Econ Econ uber alles

I am stuck underneath the Goethals bridge for the foreseeable future! Here though is a self-serving tidbit from USA Today:

"Recent college graduates lucky enough to nab jobs are earning less, according to the National Association of Colleges and Employers, which said that 2010 graduates' average starting pay was $48,661, down 1.3% from 2009...."

However, "Offers for economics majors rose 2.1% to 50,885; those studying finance got a 0.0% bump to $50,356."

Come and join us!

Seriously, beyond the miniscule differences in starting salaries, and my obvious bias (though I was a business major in college), I believe econ is a much better undergraduate major that finance. Econ BA + Finance MBA is a great combo though.

Half a loaf

Been listening to the debut album by Surfer Blood called "Astro Coast".

It is basically half of a stellar album. The first six songs are all good with three that are really excellent (Floating Vibes, Swim, & Twin Peaks).

They sound a lot like the Shins circa "Oh Inverted World" (one of the great indie albums of all time by the way).

Then they go and spoil it all with track 7, a weird rip-off of "I'll stop the world and melt with you" by Modern English. It is really atrocious, people.

The rest of the record never recovers.

At the least, I can wholeheartedly recommend getting the three awesome songs. I am putting the first six tracks onto my Iphone.

The rest is pretty bad.

Here's the video for "Swim"

Bass Ackwards Redux

I have been claiming that Greece is not ruining the Euro, but that the Euro ruined Greece. Now, compulsive tweeter Felix Salmon provides a provocative tidbit in support of this thesis:

"Greece had a primary budget surplus for every year from 1992 to 2000"

In other words, joining the Euro somehow got lenders to believe that Greece was no longer Greece.

People, they (the lenders) deserve whatever haircut they end up getting.

Sadly for Paul Kedrosky, newspapers are not dead

Because if they were, no one would be mocking him on the interwebs for his extremely weak and bogus op ed on tennis challenges.

First, PK doesn't seem to know much about tennis:

The rules allow three incorrect challenges per player per set. In a best-of-five-sets match (which is normal for men), that means at least 18 available challenges per match, none of which carry over from set to set.In other words, use ’em or lose ’em. A player can get an additional challenge if the match goes into a tiebreaker, or if a fifth set goes overtime.

Best of 5 matches are played at the 4 major championships and in Davis Cup ties, meaning that they are an aberration, not the norm.

Second, he does not seem to know what the word substantial means:

And the rewards for challengers can be substantial. For example, the No. 10 seed at the Open, Fernando Verdasco of Spain, averaged 0.4 challenges per set and had a sparkling 43 percent success rate. If he challenged once per set, like Federer, and his challenge success rate fell to a similar 30 percent, it could mean one more point to him in a three-set match. If his success rate didn’t fall as much, however, and he challenged twice per set it might mean as many as three more points in a five-set match. Either way, it could be the difference between winning and losing.

Third, he seems to think that winning a challenge gives you the point (see the above quote). It does sometimes, but often winning a challenge just causes the point to be replayed.

Fourth and most importantly, he seems to forget that the status quo is neither player challenging much. If they both increased their challenges and were equally good at it, then there would be exactly zero net advantage to either player. In other words, in *equilibrium* challenging more cannot be a competitive advantage (not even a tiny one like what he cites in the quote above).

Aside from that, the piece was terrific!

Q&A

Q: Why should you not take seriously any economic reportage from the NY Times?

A: NY Times economics reporters are deluded morons!

Why is it surprising that tax cuts have a bigger effect than spending increases in the real world?

Tax cuts put money into the hands of people who will spend or invest it on things that are economically valuable. The money goes into the market system directly or indirectly.

Spending increases divert money out of the market system and into the sausage factory. In this world, swimming pools and tennis centers are "infrastructure", companies that have been failing for 20+ years are given billions of dollars and a mandate to undertake even less profitable business plans, bridges are built "to nowhere". We're lucky if the "multiplier" on this crap is as big as 1.0.

