fling93 loves fishies

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On Finding Better Candidates

I generally don’t have much to say about the Alito hearings, as I don’t have a strong stake in the outcome. As a libertarian conservative, I don’t view a conservative court as a bad thing per se, especially since it seems to me that the big mistakes the Supreme Court court made recently — Raich and Kelo — have been largely due to the liberals.

But I do have a few things to say about the whole nomination process.

A journalism fling?

Update 12/1/05 Forgot to credit Gene Healy for a link. Whoops!

Last week, I saw Good Night, and Good Luck at one of the South Bay Movie Fiends gatherings that I organize. This film, along with the previous movie we saw, Capote, got me thinking about my future.

This requires some explanation.

Some of you know that I’ve long been contemplating a change in career. I’ve already talked through this at length on my LiveJournal (note that this entry is only visible to friends), so let me just rehash it briefly.

Maximizing utility is just a model

For my Microeconomics night class, our professor surprisingly assigned us a murder mystery short novel, The Fatal Equilibrium. This was, however, no ordinary mystery, but one that was a mix of murder… and economics (what, you thought I was going to say underwater basketweaving?). The author, Marshall Jevons, is actually the pseudonym for two economics professors, William Breit and Kenneth G. Elzinger.

It’s not classic literature by any means. You’d occasionally find economics lectures somewhat crudely squeezed into the dialogue. They made it appear somewhat more plausible than your average Mathnet episode, as the characters were mostly college professors, the kind of people who probably squeeze lectures into normal dialogue all the time in real life. But it was plainly obvious what parts of the story were intended as entertainment and what parts were education. Still, it was a neat way to review topics such as price elasticity and consumer surplus and to see how it related to real-world examples. And one passage in particular struck me.

Comparative Advantage and Opportunity Cost

I’ve noticed lately that “comparative advantage” (especially Ricardian comparative advantage) is one of those terms that people throw around if they want to sound like they know about economics (another one being “Keynesian”). As this was a concept taught on the very first day of my economics night class and is fairly easy to understand, I kinda figured a lot of people were already familiar with it, especially since the Wikipedia entry on it isn’t half bad.

But I was wrong. In the past couple of weeks, I found myself correcting several people on this relatively simple topic. Since it has a nonintuitive conclusion, and since it’s very important to understand before tackling the issue of trade and outsourcing, let me attempt to explain it here. I know that economics can be an intimidating and/or boring topic for many people (partially because a lot of writers will write about economics in such a way as to make it sound complicated — presumably to make themselves seem smarter than their readers), so I’ll try to keep this as straight-forward and entertaining as I can.

Absolute Advantage

I said comparative advantage was nonintuitive because it teaches you that trade between two partners is beneficial to both even if one of them has an absolute advantage over the other. Absolute advantage meaning that one of them is more efficient at producing everything. To help illustrate this, let’s imagine a simplified economy with two people, let’s say Lisa Simpson of The Simpsons and Calvin from Calvin and Hobbes.

Open Thread on Merit-Based Pay

Over at Nicole Brown’s blog, Post-Hip Chick, I was taking part in a discussion on Governor Schwarzenegger’s proposal to make teacher pay based on merit instead of seniority. Her comments system uses Haloscan, which has a character limit and doesn’t have a “Preview” button, and a couple of comments (including one of hers) got truncated.

I know how it feels to lose a piece of writing (even a comment), so I offered to host further discussion here at my blog.

My Really Snarky Comment

There were a couple of reasons why blogging was so light the past couple of weeks. One of which was health related, which I won’t get into here (perhaps later on my LiveJournal account), beyond to say that everything’s okay now. The other reason being that I’ve been pretty active commenting on other blogs. I don’t get a whole lot of commenters here, and sometimes I have the itch for some more interaction. Or maybe I’m sometimes itching for a fight, who knows?

Anyway, I generally don’t get too snarky (in both comments and this blog), but I’d like to highlight one notable exception. The discussion revolved around Rumsfeld, troop levels, and how to pay for more troops. But the reason I’m reposting it here is cuz I got in a real zinger (and, of course, being a blogger, I have a really high opinion of myself and want everybody else to share that opinion).

Tabarrok on Social Security Reform

Still in the midst of NaNoWriMo, but more on that later (so far, so good). Blogging will continue to be light to nonexistent in November, although I do have some thoughts on the election I’d like to share in the next week or so. In the meantime, Alex Tabarrok at Marginal Revolution says a few things about Social Security that I’ve long held. Namely that it’s a pretty sweet deal for past and current retirees. However…

…It’s today’s workers and children for whom social security is a raw deal. Even if the system does not go bankrupt, current workers will receive a very poor return on their “investment.”

