Yesterday, my old nemesis Lou Dobbs was back on the anti-immigration warpath. His topic: H1-B visas and the support among presidential candidates for more of them at the expense of hard-working middle-class "Americans." I guess he's either hoping that you don't know what H1-B visas are, that you don't know who's most adversely affected by immigrants coming to the US, or that you don't know who the middle class is.
1. What is an H1-B visa? It is a visa for immigrants with a minimum of a bachelors degree, usually with some degree of specialization in some technical field. Do the visas uniformly get allocated to the most qualified or most in-demand? NO! But, I can only imagine how hot Lou would be at the administrative cost of our Citizenship and Immigration Services (formerly INS) if they tried to evaluate each of the hundreds of thousands of applications to try to evaluate which ones were the best-suited to help our economy grow.
2. Who's most adversely affected by immigration? Not the middle class! The only group that has been shown (in empirical studies of the economy by well qualified econometricians) to be adversely affected by immigration (legal or otherwise) is the lower-tail, i.e. those with low education (high school dropouts) and low experience (18-25 years old). I don't dispute that these, less fortunate groups should be looked after, but I do think that there are better ways to do it than by cutting off the flow of immigrants who help our economy be the leader in innovative technologies.
3. Who is the middle-class anyway? Well, the median household in the US earns about $55,000. Last time I checked, the gardener who does upkeep around my townhouse or the carpenter putting up new units accross the way isn't pulling down anything near that. So, are the immigrants we're most worked up about really killing the middle class? I don't think so-- I really don't think that they're competing in the same labor markets as the "middle" class.
Friday, September 7, 2007
Tuesday, September 4, 2007
Presidential Energy Records, Part III
So, first of all, from reading the actual record it's apparent that the big issue is OIL. Also, there is a real dialectic between the parties on this topic: Republicans want to solve the energy issue by expanding production of oil and gas, whereas Democrats favor policies that curtail consomption. So by now you may be wondering, "As an 'expert' economist who do you think is right?" Well, I'm a two handed economist-- On the one hand they're both right, and on the other hand they're both wrong. Both stategies will help extend our ability to fuel our cars and heat and cool our homes in the short to medium run. Yet, both strategies are very costly, and neither strategy promises to be very effective in the long run.
Expanding production is problematic because many of the policies involve huge subsidies to corporations. Also, it is myopic because there oil reserves are relatively fixed, and sustaining current energy consumption may not be environmentally sustainable. Yes, Virginia, there is Global Warming.
Curtailing consumption is equally problematic because these policies also involve high costs, although the costs are somewhat more disguised. Regulations, like CAFE standards will serve to raise the prices of certain big-ticket goods, and may place undue burden on households and firms. Secondly, they may not serve their intended purpose, because markets are notoriously good at subverting rigid regulations governing quantity or price.
What is particularly frustrating looking at these positions is that there is an abysmally thin record on alternative energy- one vote here on biofuels and one on hydrogen cars there, and probably a bunch of blind "yeas" for ethanol to "support hard-workin' American farmers" and that's all. Realistically, since oil is what we actually use, finding ways to manage that resource is something we must do, but what will it take to start a real Political debate over energy alternatives that will be sustainable and compatible with a cleaner environment?
Expanding production is problematic because many of the policies involve huge subsidies to corporations. Also, it is myopic because there oil reserves are relatively fixed, and sustaining current energy consumption may not be environmentally sustainable. Yes, Virginia, there is Global Warming.
Curtailing consumption is equally problematic because these policies also involve high costs, although the costs are somewhat more disguised. Regulations, like CAFE standards will serve to raise the prices of certain big-ticket goods, and may place undue burden on households and firms. Secondly, they may not serve their intended purpose, because markets are notoriously good at subverting rigid regulations governing quantity or price.
What is particularly frustrating looking at these positions is that there is an abysmally thin record on alternative energy- one vote here on biofuels and one on hydrogen cars there, and probably a bunch of blind "yeas" for ethanol to "support hard-workin' American farmers" and that's all. Realistically, since oil is what we actually use, finding ways to manage that resource is something we must do, but what will it take to start a real Political debate over energy alternatives that will be sustainable and compatible with a cleaner environment?
Presidential Energy Records, Part II
Part II of Saturday's post: the republicans on energy and oil from http://www.ontheissues.org/.
Sam Brownback
Voted NO on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted NO on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted NO on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted NO on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted NO on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted YES on drilling ANWR on national security grounds. (Apr 2002)
Voted YES on terminating CAFE standards within 15 months. (Mar 2002)
Voted YES on preserving budget for ANWR oil drilling. (Apr 2000)
Rudy Guiliani
No formal record on energy, but formal statements include:
Accept global warming & work toward energy independence. (Jun 2007)
Signing Kyoto would just move CO2 emissions to China & India. (Mar 2007)
No new energy tax; focus on alternatives instead. (Mar 2007)
Nuclear power is dangerous, but nobody's died from it. (Mar 2007)
Develop energy-independent technology, but not wind power. (Mar 2007)
Open Strategic Petroleum Reserve to battle high oil prices. (Feb 2000)
Oil crisis is “compelling justification” to use Reserves. (Feb 2000)
Mike Huckabee
Kyoto was a mistake, but "Earth in the Balance" is not. (Jan 2007)
Shouldn't limit oil production while increasing consumption. (Jan 2007)
Explore ways to harness nuclear power. (Jan 2007)
Promote alternative fuel technology. (Nov 2002)
Voluntary partnerships reduce greenhouse gases economically. (Aug 2000)
Kyoto Treaty must include reductions by all countries. (Aug 2000)
More funding to develop domestic energy supplies. (Sep 2001)
Use federal funds for nuclear cleanup, with state input. (Sep 2001)
Share offshore oil development revenue with states. (Sep 2001)
Duncan Hunter
Voted NO on removing oil & gas exploration subsidies. (Jan 2007)
Voted NO on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted YES on scheduling permitting for new oil refinieries. (Jun 2006)
Voted YES on authorizing construction of new oil refineries. (Oct 2005)
Voted YES on passage of the Bush Administration national energy policy. (Jun 2004)
Voted YES on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted NO on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted NO on prohibiting oil drilling & development in ANWR. (Aug 2001)
Voted NO on starting implementation of Kyoto Protocol. (Jun 2000)
John McCain
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted NO on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted NO on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted NO on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Voted YES on preserving budget for ANWR oil drilling. (Apr 2000)
Ron Paul
Voted NO on criminalizing oil cartels like OPEC. (May 2007)
Voted NO on removing oil & gas exploration subsidies. (Jan 2007)
Voted NO on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted YES on scheduling permitting for new oil refinieries. (Jun 2006)
Voted NO on passage of the Bush Administration national energy policy. (Jun 2004)
Voted NO on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted NO on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted NO on prohibiting oil drilling & development in ANWR. (Aug 2001)
Voted NO on starting implementation of Kyoto Protocol. (Jun 2000)
Mitt Romney
No-regrets policy: biofuel, nuclear power, drill ANWR. (Jun 2007)
Big Oil should reinvest profits in oil refineries. (Jun 2007)
Develop alternative energy but also drill in ANWR. (Dec 2006)
Tom Tancredo
Voted NO on criminalizing oil cartels like OPEC. (May 2007)
Voted NO on removing oil & gas exploration subsidies. (Jan 2007)
Voted NO on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted YES on scheduling permitting for new oil refinieries. (Jun 2006)
Voted YES on authorizing construction of new oil refineries. (Oct 2005)
Voted YES on passage of the Bush Administration national energy policy. (Jun 2004)
Voted YES on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted NO on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted NO on prohibiting oil drilling & development in ANWR. (Aug 2001)
Voted NO on starting implementation of Kyoto Protocol. (Jun 2000)
Fred Thompson
Voted YES on drilling ANWR on national security grounds. (Apr 2002)
Voted YES on terminating CAFE standards within 15 months. (Mar 2002)
Voted YES on preserving budget for ANWR oil drilling. (Apr 2000)
Sam Brownback
Voted NO on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted NO on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted NO on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted NO on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted NO on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted YES on drilling ANWR on national security grounds. (Apr 2002)
Voted YES on terminating CAFE standards within 15 months. (Mar 2002)
Voted YES on preserving budget for ANWR oil drilling. (Apr 2000)
Rudy Guiliani
No formal record on energy, but formal statements include:
Accept global warming & work toward energy independence. (Jun 2007)
Signing Kyoto would just move CO2 emissions to China & India. (Mar 2007)
No new energy tax; focus on alternatives instead. (Mar 2007)
Nuclear power is dangerous, but nobody's died from it. (Mar 2007)
Develop energy-independent technology, but not wind power. (Mar 2007)
Open Strategic Petroleum Reserve to battle high oil prices. (Feb 2000)
Oil crisis is “compelling justification” to use Reserves. (Feb 2000)
Mike Huckabee
Kyoto was a mistake, but "Earth in the Balance" is not. (Jan 2007)
Shouldn't limit oil production while increasing consumption. (Jan 2007)
Explore ways to harness nuclear power. (Jan 2007)
Promote alternative fuel technology. (Nov 2002)
Voluntary partnerships reduce greenhouse gases economically. (Aug 2000)
Kyoto Treaty must include reductions by all countries. (Aug 2000)
More funding to develop domestic energy supplies. (Sep 2001)
Use federal funds for nuclear cleanup, with state input. (Sep 2001)
Share offshore oil development revenue with states. (Sep 2001)
Duncan Hunter
Voted NO on removing oil & gas exploration subsidies. (Jan 2007)
Voted NO on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted YES on scheduling permitting for new oil refinieries. (Jun 2006)
Voted YES on authorizing construction of new oil refineries. (Oct 2005)
Voted YES on passage of the Bush Administration national energy policy. (Jun 2004)
Voted YES on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted NO on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted NO on prohibiting oil drilling & development in ANWR. (Aug 2001)
Voted NO on starting implementation of Kyoto Protocol. (Jun 2000)
John McCain
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted NO on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted NO on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted NO on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Voted YES on preserving budget for ANWR oil drilling. (Apr 2000)
Ron Paul
Voted NO on criminalizing oil cartels like OPEC. (May 2007)
Voted NO on removing oil & gas exploration subsidies. (Jan 2007)
Voted NO on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted YES on scheduling permitting for new oil refinieries. (Jun 2006)
Voted NO on passage of the Bush Administration national energy policy. (Jun 2004)
Voted NO on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted NO on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted NO on prohibiting oil drilling & development in ANWR. (Aug 2001)
Voted NO on starting implementation of Kyoto Protocol. (Jun 2000)
Mitt Romney
No-regrets policy: biofuel, nuclear power, drill ANWR. (Jun 2007)
Big Oil should reinvest profits in oil refineries. (Jun 2007)
Develop alternative energy but also drill in ANWR. (Dec 2006)
Tom Tancredo
Voted NO on criminalizing oil cartels like OPEC. (May 2007)
Voted NO on removing oil & gas exploration subsidies. (Jan 2007)
Voted NO on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted YES on scheduling permitting for new oil refinieries. (Jun 2006)
Voted YES on authorizing construction of new oil refineries. (Oct 2005)
Voted YES on passage of the Bush Administration national energy policy. (Jun 2004)
Voted YES on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted NO on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted NO on prohibiting oil drilling & development in ANWR. (Aug 2001)
Voted NO on starting implementation of Kyoto Protocol. (Jun 2000)
Fred Thompson
Voted YES on drilling ANWR on national security grounds. (Apr 2002)
Voted YES on terminating CAFE standards within 15 months. (Mar 2002)
Voted YES on preserving budget for ANWR oil drilling. (Apr 2000)
Presidential Energy Records, Part III
So, first of all, from reading the actual record it's apparent that the big issue is OIL. Also, there is a real dialectic between the parties on this topic: Republicans want to solve the energy issue by expanding production of oil and gas, whereas Democrats favor policies that curtail consomption. So by now you may be wondering, "As an 'expert' economist who do you think is right?" Well, I'm a two handed economist-- On the one hand they're both right, and on the other hand they're both wrong. Both stategies will help extend our ability to fuel our cars and heat and cool our homes in the short to medium run. Yet, both strategies are very costly, and neither strategy promises to be very effective in the long run.
