I often hear that pharmaceuticals are one of America’s biggest exports. But that isn’t what is in the actual trade data (see exhibits 7 & 8). American firms (or formerly American firms, if there has been an inversion) may own the intellectual property behind many successful drugs, but the active ingredients themselves are often manufactured abroad. In fact, the (goods) trade deficit in pharmaceuticals now exceeds the surplus in civil aircraft. This trade isn’t obviously driven by differences in labor costs. The biggest sources of pharmaceutical imports, Ireland and Switzerland, aren’t exactly low wage countries. Trade here seems motivated in large part by the ability to use transfer pricing to shift profits to low tax jurisdictions. And the new Tax Cuts and Jobs Act if anything looks to have made those games more not less attractive. The incentive to offshore intellectual property generally remains—the “GILTI” rate on profits shifted to no tax jurisdictions is the lowest rate in the tax code. And the lower tax on intangibles than on tangibles has created an incentive to offshore actual production and jobs as well—the more tangible assets abroad, the higher your deemed tangible income and the lower your tax on your intangible income (the same is true for firms that retain their intellectual property in the United States, as there is a lower tax rate on the export of intangibles than the export of tangibles). To be concrete, a firm with its intellectual property in the Caribbean believes it can reduce its effective tax rate to under 10 percent (a rate somewhat below the global "minimum"). It is too early to say definitively that these incentives drove the increase in the pharmaceutical deficit in 2018. But it doesn’t seem too early to say that there is no evidence that these kind of tax games have gone away after the tax reform.Brad’s thesis is certainly going to be controversial. As I read what he is saying is that it is not just the GILTI provisions of the 2017 tax cut that led to the increase in the life science trade deficit over the years. Rather it was the weak enforcement of basic transfer pricing rules that allowed Big Pharma to massively evade U.S. corporate taxes and created these perverse incentives. While we were told that the 2017 Republican tax cut for the rich would close the transfer pricing loopholes and perverse incentives they clearly did not. I’m all for scrapping GILTI and FDII for a lot of reasons but these steps alone will not fundamentally change what Brad is suggesting unless we start actually enforcing good old fashion transfer pricing rules. Let’s hope Biden has this in mind.
Sunday, July 19, 2020
Brad Setser on Offshoring Life Science Production and Transfer Pricing
I just posted a discussion of an interesting proposal from Biden written by Alex Parker who mentioned some February 5, 2020 testimony from Brad Setser. The gist of this testimony was noted back in a March 26, 2019 blog post entitled When Tax Drives the Trade Data:
Biden Proposes Ending the GILTI Loophole
Alex Parker covers an interesting and important tax policy issue:
Former Vice President Joe Biden's recent proposal to secure medical supply chains in the wake of the COVID-19 pandemic includes tweaks to the 2017 federal tax overhaul, reigniting the debate about whether its international provisions are pushing manufacturing facilities offshore …Former Vice President Joe Biden's recent proposal to secure medical supply chains in the wake of the COVID-19 pandemic includes tweaks to the 2017 federal tax overhaul, reigniting the debate about whether its international provisions are pushing manufacturing facilities offshore … the TCJA exempted most foreign income from taxation as part of a shift toward a more territorial tax system, similar to those used in Europe and much of the world. But it also enacted new provisions, including the GILTI tax and the base erosion and anti-abuse tax, which lawmakers said would block companies from shifting U.S. income abroad. Many of the structures for tax avoidance that have drawn public scrutiny and outrage over the past decade have involved intangibles, which are relatively easy to move from jurisdiction to jurisdiction to chase the lowest tax rate. But the very attribute that makes them difficult to tax also makes them difficult to define. Rather than attempt to pinpoint the intangibles themselves, the TCJA instead targets unusually high returns on tangible assets. Under the GILTI provision, the total foreign income of a U.S. company, beyond a 10% return on its offshore depreciable tangible assets, is taxed at 10.5%. That rate is half of the overall corporate rate of 21%. As the bill was passed by Congress in 2017, Democrats and outside critics quickly noted that the GILTI tax could encourage companies to shift investments in tangible assets abroad. Because the GILTI tax kicks in only at a 10% return on foreign tangible property, the more valuable that property is, the smaller the ultimate GILTI tax bill will be. Even further, because GILTI is calculated at the global level, in most cases it would not matter where new tangible assets were located; as long as they were offshore, they would decrease the GILTI tax. A reduced rate on foreign-derived intangible income, or domestic income defined through a formula similar to GILTI, also creates a similar incentive, critics contend. If a company has tangible assets at home, it will have less income defined as FDII, and less of the tax benefit.The 2017 tax cut for rich people was written in secret by Republicans who had told us that it would somehow stop transfer pricing manipulation and would encourage onshoring. But when the details were released, a lot of economists including conservative economics were taken back by the complexity of the international provisions. Parker’s discussion is interesting even though he might be faulted for not defining FDII and GILTI. FDII stands for Foreign Derived Intangible Income while GILTI stands for Global Intangible Low-taxed Income where both are defined as profits minus a 10 percent return to tangible assets, which is a crude attempt to allow intangible profits sourced in the U.S be taxed at a 12.5 percent rate instead of the 21 percent corporate tax rate. A lot of the large life science multinationals have found a way of sourcing profits in a tax haven. Rather than vigorously enforcing our transfer pricing rules, the Republican tax cut for rich people decided to let them by taxed a 10.5 percent, which does not exactly discourage shifting profits abroad. But hey they did set up a complex set of rules that kept the Big Four accounting firms and international law firms gainfully employed trying to figure out how to manipulate these rules. But Biden’s first concern here was how these complex rules might actually encourage shifting production abroad. Parker also notes:
Brad Setser, a senior fellow at the Council on Foreign Relations and the former deputy assistant secretary for international economic analysis at the U.S. Treasury Department, has blamed the provision for a 20% increase in pharmaceutical imports since 2018. "The rise in pharmaceutical imports is likely, in part, a reaction to the incentives to offshore pharmaceutical production that were included in the Tax Cuts and Jobs Act," Setser said Feb. 5 in testimony to the U.S. House Ways and Means Health Subcommittee.Brad has written a lot of very interesting things on transfer pricing so it is time to go read his latest on this issue as well.
Wednesday, July 15, 2020
RIP Tonu Puu
Seems like more people I know are dying. In this case it is a good friend of mine and occasional coauthor, the Swedish economist, Tonu Puu, who was born in Estonia of an Estonian father and a mother of German ancestry. As it was, he ended up speaking a very large number of languages, as well as being very cosmopolitan in many other ways. He was 83 years old and had cancer for some time, which is what I presume he did of, although the announcement did not specify a cause, but it happened this past Saturday in Umea in northern Sweden, where he was at the university there for most of his career.
Before talking about his work in economics, I want to note that probably more important for him was music. He made baroque instruments such as viols and harpsichords, and was so good at it that professional musicians had him make such instruments for them. For many years he ran an annual Baroque music festival that attracted fine musicians from all over the world to Umea. I shall note here that an important characteristic of Tonu, which some of you may not like, was that he was deeply conservative in many ways. A sign of this in music is that he considered Beethoven to be the "worst thing that ever happened to music," at least I heard him say that. He saw Beethoven as being ultimately responsible for there being rock concerts in Venice that knocked off parts of the roof of the opera house. I happen to disagree with that, seeing that as a pretty shaky link, but this was the sort of long-run perspective that he took to many things, full of his own integrity that ignored popular and transient trends, even if those were centuries long.
As a segue to talking about his economics, I note that he focused most of his attention on writing books, which are his most cited works, and covered not only many areas of economics in them, but also wrote on interdisciplinary matters. Thus one of his later books, which went into a second edition, is Arts, Sciences, and Economics: A Historical Safari, Springer (almost all his books were published by Springer), 2006, 2015, with him also being a deep student of the history of technology.
As noted he wrote on many things, but he is probably best known for something I am also into: nonlinear economic dynamics, with him applying these ideas to various parts of economics, including industrial organization, urban and regional economics, macroeconomic dynamics, international and interregional trade, and even capital theory, with over 100 articles and into the teens of books, with several of them going into multiple editions. His most cited are Nonlinear Economic Dynamics (first edition, 1989, not sure how many of them), Attractors, Bifurcations, and Chaos: Nonlinear Phenomena in Economics (3 editions,first in 2000), Mathematical Location and Land Use: An Introduction (2nd edition, 2003, not sure when first was), and Spatial Economics: Density, Potential, and Flow, coauthored with the late Martin Beckmann in 1984 (this one by North-Holland). In that one and in a few articles earlier, he presaged Paul Krugman in presenting rigorous and highly innovative models urban and regional models with economies of scale, work that Krugman never cited or recognized, although this was half of what Krugman got his Nobel Prize for. Tonu's final book came out in 2018, Disequilbrium Economics..
His most cited articles were involved applying nonlinear dynamics to industrial organization problems, such as his 1995 paper on "The Chaotic Monopolist," which appeared in Chaos, Solitons, and Fractals, a journal he served as the first economics coeditor of.. He tended to publish his papers in odd journals, many of them not strictly in economics, such as Environment and Planning A and Geographical Analysis. I note that in that paper he followed up on Joan Robinson's 1933 point that monopolists may face non-monotonic marginal revenue curves. While he was generally conservative, he paid no attention to ideology in his economics work and drew from many sources and inspirations. I think that he supported the more conservative parties in Sweden, although those tend to be to the left of the US Democratic Party. In any case, most of his macroeconomic models drew on the nonlinear Keynesian ones by people like Hicks and Goodwin.
