Friday, September 12, 2008

Bad economics makes good editorials

Like in today's WSJ where we are told "Divided Government is Best for the Market" and treated to a lovely exercise in torturing the data. It turns out that, since 1948, the stock market has done better under Democratic presidents (15.6%) than Republican ones (11.1%). Now this number really means nothing. First, we'd like to know real, inflation adjusted returns, not nominal returns. Second, and most important, we need to control for other relevant factors. Despite the best efforts of the MSM, we do not live in a unicausal world; politics is not the unique cause of all outcomes.

However, the editorial writer has a unique approach to attacking the problem:

"But it's not so simple... First, not all Democrats act like Democrats, and not all Republicans act like Republicans. John F. Kennedy, for example, was an enthusiastic supply-side tax cutter, and George H.W. Bush raised taxes. Bill Clinton promoted free trade, and Richard Nixon imposed wage and price controls.

If you assign those four presidents to the opposite party based on that -- make the two Democrats into Republicans and the two Republicans into Democrats -- the numbers completely reverse. Now stocks average 14.7% under Republicans and only 10.5% under Democrats.

In fact, it turns out that if you do just one single switch -- if you make Richard Nixon into a Democrat -- it's enough to reverse the numbers."

Awesome!! When all else fails, massage the data!

People, no matter how you slice them, these numbers can't at all be taken as evidence about what market performance would be in the future under different Presidents or about how the market would have faired if George McGovern would have beaten Nixon because they don't take into account any of the other massively important factors that affect market performance. Give a couple of examples, would there have been no oil shocks in the 70s if Nixon were not President? Would the tech boom not have happened if Clinton were not president?

Of course our beloved editorial writer is a sophisticated guy and does bring in another factor later in the article: Congress!!!

"If the electorate were really smart, it would elect a Democratic president and a Republican Congress. Under that deal, stocks have averaged a 20.2% total return"

Again, awesome. That combo in this sample is the last 6 years of Clinton. So the tech boom happened because of a Democratic prez and a Republican congress. Elect that combo again and presto, another boom. It's just that simple eh?

Why oh why oh why oh why does the WSJ publish trash like this? And why oh why oh why would anyone put a single penny into the hands of Trend Macrolytics LLC?

Thursday, September 11, 2008

News Flash: Sarah Palin is not a woman!

At least according to Heather Malik:

Palin was not a sure choice, not even for the stolidly Republican ladies branch of Citizens for a Tackier America. No, she isn't even female really. She's a type, and she comes in male form too.

and Wendy Doniger agrees:

Her greatest hypocrisy is in her pretense that she is a woman. The Republican party's cynical calculation that because she has a womb and makes lots and lots of babies (and drives them to school! wow!) she speaks for the women of America, and will capture their hearts and their votes, has driven thousands of real women to take to their computers in outrage. She does not speak for women; she has no sympathy for the problems of other women, particularly working class women.

Holy Crap people, is this a great country or what? McCain surges ahead in the polls based on his choice of a trans-gendered running mate?

It is just so awesome and fun for me to watch how our liberal chattering class has gone completely insane over Sarah Palin.

Hat tip to Betsy Newmark!

Foreign Aid: Fail

Here are Easterly and Pfutze in a recent (Spring 2008) article in the Journal of Economic Perspectives:

"Our findings on aid best practice tend to confirm a number of long-standing
complaints about foreign aid, notwithstanding the aid agencies’ perpetual claims
that they are fixing past problems. The aid effort is remarkably splintered into many
small efforts across all dimensions—number of donors giving aid, number of
countries receiving aid from each donor, and number of sectors in which each
donor operates. A lot of aid still goes to corrupt and autocratic countries and to
countries other than those with the lowest incomes. Aid tying, the use of food
aid-in-kind, and the heavy use of technical assistance persist in many aid agencies,
despite decades of complaints about these channels being ineffective. In addition,
some agencies have remarkably high overhead costs. The broad pattern that
emerges from our evidence is that development banks tend to be closest to best
practices for aid, the UN agencies perform worst along each dimension, and the
bilaterals are spread out all along in between. Explaining why each of these patterns
persists over time raises an interesting agenda for research in political economy.
The aid business now spends $100 billion dollars a year of money each year,
seeking to help the world’s poorest people. It is a sad reflection on the aid
establishment that knowing where the money goes is still so difficult and that the
picture available from partial knowledge remains so disturbing."

The UN World Food Program (which tied for last in the Easterly-Pfutze rankings) has responded and E-P have responded to them. While both are interesting and worth reading, I would be remiss in my duties if I didn't point out two of the most entertaining statements in the UN's response letter:

1. "WFP does not decide where to provide assistance"

Really? They just open the doors and see who shows up to cart off the food?? Or they spin a roulette wheel with country names on it?

2. "The world consumes more than it produces"

Yikes! I know that it's been reported that some North Koreans eat grass and leaves, but I don't think the statement can be true, can it? Are we eating the production of future generations?

Is fewer people really a good thing?

This morning, Lebron James' attempt to justify his lifestyle got me to thinking about people. We often hear that the world has too many people, but to many highly trained economists (he he he), population growth is the key to economic growth.

