Subscribe: EconLog
http://econlog.econlib.org//index.xml
Added By: Feedage Forager Feedage Grade B rated
Language: English
Tags:
attention  budget  debt  deficits  definition  growth  ngdp growth  ngdp  people  policy  problem  time  trump  wealth  women 
Rate this Feed
Rate this feedRate this feedRate this feedRate this feedRate this feed
Rate this feed 1 starRate this feed 2 starRate this feed 3 starRate this feed 4 starRate this feed 5 star

Comments (0)

Feed Details and Statistics Feed Statistics
Preview: EconLog

EconLog





Last Build Date: Thu, 22 Feb 2018 13:32:11 -0500

Copyright: Copyright 2018
 



The Double Whammy of Uselessness, by Bryan Caplan

Thu, 22 Feb 2018 13:32:11 -0500

While promoting my new book, I've repeatedly argued that foreign language requirements in U.S. schools are absurd and should be abolished.  For two distinct reasons.

Reason #1: Americans almost never use their knowledge of foreign languages (unless they speak it in the home).

Reason #2: Americans almost never learn to speak a foreign language very well in school, even though a two- or even three-year high school requirement is standard.

This double whammy is easily generalized.  If studying X for years yields minimal knowledge, and you wouldn't use X even if you knew it, you could defend X as an elective.  But how could anyone defend X as a requirement? 

Yet plenty of people I've met can and do stand by such requirements.  Indeed, they think I'm the crazy one.

(2 COMMENTS)



You get what you pay for, by Scott Sumner

Thu, 22 Feb 2018 12:57:50 -0500

This tweet caught my attention:

Jeff Bezos possesses $121.3 billion dollars. There are about 550,000 homeless people in America. If Jeff Bezos gave every homeless person in America $100,000, he would still have $66.3 Billion Dollars!

Let that sink in...


You get what you pay for.

Let that sink in...

PS. What if the money were spent lobbying for weaker zoning laws?

HT: Razib Khan

(1 COMMENTS)



A Balanced View of Trump, by David Henderson

Wed, 21 Feb 2018 23:59:05 -0500

I rarely find a balanced view of Trump. I gave one about a month ago. I've now found another.

Here's Richard Brookhiser on what William F. Buckley, Jr. thought of Trump:

Buckley wrote about Trump the politician once, in an article for Cigar Aficionado, which ran in the spring of 2000 after Trump's brief pursuit of the nomination of the Reform party, Ross Perot's then-rudderless vehicle. Buckley ID'd Trump as a demagogue, narcissist division. "When he looks at a glass," Buckley wrote, "he is mesmerized by its reflection. If Donald Trump were shaped a little differently, he would compete for Miss America." This was a political as well as a personal judgment: Trump sought office not to accomplish anything, but to advance and gratify himself. Candidate Trump had issues in 2000, and more in 2016, and beyond. But Bill knew his man. They had been fellow New Yorkers for decades. Bill did not regularly read Page Six, but his wife Pat did. Bill had observed every step of Trump's public career. He knew Trump was gilt all the way down.

Brookhiser, "WFB Today," National Review, February 16, 2018.

Brookhiser is a senior editor of National Review and a senior fellow at the National Review Institute. Indeed, he was my editor between early August and late January of 1986-87 when I was the economics editor for National Review. He's a good editor.

I quote the above because it expresses, better than most, my main problem with Donald Trump's character.

I quote it for another reason also: because it's from an article in which Brookhiser also explains why it's important not to give up on Donald Trump but, instead to work with him or at least bargain with him.

Brookhiser writes:

Admiring Trump is different from voting for him, or working with him. Politics is calculation; "to live," Whittaker Chambers told Buckley, who quoted it ever after, "is to maneuver." But to admire Trump is to trade your principles for his, which are that winning -- which means Trump winning -- is all.

