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The Econoclast
Contributors
Tuesday, November 6th, 2012Seeing the light
Economists need to realise the importance of incorporating human emotion
In modern physics, one of the biggest conundrums is that most of the matter and energy that make up the universe is apparently undetectable. The amount that we can actually see equates to only four percent of the total. The rest of the cosmos is believed ...
The Econoclast
Monday, March 5th, 2012Male crisis
Is the world of finance too male?
The recent subprime, credit-crunching, sovereign-defaulting global crisis obviously had many causes, but one fact seems unavoidable: nearly everyone involved, at least at a senior level, was a guy. In Iceland, for example, many believe that the banking...
The Econoclast
Tuesday, February 21st, 2012Vilfredo Pareto and the Occupy movement
The composition of the elite has changed with time – circulation is a natural feature of the system
One of the founders of neoclassical economics in the late 19th century was the Italian economist and sociologist Vilfredo Pareto. It might seem that the musings of a neoclassical economist over a century ago would have little in common with the concerns o...
The Econoclast
Tuesday, January 24th, 2012Paying for parking
David Orrell considers the current value of future returns of a new and somewhat outlandish exchange weight that some consider a route out of recession
When we deposit money in the bank, we usually expect to receive interest in return. But would it be better for the economy as a whole, if instead we had to pay to have our money looked after? The cost of keeping money, known as demurrage, has been a fe...
The Econoclast
Friday, January 13th, 2012Guy Fawkes on the right
Vilfredo Pareto and the Occupy movement
One of the founders of neoclassical economics in the late 19th century was the Italian economist and sociologist Vilfredo Pareto. It might seem that the musings of a neoclassical economist over a century ago would have little in common with the concerns o...
The Econoclast
Wednesday, December 21st, 2011Truth and beauty
Do we need another Newton, or do we just need a different aesthetics?
In a 2009 New York Times article entitled How Did Economists Get It So Wrong? Paul Krugman wrote that “The economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.” ...
The Econoclast
Tuesday, October 25th, 2011Where’s the puck?
We can blame ‘the butterfly effect,’ writes David Orrell, but the truth is we’re just very bad at predicting the future
The Canadian ice hockey player Wayne Gretzky once said, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” Businesses and societies try to perform a similar trick, through forecasting. We seem...
The Econoclast
Wednesday, August 24th, 2011Irrational economic man
He defeated communism, successfully lobbied for deregulation of the financial markets and was instrumental in the formation of capitalism as we know it. But in the wake of the global financial crisis, writes David Orrell, isn’t it time to abandon the idea of rational economic man?
One of the greatest of economic myths is the animal known as rational economic man. This mythological beast is frequently described in introductory economics books, and is defined by certain striking characteristics. He is highly individualistic – he...
The Econoclast
Wednesday, August 24th, 2011The economies of fiction
The fables inherent in contemporary economics are various
In early 2010, the world economy may finally be emerging from the deepest recession since the 1930s. The blame for the recession has been put on many things, including the US housing market, complex credit derivatives, risk models, banker bonuses, and so ...
The Econoclast
Friday, June 24th, 2011Power to the people
Financial disasters follow a power-law, writes David Orrell. And power-law distributions are neither completely ordered, nor completely chaotic, but are on the boundary between the two
As discussed in previous columns, financial crashes have similar statistical properties as earthquakes, craters on the moon, and many other natural phenomena, in that they follow what is known as a scale-free, power-law distribution. This means in effect ...
The Econoclast
Wednesday, April 20th, 2011On fish and finance
It might seem that fisheries management and financial regulation have little in common. Bankers have been accused of many things recently, but only rarely of being slippery underwater creatures with gills
However, the two fields of fisheries and finance do share certain properties. Their overseers are both charged with the management of complex ecosystems, either of different ocean species, or of different investor species. They each have to deal with sudd...
The Econoclast
Thursday, February 24th, 2011“The Mecca of the economist lies in economic biology…”
…said the neoclassical economist Alfred Marshall in the preface to his Principles of Economics. The mathematician and author David Orrell considers the relationship between science and economics
Since Marshall wrote those words a century ago, however, there has been surprisingly little integration between economics and other life sciences. Instead economics has continued to model itself after physics. The General Equilibrium Models favoured by po...
The Econoclast
Tuesday, January 4th, 2011Fractal finance
Can the infinite complexity of the financial markets be described by the simple rules of mathematicians?
How risky is the stockmarket? How rough is its ride? The traditional way to answer that question is to look at a representative period of history – say the last few years or decades – and use standard statistical methods to compute the average...
The Econoclast
Thursday, October 21st, 2010The happy science
Exploring the pitfalls of relating happiness and economic metrics
Economics is often called the dismal science. The expression goes back to 1849, when Thomas Carlyle described the new field as “a dreary, desolate, and indeed quite abject and distressing one; what we might call, by way of eminence, the dismal scien...
