Grasping Reality on TypePad, by Brad DeLong

The European Double-Dip Is in Sight

Ryan Avent:

Europe's economy: Pushed to the breaking point | The Economist: Europe seems to be heading straight for a period of increasing strain. Something must eventually give way.... At the same time workers are struggling, governments are pushing through painful austerity packages. Some of the countries battered by bond markets began cutting in 2010. But as the chart at right indicates, everyone gets into the game in 2011.... The worst of it is that the cuts haven't protected slow-growing, indebted nations from the ravages of the bond traders....

Obviously German and French taxpayers aren't eager to spend more taxpayer cash preserving the currency union. But this attempt to foist more of the cost of adjustment onto the very places suffering the most seems designed specifically to create insoluble tensions with the euro zone. But here's the real kicker: the European Central Bank no longer seems interested in helping smooth things over. As Buttonwood noted yesterday, the ECB is allowing interbank rates wit....

Something clearly has to give. Policy changes are pushing Europe toward a very long period of stagnation if not an outright return to recession. Workers are underemployed and furious. Core and periphery have seriously diverging views on the direction policy should take. And markets continue to pressure indebted nations to make cuts they may not actually be able to make. Either the ECB must seriously soften its stance, or Germany and France must suddenly become much more generous to struggling euro zone economies, or the euro zone will face its toughest months yet. If no exit valve for the building pressure can be found, then pressured economies will begin heading for the exits.

Yay!

"Nonfarm payroll employment increased by 151,000 in October, and the unemployment rate was unchanged at 9.6 percent." finally, a good payroll report: enough jobs to actually reduce the unemployment rate if things continue at this pace.

Well, It Depends What "Nearly" Means, Doesn't It?

Larry Meyers says Bernanke has "nearly begged" for fiscal stimulus. David Leonhardt says that he has not begged for fiscal stimulus. Seems to me both are right--for a Federal Reserve definition of "nearly":

Has Bernanke Pleaded?: WLaurence H. Meyer, a former Federal Reserve governor, said the following in today’s Times:

Bernanke has said that fiscal stimulus, accommodated by the Fed, is the single most powerful action the government can take for lowering the unemployment rate, when short-term rates are already at zero… He has nearly pleaded with Congress for fiscal stimulus, but he can’t count on it.

I am among Mr. Meyer’s many admirers, but I don’t think that’s quite right. Yes, if you go back and read Mr. Bernanke’s recent speeches and Congressional testimony, you will see he believes that last year’s stimulus bill helped the economy and that more government spending or tax cuts now would help again. But he has made a deliberate choice to avoid making that point strongly or clearly.... Mr. Bernanke had perhaps more ability to influence this debate than anyone else. Imagine if he had given a speech earlier this year, as the economy started to falter, that included something along the lines of:

Last year’s stimulus program was not perfect, and we will never know its precise effect on the economy. But the available evidence — including the Fed’s own analytical tools and those of the Congressional Budget Office and private economists, as well the timing and pattern of spending by consumers, businesses and governments — suggests that the program made a major difference. It appears that more than one million jobs, and perhaps substantially more, would not exist now had the program not been enacted. Similarly, additional fiscal stimulus today, in the form of government spending or tax cuts, could play an important role in helping the economy to continue to recover from the recent financial crisis, especially if this short-term stimulus were paired with policies to reduce the deficit in future years.”

An argument like this would have made national headlines and cut through some of the more frivolous criticism of the stimulus. It may even have affected the debate as much as Alan Greenspan’s endorsement of the Bush tax cuts did in 2001. We’ll never know because Mr. Bernanke opted not to use his bully pulpit. That’s certainly his right as Fed chairman, but I don’t think he deserves credit today for trying.

Department of "Huh?!" ("When the Economy Started to Falter" Edition

Methinks David Leonhardt is in danger of becoming a Very Serious Person. For he writes:

Was That a Plea From Bernanke?: Imagine if [Bernanke] had given a speech earlier this year, as the economy started to falter...

