by the Sandwichman
One of my Work Less Party peeps, Conrad has made a short film you should all see.
http://www.workersoftheworldrelax.org/
"What if we used our gains in productivity to slow down ? We could work less and produce less. It would also mean consuming less.
"If you like the film please forward this website to a world that desperately needs some slowing down."
Tuesday, June 3, 2008
Monday, June 2, 2008
Another Oil Futures Market
"Tom McGee's business is surging faster than the price of gasoline. That's because PMP Corp. is one of the few places in the U.S. that gas stations can turn to when they need old-style gas pumps adapted to register prices over $4 a gallon. The mechanical dials on many vintage pumps can't register prices over $3.99 a gallon or ring up single sales north of $99.99."
"Many small-town stations, especially in remote, rural areas, can't afford to buy new pumps, which can cost as much as $10,000 each. PMP's retrofits are between $600 and $800."
"PMP has a 20-week backlog, up from three days in March, and Mr. McGee's 70 workers are doing maximum overtime. He has hired more temporary workers, but it is slow getting them up to speed. The labor-intensive work involves tasks such as printing new numbers on the spinning wheels that form the core of the pricing mechanisms. His suppliers are running out of crucial parts."
"The work is also done by pump manufacturers like Gilbarco Veeder-Root, part of industrial conglomerate Danaher Corp., of Washington, D.C. An estimated 8,500 of the nation's 170,000 gas stations have the old-style pumps."
Aeppel, Timothy. "For PMP, $4 Gas Is Great for Business: Firm Helps Service Stations Adapt Old Pumps for Higher Prices." Wall Street Journal (2 May).
http://online.wsj.com/article/SB121237038897536749.html?mod=todays_us_marketplace
"Many small-town stations, especially in remote, rural areas, can't afford to buy new pumps, which can cost as much as $10,000 each. PMP's retrofits are between $600 and $800."
"PMP has a 20-week backlog, up from three days in March, and Mr. McGee's 70 workers are doing maximum overtime. He has hired more temporary workers, but it is slow getting them up to speed. The labor-intensive work involves tasks such as printing new numbers on the spinning wheels that form the core of the pricing mechanisms. His suppliers are running out of crucial parts."
"The work is also done by pump manufacturers like Gilbarco Veeder-Root, part of industrial conglomerate Danaher Corp., of Washington, D.C. An estimated 8,500 of the nation's 170,000 gas stations have the old-style pumps."
Aeppel, Timothy. "For PMP, $4 Gas Is Great for Business: Firm Helps Service Stations Adapt Old Pumps for Higher Prices." Wall Street Journal (2 May).
http://online.wsj.com/article/SB121237038897536749.html?mod=todays_us_marketplace
A Challenge on CGE Modeling
I’m currently working with Sightline Institute in Seattle, monitoring the economic analysis phase of the Western Climate Initiative. WCI, which consists of seven US states and three Canadian provinces, is cooking up a common carbon emissions plan, and a consulting firm has been brought onboard to help clarify the economic implications of different policy alternatives. There are many issues specific to this project I may return to later, but for now I’d like to put the spotlight on the methodology WCI will be relying on, CGE modeling. I think these models are so dubious theoretically and unreliable in practice that there is no case for using them. In particular, I am issuing a challenge to their defenders: if no one can answer it, the case is closed.
On a theoretical level, it is surprising that CGE modeling has become such a vibrant industry, since its underpinnings in general equilibrium theory have been systematically undermined over the past several decades. (1) CGE models use the technique of representative agents—vast numbers of households and firms are treated as if they were a single decision-making entity—when we now know that multiple agents cannot be modeled as if they were just one. (2) In particular, the Debreu-Sonnenschein-Mantel result demonstrates that full knowledge of all supply and demand relationships in an economy is not sufficient to predict the equilibrium the economy will arrive at when it is not there yet. (3) The behavioral assumptions of these models, typically resting on utility maximization or simple modifications of it, have been empirically falsified. (4) Production and utility functions are routinely chosen for their convexity properties, despite the widespread recognition that nonconvexities (that yield multiple equilibria) are rife. In short, if theory should inform practice, we shouldn’t be doing CGE.
Now for the challenge. As far as I know, there has never been a rigorous ex post evaluation of CGE models in practice, one that compares predicted to actual outcomes. Based on performance, is there any evidence that such models add value—that their predictions are any better than those derived from macro or sector-specific models, or even a random walk? Also, are CGE models employed by any private sector players who bet real money on the results, or is it only in academia and the public sector that CGE modeling is taken seriously?
