Sunday, October 30, 2011

The Post-Dispatch and the minimum wage II

So the Post-Dispatch printed my letter about the minimum wage, but only after deleting a key clause. Here's the original and here's what's in print. I guess they found something wrong with my point that one way to get statistical insignifance is to not try very hard.

Saturday, October 29, 2011

We're along for the ride

The front page of today's Post-Dispatch has an article about the near-term prospect for St. Louis employment. I'm quoted in it. According to me,
Hiring "is stuck on hold nationally and will probably continue to drift down a little," said Howard Wall, director of the Institute for the Study of Economics and the Environment at Lindenwood University. "We're just along for the ride, and there's not much we can do about it."
I also say that
SSM, which is hiring, now ranks third in the region in terms of total employment, barely 300 jobs behind second-place Boeing. Wall attributes much of that growth to the absorption of small local hospitals by larger health care systems.
Even so, he says, the boom in health care hiring points to the direction of the regional economy in both the short and long term.
"The era of big employers is over," he said. "Boeing is the last of the big manufacturers. It shows the St. Louis era of big manufacturing is on the wane."

If Wall Street is shut down

What would happen if Wall Street and the financial industry were severely diminished?  Well, this trader thinks that he will still eat your lunch.

Friday, October 28, 2011

Cardinals win their 11th World Series!!!!

Cardinals 6 - Texas 2, Game 7

Greedy OWS hippies

It looks like greed and envy aren't just for Wall Street types.

Robert Bryce on the future of fossil fuels

Robert Bryce, well-known author/journalist/public speaker, visited my institute at Lindenwood University last week.  He gave a terrific talk on the future of fossil fuels.  You can view his lecture at my YouTube channel, or watch it below.

If you've got 90 minutes to kill,

you might want to spend it watching a panel discussion on the deficit hosted by MIT.  The panelist are Peter Diamond of MIT, Jeffrey Liebman of the Harvard Kennedy School, Deborah Lucas of the MIT Sloan School of Management, Harvard economist Gregory Mankiw, and MIT's Robert Solow.  The panel is a little soft, in my view, but they're intellectually serious and honest.  In case you don't have 90 minutes, the accompanying article summarizes the proceedings.  Here it is.

Thursday, October 27, 2011

The failures of Keynesianism

Allan Meltzer has a nice summary of the failure of Keynesian thinking in getting the economy going. He lists four problems and, conveniently, four corresponding solutions. 

Wednesday, October 26, 2011

A tiff over TIF

Over at Show-Me Daily, Bruce Stahl has an explanation of Tax Increment Financing (TIF) for residential development and its effect on education funding. As he explains:
TIF allows developers to freeze taxes at a base level and invest any increase in property tax value that otherwise would go toward taxes into developing the property, for up to 23 years. Essentially, TIF allows newly-developed property to escape the higher taxes that higher property values normally entail. If a residential developer acquires approval of a TIF plan from the city, new homeowners can send their kids to public schools but the taxes collected will go towards paying off the debt for the development instead of to financing their children’s education. A good deal if you can get away with it.
In short, a TIF used to finance a new subdvision will increase enrollment in public schools but won't generate a corresponding increase in public-school funding.

The economics of scalping

Steve Geigerich has a nice piece on the changes in ticket scalping (sorry, brokering) since 2006, the last time the Cardinals were in the World Series. The reason for the change is that it is now legal to sell tickets above face value in Missouri. Those who were formerly ticket scalpers and are now ticket brokers report that legalization has lowered their profits. It has also reduced opportunities for police corruption.

Pols as entrepreneurs

Jim Powell has an excellent article in Forbes outlining why politicians make bad entrepreneurs. Read the whole thing, but here is a clear statement of the difference between the choices made by private entrepreneurs and politicians:

Tuesday, October 25, 2011

Even a blind pig finds an acorn once in a while

Paul Krugman has an informative column on the mess the Europeans are up against.

