Why Is Labor Force Participation Declining?

A worrying trend is that the proportion of people who want to work, taken out of the whole population (known as the labor force participation rate, and just as “participation” below), is declining.

It has been declining, fairly steadily, for the past 15 years. I view this as primarily demographic: we are in an echo of the baby boom of 60 years ago. That means we have relatively more people in their 20’s and 30’s right now … who aren’t always inclined to join the labor force in a timely fashion.

I have been emphasizing to SUU students since Fall 2009 that the job market is actually pretty good for graduates. It’s an urban myth that it isn’t. Where it is bad is for people who’ve put some sort of “red mark” on their resume (you know … checkered work history, failed drug tests, poorly managed mental illness, etc.). Those people tend to be a bit older.

But, maybe not.

An alternative decomposition of the labor force participation data has been provided by economists at the Federal Reserve Bank of Atlanta.  They do two things: 1) break participation down by age group, and then 2) correct for the net movement of people from one age group to another. The heart of their result is this chart:

The bars clearly will sum to something negative: this is the overall decline in participation.

One important fact is that the population has been aging, largely due to improvements in health outcomes of seniors. This means a lot more seniors, and seniors are less inclined to work. The green indicates more seniors, and the big negative bar means less participation from them. This is the biggest component of the drop in participation. So it’s not the echo of the baby boom — but the baby boom itself — that is causing participation to drop.

The two bars covering middle age are more problematic. These have green components to them, indicating that more people are surviving into middle age (again, due to better health care, and probably also reductions in violent crime). But now we have a blue bar too: this indicates people who are less inclined to participate but haven’t aged into a new group (yet). These are the people with “red marks” on their resume. Reasonable people can quibble about whether a particular person deserves their red mark, but there’s no debating that, on average, middle-aged people are less inclined to be participating.

N.B. Disability claims might be part of that. But, in posts on this blog from last year’s class, I dismissed that possibility: rates of disability are actually in line with what they’ve been for a generation or more.

Now, looking at the two bars for the young, the green indicates the echo of the baby boom: participation is bumped up a little bit because of young people. But the blue bar is still there for the second group; and again this is suggestive of “red marks”.

And for the youngest group … participation looks great. On average, there is no job problem for students like you.

What GDP Doesn’t Count

GDP isn’t perfect. It never was.

Unfortunately, it’s getting worse, but for good reasons. Take a look at this video:

Very little of what is described in this video would count in GDP. And yet it’s all valuable … and wouldn’t have been produced at all a few years ago.

The upshot of this is that it’s very likely that our announced growth rates for real GDP underestimate true growth.

N.B. For more ambitious students, the backstory here is the partition of the British Raj in 1947. The U.K. walked away from its administration of what it had considered one colony, but which had been a multitude of small states conquered or dominated over centuries. At the partition, the predominantly Moslem regions became Pakistan, and the predominantly Hindu regions became India. Many refugees (about 15 million !!!) were created through expulsions. In the video, the grandfather grew up a Hindu in Lahore, which was predominantly Moslem and became part of Pakistan. He fled to Delhi and didn’t see his friend for over 60 years.

Technorati Tags: real,gdp,underestimate,undercount,india,pakistan

What GDP Doesn’t Count

GDP isn’t perfect. It never was.

Unfortunately, it’s getting worse, but for good reasons. Take a look at this video:

Very little of what is described in this video would count in GDP. And yet it’s all valuable … and wouldn’t have been produced at all a few years ago.

The upshot of this is that it’s very likely that our announced growth rates for real GDP underestimate true growth.

About that Inequality

Everyone believes that income inequality is getting worse in America.*

Funny thing, facts: they don’t always line up with beliefs.

And the facts are that income inequality

• Is wider across individuals than across families and households.
• Has not changed much across individuals over the last 20 years.
• Has increased among families and households over the last 20 years.

The first bullet point deserves a little explanation. Parents form a family and/or household even if one works and one doesn’t. But, if they get a divorce, we now have two individuals with a great deal of income inequality between them. Families and households have less income inequality precisely because they are a way for unequal singles to group together and share resources.

So, if income is not distributed more unevenly across individuals, but it is distributed more unevenly across families and households, then it must be something about the structure of families and households that is increasing inequality.

And yet, to the extent that forming families/households smooths out inequality, then any increase in inequality must be a fault of the story of smoothing that I told two paragraphs up.

The only conclusion is that increases in income inequality across families and households is because families and households are being formed in an unequal way. More specifically, it’s because we have two richer singles getting married, and two poorer singles getting married, when in the past those two couples would have been “shuffled” more.

In short, we don’t have an inequality of income problem, we have a mate sorting problem. Nothing the government does about income inequality is going to change that.

You may read more about this at Political Calculations.

* Never you mind that it’s consumption inequality we should really be worried about, rather than income inequality. I may be cynical, but I think the reason that government officials worry more about income inequality is that it’s easier to siphon off some of the income going into a rich person’s bank account, than it is to siphon off some of the steak that they buy with it.

Early Deindustrialization

All developed countries are deindustrializing: the share of the economy coming from manufacturing is declining, while the share from providing services to others is rising.

Outside of economics classes, people tend to think this is a new development. It isn’t. We’re decades into this process already.

In the United States, manufacturing employed less than 3% of the labor force in the early nineteenth century. After reaching 25-27% in the middle third of the twentieth century, deindustrialization set in, with manufacturing absorbing less than 10% of the labor force in recent years.

What’s new and interesting is that poorer countries are doing it at a lower level of income than the developed countries did. For example, the U.S. started to deindustrialize when real GDP per capita was about 1/3 of what it is now. But places like Brazil are deindustrializing already, at incomes less than half of that.

In Brazil, manufacturing’s share of employment barely budged from 1950 to 1980, rising from 12% to 15%. Since the late 1980’s, Brazil has begun to deindustrialize, a process which recent growth has done little to stop or reverse. India presents an even more striking case: Manufacturing employment there peaked at a meager 13% in 2002, and has since trended down.

And then there’s everyone’s boogeyman, China:

Consider China. In view of its status as the world’s manufacturing powerhouse, it is surprising to discover that manufacturing’s share of employment is not only low, but seems to have been declining for some time. While Chinese statistics are problematic, it appears that manufacturing employment peaked at around 15% in the mid-1990’s, generally remaining below that level since.

We’re not sure this is a good thing:

An immediate consequence is that developing countries are turning into service economies at substantially lower levels of income. When the US, Britain, Germany, and Sweden began to deindustrialize, their per capita incomes had reached $9,000-11,000 (at 1990 prices). In developing countries, by contrast, manufacturing has begun to shrink while per capita incomes have been a fraction of that level: Brazil’s deindustrialization began at $5,000, China’s at $3,000, and India’s at $2,000.