My challenge is for those who think there is anything to CGE to come up with evidence that their forecasts add value—either careful retrospective analysis, market applications or both. If not, after more than three decades of experience to go on, why shouldn’t we draw the conclusion that this is a self-perpetuating enterprise promulgated by specialists who sell not an improved ability to make forecasts, but a patina of high-tech respectability for agencies with no stake in whether their policies will actually perform?
On a theoretical level, it is surprising that CGE modeling has become such a vibrant industry, since its underpinnings in general equilibrium theory have been systematically undermined over the past several decades. (1) CGE models use the technique of representative agents—vast numbers of households and firms are treated as if they were a single decision-making entity—when we now know that multiple agents cannot be modeled as if they were just one. (2) In particular, the Debreu-Sonnenschein-Mantel result demonstrates that full knowledge of all supply and demand relationships in an economy is not sufficient to predict the equilibrium the economy will arrive at when it is not there yet. (3) The behavioral assumptions of these models, typically resting on utility maximization or simple modifications of it, have been empirically falsified. (4) Production and utility functions are routinely chosen for their convexity properties, despite the widespread recognition that nonconvexities (that yield multiple equilibria) are rife. In short, if theory should inform practice, we shouldn’t be doing CGE.
Now for the challenge. As far as I know, there has never been a rigorous ex post evaluation of CGE models in practice, one that compares predicted to actual outcomes. Based on performance, is there any evidence that such models add value—that their predictions are any better than those derived from macro or sector-specific models, or even a random walk? Also, are CGE models employed by any private sector players who bet real money on the results, or is it only in academia and the public sector that CGE modeling is taken seriously?
My challenge is for those who think there is anything to CGE to come up with evidence that their forecasts add value—either careful retrospective analysis, market applications or both. If not, after more than three decades of experience to go on, why shouldn’t we draw the conclusion that this is a self-perpetuating enterprise promulgated by specialists who sell not an improved ability to make forecasts, but a patina of high-tech respectability for agencies with no stake in whether their policies will actually perform?
Ronald Findlay and Kevin O'Rourke
Ronald Findlay and Kevin O'Rourke published a fascinating book, entitled Power and Plenty: Trade, War, and the World Economy in the Second Millennium, which comes out in support of the historical policies of mercantilism. To my knowledge, neither author has any hint of leftist sympathies. Have I missed something?
Sunday, June 1, 2008
The Me Theory of Value
116: Jean-Claude Ellena perfumer for Hermes: "It's very important to understand that the price of perfumes is not the price of their materials. You pay for the creativity .... That has value as well, a value that I put into the perfume. This Marxist idea that the price of a thing is the price of its materials is false."
Burr, Chandler. 2008. The Perfect Scent: A Year Inside the Perfume Industry in Paris and New York (New York: Henry Holt).
POWER AS A SYSTEM OF BUSINESS
by the Sandwichman
Brenda Rosser asked me to elaborate on the concerted campaign lurking behind the textbook lore of lumpoflabor. This will be a bit messy because it relies on secondary sources and some conjecture. There is, however, one recent and scrupulously documented historical study that corroborates the overall thesis, if not the specific conjecture.
The story commences at the beginning of the 20th century as major strikes by machinists and anthracite coal miners alarmed business owners about the growing power of unions.
Local and national business organizations, such as the National Metal Trades Association, the Dayton, Ohio, Employers Association, Minneapolis Citizens' Alliance and the Associated Employers of Indianapolis launched aggressive anti-union "open shop" campaigns. Then in 1903, the National Association of Manufacturers, under its new president, David M. Parry, launched its own violent strike-breaking drive and sought to co-ordinate local groups through closely affiliated Citizens' Industrial Association of America and, later, National Committee for Industrial Defense.
Trivia question: who was the first president of the NAM and who is his great-grandson? (Actually, it turns out that the frequently reported "fact" that it was Samuel P. Bush is erroneous. The first president of the NAM was Thomas Dolan.)
The story of the anti-union open shop movement is ably told in William Millikan's A Union Against Unions. Millikan's study focuses on Minneapolis with some reference to national events. The open shop drive was analyzed in the 1940s by Robert A. Brady in his Business as a System of Power. There's also a brief account of the "Organized Revolt of Employers" in the first chapter of Sidney Fine's Without Blare of Trumpets.
The NAM became extremely "influential" in the years before World War I, to the extent that it was known as the "invisible government" after a scandal came to light in 1913 about their methods and the extent of their political influence. One of the key strategies of the various employers' organizations was conducting propaganda campaigns. These campaigns were comprehensive. They included comic strips, movies, lectures, magazines, newspaper editorials, pamphlets, orchestrated letter and telegram campaigns, etc..
