The Venezuelan government is on an unsustainable treadmill. They are running a sustained inflation rate of between 25-30% per year. People complain about higher prices, so they institute price controls and nationalize "offending" companies. Both actions tend to reduce supply, so customers then face shortages and long lines for the products. The NY Times has a good article on the situation.
But as they say, there's always a silver lining. Some citizens are getting healthier:
Waiting in line to buy chicken and other staples, Jenny Montero, 30, recalled how she could not find cooking oil last fall and had to switch from the fried food she prefers to soups and stews.
“It was good for me,” she said drily, pushing her 14-month-old daughter in a stroller. “I lost several pounds.”
Monday, April 30, 2012
Sunday, April 29, 2012
HIgher Ed blues
Here's the redoubtable Josh Barro on the costs of higher education:
Structurally, the higher education sector looks a lot like the health care sector. It hasn’t seen the productivity gains enjoyed by sectors like manufacturing and retail, which have benefited extensively from automation and technological advances. Colleges still need to employ a lot of highly skilled workers, and college costs are tied to their wages, which rise faster than inflation. It’s no surprise, then, that the higher education inflation trend looks a lot like the alarming one we see in health care.
But colleges and universities have failed to mitigate this phenomenon. For example, over the last few decades, the typical public four-year college has seen a sharp expansion of its support and managerial staff — from 5.5 per 100 students in 1987 to 7.5 per 100 in 2007. Colleges have also been reducing student-to-faculty ratios, and increasing spending on fringe offerings like gyms and student centers. As a result, expenditures per student by public institutions of higher education rose 48 percent from 1985 to 2009, after adjusting for inflation. Can we really say that higher education has gotten anywhere close to 48 percent better over that period?
While I agree with Josh that college administrators capture and waste a larger portion of the rents and that the withdrawal of state support dramatically increased the economic load of higher ed for non-wealthy families, I cannot come anywhere close to agreeing with the last couple sentences of the quoted portion.
First consider expenditure growth. People, 1985 - 2009 is 25 years. 48% growth over 25 years is, at a first approximation, something like a 2% annual growth rate. That just doesn't seem so bad a rate of spending increase. It's clearly below the rate of growth of real GDP. Is that really the same as the health care case?
Second, it's pretty much of a no-brainer that higher education is "anywhere close to 48% better" in 2009 than it was in 1985, though "better" is not easily made precise in this context:
Think of all the new majors. Think of all the innovative uses of technology. As Josh himself notes, dorms are way nicer, food is way way better, and athletic and leisure facilities are way way way better.
But maybe we shouldn't define "better" as "cooler" or "more enjoyable".
Well, how about if we define "better" as "more valuable"?
According to Goldin & Katz, the college graduate wage premium was around 40% in 1980 and rose to about 65% in 2005 (and was climbing at that point where their data stop). That's a lot more than 48% (62.5% to be exact).
Final point: A much higher percent of new high school grads attend college now than they did in 1985. The enrollment rate of new high school grads into college was 51% in 1975, and it rose to 70% in 2009.
I don't think that's because the product has gotten worse!
Structurally, the higher education sector looks a lot like the health care sector. It hasn’t seen the productivity gains enjoyed by sectors like manufacturing and retail, which have benefited extensively from automation and technological advances. Colleges still need to employ a lot of highly skilled workers, and college costs are tied to their wages, which rise faster than inflation. It’s no surprise, then, that the higher education inflation trend looks a lot like the alarming one we see in health care.
But colleges and universities have failed to mitigate this phenomenon. For example, over the last few decades, the typical public four-year college has seen a sharp expansion of its support and managerial staff — from 5.5 per 100 students in 1987 to 7.5 per 100 in 2007. Colleges have also been reducing student-to-faculty ratios, and increasing spending on fringe offerings like gyms and student centers. As a result, expenditures per student by public institutions of higher education rose 48 percent from 1985 to 2009, after adjusting for inflation. Can we really say that higher education has gotten anywhere close to 48 percent better over that period?
While I agree with Josh that college administrators capture and waste a larger portion of the rents and that the withdrawal of state support dramatically increased the economic load of higher ed for non-wealthy families, I cannot come anywhere close to agreeing with the last couple sentences of the quoted portion.
Let's break it down:
First consider expenditure growth. People, 1985 - 2009 is 25 years. 48% growth over 25 years is, at a first approximation, something like a 2% annual growth rate. That just doesn't seem so bad a rate of spending increase. It's clearly below the rate of growth of real GDP. Is that really the same as the health care case?
Second, it's pretty much of a no-brainer that higher education is "anywhere close to 48% better" in 2009 than it was in 1985, though "better" is not easily made precise in this context:
Think of all the new majors. Think of all the innovative uses of technology. As Josh himself notes, dorms are way nicer, food is way way better, and athletic and leisure facilities are way way way better.
But maybe we shouldn't define "better" as "cooler" or "more enjoyable".
Well, how about if we define "better" as "more valuable"?
