Monday, December 22, 2008
De Facto or Dejure?
Trade's shrinking. But it's unclear whether the shrinkage is because of rising protection, or because of overall declining economic activity. In particular, China is exporting less, but at the same time there are stories of increased availability of consumer goods within China, partly due to a natural decrease in demand. The Economist warns of possible increases in protectionism. They can cite for evidence is an increase in antidumping cases, but in this economic environment it may be more likely that firms will engage in actual dumping, so I'm not sure that's a good measure. I'd like to see them tell me of specific cases of actual increases in direct protection before I get too worried. Hopefully, economies will recover from the downturn before resorting to new tariff increases.
Thursday, December 18, 2008
Wednesday, December 17, 2008
The Democracy Tax
Democracy is expensive, and the Economist reminds us of it in last week's special report on India. Administering the necessary bureaucratic and legislative apparatuses that make the thing go costs a lot of and usually leads to a certain amount of disappointment. In this sense, many note that an iron-fisted despot, if "benevolent" so to speak, is a more "efficient" form of government because what gets done gets done quickly and without too much hemming or hawing. Unfortunately for these regimes, the principle applies equally to good and bad ideas.
But if you were beginning to think that our own system was hopelessly corrupt, it could be worse. Even though, "every five years, over a period of a few weeks, India holds a
reasonably orderly and fair election," the article goes on to state that:
But if you were beginning to think that our own system was hopelessly corrupt, it could be worse. Even though, "every five years, over a period of a few weeks, India holds a
reasonably orderly and fair election," the article goes on to state that:
[India's] politicians are mostly an unsavourySo, mere "pay to play" schemes and cash in a freezer is actually pretty tame!
lot. Of the 522 members of India’s current parliament, 120 are facing
criminal charges; around 40 of these are accused of serious crimes,
including murder and rape. Most Indian politicians are presumed to be
corrupt...
Thursday, December 11, 2008
Bad things that Came out of the Seventies (other than Disco)
I heard this on "All things considered" yesterday.
We used to have this urban-planning idea that we'd have these pockets of pure-residential areas that had a buffer from almost purely commercial areas known as "drivable suburbia" or "edge cities." In the seventies,people wanted to live in little cul-de-sacs of living and concrete jungles of shopping, commerce, and bigass parking lots somewhere else. I remember in the late eighties our neighborhood had huge opposition to the building of a new commercial area near our housing development because it would bring noise and crime and (gasp!) more people.
I wish I could say this is the way the market had things turn out, but that would be hooey. (I like to say hooey now because the word I really want to say makes the little green men cry.) It was carried about using subsidies and political lobbies that worked to have things zoned the way they thought best suited their views. Some might call that democracy or "majority rule" but that would be of equal portion of hooey, since most people who thought it to be a bad idea probably didn't care as much to organize and petition the local government as the "nimby"-ites (Not In My Back Yard, "nimby").
Now, some folks are having buyers remorse. Now, we want shorter commutes, closer access to jobs, groceries, routine shopping, and even public transportation (?) and people aren't so sure that driving 20-30 minutes is the best way to go about it. Maybe in fifty years when we have flying cars that run on banana peels and composted garbage we'll want to go back to our edge cities.
We used to have this urban-planning idea that we'd have these pockets of pure-residential areas that had a buffer from almost purely commercial areas known as "drivable suburbia" or "edge cities." In the seventies,people wanted to live in little cul-de-sacs of living and concrete jungles of shopping, commerce, and bigass parking lots somewhere else. I remember in the late eighties our neighborhood had huge opposition to the building of a new commercial area near our housing development because it would bring noise and crime and (gasp!) more people.
I wish I could say this is the way the market had things turn out, but that would be hooey. (I like to say hooey now because the word I really want to say makes the little green men cry.) It was carried about using subsidies and political lobbies that worked to have things zoned the way they thought best suited their views. Some might call that democracy or "majority rule" but that would be of equal portion of hooey, since most people who thought it to be a bad idea probably didn't care as much to organize and petition the local government as the "nimby"-ites (Not In My Back Yard, "nimby").
Now, some folks are having buyers remorse. Now, we want shorter commutes, closer access to jobs, groceries, routine shopping, and even public transportation (?) and people aren't so sure that driving 20-30 minutes is the best way to go about it. Maybe in fifty years when we have flying cars that run on banana peels and composted garbage we'll want to go back to our edge cities.
Tuesday, December 9, 2008
Thursday, December 4, 2008
Michelle Malkin, Ahead of the Learning Curve
Usually it takes a family of immigrants a few generations before they really adopt the slam-the-door-shut xenophobe-nationalist-conservative ideology of the Pat Buchanans and Lou Dobbses of the world. Michelle Malkin, Conservative columnist, TV commentator and blogger is there as just a first-generation daughter of Filipino parents who came here on student visas.
...and she blames the entire financial meltdown on Mexican immigrants, mostly the illegals. In a September 24 column, she opines,
...and she blames the entire financial meltdown on Mexican immigrants, mostly the illegals. In a September 24 column, she opines,
It’s no coincidence that most of the areas hardest hit by theI don't even know where to go with this! Who'd like to point out the logical fallacies with me? Composition, post-hoc-ergo-proptor-hoc? This is completely off the deep end, and hypocritical toboot! Yes! It's illegal-alien mango pickers buying million-dollar McMansions! What? Someone get me off the deep end, and Ani, remind me to smack you next time I see you for elevating my blood pressure with this.
foreclosure wave — Loudoun County, Va., California’s Inland Empire,
Stockton and San Joaquin Valley, and Las Vegas and Phoenix, for
starters — also happen to be some of the nation’s largest illegal-alien
sanctuaries. Half of the mortgages to Hispanics are subprime (the
accursed species of loan to borrowers with the shadiest credit
histories). A quarter of all those subprime loans are in default and
foreclosure.
Regional reports across the country have decried
the subprime meltdown’s impact on illegal-immigrant “victims.” A July
report showed that in seven of the ten metro areas with the highest
foreclosure rates, Hispanics represented at least one third of the
population; in two of those areas — Merced and Salinas-Monterey, Calif.
— Hispanics comprised half the population.
Tuesday, December 2, 2008
Immigrant quotas as a tax equivalent
This story on Morning Edition (NPR) got me thinking. Some folks are opposed to "selling" work visas (economists among them). Well, I'll tell you this: A quota (which is how we work it now) ain't much different. Just ask the illegal immigrants. Only difference is this: The people who get the hypothetical "tax revenues" aren't the US treasury - they're the people who are lucky enough to get visas (after about a 15 year wait for some source countries), and the coyotes who smuggle illegals over for a fee (which can run in the thousands of dollars per immigrant smuggled). That doesn't even touch on the laundry list of other externalities that quantity restrictions bring, and the fact that we spend billions of scarce treasury dollars enforcing the quota instead of collecting revenues from the auction/tax/fee.
Friday, November 28, 2008
The Auto Bailout, Trade, and Policy Specificity
As a trade economist, there is exactly one thing that could convince me that a subsidy to the auto industry is worthwhile, and it's this: Give them a direct subsidy and tear down all of the trade restrictions on foreign-made autos. That way, we could increase the competitiveness of the MARKET, and increase the chances that the monies will be used productively, rather than squandered on short-sighted SUV promotions that would keep us in the energy use gluttony of the last 20 years.
Societal Collapse
This is a relevant idea from TED Talks that I think relates somewhat to some research by my colleague Atin Basu. Really Atin's research focuses on the speaker's 5th point, the ability to recognize and react to environmental changes, i.e. take a long sight of it's continuation. I think that the issues before that, related to cooperation vs. Anyway, it's an interesting little topic.
Friday, November 7, 2008
Tuesday, November 4, 2008
Republican Party Values
This one's for Atin, per his thoughts on "Republicanism" versus "Conservatism," and it comes from Joe Scarborough, who was one of the more conservative republicans of the "Contract with America Republican Revolution" of 1994-5.
Friday, October 31, 2008
Morning Joe Entering Silly Season
Joe Scarborough, who I like, did a silly piece on folks on the upper west side of NYC supposedly saying "nasty things" to McCain-Palin supporters (specifically his "news you can't use" correspondent, Willie Geist), and take it as "representative" of some broader population. He asks, "Would the same thing happen in Nashville?" (in the other direction, against Obama supporters), since Mr Geist went to Vanderbilt for college.
While there's room to debate how "nasty" the comments of these folks really were, I can tell you that there are plenty of conservative areas where reasonably intelligent people are being just as nasty. I've heard numerous accusations of socialism directed towards friends of mine who support Obama, and really really nasty things being said about the candidate himself. It's depressing, and the total lack of intellectual diversity here really makes it isolating. Heck, people only tell a McCain supporter in the upper west side to "go to the east side." Here, they tell us to go in a different direction - the nicer ones imply that that direction is somehow farther North; the not-so-nice ones imply that that direction is more downward, and somehow involving flames that burn but do not consume.
This still all misses the point. In either event the jackasses are an irrepresentative subsample of the overall groups of supporters. Most McCain supporters are decent folks who want the best for the country. Most Obama supporters are decent folks who want the best for the country. The contention that lefties are more (or less) nasty than righties is misleading. A jackass is a jackass on either side and can't be held up to represent the whole group. The bigger question is: why raise the subject? Are McCainiacs so desperate to villify the left that it's no longer a matter of: (1) winning the ideas; (2) personally attacking the other candidate, or; (3) cherry picking facts. Now it's a matter of making personal attacks against the rank and file supporters of a candidate, party or set of ideas? Seems silly to me.
While there's room to debate how "nasty" the comments of these folks really were, I can tell you that there are plenty of conservative areas where reasonably intelligent people are being just as nasty. I've heard numerous accusations of socialism directed towards friends of mine who support Obama, and really really nasty things being said about the candidate himself. It's depressing, and the total lack of intellectual diversity here really makes it isolating. Heck, people only tell a McCain supporter in the upper west side to "go to the east side." Here, they tell us to go in a different direction - the nicer ones imply that that direction is somehow farther North; the not-so-nice ones imply that that direction is more downward, and somehow involving flames that burn but do not consume.
This still all misses the point. In either event the jackasses are an irrepresentative subsample of the overall groups of supporters. Most McCain supporters are decent folks who want the best for the country. Most Obama supporters are decent folks who want the best for the country. The contention that lefties are more (or less) nasty than righties is misleading. A jackass is a jackass on either side and can't be held up to represent the whole group. The bigger question is: why raise the subject? Are McCainiacs so desperate to villify the left that it's no longer a matter of: (1) winning the ideas; (2) personally attacking the other candidate, or; (3) cherry picking facts. Now it's a matter of making personal attacks against the rank and file supporters of a candidate, party or set of ideas? Seems silly to me.
Monday, October 27, 2008
This One
John McCain and his surrogates keep asking: which economist would promote tax increases at a time like this? Well, if structured intelligently, then, THIS ONE.