In refusing to cut benefits to current and soon-to-be retirees the costs of any reform are forced onto those people for whom the system is already a poor return. It would be fairer to spread the costs to all recipients especially to those who have benefited from social security the most.

Emphasis mine. Perhaps stating the obvious, but it needs to be said. Reforming the system will inevitably involve pain, and we should strive to spread that pain around as broadly as possible instead of just sticking it to the younger generation.

In a similar vein, his co-blogger, Tyler Cowen (who, despite my vote did not win the election and thus I can no longer refer to him as our next president, <sniff>), is also guest-blogging at WSJ.com in a discussion with John Irons of Argmax.com, and they also discuss Social Security. Cowen is actually not fond of privatization and would prefer to make Social Security less like a pension system and more like “a system of welfare for the elderly.”

I’d be perfectly fine completely phasing it out of existence and letting welfare take care of welfare, but that’s a post for another time. Although personally, I myself never liked the term “privatization” for this situation, preferring “individualization” instead. But that probably has a lesser chance of catching on than “tax shift.”

Update 11/15/04

Updated to use a permalink to the WSJ debate. Also, Tyler Cowen elaborates on his opposition to forced savings.

The Jobless Recovery

Pretty amusing post from Brad DeLong, complaining about a phone-call from a clueless magazine writer:

“…Were [sic] doing a story on the performance of the economy under the different post-World War II presidents, and…”

[DeLong:] “Now presidents don’t control the economy. They influence it. And their policies influence the economy not just while they are in office but afterwards as well.”

“That’s very true. What we are looking for is…”

“Now there are two kinds of stories you could be writing. The positive one would be to start by saying that presidents influence but do not control the economy—that most of what happens is the economy following its own path. It would go on to say that presidential policies do influence the economy, to lay out how policies influence the economy, and to evaluate presidents’ economic policies. The negative one—the actual subtraction from the American people’s knowledge—would be to throw together some simplistic indicators of presidential economic performance over which presidents have little or no control, and rank presidents by those indicators. Which are you doing?”

“The negative one…”

The sad fact of the matter is that too many people (including most journalists) do assign the President too much blame and credit as far as the economy is concerned. A topic I’ve covered somewhat before in regards to the 2001 recession and in my discussion of supply-side economics. Reagan and Clinton often get too much credit for the economic prosperity during their terms, and likewise, Carter and both Bushes get too much blame for the economic problems during their terms.

This “jobless recovery” is no different. I’m no expert, but let me explain how I understand it.

One for the Gipper

I’m not sure how much I can add to what’s already been said about Reagan, especially since I didn’t really follow politics that much back when he was in office. Plus, I’ve already written a good deal of what I thought of him in my reaction to the whole Reagan dime proposal and in my lengthy discussion of supply-side economics. But as you might expect, this won’t stop me from writing a lot more. In short, I think he was a very good, but not great president. Someone who was a lot more important to the Republican party than he was to the country (and even in that respect, I think Barry Goldwater doesn’t get his fair share of the credit). But Reagan was still clearly much better than any of his successors thus far.

Economic Record

Still, for those partisan Republicans who like to point to how much the economy improved, my reaction would pretty much mirror that of conservative blogger, Jane Galt:

I saw some Republican… saying that Reagan was great because when he took office, unemployment was 10% and interest rates were sky-high, and when he left office everything was boom-a-riffic. This is every bit as fine a bit of data mining as Democrats who make similar claims for Clinton — the economy sucked when he took office, and was booming when he left. When Clinton took office, the economy was already recovering from a recession; when he left, it was sliding into another one. That’s luck, not talent. … Similarly, high unemployment and interest rates under Reagan were not because Democrats Had Been Driving the Economy Into the Ground Until the Grownups Took Over. High inflation was the result of a dozen years of bad fiscal and monetary policy under two Republicans — Nixon and Ford — and two Democrats — Johnson and Carter — that was brought under control only when Paul Volcker, the Carter-appointed head of the Federal Reserve, jammed interest rates up to national-heart-attack levels and left them there until inflationary expectations were well and truly tamed. Reagan had nothing to do with unemployment and interest rates falling; that was the invevitable [sic] result of a drastic monetary tightening finally working its way through the economy.

Myths of Drug Price Controls

Via Steve Burnap (incidentally, the author of the excellent RoboDJ weighted shuffler plugin for Winamp and a coworker of my cousin training for the triathlon), I see that Kevin Drum is talking about the drug price controls issue (yeah, I typically read Kevin for myself, but I’ve fallen far behind):

Foreign methods for lowering drug prices are apparently too Stalinistic for Republicans to consider, but it’s OK to let other countries use these methods and then import the drugs from them. That’s nuts.

He’s right, it is nuts. That’s politics for you. However, he goes astray in the next paragraph:

Other countries use both legal measures and massive buying power to negotiate lower drug prices. Pharmaceutical companies go along with it because presumably the business is still profitable for them even at these lower prices.

