http://www.hbs.edu/research/pdf/07-073.pdf
The obvious result: Growth is inhibited in poorer nations. I highly doubt that higher costs are entirely responsible for the poor diffusion of technology in between nations (the benefits are probably lower in nations as well, and internal costs and regulations most certainly play a factor), but this explains it somewhat. Solutions? I'll read this report more throughouly and see what they attribute the higher costs to.
Wednesday, June 6, 2007
Tuesday, June 5, 2007
Things looking up?
http://macroblog.typepad.com/macroblog/2007/06/taking_it_slow.html
http://www.nytimes.com/reuters/business/business-usa-economy-factories.html?ref=business
At least in the short-term, I suppose. Retail Sales (along with income) actually fell in April, but both may have recovered somewhat in May, suggesting that personal consumption will hold up well enough to ward off recession. Exports and business investment are also contributing to demand growth, meaning we're no longer relying on JUST the consumer to keep the economy moving.
Unemployment rates have remained low as well, though it is possible that most of the effect has been felt on independent contractors and illegal immigrants.
Overall, I'd have to say that recession chances look much lower now.
http://www.nytimes.com/reuters/business/business-usa-economy-factories.html?ref=business
At least in the short-term, I suppose. Retail Sales (along with income) actually fell in April, but both may have recovered somewhat in May, suggesting that personal consumption will hold up well enough to ward off recession. Exports and business investment are also contributing to demand growth, meaning we're no longer relying on JUST the consumer to keep the economy moving.
Unemployment rates have remained low as well, though it is possible that most of the effect has been felt on independent contractors and illegal immigrants.
Overall, I'd have to say that recession chances look much lower now.
Monday, June 4, 2007
Wal-Mart, ey?
http://www.nytimes.com/reuters/business/business-walmart-research.html
I'd just like to provide this link to point out that Wal-Mart actually isn't an evil monopoly that is exercising a slow and inevitable takeover the world. They have reached their current limit, and everyone has recognized it. When Wal-Mart finally recognized it and decided to not expand anymore, the market rewarded them by recognizing them as a better stock-buy.
Incentives are cool.
I'd just like to provide this link to point out that Wal-Mart actually isn't an evil monopoly that is exercising a slow and inevitable takeover the world. They have reached their current limit, and everyone has recognized it. When Wal-Mart finally recognized it and decided to not expand anymore, the market rewarded them by recognizing them as a better stock-buy.
Incentives are cool.
Swedish Economics
http://economistsview.typepad.com/economistsview/2007/06/swedish_models.html
The commenters are quite right that Swedish productivity continued to rise and that the Swedish standard of living remained quite high, even through the stringent regulations of the welfare age.
The crux of the story, of course, is that the Swedish economy as a whole was growing slower in production terms under the stringent welfare state controls of the second-half of the 20th century. The Swedish economy was structured to favor consumption and unproductive investments like housing. Swedish tax reform in the early 1990s succeeded in eliminating some of these preferences, and the Swedish economy has been growing more efficiently (in production terms) since then.
The discussion is...do we favor the standard of living...or do we favor production?
My response is obvious: We should let the market decide. And the market wasn't deciding under old rules. The Swedish government laid down law after law that effectively limited the dynamism of their economy and favored consumption over investment.
The commenters are quite right that Swedish productivity continued to rise and that the Swedish standard of living remained quite high, even through the stringent regulations of the welfare age.
The crux of the story, of course, is that the Swedish economy as a whole was growing slower in production terms under the stringent welfare state controls of the second-half of the 20th century. The Swedish economy was structured to favor consumption and unproductive investments like housing. Swedish tax reform in the early 1990s succeeded in eliminating some of these preferences, and the Swedish economy has been growing more efficiently (in production terms) since then.
The discussion is...do we favor the standard of living...or do we favor production?
My response is obvious: We should let the market decide. And the market wasn't deciding under old rules. The Swedish government laid down law after law that effectively limited the dynamism of their economy and favored consumption over investment.
Thursday, May 31, 2007
More on the immigration bill
What could be one effect of the new bill? Well, apparently, it may contribute to shifting economic growth from the city to the suburbs: http://www.marginalrevolution.com/marginalrevolution/2007/05/should_immigrat.html
I have no idea how badly businesses inside cities depend on family labor, nor do I know the full social benefits of having a good family (though I support family life almost as much as I support free markets). However, it is important to note the opportunity cost in general; having more high-skilled immigrants means attacking the social capital that often enables small, family-owned immigrant businesses (and immigrants are the most likely group of people to be entrepreneurs!) to survive and prosper.
I have no idea how badly businesses inside cities depend on family labor, nor do I know the full social benefits of having a good family (though I support family life almost as much as I support free markets). However, it is important to note the opportunity cost in general; having more high-skilled immigrants means attacking the social capital that often enables small, family-owned immigrant businesses (and immigrants are the most likely group of people to be entrepreneurs!) to survive and prosper.
Sudan
As President Bush enacts yet more sanctions against Sudan over the recent violence in Darfur, I'm left to wonder: what the heck is going on here?
When I was in high school, I was assured that no one was doing a thing, and that this would be the most violent genocide since Rwanda; 400,000 dead in 6 months, I believe? Years later, the toll has apparently remained under 200k, and most people seem to be saying that we still aren't doing enough and that a serious crisis is just a second away.
Forgive me, but I think the problem is being a bit overstated. That's not to say that we shouldn't be working to undermine Sudan (although these sanctions probably won't do much) as it is one of the most irresponsible and inhumane governments on the planet. I would, however, like to see the moral crusade die down a bit, so cooler heads prevail and we can undertake a rational strategy.
