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December 2005

Theory Really Ahead of Measurement

Lisa Randall (2005), Warped Passages: Unraveling the Mysteries of the Universe's Hidden Dimensions (New York: Harper Collins: 0060531088). Highly recommended. Theory is really ahead of measurement in modern particle physics. There is the sense of thousands of people around the globe holding their breath as they wait for the Large Hadron Collider to come on line, all of them hoping to see a lot of new physics in the 250-1000 GeV range...

Just think of what we would know if since 1970s we had diverted NASA's manned space flight budget into building bigger and bigger atom smashers...

Whose Home Bias Are We Talking About Here?

Brad Setser gets a little cognitive dissonance from listening to Alan Greenspan:

RGE - Alan Greenspan, financial globalization, home bias and central bank reserves: I kind of liked the message of [the speech's last] paragraph.... Concerns about "the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested" and warnings that "the adjustment process could be quite painful for the world economy" appeal to my inner bear.

Alas, I thought the warnings in the last paragraph were a bit at odds with the rather rosy tone of the rest of Greenspan's speech... arguing that deep fundamental forces in the global economy explained the widening of the US current account deficit, will allow relatively large deficits to be sustained, and will facilitate gradual adjustment.... Among those fundamental forces: a fall in home bias - the propensity of folks to use their savings to finance investment at home, not in the world at large.... Greenspan is tempted to conclude that since the US household deficit is small relative to the pool of global savings, there is little to worry about. But he is not quite willing to go that far....

I think Greenspan's core argument more or less goes like this:

["]Modern finance means that you do not have to save to spend. If households want to run a deficit, and firms a surplus, the financial system will intermediate between firms excess savings and households borrowing needs. Plus, a fall in home bias means that the borrowing needs of key US sectors can be financed globally, not locally. Those in need of financing can tap global markets. US household deficits can be financed by the surplus of Japanese, Chinese, or European firms. And a surge in US productivity (all those platform companies?) made the US an attractive place to invest. That is why a fall in "home bias" is leading to large net flows to the US. After all, if US investors lost their home bias and say European investors lost their home bias, US investment in Europe would be offset by European investment in the States, and there would be no net flow of capital. Everyone would just hold a more diverse portfolio....["]

What of the future? How well does Greenspan's story explain the current pattern of capital flows? Not very well, I would argue. Yes, productivity growth in the US is up. But the current world is not marked by large net flows from sclerotic Europe to the dynamic US, but rather by large net flows from the dynamic emerging world to the dynamic US. I am not sure productivity differentials explain why capital is flowing from China to the US, rather than from the US to China.

Private capital certainly is not fleeing China. Far from it. It is banging on the door trying to get in. Net private capital flows into China are quite large. Think close to $60 b plus of FDI, and $50 b, if not more, of "other" inflows.... [P]rivate investors have regained their appetite for financing high growth, high-risk emerging economies....

What explains the large (net) flow of funds from emerging economies to the US then? Not the decisions of private investors, but rather the decisions of foreign governments. There actually hasn't been a fall in home bias among private savers in China, one of the world's big net lenders right now.... Right now, private Chinese savers are running down their offshore accounts to increase their RMB holdings. They want RMB assets, not dollar assets. Hardly a reduction in home bias.

What explains the net flow of funds from China to the US then? Simple: the People's Bank of China is willing to transform Chinese demand for RMB assets (and foreign demand for RMB assets) into Chinese demand for dollar assets. It no longer holds domestic bonds (at least not many) against the money it issues; rather, backs the renminbi in circulation with dollars and euros - and... issues more and more sterilization bills.... Chinese savings is invested abroad, but the investment is not exactly done through the market....

OK, call me reserve obsessed. But I don't think you can explain the current global flow of capital - or the recent fall in home bias among savers in emerging economies - without talking about the actions of the world's central banks, or the actions of the governments of the world's oil exporters.

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Republican Bias Edition)

Hilzoy writes about pro-Republican bias at the Washington Post

Obsidian Wings: Media Bias Strikes Again: Chris Cillizza... at the Washington Post, wrote up a 'scorecard' on corruption scandals in politics. He said at the outset that he was going to limit himself to currently serving politicians, but stuck in Rep. Frank Ballance, who resigned in 2004.... Ballance was a Democrat. Without him, the scorecard would have included 8 Republicans and 2 Democrats.... Today... Cillizza... [wrote]:

Cillizza: This was an editorial mixup. In my original post, Ballance was not included.... After an edit, Ballance was unnecessarily included for, frankly, balance. I did not read the final edit and therefore was unaware that Ballance had been added.... I apologize for my editor's error (he's been flogged)....

OK, Media: let's take this slowly. What is journalistic objectivity? -- It is the attempt to present the facts neutrally and fairly.... Why do we care about journalistic objectivity? -- Because if journalists allow their own preconceptions to distort their presentation of the facts, then their readers cannot trust what they read.... Does journalistic objectivity require making it look as though both sides have a point? -- No. It requires presenting the facts impartially.... Isn't the attempt to make reality look evenhanded actually the antithesis of journalistic objectivity? -- Yes.... It is just as bad to create an illusion of balance where none exists as to create an illusion of one-sidedness where none exists.... If there are eight Republicans and two Democrats currently embroiled in scandals... [and] an editor decides that this is an 'imbalance' that needs to be 'corrected' by including on a list Democrats who do not meet the criteria for inclusion, s/he is basically saying... I am going to fiddle with the facts until I get things to look the way I think they should....

I'm glad Cillizza (or someone) flogged his editor, and Cillizza deserves credit for talking about this openly. Because this is just plain wrong... [for] editors want to make the Republican party look as though it has less of a corruption problem...

So who is this editor at the Washington Post?

Why Oh Why Can't We Have Better ThinkTanks? (Bush Uses the Council on Foreign Relations as a Backdrop Edition) Bush uses the Council on Foreign Relations as a backdrop for one of his no-questions-allowed exercises in dissimulation. ThinkProgress reports:

"Only a few hundred members showed up for the hastily organized event at a Washington hotel and empty chairs were removed from the back of the ballroom before Bush arrived."... We were forwarded this desperate plea the Council sent out late Tuesday, asking people who were planning on coming to bring a friend. Bush broke Council tradition by refusing to accept questions after his speech. Apparently, most people aren't that excited about being used as a presidential prop. This may explain why Bush has preferred giving his speeches in front of military audiences, who are required to attend.

CFR President Richard N. Haass should know that twelve out of sixteen social-science professors surveyed think that he has taken significant reputational damage from his complicity in this... media event...

Till We Have Faces II

SPOILERS: Porlock Junior <> shows up with the best comment--a comment on C.S. Lewis's Till We Have Faces that corrects my claim that Lewis makes his God deus absconditus:

Brad DeLong's Semi-Daily Journal: Till We Have Faces...: Times have perhaps not changed so much as Auros thinks. Until recently (at least) people have occasionally shown up on alt.books.cs-lewis with questions about why some religious schools were banning The Lion, the Witch & the Wardrobe. Possibly that trend has been weakening, but I don't know who's keeping good statistics. I'm much interested to see how this will play out as the movie comes out. I suspect that the "Ban the Lion" movement, which has always been marginal (Christians who don't like C. S. Lewis are a special breed, or rather several incompatible special breeds), will drag on, but with many conservative types now feeling freer to treat them with scorn.

As to faith versus reason, there's an aspect of Till We Have Faces that everyone seems to have missed, though it struck me strongly because of my deeply ingrained rationalism.

(Alert: I am writing this without any regard for spoilers.) It's true that the god is invisible, and so is his palace and all. Psyche is obviously crazy and hallucinating. Her sister, who is telling the tale (and by the way is not malicious in this version, but loves Psyche more than anyone else does), is wrong about this, we know; but who is to say that she's wrong? She is following the evidence and reason; and yet, by the nature of the story, she must be wrong in more than a casual and accidental way--tragic flaws and all that, you know.

Is she to abandon all sense without even some mystical ecstatic experience to lead her to mystical conclusions? Just follow the superstitions of the priests? (Malicious priestesses in this case, who condemned Psyche to be abadoned to the Monster because they hated her.) Sure, if you believe that Lewis wanted all reason abandoned in favor of blind faith in priests' tales. But since he plainly did not, what's up?

Well, actually, Psyche, who is living in the wild with no food, no shelter, and next to no clothing on top of a mountain, is in extraordinary good health and more beautiful than ever.(1) Her sister notices this, but, Watson-like, fails to draw any conclusion, such as, Somehing is bloody well wrong here! The evidence that her neat logical story (Psyche's madness) does not explain everything is staring her in the face; reason demands trying another hypothesis; but she never sees it. It costs her, even more than it costs Psyche.

(1) About that pro-beauty bias; take it up with the evolutionists. Even the evolutionary psychology folks aren't wrong 100% of the time, and outside of 19th-century perversions about dying romantically of consumption, there have been strong correlations between health and beauty.

Sorry that's so long. I was going to scribble something last night about this, but got lazy. Then the comments thread got me going, and I couldn't stop.

Very remarkable book, anyway. The second time I read it, I was amazed at how much good stuff Lewis had put in since my first reading, considering he'd been dead for 20-30 years.

Till We Have Faces...

Let me endorse the quality of Garence Franke-Ruta's judgment in her high praise for C.S. Lewis's brilliant version of Cupid and Psyche: Till We Have Faces: A Myth Retold. It is, I think, the best thing Lewis ever wrote.

In one of the alternative branches of the multiverse in which I went to graduate school in English Literature rather than in Economics, I wrote an essay about the meaning of the big change Lewis made in the myth. In the myth, the works of the God Cupid are manifest and visible, and Psyche's sisters convince her that Cupid is a monster because they are evil and spiteful. In Lewis's book, Cupid is deus absconditus: his works are hidden, and invisible to Psyche's sisters. It makes a very big difference.

Productivity News Good, Real Wage News Bad

Kevin Drum watches the two-class economy roll forward:

The Washington Monthly: Great economy we have going here:

Productivity rose [at a] 4.7 percent [annual rate] in the non-farm business sector of the economy from July to September.... Real hourly compensation, which adjusts wages and other benefits for inflation, fell [at a] 1.4 percent [annual rate]....

So if productivity is skyrocketing, but labor compensation is going down, where's all that extra money going? Yes, you in the back?...

And Mark Thoma watches as Greg Mankiw tries to say that it's somehow Donald Rumsfeld's fault:

Economist's View: Greg Mankiw: People are Confusing the Economy with Iraq : Here's former Bush administration economic adviser Greg Mankiw's offering an alternative... explanation of why people aren't overly excited about the economy:

Bush Begins Effort to Allay Concerns on the Economy, Bloomberg: The war in Iraq also makes it tougher for Bush to reassure Americans, said Harvard economist Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005. "The perception that things are going badly in Iraq often makes people think that this economy is doing badly even when it's not true," he said...

