Monday, December 16, 2013

Remember all that nonsense about peak oil?

Doomsayers in 2007:  "The world has reached the point of maximum oil output and production levels will halve by 2030 -- a situation that will eventually lead to war and disaster, a report claims."

Reality in 2013:
The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields...The doubling in Mexican oil output that Citigroup Inc. said may result from inviting international explorers to drill would be equivalent to adding another Nigeria to world supply, or about 2.5 million barrels a day.
That boom would augment a supply surge from U.S. and Canadian wells that Exxon Mobil Corp. (XOM) predicts will vault North American production ahead of every OPEC member except Saudi Arabia within two years. With U.S. refineries already choking on more oil than they can process, producers from Exxon to ConocoPhillips are clamoring for repeal of the export restrictions that have outlawed most overseas sales of American crude for four decades.

LIes, damn lies, and bogus income statistics

Greg Mankiw has a must-read post that describes very neatly how much of the talk about income and inequality is tainted by bogus income measures.  To wit, a paper by Piketty and Saez, which has received a lot of attention the past couple of years, used tax data to show that real median income rose by only 3.2 percent between 1977 and 2007.  But, because
(t)he data are on tax units rather than households, they do not include many government transfer payments, they are pre-tax rather than post-tax, they don't adjust for changes in household size, and they do not include nontaxable compensation such as employer-provided health insurance.
After accounting for these things, one obtains a 36.7 percent increase in real median income over the period.

Friday, December 6, 2013

The Pope should NOT shut up

An earlier post of mine "Does the Pope read Tom Woods?" lamented some of the lame leftist support for Pope Francis's recent comments on economics. Many, if not most, of these lefty lame-os were happy to hijack the Pope's moral authority to push statist economic policies, while ignoring the greater part of the Pope's document, which had little or nothing to do with economic policy. My post also lamented the Pope's misunderstanding of basic economics and his failure to appreciate that the freeing of markets has raised billions out people out of poverty over just the past two decades.

Can a TV be worth a kidney or a child?

I'm thinking of getting a new TV, but I'm not sure what to get. Samsung has an 85 inch model for just under $40,000 from Amazon (free shipping and AA batteries!) that looks pretty good, but the reviews are somewhat mixed.

Monday, December 2, 2013

Unsettled science

Back in 2007, a number of climate 'scientists' were exceedingly confident that the polar ice caps were on their way out.  In fact, it was even predicted that the Arctic would be ice-free by 2013.  In what has become a pattern, the dire predictions were not just incorrect, but were the opposite of the truth.  Leave it to Mark Steyn to put it most succinctly: Ice Everywhere, But No Hockey Sticks.

Saturday, November 30, 2013

Does the Pope read Tom Woods?

Pope Francis created a hubbub last week when he decided to weigh in on economic policy.  From page 45 of the Evangelii Gaudium:
Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.
Reactions from the left were predictably rapturous, often trying to use the Pope's moral authority to close the policy debate. The Washington Post has an especially transparent example of this lame tactic:
“There’s no way a Catholic who is a serious intellectual can ever again not address the issue of income inequality, of the structural sins of our economic system. This is so front and center,” said Michael Sean Winters, a fellow at Catholic University’s Institute for Policy Research and Catholic Studies. “This is a pastor’s voice. He’s saying, ‘If we’re serious Christians, we need to be knee-deep in this stuff.’ ”
Well, Mr. Winters, you've certainly made me feel knee-deep in something, but it's not concern about the evils of free markets.

Fantastic video

The bunny has been watching the dog herding; now bunny thinks he can herd too.  Watch.

This is the the best video I've seen since the one with the time traveler at the premiere of a Charlie Chaplin movie.

Monday, November 25, 2013

When economists sell their soul

Harvard economist David Cutler, who ought to be hiding his head in shame at being one of President Obama's health care advisors, has demonstrated how unsound one's analytical skills can become once one's brain has been ravaged by Potomac fever.  In a Washington Post Op-Ed he declared that the president's claim that Obamacare would reduce health care costs by $2,500 per family of four has turned out to be true.  The basis of his argument is that the projected path of future health care spending has been adjusted downward:
Between early 2009 and now, the Office of the Actuaries at the Centers for Medicare & Medicaid Services has lowered its forecast of medical spending in 2016 by 1 percentage point of GDP. In dollar terms, this is $2,500 for a family of four.
Unfortunately for Cutler and his reputation, the Office of the Actuaries at the Centers for Medicare & Medicaid Services outlined the sources of the change in its projections, and Obamacare was decidedly not one of them.  Charles Blahaus has a detailed analysis, which includes a summary of the sources of the changes in health spending projections:
1) Medicare/Medicaid/other programs “unrelated to the ACA” (50.7% of improvement).
2) Other factors “unrelated to the ACA” (26.1%).
3) Updated data on historical spending growth (21.8%).
4) Updated macroeconomic assumptions (6.1%).

