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May 2005

As the Sun Sets on Daniel Okrent Day...

This is perhaps the most bizarre thing of all. As Mr. Spock would say, fascinating...

Did Daniel Okrent really say that David Cay Johnston is the leader of a lynch mob?

Did Daniel Okrent really say that he hoped that by the end of his stint as "Public Editor" everyone would know that the New York Times does not deserve to be called the newspaper of record?

Did Daniel Okrent really read 40,000 words--200 pica courier pages--written by Luskin?

Did Daniel Okrent really say that Don Luskin is better looking than Paul Krugman?

A correspondent directs us here:

Donald Luskin on Daniel Okrent and Paul Krugman on NRO Financial: New York Times "pubic editor" [sic] Daniel Okrent.... I've met with him and corresponded with him... 40,000 words.... Yes, I'm the one Okrent was talking about when he referred to "Krugman's enemies."... [W]hy didn't Okrent go further with his critique? And why, as the self-described "readers' representative," did he feel it was necessary at the same time to take a gratuitous swipe at me--one of his readers?...

[A] fear of reprisal.... Okrent wasn't always afraid.... When I first met him in early 2004 he was full of the burning zeal of the reformer, and eager for intellectual allies. His first words to me were, "You're much better looking than Paul Krugman." He told me that the Times didn't deserve to be called the "newspaper of record" and vowed, "When I'm done with this assignment, I want everyone to know that."... I knew it wouldn't last.... I wondered how long Okrent could maintain his independence... the glittery social world of Times management.... Times staff fought Okrent.... David Cay Johnston... organize[d] other reporters into what Okrent called a "lynch mob"....

the Times's campaign coverage... Okrent... asking, "Is The Times systematically biased toward either candidate? No."... What, you are no doubt wondering, could Okrent possibly have been thinking?... the Times's coverage of the presidential campaign... self-evidently biased toward John Kerry to the point of self-parody.... hundreds of e-mails from the Angry Left....

Okrent had not only succumbed to the pressure from the Left, he had cracked under it. Here we had the "readers' representative" using the mighty power of the New York Times to lash out at one of its own readers... calling him a "coward"... quoting him... in defiance of his pleading not to be quoted....

So, Okrent ends his 18-month[s]... a broken man, having turned against the readers he was supposed to represent...

When Wingnuts Read!

A Washington lawyer friend of mine who reads Wonkette on an hourly basis directs us to a great piece of right-wing wingnuttery:

HUMAN EVENTS ONLINE :: Ten Most Harmful Books of the 19th and 20th Centuries:

  • The Communist Manifesto
  • Mein Kampf
  • Quotations from Chairman Mao
  • The Kinsey Report
  • Democracy and Education
  • Das Kapital
  • The Feminine Mystique
  • The Course of Positive Philosophy
  • Beyond Good and Evil
  • General Theory of Employment, Interest and Money

Social Causation and Discouraged Workers

Early in March 1980, about 100 of us Harvard sophomores began carrying around--everywhere we went--a large book with a bright red cover, and the word "SUICIDE" emblazoned on the front in large black letters.

It had been--as it always is in Cambridge, Massachusetts--a miserable winter: not cold enough for the snow to be a constant delight, but just a wet garbage-filled slushness. The absence of sun had given us all seasonal affective disorders. And we were desperate for spring and sunlight to come as we opened our copies of our books and smeared turkey tetrazini from the Leverett House dining hall across the table of contents.

To make things worse, our roommates and passers-by used the books we carried as an opportunity for jokes: "Don't do it, Brad! You still have plenty to live for!" was about as good as it got.

What we were reading, of course, was Emile Durkheim's Suicide. As we were taught the book, Durkheim was attempting two very important things:

  1. A critique of classical liberal modernity, as tending to cause a great deal of distress as people found themselves severed from their communities and turned into isolated Benthamite machines or, more optimistically, Millian agents.
  2. A stunning demonstration of the power of sociology: nobody about to commit suicide will say "I'm doing this because I'm Protestant and not Catholic" or "I'm doing this because I live in a big city rather than a small town," and yet suicide rates exhibit powerful variation in response to standard sociological variables. What the sociological background is can provide the extra push that makes the normal (or abnormal) stresses of life unbearable, or can provide the extra support that makes the unbearable bearable.

It is for this reason--call it social causation--that I find unconvincing Andrew Samwick's argument that because people don't say that the primary reason they're dropping out of the labor force is because jobs are hard to find that we can therefore conclude that people aren't dropping out of the labor force because jobs are hard to find:

Vox Baby: Re-critiquing Krugman, with Friends: What generated the several posts of mine last fall was my attempt to figure out the extent to which the decline in the unemployment rate is due to the fact that 'some of those without jobs stopped actively looking for work, and therefore dropped out of the unemployment statistics'.... I considered the three usual augmented measures of the unemployment rate that the BLS tabulates in Table A-12 each month that specifically track those who are not in the labor force because they are not actively looking for work....

  • Unemployment Rate: Fell from 6.3 to 5.4 percent
  • UR, Incl. discouraged workers: Fell from 6.6 to 5.7 percent
  • UR, Incl. discouraged and other marginally attached workers: Fell from 7.2 to 6.4 percent
  • UR, Incl. marginally attached workers and those employed part-time for economic reasons: Fell from 10.3 to 9.4 percent

Subsequent exchanges with readers and with some helpful folks at the BLS revealed that the BLS also collects information monthly on those who are not in the labor force but want a job, even if they have not searched recently enough and/or are not currently available to work. So we could add another bullet point (from my last post in the series in October) to include these people:

  • UR, Incl. any who wants a job: Fell from 9.2 to 8.4 percent

Even measures of the unemployment rate that are specifically designed to pick up people who are out of the labor force because they stopped actively looking for work declined over the period in question. All of them fell by 0.8 - 0.9 percentage point, compared to the decline of 0.9 percentage point in the official unemployment rate. I don't even get 'primarily' from this...

I am not convinced by Andrew. Falling unemployment rates with roughly constant employment-to-population ratios and disappointing real wages seems to me more consistent with the hypothesis that discouragement is pushing more people across the psychological line that leads them to drop out of the labor force, people who when asked what is their primary reason for leaving say that it is to get more schooling or have a kid or just take some time off.

On the other hand, he is not convinced by me. And he's right to some degree at least: I should be worried by the fact that the Labor Department's attempts to pick up this phenomenon that I believe is going on do not succeed in doing so.

Why Oh Why Can't We Have a Better Press Corps? (Jonathan Chait No Like Danny Okrent Department)

Chait writes:

The New Republic Online: etc.: OKRENT'S LAST WORD: I didn't think Daniel Okrent, the departing New York Times public editor, could get any more cowardly. But he just did.

If you didn't notice, Okrent included in his final Times column a parting shot at columnist Paul Krugman and two other Times columnists. Okrent wrote, 'Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.' Okrent declined to offer a single example of such slicing and dicing, or even to expound upon his accusation in any way. By way of explanation, he wrote: 'I didn't give Krugman, Dowd or Safire the chance to respond before writing the last two paragraphs. I decided to impersonate an opinion columnist.'

This is, of course, a shockingly dumb explanation. No, op-ed columnists don't give their targets a chance to respond. But they do make some effort to substantiate their claims. Krugman wouldn't write that President Bush told a lie in a recent speech and leave it at that. He would pass on to the readers what Bush said and explain why he felt it was a lie. Is Okrent really so dim that he couldn't grasp this point?

Maybe, but more likely he doesn't have the guts to do it. In an online debate, Krugman pressed Okrent to substantiate his accusation. You can read the debate here. It's truly pathetic. Krugman explains why Okrent's accusations were wrong, and Okrent repeatedly dodges the substance.

For instance, Okrent writes, 'His 5/9/05 column on progressive indexing. The column itself (without the ex post facto explanation) suggestively conflates 'retirement income' and 'social security benefits' without sufficient explanation, but with plenty of apparent point-making.'

Krugman replies:

I explained that the term 'retirement income' normally refers to income from all sources, not just Social Security benefits (the Social Security Administration says on its Web site that 'you should not count only on Social Security for your retirement income.') I supplied him with a study (pdf) that used Social Security Administration data to show that because high-income workers depend much less than middle-income workers on Social Security, they would have smaller percentage cuts in overall retirement income than middle-income workers. This was similar to a point I made, using different data, a week earlier (5/1/05), so I was surprised that Mr. Okrent even raised the issue.

So Okrent simply launches even more personal attacks. For instance, he writes: 'For a man who makes his living offering strong opinions, Paul Krugman seems peculiarly reluctant to grant the same privilege to others. And for a man who leads with his chin twice a week, he acts awfully surprised when someone takes a pop at it.'

But of course Krugman didn't challenge Okrent's right to disagree with him, only his right to launch unsubstantiated attacks on his integrity.

The sneakiest thing in Okrent's latest entry is this:

Believe me--I could go on, as could a number of readers more sophisticated about economic matters than I am. (Among these are several who, like me, generally align themselves politically with Prof. Krugman, but feel he does himself and his cause no good when he heeds the roaring approval of his acolytes and dismisses his critics as ideologically motivated.)

Note what's going on here. First, Okrent implies that there are lots of examples of Krugman abusing data but declines to provide them. Next, he conflates that accusation with a completely different one--that Krugman plays to his liberal base and dismisses those who disagree too easily. I think there's some truth to the latter criticism. But that's a completely different accusation. Being too ideological or partisan is a common flaw among pundits, and it's in the eye of the beholder. Manipulating data is far more serious. Readers can judge for themselves if Krugman is playing to the liberal crowd. They can't judge whether he's using numbers dishonestly. To say he does so is to tell readers they can't trust him.

Okrent continues on with other snide remarks, including this parting shot: 'If he replies to this statement, as I imagine he will, I'll let him have what he always insists on keeping for himself: the last word. I hate to do this to a decent man like my successor, Barney Calame, but I'm hereby turning the Krugman beat over to him.' Look, many journalists have been in the position of wanting to dodge a reader who harbors a burning desire to debate some obscure point and lots of time on his hands. But Krugman isn't some crank, and he's not debating some obscure point. Okrent smeared him in his own newspaper, and he has a right to clear his name.

I'm not saying there are no quarrels that anybody could ever make with any of Krugman's data. He deals with very complicated questions in a very small space. He simply can't devote endless technical paragraphs to establishing his every premise. (That's why I happen to think his recent series of columns on health care, which allowed him to develop his thoughts at greater length without rushing through his premises, have been his best ones.) So Krugman can't chase every rabbit down every hole, but given the constraints of his column, he does a very good job. Okrent ought to be ashamed of himself.