Expanding production is problematic because many of the policies involve huge subsidies to corporations. Also, it is myopic because there oil reserves are relatively fixed, and sustaining current energy consumption may not be environmentally sustainable. Yes, Virginia, there is Global Warming.
Curtailing consumption is equally problematic because these policies also involve high costs, although the costs are somewhat more disguised. Regulations, like CAFE standards will serve to raise the prices of certain big-ticket goods, and may place undue burden on households and firms. Secondly, they may not serve their intended purpose, because markets are notoriously good at subverting rigid regulations governing quantity or price.
What is particularly frustrating looking at these positions is that there is an abysmally thin record on alternative energy- one vote here on biofuels and one on hydrogen cars there, and probably a bunch of blind "yeas" for ethanol to "support hard-workin' American farmers" and that's all. Realistically, since oil is what we actually use, finding ways to manage that resource is something we must do, but what will it take to start a real Political debate over energy alternatives that will be sustainable and compatible with a cleaner environment?
Expanding production is problematic because many of the policies involve huge subsidies to corporations. Also, it is myopic because there oil reserves are relatively fixed, and sustaining current energy consumption may not be environmentally sustainable. Yes, Virginia, there is Global Warming.
Curtailing consumption is equally problematic because these policies also involve high costs, although the costs are somewhat more disguised. Regulations, like CAFE standards will serve to raise the prices of certain big-ticket goods, and may place undue burden on households and firms. Secondly, they may not serve their intended purpose, because markets are notoriously good at subverting rigid regulations governing quantity or price.
What is particularly frustrating looking at these positions is that there is an abysmally thin record on alternative energy- one vote here on biofuels and one on hydrogen cars there, and probably a bunch of blind "yeas" for ethanol to "support hard-workin' American farmers" and that's all. Realistically, since oil is what we actually use, finding ways to manage that resource is something we must do, but what will it take to start a real Political debate over energy alternatives that will be sustainable and compatible with a cleaner environment?
Saturday, September 1, 2007
Presidential Energy Records, Part I
I'm feeling a little lazy, so I'll just publish some records of presidential candidates on energy and oil (from: www.ontheissues.org). Part I: The Democratic Primary Candidates for President. For the most part the policies reflect a strong concern over the environment (especially for global warming), which may be the larger issue anyway. (As I've mentioned before, energy itself will be available to fuel our cars for the foreseeable future using what's in the sands of Northern Alberta once the embarrassingly cheap reserves in the Middle East dry up.) Like we would expect from the Left, they are generally opposed to corporate subsidies.
Joe Biden:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Hillary Clinton:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on making oil-producing and exporting cartels illegal. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted NO on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Chris Dodd:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
John Edwards:
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Mike Gravel:
No recent record on energy. Strongly opposed to nuclear power because of waste issues. No strong record on energy alternatives per se. Focuses on Global Warming and waste issues.
Dennis Kucinich:
Voted YES on criminalizing oil cartels like OPEC. (May 2007)
Voted YES on removing oil & gas exploration subsidies. (Jan 2007)
Voted YES on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted NO on scheduling permitting for new oil refinieries. (Jun 2006)
Voted NO on authorizing construction of new oil refineries. (Oct 2005)
Voted NO on passage of the Bush Administration national energy policy. (Jun 2004)
Voted NO on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted YES on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted YES on prohibiting oil drilling & development in ANWR. (Aug 2001)
Barack Obama:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on making oil-producing and exporting cartels illegal. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Joe Biden:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Hillary Clinton:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on making oil-producing and exporting cartels illegal. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted NO on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Chris Dodd:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
John Edwards:
Voted YES on Bush Administration Energy Policy. (Jul 2003)
Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)
Voted NO on drilling ANWR on national security grounds. (Apr 2002)
Voted NO on terminating CAFE standards within 15 months. (Mar 2002)
Mike Gravel:
No recent record on energy. Strongly opposed to nuclear power because of waste issues. No strong record on energy alternatives per se. Focuses on Global Warming and waste issues.
Dennis Kucinich:
Voted YES on criminalizing oil cartels like OPEC. (May 2007)
Voted YES on removing oil & gas exploration subsidies. (Jan 2007)
Voted YES on keeping moratorium on drilling for oil offshore. (Jun 2006)
Voted NO on scheduling permitting for new oil refinieries. (Jun 2006)
Voted NO on authorizing construction of new oil refineries. (Oct 2005)
Voted NO on passage of the Bush Administration national energy policy. (Jun 2004)
Voted NO on implementing Bush-Cheney national energy policy. (Nov 2003)
Voted YES on raising CAFE standards; incentives for alternative fuels. (Aug 2001)
Voted YES on prohibiting oil drilling & development in ANWR. (Aug 2001)
Barack Obama:
Voted YES on removing oil & gas exploration subsidies. (Jun 2007)
Voted YES on making oil-producing and exporting cartels illegal. (Jun 2007)
Voted YES on factoring global warming into federal project planning. (May 2007)
Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)
Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)
Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)
Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)
Thursday, August 30, 2007
Sub-Prime Lending
Quick comment on subprime lending. Today, the NYTimes ran a report describing the ruling in bankruptcy court that denied Bear Stearns (based in the Caymans) bankruptcy.
I've heard about every story on who's to blame-- some people say it's all Bear Stearns, others say it's the people who took out the loans in the first place, others still say it was the people who agreed to take the mortgages as collateral in securities transactions, borrowers began defaulting as interest rates rose, the securities bombed and the collateral was worthless. Which leads back to Bear Stearns. Then, somebody I know tried to goat the government for it because they tried to create more opportunities for lower-income families to take out loans. When in doubt blame Uncle Sam.
This whole mess is more or less on Bear Stearns. I have to hold them responsible for making risky loans to folks without the means to keep making payments once rates rise and monthly payments double. They knew what they were doing, if anyone did. The borrowers screwed up, but they weren't motivated by greed. And now the judge is making them pay their own debts. Good.
I've heard about every story on who's to blame-- some people say it's all Bear Stearns, others say it's the people who took out the loans in the first place, others still say it was the people who agreed to take the mortgages as collateral in securities transactions, borrowers began defaulting as interest rates rose, the securities bombed and the collateral was worthless. Which leads back to Bear Stearns. Then, somebody I know tried to goat the government for it because they tried to create more opportunities for lower-income families to take out loans. When in doubt blame Uncle Sam.
This whole mess is more or less on Bear Stearns. I have to hold them responsible for making risky loans to folks without the means to keep making payments once rates rise and monthly payments double. They knew what they were doing, if anyone did. The borrowers screwed up, but they weren't motivated by greed. And now the judge is making them pay their own debts. Good.
Tuesday, August 28, 2007
The Dirty Secret Behind "The Dirty Secret Behind America's Energy Future"
Jeff Godell's book, "Big Coal: The Dirty Secret Behind America's Energy Future," has gotten a resurgence of media attention in recent days because of the events that have transpired in the Utah mine tragedy and the more recent tragedy of a similar nature in China. One of the things Godell blasts the coal industry for is safety (hence the newfound media attention). Now, if you've read my other posts on energy, you'll know that I'm no blind defender of Big Coal. I am, however, a big fan of making sure that if I'm going to pour my outrage, and that I target it where it will do the most good.
