Economics: Will The Behavioral Economists Shut Up?

 

(Drivebycuriosity) - Classical economists like Adam Smith, Hayek and Milton Friedman believed that humans behave rational and follow their self interest. Classical Economics is build on the insight that people want more of what is cheap and less of what is expensive, or would prefer (by same risk, stress, time etc) a higher income to a lower one. But in the recent years it became fashionable to deny rational behavior and a cult named Behavioral Economics gained followers. They claim that humans behave irrational, and Prof. Richard Thaler, one of the loudest deniers of rational economics, received the Nobel Prize for Economics in the year 2017.

Who is right? We can find some answers when we look way back in history. Max Bennett tells in his wonderful book  "A "Brief History Of Intelligence" (amazon ) that the early primates had a unique diet: they were frugivores. "Their fruit-based diets came with several surprising cognitive challenges and require rational conduct", explains Bennett. 

There is only a small window of time when fruit is ripe and has not yet fallen to the forest floor. For many of the fruits these primates ate, this window is less than seventy-two hours. Some trees of offer ripe fruit for less than three weeks of the year. Some fruit trees has few animal competitors (such as bananas in their hard-to-open skin), while other fruit has many animal competitors (such as figs). 

These popular fruits are likely to disappear quickly, as many different animals feed on them once their are ripen. Primates needed to keep track of all the fruit in a large area of forest and any given day know which fruit was likely to be ripe; and of the fruit that was ripe, which was likely the most popular and hence disappear first.

 

                   Planning In Advance  

Bennett also reports that chimpanzees plan their nighttime nesting locations in preparation for foraging on the subsequent day. For fruits that are more popular, such as figs, they will go out of their way to plan where they sleep to be en route to these fruits.  

A frugivore must plan its trips in advance before its hungry. Setting up a camp en route to a nearby popular fruit patch the night before require anticipating the fact that you will be hungry tomorrow if you don`t take preemptive steps tonight to get to food early.     

Other mammals, such as mice, clearly stock up on food as winter months approach, storing vast reserves of nuts in their burrows to survive the long stretch when trees produce little to no food.

 

              Contemporary Studies 

The rational behavior of animals, including humans, is also proven be contemporary studies. For instance the "Guardian" describes the rational behavior of Kelly, a dolphin, who lives in a research institute in Mississippi (   theguardian): 

"All the dolphins at the institute are trained to hold onto any litter that falls into their pools until they see a trainer, when they can trade the litter for fish. In this way, the dolphins help to keep their pools clean. Kelly has taken this task one step further. When people drop paper into the water she hides it under a rock at the bottom of the pool. The next time a trainer passes, she goes down to the rock and tears off a piece of paper to give to the trainer. After a fish reward, she goes back down, tears off another piece of paper, gets another fish, and so on.

…Her cunning has not stopped there. One day, when a gull flew into her pool, she grabbed it, waited for the trainers and then gave it to them. It was a large bird and so the trainers gave her lots of fish. This seemed to give Kelly a new idea. The next time she was fed, instead of eating the last fish, she took it to the bottom of the pool and hid it under the rock where she had been hiding the paper. When no trainers were present, she brought the fish to the surface and used it to lure the gulls, which she would catch to get even more fish. After mastering this lucrative strategy, she taught her calf, who taught other calves, and so gull-baiting has become a hot game among the dolphins.
The dolphins are not only gaming the system they are saving and using a capital structure to increase total output".

      The Rules Of Supply And Demand


Kelly certainly behaves rational. The dolphin is spending energy & time to get more food, a strategy which is called profit maximizing. And dolphins aren`t alone. Researchers from the Max Planck Society discovered that at least some birds, the African Grey Parrots, also behave rational and follow their self-interest (phys.org). 

They report: "The birds have learned how to trade a token for food: one each for a low, medium or high-value food. The task was to choose between an instant food reward and a token that they could exchange for higher quality food. In controlled tasks, however, selecting a token resulted in an equal or lower payoff. The parrots only rejected the immediate reward and chose the token, if the token's value corresponded to a higher quality food compared to that of the immediately accessible food. The results show that parrots are capable of deliberate and profit-maximizing decisions."

Animals also respond to rising prices and consume less of something when it gets more expensive. Animals don´t use money of course, but they pay by burning energy and spending time to get some preferred food. 