If you simply look at the graph of employment and of the population growth-driven trend, you see that the economy could not "start to falter" "earlier this year" because the economy has been faltering nonstop since late 2007. There is a temporary blip in employment from temporary census hiring. That is it. Otherwise the economy had faltered, was faltering, is faltering, and in all likelihood will continue to falter.

It is not that there was a normal "recovery" that then, unexpectedly, turned into a jobless recovery. It is that there never was a "normal" recovery in the first place.

And I, at least, could never see the logic behind forecasting models that were predicting a "normal" recovery. The Recovery Act federal stimulus was timed to start to ebb in the summer of 2000. State-level fiscal contraction was in train.

The problem was--as my daughter said at the time--that Bernanke and company were placing excessive weight on the second derivative. "Getting worse more slowly" is not the same thing as "better," and nobody should ever fit a quadratic to any time series and trust the forecast without a good warrant for doing so.

Resist the call of the Dark Side, David!

The Cost of Policy Continuity

Ryan Avent:

Elections: The midterms | The Economist: Marc Ambinder turns up an amusing exit poll result:

Who's to blame for the economy? Bankers (34%), Bush (29%), Obama (24%).  Of those who blame bankers, Republicans hold an 11 point advantage.

How Is That Voting Against Health Care Reform Working for You?

Josh Marshall:

Crushed: Of the 39 Dems who voted against Health Care Reform, 12 are going to be returning in the next Congress.

Barack Obama, Master of Zero-Dimensional Chess

The on-message line from the Obama administration is that every policy change must put the national deficit on a path to sustainability--no policy changes that do not include within themselves provisions to shrink the national debt relative to baseline ten years hence and thereafter.

That is not what we are getting:

Gibbs Says Obama ‘Open’ to Extending Upper-Income Tax Cuts By Roger Runningen

Nov. 4 (Bloomberg) -- The Obama administration is “open” to extending tax cuts for upper-income individuals in order to win extensions for middle-income families, White House press secretary Robert Gibbs said.

Gibbs reinforced remarks by President Barack Obama yesterday that he is ready to negotiate with Republicans who are pushing to extend Bush-era tax cuts that are set to expire at the end of the year...

Two Years Late and Many Dollars Short

I remember back two years ago, talking to a future subcabinet Obama official, asking what was the Plan B in case the Recovery Act that they could get through Congress turned out to be too small. He told me that there were lots of other things that could and would be done--the Treasury could leverage up its TARP money and use it to stimulate the economy, and Fannie Mae and Freddie Mac could restructure mortgage finance, and the Federal Reserve could act to raise inflation expectations and change asset supplies via quantitative easing.

Now David Leonhardt looks back on all the things the Fed has done--or, rather, not done--over the past two years:

Fed’s More Aggressive Move May Not Go Far Enough: For much of the last year, there were three basic camps on what the Federal Reserve should be doing. One focused on the risks of the Fed’s taking more action to help the economy. This camp — known as the hawks, because of their vigilance against inflation — worried that the Fed could be sowing the seeds of future inflation and that any further action might cause global investors to panic. Another camp — the doves — argued instead that the Fed had not done enough: inflation remained near zero, and unemployment near a 30-year high. In the middle were Ben Bernanke and other top Fed officials, who struggled to make up their minds about who was correct. For months, they came down closer to the hawks and did little to help the economy. On Wednesday, they effectively acknowledged that they had made the wrong choice.

The risks of inaction have turned out to be the real problem.

The recovery has not been as strong as the Fed forecast.... Since May, the economy has lost 400,000 jobs.... What’s striking about the last six months, however, is how much more accurate the doves’ diagnosis of the economy has looked than the hawks’. Early this year, for example, Thomas Hoenig, president of the Kansas City Fed and probably the most prominent hawk, gave a speech in Washington warning about the risks of an overheated economy and inflation. Mr. Hoenig suggested that the kind of severe inflation that the United States experienced in the 1970s or even that Germany did in the 1920s was a real possibility. When he gave the speech, annual inflation was 2.7 percent. Today, it’s 1.1 percent.

