Monthly Archives: September 2007

How did the princes of Moscow become the rulers of Russia?

A question from Yahoo! Answers:

What was the main reason the princes of Moscow were able to become the rulers of Russia?

Partly dumb luck, partly smart politicking.

In early 14th century, Moscow and Tver were jockeying for position of the regional leader. Prince Mikhail of Tver wanted an all-out war against the Horde, which earned him an assassination in 1318. His son Dmitry wanted to continue his father’s line and entered into an alliance with Lithuania.

Moscow (and its prince Ivan Kalita), meanwhile, remained a faithful vassal of the Horde (in fact, Moscow had familial ties with the Horde: Ivan’s older brother, Yuri, was Khan Uzbeg’s brother-in-law).

In 1326, Mongols assassinated Dmitry of Tver, and Tver responded by uprising. Ivan Kalita joined forces with the Horde and together the Horde and Moscow repressed the rebellion. There was no clear heir to Dmitry, so Tver’s leaders got mired in dynastic squabbles, and Tver gradually lost its influence. Moscow, meanwhile, grew in importance, because the Horde outsourced tax collection to it…

Another smart move by Ivan was that he talked Mitropolit (Archbishop) Peter, the leader of the Russian Orthodox Church, to move his seat from Vladimir, which was quickly losing its importance, to Moscow in 1325. So Moscow became the religious capital of Russia, which was doubly important for Ivan, since in 1313, Mitropolit Peter visited the Horde, where Khan Uzbeg granted him the privilege to be the sole judge of all Russian clergy.

Why don’t we just raise minimum wage?

A question from Yahoo! Answers:

Why don’t we just raise minimum wage to $15 dollars an hour?

That way everyone will have a decent income and no one will be on welfare and take advantage of the system.

Your proposed solution will lead to the exact opposite of what you hope to achieve — more people than ever will go on welfare and won’t get off it for the rest of their lives.

There are plenty of businesses out there that only hire unskilled workers because they are cheaper than machines. If you raise minimum wage to $15, machines will become a VERY attractive alternative to workers. So where you used to have 20 people working for $10/hour, you will have one worker making $30/hour servicing a bunch of machines that actually do the work. And the 20 people who used to work for $10/hour will all be out of work permanently.

In fact, this is exactly why unions favor higher minimum wage, even though the vast majority of their members earn far more than minimum wage; jobs that are created in response to higher minimum wages are usually higher-paying and require some training (and are thus more likely to be union), although there are far fewer of them.

A global currency?

A question from Yahoo! Answers:

Do you ever think there will be a single form of global currency ???

No. That would be a very bad idea. In order for global currency to be viable, several conditions must be in place, including common response to external shocks, free trade, unrestricted mobility of capital and labor, and a common tax and transfer system.

Just one example. Say, the oil prices are going up, just as they are now. As a result, Norway, a major oil exporter, experiences an economic boom, so Norway’s central bank is running a monetary contraction. At the same time, Japan, a major oil importer, experiences and economic slump, so Japan’s central bank is running a monetary expansion. If Japan and Norway had a common currency, this would be impossible; both countries would have to have the same monetary policy, so either Norway would have high inflation or Japan would have a recession…

Interestingly, the answer to this question has been known since 1960s. See, for example:

  • Mundell, R.A. (1961), “A Theory of Optimum Currency Areas”, American Economic Review 51: 657-665.
  • McKinnon, R.I. (1963), “Optimum Currency Areas”, American Economic Review 53, 717-724.
  • Kenen, P. B. (1969), “The Theory of Optimum Currency Areas: An Eclectic View”, in Mundell, R.A. and Swoboda, A.K. (eds.), Monetary Problems of the International Economy (Chicago: University of Chicago Press).

If all manufacturing was done in the U.S. …

A question from Yahoo! Answers:

If all manufacturing was done in the US…?

Over the years, we all know that most manufacturing has been outsourced to other nations because the cost of labor and materials is cheaper than in the US. This in turn keeps prices of products low. The main arguement I hear is that if they were manufactured here, the good would be more expensive.

However, if they moved manufacturing back to the US, wouldn’t the inscrease of jobs, and thus money that can be spent on goods keep the economy stable? More jobs, equals more people spending money?

“Over the years, we all know that most manufacturing has been outsourced to other nations”… Wow… You really need to stop listening to popular press and get your hands on some relevant research. The vast majority of manufacturing jobs that were lost were lost to machines, not to foreign countries, and one country where this process is moving especially fast is… (drum roll) China. In absolute terms, China is losing manufacturing jobs faster than any country in the world; in relative terms, it may be second only to Brazil. The world as a whole is losing manufacturing jobs, and has been doing it since at least 1985.

