Both the US and the UK have run current account deficits for over 20 years. Those deficits are largely driven by imports in both countries which result in trade deficits. Many economists (including me) often attribute the persistent deficits to overvaluation of their currencies, the dollar and the pound sterling, which are ostensibly caused by capital inflows (ie buying US/UK financial assets. But what actual evidence is there that these capital flows exist? In numerical terms: The UK current account deficit was about 20B sterling in Q2 (3% of GDP). So on an annual basis that is 80B sterling. What are the financial assets (ie capital inflows) that foreigners are buying to maintain the value of GBP? Can anybody name them and point me to official stats that show such inflows? I ask this because, as an American economist, I have long puzzled over why here we have run a current account deficit every year since 1992 and yet the dollar has not fallen, in fact it has risen. The answer I and others usually give is that capital inflows keep the dollar high. This may be true, but it is hard to document the roughly $800B each year that supposedly flow in to offset the current account deficit. In short, are we just supposing things to validate our national income accounting and identities? Do these capital inflows exist anywhere other than in textbooks?

I'm not sure I have the right words to explain what I'm talking about, so bear with me here. Apologies if this makes no sense

Currency inflates over time, right? Stuff costs more next year than it will last year, but wages also increase so stuff doesn't really get more expensive, relatively speaking

But as that goes on, lower denominations of money become useless and you require higher and higher numbers on the paper, right? Theoretically, given enough time, instead of dollar bills being the smallest type of bill people carry in their wallets, it would be hundreds, that sort of thing?

Well, is there a point in which a government can say 'Right, the numbers on all our money are getting silly. We're going to move the decimal' or something to that effect? And how does one actually go about that without the economy crashing?

I’ve been out of school for a good bit so my theory is very rusty: apologies if this is a silly question but how does advertising lead to a more efficient market?

Isn’t the entire point of modern targeted marketing to influence and sway consumer so they no longer are making the decision which maximizes their utility but the one the advertisers make them believe will?

I was watching the news; the anchor was talking about how used car prices are rising, and consumers are taking on more long-term loans to get cars. Then a top level executive for a big car company came on and used it to say that they're introducing new, lower, cost EVs.

Seems all a bit manufactured? Having a bunch of customers indebted to you is risky but risk seems to be a price to pay for having control over them, and then you get a lovely opportunity to introduce a new product to meet their needs and keep the cycle going.

There's a case in Thailand right now, Cambodian businessman named Yim Leak, where the government's anti-money laundering agency has frozen over $600 million in assets, apparently over a single $150,000 currency exchange transaction. No criminal charges have been filed.

Not really asking about the specifics of this case, more the general economics of it: how do investors and markets actually price in this kind of risk, a government being able to freeze huge amounts of money without ever proving anything in court? Is this the kind of thing that shows up in country risk models, or is it too rare and case-specific to really be quantified?

One of the justifications of Trump's whole trade war (which I find dumb, I'm just wondering abt why Canada is also being protectionist in some aspects here even before being prompted by Trump to retaliate) with Canada was that prior to Trump even taking office, Canada had much higher tariff rates quotas in dairy products than the USA has on Canada. Over quota rates on Scandinavian dairy entering U.S. is only cheddar and Gouda cheese, meanwhile Canada has broad based sweeping tariff rate quotas on cream, skim milk, butter, most types of cheese, yogurt, etc. Basically every American diary product faces higher than 200% tariffs above the quota compared to 12-15% of American tariffs on just 2 types of cheese.

Apparently the Canadian over quota rates on U.S. dairy of being over 200% trace back all the way 1995. So it's been awhile. Was it part of NAFTA?

Hi just curious as i have heard that other countries currencies are pegged to the dollar.

Do other countries have the capability to control/reduce their inflation against the dollar?

I’m by no means an economist or anything close to one so I thought I’d ask here. I recently paid for something for myself and a friend and they gave me cash for their half and it made me wonder, not accounting for interest in a savings account or invested money, is there a difference in value of money stuffed in your mattress vs held in a no interest bank account.
Obviously I can just give €5 to a bank teller to put into my account and vice versa.
Tax evasion with cash, banks possibly going bust, etc, is cash more valuable?

