Think Forward.

Economics

by Tariq Daouda
73074
Chapters: 10 13.1 min read
This series brings together articles on economics, analysis of major trends, policy debates, and the transformative forces shaping economies worldwide. Whether exploring the ripple effects of tariffs and trade policy on Canada, dissecting the informal economy in Morocco, or unpacking the global significance of of major political trends, each piece invites readers to look beyond numbers and consider the deeper currents driving growth, and innovation.

1: Managing Science is not a numbers game 4787

Tariq Daouda, 2 mon.
More people in science does not necessarily mean better results: there is an equilibrium to find, a sweet spot. There is a fundamental difference between technology, industry and science. In an industrial setting, production is mostly defined by how many units of production you have, and how much ressources are available for production. As long as input ressources are available, you can in theory scale production somewhat geometrically. Double the number of factories, double the output. Science works differently. Historically groundbreaking scientific discoveries and theories have been made in times of small tight knit communities. The most famous example being the iconic photograph from the Fifth Solvay Conference in 1927, held in Brussels, often referred to as "the most intelligent photo of all time". All the great minds that defined modern physics from relativity to quantum mechanics fit in one single photograph. In science, instruments are not the means of production, they are the tools used to assess theories. Doubling the money and the people does not imply doubling the output. Science is not about producing stuff it's about producing new ideas. Science thrives when highly intelligent individuals, extremely passionate about a single topic, get to meet to exchange often and freely over a long period of time. A hyper focused kernel driven by a similar passion. Adding more people dilutes the potential of highly meaningful interactions. That's the first reason why more people can lead to less groundbreaking discoveries. Even if the constituents of that kernel exists, it can never crystallized and reach it's full potential. Too many people to talk to, too many papers to read and too many unaligned objectives. This also promotes the apparition of dogmatism and "consensus thinking". When there are too many ideas to assess, it is tempting to go with what the majority thinks. However for science, freedom is more important than consensus. Consensus is a political tool used by human beings to govern themselves in matters of opinions. This is irrelevant to science because science is empirical. It doesn't matter how many people think something if it can be demonstrated to be false. Freedom of thought, on the other hand is the essential mechanism that keeps on generating new ideas and points of view. A necessary part of scientific development.

2: Wealth inequality as a question of Inflation and Taxation 4537

Tariq Daouda, 2 mon.
Wealth inequality has been periodically rising up at the forefront of political discussions since 2008: almost 20 years now. With the same seemingly smart analysis pointing out that wealth inequality results in social unrest, often terminating with the "solution" of taxing the rich. First of all, although it does seem that wealth inequality leads to social unrest today, it's not at all a historical fact, when historical societies with massive wealth inequality have persisted for centuries. This raises the question of political manipulation and instrumentalisation. It also points out to a material switch in the moral compass that occurred more than century ago. Fruit of a materialism Zeitgeist that colored of all the "isms" of the era: Capitalism, Marxisim, Socialism and Communism ideologies, etc.. . All raised materiality has a moral imperative. Above kindness, honesty, generosity, honor, and the rest of the set of virtues that humanity has recognized for ages. When inflation rises the value of assets compared to money increases. It means that, as money devalues, if you own land, stocks, businesses, and things of the sort, you do not get to be richer, but you get to keep what you have. This is what is commonly referred to as "the transfer of wealth" to the richest. It's not a transfer at all, the word "transfer" suggests that wealth is being taken from the population at large and given to the richest. What is happening is that the asset of most people is "Money / Currency". This is a devaluating asset by design (the inflation rate set by central banks), and the more it devalues, the less it is worth compared to everything else. Then there is taxation. Taxation disproportionately affects people who derive their income from good paying salaries. . When adding up all taxes indexed on their salaries and the indirect taxes, their tax burden can be over 60%. These are historically high numbers, nowhere near the taxation levels of asset owners, or the low salaries earners. It means they don't even get to keep half of what they made. These incredibly high numbers also hinder the capacity of the most productive members of the population to acquire assets, start businesses, and over all participate into the economy to their full extent. In comparison, the lowest payed workers. However they are disproportionally affected by indirect taxation and consumption taxes (ex: VAT). That represent a higher percentage of their income. The most direct solution to reducing wealth inequality, is not to make the richest poorer. It's to make everybody richer, and the shortest path to do that is to get rid of inflation, lower the tax burden on salaries and, have a very low or even no consumption tax. It seems obvious, let people keep most of what they make so that they attain higher levels of material wellbeing doing what they already do. And make sure that their savings do not lose value over time.