The Dictionary of Animal Behavior says, if an animal expends a certain amount of energy on a particular activity, then it usually does less of that activity if the energy requirement is increased (oxfordreference). 

Studies also show that animals invest in auspicious assets the same way stock market investors do. Researchers from the University of British Columbia and Warsaw University of Life Sciences found that dairy cows are willing to expend energy (for instance for opening a gate) to gain access to a grooming brush (phys.org).

 

                 Biological Markets 

 Scientists are observing "biological markets" where animals trade goods (food) and services (grooming, shelter, protection etc.), following the economic rule of "supply and demand" (ronaldnoe). For instance 'helper wasps' raise the offspring of dominant breeders in small social groups in return for belonging in the nest (sciencedaily).  

Scientists from the University of Sussex noticed that "the helper wasps provide less help to their own 'bosses' (the dominant breeders) when alternative nesting options are available. The dominant wasps then compete to give the helper wasps the 'best deal', by allowing them to work less hard, to ensure they stay in their particular nest".

It is unclear if animals really think. They may just follow their instincts which are shaped by evolution. But anyway, if a species would behave irrationally it would lose against their competitors (getting less food and inferior shelter for instance) and would have gone extinct over time. The best strategy wins and their genes survive. This way animals inherited behavior which leads them to act economically.

Will the Behavioral Economists shut up?      

 

   

 

Books: IPA Evolution By Amelia Khatri

(Drivebycuriosity) - Years ago, when I still lived in Germany, I gave up on beer. I found it boring and the drink made me fat. Since I live in the US I rekindled my interest in beer, especially in American IPAs, which are very different from German beers and stronger & tastier. That woke my interest in American IPAs and I wanted to know why do some of the IPAs taste much better than the beer I knew from Germany?.

I found the answers - and much more - in: "IPA Evolution" by Amelia Khatri, which is a very good introduction into this subject. According to the publisher the book was written with the assistance of AI.

Here is what I learned: In the past water was often unsafe to drink, making beer, with its boiled and fermented nature, a much safer alternative. Before the 18th century people distinguished Ale from Beer. While Ale was typically unhopped or very lightly hopped, Beer included hops as bittering and a preserving agent.  

IPAs are based on the traditional "Pale Ale", that is -beginning in the 18th century in England - barley malt fermented with the help of yeast. Ale is different from Lager: Ale ferments at warmer temperatures, which results in a faster fermentation and yield fruitier, more complex flavors, Lagers are brewed at colder temperatures, resulting in a cleaner, crisper, and often lighter-bodied beer.

In the 19th century English brewers started to produce a new version, called "India Pale Ale", specially for the market in India. Before the Suez Canal was opened, the beer had to travel more than 3 months in challenging conditions, especially high heat. Unfortunately beer doesn`t age well. In order to make the beer more resistant the brewers chose a higher alcohol content and added more hops, to preserve it better for bacteria. "The higher alcohol content inhibited the growth of spoilage bacteria, while the hops provided antimicrobial properties and contributed to the beer´s characteristic bitterness." The aging process during the long ship traffic to India "essentially transformed the beer into a distinctly different product than what was originally brewed in England".

 

                    Scent Of A Forest 

The addition of hops did not just to make the Ale more resistant against heat & unfriendly bacteria, it also made it more bitter and spicy. Today hops are also chosen for their contributions to flavor, aroma and bitterness. These contributions stem from from two main categories of compounds: essential oils, responsible for aroma, and alpha acids, precursors to bitterness.

Hundreds of different compounds can be found in hop essential oils, but a select few play a dominant role in shaping the aroma profile. Terpenes are the most abundant class of aroma compounds in hops. Some of the most important terpenes in hops include: Myrcene, which contribute earthly, herbal and slightly resinious aromas. High levels of myrcene can lend a "dank" or "cannabis-like" character in beers. Humulene, which is responsible for woody, spicy, and earthy notes. It is also believed to contribute to hop`s anti-inflammatory properties. Caryophyllene, which boasts a spicy, peppery, and woody aroma. Limonene, which provides bright citrusy aromas. Pinene, which deliver piney and resinous aromas, evoking the scent of a forest. 

Besides the terpenes there are other oil components that contribute to the overall sensory experience: Esters, that are often formed during fermentation, create fruity and floral notes. And Thiols contribute surprisingly potent aromas, ranging from tropical fruit (passionfruit, guava) to savory (garlic, onion). 

