Thursday, July 31, 2008

Fewer long faces 

Those Social Responsibility bulletin boards in the post just below remind me of an old saying, "if you aren't outraged, you aren't paying attention." In today's Wall Street Journal, Arthur Brooks says we simply aren't so outraged, unless we're very liberal.

In May 2008, the Gallup Organization asked 1,200 American adults how many days in the past week they had felt "outraged." The average number of angry days was 1.17, and 54% of those surveyed said none. Only one in 20 reported being outraged every day. Despite the litany of horrors presented to us daily by campaigning politicians, most of us appear to be doing really quite well managing our anger.

Indeed, we are less angry today than a decade ago. Let's look back to the glory days of the 1990s, when -- according to the media narrative -- we enjoyed uninterrupted peace and prosperity. In 1996, the General Social Survey asked exactly the same "outrage" question of 1,500 adults. Then, only 38% had not been outraged at all in the past week. The average number of angry days was 1.5 per week, 29% higher than at present.

Virtually every group in the population is less angry in 2008 than in 1996...
I haven't been able to find the poll itself, though Art's work has been largely using the GSS data, so I would think what he's talking about is in there.

One-in-seven respondents who called themselves "very liberal" are angry seven days a week. These may be the people who do not recognize what most Americans do, in Brooks' view:

In some countries, a depressed economic climate means mass unemployment, political instability and large-scale deprivation. In America this decade, we have reached the point at which even in a down economy, our unemployment rate does not reach 6% (lower than the rates in Canada and the European Union, let alone those in the developing world). Any unwanted unemployment is terrible; but it is worth remembering that this stability especially benefits the economically vulnerable.

Furthermore, no matter what the state of our economy, we can realistically count on uninterrupted provision of critical public services, high business start-up rates, the world's highest levels of charitable giving and volunteering, and countless other benefits that come from living in a successful nation.

I recommend, by the way, his new book, Gross National Happiness. Recognizing these blessings of living in the US reduces the demand for programs like social responsibility.


Assorted bulletin boards 1 

I am done with bulletin board #3, but while I was shooting that board I saw a few other things that I thought Scholars readers might find amusing. These are assorted postings on bulletin boards in my office building (Stewart Hall) that captured my eye. Small comments attach. I will be off tomorrow in search of new material from other buildings.

This is a work in progress, about the "Personal Responsibility and Work Opportunity Reconciliation Act," the law signed by Bill Clinton in 1996 which was to end welfare. The starting piece in the upper left corner says "A nation's laws affect a nation's ..." and nothing more yet. The left has opposed PRWORA since its enactment; it will be interesting to see where this one goes. It might be a new series on this blog some day.

Here's a board with information students might want to get about the university's graduate program in social responsibility. The little flyer in the bottom right corner was particularly interesting; let's take a closer look.
Three steps Towards Changing the World:
  1. Enroll in the Master's program in Social Responsibility at St. Cloud State University.
  2. Educate yourself about such issues as racism, gender bias, heterosexism, animal rights, globalization and many more. (...and many more? Like what? Check the list.)
  3. Use your knowledge to help make a difference in the lives of others!
I hear you can get pizza with that.

Almost directly across from this board is a maintenance closet used by the people who keep our classrooms and hallways clean. On the door:

The bumpersticker reads: "If you can read this, thank a teacher. If you can read this in English, thank a soldier." You might even say soldiers " make a difference in the lives of others!"

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Happy birthday, Professor 

Milton Friedman would have been 96 today were he still alive. Fifty events are happening around the country today to celebrate his legacy.

I have been teaching intermediate macroeconomics this summer, using the textbook of our current central bank chair (along with Andrew Abel and Dean Croushore), and we just finished the chapter on money. Towards the end of that chapter we teach the relationship between inflation and growth of the money supply. There's an equation which I can try to recreate here in words:

inflation = growth in money supply - (income elasticity of money)x(growth of real GDP)

which assumes relatively stable velocity of money in the short run. Friedman had insisted that "inflation is everywhere and always a monetary phenomenon", and I suggested we use that equation to see where we are now. I tend not to make exact measurements in class, so if I do a little rounding here you can hopefully make adjustments if you want something a little more precise.

Today's GDP report for Q2 puts the growth of GDP at about 2%. Friedman had folllowed the quantity equation to make the income elasticity of money equal one. Other research puts the number closer to 2/3 or 0.7 (the Baumol-Tobin approach makes it the inverse of the square root of 2, which is roughly 0.71). People tend to economize on cash holdings as they become wealthier, so a result for that number less than 1 makes sense.

For money, I used M2 in class (you can look at other rates here or get the raw data and do your own; see also Mark Thoma for a primer on different velocities of money). The average growth rate appears to be around 6% for the recent data.
If you accept those data, then, what would you get? Assume the income elasticity is 2/3 and the growth of GDP is 2%, and your answer would be 4.33% inflation. Assume income elasticity is 1 and you get 4%.

Now, 2% isn't probably the best guess for what GDP growth will be in the long run. That might be closer to 3%. But the point is that the acceleration of money growth since early 2007 -- approximately at the beginning of the current mortgage mess, has led to easier money which Friedman would have most certainly called out as becoming inflationary at some point. The data from the TIPS market would have shown this as well.
If you use 2.7% for the long run growth rate of potential GDP as CBO estimates, an expected inflation rate for the long term of 3.4% is quite reasonable for an assumption that M2 money growth stays at current levels for some time into the future. That target inflation rate of 2% is increasingly looking like it's out the window. The Fed's gift to Friedman on this birthday should be a Fed funds rate increase at its next meeting.

UPDATE: Ironman has built a little program that lets you compute your own expected inflation rate. Thanks -- very cool!

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Wednesday, July 30, 2008

Making Soldier Votes Count 

Our son is stationed with the US Army in Korea. One of his responsibilities is to make sure that the soldiers in his camp are able to vote. He contacted our Congressman, John Kline, and was directed to this website where soldiers stationed overseas can register to vote for any county in the USA. Please encourage your soldier to visit the site. I have gone through it and as the user who was given new applications to test because "if there's a glitch, Janet will find it" I can honestly say, this site is user friendly.

Our soldiers have had their votes denied in the past for a variety of reasons. There is enough time now to let your soldier know that they can get their ballots through this website.

Our son also reviewed it as well as other sites and has stated that in his opinion, this site is the best.

Thank your soldiers for their efforts and support.

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Complaint returned 'incomplete' 

Michael has posted a copy of the administrative law judge's dismissal of the complaint about our ads regarding Al Franken and card-check legislation. That doesn't necessarily end the story of the complaint; the judge found that Melendez and the DFL had failed to provide any documentation of their claims that the ads violate section 211B.06 of the election laws. So they could file again. It's like getting your paper back from the professor who says "I failed this because you didn't follow directions. You can send it back in for a grade if you will finish your work."

It's weird to see my own name in a complaint like this, but we feel the ad is on relatively solid ground. The principle of free speech allows us latitude to interpret EFCA in its practical intent. We do not need to be literalists, to use David Brauer's term, to meet the requirements of the law. For the 50% minus one workers who do not sign (or are not offered the opportunity to sign) union membership cards, the last protection of their right to a secret ballot would be lost if card-check legislation passed.

I believed from the moment the complaint was filed that its audience was the media, not the campaign board. Call it vapor-complaint. Its intent was to keep us off the air. However, that has failed, as more ads are currently running.

One can hardly accuse us of being anti-labor. A Zogby survey done on behalf of the Mackinac Center for Public Policy found that 53% of union workers, when offered a choice between card check and the current secret ballot form of organization, chose the government protection of a secret ballot, as opposed to 41% favoring card-check. 84% of the respondents agreed with the statement "workers should have the right ... to vote on whether they wish to belong to a union." No wonder the union leaders and the DFL have tried to squelch these ads. Their own rank and file do not agree with them.

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Daily effects of indoctrination 3, part 4 

Another concern of the bulletin board is bullying in schools. So the sign at the bottom of this picture tells us that "This is what a bully-free world would look and feel like." OK, that sounds like a good plan! But what words do we include for "the no bully zone"? Laughter. Opportunity. Fun. Yes, that's good. Happy. Harmonious. Kids harmonious? Sometimes, and sometimes not.

Inclusive. Opportunity. Diverse.

Wait a second. Are we saying bullying has a racial component to it? It's interesting that the pictures of children together are of different races, but I think only one picture has children of two races.

While this is all for this particular board, I have a few more from nearby boards that will make a nice essay for tomorrow and Friday that I will include in this series.

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Tuesday, July 29, 2008

I'll be getting some time back 

Facebook has disappeared Scrabulous for US and Canadian users. Boo!

Facebook is running instead the official Scrabble game. Yea!

It crashes. Boo!

And I had three games going, too. Oh well, I think I was going to lose two of them.

The markets for gas and oil can differ 

Aside the controversy of using a campaign worker's spouse (see the update) to pen what might otherwise have been seen as an interested letter to the editor, I thought Susan Gaertner's letter about the claim of Michele Bachmann that the price of a gallon of gas could be $2 in the US in four years deserved some commentary. It is really a bold claim Rep. Bachmann makes and thus worth considering in more detail.

Most of the letters you read these days involve the EIA's estimate of the effect of opening drilling in ANWR. As I wrote about this last week, the report assumes that the price of a barrel of oil in 2020 would be less than $60. If $140 a barrel produces a price of $4 for gasoline, what does a price of $60 a barrel for oil produce? Those of you who answered "$2" can stop now; you've just agreed with Rep. Bachmann. (Though that's 2020 versus Bachmann's forecast date of 2012; if you'd like to argue a price that stays at $140 through 2012 -- or higher -- and then falls to $60 by 2020 so that EIA is right and Bachmann is wrong, I invite you to tell that story and wish you good luck.)

So let's suppose EIA is wrong about that forecast. This kind of cuts the legs out from Gaertner's substantive claims, but let's answer her question for her anyway. What might additional drilling produce for a price change? The key lies in understanding it's about more than just additional oil production.

James Hamilton posts this evening that demand for gasoline in the US appears to be more responsive to prices now that we're at $4 than it was when we were at $3 a gallon. I have talked about this in terms of the "second law of demand": consumer responsiveness to price changes is time dependent and expectations dependent. If the price rise is temporary, you smooth your consumption of gasoline through a combination of less spending on other goods and by saving less. If on the other hand you believe it is permanent, you make bigger changes, like dumping your SUV, riding a bike or buying a more fuel-efficient car. As that shift occurs, you move from a very inelastic demand curve to a more elastic one, and that produces a snap-back of prices towards where you were before. Jim's graphs would indicate that since the beginning of 2008 we are seeing some of that. That should give one some hope that the price decline we're experiencing right now could be the beginning of a longer period of lower gas prices.

But it's also expectations-dependent for suppliers, particularly at the refinery level. There's a very interesting post on VoxEU from Lutz Kilian of U. Michigan regarding the sources of increase in gasoline prices. Most importantly, his model distinguishes the market for gasoline and the market for oil. Domestic demand for gasoline and speculation over oil futures play almost no role in the price of gas; foreign demand and supply uncertainties explain most of the change in Kilian's model. That result makes sense to most observers (it fits, for example, that CFTC report on speculators.) The price spikes following Hurricanes Katrina and Rita reflected very tight refining capacities that were upset. Those shocks went to gas prices, with negligible impact on world oil prices.

Part of the plan pushed by Rep. Bachmann is to pass HR 6139 to cut the bureaucratic hurdles that impede the construction of new refineries. Sure, they take years to produce, but the prospect of additional capacity would reduce uncertainty about gasoline supplies and reduce inventories (which, unlike crude, have been going up versus a year ago.)

Inventory uncertainty, then, can play a substantial role in gasoline prices. Easing the regulatory chokehold on gasoline production could take much more off the price of gasoline today than anyone's projection of the impact on crude oil.

Cross-posted at Outside the Beltway.

(Afterthought: Just after posting this I realize some might think I'm predicting $2 gas myself. That's not the point; the point is the plan laid out has the capacity to create a $2 price all other things equal. To actually make that forecast would require a whole lot more analysis than offered here. I don't wish to denigrate the efforts of EIA with its annual energy outlook -- just that using it to talk about prices 12 years hence is bound to be fraught with the very difficulties I used here to dismiss Gaertner's use of it. Error bands expand the further into the future you forecast.)

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Daily effects of indoctrination 3, part 3 

As we saw yesterday, this bulletin board -- appearing in a hallway near the Social Work Department at the university -- is trying to make points about sex education. Along with many condoms and their (opened) packages we find discussion of feeling during sex, some myths about sex and pregnancy, a lament that "only 49% of college health centers provide emergency contraception" ... which I think is not a condom. "2800 teens each day become pregnant," one note chastises, indicating that it thinks teen pregnancy is a problem. I would think people in social work would believe so; it must be part of their experience.

The board seems to dismiss the possibility that abstinence is helping reduce teen pregnancy, despite plenty of evidence and bipartisan support for including abstinence in programs to address the issue. Note that while I linked to some of Robert Rector's work, I don't necessarily agree that one should not talk about condoms. I simply think the board goes over the top in its pushing for condoms over abstinence.

This board appears in a hallway leading to offices of the Social Work Department, to which some newly enrolling students will walk in the next few weeks, some with their parents, to receive advising. It would be interesting to get their reaction to this board. Would it give one pause? Would there be nervous laughter? Would it raise questions? Would it educate?

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Monday, July 28, 2008

Daily effects of indoctrination 3, part 2 

Let's start with this wider view: this is part of the bulletin board that includes appeals for peace and affordable education. A lot of pictures cut out of magazine around it. If this is a classroom presentation, I'll just suggest that Littlest -- who celebrates her 14th birthday today -- can do better than this display. But click to enlarge that picture, and tell me what those are on the far right?

Yes, that's right: they're condoms. I'll start with this one for today:
The blue pieces of paper suggest these facts
More on this board tomorrow.

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That card's expensive, too 

One part of joining a union is agreeing to allow your union dues to be used by the union's leadership to engage in political activity. One of the groups pushing card-check, the SEIU, is strong-arming its rank-and-file for money to fund political activity this year. The National Right to Work Legal Defense Foundation has asked the Justice and Labor Departments to investigate the practice.

Article XV, Section 18 of the union�s constitution now authorizes the SEIU�s national brass to fine local unions for failure to meet its annual SEIU COPE fundraising obligations. SEIU COPE is the union�s federal PAC, and the FEC lists it as the top labor union PAC with over $23 million in receipts for 2005-2006.

However, federal labor law forbids unions from political fundraising through the imposition of mandatory financial penalties and it prohibits the conversion of union dues to �hard money.� In addition to asking for a Department of Labor investigation, the coercive nature of the amendment�s punitive mechanism violates core provisions of the Federal Election Campaign Act, and warrants a Department of Justice criminal prosecution.

The new amendment also appears to allow local affiliates to use nonmember employees� mandatory dues payments to cover PAC contributions and the SEIU�s fines. While imposition of financial penalties for failure to make political contributions is illegal regardless of how those fines are spent, the use of funds derived from nonmembers� fees for political purposes also violates those employees� constitutional rights.

Ed Morrissey notes
Now the SEIU suddenly has $150 million, from which they�ve already committeed at least $85 million specific to Democratic candidates. ... The union knows how to protect itself and its interests, and the lockstep nature of their support for Democrats should awaken voters to the threat their policies comprise. This is nothing more than a closed-feedback loop for Democrats, and Card Check is the prize that will ensure its rapid growth.
It's not even necessary, though, if the Justice Department does not forbid the compulsion of agency fees for payment of penalties for failing to hit the quota for its contributions to the unions' PACs.

But signing that card, my fellow worker, is now more expensive than ever. You will have no recourse to them taking that extra $6 per year. Did you sign such a card and now regret it? Instructions here on what rights you still have, at least until the next attempt to pass card-check.

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Controlling both price and quantity 

A few weeks ago I read a story on air (it's at the end of this podcast) that the idea of the gas tax holiday had not only foundered in Congress but that they were contemplating instead a gas tax increase. Today's Wall Street Journal carries a headline, "Americans Cut Back Driving, Straining Highway Funding". The problem is you are doing too much conserving, you nasty driver you.
A report to be released Monday by the Transportation Department shows that over the past seven months, Americans have reduced their driving by more than 40 billion miles. Because of high gasoline prices, they drove 3.7% fewer miles in May than they did a year earlier, the report says, more than double the 1.8% drop-off seen in April.

