To spend or save, which is better for the economy? We know all too well now that the economy is better off if people spend money instead of save it. It’s an economic tenant that goes against the commandments of personal finances. When I first started Weakonomics I wrestled with these ideas. Now I just want everyone else to spend while I save. But finally people are starting to talk about what saving really means and does for the economy. This article requires reading an extra time or two just because it’s written by an economist for other economists. But it’s worthy of your reading.
Secret Service ain’t the only ones seeking prostitutes: Interesting account of the internal process of tracking down inappropriate behavior at the Treasury Department. The investigated issues included an official using government computers to solicit erotic services and another time where a regulator played golf with bank executives, allowing the execs to foot the bill. That’s a no-no on both sides.
Evidence of comparative advantage: Comparative advantage is an economic theory about specialization amongst countries. It allows for two countries to specialize in production, and conduct trade with one another, and each ends up better than if they’d just produced all the goods they need individually. I understood this to be a generally well accepted idea with lots of real life examples (a problem with economic theories). But an economist has found a way to study this in real life. This is a small step in the direction of economics becoming more of a science.
Obama’s tax credibility: In a few words, it’s not been great. Bush Sr was worse promising to not raise taxes, but just about every president has trouble with competing against the campaign version of themselves. Reality plus Congress can really complicate things. We should hold our elected officials more accountable to their campaign promises, but since everyone exaggerates, no one is going to stop.
Save Spain with coupons: An interesting idea. To increase foreign spending they could sell coupons to foreigners. Like a Groupon for Spain. Imagine buying a coupon for a Spanish vacation home that’s good towards 100k euros but only costs the buyer 80k. This would bring a flood of international money into the country and stir an economy that is incredibly weak. But as the link will point out, this is likely against the rules of international trade even if they wanted to put a program into effect.
Why half of all public companies register in Delaware: The Caymans get all the attention as tax havens for the rich. But Delaware is a tax haven for corporations in a similar manner. Most people in business are aware of this, but few have ever looked so deep into the tiny state to explain why corporations locate there, and what the state gets out of it.
Should we even leave our kids an inheritance? It’s a topic rarely discussed in personal finance, at the highest level and down to the lower reaches of the blogosphere. I like the idea of leaving your family some money, but you have to pay yourself first. The job of the parent is to get the kid to adulthood with as many advantages as possible. It’s not crazy to think someone in their 20s today can live to 100 with relative ease. Should they really care about leaving their kids who are then in their 70s money?
It’s okay to cheat so long as you cheat less than others: In varying degrees we all cheat. The interesting thing is most of us cheat only just a little. Dan Ariely has been researching this behavior for years and has done many experiments in different forms that proves it. The basic version is he gives someone a test and they self-report their own scores and destroy the test sheet. They are paid for the number of problems they solved. Ariely either tricks the user into thinking the sheet was destroyed or through testing other subjects already knows the average score. Sure enough, many people cheat. Just enough so that we feel like we won, but not so much that we feel like we hurt anyone by doing it.
Image: 401(k) 2012