Why Oh Why Can't We Have a Better Press Corps? (Paul Krugman Has Another Word Department)

He writes:

The New York Times: Public Editor's Web Journal (Forum/Message Board): Just one last word. Mr. Okrent has so far offered only one example that, if true, would have justified his all-out attack on my ethics. Everything else is picking nits: I could explain why 77 percent, not 64 percent, is the right number, but does it really matter? The only significant example was his claim that I blended household and establishment survey data on jobs, in an attempt to score political points. But as I showed in the previous note, I didn't and in the column itself I pointed readers to the correct data. Now Mr. Okrent claims that he was only referring to my assertion that the economy needs to add 140,000 payroll jobs per month, which for some reason he thinks comes from the household survey. (It doesn't.) Sorry, that's an unconvincing evasive maneuver. Mr. Okrent clearly accused me of playing mix and match with the job numbers themselves. In fact, in our correspondence, when I said that it was all payroll data, he declared that 'your insistence that you relied only on one set of numbers is very puzzling. I don't see how the math works any other way; maybe you could further enlighten me.' In other words, the only accusation that could have justified Mr. Okrent's attack was completely unfounded. And now he's not enough of a mensch to admit his error.

Why Oh Why Can't We Have a Better Press Corps? (Danny Okrent Jumps the Shark Once Again Edition)

Paul Krugman writes:

My thingie and Okrent's reply are up:

Something you can quote me on:

"Okrent is lying to cover his mistake when he accused me of blending data from the household and establishment surveys. He now claims that he was only referring to my estimate of how many payroll jobs the economy needs to add per month [to keep labor market conditions from deteriorating], which for some reason he thinks is based on the household survey.

"But that's not what he said to me: he claimed that the basic numbers I gave on job growth were mix-and-match. In fact, in our correspondence, when I said that it was all payroll data, he declared that "your insistence that you relied only on one set of numbers is very puzzling. I don't see how the math works any other way; maybe you could further enlighten me."

"In other words, he screwed up completely..."

And here, in the extended entry, are Krugman and Okrent, with a few of my annotations:

Continue reading "Why Oh Why Can't We Have a Better Press Corps? (Danny Okrent Jumps the Shark Once Again Edition)" »

A Defender of Daniel Okrent on Paul Krugman... Well, Half a Defender

Andrew Samwick of Dartmouth couches his lance and spurs his horse forward. But he's only going to defend Okrent halfway:

Vox Baby: I'm not going to get into the issue of whether Okrent should have provided an example.

This is wise on his part--for Okrent is indefensible. In fact, it's worse than Okrent not providing any examples. It looks like he didn't have any examples that stand up in mind--otherwise he would have provided them by now.

Samwick attempts a much more limited exercise:

The discussion that followed Okrent's piece might lead one to believe that there are no examples. I'll remind my readers of one that occupied our time back in October. It started with the post, 'Paul Krugman, Meet Irony.' The key quote (with the offending statement highlighted) from Krugman's op-ed, 'Checking the Facts in Advance' is:

Mr. Bush will boast about the decline in the unemployment rate from its June 2003 peak. But the employed fraction of the population didn't rise at all; unemployment declined only because some of those without jobs stopped actively looking for work, and therefore dropped out of the unemployment statistics. The labor force participation rate - the fraction of the population either working or actively looking for work - has fallen sharply under Mr. Bush; if it had stayed at its January 2001 level, the official unemployment rate would be 7.4 percent.

As I noted in my original post and the considerable discussion that followed (here, here, here, here, and here), there are two channels that allow the unemployment rate and the labor force participation rate to fall while leaving the employment-population ratio unchanged. The first is that people who want to work give up looking for work. (This takes the same person out of both unemployment and the labor force, with no one entering or leaving employment.) The second is that people who have jobs decide they don't want them anymore (perhaps to take care of their kids or go back to school), and they get replaced by someone who was previously looking for work. (This takes one person out of employment and the labor force and another person out of unemployment and into employment. Same net effect.) The two channels have opposite implications for whether we think the statistics are bad news for the economy. Krugman asserts--via the word 'only'--that the second channel doesn't exist...

I will concede that Paul Krugman should have written "primarily" rather than "only."

Andrew's two channels have the same effect on the unemployment rate and the labor force participation rate, but they have very different effects on wages. It's just supply and demand. In the Samwick channel--unemployment falling because some of the employed decide they don't want jobs anymore, and the unemployed fill their place--the driving force is a reduction in the supply of workers--a leftward shift in the labor supply curve. Such a leftward shift is associated with a higher price of labor: higher real wages relative to trend. In the Krugman channel--unemployment falling because some of the unemployed update their views of the state of the labor market and conclude it's no longer worth it to look for work (rather than doing something else)--the exit of people from the labor market is a response to lousy labor market conditions. It is a move downward and to the left along the supply curve rather than a leftward shift of the supply curve. It is associated not with higher but with lower real wages relative to trend.

So we can figure out which channel predominates--which is the primary cause--by looking at what has happened to real wages relative to some measure of trend. And the natural trend to use is that of labor productivity. If we plot total compensation per manhour deflated by labor productivity for the nonfarm business sector, all from Economic Indicators, we find:

Since the end of 2000, employee compensation--wages and salaries plus benefits--has been falling way behind productivity. This isn't what we would expect to find if changes in preferences had led to a leftward shift of the labor supply curve, making labor scarce and expensive. This is what we would expect to find if weak labor demand had pushed the economy down the labor supply curve.

I cannot come up with a story according to which the Samwick channel is the dominant one that is consistent with the growing gap between wages and productivity.

The Medium Lobster Writes About Eggs and Omelettes

It's a wise crustacean. Is there a discount if you order it before 6?

Fafblog! the whole worlds only source for Fafblog.: sPerhaps, at this time, you may require some reassurance. Perhaps, if you are one of the handful of Americans not otherwise occupied with Amber Alerts and runaway brides and the curious sleepover habits of washed-up eighties pop stars, you may have accidentally happened upon a few bodies halfway across the world (Afwhatsistan? Bagrawho?), which may or may not have pricked whatever remains of a long-dormant and desensitized National Conscience. And you may be asking yourself what the point of all this has been, what has driven Americans halfway around the globe to sieze innocent men, beat their legs to pulp, and chain them to ceilings until they die.

Regrettable, yes, but let us remember that these two eggs, like the dozens before them, and the tens of thousands before them, were broken to make the greatest and worthiest of omelettes, the most succulent of breakfasttime generational commitments, the proudest and most visionary of truck stop slop. And when it is finished and served, to whomever it is served, will it not have been worth the mound of eggshells, the broken crockery, the shattered glass, the mountain of murdered cooks, the acres of burning kitchen, the unbroken stench of dead flesh? And if that omelette is never made, won't the idea of the omelette - finer and purer and more pristine than the thing itself - have been worth them all, in the end?

We must remember that for each complete failure the media reports - the innocents tortured to death without reason - there are hundreds of mere semi-failures we can never know about for reasons of vital national security, when the torture and murder of innocents stops a treacherous ticking bomb. Indeed, we must believe - no, assume - that with each new horror a new blow is struck for freedom, that with every new atrocity a fresh-painted Iraqi school blooms like a rose bud in spring.

The day will come when the justice of this is made manifest, when these heaps of corpses will be vindicated as unquestionably righteous. That day is ahead of us, a bright light at the end of this dark tunnel. Can you see it growing closer, brighter, louder? Victory is bearing down on us with the sound of thunder.

Revenge of the Sith

Wow! What an experience! The misdirection as to the identity of the Evil Sith Lord in episodes 1 and 2 was completely successful! I was flabbergasted to learn who the evil mastermind really was!

It echoes through my mind still, and always will:

"Meesa no name Jar-Jar Binks! Meesa name: DARTH SIDIOUS!!!!"

General Relativity Made Concise

John Baez writes:

Einstein's Equation: We promised to state Einstein's [general relativity] equation in plain English, but have not done so yet. Here it is:

Given a small ball of freely falling test particles initially at rest with respect to each other, the rate at which it begins to shrink is proportional to its volume times: the energy density at the center of the ball, plus the pressure in the x direction at that point, plus the pressure in the y direction, plus the pressure in the z direction.

In the final section of this article, we will prove that this sentence is equivalent to Einstein's equation. The reader who already knows general relativity may be somewhat skeptical of this claim. After all, Einstein's equation in its usual tensorial form is really a bunch of equations.... It is hard to believe that the single equation (2) captures all that information. It does, though, as long as we include one bit of fine print: in order to get the full content of the Einstein equation from equation (2), we must consider small balls with all possible initial velocities -- i.e., balls that begin at rest in all possible local inertial reference frames...

That is remarkably concise. Of course, the amount of auxiliary stuff you need to surround that equation with in order to calculate things with it is enormous...

And I wish somebody, sometime would tell me why Einstein's theory differs from Newton's in its prediction of the precession of the perihelion of Mercury...

Variance of Price/Rental Ratios

General Glut makes excellent points:

General Glut's Globblog: There are many bits of evidence one can muster to identify housing bubbles. The Sunday New York Times trotted out a lot of data on purchase-to-rental price ratios to further bolster the argument that in California, Florida and parts of the Northeast, it's bubblemania.The logic of the indicator is, of course, that if purchase and rental prices both increase at roughly the same pace, there are some actual economic fundamentals driving the inflation: population growth, job growth, income growth, whatever. Of course, the ratio can increase somewhat if the quality of the purchased housing stock rises more than the quality of the rental housing stock, but there shouldn't be a complete disconnect between the two.

Read the entire article to get a flavor for the data, but check out this chart for something to chew on. What stands out most remarkably to me is that in 2000:I, before the US asset-based economy switched from stocks to housing, the purchase price to rental price ratio across all major US housing markets (data for 54 of them are reported) was virtually the same. The national average stood at 11.6, with San Jose at the high end (14.1) and Pittsburgh at the low end (10.5). Note that this gap was not wide: San Jose was 122% of the national average and Pittsburgh was 91%.

It's quite a different story five years later. In 2005:I, the ratio for the national average is up to 17.1, with the top and bottom at an amazing distance from one another. The peak is now San Francisco at a stunning 34.1 (San Jose is a close second at 34.0); the trough is Albuquerque at 11.8 -- still above the national average from five years ago, I might add. Thus the high is now 199% of average; the low, just 69%.

Not only is the gap tremendously larger with the peaks in the stratosphere. The opposite motions of purchased versus rental home properties in a few markets has to be a harbinger of danger. Over the past five years, rental prices have actually decreased in frothy San Jose, San Francisco and Oakland, and have barely budged in New York, all while purchase prices have vaulted skyward...

Andrew Samwick at the Crossroads

Andrew Samwick thinks about what the Republican Party is--or, rather, what it might become:

Vox Baby: The Conservative Movement at the Crossroads: PGL from AngryBear notes that Max (of the newly and impressively redesigned MaxSpeak) linked to the Washington Post story in which I am quoted as follows:

"I'm inclined to support the Republican Party, but the question becomes, how much other stuff do I have to put up with to maintain that identification?" asked Andrew A. Samwick, a Dartmouth College economics professor who until recently was chief economist of Bush's Council of Economic Advisers.
I served on the staff at CEA from July 2003 through June 2004. The story quotes me later with:

Samwick said the disenchantment of small-government conservatives has been building since the passage of the USA Patriot Act, which some saw as infringing on individual liberties, and the Medicare drug benefit, which created future government liabilities that exceed the entire projected Social Security shortfall.