When I was in high school, I was assured that no one was doing a thing, and that this would be the most violent genocide since Rwanda; 400,000 dead in 6 months, I believe? Years later, the toll has apparently remained under 200k, and most people seem to be saying that we still aren't doing enough and that a serious crisis is just a second away.
Forgive me, but I think the problem is being a bit overstated. That's not to say that we shouldn't be working to undermine Sudan (although these sanctions probably won't do much) as it is one of the most irresponsible and inhumane governments on the planet. I would, however, like to see the moral crusade die down a bit, so cooler heads prevail and we can undertake a rational strategy.
Tuesday, May 29, 2007
More on Wage Inequality
http://www.mcgill.ca/files/economics/performancepayand.pdf
Explains a quarter of the growth in male income inequality. I'd reckon that paying bonuses to people for more work also contributes a bit to the leisure inequality growth as well: If you get paid more as you work more, you're going to get to paid more AND work more.
In this way, it appears our economy could probably solve a bit of inequality by directly tying performance to salary, and somehow introducing more dynamism into the economy that would allow people to work more hours if they so choose to (although studies conclude that most American would rather work less...)
Explains a quarter of the growth in male income inequality. I'd reckon that paying bonuses to people for more work also contributes a bit to the leisure inequality growth as well: If you get paid more as you work more, you're going to get to paid more AND work more.
In this way, it appears our economy could probably solve a bit of inequality by directly tying performance to salary, and somehow introducing more dynamism into the economy that would allow people to work more hours if they so choose to (although studies conclude that most American would rather work less...)
Mr. Al Gore on the Daily Show
No, no links. Search for it on youtube yourselves, you Intellectual-Property-violating scoundrels!
Al Gore was chatting with Jon Stewart on the Daily Show a few nights ago about "The Assault on Reason," his newest book. (http://en.wikipedia.org/wiki/Assault_on_Reason)
Now, Gore is smart. He's an emotionless robot, but he's sharp, and did a lot of work during the Clinton years (especially the first term, or so I am told). So when he says that major news media isn't doing a good job of covering the news and that the way our society processes our information is based more on fear and ideology than facts, it's a good idea to listen.
News, of course, is now a commercial business focused on the bottom-line. Corporations have to be sensitive to the market, and the market seems to demand news that appeals to emotions, confirms their views, involves a lot of heated arguments, and follows a narrative format. It's sad to think that some day news might become a soap opera, with stories about the US and Iran clashing over Iraq as opposed to news laying out the details of our discussion with Iran.
The problem, though, is that Stewart called the internet an "equalizer" and Gore seemed to agree. As an economist, we can explain this clearly: Stewart and Gore believe that the institutions of media, rather than the people watching them, are the problem, and that the internet allows us to bypass the institution: information can get to the people without being distorted.
This argument is flawed. The reason television news is so popular is because networks define niches and successfully target them with interesting marketing ploys. The problem isn't that corporations are profit-seeking; the problem is that the people want entertainment and not news. Therefore, arguing that the internet will be a better source of information for the people is baseless, as the problem IS the people.
The internet does, of course, have unique advantages. It can carry a larger number of news networks, meaning more niches can be filled; therefore, Nazis can get their own website in the same way that Republicans get Fox News. I do wonder if this is what Gore and Stewart meant by making the internet out to be some sort of great savior?
The same biases that exist in TV news exist in internet news...actually, even more so. Pundits are, of course, naturally biased to be making extreme claims (http://www.economist.com/blogs/freeexchange/2007/02/trailing_the_truth.cfm) and Cass Sunstein's "Infotopia" offers a very good summary of current research that concludes that the internet blogosphere is heavily Balkanized into conservative and liberal camps.
That Balkanization, though, enables precisely what Stewart and Gore may actually desire: A place where "wrong" views aren't allowed and people aren't allowed to discuss things that Gore and Stewart think aren't important. A very elitist view, no?
This post is in no way a criticism of Al Gore's book. It is a criticism of the idea that internet is the best source of information because news media is terrible and doesn't allow discussion of good ideas.
Al Gore was chatting with Jon Stewart on the Daily Show a few nights ago about "The Assault on Reason," his newest book. (http://en.wikipedia.org/wiki/Assault_on_Reason)
Now, Gore is smart. He's an emotionless robot, but he's sharp, and did a lot of work during the Clinton years (especially the first term, or so I am told). So when he says that major news media isn't doing a good job of covering the news and that the way our society processes our information is based more on fear and ideology than facts, it's a good idea to listen.
News, of course, is now a commercial business focused on the bottom-line. Corporations have to be sensitive to the market, and the market seems to demand news that appeals to emotions, confirms their views, involves a lot of heated arguments, and follows a narrative format. It's sad to think that some day news might become a soap opera, with stories about the US and Iran clashing over Iraq as opposed to news laying out the details of our discussion with Iran.
The problem, though, is that Stewart called the internet an "equalizer" and Gore seemed to agree. As an economist, we can explain this clearly: Stewart and Gore believe that the institutions of media, rather than the people watching them, are the problem, and that the internet allows us to bypass the institution: information can get to the people without being distorted.
This argument is flawed. The reason television news is so popular is because networks define niches and successfully target them with interesting marketing ploys. The problem isn't that corporations are profit-seeking; the problem is that the people want entertainment and not news. Therefore, arguing that the internet will be a better source of information for the people is baseless, as the problem IS the people.
The internet does, of course, have unique advantages. It can carry a larger number of news networks, meaning more niches can be filled; therefore, Nazis can get their own website in the same way that Republicans get Fox News. I do wonder if this is what Gore and Stewart meant by making the internet out to be some sort of great savior?
The same biases that exist in TV news exist in internet news...actually, even more so. Pundits are, of course, naturally biased to be making extreme claims (http://www.economist.com/blogs/freeexchange/2007/02/trailing_the_truth.cfm) and Cass Sunstein's "Infotopia" offers a very good summary of current research that concludes that the internet blogosphere is heavily Balkanized into conservative and liberal camps.
