135 private equity, 258n6 private prisons, 323n8 private sector, government’s efficiency compared to, 142 productivity human/physical capital investment and, 36–37 improving, 182–83 knowledge and, xxiv, 183–86 restoring, 181–86 in US vs. other advanced countries, 36–37 wages no longer correlated with, 38 wealth of nations and, 9 working hours and, 191 profits from bank fees, 110 in China, 95 competition as threat to, 48 explaining increase in, 54–62 fractional reserve banking and, 111 globalization and, 80 from mergers, 107–8 as source of rent wealth, 54 progressive agenda and party reform/rebuilding, 175–76 in Preamble to the Constitution, 242 to promote general welfare, 242–47 Progressive Era, 12 progressive movements, 175–76 progressive taxation, 198 property rights, trade agreements and, 83, 84 protectionism, 35, 79, 89–92, 94, 240 Protestant Reformation, 10 public education, 200–201 public good(s) data as, 131 markets’ failure to provide, xxiii, 140–41 media as, 11, 133 nongovernmental organizations and, 148–49 research and, 184 public institutions, fragility of, 230–36 Public Interest Doctrine, 352n21 public option(s), 210–11, 220 and Affordable Care Act, 213 for mortgages, 216–18 for retirement savings, 215–16 public–private partnerships, 142 public sector, 115–16; See also government public transit, returns on, 195 public utility, reclassifying Facebook as, 134 purchasing power parity (PPP), 272n12 Putin, Vladimir, 235 Qualcomm, 59 quality of life; See also standards of living access to health care, 212–13 education, 219–20 ensuring decent life for all, 209–21 home ownership, 216–18 secure retirement, 214–16 racial discrimination, 40, 125, 180–81, 201–4; See also discrimination racial inequality, 40 racial justice, economic justice and, 176, 203–4 racism, 203, 241; See also discrimination; racial discrimination rate of return on capital, 53 Reagan, Ronald, and administration economic dogma, 112 financial liberalization, xiii and growth of inequality, 45 laws enabling greater market power, 78 redirection of values, 28 tax cuts, 25 Trump’s parallels with, xvi Reaganomics, xiv–xv, 26–27; See also supply-side economics real estate interests, 168–69 real estate taxes, 206 reason, 11, 228–29 Reconstruction, 241 redistribution, xxv, 122, 156, 198 regressive taxation, 267–68n41 regulation checks and balances on, 232–33 of data, 128–31 failure to keep pace with changing economy, 146–47 2008 financial crisis and, 101–2 financial sector, 115 freedom and, 144 government and, 143–48 importance of, 150 innovation and, 134 process of, 145–46 restoration of, 146–48 of social media, 134–35 of tech giants, 124–25 trade agreements and, 83, 84 regulatory harmonization, 88 regulatory takings, 301n8 relationship banking, 110 religion, 10, 145 religious Right, 223 Renaissance, the, 8 rents and appropriation of wealth by the 1 percent, 244 capitalized, 282n17 failure to share with workers, 282n19 and national income pie, 51–52, 54 profits as source of, 54 taxation of, 206 rent-seeking, xxiv, 52, 113, 169, 229, 244 representative democracy, 6 Republican Party and Affordable Care Act, 213 anti-science stance, 20 and Citizens United, 170 composition of, 175 and corporate tax rates, 85 fiscal stimulus during Great Recession, 121 and gerrymandering, 6, 159 indifference to those left behind by globalization/technology, 186 and lack of consequences for elites in Great Recession, 152 and money in politics, 168 power-seeking objectives, 160 and Supreme Court’s loss of status as fair arbiter, 165–67 and 2017 tax bill, 237 Trump vs.


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

"World Economic Forum" Davos, affirmative action, agricultural Revolution, airport security, Alan Greenspan, anti-communist, Asian financial crisis, battle of ideas, Bear Stearns, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, Great Leap Forward, illegal immigration, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, low interest rates, Mahatma Gandhi, Martin Wolf, mutually assured destruction, National Debt Clock, new economy, no-fly zone, oil shock, open economy, out of africa, Parag Khanna, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, Suez crisis 1956, The future is already here, The Great Moderation, Thomas L Friedman, Thomas Malthus, three-masted sailing ship, trade route, Washington Consensus, working-age population, young professional, zero-sum game

As a result, between 1990 and 2010, the global economy grew from $22.1 trillion to $62 trillion, and global trade increased 267 percent. The so-called emerging markets have accounted for over half of this global growth, and they now account for over 47 percent of the world economy measured at purchasing power parity (or over 33 percent at market exchange rates). Increasingly, the growth of newcomers is being powered by their own markets, not simply by exports to the West—which means that this is not an ephemeral phenomenon. Nor is it one that is easily derailed. The financial panics, recessions, and debt crises that have left much of the industrialized world dazed for the last three years were unable to halt, or even significantly slow, the ongoing expansion elsewhere.

“Tip,” 179, 284 Opium Wars, 81 Organization of American States (OAS), 268 Organization of Petroleum Exporting Countries (OPEC), 30 Orissa, 155 Ottoman Empire, 67, 68, 73, 75, 82, 84, 85, 117–18 outsourcing, 27–28, 50, 148, 203 “Pacific Century,” 245 Pakistan, 12, 13, 14, 145, 159, 165, 166, 172, 176, 241, 260, 263, 264, 271 Palestinians, 6, 246 Pampers diapers, 105 Parsley crisis (2002), 239–41 Patriots Alliance, 135 Patten, Christopher, 248–49 “peaceful rise,” 119–20, 127–36 peasants, 65–66, 100, 106, 112 Pei, Minxin, 106, 110 pensions, 212 Perejil Island, 239–41 Perry, William, 265 Pershing missiles, 251 Persian Gulf, 32 Peru, 26 Peter I, Emperor of Russia, 83–84 petrochemicals, 32 Pew Global Attitudes Survey, 59, 122, 166, 226 Philippines, 11, 28, 133 Philosophical Dictionary (Voltaire), 123 Pilhofer, Aron, 220 Pines, Burton, 235 Pinker, Steven, 9 Pitt, William, 82 Pizarro, Francisco, 80 platinum, 131 Plaza Accord meetings, 282 plutonium, 176 polar ice caps, 33 political parties, 59, 154, 156–62, 178, 179–80, 235, 255, 276–77, 278, 279, 283 “political risk,” 19 Poos, Jacques, 245 population growth, 22, 31, 32–33, 50–51, 66, 80, 100, 112, 144, 145, 148, 178–83, 191, 213–16, 236–37 Portugal, 69, 79, 80, 116, 151 “positive supply shocks,” 20 post-American world: anti-Americanism and, 13, 35, 39, 42, 60, 166, 241, 245, 251–55, 274, 283 asymmetry in, 142–44, 269–72 cultural change in, 1–5, 16, 39, 41, 62–99, 126–27 economic conditions in, 6–61, 93, 94, 97, 197–99, 241–43, 255 future trends for, 1–5, 94–99, 199–203, 204, 239–85 legitimacy in, 243–50, 273–75 multilateralism in, 246–55, 267–69 nationalism in, 34–42, 101, 134–35, 143, 145, 158–59, 180–83, 192, 274 power shift in, 20, 22–23, 29, 34–42, 47–49, 51–54, 93–94, 99, 127–28, 137–44, 241–42, 259, 266–67 “rise of the rest” in, xii, 1–5, 47, 55–56, 65, 96–97, 99, 101, 199, 219–22, 242, 257–59, 263, 267–69, 285 strategic approach to, 142–44, 255–75 unipolar vs. multipolar order of, 1–5, 39, 52–53, 233, 241–42, 243–50, 264–65, 266–69, 274–75 U.S. global role in, xii, 4, 48–61, 117, 120, 142–44, 182–83, 223–26, 235–85 see also globalization postindustrial economies, 151, 200, 204 poverty, 3, 22, 65–66, 100, 102, 106, 111, 113–14, 117, 121, 146, 149, 150, 155–58, 169, 177 Powell, Colin, 240 Pratt School of Engineering, 205 Premji, Azim, 155 price levels, 21, 30, 67, 70, 128 private property, 73, 150 private sector, 148–53, 160–61 privatization, 107, 110, 150–51, 152, 153, 222 Procter & Gamble, 105, 151 product development, 202–3 productivity, 21, 30, 33, 50, 71–72, 160, 200, 212, 281, 282, 283 profit, 72, 80, 128, 200, 203 Protestantism, 81, 97–98, 125, 262 Prussia, 191 Pudong financial district, 102–3 Punjab, 180 purchasing power parity (PPP), 18n, 21, 66n, 113n, 148n, 198n qi (energy), 126 Qienlong, Emperor of China, 69 Qing dynasty, 63–64, 81 quotas, 109 Raffles, Stamford, 185 Rajasthan, 180 Ramo, Joshua Cooper, 142–43 Ranbaxy, 153 Ratner, Ely, 38 Rattner, Steven, 230 Reagan, Ronald, 168, 251, 284 real estate, 43, 85, 152, 217, 218, 225 recessions, 25, 227, 232 regional governments, 145, 161, 178–83 regional powers, 257–63 Reisen, Helmut, 281 Reliance Industries, 149, 153 religion, 15–16, 74, 76, 80, 81, 87, 98, 122–25, 127, 169, 171, 172, 213, 262, 278 Renaissance, 68 Report of Phihihu (Frederick II), 124 Republican Party, 59, 235, 276–77, 278, 280–81 reserve currency, 267 “responsible stakeholders,” 257 retail sector, 203 Revolutionary War, U.S., 194 Rhine River, 77 Ricci, Matteo, 124–25 Rice, Condoleezza, 252–53 Richie, Donald, 92 Rig Veda, 171 Rise of the Great Nations, The, 120 Rivoli, Pietra, 203 Roach, Steven, 282 Roberts, J.

Although tradable items like iPhones or Nikes cost roughly the same from one country to the next, goods that can’t flow across borders—such as haircuts in Beijing—cost less in developing economies. So the same income goes much further in India than in Britain. To account for this, many economists use a measure of GDP called purchasing power parity (PPP), which substantially inflates the incomes of developing countries. Proponents say this better reflects quality of life. Still, when it comes to the stuff of raw national power, measuring GDP at market exchange rates makes more sense. You can’t buy an aircraft carrier, fund a UN peacekeeping mission, announce corporate earnings, or give foreign aid with dollars measured in PPP.


pages: 268 words: 89,761

Unhealthy societies: the afflictions of inequality by Richard G. Wilkinson

attribution theory, business cycle, clean water, correlation coefficient, experimental subject, full employment, fundamental attribution error, Gini coefficient, income inequality, income per capita, Indoor air pollution, invisible hand, land reform, longitudinal study, means of production, purchasing power parity, rising living standards, twin studies, upwardly mobile

Figure 3.2 shows the relationship between percentage changes in GNPpc and changes in life expectancy over the twenty years 1970–90 among the rich market countries belonging to the Organisation for Economic Cooperation and Development (OECD). Among these countries it is possible to compare GNPpc at purchasing power parities rather than according to the vagaries of changing exchange rates between currencies. This means that pounds, francs, yen, etc. are converted into dollars according to the comparative cost of the same basket of goods in each country. In other words, the changes in GNPpc shown in figure 3.2 are more accurate reflections of changes in real purchasing power in each country.

As the points in figure 5.2 are whole countries, there is no possibility that the lack of a clear gradient has something to do with problems of sampling error or random variation. Nor could it be that the international data are more influenced by national differences in culture than by differences in the standard of living. The GNP figures used are converted at purchasing power parities rather than at the rather arbitrary currency exchange rates. This Income distribution and health 75 means that they give a more accurate reflection at least of comparative differences in purchasing power. If a much stronger relationship was merely hidden by cultural differences between countries, then that should have been revealed by the correlations of changes over time between 1970 and 1990 (see figure 3.2, p. 37) unless cultures changed radically in different directions during the period.

Although Japanese diets are healthier than many Western diets, they did not change during this period in ways that might explain the health improvement. Although Japanese economic growth has of course been rapid, not only have we seen that increases in GNPpc are not so important in the developed world but, on the basis of purchasing power parities used to compare living standards more accurately, Japanese GNPpc was only 15 per cent higher than the British in 1990—still considerably less than the United States and a number of Western European countries. It is not just since 1970 that the Japanese experience has testified to the health importance of narrowing income distribution.


pages: 287 words: 44,739

Guide to business modelling by John Tennent, Graham Friend, Economist Group

book value, business cycle, correlation coefficient, discounted cash flows, double entry bookkeeping, G4S, Herman Kahn, intangible asset, iterative process, low interest rates, price elasticity of demand, purchasing power parity, RAND corporation, risk free rate, shareholder value, the market place, time value of money

The initial assumption acts as the seed. Behaviour As with all the variables in this chapter there is no consensus among economists about the determinants of exchange-rate movements. Furthermore, many economies and groups of economies actively manage their exchange rates. A simple theory of exchange rates is purchasing power parity (ppp), which argues that exchange rates move to ensure that the relative purchasing power of one currency against another remains constant. Exchange rates, therefore, are assumed to move in response to differential movements in inflation rates between the respective economies. If one country is experiencing more rapid inflation than another country, the cost of a basket of goods in the country with the higher rate of inflation will increase faster than the cost of the same goods in the other country.

140–41 capital gains tax 258 cars 131 cash 198, 202 deficits 157 surpluses 154, 157 cash breakeven point 146 cash flow 13, 33, 60, 130, 130, 136, 141, 172, 189 adjusting 153 anticipated 151 cumulative project cash flow 152 and equity value 186 forecasts 70 free (FCF) 163, 173, 173, 180 net 146 operational 147, 152 projected 257 short time intervals 180 sign convention 176 statements 156, 157, 159, 161, 169 tax and 127, 174 timing 164, 176–7, 177 cash flow cycle 140, 140, 141, 141, 202, 202 causative techniques 85 cell comments 251–2 chart wizard button 53 check boxes 223–4 circular references 159, 211 COC see cost of capital coefficients 97, 100, 103 collinearity 105 colour scheme 67 column consistency 210 column widths 69 company acquisitions 146 company law 70 company valuation model 190–92 competition 4, 15, 257 compounding 182 computers crash 36, 39 purchase 131 CONCATENATE function 44–5, 50, 263–4 conceptual errors 206 conditional formatting 52–3 Consolidate box 37–8, 38 consumers credit 78 expenditure 14 spending patterns 88 consumption proportion 131 INDEX control toolbox 222 convertibles 149, 155 corporate decision-making 13 corporate planning pyramid 12–13, 12 corporation tax 163, 164, 167, 172, 174, 258 cost of capital (COC) 204, 205 costs 147, 172, 173, 257 capital 60, 117 drivers of 123–7 fixed 122–3, 122, 123 inflexible 125, 125 operating see operating costs COUNT IF function 47, 48, 48, 264 covenants 156 CPM see Critical Path Method credit agencies 151 credit controllers 123, 123 creditor days 145, 202 creditors 145, 145, 147 critical factors 15, 16, 17, 23, 29 Critical Path Method (CPM) 11 currency 14, 46, 46, 80, 168 current liabilities 147 customer segmentation 112–13, 113, 114 cyclical component 89 D data assumptions 6, 7 collection 6, 7, 8, 22–3, 24 labels 38, 54 scenarios 61 warehousing 8 data collection manager 9 data screens 240, 240, 241 DATA VALIDATION function 53 DCF analysis see discounted cash flow analysis de minimus rule 128 debentures 148 debt 147, 150, 151, 155, 157, 204 bad 160–63 doubtful 160–61 funders 155 funding 152 instruments 157, 157 net 155 debt to equity ratios 155–6, 156, 190 debtor days 142, 162, 202 debtors 142–3, 147, 160, 161 debugging see testing and debugging decision-making analysis 1 273 INDEX choice 2 corporate 13 implementation 2 defining the outputs 12–18 alignment with the business’s overall objectives 12–13 business model output checklist 18 creating an output template 16, 17 defining the outputs required to answer the question 13–14 establish the basics 14 model outputs and corporate decisionmaking 13 real versus nominal forecasts 14 specify the time frame and period length 13–14 identifying the critical factors that determine the outputs 15 running a workshop 17–18 demand 75, 107, 108 demand curve 87 downward-sloping 86, 87 demographic shifts 18 dependencies 258 dependency ranking 242–4 depreciation 33, 34, 46, 118, 128, 129, 187, 203 other depreciation methods 131 reducing balance 130, 130, 137, 137 straight line 129–30, 130, 132, 136, 136 development log 35, 38 dialog boxes 252 discount factor 191 discount rates 45, 180, 183 discounted cash flow analysis 172, 181, 185, 188 company valuation example 190–92 EBITDA exit multiples 189 growth rate models 188–9 terminal values 188 valuation range 190 discounted cash flow theory 179–82 discounted cash flows 34, 182–3 discounting 182 distribution 117, 133–4 divide by zero 51 dividend cover 204 dividends 147, 180 documenting the model documentation outside the model contents of a typical user’s guide 255 continuing user support 255 fit for the purpose 253 good document form design 253–4, 254 structure 254 training material 255 user’s documentation 254 documentation within the model 251–3 cell comments 251–2 dialog boxes 252 macro comments 252–3, 253 specific help software 252 text boxes 252 need for documentation 250 when to document 250 where to document 250–51 Du Pont 11, 199 dynamic effects 59 dynamic links the CONCATENATE function 44 multiple models 36–7 E earnings per share 204 EBITDA (earnings before interest, tax, depreciation and amortisation), multiples 187–8, 189, 190, 192, 203, 257 economic added value (EVA) 204 economy of scale 119, 120, 120, 175, 176, 200 Edit Links box 37, 37 endogenous variables 22 enterprise value (EV) 186, 188 environmental risk 249 equity 147, 150, 151, 155, 157, 204 equity value 186 Excel Scenario Manager 248 exchange rates 15, 53, 70, 150, 167, 168, 258 behaviour 80–81 definition and uses 80 modelling approach 81–3 seed 80 exit options 257 exit screens 239–40 exogenous variables 22 EXP function 264 extrapolation techniques 85 eyeball lines 55 F FIFO (first in first out) basis 139 file folder structure 36, 36 file-naming convention 35 finance calculations 34 financial performance 18 FIND 210–11 firm value 186 fixed asset turnover 201 274 fixed assets see under capital expenditure and working capital fixed costs see under operating costs fonts 67 for and next loops 234–6 FORECAST function 95, 95, 96 forecasting, revenue see revenue forecasting forecasts 13 nominal 14 real 14 foreign exchange calculations 167–70 generic approach to modelling foreign exchange gains and losses 168 modelling foreign exchange gains and losses on overseas financing 169–70, 170, 171 modelling foreign exchange gains and losses on overseas revenue and costs 169 principles of foreign exchange accounting 167–8 format painter 50–51 formatting 67–9 colours 67 column widths 69 fonts 67 lines 67, 68 macros 218–19 number styles 68 Forms toolbar 221–5 formula bar 41, 41 formulae, deconstructing complex 208–9, 209 free cash flow (FCF) 163, 173, 173, 180, 186, 191, 205 free-form development 32 FREEZE PANES command 229–30, 230 funding see modelling funding issues G Gantt chart 10, 11 GDP see gross domestic product gearing 155, 156, 190, 245 GO TO function 53 GOAL SEEK function 242–4 goal statement 18 Gordon Growth Model 189, 190, 192 graphs 53–8, 60, 261–2, 262 eyeball lines 55 fixed cost 122, 122 improving the appearance of 54 market value 129, 129 one graph suits all 55–8, 56 triangulation 126 variable costs 119, 119 INDEX gridlines 54 gross additions/connections 88, 93, 97, 97, 98, 98, 104 gross domestic product (GDP) 15, 76, 84, 189 behaviour 71–2 definition and uses 70–71 modelling approach 72–4 seed 71 group sheet function 39 growth 205, 258 GROWTH function 106 growth rate 45, 71, 72, 74, 74, 75 H hard coding 38, 60 hedging techniques 150 HELP function 51 hiding information 69 hyperlinks 226–7, 227 I IF function 45–6, 47, 51, 65, 73, 74, 77, 120, 145, 211, 223, 264 implementation 2, 6, 7, 9 income distribution 15 levels 15 INDEX function 46, 101, 103, 103, 104, 108, 264–5 inflation 14, 15, 53, 70, 75, 132, 258 inflation rate behaviour 75–6 definition and uses 75 modelling approach 76–7 seed 75 inflexible costs see under operating costs information, hiding 69 input sheets 59–65, 60, 61, 72, 72 input timelines 29, 29, 30, 31 inputs additional 29 alternative 22 analysis 23, 24 extreme 213 inflation 76, 76 seed 19 strategic 30 uncertainty/impact 23–4, 23, 25 validation 66 variables 6, 7 interest 147, 156, 180 interest calculations 157 interest costs 131 INDEX interest income and charges alternative approaches to modelling interest income 159–60, 159, 160 interest rate assumptions 158 issues in modelling interest income and charges 158 modelling interest income and circular references 158–9 interest rates 14, 15, 53 assumptions 158 base see base interest rates interface sheets 36 internal rate of return (IRR) 13, 172, 183–5, 183, 184, 245, 257 more than one 184–5, 185 investment commencement of 258 investment funding 203 net 157 overseas 150–51 reinvestment ratio 203 investment control 149 investor measures dividend cover 204 earnings per share 204 IRR see internal rate of return IRR function 265 ISDATE function 240 ISERROR function 46, 51, 211, 213, 265 ISSER function 265 J J curve 146, 146, 152, 154 joint ownership 149 judgmental techniques 85 L land residual value 132 leases 149 operating (rents) 147 LEN function 265 lending rates 152 leverage 155 lines, in formatting 67–8, 68 LINEST function 100–101, 101, 102, 103, 104, 108, 266 list box 224, 225 LN function 266 loans 149, 152, 156 losses 163, 165, 168 M macroeconomic factors 15, 70–84 275 base interest rates 78–80 exchange rates 80–83 gross domestic product 70–75 inflation rate 75–7 other macroeconomic variables 84 population 83–4 macroeconomic forecasts 8 macroeconomics 70 macros 216–21 calculation 233, 233 comments 252–3, 253 editing the macro code 218 macros for repeated tasks 218–21 creating a personalised toolbar 221 formatting macros 218–19 personal macros 218 protecting the model 219–21 Monte Carlo 245, 246 multiplication tables 234–6, 234, 235 print macro 231, 231 recording simple 216 running the macro 218 viewing macro code 216–17, 217 manual code review 208 market growth 15 market liberalisation 18 market size 15 market value 129, 129, 130, 132 mathematical operations 209–10 MAX function 45, 125, 135, 179, 196, 266 mean square error (MSE) 99 media 19 microeconomic variables 15 microeconomics 70 Microsoft Excel 2, 4, 37, 40, 50, 51, 53, 90, 106, 180, 183, 210, 216, 218, 227, 234, 235, 236, 237, 239 milestones 10, 258 MIN function 45, 139, 154, 196, 266–7 mission statement 18 mobile telecommunications industry bottom-down/top-up forecasting 88 critical factors 15, 16 decomposition of revenue 86 penetration 105, 106, 107, 109, 111, 111 product cycle life 106, 107 regression analysis 97, 106 segmentation 112 third-generation mobile data services 88 total revenue 115, 116 MOD function 50, 125, 134 model developer 9 model development process management 32–9 276 best practice in model development avoiding some common pitfalls 39 the basics of quality control 35–8 the model development process create workings pages for all main sections and develop calculations 33 develop the user interfaces and conduct user testing 34 set up output and input templates 33 test and debug 33 transfer results to output pages 33 a model development project plan 34 establishing a modelling charter 34 using material from the modeller’s library 34 populate input templates with base or test data 33 styles of development 32 free-form development 32 model layout 59–60, 59 model outputs 13, 17, 259–62 model ownership 35 modeller’s toolbox 40–58 naming sheets 40 range names 40–44 useful features conditional formatting 52–3 divide by zero 51 format painter 51–2 macros for repeated tasks 218–21 one graph suits all 55–8 shortcut keys 50–51 using graphs 53–5 useful functions AND and OR 46–7 AVERAGE 50 CONCATENATE 44–5 MIN, MAX or IF statements 45–6 MOD 50 OFFSET 49–50, 49 SUM IF and COUNT IF 47–9, 48 modelling funding issues 146–57 cost of funding 151–2 debt to equity ratios 155–6, 156 funding strips 152–4 identifying the cash flow to be funded 147 operating environment 150–51 project control 149–50 putting the funding cost back in the model 156–7 balance sheet 157 cash flow statement 157 profit and loss account 156–7, 157 INDEX time periods 154–5, 154 types of funding 147–9 weighted average cost of capital 152 modularisation 63 Monte Carlo analysis 245–8 moving average 90, 91, 92 MSE see mean square error multiplicative model 96 multiple models and dynamic links 36–7 multiple regression 85, 87, 101–4, 102, 103, 104, 105 N naming sheets 40 navigation see under spreadsheet applications NCF see net cash flow net book value 130, 138, 139, 140, 140 net cash flow (NCF) 182 net debt 155 net operating profit after tax 204 net present value (NPV) 13, 172, 179, 182, 183, 184, 184, 189, 190, 194, 242, 243, 245, 257 nominal forecasts 14 NPV see net present value NPV function 267 number styles 68–9 numbers for an output 4 negative 4 within a formula 4 O OFFSET function 49–50, 49, 57, 119, 125, 134, 135, 138, 224, 248, 267 operating costs 29, 31, 60, 117–27, 161 completeness of operating costs 117, 117–18 cost behaviour 118 drivers of costs 123–7 inflation 126–7 inflexible costs 125, 125 tax 127 triangulation 126, 126 fixed costs 122–3, 122, 123, 125, 126, 200 variable costs 118–22 operating environment 19, 149, 150–51 operating profit 186 operational risk 248, 249 options 148 OR function 46–7, 267–8 ordinary shares 148 output sheets 33, 60, 63, 63, 64, 248 output template 16, 17, 18 277 INDEX outputs 6, 7, 23, 29 presenting model 259–62 overdrafts 149 overheads, allocated 175 overseas investments 150–51 P P/E ratios 186–7, 188 packaging 117 payback 172, 177–9, 245, 257 payroll cost 126, 203 PBT see profit before tax PED see price elasticity of demand penetration 105, 106, 107–12, 109, 114, 115 total 114 period ends 14 period length 14 PERT (Performance Evaluation and Review Technique) 10–11 PEST analysis 21 plant residual value 131–2 utilisation 258 PLC see product life cycle population 70 behaviour 83 definition and uses 83 growth 15 modelling approach 83–4 seed 83 post-project review 6, 7 PPP see purchasing power parity preference shares 148 prepayments 141, 141, 142 present value 182 price elasticity of demand (PED) 86–7, 87, 115 prices constant 14 fall in 4 print ranges 231 probability models 19 product life cycle (PLC) 106, 107, 107, 189 product prices 53 profit and loss 33, 60, 164, 257 profit and loss account 129, 141, 143, 156–7, 157, 161, 162, 163, 167, 169, 173 profit before tax (PBT) 181 profit flow 172 profit margin 199–200 profits 14 operating 186 programming techniques with Visual Basic 232–6 project appraisal and company valuation 172–92 conventions for setting out the cash flows 176–7 sign convention 176 timing 176–7, 177 discounted cash flow theory 179–82 calculating the discount rate 180 calculating the WACC 181 dicounted cash flow decision rule 182 discount rate 180 risk premium 179 short time intervals 180 time value of money 179 discounting cash flows in practice 182–3 evaluating companies 185–92 techniques for valuing companies 186–8 using DCF analysis in practice to value companies 188–92 identifying the relevant project cash flows 172–6 the cash effect of change 174–5 dealing with allocated overheads 175 group versus project 176 relevant costs and capital expenditure 174 relevant revenues 174 relevant taxes 174, 174 internal rate of return 183–5, 183, 184 more than one IRR 184–5, 184 payback 177–9 project appraisal and valuation techniques 172 project control 149–50 project manager 8, 9, 10 Project Plan see under business modelling process property space requirement 123, 124, 124 utilisation of 258 protecting the model see under spreadsheet applications purchase, timing of 132 purchase cost 131 purchase tax 127 purchasing power parity (PPP) 80, 81 R R2 value 97, 98, 102 radio (option) buttons 222–3, 223 range names 4, 40–44, 158, 159, 164, 191 accessing the named inputs and rows 44 common range names 43–4 defining several individual names 42, 42 278 naming one cell 41 naming one cell where the cell name is displayed to the left of reference value 41, 41 naming several values at once 42–3, 42 naming whole rows 43 range test the model 212–13 RANK function 268 ratios 60 the Du Pont pyramid of ratios 199–203 balance sheet management 201–2 further analysis 202–3 percentage of sales measures 201 profit margin and asset turnover 199–201 external analysis 194 internal analysis 194–5 internal ratio analysis 195 interpreting 196–7 average 196 high and low values 196 rank 196 useful ratios to calculate return on average capital employed (ROACE) 198 return on equity (ROE) 199 return on net assets (RONA) 197–8, 198, 199, 200, 201, 204 real forecasts 14 recalculation 69 reducing balance 130, 130 regression equation 98, 98 regression techniques see under revenue forecasting regulatory environment 70 rents 147 replicating actual results 212 report style 259 research agencies 8, 70 residual (“disturbance”) component 89 residual value 132 retail price index 75 return on average capital employed (ROACE) 198 return on capital employed (ROCE) 242, 243, 245, 257 return on equity (ROE) 199 return on net assets (RONA) 197–8, 198, 199, 200, 201, 204 return on sales (ROS) 257 revenue 14, 30, 53, 60, 64, 117, 147, 172, 173 decomposition 86 derivation of 29 total 86, 115–16, 116 INDEX revenue forecasting 14, 85–116 approaches to bottom-up versus top-down forecasting 87–8 classification of forecasting methodologies 85 decomposition of revenue 86 price elasticity of demand 86–7, 87 time frame 88 long-term forecasting 105–11 fitting a product life cycle curve 107–11 the product life cycle 107, 107 regression techniques 96–105 estimating the coefficients 97–9, 97, 98 forecasting using the TREND function 100, 100 limitations of regression analysis 105 the LINEST function 100–101, 101 multiple regression 101–4, 102, 103, 104, 105 regression analysis 96–7 the TREND function 99, 100 segmentation 112–16 business segment 114–15, 114, 115 consumer segment 112–13, 113, 114 mix effects 116 total revenue 115–16, 116 time series analysis 85, 87, 88–96 additive and multiplicative models 89–90, 90 components of a time series 89 estimating the trend and seasonal factors manually 91–4, 92, 93, 94 estimating the trend using the built-in moving average function 90–91, 91 forecasting using the trend, seasonal factors and the additive model 94–5, 95 limitations of time series analysis 96 the multiplicative model 96 time series data 88, 89 revenue multiples 188 revenue tax 163 ripple effect 51 risk 149, 150, 151, 155 assumption 248, 249 commercial 257 environmental 249 operational 248, 249 premium 179 ROACE see return on average capital employed ROCE see return on capital employed ROE see return on equity RONA see return on net assets INDEX ROS see return on sales ROUND function 154, 268 rounding 65–6, 65, 66, 259 ROUNDOWN function 268 ROUNDUP function 123, 133, 268 row consistency 210 rows versus columns 261, 261 S sales forecast 55 tax 127, 163–4 saving the model regularly 36 scenario development 25–31 scenario planning benefits 20 the development of 20 stage 1: identifying high impact, highly uncertain inputs 20, 21–4 stage 2: identify alternative development paths for key inputs 20, 25–6, 25–6 stage 3: select the three or four most informative scenarios 20, 26–8, 27 stage 4: develop the scenario stories 20, 28–30 stage 5: develop the business strategy 20, 30 scenarios 20 scheduling 258 scroll bars 225, 225 seasonal component 89 seasonal factors 89–90, 90, 91, 93, 94, 94, 96 seed 19, 60, 62, 71, 75, 78, 80, 83 segmentation see under revenue forecasting sensitivity analysis 147, 241–2, 241 shareholder value 193–5, 194, 199 ratio analysis 194–5 short period rate 180 shortcut keys 50–51 sign convention 66, 176 simple modified exponential trend curve 108 SIN function 268–9 SINE curve 71, 76 SMART goals 9 social trends 70 socio-economic shifts 18 specific help software 252 spin buttons 225 splash screens 237–9, 238 spreadsheet applications appearance consistency 229 freezing the screens 229–30, 230 placement of macro buttons 230 279 removing the gridlines 230 simple layout 229 basic programming techniques with Visual Basic 232–6 Forms toolbar 221–5 navigation attaching a macro to a button 228–9, 229 basic navigation 226 creating a menu using Visual Basic 227–8, 227, 228 hyperlinks 226–7, 227 recording simple macros 216 viewing macro code 216–17, 217 printing 231 creating a print macro 231, 231 setting print ranges 231 protecting the model 219–21 spreadsheet functions 263–70 spreadsheets 2, 11 advantages and disadvantages of using 3 and model ownership 35 see also input sheets; output sheets; working sheets start of trade 133, 258 stock 143–4, 144, 202 stock days 143, 144, 202 strategic plan 12, 18, 31 style and outline 59–69 alternative model layout 63–4 formatting 67–9 colours 67 column width 69 fonts 67 lines 67–8, 68 number styles 68–9 making the model intelligible 64 making range names work 64–5, 64 model layout 59–60 recalculation 69 retaining consistent logic by having the same formulae every year 65 rounding to invisible 65–6, 65, 66 sheet layout: inputs 60–61, 60, 61 sheet layout: outputs 63, 63 sheet layout: working 61–2 sign convention 66 some things to avoid, recalculation 69 things to avoid, hiding information 69 sum of the digits 131 SUM function 269 SUM IF function 47–8, 48, 269 supply chain 176 280 SWOT (strengths, weaknesses, opportunities and threats) analysis 257 synergy 176 T tables of data 259–61, 260 tactical plans 18 tasks 10 tax shield on financing 181 taxation 33, 34, 127, 173, 258 the challenges of modelling taxation 163 forms of taxation 163–4, 163 generic approach to corporation taxation workings 164–5, 165, 166–7 technical errors 206 technical obsolescence 131 technological change 70 templates 11, 13, 16, 17, 33 terminal value 14, 189, 258 testing and debugging 33, 34, 206–15 the importance of 206 testing strategy 207–15 step 1: eliminate technical and conceptual flaws 208–12, 214 step 2: range test the model 212–13, 215 step 3: stress test the model 213, 215 step 4: user testing 214, 215 types of errors conceptual errors 206 technical errors 206 user errors 206 text boxes 252 third-party forecasts 70 tick box 43, 43 time frame 13–14, 88 time periods 154–5, 154 time series analysis see under revenue forecasting time value of money 179 top-down forecasting 87–8 total revenue 86, 115–16, 116 trace error button 51 transport trends 15 trend curves, exponential, Gompertz and Logistic 108 TREND function 99, 100, 101, 105, 269 trend see under revenue forecasting trendline 55 regression 98 triangulation 126, 126 U uncertainty, scenario planning and model inputs 19–24 INDEX business model input checklist 24 defining the inputs 19 examining different approaches to uncertainty 19 scenario-based forecasting approach 20 stages of a scenario-based forecasting approach 20, 20 stage 1: identifying high impact, highly uncertain inputs 21–4 analyse variables according to uncertainty and impact 23–4, 23 identify all the variables that influence the business 21–2, 21 identifying the relationships between variables 22 review the data collection requirements 22–3 understanding the nature of uncertainty 19 uncertainty/impact matrix 23–4, 23, 24, 25, 29 units 14 upper asymptote 107, 108, 108 urbanisation 15 useful economic life 131 users documentation 254 errors 206 interfaces 34 support, continuing 255 testing 214 using the model 241–9 dependency ranking 242–4 displaying the assumption dataset on the output sheet 248 Excel Scenario Manager 248 GOAL SEEK 242–4 Monte Carlo analysis 245–8 risk and its management 248–9 sensitivity analysis 241–2 V valuation 60 see also project appraisal and company valuation valuation approaches see project appraisal and company valuation valuation range 190 value-added tax 127 variable costs see under operating costs variables 21–2, 21 dependent 96 endogenous 22 exogenous 22 281 INDEX independent (explanatory) 96–7, 100 uncertainty/impact 23–4, 23 variance analyses 13 version control 35 versions of the model, retaining 35–6 vertical analysis 201 vision statement 18 Visual Basic 216, 232–6 Visual Basic Editor 216–17, 217, 218, 240 VLOOKUP function 121, 122, 269–70 W WACC see weighted average cost of capital warrants 148 warranty 118 weighted average cost of capital (WACC) 152, 167, 180, 181, 190 wind-farm operators critical factors for 15, 16 develop the scenario stories 28–30, 29 Gantt chart 10, 11 impact/uncertainty matrix 23–4, 23 input timelines 29, 29 output template 17 potential input development paths 25–6, 25–6 revenue model 29–30 strategic inputs 30 variables influencing 21, 22 withholding tax 258 working capital see under capital expenditure and working capital working capital turnover 201–2 working sheets 60–5 workshops 17–18 writing and presenting the business plan key issues to address in a business plan 256 presenting the model outputs 259–62 graphs 261, 262 rounding 259 rows versus columns 261 tables of data 259–60 report style 259 typical content of a business plan document assumptions 257–8 commercial risk 257 economic 258 executive summary 257 financial 257 manning 258 market 257 milestones 258 safety, health and environment 258 sensitivity 258 strategic importance 257 taxes 258 technical 258 Z zero, set all inputs to 211 zero book value 136

140–41 capital gains tax 258 cars 131 cash 198, 202 deficits 157 surpluses 154, 157 cash breakeven point 146 cash flow 13, 33, 60, 130, 130, 136, 141, 172, 189 adjusting 153 anticipated 151 cumulative project cash flow 152 and equity value 186 forecasts 70 free (FCF) 163, 173, 173, 180 net 146 operational 147, 152 projected 257 short time intervals 180 sign convention 176 statements 156, 157, 159, 161, 169 tax and 127, 174 timing 164, 176–7, 177 cash flow cycle 140, 140, 141, 141, 202, 202 causative techniques 85 cell comments 251–2 chart wizard button 53 check boxes 223–4 circular references 159, 211 COC see cost of capital coefficients 97, 100, 103 collinearity 105 colour scheme 67 column consistency 210 column widths 69 company acquisitions 146 company law 70 company valuation model 190–92 competition 4, 15, 257 compounding 182 computers crash 36, 39 purchase 131 CONCATENATE function 44–5, 50, 263–4 conceptual errors 206 conditional formatting 52–3 Consolidate box 37–8, 38 consumers credit 78 expenditure 14 spending patterns 88 consumption proportion 131 INDEX control toolbox 222 convertibles 149, 155 corporate decision-making 13 corporate planning pyramid 12–13, 12 corporation tax 163, 164, 167, 172, 174, 258 cost of capital (COC) 204, 205 costs 147, 172, 173, 257 capital 60, 117 drivers of 123–7 fixed 122–3, 122, 123 inflexible 125, 125 operating see operating costs COUNT IF function 47, 48, 48, 264 covenants 156 CPM see Critical Path Method credit agencies 151 credit controllers 123, 123 creditor days 145, 202 creditors 145, 145, 147 critical factors 15, 16, 17, 23, 29 Critical Path Method (CPM) 11 currency 14, 46, 46, 80, 168 current liabilities 147 customer segmentation 112–13, 113, 114 cyclical component 89 D data assumptions 6, 7 collection 6, 7, 8, 22–3, 24 labels 38, 54 scenarios 61 warehousing 8 data collection manager 9 data screens 240, 240, 241 DATA VALIDATION function 53 DCF analysis see discounted cash flow analysis de minimus rule 128 debentures 148 debt 147, 150, 151, 155, 157, 204 bad 160–63 doubtful 160–61 funders 155 funding 152 instruments 157, 157 net 155 debt to equity ratios 155–6, 156, 190 debtor days 142, 162, 202 debtors 142–3, 147, 160, 161 debugging see testing and debugging decision-making analysis 1 273 INDEX choice 2 corporate 13 implementation 2 defining the outputs 12–18 alignment with the business’s overall objectives 12–13 business model output checklist 18 creating an output template 16, 17 defining the outputs required to answer the question 13–14 establish the basics 14 model outputs and corporate decisionmaking 13 real versus nominal forecasts 14 specify the time frame and period length 13–14 identifying the critical factors that determine the outputs 15 running a workshop 17–18 demand 75, 107, 108 demand curve 87 downward-sloping 86, 87 demographic shifts 18 dependencies 258 dependency ranking 242–4 depreciation 33, 34, 46, 118, 128, 129, 187, 203 other depreciation methods 131 reducing balance 130, 130, 137, 137 straight line 129–30, 130, 132, 136, 136 development log 35, 38 dialog boxes 252 discount factor 191 discount rates 45, 180, 183 discounted cash flow analysis 172, 181, 185, 188 company valuation example 190–92 EBITDA exit multiples 189 growth rate models 188–9 terminal values 188 valuation range 190 discounted cash flow theory 179–82 discounted cash flows 34, 182–3 discounting 182 distribution 117, 133–4 divide by zero 51 dividend cover 204 dividends 147, 180 documenting the model documentation outside the model contents of a typical user’s guide 255 continuing user support 255 fit for the purpose 253 good document form design 253–4, 254 structure 254 training material 255 user’s documentation 254 documentation within the model 251–3 cell comments 251–2 dialog boxes 252 macro comments 252–3, 253 specific help software 252 text boxes 252 need for documentation 250 when to document 250 where to document 250–51 Du Pont 11, 199 dynamic effects 59 dynamic links the CONCATENATE function 44 multiple models 36–7 E earnings per share 204 EBITDA (earnings before interest, tax, depreciation and amortisation), multiples 187–8, 189, 190, 192, 203, 257 economic added value (EVA) 204 economy of scale 119, 120, 120, 175, 176, 200 Edit Links box 37, 37 endogenous variables 22 enterprise value (EV) 186, 188 environmental risk 249 equity 147, 150, 151, 155, 157, 204 equity value 186 Excel Scenario Manager 248 exchange rates 15, 53, 70, 150, 167, 168, 258 behaviour 80–81 definition and uses 80 modelling approach 81–3 seed 80 exit options 257 exit screens 239–40 exogenous variables 22 EXP function 264 extrapolation techniques 85 eyeball lines 55 F FIFO (first in first out) basis 139 file folder structure 36, 36 file-naming convention 35 finance calculations 34 financial performance 18 FIND 210–11 firm value 186 fixed asset turnover 201 274 fixed assets see under capital expenditure and working capital fixed costs see under operating costs fonts 67 for and next loops 234–6 FORECAST function 95, 95, 96 forecasting, revenue see revenue forecasting forecasts 13 nominal 14 real 14 foreign exchange calculations 167–70 generic approach to modelling foreign exchange gains and losses 168 modelling foreign exchange gains and losses on overseas financing 169–70, 170, 171 modelling foreign exchange gains and losses on overseas revenue and costs 169 principles of foreign exchange accounting 167–8 format painter 50–51 formatting 67–9 colours 67 column widths 69 fonts 67 lines 67, 68 macros 218–19 number styles 68 Forms toolbar 221–5 formula bar 41, 41 formulae, deconstructing complex 208–9, 209 free cash flow (FCF) 163, 173, 173, 180, 186, 191, 205 free-form development 32 FREEZE PANES command 229–30, 230 funding see modelling funding issues G Gantt chart 10, 11 GDP see gross domestic product gearing 155, 156, 190, 245 GO TO function 53 GOAL SEEK function 242–4 goal statement 18 Gordon Growth Model 189, 190, 192 graphs 53–8, 60, 261–2, 262 eyeball lines 55 fixed cost 122, 122 improving the appearance of 54 market value 129, 129 one graph suits all 55–8, 56 triangulation 126 variable costs 119, 119 INDEX gridlines 54 gross additions/connections 88, 93, 97, 97, 98, 98, 104 gross domestic product (GDP) 15, 76, 84, 189 behaviour 71–2 definition and uses 70–71 modelling approach 72–4 seed 71 group sheet function 39 growth 205, 258 GROWTH function 106 growth rate 45, 71, 72, 74, 74, 75 H hard coding 38, 60 hedging techniques 150 HELP function 51 hiding information 69 hyperlinks 226–7, 227 I IF function 45–6, 47, 51, 65, 73, 74, 77, 120, 145, 211, 223, 264 implementation 2, 6, 7, 9 income distribution 15 levels 15 INDEX function 46, 101, 103, 103, 104, 108, 264–5 inflation 14, 15, 53, 70, 75, 132, 258 inflation rate behaviour 75–6 definition and uses 75 modelling approach 76–7 seed 75 inflexible costs see under operating costs information, hiding 69 input sheets 59–65, 60, 61, 72, 72 input timelines 29, 29, 30, 31 inputs additional 29 alternative 22 analysis 23, 24 extreme 213 inflation 76, 76 seed 19 strategic 30 uncertainty/impact 23–4, 23, 25 validation 66 variables 6, 7 interest 147, 156, 180 interest calculations 157 interest costs 131 INDEX interest income and charges alternative approaches to modelling interest income 159–60, 159, 160 interest rate assumptions 158 issues in modelling interest income and charges 158 modelling interest income and circular references 158–9 interest rates 14, 15, 53 assumptions 158 base see base interest rates interface sheets 36 internal rate of return (IRR) 13, 172, 183–5, 183, 184, 245, 257 more than one 184–5, 185 investment commencement of 258 investment funding 203 net 157 overseas 150–51 reinvestment ratio 203 investment control 149 investor measures dividend cover 204 earnings per share 204 IRR see internal rate of return IRR function 265 ISDATE function 240 ISERROR function 46, 51, 211, 213, 265 ISSER function 265 J J curve 146, 146, 152, 154 joint ownership 149 judgmental techniques 85 L land residual value 132 leases 149 operating (rents) 147 LEN function 265 lending rates 152 leverage 155 lines, in formatting 67–8, 68 LINEST function 100–101, 101, 102, 103, 104, 108, 266 list box 224, 225 LN function 266 loans 149, 152, 156 losses 163, 165, 168 M macroeconomic factors 15, 70–84 275 base interest rates 78–80 exchange rates 80–83 gross domestic product 70–75 inflation rate 75–7 other macroeconomic variables 84 population 83–4 macroeconomic forecasts 8 macroeconomics 70 macros 216–21 calculation 233, 233 comments 252–3, 253 editing the macro code 218 macros for repeated tasks 218–21 creating a personalised toolbar 221 formatting macros 218–19 personal macros 218 protecting the model 219–21 Monte Carlo 245, 246 multiplication tables 234–6, 234, 235 print macro 231, 231 recording simple 216 running the macro 218 viewing macro code 216–17, 217 manual code review 208 market growth 15 market liberalisation 18 market size 15 market value 129, 129, 130, 132 mathematical operations 209–10 MAX function 45, 125, 135, 179, 196, 266 mean square error (MSE) 99 media 19 microeconomic variables 15 microeconomics 70 Microsoft Excel 2, 4, 37, 40, 50, 51, 53, 90, 106, 180, 183, 210, 216, 218, 227, 234, 235, 236, 237, 239 milestones 10, 258 MIN function 45, 139, 154, 196, 266–7 mission statement 18 mobile telecommunications industry bottom-down/top-up forecasting 88 critical factors 15, 16 decomposition of revenue 86 penetration 105, 106, 107, 109, 111, 111 product cycle life 106, 107 regression analysis 97, 106 segmentation 112 third-generation mobile data services 88 total revenue 115, 116 MOD function 50, 125, 134 model developer 9 model development process management 32–9 276 best practice in model development avoiding some common pitfalls 39 the basics of quality control 35–8 the model development process create workings pages for all main sections and develop calculations 33 develop the user interfaces and conduct user testing 34 set up output and input templates 33 test and debug 33 transfer results to output pages 33 a model development project plan 34 establishing a modelling charter 34 using material from the modeller’s library 34 populate input templates with base or test data 33 styles of development 32 free-form development 32 model layout 59–60, 59 model outputs 13, 17, 259–62 model ownership 35 modeller’s toolbox 40–58 naming sheets 40 range names 40–44 useful features conditional formatting 52–3 divide by zero 51 format painter 51–2 macros for repeated tasks 218–21 one graph suits all 55–8 shortcut keys 50–51 using graphs 53–5 useful functions AND and OR 46–7 AVERAGE 50 CONCATENATE 44–5 MIN, MAX or IF statements 45–6 MOD 50 OFFSET 49–50, 49 SUM IF and COUNT IF 47–9, 48 modelling funding issues 146–57 cost of funding 151–2 debt to equity ratios 155–6, 156 funding strips 152–4 identifying the cash flow to be funded 147 operating environment 150–51 project control 149–50 putting the funding cost back in the model 156–7 balance sheet 157 cash flow statement 157 profit and loss account 156–7, 157 INDEX time periods 154–5, 154 types of funding 147–9 weighted average cost of capital 152 modularisation 63 Monte Carlo analysis 245–8 moving average 90, 91, 92 MSE see mean square error multiplicative model 96 multiple models and dynamic links 36–7 multiple regression 85, 87, 101–4, 102, 103, 104, 105 N naming sheets 40 navigation see under spreadsheet applications NCF see net cash flow net book value 130, 138, 139, 140, 140 net cash flow (NCF) 182 net debt 155 net operating profit after tax 204 net present value (NPV) 13, 172, 179, 182, 183, 184, 184, 189, 190, 194, 242, 243, 245, 257 nominal forecasts 14 NPV see net present value NPV function 267 number styles 68–9 numbers for an output 4 negative 4 within a formula 4 O OFFSET function 49–50, 49, 57, 119, 125, 134, 135, 138, 224, 248, 267 operating costs 29, 31, 60, 117–27, 161 completeness of operating costs 117, 117–18 cost behaviour 118 drivers of costs 123–7 inflation 126–7 inflexible costs 125, 125 tax 127 triangulation 126, 126 fixed costs 122–3, 122, 123, 125, 126, 200 variable costs 118–22 operating environment 19, 149, 150–51 operating profit 186 operational risk 248, 249 options 148 OR function 46–7, 267–8 ordinary shares 148 output sheets 33, 60, 63, 63, 64, 248 output template 16, 17, 18 277 INDEX outputs 6, 7, 23, 29 presenting model 259–62 overdrafts 149 overheads, allocated 175 overseas investments 150–51 P P/E ratios 186–7, 188 packaging 117 payback 172, 177–9, 245, 257 payroll cost 126, 203 PBT see profit before tax PED see price elasticity of demand penetration 105, 106, 107–12, 109, 114, 115 total 114 period ends 14 period length 14 PERT (Performance Evaluation and Review Technique) 10–11 PEST analysis 21 plant residual value 131–2 utilisation 258 PLC see product life cycle population 70 behaviour 83 definition and uses 83 growth 15 modelling approach 83–4 seed 83 post-project review 6, 7 PPP see purchasing power parity preference shares 148 prepayments 141, 141, 142 present value 182 price elasticity of demand (PED) 86–7, 87, 115 prices constant 14 fall in 4 print ranges 231 probability models 19 product life cycle (PLC) 106, 107, 107, 189 product prices 53 profit and loss 33, 60, 164, 257 profit and loss account 129, 141, 143, 156–7, 157, 161, 162, 163, 167, 169, 173 profit before tax (PBT) 181 profit flow 172 profit margin 199–200 profits 14 operating 186 programming techniques with Visual Basic 232–6 project appraisal and company valuation 172–92 conventions for setting out the cash flows 176–7 sign convention 176 timing 176–7, 177 discounted cash flow theory 179–82 calculating the discount rate 180 calculating the WACC 181 dicounted cash flow decision rule 182 discount rate 180 risk premium 179 short time intervals 180 time value of money 179 discounting cash flows in practice 182–3 evaluating companies 185–92 techniques for valuing companies 186–8 using DCF analysis in practice to value companies 188–92 identifying the relevant project cash flows 172–6 the cash effect of change 174–5 dealing with allocated overheads 175 group versus project 176 relevant costs and capital expenditure 174 relevant revenues 174 relevant taxes 174, 174 internal rate of return 183–5, 183, 184 more than one IRR 184–5, 184 payback 177–9 project appraisal and valuation techniques 172 project control 149–50 project manager 8, 9, 10 Project Plan see under business modelling process property space requirement 123, 124, 124 utilisation of 258 protecting the model see under spreadsheet applications purchase, timing of 132 purchase cost 131 purchase tax 127 purchasing power parity (PPP) 80, 81 R R2 value 97, 98, 102 radio (option) buttons 222–3, 223 range names 4, 40–44, 158, 159, 164, 191 accessing the named inputs and rows 44 common range names 43–4 defining several individual names 42, 42 278 naming one cell 41 naming one cell where the cell name is displayed to the left of reference value 41, 41 naming several values at once 42–3, 42 naming whole rows 43 range test the model 212–13 RANK function 268 ratios 60 the Du Pont pyramid of ratios 199–203 balance sheet management 201–2 further analysis 202–3 percentage of sales measures 201 profit margin and asset turnover 199–201 external analysis 194 internal analysis 194–5 internal ratio analysis 195 interpreting 196–7 average 196 high and low values 196 rank 196 useful ratios to calculate return on average capital employed (ROACE) 198 return on equity (ROE) 199 return on net assets (RONA) 197–8, 198, 199, 200, 201, 204 real forecasts 14 recalculation 69 reducing balance 130, 130 regression equation 98, 98 regression techniques see under revenue forecasting regulatory environment 70 rents 147 replicating actual results 212 report style 259 research agencies 8, 70 residual (“disturbance”) component 89 residual value 132 retail price index 75 return on average capital employed (ROACE) 198 return on capital employed (ROCE) 242, 243, 245, 257 return on equity (ROE) 199 return on net assets (RONA) 197–8, 198, 199, 200, 201, 204 return on sales (ROS) 257 revenue 14, 30, 53, 60, 64, 117, 147, 172, 173 decomposition 86 derivation of 29 total 86, 115–16, 116 INDEX revenue forecasting 14, 85–116 approaches to bottom-up versus top-down forecasting 87–8 classification of forecasting methodologies 85 decomposition of revenue 86 price elasticity of demand 86–7, 87 time frame 88 long-term forecasting 105–11 fitting a product life cycle curve 107–11 the product life cycle 107, 107 regression techniques 96–105 estimating the coefficients 97–9, 97, 98 forecasting using the TREND function 100, 100 limitations of regression analysis 105 the LINEST function 100–101, 101 multiple regression 101–4, 102, 103, 104, 105 regression analysis 96–7 the TREND function 99, 100 segmentation 112–16 business segment 114–15, 114, 115 consumer segment 112–13, 113, 114 mix effects 116 total revenue 115–16, 116 time series analysis 85, 87, 88–96 additive and multiplicative models 89–90, 90 components of a time series 89 estimating the trend and seasonal factors manually 91–4, 92, 93, 94 estimating the trend using the built-in moving average function 90–91, 91 forecasting using the trend, seasonal factors and the additive model 94–5, 95 limitations of time series analysis 96 the multiplicative model 96 time series data 88, 89 revenue multiples 188 revenue tax 163 ripple effect 51 risk 149, 150, 151, 155 assumption 248, 249 commercial 257 environmental 249 operational 248, 249 premium 179 ROACE see return on average capital employed ROCE see return on capital employed ROE see return on equity RONA see return on net assets INDEX ROS see return on sales ROUND function 154, 268 rounding 65–6, 65, 66, 259 ROUNDOWN function 268 ROUNDUP function 123, 133, 268 row consistency 210 rows versus columns 261, 261 S sales forecast 55 tax 127, 163–4 saving the model regularly 36 scenario development 25–31 scenario planning benefits 20 the development of 20 stage 1: identifying high impact, highly uncertain inputs 20, 21–4 stage 2: identify alternative development paths for key inputs 20, 25–6, 25–6 stage 3: select the three or four most informative scenarios 20, 26–8, 27 stage 4: develop the scenario stories 20, 28–30 stage 5: develop the business strategy 20, 30 scenarios 20 scheduling 258 scroll bars 225, 225 seasonal component 89 seasonal factors 89–90, 90, 91, 93, 94, 94, 96 seed 19, 60, 62, 71, 75, 78, 80, 83 segmentation see under revenue forecasting sensitivity analysis 147, 241–2, 241 shareholder value 193–5, 194, 199 ratio analysis 194–5 short period rate 180 shortcut keys 50–51 sign convention 66, 176 simple modified exponential trend curve 108 SIN function 268–9 SINE curve 71, 76 SMART goals 9 social trends 70 socio-economic shifts 18 specific help software 252 spin buttons 225 splash screens 237–9, 238 spreadsheet applications appearance consistency 229 freezing the screens 229–30, 230 placement of macro buttons 230 279 removing the gridlines 230 simple layout 229 basic programming techniques with Visual Basic 232–6 Forms toolbar 221–5 navigation attaching a macro to a button 228–9, 229 basic navigation 226 creating a menu using Visual Basic 227–8, 227, 228 hyperlinks 226–7, 227 recording simple macros 216 viewing macro code 216–17, 217 printing 231 creating a print macro 231, 231 setting print ranges 231 protecting the model 219–21 spreadsheet functions 263–70 spreadsheets 2, 11 advantages and disadvantages of using 3 and model ownership 35 see also input sheets; output sheets; working sheets start of trade 133, 258 stock 143–4, 144, 202 stock days 143, 144, 202 strategic plan 12, 18, 31 style and outline 59–69 alternative model layout 63–4 formatting 67–9 colours 67 column width 69 fonts 67 lines 67–8, 68 number styles 68–9 making the model intelligible 64 making range names work 64–5, 64 model layout 59–60 recalculation 69 retaining consistent logic by having the same formulae every year 65 rounding to invisible 65–6, 65, 66 sheet layout: inputs 60–61, 60, 61 sheet layout: outputs 63, 63 sheet layout: working 61–2 sign convention 66 some things to avoid, recalculation 69 things to avoid, hiding information 69 sum of the digits 131 SUM function 269 SUM IF function 47–8, 48, 269 supply chain 176 280 SWOT (strengths, weaknesses, opportunities and threats) analysis 257 synergy 176 T tables of data 259–61, 260 tactical plans 18 tasks 10 tax shield on financing 181 taxation 33, 34, 127, 173, 258 the challenges of modelling taxation 163 forms of taxation 163–4, 163 generic approach to corporation taxation workings 164–5, 165, 166–7 technical errors 206 technical obsolescence 131 technological change 70 templates 11, 13, 16, 17, 33 terminal value 14, 189, 258 testing and debugging 33, 34, 206–15 the importance of 206 testing strategy 207–15 step 1: eliminate technical and conceptual flaws 208–12, 214 step 2: range test the model 212–13, 215 step 3: stress test the model 213, 215 step 4: user testing 214, 215 types of errors conceptual errors 206 technical errors 206 user errors 206 text boxes 252 third-party forecasts 70 tick box 43, 43 time frame 13–14, 88 time periods 154–5, 154 time series analysis see under revenue forecasting time value of money 179 top-down forecasting 87–8 total revenue 86, 115–16, 116 trace error button 51 transport trends 15 trend curves, exponential, Gompertz and Logistic 108 TREND function 99, 100, 101, 105, 269 trend see under revenue forecasting trendline 55 regression 98 triangulation 126, 126 U uncertainty, scenario planning and model inputs 19–24 INDEX business model input checklist 24 defining the inputs 19 examining different approaches to uncertainty 19 scenario-based forecasting approach 20 stages of a scenario-based forecasting approach 20, 20 stage 1: identifying high impact, highly uncertain inputs 21–4 analyse variables according to uncertainty and impact 23–4, 23 identify all the variables that influence the business 21–2, 21 identifying the relationships between variables 22 review the data collection requirements 22–3 understanding the nature of uncertainty 19 uncertainty/impact matrix 23–4, 23, 24, 25, 29 units 14 upper asymptote 107, 108, 108 urbanisation 15 useful economic life 131 users documentation 254 errors 206 interfaces 34 support, continuing 255 testing 214 using the model 241–9 dependency ranking 242–4 displaying the assumption dataset on the output sheet 248 Excel Scenario Manager 248 GOAL SEEK 242–4 Monte Carlo analysis 245–8 risk and its management 248–9 sensitivity analysis 241–2 V valuation 60 see also project appraisal and company valuation valuation approaches see project appraisal and company valuation valuation range 190 value-added tax 127 variable costs see under operating costs variables 21–2, 21 dependent 96 endogenous 22 exogenous 22 281 INDEX independent (explanatory) 96–7, 100 uncertainty/impact 23–4, 23 variance analyses 13 version control 35 versions of the model, retaining 35–6 vertical analysis 201 vision statement 18 Visual Basic 216, 232–6 Visual Basic Editor 216–17, 217, 218, 240 VLOOKUP function 121, 122, 269–70 W WACC see weighted average cost of capital warrants 148 warranty 118 weighted average cost of capital (WACC) 152, 167, 180, 181, 190 wind-farm operators critical factors for 15, 16 develop the scenario stories 28–30, 29 Gantt chart 10, 11 impact/uncertainty matrix 23–4, 23 input timelines 29, 29 output template 17 potential input development paths 25–6, 25–6 revenue model 29–30 strategic inputs 30 variables influencing 21, 22 withholding tax 258 working capital see under capital expenditure and working capital working capital turnover 201–2 working sheets 60–5 workshops 17–18 writing and presenting the business plan key issues to address in a business plan 256 presenting the model outputs 259–62 graphs 261, 262 rounding 259 rows versus columns 261 tables of data 259–60 report style 259 typical content of a business plan document assumptions 257–8 commercial risk 257 economic 258 executive summary 257 financial 257 manning 258 market 257 milestones 258 safety, health and environment 258 sensitivity 258 strategic importance 257 taxes 258 technical 258 Z zero, set all inputs to 211 zero book value 136


The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

addicted to oil, air freight, airline deregulation, Alan Greenspan, Albert Einstein, asset-backed security, bank run, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon tax, central bank independence, collateralized debt obligation, collective bargaining, compensation consultant, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, currency risk, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Glass-Steagall Act, Hernando de Soto, income inequality, income per capita, information security, invisible hand, Joseph Schumpeter, junk bonds, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, open immigration, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, Reminiscences of a Stock Operator, reserve currency, Right to Buy, risk tolerance, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, special economic zone, stock buybacks, stocks for the long run, Suez crisis 1956, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tipper Gore, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, We are all Keynesians now, working-age population, Y2K, zero-sum game

In addition, since 1970, the infant mortality rate has declined by more than half, school enrollment rates have risen steadily, and literacy rates are up.* *Figures on world poverty rates are from t h e World Bank and a 2002 study by Columbia University economist Xavier Sala-i-Martin. T h e $l-per-day threshold is measured in 1985 dollars on a purchasing power parity basis. Economists use purchasing power parity as an alternative to market exchange rates w h e n gauging and comparing o u t p u t s and incomes across 259 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.

I've 295 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. T H E AGE OF T U R B U L E N C E been back several times. Like all visitors, I've been impressed and often amazed by the changes from visit to visit. The Chinese economy measured by purchasing power parity has become the second largest behind that of the United States. China has also emerged as the world's largest consumer of commodities generally the second-largest consumer of oil, and the largest steel producer, and has evolved from the bicycle economy of the 1980s into a country that produced more than seven million motor vehicles in 2006, with planned facilities to reach far beyond that.

If and when foreigners' appetite for U.S. assets slackens, it will be reflected in lessened demand for U.S. currency and thus a lower foreign-exchange value of the dollar.+ A lower dollar, of course, will discourage importers and encourage *To facilitate comparisons, all nondollar currencies are converted to dollars on t h e basis of market exchange rates. Purchasing power parities (PPPs), t h e major alternative means of converting, are ill-suited for dealing with cross-border flows of saving and investment. For t h e world as a whole, saving must equal investment, irrespective of t h e currency of record. For t h e years 2003—2005, t h e absolute value of t h e statistical discrepancy between world saving and investment was $330 billion annually converting with PPPs, b u t only $66 billion employing market exchange rates, tl am disregarding t h e fact t h a t n o t all claims against U.S. residents are in dollars, and not all dollar claims, such as Eurodollars, are against U.S. residents.


pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

Alan Greenspan, Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Boris Johnson, Bretton Woods, business cycle, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, disruptive innovation, distributed ledger, Dr. Strangelove, Edward Snowden, Ethereum, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial exclusion, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, government statistician, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Johannes Kepler, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, low interest rates, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, The Rise and Fall of American Growth, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

The European Central Bank (ECB) has undertaken a couple of surveys that we will come to shortly, but first we turn to an interesting project where seven central banks aimed to harmonize the results of one-time consumer surveys so as to achieve broadly comparable cross-country data.12 The main message is similar to what we learned from the United States: consumer demand for cash does not begin to account for the extant currency supply. Table 4.1 gives estimates of “cash on person,” with figures adjusted to US dollars by purchasing power parity exchange rates.13 The table confirms that Austria and Germany are cash-intensive countries, whereas France is more similar to the United States. The figure includes only cash on person and not cash on property. Assuming similar ratios of the two for Austria and Germany as for the United States, then total cash balances would be, say, $500–600 worth of euros in Germany, and $285–340 in France, hardly enough to explain per capita currency holdings (and remember the survey is only counting adults).

Assuming similar ratios of the two for Austria and Germany as for the United States, then total cash balances would be, say, $500–600 worth of euros in Germany, and $285–340 in France, hardly enough to explain per capita currency holdings (and remember the survey is only counting adults). Table 4.1: Average cash balances in wallet Australia Austria Canada France Germany Netherlands United States Mean 59 148 64 70 123 51 74 Median 32 114 38 30 94 28 37 Note: Values are converted to US dollars by purchasing power parity–adjusted exchange rates. Source: Bagnall et al. (2014) compendium of harmonized international consumer diary surveys. We next turn to more conventional surveys, which, as in the case of the United States, seem to give similar results to the diary surveys. For example, in a 2008 survey of consumer cash usage and holdings, the ECB found fairly small cash holdings, with 57% of respondents reporting they hold only enough cash for near-term transactions.