"Some of these outcomes are really starting to alienate people who might be Republican because they are for limited government," Samwick said.
The story quotes me accurately. The trigger for me has been the fiscal policy, and the unfunded expansion of Medicare in particular. I don't have big problems with the Patriot Act or the faith-based programs. However, the quotes should not be construed to suggest that I wouldn't support the President's Social Security plan relative to the status quo or that I was particularly impressed with the challengers that the Democrats managed to put on the ticket the last time around.

I was interviewed about this topic on the Arnie Arnesen radio show this afternoon. Like a lot of people, neither of the two political parties line up particularly well with all of my views. That's been true for a while with the Democrats for me. It's a newer phenomenon with the Republicans--as they have stood less and less for limited government, which best summarizes my general view.

I think this issue is well captured in Newt Gingrich's recent white paper, with the same title as this post. (The Speaker visited campus as a guest of the Rockefeller Center last month and presented these ideas in a Government course.) He's been out of elected office for long enough now that he can "campaign" as an outsider. Here's what he had to say in the paper's introduction:
For almost a half century, from the early effort of William Buckley and National Review and the publication of Conscience of a Conservativeby Barry Goldwater, the conservative movement has been a dynamic, defining force in American politics and government.

Now at the very moment that members of the movement are in control of the White House, the House and Senate, and many governorships and state legislatures, conservatives find themselves at a crossroads.

Elected officials find themselves caught between explaining and defending the institutions over which they preside and the impulse to continue to criticize and change those institutions. The longer people are in office the more likely they tend to defend the very bureaucracies and the very policies which they may once have campaigned against. The impulse to force a transformation of those institutions is gradually overwhelmed by an impulse to preside. Presiding over an existing bureaucracy is not the same as forcing the creation of a new form and style of government.

Should the conservative movement be:

1. A movement at the grassroots dedicated to insisting on transformation of government into an institution capable of meeting the challenges of a rapidly changing 21st century world within the values of smaller government, lower taxes, stronger national security, greater individual freedom and strengthening American civilization as a unique “Creator endowed” system of human liberty; or,

2. A national and state capital- focused system of defending whatever today’s compromises with the old order of liberal big government requires because after all the people presiding over the system are people we support.

To state it more directly, should we be comfortable with presiding over the bureaucracies, special interests, and spending of the liberal government we have inherited or must we insist on transforming that obsolete system into a new, more dynamic, and significantly different system of governing?
You can read more about Newt's ideas in his new book, Winning the Future.A lot of the book makes a lot of sense. He would prefer that the Republican Party focus on governmental transformation and reduced spending, but he makes an appeal to the religious constituency as well. However, we can also see dissension from those in the Republican Party who wouldn't necessarily agree with Newt's proposals any more than they would with the Administration's policies. Consider Christine Todd Whitman, and her new book, It's My Party, Too.She wants more fiscal balance and almost everything else on the party's current agenda except for the "social fundamentalist" issues.

So the question becomes, "What does the Republican Party look like when it emerges from this internal contest? Which of these politicians represents the core constituency's ideas in 2008--Bush, Gingrich, or Whitman?"

Tyler Cowen Says that Jesse Shapiro Is an Underappreciated Economist

Tyler writes:

Marginal Revolution: Underappreciated economists, a continuing series: Jesse Shapiro. Yes, he is a mere Youngling, having just finished his Ph.D. at Harvard (he was a Shleifer student, and now visiting at Chicago). But he is likely to be one of the leading economists of the next generation. He studies why and how large numbers of people can make, or appear to make, systematic errors. This is perhaps the frontier question in contemporary economics. Here is the abstract from Jesse's paper on advertising:

I present a model of advertising in the presence of bounded memory and limited recall. In the model, consumers' memories record the quality of their experiences with a product. Exposure to advertising leads to memories of good experiences. Crucially, I assume that consumers cannot recall whether a memory orginates from a genuine consumption experience or from exposure to advertising. The model yields several novel implications. First, advertisers will concentrate their efforts on past customers, because experienced consumers will be more likely to trust that their positive feelings toward the brand are genuine. The model may therefore help to explain why established, familiar brands continue to advertise extensively. Second, the firm's desire to "saturate" the consumer with positive memories can lead to the commonly observed phenomenon of "pulsing," in which a firm oscillates between no advertising and some positive amount. Third, exaggeration is limited, in the sense that advertisers may not cause consumers to remember haivng extraordinary experiences with the brand. Indeed, under some conditions an equilibrium in which advertising conveys the best possible impression of the brand can exist only when the total amount of advertising is small.

After the Downing Street Memo

Big Brass Blog writes:

Big Brass Blog : The Big Brass Alliance was formed in May 2005 as a collective of progressive bloggers who support After Downing Street, a coalition of veterans' groups, peace groups, and political activist groups formed to urge that the U.S. Congress launch a formal investigation into whether President Bush has committed impeachable offenses in connection with the Iraq war. The campaign focuses on evidence that recently emerged in a British memo containing minutes of a secret July 2002 meeting with British Prime Minister Tony Blair and his top national security officials...

It's not clear to me why the Downing Street Memo makes a difference. Enough evidence--a mountain of evidence--already exists.

The Flower Carrier

Diego Rivera's "The Flower Carrier" at SFMOMA:

The guide said, "You have to be able to think like a communist--or at least an economist--to understand this painting."

It's true. You have to note:

  1. That in reality it's not the big basket of flowers that is bone-crushingly heavy--but the burden of being an unskilled worker under modern capitalism is very heavy.
  2. That flowers are and are a symbol of pleasant luxury--but the flower carrier never sees them: for him they are not pleasant use values, but only exchange values.

It is, I think, my favorite painting at SFMOMA.

But I also found William Kentridge's "Tide Table" to be very, very good as well:

artblog: Upstairs... we wound our way... into the permanent collection where we found the Kentridge piece, 'Tide Table' (2003).... The piece, like other Kentridge works, intertwines the character Soho Eckstein, a white industrialist who is the stand-in for the artist, with the lives of black South Africans. Here, Soho vacations at the beach and quickly the beach scene dissolves into one of hospital-dormitories with people dying of AIDS. The tide comes in, the tide goes out like the lives ebbing and flowing...

Paul Krugman Gets in Touch with His Inner Friedrich Hayek

Not Hayek the post-WWII libertarian political philosopher, but Hayek the interwar business cycle theorist.

Hayek's theory of depressions was that they started when, for some reason, interest rates got too low--below fundamentals. If interest rates are low, asset prices are high--above their fundamentals. Because financial markets are sending false signals that capital--whether in the form of machines, business organizations, commercial buildings, or housing--is very valuable, the market shift resources into capital-producing sectors and adds to its capital stock.

Someday, however, interest rates return to their fundamentals. When they do, asset prices fall sharply: it becomes clear that there are a lot of business organizations, machines, commercial structures, and houses that do not produce value to cover their costs. The last thing needed is more investment. Workers, entrepreneurial energy, and capital have to be shifted out of capital-goods production and into the production of consumer goods and services. And, said Hayek, it is that painful, lengthy, but necessary process of shifting resources out of capital-goods production that we call a "depression."

In Hayek's monetary overinvestment theory of the business cycle, the magnitude of the depression depended on the magnitude of the required structural shift, which depended on (a) how much interest rates had been pushed below fundamentals, (b) how long they had been pushed there, and (c) how much damage--in terms of capital investments that should not have been made given fundamental values--the false prices fed to the real economy by the financial sector had done.

It was a corollary to Hayek's main theory that lowering interest rates when a boom was ending was a counterproductive thing to do. It would push off the depression, yes. But only at the price of magnifying the overinvestment imbalance and thus magnifying the magnitude of the depression when it finally arrived.

It was bad luck for Hayek that he proposed his theory just as the Great Depression arrived. It was not a plausible theory of the Great Depression, not a plausible theory at all.

But today we see Arch-Keynesian Magister Paul Krugman flirting with a Hayekian line wobble:

Running Out of Bubbles - New York Times: Remember the stock market bubble?... [A] few pessimists, notably Stephen Roach of Morgan Stanley, argue that we have not yet paid the price for our past excesses. I've never fully accepted that view. But looking at the housing market, I'm starting to reconsider.

In July 2001, Paul McCulley, an economist at Pimco, the giant bond fund, predicted that the Federal Reserve would simply replace one bubble with another. 'There is room,' he wrote, 'for the Fed to create a bubble in housing prices, if necessary, to sustain American hedonism.... [I]nterest rate cuts led to soaring home prices, which led in turn not just to a construction boom but to high consumer spending, because homeowners used mortgage refinancing to go deeper into debt. All of this created jobs to make up for those lost when the stock bubble burst.

Now the question is what can replace the housing bubble.

Nobody thought the economy could rely forever on home buying and refinancing. But the...[I]f the hectic pace of home construction were to cool, and consumers were to stop borrowing against their houses, the economy would slow down sharply. If housing prices actually started falling, we'd be looking at a very nasty scene.... That's why it's so ominous to see signs that America's housing market... is approaching the final, feverish stages of a speculative bubble.... In parts of the country there's a speculative fever among people who shouldn't be speculators that seems all too familiar from past bubbles - the shoeshine boys with stock tips in the 1920's, the beer-and-pizza joints showing CNBC, not ESPN, on their TV sets in the 1990's....

[I]t's true that the craziest scenes are concentrated in a few regions, like coastal Florida and California. But these aren't tiny regions; they're big and wealthy, so that the national housing market as a whole looks pretty bubbly. Many home purchases are speculative; the National Association of Realtors estimates that 23 percent of the homes sold last year were bought for investment, not to live in. More than 30 percent of new mortgages are interest only, a sign that people are stretching to their financial limits.

The important point to remember is that the bursting of the stock market bubble hurt lots of people - not just those who bought stocks near their peak. By the summer of 2003, private-sector employment was three million below its 2001 peak. And the job losses would have been much worse if the stock bubble hadn't been quickly replaced with a housing bubble. So what happens if the housing bubble bursts?...

Mr. Roach believes that the Fed's apparent success after 2001 was an illusion, that it simply piled up trouble for the future. I hope he's wrong. But the Fed does seem to be running out of bubbles.

I would admonish him for this wobble away from Keynesian orthodoxy toward Stephen Roach-Friedrich Hayek deviationism. But I feel the same way. With each month that passes Roach and Hayek look a little bit better.


For a long, long time--it was 43 years ago when Bob Solow made this point while working for the Kennedy Council of Economic Advisors--it has been next to impossible for an economist serious about boosting national savings to avoid saying "balance the budget". Balancing the budget--indeed, moving it into surplus--is almost certainly very close to a magic bullet for increasing national savings, and it's a very good bet that it's the most effective thing the government can do to boost national savings. It's the first an highest priority for those who do care about boosting national savings.

It is very difficult for a real economist to talk about boosting national savings without saying "balance the budget." Greg Mankiw manages:

Magazine - Economist Greg Mankiw Sounds Off on Karl Rove, Paul Krugman, and More - FORTUNE - Page 5: [W]hile the trade deficit isn't a problem in itself, it may be a symptom of a problem. The problem is that Americans aren't saving enough. I don't think there's a single magic bullet to increase national saving, but I do think a switch from an income tax to a consumption tax would help.

