Another Interpretation of Payroll Numbers

There's been a lot of chatter about the new unemployment numbers. This Free Exchange post talks about some of the methodology, and why, when it's said and done, the unemployment drop is for real.

Sentences of the Day

Via Free Exchange:

Imagine a world in which technology has advanced to the point that
robots can build robots that operate at basically no cost at basically
no cost, such that people can have anything that want anytime for free;
the only constraint on consumption is the time available. That would be a
cashless economy, and as a result, debtors would be totally unable to
pay creditors. But does that matter?

Maybe we in the US are rationally accumulating debt in perfect foresight of costless robot production. That or we don't give a shit because the rapture's a-comin in 2012 and it won't matter.

A Couple of Trade-Related Links

Gains from trade? (The Economist)
Gains from trade talks? (Vox)

Confused Libertarians Arguing Against Free Press?

Market Power is a pretty libertarian economics blog, if you happen to read it. Today's post seems a little confused about the difference between the micro and the macro, though.

Is internet access a right?  I'd say "no" ... Saying that someone has a right to scarce resources means
someone else has an obligation to give the same resources up without
compensation.

And yes, this is in the context of Hosni Mubarak's decision to cut off the internet for the entire country of Egypt. There is a difference between saying "internet access is a right" at the micro level of thinking the government should subsidize it for individuals who do not have it and saying that "internet access is a right" at the macro level in the sense that the government should not restrict it wholesale. In the first context it is NOT a right; in the second context it IS a right because it represents a medium for free press. Also, according to a theoretical paper by Basuchoudhary and Razzolini (2010) communication reduces splintering and conflict escalation; according to a paper by Basuchoudhary, Bang and Shughart (2011), there is empirical evidence to support this hypothesis.

Commodity Prices

I generally don't read Krugman much anymore. This post, on commodity prices, seems reasonable. Specifically, on food prices (which some have pointed to as evidence that QE has been inflationary):

this is straightforward supply and demand. Demand may be up to some
extent because of that emerging-market boom. But if you look at the FAO reports
it becomes clear that the key thing for cereals prices is that
production is down in advanced countries, largely owing to terrible
weather.

But if it were coming from monetary pressure, it would likely be a demand-side pull rather than a cost-side push. Also, it might be temporary, since it has to do with weather (unless it is also linked to longer-term climate change).

What about those gas prices? Tyler Cowen is saying that this time it is different, and that there will probably be a change in the long-term trend in energy prices in the coming years. (Note: the long term trend in real resource prices has been negative since about the start of the 20th century.) Yglesias largely agrees. The theory is that during previous increases in price, growth in demand was led by technological innovation, which made us richer, but also better able to pull stuff out of the earth. During current price increases, growth in demand has been led by countries catching up (China and India, for example), and therefore less likely to be accompanied by adjustments on both supply side (better extraction) and demand side (enhanced efficiency). 

They may be right, especially in the short and medium run, but I'm skeptical for a few reasons. First, we've heard the Malthusian trap story before, and it's turned out to be false each time so far. Second, I'm not entirely convinced that their history is spot-on; during previous spikes there was also considerable catch-up growth in Southeast Asia (in fact, the 60s and 70s are a textbook example of "catch-up" growth for countries like Japan, South Korea, and other "Asian Tigers"). Third, prices are incentives, and thus if there is a significant increase in the real price of resources, there is likely to be a supply-side adjustment of some sort, including a shift to new sources of energy (nuclear?). Policy will also play a role in incentives (carbon tax?).

Reflections on a Bumper Sticker

There's a red minivan in my neighborhood that has a bumper sticker that reads, "Socialism isn't Cool." What didn't occur to me until today is that this person also has a special license plat that says "Keep the Lighthouses Shining." I'm pretty sure the irony is lost on her.

Some links, including some drunken research

I can imagine a situation where I might do research after a beer or two. All that would lead to is miscoding of data. These jackwagons made a breakthrough on superconductors.
Coffee in meetings: good for women, bad for men.
The costs of the war on drugs; cartel wars.
A couple of links on education and inequality.
Why seniors should favor immigration (legal or otherwise).
A couple of links on commodidty prices and growth: Econbrowser and The Economist.

Huh?

A couple of articles from this weeks Economist have me puzzled. There seems to be a bit of contradiction or confusion in their editorial office.
First, we have the Economist lending credibility to the idea that the "redback" might become a player as a reserve currency. I'm skeptical.
Seocnd, hedge funds are shorting China (i.e. betting on the notion that their boom is about up). On the one hand, this might be self-fulfilling; on the other hand it might explain the US-China trade deficits in terms of the standard inter-temporal current account macro model (if you expect the US to grow in the future, our running trade deficits today is optimal; if you expect China to shrink in the future, their running of trade surplusses today is optimal).
More on the Yuan from Econbrowser.

The Deficit We Want

Via Economix:

Herein lies the political problem. We want to cut spending. We just don’t want to cut the benefits that the spending pays for.

We want to cut the vague notion of spending ahead of raising taxes, but when given the choice between cutting specific spending (on the "big three" - Medicare, Social Security, and Defense - for example) versus funding it with higher taxes, people choose higher taxes in each case.
Cognitive dissonance?