The cutback furthers many U.S. policy goals, such as reducing oil consumption and curbing emissions. But, coupled with a rapid shift away from gas-guzzling vehicles, it also means consumers are paying less in federal fuel taxes, which go largely to help finance highway and mass-transit systems. As a result, many such projects may have to be pared down or eliminated.
Remember when we joked "light up for the Twins" when it appeared a cigarette tax would help fund a new stadium? So at the same time you are advertising that driving big SUVs are harming your mother earth, you have to compensate for the effect of the advertising by increasing taxes to fund highway and bridge construction. This is supported by folks in the highway construction industry and the union leaders of those industries.
"We were losing ground to these incredible increases in construction costs, but then to see the erosion in driving -- it's a double whammy," said John Horsley, executive director of the American Association of State Highway and Transportation Officials.
The government has used a tax system that says, in short, the more miles you drive the more you erode roads so you pay more. Thus a tax system that charges you a per-gallon tax. If Americans are driving fewer miles, highways should be eroding more slowly and construction should be able to slow to match this.

But transportation policy now appears to both want to control your price you pay (through taxes that discourage consumption) and the quantity of gas you consume (so that they can collect revenues enough to meet their construction plans.) Controlling both price and quantity is hardly a market solution to roads and bridges. Tolls would be a solution that returns us to a benefit principle for highway financing.

Cross-posted at Outside the Beltway, where I will be guest-posting most of this week.

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Saturday, July 26, 2008


[Click on photos to enlarge them.]

As many of you know, I volunteer for John Kline, Congressman from Minnesota's Second Congressional District. ELection years are parade years. When I started in 2004, I thought, "I can't do this parade stuff." Well, I was wrong - they are fun, exciting and just a good way to spend a few hours.

Parade watchers are mostly families and the enthusiasm of the kids and their relatives is a real upper. We usually have at least 50 John Kline supporters at most of our parades. Here are a couple of pictures from today's parade in Rosemount, MN. We had about 60 today, including the tots in the John Deere car, the strollers, the Harley Bikers (in the back of the photo) and others.

Last week, in Watertown, MN, home of John Kline's opponent, Steve Sarvi, there were at least 67 Kline supporters marching to Mr. Sarvi's 25. Needless to say, we had a great day.


Stop the Pork #2 

In this post, I mentioned Congressman John Kline's pork busting effort, his website, Stop the Pork - where you sign the petition to say, "enough is enough" get control of US spending!

Today's Wall Street Journal notes on the Opinion Page, "Voters Want Less Pork, Even in Their Own District." As an active supporter of John Kline, I was glad to see this. Some letters to the editors slam Congressman Kline for taking his strong stand against pork. Turns out, this "get me my money" attitude represents the minority. Kline supporters are in the majority.

The Club for Growth recently conducted a nationwide poll on government spending, and the results were exactly the opposite of what most politicians have been saying for years. Voters are fed up with Washington's out-of-control spending. Bringing home the bacon is NOT what people want. Rather this earmark practice is simply funneling money to special interest groups, including local politicians. Voters want officials to cut the fat.

Survey Question: All things being equal, for whom would you be more likely to vote for the U.S. Congress: 1) A candidate who wants to cut overall federal spending, even if that includes cutting some money that would come to your district or 2) A candidate who wants to increase overall spending on federal programs, as long as more federal spending and projects come to your district?"

The results are unambiguous:
Voting Subset.......Candidate.....Candidate
General Voters.......54%................29%
Independents........61%..............not specified
These results indicate the Democrat Party mantra of tax and control, raising taxes everywhere are NOT what we, the taxpayers, want. Reminder, the MN legislature, now dominated by Democrats passed the largest tax increase in 150 years in 2008. We pay more for anything and everything we buy, use, etc. Obama wants to increase taxes for all Americans, across the board.

People, it's our money and while we're telling "them" to stop, we also need to vote in people who will stop. As Kline indicated on his blogging conference call Thursday morning, the Democrats in the US Congress have now decided that there will be zero appropriation bills because the Democrat chairman of the appropriations committee, David Obey, is afraid to address the real issue, pork. It's time to hold Congress accountable. Vote in DC politicians who believe in sound fiscal policy - as Nike says, "Just Do It."

Updated 7/26

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Friday, July 25, 2008

Have none of my pictures made it? Don't forget

The valley of death ( 15-17) has devoured four of my balls. Ed who has plyed almost no golf in two years is carrying me. It has been a humid day.

See SCSU Scholars for your all-day MilF coverage! 

As a rehearsal for my plans for the Republican National Convention, I am going to experiment today with mobile blogging from the cellphone as we cover the Millard Fillmore Invitational from Valleywood. Updates also available from the Twitter page. Word is the Head of Alfredo Garcia will also provide live updates throughout the day. Where, I do not know.

Ed and Billy Baru be with me today.

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You're not good enough, not smart enough, to save for your retirement 

Visiting St. Cloud yesterday to promote his "Kitchen Table Tax Plan", Al Franken had a bit of trouble explaining his plan to end IRAs and replace them with a 401(u) plan.

The retirement plan would be funded by eliminating an existing income tax deduction for Individual Retirement Accounts for people who participate in the new program, which would be voluntary, Franken said.

�Tax deductions help people who make the most money, but they don�t help those who don�t make enough to pay income taxes to begin with,� he said. �I think Social Security will still be around years from now if we don�t privatize it, but we need something else to help people save for their retirement.�

Pressed to explain how a voluntary system could raise enough money to pay the subsidy if those with higher incomes who benefit more from existing deductions don�t switch, Franken referred people to his campaign Web site and said �it�s a wash.�

Well, OK, we went to his web page about his 401(u).
What would it cost?
The shift from tax deductions to matching contributions is close to revenue-neutral.
That's the entire entry for "What would it cost?" Oh, that's MUCH clearer now.

The 401(u) isn't a new concept. It's the "automatic in, opt out" plan that Obama has been pushing. It requires employers to take a portion of a worker's check and put it into a plan, where it receives a 30% match from government (in the Franken plan), if the company doesn't have a retirement plan for employees (and has more than 10 employees.) This relies heavily on the idea from behavioral economics that people do not often enough choose to save. If this is true, why does the Franken plan allow families to"shape their account to fit their unique needs"? If they aren't smart enough to opt in, how are they supposed to do that? The funds would at the outset be placed in "responsibly in low-cost, diverse portfolios." Who chooses those?

Mark Thoma wrote about such plans (when a Republican supported them for Social Security):
In general, I hate opt-out programs. I don�t want to spend my time filling out forms and checking boxes telling people all the things I don�t want to buy. If I�m convinced there is market failure in the market for bicycles resulting in too few being purchased, is the proper solution to drop bicycles in people�s yards unless they remember to send in the proper paperwork? I remember being in music clubs like that when I was younger� Maybe a better answer is to work a little harder on the incentives and ease of opting-in.

Last, I worry we have forgotten the Lucas critique yet again. Change the rules and change the behavior. I can imagine that if you impose opt-out now when it is uncommon participation might be high. But as it becomes more common and institutionalized people will more easily opt-out. In addition, it also seems participation rates will fall in the long-run as people hit financial stress points. If you can opt-out at will, then the first time a family faces financial distress, they will likely opt-out. Unless they are somehow brought back into the program later, participation rates will fall as time passes and revenues may not meet projected values.

I agree with Thoma, though see Beshears et al [2006] for a more positive report. Someone pointed out to me as well that one of Franken's justifications for this bill is that the tax deductibility of the 401k isn't a value to about half the workers in America, because they don't pay any or too few taxes. How ironic that it would be Franken to point out one of the effects of the Bush tax cuts!

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Thursday, July 24, 2008

"I protest your invitation" 

I've written twice before on the Orwellian-named Employee Free Choice Act, which would make the heretofore voluntary agreement between workers and firms to use card-check systems (allowing a union to be recognized as sole bargaining agent for all workers if a majority of workers sign cards agreeing to be so represented) binding on firms who do not agree. Firms currently can request a vote to be administered by NLRB; those workers who do not wish to be unionized would have the opportunity, along with the firm, to argue why a union would not be in workers' best interest, and a vote would be held with workers' privacy protected by the NLRB. No such protections are provided under the proposed card-check program. Those who did not sign the card, or those who were not even approached by union organizers, would find themselves in a union, obligated to pay dues, without recourse, without a check or balance. The equivalent would be to imagine you waking one morning and reading in your newspaper that organizers had gone to other homes, had others sign a card that signified that they wanted King Banaian to be president of the United States, and that because they had enough cards signed, Banaian was now president without any further action required. You've never heard me talk, you don't know my views, but I now represent you on Pennsylvania Avenue. That'd be pretty bizarre, yes?

After the DFL accused the ad put out by the Coalition for a Democratic Workplace (the TV ad was put out by them alone) of falsehoods, I wrote a letter to DFL state party chair Brian Melendez to invite him to debate the issue. We had recorded Al Franken answers twice to be sure we understood his views on the bill, and by their own admission Franken supports EFCA. So we assumed the debate would be on the merits of the bill. A discussion of the issue, I thought, might be a refreshing change to thirty-second ads.

So imagine my surprise last night to find out that the DFL would rather file a complaint. They'd rather debate through lawyers than in the state capitol. We are, of course, happy to have this debate any place Chairman Melendez chooses, but isn't it interesting that he needs to employ lawyers to assist his side?

We appreciate the coverage by the news and bloggers (Andy's post has both of the TV ads; I bet he watches them on his iPhone.) And we don't intend to go away; a new ad is running from us today.

A statement put out by J. Justin Wilson, managing director of the Employee Freedom Action Committee, said in a prepared statement,
It appears that Mr. Melendez is complicit in the scheme to deceive the public and take away working Minnesotans� right to a private ballot vote. The irony of Mr. Melendez�s �complaint� is that he is the one who is misleading the people of Minnesota in order to advance a union boss� power grab that will generate millions in new forced dues dollars.

If Mr. Melendez truly cared about the best interests of working Minnesotans he would reject these absurd political games and agree to a substantive public debate on the private vote issue.
I reiterate that invitation, Chairman Melendez. I'm available almost any day in the month of August.

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What is "the subtle difference between a want and a need"? 

A letter in this morning's StarTribune:

Regarding "Bachmann, back from Alaska, urges more domestic drilling" (July 23): U.S. Rep. Michele Bachmann doesn't seem to understand the subtle difference between need and want (describing the untapped Alaskan energy resources as a locked pantry filled with food while children go hungry). Perhaps a better analogy would be a locked medicine cabinet filled with morphine in a room full of addicts.

Let's tend to the real needs of our children and provide a livable planet for their future that doesn't involve destroying our environment.

The difference between want and need is a source of great confusion in economics. Needs are necessary; wants are optional. In The Economic Way of Thinking, Paul Heyne, Peter Boettke and David Prychitko suggest for statements of "needs":

The authors point out that all decisions are made at the margin, that all the values that matter are those at the margin. When I'm watching a baseball game at home and Mrs. S says "Who do you love more, me or baseball?" I answer "At the margin, baseball. And you're blocking the TV."

Foolish arguments like that advanced in the letter treat a marginal change as if it is an all-or-nothing choice. The choice about ANWR is not this at all. It is a decision to remove from preservation in undeveloped form a piece of land that might be 1.2 million acres (all of Area 10-02) or just 2000 acres (that part of the land designated for oil extraction) in return for an amount of oil about which we have imperfect information. The find might be small; that's the nature of oil exploration and extraction. It is a world of tradeoffs (the tragic vision I discussed earlier this week). Those tradeoffs reveal that what one might call a need is really just a want for a good with highly inelastic demand in the short run. Diabetics need insulin if they don't adjust their eating habits or use alternative health care. Those might not be great substitutes, but they are substitutes. You could list others, I'm sure.

Is a picture of an arctic scene equal to Area 10-02? Certainly not. But suppose I said you could have Area 10-02, another area of ANWR that has a very similar picture and no oil, or another area in ANWR and x billion barrels of oil. Is there no value for x that gets you to make that trade? I doubt it. I highly doubt it. If there are alternatives to oil, there are also alternatives to undeveloped land.

Scarcity is not optional; we do not live in a world where one can "tend to the real needs of our children" without sacrificing other goods for other people. People can provide for the "real needs" of pristine lands in a variety of ways, both public and private.

We call it the law of demand for a reason.

h/t: KAR, whose post is entertaining as well as educational.

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Daily effects of indoctrination 3, part 1 

This bulletin board (see here for a review of the others) is at the entry to a set of offices for the Department of Social Work in my office building. Hundreds of students pass by here each school day. I do not know if this is the result of work in their classes, but it appears to be a composite of projects done by different individuals or groups. It is unlike the previous two boards.

The top image is of President Bush "wearing" a t-shirt that says "I [heart] Hugo Chavez", with fake currency around him. He is standing at a lectern with the presidential seal. The bubble quote over him was folded over when I saw it, so I held it up to take the second picture. It reads "Americans misunderestimated me! I approve raising the poverty line, increasing social welfare and implementing a living wage."

I would like to know the purpose of this particular course, if indeed this was coursework. If it's not, and it's on a departmental bulletin board, it's a bit worse as a statement about the values of social work programs. Perhaps this is a means to educate about the dispositions expected of majors.

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Stop the Pork 

Congressman John Kline of MN's Second Congressional District (CD 2) has just completed a blogger conference call where he discussed his Stop the Pork initiative. The earmark/pork system was originally created to help states with special projects not expenditures like this one: The US House passed a bill that would spent $5 million to prevent the interstate sale of monkeys. John Kline voted against this one, thank you. But excuse me - monkeys? Our money for monkeys?

Ludicrous decisions like this one show the extent to which the earmark system has deteriorated. Funds now are totally dependent on party power and committee assignments; the definition of an earmark is unclear.

Starting in January of 2007, Republican Congressman John Kline refused earmarks. 11 other Congress members joined him. In 2008 the number increased to 50, from both parties. They were hoping to bring the issue to the entire US House but were stopped before they could begin by the Democrat "leadership" of Nancy Pelosi, Denny Hoyer and others. Net, even though there are Democrat house members who support a moratorium, the Democrat "leadership" refuses to even discuss the matter.

John Kline has had enough. He's begun a website, "Stop the Pork" where you can sign a petition to tell Congress, "Enough is enough." Please go here to sign. The goal is to obtain enough signatures to get Congress to stop all earmarks until standards can be designed and implemented.

Those who think we're not getting our fair share of the pork are missing the point - it's our money that goes to fund lighting in a fashion district in CA, olive fruit fly research in Paris, France, etc. It is up to us to take back our money.


Wednesday, July 23, 2008

Media Bias? Yep, big time. 

We've all been saturated with coverage of Senator Obama and will have to contend with this for a few more days. This saturation represents what many conservatives indicates the unfairness of political coverage by the mainstream media (MSM). Just reference one time in television's history when the anchors on the (used to be) Big Three networks were part of a non-president's overseas entourage? I don't think ever. Yet those on the left complain that the coverage is controlled by the right. Excuse me while I choke on that last statement.

Now from Investor's Business Daily comes a totally shocking report: Media donations favor Democrats. While the overview looks like 10:1 or 20:1, when Ron Paul and Rudy Giuliani are taken out of the equation and only Obama and McCain are used, the ratio is 100:1. I'm shocked, just totally shocked! I had NO idea. Take a look at this table.

The MSM uses as its excuse that Obama is more newsworthy but the donations say otherwise - the MSM wants to flex its declining muscle and put Obama in as POTUS. They may do it since they ignore his gaffes, his flip-flopping (Obama makes John Kerry look like an amateur), his flat out misstatements (to be charitable) like the one today about his heading up the Senate banking committee when he's not even on a subcommittee. What's a little lie when the press is foreign - Obama and his staff probably figure those foreigners won't know the difference. Perhaps in fawning Europe that might be the case but not in Israel or the rest of the Middle East where Senator Obama has gotten a luke warm reception at best.

Enough - money talks and this table says it all. Media bias is alive and well. Please remember this when you read news reports.

What's really bad about this is that people only get one side of the "news" and this simply is wrong. I have a saying I use, "Like promotes like" and it sure looks like MSM, located in mostly strong blue cities, promotes blue/left leaning people to the detriment of us all.


Does Al Franken want to kill IRAs? 

MPR reports on Al Franken's tax plan:
Franken wants to expand the dependent care tax credit to cover more than one-third of child care costs for families earning up to $100,000.

He would create a $2,000 tax credit to help families take care of elderly or ill relatives. Franken is also calling for an expansion of the Family and Medical Leave Act to cover millions more workers.

And he wants to eliminate the retirement savings tax deduction in favor of a 30 percent government match of every dollar a worker saves for retirement.
As one correspondent notes, the IRA deduction is valuable only if you have taxable income to deduct against. 25% of family heads had an IRA; 40.1% of families 55-64 own at least one. (Source.)

The article does not make clear what the benefit would be of the Franken plan. Imagine, for example, a young couple with a home that had appreciated (even despite the current declines in home prices.) Can they withdraw equity from their home, put it into a Franken plan and collect an extra 30%? Sounds like a good deal, but it puts the home at more serious risk of foreclosure if property values were to decline (further). Attanasio and DeLeire (2002) argue that all of the contributions to IRAs were shifting savings from taxable to tax-preferred forms. The Franken plan would likely do more of that.