And textbooks. The case for the NAM and its allies direct involvement in censuring some economics textbooks and promoting others is largely circumstantial and partly conjecture at this point. There is one celebrated case of a NAM campaign against a high school social studies textbook by Harold Rugg. There is also the documented incident of the Illinois and Missouri committees on Public Utilities Information in the 1920s conducting sweeping textbook reviews and exerting pressure on educational authorities, publishers and authors. Those activities were investigated by the Federal Trade Commission in 1928 and reported in The Propaganda Menace by Frederick Lumley.
The NAM published material clearly aimed at the college market, such as the Open Shop Encyclopedia. It maintained an Open Shop Department, subsequently renamed Industrial Relations Department, headed by a former economics professor, Noel Sargent. The express purpose of that department was "educating the public". It is hard to imagine why or how they could have refrained from blessing some economics textbooks (say by guaranteeing advance purchases) and condemning others.
It is not as if such interventions would have encountered a hostile or even indifferent reception. American universities in the early decades of the 20th century were notoriously reactionary and elitist institutions. See Thorstein Veblen's The Higher Learning in America and Upton Sinclair's The Goose Step for a sense of the general climate. The great majority of university trustees were businessmen or allied professionals. Students generally came from the upper middle classes and went on to become businessmen or professionals. College men were often recruited to work as strikebreakers and did so with enthusiasm. Strikebreaking was not something the collegians did out of desperation for the money -- it was a cause they believed in.
And let's not forget textbook companies themselves -- some of which were active members of anti-union employers' organization. For example, McGraw-Hill was a leading member of the NAM's public relations committee during its anti-New Deal "American Way" campaign and published NAM propaganda (e.g., The American individual enterprise system: its nature, evolution, and future)
So the case of NAM influence on college economics textbooks is a bit of a bear-shits-in-the-woods story. It would be difficult to imagine otherwise. As for the content influenced, I have to fall back on the observation that the shorter workday philosophy was the backbone of American Federation of Labor unionism and its expansion in the last two decades of the 19th century and the first two decades of the 20th. Discrediting the unions' case for a shorter working day would have been a strategic priority. Furthermore, since union arguments were out of step with the prevailing academic economic dogma of the day (which was still inherently classicist Say's Law, laissez-faire fundamentalism), it wouldn't have been such a hard sell. In fact, the Steward/Gunton argument for the shorter working day was probably not all that well understood by union members and spokesmen, either. In some respects, it embodied a kind of ahead-of-itself Keynesianism for which there didn't yet exist a comprehensive theoretical argument. So it took some leaps of imagination. I happen to think those leaps were and are fairly plausible and, at any rate, totally unrelated to any "fixed amount of work" or anti-technology assumption.
PS -- following up on my earlier comment and YouNotSneaky's incredulity about the absence of "price-fixing" in the lump-of-labor textbooks of the 1920s, 30s and 40s: the Public Utilities Information committees specifically targeted "books favoring municipal ownership, mentioning the lack of competition with monopolies, or political corruption of corporations". Is the Pope Catholic?
Brenda Rosser asked me to elaborate on the concerted campaign lurking behind the textbook lore of lumpoflabor. This will be a bit messy because it relies on secondary sources and some conjecture. There is, however, one recent and scrupulously documented historical study that corroborates the overall thesis, if not the specific conjecture.
The story commences at the beginning of the 20th century as major strikes by machinists and anthracite coal miners alarmed business owners about the growing power of unions.
Local and national business organizations, such as the National Metal Trades Association, the Dayton, Ohio, Employers Association, Minneapolis Citizens' Alliance and the Associated Employers of Indianapolis launched aggressive anti-union "open shop" campaigns. Then in 1903, the National Association of Manufacturers, under its new president, David M. Parry, launched its own violent strike-breaking drive and sought to co-ordinate local groups through closely affiliated Citizens' Industrial Association of America and, later, National Committee for Industrial Defense.
Trivia question: who was the first president of the NAM and who is his great-grandson? (Actually, it turns out that the frequently reported "fact" that it was Samuel P. Bush is erroneous. The first president of the NAM was Thomas Dolan.)
The story of the anti-union open shop movement is ably told in William Millikan's A Union Against Unions. Millikan's study focuses on Minneapolis with some reference to national events. The open shop drive was analyzed in the 1940s by Robert A. Brady in his Business as a System of Power. There's also a brief account of the "Organized Revolt of Employers" in the first chapter of Sidney Fine's Without Blare of Trumpets.
