At Davos, Michael Dell made clear that he believes he, and other rich people, are smarter at spending their money on public needs than government. This is why is he against the proposed 70% tax by Representative Alexandria Ocasio-Cortez. What are the downsides of a strong reliance of philanthropy?

There are two important downsides of replacing the government with philanthropy. First, most rich people have incredible skills that made them rich in the first place. It seems reasonable to assume that these skills go to waste when attention shifts to charity. Second, a strong reliance on philanthropy can increase inequality…


The European Commission has fined Mastercard for stifling competition. This behavior of Mastercard had made consumer payments more expensive. Although antitrust law is not the same as criminal law, the reasoning behind punishment from criminal law can be informative here as well. There is more to it than just the money in the state treasury.

In criminal law there are different reasons for punishment that more or less also apply to antitrust punishments. First, society has been harmed and amends ought to be made. Second, the punishment is expected to reduce the chance of repetition by the offender. Third, punishment…


May made clear that a rejection of her deal makes no Brexit more likely. A no-deal Brexit is apparently less attractive than staying in the EU. What are the economics?

Although it could be strategy, the position of May seems a cold analysis of the costs and benefits of the available options. Staying in the EU is costly, given the referendum outcome, but an uncontrolled Brexit reasonably costs even more. The shock of a no-deal Brexit could have an unbearable impact by sending waves through (the structure of) the British economy and changing how the UK is viewed. A no-deal…


According to the Saudi energy minister, the oil market is on the ‘right track’. In April OPEC will decide on its output policy for 2019. To get an impression of the importance of oil, and OPEC, I have combined the historic size of oil production and global GDP in the figure above.

The production of oil has not grown in tandem with global GDP. Global real GDP (constant 2010 prices) has about doubled since 1990. Oil production only went from 3 billion tonnes to almost 4 billion tonnes, for about a 50 percent increase. This is one of the places…


In Kenya, primary school students who wish to learn Mandarin Chinese can from 2020 onward. Kenya hopes to benefit from its citizens understanding the language of the fastest growing large economy. China has helped Kenya with developing the course.

The economics of learning another language, like Chinese in Kenya, are positive in many ways. To the person itself, because learning a second language increases your earning power. Moreover, the “widespread knowledge of languages is an important determinant for foreign trade” (Fidrmuc & Fidrmuc, 2016). …


Novartis has increased the price of a cancer medicine six-fold. The medicine was previously developed by a Dutch university hospital. Novartis has adopted the medicine under the EU’s ‘orphan medicines’ regime, is therefore protected from competition for 10 years and is hence legally able to raise the price this much. Moreover, it seems Novartis has monopolized (parts of) the supply chain for this medicine, giving it even more pricing power.

The first problem is that the ‘orphan medicines’ regime was intended to give an incentive to pharmaceutical companies to develop medicines for rare diseases. In such cases a temporary monopoly…


The European Commission is imposing definitive tariffs on imports of steel products, in a bid to protect European steelmakers getting caught up in the trade war between the US and China.

The US steel tariffs against China close off the US market for Chinese exporters, which then have to sell their products somewhere else. Given the steel plants are already there as sunk costs, in the short to medium run Chinese producers will only consider their variable costs when setting their price. Given the drop in demand from the US, prices will drop. …


British firms in the financial sector are already moving assets to the mainland. More and more assets will be moved as the end of March comes near. The movement of financial assets is accompanied by relocating staff and occupying offices on the mainland.

There are several economic effects to be expected from the departure of financial assets from London. First, the network effects that the City has now, are probably diminished as the number of financial workers there drops, and increases on the mainland. The question remains though whether network effects will strongly increase on the mainland, as it seems…


China’s growth is slowing down. This also creates worries for other countries as China is an increasingly important trade partner for many. The remarkable GDP growth of China started with +14.2% in 1992 and has dropped to +6.9% in 2017. Although this decline is not to be neglected, it is also not to be overestimated. To see why, we look at the size of the Chinese economy over time, and the two effects this has.

The size of the Chinese economy in 1992 was only 1.036 trillion (constant 2010 US dollar)[1], while the global economy had a size of 39.166…


China has put a lunar explorer on the far side of the moon. A first. The resulting research of course feeds our human curiosity. But how do such “moonshots” benefit the economy?

There are several benefits to the economy of projects like a space program. It employs people, and uses goods and services from other industries. Though, given the broken window fallacy, the expenses might be high to just feed curiosity. The good news is that there are also positive externalities. Mazzucato (2013) shows that government investment in (basic) science leads to “innovation” by companies. Moreover, moonshots improve technology transfer

Martin van Elp

Economist Liberal Practical | personal title | http://about.me/martinvanelp

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