Besides his original work on nonlinear location theory models, and his chaos theory analysis of industrial organization, another original model he developed was the first analysis of the possibility of chaotic hysteresis in business cycles. He more or less laid this out in the first edition of his Nonlinear Economic Dynamics book, his most cited work, but the full development of it appeared as the first artcle to appear in the journal Occasional Paper Series on Socio-Spatial Dynamics, which would later become Discrte Dynamics in Nature and Society. The paper is "A Chaotic Model of the Business Cycle," 1(1), 1-19. Later I and some others would empircally find evidence for such a pattern in Soviet investment patterns, of all things.
He also founded the ongoing Nonlinear Economic Dynamics Society (of which I am Chair of its Executive Committee) and also CERUM at Umea University. I am not sure what that acronym stands for precisely, but it is a center devoted to research in regional economics, and it was his final professional location. The announcement of his death came from its current director, Lars Westin.
I shall close this by quoting at length from his view on publishing and how it has changed, comparing how things used to be in Europe compared to now, especially under the influence of American academia, with this showing also showing both his integral conservatism and view of standards.This is from pp. 31-32 of his book, Arts, Sciences, and Economics: A Historical Safari, 2006 edition, and it also gives a flavor of his persona, I think.
"European university culture, until the 1960s, heavily depended on seminars, where various members of the staff, working with entirely different topics, communicated their results. For that reason, the staff members had to keep a broad perspective on their disciplines. Relatively little was regarded as being worth publishing, and national and local 'schools' were established, which made visits toother universities really interesting.
We tend to look down on the previous generation as they published relatively little. This fact, however, does not imply that the worked little or were less creative. It might just signify that they were more choosy about what they regarded as being significant enough to merit publication.
After large scale production ideals from the US overtook the European style, everything is produced for immediate publication, even the relatively insignificant ideas. If it is publishable, it is not insignificant, and the number of journals will expand to allow ever-increasing publications. The number of journals, which has exploded accordingly, conveniently provides for the space. We still have seminars, but we read already published or accepted papers, which we do not want to criticize, and we hardly expect anybody else at the department to understand our whole message. Travel and change of department only results in new personal relations, not new ideas; it may be that we would urgently need more interdisciplinary scientific fora in the future just in order to provide for encounters with the unexpected ideas we need to secure creativity."
I close by noting that an extreme example of his older view is shown by Piero Sraffa, who took 35 years to finally publish in 1960 his magnum opus, reportedly only after many efforts by Joan Robinson, the not-quite-even 100 page long Production of Commodities by Commodities: A Prelude to a Critique of Economic Theory.
Anyway, RIP, my old friend, Tonu Puu (and there should be an umlaut over that "o" in his name.)
Barkley Rosser
Before talking about his work in economics, I want to note that probably more important for him was music. He made baroque instruments such as viols and harpsichords, and was so good at it that professional musicians had him make such instruments for them. For many years he ran an annual Baroque music festival that attracted fine musicians from all over the world to Umea. I shall note here that an important characteristic of Tonu, which some of you may not like, was that he was deeply conservative in many ways. A sign of this in music is that he considered Beethoven to be the "worst thing that ever happened to music," at least I heard him say that. He saw Beethoven as being ultimately responsible for there being rock concerts in Venice that knocked off parts of the roof of the opera house. I happen to disagree with that, seeing that as a pretty shaky link, but this was the sort of long-run perspective that he took to many things, full of his own integrity that ignored popular and transient trends, even if those were centuries long.
As a segue to talking about his economics, I note that he focused most of his attention on writing books, which are his most cited works, and covered not only many areas of economics in them, but also wrote on interdisciplinary matters. Thus one of his later books, which went into a second edition, is Arts, Sciences, and Economics: A Historical Safari, Springer (almost all his books were published by Springer), 2006, 2015, with him also being a deep student of the history of technology.
As noted he wrote on many things, but he is probably best known for something I am also into: nonlinear economic dynamics, with him applying these ideas to various parts of economics, including industrial organization, urban and regional economics, macroeconomic dynamics, international and interregional trade, and even capital theory, with over 100 articles and into the teens of books, with several of them going into multiple editions. His most cited are Nonlinear Economic Dynamics (first edition, 1989, not sure how many of them), Attractors, Bifurcations, and Chaos: Nonlinear Phenomena in Economics (3 editions,first in 2000), Mathematical Location and Land Use: An Introduction (2nd edition, 2003, not sure when first was), and Spatial Economics: Density, Potential, and Flow, coauthored with the late Martin Beckmann in 1984 (this one by North-Holland). In that one and in a few articles earlier, he presaged Paul Krugman in presenting rigorous and highly innovative models urban and regional models with economies of scale, work that Krugman never cited or recognized, although this was half of what Krugman got his Nobel Prize for. Tonu's final book came out in 2018, Disequilbrium Economics..
His most cited articles were involved applying nonlinear dynamics to industrial organization problems, such as his 1995 paper on "The Chaotic Monopolist," which appeared in Chaos, Solitons, and Fractals, a journal he served as the first economics coeditor of.. He tended to publish his papers in odd journals, many of them not strictly in economics, such as Environment and Planning A and Geographical Analysis. I note that in that paper he followed up on Joan Robinson's 1933 point that monopolists may face non-monotonic marginal revenue curves. While he was generally conservative, he paid no attention to ideology in his economics work and drew from many sources and inspirations. I think that he supported the more conservative parties in Sweden, although those tend to be to the left of the US Democratic Party. In any case, most of his macroeconomic models drew on the nonlinear Keynesian ones by people like Hicks and Goodwin.
Besides his original work on nonlinear location theory models, and his chaos theory analysis of industrial organization, another original model he developed was the first analysis of the possibility of chaotic hysteresis in business cycles. He more or less laid this out in the first edition of his Nonlinear Economic Dynamics book, his most cited work, but the full development of it appeared as the first artcle to appear in the journal Occasional Paper Series on Socio-Spatial Dynamics, which would later become Discrte Dynamics in Nature and Society. The paper is "A Chaotic Model of the Business Cycle," 1(1), 1-19. Later I and some others would empircally find evidence for such a pattern in Soviet investment patterns, of all things.
He also founded the ongoing Nonlinear Economic Dynamics Society (of which I am Chair of its Executive Committee) and also CERUM at Umea University. I am not sure what that acronym stands for precisely, but it is a center devoted to research in regional economics, and it was his final professional location. The announcement of his death came from its current director, Lars Westin.
I shall close this by quoting at length from his view on publishing and how it has changed, comparing how things used to be in Europe compared to now, especially under the influence of American academia, with this showing also showing both his integral conservatism and view of standards.This is from pp. 31-32 of his book, Arts, Sciences, and Economics: A Historical Safari, 2006 edition, and it also gives a flavor of his persona, I think.
"European university culture, until the 1960s, heavily depended on seminars, where various members of the staff, working with entirely different topics, communicated their results. For that reason, the staff members had to keep a broad perspective on their disciplines. Relatively little was regarded as being worth publishing, and national and local 'schools' were established, which made visits toother universities really interesting.
We tend to look down on the previous generation as they published relatively little. This fact, however, does not imply that the worked little or were less creative. It might just signify that they were more choosy about what they regarded as being significant enough to merit publication.
After large scale production ideals from the US overtook the European style, everything is produced for immediate publication, even the relatively insignificant ideas. If it is publishable, it is not insignificant, and the number of journals will expand to allow ever-increasing publications. The number of journals, which has exploded accordingly, conveniently provides for the space. We still have seminars, but we read already published or accepted papers, which we do not want to criticize, and we hardly expect anybody else at the department to understand our whole message. Travel and change of department only results in new personal relations, not new ideas; it may be that we would urgently need more interdisciplinary scientific fora in the future just in order to provide for encounters with the unexpected ideas we need to secure creativity."
I close by noting that an extreme example of his older view is shown by Piero Sraffa, who took 35 years to finally publish in 1960 his magnum opus, reportedly only after many efforts by Joan Robinson, the not-quite-even 100 page long Production of Commodities by Commodities: A Prelude to a Critique of Economic Theory.
Anyway, RIP, my old friend, Tonu Puu (and there should be an umlaut over that "o" in his name.)
Barkley Rosser
Tuesday, July 14, 2020
Truth Is The Daughter Of Time
This is a frontispiece to a 1951 mystery novel by Josephine Tey (real name: Elizabeth Makintosh) named _The Daughter of Time_It is about the question of whether or not King Richard III ordered the murder of the "Little Princes in the Tower," his nephews Edward and Richard, as has long been alleged, and for a long time was simply accepted as historical fact. This bestselling and very well and wittily written novel makes the case that Richard was framed by his successor, Henry (Tudor) VII, who usurped him after defeating and killing him in the Battle of Bosworth Field in 1485. Tey manages to build up through the novel a very convincing case for this view, which I shall not get into the details of, although I highly recommend the novel, which I just finished reading. In any case, if she is right, or even partly right (because have been many other accusations against Richard made as well), then this is one of those cases where "the victor gets to write the history."
