Follow the Honey

There is lots of buzz (sorry) about a pair of just-published articles that provide further evidence that the colony collapse disorder, which is decimating bee populations around the world, can be at least partially attributed to neonicotinoids, one of the most widely used of pesticides. There has been a lot of controversy around this class of agents, and they are banned or restricted in much of Europe—but not in the US. In the writeup in this morning’s New York Times, after a brief summary of the new research, we get this paragraph:

Outside experts were divided about the importance of the two new studies. Some favored the honeybee study over the bumblebee study, while others felt the opposite was true. Environmentalists say that both studies support their view that the insecticides should be banned. And a scientist for Bayer CropScience, the leading maker of neonicotinoids, cast doubt on both studies, for what other scientists said were legitimate reasons.

There followed comments from four of these outside experts. One is from the main producer of neonicotinoids; he thinks the studies are flawed. Another is from the US Department of Agriculture, who thinks the studies shift the weight of research against the pesticide. The other two, both from academia, were evenly balanced, one finding the studies persuasive, the other not.

In other words, the article is a he-said, she-said about pesticides and colony collapse, which relieves the author from having to express his own judgment. Worse, there is no indication whether either or both of the academics have received funding from pesticide manufacturers. Research in entomology and ecotoxicity is expensive, and much of it is funded by industry. Being on the receiving end of pesticide dollars does not invalidate a scholar’s argument, but it is certainly relevant information for nonspecialists who want to know who to believe.

This is an interesting topic for me, because economics has the same problem: a lot of academic, not to mention think tank, economic researchers are funded by business interests with a stake in what their research shows. They present their views to the general public, but rarely with a disclosure of their own interests: the Inside Job problem.

I have two recommendations. First, there should be a public registry, for bee researchers and economists alike, that records any substantial funding they may have received from private individuals or organizations. Journalists should be able to look up this information online and include it in their reports. Professional organizations, like the AEA, should iron out the details and monitor compliance.

Second, journalists have to graduate from the duelling quote game. The only alternative is to write stories that explain, in terms that the public can understand, what the substantive issues are in scholarly disputes, and why some experts go one way and others go another. If a journalist does not have the expertise to do this herself, she should outsource the work to a panel of experts. Their job is not to take sides but to explain, as clearly as possible, what the root basis of the disagreement is, so that readers can understand the points on which the argument turns. In this scenario the job of the journalist is to put together the panel and use her writing skills to make their analysis clear to nonspecialists.

Year by year, more of the issues that democracy has to deal with are technical in nature. Journalism is the indispensable intermediary between arcane knowledge and popular debate. The job isn’t being done very well right now.

EU, How About a Public Option for Mobile Phone Users?

The EU has chosen to continue its system of price controls on mobile phone roaming and internet services.  Isn’t there a simpler way?  Why not create an EU-wide public enterprise to provide connectivity under the condition that it cover its cost of capital, and then let private firms compete with it?  If they can overwhelm the public entity with a great burst of innovation, fine.  If not, too bad.  Doesn’t this make more economic sense than trying to micromanage the price structure?

A Puzzler on Statistical Risk and Fundamental Uncertainty

Let’s compare two situations. In situation A there will be a coin toss. The coin is known with complete certainty to be fair. The odds are obviously .5 that it will come up heads and .5 that it will be tails.


In situation B there will also be a coin toss, but in this case we have no information whatever regarding the fairness of the coin. It could be rigged to always come up heads or tails, or it could be biased toward one or the other, or only in windy weather, or who knows. We don’t. What are the odds? With only two possible outcomes and no reason to expect either to be more likely than the other, it is still .5 and .5.

And that’s the puzzler. Does it really make no difference at all whether we know the true odds? From a decision point of view, are situations A and B effectively the same?