There is a chapter describing different varieties of hops and their tastes. Often the hops are named on beer cans, and many pubs also name the hops in the beers they have on tap. Cascade hops is considered the grandfather of American aroma hops. This variety offers distinct grapefruit and floral notes, especially popular in West Coast IPAs. The taste is caused by a combination of limone, myrcene and other terpenes. 

Centennial is known for its pronounced citrus character, particular lemons. Citra delivers intense grapefruit, lime and passionfruit aromas. Simcoe offers a more complex aroma profil, with a note of pine, grapefruit, and passionfruit. Amarillo contributes orange and grapefruit notes, along with a touch of floral aroma.

Another chapter focuses on New England IPAs (NEIPAs) which own a hazy appearance and juice flavor profile. One of the most crucial elements of this kind is the selection of yeast. Unlike traditional yeasts Ale yeasts that ferment cleanly and produce little in the way of flavor compounds, NEIPA brewers favor strains renowned for their ability to produce fruity esters (a chemical compound formed when an alcohol reacts with an acid) - the aromatic compounds responsible for notes of peach, mango, and pineapple. Yeast strains like Conan, London Ale III, and Verdant IPA are popular choices.

NEIPAs rely on heavily and late-addition hopping, meaning that the majority of hops are added towards the end of the boil or even after fermentation has begun (known as dry hopping). This minimizes the extraction of bitter alpha acids, allowing the more delicate aroma compounds to shine through. 

                      Science & Art   

Today IPAs are the product of science & art, especially American IPAs. The scientist in the brewer tries to understand the different varieties of hops that come with different oils that are extracted through the brewing process.  

The beer scientists also varie different kind of yeast, which not only supports the fermentation process, it also added flavors. Last but not least the brewers perform water chemistry. They often adjust the mineral content of their water to enhance the hop aroma and soften the beer`s overall profile. Higher chloride levels, for example, can accentuate the perceived sweetness and juiciness of the hops.

For the production of Hazy IPAs the brewers use protein-rich grains like oats and wheat, specific yeast strains that remain suspended in the beer, and the interaction of hop oils and proteins.

Modern craft brewers are also artists who combine the ingredients to find a balance between the sweetness of the malt and the spiciness and other flavors of hops & yeasts. Today they use technologies like senors & software to measure and fine-tune temperature and status of fermentation process.

Brewers often use a technique called "hop bursting", adding massive quantities of these hops in the final minutes of the boil or during the whirlpool (a process that separates the worst from the spent grain) to maximize aroma intensity. 

 

 

                    Agent Of Transformation

I found much more information, for instance: 

Mashing is the crucial process that transforms malted grains into a sugary liquid called wort. It involves mixing crushed malt with hot water and holding it at specific temperature to activate enzymes that convert starches into fermentable sugars. Different enzymes are active at different temperatures. Mashing at lower temperature (around 148-156 F or 64-69 C) favors the production of fermentable sugars, resulting in a drier, lighter-bodier beer. Mashing at higher temperature (around 158-168 F or 70-76 C) favors the production of less fermentable sugars (dextrins), resulting in a sweeter, fuller bodied beer.  

There are two primary mashing techniques: infusion mashing and decoction mashing. Infusion mashing involves adding hot water to the malt to reach the desired temperature. Decoction mashing involves removing a portion of the mash, boiling it, and then returning it to the main mash to raise the temperature. Decoction mashing can contribute a richer, more complex flavor to the beer. 

Yeast is a powerful agent of transformation, shaping the beer´s flavor, aroma, and overall character. During fermentation yeasts produce specific flavor compounds, like esters and phenols. They also produce alcohols, aldehydes and diecetyl. Diacetyl, a dioketone, can impart a buttery or butterscotch-like flavor.

Prohibition  in the US (1920-1933) decimated the brewing industry. When brewing resumed, only the largest and most financially stable breweries could afford to re-establish themselves, further accelerating the consolidation trend. As larger breweries prioritized Lagers, Ales like IPA were often seen as too niche, too expensive to produce, or too difficult to market. The beer landscape became increasingly dominated by bland, mass-produced Lagers.

The bitterness of beer is measure in International Bitterness Units (IBUs). 