That Balkanization, though, enables precisely what Stewart and Gore may actually desire: A place where "wrong" views aren't allowed and people aren't allowed to discuss things that Gore and Stewart think aren't important. A very elitist view, no?
This post is in no way a criticism of Al Gore's book. It is a criticism of the idea that internet is the best source of information because news media is terrible and doesn't allow discussion of good ideas.
Krugman goes nutso?
http://economistsview.typepad.com/economistsview/2007/05/paul_krugman_tr.html#trackback
Sorry. I'm lacking the link to the original article in the NY Times.
Krugman is, of course, notorious for wild statements and accussations. He's a "loony leftist" though he is damn sharp and almost always has a point worth considering.
What I'd like to point out are the comments about the current crop of Republican candidates, which are the REAL story in this commentary piece:
"Here’s the way it ought to be: When Rudy Giuliani says that Iran, which had nothing to do with 9/11, is part of a “movement” that “has already displayed more aggressive tendencies by coming here and killing us,” he should be treated as a lunatic.
When Mitt Romney says that a coalition of “Shia and Sunni and Hezbollah and Hamas and the Muslim Brotherhood and Al Qaeda” wants to “bring down the West,” he should be ridiculed for his ignorance.
And when John McCain says that Osama, who isn’t in Iraq, will “follow us home” if we leave, he should be laughed at. "
While I don't agree with the sentiment about Senator McCain, Krugman is right on the money about Romney and Giuliani: If they really said those things, they don't seem to understand that Islamism is not a Monolith who's sole purpose is destroy us. See this post (http://moaes.blogspot.com/2007/04/understanding-islamism.html) for details.
Specifically:
1. Giuliani is wrong when he says the Iranian "movement" has killed us on American soil. It most certainly has not displayed such direct approaches; the threat from Iran is regional, in the sense that it seeks to dominate the Middle East. A different movemenet has chosen to attack the United States: The global jihad that commenced with Osama's orders in 1998.
2. Romney, as much as I love the guy, is not correct in his statements. The Muslim Brotherhood is not working, as far as I know, with other Islamic movements, as the strategic goals are different. And Sunni and Shi'a groups are more focused on killing each other than working together to bring down the United States (unless people believe that Iran and Saudi Arabia are secretly allies, in which case our soldiers in Iraq are going to be dead very soon).
Dismissing them as LUNATICS, though, is over-the-top. It is unlikely that the Republican front-runners are as ignorant as they appear to be about this particular issue, in the same way it is unlikely that Obama and Clinton are really as stupid as they appear when they talk about Wal-Mart or free trade. It's called politics.
Sorry. I'm lacking the link to the original article in the NY Times.
Krugman is, of course, notorious for wild statements and accussations. He's a "loony leftist" though he is damn sharp and almost always has a point worth considering.
What I'd like to point out are the comments about the current crop of Republican candidates, which are the REAL story in this commentary piece:
"Here’s the way it ought to be: When Rudy Giuliani says that Iran, which had nothing to do with 9/11, is part of a “movement” that “has already displayed more aggressive tendencies by coming here and killing us,” he should be treated as a lunatic.
When Mitt Romney says that a coalition of “Shia and Sunni and Hezbollah and Hamas and the Muslim Brotherhood and Al Qaeda” wants to “bring down the West,” he should be ridiculed for his ignorance.
And when John McCain says that Osama, who isn’t in Iraq, will “follow us home” if we leave, he should be laughed at. "
While I don't agree with the sentiment about Senator McCain, Krugman is right on the money about Romney and Giuliani: If they really said those things, they don't seem to understand that Islamism is not a Monolith who's sole purpose is destroy us. See this post (http://moaes.blogspot.com/2007/04/understanding-islamism.html) for details.
Specifically:
1. Giuliani is wrong when he says the Iranian "movement" has killed us on American soil. It most certainly has not displayed such direct approaches; the threat from Iran is regional, in the sense that it seeks to dominate the Middle East. A different movemenet has chosen to attack the United States: The global jihad that commenced with Osama's orders in 1998.
2. Romney, as much as I love the guy, is not correct in his statements. The Muslim Brotherhood is not working, as far as I know, with other Islamic movements, as the strategic goals are different. And Sunni and Shi'a groups are more focused on killing each other than working together to bring down the United States (unless people believe that Iran and Saudi Arabia are secretly allies, in which case our soldiers in Iraq are going to be dead very soon).
Dismissing them as LUNATICS, though, is over-the-top. It is unlikely that the Republican front-runners are as ignorant as they appear to be about this particular issue, in the same way it is unlikely that Obama and Clinton are really as stupid as they appear when they talk about Wal-Mart or free trade. It's called politics.
Religion and Insurgencies
http://smallwarsjournal.com/blog/2007/05/more-on-fm-234-and-religion/
The points I consider most important:
The points I consider most important:
“Viewed in this way, it is not critical to accept that insurgencies are ‘religious insurgencies’ or not, but that all insurgencies are an expression of political struggle for power”
“Religion as political structure of the human culture is well accepted in the vast majority of schools spanning all sides of the human condition”
“The context of the extremist Islamist insurgent is the important matter here. Islam in a moderate context does not condone suicide bombing, killing of innocent victims and destruction of other societies.”
“Accepting this, Islam is marked as a faith based belief structure that includes rules and concepts for political organization, rule making and civil governance. As such, Islam can be viewed as a political structure with ready made sets of solutions for political organization that extremists exploit by appealing to the religious structures that resonate with members of the broader faith, while seeking to obtain the broader objectives of power over people and their resources. The insurgents use Islam not so much as a religious structure but as a political structure in their quest for power.”