According to Goldin & Katz, the college graduate wage premium was around 40% in 1980 and rose to about 65% in 2005 (and was climbing at that point where their data stop). That's a lot more than 48% (62.5% to be exact).
Final point: A much higher percent of new high school grads attend college now than they did in 1985. The enrollment rate of new high school grads into college was 51% in 1975, and it rose to 70% in 2009.
I don't think that's because the product has gotten worse!
Saturday, April 28, 2012
Markets in everything: South African price discrimination edition
And if you're interested in what a Kulula airlines plane looks like:
(clic the pics for more informative images). Hat tip to Jeff Ely.
Friday, April 27, 2012
In Feb 1981, that freak Angus dragged me to Graham Chapel (750 people!) on Wash U campus to see a completely unknown band. They were from IRELAND, of all things.
Concert was strange. They didn't have many songs. Most bizarrely, at least in my memory, they started with a song ("Ocean") which they later played again, as an encore. As I said, they didn't have many songs.
But the concert was pretty great. I liked them enough that I went and bought their debut album, which hadn't been out long. The album was called "Boy," and I could only buy it because I had written down the cryptic name of the unknown band. It was called U2. Perhaps you have heard of them. Anyway, here is Bono, 30 years later, 2011, in Busch Stadium. He specifically recalls Graham Chapel. They got paid $750. I think that is what a ticket cost in Busch Stadium in 2011! Most gratifyingly, Bono confirms that they did in fact START OVER on the set list, for the encores, because they didn't know many songs. And he also confirms that being in a band is still a good way to meet girls.
Concert was strange. They didn't have many songs. Most bizarrely, at least in my memory, they started with a song ("Ocean") which they later played again, as an encore. As I said, they didn't have many songs.
But the concert was pretty great. I liked them enough that I went and bought their debut album, which hadn't been out long. The album was called "Boy," and I could only buy it because I had written down the cryptic name of the unknown band. It was called U2. Perhaps you have heard of them. Anyway, here is Bono, 30 years later, 2011, in Busch Stadium. He specifically recalls Graham Chapel. They got paid $750. I think that is what a ticket cost in Busch Stadium in 2011! Most gratifyingly, Bono confirms that they did in fact START OVER on the set list, for the encores, because they didn't know many songs. And he also confirms that being in a band is still a good way to meet girls.
One day too soon
If I'da waited another day before posting my pond pics, you would have gotten to see our water lily in bloom too.
Feast your eyes (and clic the pic for a more bucolic image):
Feast your eyes (and clic the pic for a more bucolic image):
In (limited) defense of the Bernank
Progressive social media is echoing with the theme that everything would be well with the American economy were it not for the willful obstructionism of Ben Bernanke.
Here is a tweet from Matt Y:
"the gaps get smaller with every month Bernanke lets our human and physical capital stock decay -- that's the problem!"
and another:
"I'm not sure I understand why it's my job to "understand" the man presiding over a total disaster."
And here's the usually excellent Interfluidity telling us that our current economic woes are a deliberate choice made by our policymakers:
"We are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives."
Wow.
First of all, we are not in a depression. Nor is the economy a "total disaster". We are in a disappointingly slow and painful recovery from a very deep recession.
Second, the Bernank actually helped to save our asses back in the darkest days of financial panic.
Third, these are the same folks who generally believe that wages are too low and workers don't earn enough compared to capital. Yet their solution to the low growth / high unemployment problem is for the Fed to lower wages?
Fourth, the Fed cannot automatically control the real interest rate. Do you think the Fed could set inflation or inflation expectations at 10% and simultaneously hold nominal rates at zero?
Fifth, NGDP targeting is not some magic bullet that would solve our current problems. It relies crucially on a particular path for expectations. If you think it's easy for an actor who can't easily make credible commitments to control expectations, you should read Svensson's work and ask yourself how likely it is that the Fed could ever follow Svensson's foolproof path.
I personally support having the Fed try some additional unorthodox policies in the short run. Even if there's only a .25 chance they significantly affect employment and growth, why not try? But I do not think the Fed is sitting on policies that will definitely cure our economic ills. The Fed is not close to omnipotent.
Here is a tweet from Matt Y:
"the gaps get smaller with every month Bernanke lets our human and physical capital stock decay -- that's the problem!"
and another:
"I'm not sure I understand why it's my job to "understand" the man presiding over a total disaster."
And here's the usually excellent Interfluidity telling us that our current economic woes are a deliberate choice made by our policymakers:
"We are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives."
Wow.
First of all, we are not in a depression. Nor is the economy a "total disaster". We are in a disappointingly slow and painful recovery from a very deep recession.
Second, the Bernank actually helped to save our asses back in the darkest days of financial panic.
Third, these are the same folks who generally believe that wages are too low and workers don't earn enough compared to capital. Yet their solution to the low growth / high unemployment problem is for the Fed to lower wages?
Fourth, the Fed cannot automatically control the real interest rate. Do you think the Fed could set inflation or inflation expectations at 10% and simultaneously hold nominal rates at zero?