The NAM became extremely "influential" in the years before World War I, to the extent that it was known as the "invisible government" after a scandal came to light in 1913 about their methods and the extent of their political influence. One of the key strategies of the various employers' organizations was conducting propaganda campaigns. These campaigns were comprehensive. They included comic strips, movies, lectures, magazines, newspaper editorials, pamphlets, orchestrated letter and telegram campaigns, etc..
And textbooks. The case for the NAM and its allies direct involvement in censuring some economics textbooks and promoting others is largely circumstantial and partly conjecture at this point. There is one celebrated case of a NAM campaign against a high school social studies textbook by Harold Rugg. There is also the documented incident of the Illinois and Missouri committees on Public Utilities Information in the 1920s conducting sweeping textbook reviews and exerting pressure on educational authorities, publishers and authors. Those activities were investigated by the Federal Trade Commission in 1928 and reported in The Propaganda Menace by Frederick Lumley.
The NAM published material clearly aimed at the college market, such as the Open Shop Encyclopedia. It maintained an Open Shop Department, subsequently renamed Industrial Relations Department, headed by a former economics professor, Noel Sargent. The express purpose of that department was "educating the public". It is hard to imagine why or how they could have refrained from blessing some economics textbooks (say by guaranteeing advance purchases) and condemning others.
It is not as if such interventions would have encountered a hostile or even indifferent reception. American universities in the early decades of the 20th century were notoriously reactionary and elitist institutions. See Thorstein Veblen's The Higher Learning in America and Upton Sinclair's The Goose Step for a sense of the general climate. The great majority of university trustees were businessmen or allied professionals. Students generally came from the upper middle classes and went on to become businessmen or professionals. College men were often recruited to work as strikebreakers and did so with enthusiasm. Strikebreaking was not something the collegians did out of desperation for the money -- it was a cause they believed in.
And let's not forget textbook companies themselves -- some of which were active members of anti-union employers' organization. For example, McGraw-Hill was a leading member of the NAM's public relations committee during its anti-New Deal "American Way" campaign and published NAM propaganda (e.g., The American individual enterprise system: its nature, evolution, and future)
So the case of NAM influence on college economics textbooks is a bit of a bear-shits-in-the-woods story. It would be difficult to imagine otherwise. As for the content influenced, I have to fall back on the observation that the shorter workday philosophy was the backbone of American Federation of Labor unionism and its expansion in the last two decades of the 19th century and the first two decades of the 20th. Discrediting the unions' case for a shorter working day would have been a strategic priority. Furthermore, since union arguments were out of step with the prevailing academic economic dogma of the day (which was still inherently classicist Say's Law, laissez-faire fundamentalism), it wouldn't have been such a hard sell. In fact, the Steward/Gunton argument for the shorter working day was probably not all that well understood by union members and spokesmen, either. In some respects, it embodied a kind of ahead-of-itself Keynesianism for which there didn't yet exist a comprehensive theoretical argument. So it took some leaps of imagination. I happen to think those leaps were and are fairly plausible and, at any rate, totally unrelated to any "fixed amount of work" or anti-technology assumption.
PS -- following up on my earlier comment and YouNotSneaky's incredulity about the absence of "price-fixing" in the lump-of-labor textbooks of the 1920s, 30s and 40s: the Public Utilities Information committees specifically targeted "books favoring municipal ownership, mentioning the lack of competition with monopolies, or political corruption of corporations". Is the Pope Catholic?
Saturday, May 31, 2008
Debunking Skill-biased Technical Change
David Card, who always does excellent work, and John DiNardo published a nice work on the subject. Here is their conclusion:
133-40: "Since the late 1980s, a consensus has emerged that the decline in real wages for low-skilled workers in the early 1980s and the subsequent slow recovery of these wage levels are explained by skill-biased technological change. In this chapter, we have argued that the evidence underlying this consensus is remarkably frail. Much of the evidence takes the form of "proof by residual." After accounting for changes in relative supply and (in some cases) making a modest list of other factors, proponents of this consensus note that the decline in the relative wages of low-skilled labor remains unexplained. Skill-biased technological change is then left as the only plausible explanation for the facts. Given the state of knowledge about how labor markets work, we find this line of argument unconvincing. Moreover, the evidence that emerges from such an exercise is highly model-specific. Depending on how the data for different groups are organized, the degree of substitution that is allowed between workers of different genders or ages, and the list of other job characteristics that are included in the decomposition, the results can suggest that rising inequality was either an ubiquitous phenomenon affecting virtually all workers over the past three decades or a trend that mainly affected young workers in the early 1980s."