Q: But we don't seem to have had much success with efforts to bolster the savings rate, which remains near record lows.

A: I'm intrigued by some compelling evidence from [Harvard economics professor] David Laibson and others that if you design 401(k)s differently, you could improve saving a lot. For example, suppose we made the default for a 401(k) plan that people have to decide to opt out if they don't want to save, rather than having to opt in if they do want to save, as is currently the norm. The evidence suggests that the participation rate would increase substantially.

And let's not forget that while a trade deficit may not be a problem "in itself," a large trade deficit funded by foreign central bank purchases of dollar-denominated assets at a rate that they cannot sustain is a problem "in itself."

Making Light: Getting serious about "getting serious"

Patrick Nielsen Hayden's Electrolite has been absorbed by his wife's Making Light in what is on Wall Street referred to as a "merger of equals". This leaves him time to get seriously shrill about "getting serious about national security":

Making Light: Getting serious about "getting serious": Atrios discusses self-identified "liberal hawks":

The primary conceit of the "liberal hawks" has been and is that only they are "serious" about the security of the nation. Support for the Iraq war demonstrated that seriousness, no matter how misguided it was. The truth is concern for our national security was a very real reason to oppose the Iraq war, and the primary reason for lots of its opponents.

He's right. The reason so many in the Democratic "base" are infuriated over being lectured by the likes of Peter Beinart and Joe Biden about the need to "get serious about national security" is that the people delivering the lectures are precisely those who were wrong about one of the most important national security questions of our time. As a result we've spent $172 billion and 1600 American lives, damaged our military immeasurably, trashed America's global reputation for justice and fair play, and given the bin Ladens of the world a gift that will keep on giving for generations to come. The entire enterprise has made us profoundly less secure. Meanwhile, I live three blocks from New York Harbor, and port security is still, by all reports, a complete joke.

The fact of the matter is that the supposed distance between self-identified "national security Democrats" and the allegedly dovish party "base" is based on a self-serving slur promulgated by people with something to hide. The NSDs want to impute that run-of-the-mill Democrats and liberals have a deficit of temperament, a persistent inability to understand that sometimes America has got to go out and kill people. In the wake of being spectacularly wrong about Iraq, the NSDs are even more eager to promote this.

It is, of course, a bum rap. Liberal Democrats like Atrios, or me, aren't remotely opposed to "national security." We're strongly in favor of it. Getting killed because I'm an American, at home or overseas: bad. Spending money and resources to protect me from getting killed: good. Maintaining a strong military, at least until planetary utopia breaks out and there are free Jill Johnston posters for everyone: really good. Making all of that far harder, and increasing my likelihood of getting killed, because some politicians and pundits needed to "look tough": really, really bad. Likelihood that I'm going to take my cues on "national security" from those politicians and pundits: low.

At times it all seems like some sort of Bizarro World faith-versus-works argument. Liberals wind up being the ones pointing out, endlessly, that national security is provided by actual practices, not just by holding your face right. Meanwhile popinjays like Joe Biden desperately file their chins to razor-sharpness in the probably vain hope that the electorate, having sometimes demonstrated a preference for strutting phonies, will mistake them for one. And of course the fact remains, as the Poor Man never ceases to remind us: Michael Moore is fat.

Why Oh Why Are We Ruled by These Idiots? (Special California Edition)

Cory Doctorow finds this one:

Schwarzenegger creates, then fills Potemkin pothole: California governor Arnold Schwarzenegger dispatched a road crew to a residential street in San Jose to create a pothole, which he later turned up and filled, grinning for news-cameras and declaring his willingness to increase funding for transportation projects. The Potemkin pothole was later sealed by a roadcrew with a gigantic roller truck,

Porrovecchio and his business partner, Joe Greco, said that at about 7 a.m. they became fascinated watching '10 city workers standing around for a few hours putting on new vests,' all in preparation for the big moment with Schwarzenegger. But their street, he noted, didn't even have a hole to pave over until Thursday morning. 'They just dug it out,' Porrovecchio said, shrugging. 'There was a crack. But they dug out the whole road this morning.' 'It's a lot of money spent on a staged event,' said Matt Vujevich, 74, a retiree whose home faced the crew-made trench that straddled nearly the whole street. 'We still have the same problems. Everything's a press conference.'


The San Jose Mercury News says, "Get a Mac!"

Good Morning Silicon Valley: Sure, I could get a Mac, but the time I spend with my daughter removing spyware is very precious: Listening to Intel CEO Paul Otellini at the All Things Digital conference the other day, you'd think he was heading up Apple's marketing department. From today's Wall Street Journal:

Pressed about security by (a reporter), Mr. Otellini had a startling confession: He spends an hour a weekend removing spyware from his daughter's computer. And when further pressed about whether a mainstream computer user in search of immediate safety from security woes ought to buy Apple Computer Inc.'s Macintosh instead of a Wintel PC, he said, 'If you want to fix it tomorrow, maybe you should buy something else.'

Jim Henley Has Some Good Advice

He tells us:

Things That Surely Go Without Saying But Don't: Beating captives to death does not exhaust the list of "abuses" one can commit against captives. We know of two people, so far, who had their legs crippled and were hung from the ceiling until they died. We have not been discussing the people who had their legs crippled but weren't hung from the ceiling, the people who were hung from the ceiling and didn't die, or those who were tortured in other ways at Bagram Air Base, but what we know makes it pretty clear such people existed. (For instance people whose legs were beaten, but not to the point of permanent ruin.) The torture apologists will intone "two people two years ago" because that's their established method: exaggerate a detail until it obscures the full story. Don't fall for it.

Fire Donald Rumsfeld. Impeach Richard Cheney. Impeach George W. Bush. Do it now.


Musings on Finance

Powerpoint slides for a talk, Musings on Finance, that I gave at a Global Association of Risk Professionals San Francisco chapter meeting; Room 303, 425 Market St. (San Francisco State University Downtown Center), San Francisco, CA; May 26, 2005; 3:00 PM.

Electricity in Iraq

Jim Henley notes:

Unqualified Offerings: Tim Lambert's tabular history of the "good news" on the [Iraq] electricity front is a useful contribution to the field. His summary:

Due to lack of maintenance, electricity production fell from 9000 MW in 1991 to 4400 MW before the war. Since then, there have been many announcements of improved generating capacity and production has fallen further to 3560 MW.

Sadly, Dana Gioia's poem, "News from 1984," is not online.

Gillian Tett on Credit Derivatives and IB Losses

From the Financial Times: / Companies / Financial services - Credit derivative swings hit hedge funds: Recent swings in the price of credit derivatives have inflicted losses of about $1bn (£550m) on hedge funds and large banks, according to estimates by Goldman Sachs. The figure - which some traders consider far too conservative - represents the first public estimate of the damage created by the recent turmoil in instruments such as collateralised debt obligations. "A back-of-the-envelope calculation suggests that the change in net present value among market-to-market players [in the CDO market in the past three weeks] is about $1bn," Claus Toft, a senior strategist at Goldman Sachs, told a conference in London....

Mr Toft stressed that the losses sustained by hedge funds and banks could be easily absorbed by the overall financial system. However, the estimates come amid intense curiosity about the problems faced by some institutions in the CDO market. So far no bank or hedge fund has admitted to serious losses from CDOs. And some bankers hope that these losses will shrink in the coming weeks, if credit market prices recover. Indeed, some bankers now believe that a rebound is under way, because new investors are coming into the market....

The main reason hedge funds and banks suffered was that they held the so-called "equity" tranches of CDOs, the riskiest slice of debt. These tranches fell in price in mid-May, partly due to the problems at General Motors and Ford, the US carmakers...

Yes, Andrew Sullivan Is Still a Dork

He writes: - Daily Dish: MANKIW ON KRUGMAN: Almost as damning as Dan Okrent.

And gets eviscerated by an anonymous correspondent:

You are dead wrong (as well as sloppy and lazy) in your portrayal of Okrent and Mankiw's statements about Paul Krugman. (For the record, I know both Paul and Greg. although not well.)

The Okrent case is the more egregious: he says that Krugman "slices and dices" data to support his point of view, without offering an example. I'm an economist myself, and know the macro data very well. I can't think of single example to support Okrent's statement. (Paul has published corrections regarding a couple of minor, and non-substantive, points.) Most conservative attacks on his arguments involve innumeracy or sheer ignorance of basic facts or basic principles of economics; many involve willful misrepresentation.

Now consider Greg's statement (and I'm paraphrasing) that "Paul seems to think that everyone who disagrees with him is either fool or a liar." To begin with, I'll stick to economics. The plain fact is that the Bush Administration has been consistently and deliberately mendacious in its public portrayal of its economic policies. (This characterization, by the way, is the overwhelming consensus in the professional economics world, which includes many conservatives.) Capable policy apointees (like Greg or Glen Hubbard) have had no meaningful input in this Administration; nor has the professional staff at places like Treasury or CEA. All economic policy involves politics. But the politicization of the policy making process in this Administration is without precedent in my professional life.

Paul would have been called a moderate or even conservative Democrat prior to this Administration. (Read his classical essay, "In Praise of Cheap Labor," if you're under the illusion that he's some sort of leftist.) So would I. Paul appears strident only because he's had the bad manners to say that people are lying when they're obviously lying. (A prominent case in point: many of the President's public statements about the finances of the social security system have been plain, simple untruths.) And what's maddening to Paul, and to me, is that there's no core of conservative principle in this Administration. A conservative devotion to free markets has been displaced by reckless spending, reckless tax cuts, crony capitalism and special interest give-aways. What "balanced" take on these issues should Paul offer?

More generally, you should know better. Remember, I've confined myself so far to economic policy. Do you want to defend the honesty and integrity of this Administration on, say, abuse of detainees?

And then gets re-eviscerated by Matthew Yglesias:

Matthew Yglesias: The Lies, The Lies: As we know, and as this letter writer to his site reminds us, Andrew Sullivan has been a pretty consistent proponent of the view that Paul Krugman is some sort of liar. At issue, are Krugman's repeated insistences that George W. Bush's economic policy is founded on a tissue of lies. Krugman is, of course, entirely correct about this. The unnoted irony here is that in his May 14, 2001 column 'Downsize,' Sullivan conceded Krugman's point:

Ah, but the details. The Krugmans and the Chaits will shortly have a cow, if not a whole herd of them. The Times will weigh in again with yet another barrage of articles, editorials, and op-eds opposing any tax relief that would actually benefit those who pay most of the taxes. And, to be fair to these liberal critics, they're right about one thing. One of the tax cut's effects will surely be that the United States won't be able to afford a vastly expanded Medicare drug benefit. And the archaic sinkhole known as Social Security won't be shored up either. And Medicare, may the gods preserve us, may even have to grow at a slightly slower rate. In fact, many of the spending programs that some still believe solve most human problems will encounter the only political resistance that matters in budgetary matters: insolvency.