People, our government produces mass quantities of a particular product: pork. And every time it increases output, the arteries of our economy get a little bit more fatty and clogged.

On average tax cuts free up more money to go toward more highly valued uses (at least if they reduce spending or are given to non-Ricardian agents).

If you are wondering what I am ranting about check out this, this, and this.

I guess I'd rather give my money to people who are going to use it to try to make more money (i.e. save/spend it in the market system) than give it to people who are going to use it to try and get re-elected.

Hat tip to Tyler for getting me wound up on this subject.

How bad did McCain get beat?

I ask because this Yahoo news story refers to how he doesn't blame Sarah Palin for "their crushing defeat".

Crushing? Really? In my lifetime, there have been 13 presidential elections and this was the 6th closest.

Here are some crushing defeats from my lifetime: Barry Goldwater got 52 electoral votes in 64, George McGovern got 17 in 1972, Jimmy Carter got 49 (as an incumbent!!!) in 1980, Walter Mondale got lucky 13 in 84 and Dukakis got 111 in 1988.

I just don't see McCain's (162) defeat as anything close to crushing. But maybe that's just my man crush talking.

Photo of the day: Hank Paulson takes the measure of the crisis

Easy Answers to tough problems

1. Why didn't I think of that? White House "orders Banks to start loaning Money"! Such a simple and elegant solution. Thank you White House! Is it too late to change the constitution and give Shrub a third term?


2. If you're not home by midnight I'm dropping you off at the hospital: "State officials say a 15-year-old girl left at an Omaha hospital is the 21st child abandoned under Nebraska's unique safe-haven law." The government is planning to amend the law to put a on 3 day old age cap for drop offs. That is just so unfair.


3. I'm sure the IMF knows how to fix this: "IMF has '6 days to save Pakistan'" Sure, that'll work. If anyone knows how to rescue a developing country it's the good old IMF! That's a no-brainer (note that Iceland today raised their interest rate from 12% to 18% and explained the bizarre move as follows: "The central bank governor said the increase was part of its agreement with the International Monetary Fund, from which it borrowed $2bn (£1.3bn)."

Run Pakistan Run!!!!!!!!

Where have you gone Connie Mack?

I don't really follow baseball that much. Way back in grad school we used to go to Cardinal games in St. Louis during the summer where bleacher seats were a couple bucks and the Cards were dominant and that was fun. This year, just for the soap opera-ness of it all, I'd like to see a Dodgers - Red Sox series with Manny hitting around 10 dingers to win it.

One thing I do know about baseball though is that managers are dumb. Take Terry Francona last night. His starter pitches 7 stellar shutout innings but he takes him out to start the 8th to bring in a guy that is just not as good (but is left-handed). This guy (Okajima?) gives up a 2 out walk and then in comes a skinny guy with weird socks who gives up another walk, a wild pitch, and then a 2 out game tying single. This kid had pitched 3 1/3 innings in this series and given up 4 hits and 2 walks up to this point.

Lucky for the Sox that the Angels manager helped bail them out with a "suicide squeeze" play later in the game. Hey Mike Scioscia, why do you think they call it what they call it?

People, what exactly is the externality / market failure that lets baseball managers be so very very bad?

Wow! Argentina pays up.

In what I think can be fairly described as a surprise move, the Fernandez government announced that it will use foreign reserves held by the Central Bank (of which Argentina has around $47 billion) to pay off its $6.7 billion debt to the Paris Club countries, which has been in default since 2002.

"I have signed a decree today instructing the economy minister to use available central bank reserves to pay off the Paris Club debt," Fernandez said in a live televised speech, met with a standing ovation from industrial-sector executives.

This is the same method that Fernandez's husband, the ex-president Kirchner used to pay off Argentina's debt to the IMF a couple years ago.

Argentina is in the strange position of still belonging to the IMF but refusing to undergo the annual IMF reviews that generally are done for all members whether they are in a loan program or not.

What's the number for 911?