Wednesday, November 20, 2013

Hayek in the NY Times

Thomas Edsal is a little late with this observation, but his ability to learn is laudable:
(I)s the federal government capable of managing the provision of a fundamental service through an extraordinarily complex system?
This system requires coordination of over 288 policy options (an average of eight insurers are competing for business in 36 states), each with three or more levels of coverage, while simultaneously calculating beneficiary income, tax credit eligibility, subsidy levels, deductibles, not to mention protecting applicant privacy, insuring web security, and managing a host of other data points. 
A malfunction at any one of these junctures could prove fatal.
I wonder if the NY Times would have allowed this question if they knew how Hayekian it is?

Wednesday, November 13, 2013

Larry Summers, political hack

When people would ask me who I preferred to be the new Chairman of the Fed, Janet Yellen or Lawrence Summers, my response was that neither would pursue the right policies, but that Summers had become such a political hack that he should not be trusted with the reins of the Fed. He proved my point today in his praise of Obamacare for its positive effects on the economy, and of the great things that have happened to the energy sector under the President's watch. I think we can now place Summers alongside Paul Krugman among the once-distinguished economists who have rendered themselves incapable of serious economic analysis.

Tuesday, November 12, 2013

The Federal government as a criminal organization

Mark Steyn has some comments on the Michigan shop owners who have had $35,000 seized from them by the Federal government, despite not having been convicted of any offence.  The case is yet another in which the Feds act as would any other pack of gangsters and thugs. Extra kudos to Steyn for the title of his piece: "Render unto Seizure"

Tuesday, November 5, 2013

Amnesic doomsayers

Bret Stephens has an interesting piece in today's Wall Street Journal reminding environmentalists of their past doom-mongering. Stephens reminds us of "when we were supposed to believe that population growth would outstrip food production. This gave us such titles as 'Famine 1975!', a 1967 best seller by the brothers William and Paul Paddock, along with Paul Ehrlich's vastly influential 'The Population Bomb,' a book that began with the words, 'The battle to feed all of humanity is over. In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.'"

Kudos to the Post-Dispatch editorial board

The Post-Dispatch editors have a reasonably cogent piece today on the absurdity of $16 million in government subsidies for the renovation of the General American building in downtown St. Louis. The Show-Me Institute has been all over this, so it's good to see that the P-D is coming around. While the editors don't go whole hog for that whole idea that markets are better at allocating resources than governments, they do recognize that these subsidies do not magically create economic growth.

Sunday, November 3, 2013

Anatomy of a collectivist disaster

Avik Roy has good rundown of the Obamacare disaster as it was unfolding, almost from the get-go. It was always going to be too complex an operation to work, but the project was made that much more difficult by the fact that it was almost entirely a political operation. The sheer incompetence is mind boggling, but the arrogance of these supposedly all-knowing collectivists has, unfortunately, become all too familiar.

Hmm. It's as if they are so conceited about their abilities to micromanage society that it becomes fatal. Now where have I seen that before?

Update: Glenn Reynolds recommends a book that offers some lessons for those with grand schemes to perfect society.

Obamacare lies are good for you

At least the New York Times editors have come around to the undeniable fact that President Obama lied (sorry, 'misspoke', as if repeated intentional misspeaking is somehow different from bald-faced lying) when he claimed that Obamacare would not take away health insurance that you like. They don't bother trying to twist themselves into pretzels claiming that the president spoke truthfully, so the deserve a bit of credit. On the other hand, they argue that those policies that you liked weren't good enough anyway. They don't explain why people chose those policies that were so bad for them, and, unlike others, they don't say explicitly that people were too stupid to know what's good for them.  Ever the collectivists, their argument is simply that being forced to pay more for coverage that you don't want is just the price that people have to pay to be part of the great progressive project.

Friday, November 1, 2013

Comedy gold

Check out the book that someone gave to Kathleen Sebelius.

