Subtitle: The battle between John Maynard Keynes and F.A. Hayek DURING THE global financial crisis, we were told by governments that the best way to fix the world economy was to increase spending. This sounds simple enough given that increased government spending and lower interest rates can be used to boost output, but it is […]
Category: Economics
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Change is constant
NOTHING exists which is permanent. Your current success is the result of your past efforts and good fortune, and how well you have responded to changing circumstances along the way by seizing new opportunities and avoiding threats. An interesting example of a company that failed to respond to changing times is General Motors. GM was […]
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What is the purpose of a business?
MAINSTREAM economics would have you believe that the purpose of business is to maximise profits. If a business loses money it will soon go bust, this much is clear. Profit is necessary for any ongoing business operation, however the fact that a business makes a profit does not explain the purpose or raison d’être of […]
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Bank Bailouts and other Moral Hazards
In the previous post on Moral Hazard, we learnt that Moral Hazard refers to any situation where a person is not fully responsible for the consequences of their actions. As a result, they may take greater risks than they would have otherwise. Here are 6 examples of situations where Moral Hazards arise in practice. 1. Insurance […]
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Moral Hazard
Moral hazard is when they take your money and then are not responsible for what they do with it. ~ Gordon Gekko 1. Relevance of Moral Hazard THE unemployment rate in the United States is now around 9%. Over 13% of all US mortgages are either delinquent or in foreclosure (Mortgage Bankers Association). Total loses […]
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Barriers to Entry
You may want to launch a new product, start a new business or enter a new market. What’s stopping you? BARRIERS to entry are costs that must be paid by a new entrant but not by firms already in the industry. Barriers to entry have the effect of making a market less contestable and allow […]
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Pleasure is the goal of life
SEEMS fairly straight forward doesn’t it. The purpose of life is the pursuit of pleasure, and the quest for those objects and experiences that will make our life more enjoyable. As I recently discovered while reading “The Consolations of Philosophy” by Alain de Botton, this was exactly the philosophy held by Epicurus, an ancient Greek […]
An economic indicator is any statistic (e.g. the unemployment rate or GDP) which indicates the past, current or future strength of the economy THERE is talk about town and in the media of an economic upturn in the final quarter of 2009 – “banks are lending, consumers are buying, and companies are hiring.” While it […]
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Tony Robbins – Six Human Needs
FOLLOWING on from the theme of my last post, which highlighted Alain de Botton’s kinder and gentler philosophy of success, I think it would be valuable to consider why we do what we do. In an attempt to become “successful” many of us work long hours and sacrifice time that could be spent with friends and […]
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Economies of scale
1. Importance of economies of scale IN THE early 20th century, by using assembly lines to mass produce the Model T Ford, Henry Ford became one of the richest and best-known men in the entire world. Economies of scale provide a company with two main benefits: Increased market share: Lower per unit costs allow a […]
THIS article is intended to be pretty light-hearted. It provides an insight into the strengths of the current Australian economy after talking with two aspiring amateur economist taxi drivers. Taxi driver 1 I was chatting with the taxi driver on the way home from work last week, and he was complaining to me that, despite […]
It’s the economy, stupid “IT’S THE economy, stupid” is a well known phrase that was widely used during Bill Clinton‘s 1992 presidential campaign against George Bush senior. The phrase was coined by Clinton campaign strategist James Carville and refers to the notion that Clinton was a better choice because Bush had not adequately addressed the […]