Although this is a greatly stripped-down puzzle, it contains the core of the risk vs uncertainty problem. Consider the typical problem faced by a firm of whether to make an investment. There are many possible outcomes of this investment, and its profitability will be affected by events we may not even conceive of in the present—the so-called unknown unknowns. Nevertheless, if the firm has a hurdle rate of return, its decision will boil down to whether it thinks the expected return is above or below the bar. In situation A it is able to calculate an expected rate of return with full confidence, in situation B with partial, and perhaps very little, confidence. Again, from a decision perspective, is there any reason for the confidence of the expectation to matter? Note that, in the absence of relevant information in situation B, there is no reason to expect the variance of the ROI to be greater or less than in situation A.

Did I mention that this is a tremendously important topic not only in macroeconomics, but also in areas of micro like the justification for the precautionary principle?

Is there a literature that frames the problem this way? I haven’t seen it, and I would be very happy if someone could lead me to it and allow me to achieve enlightenment, since this puzzle has kept me awake off an on for years.  (But I have chipped away at it and even published a paper on it a while back...)

If The Supremes Say No To Obamneycare, Then Go To Single Payer

So, the US Supreme Court seems likely to reject the individual mandate in Obamneycare, which would bring down the entire Affordable Care Act, even though the individual mandate was cooked up by the Heritage Foundation and was long the favored Republican plan, emphasizing using private insurance companies and individual responsibility not to be freeloaders on the system.

So, if the Supremes say no, just do what Teddy Kennedy proposed: expand Medicare to the entire population. This takes care of it, and we can get rid of Medicaid as well, which is increasingly an insufferable burden on the hard pressed state budgets (reminder that last year it was state and local governments that were laying people off to balance their budgets, the main source of rising unemployment in the US economy). So, go to single payer, which was better all along anyway.

Time To Lock The Gun Nuts Up In The Looney Bin

US society has been caving and kowtowing to the NRA for some time now, with Dems terrified to stand up to them over anything. Guns in bars, churches, schools, you name it, and then the obnoxious and insane "Stand Your Ground" laws that have been widely passed. We have now seen the fruits of this in Florida where it is not just the awful Martin-Zimmerman case, but a tripling of these sorts of homicides. The old manipulations of data by sock puppet John Lott are no longer able to cover up the truth: encouraging wider availability of guns leads to more people getting killed by them. Time to lock the lying gun nuts into the looney bin.

Debt, Income and Aggregate Demand: Scoring Krugman vs Keen

Not having learned from my earlier foray into MMT-land, I’m at it again, sucked into a debate between Paul Krugman and Steve Keen over how to think about debt, money and macroeconomics. It is remarkable that these questions could still be unresolved after eons of economic theorizing; this stuff is not very complicated, after all. Someone has to be right, but who?

Former Chancellor Levy Says Profs Should Work More

OK, I am steamed. It is bad enough when someone is misrepresenting facts, but when they add hypocrisy on top of it, this is really annoying. This is the case with the latest push for bashing faculty, in this case calling for increased teaching loads without any salary increases, all supposedly to reign in rising tuition costs. I fully agree that rising tuition costs are a serious problem in US colleges and universities, but the problem has much more to do with rising spending on administrators and staff than faculty, and this latest blast from David C. Levy, former Chancellor of "New School University" (back to being the New School of Social Research now) in the Sunday Outlook section of the Washington Post, "Do Professors Work Enough?" is the worst, with its focus on faculty and no mention whatsoever of his fellow administrators and other spongers.

So, he provides no evidence of falling faculty workloads (and none exists because they have not), but wants people teaching four course loads to go to five course loads in teaching oriented schools and to teach during the summers as well, apparently on a mandatory basis, whether or not students want to attend during summers. In short, he wants to turn our colleges into high schools. A sentence that shows how weirdly fixated he is follows: "Since faculty salaries make up the largest single cost in virtually all college and university budgets (39 percent at Montgomery College), think what it would mean if the public got full value for these dollars." Yeah, wow, just think of it. Here I thought he was going to trot out something like 70%, and instead we get 39%. So, what is the other 61% being used for? Obviously administrators, staff, books, and maybe sports (at my uni the highest paid individuals are the basketball coach and football coach, even though the athletic program is not a net money earner, which is true for all but about 20 schools in the US). As it is, one could fire a quarter of the faculty at Montgomery, increase the teaching load of the rest by a third, and manage to reduce tuition by, wait for it, 8%! Wow.

