Thursday, December 30, 2010

Why we shouldn't worry about the Gini coefficient:
There is less to the income inequality issue than meets the eye. Most analyses of income inequality neglect two major points. First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well. Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does. Like the vast majority of Americans, I have access to some important new pharmaceuticals, such as statins to protect against heart disease. To be sure, Gates receives the very best care from the world’s top doctors, but our health outcomes are in the same ballpark. I don’t have a private jet or take luxury vacations, and—I think it is fair to say—my house is much smaller than his. I can’t meet with the world’s elite on demand. Still, by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.

Compare these circumstances to those of 1911, a century ago. Even in the wealthier countries, the average person had little formal education, worked six days a week or more, often at hard physical labor, never took vacations, and could not access most of the world’s culture. The living standards of Carnegie and Rockefeller towered above those of typical Americans, not just in terms of money but also in terms of comfort. Most people today may not articulate this truth to themselves in so many words, but they sense it keenly enough. So when average people read about or see income inequality, they don’t feel the moral outrage that radiates from the more passionate egalitarian quarters of society. Instead, they think their lives are pretty good and that they either earned through hard work or lucked into a healthy share of the American dream.

Thursday, December 16, 2010

What is Network Neutrality about? From the head of the lobby group Free Press:
We have a long way to go. At the moment, the battle over network neutrality is not to completely eliminate the telephone and cable companies. We are not at that point yet. But the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.

Monday, December 13, 2010

Roger Pielke:
[Kyoto] did almost nothing to accelerate historical rates of decarbonization of the EU... Decarbonization in the EU occurred at an annual average rate of 1.35 percent per year in the nine years before the Kyoto Protocol and 1.36 percent in the nine years following.

Saturday, December 11, 2010

Obama economic advisor Professor Jeff Liebman on the poverty trap created by our high effective marginal tax rates:
Despite the EITC and child credit, the poverty trap is still very much a reality in the U.S. A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me.

She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. I told her I didn’t know what I could do for her, but agreed to meet with her.

She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges.

She asked me if she should go back to earning $25,000. I told her that she should first try to find a $35k job closer to home. Also, she apparently can’t fully reverse her decision to take the higher paying job because she can’t get the child care voucher back (the waiting list is several years long she thinks). She is really stuck. She tried taking an additional weekend job, but the combination of losing 30 percent in increased rent and paying for someone to take care of her child meant it didn’t help much either.

Friday, December 10, 2010

Why do people remain poor?
As de Soto [president of the Institute for Liberty and Democracy in Peru] explained: "These pictures show that roughly 4 billion people in the world actually build their homes and own their businesses outside the legal system. ... Because of the lack of rule of law (and) the definition of who owns what, and because they don't have addresses, they can't get credit (for investment loans)."

Thursday, December 9, 2010

In a reversal of his position, Dr Lockwood explains that the Sun is a key driver in global temperatures:
The respected science journal, 'New Scientist' has published a watershed article appearing to controvert the man made global warming hypothesis. 'New Scientist' in ‘Quiet sun puts Europe on ice‘ (14 April 2010) reveals how international climatologist, Mike Lockwood, of the University of Reading, England, explains his latest findings that conflict with the accepted view that human emissions of carbon dioxide and other greenhouse gases are likely to warm our climate.

These findings vindicate the claims of skeptic researchers such as Henrik Svensmark who for years have insisted the Sun is the key driver of Earth’s climate. Skeptics of the man made global warming theory (AGW) argue that the increased activity of the Sun, not human-emitted greenhouse gases, was the real cause of the temporary global warming blip that lasted from 1975-98. Now that short burst of activity has decreased it appears global temperatures have followed suit.

Thursday, December 2, 2010

Secret mercenary army to fight pirates in Somalia:
An un-named Muslim country is funding the creation of a well-armed and privately trained militia force in Somalia's north to fight piracy, the AP reports today. And behind the scenes consulting are the George W. Bush administration's former ambassador at large for war crimes, Pierre Prosper, and former CIA deputy station chief in Mogadishu Michael Shanklin. The force has already trained its first recruits (Saracen, a private security firm, is taking the lead) and recieved its first shipment of weapons. And most incredibly of all, it will have air support -- something that no military force in the country currently has, even the U.N. peacekeepers.

It would be interesting to find out who is funding this. Egypt stands to loose if less traffic pays for tolls through the Suez Canal. Dubai on the other hand has built a major port that offers little more than transshipment, the type of work that could easily be moved elsewhere to other routes. The Saudi kingdom ships most of their oil through the Gulf of Aden and up to Europe.
Power struggles in Iran:
Casual Iran observers tend to portray the country's most prominent political division as that between fundamentalist hard-liners and secular moderates. In reality, however, the struggle for Iran's future is a three-way fight waged by the different branches of conservatives that control the parliament, the presidency, and the theocracy. The Green Movement may have stalled, but the parliamentary opposition to President Mahmoud Ahmadinejad has only grown stronger and more assertive over the past year -- culminating in a recent push to charge the president with abuses of power warranting impeachment. Those efforts are coming to a halt under orders from Supreme Leader Ali Khamenei, who fears that the parliament's attempt to assert itself against the president will also be at the expense of his own power base, the country's conservative mullahs...

Ahmadinejad has also clashed with parliamentarians over his prerogative to influence the activities of the Central Bank. As financial hardships mount on common Iranians, in part due to mismanagement and in part from international sanctions, their elected representatives are blaming the president and his bureaucrats for the economy's woes.

It's a naked power struggle that has cloaked itself in ideology. Ahmadinejad and his cohorts in the executive branch of Iran's government increasingly reference secular Iranian nationalism. They recently celebrated an exhibition honoring Cyrus the Great, the founder of the Persian Empire over 2,500 years ago; they have also been known to castigate influential mullahs for diminishing Iran's greatness, going so far as to encourage the separation of religion from the government. Meanwhile parliament speaker Ali Larijani and his legislative supporters present themselves as adherents to the fundamentalist traditions of Shiite Islam and as true believers in the velayat-e faqih, Iran's system of governance by Muslim jurists.

Wednesday, November 24, 2010

The two kinds of environmentalism in China:
I've been sucking down inhaled steroids twice a day. The day after we left for Nanning, I got a worried email from my husband, who didn't know what city I was in; the pollution index in Beijing had apparently hit 500 on a 1 to 500 scale... I'm now in Shanghai, where the pollution is also worse than usual. The rumor is that this is due to the recently closed Shanghai Expo (a sort of world's fair). During the expo, apparently, incinerating trash and various industrial processes were forbidden; now everyone's making up for lost time.

But among the people we've talked to, the pollution gets wrapped together with the issue of carbon emissions: "clean energy" and "green technology" tend to cover both the need to get rid of the particulate soup, and the need to lower carbon emissions. The one is of prime importance to the Chinese; the other is what the Americans care about.

Saturday, November 13, 2010

On average, Federal workers make double what private sector workers make.

h/t: Mikey Kaus

Tuesday, November 9, 2010

Who funds the research that develops pharmacutical drugs?
  • 58% from pharmaceutical companies.
  • 18% from biotech companies.
  • 16% from universities, transferred to biotech.
  • 8% from universities, transferred to pharma.

Monday, November 8, 2010

What does McDonalds put into a Big Mac so that it doesn't rot?

Saturday, November 6, 2010

Are you sure you want a la carte cable TV?
This is a potentially disruptive innovation for the television industry because one of the main ways the industry had practiced price discrimination (and therefore increased both revenues and quantity) was to engage in bundling. A switch to a la carte will probably result in an increase in consumer surplus per unit demanded but a drastic decrease in quantity supplied. (“Consumer surplus” is econ jargon for the subjective experience of a “bargain”).

Read the while thing.

Friday, November 5, 2010

We often hear that big cuts in government spending over a short time are a bad idea. The case against big cuts, typically made by Keynesian economists, is twofold. First, large cuts in government spending, with no offsetting tax cuts, would lead to a large drop in aggregate demand for goods and services, thus causing a recession or even a depression. Second, with a major shift in demand (fewer government goods and services and more private ones), the economy will experience a wrenching readjustment, during which people will be unemployed and the economy will slow.

