Truck and Barter Where Sympathy and Hedonism Collide
Friday, October 31, 2003
BY
Kevin
Broadband Prices "Plunge"
Last week, a report by Point-Topic indicated that prices for broadband have gone down signicantly over the past year--especially in the US.
Point Topic's index of DSL monthly rentals shows there was an average 25% cut in prices between September 2002 and September 2003.
The two biggest US telcos, Verizon and SBC, have made particularly big cuts, of 40% or more from their prices a year ago. From past experience this suggests that there will be rapid growth in DSL numbers in the USA in the current half year.
Price cuts have been the key to rapid growth in broadband users in the past. In Germany and Japan, for example, DSL numbers leapt in response to lower prices in 2002. But Deutsche Telekom has now had to raise its charges again, because of complaints that its prices were anti-competitive.
These numbers are not inflation adjusted, so real prices have decreased a little more than that.
Lately, I've been considering purchasing a wireless phone--even though I have a landline in my office, and another at home.
I don't want a wireless phone on steriods (although I think multi-use products are cool). I don't want to take photos, play games, surf the web, or to write text messages with this phone. What I want is a mobile phone that can reach my wife, emergency numbers, 800 numbers, and the towing company. It must have excellent coverage of the NYC, Wash-DC, and LA metro regions. I want it to work all the time, but I hope I never have to use it. And as a tough-minded consumer, I want it all at minimum cost.
So I looked around, and found out that there are several prepaid phones that are good options for me. However, I did find that determining total cost a pretty tricky affair with the some telecom companies.
In particular I fault Virgin Mobile USA for what I consider intentionally misleading pricing information on their otherwise fantastic website. Why is this relevant? Because their hypocrisy stinks. They hide the details of their innovative and unique pricing structure, while insisting on their clarity, honesty and openness. Their What it Costs page gives the customer what he wants to read, not what he needs to know:
Start talking each day at 25 cents a minute. After 10 minutes the rate drops to 10 cents a minute.
Call time is rounded up to the minute. Talk for one minute and 37 seconds, pay for two minutes. No tricks, no mirrors,
nothing hidden here.
Local and long distance calls to all 50 states, Puerto Rico, and the U.S. Virgin Islands all cost the same....
There is absolutely no activation fee!
Taxes and services, like call waiting and caller ID, are included in that tiny per-minute airtime rate.
Voicemail is included in your service, so when you check your messages from your cell phone, you only pay for airtime.
Reasonably straight forward. I like the mix of humor, salesmanship, and information. And over on the phone sales page, Virgin tells you that "Everything's included with your phone - Even Free Shipping: Buy a phone, activate it, use
it... No contracts to sign and no hidden fees..."
All this is crystal clear, so I became very suspicious that specifics were missing. In fact, it's what they don't tell you up-front that enervated me. Because up to this point, no mention is made of what it costs to keep your phone active. What if I activate it and don't use it? To me, it sounds like all you have to do is pay for the phone, activate it, and you can keep it active without even making a single call.
Of course, that's not how it works. What their service really costs is only listed under "Payment/Top-Up" on the FAQ page:
Q. Is there a minimum amount I need to Top-up?
A. The minimum amount you can Top-Up at a time is $20. As long as you add at least $20 every 90 days your account will stay
"Current."
Every time you Top-Up your 90 days starts over. If you forget to Top-Up at all in 90 days, your account becomes "Past
Current" and you won't be able to make or receive calls.
60 days after your account becomes "Past Current" your account will expire. But you don't want that to happen because expired
accounts lose their phone numbers.
Note to Virgin: This REALLY should be on the "What it Costs" page, not on some difficult to
access FAQ page. Some customers may not fully understand that by "top-up", you actually mean "pre-pay"; you shouldn't hide the $20 minimum every
90 days. In fact, you should openly state whether or not that $20 is lost if you don't use the minutes, or if your balance carries over. (Other sites indicate that the "minutes expire".)
By hiding the way Virgin actually charges its customers, the company makes itself and the wireless industry overall look
suspect. I should note that in contrast, Verizon's prepaid Freeup clearly posts actual rates, and expiration dates of purchased minutes.
Steve Verdon picked up and ran with my post immediately below. Discussions have emerged in his comments thread about trusting the Times and why it's either important or irrelevant to have source statements in newspaper articles.
I've learned that at least one person doesn't care to have some statements verifiable.
Just last week I faulted Edmund L. Andrews of the New York Times for citing only one economist to support his claim (reprinted here) that
most economists, including those at the Fed and many in the private sector, predict that job growth will remain very modest and that the unemployment rate will remain near 6 percent.
On Monday, a similar type of statement was made by David Leonhardt and Edmund L. Andrews (reprinted here):
Most forecasters predict that the current recovery will take hold, even if the gaudy growth of the third quarter does not last.
Most forecasters think the economy grew at an annual rate of 6 percent, and some think it climbed even faster.
Note to The New York Times--I demand empirical sources for such statements. This is not a costly or time consuming addition; just rewrite the sentence to include the source. Why do this? Because it is too easy to make false statements sound authoritative. Why not do this? If editors and fact-checkers are combing through each article, they should already have the source at hand.
In my comments, I was asked why I expect better of the NYT. My answer was curt, and I should explain myself. Because of the errors of Mr. Krugman and other improprieties, I no longer trust the reporting of the NYT, and this includes the business/economics section. I was under the impression that the Times wants its readers' trust. The only way for them to regain my trust is to enable me to verify that statements in articles are accurate.
I'm not saying that other newspapers don't make such statements--they do. But other newspapers follow the NYT. Holding the sophisticated Times to the highest standard is the most effective way to maintain high national and international standards. The easiest way to keep the mass of middle and low-ranking reporters in check is for readers to have ample comparisons to the best reporters, who are also kept in check.
Some professional writers can turn the day's headlines into a gripping story of
hope, desperation, endurance, fear, and triumph. Unforunately Steven
Greenhouse of the New York Times prefers to use the misfortune of recently
caught illegal immigrants (the Wal-Mart cleaners) to rail against
those who employed them.
Mr. Greenhouse decries the lack of health insurance, the low wages, few days
off, and most ridiculously "about whether the contractor was making the
required contributions for Social Security and unemployment insurance." I
forgive Mr. Greenhouse for not considering that illegals don't have valid
social security numbers, but I cannot forgive him for not noticing that these
illegal immigrants were paid above the national $5.15 minimum wage.
My point is that their evil profit-hungry employers could not have paid them
less, because in most markets low-skilled demand intersects low-skilled supply
at prices above minimum wage.
What Mr. Greenhouse does notice is the diversity of nationalities of illegals:
Federal officials said yesterday that the leading nation of origin for the
janitors caught in Thursday's raids was Mexico, with 90. The Czech Republic was
second with 35, followed by Mongolia with 22, Brazil with 20. Uzbekistan,
Poland, Russia, Georgia and Lithuania each had about a dozen.
well, it's nice to know we don't need affirmative action to redistribute
opportunities for illegal immigration! Ladies and gentlemen, we have now
arrested hundreds of people from across the globe who want live and work in the
United States. Except for staying in this country without government
permission, these people have played by the rules of civil society. Hell, these
people worked in jobs even American teenagers don't want to take. How much did
they actually make?
Mr. Zavala said the contractor that he and Eunice, his wife, worked for paid
them $400 a week each for working 56 hours. That would come to $6.25 an hour if
time and a half overtime is included for all hours worked in excess of 40.
It may be a federal law to pay time and a half for overtime, but that obviously
doesn't apply to illegals. The strict per hour pay comes to $7.14 an hour.
Also, Mr. Greenhouse doesn't calculate total annual earnings; by working 8 hour
days 7 days a week, both Mr. Zavala and his wife earned $400*52=$20,800, for a
total family income of $41,600. In New Jersey, this doesn't go very far, but
it's a far cry from what Mr. and Mrs. Zavala could have earned as a janitor in
Mexico, and far exceeds the official poverty line in the United States.