Around the time of a BIG EVENT with LOTS OF MEDIA, nearly every politician has to make sure they are on the public record "saying the right thing," and showing the appropriate amounts of outrage over the incident, resolve to do more from now on, and contrition that nothing was done sooner that would have saved the lives of the noble citizens who met their ultimate demise. But do we mete out our attention, sympathy, outrage and action equally? Well, OF COURSE NOT. It's a "law of small numbers" thing (the principle comes from the properties of the Poisson Distribution of statistics and referenced in Thomas Pynchon's fictional novel, "Gravity's Rainbow"). Basically, the way I'm going to apply it is to say that because certain events are so unexpected generally, that when they do occur they tend to grab our attention and affect behavior disproportionately to their risk of occuring again. My point is, there are hundreds of on-the-job fatalities every year (over 1400 in manufacturing) and almost none of them make Headline News. Why? They're just too damn common to be newsworthy! Hence, there is almost no public outcry for the government to take action. It's kind of like flying versus driving-- people are terrified of planes even though it's widely known that driving is statistically much more risky. (Again, there are so many damn car wrecks there's no way the news is going to start sending crews to them...) Does the fact that a certain type of fatality is more "common" or "mundane" make it less tragic?
Back to mining... Have I mentioned that economists like to back stuff up with data? So, the Coal mining industry actually has a much LOWER incidence of on-the-job fatality than the general manufacturing sector (according to the Bureau of Labor Statistics, manufacturing had about 3 fatal incidents per 1,000 workers in 2006 whereas coal had about 0.8 per 1000 workers). So, even if, as Mr. Godell asserts, coal accidents increase drastically over the next several years, it is unclear that our regulatory efforts are best-placed in that sector. It is conceivable that many more lives would be saved by fortifying safety regulations in a more general way rather than targeting coal. Not only that, it seems to me that the dangers of mining coal underground are not unforseen, so miners who choose that line of work are making an informed choice-- and are compensated for the perceived risk. In fact, despite a lower incidence of fatalities, COAL miners out-earn their colleagues in the manufacturing sector by about $7 per hour.
So, with all of this in mind, where should we spend our regulatory dollars? In coal, where there were just 78 fatalities in 2006, and incidents were relatively rare, or in the manufacturing sector or in a more general way altogether, where there are far more fatalities (and lives that could potentially be saved), but far less media attention? Should the media's crocodile tears and misinformation dictate where our tax dollars are spent? Maybe I'm a jerk, but as my students know, I want to make sure that I get the most "Bang" for my buck.
Around the time of a BIG EVENT with LOTS OF MEDIA, nearly every politician has to make sure they are on the public record "saying the right thing," and showing the appropriate amounts of outrage over the incident, resolve to do more from now on, and contrition that nothing was done sooner that would have saved the lives of the noble citizens who met their ultimate demise. But do we mete out our attention, sympathy, outrage and action equally? Well, OF COURSE NOT. It's a "law of small numbers" thing (the principle comes from the properties of the Poisson Distribution of statistics and referenced in Thomas Pynchon's fictional novel, "Gravity's Rainbow"). Basically, the way I'm going to apply it is to say that because certain events are so unexpected generally, that when they do occur they tend to grab our attention and affect behavior disproportionately to their risk of occuring again. My point is, there are hundreds of on-the-job fatalities every year (over 1400 in manufacturing) and almost none of them make Headline News. Why? They're just too damn common to be newsworthy! Hence, there is almost no public outcry for the government to take action. It's kind of like flying versus driving-- people are terrified of planes even though it's widely known that driving is statistically much more risky. (Again, there are so many damn car wrecks there's no way the news is going to start sending crews to them...) Does the fact that a certain type of fatality is more "common" or "mundane" make it less tragic?
Back to mining... Have I mentioned that economists like to back stuff up with data? So, the Coal mining industry actually has a much LOWER incidence of on-the-job fatality than the general manufacturing sector (according to the Bureau of Labor Statistics, manufacturing had about 3 fatal incidents per 1,000 workers in 2006 whereas coal had about 0.8 per 1000 workers). So, even if, as Mr. Godell asserts, coal accidents increase drastically over the next several years, it is unclear that our regulatory efforts are best-placed in that sector. It is conceivable that many more lives would be saved by fortifying safety regulations in a more general way rather than targeting coal. Not only that, it seems to me that the dangers of mining coal underground are not unforseen, so miners who choose that line of work are making an informed choice-- and are compensated for the perceived risk. In fact, despite a lower incidence of fatalities, COAL miners out-earn their colleagues in the manufacturing sector by about $7 per hour.
So, with all of this in mind, where should we spend our regulatory dollars? In coal, where there were just 78 fatalities in 2006, and incidents were relatively rare, or in the manufacturing sector or in a more general way altogether, where there are far more fatalities (and lives that could potentially be saved), but far less media attention? Should the media's crocodile tears and misinformation dictate where our tax dollars are spent? Maybe I'm a jerk, but as my students know, I want to make sure that I get the most "Bang" for my buck.
Monday, August 27, 2007
All New Meaning to "Cost of Living"
Several days ago, I was on a rant about Lou Dobbs calling economists "idiots" and "jackasses." But, while we tend to know what we are talking about a good deal of the time (usually with data and ituition to back up our stories), we are also really big jerks. Case in point: most "normal" people would hear the phrase, "you can't put a price on a human life" and agree without a second thought. Eonomists hear this, and ask, "can you back that claim up with data?" In fact, human life does have a price put on it, and economists aren't to blame.
Economists have actually done calculations to try to infer the cost of dying using data that are readily available. Frank Ackerman has "priced" a number of things, including death, in his pamphlet, "Pricing the Priceless." So how much is a human life worth? On average, between 1 and 6 million, depending on certain characteristics. But here's the catch: Computations aren't entirely made on the basis of earnings, life expectance at birth, etc.-- They're made by observing and evaluating our own behavior. If you feel this cheapens your worth as a person, you have yourself to blame. Here's one approach that's been used. Take construction workers, and survey their hourly earnings. Now survey the compensating differential between working on the first floor and working on the thirtieth floor. Next, calculate the increase in the risk of dying on the job, and there you have it. The price these construction workers have voluntarily put on their own lives using this back-of-the-napkin approach is about 2 million dollars.
So, the next time you run a red light,. think about the 30 seconds it saves you, the risk of dying you assume by doing it, and the fact that somewhere an economists might be watching.
Tomorrow, I will focus on the information distortion we get from the media-- are we evaluating the risk of death or disaster appropriately when we weigh whether or not to fly vs. drive, or in measuring our level of outrage for government action for things like mining regulations, bird flu precautions, etc.
Economists have actually done calculations to try to infer the cost of dying using data that are readily available. Frank Ackerman has "priced" a number of things, including death, in his pamphlet, "Pricing the Priceless." So how much is a human life worth? On average, between 1 and 6 million, depending on certain characteristics. But here's the catch: Computations aren't entirely made on the basis of earnings, life expectance at birth, etc.-- They're made by observing and evaluating our own behavior. If you feel this cheapens your worth as a person, you have yourself to blame. Here's one approach that's been used. Take construction workers, and survey their hourly earnings. Now survey the compensating differential between working on the first floor and working on the thirtieth floor. Next, calculate the increase in the risk of dying on the job, and there you have it. The price these construction workers have voluntarily put on their own lives using this back-of-the-napkin approach is about 2 million dollars.
So, the next time you run a red light,. think about the 30 seconds it saves you, the risk of dying you assume by doing it, and the fact that somewhere an economists might be watching.
Tomorrow, I will focus on the information distortion we get from the media-- are we evaluating the risk of death or disaster appropriately when we weigh whether or not to fly vs. drive, or in measuring our level of outrage for government action for things like mining regulations, bird flu precautions, etc.
Wednesday, August 22, 2007
An Immigration Story (Part III)
Today's post arrives late, and tomorrow will probably pass without new information, but SAY-LAH-VEE as the French say. 8-hour department meetings to prepare to greet the new academic semester do not leave much time for me to go on my usual rail about economics on my blog.
In my last two episodes we learned something of how my family came to the United States as immigrants from Denmark. Two days ago we learned about an old spinning wheel that my great great grandfather used as a gerry-rigged bellows, and had become worn out from hard work (much like the immigrants themselves who come here). Yesterday we learned that my ancestors came to this country somewhat casually, and not necessarily in a fully formalized way by first entering Canada, then following what work was available along the St. Lawrence River and then Sault Ste. Marie, MI, eventually landing in Plano, IL. Not only that, but they didn't all speak English from day one! The nerve! Today we will hear the story of how they built their life and eventually became landowners in Nebraska, the eventual home to most of my extended family today.
Stories of homesteads and cheap land in Nebraska were the motivation necessary to bring them to this state in February, 1880. Grandpa and his family and John Andersen and his family plus three other Danes loaded everything they had on two railroad cars and then got aboard these cars themselves and travelled to the end of the line which at that time was Lowell, Nebraska.
Uncle J*** said that Grandpa used to recall that when he looked south from Lowell and saw nothing but sandhills he said that if they did not find anything better than that they would go back to Illinois. However, they travelled to a place seven miles south of where Minden [Nebraska, ed.] is now located and there made their home.
Although homesteads were still available, Grandpa decided to buy an “improved quarter” rather than hunt for a good homestead location. He paid $400 for this farm. However, the improvements included only a one-room, dirt floor dugout on the west side of a draw and dug well on the east side.