To which my response is: Hoorah. We don't need these expansions of the welfare state. We need to privatize Social Security if we want to provide for our retirement in ways slightly more up-to-date than those based on economics and life-expectancy figures devised in the 1930s. We don't need to add yet another entitlement for the most pampered generation--our current seniors.

And if there is one thing we have learned in the past 20 years, it's that controlling government spending is simply impossible without deficits. Look back at the last decade. A huge part of Bill Clinton's economic success was his remarkable grip on public finances. He deserves credit for this, although the Republican Congresses from 1994 to 1998 were mainly responsible, and Ross Perot made deficit-cutting hot. But from 1998 on, all hell broke loose. Last year, discretionary spending increased by a whopping 8 percent--under the Republicans. The minute deficits became surpluses, in other words, the politicians started bribing the voters with their own money. The only relevant question is: Why do Dennis Hastert, Trent Lott, Dick Gephardt, and Tom Daschle know better than taxpayers how to allocate their own resources? . . . Some commentators--at this magazine and elsewhere--get steamed because Bush has obscured this figure or claimed his tax cut will cost less than it actually will, or because he is using Medicare surplus money today that will be needed tomorrow and beyond. Many of these arguments have merit--but they miss the deeper point. The fact that Bush has to obfuscate his real goals of reducing spending with the smoke screen of 'compassionate conservatism' shows how uphill the struggle is.

Yes, some of the time he is full of it on his economic policies. But a certain amount of B.S. is necessary for any vaguely successful retrenchment of government power in an insatiable entitlement state. Conservatives learned that lesson twice. They learned it when Ronald Reagan's deficits proved to be an effective drag on federal spending (Stockman was right!)--in fact the only effective drag human beings have ever found. And they learned it when they tried to be honest about taking on the federal leviathan in 1994 and got creamed by Democrats striking the fear of God into every senior, child, and parent in America. Bush and Karl Rove are no dummies. They have rightly judged that, in a culture of ineluctable government expansion, where every new plateau of public spending is simply the baseline for the next expansion, a rhetorical smoke screen is sometimes necessary. I just hope the smoke doesn't clear before the spenders get their hands on our wallets again.

Now needless to say, Sullivan differs from Krugman in thinking that this is a good thing, while Krugman thinks it's a bad thing. But that's really all there is to it. Bush was lying. As Sullivan correctly points out, the lies were integral to securing public tolerance for Bush's agenda. Krugman has tried to expose the lies in hopes of denying Bush's agenda public support. It's very hard to see how Krugman can be held culpable in this scenario.

Why Oh Why Are We Ruled by These Liars? (George W. Bush Smirks Edition)

Kevin Drum's shrillness level exceeds aleph-null:

The Washington Monthly: "George Bush's rhetorical stance is that democracy is on the march and 138,000 troops are more than enough to get the job done in Iraq. He knows perfectly well this isn't true, but in public he just smirks and says that he'd be happy to send more troops over if any of his generals asked for them.... George Bush... [is] one of the shrewdest politicians to inhabit the Oval Office in a long time, but he doesn't sound like he's being shrewd. He sounds like he really believes that our current troop strength is perfectly adequate.

So what's the answer? As Juan Cole says, 'Sometimes You are Just Screwed.' Bush knows near term success is impossible with current troops levels, just as he knows that his economic policies are unsustainable as well. In both cases, he seems to be hoping only that he can avoid disaster during the next three years and then hand off both problems to his successor in 2009 while he retires to the ranch. Politics doesn't get much more cynical than that.

Bob Rubin on Social Security

From The Hill:

Rubin urges Democrats not to reveal their hand: Former Treasury Secretary Robert Rubin, the steward of President Clinton's economic policy, told the House Democratic Caucus yesterday that it needs to continue to "hold firm"... and advised the Democrats not to introduce their own plan, according to aides and lawmakers in the meeting. Rubin, who has gained huge stature in the party for presiding over the national finances during the Clinton boom years, counseled congressional Democrats against engaging Republicans on specifics. He urged them instead to cast the debate in terms of principles.... In a sweeping review of the fiscal health of the country, the strength of the dollar and international trade, Rubin said that Social Security ranks third behind deficit reduction and Medicare reform as the most important economic policy issue facing the country. He also warned his fellow Democrats that they would need to work in a bipartisan manner with Republicans to address Medicare's deep problems.... "From a political standpoint, [Rubin] said, hold firm because you have a difference in principles; their principle is a privatization plan, ours is not to add to the deficit, and there's not a whole lot of room for compromise. 'They control the playing field. We can't get into this debate without compromising our principles.'"

David Francis on Mobility and Inequality

Mark Thoma reads the Christian Science Monitor, and finds a good article:

Economist's View: Is The American Dream Fading?: This article discusses the decline in income mobility in recent decades and asks if the US " becoming less of a meritocracy, where skill and intelligence determine success, and... more of a class-bound society...":

The American Dream gains a harder edge, By David R. Francis, The American dream, at least on the economic side, is fading.... Today... nearly 1 in 5 American households has zero net worth or actually owes more than it owns. And the odds of a son or daughter rising above their parents in such a financial predicament have shrunk. 'Income mobility has declined in the last 20 years,' says Bhashkar Mazumder, an economist at the Federal Reserve Bank of Chicago. What that means is that the US is becoming less of a meritocracy, where skill and intelligence determine success, and becoming more of a class-bound society, where economic background, including the better education money can provide, matters more.... Most Americans don't believe that to be true, surveys show. But academic studies suggest that income mobility in the US is no better than that in France or Britain. It's actually lower than in Canada and is approaching the rigidity of Brazil. That marks a change from the past.... From 1950 to 1980, Americans were more and more likely to see their offspring move up - or down - the income ladder.... Today, it could take five or six generations to close the gap between poverty and middle-class status, calculates Mr. Mazumder...

The Logical Structure of the Geneva Conventions

Paul Lukasiak writes:

The key to understanding the Geneva Conventions is that they were designed to protect everyone placed under the authority of an "enemy" during wartime. Absent the findings of a competent tribunal that someone had committed war (or other) crimes, everyone had to be treated as either a POW or a "non-combatant".

The granting of POW status is not a "benefit" under the conventions -- it is designed to enumerate (and thereby restrict) the rights of captured combatants (as opposed to captured non-combatants). In other words, there are rights granted to captured non-combatants that are far greater than those granted to combatants. The definitions for "POW status" deliniate whom a capturer can provide the limited rights afforded to combatant --- and the rights afforded "POWs" are the minimum rights granted under the Conventions.

Today's Snark Prize Goes to

Miriam Burstein. Very high quality snark:

The Little Professor: Cited by: Donald Kagan's Jefferson Lecture. Despite Kagan's warnings against the dangers of over-generalization, his critique of contemporary historiography was so non-specific--apparently, we're still stuck in 80s crusades against DWM--that I had a hard time finding the "there" there.... Being an English professor, albeit of the old-fashioned literary-historical variety, I naturally pricked up my ears (eyes?) when I stumbled across some references to Stanley Fish and Paul de Man. I was a tad puzzled to discover that Kagan didn't cite Stanley Fish and Paul de Man directly, but only from excerpts: Fish from Roger Kimball's Tenured Radicals and de Man from David Lehman's Signs of the Times: Deconstruction and the Fall of Paul de Man.

When I teach my graduate students how to evaluate secondary sources, I always ask them to consider how many times the author chooses to cite primary sources that have been quoted in other works, as opposed to citing directly from the original texts. While it's legitimate to cite a primary source "quoted in" another work when you cannot access the original text... there's no excuse for citing easily available sources in such a fashion. How can you tell if the quotation has been taken out of context or misquoted? What if your secondary source hasn't understood the original text? There's something rather depressing about reading a paean to traditional historical inquiry, only to discover that the author is generalizing about something that he apparently knows only in snippets and at secondhand.... Now, Richard J. Evans does a fine job of critiquing postmodern theories of history, precisely because he's done the reading, has clearly thought about it at some length, and can separate the wheat from the chaff. No vague handwaving there...

Who Rules the Streets of Basra?

Praktike writes:

Tales from Basra | Liberals Against Terrorism: People who have been paying attention more or less knew this already, but Steven Vincent is reporting that the streets of Basra remain controlled by shadowy religious parties:

Sitting in the plastic chair beneath the harsh fluorescent lights, watching teary-eyed men smoke cigarettes and sip their tea, I wondered about these unnamed people in Basra who 'chose to take life so cheaply'--often in the name of the Iraqi people, sanctioned by their own idea of religious virtue, purity and divine retribution. They rule the streets of Basra now. Everyone is afraid of them, including me. But more on this topic, I cannot say.

College Dropouts

Mark Thoma tells us to go read David Leonhardt:

Economist's View: The Dropout Boom and the Growing Education Gap: This article describes the rising college drop-out rate, particularly among lower income students, and the widening education gap this is bringing about. The article also looks at potential causes of the rising dropout rate and policies attempting to reverse the trend:

The College Dropout Boom, By DAVID LEONHARDT, NY Times: One of the biggest decisions Andy Blevins has ever made, and one of the few he now regrets, never seemed like much of a decision.... He had been getting C's and D's, and college never felt like home, anyway.... So he quit college... and... joined one of the largest and fastest-growing groups of young adults in America. He became a college dropout... Only 41 percent of low-income students entering a four-year college managed to graduate within five years, but 66 percent of high-income students did. That gap had grown over recent years....

Rumors that GM *Is* Going to Shovel Lots of Cash Out of the Enterprise

The question of why the auto companies aren't shoveling cash out of their enterprises is partially answered. Lee Hawkins reports:

Heard on the Street: Wall Street is betting that General Motors Corp. -- facing the twin issues of having its bonds rated 'junk' and Las Vegas billionaire Kirk Kerkorian's tender offer under way -- soon will undertake a more ambitious restructuring... GM's highly profitable finance arm, General Motors Acceptance Corp., which last year earned $2.9 billion, or about 80% of GM's total net income. GMAC's potential for growth was crimped when Standard & Poor's downgraded GM's credit ratings to junk status earlier this month.... Now, some analysts say selling all or part of GMAC would help GM raise more cash to pay for an overhaul of its money-losing North American auto business -- or a payout to shareholders -- while allowing GMAC to obtain an investment-grade debt rating that will allow it to grow....

Action in GM's shares suggests that investors are betting that something big will happen, but watching the debt situation warily....

Getting concessions from the UAW to close more plants and reduce GM's work force still might not be enough to make a significant difference, says Ron Tadross, an auto analyst at Banc of America. 'The UAW is no silver bullet here,' he said, since labor costs represent only about 20% of the cost equation for GM.... The core of GM's current problem isn't cash -- it is sitting on $54.9 billion -- but declining revenues per vehicle in North America, a reflection of slumping sales of large sport-utility vehicles and mediocre demand for many of GM's cars....