What's surprising is how confused Mr. McCain is about his economice ideologies. The concept of fiddling with taxes and expenditures on the fiscal side to affect the economic equilibrium at the macro level and combat recessions is a Keynesian (read: "liberal") one. Now, for those tax cuts to be most effective, in the Keynesian framework, they should be targeted in the ways that do most to stimulate consumption (i.e. to the middle and lower classes), so that inventories are mopped up, and thus intended investments are made instead of being diverted into unplanned inventory accumulation. This is a pretty standard principles approach. A more sophisticated approach might suggest that markets and their prices are not well-coordinated between factor markets and product markets, leading to "good" (high demand) equilibria, and "bad" (low-demand) equilibria. Random events can knock a "good" economy into a "bad" equilibrium, but government can use fiscal policy to offset those distrubances.
So, let's look at the supply side. Tax cuts are good, but ONLY if the government debt is held constant. Candidate McCain's proposals would cut taxes but wouldn't reduce spending enough to control the deficit or the debt. Most studies suggest that the proposals of each side would have equal impacts on the debt, and both would actually expand our debt, and that assumes Mr. Obama gets his way on health care and other subsidy programs, which is doubtful. McCain on the other hand is more likely to get the types of spending he wants, because he has the authority to keep troops in harm's way, and thus hijack the congress into approving more spending for those wars - denying funding is a politically indefensible position for any member of congress.
So, assuming McCain's and Obama's taxation and spending proposals would have equal effects on the debt if both get the spending increases and cuts they want, there is no net long-run difference in the two candidates' impacts on the economy. However, if we look at the political realities of their spending requests, McCain is more likely to get the increases he wants. Obama is not. Expect a filibuster on health care and other types of entitlements and education spending that Obama has proposed, and for there to be compromises on these areas of his agenda. It seems to bet the case that some of these political realities have not been taken into account in the estimation of the impact of each candidate's economic plan on the long-run economy.
What's surprising is how confused Mr. McCain is about his economice ideologies. The concept of fiddling with taxes and expenditures on the fiscal side to affect the economic equilibrium at the macro level and combat recessions is a Keynesian (read: "liberal") one. Now, for those tax cuts to be most effective, in the Keynesian framework, they should be targeted in the ways that do most to stimulate consumption (i.e. to the middle and lower classes), so that inventories are mopped up, and thus intended investments are made instead of being diverted into unplanned inventory accumulation. This is a pretty standard principles approach. A more sophisticated approach might suggest that markets and their prices are not well-coordinated between factor markets and product markets, leading to "good" (high demand) equilibria, and "bad" (low-demand) equilibria. Random events can knock a "good" economy into a "bad" equilibrium, but government can use fiscal policy to offset those distrubances.
So, let's look at the supply side. Tax cuts are good, but ONLY if the government debt is held constant. Candidate McCain's proposals would cut taxes but wouldn't reduce spending enough to control the deficit or the debt. Most studies suggest that the proposals of each side would have equal impacts on the debt, and both would actually expand our debt, and that assumes Mr. Obama gets his way on health care and other subsidy programs, which is doubtful. McCain on the other hand is more likely to get the types of spending he wants, because he has the authority to keep troops in harm's way, and thus hijack the congress into approving more spending for those wars - denying funding is a politically indefensible position for any member of congress.
So, assuming McCain's and Obama's taxation and spending proposals would have equal effects on the debt if both get the spending increases and cuts they want, there is no net long-run difference in the two candidates' impacts on the economy. However, if we look at the political realities of their spending requests, McCain is more likely to get the increases he wants. Obama is not. Expect a filibuster on health care and other types of entitlements and education spending that Obama has proposed, and for there to be compromises on these areas of his agenda. It seems to bet the case that some of these political realities have not been taken into account in the estimation of the impact of each candidate's economic plan on the long-run economy.
Wednesday, October 22, 2008
Taxes, the S-word, and McCain 2k8 vs. McCain 2k
Paying taxes is something we do to keep our society more civilized, to keep our "social contract" functional as a nation -- to protect ourselves from external threats; enforce the rules amongst ourselves; and to promote what one might call our common purpose as a nation. Progressive income taxes have been deemed "fair" and constitutional in the US since 1910 on the basis of the rich having a greater ability to pay for those public goods and services that help the whole thing work. But no need to wax philosophical on this...
How about we just have a look at this, and compare McCain 2008 and McCain 2000, borrowing the work of (of all places) The Daily Show:
How about we just have a look at this, and compare McCain 2008 and McCain 2000, borrowing the work of (of all places) The Daily Show:
Tuesday, October 21, 2008
Politics and Regulation
If most people were asked what they think of government regulation (or taxes for that matter) they'd probably tell you they don't like them. It probably has something to do with the growing mistrust of government over the last 30 years or so, and it may actually be healthy to have some mistrust.
But I'm telling you: Everyone likes regulation, just so long as it involves government controls over something that someone else is doing that I do not and that bothers me. No one really wants to make the sacrifice of being forced to constrain their own habits, but when the neighbor dog comes across to our yard to do his business, then we petition for a pooper-scooper law. Why? Because we're selfish, but at the same time we're in this whole thing called civilization (or, America) together. When it comes to unemployment insurance it's easy to say "government get off my back" as long as you have a stable job, and as long as someone else is losing theirs. But if that person loses his job and decides to drink a case of natural light or smoke a joint, there will be a long line of people wanting the government on HIS back.
And then there's taxes. Justice Oliver Wendell Holmes said "I like paying taxes. With them I buy Civilization." How true. My mother tells me that even though my grandfather was a cranky old farmer about most things, he never voted against a school bond issue. That tells us something. Schools, roads, security (police), and so on are important, and not just for the people who can buy them for themselves. And that, I think, is why a lot of rich folks (like Warren Buffet) are willing to support a candidate who has said up front that they would bear a greater tax burden at the top. One reason might be credibility - that candidate isn't playing games by trying to say he can keep the tax code flatter and lower than it was 8 years ago and still be able to lift the middle class. Another is the fact that we are simply burdened by debt and need to raise revenues to keep it in check. Yet another is simply getting that tax dollar's worth of civilization that even an independent cranky old farmer sees the value in.
But I'm telling you: Everyone likes regulation, just so long as it involves government controls over something that someone else is doing that I do not and that bothers me. No one really wants to make the sacrifice of being forced to constrain their own habits, but when the neighbor dog comes across to our yard to do his business, then we petition for a pooper-scooper law. Why? Because we're selfish, but at the same time we're in this whole thing called civilization (or, America) together. When it comes to unemployment insurance it's easy to say "government get off my back" as long as you have a stable job, and as long as someone else is losing theirs. But if that person loses his job and decides to drink a case of natural light or smoke a joint, there will be a long line of people wanting the government on HIS back.
And then there's taxes. Justice Oliver Wendell Holmes said "I like paying taxes. With them I buy Civilization." How true. My mother tells me that even though my grandfather was a cranky old farmer about most things, he never voted against a school bond issue. That tells us something. Schools, roads, security (police), and so on are important, and not just for the people who can buy them for themselves. And that, I think, is why a lot of rich folks (like Warren Buffet) are willing to support a candidate who has said up front that they would bear a greater tax burden at the top. One reason might be credibility - that candidate isn't playing games by trying to say he can keep the tax code flatter and lower than it was 8 years ago and still be able to lift the middle class. Another is the fact that we are simply burdened by debt and need to raise revenues to keep it in check. Yet another is simply getting that tax dollar's worth of civilization that even an independent cranky old farmer sees the value in.
Interesting Election Data Monkey Information
Gallup's description of "likely voters." Basically, they've changed their approach to account for the surge in registrations (perhaps controlling for the thousands of "Mickey Mouses" regestered by ACORN, perhaps not).
Monday, October 20, 2008
I Told You So
I posted this June 20.
I dunno, maybe someone else has already gone out on this limb, but have a look at this. I'm to cowardly to make it a prediction, but I would not be shocked one bit if gasoline is back to $3.00 within the next year.Data for today, and in less than half the time I predicted:
Mark it, dude.
June 20, 2008:
............Reg.....Mid...Prem.
Curr. Avg..$4.075 $4.326 $4.482
Yesterday..$4.073 $4.325 $4.481
Month Ago..$3.807 $4.043 $4.188
1 Year Ago.$2.996 $3.181 $3.297
............Reg.....Mid...Prem.
Curr. Avg..$2.923 $3.049 $4.482
Yesterday..$2.954 $3.081 $3.174
Month Ago..$3.777 $3.939 $4.059
1 Year Ago.$2.824 $2.999 $3.107
Thursday, October 16, 2008
McCains mortgage buyout plan: Bad policy, bad politics.
Delinquency Rates for Loans, all banks (source: Federal Reserve):
.........Real...Res...Comm.......Credit............................
........Estate..R.E...R.E...Cons..Card..Oth..Leases..C&I...AG...Total
2008 Q2:..4.21..4.33..4.24..3.57..4.90..2.80..1.54..1.67..1.10.. 3.31
Homeownership rate: 68.8
Bank Sector employment and earnings:
...........Employment...hr/wk...$/hr....$/wk....$/year
July 2008:..8,206,000...35.8...20.28...726.02...36,300
Labor force: 134 million
The point is, I got the feeling from Mr. McCain's plan to pay banks face value for mortgage assets and negotiate the principle down with the borrowers was a bad idea. It smacked of a second-best solution (like trade policy intervention), or at least one that would mess up a lot for very little gain.
Turns out, that seems to be the case. Employment in all financial services is about 8% of the workforce. Delinquent loans are at most about 3 percent of all households (less if you consider the fact that not all households who are homeowners have a mortgage). Who wins this way of doing it? 11 million people who didn't make wise decisions. Who loses? the 90% of us who were prudent. Moral hazard anyone?
.........Real...Res...Comm.......Credit............................
........Estate..R.E...R.E...Cons..Card..Oth..Leases..C&I...AG...Total
2008 Q2:..4.21..4.33..4.24..3.57..4.90..2.80..1.54..1.67..1.10.. 3.31
Homeownership rate: 68.8
Bank Sector employment and earnings:
...........Employment...hr/wk...$/hr....$/wk....$/year
July 2008:..8,206,000...35.8...20.28...726.02...36,300
Labor force: 134 million
The point is, I got the feeling from Mr. McCain's plan to pay banks face value for mortgage assets and negotiate the principle down with the borrowers was a bad idea. It smacked of a second-best solution (like trade policy intervention), or at least one that would mess up a lot for very little gain.
Turns out, that seems to be the case. Employment in all financial services is about 8% of the workforce. Delinquent loans are at most about 3 percent of all households (less if you consider the fact that not all households who are homeowners have a mortgage). Who wins this way of doing it? 11 million people who didn't make wise decisions. Who loses? the 90% of us who were prudent. Moral hazard anyone?
Joe the Plumber and Progressive Marginal Taxes
The biggest sense I got about Joe the Plumber last night is that he has a basic misunderstanding of the progressive marginal tax system. If Joe moves a buck over 250k, he would probably pay about a nickel more in taxes under Obama's plan compared with McCain's. That's a fact. I've explained it before. It's fine to have civil disagreement over the philosophy of the sorts of changes in the tax code that the candidates would bring to the table, but the Republicans have been distorting the facts about the tax code since Reagan, and the middle class needs to stop drinking their Kool-Aid.
Just Read It
It may be the case that there has been some misleading information on both sides about policy. If there has then Mr. McCain needs to be more specific about what exactly he believes is being misrepresented rather than just throwing vague allegations out there. More importantly, Mr. Obama has been specific in addressing exactly which allegations by Mr. McCain have been misleading, and why, perhaps simply because he understands his own proposal and the issues in a broader sense better. Have a look-see.