Bulletin board 3 preview 

This is a preview of coming attractions regarding bulletin boards we find on the university campus. This is a partial; the particular bulletin board we will study next is quite large and in a relatively narrow hallway. (I don't own a wide-angle lens.) Yes, that is a "I [heart] Hugo Chavez" shirt below President Bush's head. You can start discussion there if you like.

This is the third series of a continuing study. The summary of the first series is here. As we have not done a summary of the second series, here are links to the entire run:
I look forward to your comments on this new bulletin board, which I discovered only last week -- these might be the best ones yet.

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Tuesday, July 22, 2008

Stuff they learn in j-school 

Excuse me while I clean the Coke off my keyboard after reading this.

Rep. Bachmann used a word picture to describe the offlimits energy supplies in this way:

Picture the pantry being full of food and your children wanting to eat. Then picture that the pantry is locked. America has lots of energy but Congress has locked the pantry.

Mr. [Pioneer Press reporter Jim] Ragsdale started by saying that he liked the picture, then asked this question:

�What if the pantry was full and the children were already overweight. Shouldn�t we keep that pantry locked?

Leo suggests Mr. Ragsdale "pines for the return to the malaise of yesteryear that everyone so enjoyed during the Carter administration."

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Stein's law, ANWR, and oil prices 

Stein's Law, "If something cannot go on forever, it will stop," came to mind to me today while reading a post on Angry Bear about ANWR. To get at the thought, consider this graph above, which is from a report that pgl and most of the ANWR-ain't-diddly-squat crowd quote. You know, the one from EIA that says ANWR will make barely $.02 a gallon difference for gas. See if you can find the heroic assumption in the actual passage:
With respect to the world oil price impact, projected ANWR oil production constitutes between 0.4 and 1.2 percent of total world oil consumption in 2030, based on the low and high resource cases, respectively. Consequently, ANWR oil production is not projected to have a large impact on world oil prices. Relative to the AEO2008 reference case, ANWR oil production is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light (LSL) crude oil prices of $0.41 per barrel (2006 dollars) in 2026 in the low oil resource case, $0.75 per barrel in 2025 in the mean oil resource case, and $1.44 per barrel in 2027 in the high oil resource case. Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.
Did you catch that? It assumes OPEC's behavior in ten to twenty years will be to offset (potentially) any change in prices that occurs. It has complete control of the price. Were that true, why would people caterwaul about speculators? Can't OPEC control their behavior too?

These very same people are the ones who contend peak oil will drive the price of oil ever higher, which increases the temptation to cheat within the cartel. They never cheat, do they?

Now read that graph again. The part unshaded below the green area is production of oil in the lower 48; the green part is the current production in the leased parts of Alaska. You know, the part Pelosi says the oil companies don't use enough currently. Those other areas are the three possible projections for output from ANWR. Without additional drilling, US production in their model peaks in about ten years. (Just put your finger over all the colored areas except the green.) Drilling more of what we current lease is more a change in timing, borrowing against future oil production, unless you think the oil companies are sitting on proven reserves after a one-year 75% rise in prices.

Last point: the projections assume that in 2020 the price of a barrel of oil (without ANWR) is $59.70 and $70.45 in 2030. Were these accurate, you can see that there isn't nearly the need to increase production; prices will fall reasonably soon on their own. And they might. But people making models estimating the impact on the price of oil 20+ years from now are dealing the most imprecise of estimates. It assumes that world oil consumption is 117.6 million barrels per day. That's about thirty million more than now; if China continued to grow its consumption at its 1995-2005 rate, it would consume 21 of the 30 additional alone. And let's not forget India, perhaps for another four million. (It assumes the US would by 2020 only consumer 800,000 bpd more than it did in 2006.) Are all those assumptions realistic to you?

One of those things has to change, via Stein's Law. If prices are going to be where EIA is putting them, some economy is using a lot less energy than current trends project. Something that adds 10-20% more to our own production and reduces imports of oil by 6% (both figures for 2025, again if you beleive EIA), certainly seems a reasonable first step, lest that economy be ours.

UPDATE (7/23): pgl responds, arguing that the price in 2020 is irrelevant to the comparative statics. That's only true if you think the elasticity of demand at $60/bbl and $140/bbl are the same. I doubt this is true and would like him to write out the demand equation that does that. Given that the EIA included the price in its spreadsheet, I'm going to argue it was part of the calculations.

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Examples of the cosmic vision 

Longtime readers know my fondness for Thomas Sowell, and his Visions of the Anointed remains one of my favorites. The competing visions are "tragic" and "cosmic"; the tragic vision sees the world as containing tradeoffs and policy consists of deciding which tradeoffs are worth making. A vast majority of economists have this tragic vision. The cosmic vision does not need to worry about this. So for example if one innocent man is sentenced to death by the criminal justice system the entire system must be razed and rebuilt. "Justice" demands no less. Those with the tragic vision take a different approach:
...while saving some innocent individuals from a false conviction is important, the question is whether it is more important than sparing other equally innocent individuals from violence and death at the hands of criminals. Is saving one innocent defendant per decade worth sacrificing ten innocent murder victims? A thousand? Once we recognize that there are no solutions, but only trade-offs, we can no longer pursue cosmic justice, but must make our choices among alternatives actually available--and these alternatives do not include guaranteeing that no harm can possibly befall any innocent individual. The only way to make sure than no innocent individual is ever falsely convicted is to do away with the criminal justice system and accept the horrors of anarchy. (p. 225)
(Thanks to John Hawkins for his quotes of VoA.)

My argument with people about the Obamas is that they are the most forceful advocates of cosmic justice, "a universe tailor-made to their vision of equality", in Sowell's words. Such sugarplums dance in the heads of the Obamas, as Mrs. Obama said at a fundraiser last night in Denver:
"We have one candidate who essentially is telling us every day that the world as it is just fine. That what we've been doing for the last eight years is fine," Obama said. "Stay the course. Don't make too many changes.

"And then we have this other candidate -- Barack Obama -- who is saying every day that the world as it is not right. It's not good enough," she said.

Obama rattled off a list of areas where she believes the nation has been underperforming during the two terms of President Bush: education, health care and the economy.

"I wish we had time to be divided. I wish we had time to be upset. To be angry. To be disappointed. I wish we did," Obama said. "Because if we had time for that, then things wouldn't be so bad right now. Instead, we're in a place where another four or eight years of the world as it is will devastate the life of some child."
Ed Morrissey asks the right questions:
Which child is that? And only one child? This is the kind of rhetoric that the Left loves to use, claiming that if just one person in the world is unhappy, then everything we do is wrong and entire systems have to be recreated to address it. It�s Utopianism, an impulse that has led to the devastation of millions of lives, not just one. The message intends to show the Obamas as more caring than John McCain, vapid enough without the silliness of arguing that McCain doesn�t want to change anything at all.
To the anointed, their vision and reality are one and the same. Yet the world inside their mind has few of the harsh constraints of the world inhabited by millions of other human beings. (p. 244)
And those who do not share that cosmic vision are not just wrong to the Obamas; they are benighted,
For those who have this vision of the world, the anointed and the benighted do not occupy the same moral plane or play by the same cold rules of logic or evidence. The benighted are to be made "aware," to have their "consciousness raised," and the wistful hope that they will "grow". (p. 3)
Hasn't this seemed like their modus operandi from the beginning? When he says he is trying to "balance a hard head with a big heart", do you not hear "bigger than yours?" Only the benighted will, after hearing her, "go back to your lives as usual." There are children to save, knave. Get going.

Many have called them "arrogant". But arrogance comes in many forms: vanity; proudful boasting; audaciousness. Theirs is an arrogance of vision that not only elevates theirs but calls yours morally suspect.

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What do the Media Feminists Have to Say? 

Press corps women travelling with the Obama show to Israel and Jordan have been give explicit instructions regarding their dress codes. This article from Politico provides the list of "no-nos" for females.

Restrictions include but are not limited to the following:
�Do not wear nail polish.�

�Women should only wear a limited amount of jewelry.�

�Shoulders and arms must be fully covered (no strapless tops, no tank tops, no short sleeve shirts."

�Closed-toe shoes, women should also wear stockings.�

While I understand and respect conservative Jewish and Muslim traditions, there are plenty of Jewish and Muslim women in Israel and Jordan who do not follow these restrictive dress codes. In addition, temperatures in Israel and Jordan right now are rather high. I doubt many native women spend summers in 85+ and 90+ degree heat wearing nylon stockings.

But what really is telling is the fact that the Obama campaign thinks these professionals are not smart enough to figure out what is appropriate for themselves. Will we have dress codes in the US if he's elected?

Hat Tip: Ed Morrissey


Monday, July 21, 2008

100 billion to one 

Zimbabwe introduces $100 billion banknotes. They're worth about USD 1. Technically, we've got a long way to go to reach the highest denomination, as the Hungarians issued 100 million B-pengo notes. A billion in Europe is a trillion in America, so 100 million trillion is 100 quintillion. However, if the new notes carry all the zeroes as the bills before it did, we've reached 11, tying the highest number of zeroes ever on a bill (Yugoslavia 1993.)

The government officially released figures last week indicating an inflation rate of 2.2 million percent. Unofficial estimates would put it closer to 10 million percent.

Interestingly in the first piece, I had not realized the Reserve Bank of Zimbabwe was actually issuing bearer bonds rather than banknotes. I don't think it makes too much of a difference.

That picture to the right is the Zim$/USD exchange rate for the last twelve months. That's what hyperinflation looks like.


My opponent gave you stuff 

A few nights ago I found my name in a post by fellow St. Cloud blogger "Political Muse", noting my opposition to sports stadia and wondering how I can square that with supporting Sen. Coleman's bid for re-election. I've met the senator and asked some tough questions of him in blogger conference calls, but I didn't know him as a mayor and thus never had the opportunity or incentive to ask his view of stadium subsidies. I did comment on Muse's post that in view of Franken's writings in Playboy I would find it much easier to vote for the re-election of Coleman.

Michael reports this morning that the Franken campaign has gone so far as to release an ad deriding Coleman's support of building the Xcel Energy Center.

I find the Franken campaign's choice odd. The reason these stadia keep getting public dollars is because the public believes somehow -- mistakenly, in the view of economists, but this is hardly the first time the public has chosen to ignore the economists -- that they are of benefit to a city and would be underprovided by private financing alone. Pointing out that Norm took from Peter to give to Paul is hardly a way to gain Paul's support in voting against Norm. There may be, there might be, a few Peters who are persuaded by the ad, but if that were true these stadium deals would not keep gaining passage. And support for hockey is enough in this state that even outstate arenas like St. Cloud and Bemidji draw public funding.

I wish there was a spokesman for the economists' view of public financing of sports stadia, but I don't think Al Franken is the right guy for that job either.

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My cell phone dilemma 

We have had fun the last few weeks with Michael and another friend of mine who are, like me, gadget geeks. I haven't talked with Lileks about his iPhone, but I'm sure he likes it. I am a longtime Palm user, currently with a Treo 700p I bought in December 2006. The phone has a replacement plan so that I am probably on my third phone.

So last Friday I went with Littlest to the Sprint store to see what they have. I like that Samsung Instinct; its lack of wifi might be the only thing I don't like. (I would kinda like a GSM phone to use overseas, but I probably am down to one trip a year so I can rent one for those.) I looked at the cost of changing over to AT&T for the iPhone and decided it wasn't worth it if I could switch to the Instinct today. Alas, they will not do it without an extra $250, unless I get to 22 months in the contract, which of course isn't until October.

Littlest is out with sports enough to warrant a phone, so I upgraded her phone. But I now think perhaps we should return it and bail out to the iPhone. If I pay $200 to get out of the contract now and get an iPhone, I don't wait three months, and the cost of a plan that shares out a second phone with her is $129. Hell, I can get her an iPhone too for that price. (Will she get one? I don't know if I'm that good a father.)

I am not whinging about the early termination fee. But it seems to me Sprint is making a mistake in pricing by having such a high differential on waiting. It is in some sense encouraging switching to AT&T -- I can have the Instinct for roughly $430 now, or have the iPhone for $199 + $200 to terminate Sprint. Though, I have wondered whether the remainder will get eaten up by texting charges on AT&T.

Of course, I can always hope the Palm dies before October and, if they haven't any more 700p's, perhaps talking my way into an Instinct.

Your advice is solicited in comments.

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The Bush tax cut of 2008? 

Driving back into town Saturday night after the show, I drive first by the St. Augusta exit which has two gas stations in direct competition. One has lots of signs to attract passing vehicles, offering gas at $3.849; the one that moved in second has a much smaller sign, $3.829. I drive by both of these. They tend to attract the less-informed gas purchases. (Though it's interesting -- their prices tend to look more like Twin Cities prices than St. Cloud prices, the latter of which are often 5-10 cents more. But not this day.)

I use First Fuel (bought a big load at $2.649 about fifteen months ago), so I usually go around to Highway 15 to get to the Pantown station near the St. Cloud Times' offices. There's a station owned by some immigrant family on Third St. N., and it's sign was $3.799. I smile: I was right about those stations near St. Augusta.

Later on the phone Gary tells me that stations on the east side were selling at $3.699. The Sunday morning paper reported it; this morning prices are two cents less than that according to GasPriceWatch.

What does a forty cent decline in gas prices mean for you and me? In 2005-2006 the average vehicle consumed about 700 gallons of gas according to the Bureau of Transportation Statistics. The average household has 2.28 vehicles. So a forty cent drop in gas prices is the equivalent of a $638.40 tax cut for the average household if the price remains at this lower level for a year. As it is, for a week it would get you about $12.27 in savings.

I am hard pressed to find alternative explanations for the reduction to the president's signature of a rescission of the ban on offshore drilling. You are welcome to add other possible explanations in comments; the previous statement has a very post hoc ergo propter hoc feel. I like the graph Paul Krugman draws -- I've discussed this before as the second law of demand -- but the precipitous nature of the drop makes me skeptical that a fall in demand is the proximate cause.

FFB, by the way, pushed its price down to $3.749 to put gas away for the next time we get over $4. To the right is a chart of their prices to put fuel into your account since Jan 2007. Time to buy again?

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Sunday, July 20, 2008

The Goracle Strikes Again 

On July 17, Al Gore gave another one of his misinformed, misleading, and misrepresentative speeches regarding global warming - oops, climate change. The cultist fear mongers spreading this dis-information had to change their term because earth has actually been cooling the last 10 or so years. Darn, it's really bad when the control crowd gets clobbered by the facts.

Anyway, the Americans for Prosperity decided to show up at Gore's speech location, the DAR at Constitution Hall in Washington, DC. The hypocrisy shown by attendees and the Gore family is just more indication of the double standard the elites are now trying to impose on the rest of us. Here are a few samples of the duplicity shown by the so-called, concerned crowd:
1 - Gore and Tipper and daughter, Karenna, arrived with two Lincoln Town Cars and one Suburban SUV - but hey, they're big shots, what's a limo or two to an important person like Gore? Prius, nah!
2 - Attendees who want all of us to use public transportation, arrived in CO 2 spouting cars instead of using bus transportation (stop .03 miles from the building; over 20 subway and bus stops within a half mile of the building);
3 - One guy actually liked the camera - $8/gallon gasoline is fine with him;
3 - The driver of the limousine transferring Tipper and Karenna Gore ran the car's air-conditioning for 20 minutes so the car would be nice and comfy for our Goracle's family.
You can view the 4-minute video here - be sure and watch to the end. Priceless!

Remember, this is the guy who uses more energy in his home in one month than most Americans use in a year. But, that's OK, he cares - doesn't do, just talks and cares.

BTW, President Bush's ranch home is a model of efficient energy usage - see here.


Friday, July 18, 2008

A Key Solution for the Dropout Problem 

For 40+ years, we have tinkered with our educational instruction. The results have not shown much improvement. We try one method, it fails, then go on to the next latest and greatest. When students do not learn basics they experience frustration and failure. Eventually they simply quit. Here's what we did in the last elementary school where I taught. It worked.

My last teaching assignment was in a Fairfax County elementary school with 25% off-the-boat foreign students from southeast Asia, eastern Europe, Africa, and Latin America; about 33% black, many who managed to get out of DC; and the rest were white. Students crossed the economic spectrum from welfare families to upper middle class. We were one of the bottom five elementary schools when measured socially and economically. What did we do?

First - Understand that students did learn to read in the days when primary teaching methods were phonics and drill, drill, drill. "Drill and kill" is a superficial sloganeering attack on a method proven to be effective. The alternative reading "programs" designed by academics who rarely worked in a classroom teaching reading are mostly bunk. They may work for a few students but not the majority.

Our school worked - Why? We had a terrific reading program that had 7-9 sublevels for each grade level. Each sublevel focused on particular phonic concepts. The content of the stories was geared to the age of the student and written to specifically teach the needed skills. Result? Our school, one of the poorest in Fairfax County VA, outscored 50% of the other elementary schools.

