The fact is (as Paul Krugman might say) we don't really know how an anticipation of higher energy prices will actually play out in our economy.
Left over from the 1970's is the "stagflation principle" -- the idea that higher energy prices pushes the economy's aggregate supply curve to the left (simultaneously raising price levels and lowering equilibrium output and employment).
But left over from the 1980's is the "Lucas supply curve" -- the idea that anticipation of higher prices cause some firms to anticipate higher profits and consequently hire new workers faster than otherwise.
And to complicate things even more (ahem!) both principles can operate at the same time and to some degree cancel each other out.
So play it cool, don't hyperventilate, keep thinking about the sick and homeless and let the economy continute to do what it does best. You may be surprised.
Those pesky markets anticipate even stuff like this...
As you read all these scare stories remember all markets -- but especially those dealing with petroleum -- automatically include risk premiums that can cover all or at least part of the upcoming economic damage. Not only crude prices but also inventories have gone up. As refining comes back on stream oil will be released from these inventories and any shortages will be alleviated. (Remember what that word "shortage" actually means -- temporary rather than permanent scarcity!)
Probably most important, however, is that our refining capacity's vulnerability to natural disaster is now being tested. In the next few weeks we will see the extent to which NIMBY, environmental litigation, and over-regulation have generated a shortfall in necessary (which means, partly, geographically decentralized) refining capacity.
It seems clear Chavez has only the fuzziest of notions regarding the US economy's actual operation. Is his thinking about the international petroleum industry's workings equally fuzzy?
UPDATE: I wonder whether Jimmy Carter will announce trips to Venezuela and Cuba today? Here are two excerpts which suggest all this might actually be taken seriously in some quarters:
Chavez said Venezuela could supply gasoline to Americans at half the price they now pay if intermediaries who 'speculated...and exploited consumers' were cut out. (ellipses in original -- I wonder what was omitted???)
Chavez, in Cuba to attend the graduation of Cuban-trained doctors from 28 countries, was seen off at the airport by Cuban President Fidel Castro. Washington has accused the two leaders of being a destabilizing influence in South America.
Chavez and Castro offered to give poor Americans free health care and train doctors free of charge.
UPDATE II: Does Chavez consider all owners of the 14,000 Citgo stations in the US "intermediaries" who exploit consumers? (Here's a more-prosperous one; others are smaller and less well known.) When you think about exactly who and what is involved, the Chavez statement represents exactly the sort of foreign economic "bullying" and intereference Latin America has traditionally found offensive.
Ms. Sheehan and other appeasers around the world provide the fuel that feeds the fire of terrorism. If not for this fuel, terrorists would realize that they do not have a chance to sway the minds of people and would end the bombing. Terrorists are not stupid, they understand that bombing innocent civilians will not change the minds of the strong, but will break the will of the weak. So they attack the weak and the weak fold.
So what is wrong with bribing public officials to obtain public services, provided the practice is known and wages are adjusted accordingly? In effect, bribes shift the financing of public services from taxes to a combination of taxes and fees for service. By injecting a market element into public services, bribes can actually improve efficiency when used to get around rigid or inefficient rules. To recur to the 1950s in New York, municipal ordinances forbade contractors doing construction work to obstruct sidewalks and streets, but often it was impossible to do such work without creating at least minor obstruction and so contractors bribed police to look the other way. The net effect on social welfare was probably positive.
Read the whole thing, then look at Skaperdas/Syropoulos's brilliant treatment of the issue in abstract.
UPDATE: I think "corruption" adds a yet third category to the Skaperdas/Syropoulos schema. Under their framework we seem to have production, formally legitimate appropriation (lawsuits, taxation, regulation, etc.), and formally illegitimate appropriation ("corruption").
Byron York cannot suppress a smile. Organizing the Kathy Sheehan demonstrators as they wend their weary way to Washington is none other than Lisa Fithian.
UPDATE: No, I'm not alone in this. James Taranto agrees:
Sunni reactionaries thus find themselves in a curious position. In order to defeat the constitution, they will have to encourage their supporters to vote, which in itself would be a mark of progress toward democracy.
