By Eshe Nelson, Dan Kopf – Is gross domestic product a sufficient measure of an economy’s health?
Many argue that GDP, which counts the sum of the goods and services produced by a nation, fails to reflect a population’s well-being, because it accounts for neither distribution of income nor extractive effects such as pollution.
Wealth includes all assets, which means human capital (the value of earnings over a person’s lifetime), natural capital (energy, minerals, agricultural land), produced capital (machinery, buildings, urban land), and net foreign assets.
Assessing an economy by GDP instead of wealth is like looking exclusively at a company’s income statements without considering the assets on its balance sheet. A company can make its income look good for a short time by liquidating assets, but over the long run this will reduce the firm’s productive capacity and other means of generating income in the future.
The same applies to a country. GDP “does not reflect depreciation and depletion of assets, whether investment and accumulation of wealth are keeping pace with population growth, or whether the mix of assets is consistent with a country’s development goals,” the report states. more>
By Brad Cunningham – For those who haven’t played Scrabble recently, here’s a refresher. Players collect a number of individual tiles, each of which carries one letter of the alphabet. Players then combine their letters in order to spell words. The value of the words is determined by the sum of the value of each letter, with rarer letters (e.g. Q, X, Z) having a higher value than common letters (e.g. A, E, S, T). Players then compete to produce the most valuable words out of the letters available to them.
In an economy, firms endeavor to make products similar to how Scrabble players make words. To make a product, firms must bring together a variety of very different and very specific inputs and activities. Each of these inputs can be thought of as one capability needed for production, just as a letter in Scrabble represents one capability needed to make a word possible.
Under this model, there are two paths to industrial growth. The first path occurs when an industry with potential is new to an area and some necessary capabilities are not available locally. An entrepreneur must figure out how to create the missing letters and coordinate them with locally available letters to spell a new word. Once this problem is solved, industries can grow via the second path: by simply replicating and scaling up existing capabilities.
Developing countries can grow by bringing in capabilities from around the world, whereas developed countries generally have to innovate new capabilities to grow. more> https://goo.gl/m52AbL
Capital in the Twenty-First Century, Author: Thomas Piketty.
By Luke Kawa – According to Charles Goodhart, professor at the London School of Economics and senior economic consultant to Morgan Stanley, demographics explain the vast majority of three major trends that have shaped the socioeconomic and political environments across advanced economies over the past few decades.
Those three would be declining real interest rates, shrinking real wages, and increasing inequality.
The conditions that fostered these three intertwined major developments are nearly obsolete, and this has profound implications for the framework of the global economy in the decades to come. more> http://tinyurl.com/ntyfgd8
Posted in Banking, Book review, Business, Economic development, Economy, History, Leadership, Media
Tagged Banking reform, Capital, Economy, Financial crisis, Jobs, Monetary policy, Piketty, Super regions
Cliff house Giant Camera
(Photo credit: davidyuweb)
By Colin Neagle – As Congress continues to debate how it should prevent the federal government and national economy from plummeting off the so-called fiscal cliff at the end of the year, many technology companies – particularly smaller businesses and startups – may be unprepared for the ensuing changes.
Unfortunately for them, it may be too late to do anything about it.
For IT businesses, the fiscal cliff could mean higher taxes on research and experimentation than were imposed prior to 2011, a $114,000 decrease in tax provisions allowing small businesses to write off asset-related expenses, and the disappearance of a bonus first-year depreciation on expenses that stood at 100% as recently as 2011. More information on the impact of the fiscal cliff policy changes on the IT industry is available here. more> http://tinyurl.com/bydfghk
Reuters – The euro zone is likely to have slipped back into recession in the current quarter, according to a survey published on Wednesday (Sep 5) that showed a seventh month of contraction for the bloc’s private sector as new orders dwindled.
The Purchasing Managers’ Index (PMI), published by Markit, showed the economic rot that began in smaller periphery members of the 17-nation bloc is now taking hold even in Germany, the region’s largest and strongest economy. more> http://tinyurl.com/8mjw3mf
Posted in Business, Economy
Tagged Economy, Eurozone, Financial crisis, Germany, Industrial economy, Manufacturing, Markit Group, Purchasing Managers Index, Recession, Super regions