What are the long-term implications? We’re not sure:

… On the economic front, it is clear that early deindustrialization impedes growth and delays convergence with the advanced economies. Manufacturing industries are what I have called “escalator industries”: labor productivity in manufacturing has a tendency to converge to the frontier, even in economies where policies, institutions, and geography conspire to retard progress …

The social and political consequences are less fathomable, but could be equally momentous. Some of the building blocks of durable democracy have been byproducts of sustained industrialization: an organized labor movement, disciplined political parties, and political competition organized around a right-left axis.

The habits of compromise and moderation have grown out of a history of workplace struggles between labor and capital – struggles that played out largely on the manufacturing shop floor. …

I’m not sure what to make of any of this; even to a trained macroeconomist, this is an angle I haven’t thought about before.

Read the whole thing, entitled “The Perils of Premature Deindustrializaiton” by Dani Rodrik at Project Syndicate.

How Much Financial Trouble Is the U.S. In?

I’m going to have a different take on this than you may have seen elsewhere.

First, everyone knows we owe a ton of money.

Yawn. Or at least that’s what many people think when they hear this.

But, if you care about social programs and government commitments, a bigger problem may be the extent to which we’ve convinced people they deserve stuff. Lots of stuff …

Let me summarize the questions in this survey, and the median responses. In italics I’ve written some general commentary about what the truth it. The survey was put together by the Harvard School of Public Health, and an article discussing the results was published in the New England Journal of Medicine (a top journal in the medical field). Neither of those is known as a tool of Republicans.

1) People are not following the Medicare spending debate. I believe this.

2) People will vote against someone who proposes cutting Medicare. I believe this.

3) People have a favorable opinion of Medicare. How do they have a favorable view of something they don’t think works very well (see questions further down)? Is this just cognitive dissonance, or something worse?

7) Medicare doesn’t cover most medical costs of seniors. Actually, it covers the vast majority; most people have no idea how much their medical care actually costs (this is similar to students complaining about how much books cost after taxpayers have covered most of their tuition).

8) Most seniors are getting out less than they paid in. This is almost beyond belief: over their working lifetimes, people pay in about 1/3 of what they get out once they become covered seniors.

10) Private insurers are better run than Medicare. Probably so.

11) It’s harder to get an appointment with Medicare. This seems to be true.

12) Care is worse under Medicare. This seems to be true.

13) Doctors are paid less under Medicare. This is true, and the primary reason why some doctors will not even take patients covered by Medicare.

15) People don’t get the care they need from Medicare. Probably true.

16) Medicare already withholds treatments because of cost concerns. This actually seems rather doubtful.

23b) People believe fraud is widespread in Medicare. Fraud is everywhere, but it just isn’t that common. This is a very overrated position.

23d) Hospitals charge too much. Compared to what? If you don’t have a viable alternative, taking this position is pointless.

23e) Medicare funds are being spent on other stuff. There’s no evidence to support this.

23h) Government manages Medicare badly. Perhaps. I think this is probably overrated though: a third of the country works for the government, and they can’t all be inefficient, can they?

23 i and j) Doctors charges are a bigger problem for Medicare than lawsuits. This is interesting, but not for the surface reason. Instead, keep in mind that doctors say that charge a lot because they’re worried about lawsuits.

23 k and l) Pharmaceutical companies charge too much, and encourage prescribing drugs people don’t need. This is so bizarre as to be almost insane. Almost all medical advances of the last 75 years are pharmaceutical. And we’re living longer and healthier lives. This is like blaming your mom’s cooking because you’re overweight, and your dad’s repairs for your inability to fix stuff on your own. Sheesh.

35 and 38) Most people lean Democratic yet call themselves conservatives. WTF? Does this mean they think the Republicans are too liberal?

In sum, people like Medicare but don’t think it works well. They think they deserve care because they’ve already paid for it, when in fact they haven’t. They think there money is being spent on things other than themselves, even though the evidence is weak. And they have a but up their butts about pharmaceutical companies, even though this is the part of modern medical care that we’re sure works the best.

These viewpoints are not a recipe for the problem of Medicare funding being solved any time soon.

What Is the Obsession with Forcing Help Upon the Poor?

Manu Joseph makes a point I’ve emphasized in class:

Too many people presume that what the poor want from the Internet are the crucial necessities of life. In reality, the enchantment of the Internet is that it’s a lot of fun. And fun, even in poor countries, is a profound human need.

The key word there is “presume”.

I’ve had many students who are RM’s (returned LDS missionaries). They frequently complain in macroeconomics classes about poor people in developing countries who have cellphones and don’t use them to better themselves.

As an positivist economist I try to emphasize that it’s our job to figure out why they find the things so valuable, rather than make normative judgements about how they use them.

Read the whole thing, entitled “Let the Poor Have Fun” in the September 17 issue of The New York Times.

Low Paying Job Nonsense (and Sense)

The story that people tell is that most new jobs are low paying:

That much is true.

But, the other implication you’re supposed to get from this, given that it uses only the last 3 years of data, is that this is a new phenomenon.

That is nonsense. The truth is that most job have always been low paying:

What is a new phenomenon is the widening gap between the average pay in low wage industries and high wage industries. For this, I recommend that you go to the source article at the Federal Reserve Bank of Atlanta’s Macroblog, and click on the bottom image.

Via Marginal Revolution.

There Are People Who Argue that Well-Being In the U.S. Has Not Improved In Their Lifetime

Take a look at this photo set from the early 1940’s – when the U.S. was by far the richest country in the world.

Respectfully, I think large fractions of people who voice the opinion in the title are either lying or mentally ill.

Technorati Tags: 1940's,photos,america,well,being

What Makes Macro So Hard: Busybody Politics

This is actually a combination of two ideas that already run in this series: 1) people with control issues are attracted to politics, and 2) everyone suffers from the activist’s fallacy.

Thomas Sowell calls the combination “Busybody Politics”:

… The key to busybody politics, and its endlessly imposed "solutions," is that third parties pay no price for being wrong.

This not only presents opportunities for the busybodies to engage in moral preening, but also to flatter themselves that they know better what is good for other people than these other people know for themselves.

I experienced this just the other day at Bryce Canyon National Park:

Right now, there are people inside and outside of government who are proposing new restrictions on how you may or may not visit the national parks that your taxes support. Among their proposals is doing away with trash cans in these parks, so that visitors have to take their trash out with them.

I am not sure to what extent this policy is in effect. I do know that you can buy packaged food at the general store near the rim, walk to the rim to enjoy the view, and then be unable to find a garbage can.

Bear with me here … I don’t think the next point it flippant. No doubt part of the plan with the removal of garbage cans is to increase the amount of “pack it in, pack it back out” behavior amongst visitors. Except think about this: how is that different from what we already do? People already pack in potential garbage. And the National Parks Service already packs out garbage put in cans. So the only difference is who’s packing the garbage out. Now ask yourself: what sort of mentality do you need to think that who’s packing the garbage out matters?

