ROBERT LUCAS PARADOX: Law of Diminishing Returns

Posted on January 28, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Capital is not flowing from developed countries to developing countries despite the fact that developing countries have lower levels of capital per worker, and therefore higher returns to capital.

Classical economic theory predicts that capital should flow from rich countries to poor countries, due to the effect of diminishing returns of capital. Poor countries have lower levels of capital per worker – which explains, in part, why they are poor. In poor countries, the scarcity of capital relative to labor should mean that the returns related to the infusion of capital are higher than in developed countries.

In response, savers in rich countries should look at poor countries as profitable places in which to invest. In reality, things do not seem to work that way. Surprisingly little capital flows from rich countries to poor countries.

This puzzle, famously discussed in a paper by Robert Lucas in 1990, is often referred to as the “Lucas Paradox”.

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DAILY UPDATE: Federal Health Agencies and PBMs as Technology Stock Plunge!

Posted on January 28, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

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Federal health agencies are canceled—well, their meetings are at least. In the days following his inauguration, President Donald Trump’s administration asked officials within the Department of Health and Human Services (HHS)—which has a $1.7 trillion budget and includes the FDA, the CDC, and the National Institutes of Health (NIH)—to stop all external communication, according to an internal memo. This means no new health advisories, social media posts, or website posts.

“As the new administration considers its plan for managing the federal policy and public communications processes, it is important that the president’s appointees and designees have the opportunity to review and approve any regulations, guidance documents, and other public documents and communications (including social media),” the memo read. The pause began on Jan. 21st, and according to the memo, will remain in effect until Feb. 1st

CITE: https://www.r2library.com/Resource

The FTC’s second interim staff report on consolidated pharmacy benefit managers (PBMs) found that the three largest of these middlemen—CVS Health’s Caremark Rx, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx—”marked up two specialty generic cancer drugs by thousands of percent and then paid their affiliated pharmacies hundreds of millions of dollars of dispensing revenue in excess of estimated acquisition costs for each drug annually.”

CITE: https://tinyurl.com/2h47urt5

The NASDAQ tanked on Monday as a Chinese startup rattled faith in US leadership and profitability in AI, taking a hammer to Nvidia (NVDA), wiping out a record $589 billion in market value. The NASDAQ Composite (^IXIC) sank more than 3%, while the S&P 500 (^GSPC) dropped nearly 1.5%. The blue-chip Dow Jones Industrial Average (^DJI), which is less dependent tech stocks gained more than 0.6% as investors flocked to defensive sectors. Shares of Apple (AAPL) and software giant Salesforce (CRM) also bucked the tech rout.

CITE: https://tinyurl.com/tj8smmes

Visualize: How private equity tangled banks in a web of debt, from the Financial Times.

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