40 Times People Had Questions For Economists, And They Gladly Answered Them

"Someone needs to sit Trump down and teach him economics 101. Basic goods like aluminum and steel are low-value goods, producing them is low-wage jobs. What you want is high-wage jobs like turning aluminium and steel into cars. But, the price of cars made in America will go up if the price of aluminum and steel goes up, making them less competitive. Logically you would put tariffs on imported finished products, not basic goods, to encourage manufacturing. If you tax imported basic goods, you are actually HURTING manufacturing jobs. How can he not know this?

Like why wouldn't an American car manufacturing plant MOVE to Canada for access to cheaper steel and aluminum and then send the finished good here? That's the incentive Trump is creating.

Someone explain this to me. I think obviously no tariffs would be best, but if you MUST have tariffs to promote your American First ideology wouldn't you want to have tariffs that make logical sense to promote the thing you actually claim to want? Making steel and aluminum more expensive in the US will across the board hurt all manufacturing companies, forcing them to raise prices and cut jobs to stay competitive... just WHY?"

Your economic logic is sound. Trump has zero understanding of economics.

If you're asking why he's doing what he's doing, that's a psychoanalysis question, not an economics question.

The answer to why people want factory jobs back is not rooted in any objective and factual reasoning about the actual potential factory jobs you could bring back.

It's a political fantasy, that's all.

There are 4 core things you need in order to make a profitable EV business. Tesla got as big as it did with only 2 of them, BYD has got everything.

Firstly, you need good and cheap batteries, which can easily be 50% of the cost of the entire car. For a long time these two adjectives were at conflict. Nickel-Cobalt-Manganese batteries were good (long range, quick charge) but not cheap (price and limited global supply of metals). Lithium-Iron-Phosphate barriers were cheap, but not good. Two different philosophies hence emerged. Western, Japanese, and Korean manufacturers focussed on NCM batteries which give them very high profit margins and tried to make them cheaper. Chinese manufacturers focussed on LFP batteries which had very low profit margins and tried to make them better. The Chinese chose correctly. It was much easier to make LFP better and slightly more expensive, to the point where the performance difference is small. In the meantime, a key weakness in NCM batteries, namely the fact that they are super flammable emerged, making them even more expensive especially to ship. The West was originally better at making both battery types, but after 10 years of diverging specialisation, the Chinese completely dominate LFP technology and are getting progressively better at it too.

Secondly, you need to sell enough volume to have enough scale. This isn’t unique to EVs or even cars, and has been the secret to US success up to this point. The US has 300 million middle income consumers within a single integrated region. To be a successful company for anything just needs you to sell successfully in the US. China is the only other place in the world where this is true, and that is quite new and getting better each year. China right now has about 400 million middle class each with purchasing power about a quarter of the US, so equivalent to only about 100 million US consumers. This is more than enough. While American drivers already have established habits about the cars they own and drive, the Chinese consumer is a blank slate. There is no established product loyalty or brand loyalty, and car penetration to begin with is low. When you sell an EV to an American consumer you have to persuade him to first sell or scrap his current car, then to move to a completely different type of car, and then to pay up for features he has lived without up to now. Selling to a Chinese consumer is much easier, and means that the BYDs and Xiaomis of the world can very rapidly hit production volumes that are profitable.

Thirdly, you need to have some way to differentiate your product. ICE cars largely got by on brand loyalty, with consumers willing to pay different amounts for perceived differences in performance, feel, and look. The actual differences were relatively minuscule but the market structure was effective at making you pay more for a Ford than for pretty much the same Toyota. For better or for worse, the EV market has not operated like this especially in China, and brands are now differentiating on genuine innovations. Companies like Li Auto are specialising as family cars that are essentially small limos with all manner of amenities and features like massage chairs and beds; others like Huawei’s AITO are banking on self driving systems far more advanced than Tesla; BYD is just trying to do everything pretty well but really cheap. Only Tesla has really succeeded in the West in doing anything like this (and maybe the Porsche Taycan), while everyone else really can only sell a generic product at the same price.

Fourthly, you need good charging infrastructure. Here China, Japan, and Korea have the unique advantage of new power infrastructure combined with dense populations. The new infrastructure makes it cheap to expand, while the later urban population makes short range batteries viable and don’t need you to build charging infrastructure in the middle of nowhere. Europe has the first problem while the US has the second.

You aren't missing anything here.

We manufacture stuff where I work.

Our steel comes from Philadelphia, Our aluminum comes from Canada, our gaskets come from Turkey, our nuts and bolts from China, our electronic panels from Taiwan..... There is NO way we'll build an aluminum foundry, a gasket shop, a chip foundry tomorrow to support our production needs.

There are NO plants in the US that can ramp production up to meet our aluminum, gasket , chip , nut and bolt needs.

We buy cheap stuff from all over the world, turn it into a higher value product, and sell it all over the world. Think like a Mack truck, John Deere tractor or KitchenAid mixer.