I note a few points. The usual argument, still put accepted by many, is that Richard did the little princes in because they were threats to his having succeeded their father, his brother, Edward IV. But in fact it is now accepted (documents surfaced centuries later on this apparently suppressed by Henry VII) that showed that they were illegitimate and thus not possible heirs to the throne. Richard had no reason to kill them. He was invited to assume the throne by both houses of parliament and was thus completely legal and legitimate. And after his death, Henry had a Bill of Attainder brought against him in parliament listing all sorts of terrible things he supposedly did that justified the completely illegitimate Henry usurping Richard's throne. But murdering the princes was somehow not included in this Bill, which would obviously have been the top charge against Richard if it were true. Furthermore, given Henry's lack of any legitimacy, there was a large group of individuals, including the little princes if they were still alive, who had more claim to the throne than Henry. He was the British monarch who initially instituted Star Chambers that brought charges against each of these in turn allowing them to be "judicially murdered." The grounds for these in some cases were as vague as "for certain reasons" (unnamed). OTOH, a major reform Richard introduced was the right to bail. There is much more, but this gives some idea of what Tey puts forth, most of which I have verified from other sources.
I see a couple of relevances of this to current events, both the matter of arguments over "the Lost Cause" and Confederate monuments as well as the matter of whether ot not Donald Trump will get away historically with stating over 20,000 lies since becoming president. There seem to be three factors here. One is whether a leader can be authoritarian or not, which Trump would like to be but is not quite. Henry VII certainly was. This allows one many advantages in putting forth a false historical narrative.
Then there is the matter of having propagandists, especially initial ones. For Trump that is clearly Fox News. For the Lost Cause there was not a single clear individual or group, but a long buildup through the late 19th and into the early 20th centuries. For Henry VII the most important was his ally and enemy of Richard, John Morton, whom Henry made the Archbishop of Canterbury, a thoroughly corrupt individual. Much younger than him, but working for him, was the much revered Sir Thomas More, and it was through More that Morton put forth the initial claims and accusations against Richard.
Then we have the role of arts and media. I do not think Trump really has that yet, which takes more time, ,but for the enemies of Richard the most influential was William Shakespeare, whose play, Richard III, written during the reign of the last Tudor monarch, Elizabeth I, depicts him as a truly monstrous figure, murderer of the little princes, slanderer of his mother, and much else, as well as being hunch-backed and with a withered arm, these latter all apparently false. But he makes for a great villain, and the count of famous actors portraying him as such is beyond count. Shaekespeare's play may be the reason more than any other why most people and many textbooks present the standard story as fact without any hint of doubt. In many peoples' minds, Richard may have been the worst of all British monarchs, with only King John a possible rival (btw, his corpse was found in 2012 under a parking lot in Leicester).
While Trump may not have his Shakespeare, the Lost Cause certainly had its victory in the arts and media by the early 20th century in the form of Hollywood, most influentially with the films Birth of a Nation by Griffiths that glorified the KKK and the not quite so virulent but probably more influential Gone with the Wind. Hollywood bought the Lost Cause hook, line, and sinker all the way and really did a semi-Shakespeare version on it.
BTW, another curious example of historical distortion that I knew nothing about is reported in the novel, and it involves monuments, which do certainly reinforce these historical myths. I had never heard of the Covenanters, but they were a radical Presbyterian group in Scotland that played a major role in making Scotland be predominantly Presbyterian, with the height of their activities being in the early 1600s, with a dramatic peak around 1638. Anyway, Tey (who was born in Scotland) reports on some monuments somewhere there to some women who were supposedly martyrs to the Covenanter cause. However, according to her they were not even killed. They were not martyrs at all. But the monuments and claims they were helped the cause. Apparently the truth is now generally accepted, and occasionally somebody suggests taking down the monuments. But somehow it does not happen because they make good tourist attractions for the small towns they are in.
Barkley Rosser
I note a few points. The usual argument, still put accepted by many, is that Richard did the little princes in because they were threats to his having succeeded their father, his brother, Edward IV. But in fact it is now accepted (documents surfaced centuries later on this apparently suppressed by Henry VII) that showed that they were illegitimate and thus not possible heirs to the throne. Richard had no reason to kill them. He was invited to assume the throne by both houses of parliament and was thus completely legal and legitimate. And after his death, Henry had a Bill of Attainder brought against him in parliament listing all sorts of terrible things he supposedly did that justified the completely illegitimate Henry usurping Richard's throne. But murdering the princes was somehow not included in this Bill, which would obviously have been the top charge against Richard if it were true. Furthermore, given Henry's lack of any legitimacy, there was a large group of individuals, including the little princes if they were still alive, who had more claim to the throne than Henry. He was the British monarch who initially instituted Star Chambers that brought charges against each of these in turn allowing them to be "judicially murdered." The grounds for these in some cases were as vague as "for certain reasons" (unnamed). OTOH, a major reform Richard introduced was the right to bail. There is much more, but this gives some idea of what Tey puts forth, most of which I have verified from other sources.
I see a couple of relevances of this to current events, both the matter of arguments over "the Lost Cause" and Confederate monuments as well as the matter of whether ot not Donald Trump will get away historically with stating over 20,000 lies since becoming president. There seem to be three factors here. One is whether a leader can be authoritarian or not, which Trump would like to be but is not quite. Henry VII certainly was. This allows one many advantages in putting forth a false historical narrative.
Then there is the matter of having propagandists, especially initial ones. For Trump that is clearly Fox News. For the Lost Cause there was not a single clear individual or group, but a long buildup through the late 19th and into the early 20th centuries. For Henry VII the most important was his ally and enemy of Richard, John Morton, whom Henry made the Archbishop of Canterbury, a thoroughly corrupt individual. Much younger than him, but working for him, was the much revered Sir Thomas More, and it was through More that Morton put forth the initial claims and accusations against Richard.
Then we have the role of arts and media. I do not think Trump really has that yet, which takes more time, ,but for the enemies of Richard the most influential was William Shakespeare, whose play, Richard III, written during the reign of the last Tudor monarch, Elizabeth I, depicts him as a truly monstrous figure, murderer of the little princes, slanderer of his mother, and much else, as well as being hunch-backed and with a withered arm, these latter all apparently false. But he makes for a great villain, and the count of famous actors portraying him as such is beyond count. Shaekespeare's play may be the reason more than any other why most people and many textbooks present the standard story as fact without any hint of doubt. In many peoples' minds, Richard may have been the worst of all British monarchs, with only King John a possible rival (btw, his corpse was found in 2012 under a parking lot in Leicester).
While Trump may not have his Shakespeare, the Lost Cause certainly had its victory in the arts and media by the early 20th century in the form of Hollywood, most influentially with the films Birth of a Nation by Griffiths that glorified the KKK and the not quite so virulent but probably more influential Gone with the Wind. Hollywood bought the Lost Cause hook, line, and sinker all the way and really did a semi-Shakespeare version on it.
BTW, another curious example of historical distortion that I knew nothing about is reported in the novel, and it involves monuments, which do certainly reinforce these historical myths. I had never heard of the Covenanters, but they were a radical Presbyterian group in Scotland that played a major role in making Scotland be predominantly Presbyterian, with the height of their activities being in the early 1600s, with a dramatic peak around 1638. Anyway, Tey (who was born in Scotland) reports on some monuments somewhere there to some women who were supposedly martyrs to the Covenanter cause. However, according to her they were not even killed. They were not martyrs at all. But the monuments and claims they were helped the cause. Apparently the truth is now generally accepted, and occasionally somebody suggests taking down the monuments. But somehow it does not happen because they make good tourist attractions for the small towns they are in.
Barkley Rosser
Monday, July 13, 2020
More Likely Bad Economic Forecasting: This Time From OECD And CBO
That would be the quintessentially establishment and boringly conventional Organization of Economic Cooperation and Development, the Paris-based "rich nations'" entity that grew out of the Marshall Plan and has a reputation for excellent data, and also the Congressional Budget Office, generally regarded as bipartisan and highly professional.
So I saw their forecasts of US economic performance in terms of GDP and unemployment rates for the end of this year, and I find both to be highly unlikely, probably way too pessimistic. I get these from a column in today's Washington Post by the often execrable Robert J. Samuelson, but here he is playing it straight and just reporting. Indeed, the main thrust of his column is to note an apparent disjuncture between the hot stock market and the not-so-obviously hot economy, suggesting either the stock market is overvalued or the economy is being underforecast. I suspect actually that both are true, although I am not going to attempt forecast the stock market.
Anyway, RJS reports two forecasts coming out of the OECD, one "pessimistic" and one "more pessimistic" for the US. The first is sort of a baseline one that assumes the coronavirus is gotten to be more or less under control. The second one assumes a second wave of the virus this fall. The first forecast sees a GDP decline for 2020 of -7.3% with an unemployment rate at the end of the year of 11.3%. The second more pessimistic one has GDP declining -8.5% with a resulting end-of-year unemployment rate of 12.5%.
The CBO forecast, just one, is not quite as pessimistic. It sees GDP declining -5.9% for the year with the unemployment rate ending up at 10.6%.