Common misunderstandings like this is probably a big reason why politicians do strange things. Doing the right thing is often a harder political sell (and I’ll return to this theme in several future posts). This doesn’t excuse it, I’m just pointing out that Kevin’s contributing to the problem.

Microsoft and Bundling

There’s been some discussion of bundling and Microsoft lately. Some of it is really interesting and eye-opening, but I thought I’d clear up some misconceptions myself. Warning, this is pretty long.

Evil Empire and the Economics of Baseball

Well, the Yankees obtaining Alex Rodriguez has all the fans (especially Red Sox fans) in a snit. It’s refreshing to hear a voice of reason, and I couldn’t say it any better than my favorite sports columnist, Ken Rosenthal, of the Sporting News (the magazine isn’t what it used to be, but Rosenthal still churns out quality content), who says, Ahem! The Yankees are not evil:

Imagine, if MLB had adopted a fairer system that based revenue-sharing contributions on potential and not actual revenue, the Yankees still would pay more because they play in a large market. But they wouldn’t be punished for making extra money. Nor would other high-revenue teams.

“The Yankees generate more revenue than the Mets, but (Mets owner Fred) Wilpon shouldn’t be paying less to the system than Steinbrenner; then you’re penalizing Steinbrenner for being good,” says Andrew Zimbalist, a Smith College economics professor and author of the book May the Best Team Win: Baseball Economics and Public Policy. “You want to reward owners for being good. Otherwise, they have no incentive.”

Emphasis mine. Hey, I’m a Mets fan (well, the Giants are now my team, but I still root for the Mets when they aren’t playing us), and I have to say he makes sense. Look at what happens with the perverse incentives we have now:

No Deficit Trap, Just Two-Party Politics

Nobel Prize-winning economist Joseph Stiglitz (via Praktike from American Footprint, temporarily on hiatus), mentions the trap:

Some say that Bush created the huge deficits to squeeze government, to force cuts in public investments and social programs. Democrats who focus excessively on deficit reduction are falling precisely into the trap, especially when political timidity impedes reversing the tax cuts.

This is the whole “starving the beast” scenario. I typically hear this argument from conservative supply-side proponents (which Praktike and Stiglitz are most definitely not) after I’ve explained the Laffer curve to them (it’s amazing how many supply-side proponents don’t even know why it’s called “supply-side” and not “demand-side”). They typically retreat to say that at least the tax cut will constrain government spending.

Well, if that were true, why didn’t “starving the beast” work in the Reagan era, where tax cuts were accompanied by huge spending increases?

I think I know why…

Unintended Effects of Progressive Taxes

Virginia Postrel links to a Daniel Weintraub column that points out an unpleasant side-effect of a progressive tax system:

The rich are no longer getting richer in California. And the rest of us, oddly enough, are suffering from their misfortune.

That’s the story from the latest report on tax returns filed for the 2002 tax year. The preliminary figures, which I obtained from the Franchise Tax Board last week, show that the number of returns reporting incomes exceeding $1 million dropped again, to about 25,000. The combined income earned by those fat cats also shrunk, by more than 20 percent.

Why should we care?

Because California’s skewed income distribution, combined with progressive tax rates, means that the people at the very top of the income heap pay a very high percentage of the personal income tax collected in this state.

Their extraordinary, onetime income surge at the end of the last century provided most of the new tax revenue that legislators and former Gov. Gray Davis used to raise teacher salaries, increase welfare benefits and expand eligibility to state-provided health care. But the decline that followed also accounted for most of the revenue drop that contributed to the state’s fiscal crisis. And as of the most recent tax year, they hadn’t hit bottom yet.

Implications of the Wealth Gap

There was a good deal of discussion of the wealth gap in the blogosphere last week. As usual, I’m late to the dance (partially cuz of my new iBook). But time lets you absorb more information and gives you a chance for greater reflection anyway.

First, start with Paul Krugman’s piece in The Nation:

…America was once a place of substantial intergenerational mobility: Sons often did much better than their fathers. A classic 1978 survey found that among adult men whose fathers were in the bottom 25 percent of the population as ranked by social and economic status, 23 percent had made it into the top 25 percent. In other words, during the first thirty years or so after World War II, the American dream of upward mobility was a real experience for many people. Now for the shocker: The Business Week piece cites a new survey of today’s adult men, which finds that this number has dropped to only 10 percent. That is, over the past generation upward mobility has fallen drastically. Very few children of the lower class are making their way to even moderate affluence…. In modern America, it seems, you’re quite likely to stay in the social and economic class into which you were born.

Supply Side Economics

Update 8/24/04: Made some minor revisions and reworded the conclusion.