I'm not entirely sure how relevant this could be. It's certainly a lot better than completely ignoring the forces of religion in instances like Iraq, though the above points do not, on their own, really describe what exactly is going on.
Sunday, May 27, 2007
Message to Mahdi Army: No More Talking
http://www.nytimes.com/2007/05/27/world/middleeast/27iraq.html?th&emc=th
Al-Sadr is a destabilizing force in Iraq, and always has been. I'm quite glad to see that we're giving him a hurting.
Al-Sadr is a destabilizing force in Iraq, and always has been. I'm quite glad to see that we're giving him a hurting.
Democrats and Fox News
http://www.nytimes.com/2007/05/27/washington/27fox.html?_r=1&th&emc=th&oref=slogin
Yep, that does require a log-in, but you should be subscribed to the New York Times anyways. It's free and, if I read it despite a sometimes liberal bias, you should, too.
Anyways, this article talks about the little fiasco in the Democrat camp about the Democrat debate on Fox news, sponsored by the Congressional Black Caucus. Senators Edwards, Clinton, and Obama have decided not to appear in the debate, probably to appease their liberal base.
I must say that, while I understand their motives, I'm rather disappointed; Fox News, regardless of its right-ward tilt, is still a highly rated news agency, and a media outlet where liberal thought can reach a large number of people. The step that Edwards, Clinton, and Obama took (or Bush when he refused to speak to the NAACP) reflects a Balkanization of the media that could have negative effects in the future.
Yep, that does require a log-in, but you should be subscribed to the New York Times anyways. It's free and, if I read it despite a sometimes liberal bias, you should, too.
Anyways, this article talks about the little fiasco in the Democrat camp about the Democrat debate on Fox news, sponsored by the Congressional Black Caucus. Senators Edwards, Clinton, and Obama have decided not to appear in the debate, probably to appease their liberal base.
I must say that, while I understand their motives, I'm rather disappointed; Fox News, regardless of its right-ward tilt, is still a highly rated news agency, and a media outlet where liberal thought can reach a large number of people. The step that Edwards, Clinton, and Obama took (or Bush when he refused to speak to the NAACP) reflects a Balkanization of the media that could have negative effects in the future.
Wednesday, May 23, 2007
IQ and Wealth
http://biz.yahoo.com/fool/070518/117949647104.html
The great question about this article is…does the fact that the study controls for years of education completely invalidate the conclusion, since IQ strongly predicts years of education?
The key factor, of course, is whether or not they also controlled years of education when they measured income per person. If yes, then it means that IQ does indeed play a role for income, yet, for some reason, higher IQ people just spend more money and therefore don’t save more.
Nonetheless, the data still says SOMETHING. IQ differentials, even at the same level of education, should be generating higher levels of wealth, as small differences in IQ still imply greater intelligence, and therefore higher salaries and better decision-making skills.
So, why in the world is IQ NOT increasing wealth?The best argument that I can think of is that, at a given level of education, as your IQ goes up, so do your socially destructive habits; after all, if you were more stable, you’d have a higher level of education, wouldn’t you? The end effect is that you are more likely to get divorced, spend more, etc, and therefore your wealth will be negatively affected in the long-run.
The great question about this article is…does the fact that the study controls for years of education completely invalidate the conclusion, since IQ strongly predicts years of education?
The key factor, of course, is whether or not they also controlled years of education when they measured income per person. If yes, then it means that IQ does indeed play a role for income, yet, for some reason, higher IQ people just spend more money and therefore don’t save more.
Nonetheless, the data still says SOMETHING. IQ differentials, even at the same level of education, should be generating higher levels of wealth, as small differences in IQ still imply greater intelligence, and therefore higher salaries and better decision-making skills.
So, why in the world is IQ NOT increasing wealth?The best argument that I can think of is that, at a given level of education, as your IQ goes up, so do your socially destructive habits; after all, if you were more stable, you’d have a higher level of education, wouldn’t you? The end effect is that you are more likely to get divorced, spend more, etc, and therefore your wealth will be negatively affected in the long-run.
Lebanon and Fatah Al-Islam
http://www.nytimes.com/2007/05/23/world/middleeast/23lebanon.html?_r=1&th&emc=th&oref=slogin
http://www.france24.com/france24Public/en/news/world/20070523-Lebanon-Fatah-al-islam-palestinian-defence-minister-threat.html
As everyone is quite plainly aware of by now, Lebanon is, once again, on the receiving end of some pretty nasty violence. This time, it’s a small terrorist group known as Fatah Al-Islam, based inside a Palestinan refugee camp.
The problem is that these guys seem to be armed pretty gosh-darn well. They have night-vision goggles, strong weapons, good tactics, and maybe even anti-aircraft guns.
Is Al Qaeda behind this group? Well, it’s possible: http://counterterrorismblog.org/2007/05/fatah_alislam_alqaida_or_not_a.php#trackbacks
At the very least, they seem ideologically linked to Al Qaeda. My guess: A small, well-trained group of soldiers, conducting a bank robbery in Lebanon, operating in Iraq, controlling a refugee camp in Lebanon, with convicted terrorists from Europe. Sounds like they’re really only using Lebanon as a safe base to mount operations in Iraq, as opposed to trying to destabilize Lebanon.
Monday, May 21, 2007
Martha C. Nussbaum
http://aau.edu/aau/Nussbaum10.00.html
I spent a decent amount of time looking over the above link this morning, trying to wrestle out the valuable nuggets of information.
What seems most interesting is the possibility of combing other disciplines with economics to more properly understand standard of living (Some people also suggest that we could use fields like neuroscience and psychology to understand human decision making as well, but let's focus on standard of living for right now).
Many people have argued that the United States, while objectivley quite wealthy, actually has a lower standard of living than most European nations, because our people really aren't as happy; they just don't have access to the good things in life.
