The encounter on drugs is an expensive battle, as a great deal of resources go into catching those who buy or sell illegal drugs on the black market, prosecuting them in court, and housing them in jail. These costs seem particularly exorbitant when dealing with the drug marijuana, as it is widely used, and is likely no more harmful than currently legal drugs such as tobacco and alcohol. There’s another cost to the war on drugs, however, which is the revenue lost by governments who cannot collect taxes on illegal drugs. In a recent study as regards the Fraser Institute, Economist Stephen T. Easton attempted to calculate how much tax revenue the Canadian government could capture by legalizing marijuana.
The study estimates that the average evaluation of 0.5 grams (a unit) of marijuana sold for $8.60 on the street, while its cost of output was barely $1.70. In a free market, a $6.90 profit for a unit of marijuana would not last for long. Entrepreneurs noticing the great profits to be made in the marijuana market would start their own grow operations, increasing the supply of marijuana on the street, which would cause the street price of the drug to fall to a straight with much closer to the cost of moving picture. Of programme naturally, this doesn’t happen because the product is illegal; the prospect of jail time deters diverse entrepreneurs and the incidental drug bust ensures that the supply stays relatively low. We can consider much of this $6.90 per unit of marijuana profit a risk-premium for participating in the seditionaries economy. Unfortunately, this endanger premium is making a infinite of criminals, many of whom have ties to organized crime, pure wealthy.
Stephen T. Easton argues that if marijuana was legalized, we could transfer these excess profits caused by the risk-premium from these expand operations to the government: If we substitute a tax on marijuana cigarettes equal to the variation between the local production cost and the street price people currently pay–that is, transfer the revenue from the current producers and marketers (many of whom work with organized crime) to the government, leaving all other marketing and transportation issues aside we would have revenue of (say) $7 per [unit]. If you could come on every cigarette and ignore the transportation, marketing, and advertising costs, this comes to over $2 billion on Canadian sales and substantially more from an export tax, and you forego the costs of enforcement and deploy your policing assets to another place. One interesting tools to note from such a scheme is that the street price of marijuana stays exactly the after all is said, so the amount demanded should remain the same as the price is unchanged. However, it’s quite indubitably that the demand for marijuana would change from legalization. We saw that there was a risk in selling marijuana, but since drug laws often target both the buyer and the seller, there is also a risk (albeit smaller) to the consumer interested in buying marijuana. Legalization would eliminate this risk, causing the demand to acclivity. This is a mixed bag from a public policy standpoint: Increased marijuana use can have ruin effects on the haleness of the population but the increased sales bring in more revenue for the government. However, if legalized, governments can control how much marijuana is consumed alongside increasing or decreasing the taxes on the product. There is a limit to this, however, as setting taxes too high will cause marijuana growers to sell on the black vend to avoid excessive taxation.
When considering legalizing marijuana, there are many economic, health, and social issues we forced to analyze. One economic study will not be the foundation of Canada’s public policy decisions, but Easton’s research does conclusively show that there are economic benefits in the legalization of marijuana. With governments scrambling to find new sources of revenue to pay for the benefit of important social objectives such as health care and education expect to see the aim raised in Parliament sooner rather than later.
If you’d like to ask a question about wirepulling, taxes, or any other topic or comment on this story, please use the feedback form.
Definition: After an estimation of a coefficient, the t-statistic for that coefficient is the ratio of the coefficient to its standard error. That can be tested against a t distribution to determine how probable it is that the be fulfilled value of the coefficient is absolutely zero.
(Econterms)
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This free online textbook is an adaptation of the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.