First generation endogenous growth models (eg. Romer JPE 1990) had the implication that long run growth in income per capita was proportional to the number of researchers in the ideas sector. In this case long run growth was possible with a fixed population and policies that increased the number of researchers had growth effects.

However, Charles Jones (QJE 1995) showed that, over the last 40 years, the number of researchers had grown dramatically while growth rates were largely unchanged, so economists modified the Romer model to reduce the productivity of workers in the ideas sector. In this endogenous growth without scale effects (or semi-endogenous growth) model, long run growth in income per capita is proportional to population growth.

From this point of view, Sarah Palin has it right and Tyler (and me and Mrs. Angus) have it exactly wrong! It would be better to take pro-environment steps that did not work to reduce population growth.

Wednesday, September 10, 2008

Parents: don't let your kids go to business school!!

Another "Reason" not to vote Libertarian

From Reason magazine online that is, a story showing the LP's VP choice to be a complete ass.

An excerpt (note that Wayne Allyn Root is the LP VP candidate):

Matt Welch: So tell us what we should know about Barack Obama that we don't?

Wayne Allyn Root: I think the most dangerous thing you should know about Barack Obama is that I don't know a single person at Columbia that knows him, and they all know me. I don't have a classmate who ever knew Barack Obama at Columbia. Ever!

Welch: Yeah, but you were like selling, you know, Amway in college or something, weren't you?

Root: Is that what you think of me! And the best damned Amway salesman ever!

Welch: No, I'm sure that you were an outgoing young man, I'm just guessing.

Root: I am! That's my point. Where was Obama? He wasn't an outgoing young man, no one ever heard of him.

Tim Cavanaugh: Maybe he was a late bloomer.

Root: Maybe. Or maybe he was involved in some sort of black radical politics.

Welch: Ooooooooooh.

Root: Maybe he was too busy smoking pot in his dorm room to ever show up for class. I don't know what he was doing!

Welch: Wait, you weren't smoking pot in your dorm room?

Root: No, I wasn't. I wasn't. But I don't hold that against anybody, but I wasn't.... Nobody recalls him. I'm not exaggerating, I'm not kidding.

Welch: Were you the exact same class?

Root: Class of '83 political science, pre-law Columbia University. You don't get more exact than that. Never met him in my life, don't know anyone who ever met him. At the class reunion, our 20th reunion five years ago, 20th reunion, who was asked to be the speaker of the class? Me. No one ever heard of Barack! Who was he, and five years ago, nobody even knew who he was.

Holy Crap people, read the whole thing because it gets weirder and uglier from here. It's a shame, especially in this election where the major party choices are big government or big government that the LP is running such a weak ticket.

Tuesday, September 09, 2008

Ya know, I was just thinking "Hey, we need more government" and looky!!

Holy Crap people, the only thing dumber than this article are the fawning responses here and here.

I think the whole left wing blogosphere has totally lost it. Palin has crushed them! I'm serious.

Check out this prime example.

Competing Free Advice for Libertarians!

First from notorious Canadian Alex T at Marginal Revolution: Why Libertarians Should Vote for Obama. An excerpt:

First, war. War is the antithesis of the libertarian philosophy of consent, voluntarism and trade. With every war in American history Leviathan has grown larger and our liberties have withered. War is the health of the state. And now, fulfilling the dreams of Big Brother, we are in a perpetual war.

A country cannot long combine unlimited government abroad and limited government at home. The Republican party has become the party of war and thus the party of unlimited government.

With war has come FEAR, magnified many times over by the governing party. Fear is pulling Americans into the arms of the state. If only we were better at resisting. Alas, we Americans say that we love liberty but we are fair-weather lovers. Liberty will flourish only with peace.

Have libertarians gained on other margins in the past eight years? Not at all. Under the Republicans we have been sailing due South-West on the Nolan Chart – fewer civil liberties and more government, including the largest new government program in a generation, the Medicare prescription drug plan, and the biggest nationalization since the Great Depression. Tax cuts, the summum bonum of Republican economic policy, are a sham. The only way to cut taxes is to cut spending and that has not happened.

However, here is the wonderful Vin Suprynowicz with a slightly different point of view:

I'm considering voting for a major party's presidential ticket this year, for the first time in decades. As a matter of fact, it would mark the first time I've voted the top of the ticket for this particular party in my life.

I've met the presidential nominee. He's got character. He's also a likeable guy -- most politicians share that asset -- though he's clearly a creature of the Senate, where respect for freedom and limited government are laughed at, deemed a handicap in "making the deal."

Over the past year, though, he's run a come-from-behind Cinderella campaign that could become the stuff of legend. And then last week, he did something that made our enemies afraid.

That made me take notice.

Mind you, there's a good moral case to be made for not voting. By participating in the election, you tacitly acknowledge the winner has the right to do all the awful, unconstitutional, morally wrong things they now do in our names.

I still vote largely because the "Libertarian" button is available. This year, though, the Libertarian Party has nominated Fearless Drug Warrior Bob Barr, a man who has opposed medical marijuana initiatives, opposed needle exchanges, a man who zealously locked up for years those seeking to peacefully medicate themselves or help others to do so, shoving them into small cages.

