Relevant and even prescient commentary on news, politics and the economy.

How Much Should I Spend to See a Movie? (In which I channel McMegan)

While the brood was at Mary Poppins, I took advantage of the Academy Awards rules and went to see Revolutionary Road. The incremental cost was subway fare (arguably a sunk cost, since I have old Metro cards) and the $12.50 NYC film ticket price.

So that was quite rationalisable; met up with an old friend and spent a relatively pleasant couple of hours. (Saw the movie too.)

On the other hand, Defiance opens December 31st. At the Ziegfeld. And that one I can’t not take Shira to see.

So it’s either: spend US$18 for train fare (two r-t) and US$8 possible subway fare (walk slightly over a mile, with timming issues), and ticket price (presumably US$25), and get a babysitter to cover the minimum five hours (and probably more) this hegira would take.

Not to mention how one values ten to twelve person-hours of time with much to get done.

Or wait until it opens on 16 January, and be able to pay C$ (which might still be an advantage then), but not get to see it at The Ziegfeld.

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Whence Fall the Banks of England, England Falls, 2007 version

Shira, the kids, and the m-i-l went to see Mary Poppins on Broadway for the former’s birthday.

In this version, the father still works for the bank and is given a choice early on: he can loan money to someone who promises to invest the money in business ventures in Foreign Lands and make marvelous returns, or he can loan money to a man who comes in with a local business plan to build a factory, employ local people, and make money. The gentleman even gives sixpence to each of the father’s children, somewhat strengthening the mirroring of the tuppence scene in the original:

But, of course, the other bankers all loan to the man who wants investors, and the father is suspended for not doing so.

Until, of course, the investment turns out to be a Ponzi scheme, and the factory turns out to be the loan that “saves the bank.”

Instead, AIG will be giving out bonuses with TARP monies in March of 2009, and the only failures are among the sweeps and unemployed nannies.

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Big oil, big water, and big spending…who is the economy for?


The LA Times reports on news regarding shale oil development:

Salt Lake City – A titanic battle between the West’s two traditional power brokers – Big Oil and Big Water – has begun.

At stake is one of the largest oil reserves in the world, a vast cache trapped beneath the Rocky Mountains containing an estimated 800 billion barrels – about three times the reserves of Saudi Arabia.

Extracting oil from rocky seams of underground shale is not only expensive, but also requires massive amounts of water, a precious resource crucial to continued development in the nation’s fastest- growing region.

The conflict between oil and water interests has now come to a head. On Oct. 31, Congress allowed a moratorium on oil shale leasing to expire. That paved the way for the Bush administration to finalize leasing rules last month that opened 2 million acres of federal land to exploration.

Despite some claims in comments here, the science of shale oil extraction is very unclear.

Oil shale itself forms the bedrock of the aquifer system in the Colorado basin systems, so heating it up is sure to inject various poisons into the aquifers, and waste water has no where to go as demonstrated by the 9 mile long, 6 mile wide waste water lake at “reclamation” work in the Athabasca Oil sands area of north east Alberta, just outside Fort McMurray.

Update: And guess who gets some bailout money?

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"Should we return to the Certificate of Need (CON)?

cross posted with Health Care Think Tank by STR

“Should we return to the Certificate of Need (CON)?

In the 70s and 80s many states had health care Certificate of Need laws.

In general, the CON required state approval for the construction or major renovations of hospitals, the construction or major renovation of nursing home beds, and the addition of major technology, such as imaging centers.

The laws varied by state so the generalization did not apply exactly to each state. I believe there may be four (4) states that have retained CON laws (one being Michigan).

When I was young and naïve I believed the CON was based on the formulas built into the law. After some experience I learned that in the states I worked the CON process was rotten with politics.

Many states repealed the CON rules because the process did not work, or as a deregulation maneuver.

The market did actually work in one instance, nursing home beds are not being built despite the absence of CON laws, largely because seniors housing and assisted living centers have created a continuum of care that minimizes the need for nursing home beds.

So should we allocate health care capital via the government? What happens to the political losers? Would this slow capital spending, and is that a good thing? How do we keep rotten politics out of the process? “
cross posted from Health Care Think Tank

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If conservatives no longer take free markets seriously, why should liberals?


