A Purely Logical Theory for God’s Plan


Brennan Dwyer

One of the first thoughts that usually comes to people’s mind when they hear the term “God”, is something biblical or theological. In society, people are often on one of two sides in belief, with one side being theist and religious, and the other side being atheist and non-religious. This paper takes an alternative stance; that theoretically there is a purely logical and almost mathematical concept behind what God’s plan would be for the human race, and for the greater good.

It is logical to think that God would likely do what maximizes everyone’s well-being, and what is the best possible and most rightful thing to do. Considering how analytical, mathematical, and factual the universe is that everyone observes, it would be logical that God is much similar in character and in thought process to those descriptions of the universe.

With that being said, a big question is how God would go about maximizing everyone’s well-being and creating the best possible plan. This paper states that God would likely stick to these three principles of logic as part of his or her plan:

  1. To form the largest quantity of life.
  2. To maximize the amount of utility the quantity of life experiences.
  3. To have the quantity of life experience the maximized amount of utility over the longest possible period of time, ideally for an infinite period of time. 

In order for God to apply these three principles of logic within his or her plan, (especially within an infinite period of time), it would be logical that there would need to be a finite period of suffering and chaos in order to achieve an infinite period of maximum utility for the quantity of life that is formed. 

This finite period of suffering would act as a temporary habitat for newly formed life, which would eventually die and respawn into some sort of afterlife (infinite period of happiness). The world that acts as a finite period of suffering with a lower amount of utility could logically help achieve God’s plan to have this ideal infinite period of happiness for the quantity of life by acting in the following ways:

  1. To act as a function that randomly spawns an input of a diverse set of life, which eventually outputs towards the infinitely long afterlife.
  2. To act as a place of hardship and suffering, which in turn causes cultures and individuality to form, which could make the infinitely long after-life more interesting.
  3. To act as a school that builds character and maturity amongst the quantity of life, in order to prepare for the infinitely long afterlife.
  4. To act as a place where the quantity of life experiences suffering and a low amount of utility relative to the infinitely long after-life, which subconsciously increases the amount of happiness experienced once the quantity of life reaches the infinity long afterlife.

To have a successful infinitely long afterlife for the quantity of life to experience the maximized amount of utility, there are likely many ways on how it would be different then the world with the finite period of suffering. One way is the senses may be enhanced in a way that brings my pleasure and utility. This can include seeing more vibrant colors, smells, moods, etc. Also, scarcity is likely no longer a problem, therefore each individual lifeform amongst the quantity of life has the ability to do just about anything to their freewill, to own as much land as they want, to not have to work and have everything done for them, etc. In terms of avoiding boredom and the law of diminishing marginal utility, it would be logical to have a set rate of memory loss in the long term, so that new memories and experiences can be formed and be enjoyed.

Though there is no empirical or scientific evidence for the existence of God, this paper has a solid logical explanation for what God’s plan could be, and why everyone may have this finite period of suffering on Earth. It is logical that God probably has a ‘Laissez-faire’ approach to the quantity of life on the finite period of suffering, because otherwise the finite period of suffering would lose its purpose. It can be logically concluded that God’s intentions are likely not just for self-benefit, but rather for the benefit of everyone’s utility, and for the greater good.

Hypothesis for Explaining the Equity Premium Puzzle and the Success of the U.S Stock Market

Brennan Dwyer

 

 

The equity premium puzzle is seen as one of the biggest and most important unsolved mysteries in financial economics. In summary, the equity premium puzzle is the unsolved mystery of why the U.S stock market has continuously outperformed the returns of U.S government bonds for at least over the past 100 years. The term equity premium is defined as the gap between the returns of the U.S stock market and the returns of U.S government bonds.