Llewellyn H. Rockwell, Jr. writes about the most recent leaked snowflake. I ususally don't write about DoD politics, but in this case, I'll make an exception:
The Donald Rumsfeld memo as leaked for MSBNC is a remarkable document. Here we have the Secretary of Defense admitting that he doesn't know if the US governnment is winning or losing the war on terror, and, more pointedly, admitting that "we lack the metrics" to know. "Is our current situation such that 'the harder we work, the behinder we get'?"
There you have it: a typical government program. Hundreds of billions down the drain, and nothing to show for it but confusion. Later in the memo, Rumsfeld asks obliquely: "Do we need a new organization?" In a word, yes, and it shouldn't be government.
Recommended reading for Rumsfeld and everyone else: The Myth of National Defense, edited by Hans-Hermann Hoppe, a book which serves as the subject of my latest column. This book explains why socialism in military affairs works no better than socialism in any other sector.
I don't love or hate Rummy. I don't feel a damn thing about him, and I needed to find out some more about him before judging his memo.
Before 9-11 Tim Noah of Slate had Rumsfeld on Death-Watch (again, and again). Why? Rumsfeld had planned a massive reconfiguration of the military in mission, equipment, and personnel, and was being actively resisted from within the ranks and from those who controlled the purchasing decisions and purse strings in Congress.
After 9/11, he wasn't going anywhere.
While I'd agree with Lew about the near-impossibility of taming and reforming bureaucracy, Rumsfeld does not ask "Do we need a new organization?" obliquely--i.e. evasively or dishonestly. He actually wants to know if anybody under him has any good ideas, because if corporate experience is any guide, some of them actually will have good ideas. Good managers know to let their employees contribute to the big think.
Also, if the CIA, DoD, and the rest cannot protect the U.S. from terrorists, and terrorism is our primary long-run threat, it seems almost too polite of Rumsfeld to inquire whether the US requires a "new organization". Successful and cost effective managment of a public organization is difficult, to say the least. Turning one on its head is nearly impossible.
Also, Rumsfeld is very confusing when we writes. "The cost-benefit ratio is against us. Our costs is billions against the terrorist's cost of millions." This is a cost/cost ratio, not a cost/benefit ratio. Does Rumsfeld want us to spend less, or them to spend more? Both--he wants the U.S. government to use cost-effective, long-term solutions to attack the core of Islamic fundamentalism, and to make sure that victories in this war make it more expensive for the radicals to recruit their armies. I think Rumsfeld knows we cannot stop all terrorists, and that we do not want to spend the money to try and fail at that goal.
Rumsfeld demands that people use valid research to back up their points of view. He insists on "metrics" like any other modern profit-making organization would--only DoD's product is not tracked by Wal-Mart's legendary inventory system. Frankly without good data, we don't know a damn thing about the real world outside of ourselves, and as an Austrian economist, Lew knows this better than most.
I believe that Rumsfeld perceives himself to be a reformer; he wants the military to operate more on market terms--especially in personnel matters. Overall these efforts have not been implemented; the leaked memo might actually help them along...
The Mrs., the boy, and I went to the dentist today. On the wall, the good
dentist's assistant had crookedly push-pinned a rather amusing "History of
Dentistry" prepared by Crest. (an earlier version is reproduced here).
Some of the more interesting entries:
3100-2181 BC The Egyptians HESI-RE is the earliest dentist known by
name. Extraction was the first choice for dental trouble. The coarse diet
consumed by the Egyptians is the primary cause of dental disease, resulting in
abrasion of the occlusal surfaces of the teeth. Historical texts show numerous
references to toothache, pulpitis, erosion, gingivitis.
249 AD APOLLONIA, the Patron Saint of Dentists was burned after having
her teeth knocked out. Depictions of her are usually with forceps.
1789 - GEORGE WASHINGTON is elected President. At the time of his
election, he had only one tooth, a lower left bicuspid. George Washington
NEVER has wooden teeth. His dentures were manufactured from gold, hippopotamus
tusk, elephant ivory and human teeth.
1868-1872 The first electric dental drill was invented in 1868 by GEORGE
F. GREEN, a mechanic of the S.S. White Company. In 1872, the S.S. White
Company put the first electric drill on the market. The motor was incorporated
directly into the hand-piece. The majority of dentists used the foot driven
drill because most offices in the country were not electrified.
Dentistry is a 20th century capitalist phenomenon; it's one of those many
services that the wealthiest "gods", kings and priests could not buy, and one that
most poor today find commonplace.
Yesterday, Glenn Reynolds pointed to Katie Granju in Salon:
"These Gen-X writers were all raised after the second wave of feminism changed the basic dialogue of how to talk about families," notes Lavender. "We know that we have choices, and we are choosing to raise children. This is substantially different from what our own mothers faced, both in their daily lives and on a cultural level."
Speak for yourself lady, but first talk to my Italian-American mother--who, in 1969, chose freely to get married and have a family instead of working on Wall Street. BTW, if she would have stayed at the same company for a few years, she would have quickly been in the top 1% of income earners nationally. Instead, she adopted and raised two kids.
Thanks, ma! Bear hugs and big kisses! She would make Camille Paglia proud.
Also, despite being Catholic, my mother believes in legal abortion, birth control, pre-marital sex, and of course in working women--all this without the militant excess of feminism. My mother didn't need an ideology, and didn't need to be a feminist; by 1965 she was already free to live the life she wanted. (Many of my readers may not like my mother's values, but rest assured, she doesn't give a damn.)
I think gen-X-ers need to ask their parents more detailed questions about the 1950s and 1960s; the past is never as innocent as we like to think it.
I found Treasury Secretary Snow's prediction bold:
"Everything we know about economics indicates that the sort of economic growth expected for the next year, 3.8 to 4 percent, will translate into two million new jobs from the third quarter of this year to the third quarter of next year," Mr. Snow elaborated. "That's an average of about 200,000 new jobs a month."
Edmund L. Andrews of The New York Times agrees with me:
But most economists, including those at the Fed and many in the private sector, predict that job growth will remain very modest and that the unemployment rate will remain near 6 percent.
I have a standard that lets me verify or falsify what "most economists" believe--50% + 1 of economists must agree on something. And I want to hear this from economists themselves.
Although doubt about net job increases may be widespread among economists, Mr. Andrews must prove this objectively--most effectively with the results of a survey.
It is improper to present as news the assertion that "most economists" believe something, and then cite only anecdotal evidence--in this case, a research note by Jan Hatzius, a senior economist at Goldman Sachs.
1.4 millions disabled Americans age 65 or older are living in nursing
homes and 3.9 million are disabled and living in the community (1994)....
Between the ages of 65 and 74, there are 7 disabled people living in the
community for every one in a nursing home; between ages 75 and 84 there
are 3 disabled people living in the community for every one in a nursing
home; and at age 85+ there are 1.2 disabled people in the community for
every one in a nursing home. (Tilly and Goldenson; 2001)
Over half of assisted living residents have no chronic disability, about
25% are disabled but could be living in the community, and about 25% are
disabled and need a level of care that would require
institutionalization. (Manton and Gu; 2001)
The prevalence of institutional residence declined absolutely 1982 to
1999 despite a more than 30% increase in the U.S. population aged 65+.
The percentage of the 65+ population living in nursing homes dropped from
5.9% in 1984 to 3.4% in 1999. The percentage living in assisted living
facilities increased from nothing in 1984 to 2.3% in 1999, but 75% of
them did not require an institutional level of care. (Manton and Gu;
2001)...