Jamie Galbraith in the Predator State:

Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals? Why keep liberal thought in the straitjacket of pay-as-you-go, of assigning inflation control to the Federal Reserve, of attempting to “make markets work”? Why not build a new economic policy based on what is really happening in this country?

Which is??

Update: hat tip Movie Guy on Galbraith’s latest in the Washington Independent.

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Reasons I Haven’t Needed to Post

davenoon at LG&M and Kikuchiyo Jones subbing for the good Roger Ailes both clobbered the WSJ’s most egregious fluffing this year.

Martin Feldstein continues to try to destroy the previously-brilliant David Warsh’s reputation by openly declaring that the major Bush administration policy initiative was a complete failure, and that a dollar spent with a multiplier of at best 1.0 should be preferred to investments with spillover effects into private industry (and therefore multipliers definitionally greater than 1.0).

Warsh may never live down this piece, though economic historians may well find the seeds of the destruction of the discipline outlined therein.

UPDATE: PGL at Econospeak was there first, but is nicer than I am.

Meanwhile, it was left to the WaPo to explain Moral Equivalence in the Beltway:

Bill Clinton was sharply criticized for issuing dozens of pardons in his final days that included fugitive financier Marc Rich, while Bush’s father came under fire for forgiving Caspar Weinberger and others involved in the Iran-contra affair.

Yep, a man whose prosecution was viewed by the publisher of the New York Sun as “an error and a tragedy” is at least as evil as actively violating U.S. and international laws while working to support terrorists and destabilize democratic governments. Glad we got that one straight, guys.

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I Do Not Think These Words Mean What the Reporter Thinks They Do, Auto Sales Version

Via Dr. Black, this piece yields preciousness:

“You have to stay on top of your game,” said Sklar, 65, a straight-talker who wears cuff links to work and has managed sales crews for a quarter-century. “You have to maximize your opportunities. You have to do what you have to do to make a deal.” [emphasis mine]

Those who wonder why Philadelphia’s economy has lagged the rest of the East Coast may speculate on the quality of its reporters.

More on Dealers later, when I have more dependable Internet access.

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Income distribution and GDP, it matters

I should title this: Yeah, it is just like 1929 you freak’n see, hear and speak no inequality monkeys.

I have this pile of income data sorted out from Saez’s work (the GDP is BEA). My thoughts regarding our economy is that income inequality (or equality) matters. It matters so much, that it is the all defining focus of government in a democracy. Every policy made should be judged against this goal of ever greater equality as we use the tool called “economy” for the betterment of our lives.

For most (even the tippy-top earners), the biggest share of income is not earned from money, but from labor, whether physical or cognitive. Because of this, there must be effort as reflected in our policy toward regulation and initiatives that continually work to equalize the share of income. I am confident, that just as Cactus showed there is a low and high to top marginal rates correlating with GDP growth rates, the same is true for share of income. That’s my thoughts.

I sorted out the share of income in dollars and percentages in the past and have posted them. This time I look at per capita income and compare them to GDP.

Starting at the low point for both groups in 1933, we see $6142/person (16.46% of the total personal income) for the top 1% and $315/person for the rest. The following chart shows the years of income and GDP doubling along with the top’s percentage share. I took the starting income and kept doubling it to find the year closest. A + or – means the actual income is before or after the year (between 2 years).

Income, GDP doubling chart

For the top, the number of years to double are: 9,19, 12, 7, 5, 11, 9
For the bottom 99 the number of years to double are: 8, 7, 17, 9, 7, 15,
For GDP the number of years to double are: 8, 5, 11, 11, 8, 7, 12, 13
The bold number is the last doubling before 1976.

If we look at 2005 incomes, it is clear the trend for years to income doubling was increasing for the 99%. For this group, 9 years past the last doubling, there has only been a 34.5% increase where as the top has doubled. It appears that the best income percentage for both the top and the rest is around 10 to 12%. Based on my prior posting, I will say with confidence that once the 1%’ers increase their share to 16% of the income we are screwed. That is because, it was as the 1%’ers passed through the 16% mark as their share declined (the income low point in 1933) that the post 1929 economy started its turn upward. On the other end of this time span, it was 1996 that the 1%’ers passed through the 16% point as their share increased. 1996is the year that the 99%ers income fell below the personal consumption line and has stayed there since. Can you say deficit spending? Another funny thing about the 30’s, the second recession, the top 1% hit 19.26% of the income in 1936. The WW2 turn around? The top 1%’ers share finally went below 16% in 1941 and never turned back.