Wednesday, October 15, 2008
Austan Goolsbee mops the floor with Doug Holz-Eakin's Carcass
Listen here. I love the part with a bout 5-6 minutes left where DH-E says something about paying face value for assets, and Austan says NO! That would be obscene! It would give the biggest subsidy to those who were the most irresponsible!
Money and Capital
I really wish the talking-head TV "economists would stop saying banks don't have enough "capital." They have plenty of "capital," it's just that their "capital" assets are tied up in loans that are increasingly non-performing. They just don't have enough of that type of capital which is most liquid, i.e. cash flow or MONEY. No fancy math, just basic terminology that makes sense and is correct.
Saturday, October 11, 2008
Ron Paul, Awesomer by the Day
Dug this one up and thought it was pretty awesome. Wish other Republicans were more like Ron Paul, you know, except for the crazy part of his brain that doesn't believe in multilateralism or the police.
Ron Paul - Electability - Censored by Fox 1-10-08
Ron Paul - Electability - Censored by Fox 1-10-08
Dilbert, The Economist, and Getting Policy Right
Scott Adams posted the results of his survey of economists about the candidates, which I've blogged on before.
Well, if a cartoonist's poll doesn't sound rigorous enough, here's the results from The Economist.
Basically, I think that Obama wins a lot of points with economists NOT because economists favor his ideology, or because economists favor government intervention. We don't - at least not blindly.
Basically, as James Heckman (Nobel Laureate in Economics from the - generally conservative - University of Chicago) puts it, "I've never worked with a campaign that was more interested in what the research shows." In other words, he listens, and for egotistical economists, that goes quite a ways. There also seems to a lot more attention to the details of what economic theories of behavior and empirical research tell us.
That's not to say that Obama's policy proposals are all good fixes, but it does say that the implementation is more likely to make sense. Good ideas on a broad philosophical level can do a lot of harm if they are poorly designed and implemented, and the lack of attention to detail is apparent in McCains "low-tax" dogma.
Well, if a cartoonist's poll doesn't sound rigorous enough, here's the results from The Economist.
Basically, I think that Obama wins a lot of points with economists NOT because economists favor his ideology, or because economists favor government intervention. We don't - at least not blindly.
Basically, as James Heckman (Nobel Laureate in Economics from the - generally conservative - University of Chicago) puts it, "I've never worked with a campaign that was more interested in what the research shows." In other words, he listens, and for egotistical economists, that goes quite a ways. There also seems to a lot more attention to the details of what economic theories of behavior and empirical research tell us.
That's not to say that Obama's policy proposals are all good fixes, but it does say that the implementation is more likely to make sense. Good ideas on a broad philosophical level can do a lot of harm if they are poorly designed and implemented, and the lack of attention to detail is apparent in McCains "low-tax" dogma.
Thursday, October 2, 2008
Politics 101
There are two things you don't want to watch being made, law and sausage. The senate bailout included:
Revisions to the AMT
Corporate tax cuts
Clean energy tax cuts
Earmarks, like something about wooden arrows for use by children
Why exactly didn't either candidate make a stand against a bill loaded with pork? For one, it's because most of the provisions amount to logrolling and earmarks designed to buy votes from his own party in the house. For the other, he needs to keep his post-partisan get-things-done image of civility and compromise. I'll let readers sort out which candidate did which.
Why not to Sweat your 401k (<45 age group)
If you're under 45, then your 401k is probably mostly growth-oriented (somewhat aggressive). Many republicans are trying to sell their changes to the bailout by scaring "average folks" ….less over their 401k's. If you're in just about any age group, fiddling with your investments now is probably a knee-jerk reaction that won't do anyone much good. First of all, most of the current volatility is fueled by panic and a general sense of uncertainty, so after the 777 drop one day, it's not uncommon to see a 550 jump the next (like we did this week). But think about it: Do you really know more than the people who do this 24/7? If you did, you'd have already jumped out of your risky investments. Right now, you have to consider yesterday's loss as sunk, as hard as that is, not panic, and think about your expectations for the next month, year, decade, etc.
For the younger bunch, the value in your retirement is still climbing a lot on the back of your (and your employer's) contributions to it. That means that your contributions are getting stocks relatively cheaper, and that can work to your advantage, looking over the window over which you'll be continuing to participate in the labor force. It's the simplest rule in economics: BUY LOW SELL HIGH.
Tuesday, September 30, 2008
Good One-Liner, Mr. Reich
Robert Reich had a good one-liner on This Week, this week: What do you have when you take the greed out of Wall Street? Pavement. For some, that's high praise for Wall Street; for others, not so much.
Monday, September 29, 2008
Kudos to the Republicans
Many Republicans stuck to their conservative principles, and voted "nay" and kudos to them for that. I just wanted to put that out there before you read my rant (below).
Theocratic National Socialists
When exactly did the Republican Party trade in its stripes of classic fiscal conservatism for whatever it is some of them now espouse? Many voted "nay" for the right reasons; others, like Rep. Tom Price (R-GA) mainly held out for a variety of dogmatic reasons, namely the irresponsible lowering of capital gains taxes without showing any real fiscal restraint (beginning at about 5:50 into the clip):
I'm the first (well, maybe not the first, but definitely not the last) to admit that lower capital gains taxes are a great help to investment and GDP growth in the long run. There are several problems with invoking these cuts in the current crisis. First, we are not in a debate over long run economic performance, we are in a crisis of financial liquidity to the banking sector. Second, a percent or two cut in capital gains tax rates is unlikely to have much impact on the aggregate because private investors are scared shitless (technical term). Third, as it pertains to the current problem, capital gains tax cuts are unlikely to have a substantial impact for the sector in crisis. Even if the across-the-board cuts are generally a good thing, they would do quite a bit to cut government revenue while doing little to supply private funds to the financial sector because private citizens will avoid those corporations and institutions that are vested in securitized mortgages. Finally, there are more efficient and effective ways of reforming capital gains taxes that would have a greater impact on the amount of money invested than cutting the rates would. Namely, the value basis for calculating the gains should be deflated against price changes, which would increase the level of certainty about the net after-tax returns to assets for any tax rate.
This is an issue for another day, however. The priorities for the here and now are: 1. supplying funds, and; 2. implementing warrants to hedge the government's outlays against information asymmetries whereby firms that dump the most toxic assets for prime prices will have to pay a return for the changes to make up the difference between what they got from DOT and what the toxic assets were worth.
What's more disturbing, is the fact that Republicans, in large part, are becoming less like the true fiscal conservatives they've always purported themselves to be. What they do these days, more and more, is buy your vote with: 1. tax cuts; 2. government intervention in their own pet industries, directly through spending in non-entitlement areas, and indirectly through subsidies, tax loopholes, and no-bid government contracts, and; 3. distracting middle/working class issues by raising nationalism and xenophobia while attempting to monopolize religion and morality.
Stop drinking their Kool-Aid.
I'm the first (well, maybe not the first, but definitely not the last) to admit that lower capital gains taxes are a great help to investment and GDP growth in the long run. There are several problems with invoking these cuts in the current crisis. First, we are not in a debate over long run economic performance, we are in a crisis of financial liquidity to the banking sector. Second, a percent or two cut in capital gains tax rates is unlikely to have much impact on the aggregate because private investors are scared shitless (technical term). Third, as it pertains to the current problem, capital gains tax cuts are unlikely to have a substantial impact for the sector in crisis. Even if the across-the-board cuts are generally a good thing, they would do quite a bit to cut government revenue while doing little to supply private funds to the financial sector because private citizens will avoid those corporations and institutions that are vested in securitized mortgages. Finally, there are more efficient and effective ways of reforming capital gains taxes that would have a greater impact on the amount of money invested than cutting the rates would. Namely, the value basis for calculating the gains should be deflated against price changes, which would increase the level of certainty about the net after-tax returns to assets for any tax rate.
This is an issue for another day, however. The priorities for the here and now are: 1. supplying funds, and; 2. implementing warrants to hedge the government's outlays against information asymmetries whereby firms that dump the most toxic assets for prime prices will have to pay a return for the changes to make up the difference between what they got from DOT and what the toxic assets were worth.
What's more disturbing, is the fact that Republicans, in large part, are becoming less like the true fiscal conservatives they've always purported themselves to be. What they do these days, more and more, is buy your vote with: 1. tax cuts; 2. government intervention in their own pet industries, directly through spending in non-entitlement areas, and indirectly through subsidies, tax loopholes, and no-bid government contracts, and; 3. distracting middle/working class issues by raising nationalism and xenophobia while attempting to monopolize religion and morality.
Stop drinking their Kool-Aid.
Sunday, September 28, 2008
Industries Where the Customer May not Always be Right
Found this on Freakonomics. Consumers who bone up on their own health may actually interfere with their own health care. Interesting. Any other applications where the customer may not be "right" and "information may actually lead to worse service? Education? Investing?
Saturday, September 27, 2008
Asymmetric Information & Mechanism Design
Some thoughts on state-contingent warrants against the changes in values of bailout assets bought by the Treasury, from E40. It plays some on my previous post on the whole issue of behavioral assumptions, and the argument for this type of mechanism design is strengthened by the tendency opportunistic behavior by bailees.
Thursday, September 25, 2008
Financial Crisis & Williamson's Behavioral Taxonomy
The whole crisis in the financial sector made me reflect today on Oliver Williamson's thoughts on transactions costs economics and behavioral assumptions built into various models economists employ. The basic taxononmy can be represented by looking at agents' behavior in two dimensions, rationality (maximizing, bounded rationality, and organic rationality or rationality as an evolutionary process) and self interest motivation (opportunistic, simple self-interest, or obedient).
Mostly, the relationship in the crisis comes down to a philosophical question of rationality - how well did folks figure out what kind of trap they were getting themselves into - and greed - how willing were agents to take advantage of others to get ahead.
Realistically, if agents are acting opportunistically, the type of economic organization that leads to the best outcomes is mechanism design (regulation). Unfortunately, under those circumstances, the mechanism has to be well designed. Copouts and loopholes will basically lead to another way for agents (homeowners and banks and realtors) to game the system. Furthermore, even if we're all trying to be rational the lack of information should give us more pause. Why hasn't anyone with some authority noticed this and put the brakes on this crazy rush to do "something?"
Mostly, the relationship in the crisis comes down to a philosophical question of rationality - how well did folks figure out what kind of trap they were getting themselves into - and greed - how willing were agents to take advantage of others to get ahead.
Realistically, if agents are acting opportunistically, the type of economic organization that leads to the best outcomes is mechanism design (regulation). Unfortunately, under those circumstances, the mechanism has to be well designed. Copouts and loopholes will basically lead to another way for agents (homeowners and banks and realtors) to game the system. Furthermore, even if we're all trying to be rational the lack of information should give us more pause. Why hasn't anyone with some authority noticed this and put the brakes on this crazy rush to do "something?"
Thursday, September 18, 2008
More thoughts on Marginal Tax Rates
Alan Greenspan recently alluded to the fact that he doesn't support keeping tax rates low if it means increased debt. I couldn't agree more: It's called classic fiscal conservatism, not this low-tax rhetoric of today's Grand Old (really old) Party.