 

The term "session beer" originated in Britain, referring to beers that could be consumed of an extended drinking session without causing undue intoxication  

The popular image of a witch stirring a cauldron is thought by some to be misrepresentation of alewives brewing beer! Their pointed hats may have been worn to stand out in the marketplace, and the "cauldron" was simply the brewing kettle". 

 

 

 

The book has much more information about beers and the complexities of the different brewing processes. There are some repetitions, but the book is elegantly written and partly humorous; it seems that there were human contributions. Unfortunately the publication disappeared from Amazon`s website, but I still could find it on Google. Maybe some AI hating luddites are suing against the publication.

A cheers on AI!

Books: Naming The Bones By Louise Welsh

 (Drivebycuriosity) - A while ago I read '"Tamburlaine Must Die" by Louise Welsh, a novel about the last days of Shakespeare competitor Christopher Marlow`s short life (my review). The fascinating and dark semi-fictional biography and the exquisite style woke my interest into the books of the author and I gave her novel "Naming the Bones" a try (amazon ).

A Edinburgh based literature lecturer is researching for a book about an obscure poet, who had died 30 years ago, searching for those, who might have known his object. Welsh describes the sex drive of the protagonist and his amorous experiences - "the tyranny of sex" - nicely; but otherwise the plot is too slow and too viscous for my taste. She tried to create a mysterious and gothic atmosphere, but she couldn`t convince me - and the ridiculous, melodramatic and ghoulish finish doesn`t help.

But the Welsh is quite a wordsmith. There are sentences like "step quickly ahead and leave the old bastard to ferment in his ignorance". Therefore I am still interested in her books and might try another novel by her in a while. 

Books: Annihilation by Michel Houellebecq

 (Drivebycuriosity) - Michel Houellebecq belongs to the most important contemporary authors. His novels are analytical, philosophical and entertaining. And he likes to provoke. Houellebecq`s latest novel "Annihilation" comes up to his reputation (amazon ). 

The complex plot is set in France around the year 2027 and focuses on a man in his late 40s (this is a spoiler free blog). There are 2 basic threads, one following the protagonist´s professional and the other his private life. He has a well paid job in the French administration, "at the heart of the state apparatus" and is friend with the French minister of Finance. This thread describes political developments in France and the preparations for an upcoming election. 

The private thread focuses on marriage, the lives of siblings and health issues. Parallelly are happening mysterious & scary events and the protagonist has often bizarre dreams.

This is a spoiler free blog, so I won´t tell in which directions these threads lead, but the title "Annihilation" gives something away. Don´t expect an easy summer read. 

As usual with Houellebecq novels that I have read, I am not too much impressed by the plot. But what makes me reading him again and again - and makes me a fan of him - are his his sharp wit and his analytical & precise musings about almost anything.

This novel is of course philosophical - as usual for Houellebecq - with a pessimist undertone. There are intelligent reflections about French politics, industrial politics, global terrorism, old age and more.

 

              No Direct Contact With Matter 

 

Here some examples: 

"Lawyers and journalists were pretty much the same thing, in fact they both seemed to belong in the same disreputable world, in close touch with lies, with no direct contact with matter, reality, or any form of work". 

Baby boomers "weren`t only more energetic, more active, more creative and broadly speaking more talented that us in every point of view".

In the 1980s "things still moved quickly in those days, much less quickly than in the 1960s, of course, or even in the 1970, the deceleration and immobilization of the West, heralding its annihilation, had been progressive".

"The French economy had become powerful and a big exporter, but the level of productivity had increased to insane proportions, and unqualified jobs had almost completely disappeared"  

"Paris was a city with a weak level of social control and a high rate of delinquency".   

"By granting greater value to the life of a child - when we have no idea what he will become, whether he will be intelligent or stupid, a genius, a criminal or a saint - we deny all value to our real actions. Out deeds, whether heroic or generous, all the things he have managed to accomplish, the things we have made, none of that has the slightest worth in the eyes of the world any longer... Devaluing the past and the present in favor of times to come, devaluing the real and preferring a virtual reality located in a vague future, are symptoms of European nihilism."

 

           The Roots Of Nihilism 

Houellebecq is inclined to believe "that the nihilism "began with Christianity, the tendency to become resigned to the present world, however unbearable it might be, as we wait for a saviour and a hypothetical future, the original sin of Christianity".