The authors report making significant efforts to harmonize their approaches to gathering and analyzing data so as to make the results as comparable as possible (understanding that there are some differences across countries in the year of the survey). Although the diary survey design is similar across countries, and the process of harmonization thoughtful, the reader must recognize that precise comparisons are still difficult, and diary surveys that require meticulous detail from participants have many limitations to begin with. 13. Purchasing power parity exchange rates aim to translate nominal quantities in different currencies into a common denominator, taking account of the different price structures in each economy. The idea here, for example, is to better be able to compare the true purchasing power consumers in different countries are carrying around in their wallets or purses. 14.


pages: 414 words: 101,285

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It by Ian Goldin, Mike Mariathasan

air freight, air traffic controllers' union, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, biodiversity loss, Bretton Woods, BRICs, business cycle, butterfly effect, carbon tax, clean water, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, connected car, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, digital divide, discovery of penicillin, diversification, diversified portfolio, Douglas Engelbart, Douglas Engelbart, Edward Lorenz: Chaos theory, energy security, eurozone crisis, Eyjafjallajökull, failed state, Fairchild Semiconductor, Fellow of the Royal Society, financial deregulation, financial innovation, financial intermediation, fixed income, Gini coefficient, Glass-Steagall Act, global pandemic, global supply chain, global value chain, global village, high-speed rail, income inequality, information asymmetry, Jean Tirole, John Snow's cholera map, Kenneth Rogoff, light touch regulation, Long Term Capital Management, market bubble, mass immigration, megacity, moral hazard, Occupy movement, offshore financial centre, open economy, precautionary principle, profit maximization, purchasing power parity, race to the bottom, RAND corporation, regulatory arbitrage, reshoring, risk free rate, Robert Solow, scientific management, Silicon Valley, six sigma, social contagion, social distancing, Stuxnet, supply-chain management, systems thinking, tail risk, TED Talk, The Great Moderation, too big to fail, Toyota Production System, trade liberalization, Tragedy of the Commons, transaction costs, uranium enrichment, vertical integration

GLOBAL INTEGRATION AND INEQUALITY Even among those who are doubtful about the benefits from globalization it is recognized that, on average, poverty has decreased during decades of global integration.4 The number of people in the developing world who are living on less than US$1.25 (in terms of purchasing power parity, or PPP) per day was as high as 1.9 billion in 1990 but had dropped to 1.29 billion by 2008; the poverty headcount ratio decreased from 43.1 to 22.4 percent over the same period.5 Even looking at higher income levels, it is predicted that “by 2030, roughly 50% of the world population [will] fall into the $6,000–$30,000 bracket, up from around 29% currently (and around 24% in the 1980s).”6 In fact, during the 20 years prior to the 2007/2008 financial crisis, “real disposable household incomes increased in all OECD [Organisation for Economic Co-operation and Development] countries, by 1.7% a year, on average.”7 Furthermore, there is evidence that the link between globalization and poverty reduction is not coincidental and that increasing integration and openness are indeed responsible for reducing global poverty.8 Figures like these are overly simplistic, and the debate about the relevant development indicators to consider and the appropriate ways of measuring them remains a concern for many development economists.

Source: Branko Milanović, 2011, “Global Inequality from Class to Location, from Proletarians to Migrants,” Policy Research Working Paper 5820, World Bank, Washington, DC, 15, accessed 3 February 2013, http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2011/09/29/000158349_20110929082257/Rendered/PDF/WPS5820.pdf. Used with permission. Figure 7.3. Income distribution, United States versus the BRIC countries, 2005. Based on national household surveys, with people ranked by per capita income or per capita consumption adjusted for price differences between the countries using the most recent purchasing power parity figures. BRIC denotes the emerging market economies of Brazil, Russia, India, and China. Each value on the horizontal axis indicates 5 percent (a ventile) of the population. The value 1 corresponds to the poorest 5 percent, 20 to the richest 5 percent. Values on the vertical axis correspond to the global percentile position of each national ventile; for the poorest 5 percent of the U.S. population (1 on the horizontal axis), the value is 60 (the location of the dashed line in the figure), implying that the poorest 5 percent in the United States are better off than 60 percent of the world population.

Individuals across the world now share their concerns, but there is a complexity and diffusion of responsibilities that means that the achievement of political mobilization and consequences, particularly in a sustained manner, is often lacking. Figure 7.5. (A) Oil demand and (B) car ownership by income level. PPP, purchasing power parity. Dominic Wilson and Raluca Dragusanu, 2008, “The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality,” Global Economic Papers 170, Goldman Sachs, New York, 17, accessed 3 February 2013, http://www.ryanallis.com/wp-content/uploads/2008/07/expandingmiddle.pdf. Used with permission.


pages: 1,324 words: 159,290

Grand Transitions: How the Modern World Was Made by Vaclav Smil

8-hour work day, agricultural Revolution, AltaVista, Anthropocene, Any sufficiently advanced technology is indistinguishable from magic, biodiversity loss, Biosphere 2, Boeing 747, caloric restriction, caloric restriction, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, circular economy, clean water, complexity theory, correlation does not imply causation, COVID-19, decarbonisation, degrowth, deindustrialization, dematerialisation, demographic dividend, demographic transition, Deng Xiaoping, disruptive innovation, energy transition, European colonialism, Extinction Rebellion, Ford Model T, garden city movement, general purpose technology, Gini coefficient, Google Hangouts, Great Leap Forward, Haber-Bosch Process, Hans Rosling, hydraulic fracturing, hydrogen economy, income inequality, income per capita, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), invention of movable type, Johann Wolfgang von Goethe, Just-in-time delivery, knowledge economy, Law of Accelerating Returns, manufacturing employment, mass immigration, megacity, meta-analysis, microplastics / micro fibres, ocean acidification, oil shale / tar sands, old age dependency ratio, peak oil, planetary scale, planned obsolescence, power law, precision agriculture, purchasing power parity, RAND corporation, Ray Kurzweil, Republic of Letters, Robert Solow, Silicon Valley, Simon Kuznets, Singularitarianism, Skype, Steven Pinker, Suez canal 1869, the built environment, The Rise and Fall of American Growth, total factor productivity, urban decay, urban planning, urban sprawl, working-age population

The same is true when we compare an even more revealing indicator of healthy life expectancy defined as the average number of years that a person can expect to live in “full health”: Japan (again, combined for both sexes) leads with 21.1 years of healthy life beyond the age of 60, thanks to the exceptional longevity of its women (23.1 years), but at 19.9 years the second, Switzerland, is barely above the 12th, Canada (19.7 years). This group of longevity leaders clearly indicates that the highest per capita economic product and the highest life expectancy are poorly correlated: only 2 of the 12 longevity leaders (Singapore and Switzerland) rank among the 12 countries with the highest per capita GDP (expressed in purchasing power parities), and 7 of the 12 longevity leaders do not place even among the 25 richest countries (World Life Expectancy 2018). At first glance, a balmier climate (Australia, Spain, Italy, and Israel) might seem to be a factor, but just as many leaders (Switzerland, Iceland, South Korea, and Canada) negate that conclusion.

India, Asia’s second largest modernizing economy, has grown much more slowly than China and most African countries can offer their citizens a standard of living that remains inferior even when compared to European levels of three generations ago. The best way to compare the achievements of economic growth in per capita terms is to use constant (inflation-adjusted) monies and their purchasing power parities (PPP) that relate currencies according to their capability to buy a set number of goods and services. This is not a perfect choice but one that is superior to using often volatile official exchange rates. World Bank’s database of GDP PPP values (in constant international dollars) begins in 1870 when the United Kingdom led with about $4,800/capita and the United States averaged about $3,900, France $3,100, and Japan $1,100.

., 2–3, 155, 191 Poor Law Act (England, 1601), 41 populations (demographics), transitions in, 25–69 aging societies, 51–53 consequences of, 42–46 explanations of, 39–42 fertility rates, 31–34 food and, possible future transitions, 263–71 future possibilities of, 263–66 global growth of, 245–46, 259–60 international migration and, 266 introduction to, 7–9, 25–30, 26f, 31–34 lifespan, 47–50 markers of, 152–53 megacities, 66–69 migrations and urbanization, 57–69 national differences in timing of, 16 population declines, 8, 34, 53–56, 54f population growth rates, 8, 27–28, 28f, 43–44 possible future transitions, 263–71 second demographic transition, 37 stages of, 26f, 34–39 urbanization, consequences of, 63–66 urbanization, pace of, 58–62 Portugal energy intensity, 150 fertility rates, 38 meat supply, 92 obesity in, 106 Poschke, M., 171 potassium fertilizers, 79 poultry, 92–93 PPP (purchasing power parities), 161 premodern world anthropogenic environmental impacts, 205–7 characteristics, 1–3 city growth, 57 diets, 86–87 economic growth in, lack of, 155–56 environmental pollution, 228 everyday goods, improvements in, 191 fertility rates, 7–8 fertility span, 32 legume consumption, 90 material abundance, 187 menarche, average age of, 31–32 mortality rates, 8, 27 prime movers, 125 water usage, 190 prime movers, 125–33.


Affluenza: When Too Much Is Never Enough by Clive Hamilton, Richard Denniss

call centre, death from overwork, delayed gratification, experimental subject, full employment, hedonic treadmill, impulse control, karōshi / gwarosa / guolaosi, low interest rates, Mahatma Gandhi, McMansion, mega-rich, Naomi Klein, Own Your Own Home, post-materialism, post-work, purchasing power parity, retail therapy, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, trickle-down economics, wage slave, work culture

TABLE 2: Attitudes to needs, by income group—‘You cannot afford to buy everything you really need’ Country Total (%) Lowest income group (%) United Kingdom Australia United States 61 62 50 79 79 63 Highest income group (%) GDP per person in 2000 (US$ PPP) 46 47 33 23 509 25 693 34 142 Note: PPP denotes purchasing power parity. Australians and Britons appear, however, to be much more dissatisfied with their incomes than Americans, and this is the case at both the high and the low ends of the scale. Overall, half of Americans say they cannot afford to buy everything they really need, compared with six in ten Britons and Australians.

This group is dominated by welfare recipients and includes a disproportionate share of single parents. 3 Hamilton, Overconsumption in Australia, op. cit. 4 Holbrook, op. cit. 5 Clive Hamilton, Overconsumption in Britain: a culture of middle-class complaint?, Discussion paper no. 57, The Australia Institute, Canberra, 200 ENDNOTES 6 7 8 9 10 11 2003. GDP is measured by purchasing power parity—that is, taking account of differences in exchange rates and differences in the purchasing power of domestic currencies in each country. Strictly speaking, equivalised household incomes would be better, that is, incomes adjusted for household size. It should be noted that the US survey was conducted in 1995 and the results might differ if it were repeated today.


pages: 215 words: 59,188

Seriously Curious: The Facts and Figures That Turn Our World Upside Down by Tom Standage

"World Economic Forum" Davos, agricultural Revolution, augmented reality, autonomous vehicles, Big Tech, blood diamond, business logic, corporate governance, CRISPR, deep learning, Deng Xiaoping, Donald Trump, Dr. Strangelove, driverless car, Elon Musk, failed state, financial independence, gender pay gap, gig economy, Gini coefficient, high net worth, high-speed rail, income inequality, index fund, industrial robot, Internet of things, invisible hand, it's over 9,000, job-hopping, Julian Assange, life extension, Lyft, M-Pesa, Mahatma Gandhi, manufacturing employment, mega-rich, megacity, Minecraft, mobile money, natural language processing, Nelson Mandela, plutocrats, post-truth, price mechanism, private spaceflight, prosperity theology / prosperity gospel / gospel of success, purchasing power parity, ransomware, reshoring, ride hailing / ride sharing, Ronald Coase, self-driving car, Silicon Valley, Snapchat, South China Sea, speech recognition, stem cell, supply-chain management, transaction costs, Uber and Lyft, uber lyft, undersea cable, US Airways Flight 1549, WikiLeaks, zoonotic diseases

Levels of capitalism or feminism are harder to quantify, but an economic-liberty index produced by the Heritage Foundation, another think-tank, and a gender-equality index from the UN Development Programme (UNDP) may serve as proxies. Julian, unassuaged The relationship between fertility and wealth Sources: World Bank; The Economist *Purchasing-power parity Once GDP per person was taken into account, levels of capitalism, thus measured, did nothing extra to explain variations in birth rates. Both gender equality and the share of population that is irreligious did seem to play a part. But while those two traits may help explain why eastern European countries have far lower birth rates than Middle Eastern and Latin American ones with similar levels of income, neither was a meaningful predictor of fertility rates within Europe.

Italian 65-year-olds, for example, can expect to live about the same number of years as Norwegian ones, even though Norway is much richer than Italy. But Norway’s elderly are likely to spend nearly 80% of their remaining time in good health, whereas those in Italy can hope for just 40%. Live long and prosper Sources: Eurostat; IMF; The Economist *At purchasing-power parity This may be a result of countries’ spending on public services and infrastructure. Many characteristic health problems of old age, such as difficulties with hearing or eyesight, are not fatal; but unless they are dealt with, and unless public spaces are adapted to the needs of the elderly, they can make life miserable.


pages: 460 words: 107,454

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet by Klaus Schwab, Peter Vanham

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, air traffic controllers' union, Anthropocene, Apple II, Asian financial crisis, Asperger Syndrome, basic income, Berlin Wall, Big Tech, biodiversity loss, bitcoin, Black Lives Matter, blockchain, blue-collar work, Branko Milanovic, Bretton Woods, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, carbon tax, centre right, clean tech, clean water, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, company town, contact tracing, contact tracing app, Cornelius Vanderbilt, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, cuban missile crisis, currency peg, cyber-physical system, decarbonisation, demographic dividend, Deng Xiaoping, Diane Coyle, digital divide, don't be evil, European colonialism, Fall of the Berlin Wall, family office, financial innovation, Francis Fukuyama: the end of history, future of work, gender pay gap, general purpose technology, George Floyd, gig economy, Gini coefficient, global supply chain, global value chain, global village, Google bus, green new deal, Greta Thunberg, high net worth, hiring and firing, housing crisis, income inequality, income per capita, independent contractor, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Khan Academy, Kickstarter, labor-force participation, lockdown, low interest rates, low skilled workers, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, means of production, megacity, microplastics / micro fibres, Mikhail Gorbachev, mini-job, mittelstand, move fast and break things, neoliberal agenda, Network effects, new economy, open economy, Peace of Westphalia, Peter Thiel, precariat, Productivity paradox, profit maximization, purchasing power parity, race to the bottom, reserve currency, reshoring, ride hailing / ride sharing, Ronald Reagan, Salesforce, San Francisco homelessness, School Strike for Climate, self-driving car, seminal paper, shareholder value, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, social distancing, Social Responsibility of Business Is to Increase Its Profits, special economic zone, Steve Jobs, Steve Wozniak, synthetic biology, TaskRabbit, The Chicago School, The Future of Employment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the scientific method, TikTok, Tim Cook: Apple, trade route, transfer pricing, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, We are the 99%, women in the workforce, working poor, working-age population, Yom Kippur War, young professional, zero-sum game

And it helped many other emerging markets achieve higher growth rates, leading at its peak to a global convergence—though it has since ebbed somewhat. The greatest consequence of this China effect is that what many people call “the Asian Century” has already begun, according to some measures. In a March 2019 essay,32 Financial Times writers Valentina Romei and John Reed pointed to a remarkable statistic: as a share of world GDP at purchasing power parity (PPP), 2020 was going to mark the first time in two centuries that Asian GDP will be higher than that of the rest of the world (Figure 3.3). And the COVID crisis confirmed that outlook. By October 2020, the IMF forecasted33 that China would be the only major economy that would see full-year economic growth in 2020, with ASEAN the only other region able to limit its losses.

For the people of Ethiopia, most of whom were still living at, or below, the poverty line around the turn of the millennium, that rapid economic growth has been a blessing. The per capita GDP almost tripled, going from barely more than 50¢ per day in 2003, to almost $2 per day today,21 measured in “constant” US dollars. It is a jump that may seem tiny in real terms, but in so-called purchasing power parity, the average Ethiopian is no longer living in extreme poverty. Measured by what one can buy, GDP per capita in Ethiopia in 2018 reached more than $2,000, where it was barely $500 in 2003, when the economic boom began. But like everywhere else, Ethiopia has paid an environmental price for its development.

See China (People's Republic) PepsiCo (US), 250 Persson, Mayson, 149 Peru, 64 Philippines economic recession (1997) in, 98 post-war economy of, 6 predicted economic growth (2020–2021) in, 65–66 tech unicorns of, 66, 67fig Philippon, Thomas, 140, 142 Philips (The Netherlands), 215, 250 Physical capital definition of, 235 New Zealand's Living Standards Framework on, 235fig–236 Pichai, Sundar, 69 Piketty, Thomas, 38 Ping an Insurance, 60 PISA (Programme for International Student Assessment) ranking, 230 Pitchfork protests (2013) [Italy], 86 Pittsburgh (Pennsylvania), 159 Planet at the center of the global stakeholder model, 180fig at the center of the simplified stakeholder model, 178fig–179 a post-COVID world and sustainable economy for the, 251 as the responsibility of every stakeholder, 176 as Stakeholder Capitalism Metrics pillar, 214 See also Environmental issues; People; Stakeholder model Platform on Biodiversity and Ecosystems Services (IPBES) report [2019], 51 Poland Solidarity movement in, 83 stakeholder approaches to major challenges in, 195 Political divisions checks and balances and robust institutions to heal, 185, 193–198 erosion of the political center creating, 80–90 need to overcome our, 194 See also Democracy Political parties erosion of political center of, 80–90 existential crisis facing todays, 188 See also specific party Pollution Asian economic growth and, 72 CO2 emissions, 160, 161, 165–166, 182, 200, 202, 203, 207 impact on natural ecosystems by, 50 microplastics, 50 as negative impact of globalization, 107 WHO guidelines on air, 50 WHO on unsafe air (2019) due to, 72 See also Climate change; Global warming; Greenhouse gases Pony Ma, 60 Population Baby boom (1950s and 1960s), 8, 9, 105, 135, 154, 160 demographic change megatrend, 160–161 GFN of growing global, 48–49 increasing rates of, 48–49 megacities, 159 urbanization megatrend, 159–160 Populism erosion of the political center and rise of, 80–90 increasing nationalism and, 84 Porsche (German manufacturer), 9 Preindustrial Revolution, 45fig, 129–130 Principles of governance description of, 214 as Stakeholder Capitalism Metrics pillar, 214 Productivity growth declining, 33–34 “decoupling” of wages from, 34 during golden age of capitalism, 33–34 Proposition C referendum (San Francisco), 212–213 Prosperity description of the elements of, 214 Legatum Prosperity Index (2019) ranking, 231 as Stakeholder Capitalism Metrics pillar, 214 stakeholder government role in enabling equitable, 178–179, 225 success of New Zealand and Singapore in creating, 249 See also Environment, social, and governance (ESG) objectives; Income equality; People Puar, Puty, 95, 96, 107, 110 Public debt COVID-19 pandemic and increasing, 19, 29–30 increasing rates of predicted, 28 population pyramid and repayment of, 30 Public health care spending dramatic increase (2000–2016) of, 32 in OECD countries, 32 Purchasing power parity (PPP), Financial Times reporting on Asian GDP (2020), 70–71 PwC (US), 126, 215, 250 Q Qambrani, Tanzeela, 245–246 Qing Imperial dynasty (China), 56 QQ social media app (China), 60 Qualcomm, 141 Quebec (Canada), 167 R Racism against Sheedi population in Pakistan, 245–246 Black Lives Matter protests against, 186, 243, 246, 250 history of US school segregation and, 226 redlining practice of housing discrimination, 226 Rapin, Philippe, 163–164 Ravensburger Pact (1997), 17 Ravensburger (Germany), 5, 7, 8, 9, 19, 251 Reagan, Ronald, 77, 122 Redlining practice, 226 Reed, John, 71 “Reefer ships” (1870s), 104, 110 Reform and Opening Up policy (1979) [China], 15, 18, 36, 57, 59, 72 Reformation, 130 Reich, Robert, 122 Reliance Industries (India), 68 Renaissance, 130 Ren Zhenfei, 60 Renzi, Prime Minister (Germany), 81 Republic of Korea.


pages: 460 words: 107,454

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet by Klaus Schwab

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, additive manufacturing, agricultural Revolution, air traffic controllers' union, Anthropocene, Apple II, Asian financial crisis, Asperger Syndrome, basic income, Berlin Wall, Big Tech, biodiversity loss, bitcoin, Black Lives Matter, blockchain, blue-collar work, Branko Milanovic, Bretton Woods, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, carbon tax, centre right, clean tech, clean water, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, company town, contact tracing, contact tracing app, Cornelius Vanderbilt, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, cuban missile crisis, currency peg, cyber-physical system, decarbonisation, demographic dividend, Deng Xiaoping, Diane Coyle, digital divide, don't be evil, European colonialism, Fall of the Berlin Wall, family office, financial innovation, Francis Fukuyama: the end of history, future of work, gender pay gap, general purpose technology, George Floyd, gig economy, Gini coefficient, global supply chain, global value chain, global village, Google bus, green new deal, Greta Thunberg, high net worth, hiring and firing, housing crisis, income inequality, income per capita, independent contractor, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Khan Academy, Kickstarter, labor-force participation, lockdown, low interest rates, low skilled workers, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, means of production, megacity, microplastics / micro fibres, Mikhail Gorbachev, mini-job, mittelstand, move fast and break things, neoliberal agenda, Network effects, new economy, open economy, Peace of Westphalia, Peter Thiel, precariat, Productivity paradox, profit maximization, purchasing power parity, race to the bottom, reserve currency, reshoring, ride hailing / ride sharing, Ronald Reagan, Salesforce, San Francisco homelessness, School Strike for Climate, self-driving car, seminal paper, shareholder value, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, social distancing, Social Responsibility of Business Is to Increase Its Profits, special economic zone, Steve Jobs, Steve Wozniak, synthetic biology, TaskRabbit, The Chicago School, The Future of Employment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the scientific method, TikTok, Tim Cook: Apple, trade route, transfer pricing, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, We are the 99%, women in the workforce, working poor, working-age population, Yom Kippur War, young professional, zero-sum game

And it helped many other emerging markets achieve higher growth rates, leading at its peak to a global convergence—though it has since ebbed somewhat. The greatest consequence of this China effect is that what many people call “the Asian Century” has already begun, according to some measures. In a March 2019 essay,32 Financial Times writers Valentina Romei and John Reed pointed to a remarkable statistic: as a share of world GDP at purchasing power parity (PPP), 2020 was going to mark the first time in two centuries that Asian GDP will be higher than that of the rest of the world (Figure 3.3). And the COVID crisis confirmed that outlook. By October 2020, the IMF forecasted33 that China would be the only major economy that would see full-year economic growth in 2020, with ASEAN the only other region able to limit its losses.

For the people of Ethiopia, most of whom were still living at, or below, the poverty line around the turn of the millennium, that rapid economic growth has been a blessing. The per capita GDP almost tripled, going from barely more than 50¢ per day in 2003, to almost $2 per day today,21 measured in “constant” US dollars. It is a jump that may seem tiny in real terms, but in so-called purchasing power parity, the average Ethiopian is no longer living in extreme poverty. Measured by what one can buy, GDP per capita in Ethiopia in 2018 reached more than $2,000, where it was barely $500 in 2003, when the economic boom began. But like everywhere else, Ethiopia has paid an environmental price for its development.

See China (People's Republic) PepsiCo (US), 250 Persson, Mayson, 149 Peru, 64 Philippines economic recession (1997) in, 98 post-war economy of, 6 predicted economic growth (2020–2021) in, 65–66 tech unicorns of, 66, 67fig Philippon, Thomas, 140, 142 Philips (The Netherlands), 215, 250 Physical capital definition of, 235 New Zealand's Living Standards Framework on, 235fig–236 Pichai, Sundar, 69 Piketty, Thomas, 38 Ping an Insurance, 60 PISA (Programme for International Student Assessment) ranking, 230 Pitchfork protests (2013) [Italy], 86 Pittsburgh (Pennsylvania), 159 Planet at the center of the global stakeholder model, 180fig at the center of the simplified stakeholder model, 178fig–179 a post-COVID world and sustainable economy for the, 251 as the responsibility of every stakeholder, 176 as Stakeholder Capitalism Metrics pillar, 214 See also Environmental issues; People; Stakeholder model Platform on Biodiversity and Ecosystems Services (IPBES) report [2019], 51 Poland Solidarity movement in, 83 stakeholder approaches to major challenges in, 195 Political divisions checks and balances and robust institutions to heal, 185, 193–198 erosion of the political center creating, 80–90 need to overcome our, 194 See also Democracy Political parties erosion of political center of, 80–90 existential crisis facing todays, 188 See also specific party Pollution Asian economic growth and, 72 CO2 emissions, 160, 161, 165–166, 182, 200, 202, 203, 207 impact on natural ecosystems by, 50 microplastics, 50 as negative impact of globalization, 107 WHO guidelines on air, 50 WHO on unsafe air (2019) due to, 72 See also Climate change; Global warming; Greenhouse gases Pony Ma, 60 Population Baby boom (1950s and 1960s), 8, 9, 105, 135, 154, 160 demographic change megatrend, 160–161 GFN of growing global, 48–49 increasing rates of, 48–49 megacities, 159 urbanization megatrend, 159–160 Populism erosion of the political center and rise of, 80–90 increasing nationalism and, 84 Porsche (German manufacturer), 9 Preindustrial Revolution, 45fig, 129–130 Principles of governance description of, 214 as Stakeholder Capitalism Metrics pillar, 214 Productivity growth declining, 33–34 “decoupling” of wages from, 34 during golden age of capitalism, 33–34 Proposition C referendum (San Francisco), 212–213 Prosperity description of the elements of, 214 Legatum Prosperity Index (2019) ranking, 231 as Stakeholder Capitalism Metrics pillar, 214 stakeholder government role in enabling equitable, 178–179, 225 success of New Zealand and Singapore in creating, 249 See also Environment, social, and governance (ESG) objectives; Income equality; People Puar, Puty, 95, 96, 107, 110 Public debt COVID-19 pandemic and increasing, 19, 29–30 increasing rates of predicted, 28 population pyramid and repayment of, 30 Public health care spending dramatic increase (2000–2016) of, 32 in OECD countries, 32 Purchasing power parity (PPP), Financial Times reporting on Asian GDP (2020), 70–71 PwC (US), 126, 215, 250 Q Qambrani, Tanzeela, 245–246 Qing Imperial dynasty (China), 56 QQ social media app (China), 60 Qualcomm, 141 Quebec (Canada), 167 R Racism against Sheedi population in Pakistan, 245–246 Black Lives Matter protests against, 186, 243, 246, 250 history of US school segregation and, 226 redlining practice of housing discrimination, 226 Rapin, Philippe, 163–164 Ravensburger Pact (1997), 17 Ravensburger (Germany), 5, 7, 8, 9, 19, 251 Reagan, Ronald, 77, 122 Redlining practice, 226 Reed, John, 71 “Reefer ships” (1870s), 104, 110 Reform and Opening Up policy (1979) [China], 15, 18, 36, 57, 59, 72 Reformation, 130 Reich, Robert, 122 Reliance Industries (India), 68 Renaissance, 130 Ren Zhenfei, 60 Renzi, Prime Minister (Germany), 81 Republic of Korea.


pages: 356 words: 106,161

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century by Rodrigo Aguilera

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, availability heuristic, barriers to entry, basic income, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, bitcoin, Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, carbon footprint, Carmen Reinhart, centre right, clean water, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer age, Corn Laws, corporate governance, corporate raider, creative destruction, cryptocurrency, cuban missile crisis, David Graeber, David Ricardo: comparative advantage, death from overwork, decarbonisation, deindustrialization, Deng Xiaoping, Doha Development Round, don't be evil, Donald Trump, Doomsday Clock, Dunning–Kruger effect, Elon Musk, European colonialism, fake news, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, fundamental attribution error, gig economy, Gini coefficient, Glass-Steagall Act, Great Leap Forward, green new deal, Hans Rosling, housing crisis, income inequality, income per capita, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, Jeff Bezos, Jeremy Corbyn, Jevons paradox, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, karōshi / gwarosa / guolaosi, Kenneth Rogoff, Kickstarter, lake wobegon effect, land value tax, Landlord’s Game, late capitalism, liberal capitalism, long peace, loss aversion, low interest rates, Mark Zuckerberg, market fundamentalism, means of production, meta-analysis, military-industrial complex, Mont Pelerin Society, moral hazard, moral panic, neoliberal agenda, Network effects, North Sea oil, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, Overton Window, Pareto efficiency, passive investing, Peter Thiel, plutocrats, principal–agent problem, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, savings glut, Scientific racism, secular stagnation, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, Social Justice Warrior, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Stanislav Petrov, Steven Pinker, structural adjustment programs, surveillance capitalism, tail risk, tech bro, TED Talk, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transatlantic slave trade, trolley problem, unbiased observer, universal basic income, Vilfredo Pareto, Washington Consensus, Winter of Discontent, Y2K, young professional, zero-sum game

If any statistic captures the triumphalism of the progress narrative it is this one, and why wouldn’t it? Poverty is unequivocally bad. However, there is a significant problem here: the “science” behind global poverty estimation though a standardized international poverty line is rather un-scientific. Currently this number is set at $1.90 (US) a day in purchasing power parity (PPP) terms based on 2011 US prices, higher than the original $1 a day when this indicator was introduced in 1990 in order to account for inflation. What most people are unaware of is the arbitrary nature of this number, which in fact is the simple average of the poverty lines of fifteen developing countries whose individual poverty lines also happen to use completely different methodologies.28 This is compounded by comparison issues when applying PPP, exchange rate, and inflation adjustments for each country as well as the obvious difficulty of applying a single number to countries with completely different demographic and geographic contexts.

The World Bank defines two additional poverty lines, of $3.20 and $5.50 a day, which reflect a rough average of the national poverty lines31 in lower-middle-income and upper-middle-income countries respectively, plus an estimated “unofficial” poverty line of $21.70 a day for high-income countries.32 In other words, the true world poverty rate even by World Bank standards should be the percentage of people under each of their country’s income classification, and would be much higher than the rate using just $1.90. Unfortunately, such sophistication seems too much for policymakers and pundits, which is why the $1.90 figure endures. This, in turn, presents another problem. Most people assume $1.90 a day is what would get you by in a poor country, but that reflects a misunderstanding of purchasing power parities. Rather, $1.90 a day 2011 PPP means that the threshold of extreme poverty in each country is that which is equivalent to living on $1.90 a day in the US in 2011. Assuming an eight-hour workday, that amounts to less than twenty-four cents per hour. This isn’t the threshold of being extreme poor: this is an actual starvation wage on which nobody in the US would physically survive on a sustained basis.

Returning to Hans Rosling’s comparison of the Zambia of today and the Sweden of 1921 that was mentioned in Chapter Three, he may have been surprised to know that Zambia in those days was probably richer relative to Sweden than it is now: at least using 1950 data (the earliest available for Zambia), it had an income per capita that was 12% of Sweden’s compared to just 8% in 2016.39 And that’s using purchasing power parities, which often overestimate the income of developing countries since most tradable goods are priced globally rather than locally. In other words, a haircut or taxi ride will be considerably cheaper in Lusaka than Stockholm but a smartphone or airline ticket (which presumably these new middle classes will be consuming more) will cost roughly the same.


pages: 437 words: 115,594

The Great Surge: The Ascent of the Developing World by Steven Radelet

Admiral Zheng, agricultural Revolution, Asian financial crisis, bank run, Berlin Wall, biodiversity loss, Boeing 747, Branko Milanovic, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, clean water, colonial rule, creative destruction, demographic dividend, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, Erik Brynjolfsson, European colonialism, export processing zone, F. W. de Klerk, failed state, Francis Fukuyama: the end of history, Gini coefficient, global pandemic, global supply chain, Great Leap Forward, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invention of the steam engine, James Watt: steam engine, John Snow's cholera map, Joseph Schumpeter, Kenneth Arrow, land reform, low interest rates, low skilled workers, M-Pesa, megacity, middle-income trap, Mikhail Gorbachev, Nelson Mandela, off grid, oil shock, out of africa, purchasing power parity, race to the bottom, randomized controlled trial, Robert Gordon, Robert Solow, Second Machine Age, secular stagnation, Shenzhen special economic zone , Sheryl Sandberg, Simon Kuznets, South China Sea, special economic zone, standardized shipping container, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, three-masted sailing ship, trade route, women in the workforce, working poor

We are in the early stages of a new age of global prosperity in which, with many setbacks and challenges along the way, extreme poverty will continue to decline, incomes in developing countries will grow, health and education will improve, and democracy and basic freedoms will expand—haltingly, unevenly, but unrelentingly. * * * I. Consumption of $1.25 a day is the World Bank’s definition of “extreme” poverty, with all figures in purchasing power parity terms and adjusted for inflation, as described in chapter 2. II. This figure was calculated as a simple (unweighted) average, counting each country the same. A weighted average yields a higher growth rate due to the impact of China and a few other fast-growing countries with large populations.

First, they are corrected for inflation over time within countries by using the prices in a set base year. (That is, the data are measured in “constant” prices, or “real” terms.) Most of the data are measured in 2005 prices, although the Bourguignon and Morrisson data mentioned earlier are measured in constant 1985 prices. Second, the estimates are based on purchasing power parity (PPP) prices, sometimes called international prices. PPP prices account for the differences in price levels across countries. Anyone who travels knows that the cost of living varies widely across countries, and that the prices of the same goods can be very different. Fruits, vegetables, haircuts, and taxi rides are cheap in Tanzania, but expensive in Switzerland, so $1 converted at the local exchange rate goes a lot further in Dar es Salaam than it does in Zurich.

For discussions on this topic, see Kishore Mahbubani, The Great Convergence: Asia, the West, and the Logic of One World (New York: PublicAffairs, 2013); Charles Kenny, The Upside of Down: Why the Rise of the Rest Is Good for the West (New York: Basic Books, 2014); Smart Power 2.0: America’s Global Strategy (Washington, DC: US Global Leadership Coalition, 2012), www.usglc.org/downloads/2012/12/USGLC-Smart-Power-Brochure.pdf. 10. The global economy shares are from the World Bank’s World Development Indicators and include all low- and middle-income countries, and are calculated based on GDP in purchasing power parity prices. The trade shares are from Constantine Michalopoulos and Francis Ng, “Trends in Developing Country Trade 1980–2010,” policy research working paper 6334, World Bank, Development Research Group, Trade and Integration Team, Washington, DC, January 2013, http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-6334.


pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Berlin Wall, biodiversity loss, Black Swan, Bretton Woods, business cycle, capital controls, carbon credits, carbon tax, Cass Sunstein, central bank independence, classic study, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial engineering, financial innovation, floating exchange rates, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global macro, global reserve currency, global village, high net worth, high-speed rail, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inverted yield curve, invisible hand, Just-in-time delivery, Kenneth Rogoff, Long Term Capital Management, low interest rates, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, precautionary principle, price stability, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Ronald Reagan, Savings and loan crisis, sovereign wealth fund, special drawing rights, subprime mortgage crisis, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Tragedy of the Commons, Washington Consensus, Westphalian system, WikiLeaks, women in the workforce, yield curve

Figure 5.6 European Monetary Union Real Effective Exchange Rate Index (BIS), Adjusted by Relative Consumer Prices Source: Thomson Reuters This risk is further underlined by Figure 5.7, which shows relative hourly labor costs around the world, as surveyed annually by the US Bureau of Labor Statistics (updated using current exchange rates). This “absolute” measure of competitiveness or purchasing power parity does not depend on any expectation of mean reversion, but rather on the concept that an hour of manufacturing labor should cost about the same in advanced economies with access to similar technology and managerial know-how. On this basis, the euro appeared to be overvalued by 26 percent against the dollar and by 34 percent against the pound in the third quarter of 2010.

(High concentrations of such business boosts land values, and the elites in these societies usually own much of the land.) Quite apart from the city-states (Singapore, Hong Kong, Dubai, Qatar, Bahrain), the big player in the background is China—more specifically Shanghai. China is by far the world’s largest creditor nation, and its national output, measured at purchasing power parity, was about $8.5 trillion in 2009 compared with the United States’ $14 trillion. (See Table 17.1.) No one can predict exactly what will happen to different countries’ output by 2020 or 2030, but there has to be a possibility that—if the trend growth differential of the 2000s (that is, about 6 percent a year, with 8 to 9 percent growth in China compared to 2.5 percent in the United States) persists—China’s GDP will catch up with US GDP by 2020.

See Party of the Democratic Revolution (PRD) PRI. See Institutional Revolutionary Party (PRI) productivity gains, xvi, 4 productivity lags, in Canada, 26 Project Kuwait, 184 protectionism, 24–25, 27 public debt, xxvii–xxviii, 81; global financial crisis and, 256–257; US, 5–6. See also fiscal deficits purchasing power parity, 245 Qajars, 206 quantitative easing, xvii, 7–8, 24, 96–97, 173 rand, 136, 137 rating agencies, 267, 268 rational choice theory, 286 reading skills, 293 real estate market: Australia, 143–145; Canadian, 16–17, 19–20 reality, perceptions of, 298–300 regional economic communities (RECs), 121–122 regulatory reform, 120 Rengo, 112 renminbi (RMB), 163–164 Republican Party, xvii, 6, 12–13, 63, 269–270 Reserve Bank of Australia, 144, 146–147 reserve currency, xxiv; alternative, 158; decline of British pound as, 153–154; euro as, 158–160; requirements for, 156–158; RMB as, 163–164; synthetic currency as, 161–163; US dollar as, 153–165 residential construction, 4 resource nationalism, 185 Ricardian equivalence, 71 Rich, Frank, 299 risk assessment, 276–277 RMB.


pages: 573 words: 115,489

Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, banks create money, Basel III, basic income, biodiversity loss, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, circular economy, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, critique of consumerism, David Graeber, decarbonisation, degrowth, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, Glass-Steagall Act, green new deal, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, impact investing, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, low interest rates, Mahatma Gandhi, mass immigration, means of production, meta-analysis, Money creation, moral hazard, mortgage debt, Murray Bookchin, Naomi Klein, negative emissions, new economy, ocean acidification, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, Post-Keynesian economics, profit motive, purchasing power parity, quantitative easing, retail therapy, Richard Thaler, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, TED Talk, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Tragedy of the Commons, universal basic income, Works Progress Administration, World Values Survey, zero-sum game

See US Congress (1973). 2 It is a possibility worth considering – and I touch on it later – that this particular concept of progress as material betterment over time is itself a modern construction. 3 Global population will reach ten billion people by 2056, according to the median variant in the latest UN projections (UN 2015). 4 As we discuss in Chapter 6, the GDP can be thought of as simultaneously measuring the sum of all economic output (gross value added), the sum of all incomes (wages and dividends/profits) and the sum of all expenditures (consumption and investment). This latter is often referred to as aggregate demand. For a fascinating history of the GDP and its limitations, see Philipsen (2015). 5 In October 2015, the World Bank updated its poverty lines to reflect changes in purchasing power parity. Extreme poverty is now defined as living on less than $1.90 a day at 2011 purchasing power parity. Updated poverty data at different poverty lines can be calculated on the World Bank’s PovCalNet website: http://iresearch.worldbank.org/PovcalNet/index.htm?0 (accessed 7 November 2015). 6 This evocative phrase comes from the Indian ecologist Madhav Gadjil (Gadjil and Guha 1995). 7 Philipsen (2015). 8 ‘Be moderate in prosperity, prudent in adversity’, advised Periander, the ruler of Corinth in 600 bc; ‘Prosperity tries the fortunate; adversity the great’, claimed Rose Kennedy, mother of JFK and RFK. 9 On income shares of the poor, see, for example, Milanovic (2011, 2012); see also his online presentation at www.ub.edu/histeco/pdf/milanovic.pdf, accessed 7 November 2015.

‘It measures everything in short, except that which makes life worthwhile.’20 Notice, also, that this comfortable elision of utility with the GDP completely undermines the humanitarian point above. It equates a dollar of GDP for a rich person with exactly the same dollar of GDP for a poor person. Statisticians may do clever things to adjust these dollars for ‘purchasing power parity’. But they can’t (as yet) adjust for the much higher marginal utility that a dollar represents to a poor person than it does to a rich one. The formal economics literature is replete with critical examinations of the GDP. But it was to be another 40 years before a senior politician once again dared to articulate its shortcomings.


One Billion Americans: The Case for Thinking Bigger by Matthew Yglesias

Affordable Care Act / Obamacare, airport security, assortative mating, Big Tech, Boeing 737 MAX, Boris Johnson, British Empire, business logic, carbon footprint, carbon tax, classic study, collective bargaining, Colonization of Mars, congestion charging, congestion pricing, coronavirus, COVID-19, cross-subsidies, deindustrialization, demographic transition, Diane Coyle, Donald Trump, drive until you qualify, Edward Glaeser, Elon Musk, gentrification, global pandemic, Greta Thunberg, high-speed rail, housing crisis, illegal immigration, immigration reform, income inequality, Induced demand, industrial cluster, Kowloon Walled City, low interest rates, mandatory minimum, mass immigration, Mercator projection, minimum wage unemployment, moral panic, New Urbanism, open borders, open immigration, plutocrats, purchasing power parity, race to the bottom, secular stagnation, selective serotonin reuptake inhibitor (SSRI), self-driving car, Silicon Valley, social distancing, superstar cities, tech worker, the built environment, Thomas Malthus, transit-oriented development, white flight, working-age population, Yogi Berra

For countries like China that don’t allow their exchange rate to float up and down in the free market, the problem is different. You get a good deal of stability, but you also get changes that happen because of the shifting winds of government policy rather than economic conditions. International economic organizations try to deal with this reality by using what they call purchasing power parity (PPP). This works when organizations survey the world for what a representative basket of goods and services—tomatoes, haircuts, refrigerators, shoes, pasta, rent—costs in local currency in each country. Then by doing a little mathematical wizardry to account for how important each particular item in the basket is to a typical household, they construct a measure that allows them to say, for example, that Spain’s GDP lets them buy about US$40,000 worth of stuff per person while in America we are closer to US$60,000 per person.

* This is an order of magnitude more than what continental Europe spends on urban subway tunnels. Berlin’s U-55 line cost $250 million per kilometer, Paris Metro’s Line 14 cost $230 million per kilometer, and Copenhagen’s Circle Line cost $260 million per kilometer (and less than that in purchasing power parity terms). Alon Levy, a quirky Israeli mathematician who did a lot of the original legwork on comparative construction costs before pivoting his career to working full time on transit issues, observes that this cost gap drives a growing divide in actual infrastructure provision. Between 2005 and 2030, New York will have spent about $35 billion on subway and commuter rail projects in exchange for fifteen kilometers of new tunnel.


pages: 1,014 words: 237,531

Escape From Rome: The Failure of Empire and the Road to Prosperity by Walter Scheidel

agricultural Revolution, barriers to entry, British Empire, classic study, colonial rule, conceptual framework, creative destruction, currency manipulation / currency intervention, dark matter, disruptive innovation, Easter island, Eratosthenes, European colonialism, financial innovation, financial intermediation, flying shuttle, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Johann Wolfgang von Goethe, Johannes Kepler, joint-stock company, Joseph Schumpeter, knowledge economy, low interest rates, mandelbrot fractal, means of production, Multics, Network effects, out of africa, Peace of Westphalia, peer-to-peer lending, plutocrats, principal–agent problem, purchasing power parity, rent-seeking, Republic of Letters, secular stagnation, South China Sea, spinning jenny, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, trade route, transaction costs, vertical integration, zero-sum game

503 Glossary 529 Technical Note to Chapter 1 533 Notes 537 References 603 Index 647 FIGURES AND TABLES FIGURES     I.1  Per capita GDP in the United Kingdom, China, and India, 1000–2000 CE     I.2  Distribution of global GDP adjusted for purchasing power parity in 1 CE     I.3  Distribution of global GDP adjusted for purchasing power parity in 1960     I.4  Distribution of people worldwide living on more than $200 per day in 2002     I.5  Social development scores in the most developed parts of western Eurasia, 5000 BCE–2000 CE     I.6  Social development scores in western and eastern Eurasia, 500 BCE–1500 CE     I.7  Social development scores in western and eastern Eurasia, 1500–1900 CE     I.8  The population of the single largest empire and the three largest empires in the world as a proportion of world population, 700 BCE–2000 CE     1.1  Macro-regions of state formation     1.2  The population of South Asia, Europe, the Middle East and North Africa, and the “Roman empire region” as a proportion of the population of East Asia, 200 BCE–2000 CE, at centennial intervals     1.3  The proportion of the population residing in the area covered by the Roman empire at its peak that was claimed by the largest polity in that area, 450 BCE–2000 CE     1.4  The proportion of the population of Europe claimed by the largest polity in that area, 250 BCE–2000 CE     1.5  The population of the area claimed by the Roman empire at its peak as a proportion of the population of Europe, 200 BCE–2000 CE     1.6  The proportion of the population of the MENA region claimed by the largest polity in that area, 700 BCE–2000 CE     1.7  The proportion of the population of South Asia claimed by the largest polity in that area, 500 BCE–2000 CE     1.8  The proportion of the population of East Asia claimed by the largest polity in that area, 250 BCE–2000 CE     1.9  Comparison between the proportion of the population of East Asia controlled by the largest polity in East Asia and the proportion of the population of China controlled by the largest polity in China, 250 BCE–2000 CE   1.10  Actual population and census population of the largest polity in China as a proportion of the total population of that region, 250 BCE–2000 CE   1.11  Proportion of the population of Europe and East Asia claimed by the largest polity in each region, 250 BCE–2000 CE     2.1  Italy in the early fourth century BCE     2.2  Political statuses in Italy in the third century BCE     2.3  Approximate military mobilization rates of the Roman citizenry, 346–31 BCE     2.4  Roman and Italian military deployments by region, 200–168 BCE     2.5  Expansion of the Roman empire to its peak size     2.6  (a) General form of the social structure of agrarian societies according to Ernest Gellner     2.6  (b) Adaptations of the Gellner model     3.1  The Middle Eastern political-military network, c. 1500–500 BCE     3.2  Political-military networks in the ancient Mediterranean during the third quarter of the first millennium BCE     3.3  Roman troop deployments by region as a share of all deployments, 200–168 BCE     3.4   Stylized typology of peripheries in the Roman-era Mediterranean     3.5  Time cost of transfers from Rome     3.6  Financial cost of transfers to Rome     3.7  The Mediterranean core of the Roman empire     4.1  The Akkadian, Neo-Assyrian, and Achaemenid empires     4.2  The Athenian empire (late fifth century BCE) and the empire of Alexander the Great (323 BCE)     5.1  The Mediterranean, c. 500 CE     5.2  The Roman empire, c. 555 CE     5.3  The Umayyad caliphate, c. 750 CE, and later successor states     5.4  The Carolingian empire, c. 800 CE     5.5  Carolingian partitions, 843–888 CE     5.6  The German (“Roman”) Empire, c. 1200 CE     6.1  The Mongol empire in the late thirteenth century CE     6.2  The Holy Roman empire and the European possessions of Charles V, c. 1550 CE     6.3  The possessions of Philip II, 1590s CE     6.4  The Ottoman empire, c. 1683 CE     6.5  Europe in 1812 CE     7.1  Empires of the Old World, c. 200 CE     7.2  The Han, Tang, Northern Song, Yuan, Ming, and Qing empires     8.1  Altitude profile of Europe     8.2  Altitude profile of East Asia     8.3  The Eurasian steppe     8.4  Spatial distribution of the core areas of empires of at least 1 million square kilometers in Afroeurasia     8.5  Probability of being part of large polities (> 1 million km2) at 100-year intervals, 500–1500 CE     8.6  Effective distance from the Eurasian steppe (by land)     8.7  Potential vegetation cover of Asia     9.1  Modern distribution of Chinese dialect groups 10.1.  

While inequality also contributes to this pattern by boosting the standing of the United States, South Africa, and South America, the timing of modernization remains the principal determinant of these imbalances (figure I.4).4 FIGURE I.2   Distribution of global GDP adjusted for purchasing power parity in 1 CE. Sources: http://archive.worldmapper.org/display.php?selected=159 and http://archive.worldmapper.org/display.php?selected=162 (© Copyright Worldmapper.org / Sasi Group [University of Sheffield] and Mark Newman [University of Michigan]). FIGURE I.3   Distribution of global GDP adjusted for purchasing power parity in 1960. Sources: http://archive.worldmapper.org/display.php?selected=159 and http://archive.worldmapper.org/display.php?selected=162 (© Copyright Worldmapper.org / Sasi Group [University of Sheffield] and Mark Newman [University of Michigan]).

selected=162 (© Copyright Worldmapper.org / Sasi Group [University of Sheffield] and Mark Newman [University of Michigan]). FIGURE I.4   Distribution of people worldwide living on more than $200 per day in 2002 (adjusted for purchasing power parity, by country). Source: http://archive.worldmapper.org/display.php?selected=158 (© Copyright Worldmapper.org / Sasi Group [University of Sheffield] and Mark Newman [University of Michigan]). Ian Morris’s social development index is perhaps the most ambitious attempt to quantify this massive transformation. It seeks to (very roughly) quantify and compare overall levels of material development by tracking four key components—energy capture, social organization, war-making capacity, and information technology—over the very long term in the most developed parts of western and eastern Eurasia.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, classic study, clean water, collapse of Lehman Brothers, collective bargaining, company town, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, gentrification, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, Glass-Steagall Act, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

China has now become the world’s largest economy—which simply means that because it has roughly five times the population, its income per head is only one-fifth that of the United States (based on standard statistics, called “purchasing power parities,” designed to convert the income in one country into an equivalent income in another). Still, that’s much better than it was even 25 years ago, when purchasing-power-parity income per capita was less than 5 percent that of the United States. But at the same time there has been an enormous growth of inequality in China—more millionaires, more billionaires. Although India’s growth spurt has not been as long or as fast as China’s, it did peak at 9 percent per year.

In the third of a century that Americans saw their incomes stagnate, China went from being an impoverished country, with a per capita income less than 1 percent that of the United States and a GDP that was less than 5 percent that of the United States, to being the largest economy in the world (measured in what economists called purchasing power parities). By the end of the next quarter-century, it was slated to be twice the size of the U.S. economy. But ideologies are often more influential than evidence. Free-market economists seldom looked at the success of the managed-market economies of East Asia. They preferred to talk about the failures of the Soviet Union, which eschewed the use of the market altogether.


pages: 363 words: 28,546

Portfolio Design: A Modern Approach to Asset Allocation by R. Marston

asset allocation, Bob Litterman, book value, Bretton Woods, business cycle, capital asset pricing model, capital controls, carried interest, commodity trading advisor, correlation coefficient, currency risk, diversification, diversified portfolio, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, family office, financial engineering, financial innovation, fixed income, German hyperinflation, global macro, high net worth, hiring and firing, housing crisis, income per capita, index fund, inventory management, junk bonds, Long Term Capital Management, low interest rates, managed futures, mortgage debt, Nixon triggered the end of the Bretton Woods system, passive investing, purchasing power parity, risk free rate, risk-adjusted returns, Robert Shiller, Ronald Reagan, Sharpe ratio, Silicon Valley, stocks for the long run, superstar cities, survivorship bias, transaction costs, Vanguard fund

., 222 Pioneering Portfolio Management, 204 Plaza Accord, 81 portfolio constraint, real estate, 259–260 portfolios alternative investment, 262–264 bonds in, 290–291, 309–310 commodities, 245–249 estimating returns, 155–159 examples, 159–162 expansion, 145–147 gold, 249–251 growth and value, 69–71 hedge funds, 186–187 high net worth, 264–266 real estate, 218 rebalancing, 319 stocks in, 290–291, 309–310 ultra-high net worth, 266–269 PPP. See purchasing power parity premium method, 155–159 price-earnings ratio (p-e), 31–32, 107 private equity, 191 key features, 211 proportional rule, 291 purchasing power parity (PPP), 100 Q qualified purchasers, 168 R real estate, 213–214 asset allocation, 258–262 direct ownership, 220–223 diversification gains, 219 portfolio constraint, 259–260 real estate capital, 214 real estate investment trusts (REIT), 4, 214–220 real house appreciation, 224–226 real returns, 15, 17, 25–27 compound, 35 rebalancing defined, 320–321 down economy, 323–324 portfolios, 319 up economy, 321–323 recessions, 6 effects on bonds, 7 effects on stocks, 7 Reinganum, Marc R., 49 REIT.

P1: a/b c06 P2: c/d QC: e/f JWBT412-Marston T1: g December 8, 2010 17:41 Printer: Courier Westford 100 PORTFOLIO DESIGN Irving Kravis and his colleagues at the University of Pennsylvania developed a methodology for measuring the cost of living across countries.4 This methodology, which has since been adopted by the World Bank and other international agencies, deflated gross national income using the cost of a common market basket to produce GNI adjusted for purchasing power parity or PPP. The results follow a consistent pattern. Less developed countries have lower costs of living than industrial countries. So the GNI adjusted for PPP of the less developed countries tends to be larger than the unadjusted GNI. In the case of the industrialized countries, the reverse is true.


pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

"Friedman doctrine" OR "shareholder theory", Airbnb, Akira Okazaki, antiwork, behavioural economics, big-box store, Black Swan, book scanning, British Empire, business cycle, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, classic study, clean water, Columbian Exchange, conceptual framework, correlation does not imply causation, Costa Concordia, creative destruction, critique of consumerism, crony capitalism, dark matter, Dava Sobel, David Graeber, David Ricardo: comparative advantage, deindustrialization, demographic transition, Deng Xiaoping, do well by doing good, Donald Trump, double entry bookkeeping, electricity market, en.wikipedia.org, epigenetics, Erik Brynjolfsson, experimental economics, Ferguson, Missouri, food desert, Ford Model T, fundamental attribution error, Garrett Hardin, Georg Cantor, George Akerlof, George Gilder, germ theory of disease, Gini coefficient, God and Mammon, Great Leap Forward, greed is good, Gunnar Myrdal, Hans Rosling, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, immigration reform, income inequality, interchangeable parts, invention of agriculture, invention of writing, invisible hand, Isaac Newton, Islamic Golden Age, James Watt: steam engine, Jane Jacobs, John Harrison: Longitude, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labor-force participation, lake wobegon effect, land reform, liberation theology, lone genius, Lyft, Mahatma Gandhi, Mark Zuckerberg, market fundamentalism, means of production, middle-income trap, military-industrial complex, Naomi Klein, new economy, Nick Bostrom, North Sea oil, Occupy movement, open economy, out of africa, Pareto efficiency, Paul Samuelson, Pax Mongolica, Peace of Westphalia, peak oil, Peter Singer: altruism, Philip Mirowski, Pier Paolo Pasolini, pink-collar, plutocrats, positional goods, profit maximization, profit motive, public intellectual, purchasing power parity, race to the bottom, refrigerator car, rent control, rent-seeking, Republic of Letters, road to serfdom, Robert Gordon, Robert Shiller, Ronald Coase, Scientific racism, Scramble for Africa, Second Machine Age, secular stagnation, seminal paper, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, spinning jenny, stakhanovite, Steve Jobs, tacit knowledge, TED Talk, the Cathedral and the Bazaar, The Chicago School, The Market for Lemons, the rule of 72, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, total factor productivity, Toyota Production System, Tragedy of the Commons, transaction costs, transatlantic slave trade, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, union organizing, very high income, wage slave, Washington Consensus, working poor, Yogi Berra

The Great Recession was not economic Armageddon: Years to recover from the Great Recession, for large and some small countries, measured by matching or exceeding the previous peak of GDP per head at U.S. purchasing power parity Zero to 1 year 2 years 3 years 4 years or more Australia Brazil European Union Argentina* Egypt Canada France Bangladesh* Israel Chile Mexico China* South Korea Columbia* Russia Greece Nigeria Germany UK India* Peru Japan Ireland Poland Mongolia Italy Taiwan Indonesia* Pakistan* WORLD USA Philippines Saudi Arabia South Africa # Spain Turkey (2007 peak) Venezuela * = peak occurred before 2008. Source: World Bank figures corrected for inflation and purchasing power parity. * The eminent Marxist historian Eric Hobsbawm (1917–2012) gave in 2011 the conventional left-wing analysis of the Great Recession.

All the formerly poor can enjoy bourgeois incomes and can pursue, if they wish, the spiritual enrichment that such an income permits. We’re on the way to a pretty good material paradise. Look at the numbers.3 Average daily expenditures by Haitians and Afghans, expressed in present-day U.S. prices at “purchasing power parity”—and so allowing for inflation and the relevant exchange rates among currencies—are well below $3 a day, which before 1800 was what the average human more or less everywhere expected to make, earn, and consume.4 So it had been, always, back to the caves. Imagine living each day on the cost, spread over all your activities, of a half gallon of milk.

Slow growth yields envy, as the economist Benjamin Friedman has argued, and envy yields populism, which in turn yields slow growth.6 In 2014 Venezuela ranked 182nd out of 189 countries in the world in the ease of doing business, Brazil 120th.7 That’s the real “middle-income trap.” Here are the data on the transformative, quadrupling rates of growth of China and India, and the nontransformative rates of the rest. Note the italicized years to quadruple: Table 2. Annual rates of growth and years to quadruple in gross domestic product per person at purchasing power parity in constant 2005 international dollars of the BRIICS and the USA at the rates of growth experienced 1992–2002, 2002–2012, and over the entire twenty years, 1992–2012 Periods China India Brazil Indonesia Russia South Africa USA 1992–2002 ×4 in 8.42% 16 yrs 3.38% 36 1.31% 100 1.87% 74 –0.682% n.a. 0.593% 230 2.18% 63 2002–2012 ×4 in 9.40% 15 yrs 5.98% 23 2.49% 55 4.15% 33 4.64% 30 2.26% 61 0.934% 150 1992–2012 ×4 in 8.92% 15 yrs 4.92% 28 1.90% 73 3.01% 46 1.98% 70 1.43% 98 1.56% 88 Methods and sources: I used continuous compounding instead of simple interest, so at 1.0 percent per year the rule to double is 69 years instead of 72, and so the rule to quadruple is 138 years instead of 144.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Glass-Steagall Act, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

The rate at which two currencies would exchange, according to his theory, was determined by the purchasing power of each currency within its country of circulation. If one were to take an identical basket of commodities and compare how much it would cost in terms of each currency in the two countries, then the ratio was the correct rate of exchange. This was called the purchasing power parity (PPP) theory. Thus, if a basket filled with the same goods cost $350 to purchase in the US and £100 to purchase in the UK, the exchange rate would be $3.50 to the pound. If prices in the UK rose faster than in the US, and the same two baskets now cost £175 and $350 respectively, the new exchange rate would be $2.00 to the pound.

(i) Phillips curve (i), (ii), (iii), (iv), (v), (vi), (vii) Friedman’s challenge (i) Friedman’s version (i) Phillips’ historical study (i) Pigou, Arthur Cecil (i), (ii), (iii) equation (i) “The Classical Stationary State” (i) Piketty, Thomas (i), (ii) Pitt, William (younger) (i) point of maximum efficiency (i) policy, responses to (i) politics, effect of economic change (i) population aging (i), (ii) growth (i), (ii), (iii), (iv) Malthus’ law (i) portfolio selection (i) Post-Keynesians (i) postwar economic order, planning for (i) poverty, urban (i) precautionary motive (i) precious metals acquisition of (i) as indicators of wealth (i) predictive modeling (i), (ii) preemptive tax cut (i) preference shocks (i) price, as value (i) price levels, new classical model (i) price rises 1492 to 1589 (i) and inflation (i) post-World War I (i) vs. value (i) price takers, vs. price setters (i) price volatility, Smith’s theory (i) prices agricultural (i) determination (i) empirical analysis of asset prices (i) and productivity (i) sticky (i) Prices and Production (Hayek) (i) pricing, monopoly power (i) Prince, Chuck (i) Principle of Motion (i) Principles of Economics (Marshall) (i) private spending, control of (i) privatization (i) problems, concealment by accounting (i) productivity and price of goods (i) and prosperity (i) professionalization, of economics (i) profit (i) dependence on market (i) effects of progress (i) vs. interest (i) maximization (i) realization of (i) as unearned income (i) profit rates, and unrestricted movement of capital (i) profit squeeze (i) profitability (i) progress, effects on profit (i) Progressive Movement, United States (i) prospect of recovery (i) prosperity (i), (ii), (iii) protectionism (i), (ii) public debt (i) as intergenerational (i) Keynesian models (i) public policy, inflation targeting (i) purchasing power parity (PPP) theory (i) quantitative easing (i) see also liquidity injecting quantity theory of money (i), (ii), (iii) railroads (i), (ii) Rajan, Raghuram (i), (ii) random events (i), (ii), (iii) rate of profit, and unrestricted movement of capital (i) rates of return, ex ante/ex post calculations (i) rational expectations (RE) (i), (ii), (iii) ready cash (i) Reagan, Ronald (i) real balance effect (i) real interest parity (i) real wages (i), (ii), (iii), (iv), (v), (vi), (vii) see also money wages; wages recapitalization, banks (i) reconstruction (i), (ii) recovery, prospect of (i) redistribution (i) regulation of banks (i) financial and commodity markets (i) UK approach (i) Reinhardt, Carmen M.


pages: 352 words: 80,030

The New Silk Roads: The Present and Future of the World by Peter Frankopan

"World Economic Forum" Davos, active measures, Berlin Wall, Big Tech, bitcoin, blockchain, Boris Johnson, cashless society, clean water, cryptocurrency, Deng Xiaoping, don't be evil, Donald Trump, Ethereum, ethereum blockchain, F. W. de Klerk, failed state, fake news, Fall of the Berlin Wall, global supply chain, high-speed rail, illegal immigration, income inequality, invisible hand, land reform, Londongrad, low interest rates, Mark Zuckerberg, mass incarceration, Meghnad Desai, Nelson Mandela, Paris climate accords, purchasing power parity, ransomware, Rubik’s Cube, smart cities, South China Sea, sovereign wealth fund, Steve Bannon, trade route, trickle-down economics, UNCLOS, urban planning, WikiLeaks, zero-sum game

Decisions about whose voice should and whose should not be heard are closely linked to the consolidation and retention of power in a changing world and with fears about the consequences if alternative views are allowed to be expressed.23 We are living in the Asian century already, a time when the movement of global gross domestic product (GDP) from the developed economies of the west to those of the east is taking place on an astonishing scale – and at astonishing speed. Some projections anticipate that by 2050 the per capita income in Asia could rise sixfold in purchasing power parity (PPP) terms, making 3 billion additional Asians affluent by current standards. By nearly doubling its share of global GDP to 52 per cent, as one recent report put it, ‘Asia would regain the dominant economic position it held some 300 years ago, before the Industrial Revolution.’24 The transference of global economic power to Asia ‘may occur somewhat more quickly or slowly’, agreed another report, ‘but the general direction of change and the historic nature of this shift is clear’ – concluding similarly that we are living through a reversion to how the world looked before the rise of the west.25 The acute awareness of a new world being knitted together has helped prompt plans for the future that will capitalise on and accelerate the changing patterns of economic and political power.

They are based on a great movement of global GDP over the last twenty-five years, with more than 800 million being lifted above the poverty line since the 1980s in China alone.18 While the setting of what constitutes ‘poverty’ is a matter of debate for development economists and others, there can be little doubt that the pace as well as the extent of China’s growth is astonishing. In 2001, China’s GDP was 39 per cent of that of the US (on a purchasing power parity); that rose to 62 per cent by 2008. By 2016, China’s GDP was 114 per cent that of the United States, measured on the same basis – and is likely to rise both further and sharply in the next five years.19 This change is not just transformational for China; it is transformational for the rest of the world.


pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

"there is no alternative" (TINA), British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, degrowth, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, mass immigration, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Philip Mirowski, plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, selection bias, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, vertical integration, Washington Consensus, zero-sum game

In this increasingly complex world, the domestic fight for self-determination of the people and for better control of economic processes is, in my view, the cornerstone on which the poorest countries will have to build themselves up, as young nations aspiring to have their say in the global concert of nations. 152 Sylla T02779 01 text 152 28/11/2013 13:04 Annexes Table A1 Productivity statistics according to development level GDP per capita GDP per capita, PPP* (current 2008 $) (constant 2005 $) Low-income countries Lower middle income Upper middle income 490 2,220 8,389 Agricultural value added per worker (constant 2000 $) 1,114 4,427 13,052 285 609 3,681 Note: PPP = * Purchasing Power Parity. Source: Development Indicators of the World Bank (2010a). Table A2 Transfair USA’s revenue compared to additional FT income transferred from USA (in thousand $) Licence fees Total revenue 2001 2002 2003 2004 2005 2006 2007 2008 2009 686 1,114 1,665 2,748 4,209 5,570 7,665 9,270 10,008 307 474 933 1,895 2,932 4,521 4,961 5,757 6,881 Total additional FT FT premium income from USA 5,679 8,121 15,919 26,624 14,818 17,770 19,870 34,671 48,209 344 518 1,017 2,061 2,858 4,037 6,091 10,811 13,778 Receipts transferred* 5,335 7,603 14,902 24,563 11,960 13,733 13,779 23,860 34,431 Note: * Additional income created by the positive differential between FT prices and market prices.