In yesterday's WSJ, Ethan Penner ("a pioneer in real estate finance" according to the Journal (wouldn't that make him well over 100 years old??)) says the following:

To understand exactly what is happening, one needs to properly understand what occurred in the late stages of the prior cycle. Interest rates had been driven to historical lows in the U.S. and throughout the world. The cause of this can be debated. However, it is clear that economic globalization, with the migration of jobs to low-wage nations, had a profound impact on inflation, and thus on interest rates.

Uh, earth to Penner! Phone call for Mr. Penner. Irving Fisher on line 3!

Ignoring the issue of how globalization affects inflation, Penner is (here and throughout the article) making the basic error of confusing real and nominal returns:


The flip side of a low-interest rate environment is that it reduces the absolute level of returns that are available to investors. This has significant implications for the massive wave of baby boomers, which holds many billions of dollars in retirement savings, either through direct investment or through managed pension-fund systems.

People, repeat after me: A 10% rate with 15% inflation is not high and a 5% rate with 0% inflation is not low.

If you read the full article, Penner also seems to believe that the shape of the yield curve is time invariant!

May you live in interesting times

Zimbabweans certainly are! After 28 years of Mugabeism, they seem tantalizingly close to getting a new president. However, the electoral commission still will not release any information about the presidential vote now 3 days after they were supposed to do so. The NY Times is running a story quoting a Zimbabwean newspaper saying that neither Mugabe nor his rival Tsvangirai have gotten 50% of the vote, meaning that there will be a runoff. Meanwhile the AP is quoting a spokesman for Tsvangirai's party as saying they have won a (bare) majority of 50.3%. These numbers are a far cry from what the opposition M.D.C. party was touting immediately after the election, i.e. that they had won a landslide with around 60% of the vote.

From my perspective, its very hard to imaging how in a country with 80% unemployment and virulent hyperinflation, the incumbent president could get anywhere close to 48-49% of the vote, but the opposition is not claiming any vote rigging in their claim of getting 50.3%.

The main theories behind the delays are (1) Mugabe is buying time to steal the vote. This theory now seems out of favor. Apparently the simple tactic of posting the results quickly at each polling station has made changing the results too costly. (2) Mugabe is buying time to negotiate a golden parachute. This seems plausible. (3) Mugabe considers having to endure a runoff "humiliating" and beneath him, but his advisers are pushing him to suck it up and accept the runoff. That sounds like something a crazy person would think, so I guess it is a plausible theory here too.

Still no official results in the Zimbabwe Election

People, a presidential election occurred Saturday in Bobby Mugabe's Zimbabwe. The results were supposed to be reported this morning, but so far no complete results have been forthcoming. The main opposition party, the M.D.C. is claiming they've won a majority (there are three candidates, Mugabe, Tsvangirai of the M.D.C. and Simba Makoni). As of last night the NY Times was quoting an anonymous "independent observer" saying the tallies were Tsvangirai 58%, Mugabe 37%, and Makoni 5%.

However, the delay in announcing full results and the staging of the partial results are causing concern. The results announced so far show Mugabe's party and the M.D.C tied in the number of seats won for Parliment, and the fear is that Mugabe trying to steal the election and get a result announced of him winning 52% of the vote and his party holding a 1 seat majority in Congress.

Hmmm, I wonder what Ray Fair's economic model of the incumbent's share of the vote would predict when you plug in an unemployment rate of 80% and an inflation rate of 100,000%?

There's no Debatin' these Socialist Calculations!!

Apparently Salvadore Allende didn't get the memo that Lange & Lerner lost the calculation debates. Allende's government (while it lasted) was attempting to implement a plan to "manage Chile’s economy using a clunky mainframe computer and a network of telex machines."

The project, called Cybersyn, was the brainchild of A. Stafford Beer...who employed his “cybernetic” concepts to help Mr. Allende find an alternative to the planned economies of Cuba and the Soviet Union.....