"The liberal doxa persisted in ignoring the problem, in the naive belief that the lure of material gain could be substituted for any other human motivation, and could on its own supply the mental energy necessary for maintaining of a complex social organization". 

"We always communicate, more or less, within a particular age range; people who belong to a different age range, to whom you are not otherwise connected by a direct family relationship; the billions of people with whom we share the planet, have no real existence in your eyes". 

 

What Made Great Kings Great

"It`s probably normal for old people to take an interest in history, which contextualizes their own passing by retracing the fates of important, illustrious and sometimes even all-powerful people who had nonetheless returned to dust." 

Why the kings of France had gone down in history as great kings: "Not reducing the territory of the kingdom, on the contrary increasing it if possible, either through purchases or more often through wars, while at the same time avoiding increasing the costs of mercenaries to excess, and more generally avoiding any unnecessary fiscal pressure. Avoiding civil wars within the kingdom, in particular religious wars, they had always been the deadliest, which had been achieved by unambiguously designation a single dominant region .....Perhaps increasing the prestige of the kingdom by erecting monuments and supporting the arts. For some centuries this ideal programme had ensured the prestige of the curious partnership of Richelieu and Louis XIII; no one really knew how it worked, but the fact remained that it had". 

"When one is dealing with a pure opportunistic demagogue like Jacques Chirac, or other local personalities on a lesser intellectual scale, who sometimes won certain elections by virtue of their popularity among the very stupid, and who thus saw themselves as being elevated much higher than their normal level via a regrettable fate".       

Houellebecq also adds descriptions of rivers, cityscapes, the taste of pussies, the therapeutic influence of escape literature like Conan Doyle´s Sherlock Holmes stories and much more. 

The image above is taken from the book and refers to parts of the plot. 

Read it! 

Economics: Are Monopolies Real?

 (Drivebycuriosity) - There is a lot ado about monopolies. Since the Sherman Antitrust Act from 1890 US politicians have been fighting alleged monopolies. They claim that there exist corporations that are too big and that these are crushing competition & harming consumers. The U.S. Department of Justice (DOJ runs now a huge law suit against Google, a corporation that offers search, maps and other services predominantly for free. The DOJ claims that Google maintains a monopoly and they attempt to break up the corporation. Part of the intended breakup would by a forced sale of the Google Chrome Browser.

Last week Perplexity made an offer to purchase Google`s Chrome Browser for $34.5 billions ( cnbc). Who is Perplexity? Perplexity is a start up, an American privately held software company offering a web search engine that processes user queries and synthesizes responses, says wikipedia. Perplexity was founded in 2022!  

Perplexity is a nice example for companies that suddenly come out of nowhere and attack the alleged monopolies. The fact that Perplexity, that exists only for 3 years, expects to get $34.5 billions from investors shows that there is a lot of money available to enter an attractive market and to challenge the leader.

The DOJ ignores that Google, who gets most of the revenues from advertisements on their platforms, is competing against Meta and other giants and is already losing market share to Amazon`s advertising business ( realclearmarket). 

 

 

And who remembers MySpace? The company was once the leading social network and regarded as a monopolist ( theguardian). But then came Zuckerberg out of nowhere and destroyed MySpace`s "monopoly" by creating Facebook. 

When a company has success it will inspire copycats who want a share from the pie. When Jeff Bezos started Amazon in the year 1994 his company was a monopolist, but just for a very short time. Amazon`s success story animated worldwide others to offer similar services.  

Today there are thousands of companies selling online, including giants like Walmart, Target, Best Buy & Costco, who all developed large online departments, and there also exist a lot online platforms like Overstock, Shopify, Wayfair, Etsy & Ebay, who all are successfully copying Amazon.

 

                    Perpetual Struggle  

Amazon was forced to be cost conscious and to become more and more efficient in order to survive the growing attacks. "What doesn´t kill me, will make me stronger", said Nietzsche. The perpetual struggle between innovators who turn into market leaders and their copycats is called competition, the yeast of the economy. The permanent struggle raises efficiency, suppresses costs and constrains prices for the benefit of the consumers.

There exist indeed real monopolies. Only the U.S. Department of the Treasury has the right to print US bank notes, do not try it at home. And there are monopolists owned and protected by the US government, states, counties and by laws, like JFK, USPS, Port of Los Angeles or Amtrak.  