Card, David and John DiNardo. 2006. "The Impact of Technological Change on Low-Wage Workers: A Review." In Rebecca M. Blank, Sheldon H. Danziger, and Robert F. Schoeni, editors. Working and Poor: How Economic and Policy Changes Are Affecting Low-Wage Workers (New York: Russell Sage Foundation): pp. 113-140.
133-40: "Since the late 1980s, a consensus has emerged that the decline in real wages for low-skilled workers in the early 1980s and the subsequent slow recovery of these wage levels are explained by skill-biased technological change. In this chapter, we have argued that the evidence underlying this consensus is remarkably frail. Much of the evidence takes the form of "proof by residual." After accounting for changes in relative supply and (in some cases) making a modest list of other factors, proponents of this consensus note that the decline in the relative wages of low-skilled labor remains unexplained. Skill-biased technological change is then left as the only plausible explanation for the facts. Given the state of knowledge about how labor markets work, we find this line of argument unconvincing. Moreover, the evidence that emerges from such an exercise is highly model-specific. Depending on how the data for different groups are organized, the degree of substitution that is allowed between workers of different genders or ages, and the list of other job characteristics that are included in the decomposition, the results can suggest that rising inequality was either an ubiquitous phenomenon affecting virtually all workers over the past three decades or a trend that mainly affected young workers in the early 1980s."
Card, David and John DiNardo. 2006. "The Impact of Technological Change on Low-Wage Workers: A Review." In Rebecca M. Blank, Sheldon H. Danziger, and Robert F. Schoeni, editors. Working and Poor: How Economic and Policy Changes Are Affecting Low-Wage Workers (New York: Russell Sage Foundation): pp. 113-140.
Wednesday, May 28, 2008
My new book project -- revised again
I have rewritten the introduction for my new book again, although the first chapter is unchanged. I think that the focus is much stronger. Thanks to Jim Kirby and the others for their suggestions. Any more comments would be appreciated.
http://michaelperelman.wordpress.com/files/2008/06/ch-1.doc
http://michaelperelman.wordpress.com/files/2008/06/ch-1.doc
Wall Street Journal Evidence That Speculators Are Responsible for the Run Up in Oil?
The Journal article does not discuss oil, but chocolate. Even so, the article is of interest because it dismisses the idea that fundamentals are responsible for a rapid increase in prices.
The only speculator quoted responded that speculation can only cause higher prices in the short run because farmers can plant more trees. How long does a tree take to mature.
Patrick, Aaron O. 2008. "Candy Companies Blame Higher Prices On Hedge Funds' Chocolate Cravings." Wall Street Journal (28 May): p. C 1.
The only speculator quoted responded that speculation can only cause higher prices in the short run because farmers can plant more trees. How long does a tree take to mature.
Patrick, Aaron O. 2008. "Candy Companies Blame Higher Prices On Hedge Funds' Chocolate Cravings." Wall Street Journal (28 May): p. C 1.
Soaring cocoa prices are driving up the cost of chocolate around the world. The chocolate industry points its finger at speculative buying by professional investors, especially hedge funds.
"They definitely influence the market and the prices," says Bernd Rossler, a spokesman for August Storck KG, one of Germany's bigger chocolate makers. "There is a lot of money invested in [cocoa], and it is coming from hedge funds."
Shipped around the world as a powder, paste, liquor or butter, cocoa sells for about $2,600 a metric ton on New York's Intercontinental Exchange, up from $1,700 at the beginning of 2007.
Cocoa investors acknowledge that they can affect prices but say their influence is strictly short term. Any increase in prices should lead to farmers growing more cacao trees, which produce cocoa beans, driving prices down again, they say.
One of the puzzles behind the cocoa-price increase is that it doesn't appear to reflect an imbalance between supply and demand. In the year ending in September, there will be almost enough cocoa grown to meet the world's needs, according to the International Cocoa Organization, a trade group. The expected 51,000-metric-ton shortfall isn't particularly large and can easily be covered by existing stock, the group says. "The fundamentals do not justify this price, and I haven't heard of any other explanation other than [investment] funds," says Hagen Streichert, a German government official and the spokesman for cocoa-buying countries on the International Cocoa Council.
