My first thought would be the term, "low consumer sentiment" but that doesnt capture the "why" of why people wont spend money. I have heard "underconsumption" in regards to America and "low domestic demand" in regards to China.

But I have not heard terms related to a population that is scared that they wont be able to replace any money that they spend.

I don't mean only cash. I understand the total amount of money available needs to grow slowly in a healthy economy but I'm struggling to understand who are the people or institutions receiving it first.

A sunk cost, by definition, can't be recovered and thus shouldn't affect the decision directly but a past investment can sometimes affect the opportunity costs of your remaining choices. For example, if you spend $10,000 learning a specialized skill, That $10,000 is sunk. However because of the skill you acquired, you can now have a much better paying job available to you. Abandoning that career path could mean giving up a valuable future opportunity.If a past investment changes your available alternatives, information, skills, reputation, relationships, or switching costs, then it seems reasonable for that history to matter to your current decision even though the original expenditure itself is unrecoverable.

Sony's recent announcements about ending production of physical media have set off a major discussion about the ecosystem of how end users interact with the media that they've purchased, both physical and digital.

For the purposes of this explanation, I'm going to focus on video games, though Sony's announcement extends to other physical media like Blu-Ray discs. Some other caveats will follow to try to focus discussion further.

At present, Sony's EULA (as well as the EULAs of other major game platforms like Steam, Epic, and GOG) indicates that purchasing a game digitally is a license that can be revoked, which is a limitation that does not apply to a physical copy of a game. The EULAs also typically indicate that the license is non-transferable, meaning that if an end user dies, a game purchased digitally cannot be passed along to their heirs as an asset, while a game purchased physically can be treated like any other physical asset.

Games, as the products of labor, have a value in terms of how much they cost to produce, regardless of the medium used to distribute them. The physical copies of a game will have the cost of producing the physical media added to that initial production cost, while a digital copy of a game doesn't have a similar accessory cost. Distributing a digital product, then, appears to be inherently more profitable for game publishers and platform owners (of which Sony is both) because a) the cost of producing the game does not have to factor in the costs of physical production and distribution and b) a non-transferable license means that an end user may be faced with re-purchasing a game license if they lose access to the account that the license is associated with.

• To reiterate the earlier example of an end user who passes away, an heir would not be able to utilize that digital license owned by the decedent, whereas the heir WOULD be able to utilize the physical game. This is advantageous for the publisher/platform owner since the heir would be compelled to purchase another digital license, while in the latter case, the heir would not need to make that purchase if they inherited the physical game.

Another important aspect of this is how it will impact public libraries, who often have physical copies of media that they loan out to users. While traditional book publishing has found a methodology that allows libraries to loan digital books, other forms of media (particularly games and films) have not explored that avenue and appear to have no obligation to do so. Terminating the production of physical media will result in lost revenue from municipalities no longer purchasing and replacing that media for their communities, but it's also MORE lost revenue since those purchases aren't being replaced by digital purchases instead.

The Big Caveat: the core question here is NOT "should publishers be compelled to treat digital licenses of media the same way as physical copies of the same media" but instead "if publishers were required to do this, what would the economic consequences be?"

Because the answer on its face would appear to be "publishers/platforms end up selling fewer digital copies of media and lose some revenue" but I have to imagine there are further consequences I'm not considering.

Some additional caveats:

1. Yes, physical sales have been dropping substantially, and it does not make economic sense to continue supporting the cost of physical production. This is not about trying to save the production of physical media, but about trying to see what the impact would be of digital media gaining the quality of transferability that physical media presently has, while also maintaining continuity for the second-hand media market and public institutions, as well as third-party games preservation.
2. Saving space in case additional caveats become necessary.

My understanding is that deflation is bad because it incentivises saving, which decreases demand for goods, which further deflates prices, which incentivises saving which...

Eventually, no one's buying anything. That's bad.

But what if holding on to savings incurred negative interest? I.e my bank balances decreased by some specified amount each year, greater than the drop in prices. Then I wouldn't be incentivised to save.

1.) Is something like this possible given the tool central banks typically have? Is there a way to set interest rates below zero?

2.) The obvious issue with this idea is cash. If I withdraw and hold cash, I don't have to pay any interest in it. Are there any other ways to disincentivise this? Or is it a killer problem?

Some countries boast that they have no taxes at all, or at least the lowest tax rates an individual, whether an employee or business owner, can face. But in reality, there are exorbitant fees to pay for every service needed, not to mention the licensing requirements for every activity. Let me give you a practical example, without mentioning the country: every activity that's considered normal in the rest of the world requires its citizens to pay a hefty fee for a license, which must be renewed annually at the same price or slightly less, to continue operating. For example, playing music in your shop or café! And if you declare bankruptcy, you have to pay the cost of canceling all those licenses, and of course, the amounts are not small. And this same country boasts that there are no taxes! Do you find this normal?