You can track Hurricane Katrina here. Right now the eye is still south of New Orleans.
What little I know about these things was learned in 1992, when we had to flee from Hurricane Andrew. Out at sea, I remember, they can wobble from side to side like a spinning top. (That's why landfall is so hard to predict.) On land I think the path is more predictable.
The question isn't why they hate us, but rather why they insist on continually sending so much of their surplus savings for us to take care of?
Via Powerline and WatchingAmerica, the answer is given by the Deutsche Bank Group. America's demographics, currency, growth rate, and entrepreneurship, says the Group, all add up to an overwhelmingly promising future relative to that of Europe:
While European countries will remain rich in terms of per capita income (about $32,500), their relative weight will decline with their demographics and weaker growth (on average, almost half as much as the United States)...The increased weight of [faster growing European countries like Ireland] will not...be sufficient to compensate for the retreat of its historic champions [Britain, France, Germany] who will feel the full weight of their society's declining demographics... [And while there remain concerns about the United States' twin deficits,] because the United States will remain the world's superpower for the next two decades, the dollar still has some beautiful days ahead of it, remaining the key international reserve currency, so American budget deficits should remain under control, can be financed, which should avert a major international crisis.
UPDATE: Here's a little tidbit I found while poking around. The following, from this essay, is apparently based on A.S. Basinski and C.D. Naylor, "A Survey of Provider Experiences and Perceptions of Preferential Access to Cardiovascular Care in Ontario, Canada," Annals of Internal Medicine, Vol. 129, No. 7, 1998:
-- More than 80 percent of physicians, including 90 percent of cardiac surgeons, 81 percent of internists and 60 percent of family physicians, had been personally involved in managing a patient who had received preferential access on the basis of factors other than medical need.
-- When asked about those patients most likely to receive preferential treatment, physicians reported that 93 percent had personal ties to the treating physician, 85 percent were high-profile public figures and 83 percent were politicians. (Emphasis added)
UPDATE: Another tidbit for the "admistrative cost" bunnies (yeah, you know who you are):
UPDATE II: More here (relating to a terrible New Yorker article which started this thread but which was so bad I never linked to or even mentioned it).
Let's see...de-emphasized undergraduate education...contributes to higher costs...exactly how...?
Richard Vedder discusses a serious issue ("Why Does College Cost So Much?") in a nonserous fashion. The grab-bag of university complaints neither answers the question nor argues well for the book on which the editorial is based.
This is from the latest monthly Brookings report on quantitative military aspects of the Iraq war: Much as I hate to sound like an unclean economic vampire, I suspect this chart is the most important measure of how the war is going.
Please review how neural networks do their job. You will remember they're basically dumb finders of potential ways any huge set of data might be interconnected. Sometimes they come up with answers as silly as those old fashioned AI systems that tried to build towers of blocks by starting at the top and working down.
You can intellectually tie together these and a multitude of similar stories with a single economic abstraction: the tradeoff between production and appropriation. While it is technical, this article is worth puzzling over for its basic central idea: a politically-determined (i.e. nonmarket) set of laws determines the proportion of national product devoted to allocation as opposed to production -- and this proportion has a major impact on the (otherwise strictly market-determined) distribution of income.
UPDATE: If you're confused, don't be. This is the more everyday, nontechnical approach to the issue. The last paragraph simply must be quoted:
Clearly, the fault for [the 9/11 attack] lies squarely with al Qaeda and the militant Islamists who deliberately chose to commit unspeakable atrocities. But it's hard to avoid noticing that the logic of the trial lawyers -- who regularly ask the judicial system to redistribute billions from bystanders' deep pockets to those of the plaintiffs' bar because of tenuous connections that skip over the worst wrongdoers -- would hold the litigation lobby responsible for their role in creating a culture of fear that prevented the American government from doing its job to protect its citizens. This is not a double standard the American public should continue to tolerate.
