Another example of the importance of starting dates

Back in October, Yglesias reported on how the Trump stock market rally wasn't all that impressive. Other countries' stock market indices had risen by more than ours had. To illustrate this, he included this graph comparing the US S&P 500 with Japan's Nikkei, Germany's DAX, and France's CAC indices:

It clearly shows that, while the S&P500 has risen considerably since Aug 2016, the rise is not as large as the gains experienced by other countries. He concluded:

That said, the fact that stock market enthusiasm over the past year has been worldwide with the United States lagging other key countries seems like a strong indication that Trump hasn’t done anything that’s particularly successful or exciting. ... For whatever reason, markets are up just about everywhere, not only in the United States. And markets generally seem to be up by more in countries with boring, competent-seeming leadership than they are in the United States.

I liked the graph and it is a good idea to think in terms of such counterfactuals, but I also had my doubts. Why normalize all the indices at the end of July, half a year before he became president and months before he won the election? In the middle of the semester I felt it was interesting enough to mention to my honors students while bringing up a concern or two, but I eventually forgot my desire to investigate further.

Well, time to investigate! Compare if you will the following graphs with three different normalizations: Yglesias' end-of-July 2016, the election in 2016, and the inauguration in 2017. I'm extending the data out to today, using weekly closing numbers.

The S&P's relative performance has improved since Yglesias wrote, so that even using his normalization the US is now modestly outperforming Europe and has been for the most part since the Tax Cut and Jobs Act. The Nikkei is still outperforming the S&P by a wide margin, but his conclusion would now have to be that the President's antics haven't harmed the US.

If we normalize just before the election, however, we see that the US is right on par with Japan and outperforming Europe by a wide margin.

And normalizing from the inauguration shows the US ahead of every other country with the most boring and competent seeming Germany performing worst.

So what's the takeaway? We need more crazy antics? I doubt it. My three lessons for today are about how little we know:

1) If you're going to do this kind of analysis, be forthright about why you are choosing your starting dates. Starting dates are everything. That's part of why statistics gets its reputation for lies: you can make the same numbers tell almost any story you want. If you want US stock returns to look as bad as possible, start at July 3, 2016 (really close to Yglesias' starting point) so that Japan is 20 points ahead of the US. If you want the US stock returns to look as strong as possible, go back nearly 3 years ago to June 28, 2015 and give Trump credit for growth that happened during Obama's term, putting the US 20 points ahead of Japan. Or maybe just pick a credible day from which we can justly and reasonably judge the President's performance.

2) Let's please remember on all sides that the stock market is not a great indicator of how the economy as a whole is doing. The correlation may even be negative in the very long run (http://www.businessinsider.com/equity-returns-and-gdp-per-capita-2014-2)

3) Let's not draw too many life lessons about how to run an economy and a presidency until all the data points are in. 

Lit in Review: Social insurance programs

From the AER meeting in 2015:
"Despite the consensus that higher unemployment benefits lead to longer durations of unemployment, the precise magnitude of the effect is uncertain."

Card et al. "The effect of unemployment benefits on the duration of unemployment insurance receipt: new evidence from a regression kink design in Missouri, 2003-2013"
They find an elasticity of 0.35 pre-recession and between 0.65-0.9 during and after. [Translation: increase unemployment benefits by 1% and people stay unemployment 0.35% longer before the recession.] Why the difference? Could be jobs are harder to come by, so you're less likely to turn one down if your benefits aren't that generous. Could be that unemployment benefits lasted so much longer during the recession.

Coile, Duggan, and Guo. "Veterans' Labor Force Participation: What role does the VA's disability compensation program play?"
They find that increases over time in the generosity of disability compensation closely coincides with the decrease in veterans' labor force participation and that veterans have become increasingly sensitive to economic shocks. Back of the envelope calculations suggest no more than 55% of DC recipients who would not have been eligible before it became easier to get disability would be working without it.

Nekoei and Weber. "Recall expectations and Duration Dependence" in Austria
They survey a bunch of unemployed people and break them into two groups: those who expect to be hired back to their old job (temporary unemployment) and those who don't (permanent). Interestingly, 42% of separations are planned to be temporary, but only 58% of temporary layoffs actually are, while 19% of permanent layoffs are recalled. "On average, jobs ending in temporary layoffs lasted a shorter period but paid higher wages." They find that temporarily laid-off workers are less likely to look for a job (51% don't even try) and, even if they do, don't look as hard for one (use fewer search methods).