Between 1984 and 1994, the percentage of elderly persons receiving
long-term care in any setting declined from 19.7% to 16.7%, but this was
accompanied by a striking increase in the level of disability among those
who received help. (Spector, et.al.; 2000)
Roughly 79% of people receiving long term care live at home or elsewhere
in the community rather than in institutions, and almost half are under
65 years of age. (Spector, et.al.; 2000)
That's a hell of a lot of elderly who're not in group homes or institutions. One hopes that most have taken to heart what Mr. King has two characters say in the The Shawshank Redemption, "get busy living, or get busy dying." Anyway, it's still more evidence that we need a more refined picture of what healthcare means to the elderly in the United States.
REGION: I understand that you found the initial inspiration for your work on the economics of crime
while searching for a parking spot.
BECKER: True story.
REGION: Would you tell us that story?
BECKER: I was coming down for an oral exam at Columbia University when I was teaching there. In
those days instead of written exams for Ph.D. students, we gave them orals. And my task was to ask
a half-hour of questions on price theory. I was living in the suburbs, I drove down to Columbia and
I was a little late. And it's New York City, so it's not easy to find a parking place. Columbia had
no parking for its faculty in those days, so either you parked illegally or you went into a parking
lot. Those were your choices. So as I got there I had to make that decision. I remember making that
calculation of what are my chances if I park it in an illegal spot. Or, there was a parking lot a
couple of blocks away and I would have a longer walk and, of course, it cost a little money.
I started thinking about my chances of getting caught. As I walked over to the exam—it took me
about 10 minutes—I'm realizing that if I'm thinking about my chances, the police, if they're being
rational, must also be thinking about that. What's the likelihood, the chance of catching somebody?
He tells a similar tale in his 1992 Nobel prize lecture.
Having lived at Columbia U. for four years, I know the area, but I don't understand why it took him
10 minutes to get to his building, since the urban campus is cris-crossed by streets with ample
illegal parking. (See map).
There are several decades-old parking garages just a few blocks away from campus. If it took
Becker 10 minutes to walk from an illegal parking space, he didn't park near campus. If he didn't
park near campus, he didn't save much time by parking illegally, but he did save the price
of parking at the lot, which is substantial in NYC. But wasn't saving time Becker's reason for parking illegally?
Assuming an average walking
speed of 5 feet per second, in 10 minutes Becker walked 10*60*5 of 3000 feet or 3000/5280= .57
mile. Let's say he walked a little over half a mile or 10 city blocks. That's pretty damn far to
walk if he parked illegally--and it seems too far, really.
Just where did Becker park so that it took him 10 minutes?
I missed this
story a few weeks back. One Russell B. Clark was crowned America's oldest
worker. At 102 years old, he actively manages his properties. Apparently,
he's been working for 93 years--since 1910, at a time when working as a child
was not only appropriate, but required for survival.
"The young people are in need of our experience," he said. "Experience Works
is an outstanding program -- it gets people to either have a good hobby or find
productive work. Research has shown that 94 percent of those who don't keep
busy after they retire pass away within 18 months."
In this month's (November 2003) Parents magazine, in an article entitled, "THE CHILD CARE CRISIS,"Diane Debrovner demands that the government subsidize (or supply
outright) high-quality child care for every child in the United States--and that this system
be modeled after the military Child Development System. She writes:
The government works hard to make sure that our food, highways, and air travel are safe--so how
come it ignores the well-being of 12 million children?
The article is not available online, and perhaps that's for the best. Because the article is
misleading, in its perception of the military child care system, the civilian child care market,
and in its use of economics.
The Department of Defense (DoD) military child development system (CDS) provides services for the
largest number of children on a daily basis of any employer in the United States. Military child
care is provided in 800 centers in over 300 geographic locations, both within and outside of the
continental U.S.
Why is it provided for military servicemembers?
Military families face challenges that are not found in other work environments. Shifting work
schedules that are often longer than the typical eight hour day, and the requirement to be ready to
deploy anywhere in the world on a moment's notice, require a child development system that is
flexible in nature.... Frequent family separations and the requirement to move, on average every 3
years, place military families in situations not often experienced in the civilian world. For this
population, finding affordable, high quality child care is paramount, if they are to be ready to
perform the mission and their jobs. It is also important to military personnel that child care
services be consistent and uniform at installations throughout the military.
DoD considers child care a workforce issue. It impacts the effectiveness and readiness of the
force. Some general statistics about the military child care environment include:
Over 1.2 million children under the age of 18
Approximately 244,000 children under the age of 3
53 percent of the active duty workforce is married
Two-thirds (63%) of young enlisted military spouses are employed or seeking employment
Six percent of military members are single parents
Six percent of military members are in dual-military marriages
Availability, affordability and quality of child care services translate into quality of life
issues that impact the DoD's "bottom line."
So, clearly, this is considered a wise business decision. When you're in the business of
conducting war, personnel readiness and excellence are key quality control issues. But all Ms.
Debrovner sees is the government helping out some people at the expense of everyone--and she wants
her cut of the action.
It's not surprising to me that military members are paid in kind--they have been given housing and
food rations as a form of compensation for a very long time--so why not child-care? For the
military to subsidize and control childcare centers on military barracks is not surprising either;
except for purely commercial ventures--like gasoline stations and fast food joints--the military
system performs almost everything that the civilian private sector and government
authorities do. I am not surprised that the government orders and structures military society; I
am surprised that Ms. Debrovner wants to order and structure civil society on the same pattern.
When our author gets to the private child care market, she has little good to say about
parents:
About 65 percent of women with children under age 6 are in the workforce, and full-day child care
costs approximately $4,000 to $10,000 a year--at least as much as a public university. More than a
quarter of families with young children earn less than $25,000 a year, but even for middle-class
families, quality care is often beyond their means. Mnay families can only afford unlicensed
family day care, or one parent has to stay at home. "Everyone wants the best care for their
children, but the cost is outrageous," says Kathleen Coles, a mother of three in San Diego who
works full-time.
Maybe I misread this, but Ms. Debrovner seems to think that parents themselves and their
relatives are not "quality care". If so, she can go to hell. But she believes there's a crisis of
cost and quality--regardless of the data.
Sadly, most early child care in this country is mediocre... 12 percent of all types of early child
care is high quality, 32 percent is good, 50 percent is fair, and 6 percent is poor.
This is not a great record, but this is certainly not a "crisis" of quality. But no matter, Ms.
Debrovner is off proving the government can make all this better--if only it would tightly control
and regulate child care:
Amazingly, there are no national standards. Each state is responsible fore mandating
staff-to-child ratios and other requirements....
I guess she's never heard of federalism. But we finally get to her real grief in child
care--the workers are paid too little, and the care costs too much!
A major part of the problem is that child-care workers are among the lowest paid in America. In
2001, their average salary was $8.16 an hour, or $16,980 per year--less than crossing guards and
pet sitters--and few receive health benefits...
"The child care market is broken," Dr. [Kathleen] McCartney insists. "Parents can't afford to pay
more, and caregivers can't afford to earn less. The government needs to get involved."
So Ms. Debrovner's article is really a popularization of Dr. McCartney's
research. The good doctor is a little more expansive on her beliefs in this interview:
As it is, it's a fair statement that childcare costs are subsidized by early childhood teachers,
who are grossly underpaid. The average childcare worker makes $7.80—below a living wage. The U.S.
childcare market is essentially broken—parents cannot afford to pay more, and teachers cannot
afford to make less.
Excuse me! There is no economic justification for the assertion that childcare costs are
subsidized by "grossly underpaid" worker--even if $7.80 an hour is below her personally preferred
"living wage." If these wages are determined in markets, she should tell us why the resulting
wages do not reveal consumer preferences about child-care. There's even more:
[I]t is clear that teacher compensation is one of the best predictors of quality. But efforts to
increase quality are sure to backfire without additional government supports, because they will
inevitably result in increased costs that will surely drive many families to use unregulated, lower
quality care. Although government subsides account for 73% of the costs of higher education, they
account for only 39% of childcare costs. We need to find ways to increase government support of
child care.
