Moneybox

Basic Economics Has a Liberal Bias

Basic Economics Has a Liberal Bias:

People to the left of econ 101 will typically invoke the phrase “political economy” to explain why, for example, econ 101 underrates labor unions. Conversely those to the right of econ 101 will instead invoke the phrase “public choice” to explain why, for example, econ 101 overrates utility regulation. But in both cases the critics are saying the same thing, namely that the moderately liberal policies advocated by introduction to economics textbooks are ignoring certain realities of institutional design, practical politics, power dynamics, etc.

That is 100% spot on. I just do not see how it fits in with his title. Maybe I am missing something but it reads like Yglesias is making the mistake of confusing economics with a morality play.

Keith Hennessy on Bush and the financial crisis.

Keith Hennessy on Bush and the financial crisis.

One of my students asked "How involved was President Bush with what was going on?" I smiled and responded, "What you really mean is, 'Was President Bush smart enough to understand what was going on,' right?" The class went dead silent. Everyone knew that this was the true meaning of the question.

I used to joke about someone explaining the collapse of Lehman to Bush and him asking how big a tax cut do we need to save Lehman?

"The people who are the engine of the economy."

"The people who are the engine of the economy."

I’m not much of a car guy, but the way I understand this metaphor to work is that if you want to give rich people credit for being “the engine of the economy” then if the economy is performing subpar it follows that something’s wrong with your engine. And yet I suspect Zambrelli wouldn’t take kindly to that diagnosis.

If something good happens, praise me. If something bad happens, blame yourself. And if you disagree you’re a Marxist from Kenya.

Devaluation Is Austerity Done Right

Devaluation Is Austerity Done Right

Currency devaluation is best understood not as an alternative to austerity, but as the correct way for a debt-burdened society to implement austerity.

Why did Iceland recover and Ireland get worse? Iceland had a currency to debase. And they debased their currency enough to reset the economy and grow again. Three cheers for currency debasement. Ireland on the other hand, couldn’t debase the Euro. Like a nation on a gold standard, they had no way to make monetary policy changes to get the economy moving.

So if austerity works, shouldn’t it be the other way around? A stagnant Iceland and a booming Ireland?

Economic Theory Doesn't Say That Small Business Owners Maximize Profits

Economic Theory Doesn't Say That Small Business Owners Maximize Profits

to the best of my knowledge there is no economic theory that says small business owners maximize profits. Think about it from a workers’ perspective. People who work on commercial fishing operations earn a lot more money than most people with comparable levels of education. But nobody thinks it defies economic theory that America’s retail clerks don’t quit their jobs en masse to go fishing. Commercial fishing is dangerous and you have to live on a boat. All else being equal, people prefer to earn more money but they also prefer to do safe work and have the opportunity to socialize. What economic theory says is that workers maximize utility and therefore employers who want to get workers to do something that’s unusually dangerous or unusually unpleasant will have to pay a premium. A small business operator is in the same situation. She’s balancing income against other lifestyle factors, including the hours put in on the job, the pleasantness of the work, the sense of self-esteem that comes from having something to do, possibly a sentimental attachment to a particular location or certain employees. What economic theory says is that a profit maximizing small business person has to be someone with a very unusual utility function.

This can not be repeated enough. Small businesses rarely behave the way politicians describe.

Taxi Medallions How New York's terrible taxi system makes fares higher and drivers poorer

Taxi Medallions: How New York's terrible taxi system makes fares higher and drivers poorer

When New York's Taxi and Limousine Commission held a public hearing last week to consider whether to raise taxi fares by 20 percent, cabdrivers pled poverty and passengers argued that fares are too high. Paradoxically, both groups were right. This lose-lose scenario is only possible under the taxi medallion system, a regulatory scheme in which the right to operate a taxi is thoroughly divorced from the actual work of driving one. It's a classic example of the perils of financialization, the process through which economic potential is turned into a liquid and leveraged asset. By converting a portion of cabbies' future revenue into a freely tradable asset, New York, Chicago, San Francisco, and a host of other cities have created a powerful investor class, medallion owners and financiers, whose interests routinely compete with those of drivers and passengers.

Financialization also makes what should be a trivial deregulation nearly impossible as it would make the Medallion owners very upset. They would be willing to spend big bucks to prevent any attempt at deregulation.