Five thoughts on Government reading over your shoulder right now

Sumner:

PPS.  I’m just kidding folks.  Honest people have nothing to fear.  Senator Feinstein assures us that it will only be used against terrorists, and also people that someday might become a terrorist:  

... She said on Thursday that the authorities need this information in case someone might become a terrorist in the future.

And since I don't ever plan on becoming a terrorist, I figure I have nothing to fear. Yes, I do publish one post after another calling for the IRS to be abolished, but I'm confident that IRS agents have too much professionalism to single me out for special treatment.

Kling:

2. I also claim that a must-read is my own article, The Constitution of Surveillance, written nine years ago. [DW - Quite good]
3. I hope people are putting the NSA program in context with the Boston Marathon bombing. Here you go to all this effort to use Big Data to find terrorists, and when you are handed hard, actionable intelligence from the Russians you muff it.
4. I bet you will not find politicians putting the NSA program in context with Chinese cyber-spying, and explaining why ours is good and their is bad. I don’t think politicians are capable of doing the hair-splitting, so I think what they are left with is “What we do is good because we are good, and what they do is bad because they are bad.”

Cato:

Fournier then runs through how the various Obama scandals show:

Government is intrusive … Orwellian … incompetent … corrupt … complicated … heartless … secretive … [and] can’t be trusted.

And that’s when the good guys are running the show!

Wallace (hat tip: The .Plan):
Are some things still worth dying for? Is the American idea one such thing? Are you up for a thought experiment? What if we chose to regard the 2,973 innocents killed in the atrocities of 9/11 not as victims but as democratic martyrs, “sacrifices on the altar of freedom”?* In other words, what if we decided that a certain baseline vulnerability to terrorism is part of the price of the American idea? 

...Is this thought experiment monstrous? Would it be monstrous to refer to the 40,000-plus domestic highway deaths we accept each year because the mobility and autonomy of the car are evidently worth that high price? Is monstrousness why no serious public figure now will speak of the delusory trade-off of liberty for safety that Ben Franklin warned about more than 200 years ago? What exactly has changed between Franklin’s time and ours? Why now can we not have a serious national conversation about sacrifice, the inevitability of sacrifice—either of (a) some portion of safety or (b) some portion of the rights and protections that make the American idea so incalculably precious? I recognize my own biases are showing pretty heavily here. On the other hand, The Economist publishes this that is tempering my thinking:

3. And now the key question: is it okay for Google to use knowledge it gains from searching your e-mails to sell advertising to Williams Sonoma, but not to pass it on to the government when it asks for matches between pressure cookers and beheading videos?

 We need to think coherently about what we find scary here. The problem isn't so much that we haven't set up a legal architecture to preserve our online privacy from the government; it's that we haven't set up a legal architecture to preserve our online privacy from anyone at all. If we don't have laws and regulations that create meaningful zones of online privacy from corporations, the attempt to create online privacy from the government will be an absurdity.

Amnesty and the Median Voter

As I prepare to introduce my ECO 303 students to the Median Voter Theorem today, I've been thinking about Republicans' worries that allowing more migration from Mexico or amnesty or Puerto Rico into the US will increase the number of Democrats. More of them, fewer of us, we lose elections. The Median Voter Theorem tells me that that isn't the real point to worry about.

Fact checking Common Core: Fair and Balanced

A friend pointed out an article on the Obama administration's current set of Common Core (CC) standards in education. The article, by Burke of the Heritage Foundation appearing on Fox News, casts the standards in a fully distopian light, closing with the beautiful zinger:

But if states stay on the Common Core bandwagon, say goodbye to “1984,” “Animal Farm” and “Brave New World.” No need for kids to be reading those books, anyway. They’ll be living them.

Burke's primary concern is that for most of students' learning experiences, fully half of what they read is supposed to come from so-called "informational texts," which she typifies with the following list:

The Federal Reserve Bank’s “FedViews,” “The Evolution of the Grocery Bag,” and “Health Care Costs in McAllen, Texas.” And, roll over “For Whom the Bell Tolls” it’s time to make way for that GSA classic: “Executive Order 13423: Strengthening Federal Environmental, Energy, and Transportation Management.”