Get this--the government already pays for 40% of childcare costs, but it's not enough! In other
words, many people think that the "unregulated, lower quality care" is better overall for them and
their kids, but they're wrong. Economists would say that the opportunity costs of switching from
low to high quality care are larger than the benefits of switching from low to high quality care.
But, Dr. McCartney insists that people must be forced to consume high-quality care.
See UPDATE 3 in the Percentiles post below--and the excellent comments by readers.
UPDATE! I can't help but point to the Concise Encyclopedia's entry Poverty in the United States by Isabel V. Sawhill:
In sum, a variety of factors have influenced the incidence of poverty. Those that have reduced the poverty rate, in rough order of importance, are the growth of cash transfers, the investments in government training and education programs, and the overall growth in the economy since the midsixties. Factors that have increased the poverty rate include, in order of importance, the increase in the unemployment rate, the growth of female-headed families, and (possibly) an increase in dysfunctional behavior associated with the rise of the underclass. All of these factors together have left the incidence of poverty much the same as it was in the late sixties.
See also the comments--reprinted in full below--by the editor of the Concise Encyclopedia, David R. Henderson:
For most Americans who experience poverty, poverty is temporary rather than permanent. In the ten years from 1969 to 1978, only 2.6 percent of the population was poor for eight years or more. During that same period 24.4 percent of the population was poor for at least one year.
Why is poverty temporary? For the nonelderly, 38 percent of poverty spells began when the head of the family's earnings dropped. Another 43 percent of poverty spells began when the marriage ended in divorce, when a child was born, or when someone in the family set up an independent household.
The fact that so small a percentage of the population is poor for eight out of ten years means that the number of people who are born into poverty and never escape is very small.
I doubt there will be any posts of substance today on T&B, as I am doing doctoral research.
In the meantime, note that cost of living adjustments will increase Social Security Benefits by 2.1% next year. Also, the taxable income ceiling will be raised from $87,000 to $87,900. The 9.2 million households who earn at least this much will pay an average of $900*6.2% = $56 more in payroll tax, and their employers will pay an equivalent amount. Let me clarify--this is not small increase in savings for future retirees, but a marginal increase in current income transfer from high-income earners to the elderly and the disabled, and others.
Ben at Economist-to-Be gets serious in his reply to my comments about who's getting fatter. His reply is in three parts, and this post is a response to the first part only, in which he says:
1) It has been thoroughly documented that inequality has widened considerably in the past 30 years, and the rich have gotten much, much richer. Here is one statistic: In 1971 the top 5 percent of Americans made about 6.3 times what the bottom 20 percent made. In 2001, after 30 years of relentless widening, that same group made 8.4 times what the bottom 20 percent did.
I do not dispute the accuracy of the data, but I do dispute Ben's interpretation. "Widening income inequality" has occured, but this doesn't demonstrate that "the rich" in the US (in this case, people with high incomes) have gotten richer (earning even higher incomes than before). The people in the top 5% of the income distribution in 1970 are not the same people in it today. More importantly, the overwhelming majority of those in the bottom bracket 30 years ago have moved up one or more income brackets in 30 years.
Percentiles are not people. The only way to prove the assertion, "the rich are getting richer" is to look at the specific high income earners 30 years ago and follow their incomes into the future, and the only way to prove that "the poor are getting poorer" is to look at the specific people in the bottom 5% or bottom 20% of income earners 30 years ago, and follow thier incomes into the future.
Only a longitudinal survey--like the Panel Study of Income Dynamics, conducted by the University of Michigan--can really answer whether the rich are getting richer. In fact, researchers have used the PSID to thoroughly document income dynamism--and have shown that overall, the rich got richer, but so did the poor.
Instead of reinventing the wheel, let me quote Cox and Alm's explanation of figure 4:
Of individuals who were in the lowest income quintile in 1975, 5.1 percent were still there in 1991, 14.6 percent had moved up to the second quintile, 21 percent to the middle quintile, 30.3 percent to the fourth quintile and 29 percent to the highest quintile. Of those in the highest quintile in 1975, 62.5 percent were still there in 1991, while 0.9 percent had fallen all the way to the bottom fifth.
And then their explanation of figure 5:
Individuals in the lowest income quintile in 1975 saw, on average, a $25,322 rise in their real income over the 16 years from 1975 to 1991. Those in the highest income quintile had a $3,974 increase in real income, on average. The rich got richer, but the poor got richer faster.
These data are not conclusive, but they give a hell of a different picture than annual snapshots of the income distribution. Only 5.1% of those in the bottom 20% in 1975 were still there by 1991. Only 62.5% of the top 20% of income earners were there 17 years later. Most income gains accrued to those who were formerly in the bottom 40%. Read the rest of the report, if you haven't--including a second report by the US treasury that found that only 14.2% of those in the lowest income bracket in 1979 were still there in 1988--10 years later!
But little do [SF brethren] realize that functionaries they chastise like Wal-Mart, Globalization (e.g. trade liberalization with China and India), and Financial wizardry (e.g. low cost credit, mortgages) have been FAR more relevant factors in the transformation of Poor lifestyles over the past 30 yrs than any government program they could concieve.
UPDATE2: I want people to respond to this post.
Looking at how people change over time makes far more sense to me than looking at how percentiles change over time. Looking at people reveals that most poor will lift themselves out of poverty. There's no point in ignoring this dynamic, and each of us should use this information to focus our analysis and resources where they are most needed--specifically the type of poor who will never rise above the lowest quintile.
There are sizable problems with entrenched poverty in the US--nobody I know disagrees about this. But differing views of how people move between income percentiles can influence beliefs about effective remedies.
Those who hold to solely a static "distribution view" want to the government to help equalize income for everyone at every point in time, with the humane benefits of such intervention outweighing the costs in economic civil liberties and reduced output. They see economic classes as stagnant, with little movement. The poor remain poor, while the rich get richer. I do not believe the evidence supports this view--in the United States today.
But those who insist on a "dynamic view" want people to move up the distribution as quickly as possible. Depending on how easy the poor realize the American Dream, dynamists may or may not support government programs designed to facilite movement up the distribution. Those with strong views will insist that levelling the income distribution would retard the very strong upward movement. Those who see the dream as harder to achieve today might see room for government assistance in training/education, or might even demand outright subsidies. But within this view, it is possible to assess the data, revise one's view about the state of the nation, and adjust policy preferences...
I hope my readers sense and share my frustration at the standard measure of income inequality...
UPDATE 3: Absolute Mobility vs. Relative Mobility
Very smart commenters have pointed out difficulties in the data that I presented. This is a VERY unsettled and complex issue, and I have to read up more before making an intelligent judgement, but I wanted to give some indication of my trouble.
The Urban Institute's Daniel P. McNurrer and Isabel Sawhill review the literature on income mobility--including the Treasury and Cox and Alm studies referenced above-- and make a short assessment of their own. They write:
There are two additional studies that find a degree of earnings mobility that is much greater than that reported in any of the above studies: U.S. Department of Treasury (1992) and Cox and Alm (1996). The discrepancies between these studies and the others has been attributed in large part to differences in methodology, which reflect subtle but fundamental differences in the questions being asked by each study.
They're highly critical of the "absolute mobility" methodology of Cox & Alm--preferring a relative mobility method. They refer to Krugman's heated article linked to by Leaderlog in my comments, and to an unpublished paper by Peter Gottschalk entitled "Notes on 'By Our Own Bootstraps: Economic Opportunity and the Dynamics of Income Distribution' by Cox and Alm," Boston College, April 22, 1996. (I've emailed Dr. Gottschalk for a copy of this paper).