., 33, 64, 67; Keynesianism, 42, 74, 141; euthanasia of the rentier, 157(n2) Kiribati, 135 Klein, Naomi, 78 Korea, the Republic of, 155(n1) Kraft Jacobs Suchard, 21 175 Sylla T02779 02 index 175 28/11/2013 13:04 the fair trade scandal Label-Step, 47 Labour, child labour, 51, 69, 79, 80, 113, 158(n7); division of labour, 63, 64, 65, 75; family labour, 51, 91, 94–5; forced labour, 71, 75, 80; hired labour, 43, 48, 49, 50, 51, 52, 94, 95, 112, 123, 129, 137, 160(n4), 161(n5); labour power, 76, 88, 98, 140, 148; labour supply, 9, 94–5; see also wage Lao People’s Democratic Republic, 135 Latin America, 9, 13, 15, 24, 37, 38, 42, 49, 74, 80, 107, 112, 115, 116, 117, 122, 129, 130, 131, 133, 135, 136, 137, 138, 139, 148, 154, 155(n1), 159(n23), 161(n14), 162(n22) Latin American and Caribbean Network of Smallholder Fair Trade Producers, 107 Latouche, Serge, 82–3 Least developed countries, see developing countries Lesotho, 135 Liberalism, 63, 67, 68, 74; neoliberal critique, 1, 59, 68–74, 84, 126, 146, 156(n4); neoliberalism, 3, 4, 6, 7, 41–3, 56, 59, 72, 120, 139–45, 146, 151, 162(n26), 163(n1) Liberia, 135 List, Friedrich, 8, 25; see also Protectionism Logistics Performance Index, 89, 137 Lomé Convention 155(n2) Low Income Food Deficit Countries, 135 Luxembourg, 162(n29) Madagascar, 135 Magnusson, Lars, 63–8, 71 Malawi, 134, 135 Malaysia, 155(n1) Maldives, 135 Mali, 134, 135 Market Access Overall Trade Restrictiveness Index, 30 Mars, 21 Marx, Karl, 60, 62, 75, 87, 157(n3) Marxist (tradition), 75, 76, 82, 157(n11) Mauritania, 135 Max Havelaar (novel), 39 Max Havelaar (label), 6, 39–40, 44–5, 130, 139, 157(n4), see also Fairtrade Max Havelaar (labelling initiatives), France, 46, 127, 156(n9), 158(n10), 159(n23), 160(n25), 161(n6); Switzerland, 127 McDonald’s, 77, 78, 79 Mexico, 3, 38, 79, 98, 114, 118, 131, 132, 133, 134, 136, 137, 139, 155(n1), 157 (n4), 159(n20), 161(n17) Mercantilism, 64–7 Microfinance, 1 Middle East, 15, 49 Mill, John Stuart, 65 Millennium development goal(s), see Development Mises (von), Ludwig, 42 Mohan, Sushil, 101–2 Monde (Le), 159(n19) Mont Pelerin Society, 42 Mozambique, 135 Multatuli, see Max Havelaar (novel) Multinationals, 19, 21, 41, 47, 53, 55, 56, 77–81, 140, 147, 149, 157(n13), 158(n5), 160(n26) Myers, Norman, 23, see also hamburger connection Nadel, Henri, 76 National sovereignty, 33, 64, 152 Neoclassical economics, 4, 11; 42, 65, 66, 72, 74, 82, 94–5, 140; general equilibrium theory, 99; gravity models, 162(n20) Neoliberalism, see liberalism Nepal, 135 Nestlé, 21, 78 Netherlands, 3, 20, 38, 39, 40, 54, 160 (n26), 162(n29); Groningen, 70; Kerkrade, 36 Network of European World Shops (the), 44, 46 New York, 157(n3) New York Times (the) 159 (n15) NGO, 3, 36, 38, 46, 47, 50, 53, 116, 117, 138 Nicaragua, 133, 134 Niche, 38, 70, 77 Niger, 135 Nigeria, 21 Nokia, 85–6, 125 Non-tariff barriers, 26–7, 30, 90 176 Sylla T02779 02 index 176 28/11/2013 13:04 index North America, 24, 35, 40, 44, 53, 136 North American Free Trade Agreement (NAFTA), 136 North-North relations, 31, 54, 80, 108 North-South relations, 1, 16–33, 34, 35, 40, 41, 43–4, 61–2, 73, 80, 87, 90, 97, 105–9, 126, 135, 140–5, 147, 148, 149, 163(n2), see also dependency theory Norway, 28, 162(n29) Oceania, 9, 24, 129, 131, 154 Organic production, 9, 53–5, 79, 92, 96, 112, 115, 160(n1) Organisation for Economic Co-operation and Development (OECD), 28–9; OECD countries, 10, 15, 21, 28, 29, 30, 42, 131, 144 Overall Trade Restrictiveness Index, see Market Access Overall Trade Restrictiveness Index Oxfam, 30, 32, 36, 38, 72, 122 Pakistan, 36 Palestine, 35 Panama, 134 Papua New Guinea, 134 Penson, Jonathan, 138 Peru, 114, 133, 134, 159(n20), 160(n26) Philippines, the, 155(n1) Pitt, William, 8 Polanyi, Karl, 75, 140 Popper, Karl, 42, 58–60 Portugal, 23, 65 Poverty, 2, 7, 10, 11, 33, 35, 36, 40, 58, 62, 68, 79, 84, 85–6, 95, 97–100, 103, 105, 109, 113, 114, 119, 122, 125, 131, 132, 137, 142, 143, 144, 145, 147, 148 Prebisch, Raúl, 17, 38 Price volatility, 17–18, 66, 86, 109 Primary product dependency, 10, 16, 90, 121, 132–8, 140–1, 147 Primary product financialisation, 17–8 Problem of induction, 110 Producer organisations, 3, 80, 98, 118–19, 157(n3), 159 (n16); certification, 45, 48, 49, 51, 91, 109, 111; 159(n20), 160(n4); selection bias, 81, 116–17, 132–9, 159(n23), 160(n26); shortcomings of the Fairtrade model, 97, 107–9, 138, 142–3, 162(n25); statistics, 51–3, 123–4, 130–1, 132–4, 161(n11) Producer support Estimate, 28–9; see also OECD Productive theory, 64–5, 75 Protectionism, 5, 25–33, 63, 67–8, 71–2, 145; infant industries protection, 25, 32, 37, 66, 67; see also free trade Puerto Rico, 35 Purchasing Power Parity, 153 Quinoa, 54, 159(n15) Rainforest Alliance, 53–6 Reagan, Ronald, 42 Ricardo, David, 65–7 Rist, Gilbert, 34 Rodrik, Dani, 73–4 Roozen, Nico, 3, 38–43, 54, 70, 87–8, 98, 139, 158(n4), 163(n1) Rowntree, Joseph, 72, Ruben, Ruerd, 113–17, 160(n27) Rugmark, 47 Rwanda, 134, 135, 138, Sachs, Jeffrey, 162(n23) Sao Tomé and Principe, 134, 135 Saint Lucia, 91, 134 Saint-Vincent and the Grenadines, 91, 134 Sales Exchange for Refugee Rehabilitation and Vocation (SERRV), 35–6 Samoa, 135 Samsung, 85–6, 125 Sara Lee, 70 Schumpeter, Joseph A., 63, 156(n3) Second World War, 35, 42 Selection bias, see producer organisations SELFHELP Crafts (shops), see Ten Thousand Villages Senegal, 134, 135 Sharif, Mohammed, 94–5 Sidwell, Marc, 68–73 Sierra Leone, 135 Singapore, 155(n1) Singer, Hans, 17; see also Structuralist school Slavery, 60–2, 75 177 Sylla T02779 02 index 177 28/11/2013 13:04 the fair trade scandal Slavery footprint, 156(n2) Smith, Adam, 8, 63–8, 75–6, 156(n3) Smith, Alastair M., 132, 156(n4) Smithsonian Migratory Bird Center, Bird-friendly Coffee programme, 54 Social capital, 101, 117, 119 Solidaridad, 3, 38–9, 114; see also Roozen Solomon Islands, 135 Somalia, 135 SOS Wereldhandel; see Fair Trade Organisatie Spaghetti bowl, 27 South Africa, 136, 137, 159(n20), 162(n21) South South relations, 80, 149, 163(n2) Sri Lanka, 134 STABEX, see Export earnings stabilisation system Starbucks, 77, 78, 150; Coffee and farmer equity practices, 55 Stigler, Georges, 42 Stiglitz, Joseph E. and Charlton, Andrew, 31–3, 66 Structural adjustment policies, 17, 18, 42 Structuralist school, 37–8 Sudan, 135 Sugar, 16, 27, 30, 36, 60–2, 80, 85, 90 Sustainable Agriculture Network, 53 Sustainability, 4, 24, 34, 47, 50, 53, 55, 56, 57, 70, 79, 113, 138, 142, 149–50, 158(n5) Sustainable development, 4, 34, 47, 55, 70, 82, 83, 156(n2), 163(n1) Sustainable Fair Trade Management System, 45; see also World Fair Trade Organization Sweden, 63, 162(n29) Switzerland, 53, 127, 128 System for Minerals (Sysmin), 155(n2) Taiwan, 155(n1) Tanzania, United Republic of, 134, 135 Tariff escalation, 26–8, 30 Tariff peaks, 30 Tax havens, 157(n13) Tea, 40, 49, 52, 53, 54, 56, 80, 130, 133, 134, 136 Ten Thousand Villages, 35–6 Thailand, 155(n1) Thatcher, Margaret, 42 Third Worldism, 36–40, 120 Times (the), 160(n2) Timor Leste, 135 Togo, 134, 135, 155(n2) Torrens, Robert, 65 Trade not aid (slogan), 38, 40, 126 Trade structure, 9, 10, 133–8, 141, 154, 163(n2); see also Developing countries Traders, 20, 44, 49, 86, 106, 116–17, 140 Transfair USA, additional income transferred, 125, 128, 130–1, 153; 161(n9), 161(n11); budget and licensee fees, 127–8, 153; exit from Fairtrade, 161(n13); name change, 161(n9); sales, 161(n10) Tribune (La), 159(n18) Truman, Harry, 34, 35 Turkey, 155(n1) Tuvalu, 135 UCIRI (Union de Comunidades Indigenas de la Region del Istmo), 98, 157(n4) Uganda, 134, 135, 138 Un Comtrade, 20, 134 Underdevelopment, see development Unequal exchange, 1–2, 16–22, 25, 37, 62, 76, 120, 132, 133; unequal ecological exchange, 22–4 United Nations, 10, 144, 155(n4) United Nations Conference on Trade and Development (UNCTAD), 9, 10, 13, 14, 16, 20–1, 38, 133, 134, 135, 154, 162(n19), 162(n21), 163(n2) United Kingdom, 8, 25, 31, 32, 36, 46, 53, 56–7, 60–2, 64–9, 71, 127, 128, 132 United States, 16, 20, 22, 23, 25, 27, 29, 31, 32, 35, 36, 42, 46, 53, 54, 61, 63, 67, 71, 79, 90, 125, 127, 128, 130, 131, 132, 136, 156(n2), 158(n8), 158(n9); American System, 26, 67; United States Agency for International Development (USAID), 138; see also Transfair USA UTZ Certified, 54, 55, 56, 70 Van der Hoff, Frans, 3, 38–43, 87–9, 98, 139, 158(n4), 158(n5), 162(n26), 163(n1) 178 Sylla T02779 02 index 178 28/11/2013 13:04 index Vanuatu, 135 Vent for surplus theory, 65 Vertical integration, 19–21, 41 Vietnam, 74 Wage, 79, 80, 158(n7), 160(n26), 160(n27), 161(n5); minimum wage, 51, 95, 98; reservation wage, 94–5; wage employment, 19, 72, 94, 123–4, 128, 131, 133, 137, 142, 162(n22) Wal-Mart, 78, 79 Washington Consensus, 73 Wealth of Nations, see Smith, Adam West Indies, 60–2, Williams, Eric, 60–2 Williamson, Jeffrey G., 162(n27) World Bank, 17, 31, 42; development indicators, 9, 10–12, 15, 30, 89, 131, 137, 153, 161(n7, n14, n17) World Fair Trade Organization, 44–5, 46, 80, 151 World-system theory, 76 World Trade Organization, 26, 28, 29, 31–3, 74, 144, 155(n3) Yemen, 135 Zambia, 135 179 Sylla T02779 02 index 179 28/11/2013 13:04 Sylla T02779 02 index 180 28/11/2013 13:04


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bond market vigilante , bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, foreign exchange controls, Glass-Steagall Act, guns versus butter model, Hyman Minsky, index fund, intangible asset, interest rate swap, inverted yield curve, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", joint-stock company, junk bonds, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, low interest rates, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, proprietary trading, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

In the era of floating rates, economists have attempted to study how the exchange rate affects, and is affected by, both the current and the capital account. Their study has centred on two factors, the level of prices and the level of interest rates. The study of the effect of prices on exchange rates has focused on the purchasing power parity (PPP) theory. At its simplest the theory argues that exchange rates will tend towards the point at which international purchasing power is equal. In other words, a hamburger would cost the same in any country, something The Economist highlights in its Big Mac index. In turn that means differential inflation rates are the most important driving factor behind exchange-rate movements.

However, the dividend paid will normally be less than that paid to ordinary shareholders PRINCIPAL The lump sum lent under a loan or bond PRIVATE EQUITY Investment in unquoted companies by funds that use large amounts of borrowed money PRIVATE PLACEMENT Method of selling securities by distributing them to a few key investors PSBR Public-sector Borrowing Requirement – the gap between the government’s revenue and expenditure PURCHASING-POWER PARITY The belief that inflationary differentials between countries are the long-run determinants of currency movements REAL INTEREST RATE The return on an investment once the effect of inflation is taken into account REPAYMENT MORTGAGE Mortgage on which capital and interest are gradually repaid REPURCHASE AGREEMENT A deal in which one financial institution sells another a security and agrees to buy it back at a future date RETAINED EARNINGS Past profits which the company has not distributed to shareholders RIGHTS ISSUE Sale of additional shares by an existing company SALE BY TENDER Method of making a new issue in which the price is not set and investors bid for the shares SAVINGS RATIO The proportion of income which is saved SCRIP ISSUE The creation of more shares in a company, which are given free to existing shareholders.


pages: 518 words: 128,324

Destined for War: America, China, and Thucydides's Trap by Graham Allison

9 dash line, anti-communist, Berlin Wall, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, conceptual framework, cuban missile crisis, currency manipulation / currency intervention, Deng Xiaoping, disruptive innovation, Donald Trump, Dr. Strangelove, escalation ladder, facts on the ground, false flag, Flash crash, Francis Fukuyama: the end of history, game design, George Santayana, Great Leap Forward, guns versus butter model, Haber-Bosch Process, Herman Kahn, high-speed rail, industrial robot, Internet of things, Kenneth Rogoff, liberal world order, long peace, Mark Zuckerberg, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, Nelson Mandela, one-China policy, Paul Samuelson, Peace of Westphalia, public intellectual, purchasing power parity, RAND corporation, Ronald Reagan, Scramble for Africa, selection bias, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spice trade, Suez canal 1869, synthetic biology, TED Talk, the rule of 72, The Wealth of Nations by Adam Smith, too big to fail, trade route, UNCLOS, Washington Consensus, zero-sum game

In 2014 the IMF estimates the size of the U.S. economy was $17.4 trillion and the size of China’s economy was $17.6 trillion.” The FT went on to note that “as recently as 2005, China’s economy was less than half the size of the U.S. By 2019, the IMF expects it to be 20% bigger.”17 The IMF had measured China’s GDP using the yardstick of purchasing power parity, or PPP, which is the standard now used by the major international institutions whose professional responsibilities require them to compare national economies. As the CIA puts it, PPP “provides the best available starting point for comparisons of economic strength and wellbeing between countries.”

As the CIA puts it, PPP “provides the best available starting point for comparisons of economic strength and wellbeing between countries.” The IMF explains that “market rates are more volatile and using them can produce quite large swings in aggregate measures of growth even when growth rates in individual countries are stable. PPP is generally regarded as a better measure of overall wellbeing.”18 Measured by purchasing power parity, China has not only surpassed the US, but also now accounts for roughly 18 percent of world GDP, compared to just 2 percent in 1980.19 Among those for whom American primacy is an article of faith, the IMF announcement stimulated a vigorous search for metrics by which the US is still number one.

See PLA (People’s Liberation Army) Pericles, 28, 35–38, 40, 43, 155, 212, 225, 233 Permanent Court of Arbitration, 151, 191 See also The Hague Perry, Matthew, 47 Persian Empire, 29–31, 60, 264 Persian wars, 29–31, 33, 38 Pescadores Islands, 270 Petraeus, David, 3 Peyrefitte, Alain, 134 Philip II (king), 249 Philip IV (king), 249 Philippines, 45, 93–94, 96, 127, 131, 151, 170, 173, 235, 315 n35 Phillipsburg, 258 Pillsbury, Michael, 129 Pitt, William, 141, 262 PLA (People’s Liberation Army), 130–31, 158–60, 167, 171, 175, 177–78, 183, 325 n79 Plato, 28 Plutarch, 30 Poland, 206, 222, 253, 264 Polish-Lithuanian Commonwealth, 253 Politburo, 120, 157 Pomerania, 254 populism, ix, 175, 194, 230–31 Port Arthur, 45, 48, 74, 271 Portugal, 187–91, 225, 245–47, 331 n8, 339 n2, 340 n8, 340 n12 Potidae, 36 PPP (purchasing power parity), 10–11, 118, 291 n25 preemptive attacks, 49, 74, 155, 280, 335 n59 Prince Eugene of Savoy. See Eugene of Savoy (prince) Prussia, 49–51, 59, 261, 266–67 Puerto Cabello, 97 Puerto Rico, 96 Pulitzer, Joseph, 95 Putin, Vladimir, 22, 200, 208 Q al-Qaeda, 136, 228 Qing Dynasty, 111–12, 122, 133, 143, 268, 322 n44 R Raid on the Medway, 257 railways, 62, 118, 125, 267, 275, 335 n59 RAND Corporation, 20, 132, 155, 176 Rape of Nanking, 45, 279 Reagan, Ronald, 125, 207–8, 216, 223, 226–28, 237, 283 Red Guards, 113 Reinhart, Carmen, 206 relations Anglo-American, 195–99, 222, 272–73, 333 n37 Anglo-Chinese, 7, 112, 133–36 Anglo-German, 55–89 Greek, 54 Russian, 64, 72, 83, 125, 152, 215 US-China, viii, ix, xviii, xx, 126–84, 208–11, 214, 219–21, 227–35, 279 US-Soviet, 207, 236 See also balance of power; individual countries religion, 252, 254–56 reunification (German), 191–94, 224, 284–85 Revolutionary War, 7 Rhodes, Cecil, 93 Rice, Condoleezza, 284 rise vs. rule, xv, 39, 41, 47, 187–232, 244, 288, 298 n1, 346 n153 See also rising power syndrome; ruling power syndrome; Thucydides’s Trap rising power syndrome, 44, 49, 51–52, 63, 68–69, 77, 151, 161, 211 See also honor; hubris; ruling power syndrome; Thucydides’s Trap rivalries.


Making Globalization Work by Joseph E. Stiglitz

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, benefit corporation, Berlin Wall, blood diamond, business process, capital controls, carbon tax, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Garrett Hardin, Gini coefficient, global reserve currency, Global Witness, Great Leap Forward, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Jones Act, Kenneth Arrow, Kenneth Rogoff, low interest rates, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, negative emissions, new economy, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Seymour Hersh, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, Tragedy of the Commons, trickle-down economics, union organizing, Washington Consensus, zero-sum game

Inequality is measured by the Gini coefficient, one of the standard measures. 3.Even the $2-a-day standard is less than a fifth of the poverty standard used in the United States and western Europe. 4.Shaohua Chen and Martin Ravallion, “How Have the World’s Poorest Fared since the Early 1980s?,” World Bank Development Research Group, World Bank Policy Research Working Paper 3341, June 2004. The $1-a-day standard actually is defined as $1.08 in 1993 “real” (or purchasing power parity) dollars; the $2-a-day standard is defined as $2.15. China’s poverty reduction has been truly remarkable. At the $1-a-day standard, the number in poverty has fallen from 634 million to 212 million—more people have been brought out of absolute poverty than the total number living in Europe or America. 5.The Voices of the Poor project was undertaken while I was chief economist of the World Bank as part of the preparation for the decennial report on poverty (World Development Report 2000/2001: Attacking Poverty).

Moreover, as we shall see later, the lopsided investor protection—foreigners were provided better protections than domestic investors—put into jeopardy environmental and other regulations. 8.See Instituto Nacional Estadística Geografía e Informática, “Personal ocupado en la industria maquiladora de exportacion segun tipo de ocupación” available at www.inegi.gob.mx/est/contenidos/espanol/rutinas/ept.asp? t=emp75&c= 1811. 9.In 1993, Mexico’s per capita PPP (purchasing power parity) income was 3.6 times that of China; by 2003, the ratio was cut in half, to 1.8. China had a distinct wage advantage over Mexico—wages are one-eighth of those in Mexico. But over the period of NAFTA, China’s wages have increased, while Mexico’s wages have stagnated. Thus, China’s relative success must be based on other factors. 10.Some simple models—where there are no transportation costs and where everyone has access to the same knowledge (technology)—predict that there will be complete factor price equalization.

Complicated technical provisions (rules of origins, which detail how much of the “value added” in the good have to be produced within the country) seem partially responsible, highlighting the importance of the fine details within a trade agreement. 38.I have, accordingly, dubbed the proposal the “EBP” initiative—opening up markets to everything but what you produce. 39.OECD, Agricultural Policies in OECD Countries: Monitoring and Evaluation (Paris: OECD, 2005). 40.In 2004, OECD subsidies were $279 billion, including water subsidies and other indirect subsidies. See ibid. 41.In purchasing power parity, the farmer’s income is somewhat higher, between $1,100 and $1,200. 42.The International Cotton Advisory Committee (ICAC), an association of forty-one cotton-producing,-consuming, and-trading countries formed in 1939, estimates that the elimination of American cotton subsidies would raise the global price by between 15 percent and 26 percent.


pages: 496 words: 131,938

The Future Is Asian by Parag Khanna

3D printing, Admiral Zheng, affirmative action, Airbnb, Amazon Web Services, anti-communist, Asian financial crisis, asset-backed security, augmented reality, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Basel III, bike sharing, birth tourism , blockchain, Boycotts of Israel, Branko Milanovic, British Empire, call centre, capital controls, carbon footprint, cashless society, clean tech, clean water, cloud computing, colonial rule, commodity super cycle, computer vision, connected car, corporate governance, CRISPR, crony capitalism, cross-border payments, currency peg, death from overwork, deindustrialization, Deng Xiaoping, Didi Chuxing, Dissolution of the Soviet Union, Donald Trump, driverless car, dual-use technology, energy security, European colonialism, factory automation, failed state, fake news, falling living standards, family office, financial engineering, fixed income, flex fuel, gig economy, global reserve currency, global supply chain, Great Leap Forward, green transition, haute couture, haute cuisine, illegal immigration, impact investing, income inequality, industrial robot, informal economy, initial coin offering, Internet of things, karōshi / gwarosa / guolaosi, Kevin Kelly, Kickstarter, knowledge worker, light touch regulation, low cost airline, low skilled workers, Lyft, machine translation, Malacca Straits, Marc Benioff, Mark Zuckerberg, Masayoshi Son, megacity, megaproject, middle-income trap, Mikhail Gorbachev, money market fund, Monroe Doctrine, mortgage debt, natural language processing, Netflix Prize, new economy, off grid, oil shale / tar sands, open economy, Parag Khanna, payday loans, Pearl River Delta, prediction markets, purchasing power parity, race to the bottom, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, Ronald Reagan, Salesforce, Scramble for Africa, self-driving car, Shenzhen special economic zone , Silicon Valley, smart cities, SoftBank, South China Sea, sovereign wealth fund, special economic zone, stem cell, Steve Jobs, Steven Pinker, supply-chain management, sustainable-tourism, synthetic biology, systems thinking, tech billionaire, tech worker, trade liberalization, trade route, transaction costs, Travis Kalanick, uber lyft, upwardly mobile, urban planning, Vision Fund, warehouse robotics, Washington Consensus, working-age population, Yom Kippur War

For most of recorded history, Asia has been the most important region of the globe. As the late British economist Angus Maddison demonstrated, for the past two thousand years, until the mid-1800s, China, India, and Japan together generated a greater total gross domestic product (GDP) (in purchasing power parity, or PPP, terms) than the United States, United Kingdom, France, Germany, and Italy combined. But with the Industrial Revolution, Western societies modernized their economies, expanded their empires, and subjugated most of Asia. After two centuries of Europe ruling the world, the United States rose to become a global power through its victory in the Spanish-American War (which gave it control of Cuba and the Philippines) and its decisive role in ending World War I.

Given its archaic financial system, mobile banking is spreading before bank branches and ATMs—and eventually, once the whole population gets banking apps, demonetization (removing physical currency altogether) as its larger neighbor India has done. With their low wages, Myanmar, Cambodia, and Laos are also attracting their share of light manufacturing activity, helping them climb toward middle-income status.40 Consumption levels tend to take off once GDP per capita hits $3,000, which Pakistan has now crossed in terms of purchasing power parity (PPP). In Pakistan, the average disposable income doubled between 2010 and 2017, making the country the world’s fastest-growing retail market, with the number of retail stores expected to double to 1 million between 2010 and 2020. Two-thirds of the country’s 210 million people under the age of thirty, many of them joining the urban consumer class en masse, are benefiting Western brands from McDonald’s to Dutch Boy paint.

Western, 357–58 Phoenicians, 29 Pinker, Steven, 284 plague (Black Death), 40 Plato, 37, 286, 291, 300 Poland, 249 pollution, 176–78, 181 Polo, Marco, 40 Pol Pot, 56, 70 populism, 283–84, 296 democracy hijacked by, 3 Portugal, 44 poverty, 183, 184, 318 prisons, 308 private equity, 171–72 privatization, 169–70 Progressive Alliance of Socialists and Democrats, 249 public goods, global, 321–22 Punjab, 33, 47 purchasing power parity (PPP): of Asia, 2, 9, 10, 63, 184 global, 10 Putin, Vladimir, 84, 85–86, 87, 89, 241, 310 oligarchic regime of, 310–11 Qajars, 47 Qara Khitai, 39 Qatar, 100, 101, 247 gas exports of, 175 Russia and, 88 Qichao, Liang, 351 Qin Dynasty, 31–32 Qing Dynasty, 44–45, 47, 48, 69, 76 Qin Shi Huang, 31 Quah, Danny, 320 racism, 329 Rajgir, 31 Rakuten, 133 R&D, in Asia, 197, 210, 211, 227 Rashid al-Din, 40 Rashidun Caliphate, 36 Rashtriya Swayamsevak Sangh (RSS) movement, 313 Rason, 143 Ray, Satyajit, 349 Regional Comprehensive Economic Partnership (RCEP), 8, 9 religious tolerance, 40, 70–71, 75 renewable energy, see alternative energy renminbi, 165, 188, 243, 264 as currency for intra-Asia trade, 102, 103, 110, 157 retail sector: in Asia, 172, 184–85, 189, 200, 210–11 in US, 228 Reza Shah Pahlavi, Shah of Iran, 50, 54 ride-sharing industry, 174–75 Rio Branco Institute, 277 Riot Games, 209 robotics, 134, 193, 196–97 Roma, 256 Romance of the Three Kingdoms, 353 Rome, ancient, 33 fall of, 35, 36, 39 Roosevelt, Franklin D., 287 Rosen, Dan, 156 Rudd, Kevin, 12 rule of law, 281, 282, 292, 312 blurred line between abuse of power and, 319 economic performance and, 309–10 Rumi, 39, 220 Rushdie, Salman, 256 Russia, modern, 3, 11, 15, 40, 140 arms exports of, 86, 87 Asian territory of, 82 China and, 19–20, 82–83, 84–85 Crimea annexed by, 83 ethnic and cultural diversity of, 89 Europe and, 83–84, 85, 89 European territory of, 82 expansionism of, 240 grain exports of, 90 India and, 86–87 Iran and, 87 Israel and, 88 Japan and, 82, 86–87 Latin American investments of, 275 North Korea and, 143 oil and gas exports of, 82–83, 84, 87–88, 175, 176 Qatar and, 88 re-Asianization of, 81–91 Saudi Arabia and, 87–88 Southeast Asia and, 87 Southwest Asia and, 87 stability preferred over democratic ideals in, 310 Syria and, 11, 83, 87, 88 Turkey and, 88, 92–93 2016 US election and, 83, 320 Ukraine invaded by, 83 Western sanctions against, 83, 86, 240–41 West’s divided policies toward, 83–84 see also Soviet Union Russia, prerevolutionary: Bolshevik Revolution in, 49 in era of European imperialism, 45, 47, 48 Russian Direct Investment Fund (RDIF), 88 Rwanda, 268 Ryukyu Kingdom, 44 Safavid Empire, 106 Saint Petersburg, 82, 90 Salesforce, 331 Salman, king of Saudi Arabia, 103 Salopek, Paul, 4–5 Samarkand, 32 Samsung, 159, 195, 211 Sanskrit, 69, 253 Sassanian Empire, 36 Satanic Verses, The (Rushdie), 256 Saudi Arabia, 11, 50, 54, 57, 71–72, 101, 134, 251 alternative energy programs in, 179 Asia investments by, 104 bond offerings by, 165 Chinese arms sales to, 101 economic diversification in, 190 Indian migrants in, 334 Iran and, 95–96, 100, 105–6 oil exports of, 58, 87–88, 102, 103 privatization in, 170 Public Investment Fund (PIF) of, 164 Russia and, 87–88 technocracy in, 312 Saudi Aramco, 102, 103, 104, 168 Saudi-Iraqi Coordination Council, 96 Schmidt, Eric, 200 Schröder, Gerhard, 83 sciences: Asian achievements in, 354–55 Asian fusion of spirituality with, 355 Scythians, 29, 30, 76 SEA Group, 167, 189, 209 sea levels, rising, 181–82 security systems, in Asia, 137–44 self-determination, 22 Seljuks, 38, 39, 44, 76 September 11, 2001, terrorist attacks, 3, 62, 113, 220, 231 service sector growth, 191, 192 sexual discrimination, sexual harassment, 314–15 shadow economies, 203 Shah Jahan, 41 shale oil energy revolution, 13, 175, 272 Shanghai, 42, 114 art scene in, 342 Shanghai Cooperation Organisation (SCO), 60, 84, 86, 92, 106, 108, 117 Shanghai-Tehran railway, 106 Shankar, Ravi, 332 Sharp, 132 Shi’a Muslims, 36, 41, 58, 95, 106, 312 Shintoism, 31, 34, 69 Shōtoku, prince of Japan, 35 Siam, 45–46 Siberia, 82 Siddiqi, Lutfey, 163 Siemens, 242, 246 Sikhs, 47 Sikkim, 186 Silicon Valley, 172, 199, 219, 287 Silk Road Fund, 110 Silk Roads, 24, 32, 33, 35, 40, 68, 69, 76, 81, 106, 239, 329 modern versions of, 1, 75, 84, 92, 97, 103, 108–13, 122, 244, 246, 252 as weakened by European voyages of discovery, 44 Silk Way Rally, 81 Simpfendorfer, Ben, 96–97 Sina Weibo, 314 Singapore, 22, 46, 53, 56, 74, 121, 156, 187, 212, 268, 334 American expats in, 234 art scene in, 342 civil liberties in, 297 civil service in, 292–93 in Cold War era, 54 data collection in, 295–96 democracy in, 288–89, 290 diversified economy of, 290 education in, 294 ethnic and cultural diversity of, 288, 297–98, 337 gun and drug laws of, 306 Japan and, 50–51, 133 Latin America investments of, 277 as libertarian nanny state, 289 as melting pot, 24 as model for other Asian countries, 299, 331 multiracial families in, 337–38 parliamentary system of, 295 policy corrections in, 291 public trust in government in, 291 technocratic government of, 287–99 technological innovation in, 195 Singapore Cooperation Program, 299 Singh, Shailendra, 174 Sino-Australian Free Trade Industrial Park, 129 Sino Israel Technology Innovation fund, 99 Sistema, 90 Slovakia, 256 Slumdog Millionaire (film), 348 social media, 208–9, 314 censorship of, 320 SoftBank, 112, 134, 171, 174, 179, 193 Sogdian peoples, 32, 33, 67 solar panel industry, 242, 272–73 Song Dynasty, 38–39, 42, 73 South Asia: early history of, 35 economic growth of, 9 failure of democracy in, 302 low-level workers from, 334–35 Muslims in, 70–71 oil and gas imports of, 152 poverty in, 183, 184 religious and ethnic diversity in, 70 South China Sea, 60, 84, 125, 130 Chinese assertiveness in, 19, 60, 84, 123, 124, 128, 137 Southeast Asia, 29, 50, 52, 208 Africa and, 264 Asianization of, 81 China and, 122, 154 Chinese migration in, 333 in Cold War era, 52, 53–54 cross-border integration of, 121–27 digital integration in, 187–89 economic growth in, 63, 148 energy investments of, 102 European colonization of, 45–46, 67 failures of democracy in, 302–3 foreign investment in, 9, 121, 148, 154, 250 Gulf states trade with, 102 India and, 154–55 Indianization of, 34 Indian migrants in, 334 internal trade in, 152 Japan and, 50–51, 133, 153–54, 156 low-level workers from, 334–35 manufacturing in, 133, 148, 153–54 Muslims in, 38–39, 43, 70–71, 121 1997 financial crisis in, 121 opium products in, 123 in post–Cold War era, 61 religious and ethnic diversity of, 43, 46, 70, 121 Russia and, 87 South Korea and, 153–54 tourism in, 122 US and, 125 see also Association of Southeast Asian Nations Southeast Asia Treaty Organization (SEATO), 53 South Korea, 14, 16, 55, 56, 60, 61, 63, 104, 275 Asian migrants in, 336–37 automation in, 193 capitalism in, 159 cashless economy in, 189 China and, 141–42 civil society in, 313 corruption in, 161 economic growth of, 158 film industry in, 348 global branding of, 331 Gulf states and, 102 Japan and, 141–42 multiethnic families in, 336 North Korea and, 142 Southeast Asia and, 153–54 technological innovation in, 195, 197 US and, 52, 142–43 Vietnam and, 154 Southwest Asia, 54 in Cold War era, 54 Russia and, 87 use of term, 6 sovereign debt, 165–66 Soviet Union, 49, 300 Afghanistan invaded by, 58, 59 Africa and, 261 in clashes with China, 56 in Cold War, see Cold War collapse of, 13, 14, 58, 59, 82, 283 Germany’s invasion of, 50 Spain, transpacific trade of, 44, 74 Spanish-American War, 2, 48 Sri Lanka, 105, 334 Srivijaya Kingdom, 34, 35, 38, 39, 70 State Department, US, Asia and, 143–44 steel production, 109, 176, 272–73 Steinmeier, Frank-Walter, 12 stock markets, Asia, 167–68 Straits Times, 290 Suez Canal, 102 Suez Canal Economic Zone, 99 Suharto, 61 Sui Dynasty, 37 Sukarno, 53 Sumatra, 38, 45, 70 Sumer, 28, 29 Sunni Muslims, 11, 36, 38, 57, 95, 312 Sun Tzu, 31 Sun Yat-sen, 48, 49 Sweden, Syrian refugees in, 255–56 Sykes-Picot Agreement, 49 Syngman Rhee, 55 Syria, 11, 16, 49, 54, 62, 94 civil war in, 63, 95, 255 Iran and, 106 Russia and, 11, 83, 87, 88 Syrian refugees, 218 systems, global, 7 systems, regional: Asia as, 5, 6–7, 15 conflict and, 11 Europe as, 7 North America as, 7 in world order, 13–14 Tagore, Rabindranath, 48, 351, 353 Taipei, art scene in, 342 Taiping Rebellion, 47 Taiwan, 52, 56, 61 China and, 141 civil society in, 313 Tajikistan, 59, 108–9, 182 Talas, Battle of, 36, 37, 77, 117 Tale of Genji, The (Murasaki), 353 Taliban, 62, 68, 116–17, 139 Tan, Anthony, 175 Tan, Yinglan, 173 Tang Dynasty, 36–38, 69, 70, 72, 75, 117, 137 Taoism, 182 Tao of Physics, The (Capra), 220 Tarim basin, 32, 33, 35, 36, 59 Tatars, 89 technocratic governance systems, 286–313 civil service in, 292–93 data collection and, 295–96 policy corrections in, 291 utilitarianism and, 286, 298, 306 technological innovation, 195, 196–200 Teets, Jessica, 300–301 Tehran-Mashhad railway, 107 Tel Aviv, 98 telemedicine, 202 television, American, Asians in, 350 Tencent, 104, 167–68, 188, 189, 193, 198, 199, 200, 209, 314, 318, 319 Tenshin, Okakura, 351 terrorism, 62–63, 97, 113, 116–17, 139, 220, 231, 240 Tesla, 179 Tetlock, Philip, 291 Thailand, 61, 63, 89, 121, 122–23, 154 Asian foreign labor in, 335 in Cold War era, 53, 54 corruption in, 161 economic growth of, 148 eco-tourism in, 340 failure of democracy in, 302 foreign investment in, 192–93 manufacturing in, 192–93 military junta in, 307 privatization in, 170 technocracy in, 308 Thomas, Apostle, 36 3D printing, 213 Tibet, 34, 36, 38, 47, 52, 55, 120 Time, 288 Timur (Tamerlane), 41 Timurid Dynasty, 41, 42 Tocqueville, Alexis de, 291 Tokyo, 47, 342 top-down revolutions, 309–13 tourism: in Asia, 213–14 Asian, in US and Europe vs. within Asia, 339–40 eco-, 340 Toynbee, Arnold, 22 trade: Asia-Europe axis of, 13, 14 internal, 150–52, 156–57, 212 intraregional, 62 see also free trade; specific countries and subregions Traditional Chinese Medicine (TCM), 355 Trans-Anatolian Natural Gas Pipeline, 94 Trans-Pacific Partnership (TPP), 126, 140, 141, 272, 273 transportation innovation, 198 Treasury bonds, US, Asian holdings of, 163, 164 Treasury Department, US, 157 Trenin, Dmitri, 83, 90 Trudeau, Justin, 223 Truman, Harry, 52, 287 Trump, Donald, 213, 232 anti-Asian policies of, 10, 152, 194, 195, 224, 225 anti-Hispanic policies of, 272 climate change and, 178 election of, 3, 16, 272, 273, 283, 294, 384 Europe and, 240 Gulf states and, 101 Indian Americans’ support for, 222 Israel and, 98 North Korea and, 142 Pakistan and, 114 populism of, 18, 284 Russia and, 84 Taiwan and, 141 unpredictability of, 18 US State Department gutted by, 143–44 Tsinghua University, 232 Tsushima, Battle of, 48 Turkestan, 47, 117 Turkestan Empire, 41–42 Turkey, Republic of, 3, 49, 58, 101 Asian investment in, 93–94 Asianization of, 81 China and, 93 European focus of, 57, 60, 91–92 European immigrants from, 253, 256 Iran and, 94 Muslims in, 92 oligarchic regime in, 311 re-Asianization of, 91–94 Russia and, 88, 92–93 Syrian refugees in, 63, 94, 95 Turkic peoples, 38, 39, 67, 68, 91 Turkmenistan, 59, 92, 106, 108, 140 Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline, 118 Turnbull, Malcolm, 129 Uber, 174–75, 198 Uighur people, 37, 42, 117 Ukraine, 83, 85, 241 Umayyad Caliphate, 36 Understanding Latin America (Toro Hardy), 275 UN Human Rights Council, 324 Uniqlo, 345 United Arab Emirates (UAE), 88, 96, 100, 101, 104, 312 alternative energy programs in, 179 bond offerings by, 165 digital technology in, 318–19 Indian migrants in, 334 oil exports of, 102, 103 technocracy in, 312 United Kingdom, see Great Britain United Nations, 51 United States: Afghanistan invaded by, 62 AI research in, 199–200 Arab world and, 100–101 arms sales of, 16–17, 101 Asian belief systems in, 220 Asian capital in, 163 Asian companies in, 227–28 Asian economic growth as benefit to, 207 Asian goal of reduced dependence on, 17 Asian immigration to, see Asian Americans Asian investments in, 164 Asian investments of, 110–11, 207 Asian military presence of, 137, 138 Asian trade deficits of, 16 Asian trade with, 144 Asian views of, 16–17 Australia and, 128 Chinese acquisition of technology companies blocked by, 195–96 Chinese trade with, 272–73 civil service in, 293 coal exports of, 177 in Cold War, see Cold War East Asia and, 140–41 eroding industrial base of, 16 ethnic diversity in, 221–22 European capital in, 164–65 Europe’s relations with, 240 failed West Asian policies of, 140 failures of democracy in, 282–85, 294 falling standard of living in, 284–85 global civilization as influenced by, 21, 22–23 global governance and, 321 income inequality in, 228, 285 Iraq invaded by, 62 Japan and, 136 Latin America and, 271–72 Muslims in, 220 in North American regional system, 7 North Korea and, 142–43 oil and gas exports of, 16, 207 outsourcing of jobs by, 16 Pakistan and, 113–14 Philippines and, 123–24 populism in, 283–84 PPP of, 10 protectionist policies of, 241 retail sector in, 228 Russian sanctions by, 240–41 shale oil revolution in, 13, 175, 272 Southeast Asia and, 125 South Korea and, 142–43 South Pacific tensions of, 48 South Pacific territories of, 48 as superpower, 2, 14, 15, 22 Syrian refugees in, 218 technocracy in, 287 utilitarian thinking as lacking in, 299 Vietnam and, 125 Ur, 28 Ural Mountains, 81, 82 urban development, 156, 190, 245–46 utilitarianism, 286, 298, 306, 320 Uzbekistan, 59, 72, 108, 169, 226–27 Chinese hegemony resisted by, 20 civil society in, 313 economic growth of, 17, 109 Vedas, 29 Venezuela, 271, 274 China and, 274–75 venture capital (VC) industry, in Asia, 173–74 Vienna, 40 Vietnam, 45, 52, 60, 121, 161, 274, 275 China and, 124–25 in Cold War era, 56 early history of, 31–32, 38 economic growth in, 308 industrialization in, 63 South Korea and, 154 territorial claims of, 11 US and, 125 Vietnamese Americans, 217 Vietnam War, 52, 56 Vitasoy, 172 Vivekananda, Swami, 220 Vladivostok, 90 Wadhwa, Vivek, 219 Wahhabism, 72, 114 Walmart, 193, 208 warfare: in Asia, 75–76 in Europe, 75 war on terror, 113, 115, 240 Washington Consensus, 2–3 Water Margin, 353 water shortages, 181 wealth management industry, 160–61 Weber, Max, 293 WeChat, 314 Wei Fenghe, 84 West: arms sales to Asia by, 212 Asia studies in, 352 China-centric views of, 18–19 as dependent on Asian economic growth, 206–14 economic and social ills of, 3 ignorance about Asia in, 17–20, 24, 76, 329 outsourcing of manufacturing to Asia by, 62 uncritical self-appraisal of, 351–52 worldview of, 10–11 West Asia, 57, 69–70, 72 Asianization of, 9, 81 civil society in, 313 conflict and state failure in, 95 crusades and, 39 dawn of civilization in, 28 ethnic and sectarian violence in, 256 India and, 155 oil and gas exports of, 9, 23, 57, 62, 152 in post–Cold War era, 58 re-Asianization of, 95–106 refugees from, 95 terrorism in, 62–63 use of term, 6 US involvement in, 59, 140 Western Educated Industrial Rich Democracies (WEIRD), 357 What Is Global History?


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

"there is no alternative" (TINA), "World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, barriers to entry, battle of ideas, behavioural economics, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Great Leap Forward, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low interest rates, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

What concerns me is that the economic framework of the eurozone is being used to push for a particular set of views concerning the economy and society—and these perspectives are effectively being imposed on the crisis countries.12 WHY THE EUROPEAN PROJECT IS SO IMPORTANT It is not in the interest of Europe—or the world—to have a country on Europe’s periphery alienated from its neighbors, especially now, when geopolitical instability is already so evident. The neighboring Middle East is in turmoil; the West is attempting to contain a newly aggressive Russia; and China, already the world’s largest source of savings, the largest trading country, and the largest overall economy (in terms of purchasing power parity), is confronting the West with new economic and strategic realities. This is no time for European disunity and economic weakness. I would argue even more strongly that all people have an interest in the success of the European project. Europe was the source of the Enlightenment, which resulted in the increases in living standards that have marked the last two centuries.

., “Macroeconomic Priorities,” American Economic Review 93, no. 1 (2003): 1–14; the quote appears on p. 1. 3 With every country’s currency pegged to gold, the value of each currency relative to the other was also fixed. 4 Bryan uttered this phrase in his July 9, 1896, speech at the Democratic National Convention in Chicago. 5 See Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919–1939 (New York: Oxford University Press, 1992). 6 The equivalent value for US and China GDPs are $17.9 trillion and $11.0 trillion, respectively. (In purchasing power parity, PPP, a standard way of making cross-country comparisons, the EU was about 1.0 percent smaller than China, but 7.0 percent larger than the United States.) Because of varying exchange rates (the value of the euro relative to the dollar varied during 2015 alone from 1.06 to 1.13), the relative size (at current exchange rates) varies.

Still more complicated issues arise when comparing GDP across countries, because the market basket of goods consumed in different countries differs and different goods cost different amounts in different countries. In this book, we focus on the effect of the euro on growth, and we assess growth by using each country’s own price deflator. When comparing levels of GDP to take account of differences in prices of different goods in different countries, a standard approach is to calculate real PPP (purchasing power parity) GDP, discussed briefly in note 6 in the preface. It compares incomes using a standardized basket of goods. 4 GDP in 2015 for the 13 countries that had adopted the euro as of January 1, 2007, was merely 0.6 percent above that in 2007. Figures were actual, with the exception of Belgium and Luxembourg, as reported by the IMF. 5 Graph shows the largest contractions over 2007–2015.


pages: 454 words: 134,482

Money Free and Unfree by George A. Selgin

Alan Greenspan, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, centralized clearinghouse, Charles Lindbergh, credit crunch, Credit Default Swap, crony capitalism, disintermediation, Dutch auction, fear of failure, fiat currency, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, foreign exchange controls, Fractional reserve banking, German hyperinflation, Glass-Steagall Act, Hyman Minsky, incomplete markets, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, large denomination, liquidity trap, Long Term Capital Management, low interest rates, market microstructure, Money creation, money market fund, moral hazard, Network effects, Northern Rock, oil shock, Paul Samuelson, Phillips curve, plutocrats, price stability, profit maximization, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, Robert Gordon, Robert Solow, Savings and loan crisis, savings glut, seigniorage, special drawing rights, The Great Moderation, the payments system, too big to fail, transaction costs, Tyler Cowen, unorthodox policies, vertical integration, Y2K

INTERNATIONAL MONETARY EQUILIBRIUM The “tight” nature of domestic monetary equilibrium under free banking also has implications for the preservation of international monetary equilibrium. In the context of an international specie standard—let us say gold—the condition for such an equilibrium, that of “purchasing power parity,” implies that a given sum of gold bullion should purchase approximately the same bundle of tradable goods in all gold-standard countries: “approximately” because prices can differ persistently by amounts that reflect the costs of importing goods from abroad, including transport costs and duties.

Should the bundle’s price in any one country vary from its price elsewhere beyond upper and lower boundaries known as “gold points,” consistent with the aforementioned costs, the difference will cause more goods to be imported into and fewer to be exported from the country where prices are higher, with gold flows serving to finance the increased trade deficit. This Humean price-specie-flow mechanism will eventually restore purchasing power parity by promoting, on the one hand, monetary contraction in the country where goods are more expensive and, on the other, monetary expansion where goods have been less expensive. A virtue of free banking is that it limits the occasions in which the Humean mechanism must operate by checking a domestic overexpansion of money and credit before it has a chance to drive domestic prices higher than their values consistent with the international purchasing power equilibrium.

Churchill’s now much-maligned decision to resume gold payments on April 28, 1925, is supposed by most authorities to have overvalued the pound by about 10 percent, severely depressing British exports, provoking a general strike, and giving rise to what were euphemistically termed balance-of-payments “difficulties.” The obvious alternatives for bringing the pound back into purchasing-power parity with the (undiminished) U.S. dollar were further deflation (and corresponding depression) or devaluation. British authorities, however, opted for “none of the above.” Drawing inspiration from the 1922 Genoa Conference, they responded to the general strike by means of a further expansion of bank credit, while attempting to address the “gold shortage” (that is, the now further enhanced “overhang” of sterling monetary liabilities), first, by abandoning (as France had already done) the prewar gold coin standard in favor of a gold bullion standard, and second and more importantly, by convincing other central banks to treat sterling balances rather than gold itself as their principal reserve asset.


pages: 561 words: 138,158

Shutdown: How COVID Shook the World's Economy by Adam Tooze

2021 United States Capitol attack, air freight, algorithmic trading, Anthropocene, Asian financial crisis, asset-backed security, Ayatollah Khomeini, bank run, banking crisis, Basel III, basic income, Ben Bernanke: helicopter money, Benchmark Capital, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, blue-collar work, Bob Geldof, bond market vigilante , Boris Johnson, Bretton Woods, Brexit referendum, business cycle, business process, business process outsourcing, buy and hold, call centre, capital controls, central bank independence, centre right, clean water, cognitive dissonance, contact tracing, contact tracing app, coronavirus, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, currency manipulation / currency intervention, currency peg, currency risk, decarbonisation, deindustrialization, Donald Trump, Elon Musk, energy transition, eurozone crisis, facts on the ground, failed state, fake news, Fall of the Berlin Wall, fear index, financial engineering, fixed income, floating exchange rates, friendly fire, George Floyd, gig economy, global pandemic, global supply chain, green new deal, high-speed rail, housing crisis, income inequality, inflation targeting, invisible hand, It's morning again in America, Jeremy Corbyn, junk bonds, light touch regulation, lockdown, low interest rates, margin call, Martin Wolf, mass immigration, mass incarceration, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, oil shale / tar sands, Overton Window, Paris climate accords, Pearl River Delta, planetary scale, Potemkin village, price stability, Productivity paradox, purchasing power parity, QR code, quantitative easing, remote working, reserve currency, reshoring, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, shareholder value, Silicon Valley, six sigma, social distancing, South China Sea, special drawing rights, stock buybacks, tail risk, TikTok, too big to fail, TSMC, universal basic income, Washington Consensus, women in the workforce, yield curve

In a low-income country like Nigeria, where life expectancy at birth is fifty-five, 68 percent of deaths are due to diseases of poverty. In Germany, where life expectancy is eighty-one, that share is 3.5 percent; in the UK, 6.8. The United States is in-between. In 2017, health spending per capita in high-income countries was 49 times greater in purchasing power parity terms than in low-income countries.1 Within rich countries, there are appalling disparities in infant and maternal mortality and overall life expectancy along lines of race and class. Epidemics of drug use in disadvantaged and marginalized populations, asthma, and lead poisoning go unaddressed.

That was more than four times worse than the outflow after the start of the global financial crisis in September 2008.1 For stressed borrowers in sub-Saharan Africa, the financial markets were effectively closed from February and the damage was not limited to them. Far stronger economies were hit hard as well. With an annual economic output of over $3 trillion in purchasing power parity, Brazil is a giant among the emerging markets. Dwarfing the rest of Latin America, it ranks alongside Indonesia and Russia, behind only China and India. In the spring of 2020, Brazil faced a financial storm. In a matter of months, it saw the value of its currency plunge by 25 percent, delivering a huge hit to anyone buying imported goods or servicing debts denominated in dollars.

By the autumn of 2020, Delhi was shadowed by dark fears of strategic encirclement.75 There was some comfort in the fact that Washington was pushing “the Quad”—the military relationship between the United States, Japan, Australia, and India—but in that company, India was far from being number one.76 * * * — It was not only Asia that lived under the shadow of China’s growth. The shifting balance was felt even on the other side of the Pacific. In purchasing-power parity terms, allowing for the very different cost of living, China’s economy probably overtook that of the United States in 2013. In current dollar terms, reflecting purchasing power in global markets, the United States was still considerably ahead. China was not predicted to become number one until the mid-2030s.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, benefit corporation, Black Swan, blood diamond, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, company town, compensation consultant, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Glass-Steagall Act, Gordon Gekko, Greenspan put, hiring and firing, Ida Tarbell, income inequality, independent contractor, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, Money creation, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, Paul Volcker talking about ATMs, pension reform, performance metric, Pershing Square Capital Management, pirate software, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, prosperity theology / prosperity gospel / gospel of success, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, rolling blackouts, Ronald Reagan, Sand Hill Road, Savings and loan crisis, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, stock buybacks, subprime mortgage crisis, The Chicago School, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

As a result of these trends, America has become a low-wage nation, where both wages and total employer costs for labor, once the highest in the world, have been surpassed by many other rich democracies. As we see depicted in Chart 3.1, comprehensive costs for all private sector workers, including benefits paid by employers in shops, offices, and plants across northern Europe, are about 30 percent higher than in America. Chart 3.1. 2008, cost adjusted for purchase power parity. All private sectors including non-farm business industry, construction, and services. European data includes part time and employees at firms > 10 employers, but excludes annual bonuses generally equal to one month pay. Germany includes the former German Democratic Republic. Source: Hourly Labor Costs, Eurostat 2011, Marie Visot, “The Debate on Labor Costs Revived,” Le Figaro, February 28, 2011, OECD.StatExtracts, “Employer Costs for Employee Compensation, Bureau of Labor Statistics Historic listing (December 2008), and “The Cost of Labor Divides Senators,” Le Monde, March 9, 2011.

That sector is the fount of most productivity growth, typically pays the highest wages aside from finance, and is the sector most stressed by globalization. The actual wage component of these figures ranges from about one-half in Belgium to two-thirds or so in Australia and the US. Chart 3.2. Private sector, US dollars adjusted for purchase power parity, 2007. Source: Hourly Compensation Costs, Competitiveness in Manufacturing, Bureau of Labor Statistics, Department of Labor, 2010, Washington, table 3.1. These high wages are the consequence of the family capitalism countries achieving steadily rising real wages. That means workers have received a notable portion of the gains from growth for decades.

This erosion has had a generalized impact because minimum wages serve as an escalator, pushing up wages for workers further up the income scale. The US experience sharply contrasts with policies in the family capitalism countries, where minimums are considerably higher, as we will learn in a later chapter. The minimum wage, for example, in France during 2012 was €9.22 per hour; in purchase-power parity terms that is over $11 per hour, or 60 percent above the federal minimum in America. The minimum wage in Australia is higher still. Chart 12.1. Source: Wage and Hour Division, “History of Changes to the Minimum Wage Law,” Department of Labor, Washington, DC. Also: Phyllis Korkki “Keeping an Eye on the Low, Point of the Pay Scale,” New York Times, August 31, 2008, and Ralph E.


pages: 288 words: 85,073

Factfulness: Ten Reasons We're Wrong About the World – and Why Things Are Better Than You Think by Hans Rosling, Ola Rosling, Anna Rosling Rönnlund

"World Economic Forum" Davos, animal electricity, clean water, colonial rule, en.wikipedia.org, energy transition, fake news, first square of the chessboard, first square of the chessboard / second half of the chessboard, global pandemic, Hans Rosling, illegal immigration, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), jimmy wales, linked data, lone genius, microcredit, purchasing power parity, revenue passenger mile, Stanford marshmallow experiment, Steven Pinker, systems thinking, TED Talk, Thomas L Friedman, Walter Mischel

The girls in these six countries suffer under severe gender inequality, but in total they make up only 2 percent of all girls of primary school age in the world, based on UN-Pop[4]. Note that in these countries, many boys are also missing school. See gapm.io/twmedu. Income levels. The numbers of people on the four income levels have been defined by Gapminder[8] based on data from PovcalNet and forecasts from IMF[1]. Incomes are adjusted for Purchasing Power Parity $ 2011 from ICP. See gapm.io/fwlevels. The graphs showing people distributed by income, comparing incomes in Mexico and the United States in 2016, are based on the same data, slightly adjusted to align with the shape of the distributions from the latest available national income surveys.

Revenue Passenger-Kilometres. Air Transport Monitor. 2017. https://www.icao.int/sustainability/Pages/Air-Traffic-Monitor.aspx. Ichiseki, Hajime. “Features of disaster-related deaths after the Great East Japan Earthquake.” Lancet 381, no. 9862 (January 19, 2013): 204. gapm.io/xjap. ICP. “Purchasing Power Parity $ 2011.” International Comparison Program. gapm.io/x-icpp. IHME[1] (Institute for Health Metrics and Evaluation). Data Life Expectancy. Global Burden of Disease Study 2016. Institute for Health Metrics and Evaluation, University of Washington, Seattle, September 2017. Accessed October 7, 2017. gapm.io/xihlex.


pages: 280 words: 83,299

Empty Planet: The Shock of Global Population Decline by Darrell Bricker, John Ibbitson

"World Economic Forum" Davos, affirmative action, agricultural Revolution, Berlin Wall, Black Lives Matter, Brexit referendum, BRICs, British Empire, Columbian Exchange, commoditize, demographic dividend, demographic transition, Deng Xiaoping, Donald Trump, en.wikipedia.org, full employment, gender pay gap, gentrification, ghettoisation, glass ceiling, global reserve currency, Great Leap Forward, Gunnar Myrdal, Hans Rosling, Hernando de Soto, illegal immigration, income inequality, James Watt: steam engine, Jeff Bezos, John Snow's cholera map, Kibera, knowledge worker, labor-force participation, Mark Zuckerberg, megacity, New Urbanism, nuclear winter, off grid, offshore financial centre, out of africa, Potemkin village, purchasing power parity, reserve currency, Ronald Reagan, Silicon Valley, South China Sea, statistical model, Steve Jobs, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, transcontinental railway, upwardly mobile, urban planning, working-age population, young professional, zero-sum game

But with the passing of Mao and the arrival of Deng Xiaoping, China finally took off. The economy doubled between 1980 and 1990, tripled between 1990 and 2000, and more than tripled between 2000 and 2010. Let’s put it another way. In 1980, the wealth created by a Chinese citizen in one year was $205 (in constant dollars based on purchasing power parity). In 2016, it was $8,523.00. Over the past forty years, wealth creation in China has lifted a fifth of humanity out of dire poverty.70 India grew more slowly, thanks to the foolish policies of the government in New Delhi. But despite protectionism, internal corruption, and regional rivalries, India’s economy too has experienced rapid growth, though nothing like China’s.

.: Environmental Protection Agency, 2017). https://www.epa.gov/air-trends 67 Dan Egan, “Great Lakes Water Quality Improved, but There Are Still Issues, Report Says,” Milwaukee Journal-Sentinel, 14 May 2013. http://www.jsonline.com/news/wisconsin/great-lakes-water-quality-improved-but-there-are-still-issues-report-says-i49uq79-207463461.html 68 Prabhu Pingali, “Green Revolution: Impacts, Limits and the Path Ahead,” Proceedings of the National Academy of Sciences of the United States of America, 31 July 2012. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3411969 69 Tania Branagan, “China’s Great Famine: The True Story,” Guardian, 1 January 2013. http://www.theguardian.com/world/2013/jan/01/china-great-famine-book-tombstone 70 Annual GDP per capita in constant dollars based on purchasing power parity. Ami Sedghi, “China GDP: How it has changed since 1980,” Guardian, 23 March 2012 (then updated). http://www.theguardian.com/news/datablog/2012/mar/23/china-gdp-since-1980 71 “GDP Per Capita of India,” Statistics Times (Delhi: Ministry of Statistics and Programme Implementation [IMF], 19 June 2015). http://statisticstimes.com /economy/gdp-capita-of-india.php 72 Such as Max Roser and Esteban Ortiz-Ospina, “Global Extreme Poverty,” Our World in Data, 2013/2017. http://ourworldindata.org/data/growth-and-distribution-of-prosperity/world-poverty 73 Clyde Haberman, “Retro Report: The Population Bomb?”


pages: 332 words: 81,289

Smarter Investing by Tim Hale

Albert Einstein, asset allocation, buy and hold, buy low sell high, capital asset pricing model, classic study, collapse of Lehman Brothers, corporate governance, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, fiat currency, financial engineering, financial independence, financial innovation, fixed income, full employment, Future Shock, implied volatility, index fund, information asymmetry, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, managed futures, Northern Rock, passive investing, Ponzi scheme, purchasing power parity, quantitative easing, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, South Sea Bubble, technology bubble, the rule of 72, time value of money, transaction costs, Vanguard fund, women in the workforce, zero-sum game

Exchange rate – Bank of England There are several properties of currency worth considering. First, it is a rate of exchange and in itself has no economic return-generating mechanism like being an owner or a lender. Second, over the long run the exchange rate should be in line with the purchasing power parity between two countries. This principal is succinctly explained by the Economist and their well-known Big Mac Index: ‘Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country.


pages: 207 words: 86,639

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

Abraham Maslow, Alan Greenspan, Alvin Toffler, Apollo 11, Asian financial crisis, back-to-the-land, banking crisis, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, carbon tax, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Crossrail, delayed gratification, deskilling, digital divide, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, Glass-Steagall Act, green new deal, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Elkington, junk bonds, Kickstarter, land bank, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, Money creation, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pension time bomb, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, systems thinking, the long tail, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

Recent research at the World Bank, released at the end of 2007, suggests that income inequality and absolute poverty in the world are very much worse than anybody thought.8 The problem with World Bank estimates of absolute poverty (living on less than $1 a day) is that they relied on calculations of what the equivalent of a US dollar was in some of the most impoverished economies in the world, a formula known as ‘purchasing power parity’. The latest World Bank research suggests that this was extremely inaccurate and that the 1.2 billion people living on $1 a day may be very much higher. Poverty, though, is not escaped by earning just over $1 or $2 a day, as we will see below. The World Bank estimates that the number of people in absolute poverty will have halved by 2015.

