Savings Rate

I recently computed my post-tax savings rate. It appears to be about 50%. Is this amazing?

There are currently about 6.5 billion people on earth. Assuming a total world gross "domestic" product of somewhere between 66 and 72 trillion dollars in 2007 (see wikipedia), that puts global per capita income right around $10,600. Of course, the median income must be far lower, due to the immense concentration of wealth in the wealthy.

With this in mind, it might seem foolish that I, who would like to save up for house-building and restaurant start-up funds as quickly as possible, must spend $17,000 on myself every year. How can I cut costs?

The biggest cost is rent: about $8,400 annually, including utilities. By moving to a more densely populated house, I could conceivably bring that down to $5,000 or $6,000 without getting rid of possessions. The hard thing would be finding such a good deal and still have room to host guests.

Next is food. Maybe $3,000 per year. That could drop a thousand if I focused more on beans and rices.

Car depreciation, insurance, gas might run $2,000 per year. I could sell my car and stop traveling.

My bike maintenance is about $250 per year. No need for that. I can run.

Small White Mind seeking Research Topics

I've got time and access to data. I don't know much, but I'm surrounded by expert researchers who are happy to help. Supposedly my mental-mathematical creativity is near its peak. There is no better time for me to start solving the world's problems. But so far I can't think of any topic for which data already exists that hasn't been far too over-analyzed already. Help!

Santa Claus for President

What do YOU want out of your next president? If you're a generic US citizen, here is what you want:

• A growing economy, full of interesting job opportunities.
  
• Low taxes.
  
• Lots of free public services, especially health care and education.
• National security: protection from terrorism, environmental protection, and financial stability.
  

Good luck with getting that! My wish list is much more modest:

• End the income tax and introduce the FairTax. Just because Mike Huckabee is pushing the idea doesn't mean it's a bad idea. In fact, God probably came up with it.
  
• A $20,000 tax-free handout to anyone who gets a non-reversible sterilization procedure done before having a second child and before the age of 40.
• Bring home all the troops. If we really need national defense, let's at least have the integrity to fight our battles at home and not on other peoples' soil.
  
• End free education. Hasn't anyone noticed that 80% of students are more interested in finding ways to distract each other during their daily 8 hour imprisonment than they are in learning?
  
• Phase out minimum wages, labor laws, and anything else that makes life hard for businesses besides the most basic environmental protection and anti-monopoly laws. If we feel compelled to take care of our workers, the last thing we should be doing is preventing the growth of business. Better ideas exist, like just giving the workers money.

An Old Theme without Interpretation

Before the education-industrial complex, church and state were one thing. God selected the King or Emperor. A nation conquered was a nation judged by God rather than a nation that had fallen behind in arms, education, or economic competitiveness. This is not the only sense in which the state has come to replace the church. Nationalized health care, social security, and welfare conspire to reduce God's role in providing for the poor. Upwardly mobile people give thanks to the free markets. Within health care, demons have been replaced by psychological disorders or cancer. Although many people still use "prayer," it's not where people are putting most of their time and money when they get sick. What does it mean?

If the Federal Reserve Chairman would get involved in a Scandal ...

Federal Reserve Chairman Ben Bernanke today denied allegations that he was involved in some skanky hanky panky. Said Bernanke, "I care deeply about this swanky bank. The American people can rest assured that my actions have in no way defiled the position of confidence I am honored to hold ... and for that, they can thank me." Bernanke then dabbed his eyes with a hankie.

Book Review: Theory of Ordinary Differential Equations

Shame on Coddington and Levinson for smearing across 429 pages just enough mathematics to bore the typical slacker shmath student through about five undergraduate courses.

To his discredit, Coddington coddles the reader excessively. For example, on pg. 287, he makes the following Remark: "The only application of the results of this chapter will be for the case m = n, and therefore the reader may restrict himself to this case in what follows, if he desires." [Emphasis added. Sick, right?]

