De Facto or Dejure?

Trade's shrinking. But it's unclear whether the shrinkage is because of rising protection, or because of overall declining economic activity. In particular, China is exporting less, but at the same time there are stories of increased availability of consumer goods within China, partly due to a natural decrease in demand. The Economist warns of possible increases in protectionism. They can cite for evidence is an increase in antidumping cases, but in this economic environment it may be more likely that firms will engage in actual dumping, so I'm not sure that's a good measure. I'd like to see them tell me of specific cases of actual increases in direct protection before I get too worried. Hopefully, economies will recover from the downturn before resorting to new tariff increases.

So, uh, yeah..

I just can't resist putting this up.

The Democracy Tax

Democracy is expensive, and the Economist reminds us of it in last week's special report on India. Administering the necessary bureaucratic and legislative apparatuses that make the thing go costs a lot of and usually leads to a certain amount of disappointment. In this sense, many note that an iron-fisted despot, if "benevolent" so to speak, is a more "efficient" form of government because what gets done gets done quickly and without too much hemming or hawing. Unfortunately for these regimes, the principle applies equally to good and bad ideas.

But if you were beginning to think that our own system was hopelessly corrupt, it could be worse. Even though, "every five years, over a period of a few weeks, India holds a
reasonably orderly and fair election,"  the article goes on to state that:

[India's] politicians are mostly an unsavoury
lot. Of the 522 members of India’s current parliament, 120 are facing
criminal charges; around 40 of these are accused of serious crimes,
including murder and rape. Most Indian politicians are presumed to be
corrupt...

So, mere "pay to play" schemes and cash in a freezer is actually pretty tame!

Thanksgiving Fun, A Little Late

In Thanksgiving Tradition, Bush Pardons Scooter Libby In Giant Turkey Costume

Bad things that Came out of the Seventies (other than Disco)

I heard this on "All things considered" yesterday.

We used to have this urban-planning idea that we'd have these pockets of pure-residential areas that had a buffer from almost purely commercial areas known as "drivable suburbia" or "edge cities." In the seventies,people wanted to live in little cul-de-sacs of living and concrete jungles of shopping, commerce, and bigass parking lots somewhere else. I remember in the late eighties our neighborhood had huge opposition to the building of a new commercial area near our housing development because it would bring noise and crime and (gasp!) more people.

I wish I could say this is the way the market had things turn out, but that would be hooey. (I like to say hooey now because the word I really want to say makes the little green men cry.) It was carried about using subsidies and political lobbies that worked to have things zoned the way they thought best suited their views. Some might call that democracy or "majority rule" but that would be of equal portion of hooey, since most people who thought it to be a bad idea probably didn't care as much to organize and petition the local government as the "nimby"-ites (Not In My Back Yard, "nimby").

Now, some folks are having buyers remorse. Now, we want shorter commutes, closer access to jobs, groceries, routine shopping, and even public transportation (?) and people aren't so sure that driving 20-30 minutes is the best way to go about it. Maybe in fifty years when we have flying cars that run on banana peels and composted garbage we'll want to go back to our edge cities.

I couldn't resist...

If you like recycling, and you like elephants pooping, this is for you.

Michelle Malkin, Ahead of the Learning Curve

Usually it takes a family of immigrants a few generations before they really adopt the slam-the-door-shut xenophobe-nationalist-conservative ideology of the Pat Buchanans and Lou Dobbses of the world. Michelle Malkin, Conservative columnist, TV commentator and blogger is there as just a first-generation daughter of Filipino parents who came here on student visas.

...and she blames the entire financial meltdown on Mexican immigrants, mostly the illegals. In a September 24 column, she opines,

It’s no coincidence that most of the areas hardest hit by the
foreclosure wave — Loudoun County, Va., California’s Inland Empire,
Stockton and San Joaquin Valley, and Las Vegas and Phoenix, for
starters — also happen to be some of the nation’s largest illegal-alien
sanctuaries. Half of the mortgages to Hispanics are subprime (the
accursed species of loan to borrowers with the shadiest credit
histories). A quarter of all those subprime loans are in default and
foreclosure.

Regional reports across the country have decried
the subprime meltdown’s impact on illegal-immigrant “victims.” A July
report showed that in seven of the ten metro areas with the highest
foreclosure rates, Hispanics represented at least one third of the
population; in two of those areas — Merced and Salinas-Monterey, Calif.
— Hispanics comprised half the population.