The doves, on the other hand, pointed out that recoveries from financial crises tended to be weak because consumers and businesses were slow to resume spending. Around the world over the last century, the typical crisis caused the jobless rate to rise for almost five years....

[G]lobal investors have continued to show no signs of panicking. If anything, as the economy weakened over the summer, investors became more willing to lend money to the United States, viewing its economy as a safer bet than most others. After the Fed’s announcement on Wednesday, many of the hawks who warned about inflation earlier this year repeated those warnings anew. The Cato Institute, citing a former vice president of the Dallas Fed, said the new program would “sink” the economy. Mr. Hoenig provided the lone vote inside the Fed against the bond purchases. It’s always possible that the critics are correct and that, this time, inflation really is just around the corner. But there is still no good evidence of it. The better question may be whether the Fed is still behind the curve....

“I’m a little disappointed,” said Joseph Gagnon, a former Fed economist who has strongly argued for more action. The announced pace of bond purchases appears somewhat slower than Fed officials had recently been signaling, Mr. Gagnon added, which may explain why interest rates on 30-year bonds actually rose after the Fed announcement.

One thing seems undeniable: the Fed’s task is harder than it would have been six months ago. Businesses and consumers may now wonder if any new signs of recovery are another false dawn. And although Mr. Bernanke quietly credits the stimulus program last year with being a big help, more stimulus spending seems very unlikely now.

Unfortunately, in monetary policy, as in many other things, there are no do-overs.

The Republicans Announce Their Eagerness to Serve Their Banking-Sector Masters

Rarely do you get such a blatant announcement by a legislator that he has been captured by his campaign contributors:

Yglesias » Rep Spencer Bachus (R-Alabama) Plots to Weaken Financial Regulation, Strengthen Banks: I think relatively few people understand that one of the principal substantive complaints the new Republican House majority has about Barack Obama is that he’s been unkind to the incumbent firms in the financial services sector. But here’s Spencer Bachus, the likely new chair of the relevant committee, firing warning shots on behalf of Wall Street:

Spencer Bachus, a potential Republican chairman of the House financial services committee, has fired the first salvo in a battle with regulators – warning them against harming US banks by curbing their trading activity. [...]

Underlining the change in Congress, Mr Bachus, who as ranking Republican on the committee could replace Barney Frank as chairman of the panel, expressed concern that shareholders of Goldman Sachs and JPMorgan Chase will be hurt because the banks will be less profitable. [...]

“The derivatives provisions in Dodd-Frank alone… as they stand now they’re going to take a trillion dollars out of our economy. Think how many jobs that’s going to kill,” he said.

Rising stars in the conservative media firmament have painted an appealing picture over the past two years of a populist right outraged by allegedly undue entanglement between government and big business and eager to help out the little guy. But this is the reality. The article is via Tyler Cowen who remarks “It is difficult to fathom how that last paragraph can make any sense, other than as fabrication.”

This is simply another example of why friends simply do not let friends vote Republican, ever.

Looking Back at the Past: Bruce Bartlett on the Ignorance of the Tea Party Crowd (March 17, 2010)

Bruce Bartlett:

Ignorance Is Bliss for the Tea Party Crowd: Back when I used to listen to Rush Limbaugh there was one thing in particular he used to say that I agreed with. Over and over he said that liberals defined themselves largely by the worthiness of their objectives and the sincerity of their motives. The actual results of their policies didn’t matter at all.... Today, however, conservatives have largely adopted the liberal operating assumption and now also define themselves by the righteousness of their motives. This fact became very obvious to me this week when I examined the knowledge that tea party demonstrators on Capitol Hill had on the subject of taxation....