Levinson, too, waxes un-coshure with mathematical yeastiness in fluff like this on page 11: "However, as was pointed out after that proof, if the solution through the given point is known to be unique, then the original polygonal approximate solutions can be used to obtain the solution; no subsequence need be chosen." [Emphasis added. Levinson can go knead his own bread. I, on the other hand, like any self-respecting mathematician, am not about to neglect to choose a subsequence!]

Perhaps the authors' worst violation of the reader is their persistent refusal to accept responsibility for their actions, always instead failing to name the subject (and culprit) of each action described: "In the following a very useful method ... will be considered, and the existence of a solution will be deduced with it's aid." [Emphasis added. The tantalizing evasiveness brings to mind such titles as If I Did It.]

The Mankiw Review

Feb. 22: Obama at agrees with at least some libertarian sentiments, despite his recent anti-NAFTA rhetoric. In The Audacity of Hope, Obama writes that "the conservative revolution that Reagan helped usher in gained traction because Reagan's central insight--that the liberal welfare state had grown complacent and overly bureaucratic, with Democratic policy makers more obsessed with slicing the economic pie than with growing the pie--contained a good deal of truth."

Feb. 22: A cancer patient in the United Kingdom reportedly was forced to choose between these two options:
1.) Receiving public, less-than-state-of-the-art free treatment.
2.) Seeking treatment completely on her own, without public support.
She was not allowed to receive the public treatment for free while adding additional treatments at her own expense, thanks to the philosophy that rich patients should not have an unfair advantage over poorer ones. Mankiw adds, "This kind of situation is likely to arise more over time. Technological advance is making state-of-the-art health care increasingly expensive. In any kind of national health system, some treatments will, by simple cost-benefit calculation, be deemed too expensive to provide to all citizens."

Feb. 26: Reportedly, McCain has taken the unpopular-but-scientifically-excellent position that ethanol subsidies are a bad idea, because ethanol is an extremely inefficient alternative source of energy, and in at least some cases may contribute more to greenhouse gases than regular gasoline. Corn ethanol production is the worst, while sugarcane ethanol is not so bad.

The Mankiw Review (should rhyme)

http://gregmankiw.blogspot.com/ is an excellent source for economic inspiration. Here is a collection of Mankiw's most recent findings summarized and translated:

Feb. 13: Advocates of greenhouse gas emissions regulation debate the merits of a "carbon tax" system versus a "cap-and-trade" system. A carbon tax would tax emissions at a steady rate. A cap-and-trade system would put a fixed limit on emissions and let the free market decide who gets to pollute. (Under a cap-and-trade system, an uber wealthy anti-emissions group theoretically could lower the emissions cap by buying up lots pollution rights and not using them.) Mankiw quotes the Congressional Budget Office arguing that a carbon tax makes the most sense: "An inflexible cap-and-trade program would provide more certainty about annual emissions than would a tax; however, that certainty would come at a cost:The cap would require too many reductions when the cost of achieving them was high and would mandate too few reductions when the cost was low."

Feb. 12: The fiscal stimulus package idea is a disaster. Many economists say we probably aren't even experiencing a recession. Others say a small recession is no big deal, since historically recessions are immediately followed by booms. Others worry about the cost of the stimulus package and the growing national debt. Mankiw estimates that the short-term growth in the national debt corresponding to the creation of each new job by means of a fiscal stimulus runs at about $336,000.

Feb. 12: Mankiw points to research (http://papers.nber.org/papers/w7512) indicating that high taxes on the rich do more to reduce GDP than high taxes on the middle class.

Feb. 10: Income v.s. consumption: Households in the top fifth of the US by income make 15 times as much, but only consume 4 times as much, as households in the bottom fifth. Does this suggest that the wealthy in America, by and large, are acting as good stewards of wealth, placing their money in the service of economic growth rather than buying lots of junk?

Book Review: Between Genius and Genocide

Dan Charles provides an intimate view into German culture in the first 30 years of the twentieth century from the perspective of a prominent Jewish German chemist and industrialist whose absolute patriotism in the decades prior to the holocaust left the moral meaning of his life and work especially difficult to categorize.