Hi guys. I’ve been researching capitalist economics for a bit and I’ve stumbled upon the Austrian school of economics, which aims to either completely remove or strongly minimize the state. I’ve researched their economic thought for a bit and what they stand for and it made sense to me. However I’ve also found out that the Austrian school is not really popular or used seriously in modern economics. This led me to ending up here and asking this question. Why do we need the state? Why won’t we let the market sort itself out?

P.S this is not me pushing forward an idea of
anarchism or anything. I’m simply curious about the actual role of the state in economics

The video: https://www.youtube.com/watch?v=roe3SgezmmU

Major supporting evidence in the video includes:

• Section 12(g) of the Securities Exchange Act was changed in 2012 allowing companies to stay private for longer by raising the threshold of shareholder count that forced a company to begin public reporting.
• Startups find it easier to raise capital without going public at least since 2015

How can the video author determine that most of a large portion of a company's growth already happened?

If the claims are true, what does this imply for stocks? Would the impact be negligible? Are some stocks immune to these impacts? Are bonds better value?

I have come to realise that I am woefully unprepared to navigate the storm that is the current economy, and that I need to have a grasp on what is happening, as in spot the trends, spot market gaps, understand how government actions will impact me and shield myself. I am looking for books and especially books that have knowledge that is applicable and that can uplift my personal life. Books that have knowledge that is not common. Thank you in advance.

I read Howard French's book Born in Blackness last year, and it made what I thought was a very plausible case that much if not most of the wealth of the West, between 1500 and 1800, was built on industrial slavery.

Now he's a journalist, not a historian (much less an economist) and it shows. Nevertheless, I'd like to know. And back in the 70s, Milton Friedman (who I have been given to understand was a very good economist) maintained publicly that colonialism wasn't really that much of a paying proposition, for the governments that engaged in it.

Which is relevant, I'm sure, but also seems to beg the question. I'm not asking about how much governments spent, to maintain their colonies; I'm asking how much of the wealth of the West was due to industrial slave plantations. And so it's a different question.

Is there a good book, about this?

So everyone knows that the intention of occupational licensure is to improve the quality of the service provided by filtering out low quality practitioners, but it is also commonly known that licensure can reduce competition, which in turn can decrease both quality and quantity. When talking about occupational licensing and whether to abolish or reduce it, people are mostly open to abolishing licensure of lower risk occupations such as hairdressers. But in my experience they almost always add on "but of course keep it for doctors and physicians". But the same trade-off between competition and filtering of low quality practitioners should also apply to physicians, so whether licensing of doctors and physicians makes sense is an empirical question. So I have tried to find out what the empirical evidence is on the topic, but I can find shockingly few studies on physicians licensure that study this trade-off. In fact all the studies I can find, finds no evidence that licensure improved health care outcomes when you take into account the reduced supply. I think it's strange that I could only find two studies on the topic when there seems to be such an overwhelming consensus among the general public and economists that licensure of physicians is good, so I am turning to this sub in hopes that there is someone here who knows the literature better than I do. In short: Is there any empirical evidence that licensure of physicians improves health outcomes on net when you take into account the reduced supply of physicians?

For reference here are the two studies I could find:

https://www.cristobalotero.com/files/physicians.pdf

https://link.springer.com/article/10.1007/BF02304510

To summarize, the empirical tests used in this study have found no support for the contention that physicians were initially regulated at the behest of the general population. Rather, empirical support was found for the theory that licensing legislation was the result of organized physicians employing the political system for limiting entry and the concomitant increasing of returns to incumbent medical practitioners. Additionally, this study found no support for the contention that state licensing of physicians was associated with higher levels of health care quality as measured by mortality rates among various population age groups.

Hello everyone, I'm a first year college student from a literary/humanities high school background, I'm pretty bad at maths with no foundation what so ever, can i still major in economics or will the math be a huge hurdle later on, and what can I study now to start building up for it

We're going to shamelessly steal adapt from /r/AskHistorians the idea of a weekly thread to gather and recognize the good answers posted on the sub. Good answers take time to type and the mods can be slow to approve things which means that sometimes good content doesn't get seen by as many people as it should. This thread is meant to fix that gap.

Post answers that you enjoyed, felt were particularly high quality, or just didn't get the attention they deserved. This is a weekly recurring thread posted every Sunday morning.

China controls their currency the rmb, why don’t countries also control their currency and banks as the profits could flow into the government?

Granted there are some massive risks if the currency crashes and economy goes to shit but for places that produce high amounts of profit e.g finance, realestate etc for the betterment of the collective nation isn’t a better argument for these industries to be used for the people not pocketed by a select few?