(6 COMMENTS)



Do deficits matter?, by Scott Sumner

Wed, 21 Feb 2018 16:16:28 -0500

I am seeing a disturbing rise in "free lunch" thinking. One place this increasingly shows up is in the case of "deficits". People seem to have trouble grasping that deficit spending implies future austerity. Let's start with an electric company. Suppose it plans on being in business forever. It decides to issue enough debt so that it's current stock of debt at any given point in time is equal to 1% of the GDP of the city it serves. If the city it serves is growing over time, the electric company can basically run "deficits" forever, or so it would appear. In fact, the electric company still faces a budget constraint. It must still service that debt with money earned from customers. The net present value of future interest and principle payments is still equal to the value of the debt issued. The debt continues to be a liability, in any meaningful sense of the terms. Ratepayers should still be concerned about the electric company issuing too much debt, and saddling them with huge future liabilities. The same reasoning applies to the Federal government. Some might argue that if the growth rate of the economy exceeds the interest on debt, then there is a free lunch. Governments can simply issue more debt to pay interest on existing debt. That may work for a brief period, but beyond some point additional debt will push up interest rates, and the marginal cost of the new debt will exceed the growth rate of the economy. Indeed this may well have happened in the US in recent months, as some people believe that rising fiscal deficits partly explain the recent increase in interest rates on Treasury debt. The marginal cost of borrowing exceeds the average cost, and at some point it exceeds the average growth rate of the economy. Let's say $X represents the amount of newly issued debt that a government will issue over a period of N years. (Make X as a big a number as you'd like). In that case, the average annual deficit equals $X/N. A decision to borrow more money in any given year will lead to less borrowing (more austerity) in the other N-1 years. Fiscal policy cannot be continually expansionary, even if the government runs a budget deficit in every single year. That's because the expansionary impact (on AD) doesn't come from there being a budget deficit, but rather from the deficit being bigger than the year before. In the very, very long run, there are no deficits at all. The net present value of taxes from now until the end of time should equal the net present value of government spending from now until the end of time. And the same is true of trade deficits. Other countries will not give us stuff for free, and hence we must eventually pay for all imports with exports. Even the outflow of US currency will eventually be reversed, when the world switches to electronic money. Interestingly, there's a certain type of person who is so swayed by recent trends that they think both trade and budget deficits can go on forever. That's wrong. They also think that this is good news for the budget, but bad news for trade. That's also wrong. If we could run trade deficits forever, that would be really good news. The outside world would be a big Santa Claus for the USA. Alas, they will eventually want to be paid. Ironically, that fact (which is bad news for us) would be greeted as good news by many people who regard exports as "good for the economy". PS. Measured trade deficits can go on forever, as they do not accurately measure actual trade deficits. Indeed they don't even come close. It's not at all clear that the US has run large actual trade deficits in recent decades, properly measured. Budget deficits are also incorrectly measured, usually quoted in nominal terms rather than real terms. In real terms the US often ran budget surpluses during the 1960s and 1970s. The real budget deficit is the change in the real stock of public debt. If the nominal stock of debt rises more slowly than inflation, the real b[...]



Harassment: A Keyhole Solution, by Bryan Caplan

Wed, 21 Feb 2018 14:06:35 -0500

Way back in The Undercover Economist, Tim Harford taught us the wonder of "keyhole solutions" for social ills:Keyhole surgery techniques allow surgeons to operate without making large incisions, minimizing the risk of complications and side effects. Economists often advocate a similar strategy when trying to fix a policy problem: target the problem as closely as possible rather than attempting something a little more drastic. How, then, can we fix health care?... [I]s there a 'keyhole' solution...?So far, it's advocates of open borders who most frequently invoke keyhole solutions.  My forthcoming graphic novel with Zach Weinersmith has a whole chapter on the topic.  The idea, though, is universal.  Faced with any social problem, you can use a hand grenade... or a scalpel.  So why not carefully define the problem, then craft carefully targeted remedies with minimal collateral damage?Case in point:Over the last year, resentment of unwanted job-related sexual attention (better known as "sexual harassment") has gone from high to extreme.  It's easy to grasp why people would see such harassment as a problem.  The standard remedy, though, is to punish virtually all job-related sexual attention, wanted or not.  In practice, workplaces now discourage employees from dating each other - and heavily discourage mixed-status romance.What explains the ubiquity of these broader policies?  Simple: It's hard to know in advance if sexual attention is unwanted.  (To quote Merlin in Excalibur, "Looking at the cake is like looking at the future, until you've tasted it what do you really know? And then, of course, it's too late.")  Especially if the person making an unwanted advance outranks you, you may be uncomfortable bluntly refusing.  The surest way to abolish unwanted attention is to abolish attention itself.Unfortunately, the abolition of attention causes massive collateral damage.  People spend tons of time getting to know their co-workers.  As a result, many promising matches are discovered on the job.  Furthermore, humans find high status attractive.  As a result, attention from higher-status co-workers is often appealing.  Ban workplace romance, and you deprive many people of the partner of their dreams.  I don't want my kids to live in a world where fear crushes love.What can be done?  Before I answer, let's back up.  In speed dating, a standard practice is to give every participant a list of names.  Men check off all the women they're interested in dating.  Women check off all the men they're interested in dating.  Once the results are in, organizers inform individuals about all cases of mutual interest.  The rest go in the trash.  Thus, if Jack checks Sally and Jane, Tom checks Jane, Sally checks Tom, and Jane checks Jack, Jack and Jane are informed that they have a match.  But Sally never finds out that Jack liked her - and Tom never finds out that Sally liked him.  This doesn't just spare Jack and Sally the humiliation of being rejected.  It also spares Sally and Tom the awkwardness of having to reject.  Jack and Jane, in contrast, both get to enjoy each others' wanted attention.So what's my keyhole solution for harassment?  Firms should adopt the speed dating paradigm.  Let everyone secretly record their feelings, if any, for their co-workers.  If the feelings are unrequited, no one ever finds out.  If the feelings are mutual, however, both parties receive official confirmation.  And unless they edit their recorded preferences, they waive their right to complain about (or sue over) unwanted attention from whoever they explicitly approved.How is this better than the status quo?  Simple: It retains standard rules against unwanted attention, but gives people a safe way to take a chance on love.  Indeed, my proposal even shields everyone from [...]



