After seeing the movie "Trading Places" (1983), starring Eddie Murphy and Dan Aykroyd, for the thousandth time during the holiday season, I decided to write a quick post explaining what happened at the end of this movie that gets so many people puzzled (including me for the first couple of times I've seen it). This entertaining 80s comedy can actually teach you more about finance and trading than any other Hollywood movie (not counting documentaries), including the infamous "Wall Street" (1987), starring Michael Douglas as the ruthless Gordon Gecko, and especially the latest Scorsese film "The Wolf of Wall Street" (2013). Anyway, we all know the story from Trading Places. Dan Aykroyd plays a snobbish investor Louis Winthorpe ("the Third"), while Eddie Murphy plays a street con artist Billy Ray Valentine whose lives get reversed as a result of a bet between two cruel millionaires, the Duke brothers. The Dukes own a commodities bro
The taxi market is undoubtedly one of the best examples of something economists like to call rent-seeking . What does this phenomenon stand for and why do economists (particularly political economists) devote a lot of attention to it? The classical definition was given by Gordon Tullock back in his 1967 seminal paper "The welfare cost of tariffs, monopolies and theft" , even though the phrase itself was coined by Anne Krueger in 1974 . Rent-seeking is a process of gaining private benefits through the political process (by lobbying or logrolling for example). It implies gaining protection for a certain privileged group, which in return promises political support, large campaign contributions, or even bribes. This protection varies from giving a monopoly status to a certain company, regulating market entry than hampers competition (such as introducing licences to specific occupations), imposing tariffs to import goods to protect the domestic industry, handing out su
All too often during poor economic times many debunked economic fallacies of the past get reinvented. The reason is simple: a search for ideas and solutions alternative to the "mainstream" (however we define it) allows those who succumb to these fallacies to repeat the ancient errors classical economics was hoping to get rid of. The short-termism of politics plays a crucial role in the process of persistent perpetuation of such fallacies. This is why in times like these it is essential to go back in economic history and debunk some of the ideas that tend to surface repeatedly. In the following couple of posts, I attempt to do just that. Misunderstanding trade One of the most misunderstood areas of economics is international trade. More precisely, the idea that if we were to boost net exports - by subsidizing exports and constraining imports - we can achieve higher GDP growth. If one looks at the simple arithmetic of a standard Keynesian macro model: Y=C+I+G+NX, the
Usually comparing countries or regions requires looking at GDP growth data, GDP per capita, living standards, relative income or even the happiness index. But even a simple areal glimpse at the borders separating two systems can be more than enough to conclude which country is richer, healthier, more educated and on average more prosperous. It tells us that the causes of between-country differences have to be more than just climate, geography, culture or mentality. Particularly when the same nation is separated by nothing more than a border depicting the striking differences in political systems of the two countries (a classical example here are East and West Germany, but an equally good example can be North or South Korea). As a result I found that the following set of images paint a better picture on between-country differences than any existing data on global inequality. The first one is from a blog post I encountered on the Why Nations Fail blog, comparing the citi
You baby boomers are the most selfish generation to ever exist. You destroyed your own children's and grandchildren's future with your short-sighted selfishness and immaturity. And then you expect them to pay for your retirement????ReplyDelete
Can you baby boomers just hurry up and drop dead, please?
What do you mean by "you"? I wasn't even born in America, yet alone in the 50-ies :)Delete
I do hope you understand my point was sarcastic, as is the entire "Yes, Minister" series.