So, let us get at what is the real problem, completely ignored by this former high level university administrator. According to the New York Times of 12/5/11, during the decade 1999/2000-2009/2010, salaries for presidents at the 50 wealthiest universities rose 75%, while professorial salaries rose 14%, http://www.nytimes.com/2011/12/05/education/increase-iin-pay-for-presidents-at-private-colleges.html .

Nor is this just a matter of the salaries going up for people like Levy way more than for faculty, it is that the numbers of these parasites has also risen dramatically relative to faculty across the board (so that the 39% figure is not all that surprising, although we tend to think that faculty are doing most of the educating at colleges and universities, not the administrators and staff). So, between 1975 and 2005, while total spending on higher ed roughly tripled in constant dollar terms, student-faculty ratios remained about constant at 15-16, administrator-student ratios went from 84 to 68 and staff-student ratios went from 50 to 21. From 1998 to 2008, while faculty spending rose 22%, admin and staff spending rose 36%. From 1965 to 2005, while the number of faculty rose from 446,830 to 675,000, the numbers of administrators and staff rose from 268,952 to 756,405, http://www.washingtonmonthly.com/magazine/septemberoctober_2011/features/administrators_ate_my_tuition031641.php .

Really, I do not know if this guy Levy, now supposedly president of something called "the education group at Cambridge information group," is as seriously ignorant of these facts as he appears to be, or if he is just supremely hypocritical in ignoring the explosion of spending for his type of person in the higher education firmament. But, the push going on for putting faculty in their place by people like this is simply despicable. I must grant that Levy disavows such advocacy by "the political right [who] have been associated with anti-labor and anti-intellectual values," but this looks pretty empty given that earlier in his piece he singles out the "advent of collective bargaining in higher education" in the early 1970s as a main soure of the supposedly rising salaries of the supposedly wickedly lazy faculty he condemns.

I shall conclude with one more source on the bottom line statistics here, which puts to shame his jibe about collective bargaining. These come from the National Center for Education Statistics as reported by Mark Perry at http://mperry.blogspot.com/2009/08/college-tuition-increases-and-faculty.html . So, between 1978 and 2007, while tuitions rose 7.9% per year, faculty salaries rose just barely faster than inflation, 4.5% per year against the CPI at 4.1% per year. Somehow Levy never bothered to notice or cite such numbers in his ridiculous screed. I sincerely hope we do not see too much more of this sort of drivel from this sort of person.

Greg Mankiw Admits a Political Operative Into the Pigou Club

Via Greg comes some odd piece by Jim McTague:

President Obama habitually made the superhero boast, especially in regard to his energy policies. Consequently, now that pump prices have topped $4 in many parts of the country, he finds himself tangled in his cape, with his approval ratings several points below the crucial 50% deemed necessary for re-election. This is a campaign crisis for the president, which is why he is focusing so much of his time on it, including two solid days last week. Obama's mistake was to advertise himself as a hi-tech guru with the added, superhuman ability to manipulate market forces to create a green-energy utopia where batteries, algae and solar cells would replace climate unfriendly fossil fuels like coal and gasoline. His lengthy litany of powers included the ability to raise the cost of these dirty fuels to reduce their pricing advantage over renewable energy. He harped that this was desirable and necessary. The political imprinting worked better than our president ever imagined. Now that gasoline prices are pinching pocketbooks, the public expects Obama to exercise his superpowers and manipulate prices lower. Protestations by Obama that market forces beyond his control are setting the prices are greeted with disdain rather than sympathy.