Fifth, NGDP targeting is not some magic bullet that would solve our current problems. It relies crucially on a particular path for expectations. If you think it's easy for an actor who can't easily make credible commitments to control expectations, you should read Svensson's work and ask yourself how likely it is that the Fed could ever follow Svensson's foolproof path.
I personally support having the Fed try some additional unorthodox policies in the short run. Even if there's only a .25 chance they significantly affect employment and growth, why not try? But I do not think the Fed is sitting on policies that will definitely cure our economic ills. The Fed is not close to omnipotent.
Thursday, April 26, 2012
Normatopia
The irises are blooming in the pond, the fish survived our "winter", and all is well with the world. (clic the pics for images that are even more bucolic).
Wednesday, April 25, 2012
We Get Letters: Polls on I-95
From Jason S:
Dr. John Whitehead posted ”It is Hard to Stifle My Outrage When the Government Asks Those Who Benefit to Pay” regarding the wisdom of Tolling I-95.
I thought that maybe I had something to add that could cut to the heart of the matter. Tolls and user fees are excellent instruments to create value, but this is unlikely to be such an occasion for this multi-billion dollar expenditure. 1. The Draft Environmental Assessment, Purpose and Need, Page 13, Table 1-5, Statewide Average shows that fewer people will use the facility if they have to pay the price(toll) for the facility compare to if they continue with the current maintenance plan.
If the project has less people using I-95, it would seem that the project has increased the overall cost to users based on the laws of supply and demand. 2. This can also be seen quite simply by looking at the need to provide 19 cents in benefit to the users to match the fee being collected. If the new project lets everyone drive at 70mph on the corridor, and in the year of opening people value their time on average at $20/hour, then driving at 70mph with 19 cent toll is equivalent to driving at 42mph without a toll. This is equivalent to Level of Service D that the planners are trying to avoid. I would add that low income users would feel even more disadvantaged with $10/hr value of time. It makes the toll chill[1] equal to 30 mph.[2] 3.
While I have driven the corridor a decade ago and realize there are many large trucks the current traffic, according to Google Maps, is free flowing on Friday afternoon at 5:30pm typically the worst time for traffic. The proposed changes could mean very little if traffic volumes continue to hold steady as seen in the FHWA vehicle mile traveled (vmt) trends. (I looked at the NC data but there was a 2 billion vmt discrepancy going from 2010 to 2011 that makes a good estimate of the recent NC trends hard to enumerate.) I am a big supporter of no subsidies and user pays, but costumers still expect profits from their user fees that they pay. Users are smart enough to know there are intermediate solutions, phased solutions and new technology that can guide smarter investment in infrastructure.
Footnotes: [1] Toll Chill is meant to mean how it feels, in the same vain as Wind Chill.
[2] Safety and Bridge Rehab were not addressed these have only small changes to user benefits proposed.
Dr. John Whitehead posted ”It is Hard to Stifle My Outrage When the Government Asks Those Who Benefit to Pay” regarding the wisdom of Tolling I-95.
I thought that maybe I had something to add that could cut to the heart of the matter. Tolls and user fees are excellent instruments to create value, but this is unlikely to be such an occasion for this multi-billion dollar expenditure. 1. The Draft Environmental Assessment, Purpose and Need, Page 13, Table 1-5, Statewide Average shows that fewer people will use the facility if they have to pay the price(toll) for the facility compare to if they continue with the current maintenance plan.
If the project has less people using I-95, it would seem that the project has increased the overall cost to users based on the laws of supply and demand. 2. This can also be seen quite simply by looking at the need to provide 19 cents in benefit to the users to match the fee being collected. If the new project lets everyone drive at 70mph on the corridor, and in the year of opening people value their time on average at $20/hour, then driving at 70mph with 19 cent toll is equivalent to driving at 42mph without a toll. This is equivalent to Level of Service D that the planners are trying to avoid. I would add that low income users would feel even more disadvantaged with $10/hr value of time. It makes the toll chill[1] equal to 30 mph.[2] 3.
While I have driven the corridor a decade ago and realize there are many large trucks the current traffic, according to Google Maps, is free flowing on Friday afternoon at 5:30pm typically the worst time for traffic. The proposed changes could mean very little if traffic volumes continue to hold steady as seen in the FHWA vehicle mile traveled (vmt) trends. (I looked at the NC data but there was a 2 billion vmt discrepancy going from 2010 to 2011 that makes a good estimate of the recent NC trends hard to enumerate.) I am a big supporter of no subsidies and user pays, but costumers still expect profits from their user fees that they pay. Users are smart enough to know there are intermediate solutions, phased solutions and new technology that can guide smarter investment in infrastructure.
Footnotes: [1] Toll Chill is meant to mean how it feels, in the same vain as Wind Chill.
[2] Safety and Bridge Rehab were not addressed these have only small changes to user benefits proposed.
The EU Banquet
A. Raoul suggests that, at the EU Banquet, lobster will be served. Everyone will get their fair share. Here is the German lobster:
And the Greek lobster.
And the Greek lobster.
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