October 11, 2006
Deficit Down Thanks to Taxpayers
President Bush can take credit all he wants for the 2006 budget deficit, "the smallest amount of red ink in four years" to use the AP's words. What disappoints me is how the deficit went down:
Both spending and tax revenues climbed to all-time highs in 2006. The sharp narrowing of the deficit reflected the fact that revenues climbed by 11.7 percent, outpacing the 7.3 percent increase in spending.
That's more money being sucked out of private hands and into a government that's incapable of spending it wisely. Imagine where the deficit would be if Congress could control its spending appetite and the President was willing to veto a spending bill.
October 05, 2006
Cheap Drugs Already Available at FL Wal-Marts
Wal-Mart pushed up its plan to sell some prescription drug for $4/month, four months sooner than expected.
Wall Street wasn't happy. The retailer's shares fell during the day. But Wal-Mart isn't stupid. They must think there's good money to be made even from drastically cutting drug costs.
"Wal-Mart To Sell Low-Price Drugs Sooner Than Expected"
September 27, 2006
Dow Jones Index Near All-Time High
An economic story that's flown under the radar is the rise of the stock market to near-record heights. It's almost come back from the Internet stock-charged bubble that burst in 2000:
The Dow Jones industrial average is just 53.59 points away from its all-time high close, going into today's trading. In pre-market trading, Dow Jones futures are up 3 points, S&P 500 futures rose 0.5 of a point, and Nasdaq futures rose 2.8 points.
When Bill Clinton was President I remember his administration touting new stock market high after new stock market high as a sign of their success in managing the economy. I think President Bush and the gang should do a little crowing of their own.
"Dow Just 53.59 from All-Time High Close"
September 20, 2006
Indiana Refinery to be Expanded
BP wants to expand its Indiana oil refinery to process Canadian oil. Those who complain about high gas prices and reliance on Middle East oil should get on board and make sure the regulators give their approval.
"BP Planning $3 Billion Whiting Refinery Investment"
September 18, 2006
Ford-GM Have Talked about Merging
GM and Ford merging would rock more than Detroit:
Senior executives at General Motors and Ford Motor Co. have discussed a merger or alliance, according to several sources familiar with the talks.
The Chevy and Ford fanatics would puke. For me, I'd want to short the combined company's stock. Nothing good happens when you take one faltering company and mush it together with another faltering company. Either GM or Ford will have to go under before the labor unions and calcified management really shake things up, become more innovative, and make cars people want to buy.
Both Ford and GM have to get under their union contracts and start from scratch. That means some factories would be unionized while other wouldn't. It means building cars would be more like building computers. Cars would go from designs to sell-able product in months instead of years. It means designing factories and manufacturing processes to quickly shift production from slow-selling vehicles to more popular cars. That way the companies wouldn't have to shut down production or offer margin-crimping incentives. GM and Ford have learn much from Toyota, Honda, and the other Japanese car companies. Now, they should look to Silicon Valley as their model. If they did it right they'd leapfrog the Japanese and be kings of the next generation of car making.
"The Ultimate Alliance"
UPDATE: GM's and Ford's home state has an abundance of economic problems as Jay Reding notes.
September 06, 2006
Get Ready to Flip that Playstation 3
People looking for a way to make a quick (legal) buck should know Sony has lowered the expected number of Playstation 3 consoles that will make it to North America this fall:
Sony Computer Entertainment Chief Ken Kutaragi told reporters that far fewer units will be available for the U.S. and Japanese launches, with the U.S. to be allocated 400,000 units, and Japan getting 100,000. As a result, Sony has now lowered its estimate of 4 million PS3s shipped by the end of 2006 to a more realistic 2 million.
Like what happened last year with the Xbox 360, eBay will be buzzing with high-priced game console auctions. European gamers with large wallets will be wanting their PS3.
"North American, Japanese PS3 Launch Limited to 500,000 Units"
"Sony’s PS3 Delayed In Europe"
September 05, 2006
Carnival of the Capitalists
The Business of America is Business hosts this week's Carnival of the Capitalists Q & A style.
August 24, 2006
Ford Might Go Private
Ford is thinking of going private and ditching the constant pressure to report to Wall Street while it restructures. The company's stock is in the tank with its market capitalization down to $14.5 billion. That would make Ford a tempting target for outside buyers if the Ford family didn't control 40% of the voting stock.
"Ford Motor Considers Going Private"
August 23, 2006
79-Year-Old Earns Economics Ph.D.
For my econ geek readers here's a story to let you know it's never too late to get that Ph.D.:
After a long and fruitful career, 79-year-old master’s degree graduate Herbert Baum has returned to the University of Chicago to earn his Ph.D. The oldest person ever to be awarded a doctorate by the University, Baum will receive the degree in economics Friday, Aug. 25.
Baum's dissertation committee included three Nobel Prize winners.
August 22, 2006
Carnival of the Capitalists
Forty Media hosts this week's Carnival of the Capitalists.
August 21, 2006
King Leopold and Government Constraint
Belgian King Leopold II's rule is a case of instututional and cultural contraints limiting a government. It's a case of two Leopolds. As king of Belgium he implemented free trade, and the nation prospered. It prospered so much Leopold undertook public building projects that gave him the name "King-Builder."
But there was another Leopold. In Africa he personally owned the Congo Free State. There he had fewer constraints. He could more easily do what he wanted for personal enrichment. Millions perished.
Brian Micklethwait summarizes well Leopold's lessons to political economists:
Leopold II, pursuer of ultimate and permanent power whenever and wherever he could find it, was able to let rip in Africa, but not in Belgium. Her was a civilised Belgian ruler not because he liked his fellow Belgians and welcomed their massed and massive influence over him. He hated it. He just did, in Belgium, what he had to do. The environment made the difference.
"Bruce Bueno de Mesquita on the Logic of Political Survival and the Two Faces of King Leopold II of Belgium"
"The Political Economy of Power"
August 15, 2006
More Money Posts than You Can Shake a Stick At
BarryBlog hosts this week's Carnival of the Capitalists.
August 07, 2006
Alaskan Pipeline Could Take Months to Repair
Fixing the Prudhoe Bay pipeline in Alaska won't be a quick fix:
BP said Monday it discovered corrosion so severe that it will have to replace 16 miles of pipeline at the huge Prudhoe Bay oil field — work that could shut down the nation's single biggest source of domestic crude for months and drive gasoline prices even higher.
When I was finally getting used to $2/gallon gas now I'll have to tolerate $3/gallon for a fairly long time. Those tiny, European Smart cars are looking pretty good right now.
"BP: Pipeline Closing May Last for Months"
July 24, 2006
A Face of Globalization
It's rare that Hilbert, Wisconsin, my hometown, gets a dateline in the Milwaukee Journal Sentinel. There's no way I can ignore the story of Todd Thiel's global investment firm McKinley Reserve managing $1 billion in assets from in such an out-of-the-way place. Cheap communications technology and inexpensive airfares allow Thiel to run his investment firm from little Hilbert.
McKinley Reserve is garnering plenty of attention for its $1 billion RiverWalk real estate investment in Dubai. McKinley is the first American company to actually own the land. That's something Donald Trump can't even lay claim to.
Technology like the internet and mobile phones means Thiel's company can communicate with clients and dealmakers all over the world. Airlines flying almost anywhere mean Thiel can go anywhere to get on-the-ground information and to seal deals personally. With a website like McKinley's you'd never know the company is run in a rural town of 1000.
With the ability to do business anywhere from anywhere something had to bring Thiel back to rural Wisconsin. He comes from a large family with relatives all over the Hilbert area. Hilbert is comfortable. "There's a lot of people who leave to go find things, but everything you need is right here. I don't fight traffic. I don't fight people. The cost of living is obnoxiously low," Thiel told John Schmid. It indeed is a comfortable place.
But access to global communications and travel is a double-edged sword. Thiel could just as easily move his company out of Wisconsin if state economic policies deteriorated. RedPrairie's CEO has trouble recruiting talent because of Wisconsin's high taxes and Milwaukee's high crime. Policy makers have to make sure the state is a pleasant place to live and make money or people like Thiel won't establish billion dollar companies here.
July 23, 2006
Malcolm Gladwell notes a reason not to long for the "good old days:"
[I]n 1949, the highest paid CEO in America was Charlie Wilson of General Motors, who earned $586,100 in salary, bonus and stock. That's roughly equivalent to what some of the better-compensated CEO's are making today.
[via Club for Growth]
July 16, 2006
Marx as Literary Genius
Karl Marx biographer Francis Wheen sees Das Capital as more than a political economic treatise. It's a literary achievement of the first order. The number of literary references in the first volume--the only one completed before Marx's death--is astounding:
In 1976 SS Prawer wrote a 450-page book devoted to Marx's literary references. The first volume of Das Kapital yielded quotations from the Bible, Shakespeare, Goethe, Milton, Voltaire, Homer, Balzac, Dante, Schiller, Sophocles, Plato, Thucydides, Xenophon, Defoe, Cervantes, Dryden, Heine, Virgil, Juvenal, Horace, Thomas More, Samuel Butler - as well as allusions to horror tales, English romantic novels, popular ballads, songs and jingles, melodrama and farce, myths and proverbs.
The book can be read as a vast Gothic novel whose heroes are enslaved and consumed by the monster they created ("Capital which comes into the world soiled with gore from top to toe and oozing blood from every pore"); or as a Victorian melodrama; or as a black farce (in debunking the "phantom-like objectivity" of the commodity to expose the difference between heroic appearance and inglorious reality, Marx is using one of the classic methods of comedy, stripping off the gallant knight's armour to reveal a tubby little man in his underpants); or as a Greek tragedy ("Like Oedipus, the actors in Marx's recounting of human history are in the grip of an inexorable necessity which unfolds itself no matter what they do," C. Frankel writes in Marx and Contemporary Scientific Thought). Or perhaps it is a satirical utopia like the land of the Houyhnhnms in Gulliver's Travels, where every prospect pleases and only man is vile: in Marx's version of capitalist society, as in Jonathan Swift's equine pseudo-paradise, the false Eden is created by reducing ordinary humans to the status of impotent, alienated Yahoos.
To look at Marx's thought--as opposed to Marxism with all its strains--simply as a theory of exploitation and alienation is to look at Adam Smith's The Wealth of Nation without his Theory of Moral Sentiments. Doing such ignores the richness of thought contained in both men's works. It takes economics far from simply being about money.
July 11, 2006
Google to Build Michigan Office
Google announced they will open an office in Ann Arbor, Michigan that will create 1000 jobs within five years. The internet giant is already looking to fill positions.
In its search for a headquarters for his revenue-producing AdWords service Google the company looked at university cities like Boston, Boulder CO, Phoenix, and the winner Ann Arbor. Missing from that list was a Wisconsin city, specifically Madison. That's a city with a reputable university and a highly-educated workforce. AdWords manager David Fischer told the Detroit Free Press, "We see Michigan as an ideal location to recruit the best and brightest workers." Could it be Wisconsin isn't an "ideal location" like Michigan? And could it be one of the reasons it would be difficult for a company to "recruit the best and brightest workers" is the Badger State's tax and business climate? RedPrairie CEO John Jazwiec is considering moving his software company out of Wisconsin because it has trouble recruiting talent. Wisconsin's economic environment might have kept her out of Google's sights which would mean another opportunity lost.
UPDATE: Peter Cohan at Blogging Stocks sees this project as another example of "Google's underlying cheapness gene."
July 05, 2006
Ken Lay Dead at 64
Convicted felon and ex-Enron CEO Ken Lay died of a heart attack:
"Apparently, his heart simply gave out," said Pastor Steve Wende of Houston's First United Methodist Church. Lay, who lived in Houston, frequently vacationed in Colorado.
I think it was more of the stress of a prison sentence and the "$100 million in personal debt."
I found some Democratic Underground wacko looking for the Dick Cheney conspiracy angle:
I have to wonder if Cheney had him killed. Lay knew where a lot of bodies are buried.
Yes, I heard rumors Cheney went hunting with Lay earlier today.
"Enron Founder Kenneth Lay Dies at 64"
June 28, 2006
Ellison Takes Back Gift to Harvard
I'm under the weather today. Sleep has been my best friend. That's why there was no show prep for Charlie Sykes, and my first post is so late today.
Anyway, Oracle's billionaire Larry Ellison took back his gift to Harvard University, and it has to do with outgoing president Larry Summers:
An Oracle spokesman said on Tuesday that Mr Ellison’s decision to withdraw his pledge was “directly related” to the departure of Mr Summers, the controversial former US treasury secretary, whose brusque management style frequently clashed with members of the Harvard faculty.
Ellison loves publicity so I wonder if he timed this announcement for Summers' departure or because Warren Buffett got loads of press for his massive gift to the Gates Foundation.
"Ellison Rescinds $115m Harvard Gift"
June 26, 2006
Buffett Donation is Estate Tax Dodge
You don't get to be the second-richest man in the world by being dumb. Warren Buffett has been a smart investor and is being smart in what happens to his money after he dies. James Taranto notes:
The federal death tax is currently being phased out, but it will reappear in 2011 unless Congress acts--which means that if Buffett lives that long, the government will confiscate 55% of his assets upon his death.
Buffett is wise with his own fortune but isn't smart about the estate tax. He's called its repeal "a terrible mistake." Yet he's finding a way to get out of paying it. That's pretty easy for the Sage of Omaha who can hire the best tax lawyers in the world. If he advocated the end of such pointless wealth redistribution he wouldn't waste money on legal fees, he could have found a more economically or personally satisfying use for his fortune, and we'd all be better off.
Critics Gloss Over Wal-Mart's Cheap Prices
Jason Furman, a self-professed progressive [PDF] who "instinctively recoil[s] at the big-box shopping centers spreading their uniformity across the American landscape" sees the benefits of Wal-Mart:
A range of studies has found that Wal-Mart's prices are 8 percent to 39 percent below the prices of its competitors. The single most careful economic study, co-authored by the well-respected MIT economist Jerry Hausman, found that grocery sales by Wal-Mart and other big-box stores made consumers better off to the tune of 25 percent of food consumption. That doesn't mean much for those of us in the top fifth of the income distribution—we spend only about 3.5 percent of our income on food at home and, at least in my case, most of that shopping is done at high-priced supermarkets like Whole Foods. But that's a huge savings for households in the bottom quintile, which, on average, spend 26 percent of their income on food. In fact, it is equivalent to a 6.5 percent boost in household income—unless the family lives in New York City or one of the other places that have successfully kept Wal-Mart and its ilk away.
So on the matter of price Wal-Mart is good. Of course price isn't the only concern to a consumer. The retail monster is not known for customer service and there are a number of goods and brands that aren't available in their stores because they refuse to deal with Wal-Mart's tough negotiators. Wal-Mart isn't perfect, but even it's biggest cheerleaders wouldn't claim that. The free market allows an assortment of business models from price-focused chains like Wal-Mart to those that emphasise quality, service, atmosphere, and aethetics like Crate & Barrel.
Furman is surprised "by how quickly Wal-Mart's critics move past the issue of low prices?" They move pass that fact because deep down Wal-Mart's critics are anti-capitalist, anti-freedom. They get a strange, negative reaction knowing someone is making a profit. James Joyner puts this view into one sentence: "The thing to keep in mind, however, is that the people who own Wal-Mart make a lot of money, and they are therefore evil." The anti-capitalists view the economy as a zero-sum game where Wal-Mart's profit is derived directly from the low-wage serfs who work in the stores (voluntarily I might add). It's not true, but it helps power their crusade against an American success story.
"Is Wal-Mart Good for the American Working Class?"
June 05, 2006
Adam Smith's Birthday
The founder of economics Adam Smith was born 283 years ago today. Although DealBreaker.com says today is the anniversary of Smith's baptism. Either way, it's good to be reminded of the field of study he started and the brilliant ideas he advanced.
Carnival of the Capitalists
Rethink(IP) hosts this week's Carnival of the Capitalists.
May 30, 2006
Paulson Nominated as Next Treasury Secretary
John Snow resigned and President Bush nominated Goldman Sachs CEO Henry Paulson as the new Treasury Secretary.
Snow has been the most quiet, least public Treasury Secretaries in modern times. Today, President Bush said, the Treasury Secretary is the "chief spokesman for my economic policies." Snow's lack of exposure (whether his fault or the White House's) made him a failure. The economy isn't in recession yet a malaise infest the public's attitude toward it.
Being a long-time Wall Street veteran Paulson will have the investment community's ear. Whether that will translate into getting President Bush more credit for the economy will have to be seen.
The AP has already jumped on Paulson's environmental work. He is chairman of The Nature Conservancy. Unlike most environmental groups it uses donated money to buy land and use rights for protection. They take advantage of the power of private property rights.
"President Bush Nominates Henry Paulson as Treasury Secretary"
"Bush taps Paulson for Treasury Secretary"
"Goldman Sachs Chair Paulson Replacing Snow at Treasury"
UPDATE: Wonkette is occasionally funny. "Paulson: does he have a cold or does he always talk like “Macho Man” Randy Savage?"
May 16, 2006
Gasoline as a Percentage of Income
Glen Whitman whipped up some economic perspective that goes beyond adjusting current gas prices for inflation. He found that gasoline prices as a percentage of household income hasn't reached their early 1980s peak. He writes,
Even looking at the poorest fifth of the population, the fraction of income required to buy gasoline is still lower than it was in the early '80s.
It still doesn't ease the emptiness of my wallet.
May 13, 2006
The Power of Prices
Economics shows that when the price for something goes up consumers look for substitutes. We're seeing an example of this with the Air Force testing a new jet fuel:
In a series of tests — first on engines mounted on blocks and then with B-52's in flight — the Air Force will try to prove that the American military can fly its aircraft by blending traditional crude-oil-based jet fuel with a synthetic liquid made first from natural gas and, eventually, from coal, which is plentiful and cheaper.
As the price of oil goes up synthetic fuels made from coal, which the United States has lots of, become more cost effective.
May 11, 2006
Mont Pelerin Society Essay Contest
A dream of mine is to attend a meeting of the Mont Pelerin Society, a group of classical liberal, libertarian, and conservative thinkers. The organization's website states, "Its sole objective was to facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems." Past members include Ludwig von Mises and my intellectual hero Friedrich von Hayek. Current members include Milton Friedman, James Buchanan, Gary Becker, and Ed Feulner.
If I get my act in gear and write one hell of an essay I could win and be invited. The topic is on this Hayek quote:
From the first establishment of (trade) which served reciprocal but not common purposes, a process has been going on for millennia which, by making rules of conduct independent of the particular purposes of those concerned, made it possible to extend these rules to ever wider circles of undetermined persons and eventually might make possible a universal peaceful order of the world.
That quote contains mini-summaries of Hayek's ideas: the importance of the rule of law, free trade, how dispersed knowledge is used to coordinate economic actions, and how we would have a better, more peaceful world.
Any essay of mine will draw upon Hayek's "The Use of Knowledge in Society." His The Constitution of Liberty and The Road to Serfdom will also have meaningful material. What I will need is a unique angle or hook to get the judges' attention. A few years ago I won an essay contest sponsored by Laissez Faire Books. My winning essay was title "Hayek's Alien Abduction." My hook was having the great economist kidnapped by aliens then transported to the present to see if his fears in The Road to Serfdom came to fruition. I'll need something more substantial to have a shot in the Mont Pelerin Society contest. If you've read any Hayek or have any thoughts on the above quote leave a comment or send me an e-mail.
May 04, 2006
A Picture is Worth a Few Billion Words (or Dollars)
Steve Verdon noticed Tim Russert had a little trouble understanding oil company profits. Being the econ geek he is he whips out some graphs.
"Helping Tim Russert"
May 01, 2006
Day of Rememberance
April 25, 2006
With the talk in Washington (by Republicans no less) of price gouging by oil companies it's obvious basic economics lessons are in order. That's where a resource like Wikipedia comes to the rescue with their entry on supply and demand. If someone knows of a site full of interactive or animated supply and demand graphs let me know. Seeing how the shifting curves affect prices helps me.
Some price manipulation may be occuring--the godfather of capitalism Adam Smith wasn't even that naive--but there's no need to leap to nefarious conclusions when non-evil explanations suffice.
Charlie Sykes read this Wall Street Journal editorial on his show today that applies the basic economic laws to gasoline prices.
April 19, 2006
A Tale of Two Headquarters
From the looks of the company headquarters you'd never guess Wal-Mart was the biggest name in retail. You'd never guess suppliers and potential suppliers come from all over the world to meet with company executives in a structure that looks like a high school. There are no flashing lights, no marble statues of Sam Walton spouting water into the air, and no post-modern architecture.
Comparing the two headquarters is a brief tale of two companies. Wal-Mart strives for efficency and customer satisfaction. Their headquarters is there to achieve those goals with no focus on flash. It's aesthetically unpleasing, but it works; just like your typical Wal-Mart store.
The New York Times is a company in the midst of change. The newspaper business is slowly but surely losing to electronic and alternative media. It has turned from being the United States' "paper of record" to a source of derision, contempt, and ideological bias. Despite the threats to their long-term business they put energy into a new headquarters designed by a famed (and pricey) architect. They even had a reporter do a hit piece on how Wal-Mart was using webloggers to promote the company. That's an interesting way to grow the business. Maybe that thinking is why NY Times investors want changes in how the company's stock is structured. Here's the tale of the tape: New York Times stock vs. Wal-Mart stock. Where would you rather have your money?
April 18, 2006
Weblogger Covers Wal-Mart Media Conference
The center of all that's evil, Lefties would call that Wal-Mart, looks awfully plain. Rob at Say Anything says the "headquarters looks like my high school." Judging by the picture he took he's right.
Rob is down there for the company's media conference. He got a tour of the headquarters and listened into MSM arrogance while getting hijacked by a labor union.
Tom Forbes is also in Bentonville at the conference.
"Wal-Mart Conference Day 1"
April 04, 2006
A Sign of the Bubble Bursting?
Larry Kudlow is always the optimist:
The economy is in a boom.
"Firing on All Cylinders"
March 30, 2006
Bolten Wants Snow Replaced
New White House Chief of Staff Josh Bolten wants Treasury Secretary John Snow replaced. Snow has been pretty much invisible while serving (like his predecessor Paul O'Neill so it's not like anyone would really notice. Part of it is the times we live in. We're at war so the foreign policy departments, State and Defense, get the limelight. Part of it is also the importance placed on the department by the President. Other than tax cuts Bush hasn't been an economics-focus President.
"Chief of Staff Is Expected to Shake Up 2 Key Teams"
March 14, 2006
Chunk of Change
Wow. According to the Legislative Fiscal Bureau (via MJS)...
But not everyone's happy:
Clearly, taxpayers mean nothing to the pro-tax forces in this state. It doesn't matter how much the hypothetical savings could have aided the state and our economy. What matters are state programs, which must be funded with extensive annual increases, regardless of whether we can afford it or not.
This is something the left conveniently forgets about tax and expenditure limits--they do not decrease existing expenditures, or remove funding from certain programs, but merely enforce reasonable growth rates. If necessary, every single program can increase at the given rate. As long as program officials and administrators are responsible, nothing will be "devastated."
I think that's the gist of the problem, however, is responsibility. Those who oppose TELs would never think to impose a requirement of responsibility upon anyone.
March 05, 2006
AT&T to Buy BellSouth
AT&T, formerly SBC, formerly Southwest Bell, formerly one piece of the Ma Bell empire, wants to buy BellSouth, another piece of old Ma (Grandma?) Bell. My initial reaction is this won't happen. There may be plenty of business and public policy reasons for this merger to happen--I am not fond of antitrust laws. It will take a lot of convincing of the public by AT&T and BellSouth that consumers won't be gouged. At a time when many people there's a conspiracy among oil companies to keep gas prices high the public will be highly skeptical of a business deal that reduces the number of major U.S. telecom players to three (AT&T, Qwest, and Verizon).
A part of the press release that caught my eye was the combined company will be headquartered in San Antonio, TX. If the deal goes through the U.S.'s #1 telecom players will be in Texas while the #1 retailer, Wal-Mart will be in Arkansas. Who would have thought 50 years ago that the dominant players in these two industries wouldn't be located either New York City or Chicago?
"AT&T, BellSouth to Merge"
March 03, 2006
Hamilton Never Looked Uglier
The feds continue to ruin our money. No, I'm not talking about inflation. I'm talking about adding garish colors that slowly evolve our fine greenbacks into euros. It's bad enough the fifty-dollar bill is pink. The new ten-dollar bill now includes yellow and red. It looks like the bill is suffering from yellow fever and chicken pox. (Is this prophetic of the bird flu?) Aesthetics have been abandoned to fight the counterfeiters. It means the coin-side of the federal moneymakers has the monopoly on the talent.
"New, More Colorful $10 Bill to Debut"
February 21, 2006
Carnival of the Capitalists
Lots of capitalist goodness at The Stalwart.
January 18, 2006
Carla Howell roughly estimates $7 trillion out of a $12 trillion economy last year was government controlled spending. We live during a time when people like Karl Rove think the nation is on the cusp of a long-term GOP majority. It goes to show you Republican doesn't equal conservative. Go John Shadegg!
January 16, 2006
The Incredible Shrinking Deficit
Steve Conover, The Skeptical Optimist, sees a trend brewing. With some luck and a gridlocked Congress we could see the federal budget deficit at zero in a few years. It's so contrarian to what you hear from the MSM.
You can find this post along with other great business and economics writing at the Carnival of the Capitalists hosted this week by Wordlab.
"The Disappearing Deficit"
December 19, 2005
Sponsored by ACME
Not TAM, but this week's Carnival of the Capitalists hosted by Coyote Blog.