Well, the latest unemployment rate is reported to be 11.1%, already lower than what either of the OECD forecasts see as the US economy having at the end of 2020. That is above the 10.5% forecast by the CBO, but not by much, especially if one notes that the rate declined by about 2% in just the last month. For the OECD projections to hold, the US GDP will have to stop rising, as it appears to be doing and go back downwards, thus giving us the infamous "W" pattern some have forecast, even without a second wave. The CBO forecast may not need an outright downturn, but it will need a pretty hard flattening to near zero growth soon to come true, something like the "square root" pattern that some have forecast.
Now most think the growth of the US economy is slowing, probably has been since sometime in mid-to-late June after the new infection rate took off again and we began to see renewed closings, although in some states reopenings are still happennig. But in fact most private forecasters have the US economy still growing, although there is much debate about how much (see Econbrowser for a recent post on competing forecasts, all positive for the near term).
I think it is impossible for the US economy to follow the forecasts coming out of the White House and its sycophants that would have the US experience a V-shaped recovery all the way to the election, with the US getting back to its "perfect" February condition. But unless we do have a full-blown second wave, I think it is unlikely the unemployment rate will be over 10 percent come November 3, even if I am not going to try to pin it down more. The OECD and CBO forecasts are not impossible, but I think they involve a very serious and ongoing full-blown pandemic continuation in the US unlike what we see in all but a handful of other nations. And if Trump starts wearing a mask all the time and starts actively pushing his followers to do so, that may well bring the virus more under control and make those OECD and CBO forecasts and up looking way too pessimistic.
Barkley Rosser
So I saw their forecasts of US economic performance in terms of GDP and unemployment rates for the end of this year, and I find both to be highly unlikely, probably way too pessimistic. I get these from a column in today's Washington Post by the often execrable Robert J. Samuelson, but here he is playing it straight and just reporting. Indeed, the main thrust of his column is to note an apparent disjuncture between the hot stock market and the not-so-obviously hot economy, suggesting either the stock market is overvalued or the economy is being underforecast. I suspect actually that both are true, although I am not going to attempt forecast the stock market.
Anyway, RJS reports two forecasts coming out of the OECD, one "pessimistic" and one "more pessimistic" for the US. The first is sort of a baseline one that assumes the coronavirus is gotten to be more or less under control. The second one assumes a second wave of the virus this fall. The first forecast sees a GDP decline for 2020 of -7.3% with an unemployment rate at the end of the year of 11.3%. The second more pessimistic one has GDP declining -8.5% with a resulting end-of-year unemployment rate of 12.5%.
The CBO forecast, just one, is not quite as pessimistic. It sees GDP declining -5.9% for the year with the unemployment rate ending up at 10.6%.
Well, the latest unemployment rate is reported to be 11.1%, already lower than what either of the OECD forecasts see as the US economy having at the end of 2020. That is above the 10.5% forecast by the CBO, but not by much, especially if one notes that the rate declined by about 2% in just the last month. For the OECD projections to hold, the US GDP will have to stop rising, as it appears to be doing and go back downwards, thus giving us the infamous "W" pattern some have forecast, even without a second wave. The CBO forecast may not need an outright downturn, but it will need a pretty hard flattening to near zero growth soon to come true, something like the "square root" pattern that some have forecast.
Now most think the growth of the US economy is slowing, probably has been since sometime in mid-to-late June after the new infection rate took off again and we began to see renewed closings, although in some states reopenings are still happennig. But in fact most private forecasters have the US economy still growing, although there is much debate about how much (see Econbrowser for a recent post on competing forecasts, all positive for the near term).
I think it is impossible for the US economy to follow the forecasts coming out of the White House and its sycophants that would have the US experience a V-shaped recovery all the way to the election, with the US getting back to its "perfect" February condition. But unless we do have a full-blown second wave, I think it is unlikely the unemployment rate will be over 10 percent come November 3, even if I am not going to try to pin it down more. The OECD and CBO forecasts are not impossible, but I think they involve a very serious and ongoing full-blown pandemic continuation in the US unlike what we see in all but a handful of other nations. And if Trump starts wearing a mask all the time and starts actively pushing his followers to do so, that may well bring the virus more under control and make those OECD and CBO forecasts and up looking way too pessimistic.
Barkley Rosser
A Framework for Coronavirus Policy
There are two general ways to reduce the transmission of the virus. One is “engineering”, changing the physical environment, the other is “social”, changing behavior to keep people distant from each other. Under engineering we can include not only physical partitions, UV lighting and ventilation, but also mask-wearing and other PPE. I know, there is a very large behavioral component to masking, but I want to focus on the distancing aspect, so let’s put everything else in the engineering box.
Now for distancing. Suppose we know instantaneously and with certainty everyone who is infected. In that case we can selectively quarantine them, and this will cut off transmission. That is possible only in rare circumstances, such as a country that has fully eradicated the virus but has occasional external visitors. If you have a reliable test you can identify anyone arriving with the disease and isolate them. The rest of the population, known to be uninfected and unexposed, can move freely and congregate as they want.
A more realistic case is that you know with near certainty everyone who is infected, but only with a delay. Then those who came into contact with them during their potential spreading period are also suspect and need to be isolated. This is the idea behind contact tracing, which imposes distancing on a small subset of the population who may not be infected but leaves everyone else free to go on with their life.
Now what happens if there is some combination of too many cases, too little or inaccurate testing, and insufficient tracing? This is where we are now, and the only recourse if we want to get control over the pandemic is to impose distancing on the entire population or as much of it as possible. Only after this policy reduces the number of active cases to the point where testing and tracing can bring us back to the previous state will it be advisable to resume most congregating activity.
What it all adds up to is the notion that distancing is distancing, whether it applies only to quarantining those already infected, the larger group who have been in contact with those infected, or the whole population. The smaller the number of people to whom distancing can be applied, the better. The goal of policy should be to systematically move from the third case to the second and then to the first.
Now for distancing. Suppose we know instantaneously and with certainty everyone who is infected. In that case we can selectively quarantine them, and this will cut off transmission. That is possible only in rare circumstances, such as a country that has fully eradicated the virus but has occasional external visitors. If you have a reliable test you can identify anyone arriving with the disease and isolate them. The rest of the population, known to be uninfected and unexposed, can move freely and congregate as they want.
A more realistic case is that you know with near certainty everyone who is infected, but only with a delay. Then those who came into contact with them during their potential spreading period are also suspect and need to be isolated. This is the idea behind contact tracing, which imposes distancing on a small subset of the population who may not be infected but leaves everyone else free to go on with their life.
Now what happens if there is some combination of too many cases, too little or inaccurate testing, and insufficient tracing? This is where we are now, and the only recourse if we want to get control over the pandemic is to impose distancing on the entire population or as much of it as possible. Only after this policy reduces the number of active cases to the point where testing and tracing can bring us back to the previous state will it be advisable to resume most congregating activity.
What it all adds up to is the notion that distancing is distancing, whether it applies only to quarantining those already infected, the larger group who have been in contact with those infected, or the whole population. The smaller the number of people to whom distancing can be applied, the better. The goal of policy should be to systematically move from the third case to the second and then to the first.
Sunday, July 12, 2020
Cancel Culture: Retail vs. Wholesale
When my stomach can take it, which is rarely, I take a look at Marginal Revolution. Tuning in today, I see Cowen predicting that the intellectual right will become much more open to deviations in the future -- as long as all agree in being anti-leftist. And the latter involves, of course, the condemnation ad nauseam of "Cancel Culture." Look I don't like this retail stuff they go on about either, but isn't it rich to hear the GMU crowd, using Koch money and the influence it buys to keep the groves of their Academy quite free of any left-wing ideas --wholesale Cancel culture, that --making the case!
Saturday, July 11, 2020
Favoring Hi-Tech Tax Cheats Over Consumers of French Wine
Hoping to buy a nice bottle of French wine? Doug Palmer of Poltico has some bad news for you:
The Trump administration announced Friday a 25 percent tariff on $1.3 billion worth of French handbags, cosmetics and soaps in retaliation for a digital services tax on U.S. internet giants, but said it would suspend imposing them for up to six months. The United States believes the way the French tax is structured unfairly targets large U.S. internet companies like Facebook, Google and Amazon. However, other countries are increasingly determined to find a way to collect revenue from firms that earn billions of dollars in their markets.Let’s note that Amazon, Facebook, and Amazon made yuuuuge profits and evade U.S. corporate profits taxes. So paying a modest excise tax on European sales is not exactly going to bankrupt these tax cheats. But back to the story:
U.S. Trade Representative Robert Lighthizer’s office concluded last year that France’s digital service tax was unreasonable, discriminatory and a burden on U.S. commerce. It also laid out a list of $2.4 billion worth of French goods — including Champagne, cheeses, handbags, soaps and fine dinnerware — that could be hit with retaliatory duties as high as 100 percent. U.S. trade officials said the final retaliation figure announced Friday reflects the value of U.S. digital transactions covered by France’s 3 percent digital services tax, which is estimated to be in the range of $15 billion per year, and the amount of taxes that France is expected to collect from U.S. companies.If collecting tax revenues were the goal, the U.S. could make much more from Amazon, Facebook, and Google by simply enforcing the transfer pricing rules. Oh but that would be taxing rich people which is not the Republican way. Back to the story:
The final retaliatory list leaves off Champagne, cheese and fine dinnerware. U.S. wine wholesalers and retailers, who have already been hurt by a 25 percent U.S. retaliatory duty on European wine in a separate dispute over European government support for aerospace giant Airbus, fought Lighthizer’s threat to include French Champagne in the retaliatory list for the digital services tax.Industry groups estimated an additional 100 percent duty on French sparkling wine would increase the cost to importers by $718 million and cause the loss of more than 17,000 jobs throughout the distribution chain. A tariff of just 25 percent would boost costs by $179 million and jeopardize an estimated 6,000 jobs, the groups said.Screw the little guy and consumers too. That’s the Republican way.
