Fraudulent web click are friction in Google’s business. Fraudulent clicks ad costs to the system without a benefit to the performance of the system. Google’s profit is derived from improving the system (of finding customers for advertisers) and taking a cut of the profits that their system creates. Google makes a great deal of money because their system of matching advertisers with dollars to spend to customers. Google does this through ads on their search results pages and on third party web sites. Google engineers will do whatever they can to find ingenious ways to reduce that friction.
There have been many stories over the last few years about click-fraud. But none I have seen explain the simple idea that Google is the company with the most to gain by eliminating it (and Yahoo next). They often point to companies suing Google about fraudulent clicks instead.
Companies like Google run ads on web sites and charge the advertisers for each click (anywhere from a few pennies to several dollars for each click). Advertisers want to get potential customers when someone clicks on their ads, obviously they don’t want to pay when there is no chance the “visitor” is going to become a customer. Obviously, fraudulent clicks are bad and those that engage and encourage such behavior are acting unethically and immorally and should be stopped and punished.
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You might think that China has been exporting more than the USA but you would be wrong. As Brad Setser discusses in, China tops the US — at least in the goods exporting league table, in August (which is a bit misleading – USA exports are seasonally adjusted, China’s are not) China exported more than the USA. He predicts that next year China will export more than the USA for the first time.
That calls into question my credibility. China has a great capacity to surprise.
He is right, China continues to surprise. However, don’t forget that the USA is still by far the largest manufacturer in the world (more than double China). And Japan still manufactures more than China too (though that is probably getting very close).
Related: Manufacturing Value Added Economic Data – Manufacturing Jobs Data: USA and China
Aid Is a Bumper Crop for Farmers
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One week before the presidential election, it passed a new $1.8 billion disaster bill to assist farmers hurt by bad weather. Two others followed in subsequent years, totaling more than $6 billion. Today, after a searing drought in the Plains, farm-state legislators are pushing for billions more in aid.
The result is that farmers often get paid twice by the government for the same disaster, once in subsidized insurance and then again in disaster assistance, a legal but controversial form of double-dipping, a Washington Post investigation found. Together, the programs have cost taxpayers nearly $24 billion since 2000.
Some politicians talk as though they respect capitalism. They claim to reject taxing people just to give that money to others. Yet they continually increase the debt (taxing our children and grandchildren) and make payments to corporations, farmers and others for no reasonable purpose, other than buying votes. In addition to payments to farmers the government pays those who build million dollar beach house when the predictable storm knocks them down. No rational capitalist or economist would support such behavior (a political consultant might if when voters reward those that buy votes with taxpayer money, which seems to be the case now).
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The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.
Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.
Unfortunately many seem to have skipped economics in school and accepted the claim that Capitalism is about protecting the rich. They seem to believe it is a tenant of Capitalism that those that have the gold make the rules. That is in fact a risk that Capitalists must protect the economy from, not something Capitalist approve of. Those who believe in the wealth being passed from those who earn it to those who they like, believe not in Capitalism but in the state not taxing the idle rich but instead taxing those who don’t have millions given to them. While many have come to believe that such idiocy is Capitalist, it is not. People should read the Wealth of Nations by Adam Smith to get a much clearer idea of what Capitalism is about than those in Washington DC have.
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The 2006 Nobel prize has been awarded to Muhammad Yunus and Grameen Bank (which he founded). Trickle Up has long been my favorite charity. It is based on a model similar to the Grameen Bank where small micro-loans help people help create an economic future for themselves out of poverty (Trickle Up makes small grants instead of loans).
Trickle up and Grameen bank are amazing studies in financial literacy. They provide both seed capital and training to help people create businesses and have an absolutely amazing track record. Interview on the Noble Prize web site:
Muhammad Yunus: The one message that we are trying to promote all the time, that poverty in the world is an artificial creation. It doesn’t belong to human civilization, and we can change that, we can make people come out of poverty and have the real state of affairs. So the only thing we have to do is to redesign our institutions and policies, and there will be no people who will be suffering from poverty. So I would hope that this award will make this message heard many times, and in a kind of forceful way, so that people start believing that we can create a poverty-free world. That’s what I would like to do.
