82

Some areas of economics have more consensus and predictive power than others. Most economists would agree on the effects of trade barriers, could fairly accurately forecast the effects of a price change given a good demand estimate, would come to the same conclusion about the effects of allowing a merger between two large competing firms, know how asset ...


78

That would be really, really bad. Any house that loses value will be unsellable, and thus virtually worthless. Most people living in such a house would be prevented from moving. They cannot sell it, since no one wants to buy an overpriced house, and they cannot afford buying another house with their capital already tied up in the current house. A black ...


72

There could be several reasons here are just few: Principal-agent problems. Firms are typically not managed by their owners but by managers (agents) who act on the behalf of owners/shareholders (principals). While, owners might desire to maximize profits agents can to some degree act to pursue their own goals (see discussion in Hendrikse Economics and ...


67

This is an interesting question a lot of good labour economists have been thinking about for a while. There are a few conflicting theories as to what will happen. You could base a whole career on this question. This IGM survey will give you some idea as to what leading economists think. The prevailing opinion seems to be that increased automation is not ...


45

Automation has been happening for a couple of hundred years now and right now we're all still working pretty hard. Although a 40-hour working week is standard, many people exceed this, and many families have two working parents. One reason for this is that we've used productivity gains for increased consumption, rather than decreased work. The industrial ...


41

But when people pathologically hoard so much cash that they impoverish the entire nation This sentence seems to imply that we should fault the rich not because they are rich, but because they do not spend their riches. Ok, let's scrutinize this assertion, and not go into philosophical and sociopolitical arguments about inequality, justice, etc, which ...


40

Marginal propensity to consume is the proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it. If someone gets extra income $\\\$1000$ and consumes $\\\$750$ of this additional income their marginal propensity to consume is 0.75. The marginal propensity to consume is higher for poor ...


37

If you ask yourself how much a potential employer would have to pay you to convince you to work for him, the answer is probably something like "at least as much as I could earn by doing the same job for another employer". So, provided there are several employers competing to hire workers, you can think of employers as bidding against each other for the best ...


36

It would not work. Historically speaking, governments that try to fund their operations primarily via the printing press experience not just inflation but hyper-inflation. Why? Well, one explanation is that without taxes nobody has any reason to want the government's currency. You can try to force people to use it, but that just encourages black marketeering....


35

Two reasons: history and ability to control the money supply. History: paper-money started by being issued by trustworthy agents from kings/governments, as a way to be able to transfer the ownership of gold without moving the gold physically. This looked something like "This paper is exchangeable for 10 gold coins at this location". This meant you had to go ...


35

Quite simple. If women are paid less, then that's because people believe their work to be worth less. The same believe, that womens work is worth less, then stops employers from hiring more women. (Please note that I don't endorse this view. It is, however, the most simple explanation inside of the assumptions made by the question. Also, as a plus, this ...


33

Most of the US real earnings data which go only as far as mid 60s. According to the statista data presented in this article by world economic forum the evolution of real hourly earnings in the US for production and non-supervisory workers looked like this: If we extrapolate to 50s then the real earnings are now higher overall. However, this being said the ...


31

I will focus on some economics reasons not mentioned explicitly so far. There are economic benefits to having your own currency. Your question essentially raises the question of so-called "Optimum Currency Areas" (OCAs). There was a lot of interest in the question of what areas should have the same currency. It is in general not immediately obvious that ...


30

Because there is no indication in your question that you are a student or practitioner of economics, I am writing an answer for a lay audience. Let me know if you would like more technical detail. A fairly general prediction from economic models of competition between firms is that the price that maximises their profit is higher the less sensitive is demand ...


30

I should say pre-emptively that I'm not satisfied with ideas that merely may explain the effect, as yesterday's question produced a proliferation of rationalisations and claims that lacked rigour. I'd prefer to see an explanation that attempts to be comprehensive, or supports contentious claims (such as those about women's productivity) with research. Your ...


29

And everyone is safe, the crash prevented and everyone will keep making millions simply by borrowing more for risk free "investing" in simply owning ones own house, right? It is true, your investment cannot drop in nominal value (not counting inflation,) but it can become totally illiquid, which is worse in many ways. You see, if a stock drops in value by 5%...


29

This is known as dividing markets or market allocation, and it is against the law in the US, the EU, and I imagine in most countries with antitrust laws.


29

prices should have already been set to maximize the trade off between profit-per-sale and volume sold But profit-per-sale depends on costs, which depends on the theft numbers, so if theft increases, the equation changes.


27

Your question relates to an important research topic on the link between automation and employment. David Autor works on this issue and the topic "Inequality, Technological Change and Globalization". He published a very recent and interesting JPE paper on “Why Are There Still So Many Jobs?” There have been periodic warnings in the last two centuries that ...


26

Because women are not paid less for the same work when all the variables are taken into equasion. Caveat: below answer is a nearly verbatim copy of my earlier answer on Politics.SE on the topic In short, the much-cited "77 cents" figure is from the "lies, big lies, and statistics" department of political propaganda. The real unexplained ...


24

Voluntarily contributing to a public good (such as Wikipedia) is a strong social norm. The tendency to follow such norms even if this is costly in the short run has developed over humans' evolutionary history, as in small to medium-sized hunter-gatherer communities this behavior was adaptive, e.g. due to reputation effects ("community enforcement")....


23

Average standard of living is massively higher today compared to the 1950s, primarly due to technological progress. Even a cheap low end car today is much better than the big cars of the 1950s, it is orders of magnitude safer, much more comfortable and has a whole bunch of new features that didn't exist back then. Houses as such haven't changed that much, ...


23

I wouldn't underestimate the role of learning by answering. Drafting a significant text typically forces a person to put their thoughts in order, to engage in research, and then to structure the information for the purpose of recording and conveying it. It is not unusual that further insights or questions emerge during this process, the answerer certainly ...


22

Horses were replaced by cars. Clerks were replaced by word-processors and spreadsheets. We have adapted to the technology and changed how we work. Therein lies the answer. Consider if you will a society where every person owns a robot and has that robot work on their behalf, freeing their time to pursue creative arts and learning like the nobles of old. Yes, ...


21

Who would pay depends on the terms of the default. Sometimes holders of similar debts are not treated equally, and this can play out in different ways. Greeks could default on external debts but continue to pay internal creditors. Or because the ESM and other entities are providing ongoing financing, perhaps they will continue to be repaid when others are ...


21

In addition to Ubiquitous' excellent answer, I will also point out the general lack of experimental controls in economics. Your example about crash-testing a car is an easily designed, perfectly reproducible experiment. We can start with laws of motion and knowledge of forces and material strengths to design a car we think will work well, and then actually ...


21

In economics, it is accepted that countries with good 'inclusive' institutions, such as strong property rights, are more productive and able to develop faster (or even develop at all) than countries with bad 'extractive' institutions, such as forced labor (see Acemoglu 2008, Acemoglu & Robinson 2000a, 2000b, 2001, 2006, 2008; Olson 1984, Bates 1981, 1983,...


19

There are already excellent answers, but I would like to add in a different perspective: There will be fewer people. Not just jobs, but actual human beings - if there is less demand for human workers (i.e. laborers), due to machines taking over, the amount of "land" or other resource that a single human can manage will increase with technology, leading ...


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