This is Transparency?

Geez, this guy makes Bush seem eloquent.

New Deal Policies and the Persistence of the Great Depression

Earlier I posted an excellent editorial by professors Harold Cole and Lee Ohanian in which they argue that the New Deal made the Great Depression worse, or at least last longer. In it they discuss their academic research, which I fortunately was able to find. I haven't managed to read the whole thing, and it is quite technical at times, but rather interesting. From the conclusion:

The recovery from the Great Depression was weak despite rapid productivity growth, and was accompanied by significant increases in real wages and prices in several sectors of the economy. A successful theory of the recovery from the Depression should account for persistent low levels of consumption, investment, and employment, the high real wage, and the apparent lack of competition in the labor market. We developed a model with New Deal labor and industrial policies that can account for sectoral high wages, a distorted labor market, and depressed employment, consumption, and investment despite normal productivity.

Our results suggest that New Deal policies are an important contributing factor to the persistence of the Great Depression. The key depressing element behind these policies was not monopoly per se, but rather linking the ability of firms to collude with paying high wages. Our model indicates that these policies reduced consumption, and investment about 14 percent relative to their competitive balanced growth path levels. Thus, the model accounts for about half of the continuation of the Great Depression between 1934 and 1939.

New Deal labor and industrial policies did not lift the economy out of the Depression 51 as President Roosevelt and his economic planners had hoped. Instead, the joint policies of increasing labor’s bargaining power, and linking collusion with paying high wages, impeded the recovery by creating an inefficient insider-outsider friction that raised wages significantly and restricted employment. The recovery would have been stronger if wages in key sectors had been lower. 52

None Dare Call It Science

The anti-war fringe has been pushing the Lancet medical study claiming that 600,000+ Iraqis have died as a result of the war (and that was several years ago). I have argued against it on a couple of occasions, and Slate did a particularly good column on it. Now there is even more reason to doubt their conclusions.

Gilbert Burnham said in the Lancet medical journal in 2006 that 650,000 civilians had died since 2003 - a figure far higher than other estimates.

A polling association in the US said Dr Burnham had refused to supply "basic facts" for its inquiry into his work.

It did not comment on the accuracy of his conclusion.

The American Association for Public Opinion Research (AAPOR)began investigating Dr Burnham's work .

Reproducibility is of course one of the key parts of the scientific method. They should be begging for people to review their work, not blocking them.

The Lost Library Book

With all that is going on right now, sometimes it is nice to just read a story like this. From a Southern California radio station, via the Best of the Web.

Chesley Sullenberger has a problem. He borrowed a book from the Danville Library – and it’s overdue. To complicate matters, the book was an interlibrary loan from Fresno State.

Sullenberger contacted librarians and asked for an extension on the loan and a waiver on the overdue fine. The reason? The book is in the cargo hold of the US Airways plane that made an emergency landing last month in New York’s Hudson River. Sullenberger is the pilot who made that landing. No one was seriously injured.

Fresno State library officials were impressed with Sullenberger’s sense of responsibility… and waived all fines and fees, even the one for losing the book. The library’s going one step further: when the replacement book goes up on the shelf, it will have a special template in front, dedicating it to Chesley “Sully” Sullenberger.
Oh, by the way. The topic of that book? Professional ethics.

The One Politician Dumber than Joe Biden

That is 6 billion this year alone! Although Barack Obama promises to save 3 million of those....

More On the Great Depression

I discussed recently how I thought the government helped make the Great Depression even greater. Helpfully an editorial in the Wall Street Journal today by economists Harold Cole and Lee Ohanian assists me in making my case.

The goal of the New Deal was to get Americans back to work. But the New Deal didn't restore employment. In fact, there was even less work on average during the New Deal than before FDR took office. Total hours worked per adult, including government employees, were 18% below their 1929 level between 1930-32, but were 23% lower on average during the New Deal (1933-39). Private hours worked were even lower after FDR took office, averaging 27% below their 1929 level, compared to 18% lower between in 1930-32.