Some links: Climate, China Trade, and Inefficiency

Exchange rates (if relevant in the first place) aren't the whole story with China (Economix)
Rebalancing (Brookings)
Green energy won't create jobs (Economix)
Green energy shouldn't be used to create jobs (Free Exchange) Right. A carbon tax (or if an international mechanism can be designed, cap and trade) would nudge the market to do the job with fewer unintended consequences.
Inefficiency in the tax code; good for somebody (Economix)

One Need not Move to Somalia...

...to appreciate the economic benefits of an active, competent public sector. According to Eric Crampton, New Zealand is "freer" in the libertarian sense (e.g. by the Heritage Foundation's definition) than the U.S.; yet, it seems they are not better off, economically.

By the general axiom of revealed preference, the increment of liberty isn't worth the loss of income (and inconvenience of moving and living abroad) for the vast majority of libertarians.

At what margin is liberty for liberty's sake worth it?

Advice to Right-Wing Bloggers

TC asks where the left-wing bloggers went, and wonders if the sphere promotes moderation. He also sees a few ways things can go: more moderation, or less. He seems to favor the former. Here's one option he proposes:

Hold strongly to a pure free market line, but not much consider the toughest issues, starting with Social Security, Medicare, and Medicaid, and finishing with the inability of government to precommit to a lot of policies which might work as rules but never can be rules. There are plenty of easy issues to focus on, starting with farm policy and free trade and on those the market-oriented point of view is a slam dunk.

That's free-market conservatism I can believe in. There are sosme areas where freer markets are not necessarily a win-win proposition.

An Interesting Market Failure

Will the market mechanism evacuate efficiently? George Stigler says yes; Tyler Cowen is not so sure.

If you are evacuating a city suddenly, along a constrained road or path, ideally (at least by economic standards, which may or may not be your final moral theory) you wish to favor the people who are young, productive to others, and people who value their own lives highly and are risk-averse. A market auction tends to favor the wealthy and in this context many of the first leavers in line will be inefficiently old

TC also notes that the old may also have a higher discount factor for spendig their current wealth, adding to the dilemma.

3 Links on Bayesian Probability; 2 Links on Teaching

Another reason Bayesian statistics might be intriguing. (Gelman)
Conditional expected productivity and benching players with fouls. (ESPN)
A Bayesian rational for a situation where high variance might be a good thing. (MR)
Paying for grades isn't easy. (Freakonomics)
Ugly fonts and material retention. (Wired) This gives me my quote of the day:

making material harder to learn — what the researchers call disfluency — can actually improve long-term learning and retention

...and worsen teaching evaluations.

The Illogic of Debt Ceiling Politics

One interesting sentence:

If the government is (a) required by the deficit legislation to spend,
and (b) precluded by the debt legislation from borrowing, the Treasury
would be forced into default.

From James Hamilton. There is more; all of it is good.

A Couple of Links about Children

Steven Landsburg's Big Answer about preferences for boy children and the proportion of boys and girls. (The Big Questions)
A game theoretic solution to child punishment. (Freakonomics)

Some Links on Trade, Immigration, and Income Distribution

(Unlike immigrants) will robots permanently drive down real wages? I agree that immigrants will not necessarily drive down wages, but am skeptical as to whether robots will. (Modeled Behavior)
Increasing opposition to immigration - is it inversely correlated with the actual immigrant population? (Cleveland Plain Dealer)
Baby steps to promote free trade in 2011. (WSJ)
Are the poor worse off when the rich are better off? Not always. (Economist)
Could you be richer if you really wanted to be and if so what does that do to income distribution at the macro level? (Gelman)
Giving back the Bush tax cuts for jobs and fairness (Freakonomics)

Some links

Poverty-reduction matters globally. Chalk one up for redistribution, a.k.a. "socialism." It's not just about money. 
American public opinion, then and now.
Happy old people. It beats the alternative.

Lazy Academics

Hamermesh has a post out on Freakonomics saying that he's paying the price of other professors' laziness at his own institution. My colleagues and I at VMI are paying the price for the laziness of professors at other institutions. VMI credibly fights grade inflation; many schools don't. It affects teaching evaluations.

Student in my class: Why are tests here at VMI so hard?
Me: What do you mean?
Student: My friend at (an institution about an hour north of VMI) took (a class in the business school) and her tests were 25 easy multiple choice questions and that's it. They get an easy A while we have to work for B's and C'sWhy is that?
Me: There are probably two reasons: First, there is a lot of grade inflation at other schools, which is very closely tied to whether professors get tenure. Second, the teachers there probably lazy - the cheapest way to get better teaching evaluations is to make the course easy and thus give higher grades.
Student: I wish VMI did that, too.
Me: No, you don't. In fact, you came to VMI knowing that it was a tougher place, and you made that choice anyway. If you want easy A's there are plenty of schools where you can get easy A's. Why didn't you go there instead?
Other Student: Because I don't want to get a shitty job.

There you go. Even students nearing final exams can get why grade inflation is bad, you just have to work them through the logic. Too bad incentives are so skewed the other direction.

A Political Question I don't quite Understand

Here. If the tax increase on folks making $250k + is based on AGI, and those folks are really making $315k on average, why wouldn't Democratic politicians phrase it that way when they stump for it? Wouldn't that make it less unappealing?