#### Discover more from Economics Matters by Laurence Kotlikoff

**What was China’s quarterly growth rate, computed on an annual basis, last quarter?**a. 10 percent

b. 8 percent

c. 6 percent

e. 3 percent

f. 1 percent

**And the answer is …**

**The answer is 3 percent. No one knows the accuracy of China’s data. But they may well be as accurate or more accurate than U.S. growth reports. Certainly, the fact that the government is willing to report disappointing results, relative to recent decades, suggests the figures are not politically produced.**

**What the UK’s current annual inflation rate?**a. 15 percent

b. 12 percent

c. 8 percent

d. 5 percent

e. 3 percent

**And the answer is …**

**The answer is 8 percent. The euro inflation rate is running at 5.5 percent on an annual basis. Inflation is sticker there than here. Here, in the U.S., we’re down to 3 percent year over year. Our lower inflation rate is very good news. But it may take years for nominal bond rates to fall. This is a major concern for our insolvent banking system, which is holding lots of medium term bonds paying far less than the 4 percent rate now being paid on five to 15 year Treasuries. Interest rates in the 1980s stayed high even as inflation came down as lenders worried that the very high inflation rates of the 1970s would return. **

**What is the average loss on a $10,000 bet in Las Vegas?**a. $5,200

b. $3,900

c. $1,800

d. $600

**And the answer is …**

**The answer is $600. These odds appear well known. What’s not readily known is the odds of losing all your money. The “gambler’s ruin” problem in statistics tells us that if you keep betting at losing odds, the probability of losing all your money approaches 100 percent. **

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**What is the current U.S. fertility rate? Here’s the formal definition of the fertility rate: the ratio between the number of live births in a year and the whole female population of childbearing age — age15 through age 50.**a. 3.1

b. 2.7

c. 2.1

d. 1.8

e. 0.9

**And the answer is …**

**The answer is 1.8. That’s below the 2.1 rate needed to maintain/replace the population absent net immigration. Each female needs to reproduce herself and a male. The 0.1 reflects deaths at childbirth. S. Korea has the world’s lowest fertility rate — 0.7. Niger’s 6.7 fertility rate is the highest rate of any country. Actually, given in-vitro fertilization, each female could, on average, produce just one living child to sustain a constant population. Furthermore, if humans can be grown from stem cells, as now appears possible, a country’s population could be maintained independent mechanically. **

**What is the average annual salary of a middle-aged Hollywood writer?**a. $321,000

b. $179,000

c. $137,000

d. $64,000

e. $47,000

**And the answer is …**

**The answer is $64,000. That’s starvation wages if you live in LA. The average annual rent for a two bedroom apartment in LA of average size, namely 788 square feet, is $33,000. **

**Compared with U.S. median real wages right before COVID, current median real wages are:**a. 20 percent higher

b. 14 percent higher

c. 3 percent higher

d. 1 percent higher

e. 3 percent lower

f. 7 percent lower

**And the answer is …**

**The** **answer is 7 percent lower.*** This helps explain why the employment-population ratio of those age 25-54 is above 80 percent*.

**That’s the highest value recorded for the last quarter century.**

**When real wages decline, people can decide to work less because working pays less. That’s substituting leisure for consumption — what economists call the Substitution Effect. Or they can work more to make up for their lost income. Economists call this the Income Effect.**

**The income effect appears, empirically, to be far stronger than the substitution effect.**

**At what annual rate have U.S. median real wages grown since 1980?**a. 4.1 percent

b. 3.7 percent

c. 2.6 percent

d. 1.9 percent

e. 0.9 percent lower

f. negative 1.3 percent

**And the answer is …**

**The** **answer is 2.6 percent. **

## The Financial Riddler 7/24/23

Hi Marz,

Population management is unethical. And it's also infeasible given that most of the growth of global pop will occur in Africa and the Middle East.

best, Larry

edited Jul 24What's the catch with -> instead of growing our population to keep the economy in fruitful expansion ad infinitum (contributing more climate damage, resource depletion, eventually moving to Mars, etc) why not actively downsize consumption and productivity? In other words, in the same way we manage the economy to improve productivity and growth, why not manage a soft-landing to a sustainable population target?