Russia’s privatization after the Cold War, failed partially because the Russian government was too weak. It could not enforce property rights and the rule of law. Instead, the government was corrupted by the oligarchs. When Putin took over, he exchanged many oligarchs for one–himself.
When the U.S. tries to deregulate for potentially good reasons, and avoids taxes, we need to be careful that we are not setting up our own oligarchs who avoid helpful taxes and regulations at the expense of the people.
The wisdom of the crowds and the efficient market hypothesis require an amount of independence of the people in the crowd. With the internet and social media, people are much more connected and therefore much less independent. The same fads, cults, and appeals that warp people’s political views may also warp their market views. So, markets may have gotten dumber.
Trump’s Saudi Arabia deal may be a lie. Multiple countries have promised to invest big money in the U.S. in deals with Trump, and many have not materialized. Is this a real deal, or a misleading press release?
Economists have simplified models that are very simple compared to the complexity of the real world. This means a model will inevitably leave out parts of the economic world. But, trying to fit too much in, makes the model unreadable and it’s hard to tell what’s happening in the model and therefore it doesn’t teach us much. A good model helps explain something that is happening, even if it is flawed and doesn’t explain everything.
In places where wealthy people want to be and are not just there for tax advantages, higher taxes often don’t make many wealthy people leave. Keeping high-skilled professionals is more important to a city than keeping super wealthy people.
“Trump is carving out his own brand of capitalism — launching extraordinary federal interventions in the economy through ownership stakes in private companies alongside sweeping tariffs, tax cuts and deregulation. But the way he’s using these tools isn’t really guided by a discernable economic strategy
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Trump’s policies, taken together, are more like “an idiosyncratic hodgepodge.””