Second - we drilled basic arithmetic facts (addition, subtraction, multiplication and division) until they came easily and quickly.

Third - we had a 6'+ black guy for a principal who backed his teachers, regardless of color. Decent behavior standards, including respect, were known and maintained.

No one can learn concepts or critical thinking without knowing basics (reading codes, math facts, historical facts) and then taught when and where to apply them. Once the foundation of leanring is internalized, the vast majority of students will learn. Teaching feel-good pabulum results in students who are not only incapable of thinking but also unprepared for most kind of work that can lead to a successful life.


Where are the Western Feminists? 

Reading a Leon Uris book decades ago, I was struck by the blatant description of the crass behavior of some middle eastern men towards women. I put it aside as a vulgar rarity but after reading this description about the behavior of Egyptian men, I wonder. While this article was written by two women, it's not in a mainstream publication.

This story follows another that showed the assassination of two Afghan women by the Taliban. The Taliban still exists in areas of Afghanistan where women are forced, as is visible in this photo, to wear the full burka. They were accused of prostitution but note what's missing: no witnesses; no trial; no court; no defense; no alternative other than to be executed by men of questionable standards.

When will the so-called defenders of women's freedom, those security driven feminists and their male cohorts, speak out about this kind of atrocious behavior? Their silence is in direct opposition to their comments that men and women are completely equal.

What has bugged me about the equal rights mantra of feminists is their refusal to support all women. They only support their whining compatriots and want their secure jobs (government, academia) while preaching that all cultures are OK. Cultures that blame women for men's sexual misbehavior and treat women as second class people/slaves are not equal to ours, never have been and as long as they exist never will be.

The spinelessness of far too many feminists and their weak-kneed male buddies shows that they really do not mean what they say. They simply show their selfish behavior while promoting a "take care of me" agenda in a country where they have no fear of a free-lance militia kidnapping and executing them.


Seeing through the broken window 

One pleasant part of doing early morning radio is talking about the weather (the morning show gets an hourly call from friend and colleague Bob Weisman.) One thing Bob reminded me of as we experienced rain this week was the flooding in southern Minnesota, Iowa and Wisconsin. In some flatter riverbeds the water has not receded back to the banks.

Rick Mattoon has a good review of the economic dislocation of the flood of 1993 and an estimate of what will be the loss this year. In the process he teaches an important economic lesson:

Following the 1993 floods, estimates for the third quarter reduced personal income by $9 billion and forecasted uninsured losses to be $2 billion. Losses to proprietors� incomes were estimated at another $1 billion.

Remarkably, such initial losses soon appear to translate into economic gains as business and households rebuild. The rise in construction activity and the resumption of business activity often boost gross domestic product (GDP) estimates for future quarters, as households and businesses attempt to rebuild their physical capital and, in the case of businesses, to fill order backlogs. For example, following Hurricane Andrew, annualized GDP growth hit 5.7% in the fourth quarter of 1992, spurred by rebuilding activities.

However, such rebuilding does not reflect an actual economic gain in the broad long-term perspective. In most cases the rebuilding merely replaces lost capital stock�meaning that, in the long term, the nation�s product will not exceed what would have been produced without the disaster. While the immediate burst of economic activity is quite evident, the losses from the foregone output of interrupted and diminished business activity may go largely undetected because the diminished growth takes place in small amounts spread over many years.

Students of economics will recognize the title's reference to Bastiat. See further insights by Tim Schilling.

A look at Minnesota damages from last year's floods.

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A study problem for the Pigou Club 

From the Aplia Economics Blog:
California utilities reported hundreds of balloon-related outages last year: 211 for northern California's PG&E and 478 for southern California's Edison. California Senate Bill 1499 proposes to deal with the problem by banning foil balloons and fining violators. Though foil balloons can be a problem, a bit of economic analysis suggests that the heavy-handed ban may not be the best remedy.

By increasing the odds of costly power outages, helium balloon consumption imposes external costs on society. The vast majority of electricity consumers outside of the helium balloon market may nonetheless end up incurring some costs when errant balloons make their way into nearby power lines. Since helium balloon consumption imposes external costs, the social benefit of helium balloon consumption is considerably less than the private benefit. When the social value of a good is lower than the private value, there will be an inefficiently high level of consumption in the private market.

So rather than banning the balloons altogether, the California legislature may want to consider a corrective tax. Taxing the consumption of helium balloons would force buyers to internalize the heretofore external costs that the balloons impose on everyone else. The tax would reduce both foil balloons purchased and balloon-related power outages while giving buyers and sellers an incentive to shift toward less disruptive party favors.


Why airlines favor socialism 

There are days I wonder why David Strom ever invites me on his show. This column about the Stop Oil Speculation Now program gets it right, and adds something I had not:
The government taking more control over futures markets would do nothing to hold down the price of oil or food�in fact, such a move would almost certainly make things worse in the long run. And I am willing to bet that the folks behind Stop Oil Speculation Now KNOW that it would make things worse for consumers.

But they aren�t worried about that. I think they are hoping that getting the government into the oil pricing business will lead to more explicit price controls and supply management, putting their �vital� businesses at the head of the line for cheaper fuel and avoiding the inevitable fuel shortages that price controls would bring.
All scarce goods are allocated somehow; in a market system, price serves that function. If you prevent prices from performing that function, something else will. Airlines as rentseekers would be in a position to get government to do it for them.


25% Dropout Rate in CA Schools - More Failure 

Many of us were raised in the era where the California (CA) public school system was one of the best, if not the best overall in the USA. Those days, sadly, are gone, gone, gone.

A recent report by the California Department of Education estimates that 1 in 4 (24.2%) of the high school students failed to graduate with their class or move into another educational program to continue their high school education. The Sacramento Bee article gives more detail regarding the bad news.

Current numbers are more accurate because students who claimed they were transferring schools but in reality simply quit, are now tracked. Previously, this follow-up did not occur so reported dropout numbers were substantially lower.

We are doing our students a disservice by not teaching them. However, they also must take on the responsibility of learning. To expect a teacher to pour knowledge inside someone's head is foolish - learning doesn't work that way. Learning is work, not always fun and games. When we fail to teach our children what they need to know, we all lose. The two subsequent posts will address a system that worked in a very difficult school and the roles that all participants in this educational process play.


Thursday, July 17, 2008

A line I wish I had used on radio 

Whenever Congress does anything in the name of housing, if you take a good whiff, you'll smell pork.
Arnold Kling, on the latest attempt of the Congressional Democrats to double down on their last great idea, allowing Fannie and Freddie to buy up jumbo mortgage loans. Greg Ransom is channeling a similar thought. He points to Franklin Raines, former head of Fannie, who says the reason we need to bail out the GSEs now is that Bush and the Fed didn't explicitly say they would bail them out years ago. Um, yeah. Justin Fox comments:
Raines's depiction of them as successful private companies that aren't really reliant on taxpayer backing sounds a lot like somebody who was born on third base hitting a triple.
I'm sure I can steal that one in another context some day.

BTW, KNSI tomorrow, the Patriot Saturday. Show details tomorrow.

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Making new numbers 

MPR is running a series of stories on the "Minnesota Slowdown". More on the stories in a moment, but first I want to call attention to their new "Job Pain Index." They define it as "a gauge of how hard it is to find a job."
A lower index number means it's more difficult to find a job because job seekers are facing less demand, or more competition, or both.
OK, that sounds very cool to me, as someone who has created some indexes himself for the St. Cloud area. So I'm eager to dig into this index and see what it is and how it works. And they give me details.
The Job Pain Index incorporates measures of supply and demand for workers, and total employment, the point at which supply and demand reach equilibrium.
I don't understand the last item. We don't really know what equilibrium employment is; what we observe in the labor market is where the amount of labor sold equals the amount of labor bought, which is true tautologically. We have some idea of full employment unemployment rates (I know, it sounds oxymoronic, but all labor markets will contain some workers who are literally between jobs and others for whom the skill-position mismatch is so severe that they cannot find meaningful work even at full employment. c.f. Greg Ip.) I would think conceptually that an indication of job pain would be measured by things which increase the supply of labor -- meaning workers face more competition from other workers -- or a decrease in the demand for labor -- fewer buyers.

The index contains four items:
The first item is certainly a good measure, but it is an indicator of increase supply of sellers of labor in the market, not a measure of demand. We use initial claims in the St. Cloud unemployment office as the one of our measures for the St. Cloud Index of Leading Economic Indicators, and it is used nationally both for the U.S. LEI index and as an indicator for the stock market. (Today's report.)

Help wanted is also a good measure that we use for St. Cloud (our measure comes from linage at the St. Cloud Times rather than an on-line series.) But this is a demand measure that rises when demand is rising, in which case job pain is falling. Perhaps they invert or flip the sign on this number; if not, it points in the opposite direction of job pain.

But an online series is rather skewed in its representation of jobs. Dave Senf at DEED studied online job postings. He finds, for example, that more than 35% of jobs advertised online are professional positions, but the share of professional jobs in the state is closer to 12%. Another 29% of ads online are in management, which is far less than 10% of the jobs out there. We have intentionally kept the newspaper data in St. Cloud because the shares of those jobs in St. Cloud are even less than for the Twin Cities. I think the measure is rather skewed.

I have fewer issues with the number of workers unemployed here, but we do know that workers may be encouraged to join the labor force and leave family-building and other non-labor activities when wages rise. That is not necessarily a measure of pain. But the logic of the index seems to equate pain with an increasing labor surplus. If that's the theory, the component is at least reasonable.

So two of the four items in the index are really suspect, one is good and the other OK if you buy the premise of the index. There already exists a series for each of the fifty states, created by the Philadelphia Federal Reserve, which includes some of the indicators they are using, except rather than some value-laden term like "job pain" they call the index a neutral "coincident indicator" series. The data and methodology are documented there far better than the MPR series, and if one is looking for a piece of data to use I would recommend the Philly series.

About the rest of the Minnesota Slowdown project: I like the idea of the story, but note that it did not include any "economic lookouts" from Central Minnesota. This happens to be the one area that has faster employment and population growth longer-term than the Twin Cities. But the whole project seems to hinge on a story that makes the housing industry's misfortunes cause the state economy to sink before the national economic slowdown/recession. It's the premise the state's economists have used for a year now; weird that with so much pain the government keeps getting more revenue than they expect, isn't it?

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Wednesday, July 16, 2008

Dual-plus-one mandate 

Yesterday's monetary policy testimony to Congress has painted Ben Bernanke as veering back to easy money.
So soon after we were told that central bankers had "figured it out", that previous inflations were due to insufficient knowledge or the use of a bad macro-model and that the era of inflation was over, we are heading right back into the soup. Yes I know that unemployment and recession are painful experiences that should be avoided if possible. But I also know that the one thing the Fed actually can control is inflation. I am not so sure they can provide a monetary solution to an adverse real event (or sequence of events).
This morning, in light of that CPI report, Bernanke reiterated his commitment to price stability, though he laid blame on factors in energy prices that are "outside the control of the Federal Reserve."

But truth be told, the Fed's mandate is to provide solutions to adverse real events. From Bernanke's testimony yesterday:
In mid-March, a major investment bank, The Bear Stearns Companies, Inc., was pushed to the brink of failure after suddenly losing access to short-term financing markets. The Federal Reserve judged that a disorderly failure of Bear Stearns would pose a serious threat to overall financial stability and would most likely have significant adverse implications for the U.S. economy. After discussions with the Securities and Exchange Commission and in consultation with the Treasury, we invoked emergency authorities to provide special financing to facilitate the acquisition of Bear Stearns by JPMorgan Chase & Co. In addition, the Federal Reserve used emergency authorities to establish two new facilities to provide backstop liquidity to primary dealers, with the goals of stabilizing financial conditions and increasing the availability of credit to the broader economy.
Like it or not, that's their job. Now we find discussions, including yesterday's testimony after which Bernanke was joined by the heads of the Treasury and the SEC, to expand that mandate to include a third. Bernanke spoke about this last week.

Another possible step to reduce the incidence and severity of financial crises, recently proposed in the Treasury blueprint for regulatory reform, would be to task the Federal Reserve with promoting the overall stability of financial markets. To some extent, the Fed already plays that role, and indeed its founding in 1913 was prompted largely by the desire of the Congress to address the problem of recurring financial panics. In recent decades, the Federal Reserve has figured prominently in the government's attempts to address a range of financial crises, in part because of the broad expertise derived from the Fed's wide range of activities. Moreover, the Fed is the only agency that has the power to serve as a liquidity provider of last resort, a power that has proved critical in financial crises throughout history.

That said, holding the Fed more formally accountable for promoting financial stability makes sense only if the institution's powers are consistent with its responsibilities. In particular, as a practical matter, I do not think that the Fed could fully meet these objectives without the authority to directly examine banks and other financial institutions that are subject to prudential regulation. During the recent financial turmoil, the ability of the Fed to obtain information directly from key institutions and from supervisory reviews has been invaluable for understanding financial developments and their implications for the economy. To fulfill its responsibilities, the Fed would also need to have the ability to look at financial firms as a whole, much as we do today when we exercise our umbrella authority over financial holding companies, and the authority to set expectations and require corrective actions as warranted in cases in which firms' actions have potential implications for financial stability. Finally, to identify financial vulnerabilities, the Fed would need general authority to collect information on the structure and workings of financial markets. In particular, the recent experience has clearly illustrated the importance, for the purpose of promoting financial stability, of having detailed information about money markets and the activities of borrowers and lenders in those markets.

If the Congress chooses to go in this direction, attention should be paid to the risk that market participants might incorrectly view the Fed as a source of unconditional support for financial institutions and markets, which could lead to an unacceptable reduction in market discipline. If the Federal Reserve's formal mandate were broadened to encompass financial stability, it would be particularly important to make clear that any government intervention to avoid the disorderly liquidation of firms on the verge of bankruptcy should use clearly defined tools and processes, along the lines I discussed earlier.

It's an intriguing speech, which Justin Fox reviews, describing Bernanke as walking a tightrope. Senator Jim Bunning thinks the Fed has fallen off the rope, while I would argue they've muddled through pretty well, consistent with what they've always done in this situation.

Bordo and Wheelock [1998] examine the hypothesis that price stability and financial stability go hand in hand (first promulgated by Anna Schwartz). They found informally that for the USA, Canada and the UK, the two were in fact linked up. They conclude
Regardless of what triggers financial distress, be it monetary or nonmonetary forces, the most severe episodes of instability have occurred typically in disinflationary environments. This has not always been true, however. Severe banking panics occurred in the United States in the late nineteenth and early twentieth centuries, when the price level was comparatively stable. Still, before the Civil War, during the Great Depression, and since World War II, financial distress was typically most severe during periods of substantial disinflation. The historical record thus suggests that a monetary policy that focuses on limiting fluctuations in the price level will tend also to promote financial stability.
Clearly within the housing sector we are seeing a period of disinflation that will end up causing the same kinds of dislocations as Bordo and Wheelock documented. In this situation, whether or not real interest rates in the US are positive or negative probably doesn't matter very much; they are just allowing banks a little breathing room to repair their balance sheets.

So does the dual mandate (or triple?) mean the Fed is doing it wrong? Charles Wyplosz is a little more charitable than Angus.
Why should it, on the one hand, provide ample liquidity against second-rate collateral and, on the other hand, maintain high real interest rate, especially as the Treasury mail checks to US citizens? Yet, the amazing reduction of interest rates in the wake of irresponsible bank behavior through a credit cycle leaves the painful impression that moral hazard is officially accepted as a fact of life. The Fed may note, however, that many banks have suffered severe losses and that their shareholders have seen some dilution of their assets as capital has been raised. The new Bagehot rule seems to be: banks are bailed out indirectly via low real rates and the ability of swapping toxic assets against liquidity while their shareholders take a beating and some top managers are made redundant. ...

Central banks are going through a rough patch. Oil shocks are technically easy � prevent inflation from setting in � but politically delicate � allow for rising unemployment � to deal with. Financial crises are always delicate because they are always different, largely because lessons from the previous have been learnt. High food prices additionally complicate the picture. Facing different situations, the Fed and the ECB muddle through, each in its own way. They could have done it differently, maybe, but it is fair to say: �so far, so good�.
If the liquidity the Fed is issuing is being hoarded to balance sheets and not passing through to lending it would also not pass through to inflationary expectations. Today's CPI reading would have you believe something a little different than that. But while a core rate rise towards 3% is concerning, central banks with dual mandates may decide it's a price they need to pay.

UPDATE: Bleak notes that Bernanke's job isn't easy and lays some of the blame on Greenspan. As Jim Rome would say, concurrrrrrrrr!

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Best paragraph I read today 

Obama's plan, according to [Dan] Mitchell, means "higher taxes on work, savings, and investment." He pointed out that politicians understand the economics at play when they tax activities like smoking: higher taxes, less smoking. Why then, he asked, would we want to increase taxes on work, savings, and investment?
From a summary of a Cato Institute podcast by Will Luther at the Tax Foundation.