Economists have tried to rationalize the equity premium puzzle through different theories such as the theory that investors get more returns for their willingness to take more risks. Though many economists have attempted to solve the equity premium puzzle, there simply hasn’t been a strong enough explanation provided to solve the equity premium puzzle. For example, as explained by the scholarly article “The Equity Premium: It’s Still a Puzzle” written by Narayana R. Kocherlakota, the growth rate of per capital consumption has been compared with the growth rate of stock returns, with the attempt of trying to rationalize the puzzle. However, in the paper, “The Equity Premium: It’s Still a Puzzle”, per capital consumption lacked strong correlation with the growth of stock returns, and lacked any logical sense for per capital consumption having causation with the growth of stock returns in the first place. However, in this paper, there is empirical evidence for a more logical variable causing the high growth of the stock market to occur. Also, many other scholarly articles have provided the theory that there has been a risk premium with the stock market due to the high volatility and risk involved, as opposed to government bonds being much more stable. However, this risk premium still isn’t nearly high enough of a premium to explain the large difference between stock returns and government bond returns. This paper will attempt to give a possible solution to the equity premium puzzle, as well as explain why the U.S stock market has performed so well.

This paper states the hypotheses that the U.S stock market has been experiencing demand pull inflation because of the increase in total gross domestic savings over time (in dollars, not percentage of GDP), and there likely isn’t even a premium as a result.

Demand pull inflation is defined as when the aggregate demand of an economy exceeds the aggregate supply of an economy. In this paper, the term ‘demand pull inflation’ is used for the stock market, since this paper sees the stock market as its own economy, with the terms aggregate demand and aggregate supply being a good way to describe the stock market in this scenario. It is likely commonly agreed upon that within the stock market, the stocks being sold are represented as the supply, and the stocks being bought are represented as the demand.

If within the long run there has been an increase in gross domestic savings, it would make logical sense for a large portion of the savings to be used to buy more stocks at higher prices (aggregate demand), which would outpace the amount of stocks being sold in the long run (aggregate supply), thus causing demand pull inflation of the stock market. In other words, this paper has the assumption that a large portion of the increase in gross domestic savings is invested towards the stock market.

To prove this hypothesis, Figure 1 shows a very strong correlation between the gross domestic savings and the market capitalization of listed domestic companies within the U.S over several recent decades. The R-value of the power trendline for Figure 1 is 0.9749. The data for the two variables was collected from “data.worldbank.org”. However, the two separate variables that were collected from this source were put together and analyzed as part of the work for this paper.

Capture

Figure 1– Scatterplot model of the relationship between gross domestic savings and the market capitalization of listed domestic companies within the U.S from 1980-2016 in current U.S dollars.

Data used from “data.worldbank.org”

 

Despite the observation that in Figure 1 the gross domestic savings are not nearly as large in monetary value as the market capitalization of listed domestic companies, this paper has the hypothesis that there doesn’t need to be quite as much of an increase in the aggregate demand for the stock market to match the increase for the total value of the market capitalization. It is logical to assume that many stocks within the stock market aren’t frequently bought or sold and are held onto by certain investors for the long-run, therefore only a certain fraction of the stocks in the stock market would need to be demanded at a higher price to cause the whole market capitalization to go up. In other words, the prices of the stocks are very elastic in response to the increase in demand for the stocks, considering not all stocks are traded at once.

It is important however to bear in mind that the difference in monetary value between the two variables on Figure 1 are not that different in magnitude, with the values for gross domestic savings ranging from 6.53E+11 up to 3.18E+12 in dollars, and the values for market capitalization ranging from 1.26E+12 up to 2.74E+13 in dollars.

It is important to note that this hypothesis could apply for the world market capitalization as well, considering the correlation that is shown in Figure 2. Though the R-value of the power trendline for Figure 2 is 0.9295, which isn’t quite as high of an R-value as Figure 1, it would still be considered a very high R-value, meaning a very strong correlation.

Capture2

Figure 2– Scatterplot model of the relationship between gross domestic savings and the market capitalization of listed domestic companies for the world from 1980-2010 in current U.S dollars.