It occurred to me a while back that one thing that sometimes separates conservatives from liberals is that conservatives tend to know more about economics, and liberals know more about sociology (yes, I know this isn’t always the case). Furthermore, that experts in economics tend to look down upon sociology and other social sciences as not being real sciences, even though economics itself is also a social science, indeed, as Brian Leiter notes, one with a very poor track record of predictive success, which is why it’s called the “dismal science.” After all, with all the mathematics involved, it’s easy to forget that it all relies on a model of human behavior, often a crude one.

And if you can stomach yet another overgeneralization, it seems to me that conservatives often try to take advantage of many liberals’ aversion to economics to pull a fast one on them. Case in point? Supply-side economics, which is often misunderstood or misinterpreted badly by both sides, but is often used by conservatives against liberals who don’t know enough economics to know they’re being had. Again, I’m no expert, but I think I can clear this up a bit. Now, Art Laffer actually had the right idea with the Laffer Curve, but people forget that this was not the only thing about supply-side economics, or indeed, even the primary selling point.

Decline of the Two-Party System?

Now that I’ve discovered news aggregators and RSS feeds, I can finally stay on top of Slashdot, which I used to monitor sporadically (and I’d have found out about the new Firefly and Farscape projects much sooner).

Anyway, they have an interesting entry on Dean’s use of the Internet, and how the Internet is actually already starting to bring down the two-party political system. Here’s some of the original Washington Post article:

Rubin's Probabilistic Thinking

Brad DeLong recently read In an Uncertain World: Tough Choices from Wall Street to Washington, the recently released memoir of Robert Rubin (the Treasury secretary under Clinton), and has an enlightening post on him:

The factor Rubin himself sees as most important is his habit of “probabilistic thinking”: a willingness to always ask questions like “What else might happen?”, “What if we’re wrong?”, “What could happen next?”, and to look at the full range of situations that might come to pass—and at their costs and benefits—rather than to assume that things will go as planned or as the fashionable ideology or favorite administration model would have predicted…. Rubin’s recognition that the world is a complicated and poorly-understood place, where lots of unexpected and surprising things happen (as opposed to a place to which John Maynard Keynes or Milton Friedman or Irving Kristol has already drawn us an accurate map we need merely to consult), seems to have been the most powerful of his secret weapons.

Sentence italicized by me. Despite being a fan of Friedman (although it’s admittedly been many years since I’ve read anything by him), I’ve always found this kind of thinking to be an admirable quality to be striven towards. The world is a very complicated and unpredictable place, and I am tired of leaders who pretend that it isn’t (well, until only after something goes wrong).

Perhaps this is an inevitable result of democracy in a country where much of the electorate views the world the same way? Maybe most people (or just Americans?) find it inconvenient for the world to be too complicated to predict — so much so that we punish leaders who admit they’re wrong more than leaders who are too stubborn to admit they’re wrong.

Steel Tariffs Lifted

Here’s a bit of President Bush’s statement regarding the lifting of those steel tariffs I mentioned earlier (well, that Kevin Drum mentioned earlier):

“I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods,” Bush said. “These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them.”

So apparently the threats by the WTO and the EU had absolutely nothing to do with it. Right. And no doubt, Grady Little was fired because he achieved his purpose of taking the Red Sox to Game 7 of the ALCS. Losing control of the clubhouse and being intimidated by Pedro into leaving him in the game too long had absolutely nothing to do with it.

Of course, the tariffs never should have been enacted in the first place, but hey, in American politics, it’s always worth it to slightly hurt the many to greatly benefit a few. Gotta love that Electoral College.

Calpundit on the Steel Tariffs

I’m in the process of setting up the new server, so in the meantime, in case you haven’t seen these already, Kevin Drum has some insightful observations here and here on the WTO’s retaliation over those steel tariffs Bush passed in March, as well as on Bush’s likely response.

Update 12/04/03

Bush caved in, thank goodness. Of course, he’s claiming he didn’t.

Whom to Blame for the Recession?

Now that the economy appears to be on the right track again, I’d like to revisit what I think was the cause of the 2001 recession. I run across too many people who take a partisan stance and blame it on Dubya or blame it on Clinton. Really, the President doesn’t have as much power over the economy as most people think. While I’m no expert, I think the real answer is pretty simple.

Basically, this recession was caused by overproduction. Companies built too much stuff and ended up with too much inventory. When they finally realized this, they cut down production tremendously, laying off people, and cutting down their capital expenditures (CapEx) to buy equipment and parts from other companies, which had a ripple effect to those companies who also had to cut production. This is why you’ll hear some people refer to this as a CapEx recession (and I’d guess that many of them don’t actually know what that means, but just heard it somewhere and want to sound smart). Lack of consumer spending wasn’t really the cause. Corporate spending was.