Because Minden had not been founded it was necessary to go to Gibbon [NE, ed.] or Kearney [NE, ed.] to sell produce and to buy needed provisions. This was a hard two-day trip with a team of horses, in that it was 29 miles to Gibbon and 27 miles to Kearney. When Grandpa made these trips it left Grandma alone with a young family. However, Uncle J*** said that Grandma did not worry about anything except the possibility of an animal or a herd of animals falling through the roof of the dugout which was ground level on one side. There were some wild cattle, wild horses, and some buffalo in the area at the time.
Crops were good in those early years, but one of the first winters caught Grandpa and Grandma without a fuel supply. Fuel was very hard to find in that there was little wood available, because every year for hundreds of years prairie fires had burned all trees except those in sheltered spots at a crook of a stream. When the early snow came it became necessary for Grandpa to take a shovel and a length of rope and go to the corn field to find fuel. He would uncover corn stalks, cut them off, lay them over the rope, and when he had gathered a large bundle he would tie them up and carry them home.
The good crops enabled them to make good progress. After two years in the dugout they built a sod house. By 1892 they had a frame house, they had outbuildings and a good orchard and garden. In 1904 a fine addition to the house was completed. Uncle J*** said that Grandpa was proud that his former employer from Illinois, J*** L****, and his wife came to visit them one year and spent a while month in their home.
To return once more to the spinning wheel. Uncle Jim said that spinning wheel was one of their best toys when he was a kid. He said they would run it by the hour, and that along with the fun it provided it was often the cause of a fight when a brother or sister would cause the belt to come off.
In my last two episodes we learned something of how my family came to the United States as immigrants from Denmark. Two days ago we learned about an old spinning wheel that my great great grandfather used as a gerry-rigged bellows, and had become worn out from hard work (much like the immigrants themselves who come here). Yesterday we learned that my ancestors came to this country somewhat casually, and not necessarily in a fully formalized way by first entering Canada, then following what work was available along the St. Lawrence River and then Sault Ste. Marie, MI, eventually landing in Plano, IL. Not only that, but they didn't all speak English from day one! The nerve! Today we will hear the story of how they built their life and eventually became landowners in Nebraska, the eventual home to most of my extended family today.
Stories of homesteads and cheap land in Nebraska were the motivation necessary to bring them to this state in February, 1880. Grandpa and his family and John Andersen and his family plus three other Danes loaded everything they had on two railroad cars and then got aboard these cars themselves and travelled to the end of the line which at that time was Lowell, Nebraska.
Uncle J*** said that Grandpa used to recall that when he looked south from Lowell and saw nothing but sandhills he said that if they did not find anything better than that they would go back to Illinois. However, they travelled to a place seven miles south of where Minden [Nebraska, ed.] is now located and there made their home.
Although homesteads were still available, Grandpa decided to buy an “improved quarter” rather than hunt for a good homestead location. He paid $400 for this farm. However, the improvements included only a one-room, dirt floor dugout on the west side of a draw and dug well on the east side.
Because Minden had not been founded it was necessary to go to Gibbon [NE, ed.] or Kearney [NE, ed.] to sell produce and to buy needed provisions. This was a hard two-day trip with a team of horses, in that it was 29 miles to Gibbon and 27 miles to Kearney. When Grandpa made these trips it left Grandma alone with a young family. However, Uncle J*** said that Grandma did not worry about anything except the possibility of an animal or a herd of animals falling through the roof of the dugout which was ground level on one side. There were some wild cattle, wild horses, and some buffalo in the area at the time.
Crops were good in those early years, but one of the first winters caught Grandpa and Grandma without a fuel supply. Fuel was very hard to find in that there was little wood available, because every year for hundreds of years prairie fires had burned all trees except those in sheltered spots at a crook of a stream. When the early snow came it became necessary for Grandpa to take a shovel and a length of rope and go to the corn field to find fuel. He would uncover corn stalks, cut them off, lay them over the rope, and when he had gathered a large bundle he would tie them up and carry them home.
The good crops enabled them to make good progress. After two years in the dugout they built a sod house. By 1892 they had a frame house, they had outbuildings and a good orchard and garden. In 1904 a fine addition to the house was completed. Uncle J*** said that Grandpa was proud that his former employer from Illinois, J*** L****, and his wife came to visit them one year and spent a while month in their home.
To return once more to the spinning wheel. Uncle Jim said that spinning wheel was one of their best toys when he was a kid. He said they would run it by the hour, and that along with the fun it provided it was often the cause of a fight when a brother or sister would cause the belt to come off.
Tuesday, August 21, 2007
An Immigration Story (Part II)
Today is Part II of a three-part series on the immigration experience of my own family from Denmark in the late 1860's to early 1870's, as written by my grandfather. In yesterday's excerpt, we learned of a spinning wheel that had been passed from my great-great grandfather to my great-great uncle, which was now worn out and broken. In a sense it represented both the struggles they went through to achieve something more, and the power of the American entrepreneurial spirit. Today, we get the story of how my family was able to arrive here.
To get back to the original story that thoughts of this old spinning wheel brought back to Uncle J***, I will start with Grandpa’s arrival in the United States. He was M**** B***, born in Denmark on October 5, 1849, and he landed in Canada in 1869. After arriving in the “New World” he got a job on a boat that worked the St. Lawrence River. From that boat he transferred to a boat that sailed the Great Lakes. His primary objective at this time was to travel until he found a place where he wanted to settle or where he could find a good job. When he got to Sault Ste. Marie, Michigan, he found a job at the “unheard of wage”, as Uncle J*** said, of four dollars a day. This job was in an open pit copper mine.
These good wages allowed him to save money rather rapidly and it was not long until he was able to send money to Denmark to bring his brother **** to the United States. **** also worked in the copper mine until the two of them heard of good jobs being offered at the Plano Binder Company in Plano, Illinois. (The Plano Binder was a hand tie forerunner of the McCormick Reaper.) The two of them went to Plano, but by the time they arrived all of the jobs had been filled, so Grandpa went to work for a farmer by the name of J**** L*****.
The story now goes back to Denmark and to my Grandma’s side of the family. Her brother J*** A**** had come to Plano to get his start and had saved enough money to bring his sister, my grandma, and his fiancee Tante M*** to the United States. The two of them were packed and arrived at the pier to board ship to come to the United States. However, at the last minute Tante Marianna lost her nerve and did not go, but Grandma made the trip by herself. She was sixteen years of age at that time. Tante M*** did come at a later date and did marry Uncle J*** A****.
Uncle J**** said that Grandma used to tell of the first sighting of the Statue of Liberty when all of the passengers went on deck and gave a great cheer for what was to become their adopted country.
Grandma was in a new strange country and could not speak the language. After the ordeal of going through customs she was trying to think of a way to order a meal in a restaurant when the waiter told her to talk Dane because he too was Dane. He not only helped her order a meal but he wrote notes for her to use in ordering future meals and making railroad transfers and the like. One side of the note was written in Dane, the other in English.
Grandma got to Plano and expected to meet her brother, but although he had waited for her for several days he had decided that he had to go back to work. Communications did not allow them to contact each other. However, they did get together and Grandma got a job working for a family by the name of A**** D****. My dad got his name from this employer, and I in turn have that name.
Grandpa and Grandma met in Plano and were married there on February 19, 1878. They rented a farm from J*** L**** and farmed in the Plano area for the next two years. Their oldest child **** was born May 21, 1879. (**** was my Uncle J***’s father.)
So, the history of how my great-great grandfather got here is somewhat vague. What is somewhat interesting here, is that he seems to have first come to Canada, then worked along the St. Lawrence river, and probably first arrived through Sault Ste. Marie, MI. Although there were no formal restrictions or quotas on immigration until 1924, the government was trying to document new immigrants, which is ultimately why Ellis Island was founded in 1892. So even though no law prohibited my ancestors' entry to the US, one could surely doubt whether their entry was documented or controlled in the ways immigration is now regulated. I imagine there are several thousand stories like this one in nearly every US citizen's background, and the hypocricy and prejudice that dominates the debate over immigration needs to be set aside in favor of reasonable arguments about National welfare (rather than the special interest welfare of certain interest groups).
To get back to the original story that thoughts of this old spinning wheel brought back to Uncle J***, I will start with Grandpa’s arrival in the United States. He was M**** B***, born in Denmark on October 5, 1849, and he landed in Canada in 1869. After arriving in the “New World” he got a job on a boat that worked the St. Lawrence River. From that boat he transferred to a boat that sailed the Great Lakes. His primary objective at this time was to travel until he found a place where he wanted to settle or where he could find a good job. When he got to Sault Ste. Marie, Michigan, he found a job at the “unheard of wage”, as Uncle J*** said, of four dollars a day. This job was in an open pit copper mine.
These good wages allowed him to save money rather rapidly and it was not long until he was able to send money to Denmark to bring his brother **** to the United States. **** also worked in the copper mine until the two of them heard of good jobs being offered at the Plano Binder Company in Plano, Illinois. (The Plano Binder was a hand tie forerunner of the McCormick Reaper.) The two of them went to Plano, but by the time they arrived all of the jobs had been filled, so Grandpa went to work for a farmer by the name of J**** L*****.
The story now goes back to Denmark and to my Grandma’s side of the family. Her brother J*** A**** had come to Plano to get his start and had saved enough money to bring his sister, my grandma, and his fiancee Tante M*** to the United States. The two of them were packed and arrived at the pier to board ship to come to the United States. However, at the last minute Tante Marianna lost her nerve and did not go, but Grandma made the trip by herself. She was sixteen years of age at that time. Tante M*** did come at a later date and did marry Uncle J*** A****.
Uncle J**** said that Grandma used to tell of the first sighting of the Statue of Liberty when all of the passengers went on deck and gave a great cheer for what was to become their adopted country.