Even comparing hours worked at the end of 1930s to those at the beginning of FDR's presidency doesn't paint a picture of recovery. Total hours worked per adult in 1939 remained about 21% below their 1929 level, compared to a decline of 27% in 1933. And it wasn't just work that remained scarce during the New Deal. Per capita consumption did not recover at all, remaining 25% below its trend level throughout the New Deal, and per-capita nonresidential investment averaged about 60% below trend. The Great Depression clearly continued long after FDR took office.

Unfortunately not everyone reads history. And one of those people we just elected president.

The European Union warned the US yesterday against plunging the world into depression by adopting a planned “Buy American” policy, intensifying fears of a trade war.

The EU threatened to retaliate if the US Congress went ahead with sweeping measures in its $800 billion (£554 billion) stimulus plan to restrict spending to American goods and services.

Gordon Brown was caught in the crossfire as John Bruton, the EU Ambassador to Washington, said that “history has shown us” where the closing of markets leads — a clear reference to the Depression of the 1930s, triggered by US protectionist laws.

Can We Question Their Patriotism Yet?

Vice President Joe Biden, back during the campaign:

Noting that wealthier Americans would indeed pay more, Biden said: "It's time to be patriotic ... time to jump in, time to be part of the deal, time to help get America out of the rut."

Which makes all their appointments interesting:

The failure by the former Senate majority leader to pay taxes on the free use of a car and driver for several years, first reported Friday by ABC News, complicates Daschle's nomination and erodes the chances that it will sail through the Senate.

Daschle said tonight he did not realize his car service was income and not a gift from a good friend.

After the closed-door session, the Democratic senators on the Finance Committee expressed support en masse for their former colleague.

"There is a completely understandable, rational, reasonable and acceptable explanation" for his mistakes," Sen. John Kerry, D-Mass., said.

As I said earlier, how scary is it for a $700 billion bailout being run by a guy who can't figure out how to use TurboTax.

So Much for Bipartisanship

Well the stimulus bill passed today, without a single Republican voting for it. I am not sure what is scarier, a $350 billion TARP package in the hands of a man who can't figure out how to use Turbotax properly, or $900 billion in the hands of Democrats eager to buy off votes.

Well for a refreshing breath of reality, the National Review has an excellent article on the failed history of Keynesian stimulus. I actually have a copy of the awkwardly named The General Theory of Employment, Interest and Money, sitting on my shelf, that I have been meaning to read. I will have to move it up in priority, so I know what woes are in store.

Using quaint Keynesian arguments to rationalize heavy spending is nothing new. But its resurgent popularity is somewhat surprising. Democrats and their favorite economists spent the past 25 years bemoaning the “twin deficits” of the 1980s and then claimed that the strong economy of the late 1990s was the result of President Clinton’s fiscal restraint — the precise opposite of “fiscal stimulus.” Also working in the anti-Keynesian mode, former treasury secretary Robert Rubin co-authored a 2004 paper with forecaster Allen Sinai and Peter Orzsag of the Brookings Institution, who now has been tapped by Obama to lead the Office of Management and Budget. They argued that “budget deficits decrease national saving, which reduces domestic investment and increases borrowing abroad.” Big budget deficits, warned Rubin, Orzsag, and Sinai, would “reduce future national income” and risk a “decline in confidence [which] can reduce stock prices.”

Joe the Dumber Speaks, Again

I had thought, well, I had hoped that Obama still had him locked in a closet somewhere, but apparently they still let him speak occasionally. Economist Gregory Mankiw, or as I call him, the anti-Krugman, takes him to task for his recent statement on the stimulus bill:

In a TV interview last month, Vice President Joe Biden said the following:

Every economist, as I've said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs.

That statement is clearly false. As I have documented on this blog in recent weeks, skeptics about a spending stimulus include quite a few well-known economists, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales--and I am sure there many others as well. Regardless of whether one agrees with them on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the standard objective criteria by which economists evaluate one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.

Ouch. It well worth reading the rest. I didn't realize that Mankiw had a blog. It is not on my to read list.

Kristof Copies Krugman

A couple of years ago I posted a link to Paul Krugman's excellent essay on sweatshops in the third world (this was back when Krugman was an actual economist).