I don't even know where to go with this! Who'd like to point out the logical fallacies with me? Composition, post-hoc-ergo-proptor-hoc? This is completely off the deep end, and hypocritical toboot! Yes! It's illegal-alien mango pickers buying million-dollar McMansions! What? Someone get me off the deep end, and Ani, remind me to smack you next time I see you for elevating my blood pressure with this.

Immigrant quotas as a tax equivalent

This story on Morning Edition (NPR) got me thinking. Some folks are opposed to "selling" work visas (economists among them). Well, I'll tell you this: A quota (which is how we work it now) ain't much different. Just ask the illegal immigrants. Only difference is this: The people who get the hypothetical "tax revenues" aren't the US treasury - they're the people who are lucky enough to get visas (after about a 15 year wait for some source countries), and the coyotes who smuggle illegals over for a fee (which can run in the thousands of dollars per immigrant smuggled). That doesn't even touch on the laundry list of other externalities that quantity restrictions bring, and the fact that we spend billions of scarce treasury dollars enforcing the quota instead of collecting revenues from the auction/tax/fee.

Good News, Lou!

Louie Louie (Dobbs) must be thrilled about the recession: Check this out!

The Auto Bailout, Trade, and Policy Specificity

As a trade economist, there is exactly one thing that could convince me that a subsidy to the auto industry is worthwhile, and it's this: Give them a direct subsidy and tear down all of the trade restrictions on foreign-made autos. That way, we could increase the competitiveness of the MARKET, and increase the chances that the monies will be used productively, rather than squandered on short-sighted SUV promotions that would keep us in the energy use gluttony of the last 20 years.

Societal Collapse

This is a relevant idea from TED Talks that I think relates somewhat to some research by my colleague Atin Basu. Really Atin's research focuses on the speaker's 5th point, the ability to recognize and react to environmental changes, i.e. take a long sight of it's continuation. I think that the issues before that, related to cooperation vs. Anyway, it's an interesting little topic.

Redistribution Policy

Good a Place as Any

Watch the Results Roll In!

Republican Party Values

This one's for Atin, per his thoughts on "Republicanism" versus "Conservatism," and it comes from Joe Scarborough, who was one of the more conservative republicans of the "Contract with America Republican Revolution" of 1994-5.

Economic Crisis Forensics

We've finally traced back the cause of the crisis!

Morning Joe Entering Silly Season

Joe Scarborough, who I like, did a silly piece on folks on the upper west side of NYC supposedly saying "nasty things" to McCain-Palin supporters (specifically his "news you can't use" correspondent, Willie Geist), and take it as "representative" of some broader population. He asks, "Would the same thing happen in Nashville?" (in the other direction, against Obama supporters), since Mr Geist went to Vanderbilt for college.



While there's room to debate how "nasty" the comments of these folks really were, I can tell you that there are plenty of conservative areas where reasonably intelligent people are being just as nasty. I've heard numerous accusations of socialism directed towards friends of mine who support Obama, and really really nasty things being said about the candidate himself. It's depressing, and the total lack of intellectual diversity here really makes it isolating. Heck, people only tell a McCain supporter in the upper west side to "go to the east side." Here, they tell us to go in a different direction - the nicer ones imply that that direction is somehow farther North; the not-so-nice ones imply that that direction is more downward, and somehow involving flames that burn but do not consume.

This still all misses the point. In either event the jackasses are an irrepresentative subsample of the overall groups of supporters. Most McCain supporters are decent folks who want the best for the country. Most Obama supporters are decent folks who want the best for the country. The contention that lefties are more (or less) nasty than righties is misleading. A jackass is a jackass on either side and can't be held up to represent the whole group. The bigger question is: why raise the subject? Are McCainiacs so desperate to villify the left that it's no longer a matter of: (1) winning the ideas; (2) personally attacking the other candidate, or; (3) cherry picking facts. Now it's a matter of making personal attacks against the rank and file supporters of a candidate, party or set of ideas? Seems silly to me.

This One

John McCain and his surrogates keep asking: which economist would promote tax increases at a time like this? Well, if structured intelligently, then, THIS ONE.