Discouraging to read that the budget (and therefore taxation) rises under either McCain or Obama. Obama's rise is five times more, but McCain has added $63 billion in new spending since January. Enough already.

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Return to MEOW 

Courtesy HotAir, here's a great clip to tell you why you should never let the media engage in economic thinking:

I could have lived without the reference to CAFE standards, but Bush's tying of consumer sovereignty in energy goods to tax cuts was worth the wait.
(Your title hint here.)

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Life's value 

My friend and loyal reader jw sent along an article on the value of a life being used by EPA.
It's not just the American dollar that's losing value. A government agency has decided that an American life isn't worth what it used to be.

The "value of a statistical life" (VSL) is $6.9 million in today's dollars, the Environmental Protection Agency reckoned in May � a drop of nearly $1 million from just five years ago.

The Associated Press discovered the change after a review of cost-benefit analyses over more than a dozen years.

Now where do you get that $6.9 million from? There are two ways traditionally used in cost-benefit analysis. One is to take my estimated income over my lifetime, discount it to present value and come up with the sum. That number is likely to be relatively low, almost certainly less than $6.9 million. (If yours is not, congratulations -- you're a pretty rich fellow!)

The other way to find that out is to look at different jobs with different levels of safety or risk. Figure out the probability of a job fatality for the different occupations, and then compute how much additional pay the average worker receives in the riskier job. For example, one of the job opportunities I might have is to work as an adviser to, say, the central bank of Afghanistan. How much more would you have to pay me to go there versus, for sake of comparison, the central bank in Mongolia? Afghanistan is riskier, and if we can figure out how much riskier it is and compare it to the wage differential required to hire economists into both positions we have some measure of the value of a life. Indeed, this is what EPA is using:
...economists calculate the value based on what people are willing to pay to avoid certain risks, and on how much extra employers pay their workers to take on additional risks. Most of the data is drawn from payroll statistics; some comes from opinion surveys. According to the EPA, people shouldn't think of the number as a price tag on a life.

The EPA made the changes in two steps. First, in 2004, the agency cut the estimated value of a life by 8 percent. Then, in a rule governing train and boat air pollution this May, the agency took away the normal adjustment for one year's inflation. Between the two changes, the value of a life fell 11 percent, based on today's dollar.

EPA officials say the adjustment was not significant and was based on better economic studies. The reduction reflects consumer preferences, said Al McGartland, director of EPA's office of policy, economics and innovation.

"It's our best estimate of what consumers are willing to pay to reduce similar risks to their own lives," McGartland said.

But the EPA's cut "doesn't make sense," said Vanderbilt University economist Kip Viscusi. The EPA partly based its reduction on his work. "As people become more affluent, the value of statistical lives go up as well. It has to." Viscusi also said no study has shown that Americans are less willing to pay to reduce risks.

At the same time that the EPA was trimming the value of life, the Department of Transportation twice raised its life value figure. But its number is still lower than the EPA's.
There's no good reason for them to use different numbers, so that there has been convergence between DoT and EPA should be considered a good thing, caterwauling by liberal blogs notwithstanding. Here's a white paper from 2004 that EPA has posted that describes their study of VSL. Part of the problem is that people sort themselves into jobs in part depending on the attitudes towards risk. The report takes, for example, the observation that night clerks at convenience stores tend to be older and male. Older individuals tend to make more because of experience; males have been noted to earn more than females. Should all of the difference between the pay the night clerk and the morning clerk receive be attributed to the greater chance of armed robbery at night?

Interestingly, that paper includes a study done by Viscusi, which puts VSL at $6.9 million in one estimate. You would need to adjust that for inflation from 2003.

The implications of this for the drilling debate should be obvious. We have on one side a desire to reduce the price of gasoline and other energy products, which clearly increases the welfare of our citizens. Against that we have to weight the cost to the environment, which might include the loss of wildlife. What is the demand for wildlife? If you look at it in market terms, the location of ANWR matters as it provides less value to tourism than a similar-sized area on the California coast. We can compute the value of ANWR or any other place by looking at how much people will pay to travel there, and how many people do so. Take for example this 2001 piece that says 2500 people travel there and pay $4000 each to go. That's $10 million a year; discounted at 5% in perpetuity says the value of tourism in ANWR is $200 million. Now that number is almost assuredly too low -- there must be other tours. But as well, tourism would not fall to zero if rigs were put there. If we assume the tourists are there to see caribou, and if caribou will remain after the rigs are put in, some fraction of the 2500 will still go. A survey might tell you how many.

The benefits are likely to be large; sure, it might take years to get production (though Larry Kudlow (h/t: Dave) points out that in California, one estimate says you get drilling within one year), but that is an easy correction to the spreadsheet on which you do the cost benefit analysis.

Democrats have ignored tradeoffs on energy for years, and a few Republicans have joined them at least until now. A format exists to make sound calcuations about the tradeoffs. It is good to see liberals considering the meaning of VSL. Now to get consistent application of the method...

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About time 

New JibJab!

Tuesday, July 15, 2008


When that sign on the bank says FDIC insured deposits up to $100,000, they aren't kidding.

Federal regulators seized Pasadena-based IndyMac on Friday and reopened the bank Monday under the control of the Federal Deposit Insurance Corporation. Deposits to $100,000 are fully insured by the FDIC.

Worried customers with deposits in excess of insured limits flooded IndyMac Bank branches on Monday, demanding to withdraw as much money as they could or get answers about the fate of their funds.

When it was clear some wouldn't get in before closing, FDIC employees apparently took down names and told them to return Tuesday.

Other customers began lining up at 1:30 a.m. Tuesday, and by dawn, tensions escalated because people on the list were getting priority.

By 8 a.m., about 50 people on the list waited in one line and many more waited in another. Five people were allowed in at a time.

Customers became infuriated, and police told them they could be arrested if they didn't remain calm.

They are allowed to get half now:

At the time of closing, IndyMac Bank, F.S.B. had about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors. The FDIC will begin contacting customers with uninsured deposits to arrange an appointment with an FDIC claims agent on Monday. Customers can contact the FDIC for an appointment using the toll-free number above. The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount.

Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 and $8 billion.
Mish has much more and points out Netbank went through the same 50% rule last September. There have been in fact others. Used to be, FDIC would brag that no depositor, insured or not, ever lost a dime on a bank closure but FDICIA, an act passed in 1991, changed the rules so that these depositors had to bear some of the risk of the bank's behavior (and require a higher interest rate in turn, which would limit the troubled bank's expansion.) The law forbids helping uninsured depositors if it increases the losses expected by FDIC. (c.f., Furlong and Kwan.) Instead, like other creditors, uninsured deposits take a haircut. Potentially, then, if DIF is going to lose $4-$8 billion, $0.5 billion is being recaptured from those depositors.

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Yep, We're Winning in Iraq 

Thank goodness for the Wall Street Journal or we might not know this: the Iraqi expats in Cairo, Egypt are GRATEFUL to we Americans. Why? For the first time they have a chance at a society not ruled by a dictator. Ok, not the first because they did have a leader whom Saddam removed but they have a chance now, and they know it.

Le Grillion is a restaurant-bar in the always-crowded downtown Cairo frequented by Iraqi expats. Take a look at what they are saying and also note their concerns.
"I am from Fallujah" says one man � an art agent � with a cigar ever between his fingers. "We should make the most benefit from the Americans while we can. It is a moment of history. We either get a state now, or we will always be like this."

Author, NUMAN AL FADDAGH, "I cannot keep my pleasure to myself. I saw my Iraq � one that I have only seen in poetry � in the near future: an oasis of peace and prosperity amidst the scorching desert, a home for its children and a sanctuary for its guests."

A female commented, "They (Iraqis) were of every color in the Iraqi rainbow, but you can speak of two common things among them: telling you about their plans to go home within months and considering the Americans to be partners in that home they are returning to."

Another female, this time a Christian who was forced to leave Iraq by Al Qaeda and now lives in Jordan, says, She told me "it seems that the Americans know what they are doing. They have been so patient with us, but it seems that we have learned our lesson now."

Numan then asked the gang at Le Grillion what they thought about the proposed long-term treaty with the Americans. The answer came immediately: "We have nothing to give the Americans; we are the ones who should be thankful!"

My greatest fear (Numan) � and it seems to be the case for all my new friends here � is the future of the American presence in Iraq. Our tongues and our minds have been freed, and yes we are heading home, but the Americans might run out of patience before we can make it.

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The greater of two failures 

Lots of good material being written on the bailout of Fannie Mae and Freddie Mac, all pointing in the same direction. Arnold Kling:

The plan that Treasury Secretary Paulson announced on Sunday appears designed to shore up the GSEs and to return to the status quo prior to the recent loss of confidence by investors. In fact, however, I think it is unrealistic and undesirable to return to the status quo.

If you had it to do over again, you would not allow the GSEs to become more than 50 percent of the mortgage market. Instead, you would create a system that diversifies mortgage finance across many institutions. The �regulatory arbitrage� that the GSEs enjoyed should be replaced by a level playing field, which reduces the capital requirements for banks to hold investment-quality loans while increasing the capital requirements for GSEs should they continue to stray out of the arena of low-risk, high-quality mortgages.

Gerald O'Driscoll:
We must also realize that, whatever the deficiencies of the mortgage market in Depression-era America, that era is over. There is no "market failure" in housing finance today, except the one created by government-backed institutions dominating housing finance. Money flows where it is rewarded. Home mortgages are plain vanilla financial instruments, perhaps partly due to Fannie and Freddie. So by all means, let us thank them for their service as we bid them adieu in their present form.
Brian Wesbury and Robert Stein:
One of the reasons Fannie/Freddie are too big to fail (at least right now) is that their access to government credit has �crowded out� what could otherwise have been a flourishing competitive market in mortgage securitization, with no one firm dominant enough to necessitate federal help. In addition, because Fannie/Freddie were able to dominate the market using subsidized credit, they pushed private firms toward the fringes of the securitization process and into territory which included subprime and Alt-A loans. Clearly, Fannie/Freddie led to a world with greater securitization of mortgage debt than would otherwise be the case.
Willem Buiter:

So let�s call a spade a bloody shovel: nationalise Freddie Mac and Fannie Mae. They should never have been privatised in the first place. Cost the exercise. Increase taxes or cut other public spending to finance the exercise. But stop pretending. Stop lying about the financial viability of institutions designed to hand out subsidies to favoured constituencies. These GSEs were designed to make losses. They are expected to make losses. If they don�t make losses they are not serving their political purpose.

So I call on Secretary Paulson, Chairman Bernanke and Director Lockhart to drop the market-friendly fig-leaf. Be a socialist and proud of it. Come out of the red closet. The Soviet Union may have collapsed, but the cause of socialism is alive and well in the USA.
Don't care if the current Paulson plan is a temporary sandbag; eventually, we want the flood to remove this inefficiency. Contra Jim Hamilton, that there is a dollar limit on what the Congress can stake on the bailout is like those commercials telling you to set a limit on how much you gamble (that are a staple of the Texas Hold'em shows on TV): That just invites you to lose that much money. Better will be to simply remove these guarantees; if it pushes mortgage rates up 25-50 bp, that would simply be recognition of a subsidy that has long since lost its usefulness. If making losses ever was useful.


"I'm proud to live in a state that killed off people's livelihoods" 

Well, that's not exactly what she said. She said:

... As a physician, I have already seen how this ban has helped people who work in bars finally quit smoking. I have patients who struggled quitting because they were around smoke at work. They have been more successful in quitting now that they are able to completely avoid secondhand smoking.

There are many other states starting to look at banning smoking in bars and restaurants.

I�m proud to live in a state that chose health and I hope that our progress helps other states make that commitment as well.

One person's benefits, though, are another person's costs:
The physician's answer?
I am not going to debate what is in the Bill of Rights we all hold so dear. Instead, I would like to bring forth evidence that is very well known to the medical community that supports a smoke-free workplace.
Some of us, obviously, hold it a little more dearly than others.

UPDATE: Phil Miller notes as well the passing of the Bandana Brewpub.

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Monday, July 14, 2008

Blue collar speculation tour 

# If you have a retirement account, you might be a speculator.
# If you've ever bought stock, you might be a speculator.
# If you ever bought baseball cards or Beanie Babies as an investment, you might be a speculator.
# If you buy airline tickets early because you expect the price to rise as the time of the flight gets closer, you might be a speculator.
# If you wait to buy scalped tickets, knowing that the price falls as game time nears, you might be a speculator.
# If you buy gas upon hearing that oil prices have jumped again, you might be a speculator.
# If you wait to buy gas upon hearing that oil prices have fallen, you might be a speculator.
# If you went to college and chose a major because of the future it was expected to give you, you might be a speculator."
From Phil Miller.

Meanwhile, Bob Lawson has a word for those airlines we talked about last week. Right after I wrote that post, the same email arrived in my inbox.


Oh no, it's coming! Believe us, it's coming! 

(or, Dude, who stole my recession?)

On January 15, Tom Stinson, Minnesota state economist, said there was no doubt the state was in a recession. In May, he had not changed his mind. On that basis the state issued a forecast for the budget that led to the closing of a tax loophole, a few minor spending cuts, and the rest of the money coming from reserve accounts. As Phil Krinkie pointed out last month, there was very little spending cuts. I had argued for more reliance on the reserve because I had suggested the recession forecast in the budget report might be more pessimistic than real.

I love it when I turn out to be right.
Minnesota�s net general fund receipts for FY 2008 are now estimated to total $16.257 billion, $389 million (2.5 percent) more than forecast in February. The individual income tax and the corporate income tax accounted for more than 75 percent of the positive revenue variance.
They got more money than they expected on 2007 individual income taxes. But lest you be cheery, the state forecasters are not backing off their doom and gloom:
Thus far the U.S. economy has been stronger than was projected at the start of the year. Unfortunately, the good news ends there. Economists now see few signs that economic growth will return to its 3 percent, trend level before mid-2009. Energy prices have increased to levels well beyond those previously projected, housing markets remain severely depressed, and the financial sector�s problems have yet to be fully resolved. The current economic weakness is now expected to extend into early 2009.

Households received their stimulus package rebate checks ahead of schedule, but that simply shifted some rebate-related spending from the third and fourth quarters of this year into May and June. Accelerating payment of the rebates helped second quarter growth, but it also reduced the amount available for the remainder of the year.
The forecasters in the WSJ Economic Forecasting Survey don't project 3% on average, but the slowest growth rate forecasted is for Q4 at 0.6%. 2% growth is projected for 2009:II. Global Insights, the vendor that sells its forecast to the Department of Finance, has the most negative number in the forecast for that fourth quarter, at -1.7% (and -0.7% versus an average of +1.3% for 2009:I; it anticipates a sharp bounceback in 2009:II to 2.5% growth.) That is, the Minnesota Department of Finance is basing its forecast for the state budget on a recession call beginning in the fourth quarter, nine months after the initial Stinson statement.

I've certainly bunged up my share of forecasts before, and it's not like GI or Stinson were alone in their recession call. And it's quite possible they're right this time -- I've thought for awhile that the fourth quarter is the key to whether we skirt the recession or not. But the new report lacks some humility in calling for a new recession based on higher oil prices. We have had increased oil prices in percentage terms that like that in the past; why does it matter so this time?

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Bummer of a multiplier, Howard 

The Democratic National Convention Committee told the city of Denver that its convention would provide $160-$200 million in economic impact. Ed Morrissey reports that they might be a few bucks short.
According to the Denver Post via Politico, Denver businesses have been disappointed by the amount of money spent locally by the Democratic National Convention Committee. While over 2,000 listings for local companies have made the DNCC�s directory, little actual revenue has been received by locals for the convention itself. The DNCC seems more comfortable working with vendors they already know, from as far away as New York City.
A recent paper by Robert Baade, Robert Baumann and Victor Matheson (BBM) argues that these claims of economic impact are largely bogus. The economic impact of all these conventioneers on Denver or St. Paul will be offset by local persons leaving the city while the conventions -- and all the traffic snarls and crowded bars and restaurants they entail -- go on. What happened to Broadway plays while the GOP met in New York in 2004? Down 20%. BBM cite a study by Craig Depken and Dennis Coates that showed the 1992 GOP convention in Houston "reduced taxable sales by $19 million and reduced sales tax revenues by approximately $1.4 million.� BBM find that there is no discernible effect of conventions on employment or personal income. Perhaps part of the reason is that conventions don't spend all their dollars locally.

The same applies, by the way, for St. Paul, but at least one group is figuring out how to grab a few dollars.

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Is it really a choice? 

As is common during every economic downturn, articles will pop up about how hard it is for graduates of our colleges and universities to find jobs. Today's in the StarTribune includes a poll question "Have colleges and universities put too much emphasis on 'liberal arts' education?" (currently running about 60% yes.)