Yet, this scenario has already occurred in the United States, and the result was an astonishing boom...

Ask people who lived through that period as young adults what economic conditions were like, and you will inevitably get the answer that they experienced an economic boom. The U.S. economy during the post-World War II years is exhibit A against the Keynesian view that economies will necessarily suffer high unemployment and slow growth when governments make big cuts in government spending. Why did the U.S. economy do so well in the years following World War II given how badly it had done in the years preceding America’s entry into the war? The answer, in a nutshell, is that dramatically reducing government spending and deregulating an economy can take that economy from sickness to health.

-David Henderson at the Mercatus Center

Saturday, October 30, 2010

Get rid of the corporate income tax:
The corporate income tax encourages firms to use debt finance, rather than equity. Debt finance makes companies riskier. But because payments on debt are tax deductible, and dividends are not, companies have a strong incentive to use debt rather than equity finance. The deductibility of debt payments also lowers the required rate of return for new projects, possibly encouraging companies to invest in marginal ideas that aren't really worth it. Without the corporate income tax giving them a 35% reduction on their interest payments, they might think twice.

The corporate income tax encourages firms to waste resources on tax avoidance. In general, taxes are most efficient when they fall on those who have the most difficulty avoiding them. Big corporations can and do spend an enormous amount of money and human effort transforming their income into more tax-preferred forms--deferring it, moving it, swapping it with entities that have different tax rules, and so forth. We spend an enormous amount of energy trying to make rules to stop them. It would be a lot easier to get rid of the thing entirely and focus on getting the money from people, who can't afford quite such large squads of tax attorneys. This would also correct an obvious flaw in the corporate tax code: it's easier for big companies to afford pricey tax lawyers--and pricey lobbyists to get them special tax breaks. Moreover, as I hinted above, the rules governing corporations are complicated for a reason--what constitutes an expense is as much art as science, and varies from industry to industry.

Without the corporate income tax, a lot of the incentive for lobbying would go away. Not all of it, by any means--I am not trying to paint some halcyon future here. But an enormous amount of effort goes into lobbying for tax laws, and politicians often reward favored constituent businesses with little sweetheart fillips to the tax code. Conversely, apparently neutral changes to the tax code often turn out to be excellent ways to hamstring your competition, particularly small businesses who cannot afford a huge tax department.

With equity, financiers share in the risk, and the moral element of the shift from equity to debt financing is widely under-appreciated. Similarly, the mere presence of government, in taxation or regulation, provides opportunities for regulatory capture and outright corruption. Removing the opportunity for corruption is a far more effective means of draining the swamp than any enforcement could hope to be.

Friday, October 29, 2010

TARP: Government bailouts lead to corruption.

Thursday, October 28, 2010

Michael Totten and Michael Kramer on Iran:
Martin Kramer: I do think a nuclear Iran creates a dynamic where Israel, from a strategic point of view, is compelled to keep a tight grip on Jerusalem and a large swath of the West Bank for the simple reason that it creates a deterrent to an Iranian attack. If all our strategic assets are concentrated on the coastal plain around Tel Aviv, we’re vulnerable. An Iranian ayatollah, Rafsanjani, has already noted that Israel is vulnerable to one strike. So how to we change that calculation?

A big country like the United States disperses its assets across a vast continent when facing nuclear adversaries. A small state can’t do that. But within this small state is a prime Muslim holy place, the liberation of which is championed by the Iranians, and it’s in Jerusalem...

MJT: It sounds, though, like this would make resolving the conflict with the Palestinians much more difficult.

Martin Kramer: Yes.

Linkage is a big issue, but there’s a debate over which way linkage runs. Some say a resolution to the Israeli-Palestinian conflict would make it much easier for the United States to deal with Iran. But I think the absence of a solution to the Iranian nuclear dilemma places a high premium on Israel holding if not the totality of the occupied territories, at least a sizable bit of real estate around Jerusalem as a strategic reserve.

I’d like to know more about how this is supposed to affect Iran’s calculations. I don’t think it will. I think they decided long ago that they want to have a hegemonic role enhanced by nuclear capability. A resolution of the conflict here wouldn’t deter them or persuade them from that ambition. On the contrary, they would believe that Israel would grow stronger and would be even more of a threat than it is today. They’re going to pursue this track no matter what.

He has some intriguing prescriptions:
Martin Kramer: The regions used to be separate. During the British time, the Levant was run from London and the Persian Gulf from India. The Levant was called the Near East, and the Gulf was called the Middle East. These were two distinct zones. We’ve conflated them in the meantime, and it’s in the interest of the United States to disaggregate them again and to keep them disaggregated. Any attempt to project power from one into the other undermines the position of the regional hegemon. And it compels others to do the same. If Israel acts over the head of the United States against Iran, it will be just the latest example. It’s something the United States can’t afford.

MJT: How can the United States drive a wedge between the two regions?

Martin Kramer: That’s easy. The U.S. just has to say that it supports its Israeli ally to keep order in its arena, and the U.S. will take responsibility for keeping order in its arena. Just effectively divide responsibility. If the U.S. flags in its resolve to do that, it will be under pressure from those who are tempted to act outside their arena.

Many Americans are hoping that the Israelis will do our dirty work for us when it comes to destroying Iran's nascent nuclear capability, but this suggests it is in our interest to take ownership of the problem.

Wednesday, October 27, 2010

The case for calling them nitwits:
Nowhere is the gap between sinister stereotype and ridiculous reality more apparent than in Afghanistan, where it’s fair to say that the Taliban employ the world’s worst suicide bombers: one in two manages to kill only himself. And this success rate hasn’t improved at all in the five years they’ve been using suicide bombers, despite the experience of hundreds of attacks—or attempted attacks. In Afghanistan, as in many cultures, a manly embrace is a time-honored tradition for warriors before they go off to face death. Thus, many suicide bombers never even make it out of their training camp or safe house, as the pressure from these group hugs triggers the explosives in suicide vests. According to several sources at the United Nations, as many as six would-be suicide bombers died last July after one such embrace in Paktika.

Many Taliban operatives are just as clumsy when suicide is not part of the plan. In November 2009, several Talibs transporting an improvised explosive device were killed when it went off unexpectedly. The blast also took out the insurgents’ shadow governor in the province of Balkh.

More and more, as we work to disrupt training efforts, the jihadists we face are likely to be poorly prepared, and while that won’t always ensure a bungled attack, it suggests that terrorists are likely to select targets that are undefended and easy to hit. The United States has spent billions on port security since 9/11, even though terrorists have shown little interest in ports as targets and even less ability to actually strike them. In contrast, even small investments in training for police and airport-security personnel can make a big difference, as these are the people most likely to encounter—and have a chance to disrupt—an unskilled attacker.

Sunday, October 24, 2010

I have talked before about fundamental misunderstandings about what counter-insurgency doctrine entails. Max Boot sets us straight again:
A number of commentators such as Fred Kaplan, David Ignatius, and Joe Klein have claimed that General Petraeus is abandoning counterinsurgency doctrine in Afghanistan in favor of a more kinetic counterterrorism approach designed to generate faster results. As evidence, they can point to an increase in air strike and Special Operations raids. This represents a fundamental misreading of counterinsurgency doctrine, which hardly eschews killing the enemy; rather, a proper counterinsurgency strategy has to be about more than simply killing the enemy — it has to have political, economic, diplomatic, legal, communications, and other elements to be successful. But that doesn’t mean you can ignore the imperative to kill or lock up insurgents — and Petraeus hasn’t, in either Iraq or Afghanistan.

Max points to an excellent note by Paula Broadwell on Tom Rick's blog at Foreign Policy:
One of the big ideas Petraeus embraced when he moved to Afghanistan last summer was "the need to change the COIN math, to figure out how to increase the numbers of ISAF/ANSF and to reduce the numbers" of fighters. The kill/capture roll-up rate mentioned above is one side of that ledger, and the other side is the now-complete surge of ISAF troops and the increase in ANSF troops. Though questions remain regarding their quality, the military and police training program is, in fact, ahead of October 2010 goals...

