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Macro 19
- 3. Bonus - 2 points Exchange Rates Arbitrage Law of One Price Due Monday 11:59pm #econbyuharbitrage2
- 4. Extra Credit Opportunities Movie and Popcorn Wednesday June 19 HGB 133 7:00pm
- 6. Big Mac Index Country Currency Price Rate Dollars Phillipines Peso 140 0.019 $2.66 Vietnam Dong 65,000 0.000043 $2.80 China Yuan 20.50 0.15 $3.08 Saudi Arabia Riyal 12 0.265 $3.18 Switzerland Franc 6.5 1.0 $6.50
- 7. Arbitrage Buy low and sell high Buy here and sell there Buy today and sell tomorrow
- 8. Arbitrage Are the price differences different than the exchange rate? If so, buy low and sell high
- 9. The Law of One Price Arbitrage closes price gaps Bid up the low price - Demand Bid down the high price - Supply
- 10. 1.00 Dollar to 6.92 Yuan USD to CNY $ to ¥ $ 5.00 x 6.92 = ¥ 34.60 ¥ 30.00 ÷ 6.92 = $ 4.34
- 11. $ 5.00 $ 4.34 increase demand increase supply $ 4.67 one price Price Arbitrage Arbitragers
- 12. Time Price Database 1980 2018
- 13. 1980 2018 $14.99$22.95 Change Reduced by 80% $22.46 Per Hour $6.85 Per Hour 3.35 Hours 0.67 Hours 5x
- 14. 1980 2018 $71.98$459.95 Change Reduced by 95.2% $22.46 Per Hour $6.85 Per Hour 67.1 Hours 3.2 Hours 21x
- 15. 1980 2018 $62.89$459.95 Change Reduced by 95.8% $22.46 Per Hour $6.85 Per Hour 67.1 Hours 2.8 Hours 24x
- 16. 1980 2018 $36.80$399.85 Change Reduced by 97.2% $22.46 Per Hour $6.85 Per Hour 58.4 Hours 1.6 Hours 36x
- 18. 2018 8.3 hours 1 day 1980 196 hours 24 days Reduced 95.8% 187.7 Hours Saved 24x
- 19. 1997 2017 Increased by 200% You only get 1/3 of a textbook Time Price decreased by 96.0% You get 25 TVs College Textbooks In the past 20 years textbooks have become 75 times more expensive relative to TVs 25 ÷ .33 = 75 TV
- 20. “Is it still okay to have children?”
- 21. This universe is finite, its resources, finite… If life is left unchecked, life will cease to exist. It needs correcting. Thanos
- 22. Society needs rescaling – we’ve got to reduce the size of the entire human enterprise. Paul Ehrlich
- 23. The power of population is indefinitely greater than the power in the earth to produce subsistence for man. Thomas Malthus 1798
- 25. 336 million abortions 33 million extra men Source: The Telegraph, 3/15/2013
- 26. 55 million abortions per year
- 30. Would Simon still win today? Too Generous Gave Even Odds Should Have Used Time Prices
- 32. Project Abundance 50 Commodities Time Prices Price Elasticity of Population Simon Abundance Index
- 33. The relationship between population and time prices Abundance
- 35. Innovation Lower prices Higher incomes See the whole picture
- 36. The real price of everything is the toil and trouble of acquiring it …. What is bought with money... is purchased by labour. Adam Smith
- 37. Money Price Time Price Dollars and Cents Hours and Minutes
- 38. Money Prices Real Price Nominal Price Deflator =
- 41. Hourly Income GDP Per Capita Annual Hours Worked ÷
- 42. 1980 - 2017
- 43. 1980 2017 Percentage Change Source or Equation Nominal Price $0.40 $0.81 102.5% World Bank GDP per Capita $2,516 $10,495 317.1% World Bank Hours Worked 2,168 1,964 -9.4% The Conference Board GDP per Capita per Hour $1.16 $5.34 360.5% GDP per Capita ÷ Hours Worked Time Price in Hours 0.345 0.152 -56.0% Nominal Price ÷ GDP per Capita per Hour Time Price in Minutes 21 9 -56.0% Time Price in Hours x 60
- 44. Oranges SimonProject y = -1.2159x + 88.995 R² = 0.6301 0 10 20 30 40 50 60 70 80 90 100 110 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Oranges Time Price Index 1980 =100
- 45. Percentage Change Multiplier Compounded Annual Growth Rate Years to Double
- 46. How many units of an item the same time would purchase at different points in times = old time price ÷ new time price Multiplier
- 47. How many units of an item the same time would purchase at different points in times = 1 ÷ (1 + Percentage Change) Multiplier
- 48. = Multiplier Compounded Annual Growth Rate CAGR 1 Years -1
- 49. = Log(2) ÷ Log(1 + CAGR) Years to Double = 70 ÷ CAGR
- 50. Time Price -56.0% Multipler 2.27 Compounded Annual Growth Rate 2.24% Years to Double 31.2 1980 - 2017 Oranges
- 51. SimonProject 50 Commodities 0 10 20 30 40 50 60 70 80 90 100 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Time Prices 1980 = 100 —64.7 Percent
- 52. Time Price -64.7% Multipler 2.83 Compounded Annual Growth Rate 2.85% Years to Double 24.6 1980 - 2017 50 Commodities Findings
- 53. Percentage Change in Time Prices Percentage Change in Population We assume that Population is always increasing Price Elasticity of Population
- 54. 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Population and Time Prices 1980 = 100 Population Time Prices +69.3 Percent —64.7 Percent
- 55. Price Elasticity of Population 1980 - 2017 = - 0.934 For every one percent increase in population, prices declined almost one percent - 64.7% = %∆ in Time Prices %∆ in Population +69.3%
- 56. Decreasing Abundance Emerging Abundance Accelerating Abundance Superabundance Abundance Zones
- 57. In 1980 you invite 100 guests for dinner The cost per guest is $10 The bill is $1,000 In 2017 you invite 69 percent more guests but the cost per guest has fallen by 65 percent. What is the bill? 169 x $3.50 = $591.50 Your bill has fallen by over 40 percent
- 58. What is Superabundance? No matter how many more people come to dinner, your bill decreases
- 59. Measures abundance since 1980 Set 1980 equal to 100 Simon Abundance Index SAI
- 60. 1 + percentage change in population ÷ 1 + percentage change in time prices x 100 = 1.693 ÷ 0.353 x 100 = 479.6 Simon Abundance Index
- 61. Change in Time Price Multiplier x 1 + %∆ in Population x 100 Simon Abundance Index = 2.833 x 1.693 x 100 = 479.6
- 62. y = 9.6583x + 100 R² = 0.8514 0 100 200 300 400 500 600 19801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017 Simon Abundance Index 1980 = 100
- 63. Simon Abundance Index 1980 100.00 2017 479.60 Percentage Change 379.6% Growth Rate 4.33% Years to Double 16.36
- 64. Project Abundance 50 Commodities Time Prices Price Elasticity of Population Simon Abundance Index
- 65. humanprogress.org/simonproject To learn more visit: HumanProgress The Simon Project
- 68. Malthus Ehrlich Thanos Wrong Level of Analysis
- 69. Quantity Money Price Time Price Change in Time Prices Addition Values Ratios Calculus
- 71. An economy grows whenever people take resources and rearrange them in a way that makes them more valuable
- 72. How many keys? How many songs?