The Post-Dispatch and the minimum wage

It's getting pretty tiresome, but the Post-Dispatch has written another editorial claiming that the minimum wage does not have all of the negative effects that economists tend to think they have.  Now that I'm not a Fed economist and can actually speak my mind in public, I will take on the quixotic quest of trying to get the editors to at least admit that they are taking a position that is at odds with the expert evidence.  Here is a letter to the editor that I submitted today:

Monday, October 24, 2011

President pees on protesters

President Obama visited Las Vegas yesterday and left a calling card.

Much ado about nothing, again

Back in the spring of 2009, the Obama administration began its Home Affordable Refinance Program to assist people in refinancing their mortgages.  It turned out to have been a failure, with fewer than 900,000 borrowers taking advantage of it, far short of the target of 5 million borrowers. The President is now revisiting the program by loosening the standards further.  It's tough to see how this will do much of anything except allow a some people to take advantage of lower interest rates to reduce their mortgage payments.  It will do absolutely nothing to boost the market or to speed up the adjustments in the housing market.  Even CNN is able to figure that out.

New estimates of the effect of Stimulus Sr.

According to the most outrageously optimistic (i.e., fanciful) claims, the 2009 stimulus package generated 2 million jobs.  That sounds like a lot but the average cost of these mostly imaginary jobs was $412,500

Friday, October 21, 2011

We're the government and we're here to help

For those who don't know, the Lake of the Ozarks is a man-made lake in southwest Missouri that has become an extremely popular place to build vacation homes.  There are thousands of such homes on the lake's 1,150 miles of shoreline.  Well, it turns out that over the course of several decades, many of the homes have been built on land within Ameren Missouri's Bagnell Dam and Osage hydroelectric project.  (The lake exists because the Bagnell Dam was built on the Osage River to generate hydro power.)

A sharp drop in St. Louis employment

According to data released today by the Bureau of Labor Statistics, employment in the St. Louis metro area fell by 6,200 in September. The BLS estimates also suggest that employment in September was 9,900 higher than a year earlier.

My institute, the ISEE, produces its own estimates of St. Louis employment, which show much weaker employment growth over the past year.  Specifically, the ISEE estimates that job growth between September 2010 and 2011 was only 1,300.  Go here for more details.

The Fed's fatal conceit II

An impotent Federal Reserve looks as if it will keep dropping its pants hoping that, this time, something will happen.

Thursday, October 20, 2011

The Fed's fatal conceit

Ron Paul has an opinion piece in today's WSJ blaming the Fed for the recent financial crisis as well as "every single boom and bust that has occurred in this country since the bank's creation in 1913."  His analysis is decidedly from the Austrian School and you can judge it for yourself.  He hits the nail on the head, however, when he points out how the Fed is afflicted with the fatal conceit that plagues too many policymakers:
In many respects the governors of the Federal Reserve System and the members of the Federal Open Market Committee are like all other high-ranking powerful officials. Because they make decisions that profoundly affect the workings of the economy and because they have hundreds of bright economists working for them doing research and collecting data, they buy into the pretense of knowledge—the illusion that because they have all these resources at their fingertips they therefore have the ability to guide the economy as they see fit.
The Fed's continued flailing about trying to be relevant is a case in point.  Having spent 12 years as a Fed economist, I can assure you that it is indeed a pretense of knowledge.

President Obama forced to wing it

Humanism and the miracle of oil from sand

Ronald Bailey has visited Alberta to see for himself how oil is extracted from sand.  Where others see environmental desecration, he sees a humanist miracle.

No thanks

I don't think we really want any part of the green economy that some of our leaders have plans for.  And I mean the actual green economy that would result from forcing us to shift to inadequate and expensive wind and solar power, not the fanciful one dreamed of by its advocates.  I, for one, do not think our well-being will benefit from the doubling of energy bills that would hit the EU.

Amazon taxes are not the solution

Veronique de Rugy argues that there are at least two problems with the so-called "Amazon tax", which would require internet retailers to collect sales taxes based on the locations of their customers.  One important point is that the bulk internet sales are not from Amazon but from small retailers, who would be hard-pressed to handle the burden of collecting sales taxes given "the complexity and cost associated with dealing with a hodge-podge of regulations and tax rates in 50 states and local municipalities."

