FIRE economy
Encyclopedia
A 'FIRE economy is any economy based primarily on the paper-intensive sectors of Finance, Insurance, and Real Estate (FIRE). The origins of the term are unclear. Barry Popik describes some early uses as far back as 1982. Since 2008, the term has been commonly used by Michael Hudson
and Eric Janszen
.
It is New York City's largest industry and a prominent part of the service industry in the U.S. overall economy and other Western, developed countries. FIRE activities are unique in that they generate relatively large profit margins with little productive resources or capital employed other than people and paper.
The newer NAIC two-digit codes, 52 and 53, are extensively elaborated – down to the five-digit level. They remain largely unchanged in the 2007 NAICS drill down chart whose details are this for code 52 and this for code 53.
The entire mapping from SIC to NAICS is shown in this table or this one.
The second use of the term derives from the study of financial capital and income – as opposed to industrial capital and income. To characterize the so-called financial services industries, economists carved out part of the SIC/NAIS breakdown of types of industry: finance, insurance, and real estate. They contracted this to FIRE, deliberately invoking the negative connotations which were, at least then, contrary to conventional wisdom
. The following table elaborates on this dichotomy in the header row and gives examples in ensuing rows.
At the city scall, Sassen has done a lot of researches of the FIRE influences to the Global Cities, such New York, London and Tokyo, since 1984. She and a group of scholars like Feistein, argued that FIRE aggravated social inequality and polarization of these cities.
Michael Hudson (economist)
Michael Hudson is research professor of economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College...
and Eric Janszen
Eric Janszen
Eric Janszen is an economic commentator and former venture capitalist. He founded the financial advisory company iTulip.Janszen wrote an analysis of economic bubbles in a 2008 Harper's Magazine article predicting a future alternative energy bubble bursting in the mid 2010s...
.
It is New York City's largest industry and a prominent part of the service industry in the U.S. overall economy and other Western, developed countries. FIRE activities are unique in that they generate relatively large profit margins with little productive resources or capital employed other than people and paper.
Definition
This term is used in the financial press and blogs; its origin is in the realm of North American industrial classification. "Finance, Insurance, and Real Estate" is the title of 1992 U.S. Census Bureau Standard Industrial Classification (SIC) Division H. Its coverage was "All domestic establishments that provide financial, insurance, or real estate services." Its coverage was elaborated in two-digit SIC codes 60 through 67. The SIC was replaced by the North American (Canada, USA, Mexico) Industry Classification System (NAICS) starting in 1997. The SIC had ten top-level divisions, NAICS has twenty. The new NAICS essentially split the old Division H into code 52 Finance and Insurance and code 53 Real Estate and Rental and Leasing.The newer NAIC two-digit codes, 52 and 53, are extensively elaborated – down to the five-digit level. They remain largely unchanged in the 2007 NAICS drill down chart whose details are this for code 52 and this for code 53.
The entire mapping from SIC to NAICS is shown in this table or this one.
The second use of the term derives from the study of financial capital and income – as opposed to industrial capital and income. To characterize the so-called financial services industries, economists carved out part of the SIC/NAIS breakdown of types of industry: finance, insurance, and real estate. They contracted this to FIRE, deliberately invoking the negative connotations which were, at least then, contrary to conventional wisdom
Conventional wisdom
Conventional wisdom is a term used to describe ideas or explanations that are generally accepted as true by the public or by experts in a field. Such ideas or explanations, though widely held, are unexamined. Unqualified societal discourse preserves the status quo. It codifies existing social...
. The following table elaborates on this dichotomy in the header row and gives examples in ensuing rows.
At the city scall, Sassen has done a lot of researches of the FIRE influences to the Global Cities, such New York, London and Tokyo, since 1984. She and a group of scholars like Feistein, argued that FIRE aggravated social inequality and polarization of these cities.
Criticisms
Much criticism exists on the internet and in the blogosphere for the shifting of the U.S. economy to a FIRE economy at the expense of a manufacturing and export-based economy. As the consumer of last resort, many believe that the United States has eschewed productive elements of its economy in favor of consumption to its long term detriment.
Particularly after 1973 … pundits of the status quo hailed the proliferation of the "FIRE" (finance, insurance, real estate) economy as the coming of a new "service" "post-industrial" economy that would replace the old "smokestack" economy and the jobs lost through plant closings, restructuring, and down-sizing … Loren Goldner
Examples of FIRE economies
- New York City, NY, USA
- London, UK
- Hong Kong SAR, China
- Sydney, Australia
See also
- Exurb
- BoomburbBoomburbBoomburb is a neologism for a large, rapidly growing city that remains essentially suburban in character even as it reaches populations more typical of urban core cities...
s - Edge cityEdge city"Edge city" is an American term for a concentration of business, shopping, and entertainment outside a traditional urban area in what had recently been a residential suburb or semi-rural community...
- FinancializationFinancializationFinancialization is a term sometimes used in discussions of financial capitalism which developed over several decades leading up to the 2007-2010 financial crisis, and in which financial leverage tended to override capital and financial markets tended to dominate over the traditional industrial...
- Bedroom CommunityCommuter townA commuter town is an urban community that is primarily residential, from which most of the workforce commutes out to earn their livelihood. Many commuter towns act as suburbs of a nearby metropolis that workers travel to daily, and many suburbs are commuter towns...