Really Bad Carbon Emissions Plan #91: Personal Emissions Trading
If there were any doubt that old fashioned Tory moralism is alive and well in (temporarily) Labor England, this crazy idea should dispel it. It plays on the “personal responsibility” trope at the expense of any hope of getting the job done fairly and efficiently. To wit:
1. If you have a national cap, you have a national cap. Enforce it and people’s carbon emissions have to fall in line according the laws of arithmetic.
2. How on earth are you going to put carbon prices on each and every personal decision, especially if you take life-cycle and indirect effects into account? After all those years of Maggie channeling Hayek you’d think the basic lessons of the socialist calculation debate would have rubbed off.
3. The more upstream the cap, the more flexible and efficient the system will be. Capping each individual’s consumption is as downstream as you can go. Upstream capping means that the advantages of shifting the economy across sectors, technologies and the like would be transparent and seamless: if the higher cost of carbon results in an investment in rail transport being more productive than one in highways, you can transfer the resources and adjust in a lower-cost way to the cap. If you have separate caps for separate activities this visibility and flexibility is lost.
4. And the whole scheme is based on the misperception that an economy-wide carbon tax—or even better, an economy-wide cap—bleeds households. Yes, of course, taking money from households would do this, and the tax/cap would function much like a regressive sales tax. But wait: the money has to go somewhere. The simple solution is to give it back on an equal per capita basis. This reimburses the public and turns a regressive transfer into a highly progressive one. Much more sensible, I would say, than moralism run amok.
1. If you have a national cap, you have a national cap. Enforce it and people’s carbon emissions have to fall in line according the laws of arithmetic.
2. How on earth are you going to put carbon prices on each and every personal decision, especially if you take life-cycle and indirect effects into account? After all those years of Maggie channeling Hayek you’d think the basic lessons of the socialist calculation debate would have rubbed off.
3. The more upstream the cap, the more flexible and efficient the system will be. Capping each individual’s consumption is as downstream as you can go. Upstream capping means that the advantages of shifting the economy across sectors, technologies and the like would be transparent and seamless: if the higher cost of carbon results in an investment in rail transport being more productive than one in highways, you can transfer the resources and adjust in a lower-cost way to the cap. If you have separate caps for separate activities this visibility and flexibility is lost.
4. And the whole scheme is based on the misperception that an economy-wide carbon tax—or even better, an economy-wide cap—bleeds households. Yes, of course, taking money from households would do this, and the tax/cap would function much like a regressive sales tax. But wait: the money has to go somewhere. The simple solution is to give it back on an equal per capita basis. This reimburses the public and turns a regressive transfer into a highly progressive one. Much more sensible, I would say, than moralism run amok.
Monday, May 26, 2008
David Warsh on the JMU economic complexity conference: "A Brave Army of Heretics"
David Warsh has posted an 8-page discussion of the conference held on May 17 at James Madison University in Harrisonburg, VA that John Horgan has also discussed ("chaoplexity," not my "chaoplexology"). Warsh discusses broader issues of complexity, but also declares that when he came to the conference he was "slightly surprised at the real progress that had been made..." His article is available in the latest issue of the independent weekly, Economic Principals, under the title of "A Brave Army of Heretics" (which comes from a passage in Keynes's General Theory).
Warsh's posting has also been linked on Economist's View run by Mark Thoma. I have to thank Dave for his kind remarks about me and Mark for giving the whole thing more publicity. Warsh's post provides lots of links, including to my earlier post here and John Horgan's post.
Warsh's posting has also been linked on Economist's View run by Mark Thoma. I have to thank Dave for his kind remarks about me and Mark for giving the whole thing more publicity. Warsh's post provides lots of links, including to my earlier post here and John Horgan's post.
Saturday, May 24, 2008
Further Decline of the Washington Post
In Friday's (May 23) Washington Post Business section there was a story by Frank Ahrens, "More Than 100 Post Journalists Take Buyout," the third round of these, which will reduce the staff from about 780 to around 700. This is in response to declininig circulation, which peaked at 832,232 in 1993 and is now down to 638,300. Among those taking these early retirements and not being replaced are Pulitzer Prize winning foreign correspondent Thomas Ricks, even better in my view foreign correspondent Nora Boustany, Pulitzer Prize winning movie critic Steven Hunter, music critic Tim Page, and Maralee Schwartz and Tony Reid from the Business section. The most prominent retiree will be the increasingly blovious David Broder, although he will still lurk about "on contract." Brad Delong may crow about the "death spiral" of the Post (and the NY Times), but I am not at all. This will be a severe loss as Americans will be further cut off from independent reporting of foreign news events. The coverage of such events in the American media is already about as limited and distorted as what one used to get if one lived in the USSR.
