Why US military expenses are so high compared to global rivals

... and the relationship that has with offshoring, outsourcing, globalised processing, and other aspects of trade, shipping, production, and commerce.

You've likely seen examples of goods which are produced in one location, processed in another, and sold in a third, often spanning the globe. Fish shipped from the US to China and back, salt sourced in Pakistan, packed in South Africa, and sold in Canada, and other examples come to mind.

Much of what drives this is 1) the high cost of US and European wages and 2) the low cost of shipping.

This is related to what drives up the cost of US military operations, though that's largely driven by constraints on who can do what and where.

There's a great Reddit thread which breaks down drivers of US military expenses as compared with global rivals China and Russia (or if you prefer, the Taliban), by /u/GTFErinyes:

The metric that the US spends more on their defense budget than other most other nations combined is an extremely superficial look at military spending and mostly pointless as a comparison of power.

Of course the US spends a lot more than China or Russia: there is a vastly different cost of living in the US versus those nations.

To actually understand where/how the US spends on its military, take a look at the DOD Budget Request for 2018 and Table 5.1 from the Government Publishing Office for historical spending.

You'll see the actual budget breakdown:

• Military Wages - $141.7B
• Operations and Maintenance - $223.3B
• Procurement - $114.9B
• Research and Development - $82.7B
• Management - $2.1B
• Military Construction - $8.4B
• Family Housing - $1.4B
• Overseas Contingency Operations (war funds) - $64.6B

That's right - 25% of the base (day to day non-war funds) budget of the DOD is spent on JUST wages (22% if we include funds spent for war operations). That's just military personnel wages - contractor wages fall under the other categories they get contracted for (e.g. maintenance contractors fall under Ops/Maintenance)

Why does this matter? Compare this to China, where their soldiers are paid a tenth of what the US pays its soldiers. Or South Korea, a first world nation with conscription, which pay its soldiers $100 a month.

If the US paid its personnel what the Chinese do, we'd save nearly $130 billion overnight! ...

https://old.reddit.com/r/changemyview/comments/71bq8h/cmv_the_military_budget_of_the_us_is/dn9mqdq/

The comment continues, with an additional Part 2.

Input costs matter, and where there's price-sensitivity, often-paradoxical behaviours can emerge as a result.

Oh, and: Offshoring is a form of wage suppression.

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Inspired by this Diaspora thread.

#offshoring #economics #wages #shipping #globalisation #MiltaryExpenses #military #outsourcing #prices

Residential solar pricing down 6.3%, hints of greater drops coming

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Residential solar installation price declines have accelerated over the past year. However, energy storage pricing has gone up, with Enphase taking an increasingly larger share of the market.
https://pv-magazine-usa.com/2021/08/16/residential-solar-pricing-down-6-3-hints-of-greater-drops-coming/
#prices, #consumer, #cost, #installations, #energy, #protection, #business, #storage

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#UK #DrugCompanies #fined £260m for inflating #prices for #NHS | #PharmaceuticalsIndustry | The Guardian

This is the right way to handle over-inflated prices.

https://www.theguardian.com/business/2021/jul/15/uk-drug-companies-fined-260m-overcharging-nhs

#Pharmaceuticals #Medicine #Monopoly

Price pressures may delay 15% of utility-scale solar projects this year, Roth Capital warns

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Shaving off 15% would trim new capacity additions by more than 2.3 GW this year alone, based on Energy Information Administration forecasts. Higher prices throughout the solar supply chain are being blamed.
https://pv-magazine-usa.com/2021/05/18/price-pressures-may-delay-15-of-utility-scale-solar-projects-this-year-roth-capital-warns/
#prices, #covid-19, #cost, #business, #upstream, #markets, #modules

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When I look at the rise of the #prices of hard drives because of the new #cryptocurrency #Chia, I have the feeling that hard drives will become the new tulips...

background: https://en.wikipedia.org/wiki/Tulip_mania

Chia #Coin now using over 1 exabyte of #storage, HDD/SSD shortage feared

source: https://www.tweaktown.com/news/79068/chia-coin-now-using-over-1-exabyte-of-storage-hdd-ssd-shortage-feared/index.html

Actually, I had hoped we would use the Internet for knowledge exchange and international understanding and not for such a #waste of #resources.

#xch #economy #technology #internet #hype #hdd #ssd #hardware #news #environment

Adam Smith on types of labour and economic goods

keyboarduserforever0 comments at Reddit:

Basically he says there are 3 classes: workers, landlords, businessmen. Workers are ignorant of their condition because they're too busy toiling. Landlords are ignorant because they're too busy managing their estates and living lavish lifestyles. But businessmen, on the other hand, know exactly what's in their interests, and act accordingly. The problem is that what's in their interest is often not in the interest of the rest of society.