On March 16 the tea party crowd showed up for yet another demonstration on Capitol Hill in Washington. Curious about the factual knowledge that these people have regarding the issues they are protesting, my friend David Frum enlisted some interns to interview as many tea partiers as possible on a couple of basic questions. They got 57 responses--a pretty good sized sample from a crowd that numbered between 300 and 500 people.... Tea partiers were asked how much the federal government gets in taxes as a percentage of the gross domestic product. According to Congressional Budget Office data, acceptable answers would be 6.4%, which is the percentage for federal income taxes; 12.7%, which would be for both income taxes and Social Security payroll taxes; or 14.8%, which would represent all federal taxes as a share of GDP in 2009. Not everyone follows these numbers closely and tea partiers may have been thinking of figures from a few years ago, before the recession when taxes were higher. According to the CBO, the highest figure for all federal taxes since 1970 came in the year 2000, when they reached 20.6% of GDP. As we know, after that George W. Bush and Republicans in Congress cut federal taxes and they fell to 18.5% of GDP in 2007, before the recession hit, and 17.5% in 2008. Tuesday's tea party crowd, however, thought that federal taxes were almost three times higher than they actually are. The average response was 42% of GDP and the median was 40%....

Tea party goers also seem to have a very distorted view of the direction of federal taxes. They were asked whether they are higher, lower or the same as when Barack Obama was inaugurated last year. More than two-thirds thought that taxes are higher today and only 4% thought they were lower; the rest said they are the same. As noted earlier, federal taxes are very considerably lower by every measure since Obama became president. And given the economic circumstances, it's hard to imagine that a tax increase would have been enacted last year. In fact, 40% of Obama's stimulus package involved tax cuts. These include the Making Work Pay Credit, which reduces federal taxes for all taxpayers with incomes below $75,000 by between $400 and $800. According to the JCT, last year's $787 billion stimulus bill, enacted with no Republican support, reduced federal taxes by almost $100 billion in 2009 and another $222 billion this year. The Tax Policy Center, a private research group, estimates that close to 90% of all taxpayers got a tax cut last year and almost 100% of those in the $50,000 income range. For those making between $40,000 and $50,000, the average tax cut was $472; for those making between $50,000 and $75,000, the tax cut averaged $522. No taxpayer anywhere in the country had his or her taxes increased as a consequence of Obama's policies.   It's hard to explain this divergence between perception and reality. Perhaps these people haven't calculated their tax returns for 2009 yet and simply don't know what they owe. Or perhaps they just assume that because a Democrat is president that taxes must have gone up, because that's what Republicans say that Democrats always do. In fact, there hasn't been a federal tax increase of any significance in this country since 1993....

Probably the simplest motivation the tea partiers have is the one that Howard Beale (actor Peter Finch) gave in the 1976 movie Network. "I'm mad as hell and I'm not gonna take it any more!"... In this sense, the tea parties are simply the latest manifestation of populism.... Unfortunately for the tea party populists, there is no evidence in American history that populism has ever had a meaningful effect on policy. Even when the movement had a charismatic and articulate leader in William Jennings Bryan, the populists only elected a handful of members to Congress and never achieved the presidency. One reason is that the major parties co-opted populist issues and leaders, which bought time until the populist impulse burned itself out like a brush fire. Whatever the future of the tea party movement in American politics, it's a bad idea for so many participants to operate on the basis of false notions about the burden of federal taxation...

Paul Krugman on the Strange Death of Expansionary Fiscal Policy

A plurality of voters want to see a new economic stimulus bill--called a stimulus--to create jobs. Even 18% of Republicans and 32% of independents think a new job-creating stimulus bill should be Congress's highest priority. Yet is Congress going to pass one? No. Is the Treasury leveraging up its TARP money and using it to stimulate the economy? No. The Federal Reserve--well, the forecasts are that the Federal Reserve's quantitative easing programs may add between 0.2% and 0.5% to economic growth next year, although I do not see how the estimates can be so high unless the program has a large effect on inflation expectations.