Data used from “data.worldbank.org”

 

A criticism that may come up for the hypothesis that the stock market has been inflating in prices due to demand pull inflation from the increase in gross domestic savings, is how dividends could keep up in relation to the value of stocks if that hypothesis was correct. However, a solution to that potential criticism can be found on Figure 3, which shows the relationship between gross domestic savings and the net dividends for the U.S from the years 1980-2016.

Figure 3 proves that public companies have managed to pay a large enough amount of dividends to keep up with the increase in gross domestic savings. It is important to remember that this paper states that gross domestic savings is likely the main source behind the demand-pull inflation of the U.S stock market. Therefore, as the increase in gross domestic savings causes the aggregate demand for stocks to increase over time, public companies have managed to increase their dividends to keep up with the increase in prices of stocks.

Capture3

Figure 3– Scatterplot model of the relationship between gross domestic savings and the net dividends for the U.S from 1980-2016 with gross domestic savings in current U.S dollars and net dividends in dollars. 

Data used from “Federal Reserve Bank of St. Louis”

 

In conclusion, this paper has the hypothesis that the U.S stock market has been experiencing demand pull inflation because of the increase in total gross domestic savings over time. From a logical standpoint this could explain that the premium in the equity premium puzzle is likely only due to the demand pull inflation of the U.S stock market, with the demand pull inflation being an result of the increase in gross domestic savings. That could even mean that there simply isn’t a premium. Again, this paper has the assumption that a large portion of the increase in gross domestic savings is invested towards the stock market.

 

 

 

 

 

 

Works Cited

Gross Domestic Savings (Current US$). data.worldbank.org/indicator/NY.GDS.TOTL.CD?end=2016&locations=US&start=1980&view=chart.

Market Capitalization of Listed Domestic Companies (% of GDP). data.worldbank.org/indicator/CM.MKT.LCAP.GD.ZS?end=2016&locations=US&start=1980.

U.S. Bureau of Economic Analysis, Corporate Profits After Tax (without IVA and CCAdj) [CP], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CP, November 10, 2018.

The Equity Premium: It’s Still a Puzzle | Narayana R. Kocherlakota | Academic Roomhttp://www.academicroom.com/article/equity-premium-its-still-puzzle.

 

Hypothesis for Explaining the Equity Premium Puzzle and the Success of the U.S Stock Market (First Draft)

Brennan Dwyer

 

 

The equity premium puzzle is seen as one of the biggest and most important unsolved mysteries in financial economics. In summary, the equity premium puzzle is the unsolved mystery of why the U.S stock market has continuously outperformed the returns of U.S government bonds for at least over the past 100 years. The term equity premium is defined as the gap between the returns of the U.S stock market and the returns of U.S government bonds. Economists have tried to rationalize the equity premium puzzle through different theories such as the theory that investors get more returns for their willingness to take more risks. Though many economists have attempted to solve the equity premium puzzle, there simply hasn’t been a strong enough explanation provided to solve the equity premium puzzle. This paper will attempt to give a possible solution to the equity premium puzzle, as well as explain why the U.S stock market has performed so well.

This paper states the hypotheses that the U.S stock market has been experiencing demand pull inflation because of the increase in total gross domestic savings over time (in dollars, not percentage of GDP), and there likely isn’t even a premium as a result.

Demand pull inflation is defined as when the aggregate demand of an economy exceeds the aggregate supply of an economy. In this paper, the term ‘demand pull inflation’ is used for the stock market, since this paper sees the stock market as its own economy, with the terms aggregate demand and aggregate supply being a good way to describe the stock market in this scenario. It is likely commonly agreed upon that within the stock market, the stocks being sold are represented as the supply, and the stocks being bought are represented as the demand.

If within the long run there has been an increase in gross domestic savings, it would make logical sense for a large portion of the savings to be used to buy more stocks at higher prices (aggregate demand), which would outpace the amount of stocks being sold in the long run (aggregate supply), thus causing demand pull inflation of the stock market. In other words, this paper has the assumption that a large portion of the increase in gross domestic savings is invested towards the stock market.