Manufacturing does not have the significance you ascribe to it. Contrary to popular belief, wages in manufacturing in general are not particularly good (not every industry has a UAW-style collective bargaining agreement in place). In terms of employment, manufacturing is responsible for mere 11% of the U.S. non-farm workforce. All in all, manufacturing is going through the same transition agriculture went through between 1870 and 1970; in 1870, agriculture employed three quarters of all U.S. workforce, by 1970, the figure dropped to about 3%…

What are the working poor doing wrong?

A question from Yahoo! Answers:

What are the working poor doing wrong that keeps them poor?

Nothing. They are basically paying for the sins of their parents. They didn’t get to go to college because they didn’t do well in high school. They didn’t do well in high school because they didn’t do well in middle and elementary school. And performance in elementary school traces back to things like parents’ education and income, child’s weight at birth, mother’s age at first childbirth, and whether parents speak English at home…

Why do some markets consolidate?

A question from Yahoo! Answers:

Economic question : Why do some markets consolidate while others fragment over time ?

Many markets – esp. media-related markets such as magazines, newspapers, websites, tv channels etc. have fragmented and are increasingly catering to niche audiences.

Other markets – banks, steel, enterprise software etc. have consolidated over time.

Can an economist or some financial expert point me to the fundamental forces in play that determine whether a market will fragment or consolidate over time ?

First of all, there are different ways to look at fragmentation. Media industry, for example, may be fragmented in terms of output it produces, but its ownership is getting increasingly concentrated over time. 85% of U.S. newspapers, for example, have circulation under 50,000, while 20 largest newspaper companies control 60% of newspaper circulation.

This said, there are two fundamental forces that determine whether an industry is going to remain fragmented or consolidate. One is consumer preference; some products are (perceived as) standardized, while others are (perceived as) differentiated (producers of standardized products compete primarily on price, while producers of differentiated products compete primarily on features). The other is the interplay of economies of scale and economies of scope.

In industries whose products are perceived as standardized, the outcome is largely determined by economies of scale. The industry consolidates as far as economies of scale allow.

If the product is perceived as differentiated, the outcome is determined by economies of scope; the industry consolidates as far as economies of scope allow.

Poverty and child labor

A question from Yahoo! Answers:

Why is poverty a contributing factor to the problem of child labor?

It’s not “a contributing factor”, it’s the only reason child labor exists. You are poor, so you expect to have no way to support yourself in your old age, other than your children’s assistance. To be less of a burden to your children, you spread the cost of your “retirement” among many future households by having many children. But in the interim, you can’t feed (not to mention educate) those children, so you send them off to work…

Is the growth in China and India a threat to the US?

A question from Yahoo! Answers:

Is the growth of Asian economies(China, India) a threat to the US?

I need to analyze the growth of US trade with China and India. Is growth of these and other Asian economies a threat to the US? I’d prefer to hear both sides(pros and cons), if that’s possible.

Depends on your energy outlook.

From the standpoint of conventional economics, the growth of China and India is not a threat, but an opportunity; to develop, China and India will require lots and lots of capital goods (from power plants to wide-body airliners), in which developed countries have a distinct comparative advantage.

At the same time, it is possible that continuing growth in China and India will put upward pressures on energy prices and increase emissions of greenhouse gases (even now, China’s carbon dioxide emissions are second only to those of the U.S., mostly because of China’s reliance on coal), so in this regard, growth in Asia can be a threat, but not just to the U.S., but rather to the survival of the human race. Indeed, it can be argued that the greatest threat to the survival of the human race actually comes from the U.S. and its unwillingness to do something about its greenhouse gas emissions…

Why run PHP on Windows?

A question from comp.lang.php:

Does it make any sense to use php on a windows server?

Of course it does. 🙂

I mean it might be better than asp/.net (which I don’t know about). But why *would* a person code in php on a windows machine, when they could do it on a linux box,

Because the person in question may also need to code in a .Net language or Delphi. Or because they need to make their PHP application work with something that is only available through the use of COM objects (which could be anything from Crystal Reports to QuickBooks).

I’m not trying to insult or start a war, I’m just curious. Why run php on a windows server *rather* than linux? I’m perfectly willing to believe there is a good reason. I just can’t imagine what it is.

Integration with third-party products not available for Linux.

How many Kremlins are there in Russia?

A question from Yahoo! Answers:

How many Kremlin’s are there in Russia?

Pretty much every Russian city founded before 1500 has or had one. There are three that I know of within 100 miles of Moscow (Moscow, Zaraisk, and Kolomna; the latter survived only partially):

Moscow Kremlin

Zaraisk Kremlin

Kolomna Kremlin

The Serpukhov Kremlin only has two fragments standing:

There used to be kremlins in Vereya, Volokolamsk, Dmitrov, Zvenigorod, Pereyaslavl-Zalessky, and Ruza, but now only their bulwarks remain. Again, this is only within 100 miles of Moscow.

The Kremlin page on Russian Wikipedia lists 20 known locations for stone-built kremlins, 10 for kremlins built of stone and wood, and 37 for wooden kremlins.

All images courtesy of Wikipedia.