I want to know if there ways to determine which measure is better for which application. The McNurrer and Sawhill contrast of relative mobility to absolute mobility--both measuring movement of people between percentiles through time--does not help much:
Researchers make reference to two different types of economic mobility: relative and absolute. Relative mobility is the movement of an individual within a fixed group of individuals. Thus, for one individual to move up, another individual must move down. Absolute mobility is the movement of an individual in relation to an external standard, usually defined by averages among the population as a whole. Thus, it is possible for all individuals in a fixed group to move up in relation to this external standard.
Relative mobility looks at how people within a sample rate against each other at the beginning, and then again at then end. Absolute mobility looks at how people in the sample compare to the entire population at the beginning, and again how they compare to the entire population at the end.
Relative mobility is a great measure if the composition of your society doesn't change at all. RM uncouples and isolates itself from all population changes. Absolute mobility permits the entire sample to rise relative to the population. While this may seem like the sample is no longer representative of the population at the end of the survey, that's the entire point. The population has changed--and so has the sample.
Relative mobility findings have shown that some of the the formerly poor have moved up within their samples. Absolute mobility studies have shown that a lot of the formerly poor have moved up compared to the entire population. One problem with Cox and Alm, like that of the treasury, is that their sample ages but their population stays the same average age.
That is, the average income of the sample would be expected to rise each year simply as a result of the individuals in the sample growing older and gaining more work experience. The average income of the population as a whole, however, would be expected to remain constant. To count this increase in income as a component of "mobility" is to use a significantly different definition of mobility than was employed in the other studies discussed above.
How the hell are we supposed to adjust for the tendency of wages to increase with age when it is precisely working hard consistently for long periods that the poor use to rise in income? The absolute mobility argument is that people start poor and then become less so. (Yes, so do college students, but we can separate these out later). Both move up the income distribution and make real gains.... Anyway, I'm tired.
Tyler Cowen asked my fellow GMU students about pricing policies for Persian carpets. Their answers are plausible:
Have you ever wondered why Persian carpets always seem to be for sale? Why the stores are always having "liquidations"? Why the stores are always "going out of business"?...
First, most consumers have little or no idea what the pieces are worth....
Second, most customers demand only a small number of such carpets. Plus the stores buy large quantities of carpets at a time, receiving discounts in the process. The stores end up holding almost all of their capital in the form of inventory, and very little in the form of reputation.
The highest quality textile dealers, as you might find on Madison Avenue, do not pursue this strategy, and they do not have perpetual sales.
The first argument says that most consumers can't tell a Persian carpet from a Persian cat. The second says that consumers are picky but want the carpet immediately. They have to deal with "sales" in order to have the most inventory to choose from.
Both these assume that store owners have experimented and found the profit-maximizing business process, but this would only be convincing to me if we had a history of the development of Persian carpet sales. When did such business practices become standard? Did stores that fail to adopt these practices have a higher rate of failure? Or are businessmen just doing any damn thing they can to get people into the store, in the knowledge that walk-ins=sales?
But Tyler, why focus on carpets?
Look at the low-end to low-mid-range retail clothing industry, say in Manhattan. Every single store is having a sale, or calls their operations a warehouse liquidation, or insists that it is going out of business. I particularly like stores that have signs that read, "Going out FOR business," which clearly indicate their customers' inattention to detail.
This discount model is a standard retail business practice. I'd say, without data to back me up, that most owners are imitative of success--and operate their business on the same models as other successful businessmen. There are only a small, distinct set of retail business models to pursue.
Once there was a fire next to my father's mens retail clothing store. He thought his inventory was worthless, and decided to sell it off in a "fire sale." The response was enormous. After the first day, he actually had an employee buy a briefcase to transfer all the cash to the bank. After seeing this enormous response to his fire-sale of smokey inventory, he made the decision to go from "boutique" to "discount". He remodeled the store and his future inventory to meet the needs of a lower-income clientele that he hadn't realized the neighborhood was actually sustaining.
After my father passed, we closed down this store, and hired a company that specializes in helping small business run "Going out of business" sales. You would not believe the change in clientele that occurred. It was like the "fire-sale" all over again. Suddenly, all these people who had never before stopped in the store (it had been there a quarter of a century), wandered in to find the "$1 shirts". Others were more suspicious, asking how many times we had "gone out of business".
Also, never, ever--ever pay sticker price on a carpet. These deals are meant to be negotiable, and the owners will not hesitate dicker with you. And, believe it or not, (or just ask Victor Niederhoffer), you can dicker on price for almost every item in small, owner operated, retail stores.
What are the alternatives to not having a continual sale? How can they spice up their stores to get people to come in?
Put another way, the question is this: why do all of the Persian rug stores locate in such close proximity to each other? ... Basically the idea is that if you have customers uniformly distributed across a space, it is profit maximizing for the stores to locate as close to the middle of the space as possible.
Clustering is contrary to my experience. So I used superpages.com to map the oriental rug stores closest to my home in Alexandria, VA. The results reveal minimal clustering. How well should the Hotelling model represent such stores?
The Financial Times reports that two competing lists of the 100 richest Chinese are being created by Asiamoney and Forbes:
The rich list has attracted significant publicity in the five years it has been published in China, and also much notoriety, after a number of high-profile entrepreneurs were struck off after being jailed, and one murdered in a dispute over business.
In keeping with the entrepreneurial theme, this year there will be competing lists for the first time, with little love lost between the two rival publishers: Asiamoney, a unit of the Euromoney publishing group, and Forbes, the US business magazine....
"We had noticed there were a lot of disputes about the list, and we were hoping to make it even more reliable," said Mr Flannery yesterday....
Despite these disputes, the lists stand as testament to the increasingly dominant role being played by the private sector in a China still ruled by a communist party claiming a monopoly on political power.
Political connections remain important for the entrepreneurs - one third of the list are members of either the National People's Congress or the peak political consultative body.
I wholly support the idea of competing data sources, and wish more were done to find alternative estimates of national macroeconomic aggregates like GDP, the unemployment rate, and the consumer and producer price levels.
Of course the most important statistic is the one not stated. 2/3 of the richest entrepreneurs in China are NOT members of the top political gangs! Still, I wish they had a measure of connectivity of the private sector with the public sector.
Ben at Economist-to-be points to two articles referencing RAND Health research, trying to make it look like the poor are getting fatter. Some people are getting fatter, but Ben has no basis to assert that the rich are getting richer, while the poor are getting fatter. The research he points to does not indicate who is getting fatter over time.
But we know that, in the last 20 years, severe obesity increased in the US population overall, faster than the rate of increase for being just overweight. This research was conducted by Roland Sturm at RAND), and published by the Archives of Internal Medicine in the article Increases in Clinically Severe Obesity in the United States, 1986-2000. The skinny:
Between 1986 and 2000, the prevalence of a BMI (self-reported) of 40 or greater (about 100 lbs overweight) quadrupled from about 1 in 200 adult Americans to 1 in 50; the prevalence of a BMI of 50 or greater increased by a factor of 5, from about 1 in 2000 to 1 in 400.
The tails of the fat distribution are spreading wider as the entire distribution shifts to the right. Even though there are problems with the data-- undercounting obesity because of self-reporting and overcounting obesity because the obese are more likely to be stuck at home and answer the survey, Mr. Sturn does the best he can with the data. He also writes something I didn't expect:
Neither the aging of the US population nor the increasing percentage of minority groups plays a major role relative to the obesity trends in the Figure.
However, I have libertarian concerns with Sturn's assessment of policy options:
Car-friendly (and bike/pedestrian-hostile) urban developments, desk jobs, television, and relatively inexpensive calorie-dense foods are some of the recent environmental changes that have changed relative prices of caloric intake and physical activity. Arguably, environmental interventions to counter the obesity epidemic, similar to tobacco and alcohol policy, would be needed. As this appears to be politically less feasible than expanding surgery programs or treating the ensuing complications of obesity. [Emphasis added].