Grandma was in a new strange country and could not speak the language. After the ordeal of going through customs she was trying to think of a way to order a meal in a restaurant when the waiter told her to talk Dane because he too was Dane. He not only helped her order a meal but he wrote notes for her to use in ordering future meals and making railroad transfers and the like. One side of the note was written in Dane, the other in English.
Grandma got to Plano and expected to meet her brother, but although he had waited for her for several days he had decided that he had to go back to work. Communications did not allow them to contact each other. However, they did get together and Grandma got a job working for a family by the name of A**** D****. My dad got his name from this employer, and I in turn have that name.
Grandpa and Grandma met in Plano and were married there on February 19, 1878. They rented a farm from J*** L**** and farmed in the Plano area for the next two years. Their oldest child **** was born May 21, 1879. (**** was my Uncle J***’s father.)
So, the history of how my great-great grandfather got here is somewhat vague. What is somewhat interesting here, is that he seems to have first come to Canada, then worked along the St. Lawrence river, and probably first arrived through Sault Ste. Marie, MI. Although there were no formal restrictions or quotas on immigration until 1924, the government was trying to document new immigrants, which is ultimately why Ellis Island was founded in 1892. So even though no law prohibited my ancestors' entry to the US, one could surely doubt whether their entry was documented or controlled in the ways immigration is now regulated. I imagine there are several thousand stories like this one in nearly every US citizen's background, and the hypocricy and prejudice that dominates the debate over immigration needs to be set aside in favor of reasonable arguments about National welfare (rather than the special interest welfare of certain interest groups).
Monday, August 20, 2007
An Immigration Story (Part I)
Dear All,
I often write posts on this site relating events in the news to abstract economic theories and technical empirical studies. This mountain of theory and evidence so often gets dismissed by skeptics of economic science as irrelevant to their own lives and families. Too often we struggle to see the human face of the opportunities free markets afford us. Jagdish Bhagwati also speaks of this need for a more human face for topics such as immigration, trade, and globalization.
The story begins in Nebraska in 1974 with an interview by my grandfather with his uncle, my great-great uncle.
Too often we neglect to keep account of family history until the source of such information is no longer available. For that reason I shall always be pleased that on Friday, February 15, 1974, I was fortunate enough to be able to have a visit about such things with my Uncle **** **** of Minden, Nebraska.
At that time Uncle **** was 88 years of age and had just returned home from the hospital. He had been hospitalized because of an ulcer and possible heart problems. However, on this date he was in good spirits and very able and willing to visit. He was best able to visit with one person at a time because his hearing was poor. He and I sat at the kitchen table while others present were in the living room.
This story of family history started when I asked Uncle **** if he remembered his mother’s spinning wheel. He said he sure did and wondered what had become of it. I told him that I had it and had started to restore it, that it was in pieces in a box, and that the wheel would need some repair parts which I planned to make. He told me to keep it as nearly like the original as possible and added that he would like to see it again. I assured him that I would bring it to Minden for him to see after I had completed the restoration job. He told me that the Danish name for a spinning wheel is “ruck.”
(This is not a part of our visit, but I believe should be of interest to those who might read this account. My dad, ******* ******, told me that when Uncle **** was a young man he used the wheel and pedal to drive the bellows on a forge that he built. The wheel could not stand the strain and broke up. Dad said he gathered up all of the parts and put them in a box which he placed on a shelf in the shop. Here they stayed until his parents **** and **** **** moved to town in 1917. At that time Dad asked his mother for the spinning wheel and she was pleased to give it to him. Dad always planned to restore it, but did not get it done.)
I will continue with the transcript tomorrow, and I will post it in 3 parts. It speaks to the history of my own family, but also to the history of this country as a Nation of Immigrants, in the words of President John F. Kennedy.
I often write posts on this site relating events in the news to abstract economic theories and technical empirical studies. This mountain of theory and evidence so often gets dismissed by skeptics of economic science as irrelevant to their own lives and families. Too often we struggle to see the human face of the opportunities free markets afford us. Jagdish Bhagwati also speaks of this need for a more human face for topics such as immigration, trade, and globalization.
The story begins in Nebraska in 1974 with an interview by my grandfather with his uncle, my great-great uncle.
Too often we neglect to keep account of family history until the source of such information is no longer available. For that reason I shall always be pleased that on Friday, February 15, 1974, I was fortunate enough to be able to have a visit about such things with my Uncle **** **** of Minden, Nebraska.
At that time Uncle **** was 88 years of age and had just returned home from the hospital. He had been hospitalized because of an ulcer and possible heart problems. However, on this date he was in good spirits and very able and willing to visit. He was best able to visit with one person at a time because his hearing was poor. He and I sat at the kitchen table while others present were in the living room.
This story of family history started when I asked Uncle **** if he remembered his mother’s spinning wheel. He said he sure did and wondered what had become of it. I told him that I had it and had started to restore it, that it was in pieces in a box, and that the wheel would need some repair parts which I planned to make. He told me to keep it as nearly like the original as possible and added that he would like to see it again. I assured him that I would bring it to Minden for him to see after I had completed the restoration job. He told me that the Danish name for a spinning wheel is “ruck.”
(This is not a part of our visit, but I believe should be of interest to those who might read this account. My dad, ******* ******, told me that when Uncle **** was a young man he used the wheel and pedal to drive the bellows on a forge that he built. The wheel could not stand the strain and broke up. Dad said he gathered up all of the parts and put them in a box which he placed on a shelf in the shop. Here they stayed until his parents **** and **** **** moved to town in 1917. At that time Dad asked his mother for the spinning wheel and she was pleased to give it to him. Dad always planned to restore it, but did not get it done.)
I will continue with the transcript tomorrow, and I will post it in 3 parts. It speaks to the history of my own family, but also to the history of this country as a Nation of Immigrants, in the words of President John F. Kennedy.
Friday, August 17, 2007
This Jackass's Thoughts
Economists typically get bombarded with criticism for being arrogant, dispassionate, unrealistic, wishy-washy, abstract, misguided, and a whole list of other things, some of which I cannot list here. But usually economists have a strong reputation for being pretty smart guys and gals. Now, journalist Lou Dobbs has called economists "idiots" and "jackasses." How does one argue with someone so steadfast in his convictions that he categorically dismisses an entire field of science? Let me try.
First, let me apologize for the stooge who likened labor migration to trading apples. Clearly human beings are not to be treated as objects, but this was not the point of the comparison. The point was that when Factors of Production (machinery, workers, or other "stuff" that's used to produce the "stuff" households consume) move, society gains in a way that is similar to the way society gains when we are able to trade goods freely (both within our own borders and with other countries). The comparison was in the nature of the gain to society, not the ways in which they should be treated in a political, social, or moral sense. Economists are rational to a fault, and often ineloquent.
Mr. Dobbs asks, "Are there any empiricists among these idiotic economists?" Yo. Right here. In fact, the vast majority of the policy recommendations are based on careful empirical research that gets scrutinized by the sharpest minds in economic theory and statistical methodology before they see print. Trade (and movement of labor and capital) has two impacts: Aggregate gains and distributional consequences. When there is a change that lifts the restrictions placed on Rational Individuals, markets tend to function better and on average countries experience net gains. The net gains from trade are generally pretty big. But, some argue, trade is bad for labor and can lead to a loss in jobs. Still, if we count up every job that would be lost in the sectors dessimated by import competition, the average cost of US trade restrictions was estimated to be around $50,000 per job saved in 2000. The gains from immigration inflows has been estimated to be quite a bit smaller at around 0.25% of GDP per capita, but they are gains nonetheless. That means the median household (middle class American) is better off by $125 per year because of immigrants already here. War on the middle class? Hardly.
However, some individuals and groups will lose in the short run, and their transition to greener pastures in the long run may be a rocky path. Economists are not ignorant of that. Take for example Jim Richardson at Syracuse. He actively advocates for stronger Trade Adjustment Assistance programs that would include wage repacement stipends in addition to education credits.
Speaking to immigration specifically, Dobbs argues that since we have the strongest and best-funcioning economy, suddenly every person from a poor country will flood through our borders. Now who's being arrogant?!? First of all, immigration is difficult and costly (financially and socially), and there are a lot of people living in poor countries who simply cannot afford to come here, even if they wanted to do so. Second of all, not everyone wants to live here! Not only that, but almost one million illegal immigrants leave every year voluntarily! So let's not make up a number like, "4.8 billion people" that would suddenly flood our border once the gates open.
Finally, immigrants who come here looking to work and toil for a better life make our country richer and greater. To enact legislation that is largely designed to protect certain US labor interests at the expense of immigrants who are even poorer than the working poor here (not to mention to the detriment of the majority of native-born US citizens) is nationalist bigotry. It feeds on our basest prejudices against "outsiders." But even more than that, it is poor public policy. It is a lazy man's solution to a complicated problem. Immigration, like trade can benefit us all. Unfortunately, change causes socio-economic displacements that cannot be ignored, are difficult to solve, but must be addressed head-on rather than haphazardly. The solution to an infected papercut is not to chop of the entier arm.
First, let me apologize for the stooge who likened labor migration to trading apples. Clearly human beings are not to be treated as objects, but this was not the point of the comparison. The point was that when Factors of Production (machinery, workers, or other "stuff" that's used to produce the "stuff" households consume) move, society gains in a way that is similar to the way society gains when we are able to trade goods freely (both within our own borders and with other countries). The comparison was in the nature of the gain to society, not the ways in which they should be treated in a political, social, or moral sense. Economists are rational to a fault, and often ineloquent.