To prove this hypothesis, Figure 1 shows a very strong correlation between the gross domestic savings and the market capitalization of listed domestic companies within the U.S over several recent decades. The data for the two variables was collected from “data.worldbank.org”. However, the two separate variables that were collected from this source were put together and analyzed as part of the work for this paper.

equity premium puzzle picture

Figure 1– Scatterplot model of the relationship between gross domestic savings and the market capitalization of listed domestic companies within the U.S from 1980-2016 in dollars.

Data used from “data.worldbank.org”

 

Despite the observation that in Figure 1 the gross domestic savings are not nearly as large in monetary value as the market capitalization of listed domestic companies, this paper has the hypothesis that there doesn’t need to be quite as much of an increase in the aggregate demand for the stock market to match the increase for the total value of the market capitalization. It is logical to assume that many stocks within the stock market aren’t frequently bought or sold and are held onto by certain investors for the long-run, therefore only a certain fraction of the stocks in the stock market would need to be demanded at a higher price to cause the whole market capitalization to go up.

It is important however to bear in mind that the difference in monetary value between the two variables on Figure 1 are not that different in magnitude, with the values for gross domestic savings ranging from 6.53E+11 up to 3.18E+12 in dollars, and the values for market capitalization ranging from 1.26E+12 up to 2.74E+13 in dollars.

In conclusion, this paper has the hypothesis that the U.S stock market has been experiencing demand pull inflation because of the increase in total gross domestic savings over time. From a logical standpoint this could explain that the premium in the equity premium puzzle is likely only due to the demand pull inflation of the U.S stock market, with the demand pull inflation being an result of the increase in gross domestic savings (in dollars). That could even mean that there simply isn’t a premium. Again, this paper has the assumption that a large portion of the increase in gross domestic savings is invested towards the stock market.

 

 

 

Works Cited

Gross Domestic Savings (Current US$). data.worldbank.org/indicator/NY.GDS.TOTL.CD?end=2016&locations=US&start=1980&view=chart.

Market Capitalization of Listed Domestic Companies (% of GDP). data.worldbank.org/indicator/CM.MKT.LCAP.GD.ZS?end=2016&locations=US&start=1980.

 

List of Possible Bipartisan Compromises

Here are a list of possible bipartisan compromises that I have put some deep thought into. I really think that it is important that our politicians come together and create more bipartisan compromises that are a win-win for both parties. Otherwise, if you think about it analytically, in the long run legislation will likely continue to be repealed and replaced amongst both political parties. If we want there to be anything done long-term, there needs to be more of a push for everyone in congress to come together! 

  •  A gradual increase in minimum wage (as a percentage increase on the current minimum wage of each state) in return for tax credits for businesses that match up to the extra cost of the higher minimum wages that they are forced to pay. The tax credits would be funded by a combination of cuts in spending towards administrative costs and fees for healthcare, and from the increase in tax revenue due to the workers being paid higher wages.

  •  Cuts in spending towards the large costs of unnecessary administrative costs and fees for healthcare, in return for more price ceilings and regulation on the prices of pharmaceutical drugs in the pharmaceutical industry.

  •  More border security in return for a higher intake of immigrants.

  •  A flat increase on the capital gains tax (regardless of the amount earned income from investments) in return for paying off more of the national debt, and more relief towards student loan debt, (especially on loans that are most frequently defaulted on.)

  •  More emphasis and more of an expansion on online k-12 learning, with the money that is saved from more online learning going towards funding normal k-12 education.

  • A carbon tax for businesses that are releasing high amounts of carbon into the atmosphere, and a tax credit for corporations that are reducing their carbon levels, leaving total tax revenue unchanged.

  • More sex education and awareness on how to prevent from getting an STD or becoming pregnant, and leave current abortion and planned parenthood laws the same as they already are.