Petraeus has also placed increased emphasis on reconciliation and reintegration efforts in his first four months. "Reconciliation" focuses on senior Afghan leaders, most of who are hiding in Pakistan leading by cell phone. News of recent negotiations with senior Taliban this week indicates that small reconciliation efforts may be underway. "Reintegration" is conducted with those who are on the ground in Afghanistan -- mid-level leaders including district shadow governors and below. The objective, Petraeus said in a recent interview, "is to take away as many of the rank and file, take them off the battlefield again turn them from bad guys to good guys" or at least prevent them from "trying to kill our troopers and our Afghan partners and civilians." Intel chatter interdicted via low-level voice intercepts has shown that some senior-level insurgents feel coalition force pressure across their networks. Some reports indicate they may be willing to "cut a deal," as the recent negotiations between the Afghan government and Taliban portend.

Saturday, October 23, 2010

Daniel Drezner:
Based on the indictment, however, it appears that the Russian spies gathered nothing from the decade-long enterprise that a well-trained analyst couldn’t have picked up by trolling the internet. The problem is that Russia’s intelligence services believed that a secret cabal runs American foreign policy.

Similarly, the current Iranian leadership seems to have very little understanding of how the American government works. Hossein Shariatmadari, a key adviser to Iran’s Supreme Leader Ali Khamenei, recently told a reporter for the New Yorker that the green movement was a US-led conspiracy organised by, among others, the neoconservative think-tanker Michael Ledeen, Richard Haass, president of the Council on Foreign Relations, and the billionaire George Soros. These three individuals agree on very little. They are more likely to form a new hip-hop group than successfully organise the Iranian reform movement...

Why are foreign policymakers — who presumably would not be able to rise to leadership status without some appreciation for their own country’s domestic politics — so awful at understanding the domestic politics of other countries? Alas, there are a surfeit of reasons. The most basic is that our standard models for understanding international relations are based on a radically simplifying assumption: that states can be treated as rational, unitary actors. Realists assume that all states act in an opportunistic manner, fearing the relative power of other countries. Liberals assume that states are self-interested utility-maximisers interested in co-operation. What these theories have in common is the assumption that states have something resembling a national interest, and that these interests are similar across states.

It’s not just the rational mind that causes policymakers to ignore the domestic politics of other countries — the emotional mind works in a similar manner. When interpreting the behaviour of other actors, individuals will often perceive allied nations differently from adversaries even if their policies are similar. If an ally does something positive, it is attributed to the country’s ‘good’ internal character. If an adversary does [the same thing], we look for evidence that the country was forced into co-operating. Psychologists refer to this phenomenon as ‘fundamental attribution error’, and it has a curious effect on how policymakers perceive the domestic politics of other countries. With allies, there is usually a greater appreciation for the nuances of domestic coalitions and institutions...

There is one final reason why policymakers are often wilfully ignorant of the domestic politics of other countries — such awareness can actually lead to a bargaining disadvantage. International relations scholars from Thomas Schelling onwards have observed that leaders can translate domestic weakness into international strength. Both Netanyahu and the Palestinian Authority president Mahmoud Abbas, for example, have not been shy in pointing out the domestic constraints on their ability to cut a deal. If the other side can comprehend the domestic political situation, it might make them willing to offer concessions.

Increasingly in international relations, it seems that all politics are local... Even in authoritarian countries like Iran and China, leaders need to play to their domestic bases. The political incentives for acting this way are understandable. The problem is that, when everyone cares only about their domestic standing, sustainable international co-operation looks more and more like a chimera.

Sunday, October 17, 2010

What makes Steve's methodology different from everyone else’s is that he always believed the most important decisions you make are not the things you do – but the things that you decide not to do.

John Sculley on Steve Jobs

Friday, October 15, 2010

The progress of the Kyoto protocol in the EU:
The left leaning Guardian newspaper in Britain let the cat out of the bag yesterday, reporting that while the EU’s emission of CO2 declined by 17% between 1990 and 2010, this apparent progress was bogus. If you add up the CO2 released by the goods and services Europeans consumed, as opposed to the CO2 thrown off by the goods and services they produced, the EU was responsible for 40% more CO2 in 2010 than in 1990. The EU, as the Guardian puts it, has been outsourcing pollution — and jobs — rather than cutting back on greenhouse gasses.

EU “progress” on greenhouse gasses in the last twenty years was a mirage. And the only reason that the EU can pretend to look green is that it was outsourcing economic growth to countries like China.

Thursday, October 14, 2010

Radley Balko:
Consider the 2000 federal law that pressured states to lower their BAC standards to 0.08 from 0.10. At the time, the average BAC in alcohol-related fatal accidents was 0.17, and two-thirds of such accidents involved drivers with BACs of 0.14 or higher. In fact, drivers with BACs between 0.01 and 0.03 were involved in more fatal accidents than drivers with BACs between 0.08 and 0.10. In 1995 the National Highway Traffic Safety Administration studied traffic data in 30 safety categories from the first five states to adopt the new DWI standard. In 21 of the 30 categories, those states were either no different from or less safe than the rest of the country.

Once the 0.08 standard took effect nationwide in 2000, a curious thing happened: Alcohol-related traffic fatalities increased, following a 20-year decline. Critics of the 0.08 standard predicted this would happen. The problem is that most people with a BAC between 0.08 and 0.10 don't drive erratically enough to be noticed by police officers in patrol cars. So police began setting up roadblocks to catch them. But every cop manning a roadblock aimed at catching motorists violating the new law is a cop not on the highways looking for more seriously impaired motorists.

Friday, October 8, 2010

Clayton Cramer has a post worth quoting in full:
If you want to understand what makes this recession continue, ask the authors of Federalist 62. First, the problem of the health care reform bill that came to 2700 pages:
It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

The following paragraph explains why people like George Soros always back Democrats:
Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uniformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many.

And why employers are reluctant to hire right now:
In another point of view, great injury results from an unstable government. The want of confidence in the public councils damps every useful undertaking, the success and profit of which may depend on a continuance of existing arrangements. What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government? In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady system of national policy.

Thursday, October 7, 2010

"It is a mistake to think that businessmen are more immoral than politicians." - John Maynard Keynes
The Wall Street Journal:
Mr. Boehner also proposed to break spending bills into smaller bills for each federal agency or function rather than piling education with health care, for example, into a giant log-rolling exercise. The man who would be Speaker didn't say whether he'd let reformers like Mr. Flake onto the Appropriations Committee, where the spending culture is ingrained. But he ought to do so, and we'd recommend that he also impose term limits for Appropriators, so it wouldn't be a life-time pork-barrel sinecure.

Most intriguingly, Mr. Boehner suggested that "we ought to start at square one and give serious consideration to revisiting, and perhaps rewriting, the 1974 Budget Act." Now he's getting somewhere. That law, passed over the veto of a Watergate-weakened Richard Nixon, further rigged the budget process to abet spending. It killed the President's impoundment power not to spend money, and it established the annual "budget baseline" that makes spending increases automatic. Thus even a reduction in the amount of spending increase in a program becomes a budget "cut" that special interests can attack. Mr. Boehner should consult Budget ranking Member Paul Ryan and former Member Chris Cox for reform ideas.

The larger insight here is that Democrats have organized Congress and written its rules to aid and abet their policy priorities. During their last time in the majority, Republicans didn't do enough to rewrite those rules to assist their ostensible goal of limiting government power and reducing spending and taxes. They shouldn't make the same mistake again.

In addition to rewriting the Budget Act, Republicans need to assert control over the scoring conventions at the Congressional Budget Office that typically underestimate spending—see ObamaCare. Ditto for the rules at the Joint Tax Committee that underestimate the impact of tax changes on taxpayer behavior and economic growth.

If Republicans and the Tea Party are serious about limited government, especially if working under an Obama veto, they need to think structural.

Wednesday, October 6, 2010

David Henderson at Mercatus:
A federal government runs a large deficit. Deficits are so large that the ratio of federal debt to Gross Domestic Product (GDP) approaches 70 percent. A constituency of voters have gotten used to large federal spending programs. Does that sound like the United States? Well, yes. But it also describes Canada in 1993. Yet, just 16 years later, Canada’s federal debt had fallen from 67 percent to only 29 percent of GDP. Moreover, in every year between 1997 and 2008, Canada’s federal government had a budget surplus. In one fiscal year, 2000–2001, its surplus was a whopping 1.8 percent of GDP. If the U.S. government had such a surplus today, that would amount to a cool $263 billion rather than the current deficit of more than $1.5 trillion.

