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Jon Swift Memorial Blogroll Amnesty Weekend, 2013

This coming weekend is the annual Jon Swift Memorial Blogroll Amnesty, the reasoned, proportionate response to some of the Bigger Names suddenly deciding that they needed to cull their recommendations.  Swift’s brilliant (and certainly modest) proposal was that you should instead find five blogs with lower hits than you and recommend (i.e., promote) them, not drop them.

I don’t need to tell you to read Brad DeLong or Mark Thoma or Bill McBride—or David Altig or David Beckworth.or Jared Bernstein. Or anyone else who is probably already on the AB blog roll.
Things that have been disappearing from view as Blogroll Amnesty Years pass:

  • Single-person blogs
  • Blogs that are not always updated daily
  • Blogs that are not themed but are rather “what the owner feels like mentioning”

The following five are my recommendations for this year, in alphabetical order:

  1. Andrew Rickard (updated almost every day; in perfect timing, just went on a week’s hiatus)
  2. A Boat Against the Current (Mike does update almost every day)
  3. The Hunting of the Snark
  4. You and Me, Dupree
  5. Underbelly (who sent me to Andrew Rickard)

    and a bonus one, because you can never have enough (a) Canadian content or (b) food blogs, let alone both:

  6. Double Trouble, Kitchen Edition
(h/t to Skippy the Bush Kangaroo for the reminder)

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Updates and Notes

Just a quick one:

  1. I was wrong; Greg Sargent and Stan Collender were correct. And, yes, I could not be happier about this, though I still expect that any real evidence of Moderate Republican Senators will show up about the same time as a flock of Ugly Chickens (link not guaranteed to work; reference discussed here).

  2. Jared Bernstein, of whom I am occasionally brutally honest less than deferential, reveals a hithero unknown skill at comedy in this must-read post:

    Most coefficients in the table have the “wrong sign” or are insignificant, except the bold one, suggesting, counter to anti-union theory, states where union density grew most had the best employment growth.

  3. Current Canadian and future BoE leader Mark Carney manages to present both of these as part of his latest Monetary Policy Report:
    • Caution about high debt levels has begun to restrain [Canadian] household spending.
    • The three main downside risks to inflation in Canada relate to [lists two]…and the possibility that growth in Canadian household spending could be weaker
  4. And, with all due respects—and there are many—to Beverly’s multiple posts on President Obama’s “Seneca Falls, Selma, and Stonewall” speech, I’ll continue to disbelieve the Administration’s claims to believing in creating opportunities by its actions. As Dan Crawford noted here yesterday:

    Meanwhile, PBS reporter Martin Smith just reported that in response to his report, the Obama White House has decided to block access to Frontline reporters in their future reporting.

    That’s the Biden/Geithner/Summers Administration I’ve watched these past four years, and anyone believing it is dedicated to justice or creating opportunity is fooling themselves. (I would, of course, love to be wrong here, too. But it’s not the way to bet.) If that was “throwing down the gauntlet,” it’s now being used—as is all too usual—to slap the people who tell the truth, not those who break the law.

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That Time of Year Again

I end up posting this, I believe, every year. And every year, despite not trying at all, I find a newer and better reason to post it. This year, it’s because cities in Virginia, including Harrisonburg City, have their students in school today—a Federal holiday—but made damned certain the kids were out on Friday for [Robert E.]Lee-[Stonewall]Jackson Day. If Barack Obama deserves to reign in Hell over one thing alone, it is because he took locally-popular Democrats like KathleenI’m incompetent, so I will overrule the scientistsSibelius and Janet Napolitano and moved them to DC, weakening the strength of his own Party and (worse) having those Governors replaced by people who make life worse for his constituents in Sam Brownback and Jan Brewer. Jan Brewer probably isn’t as bad as Evan Meacham, but that’s the best anyone has said. Bob McDonnell at least proclaimed today Martin Luther King, Jr., Day,* even if the kids don’t get it off, the way they do for real heroes of his state.