December 05, 2005
Google is a joy for stock owners as well as employees. The perks of working there are lavish:
Meals of all kinds, painstakingly prepared by company chefs, are free at the company's headquarters in Mountain View, Calif., a modern corporate campus known as the Googleplex. Other amenities there include children's day care, doctors, dry cleaning, laundry, a gym, and basketball and volleyball courts. Maternity or paternity leave is 12 weeks at 75 percent of full pay. There is also up to $500 available for takeout meals for the entire family after a newborn arrives, courtesy of Google. Shuttle buses (with wireless Internet access for working while commuting) ferry employees to the Googleplex from throughout the Bay area.
It's easy to offer such great benefits when the company is growing and the money is rolling in. But what happens when times get tough, and they will? Shona L. Brown, vice president of operations said, "We will not pull back on our commitments to employees. The last thing we would do is take it out of the hide of our employees. That is a path to a downward spiral." I'm sure that's what GM thought when they doled out lavish retirment and health benefits that today are crushing the company.
CEO Eric Schmidt is a little more realistic though vague:
Another issue that we will face in the coming years is the maturation of the company, the industry and our work force. We, along with other firms in this industry, are in a rapid growth stage now, but that won't go on forever. Some of our new workers are fresh out of college; others have families and extensive job experience. Their interests and needs are different. We need to provide benefits and a work environment that will be attractive to all ages.
Leftists Would Say Bartlett is "Growing"
Bruce Bartlett isn't a fan of President Bush. Next year, he'll be coming out with a book titled Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. The book got him fired from a conservative think tank. During the Harriet Miers brouhaha he wrote in a column:
The truth that is now dawning on many movement conservatives is that George W. Bush is not one of them and never has been. They were allies for a long time, to be sure, and conservatives used Bush just as he used them. But it now appears that they are headed for divorce. And as with all divorces, the ultimate cause was not the final incident, but the buildup of grievances over a long period that one day could no longer be overlooked, contained or smoothed over.
The case can be made. However Bartlett will lose mucho credibility in conservative circles because he doesn't reject a value-added tax (VAT). NY Times reporter Eduardo Porter writes,
Bruce Bartlett, who worked as an economic aide to Presidents Reagan and George H.W. Bush, recommends the introduction of a value-added tax - a kind of sales tax used in Europe and most other advanced industrial nations - to bring in the large amounts of new revenue he deems necessary to close the enormous budget gap.
I read this and scratched my head. A man who says he's a Reagan conservative wants the federal government to have more taxing power? You be the judge. In a 03.08.05 column he praised the VAT saying it's a "highly efficient tax." He countered VAT critics like the Wall Street Journal Editorial Board who think the VAT is a silent way to squeeze more money out of taxpayers:
Serious academic studies have concluded that the VAT cannot be blamed for raising the overall burden of taxation even in countries where it was a new tax and not a replacement for some existing tax. Writing in the prestigious National Tax Journal in December 1985, economist J.A. Stockfisch found no support for the view that VATs raise either the tax level or government spending.
[The VAT] may turn out to be the least bad way of financing needed tax reforms and the massive growth of federal health care spending that neither the White House nor Congress shows any interest in restraining.
When a conservative begins to advocate ideas that increase the size of government Leftists claim they are "growing" intellectually. They're are starting to realize government's growth is the only way to solve our nation's problems. After reading a 10.30.02 National Review Online column we see Bartlett has indeed grown:
On Saturday (October 26), the Washington Post reported that the Treasury Department is studying plans to impose a value-added tax (VAT) to replace the corporate income tax and finance other tax reforms. This is a dangerous road for the Bush administration to travel, both politically and economically.
The conservative movement doesn't need a "growing" conservative who won't reject a new tax.
December 02, 2005
Wondering about eBay
What's the point of hunting for deals on eBay when sellers slap on a big shipping charge? You may still end up getting a bargain, but something gets lost in the experience.
And I still don't understand the Skype purchase.
November 29, 2005
"Cyber Monday" a Myth
I fell for online marketers' claims that the Monday after Thanksgiving is the big online shopping day:
So what's up with this Cyber Monday idea? A little bit of reality and a whole lot of savvy marketing. It turns out that Shop.org, an association for retailers that sell online, dreamed up the term just days before putting out a Nov. 21 press release touting Cyber Monday as "one of the biggest online shopping days of the year."
The biggest online shopping days are actually "around Dec. 5 and Dec. 15."
Bravo to Shop.org. There are some cleaver people there. Too bad for them I'll discount anything put out by them as pure spin. Like The Who "I won't be fooled again."
Carnival of the Capitalists
Plenty of good econ/biz reading at Gill Blog who hosts this week's Carnival of the Capitalists.
November 20, 2005
Sunday Night Pick-Me-Up
Dead Meat is a documentary that looks at the waiting, and waiting, and waiting...of the Canadian health care system. Unless you're a dog of course.
[via Dr. Helen]
November 14, 2005
Fed to Start Hiding Econ Data
Fiat currency is a given. Money backed in something tangible like gold or a basket of commodities will not happen in my lifetime. Doing so would restrict government power, something that rarely happens in modern times. Given that we're stuck with central banks printing money at will (but using fancy econometric and macroeconomic theories to support them) investors, consumers, and businesses need to know how much money is being created. The Federal Reserve has decided to no longer publish M3 money supply numbers. M3 covers not only cash but checking accounts (demand accounts in econo-speak), savings accounts, CDs, eurodollar deposits, and repurchase agreements. By manipulating the money supply central bankers attempt to regulate business cycles. Sometimes they do ok (Alan Greenspan) and sometimes they really blow it (the Great Depression). If Ben Bernanke becomes the next Fed chairman he will implement some kind of inflation targeting. Economic actors will be better off knowing how well the Fed is doing with the M3 numbers. Transparency is important. Economic actors won't want to rely solely on the good faith of the Fed, especially with a new Fed chair running the show.
Other great economics and business posts are found at this week's Carnival of the Capitalists hosted by The Entrepreneurial Mind.
"Unpleasant Trend - Fed Counters By Stopping Release of M3 Money Supply Data"
November 13, 2005
Peter Drucker, R.I.P.
Management guru Peter Drucker died at 95:
Peter F. Drucker, revered as the father of modern management for his numerous books and articles stressing innovation, entrepreneurship and strategies for dealing with a changing world, died Friday, a spokesman for Claremont Graduate University said.
I first became familiar to him when Newt Gingrich put his The Effective Executive on his reading list.
Drucker's influence on corporate America is substantial. Unfortunately he led to the plethora of business guru-wannabes who fill bookstore shelves with mountains of buzzword-laden dreck.
Here's some blogosphere reaction:
"Peter F. Drucker, Father of Modern Management, Dies at 95"
October 26, 2005
Banian on Bernanke
King goes into Ben Bernanke's idea of "inflation targeting." It may not be that different from what Alan Greenspan has been doing for years. In a later post he goes into the role of the Federal Reserve as an economics research outfit.
"Bernanke, Inflation and Targeting"
October 25, 2005
When economics gets into the news I'm pleased. But the problem with talking about the Fed nominee Ben Bernanke is it goes into an area I'm not well versed in. I'm acquainted with macro and monetary economics from my undergraduate work, but I caught the Hayek bug* and have been more interested in microeconomics--especially the distribution and use of knowledge--and political economy broadly defined. Plus, I'm not fond of the wizbang applied mathematics macro has turned into.
Still, talking about the Federal Reserve and its role in the economy gets the econ gears in my head turning. Here's some blogospheric comments on Bernanke:
October 24, 2005
Bernanke to be Next Fed Chairman
CNN reports President Bush will name Ben Bernanke as the next Federal Reserve Chairman to replace Alan Greenspan. Unlike Harriet Miers Bernanke won't be labled as a Bush crony. The unsurprising pick (he's been mentioned many times as Greenspan's replacement) worked at the Fed before as well as in academia. Currently he's the chairman of the Council of Economic Advisors.
On the plus side he's an inflation hawk like Greenspan. He's in favor of something called "inflation targeting." Here's what he told the Minneapolis Fed:
It's true that the Federal Reserve is already practicing something close to de facto inflation targeting, and I think we've seen many benefits from that. My main suggestion is to take the natural next step and to give an explicit objective, that is, to provide the public with a working definition of price stability in the form of a number or a numerical range for inflation. I believe that that step, though incremental, would have significant marginal benefits relative to current practice.
On the downside he hasn't worked on Wall Street, and it might take a while for the bankers and financiers to get comfortable with the academic.
Here's Bernanke's c.v. and Princeton home page. In August, John Tamny wrote a critical article on Bernanake for National Review. "For his views on money, Bernanke has the potential to be very dangerous," he writes." Brad DeLong countered. It will be fun watching dueling economists for a day or two.
"Bernanke's the Man"
October 08, 2005
Fallen Wall Street Star Weblogs
Henry Blodget was wrapped up in the dotcom boom, bust, and subsequent repercussions. The ex-Wall Street stock analyst (now barred from the industry) now has a weblog. He tackles his past as much as he's allow to:
The first stage of my own personal dotcom bust came when, along with many others, I stayed optimistic too long. For me, this was especially frustrating because I had expected that there would be a major reversal at some point, that the industry would follow a typical boom-bust-boom pattern and that most early entrants would fail. I got the macro pattern right, but I blew the timing. I also vastly underestimated the impact the bust would have on the Internet leaders, the technology industry, and, ultimately, the broader economy. Like most economic phenomena, these events are screamingly obvious in hindsight, and I will always regret not nailing them ahead of time.
Unlike the SEC, the blogosphere won't wait years to hand out a smack down. He's a weblogging newbie who could rise quickly.
October 02, 2005
No More Free Shipping
To cut costs Dell will offer free shipping only if a computer is sent to a post office. The days of free UPS or FedEx shipping are over--until competition drives them to offer it again. (Just like you can expect the auto companies to offer employee prices again when sales get soft.) Some won't like it because they get their mail home delivered and might no know where their post office is. Folks like me don't mind. I'd prefer it sent to someplace where an actual human signed off on it instead of having a delivery person leave a $1000+ box sitting on my porch or next to the garage.
"Dell Stiffs Customers"
September 26, 2005
Better Late Than Never
AnyLetter hosts this week's late Carnival of the Capitalists. The tardiness shouldn't take away for its always high quality content.
September 20, 2005
Cash It All In
WILLisms.com hosts this week's Carnival of the Capitalists.
September 14, 2005
The Wal-Mart Bugaboo
Sen. Glenn Grothman was swept into office because his opponent State Senate Majority Leader Mary Panzer was ineffective in advancing the government-limiting Taxpayers' Bill of Rights (TABOR). We've found nothing has been done with TABOR. It's dead thanks to the new GOP Senate Leader Dale Schultz, a TABOR opponent. Now, Grothman is explaining why in a committee he voted to keep the minimum markup law. On WTMJ radio he put out two reasons: 1) he didn't get his compromise amendment voted on; and 2) he fears Wal-Mart swooping into the gas market, killing off competition, then raising prices. Grothman's first reason is just petty legislator-speak. The second reason has little empirical evidence. I've studied economics for years and know the theory of predatory pricing. The problem is there are few examples of it actually happening. For instance, Wal-Mart has cut prices on food and consumer disposable goods that have driven out mom-and-pop stores selling the same items. It doesn't matter if the state has a minimum markup law or not. There's been no example of Wal-Mart then raising prices after killing competition. That's because there's free entry into the market. A big competitor can come in like Target. Smaller stores adjust to the new competition and offer better service, a better environment, or lower prices on some items. New business models like the dollar stores pop up. Minimum markup backers have not offered any reason why something similar wouldn't happen in the gas market.
Grothman was a breath of fresh air when he came into office. He's now become a big disappointment in a very disappointing Wisconsin Republican Party.
September 12, 2005
eBay Buys Skype
Ebay buying Skype makes little sense unless Meg Whitman is trying to turn her company into the GE of the internet. Sure, Skype technology will allow some eBay buyers and sellers to better communicate. But she could have just as easily (and more cheaply) partnered with Skype. She didn't have to pay $4.1 billion. This is the first purchase for the company that goes outside the e-commerce zone eBay has dominated. If we see more unusual purchases we'll know if Whitman is trying to become the next Jack Welch.
Engadget interviewed Michael Robinson, CEO of SIPhone, a VoIP competitor. Interesting view of the whole market.
"EBay Set to Acquire Skype Technologies"
August 31, 2005
Possible Gas Shortages
Me and my big mouth. Gas hit $3.30 in places around Milwaukee. $3.50-3.75 isn't out of the question. Now, gas stations fear shortages. The problem is state law that says stations can only changes prices once in a 24-hour period. If that price is below the point where supply equals demand then we will have shortages. This law is an instance of putting emotion and "fairness" (whatever that means) before economic logic.
"$3.50 Gas Could Be Next"
August 30, 2005
Going home from work today I saw a station selling gas for $2.99. I'm so glad I filled up Sunday and saved about $0.30/gallon. I won't be shocked to see $3.25/gal gas within a week. Expect a mild recession and even an interest rate cut by Alan Greenspan.
August 29, 2005
Carnival of the Capitalists
Oodles of business and economics posts all in one nice place. CaseySoftware.com hosts this week's Carnival of the Capitalists.
August 27, 2005
The corporate world dodged a bullet with KPMG agreeing to a fine and an outside monitor instead of an indictment. The accounting firm sold questionable tax shelters a Senate subcommittee said cost the federal treasury $1.4 billion. If KPMG would have been indicted it might have dissolved like Arthur Andersen did. Corporations were worried since that would have reduced competition in accounting services when compliance regulations have increased so much in recent years.
"KPMG Agrees to Fine"
August 22, 2005
"Peak Oil" Idea Demolished
Economics' newest celebrity Steven Levitt demolishes a NY Times Sunday Magazine story about "peak oil" and how it means oncoming economic catastrophe. It's obvious to Levitt that writer Peter Maass didn't pay much attention in his economics classes (if he took any). Levitt offers a Cliff Notes version of one very important economic insight:
What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives. If the price of a good goes up, people demand less of it, the companies that make it figure out how to make more of it, and everyone tries to figure out how to produce substitutes for it. Add to that the march of technological innovation (like the green revolution, birth control, etc.). The end result: markets figure out how to deal with problems of supply and demand.
Here's my problem with this analysis: Maas admits that the studies cover only a portion of the known Saudi fields and "date back, in some cases, several decades"! Despite these huge faults, these studies are presented "as perhaps the best public data about the condition and prospects of Saudi reservoirs."
Being a student of economics I'm very sympathetic to Levitt. Incentives matter, the price system conveys scarcities and a lack thereof, and the profit motive drives people to develop new technology and methods to deal with changing prices. If oil continues to go up alternative energy will become cost-effective. We might be reaching the point where nuclear power will be worthwhile even with all the regulatory, security, and insurance burdens placed on them. One thing we can be sure of is a growing global economy will need more energy. Satisfying more wants and needs requires more energy. We're seeing that already in the increased energy needs of developing India and China. Wait until Africa and the Middle East finally get their economic houses in order. We can't conserve our way to growth. In The Bottomless Well Peter Huber and Mark Mills argue that energy conservation ends up leading for more energy use. (Conservation lowers energy's price which increases demand.)
Prices change incentives which in turn change behavior. We may well be reaching the peak of oil production. That doesn't mean economic disaster is at hand, nor does it mean us using less energy. What it does mean is change. That's the one thing that's always constant.
"The Breaking Point"
[Added to OTB's Beltway Traffic Jam.]
July 31, 2005
A Fad is Dead
The company behind the low-carb Atkins died filed for Chapter 11 bankruptcy today.
Atkins Nutritionals Inc., the company that promoted low-carb eating into a national diet craze, filed for bankruptcy court protection Sunday, a company spokesman said.
Who knew federal court was open on a Sunday? Why can't the post office be open then too?
"Low-Carb Pioneer Atkins Files Chapter 11"
Thieves Target Retail
Organized crime has gone domestic. Gangs and crime rings now shoplift razors, prescription drugs, CDs, DVDs, and my favorite, hair-growth products. Yes, there's an black market to help balding men. The Washington Post reports:
Retailers and theft experts say criminals have discovered that large profits can be made relatively easily, and without much risk, by stealing merchandise from crowded, understaffed stores. They say the most stolen items tend to be high-priced, widely used products that are routinely sold in chain stores: over-the-counter medicines, razors, film, CDs and DVDs, baby formula, diapers, batteries, hair-growth and smoking-cessation products, hardware, tools, designer clothes and electronics.
America's car-friendly road system and its resultant sprawl of retail centers not only conveniences shoppers but makes it easy for thieves to hop from store to store before a retail chain notices they've been struck.
Department stores and drug stores aren't the only targets. Bookstores are also targets. They contain small valuable items that can quickly be resold or "returned" for cash or other more-easily sold merchandise.
Much of the problem is pointed out in the Post story. Stores are understaffed. The ceaseless desire for maintaining profit margins, keeping labor costs down, and not raising prices for fickle, internet-informed consumers makes stores vulernable to shoplifting. It also doesn't help if the government isn't talking shoplifting seriously. An anti-theft official for Walgreens, Jerry Biggs has one example:
"I'm going after a guy right now that's been arrested 56 times," Walgreen's Biggs said. "I've got to put together a case that can show this isn't your typical little shoplifter."
You'd think after the third time the police or a prosecutor would have taken this seriously.
"Retail Gangs: A New Breed of Thieves"
July 25, 2005
$134,000 a year! If you got it, flaunt it.
July 24, 2005
Political Calculations hosts this week's Carnival of the Capitalists.
July 18, 2005
Carnival of the Capitalists
The Club for Growth Blog hosts this week's Carnival of the Capitalists. Andrew Roth has lots of good links and some good commentary too.
July 13, 2005
Doha Round Frustration
Daniel Drezner on why free-marketers shouldn't be optimistic about then end of agricultural protection:
The scary thing is that what's proposed represents liberalization of a sort -- agriculture is so heavily protected and subsidized that it will take decades for complete liberalization.... if it ever happens.
The number of people that have to agree on a deal is staggering: top-level negotiators from a host of nations, national leaders, legislators, intellectuals, special interests, and the public. I'm amazed international trade restrictions ever get reduced. Too bad too many people the world over still hold on to the notion that trade is a win-lose game. Then nations would realized that unilateral reductions in their own trade barriers would be in their economic benefit.
"Progress for the Doha Round?"
July 09, 2005
Ending Farm Subsidies
I'd love to see the end of U.S. farm subsidies. President Bush would definitely bolster his free market credentials with me. But the President can say stuff like this all he wants:
Let's join hands as wealthy industrialised nations and say to the world, we are going to get rid of all our agricultural subsidies together.
Bush can't just wave his hand and make the subsides disappear. Congress is in the way. Way back in 1996 the Freedom to Farm bill was passed. That looked like a path to a true agricultural free market. But almost immediately Freedom to Farm was weakened:
Although opponents of the reform legislation were disgruntled because it reduced the level of government control over the nation's agriculture industry, once the bill was passed, most farmers supported the flexibility it provided. Within two years, however, the bill's benefits were dimmed by worldwide economic problems and weather-related disasters in the United States.
Farmers have become a tiny part of the workforce yet they have tremendous clout in Congress. Part of it is the romantic notion of saving the family farm--too bad economic reality has shown most family farms aren't sustainable. Part of the fear is the general fear of international trade. They feel the U.S. shouldn't need foreigners to feed us. That goes against the centuries-old economic concept of comparative advantage. Many lessons have to be relearned constantly.
"Bush: We'll Drop Farm Subsidies If You Will"
June 30, 2005
Flatter is Better
An entire conference on the flat tax. It sounds like a policy wonk's dream. There is this nugget from former Estonian prime minister Mart Laar:
Among his points was the fact that he and his government team were all too young to know it couldn't be done, so they just did it. The IMF told them to prepare for a huge drop in revenue, but it resulted in a big gain which has been maintained. Investment and growth have boomed, and now Estonia is set to lower from the original 26 percent flat rate to a new 20 percent flat rate.
Lots of people in D.C. could learn from little Estonia.
"Estonia Did it First"
June 27, 2005
Kelo-ing the Cable Companies
People dismayed the Supreme Court didn't force cable companies to open their networks to competitors could feel some solace in last week's Kelo decision. As Greg Ransom writes,
Something that most people have overlooked is that fact that the logic of Kelo v. New London extends beyond merely land and buildings. The general logic of Kelo v. New London has it that private property and private purposes are trumped by a govenment’s desire to increase its tax stream. This could be any kind of private property dedicated to any sort of private aim.
All that's needed is for the Center for Digital Democracy or the Consumers Union to convince some government body with eminent domain powers to claim a cable network. Why not? It would be a "public use" for the common good (and I'm sure government would get more taxes out of the deal).
"Cable Wins Supreme Court Battle"
Money Posts Galore
BusinessBlogCast hosts this week's Carnival of the Capitalists.
June 18, 2005
Coffee is a Drop in the Bucket
It takes a hell of a lot of gumption for a law school to worry that its students are going into too much debt because of $3 Starbucks coffee. The example the Washington Post uses is Kirsten Daniels. Three years at Seattle University School of Law has put her $115,000 in debt. The director of career services at the law school calculated that Daniels' coffee consumption will cost her over $4000 including interest. While that is serious money it's ignoring the elephant in the room. The coffee is barely 3% of Daniels' debt. I'd think the school would be a lot more concerned with their students' debt by figuring out how to lower tuition, book costs, and fees. Heaven forbid a bastion of higher education try to control costs. Maybe after that they can then complain about students' "frivilous" spending.
June 12, 2005
Silicon Valley's Brat Pack
When Silicon Valley gets a big long article in the NY Times Magazine I wonder if a tech startup boom is at hand or another bubble is soon to arrive. If venture capital funding is any indication Silicon Valley doesn't even have a boom yet:
Talk of what some in Silicon Valley are calling Web 2.0 began about two years ago. What started as a self-conscious whisper has now turned into a full-throated rallying cry. Significantly, the venture capitalists of Sand Hill Road have joined the chorus. Last year, they sank $7.5 billion into Bay Area startups. That's still a fraction of the staggering sums they invested during the bubble (the high-water mark was $33.2 billion in 2000), but once again they are willing to gamble on the latest startups.
Here is Mark Pincus, founder of Tribe.net:
have egos, they have their insecurities, they're concerned about their current standing in the world. ''Everyone's watching everyone else. Like Hollywood, there's this pecking order, and everyone is fundamentally aware of where they stand in the pecking order. They may pretend like they don't, but they know it.
He also said, "''There's an A-list here, and then there's everyone else. And I'm not A-list."
Then there's Joe Kraus, one of the founders of Excite on appreciation by the Valley's elite:
''You can't underestimate the good feeling you get when people in your wider social circle think you created something really, really cool.
"If You Can Make It in Silicon Valley, You Can Make It . . . in Silicon Valley Again"
June 08, 2005
Is It Hayek?
I'm stealing this from Greg Ransom who used to do this on the now defunked HAYEK-L e-mail list.
Meanwhile, to expose humans' bounded rationality when it comes to economic reasoning is not to kick the legs out from under traditional economics, as is frequently claimed by diehard leftists. The power and legitimacy of markets doesn't depend on perfectly "rational" or consistent choices, but merely on relatively consistent behaviour by individuals acting on their unique knowledge of their circumstances and desires. Although we may be philosophically deluded in thinking that we "know our own minds," we certainly know them way better than those who would plan our affairs for us, whose "folly and presumption" Adam Smith, again, so perceptively noted.
Answer below the fold.
Answer: It isn't Hayek. It's Peter Foster.
June 07, 2005
Expect to Hear the Sky is Falling
Bush bashers and economic nationalists will be freaking out over the news that GM will lay off 25,000 workers. Talk of a "jobless recovery" will return to political economic conversation. But what you won't hear are the all the jobs foreign companies like Hyundai are bringing to the states.
"GM Plans to Cut 25,000 U.S. Jobs by 2008"
June 06, 2005
Carnival of the Capitalists
Get your fill of econ and business posts at the Carnival of the Capitalists hosted this week by GalaTime.
June 04, 2005
Mahashaya, May I Take Your Order?
Outsourcing fast food orders.
More and more pizza restaurants -- including two chains in the Washington area -- are relying on operators at call centers to take orders for delivery and give employees more time and space to focus on food preparation.
Hmm. You just know the economic nationalists will go nuts when McDonald's sets up a call center in Bangalore.
"Call Centers for Fast Food Now a Remote Possibility"
June 03, 2005
Amazing Time Span
Now, a company shutting down part of its operation wouldn't normally justify a TAM post. The economy is inherently dynamic. New ideas and resources are tried daily. That's understandable and praisworthy. But I have to mention Badger Paper Mills in Peshtigo. They're shutting down a papermaking machine that they've been running for 70 years! Human beings are about the only that lasts 70 years anymore. Jobs will be lost but credit must be giving to those who had the ingenuity to keep that hunk operating profitably for so long.
"Badger Shutting Down a Machine"
June 02, 2005
Cox as SEC Chief
President Bush will nominate Rep. Chris Cox to be the next SEC chief. Current SEC chairman William Donaldson is retiring. I don't like this. Cox is one of the biggest tax cuttering in the House. I wonder if this is a sign the President has seen enough tax cuts. This does not bode well since raising Social Security taxes is seen as a possible way to "fix" the welfare state retirement program. We need as many anti-tax people in Congress as possible.
"Bush to Nominate Rep. Cox for SEC Chairman"
May 30, 2005
Removing Chinese Tariffs
In reaction to the Bush administration slapping quotas some Chinese textiles the ChiComs will removes tariffs on "export duties it has charged on 78 types of textile products."
"China to Abolish Textile Export Tariffs"
May 25, 2005
A Tax Increase is Unacceptable
Any compromise would fall far short of Bush's goal of fundamentally overhauling Social Security. It would make big changes to the program yet retain a basic government-provided benefit for all Americans. It would secure the system's financial solvency for many years by cutting promised benefits and raising payroll taxes on high-income workers. But it would not ensure permanent financial stability, as the President has demanded. An agreement would also include some form of personal accounts, just not the White House version. And new savings incentives -- sometimes called add-on accounts -- would be created outside the current Social Security system. "I can see an agreement along those lines," says Heritage Foundation research fellow David C. John, "assuming both sides come off their absolute positions."
