Uber in London

Uber will lose its license in London by the end of this month. Although Uber has said it would repeal, I do not think Uber would earn back its license in London. Uber was a tech company that aimed to share people’s cars when they are not occupied. However, Uber has already turned to become a taxi company. This is how the London Public Transport Authority has control over Uber’s cooperation in London.

The reason for Uber becoming a taxi company is because it violates one rule of sharing cars. Uber does not only occupy people’s cars when they are not using their cars, but also occupy people’s time as well. However, the principle of the labour market is people selling their time to companies; therefore, Uber starts to occupy people’s time, it indirectly pull people back into the labour market if they want to sell their excess capacity of their cars. At most time, when people are not using their cars, they do not like sacrifice their luxury time for working in the labour market again as well. This makes many people do not have incentives to joining the car sharing program created by Uber. Thus Uber started to hire professional Uber drivers to drive taxis across cities. 

I think that Uber may become more successful when people can separately sell their free capacities of their cars and their free time that people can let others drive their cars for taxi business when they are not using their cars and the earnings can be split between car owners and drivers. Of course, insurance companies can also step in to provide insurance for inappropriate use of cars to lower the risk of car owners lending cars to others.

Entrepreneurship and resource allocation

I have repeatedly argued that entrepreneurs are merely those who help to improve the efficiency of the resource allocation in the market as well as the economy. Excellent entrepreneurs are those who are the best at reallocating resources. Today I would like to further discuss how entrepreneurs help to improve the efficiency of resource distribution in many different situations.

The most obvious situation is when the owners of a company is seeking new managers to manage their companies. Good managers are believed to be more able to generate higher returns and greater profits. The ability to achieve such goal is to redistribute the company’s resources more efficiently, better efficiency means resources are able to have greater marginal returns.

There is a less obvious way to see entrepreneurship’s function in helping to improve the efficiency of resource allocation, which is when entrepreneurs also play the role of innovators and start businesses in a whole new sector. For example, the case of Elon Musk and his SpaceX is such situation. However, under such circumstance, we can see entrepreneurs reallocate resources from our entire economy in a completely new sector where resources are able to generate surprisingly high returns. Entrepreneurs here can be seen as the entrepreneurs who have less traditional ideas about allocating resources but innovative ideas about where to put resources. 

However, some people may feel confused that they may think bankers are bankers or investment managers who are also helping to allocate capitals. However, allocating capitals and allocating resources are not entirely the same, as capitals are only part of resources.

Overall, anyone with abilities to allocate resources efficiently can be a good entrepreneur. 

The US Fed’s plan to end its quantitative easing program

The chairwoman of the US Federal Reserve, Janet Yellen, said today (the 20^th September) that the US Federal Reserve would shrink its balance sheet to reduce its asset holdings. It will speed up the rate of the global ending quantitative easing, followed by the plan to end the quantitative easing revealed by the president of the European Central Bank, Mario Draghi.

Of course, to end the quantitative easing programs cannot be done within a few months, it will takes several years, especially when multi-trillion dollars worth assets are currently held by the US Federal Reserve. Similarly, the European Central Bank also needs several years to end its quantitative easing program.

During the next several years, the central banks in many major economies tend to cut their asset holdings and raise their base rates. Today’s Fed’s announcement rallies the US dollar to appreciate, this means the Forex market expects that the end of the quantitative easing program will bring down the inflationary pressure, which helps to appreciate the exchange rate. In addition, the rally of the US dollar may show that the financial sector still holds confidence about the US economy after the end of the quantitative easing program.

In addition, many of other countries which are still having expansionary monetary policies may also follow the paths of the European Central Bank and the US Federal Reserve to start cur their expansionary monetary policies.

Capitalist and entrepreneurship

Capitalists and entrepreneurs are often considered as the same group of people, and they are often considered as the wealthy classes. Borrowed from what is said in Marx’s “Kapital”, either capitalists or entrepreneurs are those who exploit the working classes. However, the two terms are different and represent their different contributions to the production. Capitalists provide capitals for the process of production and entrepreneurs provide entrepreneurship (including management) for the process of production. There is a reason for the confusion about the two terms. Firstly, nowadays, many capitalists especially those well known capitalists earn their first bucket of gold by their excellent entrepreneurship, so when they become wealthy capitalists, they are also known as famous entrepreneurs. Therefore, when the famous entrepreneurs are also capitalists, people become confused about these two terms.

Capitalists do not need to manage companies that they invest in; however, capitalists are required by our economies, since in the modern era, the investment has become more crucial as the amount of capital required for production becomes greater. Unlike entrepreneurs, capitalists do not necessarily involve in the production or the economy by themselves, they can find wealth managers to manage their capitals and generate even more capitals. In addition, if we believe our economies are growing forever, large capitalists can always earn more capitals as long as their investment portfolios cover large numbers of sectors.

On the other hand, entrepreneurship is always important in the process of production. Entrepreneurship is a process of allocating resources in order to improve the efficiency of resource allocation. Even those entrepreneurs with new ideas, they are just entrepreneurs with new ideas about how and where to allocate resources.

Therefore, capitalists are those who add fuel to the economy to generate productions and entrepreneurs are those who drive the economy and manage the fuel more efficiently.