Smith's discussion of types of labour, or really, types of economic goods, is only partially developed and but still nuanced.

In his chapters on prices, wages, stock, interest, money, and taxes, you'll find a few divisions worth noting.

There are the five determinants of wages, from Book I Chapter 5:

• First, the agreeableness or disagreeableness of the employments themselves;
• secondly, the easiness and cheapness, or the difficulty and expense of learning them;
• thirdly, the constancy or inconstancy of employment in them;
• fourthly, the small or great trust which must be reposed in those who exercise them; and,
• fifthly, the probability or improbability of success in them.

If you tease these out, you start getting the rudiments of a classification of activities and trades:

• Commodities
• Wages
• Stock (capital)
• Skill-, Risk- and Trust-based compensation
• Rents
• Assets (speculation, asset inflation and deflation)
• Interest, a form of risk
• "Expenses of the Sovereign" (Government, taxes, public goods)

It's also possible to look at areas of economic activity, which range from Quesnay's Tableau économique (which serves as the fronticepiece of my own print copy of Wealth of Nations) to modern SIC, NAICS, and ISIC codes, and, at least the way I squint at it, there seem to be six-ish general classifications:

1. Sourcing: raw materials, agriculture, fuels.
2. Making: construction, manufacturing.
3. Risk: interest, finance, insurance, real estate.
4. Government and Public Sector: Public goods.
5. Services: "Doing", generally management and administration ("masters"), transport and distribution, information / comms / media, education, health & hygiene.
6. Other: Not otherwise addressed.

Monetisations vary. Sourcing and making both rely on direct tangible item sales, occasionally contract sales. Risk is managed through arbitrage and gatekeeping. Note that this includes landlords, and may include some elements of capital. Government / public sector is financed via taxes, or if you're of the MMT school, through money creation balanced by taxes. Services may be compensated on an hourly, annual, or contract basis, and incorporate the elements of Smith's Five Determinants. The positions of unskilled, skilled, and highly-trusted labour differ markedly. In the case of information goods and distribution on recurring periodic payments (subscriptions), or for information: advertising and manipulation services riding parasitically on the information stream and generating revenues. Distribution and other networked businesses return rents, prices commanding not merely the costs of production but also a fraction of consumer surplus, along with the FIRE sector.

I'll note that I classify the classic "FIRE" sector (finance, insurance, and real estate) as fundamentally concerning risk. They return rents, though are not alone in doing so. I'm not aware that this is commonly held, and it's possibly flawed. All economic activity involves risk, but in the FIRE sector, it is asset value and revenue stream risk which has primacy. The means of managing that deviate from those of other sectors, say, sourcing (prospecting or resource risk, cultivation or extraction skill), making (dominated by capitalisation and technique), and services (likewise). Real estate is included as this forms a major, often the major, asset class. It's classic risk-management strategies that dominate in all three components:

• Arbitrage between different domains.
• Information asymmetries.
• Law of large numbers.
• Shock resilience: the capacity to absorb temporary losses, made up in the long term.
• Directly pressuring debtors, or having recourse to collections, courts, and law enforcement.
• Mitigating moral and morale hazards.
• Increased prediction capabilities.
• Capacity to deploy and enact short-term disaster mitigations, say, against storms, fire, or other acute disasters.
• Long-term management against systemic risk, e.g., internal controls, shrinkage losses, safety programmes, or other similar mitigations that are not event-specific.

It's worth noting that it's the finance sector, inclusive of insurance, was the sole exception to Smith's general opposition to joint-stock (shareholder) corporations.

And though I've split these out separately, there are major elements of risk involved especially in high-technology sectors, which also typically return rents.

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Adapted from a Reddit comment

#economics #labour #goods #economics #prices

Dreddit: Markets and Price-Setting: Thoughts on information, created goods and services, fixed-supply commodities, financial instruments, and other market values behave

I've been reflecting on Paul Mason's Postcapitalism, particularly as concerns what he identifies as a hum-dinger of information goods: Information goods destroy the price formation mechanism based on scarcity.

That's one of a few cases in which markets as price-setting mechanisms fail, or are subject to very high degrees of ambiguity...

Continued at the dreddit.

#economics #prices #markets #value #information #finance #luxury #assets

http://www.reddit.com/r/dredmorbius/comments/2jh7l7/markets_and_pricesetting_thoughts_on_information/