Wednesday, October 19, 2011

A sign of the times

When your country's richest city is one that produces nothing of actual value, you might have a problem.

Simple enough for Tim Geithner

Texas Governor Rick Perry says that he will reveal his pro-growth plan in six days.  It will include tax reform that will "make the tax code so simple that even Timothy Geithner can file his taxes on time.”

I beg to differ

It seems that President Obama believes that he and his economic team have made all the right choices when it comes to recovering from the recession.  I humbly beg to differ (something this President seems incapable of).  I cannot think of a single good economic decision that they made until the recent halting of new EPA restrictions and the decision to stop dragging their feet over the trade deals with Panama, Colombia, and South Korea.  More to the point, I think that nearly every one of their decisions has been the opposite of what should have been done to restart the economy.

The President should stop whining about how he inherited a deep a hole (which is true) and explain how, despite all of his "right choices," the economy keeps drifting down.  His excuse-making is about how long it will take to get back to where we were, but his policies are keeping us from even turning upward.

Tuesday, October 18, 2011

Are you smarter than a OWS protester?

New York Magazine quizzed the Occupy Wall Street protesters on their basic knowledge of the economy.  Given that one of their goals is to increase awareness, they should be experts, right?  Well, no.  Moderately knowledgeable?  Not quite.  Pretty clueless?  Bingo.

Eleanor Clift has figured it out

I can't imagine what took her so long, but Eleanor Clift has had an epiphany: The President's green jobs initiatives appear to have been driven by politics and money, not the greater good of the big blue marble we call Earth.
Some of the biggest immediate beneficiaries of the green revolution, ironically, may have been politicians themselves. Executives of the top 50 recipients of the government’s green-energy aid have donated more than $2 million to federal campaigns since Obama took office. Some of the biggest recipients of green stimulus money—including NRG Energy and Consolidated Edison—made six-figure donations to candidates and interest groups. The industry as a whole has ponied up more than $5 million from its executives and political action committees, a notable increase from a formerly quiet sector. Democrats have been the main beneficiaries of clean-energy money.
She says it is ironic that the biggest beneficiaries of the green economy scam have been politicians themselves, so maybe it's not quite an epiphany.  Still, it's progress.

Save a pretzel for the gas jets!

I'm a gremlin, I'm leaving the party, and I want everyone to stuff the ice chest

Pointless delays for trade deals

I posted the other day that trade deals with Panama, Colombia, and South Korea finally passed, years after they were negotiated.  This was somehow a victory for President Obama, even though he had withheld the pacts from Congress for years. Dana Milbank, who appears to know nothing at all about economics or the Tea Party, argued that it is defeat for the Tea Party and a victory for corporate interests and the Washington elite. 

But, to give credit where credit is due, under election duress and years of failed economic policies, the President was able to will himself to send the trade pacts to Congress once it was ensured that unions would be paid off with an extended and otherwise-pointless trade assistance program.

Dave Nickalus has a nice wrapup of the economic costs of the delay.

Monday, October 17, 2011

Higher Education Bubble

Jim Gallagher has some good advice in the Post-Dispatch for those looking at colleges: "Look at the loan default rates."  The logic is straightforward:

Minimum wage, maximum harm

Greg Mankiw has a post discussing the role of the minimum wage in the Obama recovery.  Comparing 2010 to 2007, Mankiw finds that
  • The percentage of all hourly-paid workers paid at or below the minimum wage rose from 2.3 to 6.0 percent.
  • The percentage of part-time workers paid at or below the minimum wage rose from 5 to 14 percent.
  • The percentage of teenagers paid at or below the minimum wage rose from 7 to 25 percent.
In short, the minimum wage, which was raised by more than $2 per hour as the economy was sliding into recession, has become binding for many more people, thereby constricting employment opportunities.  Those hit hardest by this: teens, African Americans, the less-educated.

Friday, October 14, 2011

Show Me!