Sowell follows with an interesting and provocative point:

What could lead anyone to believe that they have either the right or the omniscience to dictate to hundreds of millions of other people? Our educational system may have something to do with that, with their constant promotion of "self-esteem" and especially their emphasis on developing "leaders."

Our schools and colleges are turning out people who cannot feel fulfilled unless they are telling other people what to do.

What (Macroeconomic Development) Success Looks Like

It’s been a summer of unrest: riots in Turkey, Chile and Brazil, and a coup to support the protests in Egypt. There are also apparently daily riots scattered around China, although the Chinese are much better at suppressing this news than other countries.

Why is this so?

Non-economists will point to all sorts of causes. But to economists these are signs of countries that are getting rich enough that people have time to notice things that aren’t improving as fast as they’d like.

Think about it: there are rarely protests in the developed world (the top quintile of 40 or so rich countries), and there are rarely protests in the bottom quintile (think Haiti, Bolivia, Laos, Myanmar, Nepal, Zimbabwe, Chad or Burkina Faso).

Here’s one thesis:

… The answer may be found in a book that the late Harvard political scientist Samuel Huntington published in 1968, Political Order in Changing Societies. His thesis is that in societies experiencing rapid change, the public’s demand for public services grows at a faster clip than the government’s ability to satisfy it. His more general point is that institutions cannot develop at the pace required by the fast-growing expectations of a population recently empowered by prosperity, literacy, more information, and a newfound expectation—indeed hunger—to shape its own better future. In Huntington’s words, “The primary problem of politics is the lag in the development of political institutions behind social economic change.”

This is also exemplified in the American crisis of the summer: the fact that the NSA is eavesdropping on everyone’s digital communication.

The overriding, but understated, issue here is: OMFG, why would you bother? Cheap communication has led to a proliferation of … kitten videos. And yet our government has put together a surveillance apparatus worthy of the middle of the 20th century. It’s yet another example of “the lag in the development of political institutions behind social and economic change.”

Big GDP Update

GDP gets revised continuously. But it gets updated more rarely.

Updating is what happens when they decide they’ve got the data and technique to measure something they couldn’t measure before. So, they go back and figure out that component for all the officially tracked quarters (back to 1947) or years (back to 1929) and add it in.

They just did one of these updates. On July 31, 2013, they added a component to GDP. This component better measures how intellectual property contributes to the economy. More specifically, R&D will be treated as an investment rather than an expense. Also to be treated as investment are long-lived assets like movies, music, TV shows and books.

The effect on the data is that the levels of real GDP will be marked up by about 3% for the entire period. The old data will be taken down, and the new data will go up, so this will be seamless.

The effect on growth rates in the future will be about a 0.1% increase each year.

Note that no one is claiming that any of this means that we are richer than we were before. Instead, they’re saying what we know is more accurate. So this is analogous to having a mental account of how much money is in your checking account, and then balancing your account and finding out that there was always a little more there than you thought.

This is a very good thing for getting our politicians focused on what’s important:

It’s a great idea, if late. The BEA has the 20th century economy down cold. It can tell you about personal income trends in Anchorage, Alaska, or America’s annual output of rubber products and plastics.

…

Thanks in part to the power of ideas, the nine or 10 most valuable companies in the world are headquartered in the U.S. (It’s nine on days when PetroChina edges ahead of Wells Fargo (WFC).) Only three—General Electric (GE), ExxonMobil (XOM), and Chevron (CVX)—are in the world’s top 10 for tangible fixed capital …

Here’s a chart:

In many ways, this is telling you something you should already know. No one goes to school to “learn to make things” any more (the black line). We go to school to learn to make ideas and concepts (the orange line).

Egypt’s Coup

Egypt had a revolution in 2011 (which was covered here, here, and here, on SUU Macroblog). At the time, I remarked to the class that a population has to achieve a certain level of real GDP per capita before people start to care much about their government. Egypt was at the low end of the range for this.

They had elections in Egypt in 2012. An Islamist party won. In July they were overthrown by the military (which, I think, gave them pretty ample warning to start running things better).

The thing is, this isn’t really about politics. Instead, it’s macroeconomics:

… Egypt’s economy has been one of the major grievances propelling the masses into the streets. Although the economic structure Mursi inherited was dysfunctional, for many his inability to stabilize the situation was the last straw. As foreign reserves dwindled, the currency dropped, inflation rose, and shortages spread, the government was nowhere to be found. Mursi was the one person visible enough to blame.

Ahmed el-Hawary, a founding member of the Dostour Party, which collected signatures in a campaign that called for the June 30 protest, says the economy was all anyone talked about in the weeks preceding the demonstrations. “The substantial part [of conversations] was not revolutionary rhetoric. The substantial part was people are barely able to feed themselves, with how the currency is devalued every day and all the groceries are getting more and more expensive,” el-Hawary says. Blackouts and water shortages in the early summer “made everybody feel they’re going to go into hunger and strife and won’t even have water to drink.” A steady supply of electricity “was one of the things we really enjoyed in Egypt for 30 years. We didn’t have blackouts, especially in the cities.” Collecting signatures against Mursi was a breeze.

One thing to keep in mind is that less-developed countries (and Egypt is one of the least developed Arab countries) is that important parts of the economy must be imported, so exchange rates are a critical part of daily life for the masses. In particular, most Americans think all Arab countries have oil, but Egypt has almost none.

What If Trade Volume Is the Bubble?

Here’s two insights from Paul Krugman: 1) interstate trade is declining in the U.S., and 2) international trade may be going the same way.

Think about it. What we’ve done in America is homogenize our regions. With that homogenization comes a reduction in the need for trade. Why ship something when it’s made down the street?

The exception to this is agricultural products.

The exception to this also used to include manufactured products. But note how long the specialization in manufacturing has been in decline: it peaked 90 years ago.

Now think about the world. Do you think a chart like this for the whole world would show a big pink hilltop like this one? My guess is that for the world we are just approaching the peak.

This means the story of the next 100 years is going to be declining international trade in manufacturing. The reason is that there won’t be much point in getting something shipped from China when their wages are high enough to make that more costly.

And the growth of international trade in manufactured goods needs, perhaps, to be seen as something more special and less generic than often imagined. It’s not that there’s some inexorable force leading to stuff rattling around the globe; it’s that the combination of containerization and trade liberalization has made it possible to break up the value chain to take advantage of international wage differences.

What will a future of less trade look like?

Don’t Believe Chinese Economic Data

You knew that, right?

No one is claiming that China isn’t growing, or that it isn’t big and getting bigger.

But, having said that, the data by which we measure that isn’t any better than propaganda.

Here’s my prediction for my students’ adult lives: the big threat to America is not being overtaken by China, instead it is how the world deals with another very large economy doing what Japan has been doing the last 25 years … basically, not much at all.