There are plenty of sophisticated studies that show that there is virtually no impact on investment from higher marginal tax rates on individual income. Other studies (equally (sophisticated) say that high levels of debt are damaging to economic performance, investment, and growth. But, as my graduate econometrics professor once told me, "if you torture the data enough, it will confess." In other words, maybe these studies are doing something high-falootin that is getting the data to tell us something that really isn't there. So, take these scatterplots (pictures) on for size (longitudinal data from World Development Indicators, 1998-2006):
Investment v. Government Debt:
Negative relationship. Classic fiscal-conservative result.
Investment v. Highest marginal corporate tax rate:
Negative relationship, not so bad, but now...
Investment v. Highest individual marginal tax rate:
Nothing!!! Even if there were, it's a positive trendline! Maybe some fancy-pants regressions will help:
Whew! At least that straightens out the signs to be as expected: Lower taxes (especially on individual incomes) are only useful for stimulating investment all else equal, i.e. if they don't lead to higher debt levels (exactly what Greenspan said!). Even then the impact of the debt is significant; the effect of taxation is not significant (in a statistical sense - significance roughly requires column 3 (t-stats) greater than 2 or less than -2).
Here's the punchline: anyone who tries to sell lower individual income taxes as a boon to investment is full of hooey (technical term).
There are plenty of sophisticated studies that show that there is virtually no impact on investment from higher marginal tax rates on individual income. Other studies (equally (sophisticated) say that high levels of debt are damaging to economic performance, investment, and growth. But, as my graduate econometrics professor once told me, "if you torture the data enough, it will confess." In other words, maybe these studies are doing something high-falootin that is getting the data to tell us something that really isn't there. So, take these scatterplots (pictures) on for size (longitudinal data from World Development Indicators, 1998-2006):
Investment v. Government Debt:
Negative relationship. Classic fiscal-conservative result.Investment v. Highest marginal corporate tax rate:
Negative relationship, not so bad, but now...Investment v. Highest individual marginal tax rate:
Nothing!!! Even if there were, it's a positive trendline! Maybe some fancy-pants regressions will help:
| Coefficients | Standard Error | t Stat | |
| Intercept | 27.33017 | 1.984217 | 13.77378 |
| Government Debt | -0.0221 | 0.010433 | -2.11784 |
| Highest Marginal Individual Tax | -0.0238 | 0.031682 | -0.75128 |
| Highest Marginal Corporate Tax | -0.0927 | 0.059525 | -1.55728 |
Whew! At least that straightens out the signs to be as expected: Lower taxes (especially on individual incomes) are only useful for stimulating investment all else equal, i.e. if they don't lead to higher debt levels (exactly what Greenspan said!). Even then the impact of the debt is significant; the effect of taxation is not significant (in a statistical sense - significance roughly requires column 3 (t-stats) greater than 2 or less than -2).
Here's the punchline: anyone who tries to sell lower individual income taxes as a boon to investment is full of hooey (technical term).
Wednesday, September 17, 2008
What?
The WSJ today published an opinion piece, "The Deeper the Downturn, the Quicker the Recovery." I can scarcely think of a sillier premise to start from. Has he studied history, and the economic volitility of the US and world economies prior to WWII?
If you get past the silliness of his title and basic premise, the author (Christopher Wood) makes some interesting points about moral hazard and "debt deflation," but it would be unwise to conclude from those ideas that a steeper fall will mean a quicker recovery and a better long-term outlook. If the fall is deep then most of that "quicker recovery" will be wasted just trying to catch back up to where we were before.
If you get past the silliness of his title and basic premise, the author (Christopher Wood) makes some interesting points about moral hazard and "debt deflation," but it would be unwise to conclude from those ideas that a steeper fall will mean a quicker recovery and a better long-term outlook. If the fall is deep then most of that "quicker recovery" will be wasted just trying to catch back up to where we were before.
Tuesday, September 16, 2008
Tax Cuts vs. Debt Reduction
More to come on this topic, but recently Greenspan was asked if he favord across-the-board taxcuts that would result in a net loss in revenue, a la the cuts Sen. McCain proposes. His response: “I’m not in favor of financing tax cuts with borrowed money,” (which is exactly what "W" has done, and what Mac proposes). Bottom line: Debt Reduction is more important for investment and growth than willy-nilly tax cuts. See also: classic fiscal conservatism.
Monday, September 15, 2008
Global Institutions
The bloggers at The Economist apparently don't read their own posts. This institutional report card for global institutions take a pithy route to imply that these institutions have done poorly.
However, these posts and articles (1, 2, 3), most published last spring, suggest that those same institutions have done "OK." Has the world spun off it's wheels since they took these positions? Methinks not.
However, these posts and articles (1, 2, 3), most published last spring, suggest that those same institutions have done "OK." Has the world spun off it's wheels since they took these positions? Methinks not.
Voting and Economic Interests
There's some notion running around that folks aren't voting their economic interests or that they are being somehow irrational when they vote Republican. I don't know if I agree with this. I mean, it may be correct, on average, but not necessarily evidence that they are being in any way irrational. Maybe middle-class families are simply making a "high" guess at their chances of moving upward in the income distribution (becoming rich). If we think of the market economy as partly based purely on hard work, partly on ability, and partly on luck, then at least part of the outcome is based on a sort of lottery, and there's plenty of anecdotal evidence that suggests that many people overestimate their chances in a lottery. Perhaps middle class voters who support McCain's tax structure are (often wrongly) estimating that they will be one of the few who move upward into the $250,000+ income range, the top 5%.
Thoughts on Evacuations
Do people undervalue their own lives? I found this doing a google search for "evacuation fines." An interesting point rises. If people are valuing their worldly possessions over their lives (in hurricanes, etc.) and do not evacuate, then what is our responsibility to help them? Furthermore, what is their responsibility if we do? Here's thought: maybe we should announce "mandatory evacuations" with the warning that anyone for whom the authorities have to provide emergency rescue gets fined some large amount, say $5,000. This might help ensure higher evacuation rates, and also curb some of the costs of risky rescue operations.
Wednesday, September 10, 2008
Bayes' Rule and Tax Hikes for the Rich
This is interesting. Keep in mind it's only for the 35% bracket. I guess that's why nobody's made a "read my lipstick" comment.
CBS News - Not biased, just dumb
I can't believe this from CBS NEWS - http://www.cbsnews.com/video/watch/?id=4433164n
The family just over 200k in income owns a business, and currently fall in the 28% bracket. They estimate income for next year to be a bout 213k and they "worry" about their income going into what is currently the 33% bracket, the second-highest bracket, and the lowest bracket for which Obama's plan would raise taxes. The increase for this bracket begins to offset the increases from lower brackets at about 250,000 in income, but here's the point.
Their worry was that, with next year's cutoff for the highest bracket proposed at 200,300, that they would pay "another 8% of their income" in taxes. Not true. Most of their income is still going to be taxed at the lower-bracketed rates and only their income ABOVE 200,300 will be taxed at the higher rate. In fact, with Obama's overall restructuring plan, the TAX CUT that family would get on their incomes UP TO 200,300 would more than offset the portion of their income that falls in the higher bracket
YOU ONLY PAY THE GIVEN RATE FOR THE PORTION OF YOUR INCOME THAT FALLS IN A GIVEN RANGE. Here are the tax brackets, and we can calculate the net impact of raising the next-to-highest bracket from 33 to 36, assuming no other changes (and without applying the built in cutoff adjustments for 2009):
Under the current plan, this individual pays: $0.1*(15650) + $0.15*(63700-15650) + $0.25*(128500-63700) + $0.28*(195,850-128,500) + $0.33*(213,000-195,850) = $49,019, an average rate of about 23%. Ignoring the scheduled shift in the brackets (to account for inflation and stave off "bracket creep"), then for that same family the tax increase for the last bracket only applies to PART of their income, so they pay 49,400, 381 bucks more, but not 8% of their income more, and that ASSUMES they wouldn't benefit from the tax CUTS to the other portions of their income in the plan, which they would at a net gain to them.
The family just over 200k in income owns a business, and currently fall in the 28% bracket. They estimate income for next year to be a bout 213k and they "worry" about their income going into what is currently the 33% bracket, the second-highest bracket, and the lowest bracket for which Obama's plan would raise taxes. The increase for this bracket begins to offset the increases from lower brackets at about 250,000 in income, but here's the point.
Their worry was that, with next year's cutoff for the highest bracket proposed at 200,300, that they would pay "another 8% of their income" in taxes. Not true. Most of their income is still going to be taxed at the lower-bracketed rates and only their income ABOVE 200,300 will be taxed at the higher rate. In fact, with Obama's overall restructuring plan, the TAX CUT that family would get on their incomes UP TO 200,300 would more than offset the portion of their income that falls in the higher bracket
YOU ONLY PAY THE GIVEN RATE FOR THE PORTION OF YOUR INCOME THAT FALLS IN A GIVEN RANGE. Here are the tax brackets, and we can calculate the net impact of raising the next-to-highest bracket from 33 to 36, assuming no other changes (and without applying the built in cutoff adjustments for 2009):
| Marginal Tax Rate | Single | Married Filing Jointly or Qualified Widow(er) | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0–8,025 | $0–16,050 | $0–8,025 | $0–11,450 |
| 15% | $8,026–32,550 | $16,051–65,100 | $8,026–32,550 | $11,451–43,650 |
| 25% | $32,551–78,850 | $65,101–131,450 | $32,551–65,725 | $43,651–112,650 |
| 28% | $78,851–164,550 | $131,451–200,300 | $65,726–100,150 | $112,651–182,400 |
| 33% | $164,551–357,700 | $200,301–357,700 | $100,151–178,850 | $182,401–357,700 |
| 35% | $357,701+ | $357,701+ | $178,851+ | $357,701+ |
Under the current plan, this individual pays: $0.1*(15650) + $0.15*(63700-15650) + $0.25*(128500-63700) + $0.28*(195,850-128,500) + $0.33*(213,000-195,850) = $49,019, an average rate of about 23%. Ignoring the scheduled shift in the brackets (to account for inflation and stave off "bracket creep"), then for that same family the tax increase for the last bracket only applies to PART of their income, so they pay 49,400, 381 bucks more, but not 8% of their income more, and that ASSUMES they wouldn't benefit from the tax CUTS to the other portions of their income in the plan, which they would at a net gain to them.
Saturday, September 6, 2008
Will the Fiscal Conservatives Please Step Forward?
Friday, September 5, 2008
McCain, Substance
Just wanted to go out there and say that through all the other stuff that some folks might criticize about Mac's speech, the one (maybe only) substantive idea in it that resonated with economic theory was his portion about trade, openness, and adjustment assistance. His proposal seemed to mirror what J. David Richardson of Syracuse has proposed - some wage assistance while you take a lower wage job in transition to sectors that are growing.
The rest of the speech seemed like all the others, from both conventions. That is to say, it was full of political fluff and rancor.
The rest of the speech seemed like all the others, from both conventions. That is to say, it was full of political fluff and rancor.