Some shareholders want more significant steps. 'I would hate to see them split off some of their best assets, but at the same time they need to take some strong action to save the company,' says Christopher Ailman, chief investment officer of the California State Teachers Retirement System, the third-largest public pension fund in the U.S. Some analysts caution that it wouldn't be a simple matter for GM to simply sell GMAC.... If Mr. Wagoner raised cash with a GMAC transaction, how would he spend the money? Some analysts have suggested GM could use the proceeds of a GMAC deal to fund employee-buyout plans.... [A]ny windfall from a GMAC deal also could be returned to shareholders. Mr. Kerkorian has in the past invested in companies and then pushed management to return more wealth to shareholders.... 'The benefit [of selling GMAC assets] would be really to GM shareholders as opposed to GM as an ongoing company,' says Brian Johnson, an auto analyst at Sanford C. Bernstein. 'It gets money in their pocket and forces GM to negotiate with the UAW without the GMAC piggybank in their pocket.'...


An interesting email telling me why I can't submit my students' "egrades":

Date: Tue, 24 May 2005 23:18:20 -0700
To: Brad DeLong
From: Bear Facts Team
Subject: Re: Technical Issues

The system is heavily overloaded at egrades time. Response times are made slow by a heavy influx of students checking their grades, and the processor never gets a chance to recover because they just keep pounding on the system, making response times worse.

A system critical to the university's smooth functioning at a critical time. High demand not a surprise.

Edward Hugh on the European Central Bank

He writes:

A Fistful of Euros: Crisis Looming At The ECB?: A right royal row is brewing at the ECB. Basically the old guard theorists of the "one size fits all" monetary policy are being challenged by more pragmatic observers of day to day realities. For the moments it is the politicians who are making the running (but there are plenty of competent economists in Germany and Italy who are ready to back them up), and yesterday the OECD joined the fray....

[Y]ou have the theorist of the old guard over at the ECB Otmar Issing: "European Central Bank chief economist Otmar Issing said euro zone growth differentials have to be addressed by national economic policies rather than by the ECB's interest rate policy." In fact Issing is really digging in. He provocatively gave this One Size Fits All speech on 20 May. His conclusions were as follows: "Let me conclude with a citation. On the eve of the changeover, I wrote a commentary on diversity and monetary policy in the euro area. To the question whether a single one-size monetary policy could fit all parties involved -- be they national entities, social partners or economic actors -- my answer was: 'One size must fit all'. The political decision on the creation of EMU had resolved all discussions on whether monetary union should precede or follow political unity and the fulfilment of the criteria for an optimum currency area. Today, in light of the evidence gathered so far in the euro area, I am more confident in saying: 'One size does fit all!'"

p>Obviously you have to ask whether Issing in now losing his grip on reality.... As the FT notes: "The ECB has insisted that a rate cut would be harmful and was not supported by sensible economists. Jean-Claude Trichet, the ECB president, told the European Parliament on Monday: 'The last time we met, we were absolutely convinced that we would not improve the situation [with a rate cut] but that we would hamper Europe if we would go in the direction that is suggested by some.' But now that the OECD, a bastion of orthodox economic thought, has flatly contradicted the ECB's position, Mr Trichet will find it more difficult in future to reject out of hand a discussion of lower rates."...

Just to give us a measure of who is and who isn't considered a "sensible economist", one might look at today%'s statement from Hans-Werner Sinn, President of Germany's prestigious Ifo index: he is reported as telling CNBC that: "the ECB has done a good last year in keeping interest rates stable, but we have a different situation now and the ECB should cut interest rates." This situation is not without its comic aspect: Sinn means sense, ie he is the real, true to life, sensible economist.

More Signs of Incipient Senility...

For about two years now, I have been saying "Stu Eisenstat" when I mean "Dick Zeckhauser," and saying "Dick Zeckhauser" when I mean "Stu Eisenstat." I have no excuse and no explanation.

And then there was that horrible moment in lecture this year when I all of a sudden could not distinguish FDR's trustbuster Thurman Arnold from poet Thomas Arnold from Terminator Arnold Schwarznegger from golfer Arnold Palmer from Wilson's red-baiting Attorney General Mitchell Palmer.

Not to mention my also-inexcusable frequent confusion of Sandra Bullock with Sarah Jessica Parker...

Housing Bubble

James Hagerty and Ruth Simon find some people who are certainly acting like they would in a housing bubble. Up until six months ago, I could account for housing prices in terms of scarcity (they aren't building many houses near the California coast any more) and low interest rates. That's getting less possible with each passing day: - As Prices Rise, Homeowners Go Deep in Debt to Buy Real Estate: A year ago, Ryan Epstein and his wife had whittled down the mortgage on their four-bedroom colonial house in North Beach, Md., to $130,000. Then Mr. Epstein had a chat with a mortgage broker. The broker helped the Epsteins refinance their home, valued at about $300,000, to take advantage of lower interest rates. He also encouraged the couple to take out extra cash, a popular technique called a cash-out refinancing. The Epsteins used that cash, $25,000, as the down payment to buy a rental property. That purchase swiftly led to others. Today, Mr. Epstein says he has about $1.4 million of equity in nine dwellings -- and $2 million in mortgage debt. Those rapid profits reflect surging house prices, rising at a double-digit rate in the Epsteins' area near Washington. "It's a wonderful market out there," Mr. Epstein says.

Five years into a housing boom that has boosted U.S. home values an average of 50% and added an estimated $5.5 trillion to the total market value of residential real estate, many Americans no longer think of their home as just a place to live. Instead, it's a cash machine that can be used to rapidly build wealth. To that end, a growing number of people are tapping into their home equity to invest in more real estate. That's a lot like using a margin account -- a line of credit backed by securities in an investor's portfolio -- to buy stocks. During the 1990s, many investors used such accounts to buy shares in fast-rising tech stocks. When the dot-com bubble burst, the value of the shares bought on credit cratered and investors' borrowing worsened their losses. Economists say today's debt-fueled investment binge in real estate is fanning the flames of an already overheated housing market, and making demand from people who actually need houses to live in seem stronger than it truly is.

In some markets, this buying is adding to a glut of rental housing and causing rents to fall, which will make it more difficult for investors to break even. Already, there are signs that a few investors are starting to get burned. On Friday, Federal Reserve Chairman Alan Greenspan suggested that house-price inflation in some parts of the country is starting to look excessive. "At a minimum, there's a little froth in the market," Mr. Greenspan said in response to a question at a lunch hosted by the Economic Club of New York. "We don't perceive that there is a national bubble, but it's hard not to see that there are a lot of local bubbles," he added. He played down the idea that the market could suffer a dramatic crash like the bursting of the dot-com bubble, in part because homes don't sell as quickly as stocks do. Also, most people still have plenty of equity in their homes, he noted, so the prospect of mass bankruptcies in the event of a housing-market decline seems far-fetched.

Others express more anxiety. Dean Baker, co-director of the Center for Economic and Policy Research, a think tank in Washington, says many Americans are being "incredibly reckless" in assuming that real-estate prices will keep rising or, at worst, flatten out. "It's a classic phenomenon you expect to see in a speculative bubble," Mr. Baker says. He is so bearish on housing prices that he sold his own home last year and now rents. In another sign of growing concern, the Federal Reserve and other bank regulators last week issued guidelines calling for lenders to tighten their criteria for making loans backed by home equity by looking more closely at borrowers' ability to repay under various possible future market conditions. The regulators are starting work on similar guidelines covering mortgage loans used to purchase homes. Among regulators' top concerns: the surge in popularity of interest-only loans, which allow people to pay only interest in the initial years and face the burden of paying back the principal later....

Why are people like the Balderstons so confident of strong returns from real estate even amid growing warnings about the dangers of a housing bubble? "People form their expectations on a backward-looking basis," says Jan Hatzius, an economist at Goldman Sachs in New York. Based on the experience of recent years, they tend to see real estate as a very promising investment, he says, adding: "That's probably not correct.... You should think pretty hard about whether you want to increase your exposure to real estate at a time when it is trading at historically high valuations." Like the Epsteins, who used their home equity to buy rental housing in Maryland, many real-estate investors see the stock market as far riskier. "If you buy stocks," Mr. Epstein says, "the next day they can tumble in the toilet." Home prices can't fall nearly as quickly as stocks, he reasons, because people tend to hang on to their real estate when prices are weak and await an upturn. And unlike those who buy stocks with borrowed funds, home buyers don't face margin calls, or demands from their creditors for additional funds, when prices fall....

What makes this get-rich-quick formula more dangerous is that many investors are willing to buy properties on which the rent is too low to pay for financing and other monthly costs. Their bet is that rising property prices eventually will make these deals profitable...

Virtual Steve Levitt Seminar at Crooked Timber

There is a very good virtual Steve Levitt seminar at Crooked Timber:

Steven Levitt Seminar - Introduction: Posted by Henry: Steven Levitt's work is familiar to many Crooked Timber readers. He's a professor in the University of Chicago's Economics Department, a winner of the John Bates Clark medal, [an] editor of the Journal of Political Economy, and the author of a rather terrifying number of peer-reviewed articles.... Freakonomics is currently Number Two on the New York Times bestseller list.... We asked Steve a while back whether he would be prepared to participate in a Crooked Timber seminar on freakonomics, economics, and the social sciences; he very kindly agreed, and you see the result before you. We're also grateful to have the participation of two non-CT regulars. Tyler Cowen is a professor at George Mason University; he blogs at Marginal Revolution and still puts in an occasional appearance at the Volokhs. Tim Harford writes the Dear Economist column for the Financial Times. His first book, The Undercover Economist, is coming out in November 2005.

I was supposed to participate, but inspiration did not strike and the time to write something good while uninspired was nibbled to death by bureaucratic ducks. *Sigh.*

It's very good.

Here's Steve's gracious response:

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt and Stephen J. Dubner - William Morrow, 2005 : Posted by Steven Levitt: I'm not sure whether it says more about my own shortcomings, or the quality of these five commentaries above on Freakonomics, that I gained a great deal of self-awareness from reading them. It was a surprising reaction for me. There have been many published reviews of Freakonomics, and not one of them has given me the slightest insight into myself. Strangely, though, I felt like I understand my own motivations and goals better than I did a few hours ago. For me, that has always been one of the greatest benefits of inter-disciplinary interactions. Self-awareness is a scarce commodity, and a valuable one, so I am quite grateful for this remarkable gift that Tyler Cowen, Henry Farrell, Tim Harford, Kieran Healy, and John Quiggin have given me.

So let me try to pay these guys back with some thoughtful responses to their comments. Because the same themes ran through most of the comments, I address them collectively rather than individually.

Let's start with the title. Freakonomics. We debated endlessly over the title. From a naming perspective, the difficulty with this book is it doesn't have a theme. We thought about a question title ("What do sumo wrestlers and school teachers have in common?"), some non-threatening titles ("The Hidden Side of Everything" or "Ain't Necessarily So"), and some loopy titles ("E-ray Vision"). In the end, though, Freakonomics became the obvious choice, for reasons anchored in the contrast between my own research on names and that of others. Let's just assume that the research is right and it is really true that names matter for getting a resume callback, but don't matter for long-term life outcomes. Then this probably implies that names matter a little for first impressions, but then quickly get swept aside in importance once we gain some familiarity. When's the last time you thought to yourself, "Oprah is a ridiculous name, I certainly won't watch her show." Or, "The Beatles...what a ridiculous name for a band. No one would ever buy their records." In naming a book, you need something attention-grabbing to cut through the clutter of the thousands of competing books, but as shocking as "Freakonomics" sounds the first time you hear it, by the twentieth time it becomes familiar, like Oprah. My guess is that the commenters were already softening their hatred for the title by the time they finished writing. And a year from now, they may even forget that they ever hated the title. (At least, that is what happened with our publisher, who initially dismissed the title out of hand, only allowed it at the 11th hour, and now are telling us we need to sign up with them for a second book because who else can market our books as well as they do.) And if there is a second book, we have a title in mind that is so outrageous it will have to be loved.