Of course, we know this just ain't true: http://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000209864.pdf
Nonetheless, we should recognize that there are many things that make a good life besides a high rate of GDP growth. My training in psychology has taught me that most people are happy when they are:
1. Not poor
2. Healthy
3. Have meaningful social relationships
4. Have a place in society
Just because our current measures, for whatever reason, are excellent proxies for good standards of living (and are excellent measures for measuring our strength and influence in the world) does not mean that they will always be good measures of how happy our people are. To understand that, we need to work with other disciplines, specificially on the power structures of our society. That's what I get out of reading the link above. Nussbaum has experience with these power structures (though she specifically examines women and their status). Hence, she has a lot of knowledge to bring to us.
Power structure study will also enable us to better understand the structure of the economy as a whole; simply supply and demand graphs don't show the actual gears of the economy underneath the surface of the economy. Rather, they only explain how changes in price will make those gears respond. It is an awesome and powerful tool to understanding how people make decisions, but it leaves a lot of the picture.
What is disturbing, though, is how she seems to criticize interdisciplinary studies. She may be right: true knowledge takes a long time to develop and master. But if interdisciplinary study truly detracts from the quality of our findings, we have arrived at an interesting junction in human history: we have so much knowledge at our disposal that, in order to properly integrate it, we have to slow down the path of discovery.
Very interesting, no? Yet economics is a perfect example of this dichotomy
I spent a decent amount of time looking over the above link this morning, trying to wrestle out the valuable nuggets of information.
What seems most interesting is the possibility of combing other disciplines with economics to more properly understand standard of living (Some people also suggest that we could use fields like neuroscience and psychology to understand human decision making as well, but let's focus on standard of living for right now).
Many people have argued that the United States, while objectivley quite wealthy, actually has a lower standard of living than most European nations, because our people really aren't as happy; they just don't have access to the good things in life.
Of course, we know this just ain't true: http://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000209864.pdf
Nonetheless, we should recognize that there are many things that make a good life besides a high rate of GDP growth. My training in psychology has taught me that most people are happy when they are:
1. Not poor
2. Healthy
3. Have meaningful social relationships
4. Have a place in society
Just because our current measures, for whatever reason, are excellent proxies for good standards of living (and are excellent measures for measuring our strength and influence in the world) does not mean that they will always be good measures of how happy our people are. To understand that, we need to work with other disciplines, specificially on the power structures of our society. That's what I get out of reading the link above. Nussbaum has experience with these power structures (though she specifically examines women and their status). Hence, she has a lot of knowledge to bring to us.
Power structure study will also enable us to better understand the structure of the economy as a whole; simply supply and demand graphs don't show the actual gears of the economy underneath the surface of the economy. Rather, they only explain how changes in price will make those gears respond. It is an awesome and powerful tool to understanding how people make decisions, but it leaves a lot of the picture.
What is disturbing, though, is how she seems to criticize interdisciplinary studies. She may be right: true knowledge takes a long time to develop and master. But if interdisciplinary study truly detracts from the quality of our findings, we have arrived at an interesting junction in human history: we have so much knowledge at our disposal that, in order to properly integrate it, we have to slow down the path of discovery.
Very interesting, no? Yet economics is a perfect example of this dichotomy
Mexican Drug War
http://www.chron.com/disp/story.mpl/world/4821006.html
I'm afraid I don't know what exactly is going on south of the border right now. Apparently drug lords are more powerful than I imagined, and the Mexican government has called out a sizable number (I have heard 24,000) federal troops to squash resistance.
Mexican internal politics were never my strong suite, but Americans should be aware that this is happening. Violence has a tendency to spill over the border; even if it doesn't it will affect the Mexican economy, which will in turn affect our own as well as tourists in Cancun.
I'm afraid I don't know what exactly is going on south of the border right now. Apparently drug lords are more powerful than I imagined, and the Mexican government has called out a sizable number (I have heard 24,000) federal troops to squash resistance.
Mexican internal politics were never my strong suite, but Americans should be aware that this is happening. Violence has a tendency to spill over the border; even if it doesn't it will affect the Mexican economy, which will in turn affect our own as well as tourists in Cancun.
The Bear wakes up
http://news.bbc.co.uk/2/hi/europe/6665145.stm
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/05/19/wruss119.xml&CMP=ILC-mostviewedbox
http://euobserver.com/9/23917
http://euobserver.com/24/24088
http://www.nytimes.com/2007/04/27/world/europe/27russia.html?ex=1179720000&en=683ac7070f8970db&ei=5070
Now, I don’t want to be a nay-sayer, but it seems relations between Russia and the West have fallen lately. Quite a shame, too, especially since they seem dead set on threatening the security of the relatively prosperous Baltic nations.
Oh well. The best way to make sure that nations play a positive role in the world is to assure them that they have more to gain from cooperation than from intimidation. This means a dedicated effort to keep block Russia’s external political moves, wherever they may be.
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/05/19/wruss119.xml&CMP=ILC-mostviewedbox
http://euobserver.com/9/23917
http://euobserver.com/24/24088
http://www.nytimes.com/2007/04/27/world/europe/27russia.html?ex=1179720000&en=683ac7070f8970db&ei=5070
Now, I don’t want to be a nay-sayer, but it seems relations between Russia and the West have fallen lately. Quite a shame, too, especially since they seem dead set on threatening the security of the relatively prosperous Baltic nations.
Oh well. The best way to make sure that nations play a positive role in the world is to assure them that they have more to gain from cooperation than from intimidation. This means a dedicated effort to keep block Russia’s external political moves, wherever they may be.