Bid Baby Bid
There's a lot of baloney out there about drilling. One group of dolts wants you to think it should be done at all costs because it will "crah-ate jawbs fir hurd-wurkin Amuhricans" and "rah-doos ahr dahpendens on furrin awl." Silliness. The other thinks it's being clever by pointing out that "drilling in these areas will harm the environment" and "have virtually no impact on prices." Highbrow silliness.
As Free Exchange and Tyler Cowen point out, the reason that drilling might be useful is that it generates a whole lotta money, and these fiduciary benefits may simply dwarf the costs - cost benefit, plain and simple. But really, they're missing the point too!
Drill baby drill is a silly oversimplification of what should be done. The government OWNS that land, and shouldn't simply write over the mineral rights to it to the oil companies; these rights should be sold, preferably by auction, and preferable for at least a couple hundred billion dollars (based on reserve estimates). That way, the excess benefits that can be anticipated can be captured, and redistributed towards environmental restoration, transfers, and debt reduction.
As Free Exchange and Tyler Cowen point out, the reason that drilling might be useful is that it generates a whole lotta money, and these fiduciary benefits may simply dwarf the costs - cost benefit, plain and simple. But really, they're missing the point too!
Drill baby drill is a silly oversimplification of what should be done. The government OWNS that land, and shouldn't simply write over the mineral rights to it to the oil companies; these rights should be sold, preferably by auction, and preferable for at least a couple hundred billion dollars (based on reserve estimates). That way, the excess benefits that can be anticipated can be captured, and redistributed towards environmental restoration, transfers, and debt reduction.
Thursday, September 4, 2008
Menu Costs and Information
Are the costs of changing menus really the main barrier that makes restaurants not want to print caloric and nutritional information?
Selection Bias and the Truthfulness of Palin
Last night, Palin said Obama would raise "your" taxes. I take her at her word, assuming her words were intended only for those individuals in the halls of the convention. Chances are those convention attenders are mostly among the top 5% of Americans (those earning above $250,000) whose taxes would go up under the Obama plan. But out there in TV land, peoples' taxes would be HIGHER under MCCAINS plan. Check it out at the Tax Policy Center or play around at Obamataxcut.com.
Desks, like Lunch, is not Free
This is an interesting counterpoint to the Huckabee tear-jerking, flag-waving anecdote at the end of his speech. Publicly provided things (including the wars we fight) cost money. In the end you can't spend more and sustain tax cuts. The taxes needed to finance W's reckless spending will come, now or later. Pass it along and Bush might get the memo.
Wednesday, September 3, 2008
Friday, August 29, 2008
Markets and Sea Turtles
Interesting story on how the market and incentives can help people in poor countries be more environmentally/ecologically responsible. (Source: Deutsche Welle TV.)
Thursday, August 28, 2008
Name that Candidate
Who is the New York Times describing here?
From the beginning, X has sought out academic economists, rather than lawyers or former White House aides. His first economic adviser, Y, is a young University of Chicago professor who shares X’s market-oriented [Party] views. This summer, X added Z, who has a more traditional background ... but he, too, has a Ph.D. in economics, from Harvard.
As anyone who has spent time with X knows, he likes experts, and his choice of advisers stems in part from his interest in empirical research. (James Heckman, a Nobel laureate who critiqued the campaign’s education plan at Y’s request, said, “I’ve never worked with a campaign that was more interested in what the research shows.”) By surrounding himself with economists, however, X was also making a decision with ideological consequences. Far more than many other policy advisers, economists believe in the power of markets. What tends to distinguish [Party] economists is that they set out to uncover imperfections of the market and then come up with incremental, market-based solutions to these imperfections. This helps xplain the X campaign’s interest in behavioral economics, a relatively new field that has pointed out many ways in which people make irrational, short-term decisions. To deal with one example of such myopia, X would require companies to automatically set aside a portion of their workers’ salary in a 401(k) plan. Any worker could override the decision — and save nothing at all or save even more — but the default would be to save.
Friday, August 22, 2008
Friedman, Taxes and Pidgeonholing Economists
Scott Adams, Dilbert Cartoonist is funding a survey of 500 economists about which candidate they support. A comment to the unveiling of this read as follows:
There are about 3 things wrong with this statement: (1) Milton Friedman (was) a very highly respected economist of the 20th century, but not necessarily the "most" - at the very least you would have to qualify it to only look at MACROeconomists; (2) raising taxes slows the economy, ceteris paribus, you know, assuming the money is thrown in a bottomless pit (the devil is in the details of how those taxes are structured, and how their revenues would be used), and; (3) that something that is universally known can be universally applied (the "law" of gravity works great at sea level and in a vacuum).
I'll start with point (1). Friedman was a great macroeconomist. Think of it like the difference between the 30,000 feet up that Rummy looked on Iraq from versus the ground-level view on which the troops are getting shot at. There are tons of other fields of study in economics: International trade, developing economies, labor markets, econometrics, microeconomic theory, environmental economics, economic history, game theory, public finance, political economy, etc., etc. How you feel about the candidates may depend on the issue at hand. Take for instance the environment. I've railed on the misuse of the term "incentive" as a euphemism for "subsidy," because incentives can be negative, too. In a MICROeconomic context taxes are negative incentives, and often sticks (taxes) work better than carrots (subsidies) to do the job. In the case of the environment, if your goal is reducing emissions, taxes work "better" in the sense that (a) they encourage pollution abatement to save on the cost of the tax, and; (b) they discourage output in pollution intensive industries.
Next consider the proposition about higher taxes. For starters, this comment is intended to mean that lower taxes will reduce government spending and involvement in our lives. The last 8 years have done exactly the opposite with lower taxes - Bush spends more, saddles us with more public debt, and gets in our business more than any administration in a long, long time. Also, the premise of Friedman's neoclassical model begins from a balanced budget and no debt (heroic?). Finally, just because taxes slow production, it is not universally true that either (a) the converse (lowering taxes helps growth) is true, or; (b) higher taxes are not necessary for accomplishing certain objectives. Let's look at the current situation. We have a large and growing debt and are waging a war without funding it. When the government spends (say, on a war) it is committing itself to higher taxes, now or later. Since it is the rich who also own most of the Treasury's debt, by supporting irresponsible taxcuts today's administration is screwing tomorrow's middle class for the sake of todays upper class. This is where I wish conservatives would go back to true fiscal conservatism and stop railing a dogma of "low taxes - good." Higher taxes, if used to reduce the current deficits and debt, might actually promote growth in the long run.
I think a fair argument for (3) against Joe Commenter's claim follows from the previous arguments. Still, the fact remains that the structure of the taxes is important. The taxes that are most "universally-accepted" to be harmful are those levied against capital. Therefore, it is probably true that capital gains and dividends could be taxed less with quite a bit of benefits. In particular, interest income and capital gains should, at the very least, be indexed against inflation (deflated) in terms of the basis against which the value of the asset or principal is compared. On the other hand, it is probably true that raising the tax on the highest marginal income bracket will not be very harmful. Taxes on wages and salaries have been found in both the theoretical (Ramsey, other optimal tax macro models here) models and empirical literature to be pretty benign. Taxing the million and first dollar earned from salary another percent does not drastically impact effort; taxing the 10,001st might.
I'm sorry that the world of economics is such a complicated place. Ultimately my rule, is that most politicians do a pretty good job of ignoring economic advice from pros, and neither party has a monopoly on ignorance of economic theory. So feel free to go out and vote on the basis of some banal social issue like gay marriage, guns, or which party has had more sex scandals in the last 90 days.
Milton Friedman is the most respected economist of the 20th century.
Friedman says in all cases raising taxes and increasing government
slows down the economy. This is principle is pretty universally known
by now.
Given that Obama wants to do exactly that, if we find these 500
economists think Obama has the better way, we'll know that the fix is
in.
Why do I have the feeling it will turn out that way?
There are about 3 things wrong with this statement: (1) Milton Friedman (was) a very highly respected economist of the 20th century, but not necessarily the "most" - at the very least you would have to qualify it to only look at MACROeconomists; (2) raising taxes slows the economy, ceteris paribus, you know, assuming the money is thrown in a bottomless pit (the devil is in the details of how those taxes are structured, and how their revenues would be used), and; (3) that something that is universally known can be universally applied (the "law" of gravity works great at sea level and in a vacuum).
I'll start with point (1). Friedman was a great macroeconomist. Think of it like the difference between the 30,000 feet up that Rummy looked on Iraq from versus the ground-level view on which the troops are getting shot at. There are tons of other fields of study in economics: International trade, developing economies, labor markets, econometrics, microeconomic theory, environmental economics, economic history, game theory, public finance, political economy, etc., etc. How you feel about the candidates may depend on the issue at hand. Take for instance the environment. I've railed on the misuse of the term "incentive" as a euphemism for "subsidy," because incentives can be negative, too. In a MICROeconomic context taxes are negative incentives, and often sticks (taxes) work better than carrots (subsidies) to do the job. In the case of the environment, if your goal is reducing emissions, taxes work "better" in the sense that (a) they encourage pollution abatement to save on the cost of the tax, and; (b) they discourage output in pollution intensive industries.
Next consider the proposition about higher taxes. For starters, this comment is intended to mean that lower taxes will reduce government spending and involvement in our lives. The last 8 years have done exactly the opposite with lower taxes - Bush spends more, saddles us with more public debt, and gets in our business more than any administration in a long, long time. Also, the premise of Friedman's neoclassical model begins from a balanced budget and no debt (heroic?). Finally, just because taxes slow production, it is not universally true that either (a) the converse (lowering taxes helps growth) is true, or; (b) higher taxes are not necessary for accomplishing certain objectives. Let's look at the current situation. We have a large and growing debt and are waging a war without funding it. When the government spends (say, on a war) it is committing itself to higher taxes, now or later. Since it is the rich who also own most of the Treasury's debt, by supporting irresponsible taxcuts today's administration is screwing tomorrow's middle class for the sake of todays upper class. This is where I wish conservatives would go back to true fiscal conservatism and stop railing a dogma of "low taxes - good." Higher taxes, if used to reduce the current deficits and debt, might actually promote growth in the long run.
I think a fair argument for (3) against Joe Commenter's claim follows from the previous arguments. Still, the fact remains that the structure of the taxes is important. The taxes that are most "universally-accepted" to be harmful are those levied against capital. Therefore, it is probably true that capital gains and dividends could be taxed less with quite a bit of benefits. In particular, interest income and capital gains should, at the very least, be indexed against inflation (deflated) in terms of the basis against which the value of the asset or principal is compared. On the other hand, it is probably true that raising the tax on the highest marginal income bracket will not be very harmful. Taxes on wages and salaries have been found in both the theoretical (Ramsey, other optimal tax macro models here) models and empirical literature to be pretty benign. Taxing the million and first dollar earned from salary another percent does not drastically impact effort; taxing the 10,001st might.
I'm sorry that the world of economics is such a complicated place. Ultimately my rule, is that most politicians do a pretty good job of ignoring economic advice from pros, and neither party has a monopoly on ignorance of economic theory. So feel free to go out and vote on the basis of some banal social issue like gay marriage, guns, or which party has had more sex scandals in the last 90 days.
Thursday, August 21, 2008
Terrorism and Oil
This is an interesting post on the World Bank PSD blog, with nice links to support.