So how about the absence of a unifying theme in the book? My own hunch, borne out by the public response to this book, is that nobody really cares about or even wants a unifying theme in a book. Everyone is just afraid not to have one, since almost all books do. (In this respect, I think unifying themes in books are a lot like campaign spending. All candidates feel compelled to spend a lot of money for fear of the disastrous consequences that could result if they take a chance and don't spend, spend, spend.) But when I read Malcolm Gladwell's incredible books, I don't care about the theme, I just love his stories. His books top the charts because he has incredibly good taste and he is the best storyteller going. For me, and others I talk to, the unifying themes sometimes get in the way of his stories which are individually so amazingly interesting. Books of short stories, similarly, have no unifying theme. I certainly don't feel cheated by that either. More valuable than anything else I or Dubner ever does, perhaps, would be to make the world safe for books that have great stories but no unifying theme.

All of the commentaries spent some time discussing where I fit into economics and the social sciences more broadly. If I got to make three wishes, perhaps one of them would be that I might turn into a truly interdisciplinary social scientist who uses data to inform human behavior in ways that both shed light on and draw upon not only economics, but sociology, political science, and psychology as well. But, let's be realistic. I'm having trouble even mastering the tools of my own discipline. (If you ask my students whether I know calculus, they will say "not very well." I'm not proud of that fact, but I am a realist. If you ask the really great economic thinkers like Gary Becker or Kevin Murphy, how often I'm right when I try to apply Chicago price theory, they will simply tell you that I am showing a lot of improvement because they are kind.) The only things I'm good at, really and honestly, are asking questions that people seem to find interesting, and figuring out how to trick data into answering those questions. I will never be even a passable sociologist, political scientist, or psychologist. But that is okay. I think the thing that gets a lot of economists into trouble is the false belief that they can be good at everything. A few years back, when I was on sabbatical at the Center for Advanced Study of Behavioral Sciences at Stanford, I gave a talk to the other fellows on my research. Some in the audience were indignant, asking why I called myself an economist given what I did. They said I was really a sociologist. One only had to look at the horror on the faces and the strong counter-arguments made by the sociologists in the room to see that I wasn't a sociologist either. But, by starting from the position that I don’t know much, I am open-minded enough to co-author with an ethnographer (Sudhir Venkatesh), an econometrician (Jack Porter), a political scientist (Tim Groseclose), and now a journalist (Stephen Dubner). And maybe, in addition to making it safe for someone to publish a book without in a theme in the future, I will make it easier for academics from all social sciences to follow the sort of "adisciplinary" (as opposed to inter-disciplinary) path I'm on.

Next, there is the question of incentives. In the same way that "utility maximization" can be turned into a tautology, the commentors point out that our use of the term incentives is moving in that direction as well. By widening incentives to encompass not only financial, but social and moral incentives, we have covered just about everything. Still, I think there isn't really another choice. To focus just on financial incentives would obviously be misguided. On the flip side, for me (and I think this is the thing that makes me an economist ultimately) I just can't get away from the idea that people are active decision makers trying to get what they want in a reasonably sophisticated fashion. The most real sense in which I think incentives are the unifying theme of my research (even when they aren't obviously there like in the abortion-crime stuff), is that whenever I try to answer a question, I put myself in the shoes of the actors and I ask myself "what would I do if I were in that situation?" And I am the kind of person who is always trying to concoct some scheme to beat the system or avoid getting scammed, so I presume the people I'm studying are thinking the same way. So when I think about legalized abortion, I think it sounds like a really sick form of insurance policy against an unwanted pregnancy. When I see that one sumo wrestler has more to gain from a win than the other foregoes by losing, I figure they'll make a deal. When I think about real-estate agents, I'm constantly paranoid they are trying to screw me.

Finally, there is the question of whether I deserve to be called a rogue economist or not. There are two definitions of rogue. One kind of rogue is the Saddam Hussein-type. We have a few of those in economics, unfortunately, and we sure don't need any more. But when the book calls me a rogue, we mean it in the "mischievously playful" sense of the word that Webster's lists as the second definition. The rogue I have in mind is someone who strays from the subjects deemed appropriate for an economist, fails to treat economics with the necessary sense of seriousness (how dare I admit I can't do theory, or call the book Freakonomics), and embraces approaches that are implicitly disallowed by the profession (like ethnography and story-telling). As I said on the Daily Show, and apparently no one except me has seen Shrek 2, I like to think of myself as a rogue in the way that Antonio Banderas' character Puss 'n' Boots is a rogue.

I am the first one to admit that if all economists were like me, the field would probably be a disaster. But the fact that other economists more or less like me in spite of this, tells me that there is plenty more room for rogue economists in the profession.

Wait a Minute Here!

Fortune's Peronet Despeignes interviews Greg Mankiw:

Magazine - Economist Greg Mankiw Sounds Off on Karl Rove, Paul Krugman, and More - FORTUNE - Page 7: Q: So you often read the paper and slap your forehead?

A: Let me give you example. This is as I was arriving [as the new chair of the White House Council of Economic Advisers]. Glenn Hubbard, my predecessor, was leaving. I read one of Paul Krugman's New York Times' columns, and he said something like, 'Hubbard said he was leaving to be with his family, but you could see the knives sticking out of his back.' The suggestion was that he's being kicked out. I knew that wasn't true. I knew I got the job in large part because Glenn recommended me. So here we have Krugman sitting in some office in New Jersey making a supposition about what's going on in Washington and then writing for the New York Times, with readers presuming that he knew something...

Wait a minute. Stop right there. I understood that when Paul Krugman was writing, Glenn Hubbard had just played the up-or-out game--promote me to a job that has more power and prestige, or I'll head back to Columbia. Remember that in the winter of 2003 Glenn Hubbard was being described as one of the "four horsemen of Bush economic policy," the "most influential chairman of the Council of Economic Advisers in two decades," a man who has "stretched his role far beyond tinkering with the tax code and overhauling the pension system." The Washington gossip vine in the fall and winter of 2003 was singing that Glenn would stay--but only for the right job, with more influence.

When Glenn went back to Columbia in early 2003, I was told by not-very-senior administration officials that it was because some feared that Glenn was just a little *too* smart and too capable, and that he was not "safe."When the Treasury and NEC jobs were opened up, Glenn did not get either of them--that's what Paul Krugman was referring to. (I think that everyone in the White House now agrees that this was a bad mistake: that Glenn would have greatly strengthened the administration's economic policy team over the last two and a half years.)

Greg is telling the truth when he says that Glenn recommended him for the job, and Greg is telling the truth when he says that Glenn could surely have stayed in the CEA chair job if had wanted to. But Greg's claim that Krugman is wrong? The best you can say is that it is... "incomplete."

Read Greg's _Fortune_ interview with this in mind, particularly when you come to statements like:

There are three kinds of people in Washington when they look at this budget situation. There are conservatives—honest conservatives—who think we need to reduce the size of government. There are honest liberals who want to raise taxes to make government bigger. And then there are people who are putting their heads in the sand who do not want to do either. It's very clear that this administration is filled with conservatives who believe in smaller government, leaner government, and the tax cuts go hand in hand with that.

No Greg. That's not clear at all. Not clear to anyone.

More Intellectual Garbage Pickup

This is really a thankless task. But somebody needs to occasionally lay down a marker that Steve Antler writes with forked tongue.

He attempts to come to Daniel Okrent's defense:

EconoPundit: Professor Krugman says... "unemployment lasts much longer than it used to."... Daniel Okrent says: ...columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults."

A plot of the BLS statistic 'average weeks unemployed' from its 1948 start to the present illustrates Okrent's point:

The first gray arrow shows upward trending from 1948 to 1983. During those years Krugman was correct. The second gray arrow shows a slight downward trend since the mid 1980's. During these years, Krugman is wrong.

So which is it? Relative to 1948, unemployment now lasts longer than it used to. Relative to 1983 recession-peak-unemployment lasts about two weeks less than it used to.

I guess the question is one of interpretation. It just has to be left to the voters. Do they share Krugman's pessimism, or do they feel optimistic about the future?

Here is Antler's figure:

What should you think of this argument?

  1. You should look at the duration of unemployment during business cycle peaks, and see a steady rise: 7.8, 10, 10.8, 11.9, 12.6--today's level is 19.3.
  2. You should look at the average duration of unemployment during entire business cycles, and see a steady rise: 12, 10.5, 12.8, 15, 15.4, 17.1.
  3. You should cyclically-adjust the series--after all, we know that the duration of unemployment will be relatively high whenever unemployment itself is relatively high--and calculate what the duration would be if the unemployment rate were six percent, as is shown here:
  4. You should reflect on the fact that of these four possible ways of calculating the trend in unemployment duration, only one way--and a relatively weak way--produces Antler's downward trend since 1983. And Antler's way produces a much stronger upward trend in unemployment duration in the 1970s and early 1980s than any of the alternatives.
  5. You should reflect on the fact that Krugman's "unemployment lasts much longer than it used to" is part of a tradition of analysis that contrasts the first post-World War II generation--the 50s, 60s, and early 70s--with today. There's nothing in Krugman to make anyone imagine that "used to" applies to the 1980s only.

But it really isn't economics that Steve Antler is doing here, is it?

Louis Uchitelle Looks at the Long-Term Unemployed

The reliable Louis Uchitelle looks at the distressingly-high level of long-term unemployment:

The New Profile of the Long-Term Unemployed - New York Times: After three years of unemployment, Allen Gruenhut finally landed a job as director of human resources for a company in the stone business on Long Island. His age, 53, worked against him in his long hunt for work, he contends, and so did the six-figure salary he earned at his last job, in banking. "They would not take me seriously at job interviews when I said I would be happy with a lower salary," Mr. Gruenhut said.

Jackie Ellenwood, 31, is still without a job. She worked for three travel agencies over 13 years, until her last job, in Allen Park, Mich., ended in a layoff nine months ago. The industry is shrinking in response to more Internet bookings and cutbacks in corporate travel so Ms. Ellenwood is looking for work elsewhere and studying to become a nurse, confident that health care will continue to expand in an aging America. "I'm going to stick to my nursing courses," Ms. Ellenwood said, "even if I get a job."