The Show-Me Institute has a challenge:
I would like to see examples where cities, counties, etc., hired a planning firm to determine the appropriateness of a blighting, conservation, etc., declaration for the purpose of TIF (Tax Increment Financing) or other types of abatements / incentives, and were told “no, they are not applicable here” by the urban planning firm. Are there any such examples, anywhere in Missouri, where planning firms that governments hired gave a negative answer to these types of questions? And I mean a completely negative answer, not a “you can’t do this, but you can do this” answer.

Bipartisan green elephants

The Solyndra debacle is only one part of the corrupt and shameful waste of money that is the Department of Energy's Loan Programs Office.  It turns out, however, that President Obama isn't the only one with a green-economy slush fun.  Many state governors around the country, including Mitt Romney and Rick Perry, have or had their own pile of discretionary funds to invest in green companies.  Kim Strassel has the lowdown in the WSJ:

Thursday, October 13, 2011

Capitalism is not the problem, crony capitalism is

From Melanie Sturm:
The chief villain in this story is Fannie Mae, which capitalized on the political cover provided by affordable housing goals (as well as government ties and generous political donations) to “build itself into the largest and most powerful financial institution in the world.” Essentially, taxpayers unwittingly channeled the agency billions of dollars a year to finance a campaign of self-promotion and self-protection, enriching Fannie Mae's executives as well as its political patrons.

It's about time

Three free trade pacts (Colombia, Panama, and South Korea) have been passed five years after they were signed.  Finally a sensible economic policy.

Wednesday, October 12, 2011

Batting averages for economic consultants?

Nearly every new proposal for corporate welfare is accompanied by a study claiming huge benefits from the use of taxpayer money to subsidize a private business.  Despite the frequent failures of projects to deliver the promised benefits, each new study is presented with as much confidence as the last.  In light of this, Audrey Spalding of the Show-Me Institute proposes that "(c)onsulting organizations should report their track record of success (and failure)."
What if every estimate of job and investment creation the RCGA publishes had to be accompanied with a percentage showing the accuracy of previous estimates the agency predicted? What if, when contemplating creating new tax credit programs, we considered whether existing programs delivered on the promises used to create them?
If we are considering whether hundreds of millions of taxpayer dollars should be allocated to a particular project, it is not enough to take proponents’ claims for fact, especially if those organizations have a track record of poor prediction. We need to know how frequently those predictions actually become reality.

Planting the seeds of the financial crisis

The usual narrative about the financial crisis of 2008-09 is that greedy and under-regulated Wall Street operators took down the economy with their reckless behavior.  This is certainly the narrative pushed in the press, and the Occupy Wall Street crowd seems to have bought into it.  The other, more plausible, narrative attributes much of the blame to reckless government housing policies that encouraged (to the extent of even requiring) lending to financially unsuitable homebuyers.  There is a good outline of this narrative in today's Wall Street Journal by Peter Wallison.

Economic Freedom in America Today

Economic Freedom and Quality of Life

Earplugs and blinders regarding energy

An editorial in the Washington Examiner outlines the costs of the President's unwillingness (inability?) to see the folly of his energy policies.

"It's a party, not an investment"

There's a nice article in today's Post-Dispatch about the allegedly large economic impact of the Cardinals' postseason run.  As discussed in an earlier post, the Regional Chamber and Growth Association has estimated that each game of the NLCS will add $6 million to the St. Louis economy.  But, as today's article describes, many industries are hurt by the games because activity is shifted away from them towards watching or attending the games.  These effects are usually ignored by impact studies, which makes their estimates bogus.

Tuesday, October 11, 2011

Democrat Senators jumping ship

Despite demands from the President for Congress to pass his "jobs bill", also known as Stimulus Jr., it failed a cloture vote in the Senate.  It did get 50 votes, with one more on the way, but two Democratic senators voted no.  Another three who voted for cloture have already said that they would have voted against the plan if it had come to a vote.  Here's the story.

If you're going to mix religion and politics, at least get it right

Morning Joe host, Joe Scarborough, tried to inject religion into a discussion of government policy, and his fellow panelists (liberals all) were all in favor of it.  Scarborough seems to think that many Christians on the right, who oppose big government, don't have as keen an understanding of the Bible as he does, despite the fact that they "wave their bibles around the most."

