Craig Depken at Heavy Lifting has noticed a correlation between income growth by county, and voting for McCain over Obama.
Which is the cause and which is the effect?
I left a comment on the original post that you could also interpret this as convergence as predicted by the Solow growth model. If so, then Democrats seem to be against it.
In case you’re keeping up with this blog after class is over – the rate charged on insuring government debt in Europe has spiked so much that Spain is now paying about the same rate that Greece was paying in 11 weeks ago.
There was a post and comments on the student blog about it making sense to buy a home rather than rent. I trashed this fairly roughly because this amounts to a financial myth.
A piece from The New York Times this week notes that it may finally make financial sense to buy. Many places where you should have rented in 2005 — Washington D.C., Boston, Sacramento, Chicago, Miami, Palm Beach and Fort Lauderdale, Los Angeles and Riverside, Las Vegas and Phoenix — have now turned into locations where it might make sense to buy.
Most of the Pacific coast, the New York suburbs, Honolulu, and North Carolina were and remain places where it makes sense to rent.
More rust-belty places — like Philadelphia, New York, St. Louis, Indianapolis, Cleveland, Detroit and Pittsburgh — were and still remain places where you should buy. Having grown up in Buffalo, unless you don’t have a life, I don’t recommend getting tied down to those places.
Earlier in the semester we talked about the unevenness of recessions, and how some states have skipped the Great Recession entirely.
The New York Times ran a front page article this week about how North Dakota is booming so strongly that they’ve run out of temporary housing for people: new residents with high-paying jobs are sleeping in their cars.
Graham raised the point in class a few weeks ago that it’s goofy that poor Brazilians have cellphones when they don’t have so many other things.
I tried to steer in the opposite direction: perhaps it’s our value systems are goofy if so many people are buying and using these things instead of other things.
David Gardner sent me an e-mail about a video he saw in another class about social media (sorry, this video is not embeddable). It reminded me of Graham’s point.
I’m not thrilled with the video — it focuses too much on cute examples and trite observations — which I think leads it to missing the big picture.
This is not that people do social networking, but that they value it.
Why is that so? Network externalities is part of it.
Does it matter to macroeconomics? I think it does. Our conception of macroeconomics is based on pink dashed lines drawn in atlases – essentially networks established by physical proximity. If our identity becomes more tied up with our social networks than our proximity networks, then the policies of governments and the scores we keep about countries (like GDP) become less relevant too. I don’t expect governments to take that threat lightly — there’s a reason that computer programmers tend to be libertarian.
Which brings us full circle back to Graham. Does a kid with a cellphone and a social network in Brazil feel Brazilian? For now, I think the answer is yes. What will the world look like when the answer is no?
FWIW: as a non-Mormon, who relocated to Utah from out of state, who spends a lot of time on the internet, and who teaches at a university that is somewhat separated from the local community, I can tell you that I’m already losing a sense of identification with my local community. Most of me is still “Utahn”, but a bigger chunk of me is floating separately from Utah than most of you. It’s an interesting feeling … and a positive one.
Carl Bialik’s column in The Wall Street Journal this past week pointed out that what is normally announced about government data is a point estimate.
Of course, the probability that any point estimate is exactly correct is generally zero.
It would be better to use a confidence interval instead.
If you do though, you find that it isn’t clear if the number of unemployed has gone up or down over the course of the last year or so.
That ought to be the point though. If you’re worried about the unemployed, we’re not seeing evidence that the situation is getting better. Alternatively, if you think activist policy is a problem, we’re not seeing any evidence that it is working.
The Wall Street Journal had an editorial about Larry Summers the other day. Summers wrote a letter to the editor that was published the same day.
He is currently director of Obama’s National Economic Council. Previously he was one of Clinton’s Treasury Secretaries, President of Harvard University, a well-known macroeconomist — for which he won the John Bates Clark medal in 1993 — and wonderkid going back to the early 80’s, as well as son of two famous economists and nephew of two Nobel Prize winners.
Summers is not regarded as a conservative.
But, over the last 40 years, a preponderance theory and evidence in economics has supported conservative political positions. This has moved the profession to the political right. Summers was pushed out at Harvard largely because he was seen as too conservative by its faculty.