I am someone who gets WaPo delivered to my door in Harrisonburg, VA. If it were to go the alternatives would be the Washington Times and the Harrisonburg Daily News-Record. The latter is quite reasonably moving towards covering mostly local news. While its editorial page writer has gone off the deep end, putting himself far to the right of George W. Bush on global warming, among other things, at least the DNR has an array of views presented in the columnists who appear there, whereas the WT is so uniform in its columnists it makes Fox News look like Le Monde Diplomatique. As it is, I fear that WaPo has decided to become a local Washington newspaper, which at least means there might still be good coverage of national political news from there, even if its global and other coverage deteriorates further.
I note another issue of relevance to Brad Delong and bloggers. There is this idea in the blogosphere that it will replace the print media. However, I note that much of what appears in blogs ultimately comes from the print media. I was made all too aware of this several years ago when on maxspeak I broke the story of the mistreatment by federal prosecutors of the Harrisonburg Kurds. This blew all over the world, but many, such as the Volokh Conspiracy, questioned whether it was even happening. Was I lying? It was not until we could find a small back page story from the Harrisonburg Daily News-Record confirming that there was a prosecution of Kurds (and which totally reflected the prosecution's view), that the blogosphere accepted that this was really going on, and in the end the blowback from the blogosphere then played a role in bringing print media attention in Harrisonburg and elsewhere to what was going on, eventually leading to a much more favorable outcome in the courts.
I am someone who gets WaPo delivered to my door in Harrisonburg, VA. If it were to go the alternatives would be the Washington Times and the Harrisonburg Daily News-Record. The latter is quite reasonably moving towards covering mostly local news. While its editorial page writer has gone off the deep end, putting himself far to the right of George W. Bush on global warming, among other things, at least the DNR has an array of views presented in the columnists who appear there, whereas the WT is so uniform in its columnists it makes Fox News look like Le Monde Diplomatique. As it is, I fear that WaPo has decided to become a local Washington newspaper, which at least means there might still be good coverage of national political news from there, even if its global and other coverage deteriorates further.
I note another issue of relevance to Brad Delong and bloggers. There is this idea in the blogosphere that it will replace the print media. However, I note that much of what appears in blogs ultimately comes from the print media. I was made all too aware of this several years ago when on maxspeak I broke the story of the mistreatment by federal prosecutors of the Harrisonburg Kurds. This blew all over the world, but many, such as the Volokh Conspiracy, questioned whether it was even happening. Was I lying? It was not until we could find a small back page story from the Harrisonburg Daily News-Record confirming that there was a prosecution of Kurds (and which totally reflected the prosecution's view), that the blogosphere accepted that this was really going on, and in the end the blowback from the blogosphere then played a role in bringing print media attention in Harrisonburg and elsewhere to what was going on, eventually leading to a much more favorable outcome in the courts.
Could Someone Explain Stolper-Samuelson to James Surowiecki?
And why does Greg Mankiw endorse this stuff?
The candidates are trying to win the favor of unions and blue-collar voters in states like Ohio and West Virginia, of course, but their positions also reflect a widespread belief that free trade with developing countries, and with China in particular, is a kind of scam perpetrated by the wealthy, who reap the benefits while ordinary Americans bear the cost. It’s an understandable view: how, after all, can it be a good thing for American workers to have to compete with people who get paid seventy cents an hour? As it happens, the negative effect of trade on American wages isn’t that easy to document. The economist Paul Krugman, for instance, believes that the effect is significant, though in a recent academic paper he concluded that it was impossible to quantify. But it’s safe to say that the main burden of trade-related job losses and wage declines has fallen on middle- and lower-income Americans. So standing up to China seems like a logical way to help ordinary Americans do better. But there’s a problem with this approach: the very people who suffer most from free trade are often, paradoxically, among its biggest beneficiaries. The reason for this is simple: free trade with poorer countries has a huge positive impact on the buying power of middle- and lower-income consumers—a much bigger impact than it does on the buying power of wealthier consumers. The less you make, the bigger the percentage of your spending that goes to manufactured goods—clothes, shoes, and the like—whose prices are often directly affected by free trade.
Yes, it seems we have another edition of free trade benefits everyone through lower prices. Dani Rodrik addressed this argument directly over a one year ago:
And since Surowiecki mentioned Paul Krugman, let’s see what he had to say:
Hard to quantify is not the same thing as nearly zero. Of course, the Stolper-Samuelson theorem states:
In fact, as the price of apparel declines from free trade with China, the wages of apparel workers fall by more than the prices of apparel so the real wages of apparel works decline. Somehow it seems that James Surowiecki never grasped this proposition.