Saturday, May 19, 2007
China criticizes West on Africa
http://www.ft.com/cms/s/26eb49fe-0414-11dc-a931-000b5df10621.html
Pot calling the kettle black! I seem to recall Ghana whining that China wasn’t following through on its promises a few years ago, though perhaps my memory is fuzzy.
Regardless, the move is disturbing. China has been effectively encircled by powerful states in Asia, and it’s best ally is Myanmar. However, Africa and its rich mineral wealth, a longtime battleground between the Great Powers of the world, is still up for grabs, and not very friendly to Western intervention.
My take is that China is being a little harsher on us than they might otherwise be, and is currently trying to further relations and make economic inroads into the continent. The US has been making economic inroads as well, in addition to geopolitical moves on the Horn and strengthening militaries in North Africa. In a few years, we’ll also have a new aircraft carrier and the ability to rapidly transport a small number of F-22s (that would be able to do a LOT of damage) and our African command center, which is a recent addition, will be fully experienced and likely possess its own special operations forces.
So, we’re both playing strong for Africa. The difference is that we have force projection coming soon, and they do not. So, China is going to have to play a LOT tougher than us to make friends in Africa, and they’re going to have to start very soon.
Pot calling the kettle black! I seem to recall Ghana whining that China wasn’t following through on its promises a few years ago, though perhaps my memory is fuzzy.
Regardless, the move is disturbing. China has been effectively encircled by powerful states in Asia, and it’s best ally is Myanmar. However, Africa and its rich mineral wealth, a longtime battleground between the Great Powers of the world, is still up for grabs, and not very friendly to Western intervention.
My take is that China is being a little harsher on us than they might otherwise be, and is currently trying to further relations and make economic inroads into the continent. The US has been making economic inroads as well, in addition to geopolitical moves on the Horn and strengthening militaries in North Africa. In a few years, we’ll also have a new aircraft carrier and the ability to rapidly transport a small number of F-22s (that would be able to do a LOT of damage) and our African command center, which is a recent addition, will be fully experienced and likely possess its own special operations forces.
So, we’re both playing strong for Africa. The difference is that we have force projection coming soon, and they do not. So, China is going to have to play a LOT tougher than us to make friends in Africa, and they’re going to have to start very soon.
Immigration Reform?
Wow. It’s not often that I’m absolutely floored by a bill in Congress, but this new “immigration reform” really does take the cake.
The problem isn’t that this bill isn’t going to accomplish anything positive. It’s that it really doesn’t seem to accomplish anything. If I may reference my own sociology paper on immigration, the level of illegal immigration to the United States seems to associated mostly with US economic growth and demand for labor; in other words, immigrants are going to keep coming because businesses will pay them for their labor.
So, if immigrant flows keep coming, what’s our response going to be? Apparently…more amnesty (except we can’t call it that, even though they only have to pay a small fine!) and more border control, neither of which has really worked in the past.
Color me ungrateful, but this bill seems to be a pile of useless paper.
What is positive, though, is the fact the new guest worker provision, which allows 400,000 guest workers to come to the United States legally; they also will be given visas based on their skill level and education as opposed to how many family members they have here. That much signifies a good trend in the United States; evaluating people based on their abilities and not their connections
The problem isn’t that this bill isn’t going to accomplish anything positive. It’s that it really doesn’t seem to accomplish anything. If I may reference my own sociology paper on immigration, the level of illegal immigration to the United States seems to associated mostly with US economic growth and demand for labor; in other words, immigrants are going to keep coming because businesses will pay them for their labor.
So, if immigrant flows keep coming, what’s our response going to be? Apparently…more amnesty (except we can’t call it that, even though they only have to pay a small fine!) and more border control, neither of which has really worked in the past.
Color me ungrateful, but this bill seems to be a pile of useless paper.
What is positive, though, is the fact the new guest worker provision, which allows 400,000 guest workers to come to the United States legally; they also will be given visas based on their skill level and education as opposed to how many family members they have here. That much signifies a good trend in the United States; evaluating people based on their abilities and not their connections
Thursday, May 17, 2007
Income Inequality
http://www.federalreserve.gov/boardDocs/Speeches/2007/20070206/default.htm
http://elsa.berkeley.edu/~saez/pikettyqje.pdf
So, one of the obvious political and economic issues of our day is the level of income inequality, which has been rising. The questions most people have are “why” and “what are the ramifications.”
There are two dominant theories right now. One describes income inequality as pretty benign: it reflects a greater of return on education.
The second is malignant: There has been a fall in taxes, allowing rich people to accumulate fortunes. CEOs can manipulate their pay and stock prices, unions have fallen, and outsourcing is taking a toll on wages. The rise in inequality is a very bad thing under this scenario, and not everyone is better off.
This argument, of course, is politicized. Most Republicans like to think that inequality is due to education and hard work, and Democrats are more likely to believe that CEOs are abusing the system.
In truth? It’s a little bit of both. The top 20% households as measured by income have been growing in share since the 1960s, but, within that segment of the population, households have been growing at different rates and at different times. The top .01%, in terms of total income, earned 50 times the median level of society in 1970. That same factor was 250 in 1998. On the other hand, a worker at the 90th percentile (we’re talking wages now, not total income) earned 3.7 times what the worker at the 10th percentile made in 1979. In 2006, that number was 4.7 times.
Obviously, different factors at work here.
Looking at the top 20% and top 10%, the story is pretty simple; the return to education has increased dramatically. In 1979, the median worker with a bachelor’s degree earned 38% more than a person with just a high school degree. That number was 75% on 2005. Numbers like this shouldn’t be too shocking too much to anyone; better educated workers are better able to take advantage of our dynamic economy and our growing level of technology. I’d also suggest that we’re more efficient in who we send to college; even though we’ve sent a lot more people to postsecondary education since the middle of the century, the average IQ of the college student has increased significantly. Since the two factors work together to increase wages, it’s not surprising to see their incomes rise.