Bush's private accounts fall by the wayside. They have lost any traction they might have had after his re-election. Either the President did a lousy job selling them, or a cynical public is too afraid of having more responsiblity over their own retirement. The best idea in decades to free Americans from Big Government is dying. With the death of private accounts you defintely won't see any politician call for allowing people to opt-out of S.S. so they can fund their retirement on their own. A dirty little secret about S.S. is no one can leave because retirees get their money out of the pockets of current workers. The way the system is structured old people need to pay for them (and I never ever get a "thank you").
What is absolute for this conservative is there can be to tax increases. The problems with government isn't that they don't have enough money. Government takes more money out of our pockets than at anytime in American history. And when they get their (our) money all they do is ask for more.
Benefit cuts I could stomach. Increasing the retirement age is also acceptable but doesn't go far enough. It should be pushed to 70. People are living longer, therefore they can work longer. Making cost-of-living adjustments that would slow the increase in S.S. benefits is also acceptable. These changes would better illustrate the fact that S.S. is a welfare state redistribution program cloaked in social insurance garb.
I can't believe President Bush would sign a tax increase after seeing close up what it cost his father. I also can't believe the same man who fought so hard for his tax cuts would make a 180 turn. That would be like him telling war critics they were right about Afghanistan and Iraq and order an immediate pull out.
But if Bush should sign a tax increase that would only delay Social Security's insolvency then he would cause a tremendous tumble in Republican support. Tax hawks and other economic conservatives would throw up their hands and withhold support. They'd say, "What's the point of electing Republicans if they end up raising taxes?" Raising S.S. taxes would surely usher in a Democratic President because the GOP base would be so discouraged.
"What A Social Security Deal Could Look Like"
States in the World Economy
Portugal has over 10 million people. Wisconsin has a little over 5 million. Yet the Badger State's economy is almost 10% bigger. The Club for Growth's Andrew Roth is right, "It’s exactly what the free market is all about, baby…" Let's make sure it stays that way.
May 23, 2005
Carnival of the Capitalists
Oodles of econ posts are collected at the Carnival of the Capitalists hosted this week by Ideologic.
May 18, 2005
Celebrity Economic Illiteracy
Chris Martin of Coldplay is unsettled his band could affect a company's profits.
Martin told reporters at Manhattan's Beacon Theatre that the band was uncomfortable that they sell so many albums they can affect a major corporation's stock price.
Martin also told reporters, "I think shareholders are the great evil of this modern world." That means each and every one of you holding stock in your 401(k) or your child's college fund are evil. Every one of you who believes saving is good personally and nationally or globally are evil. It's because of you that Martin and his bandmates feel like they're slaves to The Man. This while they continue to collect royalty checks from their two previous hit albums.
Notice that Coldplay hasn't decided to cancel their new album X&Y or make music for free. No one forced them to sign with EMI. They could say, "screw it," and walk away from their fame. They could give away new music as long as their large (and also probably evil) bank accounts allow. They won't because they're immature whiners who don't grasp the magnificant results of a global economy filled with joint-stock corporations. Without that institution there would be more suffering, more disease, more poverty, more death on this planet. I feel safe to claim that we wouldn't be hearing Martin's banal economic diatribe if it weren't for the corporation. That's because there wouldn't be a music industry, telecommunications, and Martin would be toiling away as a serf in some field. Get Mr. Gwyneth Paltrow some reading material so he doesn't sound like a complete fool the next time he complains about being a famous slave.
May 15, 2005
Joseph DePalma talks about how valuable retaining customers are to enhancing the bottom line. He writes,
Even if we want to play the devils advocate and say super-conservatively that a 15 - 25% increase in profits occurs for a 5% increase in customer retention, that's proof enough that businesses must direct their efforts on RETAINING CUSTOMERS.
When shopping have you been asked to join some kind of membership? That's another way of making sure you make a return visit. The important thing with a membership program is to offer something of real value. For $25 a year, my company Barnes & Noble gives members an additional 10% off all purchases. That additional discount gets B&N's best customers into the stores a few more times a year. When a lot of people join that really helps boost the bottom line.
For more good business and economics posts check out the latest Carnival of the Capitalists hosted by AnyLetter.
"Tie Up Your Customers"
Finally some greens see the environmental benefits of nuclear power. Or at least they view it as less bad than oil or coal. Hopefully the environmental movement finally matures into accepting the fact that improved lives mean more not less power consumption. By the looks of the NY Times' piece that movement will endure an internal crack-up in the process.
New Quotas on Chinese Clothing
President Bush the anti-free trader strikes again:
The Bush administration is re-imposing quotas on three categories of clothing imports from China, responding to complaints from domestic producers that a surge of Chinese imports was threatening thousands of U.S. jobs.
And just when I thought I was spending too much on clothing.
"White House Re-Imposes Quotas on China"
UPDATE: Oh the irony. President Bush has declared 05.15-05.21 to be World Trade Week where we "recognize the many benefits of free and fair trade in strengthening economies and improving lives."
May 14, 2005
When Rising Incomes are Bad
There's no denying economists are strange fellows. The lastest example is John Hancock Financial Services economist Oscar Gonzalez commenting on the U.S. trade situation. He told the Washington Times,
"But the trade picture is still fairly dismal," he said. "We still are on course to break last year's record trade gap" because consumers are earning more and likely will want to indulge their "appetite for cheap foreign goods," he said.
First and not very important, Gonzalez seems to think the income effect doesn't exist.
Second and more important, Gonzalez worries that people are earning more. That's a bad thing because then they'll buy for foreign goods. So, would Gonzalez prefer consumers not to have higher incomes? How does that help the U.S. economy? It doesn't which means either the Times reporter Patrice Hill botched the interview, Gonzalez did a poor job explaining himself, or the economist doesn't know what he's talking about.
"Exports Boom, Drop in Imports Boost Economy"
May 13, 2005
Buying the Product Not the Politics
Capitalism is about firms collecting resources to create a good or service people want to buy. The product or service has to offer something of value for an acceptable price in order to earn my dollars. For me politics has little to do with it. Charmaine has a post about the the Buy Blue meme floating around Left circles. She has some graphs on how particular companies' employees politically donated. I'm just going to pick out a few:
So there you have it. My life is more productive and fun because I don't deeply examine the politics behind everything I buy. Doing that means letting ideology rule your life. That's a very unconservative way to live. Like I tell people: if I based my music choices on politics I could only listen to Ted Nugent. That, my friends, would not be fun.
"Color-Coded Shopping: Starbucks, Out! Dunkin' Donuts In!"
May 02, 2005
Oodles of econ and biz links are in the Carnival of the Capitalists this week hosted by Incite.
April 30, 2005
Jimmie at The Sundries Shack is not pleased with President Bush's remarks about Social Security:
So instead of an egalitarian system where you get back what you contribute plus some interest on your “contribution", we’re going to have a system where the rich again subsidize the poor? Instead of the regular old Ponzi Scheme, we’re going to get a Ponzi Scheme that redistributes wealth, too?
The sad truth is the government needs Jimmies' and my, and other American's Social Security "contributions" to pay for current retirees. That's what's meant by Pay As You Go (PAYGO). It's the reason Bush only talked about allowing younger workers the option (never mandatory, only voluntary) of putting a portion of one's SS contribution into a personal account. Money would still be needed to pay current and future retirees.
Younger workers like Jimmie and myself are stuck with a system that claims to be a retirement plan* but is really an intergenerational welfare program. That's what it was set up to do, and that's what it is still today.
Jimmie goes on ranting:
You know something? I don’t want any more of my money going to prop up a lifetime of someone else’s stupid financial decisions. I don’t expect any of you to do that for me. I’m sick and tired of hearing how people need Social Security because that check is all they have. I need that money, too. I have rent, car insurance, and utility bills I need to pay and I have some small hope of building my own little nest egg so I’m not one of the people who my children are going to have to support in 40 years. If other people have frittered away a lifetime of savings, tough on ‘em.
I feel his pain. Years ago, I participated in a SS discussion session put on by the Pew Charitable Trust. It was full of ordinary people like myself to discuss how to make SS better. I volunteered to give up all my SS "contributions" and any future claim on them in exchange for a personal account. No one in my group would let me. They thought that someday if I failed to properly fund my retirement I'd come crawling to the government for help. They had no faith that I would take responsiblity for my success or failure. They assumed I'd demand government (i.e. taxpayers') help because that's what everyone does. These people weren't policy wonks. They were just ordinary, concerned citizens. Such cynicism towards a fellow American yearning to be free might be the biggest obstacle facing President Bush. And I don't think he even realizes it.
"So It’s Now a Wealth-Redistributing Ponzi Scheme?"
*James Buchanan wrote (paragraph 40) that SS is accepted because the public is led to believe individual contributions fund one's own retirement instead of current retirees. He dubs this "an illusion of the Puviani sort."
April 29, 2005
Growing Economy Needs More Not Less Energy
In his primetime news conference President Bush said energy prices could go down by helping "growing energy-consumers overseas, like China and India, apply new technologies to use energy more efficiently and reduce global demand of fossil fuels." Efficency only goes so far, but it should certainly help developing economies like China and India. What will encourage efficency even more are rising energy costs. Rising prices tells energy users that they need to economize. The process won't be quick, and it may be painful. Feel the pain of someone who bought a gaz-guzzling SUV just before gas prices shot up.
But the UPI headline is misleading. Bush never called for reducing global energy demand. Saying something like that would be foolish. Man has insatiable desires. Economies organize resources to satisfy those desires. Economies grow when more and more desires are met. Energy is one resource that is needed for growing economies. Effectively using wasted energy is useful, but there comes a point (whether one runs into the laws of physics or diminishing marginal returns) where energy conservation isn't useful and more energy has to be produced. In a free market rising energy prices are a signal that there is a profit opportunity for new energy producers.
Why aren't more energy producers getting into the act? Well, stringent environmental zealots, Not In My Back Yard (NIMBY) protesters, and untold numbers of twisted governmental subsidies, regulations, and disincentives block entrepreneurs' attempts to build more nuclear plants, coal-burning plants, and even alternative energy producers.
It's sad to say, but I think it will take $5/gallon gas and/or multiple regional blackouts like the one that hit the eastern part of the U.S. a few years ago before some people really get serious about increasing U.S. energy production.
"Bush Wants Lowered Global Energy Demand"
April 25, 2005
That noise means a new Carnival of the Capitalists hosted by Peaktalk.
April 19, 2005
No to "Add-On"
House conservatives oppose a Social Security "add-on." It's personal savings accounts within SS or nothing at all.
"Conservatives Oppose Social Security 'Add-Ons'"
April 15, 2005
Tax Day 2005
If you haven't filed your taxes yet you have less than 12 hours. If you haven't thought about getting them done and expect to just drop into an accountant's office or H&R Block, go get an extension and don't bother them. Leave the accountant's alone.
After getting all your stuff into the mail or filed online check out how much spending increased in your (Wisconsin) school district. Then read Charlie Sykes' latest newspaper column. And if you're still in need of material get a copy of Amity Shlaes' The Greedy Hand. Any other anti-tax books you recommend?
UPDATE: One more read is the Journal Sentinel editorial board actually opposed to a tax increase. Don't raise the gas tax, they say, but raise beer and cigarette taxes. You what they say: even a broken clock is right twice a day.
"Where's Gas Tax Outrage?"
April 07, 2005
Regulating Gift Cards
Charlie Sykes just talked about retail gift cards and how some businesses impose fees if the card isn't used in a certain length of time. A state legislator wants to pass a law regulating them (sorry can't find a link). Legislative action on gift cards is equivalent to a tax. Say it costs a business $0.10/year for every $100 is outstanding gift cards. A law requiring cards to never lose value would mean a perpetual cost imposed by the state. No matter if the owner of the cards knows she has them or not as the clock ticks the costs continue to be placed on the business. When the state does that to local governments it's called an unfunded mandate and many are outraged. When it's done to businesses it's called "consumer protection."
Good business sense tells you there shouldn't be any expiration date, and it appears the market is working things out. But what about the many people who lose their cards? Should businesses be required to give replacements? From work experience that seems like a bigger "rip-off" to the consumer. We complain about the government sticking its nose into so many things. They don't need to get involved in gift cards.
March 28, 2005
What's in a Name?
It's bad enough the EU decided to centrally plan what can and can't be in an operating system. The loons also have a veto on what the altered OS can be named.
"Microsoft to Rename Media Player-Less Windows"
March 17, 2005
Some Europeans don't like President Bush's pick of Paul Wolfowitz to run the World Bank. This quote from an unnamed source really makes me love the pick and the President:
Mr. Wolfowitz's nomination today tells us the U.S. couldn't care less what the rest of the world thinks.
"Europeans at World Bank Cool to Wolfowitz Pick"
March 16, 2005
Wolfowitz Picked to be World Bank Chief
President Bush named Defense Undersecretary Paul Wolfowitz to run the World Bank. With him there and John Bolton at the U.N. radical Lefties and paleoconservatives must will be going crazy believing a global neoconservative coup is taking place before their eyes.
I'm not sure how to evalutate the choice. The World Bank, at best, is an anachronism that has little purpose today. It'd be better if it were shut down. I assume Bush hasn't chosen Wolfowitz to liquidate the place, but at least he's better than Bono.
"Bush Taps Wolfowitz as New World Bank President"
March 10, 2005
Through the use of language the NY Times doesn't call a tax increase a tax increase. Some of President Bush's tax cuts are set to expire. Some Senate Republicans are worried about the budget deficit and don't want to extend all the cuts the administration wants. Senators like Judd Gregg, Olympia Snowe, and Lincoln Chafee prefer $70.2 billion verus the White House's $100 billion. If these tax cuts are allowed to expire that's a tax increase. Money that previously wasn't claimed by the government will become so. In short, there are some Senate Republicans who want to raise your taxes. Children of Reagan they're not.
Sen. Chafee tells the Times he's very concerned about the deficit. He's so concerned he braggs about nabbing $16 million in homeland security money (PDF) for Rhode Island and $10 million to reduce noise around an airport (PDF).
Sen. Snowe worries that the government might have to cut programs. Shudder to think. Being a D.C. veteran, she knows federal programs rarely die. They don't even fade away like soldiers. They grow even when their purpose for existing has ended.
"G.O.P. Senators Balk at Tax Cuts in Bush's Budget"
March 08, 2005
Oil of O'Larry
Larry Kudlow tells us to not worry so much about the high price of oil. He's right. Historically, oil today isn't as expensive as it was in the past. Demand is high because of blistering economic growth in China and India. They have millions of people entering the workforce so the demand for energy won't abate. Expect high oil prices for a long time. In a free market this would encourage new sources of energy. In the past few years we've seen the use of natural gas to generate electricity increase. I highly doubt renewable energy sources like wind power can satisfy the United States' unquenchable need for energy. I'm hoping our almost 30-year fear of nuclear power vanishes.
March 07, 2005
Carnival of the Capitalists
Oodles of econ and business posts are collected at this week's Carnival of the Capitalists hosted by Blogcritics.org.
Bono: the "One" for the World Bank?
Bono to run the World Bank? What an absurd idea. Treasury Secretary John Snow didn't take his name off the list, but didn't put it on either.
Wouldn't it be some twisted joke to have U2's lead singer run the World Bank? It would show the lack of confidence the Bush administration had in that institution.
Even considering a rock star to run the World Bank shows to me that its time--if it ever had one--is long gone, and it should be dismantled.
"Will Bono's Next Gig be World Bank President?"
March 04, 2005
February Employment Numbers
I'm going to pick on Reuters and reporter Tim Ahmann a little bit. Here's the lead to a story on the release of February jobs numbers:
U.S. employers added 262,000 jobs last month, the biggest gain in four months, but the good news for workers was tempered by a rise in the jobless rate.
What could I possibly be criticizing this member of the MSM about? They assume the rise in the unemployment rate is a bad thing. Now, you probably just re-read that last sentence to make sure I really did write what I just wrote. You're probably yelling to your computer screen, "Sean, how can the rise in the unemployment rate be a good thing?" My answer, "It's all about context."
The unemployment rate is the percentage of workers actively seeking work divided by the emplyed workforce. There are times when the lots of people are finding work expanding the employed workforce. If the number of workers looking for jobs doesn't grow as fast the unemployment rate falls. There are also times when the number of workers looking for work grows faster than the employed workforce. When that happens the unemployment rate goes up.
From the February numbers it appears the number of job seekers are growing faster than the total number employed. That means many people who previously didn't think the economy as good enough to bother looking for work are now jobseeking. Why bother looking for a job if you think the economy stinks so much your effort will fail?
Jeannine Aversa for the AP better describes the economic situation:
America's employers added a sizable 262,000 jobs in February — the most in four months. The new hiring, however, wasn't sufficiently brisk to accommodate a wave of job seekers, and the overall unemployment rate rose to 5.4 percent.
More people looking for work may be a sign of more confidence in the economy despite what the fall in the consumer confidence index also announced today. (Another possiblity is workers are seeking jobs now because they've depleated their savings.)
I'm not harshly criticizing Ahmann and Reuters because if you ask the man on the street if a rise in the unemployment rate is a good or bad thing most would say it was bad. Their gut instinct is that rising unemployment rate means more people out of work, and that's bad. But as the AP demonstrates superficial economics reporting doesn't have to be the norm.
For some other reaction Ken Jarboe gives us a breakdown of the unemployment numbers by general occupation.
"Job Gains Strong, But Jobless Rate Climbs"
February 26, 2005
Beyond "Compassionate Conservatism"
If Myron Magnet is correct "compassionate conservatism" is only a different method of statism. In no way is it a reduction in the role of government. He writes,
Implicit in compassionate conservatism was the epochal paradigm shift that is now all but explicit. Taken together, compassionate conservatism's elements added up to a sweeping rejection of liberal orthodoxy about how to help the poor, which a half century's worth of experience had discredited. If you want to help the poor, compassionate conservatives argued, liberate them from dependency through welfare reform; free their communities from criminal anarchy through activist policing; give them the education they need to succeed in a modern economy by holding their schools accountable; and let them enjoy the rewards of work by taxing their modest wages lightly--or not at all.
The question of if it's even the federal government's role to meddle in welfare, local policing, education, and addiction is not asked by compassionate conservatives. To an extent the debate is over. The public has demonstrated a desire for the welfare state just more effective. Ten years ago the public was turned off when the Gingrich revolution threatened to shut down the Department of Education. Political beatings like that showed Republicans that the public has little desire to really cut federal spending.
Magnet writes that President Bush's Social Security plan is consistent with compassionate conservatism. What he proposes is a forced savings plan. The hand of government isn't lessened by lowering payroll taxes. No, the government just will allow you a choice of how you want your Social Security "contribution" invested. Granted, individuals have more opportunity, but they don't gain any more freedom.
Politicians' role is to get legislation passed and to get re-elected. Hence, they have to go with the flow of public opinion as much as lead. Classical liberals and small government conservatives like myself can hem and haw all we want about weak-kneed pols and RINOs. But should we be surprised that after feeling the public's pulse well enough to get elected they switch gears to oppose public feeling?
The Right has created a marvelous set of institutions to advance the cause in government. But it's only done part of the job. Instead of the relentless analysis of legislation in Washington, D.C. and state capitols we need an campaign to teach the public a love for liberty and limited government. We need to instill into our fellow men and women that private property is the key to economic dynamism; that government programs my help some the taxes used to fund them lessen individual's ability to solve their own problems; that a bureaucrat in Washington had neither the knowledge nor the information to educate a child a thousand miles away.
Let me state that because of present political realities I support much of what the President is advancing. His ideas take the nation closer to the state our Founding Fathers envisioned when they wrote the constitution. Compassionate conservatism is not the end; it's only one step toward the much smaller state I hope to see the U.S. return to.
"The War on the War on Poverty"
[Added to Wizbang's Automated Linkfest.]
February 23, 2005
Still Working on It
Ugh! How can I call myself an economist (amatuer that is) when I still can grasp this stuff about Social Security transition costs. Want to embarass me more ask me about foreign exchange rates.
"There's No Free Lunch"
February 22, 2005
Some economists including Nobel Prize winner Edward Prescott consider any transition costs for Social Security reform to be a myth. I'm in a hurry to get out the door so I can't decide if they're right or wrong. I'll leave it up to my readers to discuss.
"Social Security 'Transition Costs' a Myth, Say Economists"
[Added to OTB's Beltway Traffic Jam.]
February 17, 2005
Republicans Against Spending Cuts
Since the GOP runs both houses of Congress they don't need Democratic help in passing any bill. Yet it may be Republicans who are the most strident opponents to cutting farm subsidies. Missouri Rep. Jo Ann Emerson worries that farmers in her state "will have a 10 percent loss in their gross income." No concern about the market-distorting effects that harm all consumers. Illinois' Rep. Ray LaHood went demogogic by saying the White House "is trying to balance the budget on the backs of farmers."
"House Lawmakers Say No to Farm Subsidy Cuts"
February 14, 2005
Become Enlighten and Maybe Rich
Weekend Pundit hosts this week's Carnival of the Capitalists.
February 09, 2005
Save Social Security: Soak the Rich
Democrats shouldn't be too despressed about their political setbacks. When it comes to fixing Social Security their 70 years of class warfare, soak-the-rich rhetoric has converted a wide swath of the electorate.
Most Americans are willing to endorse painful steps to ensure Social Security's long-term solvency - steps that nick the rich, that is.
The poll also shows Bush will have to campaign hard to convince voters that personal accounts are the way to go.
"Poll: Tap Wealthy on Social Security"
[Added to OTB's Beltway Traffic Jam.]
I Wanna New Drug...Plan
Why should anyone be shocked that the estimate for the new Medicare prescription drug benefit has shot up to $720 billion? Government entitlements seem to have a way of skyrocketing in cost. When Medicare started in 1965 it cost taxpayers $1 billion a year. By 1971 it ballooned to $7.9 billion. The perception of free money does that.
Democrats are claiming the White House lied to them and the public. If so then the Congressional Budget Office also lied. But Democrats shouldn't gripe about cost when they "complained that the promised benefits would not go far enough."
Since the drugs haven't started flowing yet Congress and the President could get some common sense and end this expensive entitlement. I know, fat chance.
"New White House Estimate Lifts Drug Benefit Cost to $720 Billion"
February 08, 2005
TAM on the Cutting Edge
Neo-Sears will be rolling out a new version of their stores:
The company will open 25 of the new concept stores this spring in former Kmart and Wal-Mart locations that Sears purchased last year.
Last year, when Neo-Sears was born, I told you it was the end of Kmart.
"Sears' New Store to Offer Essentials"
Drudge Gets It Wrong
Drudge reports that White House budget director Josh Bolten "bragged" about the rich paying so much in federal income taxes. "Bragged" is Drudge's word since I've found no mention of it in a Google News search. Drudge quotes Bolten as saying:
If you look at the president's tax cuts as a totality, the income tax, those at the upper end of the spectrum are now paying a larger share of the income tax than they were before.
I know Drudge has been on the President's case for years about Big Government getting bigger, but I can't even detect a hint of bragging by Bolton. Bolton definitely doesn't deserve a WTF nomination. He was just stating what many have said about the U.S. tax structure: the rich pay higher portion in income taxes than any other group. He was talking like a policy wonk. Bolton wasn't taking any pride in that fact. He was just defending the Bush tax cuts from critics who the tax system has become less progressive.
February 07, 2005
No Miller Super Bowl Ads?
I've gone through the online edition of the Journal Sentinel and I found no story reporting on the lack of any Miller ads during the Super Bowl. Ifilm is hosting the ads and it confirmed that Miller didn't air any. When was the last time the #2 beer maker didn't advertise during the Super Bowl? I want to know what SABMiller is thinking. I'm sure shareholders would too. I've e-mailed SABMiller and hope to get a response.
Another company that didn't air a commercial was Coors. Usually the Super Bowl is dominated by engagements in the beer wars. This year, two decided to play pacifists.
UPDATE: It seems Anheuser-Busch bought the privilage of being the only beer company to air ads during the Super Bowl. The Minneapolis Star Tribune reports, "The company has been the exclusive Super Bowl beer advertiser since 1986 and has the rights locked up through next year's game." That can't be right. Miller and Coors have both had beer commercials during the game in the last 19 years. I swear I saw them. I guess not because this Journal Sentinel article backs up the other two. Guess my senility has set in very early.
UPDATE II: Speaking of Super Bowl ads, the racy GoDaddy.com ad only got to be aired once.
UPDATE III: Miller Brewing quickly responded to my e-mail by pointing out A-B's exclusive SB deal. I'm happy they responded so quickly to a set of ill-informed questions.
February 05, 2005
What a Crockpot Can Inspire
Mark Hasty thinks about Wal-Mart and its very microeconomic effects:
My point in all of this is that, while we certainly know that many things have grown unfathomably more expensive since 1976, there’s an awful lot of stuff which has grown cheaper, everyday stuff that we all take for granted. So when you’re shaking your fist at the big-box retailers, remember–without their clout, you’d probably have to spend $60 for a crockpot and $100 for a coffeemaker. Say what you will, the price for the trappings of a middle-class life is less than it used to be.
Just don't tell him I described his piece in such a sterile term.
"We're All Wal-Mart People"
February 01, 2005
My French Boycott Continues
Jacques Chirac has proposed international taxes on financial transactions (the Tobin Tax), bank secrecy, and air and sea transportation. The revenue would go to developing the Third World, but the Adam Smith Institute's Dr. Madsen Pirie thinks there are ulterior motives.