The candidates are trying to win the favor of unions and blue-collar voters in states like Ohio and West Virginia, of course, but their positions also reflect a widespread belief that free trade with developing countries, and with China in particular, is a kind of scam perpetrated by the wealthy, who reap the benefits while ordinary Americans bear the cost. It’s an understandable view: how, after all, can it be a good thing for American workers to have to compete with people who get paid seventy cents an hour? As it happens, the negative effect of trade on American wages isn’t that easy to document. The economist Paul Krugman, for instance, believes that the effect is significant, though in a recent academic paper he concluded that it was impossible to quantify. But it’s safe to say that the main burden of trade-related job losses and wage declines has fallen on middle- and lower-income Americans. So standing up to China seems like a logical way to help ordinary Americans do better. But there’s a problem with this approach: the very people who suffer most from free trade are often, paradoxically, among its biggest beneficiaries. The reason for this is simple: free trade with poorer countries has a huge positive impact on the buying power of middle- and lower-income consumers—a much bigger impact than it does on the buying power of wealthier consumers. The less you make, the bigger the percentage of your spending that goes to manufactured goods—clothes, shoes, and the like—whose prices are often directly affected by free trade.
Yes, it seems we have another edition of free trade benefits everyone through lower prices. Dani Rodrik addressed this argument directly over a one year ago:
Advocates of globalization love to argue that free trade lowers prices, and the argument seems sensible enough. Think of all the cheap goods from China that we can buy at Wal-Mart. But anyone who understands comparative advantage knows that free trade affects relative prices, not the price level (the latter being the province of macro and monetary factors). When a country opens up to trade (or liberalizes its trade), it is the relative price of imports that comes down; by necessity, the relative prices of its exports must go up! Consumers are better off to the extent that their consumption basket is weighted towards importables, but we cannot always rely on this to be the case.
And since Surowiecki mentioned Paul Krugman, let’s see what he had to say:
What all this comes down to is that it’s no longer safe to assert, as we could a dozen years ago, that the effects of trade on income distribution in wealthy countries are fairly minor. There’s now a good case that they are quite big, and getting bigger.
Hard to quantify is not the same thing as nearly zero. Of course, the Stolper-Samuelson theorem states:
An increase in the price of a good will cause an increase in the price of the factor used intensively in that industry and a decrease in the price of the other factor.
In fact, as the price of apparel declines from free trade with China, the wages of apparel workers fall by more than the prices of apparel so the real wages of apparel works decline. Somehow it seems that James Surowiecki never grasped this proposition.
Friday, May 23, 2008
War For Oil, Or Oil For War?
The Wall Street Journal has an article suggesting that the military consumes 340,000 barrels of oil a day, compared to Iraq's 2.4 million; and that the Defense Department paid $13.6 billion for energy in 2006. I suspect that these figures would be what uniformed personnel consumed. Maybe somebody here knows, but I feel fairly confident that contractors in Iraq -- even contractors carrying out military missions -- consume oil that escapes these estimates.
Wasting oil is nothing compared to wasting lives, but even so I can think of better uses for 340,000 barrels of oil a day.
Dreazen, Yochi J. 2008. "U.S. Military Launches Alternative-Fuel Push Dependence on Oil." Wall Street Journal (21 May): p A 1.
Wasting oil is nothing compared to wasting lives, but even so I can think of better uses for 340,000 barrels of oil a day.
Dreazen, Yochi J. 2008. "U.S. Military Launches Alternative-Fuel Push Dependence on Oil." Wall Street Journal (21 May): p A 1.
U.S. military consumes 340,000 barrels of oil a day, or 1.5% of all of the oil used in the country. The Defense Department's overall energy bill was $13.6 billion in 2006, the latest figure available -- almost 25% higher than the year before. The Air Force's bill for jet fuel alone has tripled in the past four years. When the White House submitted its latest budget request for the wars in Iraq and Afghanistan, it tacked on a $2 billion surcharge for rising fuel costs.
Just as important, the military is increasingly concerned that its dependence on oil represents a strategic threat. U.S. forces in Iraq alone consume 40,000 barrels of oil a day trucked in from neighboring countries.
The Air Force wants to be able to purchase 400 million gallons of synthetic jet fuel a year by 2016, an amount equal to 25% of its total fuel needs for missions in the continental U.S. This year, it expects to buy slightly more than 300,000 gallons.
Subscribe to:
Posts (Atom)