3: It not tariffs it's a cost on trade deficit. 7614

Tariq Daouda, 7 mon.
Trump tariffs are not traditional tariffs, because they are indexed on the US trade deficit. Historical, tariffs have usually been either as a way to protect internal markets, get revenue for the government by indirectly taxing the population or both. They have also been used as punitive measures. A tariff is both a tax on outside goods, and a subsidy to the internal market. As such they are either seen as distorting the market, or a way to put a price on not been able to produce something internally. However, this new form of tariffs tell a different story, they are blanket tariffs based on the general trade deficit that the US has with different countries. Which means they go up and down with the trade deficit, that alone makes them function differently. How they will impact the global market remains to be seen. From a strictly optimization (the mathematical discipline) perspective, the most likely outcome, after a period of instability, is a general lowering of US trade deficit, mirrored by a lowering of reciprocal tariffs leading to an increase in trade and GDP. This of course does not take into account specific geopolitical sensitivities and the complexity of the potential readjusting in regulations, fiscal policies and otherwise that countries may have to do lower their trade deficit with us.

4: Trump Tariffs & Retaliations: What could happen to Canada if it Lasts 10542

Tariq Daouda, 9 mon.
Even more inflation and a general depreciation of the Canadian market. If Canada increases tariffs on US imports, Canadian companies will have to borrow more to buy what they need to produce, therefore increasing the money supply and driving Canadian inflation higher. The vast majority of the borrowing will be directed to buying supplies not increasing salaries. Tariffs on Canadian products in the US will likely lower the demand for them. Which means Canada will have a surplus of products that they might not be able to sell. The US is after all the number one market for Canadian products and for some companies the only one. This in terms will lead to a lowering of production which coupled with increased borrowing will likely increase inflation even higher. So why not sell in Canada? Canada has a very high GDP / Capita but the size of it's market is not comparable to the US. Canada has also accumulated a high number of regulations that prevent economic growth and turn one of Canada's biggest advantage (its size) into one of it's biggest disadvantages. Canada is the second biggest country on earth, a fact that comes with a unique set of economic challenges, chief amongst them is the transport of goods. Canadian economy mostly relies on trucks to ship good from *A Mare Usque Ad Mare*. Canadian trucks are subjected to different laws in different Provinces. Some cannot event drive at night. In the second biggest country on earth it means a huge increase in shipping time and therefore cost needed to ship goods. Canadian energy costs are high, due to carbon taxes and various laws and regulations that prevent the growth of its oil industry. Canadian provinces also have specific taxation laws that effectively act as tariffs within the country, driving the competitiveness of the inner Canadian market lower. Canada taxes on employment and consumption are also general higher, driving cost of labor and therefore the cost of everything higher. All this means that until now, it was cheaper to sell to the US than within Canada. For some, it was even cheaper to drive to the border and send a package with USPS than to send from Canada using Post Canada. Why not Europe then? Europe is far, which means higher logistical and shipping costs. Europe is also extremely regulated, which means that Canadian companies would have to undergo massive restructurations to make their products fit the European market from a regulatory perspective. Canadian market is so intertwined with the US market that a lot of what it produces is in inches and feet. Not what Europeans are looking for. Europe is also suffering from a serious inflation meaning that their capacity to buy Canadian surplus is not that high. Europe is not an homogeneous market. Selling in Europe means dealing with many languages and tax regulations like VAT that are specific to each country. This drives the cost of compliance even higher. In short, If the tariffs war lasts, Canadian economy will produce surplus that it will not be able to sell, leading to a downsizing of the economy, and Canadian companies will have to increase their borrowing to maintain production. These will lead to higher inflation in Canada that will be accelerated by existing consumption taxes. This in turn will lead to an increase in salaries, therefore of borrowing and an acceleration of inflation due to existing labor taxes, which will lead to an increase of unemployment. This is the road to a Canadian recession that could lead to a massive defaulting on debt in Canada (especially in the housing market) and a general divestment from the Canadian economy. The only viable option for Canada to soften the blow is to increase the competitiveness of its inner market: lower taxes and lower government spending (to reduce inflation), remove regulations (starting with the ones hindering inter-provincial economy), lower energy costs. Edit: Canada just cut interest rates to 2.75% increasing money supply (link bellow).
financialpost.com/news/economy/b...