We sell, all over the world, because we have a quality product at a competitive price.

Now , put 10% tariff on aluminum we buy, 50% tariff on our nuts&bolts; then add another retaliation tariff from EU. I just have a product that cannot compete in any market.

Yes. Jimmy Carter effectively forced a recession by promoting Paul Volcker as chairman of the Fed and telling him to do his job appropriately.

Volcker attacked the stagnation of the 70s by dramatically increasing interest rates to recenter the economy. This was not popular.

The resulting recession arguably cost Carter any real chance at a second term with many calling him a terrible economic president; however, one could make substantive arguments that he laid the foundation to economic growth we saw over the next two decades, if not longer.

Partly thanks to his targeted deregulations, but I think the credibility he gave to the USD is the most significant factor in the US' surge as an economic power beyond his term.

He bought USD credibility in the face of inflation by sacrificing the US economy over a short window.

Oil sales are still happening to Asia.

India specifically took nearly all the slack created by the reductions of exports to the European Union.

I think it's very likely. China is definitely stepping forward as the world economic leader, but has also been focusing on investing in various countries' infrastructure for years. It's already built a network of soft power initiatives. I guarantee new trade treaties are being drafted.

The UK does not pay the most for water. The UK has one of the lowest subsidies per passenger mile for Rail and energy costs are heavily taxed.

Denmark has pretty high tax to gdp ratios; second in the OECD after france (43% vs 25% for the US). they're also really rich (ignoring tax havens and qatar, they're around the fifth richest country in the world in terms of GDP / capita, adjusted for PPP) and have a relatively low gini index. all of those are a recipe for the median denmarkian having a high standard of living. similarly, if the US was to increase its tax to GDP ratio it could also afford a much welfare state.

most of the concerns about the french welfare state's solvency have to do with its pension obligations. i've no idea what the denmark equivalent is.

as a last point, i have denamrk at ~1.5-2% military spending as a share of GDP vs 3.4-3.7 for the US.

If we had higher taxes based on size of company, this would force companies to split into a vast array of smaller companies. This would be very inefficient with no benefit at all.

Governments can force progressive taxes on personal income because humans cannot split into multiple other humans. A person who makes 100k cannot split into ten people who each make 10k.

It's because China:

- opened up their economy before India did (1978 vs 1991)

- attracted more foreign investment

- had a higher savings rate

- tackled corruption much better

- placed a higher priority on education

- invested more heavily in Research and Development

- industrialised far faster (built infrastructure, industry and electrified the country more rapidly)

- took on higher risk, higher reward loans in their credit sector to fuel infrastructure growth

- urbanised their rural population at a faster rate (increasing productivity and creating a larger worker pool for manufacturing)

- undervalued their currency to make their exports more competitive

- achieved higher gains in Total Factor Productivity, by more efficient resource allocation in their industrial sector

- has a system of government where officials future career prospects are contingent on their ability to deliver economic growth

These are just some that I can name off the top of my head. There are a lot more, but I think this list covers most of the important ones.

It goes to show how big of an impact governance has on economic growth. The current divergence between the two even more surprising considering India was slightly ahead of China in the mid 70s on a GDP per capita basis.

"Even if the US enjoys high GDP growth, are there major areas about the economy that could be improved?" is a question economics can answer.

The answers to "Why does the current administration want to 'fix' the economy?" are largely political and not economics. On many accounts, economics would heavily disagree with their notions about what "needs fixing" and/or their attempts to "fix" it.

Yes, but the caveat is that the accepted standing of living was way less than it is now. My grandparents on a single income had a house that was less than 1000 ft.² with one bathroom and only one car, and they had to work hard and save just to have that. The not working spouse also had substantial stuff to do at home because there weren’t nearly as many time-saving appliances.

Scroll back in the thread and I think there’s been more substantive discussion about it. The short version is that yes, housing was cheaper relative to incomes, but other things were way more expensive than they are now. Notably, food, clothing and electronics/appliances.

A few points I've made here before. We know that the interest rate (16%) and the inflation rate (8.4%) are fairly high. Russian government statistics tell us this. It could be that inflation rates are actually higher, but it seems unlikely that they are lower.

The sanctions are not as big a problem as people think. Russia can sell oil to China and India. Though this is limited by the rate of flow of the pipelines to those countries. Also, the Chinese and Indians are probably not giving the Russians favourable prices. This is one of the advantages of selling commodities.

Russian business can buy from many countries outside of the Western ones who have sanctioned it. Also, it is often possible to smuggle goods. In many cases simple trans-shipment is all that's needed. An agent in some African country buys a sanctioned good from a US company. Then that agent re-exports the goods to Russia. This is why Russia's many Boeing and Airbus aeroplanes are still flying. So, Russia doesn't even really need to fully decouple from Western imports, just reduce them to the level so that those which are needed can be brought in using these methods.