*It would be petty of me to note that McDonnell’s proclamation conspicuously leaves the “Dr.” off the front of Doctor Martin Luther King, Jr. I guess a Ph.D. from Boston University isn’t worth all that much.

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What I Missed These Two Days

Hmm, anything unusual in the world?

Well, Greg Sargent tries to perpetuate the Myth of Moderate (but of course Unnamed) Republican Senators.  Stan Collender gets punked.  Nothing new on the first, but Collender’s previous piece about the realities of the Ancestral Party gives the lie to Sargent’s delusion.  Economics version: the Republican Party is at a stable equilibrium. And has been there or near it for at least sixteen years, which is probably two-thirds of Greg S’s life.  You might think he would notice.

The NRA—most recently seen attacking the President for being President, and before that discussing decade-old video games—released a video game so that four-year-olds can get practice using AR-15s to kill people.  I suspect McMegan and her literacy-impaired cohort, Jeffrey Goldberg, are lamenting that the kids are not being taught to be cannon fodder, but will wait for Susan of Texas (whose current marvelous takedown of Publicity Whore Andrew Sullivan is required reading for everyone fooled into paying money to support his ego) to provide details.

And Brad DeLong’s Better Half put up a post on tobacco surcharges that keeps me from having to figure out the latest AAA insurance policy offering.  If I were a marketing executive at a Life Insurance firm right now, I would be heavily advertising 20-year Term Life policies to 25 to 30-year-old smokers.

Oh, and Notre Dame football has another scandal surrounding it. Scott Lemieux says what needs to be said.  Apparently, “Catholics versus Convicts” is only a matter of who owned the police and the judges.

Probably a good two days not to have gotten out of bed.

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The Problem with Macro, and An Apology

There has been much discussion recently of the “problem” with Macroeconomics. See Nick Rowe, Noah Smith (who may have been punked by a self-selecting sample—or may not have), Mark Thoma, Brad DeLong, RDan’s collection here a while back, and the rest of The Usual Suspects.
Let’s ignore for the moment that the problem with Macro is Micro.  I think I have figured out the other problem with Macro, and I have Victor Matheson to thank for it.

In the midst of a post last week, I noted that there are perpetually claims from economists and that “chained CPI” is a “more accurate” measure of inflation. (Not coincidentally, Chained CPI runs below CPI.)  That not being enough I continued—in the calm, rational manner for which I am known (think a combination of Scipio Aemillianus and William Tecumseh Sherman)—by highlighting Professor Matheson’s otherwise rather innocuous comment chez DeLong that he remembered being told the same thing.

I gave Professor Matheson a “most notably,” when he was hardly the most extreme representative.  Indeed, anyone following the link to his comment would wonder why he was chosen.  It was mainly from this:

While I teach intro to macro, I am not an expert in the minute details of the CPI calculations, and I do remember the talk in the 90s was that the CPI overestimates the true costs of inflation by something like a percentage point or two every year.

But it is my misreading of that.  Note that, while Professor Matheson teaches Introduction to Macroeconomics (presumably Econ 301 or 302), he specifically does not say that he teaches that CPI overestimates the true cost of inflation.

But he does say that he heard it in the 1990s, and does not say he has heard that those claims are bollocks.
Before going further, I want to apologize to Professor Matheson for making him the poster child and putting words into his mouth that his fingers didn’t actually type.  (And, in direct answer to his question chez DeLong, Nancy Ortiz in comments to the previous thread, lays out the biggest problems with “chained CPI” specifically as a measure for Social Security [or generally for anyone without legacy wealth].)

PJR, again in the previous comments thread, correctly sends us to the Boskin Report, and is not impressed:

I conclude that the C-CPI probably answers the wrong question, consequently measures the wrong concept, and conflates inflation with behavioral responses to inflation.

To I trust no one’s great surprise, I consider that a generous interpretation.  Yet the myth persists.  Which is another reason we have a problem with Macro.