It’s also important to note that our measures of inequality check for inequality of households. The fact that more women are working now implies greater inequality, as higher income households are more likely to have a well-educated father and well-educated mother.
But what the heck is going on at the VERY top? Their income share has risen dramatically, much more so than the rest of the population. Does this mean we’re returning an era of oligarchy?
Eh, not quite, but education doesn’t explain everything. Technology, however, does still a play a role.
For instance, technology enables actors and baseball players to be seen all around the world and quite easily; their services are now in much greater demand, and they can be paid higher wages. And I’d suggest American cultural imperialism has played a complementary role to that as well.
The other group at the top are, of course, the CEOs. This is the most profound change in the United States throughout the 20th century. Prior to the Great Depression, the top 1% made 70% of their income in dividends. The shocks of the Great Depression and World War II seemed to have completely destroyed many vast fortunes, and the capital income that the rich got was never the same. On the contrary, since then most of the top 1% has earned money by…well, by actually earning their money. In 1998, roughly half of their income came from labor, and another sizable chunk came from private business income. Dividends only composed about a quarter (compare this to France, where the rich still live off of dividends). Why has CEO pay risen?
Well, the top 1% (CEOs included) started having income share increases in the 1970s, about a decade after the rest of the top 20%. However, their income share rose much faster than the rest of the top 20%. In 1970, the top .1%, for example, had 1% of the wage share of the population. That was 2% in 1984, and has increased since then.
The reason corporate board pay has risen so much is a matter of much contention. In my opinion, the average corporate executive these days really does have it all; they posses a high level of education, put in many hours, typically have much experience, and are better connected socially. This productivity has been seen in the large increase in shareholder value since the 1970s, as well as in the numerous powerful corporations that have emerged over the past 30 years that have revolutionized the way we think about business; Wal-Mart and Microsoft are good examples.
However, does this explain the WHOLE story? Perhaps executive compensation has risen too dramatically to fully account for the new firms that been made that are, indeed, profitable. Marginal taxes, for instance, may play a role. The large reduction in taxes under Reagan may have made work more profitable for the rich, who then would work more and obviously make higher incomes. There is indeed a measured increase in the share of income for the top 1% after 1986, but this is probably due to the change in tax structure; before 1986, it made more sense to classify personal income as corporate income. It’s tough to say how much inequality rose in the Reagan years before that.
Another factor, as many on the left say, is corporate influence over their own pay, as well as social norms. Since I don’t know too much about influence over their own pay, I’ll save that for a future post.
The social norms basically suggest that no one has no idea how much executives should really be paid. Are they worth that much? It’s almost impossible to measure, but investors are willing to jump on the bandwagon simply because they don’t know any better. If true, it’s a big reason why executive pay has increased, and explains why executive pay doesn’t seem to be sensitive to things like oil shocks (which DO affect the wages of everyone else). .
So, do we have anything to worry about?
1. The higher income definitely enables the creation of an oligarchy. Tyler Cowan recently pointed out that the college premium is the same as it was in the Gilded Age. Although he was saying nothing about an oligarchy, I found it pretty interesting.
2. Consumption inequality is even more important than income inequality, and doesn’t appear to have been dramatically affected in recent years. Consumption inequality, of course, measures how much each household consumes as opposed to how much it makes. This is important because many households are at different stages of their lives; obviously, inequality exists if there are households that are run by the elderly and households that are run by people in the prime of their lives, even though the amount of goods that they have is more equal than the amount of income they make.
3. The increasing level of single mothers should disturb everyone.
4. There is still a lot of income mobility, mostly because the level of income is largely determined by what stage of life a household is in. For instance, between 1996 and 1999, slightly more than one-third of the population was impoverished for at least 2 consecutive months. Only 2% was impoverished the entire time. Indeed, even the super-rich .01% change every year as executives exercise stock options at different times. We may not all be in the top 10% now, but a lot of us will be at some point in our lives; with wise investments, we’ll be able to live well for a long time.
5. An important thing that I’m going to come back to; we should be worried about the fact that people don’t see opportunities. Part of what makes the top 1% so wealthy, in my opinion, is the fact that they recognize business opportunities more effectively than the rest of the population. Part of this is due to the fact that the top 1% has more connections and more experience. Part of this is also due to the fact that some people major in Gender studies and later join the private work force.
6. We should be confused that education is such a big problem because education reform is difficult to implement. We’re middle-of-the-road at best in k-12 education, and college education is getting quite expensive. Postgraduate education isn’t even considered by many.
7. One thing that is hopeful? Though implementation is tough, there is a lot of room for future growth in the United States. If we reformed education, if people became more perceptive of the business world, and if families in the US were more stable, economic growth would pick up considerably.
In the future:
-A post about unions will appear
-A post discussing solutions to inequality (or, rather, policies to make our economy grow faster)
-A lot more discussion on the gap in business knowledge and opportunity recognition
http://elsa.berkeley.edu/~saez/pikettyqje.pdf
So, one of the obvious political and economic issues of our day is the level of income inequality, which has been rising. The questions most people have are “why” and “what are the ramifications.”
There are two dominant theories right now. One describes income inequality as pretty benign: it reflects a greater of return on education.
The second is malignant: There has been a fall in taxes, allowing rich people to accumulate fortunes. CEOs can manipulate their pay and stock prices, unions have fallen, and outsourcing is taking a toll on wages. The rise in inequality is a very bad thing under this scenario, and not everyone is better off.
This argument, of course, is politicized. Most Republicans like to think that inequality is due to education and hard work, and Democrats are more likely to believe that CEOs are abusing the system.