McTague does go onto to praise Greg:

Harvard University economist Greg Mankiw, currently an advisor to GOP presidential hopeful Mitt Romney, has long been an advocate of a $1-per-gallon gas-tax hike phased in over 10 years (Romney won't countenance the tax). Absent the tax, politicians resort to crazy, Obama-like schemes to achieve the same end of reducing our dependence on foreign oil supplies. MANKIW PRESCIENTLY STATED during a 2006 interview conducted by CNBC's Larry Kudlow that the alternative to a simple gas tax is "an energy policy that looks like it was created in the Kremlin." "An alternative in Washington to gas taxes," he said, "is very heavy-handed regulation that's extraordinarily intrusive and not particularly effective. Things like CAFE standards"—the fuel-efficiency rules that auto manufacturers are required to follow—"and biofuel mandates are tremendously regulatory. The gas tax is really the least invasive way of getting toward our energy goals." In an Oct. 20, 2006, op-ed piece in The Wall Street Journal, Mankiw said higher gasoline taxes would be the least invasive way to reduce pollution and highway congestion. The tax would encourage manufacturers to make fuel-efficient cars and eliminate the need for bureaucratic mandates. Mankiw estimated in his 2006 article that tax revenue would amount to $100 billion a year, which could be used to lower the deficit.

OK – a little credit may have been due this silly op-ed for noting that Romney has not endorsed Mankiw’s tax except for the claim by McTague that “oil men don't have a knee-jerk opposition to such a tax”. McTague also seems to have missed this account of how Romney used to support the same eco-friendly positions that McTague ridicules.

To be honest – I had no idea who Jim McTague was until I found this:

I have little respect for journalists like Larry Kudlow and Jim Mctague who are merely right wing, Republican, political operatives masquerading as financial journalists. Since they are mere mouth pieces for industry groups, and self interested big business, who knows what financial incentives they receive? I have more respect for prostitutes, at least they’re upfront about what they do.

My only problem with this last blog post is that it claimed Kudlow used to be an economist.

Cochrane Confuses Keynesian and the Laugher Crowd

Noahpinion catches John Cochrane making a little sense:

Austerity isn't working in Europe. Greece is collapsing, Italy and Spain’s output is declining, and even Germany and the U.K. are slowing down. In addition to its direct economic costs, these “austerity” programs aren't even swiftly closing budget gaps. As incomes decline, tax revenue drops, and it is harder to cut spending. A downward spiral looms.

Alas, Cochrane switches to his usual rant criticizing fiscal stimulus, which Noah ably takes down. But let’s focus on this:

Economists have been arguing about whether this “multiplier” is more or less than one; five is beyond any reported estimate. Keynesians made fun of “supply siders” in the 1980s, who made similar claims for tax cuts. At least those cuts had incentives on their side, which stimulus doesn't.

Mark Thoma had a similar concern. I wish Cochrane had read this post and how Mark resolved his concern:

The people making the claim about government spending are careful to note that it only applies to very depressed economies

Art Laffer was claiming that tax cuts pay for themselves even if the economy were at full employment and even if the Federal Reserve was setting interest rates well above zero. In case, Cochrane does not realize that interest rates today are a far cry from what they were during the 1980’s, here’s a graph of Treasury bill rates.

Is The West Shooting Itself In The Foot With Iran Oil Sanctions?

Juan Cole describes a translation from a questionable web source, Javan, of the Iranian Revolutionary Guards, who claim there was a summit of intel analysts from the US (CIA), Israel (Mossad), UK (MI6), Germany (BND), and France (DSGE) on March 20 in Stockholm in which they supposedly discussed how Iran has gained $3 billion in revenues from the higher oil prices due to the sanctions against Iran, which supposedly have failed to reduce Iran's oil sales all that much, and of course are hurting the western oil-importing countries, http://www.juancole.com/2012/03/western-intelligence-analysts-worry-that-iran-sanctions-are-hurting-west-irgc.html .

One must suspect that even if the reported meeting took place and that the claims about what has been reported are at least somewhat accurate, that this may be a report intended to understate damage to the Iranian economy and an effort to discourage the sanctions. The issue seems to be Iranian inflation, which has almost certainly accelerated due to the substantial devaluation of the Iranian rial that has happened since the sanctions began being imposed. Indeed, the translation does not deny that this is the case. Rather it says that this does not matter politically or stategically in that the March 2 Majlis election has already passed with pro-Khamenei supporters winning solidly and with the Iranian public supposedly convinced that the increased inflation is strictly due to domestic causes. Even if they are not so convinced, there is reason to believe that the response of the Iranian public, even those critical of the government, is to be angry at outsiders for imposing the sanctions, with much past evidence to support such a view.