We often think of Canada as a more-socialist and higher-tax country than the United States, and for good reason: to some extent it’s true. For instance, Canada has a single-payer health care system, no private universities, and a five-percent federal tax on goods and services. So, what happened? How did the Canadian government do it? You might think that the Canadian government achieved the budget surplus by 2000–2001 with major increases in taxes, but it didn’t. Part of the fiscal improvement was due to high economic growth. But economic growth is, in part, a result of policy, not a policy itself.

The main policy actions that the Canadian government took to shrink its budget deficit and turn deficits into surpluses were cuts in government spending. Moreover, the Canadian government didn’t just cut the growth rate of spending, a favorite trick of U.S. politicians who want to claim the mantle of fiscal conservatism. It also cut absolute spending on many programs in dollar terms. And because the inflation rate in Canada, though low, was greater than zero over the whole time period, these cuts in dollar terms were even larger in inflation-adjusted dollars.

There are two morals of this story. First, the Canadian experience shows us that a large budget deficit can be turned into a budget surplus with ten years of fiscal discipline, mainly with spending cuts. It can happen here in the United States. We do not have to accept the idea that we have only two grim choices: living with huge budget deficits and a federal debt that both increase as a percent of GDP, or accepting our current spending but reducing the budget deficit with major tax increases.

The second moral of the story is that the Canadian experience does not support the Keynesian view that policymakers should not cut government spending during an economic slowdown. The Canadian experience, just like the U.S. experience during the 1920–21 recession and in the first two years following World War II, shows that cutting government spending even during low-growth years can be good for long-term economic results.

Tuesday, October 5, 2010

Michael Totten on the Druze of the Golan Heights which he uses as a jumping off point for a great overview on the politics of the Druze, the Allawites, Shi'a, Sunni and Christians in Syria, Lebanon and Israel.
Israeli journalist and political analyst Jonathan Spyer noticed a similar phenomenon when he traveled from Israel to Lebanon after the war against Hezbollah in 2006. “People have an acute sense of this unseen power which is both nowhere and everywhere,” he told me...

Bashar Assad and his Alawite community have some things in common with Druze. They, too, are religious minorities who emerged long ago from Islam and became something else. They, too, have to be sensitive to the majority where they live. If Syria’s Alawite rulers made peace with Israel, they may well face a Sunni insurgency as Jumblatt suggested—and it would not be the first time.

The Alawi, or Alawite, sect is a peculiar religious community that makes up around ten percent of Syria’s population and a tiny percentage of Lebanon’s. Most Alawites live along the Mediterranean coast in Syria and Northern Lebanon, but a few live as far south as the Golan Heights area. They are descendants of the followers of Muhammad ibn Nusayr, who took them out of mainstream Twelver Shia Islam in the 10th century. Their religion has as much in common with Christianity and Gnosticism as it does with Islam, and both Sunnis and Shias have long considered them “infidels.”

The strangest thing about the Alawites is that they have made themselves rulers of Syria. It’s as unlikely as the Druze lording it over Lebanon, or the Kurds seizing control of Iraq, or Coptic Christians mounting a successful coup against Mubarak in Egypt, but it happened. As the Assad clan is Alawite, most of the elites in the Baath Party, the bureaucracy, and the military are Alawites, too.

Imam Musa Sadr, founder of the Shia movement Amal in Lebanon, struck a deal with Hafez Assad in 1974 and issued a fatwa, or religious ruling, somewhat implausibly declaring Alawites part of the Shia community.

Yet the Alawites are not Shias. They’re Alawites. The two communities need religious cover for their political alliance, however, and Sadr’s fatwa gives it to them. The relationship between Hezbollah and Damascus’ Alawite regime, though, is strictly one of convenience. The two feel little or no warmth for each other.

While Hezbollah and Amal are politically aligned with the Alawite government, the Sunnis are not, and Sunnis make up around 70 percent of Syria’s population. The fundamentalists among them have long detested Assad’s Baath Party regime, not only because it is secular and oppressive, but because its leaders are “heretics.”

So the Assad family ended up supporting terrorist groups in Syria’s war against Israel for some of the same reasons the Khomeinists do in Iran. As minorities in the region, neither can be rulers of or hegemons over Sunnis without street cred.

Sunday, October 3, 2010

Modern Sweden:
In fact, contemporary Sweden is much less socialist than many Americans realize. Since the early 1990s, when it suffered a painful financial crisis, the Scandinavian country has deregulated key industries (such as airlines, telecommunications, and electricity), lowered its overall tax burden, established universal school vouchers, partially privatized its pension system, abolished certain government monopolies, sold a number of state-owned enterprises (including the parent company of Absolut vodka), and trimmed public spending. Several years ago, it eliminated gift and inheritance taxes. The World Economic Forum now ranks Sweden as the second-most competitive economy on earth, behind only Switzerland. According to the 2010 Index of Economic Freedom (compiled by the Wall Street Journal and the Heritage Foundation), Sweden offers greater business freedom, trade freedom, monetary freedom, investment freedom, financial freedom, freedom from corruption, and property-rights protection than does the United States...

Yet certain aspects of the old Swedish model have proved stubbornly resistant to change. For example, the government-run health-care system remains plagued by long waiting times, and onerous labor regulations make it very difficult for companies to hire or fire workers. Labor-market rigidity has contributed to a yawning employment gap between natives and immigrants, which has retarded the process of integrating Swedish Muslims.

Thursday, September 30, 2010

A so-called passive home like the one the Landaus are now building is so purposefully designed and built — from its orientation toward the sun and superthick insulation to its algorithmic design and virtually unbroken air envelope — that it requires minimal heating, even in chilly New England. Contrary to some naysayers’ concerns, the Landaus’ timber-frame home will be neither stuffy nor, at 2,000 square feet, oppressively small.

It has been a good deal more expensive to build, however, than the average home. That might partly explain why the passive-building standard is only now getting off the ground in the United States — despite years of data suggesting that America’s drafty building methods account for as much as 40 percent of its primary energy use, 70 percent of its electricity consumption and nearly 40 percent of its carbon-dioxide emissions.

Proponents of the standard, who note that passive homes often use up to 90 percent less heating and cooling energy than similar homes built to local code, say the Landaus embody the willingness of more homeowners to embrace passive building in the United States.

From the NYT. I'm curious to see a little more detailed breakdown of the costs and payback of passive building. The article notes that passive houses in the US cost "at least 15% more". Therefore a $200,000 house would then cost an additional $30 thousand to make it passive. Now, assuming an average monthly heating/cooling cost of $200, a 90% reduction would save around $2150 per year, so about a 14 year payoff, using optimistic numbers, and ignoring design and architect costs. More information can be found at the US Passive House Institute.

Wednesday, September 29, 2010

Chris Blattman on conflict and development:
  1. Civil war is on the decline (while NGOs are on the rise)
  2. There’s little evidence that poverty causes conflict
  3. Poor and unemployed young men don’t seem to be a source of social instability
  4. Conflict and violence are at root a governance failure
  5. The MDGs and good governance may be at cross-purposes
  6. Elections do not good governance make
  7. Political development, like economic development, evolves slowly; Good governance will take a long, long time
  8. Institutions develop through internal forces, not foreign NGOs
  9. Just being there may be a governance intervention; outside the capitol you could be the only professional, impersonal, meritocratic bureaucracy in town
  10. We don’t really know how to build better governance systems (but that doesn’t mean we shouldn’t try)

He follows up today with this:
Whether as policy makers or social scientists, if there’s one thing we think we know, it’s that poor and unemployed young men are a source of social instability. Underemployed young men have been implicated in Kenyan election violence, religious riots in Nigeria, and rebellion in Sierra Leone.

Economic theory gives us a solid explanation: without incomes, the returns to predation are greater than the returns to peaceful production. With future earnings prospects so poor, there is little to weigh against the costs and risks of violence are weighed.

