Nick Rowe was looking for the role of money in the Heuristic Macro Model, which is often used to introduce students to Trade economics. The problem he discovered is that there is only a role for money if there is friction in the model, and therefore a two-household (or household-firm or firm-firm) model makes money if not superfluous, then at least a poor substitute to direct barter.

Following is a “finger exercise” for introductory economics the way (I think) it should be taught, using that heuristic model and the Whopper story that often is used at the start of Introduction to Economics.¹

Telling a Whopper

The Whopper story basically has the eager student challenging talk about scarcity and optimal reource allocation by saying, “But I can go into Burger King and get a Whopper for $1 and I can keep ordering $1 Whoppers all night.” The general Professorial Counter runs “well, that wouldn’t really happen because you run out of money and/or they run out of supplies,” which is a missed opportunity.

First, relax all of the normal constraints. You have an unlimited cash availability, and the Burger King has unlimited supplies and is open 24/7. Both the workers and any other customers are nether going to be irritated by you buying a new Whopper every five or ten minutes nor start calling their friends/hitting social media to get others to see the “spectacle” (no external incentives to start or stop). Oh, and the $1 price includes any taxes.

All Hail Declining Marginal Utility

For the first few rounds, both parties will act in keeping with the premise. You get your second, third, fourth, and even fifth Whopper and have spent $5.

You also are now less hungry than when you bought the first Whopper. That first Whopper cost you $1–and you valued it at least that much, if not more (consumer surplus >=0). The second was almost as good as the first; still well worth its dollar. The third, fourth, and fifth aren’t being eaten to satisfy hunger pangs, but you enjoy them at the $1 price.

You always have the same choice: give a dollar, get a Whopper. But sooner or later,² you will decide that keeping that next $1 in your pocket is worth more than eating another Whopper (consumer surplus<0).

On to the Model

In comments to NDD’s post, Terry says:

Wisconsin—except for Milwaukee and Madison —basically opened up with no restrictions as a result of the Wisconsin Supreme Court ruling 4 weeks ago and much to the delight of the late night comics people flocked to taverns without regard of masks or social distancing. I certainly expected to see numbers bump up by now but in fact they have fallen steadily

Cool if true, but, as Warner Wolf said, let’s go to the video tape data:

author calculations from NYT County-level data

I’m seeing a pop in cases about two to three weeks after the ruling, which rather matches Terry’s (and the world’s) initial expectations.

If you look at the time after those two well-predicted spikes, they look as if they might—best case—return to the mid-May, still pre-“reopening” levels. This is most likely because large firms and stores and most non-alcoholics (unlike the gerrymandered abomination that is the lame-duck Wisconsin Supreme Court) are taking a cautious approach to returning people to work and restaurants and shops to full capacity (assuming they still have disposable income).

Chattahoochee County, Georgia, had a significant increase in cases from a relatively high (ca. 50) base. Fort Benning’s new cases appear to be the source, even as those are not fully reported in the NYT data yet.

Scurry County, Texas, is more typical; a 1200% (not a typo) increase—but from a base of two (2). Curiously, the Snyder, TX, website still lists 33 cases in the county, while the NYT data indicates about seven of those have been removed.

This is independent of the Huntsville, Texas, prison facility with significant issues, which is in Walker County. There have been more than 900 new cases there in the past eight days.

Arkansas has been a microcosm of what not to do, so it’s no surprise that both Jackson and Nevada Counties there are showing huge increases, though from relatively small bases. I can find no online explanation for the growth in either location.

Cache County, Utah, is home to Logan, now showing one of the fastest growth rates in cases—including nearly a ten-fold increase since Memorial Day: “The growth in northern Utah is driven by the increase of cases at the JBS meat packing plant in Hyrum.” I’m going to tell my students next semester that being an omnivorous human, in addition to decreasing your lifespan, creates negative externalities.