It's also true that the unemployment rate looks fairly low by historical standards. But other measures of the job situation, like the average of weekly hours worked (which remains low), and the average duration of unemployment (which remains high), suggest that the demand for labor is still weak compared with the supply. (emphasis added)
I'm sort of impatient with this because the BLS directly measures the demand side of the labor market in several ways. Paul: instead of measuring demand for labor by inference and guesswork, you can simply check the numbers and see what they are.
Here's BLS series JTS00000000JOR, total US nonfarm job openings, measured as number of new positions as a fraction of total employment: While the series has been flat for the past several months, anyone can see new job openings have trended dramatically upward since late 2002.
If demand for labor is weak compared with supply, we're talking about a temporary flat period in a long-term upward trend (much like the last quarter of 2004).
Now consider the following. Here's the 2,500 mile trip from which we returned last night:
While a Toyota Sienna van gets good mileage, we still had to stop at lots of gas stations along the way. And while I don't go out of my way to talk to people while filling up the van, I'm neither unfriendly nor unwilling to quietly listen to others' conversations at the pump.
So how many complaints did I happen to pick up regarding record high gasoline prices?
NONE. ABSOLUTELY NONE. In all the 2,500 miles with all its required tank fillups, not a single other traveller was overheard saying anything about gas prices!
Politics of leaks and (peer reviewed? non-peer-reviewed?) articles...
Here we are on Mass Ave waiting for family in car trying to post this thru somebody's stray wireless network.
This is the story to follow. NYT buried it in today's print edition, and soon buried it in the online edition as well.
UPDATE: And now from our slightly worn non-smoking Best Western motel room with free hardwired broadband, we forward to you information from Kevin (Truck and Barter) Brancato on this new and important climate science blog.
Interestingly NYT linked to the blog but the link didn't work. (Or at least it didn't work for me in the parked car on Mass Ave.)
Unfunded mandates have been controversial for at least 1.5 decades, but this lawsuit may (repeat: may) be challenging the basic workings of the phenomenon (federal government passess the law, states/localities foot the bill).
Wouldn't it be ironic if certain parties' propensity to hatefully choke whenever the name "Bush" comes up moved them to outlaw a practice beloved by all federal Democratic policy wonks?
His reply was that they covered minor stuff pretty well, but there was a consideration in specialty care that he never saw mentioned in the news articles. According to him, the Canadian method for figuring out where a patient belonged on the priority list included a consideration of how many years of good health one could expect to enjoy if the procedure in question were successful. In other words, if you needed heart work and you were over about 65, you would die before you reached the top of the priority list for treatment.
Just finished this graphic for a paper, thought I'd post it. Data are United States mean and median household income in current dollars.
The central political question is whether households at point A in, say, 1993 can rationally expect to arrive at point B by, say, 2002. If everyone at above-average income votes for tax cuts (i.e. against redistribution) and everyone below votes for tax hikes, redistribution, etc., the question hinges on whether the A's continually get to be B's fast enough.
The offices of the Corporation for Public Broadcasting, situated behind the FBI building at 9th Street and "E" in downtown Washington, are airy and spacious, so spacious in fact that only about 70 percent of the leased space is occupied. Inside, the atmosphere is serene, very much unlike an actual network or production studio. The pace is slow and steady. It would be easy to imagine, in fact, that the same output could be achieved by half the number of employees at CPB, not by asking them to work any harder, but by removing duplicate functions and other bureaucratic impediments. In the hypothetical instance of a commercial media company acquiring CPB in a hostile takeover, the staff would be reduced by at least 75 percent.
And here's a quick review of the theory (or if you prefer ideology): If a private firm doesn't deliver the goods, it goes out of business. If a government bureau doesn't deliver the goods, it gets increased funding. In the private sector problems solve themselves via the harsh self-correction mechanisms of the marketplace. In the public sector, they just get worse owing to those devious self-reinforcement mechanisms within public life and politics.
