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Archive for October, 2009

One Completely False Statement in Superfreakonomics

October 27th, 2009 1 comment

Then there’s this little-discussed fact about global warming: While the drumbeat of doom has grown louder over the past several years, the average global temperature during that time has in fact decreased.

This “fact” is true…but only if you calculate forward from 1998–one of the two hottest years in history (2005 was hotter).

It’s not true if you calculate from 1997, or 1999, or any other year “over the past several years” except 2005.

It’s not true.

It’s childishly obvious statistical cherry picking, delivered by a man who has spent his professional life working with statistics.

GLOBAL TEMPERATURE

You don’t need a statistician to figure out what’s going in this graph. But if you want some, the AP hired several:

Statisticians reject global cooling.

This all putting aside the fact that the purported “fact” is far from “little-discussed.” The wingnuts have been proclaiming it from the mountaintops for years. By pretending it is a fact, Levitt gives aid and comfort to the enemies of mankind.

The only explanations I can imagine for this incorrect statement are 1. intentional deception or 2. gross professional negligence.

Given the dismissive and contemptuous “drumbeat of doom” language, #1 becomes a more likely possibility.

Most Regressive Taxes? My Home State :-(

October 23rd, 2009 4 comments

I’m finally getting around to following up on a graph I posted sort of in passing a while back, a graph that to my eyes makes a profound statement about our country and our economic system.

It shows total taxes paid–local, state, and federal combined.

People making $55-90K (fourth quintile, approx.) pay the same share relative to their share of income as those making hundreds of millions. Above $55K, U.S. taxes really aren’t progressive. Like, at all.

So-called conservatives love to crow about how progressive federal income taxes are. But of course (as is their wont), they ignore the inconvenient truths about payroll taxes, and state and local taxes–which in general are horribly regressive. And I’m depressed to say that my home state is right at the top of the list:

Untitled

Middle-class taxes in my state are three and a half times what they are for rich people. Poor people’s taxes are five and a half times what they are for rich people. This is unfair, of course, but truly even more important, over the long term it makes everyone worse off–including the rich people.

I know, I know: “Look how well Washington is doing. It’s thriving!”

Uh…look at the rest of the states on the list. Tennessee? Michigan? Alabama? I don’t think we need a scatterplot or trend line to draw a judgment on that idea.

Source (pdf)

The Problem with “Socialism”

October 22nd, 2009 10 comments

As an attack term, “socialism” packs a lot of wallop. But that’s mainly because it’s used to attack things that aren’t actually socialism.

Socialism, defined: “various theories of economic organization advocating public or direct worker ownership and administration of the means of production.”

But when attackers go after “socialistic” policies, they’re usually imprecating against something else entirely: government redistribution of wealth and income. (Via education, health care, infrastructure, direct transfers, etc.)

“Look at the USSR,” they say. “Socialism failed!” And it did. Government ownership of the means of production has been soundly discredited by history.

But they’re not attacking such systems. They’re attacking redistribution. And that policy has been resoundingly endorsed by history. Of all the thriving, prosperous countries in the world, there is not one that does not have massive doses of redistribution.

By their very usage, the attackers define the “socialism” that they’re attacking as redistribution. But their evidence for its perfidy? Another “socialism” entirely: government ownership of the means of production.

I wish I could redefine words:

“Communism” is government ownership of the means of production.

“Socialism” is government redistribution.

But I don’t think I’m going succeed in revising all those dictionaries out there.

What’s a better word for an economic system that includes significant redistribution? One that doesn’t include the word “social”?

Financial services, by the way (including insurance, including health insurance), are not a “means of production.” They’re a (necessary) catalyst to production.

Socialism and Prosperity: Does One Cause the Other?

October 11th, 2009 2 comments

Regular readers will find me beating something of a dead horse here, but I felt it necessary to respond to a recent post by Bryan Caplan, who continues to speculate on the putative negative economic effects of “socialism.”

>”Lots of developed countries have some significant socialistic elements,” … would be an understatement. Every developed country has some significant socialistic elements.

Brian, yours is also an understatement. Every thriving, prosperous country in the world has major, massive elements of socialism. Even in your favorite poster child, Singapore, 80-90% of residents live in public housing.

I’ve asked you before: if the principles of libertarianism and small government were as economically efficient as you believe, wouldn’t at least one prosperous country have emerged that is governed by those principles, and wouldn’t those countries that have done so have left all the others in the dust?

In fact, over those decades you describe, in developed, prosperous countries (here repeating from a previous post),

Countries with more generous social programs and redistribution regimes grow at least as fast as others.

Countries with more progressive tax systems grow faster than others.

Countries with more wealth equality grow much faster than others.

More-equal countries provide more opportunity for people to climb the economic ladder.

(It’s worth noting here, by the way, that Lane Kenworthy and many others have demonstrated conclusively that equality in prosperous countries is achieved through various methods of redistribution–from education to infrastructure to social support–not through market mechanisms.)

>don’t you think it’s at least possible that, say, the EU would have had 1% higher growth over the last thirty years if it had more free-market policies?

Since the two regions’ growth rates over those years have been the same, you’re effectively asking, “would the EU have kicked our ass?” Certainly an interesting question.

>(I’m not saying that the trade-off is really this stark; it’s just a hypothetical).

This parenthetical disavowal, it seems me, deserves just as much attention as “Marx’s left-handed compliments to capitalism.”

Update 10/24: I notice that they’re hashing this out over at Cato. Will Wilkinson starts it out here, my hero Lane Kenworthy provides his cents’ worth here and here, with other contributions of interest here and here.

I also went back to the most widely-cited paper on this topic (from the world’s most widely-cited economist), Robert Barro‘s 2000 “Inequality and Growth in a Panel of Countries” (PDF). He concludes that over all the countries surveyed, there’s no correlation. He finds a negative correlation for poor countries (more unequal, slower growth) and a smaller positive correlation for richer countries (more unequal, higher growth).

growth and inequality barro

Ratings Agencies and Real-Estate Appraisers: How Do You Keep ‘em Honest?

October 4th, 2009 No comments

Megan McArdle points to an interesting suggestion from Joe Wiesenthal at Clusterstock: form a pool of say, ten certified ratings agencies. When an issuer wants a rating, they are assigned an agency by lottery. They can’t go shopping for the best rating.

I’ve suggested exactly the same lottery-type system for real-estate appraisers. We’ve been hearing lots of stories about mortgage brokers selecting appraisers who will reliably give a (high) valuation that makes the loan look reasonable, with less-tractable appraisers getting squeezed out of the business. (I recently got an appraisal for a re-fi, and I truthfully have no idea how much credence to give that appraisal, which seems somewhat high.)

Interestingly, this randomization method has much in common with the method that emerged through evolution which prevents “selfish” genes from taking over and destroying the ability of organisms (and their other genes) to propogate long-term. (For a fascination if lengthy discussion, see Mark Ridley’s Mendel’s Demon.)

The random gene choice that occurs during meiosis means that a selfish gene can never “know” whether it’s wreaking its havoc on copies of itself. So it can’t win. Likewise, when randomization means that securities issuers and mortgage brokers can’t choose or even predict their ratings agencies/appraisers, they lose much of their ability to game the system, or damage the system as a whole.