The “Final” Cypriot Haircut

What started out as a proposal for a 10% haircut on all accounts back in March, has now been set officially as a 47.5% haircut on all accounts over 100K Euros.

This is a little better than the worst-case scenario.

How the “I” in the PIIGS Is Getting By

Italy is doing it the old-fashioned (private business) way: not paying their bills on time.

The government’s refusal to pay its suppliers violates EU rules. But the EU has soft-pedaled the issue, for two very big reasons: payment of arrears would force Italy to sell a truckload of bonds when there might not be any demand; and it would push the deficit way beyond the 3% line in the sand. Thanks to cash accounting, only actual disbursements make it into the deficit figure. Italy has achieved its “austerity” goals by not paying its suppliers.

Italy owes private firms about €120B, while its GDP is about €1,200B. If America owed the same proportion it would be about $1,500B. Yes, that is the size of the U.S. deficit, but (that’s just a coincidence and) there’s a huge difference. America has actually sold the bonds to fill that hole, while Italy can’t sell that many bonds (and remain good with the EU) so instead they’re simply not paying the bills on time.

The EU is also trying the sort of accounting gimmicks that got WorldCom into trouble:

Hence, a eurocratic deus ex machina: José Manuel Barroso, president of the European Commission, told the European Parliament on Wednesday that the budget rules would be reinterpreted for 2014 so that some public spending on infrastructure projects could be excluded from the deficit figures – something Italy has long pushed for in its valiant efforts to keep its deficit under 3%. If all else fails, monkey with the rules.

Read the whole thing.

Via Tyler Cowen, who points out that if you’re a Keynesian (as most Europeans are) then the centrist government of Italy is choosing a contractionary fiscal policy that harms its own country … just to stay cool with the EU. This during Italy’s longest recession in 70 years, all while the right-wing party that wants the payments made now to help the economy.

BTW: You should look up and learn “deus ex machina”. It’s a fairly common phrase that a college student should know.

New World Record

It’s constantly in the news: some feature of widgets hit a new record today.

Vacuous former communications majors love this sort of headline for stock markets and government debt.

Here’s what you need to think about:

[sic]

Just about any series that is trending upwards will set new records … constantly.

This includes, but is not limited to: GDP, GNP, income, personal income, disposable income, the number of unemployed and employed, the deficits, the debt, military spending, social spending, disability payments and recipients, nominal prices and price indices, and all stock market indices.

You need to put on your foil hat and recognize this for what it is: emotional button-pushing intended to get you to think less.

Where Is Life Better?

Real GDP per capita gets criticized as a measure of well-being. Here’s a more comprehensive measure:

These rankings were produced on the basis of a certain weighting of factors. If you don’t like the weights, you can change them to ones you prefer.

What’s cool about the version shown above, lifted from The Economist, is that it allows you to compare the top and bottom of each country.

So, yes, the rich live best in the U.S. And yes, inequality (the distance between the blue and orange circle) is greater in the U.S. than in most other countries. But on the other hand, the poor live very well in the U.S.: as well as the rich in Italy, and better than the rich in Israel, Russia, Portugal, Brazil, Turkey and Mexico.

Now, you should ask the Rawlsian question: where is the place where the poor are the best off. Canada, Sweden and Australia have us beat on that count.

Exchange Rate Inequities

John Cochrane:

If they don't like the Chinese peg, maybe next they can target Texas for its 1-1 peg to the Ohio dollar, which is obviously sucking business to Texas.

It’s hard to get the point across to undergraduates that living inside a country is like living in a big fixed exchange system. And fixed exchange systems, by construction, allow the free transfer of wealth from one location to another.

Alternatively: people who bitch about Texas are just avoiding the inadequacy of their own current location.

Via Café Hayek.

Immigrants Don’t “Take” Jobs Away

John Cochrane:

The vague charge that immigrants will “take jobs” and lower American’s wages is not established at all in economics, and it doesn’t make much sense anyway.  … Our ancestors didn’t steal Native Americans’ jobs to get rich;

The Landsburg Multiplier

Steven Landsburg argues that if the Keynesian story of the mulitplier is true, then there’s also a (huge) multiplier on his own personal spending. Your’s too. Here’s the Keynesian story. We start with:

Y = C + I + G

…

Next, we notice that people tend to spend, oh, say about 80 percent of their incomes. What they spend is equal to the value of what ends up in their households, which we’ve already called C. So we have

C = .8Y

Now we use a little algebra to combine our two equations and quickly derive a new equation:

Y = 5(I+G)

That 5 is the famous Keynesian multiplier.

To see how what story perverts the math, try this:

Let’s start with this one:

Y = L + E

Here Y is economy-wide income, L is Landsburg’s income, and E is everyone else’s income. No disputing that one.

Next we observe that everyone else’s share of the income tends to be about 99.999999% of the total. In symbols, we have:

E = .99999999 Y

Combine these two equations, do your algebra, and voila:

Y = 100,000,000 L

That 100,000,000 there is the soon-to-be-famous “Landsburg multiplier”. Our equation proves that if you send Landsburg a dollar, you’ll generate $100,000,000 worth of income for everyone else.

The argument was originally made by Murray Rothbard.

How Much Does Regulation Knock Off of Growth?

New research by Dawson and Seater indicates that the amount is huge.

They estimate that the real GDP growth rate was reduced by 2% per year.

Compounding since World War II, they estimate that per capital real GDP in the U.S. is over 70% lower than it would be otherwise.

How do you feel that you should expect to be graduating and finding a first (real) job at $30K/yr instead of $100K/yr?

Our Trading Partners

Just a graphic with some macro trivia:

Via I Love Charts.

What Are the Options to Make Social Security Sound?

Here’s an interactive tool from the Committee for a Responsible Federal Budget.

Do note that the first page only contains the big movers. The smaller ones are all under the “Other Benefits” tab.

Note the huge benefit from moving to cost-of-living-adjustments based on CPI minus 1%. This does nothing to improve the calculation of the CPI (as the chaining finally promoted by President Obama this past spring). But, it does make a rough move to correct for the fact that the CPI, as a Laspeyres index, systematically overstates the rate of inflation. Whether the 1% is too much or too little is open to debate, but this can take care of a huge chunk of the problem right off the bat.

Also note that the bugbears of reducing fraud and waste (a Democratic favorite) and going after disability (a Republican favorite) are really minor players. The huge focus on these in the political arena and legacy media should be your first clue that those people are more serious about name-calling and scoring easy political points than actually addressing the problem.

Lastly, in politics, it’s often easier to get a small package of more unpopular things that hurt everyone done, than to nitpick over a large basket of things that individually don’t hurt that much. According to this tool, we can solve the entire problem by switching to CPI minus 1%, and raising the retirement age to 69 and then indexing it to grow with longevity.

Cyprus Update: Capital Controls Aren’t Stopping Capital Flight

It’s been 3 months since the Cypriot crisis was “solved” with capital controls.