Gary Becker first argued this case with American crime. It has been applied broadly, and is the basis of economic theories of civil war. Scattered evidence on economic shocks, or the income conflict correlation, suggests its truth.

The theory also provides a strong basis for a public intervention, because there is a negative externality not being taken into account by the market.

Here’s the thing, I’ve seen nothing to suggest any of this is true.

We really don’t have much evidence one way or the other, but the little we have argues against rather than for Becker’s philosophy.

There are actually several possible explanations for violence and social instability, some of them with more evidence in their favor. If they turn out to be true, then not only could youth employment programs not stem the risk of instability, they could heighten that risk.
A report submitted to the fifty-seventh annual meeting of the American Bar Association noted that by June 25 of 1934, some 485 codes and 95 supplements had been approved by the president and 242 more by the Administrator for Industrial Recovery. In the period of a year, 10,000 pages of law had been created, a figure that one had to compare with the mere 2,735 pages that constituted federal statute law. In twelve months, the NRA had generated more paper than the entire legislative output of the federal government since 1789.

Amity Shales, The Forgotten Man, p202.

Tuesday, September 28, 2010

NEWCASTLE, South Africa — The sheriff arrived at the factory here to shut it down, part of a national enforcement drive against clothing manufacturers who violate the minimum wage. But women working on the factory floor — the supposed beneficiaries of the crackdown — clambered atop cutting tables and ironing boards to raise anguished cries against it.

“Why? Why?” shouted Nokuthula Masango, 25, after the authorities carted away bolts of gaily colored fabric.

Structural unemployment in South Africa.

Sunday, September 26, 2010

Federal spending versus median income:

Friday, September 24, 2010

The CDC on the effectiveness of gun control:
During 2000--2002, the Task Force on Community Preventive Services (the Task Force), an independent nonfederal task force, conducted a systematic review of scientific evidence regarding the effectiveness of firearms laws in preventing violence, including violent crimes, suicide, and unintentional injury... The Task Force found insufficient evidence to determine the effectiveness of any of the firearms laws or combinations of laws reviewed on violent outcomes.

Thursday, September 23, 2010

Randy Barnett's Bill of Federalism:
  1. Restrictions on Tax Powers of Congress
  2. Limits of Commerce Power
  3. Unfunded Mandates and Conditions on Spending
  4. No Abuse of the Treaty Power
  5. Freedom of Political Speech and Press
  6. Power of States to Check Federal Power
  7. Term Limits for Congress
  8. Balanced Budget Line Item Veto
  9. The Rights Retained by the People
  10. Neither Foreign Law nor American Judges May Alter the Meaning of Constitution

Wednesday, September 22, 2010

The Chinese and Mugabe's blood diamonds.
Cuba: Fidel Castro finally admits the obvious.

Sunday, September 19, 2010

If governments did follow normal accounting practices, taking account of future liabilities today instead of pretending they don’t exist, then the national-debt numbers we talk about would be worse — far worse, dreadfully worse — than that monster $14 trillion–and–ratcheting–upward figure we throw around...

The debt numbers start to get really hairy when you add in liabilities under Social Security and Medicare — in other words, when you account for the present value of those future payments in the same way that businesses have to account for the obligations they incur. Start with the entitlements and those numbers get run-for-the-hills ugly in a hurry: a combined $106 trillion in liabilities for Social Security and Medicare, or more than five times the total federal, state, and local debt we’ve totaled up so far. In real terms, what that means is that we’d need $106 trillion in real, investable capital, earning 6 percent a year, on hand, today, to meet the obligations we have under those entitlement programs. For perspective, that’s about twice the total private net worth of the United States. (A little more, in fact.)

Kevin Williamson in the National Review. It is an outright scandal that the government isn't required to publish their books with the same GAAP guidelines that they require of private corporations.

THE actual figure of the US' national debt is much higher than the official sum of $US13.4 trillion ($14.3 trillion) given by the Congressional Budget Office, according to analysts cited on Sunday by the New York Post.

"The Government is lying about the amount of debt. It is engaging in Enron accounting," said Laurence Kotlikoff, an economist at Boston University and co-author of The Coming Generational Storm: What You Need to Know about America's Economic Future...

Mr Kotlikoff says the debt is actually $US200 trillion.

Mr Moylan says the number is likely about $US60 trillion.

That is close to the figure quoted by David Walker, the US Comptroller General from 1998 to 2008.


Saturday, September 18, 2010

The Economist on agriculture:
In 1967 Paul Ehrlich, a Malthusian, wrote that “the battle to feed all of humanity is over… In the 1970s and 1980s hundreds of millions of people will starve to death.” Five years later, in “The Limits to Growth”, the Club of Rome (a group of business people and academics) argued that the world was running out of raw materials and that societies would probably collapse in the 21st century.

A year after “The Limits to Growth” appeared, however, and at a time when soaring oil prices seemed to confirm the Club of Rome’s worst fears, a country which was then a large net food importer decided to change the way it farmed. Driven partly by fear that it would not be able to import enough food, it decided to expand domestic production through scientific research, not subsidies. Instead of trying to protect farmers from international competition—as much of the world still does—it opened up to trade and let inefficient farms go to the wall. This was all the more remarkable because most of the country was then regarded as unfit for agricultural production...

Even more striking than the fact of its success has been the manner of it. Brazil has followed more or less the opposite of the agro-pessimists’ prescription. For them, sustainability is the greatest virtue and is best achieved by encouraging small farms and organic practices. They frown on monocultures and chemical fertilisers. They like agricultural research but loathe genetically modified (GM) plants. They think it is more important for food to be sold on local than on international markets. Brazil’s farms are sustainable, too, thanks to abundant land and water. But they are many times the size even of American ones. Farmers buy inputs and sell crops on a scale that makes sense only if there are world markets for them. And they depend critically on new technology. As the briefing explains, Brazil’s progress has been underpinned by the state agricultural-research company and pushed forward by GM crops. Brazil represents a clear alternative to the growing belief that, in farming, small and organic are beautiful.

I highly recommend reading the full briefing, it lays to rest a lot of bad reporting and predictions on sustainability of farming.

Wednesday, September 15, 2010

Sunspot formation is triggered by a magnetic field, which scientists say is steadily declining. They predict that by 2016 there may be no remaining sunspots, and the sun may stay spotless for several decades. The last time the sunspots disappeared altogether was in the 17th and 18th century, and coincided with a lengthy cool period on the planet known as the Little Ice Age.

From Physorg via Insty

Tuesday, September 14, 2010

Tax compliance is a big deal in the US--by one estimate, the ratio of compliance costs to compliance revenue for the corporate tax is almost 30%. According to the Tax Foundation, the total compliance cost of the tax code is $196 billion--or more than 1% of GDP. The IRS estimates that Americans spend 6.6 billion hours a year filling out tax forms.

Megan McArdle

Monday, September 13, 2010

European terrorism by category:


Sunday, September 12, 2010

Instructables has an article on how to become a hypermiler. Reading through the list, I'm struck by how many of the suggestions are fundamentally dangerous. Among the things that they list are over-inflating tires, coasting with the engine off, wild swings in speed, removing emergency equipment, blocking the radiator, installing flimsy cardboard over your tires. Wow.

Also of note, that article recommends coasting by putting the car in neutral or turning the engine off. Yet with modern fuel injection, idling an engine while coasting in neutral can actually burn more fuel than leaving it in gear, so I would take the rest of their suggestions with a grain of salt.

Saturday, September 11, 2010

ESR on the myth of man as a killer:
Even when the fear of violence is less acute, the myth of man the killer well serves power elites of all kinds. To define the central problem of society as the repression of a universal individual tendency to violence is to imply an authoritarian solution; it is to deny without examination the proposition that individual self-interest and voluntary cooperation are sufficient for civil order.

In sum, the myth of man the killer degrades and ultimately disempowers the individual, and unhelpfully deflects attention from the social mechanisms and social instincts that actually underlie virtually all violence. If we are all innately killers, no one is responsible; the sporadic violence of crime and terrorism and the more systematic violence of governments (whether in "state" or "pre-state" societies, and in wartime or otherwise) is as inevitable as sex.