The last time I checked, even though the right to eat was not specifically mentioned n the constitution, neither was crafting and enforcing a mandatory "food policy." Also, renaming fatty-food regulation "environmental intervention" serves only to obscure its ferocious attack on American civil liberties; it is like calling China's one-child policy a friendly and necessary "family intervention."
Choice of diet is no less important than the choice of family size. If somebody wants to eat grease all day, fine by me. If somebody wants to have 10 children, fine by me. Just don't expect me to feel bad if you die at 50, or cannot afford the best in medical care for all your children. I'd love to have a cheesburger and fries tonight, but I'll grill chicken instead. And personally I and my wife don't want a large family, but we do want 2 children. These are our choices to make--wisely or foolishly--nobody else's.
However, there are real fiscal concerns with the morbidly obese. On May 1, 2002, before this blog was started, Rhonda L Rundle published an article entitled "Obesity's hidden costs" in the Wall Street Journal (reproduced here). It notes that rapidly increasing numbers of obese people will force hospitals to purchase capital equipment--bariatric wheelchairs, beds, mattresses, surgery tables, scales--to accomodate them. What the article doesn't say is that some of these charges will accrue to all hospital facility users--meaning the non-obese will pay for the obese.
All these expenditures are, somewhat incorrectly, termed "social costs". In previous research Sturm conlcuded:
Obesity is associated with a 36% increase in inpatient and outpatient expenditures and a 77% increase in medication costs than people falling within a normal weight range.... The study reinforces growing concerns about how dramatically increasing obesity in the U.S. will negatively affect health care costs as well as overall public health.
It seems pretty clear that at any given point, obese people cost more to treat than non-obese people. What is still unclear however, is whether the life-cycle healthcare cost of being obese is greater than the life-cycle cost of healthy. An obese person may cost more every year to treat, but he may die much earlier, leaving a lower total healthcare cost over his lifetime (i.e. lower net present vallue). Eliminating obesity--or smoking or drinking--could actually increase the total expenditure on health maintenance.
Sorry for the post-free weekend. I've been playing Mr. Mom, but I'll have some time to devote to blogging soon.
In the meantime, check out the first ever edition of the Carnival of the Capitalists--a weekly summary of the best posts from economics, business, and finance blogs. Your's truly is only one among dozens of bloggers--most of which are not linked at right--who have come together in this effort.
Instapundit, Howard Kurtz, and a bunch of others note their ambivalence towards and wariness of the press (except for Drudge) withholding California recall exit poll data, but letting hints slip by.
I'm not upset, and I haven't been given a good economic reason why I should be. As I understand the story, a group of media organizations contracted with and paid a professional polling organization to take the exit poll. Given a specific contract between the polling organization and its clients, and the lack of an official contract between the polling organization and those being polled, I believe that ownership of the information accumulated by the polling organization is its clients' property--which they can do with as they damn well please. Neither the public, the blogosphere, nor the government should have any say in how the data are used.
I know the arguments are against me--the press has a higher ethical obligation to report accurately and promptly about elections, etc. However, why should we believe the press will fulfill those obligations? Why should I count on "the press" to tell us how elections are going? Why don't we have NGOs and non-profits conducting their own analysis, and making it available directly to the public via the internet?
We've had disappointments before; in 2002 the Voter News Service, owned and operated by the major networks, was disbanded after the networks misused exit polling data, presuming it had scientific accuracy. It was a shameful performance--not by the VNS, but by the networks.
For the California recall, many news agencies--AP, ABC, NBC, CNN, Fox, New York Times, Washington Post, USA Today, Sacramento Bee, KABC-TV, KCBS-TV, KNBC-TV, KNSD-TV, KTVU-TV and KNTV-TV--chipped in to pay Edison Media Research and Mitofsky International to conduct an exit poll and telephone survey. Some details of the interviews with 3814 voters leaving polling stations and 400 absentee voters:
Edison/Mitofsky conducted the Election Day survey at 60 randomly selected precincts around California, and the telephone poll of absentee voters from Sept. 29 through Oct. 5. Results from the telephone poll were weighted so that those responses represented 26 percent of the sample, the estimated size of the absentee vote.
I say unto you, if you want exit poll information available to all, CONDUCT YOUR OWN DAMN EXIT POLL. Give the results to the people freely!!! Do not wait for the press to leak the information--they think too little of your intelligence, and too highly of their own social position.
In fact, up to now, I've been under the impression that there was only one exit poll. But I just noticed, as you might have, that the LA Times in NOT included in organizations listed above. That's because they paid for their own exit poll!, conducted by Davis Research of Calabasas. They sampled 5205 voters in 74 polling places:
Precincts were chosen based on the pattern of turnout in past statewide elections. The survey was by a confidential self-administerd questionaire in English and Spanish.
If the LA Times and the other media organizations do not want to share their polling data, interested citizens will be left no choice but to come together and finance their own polls. Frankly, I personally don't think it's worth it, and would not support such efforts--unless the press start intentionally misreporting theirs.
Also, such polls are clearly club goods--not public goods. Why?
Last Sunday, Matthew Yglesias noted that the Federal Government, not Wal-Mart, is the largest employer in the US. True, but lumping together all federal employees in all departments really ignores how these bureaucracies are managed. For example, it's been my experience that the military services think of themselves as separate, distinct entities for the purposes of personnel management.
The latest military and civilian stats (July 2003) indicate that Wal-Mart is in the lead:
Also, the postal service employs about 800,000 workers--or thereabouts.
UPDATE: Our military really is bigger than that--just more efficiently designed. The data above reflect active duty military only. Each reserve component is managed separately from the active component--and from each other. Still, active-reserve integration has been acclerating for some time.
Table 5-2 of Selected Manpower Statistics FY2002 show data about the reserve components--which together yielded 1.2 million persons in 2002. Remember, most of these guys and gals are not full-time soldiers--or at least weren't until the recent military campaigns. Wal-Mart is still bigger than each component, but not all of them put together. An interesting question I'll try to answer is "how many reservists actually work at Wal-Mart?".
I've criticized other economists for focusing blindly on the marginal financial costs of war. It's easy to focus solely on the costs, because they can be extrapolated by simple methods from current U.S. budget allocations. As I write this costofwar.com says the toppling of Hussein and the occupation of Iraq--i.e. setting up democratic political institutions, the reconstruction of schools, the reconstruction of the a modern electric grid, water supply, and road network, eliminating the Ba’athists, rebuilding of the Iraqi police forces and military, securing oil production, and etc.--reads just over $78 billion. This is an enormous sum of money--roughly $275 per person in the United States.
However, time has come for somebody to provide an estimate of the economic benefits of the Iraq war. I am not an expert in these matters--and I don't know who is. But the world needs to know that there will be substantial economic benefits--not immediately, and not primarily to U.S. residents. The benefits will accrue in the future, and primarily to Iraqi residents and their trading partners. These benefits will far exceed the consumer-based market rush experienced after the downfall of Saddam.
There is no doubt that this war--like all wars--brought immediate death and impoverishment--not prosperity. The techniques of cost-benefit analysis cannot easily account for the loss of human life. In addition to the budgeted costs, the economic loss incurred from the two hundred American military and journalistic casualties, as well as the 2200 Iraqi military personnel and the hotly debated number of Iraqi civilians, can be roughly estimated. In addition, the destruction of buildings and equipment in Iraq, and the loss of production from calling up reservists can be estimated.
But the economic benefits are even harder to calculate and summarize--and I won't even try. We cannot count on supposed beneficial effects on the stock prices for Americans or on oil prices for Iraqis. These are not real tangible improvements. We cannot count on the broken window fallacy--that explosion of American bombs and the destruction of Iraqi wealth are, through their impacts on rebuilding efforts, positive economic shocks.