Wednesday, August 20, 2008
Economics Joke (You've been Warned)
If you get this joke, seek help.
A bird in the hand is worth:
[(1+W0)(1+s)/p – (1 – p)Wo(1+s)/p]1/(1+s) - Wo
in the bush.
Optional ARM
I've moaned about the "negative amortization option" on three part optional ARM mortgages here already. Basically an optional ARM an adjustable rate mortgage that lets you pay one of three payments (not by agreeing to it in advance but on a month to month basis):
1. normal payment that (if made each and every month) amortizes the loan after X months.
2. interest only payment that (if made each month) never amortizes the loan (the bank perpetually owns your house).
3. "negative amortization" payment that doesn't even pay off the interest, and adds the difference onto the principle (I'd rather call this the "default incentive" option - do this as long as the bank will let you, default, foreclose, and rent for the rest of your life).
Now the Economist is onto the stupidity (just so you know that I'm not making this stuff up).
1. normal payment that (if made each and every month) amortizes the loan after X months.
2. interest only payment that (if made each month) never amortizes the loan (the bank perpetually owns your house).
3. "negative amortization" payment that doesn't even pay off the interest, and adds the difference onto the principle (I'd rather call this the "default incentive" option - do this as long as the bank will let you, default, foreclose, and rent for the rest of your life).
Now the Economist is onto the stupidity (just so you know that I'm not making this stuff up).
Tuesday, August 19, 2008
Two Bad Ideas
In the August 11 WSJ, Newt Gingrich & Jerry Brown proposed their ideas for how they could or would spend $10b. in public funds. One thing both authors ignore is how pitifully small the sum of $10b. is for tackling any truly problem confronting the public good.
In the Gingrich corner, there were some very good and well-focused goals that he hoped to accomplish with the money, but they were ultimately based on a bad idea: an "innovation lottery." He also ignores the fact that $10b. couldn't possibly resolve all 7 of his issues, and if it could, at least 5 of them would already be solved. For instance, "6) A method for reusing nuclear waste to make Yucca Mountain, Nevada unnecessary as a repository," would probably benefit the nuclear power industry by at least the amounts that Mr. Gingrich would award the winner of said lottery. Also, while lotteries have been shown to actually be a pretty good way for the government to meet its goals financially, they are horribly distortive of behavior. People will over-invest in trying to accomplish goals, and may reap zero payoff for their investments of personal resources. Basically, a lot of time effort and capital will go wasted.
From Brown's corner we actually see a little bit more reality by focusing on one goal, but that goal is simply too big for $10b. "Curbing our energy appetite with efficiency programs incentives," cannot be done for such a paltry amount. In fact, "incentives" may not even be the best way to do it. While incentives for producing more energy sources (even cleaner ones) may be usefull for stimulating research, they don't do the job of "curbing our energy appetite" because subsidies mean lower prices, and lower prices mean more output and use of energy. On the other hand, applying the carbon tax prescribed by the UN on coal power would stimulate wind and solar energy output AND curb consumption. Coal is now about $0.05 per kilowatt; wind is about $0.08. The UN's proposed carbon tax of about $30 a tonne would bring coals cost up to par, and energy producers, comparing the 2 sources will naturally invest in the latter. Also, it wouldn't cost the man a dime! In fact the government would generate revenues from the deal, which it could distribute as a tax rebate or use to bomb (bomb bomb, bomb bomb) Iran.
In the Gingrich corner, there were some very good and well-focused goals that he hoped to accomplish with the money, but they were ultimately based on a bad idea: an "innovation lottery." He also ignores the fact that $10b. couldn't possibly resolve all 7 of his issues, and if it could, at least 5 of them would already be solved. For instance, "6) A method for reusing nuclear waste to make Yucca Mountain, Nevada unnecessary as a repository," would probably benefit the nuclear power industry by at least the amounts that Mr. Gingrich would award the winner of said lottery. Also, while lotteries have been shown to actually be a pretty good way for the government to meet its goals financially, they are horribly distortive of behavior. People will over-invest in trying to accomplish goals, and may reap zero payoff for their investments of personal resources. Basically, a lot of time effort and capital will go wasted.
From Brown's corner we actually see a little bit more reality by focusing on one goal, but that goal is simply too big for $10b. "Curbing our energy appetite with efficiency programs incentives," cannot be done for such a paltry amount. In fact, "incentives" may not even be the best way to do it. While incentives for producing more energy sources (even cleaner ones) may be usefull for stimulating research, they don't do the job of "curbing our energy appetite" because subsidies mean lower prices, and lower prices mean more output and use of energy. On the other hand, applying the carbon tax prescribed by the UN on coal power would stimulate wind and solar energy output AND curb consumption. Coal is now about $0.05 per kilowatt; wind is about $0.08. The UN's proposed carbon tax of about $30 a tonne would bring coals cost up to par, and energy producers, comparing the 2 sources will naturally invest in the latter. Also, it wouldn't cost the man a dime! In fact the government would generate revenues from the deal, which it could distribute as a tax rebate or use to bomb (bomb bomb, bomb bomb) Iran.
If You Can't Bring Compeitive Markets to Health Care ...
bring your health care to the competition.
Competition lowers prices and improves welfare for the average consumer. Trade, offshoring, outsourcing, immigration, privatization, etc. all tend to promote competition. But one problem with health care is that high fixed costs and localization of many markets allow the market to be dominated by a small number of providers who don't have to do much to compete, and often cross-subsidize losses on emergency care with high prices on "elective care." The Economist briefing asks, "What if elective care procedures can be performed equally well in developing countries at a cost low enough to offset the travel cost?"
Until recently most medical outsourcing was limited to hospitals reducing costs by having tests performed and analyzed offshore. But now, folks are taking it to the competition themselves. Other issues here are complex, but it provides an interesting economic analysis in three areas: competition/basic micro; trade and offshoring, and; insurance.
The first two are related and more clear cut. Insurance is an interesting aspect because one might ask what happens once insurance companies start to save a buck by allowing patients to go to India for their knee surgery? Will they begin to require patients to do so if they want that to be covered at their current rates? Will the compensate for it by lowering prices? Will insurers, foreign providers, and patients be equally informed about the benefits and costs? How will US providers respond - will they compete by lowering prices or will they try to differentiate their product by bashing foreign facilities and/or playing to nationalism? All intersting questions. I do not have the answers to them.
Competition lowers prices and improves welfare for the average consumer. Trade, offshoring, outsourcing, immigration, privatization, etc. all tend to promote competition. But one problem with health care is that high fixed costs and localization of many markets allow the market to be dominated by a small number of providers who don't have to do much to compete, and often cross-subsidize losses on emergency care with high prices on "elective care." The Economist briefing asks, "What if elective care procedures can be performed equally well in developing countries at a cost low enough to offset the travel cost?"
Until recently most medical outsourcing was limited to hospitals reducing costs by having tests performed and analyzed offshore. But now, folks are taking it to the competition themselves. Other issues here are complex, but it provides an interesting economic analysis in three areas: competition/basic micro; trade and offshoring, and; insurance.
The first two are related and more clear cut. Insurance is an interesting aspect because one might ask what happens once insurance companies start to save a buck by allowing patients to go to India for their knee surgery? Will they begin to require patients to do so if they want that to be covered at their current rates? Will the compensate for it by lowering prices? Will insurers, foreign providers, and patients be equally informed about the benefits and costs? How will US providers respond - will they compete by lowering prices or will they try to differentiate their product by bashing foreign facilities and/or playing to nationalism? All intersting questions. I do not have the answers to them.
Monday, August 18, 2008
Georgia, Russia, and Democracy
Democracy in Russia is very publicly flawed, at best, most Americans are aware of the wink-wink election they had to elect Medvedev. This is not a secret, but where does a former expert on Russian and Soviet Politics (Condolezza Rice) get off extolling the virtues of Democracy in Georgia? It's misleading at best to make the claim that Georgia is a well-functioning democracy. Check out the Economist "Intelligence Unit's" 2007 Democracy Index:
Rank Overall Elections Function Particip. Culture Civ. Liberty
Full democracies
Sweden 1 9.88 10.00 10.00 10.00 9.38 10.00
Flawed democracies
S. Afr. 29 7.91 8.75 7.86 7.22 6.88 8.82
Hybrid regimes
Albania 83 5.91 7.33 5.07 4.44 5.63 7.06
Kenya 101 5.08 4.33 4.29 5.56 6.25 5.00
Russia 102 5.02 7.00 3.21 5.56 3.75 5.59
Malawi 103 4.97 6.00 5.00 3.89 4.38 5.59
Georgia 104 4.90 7.92 1.79 3.33 5.00 6.47
Cambodia 105 4.77 5.58 6.07 2.78 5.00 4.41
So, uh, yeah. Georgia is a "hybrid regime" meaning that it is NOT a democracy, it is not even a FLAWED democracy, it is a mix of some democratic elements and some distinctly authoritarian elements, kind of like Cambodia, or Kenya. But funnier still, even with the publicized political shenanigans taking place in Russia, it's still more democratic than Georgia. And oh yeah, does everyone remember from all the biased reporting that Georgia attacked first? Thought not.
Sunday, August 17, 2008
Friday, August 15, 2008
I know I've said THIS before...
Check THIS out. I've said it for several years, citing a mid-nineties Foreign Affairs Article by Krugman (The Myth of the East Asian Miracle...):
China can grow at a rapid rate with a collectivist spirit because itPure capital accumulation peters out once relative returns start to even out across sectors and across countries, and pure labor mobilization peters out when the marginal return for "collective" labor is matches that in the market sector. So, kudos to China, but don't be shocked when they hit a "wall" with their ability to grow: Property rights don't incentivize innovation or entrepreneurship, and markets aren't fully in place to weed out those entrepreneurs who take bad risks.
has so many resources (ie, so much labour) to put towards fuelling
its growth. We saw in previous decades other Asian economies quickly
accumulate capital and labour, and it also resulted in impressive
growth rates. However, long-term growth can only be achieved through
innovation and entrepreneurship.
Wednesday, August 13, 2008
Marriage & Insurance
There are a handful of economics articles relating marriage to a type of insurance contract, with an emphasis on countries where arranged marriages are common. This idea is as old as the earth. In fact until about the last 50 years most marriages were a form of diversification and specialization in household production. Now they are more consumption-based in the sense that experiences that make us happy are enhanced by a partner we like. But health care is a new dimension and has turned marriage back to the old model in the US. Couples are marrying because they need their partner's health insurance, but paradoxically, some are considering divorce so that ailing partners can qualify for subsidized insurance. Crazy, but two comments:
1. is marrying for health insurance all that different from the incentives folks are trying to reinforce into the tax code to incentivize marriage?
2. I'm always a little troubled by people who say things like "“Nobody should have to make a choice like that,” Ms. Moulton said. “What happened to our country? I don’t remember growing up like this.”"
I feel for Ms. Moulton, but people like Ms. Moulton (who considered divorce to qualify for subsidies for her kidney transplant) faced even greater difficulties in the past. As bleak as the current system may be for some it was in fact always been difficult for many people like her who were poor and in need of transplants or other very costly procedures. People too often look on the past with rose-tinted glasses. We usually see this type of reactionary response dressed in conservative morality, but Lou Dobbs has bred a new strain of it among progressives. Instead of romanticizing the past that never was let's work together for a better future.