Mr. Dobbs asks, "Are there any empiricists among these idiotic economists?" Yo. Right here. In fact, the vast majority of the policy recommendations are based on careful empirical research that gets scrutinized by the sharpest minds in economic theory and statistical methodology before they see print. Trade (and movement of labor and capital) has two impacts: Aggregate gains and distributional consequences. When there is a change that lifts the restrictions placed on Rational Individuals, markets tend to function better and on average countries experience net gains. The net gains from trade are generally pretty big. But, some argue, trade is bad for labor and can lead to a loss in jobs. Still, if we count up every job that would be lost in the sectors dessimated by import competition, the average cost of US trade restrictions was estimated to be around $50,000 per job saved in 2000. The gains from immigration inflows has been estimated to be quite a bit smaller at around 0.25% of GDP per capita, but they are gains nonetheless. That means the median household (middle class American) is better off by $125 per year because of immigrants already here. War on the middle class? Hardly.
However, some individuals and groups will lose in the short run, and their transition to greener pastures in the long run may be a rocky path. Economists are not ignorant of that. Take for example Jim Richardson at Syracuse. He actively advocates for stronger Trade Adjustment Assistance programs that would include wage repacement stipends in addition to education credits.
Speaking to immigration specifically, Dobbs argues that since we have the strongest and best-funcioning economy, suddenly every person from a poor country will flood through our borders. Now who's being arrogant?!? First of all, immigration is difficult and costly (financially and socially), and there are a lot of people living in poor countries who simply cannot afford to come here, even if they wanted to do so. Second of all, not everyone wants to live here! Not only that, but almost one million illegal immigrants leave every year voluntarily! So let's not make up a number like, "4.8 billion people" that would suddenly flood our border once the gates open.
Finally, immigrants who come here looking to work and toil for a better life make our country richer and greater. To enact legislation that is largely designed to protect certain US labor interests at the expense of immigrants who are even poorer than the working poor here (not to mention to the detriment of the majority of native-born US citizens) is nationalist bigotry. It feeds on our basest prejudices against "outsiders." But even more than that, it is poor public policy. It is a lazy man's solution to a complicated problem. Immigration, like trade can benefit us all. Unfortunately, change causes socio-economic displacements that cannot be ignored, are difficult to solve, but must be addressed head-on rather than haphazardly. The solution to an infected papercut is not to chop of the entier arm.
Thursday, August 16, 2007
Perverse Effects of Sanctions
It can be amusing how an idea that sounds so very sensible in the world of politics ends in precisely the opposite effect that may have been intended. A Reuters article appeared Monday in the Washington Post in which British officials called the embargo of the Palestinian authority in Gaza "counterproductive." An embargo does have a substantial negative impact on a country, especially if that country is small and lacks sufficient allies to make the threat of cooperative retaliation tangible and credible. But the punitive effect of the embargo is no "free lunch"-- countries that impose the sanctions will also experience a small loss in welfare.
These welfare effects for the sanction-imposing countries aside, do the punitive effects lead to the desired effect? In rare cases they may, but there is not much evidence that shows sanctions to have any effect than to lead the offending country to dig in its heels and become more belligerent. It seems that in the cases of most of the usual suspects (Iran, Iraq, North Korea, Libya, Cuba, the Palestinian Authority), the demagogues in charge of these areas managed to use the embargo to rally support around them.
This just seems to be another case where trade gets perversely tangled up where it has no business being drug in. My rules for public policy are simple: (1) achieve your goal; (2) minimize unintended consequences. In most cases trade-related solutions are second-best at best.
These welfare effects for the sanction-imposing countries aside, do the punitive effects lead to the desired effect? In rare cases they may, but there is not much evidence that shows sanctions to have any effect than to lead the offending country to dig in its heels and become more belligerent. It seems that in the cases of most of the usual suspects (Iran, Iraq, North Korea, Libya, Cuba, the Palestinian Authority), the demagogues in charge of these areas managed to use the embargo to rally support around them.
This just seems to be another case where trade gets perversely tangled up where it has no business being drug in. My rules for public policy are simple: (1) achieve your goal; (2) minimize unintended consequences. In most cases trade-related solutions are second-best at best.
Wednesday, August 15, 2007
Rule #1 of Public Finance
Here in Virginia, there has been much ado about so-called "bad-driver fees" that get added on to your normal fines if you commit certain types of driving offenses like wreckless driving, or if you are a repeat offender for normal offenses like speeding. The idea behind the law is to raise the approximately $65 million needed to help fund the repair and construction of roads and bridges in Virginia. Other states such as Michigan, New Jersey, and Texas have similar fees. The catch for Virginians is that out-of-state drivers are exempt from the fees.
Is it Constitutional? Challengers to the bill are claiming that this violates the equal protection clause and the 14th amendment of the US Constitution. The law has been alternately struck down and upheld by various appellate courts, and was most recently reported to be upheld in Tuesday's Washington Post (Tim Craig, Virginia Bad Driver Fees Upheld, Aug. 14, 2007 p. B-01).
Is it Safe? In the short run, it may make roads safer because it raises the cost of bad behaviour. In the long run, the impact on safety is less certain. According to Craig's article, "Michigan judges are calling for repeal of the program because they are seeing an influx of motorists cited for driving on suspended licenses." What it doesn't add is the fact that many of these unlicensed motorists are also likely to be uninsured.
Is it Fair? Taxing in-staters does seem to make sense on the basis of the benefits received principle--Virginians do tend to use Virginia's roads and highways more than out-of-staters. However, groups that advocate for low-income households are concerned about the impact it may have on the basis of the ability to pay principle. The Post article relates the story of an 81-year old lady getting an excessive fee slapped onto a wreckless driving citation.
Is it Politically Smart? Constitutional/unconstitutional? Safe/Unsafe? Fair/unfair? The bottom line here is that economically there are arguments that can be made on both sides, but the real reason this bill should never have been passed is that it is POLITICALLY STUPID. As a matter of politics and electoral competition, rule number one of public finance is: ALWAYS TAX THE OUTSIDER. Why? Because she doesn't vote in your district/state. This law disproportionately taxes the people that can legally vote in Virginia. Pack your bags, Virginia House.
On the other hand, Kansas City decided it would throw public dollars at the owners of the Chiefs to make a few hundred million in renovations to Arrowhead Stadium so they could host a Super Bowl. Let me say first that there is no worse public finance blunder than to throw money into a sports stadium. Check out Division of Labor for a series of good rants on this. But I absolutely love the way they decided to pay for it: They added a $4 fee to car rentals. It's beautiful. Locals almost never rent cars, and if they do, they can probably avoid the fee by renting from an office in the 'burbs (which is where most locals likely to rent cars live). Plus, there's no statutory bias in how or to whom the fee applies. An article by Rick Alm and David Helling in the Kansas City Star (July 18, 2006) cites a study by William Gale and Kim Reuben (2006) that says the fees are inefficient, that they disproportionately tax certain groups, etc, but least politically they got it right in KC. For AGES we've been taxing the outsider to gain revenue-- hotel taxes, higher sales taxes in touristy areas, etc. This is nothing new. At least POLITICALLY it makes sense, which is more than I can say for Virginia's bad driver fees.
Is it Constitutional? Challengers to the bill are claiming that this violates the equal protection clause and the 14th amendment of the US Constitution. The law has been alternately struck down and upheld by various appellate courts, and was most recently reported to be upheld in Tuesday's Washington Post (Tim Craig, Virginia Bad Driver Fees Upheld, Aug. 14, 2007 p. B-01).
Is it Safe? In the short run, it may make roads safer because it raises the cost of bad behaviour. In the long run, the impact on safety is less certain. According to Craig's article, "Michigan judges are calling for repeal of the program because they are seeing an influx of motorists cited for driving on suspended licenses." What it doesn't add is the fact that many of these unlicensed motorists are also likely to be uninsured.
Is it Fair? Taxing in-staters does seem to make sense on the basis of the benefits received principle--Virginians do tend to use Virginia's roads and highways more than out-of-staters. However, groups that advocate for low-income households are concerned about the impact it may have on the basis of the ability to pay principle. The Post article relates the story of an 81-year old lady getting an excessive fee slapped onto a wreckless driving citation.
Is it Politically Smart? Constitutional/unconstitutional? Safe/Unsafe? Fair/unfair? The bottom line here is that economically there are arguments that can be made on both sides, but the real reason this bill should never have been passed is that it is POLITICALLY STUPID. As a matter of politics and electoral competition, rule number one of public finance is: ALWAYS TAX THE OUTSIDER. Why? Because she doesn't vote in your district/state. This law disproportionately taxes the people that can legally vote in Virginia. Pack your bags, Virginia House.
On the other hand, Kansas City decided it would throw public dollars at the owners of the Chiefs to make a few hundred million in renovations to Arrowhead Stadium so they could host a Super Bowl. Let me say first that there is no worse public finance blunder than to throw money into a sports stadium. Check out Division of Labor for a series of good rants on this. But I absolutely love the way they decided to pay for it: They added a $4 fee to car rentals. It's beautiful. Locals almost never rent cars, and if they do, they can probably avoid the fee by renting from an office in the 'burbs (which is where most locals likely to rent cars live). Plus, there's no statutory bias in how or to whom the fee applies. An article by Rick Alm and David Helling in the Kansas City Star (July 18, 2006) cites a study by William Gale and Kim Reuben (2006) that says the fees are inefficient, that they disproportionately tax certain groups, etc, but least politically they got it right in KC. For AGES we've been taxing the outsider to gain revenue-- hotel taxes, higher sales taxes in touristy areas, etc. This is nothing new. At least POLITICALLY it makes sense, which is more than I can say for Virginia's bad driver fees.