The State of Virginia may well be trending in a positive direction, but Greensville County is an exception, with a four-day increase of just under 70%, and more than a 400% increase since Memorial Day. There is a prison facility there, but local authorities say that isn’t the reason for the increase.

As a final note for today, Otero County in New Mexico, is the home of an “immigration detention facility.” Those cases were previously allocated to Otero and Doña Ana counties, have been treated as State only for the past month, but another prison (one authorities admit is one) is still counted as being in the county. Given the data, it seems likely that the NYT source is still counting the ICE black ops site as part of Otero county.

Shot:

Protecting Your Business From Legal Liability During Reopening
May 15 @ 11:00 am – 12:00 pm

In this brief 30-minute webinar, we will step business owners through the liability concerns when reopening following the COVID-19 shutdown. Bobbi Berkhof will inform entrepreneurs why following local, state, and federal recommendations may help protect the business from lawsuits, potentially stemming from employees and customers.

Chaser:

Or, in table form:

As noted in my last post, I have been looking at data. This usually causes trouble, and today is no exception.

As anyone who was paying attention predicted, the “Easter Effect”–a large gathering of people (“EC” or Otherwise) in an enclosed area that likely has multiple asymptomatic carriers (and likely a few with symptoms) is a recipe for infection. With a two- to three-week gestation period, that there was going to be an increase in cases at the end of April was well known. The only question was how much. Without running the numbers carefully, it looks as if it was about 10% above trend.

But the overall data covers for a lot of local sins. If you look at the places that have a high percentage of people infected, the relatively large Metropolitan Areas are no surprise: Providence, Worcester (MA), and NYC suburbs and exurbs (think Rockland, Westchester, Nassau, Suffolk, and Orange Counties in NY State; Passaic, Union, Hudson, Bergen, and my own Essex County in NJ).

But Cass County, Indiana, is running at over a 4% infection rate. With a County size of about 38,000 people, they’re reporting just under 1,600 cases.

Will anyone be surprised that those cases were not evenly distributed? Not really convinced this is what people have in mind when they say, “He is Risen”:

My source is the New York Times’s County-level data (h/t Charles Gaba at acasignups.net); their source is probably the Indiana State Deparment of Health, which has been getting an A+ for their data from the Covid Tracking Project.)

Data excerpt attached below.

CassCountyTable

I’m back to playing with data, so there will probably be more posts coming soon. (Sorry.)

Meanwhile, this one was irresistible. FRED® has a “Natural Rate of Unemployment” data series. Apparently, the evil of the United States is that—except for the second half of the Clinton Administration where it was worth people’s while—Americans Just Don’t Work Enough,

Same graphic, excluding last month and with the monthly employment data averaged to match the Quarterly NAIRU.

Figure 1

What happens when you downsize a large number of people? Well, it depends on the cohort downsized. In this case,

Figure 1

That’s correct; Average Hourly Earnings skyrocketed from $28.67 to $30.01: up $1.34.

For context, that one-month change matches the average hourly earnings growth from September/October of 2018 until March of this year–18 months of increases in a month. And all it took was eliminating the jobs of about 6% of the U.S. population (not just workers).

It’s That Day again. I mostly stayed off Facebook (except for birthday greetings) and Twitter, but even LinkedIn has posts of now-yellowed newspaper articles of survivors–and probably some of those who didn’t.

In another ten years, it will be as far from 11 Sep 2001 as that date was from 11 Sep 1973.