Andrew Samwick Worries About Fiscal Policy

Andrew Samwick is not happy with the fiscal situation:

Vox Baby: A Forecast and a Budget: Last Thursday, the Administration released its economic forecast that will be used as the basis for its FY 2007 Budget, to be released early in 2006. See the actual forecast summary here, and a transcript of a conference call with CEA Member Matt Slaughter here....

Yesterday, the President was on the road to promote continued extension of some of the soon-to-sunset tax cuts. The ones in question pertain to the tax rates on dividends and capital gains. I find this whole discussion to be disheartening. The first order issue with tax policy is that we are not raising enough revenue to match our expenditures. Making the lower tax rates permanent just makes sure that we will permanently not have enough revenue to match our expenditures, unless we decide to lower expenditures by even more.

That brings us back to the FY 2007 budget. I would be much happier if the President spoke about which expenditures he will cut in that budget with the same specificity that he talks about which tax cuts he'd like to make permanent. Yesterday's road show was not a high point. Consider this:

Bush fell back on campaign-style rhetoric yesterday: "When you hear people say that we don't need to make the tax relief permanent, what they're really saying is, they're going to raise your taxes."

I'm prepared to be very unhappy come budget time.

I'm already unhappy. I think I can unhappy enough for at least five of us, all by myself. Andrew can, if he wants, spend budget time enjoying Winter Carnival...

And thanks to Matthew Slaughter for being willing to sit in the hot seat this fall and winter. It is appreciated.

Rick Perlstein on the Conservative Movement Today

Rick Perlstein on the downfall of American conservatism:

The Conservative Movement Now | The Huffington Post: I'm working on the sequel to my book Before the Storm: Barry Goldwater and the Unmaking of the American Consensus now. It's going to be called Nixonland.... Douglas Caddy... the co-founder of the effort to draft Goldwater for vice-president in 1960 and YAF's first president... was the man the White House called on to represent the Watergate burglars in 1972.... [T]he guy inaugurated as YAF's chair in the 1965... Tom Charles Huston... an architect of Watergate. It is a thread one finds throughout the annals of the Nixon presidency. The notion that what they were doing was moral, the eggs that need be broken in the act of redeeming a crumbling West. Jeb Magruder told the Senate Watergate Committee: "Although I was aware they were illegal we had become somewhat inured to using some activities that would help us in accomplishing what we thought was a cause." That message came straight from the top. "Just remember you're doing the right thing," the president told Bob Haldeman on Easter Sunday, 1973. "That's what I used to think when I killed some innocent children in Hanoi." Then he briefed him on how to suborn perjury from an aide concerning the blackmailing of the Watergate burglars....

[M]y thesis [is] that the Republicans are less the party of Goldwater, and more the party of Watergate--and this not despite the operational ascendecy of the conservative movement in its councils but in some sense because of it.... This past year, I interviewed Richard Viguerie.... With a couple of hours' research I was able to find a mailer from an organization that was then one of his direct-mail clients that said "babies are being harvested and sold on the black market by Planned Parenthood."

Why not cut corners like this, if you believe you are defending the unchanging ground of our changing experience? This is what many Americans of good faith seem to be hearing conservatives telling them.... Is this allergy to transparency a constitutive part of conservatism? A friend of mine suggests an answer, imagining Hillary Clinton reading conservative con law professor John Yoo's assertion that "in the exercise of his plenary power to use military force, the Preisdent's decisions are for him alone and are unreviewable": "President Hillary thanks you."...

Tom Charles Huston often signed his memos to Richard Nixon "Cato the Younger," after the statesman of the late Roman Republic famous for both his stubborn inflexibility and incorruptibility. What does it mean that the member of Nixon's staff who was closest to the conservative movement, who was best-versed in its literature and its habits, was not merely the most ruthless malefactor on Richard Nixon's staff but the one most convinced he was acting on principle?... [T]he stations of the cross of a conservatism in power include not merely Sharon, Connecticut, but Saipan, Commonwealth of the Northern Mariana Islands; not merely Mont Pelerin, but the competing Indian casinos whose money was laundered by conservative groups on Jack Abramoff's behalf. Barry Goldwater ran against Lyndon Johnson's ties to Bobby Baker.... Ask yourself, What would Barry Goldwater say?

A big difference between me and Rick is that he likes the Goldwaterites--or at least likes who they were when they were young, idealistic, and out of power.

I don't.

I see them--or most of them--as sleazy: pretending that "states' rights" meant something other than "states have the right to control their Negroes however they wish." I see them as corrupt: eager to call for the abolition of Communism and the unleashing of Chang Kai-Shek, but also eager to wash their hands when people in Hungary thought they were serious about replacing containment with rollback. I see them as stupid: seeing Social Security in particular and social insurance in general as infringements on rather than supports to individual freedom and independence.

More Family Planning, Fewer Unwanted Children, Less Crime

Steve Levitt and John Donahue are unconvinced by the critics of their "more wanted and fewer unwanted children means happier families and less crime" hypothesis. In large part what is going on is "normal science"--Foote and Goetz are inducing Levitt and Donahue to focus and improve their arguments by finding better data. It's not (at least not in anything I've seen) that Foote and Goetz are coming up with empirical results that tightly estimate the effect of abortion availability on crime to be small. The most their empirical results showed was that Levitt and Donahue had not proved their case (and that their Table 7 was badly mislabeled):

Freakonomics: Back to the drawing board for our latest critics%u2026and also the Wall Street Journal and (Oops!) the Economist.... [A] working paper by Chris Foote and Chris Goetz that is sharply critical of John Donohue and me has gotten an enormous amount of attention.... Foote and Goetz criticized the analysis underlying one of the tables in our original article that suggested a link between legalized abortion and crime. (It is worth remembering that the approach they criticize was one of four distinct pieces of evidence we presented in that paper they offer no criticisms of the other three approaches.)

Foote and Goetz... correctly noted that the text of our article stated that we had included state-year interactions in our regression specifications, when indeed the table that got published did not include these state-year interactions... correctly argue that without controlling for changes in cohort size, the original analysis we performed provided a test of whether cohorts exposed to high rates of legalized abortion did less crime, but did not directly afford a test of whether "unwantedness" was one of the channels through which this crime reduction operated.... They found that once you made those changes, the results in our original Table 7 essentially disappear.

There is, however, a fundamental problem with the Foote and Goetz analysis. The abortion data... are... noisy. As one adds more and more control variables... the meaningful variation in abortion rates gets eaten away [while the noise remains].... That will lead the measured impact of abortions on crime to dwindle.... In light of this, it seems uncontroversial that one would want to do the best one could in measuring abortion when carrying out such an exercise....

What John Donohue and I have done (with fantastic research assistance from Ethan Lieber) is... the following [four corrections].... 4) The standard solution to measurement error is to perform instrumenal variables in which one uses one noisy proxy of the phenomenon that is poorly measured as an instrument for another noisy proxy. (I recognize that most readers of this blog will not understand what I mean by this.) In this setting, the CDC's independently generated measure of legalized abortions is likely to be an excellent instrument.... I think that just about any empirical economist would tend to believe that each of these four corrections we make to the abortion measure will lead us closer to capturing a true impact of legalized abortion on crime. So, the question becomes, what happens when we replicate the specifications reported in Foote and Goetz, but with this improved abortion proxy?...

Foote and Goetz... We are able to replicate their results.... [But] with our more thoughtfully constructed abortion measure... the estimated abortion impacts increase... are now statistically significant[ly different from zero at the .05 level] in all of the Foote and Goetz specifications.... The only difference between what Foote and Goetz did and what we report in row 2 is that we have done a better job of really measuring abortion....

[T]he results of instrumental variables estimates using the CDC abortion measure as an instrument... [produces] results... a little bigger, but are more imprecisely estimated....

The simple fact is that when you do a better job of measuring abortion, the results get much stronger. This is exactly what you expect of a theory that is true: doing empirical work closer to the theory should yield better results than empirical work much more loosely reflecting the theory.... The results we show in this new table are consistent with the impact of abortion on crime that we find in our three other types of analyses we presented in the original paper using different sources of variation. These results are consistent with the unwantedness hypothesis.

No doubt there will be future research that attempts to overturn our evidence on legalized abortion. Perhaps they will even succeed. But this one does not.

John Snow Has Not Good News, But an Expectation That He Will Have Good News--Soon

Daniel Gross watches Treasury Secretary John Snow say that--up until some moment that is not yet here but is coming soon--the economy has not been generating good news about real wages:

Daniel Gross: SNOW FALLING ON CEDARS: Yesterday, John Snow said U.S. workers could expect pay increases in 2006.

WASHINGTON (Reuters) - Treasury Secretary John Snow said on Monday that a steadily expanding U.S. economy has reached a point where it should start generating good news about incomes and jobs. "We're about at a tipping-point here where we're going to see much improvement in wage rates and compensation," Snow said during an interview on CNBC television....

Notice the double conditional -- "about at a tipping point."

Hacker and Pierson

For months now I have had Jacob Hacker and Paul Pierson's Off Center by my bedside, and every night I think I should say something intelligent about it. But so far no luck. Here's what they say about their book:

TPMCafe || OFF CENTER...: This is a remarkable -- and deeply troubling -- moment to discuss American politics. In this first post we would like to introduce the book and flag a few issues that we hope to toss around with the commentators and the TPM community during the coming week. We wrote Off Center to demonstrate and explain three broad developments in American politics over the past quarter-century. The first is that the Republican Party -- especially its leaders, activists, and most important affiliated groups -- have moved WAY to the right. The second is that there is no evidence of a similar change in the basic opinions of American citizens on the issues they identify as most important. The third development is the most puzzling. Despite the large and growing gap between the views of the GOP and the views of the electorate, Republicans have had remarkable (though hardly unlimited) success, both in advancing a quite radical agenda and in winning elections....

[W]e need to understand not only the various forces that have pulled the GOP to the right (rising inequality, the transformed political role of the South, the growing clout and radicalism of the GOP "base", the rise of safe seats and attendant growth in importance of extremist-dominated primaries), but also the extensive protections that have insulated this radicalized GOP from political backlash. The GOP has moved off-center... because it can get away with it... in large part because it has constructed the most coordinated, unified party in modern American history. This unity and coordination allows Republican leaders to provide various forms of "backlash insurance", undercutting the checks and balances traditionally offered by the media, the opposition, and more moderate members of the majority party...