Students in the liberal arts discussed in the article are trying the Peace Corps or Teach for America, a public-private effort to recruit graduates into teaching to eliminate educational inequities, involving both more liberal philanthropies and First Lady Laura Bush. The article acts as if this is somehow new. When I graduated from college in 1979, the labor market was beginning to sour and job opportunities were not plentiful; I took refuge in graduate school, taking me to the career I now have.

I'm intrigued by the poll question though, as if one could have found a job by eschewing the liberal arts and going straight into business or engineering. Sure, those jobs pay well, and perhaps the jobs are more plentiful. But does one necessarily learn those skills at the expense of the liberal arts? In the most recent issue of The Canon, a magazine from the Intercollegiate Studies Institute, Vigen Guroian argues emphatically 'no'. He quotes approvingly from Robert Louis Stevenson's essay, "On the Choice of a Profession." Stevenson reflects on a banker who has no time to converse with him, because he is busy doing his duty as a banker. Guroian writes:
To say that �business is my duty� ignores this fact and reveals ignorance of what duty and virtue really are. That is why Stevenson quips: �Who told him it was [his duty]? Is it in the Bible?� Of course the Bible did not instruct his friend (nor does it instruct anyone else) that it was his duty to be a banker. Banking may
be a man�s choice of work, but duty impinges upon work as the transcendent obligation to do what is morally right in every location or vocation.

Duty is the �business� of being a virtuous human being. Doing business is not a duty, although it may be one�s duty to behave virtuously in business. That is why Stevenson wonders: �Is he sure that banks are a good thing?� For it can never be
one�s duty to do evil. A contractual agreement or a compelling love for making financial transactions may persuade a person to be a banker, but it may be a person�s duty to foreswear an unscrupulous bank dealing or even to leave one�s position in the bank altogether. Nothing in Stevenson�s friend�s statements suggests that he has thought through these matters or that he even knows how to begin to evaluate his position morally. He is a man with a shrunken moral imagination, though we do not know how precisely he got that way.

Finally, Stevenson�s friend does not even know why he is a banker.
Finally, the student of business is in need of the liberal arts as much as these students who go off to the Peace Corps or Teach for America. Indeed, they might serve as a substitute (albeit a very imperfect one) for what they might learn in the lecture hall or seminar. The student in the StarTribune article who majored in Chinese, philosophy and justice and peace studies (!) has no doubt that he's lacking something to "get a real job". But the liberal arts are something to help the business major or engineering student know what matters in the "real job" they get. It's a false choice.


A slow motion timetable of a bank failure 

I thought it would help to have a tick-tock of the closing of IndyMac. This is purely a dump of Google looking for reported troubles at the bank, and I wouldn't call it exhaustive. The company maintained a corporate blog which has helped with some documentation, but I invite you to read it to find more nuggets.
So by this time we know they have a problem, and that their response has been to continue confidence in the sector, continued expansion, while raising capital and cutting the dividend. It will soon release a very bad fourth quarter. So...
Schumer and the CRL report certainly helped precipitate the liquidity drain, but this was not a bank in good shape whatsoever. It seems evident that up to late fall IndyMac was using a model that suggested the problems of other banks would not spread to their balance sheets, and even as late as January they believed there to be hope. An April purchase of jumbo mortgages from IndyMac by Fannie Mae might have led it to believe the worst was behind it. Tought to judge now with hindsight, but a case can be made that the bank's management was deluded. Mark McQueen is more forgiving of Schumer than I might be but you cannot put the blame ONLY on the senator.

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Friday, July 11, 2008

Radio daze 

My radio schedule is pretty full this coming week. Tomorrow I will be on the David Strom Show at 10am for my usual one-hour discussion of the economy with David and Margaret. I would guess that we will discuss whether recession is a mental disorder.

Then the usual shenanigans of the NARN begin at 11 with the First Team of the Fraters and Ringo Hinderaker, followed by the Headliners, Mitch and Ed, and then us in the Final Word at 3pm. I'm pretty sure I saw something about Franken on Michael's blog; he might want to talk about it. Or maybe we'll just spend two hours playing with his new iPhone.

For the local St. Cloud listeners, I will be sitting in for the vacationing Don Lyons next week at KNSI's Morning Show, 6-8am Monday through Friday.

All of these shows stream (Patriot; KNSI); the Saturday shows can be found here (for Strom) and here (NARN.)

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Sign here, buddy 

I don't watch the Sopranos, but I get this:
An ad ran yesterday in the StarTribune from the Minnesotans for Employee Freedom, for which I am a member of its steering committee. The ads have drawn some attention from the press this week as the first issue ad in Minnesota.

It's worth thinking a bit more about this issue: What is wrong with card check? I got a card to join AARP recently; I didn't have to fill out a secret ballot on whether AARP could represent me or not. But unions are not voluntary organizations. If 50% plus one of my fellow employees sign a card for a union, the rest of us are compelled to make it our agent for the terms and conditions of our employment. We would give away a great deal of control to our fellow workers if they were permitted to simply get 50%+1 of employees to sign cards. I would argue that a private ballot in voting for giving someone agency rights over our voluntary association with an employer is higher-stakes than our vote in a Presidential election (since the group is so much smaller, our ballot has a much higher probability of being decisive.) You might wonder why unions would be opposed to secret ballots; my answer is "cui bono?"

As I pointed out last month, and as the new ad makes clear, voting in public is coercive. Often union representatives have access to personal information about employees in a shop they want to organize, including home addresses and phone numbers, by which they can repeatedly visit and hope for a signature in a weak moment. Consider a couple of examples. From the Man Show, a spoof was done to get women to sign a petition that would "end women's suffrage." Of course, you hear that word and if not careful think "suffering" and what woman wouldn't want to end suffering? The result is, they just signed a petition to give up their right to vote.

The other is from Penn&Teller's Bullshit program, which is a petition to get dihydrogen monoxide banned. Sounds like awful stuff, until Teller draws for you what it is. Passion overcomes reason when someone is jamming a clipboard or a card in your face asking "only" for your signature.
Remember, nobody gets to talk to you when the fellow with the card comes to visit. EFCA says that employers will be found guilty of violating the National Labor Relations Act if they should interfere with a card check drive. Interfering could be anything including signs or pamphlets advising against signing cards. This after that employee and employer had already entered into a voluntary agreement. The choice is asymmetric -- laws make it much harder to remove an existing union than to create a new one. Should that agreement be abrogated by Johnny Sack with a clipboard?

UPDATE: I had not seen until someone commented on it the "Reality Check" by Pat Kessler. Kessler is misleading on two points.
The bill that Democratic U.S. Senate candidate Al Franken supports does not eliminate the secret ballot election. Workers still have the right to hold one but labor unions say the new option gives employers less control.
We've cited what the bill says, and we're happy that Kessler agrees that Franken supports HR 800/S 1041. But unions have a strong preference for card check -- which they can only get by agreement with the employer currently. EFCA removes the ability of the employer to negotiate after the cards reach 50%+1. The National Right to Work Legal Foundation has analyzed all union elections and card checks since a case was decided in favor of employees having access to information from their employers. Over 250 were done by card check since November 2007 (basically, a six month period; the last data I saw had about 2500 elections a year by 2005.) As it is, unions win a majority of elections when they are held, 57% between 2001 and 2005. According to data from the liberal Center for Economic Policy Research, perhaps a quarter of all workers organized were through card check. But obviously that's not enough because...
You can agree or disagree with the motive of the bill, but the effect is that it would make it easier to form a union. That's why labor unions want it so badly. Union membership is plummeting.
Unions are not entitled to a share of the labor force. As the traditional manufacturing sectors have declined and as service sector jobs become more high-tech and professional, it is only reasonable that union membership would decline. Union membership is also declining in Sweden, hardly a bastion of free market capitalism. Kessler misleads by implying that employers in the US have been more successful in reducing unionism against the wishes of their workers. There's no evidence that would support that claim.

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Reserve my table 

One of my pleasures in life is a TV that pretty much is my own. This is because of sports; I watch them pretty constantly, and when there's nothing good on there's Law and Order (or, in the summer, Burn Notice, the second season opening of which last night was a little less than hoped for.) That's pretty much all I watch. But many of us in the department are foodies, and both #1 Son and my sister are chefs (I use the term liberally with respect to #1, but a father must have his pride.) So food shows are viewed as well. I don't like the contest shows except for Iron Chef (not ICAmerica, which is a poor substitute.) But I confess a supreme love for Anthony Bourdain's No Reservations, a combo travel-cooking show that blends my two favorite things -- travel to strange places, eat good food wherever.

He blogs from time to time, and today added a new place to the list of places I want to travel: Colombia.
In a world where the bad guys seem to win with a relentless regularity, and where even the presumed good guys appear, usually, to be their own worst enemies, it's really gratifying to see things get so dramatically better somewhere--especially a place where at one time, it really and truly looked hopeless. It is inspiring, when you've gotten used to the notion that some problems probably won't ever be fixed in your lifetime, to see some of the very worst kind of seemingly insurmountable problems so quickly and effectively improve. When you see a real change in the conditions and in the human hearts of a place where just a few short years ago, one neighbor couldn't walk twenty yards over without risking death from another, where drug cartels recruited their murderous young footsoldiers by the hundreds, where even the police feared to tread--it makes one hopeful again--about the whole world.

Colombia. Vacation Wonderland? Yes. Absolutely. ...

What you might not know about Colombia is that it's beautiful. That the food is really good--with the same kind of fantastic mix of African, European and indigenous influences that makes Brazilian cuisine so interesting and vibrant. That they actually like Americans down there.

It was against this backdrop of bubbly goodwill, that I watched Ingrid Betancourt and her fellow hostages freed from captivity a couple of weeks ago--in what appears to be yet another in a series of spectacular and effective strikes against the FARC, a particularly unlovely bunch of hardcore commie/narco-terrorist kidnapper/"guerillas" who've been getting knocked back on their heels in recent years.

On one hand, the government seems to be killing and capturing bad guys with skill and vigor. On the other hand, the local government in Medellin (for instance) has been improving transportation and social services for the working poor--and throwing an incredible FORTY percent of total budget at education. It looks and feels like a working combination.
My passport has no stamps from any Latin American country; Spanish is the one Romance language I have no experience with, and it seems lots of other people travel there; I like places off the beaten path like, say, Mongolia. But most of those places are where, as Tony says, "the presumed good guys appear, usually, to be their own worst enemies." What did it take for Colombia to get so good so fast? Perhaps some of it is Plan Colombia, the controversial strategy between the US and successive Colombian governments to eradicate coca fields. But more of it has been, undoubtedly, the hope of Colombians to participate in a stable trade arrangement with the US and others in FTA. That country's turnaround would be further strengthened by support from the next administration. One candidate traveled to Colombia this month, the other has no such plans. Where the candidates stand on free trade is important not only to the United States, but to its neighbors. And that might make them like us in more places than Colombia.

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Thursday, July 10, 2008

Daily effects of indoctrination 2, part 6 

Today's entry is a winding up of this bulletin board I think. It appears the class is adding more to the board since I took pictures, so something more might be forthcoming soon. As block parties go, this one is a little timid. Just two couples saying "How are you today?" and "We are fine how are you?" It's hard to believe one would need to be coached in a simple act of neighborliness.

The piece reminds me of Robert Putnam, author of Bowling Alone. In a 2006 Time article, he wrote that we simply need to make more friends.

Social isolation has many well-documented side effects. Kids fail to thrive. Crime rises. Politics coarsens. Generosity shrivels. Death comes sooner (social isolation is as big a risk factor for premature death as smoking). Well-connected people live longer, happier lives, even if they have to forgo a new Lexus to spend time with friends.

So what can be done? Unlike global warming, we can solve this problem fairly easily by simply getting more involved in our communities and spending more time with family and friends. Family-friendly workplaces would help too. Reaching out to a neighbor or connecting with a long-lost pal--even having a picnic or two--could just save your life.

The one thing missing from that list is religion, odd because, as Arthur Brooks points out in his new Gross National Happiness, "about half of all voluntary associational membership, which brings great happiness to millions of Americans, is worship-related." And, unlike going to a club, a party or a volunteer effort, going to church doesn't suffer from diminishing marginal returns to happiness (at least up to weekly attendance.) (Bowling Alone, pp. 333-34, Gross National Happiness, p. 47.)

No picture of a church appears in any of the drawings of "building community".

Background of this series here.

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A recession state of mind 

A couple of economics bloggers are dismissive of comments from former U.S. Senator Phil Gramm, an economist and adviser to the McCain campaign, that we have a recession mentality, but not a recessionary reality.

"You've heard of mental depression; this is a mental recession," he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. "We may have a recession; we haven't had one yet."

"We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a major export boom that is the primary reason that growth continues in the economy, he said.

"We've never been more dominant; we've never had more natural advantages than we have today," he said. "We have benefited greatly" from the globalization of the economy in the last 30 years.

Justin Fox wonders how the MSM will react when the advanced second quarter GDP report is released at the end of the month. So do I. Our last quarterly business report showed a very sour future outlook for businesses. When asked for their evaluation of the level of business activity in their own firms for November versus May (when we fielded the survey) to 86 respondents here in the St. Cloud area, 14 said they expected a decrease and 35 said they expected an increase (the remainder unchanged or no response.) Only five expected national business activity to be higher in the fourth quarter.

But Gramm's and Fox's assessment of the actual data we have are correct: There has been so far nothing to point to that you would classify as dating a recession nationally. Jobs are not the only indicator, as you must look at income, production and sales as well. And yet you have this attitude...

And the attitude matters. Many of the newer models of recession forecasting involve using some kind of regime-switching modeling. For the non-time-series-econometricians reading here, these models basically say that the model we use to describe an economy in expansion -- let's call that the normal world, since expansions are much longer than recessions -- and the model we use to describe an economy in recession are different in kind. Something happens, an impulse, that pushes you from expansion to recession, at which point you move from one world to another. That impulse then switches again and moves you back to the normal world. One of the great mysteries of macroeconomic theory is the identification of that impulse. One of these, though, could be one's state of mind. Nouriel Roubini made just this point last December in creating an indicator from searching for the world 'recession' through Google.
This Google New Recession Barometer is of course not a scientific measure of the probability of a recession; but, as far as forward looking indicators are concerned, it is a pretty interesting one for a variety of reasons: 1. it suggests how much media and analysts are concerned about an economic recession; so it is a proxy for the �wisdom of crowds�; 2. recessions can be, in part, self-fulfilling and due to what Keynes called �animal spirits� in the sense that, while weakening economic fundamentals are the crucial trigger of a recession the degree of confidence about the future of consumers, firms, investors is an important determinant of their economic decisions (how much to consume and invest in real capital) and their portfolio decisions (how much to shun risky assets because of increased subjective risk aversion). If consumers and firms become less confident about the future and worry about a coming recession they will behave in ways � cutting consumption and capital spending � that will reinforce such recessionary trends and increase the likelihood that such a recession will take place.
His indicator currently stands at 22,412, versus 2,870 in July 2006 and 5,060 in July 2007. I look at this as part of Dornbusch's [1991] description of an international crisis as containing three elements: vulnerability; awareness; and fear. Roubini's measure might properly be thought of as the awareness. All three of these, Dornbusch said, are a state of mind.
A rereading of crisis literature (or, more properly, �panic� literature) suggests that more emphasis should be given to the psychological element-How do asset market participants perceive or �frame� the events around them and how do they react when �reality� rapidly changes? The sauve qui peut mentality is not fruitfully explored with traditional rational expectation models. (p. 118)
So what snaps that mentality back to the normal state of the world? I don't think we know that.
Gramm can argue, and I think with some merit, that the current state of the world looks closer to the normal state than the recession state. But economic decisionmaking is nevertheless being driven by a mentality that does not see things as normal. And that will hold down economic growth for awhile. Uncertainty about the electoral outcome or the policies of the two presidential candidates plays a role, but that's not the only thing going on now.


Joseph was a foreign speculator 

Chad alerts us to a new site being promoted inter alia by Northwest Airlines, the folks who are making tipping the skycap mandatory. The site: Stop Oil Speculation Now.

Every time you buy products such as food or gas, you are impacted by unregulated, secretive and often foreign commodities futures markets. Speculators in these markets are increasingly buying and selling commodities such as oil to sell again, rather than to use. As largely unregulated speculators pocket billions of dollars at your expense, the price of commodities has increased out of proportion to marketplace demands.

As speculators continue to dominate the market, the volume of oil traded �on paper� has been as high as 22 times greater than the volume of oil consumed. As prices rise, institutional investors have become active traders, turning commodities into just another asset class. This has caused severe market imbalance and upset the natural relationship between supply and demand. As a result, legitimate customers such as trucking companies, airlines, and consumers have been forced to purchase oil at unnecessarily higher prices. This has dramatically raised costs, resulting in needlessly high prices for American consumers and businesses.