The Real Source of Corruption in Congress: Members' Good-Faith Efforts To Help People

The Real Source of Corruption in Congress: Members' Good-Faith Efforts To Help People

But why does Rogers care so much about Phoenix Products that he wants to send all this business his way? What Phoenix Products has is something unique. It’s based in Kentucky, just like Harold Rogers. Its employees live in Harold Rogers’ district, they shop in stores that are in Harold Rogers’ district, their spouses and siblings live in Harold Rogers’ district, their incomes bolster the tax base for municipalities in Harold Rogers’ district. So if Harold Rogers wants to do the right thing for Harold Rogers’ constituents, he needs to do the right thing for Phoenix Products.

Hayek differentiated between an welfare state of Law versus one of administration. The former would function based on a set of rules in openness and transparency. The latter would be run by bureaucrats who distributed favors for their own political gain. The former would be compatible with a free democratic society, the later would subvert it.

I think we need to start looking at the defense industry as favor distributing patronage system that no longer serves its defined public purpose.

In 47 of America's fine states, if you want to accept people's money in order to give them advice on decorating and other people want to pay you to give advice on decorating, then congratulations-you're an interior decorator. In the other three states, and the District of Columbia, you need undergo 2,190 hours of training and apprenticeship and pass an exam before practicing. This, of course, is why homes in DC are wildly better-decorated than the homes in the Maryland and Virginia suburbs or in other large American cities such as New York, Los Angeles, Chicago, Boston, Dallas, and Philadelphia. Except of course that's not true.

In 47 of America’s fine states, if you want to accept people’s money in order to give them advice on decorating and other people want to pay you to give advice on decorating, then congratulations-you’re an interior decorator. In the other three states, and the District of Columbia, you need undergo 2,190 hours of training and apprenticeship and pass an exam before practicing. This, of course, is why homes in DC are wildly better-decorated than the homes in the Maryland and Virginia suburbs or in other large American cities such as New York, Los Angeles, Chicago, Boston, Dallas, and Philadelphia. Except of course that’s not true.
Licensed To Decorate

Scott Walker to campaign on made-up jobs data.

Scott Walker to campaign on made-up jobs data.

Wisconsin lost 23,900 jobs between March 2011 and 2012, according to the bureau, which will release fresh estimates tomorrow. Walker, who promised to create 250,000 jobs by the end of his first term in 2014, says the state is performing better than that. He said while campaigning this week that he would release his own figures as early as today, the Associated Press reported.

The numbers show my policy isn’t working so I will change the numbers we use so I can still promote my policy as a success. Wow.

America's Helium Privatization Fiasco

America's Helium Privatization Fiasco

in 1996 when Congress decided that the United States did not need a giant strategic helium reserve, Chris Cox, R.-Calif., and his colleagues passed a Helium Privatization Act that ordered the helium supplies to be sold down at a formula-driven price rather than auctioned. That price has turned out to be way below the market rate. That’s encouraging overconsumption of helium, discouraging new helium production, and all-in-all creating a big helium shortage.

I’ve asked this question before and I will ask it again. If you think government can not run anything right, why do you think it can run a privatization program? Second, it looked like the state run helium system worked better (the fact that it was set up by people who actually think the public center can run things might have something to do with it) would you consider going back?

Tourism: America should make it much easier for foreign visitors to come here.

Tourism: America should make it much easier for foreign visitors to come here.

Talk of exports normally conjures up images of factories and container ships, but many of America's exports are services. The nation's biggest service export is in some sense not an export at all-it's travel and tourism

So can we now start arguing that the national security state is hurting exports?

The Spanish government, fearful of the bond markets, enacted tough austerity budget measures that decreased Spanish people's incomes and therefore demand for the products of Spanish firms. This has pushed the country deeper into recession, so it should come as little surprise that their bond sales are now going poorly. That's counterproductive austerity at work.

The Spanish government, fearful of the bond markets, enacted tough austerity budget measures that decreased Spanish people’s incomes and therefore demand for the products of Spanish firms. This has pushed the country deeper into recession, so it should come as little surprise that their bond sales are now going poorly. That’s counterproductive austerity at work.

Counterproductive Austerity in Spain

Contraction isn’t expansion.

Opposition to the bailout was driven, in part, by the recognition that nationalization of an industrial enterprise is an open invitation to mismanagement and bad public policy. You could easily imagine a scenario in which the Obama administration made its partisan political objectives a key management priority at Government Motors. Alternatively, you could easily imagine a scenario in which Obama administration trade policy became dominated by the narrow interests of Government Motors rather than the broad interests of the American public. There's a good reason why sensible people don't normally recommend that the government own manufacturing companies. But these bad things didn't happen, and given the total lack of private financing for anything at the time the alternative was liquidation rather than reorganization. I think it's very understandable that Obama's political foes were not prepared at the time to simply assume that the administration was handle a post-nationalization auto industry in a responsible way.