"Don't Back Chirac"
Taxes and an Ancient Question
Power Line's Scott Johnson and John Hinderaker look at who pays what kind of federal taxes. The rich pay most of the income tax that funds everything except Social Security and Medicare. The other income brackets "pay more in payroll taxes (supposedly earmarked for Social Security and Medicare, but in practice co-mingled with all other federal revenues) than they do in income taxes." They then ask a question:
Which leads to the question: What will happen if conservatives succeed, as part of their push for an Ownership Society, in redirecting much of the payroll tax from federal coffers into the personal accounts of workers? Most Americans would then be directly supporting the federal government only through the income tax and the few federal sales and excise taxes (e.g., on gasoline). The result: Most Americans would no longer be making any significant contribution whatever toward the maintenance of the federal government.
Will these Amercians fulfill Aristotle's and James Madison's fears of the masses using their majority power to pillage the rich?
I'd say no. As the payroll tax has become the dominant tax for lower-income Americans these people haven't felt they were feeding from the government's trough. If you ask most people why they should be allowed to use government services they'll tell you they work hard and pay their taxes. Most Americans lump the income and payroll taxes together even though they're separately deducted off their paychecks. In fact, this perception is quite accurate. Johnson and Hindrocker point out the payroll taxes are "co-mingled with all other federal revenues." An unintended consequence of Congress' insatiable desire for revenue all Americans pay for all of government.
"Broad Ownership Needs Broad Taxpaying"
[Added to OTB's Beltway Traffic Jam.]
January 26, 2005
Social Security Weblog
The Club for Growth has a weblog devoted to Social Security reform. This should be good.
January 25, 2005
It's Just a Study
Minnesota Gov. Tim Pawlenty wants to look at how Colorado funds higher education. That state allocates funds through college students. Pawlenty asked that it be studied by his administration. I'm amazed that there's actually hub-bub about a study. About Colorado's approach, Travis Reindl of the American Association of State Colleges and Universities said, "States wouldn't do this unless they had a gun to their head, and Colorado had a fiscal gun to its head." University of Minnesota President Robert Bruininks said it was "a recipe to erode the strength and capacity of the university to support its educational and research programs." When two people who would like to see public universities get an unlimited budget complain about a study I suspect worry about the Colorado approach becoming law. It's also ironic that Reindl and Bruinicks are associated with centers of inquiry yet they complain when a governor attempts some of his own.
"Pawlenty College-Aid Plan Draws Criticism"
January 23, 2005
Walter Wriston: R.I.P.
Walter Wriston, former CEO of Citibank, died this week. His claim to fame: turning banking into an information technology industry. Wriston has a Wisconsin connection. In 1925 his family moved to Appleton, WI because his father was named president of Lawrence University.
"Walter B. Wriston: A Remembrance"
"Walter Wriston, Ex-Citigroup Chief Executive, Dies"
"Walter B. Wriston, Banking Innovator as Chairman of Citicorp, Dies at 85"
January 11, 2005
Krispy Kreme is Fried
Stay away from Krispy Kreme. The stock I mean. The doughnuts are still the golden glazed goodies I dream about. The company decided to restate 2004 earnings. More importantly for investors the company might default on a credit line.
"Krispy Kreme to Restate Earnings for 2004"
Robert Heilbronner, economic historian, died last week. I'm guessing his The Worldly Philosphers was the second-most read economics book of the 20th Century, behind Paul Samuelson's textbook. Many college students read that in an introductary econ class. The power of that book resided in Heilbronner's clear exposition of the ideas of Adam Smith, Karl Marx, and John Keynes. He also brought the study of the subject back to its initial roots as moral philosphy.
"A Realistic Socialist Dies"
"Professor and Economic Historian Robert Heilbroner Dies at 85"
January 04, 2005
One Word: Plastic
James Joyner links to a story on plastic bills replacing paper ones. I'm all for it. Plastic bills are hard to counterfit and they last much longer than paper ones. I just want the government to make U.S. bills green again, not the ugly pink they're becoming.
January 03, 2005
Making Nations Richer and Safer
Timothy Terrell presents some data showing a nation's wealth determines how deadly natural disasters are. To generate wealth states must "allow people to interact in the marketplace without government intrusion." He then counters the belief that more regulation and government programs are needed by using the all-important idea of tradoffs:
Regulation to put technological fixes into place takes away from other contributors to disaster mitigation. Requiring stronger structures means that people cannot devote as many resources to improving communication (to find out in advance about coming disaster), transportation (to get away from approaching calamity), medical care (to keep injuries from turning into deaths, or to treat post-disaster diseases), and so on. In fact, any government mandate is likely to overemphasize some fraction of disaster mitigation, rather than allow people to choose for themselves the appropriate mix. Government funding of tsunami warning systems, for example, may require such an investment in communications networks that medical care or transportation are underfunded. Trying to fund all of these elements of mitigation through the state implies such high taxation that the incentive to produce is reduced, and economic growth is stunted. In fact, more resources going toward disaster mitigation of any type means giving up other things that contribute to long life and well-being: a better diet, education, freedom from crime, safer workplaces, and family and religious obligations.
UPDATE: One effect of the lack of wealth is poor infrastructure as noted by James Joyner.
Bush Sticking Hand in "Wasp Nest"
Cuts in future Social Security benefits will be proposed by the Bush administration. That will tick off the old people. (AARP will spend $5 million on an ad campaign.) For me, since I think all my S.S. "contributions" are going into a black hole, a cut in a promise that can't be fulfilled doesn't bother me. I'm sure a lot of people me age feel the same way.
"Social Security Formula Weighed"
December 30, 2004
Business Can Be Strange
A few years ago, the bright spot for AT&T was its wireless unit. AT&T Wireless got spun off. Earlier this year, it merged with Cingular. Now, AT&T will be going back into the wireless business by using Sprint as its backend. It just has to get back the AT&T Wireless name from Cingular.
It's stories like this that make me understand how some can view capitalism as a chaotic, confusing mess.
"Coming in '05: AT&T Mobile (Via Sprint)"
December 29, 2004
Dealing with Future Disasters
The best way to deal with natural disasters is to be rich enough to take precautions and have the resources available to handle the aftermath. Only when a nation like Sri Lanka is rich enough can she seriously contemplate a tsunami warning system. Madsen Pirie on the Adam Smith Institute weblog offers some ideas to help make poor countries richer:
Cancel their debts (which were run up by a previous generation of predatory despots) and open our markets to their goods. Help them fight AIDS/HIV and Malaria. Help everyone gain access to clean water. Help them tackle corruption and predatory government. Buy their stuff.
These are simple answers that go back to Adam Smith (go figure). The challenge is to build the political will to get them enacted. Hopefully this disaster will wake people up. Then something good will come from this.
"Ending World Poverty"
December 28, 2004
Last CotC of 2004
This week is the worst week of the year to host a weblog linkfest. Last year, I hosted the Carnival of the Capitalists. It was one of the only weeks that wasn't linked by Glenn Reynolds. Thus, I'm giving Dane Carlson some linky love.
Tsunamis' Possible Economic Effects
Early guesses indicate the deadly tsunamis won't hurt U.S. insurance companies. That means the U.S. economy shouldn't see a direct economic effect. But there could be indirect effects to the U.S. economy. That area of Southeast Asia is a source of cheap labor. Look on the tags of your clothes and you'll probably read "Made in Thailand" or "Made in Indonesia" on it. The tsunamis could disrupt a lot of production. That could mean temporary shortages or higher prices on some imports, at least until manufacturers can move production.
"U.S. Insurers Seen Little Exposed to Asia Tsunami"
UPDATE: It's good U.S. insurers have little exposure in SE Asia. They had a rough 2004 with U.S. hurricanes and Asian typhoons. Here's a "wow" statistic I found:
Total insurance premiums per capita in the U.S. averaged $3,638 last year, according to Swiss Re. In Indonesia, the average was $14.50.
One needs to be richer to afford insurance in addition to a tsunami warning system.
"Insurers Took a Hit in 2004"
December 27, 2004
Preparing for the Big One
Glenn Reynolds' latest TCS article expands nicely on the points I've made about economic trade offs and tsunami warning systems. Sri Lanka, Indonesia, Thailand, and the other nations severely hit would have been better off had they been richer. That's easy for me to say since I have the luxury of typing my thoughts on a computer that's connected to the internet. But what is needed is the never-ending fight for global economic freedom. That means tax cuts where they impede growth, adequate law enforcement to protect life and property, innovation, and global free trade.
"Catastrophes and Their Cures"
Many Sri Lankans feel the same way about the lack of a tsunami warning system in the Indian Ocean as air force chief Harry Goonetilleke: "This is tragic. There should have been such an arrangement for the region. This is absolutely not acceptable." So those Asian nations hit by the devestating tsunamis are considering building an early warning system. Of course this will cost money, something countries like Indonesia, Thailand, and Sri Lanka don't have a lot of. The costs of building a system have to be weighed against its effectiveness. A warning means nothing if local areas don't take advantage of it. One can't simply say a tsunami early warning system should be built. If one killer tsunami happens in the Indian Ocean every century would the system be worth it? What must also enter the equation is what will be sacrificed if money is put into an early warning system. Would programs fighting disease get lesser funding? Would infrastructure improvements be postponed? Money going to an early warning system and away from other programs may make nations worse off.
Even during disasters Man cannot change the laws of economics.
"Asia Considers Disaster-Warning System"
December 21, 2004
Cash Register Blues
Steven Taylor has posted some thing he doesn't get. I'll respond to his first item:
Three workers, long line of customers, yet only one register is open.
If the store operates the same way as my bookstore it's a combination of allocating labor and the power of accountants.
Even during the busiest shopping day there are lulls. For instance having every register manned when the store opens at 8:00 a.m. is a waste of money (wages). The store manager has to make educated guesses as to when to max out his cashiers. If he guesses wrong and customers flood the store early, lines build and tactical adjustments have to be made.
Which segues nicely to the second part of my explanation. If they know it or now accountants rule the world. They can take down global companies like Enron and WorldCom, and they can stick wrenches into public policy proposals--we'll see plenty of this with Social Security reform. In a store it's important to give limited access to cash and cash functions. Doing so prevents internal theft and mistakes that can lead to the retail buzzword "shrink." In order to minimize shrink only the management team has access to the store safe, and individual cashiers are assigned a register. That means that when more customers than expected appear in line an "excess" employee can't just hop onto a register and start checking people out. They have to get a manager to get them a cash drawer which has to be counted. Then the employee has to get a manager to sign them onto an unused cash register. Since lots of needy customers are around finding a free manager can take some time. I've seen many instances where someone found a manager, got a drawer, got signed in only to find no one left waiting in line.
There's probably a better way of handling the wax and wane in a store. If you figure a solution out you'll probably be able to make some good money in the consulting business. But for now we're bound by imperfect projections and accounants who have a lot more power than they realize.
"Things I Don’t Get (Christmas Shopping Edition)"
[Of course I shouldn't discount the most obvious explanation: lazy incompetence.]
Way to Go Apple
When it seems like customer service is going down the toilet, some of us get pleasantly surprised.
"I was So Ready to Hate Apple Today"
What's Old is New Again
Retro will never die. At least if marketers have their way.
Remember Spam, that mystery meat in a can? Does Popeye ring any bells? How about White Castle burgers? Maybe you're familiar with these products just from listening to your parents talk about the good old days. But chances are your familiarity will grow next year. Marketers are revving up the publicity machine to turn these darlings of yesteryear into 21st century stars.
"Old Brands, Renewed Appeal"
December 14, 2004
No More Late Fees
One thing that makes capitalism so interesting is the changes that take place due to competition. Netflix and other (relatively) new DVD rental services have done better at satisfying consumers. Rental behemoth Blockbuster is countering by no longer charging late fees. If a customer doesn't return their movie or game within one week of the return date they'll buy it. If the item is returned after that one-week grace period but within 30 days they'll get a credit on their account. I'm not sure if that's a credit onto their credit card or if it can only be used on future rentals.
One result of this is customers won't consider the due date as the real due date. The average return date will be the last day of the grace period because customers won't have the incentive not to return the movies on the "soft" due date. But since Blockbuster test marketed this before rolling it out nationwide, I'm sure they know this.
Another result is the hit the company will take on the bottom line.
Blockbuster, which has more than 4,500 stores in the United States, says it expects to make up the lost revenue from late fees with increased store traffic, reduced promotional and marketing expenses and more focus on managing its operating expenses.
I'm glad I don't have any money invested in Blockbuster. Somehow relying on your customers tardiness doesn't seem like the most reliable way to make money.
December 13, 2004
Warming Up to Dean
On global warming Dean Esmay writes,
My own opinion, for whatever it's worth: Lomberg is right on the most important matter: trying to "fix" global warming by spending trillions of dollars would be inhumane and irresponsible. For the costs associated with such questionable nostrums as the Kyoto protocol, we could do far more to provide clean air and water for most of the world's population, and do far more for extinct species preservation and nature conservation. The Earth has been much hotter (and had much higher CO2 levels) in the past, and the notion that we can control the temperature of the Earth the way we control the thermostat in our homes is absurd.
I've been skeptical about man-made global warming ever since the theory surfaced. However, even if it does exist there are greater environmental issues to be dealt with--and not necessarily via government. It's about priorities and tradeoffs--something many "intellectuals" don't understand.
"The Nature of Science"
At Least de Soto Likes Him
If you have to fill the position of Energy Secretary (name one thing Spence Abraham did in his term--heck name one thing any secretary did) I guess filling it with someone respected by Hernando de Soto is alright.
But if "gets it" on property rights in the developing world then why waste him at Energy? Send him to USAID, have him run Treasury, or better yet send him to Iraq. It sounds like Samuel Bodman is a wasted talent in a wasteful department.
December 08, 2004
IBM Name Change?
The news of IBM selling its PC business to China's Lenovo Group wasn't shocking to me. Big Blue hasn't been big in PCs for years. Dell and HP have whupped them in market share. The fact that a Chinese company bought the division doesn't bother me because IBM has been outsourcing PC manufacturing for years. You can't make this into an "America gets screwed by the Chinese" story. If we did get "screwed" it happened some time ago. What did raise my eyebrow (I can do it just like Spock) was this nugget:
Like other major Chinese manufacturers hoping to expand overseas, Lenovo is planning to leverage a well-known foreign brand name. Liu said the company would be entitled to freely use IBM's brand name in five years' time.
Expect IBM to not be called IBM five years from now. The company will be giving up a lot in branding, but with their focus on computer services and software they must feel a legendary household name wasn't worth as much as the $1.75 billion they got. Let's just hope they don't pick something stupid like Accenture.
"China Computer Maker Acquires IBM PC Biz"
November 30, 2004
Another Wal-Mart Theory
Joe Carter thinks Wal-Mart's bad news isn't really bad. The secret: gift cards.
"The Retailer’s Ruse Redux: What’s Going on with Wal-Mart?"
Midwest Christmas Shopping
In Milwaukee and the Midwest Black Friday's shopping was brisk but it tailed off on Saturday and Sunday. A manager of a Milwaukee mall said, "Saturday was pretty flat, or down." In the story we may have an explanation for Wal-Mart's lackluster November:
While retailers Boston Store, J.C. Penney and Sears, Roebuck & Co. drew crowds on Friday for early-bird deals on jewelry, toys, tools and electronics, some discounters didn't fare as well.
Also "books, music and video games" were the items of choice this weekend. I would argue that Wal-Mart is only really strong in the video game market. They just don't have the selection of books and music like a Barnes & Noble or Best Buy respectively have. Instead of an income effect, shoppers so far just aren't into what Wal-Mart's selling.
"Shoppers' Pace Slowed on Weekend"
November 29, 2004
Sluggish Wal-Mart Sales
While I'm watching the Packers battle the Rams (hopefully the succeed better than my fantasy football team) ponder the possiblity of Wal-Mart having sluggish early Christmas season sales while retail as a whole appearing to be doing well. Professor Bainbridge thinks we're seeing an income effect. With a stronger economy than in year's past people may be shopping more for quality rather than price. With more consumer purchasing power due to greater employment, better pay, and lower taxes price may not be as important in a shopping decision. While Wal-Mart can trump anyone on everyday items (groceries, toiletries, paper products) Christmas shoppers may be more interested in higher quality, name brands. Wal-Mart current product mix maybe unable to pique shoppers' interest. An indication that this may be what's happening we should look to Target's sales. That company's strategy has been to emphasis style rather than price. While Target too offers plenty of low prices they have an image of placing more emphasis on appearance, aethetics, and quality. If Target's sales better match the entire retail field then Professor Bainbridge's theory has more weight.
If you're a worried Wal-Mart investor I wouldn't fret too much. Wal-Mart has the best internal computer system in retail. When you combine that with their buying power Wal-Mart has the ability to figure out what customers want and get those goods to them. I don't think even it is fast enough to make changes in the middle of this shopping season, but don't be surprised if you see more name brands and higher quality goods in their stores.
"Wal-Mart's Woes, Online Shopping, and the Economy: A Comment"
November 21, 2004
Experts: Kmart is Doomed
A bunch of people who get paid to talk about retail said pretty much the same stuff I did about the death of Kmart. But you got it from me two days sooner.
November 17, 2004
Kmart Buys Sears; Will Dump Kmart
Ed Lampert sees the future of retail. It includes Sears but not Kmart. That's the conclusion I've come to after thinking about the Sears-Kmart merger announced today.
Kmart ran smack-dab into the retail hurricane that is Wal-Mart and got blown away driving the company into bankruptcy. Lampert got the company out of its problems, not by boosting sales, but by closing stores. That effort has worked. Now, Lampert sees the Kmart brand as something of little value. They can't out Wal-Mart Sam Walton's creation. That was tried. Other than the Martha Stewart line, the store chain isn't known for style so it would be hard to battle Target on its turf. Just being the store with the Blue Light Special won't cut it.
Sears is in the position of being a hardware store and an appliance store and an apparel store in an age when customers think of Home Depot, Best Buy, and The Gap. Being all things to all people may work, but just not as shopping mall anchor stores where specialization is the word, and stores like Barnes & Noble become new anchors.
Sears Holdings gets Kmart's non-mall real estate plus Sears staid but reliable sensibility. More importantly the new company loses Kmart's bad reputation. There will be places where Kmart will survive, but expect most of the old Kmarts to become new Sears.
Don't think Kmart is doomed? The 50 stores Sears just bought from Kmart will still be turned into Sears. The old Sears CEO and CFO will hold the same titles in Neo-Sears. At least one "industry consultant" (whatever that means), George Whalin, agrees with me:
This is more a real estate deal than anything else. I would be very surprised if Kmart doesn't completely go away in the two to three years, or become something completely different.
Merging two stores loaded with great real estate and some proprietary brands won't be enough to produce a Wal-Mart or Target killer. Stephen Karlson poo-poos the merger as a mediocre combination of mediocre parts. The new Sears, now dubbed "Neo-Sears," will have to find some aspect of the shopping experience that neither Wal-Mart of Target satisfy and deliver on it in a cost effective way.
Wal-Mart wins on price, and Target wins on style. Neo-Sears should try to win on customer service. Neither of the two competitors offer much of it, but that doesn't stop customers from buying from them. Customers may be willing to pay a little more to get more than a greeting from an elderly person and fast check out. It will mean putting a customer service desk in the open instead of tucked away in a corner. It also means hiring and training employees to do more than find a product for the customer. They'll have to suggest complementary items. In essence Neo-Sears should have Marshall Fields' (or another high-end department store) service at value prices. Exclusive brands can get bodies into stores, but great customer service can additional incremental sales.
"Kmart to Acquire Sears in $11 Billion Deal"
"Sears and Kmart to Merge"
"Sears is Kmart is Sears"
"Kmart Buys Sears...Our Analysis"
"Screw the Softer Side"
October 12, 2004
A Realistic View of the Economy
Economic growth requires businesses developing better ways to satisfy consumers' desires. To do this an environment of innovation and incentive is needed. When businesses are free to try out different methods of fulfilling consumers' cravings, and the know they will be rewarded for it you will see more and better goods and services. In short, a growing economy requires an environment of limited regulation and low taxation.
If there were only more stories like this in the USA Today, the American public wouldn't look so much to Washington to solve their economic problems.
"U.S. Job Picture Isn't Drawn in the Oval Office"
September 28, 2004
Slog through the posts below because if you're interested in the potential power of prediction markets like the Iowa Electronic Markets these posts will help you understand some of the strengths and weaknesses of these devices.
While the Manski paper argues there is a weakness in the market-derived probability, Steve Vernon points out that the movement of the probability and the Manski bounds can tell us something about what market participants think will happen.
UPDATE: I just found this Tyler Cowen post. Here's a key paragraph:
The very virtue of prediction markets now becomes their cost. If you hear rumors, in the absence of prediction markets, you can ignore them and pretend they are not true. With asset markets, however, your forecast moves into equality with that of the market, otherwise you would trade. It is precisely this "forcing quality" that makes prediction markets so useful, but also so potent. Price movements are materially and psychologically harder to ignore. The very feature of prediction markets that mobilizes information also mobilizes coordinated social reactions to the embodied information, and not always for the better.
"Prediction Markets: Need We Fear Price Variance?"
September 24, 2004
Blogosphere is Hayekian
I always like posts that reference F. A. Hayek. King's is no different. I wonder if anyone has published a Hayekian analysis of the blogosphere? If not, someone should. Or how about getting the Pope to declare Hayek the saint of the blogosphere?
"Forming Different Information Flows"
September 12, 2004
Dispersed Vs. Centralized Journalism
Steven Horwitz sees the blogosphere's victory over CBS News through Hayekian glasses.
September 01, 2004
Helping The Cause
I want to do what I can to help President Bush in his re-election effort.
In a couple days, I will accept a job offer. That will reduce the unemployment rolls by one person, at least. Now that it's September, September's unemployment rate won't be reported until October. I hope that the lower unemployment rate will further solidify the President's lead in the final weeks of the campaign.
An added bonus, that might make Oliver mad.
August 23, 2004
There's Gold in Those Medals
With all that's happening with the Olympics you just want to read economics and business posts, right? Er, probably not. But check out the latest Carnival of the Capitalists.
August 16, 2004
Culture vs. Prosperity
A growing economy based on computers, electronics, and other gizmos needs energy. Gas, coal, nuclear, wind, solar, whatever, we need power or the machines will stop running, the cars will stop moving, and material improvement will grind to a halt. Oil prices have been high for months, long enough for serious alternatives to be considered. One is liquified natural gas (LNG) transported from overseas on large tanker ships. When the LNG arrives here it can immediately be put to use. It has to have its temperature raised so it can go into the natural gas pipeline network. Thus there is a need to build facilities to take in LNG.
The Passamaquoddy tribe in Maine will be voting tomorrow whether to turn over one-quarter of their reservation to a LNG facility. The Passamaquoddies are poor, and the facility will bring in 70 21st Century jobs (not all of them will go to tribe members) along with the halo of economic benefit that comes with them.
Critics inside the tribe worry that tradition will be lost. If continued poverty (half of the tribe is unemployed) and economic stagnation is tradition, then yes it will be lost to good jobs. It's wrong to assume the Passamaquoddy arrived in North America and stopped evolving culturally and socially over the centuries. I'm confident the tribesmen aren't living in huts and spending hours collecting and hunting for food like their ancestors did. So already some of their tradition has been lost.
As in all aspects of life, tradeoffs are required. The Passamaquoddy can drop the proposed LNG plant and try to find another way out of their poverty. Or they can embrace the economic benefits from the plant and use that gain to save the parts of the culture they feel are most important.
Just look at the rest of the world today. You will find that the richer a nation the more culture is created. This is because once individual needs are satisfied, people can use their surplus on culture--both high and low. Ironically, the best way for the Passamaquoddy to save their culture is to embrace the modern world.
"Maine Tribe Offers Home for Natural Gas Depot"
August 10, 2004
The Small Biz President
If Bill Hobbs had his way, President Bush would be touting how many jobs were created according to the household survey. Hobbs then notes that according to that survey small business does better under Republican administrations. Therefore, it's no surprise one of the poles of the GOP's big tent is small businessmen.
"Republicanomics Helps Small Business"
August 08, 2004
Difference of Opinion
Here we have two smart webloggers who would both be considered pro-Bush or Bush-leaning. Bill Hobbs liked the recent employment numbers, but based on the same information Megan McArdle wrote, "I think we in the media should start practicing saying 'President Kerry.'"
August 05, 2004
Thomas Sowell discusses a range of topics from race to Marxism to rebuilding Iraq.
August 02, 2004
Pass Me the Money
This week's Carnival of the Capitalists is at the Business Evolutionist.
July 20, 2004
Tax Cuts For The Rich
[T]oday marked the end of the tax-cut spending orgy. I’ve spent more than my taxes were reduced, but these improvements were spurred by the tax cut. I just plain felt flush, and that led to this mad spasm of extravagance – fixing a roof, repairing the garage, shoring up the storage room, and replacing windows that were installed during the Woodrow Wilson administration. It’s called “consumer confidence.” It’s a force-multiplier.
We've done the same here, notably taking a cruise last February after a 4-day trip to Miami. Also, while not hiring people to do the work, finishing a level of our basement (our basement is a split level of the house), and other things around here. When the Sarazin Consumer Confidence index rises, you can bet some other activities are going to take place around here, including some land clearing to erect a swing set for my daughter, a new (newer, probably will be a used or "certified Pre-owned") car for me, new clothes/wardrobe for the new job.
Read the whole Lileks piece. I'm changing my DirecTV service provider soon, will be buying my service directly from DirecTV. Lileks' experience leaves me a little weary of making that change. What I did here though, as part of the basement project, was have 2 CAT-5 and a Satellite cable run to several locations in the house, when the basement was all naked. All 3 upstairs bedrooms, the living room, and 2 sets in the downstairs living room and in the downstairs office. While I don't plan to activate the TV/phone/network connections in the guest or daughter's bedrooms, the capabilities are there for it for the next family that lives in this house. I did the "homerun" wiring plan. Now if I get the service switched over to DirecTV, they will install a 3-room service; well, now the wires just come in one place in the house, and I can determine, from the basement, which rooms are "hot" and which are not.