Brexit will become a standard for the coming world foreign policy

Brexit has been relatively unpopular among the European area, even within the UK, there have been many different opinions surrounding the issue of Brexit, from whether or not to leave the EU to how to negotiate with the EU parliament. However, undoubtedly Brexit is one of the most crucial events in this twenty-first century. Many people see this as the turning point from globalisation to deglobalisation, but I have a different opinion that I think Brexit will set a new standard for the future worldwide foreign policy.

The reason for Brexit not being a turning point of deglobalisation is because the foundation of the European Union is not necessarily a movement towards globalisation. There have been some scholars and economists believing that the formation of the European Union is a geographical isolation that to unite European countries to fight the rest of the world in terms of politics and trades. Brexit could be seen as a movement that brings Britain away from uniting with other countries (which is a process of deglobalisation), but it could be seen as a movement that Britain leaves the European Union and rejoin the global entire economy (which is a process of globalisation). Therefore, Brexit could not be simply seen as a turning point of deglobalisation.

The reasons for me to see Brexit setting a new standard of the future worldwide foreign policy are the followings. Firstly, when transport has been faster and easier than decades ago, the cooperation between countries has been expanding outside their traditionally geographical regions. Britain is currently leaving its traditionally geographical allies and seeking new trade partners globally. Many other countries may follow Britain to leave their current geographical trade deals and seek more trade partners, including Japan. Secondly, Britain is restructuring its foreign policy, and many other countries may need to do something similar in the future. When the US is starting more and more disagreement with its traditional allies, American allies may want to change their foreign policies and become less dependent of America. In the future, countries need to have their specific foreign policies and cannot rely on one or two stable allies, as such alliance could become quite vulnerable. Actually even if Japan wants to become normal countries again, it has to get rid of the influence from America. Thirdly, the trade negotiation after Brexit could set examples for some countries which seek trade deals without forming some political alliance.

Overall, I think that Brexit will set a standard for many countries’ future foreign policies.

Why are attackers at stronger positions than the victims?

Today, another terrorist attack hit London tube system again. There have already been several terrorist attacks around the world. People do not only face the threat from terrorism, but also face threat from serious crimes (robbery, murder). Usually we often find victims are always dominated by the attackers or terrorists.

Of course, criminals and terrorists often choose their targets carefully in order to ensure they have the power to dominate their targets. However, in some events where the two sides seem to have similar strengthen or power, the attackers still seem to dominate the victims. This is because the two sides have different preferences thus choosing different strategies.

When a person notices that he(she) is about to be attacked, his(her) preference makes him(her) perfect being unhurt over defeating the attacker. As the priority of the potential victim is to stay unhurt, this individual tends to escape rather than to attack back. The probability of getting hurt is much higher when attacking back than the probability when trying to escape, as getting in physical contact is more likely to be hurt even when the strengths of both sides are similar. Especially when the number of potential attackers is significantly larger than the number of attackers, the probability of getting hurt when choosing to escape is fairly small. Moreover, in modern eras, the information asymmetry also plays a significant role when potential victims are making their emergent decisions. The possible weapons that the attackers hold are more various than decades ago, to the attackers, the information about the victims is almost completely obvious and transparent; therefore, it is much less risky for attackers to attack victims than for victims to face attackers, due to the information asymmetry between the two groups.

Therefore, when facing criminals or terrorists, potential victims automatically become the dominated and vulnerable group that even giving them any sort of training or education is not going to change such position.

The end of expansionary monetary policy era

Today the Bank of England sends a strong signal on rate rise, and earlier this month, the chairman of the European Central Bank also made an announcement of possible end of the asset purchasing program. The US Federal Reserve has already increased its rates several times. The world economy seems to enter the era of the end of expansionary monetary policies.

The end of expansionary monetary policies is caused by several reasons. Firstly, the central bank believes there is high inflationary pressure in the economy, stopping expansionary monetary policy can lower the inflationary pressure in the economy. Secondly, when the central bank believes that there are too many bubbles in the economy. One of the functions of the central bank is to stabilize the economy. Usually the economic growth is too strong ,it may imply when the recession hits the economy, its damage could be more harmful. Therefore, the central bank tends to stabilise the economy and maintain the growing trend but reduce the volatility in the economy. Thirdly, when the central bank feels continuing expansionary monetary policies ineffectively improve the economic performance, the central bank could stop its expansionary monetary policies in order to improve the efficiency of the use of resources. Fourthly, when the central bank feels satisfied about the improvement made by the expansionary monetary policies, they will stop the expansionary policies and leave the economy to the market without any further intervention.

The possible end of the ECB and the BoE's monetary policies may be caused by the central banks feel continuing expansionary policies will not further improve the economic performances. The economic growth rates of Britain and the Eurozone are still relatively low. Though the inflation rates tend to rise, the rates are not yet rising far above 2.0%, which is usually the target set by the central banks. Therefore, the decision of stopping expansionary monetary policies is made based on they want to prevent inflation or strong volatility in the economies.

Once the Bank of England and the European Central Bank finally stop their expansionary monetary policies and start to rise rates, it may immediately cause a shock in the financial markets in Europe. The costs of borrowing in Britain and the Eurozone will increase and some companies may find themselves seeking financing becomes more costly and difficult. The economic performances may become weakened. However, it may reduce the increasing bubbles in the economies and give more room to the central banks when they are dealing with the recession in the future.