Post-Dispatch editors outdo themselves

The editorial page of the St. Louis Post-Dispatch is renowned for its wacky leftwingedness and willful ignorance of basic economics. But I was not prepared for the editors' jump onto the latest loopy bandwagon claiming that government programs such as food stamps and Medicaid are a form of corporate welfare. I was trying to pen a retort to this nonsense, but I was having a tough time grasping the roots of its sheer stupidity. Fortunately, David Hornburg, of Des Peres, succeeded where I failed. Read the whole thing, but here's the crux of it, especially the first sentence:
The fast-food companies are employers, not parents of minor children. They have no moral or legal obligation to provide these additional goodies to those who happen to work in their restaurants. Like the value of any good or service, wage rates are set by the market. If better jobs were available, the fast-food workers would take them. If the fast-food jobs were to disappear, the workers would likely find jobs that are even worse or be unemployed. This would increase the amount of government transfer payments. So it would be more logical to say that if the fast-food industry did not employ so many marginal workers, that the burden on government would be even higher.
Update: Susan Fiegenbaum has also skewered the P-D editors.

Tuesday, October 29, 2013

Dishonesty, incompetence, or both?

President Obama claimed repeatedly and recently that, under his health care reform, people could keep their health insurance plans if they liked them.  As everyone knows by now, and should have known when the claim was first made, it is a load of nonsense.  The fact is that millions of people will lose plans that they were perfectly happy with.  It turns out that the Obama administration was aware of this fact years ago, but that the president continued to make the false claim anyway.  Greg Mankiw has a rundown of the three scenarios under which this could have happened. As Mankiw says, "(n)one of them reflects particulary well on what has been going on in the White House." 

The first possiblity is that the president and his staff didn't have any idea how their policy would actually work (incompetence all around).  The second possibility is that the staff knew but let the president make false claims to the public (the president was incompetent and his staff were liars).  The third possibility is that the president and his staff knew all along (they were all liars).

Saturday, October 26, 2013

Mr President, you have turned us into a banana republic

When your tax authorities, legal system, and military are subsumed into the political arm of the head of state's party, you are a banana republic.

What kind of republic?

Remember, President Obama has assured us that we are not a banana republic. If he's right, then Federal agents would never raid a reporter's house to swipe embarrassing information:
Maryland state police and federal agents used a search warrant in an unrelated criminal investigation to seize the private reporting files of an award-winning former investigative journalist for The Washington Times who had exposed problems in the Homeland Security Department's Federal Air Marshal Service.
Reporter Audrey Hudson said the investigators, who included an agent for Homeland's Coast Guard service, took her private notes and government documents that she had obtained under the Freedom of Information Act during a predawn raid of her family home on Aug. 6.
The documents, some which chronicled her sources and her work at the Times about problems inside the Homeland Security Department, were seized under a warrant to search for unregistered firearms and a “potato gun” suspected of belonging to her husband, Paul Flanagan, a Coast Guard employee. Mr. Flanagan has not been charged with any wrongdoing since the raid.

Friday, October 25, 2013

Al Gore, genius

Al Gore has been arguing with the Prime Minister of Australia about the causes of the wildfires currently running amok in New South Wales.  Gore blames global warming (surprise, surprise) while ignoring the long history of wildfires in Australia:
Gore is upset with Australian Prime Minister Tony Abbott's insistence that the recent New South Wales wildfires are not linked to climate change and his statement on Australian radio that "these fires are certainly not a function of climate change, they are just a function of life in Australia."
In related news, "Al Gore Got ‘D’ in ‘Natural Sciences’ at Harvard"

Government goons grab granny's goods

The government of Seattle, the only major US city with a public statue of Lenin, is using eminent domain to seize a privately owned parking lot to turn it into a city-owned parking lot. This is what happens when the Supreme Court declares government revenue to be a public use. The infamous Kelo decision seems to have made government revenue constitutionally superior to private revenue.

Wednesday, October 16, 2013

Stupid, stupid, stupid educators

I'm sorry, but sometimes there is just nothing that can be said for a policy other than that it is stupid beyond belief.  As the LA Times reports, an increasing number of school districts are making Advanced Placement classes open to all students, regardless of the students' levels of preparation.  Further, if the classes are oversubscribed, a lottery is held, meaning that the best students can end up being excluded.  Jason Richwine has further comments.

Math is hard

There's a common saying that reporters don't go into journalism because they're good at math. While I certainly won't argue with the sentiment of that saying, I think there's something more nefarious going on with the press's innumeracy. To pay any attention to the math would mean finding out the true nature of President Obama's economic mismanagement. It's better for their collective psyche to not question Him rather than to run the risk of seeing how disastrous His administration has been. They might even find out that He has been lying to them for years.