Thursday, September 9, 2010

Fascinating article on the Vatopadi monastery and the roots of the Greek financial scandal:
Like a lot of people who come to Vatopaidi, I suppose, I was less than perfectly sure what I was after. I wanted to see if it felt like a front for a commercial empire (it doesn’t) and if the monks seemed insincere (hardly). But I also wondered how a bunch of odd-looking guys who had walked away from the material world had such a knack for getting their way in it: how on earth do monks, of all people, wind up as Greece’s best shot at a Harvard Business School case study?

After about two hours I work up the nerve to ask him. To my surprise he takes me seriously. He points to a sign he has tacked up on one of his cabinets, and translates it from the Greek: the smart person accepts. the idiot insists.

He got it, he says, on one of his business trips to the Ministry of Tourism. “This is the secret of success for anywhere in the world, not just the monastery,” he says, and then goes on to describe pretty much word for word the first rule of improvisational comedy, or for that matter any successful collaborative enterprise. Take whatever is thrown at you and build upon it. “Yes … and” rather than “No … but.” “The idiot is bound by his pride,” he says. “It always has to be his way. This is also true of the person who is deceptive or doing things wrong: he always tries to justify himself. A person who is bright in regard to his spiritual life is humble. He accepts what others tell him—criticism, ideas—and he works with them.”
In a recent column on how progressives need to claim the Constitution, Dennis Henigan comments:
As recently as 2005, a conservative majority of the Supreme Court reaffirmed this precedent by recognizing federal power to prohibit the purely local production and medical use of marijuana authorized by state law.

The case he links to is Gonzales v Raich, with the majority in this case consisting of Stevens, joined by Kennedy, Souter, Ginsburg and Breyer. So, which one of these is the conservative?

Wednesday, September 8, 2010

Relative cost of goods:


Tuesday, September 7, 2010

Hassan Nasrallah, the leader of Hezbollah, was quoted in Lebanon's Daily Star as saying "if [Jews] all gather in Israel, it will save us the trouble of going after them worldwide." The implication here is clear, the root of the Arab-Israeli issue isn't Israel's existence, it is the Jew's existence.

Sunday, September 5, 2010

Counterinsurgency, winning hearts and minds:
According to the latest CBS poll, nearly 70 percent of Americans approve of President Obama’s decision to withdraw all combat troops from Iraq. In a remarkable turnaround, the Iraqis are the bigger opponents of the president’s plan. Iraqis want American soldiers to stay in their country more than Americans do.

Friday, September 3, 2010

The science of criminal profiling. Highly recommended.

Thursday, September 2, 2010

The reverse gender wage gap?

Wednesday, September 1, 2010

Victor Davis Hanson:
The truth about Iraq is that, for all the tragedy and the loss, the U.S. military performed a miracle. After nearly seven years, a constitutional government endures in that country. It is too often forgotten that all 23 of the writs for war passed by the Congress in 2002 — from enforcing the Gulf I resolutions and stopping the destruction of the Kurds and Marsh Arabs, to preventing the Iraqi state promotion of terrorism, ending suicide bounties on the West Bank, and stopping Iraq from invading or attacking neighbors or trying to acquire WMD — were met and satisfied by the U.S. military. It is also too often forgotten that, as a result, Libya gave up its WMD program; Dr. Khan’s nuclear franchise was shut down; Syria left Lebanon; and American troops in Saudi Arabia, put there as protection against Saddam, were withdrawn.

Tuesday, August 31, 2010

Can Thorium reactors provide, safe, clean, green energy?

Saturday, August 28, 2010

The technology sector as a major driver of deflation:
Most high-tech companies have a business model that incorporates a sort of 'bizarro force' that is completely the opposite of what old-economy companies operate under : The price of the products sold by a high-tech company decreases over time. Any other company will manage inventory, pricing, and forecasts under an assumption of inflationary price increases, but a technology company exists under the reality that all inventory depreciates very quickly (at over 10% per quarter in many cases), and that price drops will shrink revenues unless unit sales rise enough to offset it (and assuming that enough unit inventory was even produced). This results in the constant pressure to create new and improved products every few months just to occupy prime price points, without which revenues would plunge within just a year. Yet, high-tech companies have built hugely profitable businesses around these peculiar challenges, and at least 8 such US companies have market capitalizations over $100 Billion. 6 of those 8 are headquartered in Silicon Valley.

Wednesday, August 18, 2010

Jack London: Racist and Socalist.

Monday, August 9, 2010

North Korea:
Kim [Jong Il] must also be aware that the infantilization of the people has come at a price. Away from Pyongyang's carefully monitored tourist sites, North Korea is a much more raucous place than any dictator could be comfortable with. "One surprising thing," Michael Breen writes in Kim Jong Il: North Korea's Dear Leader (2004), "surprising because you expect robots, is … how frequently fights break out." According to refugees, even women fight out their differences, and young female teachers are said to hit children the hardest. This lack of restraint is a problem for many North Koreans trying to adjust to life in the South. Social workers complain that the refugees pick fights with strangers, and storm off jobs on the first day. "I'd have thought they'd be better at controlling themselves, coming from a socialist system," is a common lament.

Saturday, August 7, 2010

The peerless Stephen Ellis on the global drug trade:
A major change in the global cocaine trade is taking place. South American cocaine traders are reacting against the saturation of the North American market, the growing importance of Mexican drug gangs, and effective interdiction along the Caribbean smuggling routes. These factors have induced them to make a strategic shift towards the European market, making use of West Africa's conducive political environment and the existence of well-developed West African smuggling networks.

Friday, August 6, 2010

Universal health insurance saves money by reducing ER visits, right?
Unfortunately, the experience of Massachusetts appears to be disproving the President’s hypothesis. Last week, the Massachusetts Division of Health Care Finance and Policy reported that, despite the imposition of universal health insurance in that state in 2006, emergency room visits increased by 9 percent between 2004 and 2008, even after taking population increases into account...

If the number of doctors stays the same, but more and more people utilize health care resources, the supply of available doctors goes down.

Hence, it takes longer and longer to get an appointment to see a doctor, and people end up right back where they started: in the emergency room. As the Globe points out, “the growing use of emergency rooms has significant cost implications, because private insurers and government programs pay substantially more for a visit to the emergency room than for a doctor’s appointment.”

Massachusetts reminds us: Access to health insurance is not the same thing as access to health care.

Thursday, August 5, 2010

What a successful counterinsurgency looks like, Columbia edition:
President Álvaro Uribe mandated that security forces provide annual, publicly available reports on how money is spent and how effectively it is used.

Colombia also created a civilian Ministry of Defense, making the military accountable to democratically elected leaders. The new ministry put the armed services under a single chain of command directly responsible to the president and developed a cadre of experienced civil servants.

These steps quickly led to a steadier stream of funds devoted to antidrug efforts, more reliable security forces and, most important, strong public support. As a result, Colombia has made significant strides in fighting drug traffickers, guerrillas and paramilitaries: since Mr. Uribe’s election in 2002, coca production has decreased by a third, kidnappings have dropped by 90 percent and murders have fallen significantly.

Wednesday, August 4, 2010

Scott Winship takes down a noxious piece in the Financial Times on our economic stagnation:

Their son, Andy, was recently knocked off his mother’s health insurance and only painfully reinstated for a large fee.

Luce is arguing that there’s a new crisis facing the current generation. About 30 percent of those age 18 to 24 were uninsured in 2008 when the National Health Interview Survey contacted them. I don’t have trends for that age group, but the share of Americans under age 65 without health insurance coverage was 14.7 percent in 2008, up from….14.5 percent in 1984.

And, much like the boarded-up houses that signal America’s epidemic of foreclosures, the drug dealings and shootings that were once remote from their neighbourhood are edging ever closer, a block at a time.

Well, the violent crime rate in 2008 was 19.3 per 1,000 people age 12 and up, down from 27.4 in 2000 and 45.2 in 1985...

The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.

Adjusting for household size and using the PCE deflator to adjust for inflation, median household income in the Current Population Survey rose from $29,800 in 1973 to $40,500 in 2008 (in 2009 dollars, again based on my compuatations). Factoring in employer and government noncash benefits would show even more impressive growth.