Reminder: Talk at Webber International University, by David Henderson

Wed, 21 Feb 2018 09:23:19 -0500

I will be speaking on Thursday at 7:00 p.m. at Webber International University, Babson Park, Florida.

Topic: Economic Inequality: Popular Misunderstandings and Important Facts

Place: Yentes Conference Center
1201 N Scenic Hwy
Babson Park, FL 33827

If you're an EconLog reader and you show up, please come up to say hi before or after the talk.

Here's Webber's announcement.

(0 COMMENTS)



Henderson on Economic Inequality, by David Henderson

Tue, 20 Feb 2018 19:58:50 -0500

[L]et us consider two historical figures of twentieth-century American history. The first came to prominence in the late 1940s, when he invented a light one-man chainsaw, and sold more than 100,000 of them at a price that made him quite rich. That added slightly to wealth inequality. But although the wealth gap between this man, inventor Robert McCulloch, and his customers was higher than it was before, the customers got a product they valued that made their lives easier. In economists' terms, the wealth of these customers increased slightly. Is that increase in wealth inequality a problem? When I've asked college students this question, the vast majority says no--and I agree.

Now let's consider the second figure. In the early 1940s, as a Congressman from Texas, this man defended the budget of the Federal Communications Commission when a more senior member of the House of Representatives was trying to cut it. So the FCC owed him a favor. One FCC official suggested the politician have his wife apply for a license for a radio station in the underserved Austin market. She did so and within a few weeks, the FCC granted her permission to buy the license from the current owners. She then applied for permission to increase its time of operation from daylight-hours-only to 24 hours a day and at a much better part of the AM spectrum--and the FCC granted her permission within a few weeks. The commission also prevented competitors from entering the Austin market.

These moves made Lyndon Johnson and his wife very rich. When he ran for President in 1964, the radio station accounted for over half of his $14-million net worth. This increase in his wealth added slightly to wealth inequality. But customers in the Austin market were, due to the FCC restrictions on further radio stations, slightly less well off than if more stations had been allowed. When I tell this story to college audiences and ask them if they think there's an important difference between McCulloch's and Johnson's methods of increasing wealth inequality, virtually all of them do, and few will defend the latter way.


This is from by David R. Henderson, "Income Inequality Isn't the Problem," Defining Ideas, Tuesday, February 20, 2018.

Here are the final two paragraphs:

If the problem we care about is poverty, then the calls to tax the rich and reduce income inequality are misguided. Instead, we should be cheering for policies that lead to higher economic growth. One other important measure is increased immigration. Allowing more immigration into the United States would allow people to move from low-productivity jobs in poor countries to higher-productivity jobs in America. That would dramatically improve the plight of the poor while also improving, but by a smaller margin, the well-being of the rich. Piketty, for all his faults, put his finger on how to do so. He wrote: "A seemingly more peaceful form of redistribution and regulation of global wealth inequality is immigration. Rather than move capital, which poses all sorts of difficulties, it is sometimes simpler to allow labor to move to places where wages are higher."

Amen, frère.

Thanks to Emily Esfahani Smith for doing an excellent job of editing.

