Much of the money that the government spends comes from taxation. Taxation includes income tax, social security or national insurance levies, sales taxes or goods and services taxes, import tariffs, excise taxes, property rates or council taxes, stamp duty, death duties, and many more. In the past, there were taxes on such symbols of wealth [more...]
Sam is the world’s most skilled brain surgeon. Sam also happens to be the world’s fastest typist. Should Sam hire a secretary to type up all the patient notes and research papers, even though the secretary will take twice as long as Sam to finish the typing? A little reflection shows that it makes very [more...]
Many factors increase the cost of living in a cold climate. They make a big difference to the standard of living that is not always apparent from official statistics: Houses and workplaces must be heated during winter. It’s common for 10% of family income to be spent on fuel for heating. Buildings are more expensive [more...]
The terms deficit and debt are sometimes used loosely by politicians. It may even be politically expedient to use the terms sloppily. If a government spends less than its income, the government is said to operating at (or “running”) a surplus. If a government spends more than it receives, it is running a deficit. If [more...]
Bitcoins are computer-generated digital tokens. You can buy stuff with them, yet bitcoins differ fundamentally from banknotes, coins, and digital currencies—not the least because you can mint bitcoins yourself. Paper money, minted coinage, and digital currencies each require a central authority to issue the stock of the currency. Digital currencies also require a central authority [more...]
Inflation has eroded the value of the penny to the point where many people will no longer pick up a penny when they see one in the street. But how does this stand up to cold-blooded economic analysis? Suppose it takes three seconds to pick up a penny. There are 3600 seconds in an hour, [more...]
The Big Mac index is a very quick and very easy way of comparing the relative value of two currencies. Developed by The Economist Newspaper, the Big Mac index is based on “burgernomics,” the partly tongue-in-cheek theory that a Big Mac, the flagship hamburger of the McDonald’s fast-food chain, “should” cost the same amount of [more...]
The phrase “printing money” is loaded with all kinds of negative connotations. It’s something we associate with Robert Mugabe, destroying the value of Zimbabwe’s currency. But now “quantitative easing” is about to begin. How does that work, and is it really the same as printing money? Most of the money in circulation is not in [more...]
The Pareto principle is popularly known as the 80-20 rule, and is the idea that 80 percent of the results are connected with 20 percent of the causes. A few examples: In a society, 20 percent of the people may have 80 percent of the wealth. This is an actual discovery of Italian economist Vilfredo [more...]