The WSJ dug up this quote from Summers arguing against unemployment insurance:
"First, government assistance increases the measure of unemployment by prompting people who are not working to claim that they are looking for work even when they are not. …
"The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a 'reservation wage'—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer."
Summers’ reply argued that he was taken out of context, and offered this quote from the same article:
It is "a great mistake," I wrote in the article cited by the Journal, "to attribute most unemployment to government interventions in the economy or to any lack of desire to work on the part of the unemployed."
I have no doubt that Summers is correct. Having said that, it is not normal or typical for a White House economics advisor to have to claim that readers of their scholarly oeuvre are prevaricating. I’d go so far as to call it unheard of.
BTW: Krugman has also been getting “hoist by his own petard” about contradictions between his more serious scholarly work, and his current opinions.
Brian Gongol on central planning:
Food for thought: Decades after the college students and hackers of free countries built their own software (and some massive fortunes from doing so), Communists are still just copying and stealing free people's work.
The context of this is that 1) the North Koreans are using open source software to build their own operating system Red Star, and, of course, 2) the Chinese government has hit the news a bunch of times this year by ignoring the vast ability of their population to contribute to the positive-sum-game that is modern civilization in favor of the zero-sum-game of building malware to invade the servers of private companies in developed countries.
Both The Wall Street Journal and The New York Times have run pieces this week about next Monday’s official announcement from the NBER Business Cycle Dating committee.
Unlike most countries, the U.S. has a non-partisan, non-government committee of macroeconomists that calls turning points.
They do not make timely announcements, and they do not meet that often.
The rumor is that they are going to announce that the are still not sure when the economy troughed.
The reasoning is twofold: 1) the data that is old enough to be solid — 6-12 months — doesn’t show a distinct trough, and 2) the newer data, which looks like a recovery, isn’t solid yet.
My guess is that they will meet in the summer, or over Christmas vacation, and declare a trough late last summer. My money is on August.
Carpe Diem, which always posts a lot of data charts, has been showing many lately that clearly show a recovery.
Macroeconomists have always said that a bailout of the financial system should not be expensive if the problem was a loss of liquidity and not a loss of solvency.
It was unclear in 2008 which situation we were in when TARP was enacted.
It’s now pretty clear that as far as the private sector goes, TARP solved a liquidity problem. Estimates of the final cost of TARP have been declining for about a year, and are now down to $90 Billion (see the article entitled “Light at the End of Bailout Tunnel” in The Wall Street Journal).
However, Kids Prefer Cheese points out that this does not count the money that went into Fannie Mae and other GSEs. This is still forecast to go higher – indicating a solvency problem.
I asked my kids where that line came from, and they said it’s from the Horton Hears a Who movie:
In my world everyone is a pony, and they all eat rainbows, and poop butterflies.
Feel free to use this in polite conversation – it’s a good one to use when talking to people who believe in nonsense, like, say, price controls can make healthcare better.
We’ve talked a bit in class about the CBO’s numbers not being very good.
Here’s some viewpoints from Mike Munger of Kids Prefer Cheese – a poli sci prof at Duke, from Greg Mankiw – a macroeconomist at Harvard and former White House advisor – based on a letter sent from the CBO to Congress, and another one from Mankiw about the process.
Munger is admittedly anti-government. Mankiw, on the other hand, is tarred as a conservative, but to call him anything other than a liberal who has hit middle-age is disingenuous (and, of course, the professional liars out there have readily forgotten that Mankiw was almost fired by the Bush administration for telling the truth about their policies).
The specifics of this post are not testable, but you had better have command of the general idea by the end of the course:
Via Carpe Diem and 4-Block World.
Employment lags the business cycle.
Of course, this was a very severe recession. Also, the employment picture in recessions appears to be stretching out. Economists are not quite sure why, but we think it’s because of 1) fixed costs that slow down layoffs but also rehires, and 2) less dependence of the economy on cyclical industries (where layoffs and overtime are part of the job).
Via Paul Kedrosky’s Infectious Greed via Calculated Risk.