The latest example of the press's happy mathophobia is how it has swallowed whole the administration's reckless talk about an imminent default. Congressman David Schweikert of Arizona tried to help them out
[T]here is no such thing as default unless there is an actual evil attempt from the administration. When you have 18 percent of GDP coming in in cash, less than 2 percent going out in debt coverage—I’m stunned you all fall for it in the press. None of you were math majors, were you?”
I'm not as stunned as the congressman is. After all, imagine how uncomfortable a reporter would feel among his colleagues if he actually managed to give an accurate reporting of the Obama economy. The wailing and the gnashing of the teeth would be deafening, and it wouldn't exactly put the reporter on the fast track for a Pulitzer.

Monday, September 23, 2013

How would a banana republic do it?

"Independent" NSA review panel is basically an arm of the Director of National Intelligence, who lied to Congress about the extent of NSA spying.

Keep chanting...

We're not a banana republic, and election fraud doesn't exist.

KC Star eats crow and admits that Democratic primary turned on fraud.

From our non-banana republic

If we're not a banana republic, then what are we? The USA Today revealed a spreadsheet listing conservative groups targeted by the IRS for reasons such as their "anti-Obama rhetoric". Here's a video from the Wall Street Journal summing up the state of the scandal.

Sunday, September 22, 2013

The US as a banana republic

President Obama gave a speech recently in which he declared that the United States was not a banana republic. For once, I can agree with him, but only on the technicality that banana republics aren't usually able to print the world's reserve currency ad infinitum. I'm with the inimitable Mark Steyn in thinking that this fact means that we're well on our way to becoming something worse.
“Banana republic” is an American coinage — by O. Henry, a century ago, for a series of stories set in the fictional tropical polity of Anchuria. But a banana republic doesn’t happen overnight; it’s a sensibility, and it’s difficult to mark the precise point at which a free society decays into something less respectable. Pace Obama, ever swelling debt, contracts for cronies, a self-enriching bureaucracy, a shrinking middle class preyed on by corrupt tax collectors, and thuggish threats against anyone who disagrees with you put you pretty far down the banana-strewn path.
In related news, our Hunger Games economy is forming according to plan, and you'll be arrested if you question what they want to teach your children.

Friday, August 16, 2013

St. Louis is not Detroit

Rick Edlund of the Show-Me Institute has a terrific piece in the Post-Dispatch today explaining why he thinks St. Louis will not become the next Detroit.  It is a nice contrast with Paul Krugman's breathtakingly dumb claim that Detroit's problems are largely due to outside forces.  St. Louis has faced those same outside forces and has suffered a great deal over the years.  But, despite its problems, it has been governed much better, especially under the current mayor.  That's not to say that St. Louis has been particularly well-governed most of the time, but it has certainly been able to stay afloat and provide basic services.  In fact, many parts of the city are flourishing.

Wednesday, July 24, 2013

Detroit: Krugman being Krugman

Unsurprisingly, Paul Krugman has said the single dumbest thing about Detroit's bankruptcy:
So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.
Actually, Melissa Harris Perry's claim that it was small government that did it is the winner for absolute dumbness, but she doesn't have a Nobel prize in economics to sully, so Krugman's comment wins for relative dumbness. 

If it was simply market forces that did in Detroit, then we should be seeing bankruptcies and general decline throughout the entire Detroit metro area, and not just in the city of Detroit.  Detroit is a political unit within the larger metro area, and the metro area is the relevant economic unit.  Here is what has happened to the populations of the city of Detroit and the rest of the Detroit metro area since 1950:

As you can see, the non-Detroit part of the Detroit metro area has grown continuously since 1950, although, like the rest of the Rust Belt, its growth has slowed over time. But when you take into account that the metro area was saddled with such a horrifically governed urban core, it doesn't look so bad.

In short, similar market forces buffetted the entire Rust Belt and the rest of the Detroit metro-area.  But Detroit is the only political unit among them that has filed for bankruptcy:  Pittsburgh hasn't, Cleveland hasn't, St. Louis hasn't, Buffalo hasn't, Wayne county hasn't, Dearborn hasn't, Pontiac hasn't, Livonia hasn't,...

I assume that, like me, very few of you have Nobel prizes in economics, but it looks to me as if the city of Detroit might have had some city-specific problems that led it to where it is today.

For anyone who is interested, Veronique de Rugy and Walter Russell Mead have some solid reality-based commentary on Detroit.