In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start.

This is entirely a function of changes in the population composition (more Latinos) and in the share of employee compensation going to health insurance and retirement plans.


Tuesday, August 3, 2010

An excellent backgrounder on how Pakistan views the US.

Sunday, August 1, 2010

A number of years ago a progressive friend of mine pointed me to the National Priorities Project (NPP) Cost of War website, commenting on the number of things we could have done without the current wars in Iraq and Afghanistan. Most damningly, he pointed me to the Trade-offs page, which list the things we could have spent the money on instead. It wasn't until later that I went over the details of their calculations and realized how misleading, and downright deceptive they are with their numbers.

First off, the site lumps the wars in Afghanistan and Iraq together, yet very few Americans view Afghanistan as illegitimate as they view the war in Iraq. Iraq alone is about 72% of the total. But these top level numbers are abstract, the spending alternatives are the interesting part, and the most misleading. First off, the site lists a series of programs, delineating them with ORs. Unfortunately, some people will read it as an AND. This is a common rhetorical device, one my friend fell for. More egregiously, the site conflates the 8 year cost of war, and compares that to one year costs of other programs.

But the underlying calculations for the trade-offs are very deceptive. The site lists the cost of hiring firefighters, police or elementary school teachers. To come up with these numbers, their notes and figures page states "Each state's number is based on the average amount of annual pay a firefighter receives, plus 25% for other expenses associated with employment such as benefits." They use the same 25% number for police and teachers as well. However, the Bureau of Labor and Statistics notes that the average cost of an employee is 42% higher than their wages. And that in the private sector, where benefits are significantly less generous than the public sector. But even this isn't the full picture. The cost of hiring and retaining an employee is significantly more than their salary plus their benefits. As you add employees, you need to add more HR people to hire and track these employees. You need more managers to supervise them. You have to provide them with office space, computers and office equipment. You need insurance to cover yourself. You need to pay for training. The typical business school number I've heard is that the cost of an employee is about two to three times their salary, as a rough rule of thumb. This page puts it at 2.7.

These numbers add up. For example, the site tells me that the cost of both wars could have provided 3,466 elementary teachers in Tennessee for one year. But, divide that by eight years to compare one year costs to one year costs. Then, divide that number by 2 to factor in the real cost of hiring a teacher. You wind up at 216 teachers. Then, multiply by .72 to limit yourself to Iraq. 155 teachers still sounds like a lot. But, there are 982 elementary schools in Tennessee. That's 0.16 more teachers per elementary school, or 0.027 teachers per school per grade level. Now, considering that class size doesn't seem actually have all that big of an effect on educational outcomes, the cost of the war seems decidedly muted. The NPP also compares the cost of war to Head Start and Medicaid, two other programs with dubious quantitative outcomes. The other comparisons are similarly misleading.

As of this writing, the site lists the total cost of both wars at a little over $1.023 trillion. $128 billion a year is a lot of money. For comparison, Social Security runs nearly $680 billion per year, Medicare another $680 billion. TARP was over $150 billion last year, and interest on our debt nearly $190 billion. Our government has a lot of trimming it can do, but the war in Iraq will end, eventually. The same isn't true for everything else on our ledger.

Friday, July 30, 2010

Other options for health care reform.

Wednesday, July 28, 2010

Universal health care in Switzerland.

Monday, July 26, 2010

Against some expectations, Russia failed to veto sanctions on Iran while simultaneously canceling the pending sale of advanced anti-aircraft systems. Welcome to the new multi-polar world:
Moscow's policies towards the Middle East are clearly very different from its Cold War stance, when it steadfastly supported Muslim nations against the US and its closest ally, Israel.

Today Russia is seriously distressed by the spread of Western influence and the expansion of the North Atlantic Treaty Organisation (Nato) into what it considers its legitimate sphere of "privileged interests": Ukraine, Georgia and other former Soviet republics...

[I]f Israel obediently agrees to stop the supply of modern weapons to Georgia - like it did in 2008 - Russia is ready to be forthcoming on Iran.

The threat of Iran acquiring nuclear weapons is also a factor, but hardly the main one. The Russian military do not consider a handful of primitive North Korean or Iranian nuclear weapons a serious threat. Of course, Moscow has genuine business and security interests in the larger Middle East: supplying arms and nuclear technologies to Arab nations and to Iran.

At the same time, Russia has an increasingly important military and security relationship with Israel. With Israel, Russia has been jointly producing billions of dollars worth of weapons for India. The Russian military have acquired a substantial batch of different types of Israeli-made spy drones or unmanned aerial vehicle (UAV), the first official procurement of a major weapon system from a Western nation since 1945...

An additional factor that may further influence the decision-making in Moscow is Saudi Arabia's offer to buy more than $2bn worth of Russian weapons (helicopters, armour, anti-aircraft missiles) on condition that Russia does not sell Iran S-300 missiles, and stops supporting it in the UN.

Saturday, July 24, 2010

Governmental causes of the five largest ongoing ecological disasters.

Friday, July 23, 2010

The reliability of domestic violence statistics.

Wednesday, July 21, 2010

The Tennessee Dept of Health publishes Joint Annual Reports, which include detailed financial data of all state hospitals which include revenue broken out by method of payment. The documents include both the initial charges (similar to a sticker price, nobody pays these amounts) and the adjusted charges. By comparing the total operating costs of the hospital to total charges, we can deduce the rough point at which the adjusted charges must be at for the hospital to break even. Since the data includes both initial and adjusted charges, we can therefore calculate the rough profit margin by insurance type.

There are a few caveats to these numbers. I assume the break even point is the same for all charges and procedures, with is certainly not the case. I don't adjust for the variance of procedure type with the patient population in each payment group. I also ignore both capital deprecation and debt. The result is that these numbers should be taken as rough order of magnitude estimates, and are not exact numbers.

Vanderbilt Medical Center, a well known research university hospital, is compared with Centennial, a community hospital, and the publicly funded Nashville General all less than three miles from each other. Vanderbilt and Centennial earn more 95% of their funding from patient fees, while Nashville General receives slightly over 50% of its operating revenue from state and local government.

Profit MarginsNashville GeneralVanderbiltCentennial
Medicare Inpatient 5% 4% -0.4%
Medicare Outpatient -42% -31% -33%
Medicaid/TennCare IP -49% -43% -4.5%
Medicaid/TennCare OP -57% -22% -41%
Self Pay -95% -61% -73%
Private Insurance -10% 32% 63%

Applying Mickey Kaus's first rule of journalism, we can make some tentative statements. Across the board, Medicare inpatient reimbursement rates barely cover the cost of treatment. At hospitals without external funding, the cost of all other government-insured and non-insured patients are subsidized in their entirety by private insurance. The disparity in the profit margins for insured individuals between Nashville General and the other two indicates that there are insurance plans out there which don't cover the cost of care, and therefore are unlikely to be accepted for outpatient and non-critical treatment.

The health care reform act covers half of the uninsured by simply raising the threshold for Medicaid-- an insurance plan which covers barely half of the actual cost of care. By shifting these patients from uninsured to Medicaid, hospitals will lose slightly less money on them, but the question is how much will having insurance lead these patients to simply consume more? This also ignores the real question of the effectiveness of Medicaid in improving health outcomes. Shifting the costs of uninsured onto private insurers brings up the very real concern that business may simply drop coverage for their employees, exacerbating the cost spiral.

Full spreadsheet here with data and computations.
Green food:
So even though a meat-free world sounds good on paper, it is likely that a utopian future will still have some animal products in it. And we are talking meat, not just milk and eggs...

Under this scenario, the goal will have to be producing the most meat at the lowest environmental cost. That means fewer free-range cattle and sheep grazing in bucolic pastures and more animals, especially chickens, packed into feedlots or high-density enclosures. "If you're going to keep some livestock systems, I think the ones you'll want to keep are the intensive ones," says Walter Falcon, an agricultural economist at Stanford University in California.

That's because pasture grazing is inherently inefficient. Animals burn large amounts of energy roaming about the landscape feeding on relatively indigestible grasses. They grow more slowly than feedlot animals and, as a result, emit more methane over their lifetime. A beef cow in a US pasture, for example, emits 50 kilograms of methane per year, compared with just 26 kilograms in a feedlot, according to Livestock's Long Shadow.