(John Kenneth) 41, 51 gambling 14–15, 152 Gandhi, Mohandas (Mahatma) 18, 19, 21, 110, 112 Gates, Bill 141 Gates, Jeff 141–2 GDP (gross domestic product) 10, 32, 36–40, 42, 43, 54, 79 alternatives to 40–2, 43 bad measure of success 10, 37, 55, 78 INDEX global 141 UK 4 see also growth genetically modified crops see GM crops Germany 33, 50, 58 Gladwell, Malcolm 68 Global Barter Clubs 57, 58 global commons 113, 148 global currencies 56, 61, 120, 147–8 global greenback 61 global warming 3, 3–4, 115, 155 see also climate change globalization 8, 28, 143, 153 see also interdependence GM (genetically modified) crops 91, 117, 119, 140–1 Goetz, Stephan 124 gold standard 8, 143 Good Life, The (BBC sitcom) 69 goods, local 19, 109, 110 Goodwin, Fred 142 government borrowing 37–8, 49–50, 58, 62, 141 governments 2, 28, 116, 129, 158 creating money 58–9, 62, 90 propping up banking system 6, 7 Graham, Benjamin 120 Grameen Bank 26, 143–4, 153 Great Barrington (Massachusetts) 57, 151–2, 153 Great Depression 3, 36, 57 green bonds 157 green collar jobs 106, 157 Green Consumer Guide, The (Elkington and Hailes, 1988) 26, 69, 72 green economics 23, 100, 117 green energy 26, 97, 102–3, 114, 156, 157 Green New Deal 156–8 green taxation 153 greenhouse gas emissions 3–4, 115, 148 gross domestic product see GDP Gross National Happiness 43 growth 2, 11, 12–13, 23, 36–7, 38–40, 42, 43 185 bad measure of success 10, 158 maximizing 25 and poverty 4, 39–40, 81–2 and progress 39, 78 wealth defined in terms of 32 and well-being 4–5 see also GDP guilds 80, 80–1 happiness 12, 18, 29, 41, 43, 45–6 Happy Planet Index 32–3, 34, 43 Hard Times (Dickens, 1854) 36 HBOS 7 health 46, 72, 78, 96, 115, 129 health costs 117 healthcare 13, 33, 44 hedge funds 5, 7, 97, 120 Helsinki (Finland) 102 HIV/AIDS 70, 111, 135, 148 Honduras 139, 141 house prices 36, 46, 79, 83, 91, 126–7, 151 London 53, 54, 91 see also mortgages Howard, Ebenezer 105, 158 HSBC 5 human interaction 67–8, 74 human needs 20, 24, 67, 86 human rights 110–11, 116, 147 ill-health 35, 38, 46 ‘illth’ 29, 35 IMF (International Monetary Fund) 27, 82, 91, 135–6, 139, 143, 147, 147–8 incomes 24, 37, 43, 44, 78, 79, 81 and happiness 45–6 inequalities 37, 81, 82, 142 of poorest 4, 81, 82, 112, 142 Index of Sustainable Economic Welfare see ISEW India 82, 91, 110, 119, 136, 139–40, 153 indigenous knowledge 82, 117 inequality 4, 81–2, 96, 112–13, 116 inflation 8, 22, 58, 90 information technology 58, 59, 115 186 THE NEW ECONOMICS intellectual property 82, 91, 110, 113, 116, 117 interdependence 111–20, 135–8 Keynes on 19, 109, 110, 115, 143 see also globalization interest 8, 11, 11–12, 58, 77, 157 interest rates 144, 144–5 interest-free money 43, 73, 84, 90 intergenerational equity 25, 117 international bankruptcy 147 International Monetary Fund see IMF investment 14, 45, 53, 60, 104, 118, 137–8 ethical 26, 69–70, 74, 154 involvement 71, 75, 128–30 Iraq 49, 60, 136 ISEW (Index of Sustainable Economic Welfare) 40–1, 43, 78 Islamic banking 58, 90, 146 islands, small 31–2, 33–4 Italy 33, 119–20, 138 Ithaca hours currency 57, 58 It’s a Wonderful Life (film, Capra, 1946) 38 Jacobs, Jane 56, 110, 126 Jaffe, Bernie 126 Japan 26, 50, 91, 113, 119, 128 Jefferson, Thomas 18, 20 Jersey 52, 53 Jones, Allan 103 Jubilee Debt campaign 137 junk bonds 1, 142–3 just-in-time 123–4, 155 Keynes, John Maynard 2, 13–14, 15, 17, 21, 37, 55 on interdependence 19, 109, 110, 115, 143 international currency 61, 120 on local production 19, 109, 110 on ‘practical men’ as ‘slaves of some defunct economist’ 10, 35, 67, 87, 159 Keynesian economics 8, 18, 22, 27, 28 Kinney, Jill 130 Knowsley (Merseyside) 104 Kropotkin, Peter 18 Krugman, Paul 52 land 19, 82, 96 land tax 43 landfill 97, 98, 100, 107 Layard, Richard 41 Lehigh Hospital (Pennsylvania) 129 Letchworth Garden City (Hertfordshire) 105 lets (local exchange and trading systems) 57 liberalism 18, 19, 27 Lietaer, Bernard 56, 61, 120 life 19, 29, 55, 69, 86, 91 need for meaning 42, 75 life expectancy 31, 32–3, 82 life poverty 82–3 life satisfaction 31, 33, 41, 42 Lima (Peru) 130–1 Linton, Michael 57, 58 Living Economy, The (Ekins, 1986) 24–5 LM3 (Local Money 3) 60, 104–5 loans see debt Local Alchemy programme 152–3 local circulation of money 103–5, 107, 124, 151–2 local currencies 26, 56, 57, 58, 59, 60, 151–2, 153 local economies 26, 81, 85, 86, 105–7, 118, 124, 133 local exchange and trading systems (lets) 57 local food 2, 118, 119–20, 151 local governments 6, 44, 60 local life 4, 81, 158 Local Money 3 see LM3 local production 109, 116, 118 local savings schemes 61 local shops 75, 82–3, 104, 124, 124–5, 126, 151 supermarkets and 80, 105, 125 local wealth 14, 53–4 localization 155–6, 159 London 52, 53, 61, 97, 102, 103 house prices 53, 54, 91 traffic speed 65–6 INDEX London Underground 147 Lutzenberger, Jose 26 Macmillan Cancer Care 88–9 McRobie, George 22, 24 mainstream 4–5, 26, 154, 159–60 see also economics Malawi 135–6, 137 Malaysia 51 Manchester United 155 manipulated debt 139–41 markets 10, 12, 51, 70, 158 financial 1–2, 52, 53, 55, 138, 154–5 free 22, 85, 112–13 new economics and 67, 72–5, 85 Marsh Farm estate (Luton) 104–5, 152–3 Maslow, Abraham 67 materialism 12, 46–7 Max-Neef, Manfred 24 Maxwell, Robert 143 MDGs (Millennium Development Goals) 39, 136 Mead, Margaret 129 meaning, need for 42, 75 measurement problem 36–40 measuring 12, 42, 55, 85 success 2, 8, 10, 43, 44, 55, 154, 156, 158 value 10, 15, 29, 53, 59, 115 wealth 32, 37–40, 53–4 well-being 4, 18, 32–3, 34, 43 mechanics, Cuban 95–6, 97 medieval economics 78–80, 80–1 mega-rich 120, 141, 142 mental health 4, 35, 36, 46, 68, 83 Merck 99 micro-credit 26, 143–4, 145, 146, 151, 153 Milkin, Michael 142 Millennium Development Goals see MDGs minimum wage 92 misery, of UK young people 35–6 Mishan, E.J. 40 Mogridge, Martin 65–6, 74 Mondragon (Spain), cooperatives 153 money 8, 11, 13, 18, 27, 29, 36, 95 187 as a bad measure 10, 15, 18, 53, 59, 90, 143, 154 creating 7, 56–7, 58–9, 84, 90, 120, 138, 147 designed for money markets 53 economics and 25, 127 externalities 35 and life 55, 86, 154, 159 local circulation 103–5, 107, 124, 151–2 means to an end 15 new economics view 15, 59–60, 89 new ways of organizing 56–60 re-using 103–5 replacing with well-being 42 slowing down 51–2, 60 too little 57 types of 14–15, 57, 59, 120 and value 10, 15, 53, 59 and wealth 15, 19, 32, 38, 78 and well-being 18, 21, 81 see also GDP; growth; price; trickle down money flows 26, 50–2, 60, 103–5, 107, 124, 136–8 money markets 1–2, 52, 53, 55, 138, 154–5 money poverty 81–2 money system 7–8, 50–6, 60 monopolies 8, 20, 83, 84–6, 89–90, 125–6, 133, 146 Monsanto 85, 140 moral philosophy 12, 19, 72–3 morality 8, 18, 28, 74, 115 economics and 12, 19, 22 Morris, William 18, 78, 151 mortgages 1, 4, 5–6, 6, 7, 46, 91 working to pay 46, 68, 73, 77–8, 79, 81, 83, 84, 89, 126–7, 140 see also house prices motivations 4–5, 11, 67–9, 70, 71, 72, 73, 75 multinationals 14, 61, 84–5, 90, 137–8, 139, 143 multiple currencies 58, 59–60, 60, 90 multiplier effect 103–5 Murdoch, Rupert 52 188 THE NEW ECONOMICS Myers, Norman 117 Nanumaea (Tuvalu) 34 national accounting 37–8, 38–9 national debt 49–50, 83, 84, 139, 141 national grid 102, 106 National Health Service see NHS natural capital 3, 99 natural resources 22, 40, 43, 84, 97–8 needs 20, 24, 25, 67, 75, 86 basic 25, 89, 91–2, 115 nef (the new economics foundation) 24, 26, 45, 71, 104, 131–2, 145 Local Alchemy programme 152–3 see also Happy Planet Index; LM3 ‘neo-liberal’ policies 8, 27–8 Nether Wallop (Hampshire) 80, 81 The Netherlands 58, 106, 138 New Century 5 New Deal for Communities 152 New Deal (US) 157 new economics 2–3, 9–10, 18–19, 28–9, 59, 153–4, 159–60 Cuba as object lesson 96–7 history of 9–10, 18–19, 21–7 and the mainstream 26 as new definition of wealth 15 principles 35, 157–8 new economics foundation see nef New York City 52, 128 News Corporation 52 NHS (National Health Service) 87, 114, 131 Northern Rock 6 Nottingham 35 Nu-Spaarpas experiment 106 Obama, Barack 154, 157 obsolescence, built-in 98, 100, 101 odious debt 146 offshore assets 136–7 offshore financial centres 52–3, 61 oil 3, 96, 115, 117, 155 Oil Legacy Fund 157 orchards 111, 112, 115, 124 organic food 26 Ostrom, Elinor 127 out-of-town retailing 75, 80, 123, 132 overconsumption 32, 40, 44, 113 Owen, Robert 57 ownership 11, 46, 60, 91, 118, 156 paid work 87–9, 92 palm oil 112 Partners in Health 130–1 peak oil 3, 96, 117, 155 Pearce, David 25–6, 98, 115 Peasants’ Revolt (1381) 18 pensions 7, 44, 61, 73, 155 people, as assets 15, 57–8, 128–9, 130, 131 permit trading 45, 117–18, 148 personal carbon allowances 45, 117–18 personal debt 7, 36, 83–4, 91, 140, 141 Petrini, Carlo 119–20 Pettifor, Ann 135, 137 philanthropy 130, 133 policy makers 28, 35, 73, 87, 90 assumptions of 67, 68, 73, 128 Keynes on 10, 35, 67, 87, 159 political agenda 42–7 politicians 11, 54, 159 politics, new 159 pollution 10, 35, 37, 40, 98, 112, 114 by GM genes 91, 117, 119 poor 29, 145–6 Porritt, Jonathon 23 post-autistic economics 9–10, 71–2 poverty 4, 23, 35, 79–80, 81–2, 127 economic system and 13–14, 18, 29, 81–2, 154 interdependence leading to 111–15 reduction 39–40, 51–2, 61, 116, 124–5 poverty gap 4, 52–3, 78, 82 power 10, 12, 25, 28, 53, 141–2 corporate 20, 28, 85 monopoly power 83, 89–90, 125–6, 146 power relationships 29, 114 price 10, 67, 72, 73, 115, 153 Price, Andrew 132 INDEX prices 80, 156, 158 Pritchard, Alison 23 product life cycle 97–8, 101 professionals 130, 132, 133, 159 profits 12, 13, 99 progress 36, 37–8, 39, 43, 44, 77–8, 81–2, 84 Proudhon, Pierre-Joseph 120 psychology, economics and 67–8, 71, 72–3 public goods 148 public sector commissioning 131–2, 133 public services 45, 74, 127–32, 158 public transport 66, 74 ‘purchasing power parity’ 81 Putnam, Robert 126–7, 127–8 189 retirement 46, 73 see also pensions rewarded work 88 rewards 7, 8, 11, 25, 92, 141, 142 roads 66, 115 Robertson, James 17, 22, 23, 55, 145 Rockefeller, John D. 28 Roman Catholic church 19, 21, 117 Roosevelt, Eleanor 96 Roosevelt, Franklin Delano 157 Rotterdam (The Netherlands) 106 rubbish 97–105 Rupasingha, Anil 124 Rushey Green surgery (London) 131 Ruskin, John 17–18, 18, 29, 35, 78, 81 Russia 110 qoin system 58 rainforests 4, 10, 111, 112 ‘rational man’ assumption 10, 71 RBS 142 re-use 97, 99, 100–5 Reagan, Ronald 22, 27 real money, generating 120 ‘real’ wealth 2, 32, 36–40 reciprocity 44, 128, 128–30, 133 see also co-production recycling 97, 98, 100–1, 105–6, 106–7 redistribution 19, 27, 52, 96 regeneration 27, 104, 105, 107, 116, 124, 128 regional currencies 58, 59, 60 regulation 129, 156 competition 85, 113, 125, 126, 133 financial sector 53, 85, 157 relationships 4, 69, 83, 128–30 remittances 137 Rendell, Matt 33 renewable energy 26, 97, 102, 102–3, 114, 156, 157 repair 97, 98, 101, 105, 107 resources 32, 43, 97–8, 99, 100–1, 114, 158 local 25, 115 natural 22, 40, 43, 84, 97–8 St Louis (Missouri) 131 Samoa 34 Sane (South African New Economics) 58 saving seeds 91, 117, 119, 141 savings 7, 46, 73, 90, 157 schools 131 Schor, Juliet 83 Schumacher, E.F.


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The fortune at the bottom of the pyramid by C. K. Prahalad

"World Economic Forum" Davos, barriers to entry, business cycle, business process, call centre, cashless society, clean water, collective bargaining, corporate social responsibility, deskilling, digital divide, disintermediation, do well by doing good, farmers can use mobile phones to check market prices, financial intermediation, Hernando de Soto, hiring and firing, income inequality, information asymmetry, late fees, Mahatma Gandhi, market fragmentation, microcredit, new economy, profit motive, purchasing power parity, rent-seeking, shareholder value, The Fortune at the Bottom of the Pyramid, time value of money, transaction costs, vertical integration, wealth creators, working poor

What is needed is a better approach to help the poor, an approach that involves partnering with them to innovate and achieve sustainable win–win scenarios where the poor are actively engaged and, at the same time, the companies providing products 3 The Fortune at the Bottom of the Pyramid 4 Purchasing power parity in U.S. dollars Population in millions > $20,000 Tier 1 75 – 100 $1,500 – $20,000 Tiers 2–3 1,500 – 1,750 $1,500 Tier 4 4,000 < $1,500 Tier 5 Figure 1.1 The economic pyramid. Source: C. K. Prahalad and Stuart Hart, 2002. The Fortune at the Bottom of the Pyramid, Strategy+ Business, Issue 26, 2002.

With a population of 1.2 billion and an average per capita gross domestic product (GDP) of US $1,000, China currently represents a $1.2 trillion economy. However, the U.S. dollar equivalent is not a good measure of the demand for goods and services produced and consumed in China. If we convert the GDP-based figure into its dollar purchasing power parity (PPP), China is already a $5.0 trillion economy, making it the second largest economy behind the United States in PPP terms. Similarly, the Indian economy is worth about $3.0 trillion in PPP terms. If we take nine countries—China, India, Brazil, Mexico, Russia, Indonesia, Turkey, South Africa, and Thailand—collectively they are home to about 3 billion people, representing 70 percent of the developing world population.

(HLL), India, 13, 193–198, 213 Arogya (Health) Day, 199 background, 193–194 challenges, 202–203 competition, 201 dealer evaluation, 197 gender considerations, 196 goals, 194 implementation approach, 194–198 i-Shakti, 200 leveraging government relationships in site selection, 195–196 leveraging know-how globally, 203 local organization and process, 196–198 long-term vision, 202 marketing Anapurna salt through, 198–200 newsletters, 200 Project Iodine, 200 promotional video, 200 sales and margins, 200 Shaki dealer, 196–197 Shakti Day, 199–200 Shakti Family Packs, 199 399 Shakti Pracharani, 197–198 site selection, 195–196 stimulating demand through education, 199–200 stimulating demand through linkages, 199 year 2002 results, 201 year 2003 performance, 201–202 Promoters, Patrimonio Hoy project, 156–157 Promotions, Casas Bahia, 136 Public-private partnerships (PPPs), 215–220 Pukka adatiyas, 324 Pundiselvi, Ms., 308–309 Purchasing power parity (PPP), 10–12, 218 R Rahmathulah, Lakshmi, 283 Rail distribution, salt, 191–192 Rajendra, Anuja, 385–386 Rao, Sachin, 357, 382 Ravikumar, P. H., 302 Reeder, Kate, 239, 383 Reliance, 28, 50, 116 Reserve Bank of India (RBI), 290–292 Rural Development Initiative, Bank of Madura (India), 299–301 Rural income distribution, 111–112 Rural poor, access to distribution, 13 Rural sales promoters (RSPs), 195 S Salespersons, Casas Bahia: compensation for, 143 training, 135 Salt farming, 175 Salt market, 175–179 diverse tastes/cultural variations, and demand for salt in India, 176 iodized salt, 177 players in, 179–181 Samsung, 50 Samyojaks, 339–340 defined, 335 subversion of, toward competitive entry, 354–355 Sanchalak, 70 400 SANGAM, 193 Sarawathi, Ms., 309 Savings, Mexican society, 150–151 Seaweed, as iodine source, 174 Self-help groups (SHGs), 58–61, 100, 107, 288 evolution of, 74 and ICICI Bank: affiliations, 307–308 bank loans, 308–309 dedication to, 310–311 first monthly meeting, 305 monthly meetings, 305–306 positive effects of, 311 reports of business enterprise progress, 307 scaling, 302–304 identities at, 107 maturation model, 73–74 Service of Credit Protection (SPC), 123 Sethi, P.


pages: 389 words: 87,758

No Ordinary Disruption: The Four Global Forces Breaking All the Trends by Richard Dobbs, James Manyika

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, additive manufacturing, Airbnb, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, asset light, autonomous vehicles, Bakken shale, barriers to entry, business cycle, business intelligence, carbon tax, Carmen Reinhart, central bank independence, circular economy, cloud computing, corporate governance, creative destruction, crowdsourcing, data science, demographic dividend, deskilling, digital capitalism, disintermediation, disruptive innovation, distributed generation, driverless car, Erik Brynjolfsson, financial innovation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Gini coefficient, global supply chain, global village, high-speed rail, hydraulic fracturing, illegal immigration, income inequality, index fund, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, job automation, Just-in-time delivery, Kenneth Rogoff, Kickstarter, knowledge worker, labor-force participation, low interest rates, low skilled workers, Lyft, M-Pesa, machine readable, mass immigration, megacity, megaproject, mobile money, Mohammed Bouazizi, Network effects, new economy, New Urbanism, ocean acidification, oil shale / tar sands, oil shock, old age dependency ratio, openstreetmap, peer-to-peer lending, pension reform, pension time bomb, private sector deleveraging, purchasing power parity, quantitative easing, recommendation engine, Report Card for America’s Infrastructure, RFID, ride hailing / ride sharing, Salesforce, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, Snapchat, sovereign wealth fund, spinning jenny, stem cell, Steve Jobs, subscription business, supply-chain management, synthetic biology, TaskRabbit, The Great Moderation, trade route, transaction costs, Travis Kalanick, uber lyft, urban sprawl, Watson beat the top human players on Jeopardy!, working-age population, Zipcar

Although other emerging regions will undergo a similar shift, Asia will dominate this transformation.”14 Three billion people joining the consuming class between 1990–2025 1. Historical values for 1820 through 1990 estimated by Homi Kharas; 2010 and 2025 estimates by McKinsey Global Institute. 2. Defined as people with daily disposable income above $10 at purchasing power parity (PPP). Population below consuming class defined as individuals with disposable income below $10 at PPP. SOURCE: Homi Kharas; Angus Maddison; McKinsey Global Institute Cityscope database TIPPING POINT Incomes have been rising, and the consumer class has been expanding, for some years. But we have reached a tipping point where the spending of a new generation of consumers in emerging economies has become an overwhelming force.

Your business can gain an advantage by using this data to create maps of global skills supply, which will inform decisions about where to invest. The world is likely to have too few high-skill workers and not enough jobs for low-skill workers 1 Twenty-five countries from the analyzed set of seventy countries, with 2010 GDP per capita greater than US$20,000 at 2005 purchasing power parity (PPP) levels. 2 Eleven countries from the analyzed set of seventy countries, from South Asia and sub-Saharan Africa, with 2010 GDP per capita less than $3,000 at 2005 PPP. 3 Low-skill defined for advanced economies as no post-secondary education; for developing economies, low skill is primary education or less.


pages: 305 words: 89,103

Scarcity: The True Cost of Not Having Enough by Sendhil Mullainathan

American Society of Civil Engineers: Report Card, Andrei Shleifer, behavioural economics, Cass Sunstein, clean water, cognitive load, computer vision, delayed gratification, double entry bookkeeping, Exxon Valdez, fault tolerance, happiness index / gross national happiness, impulse control, indoor plumbing, inventory management, knowledge worker, late fees, linear programming, mental accounting, microcredit, p-value, payday loans, purchasing power parity, randomized controlled trial, Report Card for America’s Infrastructure, Richard Thaler, Saturday Night Live, Walter Mischel, Yogi Berra

But in some cases this can be misleading because exchange rates do not account for price differences between countries. For example, a rupee goes further in India because many things are also cheaper there. In trying to assess income differences across countries, most economists adjust not only for exchange rates but also for purchasing power parity—a measure of price differences. Since this book is not intended to be a careful cross-country comparison of incomes, for ease of reading we simply use nominal exchange rates. But the reader should keep this distinction in mind. Imagine you have spent the day shopping: This is a slightly updated (for inflation) version of Tversky and Kahneman’s famous “jacket-calculator” problem; A.

Yet many experts feel this can paint a misleading impression because people in different countries also face different prices. So the vendor, for example, will also have lower prices for food and other items. As a result, her income in nominal dollar terms does not adequately reflect her purchasing power. Economists have suggested using purchasing power parity instead of nominal exchange rates. In the case of India, this would result in an income that is roughly 2.5 times higher for the vendor. An initial scarcity is compounded by behaviors that magnify it: Economists and especially development economists have focused on what they call poverty traps—the notion that those who begin poor will stay poor.


pages: 257 words: 94,168

Oil Panic and the Global Crisis: Predictions and Myths by Steven M. Gorelick

California gold rush, carbon footprint, energy security, energy transition, flex fuel, Ford Model T, income per capita, invention of the telephone, Jevons paradox, meta-analysis, North Sea oil, nowcasting, oil shale / tar sands, oil shock, peak oil, price elasticity of demand, price stability, profit motive, purchasing power parity, RAND corporation, statistical model, stock buybacks, Thomas Malthus

Energy Information Administration reporting of Oil and Gas Journal value (January 2008); BP Statistical Review (2008); www.opec.org/home/basket.aspx The average price of OPEC oil in 2008 was $95 per barrel. This gave a total value of OPEC reserves of about $87 trillion. The gross world product in 2008 was $69 trillion (IMF estimate in purchasing power parity, ppp). www.imf.org/ external/pubs/ft/weo/2008/01/pdf/tables.pdf Reported here are data from the US Energy Information Administration. The EIA does not include in its OAPEC oil production statistics Egypt, Syria, and Bahrain (the non-OPEC members). Note that Middle Eastern OPEC countries are low-cost producers at $2 per barrel.

“Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle,” USGS Fact Sheet 2008–3049; “90 Billion Barrels of Oil and 1,670 Trillion Cubic Feet of Natural Gas Assessed in the Arctic,” US Geological Society News Release, July 23, 2008. Consumption data from EIA; population data from Economic Research Service, USDA. Income approximated as per capita GDP; GDP based on GDP Purchasing Power Parity (PPP) is $6,200 per capita in China versus $41,500 per capita in the US. EIA 2008 and BP Statistical Review of World Energy, June 2008. The Russian Federation was formed in December 1991, and 1992 is the first full year for comparison. However, in 1985 the Russian Federation, before dissolution of the USSR, consumed about half of the oil it consumed in 2007.


pages: 1,088 words: 228,743

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Black Swan, Bob Litterman, bond market vigilante , book value, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, carbon credits, Carmen Reinhart, central bank independence, classic study, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global macro, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, inverted yield curve, invisible hand, John Bogle, junk bonds, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, pension time bomb, performance metric, Phillips curve, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, savings glut, search costs, selection bias, seminal paper, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stock buybacks, stocks for the long run, survivorship bias, systematic trading, tail risk, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

Thus, systematic currency-trading models tend to be purely atheoretical or only loosely guided by formal models. Many such models amount to combining carry with other indicators. Candidates for additional indicators include• Carry plus value. One could proxy E(ΔS) with some expected normalization toward a “fair value” exchange rate that can be estimated based on purchasing power parity (PPP) or other valuation models. Or one could use valuation filters that rule out carry trading when it conflicts with extreme mispricing signals. • Carry plus momentum. Exchange rates tend to trend, or at least they used to; trend-following strategies within the G10 have become much less profitable during the past decade.

Proximate determinants from order flows are much better than any fundamental determinants at explaining FX changes. However, over time, various predictability patterns (potentially related to time-varying ex ante FX premia) have been documented, and certain indicators are able to contemporaneously explain FX moves. Inflation differentials across countries influence exchange rate changes, but purchasing power parity holds only approximately and even then only in the very long run. Relative interest rates (levels and changes, short and long, nominal and real) have some impact on exchange rates, perhaps because they are proxies for monetary policy or economic growth. Productivity and real-growth differences, terms of trade, and current account and/or capital flow developments also matter.

High inflation also undermines currencies in the short term because they lose their international purchasing power. As an exception, if the central bank is sufficiently credible that markets view any rise in inflation as temporary and expect it to trigger policy tightening, higher inflation may result in short-term currency appreciation. Purchasing power parity does not hold in the short term but works reasonably well over long horizons. In the case of hyperinflation, in particular, exchange rate changes tend to offset persistent cross-country inflation differentials. Deflation—topical and scary It is important to distinguish between disinflation (which typically helps risky assets) and deflation (which can be destructive).


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, classic study, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, decentralized internet, Deng Xiaoping, Dutch auction, electricity market, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Great Leap Forward, Hacker News, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, independent contractor, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John Perry Barlow, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Robert Solow, Ronald Coase, Ronald Reagan, sealed-bid auction, search costs, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, world market for maybe five computers, Xiaogang Anhui farmers, yield management

In China, the average income is about one-tenth that in the United States. In India it is one-fourteenth. In Tanzania, to take an extreme case, it is one-sixtieth. A typical American spends in less than a week what a Tanzanian must eke out over a whole year. (These comparisons are done in purchasing-power-parity terms, which take account of the cross-country variations in the cost of living; without such an adjustment, the disparities would be still bigger.)2 The world’s millionaires number seven million, according to the firm Gemini Consulting. Millionaires therefore make up just over one-thousandth of the world’s population.

Skidelsky (1996, p. 142), Boycko, Shleifer, and Vishny (1995, p. 5). 16. U.S. General Accounting Office (2000, p. 10). 17. The quote is from Zhou (1996, p. 106). Chapter Sixteen. Antipoverty Warriors 1. Economist, June 23, 2001, p. 13. The Shiva quote is from www.gn.apc. org/resurgence/articles/mander.htm, accessed September 26, 2001. 2. World Bank purchasing-power-parity data for 1999, www.worldbank. org/data/databytopic/GNPPC.pdf. 3. The data on millionaires, for 1999, are at www.gemcon.com/fs/wealth2000.htm. The number of the poor, an estimate for 1998, is reported at www.worldbank.org/poverty/data/trends/income.htm. 4. Data from Temple (1999) and Pritchett and Summers (1996).


pages: 337 words: 103,273

The Great Disruption: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World by Paul Gilding

"World Economic Forum" Davos, airport security, Alan Greenspan, Albert Einstein, biodiversity loss, Bob Geldof, BRICs, carbon credits, carbon footprint, carbon tax, clean tech, clean water, Climategate, commoditize, corporate social responsibility, creative destruction, data science, decarbonisation, energy security, Exxon Valdez, failed state, fear of failure, geopolitical risk, income inequality, Intergovernmental Panel on Climate Change (IPCC), John Elkington, Joseph Schumpeter, market fundamentalism, mass immigration, Medieval Warm Period, Naomi Klein, negative emissions, Nelson Mandela, new economy, nuclear winter, Ocado, ocean acidification, oil shock, peak oil, Ponzi scheme, precautionary principle, purchasing power parity, retail therapy, Ronald Reagan, shareholder value, systems thinking, The Spirit Level, The Wealth of Nations by Adam Smith, union organizing, University of East Anglia, warehouse automation

It reminds me of a quote favored by my late father-in-law, Max Grosvenor: “Hell hath no fury like a vested interest masquerading as a moral principle.”3 That aside, though, my more considered response is to go back to the core argument as to what’s wrong with our current economic system. Quantitative economic growth is, let’s be clear, very effective at improving the quality of life and life satisfaction of the poor. Countless studies have shown that, using a measure of purchasing power parity, going from an income per annum of $0 per capita up to around $10,000 to $15,000 per capita delivers a dramatic and sustained improvement in quality of life. This means it works up to a family income of around $60,000, then any further average improvement stops. So I am not arguing that quantitative economic growth doesn’t work for the poor; it most certainly does.

Dominic Wilson and Anna Stupnytska, “The N-11: More Than an Acronym,” Goldman Sachs, Global Economics Paper No. 153, 2007. Available at http://www.goldmansachs.com. 4. John Hawksworth, “The World in 2050: How Big Will the Major Emerging Market Economies Get and How Can the OECD Compete?” PwC, 2006. Available at http://www.pwc.com. PwC’s figures are based on purchasing power parity (PPP), where amounts are adjusted to take account of how many goods or services one unit of currency buys. For example, $1 at market exchange rates buys a lot more in China than it does in the United States and slightly less in Scandinavia than it does in the United States. PPP is a useful measure for our purposes, since it has been closely linked with consumption and thus ecosystem demands.


pages: 370 words: 97,138

Beyond: Our Future in Space by Chris Impey

3D printing, Admiral Zheng, Albert Einstein, Alfred Russel Wallace, AltaVista, Apollo 11, Apollo 13, Berlin Wall, Biosphere 2, Buckminster Fuller, built by the lowest bidder, butterfly effect, California gold rush, carbon-based life, Charles Lindbergh, Colonization of Mars, cosmic abundance, crowdsourcing, cuban missile crisis, dark matter, Dennis Tito, discovery of DNA, Doomsday Clock, Edward Snowden, Elon Musk, Eratosthenes, Great Leap Forward, Haight Ashbury, Hans Moravec, Hyperloop, I think there is a world market for maybe five computers, Isaac Newton, Jeff Bezos, Johannes Kepler, John von Neumann, Kickstarter, Kim Stanley Robinson, Late Heavy Bombardment, life extension, low earth orbit, Mahatma Gandhi, Marc Andreessen, Mars Rover, Mars Society, military-industrial complex, mutually assured destruction, Neal Stephenson, Neil Armstrong, Nick Bostrom, ocean acidification, Oculus Rift, operation paperclip, out of africa, Peter H. Diamandis: Planetary Resources, phenotype, private spaceflight, purchasing power parity, quantum entanglement, radical life extension, RAND corporation, Ray Kurzweil, RFID, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Rubik’s Cube, Scaled Composites, Search for Extraterrestrial Intelligence, Searching for Interstellar Communications, seminal paper, Silicon Valley, skunkworks, Skype, Snow Crash, space junk, SpaceShipOne, Stephen Hawking, Steven Pinker, supervolcano, technological singularity, telepresence, telerobotics, the medium is the message, the scientific method, theory of mind, There's no reason for any individual to have a computer in his home - Ken Olsen, Virgin Galactic, VTOL, wikimedia commons, world market for maybe five computers, X Prize, Yogi Berra

China is the third nation to land a wheeled rover on the Moon, after the Soviet Union and the United States. The Jade Rabbit, or Yutu, rover reached the Moon in December 2013. It has a plutonium-powered nuclear reactor. China is a rapidly emerging superpower, with a GDP per capita (scaled to purchasing-power parity) that will exceed that of the United States in about five years. The purchasing-power-parity comparison makes sense, since goods and services are cheaper in China and they get a lot more bang for their yuan. Chinese spending in space matches the growth rate of the economy, which has been averaging 10 percent per year for the past two decades.


pages: 371 words: 98,534

Red Flags: Why Xi's China Is in Jeopardy by George Magnus

"World Economic Forum" Davos, 3D printing, 9 dash line, Admiral Zheng, AlphaGo, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bear Stearns, Bretton Woods, Brexit referendum, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, general purpose technology, Gini coefficient, global reserve currency, Great Leap Forward, high net worth, high-speed rail, hiring and firing, Hyman Minsky, income inequality, industrial robot, information security, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, megaproject, middle-income trap, Minsky moment, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, Shenzhen special economic zone , smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, vertical integration, Washington Consensus, women in the workforce, working-age population, zero-sum game

President Hu Jintao and Premier Wen Jiabao were in power for the decade to 2013, a period in which the Chinese economy erupted. With annual growth of 10 per cent, China went from being the world’s sixth biggest economy to the second largest, and gained the status to demand a bigger seat at the global governance table. As income per head rose from $1,293 to $7,080, or in purchasing power parity terms, from $3,940 to $12,205, China could proudly justify its status as a middle-income country. For urban citizens at least, the decade was also one to savour. Wages rose steadily, owner-occupied housing boomed, and urban car ownership rates soared; Chinese car sales were almost 25 million in 2017, accounting for about a third of global car sales.

World Bank colleagues, arguing more recently that the middle-income trap might be a myth, were careful to note that policymakers had to be aware not only that the transition from middle to high income was a lengthy process, but also that they could only expect to succeed by pursuing consistently sound policies designed to boost productivity.3 All economists can agree on that, and the quest to boost productivity in China lies at the heart of this chapter. The evidence for the middle-income trap suggests that growth in middle-income countries tends to slow down initially as income per head moves into a range of $10,000 to $11,000, and then again at levels around $15,000 to $16,000 (measured in 2005 purchasing power parity to US dollars).4 Indeed, over the course of any decade since 1950, only about a third of emerging countries were able to grow by 5 per cent or more each year, less than a quarter kept high growth going for two decades, a tenth managed to do so for three decades, and a select few – Malaysia, Singapore, South Korea, Hong Kong, Taiwan and Thailand – were able to do so for four decades.5 Eventually, though, growth slows down everywhere.


pages: 328 words: 96,678

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them by Nouriel Roubini

"World Economic Forum" Davos, 2021 United States Capitol attack, 3D printing, 9 dash line, AI winter, AlphaGo, artificial general intelligence, asset allocation, assortative mating, autonomous vehicles, bank run, banking crisis, basic income, Bear Stearns, Big Tech, bitcoin, Bletchley Park, blockchain, Boston Dynamics, Bretton Woods, British Empire, business cycle, business process, call centre, carbon tax, Carmen Reinhart, cashless society, central bank independence, collateralized debt obligation, Computing Machinery and Intelligence, coronavirus, COVID-19, creative destruction, credit crunch, crony capitalism, cryptocurrency, currency manipulation / currency intervention, currency peg, data is the new oil, David Ricardo: comparative advantage, debt deflation, decarbonisation, deep learning, DeepMind, deglobalization, Demis Hassabis, democratizing finance, Deng Xiaoping, disintermediation, Dogecoin, Donald Trump, Elon Musk, en.wikipedia.org, energy security, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, eurozone crisis, failed state, fake news, family office, fiat currency, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, future of work, game design, geopolitical risk, George Santayana, Gini coefficient, global pandemic, global reserve currency, global supply chain, GPS: selective availability, green transition, Greensill Capital, Greenspan put, Herbert Marcuse, high-speed rail, Hyman Minsky, income inequality, inflation targeting, initial coin offering, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of movable type, Isaac Newton, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, knowledge worker, Long Term Capital Management, low interest rates, low skilled workers, low-wage service sector, M-Pesa, margin call, market bubble, Martin Wolf, mass immigration, means of production, meme stock, Michael Milken, middle-income trap, Mikhail Gorbachev, Minsky moment, Modern Monetary Theory, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Mustafa Suleyman, Nash equilibrium, natural language processing, negative equity, Nick Bostrom, non-fungible token, non-tariff barriers, ocean acidification, oil shale / tar sands, oil shock, paradox of thrift, pets.com, Phillips curve, planetary scale, Ponzi scheme, precariat, price mechanism, price stability, public intellectual, purchasing power parity, quantitative easing, race to the bottom, Ralph Waldo Emerson, ransomware, Ray Kurzweil, regulatory arbitrage, reserve currency, reshoring, Robert Shiller, Ronald Reagan, Salesforce, Satoshi Nakamoto, Savings and loan crisis, Second Machine Age, short selling, Silicon Valley, smart contracts, South China Sea, sovereign wealth fund, Stephen Hawking, TED Talk, The Great Moderation, the payments system, Thomas L Friedman, TikTok, too big to fail, Turing test, universal basic income, War on Poverty, warehouse robotics, Washington Consensus, Watson beat the top human players on Jeopardy!, working-age population, Yogi Berra, Yom Kippur War, zero-sum game, zoonotic diseases

Overnight, the euro replaced the German mark, the French franc, the Italian lira, and other national currencies (but not the British pound, an omen of Britain’s eventual exit from the European Union). The euro has survived a few brushes with collapse so far, and today its economy ranks third in purchasing power parity, behind those of the United States and China. On close scrutiny, the EMU lacks crucial characteristics of a robust and optimal currency area. Political motives trumped economics at its origin: anchoring a united Germany to Europe was more important than working out the economic details and the optimality of a currency union.

“China Overtakes US as No. 1 in Buying Power, but Still Clings to Developing Status,” the South China Morning Post reported.18 The statistic known as GDP, gross domestic product (or output), adds the value of all goods and services a country produces. The United States leads in that category. Purchasing power parity (PPP), on the other hand, measures national wealth using the relative cost of equivalent goods and services. On that score, China edged past the United States in 2017, to $19.6 trillion. Yet China’s National Bureau of Statistics insisted that the number one ranking in PPP-based GDP should not alter China’s status as the world’s largest developing country.


The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy by Bruce Katz, Jennifer Bradley

"World Economic Forum" Davos, 3D printing, additive manufacturing, Affordable Care Act / Obamacare, benefit corporation, British Empire, business climate, carbon footprint, clean tech, clean water, collapse of Lehman Brothers, company town, congestion pricing, data science, deindustrialization, demographic transition, desegregation, Donald Shoup, double entry bookkeeping, edge city, Edward Glaeser, financial engineering, global supply chain, immigration reform, income inequality, industrial cluster, intermodal, Jane Jacobs, jitney, Kickstarter, knowledge economy, Lewis Mumford, lone genius, longitudinal study, Mark Zuckerberg, Masdar, megacity, megaproject, Menlo Park, Moneyball by Michael Lewis explains big data, Network effects, new economy, New Urbanism, Occupy movement, place-making, postindustrial economy, purchasing power parity, Quicken Loans, race to the bottom, Richard Florida, Shenzhen was a fishing village, Silicon Valley, smart cities, smart grid, sovereign wealth fund, tech worker, TechCrunch disrupt, TED Talk, the built environment, The Death and Life of Great American Cities, the market place, The Spirit Level, Tony Hsieh, too big to fail, trade route, transit-oriented development, urban planning, white flight, Yochai Benkler

07-2151-2 ch7.indd 148 5/20/13 6:55 PM A GLOBAL NETWORK OF TRADING CITIES 149 THE STRAITJACKET OF SELF-REFERENTIAL THINKING The path of American metros to a true trading culture will not be an easy one. The United States is the largest economy in the world and has been since 1871.15 In 2011 it made up only 5 percent of the global population but generated 19 percent of global output (at purchasing power parity rates).16 Until recently, metro areas and their firms, situated within a large, diverse, and growing domestic economy, had far fewer incentives to internationalize because they were able to realize desired growth from domestic demand. For that reason, a relatively small portion of the U.S. economy is dedicated to exports.

As a result, exporting metro economies are overall more productive and wealthier.24 It is not unusual in public and private gatherings to hear metropolitan business leaders ask, Isn’t it all the same to a metro whether it trades with Milwaukee or Mumbai? The answer is emphatically no. Milwaukee’s metropolitan population is 1.5 million people; Mumbai’s is 21 million. Milwaukee’s nominal gross metropolitan product (at purchasing-power parity rates) was $80.9 billion in 2012 and grew 12 percent in real terms between 2000 and 2012; Mumbai’s nominal GMP was $125 billion in 2012 but grew by 165 percent in real terms during the same period.25 Milwaukee remains, like many midsize metropolitan economies in the United 07-2151-2 ch7.indd 150 5/20/13 6:55 PM A GLOBAL NETWORK OF TRADING CITIES 151 States, an important market for U.S. metros.


pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

accounting loophole / creative accounting, algorithmic trading, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, Big bang: deregulation of the City of London, buy and hold, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, currency risk, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, equity risk premium, Exxon Valdez, foreign exchange controls, forensic accounting, Glass-Steagall Act, global reserve currency, high net worth, index fund, inflation targeting, information security, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, proprietary trading, purchasing power parity, Real Time Gross Settlement, reserve currency, Right to Buy, risk free rate, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

In early 2006, for example, there was major dollar repatriation related to a tax window by the United States government allowing US companies to repatriate profits made abroad at a very low tax rate. ‘This is partly why the dollar started to lose ground,’ says Furness. ‘When there is movement in one direction, the hedge funds and momentum players get involved, and the movement becomes exaggerated.’ Purchasing power parity (PPP) says that exchange rates will converge to a level at which purchasing power is the same internationally, so countering inflation. It is the oldest theory of how exchange rates are formed but, according to Furness, it rarely works in the short term. _________________________________________ FOREIGN EXCHANGE 119  Economists say that an imbalance between exchange rates and inflation is driven by speculative capital flows seeking to make money from currency differentials and can last a while, but PPP works better over the long term.

Index 419 fraud 204 9/11 terrorist attacks 31, 218, 242, 243, 254, 257 Abbey National 22 ABN AMRO 103 accounting and governance 232–38 scandals 232 Accounting Standards Board (ASB) 236 administration 17 Allianz 207 Alternative Investment Market (AIM) 44–45, 131, 183, 238 Amaranth Advisors 170 analysts 172–78 fundamental 172–74 others 177–78 Spitzer impact 174–75 technical 175–77 anti-fraud agencies Assets Recovery Agency 211–13 City of London Police 209 Financial Services Authority 208 Financial Crime and Intelligence Division 208 Insurance Fraud Bureau 209 Insurance Fraud Investigators Group 209 International Association of Insurance Fraud Agencies 207, 210, 218 National Criminal Intelligence Service 210 Serious Fraud Office 213–15 Serious Organised Crime Agency 210–11 asset finance 24–25 Association of Investment Companies 167 backwardation 101 bad debt, collection of 26–28 Banco Santander Central Hispano 22 Bank for International Settlements (BIS) 17, 27, 85, 98, 114 bank guarantee 23 Bank of Credit and Commerce International (BCCI) 10, 214 Bank of England 6, 10–17 Court of the 11 credit risk warning 98 framework for sterling money markets 81 Governor 11, 13, 14 history 10, 15–16 Inflation Report 14 inflation targeting 12–13 interest rates and 12 international liaison 17 lender of last resort 15–17 Market Abuse Directive (MAD) 16 monetary policy and 12–15 Monetary Policy Committee (MPC) 13–14 Open-market operations 15, 82 repo rate 12, 15 role 11–12 RTGS (Real Time Gross Settlement) 143 statutory immunity 11 supervisory role 11 Bank of England Act 1988 11, 12 Bank of England Quarterly Model (BEQM) 14 Banking Act 1933 see Glass-Steagall Act banks commercial 5 investment 5 Barclays Bank 20 Barings 11, 15, 68, 186, 299 Barlow Clowes case 214 Barron’s 99 base rate see repo rate Basel Committee for Banking Supervision (BCBS) 27–28 ____________________________________________________ INDEX 303 Basel I 27 Basel II 27–28, 56 Bear Stearns 95, 97 BearingPoint 97 bill of exchange 26 Bingham, Lord Justice 10–11 Blue Arrow trial 214 BNP Paribas 145, 150 bond issues see credit products book runners 51, 92 Borsa Italiana 8, 139 bps 90 British Bankers’ Association 20, 96, 97 building societies 22–23 demutualisation 22 Building Societies Association 22 Capital Asset Pricing Model (CAPM) see discounted cash flow analysis capital gains tax 73, 75, 163, 168 capital raising markets 42–46 mergers and acquisitions (M&A) 56–58 see also flotation, bond issues Capital Requirements Directive 28, 94 central securities depository (CSD) 145 international (ICSD) 145 Central Warrants Trading Service 73 Chancellor of the Exchequer 12, 13, 229 Chicago Mercantile Exchange 65 Citigroup 136, 145, 150 City of London 4–9 Big Bang 7 definition 4 employment in 8–9 financial markets 5 geography 4–5 history 6–7 services offered 4 world leader 5–6 clearing 140, 141–42 Clearing House Automated Payment System (CHAPS) 143 Clearstream Banking Luxembourg 92, 145 commercial banking 5, 18–28 bad loans and capital adequacy 26–28 banking cards 21 building societies 22–23 credit collection 25–26 finance raising 23–25 history 18–19 overdrafts 23 role today 19–21 commodities market 99–109 exchange-traded commodities 101  fluctuations 100 futures 100 hard commodities energy 102 non-ferrous metals 102–04 precious metal 104–06 soft commodities cocoa 107 coffee 106 sugar 107 Companies Act 2006 204, 223, 236 conflict of interests 7 consolidation 138–39 Consumer Price Index (CPI) 13 contango 101 Continuous Linked Settlement (CLS) 119 corporate governance 223–38 best practice 231 Cadbury Code 224 Combined Code 43, 225 compliance 230 definition 223 Directors’ Remuneration Report Regulations 226 EU developments 230 European auditing rules 234–35 Greenbury Committee 224–25 Higgs and Smith reports 227 International Financial Reporting Standards (IFRS) 237–38 Listing Rules 228–29 Model Code 229 Myners Report 229 OECD Principles 226 operating and financial review (OFR) 235– 36 revised Combined Code 227–28 Sarbanes–Oxley Act 233–34 Turnbull Report 225 credit cards 21 zero-per-cent cards 21 credit collection 25–26 factoring and invoice discounting 26 trade finance 25–26 credit derivatives 96–97 back office issues 97 credit default swap (CDS) 96–97 credit products asset-backed securities 94 bonds 90–91 collateralised debt obligations 94–95 collateralised loan obligation 95 covered bonds 93 equity convertibles 93 international debt securities 92–93  304 INDEX ____________________________________________________ junk bonds 91 zero-coupon bonds 93 credit rating agencies 91 Credit Suisse 5, 136, 193 CREST system 141, 142–44 dark liquidity pools 138 Debt Management Office 82, 86 Department of Trade and Industry (DTI) 235, 251, 282 derivatives 60–77 asset classes 60 bilateral settlement 66 cash and 60–61 central counterparty clearing 65–66 contracts for difference 76–77, 129 covered warrants 72–73 futures 71–72 hedging and speculation 67 on-exchange vs OTC derivatives 63–65 options 69–71 Black-Scholes model 70 call option 70 equity option 70–71 index options 71 put option 70 problems and fraud 67–68 retail investors and 69–77 spread betting 73–75 transactions forward (future) 61–62 option 62 spot 61 swap 62–63 useful websites 75 Deutsche Bank 136 Deutsche Börse 64, 138 discounted cash flow analysis (DCF) 39 dividend 29 domestic financial services complaint and compensation 279–80 financial advisors 277–78 Insurance Mediation Directive 278–79 investments with life insurance 275–76 life insurance term 275 whole-of-life 274–75 NEWICOB 279 property and mortgages 273–74 protection products 275 savings products 276–77 Dow theory 175 easyJet 67 EDX London 66 Egg 20, 21 Elliott Wave Theory 176 Enron 67, 114, 186, 232, 233 enterprise investment schemes 167–68 Equiduct 133–34, 137 Equitable Life 282 equities 29–35 market indices 32–33 market influencers 40–41 nominee accounts 31 shares 29–32 stockbrokers 33–34 valuation 35–41 equity transparency 64 Eurex 64, 65 Euro Overnight Index Average (EURONIA) 85 euro, the 17, 115 Eurobond 6, 92 Euroclear Bank 92, 146, 148–49 Euronext.liffe 5, 60, 65, 71 European Central Bank (ECB) 16, 17, 84, 148 European Central Counterparty (EuroCCP) 136 European Code of Conduct 146–47, 150 European Exchange Rate Mechanism 114 European Harmonised Index of Consumer Prices 13 European Union Capital Requirements Directive 199 Market Abuse Directive (MAD) 16, 196 Market in Financial Instruments Directive (MiFID) 64, 197–99 Money Laundering Directive 219 Prospectus Directive 196–97 Transparency Directive 197 exchange controls 6 expectation theory 172 Exxon Valdez 250 factoring see credit collection Factors and Discounters Association 26 Fair & Clear Group 145–46 Federal Deposit Insurance Corporation 17 Federation of European Securities Exchanges 137 Fighting Fraud Together 200–01 finance, raising 23–25 asset 24–25 committed 23 project finance 24 recourse loan 24 syndicated loan 23–24 uncommitted 23 Financial Action Task Force on Money Laundering (FATF) 217–18 financial communications 179–89 ____________________________________________________ INDEX 305 advertising 189 corporate information flow 185 primary information providers (PIPs) 185 investor relations 183–84 journalists 185–89 public relations 179–183 black PR’ 182–83 tipsters 187–89 City Slickers case 188–89 Financial Ombudsman Service (FOS) 165, 279–80 financial ratios 36–39 dividend cover 37 earnings per share (EPS) 36 EBITDA 38 enterprise multiple 38 gearing 38 net asset value (NAV) 38 price/earnings (P/E) 37 price-to-sales ratio 37 return on capital employed (ROCE) 38 see also discounted cash flow analysis Financial Reporting Council (FRC) 224, 228, 234, 236 Financial Services Act 1986 191–92 Financial Services Action Plan 8, 195 Financial Services and Markets Act 2001 192 Financial Services and Markets Tribunal 94 Financial Services Authority (FSA) 5, 8, 31, 44, 67, 94, 97, 103, 171, 189, 192–99 competition review 132 insurance industry 240 money laundering and 219 objectives 192 regulatory role 192–95 powers 193 principles-based 194–95 Financial Services Compensation Scheme (FSCS) 17, 165, 280 Financial Services Modernisation Act 19 financial services regulation 190–99 see also Financial Services Authority Financial Times 9, 298 First Direct 20 flipping 53 flotation beauty parade 51 book build 52 early secondary market trading 53 grey market 52, 74 initial public offering (IPO) 47–53 pre-marketing 51–52 pricing 52–53 specialist types of share issue accelerated book build 54  bought deal 54 deeply discounted rights issue 55 introduction 55 placing 55 placing and open offer 55 rights issues 54–55 underwriting 52 foreign exchange 109–120 brokers 113 dealers 113 default risk 119 electronic trading 117 exchange rate 115 ICAP Knowledge Centre 120 investors 113–14 transaction types derivatives 116–17 spot market 115–16 Foreign Exchange Joint Standing Committee 112 forward rate agreement 85 fraud 200–15 advanced fee frauds 204–05 boiler rooms 201–04 Regulation S 202 future regulation 215 identity theft 205–06 insurance fraud 206–08 see also anti-fraud agencies Fraud Act 2006 200 FTSE 100 32, 36, 58, 122, 189, 227, 233 FTSE 250 32, 122 FTSE All-Share Index 32, 122 FTSE Group 131 FTSE SmallCap Index 32 FTSE Sterling Corporate Bond Index 33 Futures and Options Association 131 Generally Accepted Accounting Principles (GAAP) 237, 257 gilts 33, 86–88 Giovanni Group 146 Glass-Steagall Act 7, 19 Global Bond Market Forum 64 Goldman Sachs 136 government bonds see gilts Guinness case 214 Halifax Bank 20 hedge funds 8, 77, 97, 156–57 derivatives-based arbitrage 156 fixed-income arbitrage 157 Hemscott 35 HM Revenue and Customs 55, 211 HSBC 20, 103 Hurricane Hugo 250  306 INDEX ____________________________________________________ Hurricane Katrina 2, 67, 242 ICE Futures 5, 66, 102 Individual Capital Adequacy Standards (ICAS) 244 inflation 12–14 cost-push 12 definition 12 demand-pull 12 quarterly Inflation Report 14 initial public offering (IPO) 47–53 institutional investors 155–58 fund managers 155–56 hedge fund managers 156–57 insurance companies 157 pension funds 158 insurance industry London and 240 market 239–40 protection and indemnity associations 241 reform 245 regulation 243 contingent commissions 243 contract certainty 243 ICAS and Solvency II 244–45 types 240–41 underwriting process 241–42 see also Lloyd’s of London, reinsurance Intercontinental Exchange 5 interest equalisation tax 6 interest rate products debt securities 82–83, 92–93 bill of exchange 83 certificate of deposit 83 debt instrument 83 euro bill 82 floating rate note 83 local authority bill 83 T-bills 82 derivatives 85 forward rate agreements (FRAs) 85–86 government bonds (gilts) 86–89 money markets 81–82 repos 84 International Financial Reporting Standards (IFRS) 58, 86, 173, 237–38 International Financial Services London (IFSL) 5, 64, 86, 92, 112 International Monetary Fund 17 International Securities Exchange 138 International Swap Dealers Association 63 International Swaps and Derivatives Association 63 International Underwriting Association (IUA) 240 investment banking 5, 47–59 mergers and acquisitions (M&A) 56–58 see also capital raising investment companies 164–69 real estate 169 split capital 166–67 venture capital 167–68 investment funds 159–64 charges 163 investment strategy 164 fund of funds scheme 164 manager-of-managers scheme 164 open-ended investment companies (OEICs) 159 selection criteria 163 total expense ratio (TER) 164 unit trusts 159 Investment Management Association 156 Investment Management Regulatory Organisation 11 Johnson Matthey Bankers Limited 15–16 Joint Money Laundering Steering Group 221 KAS Bank 145 LCH.Clearnet Limited 66, 140 letter of credit (LOC) 23, 25–26 liability-driven investment 158 Listing Rules 43, 167, 173, 225, 228–29 Lloyd’s of London 8, 246–59 capital backing 249 chain of security 252–255 Central Fund 253 Corporation of Lloyd’s 248–49, 253 Equitas Reinsurance Ltd 251, 252, 255–56 Franchise Performance Directorate 256 future 258–59 Hardship Committee 251 history 246–47, 250–52 international licenses 258 Lioncover 252, 256 Member’s Agent Pooling Arrangement (MAPA) 249, 251 Names 248, one-year accounting 257 regulation 257 solvency ratio 255 syndicate capacity 249–50 syndicates 27 loans 23–24 recourse loan 24 syndicated loan 23–24 London Interbank Offered Rate (LIBOR) 74, 76 ____________________________________________________ INDEX 307 London Stock Exchange (LSE) 7, 8, 22, 29, 32, 64 Alternative Investment Market (AIM) 32 Main Market 42–43, 55 statistics 41 trading facilities 122–27 market makers 125–27 SETSmm 122, 123, 124 SETSqx 124 Stock Exchange Electronic Trading Service (SETS) 122–25 TradElect 124–25 users 127–29 Louvre Accord 114 Markets in Financial Instruments Directive (MiFID) 64, 121, 124, 125, 130, 144, 197–99, 277 best execution policy 130–31 Maxwell, Robert 186, 214, 282 mergers and acquisitions 56–58 current speculation 57–58 disclosure and regulation 58–59 Panel on Takeovers and Mergers 57 ‘white knight’ 57 ‘white squire’ 57 Merrill Lynch 136, 174, 186, 254 money laundering 216–22 Egmont Group 218 hawala system 217 know your client (KYC) 217, 218 size of the problem 222 three stages of laundering 216 Morgan Stanley 5, 136 multilateral trading facilities Chi-X 134–35, 141 Project Turquoise 136, 141 Munich Re 207 Nasdaq 124, 138 National Strategy for Financial Capability 269 National Westminster Bank 20 Nationwide Building Society 221 net operating cash flow (NOCF) see discounted cash flow analysis New York Federal Reserve Bank (Fed) 16 Nomads 45 normal market share (NMS) 132–33 Northern Rock 16 Nymex Europe 102 NYSE Euronext 124, 138, 145 options see derivatives Oxera 52  Parmalat 67, 232 pensions alternatively secured pension 290 annuities 288–89 occupational pension final salary scheme 285–86 money purchase scheme 286 personal account 287 personal pension self-invested personal pension 288 stakeholder pension 288 state pension 283 unsecured pension 289–90 Pensions Act 2007 283 phishing 200 Piper Alpha oil disaster 250 PLUS Markets Group 32, 45–46 as alternative to LSE 45–46, 131–33 deal with OMX 132 relationship to Ofex 46 pooled investments exchange-traded funds (ETF) 169 hedge funds 169–71 see also investment companies, investment funds post-trade services 140–50 clearing 140, 141–42 safekeeping and custody 143–44 registrar services 144 settlement 140, 142–43 real-time process 142 Proceeds of Crime Act 2003 (POCA) 211, 219, 220–21 Professional Securities Market 43–44 Prudential 20 purchasing power parity 118–19 reinsurance 260–68 cat bonds 264–65 dispute resolution 268 doctrines 263 financial reinsurance 263–64 incurred but not reported (IBNR) claims insurance securitisation 265 non-proportional 261 offshore requirements 267 proportional 261 Reinsurance Directive 266–67 retrocession 262 types of contract facultative 262 treaty 262 retail banking 20 retail investors 151–155 Retail Prices Index (RPI) 13, 87 264  308 INDEX ____________________________________________________ Retail Service Provider (RSP) network Reuters 35 Royal Bank of Scotland 20, 79, 221 73 Sarbanes–Oxley Act 233–34 securities 5, 29 Securities and Futures Authority 11 self-regulatory organisations (SROs) 192 Serious Crime Bill 213 settlement 11, 31, 140, 142–43 shareholder, rights of 29 shares investment in 29–32 nominee accounts 31 valuation 35–39 ratios 36–39 see also flotation short selling 31–32, 73, 100, 157 Society for Worldwide Interbank Financial Telecommunications (SWIFT) 119 Solvency II 244–245 Soros, George 114, 115 Specialist Fund Market 44 ‘square mile’ 4 stamp duty 72, 75, 166 Sterling Overnight Index Average (SONIA) 85 Stock Exchange Automated Quotation System (SEAQ) 7, 121, 126 Stock Exchange Electronic Trading Service (SETS) see Lloyd’s of London stock market 29–33 stockbrokers 33–34 advisory 33 discretionary 33–34 execution-only 34 stocks see shares sub-prime mortgage crisis 16, 89, 94, 274 superequivalence 43 suspicious activity reports (SARs) 212, 219–22 swaps market 7 interest rates 56 swaptions 68 systematic internalisers (SI) 137–38 Target2-Securities 147–48, 150 The Times 35, 53, 291 share price tables 36–37, 40 tip sheets 33 trading platforms, electronic 80, 97, 113, 117 tranche trading 123 Treasury Select Committee 14 trend theory 175–76 UBS Warburg 103, 136 UK Listing Authority 44 Undertakings for Collective Investments in Transferable Securities (UCITS) 156 United Capital Asset Management 95 value at risk (VAR) virtual banks 20 virt-x 140 67–68 weighted-average cost of capital (WACC) see discounted cash flow analysis wholesale banking 20 wholesale markets 78–80 banks 78–79 interdealer brokers 79–80 investors 79 Woolwich Bank 20 WorldCom 67, 232 Index of Advertisers Aberdeen Asset Management PLC xiii–xv Birkbeck University of London xl–xlii BPP xliv–xlvi Brewin Dolphin Investment Banking 48–50 Cass Business School xxi–xxiv Cater Allen Private Bank 180–81 CB Richard Ellis Ltd 270–71 CDP xlviii–l Charles Schwab UK Ltd lvi–lviii City Jet Ltd x–xii The City of London inside front cover EBS Dealing Resource International 110–11 Edelman xx ESCP-EAP European School of Management vi ICAS (The Inst. of Chartered Accountants of Scotland) xxx JP Morgan Asset Management 160–62 London Business School xvi–xviii London City Airport vii–viii Morgan Lewis xxix Securities & Investments Institute ii The Share Centre 30, 152–54 Smithfield Bar and Grill lii–liv TD Waterhouse xxxii–xxxiv University of East London xxxvi–xxxviii


pages: 417 words: 109,367

The End of Doom: Environmental Renewal in the Twenty-First Century by Ronald Bailey

3D printing, additive manufacturing, agricultural Revolution, Albert Einstein, Anthropocene, Asilomar, autonomous vehicles, biodiversity loss, business cycle, carbon tax, Cass Sunstein, Climatic Research Unit, commodity super cycle, conceptual framework, corporate governance, creative destruction, credit crunch, David Attenborough, decarbonisation, dematerialisation, demographic transition, disinformation, disruptive innovation, diversified portfolio, double helix, energy security, failed state, financial independence, Ford Model T, Garrett Hardin, Gary Taubes, Great Leap Forward, hydraulic fracturing, income inequality, Induced demand, Intergovernmental Panel on Climate Change (IPCC), invisible hand, knowledge economy, meta-analysis, Naomi Klein, negative emissions, Neolithic agricultural revolution, ocean acidification, oil shale / tar sands, oil shock, pattern recognition, peak oil, Peter Calthorpe, phenotype, planetary scale, precautionary principle, price stability, profit motive, purchasing power parity, race to the bottom, RAND corporation, Recombinant DNA, rent-seeking, rewilding, Stewart Brand, synthetic biology, systematic bias, Tesla Model S, trade liberalization, Tragedy of the Commons, two and twenty, University of East Anglia, uranium enrichment, women in the workforce, yield curve

During that time, female literacy rose to 90 percent; 50 percent of the workforce is now female; and fertility fell from 6 children per woman in the 1960s to 1.5 today. Although Thailand is classified as only moderately free on the economic freedom index, its gross domestic product (GDP) grew in terms of purchasing power parity from just over $1,000 per capita in 1960 to over $8,500 per capita in 2012. Back in 1968, Garrett Hardin declared, “There is no prosperous population in the world today that has, and has had for some time, a growth rate of zero.” That’s no longer true. Japan is now experiencing a fall in its population due largely to reduced fertility, as are Germany, Russia, Italy, Poland, and some 20 other countries and territories.

Recent data suggests that sulfur dioxide emissions even from rapidly industrializing China may have peaked in 2006 and have begun declining. Earlier studies cite evidence for a pollution turning point at which people begin to demand reductions in sulfur dioxide emissions when their per capita annual incomes reach a threshold of around $10,000 (purchasing power parity). The researchers in that study concluded, “One important lesson here is that it is possible to reduce emissions that are by-products of a modern economy, without sacrificing long-term growth.” In the face of the overwhelming evidence to the contrary, why do so many Americans still believe that air pollution is getting worse?


pages: 376 words: 109,092

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, Goodhart's law, Greenspan put, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, junk bonds, Kenneth Rogoff, Kickstarter, labour market flexibility, Les Trente Glorieuses, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market clearing, Martin Wolf, Minsky moment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

Inflation For investors, it makes sense for inflation to be a determining factor in currency markets. Inflation reduces the purchasing power of a currency; so investors should avoid currencies with high inflation rates. Roughly speaking, economists think that, over the long run, exchange rates will move in line with relative inflation rates, a concept known as purchasing-power parity (PPP). If country A’s inflation rate was 5 per cent higher than that of country B, its currency would decline by around 5 per cent a year. It has never worked quite as simply as that. At the extremes, PPP proved roughly right. Countries with very high inflation, such as several in Latin America in the 1970s and 80s, did see their exchange rates decline significantly.

leverage leveraged buyout Lewis, Michael Liberal Democrat party (UK) Liberal Party (UK) life expectancy life-cycle theory Little Dorrit lire Live 8 concert Lloyd George, David Lombard Odier Lombard Street Research London School of Economics Long Term Capital Management longevity Louis XIV, King of France Louis XV, King of France Louvre accord Lucas, Robert Lucullus, Roman general Luxembourg Macaulay, Thomas McCarthy, Cormac Macdonald, James MacDonald, Ramsay McKinsey McNamara, Robert Madoff, Bernie Malthusian trap Mandelson, Peter Marais, Matthieu Marco Polo Mares, Arnaud Marks & Spencer Marshall, George Marshall Aid Marshalsea Prison Mauro, Paolo May, Sir George means/media of exchange Medicaid Medicare Mellon, Andrew mercantilism Merchant of Venice, The Meriwether, John Merkel, Angela Merton, Robert Mexico Mill, John Stuart Milne-Bailey, Walter Minsky, Hyman Mises, Ludwig von Mississippi Project Mitterrand, Francois Mobutu, Joseph Mongols monetarism monetary policy monetary targets money markets money supply Moody’s Moore’s Law moral hazard Morgan Stanley Morgenthau, Henry Morrison, Herbert mortgages mortgage-backed bonds Multilateral Debt Relief Initiative Napier, Russell Napoleon, emperor of France Napoleonic Wars Nasser, president of Egypt National Association of Home Builders National Association of Realtors National Association of Security Dealers Netherlands New Century New Hampshire New Jersey Newton, Sir Isaac New York Times New Zealand Nixon, Richard Norman, Montagu North Carolina Northern Ireland Northern Rock North Korea North Rhine Westphalia, Germany Norway Obama, Barack odious debt Odysseus OECD d’Orléans, duc Ottoman Empire output gap Overstone, Lord overvalued currency owner-equivalent rent Papandreou, George paper money paradox of thrift Paris club Passfield, Lord (Sidney Webb) Paulson, Hank pawnbroking pension age pension funds pensions Pepin the Short Perot, Ross Perry, Rick Persians Peter Pan Philip II, King of Spain Philip IV, King of France PIGS countries PIMCO Plaza accord Poland Ponzi, Charles Ponzi scheme population growth populism portfolio insurance Portugal pound Prasad, Eswar precious metals Price-earnings ratio primary surplus Prince, Chuck principal-agent problem printing money private equity property market protectionism Protestant work ethic public choice theory public-sector workers purchasing power parity pyramid schemes Quaintance, Lee quantitative easing (QE) Quincy, Josiah railway mania Rajan, Raghuram Rand, Ayn Reagan, Ronald real bills theory real interest rates Record, Neil Reformation, the Reichsbank Reichsmark Reid, Jim Reinhart, Carmen renminbi Rentenmark rentiers reparations Republican Party reserve currency retail price index retirement revaluation Revolutionary War Ridley, Matt Roberts, Russell Rogoff, Kenneth Romanovs Roosevelt, Franklin D.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, antiwork, AOL-Time Warner, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, Charles Babbage, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial engineering, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, Great Leap Forward, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land bank, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Neal Stephenson, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, proprietary trading, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, search costs, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

In this case, $5,000 per capita income will be a relatively accurate description of the standard of living in Country B but will be completely misleading for Country A. To use a more technical term, you would say that the average income is a more accurate indicator of the living standard for a country with a more equal distribution of income. (More on this in Chapter 9.) Adjusting for different price levels: purchasing power parity One important adjustment that is often made to the GNI (or GDP) figures is that for different price levels in different countries. The market exchange rate between the Danish krone and the Mexican peso may be around one krone to 2.2 pesos, but with 2.2 pesos you can buy more goods and services in Mexico than you can with one krone in Denmark (I will explain shortly why).

The problem is that market exchange rates are largely determined by the supply and demand for internationally traded goods and services, such as the Galaxy phones or international banking services, while what a sum of money can buy in a particular country is determined by the prices of all goods and services, including those that are not internationally traded, such as eating out or taking a taxi.1 To deal with this problem, economists have come up with the idea of an ‘international dollar’. Based on the notion of purchasing power parity (PPP) – that is, measuring the value of a currency according to how much of a common set of goods and services (known as the ‘consumption basket’) it can buy in different countries – this fictitious currency allows us to convert incomes of different countries into a common measure of living standards.


pages: 332 words: 106,197

The Divide: A Brief Guide to Global Inequality and Its Solutions by Jason Hickel

"World Economic Forum" Davos, Alan Greenspan, Andrei Shleifer, Asian financial crisis, Atahualpa, Bartolomé de las Casas, Bernie Sanders, Bob Geldof, Bretton Woods, British Empire, Cape to Cairo, capital controls, carbon credits, carbon footprint, carbon tax, clean water, collective bargaining, colonial rule, Cornelius Vanderbilt, David Attenborough, David Graeber, David Ricardo: comparative advantage, declining real wages, degrowth, dematerialisation, Doha Development Round, Elon Musk, European colonialism, falling living standards, financial deregulation, flying shuttle, Fractional reserve banking, Francisco Pizarro, full employment, Glass-Steagall Act, Global Witness, Hans Rosling, happiness index / gross national happiness, Howard Zinn, income inequality, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Watt: steam engine, laissez-faire capitalism, land reform, land value tax, liberal capitalism, Live Aid, Mahatma Gandhi, Money creation, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, negative emissions, Nelson Mandela, offshore financial centre, oil shale / tar sands, out of africa, Phillips curve, planned obsolescence, plutocrats, purchasing power parity, race to the bottom, rent control, road to serfdom, Ronald Reagan, Scramble for Africa, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, structural adjustment programs, TED Talk, The Chicago School, The Spirit Level, trade route, transatlantic slave trade, transfer pricing, trickle-down economics, Washington Consensus, WikiLeaks, women in the workforce, Works Progress Administration

How did the World Bank’s poverty numbers change so suddenly from a rising trend to a falling one? To put it simply, they changed the international poverty line. In 2000, they shifted it from the original $1.02 level to $1.08. While the new poverty line looks slightly higher than the old one, in reality it was just ‘rebased’ to new purchasing power parity (PPP) calculations, which are updated every few years to compensate for depreciation in the purchasing power of the dollar. If the purchasing power of the dollar goes down, people need more dollars to buy the same stuff as before. So the poverty line needs to be periodically ‘raised’ to account for this.