Tuesday, August 14, 2007
Green Energy
Here's a continuation of yesterday's topic. So, if you read yesterday's post it may seem that I'm not too motivated for "alternative energy." Nothing could be further from the truth-- I just want to find the most appropriate alternative. First, I feel we need to make sure our resources are focused on alternatives best address the issues of sustainability and affordability but also minimize the negative consequences of our energy use, namely global climate change. An editorial appeared in the Saturday New York Times (Energy Surge, Staff Editorial, Aug 11, 2007) that I think accurately reflects the interdependence between energy policy and climate change, and the need for energy policy that has complementarities that help address both ills simultaneously.
On this basis I cannot bring myself around to the viewpoint that coal represents a worthwhile improvement. That makes me pretty unpopular in my neck of Virginia. Coal is currently plentiful in relation to its demand, but that is due in large part to the fact that about a century ago, technological change led us to an alternative that was both more abundant and cleaner-burning. At that time, Malthusian Chicken Littles cried that the sky was falling and that Coal was both too scarce and too harmful to our air. Then came petroleum, which was plentiful and clean (in comparison), and was compatible with the fabulous new internal-combustion automobiles running off Henry Ford's assembly lines. No matter how "clean" the coal industry claims their product to be, we cannot shake the reality that coal is entirely composed of carbon, which, when burned produces carbon gasses.
In the same regard, my love for alternatives such as natural gas and ethanol is equivocal at best. Ethanol and natural gas burn cleaner than some alternatives, and ethanol is good for short-run sustainability, but, as my father-in-law (a corn and soybean farmer) puts it, "it just stretches out" petroleum products-- we don't yet have technology for using ethanol as a stand-alone alternative. These options also suffer from a lack of sufficient nation-wide distribution network. Hydrogen, you say? I'm personally still a tad skittish about the possibility of this happening on my drive to work:
So, here's what's caught my eye in the alternative energy debate: nanotubes. These little guys can be used for a lot of applications and their capabilities and limitations are pretty unknown, but the early research is promising. One of their advantages is that they can be designed to work as transistors, ultracapacitors, can be designed to have photovalic, semiconducting, or superconducting (at low temperatures) properties, and I've heard that they even do the laundry and wash windows. According to Collins and Avouris (December 2000, Scientific American), certain nanotubes can carry electrical current 1,000 times denser than copper or silver. I'm no expert on these little suckers, but I'd count them among the innovations to keep an eye on for helping solve our energy policy, cure disease, and protect our troops.
On this basis I cannot bring myself around to the viewpoint that coal represents a worthwhile improvement. That makes me pretty unpopular in my neck of Virginia. Coal is currently plentiful in relation to its demand, but that is due in large part to the fact that about a century ago, technological change led us to an alternative that was both more abundant and cleaner-burning. At that time, Malthusian Chicken Littles cried that the sky was falling and that Coal was both too scarce and too harmful to our air. Then came petroleum, which was plentiful and clean (in comparison), and was compatible with the fabulous new internal-combustion automobiles running off Henry Ford's assembly lines. No matter how "clean" the coal industry claims their product to be, we cannot shake the reality that coal is entirely composed of carbon, which, when burned produces carbon gasses.
In the same regard, my love for alternatives such as natural gas and ethanol is equivocal at best. Ethanol and natural gas burn cleaner than some alternatives, and ethanol is good for short-run sustainability, but, as my father-in-law (a corn and soybean farmer) puts it, "it just stretches out" petroleum products-- we don't yet have technology for using ethanol as a stand-alone alternative. These options also suffer from a lack of sufficient nation-wide distribution network. Hydrogen, you say? I'm personally still a tad skittish about the possibility of this happening on my drive to work:
So, here's what's caught my eye in the alternative energy debate: nanotubes. These little guys can be used for a lot of applications and their capabilities and limitations are pretty unknown, but the early research is promising. One of their advantages is that they can be designed to work as transistors, ultracapacitors, can be designed to have photovalic, semiconducting, or superconducting (at low temperatures) properties, and I've heard that they even do the laundry and wash windows. According to Collins and Avouris (December 2000, Scientific American), certain nanotubes can carry electrical current 1,000 times denser than copper or silver. I'm no expert on these little suckers, but I'd count them among the innovations to keep an eye on for helping solve our energy policy, cure disease, and protect our troops.
Monday, August 13, 2007
Energy
I've thought a lot about energy use, begun some preliminary research on it, and come to the following conclusion: Energy Sustainability is not a very serious issue. There is sufficient oil resources embedded in the clays of Northern Alberta to keep our SUVs runnig for several decades at current rates of usage growth. Higher prices tend to make the profit margins on very cheaply-extracted sources of oil (like simply poking a hole in the Saudi desert) much higher than they had been, but it also pulls more expensively-extracted sources into the market. Paradoxically, the same scarcity that leads to the higher market price and discourages consumption to allocate oil more efficiently in the short run also helps resolve the scarcity issue by encouraging firms to exploit new reserves in the long run. Energy Affordability and Price Stability are much more salient to how we approch our energy policy.
Classical theories in economics, which focus on competitive markets, have found three trends for primary commodities such as oil: (1) stable prices; (2) a gradual, secular decline in the price, following the "Prebisch Thesis" (see, for example, Grilli and Yang, World Bank Economic Review, 1988), and; (3) little or no cross-sectional variation in prices. Empirically, many of these theoretical predictions described oil and energy markets quite well until about 1973, but none since. Many of these discrepancies have been explained in part by market structure (violations to the assumption of perfectly competitive markets) but more meaningful explanations of the current price volatility have focused on the lack of political stability in Middle East, where most of the most cheaply-extracted oil can be found.
The following article appeared Wednesday (Aug. 8, 2007) in the New York Times: Energy Has a Tough Act to Follow: Itself. It briefly addressess this issue of political stability, which has consequences for price levels and their stability. Remember what I mentioned before about higher prices? Well, I hate to bear bad news, but if reliance on oil from politically volatile countries is the problem, then low prices cannot be found in anywhere in the solution. When prices are low our own production of oil, as well as the diversity in the sources from which we import oil, are the also the lowest because these sources of oil cannot be profitably tapped. According to the times article: ''Over the long run, a premium will be paid for these assets (the Canadian Oil Sands Trust) because they are in a politically stable area,'' said Evan Smith, a co-manager of U.S. Global Investors Global Resources.
If we want to have reliable, stable sources of oil, we'll have to pay the price, and it appears as if we already do: "Gravity" models of international trade predict that the more homogeneous the product, the more likely it will be that countries import a particular prodcut from geographically convenient sources, and the less likely it will be that producers will bear the shipping costs of sending their supplies to geographically extended markets. An initial look at the data shows that much of the oil produced in Mexico, Venezuela, and even Alaska are going to places like South and East Asia.
Classical theories in economics, which focus on competitive markets, have found three trends for primary commodities such as oil: (1) stable prices; (2) a gradual, secular decline in the price, following the "Prebisch Thesis" (see, for example, Grilli and Yang, World Bank Economic Review, 1988), and; (3) little or no cross-sectional variation in prices. Empirically, many of these theoretical predictions described oil and energy markets quite well until about 1973, but none since. Many of these discrepancies have been explained in part by market structure (violations to the assumption of perfectly competitive markets) but more meaningful explanations of the current price volatility have focused on the lack of political stability in Middle East, where most of the most cheaply-extracted oil can be found.
The following article appeared Wednesday (Aug. 8, 2007) in the New York Times: Energy Has a Tough Act to Follow: Itself. It briefly addressess this issue of political stability, which has consequences for price levels and their stability. Remember what I mentioned before about higher prices? Well, I hate to bear bad news, but if reliance on oil from politically volatile countries is the problem, then low prices cannot be found in anywhere in the solution. When prices are low our own production of oil, as well as the diversity in the sources from which we import oil, are the also the lowest because these sources of oil cannot be profitably tapped. According to the times article: ''Over the long run, a premium will be paid for these assets (the Canadian Oil Sands Trust) because they are in a politically stable area,'' said Evan Smith, a co-manager of U.S. Global Investors Global Resources.
If we want to have reliable, stable sources of oil, we'll have to pay the price, and it appears as if we already do: "Gravity" models of international trade predict that the more homogeneous the product, the more likely it will be that countries import a particular prodcut from geographically convenient sources, and the less likely it will be that producers will bear the shipping costs of sending their supplies to geographically extended markets. An initial look at the data shows that much of the oil produced in Mexico, Venezuela, and even Alaska are going to places like South and East Asia.
Friday, August 10, 2007
I'll keep my $125, Thank You Very Much!
The following headline appeared on page A.10 of today's New York Times: Bush Plans Immigration Crackdown. The summary explains that the crackdown will pertain mainly to illegal immigrants who are members of street gangs, but amendments to the bill chide the Administration to "demonstrate operational control" of the border, enforce existing immigration controls, and require employers to fire workers who are employed under false SSN's.
Perhaps sponsors of such amendments to elevate the level of border control (like Dr. Tom Coburn, R-OK) could answer a few key questions:
1. How many illegal entries is acceptable? Some estimate the net entry of illegal immigrants to be as high as 300-500,000 per year. For 2005, the Department of Homeland Security reported the number of voluntary departures to be 965,538 and the number of deportations to be 208,521 (Yearbook of Immigration Statistics), so that means between 1.4 and 1.7 million enter each year. There were about 14 million arrests nationally for all crimes in 2005. There were about 25 million total offenses reported. We know that we cannot reduce either of these number to zero without putting an undue strain on the private economy, so what will the benchmark for success be in the case of immigration?
2. What additional cost must society bear to hunt down and deport existing illegals? Most journalists cite about 12 million as the number of immigrants currently living in the U.S. We are already deporting over 200,000 immigrants each year, several thousand more are brought in, and leave by means other than deportation, and a handful are incarcerated for crimes they commit while they are here. About 300,000 illegals per year are removed from the workforce as a result of enforcement activities.