A speech that worth the teleprompter it's written on

The Economic Speech the President Ought to Give
(I)nstead of sparking growth, the rich got richer and the poor got poorer, and my policies produced the worst recovery since the Great Depression. Yes, the economy is finally growing, but at an agonizingly slow pace.
Had my policies managed to produce a merely average recovery, the economy would be $1.2 trillion — that's trillion with a "t" — bigger today. And 7.6 million more people would have jobs.
Instead of bottom-up prosperity, my policies produced the exact opposite — with gains at the top, but ongoing misery everywhere else.
The stock market has climbed and corporate profits are up. But median family income fell more during my recovery than it did during the recession itself. There are 2.7 million more people in poverty and 14 million more on food stamps.
On top of all this, over the past four years I've repeatedly witnessed the dead end of my vision for activist government — from the economic collapse of Greece to the bankruptcy of Detroit.
I now realize that had I put more faith in the free market, in the genius of the American people to solve problems on their own, rather than in Washington politicians and bureaucrats, we'd be in a far, far better place today.
So I'm no longer clinging blindly to the ideology I espoused on this spot eight years ago in hopes that someday, somehow, it will work as I'd hoped.

Friday, July 19, 2013

Obamacare and the weaselly use of "may" when you mean "might"

One of my pet peeves is that the word "may" is used at different times to convey two entirely different meanings, thereby creating great uncertainty about the true meaning of a sentence.  If I say that "I may go to the store", do I mean that I am allowed to go to the store, or that there is a chance that I will go to the store?  If, instead, I say "I might go to the store", then it is clear that I mean the latter.  If we reserve "may" for use only when you mean the former, then there can be no ambiguity.  For some reason, however, it has become common to use "may" to convey each meaning, although it actually ends up conveying both meanings at the same time.

As is their wont, politicians will take any opportunity they can to be ambiguous and weaselly, and the blurriness between "may" and "might" gives them one more safe harbor.  I was reminded of this when I read a blog post by Jeryl Bier at the Weekly Standard about the Obama Administration's backpedaling on its guarantee that, under Obamacare, you will be able to keep your current doctor.  You might recall this statement from the President:
Here is a guarantee that I've made. If you have insurance that you like, then you will be able to keep that insurance. If you've got a doctor that you like, you will be able to keep your doctor.
 Now we have this from Health and Human Services:
Depending on the plan you choose in the Marketplace, you may be able to keep your current doctor.
The problem is that, because of the many onerous regulations and restrictions under Obamacare, plans available in the Marketplace in your state (the health exchanges that each state is required to have) will not necessarily include all of the insurance plans that had been available. And, even if your plan is available, it might not include your doctor any longer. 

So, the President's iron-clad guarantee that you can keep the same doctor, which only a fool would have believed, has become the weaselly "you may keep the same doctor", thereby creating the illusion that you will be allowed to keep the same doctor.  The fact is that you might be able keep the same doctor, but that Obamacare might be responsible for eliminating your plan and your doctor as options. 

Tuesday, July 16, 2013

Maybe we should be more like Europe

From Via Meadia:
Spain is the latest European country to regret its foray into green energy production. On Friday the Spanish government announced some contentious reforms to its regime of green energy subsidies, which were among the most generous in Europe....
While environmentalists will no doubt be upset, Spain made the clear choice. High electricity rates are an unnecessary and regressive tax on citizens and a serious drag on industry, and green energy has yet to prove itself competitive without substantial subsidies. Spain is right to cut its losses on its costly green energy boondoggle and to refocus its limited resources on the country’s more pressing problems.
The Spanish government is smart enough to do this, and, unlike the United States, they aren't even sitting on top of decades worth of clean natural gas.

It's almost as if Jay Carney is paid to just make stuff up

74% of small businesses will fire workers, cut hours under Obamacare

Carney: Suggestion ObamaCare reduces full-time hiring 'belied by the facts'

I know first hand that ObamaCare is directly responsible for turning full-time employees into part-time ones.  It is only because of ObamaCare that my university, among many others, is restricting the number of courses that an adjunct instructor can teach.  These are people who are perfectly happy to be paid to teach, but not receive health benefits, and the university is perfectly happy to hire them to teach as much as they want.  But, because of ObamaCare, and for no other reason, these voluntary transactions that would benefit all parties will not take place.

Wednesday, July 3, 2013

Well, it did help him get elected

ObamaCare's success depends on the young being stupid:
ObamaCare's efforts to expand insurance coverage and bring down costs depend entirely on convincing young people to buy coverage, while the law gives these people every reason not to.

Monday, July 1, 2013

Yes, it's that simple

'Basically you have the government regulating and making business more difficult, and you have the Fed trying to compensate for it'

The most idiotic policy yet?

Given that nearly every decision and initiative undertaken by the Obama administration has or will impoverish the country, it's getting harder and harder to argue against those who claim that the president is intentionally ruining the economy. Off the top of my head I am unable to think of a single one of his policies that will have a positive economic impact. There must be at least one that does this, even if inadvertently.