On the one hand, we can see Fritz Haber as a patriot, a civil servant, and the inventor of a chemical process for nitrogen fixation responsible for the enormous harvests of modern agriculture. On the other, we see a profiteering militaristic capitalist jockeying for higher social status, a man striving to separate himself from his Jewish heritage, and a ruthless founder of chemical warfare.

This book is meticulous in its research on a topic about which much has been lost, and reveals much about the relationships between scientific research, the environment (it turns out that environmental problems stemming from nitrogen fertilizers might be no less a threat to humanity than global warming), war, politics, and capitalism in the German context in its effort to drum up details on the life of Haber.

Random note of interest: Dan Charles takes a somewhat non-mainstream approach to explaining China's green revolution in the 70's when crop yields suddenly skyrocketed. Whereas most economists point to a political change around that time -- the privatization of agriculture, resulting in farmers having greater motive to work harder for their own gain -- Charles points only to the grand entrance of nitrogen fertilizers into China around the same time. These were the fertilizers do to Fritz Haber, the same chemist who invented (as an insecticide) the gas used to kill his fellow Jews in concentration camps just ten years after his death.

Book Review: The Elusive Quest for Growth

William Easterly (2001) analyzes a bunch of factors that could influence a nation's rate of economic growth and seems to conclude that the vast majority of specific, conscious efforts by governments to increase the growth rate have not had a clear positive effect.

To date, loans from the IMF/World Bank on average appear to not help, or even harm, recipient nations, partially due to how recipient governments are either temporary (and thus do not have a strong incentive to think long-term) or are autocratic (and thus do not necessarily care about national growth as much as personal gain).

Investment by governments to jump-start specific industries at home, in the absence of an already-vibrant network of commerce, business connections, and a skilled workforce, often fail disastrously. Governmental corruption, by creating a non-productive black market for favors and bribes, tends to slow growth.

The brain drain is another threat to growth for the poorest countries. Poor countries can't build an educated work force if every educated or highly skilled person chooses to migrate to industrialized nations where the wages for highly skilled work are higher.

Two factors strongly associated with low economic growth are income inequality (where a wealthy, educated elite would have a lot to lose if an educated middle class became large enough to seize political power) and ethnic diversity. Ethnically diverse nations tend to be polarized. The costs of polarization include wars, costly political battles, and a slightly less efficient market on the ground due to lack of trust between buyers and sellers.

Possibly the most surprising conclusions of the book are that education and investment often seem to do little good in third-world nations. The reasons for this are complicated. Read the book.

Overall, the books title pretty much gives it away: the quest for growth is elusive. Easterly does a much better job of describing how to promote growth despite complexity in The White Man's Burden (see review below).

Blueprint for a Restaurant

Here is how to break into the restaurant industry with minimal start-up costs and massive profits by offering cheap and healthy fast food targeted at lower-to-middle income people in the US.

First, choose a good spot in a good city. The ideal spot would be right between the blue-collar business district and the blue-collar residential district, so as to maximize visibility to the target customers. Next, design the world's simplest menu. For example: Rice, Chicken or Tofu gravy, Broccoli, Peas, Roles, Whole-grain roles, Stewed cinnamon apples, Chocolate chip cookies. Next, set the world's lowest prices: A big serving of rice plus a big role plus gravy plus a vegetable is just $2.50. Cookies are small and cost only 25 cents each, and half a stewed apple is 50 cents. Next, design specialized machinery that enables one technician (you) to churn out about ten thousand of these meals per day. Waste no money on advertising, but serve all meals for free until the level of business threatens to surpass your production capacity. Like Google, allow companies to pay to place advertisements throughout your restaurant and on your road-side billboard. Be as secretive about your existence as possible, so that people who find you feel proud of their discovery and bring all their friends. Maintain large, clean bathrooms. Do not install TVs or play music. Instead, softly play a continuous recording of polite applause, taken, for example, from an old Peter, Paul, and Mary live performance record. At the same time, play another soft recording of the bubbling/banging/frying sounds you would imagine a woman would make back in the fifties as she cooks in the kitchen.