Contrary to them big corporations like Google, Microsoft, Meta, Apple & Amazon and others all are competing against each others and versus countless challengers. The founders of Sherman Act and today the DOJ have no idea how the economy functions, they are economic illiterate and ignorant of history.

Science Fiction: Why Tomorrow Factory By Rich Larson Is Lots Of Fun

 (Drivebycuriosity) - Rich Larson belongs to the up and coming writers in the science fiction genre. His short collection "Tomorrow Factory", published 2018, is lots of fun ( amazon). The collected 23 stories span a considerable bandwidth and are all crispy, quirky & cool. 

I have two favorites:

Innumerable Glimmering Lights" follows octopus-like intelligent beings who live in an ocean below miles of ice. One of them is ambitious and wants to find out what is beyond the ice - causing a lot of trouble. Lawson invented a plausible ecologic & social system of smart submarine beings who have their own ways to communicate - a master piece inspired by evolution, biology & chemistry. 

The Ghost Ship Anastasia: The crew of a spaceship tries to recover a very bizarre spaceship, leading to strange experiences - a horror story

 
I also enjoyed: 

"You make Pattaya": A funny con story about a farang and a local hooker set in Thailand`s sex capital 

"Circuits": An AI is piloting a train circling a wasted planet - again and again 

"Every so often": A Time travel story

"An Evening with Severyn Grimes":  A billionaire gets abducted by a group of radical terrorists. A slick near-future thriller  

"Datafall" In the past a whole village was excited when a circus came to town. In this story the population of a peninsula is excited because they get - for a very short time - access to the internet and the cloud. I remember when I got my internet access in the late 90s - what a change!   

"The Sky didn`t load today": Surreal cyper-punk 

"Atrophy": Another horror story - set in a radioactive contaminated world 

I am convinced that the rest caters many readers with different tastes. 

 

Economy: Why Doesn`t Inflation Get Hotter In Spite Of Trade War & Rising Tariffs?

 (Drivebycuriosity) - There is a lot ado about President`s Trump`s trade war and the tariff hikes. Rightly so, his tariffs do a lot damage. But inflation stays tame. In July the price level rose just 2.7% y-o-y (image above cnbc ). 

Tariffs do not create inflation! They hike the prices of imported goods and goods from producers who compete with foreign producers. But other prices, like houses, dentist visits, cinema admissions and many others, are not touched. Economists talk about relative prices, contrary to the general price level.

Milton Friedman said "inflation is always and everywhere a monetary phenomenon". He was right. The money volume, the amount of money available in the whole economy, restricts how much people can spend. If they have to pay higher prices for imported goods, then they purchase fewer of them or they spend less for other goods & services.

The recent high inflation was caused by a deluge of money in the years 2020 & 2021. In 2020 & 2021 the Biden government flooded the economy with stimulus checks in the value of trillions of dollars to fight the Covid19 recession (American Rescue Plan). The government checks got financed with massive bond purchases by the Federal Reserve (Quantitative Easing known as QE1,QE2 & QE3).

The government money landed directly on the bank accounts of the Americans, blowing up the money volume M2 (bank notes & coins & deposits at banks). Milton Friedman described this as helicopter money (cato ). As a result in 2021 & 2022 the US money supply M2, the engine of the inflation, jumped 40%. Unfortunately the money deluge met a constrained supply of goods & services partly - partly because of Covid19. So the price level inevitably had to jump and the inflation rate (first derivation) went up.

 

                         Causal Relationship

The causal relationship between the money supply and inflation was already recognized by Nicolaus Copernicus! The astronomer explained in the year 1517 why "too much money" causes inflation. Copernicus` "quantity theory of money" is based on observations: Early in the 16th century Spain conquered today`s Latin America and looted the silver stocks. The Spaniards send the precious metal to Europe where it was printed into coins and used as money.

As a result the European money supply jumped, but the supply of goods & services did not change much. The flood of money raised suddenly the demand for scarce goods & services and caused a jump of the price level.

Elaborated studies by Milton Friedman, Karl Brunner, Allan Meltzer and many other economists (known as Monetarists) confirmed Copernicus & the quantity theory of money. They described in the 1960s elaborately how and why the inflation rate follows the growth rate of money with a time lag (causal connection).