July 17, 2004
Health Care Costs
Perhaps we don't spend enough on healthcare costs in the United States.
A Romanian surgeon who underwent a fit of madness while operating on a man's testicles proceeded to amputate his penis and cut it into three pieces.
July 16, 2004
Twin Cities Light Rail
Minneapolis's light rail line just opened for business last week.
Fraters Libertas's The Elder (not that there is a Younger) points us to an article in The Economist discussing the light rail line. (The article is "premium content" so you have to pay to read the article.) The Elder breaks it down for us a little more sensibly:
And, to conclude that "the return of rail has given the Twin Cities something of a boost" is ridiculously pre-mature. The line opened this month for farg's sake. If there's been a "boost", I'd like someone to please point it out to me.
It certainly will be quite some time before any impact can be realized. Early ridership was "above projections" but that's the novelty of the thing talking. I wonder in the coming months if we will hear from the local news media about the ridership numbers; have they increased? Stayed the same? Dropped?
July 12, 2004
Econ Links Galore
The Outsourcing Weblog is hosting this week's Carnival of the Capitalists.
July 07, 2004
One Step Forward, Two Steps Back
Just when I thought the Bush administration got it together on trade with agreements with Morocco and Central American countries they just have to raise tariffs on imported shrimp. I feel like Charlie Brown. UGH!
A Tax that Will Not Die
We can all agree that World War I is over, right? Then why are we still stuck with a "luxury" tax on telephone calls that origniated in during the Spanish-American War and was revived to pay for WWI? The answer is government inertia and the concept of concentrated benefits verus distributed costs. A 3% tax on phone calls winds up being a small portion of a consumer's total phone bill. For him the effort to lobby his Congressman to nix the tax isn't worth the benefits. On the other side are those inside the government who turn white when there's the possibility of reduced revenue coming to the federal government. These people, for ideological purposes or to protect their bureaucratic turf, lobby heavily to continue the revenue stream. This may have been what happened to the phone call excise tax. In 2000, the House of Representatives voted 420-2 to ax the tax, but the Senate didn't even take up the bill.
"IRS Eyes Net Phone Taxes"
"Public Choice Theory"
Cars for the Poor
The free market argument for why passenger rail shouldn't get government subsidies is that if the service were valued enough by riders they would pay enough in fares to cover the costs. This is very simplistic and doesn't add externalities into the calculation of social cost (if even such a beast actually exists). One arguement of proponents of passenger rail is the poor need means to get to jobs. In a thought experiment, the Heartland Institute's Wendell Cox concludes that giving the poor automobiles would be less costly than subsidizing transit.
[This is analgous to the thought that handing out cash payments (or a negative income tax) to the poor would be cheaper than funding bureaucratic welfare programs.]
"Why Not Just Buy Them Cars?"
June 26, 2004
A Tip of The Cap
Retailer Home Depot Inc. is donating $1 million in tools and materials to support the U.S. military in Iraq.
In a world where there are plenty of choices to make regarding where to shop for home remodeling goods, one could, and possibly should, choose to support a company that is doing something like this. I'm not going to go to Home Depot and spend a couple hundred dollars today, but I'll consider shopping there the next time I need some lumber, or a table saw or a gallon of paint. This isn't to say that your neighborhood hardware store or lumber yard isn't helping out in the war effort in some way. It is saying Home Depot has a PR firm and enough capital and goods to make a large impact.
In mentioning Minnesota blogs earlier, I failed to mention the fine Jay Reding. Another daily stop in my tour of the blogosphere. And, I've been reading asmallvictory for quite a while, before it was fashionable to do so. This is one site I found by visiting The American Mind. So, a tip of the cap all around: To Home Depot, to Jay Reding, to Michelle, and finally to Sean.
June 22, 2004
I don't know how rampant a problem this is across America, but it has been a problem here in Minnesota.
The Minneapolis School Board has chosen its candidate for the next Superintendent of Schools, Thandiwe Peebles. Now the school board is in the process of negotiating her contract, which will likely pay her over $160,000 a year.
Minneapolis attorney Marshall H. Tanick has a piece in today's Star Tribune about the contract and what the school board should do to strengthen the contract.
Tanick is upset, rightfully, that contracts are not written to require an iota of loyalty on the part of the superintendant, but do require the school board to be loyal by providing payment, a car, a vacation policy, etc.
Previous superintendents in Minneapolis have left town before the end of their contract term, often with healthy package of unused vacation and sick time, and a pension. Then a new candidate search is started. And Minneapolis only looks for national candidates it seems. Nobody local is good enough.
Taxpayers in Minneapolis -- heck, all of Minnesota -- are left to pay for all this. The school board needs to remove the revolving door from the Superintendent's office, and get someone here who truly has a vision, a long term vision, for these schools instead of a candidate who views Minneapolis as a stop on the road to someplace bigger.
June 16, 2004
More Free Trade Progress
More good news (except if your the LJ) on the free trade front. A deal has been made with Morocco and one with Bahrain is on its way. If this keeps up I'd hope President Bush were always running for re-election.
"U.S. Signs Free Trade Deal With Morocco"
June 15, 2004
I don't know what Oliver's been reading, but I haven't seen the claim that the war is boosting the economy. If this nonsense is out there I want to know about it so it can be slapped down properly.
War doesn't directly help the economy because goods and services are destroyed not created. It's like the nostrum that World War II pulled the U.S. out of the Great Depression. Not so. Instead, it was a better-managed money supply and the pent up demand of a post-war population who weren't burdened by war-time rationing.
But in a way, war is sometimes necessary for an economy. Anarcho-capitalist and hardcore libertarian readers will balk that government can do anything beneficial, but war and police powers are needed to protect economic and political rights. World War II is an example. A Europe controlled by Nazi Germany wouldn't have been good in the long-term interests of the U.S. That continent suffering under the National Socialists' facist central planning wouldn't have been able to buy or produce as much as a free Europe could. Also, who's to say Hitler would have stopped by conquering Britain? If the U.S. never got involved in WWII the tyrant could have assumed the U.S. was weak and made preparations for the invasion of North America.
"An Economic Question"
May 28, 2004
On the Right Path
After a very stupid decision to slap tariffs on imported steel, the Bush administration is actually promoting free trade with the Central America Free Trade Agreement. John Kerry, unions, environmentalists, and Pat Buchanan paleoconservatives will not be pleased.
Honoring Adam Smith
Planning has begun on a statue in Edinburgh to honor Adam Smith. No postmodernism here. Just good, old sculpture.
May 26, 2004
I don't care if doctors determine that low-carb diets will let me live until I'm 300, I will NOT EVER buy a low-carb Krispy Kreme. Note I wrote "buy." If I'm in a store when the hot light is on and the smiling person behind the doughnut case hands me a hot, sticky just-fried sample, I guarantee I won't say no.
May 21, 2004
It's a Good Thing
A Secret Service ink expert who testified in the Martha Stewart trial has been arrested for lying on the stand. Federal prosecutors accuse Larry Stewart (no relation to Martha) of giving eight false statements. U.S. Attorney David Kelley didn't think this news would help overturn Martha Stewart's conviction, but I'm sure Martha's lawyers disagree.
"Stewart Witness Charged With Perjury"
Fad Fading Fast
"Low-Carb Losing Steam"
May 17, 2004
Krispy Kreme's stock has been in the toilet along with the rest of the market. Yappers on stock message boards are calling for management's heads. All because management believes the low carb craze will slow profit growth. Note that CEO Scott Livengood didn't say the company would lose money. Profits just won't meet company expectations. In the same statement, Krispy Kreme pointed out that "Krispy Kreme experienced a 26.3% increase in systemwide volume in U.S. packaged doughnuts, predominantly through the addition of new accounts, while all other brands in the doughnut category combined experienced a 7.2% decrease in volume." KK store sales continue to grow which means the low carb fad is only effecting grocery store purchases. People continue to buy Krispy Kremes. They're just not considering it an add-on purchase while buying other groceries. Instead, they consider it a treat to go to a KK store, watch dough become golden glazed goodies, and savor a hot, soft doughnut.
If you really want to know the place of off-site sales in Krispy Kreme's plans read Making Dough. It's a bit on the hagiographic side, but it does mention that the company treats sales in grocery stores, gas stations, and convenience stores as a form of marketing. KK doesn't buy commericals on television or the radio. By offering doughnuts off-site the company gives you a taste of what they have to offer. Because of word of mouth potential buyers think there has to be something more at a KK store than an above average doughnut. The well-branded displays are the closest thing the company has to traditional commericals. Once someone goes into a store to have a hot doughnut off-site sales keep that experience in the consumer's mind.
I have to mention that I asked Prof. Bainbridge for his take on the KK lawsuits. He was kind enough to reply.
"Krispy Kreme Woes Take Cyber-Focus"
May 14, 2004
Krispy Kreme Sued
My beloved doughnut maker is being sued by shareholders for supposedly misleading them. Let me quote from the Reuters story:
The complaint names members of Krispy Kreme's senior management as defendants, and charges that they disregarded signs that the company had expanded too quickly, that its wholesale business undermined sales at its retail stores, and that it faced stiff competition from rival doughnut chain Dunkin' Donuts.
This suit stems from a company statement last week telling investors that earnings would be "10% lower than previously announced guidance." Krispy Kreme is being sued because they may have misjudged their expansion plans and not realized how much the low-carb craze would effect them. It sounds to me that this is a case of business error. There's a big difference between lying and being wrong (as I've mentioned [and here] with regards to Iraq's lack of WMD). There isn't much here unless there's a smoking gun hidden that shows management thought one thing but said something else. That would be fraud, and that's untolerable.
This is a reason why companies should bother with earnings guidance. There are too many variables that can change. It's similar to the problem macroeconomists have with measuring GDP or someother large aggregate. Months, even years later, revisions are made. It's good that Google won't be offering any guidance.
"Krispy Kreme Facing Two Shareholder Lawsuits"
May 13, 2004
De Soto Criticized
Previously, I've praised Hernando De Soto's The Mystery of Capital [here and here]. Gabriel Calzada Álvarez criticizes the book from a anti-statist/anarcho-capitalist angle. The criticism is a two-part one: first, De Soto doesn't offer a "clear definition of 'private property;'" second, the state would be the final arbiter of property rights. On the first part, I'll grant Álvarez that de Soto's defense of private property is flabby in its reliance on utilitarianism. But since the man focuses more on public policy examining the effects of not defining and enforcing property rights is more important in his goal of reducing poverty in the Third World.
On the second part of the criticism, Álvarez notes that government failure (both through mismanagment and corruption) happens. As much as possible designation of the boundaries of property lines should be left in the hands of private entities. Institutions like for-profit title companies have an incentive to efficiently determine boundaries. However, in some disputes there has to be a final arbiter. After all the obligatory private arbitration hearings, there will be occasions where people will seek an institution to make the final decision on their property conflict or some entity has to enforce a contract's provisions. Since the state has a monopoly on force it natually flows to them. Álvarez believes that "such a defense can be undertaken directly by the property owner, or by contracting for it with a third party or agency." But who keeps a check on the third party other third parties? Who enforces the third party obligations other third parties? This never-ending circle of private checks and balances is one of the most confusing aspects of anarcho-capitalism I've encountered. Since I've been a causual observer of this line of political economy I would guess anarcho-capitalists have found a way out of this infinite loop.
"De Soto's Embrace of the State"
May 07, 2004
That Damn Atkins!
Krispy Kreme announced that growth will slow because of the low-carb craze sweeping the nation. Looks like I'm going to have to do my part and buy a dozen or two.
A frightening thought just occured to me: a low-carb Krispy Kreme. Oh, I hope not.
May 02, 2004
What's in a Name?
We live in interesting times when a company named "Google" lists "Microsoft" and "Yahoo" as two of its chief competitors.
I feel a Google IPO post in me. I've been playing around with some numbers and have been collecting news stories and weblog posts. It might happen later today if Donald Westlake's latest Dortmunder novel doesn't capture all my attention.
UPDATE: As you can tell from today's lack of posts, my nose was deep into a book. The Road to Ruin was a typical Dortmunder novel: dark comedy; obvious foreshadowing; and plenty of quips. There was a subplot that should have been developed, but it still made for enjoyable reading.
April 20, 2004
Don Boudreaux has an outstanding post on job loss and economic change. Here's just a portion:
50 years ago this month, Dr. Jonas Salk launched nationwide testing of his polio vaccine. Within an incredibly short time (and with help from the researches and refinements of Dr. Albert Sabin), polio was effectively wiped out as a health threat in America.
The rest is Bastiat-like.
"Polio Vaccination and Jobs"
April 19, 2004
For the Econ Junkies in My Audience
The Knowledge Problem hosts this week's Carnival of the Capitalists.
April 16, 2004
Hayek's Spirit Takes Over Stephenson
When Neal Stephenson's Quicksilver came out last year geeks, webloggers, and sci-fi freaks were excited. Because of my connections I got a copy of the book a week before it was released. I got about half-way through (400+ pages) and quit. It's one of the rare occasions where I couldn't finish a book. If anything, I will myself to get to the end, just to say I finished it. With Quicksilver, so many lengthy sidebars, tangents, and details bored me so I moved on to something else.
I'm now a little bothered with not finishing Quicksilver because the next book in The Baroque Cycle, The Confusion has just been released. In this book, Stephenson gets into the economic history of 17th century Europe. He talks to Wired News about the economy back then in particular and economies in general:
Very generally, it has to do with the flow of metal around the world. That's important because money is a sort of medium for the exchange of information. When the price of cloth went up in Antwerp, it was because the system of international trade, in some fashion that's too complex for us to understand, was transmitting information about the supply/demand balance. Money makes that kind of information flow better. [Emphasis mine.]
Those thoughts are practically Hayekian. There's the idea of the economy as an undesigned order that transcends any individual mind. Then there's the idea of money as a highly efficent communications mechanism. (Hayek calls the role of prices a "system of telecommunications" in his essay "The Use of Knowledge in Society.")
Sadly, I'm not willing to re-start a 900+ page novel just to then jump into a 800+ page sequel when I'm getting all the Hayek I want in Bruce Caldwell's Hayek's Challenge.
"Clearing Up The Confusion"
April 15, 2004
To celebrate (accountants and those who get refunds) or dread (those who owe) April 15, here's Reason's Brian Doherty on the "tax honesty" movement.
""It’s So Simple, It’s Ridiculous"
April 12, 2004
Bill Hobbs, in his quest to find the economy's "missing" workers (they're hidden in plain sight) links to an op-ed that echoes much of Bill's thinking.
"Payroll Survey Misses 'The Evolution of ... Work'"
April 08, 2004
O is for obdurate. As in those obsessed (another O word!) with outsourcing "evils" fail to understand the importance of the division of labor in a modern, productive society. I offer them Bastiat's "A Petition" for enlightenment.
"Outsourcing Sends Jobs Away, But Others Come In, Supporters Say"
[My first (and possibly only) addition to Kate's Letter of the Day.]
April 07, 2004
Voters in California vetoed Wal-Mart's attempt to avoid the onerous zoning and environmental regulations that plagued the Golden State's economy. Wal-Mart critics will see this as a loss for Goliath and a victory for David. However, it really is a loss all-around. As Doug Bandow writes:
The objection to Wal-Mart is simple: It charges lower prices, drawing customers away from established businesses, hurting "the community." The problem is not really Wal-Mart, however. Rather, it is economy-minded customers who desire increased choice and lower prices. Thus, instead of barring Wal-Mart, honest critics should favor arresting anyone who shops at any discounter—even by mail. This is the logical, if nonsensical, consequence of the anti-Wal Mart worldview.
"Can 'Unbridled Capitalism' Be Tamed?"
"California's Chilly Welcome for Wal-Mart"
[Added to OTB's Beltway Traffic Jam.]
April 01, 2004
De Soto Honored
Hernando de Soto won the 2004 Milton Friedman Prize for Advancing Liberty. The award goes to an "individual who has made a significant contribution to advancing human freedom." De Soto realized the property rights are vital to economic development. In the Third World, squatters live on land but have no formal right to that beneath their feet. He wrote in his book The Other Path, "They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation." Even if common sense would dictate that they were the landowners due to not having a title, they cannot use the land as collateral to build a business or improve their homes. Economic progress is stagnant as a result. An innovative vision and entreprenurial spirit may be there, but the access to capital prevents them from taking on a greater economic role. If his most recent book, The Mystery of Capital, were written in the language of mainstream economists--mathematics--De Soto would be in line for the Nobel Prize. Nevertheless, he's deserving. His ideas, while appearing to be simple, common sense are powerful and could lift millions out of poverty.
"Property Rights Champion Hernando de Soto Wins Friedman Prize for Liberty"
UPDATE: NRO has a great interview with de Soto on the importance of well-defined property rights.
March 31, 2004
Corporate Reform and Entrepreneurship
Stephen BoykoHere and Aron Gottesman have something to ponder when looking at the government's response to "Enronitus:"
What is ironic is that having demonstrated the virtues of the capitalistic system, American policy makers are now trying to recreate the governance regime of European ancestry. Sarbannes-Oxley type regulation is a large operational tax on job creation that gives rise to unintended consequences. The more top-tier regulatory commands strive for predictive capability, the more imprecise the management of micro-cap commercial activity. The more commands add costs to the micro-cap market, the greater the incentive to go underground and/or offshore to conduct business. This, in turn, causes the US micro-cap market to become less transparent, less innovative and less productive.
March 26, 2004
The Transportation Security Administration is yet another example of inefficient government:
About one-quarter of the nation's commercial airports no longer want government employees screening passengers and baggage, preferring private companies working under federal supervision, a congressman said Thursday.
The government is failing to effectively use scare resources because it doesn't have an incentive to economize. The only way a private business can make a profit is by taking in more money than it spends. To use a little bit of economic jargon, they try to maximize revenues while minimizing costs. If a private firm fails to at least balance out revenues with costs then it will cease to exist. Government, on the other hand, has no profit motive. The ultimate incentive is that politicians want to be re-elected. One way to do that is to appear to "do something" to solve a problem no matter how economically unsound it is. No conspiracy is needed. Blame doesn't have to be put on idiot bureaucrats. It's just a matter of incentives and not having the ability to collect and digest time and place-specific information. It's similar to why the Soviet Union's economy collapsed.
Finally, let me toot my horn and quote what I wrote almost two years ago:
Airport security was passed only for Congress and the President to demonstrate that they were doing something about airline security. They made no case that a properly monitored collection of private firms couldn't do the job better. (Europe contracts security out to private companies.) So now, we're stuck with nationalized airport security with all its bloat and inefficiency.
I told you so.
March 21, 2004
Give Him a Pulitzer
Thomas Friedman has another column based on his trip to India. There's much I don't agree with him in this piece. He thinks it's important for India's future that the government run much of the infrastructure now being built in private enclaves. However, his on-site reporting give his readers a colorful, three-dimentional view of outsourcing, the most current issue in political economy. Next year, the Pulitzer committee shouldn't even bother with nominations. Just give Friedman the award. He's doing an outstanding job.
"Software of Democracy"
Expanding the Pie
Miguel Helft found an example of the job-creating benefits of outsourcing. Extending the division of labor worldwide isn't just a zero-sum game. Finding the cheapest, most efficient uses of scarce resources is what has brought Americans the rich lives they live today.
"Offshore Complexities: Jobs there Mean Jobs Here"
UPDATE: For further reading, Tyler Cowen has some interesting links.
March 11, 2004
Steve Verdon is hosting a good discussion on anarcho-capitalism. The idea still seems very pie-in-the-sky to me, but it provides plenty of food for thought.
"Defending the Anarcho-Capitalists"
Job Gains Under Bush
Bill Hobbs sent me a link to a Heritage Foundation study that tries to explain the disparities between the payroll survey and the household survey. If you look at the former it appears the economy isn't producing jobs, but if you look at the later there's been a "surge in employment." Tim Kane offers some explanations for the differences:
This is a technical and methodological question so I'm hoping some of my economist webloggers buddies offer their thoughts.
"Think Tank: Household Survey Accurate, Employment Surges"
March 08, 2004
Economics Posts Galore
Catallarchy.net is hosting this week's Carnival of the Capitalists. Read and become enlightened.
March 06, 2004
No Justice No Quiche
March 05, 2004
It's (Not) a Good Thing
From what I've learned from barely following the Martha Stewart trial is echoed by an InstaPundit reader:
So, am I correct in assuming she has been found guilty of covering up crimes the government couldn't prove she committed?
She wasn't found guilty of insider trading or securities fraud just hiding stuff from the feds.
"Martha Stewart Guilty of All Counts"
March 01, 2004
The Capitalist Pig
Not only is Jonathan Hoenig a financial talking head for Fox News, he also is managing member of a hedge fund, a book reviewer, and from looking at the Capitalistpig merchandise for sale, an Ayn Rand fan.
"Capitalism Best Cure for Dismal Education System"
February 29, 2004
Carnival of the Capitalists
Ignore Oscar and read the results on the wires tomorrow morning. Econ and biz posts galore are at the Carnival of the Capitalists hosted this week by D. F. Moore.
February 26, 2004
Friedman Gets It
Tom Friedman is right on the money when it comes to outsourcing, globalization, and a growing, dynamic economy:
[W]e must design the right public policies to keep America competitive in an increasingly networked world, where every company — Indian or American — will seek to assemble the best skills from around the globe. And we must cushion those Americans hurt by the outsourcing of their jobs. But let's not be stupid and just start throwing up protectionist walls, in reaction to what seems to be happening on the surface. Because beneath the surface, what's going around is also coming around. Even an Indian cartoon company isn't just taking American jobs, it's also making them.
The debate shouldn't be about protectionism vs. free trade. What it should be about is what's the best public policy to encourage the business creation and job growth. Friedman and I would probably disagree on details big and small, but we're both looking in the same direction. This is easily the best column Friedman has written in some time.
"What Goes Around . . ."
February 24, 2004
There's good and bad economic news:
U.S. factory production will increase this year at the fastest pace since 1999, the National Association of Manufacturers forecast Monday.
As the head of a manufacturing trade group you'd think Jasinowski would be in favor of trade restrictions of the John Edwards' type. No.
But with more U.S. companies counting on exports, Jasinowski warned that the government should not repeal international trade agreements.
To get a better picture, we need to know the status of business creation.
"Factory Output is Headed Up; Jobs Aren't"
Stealth Jobs and the Radio Shack Factor
In her latest NY Times column, Virginia Postrel makes a point that can't be said enough:
In a quickly evolving economy, in which increased productivity constantly makes some jobs redundant, we notice the job losses. It is much harder to spot where new jobs are emerging. Our mental categories tend to be behind the times. When we think of jobs, we see factories, secretarial pools, police officers, lawyers. We forget all about jobs we see every day.
Government statisticians are having trouble too which may partially explain why the economy seems to have recovered, but job creation has been nil.
For a whole lot of econ/biz reading, there's this week's Carnival of the Capitalists at Forgotten Fronts.
"A Prettier Jobs Picture?"
The "Good" Paul Krugman
Once upon a time Paul Krugman was an interesting economist. Before he got a job with the NY Times and went on a crusade to berate the Bush administration at every opportunity Krugman was a well-respected economist. An essay about how he goes about his research is a facinating window into an insightful mind. In his lecture on "pop internationalism" he cuts through the cliches surrounding the trade/outsourcing/imports/exports debate. At a time like this when both political parties harbor protectionist notions (The Dems denigrate NAFTA, while Bush raised steel tariffs.) clear thinking is needed.
"What Do Undergrad Need to Know about Trade?" [via Chip Taylor]
February 21, 2004
The White House is trying to soothe a possible conservative rebellion (it's what killed Bush I's re-election) with lots of face time. But the Heritage Foundation's Michael Franc put it correctly that actions speak louder than words. The first test is to see if Bush vetos a bloated highway bill.
One other note: Does Reuters consider "libertarian" to be a synonym for "conservative?" Both words are used to describe the Cato Institute.
"Bush Reaches Out to Conservatives to Quell Revolt"
February 19, 2004
Breathe In, Breathe Out, Start Car
The New Mexico House passed a bill that would mandate breathalizers for every vehicle. The bill's sponsor says it would save lives. If we really want drivers to drive safely the government should mandate that a steel spike be installed on every steering wheel. That would certainly provide an incentive to drive safely.
February 17, 2004
Tasty Manatees is hosting this week's Carnival of the Capitalists. Plenty of econ and biz posts to keep all you money geeks happy for a few hours.
February 12, 2004
Lecture Next Friday
Barring some unforseen event, I plan on attending a lecture given by Austrian economist and Foundation for Economic Education president Dr. Richard Ebeling. If you're in the Milwaukee area at that time contact me. The event should provide some good intellectual fodder over drinks or a late meal. If it turns out to be awful, I should have some juicy material for a few Paleowatches.
"On the Road with FEE: Winning Freedom"
February 11, 2004
Comcast Wants to Grow Ears
This smells of AOL-TimeWarner. At the time, I thought it was some business innovation of historic proportions. What was I smoking? For the most part Comcast is a hardware company while Disney is a software company. They have two different cores. How does having lots of cable help Disney make more successful movies like Finding Nemo and Miracle? What X factor should make this combination work? If Comcast wanted exclusive access to Disney content they could negotiate individual contracts. What kind of economy of scale do they hope to achieve? If I was a gambling man I'd short the combo if they actually merge.
For more reading, check out Professor Bainbridge's take on the situation.
January 26, 2004
Carnival of the Capitalists
Winds of Change.NET hosts this week's Carnival of the Capitalists.
January 23, 2004
Interview with an Economist
John Hawkins got himself an interview with the prolific economist and columnist, Thomas Sowell. It's brief so if you want further insight read Basic Economics and Applied Economics. Both are outstanding.
"10 Questions With Thomas Sowell"
Indian Business Development
Despite the cries that someone should "do something" about outsourcing, based on Gordon Smith's observation of India, the U.S. stil retains an important comparative advantage in entrepreneurship.