The experiences of Mr. Gruenhut and Ms. Ellenwood help to explain why many of the nation's unemployed are still struggling to get back to work. Not since World War II has long-term joblessness - the percentage of the unemployed out of work for six months or more - been so high for so long after a recession has ended.... Several factors seem to be contributing to the rise in long-term unemployment. The swelling cost of company-paid health insurance is "inducing business to be less aggressive in its hiring," said Mark Zand.... The baby boomer bulge working its way through the labor force also plays a role; as this large group of workers ages it becomes harder for some who lose their jobs to find new work suited to their skills....

"It looks like employers are very hesitant about the future of the economy," said Lawrence F. Katz, a labor economist at Harvard. "It may be that we will fall into another weak economic period before we get a good recovery and really robust hiring." After World War II, when traditional industries dominated the economy, the usual pattern was for long-term unemployment to surge during recessions and die away quickly as recoveries took hold. That changed during the early 1990's and is even more evident in the current recovery, which began in November 2001. Rather than subside as growth resumed, long-term unemployment as a share of total joblessness continued to rise, according to the Bureau of Labor Statistics. It peaked 17 months ago at 23.3 percent and has only gradually tapered off since then, to 21.2 percent in April....

Toyota Motors of North America, whose sales are rising more rapidly than other automakers in the United States, is holding back on hiring although its plants are operating flat-out. Its payroll, said Dennis Cuneo, a senior vice president, has grown by only 600 jobs this year - all of them at newly opened plants - to a total of just over 32,000 employees. Existing factories continue on two shifts a day. Overtime and reconfigured work schedules help to squeeze out more production, without adding third shifts and the hiring that the additional shifts would require. "We are reluctant to bring people on immediately," Mr. Cuneo said. "We are going to wait and see what we can still get from improvements in productivity. If the demand is sustained, there will come a point where you have to add a shift."...

Sixty-six percent of the working age population was in the labor force in April, down from 66.7 percent at the start of the recovery. That is 1.6 million missing people, enough to raise the unemployment rate to 6.2 percent from its present 5.2 percent - if they all showed up....

Alan Greenspan Is a Master at What He Does

Matthew Yglesias watches with a kind of awe:

Matthew Yglesias: Department of Equivocation: "Being Chairman of the Federal Reserve is sort of like the reverse of being a blogger -- you need to be very, very, very careful about every word that passes through your lips lest an unintentional slip create a financial panic. Thus, Greenspan's thoughts on housing are a true classic of the genre:'

Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern,' Mr. Greenspan told the Economic Club of New York at the Hilton New York hotel in Midtown. Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over 'froth' in the market and pointed to a big increase in speculation in homes - particularly in second homes. As a result, he said, there are 'a lot of local bubbles' around the country.

No bubble, but many small, local bubbles. Hence an overall froth. And, presumably, a bubble here in Washington, DC, where prices have gone up a lot. From the standpoint of self-interest, this seems to me to be the best possible outcome since a decline in local home prices would be give for me as a non-homeowner who plans on sticking around town for a whle, but a nationwide collapse would have all sorts of bad spillover effects. Therefore, I choose to believe that Greenspan's called this correctly.

Via Alina Stefanescu who notes that the equivocation has thrown the nation's headline-writing industry into crisis.

I am told that in Washington, whenever someone wants to know whether they are supposed to deepen the darkness or illuminate the issue, they are likely to say, "Should I Greenspan it?"

Speaking of Ire...

The Daily Howler uses its verbal trebuchet to launch a rhetorical cow in the direction of Daniel Okrent:

Daily Howler: Daniel Okrent finally leaves--taking a cheap shot at Krugman: What a truly amazing flyweight is departed Times public editor Daniel Okrent! Yesterday, Okrent concluded his unfortunate reign, discussing thirteen topics he somehow avoided during his eighteen months of service.... Below, we present the second of these thirteen ruminations, in full. But alas! As Okrent slices and dices Paul Krugman, he provides the perfect public showcase for his fly-weight intellectual standards and his unexplained but omnipresent resentment. Try to believe that he actually wrote such a cheap slasher piece! Again, it's the second thing he "meant to write about" but somehow never did:

Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults....

[S]ome of Krugman's enemies are every bit as ideological (and consequently unfair) as he is. But that doesn't mean that their boss, publisher Arthur O. Sulzberger Jr., shouldn't hold his columnists to higher standards.

I didn't give Krugman, Dowd or Safire the chance to respond before writing the last two paragraphs. I decided to impersonate an opinion columnist.

Good grief! If the ivory-billed 'pecker is the "Lord God bird," that must be the "Lord God third paragraph....

In the case of Dowd and Safire, Okrent at least provides specific complaints... at least semi-valid.... But what about Krugman? Okrent goes after his troubling poster boy hard--but he doesn't cite a single specific example of the gentleman's troubling conduct! He calls Krugman every name in the book--but after eighteen months on the job, he doesn't give a single example of Krugman's deeply disturbing conduct. How exactly is someone like Krugman supposed to respond to such work?

For the record, Krugman is quite a bum--if you listen to Okrent. According to the exercised editor, Krugman "has the disturbing habit of shaping, slicing and selectively citing numbers." Beyond that, Krugman is "ideological" and "unfair," Okrent says--and he seems to say that the slippery scribe selects his misleading numbers in a fashion designed to "please his acolytes." These are very nasty charges. But in the style of classic hit-and-run bullies, Okrent provides no examples of his target's troubling conduct, and he bravely offers these ringing complaints in his final public editor column, depriving Krugman of a chance to respond (and knowing he wo't have to defend himself against the complaints that will come).

How big and brave is the mighty Okrent--this big, bold man who slithers away with so many loud complaints? The big, brave fellow had eighteen months to offer examples of Krugman's misconduct, but even now, he offers none.... In his very next item--undiscussed Topic 3--Okrent complains that three other writers have failed to let the great New York Times serve "as a guardian of civil discussion!" Was this an attempt at comic relief? Or is it the sign of a consummate flyweigh--the sign of a man who waded far over his head when offered this unwise assignment?...

The exercised ed had eighteen months to offer examples of Krugman's misconduct. Instead, he waits until his final column, then provides exactly no examples of the crimes he lustily limns.... [I]n Sunday's closing (cheap) shot against Krugman, he showed himself again as a cheap, petty thug--and as a flyweight for the ages. How does America's most important newspaper have such a flyweight in such a high post? We'll examine that important question all week, starting tomorrow with Okrent's Topic 5--an item which is almost perfect in its pure unalloyed dumbness.

Sing, O Muse, of the Ire of Teresa Nielsen Hayden and Company...

They are annoyed. This is far better than "your father was a hamster and your mother smelled of elderberries":

Making Light: On reading Thomas Friedman again: I was right. Thomas Friedman is indeed one of those rare enlivening bad artists who inspires better writers to bouts of splenetic eloquence. What better proof could you ask than the following poems, written upon the occasion of my previous post?

The first, by John M. Ford, from the comments thread:

Much have I travell’d on the feet of gold,
And many tumbled walls and maidens seen,
Round many horny Africs have I been
Which bards like bosoms in their welkins hold,
Oft of a spare expanse had I been told
That fence-swung Homer looked on as demesne;
Yet never did I breathe its mountains clean
Till I heard Friedman speak out uncontrolled,
Then felt I like some Cousteau of the skies
When a new bubble undermines his ken,
Or sack-like Falstaff, when with precast eyes
He stared at echoes—and his fellow men
Harked back in multitudes like single spies
Silent, past their peak in Darien.

The second came in the mail from James D. Macdonald:

On first looking into Friedman’s Flathead

Much have I travell’d in a chartered jet
And munched betimes upon a Cinnabon;
Upon my iPod listened to Don Juan
Which I downloaded from the wireless ‘Net.
I did not understand the ‘Nineties lore
Of Windows systems and of Pizza Hut,
How one was opened and the other shut,
Till I heard Friedman speak in metaphor.
Then felt I like a steroid in a vein:
Jose Canseco on a level field,
Whose random thoughts of glory and of pain
Were like an ice-cream sundae all congealed.
The moral is, when put by words in train,
That which does not exist can’t be revealed.

This becomes interesting. If it continues, Friedman may conceivably hope to someday outdo Gene Steinberg as one of the Muses of Eloquent Indignation.

Only time will tell.

Addendum: Jonathan Vos Post has weighed in:


I met a traveller from the New York Times
Who said: ‘Two vast and Lexus legs of stone
Stand in Bangalore. Near their paradigms
Half sunk, a shattered visage lies, whose frown,
And open Windows, and sneer of the Berlin Wall,
Tell that its sculptor often ate at Pizza Hut
Which yet survive, stamped on this Lilliput,
T.I. that mocked them as ephemeral.
And on the plinth by this Michelangelo—
“My name is Friedmandias, king of the IPO:
Look on my prose, ye Mighty, and despair!”
Nothing coherent stays. Round the decay
Of that steroidal wreck, boundless and bare
The level playing fields stretch far away.’

Those who prefer their inspired indignation in the form of prose may appreciate Ademithopur’s Venting at Cinematic Rain:

a commenter cited this little excerpt from a review of Mr Friedman in the LATimes book review, which set me off, hence the need to vent. my apologies
“… Friedman recounts that he first realized the extent of these changes recently at the KGA Golf Club in southern India when his playing partner pointed at two shiny glass-and-steel buildings and declared, ‘Aim at either Microsoft or IBM….’”

IIRC, nearlymore than half the indian population is under the age of 25, a good number of whom live in abject poverty.

i seriously doubt that there are enough jobs at any level in IBM or MSFT or all the software startups in the world combined to satisfy such a vast labor market (250 freaking million jobs over the next 15 years, to keep up with population aging). the reason that people are pissed is because the MNC’s have this Massive advantage in the labor market and are abusing it thoroughly, making employees work crap hours for marginally higher pay. these are the ‘haves’ btw. the have-nots are pissed because they have no avenues to get a piece of this action.

i am from south india. my cousin works for HP in B’lore. i visited him this past december. i also visited chennai and hyderabad. there are a lot more poor, hungry people in india than there are employees at HP. these people have not received any of the ‘trickle-down’ effects of globalization. the situation is pretty standard for a developing nation. rich get richer, poor get bent over and penetrated with a wooden spoon. the right-wing politics that held sway the past 4 years hasn’t helped at all, only causing more social rifts while failing to heal or treat the economic ones.

It makes such a difference in the language when the writer knows something.

Alberto Gonzales Is a Bad Man (Why Oh Why Are We Ruled by These Liars? Department)

In comments, JR writes:

Gonzales'references to athletic uniforms and scientific equipment was a classic rhetorical tactic - find some minor thing in the Convention to ridicule and thereby invite your reader to conclude with a sneer that the whole thing needs to be junked.... Gonzales' references... are lies. There is no requirement that POWs be "afforded" athletic uniforms and scientific instruments. There IS a requirement that prisoners be allowed to receive mail, including packages, which may include such things as "foodstuffs, clothing, medical supplies and articles of a religious, educational or recreational character which may meet their needs, including books, devotional articles, scientific equipment, examination papers, musical instruments, [and] sports outfits..." (Geneva Convention III, Art. 72).

So in order to ridicule the Geneva Convention, Gonzales had to lie about it.

And why are we not surprised to find Okrent repeating Gonzales' lies in his parting column?