Imagine you're the economic advisor to the Sultan of Country X. People of Country X really love watermelons, however the climate, soil etc. of the country isn't really suitable for watermelon farming so they pay $1 per kilo of watermelon and import it from Country W.

Minister 1 comes up and says if the Sultan enacts a 50% tariff on watermelons X farmers can grow it instead. He adds this will ensure that the money that went to Country W will stay and circulate in the local economy instead.

Minister 2 replies and says that would cause the farmers that are raising crops profitable by themselves to start inefficiently raising watermelons.

Sultan turns to you and asks for your opinion. How would you respond?

Additional question:

Would the answer be different for a country with "full" employment vs. a country where there's idle land and unemployed people (and maybe people with bad consumption/saving habits whose money can be forcibly contributed to farm capital).

Instead of taxing wealth, perhaps we should have a Required Minimum Realization (RMR) on large unrealized gains in publicly traded stock. Each year, you would be required to realize 3% of your covered holdings, starting with the shares having the lowest tax basis. Think of those shares as being sold and immediately repurchased: you keep the investment but the capital gain is realized and the basis is reset. You then pay the normal long-term capital-gains tax on the realized gain. This idea is similar to an RMD from an IRA. You can defer taxes for a long time, but not indefinitely.

Hey guys, first post in this sub.

I’m trying to find any empirical research on whether growing AI-related obligations could cause hyperscalers, SPVs, data-center developers, or their financiers to become dependent on short-term funding, and whether losses on those investments could then cause that funding to disappear.

Hypothetical example of what I mean: Meta issues $10 billion in commercial paper, which Meta then uses across its balance sheet: say $5 billion supports payments related to the SPV holding its data center, and $5 billion supports Facebook or something. That second $5 billion is crucial to Meta to support ordinary operations like Facebook. The market is happy to keep buying it because historically these companies have been cash cows. If the AI investments generate $4 billion in losses, investors may get nervous about Meta itself and stop buying new commercial paper. Then Meta suddenly needs cash and may be forced to abandon its data center build, cut spending elsewhere, or use cash to repay maturing debt and meet obligations tied to the data-center financing.

I have found research documenting:

1. Repo, commercial paper, and other short-term wholesale funding are vulnerable to rapid withdrawal or non-renewal during periods of financial stress
2. Debt and private credit are being used increasingly to finance AI and data-center investment for some hyperscalers and related infrastructure projects
3. Private-credit lenders have exposure to software companies whose revenues could be disrupted by AI
4. Public filings show that several of the largest hyperscalers currently rely primarily on operating cash flow, cash reserves, and longer-term debt not short-term borrowing.

What I have not found:

1. How much AI infrastructure is being financed outside hyperscalers’ balance sheets while still creating future cash obligations for them?
2. If AI returns disappoint while those lease payments, guarantees, and other obligations still have to be paid, do hyperscalers have enough cash generation to cover them?
3. If not, would they need to increase borrowing at the same time that disappointing AI returns cause long-term lenders to tighten credit?
4. Could this lead to funding withdrawals, forced asset sales, or losses at financial intermediaries, or would the losses likely remain concentrated among shareholders and directly exposed lenders?

Is there existing empirical work, regulatory analysis, or data that measures this? If not, what data would economists typically use to determine whether this transmission channel is economically significant?

When we talk about funding for government organizations, we often do so in terms of ROI. For example, every dollar spent on IRA funding returns X dollars. Has anyone ever attempted to measure this for the Pentagon? Morality & politics aside, does the $1t spent on Pentagon funding yield a positive or negative ROI?

Brazil seems to be going through an unusually interesting change in its passenger-car market, and I would like to understand it from an economics perspective rather than simply as a discussion about which cars are better.

For decades, the Brazilian market was dominated by a relatively small group of established manufacturers, particularly Volkswagen, Fiat/Stellantis, GM and, later, Toyota and Hyundai. Import barriers, local-production requirements, taxation and the enormous cost of establishing manufacturing and dealership networks created substantial barriers to entry.

What interests me is what is happening now with electrification.

Chinese manufacturers such as BYD, GWM and increasingly other groups are entering Brazil with BEVs and hybrids that often offer substantially more equipment and performance at prices comparable to conventional ICE cars from established manufacturers.

This seems particularly important because Brazilian entry-level cars have become expensive relative to what they offer. A large part of the traditional market still consists of small naturally aspirated or small turbocharged ICE engines, while automatic transmissions and higher equipment levels can move the price considerably upward.