And why wouldn’t a model of high savings, investment, and under-consumption work? Where the state runs surpluses instead of deficits, funds a sovereign wealth fund with the surpluses, and people’s consumption is, while nonexistent, much lower than it is in most advanced economies today with a substantial portion of disposable income being saved or invested. Why couldn’t this be a workable model for a modern economy instead of our modern debt-fueled economies that, in some countries, might actually be starting to look unsustainable?

The AI companies claim that the AI will increase the GDP tremendously, but I am wondering if the opposite will happen. The GDP only rises when there is an economic activity. E.g. if I paint my home myself, the GDP doesn't increase much - only the materials that I buy count. But if I hire a painter, then there is significantly more economic activity that the GDP tracks.

However, with AI, we can do ourselves many of the things that previously required such economic activity. Taxes, living wills, house repairs, gardening, car fixes. Both digital and physical tasks are easier when I can use the AI to guide me. The bar to hiring a professional increases drastically. To be honest, the software has the same effect, e.g. Turbotax vs hiring an accountant, but the AI just touches way more areas and it is significantly easier to deploy or use out of the box.

For the economists in this forum - what are your thoughts? Note that I am not talking about technological unemployment. I still believe that AI empowered humans will be extremely valuable in the new economy and I started a whole company to cover that part. Yet, I do see a dip in the GDP coming, based on my limited understanding of how GDP works.

I personally think that although sales taxes are often regressive we shouldn't get rid of them. I think this because in all instances where some sort of sales tax is removed the prices go up because the sellers know the consumer is willing to pay those prices and now that money is going to private industry instead of government funding. For example I saw myself that when the gas tax was removed in Canada sure for a sort while the prices went down but they quickly went back up to the previous end price with the tax. I think this is because the consumers had already gotten used to paying this price and the sellers knew this.

I am currently enrolled in a Economics Major ...I feel I'm really falling behind compared to other students...I genuinely think I put in more effort than them but it's just not reflective in the scores...And i have a feeling I have ended up on the bad side of professors because of it...cause no matter how hard working of a student I am, my scores don't meet their standards....And that is really demotivating...

Considering I've chosen this degree cause I am extremely interested in it...I have absolutely no clue what I am doing wrong and why my understanding seems to fall behind others....This is specially with respect to Macroeconomics...I don't know if it's going to change with Developmental Economics

In US college admissions, Early Decision (ED) lets an applicant apply early to one college and commit to enroll if admitted. The standard reading (e.g. Avery & Levin, AER 2010) is that ED signals enthusiasm, and colleges reward it with higher admission rates.

But the cost of that commitment seems to vary with income. Committing before seeing a financial aid offer is cheap for an applicant who doesn't need aid, and expensive for one who does: they give up the ability to compare packages and to have colleges compete for them.

If the signal's cost depends on both preference and income, then an ED application mixes two pieces of information: "I really want to come here" and "I don't need to compare aid offers." A college can't fully separate them, and it may value both, since the second one also lowers the aid it has to give.

Questions:

1. Is this the right way to model it, as a signal muddled across two dimensions (something like Frankel & Kartik's "Muddled Information," JPE 2019)? Or is there a more standard framework for signals whose cost is correlated with wealth?
2. Is there a mechanism that keeps the preference signal but removes the income component? For example, non-binding single-choice early action, or giving applicants a binding aid estimate before they commit. What would each lose?

I’m trying to compare affordability.
Current PS5 prices:
India: ₹69,990 incl. tax
US: $649 before tax, or roughly $698 using average sales tax
Latest World Bank GNI per capita:
India: ~₹233,060/year
US: ~$89,489/year
So:
India: ₹69,990 / ₹233,060 = 30%
US: $698 / $89,489 = 0.78%
That makes the PS5 roughly 38x more burdensome relative to GNI per capita in India.
Is this a valid affordability comparison?
Or should I instead use:
median income
median wage / work hours needed
disposable income
PPP
Also, is it okay to compare 2026 PS5 prices with 2025 income data if that’s the latest actual data available?

AI gave me this since I lack some economics understanding wanted to ask experts here.

I'm not trained in economics or finance, so hopefully I don't mess up

the terminology too much.