What we must count on is the superior demonstrated performance of open decentralized market economies over stagnant centrally-strangled economies.
Formerly, Iraq was tied with North Korea for last (155th) on the 2002 Index of Economic Freedom. (It was not ranked in 2003). On each and every component--from government regulation to monetary policy to property rights, it earn the worst possible score. We must count on Iraqis using economic freedom to create economic prosperity. If history is our guide, the economic future of the Iraqi people has never shined brighter.
On page 51 of the 2003 index the authors insist that economic benefits will accrue after the transition to a market economy:
The talk is of replacing the regime of Saddam Hussein with an economically free constitutional democracy, not just a friendlier thug. American success in Palestine and Iraq could be precisely the sort of exogenous shock the
Arab world needs, spurring calls for reform throughout the region....
The problem is that bureaucracy, corruption, and uncertainty make it difficult to build a business bigger than a market stall. If accountable government and the rule of law could be brought to the region, fortunes could change very rapidly.
The future performance of the Iraqi economy, if U.S. sets up the rules of the game intelligently, should be unparalled in the Middle East. How will this happen? If the future Iraqi government maintains an economically free nation, that will be for Iraqi businessmen--bankers, manufacturers, industrialists, and retailers--to decide. We cannot provide a guarantee or a blueprint, but that's the entire point...
And if all goes well, some day we will be sending our manufacturing jobs to Iraq, as well as China and Mexico.
I wanted to post pictures of my son sooner, to meet customer demand and supplier ego, but I had to wait until my mother-in-law saw Misha's pictures and videos first. Anyway, Misha thanks you for patronizing T&B.
He's the one on the right.
My mother-in-law, who lives in Russia, has been repeatedly denied a visitors visa to the US. Despite the popular belief of most Americans born in the U.S., it's not easy to get into this country legally--even just to visit or travel--if you're not from a select set of elite countries. Someday I'll discuss the... well... uneven... treatment she has received at the hands of some of the Consular Officers in St. Petersburg.
I don't mean to routinely pick on Tyler Cowen. He's goliath; I'm the bug under David's shoe sandal. The title of his entry is A New Proposal for Cleaner Air, and he cites the very creative Dan Klein for the idea of using remote sensing infrared technology to test for high emitting vehicles. But the idea is not new. It's on page 65 of the premier study, Evaluating Vehicle Emissions Inspection and Maintenance Programs , published in 2001 by the National Academy of Science. This work summarizes much previous research on the subject.
Tyler also writes:
Most auto emissions come from the dirtiest ten percent of the cars on the road... Note that your annual or bi-annual auto emissions test is easy to fake or prepare for.
The first factoid is summarized in the report. But on page 5, the report notes that focusing on the dirtiest 10% will actually mean making the poor worse off:
Studies... suggest a strong link between low household income and the likelihood of owning a high-emitting vehicle.... [A]ny program designed to repair high-emitting vehicles might raise serious fairness concerns, because high emitters are more likely to be owned by persons of limited economic means.
But whether it's easy to fake auto emissions test I can't figure out...
Emissions tests are run and enforced by State governments, each with its own set of required procedures and equipment. At any given time, you should have an easier time of faking it in some states than than others. However, over time, most states have begun "advanced automotive emissions programs", effectively designed to made it harder for auto shops to fake emissions tests. The new equipment required can tell if the mechanic is tinkering with the process.
I know this happened in New York in the late 1990's, as my relatives who run auto shops were complaining bitterly.
In Virginia, "antique" cars--i.e. cars more than 25 years old--do not have to pass emissions inspection! Could this exception be the cause of much of the pollution?
Today, most Americans would be offended by any law that banned blacks and whites from playing tennis together or marrying one another. Wouldn't it be just as offensive were there a law requiring blacks and whites to play tennis together or marry one another?...
One might be tempted to answer by asserting that arbitrary discriminatory association choices in marriage don't have the important socioeconomic effects that other discriminatory choices have. That's dead wrong. Race and income are highly correlated. Whites have higher income than blacks. Only about 5 percent of all marriages are interracial. That means whites marrying other whites makes the income and education distribution more skewed than it would be if there were more interracial marriages. I imagine that most of us would be horrified by the suggestion of mandated marriage diversity.
Looking through the single Bush 2004 blog entry about Economics makes me think it might be fruitful to examine all campaign blogs for the stories and commentary on economic matters. Clearly, the Dems will focus on the negative numbers and team Bush will focus on the positive numbers. I don't expect to find out how the candidates want to intervene in the economy, and why they think their plans are the best. In fact, I find all this campaigning boring, tiresome, and much of the time childish.
Instead of offering a button or a blog or a 30-second ad, I think it would be really nice if all the candidates were to tell us--in writing:
what they think "the economy" is
what they think "economic policy" means
precise economic goals--year by year, industry by industry, or reasons why they don't know
a summary of the economic/regulatory bills they plan to send to congress
reasons why they think their policies are superior to the status quo
reasons why they haven't already sponsored bills or pushed Bush to enact these policies
reasons why they have the smarts and ability to do what's best for the economic situation of 280 million people--and the rest of the field doesn't
I know, there's not a chance in hell any candidate would do this.
A Federal Appeals court maintains that Cable internet services must be treated as telecommunications services for regulatory purposes.
This means that cable companies must let competitors use their lines (at what
prices???). I'll leave the experts to disentangle this mess, but wanted to
point out one paragraph that was particularly misleading:
Currently, the vast majority of the nation's approximately 14 million homes
that subscribe to cable high-speed Internet service have no choice when it
comes to their service provider. If the ruling survives a likely appeal, the
decision could provide broadband Internet users with new options for the
content they see online, their e-mail addresses and potentially the monthly
rates they pay.
Excuse me, but from most consumers' point of view, "cable broadband" is not a
separate industry from broadband in general. Competition for broadband
services exists even in almost all 14 million cable broadband homes-- from 1)
telephone provider's DSL service, or 2) satellite providers like Dish Network
(with
Earthlink) and Direct TV (Direcway). As far as price goes, I
have no aggregate data, just personal anecdote. DSL and cable internet service
cost about the same, while the dish stuff is more expensive.
Note that cable and the dish folks act like fiery competitors. Comcast, my cable
service provider, runs folksy commercials making fun of "The Dish", and Direct
TV uses Danny Devito and other celebrities to read consumers' letters about how
the dish's quality is excellent, and service is unbeatable.
On the other hand, many orchestras are experiencing financial difficulties, and some are closing.
I would have agreed with Tyler--until last July, when I emailed Jan Wilson of the American Symphony Orchestra League. I requested data about the number of symphony orchestras in the United States. Jan's reply, if you find it credible, makes the industry sound better off than I previously thought. According to the data she sent, less than 1% of symphony orchestras have gone bankrupt recently:
The number of orchestras in the US has actually increased over the past ten years. Recent news reports of the demise of symphony orchestras are a little premature and inaccurate. There have been only 8 orchestras that have filed for bankruptcy or reorganization. Currently, the League has over 900 member orchestras and we no of approximately 1200 orchestras total for the US. Most of the remaining 300 or so orchestras are smaller budget orchestras.
There is no question that the current economic climate has made balancing budgets quite difficult for all nonprofit organizations and orchestras are no exception. However, with the high number of messages we receive on a daily basis, I can tell you from firsthand experience that orchestras are still thriving - possibly doing business a little differently than they have before, but they are for the most part flexible and will ride out this storm as they have in the past.
Many commentators have noted the continual loss of manufacturing jobs overseas (or lost forever to productivity gains). But as anybody who looks at the size composition of GDP knows, as the number employed in manufacturing has decreased, manufacturing output has steadily increases.