Those controls were intended to keep capital (movable, fungible wealth) from leaving the country. A country needs capital for investment and economic growth, but who would want to keep capital in a place where the government can tax it away to cover the mistakes of others? So, when you’re like Cyprus, capital leaves the country. Capital controls are supposed to limit that.

Now … we don’t have a counterfactual: we know what the data says happened with the controls in place, but we don’t know how much worse (or possibly better) things would have been without them.

Anyway, the data isn’t pretty. Twice as much capital left Cyprus in April (after the controls were put in place) than in March (when the country basically was shut down).

Cyprus’ overall problem is roughly in the (low to mid) tens of billions of dollars.

And with capital controls they still lost $3B in a month.

Which money left? About half was foreign, and about half was Cypriot. It’s not good when your own natives are taking their wealth out of their own country.

And surprisingly, a lot of the money that left was already denominated in dollars. That is money that is held in a Cypriot branch of an institution that operates in the U.S. That money should have been safe already, since it kinda’ sorta’ is already non-Cypriot. But it moved too, probably to American financial institutions without operations in Cyprus at all. This is what you do if 1) your long-run goal is to “get the heck out of Dodge”, or 2) you are selling your wealth to family and friends in foreign countries in exchange for basic products that they are shipping to you (in short, you can’t get stuff like, say, printer toner because you don’t have any cash to buy merchandise, and the stores don’t have any money to buy inventory).

Via Marginal Revolution.

You Heard It Here First

Back in March, when I first heard about it, I posted about the new research from Paul Beaudry, David Green and Benjamin Sand. I was taking a shot that theirs’ is the sort of result that ends up in undergraduate textbooks in 5 or 10 years.

I think I’m on the right track, since the article has now been mentioned in the cover story to the Mary 13-19 issue of Bloomberg Businessweek. That’s not an outlet for serious academic research unless it’s really provocative.

The researchers found that the average “cognitive content” of tasks performed by employed college graduates of all ages peaked in 2000 and has dropped fairly steadily since. … In the same vein, the Conference Board, a company-supported research organization, recently found that since 2000 the importance of math and science skills in jobs declined, while social skills became more important.

This is one of those horrifyingly-difficult-to-read-correctly charts that the legacy media specializes in. Cognitive content is the name given in Beaudry et al. for the amount of technical knowledge a job takes; jobs high in cognitive content include management executives, professionals, and skilled technicians. The graph is for the current job of recent graduates. So it says that the amount of technical knowledge required peaked around 2000, and has declined to the level from the 1980’s.

In short, the economy needed lots of technically skilled people in the 90’s, and since you can’t retrain very many people in mid-career, that gap was filled by college graduates But now that those people are in mid-career, the economy doesn’t need as many technically skilled young people.

What isn’t shown on the graph is the Beaudry et al. argue that schools are still producing lots of technically skilled graduates, and that’s no longer where the jobs are.

The result is that technically skilled graduates are going into jobs that don’t require all the technical background (e.g. barista), and pushing the people with lower skills out of those jobs.

There’s a set of Powerpoint slides in PDF format here. The penultimate slide shows that new graduates at the top end of the income distribution got big gains in the 1990’s, consistent with there being a big benefit to being highly skilled. But that same group has done just as well (or poorly) as any other group since 2000, consistent with the excess demand for skills dissipating.

Why Is Macroeconomics So Hard: The WTF, Lying, Deceptive, Senator Edition

A scholar from a conservative think tank is called a liar, for 8 minutes, on national television, by a Democratic Senator.

The scholar had the temerity to cite what European governments did do in the most recent data.

The Senator said this was a lie, and produced a deceptive document in support. The Senator’s document showed the European government’s plan for what they plan to do.

That’s right: plans are facts, and facts are lies. You can’t make this stuff up.

The specifics are about fiscal policy. It’s a common position that European governments are pursuing contractionary fiscal policies, and that this isn’t a good idea when their economies are down. The scholar produced evidence that government spending was up rather than down, and thus presumably expansionary. The Senator produced evidence that the governments planned to cut spending in the future, and that this was somehow contractionary today. Sheesh.

Via seminal new Keynesian Greg Mankiw (now pilloried as a conservative) and Steve Landsberg who covered this in full, and said:

… Only sheer dishonesty — or perhaps an extraordinary failure of competence — can account for a discrepancy like this.

Can We Eliminate Subsistence Level Absolute Poverty In the Next 20 Years?

The Economist thinks we’ll get pretty close:

Keep in mind, that while we complain about poverty in the U.S., it is relative rather than absolute poverty. There hasn’t really been any significant population within the U.S. living at the subsistence level in a century.

Income Inequality Doesn’t Make the Poor Absolutely Poorer

Assessing income inequality is a hornet’s nest for those who are weak at statistics.

First off, most of the data we have is averages, which can’t tell us anything about inequality.

Secondly, many people slip mindlessly between the concepts of absolute and relative poverty. The latter is having less than others, while the former is not having enough.

Relative poverty exists everywhere, and is what is important if you think that income inequality is a problem.

Essentially, absolute poverty no longer exists in developed countries. Yet when we worry about others “not having enough” this is the only kind of poverty measure that’s important.

Tim Worstall, writing for the Adam Smith Instituted, reprinted this chart that can clarify matters:

The bars show different countries. The data is on net income after taxes have been removed and benefits added back in, adjusted for international prices using PPP.

The endpoints of each bar show the income of the 10th percentile and 90th percentile in each country. So, it’s not the poorest (who are probably close to zero everywhere) or the richest (who are off the chart to the right). Having said that, the most expansive view of the “middle class” usually runs from the 20th to the 80th percentile, so this is getting us that plus the richest half of the poor on the low end and the poorer half of the rich on the top end. What’s key is that this isn’t showing averages.

And what does it show?

• America has the most unequal distribution of income of the countries shown.
• America’s poor are no poorer than the poor in other countries.
• America’s rich are richer than the rich in other countries.

If you put these together it means that our inequality is not a result of our poor being worse off, but of our rich being better off.

And yet the world is fill of people who think America is somehow a bad place because of our inequality.

This is pretty dumb. An example may help:

• The poor in countries A and B both eat only turnips.
• The rich in country A eat a variety of fresh vegetables.
• The rich in country B eat a variety of canned vegetables.

Would any rational person claim that people in country B are better than those in country A? To do so, you’d need to believe that people shouldn’t eat what’s best, but rather what’s closest to what their neighbors eat.

But that’s just silly … because it would mean you judge the wellness of your community by trying to match the contents of your grocery cart to that of the other people in the checkout line.

No one does that in real life. And yet the chart tells us that this is what people who are concerned about inequality in America think we should do.

Some Sequester Facts

The Obama administration bemoans the cuts made by the sequester.