Prairie Weather: Interview [by Terry Gross] with Hacker and Pierson about the Republican agenda and the corruption of Congress

If I Had Infinite Hours in the Day: 20051206

If I had infinite hours in the day: Another person who has my view of Comcast Internet: "To add insult to injury, after I waited through the inane advertisement, they tell me that the department is closed on the weekend and I need to call back during the week. I did. When I went through the entire process a second time and finally was able to talk to a human I was extremely happy to say the words 'I would like to cancel my internet service.'..." Kieran Healy backs up: "I've also signed up for a basic account with, part of Dean Allen et al's Textdrive outfit. With the assistance of a helpful tutorial from MagpieBrain... I now have secure, automated, passwordless, incremental, daily remote backups of the important stuff on my Mac. Strongspace starts at eight bucks a month for just over 4GB of space (and unlimited bandwidth). I recommend it...! reminds us: Christmas is a sacred, religious time.... Every year Santa and his heraldic winged reindeer emerge from their manufacturing facilities in the frozen north to sell overpriced gadgets, processed snack foods, and proprietary game software... for Santa so loves the world that he exploits his overseas workforce, that whosoever would purchase his products would not pay exorbitant fees, but save on a fine selection of high quality goods every day... The training of Iraqi security forces has suffered a big "setback" in the last six months, with the army and other forces being increasingly used to settle scores and make other political gains, Iraqi Vice President Ghazi al-Yawer said Monday. Al-Yawer disputed contentions by U.S. officials, including President Bush, that the training of security forces was gathering speed, resulting in more professional troops... Over at Angry Bear, and well worth reading. Multiplication Problems: One of the many tasks I need to complete... is to develop a lab for our junior-level lab course.... The key question in all of this is what is the appropriate time multiplier. There are time multipliers all over the place in academia, to account for the difference between trained academics and college students. The most common multiplier is the exam multiplier, which is widely known to be a factor of three... It's a dirty job. Let's thank Daniel Gross for doing it--reading the clown show that is the Wall Street Journal editorial page, that is... Janet Yellen says more interest-rate hikes to come... It's low-hanging fruit day. I mean, who really wants to follow the "You take back what you said about Uncle Irving" thread at The Corner? It's like Long Day's Journey Into Night as performed by the Willowbrook 1972 Dramatic Society... Ross Douthat continues to trash himself... This [New York Times] article about my beloved Dorsoduro sestiere in Venice depresses me... superficial and full of elementary errors.... The photos in the attached slide show are good, but I have better.... Worst of all is the thought, of course, that I could have done better, even now, even at this distance in time and space, without half trying... Daniel Gross: STOP THE PRESSES! An intelligent, decently-reasoned article found its way onto the Wall Street Journal op-ed page this morning: John Goodman of the National Center for Policy Analysis argues for scrapping the Medicare prescription drug plan... REGISTER of the names of those who personally appeared, as required under the Test Act, at the Quarter Sessions for co. Denbigh from 15 July 1673 to 15 Jan. 1688/9, to deliver certificates of receiving the Sacrament according to the usage of the Church of England, to take the Oaths of Allegiance and Supremacy, and to make a declaration against Transubstantiation. (Roll; parts destroyed by vermin)...

A Very Good Long Article About New Orleans by Peter Gosselin

Peter Gosselin writes:

On Their Own in Battered New Orleans - Los Angeles Times: What Bush said would be one of the largest public reconstruction efforts ever is becoming a private affair, leaving the tough choices to residents as their risks increase. Laurie Vignaud faces a double dilemma: If she rebuilds her wrecked ranch house at 1249 Granada Drive in the great suburban expanse south of Lake Pontchartrain, will her neighbors do the same? And even if they do, will that guarantee their Gentilly neighborhood does not end up an isolated pocket in a diminished, post-Katrina New Orleans?

Nothing in Vignaud's 46 years, not even her job as affordable housing vice president with Hibernia Bank, the region's biggest financial institution, prepared her for this problem. From her relocated offices in Houston, she recently confessed, "It's scary. I don't know when I'll ever go home." Double dilemmas abound in this deeply damaged city, and represent considerably more than the start of the slog back from disaster. Lost amid continued talk of billions in federal aid is the fact that most homeowners and businesses are being left to make the toughest calls on their own. Lost is that New Orleans' recovery -- which President Bush once suggested would be one of the largest public reconstruction efforts the world had ever seen -- is quickly becoming a private market affair.

"My constituents have pretty much concluded that it's up to us to put our neighborhood back together and get on with our lives," said Republican city council member Jay Batt, who represents the Lakeview neighborhood just west of Vignaud's. To market advocates, this is the way it should be. Rugged individuals settled the American West in the 19th century and can resettle the Crescent City in the 21st. But the risks that individual New Orleanians must shoulder in such an on-your-own recovery appear staggeringly large.

"There is no market solution to New Orleans," said Thomas C. Schelling of the University of Maryland, who won this year's Nobel Memorial Prize in Economic Sciences for his analysis of the complicated bargaining behavior that underpins everything from simple sales to nuclear confrontations. "It essentially is a problem of coordinating expectations," Schelling said of the task that Vignaud and her neighbors must grapple with. "If we all expect each other to come back, we will. If we don't, we won't. But achieving this coordination in the circumstances of New Orleans,'' he said, "seems impossible."

I Challenge Franklin Foer to a Battle of Wits: Fishwrap at Ten Paces...

Franklin Foer rides to the defense of "important institutions... The New York TImes and The Washington Post."

The Plank: But the reckless, sweeping assault on important institutions--especially The New York Times and The Washington Post--that emanates from large swaths of the liberal blogosphere will have a devastating long-term effect. These are irreplaceable institutions. As Massing points out:

Even the bloggers who so hate the "mainstream media" get much of their raw material from it. If the leading newspapers lose their capacity to report and conduct inquiries, the American public will become even more susceptible to the manipulations and deceptions of those in power.

I just wish that more of the MSB had a modicum of awareness of this fact.

Is that really true? I would say that Joshua Micah Marshall gets some but not much of his raw material from the "mainstream media." Ditto for Pandagon and Andrew Sullivan. Wonkette, Crooked Timber, Billmon, Orcinus, OxBlog, Volokh Conspiracy, and Outside the Beltway get material from the "mainstream media," but in the sense that it is their lawful prey. Daniel Drezner, Marginal Revolution, and ThinkProgress are much more likely to be sources that the mainstream media draw on than otherwise. Baghdad Burning owes nothing to the mainstream media.

Among those I read most regularly, I would say that Kevin Drum and Matthew Yglesias are the ones that get "much of their raw material" from the mainstream media.

And the quality of the "mainstream media" is low, quite low.... Let's surf on over to and look at the articles it regards as the most important and puts on the home page. They are:

  1. Judge Upholds Most Serious Charges Against DeLay. By DAVID STOUT.
  2. Hussein Is Fiery Again in Unruly Court Session. By ROBERT F. WORTH.
  3. Rice Chides Europeans on Detention Center Complaints. By JOEL BRINKLEY.
  4. ABC Names Anchors of 'World News Tonight'. By JACQUES STEINBERG.
  5. In Today's India, Status Comes With Four Wheels. By AMY WALDMAN.
  6. Troubled Maker of Heart Devices Gains New Suitor. By VIKAS BAJAJ and BARNABY FEDER.
  7. Bomber Kills 5 Outside Shopping Mall in Israel. By GREG MYRE.
  8. 9/11 Panel Calls U.S. Response 'Disappointing'. By TIMOTHY WILLIAMS.

There we have a sample of 8. Let's pick one at random. I pick 5....

Oh my God.

This is far worse than I expected to find.

Story number 5 begins:

On the dark highway, the car showroom glowed in the night like an American drive-in. Inside, it looked more like a game-show set: bright lights, white floors, huge windows, high ceilings and ad posters of beaming consumers far paler than most Indians. For 36-year-old Ram Reddy, the price was right enough to make a down payment on his fifth family car.

He and his brother already had one car "for the children," two "for the ladies," and so on. Now they were buying the Toyota Innova, a big-as-a-boat luxury van that retails for a minimum of $23,000, 46 times India's per capita income of about $500.

The Innova is a new plaything of the moneyed here, one being peddled, like so many products in India today, by a Bollywood star. It is yet another symbol of the kid-in-a-candy-store psyche that has seized India's growing consuming class, once denied capitalism's choices and now flooded with them.

Fifteen years after India began its transition from a state-run to a free-market economy, a new culture of money - making it, and even more, spending it - is afoot.

This domestic hunger for goods has become an important engine for an economy that still lags in exports. So intense is the advertising onslaught, so giddy the media coverage of the new affluence, that it is almost easy to forget that India remains home to the world's largest number of poor people, according to the World Bank.

Still, India's middle class has grown to an estimated 250 million in the past decade, and the number of super-rich has grown sharply as well.

And, after more decades of socialist deprivation, when consumer goods were so limited that refrigerators were given pride of place in living rooms, they have ever more wares to spend it on: cellphones, air-conditioners and washing machines; Botox, sushi and Louis Vuitton bags; and, perhaps the biggest status symbol of all, cars.

India has become one of the world's fastest-growing car markets, with about a million being sold each year. It once had only two kinds, Fiats and Ambassadors. Now dozens of models ride the roads, from the humble, Indian-made Maruti to the Rolls-Royce, which has re-entered India's market some 50 years after leaving in the British wake....

One million cars sold a year.... That means that at most one out of 200 Indian families buys a car. Only one in 40 families in India has anything we would call a car.

India's "superrich".... At current exchange rate, the income of the 20,000th richest Indian family is roughly $250,000 a year. Maybe 3000 Indian families are "superrich" in the sense of making more than $1,000,000 a year.

India's "250 million strong middle class."... The income of the family that contains the 250 millionth richest Indian is about $2,500 a year at the current exchange rate--and about $15,000 a year at purchasing power parity. The PPP estimate is probably more relevant, because what most of India's "250 million strong middle class" buy are the necessities that are so very cheap in India because the wages of unskilled labor are so very low. India's "250 million strong middle class" has a material standard of living that we in the United States associate with the working poor.

Average hourly wages in India? Perhaps $0.50 measured at current exchange rates. It is not easy to forget that India remains the country that is home to the world's largest number of poor people. It is not easy to forget that at all.

I receive mammoth value added from the Financial Times, Reuters, and Bloomberg. I receive substantial value added from Knight-Ridder, from the (increasingly uneven) Economist, from the inside-baseball-political news (but not the substantive policy analysis) of the National Journal, and from the news (but definitely not the editorial) pages of the Wall Street Journal.

But value added from the New York Times? A few reporters are good. Others are liars--the kind of people who would agree to claim that a senior administration official is an ex-Capitol Hill staffer. Most don't know enough about substance to write the stories they are tasked with writing.