This is a general, long-run trend, demonstrated by the exception in 2001, when manufacturing was hard-hit by the recession. These are rough numbers, and perhaps the BLS and BEA work with different definitions of manufacturing, so I reserve the right to correct later, but I think this trend is accepted by most economists.
True, increasing output and productivity is little consolation to those who lose their jobs. Even though we're sympathetic, we economists do not often specify which jobs are lost in much detail, and cannot explain the history of those lost jobs.
To begin to make up for that lack, I would like to link to two great articles about Elkhart, Indiana--the self proclaimed "Band Instrument Capital of the World." The first is entitled American dream, economics clash and the second Foreign competitors siphon market share: Cuts, shift overseas may help locally
. Both are written by Andrew Souukup of the South Bend Tribune. The articles reveal modern worries about globalization, but a century-long history of participating in the global marketplace. The articles are best read in reverse. The second article begins:
Until recently, Jerry Stayton and his co-workers took their job security for granted.
As musical instrument craftsmen, they work in an industry that has been entrenched in Elkhart for 130 years. Band instrument factories there have employed families for generations.
On Friday, Conn-Selmer said it would close its North Main Street plant later this year, putting as many as 100 people out of work.
That follows a rough few years for Conn-Selmer's Elkhart plants, which have lost hundreds of workers through layoffs.
Companies consider outsourcing the solution to tough competition:
The remedy may be of the if-you-can't-beat-'em-join-'em variety.
"Our view is there's a long-term solution that may require offshore manufacturing," analyst Ursaner said.
But the first article notes this has been a long-term battle-- fierce competition first by local producers and then by international producers.
Conn couldn't have imagined concepts like global trade and the rise of technology when he founded C.G. Conn Ltd. in 1875. After briefly entertaining an offer to move to Massachusetts, Conn established the headquarters for his company in Elkhart. At the time, the city had just 1,000 residents.
Almost immediately, however, the Conn company gained a reputation for producing quality musical instruments. Conn lured craftsmen from Europe to work in his Indiana factories, and many employees left C.G. Conn to launch their own Elkhart-based musical-instrument companies....
When [after WWII] Conn resumed making musical instruments in 1946, it started losing its industry dominance.
By 1969, C.G. Conn's stock prices had sunk and its earnings started slipping. Fearing a hostile takeover, the owners sold the company to the MacMillan Co., ushering in an age of mergers and consolidations....
Most of Conn's manufacturing plants were relocated to other states (some would return years later) and the strong reputation of the industry's most famous company took a huge hit....
Companies shifted hands and merged in the 1970s and 1980s to reduce costs and improve efficiency. Giglio said some companies focused on a "back-to-basics" approach emphasizing quality while others put profits above other considerations.
As the quality of foreign instruments improved, the market share for Elkhart companies began to erode. Some jobs began to disappear, a trend that was exacerbated by technological advancements.
So being the "Band Instrument Capital of the World" and luring employees from abroad is NOT globalization, but sending production abroad is?
Does your legislator always do what you want him to do? If not, then you are not politically powerful, and you are one of the victims of subsidies, tariffs, and quotas. Demand that they be ceased immediately.
The purer the majority rule, the greater the centralization of power and legislators' control and direction of economic wealth. Everybody knows that the wealthy and the powerful will use any means necessary to secure the highest rate of return on their investments. We must admit to ourselves that politicans in the U.S. today control massive amounts of wealth--because they have the regulatory power to expropriate property rights.
Here's a theoretically refutable hypothesis, "It is impossible for a politician to maximize his own welfare and the welfare of those he represents." If true, I do not see the point of insisting that subsidies and the like be repealed (which is clearly the right thing to do for us and the third world), since many U.S. politicians would make themselves worse off by doing so.
My House Representative, Jim Moran, is no more accountable to me or to the people than the bully quasi-monopolist Microsoft. Neither Moran nor Microsoft do what I want them to. And frankly I don't expect them to.
But Microsoft will deal with me on specific terms, by selling me products for specified prices. Moran, because he's a national legislator, instead of a consumer goods producer, doesn't have to worry so much about a bunch of disorganized little guys being dissatisfied. If I don't like Windows XP, I can still move to Mac OS with my next computer, thereby punishing Microsoft (and myself a little). If I don't like Moran's policy objectives, I can move to another district and hope for more influence, but this punishes myself, and leaves Moran untouched! If I stay in his district, a single vote against him would probably not hurt him at all. The only way to get noticed is to form a sustainable special-interest group, like AARP.
Jim Moran's office has dealt with me before, by sending me a form letter when I wrote a note arguing against his stance on post 9/11 relief ("It’s an open grab bag, so let’s grab."), and another when I wanted clarification on this statement, "If it were not for the strong support of the Jewish community for this war with Iraq, we would not be doing this..."
If I were an important person--with wealth or a voice that could hurt Moran, he'd respond to me personally. But the same is true of Microsoft. For some reason, politicians are supposed to respond to the people. Maybe they do, but they don't respond to this person.
Wow... I didn't realize how much I disliked Moran.
This headline for employment data is just ridiculous. Simply put, it is not at all true that For First Time in 8 Months, U.S. Businesses Add New Jobs . Obviously, they mean that on net, more jobs were created in September than were destroyed. But this does not mean that U.S. businesses created zero jobs in the previous 8 months, until suddenly, for no apparent reason, they began hiring in September.
UPDATE: James Picerno (no permalinks!) provides an excellent comparison of the current job picture with recent history.
Yes, the great jobs-creating machine that is the United States is having a tough time of late. But before we go off the deep end and start comparing the here and now with the Great Depression consider that total nonfarm employment for September, despite the job losses of recent vintage, has almost never been higher.
Most American parents think their kids the right amount of homework
. They could be right, but a broad question like How Much is Too Much? might not be specific enough. Neither parents, students, nor teachers are homogenous groups--not across the country, and not within the classroom. Given such diversity, it seems inappropriate to assume that the correct level of homework is the same for each student in a class, regardless of his level of ability or interest in the subject matter.
I would like to suggest that students of different abilities should be given varying types and amounts of homework.
Certainly, it is pragmatic for a teacher to assign a uniform level of homework to all students in a class. In fact, some students might think it unfair that other students get less homework than they do (although it is doubtful that any student would complain if other students were getting more homework). But it's clear to me (from hands-on experience in an after-school program), that some kids need to read the same paragraph several times to get the basic meaning out of something, while others barely need to skim to retain the details.
If the objective is to keep kids busy learning, then smarter students need more homework--longer and more complex reading and writing assignments, harder math problems, more free-thinking after rote memorization, etc. Slower students need to master skills and acquire basic information before moving on--shorter, more repititious assignments.
The Washington Post notes that "Teachers tend to demand more from the children of college-educated parents." I doubt this happens very often within the classroom...
[H]ow will neuroscience influence economics? This question seemed to have less consensus, but one view suggested by a number of participants was that neuroscience lets us see economic decision making as a nexus of competing interests inside the individual, and that this competition results in heterogeneity in individual behavior that once understood will likely influence the way we think about economic policy.
As a good friend of mine puts it--"neat shit."
In addition to Neuroeconomics, GMU Economics has Tyler Cowen and Alex Tabarrok at Marginal Revolution. We also have Chairman Donald Boudreaux, whose unorthodox blog entries are his pointed letters to the editors of major newspapers.
I will encourage more GMU econ professors to join us, but most are too damn busy teaching, doing research and writing papers and books.
But we know that, in the last 20 years, severe obesity increased in the US population overall, faster than the rate of increase for being just overweight. This research was conducted by 
This is a general, long-run trend, demonstrated by the exception in 2001, when manufacturing was hard-hit by the recession. These are rough numbers, and perhaps the BLS and BEA work with different definitions of manufacturing, so I reserve the right to correct later, but I think this trend is accepted by most economists.