Time to put on our thinking caps. These are the facts about the process in May 2013:

• Presidents propose budgets.
• Congress passes, and the President signs, budgets that are often larger (and always different) than what the President proposes.
• The sequester of 2013 went into effect in March. It was based on the continuation of the 2012 budget, because …
• Obama didn’t propose his budget until April, and …
• As if May 5, 2013, Congress has yet to pass a budget for 2013.

Which leads to this awesome little turn of events: there are some programs that are receiving higher funding after the sequestration of their budgets than Obama has proposed.

That’s right:

• He’s actively complaining about budget cuts, that
• Were passively imposed due to past budget rules,
• Originally proposed by the Obama administration in summer 2011, while
• Actively proposing bigger budget cuts, that are irrelevant because
• The office of President is fairly passive in the process.

This is like “having your cake and eating too” (if the meaning is unclear, read the second paragraph here).

Except that it’s having your cake, and eating it, and having it, and eating it, and having it too.

Minority Treatment In Hungary

Macroeconomics is about well-being and quality-of-life. Politics is involved, not just for policy, but because restrictive political systems typically lead to bad outcomes for well-being and quality-of-life. Think: North Korea or Cuba.

On the other hand, restrictive political systems are often able to deliver short-term gains in well-being and quality-of-life to the majority (as in Nazi Germany) and long-term gains to the politically connected (as in “oil states” and contemporary China).

So, it was of interest in 2012 when Hungary started a system of labor camps, primarily targeted at Romani.

The justification was that the behavior of the minority was impacting the well-being and quality-of-life of the majority. I am usually dubious of such claims, and tend to regard them as a slippery slope.

More evidence of that popped up this week with news of increased anti-Semitism in Hungary.

Senior figures from the opposition Jobbik party, the third biggest … harangued the crowd with charges that Israeli President Shimon Peres had praised Jews for buying property in Hungary.

…

"The Israeli conquerors, these investors, should look for another country in the world for themselves because Hungary is not for sale," Jobbik chairman Gabor Vona told the rally near the neo-Gothic parliament along the Danube River.

"Our country has become subjugated to Zionism, it has become a target of colonization while we, the indigenous people, can play only the role of extras," Marton Gyongyosi, a Jobbik member of parliament, told the crowd.

Fear of foreign investors is a relatively common sentiment the world over. This is often nonsense produced by asymmetric thinking (one of the things that makes macro so hard). An example may help.

Investors in country A buy assets in country B. Typically we hear a lot about citizens and policy-makers in country B complaining about these foreign investors. The asymmetry is that we don’t usually ask what citizens and policy-makers in country A think about other citizens making foreign investments. There are two possibilities in country A: one is that they are glad that other citizens are taking their money out of their own country to buy up other country’s stuff, while the second is that they are upset that investors are sending their money out of the country instead of investing at home.

Now let’s put some names on things: country A is America, country B is Brazil, and the investor is Donald Trump. How often would you hear Americans say “I’m so glad Donald Trump is investing in Brazil instead of America”. My guess is … never … because Americans would think it indicated something wrong with themselves. And yet the Brazilians will say “I wish Donald Trump wouldn’t investor because he’s American”. There’s the asymmetry: both positions can’t be right. I tend to think that the first argument is usually correct, since Donald Trump’s voluntary investment decision does suggest that there’s something wrong with America because he thinks he can make more money in Brazil.

So, back to Hungary and Israeli/Jewish investors. The people that should be worried are the Israelis: clearly Israeli/Jewish investors are getting better returns in Hungary than Israel. And yet the Hungarians are worried about this. It’s unlikely they have a viable argument (thus all the emotionally-loaded words, like “conquerors”, “subjugated”, “target”, “colonization”, “extras”), and the probably outcome is that well-being and quality-of-life will not be as high in Hungary as they could be.

Coverage for Exam 4

Chapter 5 from the text.

Chapter XI from the handbook.

All posts from April 24 to April 30.

All posts marked as “Exam 4 Only” on the post “Required for Exams 3 and/or 4”.

There will also be a “wild card” section consisting of questions that were on the last exam, but which were not answered by anyone.

How Bad Are Things In Europe?

Here’s a chloropleth from the April 26 article from The New York Times entitled “Southern Europe’s Recession Threatens to Spread North”

Note how few EU countries match the (below average) growth rate that America put up over the last year.

Also, recall that Russian money that fled Cyprus is now reported to be going to Latvia. Latvia is a member of the EU (like Cyprus) but is not a member of the EMU (unlike Cyprus) — so it’s reasonable to conclude that the situation won’t evolve the same way. Even so: check out Latvia’s growth rate: inflows of foreign cash are apparently good for you up until they’re bad for you.

Obama’s Government Recession

The economy grew at a below average annualized rate of 2.5% in 2013 I.

Part of the reason is cuts in government spending.

How is that possible given the level of spending coming out of D.C.?

The reason is that what we commonly hear in the legacy media as government spending is actually government outlays. In short, every check they write. But outlays includes both government consumption and investment (what used to be called government purchases of goods and services) and transfer payments.

But, only the former enters into GDP directly. Transfer payments enter into GDP as private consumption and investment.

So, the explanation is that Obama had doubled-down on the progressives’ nightmare: increasing transfer payments more than government consumption and investment. Thus, total outlays go up, while creating a direct drag on the economy.

You can see this in Table 1.3.3. in Section 1 here. It shows the components of GDP in index form: Federal government consumption and investment has declined for 6 straight quarters.

Real GDP Growth for 2013 I

The advance report came out this morning: 2.5% (annualized). With the final revision to the previous quarters growth of 0.4% (annualized), this puts total growth over the last 12 months at 1.8%.

That is not enough to exceed the population growth rate of around 2%, so we’re talking about continued declines in real GDP per capita.

It’s now been 15 quarters since the trough … making this expansion one of medium length already. Yet total growth is only 8.3%

For comparison, Bush’s weak recovery in 2001-5 put up 10.9% growth over the same number of quarters. The somewhat stronger Bush/Clinton recovery of 1991-4 (that was bad enough to get Bush I voted out of office) got 13.2% over the same period. Reagan got 20.2% in his recovery.

The Nonsense that Passes for Policy

When governments get into financial trouble, (like toddlers) they start making outrageous claims.

This week it’s Greece. Greece wants Germany to pay war reparations for World War II.

It’s a little late for that, isn’t it?

Oh … and there’s the other thing … that by having its Nazi government dissolved by the Allies almost 70 years ago, Germany gets a pass on any damages it incurred.

Italy Has a Government

After 2 months, Italy has a (rickety) government. They were able to elect a ceremonial figurehead last week, and this week put together a coalition government headed by … someone no one has ever heard (not really, but none of the big name people could get a majority of the votes).

He is not seen as someone who will make tough choices that Italy may need:

Mr. Letta, one of Italy's most Europe-minded politicians, is already joining a rising chorus calling for an easing of austerity measures that have hobbled several of the continent's weaker economies—including Italy—and more emphasis on jogging growth and jobs.