A Star Trek-like chair with controls in the armrests was a replica of those in a prototype operations room. Mr. Beer planned for the room to receive computer reports based on data flowing from telex machines connected to factories up and down this 2,700-mile-long country. Managers were to sit in seven of the contoured chairs and make critical decisions about the reports displayed on projection screens.

While the operations room never became fully operational, Cybersyn gained stature within the Allende government for helping to outmaneuver striking workers in October 1972. That helped planners realize — as the pioneers of the modern-day Internet did — that the communications network was more important than computing power, which Chile did not have much of, anyway. A single I.B.M. 360/50 mainframe, which had less storage capacity than most flash drives today, processed the factories’ data, with a Burroughs 3500 later filling in.

(the program was intended) to use the telex communications system — a network of teletypewriters — to gather data from factories on variables like daily output, energy use and labor “in real time,” and then use a computer to filter out the important pieces of economic information the government needed to make decisions.

Sweet! Here's more from Wikipedia:

There were 500 unused telex machines bought by the previous government, each was put into one factory. In the control center in Santiago, each day data coming from each factory (several numbers, such as raw material input, production output and number of absentees) were put into a computer, which made short-term predictions and necessary adjustments. There were four levels of control (firm, branch, sector, total), with algedonic feedback (if lower level of control didn't remedy a problem in a certain interval, the higher level was notified). The results were discussed in the operations room and the top-level plan was made. The software for Cybersyn was called Cyberstride, and it used Bayesian filtering and Bayesian control. It was written by Chilean engineers in consultation with a team of 12 British programmers.


Move over Von Mises! It looks like maybe it was Augustin Pinochet who actually won the calculation debate!

Hat tip to Mrs. Angus

Have you heard about the new Argentine diet plan?

Recently elected Argentine President Christina Fernandez is facing the first big crisis of her administration over the government's inceased tax rates on some agricultural export crops, chiefly soybeans. Argentina has been growing rapidly since 2003 though with higher and higher inflation, now estimated to be between 20 and 30 percent, and higher and higher government spending. The government raised export tariff rates on March 11 and farmers went "on strike" with roadblocks, protests, and a cessation of delivering agricultural products either for export or for domestic consumption. Farmers vow to continue striking indefinitely and Fernandez vows not to give in to extortion.

From the FT story:

Agriculture is the backbone of the Argentine economy and high international prices for commodities, especially soya, have translated into booming exports.

The government’s new tariff regime replaces a 35 per cent levy on soya sales, with charges of up to 95 per cent if prices rise to $600 (€380, £300) a tonne.

Other crops are similarly affected, but soya is Argentina’s agricultural star commodity. Cattle farmers and other producers have been switching to the grain en masse, attracted by high profitability.

Under the new tariff scheme, farmers pay 44 per cent on exports at prices of about $465 a tonne. Added to income tax and provincial levies, this results in a total tax burden on farmers of 73 per cent, according to the Argentine Agrarian Federation, one of the four main producers’ associations.

The government argues that higher tariffs are needed to share out more fairly the windfall from exceptional commodities prices, and that the sliding scale benefits farmers more than a straight increase.

But the agriculture sector feels it is being squeezed to provide funds for a spendthrift government to fuel what critics say are unsustainable subsidies. Farmers say that the new tariff regime, coming just four months after the last increase in export tariffs on grains and cereals, was the last straw.

The government could close down meat exports in an effort to stave off shortages. It has requisitioned cattle owned by the armed forces for slaughter. But farmers say that is a drop in the ocean. Meanwhile, no trucks have entered the port of Rosario, Argentina’s grains export centre, for four days; eight ships have been diverted for lack of cargoes in Argentina and 15 are stuck in Rosario awaiting loading, according to the Agrarian Federation.

While I get a kick out of seeing farmers taxed instead of subsidized, them are some pretty steep tariffs. Note that when prices go up, tariff revenues rise with a constant tariff rate; what is going on here is that the tariff rate is also rising. I'm guessing the Argentine farm lobby screwed up and didn't put enough pesos into the Kircher-Fernandez political organization.

