Saturday, November 22, 2014

One Reason Why Household Income Is Falling

Median household income is falling. Progressives paint this as a chronic problem with our economic system, and an acute problem associated with the Great Recession.

Then what about this:

earners

There’s certainly a position that could be taken that what we have is one or both earners in two-income houses being pushed out of work.

But I don’t think that’s a very strong position. Instead, look at the ends of the expansions.

The Bush II expansion (2002-7) was a pretty strong one, and two earner households showed no growth during its later stages. There was even a slight decline in no earner households from 2003 to 2007. But one earner households went through the roof. This sounds like a lifestyle choice.

The effect is there too in Clinton’s share of his expansion (1993-1999). Two earner households hold steady (at best), and no earner households decline. Again, the one earner households rise.

Then there’s the Reagan expansion (1983 to 1989). Again, no earner households hold steady, but now two earner households climb steadily. That’s probably baby boomers getting married. It’s also the heydey of yuppies. I’d bet that when the blush wore off, a lot of those couples got divorced, and some of them didn’t remarry.

The absence of any business cycle pattern in one earner households is indicative of an economic symptom without an economic cause. Arguably, it doesn’t require an economic solution either.

Via Carpe Diem.

Sunday, November 16, 2014

How Stupid Is Obama?

I have to be rather bald about this. Obama’s response to recent questions about the Keystone XL pipeline make me wonder whether he’s stupid, or whether he’s just pandering to people who are stupid.

FYI: The Keystone XL pipeline is an oil pipeline proposed to run across the plains, primarily for the purpose of bringing oil production from northern Alberta (that’s ramped up over the last 10 years) to refineries and ports along the American Gulf Coast that have been there for decades.

Here goes:

Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices …

Where do I begin?

  • Is Canada our friend or not? Do we help friends? In this case, private U.S. firms want to help Canadians, and the U.S. government is blocking that.
  • Why single out oil? I know, it’s the Keystone XL pipeline that’s in question here, but I really can’t imagine him saying this about Canadian water?
  • Whose oil will it be when it crosses “our land”? Is Obama also against Canadian storage tanks in Houston, or are those not necessary? My guess is that the Canadians sell their oil to the American owners of the pipeline as soon as it crosses the border. It seems to me that he’s actually against our oil, and is using the Canadians as a punching bag (see the first point).
  • Why is adding “the Gulf” necessary? Would Obama be in favor of this if the pipeline went to the Pacific Ocean? My guess is that this is to attract the attention of people who are worried about oil spills in the Gulf specifically in the wake of the BP Horizon spill. If I’m right, Obama hopes that listeners suffer from availability bias. If I’m wrong, then I think Obama suffers from it. Note that my position is not in favor of spills: I’m just pointing out that they can happen anywhere but that referring to a place where they recently did happen should make you suspicious of manipulation.
  • Why bring the oil to the Gulf at all. Oh yes … because the refineries are already there. Note that Obama is not suggesting the we build new refineries closer to where the oil comes out of the ground. Heck, he could even offer to build refineries for Canada to just keep the oil away. But he didn’t. Instead he rather specifically wants oil refineries along the Gulf to not have access to Canadian oil. Why?
  • Why would anyone care where the outputs of the refineries, which are for the most part no longer “oil”, are sold? This almost seems like Obama wants a trade restriction on refinery exports. Then why didn’t he just say so? Oh yeah … because restricting exports is usually stupid. Do note that Obama never suggests that we’ll build the pipeline and then throw big, sharp, rocks in the harbors where the resulting products might leave from. Because that would sound stupid. Even though that produces the same outcome of reducing exports.
  • And how is this not going to have an effect on U.S. gas prices? This is a President whose policies actually encourage people to import their own pharmaceuticals because they’re cheaper to put pressure on domestic pharmaceutical prices. Apparently gas doesn’t work the same way. It’s not like you can put it in containers and take it with you. Oh … wait … scratch that.

I’m sorry. All Presidents say dumb and bizarre stuff sometimes. But this is by far the most “out there” thing this President has ever said.