For many years a huge Manila garbage dump known as Smokey Mountain was a favorite media symbol of Third World poverty. Several thousand men, women, and children lived on that dump--enduring the stench, the flies, and the toxic waste in order to make a living combing the garbage for scrap metal and other recyclables. And they lived there voluntarily, because the $10 or so a squatter family could clear in a day was better than the alternatives.

So I was a bit surprised to read this editorial recently by Nicolas Kristof in the New York Times:

Before Barack Obama and his team act on their talk about “labor standards,” I’d like to offer them a tour of the vast garbage dump here in Phnom Penh. This is a Dante-like vision of hell. It’s a mountain of festering refuse, a half-hour hike across, emitting clouds of smoke from subterranean fires.

The miasma of toxic stink leaves you gasping, breezes batter you with filth, and even the rats look forlorn. Then the smoke parts and you come across a child ambling barefoot, searching for old plastic cups that recyclers will buy for five cents a pound. Many families actually live in shacks on this smoking garbage.

Now I think both editorials are good mind you, and the wording is different enough that it is not plagiarism, but Kristof is hardly being original.

CSPAN Porn

I was amused by this passage:

WASHINGTON - Barack Obama’s $825 billion plan to boost the recession-bound U.S. economy has some elements that, well, aren’t the sort of stimulus that House Minority Leader John Boehner says he can believe in.

“I’m concerned about the size of the package, and I’m concerned about some of the spending that’s in there,” Boehner complained Friday after a meeting at White House.

“How can you spend hundreds of millions of dollars on contraceptives? How does that stimulate the economy?”

OK, maybe I have a dirty mind, but when talking about contraceptives you should be careful discussing "stimulate" and the "size of packages".

Obama Does Have Superpowers!

Faster than a speeding bullet, stronger than a locomotive... able to time travel. From the new White House website.

President Obama swiftly responded to Hurricane Katrina.

Yeah, OK, buddy.

Michael Shermer on the Bailouts

Ever since I have taken up following conspiracy theorists I have been reading a lot of Michael Shermer, he is founder of the the Skeptic Society after all. He recently wrote a pretty decent book on economics, which I got an autographed copy of (and actually made a YouTube video of when the troofers interrupted it). He continues this theme with a editorial in the City Journal.

Though the financial crisis is complex and has many explanations, one of its primary causes involves Fannie Mae and Freddie Mac, the nation’s largest guarantors of home mortgages. Recall that Fannie and Freddie are government-run organizations that do not make loans directly to customers; rather, they buy loans from the banks that make those loans directly. In spring 1999, Fannie and Freddie—under pressure from the Clinton administration—increased their portfolio of loans to lower- and moderate-income borrowers from 44 percent to 50 percent by 2001. That meant granting loans to higher-risk customers.

Now, there’s nothing wrong with corporations’ and institutions’ taking higher risks, so long as they adjust for it by charging more. The higher price acts as a risk signal to both buyers and sellers, thereby dialing up their emotion of risk aversion. That’s what Fannie Mae was already doing, in fact: when it purchased loans that banks made to high-risk customers, it bought only those that charged 3 to 4 percentage points higher than conventional loans. But under the new program, Fannie would buy high-risk mortgages that were only 1 point above a conventional 30-year fixed-rate mortgage (and that added point would be dropped after two years of steady payments). In other words, the normal risk signal sent to high-risk customers—you can have the loan, but it’s going to cost you a lot more—was removed.

Atlas Still Shrugs

One of the greatest books ever, but one I hoped wouldn't come true.

Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most
influential book in their lives, behind only the Bible.

Only in Seattle: Part II

Well they at least figured out that it isn't really that big of a deal to put salt in the ocean, but geez, they have to hire a consultant. Doesn't anyone on the city council have a cousin in Spokane or something?

The Seattle City Council will consider hiring an outside consultant to look at the city's response to December's historic snowstorms.

City departments will give the mayor a report Jan. 30, but Councilmember Tom Rasmussen said this morning that an outside party could help city officials figure out what went wrong.