Tuesday, July 20, 2010

When discussing poverty in the United States, there are actually a couple of different measures, a relative measure commonly used for cross-country comparisons, and a slightly more complicated one that is detailed in a 2006 piece on poverty measurements in the New Yorker:
From 1945 to 1958, [Mollie Orshansky] worked in the Department of Agriculture’s Bureau of Human Nutrition and Home Economics, where she worked on a series of diets designed to provide poor American families with adequate nutrition at minimal cost. In painstaking detail, the food plans laid out the amount of meat, bread, potatoes, and other staples that families needed in order to eat healthily. These were “by no means subsistence diets,” Orshansky later wrote. “But they do assume that the housewife will be a careful shopper, a skillful cook, and a good manager who will prepare all the family’s meals at home.”

In 1958, Orshansky joined the research department of the Social Security Administration, and decided to try to estimate the incidence of child poverty. “Poor people are everywhere; yet they are invisible,” she told a reporter for the Dallas Morning News in 1999. “I wanted them to be seen clearly by those who make decisions about their lives.” Building on pioneering research on diet and poverty conducted in York at the turn of the twentieth century by Seebohm Rowntree, a British social reformer, Orshansky used her food plans to calculate a subsistence budget for families of various sizes. For a mother and father with two children, she estimated the expense of a “low cost” plan at $3.60 a day, and of an even more frugal “economy plan” at $2.80 a day. Rather than trying to calculate the price of other items in the family budget, such as rent, heat, and clothing, Orshansky relied on a survey by the Agriculture Department, which showed that the typical American family spent about a third of its income on food. Thus, to determine the minimum income a family needed in order to survive, she simply multiplied the annual cost of the food plans by three. Families on the low-cost plan needed to earn at least $3,955 a year; families on the economy plan needed to earn $3,165.

Orshansky compared these figures with the Census Bureau’s records on pre-tax family incomes and concluded that twenty-six per cent of families with children earned less than the upper poverty threshold and eighteen per cent earned less than the lower poverty threshold. In total, she estimated that between fifteen million and twenty-two million children were living in poverty, a disproportionate number of them in single-parent households and minority neighborhoods...

[I]n 1969 the White House adopted a slightly modified version of Orshansky’s lower threshold—the one based on the economy food plan—as the official poverty line.

The persistence of endemic poverty raises questions about how poverty is measured. In the past ten years or so, significant changes have been made in the way that inflation, gross domestic product, and other economic statistics are derived, but the poverty rate is still calculated using the technique that Orshansky invented. (Every twelve months, the Census Bureau raises the income cutoffs slightly to take inflation into account.)

This approach has some obvious shortcomings. To begin with, the poverty thresholds are based on pre-tax income, which means that they don’t take into account tax payments and income from anti-poverty programs, such as food stamps, housing subsidies, the Earned Income Tax Credit, and Medicaid, which cost taxpayers hundreds of billions of dollars a year. In addition, families’ financial burdens have changed considerably since Orshansky conducted her research. In the late fifties, most mothers didn’t have jobs outside the home, and they cooked their families’ meals. Now that most mothers work full time and pay people to help them take care of their kids, child care and commuting consume more of a typical family budget.

Another problem is that the poverty thresholds are set at the same level all across the country. Last year, the pre-tax-income cutoff for a couple with two children was $19,806. This might be enough to support a family of four in rural Arkansas or Tennessee, but not in San Francisco, Boston, or New York, where the real-estate boom has created a shortage of affordable housing. According to Jared Bernstein and Lawrence Mishel, economists at the liberal Economic Policy Institute, in Washington, D.C., the average rent in working-class neighborhoods of Boston is about a thousand dollars a month, which for a family of four with a poverty-level income leaves just six hundred and fifty dollars a month for food, clothing, heat, and everything else.

While these examples cut one way (that the poverty rate may be under-estimated), it may cut the other. A lot of measured poverty is in rural areas, where cost of living is lower. Similarly, considering the the poverty rate is largely defined by the cost of food in 1969 and adjusted for inflation, the inflation rate doesn't actually measure the cost of food. In fact, the cost of food has been increasing at a slower rate than the overall level of inflation. The New Yorker continues:
Such considerations suggest that the official measures understate the extent of poverty, but the opposite argument can also be made. The poverty figures fail to distinguish between temporary spells of hardship, like those caused by a job loss or a divorce, and long-term deprivation. Surveys show that as many as forty per cent of people who qualify as poor in any given year no longer do so the following year. Middle-class families that suffer a temporary loss of income can spend their savings, or take out a loan, to maintain their living standard, and they don’t belong in the same category as the chronically impoverished. One way to remedy this problem is to consider how much households spend, rather than how much they earn. If in the course of a year a household spends less than some designated amount, it is classified as poor. Daniel T. Slesnick, an economist at the University of Texas, has tested this approach using figures that he obtained from the Department of Labor’s Consumer Expenditure Survey, which tracks the buying habits of thousands of American families. Slesnick calculated that the “consumption poverty rate” for 1995—that is, the percentage of families whose spending was less than the povertyincome threshold—was 9.5 per cent, which is 4.3 per cent less than the official poverty rate. Subsequent studies have confirmed Slesnick’s findings.

In 1995, a panel of experts assembled by the National Academy of Science concluded that the Census Bureau measure “no longer provides an accurate picture of the differences in the extent of economic poverty among population groups or geographic areas of the country, nor an accurate picture of trends over time.”

h/t: Steve Krause via MR

Monday, July 19, 2010

So, why do we have such weird poverty data in the US? An 2005 op-ed in the New York Times calls it a Broken Yardstick:
According to the latest poverty rate estimates - released by the Census Bureau on Aug. 30 - the total percentage of Americans living in poverty was higher in 2004 (12.7 percent) than in 1974 (11.2 percent). According to that same report, poverty rates for American families and children were likewise higher last year than three decades earlier...

But even the most basic facts bearing on poverty alleviation confute the proposition that material circumstances in America are harsher for the vulnerable today than three decades ago. Per capita income adjusted for inflation is over 60 percent higher today than in 1974. The unemployment rate is lower, and the percentage of adults with paying jobs is distinctly higher. Thirty years ago, the proportion of adults without a high school diploma was more than twice as high as today (39 percent versus 16 percent). And antipoverty spending is vastly higher today than in 1974, even after inflation adjustments...

All strata of America - including the disadvantaged - are markedly healthier today than three decades ago. Though the officially calculated poverty rate for children was higher in 2004 than 1974 (17.8 percent versus 15.4 percent), the infant mortality rate - that most telling measure of wellbeing - fell by almost three-fifths over those same years, to 6.7 per 1,000 births from 16.7 per 1,000.

There's a couple of possible explanations. Marginal Revolution quotes Lane Kenworthy:
Poverty comparisons across affluent nations typically use a “relative” measure of poverty. For each country the poverty line — the amount of income below which a household is defined as poor — is set at 50% (sometimes 60%) of that country’s median income. In a country with a high median, such as the United States, the poverty line thus will be comparatively high, making a high poverty rate more likely...

Using a relative measure, the U.S. poverty rate is higher than Romania’s and only slightly lower than Mexico’s (see here). Similarly, Mississippi’s relative poverty rate is the same as Connecticut’s.

Tyler Cowen follows this up with:
It's also worth noting that poverty rate numbers do not take into account food stamps, housing subsidies, the Earned Income Tax Credit, and Medicaid, among other benefits. Not to mention black market income and underreported income (often for EITC reasons); yes it is worth referring back to consumption data which show that the poor do quite a bit better than income data alone would indicate.

Tyler follows up they NYT article pointing to the fact that we should be looking at consumption, not income data:
Consumption data, even if sometimes misused by zealous libertarians, are not a means of dismissing the poverty problem, but they do put that problem in another light.

First, they show that income and wealth data overstate poverty and inequality problems. Second, a focus on income data leads one to conclude that the elderly require most of the assistance. A focus on consumption data lead one to conclude that helping parents with children is, in many cases, more important. That sounds right to me.
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