So let me ask Franklin Foer a question: in the New York Times of December 5, 2005, where does he see any value added? I see value added (but not to me) in Paul Krugman's musings about the strange shape of the current economic recovery. Where else?

Dani Rodrik on South Korea and Taiwan

I assigned this piece of Dani Rodrik's this year, and I find I have to think more to figure out what I believe is going on here:

Getting Interventions Right: How South Korea and Taiwan Grew Rich : by Dani Rodrik: NBER Working Paper No. 4964:

Abstract: Most explanations of Korea's and Taiwan's economic growth since the early 1960s place heavy emphasis on export orientation. However, it is difficult to see how export orientation could have played a significant causal role in these countries' growth. The measured increase in the relative profitability of exports during the 1960s is too insignificant to account for the phenomenal export boom that ensued. Moreover, exports were initially too small to have a significant effect on aggregate economic performance. A more plausible story focuses on the investment boom that took place in both countries. In the early 1960s both economies had an extremely well- educated labor force relative to their physical capital stock, rendering the latent return to capital quite high. By subsidizing and coordinating investment decisions, government policy managed to engineer a significant increase in the private return to capital. An exceptional degree of equality in income and wealth helped by rendering government intervention effective and keeping it free of rent seeking. The outward orientation of the economy was the result of the increase in demand for imported capital goods.

Why Oh Why Can't We Have a Better Press Corps? (Special George Will Edition)

This is above and beyond the call of duty. Daniel Gross reads George Will on Mitch Daniels:

Daniel Gross: November 27, 2005 - December 03, 2005 Archives: FAILURE OF THE WILL: Talk about willful ignorance. Can George Will really be this clueless?

Answer: Yes.

And doesn't he have an editor?

Answer: No:

In Sunday's Washington Post, he rhapsodizes about the brilliance of Indiana Gov. Mitch Daniels and his budget-cutting ways. "Ending bottled water for employees of the Bureau of Motor Vehicles (annual savings, $35,000). Ending notification of drivers that their licenses are expiring; letting them be responsible for noticing (saving $200,000). Buying rather than renting floor mats for BMV offices (saving $267,000 this year). Initiating the sale of 2,096 surplus state vehicles (so far, $1.95 million in revenue from 1,514 sales). Changing the state lottery's newsletter from semimonthly and in color to a monthly and black-and-white (annual savings, $21,670). And so on, and on, agency by agency.

Such matters might be dismissed by liberals who think government spending is an index of government "caring," and perhaps by a new sect called "national greatness conservatives" who regard Daniels's kind of parsimony as a small-minded, cheeseparing exercise unworthy of government's great and stately missions. But it seems to be an Indiana approach.

What is it about Indiana? In this annus horribilis for conservatives, one of their few reasons for rejoicing has been the ascent to influence in the U.S. House of Representatives of the Republican Study Committee, more than 100 parsimonious members under the leadership of Mike Pence, a third-term Hoosier from a few miles east of here. The RSC's doctrine, a response to a one-third increase in federal spending during the current president's first four years, might be called Danielsism, which is: There is more to limited government than limiting its spending, but there will be nothing limited about government unless its spending is strenuously limited.

So "Danielsism" means responding to the "one-third increase in federal spending during the current president's first four years"?

People who were awake during the first part of this decade may have a different definition of "Danielsism." People who were awake then might recall that Mitch Daniels was the head of the Office of Management and Budget, through June, 2003. They might also remember that while he was nicknamed "the Blade," he did nothing to cut federal spending, and in fact was a key player in the events that led to the "one-third increase in federal spending during the current president's first four years."

Oh, and one of the first things Daniels did upon taking office was to call for increasing marginal tax rates on the wealthy.

"Danielsism" a sounds an awful lot like Fiorello LaGuardiaism.

Why Oh Why Can't We Have a Better Press Corps? (White House Briefing Room Edition)

Dan Froomkin on press inquiries about Bush's "plan" to bomb Al-Jazeera's headquarters in Qatar:

The al-Jazeera Dodge: For some reason, the White House refuses to provide a straight answer to this question: Did President Bush raise the idea of bombing the headquarters of the al-Jazeera television network in an April 2004 conversation with British Prime Minister Tony Blair -- and if so, was he serious or was he joking?

Reporters who have asked press secretary Scott McClellan to respond to the claim first published in the British Daily Mirror almost two weeks ago have gotten two crude non-denial denials. The first one.... "We are not interested in dignifying something so outlandish and inconceivable with a response."... The next day, I predicted in my column that "nothing arouses White House reporters more these days than a non-denial denial." But I apparently overestimated the mainstream press corps' baloney detectors.

Since then, McClellan has been publicly asked about the al-Jazeera story precisely once... he played dumb.... "MR. McCLELLAN: Can I assure them what?"... "MR. McCLELLAN: Make what comments?"... "MR. McCLELLAN: Any such notion that we would engage in that kind of activity is just absurd."... "MR. McCLELLAN: I don't know what comments you're referring to. I haven't seen any comments quoted."... "MR. McCLELLAN: Let me just repeat for you, Connie. Any such notion that America would do something like that is absurd."... "MR. McCLELLAN: I'm sorry? Whose offices? The terrorist offices."... "MR. McCLELLAN: And the military talked about that. What are you suggesting? I hope you're not suggesting that they're targeting civilians, because that's just flat-out wrong."... [W]here were the follow-up questions? Nobody in the briefing room pursued the issue any further, and nobody even said one word about al-Jazeera at yesterday's briefing .

By contrast, the corps was downright dogged yesterday when it came to rooting out the details of Bush's summons to jury duty in Crawford. Now there's a big story.

A Fourth Amendment Problem

Can this really be as represented? I know that some of my friends think that I am too-prone to jump to the conclusion that Republicans are malevolent sadistic f----. But is there another interpretation possible?

Digby directs us to the scene of Samuel Alito's criminal opinion:

Hullabaloo : Samuel Alito is a real piece 'o work:

'84 Alito Memo Backed Police Who Shot Unarmed Suspect - Los Angeles Times : Alito wrote that he saw no constitutional problem with a police officer shooting and killing an unarmed teenager who was fleeing after a $10 home burglary.

"I think the shooting [in this case] can be justified as reasonable," Alito wrote in a 1984 memo to Justice Department officials. Because the officer could not know for sure why a suspect was fleeing, the courts should not set a rule forbidding the use of deadly force, he said. "I do not think the Constitution provides an answer to the officer's dilemma," Alito advised.

A year later, however, the Supreme Court used the same case to set a firm national rule against the routine use of "deadly force" against fleeing suspects who pose no danger. "It is not better that all felony suspects die than that they escape," wrote Justice Byron White for a 6-3 majority in Tennessee vs. Garner. "Where the suspect poses no immediate threat to the officer and no threat to others, the harm resulting from failing to apprehend him does not justify the use of deadly force to do so."

The 4th Amendment forbids "unreasonable searches and seizures" by the government, and the high court said that killing an unarmed suspect who was subject to arrest amounted to an "unreasonable seizure." Said White: "A police officer may not seize an unarmed, nondangerous suspect by shooting him dead."

Impeach George W. Bush. Impeach him now.

Big-Deficit Tax Reform Does Not Seem to Be a Winner

Tax reform falls off the agenda:

Bush to Delay Major Push for Tax Overhaul, People Familiar Say: Dec. 5 (Bloomberg) -- President George W. Bush will delay a major push for revamping the tax code because administration officials concluded the changes are too tough to sell to the public and lawmakers, two people familiar with the matter said.... Bush hasn't mentioned tax code changes since his Advisory Panel on Federal Tax Reform issued a 272-page report Nov. 1 recommending two ways to overhaul the tax code. The proposals would reduce or eliminate many popular deductions such as those for mortgage interest and state and local taxes while reducing taxes on investment and abolishing the alternative minimum tax.

The silence stands in contrast to the fanfare with which the president announced the panel's creation in January. Then, Bush introduced panel Chairman Connie Mack, a former Republican Senator, and Vice Chairman John Breaux, a former Democratic Senator, in a ceremony at the White House.... Surveys and focus groups conducted for the Bush administration on overhauling the tax code found some enthusiasm until details such as altering the mortgage deduction were mentioned and began to draw objections, according to the person who has worked with the administration...

This was a group hand-picked to be friendly to the Bush agenda--whatever it turns out to be. The people who understand fiscal policy seem to want to spend their time putting pressure on the government to fix the deficit. The people who don't understand fiscal policy are scared of the reduction in the mortgage interest deduction.

Economist's View: Greenspan: Social Security and Medicare Must Be Cut to Solve the Budget Deficit Problem

Mark Thoma finds Alan Greenspan wanting the 1990 Budget Enforcement Act PAYGO restrictions back:

Economist's View: Budget Deficit Legerdemain....

The positive short-term economic outlook is playing out against a backdrop of concern about the prospects for the federal budget over the longer run. ...[T]he latest projections... suggest our budget position will substantially worsen in the coming years unless major deficit-reducing actions are taken. As I recently testified, the necessary choices will be especially difficult to implement without the restoration of procedural restraints on the budget-making process.... Reinstating a structure like the one formerly provided by the Budget Enforcement Act of 1990 would signal a renewed commitment to fiscal restraint and help restore discipline to the annual budgeting process.... I do not mean to suggest that the nation's budget problems will be solved simply by adopting a new set of budgeting rules. The fundamental fiscal issue is the need to make difficult choices among budget priorities....