At any rate, although most of the president's policies have severely negative effects that have prolonged and worsened the recession, some are even worse than that because they would drive our economy into the ground for years to come.  The most recent of these is the president's idea to centrally plan every aspect of energy use.

Sunday, June 30, 2013

No, destroying efficient capital will not generate growth

Paul Krugman has forgotten more economics than you will ever know:
With the Environment, Paul Krugman Forgets the Poor

Update: From James Taranto and Best of the Web

Two Former Enron Advisers in One!
  • "Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of 'Eurosclerosis,' the persistent high unemployment that affects a number of European countries."--former Enron adviser Paul Krugman and Robin Wells (Mrs. Krugman), "Introduction to Macroeconomics," second edition, 2009
  • "In general, modern conservatives believe that our national character is being sapped by social programs that, in the memorable words of Paul Ryan, the chairman of the House Budget Committee, 'turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency.' More specifically, they believe that unemployment insurance encourages jobless workers to stay unemployed, rather than taking available jobs. . . . The move to slash unemployment benefits . . . is counterproductive as well as cruel; it will swell the ranks of the unemployed even as it makes their lives ever more miserable."--Krugman, New York Times, July 1, 2013

Friday, June 21, 2013

Credit where credit is due

It's not very often I can say this, but the St. Louis Post-Dipatch had an editorial the other day that hits the nail on the head:  Missouri is drunk on tax credits. Who will take the bottle away?

Their focus is on the politics and corruption behind the growing burden of development tax credits: 
Part of the problem is an old one in Missouri: Despite a strong push from Gov. Jay Nixon, a Democrat, and many conservative Republicans in the Senate, lawmakers have been unable to overcome the power exerted by key developers (and contributors) who profit from the tax credit programs.
Another problem was outlined by Post-Dispatch reporter Jeremy Kohler in his report Sunday on the $7.8 million in brownfield redevelopment tax credits used to help pay for the demolition and eventual reconstruction of Northwest Plaza shopping center in St. Ann’s.
They fail to mention, however, that tax credits simply do not work, as has been shown over and over again.  Then again, I'm probably being naive in thinking that any big-government boondoggle is going to end just because it's ineffective. 

Maybe because there is no link

EPA fails to link fracking to water contamination for the third time

Wednesday, June 12, 2013

Economics research in Missouri

If you've seen my previous two posts (here, where I provide the ranks Fed economists, and here, where I create a ranking of Feds), then you already know that I am devoting today's blogging to various rankings of economics research.  Truth be told, the BLS website that I need has been down for maintenance, so I've been fiddling around with these rankings instead.  This particular post is my annual look at economics research rankings for Missouri based on data from RePEc (see previous years' posts: 2011, 2012).

Ranking Fed research

My previous post discussed and documented the large number of Fed economists among the top tier of economists doing academic research.  As a fun follow up, I've used information from the ranking of Fed economists' research to rank the various Feds.  Specifically, I simply aggregated the Wu-index across economists at each Fed to obtain a measure of "Total Wu-ness".

Here it is. Make of it what you wish:

Academic economics at the Fed

This story from Reuters describing Federal Reserve Governor Janet Yellen as "by far the most likely candidate to replace Ben Bernanke when his second term" made me wonder if there has been a permanent change in the job requirements for the Fed Chairmanship.  Specifically, if Yellen does succeed Bernanke, the Fed will have its second leader in a row whose prior career was as a highly successful academic economist: Bernanke's Fed tenure was preceded by many years at Princeton, where he was one of the most prominent research economists in the world, and Yellen spent many years as a world-renowned professor at UC-Berkeley.  Prior to Bernanke, Fed chairmen were (almost?) exclusively from Wall Street or Washington rather than the ivory tower.

Friday, April 12, 2013

Is it possible to finally slay the most monstrous of all green boondoggles?

The various subsidies and mandates for corn ethanol are not the most stupid and ludicrous alternative-fuel policies out there. That title goes to cellulosic ethanol.  But they have probably been the most costly and deadly.  Perhaps there is hope that this monster of a boondoggle will be given the boot.

Wednesday, April 10, 2013

The Missouri Quality Jobs Program: Simply a waste of money

Back in late January I testified in front of the Missouri House Committee on Government Oversight and Accountability about the Missouri Quality Jobs Program.  The program provides tax credits to firms that promise to provide new jobs in Missouri, and has given out hundreds of millions of dollars in credits since 2006.  The Missouri Department of Economic Development claims that the program has directly created more than 11,000 jobs.  This claim is simply the sum of the new jobs associated with projects that received the credits.