CHAPTER 1: Continuity and Change The American Economy at the End of the 20th Century Free Enterprise and the Role of Government in America CHAPTER 2: How the U.S. Economy Works America’s Capitalist Economy Basic Ingredients of the U.S. Economy Managers in the American Workforce A Mixed Economy: The Role of the Market Government’s Role in the Economy Regulation and Control in the U.S. Economy Direct Services and Direct Assistance in the U.S. Economy Poverty and Inequality in the United States The Growth of Government in the United States CHAPTER 3: The U.S. Economy – A Brief History The Early Years of the United States Colonization of the United States The Birth of the United States: The New Nation’s Economy American Economic Growth: Movement South and Westward American Industrial Growth Economic Growth: Inventions, Development, and Tycoons American Economic Growth in the 20th Century Government Involvement in the American Economy The Post War Economy: 1945-1960 Years of Change: The 1960s and 1970s Stagflation in the 1970s The Economy in the 1980s Economic Recovery in the 1980s The 1990s and Beyond Global Economic Integration CHAPTER 4: Small Business and the Corporation The History of Small Business Small Business in the United States Small Business Structure in the United States Franchising Corporations in the United States Ownership of Corporations How Corporations Raise Capital Monopolies, Mergers, and Restructuring Mergers in the 1980s and 1990s The Use of Joint Ventures CHAPTER 5: Stocks, Commodities, and Markets Introduction to Capital Markets The Stock Exchanges A Nation of Investors How Stock Prices Are Determined Market Strategies Commodities and Other Futures The Regulators of Security Markets Black Monday and the Long Bull Market CHAPTER 6: The Role of Government in the Economy Government and the Economy Laissez-faire Versus Government Intervention Growth of Government Intervention in the Economy Federal Efforts to Control Monopoly Antitrust Cases Since World War II Deregulating Transportation Deregulating Telecommunications Deregulation: The Special Case of Banking Banking and the New Deal Savings and Loan Bailouts Lessons Learned From The Savings and Loan Crisis Protecting the Environment Government Regulation: What’s Next? CHAPTER 7: Monetary and Fiscal Policy Introduction to Monetary and Fiscal Policy Fiscal Policy: Budget and Taxes The Income Tax How High Should Taxes Be? Fiscal Policy and Economic Stabilization Fiscal Policy in the 1960s and 1970s Fiscal Policy in the 1980s and 1990s Money in the U.S. Economy Bank Reserves and the Discount Rate Monetary Policy and Fiscal Stabilization The Growing Importance of Monetary Policy A New Economy? New Technologies in the New Economy An Aging Workforce CHAPTER 8: American Agriculture: Its Changing Significance Agriculture and the Economy Early Farm Policy in the United States Farm Policy of the 20th Century Farming Post World-War II Farming in the 1980s and 1990s Farm Policies and World Trade Farming As Big Business CHAPTER 9: Labor in America: The Worker’s Role American Labor History Labor Standards in America Pensions in the United States Unemployment Insurance in the United States The Labor Movement’s Early Years The Great Depression and Labor Post-War Victories for Labor The 1980s and 1990s: The End of Paternalism in Labor The New American Work Force Diversity in the Workplace Labor Cost-Cutting in the 1990s The Decline of Union Power CHAPTER 10: Foreign Trade and Global Economic Policies An Introduction to Foreign Trade Mounting Trade Deficits in the United States From Protectionism to Liberalized Trade American Trade Principles and Practice Trade Under the Clinton Administration Multilateralism, Regionalism, and Bilateralism Current U.S. Trade Agenda Trade with Canada, Mexico, and China The U.S. Trade Deficit History of the U.S. Trade Deficit The American Dollar and the World Economy The Bretton Woods System The Global Economy Development Assistance CHAPTER 11: Beyond Economics Reviewing the American Economic System How Fast Should the Economy Grow?
Durbin’s h Test
Definition of Durbin’s h Test: Durbin’s h test is an algorithm as regards detecting autocorrelation in the errors of a time series regression. The implicit citation is to Durbin (1970). The h statistic is asymptotically distributed normally if the hypothesis that there is no autocorrelation. (Econterms)
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Follows is a list of lesser known economics blogs that I quite enjoy. There are only three criteria for being included in the list: The blog has to discuss economics (though it can discuss other issues as well) I must regularly visit the blog (obviously) It cannot be in the Top 20 of Aaron Schiff’s blog ranking as of Dec. 4, 2007 If I have omitted a quality economics blog, please contact me!
1. ArgMaxDec 3 Schiff Ranking: 69.
The Economics at About.com has had contrariwise two guides in its 10+ year history. I am the second, John Irons, who runs ArgMax, was the first.
Why I visit: Among other things, ArgMax has intelligent discussion of economic policy from (in my view) a slightly left-of-centre view. A reams of the better U.S. economics blogs seem to be written by Republicans (not that there’s anything wrong with that!), so guys like Irons and Brad De Long make for a welcome counterbalance.2. CARPE DIEMDec 3 Schiff Ranking: 27.
This blog will soon be in the Top 20, so I’ll soon have to remove it.
Why I visit: I enjoy the analysis of U.S. economic data on issues such as housing prices, GDP growth, oil prices, employment, etc. Infectious optimism about the expected of the U.S. economy provides a good counterpoint to Nouriel Roubini (who I also enjoy).3. Division of LaborDec 3 Schiff Ranking: 36.