1. is marrying for health insurance all that different from the incentives folks are trying to reinforce into the tax code to incentivize marriage?
2. I'm always a little troubled by people who say things like "“Nobody should have to make a choice like that,” Ms. Moulton said. “What happened to our country? I don’t remember growing up like this.”"
I feel for Ms. Moulton, but people like Ms. Moulton (who considered divorce to qualify for subsidies for her kidney transplant) faced even greater difficulties in the past. As bleak as the current system may be for some it was in fact always been difficult for many people like her who were poor and in need of transplants or other very costly procedures. People too often look on the past with rose-tinted glasses. We usually see this type of reactionary response dressed in conservative morality, but Lou Dobbs has bred a new strain of it among progressives. Instead of romanticizing the past that never was let's work together for a better future.
Wither, Reform (Math)?
I received info on a new study on remedial math and studying economics by an acquaintance of mine, Andrew Selzer. Summarizing, they find:
I guess that leaves more questions than answers, though. We know that students who are deficient when they arrive will struggle, but what do we do about it? Essentially, this tells us that if our goal is getting the econ curricula to stick, then remedial "catch-up" math courses are basically a waste of University resources, but why?
I would suggest that the weak link for deficient students is not math per se, but those types of analytical and critical thinking skills that are developed with a longer-term exposure to mathematical reasoning (Atin, we've talked about this in fact). There is also some selection bias in which students are more or less attuned to acquiring these critical skills. Some students (namely non majors forced to take economics courses) have deliberately avoided those types courses as much as possible, taking just the bare minimum. At the same time, this choice may reflect those students' rational awareness of her or his own abilities. Therefore a "D is for degree" approach to their econ courses may be optimal for obtaining the degree credential. Similar selection bias has been show to be exhibited in the fertility choices and educational outcomes of women.
- overall high school performance and performance in high school math positively affect performance in college economics courses.
- taking remedial mathematics after arriving has a statistically insignificant effect on college performance, performance in economics core courses, or other long-term outcomes (i.e. these outcomes have more to do with "ability" and pre-college performance).
I guess that leaves more questions than answers, though. We know that students who are deficient when they arrive will struggle, but what do we do about it? Essentially, this tells us that if our goal is getting the econ curricula to stick, then remedial "catch-up" math courses are basically a waste of University resources, but why?
I would suggest that the weak link for deficient students is not math per se, but those types of analytical and critical thinking skills that are developed with a longer-term exposure to mathematical reasoning (Atin, we've talked about this in fact). There is also some selection bias in which students are more or less attuned to acquiring these critical skills. Some students (namely non majors forced to take economics courses) have deliberately avoided those types courses as much as possible, taking just the bare minimum. At the same time, this choice may reflect those students' rational awareness of her or his own abilities. Therefore a "D is for degree" approach to their econ courses may be optimal for obtaining the degree credential. Similar selection bias has been show to be exhibited in the fertility choices and educational outcomes of women.
Tuesday, August 12, 2008
More Flatulence over Gas
Hopefully the hot air over gasoline prices will wane soon and things will turn again towards emissions. Gas prices are down about $0.30 from their peak and the sheep are starting to jump on the bandwagon for predicting more of a fall. Here's todays fuelgaugereport from AAA (similar info can be gotten from the Department of Energy):
National
Unleaded Average
Recorded Average Price:
Gasoline hit $3.73 from its $4.19 peak in Lexington. It was rumored to have been $3.47 as close as Roanoke.
National
Unleaded Average
| Regular | Mid | Premium | Diesel | E85 | **E85 MPG/BTU adjusted price |
| Current Avg. | $3.799 | $3.962 | $4.082 | $4.517 | $3.070 | $4.040 |
| Yesterday Avg. | $3.810 | $3.974 | $4.093 | $4.537 | $3.090 | $4.066 |
| Month Ago Avg. | $4.104 | $4.357 | $4.514 | $4.817 | $3.299 | $4.342 |
| Year Ago Avg. | $2.770 | $2.941 | $3.048 | $2.934 | NA | NA |
*Prices
are in US dollars per gallon
Recorded Average Price:
| Regular Unl. | $4.114 | 7/17/2008 |
| DSL. | $4.845 | 7/17/2008 |
Gasoline hit $3.73 from its $4.19 peak in Lexington. It was rumored to have been $3.47 as close as Roanoke.
Sunday, August 10, 2008
Favre... Traded
I guess I miscalcluated, and I still think Favre made a poor choice. Why would someone wanting to contend and play 1 or 2 more great years agree to a trade to the Jets?
Wednesday, August 6, 2008
Life Could Be Worse
At least students at the US Universities aren't forming fraternity gangs that intimidate, assault, and harrass faculty.
Tuesday, August 5, 2008
Subtle Racism: Can Repulicans be Proud?
I've respected John McCain for a long time. I said as late as June that I could see myself voting for him, depending on what the alternatives are. But it saddens me to hear the subtle influence of the Karl Rove "How Racist Can We Be Without Putting too Many White People Off?" campaign strategy. The warmup, Joe Lieberman:
Not too bad, now Mitt Romney:
Now, Chris Rock recycling some of his comedy for the topic:
McCain supporters and doners: Tell your candidate this not the honorable campaign we expect and that this insults our intelligence.
Not too bad, now Mitt Romney:
Now, Chris Rock recycling some of his comedy for the topic:
McCain supporters and doners: Tell your candidate this not the honorable campaign we expect and that this insults our intelligence.
Mission Accomplished, Part Duh
The Murdoch Street Journal published and article that once again declares victory: "The War in Iraq is Over. We've Won," reports Bret Stephens. Bold. What does that mean John McCain will do for the next hundred years?
My if it takes more than 100 words to prove victory, then you probably ain't won yet, but he bases the decision on the fact that Francis Fukuyama conceded a bet about whether Iraq would still be "a mess" five years after the war started in 2003. In my book, a country that can't stand on it's own without 100,000+ foreign troops occupying it as peacekeepers qualifies as a mess, and few would argue that it wasn't a mess in March at the date of the 5-year anniversary.
But that's neither here nor there. This is the key point Mr. Fukuyama points out that trumps the current conditions on the ground: "We've spent a trillion or so dollars, 30,000 dead or wounded, a large loss in international influence and prestige, all for the sake of disarming a country with no WMDs." Where is the margin indeed? Few dispute the tangential benefits that have been realized by giving Saddam the boot, but those benefits weren't the main reason for entering. I, along with others including Mr. Fukuyama, have said from the start that regardless of your personal views about the war, it was never giving the American Taxpayer the most bang for it's military spending buck in the socalled "war on terror."
My if it takes more than 100 words to prove victory, then you probably ain't won yet, but he bases the decision on the fact that Francis Fukuyama conceded a bet about whether Iraq would still be "a mess" five years after the war started in 2003. In my book, a country that can't stand on it's own without 100,000+ foreign troops occupying it as peacekeepers qualifies as a mess, and few would argue that it wasn't a mess in March at the date of the 5-year anniversary.
But that's neither here nor there. This is the key point Mr. Fukuyama points out that trumps the current conditions on the ground: "We've spent a trillion or so dollars, 30,000 dead or wounded, a large loss in international influence and prestige, all for the sake of disarming a country with no WMDs." Where is the margin indeed? Few dispute the tangential benefits that have been realized by giving Saddam the boot, but those benefits weren't the main reason for entering. I, along with others including Mr. Fukuyama, have said from the start that regardless of your personal views about the war, it was never giving the American Taxpayer the most bang for it's military spending buck in the socalled "war on terror."
Monday, August 4, 2008
Gains from Trade and why Favre won't get Traded
Gains from trade occur when one side has different endowments or preferences that make exchanges mutually beneficial. For a Brett Favre trade to happen 3 parties have to all be satisfied: GB has to get talent without helping its division and conference rivals, Farve wants to find a team with a legit shot, and the team he goes to has to have QB needs. Most trades only satisfy 2 of these parties, and that's why economics gets so difficult when there are more than two parties have veto power to a transaction.
Which contenders need a QB? The Giants, Pats, Cowboys, Chargers, Seahawks, Colts and Steelers all have stars in the position. The Jags are solid, leaving the Bucs and Skins as the only possibilities from last year's playoff teams. The Titans, Saints, Rams, and Panthers don't seem to be itching to make a QB change either. Bears fans would rather go 0-16 than see "Number Four" wearing GSH on his sleeve. Would the Pack really help the Vikes or Bucs to fill their biggest holes? The only teams left are a handful of AFC teams with little or no chance of making the Playoffs let alone the big piece of dinnerware at the end (I include my beloved Chefs in that lot). So sit back and enjoy the drama, NFL fans.
Which contenders need a QB? The Giants, Pats, Cowboys, Chargers, Seahawks, Colts and Steelers all have stars in the position. The Jags are solid, leaving the Bucs and Skins as the only possibilities from last year's playoff teams. The Titans, Saints, Rams, and Panthers don't seem to be itching to make a QB change either. Bears fans would rather go 0-16 than see "Number Four" wearing GSH on his sleeve. Would the Pack really help the Vikes or Bucs to fill their biggest holes? The only teams left are a handful of AFC teams with little or no chance of making the Playoffs let alone the big piece of dinnerware at the end (I include my beloved Chefs in that lot). So sit back and enjoy the drama, NFL fans.
Gots to Get Paid
I knew the man was stickin it to me!
Or, maybe writers (like people with "real" writing jobs for mags & papers) get something out of blogging. Blogs aren't necessarily as scrutinized for length or content, so writers can say more and be more blunt in blogs than they would in their more formal editorial and analytical writing.
Or, maybe writers (like people with "real" writing jobs for mags & papers) get something out of blogging. Blogs aren't necessarily as scrutinized for length or content, so writers can say more and be more blunt in blogs than they would in their more formal editorial and analytical writing.
Friday, August 1, 2008
CFL - Inferior version of US Football, or "Bright" Idea?
I wish understanding the environment were easier. Apparently, so does Stephen Colbert, who interviewed one of Slate's the "Green Lantern" writers, Brendan Koerner, and discussed Compact Fluorescent Lightbulbs (CFL).
Anyway, the main issue with CFLs is alleged to be mercury. It's true that CFLs use less energy, and compensate for their higher cost over their lifetime in savings on energy bills. The question was whether this cost was worth it given concerns over the fact that the bulb itself contains a small amount of mercury (less than 1/100 of the mercury in a mercury thermometer).
This report, outlines some of the mercury issues. Basically, on average much more mercury is emitted as vapor from the coal-burning electrical plants that supply extra energy needed for incandescent bulbs than the combined mercury in a CFL plus their emissions. The report, however reveals a small concern: some of the mercury from a CFL is sent to the place it goes after it is burnt out. If you have access to a place that can recycle the bulb, do that. If you don't, I worry about the nature of liquid mercury piling up in landfills if everyone switches over to CFBs. Vapor emissions are less of a big deal because they become a bit more diffuse in the atmosphere, although they eventually find their way into water sources. Liquid mercury doesn't become diffuse: That's why Bush's bright idea to auction mercury pollutants like we had begun to do with SO2 and other atmosphereic pollutions was quickly shot down.