Top 5
Highest corporate tax
rates in Europe
European countries are scrambling to raise every last penny of funds through taxes. But some countries may have gone too far...
Belgium
Though all business taxes in Belgium can be paid online with little effort and preparation, the rates are still sky-high at 57.7 percent, including a staggering 50.8 percent total rate on profits only in social security contributions.
Belarus
In Belarus, a company spends up to 338 hours annually preparing for and paying ten different taxes and duties. The total tax rate has incredibly been lowered to 60.7 percent, from 117.5 percent in 2008.
France
A company in France pays seven different taxes and duties, the sum of which can amount to 65.7 percent of profits; though President François Hollande has announced a wave of business tax rate cuts coming up.
Estonia
A business in Estonia pays 67.3 percent of profits in tax, 37.2 percent exclusively in social security contributions. The country has gone against the grain in Europe by raising businesses taxes from 48.6 percent in 2008 to the current rates.
Italy
While corporate income tax (IRES) in Italy is limited to 38 percent of taxable profit, a company operating in Italy can expect to pay 14 other taxes and duties, including social security contributions, bringing their total payable tax to 68.7 percent of profits, according to the World Bank.
Norway
Norway taxes motor fuels twice, with a road use tax and a CO2 emissions tax. Combined with strikes in the energy sector that have curbed output, the price of gas at a local pump has soared to $10.12 per gallon.
Turkey
Though Turkey sits on the Suez Canal and neighbours many oil rich countries, the price of a gallon of average gas clocks in at $9.41 in Turkish pumps, because of a 60 percent share of taxes.
Israel
Like Turkey, Israel is surrounded by oil-rich neighbours, but drills very little itself. Gas prices are controlled by the government, so about half of the $9.28 per gallon goes to taxes.
Hong Kong
There are few gas stations in Hong Kong, but the ones available charge up to 76 percent more per gallon than mainland China, where the government caps the cost of fuel. A gallon at the pumps will cost around $8.61 on the island.
Netherlands
Expensive labour costs make the Dutch petrol prices the dearest in Europe, at $8.26 per gallon; though the 57 percent tax add-ons don’t help.
The credit crisis
8 February 2007
HSBC warns of subprime mortgage losses
2 April 2007
New Century goes bus
14 September 2007
Wholesale markets have dried up
17 March 2008
Rescue of Bear Stearns
7 September 2008
Rescue of Fannie Mae
15 September 2008
Lehman Brothers file for bankruptcy
3 October 2008
US congress approves $700bn bailout
14 February 2009
$787bn stimulus approved by congress
The effects of the current financial crisis are global and irrefutable. With the collapse of Lehman Brothers, the domino effect of irresponsible public monetary policies, huge levels of unsustainable debt, and a deregulated financial sector, has escalated to the point where no corner of the globe has been left untouched.
1973 oil crisis
October 1973
Syria and Egypt launch an attack on Israel on Yom Kippur and set off a twenty day war;
1977
US President Carter creates Department of Energy, which develops the US strategic petroleum reserve
The Organisation of Petroleum Exporting Countries (OPEC) used their oil reserves as a weapon with the Arab Oil Embargo against those who supported Israel. By January 1974, world oil prices were four times higher than they were at the start of the crisis, especially in the US, and the shock led to a huge drop in the stock market with NYSE losing $97bn in just six weeks. The embargo lasted five months, and the effects are still seen today.
German hyperinflation
1922-1923
Hyperinflation
1923 – 1924
Stabilisation
The trouble began when Germany missed a repatriation payment, worth about one third of the German deficit in this period. Inflation was already high but by 1923 it was raging. Prices doubled within hours, and by late 1923, it cost 200bn marks to buy a single loaf of bread. People burned money as it was cheaper than buying firewood. Germany eventually regained control of its economy when it introduced the Rentenmark into circulation in 1923, and then the Reichmark in 1924.
The Great Depression
1929-1933
The Great Crash
1934-1939
Recovery and Recession
After the decadence of the Roaring Twenties, the 1930s saw the biggest economic slump of all time. The stock market crashed on 29 October 1929, and optimism and decadent living tumbled along with the figures. The GDP fell from $103.6bn in 1929, to $66bn in 1934 and the subsequent years of recovery were the most dramatic in US history.
1907 bankers’ panic
1907
Otto Heinze and his brother Augustus Heinze bought shares of United Copper.
The stock market was already cautious over the tight money supply, but the US was thrown into a depression after the stock market fell nearly 50 percent from its peak in 1906. The Heinze brothers thought they could influence market shares but ended up bankrupting lenders that provided the financing to buy the stock. A chain reaction left nine institutions bankrupt. By February 1908, the panic was over and the government created the Federal Reserve system, to prevent banks from exercising too much control over the economy.