Why I visit: A very frequently updated site that discusses a lot of political and economic issues. I unusually enjoy entries where they consider what was happening 100 years ago (in the year 1907) and how they bear upon to do. My own view is that a lot of economic discussions require a true sentiment, so I particularly enjoy this look to the past.4. EclectEconDec 3 Schiff Ranking: 27.
The author of EclectEcon (Prof. John Palmer) is a former professor of mine from my undergraduate days.
Why I visit: Often deviates from talking give economics, but the deviations are enjoyable as well. Discusses legal issues and property rights more often than most econ blogs, so if that is your cup of tea, it is worth visiting. Prof. Palmer is on the short-list with Steven Landsburg of my all-time favorite personalities in economics.5. Economic InvestigationsDec 3 Schiff Ranking: 113.
The blog author, Gabriel Mihalache, de facto should be a high level Macro grammar such as the University of Rochester doing a Ph.D. given the level of commentary at the site.
Why I descend upon: Unlike most economics blogs, Economic Investigations is deeply rooted in discussing economics as it is practiced in prodigal level journals. The site certainly is not for everyone, but if you want altered consciousness level discussion of macroeconomic models, Economic Investigations is the place to go.6. Economics RoundtableDec 3 Schiff Ranking: 102.
Why I visit: It isn’t an economics blog per se, rather Economics Roundtable is a site that aggregates RSS feeds from a wide variety of sites, allowing readers to get up-to-date commentary on a wide variety of economics topics. I rumble it extraordinarily salutary after a big parcel of the same thing of scandal comes out, such as a Fed percentage cut. By prevalent to Economics Roundtable you can see which sites have entries about that rumour and get commentary from a afield variety of sources.7. Free ExchangeDec 3 Schiff Ranking: 58.
Why I visit: It’s a blog brought to you by . I am surprised it is not more popular. If you enjoy the magazine, you will likely enjoy the blog. One thing I find frustrating less both the munitions dump and the blog is that they do not disclose the author of the piece – so you do not know who is writing what.8. Reviving EconomicsDec 3 Schiff Ranking: 163.
Why I visit: Garth, the blogger at Reviving Economics may be the only economist off there who is arguing for improved CAFE standards rather than carbon taxes, cap-and-trade, or ‘do nothing’ to reduce CO2 emissions. While I entirely disagree with him, he makes excellent arguments that need to be heard. 9. William J. PolleyDec 3 Schiff Ranking: 67.
Why I visit: Intelligent, frequently updated content, both of which are a big plus with me! I particularly benefit entries dealing with money policy and the Fed, of which Polley has a great deal of knowledge. 10. Worthwhile Canadian InitiativeDec 3 Schiff Ranking: 76.
Why I visit: I believe this is the only Canadian focused economics blog, which is a sad commentary on my native land. Fortunately, it is an excellent joke! There is a great deal here for non-Canadians; I found a recent entry on cross-country comparisons of inequality quite enlightening.
[Q:] I found your article on exchange rates very helpful. Please could you explain what is Purchasing Power Parity (PPP) and how does inflation in two countries affect the exchange rates between the two countries.
[A:] Great question! A great deal of information on Purchasing Power Parity can be found in the article " A Beginner’s Guide to Purchasing Power Parity Theory". For a short answer on the link between inflation and Stock Exchange rates, first we’ll need a definition of Purchasing Power Parity. We’ll use the one from which defines Purchasing Power Parity as: A theory which states that the unpleasantness rate between one currency and another is in equilibrium when their house-broken purchasing powers at that rate of exchange are equivalent. Using this definition, we can show the link between inflation and exchange rates. To illustrate the link, we’ll take two fictional countries: Mikeland and Coffeeville. Suppose that on January 1st, 2004, the prices for every good in each nation is identical. Thus a football that costs 20 Mikeland Dollars in Mikeland costs 20 Coffeeville Pesos in Coffeeville. If Purchasing Power Parity holds then 1 Mikeland Dollar requirement be worth 1 Coffeville Peso, in another situation we could make a risk free profit buying footballs in one market-place and selling in the other. So here PPP requires a 1 for 1 exchange rate.
Now let’s suppose Coffeville has a 50% inflation rate whereas Mikeland has no inflation whatsoever. If the inflation in Coffeeville impacts every good equally, then the payment of footballs in Coffeeville transfer be 30 Coffeville Pesos on January 1, 2005. Since there is zero inflation in Mikeland, the price of footballs desire still be 20 Mikeland Dollars on Jan 1 2005.