Lovely. Foreign speculators. It takes a special kind of chutzpah for someone to practice xenophobia while selling you a plane ticket to Asia. (Now with an extra $100 processing fee for using your frequent flyer miles, too!) Foreign speculation has been done for a long time, even going back to Biblical times. Does it matter? Do we think the price would be less if speculation was restricted to Wall Street firms? (Such firms, by the way, often use foreign futures markets for their trading, just a small quibble.)

The site provides a definition for a speculator:
In commodity futures, an individual who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements.
That begs the question, what do they mean by hedge?
Hedging: Taking a position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price change; or a purchase or sale of futures as a temporary substitute for a cash transaction that will occur later. One can hedge either a long cash market position (e.g., one owns the cash commodity) or a short cash market position (e.g., one plans on buying the cash commodity in the future).
So someone who is minimizing risk is hedging. But risk doesn't disappear when a futures contract is purchased or sold. It can only be transferred from the seller of the contract to the buyer. The speculator, in buying futures contracts, is accepting the risk that the price will be lower in the future; he loses money if the spot price for oil in the future is below the contracted price in the futures contract. The airlines are of course trying to reduce their exposure to oil price fluctuations, so they pay speculators to transfer that risk. Who did they think they were doing business with before, just oil companies?

Northwest and others are seeking relief from Congress, to which Chad writes:
One obvious question is how the UNITED STATES CONGRESS plans to "act" to do something about these "foreign" commodities futures markets. The arrogance and ignorance that leads these bozos to believe that global oil markets will bow to the whims of Congress is rather astounding.

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Wednesday, July 09, 2008

Patience, dear major 

A new study from Forbes shows that while we in economics often below most engineering degrees for starting salaries for our graduates, economics ranks #2 (ahead of finance, btw) for salaries for those with 10+ years experience in the field. I think that Forbes study will come in handy for showing our majors a longer view of salary in the profession. Political science comes in #9. The study is from h/t: Mankiw


Unfairly burdening politicians 

This fiscal crisis in Social Security affects every generation. We now know that the Social Security trust fund is fine for another few decades. But if it gets in trouble and we don't deal with it, then it not only affects the generation of the baby boomers and whether they'll have enough to live on when they retire, it raises the question of whether they will have enough to live on by unfairly burdening their children and, therefore, unfairly burdening their children's ability to raise their grandchildren....
You might say such an unfair burden would be disgraceful. But say it's disgraceful on the campaign trail, and your opponents go bonkers.

BTW, the quote isn't John McCain. It's Bill Clinton in 1998. (h/t: Greg Mankiw.)

Is transferring money from young to old a disgrace? I don't know, it's a pretty strong statement, but standing against it gives the young just a little less change they can believe in.

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Two graphs that I find interesting together 

From Christian Broda, the second graph and this:
We need to remind politicians and the public that the gains from trade are broadly shared. Every time the discussion over trade is diverted towards the problems facing specific producers, be they farmers in France or textile workers in the U.S., we miss the central point. Trading allows everyone, and especially the poor, to buy things that they could not otherwise afford. Without better public understanding of these facts, governments will not only keep supporting policies aimed against China and Wal-Mart but may receive the uninformed support of many consumers who are benefitting from trade.
The higher your expenditures are composed of tradeable goods, the greater the benefits of globalization. The highest shares of food and fuel in one's budget are for the poor (we would say they are income-inelastic.)

h/t: Mark Perry for the first graph, McQ for the second.

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And just after I had a good experience, too 

I certainly have been critical in the past of Northwest, but can tell you last week's trip went relatively well. My flight out of St. Cloud was cancelled, but early enough to have NWA send me down in a cab to the Cities in time for the flight. (Of course, while in the cab they had rebooked me for the flight the next day, the reservations people and the gate personnel not knowing what each other were doing. But this was handled quickly and efficiently.) After that, no problems at all if you don't count the breaking of my suitcase ... as if that's the first time THAT had happened.

Well now I get to pay $15 for the chance for them to break my bag again. Along with 2,500 in layoffs comes this lovely news:
Northwest also says it will begin charging $15 for the first checked bag, matching a fee added by other carriers this year. And the airline says it will begin charging a fee for frequent-flier award tickets -- from $25 for domestic tickets to $100 for flights to Asia.

The company says those measures should increase revenues by as much as $300 million a year.
Consider this a minute -- who does this hurt more? The business traveler typically does not have a checked bag. So the leisure traveler is taking the brunt of the bag charge. The miles thing is less clear -- I am inclined to think ff miles are more the perk of business travelers who are allowed to keep them, but are used for leisure travel. Given the price of substitutes have gone up for the vacationer, I can see this as a reasonable strategy. Other airlines have been doing the same thing on the frequent flyer award travel, but the bag charge seems to be new.

I'll bring fewer, or smaller, gifts back from my next stop.

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Let me help you out here, Bob 

Bob Collins seems confused by Rep. Seifert's use of the term "Smurf village". Think about this a minute: all Smurfs are one color (sky blue), Smurf dialogue uses the same word, 'smurf', over and over. Thus, they look all alike and talk all alike. Sort of like this.

Sort of like Democrats. Don't believe me? Let's ask an astute, outside observer, Gerard Baker, most certainly not a right-winger.
It's hard to know what's worse - expressing condescending views about the working class or pretending to be one of them. The Democratic campaign is simply disappearing in the enveloping vapidity of the candidates' making.

The economy's a mess; the US is bogged down in Iraq and Afghanistan. Instead of seizing the opportunity to present a convincing vision of an alternative way forward the Democrats are fumbling. When they are not scrapping about each other's street cred they are falling back on the old verities of left-wing dogma: class warfare on taxes; irresponsible (and unredeemable) promises to pull out of Iraq in an instant; a protectionism that makes a mockery of their claims to want to restore America's standing in the world.

Amid this sorry spectacle of cynical opportunism and atavistic dogmatism, the Republicans have contrived somehow to select in John McCain the one candidate in their party who might actually have a shot at winning the election.
Which could pull along some House candidates and make the DFL, well, blue.

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Daily effects of indoctrination 2, part 5 

Today's daily effects is an interesting one. On the surface I should support the idea that a voluntary transaction is being applauded for building community. But suppose the kids on the block want $20 but the guy in the next town would do it for $10. Should I sacrifice $10 to build my community? Suppose I use this logic as a means of supporting import restrictions? I know, it only says odd jobs, but I actually hire someone as my handyman, whose livelihood depends on selling me his services.

Background of this series here.

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A Real Female Star 

There are people who make an impact on the world. They can be soldiers freeing a country from a tyrannical ruler, an individual saving a life after an accident, an author who writes in a manner that causes people to think, (versus emotionally react), a teacher or parent or relative who positively influences a youth's life.

Then there are the athletes. Many are glory hounds after fame, prestige and money but there are others who truly love their sport and through their talent live life to its fullest. One such athlete was Agata Mroz, a world class volleyball player from Poland, profiled in this link from National Review. She stood over six foot and had the ability to block like very few. She led the Polish national volleyball team to European championships in 2003 and 2005 and continued in international competition for a few more years.

Unfortunately in 1999, when she was 17, she developed MDS, a collection of disorders that prevent the bone marrow from producing enough blood cells. Her MDS progressed to leukemia over the years but she always kept her zest for life.

In June of 2007, she married and despite the risk, decided to try to get pregnant. Why? She said in a February news interview, �I felt happy that I would know what it is to be a mother and that I would give my husband something good of myself.�

Her daughter was born prematurely but is now healthy. In the meantime, Agata's condition worsened. She delayed a needed bone marrow transplant because she feared it might impact her then unborn child. Seven weeks after the birth of her daughter, Lilliana, Agata underwent bone marrow transplant surgery, she didn't make it. At her funeral Mass, the bishop paid high tribute to Agata when he said her life was a witness of �love of life, motherhood, the desire to give life and the heroic love of an unborn child."

Agata Mroz learned the lessons of sports and applied them in life. Accustomed to giving all she had on the court, Agata indeed gave the best of herself to her husband and every last ounce of herself to her daughter. She learned and believed it was more important for her to bring a new life into the world than to extend her own.

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Tuesday, July 08, 2008

Who's fishy? 

In posting on the "crisis of choice" made by Democrats and Bill Clinton's veto of ANWR drilling, Gary Gross links to a letter in the local paper praising renewable energy. Why not drill offshore?
Offshore drilling is extremely expensive and jeopardizes important sources of seafood.
This despite there being not one drop of oil spilled from Katrina or Rita off of the Louisiana Coast. And Humberto Fontova points out, the fish and coral life seem to like being around oil rigs. He's written a book on a group of people who go fishing off of abandoned oil rigs, most of which are off the Louisiana coast. The group has a video that shows spearfishing off those waters.

The high prices of gas and oil are exactly the thing that induces offshore drilling. Yes it's expensive, but firms in Florida who got a few leases squeezed out of Congress in 2006 are willing to risk $100 million or more to see if they can find new reserves. When Congress passed the Deep Ocean Energy Resources Act of 2006 , Democrats like Florida Senator Bill Nelson threatened a filibuster. DOER never passed the Senate. It kept drilling (in a rider on another bill) to 125 miles offshore the FL panhandle, an area of 8.3 million acres. That's when gas was $3 and oil $60. Now we're north of $4 and $140, and they're drilling and wanting more leases. Any chance we could get Congress to agree?

Let's say that again: in 2006, the Republican House passed DOER Act; the Democrats in the Senate threatened a filibuster and gutted it. Anyone wanting to blame Republicans for not drilling OCS when they were in charge is ignorant of DOER's history.

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Blood, turnip, onion 

Two thoughts tied together by root vegetables and a little Biblical observation:
  1. The Tax Foundation has a new study out showing that the amount of income transferred from the top 40% to the bottom 60% in America by the federal tax system exceeded $1 trillion in 2004. The Obama plan would take an extra $131 billion from the top 1% and redistribute it to the other 99%. As Shaw once said, the robbing of Peter to pay Paul will always have the support of Paul. And it isn't like the middle fifth already has had some tax breaks. (Data.)

    Of course, some would like you to think wealth is all relative, that you cannot be happy if some others' gains are more than yours. Others focus on your absolute change in living standards over time. What would Jesus shrug? "A sound heart is the life of the flesh: but envy the rottenness of the bones." (Proverbs 14:30)

  2. Lots of people writing about onions today after this article in the WSJ, as well as in Fortune last week. In short, the loss of a futures market leads to more volatile prices rather than less and is very shortsighted in resolving our current issues with oil prices. The onion futures market is the object of the discussion, as it was banned fifty years ago. Courtesy Alex Tabarrok, I skimmed this paper from a 2005 NBER conference which shows the history of opprobrium heaped upon speculators. And yet even in the first book of the Bible there was speculation. If you saw "Joseph and the Amazing Technicolor Dreamcoat", it's in the second act. Pharoah has had a dream in which seven gaunt cows devour seven fat ones, which Joseph interprets as the feast-famine cycle. (Genesis 41.)
    48 Joseph collected all the food produced in those seven years of abundance in Egypt and stored it in the cities. In each city he put the food grown in the fields surrounding it. 49 Joseph stored up huge quantities of grain, like the sand of the sea; it was so much that he stopped keeping records because it was beyond measure.

    53 The seven years of abundance in Egypt came to an end, 54 and the seven years of famine began, just as Joseph had said. There was famine in all the other lands, but in the whole land of Egypt there was food. 55 When all Egypt began to feel the famine, the people cried to Pharaoh for food. Then Pharaoh told all the Egyptians, "Go to Joseph and do what he tells you."

    56 When the famine had spread over the whole country, Joseph opened the storehouses and sold grain to the Egyptians, for the famine was severe throughout Egypt. 57 And all the countries came to Egypt to buy grain from Joseph, because the famine was severe in all the world.
    You might argue, I guess, that Joseph was kind and gave away the grain, and he did, but later he trades grain for the entirety of the flocks of the people, acquires land for Pharoah, and gives them seed and collects a 20% tax. If you're a student of economics, try drawing the supply curve for grain in Egypt in Joseph's time for the seven fat years and the seven gaunt years, both before an after Joseph's speculation in the grain market. What differs between this and the action of onion futures traders? Oil future traders? (This example inspired by a question in Heyne, Boettke and Prychytko.)


Daily effects of indoctrination 2, part 4 

Today's bulletin board offering is actually rather nice, given Mrs. S father was a postal carrier. But the fellow drove a jeep, as does the guy who delivers my mail (and I live in the city). One time his predecessor, now retired, came to ask for any of our excess apples from our two prodigious trees. I never did get his name, or to know him. Yet he brought the mail faithfully, we gave him a Christmas card and gift each year -- I was unfamiliar with this practice before marrying the daughter of a postman -- and we both enjoyed the experience. Were we "building community"? No, I just wanted my Sports Illustrated.
Background of this series here.

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Monday, July 07, 2008

How to close a deficit 

Ed's first question to me today was about the new McCain paper on closing the budget deficit by 2013 (and several other economic proposals.) It's worth noting that the CBO had scored the budget as in balance by 2012 if the Bush tax cuts had expired, so the debate Democrats want to have is how to reduce the deficit while extending the cuts. McCain's plan includes three items -- promoting economic growth, comprehensive spending controls, and a bipartisan approach to reducing the deficit. Justin Fox calls the last an appeal for the benefits of gridlock: You only feel safe with a Democrat Congress if you have a Republican president.

I remember reading a paper by Mark Zupan many years ago making this argument. See also Chari, Jones and Marimon [1997] or Carmines and Ensley [2006]. The problem with the argument back in the 1990s was that the theory argued for a Democratic legislature and a Republican executive. The world of Newt Gingrich and Bill Clinton didn't fit. Neither, to some, did Reagan and Tip O'Neil. At any rate, I don't have a good guess of how much restraint you would get from that.

How much would a normal amount of economic growth reduce the deficit? If we look at the standardized deficit you get about 0.3-0.4% of GDP, so that the 2009 estimated standardized budget deficit was to be only 0.9% of GDP (about $133 billion). So what you hope is for a budget that works down the deficit by about one quarter of one percent a year on a permanent basis. What McCain has to sell is that this is done by spending restraints he can put in place (with a Republican legislature, lest he sell his Congressional delegation down the river.) As the graph to your right should make clear, the size of this "deficit problem" is not so large when placed in context. Neither is the cure for it, if you believe a zero deficit should be a goal of federal budget policy.

One other thing I said on the air with Ed was that there was not much of a dollar policy either way. McCain at least pays lip service to it today...
John McCain's policies will increase the value of the dollar and thus reduce the price of oil. In recent years, the declining value of the dollar has added to the cost of imported oil. This will change. Americans will have a stronger economy, a stronger dollar and greater purchasing power for oil, gas and food.
...but I wouldn't tie it to the price of oil as its only reason. And he needs to say how he would create it. The Fed doesn't seem inclined to do it for us.

The McCain campaign also released a memo today by Douglas Holtz-Eakin, its senior economic policy advisor, that claims the Obama plan taxes everyone with income above $32,000.
If you own stocks, Barack Obama has a plan to raise your taxes. During the primary, he proposed lifting the cap on income subject to Social Security taxation. He has proposed to repeat the failed Windfall Profits Tax and new taxes on natural gas and coal. He is going to raise taxes on small businesses. There is no group rich, poor or other who will not be adversely impacted by his tax increases.

Even more troubling, Barack Obama has proposed increasing Washington spending and expanding government programs while failing to outline how he will pay for his proposals. Where will Barack Obama make up the difference?
Mandatory spending is about to rise as a share of GDP to about 11% on a standardized basis. It will continue to rise as aging demographics drive up Social Security and Medicare spending. There is not a shred of evidence yet that the Obama campaign has dealt at all with these issues. I wish McCain would say more, but today's plan is at least a start.

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Cue up Sherman 

I read almost every newspaper I get online. (The exception is the WSJ, whose front section is read at the coffee shop.) I walked into my usual place this morning and someone said I was in the piece about Sen. Tarryl Clark's future this morning. Yes, I said, I had talked to Larry Schumacher before I went away last week and gave him a few quotes. But when I came home today early (and promptly got on Ed Morrissey's show on Hot Air) Mrs. S points me to this line:
Banaian is an economics professor at St. Cloud State University and conservative blogger. He has been mentioned among Republicans as a possible challenger for her Senate seat in 2010, if she runs for re-election.
I think Larry would confirm I said I wasn't interested when he asked that of me. I have a longer version of why, but the simple explanation is that I'm looking forward to getting back to academic life when my last term as a department chair ends in 2010. (Thankfully, term limits in our faculty contract will keep the department from asking me to do it again.) Maybe on radio I will give a longer version, but that will do. I tell my kids "never is a very long time" so I don't do Shermanesque statements, but really, not interested.

Still, to anyone who said it to Larry, I thank you for holding me in such regard. (High or low?)