If I Had Infinite Hours in the Day: December 5, 2005

If I had infinite hours in the day: Henry Farrell reviews George Packer's The Assassin's Gate: "[I]t really does a terrific job of setting out the complexities of politics in Iraq. Pro-war leftists and liberals should read this book too, and reflect carefully on Packer's documentation of how badly "democracy-building" was implemented in practice.... Packer sets out his indictment of the Bush administration: '...a carelessness about human life that amounted to criminal negligence. Swaddled in abstract ideas, convinced of their own righteousness, incapable of self-criticism, indifferent to accountability, they turned a difficult undertaking into a needlessly deadly one. When things went wrong, they found other people to blame. The Iraq War was always winnable; it still is. For this very reason, the recklessness of its authors is all the harder to forgive'.... Jay Conner in comments... [points] me towards this interview with Packer in yesterday's San Francisco Chronicle. Packer qualifies his statement that 'the Iraq War was always winnable; it still is'... by saying that he 'would not have written that line in the present tense' given recent developments... Anil Dash looks at the end of Macromedia, and thus at even less competition in software... General Glut is back... Wonkette: "We're a bit late on this item because, frankly, the implications are terrifying. Afghani brothers Badr Zaman Badr and Abdurrahim Muslim Dost were released at the end of October from three years' detention in Guantanamo. The activity that drew the attention of military interrogators was a satirical piece that Dost wrote in reply to Bill Clinton's 1998 $5 million bounty for the capture of Osama bin Laden in the wake of the US embassy bombing in Tanzania and Kenya. Dost counterproposal: Offer up 5 million Afghanis--valued at roughly $113--in return for the capture of Bill Clinton.... 'Again and again, they were asking questions about this article', Dost told Newsday reporter James Rupert. 'We had to explain this was a satire. It was really pathetic'. Pentagon spokesman Lt. Cmdr. Flex Plexico--who on the basis of his name alone appears to be a satirical charcter himself--insists the brothers' detention 'was directly related to their combat activities [or support] as determined by an appropriate Department of Defense official.'... Americans 'have freedom to criticize their government, and this is very good,' Badr told Rupert. 'We know that America's laws say that a person is innocent until proven guilty' except of course that 'for us it was the opposite.' You know, maybe the DoD really does understand satire, after all." Wonkette: "And of course, the secretary, who delivered her remarks most inappositely moments before boarding a plane for a goodwill tour of Europe, admitted complicity in the only way the Bush administration knows how: with arrogant belligerence." Dan Froomkin: "...according to an e-mail from a White House staffer five days later, the letter never arrived. Margaret Grant sent an e-mail to Blanco's office Sept. 7 asking that the Sept. 2 letter be resent. 'We found it on the governor's Web site but we need "an original," for our staff secretary to formally process the requests she is making,' Grant wrote." Josh Micah Marshall: "Neil Bush traveling through Asia with Rev. Moon to raise money for an underwater tunnel between Russia and Alaska." P.Z. Myers is nervous: "Here's the question. Was this a sincere review, or an example of hard-to-discern sarcasm? Stuff like 'non-biological animals' is so ridiculous that I'm tempted to say it's gotta be a put-on, but then I've read [Intelligent Designers] Ham and Hovind and Dembski and Gish and Wells, and it's become awfully hard to distinguish snark from stupidity any more. Bonus question: 18 of 128 people found the review helpful. What the heck does that mean? 14% of the browsers on Amazon that this was a valid criticism, or do Amazon browsers just approve of funny reviews?" Marginal Revolution links to James Buchanan at Cato Unbound. I say there's something wrong about a discussion of fiscal responsibility that blames deficits on "now-discredited Keynesian economics while excusing Reaganites' "distraction by supply-side arguments" while failing to mention the controls on deficits introduced in the 1990 Budget Enforcement Act at all. Not a good start. John Derbyshire thinks National Review is a family website... All the things John Yoo doesn't know: "a) whether... information obtained under torture is inherently unreliable... b) whether torture... have aided U.S. forces in saving even a single life... c) whether torture... causes the loss of more lives than it saves by creating an atmosphere of sheer hatred of Americans..."

Matthew Yglesias is annoyed: "Also annoying, I would think, would be... you're kidnapped off the streets by the American government and held, without evidence or trial, for a period of five months. And then in turns out the Americans have the wrong guy! 'I have very bad feelings,' concludes the victim, to no one's surprise at all.... I'm being a bit flip because it's hard to get serious about this business without becoming completely depressed about what our country's become... Economist's View: Does Monetary Economics Ignore Rust Belts? Edmund Andrews on the Alternative Minimum Tax... Stygius on Judge Alito...

Stygius on Judge Alito... More high-quality anti-press snark from Matthew Yglesias: "Reading Jeffrey Birnbaum's article on American automakers[' hoping]... 'for the government to provide catastrophic health care coverage.' One person who floated this proposal was, of course, John Kerry who made it the centerpiece of his domestic policy agenda. Tragically, political reporters for major newspapers and television networks chose to devote approximately zero percent of their campaign coverage to this idea or its (significant) merits..."


Falling Income Tax Revenue (as a Share of GDP)

Kash Mansouri has a graph:


Angry Bear: The Budget Deficit in Context: Even I, someone extremely familiar with the details of the US's budget problems, was slightly astonished by this picture.... The truly remarkable thing about the graph is just how far [non-Social Security] federal revenues have fallen over the past fifty years. It appears that successive tax cuts, especially those by Reagan and Bush, have driven down federal revenues in a permanent way. Equally important, it is clear that those tax cuts have NOT driven down federal spending; the only substantial decline in federal spending happened during the 1990s, following a major tax increase in 1993. Yet more evidence that the "starve the beast" theory has the empirical validity of the Ptolomaic solar system.

[Non-Social Security] revenues have trended strongly down over the past fifty years, while spending has remained roughly constant (with the exception of the Clinton-era downsizing of the federal government). That, in a nutshell, is the reason for the US's present and future deep structural budget deficit.

Note: The projection for the rest of the decade is from the CBO. This CBO forecast assumes that Bush's tax cuts are made permanent, that AMT is mostly fixed, that spending in Iraq and Afghanistan tapers off gradually over the next decade, and that non-defense non-homeland security (NDNHS) discretionary spending is sharply curtailed. Unlike the referenced CBO document, however, I do not assume that Bush's social security privatization scheme is enacted into law.

And let me rise to the defense of Claudius Ptolemy: his theory works for predicting the motions of the planets. The "starve the beast" theory does not work. Please Don't slander Claudius Ptolemy.

Consequences of Our Weak Labor Market

Paul Krugman on the current weirdnesses of the American economy:

The Joyless Economy: 63 percent of Americans rate the economy as only fair or poor, and by 58 to 36 percent people say economic conditions are getting worse, not better. Yet... gross domestic product is rising at a pretty fast clip. So why aren't people pleased with the economy's performance? Like everything these days, this is a political as well as factual question. The Bush administration seems genuinely puzzled that it isn't getting more credit for what it thinks is a booming economy. So let me be helpful here and explain what's going on....

[T]he economic numbers, especially the job numbers, aren't as good as the Bush people imagine. President Bush made an appearance in the Rose Garden to hail the latest jobs report, yet a gain of 215,000 jobs would have been considered... subpar - during the Clinton years... total number of hours worked actually fell last month.

But the main explanation for economic discontent is that it's hard to convince people that the economy is booming when they themselves have yet to see any benefits from the supposed boom. Over the last few years G.D.P. growth has been reasonably good, and corporate profits have soared. But that growth has failed to trickle down to most Americans.... [F]amily income data for 2004... showed a remarkable disconnect between overall economic growth and the economic fortunes of most American families.

It should have been a good year for American families: the economy grew 4.2 percent, its best performance since 1999. Yet most families actually lost economic ground. Real median household income - the income of households in the middle of the income distribution, adjusted for inflation - fell for the fifth year in a row. And one key source of economic insecurity got worse, as the number of Americans without health insurance continued to rise... data for 2005... will be similar. G.D.P. growth has remained solid, but most families are probably losing ground as their earnings fail to keep up with inflation.

Behind the disconnect between economic growth and family incomes lies the extremely lopsided nature of the economic recovery that officially began in late 2001. The growth in corporate profits has, as I said, been spectacular. Even after adjusting for inflation, profits have risen more than 50 percent since the last quarter of 2001. But real wage and salary income is up less than 7 percent... [M]uch of the wage and salary growth that did take place happened at the high end.... Americans don't feel good about the economy because it hasn't been good for them. Never mind the G.D.P. numbers: most people are falling behind.

It's much harder to explain why. The disconnect between G.D.P. growth and the economic fortunes of most American families can't be dismissed as a normal occurrence. Wages and median family income often lag behind profits in the early stages of an economic expansion, but not this far behind, and not for so long. Nor, I should say, is there any easy way to place more than a small fraction of the blame on Bush administration policies. At this point the joylessness of the economic expansion for most Americans is a mystery.

What's clear, however, is that... the problem isn't that people don't understand how good things are. It's that they know, from personal experience, that things really aren't that good.

Donald Luskin: Stupidest Man Alive

A correspondent asks me if it isn't time to surf on over again to Donald Luskin's "Poor and Stupid" website, find some egregious offense against intelligent thought, and lay down another marker saying that Luskin is indeed the Stupidest Man AliveTM, just in case there's somebody out on the internet searching for information on Luskin who doesn't already know.

Sigh. OK. It's painful, though... Here's the very first item

Ah. Donald Luskin has taken down the post I was pointing to to show that he is indeed the stupidest man in the world. Well, here's another example. Here Luskin is outraged that is unwilling to lose lots of money by taking the sucker side of bets:

The Conspiracy to Keep You Poor and Stupid: GREED? MARKET EFFICIENCY? SAME THING! Betting in futures contracts on an online "prediction market" has been shut down, apparently because insiders who know the outcomes are heavily trading the contracts. Isn't this the whole point of prediction markets? To make predictions? Based on what knowledgeable people know?

Sadly, Donald, no. The point of running a gambling website is to entertain and so make money--not to lose money by taking the sucker side of bets against the better informed.

And here's what Paul Kedrosky has to say on the subject:

Paul Kedrosky's Infectious Greed: Online Betting is Too Accurate : shut off betting Friday on both Sports Illustrated's Sportsperson of the Year, and Time Magazine's Person of the Year. Why? Because it looked like the betting was tilting rapidly toward two candidates, quarterback Tom Brady and Mother Nature, respectively. So what, right? If the betting market is working, it is only to be expected it would tilt toward a smart choice. Maybe, but in this case some of the biggest action Friday was coming from folks who had email addresses at Time-Warner's (the owner of both magazines) PR agency. I have only one question: What insider could conceivably be so dumb as to make a heavy bet on such a prominent topic, and do it using their work email address? Truly amazing.

And here's the original item that he deleted:

The Conspiracy to Keep You Poor and Stupid : HMMM... Our friend John Grauel says:

You consider that there have been an average of 160,000 troops in the Iraq theater of operations during the last 22 months, and a total of 2112 deaths, that gives a firearm death rate of 60 per 100,000.

The rate in Washington D.C. is 80.6 per 100,000(1). That means that you are about 25% more likely to be shot and killed in our Nation's Capitol, which has some of the strictest gun control laws in the nation, than you are in Iraq.

Conclusion: We should immediately pull out of Washington D.C.

If Donald Luskin were not the Stupidest Man AliveTM, he would know that the DC figure of 80.6 is an annual figure, while the 60 figure is a monthly figure. 2112 deaths divided by 160,000 soldiers divided by 22/12 years gives an annual death rate of not 60 per 100,000 but 720 per 100,000.

But what is a factor of twelve to the Stupidest Man AliveTM?

(1) Note: This "80.6" itself appears to be about twice as large as the real number. But why am I not surprised?