What's surprising is how confused Mr. McCain is about his economice ideologies. The concept of fiddling with taxes and expenditures on the fiscal side to affect the economic equilibrium at the macro level and combat recessions is a Keynesian (read: "liberal") one. Now, for those tax cuts to be most effective, in the Keynesian framework, they should be targeted in the ways that do most to stimulate consumption (i.e. to the middle and lower classes), so that inventories are mopped up, and thus intended investments are made instead of being diverted into unplanned inventory accumulation. This is a pretty standard principles approach. A more sophisticated approach might suggest that markets and their prices are not well-coordinated between factor markets and product markets, leading to "good" (high demand) equilibria, and "bad" (low-demand) equilibria. Random events can knock a "good" economy into a "bad" equilibrium, but government can use fiscal policy to offset those distrubances.

So, let's look at the supply side. Tax cuts are good, but ONLY if the government debt is held constant. Candidate McCain's proposals would cut taxes but wouldn't reduce spending enough to control the deficit or the debt. Most studies suggest that the proposals of each side would have equal impacts on the debt, and both would actually expand our debt, and that assumes Mr. Obama gets his way on health care and other subsidy programs, which is doubtful. McCain on the other hand is more likely to get the types of spending he wants, because he has the authority to keep troops in harm's way, and thus hijack the congress into approving more spending for those wars - denying funding is a politically indefensible position for any member of congress.

So, assuming McCain's and Obama's taxation and spending proposals would have equal effects on the debt if both get the spending increases and cuts they want, there is no net long-run difference in the two candidates' impacts on the economy. However, if we look at the political realities of their spending requests, McCain is more likely to get the increases he wants. Obama is not. Expect a filibuster on health care and other types of entitlements and education spending that Obama has proposed, and for there to be compromises on these areas of his agenda. It seems to bet the case that some of these political realities have not been taken into account in the estimation of the impact of each candidate's economic plan on the long-run economy.

Taxes, the S-word, and McCain 2k8 vs. McCain 2k

Paying taxes is something we do to keep our society more civilized, to keep our "social contract" functional as a nation -- to protect ourselves from external threats; enforce the rules amongst ourselves; and to promote what one might call our common purpose as a nation. Progressive income taxes have been deemed "fair" and constitutional in the US since 1910 on the basis of the rich having a greater ability to pay for those public goods and services that help the whole thing work. But no need to wax philosophical on this...

How about we just have a look at this, and compare McCain 2008 and McCain 2000, borrowing the work of (of all places) The Daily Show:

Politics and Regulation

If most people were asked what they think of government regulation (or taxes for that matter) they'd probably tell you they don't like them. It probably has something to do with the growing mistrust of government over the last 30 years or so, and it may actually be healthy to have some mistrust.

But I'm telling you: Everyone likes regulation, just so long as it involves government controls over something that someone else is doing that I do not and that bothers me. No one really wants to make the sacrifice of being forced to constrain their own habits, but when the neighbor dog comes across to our yard to do his business, then we petition for a pooper-scooper law. Why? Because we're selfish, but at the same time we're in this whole thing called civilization (or, America) together. When it comes to unemployment insurance it's easy to say "government get off my back" as long as you have a stable job, and as long as someone else is losing theirs. But if that person loses his job and decides to drink a case of natural light or smoke a joint, there will be a long line of people wanting the government on HIS back.

And then there's taxes. Justice Oliver Wendell Holmes said "I like paying taxes. With them I buy Civilization." How true. My mother tells me that even though my grandfather was a cranky old farmer about most things, he never voted against a school bond issue. That tells us something. Schools, roads, security (police), and so on are important, and not just for the people who can buy them for themselves. And that, I think, is why a lot of rich folks (like Warren Buffet) are willing to support a candidate who has said up front that they would bear a greater tax burden at the top. One reason might be credibility - that candidate isn't playing games by trying to say he can keep the tax code flatter and lower than it was 8 years ago and still be able to lift the middle class. Another is the fact that we are simply burdened by debt and need to raise revenues to keep it in check. Yet another is simply getting that tax dollar's worth of civilization that even an independent cranky old farmer sees the value in.

Interesting Election Data Monkey Information

Gallup's description of "likely voters." Basically, they've changed their approach to account for the surge in registrations (perhaps controlling for the thousands of "Mickey Mouses" regestered by ACORN, perhaps not).