What trade is most profitable?

What trade is most profitable?

A single question that arises from the various questions at issue in this analysis, and which we’ll address in separate pieces, is “which of these trade indicators best describe the state of market competition?” As a matter of definition, the answer to the first question is “none,” the second, “incomplete market development.” Although it is true that the number of people participating in certain types of transactions has increased substantially along with the Internet, it’s worth thinking about why this might be: why aren’t more people using the most efficient and productive technology available for commerce?

The best answer I could find to this question came from a piece of literature I found at the Brookings Institute, a respected think tank in Washington, D.C., and one with a relatively high level of independence from U.S. policy. In 2009 I ran these questions through the Brookings Institute’s new “Transactional Information Criteria for Business” program, which seeks to quantify how many transactions the economic system could benefit from. The results of the evaluation: 1) a lot of economic activity that we might call “transaction economics” — which comprises about half (49 percent) of all transactions occurring today; 2) a very slight decline in efficiency as the share of transactions increases; and 3) overall market progress, or the size of the economic pie, has not significantly improved since the 1990s.

If you combine all the available trade indicators in this analysis with the Brookings Institute’s methodology, you get a rough estimate of the value of each of the four following categories, all of which I consider worth exploring:

1. The amount of economic output per person per year, in both absolute and relative terms.

2. In the aggregate, market power and total trade.

3. Exports adjusted for the size of the domestic market, and

4. In the aggregate, market control.

I’ll discuss trade and market power in more detail in a future column.

The first three of these categories provide a measure of the extent to which economic activity is taking place in each U.S. city (or state or province). The U.S. has a large number of cities, but a small number of cities (and thus a small number of markets); as such, in each case it’s not possible to gauge, with anything resembling confidence, the total size of that market (in some cases as much as 30 percent of the total economy) unless we can find a way to estimate the total market size