But what I really want to do is to pull an item out of my archives--an item in which Luskin's stupidity provides us with an opportunity to teach some really important things:

I continue to shake my head in amazement as I consider the most bats--- ignorant thing I read all last summer: Donald Luskin's claim in National Review that in order to get a picture of income distribution and mobility in America:

Intellectual Garbage Pickup: you'd have to track hundreds of millions of individuals.... [N]one of this is reliable... the Panel Study of Income Dynamics... tracks only 8,000 families out of a U.S. population of 295 million individuals...

The whole purpose of the science of statistics is to tell us that this is simply not true. As long as you can take a random sample of your population, you can find out an enormous amount about the population from a relatively small number of observations. You can find out what proportion of rich people had poor paretns, or what proportion of twenty year olds think they will graduate from college, or pretty much any other average proportion that you want.

Now the "random sample" part of this is very important. But if your sample is random--if the fact that the yes-no pattern of observations so far makes it no more (or less) likely that you next observation will be a "yes"--then the law of large numbers tells us that the sample average you compute will converge to the true population average at a frighteningly rapid speed.

The standard demonstration of this is to repeatedly flip a coin and count the excess proportion of heads over tails. We know that--with a coin flipped and caught in the air by a human being at least--the population average taking all coins that have ever been flipped of the excess proportion of heads is zero. How many observations do we have to take--how many coin flips--before the sample average converges to this population average of 0% excess heads?

Let's see. Here's one run of 1,000 "flips" from Excel's internal random number generator:

Here are ten more:

Impressive, no?

Try some yourself.

You could have a population of 295 million flipped coins. Yet you don't need to look at "hundreds of millions" of them to determine what is going on. Looking at 1,000 will do.

This is the principal insight of the science of statistics. it is an important insight. It is a powerful insight. It is also not an obvious insight--that's what makes it powerful and important.

Is This Wise?

Certainly Jonah Goldberg is well-intentioned when he writes:

Jonah Goldberg : It does't help if a conservative says "Merry Christmas" when he really means "Eat yuletide, you atheistic bastard!" If you're putting up a Christmas tree in order to tick off the ACLU, you've really missed the point....

He is performing a mitzvah. And any signs of intelligence from the National Review crowd are very welcome. But is it wise for him to mock all his yahoo friends in this way?

I mean, Jonah does know that "Yuletide" is the profoundly unChristian Saxon solstice festival, doesn't he?

Yule - Wikipedia, the free encyclopedia : Though there are numerous references to Yule in the Icelandic sagas, there are few accounts of how Yule was actually celebrated, beyond the fact that it was a time for feasting.... It is, however, known to have included the sacrifice of a pig for the god Freyr.... [C]onfraternities of artisans of the 9th century, which developed into the medieval guilds, were denounced... for their "conjurations" when they swore to support one another in coming adversity and in business ventures... on December 26, the "feast day of the pagan god Jul, when it was possible to couple with the spirits of the dead and with demons that returned to the surface of the earth...." [T]he burning of the Yule log, the eating of ham, the hanging of boughs, holly, mistletoe, etc. are apparently derived from traditional northern European Yule celebrations....

So let's all get ready to celebrate the Twelve Days of Marduk!

Why Oh Why Can't We Have a Better Press Corps? (New Republic Contraversializing-the-Teaching Edition)

Ah. The neoconservative New Republic joins the Republican War and Science by giving its space to Gertrude Himmelfarb, who argues that it is important that we get the science wrong, and respect Intelligent Design, which she mischaracterizes as:

TNR Online | Monkey and Morals (1 of 3) (print) : [a] quarrel... not with evolution itself but rather with natural selection conceived as a purely mechanistic and entirely sufficient explanation for evolution. For them, intelligent design is nothing more or less than teleology, the recognition of a purposiveness or direction in nature, with or without a Creator in the orthodox sense of God....

The kicker is that it is more likely than not that Gertrude Himmelfarb herself doesn't believe in Intelligent Design, or in the Fundamentalist Protestant God that hides behind the mask of the Intelligent Designer. In the circles in which she primarily travels, the Fundamentalist Protestantisms that fuel Intelligent Design are good things for the simple to believe in because (a) it keeps them in line, and (b) it increases the likelihood that the U.S. government will tolerate the policies of Likud (the belief, you see, is that Israel must reconquer the entire territory of the Davidic Kingdom before God can bring about the Day of Judgment and unleash his wrath upon the Idolatrous Jews (and the Idolatrous Others).

All in all, better than in the days when Andrew Sullivan and Marty Peretz gave space to the Blacks-are-genetically-inferior-in-what-counts-even-though-they-can-jump crowd. But not by much.

Whether the New Republic will survive the technological changes of the next decade is an open question. If Peter Beinart wants to keep its only edge--its reputation for publishing smart things--he needs to seize control over the back of the magazine.

If I Had Infinite Hours in the Day: December 4, 2005

If I had infinite hours in the day: Hurricanes and Atlantic water temperature. The Economist writes about Rich Lyons's studies of order flow and currency movements. Jane Galt on Nazi economic ideology. Frank Rich on Bob Woodward--and on how Woodward's first priority is not to inform his readers but to make his sources look good.,,2089-1903373,00.html Condi Rice is "offensive"... Joan Didion on Bob Woodward... The Duck of Minerva on Bush's "Victory Strategy." RJ Rummel has retabulated the totals for democide for The People's Republic of China under "The Geat Helmsman" Mao Zedong: 77,000,000 dead. Chad Orzel fears that George R.R. Martin is turning into Robert Jordan. Scott Adams pities the poor "third highest ranking al-Qaida leader"... Hilzoy on "extraordinary erroneous rendition." Meanwhile, in tinfoil helmet territory... Torture: a short user's guide.

Smarter Living Through Chemistry!

Coffee. Now why does something that evolved as a nerve poison for bugs have such wonderful effects?

New Scientist Breaking News - Coffee's effects revealed in brain scans : Gaia Vince: Coffee improves short-term memory and speeds up reaction times by acting on the brain’s prefrontal cortex, according to a new study.... “Caffeine modulates a higher brain function through its effects on distinct areas of the brain,” explains Florian Koppelstätter, who carried out the research with colleagues at the Medical University at Innsbruck, Austria.... During the memory tests, participants were shown a fast sequence of capital letters, then flashed a single letter on a screen and told to decide quickly whether this letter was the same as the one which appeared second-to-last in the earlier sequence. They had to respond by pressing a “Y” for yes or “N” for no.

“The group all showed activation of the working memory part of the brain," Koppelstätter explains. "But those who received caffeine had significantly greater activation in parts of the prefrontal lobe, known as the anterior cingulate and the anterior cingulate gyrus. These areas are involved in 'executive memory', attention, concentration, planning and monitoring." “This type of memory is used when, for example, you look up a telephone number in a book and then mentally store it before dialling,” he adds. Koppelstätter stresses that the study is preliminary and that he has yet to discover how long the memory effects last or what other effects coffee has on brain function. He adds that the long-term impact of caffeine use is also an important consideration.

But he says the study shows that coffee has an effect on specific brain regions involved in memory and concentration that tallies with anecdotal evidence of the drink's “pick-me-up” effect. Caffeine is known to influence adenosine receptors which are found throughout the brain on nerve cells and blood vessels. It is thought that the drug inhibits these receptors and that this excites the nerve cells in the brain. “This may be the mechanism involved,” suggests Koppelstätter.

The Bush Administration: Worse Than You Imagine Possible...

Daniel Gross provides yet another example of how the Bush administration is worse than you imagine possible, even after you take account of the fact that it is worse than you imagine possible:

Daniel Gross: November 27, 2005 - December 03, 2005 Archives: DEBT BE NOT PROUD: This is scary. Allan Hubbard, President Bush's top economic adviser, professes not to know the size of the national debt. From yesterday's White House press briefing.

Q Al, can I ask you one? I can't remember the last time the President spoke about the national debt, which is now over $8 trillion. Is that something you guys worry about?

DIRECTOR HUBBARD: Well, I don't know where your $8 trillion comes from, but we --

Q The public website.

DIRECTOR HUBBARD: Well, I guess it really depends on what you're including, but let me -- again, the President is most concerned about the economy and the budget. And a key component of that, as I have spoken earlier, is the budget deficit. And, you know, that's what contributes to the overall budget debt, the country's debt, and that's why it's so important to reduce the budget deficit and, hopefully, ultimately, eliminate the budget deficit.

Q Does the magnitude of the national debt disturb you?

DIRECTOR HUBBARD: Actually, again, I don't know what numbers you're using, but the current budget debt is not a problem, but we do not want it to grow as a percentage of the GDP. That's the way you want to look at it, is the debt as a percentage of GDP. And our budget debt is lower than many other developed countries. The President is committed to keeping it low; that's why he wants to cut the budget deficit in half by 2009. . . . .

Q Check the Bureau of Public Debt website, you'll see the number there.

DIRECTOR HUBBARD: Okay, thank you.

Is the ignorance here calculating -- i.e. Hubbard really knows what the national debt is but acts like he doesn't because it's embarrassing to talk about? Or is it genuine -- i.e. Hubbard really doesn't have any clue what the national debt is? (I vote for the latter.)

In case, he's still looking, the link is right here. And the [gross] debt [including money owed by the Treasury to Social Security and other trust funds] is actually now more than $8.1 trillion.

I vote for genuine ignorance as well.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.

When Ex-CEA Chairs Attack...

Ex-Bush CEA Chair Greg Mankiw attacks reporter Daniel Altman. Lord knows that I typically find media coverage of economic policy issues to be abysmal. But this one I score for Altman.

Mankiw's principal beef with Altman is that Altman wrote:

Back in 2003, the choice of N. Gregory Mankiw, a Harvard professor, to head the council initially provoked some wonderment from economists. He had condemned supporters of some Reagan-era tax cuts as "charlatans and cranks" in the first edition of his basic economics textbook.... But it's possible that the administration had few other options....

[T]he role of the council's chair can take on a decidedly political tilt.... Professor Mankiw, who has returned to Harvard, sounded more like Scott McClellan, the White House press secretary, than an economic adviser. "The president is very focused on putting people back to work, at creating jobs," he said. "The president has said that he wants to make the tax cuts permanent. He believes that is important for economic growth."...

But I can't see what Mankiw's objection is. Mankiw writes:

On the issue of my previous views, Altman makes a common error. In the past, I have been critical of supply siders who say that tax cuts generate so much growth as to increase tax revenue. That is different than being critical of tax cuts. I believe that tax cuts increase growth and, therefore, are partly self-financing. I think it is overoptimistic to say they are fully self-financing. That is why spending restraint must go hand in hand with tax cuts. For some reason, some Times reporters think that being critical of one argument for tax cuts is to be critical of tax cuts themselves...