The storms stranded bus riders and left ice and compact snow on many streets for nearly two weeks.

The Wall Street Journal Imitates Me

Igor Panarin, the Russian academic who predicted the collapse of the United States, is back. This time on the front page of the Wall Street Journal. They left out much of the nutty stuff:

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.

California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence. Texas will be the heart of "The Texas Republic," a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an "Atlantic America" that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls "The Central North American Republic." Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

"It would be reasonable for Russia to lay claim to Alaska; it was part of the Russian Empire for a long time." A framed satellite image of the Bering Strait that separates Alaska from Russia like a thread hangs from his office wall. "It's not there for no reason," he says with a sly grin.

Only In Seattle

Now correct me if I am wrong, but isn't the Puget Sound pretty salty already?

The icy streets are the result of Seattle's refusal to use salt, an effective ice-buster used by the state Department of Transportation and cities accustomed to dealing with heavy winter snows.

"If we were using salt, you'd see patches of bare road because salt is very effective," Wiggins said. "We decided not to utilize salt because it's not a healthy addition to Puget Sound."

Russia Gets Scarier

As I have mentioned before, as a long time student of Russia, the Putin regime scares me. Things are getting worse as the prepare to essentially ban dissent:

Putin did not specify who might pose a threat to Russia's stability. But in the past, he has often blamed Western security services of trying to destabilize the country using opposition groups and non-governmental organizations as their instruments.

"Any attempts to weaken or destabilize Russia, harm the interests of the country will be toughly suppressed," they quoted ex-KGB spy Putin as telling an annual meeting of top spies and security officers ahead of their professional holiday.

But what do you expect from a country which has a national holiday for the secret police?

The Day of Security Officers is marked annually on December 20, a day when in 1917 Bolshevik rulers created the CheKa secret police to suppress their foes. After a string of transformations, the Cheka became the KGB.

As president, Putin always personally attended the holiday meetings of security officials. Medvedev, a former corporate lawyer with no security background, stayed away and sent his chief of staff Sergei Naryshkin to deliver his greetings.

Al Gore and the Broken Window Fallacy

One of the things that drives me nuts (admittedly, there are a lot right now) is the constant insistance among environmentalists and politicians that "alternative energy" will "create jobs", somehow justifying large government expenditures to pay companies to do things which they would not normally waste money on. As Obama said when he met Al Gore today:

"We all believe what the scientists have been telling us for years now, that this is a matter of urgency and national security, and it has to be dealt with in a serious way," Obama said. "We have the opportunity now to make jobs all across this country, in all 50 states, to repower America. ... We are not going to miss this opportunity," he said.

OK, now if you want to argue that "green energy" has some sort of positive externalities in regards to the environment or national defense, you might have an argument, I am not saying it would be a good one, but you could at least make it, but to argue that it is an economic benefit in that it provides jobs, is a fallacy. Under no circumstances is it an economic benefit to subsidize people to do things in a manner which are a less efficient application of resources than they would otherwise. If solar power costs $20 per megawatt, and coal costs $10 a megawatt, it is never an economic benefit to pay someone $20 extra per megawatt in order to get them to put up solar cells. You might as well just use coal and pay them $10 to surf the Internet for Carrie Underwood videos.

This tactic, commonly used by politicians is a variation of the Broken Window Fallacy, by which you argue an economic benefit to smashing windows in order to employ window repairman, but at a loss to society as a whole.

The AP On Military Education

The AP, which has pretty much given up reporting the news and become an editorial service, has written an article on why soldiers are reenlisting in the military because... well apparently they can't get a job anywhere else. While obviously a bad economy probably has an effect, they take the John Kerry education approach.

Roughly 208,000 men and women left the military in 2007. Some were rank-and-file warriors, while others worked in specialized fields such as satellite communications or computer networking. Only about 30 percent of enlisted soldiers hold a bachelor's degree.

Only about 30 percent of enlisted soldiers hold a bachelor's degree? Well, how does that compare to the population at large? Well, according to the US Census, 27.1%, or less than the military, and this is not even counting officers, who almost all have degrees. So why exactly did they add the "only"?