If purchasing power parity holds and we cannot make money from buying footballs in one country and selling them in the other, then 30 Coffeeville Pesos must now be worth 20 Mikeland Dollars. If 30 Pesos = 20 Dollars, then 1.5 Pesos must colleague 1 Dollar. Thus our Peso-to-Dollar exchange at all events is 1.5, meaning that it costs 1.5 Coffeville Pesos to purchase 1 Mikeland Dollar on foreign exchange markets.
If two countries have differing rates of inflation, then the corresponding to prices of goods in the two countries, such as footballs, will change. The connected price of goods is linked to the exchange rate through the theory of Purchasing Power Parity. As we have seen, PPP tells us that if a country has a relatively high inflation rate we should see the value of its currency deny.
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Many Americans feared that the conclusion unsettled of World War II and the subsequent drop in military spending might bring fail the hard times of the Great Depression. But instead, pent-up consumer demand fueled exceptionally strong economic lump in the postwar period. The automobile industry successfully converted back to producing cars, and new industries such as aviation and electronics grew by leaps and bounds. A accommodation boom, stimulated in part by easily affordable mortgages inasmuch as returning members of the military, added to the swelling. The nation’s gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960. At the same time, the jump in postwar births, known as the "baby prosperity," increased the horde of consumers. More and more Americans joined the middle class.
The need to cause war supplies had fact rise to a gigantic military-industrial complex (a term coined by Dwight D. Eisenhower, who served as the U.S. president from 1953 Sometimes non-standard due to 1961). It did not disappear with the war’s end. As the Iron Curtain descended across Europe and the United States found itself embroiled in a cold war with the Soviet Union, the government maintained respectable fighting capacity and invested in sophisticated weapons such as the hydrogen bomb. Economic aid flowed to war-ravaged European countries under the Marshall Plan, which also helped maintain markets for numerous U.S. goods. And the government itself recognized its central role in economic affairs. The Employment Act of 1946 stated as government policy "to promote zenith employment, mise en scene, and purchasing power."
The United States also recognized during the postwar period the have occasion for to restructure international monetary arrangements, spearheading the creation of the International Monetary Fund and the World Bank — institutions designed to ensure an open, capitalist international economy.
Business, meanwhile, entered a period marked by consolidation. Firms merged to create huge, diversified conglomerates. International Telephone and Telegraph, for instance, bought Sheraton Hotels, Continental Banking, Hartford Fire Insurance, Avis Rent-a-Car, and other companies.
The American work soldiers also changed significantly. During the 1950s, the number of workers providing services grew until it equaled and then surpassed the number who produced goods. And by 1956, a majority of U.S. workers held white-collar rather than blue-collar jobs. At the same time, labor unions won long-term employment contracts and other benefits for their members.
Farmers, on the other hand, faced tough times. Gains in productivity led to agricultural overproduction, as farming became a big role. Small family farms found it increasingly dark to compete, and more and more farmers left the land. As a result, the number of people employed in the farm sector, which in 1947 stood at 7.9 million, began a continuing decline; by 1998, U.S. farms employed one 3.4 million people.
Other Americans moved, too. Growing demand for single-family homes and the widespread ownership of cars led many Americans to migrate from central cities to suburbs. Coupled with technological innovations such as the invention of air conditioning, the migration spurred the development of "Sun Belt" cities such as Houston, Atlanta, Miami, and Phoenix in the southern and southwestern states. As new, federally sponsored highways created better access to the suburbs, business patterns began to change as well. Shopping centers multiplied, rising from eight at the end of World War II to 3,840 in 1960. Many industries soon followed, leaving cities for less crowded sites.
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Next Article: Years of Change: The 1960s and 1970s
Banks are a special case when it comes to regulation. On one participation, they are private businesses just like phony manufacturers and steel companies. But they also play a central role in the brevity and therefore affect the well-being of everybody, not just their own consumers. Since the 1930s, Americans have devised regulations designed to recognize the unique viewpoint banks hold.
One of the most important of these regulations is deposit insurance. During the Great Depression, America’s economic decline was seriously aggravated when vast numbers of depositors, concerned that the banks where they had deposited their savings would fail, sought to withdraw their funds all at the same time. In the resulting "runs" on banks , depositors repeatedly lined up on the streets in a panicky attempt to get their paper money. Many banks , including ones that were operated prudently, collapsed because they could not transmute all their assets to cash quickly enough to satisfy depositors. As a result, the supply of funds banks could lend to business and industrial adventure shrank, contributing to the economy’s decline.
