Posts Tagged ‘economics’

On pennies

Saturday, February 2nd, 2013

The BBC has an article on whether or not the UK may end up withdrawing the penny as too small.

What the article apparently has forgotten, when carefully noting the examples of Canada, Australia, Brazil and New Zealand, is that the UK has withdrawn currency for being too small – the halfpenny circulated until the end of 1984 (you still found a couple in the backs of drawers when I was small). (It’s not the only coin to have been withdrawn in living memory; the pre-decimal farthing was withdrawn in 1960 as too small.)

It’s informative to look at how little something had to be worth to be withdrawn then. Using RPI, in 1960, 1/4d was worth £0.0196 (2011 values). In 1984, 1/2p was worth £0.0131 (ditto). The penny is worth substantially less than either earlier coin was at the time of its withdrawal…

Capital Gains Tax side-effects

Thursday, June 3rd, 2010

From the Telegraph:

Britain’s biggest building society issued a veiled warning to the coalition government that its plans to raise capital gains tax (CGT) may put the partial recovery in house prices at risk.

Buy to let and other landlords now own more than one in seven British homes or 15 per cent of the property in the private sector, according to Nationwide. Government plans to double the CGT landlords pay from its current fixed rate of 18 per cent to “closer” to 40 per cent, could cause many to sell and force prices down.

You know, in a more sensible world we’d be reading that as a two-for-one bonus, not as a terrible death-knell side effect. Buy-to-let speculative investment is distorting the housing market; anything which calms it down is all to the good.

We don’t expect government policies to make the price of used cars depreciate less drastically. We don’t expect government intervention to stabilise the antiques market, or tax policies carefully tailored to make unit trusts continue to burgeon. We are happy to see industrial or commercial property firms humbled by the shifting economic vagaries of the market. But put your money in residential property, and it seems the safety of your investment is the concern of every economist in the country.

There’s something a bit weird there.

Authorial inequalities

Friday, May 14th, 2010

A recent post in Charlie Stross’s series on misconceptions about publishing (more on which anon, hopefully), has an interesting side-note:

Interestingly, the researchers went on to calculate a Gini coefficient for authors’ incomes … The Gini coefficient among writers in the UK in 2004-05 was a whopping great 0.74.

I felt you could make a dramatic comparison from that, so I went to check the figures. The surprising thing is, though, Gini coefficients that high just don’t usually exist on a national level – there’s only one or two countries where we have the data to reasonably conclude it’s as high as 0.7. (Namibia, if you’re wondering). The reason for this is that rural hinterlands tend to reduce the effect of the inequalities of the cities (which are, obviously, where you find both the urban shantytowns and the wealthy metropolitan elite).

Are there, then, specific cities where it’s this bad? Yes. Again, just. The worst cities in the world, by inequality, are the major metropolises of South Africa; even there, it peaks at about 0.75. So, visualise it that way for a second: the population of people in the UK who are paid to write, full-time or part-time, has a level of economic inequality on a par with that of the population of Johannesburg.

It’s quite a staggering image, really. You realise it’s a very sharp differential, but you don’t realise it’s that steep!

The least valuable thing imaginable

Thursday, April 8th, 2010

Clearing out a drawer of papers today, we discovered two old banknotes, probably a gift from a far-flung relative many many years ago.


The astute reader will notice “Reserve Bank of Rhodesia” at the top of these; they were the banknotes hastily printed after UDI in 1966.

The Rhodesian pound became the Rhodesian dollar, which became the Zimbabwean dollar – which, famously, then was redenominated three times before effectively ceasing to exist last April, at a ratio of about 250 to the US dollar.

If we follow through each of the redenominations, taking the fiction it remains a functioning unit of currency, then… £1 10s Rhodesian turns into $3 Rhodesian, then $3 Zimbabwean, then – it rapidly becomes silly – $0.03 Zimbabwean (2006), $3×10-13 Zimbabwean (2008), and finally $3×10-25 Zimbabwean (2009); on 12th April 2009, the last day of it remaining in existence, it would thus be worth 1.2×10-27 US dollars, or just under 8×10-28 British pounds.

It’s hard to give the context for just how small that is. If you could somehow find an Indian ten-paise coin, probably among the lowest value currency units still circulating in any number, it’d be worth ~$0.0025; two trillion trillion times more than the nominal value of the two banknotes. (For comparison, the entire world economy is worth a mere thirty million trillion times the ten-paise coin…) The famous German post-WWI hyperinflation over three years only devalued the currency by 1012; this is quite literally a million million times worse. The only currency which collapsed further seems to be the Hungarian pengő, which over five years during and after WWII devalued by 1029.

The Treasury, unexpectedly, turns a profit

Wednesday, March 24th, 2010

Here’s an interesting note, buried deep in all the Budget reporting today – a report from UK Financial Investments, one of the world’s odder holding companies.

Shares in the two part-state-owned banks, RBS and Lloyds, closed at 44.49p and 64.2p respectively today, rising after the Budget failed to demonstrate we were ALL GOING TO DIE (etc). This is a substantial improvement on this time last year, though far from the highest they’ve been in the interim.

What it also means is that… well, the Treasury poured money into these banks like water in 2009 to stabilise them, taking share capital in return. They got an 84% stake in RBS – 90.6 billion shares – in return for £45.5 billion in funding, and a 41% stake in Lloyds – 27.6 billion shares – in return for £20.3 billion. The maths are simple – 45.5/90.6 = 50.22p per RBS share, 20.3/27.6 = 73.55p per Lloyds share.