In truth? It’s a little bit of both. The top 20% households as measured by income have been growing in share since the 1960s, but, within that segment of the population, households have been growing at different rates and at different times. The top .01%, in terms of total income, earned 50 times the median level of society in 1970. That same factor was 250 in 1998. On the other hand, a worker at the 90th percentile (we’re talking wages now, not total income) earned 3.7 times what the worker at the 10th percentile made in 1979. In 2006, that number was 4.7 times.
Obviously, different factors at work here.
Looking at the top 20% and top 10%, the story is pretty simple; the return to education has increased dramatically. In 1979, the median worker with a bachelor’s degree earned 38% more than a person with just a high school degree. That number was 75% on 2005. Numbers like this shouldn’t be too shocking too much to anyone; better educated workers are better able to take advantage of our dynamic economy and our growing level of technology. I’d also suggest that we’re more efficient in who we send to college; even though we’ve sent a lot more people to postsecondary education since the middle of the century, the average IQ of the college student has increased significantly. Since the two factors work together to increase wages, it’s not surprising to see their incomes rise.
It’s also important to note that our measures of inequality check for inequality of households. The fact that more women are working now implies greater inequality, as higher income households are more likely to have a well-educated father and well-educated mother.
But what the heck is going on at the VERY top? Their income share has risen dramatically, much more so than the rest of the population. Does this mean we’re returning an era of oligarchy?
Eh, not quite, but education doesn’t explain everything. Technology, however, does still a play a role.
For instance, technology enables actors and baseball players to be seen all around the world and quite easily; their services are now in much greater demand, and they can be paid higher wages. And I’d suggest American cultural imperialism has played a complementary role to that as well.
The other group at the top are, of course, the CEOs. This is the most profound change in the United States throughout the 20th century. Prior to the Great Depression, the top 1% made 70% of their income in dividends. The shocks of the Great Depression and World War II seemed to have completely destroyed many vast fortunes, and the capital income that the rich got was never the same. On the contrary, since then most of the top 1% has earned money by…well, by actually earning their money. In 1998, roughly half of their income came from labor, and another sizable chunk came from private business income. Dividends only composed about a quarter (compare this to France, where the rich still live off of dividends). Why has CEO pay risen?
Well, the top 1% (CEOs included) started having income share increases in the 1970s, about a decade after the rest of the top 20%. However, their income share rose much faster than the rest of the top 20%. In 1970, the top .1%, for example, had 1% of the wage share of the population. That was 2% in 1984, and has increased since then.
The reason corporate board pay has risen so much is a matter of much contention. In my opinion, the average corporate executive these days really does have it all; they posses a high level of education, put in many hours, typically have much experience, and are better connected socially. This productivity has been seen in the large increase in shareholder value since the 1970s, as well as in the numerous powerful corporations that have emerged over the past 30 years that have revolutionized the way we think about business; Wal-Mart and Microsoft are good examples.
However, does this explain the WHOLE story? Perhaps executive compensation has risen too dramatically to fully account for the new firms that been made that are, indeed, profitable. Marginal taxes, for instance, may play a role. The large reduction in taxes under Reagan may have made work more profitable for the rich, who then would work more and obviously make higher incomes. There is indeed a measured increase in the share of income for the top 1% after 1986, but this is probably due to the change in tax structure; before 1986, it made more sense to classify personal income as corporate income. It’s tough to say how much inequality rose in the Reagan years before that.
Another factor, as many on the left say, is corporate influence over their own pay, as well as social norms. Since I don’t know too much about influence over their own pay, I’ll save that for a future post.
The social norms basically suggest that no one has no idea how much executives should really be paid. Are they worth that much? It’s almost impossible to measure, but investors are willing to jump on the bandwagon simply because they don’t know any better. If true, it’s a big reason why executive pay has increased, and explains why executive pay doesn’t seem to be sensitive to things like oil shocks (which DO affect the wages of everyone else). .
So, do we have anything to worry about?
1. The higher income definitely enables the creation of an oligarchy. Tyler Cowan recently pointed out that the college premium is the same as it was in the Gilded Age. Although he was saying nothing about an oligarchy, I found it pretty interesting.
2. Consumption inequality is even more important than income inequality, and doesn’t appear to have been dramatically affected in recent years. Consumption inequality, of course, measures how much each household consumes as opposed to how much it makes. This is important because many households are at different stages of their lives; obviously, inequality exists if there are households that are run by the elderly and households that are run by people in the prime of their lives, even though the amount of goods that they have is more equal than the amount of income they make.
3. The increasing level of single mothers should disturb everyone.
4. There is still a lot of income mobility, mostly because the level of income is largely determined by what stage of life a household is in. For instance, between 1996 and 1999, slightly more than one-third of the population was impoverished for at least 2 consecutive months. Only 2% was impoverished the entire time. Indeed, even the super-rich .01% change every year as executives exercise stock options at different times. We may not all be in the top 10% now, but a lot of us will be at some point in our lives; with wise investments, we’ll be able to live well for a long time.
5. An important thing that I’m going to come back to; we should be worried about the fact that people don’t see opportunities. Part of what makes the top 1% so wealthy, in my opinion, is the fact that they recognize business opportunities more effectively than the rest of the population. Part of this is due to the fact that the top 1% has more connections and more experience. Part of this is also due to the fact that some people major in Gender studies and later join the private work force.
6. We should be confused that education is such a big problem because education reform is difficult to implement. We’re middle-of-the-road at best in k-12 education, and college education is getting quite expensive. Postgraduate education isn’t even considered by many.
7. One thing that is hopeful? Though implementation is tough, there is a lot of room for future growth in the United States. If we reformed education, if people became more perceptive of the business world, and if families in the US were more stable, economic growth would pick up considerably.
In the future:
-A post about unions will appear
-A post discussing solutions to inequality (or, rather, policies to make our economy grow faster)
-A lot more discussion on the gap in business knowledge and opportunity recognition
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