Opposition to the bailout was driven, in part, by the recognition that nationalization of an industrial enterprise is an open invitation to mismanagement and bad public policy. You could easily imagine a scenario in which the Obama administration made its partisan political objectives a key management priority at Government Motors. Alternatively, you could easily imagine a scenario in which Obama administration trade policy became dominated by the narrow interests of Government Motors rather than the broad interests of the American public. There’s a good reason why sensible people don’t normally recommend that the government own manufacturing companies. But these bad things didn’t happen, and given the total lack of private financing for anything at the time the alternative was liquidation rather than reorganization. I think it’s very understandable that Obama’s political foes were not prepared at the time to simply assume that the administration was handle a post-nationalization auto industry in a responsible way.
Economist Devastates Romney On The Auto Bailout

The real workforce of Facebook is all the people who are creating Facebook content. That's closer to 800 million people (roughly their user base) than to 3,000 people (roughly their number of employees). There's nothing new about medica companies getting people to produce content for free (that's what the letters to the editor page or comments section is) but Facebook has built the most amazing vehicle for the appropriation of surplus value that the world has ever known. Ergo its stunning profits and amazing ratio of market capitalization to formal employees.

The real workforce of Facebook is all the people who are creating Facebook content. That’s closer to 800 million people (roughly their user base) than to 3,000 people (roughly their number of employees). There’s nothing new about medica companies getting people to produce content for free (that’s what the letters to the editor page or comments section is) but Facebook has built the most amazing vehicle for the appropriation of surplus value that the world has ever known. Ergo its stunning profits and amazing ratio of market capitalization to formal employees.

Facebook Has The World’s Largest Workforce

I’ve been working on the model that the difference between internet media companies and social networking is content creation. If you create content for your users (like Slate) you’re in publishing. If your users create and share content, you’re a social network. And Usenet was the first large scale social network.

Loser liberalism, by implying that all fortunes are created equal, alternately goes too easy on scoundrels and comes down too hard on people who are merely prosperous. Chris Paul is in the one percent, but he's also a kid from a working class background who's spent his entire career being structurally underpaid and victimized by cartels. By contrast, even substantially lower-paid (and there's lots of room to be both lower-paid than Chris Paul and very highly paid) folks working on Wall Street are making a living in an industry that's systematically dependent on implicit and explicit government guarantees. Making a living as a patent troll is totally different from making a living as a genuine innovator.

Loser liberalism, by implying that all fortunes are created equal, alternately goes too easy on scoundrels and comes down too hard on people who are merely prosperous. Chris Paul is in the one percent, but he’s also a kid from a working class background who’s spent his entire career being structurally underpaid and victimized by cartels. By contrast, even substantially lower-paid (and there’s lots of room to be both lower-paid than Chris Paul and very highly paid) folks working on Wall Street are making a living in an industry that’s systematically dependent on implicit and explicit government guarantees. Making a living as a patent troll is totally different from making a living as a genuine innovator.
Barack Obama’s Loser Liberalism

If the problem is years of "living beyond our means" the solution dictated by cosmic justice is years of laboring in auto plants building cars for South Koreans to drive. If the question is "why are we consuming so much less than we produced" the answer may be "it's because in the past we consumed more than we produced." But right now the question facing America is "why are so many millions of people producing nothing at all." The answer can't be simply that we had too much debt in the past or that we lived beyond our means.

If the problem is years of “living beyond our means” the solution dictated by cosmic justice is years of laboring in auto plants building cars for South Koreans to drive. If the question is “why are we consuming so much less than we produced” the answer may be “it’s because in the past we consumed more than we produced.” But right now the question facing America is “why are so many millions of people producing nothing at all.” The answer can’t be simply that we had too much debt in the past or that we lived beyond our means.
"Japanese" Cars, Made in America and Ready for Export to South Korea

a study from Robert Pollin and Heidi Garrett-Peltier finds that defense spending does indeed create jobs under recession conditions but that "$1 billion spent on each of the domestic spending priorities will create substantially more jobs within the U.S. economy than would the same $1 billion spent on the military" with "investments in clean energy, health care and education.

a study from Robert Pollin and Heidi Garrett-Peltier finds that defense spending does indeed create jobs under recession conditions but that “$1 billion spent on each of the domestic spending priorities will create substantially more jobs within the U.S. economy than would the same $1 billion spent on the military” with “investments in clean energy, health care and education.
Armed Keynesianism Assessed