The only two things these posts seem to agree on is that Libertarians should not vote for Barr (Alex implicitly and Vin quite explicitly)!! Now where have I heard that before?

Monday, September 08, 2008

How not to make an argument

The inimitable Mary Anastasia O'Grady (Latin American (LA) columnist for the WSJ) shows us exactly how as she argues for McCain over Obama by positing that the Smoot Hawley Tariff of 1930 caused the spread of import substitution policies in Latin American in the 1950s. Really, I am not making this up. See for yourselves:

Of the two U.S. presidential candidates, one promises to expand international trading opportunities for American producers and consumers. The other pledges to raise the barriers that Americans already face in global commerce.

For Latin America, this is the single most important policy issue in the campaign. If Republican candidate John McCain wins, he says he will lead the Western Hemisphere toward freer trade. Conversely, Democratic candidate Barack Obama has promised that he will craft a U.S. trade policy of greater protectionism against our Latin neighbors. The former agenda will advance regional economic integration, the latter will further Latin American isolation.

Anyone who has read 20th-century history knows the seriousness of this policy divide. The last time Washington adopted a protectionist stance toward our southern neighbors was in 1930, when Congress passed the Smoot-Hawley tariffs. It took more than 50 years to even begin to climb out of that hole.

This is so weird. Clearly it didn't take the US 50 years to begin to recover from the depression. Nor did it take Latin America that long. Most big Latin American countries were doing great, growing rapidly and showing some catch-up to the USA in the late 1960s and the 1970s until the 1980s debt crisis smashed them up pretty good.

Many economists blame Smoot-Hawley for the depths of the U.S. depression. But Latin Americans have suffered even more over a longer period. Their leaders chose to retaliate at the time with their own protectionist tariffs, but the damage didn't end there.

And, I think it is fair to say that many economists DON'T!! Also, on average over the region, the depression hit LA much more lightly than it hit the US, which is not what you'd gather from the above sentences.

In his 1995 book "Crisis and Reform in Latin America," UCLA professor Sebastian Edwards writes that though there was a brief period of liberalization in Argentina, Brazil and Chile in the late 1930s, it didn't last long. Adverse conditions brought about by World War II prompted the region's policy makers to restore tariffs, in the hope that protectionism would stimulate economic development.

"By the late 1940s and early 1950s," writes Mr. Edwards, "protectionist policies based on import substitution were well entrenched and constituted, by far, the dominant perspective." The U.N.'s Economic Commission on Latin American and the Caribbean, he adds, provided the "intellectual underpinning for the protectionist position."

Awesome, so O'Grady does decide to cite one source for her "thesis" and the source completely contradicts her. As I read Edwards, Smoot Hawley had nothing to do with high tariffs in LA and Import Substitution, which was a fashionable position among development economists of the 1950s, gave intellectual cover to protectionist governments around LA.

Why oh why oh why can't we have a better LA press corp?

Having had my fill of mockery, let's consider whether a McCain administration would promote trade with LA more than an Obama one. They might want to, but it would be almost impossible given the expected Democratic majorities in both Houses of Congress. Ironically, the best chance of getting deals done (even though those deals might be weird and crappy) would be with the Obama people negotiating a deal that the Pelosis of the world could live with (again, I shudder to think what such a deal would look like).

Take it to the bridge, throw it overboard / See if it can swim back up to the shore

Mrs. Angus & I saw Squeeze's reunion tour stop at the House of Blues in Dallas Saturday night.

I am of two minds about what transpired.

On the one hand, they have a ton of good songs and played them for over 90 minutes with enthusiasm and a minimum of chatter. It was great to see them and hear their catalog.

On the other hand, they seemed more prepared to play Texas stadium than a small hall. The bass and drums were mixed way way up, and overall the band's sound had a hard brittle edge. This is not the fault of HOB, we saw the Breeders there and while it was way loud, the sound was clean and clear and textured. It's not the fault of my ears either; I've seen Sonic Youth and My Bloody Valentine and can appreciate brutal distortion as it's own art form.

The other somewhat disturbing element of the show is that the original members seemed to have instructed their current keyboardist to impersonate Jools Holland (at least his clothing style and physical mannerisms). That was very jarring indeed.

I think those boys need some tube amps!

Sunday, September 07, 2008

And that's a mighty long airplane ride....

I'm heading for Perth, Australia. After that, I hope to post more. I certainly can't post much LESS. Thanks to Angus, for, as always, carrying me.

I leave RDU today, SUNDAY, at 1:30 pm. I arrive (travelling through JFK, LAX, and Sydney) in Perth at (gulp) 1 pm on TUESDAY.

On the other hand, I am going to stay here, in Fremantle (just south of Perth). Nice.

Oh, but on the third hand....I'm going to be at this conference, sharing my views on recycling. I believe that I am the tethered goat.

Back Saturday night, September 20. Back to the world of the living after the election on Nov. 4.


Nice article and other material in Raleigh N&O today.

For more.....