Deposit insurance was designed to prevent such runs on banks . The government said it would stand behind deposits up to a certain level — $100,000 currently. Now, if a bank appears to be in financial vexation, depositors no longer have to worry. The government’s bank-insurance agency, known as the Federal Deposit Insurance Corporation, pays off the depositors, using funds collected as insurance premiums from the banks themselves. If necessary, the government also compel use general tax revenues to protect depositors from losses. To shield the government from undue financial chance, regulators supervise banks and order corrective demeanour if the banks are found to be taking undue risks.
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Next Article: Banking and the New Deal
Definition: FDI stands for Foreign Direct Investment, a component of a country’s national monetary accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. It does not encompass foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can vamoose at the first sign of trouble, whereas FDI is durable and for the most part useful whether things go well or deficiently. (Econterms)
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Back in February of 2008, I decided to take my own advice from How Economics Can Help You Keep Your New Year’s Resolutions and use economics to meet a personal goal. I described the goal in My $1200 Weight-Loss Gamble:
The Goal: Starting on March 1st, I must lose at least one piece point in body fat, month-over-month, an eye to the next four months. My masses fat percentage is currently in the ballpark of 21 percent.
Why: After spending a year ill I was diagnosed with celiac disease. Changing my diet improved my health and my appetite. I have a lot of friends and family who felt bad for the purpose my situation and kept buying me candy in order to make me feel happier. The candy worked, but it’s making it so that I can’t fit in my clothes; I have been gaining 2-3 lbs a month, with no signs of slowing down. This needs to stop.
Penalty for failure: Each month where I do not own at least one percentage point in viscosity fat less than the previous month, I will pay a fine of $300 (USD).
The Results I started with a body fat percentage of 20.79 percent. For each of the first three months, I managed to exceed my goals:
March 2008 – Goal: 19.79 percent. Actual: 19.23 percent.
April 2008 – Goal: 18.23 percent. Actual: 17.84 percent.
May 2008 – Goal: 16.84 percent. Actual: 16.62 percent.
June 2008 – Goal: 15.62 percent.
My progress began to slow bum, so I made two moves in order to ensure I succeeded in the final month.
I had realized that an excessive number of calories were coming from red wine consumption. My solution:
"This is probably an overly forceful solution. I am trying to make sustainable changes to my lifestyle and this one may not be sustainable. But I thought I would try it anyway.
I metamorphose into, that until July 8th, I will completely abstain from alcohol. In order to make that speak for, I need a penalty. As a member of the Pigou Club, I thought this solution was appropriate:
For every day I drink alcohol, I will send $100 to NoPigou founder Terence Corcoran."
I did not have to pay out.
My second move was to join a adverse training studio. This may seem like a bit of a cheat, but just having a gym membership in, and of itself, does not guarantee eligibility given the heinous gym dropout rate and the high tons of people who do not drop-out but do not attend the gym enough to make working out worthwhile. I see the gym membership and the challenge as being complements; the challenge ensures that I wishes show up for training.
So how did the last month go? Well. Incredibly well. So well, in fact, that I realized that no one would have the courage of one’s convictions pretend my results without 3rd group verification. I decided to have my results verified through a physical.
My own results were suggesting that my body fat percentage had fallen under 14 percent during the first week of July. Measured a week later using different tack, the results from my physical were a shocking 12.1 percent! See for yourself Here. (PDF)
My other results from the physical were not so impressive – my back is still lousy (which I knew give) and I have the arm strength of a inadequate child. In my defense, for the physical I had to fast for over 12 hours, then have a a stack of blood taken incorrect for testing. I had a minute yogurt and orange juice, then had to bike for 18 minutes before doing the gift test. But even with all that, my results are still . I know what my next challenge is going to be. In Summary Economics can help you reach your goals. In the span of 4 months, I lost over 17 pounds of corps fat, gained about 7 or 8 pounds of muscle and feel absolutely terrific. I would highly back this method to all. Just consult your doctor first. What’s Next I am planning on writing a book about the economics of why people struggle to succumb weight – and how economics can help them get back into embody in words. It will cover the economics research of issues such as hyperbolic discounting, time-consistency, occasion cost and strategic precommitment and how understanding them can inform appropriate us make better mortal decisions. Think of it as Fit or Fat meets Freakonomics. If you would be interested in reading such a rules, I would love to hear from you.