  •  More background checks and mental health screenings, as well as limitations on the ownership of certain types of guns that statistically lead to the most gun deaths and mass shootings, in return for the protection of many second amendment rights as well as more freedoms to where you can own and carry a gun.

  •  More funding towards correctional education and other programs that are statistically proven to reduce recidivism rates, that could in the long run save money for the government due to the lower recidivism rates and lower crime rates.

List of Economic Questions from an 18 Year Old Passionate About Economics

Here is a list of economic and political questions that I have come up with over time, and wish to potentially solve one day, or learn about from others. Some of these may be unsolved, though I am not completely sure!

 

  • Is the economic growth or stability of an economy affected by the percentage of the GDP that is made up of government expenditure, with all other things remaining consistent? If so, then what is the equilibrium amount of government expenditure as a percentage of the GDP that leads to the most economic growth or stability?
  • Is the economic growth or stability of an economy affected by how equal or unequal the income or wealth distribution is? If so, then is there an equilibrium point for how evenly distributed the income or wealth distribution is that leads to the most economic stability or growth?
  • Is the ‘trickle-up theory’ or the ‘trickle-down theory’ true? Could they both be true? Does one lead to more economic growth, stability, then the other? Could they both be equally important?
  •  Is there a universal underlying factor behind how or why the business cycle occurs? Is there an equation that can prove that? If not, then what are the main contribution factors that cause it, and can help predict it?
  •  Can a recession or economic decline occur largely from the process of a particular sector of the economy significantly innovating and growing, which leads to higher wages and wealth in the economy that may cause demand-pull inflation to occur on other sectors of the economy?
  •  Does an increase in innovation and output for the factors of production that ends up producing more finished goods for one business or industry lead to more output for other businesses or industries as well? Ex: Does growth from the gun industry help lead to growth for the butter industry?
  • What has caused the stock market to exponentially increase over the past century by such a large amount, especially compared to the Real GDP or Bond rates? Could the stock market simply just be very elastic, causing it to react very elastic to people selling their stocks?
  •  Is the total wealth in the economy not very liquid, considering that if the wealth was suddenly used for consumption, the economy would be too scarce to provide for the sudden demand for many different goods and services?
  • Similar to the field of game theory, could there be a field in mathematics that studies the concept of comprise, which would lead to the theory that politicians would be better off if they compromised more?

Model of Unemployment Rate vs Minimum Wage to Median Wage Ratio of Different Countries

(Down below is my first official economics paper I have written. Please let me know what you think or if you have any feedback!)

 

 

This model was created to show the relationship between unemployment rates and the minimum wage to median wage ratio of different countries listed from the OECD. It is interesting to note that generally in the economic community, it is often theorized that a higher minimum wage correlates with a higher unemployment rate. For example, in many European nations they are known to have a more progressive approach to their economy, and are known to have higher rates for their minimum wage in comparison with the U.S. Also, the Euro-zone tends to have a higher unemployment rate then the U.S (Liberty Street Economics).

To specifically describe this model, the independent variable is the minimum wage to median wage ratio. This ratio for each country was data taken from the OECD library. The dependent variable is the unemployment rate of each given country. This data on the unemployment rate was taken from the World Facebook, which was given on the CIA’s official website. It is interesting to note how significant the positive correlation is between having a higher minimum to median wage ratio, in comparison with having a higher unemployment rate. In other words, the countries that tend to have a higher minimum to median ratio tend to have a higher unemployment rate. Though it is unclear which variable causes the other variable, again many individuals in the economics community would likely agree that a higher minimum wage leads to a higher unemployment rate. One factor that stands out about this model compared to other models on minimum wage to unemployment is this model shows how high the minimum wage is relative to its own countries median wage, rather than unfairly comparing minimum wages across the world without considering how rich or poor the country is itself., As a result, this aspect of this model helps to give a better idea for a higher or lower minimum wage in comparison to a higher or lower unemployment rate.