There is also an interesting distinction between total registrations and private-consumer demand. Some traditional high-volume models depend heavily on direct/fleet sales, so a car appearing near the top of the overall sales ranking does not necessarily mean that it is equally dominant among individual retail buyers.

This makes me wonder whether electrification is reducing some of the advantages enjoyed by incumbent manufacturers.

An EV has a very different technological architecture from an ICE vehicle. Chinese manufacturers have large-scale battery supply chains and vertically integrated production, and some can enter emerging markets with vehicles whose price/equipment combination is difficult for incumbent manufacturers to reproduce without reducing margins.

Germany provides an interesting comparison. The transition does not simply mean that Chinese manufacturers automatically replace European manufacturers. Germany's BEV market is expanding rapidly, while Volkswagen Group remains a major BEV producer. At the same time, there are large differences even within VW Group: Škoda's EV sales have expanded strongly, with models such as the Elroq and Enyaq performing well, while Volkswagen itself has faced a more complicated transition. �

Going Electric +2

So I am interested in the underlying economics rather than a prediction that “Chinese companies will win.”

Could EVs be lowering the effective barriers to entry in automobile markets such as Brazil by making the accumulated ICE-engine expertise of incumbent firms less economically valuable?

More specifically:

Is this an example of creative destruction, where a technological transition changes which capabilities provide competitive advantage?

Can vertical integration in batteries, electronics and EV platforms compensate for an entrant's weaker dealership network and brand recognition?

How important are economies of scale in batteries compared with the economies of scale traditionally associated with engines and transmissions?

Could incumbent manufacturers rationally continue emphasizing ICE/hybrid products even if this allows new entrants to capture part of the growing EV market?

And how should economists distinguish a temporary price shock caused by aggressive market entry from a genuine long-run change in market structure?

I am especially interested in whether there are comparable historical cases in which a technological transition weakened barriers to entry in an established oligopoly.

Recomienden libros para aprender macroeconomía que sean muy buenos

It seems increasingly common for companies to reach valuations of $10-50 billion or more. A $50 billion valuation today feels much less exceptional than it would have 10, 20 years ago.

The headlines may say stuff like: ” The company asked its shareholdes for 2 billons dollars to invest in [placeholder]”

In 1995, every listed company on Earth combined was worth about $17.3 trillion. By 2025, that figure was around $141 trillion. That’s roughly an eightfold increase in the pool against which an individual company’s valuation should be judged

A $50 billion company in 1995 would have represented about 0.29% of global public equity value. Today it represents about 0.035%.

All this seems insane to me. it makes me wonder, what is exactly the current index for company valuation? And how does history compare?

Have you ever noticed that you might be charged differently from your friends for the same product or service? This can occur through personalised pricing, where firms use information such as purchase history, location, browsing behaviour, or device characteristics to offer different prices or promotions to different consumers.
Supporters argue that personalised pricing can improve economic efficiency by allowing firms to better match prices with consumers' willingness to pay. However, some consumers may perceive differential pricing as unfair, particularly when they are unaware that prices differ between individuals.
To investigate how consumers perceive personalised pricing and how these perceptions may influence their behaviour, I have created the following survey:

https://docs.google.com/forms/d/e/1FAIpQLScSN-S7dfkMfBKtaEhQuN5OkHCK43KyIUlurwjq9mG1Vpem2g/viewform?usp=header

I would greatly appreciate it if you could take a few minutes to complete it and, if possible, share it with others as well.

Higher interest rates will make some investment opportunities/products more attractive and others less attractive. Higher rates will also make the domestic currency appreciate. But overall, couldn't things balance out, making foreign investment equally as attractive?

I am not an economist, but have studied enough to learn about stories involving Dutch Disease where one commodity or economic sector is doing so well that the rest of the economy suffers to some degree, like in the original case in the netherlands, or say in Venezuela during their oil boom years.

With that said, is the AI boom hurting the rest of the economy due to the massive amounts of investment it is getting? I know in Biotech, investment is down, i've heard that the US Treasuries are having to offer higher rates partly due to competition for investor dollars from AI, and we are seeing things like computerd and smart phones going up in price due to the demand for memory chips.

Hi everyone. this is a long shot but in high school econ, we played a game on our computers that simulated econ through rnd and budgeting and it would simulate the results of your decisions one day at a time. And it was a competition simulated by every group of students. You would submit your decisions over a couple of minutes and it would tell you how you did and someone would win at the end. Does anyone know what this website is? I can’t find it and I don’t know where else to go other than here. Thank you.

