Scott Sumner on Rents – I agree with Sumner on rent-seeking being abhorrent. I often think of this article from 2014 whenever Elon Musk is brought up (usually extremely favorably; someone I interviewed recently gave Elon’s name as the answer to ‘Who would you have lunch with if you could have lunch with anybody that has ever lived?’). I’ve met a lot of homeowners here in Santa Barbara who say they believe it is their duty to preserve the beauty and character of the city, and I generally believe that they are not being duplicitous. However, if you looked at their actions, the zoning they favor, etc., they are indistinguishable from land owners seeking as much rent (both in the normal sense of the word and economic, I suppose) as they can possibly get.
Scott Sumner on Exchange Rates – Everybody understand on some intuitive level what it means for one country’s currency to be ‘strong’ versus another – that they can buy more goods in the ‘weak’ country than they could buy of similar goods in the ‘strong’ country. This is usually best seen by going to a developing country from a developed one, and whenever the scenario deviates from this familiar one, people start making errors, conflating cause and effect, and being generally confused.
A few notes:
- Knowing ‘how many’ of one currency you can get for another doesn’t help decide if one is stronger than the other.
- Knowing how the exchange rate has changed does not help unless you also know how the underlying price levels have changed AND which currency was ‘stronger’ to begin with.
- As a country develops, it is a lot simpler to think of their citizens as being able to command a more competitive wage (usually because they have more capital) rather than trying to think of it as an effect of ‘strengthening currency’.