But between them, these two banks – mostly Lloyds – have paid back just under £3.2 billion of that initial funding, in cash. If we subtract this from the total investment, we find the cost to the Treasury of those shares is… 49.89p per RBS share, 63.16p per Lloyds share.

Which means that UK Financial Instruments is currently sitting on a paper loss of around £5 billion in RBS shares, but a paper gain of around £280 million in Lloyds shares.

There’s clearly still a long way to go before it would be economically or politically viable to sell these shares, but it does look to be on the right track – it seems distinctly possible we’ll see the Treasury actually turning a profit on these over the next few years, even accounting for the cost of the borrowing to pay for it (at, what, 4%?).

(On a semi-unrelated note… I was quite unimpressed by the Conservative response to the Budget. All it seemed to involve was hammering on about how large the deficit was, without ever touching on… well, what else they’d have done. A missed opportunity to actually discuss economic policy, there.)

Fake reward signs

Friday, March 5th, 2010

Via Andrew Garrett, this amusing image: two signs, one advertising a $50 reward for a lost ipod… and the other advertising a $51 reward for a lost ipod. Amusing, but I can’t see anyone actually calling the $51 guy.

Let’s assume you were indeed some kind of conniving scammer; how would you go about this, presuming that “take down the first poster” isn’t an option? The person who lists second needs to pick a value that increases the plausibility of their poster (is a round number) and provides an economic incentive to call them (is larger) without being self-defeating (is too expensive compared to just buying one).

If the poster had said $60, we might have taken it more seriously – it’s a round number, so it looks more independently plausible – but this doesn’t automatically make it more convincing than the first. When you’re approaching the two signs with the knowledge that one of them is a scam, you’re thinking more critically than usual, and so you’re trying to deduce which one is legitimate.

Seeing the two signs, you’re likely to run through something like the above chain of logic and conclude – one of these two is a scammer, and it makes sense that it’s the higher one. Would it, then, be smarter to deliberately flout the economic aspect and undercut the legitimate poster? Your price is the only way of signalling your plausibility you have, and a lower price implies that you were first to advertise – because it’s irrational to make a lower bid after a higher one.

There is a counterargument that most finders wouldn’t be this honest – they would be motivated by nice simple economic motives first, and so would call the person offering an extra $10. But this doesn’t really reflect the situation: we know that the market value of a second-hand ipod must be more than the amount the scammer offers as a reward, and so a large number of those motivated by purely economic motives would no doubt want to sell the ipod (or keep it). If someone is already contemplating the reward posters at all, they’ve indicated a willingness to take a nominal loss in the interests of “justice” by returning it to its owner.

Alternatively, I suppose, you could counterbid $50, thus anulling pretty much any benefit either you or the original poster would have and turning it into a game of chance. Which offers better odds?

I wonder what we’d get from testing this… is there a sweet spot, just above or just below the original reward, where you’re most likely to get a response?

Archives for the 21st Century

Tuesday, November 24th, 2009

Mike Peel of WMUK points out the new governmental policy on public archives. A couple of interesting figures to highlight:

  • There are about 300 publicly funded archives; half local government, a quarter universities, then museums etc making up the remaining third.
  • Per-capita funding for archive services by local government varies by a factor of twenty-two between the best and least funded regions. (In absolute terms, which is a bit less meaningful due to sharp population distinctions, it’s a factor of forty)
  • Less than 50% of material is described in online catalogues; less than 1% is accessible via digitisation programs. (I suspect the missing word there is vastly less than 1%…) [p. 14]
  • The National Archives provides 170 digital documents for every one used in a reading room, and given the overall figures (112m) that suggests a reading-room usage of 650,000 per year. [p.18]

One figure that would have been very helpful would be an estimate – even an order-of-magnitude ballpark estimate – as to the economic value of public archives. Section 2 talks at some length about the tangible benefits of archives, and indeed mentions economic benefits twice alongside things such as supporting public decision-making or academic research, but the whole section is quite vague and devoid of numbers to quantify what those economic benefits are.

Whatever the plan that follows this report turns out to be, it’ll imply government spending in some way or another; to help make the case for supporting these services properly we need to be able to say – archives are [potentially] worth fifty million to the country a year, or a hundred million, or whatever number it might be. People make these numbers for libraries, for museums, for school playing fields… it shouldn’t be too difficult for the sector to say, upfront, this is what we’re worth to you, treat us accordingly.

(It may seem a bit blunt – but, well, arguing for more public funding without hard numbers is like going unarmed to a duel. You may go through all the motions, but unless your opponent is very scrupulous, you’ll lose)

Government spending visualisations

Saturday, November 14th, 2009

An interesting new project: Where Does My Money Go? [currently an alpha version; details; announcement]

Basically, interactive visualisations of UK governmental spending, broken down by topic or by region. There’s also a time-series function, which is quite interesting to see – overall government spending, as a proportion of GDP, has just hit the bad old days of 1992.

Things that currently stand out as major issues:

  • uncleaned data means hideous governmental terminology – “n.e.c.” everywhere
  • expanding on that, the data needs a bit more organising – ensuring you can switch between subdivisions on the national-level, for example, would mean linking the ‘economic > transport’ sections together in the same way that the ‘economic’ sections currently are
  • the main charts are a little ambiguous as to which circles are subdivisions of each other
  • there’s no way to apply the time-series graph to “second level” data – so you can compare “general public services” spending over time, but you can’t compare the amount spent on debt servicing
  • mousing over a column really should display its numeric value

On the whole, though, promising – definitely worth ten minutes playing with. Gets the concept across a lot more clearly than the bare figures might.