Being Targeted
Arguably this is paranoia, but the mayor and police chief of my city do not think so and have officially reacted with formal response. What a sign that I am an old whatever, praising local law enforcement, but, well....
So the issue is that late last evening a truck full of masked white men, and no, we are not talking health masks but ones that cover ID, with flags waving including the Confederate battle flag, were going up and down our block taking photos of certain houses, including ours. What did these objects of this photographic effort find consistent? We all had posters on our property declaring "Black Live Matters." Many on our block became upset over this, including my wife, and now the City of Harrisonburg, VA police are specially watching our block. I note that both the mayor and police chief of our city happen to be Black, for which at this time I am grateful.
Background here is that I have been living where I am for 32 years with my wife, Marina, in a block in Old Town of Harrisonburg, VA, where most of the houses are somewhat over a century old, and we are five minutes from the central square, as well as being 20 minutes from offices at James Madison University. Where we are is given by the 2004 prez election. There are 5 precincts in Harrisonburg, but ours, closest to JMU, was the only precinct in the entire Shenandoah Valley that went for Kerry over Bush. Yes, we are an island of "liberalism," with Harrisonburg later in 16 going strongly for Bernie.
So I happen to live on the most publicized block of all of this Old Town, which I note for the record has both Trump supporters in good number as well as Republicans who are not big fans of Trump. There has been a long history of the local newspaper focusing on our block in particular [Daily News Record owned by family of the late racist Harry Byrd], with even our house appearing twice in stories in this paper representing the neighborhood [we have a nice garden in front]. I note here that our block is a super fave on Halloween for trick or treaters, many hundreds coming from outside the city. We do our best to treat them well.
Our neighborhood, heavily crawling with JMU faculty, is certainly mostly an upper middle class neighborhood, But while being mostly white there are Blacks as well as various people from abroad from all over the world. So we are fairly diverse these days.
Anyway, several weeks ago a friend-neighbor up the street starting putting out these Black Lives Matter signs, costing I think 3 bucks or so, that one could put in one's yard. They went all over town, but our block got more than anywhere else, with where I live 5 of us in a contiguous row puttng them in our visible front yards. At least one of those in our row is a Republican family..
Barkley Rosser
So the issue is that late last evening a truck full of masked white men, and no, we are not talking health masks but ones that cover ID, with flags waving including the Confederate battle flag, were going up and down our block taking photos of certain houses, including ours. What did these objects of this photographic effort find consistent? We all had posters on our property declaring "Black Live Matters." Many on our block became upset over this, including my wife, and now the City of Harrisonburg, VA police are specially watching our block. I note that both the mayor and police chief of our city happen to be Black, for which at this time I am grateful.
Background here is that I have been living where I am for 32 years with my wife, Marina, in a block in Old Town of Harrisonburg, VA, where most of the houses are somewhat over a century old, and we are five minutes from the central square, as well as being 20 minutes from offices at James Madison University. Where we are is given by the 2004 prez election. There are 5 precincts in Harrisonburg, but ours, closest to JMU, was the only precinct in the entire Shenandoah Valley that went for Kerry over Bush. Yes, we are an island of "liberalism," with Harrisonburg later in 16 going strongly for Bernie.
So I happen to live on the most publicized block of all of this Old Town, which I note for the record has both Trump supporters in good number as well as Republicans who are not big fans of Trump. There has been a long history of the local newspaper focusing on our block in particular [Daily News Record owned by family of the late racist Harry Byrd], with even our house appearing twice in stories in this paper representing the neighborhood [we have a nice garden in front]. I note here that our block is a super fave on Halloween for trick or treaters, many hundreds coming from outside the city. We do our best to treat them well.
Our neighborhood, heavily crawling with JMU faculty, is certainly mostly an upper middle class neighborhood, But while being mostly white there are Blacks as well as various people from abroad from all over the world. So we are fairly diverse these days.
Anyway, several weeks ago a friend-neighbor up the street starting putting out these Black Lives Matter signs, costing I think 3 bucks or so, that one could put in one's yard. They went all over town, but our block got more than anywhere else, with where I live 5 of us in a contiguous row puttng them in our visible front yards. At least one of those in our row is a Republican family..
Barkley Rosser
Friday, July 10, 2020
Death Comes To My Old Economics Department
That would be the one at my alma mater, the University of Wisconsin-Madison. I have learned that on July 6 one of its current members died, Bill Sandholm, an excellent evolutionary game theorist who was about 50 years old. It is a sign of my age that he always seemed quite young to me, barely older than my oldest daughter, and now he is dead. He was a very nice guy, aside from being a very capable economist who was the Richard Stockwell Professor of Economics and once helped me out with a paper that was in a Revise and Resubmit condition.
I bring this up because there is an unconfirmed rumor that he died of complications of Covid-19, with for the moment nobody that I know, including members of the department, knowing what he died of. If the rumor is correct, he will be the first person I knew personally to die of this dreadful pandemic. It does bring it rather home.
It also does so because it probably puts the final nail into any plan to visit Madison this summer, which I have done almost every summer if for no other reason than having family members there I wish to see, not to mention some friends still, and it being a very pleasant place to visit in the summer, cooler than Virginia where i live. Indeed, Plan A had been to be there last weekend, but that got put off due to the pandemic. I had still thought of possibly going maybe at the beginning of August or thereabouts for a quick pop-in. But now apparently there has been a new spike of cases there and in Wisconsin more broadly, something my daughter who lives there had informed us of just in the last couple of days accompanied by discouraging noises about trying to go there. And now I have learned about this new development, although it may be that the rumor is false. But it does seem to be a final hammer hit on any plans to visit that fair city I am so much attached to for now.
Barkley Rosser
I bring this up because there is an unconfirmed rumor that he died of complications of Covid-19, with for the moment nobody that I know, including members of the department, knowing what he died of. If the rumor is correct, he will be the first person I knew personally to die of this dreadful pandemic. It does bring it rather home.
It also does so because it probably puts the final nail into any plan to visit Madison this summer, which I have done almost every summer if for no other reason than having family members there I wish to see, not to mention some friends still, and it being a very pleasant place to visit in the summer, cooler than Virginia where i live. Indeed, Plan A had been to be there last weekend, but that got put off due to the pandemic. I had still thought of possibly going maybe at the beginning of August or thereabouts for a quick pop-in. But now apparently there has been a new spike of cases there and in Wisconsin more broadly, something my daughter who lives there had informed us of just in the last couple of days accompanied by discouraging noises about trying to go there. And now I have learned about this new development, although it may be that the rumor is false. But it does seem to be a final hammer hit on any plans to visit that fair city I am so much attached to for now.
Barkley Rosser
Tuesday, July 7, 2020
Worrying About November 3, 2020
Sigh. So the US election is now just four days less than being four months from now, and, really, anything can happen. After all, four days less than four months ago was March 11, just before the US fully recognized that we were in a pandemic, with everything closing, and "the economy falling off a cliff," as it is now put, but was not obvious on 3/11 at all, even though it was only about two days away. And the murder of George Floyd was still some time off. So, the world can turn completely upside down before the election, and nobody should forget that what really matters is what happens in the two weeks before the election, the period of short-term memory, and that really cannot be foreseen. I mean, those who hate Hillary a lot say it was not a big deal, but most of us realize that if James Comey had not made his big announcement about new nothing investigations of her emails 11 days prior to the election in 2016, she almost certainly would be running for reelection right now.
So, we are in this obviously ironic position: may Dems are hoping things go badly in the next four months while many GOPs are hoping just the opposite, just so each gets the electoral outcome they want. This is nothing new, but it does put forward ironies in an unprecedented situation with many bad things happening and general uncertainty simply super high. Thus we have the oddity that in Congress it is Dems who are pushing for more and more expansive fiscal stimulus, which would presumably help the economy and thus Trump's reelection chances, while it is GOPs, especially in the Senate where they are in control, who are being the most negative about such a package, especially because of its aid to states and localities, whom they view as Dem interests. I see out of the White House that Trump himself understands this and would like to see more fiscal stimulus, if perhaps with some limits and conditions. But, heck, things are indeed fully topsy-turvy.
So, keeping in mind that anything can happen, and I mean seriously all sorts of currently completely inconceivable things, I am going to worry about how if nothing dramatic happens, we could see gradually improving trends on several fronts that could move the November prez election back from its current state where if it were held today Biden would simply blow out Trump and the Dems would easilly take control of the Senate, back more to what was where things were before four months ago, where it looked like a close race in November, both for the White House and the Senate, with Biden's chances probably better than those of the Dems taking the Senate.