P.S. I need to add another point about what will happen to the oil without the pipeline. It will still get to refineries. Maybe even refineries along the Gulf. How do we want it to get there? Tanker truck driving too close behind you on the interstate? Railroad tanker cars snaking through your town? Or in the pipes just like the ones that go everywhere already. If Obama is against the Keystone XL pipeline, is he also against the pipe that carries gas (and perhaps oil) into your home?

Sunday, October 26, 2014

(Nominal) Income, Cost-of-Living, and Real Income (by Profession)

Rasmussen College has a great site that allows you to input professions, and then get a ranking of all 50 states by nominal and real income.

The Bill Arrives

With great fanfare last year the EU released updated GDP figures that includes information on prostitution, illegal drug use, and other underground aspects of an economy that were not counted before.

And this year, the EU wants the UK to cough up a bigger contribution because their economy has done better than the average European one … in part because of the bigger numbers from prostitution and drugs.

The payment, described by officials as a “surcharge” follows a change to the way the EU calculates gross national income to include previous hidden service industries, including such prostitution and illegal drugs.

Tim Worstall points out that just because you can count the GDP doesn’t mean you can raise the tax revenue from those sectors.

I’d add that since you probably can’t raise the money from those sectors, this amounts to a higher tax on legal sectors because the UK tried to count the illegal sectors.

This is analogous to taking a family containing a drug abuser, and telling the straight members of the family they have to work harder because one member of the family is having extra fun.

The bureaucrats at the EU have to be have a pretty screwed up worldview not to see that. Or … they just want the cash (and will use whatever excuse is handy).

Tuesday, October 21, 2014

Misinformation, and the Drive for Income Equality

There’s new and provocative research out of Sweden entitled “Richer (and Holier) Than Thou? The Effect of Relative Income Improvements on Demand for Redistribution”.

… A vast majority of Swedes believe that they are poorer, relative to others, than they actually are. This is true across groups, but younger, poorer, less cognitively able and less educated individuals have perceptions that are further from reality.

To put it more bluntly, people pushing an agenda for income redistribution will have better luck if their target market is young, dumb, and ignorant.

Then the authors try a little social engineering:

… We conduct an experiment by randomly informing a subsample about their true relative income position. Respondents who learn that they are richer than they thought demand less redistribution and increase their support for the Conservative party.

Their evidence of this is based on before and after responses to survey questions, not actual voting records.

Wanna’ Work at Google? (Not Required)

From the Business Insider piece entitled “The One App You Need On Your Résumé If You Want A Job At Google" (read more: http://www.businessinsider.com/matlab-software-skills-needed-for-jobs-at-google-2014-10#ixzz3GniQv7jC).

Google's former svp/product management Jonathan Rosenberg was in London with chairman Eric Schmidt …

… Schmidt had some more down-to-earth advice. Google really needs data analytics people and folks who have studied statistics in college, he said.

Big data — how to create it, manipulate it, and put it to good use — is one of those areas in which Google is really enthusiastic about.

And then Rosenberg said something really interesting. If you want to work at Google, make sure you can use MatLab, he said.

And, who’s the only SUU professor who has experience with Matlab? Yours truly. I gave up trying to get funding to buy Matlab for SUU about 10 years ago … no one had any vision about what it would be used for.

FWIW: I wouldn’t even worry about Matlab just yet. In order to use Matlab you really need to have taken linear algebra. I wouldn’t even worry about linear algebra yet though. In order to take linear algebra, you need two semesters of calculus. And that’s not business calculus, or ECON 2500. So, there’s a plan: Calculus I, Calculus II, Linear Algebra, talk to Tufte about learning Matlab.

Sunday, October 19, 2014

This Is What an Expansion Feels Like

Two graphs from the Pew Research Center:

Americans may not be raging optimists when it comes to finding work — perhaps “skeptical realists” is closer to the mark — but their self-assessment of the job market tracks pretty closely with official unemployment statistics.

It’s been a long time coming, because, really, that was a very nasty recession a few years back. But … people’s perception of the availability of jobs is back in line with what it was during the middle parts of the Bush expansion (say around 2004), and he unemployment rate is back where it was in the early middle of the Bush expansion (say around 2003).

Via I Love Charts.