Another matter in the translation is that there was reportedly a split at the meeting, with the European nations criticizing the US and Israel, with the German BND being particularly incensed over the negative impact of rising oil prices induced by the sanctions. Supposedly it was decided that the UK should engage in an expanded propaganda effort in Iran to convince their public that the higher inflation there is caused by the sanctions (as if this will do much).

What should be noted here is that even if the report is seriously flawed, this fits in with an ongong theme of intel agencies in western countries being far less enamored of and supportive of the vigorous anti-nuclear-Iran efforts being pushed by most of the media and politicians. In the US, a solid majority believes Iran is actively pursuing a nuclear weapons program, even though all 16 US intel agencies in the latest NIE on this subject agree that Iran is not actively pursuing nuclear weapons (although it may be pursuing a potential capability to pursue them). Less reported than the NIE report is the fact that Israeli Mossad completely agrees with this assessment as well, even though the disjuncture with Israeli politicians is much greater than is the case currently in the US, with the Israeli leaders pushing for an attack, even against public opinion in Israel, which may be more negative on that than public opinion in the US.

Although it is possible that this report is simply bogus propaganda from the Iranians (and that no such meeting in Stockholm occurred or had very different results than reported), it remains that like most sanctions programs this one is probably not as damaging as many think and certainly does have a damaging feedback on the oil-importing countries still struggling to come out of the depths of the past recession, with these sanctions basically pointlessly directed at a nonexistent nuclear weapons program (and Iran's actual nuclear activities completely legal under the Nuclear Non-Proliferation Treaty of which it is a party).

Bankers Who Can’t Live Without Multi-Million Salaries

J.P. Morgan was a bit sloppy in their salary offer to Kai Herbert:

The original contract said Herbert’s annual pay would be 24 million rand ($3.1 million). JPMorgan blamed the mistake on a typographical error and said the figure should have been 2.4 million rand, according to court documents.

Herbert is now suing after he realized that he’d make a mere $300,000 a year. As the attorney for J. P. Morgan noted:

How can you possibly suggest that they would pay you so much money for an executive director level job?

This strange story alludes to this lawsuit:

More than 100 bankers claim Commerzbank AG broke a pledge by Dresdner Bank, which it bought in 2009, to set aside about $516 million for bonuses and are asking a U.K. court this week to order that they be paid. In the trial, scheduled to begin Jan. 25 in London, the former Dresdner bankers seek about 50 million euros ($64.5 million), with individual payouts of as much as 2 million euros ... Commerzbank bought Dresdner in January 2009, even though it was forced to seek an 18.2 billion-euro bailout from Germany during the credit crunch. A month after the deal was struck, Blessing had to defend the acquisition when Dresdner posted a full-year loss of $8 billion.

During the Great Recession, these bankers insist they are entitled to 7-figure compensation!

The Lovins Paradox: "this old canard"

Amory Lovins has responded to David Owen's commentary at the New York Times on "Efficiency’s Promise: Too Good to Be True." In his Times comment, Lovins cites his complete response at the Rocky Mountain Institute blog, wherein he asserts: "There is a very large professional literature on energy rebound, refreshed about every decade as someone rediscovers and popularizes this old canard."

Now, "this old canard" -- the Jevons Paradox -- is based explicitly on an even older canard the Sandwichman has dubbed the "Rasbotham rebound", the truism opposite to the so-called lump-of-labor fallacy. Although he may not be aware of it, in trivializing the Jevons Paradox, Lovins is implicitly trivializing the Rasbotham rebound as well. So, in effect (as many economists would claim) he is embracing the lump-of-labor fallacy. You cannot categorically reject both the Jevons Paradox and the lump-of-labor fallacy because the two are diametrically opposing principles. If "A" is absolutely false, then "B" is absolutely true. However is "B" is absolutely false, then "A" is absolutely true.