It occurs to me Christopher Hitchens sometimes asks the same sorts of questions (and heck, he even sounds an looks the part!) as did those biblical prophets of old:
How can so many people watch this as if they were spectators, handicapping and rating the successes and failures from some imagined position of neutrality? Do they suppose that a defeat in Iraq would be a defeat only for the Bush administration? The United States is awash in human rights groups, feminist organizations, ecological foundations, and committees for the rights of minorities. How come there is not a huge voluntary effort to help and to publicize the efforts to find the hundreds of thousands of "missing" Iraqis, to support Iraqi women's battle against fundamentalists, to assist in the recuperation of the marsh Arab wetlands, and to underwrite the struggle of the Kurds, the largest stateless people in the Middle East? Is Abu Ghraib really the only subject that interests our humanitarians?
What he did was set up a page (on July 11th) that pulled one of my graphics directly from my server, using my limited bandwidth to fuel part of his big blog so to speak. No credit, acknowledgement, hat tip, or link to my site, however. (Thanks for nothing, jerk.) The only way a viewer would know it came from me would be to examine the html source code on Kos' page.
Well, I dunno. Some time ago this new feature appeared on blogger and it lets you refer to someone else's graphic and it appears on your blog like this:
So there you have it. I got this graphic from Kos who got it from Joe Sherlock except I think Joe changed the graphic from whatever original Kos liked to this and that's the way the web goes round and round and round.
UPDATE: Yes, I get it now. The original graphic was this: What this proves is you use the new blogger "lift a graphic from someone else" feature at your own peril Your nifty chart of projected inflation may turn into giant sexual organs while you're off doing something else.
UPDATE II: Is the car still there? Has it morphed into anything bad yet?
Documentary Thesis part of the Reformation? I don't think so...
I am surprised how loosely informed Salman Rushdie is. I am surprised his editors didn't suggest a litte rephrasing in the name of historical accuracy:
The traditionalists' refusal of history plays right into the hands of the literalist Islamofascists, allowing them to imprison Islam in their iron certainties and unchanging absolutes. If, however, the Koran were seen as a historical document, then it would be legitimate to reinterpret it to suit the new conditions of successive new ages. Laws made in the seventh century could finally give way to the needs of the 21st. The Islamic Reformation has to begin here, with an acceptance of the concept that all ideas, even sacred ones, must adapt to altered realities.
The Reformation had virtually nothing to do with accepting the Bible as historical document. This came much later -- not until nineteenth century German scholarship.
I'm not a lawyer, but some time ago I attempted to frame the best basic rational policy case for actually bombing Mecca and asked Pejman Yousefzadeh -- who is a lawyer and who knows more about this stuff than do I -- to respond.
Let me try out a short version of the introduction on all the readers of this blog. Tell me if the following is (a) crystal clear, (b) partly muddy, or (c) obscure chipmunk chatter.
VERY ROUGH DRAFT OF THE INTRODUCTION According to the University of Michigan's Panel Study of Income Dynamics (PSID) median total family income of all households reporting for years 1993 and 2002 was (when averaged over the two years in question) $42,499. By "median" income, of course, we mean 50% of all households in the study earned income above $42,499, 50% below.
Average income was different. The 2002-1993 average of this datum was substantially higher -- a whopping $57,187. Only a minority of the 4,427 households in this sample earned income at average or higher.
Why wasn't this minority "outvoted" by households favoring redistribution (in the form of progressive taxation, continuation of the estate tax, whatever) rather than tax cuts?
To answer the question we're particularly interested in a relatively small subset of households within this panel, namely, all the households with incomes between median and average. If households with above average income support tax cuts (because, for example, their higher-than average income status would be diminished by redistributive taxation) their voting status remains minority unless they are joined by "coalition households" who feel they enjoy POUM -- the prospect of upward mobility.
As of 1993 there were a total of 621 households whose income was between median and average. We know from the numbers cited above that the 1993-2002 average difference between median and average was $14,688.
So the "rational" average household in this group of 621 will vote for (or otherwise favor) the tax cut if it expects its household income will rise by $14,688 or more between 1993 and 2003. It will vote against the tax cut, on the other hand, if it feels it cannot make enough economic progress to get itself up to average.
So how did this group of 621 households fare between 1993 and 2002? According to PSID numbers this particular group's income increase during the nine years in question averaged $19,394. In effect, the average swing voter household received a "bribe" of $4,706 -- a bribe from the economy itself, in the form of upward economic mobility -- to vote for or otherwise feel favorably disposed to the Bush tax cut.