Russia's military spending as a share of GDP is also not that high (of course Russia may not be giving accurate numbers to the World Bank). This is not a war on the scale of WWII or anything like that.

All that said I'm not ruling out the possibility of sudden change in Russia.

In short, yes. Both of you have derived pleasure, presumably, from being each other getting slapped. Therefore you both produced something (entertainment) for each other.

As an aside, hopefully you both reported the income and paid taxes, so in actuality this wasn’t net zero for either of you but a net loss.. ;)

The US had a recent credit downgrade. This means that US debt is considered less safe than it was prior, and so the rate should be higher. This is due to the US having a large budget deficit and active discussion in Congress of unfunded tax cuts.

In the presence of inelastic supply caused by regulatory supply constraints any and all sources of demand can do nothing other than impact prices.

The impact of immigrants alone on home prices pales in comparison to the total impact of the regulatory supply constraints.

Black people* in America have higher poverty rates, lower incomes, lower wealth levels, higher unemployment rates and experience worse economic outcomes compared to White and Asian Americans. Incomes, wealth, and poverty are comparable to non-White Hispanic people and to Native Americans (along those metrics Black people generally do better**; on other outcomes, like eviction or incarceration rates, this is not true). There's some evidence that economic outcomes between Black and White people are converging, but, to the extent this convergence is happening, this convergence is very slow.

The "why do Black people have worse economic outcomes than White people" is a really long question****. The short answer -- a long a continuous history of racism in the United States -- is correct, although not maybe not the most helpful for spelling out how exactly this manifests itself. I'll write a brief series of events, with the understanding that nothing I write will be particularly comprehensive as there's vast amounts of scholarship on this and I'll be omitting lots of things. I'll be writing this through the lens of where Black-White economic convergence does and doesn't happen. I'm also going to be lumping Black women and Black men together, even though a more complete answer would talk seperately about the two groups, since their economic experiences are different in some important ways.

In the immediate aftermath of emancipation, Black wealth was rapidly converging towards White wealth (see figure 1 from the fourth link). To a large extent this was mechanical; Black wealth prior to the Civil War was, for obvious reasons, very close to zero, which meant that any increase in economic circumstances, would show up as rapid convergence. For context here, the convergence was per-capita White wealth 60 times than of per-capita Black wealth shrinking to about 20x. Relatively quick convergence through reconstruction until around ~1900, where it stalled out at ~12X. My read on why the convergence stalled out was that Reconstruction was kind of a failiure and Jim Crow era laws in the South were pretty explicit about being designed to perpetuate Black poverty.

Turning to the first Great Migration (I think historians quote it as begining in ~1910), in which a large number of Black Americans moved North to try and escape oppressive Southern laws, there's some evidence that early Black migrants saw better economic fortunes, however, mass Black migration lead to White Americans to self segregate; government spending was reallocated away from areas where Black people moved to, schools became segregated, crime increased, and poverty became much more concentrated. (see fourth link for a paper and some discussion on this). Making the Second Ghetto is also a good book that covers the back end of this phenomoem. Also happening concurrently was the rise of a lot of pretty explicitly discriminatory housing laws that prohibetd Black people from owning property in certain areas (racial covenents); these covenants would not be deemed illegal until 1948, and were often replaced with laws that, in practice, acted as racial covenants (see The Color of Law for more).

Racial wealth convergence continues post 1900 through around 1980, although at a much slower rate. Income convergene happens as well, which we can track with better ease after 1940 when the Census begins asking about it. Despite slow convergence, Black people were explicitly and implicitly locked out of many New Deal programs that allowed middle class White people better access to education, home ownership, and jobs. People usually think of "redlining" as the policy most synonomous with this; I think redlining should be thought of as a catch all term for housing discrimination that Black people faced, since the way the actual policy worked doesn't quite line up with how people think (It was more FHA loans than HOLC maps that are commonly cited). If you're thinking of why there's a very large Bla

Because they can finance a lot of their assets to get roe to over 10%.

Also 3% margin is a % of revenue while a t bill would provide you a % of assets. I'd wager Walmart probably turns over between 2-3x it's assets in sales (I'm not going to look) so before you eliminate the leverage you need 2-3x the yield to get to the same profits based on asset value. T bills don't yield 6-9%, they yield 4.5%.

I find a Hirschian model on this helpful. As more of our basic needs are met, we substitute more of our income towards positional goods - markers of power and social status. Unlike other goods, we cannot increase 'social status' in the aggregate - it acts as a conserved quantity.

This spills over into other product markets. Consider housing. Yes, a house is a place to live, but it is also a conspicuous marker of social status - your neighborhood selects you into a peer group and community. If you read arguments against housing expansion, many of them boil down to a desire to maintain exclusivity.

In the United States (and across the industrial world), an aspirational lifestyle from the middle of the 20th century is now widely available. If you want to own a small home and a car in a small city, that is broadly accessible on working class incomes. That just isn't an aspirational lifestyle anymore.