There is, however, a third possibility, which is that both "A" and "B" are only conditionally true. They are true in some circumstances but false in others. In that case, their relative importance vis a vis each other can only be gauged in context. It is not sufficient to find circumstances where "A" is true and other circumstances where "B" is false. One must examine the relationship between "A" and "B" in a given circumstance. Or -- to bring it back to the language of energy efficiency, energy consumption and employment -- one must look specifically at the energy intensity of employment, not the energy intensity of GDP or the micro-level effects of energy efficient light bulbs on the demand for lighting.

The Lovins Paradox thus can be stated as: even if Amory Lovins is right about the Jevons Paradox (or rebound effect) being an "old canard", the implications for energy consumption are troubling because of the intricate linkage between energy consumption and employment. In other words, dispensing with the rebound still leaves us with what David Owen calls The Conundrum (see video embedded below). The following chart compares the energy intensity of GDP in the U.S. with the energy intensity of employment (energy consumption per worker). The green line shows the index Lovins likes to cite, energy intensity of GDP from 1949 to 2009. The blue line shows energy intensity of employment in the U.S. for the same period. The red line shows the energy intensity of the labor force (because employment data is not available) for the world from 1980 to 2006.

Sources: World Bank, U.S. Bureau of Labor Statistics, U.S. Energy Information Agency

World energy intensity of employment in 2006 was around five percent higher in 2006 than it was in 1980. This is not an improvement, not even a relative improvement.

Bankrupt Rhetoric

I woke up this morning to Paul Ryan, describing his budget proposal, as quoted in the New York Times: “This is about putting an end to empty promises from a bankrupt government.”

Bankrupt government?  Let’s consider this more closely.  The normal meaning of bankrupt is negative net worth, as when your liabilities exceed your assets.  By this standard, the US government is hardly bankrupt, since it has enormous hard assets and an even larger soft one, the legal right to tax the income, transactions and property of all individuals and organizations subject to US law.  We should all be so bankrupt!

So I guess Ryan is not using the normal business meaning of the word.  Perhaps for him bankrupt means having negative earnings over some period of time.  Here is the federal government’s fiscal record since 1929:

So during what periods has the federal government been “bankrupt”?  During every year when outlays exceeded revenues?  That would include nearly all of modern history since the 1960s.  Or when the fiscal deficit exceeded, say, 5% of GDP?  That’s a smaller time frame—basically the past few years since the financial crisis hit and WWII.  But if the government is bankrupt now, how bankrupt was it in the days of FDR and the struggle against Germany and Japan?  And what does it mean to be bankrupt if the US could be really, really bankrupt in the 1940s and then bounce back to fiscal health almost immediately as soon as the troops came home?

And if the US government is bankrupt today, how come it can raise money at approximately a zero real interest rate?

And on a philosophical level, how does Ryan measure the financial health of government when its purpose is not to make itself rich but to support the prosperity of everyone else?

My translation of the way Ryan uses the word “bankrupt” would be “I want to scare everyone about the current fiscal deficit, and the best way to do it is to use a business-sounding term that has no meaning at all in this situation and hope that the public, and especially the journalists, are too dumb to notice.” 

What Did He Say?

The Los Angeles Times has an article about a campaign to get Pete Seeger, now a vibrant 92 years old, back on the Billboard charts.  (Hat tip An Overgrown Path.)  Toward the end I stumbled onto

Arlo Guthrie, at a tour stop in Oklahoma City, Okla., last week on his way to a centennial concert salute to his father, said he had recently invited Seeger, with whom he toured on and off for three decades, to join him for a show, but Seeger declined. 

“Pete said, ‘Arlo, I can’t play as well as I used to play, and I can’t sing as well as I used to sing,’” Guthrie told the audience. “I said, ‘Pete, have you taken a look at your audience lately? They can’t hear as well as they used to hear!’”

The Post-Privacy Era Has Already Begun

You don’t have time to read this long, sober report on the National Security Agency’s program to capture and analyze all data on planet earth, but you should anyway.  The author is James Bamford, the generally recognized authority on the US intelligence establishment.  Thanks to Naked Capitalism for linking this.