The problem with the DED's claim is that it assumes that all of those jobs would not have been created were it not for the credits.  This is clearly incorrect, however, because many firms only apply for the credits after deciding on a project.  In addition, the claim ignores that the most of the workers filling these new jobs usually come from other jobs within Missouri. Thus, they are merely shuffled from one Missouri firm to another.

I presented some preliminary estimates that the overall effects of the program so far was a small decrease in employment.  The best-case would be if the program was simply a waste of money.  I'm waiting for new data so that I can do a complete analysis of the policy. 

Here are some summaries of the hearing:

Department of Economic Development's Forecasting Model Questioned, El Dorado Springs Sun, March 7.
Economist Casts Doubt on Mo. Business Incentives, BloombergBusinessweek, January 28.
House Committee Looks for Ways to Improve Quality Jobs Program, Missourinet, January 28.
Lawmakers Address Mamtek, abc17news, January 28.

Tuesday, April 9, 2013

A catalog of economic incompetence

Someday there will be an extremely long book that catalogues the stupendously wrong-headed economic policies pursued by President Obama.  In the meantime, Richard Epstein has a good summary.

As an aside, I can no longer say that every economic policy pursued by the administration is the opposite of what should be done. The president's modest proposal to trim social security payments by using a more-accurate inflation measure is perfectly sensible.  That said, I'm not sure it's a good idea.  But at least it's not the opposite of what should be done.

Monday, April 8, 2013

Experts shmexperts

Michael Greve has a nice discussion of how the economy and much of the government has been outsourced to panels of experts who are not particularly expert:
How is this working out? Not so well, in my judgment—not for the pubchoice reasons of old, but for more Hayekean reasons.
For starters, it’s obvious that the experts don’t have a clue. The Fed’s pronouncements anno 2007, to the effect that everything was firmly in hand, are the stuff of legend, and its models have proven lamentably inaccurate in predicting even short-term economic performance. As for the experts’ climate change models about the planet’s behavior a century hence, right.
Even so, expert government proceeds on an implied premise of omniscience. The intergovernmental committee that decides, under and pursuant to the Endangered Species Act, whether the One-Eyed Toad shall live or die is called, only semi-ironically, the “God Squad.” (That would have been a terrific title for IPAB, but it’s already taken.) The squad’s reasoned decision-making is one step up from shooting dice. We can live with that, even if the toad cannot. However, expert ignorance increases with the scale, scope, and complexity of the experts’ mandate; and when we’re taking about the U.S. economy or the planet, that’s biggish. Still, we’re supposed to believe that there’s nothing wrong with the attempt to predict and manage these systems—nothing, that is, that can’t be fixed by an econometrician in the Fed’s basement or perhaps the Mann Brothers’ Earth Band (Michael with the hockey stick and Manfred with the keyboards).
Hard to say, from where I sit, what’s worse: the dark suspicion that the experts may actually believe their own models, or the fact that they’re putting on a game face in public and, in so doing, impede a serious discussion over what the institutions can and cannot do.

I'm beginning to wonder if they have even the slightest idea

Back in January 2010 our economic policy was beginning its drive down a bold new path.  The Obama administration had enacted a $900 billion stimulus package the previous year, and was embarking on a transformation of the economy: Obamacare, wind and solar power, Keynesian stimulus ad infinitum, etc.  In the meantime, the Fed was continuing its loose-money policies and maintaing interest rates close to zero. 

The administration and the Fed were confident that their actions would set the economy on a path of prosperity, as evidenced by the rosy forecasts they made at the time.  Because neither has really strayed much from the path it set out on, it's fair to take a look at how their notion of the economy compares with the actual one.  Specifically, we can look back on the forecasts they made at the time to see how well their visions of the economy stack up against reality.

Here are two charts outlining the Obama administration's notion of how the economy works.  The forecasts are taken from the 2010 Economic Report of the President (Table 2-3):

Hmm.  According to the Obama administration, the economy was supposed to be booming by now as a result of all the great things that had been done.  But it turns out that real GDP growth in 2012 was only 1.7 percent rather than the 4.3 percent that was forecast.  And despite Joe Biden's declaration that the President would focus on one three-letter word, J-O-B-S, payroll employment is nowhere near where it is supposed to be.  In fact, there are about 4.8 million fewer jobs than were promised by these glorious policies. 

Perhaps the Fed was better at this than the administation.  After all, they're free from politics and have hundreds of PhD economists running around the place.  Well, it turns out that they know about as much about the economy as the President does.  Here are the forecasts from the FOMC in January 2010.  They are the central tendencies of members of the FOMC, and according to them, the economy should have seen its boom in 2011.