These numbers are easily calculated by anyone with enough knowledge to access the PSID, read a dataset into Microsoft Access, carry out a few intermediate processing steps in Excel, and run a few simple queries in Access.
And the paper I am writing explains in exacting detail how to do this.
12 out of 40? No, 6 out of 22? No, page rank 6?....
Reader Alex has sent me the news that all Economics Blogs have now been ranked. Apparently EconoPundit, though not all the way up there at the very top with Brad "You're an idiot, and you're an idiot, and, uh, did I miss someone? -- yeah, you're an idiot too !!!!" DeLong, hasn't got lots to be ashamed of.
Fairmodel: nice growth, higher inflation, declining deficit, eventual decline in current account deficit
Fairmodel has been reestimated using last quarter's data and all revisions, and rerun. Here's a pertinent extract from the new forecast memo (in what follows, emphasis of certain points was added by EconoPundit):
Real Growth and the Unemployment Rate: The predicted [real] growth rates for the next four quarters are 4.0, 2.9, 2.3, and 2.4 percent, respectively. The unemployment rate at the end of 2006 is 5.0 percent. ...
Inflation: Inflation as measured by the growth of the GDP deflator (GDPD) is predicted to be around 4.0 percent in 2005 and 2006. The predicted values are higher than the actual values in the past few years, and so inflation is predicted to increase.
Monetary Policy: The estimated interest rate rule (equation 30) is predicting that the three month bill rate (RS) will rise to 3.8 percent by the end of 2006.
Other Variables: The federal government budget deficit is predicted to be around $260 billion in the next four quarters (on a NIPA basis)...The U.S. current account deficit (variable -SR in the model) is forecast to be around $720 billion in the next four quarters (on a NIPA basis). By the end of 2008 it is predicted to be down to $613.2 billion.
As a dedicated Ray Fair watcher (I try to track his public statements the way others watch Alan Greenspan) EconoPundit can't help but point to an unusual new emphasis. Ray rarely points to numbers at the end of the forecast period. Instead, his tendency is to wisely shake his head and mumble something about how statistical reliability diminishes substantially as one traverses the forecast period.
But now he's willing to mention that by "the end of 2008 [the current account deficit] is predicted to be down to $613.2 billion" despite increases during the earlier quarters of the forecast period. In other words, the model is saying exchange rate adjustments are in fact doing their job.
Did you know Brookings compiles a monthly quantitative report showing how the war is going? There are lots of tables and charts here, but to me the numbers show continuingly diminishing attacks on (a) US troops and (b) Iraqi infrastructure (both relatively hard targets), accompanied by (c) continuingly increasing attacks on Iraqi civilians (soft targets).
Is this subkindergarten economics going to go completely unchallenged? Peter Wilby says:
The large majority of Americans (including migrants) have bought into this project and benefit from it -- through cheap oil, for example, or through profits of US-based multinationals, which are often derived from expropriation of other countries' resources. Any president who fails to protect these benefits risks himself or his party losing office. So if they are serious about democracy, Americans should accept a share of responsibility for what is done in their name. And so should we, whose country is America's closest ally and accomplice. (Emphasis added)
Forget about the price of oil, just think about those "resources." Are we really to understand we steal them -- that our battleships stand guard while U.S. Marines load zinc, copper, and bauxite into the holds of waiting tankers?
UPDATE: For the dedicated (or those who really need something to do right now) check the original article referenced by the last link. You'll notice the first part of the quote from Muhammad Galal Al-Kushk was edited out.
But when you're talking about CARS isn't it better to say...
There ought to be an expression for an appropriate metaphor applied inappropriately. Like naming a hospital "Resurrection Health Care Center", or this:
The bill "is meant to be a jump-start" to spur hybrid sales, says Dan Brouillette, a Ford Motor vice president. Ford makes the Ford Escape and Mercury Mariner SUV hybrids and has three more hybrid models on the way.
Are you really comfortable thinking about "jump start" when you're buying a car -- especially an electric car?