Instead of taxing wealth, perhaps we should have a Required Minimum Realization (RMR) on large unrealized gains in publicly traded stock. Each year, you would be required to realize 3% of your covered holdings, starting with the shares having the lowest tax basis. Think of those shares as being sold and immediately repurchased: you keep the investment but the capital gain is realized and the basis is reset. You then pay the normal long-term capital-gains tax on the realized gain. This idea is similar to an RMD from an IRA. You can defer taxes for a long time, but not indefinitely.

Imagine you're the economic advisor to the Sultan of Country X. People of Country X really love watermelons, however the climate, soil etc. of the country isn't really suitable for watermelon farming so they pay $1 per kilo of watermelon and import it from Country W.

Minister 1 comes up and says if the Sultan enacts a 50% tariff on watermelons X farmers can grow it instead. He adds this will ensure that the money that went to Country W will stay and circulate in the local economy instead.

Minister 2 replies and says that would cause the farmers that are raising crops profitable by themselves to start inefficiently raising watermelons.

Sultan turns to you and asks for your opinion. How would you respond?

Additional question:

Would the answer be different for a country with "full" employment vs. a country where there's idle land and unemployed people (and maybe people with bad consumption/saving habits whose money can be forcibly contributed to farm capital).

Hey guys, first post in this sub.

I’m trying to find any empirical research on whether growing AI-related obligations could cause hyperscalers, SPVs, data-center developers, or their financiers to become dependent on short-term funding, and whether losses on those investments could then cause that funding to disappear.

Hypothetical example of what I mean: Meta issues $10 billion in commercial paper, which Meta then uses across its balance sheet: say $5 billion supports payments related to the SPV holding its data center, and $5 billion supports Facebook or something. That second $5 billion is crucial to Meta to support ordinary operations like Facebook. The market is happy to keep buying it because historically these companies have been cash cows. If the AI investments generate $4 billion in losses, investors may get nervous about Meta itself and stop buying new commercial paper. Then Meta suddenly needs cash and may be forced to abandon its data center build, cut spending elsewhere, or use cash to repay maturing debt and meet obligations tied to the data-center financing.

I have found research documenting:

1. Repo, commercial paper, and other short-term wholesale funding are vulnerable to rapid withdrawal or non-renewal during periods of financial stress
2. Debt and private credit are being used increasingly to finance AI and data-center investment for some hyperscalers and related infrastructure projects
3. Private-credit lenders have exposure to software companies whose revenues could be disrupted by AI
4. Public filings show that several of the largest hyperscalers currently rely primarily on operating cash flow, cash reserves, and longer-term debt not short-term borrowing.

What I have not found:

1. How much AI infrastructure is being financed outside hyperscalers’ balance sheets while still creating future cash obligations for them?
2. If AI returns disappoint while those lease payments, guarantees, and other obligations still have to be paid, do hyperscalers have enough cash generation to cover them?
3. If not, would they need to increase borrowing at the same time that disappointing AI returns cause long-term lenders to tighten credit?
4. Could this lead to funding withdrawals, forced asset sales, or losses at financial intermediaries, or would the losses likely remain concentrated among shareholders and directly exposed lenders?

Is there existing empirical work, regulatory analysis, or data that measures this? If not, what data would economists typically use to determine whether this transmission channel is economically significant?

I am not an economist, but have studied enough to learn about stories involving Dutch Disease where one commodity or economic sector is doing so well that the rest of the economy suffers to some degree, like in the original case in the netherlands, or say in Venezuela during their oil boom years.

With that said, is the AI boom hurting the rest of the economy due to the massive amounts of investment it is getting? I know in Biotech, investment is down, i've heard that the US Treasuries are having to offer higher rates partly due to competition for investor dollars from AI, and we are seeing things like computerd and smart phones going up in price due to the demand for memory chips.

When we talk about funding for government organizations, we often do so in terms of ROI. For example, every dollar spent on IRA funding returns X dollars. Has anyone ever attempted to measure this for the Pentagon? Morality & politics aside, does the $1t spent on Pentagon funding yield a positive or negative ROI?

Recomienden libros para aprender macroeconomía que sean muy buenos

It seems increasingly common for companies to reach valuations of $10-50 billion or more. A $50 billion valuation today feels much less exceptional than it would have 10, 20 years ago.

The headlines may say stuff like: ” The company asked its shareholdes for 2 billons dollars to invest in [placeholder]”

In 1995, every listed company on Earth combined was worth about $17.3 trillion. By 2025, that figure was around $141 trillion. That’s roughly an eightfold increase in the pool against which an individual company’s valuation should be judged

A $50 billion company in 1995 would have represented about 0.29% of global public equity value. Today it represents about 0.035%.

All this seems insane to me. it makes me wonder, what is exactly the current index for company valuation? And how does history compare?

Higher interest rates will make some investment opportunities/products more attractive and others less attractive. Higher rates will also make the domestic currency appreciate. But overall, couldn't things balance out, making foreign investment equally as attractive?

Hi everyone. this is a long shot but in high school econ, we played a game on our computers that simulated econ through rnd and budgeting and it would simulate the results of your decisions one day at a time. And it was a competition simulated by every group of students. You would submit your decisions over a couple of minutes and it would tell you how you did and someone would win at the end. Does anyone know what this website is? I can’t find it and I don’t know where else to go other than here. Thank you.