Notably missing from the CC are many of the greatest authors of all time:

Jane Austen, Charles Dickens, J.D. Salinger, Washington Irving, Edith Wharton, James Joyce, Sinclair Lewis – all achieved that complex goal. And all are absent from the Common Core list

From her article, I was quite sympathetic to her concluding line. It turns out, however, there is an important element she missed from reading the standards themselves and their intents, and I was relieved to see that these nuggets are not representative of the writing students are expected to have mastered. (However, I was much less reassured by the CC explanation that teachers were to be free to use whatever methods they wanted, as long as Big Brother gets to control the messages.

Changes in monetary tectonics

At home:
Ball: "or the first time, the Fed clearly says it will be more dovish in the future than the pre-crisis Taylor Rule dicates [sic]."

O'Brian:  The Fed still thinks it’s first rate hike will come in 2015-ish, and it’s still buying $85 billion of bonds a month. This is a true fact. But it undersells the intellectual shift at the Fed. It’s gone from mostly thinking about inflation to creating a framework to guide its thinking about inflation and unemployment. And it’s done that in just a year.

Woodford:

Today’s statement provides important additional clarification of the conditions under which it will be appropriate to begin raising short-term interest rates, relative to the FOMC’s statements in September and October. Such clarification is particularly likely to help stimulate the economy when, as in this case, it indicates that the conditions required for policy tightening will not be reached as early as some might have expected on the basis of past Fed behavior.
The explicit thresholds mentioned today are not ones that will be reached as soon as a federal funds rate above 25 basis points would be dictated by a reaction function estimated on the basis of the FOMC’s pre-crisis decisions, and in that respect the announcement should change the forecasts of future Fed policy of at least some market participants.

Yglesias: This is huge. With today’s policy announcement, the Federal Reserve’s Open Market Committee has stopped screwing around and started doing real expectations-based monetary easing.

In England:
Carney [up and coming BoE head]: If yet further stimulus were required, the policy framework itself would likely have to be changed. For example, adopting a nominal GDP level target could in many respects be more powerful than employing thresholds under flexible inflation targeting.

Create value. Make stuff if necessary

I'm often confused why we celebrate manufacturing as much as we do. The goal is to "create value" for other people as I blogged about yesterday - to serve in meaningful ways. Some services are more urgent than others, some more luxurious, some more faddish, and some of them involve turning one thing into another thing someone wants more than what it used to be. I turn ingredients into restaurant meals, I'm classified as a service worker. I turn metal into injectors, I'm classified as a manufacturing worker. The point is still the same - create value for fellow human beings. Why do we love manufacturing?

An Atlantic article on manufacturing in America has some very intelligent discussion, some of which tries to help me answer this. From the 1940s to 1970s, manufacturing was a pathway forwards and that got embedded into the psyche:

All came to work unskilled, at first, and then slowly learned things, on the job, that made them more valuable. Especially in the mid-20th century, as manufacturing employment was rocketing toward its zenith, mistakes and disadvantages in childhood and adolescence did not foreclose adult opportunity.

But now a hefty part of the growing inequality in the US is from opposing forces:

CBO on the Tobin Tax: "slightly" disastrous

The Tobin tax would put a very teensy tiny tax on certain kinds of financial transactions. Miniscule really. Hardly worth mentioning. Right, Congressional Budget Office?

As foreign holders of U.S. securities moved their transactions abroad, more of the market could go with them, which could diminish the importance of the United States as a major global financial market ... In the short term, a decrease in investment would lower demand for goods and services and thus reduce output and employment ... The tax might discourage short-term speculation, which can destabilize markets and lead to disruptive events (such as the October 1987 stock market crash and the more recent “flash crash,” when the stock market temporarily plunged on May 6, 2010) The transaction tax would also affect the funding of state and local pension plans ($3 trillion as of June 2011). Besides initially reducing the value of their existing assets slightly, the tax would raise transaction costs for pension plans. Both of those effects would increase required contributions to the plans.