"Is India Entrepreneurial Enough?"
January 19, 2004
Civil Rights and Economics
Dwight Lee on Martin Luther King, Jr.'s economic legacy:
The expansion in freedom brought about by the civil rights movement under King's inspiring leadership receives far too little credit for improving the prospects and prosperity of all Americans. And our free-market economy receives far too little credit for helping move us toward King's dream of freedom for all our citizens.
"MLK, the Marketplace, and a Legacy of Freedom"
Unpersons hosts this week's Carnival of the Capitalists.
January 12, 2004
"Your Tired, Your Poor, Your Huddled Masses..."
When President Bush released his illegal immigration plan, I didn't jump on the story. I still won't bash or praise it because in order to determine if it's a good idea one has to look beyond the immediate, "stage one" effects (to use Thomas Sowell's term from his excellent Applied Economics). It's obvious that wage rates for unskilled labor has been pushed down due to illegal workers. But it is also true that employers saved money by using the lower-cost labor. They either passed those saving onto consumers (if their market is sufficiently competitive) or invested their increased profits in some other enterprise.
National security has to be considered as well. Open borders can mean easy access for terrorists. However, amassing troops at the border to prevent any illegals from entering would draw forces away from international hotspots like Iraq, Afghanistan, and North Korea.
Then there are the cultural effects. No one knows how American society would change due to the influx of immigrants who may decide not to assimilate. Past American history shows this hasn't happened. However with the rise of organized ethinic interest groups and Leftists who feel America is evil and has to be changed, assimilation may not happen as readily as it used to.
"One Man's Verdict on Bush's Illegal Worker Plan"
"Bush Immigration Reform--No Reform at All"
[Linked to OTB's Beltway Traffic Jam]
Ensight is hosting this week's Carnival of the Capitalists.
Net Doesn't Change Economics
Robert Murphy takes on critics who think free trade ideas are somehow obsolete because of the Internet.
"Free Trade and Factor Mobility"
January 06, 2004
Misty is hosting this week's Carnival of the Capitalists. If I were a conspiracy nut I'd think Glenn Reynolds has something against me (What, Glenn? What?). He linked to this week's CotC and the one from 12.15.03, but not the weeks Bejus Pundit or TAM hosted it. I'll just chalk it up to bad luck and the mountains of e-mail Glenn gets daily. How he can go through it all, I don't know. Let's see what happens when TAM hosts the Carnival of the Vanities at the end of January.
December 29, 2003
Carnival of the Capitalists
This is the last Carnival of the Capitalists for 2003. What a toppsy-turvy year in the economics/business world it was. President Bush got more tax cuts passed and continued to allow the Congress to spend, spend, spend. Also, through much of the year, the economy looked to be a heavy weight on Bush's re-election chances. But in the second half of the year, things perked up. The economy grew at a rate not seen in 20 years. The stock market has rebounded, while everyone waits for jobs to be created. What will happen in 2004? Here's wishing all of you untold riches (both material and non-material) in the new year. I apologize in advance for any and all errors or misconceptions of posts. Next week's CotC will be hosted by Misty at A Special Kind of Stupid.
Let's get this party started.
Josh Cohen has given up on NASA and sees it as a waste of tax dollars.
Da Goddess has found the real reason behind an Australian kangaroo culling.
Dean Esmay found a union he wouldn't mind joining.
J. P. Carter gets the "Most Clever Post Title Award" for his "Collecting Dead Presidents from Dead Peasants." It looks at a practice where an employer gets life insurance benefits from dead employees.
Todd at A Penny For... can help you find some good business books to help pass the time during the post-holiday doldrums.
Karun Philip is about to start his Knowledge Capital Project. This innovative, grass roots idea has real promise.
Robert Prather points out something good in the recently passed Medicare bill: Health Saving Accounts "get the same tax treatment as a regular insurance policy -- meaning a company can expense it and the employee doesn't have to pay taxes on it."
For you students of technical economics, Steve Verdon got a new book for Christmas. Firms aren't the "profit maximizers" you thought they were. This is due to the incentives of employees.
Joe Kristan offers some end-of-the-year tax ideas. (As with all things legal and tax-related, check with you accountant or financial adviser.)
Professor Bainbridge looks at food regulation in light of the Mad Cow situation.
Barry Ritholtz sees 2004 as a test for supply-side economic theory.
Aunty Goob rips apart a news story on pollutants found in people.
Rob of BusinessPundit sees the business benefits of running.
Micha Ghertner at Catallarchy.net points out that capitalism's critics have to do more than use platitudes.
Mike Pechar, the Interested-Participant, posts on the rise of the gift card and its effect on after-Christmas sales.
Tony Gill writes about Canada's new Ministry of Public Safety and Emergency Preparedness and how it incorporates health emergencies (unlike the U.S. Department of Homeland Security).
Lesjones applies the Law of Demand to prescription drugs.
And last, but not least, Kevin points out that Howard Dean, M.D. is already calling for a federal bailout of the cattle industry in light of the Mad Cow situation.
December 28, 2003
Still Waiting for CotC?
I'm home, but due to the Packers sneaking into the playoffs (thank you, Arizona) I'm on the phone and Net trying to get tickets for next Sunday's game. Wish me luck.
UPDATE: My patience paid off. After a little over 1 1/2 hours of constant redialing, I got through and got my tickets. What a way for a big Green Bay Packers fan like me to start the new year. The CotC is on its way.
Another CotC Reminder
You still have plenty of time today to get in your entry to this week's Carnival of the Capitalists. I'll be at a family Christmas gathering today so the CotC won't be up until late this evening. So far the entries are of high quality. Now, I also want a high number. Any recent economic or business related posts are fair game. Just send the URL to capitalists -at- elhide.com.
December 25, 2003
Not Over Yet
Just because Christmas is over, don't think that me and other retail workers will be taking it easy. Schools are out until after New Year's Day and many workers take their last few days of vacation for the year. Add that to the large numbers of gift cards given this Christmas and the inevitable gift returns, and retailers will be quite busy for a while. I won't be taking a breather until the middle of January when the post-holiday doldrums set in. It won't come too soon.
December 24, 2003
Mad Cow Effects
It may be a short trading day on Wall Street, but resturant stocks are getting hit because of the Mad Cow scare. But there's a possible bright side:
But some analysts said there could be a long-term benefit for restaurants as beef prices slide from recent highs.
Of course, that requires people to not be scared to eat beef.
On the futures market cattle futures are down sharply. No surprise there.
"Restaurant Stocks Drop on Mad Cow Scare"
This is a reminder that I'm hosting the last Carnival of the Capitalists for 2003. Fitting posts would include "year in review" or "look ahead" posts. Do you have an analysis of the ups and downs of the stock market? Send them my way? Do you know what a major marketing trend was this year? Let me have it. Do you know of a hot company or sector we should all be watching in 2004? Send me that too. Do you know who'll win the Nobel Prize in economics next year? Gimme, gimme, gimme. Of course, I'll accept any and all economics and business-related posts. Send all entries to capitalists -at- elhide.com.
Black Christmas for Beef Producers
The first U.S. case of Mad Cow disease has been found in Washington state. Japan, Singapore, and South Korea immediately banned U.S. beef imports. It was only a matter of time before the disease reached the U.S. Let's hope the beef industry prepared for this potentially devastating blow.
Mad Cow is related to Creutzfeldt-Jakob disease [also here], a devestating neurological disease where 90% of its victims die within one year. Scientists believe both diseases are caused by prions, proteins folded in such a way as to disrupt the brain. There is no known treatment.
As for me, I'll be enjoying some nice beef roast at my family's Christmas dinner.
"First U.S. Mad Cow Case, Buyers Ban Beef Imports"
"USDA Refused to Release Mad Cow Records"
December 22, 2003
James Joyner has an insightful post on the homeland security color threat scheme and government bureaucracy:
Since the inception of the system, we have always been in either Elevated or High status. Because the level is set by a bureacracy, it will likely always be either Elevated or High. No bureaucrat is going to be willing to take the risk of lowering the level to merely Guarded or--Heaven forfend--Low because, if they do, and an attack happens, heads would roll. Likewise, we're unlikely to see the level raised to Severe unless we're literally in the midst of an attack and already know it. No one is going to be willing to call Red Alert and then not have an attack happen.
The end result is a constant state of alert that becomes "background noise" to the public. Using public choice economics would offer a more complete analysis, but all we really have to know is that much of this is simple CYT (Cover Your Tush). Bureaucracies want to continue to exist. Setting the level too high for an attack that doesn't come is less damaging than setting the level too low and giving the public a false sense of security. However, setting the level too high puts financial stress on state and local governments. These bureaucracies pressure Congressmen who pressure the Department of Homeland Security. The equilibrium color is yellow, the color the scheme started with.
CotC Now Available
The Bejus Pundit hosts this week's Carnival of the Capitalists. Yours truly will be hosting next week. Get those economic and business posts in. I'm really interested in takes on the Christmas shopping season. Was it good in your neck of the woods or lackluster? Notice any trends? Another good topic is last-minute tax advice or important changes for 2004. Of course any subject-related posts are welcome. Tell your friends, family, and friends' family about the CotC. I want to be really busy on Sunday collecting all the entries. Send all entries to capitalists -at- elhide.com.
December 21, 2003
Bush Benefits from Improving Economy
An AP poll finds public support increased for President Bush's handling of the economy. Right now, 55% approve and 43% disapprove. Last month, 46% approved, while 51% disapproved. The first thing to notice is how quickly public opinion moved. Second, other than dropping the steel tariffs, Bush hasn't done anything in the past month to deserve praise. In fact, the signing of the prescription drug expansion to Medicare will do long-term harm to the economy. What probably did more to boost people's spirits was the good economic news from the government and the rise in stock market indices [Dow Jones, NASDAQ, S&P 500] and a decrease in gasoline prices.
This is another reason to discount a poll from a rationally uninformed sample.
December 17, 2003
The Bush administration's great efforts to get free trade agreements makes it even more frustrating when they try to buy votes like they did with the steel tariffs.
Austrian Econ Apparel
"What the World Needs Now"
December 14, 2003
Econ Links. Yummy!
samaBlog hosts this week's Carnival of the Capitalists.
December 11, 2003
Bob Bartley died of cancer at the age of 66. He made his mark as the editor of the Wall Street Journal's editorial page. His advocacy for tax cuts influenced Republican Presidents for over 20 years. Fred Barnes said, "How many other editorial pages can say they created the economic policy for an administration and for an era? Without The Wall Street Journal editorial page, there is no supply side economics." It's pretty easy to argue that Bartley's editorial page was the most influential in the world. That stems from Bartley's belief in the benefits of freedom and its relentless pursuit.
"Robert L. Bartley"
"Robert L. Bartley, Who Led Journal Editorial Page, Dies at 66"
"Robert L. Bartley Dies; Influential Editorialist"
December 10, 2003
Revised GDP Numbers
Steve Verdon points out that due to adjustments on how the government measures the economy third quarter 2000 GDP growth was negative. There goes the idea that President Bush led the country into a recession.
"Bureau of Economic Analysis Revises 2000 GDP Numbers"
December 09, 2003
Population Bomb a Dud
Paul Erlich and those that feared a world where we run out of room must be happy with new U.N projections. For me, it's just further proof that capitalism solves leads to a solution. For some reason when a country gets richer they don't have as many children.
"World Population to Level Off"
December 08, 2003
Good Business Weblog
Oliver Willis and Jimmy Varghese have a business weblog called BoomNation. There are good, short, pithy posts there.
December 06, 2003
Iraq's "Odious Debt"
Politically speaking does anyone really believe U.S. critics like France will consider any of Saddam's debt "odious?" Doing so would help the U.S. in their rebuilding efforts, and the only thing France cares about it putting up as many roadblocks in front of the U.S. as possible. For Chriac et. al. global gamesmanship is more important than successfully building a free country in Iraq.
December 05, 2003
Iraq's DebtPresident Bush appointed James Baker as the point man in restructuring Iraq's debt. Why should Iraq even bother paying back this debt? There is a new regime in charge. The money lent to Iraq by other nations was to Saddam's government. That one is no more. The $120 billion owed is Saddam's debt, not the New Iraq's. Besides the crushing effect on the Iraqi economy, paying off this debt wouldn't change international lending behavior. There should be a disincentive to not lend money to dictators. Paying off the debt is a form of moral hazzard. Lending money to dictators only encourages these brutal people to continue on violating the rights of their citizens. There should be more risk for lenders who lend to dictators. If thug become a pariah toward the rest of the world, they risk being toppled and the debts vanishing. In Iraq's case, the people shouldn't need to suffer because of Saddam's economic policies. Operation: Iraqi Freedom wiped the slate clean. That includes international debt. "Bush Picks Friend Baker as Iraq Debt Envoy"
The unemployment rate dropped to 5.9%
UPDATE: Steve Verdon's post asks a good question: "has something changed in the economy that means employment will take longer to rebound and the rate of growth will be smaller?"
Could Paul Krugman get off his Bush-bashing horse and tackle this question? He is a better economist than political hack columnist.
"Unemployment Lower for Second Month"
December 04, 2003
Here's a stunning quote from liberal researcher Isabel Sawhill on how to reduce poverty:
If people did a few things -- graduated from high school, got a job, and delayed having a baby until they married -- our analysis shows that would eliminate a huge chunk of poverty in this country, and that would be far more effective than anything we could feasibly do through the welfare system alone.
When Dan Quayle said stuff like this he was chastised for "blaming the victim." This thinking may soon become conventional wisdom.
December 03, 2003
Better Check Those Numbers
Steve Verdon ran Duck, M.D.'s budget numbers. They don't add up. With some generous assumptions Howard Dean's spending plans would increase the deficit. Duck, M.D. hasn't even been elected yet, and he's already broken one of his campaign promises.
Steve doesn't even include the effects of Duck M.D.'s "re-regulating," of rescinding Bush's tax cuts. Both would prevent economic growth which would lead to greater deficits (barring the miracle that Duck, M.D. would actually cut non-defense spending).
"Democrats and the Deficits: Dean"
Lessons from Adam Smith
In his column last week, Declan McCullagh points out that the Bush administration has done more for protectionism than just slapping tariffs on imported steel and Chinese underware. They also went after cheap Korean memory chips. Somebody send the White House a copy of The Wealth of Nations.
"Adam Smith's Lessons for IT"
December 02, 2003
Steel Tariffs Still Kicking
Maybe dumping the steel tariffs aren't "all but set in stone" like I thought yesterday. The AP reports President Bush is still weighing his options. He might decide not to get rid of all the tariffs he imposed last year. Keeping some wouldn't make the EU happy and would probably result in retaliation. I don't know what political calculations Bush is doing. If he doesn't drop the tariffs there will be a trade war just when the U.S. economy is coming out of its slumber. Domestic steel manufacturers would be hurt, but domestic steel users could face a steel shortage. We will know the President's decision later this week.
"Advisers Urge Bush to Drop Steel Tariffs"
December 01, 2003
The Bush Boom
Factory growth is at a 20-year high, people are being hired, and construction remains strong. Dare I say it? The recession is over and a new boom has begun.
Bush's Beneficial Quirk
The slow crawl of government may be pretty timely for President Bush's re-election:
Mr. Stanley pointed out that while the Bush tax cuts this year were retroactive to Jan. 1, the tax tables could not be changed until July 1, after the cuts were adopted. As a result, next spring, consumers will receive tax refunds fattened by federal over-withholding during the first six months of this year. That might make taxpayers feel better, and if they spend the money, it could buoy an already consumer-driven economy as the campaign moves into high gear.
Bush bashers (i.e. Oliver Willis) will simply smell a conspiracy.
"Change in Consumer Confidence and Thus the Presidency"
Bush Steel Tariffs: R.I.P.
Rolling back the steel tariffs are "all but set in stone" according to unnamed Bush administration officials. Yeah!
"Bush Likely to Repeal Tariffs on Steel Imports"
"President To Drop Tariffs On Steel"
UPDATE: Stephen Green notes, "Free trade just doesn't seem to be in Bush's blood."
Satisfy Your Econ Cravings
Bill Hobbs is hosting this week's Carnival of the Capitalists.
November 30, 2003
Stop the Insanity!
It's bad enough that AmeriCorps even exists. Now, it's got itself a budget increase. This is how bad the Bush administration is doing on domestic budget spending:
The money represents a $170 million increase over AmeriCorps' 2003 budget. And it is at least $99 million more than either the House or the Senate had previously indicated they would grant AmeriCorps in 2004. Both the funding level and the increase are the highest in the corporation's history.
Boy is Big Government Conservatism expensive.
November 29, 2003
I made it through Black Friday without any injuries to me or customers. In fact, it didn't seem as busy as it was (my boss was very pleased with the sales). I also know, that this is just the tip of the iceberg. My store has historically gotten busier the closer we get to Christmas.
Last year, I posted some tips to make last-minute Christmas shopping a little smoother. Almost all of them can be applied already, less than one month from Christmas.
November 28, 2003
Bush May Dump Steel Tariffs
It looks like some sense has come to the Bush administration on those stupid steel tarrifs.
Speculation mounted on Friday that Washington will scrap or roll back controversial steel tariffs after it sought and obtained an effective delay in retaliatory sanctions by countries opposed to them.
Tariffs usually cause more harm than good. That's why free traders like myself oppose them. If Bush and Rove would have listened to me instead of made a purely politically strategic decision, the harm to steel-using businesses wouldn't have happened, and the U.S. wouldn't be close to a trade war with the E.U.
"Speculation Mounts Bush May Give Way on Steel"
November 25, 2003
Outsourcing and Entrepreneurial Error
Glenn Reynolds points out that Dell Computer is moving some of its tech support back into the U.S. because "customers weren’t satisfied with the level of support they were receiving." Because no one has perfect insight into the future, businesses have to be allowed to experiment with new ways of doing things. Dell tried outsourcing their tech support to India. It hasn't met the needs of their customers so it was brought back to the states. Maybe in the future Dell will develop ways to make Indian tech support better for customers and cheaper for the company. For now they haven't figured that out.
Experimentation like this is one way the free market better satisfies the desires of consumers (customer feedback that's really listened too is also extrememely important). The possibility to err is vital in channeling resources to their most beneficial ends.
Austrian economist Israel Kirzner writes,
In fact, the one really valuable feature of unprofitable entrepreneurial endeavor lies in its crucially important role in stimulating profitable entrepreneurship. Only in a society where entrepreneurs are free to make errors, can we expect an outpouring of entrepreneurship to lift its economy to new, hitherto unglimpsed, heights of prosperity. Only where potential entrepreneurs are free to follow the lure of profits as they see them, will there be the unleashing of entrepreneurial vision, daring, and judgment that creates profits in fact-and in so doing, creates new, more valuable ways of utilizing resources.
From errors, entrepreneuers re-evaluate how they use their resources. In Dell's case, while outsourcing tech support saved them labor costs, it wasn't keeping their corporate customers happy. With the easy substitution of computers and their life cycles being so short Dell knew unhappy customers would result in lost future sales. Based on the feedback from this failed experiment the company knows how to better allocate scarce resources to meet their customers' needs.
"From Outsourcing to Insourcing"
November 24, 2003
Great Econ Posts
The latest Carnival of the Capitalists is up hosted at Truck and Barter. I went straight for Professor Bainbridge's examination of the mutual fund scandal. The most glaring bit of malfeasance mentioned by the professor is the mutual funds' violation of the agreement between money manager and investor. This can create distrust turning the business into a lemons market for mutual funds. For me, the mud thrown on the industry just makes Vanguard look that much better.
Bainbridge has earned himself a place on the TAM blogroll.
There's more there to sink you capitalist teeth into.
"Alex Tabarrok on the Mutual Fund Scandal"
An Economic Fable
Gene Callahan has written one great fable on the benefits of trade. After reading it you'll understand that fears of lost manufacturing jobs are unfounded. The key to wealth is market being free to use scarce resources to satisfy people's desires.
November 21, 2003
Attack of the Big Government Conservatives
Late tonight the House will vote to add prescription drugs to Medicare. The cost is estimated at $400 billion, but since when has a government program been anywhere close to its estimate? The GOP leadership and the White House want this bill passed, but it's just not good policy. There is a group of Republicans fighting this massive increase in an already massive federal entitlement. Since the House will be working late, Congressional offices should be open too. The Capitol switchboard number is 202-224-3121. Just tell the operator you Congressman's name or zip code, and they'll connect you to the right office.
"A Senior Moment"
November 20, 2003
Jobless Claims Down Again
Good economic news for the President. This from Reuters:
How will Bush bashers spin this to make it sound like the economic sky is still falling?
"U.S. Jobless Claims Fell 15,000 Last Week"
November 19, 2003
Bush Still Bad on Trade
The last thing our economy needs while working its way into a decent recovery are new trade restrictions. But that's just what the Bush administration is doing. Limits on import growth will be implemented as a sop to uncompetitive U.S. textile factories. I hoped that the WTO's ruling against Bush's steel tariffs would have let the President reverse his trade stance with some political cover.
The affect on the world economy was immediate. The dollar dropped to a record low against the euro. That means U.S. buyers don't have as much buying power of European goods as before this decision. American consumers' choices have been restrained in exchange for an attempt to save some jobs.
Let's put this on a personal level. The U.S. government has no business from whom or where I buy my clothes. If an American company can produce a good product for a good price, then they'll have my business. If I can get better and/or cheaper stuff from a place like China, then so be it. This is how a free market works. This institution, not intentionally designed by any single mind, has created more wealth and a better quality of life to more people than any other in human history. Messing with it ends up hurting everyone.
November 17, 2003
New CotC and Mutual Fund Scandal
There are some really good posts in this week's Carnival of the Capitalists hosted by Professor Bainbridge. Sadly, there's nothing from TAM this week. However, read this post by Chris Noble on the mutual fund scandal. He responds to some bad writing by a MSN Money columnist.
With [open ended] mutual funds, shares are created when the purchase is made and destroyed when the shares are sold. There is no direct harm to another investor. Indirect through higher fees and operating expenses, maybe. But not directly.
I've followed the story only casually because a local fund executive is in Elliot Spitzer's sights. Throughout all the reporting I've read, I never found out how investors were being harmed. Does "higher fees and operating expenses" justify the witchhunt by regulators and the press? Or am I missing something?
"Mutual Fund Misinformation"
November 13, 2003
Mises Institute Politics
The LibertarianJackass has little problem with the Mises Institute promoting a paleo-libertarian political agenda under the name of economic study. He writes,
Talk about price theory all you want, but don't touch the fundamental issues facing society today ("national defense," galloping statism, etc.)?
More "fundamental" is price theory, the capital structure, and how knowledge is used in an economy. These are more fundamental because they need to be understood in order to better address the more political questions Mises Institute scholars talk about. I've been following the Austrian School for over ten years (the Mises Institute sent me monthly Free Market issues when I was in college) so I can safely say the Misesians wear their anarchist advocacy on their sleeves (I just wish they'd publically say it). I compare the essays and weblog entries at Mises.org to the discussions that take place on the Hayek-L e-mail list. Part of it may just be scholarly politeness, but those postings to the e-mail list aren't knee-jerk libertarian.
My main complaint with the Mises Institute is their straying from economic analysis into defending the South in the Civil War and beating the hell out of Lincoln. DiLorenzo actually compared Lincoln to Zimbabwe's dictator Robert Mugabe. As a learning institution, they have done the most of anyone in the world to keep Ludwig von Mises' ideas alive. For economics students and lovers of liberty, that's a great accomplishment for which they deserve tremendous praise.
"The Austrian Economics Hoopla"
November 11, 2003
Kling's Take on Austrian Economics
The reason that I only scored a 78 is that I took the title of the quiz literally ("are you an Austrian"), so I answered with my own beliefs, knowing that they diverged in some cases with the Austrian School. For example, I subscribe to the quaint notion of national defense. When tyrants and would-be tyrants ask about our President, as Stalin once asked Churchill about the Pope, "How many divisions does he have?" I would like the answer to be "more than enough to smash you!" The Austrian School thinks that you do not need a government to provide national defense. The Mises.org weblog is as eager as any Dean Democrat to see the U.S. fail in Iraq.
The Mises Institute group is deeply influence by Murray Rothbard, a student of Mises and and the second-most influential thinker (behind Ayn Rand) of the libertarian movement. These Austrians are highly critical of any governmental activities. Why they don't overtly call themselves anarchists, I don't know. They don't even admit to being anarcho-capitalists. To them, government fails at everything it touches. It's not only bad at educating children, managing trade, writing environmental regulations, managing health care for the elderly and poor, running welfare, and running the post office; it's also bad at defending the country (even though we haven't endured a serious invasion since the War of 1812) and handling monetary policy.
But the Rothbardians aren't the only branch of the Austrian School. From my observations, most non-Rothbardians focus more on economic research than libertarian political economy.
For a response to Kling's article, Mateusz Machaj has a post on the Mises Economics Blog.
"The Sect of Austrian Economics"
Catallarchy.net also has a few posts on Kling and the quiz.
"The Ubiquitous Quiz"
"Burn the Heretics"
November 10, 2003
Read and Be Enlightened
UPDATE: James Joyner's link to a story of cities chasing young smarties dovetails nicely with my entry in the CotC.
November 09, 2003
Bartlett on Flat Tax
Bruce Bartlett has a weblog. Nice. He points out that Paul Bremer didn't actually institute a flat tax in Iraq. What he did was put a ceiling on individual and corporate rates of 15%. That doesn't prevent future Iraqi governors from creating a progressive tax scheme with a top rate of 15%. Bartlett then looks at the effects of a flat tax on Estonia and Russia. He also points out that Arnold Schwarzenegger is eyeing a flat tax for California's budgetary ills.