I'm no expert, but even I know that the Bible calls for personal charity and not for using the force of the

Billionaires vote on taxes

The views of a billionaire such as Warren Buffett are often trotted out as proof that a tax increases or some other "worthy" policy is a good idea.  "If even billionaires want to pay more taxes, then it must be a good idea?"

This never strikes the intended chord with me because my first reaction is always "When the heck did we decide that billionaires' opinions matter more than everybody else's?  If billionaires' opinions are superior to mine, then, instead of cherry picking, take a vote of all billionaires and let them decide government policy." 

It turns out that someone did just this, and it turns out that Warren Buffett is in a small minority: Only eight of the Forbes 400 want to pay higher taxes.

Monday, October 10, 2011

No wonder the economy's in the crapper

It looks like Rep. Ellison isn't the only one (see previous post).  Sen. Barbara Boxer (D-Calif.) is also of the view that what the economy really needs are more regulations to get job creation going.  Are they political hacks who will say anything to toe the party line, or do they actually believe this nonsense?

Wisdom and brevity from a new Nobel laureate

One of the winners of the Nobel Prize in economics, Thomas Sargent of New York University, gave a speech in 2007 to graduating economics students at UC-Berkeley.  It was both wise and brief.  In it, he listed 12 valuable lessons from economics, which he called "organized common sense."  Here are the first five:
1. Many things that are desirable are not feasible.
2. Individuals and communities face trade-offs.
3. Other people have more information about their abilities, their efforts, and their preferences than you do.
4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.
5. There are tradeoffs between equality and efficiency.
Here's the whole thing.

Another novel economic theory

Lately, there have been a lot of novel and bizarre claims about how the economy works, and Rep. Keith Ellison (D-Minn) has yet another one.  His claim is that the more regulations you have on businesses, the more people they will hire because they will need extra people to make sure the businesses are in compliance.  The regulations aren't really much of a burden because the extra costs imposed on firms will have no effect on their operations.  See for yourself.

Bipartisan saber rattling

The Senate voted overwhelmingly and in a bipartisan manner to threaten China over its exchange rate policy.  Supporters of the threat argue that an undervalued yuan (meaning an overvalued dollar) is a problem for the U.S. economy because it gives China an advantage in trading with the U.S. 

This is truish, but beside the point.  An artificially weak yuan is a huge advantage for U.S. firms and consumers who buy goods from China.  Arguing against that is the same as threatening your grocery store with sanctions if it doesn't raise its prices.

Dave Nicklaus has a good wrap up of the trade-war side of the argument.

Saturday, October 8, 2011

Policy uncertainty contributing to the weak economy

Recent research by Stanford and Chicago economists Scott Baker, Nicholas Bloom, and Steven Davis outlines the role of policy uncertainty in "choking recovery."  The uncertainty they measure "reflects deliberate policy decisions, harmful rhetorical attacks on business and 'millionaires,' failure to tackle entitlement reforms and fiscal imbalances, and political brinkmanship."

Friday, October 7, 2011

Women and minorities hit hardest by the Obama recovery

The chart below shows the employment-to-population ratios for men and women by race.  As mentioned in my previous post, this measure is the best one to use during recessions and recoveries.  The chart also splits the period since 2008 into the Bush recession and the Obama recovery according to when the overall employment-to-population ratio bottomed out (as shown in my previous post).

The Obama recovery is in full swing

Today's employment report from the Bureau of Labor Statistics was, as has become usual, pretty grim.  Between August and September, payroll employment rose by 103 thousand (but 45 thousand of this was accounted for by the end of the Verizon strike) and the unemployment rate was unchanged at 9.1 percent.

There are numbers behind the headlines that need to be controlled for: 

Thursday, October 6, 2011

Stimulus shmimulus and our glorious green economy

A prominent component of the President's first stimulus package included a sharp increase in funds for the Department of Energy's Loan Programs Office.  This program has been in the news lately as the source of taxpayer money for the failed green energy company Solyndra.  According to its own website, this program handed out $39,500,000,000, which led to the creation of 64,776 jobs. 