Clearly the fundamental driving force will be what happens with the pandemic. Right now it is getting worse, at least in terms of new cases, in the US, although that has declined in the last few days from over 50,000 per day to the mid 40,000s. I think it is highly likely we shall see another peak on that due to the gatherings for July 4, but if in fact governors react more strongly and start seriously emforcing mask wearing and all that, we might well see that peak in two weeks as the peak, with a gradual decline going on after that. Of course there are numerous chances for it to explode again, with the opening of schools in the fall one such obvious possibiity. But note that most of the rest of the world where they have been serious about mask wearing and social distancing have gotten their cases way down, with them so far staying down. If the governors get tough, nothing due to Trump, we might see the hot new hotspots getting under control in a few months, especially four months.
Heck, next dooe to where I am in Virginia is Pendleton County, West Virginia. It is currently the most pro-Trump state in the nation, and also one of the five least infeeted. My county cite-county has nearly 1700 cases, but Pendleton has a mere 12. But yesterday GOP WVa Gov. Jim Justice just imposed a statewide requirement to wear face masks in public. Trump may not get it, but if the GOP govs get it, that might be sufficient to get things much more under control than they are now.
If the virus gets under control, well, then the economy can reopen again and start growing again. I have already posted on how the US economy has done better than forecast by many. Now most of us are forecasting a slowdown due to the reemergence of the virus and the new shutdowns. But while many states are doing new shutdowns, some places are still in their first rounds of reopening. Heck, here in Virginia, July 1 marked the arrival of Phase 3 of the reopenings, and VA is ahead of DC and Maryland on that. Reopenings, with accompanying heightened GDP growth are still going on. As it is, I am not forecasting how the economy will do, but it is not at all out of the question that it might be doing not too badly come November, although I am sure unemployment will still be higher than it was four months ago. But on the stock market, heck, the NASDAQ is already at new record highs.
I am not going to speculate about the Black Lives Matter movement, but certaintly that could go in a lot of directions, and the political bottom line on it by November could be much different than it looks now.
So, bottom line is nobody should get complacent that Trump will lose, although I find those who predict that he will definitely win to just completely silly. Everything is uncertain and up in the air.
Barkley Rosser
So, we are in this obviously ironic position: may Dems are hoping things go badly in the next four months while many GOPs are hoping just the opposite, just so each gets the electoral outcome they want. This is nothing new, but it does put forward ironies in an unprecedented situation with many bad things happening and general uncertainty simply super high. Thus we have the oddity that in Congress it is Dems who are pushing for more and more expansive fiscal stimulus, which would presumably help the economy and thus Trump's reelection chances, while it is GOPs, especially in the Senate where they are in control, who are being the most negative about such a package, especially because of its aid to states and localities, whom they view as Dem interests. I see out of the White House that Trump himself understands this and would like to see more fiscal stimulus, if perhaps with some limits and conditions. But, heck, things are indeed fully topsy-turvy.
So, keeping in mind that anything can happen, and I mean seriously all sorts of currently completely inconceivable things, I am going to worry about how if nothing dramatic happens, we could see gradually improving trends on several fronts that could move the November prez election back from its current state where if it were held today Biden would simply blow out Trump and the Dems would easilly take control of the Senate, back more to what was where things were before four months ago, where it looked like a close race in November, both for the White House and the Senate, with Biden's chances probably better than those of the Dems taking the Senate.
Clearly the fundamental driving force will be what happens with the pandemic. Right now it is getting worse, at least in terms of new cases, in the US, although that has declined in the last few days from over 50,000 per day to the mid 40,000s. I think it is highly likely we shall see another peak on that due to the gatherings for July 4, but if in fact governors react more strongly and start seriously emforcing mask wearing and all that, we might well see that peak in two weeks as the peak, with a gradual decline going on after that. Of course there are numerous chances for it to explode again, with the opening of schools in the fall one such obvious possibiity. But note that most of the rest of the world where they have been serious about mask wearing and social distancing have gotten their cases way down, with them so far staying down. If the governors get tough, nothing due to Trump, we might see the hot new hotspots getting under control in a few months, especially four months.
Heck, next dooe to where I am in Virginia is Pendleton County, West Virginia. It is currently the most pro-Trump state in the nation, and also one of the five least infeeted. My county cite-county has nearly 1700 cases, but Pendleton has a mere 12. But yesterday GOP WVa Gov. Jim Justice just imposed a statewide requirement to wear face masks in public. Trump may not get it, but if the GOP govs get it, that might be sufficient to get things much more under control than they are now.
If the virus gets under control, well, then the economy can reopen again and start growing again. I have already posted on how the US economy has done better than forecast by many. Now most of us are forecasting a slowdown due to the reemergence of the virus and the new shutdowns. But while many states are doing new shutdowns, some places are still in their first rounds of reopening. Heck, here in Virginia, July 1 marked the arrival of Phase 3 of the reopenings, and VA is ahead of DC and Maryland on that. Reopenings, with accompanying heightened GDP growth are still going on. As it is, I am not forecasting how the economy will do, but it is not at all out of the question that it might be doing not too badly come November, although I am sure unemployment will still be higher than it was four months ago. But on the stock market, heck, the NASDAQ is already at new record highs.
I am not going to speculate about the Black Lives Matter movement, but certaintly that could go in a lot of directions, and the political bottom line on it by November could be much different than it looks now.
So, bottom line is nobody should get complacent that Trump will lose, although I find those who predict that he will definitely win to just completely silly. Everything is uncertain and up in the air.
Barkley Rosser
Blowing Smoke
The President's keeps saying that the US has the lowest Corona-virus fatality rate in the world. And he keeps talking about how we have a high number of cases because we test more. The game he is playing is evident, but I keep waiting for the talking heads to point it out and being disappointed. He is referring to the US case-fatality rate, not the per-capita fatality rate. More testing lowers the case-fatality rate (deaths/case), simply by increasing the denominator. But it simultaneously raises the infection rate (cases/population) by the same proportion, leaving what we are really concerned about, the per-capita mortality rate (deaths/population =(deaths/cases) * (cases/ population)) unaffected. And on this measure, the US is the 7th highest in the world, at 39.82 deaths per 100,000. (I ignore San Marino and Andorra, because the measured rate is meaningless with such tiny numbers). We are below Italy, Spain, Sweden, the UK, Belgium, France. But we are far above Germany (10.88), Canada (23.61), Mexico (24.66), Iran (13) and a host of others.
Friday, July 3, 2020
July 24 Society For Chaos Theory In Psychology And Life Sciences Conference (Continued)
This continues to the final day the schedule for the virtual 30th SCTPLS conference, registration due July 6 at societyforchaostheory.org/2020/conf .