At first glance, it might seem that the Bank has finally admitted that the old line was just too low and has raised it to a more meaningful standard; indeed, many commentators assumed precisely that. But the opposite is true. The Bank didn’t raise the poverty line at all – it simply rebased it to the newest purchasing power parity (PPP) calculations, to compensate for depreciation in the purchasing power of the dollar. And once again, the new line is significantly lower than the old one, in real terms. It makes it seem as though there are fewer poor people than before. After rolling out the new poverty line, the Bank suddenly announced that the global poverty headcount had decreased by 100 million people overnight, and that the poverty reduction trend has been declining more rapidly than we used to believe.


EuroTragedy: A Drama in Nine Acts by Ashoka Mody

Alan Greenspan, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, book scanning, book value, Bretton Woods, Brexit referendum, call centre, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, debt deflation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, fear index, financial intermediation, floating exchange rates, forward guidance, George Akerlof, German hyperinflation, global macro, global supply chain, global value chain, hiring and firing, Home mortgage interest deduction, income inequality, inflation targeting, Irish property bubble, Isaac Newton, job automation, Johann Wolfgang von Goethe, Johannes Kepler, Kenneth Rogoff, Kickstarter, land bank, liberal capitalism, light touch regulation, liquidity trap, loadsamoney, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low-wage service sector, Mikhail Gorbachev, mittelstand, money market fund, moral hazard, mortgage tax deduction, neoliberal agenda, offshore financial centre, oil shock, open borders, pension reform, precautionary principle, premature optimization, price stability, public intellectual, purchasing power parity, quantitative easing, rent-seeking, Republic of Letters, Robert Gordon, Robert Shiller, Robert Solow, short selling, Silicon Valley, subprime mortgage crisis, The Great Moderation, The Rise and Fall of American Growth, too big to fail, total factor productivity, trade liberalization, transaction costs, urban renewal, working-age population, Yogi Berra

(Each country’s share of world GDP, percent) Sources: Angus Maddison. “Historical Statistics of the World Economy: 1–​2008 ad.” University of Groningen, available from: http://​www.ggdc.net/​maddison/​oriindex.htm, series “GDP.” The values for 2009 and 2010 are from the Conference Board (GDP adjusted for purchasing power parity, series “GK GDP”), available from https://​www.conference-​board.org/​data/​economydatabase/​index.cfm?id=27762. three leaps in the dark 25 for economic development.” Working together to raise standards of living would be the glue of a politically united, postwar Europe. In his instantly historic declaration, Schuman had outlined the basic contours of postwar European integration: centralized governance and the promise of economic prosperity.

Postwar 162   e u r o t r a g e d y 80 70 60 50 40 30 20 1874 83 92 1901 10 19 28 37 46 55 64 73 82 91 2000 Figure 4.3. Europe’s impressive postwar economic recovery. (Euro-​area GDP per capita as percent of US GDP per capita, three-​year moving averages) Note: This chart plots the weighted average per capita GDP (in purchasing power parity terms) of euro-​ area countries as a ratio of US per capita GDP. Nine of the first twelve members represent the euro area in this chart. Greece, Ireland, and Luxembourg were not included, because data on these countries were not available for the entire period. Given the relatively small size of the omitted countries, the picture looks much the same if they are included for the years for which their data are available.

Chronically high unemployment levels, especially among young Italians, the sharp decline in investment, and the slide into low inflation all created further impediments to future growth. These crisis-​induced liabilities came on top of the handicaps of a rapidly aging population and a business sector that had lost its vitality decades earlier. the ecb hesitates, the italian fault line deepens 339 Per capita incomes (In thousands of US dollars, corrected for purchasing power parity) Unemployment rates (Percent) 13 50 Italy 12 48 Germany 11 46 France 10 44 9 42 France 40 38 8 7 6 36 Italy 34 Germany 5 4 2003 05 07 09 11 13 15 2003 05 07 09 11 13 15 Figure 8.1. The great divergence in euro-area incomes and employment. Source: The Conference Board, “Total Economy Database (Adjusted Version),” http://​www.conference-​ board.org/​data/​economydatabase/​; IMF, World Economic Outlook Database, https://​www.imf.org/​ external/​pubs/​ft/​weo/​2017/​01/​weodata/​index.aspx.


pages: 396 words: 117,897

Making the Modern World: Materials and Dematerialization by Vaclav Smil

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, additive manufacturing, American Society of Civil Engineers: Report Card, Apollo 11, Apollo Guidance Computer, Boeing 747, British Empire, decarbonisation, degrowth, deindustrialization, dematerialisation, Deng Xiaoping, energy transition, Fellow of the Royal Society, flying shuttle, Ford Model T, global pandemic, Haber-Bosch Process, happiness index / gross national happiness, hydraulic fracturing, income inequality, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), James Watt: steam engine, megacity, megastructure, microplastics / micro fibres, oil shale / tar sands, peak oil, post-industrial society, Post-Keynesian economics, purchasing power parity, recommendation engine, rolodex, X Prize

This implies a doubling every 7.3 years resulting in a 2010 GDP (in constant prices) 17.8 times higher than in 1980. In per capita terms, the multiple was still roughly 13-fold (NBSC, 2013; IMF, 2013). Using official exchange rates these sums convert, respectively, to about $200 billion and $5.9 trillion (in current terms) and purchasing power parity (PPP) conversion boosts them to about $250 billion and $10.1 trillion. In 1980, China's economy was (in PPP terms) only about half the size of Italy's, by 2010 it was the world's second largest, more than twice as large as that of Japan (IMF, 2013). This unprecedented achievement is easier to comprehend when seen primarily as a combination of the following factors: the tremendous pent-up desire of the world's largest population, kept for decades in Maoist economic misery, to improve their quality of life; a huge population increase together with delayed urbanization that released hundreds of millions of young productive workers from the countryside to cities, powering the expansion and new manufacturing capacities that made the country the world's largest exporter; and massive direct foreign investment amounting annually to more than $50 billion since the mid-1980s and accompanied by an unprecedented transfer of modern extraction, industrial, and transportation techniques, a perfect case of advantages enjoyed by a late-starter to modernization.

Similarly, two other measures of dematerialization – declining consumption of goods or lower use of energy per unit of economic product – face a number of intractable data challenges relating to the accounting for overall economic output; while adjustments for inflation can be done fairly easily and with acceptable uncertainty, conversions to purchasing power parities (PPPs) are far more questionable. Moreover, energy use per unit of GDP may be a common measure of an economy's overall energy intensity but (even when setting aside the uncertainties inherent in converting various energies to a common denominator) a closer look shows that it is fundamentally flawed, that its narrow interpretation gives very limited insights and that it is only a poor proxy for tracing both historical and recent changes of material consumption in growing economies.


pages: 482 words: 117,962

Exceptional People: How Migration Shaped Our World and Will Define Our Future by Ian Goldin, Geoffrey Cameron, Meera Balarajan

Admiral Zheng, agricultural Revolution, barriers to entry, Berlin Wall, Branko Milanovic, British Empire, conceptual framework, creative destruction, demographic transition, Deng Xiaoping, endogenous growth, failed state, Fall of the Berlin Wall, Gini coefficient, global pandemic, global supply chain, guest worker program, illegal immigration, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), job automation, Joseph Schumpeter, knowledge economy, labor-force participation, labour mobility, language acquisition, Lao Tzu, life extension, longitudinal study, low skilled workers, low-wage service sector, machine readable, Malacca Straits, mass immigration, microcredit, Nelson Mandela, Network effects, new economy, New Urbanism, old age dependency ratio, open borders, out of africa, price mechanism, purchasing power parity, Richard Florida, selection bias, Silicon Valley, Silicon Valley startup, Skype, social distancing, spice trade, trade route, transaction costs, transatlantic slave trade, women in the workforce, working-age population

After all, most migration is from developing countries to developed countries, where wages are much higher. The current wage differential between Organisation for Economic Cooperation and Development (OECD) countries and nearby low-wage countries creates pressure for migration that mirrors historical movement from low-wage to high-wage areas.14 Unadjusted for purchasing power parity (PPP), wages in Japan are about $13.32 an hour, whereas in Vietnam, they are 13 cents an hour.15 A low-skilled construction laborer in the United States will work less than 4 minutes to make enough to buy a kilogram (2.2 pounds) of flour, whereas a Mexican laborer at home will have to work for more than an hour.16 A worker moving to the United States could increase his or her earnings (adjusted for PPP) from $17,000 per year to $37,989 per year through migration—with no extra training.17 Wage differentials offer powerful incentives for cross-border migration to better-paying labor markets.

Ghosh, 2006: 57. 153. This paragraph draws on IOM, 2008: 152–153. 154. Michael A. Clemens, Claudio E. Montenegro, and Lant Pritchett. 2009. “The Place Premium: Wage Differences for Identical Workers across the US Border,” Harvard Kennedy School Faculty Research Working Paper Series RWP 09–004. 155. Purchasing power parity adjusted US dollars. 156. Clemens, Montenegro, and Pritchett, 2009: 2–3. 157. Rosalia Sciortino and Sureeporn Punpuing. 2009. International Migration in Thailand 2009. Geneva: IOM. 158. Irina Ivakhnyuk. 2009. “Russian Migration Policy in the Soviet and PostSoviet Periods and Its Impact on Human Development in the Region,” UNDP Human Development Report 2009 Background Paper 14, p. 34. 159.


pages: 453 words: 117,893

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, low-wage service sector, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

The United Nations, with the support of all countries around the world, and the World Bank have set an ambitious target of ending extreme poverty by 2030. It would mean that, for the first time, there would be no one who lives on less than $1.90 per day, adjusted for what a dollar buys in the country or ‘purchasing power parity’. What would it take? Could we really see the end of poverty? First, there has been a great deal of progress already. The poverty rate in the developing world has fallen dramatically since 1981. Back then, more than half (52 per cent) of the global population lived on less than $1.25 per day.

monopoly A firm that has market power in the product market. monopsony A firm that has market power in the labour market. OECD (Organisation for Economic Co-operation and Development) A think-tank for advanced economies, based in Paris. negative interest rates Central banks charging commercial banks for depositing money with them. purchasing power parity (PPP) A theory of exchange rate determination, which argues that the exchange rate will change so that the price of a particular good or service will be the same regardless of where you buy it. quantitative easing (QE) Cash injections into the economy by a central bank. Ricardian equivalence David Ricardo’s theory that rational people know that the government debt will have to be repaid at some point in the form of higher taxes so they save in anticipation and do not increase current consumption that boosts growth.


pages: 374 words: 113,126

The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

The United Nations, with the support of all countries around the world, and the World Bank have set an ambitious target of ending extreme poverty by 2030. It would mean that, for the first time, there would be no one who lives on less than $1.90 per day, adjusted for what a dollar buys in the country or ‘purchasing power parity’. What would it take? Could we really see the end of poverty? First, there has been a great deal of progress already. The poverty rate in the developing world has fallen dramatically since 1981. Back then, more than half (52 per cent) of the global population lived on less than $1.25 per day.

monopoly A firm that has market power in the product market. monopsony A firm that has market power in the labour market. OECD (Organisation for Economic Co-operation and Development) A think-tank for advanced economies, based in Paris. negative interest rates Central banks charging commercial banks for depositing money with them. purchasing power parity (PPP) A theory of exchange rate determination, which argues that the exchange rate will change so that the price of a particular good or service will be the same regardless of where you buy it. quantitative easing (QE) Cash injections into the economy by a central bank. Ricardian equivalence David Ricardo’s theory that rational people know that the government debt will have to be repaid at some point in the form of higher taxes so they save in anticipation and do not increase current consumption that boosts growth.


pages: 521 words: 110,286

Them and Us: How Immigrants and Locals Can Thrive Together by Philippe Legrain

affirmative action, Albert Einstein, AlphaGo, autonomous vehicles, Berlin Wall, Black Lives Matter, Boris Johnson, Brexit referendum, British Empire, call centre, centre right, Chelsea Manning, clean tech, coronavirus, corporate social responsibility, COVID-19, creative destruction, crowdsourcing, data science, David Attenborough, DeepMind, Demis Hassabis, demographic dividend, digital divide, discovery of DNA, Donald Trump, double helix, Edward Glaeser, en.wikipedia.org, eurozone crisis, failed state, Fall of the Berlin Wall, future of work, illegal immigration, immigration reform, informal economy, Jane Jacobs, job automation, Jony Ive, labour market flexibility, lockdown, low cost airline, low interest rates, low skilled workers, lump of labour, Mahatma Gandhi, Mark Zuckerberg, Martin Wolf, Mary Meeker, mass immigration, moral hazard, Mustafa Suleyman, Network effects, new economy, offshore financial centre, open borders, open immigration, postnationalism / post nation state, purchasing power parity, remote working, Richard Florida, ride hailing / ride sharing, Rishi Sunak, Ronald Reagan, Silicon Valley, Skype, SoftBank, Steve Jobs, tech worker, The Death and Life of Great American Cities, The future is already here, The Future of Employment, Tim Cook: Apple, Tyler Cowen, urban sprawl, WeWork, Winter of Discontent, women in the workforce, working-age population

, Expert report no. 11 to Sweden’s Globalisation Council, 2008. https://www.regeringen.se/contentassets/880ac1658a944d31906ec26f9607c080/is-free-migration-compatible-with-a-european-style-welfare-state 8 Kimberley Amadeo, ‘US Welfare Programs, the Myths Versus the Facts’, The Balance, updated 14 January 2020. https://www.thebalance.com/welfare-programs-definition-and-list-3305759 9 Purchasing power parities from https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm 10 UK Government, ‘Universal Credit. What You’ll Get’. Accessed on 24 January 2020 at https://www.gov.uk/universal-credit/what-youll-get 11 ‘Policy Basics: An Introduction to TANF’, Center on Budget and Policy Priorities, updated 15 August 2018. https://www.cbpp.org/research/family-income-support/policy-basics-an-introduction-to-tanf 12 UK Government, ‘Asylum Support.


pages: 145 words: 43,599

Hawai'I Becalmed: Economic Lessons of the 1990s by Christopher Grandy

Alan Greenspan, Bretton Woods, business climate, business cycle, dark matter, endogenous growth, inventory management, Jones Act, Long Term Capital Management, market bubble, Maui Hawaii, minimum wage unemployment, open economy, purchasing power parity, Silicon Valley, Telecommunications Act of 1996

But such policies also 108 Figure 34 Hawai‘i Becalmed Per Capita Gross Product 1999 (unless indicated otherwise) Source: All but Hawai‘i and Guam from U.S. Central Intelligence Agency, The World Fact Book 2000, http://www.odci.gov/cia/publications/factbook/index.html. GDP calculations by purchasing power parity. Hawai‘i from DBEDT. Guam from http://www.admin.gov.gu/commerce/guam_income_indicators.htm come with costs that we should recognize. Only if we weigh both the benefits and costs will we make wise decisions. In my view some of the policy implications of enjoying the benefits of an export-oriented economy—and some of the lessons of the 1990s— include the following.


pages: 239 words: 45,926

As the Future Catches You: How Genomics & Other Forces Are Changing Your Work, Health & Wealth by Juan Enriquez

Albert Einstein, AOL-Time Warner, Apollo 13, Berlin Wall, bioinformatics, borderless world, British Empire, Buckminster Fuller, business cycle, creative destruction, digital divide, double helix, Ford Model T, global village, Gregor Mendel, half of the world's population has never made a phone call, Helicobacter pylori, Howard Rheingold, Jeff Bezos, Joseph Schumpeter, Kevin Kelly, knowledge economy, more computing power than Apollo, Neal Stephenson, new economy, personalized medicine, purchasing power parity, Ray Kurzweil, Richard Feynman, Robert Metcalfe, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, spice trade, stem cell, the new new thing, yottabyte

Twelfth-Grade Mathematics and Science Achievement in International Context, NCES 98–049 (Washington, D.C.: U.S. Government Printing Office, 1998). 9. The Big Mac Index reflects the cost of purchasing this hamburger at McDonald’s restaurants throughout the world. It was created in 1986 by The Economist to look at purchasing-power parity. These figures are calculated by Reforma: www.reforma.com/flashes/negocios/big_mac/. Some of the actual differences between countries may be even larger than they appear in these numbers because the average manufacturing wage is divided by the cost of a Big Mac, and a burger costs $2.09 in the United States and $1.10 in India.


pages: 421 words: 120,332

The World in 2050: Four Forces Shaping Civilization's Northern Future by Laurence C. Smith

Boeing 747, Bretton Woods, BRICs, business cycle, clean water, climate change refugee, Climategate, colonial rule, data science, deglobalization, demographic transition, Deng Xiaoping, Easter island, electricity market, energy security, flex fuel, G4S, global supply chain, Google Earth, Great Leap Forward, guest worker program, Hans Island, hydrogen economy, ice-free Arctic, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, land tenure, Martin Wolf, Medieval Warm Period, megacity, megaproject, Mikhail Gorbachev, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, purchasing power parity, Ronald Reagan, Ronald Reagan: Tear down this wall, side project, Silicon Valley, smart grid, sovereign wealth fund, special economic zone, standardized shipping container, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, trade route, Tragedy of the Commons, UNCLOS, UNCLOS, urban planning, Washington Consensus, Y2K

., “Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes: Exposure Estimates,” OECD Environment Working Papers, no. 1 (OECD Publishing, 2008), 62 pp., DOI:10.1787/011766488208. See also J. P. Ericson et al., “Effective Sea-Level Rise and Deltas: Causes of Change and Human Dimension Implications,” Global and Planetary Change 50 (2006): 63-82. 264 Monetary amounts are in international 2001 U.S. dollars using purchasing power parities. Ibid. 265 Short for “Water Global Assessment and Prognosis.” See Center for Environmental Systems Research, http://www.usf.uni-kassel.de/cesr/. 266 The climate-change component of this particular simulation is from the HadCM3 circulation model assuming a B2 SRES scenario. For more on other, nonclimatic assumptions, see Alcamo, M.

Bulte, “The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings,” Journal of Environmental Economics and Management 55, no. 3 (2008): 248-264. 536 The bulk of the Arctic economy is based on commodity exports. Public services comprise 20%-40% GDP, transportation accounts for some 5%-12%, with tourism and retail significant only in particular areas. In 2001 the total Arctic economy was U.S. $230 billion (in purchasing power parity), with Arctic defined as all of Alaska (USA); Yukon, NWT, Nunavut, Nunavik, and Labrador (Canada); Greenland and the Faroe Islands (Denmark); Iceland; Nordland, Troms, Finnmark, and Svalbard (Norway); Västerbotten and Norrbotten (Sweden); Oulu and Lapland (Finland); and the republics of Karelia, Komi, and Sakha; the oblasts of Arkhangelsk, Murmansk, Tyumen, Kamchatka, and Magadan; the autonomous okrugs of Nenets, Khanty-Mansii, Yamal-Nenets, Krasnoyarsk Krai, Taimyr, Evenk, Koryak, and Chukchi (Russian Federation).


pages: 424 words: 119,679

It's Better Than It Looks: Reasons for Optimism in an Age of Fear by Gregg Easterbrook

affirmative action, Affordable Care Act / Obamacare, air freight, Alan Greenspan, Apollo 11, autonomous vehicles, basic income, Bernie Madoff, Bernie Sanders, Black Lives Matter, Boeing 747, Branko Milanovic, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, clean tech, clean water, coronavirus, Crossrail, David Brooks, David Ricardo: comparative advantage, deindustrialization, Dissolution of the Soviet Union, Donald Trump, driverless car, Elon Musk, Exxon Valdez, factory automation, failed state, fake news, full employment, Gini coefficient, Google Earth, Home mortgage interest deduction, hydraulic fracturing, Hyperloop, illegal immigration, impulse control, income inequality, independent contractor, Indoor air pollution, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Watt: steam engine, labor-force participation, liberal capitalism, longitudinal study, Lyft, mandatory minimum, manufacturing employment, Mikhail Gorbachev, minimum wage unemployment, Modern Monetary Theory, obamacare, oil shale / tar sands, Paul Samuelson, peak oil, plant based meat, plutocrats, Ponzi scheme, post scarcity, purchasing power parity, quantitative easing, reserve currency, rising living standards, Robert Gordon, Ronald Reagan, self-driving car, short selling, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, Steve Wozniak, Steven Pinker, supervolcano, The Chicago School, The Rise and Fall of American Growth, the scientific method, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, transaction costs, Tyler Cowen, uber lyft, universal basic income, War on Poverty, Washington Consensus, We are all Keynesians now, WikiLeaks, working poor, Works Progress Administration

In 2012, Barack Obama’s National Intelligence Council produced a report declaring that by 2030 the United States would no longer hold great-power status, while China’s GDP would exceed America’s. For this declinist forecast to come true, China must more than double its GDP in just twelve years, which is all but physically impossible. (China’s economy does rival America’s on purchasing power parity, a measure different from GDP.) And if you want to mess with America’s military in 2030, be my guest. Intellectuals embrace declinism because other views are looked down upon as Pangloss or Pollyanna. In contemporary US academia, the idea that the United States has been a net positive for humanity is close to a forbidden thought.

Paul Samuelson… predicted the Soviet economy would pass the US economy by the 1980s at the latest: Samuelson’s venerable textbook Economics (New York: McGraw Hill), which first went to press in 1948, began including this forecast with the 1961 edition. The United States outproduces China and Russia combined: As elsewhere in this book, this is the standard calculation—employed by the World Bank, the CIA, and other authorities—for gauging GDP by exchange rates. If instead the gauge is purchasing power parity, China looks better. Russia remains an economic basket case under all forms of measurement. As Deirdre McCloskey, an economic historian… has written: Deirdre McCloskey, Bourgeois Equality (Chicago: University of Chicago Press, 2016). In early 2017, the market capitalization of Apple reached $800 billion: Anita Balakrishnan, “Apple Market Cap Tops $800 Billion,” CNBC, May 8, 2017.


The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics by Rod Hill, Anthony Myatt

American ideology, Andrei Shleifer, Asian financial crisis, bank run, barriers to entry, behavioural economics, Bernie Madoff, biodiversity loss, business cycle, cognitive dissonance, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, different worldview, electricity market, endogenous growth, equal pay for equal work, Eugene Fama: efficient market hypothesis, experimental economics, failed state, financial innovation, full employment, gender pay gap, Gini coefficient, Glass-Steagall Act, Gunnar Myrdal, happiness index / gross national happiness, Home mortgage interest deduction, Howard Zinn, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, liberal capitalism, low interest rates, low skilled workers, market bubble, market clearing, market fundamentalism, Martin Wolf, medical malpractice, military-industrial complex, minimum wage unemployment, moral hazard, Paradox of Choice, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, positional goods, prediction markets, price discrimination, price elasticity of demand, principal–agent problem, profit maximization, profit motive, publication bias, purchasing power parity, race to the bottom, Ralph Nader, random walk, rent control, rent-seeking, Richard Thaler, Ronald Reagan, search costs, shareholder value, sugar pill, The Myth of the Rational Market, the payments system, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, union organizing, working-age population, World Values Survey, Yogi Berra

At the world price, demand exceeds domestic supply; the difference is imports. 219 table 10.1 International trade, 2007 (%) Country Exports/ GDP Imports/ GDP Share of Share of world world exports imports 112.9 84.7 52.4 46.5 44.7 36.2 32.4 26.9 26.1 22.0 19.2 11.7 107.9 76.7 44.8 39.7 45.3 35.4 35.8 28.9 29.8 24.8 17.6 17.1 3.1 4 1.2 9.5 2.7 3 2 4 3.1 1 5.1 8.3 2.9 3.5 1.1 7.4 2.5 2.7 2.1 4.3 4.4 1.2 4.4 14.2 63.4 43.0 40.8 30.5 29.9 20.1 13.9 31.6 26.2 33.1 21.8 38.6 25.1 12.3 1.7 0.5 8.7 2.6 0.5 1 1.2 0.6 0.2 6.7 1.6 0.6 1.5 0.9 Some OECD countries Belgium Netherlands Sweden Germany Korea, South Canada Mexico France United Kingdom Australia Japan United States Some non-OECD countries Saudi Arabia Nigeria China (excluding Hong Kong) Russia South Africa India Brazil Note: GDP is not adjusted for purchasing power parity. This increases the ratios of exports and imports to GDP significantly for developing countries. Source: World Trade Organization Statistics, Country Profiles, October 2008 If the government imposes a tariff of $1/kilo on nails, the domestic price rises by the same amount. Foreign suppliers of imported nails must get $11/kilo of nails so that after paying the tariff they still get the world price of $10/kilo.

There are seventy-three surveys for sixty-nine countries; three were sampled twice and the former East Germany and West Germany were surveyed separately. 15 The values are from the variable rgdpeqa in the Penn World Tables, Version 6.2. Gross domestic product is expressed in US dollars of the year 2000, with exchange rates adjusted for purchasing power parity, to give a more appropriate comparison between countries than market exchange rates permit. Rather than divide GDP by population, an adjustment is made to give less weight to children, whose consumption needs are less. 16 Satisfaction with life is significantly lower in these countries, however (Deaton 2008).


pages: 413 words: 119,379

The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis

Airbus A320, Berlin Wall, blood diamond, BRICs, British Empire, central bank independence, clean water, colonial rule, corporate social responsibility, crony capitalism, Deng Xiaoping, Donald Trump, F. W. de Klerk, financial engineering, flag carrier, Gini coefficient, Global Witness, Livingstone, I presume, McMansion, megacity, megaproject, Nelson Mandela, offshore financial centre, oil shock, open economy, purchasing power parity, rolodex, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, structural adjustment programs, trade route, transfer pricing, upwardly mobile, urban planning, Washington Consensus, WikiLeaks, zero-sum game

Rosa Palavera, interview with author, Luanda, June 2012. 26. Paulo Moreira (Portuguese PhD student living in Chicala to study the Angolan government’s slum policies), interview with author, Luanda, June 2012. 27. The World Bank data for 2009 put 43 per cent of Angolans below the international poverty line of $1.25 a day, adjusted for purchasing power parity. World Development Indicators, World Bank, http://data.worldbank.org/indicator/SI.POV.DDAY. 28. Delta Imobiliária’s role as the estate agent for Kilamba and other Chinese-built housing developments is confirmed in a 28 August 2013 press release by Sonip, the real estate arm of Sonangol, titled ‘Lista de beneficiários de habitações na centralidade do Kilamba atendimento de 02 a 06 de setembro de 2013’.

UN Development Programme, Human Development Indicators 2013, https://data.undp.org/dataset/​Table-1-Human-Development-I​ndex-and-its-components/wxub-qc5k. The non-African countries in the bottom ten were Qatar, Kuwait and Oman, all significant oil and gas producers, Bhutan, where fuel and minerals account for half of exports, and Turkey. 5. The GDP per head numbers are for 2012 and calculated by the World Bank using purchasing power parity at current international dollar prices. The living standards ranking is the United Nations Development Programme’s Human Development Index for 2012. 6. The US Department of Justice enumerated the assets as part of an attempt to confiscate what it said were Teodorin Obiang’s profits of corruption (‘Second Vice President of Equatorial Guinea Agrees to Relinquish More Than $30 Million of Assets Purchased with Corruption Proceeds’, 10 October 2014, www.justice.gov/opa/pr/second-vice-president-equatorial-guinea-agrees-relinquish-more-30-million-assets-purchased).


pages: 165 words: 45,129

The Economics of Inequality by Thomas Piketty, Arthur Goldhammer

affirmative action, basic income, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, conceptual framework, deindustrialization, endogenous growth, Gini coefficient, income inequality, low skilled workers, means of production, middle-income trap, moral hazard, Pareto efficiency, purchasing power parity, Robert Solow, Simon Kuznets, Tax Reform Act of 1986, The Bell Curve by Richard Herrnstein and Charles Murray, very high income, working-age population

For example, the hourly wage of an American worker increased by a factor of eleven between 1870 and 1990, for an average rate of increase of about 2 percent per year (Duménil and Lévy, 1996, chap. 15), which is approximately the same as in France if we take the decrease in annual hours of work into account. This 10:1 ratio between 1990 and 1870 is approximately equivalent to, or slightly less than, the ratio of the average income of a Western citizen in 1990 to that of a Chinese or Indian citizen, using the best available estimates of purchasing power parity (Drèze and Sen, 1995, p. 213). The gaps in GDP per capita, which are often four to five times greater, don’t actually make much sense, because they are expressed in terms of official exchange rates with the advanced economies, and these rates are a very poor gauge of actual differences in purchasing power.


pages: 193 words: 46,052

Modern China: A Very Short Introduction by Rana Mitter

banking crisis, British Empire, corporate social responsibility, credit crunch, Deng Xiaoping, global reserve currency, Great Leap Forward, invention of gunpowder, land reform, Mahatma Gandhi, Mikhail Gorbachev, Nelson Mandela, new economy, purchasing power parity, reserve currency, South China Sea, special economic zone, stem cell, urban planning

In December 2014, the International Monetary Fund (IMF) reported that the Chinese economy was worth $17.6 trillion, slightly exceeding the $17.4 trillion estimate for the US. This marked the first time since 1872 that the US had not topped the list of the world’s largest economies. One should note that these figures were adjusted for Purchasing Power Parity (PPP), without which the size of China’s economy would seem much smaller, and most measures do still categorize China as the second biggest rather than biggest global economy. Yet the IMF statistic highlighted the paradox of China’s status in the 21st century: economic superpower that moves the world’s markets, impoverished developing country—or both?


Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies by Jeremy J. Siegel

addicted to oil, Alan Greenspan, asset allocation, backtesting, behavioural economics, Black-Scholes formula, book value, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, capital asset pricing model, cognitive dissonance, compound rate of return, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, fixed income, German hyperinflation, implied volatility, index arbitrage, index fund, Isaac Newton, it's over 9,000, John Bogle, joint-stock company, Long Term Capital Management, loss aversion, machine readable, market bubble, mental accounting, Money creation, Myron Scholes, new economy, oil shock, passive investing, Paul Samuelson, popular capitalism, prediction markets, price anchoring, price stability, proprietary trading, purchasing power parity, random walk, Richard Thaler, risk free rate, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, stock buybacks, stocks for the long run, subprime mortgage crisis, survivorship bias, technology bubble, The Great Moderation, The Wisdom of Crowds, transaction costs, tulip mania, uptick rule, Vanguard fund, vertical integration

Furthermore, for investors with long-term horizons, hedging currency risk in foreign stock markets is not important. In fact, there is some evidence that in the long run, currency hedges might actually increase the volatility of dollar returns.9 In the long run, exchange-rate movements are determined primarily by differences in inflation between countries, a phenomenon called purchasing power parity. Since equities are claims on real assets, their long-term returns have compensated investors for changes in inflation and thus protected investors from exchange-rate risk. Therefore, it is not worth the cost for long-term stock investors to hedge their currency risk. Sector Diversification Although the returns between foreign and U.S. stocks might be increasingly correlated, the returns between international industrial sectors are not becoming more correlated.

., 290 Procter & Gamble, 59i, 62, 144, 176i, 177 Proctor, William, 65n Producer price index (PPI), 244–245 Profits: ratio to national income, market valuation and, 115–116, 116i (See also Earnings) Program traders, 255 Programmed trading, 258 Prospect theory, 322–323, 328–330 Public capital, in global markets, 177–178 Purchasing managers index (PMI), 243 Purchasing power, growth of, 11–12, 11i Purchasing power parity, 173 Puts, 264 in-the-money, 266 out-of-the-money, 266 Quality of earnings, 108–109 Quantum Chemical Corp., 48 Quest Communications, 64 Ramaswamy, Krishna, 145 Random walk, 29, 29i, 291–292 A Random Walk Down Wall Street (Malkiel), 303 Raskob, John J., 3–5 Rational theory of consumer choice, 322 Reagan, Ronald, 274 Real returns, 112 annual, in United States, 20 on fixed-income assets, 14–16, 15i total, growth of, 11–12, 11i Rebalancing, of fundamentally weighted portfolios, 355 Regulation Q, 8 Reported earnings, 102–104 Representative bias, 326 Research Affiliates, 356 Index Reserve accounts, 195–196 Residual risk, 140 Resistance level, 294 Retained earnings, 98 Return biases, in stock indexes, 46–47 Returns: arithmetic, 22 buy-and-hold, 215 effects of costs on, 350 from 1802-1870, 21–22 from 1802-present, 5–7, 6i excess, 215 for fixed-income assets, standard deviation of, 30 geometric, 22 long-term, 12–14, 13i from market peaks, 27, 28i mean reversion of, 13 measurement of, 23–24 predicting using trend lines, 41–42 real (see Real returns) realistic expectations for, 360–361 short-term, 14 on stocks and bonds, correlation between, 30–32, 31i switching, 214–215, 215i taxes and (see Taxes) time horizons and, 361 total, defined, 5 Revenue Act of 1913, 74 Review of Economic Statistics, 81 Rexall Drug, 62 Rhea, Charles, 290 Richardson, Scott, 108n Richardson Merrell, 60i, 62 Risk: in defined benefit plans, 106–107 diversifiable (residual), 140 holding period and, 24–27, 25i, 26i local, 169 measurement of, 23–24 standard measures of, 28–30, 29i 377 Risk (Cont.): to stockholders, lowering of by employee stock options, 105 Ritter, Jay, 310n RJ Reynolds Tobacco Co., 60i, 62 RJR Nabisco, 62 Roberts, Harry, 291, 292 Roche, 177 Roosevelt, Franklin D., 193, 227, 232 Ross, Stephen A., 18n Royal Bank of Scotland, 175 Royal Dutch Petroleum, 55, 56i, 183 Royal Dutch Shell, 183 Ruane, Cunniff, and Goldfarb, 346 Russell 1000, 45, 46i Russell 2000, 45, 46i Russell 3000, 45 Russell 2000 Index, 142n Russell indexes, 342 Russian default on bonds, 88 S.


pages: 520 words: 129,887

Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future by Robert Bryce

Abraham Maslow, addicted to oil, An Inconvenient Truth, Apollo 11, Bernie Madoff, carbon credits, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, clean tech, collateralized debt obligation, corporate raider, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, decarbonisation, Deng Xiaoping, disinformation, electricity market, en.wikipedia.org, energy security, energy transition, flex fuel, Ford Model T, Glass-Steagall Act, greed is good, Hernando de Soto, hydraulic fracturing, hydrogen economy, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, James Watt: steam engine, Jevons paradox, Menlo Park, Michael Shellenberger, new economy, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, purchasing power parity, RAND corporation, Ronald Reagan, Silicon Valley, smart grid, Stewart Brand, Ted Nordhaus, Thomas L Friedman, uranium enrichment, Whole Earth Catalog, WikiLeaks

Much of it can be explained simply by the fact that consumers, engineers, and entrepreneurs are always working to do things more efficiently, not because it is better for the environment, necessarily, but because it saves them money and increases profits. In other words, it’s just good business. FIGURE 22 Change in Energy Intensity of Major World Economies, 1980 to 2006 Source: Energy Information Administration, “World Energy Intensity—Total Primary Energy Consumption Per Dollar of Gross Domestic Product Using Purchasing Power Parities, 1980–2006,” http://www.eia.doe.gov/pub/international/iealf/tablee1p.xls. Now let’s look at one of the most important energy metrics: per-capita energy consumption. From 1980 through 2006, the average per-capita energy consumption in the United States fell by 2.5 percent. That decline was greater than in any other developed country in the world except for Switzerland and Denmark, which saw their per-capita energy use fall by 4.3 percent and 4.2 percent, respectively.8 During that same time period, per-capita energy use in major European countries rose significantly.

aid=820. 2 House Energy and Commerce Committee, American Clean Energy and Security Act, 2009, http://energycommerce.house.gov/Press_111/20090515/hr2454.pdf. 3 Energy Information Administration, “World Carbon Intensity—World Carbon Dioxide Emissions from the Consumption and Flaring of Fossil Fuels Per Thousand Dollars of Gross Domestic Product Using Market Exchange Rates, 1980–2006,” http://www.eia.doe.gov/pub/international/iealf/tableh1gco2.xls. 4 Energy Information Administration, “World Energy Intensity—Total Primary Energy Consumption Per Dollar of Gross Domestic Product Using Purchasing Power Parities, 1980–2006,” http://www.eia.doe.gov/pub/international/iealf/tablee1p.xls. Note that energy intensity fell faster in about seventeen countries not listed here, including Chad, Guam, Laos, and Afghanistan. 5 Energy Information Administration, Table 1.7, “Primary Energy Consumption Per Real Dollar of Gross Domestic Product,” Monthly Energy Review, May 2009, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec1_16.pdf. 6 Energy Information Administration, Table 1.7, “Primary Energy Consumption Per Real Dollar of Gross Domestic Product,” http://www.eia.doe.gov/emeu/mer/pdf/pages/sec1_16.pdf. 7 The U.S. population in 1980 was 227.7 million.


pages: 349 words: 134,041

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, Asian financial crisis, asset-backed security, Bear Stearns, beat the dealer, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business logic, business process, buy and hold, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, commoditize, complexity theory, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, currency risk, disinformation, disintermediation, diversification, diversified portfolio, Edward Thorp, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, financial engineering, financial innovation, fixed income, Glass-Steagall Act, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, John Bogle, John Meriwether, junk bonds, locking in a profit, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, mega-rich, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mutually assured destruction, Myron Scholes, new economy, New Journalism, Nick Leeson, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, Right to Buy, risk free rate, risk-adjusted returns, risk/return, Salesforce, Satyajit Das, shareholder value, short selling, short squeeze, South Sea Bubble, statistical model, technology bubble, the medium is the message, the new new thing, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

They were worried that the yen was going to depreciate. It was not clear why they thought this. Between 1982 and mid-1985, the yen/dollar exchange rate had traded in a modest range of $1/¥230 to $1/¥257 (about 12%). Since the end of 1984, the yen had weakened a little from ¥246 to ¥250. A theory called purchasing power parity says that relative inflation rates are an indicator of future exchange rates. The currency of a country with high inflation rates (US) will tend to depreciate relative to a country with low inflation rates (Japan). Japanese inflation was very low, about half US inflation. Disney did not seem to have noticed this.

However, the text is different. 6 ‘What Worries Warren’ (3 March 2003) Fortune. 13_INDEX.QXD 17/2/06 4:44 pm Page 325 Index accounting rules 139, 221, 228, 257 Accounting Standards Board 33 accrual accounting 139 active fund management 111 actuaries 107–10, 205, 289 Advance Corporation Tax 242 agency business 123–4, 129 agency theory 117 airline profits 140–1 Alaska 319 Allen, Woody 20 Allied Irish Bank 143 Allied Lyons 98 alternative investment strategies 112, 308 American Express 291 analysts, role of 62–4 anchor effect 136 Anderson, Rolf 92–4 annuities 204–5 ANZ Bank 277 Aquinas, Thomas 137 arbitrage 33, 38–40, 99, 114, 137–8, 171–2, 245–8, 253–5, 290, 293–6 arbitration 307 Argentina 45 arithmophobia 177 ‘armpit theory’ 303 Armstrong World Industries 274 arrears assets 225 Ashanti Goldfields 97–8, 114 Asian financial crisis (1997) 4, 9, 44–5, 115, 144, 166, 172, 207, 235, 245, 252, 310, 319 asset consultants 115–17, 281 ‘asset growth’ strategy 255 asset swaps 230–2 assets under management (AUM) 113–4, 117 assignment of loans 267–8 AT&T 275 attribution of earnings 148 auditors 144 Australia 222–4, 254–5, 261–2 back office functions 65–6 back-to-back loans 35, 40 backwardation 96 Banca Popolare di Intra 298 Bank of America 298, 303 Bank of International Settlements 50–1, 281 Bank of Japan 220 Bankers’ Trust (BT) 59, 72, 101–2, 149, 217–18, 232, 268–71, 298, 301, 319 banking regulations 155, 159, 162, 164, 281, 286, 288 banking services 34; see also commercial banks; investment banks bankruptcy 276–7 Banque Paribas 37–8, 232 Barclays Bank 121–2, 297–8 13_INDEX.QXD 17/2/06 326 4:44 pm Page 326 Index Baring, Peter 151 Baring Brothers 51, 143, 151–2, 155 ‘Basel 2’ proposal 159 basis risk 28, 42, 274 Bear Stearns 173 bearer eurodollar collateralized securities (BECS) 231–3 ‘behavioural finance’ 136 Berkshire Hathaway 19 Bermudan options 205, 227 Bernstein, Peter 167 binomial option pricing model 196 Bismarck, Otto von 108 Black, Fischer 22, 42, 160, 185, 189–90, 193, 195, 197, 209, 215 Black–Scholes formula for option pricing 22, 185, 194–5 Black–Scholes–Merton model 160, 189–93, 196–7 ‘black swan’ hypothesis 130 Blair, Tony 223 Bogle, John 116 Bohr, Niels 122 Bond, Sir John 148 ‘bond floor’ concept 251–4 bonding 75–6, 168, 181 bonuses 146–51, 244, 262, 284–5 Brady Commission 203 brand awareness and brand equity 124, 236 Brazil 302 Bretton Woods system 33 bribery 80, 303 British Sky Broadcasting (BSB) 247–8 Brittain, Alfred 72 broad index secured trust offerings (BISTROs) 284–5 brokers 69, 309 Brown, Robert 161 bubbles 210, 310, 319 Buconero 299 Buffet, Warren 12, 19–20, 50, 110–11, 136, 173, 246, 316 business process reorganization 72 business risk 159 Business Week 130 buy-backs 249 ‘call’ options 25, 90, 99, 101, 131, 190, 196 callable bonds 227–9, 256 capital asset pricing model (CAPM) 111 capital flow 30 capital guarantees 257–8 capital structure arbitrage 296 Capote, Truman 87 carbon trading 320 ‘carry cost’ model 188 ‘carry’ trades 131–3, 171 cash accounting 139 catastrophe bonds 212, 320 caveat emptor principle 27, 272 Cayman Islands 233–4 Cazenove (company) 152 CDO2 292 Cemex 249–50 chaos theory 209, 312 Chase Manhattan Bank 143, 299 Chicago Board Options Exchange 195 Chicago Board of Trade (CBOT) 25–6, 34 chief risk officers 177 China 23–5, 276, 302–4 China Club, Hong Kong 318 Chinese walls 249, 261, 280 chrematophobia 177 Citibank and Citigroup 37–8, 43, 71, 79, 94, 134–5, 149, 174, 238–9 Citron, Robert 124–5, 212–17 client relationships 58–9 Clinton, Bill 223 Coats, Craig 168–9 collateral requirements 215–16 collateralized bond obligations (CBOs) 282 collateralized debt obligations (CDOs) 45, 282–99 13_INDEX.QXD 17/2/06 4:44 pm Page 327 Index collateralized fund obligations (CFOs) 292 collateralized loan obligations (CLOs) 283–5, 288 commercial banks 265–7 commoditization 236 commodity collateralized obligations (CCOs) 292 commodity prices 304 Commonwealth Bank of Australia 255 compliance officers 65 computer systems 54, 155, 197–8 concentration risk 271, 287 conferences with clients 59 confidence levels 164 confidentiality 226 Conseco 279–80 contagion crises 291 contango 96 contingent conversion convertibles (co-cos) 257 contingent payment convertibles (co-pays) 257 Continental Illinois 34 ‘convergence’ trading 170 convertible bonds 250–60 correlations 163–6, 294–5; see also default correlations corruption 303 CORVUS 297 Cox, John 196–7 credit cycle 291 credit default swaps (CDSs) 271–84, 293, 299 credit derivatives 129, 150, 265–72, 282, 295, 299–300 Credit Derivatives Market Practices Committee 273, 275, 280–1 credit models 294, 296 credit ratings 256–7, 270, 287–8, 297–8, 304 credit reserves 140 credit risk 158, 265–74, 281–95, 299 327 credit spreads 114, 172–5, 296 Credit Suisse 70, 106, 167 credit trading 293–5 CRH Capital 309 critical events 164–6 Croesus 137 cross-ruffing 142 cubic splines 189 currency options 98, 218, 319 custom repackaged asset vehicles (CRAVEs) 233 daily earning at risk (DEAR) concept 160 Daiwa Bank 142 Daiwa Europe 277 Danish Oil and Natural Gas 296 data scrubbing 142 dealers, work of 87–8, 124–8, 133, 167, 206, 229–37, 262, 295–6; see also traders ‘death swap’ strategy 110 decentralization 72 decision-making, scientific 182 default correlations 270–1 defaults 277–9, 287, 291, 293, 296, 299 DEFCON scale 156–7 ‘Delta 1’ options 243 delta hedging 42, 200 Deming, W.E. 98, 101 Denmark 38 deregulation, financial 34 derivatives trading 5–6, 12–14, 18–72, 79, 88–9, 99–115, 123–31, 139–41, 150, 153, 155, 175, 184–9, 206–8, 211–14, 217–19, 230, 233, 257, 262–3, 307, 316, 319–20; see also equity derivatives Derman, Emmanuel 185, 198–9 Deutsche Bank 70, 104, 150, 247–8, 274, 277 devaluations 80–1, 89, 203–4, 319 13_INDEX.QXD 17/2/06 4:44 pm Page 328 328 Index dilution of share capital 241 DINKs 313 Disney Corporation 91–8 diversification 72, 110–11, 166, 299 dividend yield 243 ‘Dr Evil’ trade 135 dollar premium 35 downsizing 73 Drexel Burnham Lambert (DBL) 282 dual currency bonds 220–3; see also reverse dual currency bonds earthquakes, bonds linked to 212 efficient markets hypothesis 22, 31, 111, 203 electronic trading 126–30, 134 ‘embeddos’ 218 emerging markets 3–4, 44, 115, 132–3, 142, 212, 226, 297 Enron 54, 142, 250, 298 enterprise risk management (ERM) 176 equity capital management 249 equity collateralized obligations (ECOs) 292 equity derivatives 241–2, 246–9, 257–62 equity index 137–8 equity investment, retail market in 258–9 equity investors’ risk 286–8 equity options 253–4 equity swaps 247–8 euro currency 171, 206, 237 European Bank for Reconstruction and Development 297 European currency units 93 European Union 247–8 Exchange Rate Mechanism, European 204 exchangeable bonds 260 expatriate postings 81–2 expert witnesses 310–12 extrapolation 189, 205 extreme value theory 166 fads of management science 72–4 ‘fairway bonds’ 225 Fama, Eugene 22, 111, 194 ‘fat tail’ events 163–4 Federal Accounting Standards Board 266 Federal Home Loans Bank 213 Federal National Mortgage Association 213 Federal Reserve Bank 20, 173 Federal Reserve Board 132 ‘Ferraris’ 232 financial engineering 228, 230, 233, 249–50, 262, 269 Financial Services Authority (FSA), Japan 106, 238 Financial Services Authority (FSA), UK 15, 135 firewalls 235–6 firing of staff 84–5 First Interstate Ltd 34–5 ‘flat’ organizations 72 ‘flat’ positions 159 floaters 231–2; see also inverse floaters ‘flow’ trading 60–1, 129 Ford Motors 282, 296 forecasting 135–6, 190 forward contracts 24–33, 90, 97, 124, 131, 188 fugu fish 239 fund management 109–17, 286, 300 futures see forward contracts Galbraith, John Kenneth 121 gamma risk 200–2, 294 Gauss, Carl Friedrich 160–2 General Motors 279, 296 General Reinsurance 20 geometric Brownian motion (GBM) 161 Ghana 98 Gibson Greeting Cards 44 Glass-Steagall Act 34 gold borrowings 132 13_INDEX.QXD 17/2/06 4:44 pm Page 329 Index gold sales 97, 137 Goldman Sachs 34, 71, 93, 150, 173, 185 ‘golfing holiday bonds’ 224 Greenspan, Alan 6, 9, 19–21, 29, 43, 47, 50, 53, 62, 132, 159, 170, 215, 223, 308 Greenwich NatWest 298 Gross, Bill 19 Guangdong International Trust and Investment Corporation (GITIC) 276–7 guaranteed annuity option (GAO) contracts 204–5 Gutenfreund, John 168–9 gyosei shido 106 Haghani, Victor 168 Hamanaka, Yasuo 142 Hamburgische Landesbank 297 Hammersmith and Fulham, London Borough of 66–7 ‘hara-kiri’ swaps 39 Hartley, L.P. 163 Hawkins, Greg 168 ‘heaven and hell’ bonds 218 hedge funds 44, 88–9, 113–14, 167, 170–5, 200–2, 206, 253–4, 262–3, 282, 292, 296, 300, 308–9 hedge ratio 264 hedging 24–8, 31, 38–42, 60, 87–100, 184, 195–200, 205–7, 214, 221, 229, 252, 269, 281, 293–4, 310 Heisenberg, Werner 122 ‘hell bonds’ 218 Herman, Clement (‘Crem’) 45–9, 77, 84, 309 Herodotus 137, 178 high net worth individuals (HNWIs) 237–8, 286 Hilibrand, Lawrence 168 Hill Samuel 231–2 329 The Hitchhiker’s Guide to the Galaxy 189 Homer, Sidney 184 Hong Kong 9, 303–4 ‘hot tubbing’ 311–12 HSBC Bank 148 HSH Nordbank 297–8 Hudson, Kevin 102 Hufschmid, Hans 77–8 IBM 36, 218, 260 ICI 34 Iguchi, Toshihude 142 incubators 309 independent valuation 142 indexed currency option notes (ICONs) 218 India 302 Indonesia 5, 9, 19, 26, 55, 80–2, 105, 146, 219–20, 252, 305 initial public offerings 33, 64, 261 inside information and insider trading 133, 241, 248–9 insurance companies 107–10, 117, 119, 150, 192–3, 204–5, 221, 223, 282, 286, 300; see also reinsurance companies insurance law 272 Intel 260 intellectual property in financial products 226 Intercontinental Hotels Group (IHG) 285–6 International Accounting Standards 33 International Securities Market Association 106 International Swap Dealers Association (ISDA) 273, 275, 279, 281 Internet stock and the Internet boom 64, 112, 259, 261, 310, 319 interpolation of interest rates 141–2, 189 inverse floaters 46–51, 213–16, 225, 232–3 13_INDEX.QXD 17/2/06 4:44 pm Page 330 330 Index investment banks 34–8, 62, 64, 67, 71, 127–8, 172, 198, 206, 216–17, 234, 265–7, 298, 309 investment managers 43–4 investment styles 111–14 irrational decisions 136 Italy 106–7 Ito’s Lemma 194 Japan 39, 43, 82–3, 92, 94, 98–9, 101, 106, 132, 142, 145–6, 157, 212, 217–25, 228, 269–70 Jensen, Michael 117 Jett, Joseph 143 JP Morgan (company) 72, 150, 152, 160, 162, 249–50, 268–9, 284–5, 299; see also Morgan Guaranty junk bonds 231, 279, 282, 291, 296–7 JWM Associates 175 Kahneman, Daniel 136 Kaplanis, Costas 174 Kassouf, Sheen 253 Kaufman, Henry 62 Kerkorian, Kirk 296 Keynes, J.M. 167, 175, 198 Keynesianism 5 Kidder Peabody 143 Kleinwort Benson 40 Korea 9, 226, 278 Kozeny, Viktor 121 Krasker, William 168 Kreiger, Andy 319 Kyoto Protocol 320 Lavin, Jack 102 law of large numbers 192 Leeson, Nick 51, 131, 143, 151 legal opinions 47, 219–20, 235, 273–4 Leibowitz, Martin 184 Leland, Hayne 42, 202 Lend Lease Corporation 261–2 leptokurtic conditions 163 leverage 31–2, 48–50, 54, 99, 102–3, 114, 131–2, 171–5, 213–14, 247, 270–3, 291, 295, 305, 308 Lewis, Kenneth 303 Lewis, Michael 77–8 life insurance 204–5 Lintner, John 111 liquidity options 175 liquidity risk 158, 173 litigation 297–8 Ljunggren, Bernt 38–40 London Inter-Bank Offered Rate (LIBOR) 6, 37 ‘long first coupon’ strategy 39 Long Term Capital Management (LTCM) 44, 51, 62, 77–8, 84, 114, 166–75, 187, 206, 210, 215–18, 263–4, 309–10 Long Term Credit Bank of Japan 94 LOR (company) 202 Louisiana Purchase 319 low exercise price options (LEPOs) 261 Maastricht Treaty and criteria 106–7 McLuhan, Marshall 134 McNamara, Robert 182 macro-economic indicators, derivatives linked to 319 Mahathir Mohammed 31 Malaysia 9 management consultants 72–3 Manchester United 152 mandatory convertibles 255 Marakanond, Rerngchai 302 margin calls 97–8, 175 ‘market neutral’ investment strategy 114 market risk 158, 173, 265 marketable eurodollar collateralized securities (MECS) 232 Markowitz, Harry 110 mark-to-market accounting 10, 100, 139–41, 145, 150, 174, 215–16, 228, 244, 266, 292, 295, 298 Marx, Groucho 24, 57, 67, 117, 308 13_INDEX.QXD 17/2/06 4:44 pm Page 331 Index mathematics applied to financial instruments 209–10; see also ‘quants’ matrix structures 72 Meckling, Herbert 117 Melamed, Leo 34, 211 merchant banks 38 Meriwether, John 167–9, 172–5 Merrill Lynch 124, 150, 217, 232 Merton, Robert 22, 42, 168–70, 175, 185, 189–90, 193–7, 210 Messier, Marie 247 Metallgesellschaft 95–7 Mexico 44 mezzanine finance 285–8, 291–7 MG Refining and Marketing 95–8, 114 Microsoft 53 Mill, Stuart 130 Miller, Merton 22, 101, 194 Milliken, Michael 282 Ministry of Finance, Japan 222 misogyny 75–7 mis-selling 238, 297–8 Mitchell, Edison 70 Mitchell & Butler 275–6 models financial 42–3, 141–2, 163–4, 173–5, 181–4, 189, 198–9, 205–10 of business processes 73–5 see also credit models Modest, David 168 momentum investment 111 monetization 260–1 monopolies in financial trading 124 moral hazard 151, 280, 291 Morgan Guaranty 37–8, 221, 232 Morgan Stanley 76, 150 mortgage-backed securities (MBSs) 282–3 Moscow, City of 277 moves of staff between firms 150, 244 Mozer, Paul 169 Mullins, David 168–70 multi-skilling 73 331 Mumbai 3 Murdoch, Rupert 247 Nabisco 220 Napoleon 113 NASDAQ index 64, 112 Nash, Ogden 306 National Australia Bank 144, 178 National Rifle Association 29 NatWest Bank 144–5, 198 Niederhoffer, Victor 130 ‘Nero’ 7, 31, 45–9, 60, 77, 82–3, 88–9, 110, 118–19, 125, 128, 292 NERVA 297 New Zealand 319 Newman, Frank 104 news, financial 133–4 News Corporation 247 Newton, Isaac 162, 210 Nippon Credit Bank 106, 271 Nixon, Richard 33 Nomura Securities 218 normal distribution 160–3, 193, 199 Northern Electric 248 O’Brien, John 202 Occam, William 188 off-balance sheet transactions 32–3, 99, 234, 273, 282 ‘offsites’ 74–5 oil prices 30, 33, 89–90, 95–7 ‘omitted variable’ bias 209–10 operational risk 158, 176 opinion shopping 47 options 9, 21–2, 25–6, 32, 42, 90, 98, 124, 197, 229 pricing 185, 189–98, 202 Orange County 16, 44, 50, 124–57, 212–17, 232–3 orphan subsidiaries 234 over-the-counter (OTC) market 26, 34, 53, 95, 124, 126 overvaluation 64 13_INDEX.QXD 17/2/06 4:44 pm Page 332 332 Index ‘overwhelming force’ strategy 134–5 Owen, Martin 145 ownership, ‘legal’ and ‘economic’ 247 parallel loans 35 pari-mutuel auction system 319 Parkinson’s Law 136 Parmalat 250, 298–9 Partnoy, Frank 87 pension funds 43, 108–10, 115, 204–5, 255 People’s Bank of China (PBOC) 276–7 Peters’ Principle 71 petrodollars 71 Pétrus (restaurant) 121 Philippines, the 9 phobophobia 177 Piga, Gustavo 106 PIMCO 19 Plaza Accord 38, 94, 99, 220 plutophobia 177 pollution quotas 320 ‘portable alpha’ strategy 115 portfolio insurance 112, 202–3, 294 power reverse dual currency (PRDC) bonds 226–30 PowerPoint 75 preferred exchangeable resettable listed shares (PERLS) 255 presentations of business models 75 to clients 57, 185 prime brokerage 309 Prince, Charles 238 privatization 205 privity of contract 273 Proctor & Gamble (P&G) 44, 101–4, 155, 298, 301 product disclosure statements (PDSs) 48–9 profit smoothing 140 ‘programme’ issuers 234–5 proprietary (‘prop’) trading 60, 62, 64, 130, 174, 254 publicly available information (PAI) 277 ‘puff’ effect 148 purchasing power parity theory 92 ‘put’ options 90, 131, 256 ‘quants’ 183–9, 198, 208, 294 Raabe, Matthew 217 Ramsay, Gordon 121 range notes 225 real estate 91, 219 regulatory arbitrage 33 reinsurance companies 288–9 ‘relative value’ trading 131, 170–1, 310 Reliance Insurance 91–2 repackaging (‘repack’) business 230–6, 282, 290 replication in option pricing 195–9, 202 dynamic 200 research provided to clients 58, 62–4, 184 reserves, use of 140 reset preference shares 254–7 restructuring of loans 279–81 retail equity products 258–9 reverse convertibles 258–9 reverse dual currency bonds 223–30 ‘revolver’ loans 284–5 risk, financial, types of 158 risk adjusted return on capital (RAROC) 268, 290 risk conservation principle 229–30 risk management 65, 153–79, 184, 187, 201, 267 risk models 163–4, 173–5 riskless portfolios 196–7 RJ Reynolds (company) 220–1 rogue traders 176, 313–16 Rosenfield, Eric 168 Ross, Stephen 196–7, 202 Roth, Don 38 Rothschild, Mayer Amshel 267 Royal Bank of Scotland 298 Rubinstein, Mark 42, 196–7 13_INDEX.QXD 17/2/06 4:44 pm Page 333 Index Rumsfeld, Donald 12, 134, 306 Rusnak, John 143 Russia 45, 80, 166, 172–3, 274, 302 sales staff 55–60, 64–5, 125, 129, 217 Salomon Brothers 20, 36, 54, 62, 167–9, 174, 184 Sandor, Richard 34 Sanford, Charles 72, 269 Sanford, Eugene 269 Schieffelin, Allison 76 Scholes, Myron 22, 42, 168–71, 175, 185, 189–90, 193–7, 263–4 Seagram Group 247 Securities and Exchange Commission, US 64, 304 Securities and Futures Authority, UK 249 securitization 282–90 ‘security design’ 254–7 self-regulation 155 sex discrimination 76 share options 250–1 Sharpe, William 111 short selling 30–1, 114 Singapore 9 single-tranche CDOs 293–4, 299 ‘Sisters of Perpetual Ecstasy’ 234 SITCOMs 313 Six Continents (6C) 275–6 ‘smile’ effect 145 ‘snake’ currency system 203 ‘softing’ arrangements 117 Solon 137 Soros, George 44, 130, 253, 318–19 South Sea Bubble 210 special purpose asset repackaging companies (SPARCs) 233 special purpose vehicles (SPVs) 231–4, 282–6, 290, 293 speculation 29–31, 42, 67, 87, 108, 130 ‘spinning’ 64 333 Spitzer, Eliot 64 spread 41, 103; see also credit spreads stack hedges 96 Stamenson, Michael 124–5 standard deviation 161, 193, 195, 199 Steinberg, Sol 91 stock market booms 258, 260 stock market crashes 42–3, 168, 203, 257, 259, 319 straddles or strangles 131 strategy in banking 70 stress testing 164–6 stripping of convertible bonds 253–4 structured investment products 44, 112, 115, 118, 128, 211–39, 298 structured note asset packages (SNAPs) 233 Stuart SC 18, 307, 316–18 Styblo Bleder, Tanya 153 Suharto, Thojib 81–2 Sumitomo Corporation 100, 142 Sun Tzu 61 Svensk Exportkredit (SEK) 38–9 swaps 5–10, 26, 35–40, 107, 188, 211; see also equity swaps ‘swaptions’ 205–6 Swiss Bank Corporation (SBC) 248–9 Swiss banks 108, 305 ‘Swiss cheese theory’ 176 synthetic securitization 284–5, 288–90 systemic risk 151 Takeover Panel 248–9 Taleb, Nassim 130, 136, 167 target redemption notes 225–6 tax and tax credits 171, 242–7, 260–3 Taylor, Frederick 98, 101 team-building exercises 76 team moves 149 technical analysis 60–1, 135 television programmes about money 53, 62–3 Thailand 9, 80, 302–5 13_INDEX.QXD 17/2/06 4:44 pm Page 334 334 Index Thatcher, Margaret 205 Thorp, Edward 253 tobashi trades 105–7 Tokyo Disneyland 92, 212 top managers 72–3 total return swaps 246–8, 269 tracking error 138 traders in financial products 59–65, 129–31, 135–6, 140, 148, 151, 168, 185–6, 198; see also dealers trading limits 42, 157, 201 trading rooms 53–4, 64, 68, 75–7, 184–7, 208 Trafalgar House 248 tranching 286–9, 292, 296 transparency 26, 117, 126, 129–30, 310 Treynor, Jack 111 trust investment enhanced return securities (TIERS) 216, 233 trust obligation participating securities (TOPS) 232 TXU Europe 279 UBS Global Asset Management 110, 150, 263–4, 274 uncertainty principle 122–3 unique selling propositions 118 unit trusts 109 university education 187 unspecified fund obligations (UFOs) 292 ‘upfronting’ of income 139, 151 Valéry, Paul 163 valuation 64, 142–6 value at risk (VAR) concept 160–7, 173 value investing 111 Vanguard 116 vanity bonds 230 variance 161 Vietnam War 182, 195 Virgin Islands 233–4 Vivendi 247–8 volatility of bond prices 197 of interest rates 144–5 of share prices 161–8, 172–5, 192–3, 199 Volcker, Paul 20, 33 ‘warehouses’ 40–2, 139 warrants arbitrage 99–101 weather, bonds linked to 212, 320 Weatherstone, Dennis 72, 268 Weil, Gotscal & Manges 298 Weill, Sandy 174 Westdeutsche Genosenschafts Zentralbank 143 Westminster Group 34–5 Westpac 261–2 Wheat, Allen 70, 72, 106, 167 Wojniflower, Albert 62 World Bank 4, 36, 38 World Food Programme 320 Worldcom 250, 298 Wriston, Walter 71 WTI (West Texas Intermediate) contracts 28–30 yield curves 103, 188–9, 213, 215 yield enhancement 112, 213, 269 ‘yield hogs’ 43 zaiteku 98–101, 104–5 zero coupon bonds 221–2, 257–8


pages: 517 words: 139,477

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies by Jeremy Siegel

Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, break the buck, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, capital asset pricing model, carried interest, central bank independence, cognitive dissonance, compound rate of return, computer age, computerized trading, corporate governance, correlation coefficient, Credit Default Swap, currency risk, Daniel Kahneman / Amos Tversky, Deng Xiaoping, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Financial Instability Hypothesis, fixed income, Flash crash, forward guidance, fundamental attribution error, Glass-Steagall Act, housing crisis, Hyman Minsky, implied volatility, income inequality, index arbitrage, index fund, indoor plumbing, inflation targeting, invention of the printing press, Isaac Newton, it's over 9,000, John Bogle, joint-stock company, London Interbank Offered Rate, Long Term Capital Management, loss aversion, machine readable, market bubble, mental accounting, Minsky moment, Money creation, money market fund, mortgage debt, Myron Scholes, new economy, Northern Rock, oil shock, passive investing, Paul Samuelson, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price stability, proprietary trading, purchasing power parity, quantitative easing, random walk, Richard Thaler, risk free rate, risk tolerance, risk/return, Robert Gordon, Robert Shiller, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, stocks for the long run, survivorship bias, technology bubble, The Great Moderation, the payments system, The Wisdom of Crowds, transaction costs, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, uptick rule, Vanguard fund

Thus the dollar returns to British stocks were higher if investors did not hedge the decline in the pound than if they did. For investors with long-term horizons, hedging currency risk in foreign stock markets may not be important. In the long run, exchange rate movements are determined primarily by differences in inflation between countries, a phenomenon called purchasing power parity. Since equities are claims on real assets, their long-term returns have compensated investors for changes in inflation and thus protected investors from exchange depreciation caused by higher inflation in the foreign countries. Over shorter periods of time, investors may reduce their dollar risk by hedging exchange risk.