November 06, 2003
Another Book Source
In what should help make Downtown Milwaukee even more attractive to young professionals, a new bookstore is opening up in the Third Ward. Voss Books is expanding from its Racine location. To add a little 21st Century tech to the story, owner Kelly Voss said, "I probably would not have purchased that bookstore without the Internet."
"Racine Bookshop Expands to Third Ward"
November 05, 2003
Milwaukee's Youth Movement
In the last five years, Milwaukee has gained college-educated people aged 25-39. This is an important demographic because their high education adds to the human capital of the local economy. Also, this group is at the age where they start families which could add to the area's population.
Milwaukee has become more hip for recent college graduates. In the downtown area, old buildings are being gutting and remodeled at lofts. Entertainment institutions like the Milwaukee Art Museum and the Milwaukee Brewers have been updated with new buildings. And the city has moved passed its aura of being only a place of Rust Belt manufacturing jobs.
As a state, Wisconsin isn't doing well keeping college-educated young people (broadly defined). She lost over 11,000 from 1995-2000. The state is doing better than others at keeping them, but can't attract them from other states. That's a sign to lawmakers that the state's business climate isn't healthy. In order to have good jobs young people want, business has to have a friendly enviroment conducive to job creation. Wisconsin has a long way to go.
"Milwaukee Gains Young Professionals"
November 04, 2003
Oliver's Selective Quoting
Oliver Willis quoted this portion of an AP story on company job cuts:
Job cuts announced by U.S. companies more than doubled in October from the previous month, providing more evidence that the nation's economy is in a period of jobless expansion, according to a report from an outplacement firm.
What he failed to mention is that these are just planned job cuts. They haven't actually happened yet.
Challenger, Gray & Christmas's monthly report focuses on companies' planned cuts, not actual reductions. The data is based on tracking figures from the news media and the Securities and Exchange Commission.
Oliver should do more than a quick scan when trying to bash President Bush.
"Job Cuts Announced by U.S. Corporations More Than Double in October"
November 03, 2003
They're months away from a possible IPO and a publicly-traded Google is the buzz of the financial world. That's because it would be the first big post-tech bubble IPO. With such hype and inability of the company to prevent competitors from entering the only direction Google stock could go is down. How can a company justify a $15 billion valuation on $150 million in profits from being a text ad agency?
An Economics Feast
This time of the week is really good for reading econ material. David Warsh publishes his latest Economic Principals column and there's the always insightful Carnival of the Capitalists. First, Warsh doesn't lament the purchase of Boston-based Fleet Bank by Bank of America but uses the event to illustrate economic growth and change. He writes,
The thing about successful cities, as Jane Jacobs pointed out long ago, is that they generate their own renewal. New work grows out of old. And Boston does better than most because, since its very beginnings, it has been a center of education, a potent source of both new ideas and high-skilled talent.
"Everything Must Go"
sugarmama comments on job opportunities for those with strange names.
And I can't pass up the opportunity to comment on Paul Bremer instituting a 15% flat tax in Iraq. Now, Russia and Iraq are sensible and fair to taxpayers than the U.S. It also easier for Iraq to start from scratch with a flat tax than it does in a country like the U.S. that has oodles of tax rules and constituencies willing to lobby hard to protect them. The flat tax is sound economic policy that will help turn Iraq into the Middle East's version of Hong Kong.
"U.S. Administrator Imposes Flat Tax System on Iraq"
November 02, 2003
Gene Sperling has an outstanding article on some economic indicators anyone can look. Even better, he has links to the indicators so you don't have to spent a lot of time at Google.
Meg On Friendster Funding
Meg Hourihan on Friendster's valuation by VCs:
Hello? Did we totally forget what happened just two or three years ago?! Sure, Friendster is cool, but eyeballs and traffic do not a (huge) business model make. Remember? We already learned this! Obviously this is another deal with a valuation based on potential and not actual revenue (or did Friendster's revenue increase from ~$4 million to ~$17 million in the past two months?), and sure, there is potential there. But I hardly think there's $53 million worth. Earth to VCs: cut it out, before you force another crop of companies to grow too big, too fast, all to recoup an investment you shouldn't have done in the first place.
Ultimate blame for any Friendster flame-out has to go to company founders who accepted the VC money. They too saw what happened to most of those dot coms, yet they gladly took the money. There's no manipulation here. Like any transaction, both sides think they will gain, or they wouldn't have agreed to the deal.
"How Soon We Forget"
November 01, 2003
Wild VC Spending
Near the end of the NY Times story on Microsoft possibly buying Google, there's this:
Partly in response, Google continues to explore new businesses to extend its reach into new markets and to find new sources of revenue. One such effort included approaching Friendster, a Silicon Valley social networking company that has recently grown rapidly, according to an executive briefed on the talks. Friendster has instead received a $13 million investment from a group of venture capitalists led by Kleiner Perkins and Benchmark Capital, an action that was first disclosed in The Wall Street Journal.
$13 million for Friendster? Another bubble may be starting when a profit-less business gets a ton of money to do nothing more than visually demonstrate six degress of separation.
October 31, 2003
Strong Being Investigated
Elliot Spitzer's Wall Street investigation has reached Wisconsin where Richard Strong, Chairman of Strong Capital Managment, is accused of making improper trades in his mutual funds. Whether he did anything wrong or not index funds where fund managers aren't needed look better and better.
"Strong Ready to Step Down if 'Necessary'"
October 30, 2003
The Bush Recovery
The economy had a good third quarter. GDP rose 7.2%, the highest rate since 1984 (the year a GOP President got re-elected); initial jobless claims fell 5,000 last week, and
Unlike the past two years, any boost in the economy wasn't solely dependent on business spending. Firms finally started spending again which suggests they'll hire more workers and sustain the recovery. Housing growth remains strong too. All this good news could be harbinger for a good Christmas shopping season.
Steve briefly comments.
"Economy Rocketed Ahead in 3rd Quarter"
"Economy Grows at 7.2 Percent Annual Rate in Third Quarter"
October 29, 2003
Universal Health Care Means Gov. Monopoly
Steve Verdon points out an important part of any universal health care plan:
This is why with universal coverage legislation you see in all the legislative mumbo-jumbo a section which outlaws private insurance. The universal insurance program offered by the government is basically a big pooling equilibrium. So if private insurance is not outlawed, then the government is left with only the high risk/high cost people. It should also be noted that in this situation (i.e., pooling equilibria), the low cost individuals are subsidizing the medical care for the high risk/high cost individuals.
We'd be trapped in a monopoly. Based on the government's record with other monopolies, education and the post office, I shiver at the thought.
"Moral Hazard, Adverse Selection and Insurance"
October 28, 2003
SEC's Cold Shoulder
The SEC has frozen the accounts of an ex-FleetBoston employee on grounds that insider trading took place around the announcement of the company's merger with Bank of America. Here's the kicker:
[Guillermo Garcia] Simons has apparently not worked for FleetBoston within the past year.
It's kind of hard to be an insider if you're not inside. I know, I know. Anyone who trades on information not provided to the public can be considered an insider trader. That just shows the law in its current form is goofy.
So, because the SEC was afraid "that the assets could leave the country" they got a judge to freeze an entire family's accounts. This isn't justice. It's called being guilty until proven innocent.
The lesson to be learned is not to act on any hot tip even if you think the tipster isn't an "insider." Acting on it could set you up for a showdown with the SEC. Also don't buy any financial instrument in a large enough amount to garner notice.
October 26, 2003
Cold, Hard Cash
Chris Noble (not Nobel which would be very fitting) is hosting this week's Carnival of the Capitalists.
October 24, 2003
David Bernstein shoots down a canard used by Leftists opponents of school vouchers.
"It's Called Supply and Demand"
October 23, 2003
Free Trade With Australia
The collapse of free trade talks in Cancun last month isn't stopping the U.S. and Australia from hammering out an agreement. Like Cancun, the sticking point is agricultural products, especially Australian beef.
"U.S., Australia Agree to Fast-track Free Trade Talks"
It will be hard for Gov.-elect Schwartzenegger to get California's economy moving when local governments do ridiculous things like banning Wal-Mart from opening grocery stores.
October 20, 2003
Money, Money, Money!
Jay Solo is hosting the second Carnival of the Capitalists. There are a bunch of good posts there.
Score One for Tax Cuts
Hold the presses! Someone thinks this year's Bush tax cuts boosted the economy and got it printed in the NY Times. I would declare it the end of the world if the writer were Paul Krugman.
Edmund Andrews writes,
To the surprise of many naysayers, economic data from the past several months suggests that the $350 billion tax-cut package may indeed have jolted the economy.
Then Andrews passes along many economists' fears that this growth won't be sustained:
The impact of the tax cuts is already fading, most economists believe. Even though the lower tax rates will continue, the economic jolt comes from the initial cut. After that, the economy simply grows in line with the overall rise in wealth.
That's simply a Keynesian static view of the economy. Tax cuts don't just inject money into people's pockets to be spent or saved. It changes people's incentives to work or invest. Business plans that once seem unprofitable under the former tax rules now look profitable. With higher take-home pay, families may now be able to afford big-ticket items like a new home, car, or appliances. A small business may now be started because marginal income tax rates have been decreased and capital spending can be more quickly depreciated. Small changes on the margins can have large effects on the economy.
"Spotted: Evidence That Tax Cut Worked"
October 18, 2003
Like many states, Wisconsin is under severe bugetary pains. So, what does Gov. Doyle want to do? Have every school provide breakfast for kids. It's not just conservatives like myself who question further government intrusion into families' lives. School administrators are questioning the idea.
And Dave Schmidt, superintendent of the Waukesha School District, said his district already provides meals where the need exists, at four schools that have children from low-income families who tend to benefit most from the program, he said. But the other 20 schools in the district don't serve a morning meal because it's not needed, he said.
"Doyle Calls for School Breakfasts Statewide"
October 13, 2003
Carnival of the Capitalists
The first ever edition of the Carnival of the Capitalists is now at Business Pundit. If you want to read business, finance, and economics posts the CotC is your thing.
Carnival of the Capitalists
October 10, 2003
Krispy Kreme Invades England
My how marketing is different when an American sweet goes British. Krispy Kreme opened its first store in England at Harrod's. In the U.S. one of these golden glazed goodies (the crack cocaine of junk food) goes for about $0.75 cents. Across the pond, the tactic is to make these donuts into a Starbucks-type gourmet item with an upscale price. Each donut there sells for $1.49.
"Krispy Kreme Tempts British Sweet Tooth"
October 09, 2003
More on the Myth
In a given year, the number of divorces may well be half as large as the number of marriages that year, but this is comparing apples and oranges. The marriages being counted are only those marriages taking place within the given year, while the divorces that year are from marriages that took place over a period of decades. To say that half of all marriages end in diveroce, based on such statistics, would be like saying that half the population died last year if deaths were half as large as births. Just as most people were neither born nor died last year, so most marriages did not begin or end last year.
Sowell then uses some actual (though now dated) data to find out what portion of the population has been divorced:
According to census data for 1992, 11 percent of all adults who had ever been married were currently in the status of divorced persons. If 50 percent overstates the divorce rate, 11 percent does not include people who had been divorced but were now remarried, or those who were never married. However, these census statistics are relevant to the claim that traditional marriages are disappearing, for remarriages are still marriages. Married couples outnumbered unmarried couples by about 54 million to 3 million. (p. 59)
I still wonder if there is a longitudinal study going on where we can have some idea of what percentage of marriages in a given timeframe end in divorce.
Nobel Prize in Economics
Two statistical whiz-bangs won the Nobel in economics. I am not a statistical whiz-bang so I will withhold judgement.
UPDATE: Tyler Cowen has some links on the winners' work. He writes, "Very good picks, economists use their contributions all the time, note that their work is of less interest to the general public than is usually the case." Quite the understatement. [via The Knowledge Problem]
September 30, 2003
The Paradox of Voting
Here's something interesting (and completely unrelated to Plame/Wilson) from Will Baude:
I've recently heard a comment to the tune that Libertarians who vote for a Libertarian presidential candidate are "throwing their vote away," or hurting the major party that they consider to be the lesser evil. This isn't so.
It doesn't matter if you vote because your single vote won't decide an election, but if everyone acted in a purely rational fashion then on election day no one would show up at the polls. But that would only happen one time because voter A would realize that if no one showed up at the polls besides himself his vote would be the most valuable. But voter A wouldn't be the only person to come to the same conclusion. They would vote thereby diminishing the value of their votes.
The question that comes out of this intellectual run-around is why people vote at all? Baude has an explanation:
That is, we vote for Candidate A over Candidate B (or abstain altogether) because we feel like it, not because we have marshalled some careful analysis of whose positions are more likely to make the world a better place.
Voters also go to the polls because they see it as their duty as citizens, as well as give them a foundation to gripe. I've told plenty of people, "He who doesn't vote shouldn't complain."
"Throwing it Away"
[Note the paradox here has little to do with the game theory puzzle.]
September 27, 2003
The Clark Economic Plan
Steve Verdon on Weasley Clark's economic plan:
Lets also be clear here. What Clark is talking about is deficit spending. Sure, he can talk about repealing Bush's tax cuts, but there will still be a deficit and he wants to increase spending. So if the deficit is say $400 billion, and half of it is due to the tax cuts. Further, Clark wants to roll back the tax cut, but at the same time spend an additional $100 billion dollars, what he is saying is he finds a $300 billion deficit reasonable.
"He Has A Plan"
September 25, 2003
Airports Seeding Growth
Just as railroads created (and destroyed) cities simply because of where they went, airports are driving the growth of cities. Sprouting up around the Denver International Airport and Washington's Dulles Airport are office parks and subdivisions.
"New 'Cities' Springing up Around Many U.S. Airports"
September 24, 2003
Lindsey on Iraq Costs
Larry Lindsey got fired from his White House job because he did a poor job talking about a sluggish economy that has finally started to perk up. It wasn't because he was stupid. His USA Today column shows he's a pretty bright guy. He predicted that the Iraq War would cost 1-2% of U.S. GDP. It turns out the cost could be about 0.8% for both Iraq and Afghanistan. Lindsey then puts this cost in perspective:
Each year American households spend about 1% of their income on alcoholic beverages and another 1% on tobacco products. We spend about 0.7% of our money on cosmetic products. In other words, our combined operations to combat terror in the Middle East cost a bit more than we spend on makeup and shampoo and a bit less than we spend on booze or tobacco.
For that relatively small sum, we ended the horrible reign of an evil man, and ended a threat to the Middle East and the West. That's not a bad return on investment.
September 23, 2003
The Purpose of College
James Joyner comments on my thoughts on the future of higher education:
I've long thought that if college is to exist primarily as a job training center for the business world, it not only will but should fail. That's never been the role of the academy and, frankly, it is amazingly unsuited for it. Professors are subject matter experts in their field but, at least in the "pure" academy, they are primarily theorists. Their job is to educate, not to train. Those are vastly different missions.
He's right. The purpose of the university is to expand our knowledge. The only training that should take place should be future researchers and scholars. Trades like accounting, business, marketing, nursing, and teaching should be left to trade schools. We used to have government colleges specifically for teachers, but a time passed, they grew (as all government programs do) beyond their initial purposes.
Right now, I see a college degree as useful to employers as a sorting mechanism. But if undergraduate scholarship continues to be watered down, employers will look for proof of training in specific skills. That's where innovative for-profit and non-profit schools could make a serious impact and change higher education.
"College of the Future"
September 21, 2003
The Future of College
Arnold Kling has a vision of the college of the future:
Colleges today are in a position to continue to increase tuition charges. They have successfully met the demand for the aesthetic qualities desired by parents and students. They have achieved market dominance by becoming highly attractive holding pens.
But if colleges can continue to increase tuition without losing students, then where is the incentive to outsource? Does anyone imagine top schools like Harvard and Stanford outsourcing? I can imagine lower-tier schools outsourcing to Harvard but not the other way around.
If anything, the future of higher education (beyond high school) will be for-profit businesses providing specific training. Firms would hire the companies to train their employees to use some new piece of technology or individuals will get certified so they have better chances in the job market. As time goes on and businesses view college life as "holding pen" the value of a four-year degree will diminish.
"The World's Nicest Holding Pen"
September 20, 2003
Bird's the Word
I never would have thought a major news magazine would ever put an obscene gesture on their cover, but the breakdown of the WTO talks in Cancun really set The Economist off.
September 19, 2003
Economist vs. Krugman
Ambit responds to Paul Krugman's arguments about income inequality in his interview with Kevin Drum.
"The Economist Fisks Paul Krugman"
September 18, 2003
Java Tax Rejected
There's at least one tax people of the Left Coast don't like.
September 17, 2003
Another Economist Interview
CalPundit's interview with Paul Krugman isn't as full of virulent condemnations of the Bush administration as his columns (which I haven't bothered to read for a long, long time). Krugman sounded calm yet kooky. He thinks the Bush administration hates Government, wants to slash Social Security and Medicare, and wipe out the New Deal. He's also worried that budget deficits could create an Argentina-type financial crisis.
I say he's only a little kooky because with the U.S. having the largest economy in the world, other countries look to her to lift the world out of the economic doldrums.
As for the anti-government philosophy of the Bush administration, I have to laugh. You don't get record-setting budget deficits by tearing down government. If Bush, Grover Norquist (whom Krugman seems to be mildly obsessed with), et. al. really hate the social safety net, then how come the GOP is working on a prescription drug plan, the largest new entitlement created since Medicare? And if the Right was doing such a good job destroying the government, how come Jonah Goldberg has declared our time as an age of Big Government Conservatism?
September 15, 2003
Company Ditching Ground Zero
New York City leaders should really rethink the new design for Ground Zero. Westfield America, the company that has the lease for retail space there wants to sell it. An officer of the company said,
While Westfield wanted to be part of the future of the World Trade Centre, we recognised the conflict between the interests of the public and the needs of our commercial/net lease rights. Selling our interest back to the Port will allow the public interests to take precedence.
In other words, Westfield doesn't want any part of the debate over the amount of commerce versus memorial there should be at Ground Zero.
"Westfield Set to Quit Ground Zero"
Friedman Interview Tomorrow
I didn't do it. That lucky guy is John Hawkins. It will be posted tomorrow. I can't wait.
"Big Interview Tomorrow"
I'm just not in the mood to post tonight. It's not that there isn't anything to comment about. There's the collapse of the WTO talks in Cancun (it must have been the distraction of the nice, sandy beaches), the Swedes rejecting the Euro, and Microsoft raising its dividend. In the blogosphere, there's Steve ripping on Dick Gephardt on energy independence, Steven pointing out the horror of legal abortion, and Matthew's take on John Rawls' relevance in 100 years.
"Talks Collapse at WTO Meeting in Mexico"
"Swedes Reject Euro Referendum"
"Microsoft Doubles Dividend, Investors Seek More"
September 13, 2003
Is Hayek Still Relevant?
Hans H.J. Labohm ponders Hayek's The Road to Serfdom. Even though centralized economies proved to be no match for free markets, we still need to be aware of illiberal policies arising from egalitarianism, regulation (especially environmental), and interest group politics.
"A New Road to Serfdom?"
Commiewatch links to some disturbing pictures from Cancun. Notice in the right-hand corner of the page that the site is part of an "Anti-Capitalist Movement." These anti-traders oppose the private control of the means of production. The only other possibility is socialized control. There can be no third way. These anti-traders also consider violence to be a form of protest. But at the WTO conference who's rights were being violated that deserved such a violent response? It's one thing to parade around shouting your anti-capitalist slogans. It's quite another to attack police, rip down baracades, and use them as weapons. Each and every one of us has political disagreements. However, most of us don't pretend we're holy warriors fighting in the name of the cause. There is such a thing as discussion and debate. Change may not come quickly, but it sure prevents broken bones, broken glass, and scarred memories.
September 12, 2003
Fashionable Freedom Fighters
Anne Applebaum thinks the anti-globalization movement has run out of steam. In Cancun, protesters bared all against the WTO. Applebaum's explanation: "It was fun." She sees a youth movement in pro-capitalist ideas with France's Sabine Herold and Sweden's Johan Norberg (who is duking it out online with Robert Kuttner).
"The New Radical Chic"
UPDATE: Stephen linked to a picture of said naked protestors.
September 09, 2003
Read this article on recycling before the next time you have to sort all your recyclables and drag them to the curb. Two items of note are 1. "the total land area needed to hold all of America's garbage for the next century would be only about 10 miles square;" and 2. mandatory recycling programs use more resources than traditional landfill with voluntary recycling.
Stephen Karlson at Cold Spring Shops writes,
The role of existence proofs in blackboard economics is overstated. Most of what we teach, and a great deal of our theoretical research, is characterization results. That there is a mapping from a simplex to itself is useful; that the underlying behavior involves the extinguishing of all arbitrage opportunities is essential.
The only terms that I understood here are "simplex" (from my mathematical econ class) and "arbitrage." I don't recall ever encountering an existence proof in an econ class. In some of my math classes, maybe.
I then scanned the John Quiggin post Stephen linked to and got a slightly better understanding of existence proofs. No insight, which helps me understand why I might want an advanced econ degree but have no desire to teach or do research in a mainstream econ department.
I don't mean to knock anyone's research which may be very valuable. I'm just more sympathetic and partial to Mises' and Hayek's methodology and approach to economics.
September 04, 2003
The NY Times reports that Ticketmaster will start selling tickets via auction. Ticketmaster CEO John Pleasants said,
The tickets are worth what they're worth. If somebody wants to charge $50 for a ticket, but it's actually worth $1,000 on eBay, the ticket's worth $1,000. I think more and more, our clients - the promoters, the clients in the buildings and the bands themselves - are saying to themselves 'Maybe that money should be coming to me instead of Bob the Broker.'
This is a double-edged sword for Ticketmaster. In theory, the company could reap the revenue now going for tickets on the secondary market. But if there's such a bad response to this by the public it could cause politicians to look at Ticketmaster as an antitrust issue. Also, venues could reject Ticketmaster's auction and ask other companies to sell their tickets.
I have a feeling that only prime seats and really hot shows would work best with an auction system. An auction involves a higher transaction cost than simply buying a ticket. You don't know if you've got a winning bid until the auction closes, and you have to watch the auction to make sure you still have a winning bid.
On the macroeconomic front we have mixed messages:
Further signs emerged on Thursday suggesting a quickening in the pace of the U.S. recovery, but a rise in applications for jobless benefits showed the economy is not yet firing on all cylinders.
Unemployment is considered a lagging indicator. That means it's one of the last pieces of data to be affected by booms and busts. The Labor Department said productivity grew at a 6.8% annual rate in the second quarter. Since wages normally rise with increased productivity, the consumer sector should be strengthened.
"Signs of Economic Recovery, but Not Jobs"
While the U.S. recovery can be said to be tepid at best, it's doing better than France's. The budget minister predicted 0.5% growth while advancing a tax cut plan.
"French Economy 'to Grow 0.5% in 2003'"
On the international trade front, the World Bank called for developing nations to reduce their trade barriers.
"Gains for Poor Countries in Removing Barriers: World Bank"
September 01, 2003
Free Banking and Private Currencies
For non-econ geeks (you know who you are) just ignore this post. For the rest of us Lawrence White has an essay on free banking and competing private currencies. With the financial press and investors infatuated with central bankers, I don't expect to see real, viable private currencies in my lifetime. However, it's a stimulating subject that gets strange looks from people at parties. Free bankers aren't just goldbugs, they're even "crazier." Just add Hayek, White, and myself to the list of nuts then.
"Competing Money Supplies"
August 30, 2003
U of Michigan's Spending Overkill
Here's how college tuition skyrockets. The University of Michigan changed their undergraduate admissions process to conform to a recent Supreme Court ruling. Here's the key paragraph from the Washington Post story:
As a result of the changes, officials said, they are hiring 16 part-time readers to review applications and five additional full-time admissions counselors, at an expected added cost of $1.5 million to $2 million next year.
Let's assume the part-time readers will work half time. Meaning I'll consider them the same as 8 full-time workers. Add to that the five new admissions counselors, and that comes to 13 new hires. Divide the number of new hires by the conservative estimate of the cost ($1.5 million) and it comes out to over $115,000 per full-time hire. If using the higher estimate it comes out to almost $154,000 per full-time hire.
"U-Michigan Reveals New Policy
Humor is Profitable
The Onion makes money by not spending wildly and maintaining the integrity of the brand.
August 29, 2003
Kerry's Economic Plan
I've had so much fun picking on Howard the Duck and Sen. Bob "Numbers make my head hurt" Graham (D-FL) that I haven't offered anything on Sen. John "I was a Beatles groupie" Kerry (D-MA). With the Senator offering an economic plan, that will now be rectified.
There's no need to bother reading the speech since Kerry's website has his plan laid out full of bullet-point goodness.
First, Kerry wants to "jumpstart job growth today." According to the Senator "The Bush economic approach has left states with nearly $90 billion in budget deficits, forcing lay offs, education cuts, and tax increases." Actually, state governments' problems rest with a mild recession early in Bush's term and their own overspending. The wizards at the National Bureau of Economic Research (NBER) declared the recession to have started in March 2001. President Bush was in office six weeks when the recession began. Kerry is being intellectually dishonest in blaming Bush for an economy he had no ability to affect.
In his speech Senator Kerry said, "We're not just in a temporary downturn. America is in a fight for our economic future." Once again, Kerry is being intellectually dishonest. In July the NBER wizards declared the recession to have ended in November of 2001. That means the "Bush recession" was a whole eight months long. Now, it is certainly justified to question the thinking of a panel that took a year-and-a-half to determine the end of the recession. Despite the mainstream's love for mathematics, economics is an inexact science if it can even be called such, but sometimes we're left to play the cards we're dealt.
Then there's the "unfortunate" (for Kerry) news that manufacturing is recovering. The monthly purchasing managers index for Chicago showed a fourth straight month of manufacturing expansion. Economist Andy Kish said, "This bodes well for the domestic labor market since manufacturing layoffs have been the main impediment to generating positive job growth." When you put this Chicago news together with a recent report from the Philadelphia Federal Reserve you see that manufacturing is coming back. Even if Kerry tries to pin the loss of 2.7 million manufacturing jobs on Bush, recent news has made that more difficult.