 ( source)

Fortunately the money flood ended already in 2022 and the money supply shrank for a while. Since October 2023 the money volume is growing again, but only moderately.  

 

  

Economics: Antitrust - Why The FTC Is Obsolete & Harmful

(Drivebycuriosity) - It seems that the media, politicians and bureaucrats are obsessed with monopolies. In the US exist coevally two huge powerful government administrations that want to fight against the "monopoly power" of corporations: The Federal Trade Commission (FTC) & the Antitrust Division of the US Department of Justice (DOJ). The FTC alone has a staff of 1,123 employees and an annual budget of $425.7 million. Do we need it?

The image above refers to one of these alleged monopolists: MySpace ( theguardian). The company was once the leading social network and regarded as a monopolist. But then came Zuckerberg and destroyed the "monopoly" by creating Facebook. 

The fate of MySpace is typical for the destiny of monopolies; if they really exist, they are endangered. Their success and their profits attract others - inventors, investors & entrepreneurs - who want to have a share of their pie. Today all the leading technology corporations are attacked by a growing number of newcomers - often copycats - who are taking advantage of the technological progress and the advent of AI - and the big tech corporations are competing with each other.

 

                            Blind Eye

The FTC ignores these changes, the growing competition and the economics behind it. FTC Chair Andrew Ferguson announced that over the next few years U.S. businesses can expect “vigorous antitrust enforcement” ( realclearmarkets). Today there are already about a dozen FTC law suits and inquiries:

The most prominent is a law suit against Amazon, stretching over 172 pages! The FTC claims that the corporation is a monopoly and stifles emerging competition ( ftc.gov vox.com). The FTC ignores that the numbers of Amazon competitors has been rising fast. Walmart`s online business grew in Q1 2025 21% y-o-y ( cnbc ), while Amazon´s online shops advanced just 6% ( ir.aboutamazon). The FTC doesn`t take notice of the rapid rise of e-commerce sites like Shopify (revenue +27% y-o-y), Wayfair, Etsy & Ebay and has a blind eye to innovative newcomers, who are aggressively entering the highly competitive market, like TikTok`s online shop, the Chinese shopping app Temu and the online shopping platform Shein ( driveby Temu nymag). And  Amazon competes globally with Alibaba, Tencent (both China), Rakuten (Japan), MercadoLibre (Latin America) and others. Amazon is far away from being a monopoly. 

 (source )

 The FTC sued Meta (the mother of Facebook & Instagram), alleging that Facebook illegally maintains its personal social networking monopoly and imposes
anticompetitive conditions on developers, ignoring competing platforms like X (formerly Twitter), Snapchat, BlueSky, LinkedIn and TikTok.

The FTC is investigating Microsoft's cloud computing business and its investments and conduct related to AI, ignoring the competition with Amazon`s AWS and the fast growing cloud businesses of Oracle, Google, Alibaba and others. The administration previously also attempted to block Microsoft's acquisition of Activision Blizzard.

 The FTC launched an inquiry into Alphabet`s (Google)
generative AI investments and partnerships, disregarding the AI growth at Meta, Microsoft, Amazon and many others. 

Outside of the technology sector the FTC has sued Southern Glazer’s Wine and Spirits,  Deere & Company and sought to block Amgen's acquisition of Horizon Therapeutics plc. The administration also accused three major pharmacy benefit managers (CVS Health's Caremark, Cigna's Express Scripts, and UnitedHealth's Optum Rx) of artificially inflating insulin drug prices and hindering access to cheaper options.

Adding to this, the FTC has launched a broad inquiry into generative AI investments and partnerships involving companies like Alphabet (Google), Amazon, Anthropic, Microsoft, and OpenAI and looking into potential anti-competitive practices within the cloud computing industry. Big Government!

 

                 Assuming Witchcraft?

None of the sued and inquired corporations and industries are protected from the fate of MySpace. They all are challenged by Moore´s law. The continuously falling costs for software & chips and the accelerating rise of AI opens newcomers - often with the backing of powerful hedge funds and other investors - ways to attack the stalwarts and to take their market shares. 

But the FTC does not care. The law suits and inquiries are based on arbitrary criteria - like "stifling emerging competition" - and the claim that the big corporations are abusing market power, which is "an imagined power, like witchcraft" comments Edwin Rockefeller, the author of "The Antitrust Religion" (amazon ).  