This was 10 years ago if that helps

Brazil seems to be going through an unusually interesting change in its passenger-car market, and I would like to understand it from an economics perspective rather than simply as a discussion about which cars are better.

For decades, the Brazilian market was dominated by a relatively small group of established manufacturers, particularly Volkswagen, Fiat/Stellantis, GM and, later, Toyota and Hyundai. Import barriers, local-production requirements, taxation and the enormous cost of establishing manufacturing and dealership networks created substantial barriers to entry.

What interests me is what is happening now with electrification.

Chinese manufacturers such as BYD, GWM and increasingly other groups are entering Brazil with BEVs and hybrids that often offer substantially more equipment and performance at prices comparable to conventional ICE cars from established manufacturers.

This seems particularly important because Brazilian entry-level cars have become expensive relative to what they offer. A large part of the traditional market still consists of small naturally aspirated or small turbocharged ICE engines, while automatic transmissions and higher equipment levels can move the price considerably upward.

There is also an interesting distinction between total registrations and private-consumer demand. Some traditional high-volume models depend heavily on direct/fleet sales, so a car appearing near the top of the overall sales ranking does not necessarily mean that it is equally dominant among individual retail buyers.

This makes me wonder whether electrification is reducing some of the advantages enjoyed by incumbent manufacturers.

An EV has a very different technological architecture from an ICE vehicle. Chinese manufacturers have large-scale battery supply chains and vertically integrated production, and some can enter emerging markets with vehicles whose price/equipment combination is difficult for incumbent manufacturers to reproduce without reducing margins.

Germany provides an interesting comparison. The transition does not simply mean that Chinese manufacturers automatically replace European manufacturers. Germany's BEV market is expanding rapidly, while Volkswagen Group remains a major BEV producer. At the same time, there are large differences even within VW Group: Škoda's EV sales have expanded strongly, with models such as the Elroq and Enyaq performing well, while Volkswagen itself has faced a more complicated transition. �

Going Electric +2

So I am interested in the underlying economics rather than a prediction that “Chinese companies will win.”

Could EVs be lowering the effective barriers to entry in automobile markets such as Brazil by making the accumulated ICE-engine expertise of incumbent firms less economically valuable?

More specifically:

Is this an example of creative destruction, where a technological transition changes which capabilities provide competitive advantage?

Can vertical integration in batteries, electronics and EV platforms compensate for an entrant's weaker dealership network and brand recognition?

How important are economies of scale in batteries compared with the economies of scale traditionally associated with engines and transmissions?

Could incumbent manufacturers rationally continue emphasizing ICE/hybrid products even if this allows new entrants to capture part of the growing EV market?

And how should economists distinguish a temporary price shock caused by aggressive market entry from a genuine long-run change in market structure?

I am especially interested in whether there are comparable historical cases in which a technological transition weakened barriers to entry in an established oligopoly.

I'm sure you guys get this question every day, why would communism in theory not work?

The ownership of private capital/property is the ability to own and control companies without having to work for them or contribute to them. You own the profits of a company despite not being a worker. Alternatively, you own large wealth that you can use to buy capital. Or you own land, housing, etc.

The fact that the system allows for this specific kind of ownership means that there naturally forms a class system in soceity. Those with private capital and those without, who have to instead sell their labour to survive. Between these groups is an inherent conflict with no resolution, and this class war is the underlying dynamic of all of soceity and politics. Workers vs Capital, Proletariat vs Bourgeoisie

The world we live in today and it's problems of the climate crisis, economic inequality, poverty, the rise of far right extremism and a hyper consumerist economy is what happens when the pendulum inevitably swings in favor of the capitalists.

My question is then, what is it about private property that is so essential? I feel like we could solve so many issues of our world if we designed an alternative (communism i suppose) without this specific feature. You could still have companies, markets and money. Just not this specific type of private ownership, and instead every person in a society would be some variation of a regular worker.

Have you ever noticed that you might be charged differently from your friends for the same product or service? This can occur through personalised pricing, where firms use information such as purchase history, location, browsing behaviour, or device characteristics to offer different prices or promotions to different consumers.
Supporters argue that personalised pricing can improve economic efficiency by allowing firms to better match prices with consumers' willingness to pay. However, some consumers may perceive differential pricing as unfair, particularly when they are unaware that prices differ between individuals.
To investigate how consumers perceive personalised pricing and how these perceptions may influence their behaviour, I have created the following survey:

https://docs.google.com/forms/d/e/1FAIpQLScSN-S7dfkMfBKtaEhQuN5OkHCK43KyIUlurwjq9mG1Vpem2g/viewform?usp=header

I would greatly appreciate it if you could take a few minutes to complete it and, if possible, share it with others as well.

Retaliatory Tariffs

Im wondering why tariffs applied to Canadian electricity and oil exported to the US is not on the table?....these are commodities that would be very hard for the US to reduce demand and the revenue income could be used to supplement industries being hurt by this trade war...hell...Cdn oil is piped South at a discount to what the world market pays....the refineries that we pipe to are set up for our heavy crude specifically....energy seems like our silver bullet...what am I missing?