 

min wage to median wage chart

 

Down below is the list of data that was used to create the model. It is important to note that two countries that were originally in this data set were later removed due to being such outliers in their unemployment rates. Rather then the countries being in alphabetical order, they are put from least to greatest in terms of their minimum to median wage ratio. This was done intentionally to help create the model. Again, the data on the minimum wage to median wage ratios was taken from the OECD library, and the data on the unemployment rates were taken from the World Facebook which was on the CIA’s website.

 

Country Minimum to Median wage Unemployment Rate
United States 0.35 4.4
Mexico 0.37 3.6
Czech Republic 0.4 2.3
Japan 0.4 2.9
Estonia 0.41 8.4
Ireland 0.45 6.4
Netherlands 0.45 5.1
Canada 0.46 6.5
Germany 0.47 3.8
Slovak Republic 0.48 7.4
United Kingdom 0.49 4.4
Belgium 0.5 7.5
Korea 0.5 3.8
Hungary 0.51 4.4
Latvia 0.51 9
Australia 0.54 5.6
Poland 0.54 4.8
Lithuania 0.54 7
Luxembourg 0.55 5.9
Israel 0.58 4.3
Portugal 0.58 9.7
Slovenia 0.59 6.8
France 0.61 9.5
New Zealand 0.61 4.9
Chile 0.69 7
Costa Rica 0.69 8.1
Turkey 0.76 11.2
Colombia 0.86 9.3

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited

“COUNTRY COMPARISON :: UNEMPLOYMENT RATE.” Central Intelligence Agency, Central Intelligence Agency, http://www.cia.gov/library/publications/the-world-factbook/rankorder/2129rank.html.

Klitgaard, Thomas, and Richard Peck. “Comparing U.S. and Euro Area Unemployment Rates   Liberty Street Economics.” Liberty Street Economics, libertystreeteconomics.newyorkfed.org/2014/02/comparing-us-and-euro-area-unemployment-rates.html.

“Minimum Wages Relative to Median Wages.” OECD Instance, OECD ILibrary, http://www.oecd-ilibrary.org/employment/data/earnings/minimum-wages-relative-to-median-wages_data-00313-en.

 

I Just Self Published a Book that I Think Other Teens My Age Could Learn From

After over 3 years of fun but hard work, I finally self published a personal finance book for teens. Here is why teens should know what my book teachers…

 

One of the specific topics that I am passionate about is personal finance. There are many different aspects of personal finance that I find to be interesting. Whether it’s budgeting on different income levels, finding the best ways to gain long term wealth, or even learning advice on colleges and careers, this all comes across interesting to me.

Starting at the age of 14, I decided to write a personal finance book, specifically geared towards teenagers. Not only did I choose to write this book because it forced me to learn more about the subject and write something that I am passionate about, but also I believe that not enough teens are taught personal finance.

Personal Finance shouldn’t be a subject that is taught only primarily to people that are older and fairly well into their careers. I believe that this subject should also be taught towards a younger audience. This should be taught so that these kids not only make wise choices heading into adulthood, but also so they dont make big financial mistakes.

Take credit cards as an example of something that needs to be taught, which I talk about in my book…

To many teenagers and young adults, credit cards may come across as unlimited money. However, teenagers, (and adults) can fall into a trap where they end up spending too much with their credit card, and end of accumulating a large amount of credit card debt that they struggle to pay off later on. It is good to use a credit card and establish good credit. However, you have to remember to not overspend, and make the monthly payments on time!

The title of the chapter that I talked largely about debt is called “Spam and Scams (Yikes!)”. It may be a cheesy title, but hey, I thought it was cute… 🙂

Some other examples of topics that should be taught to a many youngsters like me, is compound interest, budgeting, college, and even investing in assets such as the stock market. Though some teens my already know how to budget, not get into debt, and even how to put money towards certain investment, I believe that many teens aren’t informed on these subjects, and may want to learn this stuff in a fun and understandable way.

If you or a teen you know is interested, here is link to my e-book: