Monthly Archives: October 2006

Globalization: advantages and disadvantages

A question from Yahoo! Answers:

GLOBALIZATION – is it more of an advantage or a disadvantage?

The world as a whole wins from globalization. To undesrtand why, you need to go back to David Ricardo and his concept of comparative advantage. But it does not mean that globalization is a problem-free process. For one thing, gains and losses accrue to different people to a different degree. Typically, globalization gains accrue to large numbers of people in small ways (for example, a certain item that 200 million people all over the world buy every day now costs on average 80 cents instead of 90), while globalization losses are highly concentrated (say, 800 workers who used to manufacture that item in France lost their jobs because the item is available more cheaply from Ireland, Poland, or Bangladesh).

Are death taxes good?

A question from Yahoo! Answers:

Can ppl come to see their own selfinterest & happiness in equal distribution of deceased estates?
is this argument false? ‘wealth shouldnt be distributed equally among ppl bc ppl arent equally qualified & arent working equally – better that a lazy heir gets the money than everyone’

It’s way more complicated than you think. Inheritance accounts for a surprisingly large share of capital formation. “Equal distribution of deceased estates” would lower the rate of capital formation and leave the society undercapitalized in the long run.

For more information, read:

Kotlikoff, Laurence J. and Lawrence Summers, “The Role of Intergenerational Transfers in Aggregate Capital Formation,” Journal of Political Economy, 89: 706-732, 1981.

Businesses killed by the Internet?

A question from Yahoo! Answers:

What Businesses have been “killed” by the Internet?

Think about it – once the internet got going, some businesses were totally taken from behind… either they no longer exist “out on the street”, or are so beaten that there are few that flourish.

My example: Travel Agencies.

The local ones you would go to for making your vacation plans, etc. Now it’s almost ALL internet based…. Any others? Why?

Video rental stores are finding it hard to compete with Netflix (Wherehouse stopped renting DVDs in the summer; now they only have DVDs for sale). Record stores are in a double squeeze between and iTunes (although department stores did eat market share away from them, too); Tower Records announced closure a couple of weeks ago.

As to the post office (suggested by some people as a candidate for obsolescence), its future is bright, because they are the enablers of e-commerce. Who, for example, delivers Netflix? The post office. As e-commerce grows, so will the postal business…

Business ownership: legalized theft?

A question from Yahoo! Answers:

Is this point rocksolid? [profits minus ownerfairpay = legal theft or beggary]?

if we understand or define costs as including fairpay for the workinput of owners, as well as employee costs, overheads, advertising, accounting, costs of materials [which are ultimately labour costs] etc, then profits BY DEFINITION have to be money for no work = injustice [legal theft or beggary] = overpay, causing wealth concentration, causing tyranny, ie, the destruction of democracy?
is it rocksolid that there is nothing to limit profits to fair return to owners? – ie, that, after they have been paid fair returns for their labour, there is nothing stopping returns to go in excess of this, which by definition are money for no work?
profits can be for reasons of scarcity, monopoly, etc which are clearly not money for work, & therefore must cause work for no money [= underpay, wageslavery, slavery, evergrowing injustice, causing evergrowing violence [= misery], necessarily escalative to extinction [selfmurder of 6-7 billion]
it is IMPOSSIBLE for there to be doubt of this – yes?

There is nothing about this point that is rock-solid. What exactly is the “owner’s fair pay”? Who is to decide if the pay is fair? Using which valuation method: valuation by multiples, valuation by discounted cash flows, real-option valuation, something else?

What you seem to be ignoring is the concept of risk; business owners are compensated primarily for risks they take by investing their time and money into their business rather than having a job and investing in mutual funds held in tax-shielded retirement plans.

As to the causes of “evergrowing” violence, you are repeating political scientisis’ claims that have no basis in reality (if for no other reason, then because violence has greatly subsided since the end of the Cold War). Read “Economic Causes of Civil War and Their Implications for Policy” by Paul Collier:…

The financial situation of young adults

A question from Yahoo! Answers:

What do you think of the financial situation of young adults (18-30)?
How we young adults manage our money and credits.

The question is much broader than just credit management… Today’s young adults may be the first generation in the American history since the Great Depression to consistently experience a standard of living worse than that of their parents. The cost of both education and health care is increasing much more rapidly than inflation, which means that young adults as a group are in a double squeeze; on the one hand, they need to pay more for their education (which they must have in order to have half-decent jobs), on the other, they need to pay more in taxes for their parents’ retirement benefits (Social Security, Medicare, etc.)

The government policies do not help, either. The federal government once again, just like in the 1980s, sinks enormous amounts of money into defense. The result, just like in the 1980s, will be a serious increase in national debt (translation: higher taxes down the road) and high inflation…

The best MBA program in Canada?

A question from Yahoo! Answers:

The best university for a MBA in Canada?

Depends on whom you ask.

Business Week puts MBA programs at Queen’s School of Business, University of Western Ontario, University of Toronto, and HEC Montreal in their international (i.e., non-U.S.) top 10.

Financial Times has a global MBA program ranking, where York University is ranked #18, University of Toronto #24, University of Western Ontario #31, McGill University #44, University of British Columbia #71, Queen’s School of Business #87, and University of Alberta #98.

Which MBA also has a global rating, where York is ranked #27, Queen’s #71, and British Columbia #77.


Data on crude oil volatility?

A question from Yahoo! Answers:

Where can I find data on crude oil volatility ?

You can compute it yourself. Get a daily time series of price. Compute daily returns. Then compute standard deviation of daily returns over the desired number of days. Then annualize (multiply times square root of 250). This will be your volatility.

If you have price data, transforming it into a volatility time series should take you all of two minutes.

Crime and DNA

A question from Yahoo! Answers:

Is it in a persons Dna which makes him a criminal?

I would like to call into attention that although there is a debate over Nature over Nurture. Two very important facts. That the african americans brought to America during the colonial ages were sold by their own people for being criminals, (some exceptions). Africa: Torn apart by civilwar, most countries under european influence or ocupation, and always changing. Is very poor and ravaged by voilence and rape. Which of course is never on TV. Europe: Where the whites come from, plagued in the old days when whites came to America by theivery, insubordination, and voilence when allowed to get away with it. Hell thats how we became Amerika in the first place and not Britian.

Africans brought to America were indeed bought from other Africans, but they were not by and large enslaved for being crimials; they were enslaved because they belonged to tribes that were defeated in wars.

Back to your original question, there is no way to distinguish nature from nurture when it comes to origins of crime. For example, criminals are disproportionately likely to have been born to single, very young mothers with low educational attainment and, consequently, very low income. Now, is mother’s income and education “nature” or “nurture”?

Derivatives funds?

A question from Yahoo! Answers:

Pls tell me about derivatives funds?

These are funds that speculate in derivatives (usually, options and futures, but some dabble in swaps as well). Derivatives funds tend to have high volatility, low correlation with major asset classes (such as stocks and bonds), and are not tax-efficient (profits they make in most cases qualify as short-term capital gains, with all related tax disadvantages).