I'm trying not to advocate a position on this. However, I would like a bit more careful thought and study to be done, preferably by someone who is not me.
Anyway, the main issue with CFLs is alleged to be mercury. It's true that CFLs use less energy, and compensate for their higher cost over their lifetime in savings on energy bills. The question was whether this cost was worth it given concerns over the fact that the bulb itself contains a small amount of mercury (less than 1/100 of the mercury in a mercury thermometer).
This report, outlines some of the mercury issues. Basically, on average much more mercury is emitted as vapor from the coal-burning electrical plants that supply extra energy needed for incandescent bulbs than the combined mercury in a CFL plus their emissions. The report, however reveals a small concern: some of the mercury from a CFL is sent to the place it goes after it is burnt out. If you have access to a place that can recycle the bulb, do that. If you don't, I worry about the nature of liquid mercury piling up in landfills if everyone switches over to CFBs. Vapor emissions are less of a big deal because they become a bit more diffuse in the atmosphere, although they eventually find their way into water sources. Liquid mercury doesn't become diffuse: That's why Bush's bright idea to auction mercury pollutants like we had begun to do with SO2 and other atmosphereic pollutions was quickly shot down.
I'm trying not to advocate a position on this. However, I would like a bit more careful thought and study to be done, preferably by someone who is not me.
Thursday, July 31, 2008
Big Bang in the Small Town News
Several of my own comments were published this week in the Lexington News-Gazette. While the New York Times makes its online content available mostly for free, the Lexington paper requires online readers to pay for access. Some of my dear friends would probably think this is wholly appropriate based on their own perceptions of quality (see my post from earlier today on media bias). Here is a link to my full thoughts that I sent the author via email.
I have to say he did a great job of pulling together my thoughts and the thoughts of a colleague at W&L and (surprise!) two independently-interviewed economists mostly agreed on the basic issues. When I spoke to the journalist over the phone, I got tricked into saying something about the Bush Tax Cuts, which I commented on in the context of the need to more budgetary discipline - if you want to spend money to fight wars you've got to ask the public to make a sacrifice to pay for it.
I have to say he did a great job of pulling together my thoughts and the thoughts of a colleague at W&L and (surprise!) two independently-interviewed economists mostly agreed on the basic issues. When I spoke to the journalist over the phone, I got tricked into saying something about the Bush Tax Cuts, which I commented on in the context of the need to more budgetary discipline - if you want to spend money to fight wars you've got to ask the public to make a sacrifice to pay for it.
Liberal Media Bias
Apparently it's true, according to Tim Groseclose and Jeffrey Milyo (2005, Quarterly Journal of Economics). I just came across the article on a random troll of the internet. Here's a quotation:
Our results show a strong liberal bias: all of the news outlets we examine, except Fox News’ Special Report and the Washington Times, received scores to the left of the average member of Congress. Consistent with claims made by conservative critics, CBS Evening News and the New York Times received scores far to the left of center. The most centrist media outlets were PBS NewsHour, CNN’s Newsnight, and ABC’s Good Morning America; among print outlets, USA Today was closest to the center.One thing I found puzzling about the study is that it ranked the WSJ almost as far to the LEFT as Ted Kennedy and farther to the left than the NY times (by a significant margin), based on the groups and studies they cite. I'm not sure I buy that part of it, but interesting read nonetheless.
Wednesday, July 30, 2008
Blog Roundup
Busch League Promotions by Division of Labor
Falling Prices (link to list) and No Free Lunch by Freakonomics
Economist Misquotes and Economic Cycles by Heavy Lifting
Doha DOA by Krugman
Playboy in Braille? by Marginal Revolution
Trade Costs, Academic Salary Differentials and Doha by World Bank Private Sector Development
Falling Prices (link to list) and No Free Lunch by Freakonomics
Economist Misquotes and Economic Cycles by Heavy Lifting
Doha DOA by Krugman
Playboy in Braille? by Marginal Revolution
Trade Costs, Academic Salary Differentials and Doha by World Bank Private Sector Development
Tuesday, July 29, 2008
What about Paper?
Recycling paper uses less energy, in principle, but what about the net environmental impact? Tough call, says Slate. I've also heard some mumbo-jumbo about paper and how most paper comes from tree farms. Thus, even though a "farmed" tree does not live very long, the carbon-absorption that it contributes kind of tips the scale, although it does not mean we should just zip through paper with reckless abandon.
Does it pay to recycle? Reconsidered
Recent figures for New York peg the cost of Recycling a ton (US) of waste at $284, compared with $267 for dumping it. This may not completely account for the costs households incur due to mandated recycling, but let's suppose that if you count all the happy vibes people get from doing "good" against the time they spend rinsing cans, bottles, and glass, it's a wash.
A reader points out that glass recycling saves 315 kg per ton (US) of glass recycled compared with making the same ton of glass from scratch. The UN suggests a carbon tax of about $30 per tonne (metric), so the conversion is simple: The added environmental cost of the new glass is about $9.50 per tonne (metric). A metric tonne is about 1.10231 US tons, so divide $9.50 by that equals about an $8.60 per US ton tax on virgin glass. That means the margin for comparison for dumping vs. recycling is about $7.40. In other words, if it were $7.40 per ton cheaper to recycle or $7.40 more costly to dump, recyclying would not only be the warm fuzzy thing to do, it would be the profitable thing to do.
Interval estimates of the harm done by 1 tonne of CO2 is about $20-$50, so if we take the high end of the interval, we get an environmental cost of $15.75 per tonne, divided by 1.10231 is about $14.30 per US ton, and that makes the margin about $2.70 per ton of glass before unsubsidized recycling would be economically profitable (with a high-end carbon tax).
One problem of course is that households aren't benefitting for the effort they put in. You cannot force people to want to recycle. If they could benefit, say be receiving a rebate on their trash removal for the amounts they recycle that might incentivize the whole thing a little better. What irks me most though is the mandating the effort without more careful consideration of other costs. I bike to work, I take short showers, I try to conserve energy used to heat and cool my home, so I'm not trying to advocate for the senseless raping and pillaging of the earth. But, when people say stuff like "we could recycle almost everything we throw out" my first instinct is to think, "sure we could, but at what cost?"
A reader points out that glass recycling saves 315 kg per ton (US) of glass recycled compared with making the same ton of glass from scratch. The UN suggests a carbon tax of about $30 per tonne (metric), so the conversion is simple: The added environmental cost of the new glass is about $9.50 per tonne (metric). A metric tonne is about 1.10231 US tons, so divide $9.50 by that equals about an $8.60 per US ton tax on virgin glass. That means the margin for comparison for dumping vs. recycling is about $7.40. In other words, if it were $7.40 per ton cheaper to recycle or $7.40 more costly to dump, recyclying would not only be the warm fuzzy thing to do, it would be the profitable thing to do.
Interval estimates of the harm done by 1 tonne of CO2 is about $20-$50, so if we take the high end of the interval, we get an environmental cost of $15.75 per tonne, divided by 1.10231 is about $14.30 per US ton, and that makes the margin about $2.70 per ton of glass before unsubsidized recycling would be economically profitable (with a high-end carbon tax).
One problem of course is that households aren't benefitting for the effort they put in. You cannot force people to want to recycle. If they could benefit, say be receiving a rebate on their trash removal for the amounts they recycle that might incentivize the whole thing a little better. What irks me most though is the mandating the effort without more careful consideration of other costs. I bike to work, I take short showers, I try to conserve energy used to heat and cool my home, so I'm not trying to advocate for the senseless raping and pillaging of the earth. But, when people say stuff like "we could recycle almost everything we throw out" my first instinct is to think, "sure we could, but at what cost?"
Sunday, July 27, 2008
Environmental Dogmatists
This is silly. You don't win the environmental crisis by saying "we gotta recycle everything" or making it a war of convictions. Those of us who don't share Andy Posner's convictions are left to deal with the tradeoffs of the real world and really do live the environmental crisis on the margin.
Oh, and by the way, things like recycling and environmental regulations aren't free lunches. Recycling glass for example, uses more energy than just manufacturing it, and is therefore less of an impact on the atmosphere and resource use. [CORRECTION: RECYCLING GLASS DOES USE MUCH LESS ENERGY AND IS A HELP TO THE ATMOSPHERE. THE TOTAL ECONOMIC COST (INCLUDING LABOR COSTS) IS STILL GREATER THAN PITCHING THE GLASS. I ALSO APOLOGIZE FOR NOT DOING BETTER CHECKING.] And environmental regulations and trying to impose sanctions on poor countries who don't yet see the environment as much of an immediate concern as, say, eating today is paternalistic and unethical. Maybe instead of preaching "the margin" I should make my point in more drastic and judgemental terms (like the lunatic fringe does):
ENVIRONMENTALISTS WANT THE POOR OF AFRICA AND ASIA TO DIE OF STARVATION.
Less (and less) bad is good because it is progress, and before long the inverted environmental "U-curve" will eventually begin to let environmental damage wane.
Oh, and by the way, things like recycling and environmental regulations aren't free lunches. Recycling glass for example, uses more energy than just manufacturing it, and is therefore less of an impact on the atmosphere and resource use. [CORRECTION: RECYCLING GLASS DOES USE MUCH LESS ENERGY AND IS A HELP TO THE ATMOSPHERE. THE TOTAL ECONOMIC COST (INCLUDING LABOR COSTS) IS STILL GREATER THAN PITCHING THE GLASS. I ALSO APOLOGIZE FOR NOT DOING BETTER CHECKING.] And environmental regulations and trying to impose sanctions on poor countries who don't yet see the environment as much of an immediate concern as, say, eating today is paternalistic and unethical. Maybe instead of preaching "the margin" I should make my point in more drastic and judgemental terms (like the lunatic fringe does):
ENVIRONMENTALISTS WANT THE POOR OF AFRICA AND ASIA TO DIE OF STARVATION.
Less (and less) bad is good because it is progress, and before long the inverted environmental "U-curve" will eventually begin to let environmental damage wane.
Can they Crap Petrol, Too?
Environmentalists want to ban plastic bags. Maybe there's a smarter way to solve the problem than a knee jerk response that inconveniences the entire population.
Flutter Power
On July 21, Depken was worried that wind won't work because of the size of turbines and the fact that they are sensitive to the direction of wind flow. Of course, it is well known how efficiently turbines can convert wind into usable energy, and we've nearly hit that known peak. How about this:
Flutter Power
Flutter Power
Thursday, July 24, 2008
Remember - it rolls DOWNhill
Make sure you hook up the pipes correctly when you install this space- and water-saving device:
Blog Notables Roundup
"Best Sentences I've read Today" by Art Carden at Division of Labor.
"Make Office 2007 look like Office 2003" by Heavy Lifting (to actually do it try here)
"Drive 70 and Freeze a Yankee" by Krugman
The ongoing debate over "Immigration and Wages" by Marginal Revolution
...people do not understand the economy very well. And what do stories like Gosselin’s tell us? That most journalists don’t either."The Cost of Aviation Security" by Freakonomics
"Make Office 2007 look like Office 2003" by Heavy Lifting (to actually do it try here)
"Drive 70 and Freeze a Yankee" by Krugman
The ongoing debate over "Immigration and Wages" by Marginal Revolution
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