., 312 Private vs. public capital, 206 Procter & Gamble, 205, 297 Producer price index (PPI), 264–265 Productivity growth, 69–71 Profit margins, 168–169 Profits. See Earnings Programmed trading, 274, 279 Prospect theory, 347–349 Psychology of investing. See Behavioral finance Public vs. private capital, 206 Purchasing managers index (PMI), 263–264 Purchasing power, 5, 93, 103 Purchasing power parity, 202 Puts, 284–287 Q theory, 168 QQQ ticker symbols, 273 Quantitative easing, 41 Rail Average, 106 Railroads, 92 Ramaswamy, Krishna, 180 A Random Walk Down Wall Street , 323 Random walk hypothesis, 98, 313–314 Randomness of stock prices, 312–314 Rao, Prime Minister Narasimha, 64 Raskob, John J., 3–5 Ratings, 25–27 Ratios.


pages: 237 words: 50,758

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

Andrew Wiles, Asian financial crisis, Bear Stearns, behavioural economics, Berlin Wall, Boeing 747, bonus culture, British Empire, business process, Cass Sunstein, computer age, corporate raider, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Goodhart's law, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, junk bonds, lateral thinking, Long Term Capital Management, long term incentive plan, Louis Pasteur, market fundamentalism, Myron Scholes, Nash equilibrium, pattern recognition, Paul Samuelson, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, Suez canal 1869, tacit knowledge, Thales of Miletus, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

Lord Kelvin’s lecture on “Electrical Units of Measurement,” 1883, reproduced in Popular Lectures and Addresses (London: Macmillan, 1891) vol. 1, p. 73. 6 United Nations Development Programme, Human Development Report (New York: Palgrave Macmillan, various years). Available at http://hdr.undp.org. 7 Derived from the United Nations Human Development Index Web site.L is life expectancy at birth. R is adult literacy rate (percent). E is gross enrollment index (combined primary, secondary and tertiary gross enrollment). G is GDP per capita at purchasing power parity. 8 Aristotle, Nicomachean Ethics (Cambridge: Cambridge University Press, 2000), 1, 4. 9 J. A. Kay, Jeremy Edwards, and Colin P. Mayer, The Economic Analysis of Accounting Profitability (Oxford: Oxford University Press, 1987). 10 Isaiah Berlin, I., Four Essays on Liberty (London: Oxford University Press, 1969) and Isaiah Berlin, “My Intellectual Path,” New York Review of Books XLV, no. 8 (1998). 11 Berlin, Four Essays on Liberty. 12 Gardner, New Oxford Book of English Verse, p. v. 13 Jonathan Lopez, The Man Who Made Vermeers: Unvarnishing the Legend of Master Forger Han van Meegeren (New York: Mariner Books, 2008). 14 Matthew Cullerne Brown, Art Under Stalin (Oxford: Phaidon Press, 1991); Berthold Hinz, Art in the Third Reich (Oxford: Blackwell, 1980).


pages: 191 words: 51,242

Unsustainable Inequalities: Social Justice and the Environment by Lucas Chancel

"World Economic Forum" Davos, Anthropocene, behavioural economics, biodiversity loss, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, centre right, clean water, COVID-19, disinformation, Donald Trump, energy security, energy transition, financial deregulation, Francis Fukuyama: the end of history, Gini coefficient, green new deal, income inequality, Indoor air pollution, job satisfaction, low skilled workers, offshore financial centre, oil shock, price stability, purchasing power parity, Ronald Reagan, Simon Kuznets, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, trade liberalization, Tragedy of the Commons, transaction costs, urban planning, very high income, Washington Consensus

Additionally, it is often difficult to compare the results of such inquiries over time and across countries, because the methodologies and definitions of income and wealth employed vary according to period and place. Figure 2.1. Global income inequality dynamics, 1980–2016. Distribution of per adult pretax national income, measured at purchasing power parity. In 2016, the global pretax income Gini coefficient was equal to its 1980 value. The gap between the incomes of the top 10 percent and incomes of the middle 40 percent had increased by 20 percent in 2016 as compared to 1980. Sources and series: www.lucaschancel.info/hup. In order to provide more reliable and comparable inequality data, a group of economists created WID.world, an open-access database of historical series on inequalities of income and accumulated wealth throughout the world.


Rethinking Islamism: The Ideology of the New Terror by Meghnad Desai

Ayatollah Khomeini, battle of ideas, Berlin Wall, Dr. Strangelove, full employment, global village, illegal immigration, income per capita, invisible hand, liberal capitalism, liberation theology, Mahatma Gandhi, Martin Wolf, means of production, Meghnad Desai, Nelson Mandela, oil shock, purchasing power parity, Ronald Reagan, structural adjustment programs, The Wealth of Nations by Adam Smith, Timothy McVeigh, Yom Kippur War

The฀ countries฀ in฀ Arabia฀ are฀ in฀ a฀ middle-income฀ rather฀ than฀ low-income฀ range฀ by฀ international฀ standards,฀ richer฀ than฀ Africa฀  ฀  and฀South฀Asia,฀if฀not฀Southeast฀Asia฀as฀well.฀The฀United฀Nations฀ Development฀Programme฀(UNDP)฀has฀published฀a฀Human฀Development฀Report฀since฀.฀It฀publishes฀a฀Human฀Development฀Index฀ (HDI)฀which฀summarises฀three฀measures฀of฀well-being฀–฀longevity,฀ literacy฀and฀access฀to฀resources฀as฀measured฀by฀income฀per฀capita฀(in฀ purchasing฀power฀parity฀units฀to฀make฀international฀comparisons฀ easier).฀For฀each฀of฀the฀three฀dimensions฀measures฀are฀calibrated฀to฀ lie฀between฀฀and฀,฀with฀one฀representing฀the฀highest฀achievable฀ level.฀The฀three฀separate฀measures฀are฀then฀combined฀in฀an฀overall฀ measure,฀ also฀ lying฀ between฀ ฀ and฀ ,฀ which฀ gives฀ us฀ the฀ HDI.฀ Countries฀are฀also฀ranked฀from฀฀to฀฀by฀their฀HDI฀score,฀with฀฀ for฀the฀country฀with฀the฀highest฀HDI.


The New Class War: Saving Democracy From the Metropolitan Elite by Michael Lind

"World Economic Forum" Davos, affirmative action, anti-communist, basic income, Bernie Sanders, Boris Johnson, Bretton Woods, Brexit referendum, business cycle, Cambridge Analytica, capital controls, Cass Sunstein, central bank independence, centre right, collective bargaining, commoditize, corporate governance, cotton gin, crony capitalism, deindustrialization, disinformation, Doha Development Round, Donald Trump, Edward Snowden, export processing zone, fake news, future of work, gentrification, global supply chain, guest worker program, Haight Ashbury, illegal immigration, immigration reform, independent contractor, invisible hand, Jeremy Corbyn, knowledge economy, Les Trente Glorieuses, liberal world order, low skilled workers, low-wage service sector, manufacturing employment, Mark Zuckerberg, mass immigration, means of production, Michael Milken, moral panic, Nate Silver, new economy, offshore financial centre, oil shock, open borders, plutocrats, Ponzi scheme, purchasing power parity, Ralph Nader, regulatory arbitrage, rent-seeking, Richard Florida, Ronald Reagan, scientific management, Silicon Valley, SoftBank, The Wealth of Nations by Adam Smith, Thorstein Veblen, Timothy McVeigh, trade liberalization, union organizing, universal basic income, upwardly mobile, WikiLeaks, Wolfgang Streeck, working poor

Consequently, offshore outsourcing that extracts product from relatively low-wage workers in the developing world has become an increasingly urgent survival tactic for companies in the developed economies.10 In 2012, the McKinsey Global Institute (MGI) concluded that from 1980 to 2010 1.7 billion workers joined the global labor force.11 In a 2019 report, MGI downplayed global labor cost arbitrage, claiming that it accounted for only 18 percent of goods trade. MGI derived this low number by redefining labor arbitrage as “exports from countries whose GDP per capita is one-fifth or less than that of the importing country.” By this offshoring-friendly definition, if a firm shuts down a factory in the US (GDP per capita in 2017: $59,500 in purchasing power parity) and opens a factory with much cheaper workers in China ($16,700) or Indonesia ($12,400) or Venezuela ($12,100), the resulting exports to the US market are “not from a low-wage country to a high-wage country.”12 In contrast with MGI, the Nobel laureate economist Michael Spence claims that “labor arbitrage has been the core driver of global supply chains for at least three decades—with significant distributional and employment effects.”13 According to the Commerce Department, between 1999 and 2009 US multinational corporations cut 864,600 workers in the US while adding 2.9 million workers abroad.


pages: 205 words: 55,435

The End of Indexing: Six Structural Mega-Trends That Threaten Passive Investing by Niels Jensen

Alan Greenspan, Basel III, Bear Stearns, declining real wages, deglobalization, disruptive innovation, diversification, Donald Trump, driverless car, eurozone crisis, falling living standards, fixed income, full employment, Greenspan put, income per capita, index fund, industrial robot, inflation targeting, job automation, John Nash: game theory, liquidity trap, low interest rates, moral hazard, offshore financial centre, oil shale / tar sands, old age dependency ratio, passive investing, Phillips curve, purchasing power parity, pushing on a string, quantitative easing, regulatory arbitrage, rising living standards, risk free rate, risk tolerance, Robert Solow, secular stagnation, South China Sea, total factor productivity, working-age population, zero-sum game

My China sources tell me that, when China fires on all cylinders, annual GDP growth is probably around 7–8% when adjusted for inflation. Consequently, 7% is my best case, and the halfway point becomes my base case. On that basis, and as you can see from exhibit 6.1, China is likely to catch up with the US in 2034 (using the base case in both instances). Admittedly, I have made no adjustments for purchasing power parities. On a PPP-adjusted basis, China’s GDP could be higher than that of the US less than 10 years from now. Exhibit 6.1: Chinese GDP catch-up under various assumptions Annual Chinese GDP Growth 3.00% 5.00% 7.00% Annual US GDP Growth 1.00% 2047 2032 2027 1.50% 2057 2034 2028 2.50% n/a 2041 2030 Source: Absolute Return Partners LLP Other sources of power If the anticipated shift in economic power from West to East is not that many years away, neither may we be far away from a shift in overall power.


pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, business cycle, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, Easter island, European colonialism, Fall of the Berlin Wall, financial engineering, Francisco Pizarro, full employment, Great Leap Forward, Gregor Mendel, guns versus butter model, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, Kickstarter, Kitchen Debate, land reform, land tenure, liberal capitalism, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, mass immigration, means of production, megacity, Mikhail Gorbachev, new economy, Pearl River Delta, Pierre-Simon Laplace, power law, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, retail therapy, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, undersea cable, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, work culture , World Values Survey

Despite the painful interruption of the Great Depression, the United States suffered nothing so devastating as China’s wretched twentieth-century ordeal of revolution, civil war, Japanese invasion, more revolution, man-made famine and yet more (‘cultural’) revolution. In 1968 the average American was thirty-three times richer than the average Chinese, using figures calculated on the basis of purchasing-power parity (allowing for the different costs of living in the two countries). Calculated in current dollar terms the differential at its peak was more like seventy to one. The Great Divergence manifested itself in various ways. In 1500 the world’s ten biggest cities had nearly all been in the East, with Beijing by far the biggest (more than ten times the size of wretched little London).

Based on data in Maddison, World Economy. The historic figures for global output (gross domestic product) must be treated with even more caution than those for population because of the heroic assumptions Maddison had to make to construct his estimates, and also because he elected to calculate GDP in terms of purchasing-power parity to allow for the much lower prices of non-traded goods in relatively poor countries. 15. Details in Fogel, Escape from Hunger, tables 1.2, 1.4. 16. Figures from Chandler, Urban Growth. 17. Calculated in terms of current dollars, from the World Bank’s World Development Indicators online database. 18.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

Or will we perhaps see another surprise—a fall from grace that is as unexpected as the previous rise to grace? For the first time since it replaced Britain as the world’s leading economy, the United States is now being challenged by another great power. China’s economy is bigger than America’s when judged in terms of purchasing power parity: $21.3 trillion compared with America’s $18.6 trillion as of 2016. Its manufacturing output overtook America’s more than a decade ago. Its exports are 50 percent larger. A 2017 Pew survey reveals that more people think that China is a bigger economic power than the United States in Britain (46 percent versus 31 percent), Germany (41 percent versus 24 percent), and Canada (42 percent versus 32 percent).

The United States will probably enjoy less dominance in the twenty-first century than it did in the twentieth: China will account for a growing share of the world’s GDP, and Europe is unlikely to tear itself apart as it did in the twentieth century. But the United States is still a long way ahead of China in terms of GDP per head: $57,608 versus $8,123 (or $15,395 at purchasing power parity). And it is doing a better job of preserving its share of global GDP than is Europe. China also shows no signs of replacing the United States as the pacesetter of the global economy. America leads in all the industries that are inventing the future, such as artificial intelligence, robotics, driverless cars, and, indeed, finance.


pages: 554 words: 158,687

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, false flag, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, general purpose technology, Glass-Steagall Act, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low interest rates, low skilled workers, M-Pesa, market bubble, means of production, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, post-Fordism, Post-Keynesian economics, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Solow, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

Credit transfers as percentage of total volume of cashless transactions 8. Direct debits as percentage of total value of cashless transactions 9. Banknotes and coin as percentage of GDP 10. Reserve deposits at central banks as percentage of GDP Chapter 7 1. Relative shares of GDP, 1970–2007; US, Japan, Germany, UK; constant prices, constant Purchasing Power Parities 2. Real GDP annual growth rates, 1971–2007; US, Japan, Germany, UK 3. Unemployment rates, US, Japan, Germany, UK 4. Employment in services as proportion of labour force, US, Japan, Germany, UK 5. Labour productivity (GDP/hour worked, levels), US, Japan, Germany, UK 6. Labour productivity (GDP/hour worked, annual growth rates) 7.

The path of accumulation in the course of financialization: Characteristic trends Empirical analysis in this section, as in much of this book, refers to the four leading mature capitalist countries of the period of financialization: the US, Japan, Germany, and the UK.5 Figure 1 gives a general indication of the relative weight of capitalist accumulation in each country by comparing shares in the aggregate GDP of the group during the period of financialization. FIG. 1 Relative shares of GDP, 1970–2007; US, Japan, Germany, UK; constant prices, constant Purchasing Power Parities There have been no major changes in relative rankings: the US has remained dominant and even increased its lead compared to the rest since the early 1990s; Japan, on the other hand, has gone into relative decline during the same period; Germany, whose economy is significantly smaller than both the US and Japan, has also been in gentle relative decline since the early 1970s; the UK has lagged behind Germany throughout the period.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

"World Economic Forum" Davos, 23andMe, Abraham Maslow, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon credits, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, Cornelius Vanderbilt, cotton gin, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Easter island, Edward Glaeser, Edward Jenner, electricity market, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, flying shuttle, Flynn Effect, food miles, Ford Model T, Garrett Hardin, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, hedonic treadmill, Herbert Marcuse, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jevons paradox, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, Kickstarter, knowledge worker, Kula ring, Large Hadron Collider, Mark Zuckerberg, Medieval Warm Period, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, ocean acidification, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, plutocrats, Ponzi scheme, precautionary principle, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Robert Solow, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, Thales and the olive presses, Thales of Miletus, the long tail, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, Vilfredo Pareto, wage slave, working poor, working-age population, world market for maybe five computers, Y2K, Yogi Berra, zero-sum game

Many economists think these futures, wonderful as they sound, are unrealistic. In one IPCC future, world population reaches fifteen billion by 2100, nearly double what demographers expect. In another, the poorest countries grow their per capita income four times as fast as Japan grew in the twentieth century. All the futures use market exchange rates instead of purchasing power parities for GDP, further exaggerating warming. In other words, the highend projections have pretty wild assumptions, so the 4°C warming, let alone the unlikely 6°C, will only happen if it is also accompanied by truly astonishing increases in human prosperity. And if it is possible to get so prosperous, then the warming cannot have been doing much economic harm along the way.

See http://sciencepolicy.colorado.edu/prometheus/archives/climate_change/001165a_comment_on_ipcc_wo.html. p. 332 ‘the Prince of Wales said in 2009’. http://www.spectator.co.uk/politics/all/5186108/the-spectators-notes.thtml. p. 332 ‘All the futures use market exchange rates instead of purchasing power parities for GDP, further exaggerating warming.’ Castles, I. and Henderson, D. 2003. Economics, emissions scenarios and the work of the IPCC. Energy and Environment 14:422–3. See also Maddison. A. 2007. Contours of the World Economy. Oxford University Press. pp. 332–3 ‘The trouble with this reasoning is that it applies to all risks, not just climate change.’ http://cowles.econ.yale.edu/P/cd/d16b/d1686.pdf; and http://www.economics.harvard.edu/faculty/weitzman/files/ReactionsCritique.pdf.


pages: 470 words: 148,730

Good Economics for Hard Times: Better Answers to Our Biggest Problems by Abhijit V. Banerjee, Esther Duflo

3D printing, accelerated depreciation, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, Airbnb, basic income, behavioural economics, Bernie Sanders, Big Tech, business cycle, call centre, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, carbon tax, Cass Sunstein, charter city, company town, congestion pricing, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, endowment effect, energy transition, Erik Brynjolfsson, experimental economics, experimental subject, facts on the ground, fake news, fear of failure, financial innovation, flying shuttle, gentrification, George Akerlof, Great Leap Forward, green new deal, high net worth, immigration reform, income inequality, Indoor air pollution, industrial cluster, industrial robot, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Jean Tirole, Jeff Bezos, job automation, Joseph Schumpeter, junk bonds, Kevin Roose, labor-force participation, land reform, Les Trente Glorieuses, loss aversion, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, middle-income trap, Network effects, new economy, New Urbanism, no-fly zone, non-tariff barriers, obamacare, off-the-grid, offshore financial centre, One Laptop per Child (OLPC), open economy, Paul Samuelson, place-making, post-truth, price stability, profit maximization, purchasing power parity, race to the bottom, RAND corporation, randomized controlled trial, restrictive zoning, Richard Thaler, ride hailing / ride sharing, Robert Gordon, Robert Solow, Ronald Reagan, Savings and loan crisis, school choice, Second Machine Age, secular stagnation, self-driving car, shareholder value, short selling, Silicon Valley, smart meter, social graph, spinning jenny, Steve Jobs, systematic bias, Tax Reform Act of 1986, tech worker, technology bubble, The Chicago School, The Future of Employment, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, trickle-down economics, Twitter Arab Spring, universal basic income, urban sprawl, very high income, War on Poverty, women in the workforce, working-age population, Y2K

LEAVING HOME The British Somali poet, Warsan Shire, wrote: no one leaves home unless home is the mouth of a shark you only run for the border when you see the whole city running as well your neighbors running faster than you breath bloody in their throats the boy you went to school with who kissed you dizzy behind the old tin factory is holding a gun bigger than his body you only leave home when home won’t let you stay.7 She was clearly onto something. The places people seem most desperate to leave—countries like Iraq, Syria, Guatemala, and even Yemen—are far from being the poorest in the world. Per capita income in Iraq, after adjusting for differences in cost of living (what economists call purchasing power parity, or PPP), is about twenty times that in Liberia, and at least ten times as high as in Mozambique or Sierra Leone. In 2016, despite a dramatic fall in income, Yemen was still three times richer than Liberia (there is no data for more recent years). Mexico, President Trump’s favorite target, is an upper-middle-income country with a much praised and widely imitated welfare system.

Farmers simply did not trust they would get any money, and the powerful farmers’ associations radically opposed the measures. Remarkably, in 2018 Badal, back in government, decided to try again. This time the plan was to first give a direct transfer of Rs 48,000 (equivalent to $2823, accounting for purchasing power parity differences) to all farmers directly into their bank accounts, before charging them for electricity by deducting from this same account. The subsidy has been calculated such that at the going rate, a farmer consuming less than 9,000 units of power would come out ahead (the state estimates the average consumption is between 8,000 and 9,000 units).


pages: 524 words: 155,947

More: The 10,000-Year Rise of the World Economy by Philip Coggan

accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, Apollo 11, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carl Icahn, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Babbage, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, cotton gin, credit crunch, Credit Default Swap, crony capitalism, cross-border payments, currency peg, currency risk, debt deflation, DeepMind, Deng Xiaoping, discovery of the americas, Donald Trump, driverless car, Easter island, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, flying shuttle, Ford Model T, Fractional reserve banking, Frederick Winslow Taylor, full employment, general purpose technology, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, global value chain, Gordon Gekko, Great Leap Forward, greed is good, Greenspan put, guns versus butter model, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, hydroponic farming, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Jon Ronson, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, Les Trente Glorieuses, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low interest rates, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, Suez canal 1869, TaskRabbit, techlash, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, world market for maybe five computers, Yom Kippur War, you are the product, zero-sum game

Their life expectancy is ten years lower than that of other developing countries and their infant mortality rate is three times higher. In some cases, these countries are going backwards. In 1980, Americans were 30 times better off than citizens of the Central African Republic; by 2015, the ratio was 90.52 The wealth spreads Global population living on less than $1.90 a day, at 2011 purchasing-power parity, % Source: World Bank Paul Collier says that these countries tend to fall into one of four traps: they are mired in conflict; have too great a reliance on natural resources; are landlocked, with bad neighbours; or are cursed with bad governments. Helping these countries can be very difficult.

Bizarrely, Ireland, which prides itself on attracting multinationals through its low tax regime, did not want to collect the money. The EU had to threaten to take Ireland to court in order to make them do so. See Rochelle Toplensky, Arthur Beesley and Adam Samson, “EU takes Ireland to court over Apple taxes”, Financial Times, October 4th 2017. 47. The figures are based on purchasing power parity, a calculation that adjusts exchange rates on the basis of tradable goods prices. Source: http://www.imf.org/external/datamapper/PPPSH@WEO/OEMDC/ADVEC/WEOWORLD 48. Dan McCrum, “Over in China, a debt boom mapped”, FT Alphaville, March 5th 2018 49. “China June forex reserves rise more than expected amid trade truce”, Reuters, July 8th 2019 50.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

"World Economic Forum" Davos, 3D printing, affirmative action, Airbnb, Alan Greenspan, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, bread and circuses, Bretton Woods, Brexit referendum, business cycle, call centre, carried interest, centre right, Charles Lindbergh, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, disinformation, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, driverless car, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Evgeny Morozov, fake news, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, gentrification, George Santayana, gig economy, Gini coefficient, global pandemic, global supply chain, Great Leap Forward, illegal immigration, imperial preference, income inequality, independent contractor, informal economy, Internet of things, Jaron Lanier, knowledge economy, lateral thinking, Les Trente Glorieuses, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meritocracy, microaggression, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, opioid epidemic / opioid crisis, Peace of Westphalia, Peter Thiel, plutocrats, precariat, purchasing power parity, reserve currency, reshoring, Richard Florida, Robert Gordon, Robert Solow, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley billionaire, Skype, Snapchat, software is eating the world, South China Sea, Steve Bannon, Steve Jobs, superstar cities, telepresence, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

But China’s politburo clearly dreads the domestic backlash a recession might trigger. It has thus opted for slower growth – preferring to let the air out of the balloon rather than pop it. Whatever its short-term fortunes, China will continue to make big strides on the West in the coming decades. In terms of purchasing power parity – measured by what you can buy in the local currency – China’s economy surpassed the US in 2014.12 Within a decade, give or take a few years, China will overtake America on more conventional dollar measures. By 2050 – a century after its communist revolution – China’s economy is likely to be twice the size of America’s and larger than all the Western economies combined.


pages: 197 words: 59,656

The Most Good You Can Do: How Effective Altruism Is Changing Ideas About Living Ethically by Peter Singer

Albert Einstein, clean water, cognitive load, corporate social responsibility, correlation does not imply causation, David Brooks, effective altruism, en.wikipedia.org, Flynn Effect, hedonic treadmill, Large Hadron Collider, Nick Bostrom, Peter Singer: altruism, purchasing power parity, randomized controlled trial, stem cell, Steven Pinker, TED Talk, trolley problem, William MacAskill, young professional

Globally, more than a billion people are living in extreme poverty, as thus defined, virtually all of them in developing countries. You may be thinking that this figure could be misleading because of the greater purchasing power of money in poorer countries, but that is already taken into account. The World Bank’s figure is at “purchasing power parity”—in other words, it is the amount that, in the local currency in the country in which the person lives, buys the same amount of food and other essentials that one can buy for $1.53 in the United States in 2014.9 If there are any legal residents of the United States living below the World Bank’s extreme poverty line, they must be missing out on benefits to which they are entitled because the Supplemental Nutritional Assistance Program, or SNAP (formerly known as food stamps), provides an average monthly benefit of $125 per person, or $4.00 per day.10 In 2014 nearly forty-seven million relatively poor Americans were participating in SNAP.


Global Financial Crisis by Noah Berlatsky

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Glass-Steagall Act, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, low interest rates, market bubble, market fundamentalism, mass immigration, Money creation, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, social contagion, South China Sea, structural adjustment programs, subprime mortgage crisis, too big to fail, trade liberalization, transfer pricing, working poor

But that was the extent of it, because Sarkozy knows that the Jan. 29 [2009] demonstrations did not reach critical 111 The Global Financial Crisis mass by a long shot. The motley alliance of protesting professors, nurses, steel workers and students lacked a shared list of economic and political demands. Their banners made a case for wage increases, purchasing power parity or the repeal of tax reforms for the rich. At the same time, however, the protests revealed a deep-seated malaise that penetrates deeply into the conservative electorate of the governing UMP [Union for a Popular Movement, a center-right political party]. The overwhelming majority of the French are plagued by fears of unemployment, lower incomes and shrinking savings.


pages: 239 words: 62,311

The Next Factory of the World: How Chinese Investment Is Reshaping Africa by Irene Yuan Sun

"World Economic Forum" Davos, asset light, barriers to entry, Bretton Woods, business logic, capital controls, clean water, Computer Numeric Control, deindustrialization, demographic dividend, Deng Xiaoping, Donald Trump, European colonialism, floating exchange rates, full employment, global supply chain, Great Leap Forward, invisible hand, job automation, low skilled workers, M-Pesa, manufacturing employment, means of production, mobile money, Multi Fibre Arrangement, post-industrial society, profit motive, purchasing power parity, race to the bottom, RAND corporation, Ronald Reagan, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Skype, special economic zone, structural adjustment programs, tacit knowledge, Triangle Shirtwaist Factory, union organizing, Washington Consensus, working-age population

Per capita GDP figures from the World Bank, “GDP per capita (current US$),” http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2015&name_desc=false&start=1990. In 1990, China’s per capita GDP was $316.20, Kenya’s $365.60, Lesotho’s $340.90, Nigeria’s $321.70, and the United States’ $23,954.50. Today, although the US economy remains largest in nominal terms, China’s is the largest in purchasing power parity (World Bank, “GDP ranking, PPP based,” http://data.worldbank.org/data-catalog/GDP-PPP-based-table). 3. “FAW Profile,” from FAW’s company website. http://www.faw.com/aboutFaw/aboutFaw.jsp?pros=Profile.jsp&phight=580&about=Profile. 4. Center for International Development at Harvard University, “Growth Projections based on 2014 Global Trade Data,” The Atlas of Economic Complexity, http://atlas.cid.harvard.edu/rankings/growth-predictions-list/. 5.


pages: 202 words: 62,901

The People's Republic of Walmart: How the World's Biggest Corporations Are Laying the Foundation for Socialism by Leigh Phillips, Michal Rozworski

Alan Greenspan, Anthropocene, Berlin Wall, Bernie Sanders, biodiversity loss, call centre, capitalist realism, carbon footprint, carbon tax, central bank independence, Colonization of Mars, combinatorial explosion, company town, complexity theory, computer age, corporate raider, crewed spaceflight, data science, decarbonisation, digital rights, discovery of penicillin, Elon Musk, financial engineering, fulfillment center, G4S, Garrett Hardin, Georg Cantor, germ theory of disease, Gordon Gekko, Great Leap Forward, greed is good, hiring and firing, independent contractor, index fund, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, invisible hand, Jeff Bezos, Jeremy Corbyn, Joseph Schumpeter, Kanban, Kiva Systems, linear programming, liquidity trap, mass immigration, Mont Pelerin Society, Neal Stephenson, new economy, Norbert Wiener, oil shock, passive investing, Paul Samuelson, post scarcity, profit maximization, profit motive, purchasing power parity, recommendation engine, Ronald Coase, Ronald Reagan, sharing economy, Silicon Valley, Skype, sovereign wealth fund, strikebreaker, supply-chain management, surveillance capitalism, technoutopianism, TED Talk, The Nature of the Firm, The Wealth of Nations by Adam Smith, theory of mind, Tragedy of the Commons, transaction costs, Turing machine, union organizing, warehouse automation, warehouse robotics, We are all Keynesians now

Today, it employs more workers than any other private firm; if we include state enterprises in our ranking, it is the world’s third-largest employer after the US Department of Defense and the People’s Liberation Army. If it were a country—let’s call it the People’s Republic of Walmart—its economy would be roughly the size of a Sweden or a Switzerland. Using the 2015 World Bank country-by-country comparison of purchasing-power parity GDP, we could place it as the 38th largest economy in the world. Yet while the company operates within the market, internally, as in any other firm, everything is planned. There is no internal market. The different departments, stores, trucks and suppliers do not compete against each other in a market; everything is coordinated.


pages: 190 words: 61,970

Life You Can Save: Acting Now to End World Poverty by Peter Singer

accounting loophole / creative accounting, Bear Stearns, Branko Milanovic, Cass Sunstein, clean water, do well by doing good, end world poverty, experimental economics, Garrett Hardin, illegal immigration, Larry Ellison, Martin Wolf, microcredit, Monkeys Reject Unequal Pay, Peter Singer: altruism, pre–internet, purchasing power parity, randomized controlled trial, Richard Thaler, Silicon Valley, subprime mortgage crisis, Thomas Malthus, Tyler Cowen, ultimatum game, union organizing

“Rich” is defined here in accordance with the definition given by Branko Milanovic and mentioned in the previous chapter. The figures are also from Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton, N.J.: Princeton University Press, 2005), p. 132. 17. According to OECD purchasing power parity figures, in 2006 the U.S. GDP was 36 percent of the OECD total. See http:// lysander.sourceoecd.org/vl=3923031/cl=l4/nw=l/rpsv/figures _2007/en/page4.htm. 18. Allowing for inflation since the report of the UN task force in 2007 would bring the figures down to seven times the estimated total amount required, and eighteen times the shortfall. 19.


pages: 236 words: 67,953

Brave New World of Work by Ulrich Beck

affirmative action, anti-globalists, Asian financial crisis, basic income, Berlin Wall, collective bargaining, conceptual framework, Fall of the Berlin Wall, feminist movement, full employment, future of work, Gunnar Myrdal, hiring and firing, illegal immigration, income inequality, informal economy, job automation, knowledge worker, labour market flexibility, labour mobility, low skilled workers, McJob, means of production, mini-job, post-Fordism, post-work, postnationalism / post nation state, profit maximization, purchasing power parity, rising living standards, scientific management, Silicon Valley, technological determinism, working poor, working-age population, zero-sum game

All the more important is it to ask what effects and side-effects this far from modern, indeed rather archaic, ideology of the free market has unleashed in its civil-religious land of origin. How sustainable is the thesis of a ‘jobs miracle’ there? What are its darker sides? Worrying signs in paradise In the mid-1990s, per capita GDP in the United States – measured in 1991 purchasing power parity – was a fifth higher than in Germany; while the proportion of the population in gainful employment was a good 10 per cent higher, at about 48 per cent compared with 43 per cent. Hourly productivity, however, was a tenth lower in the United States than in Germany, and there was a strikingly low rate of productivity increase per person employed.


pages: 234 words: 63,149

Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer

airport security, banking crisis, barriers to entry, Berlin Wall, blood diamond, Bretton Woods, BRICs, capital controls, clean water, creative destruction, Deng Xiaoping, Doha Development Round, energy security, European colonialism, failed state, global rebalancing, global supply chain, Global Witness, income inequality, informal economy, information security, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, Kickstarter, Martin Wolf, mass immigration, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Nelson Mandela, Nixon shock, Nixon triggered the end of the Bretton Woods system, no-fly zone, nuclear winter, Parag Khanna, purchasing power parity, reserve currency, Ronald Reagan, smart grid, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, trade route, uranium enrichment, Washington Consensus, WikiLeaks, Yom Kippur War

Forecasts of the arc of China’s rise vary greatly. It will become the world’s largest economy by 2050 (per HSBC), 2040 (Deutsche Bank), 2030 (IIE, World Bank), 2027 (Goldman Sachs), or 2020 (Citi, PwC). Recently, the IMF declared that China will prevail as soon as 2016 (if we assess with purchasing power parity). Citibank’s 2015 trading nation prediction: http://www.cnbc.com/id/43506564. HSBC, 2050: http://cnbusinessnews.com/hsbc-china-to-become-worlds-largest-economy-by-2050/. Deutsche Bank Research, 2040: https://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000230537.pdf. IIE, 2030: http://www.ndtv.com/article/business/china-set-to-beat-us-as-no-1-economy-by-2030-44912.


pages: 232 words: 70,361

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, behavioural economics, Berlin Wall, book value, business cycle, carbon tax, Cass Sunstein, classic study, collective bargaining, Cornelius Vanderbilt, corporate governance, cross-border payments, Donald Trump, financial deregulation, government statistician, income inequality, income per capita, independent contractor, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, Tax Reform Act of 1986, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%

There lies a key lesson: technological change and pressures from globalization cannot be the main culprits for the woes of America’s working class. 8.2 THE PLIGHT OF THE AMERICAN WORKING CLASS (Average pre-tax income of the bottom 50%, United States versus France, 2018 US dollars) Notes: The figure shows the average income per adult for the bottom 50% of income earners in the United States and in France since 1962, before government taxes and transfers. The series are expressed in 2018 US dollars, using purchasing power parity exchange rates to convert euros into US dollars. In France, bottom 50% incomes have grown faster and are now higher than in the United States. Complete details at taxjusticenow.org. The notion that the working class has suddenly become less productive in America does not bear scrutiny.


pages: 816 words: 191,889

The Long Game: China's Grand Strategy to Displace American Order by Rush Doshi

"World Economic Forum" Davos, American ideology, anti-communist, Asian financial crisis, autonomous vehicles, Black Lives Matter, Bretton Woods, capital controls, coronavirus, COVID-19, crony capitalism, cross-border payments, cryptocurrency, defense in depth, deindustrialization, Deng Xiaoping, deplatforming, disinformation, Dissolution of the Soviet Union, Donald Trump, drone strike, energy security, European colonialism, eurozone crisis, financial innovation, George Floyd, global pandemic, global reserve currency, global supply chain, global value chain, Great Leap Forward, high-speed rail, Internet Archive, Internet of things, Kickstarter, kremlinology, Malacca Straits, middle-income trap, Mikhail Gorbachev, MITM: man-in-the-middle, Monroe Doctrine, Network effects, Nixon triggered the end of the Bretton Woods system, offshore financial centre, positional goods, post-truth, purchasing power parity, RAND corporation, reserve currency, rolodex, Ronald Reagan, South China Sea, special drawing rights, special economic zone, TikTok, trade liberalization, transaction costs, UNCLOS, UNCLOS, undersea cable, zero-sum game

Neither Wilhelmine Germany during the First World War, the combined might of Imperial Japan and Nazi Germany during the Second World War, nor the Soviet Union at the height of its economic power ever crossed this threshold.44 And yet, this is a milestone that China itself quietly reached as early as 2014. China is also on track to surpass the United States in economic size. When one adjusts for the relative price of goods (i.e., purchasing power parity), China’s economy is already 25 percent larger than the US economy.45 In nominal terms, it is expected to catch up to the United States in 2028 given the impact of the coronavirus, which led the US economy to shrink 8 percent in one year while China’s grew 1–2 percent.46 It is clear, then, that China is the most powerful competitor that the United States has faced in the last century, and that it will be able to summon more resources in the competition than previous US rivals.

See also “great changes unseen in a century” peripheral diplomacy, 107, 168–74, 210–12, 237–38 permanent normal trading relations (PNTR), 66, 135–36, 142–43, 144, 145, 153–54, 155–56, 309–10 Perry, William, 115–16 Persian Gulf War, 86–87 Peru, 202–3 Philippines, 202–3, 318 Pillsbury, Michael, 8, 74 piracy, 124–25, 187–88, 204–5 PLA Defense Institute, 245–46 PLA Marine Corps, 295–96 plenums, 162–63 Polar Silk Road, 242 Politburo Standing Committee, 17, 33–34, 35, 37–38, 56, 59, 60–61, 72–73, 76–77, 84, 96, 97–98, 99–100, 129–30, 170, 184, 194 Politburo Study Session, 186–87, 189–90 political strategies and ASEAN-related institutions, 118–26 and blunting strategies, 107–11, 112–18, 120–26, 128–29 and China’s global ambitions, 280–86 and China’s participation in APEC, 111–18 and China’s participation in SCO, 126–33 and China’s use of regional institutions, 114–17, 121–23 and implementation of China’s blunting strategy, 65 leaked Expert Working Group report, 101–3 political texts on regional organizations, 104–7 as repose to US threat, 113–14, 120–26, 128–29 security benefits of, 117–18, 123–26, 130–33 strategies in regional organizations, 103–4 trifecta’s impact on, 105–7 and US asymmetric strategies, 321–23, 328–29 Wang Yizhou on, 101 populism, 268, 269, 270–71, 272–73, 274–75, 284–85 port projects, 203, 207, 241, 242, 243–44, 245–46, 295, 319 Posen, Barry, 18, 303–4 power gaps, 22 Prasad, Eswar, 253–54 Preventive Diplomacy (PD), 121 propaganda, 63 Propaganda Department, 43–44, 322–23 public opinion, 314. See also democracy and democratization Pujiang Electricity Meter Factory, 175 purchasing power parity, 313–14 Putin, Vladimir, 126, 128–29, 252 Pye, Lucian, 25–26 Qian Qichen, 108–9, 118–19, 123–24, 135–36, 139–40, 147–48, 152 Qingdao Submarine Academy, 86, 89–90 Qing period, 1, 27–28, 31–32, 57, 263–64 Qishan, Wang, 311 Qiushi, 205–6 quantum computing, 264, 286, 289 Quincy Institute, 303–4 Rajapaksa, Mahinda, 244 R&D expenditures, 272–73, 289 Reagan, Ronald, 268–69, 331 “red phone” network, 33 reformist sentiment in China, 25 “Reform of the International Monetary System,” 248–49 regional anti-terrorist center (RATS), 130 regional conflicts, 84, 87 Regional Counter Terrorism Structure (RCTS), 127–28 regionalism, 125–26 Regional Maritime Security Initiative (RMSI), 124–25 regional organizations and institutions China’s political texts on, 104–7 and Deng’s “Tao Guang Yang Hui,” 48–49, 66 and political blunting strategies, 102, 103–4, 123 and political building strategies, 214–34 and skeptics of China strategy, 8 See also specific organization and institution names rejuvenation ideology, 27, 271–76, 292–93, 309, 329 relational leverage, 236, 242–43 Ren Jingjing, 272–73, 274–75 renminbi (RMB), 108, 153–54, 246–50, 252–54, 325 Renmin Ribao, 123–24 Ren Xiao, 223–25 Report on the Work of the Government, 189–90 Republic of Vietnam, 195 research and development, 326, 327–28 reserve currencies, 238–39, 325, 332–33 revisionism, 21–22 Revolution in Military Affairs, 165 Rodrik, Dani, 216 Romanian Communist Party, 138–39 Romeo-class submarines, 84–85 Rongji, Zhu, 311 Roosevelt, Franklin Delano, 332 Ruihuan, Li, 311 rule of law, 137, 314–15, 322–23.


pages: 651 words: 186,130

This Is How They Tell Me the World Ends: The Cyberweapons Arms Race by Nicole Perlroth

4chan, active measures, activist lawyer, air gap, Airbnb, Albert Einstein, Apollo 11, barriers to entry, Benchmark Capital, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, blood diamond, Boeing 737 MAX, Brexit referendum, Brian Krebs, Citizen Lab, cloud computing, commoditize, company town, coronavirus, COVID-19, crony capitalism, crowdsourcing, cryptocurrency, dark matter, David Vincenzetti, defense in depth, digital rights, disinformation, don't be evil, Donald Trump, driverless car, drone strike, dual-use technology, Edward Snowden, end-to-end encryption, failed state, fake news, false flag, Ferguson, Missouri, Firefox, gender pay gap, George Floyd, global pandemic, global supply chain, Hacker News, index card, information security, Internet of things, invisible hand, Jacob Appelbaum, Jeff Bezos, John Markoff, Ken Thompson, Kevin Roose, Laura Poitras, lockdown, Marc Andreessen, Mark Zuckerberg, mass immigration, Menlo Park, MITM: man-in-the-middle, moral hazard, Morris worm, move fast and break things, mutually assured destruction, natural language processing, NSO Group, off-the-grid, offshore financial centre, open borders, operational security, Parler "social media", pirate software, purchasing power parity, race to the bottom, RAND corporation, ransomware, Reflections on Trusting Trust, rolodex, Rubik’s Cube, Russian election interference, Sand Hill Road, Seymour Hersh, Sheryl Sandberg, side project, Silicon Valley, Skype, smart cities, smart grid, South China Sea, Steve Ballmer, Steve Bannon, Steve Jobs, Steven Levy, Stuxnet, supply-chain attack, TED Talk, the long tail, the scientific method, TikTok, Tim Cook: Apple, undersea cable, unit 8200, uranium enrichment, web application, WikiLeaks, zero day, Zimmermann PGP

As the frequency and intensity of the Russian attacks escalated in early 2013, American officials wondered if the Russians were looking to glean their own competitive edge. For decades the Russian economy had been overreliant on oil and gas, two exports for which Putin could not control the price. By gross domestic product, Russia was now underperforming Italy, even though it had twice Italy’s population. By other metrics like purchasing power parity, Russia now ranked seventy-second in the world—trailing even Europe’s economic problem child, Greece. With its population in rapid decline—at last count, Russia was losing a million working-age adults annually—Russia’s economic growth prospects had dropped to near zero. And now, with Putin and crony capitalism at the helm, a surge in foreign investment seemed unlikely.

For Russian anxieties about cyber escalation, see Timothy Thomas, “Three Faces of the Cyber Dragon: Cyber Peace Activist, Spook, Attacker,” Foreign Military Studies Office, 2012. For details of Russia’s Internet of Things—or IoT—market, see MarketWatch, “Russia Internet of Things (IoT) Market Is Expected to Reach $74 Billion By 2023,” October 17, 2019. For statistics on Russia’s GDP, purchasing power parity, and population growth, I relied on the CIA World Factbook, the World Bank GDP Ranking, and the Wilson Center studies on Russia’s demographic trends. John Hultquist of FireEye’s research on the Russian GRU unit, known to private researchers as Sandworm, proved invaluable to my reporting for the Times.


pages: 267 words: 72,552

Reinventing Capitalism in the Age of Big Data by Viktor Mayer-Schönberger, Thomas Ramge

accounting loophole / creative accounting, Air France Flight 447, Airbnb, Alvin Roth, Apollo 11, Atul Gawande, augmented reality, banking crisis, basic income, Bayesian statistics, Bear Stearns, behavioural economics, bitcoin, blockchain, book value, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, Cass Sunstein, centralized clearinghouse, Checklist Manifesto, cloud computing, cognitive bias, cognitive load, conceptual framework, creative destruction, Daniel Kahneman / Amos Tversky, data science, Didi Chuxing, disruptive innovation, Donald Trump, double entry bookkeeping, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Evgeny Morozov, flying shuttle, Ford Model T, Ford paid five dollars a day, Frederick Winslow Taylor, fundamental attribution error, George Akerlof, gig economy, Google Glasses, Higgs boson, information asymmetry, interchangeable parts, invention of the telegraph, inventory management, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, job satisfaction, joint-stock company, Joseph Schumpeter, Kickstarter, knowledge worker, labor-force participation, land reform, Large Hadron Collider, lone genius, low cost airline, low interest rates, Marc Andreessen, market bubble, market design, market fundamentalism, means of production, meta-analysis, Moneyball by Michael Lewis explains big data, multi-sided market, natural language processing, Neil Armstrong, Network effects, Nick Bostrom, Norbert Wiener, offshore financial centre, Parag Khanna, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price mechanism, purchasing power parity, radical decentralization, random walk, recommendation engine, Richard Thaler, ride hailing / ride sharing, Robinhood: mobile stock trading app, Sam Altman, scientific management, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, Snapchat, statistical model, Steve Jobs, subprime mortgage crisis, Suez canal 1869, tacit knowledge, technoutopianism, The Future of Employment, The Market for Lemons, The Nature of the Firm, transaction costs, universal basic income, vertical integration, William Langewiesche, Y Combinator

not just on the level of a household: Lindblom, The Market System, 5. a factor of almost 2,000 since the 1500s: There is significant debate about the accuracy of historical figures, often estimations based on many assumptions. We also equated market volume with the gross global product at purchasing-power parity–that, too, is quite an approximation. See J. Bradford DeLong, “Estimating World GDP, One Million B.C.–Present,” http://holtz.org/Library/Social %20Science/Economics/Estimating%20World%20GDP%20by %20DeLong/Estimating%20World%20GDP.htm; for recent world GDP figures, we used the data from the CIA Factbook (https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html). 100–200 million firms that exist: Most nations do not track the number of firms, so no global figure exists; the best we can do is to go with estimates based on total employment and employment size; see here for some estimation approaches: http://www.quora.com/How-many-companies-exist-in-the-world.


pages: 309 words: 78,361

Plenitude: The New Economics of True Wealth by Juliet B. Schor

Asian financial crisis, behavioural economics, big-box store, business climate, business cycle, carbon footprint, carbon tax, clean tech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, degrowth, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, Herman Kahn, IKEA effect, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jevons paradox, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, ocean acidification, off-the-grid, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, radical decentralization, ride hailing / ride sharing, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, systematic bias, systems thinking, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Yochai Benkler, Zipcar

Global Footprint Network 2009 data tables. 61 the world first reached its limits in 1986 . . . 40 percent above biocapacity: A summary of overshoot can be found at the Global Footprint Network site (www.footprintnetwork.org). 62 Between 1961 and 2005, the U.S. footprint has risen: Changes in per-person footprints from 1961 are from Ewing et al. (2008), appendix table 7. Per capita incomes, corrected for purchasing power parity, are from Organization for Economic Cooperation and Development (2008). 63 Privatization . . . threatens equitable solutions: Barlow (2002). 63 the number of people living in water-stressed areas may increase dramatically: Bates et al. (2008), figure 3.3 and p. 45. 63 The water footprint shows how much: Water footprints are from Hoekstra and Chapagain (2007). 64 2,000 liters of water to produce one T-shirt: Global averages for products and water footprint data are from Hoekstra and Chapagain (2007), table 2 (p. 41) and table 3 (p. 42) respectively. 65 Now we’ve got twin crises: Thomas L.


pages: 241 words: 81,805

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis by Tim Lee, Jamie Lee, Kevin Coldiron

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, backtesting, bank run, Bear Stearns, Bernie Madoff, Bretton Woods, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, currency risk, debt deflation, disinformation, distributed ledger, diversification, financial engineering, financial intermediation, Flash crash, global reserve currency, implied volatility, income inequality, inflation targeting, junk bonds, labor-force participation, Long Term Capital Management, low interest rates, Lyft, margin call, market bubble, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, negative equity, Network effects, Ponzi scheme, proprietary trading, public intellectual, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, rising living standards, risk free rate, risk/return, sharing economy, short selling, short squeeze, sovereign wealth fund, stock buybacks, tail risk, TikTok, Uber and Lyft, uber lyft, yield curve

Terrifying though it seemed at the time, eventually the carry crash of 2008 was to turn out to be merely a “correction” in an unprecedented ongoing huge expansion of the outstanding carry trade. Traditional macroeconomic indicators also highlight the differences— from a currency carry perspective—between the 1997–1998 Asian crisis and the 2007–2008 global crisis. Simple fair value (purchasing power parity) analysis suggests that during the Asian crisis the currencies of the crisis countries fell to severely undervalued levels, at which they remained for a long period of time. Strong supporting evidence for this comes from current account balances. At the end of 1996, Korea was running a large current account deficit of about 5 percent of GDP.


Where Does Money Come From?: A Guide to the UK Monetary & Banking System by Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson

bank run, banking crisis, banks create money, Basel III, Big bang: deregulation of the City of London, book value, Bretton Woods, business cycle, capital controls, cashless society, central bank independence, credit crunch, currency risk, double entry bookkeeping, en.wikipedia.org, eurozone crisis, fiat currency, financial innovation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, Goodhart's law, Hyman Minsky, inflation targeting, interest rate derivative, interest rate swap, Joseph Schumpeter, low skilled workers, market clearing, market design, market friction, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Northern Rock, offshore financial centre, Post-Keynesian economics, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, Real Time Gross Settlement, reserve currency, Ronald Reagan, seigniorage, special drawing rights, the payments system, trade route, transaction costs

Under a crawling peg, the exchange rate is allowed to appreciate or depreciate slowly to allow for differing rates of inflation between the two countries. This stops goods in one country becoming relatively more expensive than in the other country, preserving the so-called real exchange rate (the exchange rate in terms of goods or ‘purchasing-power-parity’ to use the technical term). Conversely, currency bands allow the exchange rate to float freely, although only within a narrow range. Perhaps the most prominent currency band in recent history was the European Monetary System, which between 1978 and 1998 determined the value of exchange rates in the European Union.


pages: 314 words: 75,678

How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need by Bill Gates

agricultural Revolution, call centre, carbon footprint, carbon tax, clean water, coronavirus, COVID-19, decarbonisation, electricity market, energy security, energy transition, fear of failure, Ford Model T, global pandemic, Haber-Bosch Process, Hans Rosling, Intergovernmental Panel on Climate Change (IPCC), invention of air conditioning, Louis Pasteur, megacity, microplastics / micro fibres, negative emissions, oil shock, performance metric, plant based meat, purchasing power parity, risk tolerance, social distancing, Solyndra, systems thinking, TED Talk, the built environment, the High Line, urban planning, yield management

Figure: Income and energy use go hand in hand: This graph uses data from the World Bank World Development Indicators, which is licensed under CC BY 4.0 (https://www.creativecommons.org/​licenses/​by/​4.0) and available at https://data.worldbank.org/. Income measured as gross domestic product (GDP) per capita in 2014, based on purchasing power parity (PPP), in current international dollars. Energy use measured in kilograms of oil equivalent per capita in 2014, based on IEA data from the World Bank World Development Indicators. All rights reserved; as modified by Gates Ventures, LLC. Photo: Launching Mission Innovation: From left to right (titles were current at the time of the event in 2015): Wan Gang, Minister of Science and Technology (China); Ali Al-Naimi, Minister of Petroleum and Mineral Resources (Saudi Arabia); Prime Minister Erna Solberg (Norway); Prime Minister Shinzo Abe (Japan); President Joko Widodo (Indonesia); Prime Minister Justin Trudeau (Canada); Bill Gates; President Barack Obama (United States); President François Hollande (France); Prime Minister Narendra Modi (India); President Dilma Rousseff (Brazil); President Michelle Bachelet (Chile); Prime Minister Lars Løkke Rasmussen (Denmark); Prime Minister Matteo Renzi (Italy); President Enrique Peña Nieto (Mexico); Prime Minister David Cameron (United Kingdom); Sultan Al Jaber, Minister of State and Special Envoy for Energy and Climate Change (United Arab Emirates).


pages: 859 words: 204,092

When China Rules the World: The End of the Western World and the Rise of the Middle Kingdom by Martin Jacques

Admiral Zheng, An Inconvenient Truth, Asian financial crisis, Bear Stearns, Berlin Wall, Bob Geldof, Bretton Woods, BRICs, British Empire, classic study, credit crunch, Dava Sobel, deindustrialization, Deng Xiaoping, deskilling, discovery of the americas, Doha Development Round, energy security, European colonialism, failed state, Fall of the Berlin Wall, flying shuttle, Francis Fukuyama: the end of history, global reserve currency, global supply chain, Great Leap Forward, illegal immigration, income per capita, invention of gunpowder, James Watt: steam engine, joint-stock company, Kenneth Rogoff, land reform, land tenure, lateral thinking, Malacca Straits, Martin Wolf, Meghnad Desai, Naomi Klein, Nelson Mandela, new economy, New Urbanism, one-China policy, open economy, Pearl River Delta, pension reform, price stability, purchasing power parity, reserve currency, rising living standards, Ronald Reagan, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, spinning jenny, Spread Networks laid a new fibre optics cable between New York and Chicago, the scientific method, Thomas L Friedman, trade liberalization, urban planning, Washington Consensus, Westphalian system, Xiaogang Anhui farmers, zero-sum game

Encouraged by the ‘Go Global’ campaign initiated by the government, the larger Chinese firms have begun to invest abroad and establish overseas subsidiaries.37 China has made astounding economic progress, but its transformation is far from complete. It remains a work in progress. Although it is already the world’s second largest economy in terms of GDP (measured by purchasing power parity), this is primarily a consequence of population size rather than economic sophistication. Can China fulfil its enormous potential and become an economic superpower? HOW SUSTAINABLE IS CHINA’S ECONOMIC GROWTH? At the centre of any discussion about China’s future role in the world - let alone talk of a Chinese century - lies the country’s economic prospects.

Simon Long, ‘India and China: The Tiger in Front’, survey, The Economist, 5 March 2005, p. 10; Shell, Shell Global Scenarios to 2025, pp. 137-43; David Pilling, ‘India Hits Bottleneck on Way to Prosperity’, Financial Times, 24 September 2008. 92 . Measured in terms of GDP exchange rates. It is over twice as large measured by GDP purchasing power parity; The Economist, The World in 2007 (London: 2006), pp. 106-7. 93 . Gideon Rachman, ‘Welcome to the Nuclear Club, India’, Financial Times, 22 September 2008. 94 . Jo Johnson and Edward Luce, ‘Delhi Nuclear Deal Signals US Shift’, Financial Times, 2 August 2007. 95 . Garver, Protracted Contest, pp. 376-7. 96 .


Cultural Backlash: Trump, Brexit, and Authoritarian Populism by Pippa Norris, Ronald Inglehart

affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Berlin Wall, Bernie Sanders, Black Lives Matter, Boris Johnson, Brexit referendum, Cass Sunstein, centre right, classic study, cognitive dissonance, conceptual framework, declining real wages, desegregation, digital divide, Donald Trump, eurozone crisis, fake news, Fall of the Berlin Wall, feminist movement, first-past-the-post, illegal immigration, immigration reform, income inequality, It's morning again in America, Jeremy Corbyn, job automation, knowledge economy, labor-force participation, land reform, liberal world order, longitudinal study, low skilled workers, machine readable, mass immigration, meta-analysis, obamacare, open borders, open economy, opioid epidemic / opioid crisis, Paris climate accords, post-industrial society, post-materialism, precariat, purchasing power parity, rising living standards, Ronald Reagan, sexual politics, Silicon Valley, statistical model, stem cell, Steve Bannon, War on Poverty, white flight, winner-take-all economy, women in the workforce, working-age population, World Values Survey, zero-sum game

Norway’s total poverty rates and levels of income inequality are both ranked 7th lowest among all OECD countries.65 In 2014, the Norwegian economy was hurt by falling energy prices but since then jobs and consumer confidence have recovered; in 2016, the World Bank estimated that Norway ranked as the world’s 4th most prosperous country, with its per capita GDP of US$70,812 (in purchasing power parity).66 Nevertheless, in the September 11, 2017 Norwegian parliamentary elections, the Progress Party (FrP) led by Siv Jensen came third with 15.2 percent of the vote and 27/169 seats, beating more than 20 rivals including the Green Party, the Liberal Party, and the Center Party.67 The Social Democrats were again defeated by the right despite their historical predominance.

It’s very misleading.’ The Washington Post/Monkey Cage; Erik Voeten. December 14, 2016. ‘It’s actually older people who have become more cynical about US democracy.’ The Washington Post/Monkey Cage. Measured by the World Development Indicators and defined as societies with per capita GDP (in purchasing power parity) above $16,000. 442 Eroding the Civic Culture 73. The Pew Research Center. February 7–12, 2017. www.people-press.org. 74. Susan J. Pharr and Robert D. Putnam. Eds. 2000. Disaffected Democracies: What’s Troubling the Trilateral Countries? Princeton, NJ: Princeton University Press; Mattei Dogan.


Four Battlegrounds by Paul Scharre

2021 United States Capitol attack, 3D printing, active measures, activist lawyer, AI winter, AlphaGo, amateurs talk tactics, professionals talk logistics, artificial general intelligence, ASML, augmented reality, Automated Insights, autonomous vehicles, barriers to entry, Berlin Wall, Big Tech, bitcoin, Black Lives Matter, Boeing 737 MAX, Boris Johnson, Brexit referendum, business continuity plan, business process, carbon footprint, chief data officer, Citizen Lab, clean water, cloud computing, commoditize, computer vision, coronavirus, COVID-19, crisis actor, crowdsourcing, DALL-E, data is not the new oil, data is the new oil, data science, deep learning, deepfake, DeepMind, Demis Hassabis, Deng Xiaoping, digital map, digital rights, disinformation, Donald Trump, drone strike, dual-use technology, Elon Musk, en.wikipedia.org, endowment effect, fake news, Francis Fukuyama: the end of history, future of journalism, future of work, game design, general purpose technology, Geoffrey Hinton, geopolitical risk, George Floyd, global supply chain, GPT-3, Great Leap Forward, hive mind, hustle culture, ImageNet competition, immigration reform, income per capita, interchangeable parts, Internet Archive, Internet of things, iterative process, Jeff Bezos, job automation, Kevin Kelly, Kevin Roose, large language model, lockdown, Mark Zuckerberg, military-industrial complex, move fast and break things, Nate Silver, natural language processing, new economy, Nick Bostrom, one-China policy, Open Library, OpenAI, PalmPilot, Parler "social media", pattern recognition, phenotype, post-truth, purchasing power parity, QAnon, QR code, race to the bottom, RAND corporation, recommendation engine, reshoring, ride hailing / ride sharing, robotic process automation, Rodney Brooks, Rubik’s Cube, self-driving car, Shoshana Zuboff, side project, Silicon Valley, slashdot, smart cities, smart meter, Snapchat, social software, sorting algorithm, South China Sea, sparse data, speech recognition, Steve Bannon, Steven Levy, Stuxnet, supply-chain attack, surveillance capitalism, systems thinking, tech worker, techlash, telemarketer, The Brussels Effect, The Signal and the Noise by Nate Silver, TikTok, trade route, TSMC

Kania, Chinese Military Innovation in Artificial Intelligence (Center for a New American Security, June 7, 2019), https://www.cnas.org/publications/congressional-testimony/chinese-military-innovation-in-artificial-intelligence. 37“intelligentized” warfare: Thanks to Peter Hansen for background research on “intelligentized” warfare. 37U.S. share of global R&D spending: For more on global R&D spending, see Paul Heney, “Global R&D Investments Unabated in Spending Growth,” R&D World, March 19, 2020, https://www.rdworldonline.com/global-rd-investments-unabated-in-spending-growth/. 37nearly 70 percent of all global R&D spending: Global Research and Development Expenditures: Fact Sheet (Congressional Research Service, April 29, 2020), 1, https://fas.org/sgp/crs/misc/R44283.pdf. Thanks to former CNAS research associate Ainikki Riikonen and senior fellow Martijn Rasser for background research. 37China has now closed the gap and is on track to overtake the United States: Spending in purchasing-power parity adjusted dollars. “Gross Domestic Spending on R&D.” Thanks to former CNAS research associate Ainikki Riikonen and senior fellow Martijn Rasser for background research. 38U.S. Share of Global R&D: Rest-of-world share of global R&D in 1960 is based on countries that reported total R&D, particularly the G-7.