5: The US creates a Strategic Reserve of Digital Assets, and a Wake up Call for Morocco 10067

Tariq Daouda, 9 mon.
Finally, the world realizes that Bitcoin is not a currency but an asset. Those who understand the technology knew it from the beginning, isn't Bitcoin "digital gold", and isn't gold an asset. In 2017 Morocco decided to ban the use of digital assets, back then a Bitcoin was worth 8K dollars. This decision stemmed from a misunderstanding of the technology and a fear propagated that Bitcoin was only good for criminal activities. Interesting how things changed, and so quickly. To understand Bitcoin, you need some background in Economy and Energy, but you absolutely need a very strong understanding of Maths, and Computer Science. Without it you cannot understand what Bitcoin is, how it works, and why it is such a strong ledger of value. Bitcoin works Mathematically not on opinions or regulations. Arguably, the decision to ban digital assets cost Morocco billions of dollars. In the long run it will perhaps cost more than any other in the history of the country. The very hard anti digital stance (that was reinforced in 2022) dissuaded legitimate business from using the technology. Something that would have modernized the banking and financial system, facilitated payments and potentially captured billions worth of digital assets in Morocco. The country could have owned a significant amount of those assets that would have boosted its economy. Yes Bitcoin fluctuates, it does so because it is an asset. However, it is also a very liquid asset, it is so valuable that it is easy to exchange for Dollars or Euros. A reserve of digital assets would have guaranteed the country's access to other currencies, and would have paved the way towards the only viable long term monetary strategy for Morocco (if it wants to keep it's currency): a strong Dirham. It is of course not too late to change course, and for Morocco to become a digital assets friendly country. It was not the only country to adopt a timid approach to a misunderstood technology: this means that the market for digital assets friendly territories remains largely untapped. However, the solution to enjoy a digital assets boom, is not CBDCs (Central Banks Digital Currencies) and not Stable-coins (Digital currencies indexed on FIAT currencies). The solution is a freer digital assets market and currencies that may be, in due time indexed (in-part) on those assets.
telquel.ma/2017/11/21/loffice-ch...

6: The Historic NIH Decision that will change the Landscape of Research 9676

Tariq Daouda, 10 mon.
The NIH is the single major granting institution for research in the world and it has decided to cap the administrative overhead to 15%. This decision might forever change the organisation of major universities. To understand how university funding works in the US, when a researcher gets a grant, a significant part of that money (think 50% to 100%) usually goes to the administration of the university and not directly to research. For example if the administrative overhead is 60% on a grant of 1M$, either the research gets 40% (400k$) of the money and the university administration 60% (600k$), or the organism has to pay 1.6M dollars. This is what the NIH has been doing so far, creating a huge competition of for NIH grants. The NIH was the only organism that gladly paid the administrative overhead, while other institutions would cap it or completely refuse to pay it. Now the NIH will no be so accommodating. The huge administrative overhead is explained by the fact that over the year, administrative personnel in major universities has grown to far outnumber faculty, researchers and clinicians. Administrations at universities tend to follow extremely rigid and complex processes for almost anything. Most decisions and actions are regulated through a slow, rigid and scrutinizing process, either through a deep chain of command or through commissions that are slow to gather and have to debate every decision. This has been ongoing for a while at major universities because of virtually no negative feedback loop. The university could always raise the administrative overhead to pay for any new administrative processes it decides to implement. Major universities also do other things than research, and teaching. They are gigantic institutions with gigantic ramifications. Now more than ever, universities cannot afford to lower the standards on research. Because if they do, their faculty will not be less eligible for grants, and they might even loose the 15% that the NIH has promised to pay. The most likely outcome is swift lay offs of administrative personnel and the termination of many programs that are not conducive to outstanding research. Then, they will start doing more fundraising towards private donors, some of which already refuse to pay administrative overheads, requiring their money to go directly towards research. Institutions will also get closer to the industry, and will try to promote more startups, and spin-offs. But that will require major changes in administrative processes, money allocation and a lot more flexibility on intellectual propriety.
x.com/NIH/status/188800475939695...