At least now, most people know what a sh*t Rudy Giuliani was, both in setting up the firefighters for disaster and moving the NYC Office of Emergency Management Command Center from the safest location in the city–the basement of 1 Police Plaza–to the 23rd floor of a building in a complex that had already been bombed once before he did it. While he and Bernard Kerik got to Be Adulterers on taxpayer money, somewhere between one-third and one-half of the 343 firefighters they murdered outright certainly could have been saved. Though that would have been more people who, but for the grace (and anger) of Jon Stewart, would still be trying to get health care. Rudy’s tombstone should read: ““This group’s finding is that the security of the proposed O.E.M. Command Center cannot be reasonably guaranteed” — July 1998″

Yes, I’m still bitter. No, I’m not going to post anything nearly as subtle as this, which is probably my ultimate contribution to the genre of In The Shadow of The Towers. I’m going to talk about Milton Friedman. Because it’s the 18th anniversary, so it’s now old enough to vote–or, especially in the pre-26th Amendment world–be drafted.

Let’s be clear: Milton Friedman had one good idea in his life, and that was that his alma mater should not sponsor a football team. Even a broken clock, and the program whose highlights are Ray Rice and Greg Schiano (whose skills included guiding the team to a money-losing Bowl appearance) isn’t exactly something that could justify Superstar Economics Theory.

Milton Friedman, like Gary Becker, was wrong about almost every social policy recommendation he made. While it might be difficult to identify what he was most wrong about, a leading contender is The Elimination of the Draft, which he championed for years and finally shepherded through the Nixon Administration.

After all, people should be Free to Starve Choose, and conscription is certainly not a “choice.” Choice can discriminate; conscription means mandatory attendance or a demonstrable reason to be excused. Friedman’s ghost, twirling at Mach 3 in the Eighth Circle, probably rues that males still must register for Selective Service.

So we have a story published just over two years ago on America’s only remaining news source becoming evermore real. While before people who didn’t want to be subject to two years of training and possibly warfare had to at least come up with a somewhat reasonable excuse (*cough* bone spurs *cough*) or face jail time, the scions of the elite have no “skin in the game.” So the Longest War in U.S. History continues: planned as well as it was executed, executed as well as its objectives were planned. While the planners well know that their sons (and daughters) will not even have to come up with the lies they did to avoid any chance of being killed.

Because Milton Friedman said that would not be Freedom. And people believed him, because “freedom” means you don’t have to “have skin in the game” (literally, in this case) if you don’t want to, even if your actions caused the problem.

I suspect Rudy Giuliani approves.

The scary headlines of the past few days have been well-discussed below by Dale Coberly and Barkley Rosser.

Data, however, is only as good as its assumptions, and the overall trend is well worth a glance. (Note: I took the 2013-2017 data from BC professor (and director of their Center for Retirement Research) Alicia H. Munnell’s Table 1 here.

Note that last year’s projection that 2018 would have a funding shortfall turned out to be so incorrect that this year’s report didn’t even pretend there would be excessive demand until next year.* Also note that, despite a relatively anemic recovery in the labor force, the projection “we’re out of funds” date keeps getting extended, though not so much as it did pre-Tepid Depression years.

More coming up. As usual, the report is only so good as its data assumptions and there are some interesting assumptions made.

*Part of this, as Henry Aaron noted Tuesday, is that the Disability portion of SSDI has declined precipitously from projections.

March 27:

TEGUCIGALPA (Reuters) – The United States said on Wednesday it had reached an agreement with three Central American countries to carry out joint police operations in the region, as the Trump administration seeks to stem the flow of migrants across its southern border.

The governments of Guatemala, Honduras, El Salvador and the United States said in a statement they had agreed to a series of measures, including joint police work, improved border security, and efforts to deter international crime and curb “irregular migration.”

March 30:

WASHINGTON/EL PASO, Texas (Reuters) – The U.S. government cut aid to El Salvador, Guatemala and Honduras on Saturday after President Donald Trump blasted the Central American countries for sending migrants to the United States and threatened to shutter the U.S.-Mexico border.

A surge of asylum seekers from the three countries have sought to enter the United States across the southern border in recent days. On Friday, Trump accused the nations of having “set up” migrant caravans and sent them north.

As I have said before, it’s fairly easy to understand how the man went broke running casinos, even without noticing that Atlantic City is a drab and dreary place in the Winter.