Department of Commerce, 1997, 5, https://usa.usembassy.de/etexts/tech/nas.pdf; Mark Boroush, National Patterns of R&D Resources: 2017–2018 Data Update, NSF 20-307, Science Foundation, 2020, https://ncses.nsf.gov/pubs/nsf20307; Mark Boroush, Federal R&D Funding, by Budget Function: Fiscal Years 2018–20, NSF 20-305, National Science Foundation, 2019, https://ncses.nsf.gov/pubs/nsf20305; “Gross Domestic Spending on R&D,” OCED.org. Thanks to former CNAS research associate Ainikki Riikonen for background research. 39R&D Spending by Country: Spending in purchasing-power parity adjusted dollars. “Gross Domestic Spending on R&D,” OCED.org. Thanks to former CNAS research associate Ainikki Riikonen for background research. 39an additional $2 billion in AI spending: U.S. Sen. Martin Heinrich, “Heinrich, Portman, Schatz Propose National Strategy for Artificial Intelligence; Call for $2.2 Billion Investment in Education, Research & Development,” news release, May 21, 2019, https://www.heinrich.senate.gov/press-releases/heinrich-portman-schatz-propose-national-strategy-for-artificial-intelligence-call-for-22-billion-investment-in-education-research-and-development. 39$1.1 billion annually in nondefense AI: NITRD, “Artificial Intelligence R&D Investments: Fiscal Year 2018—Fiscal Year 2022,” https://www.nitrd.gov/apps/itdashboard/AI-RD-Investments/#Chart-1-Federal-budget-for-nondefense-AI-RD-FYs-2018-2022. 39estimated roughly $8 billion in defense AI R&D spending: The U.S.


pages: 287 words: 82,576

The Complacent Class: The Self-Defeating Quest for the American Dream by Tyler Cowen

affirmative action, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, assortative mating, behavioural economics, Bernie Sanders, bike sharing, Black Lives Matter, Black Swan, business climate, business cycle, circulation of elites, classic study, clean water, David Graeber, declining real wages, deindustrialization, desegregation, digital divide, Donald Trump, driverless car, drone strike, East Village, Elon Musk, Ferguson, Missouri, Francis Fukuyama: the end of history, gentrification, gig economy, Google Glasses, Hyman Minsky, Hyperloop, income inequality, intangible asset, Internet of things, inventory management, knowledge worker, labor-force participation, low interest rates, low skilled workers, Marc Andreessen, Mark Zuckerberg, medical residency, meta-analysis, obamacare, offshore financial centre, Paradox of Choice, Paul Samuelson, Peter Thiel, public intellectual, purchasing power parity, Richard Florida, security theater, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, South China Sea, Steven Pinker, Stuxnet, The Great Moderation, The Rise and Fall of American Growth, total factor productivity, Tyler Cowen, Tyler Cowen: Great Stagnation, upwardly mobile, Vilfredo Pareto, working-age population, World Values Survey

Americans might turn their backs on comparing themselves with similar others and striving to do better, and settle into their comfortable cocoons. After all, how many Americans these days really track whether the Chinese economy might be passing the American in terms of total GDP? And is that GDP as measured by market exchange rates or by purchasing power parity metrics? It’s mostly the Chinese who seem to care. Tocqueville did not think the American system of government would prove permanently sustainable, and this again stemmed from his views on restlessness. He thought American governance was effective because the country was relatively compact and small, but he also knew that was unlikely to last.


pages: 293 words: 81,183

Doing Good Better: How Effective Altruism Can Help You Make a Difference by William MacAskill

barriers to entry, basic income, behavioural economics, Black Swan, Branko Milanovic, Cal Newport, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Brooks, Edward Jenner, effective altruism, en.wikipedia.org, end world poverty, experimental subject, follow your passion, food miles, immigration reform, income inequality, index fund, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, job automation, job satisfaction, Lean Startup, M-Pesa, mass immigration, meta-analysis, microcredit, Nate Silver, Peter Singer: altruism, power law, public intellectual, purchasing power parity, quantitative trading / quantitative finance, randomized controlled trial, self-driving car, Skype, Stanislav Petrov, Steve Jobs, Steve Wozniak, Steven Pinker, The Future of Employment, The Wealth of Nations by Adam Smith, Tyler Cowen, universal basic income, William MacAskill, women in the workforce

wrote a book: William Easterly, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (New York: Penguin, 2006). “The other tragedy”: Easterly, The White Man’s Burden, 4. The total annual economic output of the world is $87 trillion: World GDP for 2013 was $87.25 trillion in terms of purchasing power parity, and $74.31 trillion in nominal terms. Central Intelligence Agency, The World Factbook, 2014, https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html. the United States spends about $800 billion on social security: Congressional Budget Office, “Monthly Budget Review—Summary for Fiscal Year 2013,” November 7, 2013, https://www.cbo.gov/sites/default/files/44716-%20MBR_FY2013_0.pdf.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

"World Economic Forum" Davos, battle of ideas, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, Charles Babbage, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, Gary Kildall, George Akerlof, Gini coefficient, Glass-Steagall Act, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, John Bogle, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, lateral thinking, low interest rates, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, plutocrats, Ponzi scheme, pre–internet, price mechanism, proprietary trading, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Robert Solow, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

The average tax ratio of 1975-2008 explains about 69 percent of the variation of differences between Gini before taxes and transfers and Gini after taxes and transfers calculated based on OECD data from the late 2000s. The relationship is statistically significant at one-per cent level. ‌19 Countries can then be compared by converting their GDP per capita into US dollars on the basis of the purchasing power of that country’s currency (the purchasing power parity rate). ‌20 In part, the Nordic average is so high because of the high per capita income in Norway, but even without Norway the per capita income in the other three Nordic countries is higher than the Anglo-American average at $40,012. ‌21 Data from OECD. The dashed line shows the direction of the relationship between the GDP per capita (2011 data, US$, current prices, current PPPs) and average tax levels (1975-2008) among the OECD-20, but the relationship is not statistically significant. ‌22 See Anthony B.


pages: 383 words: 81,118

Matchmakers: The New Economics of Multisided Platforms by David S. Evans, Richard Schmalensee

Airbnb, Alvin Roth, Andy Rubin, big-box store, business process, cashless society, Chuck Templeton: OpenTable:, creative destruction, Deng Xiaoping, digital divide, disruptive innovation, if you build it, they will come, information asymmetry, Internet Archive, invention of movable type, invention of the printing press, invention of the telegraph, invention of the telephone, Jean Tirole, John Markoff, Lyft, M-Pesa, market friction, market microstructure, Max Levchin, mobile money, multi-sided market, Network effects, PalmPilot, Productivity paradox, profit maximization, purchasing power parity, QR code, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, Steve Jobs, the long tail, Tim Cook: Apple, transaction costs, two-sided market, Uber for X, uber lyft, ubercab, vertical integration, Victor Gruen, Wayback Machine, winner-take-all economy

Luke Dormehl, “Starbucks Mobile App Payments Now Represent 16% of All Starbucks Transactions,” Fast Company, January 23, 2015, http://www.fastcompany.com/3041353/fast-feed/starbucks-mobile-app-payments-now-represent-16-of-all-starbucks-transactions. Chapter 11 1. World Bank, “GDP per Capita, PPP (Current International $),” http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?page=1 (data for 2006). This is GDP converted to US dollars using purchasing power parity exchange rates. 2. Kenya ranked 120 of 121 countries based on paved roads as percent of total roads and 145 of 165 countries based on gasoline consumption per capita. World Bank, “Roads Paved (% of Total Roads),” http://data.worldbank.org/indicator/IS.ROD.PAVE.ZS (data for 2011); World Bank, “Gasoline Fuel Consumption per Capita (Kg of Oil Equivalent),” http://data.worldbank.org/indicator/IS.ROD.SGAS.PC (data for 2011). 3.


pages: 279 words: 87,910

How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

banking crisis, basic income, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, carbon credits, creative destruction, critique of consumerism, David Ricardo: comparative advantage, death of newspapers, Dr. Strangelove, financial innovation, Francis Fukuyama: the end of history, full employment, Great Leap Forward, guns versus butter model, happiness index / gross national happiness, Herbert Marcuse, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, market clearing, market fundamentalism, Meghnad Desai, Paul Samuelson, Philippa Foot, planned obsolescence, precautionary principle, profit motive, purchasing power parity, Ralph Waldo Emerson, retail therapy, Robert Solow, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, Veblen good, wage slave, wealth creators, World Values Survey, zero-sum game

Further growth of GDP would come to depend largely on improvements in the quality not quantity of capital, physical and human, that is, on technical progress. Growth of GDP per head would require technical progress to outstrip population growth. * These figures are calculated according to purchasing power parity, which is a measure of what money can buy in different countries. * Households spend more time shopping, because of the increased distance and size of shops and the growth of self-service shopping. More time is also spent on childcare, which reflects changing attitudes towards child-rearing, exemplified by the phrase “quality time.”


pages: 276 words: 82,603

Birth of the Euro by Otmar Issing

accounting loophole / creative accounting, behavioural economics, Bretton Woods, business climate, business cycle, capital controls, central bank independence, currency peg, currency risk, financial innovation, floating exchange rates, full employment, inflation targeting, information asymmetry, labour market flexibility, labour mobility, low interest rates, market fundamentalism, money market fund, moral hazard, oil shock, open economy, price anchoring, price stability, purchasing power parity, reserve currency, Robert Solow, Y2K, yield curve

Prices can therefore be expected to rise faster in countries that are in the process of catching up. Nonetheless, empirical studies show that this effect has been limited in EMU in its current composition.15 14 15 The name originates from two papers that were published in the same year: B. Balassa, ‘The purchasing-power parity doctrine: a reappraisal’, Journal of Political Economy, 72 (1964); P. A. Samuelson, ‘Theoretical notes on trade problems’, Review of Economics and Statistics, 46 (1964). ECB, ‘Inflation differentials in a monetary union’, Monthly Bulletin, October 1999. 212 • The central bank and monetary policy in EMU euro area (12 countries) United States (14 MSAs) United States (4 census regions) 7 7 6 6 5 5 4 4 Stage I of EMU 3 Stage II of EMU Stage III of EMU 3 1 1 0 0 19 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 2 90 2 Sources: Eurostat, US Bureau of Labor Statistics and ECB calculations. 1 Data up to February 2005.


pages: 289 words: 86,165

Ten Lessons for a Post-Pandemic World by Fareed Zakaria

"there is no alternative" (TINA), 15-minute city, AlphaGo, An Inconvenient Truth, anti-fragile, Asian financial crisis, basic income, Bernie Sanders, Boris Johnson, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon tax, central bank independence, clean water, cloud computing, colonial rule, contact tracing, coronavirus, COVID-19, Credit Default Swap, David Graeber, Day of the Dead, deep learning, DeepMind, deglobalization, Demis Hassabis, Deng Xiaoping, digital divide, Dominic Cummings, Donald Trump, Edward Glaeser, Edward Jenner, Elon Musk, Erik Brynjolfsson, failed state, financial engineering, Francis Fukuyama: the end of history, future of work, gentrification, George Floyd, gig economy, Gini coefficient, global pandemic, global reserve currency, global supply chain, green new deal, hiring and firing, housing crisis, imperial preference, income inequality, Indoor air pollution, invention of the wheel, Jane Jacobs, Jeff Bezos, Jeremy Corbyn, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, junk bonds, lockdown, Long Term Capital Management, low interest rates, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, means of production, megacity, Mexican peso crisis / tequila crisis, middle-income trap, Monroe Doctrine, Nate Silver, Nick Bostrom, oil shock, open borders, out of africa, Parag Khanna, Paris climate accords, Peter Thiel, plutocrats, popular capitalism, Productivity paradox, purchasing power parity, remote working, reserve currency, reshoring, restrictive zoning, ride hailing / ride sharing, Ronald Reagan, secular stagnation, Silicon Valley, social distancing, software is eating the world, South China Sea, Steve Bannon, Steve Jobs, Steven Pinker, Suez crisis 1956, TED Talk, the built environment, The Death and Life of Great American Cities, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tim Cook: Apple, trade route, UNCLOS, universal basic income, urban planning, Washington Consensus, white flight, Works Progress Administration, zoonotic diseases

The measure used here also takes into account the amount needed to replace the capital assets of households (i.e., dwellings and equipment of unincorporated enterprises), which is deducted from their income. Household adjusted disposable income is shown in per capita terms and expressed in US dollars (USD) using 2017 purchasing power parities (PPPs) for actual individual consumption. The source is the OECD National Accounts Statistics database. 73 seventeen times more: Denmark spends 0.52% of national GDP on worker training; US spends 0.03%. Gary Burtless, “Comments on ‘Employment and Training for Mature Adults: The Current System and Moving Forward,’ by Paul Osterman,” Brookings Institution, November 7, 2019, https://www.brookings.edu/blog/up-front/2019/11/07/employment-and-training-for-mature-adults-the-current-system-and-moving-forward/. 73 550 more hours of leisure time: OECD Better Life Index, Denmark and United States. 74 armed: Fareed Zakaria, “The Politics of the Future: Be Open and Armed,” Washington Post, July 7, 2016, https://www.washingtonpost.com/opinions/the-politics-of-the-future-be-open-and-armed/2016/07/07/fd171ce0-447b-11e6-8856-f26de2537a9d_story.html.


pages: 309 words: 91,581

The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It by Timothy Noah

air traffic controllers' union, Alan Greenspan, assortative mating, autonomous vehicles, Bear Stearns, blue-collar work, Bonfire of the Vanities, Branko Milanovic, business cycle, call centre, carbon tax, collective bargaining, compensation consultant, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, easy for humans, difficult for computers, Erik Brynjolfsson, Everybody Ought to Be Rich, feminist movement, Ford Model T, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, government statistician, Gunnar Myrdal, income inequality, independent contractor, industrial robot, invisible hand, It's morning again in America, job automation, Joseph Schumpeter, longitudinal study, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, Paul Samuelson, performance metric, positional goods, post-industrial society, postindustrial economy, proprietary trading, purchasing power parity, refrigerator car, rent control, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, subprime mortgage crisis, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, Vilfredo Pareto, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War

Morrison, “China’s Economic Conditions” (Washington: Congressional Research Service, 2011), 1–5, 11; Ronald E. Kutscher, “Historical Trends, 1950–92, and Current Uncertainties,” Monthly Labor Review, Nov. 1993, 5; “Country Comparison: Exports,” CIA World Factbook, at https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html; and “Country Comparison: GDP (Purchasing Power Parity),” at https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html?countryName=China&countryCode=ch&regionCode=eas&rank=3#ch. 2. “World Development Indicators” July 2011, at http://data.worldbank.org/data-catalog/world-development-indicators. 3. Morrison, “China’s Economic Conditions,” 16–18.


pages: 375 words: 88,306

The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundararajan

"World Economic Forum" Davos, additive manufacturing, Airbnb, AltaVista, Amazon Mechanical Turk, asset light, autonomous vehicles, barriers to entry, basic income, benefit corporation, bike sharing, bitcoin, blockchain, book value, Burning Man, call centre, Carl Icahn, collaborative consumption, collaborative economy, collective bargaining, commoditize, commons-based peer production, corporate social responsibility, cryptocurrency, data science, David Graeber, distributed ledger, driverless car, Eben Moglen, employer provided health coverage, Erik Brynjolfsson, Ethereum, ethereum blockchain, Frank Levy and Richard Murnane: The New Division of Labor, future of work, general purpose technology, George Akerlof, gig economy, housing crisis, Howard Rheingold, independent contractor, information asymmetry, Internet of things, inventory management, invisible hand, job automation, job-hopping, John Zimmer (Lyft cofounder), Kickstarter, knowledge worker, Kula ring, Lyft, Marc Andreessen, Mary Meeker, megacity, minimum wage unemployment, moral hazard, moral panic, Network effects, new economy, Oculus Rift, off-the-grid, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, peer-to-peer rental, profit motive, public intellectual, purchasing power parity, race to the bottom, recommendation engine, regulatory arbitrage, rent control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Ross Ulbricht, Second Machine Age, self-driving car, sharing economy, Silicon Valley, smart contracts, Snapchat, social software, supply-chain management, TaskRabbit, TED Talk, the long tail, The Nature of the Firm, total factor productivity, transaction costs, transportation-network company, two-sided market, Uber and Lyft, Uber for X, uber lyft, universal basic income, Vitalik Buterin, WeWork, Yochai Benkler, Zipcar

New designers, programmers, and writers on these platforms also gain insight into wage rates for colleagues at different points in their career (for example, a young scribe will quickly learn the going rate for US-based proofreaders, editors, and writers, and how experience and compensation line up). As a result, workers breaking into the industry can set rates in accordance with industry standards in the country from which their demand originates, and workers in lower purchasing-power parity countries might end up realizing their skills are worth more than they thought. In this way, decreased information asymmetry across providers may counteract some of the negative impacts of increased global competition, although whether it will negate them entirely in the long run remains an open question.21 New Generalists For most of the past 500 years, and specifically since the advent of industrialization, we have observed progressively greater specialization in our economies.


pages: 340 words: 90,674

The Perfect Police State: An Undercover Odyssey Into China's Terrifying Surveillance Dystopia of the Future by Geoffrey Cain

airport security, Alan Greenspan, AlphaGo, anti-communist, Bellingcat, Berlin Wall, Black Lives Matter, Citizen Lab, cloud computing, commoditize, computer vision, coronavirus, COVID-19, deep learning, DeepMind, Deng Xiaoping, Edward Snowden, European colonialism, fake news, Geoffrey Hinton, George Floyd, ghettoisation, global supply chain, Kickstarter, land reform, lockdown, mass immigration, military-industrial complex, Nelson Mandela, Panopticon Jeremy Bentham, pattern recognition, phenotype, pirate software, post-truth, purchasing power parity, QR code, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Right to Buy, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, South China Sea, speech recognition, TikTok, Tim Cook: Apple, trade liberalization, trade route, undersea cable, WikiLeaks

The British did the same with the Suez Canal in the Middle East, speeding the trade route between London and its most valuable colony, India.31 “Eurasia is by far the world’s largest and most central supercontinent, with well over a third of the Earth’s entire land area,” noted the political scientist Kent E. Alder. “Beneath its soil lies nearly two-thirds of the world’s oil and over 80 percent of conventional gas reserves… Eurasia’s constituent nations hold almost 85 percent of world foreign exchange reserves, while generating close to 70 percent of global GDP in PPP [purchasing power parity] terms, not to mention nearly half of the world’s manufactured goods.”32 A supercontinent connected through trade networks and roads was exactly what China needed and wanted. With its economic growth losing momentum by 2013,33 China could move its workers and infrastructure projects to the underdeveloped west, and through the plateaus, mountain ranges, and deserts of Central Asia and the Middle East.


pages: 288 words: 89,781

The Classical School by Callum Williams

"Friedman doctrine" OR "shareholder theory", bank run, banking crisis, basic income, Brexit referendum, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Charles Babbage, complexity theory, Corn Laws, David Ricardo: comparative advantage, death from overwork, deindustrialization, Donald Trump, double entry bookkeeping, falling living standards, Fellow of the Royal Society, full employment, Gini coefficient, Gordon Gekko, greed is good, helicopter parent, income inequality, invisible hand, Jevons paradox, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, low skilled workers, Mahatma Gandhi, Martin Wolf, means of production, Meghnad Desai, minimum wage unemployment, Modern Monetary Theory, new economy, New Journalism, non-tariff barriers, Paul Samuelson, Post-Keynesian economics, purchasing power parity, Ronald Coase, secular stagnation, Silicon Valley, spinning jenny, The Wealth of Nations by Adam Smith, Thomas Malthus, universal basic income

Marshall’s thinking on clusters was to become immensely influential in the late 20th century, in particular with the work of Michael Porter. Keynes also attributes all sorts of other economic concepts to Marshall. One is the tricky statistical idea of “chain-linking”, which today is used by statistical offices all around the world to construct measures of inflation (among other things). Another is “purchasing-power parity”, which refers to the notion that some countries are cheaper to live in than others. And last but not least, Keynes argues that “I do not think that Marshall did economists any greater service than by the explicit introduction of the idea of ‘elasticity’,” the notion that changes in the price of things will lead to disproportionate changes in demand or supply for those things.


pages: 292 words: 87,720

Volt Rush: The Winners and Losers in the Race to Go Green by Henry Sanderson

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, animal electricity, autonomous vehicles, Boris Johnson, carbon footprint, Carl Icahn, circular economy, commodity super cycle, corporate governance, corporate social responsibility, COVID-19, David Attenborough, decarbonisation, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, Elon Musk, energy transition, Extinction Rebellion, Exxon Valdez, Fairphone, Ford Model T, gigafactory, global supply chain, Global Witness, income per capita, Internet of things, invention of the steam engine, Kickstarter, lockdown, megacity, Menlo Park, oil shale / tar sands, planned obsolescence, popular capitalism, purchasing power parity, QR code, reality distortion field, Ronald Reagan, Scramble for Africa, short squeeze, Silicon Valley, Silicon Valley startup, smart grid, sovereign wealth fund, Steve Jobs, supply-chain management, tech billionaire, Tesla Model S, The Chicago School, the new new thing, three-masted sailing ship, Tony Fadell, UNCLOS, WikiLeaks, work culture

There would be no guarantee the money would go into spending on healthcare and education. Such sentiments were strengthened by stories of Yuma’s lavish wedding ceremonies for his daughter in Kinshasa. The data itself also told a brutal story: annual income per capita in the Congo, at $785 in purchasing power parity terms, was still among the lowest in Africa. According to the Carter Center around $750 million that was paid to Gécamines from asset sales and royalties between 2011 and 2014 was missing from its accounts.* Despite the criticisms, however, Yuma was close to Kabila and momentum had been building in Kinshasa for a change in the country’s 2002 mining code, which had been formed in the middle of a civil war – in order to secure more of the cobalt revenues for the Congo.


pages: 308 words: 99,298

Brexit, No Exit: Why in the End Britain Won't Leave Europe by Denis MacShane

"World Economic Forum" Davos, 3D printing, Alan Greenspan, Alvin Toffler, banking crisis, battle of ideas, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, centre right, Corn Laws, deindustrialization, Doha Development Round, Donald Trump, Etonian, European colonialism, fake news, financial engineering, first-past-the-post, fixed income, Gini coefficient, greed is good, illegal immigration, information security, James Dyson, Jeremy Corbyn, labour mobility, liberal capitalism, low cost airline, low interest rates, Martin Wolf, mass immigration, military-industrial complex, Mont Pelerin Society, negative equity, Neil Kinnock, new economy, non-tariff barriers, offshore financial centre, open borders, open economy, post-truth, price stability, purchasing power parity, quantitative easing, reshoring, road to serfdom, secular stagnation, Silicon Valley, Thales and the olive presses, trade liberalization, transaction costs, women in the workforce

In Britain, average real wages fell by 10 per cent between 2007 and 2015 according to the London School of Economics Centre for Economic Performance, which added that this was the longest continuous fall in workers’ wages since the 1930s. Thus the high employment figures, which included the 6.2 per cent of the British workforce coming from the EU, went hand in hand with a slump in working-class purchasing power. The UK’s increase in GDP as measured by purchasing power parity – the usual international comparator – between 2000 and 2015 was smaller than that of Germany, France and Spain. Sadly, the UK’s press is so insular and so keen to boost the image of a ‘Great’ Britain the journalists rarely look behind the news releases put out by politicians who want to persuade voters that thanks to their leadership the people of Britain are getting richer and better off.


pages: 357 words: 100,718

The Limits to Growth: The 30-Year Update by Donella H. Meadows, Jørgen Randers, Dennis L. Meadows

Abraham Maslow, agricultural Revolution, Buckminster Fuller, clean water, Climatic Research Unit, conceptual framework, dematerialisation, demographic transition, digital divide, financial independence, game design, Garrett Hardin, geopolitical risk, Herman Kahn, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), Lewis Mumford, longitudinal study, means of production, new economy, purchasing power parity, Ralph Waldo Emerson, Ronald Reagan, systems thinking, Tragedy of the Commons, University of East Anglia, urban sprawl, Whole Earth Review

It measures the average achievement in a country in three basic dimensions of human development: • A long and healthy life, as measured by life expectancy at birth • Knowledge, as measured by the adult literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary gross enrolment rate (with one-third weight) • A decent standard of living, as measured by GDP per capita (in PPP-$, Purchasing Power Parity US dollars)' The UNDP calculates the HDI as the arithmetric average of three indices (the life expectancy index, the education index, and the GDP index)-one for each of the three factors listed in the quote above. The life expectancy and education indices increase linearly with life expectancy, literacy, and school enrollment.


pages: 363 words: 101,082

Earth Wars: The Battle for Global Resources by Geoff Hiscock

Admiral Zheng, Asian financial crisis, Bakken shale, Bernie Madoff, BRICs, butterfly effect, carbon tax, clean tech, clean water, corporate governance, demographic dividend, Deng Xiaoping, Edward Lorenz: Chaos theory, energy security, energy transition, eurozone crisis, Exxon Valdez, flex fuel, Ford Model T, geopolitical risk, global rebalancing, global supply chain, Great Leap Forward, high-speed rail, hydraulic fracturing, Long Term Capital Management, Malacca Straits, Masayoshi Son, Masdar, mass immigration, megacity, megaproject, Menlo Park, Mohammed Bouazizi, new economy, oil shale / tar sands, oil shock, Panamax, Pearl River Delta, purchasing power parity, Ralph Waldo Emerson, RAND corporation, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, smart grid, SoftBank, Solyndra, South China Sea, sovereign wealth fund, special economic zone, spice trade, trade route, uranium enrichment, urban decay, WikiLeaks, working-age population, Yom Kippur War

Today, Shenzhen’s economic zone has expanded to take in the container port of Yantian and it forms part of the powerful Pearl River Delta region with Guangzhou and Hong Kong. China’s gross domestic product overtook that of Japan midway through 2010 for it to become the world’s No. 2 economy, though per capita income, even on the basis of purchasing power parity, is only about one-fifth of Japan’s. According to the International Monetary Fund, U.S. nominal gross domestic product in 2010 was $14.5 trillion, compared with $5.88 trillion for China and $5.46 trillion for Japan. Brazil and India ranked seventh and ninth, with GDP of $2.1 trillion and $1.6 trillion, respectively.


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Madoff, book value, British Empire, buy and hold, central bank independence, collective bargaining, commodity trading advisor, compensation consultant, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, land bank, law of one price, light touch regulation, Long Term Capital Management, low interest rates, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, military-industrial complex, minimum wage unemployment, Money creation, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, Robert Solow, rolodex, Savings and loan crisis, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, ultimatum game, union organizing, Vilfredo Pareto, working-age population, World Values Survey

The rich and wealthy benefit most from this way of measuring the economic success of a nation, since it de-emphasizes the gains of the mass of low-income people relative to those of a minority of rich people. As far as nations are concerned, it benefits nations that champion the policies favored by this approach, with the US being foremost among these. If you leave out city-states like Luxembourg and small oil-rich countries like Norway, then the US is first in terms of GDP (purchasing power parity adjusted, i.e. for costs of living) per citizen or per worker. This is a beneficial status, as a large and consistently fast-growing economy attracts large sums of international capital. It enables the receiving nation to consume more than it produces and to receive credit at very favorable interest rates, especially when that country’s currency is also the world’s reserve 30 ECONOMISTS AND THE POWERFUL currency.


pages: 471 words: 97,152

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller

affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, business cycle, buy and hold, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, Future Shock, George Akerlof, George Santayana, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, junk bonds, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Michael Milken, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Paul Samuelson, Phillips curve, plutocrats, Post-Keynesian economics, price stability, profit maximization, public intellectual, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, W. E. B. Du Bois, We are all Keynesians now, working-age population, Y2K, Yom Kippur War

Our choice to exclude home equity capital assumes that retirees should not have to leave their homes for financial reasons, or to reverse-mortgage them, as they get older. 15. Communication from Gary Burtless, table titled “Fraction of Non-Earnings Income by Source, by Income Quintile for Population 65 and Older.” 16. Aaron and Reischauer (1999, p. 174). 17. Not adjusting for purchasing power parity, GDP per capita in Luxembourg is 897 times that in Burundi (Central Intelligence Agency 2008). 18. There is in fact, as has long been known, a strong historical connection (in terms of correlation across countries) between national savings rates and national economic growth rates (see, for example, Modigliani 1970 and Carroll and Weil 1994). 19.


pages: 320 words: 96,006

The End of Men: And the Rise of Women by Hanna Rosin

affirmative action, call centre, cognitive dissonance, David Brooks, delayed gratification, edge city, facts on the ground, financial independence, hiring and firing, housing crisis, income inequality, informal economy, job satisfaction, low skilled workers, manufacturing employment, meta-analysis, new economy, New Urbanism, Norman Mailer, Northern Rock, post-work, postindustrial economy, purchasing power parity, Results Only Work Environment, Sheryl Sandberg, Silicon Valley, social intelligence, Stanford prison experiment, Steven Pinker, TED Talk, union organizing, upwardly mobile, white picket fence, women in the workforce, work culture , young professional

THE GOLD MISSES ASIAN WOMEN TAKE OVER THE WORLD These rules were enshrined: Rosa Kim, “The Legacy of Institutionalized Gender Inequality in South Korea: The Family Law,” Boston College Third World Law Journal 14, no. 1 (1994): 145–162. Park Chung-hee began to rebuild Korea’s economy: See Sung-Hee Jwa, The Evolution of Large Corporations in Korea (Cheltenham, UK: Elgar, 2002). thirteenth-largest economy in the world: “GDP (Purchasing Power Parity),” CIA World Factbook. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html. private “cram” schools: Margaret Warner, “In Hypercompetitive South Korea, Pressures Mount on Young Pupils,” PBS NewsHour, January 21, 2011. http://www.pbs.org/newshour/bb/education/jan-june11/koreaschools_01-21.html.


pages: 479 words: 102,876

The King of Oil: The Secret Lives of Marc Rich by Daniel Ammann

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", accounting loophole / creative accounting, anti-communist, Ayatollah Khomeini, banking crisis, Berlin Wall, Boeing 747, book value, Boycotts of Israel, business intelligence, buy low sell high, energy security, family office, Johann Wolfgang von Goethe, Michael Milken, Mikhail Gorbachev, Nelson Mandela, oil shock, peak oil, purchasing power parity, Ronald Reagan, subprime mortgage crisis, Suez crisis 1956, trade liberalization, transaction costs, transfer pricing, Upton Sinclair, Yom Kippur War

Toni Falbo and Denise Polit, “A Quantitative Review of the Only-Child Literature: Research Evidence and Theory Development,” Psychological Bulletin 100 (1986): 176–89. 9. “In KC, Quiet Rich Barely Recalled,” Kansas City Star, March 2, 2001. 10. Calvin Trillin, With All Disrespect: More Uncivil Liberties (New York: Penguin, 1986), 148. 11. Inflation-adjusted purchasing power parity, Bureau of Labor Statistics, www.bls.gov/data/inflationcalculator.htm. 12. Letter from Donald R. Nickerson, then principal of Rhodes School, Fortune, February 20, 1984. 4: The American Dream 1. Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: Free Press, 1995). 2.


pages: 352 words: 98,561

The City by Tony Norfield

accounting loophole / creative accounting, air traffic controllers' union, anti-communist, Asian financial crisis, asset-backed security, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, capital controls, central bank independence, colonial exploitation, colonial rule, continuation of politics by other means, currency risk, dark matter, Edward Snowden, Fall of the Berlin Wall, financial innovation, financial intermediation, foreign exchange controls, Francis Fukuyama: the end of history, G4S, global value chain, Goldman Sachs: Vampire Squid, interest rate derivative, interest rate swap, Irish property bubble, Leo Hollis, linked data, London Interbank Offered Rate, London Whale, Londongrad, low interest rates, Mark Zuckerberg, Martin Wolf, means of production, Money creation, money market fund, mortgage debt, North Sea oil, Northern Rock, Occupy movement, offshore financial centre, plutocrats, purchasing power parity, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Ronald Reagan, seigniorage, Sharpe ratio, sovereign wealth fund, Suez crisis 1956, The Great Moderation, transaction costs, transfer pricing, zero-sum game

The point being made is that GDP ‘value added’ data for a particular country may include an element of value created in other countries (see Smith, ‘The GDP Illusion’). 4I discuss this question in relation to Bangladeshi T-shirt production in ‘T-Shirt Economics: Labour in the Imperialist World Economy’, in Nicolas Pons-Vignon and Mbuso Nkosi (eds), Struggle in a Time of Crisis, London: Pluto Press, 2015. 5I use nominal (money) GDP in current exchange rate terms. Other figures, such as ‘purchasing power parity’ GDP, might give a better measure of relative national welfare, but my focus is on how much a country is ‘worth’ in the world economy, and this implies measuring output in current money. 6UNCTAD, World Investment Report 2014, Investing in the SDGs: An Action Plan, United Nations Conference on Trade & Development, June 2014, Annex Table 4. 7Bank for International Settlements (BIS), Quarterly Review, June 2015, Table 2A.


pages: 471 words: 109,267

The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

Alan Greenspan, An Inconvenient Truth, banking crisis, Big bang: deregulation of the City of London, blood diamond, Bob Geldof, Boris Johnson, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, Crossrail, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labour market flexibility, market bubble, mass immigration, military-industrial complex, millennium bug, moral panic, North Sea oil, Northern Rock, offshore financial centre, pension reform, plutocrats, Ponzi scheme, profit maximization, purchasing power parity, Right to Buy, shareholder value, Skype, smart meter, social distancing, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

Labour bucked no trend. The recent past now looks like an eighteen-year cycle, gathering momentum after Black Wednesday in 1992 and ending as the economy started growing again in 2010. The UK outpaced rivals during the bubble, but the recession pushed it back down the rankings. Even then, measured in purchasing-power parity, UK living standards per capita were still higher in 2010 than in Germany, France, Italy and Japan. Labour’s tenure was a game of two halves. Towards the end of the first, in late 2006, the OECD praised the UK as ‘the Goldilocks economy’. Like the little bear’s porridge, it was neither too hot nor too cold.


pages: 267 words: 79,905

Creating Unequal Futures?: Rethinking Poverty, Inequality and Disadvantage by Ruth Fincher, Peter Saunders

barriers to entry, classic study, ending welfare as we know it, financial independence, full employment, gentrification, Gini coefficient, income inequality, income per capita, labour market flexibility, labour mobility, longitudinal study, low skilled workers, low-wage service sector, marginal employment, minimum wage unemployment, New Urbanism, open economy, pink-collar, positional goods, purchasing power parity, shareholder value, spread of share-ownership, The Bell Curve by Richard Herrnstein and Charles Murray, urban planning, urban renewal, very high income, women in the workforce, working poor, working-age population

Table 4.2 shows an alternative way of looking at the situation. This time a ‘real poverty line’ is used (Bradbury and Jäntii, 1999b). This is based on the US official poverty line which is set at the cost of a basket of basic goods. The various national income levels are made comparable by converting them into US dollars using Purchasing Power Parities (PPPs). Using this kind of measure, poverty would fall if poor 103 PDF OUTPUT c: ALLEN & UNWIN r: DP2\BP4401W\MAIN p: (02) 6232 5991 f: (02) 6232 4995 36 DAGLISH STREET CURTIN ACT 2605 103 CREATING UNEQUAL FUTURES? Table 4.2 Child poverty rates: ‘real poverty line’ Country Year Rate Rank Russia Slovakia Poland Hungary Czech Republic Ireland Spain Israel Italy United Kingdom Australia United States France Germany Netherlands Canada Belgium Austria Denmark Taiwan Sweden Norway Finland Switzerland Luxembourg 1995 1992 1994 1989 1992 1992 1990 1992 1994 1995 1995 1994 1987 1994 1991 1994 1982 1987 1995 1992 1991 1992 1994 1992 1995 98.0 95.2 90.9 90.6 85.1 54.4 47.3 45.3 38.1 28.6 20.7 18.5 17.3 12.4 10.0 9.0 7.9 5.4 4.6 4.3 3.7 2.8 2.6 1.6 1.1 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) Source: Bradbury and Jäntii 1999b, Table 2 people’s income rose in real terms, even if rich people’s income rose even faster.


pages: 354 words: 26,550

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems by Irene Aldridge

algorithmic trading, asset allocation, asset-backed security, automated trading system, backtesting, Black Swan, Brownian motion, business cycle, business process, buy and hold, capital asset pricing model, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, computerized trading, diversification, equity premium, fault tolerance, financial engineering, financial intermediation, fixed income, global macro, high net worth, implied volatility, index arbitrage, information asymmetry, interest rate swap, inventory management, Jim Simons, law of one price, Long Term Capital Management, Louis Bachelier, machine readable, margin call, market friction, market microstructure, martingale, Myron Scholes, New Journalism, p-value, paper trading, performance metric, Performance of Mutual Funds in the Period, pneumatic tube, profit motive, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, short selling, Small Order Execution System, statistical arbitrage, statistical model, stochastic process, stochastic volatility, systematic trading, tail risk, trade route, transaction costs, value at risk, yield curve, zero-sum game

M . as the trading window and download all of the quotes and trades recorded during that time. We partition the data further into 5-minute, 1-minute, 30-second, and 15-second blocks. We then measure the impact of the announcement on the corresponding 5-minute, 1-minute, 30-second, and 15-second returns of USD/CAD spot. According to the purchasing power parity (PPP), a spot exchange rate between domestic and foreign currencies is the ratio of the domestic and foreign inflation rates. When the U.S. inflation rate changes, the deviation disturbs the PPP equilibrium and the USD-based exchange rates adjust to new levels. When the U.S. inflation rate rises, USD/CAD is expected to increase instantaneously, and vice versa.


pages: 364 words: 104,697

Were You Born on the Wrong Continent? by Thomas Geoghegan

Alan Greenspan, Albert Einstein, American Society of Civil Engineers: Report Card, An Inconvenient Truth, banking crisis, Bear Stearns, Berlin Wall, Bob Geldof, business logic, collective bargaining, corporate governance, cross-subsidies, dark matter, David Brooks, declining real wages, deindustrialization, disinformation, Easter island, ending welfare as we know it, facts on the ground, Gini coefficient, Glass-Steagall Act, haute cuisine, high-speed rail, income inequality, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, laissez-faire capitalism, low skilled workers, Martin Wolf, McJob, military-industrial complex, minimum wage unemployment, mittelstand, offshore financial centre, Paul Samuelson, payday loans, pensions crisis, plutocrats, Prenzlauer Berg, purchasing power parity, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan: Tear down this wall, Saturday Night Live, Silicon Valley, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Wolfgang Streeck, women in the workforce

“The World Is Flat”—or, the country with the lowest labor cost “wins.” But if it were a flat world, Germany should be toast. Look below at this chart from The State of Working America 2008/2009. Because it’s difficult to denominate labor costs in different currencies, the chart below just fixes the U.S. labor cost at 100 in purchasing power parity. Percent of labor force in manufacturing Hourly compensation U.S. 11.3 100 Germany 22.0 131 In currency rates, the cost difference is even greater: 153 for Germany v. 100 for U.S. At “153” or even “131,” Germany should be in a receivership. For forty years, that’s what we’ve been expecting.


pages: 355 words: 63

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

Andrei Shleifer, business climate, business cycle, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, creative destruction, endogenous growth, financial repression, foreign exchange controls, Gini coefficient, government statistician, Gunnar Myrdal, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, large denomination, low interest rates, manufacturing employment, Money creation, Network effects, New Urbanism, open economy, PalmPilot, Productivity paradox, purchasing power parity, rent-seeking, Robert Solow, Ronald Reagan, selection bias, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, Tragedy of the Commons, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

In the 1960s, 1970s, and 1980s, growth rates were falling even though investment rates kept rising. Easterly and Fischer 1995. 46. I am using data in domestic prices for investment, since overseas development assistance is not purchasing power adjusted.When I put all the data together I will be forced to mix purchasing power parity and domestic price data. The data on overseas development assistance are from the OECD. 47. These results are like those of Blomstrom, Lipsey, and Zejan 1996, who found with five-year periods that investment was a function of lagged growth, but growth was not a function of lagged investment. 48.


pages: 408 words: 108,985

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, Airbnb, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, behavioural economics, benefit corporation, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, Glass-Steagall Act, hiring and firing, housing crisis, Hyman Minsky, income inequality, independent contractor, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low interest rates, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, Paris climate accords, patent troll, pension reform, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, vertical integration, zero-sum game

Then, as if in echo of these economic maladies, Trump was elected president of the United States, and the UK voted to exit the EU. China skillfully navigated the global financial crisis, continuing on its path of soaring growth to the point where, in 2015, it became the largest economy in the world (measured by purchasing power parity). Evidently, its distinctive economic system—what it calls a socialist market economy with Chinese characteristics, and what others refer to as state capitalism, Chinese style—has been working well. In fact, it has done so for more than four decades. But with the ascendancy of President Xi Jinping in 2012, and especially with his elimination of term limits in 2018, two things changed: First, the hope was dashed that China would quickly become, if not a liberal democracy, at least more liberal.


pages: 419 words: 109,241

A World Without Work: Technology, Automation, and How We Should Respond by Daniel Susskind

"World Economic Forum" Davos, 3D printing, agricultural Revolution, AI winter, Airbnb, Albert Einstein, algorithmic trading, AlphaGo, artificial general intelligence, autonomous vehicles, basic income, Bertrand Russell: In Praise of Idleness, Big Tech, blue-collar work, Boston Dynamics, British Empire, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, computer age, computer vision, computerized trading, creative destruction, David Graeber, David Ricardo: comparative advantage, deep learning, DeepMind, Demis Hassabis, demographic transition, deskilling, disruptive innovation, Donald Trump, Douglas Hofstadter, driverless car, drone strike, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, fake news, financial innovation, flying shuttle, Ford Model T, fulfillment center, future of work, gig economy, Gini coefficient, Google Glasses, Gödel, Escher, Bach, Hans Moravec, income inequality, income per capita, industrial robot, interchangeable parts, invisible hand, Isaac Newton, Jacques de Vaucanson, James Hargreaves, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, Joi Ito, Joseph Schumpeter, Kenneth Arrow, Kevin Roose, Khan Academy, Kickstarter, Larry Ellison, low skilled workers, lump of labour, machine translation, Marc Andreessen, Mark Zuckerberg, means of production, Metcalfe’s law, natural language processing, Neil Armstrong, Network effects, Nick Bostrom, Occupy movement, offshore financial centre, Paul Samuelson, Peter Thiel, pink-collar, precariat, purchasing power parity, Ray Kurzweil, ride hailing / ride sharing, road to serfdom, Robert Gordon, Sam Altman, Second Machine Age, self-driving car, shareholder value, sharing economy, Silicon Valley, Snapchat, social intelligence, software is eating the world, sovereign wealth fund, spinning jenny, Stephen Hawking, Steve Jobs, strong AI, tacit knowledge, technological solutionism, TED Talk, telemarketer, The Future of Employment, The Rise and Fall of American Growth, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Travis Kalanick, Turing test, Two Sigma, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, upwardly mobile, warehouse robotics, Watson beat the top human players on Jeopardy!, We are the 99%, wealth creators, working poor, working-age population, Y Combinator

., “Technology at Work v2.0: The Future Is Not What It Used to Be,” Oxford Martin School and Citi (2016). 81.  Automation risk data from Ljudiba Nedelkoska and Glenda Quintini, “Automation, Skills Use and Training,” OECD Social, Employment and Migration Working Papers, No. 202 (2018); GDP per person data is OECD data for 2016 (retrieved 2018). PPPs (purchasing power parities) are currency exchange rates that try to take account of different price levels across different countries. 82.  OECD, Job Creation and Local Economic Development 2018: Preparing for the Future of Work (Paris: OECD Publishing, 2018), p. 26. These comparisons use the same measure of “automation risk”: if it has a 70 percent or higher probability of being automated (see p. 42). 83.  


pages: 1,066 words: 273,703

Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

"there is no alternative" (TINA), "World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bond market vigilante , book value, Boris Johnson, bread and circuses, break the buck, Bretton Woods, Brexit referendum, BRICs, British Empire, business cycle, business logic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, company town, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial engineering, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, high-speed rail, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, low interest rates, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, military-industrial complex, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, opioid epidemic / opioid crisis, paradox of thrift, Peter Thiel, Ponzi scheme, Post-Keynesian economics, post-truth, predatory finance, price stability, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, Steve Bannon, structural adjustment programs, tail risk, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

But in light of contemporary economic developments, any claim to omnipotence was simply unrealistic. “[T]he international landscape is so varied and changes so quickly—changes in light of the dynamic development in a whole number of countries and regions. . . . The combined GDP measured in purchasing power parity of countries such as India and China is already greater than that of the United States. And a similar calculation with the GDP of the BRIC countries—Brazil, Russia, India and China—surpasses the cumulative GDP of the EU. And according to experts this gap will only increase in the future. . . .

I In the summer of 1997 the Asian financial crisis had started in Thailand and had spread from there across Southeast Asia to Indonesia, Malaysia and Singapore, before ricocheting two thousand miles to the northeast to unleash havoc in South Korea. After a year of severe recession, by 2000 Thailand, Indonesia, Malaysia and Korea were all growing again. From a combined GDP in 1997 of $2.3 trillion in purchasing power parity (PPP) terms, by 2008 the output of these four economies had nearly doubled to $4.4 trillion.3 This gave them a weight in the world economy comparable in PPP terms to France and Italy combined, or California plus Texas. In terms of economic policy, the East Asian economies were model students.


pages: 409 words: 118,448

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, Alan Greenspan, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, flag carrier, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, Great Leap Forward, guns versus butter model, high-speed rail, income inequality, income per capita, indoor plumbing, informal economy, intermodal, inverted yield curve, invisible hand, It's morning again in America, Kenneth Rogoff, knowledge economy, late capitalism, Les Trente Glorieuses, linear programming, low interest rates, manufacturing employment, Multi Fibre Arrangement, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, North Sea oil, oil shock, Paul Samuelson, pension reform, Phillips curve, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

The country’s age-standardized death rate jumped from 1,681 per 100,000 people in 1947 to 1,751 in 1948; see Australian Institute of Health and Welfare, General Record of Incidence of Mortality books, 1907–2011. 9. For consistency, this discussion relies on the work of Angus Maddison, who developed a time-series estimate of income in 1990 US dollars adjusted for purchasing power parity, allowing comparisons among as well as within countries. The United States had 42.5 million occupied units and 23.4 million homeowners in 1948; Statistical Abstract 1951, 721. In 1974, there were 70.8 million occupied units and 45.8 million homeowners; Statistical Abstract 1976, 736. On improved living standards in Great Britain, see Sandbrook, State of Emergency.


pages: 443 words: 112,800

The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World by Jeremy Rifkin

3D printing, additive manufacturing, Albert Einstein, American ideology, An Inconvenient Truth, barriers to entry, behavioural economics, bike sharing, borderless world, carbon footprint, centre right, clean tech, collaborative consumption, collaborative economy, Community Supported Agriculture, corporate governance, decarbonisation, deep learning, distributed generation, electricity market, en.wikipedia.org, energy security, energy transition, Ford Model T, global supply chain, Great Leap Forward, high-speed rail, hydrogen economy, income inequality, industrial cluster, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, job automation, knowledge economy, manufacturing employment, marginal employment, Martin Wolf, Masdar, megacity, Mikhail Gorbachev, new economy, off grid, off-the-grid, oil shale / tar sands, oil shock, open borders, peak oil, Ponzi scheme, post-oil, purchasing power parity, Ray Kurzweil, rewilding, Robert Solow, Ronald Reagan, scientific management, scientific worldview, Silicon Valley, Simon Kuznets, Skype, smart grid, smart meter, Spread Networks laid a new fibre optics cable between New York and Chicago, supply-chain management, systems thinking, tech billionaire, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, trickle-down economics, urban planning, urban renewal, Yom Kippur War, Zipcar

Retrieved from http://www.aseansec.org/19319.htm. 10. ASEAN Plan of Action for Energy Cooperation (APAEC) 2010–2015. (2010, November 8). Asean Centre for Energy. Retrieved April 19, 2011, from http://www.aseanenergy.org/index.php/about/work-programmes. 11.Ibid. 12.Ibid. 13.Ibid. 14.Country Comparison: GDP (Purchasing Power Parity). (n.d.). Central Intelligence Agency. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html. 15.African Union in a Nutshell. (n.d.). African Union. Retrieved from http://www.africa-union.org/root/au/AboutAu/au_in_a_nutshell_en.htm. 16.Access to Electricity. (2009).


pages: 416 words: 118,592

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, backtesting, Bear Stearns, beat the dealer, Bernie Madoff, book value, BRICs, butter production in bangladesh, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial engineering, financial innovation, fixed income, framing effect, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Japanese asset price bubble, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, margin call, market bubble, Mary Meeker, money market fund, mortgage tax deduction, new economy, Own Your Own Home, PalmPilot, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, stock buybacks, stocks for the long run, sugar pill, survivorship bias, The Myth of the Rational Market, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond

Only the freely tradable shares of Chinese companies listed in Hong Kong or New York are counted in the index. A second reason China gets underweighted is that the Chinese government owns a huge portion of the shares of many companies, and those shares are not counted in the float. As a result, China gets only about 2 percent of the weight in the world indexes, whereas, adjusted for purchasing-power parity, China’s GDP is about 13 percent of the world’s GDP and is growing rapidly. Hence, I believe that investors need to put more China into their portfolios than is available in general world or emerging-market index funds. I am, however, true to my indexing beliefs and think the best way to do it is to buy a broad-based index fund of Chinese companies.


pages: 389 words: 119,487

21 Lessons for the 21st Century by Yuval Noah Harari

"World Economic Forum" Davos, 1960s counterculture, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, algorithmic trading, augmented reality, autonomous vehicles, Ayatollah Khomeini, basic income, behavioural economics, Bernie Sanders, bitcoin, blockchain, Boris Johnson, Brexit referendum, call centre, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, carbon-based life, Charlie Hebdo massacre, cognitive dissonance, computer age, computer vision, cryptocurrency, cuban missile crisis, decarbonisation, DeepMind, deglobalization, disinformation, Donald Trump, Dr. Strangelove, failed state, fake news, Filter Bubble, Francis Fukuyama: the end of history, Freestyle chess, gig economy, glass ceiling, Google Glasses, illegal immigration, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job automation, knowledge economy, liberation theology, Louis Pasteur, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, mass immigration, means of production, Menlo Park, meta-analysis, Mohammed Bouazizi, mutually assured destruction, Naomi Klein, obamacare, pattern recognition, post-truth, post-work, purchasing power parity, race to the bottom, RAND corporation, restrictive zoning, Ronald Reagan, Rosa Parks, Scramble for Africa, self-driving car, Silicon Valley, Silicon Valley startup, TED Talk, transatlantic slave trade, trolley problem, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, uranium enrichment, Watson beat the top human players on Jeopardy!, zero-sum game

Tucker (ed.), The Encyclopedia of the Mexican-American War: A Political, Social and Military History (Santa Barbara: ABC-CLIO, 2013), 131. 5 Ivana Kottasova, ‘Putin Meets Xi: Two Economies, Only One to Envy’, CNN, 2 July 2017. 6 GDP is according to the IMF’s statistics, calculated on the basis of purchasing power parity: International Monetary Fund, ‘Report for Selected Countries and Subjects, 2017’, https://www.imf.org/external/pubs/ft/weo/2017/02/weodata/index.aspx, accessed 27 February 2018. 7 Hamza Hendawi and Qassim Abdul-Zahra, ‘Isis is making up to $50 million a month from oil sales’, Business Insider, 23 October 2015. 8 Ian Buruma, Inventing Japan (London: Weidenfeld & Nicolson, 2003); Eri Hotta, Japan 1941: Countdown to Infamy (London: Vintage, 2014). 12.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, Bernie Madoff, book value, break the buck, centre right, collapse of Lehman Brothers, collateralized debt obligation, commoditize, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, disintermediation, diversification, Donald Trump, energy security, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Future Shock, Glass-Steagall Act, government statistician, high net worth, High speed trading, illegal immigration, income inequality, interest rate swap, invention of agriculture, junk bonds, light touch regulation, Long Term Capital Management, low earth orbit, low interest rates, mega-rich, money market fund, moral hazard, mortgage debt, negative equity, Neil Armstrong, Northern Rock, obamacare, offshore financial centre, oil shock, pensions crisis, plutocrats, Ponzi scheme, price anchoring, price stability, proprietary trading, purchasing power parity, quantitative easing, risk tolerance, Robert Shiller, Ronald Reagan, tail risk, too big to fail, trickle-down economics, value at risk, yield curve

The extraordinary, eye-watering, economy-destroying cost. No economy in the world spends on health care the way America does. We spend over twice what the British, Japanese, Italians, and Australians do per capita, and almost exactly twice what the French do. (The figures shown in figure 3.4 are based on purchasing power parity, a way to remove any distortions arising from constantly moving market exchange rates.) Figure 3.4: Healthcare spending per capita, selected countries Source: OECD (figures for 2009 or most recent year available). Defenders of US health care like to point out that ours is a private sector system, true to the red-as-blood nature of American capitalism.


Human Frontiers: The Future of Big Ideas in an Age of Small Thinking by Michael Bhaskar

"Margaret Hamilton" Apollo, 3D printing, additive manufacturing, AI winter, Albert Einstein, algorithmic trading, AlphaGo, Anthropocene, artificial general intelligence, augmented reality, autonomous vehicles, backpropagation, barriers to entry, basic income, behavioural economics, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, Bletchley Park, blockchain, Boeing 747, brain emulation, Brexit referendum, call centre, carbon tax, charter city, citizen journalism, Claude Shannon: information theory, Clayton Christensen, clean tech, clean water, cognitive load, Columbian Exchange, coronavirus, cosmic microwave background, COVID-19, creative destruction, CRISPR, crony capitalism, cyber-physical system, dark matter, David Graeber, deep learning, DeepMind, deindustrialization, dematerialisation, Demis Hassabis, demographic dividend, Deng Xiaoping, deplatforming, discovery of penicillin, disruptive innovation, Donald Trump, double entry bookkeeping, Easter island, Edward Jenner, Edward Lorenz: Chaos theory, Elon Musk, en.wikipedia.org, endogenous growth, energy security, energy transition, epigenetics, Eratosthenes, Ernest Rutherford, Eroom's law, fail fast, false flag, Fellow of the Royal Society, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, general purpose technology, germ theory of disease, glass ceiling, global pandemic, Goodhart's law, Google Glasses, Google X / Alphabet X, GPT-3, Haber-Bosch Process, hedonic treadmill, Herman Kahn, Higgs boson, hive mind, hype cycle, Hyperloop, Ignaz Semmelweis: hand washing, Innovator's Dilemma, intangible asset, interchangeable parts, Internet of things, invention of agriculture, invention of the printing press, invention of the steam engine, invention of the telegraph, invisible hand, Isaac Newton, ITER tokamak, James Watt: steam engine, James Webb Space Telescope, Jeff Bezos, jimmy wales, job automation, Johannes Kepler, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, Large Hadron Collider, liberation theology, lockdown, lone genius, loss aversion, Louis Pasteur, Mark Zuckerberg, Martin Wolf, megacity, megastructure, Menlo Park, Minecraft, minimum viable product, mittelstand, Modern Monetary Theory, Mont Pelerin Society, Murray Gell-Mann, Mustafa Suleyman, natural language processing, Neal Stephenson, nuclear winter, nudge unit, oil shale / tar sands, open economy, OpenAI, opioid epidemic / opioid crisis, PageRank, patent troll, Peter Thiel, plutocrats, post scarcity, post-truth, precautionary principle, public intellectual, publish or perish, purchasing power parity, quantum entanglement, Ray Kurzweil, remote working, rent-seeking, Republic of Letters, Richard Feynman, Robert Gordon, Robert Solow, secular stagnation, shareholder value, Silicon Valley, Silicon Valley ideology, Simon Kuznets, skunkworks, Slavoj Žižek, sovereign wealth fund, spinning jenny, statistical model, stem cell, Steve Jobs, Stuart Kauffman, synthetic biology, techlash, TED Talk, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, TikTok, total factor productivity, transcontinental railway, Two Sigma, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, uranium enrichment, We wanted flying cars, instead we got 140 characters, When a measure becomes a target, X Prize, Y Combinator

The potential for catching up is extraordinary. India has only 200 researchers per million and Nigeria just 30 per million. Imagine a world where those numbers approach the global leaders. However much R&D has risen, it's heading far higher, with a very different regional balance. Judged by purchasing power parity, China is already the world's biggest economy. By 2050 India will be the second largest, Indonesia the fourth after the US.71 Brazil, Mexico and Turkey will also grow strongly. It is not fanciful to suppose that the R&D spending league table will adjust accordingly and the totals will climb; $2.3 trillion will feel small.


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

The USA is the only country in which direct holdings of securities by individuals form a large proportion of household assets; in the other three countries, most long-term savings are channelled through intermediaries. Fig. 6: Household wealth1 by asset category, end of 2012 (US $000 per capita at purchasing power parity) * Includes land Source: OECD, author’s calculations While in the USA long-term savings products in the investment channel are almost ten times assets in the deposit channel, in Germany the two figures are nearly equal, with Britain and France somewhere in between. Consumer debt is much higher in the USA than elsewhere: British households owe much less, while levels of consumer debt in France and Germany are negligible.


pages: 482 words: 121,672

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition) by Burton G. Malkiel

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, beat the dealer, Bernie Madoff, bitcoin, book value, butter production in bangladesh, buttonwood tree, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, Detroit bankruptcy, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial engineering, financial innovation, financial repression, fixed income, framing effect, George Santayana, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Japanese asset price bubble, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, margin call, market bubble, Mary Meeker, money market fund, mortgage tax deduction, new economy, Own Your Own Home, PalmPilot, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Salesforce, short selling, Silicon Valley, South Sea Bubble, stock buybacks, stocks for the long run, sugar pill, survivorship bias, Teledyne, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond, zero-sum game

Only the freely tradable shares of Chinese companies listed in Hong Kong or New York are counted in the index. A second reason China gets underweighted is that the Chinese government owns a huge portion of the shares of many companies, and those shares are not counted in the float. As a result, China gets only about 2 percent of the weight in the world indexes, whereas, adjusted for purchasing-power parity, China’s GDP is about 13 percent of the world’s GDP and is growing rapidly. Hence, I believe that investors need to put more China into their portfolios than is available in general world or emerging-market index funds. I am, however, true to my indexing beliefs and think the best way to do it is to buy a broad-based index fund of Chinese companies.


pages: 456 words: 123,534

The Dawn of Innovation: The First American Industrial Revolution by Charles R. Morris

air freight, American ideology, British Empire, business process, California gold rush, Charles Babbage, clean water, colonial exploitation, computer age, Cornelius Vanderbilt, cotton gin, Dava Sobel, en.wikipedia.org, flying shuttle, Ford Model T, glass ceiling, high-speed rail, hiring and firing, Ida Tarbell, if you build it, they will come, interchangeable parts, Isaac Newton, Jacquard loom, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, lone genius, manufacturing employment, megaproject, new economy, New Urbanism, old age dependency ratio, On the Economy of Machinery and Manufactures, purchasing power parity, QWERTY keyboard, refrigerator car, Robert Gordon, scientific management, spinning jenny, Stephen Hawking, The Wealth of Nations by Adam Smith, trade route, transcontinental railway, traveling salesman, undersea cable

THE RAPID GROWTH OF THE CHINESE ECONOMY IS ONE OF THE MOST portentous phenomena in the world today.1 Chart 9.1 shows the data comparing the total economic output of China and the United States from 1980 through 2011, and projected through 2017, as compiled by the International Monetary Fund (IMF). Some comments on the data. The comparison is measured in “purchasing power parity” dollars (ppp$). Official dollar/RMB exchange rates do not fully capture the pricing differences between China and the United States, especially in labor-intensive services, which are typically very cheap in a low-wage country. Using ppp$ inflates Chinese output by about 50 percent over currency market values.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, Bullingdon Club, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial engineering, financial innovation, Flash crash, Ford Model T, Frank Gehry, Gini coefficient, Glass-Steagall Act, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Max Levchin, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, seminal paper, Sheryl Sandberg, short selling, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, starchitect, stem cell, Steve Jobs, TED Talk, the long tail, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

In fact, according to calculations by Branko Milanovic, the richest man who ever lived isn’t a Russian oligarch, but he does owe much of his fortune to the great wave of liberalization that swept the world when Soviet communism collapsed. Comparing income across history is hard. The conversion tools we use to make comparisons across geographies today—currency exchange rates or the more subtle measure of purchasing power parity—are ineffective when the goods we consume—horses vs. private jets or personal scribes vs. iPads—are so different. Milanovic gets around this mismatch by turning to Adam Smith. His yardstick of wealth was how much of our compatriots’ work we can buy: “A person must be rich or poor according to the quantity of labor which he can command.”


pages: 403 words: 132,736

In Spite of the Gods: The Rise of Modern India by Edward Luce

affirmative action, Albert Einstein, Alvin Toffler, Bretton Woods, call centre, centre right, clean water, colonial rule, company town, crony capitalism, cuban missile crisis, demographic dividend, digital divide, dual-use technology, energy security, financial independence, friendly fire, Future Shock, Gini coefficient, Great Leap Forward, Haight Ashbury, informal economy, job-hopping, Kickstarter, land reform, Mahatma Gandhi, Martin Wolf, megacity, new economy, plutocrats, profit motive, purchasing power parity, Silicon Valley, trade liberalization, upwardly mobile, uranium enrichment, urban planning, women in the workforce, working-age population, Y2K

* In 2003 India’s Supreme Court made it compulsory for election candidates to publish their “criminal antecedents,” financial assets, and educational qualifications. This boosted transparency. But it did not result in a reduction of alleged criminals going into politics. * India is very close to overtaking Japan’s GDP by purchasing power parity—a measure of what you can buy if you convert dollars into the local currency. notes INTRODUCTION 1. http://www.indiayogi.com/content/indsaints/mother.asp. 2. Ramachandra Guha, “Churchill’s Indiaspeaks,” The Hindu’s Sunday magazine, June 5, 2005. 3. André Malraux (from Tristes Tropiques) in Pankaj Mishra, ed., India in Mind (New York: Vintage Books, 2005), p. 172. 4.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

Abraham Maslow, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, buy low sell high, capital controls, central bank independence, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, currency risk, diversification, diversified portfolio, family office, financial engineering, fixed income, glass ceiling, Glass-Steagall Act, global macro, Greenspan put, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, inverted yield curve, John Meriwether, junk bonds, land bank, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, Market Wizards by Jack D. Schwager, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, out of africa, panic early, paper trading, Paul Samuelson, Peter Thiel, price anchoring, proprietary trading, purchasing power parity, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, tail risk, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, Vision Fund, yield curve, zero-coupon bond, zero-sum game

Just walking around a city, looking at the level of construction, looking at what people are doing in stores, talking to people in hotels, trying to get a feeling of what kind of people are coming to visit, where they are coming from. Are locals bullish or bearish on their own market? How has their perception changed over time? We look at the price levels and do anecdotal purchasing power parity studies. None of these things necessarily has an immediate impact on things. We’re not necessarily going to make money from those observations, but often it gives you a good pulse, especially when you come back to a place over and over again and see how things change. I’ve been going to Eastern Europe and Latin America for the past 20 years.


pages: 651 words: 135,818

China into Africa: trade, aid, and influence by Robert I. Rotberg

barriers to entry, BRICs, colonial rule, corporate governance, Deng Xiaoping, energy security, European colonialism, export processing zone, failed state, global supply chain, global value chain, income inequality, Khartoum Gordon, land reform, low interest rates, megacity, megaproject, microcredit, offshore financial centre, one-China policy, out of africa, Pearl River Delta, profit maximization, purchasing power parity, RAND corporation, Scramble for Africa, Shenzhen special economic zone , South China Sea, special economic zone, structural adjustment programs, subprime mortgage crisis, trade route, Washington Consensus, zero-sum game

High Economic Growth Rate China’s high economic growth rate of over 9 percent annually has been sustained for nearly three decades. China is the world leader in this regard, out-performing all other major economies; it is now the fourth-largest economy in terms of US dollars and the second-largest in terms of purchasing power parity. Its economic development has been accompanied by an even higher growth rate in its foreign trade, contributing more to a global trade increase than any 03-7561-4 ch3.qxd 9/16/08 4:08 PM Page 58 58 wenran jiang other major economy since the 1990s. China is now the third-largest trading nation after Germany and the United States in terms of export volumes.


Adam Smith: Father of Economics by Jesse Norman

active measures, Alan Greenspan, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Cornelius Vanderbilt, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, electricity market, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial engineering, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Glass-Steagall Act, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, low interest rates, market bubble, market fundamentalism, Martin Wolf, means of production, mirror neurons, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, public intellectual, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Solow, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

Hartwell; see also Hiram Caton, ‘The Preindustrial Economics of Adam Smith’, Journal of Economic History, 45.4, 1985. For a defence of Smith on monetary economics, see David Laidler, ‘Adam Smith as a Monetary Economist’, Canadian Journal of Economics, 14.2, 1981. Smith considers inflation, the contrast between money and real prices and what would later become known as purchasing power parity at some length at the end of Book II of WN in his ‘Digression Concerning the Variations in the Value of Silver During the Course of the Four Last Centuries’ Smith’s supposed lack of originality: Joseph Schumpeter, History of Economic Analysis, Routledge [1954] 1987. A far more dismissive, and indeed manifestly unfair and inaccurate, critique is offered by Murray Rothbard, for whom ‘The mystery is the enormous and unprecedented gap between Smith’s exalted reputation and the reality of his dubious contribution to economic thought… The problem is that he originated nothing that was true, and that whatever he originated was wrong’.


pages: 460 words: 131,579

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Alan Greenspan, barriers to entry, behavioural economics, Black Swan, blood diamond, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, clean tech, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, company town, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Ford Model T, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, Golden arches theory, hobby farmer, industrial cluster, intangible asset, It's morning again in America, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, junk bonds, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, meritocracy, Michael Milken, military-industrial complex, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, open immigration, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, radical decentralization, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, tacit knowledge, technoutopianism, the long tail, The Soul of a New Machine, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, vertical integration, wealth creators, women in the workforce, young professional, Zipcar

The river carries ships loaded with the riches of the world’s workshop. High-rise housing projects stretch into the distance: the city’s population, already 19 million, is forecast to grow to 45 million by 2025. The emerging world is enjoying the most spectacular growth in history. Its share of global GDP (at purchasing-power parity) increased from 36 percent in 1980 to 45 percent in 2008 and looks set to grow to 51 percent in 2014. This dynamism shows no signs of waning: many economists expect growth in emergingmarkets to be four percentage points higher than growth in the rich world for at least the next five years.


How I Became a Quant: Insights From 25 of Wall Street's Elite by Richard R. Lindsey, Barry Schachter

Albert Einstein, algorithmic trading, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, asset allocation, asset-backed security, backtesting, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Bob Litterman, Bonfire of the Vanities, book value, Bretton Woods, Brownian motion, business cycle, business process, butter production in bangladesh, buy and hold, buy low sell high, capital asset pricing model, centre right, collateralized debt obligation, commoditize, computerized markets, corporate governance, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency risk, discounted cash flows, disintermediation, diversification, Donald Knuth, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, full employment, George Akerlof, global macro, Gordon Gekko, hiring and firing, implied volatility, index fund, interest rate derivative, interest rate swap, Ivan Sutherland, John Bogle, John von Neumann, junk bonds, linear programming, Loma Prieta earthquake, Long Term Capital Management, machine readable, margin call, market friction, market microstructure, martingale, merger arbitrage, Michael Milken, Myron Scholes, Nick Leeson, P = NP, pattern recognition, Paul Samuelson, pensions crisis, performance metric, prediction markets, profit maximization, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Reminiscences of a Stock Operator, Richard Feynman, Richard Stallman, risk free rate, risk-adjusted returns, risk/return, seminal paper, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, sorting algorithm, statistical arbitrage, statistical model, stem cell, Steven Levy, stochastic process, subscription business, systematic trading, technology bubble, The Great Moderation, the scientific method, too big to fail, trade route, transaction costs, transfer pricing, value at risk, volatility smile, Wiener process, yield curve, young professional

I, on the other hand, muddled along, testing model after model to little effect, all the while trying to make sense of my surroundings. I was to discover that graduate school had prepared me in a decidedly tangential manner for what I was to encounter. The foreign exchange markets, which I had studied extensively in the context of purchasing power parity, uncovered interest rate parity, and geometric JWPR007-Lindsey April 30, 2007 18:3 Andrew B. Weisman 189 Brownian motion, were almost unrecognizable to me. I frequently felt lost in a world of rapid-fire economic and political developments, blaring broker boxes, and arcane market nomenclature.


The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good by William Easterly

"World Economic Forum" Davos, airport security, anti-communist, Asian financial crisis, bank run, banking crisis, Bob Geldof, Bretton Woods, British Empire, call centre, clean water, colonial exploitation, colonial rule, Edward Glaeser, end world poverty, European colonialism, failed state, farmers can use mobile phones to check market prices, George Akerlof, Gunnar Myrdal, guns versus butter model, Hernando de Soto, income inequality, income per capita, Indoor air pollution, intentional community, invisible hand, Kenneth Rogoff, laissez-faire capitalism, land bank, land reform, land tenure, Live Aid, microcredit, moral hazard, Naomi Klein, Nelson Mandela, publication bias, purchasing power parity, randomized controlled trial, Ronald Reagan, Scramble for Africa, structural adjustment programs, The Fortune at the Bottom of the Pyramid, the scientific method, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, TSMC, War on Poverty, Xiaogang Anhui farmers

.: Duke University Press, 1957; and Bauer, Dissent on Development, Cambridge: Harvard University Press, 1971. 40.Speech by Gordon Brown at a DFID/UNDP seminar, “Words into Action in 2005,” January 26, 2005, Lancaster House, London. 41.Multiplying their respective 2003 growth rates by their 2002 Purchasing Power Parity (PPP) GDP in current U.S. dollars. Source: Global Development Network Growth database. 42.http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_ethiopian_ wood_collector/html/7.stm. 43.This quotation makes up the last line of Peter Bauer’s classic Dissent on Development, 1971. 44.http://www.astdhpphe.org/infect/guinea.html. 45.Demographic and Health Surveys data for 2003, http://www.measuredhs. com/countries/country.cfm?


pages: 537 words: 144,318

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, commodity super cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, equity risk premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, Minsky moment, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

Human Development Index (HDI) The United Nations Human Development Index (HDI) is a statistical measure that gauges a country’s level of human development in three principal areas: (1) life expectancy at birth; (2) knowledge and education, as measured by the adult literacy rating and enrollments at various levels of formal education; and (3) standard of living, measured principally by GDP per capita at purchasing power parity (PPP). While there is a strong correlation between having a high HDI score and a prosperous economy, the UN points out that the HDI accounts for more than income or productivity. SOURCE: United Nations Development Program. Corruption Perceptions Index (CPI) Since 1995, Transparency International has published an annual Corruption Perceptions Index ordering the countries of the world according to “the degree to which corruption is perceived to exist among public officials and politicians.”


pages: 464 words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, classic study, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial engineering, financial innovation, financial intermediation, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Glass-Steagall Act, Great Leap Forward, Hyman Minsky, inflation targeting, invisible hand, Japanese asset price bubble, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, no-fly zone, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Solow, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

., p. 217). 9 Benjamin Friedman (2014) has made this point forcefully. 10 John Maynard Keynes (1923b), Collected Writings, Vol. 18, p. 14. 11 Samuel Taylor Coleridge’s poem The Rime of the Ancient Mariner, published in 1798, contained the line ‘Water, water, everywhere, nor any drop to drink’. 12 The Five Presidents’ Report, ‘Completing Europe’s Economic and Monetary Union’, European Commission, 22 June 2015, Brussels. 13 Issing (2015). 14 Keynes (1923b), p. 41. 15 In economists’ language, the equilibrium full-employment exchange rate for a country is, at least temporarily, below its long-term equilibrium level. 16 Rodrik (2011). 17 Macdonald (2015), p. 217. 18 If GDP is measured at purchasing power parity rather than market exchange rates, then China became the largest economy in the world in 2014. 19 A perceptive analysis was outlined by Paul Keating (2014). 20 Macdonald (2015). 21 Taylor (2014). 22 See, for example, Gordon (2016). 23 http://www.bls.gov/news.release/pdf/prod3.pdf 24 Weale (2015) reports similar data for OECD countries as a whole.


pages: 459 words: 138,689

Slowdown: The End of the Great Acceleration―and Why It’s Good for the Planet, the Economy, and Our Lives by Danny Dorling, Kirsten McClure

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Anthropocene, Berlin Wall, Bernie Sanders, Boeing 747, Boris Johnson, British Empire, business cycle, capital controls, carbon tax, clean water, creative destruction, credit crunch, Donald Trump, drone strike, Elon Musk, en.wikipedia.org, Extinction Rebellion, fake news, Flynn Effect, Ford Model T, full employment, future of work, gender pay gap, global supply chain, Google Glasses, Great Leap Forward, Greta Thunberg, Henri Poincaré, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, It's morning again in America, James Dyson, Jeremy Corbyn, jimmy wales, John Harrison: Longitude, Kickstarter, low earth orbit, Mark Zuckerberg, market clearing, Martin Wolf, mass immigration, means of production, megacity, meta-analysis, military-industrial complex, mortgage debt, negative emissions, nuclear winter, ocean acidification, Overton Window, pattern recognition, Ponzi scheme, price stability, profit maximization, purchasing power parity, QWERTY keyboard, random walk, rent control, rising living standards, Robert Gordon, Robert Shiller, Ronald Reagan, School Strike for Climate, Scramble for Africa, sexual politics, Skype, Stephen Hawking, Steven Pinker, structural adjustment programs, Suez crisis 1956, the built environment, Tim Cook: Apple, time dilation, transatlantic slave trade, trickle-down economics, very high income, wealth creators, wikimedia commons, working poor

The rest of this chapter takes a tour around the planet and draws this same timeline graph for different countries and also the continents they lie in. THE SLOWDOWN IN THE UNITED STATES AND CHINA When it comes to money, the two most powerful states in the world today are the United States and China. When purchasing power parity is taken into account, China is estimated to be more productive than the United States. This is according to statistics produced by the World Bank, the Inter national Monetary Fund, and the CIA. But, of course, that productivity, and the income it results in, is shared out among far more people in China, and (interestingly) roughly as unequally as it is shared out in the United States.9 The population estimates used here are a combination of two time series.