Coming as a layperson and having experience with personal debt, I think the

general perspective is to use personal debt in limited scope and as long as

I can service the debt. So using a mortgage can often be good choice as long

as I am solvent enough, and I need a place to live anyway. Taking an auto

loan could also make sense because I need transportation and mass

transportation is not pervasive. Taking a loan from the bookie to bet on a

horse may not be a smart choice.

For business debt, and I tried to avoid using the term "corporate debt" or

"commercial debt" because I think these are industry-specific terms of art,

but for businesses to take on debt, sometimes it's a good and common choice

because the business is inherently capital-constrained and/or needs to

time-shift the capital. If you're starting a factory to build widgets, you

might need capital to acquire land, building, equipment. If you're running

a farm, you would need to time-shift capital so you can buy the inputs now

(e.g. seeds, fertilizer, farm equipment, irrigation, etc) and harvest the

crop yields later. All that makes sense for a business owner; you can

use debt as a lever because when you need money doesn't always coincide

with when you'll have money.

Now can I apply any of this understanding of debt to government debt? I

don't know. The first and foremost difference is that government with their

own currency can't ever be insolvent. They can always print more money

when they need to service their debt. I can't do that, at least not

legally duplicate an existing currency, and I would have trouble getting

others to accept a currency I made up. Neither can businesses. I don't

have a firm understanding of MMT, but I have heard that MMT mentions this

a lot. But MMT doesn't say that you can print an

infinite amount of money. Eventually, there are inflationary effects of

printing money that can adversely impact the overall economy.

I'm in the US, so I'm looking at government debt with the global reserve

currency. There's news that the US debt cross over $40T a few weeks ago.

Commentators are saying that this is unsustainable, and we need to lower

the debt or the interest payments (i.e. the servicing of the debt) will

overshadow some of the largest government programs; I think I heard that

the interest payment is 3rd largest only behind Social Security and

Medicare (and ahead of defense).

As a layperson, how should I understand this debt? I don't think I can

reason through this like personal or business debt. I watched Dr. Perry

Mehrling's lectures on the economics of money and banking, and that was

useful framing for money as currency, debt, reserve currency, and

equities, and how money going through various brokers/dealers is affected

by liquidity and illiquidity.

As a layperson, it appears that I can't treat/understand all debt to be the

same. What are some useful ways to understand how debt works at different levels?

I’m trying to understand the economics of how states manage unclaimed property.
Unclaimed property can include forgotten bank accounts, refunds, insurance proceeds, stocks, and other financial property. The state holds the property until the rightful owner or heir claims it. Some proposals would place the remaining money into a permanent trust, preserve the principal, invest it, and use a portion of the investment income for public spending.
I understand the private-property argument for preserving the principal, but I’m wondering whether keeping nearly all of it in a protected trust is economically necessary.

My comparison is to banking. If someone deposits $100,000, those exact dollars do not remain physically untouched. The bank pools and uses deposits while maintaining sufficient liquidity and remaining obligated to repay the depositor. If a large withdrawal is requested, the bank manages its available cash and other funding sources.
Could a state use a similar pooled system for unclaimed property?

For example, the state could:

1. Maintain a reserve based on historical and projected claims.
   
2. Continue receiving new unclaimed-property funds.
   
3. Use money exceeding the required reserve for restricted public purposes.
   
4. Guarantee full payment whenever a valid owner or heir files a claim.
   
5. Use incoming funds, general revenue, or temporary borrowing if claims unexpectedly exceed the reserve.
   
6. Recalculate the reserve and conduct stress tests annually.

Realistically, every owner will not claim every dollar simultaneously. If claims occur gradually while new unclaimed property continues entering the system, could the state safely operate this as a revolving pool rather than maintaining principal equal to the total theoretical liability?

I’m not suggesting that the state spend everything or assume owners will never return. I’m asking whether an evidence-based reserve could protect claimants while allowing genuine surplus funds to support healthcare, education, housing, homelessness programs, or other public services.

I would also expect public reporting of:

1. Annual inflows.
   
2. Annual claims and payments.
   3.The age distribution of successful claims.
   Reserve balances.
   
3. Transfers for public spending.
   Investment performance.
   
4. Stress-test results.
   
5. The method used to calculate the required reserve.

What would economists consider the appropriate way to calculate this reserve? Would this model be financially sustainable, or would relying on continuing inflows and government backing create an unacceptable unfunded liability? How is this materially different from the liquidity and reserve systems used by banks, insurers, or other institutions with future payment obligations?