3. To what end will firms be expected to bear the cost burden of investigating the legitimacy of each and every applicant's citizenship and work eligibility documentation? According to Dr. Coburn's own website his "priorities in the Senate include reducing wasteful spending" and "balancing the budget."
4. What are the other economic costs to "enforcing" immigration laws in the way Dr. Coburn proposes? Suppose we remove all 12 million illegals. This number would represent about 8 percent of the total civilian labor force. The total unemployment rate has been pretty steadily between 5 and 6 percent of the labor force over the last 20 years. That means that the total unemployed work force could not feasibly replace all of the illegals working in the US, even if their skills were a good fit for the jobs vacated. That means that the impact of their departure would almost certainly affect the price level.
5. I saved this for last-- What is the net benefit/cost of immigration (legal, illegal, or otherwise)? Most studies have shown (a good reference is Heaven's Door by George Borjas) that the net impact of immigration on per capita incomes is positive and amounts to about 0.25%. So, the impact of immigration is positive, but small. These benefits tend to be latently observed in their impacts on prices, productivity, competition, etc., and economists try to use sophisticated empirical techniques to best sort them out. So, if you're a native earning $50,000 per year (about the median household income in the US) would you be willing to pay an additional $125 per year in addition to the administrative cost of enforcing the border and deporting illegals just to not have them here? That sounds silly to me, but Rock On, Middle America. Keep opposing immigration reform.
Perhaps sponsors of such amendments to elevate the level of border control (like Dr. Tom Coburn, R-OK) could answer a few key questions:
1. How many illegal entries is acceptable? Some estimate the net entry of illegal immigrants to be as high as 300-500,000 per year. For 2005, the Department of Homeland Security reported the number of voluntary departures to be 965,538 and the number of deportations to be 208,521 (Yearbook of Immigration Statistics), so that means between 1.4 and 1.7 million enter each year. There were about 14 million arrests nationally for all crimes in 2005. There were about 25 million total offenses reported. We know that we cannot reduce either of these number to zero without putting an undue strain on the private economy, so what will the benchmark for success be in the case of immigration?
2. What additional cost must society bear to hunt down and deport existing illegals? Most journalists cite about 12 million as the number of immigrants currently living in the U.S. We are already deporting over 200,000 immigrants each year, several thousand more are brought in, and leave by means other than deportation, and a handful are incarcerated for crimes they commit while they are here. About 300,000 illegals per year are removed from the workforce as a result of enforcement activities.
3. To what end will firms be expected to bear the cost burden of investigating the legitimacy of each and every applicant's citizenship and work eligibility documentation? According to Dr. Coburn's own website his "priorities in the Senate include reducing wasteful spending" and "balancing the budget."
4. What are the other economic costs to "enforcing" immigration laws in the way Dr. Coburn proposes? Suppose we remove all 12 million illegals. This number would represent about 8 percent of the total civilian labor force. The total unemployment rate has been pretty steadily between 5 and 6 percent of the labor force over the last 20 years. That means that the total unemployed work force could not feasibly replace all of the illegals working in the US, even if their skills were a good fit for the jobs vacated. That means that the impact of their departure would almost certainly affect the price level.
5. I saved this for last-- What is the net benefit/cost of immigration (legal, illegal, or otherwise)? Most studies have shown (a good reference is Heaven's Door by George Borjas) that the net impact of immigration on per capita incomes is positive and amounts to about 0.25%. So, the impact of immigration is positive, but small. These benefits tend to be latently observed in their impacts on prices, productivity, competition, etc., and economists try to use sophisticated empirical techniques to best sort them out. So, if you're a native earning $50,000 per year (about the median household income in the US) would you be willing to pay an additional $125 per year in addition to the administrative cost of enforcing the border and deporting illegals just to not have them here? That sounds silly to me, but Rock On, Middle America. Keep opposing immigration reform.
Wednesday, August 8, 2007
Ethanol and Land Prices
An article appeared Wednesday on Page A.1 of the New York Times titled, "Ethanol is Feeding Hot Market for Farmland." It caught my eye because living in the middle of Coal Country (and originally hailing from the Corn Belt), ethanol (and corn farmers in the midwest generally) gets blamed for economic ills of all types here. The Coal industry dislikes them for subsidies that keep the price of coal down and crowd them out of the alternative energy market, farmers simultaneously blame them for corn prices that are too high (when they purchase feed) and too low (when they wish to sell their own corn), and consumers are absolutely convinced that the corn farmers are conspiring to elevate the price of a steak.
Anyway, the article pertains to land prices. The fundamental that drives the price of land is its derived demand. In other words, given a fixed acreage of land in the world, to what alternative uses can I allocate this land, and what are the incomes or benefits that a prospective owner can derive from those uses? Real estate's demand can also be driven up by speculative demand. Corn is but one use for the land, but the impact of various government subsidies can have a profound impact on land use in the long run, even when the policies are carefully designed. Most agricultural subsidies are designed to be "decoupled" in a way that the amount of the subsidy is not directly tied to the quantity of output. These payments are meant to resemble what economists call "lump-sum" payments, which do not necessarily impact resource allocation in the short run. However, these subsidies have effects on wealth in the long-run, and therefore may lead to the entry of new producers to the market, thus slightly impacting allocation of land resources. But judging from previous studies, in terms of this impact on land's derived demand, this impact is not likely to cause the price of an acre to double or triple, as the Times suggests.
A study by Chavas and Holt (1990, American Journal of Agricultural Economics) showed the wealth elasticity of these subsidies to be in the range of 0.08% for corn and 0.27% for soybeans between 1954 and 1985, which translatesd to to an cumulative impact on acreage decisions to the tune of 180,000 to 570,000 acres nationally. Some of this acreage impact could arise in the form of new land being mobilized in the production of corn and soybeans or from the reallocation of existing cropland from uses for things like barley or flaxseed in favor of subsidized crops. But, even if the impact on acreage decisions has doubled since 1985, this impact is still a mere drop in the bucket compared to the 300 million acres that were planted for harvest, and over 900 million acres of total farmland according to the most recent Agriculture Census by the US Department of Agriculture.
The Times article cites astronomical land price incresases (around 14% in the last year, and up to 50 or 60 percent in the last 3-5 years in some places) and implies that most of this can be blamed on ethanol policies. It discounts the reality that real estate market has gone generally nuts over the last several years and a bubble similar to the one in residential and commercial real estate may easily be spilling over into the market for farmland. Remember that the price of land is related to the value or benefit received from the next-best of all of the alternative uses for land, but also to speculation. Residential and commercial development pushes up the price of land near the cities and towns where the rest of us live, and farmers will have to find ways to drive up their per-acre yields, increase the price of their output, or compete with other bidders to acquire new land profitably. This competitive bidding from alternative users of land currently used for farms will also inflate the price, and much of it probably reflects a change the speculative demand for land more than the true derived demand or the fundamentals. In other words, as stupid as the government is, sometimes marktets are equally so. Don't get me wrong-- ethanol subsidies are bad, and their impact on markets is injurious in a lot of ways, but let's not lose our heads with how much power the government really has in influencing behavior.
Anyway, the article pertains to land prices. The fundamental that drives the price of land is its derived demand. In other words, given a fixed acreage of land in the world, to what alternative uses can I allocate this land, and what are the incomes or benefits that a prospective owner can derive from those uses? Real estate's demand can also be driven up by speculative demand. Corn is but one use for the land, but the impact of various government subsidies can have a profound impact on land use in the long run, even when the policies are carefully designed. Most agricultural subsidies are designed to be "decoupled" in a way that the amount of the subsidy is not directly tied to the quantity of output. These payments are meant to resemble what economists call "lump-sum" payments, which do not necessarily impact resource allocation in the short run. However, these subsidies have effects on wealth in the long-run, and therefore may lead to the entry of new producers to the market, thus slightly impacting allocation of land resources. But judging from previous studies, in terms of this impact on land's derived demand, this impact is not likely to cause the price of an acre to double or triple, as the Times suggests.
A study by Chavas and Holt (1990, American Journal of Agricultural Economics) showed the wealth elasticity of these subsidies to be in the range of 0.08% for corn and 0.27% for soybeans between 1954 and 1985, which translatesd to to an cumulative impact on acreage decisions to the tune of 180,000 to 570,000 acres nationally. Some of this acreage impact could arise in the form of new land being mobilized in the production of corn and soybeans or from the reallocation of existing cropland from uses for things like barley or flaxseed in favor of subsidized crops. But, even if the impact on acreage decisions has doubled since 1985, this impact is still a mere drop in the bucket compared to the 300 million acres that were planted for harvest, and over 900 million acres of total farmland according to the most recent Agriculture Census by the US Department of Agriculture.
The Times article cites astronomical land price incresases (around 14% in the last year, and up to 50 or 60 percent in the last 3-5 years in some places) and implies that most of this can be blamed on ethanol policies. It discounts the reality that real estate market has gone generally nuts over the last several years and a bubble similar to the one in residential and commercial real estate may easily be spilling over into the market for farmland. Remember that the price of land is related to the value or benefit received from the next-best of all of the alternative uses for land, but also to speculation. Residential and commercial development pushes up the price of land near the cities and towns where the rest of us live, and farmers will have to find ways to drive up their per-acre yields, increase the price of their output, or compete with other bidders to acquire new land profitably. This competitive bidding from alternative users of land currently used for farms will also inflate the price, and much of it probably reflects a change the speculative demand for land more than the true derived demand or the fundamentals. In other words, as stupid as the government is, sometimes marktets are equally so. Don't get me wrong-- ethanol subsidies are bad, and their impact on markets is injurious in a lot of ways, but let's not lose our heads with how much power the government really has in influencing behavior.
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