Friday, July 24
8:00-9:30 AM
Session A
Orlando Gomes, ISCAL, Portugal "Behavioral saving"
Yuji Aruka, Chuo University, Japan "The evolution of exchange processes"
Akio Matsumoto, Chuo University, Japan "Stability swtiching in Cournot duopoly games with three delays"
Session B
Karim Cherif, UMMTO, Algeria "Human resource marketing: A new strategy to retain top talent for company"
Jose Navarro, University of Barcelona, Spain 'The rough journey to success: Examining the nonlinear dynamics of processes and performance in teams"
Teresa Rebelo, University of Coimbra, Portugal "Does virtuality influence team learning? An analysis with cusp models"
10:00-11:30
Session A
Janice Ryan, Attunement Solutions, Tennessee, USA "Applications of prisoner's dilemma modeling in search of a more socially just dominant strategy: Overcoming anxiety associated with group oppression: Lessons from a single case study"
Ahmed Bilal Zenab, University of London, UK "Nonlinear dynamics od armed groups in Yemen and Pakistan"
Megan Chiovaro, University of Connecticut, USA "Recurrent quantification analysis of real-time and online social cohesion during the Arab Spring"
Session B
Anatoly Zhiurkov, Saint Petersburg University, Russia "Simple and complex models of optimal blood pressure: Fifteenyears of cooperation with SCTPLS"
Dimotrios Stamovlasis, Aristotle University of Thessalonika, Grreece ""Achievement goal orientation and classroom goal structures: Dynamic interaction effects on students' academic behavior"
David Chan, Virginia Commonwealth University, USA "The protective effect of having a prime supporter within a social networek of college students on mental health and education"
12:00-1:00 PM
Annual Business Meeting
1:30-3:00
Presidential Address
David Schuldberg, University of Montana, USA "Covid-19 and the nonlinear dynamics of everyday life"
3:30-5:00
Session A
Allan Combs, IISC, California, USA "Fractals all the way down"
Bernard Ricca, St. John Fisher's College, New York, USA "An introduction to topological data analysis"
Stephen Guastello, Marquette University, Wisconsin, USA "A comparison of four dyadic synchronization models"
Session B
Cortney Armitano-Lago, University of North Carolina-Chapel Hill, USA "Feedback cueing changes in lower limb loading during gait alters underlying stride intrval dynamics and intralimb coordination dynamics individuals following anterior cruciate ligament reconstruction"
Keira Lum, Dalhousie University, Canada "The collision of healthcare and complexity during Covid"
Vivian Rambihar, University of Toronto, Canada "Chaos Complexity and complex system: To prevent, contain and manage Covid-19"
5:00-5:30
Concluding Session
Friday, July 24
8:00-9:30 AM
Session A
Orlando Gomes, ISCAL, Portugal "Behavioral saving"
Yuji Aruka, Chuo University, Japan "The evolution of exchange processes"
Akio Matsumoto, Chuo University, Japan "Stability swtiching in Cournot duopoly games with three delays"
Session B
Karim Cherif, UMMTO, Algeria "Human resource marketing: A new strategy to retain top talent for company"
Jose Navarro, University of Barcelona, Spain 'The rough journey to success: Examining the nonlinear dynamics of processes and performance in teams"
Teresa Rebelo, University of Coimbra, Portugal "Does virtuality influence team learning? An analysis with cusp models"
10:00-11:30
Session A
Janice Ryan, Attunement Solutions, Tennessee, USA "Applications of prisoner's dilemma modeling in search of a more socially just dominant strategy: Overcoming anxiety associated with group oppression: Lessons from a single case study"
Ahmed Bilal Zenab, University of London, UK "Nonlinear dynamics od armed groups in Yemen and Pakistan"
Megan Chiovaro, University of Connecticut, USA "Recurrent quantification analysis of real-time and online social cohesion during the Arab Spring"
Session B
Anatoly Zhiurkov, Saint Petersburg University, Russia "Simple and complex models of optimal blood pressure: Fifteenyears of cooperation with SCTPLS"
Dimotrios Stamovlasis, Aristotle University of Thessalonika, Grreece ""Achievement goal orientation and classroom goal structures: Dynamic interaction effects on students' academic behavior"
David Chan, Virginia Commonwealth University, USA "The protective effect of having a prime supporter within a social networek of college students on mental health and education"
12:00-1:00 PM
Annual Business Meeting
1:30-3:00
Presidential Address
David Schuldberg, University of Montana, USA "Covid-19 and the nonlinear dynamics of everyday life"
3:30-5:00
Session A
Allan Combs, IISC, California, USA "Fractals all the way down"
Bernard Ricca, St. John Fisher's College, New York, USA "An introduction to topological data analysis"
Stephen Guastello, Marquette University, Wisconsin, USA "A comparison of four dyadic synchronization models"
Session B
Cortney Armitano-Lago, University of North Carolina-Chapel Hill, USA "Feedback cueing changes in lower limb loading during gait alters underlying stride intrval dynamics and intralimb coordination dynamics individuals following anterior cruciate ligament reconstruction"
Keira Lum, Dalhousie University, Canada "The collision of healthcare and complexity during Covid"
Vivian Rambihar, University of Toronto, Canada "Chaos Complexity and complex system: To prevent, contain and manage Covid-19"
5:00-5:30
Concluding Session
July 23 Society For Chaos Theory In Psychology And Life Sciences Annual Conference (Virtual)
I am currently President-Elect of the Society for Chaos Theory in Psychology and Life Sciences (SCTPLS), which means I am in charge of organizing their 30th annual conference. It was to be held this year at the University of Toronto, July 22-24, but it will be a Zoom virtual conference on those dates (first day a workshop). Anyway, the registration deadline is July 6, site to register societyforchaostheory.org/2020/conf . All are welcome. I list the program for the 23-24 below, for your interest, with the times being those of Toronto, EDT.
For this post I just show
Thursday, July 23:
8:00 AM: Welcome, Introduction, and Instructions
8:30-10:00 AM
Session A
Michael Susko, Mindspring.com, Pennsylvania, USA "Ten pulses of evolution & the logarithmic nature of evolutionary time"
Martin D. Pham, Hospital for Sick Children, Toronto, Canada "Towards nonlinear neural models of linguistic indicators in cognitive impairment with implications for Evental psychiatry"
Ken Ware, QLD, Australia "Gravities 100% reliable vertical constraint"
Session B
Bob Hodge, University of Western Sydney, Australia "Some implications of Anderson's ontological hierarchy: the case of semiotics"
Harold Hastings, Bard College of Simon's Rock, Massachusetts, USA "Empirical scaling and dynamics regines for GDP: challenges and opportunities"
J. Barkley Rosser, Jr., James Madison University, Virginia, USA "Complexity and knowledge"
10:30-12:00
Keynote Session
Simon A. Levin, Princeton University, USA "Collective motion, collective decision-making, and collective action"
12:30-2:00
Session A
Symposium
Najia Bao, Columbia University " How to lower the threshold of STEM long term memory"
Session B
Poster Session
Gentian Vyshka, University of Tirana, Albania 'Hell is made of snapshots: Disguised religious images inside an allegedly communist movie"
Sungchoon (Aviva) Sinclair, University of Utah, USA "A common pattern across different disciplines in theoretical physics, chemistry, biology, and plastic art: Using an archetype of universal non-verbal plastic patterns by Kang Woo-Hang from a qualitative perspective"
Aleksander Jakimoowicz, INEPLAN, Poland "Hyperchaos in financial markets."
Abdel Hannachi, Stockholm University, Sweden " Nonlinear time series modelling of the North Atlantic Oscillation"
Mikhail Zimin, 2554629 Ontario Ltd, Canada "Description of chaos with the help of stochastic probability density functions"
Vivian Rambihar, University of Toronto,Canada "Chaos Complexity Covid-19: 30 years teaching health professonals chaos and complexity"
Chad Danyluck, University of Colorado-Boulder, USA "Physiological synchrony during a pre-practice routine is associated with poor performance in a team of male volleyball athletes"
2:30-4:00
Session A
Mark Shelhamer,Johns Hopkins University, Maryland, USA "A complex systems approach to human and mission resilience for a mission to Mars"
Kevin Dooley, Arizona State University, USA "A CAS model of systemic corruption"
Stephen Guastello, Marqutte University, Wisconsin, USA "Autonomic synchronization, leadershipo emergence, drivers and empaths"
Session B
Bernard Ricca, St. John Fisher's College, New York, USA "On the meaning of 'phase' in collaborative research"
Matthijs Kooopmans, Mercy College, New York, USA "The distinction between seasonal and fractal patterns in long-range time series I: Concepts of fractal estimation"
Matthijs Koopmans, Mercy College, New York, USA "The ditinction between seasonal and fractal patterns in long-range time series II: Modeling responses to seasonal and fractal estimation"
4:30-6:00
Session A
Symposium
Jenny Magnes, Vassar College, New York, USA "Dynamics markers of C. elegand motion in three dimensions"
Tyler Hatch, Vassar College, New York, USA "Nonlinear time series analysis of C. elegans motion"
Session B
Allan Combs, IISC, California, USA "Tottering on the edge of chaos"
William Sulis, McMaster University, Canada "The continuum from temperament to mental illness: Clinical and dynamical perspectives"
David Kreindler, University of Toronto, Canada "Dynamic warping to analyze the similarity of mood sympton time series data"
6:00-8:00
Social Gathering
For this post I just show
Thursday, July 23:
8:00 AM: Welcome, Introduction, and Instructions
8:30-10:00 AM
Session A
Michael Susko, Mindspring.com, Pennsylvania, USA "Ten pulses of evolution & the logarithmic nature of evolutionary time"
Martin D. Pham, Hospital for Sick Children, Toronto, Canada "Towards nonlinear neural models of linguistic indicators in cognitive impairment with implications for Evental psychiatry"
Ken Ware, QLD, Australia "Gravities 100% reliable vertical constraint"
Session B
Bob Hodge, University of Western Sydney, Australia "Some implications of Anderson's ontological hierarchy: the case of semiotics"
Harold Hastings, Bard College of Simon's Rock, Massachusetts, USA "Empirical scaling and dynamics regines for GDP: challenges and opportunities"
J. Barkley Rosser, Jr., James Madison University, Virginia, USA "Complexity and knowledge"
10:30-12:00
Keynote Session
Simon A. Levin, Princeton University, USA "Collective motion, collective decision-making, and collective action"
12:30-2:00
Session A
Symposium
Najia Bao, Columbia University " How to lower the threshold of STEM long term memory"
Session B
Poster Session
Gentian Vyshka, University of Tirana, Albania 'Hell is made of snapshots: Disguised religious images inside an allegedly communist movie"
Sungchoon (Aviva) Sinclair, University of Utah, USA "A common pattern across different disciplines in theoretical physics, chemistry, biology, and plastic art: Using an archetype of universal non-verbal plastic patterns by Kang Woo-Hang from a qualitative perspective"
Aleksander Jakimoowicz, INEPLAN, Poland "Hyperchaos in financial markets."