Forecasting is a notoriously tricky business, so one shouldn't bee too harsh when forecasts are off by a bit.  On the other hand, when you are grabbing the levers of the economy with both hands shouting that you're capable of driving this thing, you had better be somewhere in the neighborhood of where you said you were taking us. 

Yet another Obama failure, but a U.S. success

Despite his best efforts, our President has failed to kill off fossil fuels.  In fact, the United States has become the world's largest oil producer, having passed Saudi Arabia last November.

Wednesday, April 3, 2013

Marx has always been full of it

Having spent a lot of time on university campuses, it's easy to recognize Marx's acolytes. They tend to resemble him in many ways: dirty, smelly, hippy, anti-semites.

Tuesday, April 2, 2013

Macroeconomists have always been full of it

Olivier Blanchard, former MIT professor and current chief economist at the IMF, recently offered five lessons that economists should have learned from fhe recent financial crisis.  He should have said that "macroeconomists" should have learned the lessons, because many actual economists already knew them.
  1. Humility is in order: Yes, macroeconomists are full of it and it's shocking how arrogant they are given how little they know.
  2. The financial system matters - a lot:  Why yes, but the financial system is too difficult to put into little toy models.  It's best to assume the financial system away so that macroeconomists can focus on important things like attending conferences in exotic places.
  3. Interconnectedness matters: Why yes, the U.S. economy is connected to the rest of the world and models of closed economies might not be realistic enough.  But then again, that would make the math hard, and it's all about the math.
  4. We don't know if macro-prudential tools work: Actually, we do know that when the economy is in the hands of politicians whose objective is to inflate housing bubbles to curry favor with selected constituents, things will go wrong.  If anything, traditional tools of fiscal and monetary policy can wreak havoc in financial markets when they're in the wrong hands.
  5. Central bank independence wasn't designed for what central banks are now asked to do:  When politics trumps sound economics, it's left to central banks to pick up the pieces.  Central banks themselves were, and continue to be, a big part of the problem because they were instrumental in inflating the housing bubble and are now distorting financial markets so much that they are holding back what little recovery we might be able to have given our dire fiscal and regulatory regime.
Ricardo Caballero has an excellent update of Hayek's view that macroeconomists labor under a pretense of knowledge. He concurs with Blanchard about how macro has neglected financial markets.

Obama has always been full of himself

Our President's narcissism seems to know no end, to the extent that he is unable to see himself as others do.  We see him as the President who is responsible for the calamity that is our economy and for a government that borrows about 40 cents of every dollar it spends.  He sees himself as one who, on April Fools Day, can proclaim April to be
“National Financial Capability Month,” during which his administration will do things such as teach young people “how to budget responsibly." “I call upon all Americans to observe this month with programs and activities to improve their understanding of financial principles and practices."
You can't make this stuff up.

Friday, March 29, 2013

Al Gore was always full of it

Steven Hayward has a nice post about the failure of those much ballyhooed climate models to actually predict climate.  The crux of the problem is that climate models, like economic forecasting models, are created by using past statistical relationships to determine time-invariant laws that can be used to project into the future.  It's relatively easy to get a model to fit the past (the in-sample fit), but the worth of a model is its ability to fit out of sample.

The problem arises because you can create a model that is a good fit for past data even though the model itself is not an accurate description of how the world works.  This can happen because the modeler can impose a structure that forces a good fit rather than being a good representation of the world's actual structure, which is probably a lot more complicated.

Now that IPPC climate models have been around for some time, there are enough observations to put them to the test.  Well, it turns out that the models have done a pretty crappy job in that they grossly overestimated the path for global mean temperature, which has been flat for over a decade.  Specifically, according to the models, the actual 2012 global mean temperature had a less than 5 percent chance of occurring.  And this was no fluke one-year event because the actual world has been trending this way for over a decade (see the chart below).  If the predictive power of these models collapses so quickly, then maybe we shouldn't rely on them as evidence that we have an urgent need to dramatically reduce our standard of living to fend off the chimera of global warming.  I've said before that climatologists remind me of macroeconomists, and I didn't mean that as a compliment to either group.

Richard Florida was always full of it

Patrick Ishmael has an excellent series of blogs (1, 2, 3) about the emptiness of Richard Florida's claims that the creative class is a key to urban growth.  Florida's research is extremely flimsy and it's shameful that it has received anything more than a snicker (Ed Glaeser has it right).  Ishmael shows how the hipster model of growth is bound to fail and has failed in St. Louis.