I had always assumed that Greg Mankiw was critical of the Bush tax cut for these reasons:

  1. Major Premise: All serious economists are critical of tax cuts that are not accompanied by spending restraint because they are likely to produce large long-run deficits which may well cause big trouble.
  2. Minor Premise: The Bush tax cut are not accompanied by spending restraint and so are likely to produce large long-run deficits.
  3. Conclusion: All serious economists are critical of the Bush tax cut.


  1. Major Premise: All serious economists are critical of the Bush tax cut.
  2. Minor Premise: Greg Mankiw is a serious economist.
  3. Conclusion: Greg Mankiw is critical of the Bush tax cut.

That Mankiw is in fact critical of tax cuts unaccompanied by spending restraint--like those of the deficits-don't-matter tax-cuts-raise-revenue big-government conservative administration of George W. Bush--is made manifest in his statement in the paragraph I quoted that "spending restraint must go hand in hand with tax cuts" for tax cuts to be a good thing.

So what is Mankiw's beef with Altman?

Mankiw also appears to have a beef with Bill Niskanen. Altman quotes:

"Bush has centralized policy decision-making much more than any president in years," [Niskanen] said. "The Council of Economic Advisers has been somewhat bypassed." Mr. Niskanen said that there were now fewer meetings between members of the council and members of the president's cabinet than there were during his term. The council's offices have even been moved to a building farther from the White House.

All of these tensions may have resulted in a sort of Catch-22. The president's inability to move forward with much of his second-term economic agenda - dealing with Social Security, the tax system, immigration and tort rules - may have dulled economists' eagerness to work with him. Yet he may need them in order to start the wheels moving. "John Snow has talked about turning the tax commission report into legislation," Mr. Niskanen said of the Treasury secretary, "but he does not have the skills on board to do that."

In response, Mankiw writes:

Sadly, this is the kind of "reporting" that I have come to expect from the Times, substituting rumor and innuendo for fact.... Bill Niskanen... assert[s]... the CEA has less access now than when Bill was at the CEA twenty years earlier. There is no way that Bill can possibly know whether this is true (has he had access to Hubbard's, my, Rosen's, or Bernanke's meeting schedule?).

Altman should know that this assertion of fact is baseless and self-serving (it makes the person making the assertion seem more important). But Altman is happy to quote the claim because it is consistent with his preconceived notions of how this administration works...

First, I don't think Bill Niskanen is saying things for I-want-to-look-important reasons. I think Bill Niskanen is saying things for I-have-good-information-sources-and-from-my-perch-in-Washington-they-seem-to-be-true reasons.

Second, the highlights of Bush administration economic policy during Mankiw's tenure were:

  1. A Medicare drug bill that Mankiw's predecessor, Glenn Hubbard, terms "unwise."
  2. Further worsening of the long-run budget deficit as the administration continued to push for tax cuts and spending increases--a worsening that has led Alan Greenspan to publicly call for a restoration of the procedural restrictions on deficits provided by the 1990 Budget Enforcement Act.
  3. No progress at all on the Doha Round of world trade expansions.
  4. A poorly-thought out attempt at Social Security reform that fell far short of the mark on both economic and political dimensions.

Now most of us don't assign Mankiw any of the responsibility for these policy mistakes. We see him as having been, largely, on the side of the angels. We had some hope when Mankiw joined the administration that he could be part of a faction that would shift Bush economic policy away from the big-government conservatism idiocy. But it didn't work. We see Mankiw as having been dealt a weak hand--with his staff exiled from the OEOB to space outside the Executive Office of the President proper, and with little access to High Politicians who have less concern than usual with the substance of economic policy--and yet as having played that hand relatively well.

Mankiw is, I think, unique today in seeking to claim that he had much rather than little influence on White House decision making in 2003 and 2004. Even Donald Rumsfeld is whispering these days that he had less--that he was out of the White House loop: had little to do with Bush's decision to attack Iraq, and in fact never advised Bush to do so.

Dana Milbank on Specter and Warner

I had always thought that Senate Committee Chairs were powerful actors. Here we have Dana Milbank bemused as Chairs Warner and Specter act like errand boys, or assistant White House press secretaries:

Oversight for Sore Eyes : It sounded on Thursday as if Senate committee chairmen were about to flex their oversight muscles. An angry Armed Services Committee Chairman John W. Warner (R-Va.) summoned Pentagon officials for a briefing on the military's paying for favorable coverage in Iraqi newspapers. And a concerned Judiciary Committee Chairman Arlen Specter (R-Pa.) ordered President Bush's Supreme Court nominee, Samuel A. Alito Jr., to explain documents he wrote expressing his opposition to Roe v. Wade.

But the senators, looking for answers, emerged instead from their meetings yesterday with questions.

"We can't verify this question of payments to the journalists," Warner reported to journalists.... "More facts are needed." Does he see evidence of illegality? "We simply do not have all of the facts." Does the practice need to be stopped? "I wouldn't want to render judgment to stop something until I have all the facts." Was the distinction between propaganda and factual information blurred? "I don't have enough facts." What's the most important unanswered question that you have? "Well, seriously, there's so many questions that are unanswered," he replied. Part of the problem, Warner explained, is that pieces of the program in question are classified, "to protect the interests of our troops."This started a new line of questioning. If the purpose of the military project is to "get the truth and the facts out," as Warner put it, why is it classified? "That's the ultimate question you've got to answer," explained Warner, who had apparently not answered it himself. "And, at this moment, I can't give you any facts to help you on that. . . . I have only but a bare initial understanding of why classification is needed."

Specter fared little better... when he sat down with Alito to talk about the judge's 1985 statement that he did not believe that the Constitution protected a right to abortion, and the legal arguments he later made against the Roe decision but did not mention in his response to a questionnaire from the Judiciary Committee. Specter... gave an account of his hour-long meeting.... "With respect to his personal views on a woman's right to choose," Specter reported, "he says that that is not a matter to be considered in the deliberation on a constitutional issue of a woman's right to choose." A reporter raised some doubt about whether stating that "the Constitution does not protect a right to an abortion" is really a personal opinion rather than a legal opinion. "He identifies that as a personal opinion, as I said before," Specter repeated. "And he said that his personal opinion would not be a factor in his judicial decision." Well, does he still hold this "personal" opinion? "He did not indicate," Specter said.

The audience was growing more skeptical. "Senator, I'm curious," one of the reporters asked. "Are you here simply to report objectively on what his answers were to you today? Or are you here to say that you were satisfied, even reassured, by the answers he gave you?"

"I'm here to report on his answers," said Specter, who finally acknowledged that he did not share Alito's view that this was a matter of personal opinion. "Judge Alito categorizes it as a personal opinion; I don't," the senator said....

In fairness, they had tough tasks: The Pentagon gave Warner little information, and Alito left Specter with the difficult argument that his belief that a right to abortion is not protected by the Constitution is not a judicial opinion. Both men dutifully read from handwritten notes.... Though lacking answers to crucial questions, the chairmen were certain that nobody was hiding anything. Warner reported that Defense Secretary Donald H. Rumsfeld "has been 100 percent cooperative," and he added: "I don't detect any effort on the part of Defense... of trying to cover up anything. They are working diligently to get the facts out." Specter, likewise, vouched that "there has not been a coverup" of Alito's abortion views. True, Alito did not include, in his response to the Senate questionnaire seeking any briefs he had worked on, his memo on a prominent abortion case. But, the chairman said, "I think it's a fair conclusion that there's no effort to make any concealment." Still, Specter couldn't pretend to be satisfied with Alito's answers. "I'm going to reserve judgment on the question as to whether Judge Alito can fairly judge an abortion case until he testifies," Specter said. "It will give considerably greater opportunity for discussion than I had with him today."

Bullet Points Over Baghdad

When I first met Paul Krugman, he was the antithesis of shrillness. He was calm. He attributed the best of motives to everybody. He took all arguments seriously.

But now:

Bullet Points Over Baghdad by PAUL KRUGMAN : Bullets haven't subdued the insurgents in Iraq, but the administration hopes that bullet points will subdue the critics at home.... It's an embarrassing piece of work. Yet it's also an important test for the news media. The Bush administration has lost none of its confidence that it can get away with fuzzy math and fuzzy facts -- that it won't be called to account for obvious efforts to mislead the public....

Here's an example of how the White House attempts to mislead: the new document assures us that Iraq's economy is doing really well. "Oil production increased from an average of 1.58 million barrels per day in 2003, to an average of 2.25 million barrels per day in 2004." The document goes on to concede a "slight decrease" in production since then.... [W]e're not supposed to understand that the real story of Iraq's oil industry is one of unexpected failure: instead of achieving the surge predicted by some of the war's advocates, Iraqi production has rarely matched its prewar level, and has been on a downward trend for the past year.

What about the security situation? During much of 2004, the document tells us: "Fallujah, Najaf, and Samara were under enemy control. Today, these cities are under Iraqi government control." Najaf was never controlled by the "enemy," if that means the people we're currently fighting. It was briefly controlled by Moktada al-Sadr's Mahdi Army. The United States once vowed to destroy that militia, but these days it's as strong as ever. And according to The New York Times, Mr. Sadr has now become a "kingmaker in Iraqi politics." So what sort of victory did we win, exactly, in Najaf? Moreover, in what sense is Najaf now under government control? According to The Christian Science Monitor, "Sadr supporters and many Najaf residents say an armed Badr Brigade" -- the militia of a Shiite group that opposes Mr. Sadr and his supporters -- "still exists as the Najaf police force."

Meanwhile, this is the third time that coalition forces have driven the insurgents out of Samara. On the two previous occasions, the insurgents came back after the Americans left... it's stretching things to say that the city is under Iraqi government control... only 100 of the city's 700 policemen show up for work on most days.

There's a lot more like that in the document. Refuting some of the upbeat assertions about Iraq requires specialized knowledge, but many of them can be quickly debunked by anyone with an Internet connection.

The point isn't just that the administration is trying, yet again, to deceive the public. It's the fact that this attempt at deception shows such contempt - contempt for the public, and especially contempt for the news media. And why not? The truth is that the level of misrepresentation in this new document is no worse than that in a typical speech by President Bush or Vice President Dick Cheney. Yet for much of the past five years, many major news organizations failed to provide the public with effective fact-checking. So Mr. Bush's new public relations offensive on Iraq is a test. Are the news media still too cowed, too addicted to articles that contain little more than dueling quotes to tell the public when the administration is saying things that aren't true?...