(9 COMMENTS)



There's no success like failure, by Scott Sumner

Tue, 20 Feb 2018 16:56:56 -0500

I've worked in several different types of organizations, and I've observed a growing tendency for managers to look for measurable metrics to assess productivity. Fortunately, I've generally been in a position where I didn't have to spend a lot of time on those reports, but others are not so fortunate. (That's not to say these management techniques are not useful or effective, I suspect at least some of them are valuable. Management is not my forte, to put it mildly.) Consider someone working on monetary policy at a research institute. What might constitute a successful performance? One could envision a set of intermediate objectives, such as publishing research on NGDP targeting, or engaging with important people in academia, the media and government. Maybe writing an op ed for the NYT or WSJ. Then there are the ultimate goals, to influence Fed policy with the force of your brilliant ideas. In the vast majority of cases, the intermediate objectives are positively correlated with the ultimate goal. The correlation may be really weak (my NYT editorial would be unlikely to influence the Fed), but the correlation will be at least slightly positive. There is one case, however, where I sort of wonder whether the correlation is negative. I'd like to get your thoughts on this as well. One of my recent projects is to encourage the formation of the Hypermind NGDP market. We now have NGDP prediction markets for 2017:Q1 to 2018:Q1 NGDP growth, as well as another market for 2018:Q1 to 2019:Q1 NGDP growth. These two markets are currently showing an expectation of 4.7% and 4.4% NGDP growth. Has this project been successful? That turns out to be a quite interesting question. The intermediate objectives of this project might include a high volume of trading, as well as productive academic research on the correlation between fluctuations in NGDP futures prices and other key macro variables. The ultimate goal of the project might be to get the Fed to stabilize NGDP growth at roughly 4%. And here's the weird part---these two goals might well be negatively correlated, indeed strongly negatively correlated. First a bit of background. I started blogging in early 2009, mostly because NGDP had recently been extremely unstable, and I believed that this instability reflected very poor monetary policy and had huge negative effects on the economy. For whatever reason, the subsequent 9 years have seen (along with the 1990s) the most stable NGDP growth in all of American history. I'd like to believe those two events were connected in some way, but I doubt even our supremely self-confident President would be so bold as to make that sort of grandiose claim. No, more likely I just happened to start blogging at a point in time where monetary policy became much more stable. The problem with stable monetary policy is that it makes monetary blogs much less interesting, especially monetary blogs whose sole raison d'être is to talk about the problems associated with unstable NGDP. Thus my MoneyIllusion blog has seen a steady deterioration in quality and readership. So how should I feel about that? In a similar fashion, an NGDP futures market is not likely to attract much attention from traders, as long as it keeps chugging along, year after year, with predictions of roughly 4% NGDP growth. Nor will it attract much interest from academic researchers, or financial reporters. So how should I feel about that? If my work for Mercatus and future Fed policy are truly 100% uncorrelated, then the answer to the preceding puzzle is clear---I should prefer the success of the Hypermind NGDP prediction market experiment. After, all the success or failure of that experiment will have no causal impact on NGDP or monetary policy more broadly. (Yes, it will still be correlated, but no causal impact will occur.) But now suppose there is a tiny chance that t[...]