A shameless plug for an ISEE event

My institute at Lindenwood University is hosting a speaker, Robert Bryce, on October 18th, 3:00-4:00 PM, Dunseth Auditorium, Harmon Hall.  The title of his talk is “Can Fossil Fuels be Replaced by Renewable Energy in 20 Years Time?”  It is free and open to the public.  More information can be found here.

Tuesday, October 4, 2011

Economic impact of the Cardinals' playoff run

There's an interesting post by Kelsey Volkmann on the St. Louis Business Journal site that discusses two very different estimates of the per-game impact of Cardinals' playoff games.

Nobel Prize in Economic Sciences

The winner of the 2011 Nobel Prize in Economic Sciences will be announced on Monday, October 10.  Unlike many economists, I do not care the least who wins the prize.  I don't have any beef with the recipients of the Nobel Prize in economics, and I count one of them, Finn Kydland, as a friend.  I just don't think that the prize in economics really stacks up against the prizes given in other areas, especially those in physics, medicine, and chemistry.

A suitable government intervention

The downtown stretch of Washington Ave. in St. Louis has been named a 'Great Street' by the American Planning Association.  As reported by Tim Bryant in the Post-Dispatch's Building Blocks blog:
Efforts to redo empty Washington Avenue warehouses as lofts didn't get far until Missouri began granting historic preservation tax credits that made such projects financially feasible. The APA said that, as a result, more than $100 million in Washington Avenue investment soon began.
Without getting into whether the amount of credits was correct, or if the recipients were the 'right' ones, it has always struck me that the effort to rehabilitate Washington Ave. is an good example of possibly appropriate government intervention into the marketplace.  I mean appropriate in the narrow sense that economists usually talk about: interventions that address market failures.

Monday, October 3, 2011

Occupy St. Louis

St. Louis now has its own version of the Occupy Wall Street protests, which are focused on the Federal reserve of St. Louis.  OccupySTL has pledged "to keep some demonstrators there around the clock for as long as it takes to make the point."  According to the Post-Dispatch
Their point, as they see it, is that it's time for 99 percent of the population to speak out and act against the greed and corruption of the richest 1 percent.
I'm still not sure that "the point" is, especially after reading their statement of purpose, which defines the 1 percent as "the bankers, politicians, and corporate persons that govern our nation."  Really, that's the top 1 percent?  One percent of what? 

I'm guessing that the 1 percent/99 percent dichotomy is based on the notion that 1 percent of the people control most of the wealth.  So, let's look at the wealthiest in America. Are they necessarily greedy and corrupt?  Are Bill Gates and Warren Buffett corrupt?  Who on the Forbes 400 list is corrupt, and what specifically have they done?  I'm pretty sure that I'm giving the group too much credit by looking for coherent ideas.  I'd really be happy with even vaguely coherent ones, but the group seems to rail against the government stooges of the wealthy while also asking for more government.

Trying to replace the market, and failing

In the wake of the Solyndra mess, yet another example has cropped up of the perils (nay, the certainties) that accompany attempts to replace the market mechanism with government.  The market mechanism has private entities deciding where to put their own money by assessing risks and rewards, both of which are borne by the private entity.  It's far from perfect, but is much less corrupt and infinitely more likely to be successful.  The government mechanism allocates other people's money (tax revenues) to politically connected firms based on wishful thinking about economically inferior hare-brained schemes.

Saturday, October 1, 2011

Just say "No!" to class warfare

Every so often a person is so fundamentally misguided in so many ways that it is difficult to know where to start.  This was the case with Elizabeth Warren's attempt to rewrite the social contract last week.  Luckily, Dan Mitchell, Russ Roberts, and others were on it.  Here's Dan Mitchell's wrapup.

More on our deficient energy policies

The WSJ has an interview with the discoverer of the Bakken oil fields in North Dakota, Harold Hamm.  According to Hamm, with the right energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."