To sum up: recession, send jobs overseas, make Really Big stock market crashes more likely, make it harder for people to save for retirement and taxing the retirement savings of the elderly more than the young, AND mess up the US bond market. Ooh, where can I sign up? /snark (HT: Newmark)

Thankful for small favors

I was introduced to a new term today: Idiocracy (n) - government of the least capable, elected by the least capable of getting a job.

I wondered how to reconcile its pith with the notion of a government of the least capable, elected by the most capable of using public processes for private gains.

Then I saw this comic and smiled at what is missing. Note that the White House, the Congress, and state legislatures are shown packed full of money. "The buck stops here and here and here" indeed. But what is missing?

The Supreme Court. In all the complaints I have heard of that august body, I have never heard anyone claim that it has been or can be bought. Filled with ideologues, all of whom legislate from the bench on the basis of their political leanings, I've heard. Up for sale, no. Today I am thankful for one branch of government that can't be bought.

Drop and give me 20

I mentioned that there was a police checkpoint with a fairly long line. They checked every car and had the motorcyclists get off their bikes to walk them in. If you weren't holding onto a bike, you had to keep your hands in the air. 

I also got some videos of some people who somehow annoyed the guards. Pity the iPad camera can't zoom worth 8 bits of beans. The guards made them frog hop across the road and back again with their hands on their heads. As usual, some of the police stood around with some pretty mean guns, fingers always near the trigger.

We passed through without incident.

One guard threatened to flog a guy with a long, thick looking whip. With our windows rolled up, we couldn't tell what the provocation was, but the guard's intent was pretty clear. The fellow finally complied and frog hopped for a bit, then was allowed to return to his bike without other punishment.

I sit back wondering at the comparative situation. I've complained at the TSA checkpoints before for violating my civil rights. I think that's what it constitutes and I don't believe the US government has the authority to do what they are doing. In both cases there are guys with machine guns staring at me like I'm wearing a shirt from Target because someone else did something heinously wrong. One government lets strangers with minimal qualifications grope me, the other lets strangers with minimal qualifications force me to frog hop. Frankly, I think I'd rather frog hop. On the other hand, TSA isn't allowed to beat me without some pretty serious provocation - I have the protection of at least some law to sue the government back if things get out of hand.

Random Links: food governance, being LDS, behavioral economics

C. Juma on how to improve Africa's research infrastructure - basically, make research institutions more like teaching institutions and teaching institutions more research oriented.

A fascinating Kenyan website called I paid a bribe. The tagline is: uncover the market price of corruption.

The price of orange juice at a 34-year high.

Price transmission in NYC from subway to pizza.

Why are Americans eating less meat? Partly higher relative prices, partly recession, party "Flexitarianism."

WalMart pays Nicaraguan farmers less than other retail outlets, but offers much less price variance in compensation. Since food price variance has increased, this might be a better deal than it used to be.

"What is essential to being a good Mormon? According to the [Pew] survey [of pretty active American members of the Church of Jesus Christ of Latter-day Saints], 80 percent said "believing Joseph Smith saw God the Father and Jesus Christ" is essential to being a good Mormon, 73 percent said "working to help the poor,"" Other interesting sound bites:

• The Latter-day Saints surveyed had a more favorable opinion of Pres. Obama than LDS Senate Majority Leader Reid (25 to 22)
• 97% of us identify as being Christians, believe in Jesus' resurrection, and use the word "Christian" as the single word that best describes us, while 49% of non-Mormons do not think we're Christian
• Most of us rank being a good parent as more important than career or religious activities
• 60% of converts cited church beliefs as why they joined. 60% of converts joined between 18 and 35 years old.
• 82% say they have a food storage, and almost half have 3 months stored up. When Pres. Ensign came to check on us and assess our needs, we were happy to report that we had 1-2 weeks of food stored up and enough cash to satisfy our needs. Water was another story, but we could boil the tap water to make more as needed and had already refilled a 5 gallon (20 liter) drum with boiled water.
• Even though most identified as conservative, we are much more positive about immigrants and immigration than the average conservative.

Asking people to give a lot of examples actually convinces them that something is less likely than asking them only a few examples. It is the ease of coming up with the marginal example that matters rather than the total number.

Bellemare on how to do well in an economics class.

How to prolong lithium battery life.

Lunch for Jonathan and Obama

They do things differently in the US and UK from Nigeria, and yet it's not so very different after all.