Instant NBA Overanalysis

Wow the J-Kidd trade by Dallas was HORRIBLE (note that this has a chance of actually being true). Kidd looked like the middle aged wife-beater that he is last night as Chris Paul ran rings abound him and the Hornets beat the Mavs.

Here are the details.

Kidd: 8 points, 6 rebounds, 5 assists to 6 turnovers and 3 steals. His team was -14 points with him on the floor.

Paul: 31 points, 5 rebounds, 11 assists to 1 turnover and 9 steals. His team was +20 points with him on the floor.

Note that CP3 played 4 more minutes than did Kidd.


Meanwhile, it has become imperative that the league step in and take over the operations of the New York Knickerbockers (note that this actually might be a good idea). Last night, the team simply didn't show up for their game in Philadelphia. the 76ers scored 100 points in three quarters, the Knicks trailed by 45 at one point in the third quarter, they committed 23 turnovers (to 12 for the 76ers) and were outrebounded 43-31. Philly shot 57% from the floor agains the Knick "defense". It's probably good to remember that the 76ers stink and shouldn't be able to beat anyone this badly.

How long can this go on?

Bobby Mugabe has been drowning his country in a sea of worthless currency for quite some time now. In March of 2006 the official inflation rate hit 900%. It turns out that those were the good old days. By the summer of 07, the inflation rate was had at least tripled from that level, and the IMF was forecasting that it would reach 100,000% in 2008.

It looks like that's at least one forecast the IMF will nail, as inflation surged from over 25,000% in December of 07 to over 66,000% in January of 08 (these are annualized rates).

From the AP report:

Zimbabwe's economy has been on a downturn for the past eight years characterised by galloping inflation and shortages of basic foodstuffs such as sugar and cooking oil.

At least 80 percent of the population is living below the poverty threshold, often skipping meals to stretch their income, which frequently fails to cover basic needs.

The government has introduced several measures to rein in inflation including imposing a ceiling on prices of some goods and services and knocking off three zeros from the country's currency.

The CSO last released the monthly inflation statistics to the media in September last year and the November figure was only released by the central bank chief in a statement last month.

It's amazing how they make it sound like an exogenous event the government is doing its best to fight rather than calling it the deliberate policy of the government, i.e. Mugabe-omics.

It's also amazing how South Africa still seems to be propping up Mugabe. Who do they think they are, us??

I am not stimulated by the stimulus

First, Greg Mankiw fills me in on the cost per job allegedly to be created by the package: $336,000

Then Art Laffer (and you know he's never wrong) tells me the stimulus will be a net negative for the economy: "any rebate will reduce output because it reduces incentives to produce output. The larger the rebate, the greater the reduction in the incentives to work and the greater the reduction in output. It's as simple as that. This $170 billion rebate camouflaged as economic stimulus will deal a serious blow to the economic health of the country."

Finally, online financial advice columns are advising people to save, not spend, their rebate checks!! People, I give you the wisdom of Suze Orman: "The rebate you're about to get should be saved, not spent. It should be used to pay down debt and build up an emergency savings account. What you need to focus on is not what your government wants you to do for the national economy, but what you can do for your personal financial security. Help yourself first."

How 'bout y'all? Feel stimulated yet?

Was 1993 just a bad dream??

Responding to a recent post, one of our more pointed commentators excoriated me for claiming that I feared for my wallet under an all Democratic Party Federal Government saying in part:

"The last time a Democratic president and congress combined to significantly raise taxes, they were doing it to pay for the Vietnam War."

Now, I am probably always deserving of a good scolding but I have to ask: What about 1993? It didn't happen? Or it wasn't "significant"? WJ Clinton's first term, all Dem Congress, big tax increase. Ring any bells for anybody?

Republicans called it "the biggest tax increase in history". Here the factcheck.org website debunks that myth saying: "the Clinton tax increase was indeed large, but not the largest."

Heck, according to them it was only the second largest.

The last chopper left Saigon in 1975 right??