This is an absolutely remarkable government that we have. And an absolutely remarkable political class.

Paul Krugman takes on the Very Serious People:

The Strange Death of Fiscal Policy - NYTimes.com: One clear result of the midterms is that we won’t have anything like a further round of stimulus. And this, in turn, means that the narrative all the Very Serious People will tell is that fiscal policy was tried, it failed, and that’s that.

But the real facts don’t at all support the conventional wisdom.

Actually, let me focus on an international comparison. You often hear the US experience contrasted with Germany: America, we’re told, went for Keynesian policies, while Germany chose austerity, and Germany did better.

But as far as GDP is concerned, Germany did not, in fact, do better.

This is, I think, the most amazing thing I hear as I wander around talking to the necktie-wearing class: they genuinely do think that real GDP in Germany fell less than real GDP in America--and I cannot figure out where this belief cam from.

Paul goes on:

Yes, Germany did better on employment — but this reflects policies that American conservatives surely don’t support, including employment subsidies, strong unions, and rules making it difficult to fire workers.

And what may be even more surprising: if we look at actual government purchases of goods and services, as opposed to transfer payments (many of them just payments from the federal government to states), Germany was more Keynesian than the United States:

So, it’s an amazing thing: Obama and company have managed to convince people that big government failed, without actually delivering big government.

"Yes, We Are Governing from the Center"

"Yes, we are governing from the center," said the person with a White House West Wing pass quite a number of months ago, "and the Republicans are insane." But, they went on to say, things were looking up: "Sooner or later the press corps will recognize that the Republicans--Senate and House--are insane, and that message will get out to the voters. And the voters will do the right thing."

Well...

The Mountain Labored, and Gave Birth to a Mouse

The Federal Reserve says:

FRB: FAQ: the Federal Reserve's responsibilities fall into four general areas... (1) conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices...

Greg Robb:

Fed to buy $600 billion in government bonds The Fed: The Federal Reserve pledged on Wednesday to start a controversial new billion bond-buying spree to rescue the economy from its current doldrums. The Fed said it would buy up to $600 billion in long-term Treasurys until the end of June 2011, about $75 billion this month, in a strategy called quantitative easing.... To implement the Federal Reserve’s new policy of quantitative easing, the New York Fed plans to buy $850 billion to $900 billion in Treasury notes over the next five months, including $600 billion in new purchases and about $250 billion to $300 billion to reinvest the proceeds of maturing mortgage-backed securities, the New York Fed announced Wednesday. The average duration of Treasurys purchased by the Fed will be five to six years...

The five-year note carries an interest rate of 1.17% per year. The Federal Reserve is thus changing the supply of assets by taking onto its own balance sheet... wait for it... wait for it... duration risk that the market is currently willing to pay $7 billion a year to avoid.

To take $7 billion a year of duration risk off of the private sector's books in a global economy that still has more than $60 trillion of financial assets is a change in "credit conditions" equivalent to what would be achieved in normal times by a coordinated one basis point reduction in short-term interest rates by the world's central bankers.

Unless this moves inflation expectations in a serious way, it is hard to see why they came out here.

Files for November 3 Lecture: Monopolistic Competition

Files for November 3 Lecture: Monopolistic Competition:

• Slides

The Midterm Electorate Is Not the Quadrennial Electorate

Matthew Yglesias:

Yglesias » The Changing Electorate: One reason it’s difficult to read midterm elections as reflecting shifts in the “national mood” is that the actual set of voting people is quite different.... That under-30 bracket still strongly backed Democrats by a 57-40 margin, turning only somewhat more skeptical of the party. But it also shrunk precipitously as a share of the voting public. But Americans didn’t react to “liberal overreach” by suddenly aging four decades in the span of eighteen months. Older people are just more inclined to stay engaged with lower profile elections...

Can Obama Get and Stay on Message?

The message is PAYGO. Any proposal that does not pay for itself over the next ten years--any proposal projected to increase the debt relative to baseline as of 2020, and not to reduce the debt thereafter--gets vetoed.