Chemists don’t teach Phlogiston Theory. None of the biologists, biochemists, or biophysicists I know talks about the glories of Lamarckism when differentiating between 3’ and 5’ DNA.  But economists still pretend, as they did a decade ago that Gary Becker proved that economics means that discrimination does not exist; that Real Business Cycle Theory can actually explain any significant portion of Business Cycles in either direction; that NAIRU is a workable concept, even as “skill shortages” cause it to be severely discontinuous in a world that claims to have continuous functions (and does not work if it doesn’t).

A world where CPI is a bad measure because people will choose dog food when they cannot afford Hamburger Helper (which we call “chicken-steak,” as if it were Patrick Stewart and Steve Martin negotiating [link will be understood by rjw’s students]) and that the IBM ThinkPads I bought three months ago costs about 1/10th what it did when it was new in 2001 (and I can probably sell it for…bupkis) means that “computing costs” have gone down for consumers.

Not to mention a world of “rational expectations” (“micromotives,” as it were) being generalized so that networks, social interactions, cliques, and indeed governments are treated solely as if they are the sum of the parts.

The problem with Macro remains Micro, and the problem with my previous post remains that I was more than a bit unfair to Professor Matheson of Holy Cross, for which I apologize to him and our readers.
(Discussion of the paper referenced yesterday is deferred to another day.)

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Thank G-d for House Republicans

Dr. Black hits the latest good news from Capitol Hill:

The House has signaled that it isn’t going to play ball today

And I am no longer the only economist noting that the House–not for the first time–is forcing the Administration to do what it should have been ready to do all along. In fact, Brad DeLong cites Tim Noah,* Scott Lemieux and Jon Chait(!), Aging Ezra, and Paul Krugman and Noam Schreiber,** while Jared Bernstein, last seen being willing to further reduce Senior Purchasing Power for a pair of dirty socks, puts it directly:

The thing that worried me most in the endgame is that the [White House] would be so intent on a deal that they’d lock in too few revenues with no path back to the revenue well, and that they’d leave the debt ceiling hanging out there…. Those fears will be realized unless the President really and truly refuses to negotiate on the debt ceiling and is willing to blow past those who would stage a strategic default. If he is not, and if this cliff deal passes, then I fear the WH may have squandered its hard won leverage.

That last is apparently politico-speak for “look who just s*at the bed.” Thank G-d for House Republicans. Otherwise, this Administration would have killed itself long ago.

*Wherein I mix Hebrew and Yiddish in comments. This could become DeLong’s first entirely non-English comments thread… **Sadly, I take this as more evidence that Slouching Toward Prosperity will not be published in my lifetime.

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Dr. Black Did It as a Shorter; Here’s the Data

The problem with waiting overnight to post is that other people figure out the same thing:

If the true CPI-E increases faster than CPI, then chained-CPI is worse, not better.

It’s actually worse than that.  The measure by which Social Security is raised turns out not to be what we usually call CPI (Consumer Price Index for All Urban Consumers), but CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers):

cpivcpiw

What George W. Bush referred to as “the miracle of compound interest” works both ways.  Seniors see their Purchasing Power decline every year.  So when Jared Bernstein, Sensible Centrist, says:

I support the change [to Chained CPI]—it’s a more accurate measure of price growth (though a chained index for the elderly would be better), and I’m sure it’s coming, so I want to get something for it.  That ‘something’ is an offset from the benefit cut for poor, old elderly.

It would be nice to think he was Ernest Lee Sincere.  But we know Jared Bernstein is not innumerate, so we have to assume he’s acting from malice aforethought, since this took me less than 20 minutes to put together from scratch, including the normalization:

threeCPIs

The reason it took me twenty minutes: ten of those were spent trying—unsuccessfully—to find post-2007 CPI-E data.  But unless Mister Bernstein and his cohorts are declaring that costs for the Elderly were actually deflationary from 2008 forward (at which point they would be correctly laughed out of polite society and relegated to Beltway Conversations…oh, wait…), note that CPI-W (the green line and, as noted above, the current, already substandard, measure) is below (that is, less than) the CPI-E line and above (that is, greater than) the Chained CPI line.