There is a delightful BBC show (Lady Thatcher's favorite during her term) called "Yes, Prime Minister." Elegant. Witty. And it introduced the world to public choice. In the very first episode's side story, the PM is cranky because no one is there to make him lunch. The staff explain that the cafeteria is only for staff, not the PM. Because the staff is doing government work, the government pays; but the PM is political, so the government can't pay for his lunch. However, meeting with ambassadors is government work, so he announces he will have lunch with a different ambassador every day so that the government will make his lunch. It goes back and forth quite entertainingly and later fits in to how defence budgets are created. Remarkable stuff.

I also have in my collection an old radio bit called The First Family, a series of comedy sketches around the Kennedy family. There's one where during a meeting of heads of government, Pres. Kennedy tells them he has been taking some criticism for the expense of all the fancy state dinners, and economy starts at home, so today they will be having a typical American businessman's lunch. Hilarity ensures as Castro orders a chicken sandwich with a live chicken, Kruschev wants the eastern half of Adenauer's "Western sandwich", and Abdul Nasser and Ben Gurion find peace over pastrami. At the end of the sketch, the President then asks each of them to pay for their sandwich.

Pres. Jonathan, encouraging us to eat cassava bread
to reduce wheat imports.

Over here, the removal of the fuel subsidies has brought to light just how much is budgeted to feed the President and Vice-President: 1 billion Naira. That would be US$6.5 million by exchange rates. The one data point I have tells me it costs twice as much to feed our family in Nigeria as it did in the States, so a not-quite Purchasing Power Parity exchange rate would put it at closer to $3 million. Still a hefty sum.

The breakdown:
           N477million for meals and catering for the office itself; -- note we're not just buying food, but hiring labor too
           N293 mil for Pres Jonathan's meals at home and office;
           N104 mil for Vice-Pres Sambo's office.
           N90 mil for kitchen supplies - similar to last year - half for the state house, half for the President's home

Among the things I would like to know, based on the humor I've already consumed, is how much of that is for feeding official guests. As my colleague Alvin Lim put it when I asked him that question, "I guess the President can't serve his important guests meat pies."

Over here, they have been touting British and American austerity, expounding on the great poverty of our millionaire leaders. On the other hand, it appears Pres. Obama's $4 million vacation to Hawaii this Christmas was also paid by taxpayers, mostly because it costs $3.3 million just to fly Air Force One there and back again. Another quarter million goes to paying for security's hotel and per diem. FactCheck tells me that Pres. Obama has used Air Force One less than Dubya did in his first two years.

So for which would you rather be taxed? $3mil to feed your leader for a year or $3mil to fly him across country for a one-week vacation?

Interesting Sentences: Romney

This is the first time I heard the first part of this sentence or anything like unto it: (HT: Mungowitz)

The party establishment wants Romney, but its voters have been so thoroughly trained to focus on gays and abortion that they cannot sit still behind a candidate who concentrates on business and economic growth.

Now that either means the "party leadership" is so secretive a cabal that no one has divined their hidden agenda except Furguson here ... or maybe his analysis is fundamentally flawed?

Fun with Forecasting

Some tongue-in-cheek forecasts for the new year:

Mungowitz: "So, the point is, to the extent the models matter, 2% growth and Obama loses. 4% growth and Obama wins in November."

Hayibo: Capetonians praying that the destruction of the world comes before the destruction by minstrel. The horror!

M. Nestle [who is serious] is less optimistic than usual. This being an election year, don't expect major movements on improving the food system: protecting Iowa farmers is a higher priority. She also predicts ongoing stalling and backpeddling from Congress, USDA, and FDA in practically every area. The lack of movement from the government will increase grassroots pressures to get something done ... later.

How do you know when the Fed is being successful?

The first question you should ask is: successful at what?

Sumner on the 1936 Fed:

This is one of the most chilling statements I have ever read.  The opening sentence is the sort of thing juvenile delinquents say to each other when their prank has gone horribly awry, and they are nervously working on a joint alibi.  An incredible effort at denial runs all through the piece.  First he admits that they raised reserve requirements because “some recession was desirable.”  Then he claims it was just a “coincidence in time” that the downturn followed the reserve requirement increase, even though the express purpose of the increase was to cause a “recession.”  Then he claims that if they reverse their decision it will look like the previous decision had caused the recession.  Then he said that a depression can’t be happening, because there is no good reason for a depression.  Well it was happening, unemployment rose to almost 20% in 1938.  In the end, they decided to stick with the high reserve requirements throughout the rest of 1937.