Can he get on and stay on message?

John Scalzi: Vote Cat Says: "Vote!"!

http://whatever.scalzi.com/2010/11/02/vote-cat-says-vote/

Liveblogging World War II: November 2, 1940

U.S. Attorney General Robert Jackson:

Robert Jackson: In this election, every citizen must vote as if that vote alone would decide the election.  If any of your friends tell you that they intend to vote for Willkie, ask them to stop and think seriously about the consequences of such an act.  What do they really know about Willkie?  They know only what the advertising experts have told them.  They know only that because he owns some farms in Indiana he has been offered as a friend of the farmer; that because he had some summer jobs in factories as a youngster, he is being paraded as a friend of labor; that because he was a lawyer and lobbyist for a big utility system, he is being hailed as a business executive....

[A]s a result of his brilliant handling of America’s foreign affairs, President Roosevelt today is feared in some capitals, beloved in others, respected throughout the world. Nobody—no thinking person—can in good conscience vote for Willkie unless he knows what his foreign policy will be.  What do they really know about Willkie?  They know only what the advertising experts have told them.  Anyone who intends to vote for Willkie had better ask himself what kind of man Willkie would be on the cold morning after election, after the honeymoon of election promises is over....

[Do we know whether] Willkie would be able to control the financial and business powers behind him who might have their own selfish ideas on what our foreign policy should be? We know what Roosevelt’s foreign policy is and we know that the country thoroughly approves it.  In our national self-interest, we cannot afford to risk a change.  We have had a vigorous foreign policy for seven and a half years.  Any shift at this time would mean giving up the valuable momentum that has been building up in those years....

The President has backed business when Wall Street would not back it [and he has] backed the American home [when] bankers did not even make gestures.  President Roosevelt fought the fight for the American farmer as no man has fought it before. Franklin D. Roosevelt was the first President to have a living faith that labor could be trusted to make its own  collective bargains with employers, faith that a system could be set up which ultimately, and when it was accepted by employers, would result in the settlement of labor disputes by reason instead of force...

Ooeee! Ooeee! Ooeee!!!

My first cup of caffeinated coffee from Pert's in six months!

I have been drinking decaf from Peer's and halfcaf from Starbuckd.

Mocha Sanani press-and-go!

Yowza!!

This Pointless Stealing of Chairs from the Wheeler Auditorium Greenroom House to Stop!

That is all.

The New York Times Starts Liveblogging the Civil War

DISUNION

Ben Bernanke Could Fix the Economy Pretty Quickly

Paul Krugman:

The End Of Western Civilization: Gauti Eggertsson writes in to follow up on my piece on quantitative easing in the Great Depression. He points me to a 2008 paper (pdf) in which he shows that the coming of FDR, combined with America’s exit from the gold standard, was seen by markets as a huge regime change; it was, said FDR’s own budget director, “the end of Western civilization.”

This regime change immediately shifted expectations of future inflation, well before there was any actual surge in monetary base. That, rather than the quantitative easing per se, is how monetary policy — or more accurately, expectations of future monetary policy — gained some traction in the 30s liquidity trap.

Again, an important lesson — but how relevant is it to current circumstances? Bernanke, unfortunately, cannot convince people that he’s bringing the end of Western civilization.

Ben Bernanke could do the near-equivalent from the perspective of fixing the economy fairly rapidly: any moment he wishes, he could announce that he no longer think the Federal Reserve's inflation target should be 2% per year but rather 4% per year--and that he will strive to hit that target.

But he is not going to do anything like that anytime soon, is he?

Barack Obama: master of zero-dimensional chess...

Econ 1: Fall 2010: Sample Midterm (Draft)

1: International question: Write one paragraph—four sentences or so—explaining what the balance of trade is, and why it is an important concept in international economics.