Against Argumentative Definitions: The Case of Feminism, by Bryan Caplan

Tue, 20 Feb 2018 14:22:36 -0500

Suppose I define socialism as, "a system of totalitarian control over the economy, leading inevitably to mass poverty and death."  As a detractor of socialism, this is superficially tempting.  But it's sheer folly, for two distinct reasons.First, this plainly isn't what most socialists mean by "socialism."  When socialists call for socialism, they're rarely requesting totalitarianism, poverty, and death.  And when non-socialists listen to socialists, that's rarely what they hear, either.  Second, if you buy this definition, there's no point studying actual socialist regimes to see if they in fact are "totalitarian" or "inevitably lead to mass poverty and death."  Mere words tell you what you need to know.What's the problem?  The problem is that I've provided an argumentative definition of socialism.  Instead of rigorously distinguishing between what we're talking about and what we're saying about it, an argumentative definition deliberately interweaves the two.  The hidden hope, presumably, is that if we control the way people use words, we'll also control what people think about the world.  And it is plainly possible to trick the naive using these semantic tactics.  But the epistemic cost is high: You preemptively end conversation with anyone who substantively disagrees with you - and cloud your own thinking in the process.  It's far better to neutrally define socialism as, say, "Government ownership of most of the means of production," or maybe, "The view that each nation's wealth is justly owned collectively by its citizens."  You can quibble with these definitions, but people can accept either definition regardless of their position on socialism itself.Modern discussions are riddled with argumentative definitions, but the most prominent instance, lately, is feminism.  Google "feminism," and what do you get?  The top hit: "the advocacy of women's rights on the basis of the equality of the sexes."  I've heard many variants on this: "the theory that men and women should be treated equally," or even "the radical notion that women are people."What's argumentative about these definitions?  Well, in this 2016 Washington Post/Kaiser Family Foundation survey, 40% of women and 67% of men did not consider themselves "feminists."  But over 90% of both genders agreed that "men and women should be social, political, and economic equals."  If Google's definition of feminism conformed to standard English usage, these patterns would make very little sense.  Imagine a world where 90% of men say they're "bachelors," but only 40% say they're "unmarried." What would a non-argumentative definition of feminism look like?  Ideally, feminists, non-feminists, and anti-feminists could all endorse it.  If that's asking too much, all these groups should at least be able to accept the proposed definition as a rough approximation of the position they affirm or deny.  My preferred candidate:feminism: the view that society generally treats men more fairly than womenWhat's good about my definition?  First, the definition doesn't include everyone who thinks that our society treats women unfairly to some degree.  In the real world, of course, every member of every group experiences unfairness on occasion.Second, a large majority of self-identified feminists hold the view I ascribe to them.  Indeed, if someone said, "I'm a feminist, but I think society generally treats women more fairly than men," most listeners would simply be confused.Third, a large majority of self-identified non-feminists disbelieve the view I ascribe to feminists.  If you think, "Society treats both genders equally well," or "Society treats women more fairly than men," you're highly unlikely to see yourself as a feminist.At this poi[...]



Italian elections update, by Alberto Mingardi

Tue, 20 Feb 2018 10:15:26 -0500

A government that doesn't do much is highly preferable than one that does harm. Italian elections are fast approaching: they'll be held on March 4. I think there is so far an unnatural/uncanny sense of composure surrounding the ballot. I think many assume that, since France ultimately didn't vote for Marine Le Pen last year and stayed on the safe course with Emmanuel Macron, the same is going to happen in Italy: another big country (60 million people, the third largest economy in the Eurozone) whose stability is fundamental for the future of the European project. I am far more doubtful. The latest polls (for the rest of the campaign polls cannot be made public) tend to confirm the scenario that international observers prefer: due to the intricacies of the electoral law, nobody wins and the 'moderates' of the right and of the left end up in another grand coalition government that certainly won't be able to profoundly reform the country, but neither will send it in the direction of Athens or Caracas. I think the very fact everybody is talking about this scenario makes it less likely to happen. The 'moderates' of the left do not want their party to govern with the right, and vice versa. The mere possibility being on the table contributes to shifting votes into the hands of the 'extremists' of both coalitions. The general public may well be less wise than political commentators and analysts coming from big financial firms: but they understandably don't like the idea of the parties they're choosing being hijacked. On the top of that, we know from polls that 30% of Italians haven't made their pick yet. This isn't big news: people tend to decide late who they're going vote for and a good chunk of them decide literally at the last minute. Another thing is sure: they decide among available options. And in Italy there is quite an interesting anomaly. The "populist" option, the so called Five Stars Movement, has at the same time an "extremist" platform and a "moderate" spokesman. Mr Di Maio, the party's frontman, is a young, well mannered, gentle politician, in sharp contrast with the perpetually grumbling leader of the nationalist right, Mr Salvini, and the bullying leader of the moderate left, Mr Renzi. Mr Di Maio's declared policies--which have at one time included leaving the euro (he seemed to have changed his mind more recently), and which include a savage nationalisation scheme, including the telephone network--may be wild, but his tones are relaxed. His party is credited with roughly speaking 1/3 of the suffrages. Is this its ceiling, or may it gain more among still undecided voters? This is the big "if" of the next election. In the meantime, Mr Berlusconi has tried to campaign as the candidate of stability. I have no glowing/fond memories of the times when Mr Berlusconi was prime minister. As an allegedly free marketer, he was a continuous disappointment. Alas, I think this time he may be an appealing choice: precisely because we know he is never particularly adamant about keeping his own promises. A government that doesn't do much is highly preferable than one that does harm. This is why the background thinking of this article of mine in Politico on Mr Berlusconi as the "candidate of calm". (0 COMMENTS)[...]