Apocalypse Never: Why Environmental Alarmism Hurts Us All by Michael Shellenberger

"World Economic Forum" Davos, Albert Einstein, An Inconvenient Truth, Anthropocene, Asperger Syndrome, Bernie Sanders, Bob Geldof, Boeing 747, carbon footprint, carbon tax, Cesare Marchetti: Marchetti’s constant, clean tech, clean water, climate anxiety, Corn Laws, coronavirus, corporate social responsibility, correlation does not imply causation, cuban missile crisis, decarbonisation, deindustrialization, disinformation, Dissolution of the Soviet Union, Donald Trump, Dr. Strangelove, Elon Musk, energy transition, Extinction Rebellion, failed state, Garrett Hardin, Gary Taubes, gentleman farmer, global value chain, Google Earth, green new deal, Greta Thunberg, hydraulic fracturing, index fund, Indoor air pollution, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, land tenure, Live Aid, LNG terminal, long peace, manufacturing employment, mass immigration, meta-analysis, Michael Shellenberger, microplastics / micro fibres, Murray Bookchin, ocean acidification, off grid, oil shale / tar sands, Potemkin village, precautionary principle, purchasing power parity, Ralph Nader, renewable energy transition, Rupert Read, School Strike for Climate, Solyndra, Stephen Fry, Steven Pinker, supervolcano, Ted Nordhaus, TED Talk, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route, Tragedy of the Commons, union organizing, WikiLeaks, Y2K

Frank Dohmen, “German Failure on the road to a renewable future,” Der Spiegel, May 13, 2019, https://www.spiegel.de; “Annual Electricity Generation in Germany,” Fraunhofer ISE, accessed January 10, 2020, https://www.energy-charts.de/energy.htm. GDP conversion between Germany and USA made using OECD data for Purchasing Power Parity. 41. Fridolin Pflugmann, Ingmar Ritzenhofen, Fabian Stockhausen, and Thomas Vahlenkamp, “Germany’s Energy Transition at a Crossroads,” McKinsey & Company, November 2019, https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/germanys-energy-transition-at-a-crossroads. 42.


pages: 565 words: 134,138

The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources by Javier Blas, Jack Farchy

accounting loophole / creative accounting, airport security, algorithmic trading, Asian financial crisis, Ayatollah Khomeini, banking crisis, book value, BRICs, business climate, business cycle, collapse of Lehman Brothers, commodity super cycle, coronavirus, corporate raider, COVID-19, Deng Xiaoping, Donald Trump, electricity market, energy security, European colonialism, failed state, financial innovation, Ford Model T, foreign exchange controls, Great Grain Robbery, invisible hand, John Deuss, junk bonds, Kickstarter, light touch regulation, lockdown, low interest rates, margin call, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, oil-for-food scandal, Oscar Wyatt, price anchoring, proprietary trading, purchasing power parity, Ronald Reagan, Scramble for Africa, sovereign wealth fund, special economic zone, stakhanovite, Suez crisis 1956, trade route, vertical integration, WikiLeaks, Yom Kippur War, éminence grise

, Sustainability , August 2018, accessed: https://res.mdpi.com/sustainability/sustainability-10-02953/article_deploy/sustainability-10-02953.pdf . 5 Eslake, Saul, ‘Commodity Prices’, Paper Presented to the International Conference of Commercial Bank Economists, 23 June 2011, accessed: https://grattan.edu.au/wp-content/uploads/2014/04/092_ICCBE_commodities.pdf . 6 IMF data, gross domestic product per capita, constant prices, measured using purchasing power parity, 2011 international dollar, accessed: https://www.imf.org/external/pubs/ft/weo/2019/01/weodata/weorept.aspx?pr.x=61&pr.y=11&sy=1980&ey=2024&scsm=1&ssd=1&sort=country&ds=.&br=1&c=924&s=NGDPRPPPPC%2CNGDPDPC%2CPPPPC&grp=0&a= . 7 ‘Protocol on the Accession of the People’s Republic of China’, World Trade Organization, November 2001, accessed: https://www.wto.org/english/thewto_e/acc_e/a1_chine_e.htm . 8 International Monetary Fund data. 9 World Bureau of Metal Statistics. 10 ‘Commodity Supercycles: What Are They and What Lies Ahead’, Bank of Canada, Bank of Canada Review, Autumn 2016, accessed: https://www.bankofcanada.ca/wp-content/uploads/2016/11/boc-review-autumn16-buyuksahin.pdf . 11 Ibid. 12 ‘The Role of Major Emerging Markets in Global Commodity Demand’, World Bank, June 2018, accessed: http://documents.worldbank.org/curated/en/865201530037257969/pdf/WPS8495.pdf . 13 ‘Glasenberg was a cheeky kid – ex teacher’, Sunday Times (South Africa), 22 May 2011, accessed: https://www.timeslive.co.za/news/south-africa/2011-05-22-glasenberg-was-a-cheeky-kid-ex-teacher/ . 14 NYC Marathon results, Glasenberg’s page at https://results.nyrr.org/runner/5960/result/941106 . 15 ‘Der Reichster Haendler der Welt’, Bilanz , 1 May 2011, accessed: https://www.handelszeitung.ch/unternehmen/der-reichste-handler-der-welt . 16 Felix Posen, interview with the authors, London, May 2019. 17 According to official Glencore biography, accessed: https://www.glencore.com/en/who-we-are/our-leadership . 18 Josef Bermann, interview with the authors, Zurich, May 2019. 19 Zbynek Zak, interview with the authors, Zug, June 2019. 20 ‘Enex Float Lifts Veil on Glencore’s $10bn Empire’, Sydney Morning Herald , 1 September 2001. 21 According to two senior Glencore partners, speaking on condition of anonymity. 22 Paul Wyler, interview with the authors, Zurich, June 2019. 23 Authors’ interview with former Glencore employee, who declined to be named. 2 4 Greg James, interview with the authors by telephone, June 2019. 25 Ivan Glasenberg, interview with the authors, Baar, August 2019. 26 By the end of 1998, Australian export prices for thermal coal had dropped to $26.1 a tonne, the lowest since 1987, according to IMF data. 27 Glencore May 2002 prospectus. 28 ‘The World is Hungry for Coal, Glencore Says’, Coal Week International , August 2001. 29 ‘Glencore’s Glasenberg on Enex IPO, Coal Potential: Comment’, Bloomberg News, 4 September 2001. 30 Glencore’s August 2000 prospectus. 31 ‘Enex Float Lifts Veil on Glencore’s $10bn Empire’, Sydney Morning Herald , 1 September 2001. 32 Glencore’s May 2002 prospectus. 33 Xstrata, IPO prospectus, 2002. 34 Mick Davis, interview with the authors, London, June 2019. 35 This account is based on the authors’ interviews with Mick Davis, Ivan Glasenberg, other executives of the time, and their advisers, as well as contemporaneous company reports. 36 Mick Davis, interview with the authors, London, September 2019. 37 According to Bloomberg data. 38 Glencore’s historical financial data compiled by the authors based on bond prospectuses and related disclosures. 39 Andy Hall, interview with the authors, Derneburg, March 2019. 40 ‘Profile: Michael Farmer’, Metal Bulletin , March 2014. 41 Noble Group’s 2016 annual report. 42 ‘Born to be a Noble Man’, South China Morning Post , 27 May 2002.


pages: 868 words: 147,152

How Asia Works by Joe Studwell

affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, foreign exchange controls, Gini coefficient, glass ceiling, Great Leap Forward, high-speed rail, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, low interest rates, market fragmentation, megaproject, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, TSMC, urban sprawl, Washington Consensus, working-age population

See, for instance, Angus Maddison, Explaining the Economic Performance of Nations, 1820–1989 (Canberra: Australian National University, 1993) p. 117. 12. All data for Cuba are from the United Nations HDI, 2009. Cuba’s gross school enrolment rate as a percentage was 100.8 (gross enrolment can exceed 100 because of re-enrolment of children who drop out of school). The GDP per capita figure for that year was USD6,876 at purchasing power parity (PPP). Many Cuban doctors have gone to Venezuela, which is able to pay them with oil revenues. 13. On Taiwan’s education system, see Wade, Governing the Market, pp. 64 and 190. A National Youth Commission survey in 1983 showed that one-quarter of all Taiwanese graduates since 1960 were engineers.


pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

"World Economic Forum" Davos, 1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Anthropocene, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, Carl Icahn, charter city, circular economy, clean water, cloud computing, collateralized debt obligation, commoditize, complexity theory, continuation of politics by other means, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, digital capitalism, digital divide, digital map, disruptive innovation, diversification, Doha Development Round, driverless car, Easter island, edge city, Edward Snowden, Elon Musk, energy security, Ethereum, ethereum blockchain, European colonialism, eurozone crisis, export processing zone, failed state, Fairphone, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, fixed income, forward guidance, gentrification, geopolitical risk, global supply chain, global value chain, global village, Google Earth, Great Leap Forward, Hernando de Soto, high net worth, high-speed rail, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial cluster, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, LNG terminal, low cost airline, low earth orbit, low interest rates, manufacturing employment, mass affluent, mass immigration, megacity, Mercator projection, Metcalfe’s law, microcredit, middle-income trap, mittelstand, Monroe Doctrine, Multics, mutually assured destruction, Neal Stephenson, New Economic Geography, new economy, New Urbanism, off grid, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Parag Khanna, Peace of Westphalia, peak oil, Pearl River Delta, Peter Thiel, Philip Mirowski, Planet Labs, plutocrats, post-oil, post-Panamax, precautionary principle, private military company, purchasing power parity, quantum entanglement, Quicken Loans, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Solow, rolling blackouts, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, systems thinking, TaskRabbit, tech worker, TED Talk, telepresence, the built environment, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, Tim Cook: Apple, trade route, Tragedy of the Commons, transaction costs, Tyler Cowen, UNCLOS, uranium enrichment, urban planning, urban sprawl, vertical integration, WikiLeaks, Yochai Benkler, young professional, zero day

McKinsey Global Institute research suggests that from now until 2025 one-third of world growth will come from the key Western capitals and emerging market megacities, one-third from the heavily populous middleweight cities of emerging markets, and one-third from small cities and rural areas in developing countries. Because prices for goods are so much lower in second- and third-tier cities of China and India, they have hundreds of millions of citizens who have become sizable aggregate consumers well before reaching the $8,000 per capita GDP (in purchasing power parity terms) projected as the baseline beyond which consumption takes off. No wonder companies target high-growth cities as their main product destinations, while investors look at municipal debt as a key metric of national economic health. There are far more functional cities in the world today than there are viable states.


pages: 511 words: 148,310

Winning the War on War: The Decline of Armed Conflict Worldwide by Joshua S. Goldstein

Albert Einstein, Ayatollah Khomeini, Bartolomé de las Casas, Berlin Wall, Black Swan, blood diamond, business cycle, colonial rule, cuban missile crisis, death from overwork, Doomsday Clock, failed state, immigration reform, income inequality, invention of writing, invisible hand, land reform, long peace, microcredit, Mikhail Gorbachev, Nelson Mandela, no-fly zone, Oklahoma City bombing, purchasing power parity, RAND corporation, selection bias, Steven Pinker, Suez canal 1869, Suez crisis 1956, Tobin tax, unemployed young men, Winter of Discontent, work culture , Y2K

Wright cites Nickerson 1934 and Ayres 1919, which says nothing about civilian deaths (see p. 119). 257 On this basis: Nickerson 1934: 110–11. 257 Lower than the range cited by most: Lacina and Gleditsch 2005: 146. 257 Lower than the historical: Wright 1942/1965: 245 258 Hasty conclusions: Sollenberg 2006: 1; Sollenberg, personal communication, 2008. 258 Book on civilians: Downes 2008: 1. 258 Respected epidemiologists: Murray et al. 2002: 348. 258 Tabulated civilian: Eckhardt 1992: 254, 255, 90, 91. 258 The 20th century itself: Eckhardt 1992: 254. 258 Strange idea: Slim 2008: 71. 258–59 Some wars kill: Wedgwood 1938: 516; Rabb ed. 1981; Wright 1942/1965: 244. 259 In African conflicts: Lacina and Gleditsch 2005: 159; Human Security Centre 2005: 128, 129. 259 Healthy life lost: Ghobarah, Huth, and Russett 2004. 259 Smart bombs: Slim 2008: 58. 259 Single errant missile: Chivers and Nordland 2010. 260 Seventeen thousand web pages: Accessed at google.com 6/28/10. 260 World’s most deadly: Coghlan et al. 2006: 44. 260–61 It all started: Coghlan et al. 2006; for earlier survey results see Roberts et al. 2003; for later results see Coghlan et al. n.d. 261 Embedded as truths: Kristof 2010a, b, c; Coghlan et al. n.d.: 13. 261 Extrapolating the results: Human Security Report Project 2009: 36–48; Spielmann 2010. 261 All of sub-Saharan Africa: Coghlan et al. 2006: 49. 262 Same GDP number for sub-Saharan: World Bank data; purchasing power parity adjusted. Accessed 6/28/10 at siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf. 262 Surveys show a drop: From about 65 to 43 deaths per thousand population. 263 Half the rate during the war: Coghlan et al. n.d.: 13. 263 Vancouver group recalculated: Human Security Report Project 2009: 45; the Vancouver researchers did not try to reestimate the first two IRC surveys, before 2001, which they considered too unreliable. 263 Remains Unchanged: Polgreen 2008a. 263 Peer review: Pedersen 2009: 21. 263 Belgian researchers: Lambert and Lohlé-Tart 2008. 263 Korean War: Human Security Report Project 2009: 26–27. 264 Has since killed: Rummel 1997: 377; see also economic data from World Bank and CIA World Factbook. 264 Clinton: BBC News 2009c. 265 John Holmes: Gettleman 2010a. 265 NGO pitched the results: Oxfam International 2010. 265 Completely different story: Harvard Humanitarian Initiative 2010: 7, 8. 265 Of all these cases: Harvard Humanitarian Initiative 2010: 13, 19. 266 But what about the far larger: Harvard Humanitarian Initiative 2010: 18–20. 266 Normalization of rape: Harvard Humanitarian Initiative 2010: 2. 266 Previous reports considered: Arieff 2009: 18; UN Security Council 2008: 8; Human Rights Watch 2009: 15. 267 Rape capital: BBC News 2010b. 267 Population Fund: UNFPA 2008; UN News Service 2010a. 267 South Kivu in 2008: Human Rights Watch 2009: 14. 267 15–20 million people: World Bank 2005: 11. 267 U.S. crime statistics: U.S.


pages: 482 words: 149,351

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, Alan Greenspan, anti-communist, bank run, banking crisis, Basel III, Bear Stearns, benefit corporation, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, export processing zone, failed state, fake news, falling living standards, family office, financial deregulation, financial engineering, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, Global Witness, high net worth, Ida Tarbell, income inequality, index fund, invisible hand, Jeff Bezos, junk bonds, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, megaproject, Michael Milken, Money creation, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, stock buybacks, Suez crisis 1956, The Chicago School, Thorstein Veblen, too big to fail, Tragedy of the Commons, transfer pricing, two and twenty, vertical integration, Wayback Machine, wealth creators, white picket fence, women in the workforce, zero-sum game

See also ‘UK national balance sheet: 2017 estimates’, Office for National Statistics, Table 2: ‘Value of UK financial assets and liabilities’, showing total financial assets of £31.5 trillion. By comparison, UK GDP was $2.6 trillion (£1.9 trillion) at market prices and US$2.8 trillion (£2.1 trillion) at purchasing power parity, meaning that on this (different) measure, financial assets were equivalent to 12–15 times GDP. 5. As The Economist put it, ‘Britain’s various elites once directed their most gifted offspring towards Parliament. Today it is as if they have all decided to stop sending their best.’ For a much deeper exploration of all this, see Aeron Davies, Reckless Opportunists: Elites at the End of the Establishment, Manchester University Press, 2018. 6.


pages: 459 words: 144,009

Upheaval: Turning Points for Nations in Crisis by Jared Diamond

anti-communist, Asian financial crisis, Berlin Wall, British Empire, California gold rush, carbon tax, clean water, correlation coefficient, cuban missile crisis, Dissolution of the Soviet Union, Gini coefficient, high-speed rail, illegal immigration, interchangeable parts, invention of writing, Jeff Bezos, low interest rates, medical malpractice, mutually assured destruction, Nelson Mandela, Nick Bostrom, nuclear winter, oil shale / tar sands, peak oil, post-work, purchasing power parity, rising living standards, risk tolerance, Ronald Reagan, Suez canal 1869, Suez crisis 1956, The Spirit Level, Timothy McVeigh, traffic fines, transcontinental railway, women in the workforce, World Values Survey

The other factor contributing to the U.S.’s world-leading economic output or wealth is its high output or wealth per person, due to the geographic, political, and social advantages to be discussed below. The various alternative ways to measure per-capita output or income include GDP (gross domestic product) or else income per person, either corrected or uncorrected for differences in purchasing power parity (i.e., differences among countries in how much goods a dollar of income can actually buy in that country). In all of these alternative per-capita measures, the U.S. exceeds by a large margin all other populous countries with large economies. The only countries in the world with per-capita GDPs or incomes higher than the U.S.’s are either small (populations of just 2–9 million: Kuwait, Norway, Qatar, Singapore, Switzerland, and the United Arab Emirates) or tiny (populations of 30,000–500,000: Brunei, Liechtenstein, Luxembourg, and San Marino).


pages: 566 words: 144,072

In the Graveyard of Empires: America's War in Afghanistan by Seth G. Jones

belling the cat, business climate, clean water, colonial rule, cuban missile crisis, disinformation, drone strike, failed state, friendly fire, invisible hand, Khyber Pass, Mikhail Gorbachev, Murray Gell-Mann, open borders, purchasing power parity, RAND corporation, Ronald Reagan, Seymour Hersh, trade route, zero-sum game

David M. Walker, Global War on Terrorism: Observations on Funding, Costs, and Future Commitments (Washington, DC: U.S. Government Accountability Office, 2006), p. 7. 8. Central Intelligence Agency, CIA World Factbook 2007 (Washington, DC: Central Intelligence Agency, 2006). Figures were in purchasing-power parity. Only 27 out of 229 countries had a gross domestic product over $430 billion. 9. Transcript of Combatant Status Review Tribunal Hearing for ISN 10024 (Khalid Sheikh Muhammad), March 10, 2007, U.S. Naval Base Guantánamo Bay, Cuba, pp. 17–18. 10. On the overthrow of the Taliban regime, see Gary Schroen, First In: An Insider’s Account of How the CIA Spearheaded the War on Terror in Afghanistan (New York: Ballantine Books, 2005); Stephen Biddle, Afghanistan and the Future of Warfare: Implications for Army and Defense Policy (Carlisle, PA: Strategic Studies Institute, U.S.


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

Abraham Maslow, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, bread and circuses, Bretton Woods, business cycle, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, disinformation, diversification, double helix, Edward Glaeser, financial deregulation, financial engineering, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, general purpose technology, George Akerlof, Gini coefficient, Glass-Steagall Act, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, language acquisition, Large Hadron Collider, liberal capitalism, light touch regulation, Long Term Capital Management, long term incentive plan, Louis Pasteur, low cost airline, low interest rates, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, meritocracy, Mikhail Gorbachev, millennium bug, Money creation, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, plutocrats, power law, price discrimination, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, Savings and loan crisis, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, systems thinking, tail risk, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, three-masted sailing ship, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, work culture , working poor, world market for maybe five computers, zero-sum game, éminence grise

Europe, the United States and Canada made up 17 per cent of the global population in 2003; by 2050, their share will be only 12 per cent (far less than it was in 1700), with Europeans reduced to 6 per cent. By then, the West will account for around 30 per cent of global output – a level that corresponds to Europe’s share in the eighteenth century and down from 68 per cent in 1950 and 47 per cent in 2003 (adjusted to reflect purchasing power parity).24 Europe will likely be a bigger loser than the United States, on account of the latter’s for-midable innovation ecosystem: the majority of the next century’s general purpose technologies will still be invented there. Nevertheless, the United States will increasingly be challenged by Asia.


The New Map: Energy, Climate, and the Clash of Nations by Daniel Yergin

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", 3D printing, 9 dash line, activist fund / activist shareholder / activist investor, addicted to oil, Admiral Zheng, Albert Einstein, American energy revolution, Asian financial crisis, autonomous vehicles, Ayatollah Khomeini, Bakken shale, Bernie Sanders, BRICs, British Empire, carbon tax, circular economy, clean tech, commodity super cycle, company town, coronavirus, COVID-19, decarbonisation, deep learning, Deng Xiaoping, Didi Chuxing, disruptive innovation, distributed generation, Donald Trump, driverless car, Edward Snowden, Elon Musk, energy security, energy transition, failed state, Ford Model T, geopolitical risk, gig economy, global pandemic, global supply chain, green new deal, Greta Thunberg, hydraulic fracturing, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), inventory management, James Watt: steam engine, John Zimmer (Lyft cofounder), Kickstarter, LNG terminal, Lyft, Malacca Straits, Malcom McLean invented shipping containers, Masayoshi Son, Masdar, mass incarceration, megacity, megaproject, middle-income trap, Mikhail Gorbachev, mutually assured destruction, new economy, off grid, oil rush, oil shale / tar sands, oil shock, open economy, paypal mafia, peak oil, pension reform, power law, price mechanism, purchasing power parity, RAND corporation, rent-seeking, ride hailing / ride sharing, rolling blackouts, Ronald Reagan, Russian election interference, self-driving car, Silicon Valley, smart cities, social distancing, South China Sea, sovereign wealth fund, Suez crisis 1956, super pumped, supply-chain management, TED Talk, trade route, Travis Kalanick, Twitter Arab Spring, Uber and Lyft, uber lyft, ubercab, UNCLOS, UNCLOS, uranium enrichment, vertical integration, women in the workforce

When the coronavirus hit in 2020, it was 16 percent, meaning that the economic impact would reverberate around the world even before the coronavirus shut down much of the rest of the world.7 When GDP is measured by exchange rates, the U.S. economy is still larger than China’s. By the other major measure of GDP—purchasing power parity—China is already the largest economy in the world. By that measure, it overtook the United States in 2014. (Just to note, Germany’s economy overtook Britain’s in 1910, four years before the outbreak of the First World War.) But one reality check is in order for China’s future growth—demographics, the consequence of the one-child policy and social changes.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

"World Economic Forum" Davos, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, commodity super cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, driverless car, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, financial engineering, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, global macro, Goodhart's law, guns versus butter model, hiring and firing, hype cycle, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Japanese asset price bubble, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, Larry Ellison, lateral thinking, liberal capitalism, low interest rates, Malacca Straits, Mark Zuckerberg, market bubble, Mary Meeker, mass immigration, megacity, megaproject, Mexican peso crisis / tequila crisis, middle-income trap, military-industrial complex, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, open immigration, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, tacit knowledge, tech billionaire, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, work culture , working-age population

In the top developed economies today, investment as a share of GDP averages barely 20 percent, ranging from 17 percent in Italy to 20 percent in the United States and 26 percent in Australia. The share of investment that goes to manufacturing also tends to decline as a nation grows richer; the manufacturing share of GDP typically rises steadily before peaking somewhere between 20 and 35 percent, when the nation’s average per capita income reaches about $10,000 in purchasing power–parity terms. That natural decline, however, does not mean factories are not important to richer countries. As a nation develops, investment and manufacturing both account for a shrinking share of the economy, but they both continue to play an outsize role in driving growth. Manufacturing now accounts for less than 18 percent of global GDP, down from more than 24 percent in 1980, but it remains a key driver of innovation.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, airline deregulation, Alan Greenspan, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, electricity market, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, Great Leap Forward, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Bogle, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low interest rates, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, Paul Volcker talking about ATMs, payday loans, Phillips curve, price stability, profit maximization, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, search costs, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, Tragedy of the Commons, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

(The difference can depend, of course, on what one spends one’s money on. Someone having to buy health care in the United States has a much lower standard of living that a comparably sick person in France.) Economists refer to the comparisons attempting to make (albeit imperfect) adjustments for cost of living as PPP (purchasing power parity) comparisons. For instance, in terms of official exchange rates, per capita GDP in 2010 in the United States was more than 10 times that in China; adjusting for PPP, it is 6 times that in China. See World Bank Indicators database, available at http://databank.worldbank.org/ddp/home.do?Step=12&id=4&CNO=2 (accessed March 26, 2012). 72.


pages: 605 words: 169,366

The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations by Sebastian Mallaby

"World Economic Forum" Davos, Alan Greenspan, Alvin Toffler, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, Bretton Woods, capital controls, clean water, Dr. Strangelove, Dutch auction, export processing zone, failed state, financial independence, Francis Fukuyama: the end of history, gentleman farmer, guns versus butter model, Hernando de Soto, Kenneth Rogoff, Kickstarter, land reform, land tenure, lateral thinking, low interest rates, market bubble, Martin Wolf, microcredit, oil shock, Oklahoma City bombing, old-boy network, Paul Samuelson, plutocrats, purchasing power parity, radical decentralization, rolodex, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the new new thing, trade liberalization, traveling salesman, War on Poverty, Westphalian system, Yom Kippur War

.: Brookings Institution, 1997), p. 696. 13. GDP per capita in sub-Saharan Africa fell 1.2 percent in 1981–90, a performance slightly worse than the 0.9 percent fall in Latin America. See the World Bank’s “Global Development Finance,” Table A.7, p. 186. However, measuring GDP on the basis of purchasing power parity gives a slightly more cheerful result: the average African grew some 40 percent richer between 1980 and 1990. 14. Kenneth Kaunda of Zambia was another well meaning but misguided leader who was backed by the World Bank. According to one assessment, “The outpouring of [World Bank] loans to Zambia from 1965 to 1976, when most of the disastrous policies were being generated, took place despite the fact that they were well understood by 1974, were at least partially understood by 1971 and should have been broadly understood even earlier.”


Basic Income: A Radical Proposal for a Free Society and a Sane Economy by Philippe van Parijs, Yannick Vanderborght

Airbnb, Albert Einstein, basic income, Berlin Wall, Bertrand Russell: In Praise of Idleness, carbon tax, centre right, collective bargaining, cryptocurrency, David Graeber, declining real wages, degrowth, diversified portfolio, Edward Snowden, eurozone crisis, Fall of the Berlin Wall, feminist movement, full employment, future of work, George Akerlof, Herbert Marcuse, illegal immigration, income per capita, informal economy, Jeremy Corbyn, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, Marshall McLuhan, means of production, minimum wage unemployment, Money creation, open borders, Paul Samuelson, pension reform, Post-Keynesian economics, precariat, price mechanism, profit motive, purchasing power parity, quantitative easing, race to the bottom, road to serfdom, Robert Solow, Rutger Bregman, Second Machine Age, secular stagnation, selection bias, sharing economy, sovereign wealth fund, systematic bias, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, universal basic income, urban planning, urban renewal, War on Poverty, working poor

Expressing all following amounts in US dollar equivalents (as we will � throughout this book), this would come out, in 2015, at $1,163 per month in the United States, $1,670 in Switzerland, $910 in the United Kingdom, $180 in Brazil, $33 in India, and $9.50 in the Demo�cratic Republic of the Congo. Correcting for purchasing power parity, �these figures become $1,260 for Switzerland, $860 for the United Kingdom, $320 for Brazil, $130 for India, $16 for the Congo. A worldwide basic income funded with a quarter of world GDP would come to about $210 per month or $7 per day in nominal terms.15 �These figures provide us with a handy benchmark that �will enable us to put specific schemes and proposals into perspective throughout the book.16 No claim is being made �here that an individual basic income of one fourth of GNP per capita suffices to get �every �house�hold out of poverty.


pages: 782 words: 187,875

Big Debt Crises by Ray Dalio

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, break the buck, Bretton Woods, British Empire, business cycle, buy the rumour, sell the news, capital controls, central bank independence, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, declining real wages, equity risk premium, European colonialism, fiat currency, financial engineering, financial innovation, foreign exchange controls, German hyperinflation, global macro, housing crisis, implied volatility, intangible asset, it's over 9,000, junk bonds, Kickstarter, land bank, large denomination, low interest rates, manufacturing employment, margin call, market bubble, market fundamentalism, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Northern Rock, Ponzi scheme, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, refrigerator car, reserve currency, risk free rate, Savings and loan crisis, short selling, short squeeze, sovereign wealth fund, subprime mortgage crisis, too big to fail, transaction costs, universal basic income, uptick rule, value at risk, yield curve

In the bullets here and in the ones that follow, we show some key economic developments typically seen as the bubble inflates. Foreign capital flows are high (on average around 10 percent of GDP) The central bank is accumulating foreign-exchange reserves The real FX is bid up and becomes overvalued on a purchasing power parity (PPP) basis by around 15 percent Stocks rally (on average by over 20 percent for several years into their peak) All sorts of entities build up structurally long currency positions because there is constant reward for doing that. Most participants are motivated to be long the currency of the country that is enjoying a sustained wave of investment into it—though they often find themselves in this position without explicitly taking it on or fully recognizing it.


pages: 651 words: 180,162

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb

"World Economic Forum" Davos, Air France Flight 447, Alan Greenspan, Andrei Shleifer, anti-fragile, banking crisis, Benoit Mandelbrot, Berlin Wall, biodiversity loss, Black Swan, business cycle, caloric restriction, caloric restriction, Chuck Templeton: OpenTable:, commoditize, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discrete time, double entry bookkeeping, Emanuel Derman, epigenetics, fail fast, financial engineering, financial independence, Flash crash, flying shuttle, Gary Taubes, George Santayana, Gini coefficient, Helicobacter pylori, Henri Poincaré, Higgs boson, high net worth, hygiene hypothesis, Ignaz Semmelweis: hand washing, informal economy, invention of the wheel, invisible hand, Isaac Newton, James Hargreaves, Jane Jacobs, Jim Simons, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, knowledge economy, language acquisition, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, Marc Andreessen, Mark Spitznagel, meta-analysis, microbiome, money market fund, moral hazard, mouse model, Myron Scholes, Norbert Wiener, pattern recognition, Paul Samuelson, placebo effect, Ponzi scheme, Post-Keynesian economics, power law, principal–agent problem, purchasing power parity, quantitative trading / quantitative finance, Ralph Nader, random walk, Ray Kurzweil, rent control, Republic of Letters, Ronald Reagan, Rory Sutherland, Rupert Read, selection bias, Silicon Valley, six sigma, spinning jenny, statistical model, Steve Jobs, Steven Pinker, Stewart Brand, stochastic process, stochastic volatility, synthetic biology, tacit knowledge, tail risk, Thales and the olive presses, Thales of Miletus, The Great Moderation, the new new thing, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Malthus, too big to fail, transaction costs, urban planning, Vilfredo Pareto, Yogi Berra, Zipf's Law

We will look at the confabulations committed by historians of economic thought, medicine, technology, and other fields that tend to systematically downgrade practitioners and fall into the green lumber fallacy. 1 The halo effect is largely the opposite of domain dependence. 2 At first I thought that economic theories were not necessary to understand short-term movements in exchange rates, but it turned out that the same limitation applied to long-term movements as well. Many economists toying with foreign exchange have used the notion of “purchasing power parity” to try to predict exchange rates on the basis that in the long run “equilibrium” prices cannot diverge too much and currency rates need to adjust so a pound of ham will eventually need to carry a similar price in London and Newark, New Jersey. Put under scrutiny, there seems to be no operational validity to this theory—currencies that get expensive tend to get even more expensive, and most Fat Tonys in fact made fortunes following the inverse rule.


Statistics in a Nutshell by Sarah Boslaugh

Antoine Gombaud: Chevalier de Méré, Bayesian statistics, business climate, computer age, confounding variable, correlation coefficient, experimental subject, Florence Nightingale: pie chart, income per capita, iterative process, job satisfaction, labor-force participation, linear programming, longitudinal study, meta-analysis, p-value, pattern recognition, placebo effect, probability theory / Blaise Pascal / Pierre de Fermat, publication bias, purchasing power parity, randomized controlled trial, selection bias, six sigma, sparse data, statistical model, systematic bias, The Design of Experiments, the scientific method, Thomas Bayes, Two Sigma, Vilfredo Pareto

About one-third of cases have values of 66 years or fewer, and this is in the range of where the break seems to occur between a smaller group of low-life-expectancy countries and a larger group of high-life-expectancy countries, so we will use the value of 66.0 years to dichotomize life expectancy into low and high categories. Figure 10-2. Histogram of life expectancy at birth Another variable that might help our model is GNI (gross national income) per capita, expressed in international dollars in PPP (purchasing power parity) terms; this figure allows us to compare the relative wealth or poverty of different countries. In general, higher-income countries have lower adolescent fertility, so this should be a good predictor for our model. The advantage of using GNI in PPP terms is that it is expressed in terms that express the ability to purchase equivalent goods in the different countries and, thus, includes information about the different price levels in each country while avoiding issues of fluctuating international exchange rates.


pages: 708 words: 196,859

Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed

Alan Greenspan, Albert Einstein, anti-communist, bank run, banking crisis, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, centre right, credit crunch, currency manipulation / currency intervention, Etonian, Ford Model T, full employment, gentleman farmer, German hyperinflation, Glass-Steagall Act, index card, invisible hand, Lao Tzu, large denomination, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, mobile money, money market fund, moral hazard, new economy, open economy, plutocrats, price stability, purchasing power parity, pushing on a string, rolodex, scientific management, the market place

In December 1923, Keynes published a short monograph, A Tract on Monetary Reform, much of which had already appeared as a series of articles in the Manchester Guardian during 1922 and early 1923—his first systematic attempt to unravel the sources and consequences of the chronic monetary instability that plagued the postwar world. Like his earlier book, A Tract was a strange hybrid, this time a half-theoretical treatise—with sections on “The Theory of Purchasing Power Parity” and “The Forward Market in Exchanges” and half pamphlet for the laity. It was, however, very different in tone from The Economic Consequences. That had been an angry, passionate work, written in the heat of debate and controversy. This one had a lighter touch, a “tentative almost diffident tone,” as if the author himself were searching for the answer to the quest for monetary stability.


Energy and Civilization: A History by Vaclav Smil

8-hour work day, additive manufacturing, agricultural Revolution, animal electricity, Apollo 11, Boeing 747, business cycle, carbon-based life, centre right, Charles Babbage, decarbonisation, dematerialisation, Deng Xiaoping, Easter island, en.wikipedia.org, energy security, energy transition, epigenetics, Exxon Valdez, Fairchild Semiconductor, Ford Model T, Frederick Winslow Taylor, Great Leap Forward, high-speed rail, hydraulic fracturing, income inequality, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), invention of gunpowder, James Watt: steam engine, Jevons paradox, John Harrison: Longitude, Joseph-Marie Jacquard, Just-in-time delivery, Kaizen: continuous improvement, Kibera, knowledge economy, land tenure, language acquisition, Lewis Mumford, lone genius, Louis Blériot, mass immigration, megacity, megaproject, Menlo Park, mutually assured destruction, North Sea oil, ocean acidification, oil shale / tar sands, peak oil, phenotype, precision agriculture, purchasing power parity, QWERTY keyboard, Richard Feynman, scientific management, Silicon Valley, Suez canal 1869, Toyota Production System, transcontinental railway, uranium enrichment, Yom Kippur War

Ayres, Ayres, and Warr (2003) identified the declining price of useful work as the growth engine of the U.S. economy during the twentieth century, useful work being the product of exergy (the maximum work possible in an ideal energy conversion process) and conversion efficiency. Once the historical data of economic output are normalized (with GDP values expressed in constant, inflation-adjusted monies and with the national products used to calculate GWP given in terms of purchasing power parity rather than by using official exchange rates), impressively strong long-term correlations between economic growth and energy use emerge on both global and national levels. Between 1900 and 2000 the use of all primary energy (after subtracting processing losses and nonfuel uses of fossil fuels) rose nearly eightfold, from 44 to 382 EJ, and the GWP increased more than 18 times, from about $2 trillion to nearly $37 trillion in constant 1990 monies (Smil 2010a; Maddison Project 2013), implying an elasticity of less than 0.5.


pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

air traffic controllers' union, Alan Greenspan, Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, Bob Noyce, borderless world, British Empire, business cycle, capital controls, classic study, complexity theory, computer age, Computer Lib, computerized trading, content marketing, creative destruction, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, digital capitalism, digital divide, disintermediation, double helix, Douglas Engelbart, Douglas Engelbart, edge city, experimental subject, export processing zone, Fairchild Semiconductor, financial deregulation, financial independence, floating exchange rates, future of work, gentrification, global village, Gunnar Myrdal, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, independent contractor, Induced demand, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, Ivan Sutherland, James Watt: steam engine, job automation, job-hopping, John Markoff, John Perry Barlow, Kanban, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, Leonard Kleinrock, longitudinal study, low skilled workers, manufacturing employment, Marc Andreessen, Marshall McLuhan, means of production, megacity, Menlo Park, military-industrial complex, moral panic, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, Pearl River Delta, peer-to-peer, planetary scale, popular capitalism, popular electronics, post-Fordism, post-industrial society, Post-Keynesian economics, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Recombinant DNA, Robert Gordon, Robert Metcalfe, Robert Solow, seminal paper, Shenzhen special economic zone , Shoshana Zuboff, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Strategic Defense Initiative, tacit knowledge, technological determinism, Ted Nelson, the built environment, the medium is the message, the new new thing, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl, vertical integration, work culture , zero-sum game

d Or latest available year, i.e. 1991 for Norway and Switzerland; 1992 for Italy, Australia, Austria, Belgium, Ireland, New Zealand, Portugal and Sweden; and 1994 for the United States, Western Germany and Denmark. e Western Germany. f Aggregates were calculated on the basis of 1992 GDP for the business sector expressed in 1992 purchasing power parities. g Mainland business sector (i.e. excluding shipping as well as crude petroleum and gas extraction). Overall, there was a moderate rate of growth of productivity for the 1870–1950 period (never surpassing 2 percent for any country or subperiod, except for Canada), a high rate of growth during the 1950–73 period (always over 2 percent, except for the UK) with Japan leading the charge; and a low growth rate in 1973–93 (very low for the US and Canada), always below 2 percent in total factor productivity, except for Italy in the 1970s.


pages: 745 words: 207,187

Accessory to War: The Unspoken Alliance Between Astrophysics and the Military by Neil Degrasse Tyson, Avis Lang

active measures, Admiral Zheng, airport security, anti-communist, Apollo 11, Arthur Eddington, Benoit Mandelbrot, Berlin Wall, British Empire, Buckminster Fuller, Carrington event, Charles Lindbergh, collapse of Lehman Brothers, Colonization of Mars, commoditize, corporate governance, cosmic microwave background, credit crunch, cuban missile crisis, dark matter, Dava Sobel, disinformation, Donald Trump, Doomsday Clock, Dr. Strangelove, dual-use technology, Eddington experiment, Edward Snowden, energy security, Eratosthenes, European colonialism, fake news, Fellow of the Royal Society, Ford Model T, global value chain, Google Earth, GPS: selective availability, Great Leap Forward, Herman Kahn, Higgs boson, invention of movable type, invention of the printing press, invention of the telescope, Isaac Newton, James Webb Space Telescope, Johannes Kepler, John Harrison: Longitude, Karl Jansky, Kuiper Belt, Large Hadron Collider, Late Heavy Bombardment, Laura Poitras, Lewis Mumford, lone genius, low earth orbit, mandelbrot fractal, Maui Hawaii, Mercator projection, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Neil Armstrong, New Journalism, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, operation paperclip, pattern recognition, Pierre-Simon Laplace, precision agriculture, prediction markets, profit motive, Project Plowshare, purchasing power parity, quantum entanglement, RAND corporation, Ronald Reagan, Search for Extraterrestrial Intelligence, skunkworks, South China Sea, space junk, Stephen Hawking, Strategic Defense Initiative, subprime mortgage crisis, the long tail, time dilation, trade route, War on Poverty, wikimedia commons, zero-sum game

Debates Atlas V RD-180 Engine Ban, ULA’s Non-Bid for Military Launch,” NASASpaceflight.com, Jan. 29, 2016, www.nasaspaceflight.com/2016/01/u-s-debates-atlas-v-rd-180-ban-ulas-non-bid-military; Phil Plait, “Russian Deputy Prime Minister Threatens to Pull Out of ISS,” Bad Astronomy blog, Slate, May 14, 2014, www.slate.com/blogs/bad_astronomy/2014/05/14/nasa_and_the_iss_russia_threatens_to_abandon_international_space_effort.html (accessed May 2, 2017). 86.Office of Inspector General, “NASA’s Commercial Crew Program: Update on Development and Certification Efforts,” IG-16-028, NASA, Sept. 1, 2016, oig.nasa.gov/audits/reports/FY16/IG-16-028.pdf (accessed May 2, 2017). 87.World Bank, “Gross Domestic Product 2016, PPP,” databank.worldbank.org/data/download/GDP_PPP.pdf (accessed Aug. 13, 2017); Joe Rennison and Eric Platt, “China Cuts US Treasury Holdings to Lowest Level Since 2010,” Financial Times, Jan. 18, 2017; US Census Bureau, “Trade in Goods with China,” www.census.gov/foreign-trade/balance/c5700.html (accessed Apr. 6, 2018). See also Central Intelligence Agency, “Country Comparison: GDP (Purchasing Power Parity)—2016 Est.,” The World Factbook, www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html; in this ranking the EU, which does not figure in the World Bank’s analysis, is second and the US third. 88.Johnson-Freese, Space as a Strategic Asset, 223; Sheehan, International Politics of Space, 165, 167; Office of the Secretary of Defense, “Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2016,” 117FA69, Apr. 26, 2016, i, 3, www.defense.gov/Portals/1/Documents/pubs/2016%20China%20Military%20Power%20Report.pdf (accessed May 2, 2017) and “Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China 2017,” C-B066B88, May 15, 2017, ii, 34–35, 42, www.defense.gov/Portals/1/Documents/pubs/2017_China_Military_Power_Report.PDF?


pages: 976 words: 235,576

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite by Daniel Markovits

8-hour work day, activist fund / activist shareholder / activist investor, affirmative action, algorithmic management, Amazon Robotics, Anton Chekhov, asset-backed security, assortative mating, basic income, Bernie Sanders, big-box store, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, carried interest, collateralized debt obligation, collective bargaining, compensation consultant, computer age, corporate governance, corporate raider, crony capitalism, David Brooks, deskilling, Detroit bankruptcy, disruptive innovation, Donald Trump, Edward Glaeser, Emanuel Derman, equity premium, European colonialism, everywhere but in the productivity statistics, fear of failure, financial engineering, financial innovation, financial intermediation, fixed income, Ford paid five dollars a day, Frederick Winslow Taylor, fulfillment center, full employment, future of work, gender pay gap, gentrification, George Akerlof, Gini coefficient, glass ceiling, Glass-Steagall Act, Greenspan put, helicopter parent, Herbert Marcuse, high net worth, hiring and firing, income inequality, industrial robot, interchangeable parts, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kevin Roose, Kiva Systems, knowledge economy, knowledge worker, Kodak vs Instagram, labor-force participation, Larry Ellison, longitudinal study, low interest rates, low skilled workers, machine readable, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass incarceration, medical residency, meritocracy, minimum wage unemployment, Myron Scholes, Nate Silver, New Economic Geography, new economy, offshore financial centre, opioid epidemic / opioid crisis, Paul Samuelson, payday loans, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, purchasing power parity, rent-seeking, Richard Florida, Robert Gordon, Robert Shiller, Robert Solow, Ronald Reagan, Rutger Bregman, savings glut, school choice, shareholder value, Silicon Valley, Simon Kuznets, six sigma, Skype, stakhanovite, stem cell, Stephen Fry, Steve Jobs, stock buybacks, supply-chain management, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Theory of the Leisure Class by Thorstein Veblen, Thomas Davenport, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, traveling salesman, universal basic income, unpaid internship, Vanguard fund, War on Poverty, warehouse robotics, Winter of Discontent, women in the workforce, work culture , working poor, Yochai Benkler, young professional, zero-sum game

But often these mechanisms complement rather than substitute for the mechanism emphasized here. GDP per capita of about $50,000: See World Bank, World Economic Outlook Database, October 2018 Edition, accessed March 11, 2019, www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx. These data measure GDP per capita not in terms of purchasing power parity but rather in nominal dollars. The data therefore adjust for exchange rates, differences in inflation, and differences in cost of living, in order to produce an international measure of the material standards of living in different countries. per capita GDPs greater than $50,000: See World Bank, World Economic Outlook Database, October 2018 Edition, accessed March 11, 2019, www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx.


pages: 1,034 words: 241,773

Enlightenment Now: The Case for Reason, Science, Humanism, and Progress by Steven Pinker

3D printing, Abraham Maslow, access to a mobile phone, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Alfred Russel Wallace, Alignment Problem, An Inconvenient Truth, anti-communist, Anton Chekhov, Arthur Eddington, artificial general intelligence, availability heuristic, Ayatollah Khomeini, basic income, Berlin Wall, Bernie Sanders, biodiversity loss, Black Swan, Bonfire of the Vanities, Brexit referendum, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, carbon tax, Charlie Hebdo massacre, classic study, clean water, clockwork universe, cognitive bias, cognitive dissonance, Columbine, conceptual framework, confounding variable, correlation does not imply causation, creative destruction, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, data science, decarbonisation, degrowth, deindustrialization, dematerialisation, demographic transition, Deng Xiaoping, distributed generation, diversified portfolio, Donald Trump, Doomsday Clock, double helix, Eddington experiment, Edward Jenner, effective altruism, Elon Musk, en.wikipedia.org, end world poverty, endogenous growth, energy transition, European colonialism, experimental subject, Exxon Valdez, facts on the ground, fake news, Fall of the Berlin Wall, first-past-the-post, Flynn Effect, food miles, Francis Fukuyama: the end of history, frictionless, frictionless market, Garrett Hardin, germ theory of disease, Gini coefficient, Great Leap Forward, Hacker Conference 1984, Hans Rosling, hedonic treadmill, helicopter parent, Herbert Marcuse, Herman Kahn, Hobbesian trap, humanitarian revolution, Ignaz Semmelweis: hand washing, income inequality, income per capita, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), invention of writing, Jaron Lanier, Joan Didion, job automation, Johannes Kepler, John Snow's cholera map, Kevin Kelly, Khan Academy, knowledge economy, l'esprit de l'escalier, Laplace demon, launch on warning, life extension, long peace, longitudinal study, Louis Pasteur, Mahbub ul Haq, Martin Wolf, mass incarceration, meta-analysis, Michael Shellenberger, microaggression, Mikhail Gorbachev, minimum wage unemployment, moral hazard, mutually assured destruction, Naomi Klein, Nate Silver, Nathan Meyer Rothschild: antibiotics, negative emissions, Nelson Mandela, New Journalism, Norman Mailer, nuclear taboo, nuclear winter, obamacare, ocean acidification, Oklahoma City bombing, open economy, opioid epidemic / opioid crisis, paperclip maximiser, Paris climate accords, Paul Graham, peak oil, Peter Singer: altruism, Peter Thiel, post-truth, power law, precautionary principle, precision agriculture, prediction markets, public intellectual, purchasing power parity, radical life extension, Ralph Nader, randomized controlled trial, Ray Kurzweil, rent control, Republic of Letters, Richard Feynman, road to serfdom, Robert Gordon, Rodney Brooks, rolodex, Ronald Reagan, Rory Sutherland, Saturday Night Live, science of happiness, Scientific racism, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Simon Kuznets, Skype, smart grid, Social Justice Warrior, sovereign wealth fund, sparse data, stem cell, Stephen Hawking, Steve Bannon, Steven Pinker, Stewart Brand, Stuxnet, supervolcano, synthetic biology, tech billionaire, technological determinism, technological singularity, Ted Kaczynski, Ted Nordhaus, TED Talk, The Rise and Fall of American Growth, the scientific method, The Signal and the Noise by Nate Silver, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, total factor productivity, Tragedy of the Commons, union organizing, universal basic income, University of East Anglia, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, urban renewal, W. E. B. Du Bois, War on Poverty, We wanted flying cars, instead we got 140 characters, women in the workforce, working poor, World Values Survey, Y2K

It plots, for the past two thousand years, a standard measure of wealth creation, the Gross World Product, measured in 2011 international dollars. (An international dollar is a hypothetical unit of currency equivalent to a US dollar in a particular reference year, adjusted for inflation and for purchasing-power parity. The latter compensates for differences in the prices of comparable goods and services in different places—the fact that a haircut, for example, is cheaper in Dhaka than in London.) The story of the growth of prosperity in human history depicted in figure 8-1 is close to: nothing . . . nothing . . . nothing . . .


pages: 1,152 words: 266,246

Why the West Rules--For Now: The Patterns of History, and What They Reveal About the Future by Ian Morris

addicted to oil, Admiral Zheng, agricultural Revolution, Albert Einstein, anti-communist, Apollo 11, Arthur Eddington, Atahualpa, Berlin Wall, British Empire, classic study, Columbian Exchange, conceptual framework, cotton gin, cuban missile crisis, defense in depth, demographic transition, Deng Xiaoping, discovery of the americas, Doomsday Clock, Eddington experiment, en.wikipedia.org, falling living standards, Flynn Effect, Ford Model T, Francisco Pizarro, global village, God and Mammon, Great Leap Forward, hiring and firing, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, Isaac Newton, It's morning again in America, James Watt: steam engine, Kickstarter, Kitchen Debate, knowledge economy, market bubble, mass immigration, Medieval Warm Period, Menlo Park, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, New Journalism, out of africa, Peter Thiel, phenotype, pink-collar, place-making, purchasing power parity, RAND corporation, Ray Kurzweil, Ronald Reagan, Scientific racism, sexual politics, Silicon Valley, Sinatra Doctrine, South China Sea, special economic zone, Steve Jobs, Steve Wozniak, Steven Pinker, strong AI, Suez canal 1869, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thomas Malthus, trade route, upwardly mobile, wage slave, washing machines reduced drudgery

By 1980, when the policy got properly established, this had fallen to 2.2. The decline then slowed, taking another fifteen years to fall to 1.0 per woman. China’s population will probably peak around 2015. *A Soviet car. *All figures are in US dollars at 2000 values, adjusted to reflect purchasing power parity. *If we assume instead that the balance will shift, positing less dramatic changes in one trait of course just means imagining even more breathtaking transformations in another. *In the end, Pistorius missed qualifying by seven-tenths of a second. *Named after the geneticist Robert Carlson.


pages: 1,373 words: 300,577

The Quest: Energy, Security, and the Remaking of the Modern World by Daniel Yergin

"Hurricane Katrina" Superdome, "World Economic Forum" Davos, accelerated depreciation, addicted to oil, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Asian financial crisis, Ayatollah Khomeini, banking crisis, Berlin Wall, bioinformatics, book value, borderless world, BRICs, business climate, California energy crisis, carbon credits, carbon footprint, carbon tax, Carl Icahn, Carmen Reinhart, clean tech, Climategate, Climatic Research Unit, colonial rule, Colonization of Mars, corporate governance, cuban missile crisis, data acquisition, decarbonisation, Deng Xiaoping, Dissolution of the Soviet Union, diversification, diversified portfolio, electricity market, Elon Musk, energy security, energy transition, Exxon Valdez, facts on the ground, Fall of the Berlin Wall, fear of failure, financial innovation, flex fuel, Ford Model T, geopolitical risk, global supply chain, global village, Great Leap Forward, Greenspan put, high net worth, high-speed rail, hydraulic fracturing, income inequality, index fund, informal economy, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), It's morning again in America, James Watt: steam engine, John Deuss, John von Neumann, Kenneth Rogoff, life extension, Long Term Capital Management, Malacca Straits, market design, means of production, megacity, megaproject, Menlo Park, Mikhail Gorbachev, military-industrial complex, Mohammed Bouazizi, mutually assured destruction, new economy, no-fly zone, Norman Macrae, North Sea oil, nuclear winter, off grid, oil rush, oil shale / tar sands, oil shock, oil-for-food scandal, Paul Samuelson, peak oil, Piper Alpha, price mechanism, purchasing power parity, rent-seeking, rising living standards, Robert Metcalfe, Robert Shiller, Robert Solow, rolling blackouts, Ronald Coase, Ronald Reagan, Sand Hill Road, Savings and loan crisis, seminal paper, shareholder value, Shenzhen special economic zone , Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, smart grid, smart meter, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, Suez crisis 1956, technology bubble, the built environment, The Nature of the Firm, the new new thing, trade route, transaction costs, unemployed young men, University of East Anglia, uranium enrichment, vertical integration, William Langewiesche, Yom Kippur War

Instead of the inward-looking self-sufficiency and the high trade barriers that had been the canon of development in the 1950s and 1960s, the “tigers” embraced trade and the global economy. In turn, they were rewarded with rapidly rising incomes and remarkably fast growth. Singapore was a beleaguered city-state when it gained independence in 1965. By 1989 its per capita GDP, on a purchasing power parity basis, was higher than that of Britain, which, as the birthplace of the Industrial Revolution, had a twohundred-year head start. Asia also became the foundation for “supply chains,” extending from raw materials to components to final goods. The world was truly being knit together in ways not imagined even a decade earlier.


pages: 1,213 words: 376,284

Empire of Things: How We Became a World of Consumers, From the Fifteenth Century to the Twenty-First by Frank Trentmann

Abraham Maslow, Airbnb, Alan Greenspan, Anton Chekhov, Ayatollah Khomeini, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, bread and circuses, British Empire, Capital in the Twenty-First Century by Thomas Piketty, car-free, carbon footprint, Cass Sunstein, choice architecture, classic study, clean water, collaborative consumption, collective bargaining, colonial exploitation, colonial rule, Community Supported Agriculture, company town, critique of consumerism, cross-subsidies, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, equity premium, Fall of the Berlin Wall, Fellow of the Royal Society, financial exclusion, fixed income, food miles, Ford Model T, full employment, gentrification, germ theory of disease, global village, Great Leap Forward, haute cuisine, Herbert Marcuse, high net worth, income inequality, index card, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, it's over 9,000, James Watt: steam engine, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kitchen Debate, knowledge economy, labour mobility, Les Trente Glorieuses, libertarian paternalism, Livingstone, I presume, longitudinal study, mass immigration, McMansion, mega-rich, Michael Shellenberger, moral panic, mortgage debt, Murano, Venice glass, Naomi Klein, New Urbanism, Paradox of Choice, Pier Paolo Pasolini, planned obsolescence, pneumatic tube, post-industrial society, Post-Keynesian economics, post-materialism, postnationalism / post nation state, profit motive, prosperity theology / prosperity gospel / gospel of success, public intellectual, purchasing power parity, Ralph Nader, rent control, retail therapy, Richard Thaler, Right to Buy, Ronald Reagan, school vouchers, scientific management, Scientific racism, Scramble for Africa, seminal paper, sharing economy, Silicon Valley, Skype, stakhanovite, Ted Nordhaus, the built environment, the market place, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, trade liberalization, trade route, transatlantic slave trade, union organizing, upwardly mobile, urban planning, urban sprawl, Washington Consensus, women in the workforce, working poor, young professional, zero-sum game

For Korea, see Laura C. Nelson, Measured Excess: Status, Gender and Consumer Nationalism in South Korea (New York, 2000), 87; for Japan, Partner, Assembled in Japan, tables 6, 1. Diffusion in the United States had been faster than in Britain, see Offer, Challenge of Affluence, esp. 173–80. 2. If we measure purchasing power parity – that is, what money really buys on the ground – China’s $10 trillion were only second in spending power to the United States in 2009. 3. The most forceful, recent version of this thesis is Karl Gerth, As China Goes, So Goes the World: How Chinese Consumers are Transforming Everything (New York, 2010), quoted at 192. 4.


Costa Rica by Matthew Firestone, Carolina Miranda, César G. Soriano

airport security, Berlin Wall, centre right, desegregation, illegal immigration, Monroe Doctrine, new economy, off-the-grid, Pepto Bismol, purchasing power parity, Ronald Reagan, Rosa Parks, Skype, sustainable-tourism, the payments system, trade route, urban sprawl, women in the workforce, young professional

Though Nicaragua was wealthier than Costa Rica as little as 25 years ago, decades of civil war and a US embargo quickly bankrupted the country, and today Nicaragua is the second-poorest country in the western hemisphere (after Haiti). For example, the 2009 CIA World Factbook lists the GDP per capita purchasing power parity of Costa Rica as US$10,900, while Nicaragua is listed at only US$2800. The main problem facing Nicaragua is its heavy external debt, though debt relief programs implemented by the International Monetary Fund (IMF) and the free-trade zone created by the Central American Free Trade Agreement (Cafta) are both promising signs.


From Peoples into Nations by John Connelly

Albert Einstein, anti-communist, bank run, Berlin Wall, Cass Sunstein, centre right, collective bargaining, colonial exploitation, colonial rule, crony capitalism, cuban missile crisis, disinformation, facts on the ground, Fall of the Berlin Wall, financial independence, German hyperinflation, Gini coefficient, Johann Wolfgang von Goethe, joint-stock company, laissez-faire capitalism, land bank, land reform, land tenure, liberal capitalism, means of production, Mikhail Gorbachev, moral hazard, oil shock, old-boy network, open borders, Panopticon Jeremy Bentham, Peace of Westphalia, profit motive, purchasing power parity, Ronald Reagan, strikebreaker, the built environment, The Chicago School, trade liberalization, Transnistria, union organizing, upwardly mobile, wikimedia commons, women in the workforce

Available at http://www.huffingtonpost.com/donald-blinken/privatization-helps-the-h_b_914383.html (accessed December 20, 2018). 31. Andor, Hungary on the Road, 62–64. 32. Ther, Neue Ordnung, 100–101, 120. 33. One World Bank survey claimed that the initial devaluation in Poland and Czechoslovakia was four times larger than that necessary to maintain purchasing power parity for Polish and Czech goods. Ivan T. Berend, From the Soviet Bloc to the European Union: The Economic and Social Transformation of Central and Eastern Europe since 1973 (Cambridge, UK, 2009), 67. 34. “Unfinished Czech Reforms,” New York Times, December 2, 1997; Ther, Neue Ordnung, 99. As late as 1999, 60 percent of the labor force in “coddled industries” had not changed jobs since 1989.


Europe: A History by Norman Davies

agricultural Revolution, Albert Einstein, anti-communist, Berlin Wall, bread and circuses, Bretton Woods, British Empire, business climate, centre right, charter city, classic study, clean water, Columbian Exchange, conceptual framework, continuation of politics by other means, Corn Laws, cuban missile crisis, Defenestration of Prague, discovery of DNA, disinformation, double entry bookkeeping, Dr. Strangelove, Edmond Halley, Edward Lloyd's coffeehouse, equal pay for equal work, Eratosthenes, Etonian, European colonialism, experimental economics, financial independence, finite state, Francis Fukuyama: the end of history, Francisco Pizarro, full employment, gentleman farmer, global village, Gregor Mendel, Honoré de Balzac, Index librorum prohibitorum, interchangeable parts, invention of agriculture, invention of movable type, Isaac Newton, James Hargreaves, James Watt: steam engine, Johann Wolfgang von Goethe, Johannes Kepler, John Harrison: Longitude, joint-stock company, Joseph-Marie Jacquard, Korean Air Lines Flight 007, land reform, liberation theology, long peace, Louis Blériot, Louis Daguerre, Mahatma Gandhi, mass immigration, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, Murano, Venice glass, music of the spheres, New Urbanism, North Sea oil, offshore financial centre, Peace of Westphalia, Plato's cave, popular capitalism, Potemkin village, purchasing power parity, Ralph Waldo Emerson, road to serfdom, sceptred isle, Scramble for Africa, spinning jenny, Suez canal 1869, Suez crisis 1956, Thales of Miletus, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transatlantic slave trade, Transnistria, urban planning, urban sprawl, W. E. B. Du Bois

European Union Belgium 11,781 851 10.025 218.7 Denmark 16,629 311 5.17 142.1 France 211,207 272 57.372 1324.9 Germany 137,352 587 80.569 1775.1 Greece 50,944 202 10.3 79.2 Ireland 27,136 131 3.547 48.8 Italy 116,303 497 57.782 1223.6 Luxembourg 908 374 .340 10.4 Netherlands 15,963 951 15.178 320.4 Portugal 35,553 277 9.846 83.9 Spain 194,884 175 34.085 573.7 UK 94,226 614 57.848 1040.5 Europaan Free Trade Area Austria 32,374 244 7.884 184.7 Finland 130,119 39 5.042 109.6 Iceland 102,819 3 .260 6.6 Norway 125,181 34 4.286 113.1 Sweden 173,648 50 8.678 245.8 Switzerland 15,941 433 6.905 240.5 Ex-Soviet Bloc Czech Rep. 30,343 342 10.383 25.3 Hungary 35,969 284 10.202 30.7 Poland 120,725 318 38.365 75.3 Slovakia 18,917 283 5.346 10.2 Albania 11,101 301 3.338 1.0 Bulgaria 42,823 209 8.952 11.9 Romania 91,699 249 22.865 24.9 Cyprus 3,578 200 .715 7.1 Malta 122 2,950 .360 2.6 Ex-Yugoslavia Bosnia 19,741 221 4.366 Croatia 21,824 219 4.784 8.6 Macedonia 9,928 205 2.039 5.06 Montenegro 5,332 120 .639 Serbia 34,107 287 9.792 Slovenia 7,817 258 2.017 14.4 (Yugoslavia, to 1991) (98,766) (239) Ex-USSR Belarus' 80,150 129 10.346 32.2 Estonia 17,413 89 1.554 5.9 Latvia 24,500 107 2.617 8.9 Lithuania 25,174 149 3.754 10.1 Moldavia 13,000 335 4.359 9.5 Russia 6.591m. 23 148.920 479.5 (in Europe) c.1.3m. 921 1201 Ukraine 232,046 225 52.1 121.9 EUROPE: TOTAL 3,639,001 sq.m.l C.190 694.011 8626.6# EU 912,886 375 342.062 6841.3 USA 3,618,770 70 252.18 5689.2 Japan 142,811 871 124.45 3707.9 GDP ($per capita) GDP (purchasing power parity) Higher education (% pupils/population 20–4 aged) Medical care (people per physician) 21,815 18,170 37 321 27,485 17,768 32 448 23,093 18.665 40 421 22,032 16.310 33 710 7,689 8,417 29 340 13,758 12,427 26 410 21,176 17.521 31 552 30,588 24.771 33 496 21,110 17,023 34 444 8,521 9,736 18 575 16,831 14,731 34 360 17,987 16,300 25 870 23,427 18,005 33 333 21,737 15,025 47 322 25,385 17,067 25 960 26,388 17,785 43 503 28,324 16,496 33 355 34,830 22,159 28 1,441 2,437 6.923 18 389 3,009 5,297 15 740 1,963 4,081 22 416 1,908 5,224 18 389 229 — 7 2.070 1,329 4.770 31 340 1,089 2.307 9 n.a. 9,930 — 15 754 7,222 — 11 500 636 1,800 471 2,481 463 493 7,150 8,098 512 3,110 250 3,830 204 3,410 195 2,710 222 2,170 249 3,220 214 2,340 229 11,9331# 20,000 I = estimate # includes the whole of the Russian Federation 22,560 Sources OECD Main Economic Indicators, December 1993; IMF IFS, 29,794 December 1993; DOTS 1993 Yearbook, World Bank Atlas, 1994 Parliamentary Assemblies (a) British House of Commons(Westminster) (b) British House of Lords(Westminster) (c) Supreme Soviet(Moscow) Political Groups in the European Parliament (Strasbourg, 1994) (after N.