Mothers' Labor Force Participation

Dean Baker says that Heather Boushey believes that the fall in labor force participation since 2000 is not, repeat not, due to a cultural shift making mothers more likely to stay home with their kids:

MaxSpeak, You Listen!: MOTHERS OPTING OUT OF WORK: BUSH MYTH # 96742 : One popular explanation for the weak employment growth of the last five years is that mothers are increasingly opting out of the labor force. The argument is that in a post-9-11 world, people have come to recognize that family is what really matters. Therefore, women now want to be at home with their kids rather than pursuing a career. The evidence to support this view usually amounts to accounts of the experiences of a few friends or neighbors.

My colleague, Heather Boushey, decided to examine the data, and says it ain't so... the impact of motherhood on labor force participation is actually lower today than it was five years ago. You can read the paper on the CEPR website...

More Midnight Thuds and Screams from the Topkapi Palace

How angry is Bush at Cheney? The current rumor mill says:

Insight : The role of Vice President Dick Cheney as the administration's point man in security policy appears over, according to administration sources. Over the last two months Mr. Cheney has been granted decreasing access to the Oval Office, the sources said on the condition of anonymity. The two men still meet, but the close staff work between the president and vice president has ended.... The sources said the indictment and resignation of Lewis "Scooter" Libby marked the final straw in the deterioration of relations between President Bush and Mr. Cheney. They said Bush aides expect that any trial of Mr. Libby, Mr. Cheney's long-time chief of staff, would open a closet of skeletons regarding such issues as Iraq, the CIA and the conduct of White House aides. "There's a lack of trust that the president has in Cheney and it's connected with Iraq," a source said.

The sources said Mr. Bush has privately blamed Mr. Cheney and Defense Secretary Donald Rumsfeld for the U.S.-led war in Iraq. They said the president has told his senior aides that the vice president and defense secretary provided misleading assessments on Iraq's weapons of mass destruction, as well as the capabilities of the regime of Saddam Hussein. As a result, the sources said, Mr. Cheney has been ousted from his role as the administration's point man in the area of national security. They said presidential staffers have kept Mr. Cheney out of the loop on discussions on policy as the White House has struggled with the political and intelligence fallout from the war in Iraq.

Mr. Bush is not expected to replace Mr. Cheney unless the vice president follows the fate of his former chief of staff. The sources also said Mr. Rumsfeld is expected to remain in his post until U.S. troops are withdrawn from Iraq.

The November Employment Report

Andrew Samwick reads the November employment report:

Vox Baby: November Employment : The top line numbers for this morning's November employment report are net 215,000 payroll jobs added... only some fortunate rounding prevented the [unemployment rate] number from ticking up by a tenth (4.95 to 5.04 percent).... Over the past 12 months, the economy has added about 2 million payroll jobs. The 215,000 number doesn't excite me this month, because the private workweek fell by 0.1 hour. As I've noted in past discussions, that reduction in the workweek offsets the added labor input of about 300,000 new workers (134 million total x 80% in private production or non-supervisory jobs x 0.1 hour reduction / 33.8 hours on average). So overall, the economy didn't appear to increase its demand for labor input to production in November. The reduction in the workweek changed a small increase in hourly wages to a small decrease in average weekly earnings, even measured in nominal rather than real terms.

The most interesting feature of this month's report is the information from some special questions in the household survey on persons displaced by Hurricane Katrina... split evenly between those now in the same residence as in August and those in a different residence than in August. The employment-to-population ratios are 46.1 and 41.6 percent for the two groups, respectively, compared to a national figure (not seasonally adjusted) of 62.9 percent. If the national figure is a reasonable proxy for what the Gulf Coast might be experiencing absent the hurricanes, that suggest continued unused labor capacity of about 30 percent (1 - ((46.1+41.6)/2)/62.9) among those people evacuated.

Falling real labor earnings are *not* a sign of an economy near full employment.

I'll Stop Calling This Crew "Orwellian" When They Stop Using "1984" as an Operations Manual

Scott McLemee watches David Horowitz in action:

Inside Higher Ed :: Piled Higher and Deeper : David Horowitz makes clear that he is not a liar just because he told a national television audience something that he knew was not true.... In February, while the Ward Churchill debate was heating up, Horowitz appeared on Bill O'Reilly's program. It came up that Horowitz, like Churchill, had been invited to lecture at Hamilton College at some point. But he was not, he said, "a speaker paid by and invited by the faculty." As we all know, university faculties are hotbeds of left-wing extremism.... [W]henever Horowitz appears on campus, it's because some plucky youngsters invite him. He was at Hamilton because he had been asked by "the conservative kids."

That came as a surprise to Maurice Isserman, a left-of-center historian who teaches at Hamilton College.... [H]e's been called all sorts of things... but "conservative kid" is not one of them. And when Horowitz spoke at Hamilton a few years ago, it was as a guest lecturer in Isserman's class on the 1960s.... "Horowitz was, in fact, an official guest of Hamilton College in fall 2002, invited by a faculty member, introduced at his talk by the dean of the faculty, and generously compensated for his time."

I will leave to you the pleasure and edification of watching Horowitz explain himself.... [H]e could not tell the truth because that would have been a lie, so he had to say something untrue in order to speak a Higher Truth.

And here's Horowitz:

Academe/November-December 2005/Letters to the Editor : When I was asked if it wasn't to Hamilton's credit to have invited me, I had two seconds to decide.... I thought that if I just say, yes, Hamilton should be praised, that would be a really big lie about the reality of my experience at Hamilton and on university campuses. So I said I was invited by conservative students, which was true of my most recent visit to Hamilton, but obviously not the whole truth.... Professors like Maurice Isserman ought to be concerned about the one-party culture they have created in institutions that once honored intellectual pluralism and fairness. Considering this, my only conclusion can be that Isserman must regret bringing David Horowitz to Hamilton. That's the truth I was driving at.

Communities of Technological Practice

Virginia Postrel writes about what I think of as AnnaLee Saxenian's key insight--that Silicon Valley's unique success and power arises not out of the hunger of its entrepreneurs and capitalists but out of its footloose, job-hopping, talkative engineers. The key productive resource--the rapid spread of news and information--is a sociological and not an economic factor:

In Silicon Valley, Job Hopping Contributes to Innovation - New York Times : By VIRGINIA POSTREL: FOR four decades, through booms, busts and bubbles, Silicon Valley has maintained an amazingly innovative business environment. Companies and technologies rise and fall. Hot start-ups morph into giant corporations. Cutting-edge products become mature commodities. Business models change. Through it all, the area remains creative and resilient - and more successful than other technology centers, notably the Route 128 area around Boston.

What makes Silicon Valley special? Thanks to some new data, economists have finally been able to test statistically some popular explanations. In her influential 1994 book "Regional Advantage: Culture and Competition in Silicon Valley and Route 128" (Harvard University Press), AnnaLee Saxenian, an economic development scholar at the University of California, Berkeley, argued that Silicon Valley's innovative edge comes from two unusual characteristics. First, talented employees move easily and often to new employers, far more so than people elsewhere. "The joke is that you can change jobs and not change parking lots," one of her interview subjects said. Second, instead of vertically integrating, Silicon Valley computer makers rely on networks of suppliers. They also design open systems that can flexibly accommodate all sorts of new components. "The system's decentralization encourages the pursuit of multiple technical opportunities through spontaneous regroupings of skill, technology and capital," she wrote.

Many people, especially in Silicon Valley, found Professor Saxenian's argument convincing. But while her research was careful, it depended on interviews and had no large-scale statistical backing. Perhaps her subjects' impressions were unreliable. After all, the argument that Silicon Valley's job hopping fosters innovation contradicts economists' common assumptions. "It didn't feel right to me," James B. Rebitzer, an economist at Case Western Reserve University, said in an interview. When employees jump from company to company, they take their knowledge with them. "The innovation from one firm will tend to bleed over into other firms," Professor Rebitzer explained. For a given company, "it's hard to capture the returns on your innovation," he went on. "From an economics perspective, that should hamper innovation."...

In a forthcoming article in The Review of Economics and Statistics, Rebitzer and two economists at the Federal Reserve Board, Bruce C. Fallick and Charles A. Fleischman, empirically test the claim that Silicon Valley employees move more often than computer industry employees in other places. (The article, "Job Hopping in Silicon Valley," is available at

The two Fed economists... use data from the Current Population Survey.... To Professor Rebitzer's surprise (though not his co-authors'), it turns out that Silicon Valley employees really do move around more often than other people. The researchers looked at job changes by male college graduates from 1994 to 2001. During that period, an average of 2.41 percent of respondents changed jobs in any given month. But, they write, "living in Silicon Valley increases the rate of employer-to-employer job change by 0.8 percentage point." "This effect is both statistically and behaviorally significant - suggesting employer-to-employer mobility rates are 40 percent higher than the sample average."...

When Microsoft Office Attacks!


macosxhints - 10.4: Avoid an Office 2004 save problem: The new version of Word has a problem when saving documents to network folders. Users with network home directories have a problem with Save or Autosave from Word 2004 11.2 (Office Service Pack 2) on OSX 10.4.2, and see an error message saying "Word cannot save this document due to a naming or permissions error on the destination volume." The first attempt to save succeeds; subsequent attempts to save, or autosave, will fail with the above error message.

The fault occurs unless a folder called .TemporaryItems has been created at the root level of any mounted volume containing the saved file; so if the user's home directory is contained in an AFP share called Homes, then there has to be a directory called .TemporaryItems in the Homes folder on the server. If the home directory is on another local volume called UserData, there has to be a directory called .TemporaryItems at the root of that volume....

This seems to fix the problem, not just for Word, but PowerPoint and the other Office apps.

Looking Forward to an Inverted Yield Curve

Macroblog looks at the forthcoming likely inversion of the yield curve:

macroblog: Fed Funds Probabilities: A Peek At March: It's Monday, and that means it's time to report the Carlson-Craig-Melick estimates of what the folks who make their livings in the market for options on federal funds futures think the Federal Open Market Committee is soon to do. At this point, there's not much question about the December meeting... [the market is forecasting a post-meeting Federal Funds rate of 4.25%]

...and scant more for the January meeting: [the market is forecasting a post-meeting Federal Funds rate of 4.25%]

So, we'll have to find what excitement we can in the March meeting. [the market is forecasting a post-meeting Federal Funds rate of a bit more than 4.5%]

That may not actually seem that exciting, but today the 10-year Treasury note closed at 4.4%. If that doesn't change, and the market prediction for the federal funds rate holds true, that could at least be interesting.

Historically, an inverted yield curve--long-term rates lower than short rates--is a sign that the market views a recession likely, and looks forward to the associated steep and rapid rate cuts as the Fed tries to fight unemployment and restore growth.