Sumner on the 1960's-70s Fed:

The Fed can always raise short term rates.  It’s true that this doesn’t always result in higher long term rates.  But that’s not a sign that monetary policy is ineffective, rather exactly the reverse.  The Fed raises short term rates to keep inflation down close to 2%.  If long term rates don’t budge very much, that’s a sign that monetary policy is credible.  In the 1960s and 1970s both long and short rates tended to rise together, hence increases in short rates weren’t enough to get ahead of the curve.  Real rates didn’t rise, as the Fed wasn’t following the Taylor Principle.  Because the “tight money” policies weren’t credible, inflation expectations rose.

Glasner on the September 2011 Fed:

In this environment small changes in expected inflation cause substantial movements into and out of assets, which is why movements in the S&P 500 have been dominated by changes in expected inflation.  And this unhealthy dependence will not be broken until either expected inflation or the expected yield on real assets increases substantially. ...

Operation Twist has almost certainly not been responsible for the rise in stock prices since it was implemented.

Why has the stock market been rising? I’m not sure, but most likely market pessimism about the sway of the inflation hawks on the FOMC was a bit overdone during the summer when the inflation expectations and the S&P 500 both were dropping rapidly. The mere fact that Chairman Bernanke was able to implement Operation Twist may have convinced the market that the three horseman of the apocalypse on the FOMC (Plosser, Kocherlakota, and Fisher) had not gained an absolute veto over monetary policy, so that the doomsday scenario the market may have been anticipating was less likely to be realized than had been feared.

Sumner on the August 2011 and January 2012 Fed:

My hunch is that I misjudged the Fed move back in August, when they promised low interest rates for the next two years.  That seemed pointless without making the promise condition on some sort of nominal growth target (GDP or inflation. Now there are indications that the Fed may do just that at the January meeting. ... It’s interesting that it took me so many months to have second thoughts about my negative verdict on the policy last August.  Equity investors seemed to need only about 30 minutes to figure this out (after the 2:15 announcement.)

And what should the Fed be doing? Here is Glasner arguing in favor of targeting nominal GDP over nominal wages - though both are highly correlated, targeting nominal GDP will avoid mistaking good supply shocks for contractions.

Claims about our food

The health claims made by potato chip manufacturers apparently vary with the price. Most popular are reminding people what's NOT in the bag: every negative increases the cost by 4 cents per ounce. Expensive chips are much more likely to have any health claim than cheap chips, which tend to emphasize being locally made.

Sugar says that using the term "corn sugar" misleads consumers by claiming that "HFCS is natural and is indistinguishable from the sugar extracted from sugar cane and sugar beets." Corn says sugar is misleading consumers by "wrongfully alleging that high fructose corn syrup (a sugar made from corn) causes health issues that do not arise from consuming cane and beet sugar." While the journalist reporting on this does manage to get M. Nestle (way down at the bottom) to comment, we also get a quote from an "alternative medicine guru and author" ... What? All the real doctors were busy?

Speaking of sugar, how much is in kids' cereals? M. Nestle reports on an Environmental Working Group report:

kids’ cereals are really cookies in disguise, typically 40% -50% sugars by weight.   Kellogg’s Honey Smacks topped the list at 55%. ... 

The good news is that at least some cereals are managing to reduce sugar content. (Image source: General Mills)


 There is a claim that Wendy's may soon be the #2 burger establishment, unseating the Burger ... well, he can't be king since he's #2 and about to be #3, how about the Burger Prince then? I have appreciated seeing Wendy's posting calorie counts in some states that don't require them and have adapted my own consumer choices accordingly. Just don't go to the Wendy's in Ithaca - I got food poisoning there twice. Update: On Wendy's triumphant return to Japan.