Kerry's "State Tax Relief and Education Fund" ends up being a bailout to the states for spending too much. Can you say, "moral hazard?" States would have less of an incentive to maintain fiscal discipline if they knew the feds would eventually come around and hand them some money. What Kerry's fund also is is redistribution from disciplined states to undisciplined states.
The section "Using American Ingenuity to Create a Strong Economic Future" includes controlling "rising health care costs by helping pay for catastrophic care cases." With Medicare's and Medicaid's costs rising yearly, having the government involved with funding catastrophic care looks like a money hole that will never be filled. Kerry also sees government, not private, research planning as the way to "pave the way for industries of the future." Then there is his ridiculous notion to produce "20 percent of all our electricity from renewable sources by 2020" with no mention of how to prevent local residents from stopping the installation of windmills and solar panels.
In the section "Making Four Years of College Affordable" Kerry wants to offer tax credits covering four years of college. Allowing people to keep more of their money is a good thing, but Kerry wants to make the credit refundable so those that don't pay taxes could still receive the credit. That's not a tax credit, it's a subsidy. That amounts to welfare, middle class welfare.
In the section on tax relief, Kerry would keep Bush's tax cuts for the middle class. That includes capital gains and dividend taxes. Later on in his budget balancing section the Kerry plan would boost revenues by repealing "Bush’s special tax breaks for Americans who make more than $200,000."
The Kerry economic plan amounts to soaking the rich, bribing the middle class, and micromanaging business. If you're in the middle class you might get some benefits: college tuition credits, health care subsidies, and no tax hikes; but if you happen to do well and become rich or start a business you will fall under John Kerry's watchful eye.
"Democrat Kerry Unveils Jobs, Economic Plan"
August 28, 2003
Learning from Their Mistakes?
This is a sign that the Bush team is beginning to understand that good economics is good politics:
Treasury Secretary John W. Snow, Commerce Secretary Don Evans and other economic advisors want President Bush to roll back tariffs he imposed on $3 billion in steel imports, people familiar with the matter said.
Now, our pocketbooks can only hope they realize that controling government spending would not only tone down the huge budget deficit projections, but would take away an issue from the Democrats.
"Bush Team Is Said to Seek Lower Steel Tariffs"
August 24, 2003
Jay makes up for his toe post with a review of a Business 2.0 [not online] story on the upcoming job boom. Since it isn't online, I'll have to remember to grab a copy next time I work at the bookstore.
"Jobs, Demographics, and Our Future"
August 20, 2003
Prop. 13 and Scheer
Stefan Sharkansky points out a consequence of Prop. 13:
Because property values are reassessed to market value only at the time of a sale, there is an enormous advantage to long-term owners at the expense of those who enter or re-enter the market. It is precisely a form of rent control with the same undesirable side effects. Do you want to give young entrepreneurs with growing families a reason to leave California to start their businesses elsewhere? Prop. 13 is the solution for you!
He then does some digging into the property holdings of capitalism-basher Robert Scheer.
Tyler Cowen on liberating electrical markets:
In the long run you would have a) much cheaper home or local generation, b) a decentralized system, immune to terrorist attack, c) no significant regulatory issues, it would be like buying a toaster, and d) perhaps a system that is more environmentally friendly (of course this depends, you don’t want people dumping system waste into the water table, or being stuck with hard-to-dispose-of batteries, let’s hope for solar panels, and don’t even ask about the guy who gets fried in the backyard trying to fix or operate his system instead of calling in an expert).
But for Matt Yglesias, he'd prefer some "nice, comfortable, regulations."
"Laissez-Faire in Electricity Supply"
August 19, 2003
PoliBlog vs TAM on Prop. 13
Don't worry, hostilities haven't broken out between Steven and me. It's not some lame attempt to generate some "news" during the August doldrums. It just a discussion on California's Proposition 13 and a better way to finance local government.
Section 2 of Article XIIIA of the California Constitution (enacted by Proposition 13) establishes an acquisition-value assessment system. It provides that property is to be assessed at its value when acquired through a change of ownership or by new construction. Thereafter, the taxable value of property may increase annually by no more than the rate of inflation or two percent, whichever is less.
Steven sees this tax limitation as unfair:
I understand the root cause of the taxpayer revolt in the 1970s that led to Prop 13, but clearly this distorts the fairness of the system. It seems to me that if my house and your house in the same neighborhood are valued the same, we should pay the same amount in property taxes.
It may be unfair for the latter buyer, but the market-assessed method for property taxes is unfair to the person who has lived in a home for a significant amout of time. Suppose person A bought a house for $100,000 in 1990. In 2000, person B bought an identical house next door for $200,000 (a result of the dot-com boom). Assuming the same tax rate is applied to both properties, B is paying twice as much as A. It's seems unfair to B because they're both using a similar amount of government services. But it would be unfair to raise A's taxes just because B spent more on his house.
In another post, Steven and I go back a forth on the property tax versus a user tax. I commented:
In my perfect world, property taxes would be based on use of city services or land size instead of the property's value.
Well, that would be a usage tax, not a property tax. Plus, how does one exactly calculate that? For example, even if one drives less than one's neighbor, one may still get other benefits from the roads (such as their use in shipping in items you buy that you neighbor doesn't--it is difficult to quantify).
No tax is economically neutral. Adding another cost onto anything creates incentives to minimize it. An example of this are the narrow houses in Amsterdam. When taxes were determined based on the width of the home, smart Dutchmen built narrow houses. When it comes to the roads, the gas tax seems like it works fairly well at focusing on the bigger users. When I mentioned a tax based on property size, I was thinking in particular the amount of road going past one's property that needed snow plowing (Wisconsinite's brain at work) and sewers.
How you would calculate the tax is to take the total levy (government spending) then divide it by the taxable land in the governmental area. It would end up being a certain dollar amount per square feet of land. Larger land owners would pay more since it would seem they used more government services. There would still be distortions--those unintended consequences--but it seems more just than basing taxes on property values that are beyond the control of property owners.
In the California situation, I see little need for tax increases or "reform" that amounts to tax increases when government spending balloon these past few years. Revenue hasn't been California's problem since the paper on Prop. 13 Steven linked to states that "The property tax has proven to be a stable revenue source for local governments, growing almost 10 percent per year between 1980 and 1992; even in 1992, a recession year, the annual increase was 7.9 percent." Any fiscal problems with local government is the result of out-of-control spending not fluctuating tax revenue. Much of the spending increases is beyond the control of the legislature due to propositions (example: Arnold's after-school initiative). I'm from the Friedman school of taxes: to shrink government you must shrink the revenue that flows into it. Prop. 13 prevents the beast from being fed more.
August 18, 2003
Problems with Electrical System
Lynne Kiesling nails what's wrong with the electrical system:
Generation is largely governed by market processes, but transmission and retail distribution remain heavily regulated. The investment decisions of transmission owners and the retail rates that they can charge to their end customers all hinge on rate cases that are decided by state-level regulators. The rates that regulators allow take into account changes in costs, required investments, and the payment to the utility of a rate of return on the assets they own. For much of the past decade this rate of return has been substantially lower than what utilities could earn from doing other things with their money, so they did not invest in building much new transmission capacity or in upgrading existing lines. Nor did a regulatory environment that is a relic from the 1930s, constructed to govern and control local, vertically integrated utilities, either have the incentive or the wherewithal to force the utilities to invest in transmission assets that would carry power to customers in other states.
Buffet and Prop. 13
Steel Tariffs Continue
The International Trade Commission voted to extend steel tariffs for five years. While this seems good for American steel manufacturers (they now claim 89% of the domestic market) overall, it hurts an already weak economy. Caterpillar wants the tariffs lifted to grow manufacturing jobs, and consumers end up paying more for steel-based products. The U.S. has already lost a WTO case, so if President Bush maintains these trade restrictions the integrity of that body could be at stake.
James (via Dean) linked to "The Road to Serfdom in Cartoons". For those of you way too lazy or time constrained to read the actual book (it's not very long) it offers the jist of Hayek's argument against economic planning.
What struck me was Look published this in their magazine and General Motors printed it as a booklet. Oh have times changed. You'd be hard pressed to find something this anti-statist published in a mainstream periodical or put out by a corporation. The former is hooked on Big Government while the latter would find such "radical" ideas in TRTS too "controversial."
Jets Not Extorting
Michele rants on the New York Jets' new policy of making people on their season tickets waiting list pay to stay in line.
The economist in me has no problem with paying to stand in line. (If you read James Fallows' Atlantic article on Rupert Murdoch you know they do it on Capitol Hill.) My beloved Green Bay Packers have over 50,000 people on their waiting list. It's common for new parents to put their child's name on the list immediately after birth so they have a possibility of getting season tickets by the time they're 40. For a really small-market team like the Packers paying to be in line would be a good money-maker. Sure, people will be ticked and drop out of line, but that would only make those left move up that much faster.
Where the Jets went wrong is for their president Jay Cross to say the charge was to keep fans "in the family." That's gobble-dee-gook. That's not even good spin. He could have been honest by saying that since there is so much demand just to wait to get Jets' tickets it is appropriate to charge for the privilige. Phil Mushnick is just wrong when he writes, "Jets are now charging something for absolutely nothing." That's not true. The Jets are charging $50 to get on the list for season tickets. Fans saw value by going on the list when the cost was zero, and they'll see value when they pay their $50. Phil certainly showed that any economics classes he took ever rubbed off on him.
With the Jets (and Packers and Redskins) having huge waiting lists for season tickets, that tells me those teams charge too little. Demand is outpacing supply. Of course, I'm being pretty simplistic. Teams want to connect with people. Having very expensive ticket prices could and do alienate fans. Just look at Michele's reaction. Then there are teams like Oakland and Arizona who can't fill up their stadiums. In their cases, if they want to maximize stadium revenue they should lower ticket prices. Since they don't some other factor comes into their decision-making. It might have something to do with shared revenue (ticket money is partially shared with the visiting team) or with television money.
"Jets' List Real Steal"
August 14, 2003
Arguing over Deflation
August 13, 2003
The Political Economy of Protectionism
Reason's Ronald Bailey and *gasp* the NY Times editorial page are correct that agricultural subsidies and tariffs are wastes of money and harmful to the poor in developing nations. However, let's look a little at the politics of these subsides in the U.S.
A few weeks ago, there was some buzz about the outsourcing of tech jobs to places like India. Politicians have called for a stop to this. I have even heard people worried that all the good, high-paying jobs will leave the U.S. Workers here will be stuck with low-paying retail and service jobs. Few thought the New Economy would be similar to the Old Economy with lower-priced labor hired for tech support and computer programming.
Then we have farmers. In the U.S. they're looked at in a romantic light. We have a picture of a man of the land working from sun up 'til sun down just to put food on his family's table and ours. The farmer is in constant contact with nature. He doesn't worship it like radical environmentalists do, but he has a deep respect for what nature gives and takes away. This closeness to the earth makes him for in touch of what it means to be human. Such wisdom that comes from hard work, patience, prudence, and common sense results in the ideal American citizen.
This view of the farmer goes as far back as Thomas Jefferson who wanted the new country to be a land of citizen farmers. In a letter, Jefferson wrote, "The cultivators of the earth are the most virtuous citizens, and possess most of the amor patriae." As it turned out, the U.S. looks more like Alexander Hamilton's vision of a land of businessmen. Nevertheless, Jefferson's bucolic picture still hangs on the wall of the American mind even if many of us have never once walked around a farm.
Through the 20th Century, America lost it's huge number of farmers, yet became the most productive agricultural nation on earth. Improved equipment, fertilizers, techniques, and science led to commodity markets flooded with corn, wheat, milk, and other products. Such output forced farmers to get more productive--which usually meant getting bigger--or to find niches like organic farming.
Economic trends ran smack into romantic visions. The result is a plethora of government subsidies and trade barriers. Price supports were enacted to prevent the disappearance of the family farm. Products like mohair and cotton are subsidised because at one time they were considered essential to national security.
When these programs are even mildly threatened, those people who stand to lose the most will fight the hardest. The rest of us who pay most of the costs (explicit and implicit) don't get involved because we're not directly affected. In Jonathon Rauch's book Government's End takes an insight from economist Mancur Olson:
In other words, small, narrow groups have a permanent and inherent advantage, and "often triumph over the numerically superior forces because the former are generally organized and active while the latter are normally unorganized and inactive."
Combatting this combination of deep-set romanic vision with special interest politics requires not just accurate economic arguments. It also requires an alternative view of the ideal America.
Financing Social Security Reform
Here's a serious post dealing with how to finance a transition from old fashioned Social Security to private retirement accounts.
"Transition Financing, Not Transition Costs"
August 06, 2003
Germany Taxing Its Way to Prosperity
Two stories demonstrate why the German economy is screwed up. First, the German unemployment rate is up to 10.4%. 4.35 million are out of work and looking for a job. Chancellor Gerhard Schroeder's solution is welfare and labor market reforms plus tax cuts. But while the German federal government tries to stimulate the economy with tax cuts, cities will be taxing doctors and lawyers and closing of tax loopholes. So tax cuts will leave one hand of government and go right into another. Forget Iraq, the German economy is starting to look like a quagmire.
"German Dole Queues Lengthen"
"Cash Rescue for German Cities"
July 31, 2003
More PAM Support
James Pethokoukis provides some real examples of event markets at work. He also takes a great shot at Sen. Clinton (D-NY) the Queen of Futures Markets in the Senate.
July 30, 2003
Price Must Equal Costs, But What Costs?
James DeLong writes on how the idea of marginal costs have been taken from their theoretical context and distorted as weapons in policy debates. Here's a key paragraph:
The axiom "prices must equal marginal cost" does not tell you whether the relevant time dimension is a decade, a year, or an hour, which makes it into a meaningless statement. So to set up an identity between marginal cost and price, without a tight specification of the assumptions about time, or to assume that short-term marginal cost is the ticket, produces nonsense.
An electronic market where traders would buy and sell futures on economic, civil, and military events was a great idea. Too bad the Pentagon caved in to some Congressional pressure.
The premise was to use markets to gather dispersed information into a form policy makers and strategists could use to base their anti-terrorism plans. Sounds goofy? How could millions of people possibly know if Jordan's monarchy was about to fall in a coup? Participants in the market would presumably read newspapers, books, websites, watch television, or even talk with people who have insider information. With the explosion of media sources no one person can possibly read and listen to everything. People will following little snippets of the whole story. The market comes in to give people an incentive to make their educated guesses profitable. If there were rumblings within the Palestinian Authority, Policy Analysis Market (PAM) activity in an Arafat assassination future could catch policy makers' attention. Just like CNBC reports talk to corporate officials when their stocks make unexpected moves, officials and the media would get curious over futures activity.
F.A. Hayek wrote on how the market allows dispersed information to be used to generate economic activity. PAM would have served a similar role in terrorism analysis. Hayek writes on the economy, but it can be applied in our current situation:
The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequesntly contradictory knowledge which all the separate individuals possess.
In a press release, Sen. Byron Dorgan (D-ND) said, "We need to focus our resources on responsible intelligence gathering, on real terrorist threats." That is what PAM would have done. With the enourmous quantity of data flooding our intelligence agencies officials need some way to distill it. Supercomputers and lots of human analysts are one way, and using dispersed knowledge and the profit motive is another.
Should U.S. policy be determined only by the results of an events market? No, what PAM could have offered was an innovative mechanism for evaluating global threats. Since humans operate in markets and they're fallible market information won't be perfect. What PAM would have done process information human eyes might never see.
How an events market can guide policy makers toward the correct decisions is explained by Hayek:
The most significant fact about this system [the market] is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order ot adjust their activities to changes of which they may never know more than is reflected in the price movement.
"Real intelligence" is knowing what's going to happen in the future. PAM would have helped.
Democrats and Bush bashers went ga-ga over PAM. Kris Lofgren's freaking out. Sen. Ron Wyden (D-OR) called the events market idea "wasteful" and "repugnant."
Since people already profit off weather futures and Presidential elections a terrorist events market doesn't seem that bizarre. But it does to people who don't appreciate the information-gathering abilities of markets.
Wyden and Dorgan won. The PAM website is down and with it went an innovative way to predict future crises.
UPDATE: Tyler Cowen compares PAM to Las Vegas odds-makers.
UPDATE II: John Cole at Balloon Juice calls the PAM cave-in "disgusting."
July 19, 2003
Serenade to Econ
Jane Galt reminds me that serious economic thinking requires more than Google:
But how do I do that, I hear you cry. Why, it is difficult, my little chickadees; that is why people have to get PhD's and things. It is so difficult, in fact, that when you see a blogger who has claimed to prove some grand theory, such as the superior economic performance of their political party, or the ability of budget surpluses to generate astonishing rates of growth, using only numbers they can find on the internet in fifteen minutes or less, you should be very, very suspicious.
And that, my friends, is why TAM isn't a place for daily economic forcasting. Sorry to tell you, but just because I did study a lot of economics in college it doesn't mean I know if the Fed's Japanese-style rate cuts will really rev up the economy. I also don't know how consumption and saving will be affected by Bush's mostly back-loaded tax cuts.
Besides, economics is so much more than GDP, unemployment rates, and budget deficits. It's a study of how people organize themselves to satisfy their wants and needs. It's a facinating examination of how disparate people all over the world somehow work together to let us live our lives. Institutions have developed, customs evolved, and rules made to foment self-interested cooperation. My love of economics is seeing the wonderous miracle of a complex society without intentional organization.
"The Dangers of Data Mining"
July 16, 2003
Battle of the Economists
USA Today run a cliche story: Battle of the Economists. Every once in a while a media outlet runs a story pitting one group of economists with another on some issue. This story is on the effects of ballooning budget deficits. There is one group who has no problem running deficits when there is "economic slack and the job market is not recovering." Then there are those, like Henry Aaron (no, not that one), who blasted Bush's tax cuts. Aaron suggested the suspension of tax cuts that haven't taken effect. No where does he suggest the elimination of Bush tax cuts that have already taken place--advocate a tax increase--nor does he talk about stopping the government's spending spree.
"Economists Defend Deficit Spending at White House"
July 15, 2003
White House Wants to Cut Deficit in Half
Scott McClellan said today, "The deficit certainly remains a concern, but it is one that is manageable and it is one that we are addressing ... Over the next few years we will cut this deficit in half." How, by wanting a prescription drug entitlement to Medicare that would be the largest expansion of the program in years? Or is the White House putting together a list of substantial budget cuts to give to Congress? Or do they think the back-loaded tax cuts will really juice up the economy?
"White House Says It Will Cut Budget Deficit in Half"
June 30, 2003
Here's Greg Ransom's mathematics of a world currency:
Central Banking + World Government = idiocy squared, then cubed.
June 18, 2003
Our Protectionist President
President Bush is not helping his record on free trade. I like low-priced computer chips and catfish. (Who knew Vietnam had catfish, let alone exported them?) Who ends up hurt the most are American consumers who will pay more for the stuff. Don't expect a swell of public outcry. While consumers as a whole will be hurt, that pain is spread out over millions of people. It ends up being pennies to an individual. On the other side, the few American chip makers and catfish producers will get more concentrated benefits. Thus they have a greater incentive to complain to the government about "unfair" trade practices.
Jane Shaw delves into this phenomenon with her primer on public choice economics.
June 07, 2003
Child Tax Credits
Brad at A Taxing Blog links [here and here] to two stories on child tax credits for the working poor. The Senate passed a bill and it's off to the House. I still can figure out how refundable tax credits to poor people who don't pay income taxes is different from a welfare check. I understand the theory is in the relm of the negative income tax, but the tax code is a roundabout way of income redistribution.
"Negative Income Tax"
June 05, 2003
Infosphere Not Planned
Glenn Reynolds feels the spirit of F. A. Hayek possess him and writes:
The Web, Wi-Fi, and Google didn't develop and spread because somebody at the Bureau of Central Knowledge Planning planned them. They developed, in large part, from the uncoordinated activities of individuals. Why can you find all sorts of stuff, from information about the Hephthalite huns to recipes for brewing beer and even recipes for cooking squirrel, on the Web? Because people thought it was cool enough (to them) to be worth the effort (on their part) of putting it online. We didn't need a thousand librarians with scanners, because we had a billion non-librarians with computers and divergent interests. Wi-Fi is springing up the same way: not as part of a national plan by the Responsible Authorities, but as part of a ground-up movement composed of millions of people who just want it.
Structures like the Web, Wi-Fi networks, or the Market in general grow from the ground up because the knowlege to do it consists of "dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess."
"The Use of Knowledge in Society"
June 04, 2003
The reason I like reading David Warsh's weekly Economic Principals column is he pulls back the curtain of the academic economics profession. In his latest, Warsh writes about what economists actually do. Even though the field is filled with intellectual problems (the substitution of mathematics for verbal logic is one), we get a glimpse at how economists talk to each other and share ideas.
"How to Play It Straight"
May 27, 2003
Are Tax Cuts Already Boosting Market?
It's been a long time since I did any statistical regression analysis, but today's stock market closing makes me wonder if there's a correlation between price changes and dividend yields of Dow Jones components. If someone would like a crack at it, they would get plenty of TAM exposure. Along with that, the rest of us would have an idea if last week's tax cut played a role in today's market.
May 23, 2003
Ho Hum on Tax Cuts
A tax cut was passed. It's $330-350 billion depending on how it's calculated. Even though President Bush is happy with it, by his definition it's "itty bitty." The President wanted about $750 billion in cuts but got only half that. And this is coming off a victorious war, high popularity, and his party in control of both houses of Congress. The center of his original plan was the ending of the dividend tax. That didn't make the final bill. Instead of ending the unfair double taxation of dividends, that unfairness is reduced to 15% where it will be aligned with capital gains. Failure to end the dividend tax means companies won't have as much of an incentive to pay out dividends to its shareholders. Congress and the President missed a golden opportunity to inject some market incentives for companies not to lie about their earnings.
The biggest losers from this bill are the Democrats who opposed a bill that might just revive the economy. If that happens it will be hard for Presidential and Congressional candidates to stand up before the public and explain why they opposed tax cuts. Also by opposing tax cuts, the Dems reinforced their apperance as tax increasers. They can say all they want how they wanted to give lower and middle income people a holiday from payroll taxes, but they never advanced a serious plan. All they did was carp on "the rich getting richer."
Another loser was President Bush, but he's a minor loser. He didn't get the tax cut he wanted. He didn't even kill the dividend tax. The tax cut is much smaller and will not be as simulative as his original plan. This may hurt him next year if the economy is still very sluggish. Politically Bush couldn't use his war victory and popularity to bull the tax cut through. If I were the Dems, I'd be breathing a sigh of relief, and realization that President Bush isn't politically all-powerful.
The Dems have a key advantage in every battle in the Senate that Bush couldn't counter, which brings me to my final loser: Senate Majority Leader Bill Frist (R-TN). This was his first big test as majority leader to get an important bill through the Senate. On this, he failed, and that's because he couldn't keep GOP moderates like Sen. Olympia Snowe (R-ME), Sen. Lincoln Chafee (R-RI), and Sen. George Voinovich (R-OH) in line. Their objections along with sometime-conservative Sen. John McCain (R-AZ) forced the tax cut to be halved. Even then, Snowe wasn't happy, calling the cuts "a trillion-dollar tax cut masquerading as $350 billion."
The winners from these tax cuts are families with children. USA Today offered this example:
Accounting giant Deloitte & Touche estimated that a married couple earning $63,000 a year with two children would get a break of $1,100 this year. A childless couple with the same income would save $300.
In order to make the numbers work, the many of the cuts expire in a few years. Sen. Max Baucus (D-MT) called it "one big yo-yo." Unless Congress comes back later to make these cuts permanent, it could create some weird economic activities just to avoid the increased rates. Fixing these problems later isn't assured because Bush could lose next year and/or the Senate could go to the Democrats. If either of these happened, it would be really tough to get tax cut bill through a class warfare-obsessed Democratic Senate.
With the fast-forwarding of rate decreased and the deductions on business equipment purchases, this tax cut could pick up the economy. There will be greater incentives for people to do things that could make more money. The key to a bigger economy is producing more goods and services that people want. Letting people keep a little more of their income could induce some entrepreneurial energy. I just wish the Republicans would have used their political power for greater effect.
"Tax Cuts Likely to Come by Summer"
"Congress Approves $330B in Tax Cuts"
"Fiscal Conservatives Say Hurray for Tax Cut"
May 22, 2003
Virginia Postrel points out the difference between price competition and deflation. Many industries are experiencing the former, but a falling dollar and rising budget deficits should prevent the latter.
"Demon Deflation: Not Here, Now"
Trust Bust Big Media?
Will anyone besides me question Glenn Reynolds' libertarian streak when he advocates the use of antitrust laws against Big Media? From reading him for so long, I have learned that he is no ideologue (he calls himself an "anti-idiotarian," whatever that means).
[find some criticism of antitrust laws; Cato?]
April 30, 2003
How should Iraq's economy be reformed? Should a version of Russian-style "shock (and awe?) therapy" be employed or a more incremental Chinese approach? David Warsh touches on this issue with some perspective from economists who were involved in Eastern European economic reconstruction.
What is crucial to success is adapting any reforms to local rules and customs. Policy makers need to take full advantage of Iraq's unique time-and-place specific knowledge. An understanding of how the economy operated under Saddam and an understanding of the rules and customs of Islam (both Shia and Sunni) are required to build the institutions and laws needed to allow Iraqis to take risks, create jobs, and grow the economy.
A book I'd recommend is Hernando De Soto's The Mystery of Capital. In it, De Soto emphasises that simple, fair rules need to be in place for people to buy and transfer property or to start a business. If government regulation is so onerous then that activity only moves to the black market.
"What Have We Learned?"