"European policies are too focused on austerity, which is no longer sufficient," Mr. Letta said after being nominated by President Giorgio Napolitano.

So ends Italy’s experiment with an EU-oriented premier who was an economist with some understanding of the necessity of tough choices.

Tax Expenditures

In trying to figure out how government finances work, we can’t forget tax expenditures.

That sounds like an oxymoron: a tax can’t be an expenditure … can it?

Welcome to D.C., where it can be. It turns out there is spending and taxes. But a tax expenditure is rebate of one form or another: it’s a tax that should be collected but is somehow exempted. The deductibility of mortgage interest is a good example.

A new or bigger tax break is a "tax cut." (Cheers.) If Congress tells the U.S. Treasury to issue a check for the same sum for the same purpose, it's a spending increase. (Jeers.) So Congress has done a lot of the tax-break approach, which has been dubbed "backdoor spending through the tax code."

This may sound like semantics or, worse, obfuscatory accounting. It's actually a whole lot more than that.

…

All these are variants on the same idea. All have similar economic effects. All involve the government using taxpayers' resources to pick up some of the … tab. One type goes through the spending side of the budget, booting the oft-cited statistic measuring government spending as a share of the economy. The other goes through the tax code, reducing government revenue as a share of the economy.

…

… Donald Marron of the Urban Institute think tank … and colleague Eric Toder estimate that about two-thirds of the $1.2 trillion a year in tax breaks is "spending in disguise."

Read the whole thing, entitled “Tax Breaks as Spending” in the April 25 issue of The Wall Street Journal.

What Lessons Should be Learned from the Aftermath of the Great Recession?

David Wessel, a fairly good economics columnist from The Wall Street Journal lists out the 7 things he thinks we should learn from the last 6 years. It’s tone is similar to my 26 short posts.

A generation ago, unemployment of 7.6% would have been considered a bad recession in the U.S. Now it's a sign of improvement …

Is this the best we can do?

…

It's hard to know what might have been. This episode is not yet over, so no one can know the ultimate consequences of what has been done. That said, a few early lessons seem clear:

Lesson one: Get the diagnosis right.

Ken Rogoff, a Harvard economist … says the single most important thing to remember is this: "When you have a recession accompanied by a deep financial crisis, you are in for a long period of slow growth."

… This sort of recession is more like a chronic disease. … "This is really about whether you are going to have slow growth for five years or 15," he says. Neither the U.S. nor Europe understood this in when the first major financial shocks hit.

Lesson two: When in doubt, do more, not less.

… Recent history demonstrates that initial forecasts are rarely gloomy enough …

… Recent history doesn't yet provide much support that less stimulus would have been better.

Lesson three: A financial crisis is about economics, not morality.

There's a temptation to preach after so many people make so many mistakes: Avoid the sins that created the crisis. Punish the perpetrators. Pursue the economic rectitude of thrift.

… There's a strong case for …  temporarily putting aside the fear …

Lesson four: Mind the banks.

During the Great Depression, as Ben Bernanke showed in his academic work, the economy suffered from the Federal Reserve's failure to see that dying banks were clogging the credit arteries of the economy. … During the 2000s, the U.S. learned from that history; Europe did not.

…

So U.S. banks are widely regarded as healthy, and are beginning to lend more readily. Some major European banks, meanwhile, are still seen as shaky.

Lesson five: Mind the borrowers, too.

If a borrower truly can't pay back a loan, then pretending he will does neither borrower nor lender any good—and it can cripple an economy. But the politics of writing off debts, especially at taxpayer expense, can be an insurmountable obstacle.

… Neither the Bush nor the Obama administrations ever found a vehicle with a payoff that they thought worth the economic and political cost. Their critics say this excessive caution prolonged the housing bust and slowed the recovery.

In Europe, there was a reluctance to appear to be rewarding profligate peripheral economies (see Lesson three) by forgiving their debts. …

Lesson six: Go for long-acting, time-release fiscal policy.

With hindsight, the composition of the small Bush fiscal stimulus of 2008 and the big Obama fiscal stimulus of 2009 weren't suited to the problem. …  Had Congress been willing, a smarter stimulus would have been …  more "speedy, substantial and sustained"

Lesson seven: Have an exit strategy and explain it.

There is still a nagging worry that this is going to end badly, and that can lead businesses, consumers and politicians to hold back and hurt the economy.

Typically, I agree with a big chunk of what Wessel says, but rarely all of it. Same here.

• I agree with Lesson One. The Great Recession was bad but not horrible; but what made is bad was the combination of a recession and a financial crisis for the first time in 75 years.
• I agree with the motivation for Lesson Two. But I have grave doubts about the ability of elected officials to ever do both “more” and “better” at the same time.
• I agree with Lesson Three. Armchair quarterbacks rarely bring up moral failings in sports, but it’s a peculiarly American sport to use moral failings as a justification for bizarre policies.
• I agree with Lesson Four. I think the unsung hero of the last several years was FDIC, and Sheila Bair (it’s boss for most of the time).
• I do not agree with Lesson Five. One point where I do think we need to be more morally high-falutin’ is with borrowers. We bitch a lot about predatory lenders, but the story of this recession was predatory borrowing. What else do you call borrowing money to buy houses to flip?
• Lesson Six is a crock. Sometimes Wessel’s Keynesian colors show through clearly, and they do on this count. If anything, Obama’s stimulus package was too stretched out. To claim that it wasn’t is denying facts.
• I agree with Lesson Seven. The thing is, I don’t think the Obama administration has a clearly defined end goal. Their treatment of the Great Recession is similar to the treatment of Iraq and Afghanistan by Bush: what is the hurdle we have to clear to stand down?

Read the whole thing, entitled “Seven Lessons for Fixing an Economy” in the April 20 issue of The Wall Street Journal.

Comparing Germany to the rest of the EU

There’s a tendency to think, that because Germany is the healthiest economy in the EU now, that it is healthy and it has always been that way. A set of graphs shows that’s not the case:

What’s interesting about these charts, is that Germany is shown in each one in comparison to another country.

In the top row, Germany starts during the Great Recession with unemployment over 8%, and is beaten on that count by half the countries. By while Germany improves more or less steadily, the other countries each get progressively worse.

The story with the debt/GDP ratio is a little different. Germany is slowly getting worse here. But following one path or another, all the other countries end up at the same level or worse.

Read the whole thing, entitled “Inside Merkel’s Bet On the Euro’s Future” in the April 24 issue of The Wall Street Journal.

Required for Exams 3 and/or 4

UPDATE: LUMPING EXAMS 3 AND 4 TOGETHER DREW A LONG (AND REASONABLE) COMPLAINT FROM SHAQUEL FARR. SO, I HAVE SPLIT THE REQUIRED POSTS MORE OR LESS IN HALF. FOR EXAM 3, YOU ARE RESPONSIBLE FOR THE POSTS WHICH ARE NOT PREFACED BY "EXAM 4 ONLY".