However, here is the meat. Using 1976 as the center point of the range because it is the low point of the share of income for the top 1%, there are 5 times that GDP doubled for an average of 8.6 years per doubling. This during the time that income share was becoming more equal. As income became less equal over the next 32 years, there are only 3 doublings of GDP or once every 10.6 years. Also, the time between doubling is increasing to more than during the prior 43 years.

Now, for the class war aspect. In the first 43 years, the top 1% saw their income double only 3 times (1 every 14.3 yrs) compared to the bottom 99% seeing theirs double 4 times (1 every 10.75 yrs). During the next 32 years, the top 1% has experienced 4 doublings, one every 8 years compared to the 99% experiencing this only twice, one every 11 years.

Here is the graph that illustrates the relationship of shifting income share and GDP growth. Following Spencer’s past suggestion, the graph is a logarithmic scale.

Income per capita vs GDP graph 12-28-08

Basically, increasing of income was more equal and the economy grew more as the top was losing share. The post 1976 economic policy we have been following has quite frankly been killing our economy. Yeah, it sure benefited the top 1%, they got their’s. But, it could not last because, you can not have one group taking more out of the economic growth faster than it can grow. That, boy’s and girls is the lesson of the first 43 year compared to the last 32 years. For the first 43 years, GDP doubling was always ahead of the income. For the next 32 years, GDP growth was always behind the income which was do to the top 1%’s share. Their’s is the only income that increased faster than the economy. In chart form it looks like this:

First 43 years doubling: GDP 8.6 yrs,  99%’ers 10.75 yrs,  1%’ers 14.3 yrs.
Next 32 years doubling: GDP 10.6 yrs,  99%’ers 11 yrs,  1%’ers 8 yrs.

You know what else this is? It is the difference between reducing debt or increasing debt: Saving or spending tomorrow’s money. Unified budget (illegal) or general budget.

So, what should economic policy in a democracy strive to do? Promote more equality in the nation’s income which everyone helps to produce thus giving everybody a more equitable rise in their standard of living or promote the top 1%’s growth and the hell with all the rest? The rest being 99% of the population, the overall economic growth, the deficit, quality of life (retirement, health care, free time, better life for future generations) and just plain happier people who don’t find a need to fight with everyone else on the planet.

Personally, between this info and my post titled “It’s the big one honey, I know it…”, I think it’s rather clear exactly what needs to be promoted with policy. In case it’s not clear, there is this post “In the Beginning there was Income”.

Such policy if implemented will also act as the stop gap for this current downward trend better than anything proposed so far because it will be returning to the true purpose of an economy in a democracy like ours. Or, we can keep talking in quintiles hiding the truth and pretending that it’s just a housing bubble, and people spending to much, and a credit freeze and bad regulation and oil and lack of stimulus spending and it is not really like 1929 and…

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Noise Traders


Blast from the past but the question remains: How do the wealthy actually plan: rational as in markets, or wealth expectations, see research begun but not continued here:

1990 Noise Traders. Robert will be surprised today.

Update: Link corrected from pdf to html, which is not as easily read. Named authors are Brad DeLong, Andrei Schliefer, Lawrence Summers, Robert Waldmann.

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Workers ruined US Economy by spending and then not working?


PGL at Econospeak points to this article in the NYT by Casey Mulligan.

Mark Thoma at Economist’s View picks up on the item as well, that the reasons for higher unemployment figures lay squarely on the shoulders of US workers.

Good discussion happens at these sites. It sure is a poke in the eye for Joe Sixpack…why not publish this before the election?

Anyway, this is the second article that makes little sense to me in the economic section of the NYT. The worker takes it on the chin for being lulled by the Chinese (and Japanese to be fairer).

bakho and Bruce Wilder make great comments, as well as Noni Mausa adding her penetrating questions. (Have to leave early on a family day trip, so this is short.)

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