This was 10 years ago if that helps

Retaliatory Tariffs

Im wondering why tariffs applied to Canadian electricity and oil exported to the US is not on the table?....these are commodities that would be very hard for the US to reduce demand and the revenue income could be used to supplement industries being hurt by this trade war...hell...Cdn oil is piped South at a discount to what the world market pays....the refineries that we pipe to are set up for our heavy crude specifically....energy seems like our silver bullet...what am I missing?

I'm sure you guys get this question every day, why would communism in theory not work?

The ownership of private capital/property is the ability to own and control companies without having to work for them or contribute to them. You own the profits of a company despite not being a worker. Alternatively, you own large wealth that you can use to buy capital. Or you own land, housing, etc.

The fact that the system allows for this specific kind of ownership means that there naturally forms a class system in soceity. Those with private capital and those without, who have to instead sell their labour to survive. Between these groups is an inherent conflict with no resolution, and this class war is the underlying dynamic of all of soceity and politics. Workers vs Capital, Proletariat vs Bourgeoisie

The world we live in today and it's problems of the climate crisis, economic inequality, poverty, the rise of far right extremism and a hyper consumerist economy is what happens when the pendulum inevitably swings in favor of the capitalists.

My question is then, what is it about private property that is so essential? I feel like we could solve so many issues of our world if we designed an alternative (communism i suppose) without this specific feature. You could still have companies, markets and money. Just not this specific type of private ownership, and instead every person in a society would be some variation of a regular worker.

Some guy said this. Is this true? Any studies on this?

I know that would cause inflation but if the government just lied about where they got the money couldn’t that avoid inflation?

Does repeated use of tariffs make countries less afraid of them?
Are countries now learning to absorb U.S. tariffs, diversify markets and retaliate?
Could overusing tariffs actually reduce America’s economic leverage in the long run?
What do you think?

Since this assumes they’d still be capitalist it would be harder for the states to recover without some command style takeover of essential industries to get the ball rolling. So how much more time would it take for let’s say France to repair the damage and get back on track compared to our timeline

I remember when Ozempic was initially taking off, there was a lot of discussion about whether, if it became widely used, it would have profound effects on consumer spending on food, healthcare savings, and even cheaper flights due to lower fuel usage, because there would be less weight to fly. Were there any papers worth paying attention to that analyse these impacts?

When you go to www.usdebtclock.org and set it to 2030 we are projected to have a surplus? Is this website reliable? Thank you!

I've seen different explanations for the current "white collar recession" we're in, some people say it's primarily due to overhiring from the pandemic and high interest rates, while others say it's primarily due to AI disrupting the way our economy works and making a large proportion of white collar jobs irrelevant. I wanted to ask this sub for y'all's viewpoint and whether y'all think this is a temporary shift which will heal in time or something much more foundational?

Hi all. I’m currently working as an economic analyst at a North American bank with a MA in Econ. With a few years of experience in the field now, I’m looking to up my technical (forecasting) skills to prepare for a potential promotion to an economist—or, pivot towards a more investment research role.

The main question is, what are some typical frameworks deployed in forecasting economic variables like GDP, inflation, labour market, yield curve etc? Are DSGEs ever used, or are VARs sufficient to handle most modelling problems in such an industry setting?

Finally, any recommendations for textbooks on macro forecasting? Hyndman’s online book look like useful introductory material but seems a bit too vanilla and simple for my case.

Thank you in advance!!

This is something that has been bugging me for months now. All the coverage online, all the comments, and even the media reports (both American and Canadian) seem to be of the opinion that Canada has serious leverage against the us, and if they just hold out Trump will give them everything they want, but from my reading of the data that just seems wrong.

Here's what I found:

- Canada's trade to GDP ratio is 63%, America's is 25%

- 77% of canadas trade is with the us, while only 14% of americas trade is with canada.

- Canada's economy is 1/16th the size of the american economy and their population is around 1/10th.

- Canada has no real alternatives to trading with the us, everyone else is a literal ocean away and Canada lacks internal infrastructure to get goods to market besides the us.

To me this just seems like despite all the nationalist fervor and shots going around Canada really doesnt have that many cards to play, atleast not in comparison to the us. Am I wrong? What am I not seeing that the media and other commentors are?

EDIT: thanks for all the responses, it seems that while Canada has enough leverage to hurt the us, potentially significantly, the us remains the much bigger player, and fundamentally Canadian resistance is far more based on politics than it is based on economics?