Abdel Hannachi, Stockholm University, Sweden " Nonlinear time series modelling of the North Atlantic Oscillation"
Mikhail Zimin, 2554629 Ontario Ltd, Canada "Description of chaos with the help of stochastic probability density functions"
Vivian Rambihar, University of Toronto,Canada "Chaos Complexity Covid-19: 30 years teaching health professonals chaos and complexity"
Chad Danyluck, University of Colorado-Boulder, USA "Physiological synchrony during a pre-practice routine is associated with poor performance in a team of male volleyball athletes"
2:30-4:00
Session A
Mark Shelhamer,Johns Hopkins University, Maryland, USA "A complex systems approach to human and mission resilience for a mission to Mars"
Kevin Dooley, Arizona State University, USA "A CAS model of systemic corruption"
Stephen Guastello, Marqutte University, Wisconsin, USA "Autonomic synchronization, leadershipo emergence, drivers and empaths"
Session B
Bernard Ricca, St. John Fisher's College, New York, USA "On the meaning of 'phase' in collaborative research"
Matthijs Kooopmans, Mercy College, New York, USA "The distinction between seasonal and fractal patterns in long-range time series I: Concepts of fractal estimation"
Matthijs Koopmans, Mercy College, New York, USA "The ditinction between seasonal and fractal patterns in long-range time series II: Modeling responses to seasonal and fractal estimation"
4:30-6:00
Session A
Symposium
Jenny Magnes, Vassar College, New York, USA "Dynamics markers of C. elegand motion in three dimensions"
Tyler Hatch, Vassar College, New York, USA "Nonlinear time series analysis of C. elegans motion"
Session B
Allan Combs, IISC, California, USA "Tottering on the edge of chaos"
William Sulis, McMaster University, Canada "The continuum from temperament to mental illness: Clinical and dynamical perspectives"
David Kreindler, University of Toronto, Canada "Dynamic warping to analyze the similarity of mood sympton time series data"
6:00-8:00
Social Gathering
Wednesday, July 1, 2020
Wildly Off Forecasts?
The macroeconomic forecasting business has become quite unhinged in the current situation, with existing models seeming to have their wheels coming off as old relationships simply do not hold and reported data seems unreliable and going in all sorts of directions. We have already seen this happen regarding forecasts that were made for the May employment numbers, with most forecasters projecting employment declines that would have been more than 10%, some of them by a lot more than that, although none more than 20%. But in the end employment was estimated to have grown by over 2%, a situation of the forecasters simply being wildly wrong.
As it is, with the month of June now over and thus the second quarter over, it looks increasingly to me like most of the forecasters have not learned their lessons from that May employment fiasco. I suspect that in many organizations they find it hard to revise their models, especially on short notice, even when it is clear their models are not working. We see a lot of the forecasters making predictions of a large second quarter decline in GDP, but more numbers have come out for May, and most of them have been positive, some of them very positive, and if June continues to be positive, even if at a lesser rate than May given renewed shutdowns occurring due to the uptick in Covid-19 infections as June proceeded, this may further make some of these strongly negative forecasts even further off.
So what are some of these forecasts and what do the latest reported numbers look like? First we must note the first quarter outcome. It seems that GDP declined by -4.8% or 5.0% for the first quarter at an annualized rate. All of the decline occurred in March, more than offsetting modest growth in both January and February.
But the forecasts for annualized rates of decline for the second quarter are awesome, at least most of them. I am getting these from a post by Menzie Chinn over on Econbrowser and are from less than a week ago on June 26. Here are some:
GDPNow -39.5%
New York Fed -16.3%
St. Louis Fed -38.16%
IHS Markit -35.3%.
Clearly rhe only one not showing a massive decline is the New York Fed.
Menzie also showed how the forecasts have evolved for two other forecasters. A blue chip group's forecast was for a -25% rate on April 30, but slid to -35% by June 5.
The Atlanta Fed has had its forecast make large movements, starting out at a relatively modest -12% as of April 30, but then plunging to a whopping -54% as of June 5, but then in the face of more recently improving data by June 26 this forecast had moved to not a not quite as whopping -40%.
So what does estimated data look like? One estimate I have seen for the month of April had the actual decline of GDP being -11.4%, which translates to about a -42% annualized rate. But we already see here the danger for all of those forecasts listed above except for that of the New York Fed. It is near certain indeed that the economy has been growing in both May and June. If so that annualized rate of -42% looks to be a definite outer bound.
Now if there has been barely any growth in May and June we might still see numbers in the 30s for the annualized rate of decline. But at least for May the numbers do not look like that. We have already seen employment grow at over 2%, which is the actual growth, not the annualized, which is much higher. We now have an estimate for consumption, which grew at over 17% in May. Given that consumption is on the order of 70% of GDP that is pretty much the ballgame right there, barring some sharp turnaround in June. This is especially the case as estimates of construction also seem to show sharp growth in May, a major component of investment, although if inventories fall sharply, that might offset the construction increase. State and local governments were almost surely declining and probably still are, but probably not a massive rates. Trade is especially hard to predict, with indeed net exports appearing to decline in April by somewhere between -7 and -16%. But exports might actually be rising now as much of the world economy appears to be growing again.
The apparently steep decline of GDP in April will be hard to overcome during these past two months. But it is not out of the question that we might actually see a slightly positive figure for the quarter, especially if it turns out that growth in June continued to be as strong as it looks like May was. But even if it flattened out some as I suggested might happen in a recent post, it looks to me that the sharply negative predietions still being held to by so many forecasters simply look to be way off. Even the much less negative New York Fed may prove to have been too negative, even if indeed the quarter outcome is still negative overall for GDP growth, with it probably going to be more than a month before we shall know at all reasonably.
I conclude by noting that even if second quarter is positive or only mildly negative, growth prospects going forward for the near future look less promising. This is not only because of the recent spiking of Covid-19 cases with associated shutdowns, but also because portions of the large fiscal stimulus that has been going on and has probably aided the recent growth will have disappeared or will do so unless Congress acts to keep them going. In particular, the individual stimulus checks have ceased, and the expanded unemployment benefits are scheduled to cease at the end of July. What is more certain is that we are truly profoundly uncertain about what will transpire in the next few months.
Barkley Rosser
As it is, with the month of June now over and thus the second quarter over, it looks increasingly to me like most of the forecasters have not learned their lessons from that May employment fiasco. I suspect that in many organizations they find it hard to revise their models, especially on short notice, even when it is clear their models are not working. We see a lot of the forecasters making predictions of a large second quarter decline in GDP, but more numbers have come out for May, and most of them have been positive, some of them very positive, and if June continues to be positive, even if at a lesser rate than May given renewed shutdowns occurring due to the uptick in Covid-19 infections as June proceeded, this may further make some of these strongly negative forecasts even further off.
So what are some of these forecasts and what do the latest reported numbers look like? First we must note the first quarter outcome. It seems that GDP declined by -4.8% or 5.0% for the first quarter at an annualized rate. All of the decline occurred in March, more than offsetting modest growth in both January and February.
But the forecasts for annualized rates of decline for the second quarter are awesome, at least most of them. I am getting these from a post by Menzie Chinn over on Econbrowser and are from less than a week ago on June 26. Here are some:
GDPNow -39.5%
New York Fed -16.3%
St. Louis Fed -38.16%
IHS Markit -35.3%.
Clearly rhe only one not showing a massive decline is the New York Fed.
Menzie also showed how the forecasts have evolved for two other forecasters. A blue chip group's forecast was for a -25% rate on April 30, but slid to -35% by June 5.
The Atlanta Fed has had its forecast make large movements, starting out at a relatively modest -12% as of April 30, but then plunging to a whopping -54% as of June 5, but then in the face of more recently improving data by June 26 this forecast had moved to not a not quite as whopping -40%.
So what does estimated data look like? One estimate I have seen for the month of April had the actual decline of GDP being -11.4%, which translates to about a -42% annualized rate. But we already see here the danger for all of those forecasts listed above except for that of the New York Fed. It is near certain indeed that the economy has been growing in both May and June. If so that annualized rate of -42% looks to be a definite outer bound.
Now if there has been barely any growth in May and June we might still see numbers in the 30s for the annualized rate of decline. But at least for May the numbers do not look like that. We have already seen employment grow at over 2%, which is the actual growth, not the annualized, which is much higher. We now have an estimate for consumption, which grew at over 17% in May. Given that consumption is on the order of 70% of GDP that is pretty much the ballgame right there, barring some sharp turnaround in June. This is especially the case as estimates of construction also seem to show sharp growth in May, a major component of investment, although if inventories fall sharply, that might offset the construction increase. State and local governments were almost surely declining and probably still are, but probably not a massive rates. Trade is especially hard to predict, with indeed net exports appearing to decline in April by somewhere between -7 and -16%. But exports might actually be rising now as much of the world economy appears to be growing again.
The apparently steep decline of GDP in April will be hard to overcome during these past two months. But it is not out of the question that we might actually see a slightly positive figure for the quarter, especially if it turns out that growth in June continued to be as strong as it looks like May was. But even if it flattened out some as I suggested might happen in a recent post, it looks to me that the sharply negative predietions still being held to by so many forecasters simply look to be way off. Even the much less negative New York Fed may prove to have been too negative, even if indeed the quarter outcome is still negative overall for GDP growth, with it probably going to be more than a month before we shall know at all reasonably.
I conclude by noting that even if second quarter is positive or only mildly negative, growth prospects going forward for the near future look less promising. This is not only because of the recent spiking of Covid-19 cases with associated shutdowns, but also because portions of the large fiscal stimulus that has been going on and has probably aided the recent growth will have disappeared or will do so unless Congress acts to keep them going. In particular, the individual stimulus checks have ceased, and the expanded unemployment benefits are scheduled to cease at the end of July. What is more certain is that we are truly profoundly uncertain about what will transpire in the next few months.
Barkley Rosser
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