The 2006 Nobel Prize in Economics (technically, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) has been awarded to Edmund S. Phelps, Columbia University for his analysis of intertemporal tradeoffs in macroeconomic policy. In other words he won for his work exploring the trade offs between short term and long term effects of macroeconomic policy. The Nobel foundations does an excellent job of providing additional information on the work of prize winners to the pubic:
We are still experimenting with how best to arrange our blog posts. We have decided to setup a new blog for posts most purely related to investing and economics. The Curious Cat Science and Engineering Blog has quite a few posts related to economics and science and engineering. I would foresee those post in the future still being made there. The Curious Cat Management Improvement blog also has economics and investing related posts. In the future I would imagine most of those posts would now be made in this blog – expect those that tie closely to both management and economics or investing.
We also will be posting more frequently on general investing and economics topics. And we will be providing posts linking to interesting articles we find.
The Curious Cat Investment Glossary defines investing terms and includes links to related online resources. The Curious Cat Investing Library includes links to selected investing and economics online articles and the Curious Cat Investing Bookstore highlights books we feel are of value to investors.
I have also added the posts on investing and economics that were originally posted on the other blogs here (that way they will be returned in searches of this blog and be seen when browsing the category listings).
Originally posted on our Management Blog.
Manufacturing Productivity and the Shifting US, China, and Global Job Scenes-1990 to 2005 (working paper – July 2005) by William Ward, Clemson University:
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I find that 100% of the (3.0 million) manufacturing jobs lost since 2000 were lost to manufacturing productivity growth and that 100% of the (1.8 million) jobs that should have been added back by GDP growth in the US after 2000 were shifted to other sectors of the US economy than manufacturing.
In this paper he is examines the factors leading to a reduction in manufacturing job worldwide. He concludes that job losses are mainly due to increased manufacturing productivity (worldwide, manufacturing productivity is increasing and jobs are decreasing – including China). Read more
Fairly frequently I am asked, by friends, for investing advice. One topic I am asked about frequently is mortgages (locking in rates, etc.). Often they are concerned about what a Federal Reserve decision to raise or lower rates will effect the 30 year fixed mortgage rate. Essentially the decision by the Fed won’t have any predictable impact (this is not the complete truth but close enough for the question being asked – this article has more, though it still just provides a cursory view of the situation).
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Our only hope: retiring later by Jim Jubak
Jim Jubak is definitely worth reading for anyone interested in investing. This column touches on the economic problem of the aging population.
That pretty much has to be part of the solution. While the United States is rich even we are not rich enough to have people work for 40 years and not work for 40 years. Retirement at 65 was set when most people died before or soon after that date. It just is not realistic to think we can live at the standards of living we expect and only work from 25-65.
If people want to cut the standard of living during the 80 years they live that would be one tradeoff they could make. I don’t believe his contention that savings is not a reasonable significant part of the solution (if that is what he means by “The whole world is getting old pretty much all at once, so saving more and investing at higher returns won’t do the trick.”
- The Impact of Aging on Financial Markets and the Economy: A Survey by Barry P. Bosworth, Ralph C. Bryant and Gary Burtless. The Brookings Institution, July 2004
- Aging population makes this deficit scarier, Sue Kirchhoff, USA Today.
The issue of how to deal with the economic consequences of aging population is an important issue to consider today. It is something I need to continue to study. But we also need to be taking action now on things like increasing the full retirement age for Social Security, increasing the saving rate, decreasing the current yearly federal deficit (and private pension liabilities), providing ways for those in their 60’s and 70’s to participate in the economy that work well (probably part time, more flexible work arrangements, etc.).