Law suits & inquiries are driven by ideology and disdain for markets, entrepreneurs & consumers. Chair Ferguson believes that the government & bureaucrats know more about how to do business than corporations. He tries to replace markets and consumer decisions by central planing. 

The real intention of the FTC bureaucrats is to gain control over America´s largest corporations and to be in charge of their business. Ferguson & Co. want to tell their CEOs what they can do and what not, how much they charge their customers and how they deal with their business partners (nationalreview ). Obviously the FTC wants to protect competitors, even those which are inefficient, which leads to less competition and will harm the consumer.

                  Sand Into Gears

Unfortunately the FTC is not only obsolete, it is also harmful. The law suits support the competitors of successful firms that want harm their rivals and take sides with firms disadvantaged by technological change.

The FTC is penalizing successful corporations and throws a lot of sand into the gears of the engines of the US economy. The FTC inquisition reduces the corporation`s ability to further innovate and is occupying their management capacities and slowing decision processes - making business more complicated and costly.  

If corporations get punished for being efficient and for keeping costs low, it will slow economic growth, raise price level and reduce living standards of low income households, who depend on purchasing cheap goods. Innovators and startups are getting discouraged when they know that strong growth will get punished.

The FTC should be shut down!  

 

 

 

Books: The Alice Behind Wonderland By Simon Winchester

 (Drivebycuriosity) - There are not many pieces of world literature that are so funny and so much pleasure to read like Lewis Carroll´s "Alice's Adventures in Wonderland", better known as  "Alice in Wonderland". Charles Lutwidge Dodgson, the real name of the author, dedicated the novel to a then six year old girl, Alice Pleasance Liddell, the daughter of the dean of Christ Church College, Oxford, where Dodgson was employed as sub-librarian & mathematics lecturer.

Simon Winchester wrote a fine little book around Dodgson, Alice, and the most famous portrait of said Alice: "The Alice behind Wonderland" (amazon ). Aged 25 Dodgson became fascinated with photography, then a flegdling art. He took a lot effort to become a master in the new medium and gained popularity as photographer of portraits, often of celebrities like Lord Alfred Tennyson, but he also got fond of portraying little children. 

Being friend with superior dean Liddell and his family gave Dodgson the opportunity to create photographic images of the Liddell children; and Alice became his favorite and friend till the end of her childhood. Winchester just reports the facts and does not participate in the speculation why Dodgson created so many portraits of children, some of them naked. He writes:

"His utter fascination with all of these girls, his need to picture them with or without clothing, his need to make them happy, to amuse them, to have them think of him as a friend and for him to feel free to do the same, his needs to buy them dresses and stocking and bonnets and shoes, and on rare occasions to exhibit brief flashes of physical affection, reflect an aspect of Charles Dodgson`s character that puzzles and intrigues to this day". The usually timid Victorian society did not take offense and Dogdson/Carroll stayed all his life reputable as mathematician, author & artist.

Dodgson - who created a catalogue of about three thousand photographies in his lifetime - made altogether 11 portraits of Alice Liddell alone; the most famous of them - and the focus of the book - is now kept on the Princeton University campus, in the Firestone Library, New Jersey, USA. The object is dressed in a ragged beggar-maid-a costume inspired by a Tennyson poem. "She is lazing coquettishly against a grumbling garden wall of limestone and sandstone, standing in a corner in her bare feet". 

Winchester asks if mother Liddell, a sister, or Miss Prickett, the governess, were present when Dodgson arranged the photo: "The garment has been decorously disarranged - her shoulder both visible, her elbows and lower arms, and her chest" and he wonders "would anyone care that Dodgson then reached behind the little girl´s hair and adjusted the off-white garment about her shoulders, such that it fell slightly from her left and exposed only just entirely her left nipple?". 

Winchester also elaborates about the first steps of the new medium, the competing inventions & technologies and the substantial preparations necessary to create a photographic image. According to Winchester "photography had a kind of manageable madness to it". 

I found this book because I became a fan of Winchester after reading "The Professor And The Madman" (my review) and recently "The River At The Center Of The World: A Journey Up The Yangtze And Back In Chinese Time" ( review). I am impressed how he mastered very different subjects and shaped them all into elegant prose.