It takes three years–until 2010—for CPI-W to reach the 2007 actual CPI-E level.  It takes four years, to 2011, for Chained CPI—the “more accurate measure,” per Mr. Bernstein’s blog post—to get to that level.

The man who says he “I want to get…an offset from the benefit cut for poor, old elderly” in exchange for going to the malicious Chained CPI is basically saying, “I’m going to create a larger and larger group of poor, old elderly in the future in exchange for a couple bowls of gruel now.”

We’ve seen other people make this mistake (most notably Victor Matheson—who, G-d help us, teaches economics at Holy Cross—in comments chez DeLong), but rarely are we so clearly reminded that not only is Barack Obama a poor negotiator, but (again: see Summers, Geithner) the people he had and has negotiating for him are venal.

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Notes Toward Economics at (or, more accurately, approaching) the Eschaton

No, not Dr. Black’s blog.  The real eschaton: the end of everything.  Or, in this case, its economics equivalent: the point at which almost all human work is no longer necessary but human beings still exist.

The scenario is a simple one.  There are x humans on Earth (x>>1).  Self-repairing, recycling machines can provide all the needs and wants of those x people and then some.*  There is only one job humans need to do: every day, one person needs to press one button once–during a specific time period—to start the self-rebuilding and repairing of the machines.

Applying basic micro and macro economic theories, and assuming a money-using society, we can come to several stylized facts:

  1. This is the true case where Chamley (1995, 1996) applies.  The only capital created is exactly that that replaces current capital.  With no new capital, the effective tax rate on capital should be 0%.**
  2. The requirement that someone presses the button has two aspects:
    1. It is not required to be skilled labor
    2. It is, however, essential labor
  3. In standard economic theory, the laborer is paid hisser Marginal Product
    1. The pressing of the button provides all of the goods to everyone for that day; since there is no MPK in this scenario, the MPL should equal the net profits from that day.
    2. Pressing the button requires the laborer to choose to do the job instead of something more pleasant; therefore, they must be compensated to provide at least as much Utility as not pushing the button would provide them
    3. For a sufficiently large population x, there may well be people who will not press the button in their lifetimes.  For even relatively large x, there will be people who will press the button less frequently than they will need to buy goods.
      1. In either of those scenarios—unless we consider Malthusian constraints necessary in a time of abundant plenty—any equilibrium condition will require that each person and any of hisser dependents be supported s.t. AD does not decline.

The natural scenario for button-pushing selection is by lottery, which would also minimize the substitution effect. Some constraints would be required: may not repeat for at least z days, cannot sell/buyout of doing the job (though some intraweek switching possible), backup available in case of illness,*** etc.

What is interesting is the tax rate t required.  It is fairly easy to show that for even moderate populations, t must approach 100% if the laborer is indeed receiving the day’s MPL.****  This is in part because, since no new capital is being created, tax revenues from capital must approach 0%.

The problem then becomes one of Game Theory.  We know what the Final State must be if all activity leading up to it is rational.  The next question is how we get there.  But that will have to be deferred to my next post.

Enjoy the Holiday.

 

*Excess capacity needs to be assumed if you assume humans are still breeding; that is, an additional y babies (y<

**It is caddish of me to note that Chamley’s brilliant realization that has been the underpinning of several decades of freshwater economic theory is, of course, completely reflected in the U.S. tax code, where investment is offset directly by depreciation.

***Anyone who designs a non-redundant system with a Single Point of Failure should be shot. The applicability of this to economic models, and most especially microeconomic models, is left as an exercise to the reader.

****It is also intuitive that a large consumption tax would not be a reasonable substitute for such an income tax; even a “luxury tax” presents significant timing issues for even a small population.

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