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2: Growth question: China’s total GDP today is about 1/6 that of the United States. China’s population is about four times that of the United States. The current level of GDP per capita in the United States is about $45,000 of marketed final goods and services produced per year. Current projections are that—if nothing goes wrong—GDP per capita in China will grow at an average rate of 6% per year for the foreseeable future. Current projections are that GDP per capita in the U.S. will grow at an average rate of 2% per year for the foreseeable future. In what year do you project that average GDP per capita in China will equal its level in the United States? What will the level of annually-produced GDP per capita be in that year?

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3: Supply and Demand question: The supply and demand curves for the market for tennis rackets are:

Qd = 500 – 4Pd
Qs = –100 + 6Ps

The government wants to raise money to provide public tennis courts, so they imposes a $10 tax on each tennis racket sold.

a: How many rackets were sold before the tax went into place?

b: How many rackets were sold after the tax went into place?

c: What is the after-tax price of rackets to the consumers?

d: How much money will the government raise to build new tennis courts?

e: What are the advantages and disadvantages of taxing tennis rackets in this case instead of implementing a general sales tax on all goods?

f: If we count the government revenue as part of the total surplus, what is the total surplus after imposing the tax?

g: Give a short argument for why we should nevertheless implement this tax.

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4: Supply and Demand question: Let us return to the city of Avicenna and the market for yoga lessons. Suppose that the daily demand curve for lessons is: Q = 1000 – 10P, where Q is the number of lessons sold and P is the price of a lesson in dollars.

a: Suppose that there are only 25 qualified and competent yoga instructors in Avicenna, each of whom can teach 10 students a day and has a reservation wage of $10 a student. What is the market equilibrium price of yoga lessons? What is the daily quantity? What is the daily producer surplus? What is the daily consumer surplus? What is the daily contribution of yoga lessons to measured GDP?

b: Suppose that there are only 50 qualified and competent yoga instructors in Avicenna, each of whom can teach 10 students a day and has a reservation wage of $10 a student. What is the market equilibrium price of yoga lessons? What is the daily quantity? What is the daily producer surplus? What is the daily consumer surplus? What is the daily contribution of yoga lessons to measured GDP?

c: Suppose that there are 100 qualified and competent yoga instructors in Avicenna, each of whom can teach 10 students a day and has a reservation wage of $10 a student. What is the market equilibrium price of yoga lessons? What is the daily quantity? What is the daily producer surplus? What is the daily consumer surplus? What is the daily contribution of yoga lessons to measured GDP?

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5: Market Structure question: Suppose that the Production and Distribution Coordination bureaucracy in the city of Avicenna around Euphoric State University decides that, to ensure quality, all yoga lessons must be provided by a single monopoly Euphoric Yoga Consortium. The daily demand curve for lessons is: Q = 1000 - 10P, where Q is the number of lessons sold and P is the price of a lesson in dollars. There are 100 qualified and competent yoga instructors in Avicenna, each of whom can teach 10 students a day and has a reservation wage of $10 a student.

a: Suppose the Euphoric Yoga Consortium is organized as a profit-seeking monopoly firm. What is the price that it will charge for yoga lessons?

b: What is the daily quantity of yoga lessons that will be given at that price?

c: What is the daily consumer surplus?

d: What is the amount of its daily revenue that EYC will be willing to devote to campaign contributions for people running for seats on PDC if they can be confident of electing a PDC that will see things their way and ensure quality of yoga lessons by preserving EYC’s important social role as guarantor of quality in the yoga lesson business?

e: What is the daily amount of money that the assembled yoga instructors of Avicenna will be willing to contribute to people running for seats on PDC if they can be confident of electing a PDC that will see things their way and lift the oppressive dead bureaucratic monopoly-capitalistic hand of EYC from its position on the throat of the people?

Liveblogging World War II: November 1, 1940

Vannevar Bush's National Defense Resources Council awards a $40,000 contract to Columbia University to assemble a large sub-critical atomic pile made of graphite and uranium oxide.