Archive for February, 2011

Christina Romer Gets It Right. Mostly.

February 27th, 2011 4 comments

I’ve been highly skeptical of Christina Romer’s thinking since she came out with that egregiously poorly-reasoned paper (PDF) that got so much play a couple of years ago. But her NYT “Economic View” piece today seems cogent, lucid, and well-supported to me.

Basically: the emperors of theory-driven, sky-is-falling inflation hysteria are not wearing any clothing.

Although the Survey of Professional Forecasters, conducted by the Federal Reserve Bank of Philadelphia, shows virtually no change in long-run inflation expectations since the start of the program, the theorists hold fast to their concerns.

And she doesn’t even pull out the big guns to prove her point – the TIPS spread, which should be telling us the market’s best guess for inflation ten years out. (Click to build your own graph.)

Terrifying, huh? And who knows better than the market?

I do have one small problem with the piece, though it’s somewhat peripheral to the main thrust.

Reductions in American interest rates make domestic assets less attractive, reducing the demand for dollars and lowering the currency’s value in foreign exchange markets. This tends to decrease our imports and increase our exports, raising domestic production and employment.

This cuts straight to the core of my current hobby horse: she’s saying that lower interest rates make American financial assets less attractive. But by lowering the dollar’s value, they make real assets — like American factories and businesses — more attractive. It drives me crazy that even top economists use the term “assets” so sloppily.

The Inflation Debate That’s Muting the Fed’s Response – HT: Ramster

“Common sense is the collection of prejudices acquired by age eighteen.”

February 27th, 2011 3 comments

Ah: The Republicans Banned Earmarks!

February 26th, 2011 2 comments

How Budget Battles Go Without the Earmarks –

This good news. But it’s badly reported good news. Misrepresentative, and more importantly, it’s not a good explanation of what happened, which is the basic purpose of news reporting.

Here’s the letter I wrote to the reporter:

Re: “The wall finally tumbled down this year when Mr. Boehner, installed as the new speaker, pushed a ban in the House and had the clout to make it stick.”

Dear Mr. Hulse:

You know the inside game of the legislature far better than I do, but it seems to me that this article is incredibly misrepresentative.

I remember the Democrats banning earmarks in the house when they had unilateral control of house, senate, and presidency, in March 2010:

(WaPo just cause it came up first in Google.) As a fully avowed liberal who also believes in political and economic efficiency, I was ecstatic.

True, there was no Senate ban so earmarks could still happen in committee (‘zat right?), but it threw significant sand in the gears, no? And it set us up for what happened since.

And we gotta remember, the Pubs had unilateral control for six years, but never even pretended to do anything about earmarks (except rant).

So the narrative as I perceive it:

After decades of bipartisan earmark profligacy and corruption, when Robert Byrd retired and *within a month* of John Murtha’s death, the responsible party in American politics instituted a ban on earmarks in the house.

This made the Pubs’ hypocrisy utterly apparent, and they were forced to join the responsible party in being responsible.

So yes: Boehner deserves endless kudos for his personal stand on earmarks — quixotic as it might have been for all these years.

But when you give credit for that whole narrative to the endlessly irresponsible Republican party — or even suggest that the motive force was bilateral — when the facts on the ground suggest exactly the opposite, I think you’re misrepresenting what happened.

Thanks for listening,


What’s Wrong with this Picture?

February 25th, 2011 Comments off

Public-sector collective bargaining is unhealthy and distorts democracy because it enables workers to influence the government which negotiates with them; but

Unlimited and secret corporate political campaign contributions are necessary to democracy because they enable corporations to influence the government which regulates them.

And I would add, “that negotiates with them over what those regulations should be.”

via New Directions in GOP Political Economy « The Reality-Based Community.

“one of the most elemental human rights—the right to belong to a free trade union”

February 25th, 2011 Comments off

Do Unions Kill Prosperity?

February 22nd, 2011 15 comments

You hear from lots of people — including lots of economists — that they do. Because they’re monopolistic price-fixers, they distort economic decisions and make us all worse off.

The theory makes sense, as far as it goes. But if it were really true you’d expect to see it in the data.

Not so much: compare percent union representation to GDP/capita by state:

The correlation is actually pretty strongly positive — .56. More union representation, more prosperity. (Or the other way around…)

It’s also worth noticing: Lower-left, red states. Upper right, blue states. Go figger.

Update: I really do have to point out the other delicious oddity here: Sarah Palin’s Socialist Utopia of Alaska is second only to the Evil Empire, New York, in union representation.

Union density:

State GDP/capita:

Do We Need More Doctors?

February 22nd, 2011 Comments off

Since the rapidly rising cost of health care services is basically the only thing that matters in the whole government budget discussion, I’ve been thinking about it a lot lately.

One frequent assertion is that the limited supply of doctors (because of semi-monopolistic medical-school, licensing, and immigration policies) is a big contributing factor.

So when I came across the following data set, I decided to chart it:

It doesn’t seem to have any obvious correlation with health-care costs:

The low-doctors-per capita phenomenon actually seems to be more related to the anglo model (and Japan). Only Australia is an outlier.

I’m not saying the idea is wrong. More doctors sounds like a good idea to me. Just that this slice of data doesn’t say so.

(I threw in China just cause I was curious.)

Embarrassed Republicans Admit They’ve Been Thinking Of Eisenhower Whole Time They’ve Been Praising Reagan

February 22nd, 2011 Comments off

“When I heard about Eisenhower’s presidential accomplishments—holding down the national debt, keeping inflation in check, and fighting for balanced budgets—it hit me that we’d clearly gotten their names mixed up at some point,” Priebus told reporters. “I couldn’t believe we’d been associating terms like ‘visionary,’ ‘principled,’ and ‘bold’ with President Reagan. That wasn’t him at all—that was Ike.”

The Onion. Hat tip to my sis.

The Best Line of the Week…

February 22nd, 2011 Comments off

Talking About Food

February 22nd, 2011 Comments off

Poking around for the previous post, I came across this lovely bit, which the Question of Wine blog has been nice enough to quote from the movie The Supper.

Napoleon 1er’s ministers. Fouche and Talleyrand.

It is the end of the dinner and Talleyrand serves a nice glass of Cognac to Fouche, who drinks the precious liquid in one single motion. Tayllerand surprised, intervenes:

“Allow me, it is not the correct way to drink Cognac. Please let me show you. We take the glass in the palm of our hand and warm it up slowly. We swirl the Cognac in a nice circular motion in order to release its perfume. Then we take it to our nostrils and smell the aromas…”

“and then?” asks Fouche.

“Then…” replies Talleyrand, “we put it back on the table and talk about it.”