I'm having the same problem I had last time with that widget on the right hand side.

This is the complete list of posts that are testable on April 24 and May 1. I've grouped these, the same way that I group questions on exams. Note that the size of the group is not indicative of how many points I'll award for each group's questions.

Remember that all posts back to May 1 of last year are fair game, so some of these are pretty far back. I started out with a chronologically sorted list, so within the groups they are still sorted chronologically.

To maintain some continuity, I kept posts you'd been tested on before, but I crossed them out.

Also note that there are some topics that seem useful to post at the time, but didn't seem as useful to cover in class for this semester (for example, Cyprus is in this year, so I cut coverage of China). You're not responsible for posts that are in that "Not Testable" section.

Tufte’s Short Posts

• Tufte’s Short Post # 1: The recession was large
• Tufte’s Short Post # 2: The second half of the rec...
• Tufte’s Short Post # 3: The recovery has been weak...
• Tufte’s Short Post # 4: Weak recoveries may be the...
• Tufte’s Short Post # 5: There is no path to recove...
• Tufte’s Short Post # 6: The Bush stimulus didn’t w...
• Tufte’s Short Post # 7: Obama’s stimulus package w...
• Tufte’s Short Post # 8: Obama’s stimulus package w...
• Tufte’s Short Post # 9: Tax cuts work better than ...
• Tufte’s Short Post # 10: The multiplier is small
• Tufte’s Short Post # 11: We don’t have a counterfa...
• Tufte’s Short Post # 12: The financial crisis and ...
• Tufte’s Short Post # 13: A lot of other countries ...
• (Exam 4 only) Tufte’s Short Post # 14: Perhaps our expectations ...
• (Exam 4 only) Tufte’s Short Post # 15: Perhaps we’re not measuri...
• (Exam 4 only) Tufte’s Short Post # 16: We’ve embodied a lot of w...
• (Exam 4 only) Tufte’s Short Post # 17: Obama’s policies have cre...
• (Exam 4 only) Tufte’s Short Post # 18: Rules vs. Discretion
• (Exam 4 only) Tufte’s Short Post # 19: Temporary vs. Permanent C...
• (Exam 4 only) Tufte’s Short Post # 20: FICA cuts were to the wro...
• (Exam 4 only) Tufte’s Short Post # 21: We’re in a liquidity trap...
• (Exam 4 only) Tufte’s Short Post # 22: Central bank policies cha...
• (Exam 4 only) Tufte’s Short Post # 23: State and local governmen...
• (Exam 4 only) Tufte’s Short Post # 24: The country is having an ...
• (Exam 4 only) Tufte’s Short Post # 25: The employment sector has...
• (Exam 4 only) Tufte’s Short Post # 26:The latest hot off the pre...

Labor Markets

• More On Overtime
• (Exam 4 only) More On Disability
• (Exam 4 only) Provocative New Research About the Labor Market
• If the Labor Market Is So Poor, Why Are Overtime H...
• (Exam 4 only) Disability Claim Nonsense from Not Logging Data

Budgets and Sequestration

• I Spoke Too Soon
• Some Budgetary Honesty
• Obama Budget Proposal Interactive Graphic
• John Cochrane On the Debt Ceiling
• Prioritizing Government Bill Paying
• (Exam 4 only) Taxes, Tax Rates and Spending
• (Exam 4 only) Straight Talk from Paul Krugman
• (Exam 4 only) Do Tax Breaks Encourage Saving?
• (Exam 4 only) Federal Budget Infographic

Unsustainability of the Welfare State

• (Exam 4 only) Continued Unraveling
• One Reason Why Medicare Can’t Be Cut
• The Progressives’ Worst Nightmare
• (Exam 4 only) Political Chaos In Italy

• (Exam 4 only) Get Used to the EMU as a Source of Problems

• (Exam 4 only) Italy and Its Election
• (Exam 4 only) A Sign of the Times
• (Exam 4 only) Why the World Seems Like One Big Currency Crisis
• (Exam 4 only) Spain’s Failed Infrastructure “Investments”
• Tim Worstall Nails the Problem with Keynesian Macr...
• (Exam 4 only) Germans Call It a Bailout, We Call It Missouri

Growth

• Hayek On Exhaustible Resources
• Tsunamis, Growth, Stocks and Flows, and the Broken...
• Math Atheism

Oil

• (Exam 4 only) Obama the Oil President

Cyprus

• Correction: Cyprus Haircut
• Cypriot Haircut Larger Than Expected
• No Bank Run Yet
• What a Capital Control Looks Like
• A Picture Is Worth a Thousand Words
• Continuing Weirdness In Europe
• The Other Shoe Drops
• Just the Same, Only Worse
• Sunday’s Cyprus News
• Cyprus’ Solidarity Plan/Fund
• Cyprus’ Capital Controls
• Saturday’s Cyprus News
• Friday Morning’s Cyprus News
• Thursday’s Cyprus News
• What Now?
• Today’s News On Cyprus
• More Light than Heat About Cyprus
• Even More On Cyprus
• More On Cyprus
• A Little More On Cyprus
• Cyprus

Old News

• (Exam 4 only) Revisiting the Argentinian Nationalization of YPF

Not Testable

• Also Required for Exam 2
• Unserious Obama
• Oh Boy
• Sequester Graphic

• Herbalife
• Armen Alchian, R.I.P.
• Same Article, Different Point
• The Scorpion
• Compared to What?
• Government Doesn’t Do Much Because It Just Isn’t T...
• Critical Thinking About GDP Forecasts

• Taking Apart 2012 IV Growth
• The Obama Recession ???
• What Were They Thinking?
• Why Is Macro So Hard? Suppression of Data
• You Heard It Here First, Part II
• Why Is There No Inflation?
• Hate to Say We Told You So
• Spurious Detrending, and How We Describe Our Reces...
• Unemployment Rates by Metropolitan Area
• Inequality–Before and After Taxes
• Labor Force Participation and the Baby Bust*
• Vindication
• Buchanan’s Contributions
• Improvement in Long-Term Unemployment
• More James Buchanan Links
• James Buchanan
• What Obama’s Thinking
• Stop Bullshitting About Disability, Conservatives
• OMG–Would You Look at That
• Seen In the Parking Lot
• Obama’s Letter Grades
• Why Is Macro So Hard: Students May Be Biased About...
• How It Was Supposed to Go
• What You Can Learn In Economics Class
• Why the World Seems Like One Big Currency Crisis
• Schoolshops Not Sweatshops
• How Low Can NPR Go?
• Federal Budget Infographic
• Self-Selection Bias, Residual Puritanism, and Macr...
• Chinese Exceptionalism and American Defeatism
• China’s Data Problems
• Where the Unemployed Are
• Understanding Where Bureaucrats Go Wrong
• Repeat After Me