In re: Clark, my comments drew in part on this piece from March. My praise of her personal side is firsthand. She can be very pleasant in private conversation, and she's not prone to mistakes. She is just wrong on most of the issues I care about; I have many friends with that quality.

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"Nail Soup" Arena: How wise an investment? 

One nice thing about the WEA meetings each year is the high number and high quality of its sessions on the economics of sports. I was happy to catch a beer and a couple of these sessions while there. One (which I missed because of a conflicting session I was involved with) was on the economics of sports facilities. I don't recall if we covered any college facilities in this discussion.

SCSU announced last week that it was going to redesign the National Hockey Center, the building that houses our only Division I program.

St. Cloud State University President Earl H. Potter III last week discussed the preliminary details of a renovation that is scheduled to be completed in the next four years without forcing the university�s hockey team to play elsewhere during the construction.

The Legislature this session allocated $6.5 million for a $14 million renovation. The university then revised its plans to create a more ambitious facility that will �give Central Minnesota something it�s never had before,� Potter said.

He is convening a leadership team to begin raising the $22 million in private dollars needed to complete the project, he said. ...

�It will dramatically change the fan experience and the experience for our student-athletes,� Potter said of the post-renovation building. �We will reposition St. Cloud State in the WCHA, in terms of our ability to attract and compete for the best student-athletes. And it will offer Central Minnesota an entertainment venue and a series of activities that it�s never had before.� ...

He described a facility that would be a small-scale Xcel Energy Center, a complex that puts fans first, emphasizes the history and tradition of St. Cloud State hockey and �reeks of Husky hockey,� he said. A team store would carry Husky merchandise.

The renovation will include accommodations and acoustics to host concerts and other events that require facilities larger than what the St. Cloud area has, he said.

The local newspaper, which has yet to find a public spending project it didn't like, of course gushed over it but with one caveat,

How does such a vision complement (not compete with) plans to expand the St. Cloud Civic Center?

Remember, city officials are making steady (albeit slow) progress on a publicly funded $30 million expansion there. So how will these separate plans work in concert (no pun intended) and bolster the area�s appeal not just to hockey fans, but other venues in need of large spaces?

You might think that perhaps we could choose between them, since expanding the Civic Center is not expected to use private dollars. Those folks have been campaigning hard for more state bonding money and are likely to come back to the local government to get tax dollars as well. If SCSU can raise the money privately, isn't that better? My guess is that you'd have all three venues for concerts -- the Paramount Theater (under 1000 seats); the Civic Center, which I think will come in at no more than 2500 and for which even at that size parking will be very tight; and the NHC which has ample parking used during the daytime for students, and which as expanded might hold 7000. Does a metro area of 100,000 (160,000 if you count everything in Stearns County out to Sauk Center and everything in Benton County past Foley) need three such venues?

But the more basic question for St. Cloud State is what the value is in this investment. This week's Chronicle of Higher Education (temp link for non subscribers) highlights the questionable nature of investment small schools make in athletic facilities by studying a set of D-III schools in Pennsylvania that are shelling out more than $20 million each for new facilities.

Mr. [John A.] Fry, president of Franklin & Marshall, says the building frenzy has made all levels of college sports more professional, though he expressed concern that money is sometimes siphoned away from academic projects for sports.

"It's fair to say there is a bit of an arms race in Division III," he says. "You see a lot more spending on athletics, and you wonder if that's the highest and best use of those dollars."

The competition is for athletes, and many of the donors we are seeking for the NHC will be people who support athletics first and foremost. More money brings better student-athletes, and given the competitive nature of the NHC, those donors are going to want to build something that they think will attract better players than other arenas in the WCHA.

Does it help academics at the university? There the evidence is less clear. The most important item in driving academic donations appears to be television appearances, not winning championships. (Grimes and Chressanthis [1994]) Given the low viewership of college hockey, I would think it more likely a donor campaign for NHC construction works as a substitute rather than a complement to academic fundraising. All the results that suggest complementary focus on D-I basketball and football. There's a case to be made for the uniqueness of college hockey in Minnesota (the state of hockey! we're told) but I don't believe it.

BTW, nail soup. It's a variation of the stone soup story that progressives have now turned into some fable. (There's a lunch group on campus that uses this name. Or at least used to be.) I like the Swedish version better. This is the second time the university has dared to think bigger about a facility on campus. If the administration succeeds in both fundraising efforts, it's a big deal for us -- we haven't seen that around here since the first building of NHC.

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The Bad, the Ugly, the Good 

One of my favorite talk show hosts is Dennis Prager, heard from 11-2 on AM 1280. I enjoy him because the topics are not always politics and he tries his best to deliver accuracy before opinions.

Education topics provide particular interest for me and Wednesday's show was one of the most informative. Two authors and their books were discussed.

Mark Bauerlein, a professor of English at Emory University just published his latest book, The Dumbest Generation: How the Digital Age Stupefies Young Americans and Jeopardizes Our Future (Or, Don't Trust Anyone Under 30). His premise is that the current digital age, IMing, last minute meetings, etc. keep younger people from reading while focusing all their energies on themselves. While "me" has been a topic of discussion since the 1980's (The Me Generation) this conclusion ignores events that led to the current implementation of poor reading.

The second author, Anthony Kronman, a Yale Law Professor, discussed his latest book, Education's End: Why Our Colleges and Universities Have Given Up on the Meaning of Life. Real philosophy, idealism, etc. are ignored for the guilt ridden, victimology currently in vogue.

Both authors agree that while our youth are intelligent, they are not being educated. The United States with its penchant for self-criticism, particularly by the left, has put its education system in a bind. We have spent almost 40 years teaching our youth only the bad and the ugly about western civilization, often by educators who entered the profession to avoid the draft in the late 1960's, early 1970's. In addition, the profession often attracts people who are risk averse. The result is that group think takes over. Because peer pressure is so intense, particularly at the post-secondary level, those with views opposing the status quo are often ridiculed and denied tenure. Many with conservative views simply keep their mouths shut.

We do our children, our nation, our taxpayers, and frankly the world, a major disservice when we deny the good of western civilization. The subject used to be required of all college freshmen, no longer. Yet many of today's students know they're missing something. They are beginning to search for classes that make them think and yes, learn about western civilization.

Is it good for a society to ignore its bad and ugly (as most societies on the planet do) and lie to their own people that they are perfect or have the only way, etc.? and all others are rotten? No.

Nor is it good for a society to only focus on the bad and ugly while ignoring the good that the society has done. Western civilization concepts have brought more people out of poverty, educated more people, debated more ideas, invented more products, produced more solutions than any other civilization, period. It is time to give our youth the good.

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Daily effects of indoctrination 2, part 3 

Today's edition of the bulletin board contains a rather interesting image. The display wants you to "Open Your Shades." A multicultural group of children plays outside.Is the issue that we aren't seeing them? Or that they want to look in? It turns out several of the items on this wall come from a poster on "How to Build Community."

Or grow one, as we'll have pictures of soon here in a non-bulletin board edition of Daily Effects.

Background of this series here.

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Friday, July 04, 2008

July 4, 2008 - Re-enlistment - in Baghdad 

Today is July 4, the day we set aside to remember how lucky we are to live in a nation as free as the USA is. We also remember that we have provided freedom to more people than any other nation on the planet, most recently the 25,000,000 plus Iraqis getting a shot at representative government for the first time, ever.

A perfect example of what America really is took place in Baghdad where 1215 American soldiers reenlisted. You can watch the video here - it's short but play it, listen to the words: "Defend the Constitution of the United States." These soldiers understand that document better than some of our Supreme Court judges.

In addition to playing the video, you might want to read the comments. They tell another, wonderful story.

Our active, all-volunteer military comprises less than .3% of our population yet these men and women are better trained, more responsible, better suited to leadership than a number of our so-called elite college graduates. If I were an employer, I'd hire a vet in a heartbeat - of course, the vet has to leave the military and these guys decided to stay around for another tour.

Thank you, thank you, thank you!!!

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The Declaration of Independence - July 4 

The Declaration of Independence - the wonderful document written by Thomas Jefferson and signed by so many leaders of the American colonies while under British rule - the document that began a chain of events that lead to more freedom for more people than possibly any other document - the document that provided the guidelines for our Constitution was signed on July 4th, 1776.

What made this Declaration so special? The documented concept that "All men are created equal and endowed by their Creator with certain unalienable rights, among these are life, liberty, and the pursuit of happiness" was a breakthrough in thought for humanity. All men created equal? Yes, and that phrase, while unusual at the time eventually made its way around the world. The phrase does not say we are equal in talent, gifts, health, wealth, but created equal - given a chance to succeed.

"Endowed by their Creator" is the phrase our Founders used to recognize and accept that there is a power behind the universe. The Founders did not push, force or regulate a any belief system but rather established the guidelines to allow people to worship as they chose.

"With certain unalienable rights, among these are life, liberty and the pursuit of happiness" these ideals were rights of all mankind. It did not mean one group could impose its perception of rights on others but rather these words supported the right to life without fear of unwarranted persecution; the freedom to think, say, work, get educated, make a difference without infringing on the rights of others to do the same; the pursuit of happiness - not a guarantee of happiness, but the pursuit of it.

Each year on the Fourth of July, we celebrate. Our freedoms are not an entitlement - freedoms can be lost. The Founders expected us to be vigilant in our free lives, take the responsibility to make sure that we remember that tyranny can arise. Their fear was that we would forget.

Unfortunately, life is not always fair nor is life risk-free. Our Founders believed in the dignity of man and desired to put in place a system that would allow man to freely pursue his/her individual ideas. They succeeded in their goal. It's our responsibility to keep the dream alive for our children, our posterity; to remain that beacon of hope for the rest of the planet.

To read our Declaration of Independence from England, go here, take a few minutes and treasure the ideal of centuries.

KB Adds: Mrs. S reflects on the Declaration here in this morning's St. Cloud Times, putting it in context of the Magna Carta.

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Thursday, July 03, 2008

Daily effects of indoctrination 2, part 2 

Today's collection from the bulletin board needs more pictures but no explanation from me. This is simply two dialogues called "wrong" and "right"

WRONG: Person of color: "I'm pissed off about how unfair and racist schools are towards minorities.
Person without color: "Hey dude, not my problem, I pay my taxes, don't be so angry."
RIGHT: Person of color: "I'm really, really angry about how racist and unfair schools are towards minorities."
Person without color: "Hey, I understand what you're angry about. Schools do not support minority children as well as white children. I want to help change this."
"I pay my taxes." I don't know where that comes from, but apparently that's not sufficient action for a responsible citizen.

Wednesday, July 02, 2008

Fight the food smears! 

I'm in Honolulu which has some of the highest food prices in the country due to transportation costs. But I smell meat on the street. That appears not to be true in Houston:
The price of food has forced many Houstonians to give up their plans for a barbecue on the Fourth of July.

"I think I'm just going to eat beans. I'm not going to eat barbecue this year, no meat," says one man who says beef has become too expensive.

...While many people say food costs have forced them to scale back their plans, food price experts say some of the most popular items at barbecues have not become more expensive since last year. They say only about a quarter of the products in the grocery store contain substantial percentages of corn or wheat.

"Soda prices haven't gone up, beer prices have not gone up, hot dog and some processed food prices have not gone up," says Brooke Coleman, the Executive Director of the New Fuels Alliance and a contributor to the web site,

Coleman says the price of beef, chicken, pork and bread products will run about three percent more than in 2007. He blames transportation costs, saying the average chicken travels more than a thousand miles from farm to market.
Foodpricetruth is a site sponsored by the biofuels industry to fight the "smear campaign" of grocers that are blaming them for food price increases. Smells like rent-seeking.

According to BLS, food prices second half of 2007 rose less than 2% in Honolulu.


Daily effects of indoctrination 2, part 1 

Today's is just a caption, which might be the best encapsulation of liberal fascism I have seen on campus. This sits on the middle of the bulletin board highlighted yesterday.
The reminder of Christopher Lasch's "Hillary Clinton, Child Saver" could not be more compelling. As we approach Independence Day Friday, a recollection of this quote:
"We can talk all we want about freedom and opportunity, about life, liberty, and the pursuit of happiness, but what does all that mean to a mother or father who can't take a sick child to the doctor?"
h/t: Ed Morrissey. Goldberg found that It Takes a Village �argues for interventions on behalf of children from literally the moment they are born.� Why do we have a classroom project (or so it appears) based on an assault on parental rights? If a parent walked by this while bringing her son or daughter to my office for advising for freshman orientation, what should I say?

The more I look at these pictures on the bulletin board, the more I think It Takes a Village is the theme.

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Heaven is 9% off 

The morning paper here in Honolulu (whose website looks remarkably like the St. Cloud Times!) announces the grim news:

The median price of a single-family home on O'ahu tumbled 8.8 percent in June to $625,000 as dwindling demand convinced many sellers to take less than they probably could have gotten a year ago.

The drop, the largest this year, was due in part to the median price having set a record high of $685,000 in June 2007.

I have looked at the property values here and that median price covers a wide array of homes and there's quite a number here as monthly home sales fell 31% from last June. Condos go for half the price of homes.

I spent time talking to a waiter at the hotel I'm at (which is really great) and pointed to the headline. He said, so, do you want to buy? I told him of yesterday's post and Mrs S, and he just smiled, "she doesn't know what she's missing." Perhaps she's missing a coming bargain. Those of us my age see retirement in a decade coming and wonder where it will happen. A 9% discount is an opportunity for some who've put themselves in a position to take advantage.

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Tuesday, July 01, 2008

A pleasant exchange, an uphill battle 

I must comment briefly on the salutary exchange between Dane Smith and Craig Westover in today's PioneerPress. �Both are good people, arguing their positions with a minimum of obfuscation or ad hominem attacks. �Would that the StarTribune promote such exchanges!

A retired colleague once wrote a manuscript entitled "To Promote the General Welfare". �That is of course a clause in the preamble to our Constitution. �The preamble is merely a context for the document; it does not carry the force of law. �Still, I thought it was useful to understand the context of what progressives wish, and I take from Smith's writing that he views "to promote the general welfare" as a legitimate function of government.

It also appears in Article I, section 8, in describing the powers and duties of Congress. �That link to Wikipedia includes a discussion of the battle between Alexander Hamilton and James Madison over whether the general welfare clause was expansive or to be taken in the narrower context as understood at the time (via the Articles of Confederation which the Constitution was to replace. �And the interpretation of this has been fought almost from the beginning, and regrettably to the Westover side (with which, unsurprisingly, I have greater sympathies) the battle has been uphill for almost 200 years.
The subject is the execution of those great powers on which the welfare of a Nation essentially depends. It must have been the intention of those who gave these powers to insure, so far as human prudence could insure, their beneficial execution. This could not be done by confiding the choice of means to such narrow limits as not to leave it in the power of Congress to adopt any which might be appropriate, and which were conducive to the end. This provision is made in a Constitution intended to endure for ages to come, and consequently to be adapted to the various crises of human affairs. To have prescribed the means by which Government should, in all future time, execute its powers would have been to change entirely the character of the instrument and give it the properties of a legal code. It would have been an unwise attempt to provide by immutable rules for exigencies which, if foreseen at all, must have been seen dimly, and which can be best provided for as they occur. To have declared that the best means shall not be used, but those alone without which the power given would be nugatory, would have been to deprive the legislature of the capacity to avail itself of experience, to exercise its reason, and to accommodate its legislation to circumstances. �(McCulloch v Maryland (1819))�
However much we may wish to put that genie back in the bottle, we cannot. We argue in essence for a status quo ante, a very difficult place on which to stand even when you are right. �

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Daily effects of indoctrination 2 

This board will be the source of the second series of stories showing indoctrination. �This is in a common hallway leading from the stairs of the first series to my department's offices. �"Community Studies" is the name of a department on our campus that houses two programs and other courses. �There are similarities between the two boards, but it is not clear who authored or sponsored the first bulletin board. �Nevertheless, I think the boards should be viewed as elements of a broader theme regarding what is perceived as the role of higher education.

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Heaven is humid 

I am quite sure a fight will break out when I get back to St. Cloud. I have never been to a more lovely place than Hawaii (though Lake Como and Bali are in the discussion and I have not seen the French Riviera yet). Moving here is now a priority, a thought Mrs. S has squelched in the past. I will now fight harder. My only complaint was the humidity this morning as I walked from my lovely 1901-built hotel (you knew I'd like it, it has a tree with my name in the back around which I get breakfast on a veranda) to the convention hotel a block away. I did not realize how humid until I walked in and the air conditioning chilled me as much as the walk to my car in St. Cloud in January.

Two words: Kona coffee. This stuff will be coming back in the bags. I'm still debating the shirts.

Attendance appears to be good but not great. The first session I saw was on the Fed's handling of recent financial crises; even with several Fed economists in the room, nobody seemed to give it a good grade. This instrument seemed to come into the greatest criticism.

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