Carl's Jr's chief, meanwhile claims the Affordable Care Act will be bad for business because it will increase the costs of doing business. His argument makes it sound as if this is a fixed cost - the company will just have to shell out an extra $18 mil each year. Actually, they are variable costs that depend on how many people they choose to employ. Making labor more expensive does discourage building more stores as he says on an income effect, but there is a substitution effect that tells them to use more machines and fewer people, or more temps who can be excluded from the Act. Yglesias points out that much more relevant are the requirements that say restaurants like Carl's Jr will need to post calorie and other nutrition information, which will likely have an even larger impact than the employment costs.

Scrooge and a Big Bag of Christmas

Marron's Twelve Days of Christmas list for the global (but mostly US) economy, including 10 new Steve Jobses to rise and replace the fallen, 7 fed governors (we've been making do with 5 for the longest time) pushing for a 5% nominal GDP growth target, $3 trillion in budget cuts, and 2 new currencies (letting the Euro drop a couple countries).


Scrooge's name came from misreading the tombstone of Adam Smith's grandnephew? Are you sure this isn't a Dan Brown plot reject? If not, how about considering below the moral hazard of Scrooge:



In which a friend of mine tries to show a Pakistani a Currier and Ives Christmas, and ends up finding its deeper meaning with an Alaskan crab fisherman.


The First Presidency of the Church of Jesus Christ of Latter-day Saints included this in their Christmas message:

This joyful season will bring to each of us a measure of happiness that corresponds to the degree in which we have turned our minds, feelings and actions to the spirit of Christmas.May this Christmas season be a time of prayers for peace, for the preservation of free principles, and for the protection of those who are far from us. Let it be a time of forgetting self and finding time for others. 

C. S. Lewis on two types of causality, that of work and that of prayer: "Prayers are not always -- in the crude, factual sense of the word -- "granted". This is not because prayer is a weaker kind of causality, but because it is a stronger kind."


Delicious satire: a response to Band Aid's "Do they know it's Christmas?" is found in Plaster Cast's "Yes, We Do." (HT: Blattman)

The Lighter Side of Poverty and Unemployment

Some of these are a touch old, but it's one of those "the more things change" things.

The price of seeds (and everything else) in Africa

Good news: the prices of cereals, edible oils, sugar, and dairy products were down sharply in October, bringing FAO's food price index down to its lowest point for the year. Not that it's all that low, but it's something. However, peanut butter prices are up 40% in the US, but not abroad (so American expat families everywhere can breathe a sigh of relief). Since the US government shields peanut growers from the world market, the weather in Georgia and Alabama matters for the US price, but not the international price.

Swaziland's government has retracted its usual agricultural input subsidies: no more discount or free seeds, no more discount tractors (government was charging $17.30/hr rental; private cost is $26.60). The article also discusses how the feudal land tenure system makes things more difficult. One farmer laments:

“I live on the banks of a river [the Nkomati]. My maize crops could easily thrive if I had a simple pump and piping. What I harvest would pay for the loan, but I have no collateral because there is nothing to offer the bank" [because he does not own the land and so can't put that up as collateral.]

Roving Bandit notices the South Sudan National Bureau of Statistics report: annual inflation in South Sudan is up to 60% from September 2010 to September 2011. For the year, the biggest contributor is food prices that went up 64%. The price of furniture and furnishings went up far more (108%) as did alcohol (95%), but food carries a much larger weight (71/100) in the basket of goods than anything else. Food price increases have been very small this month, thankfully.

Setting Poverty Lines

India recently moved its poverty line. The new poverty line said that anyone in a rural area who spent more than 50 cents (US) a day on food or 66 cents a day in urban areas was not poor. There was an immediate outcry of people worried they would no longer receive government support if they were no longer classified as poor. The government quickly went to reassure people that moving the poverty line would not impact their federal welfare help. Pictured is the distribution of poverty in India as of 2001. Some of have also admitted that the new line is not totally reflective of poverty:

Planning Commission Deputy Chairman Montek Singh Ahluwalia agreed that the norms were set at a low level. “It is clearly a rock bottom level of existence and we know very well that everybody at that level of existence is under significant stress. In fact, we know that even above that level, households are vulnerable,” said Ahluwalia.
Ahluwalia clarified that the norms had been based on the assumption that health and education would be provided free of cost to the poor. He said that has not happened in many states across the country.

The poverty of "high-fashion" models in developed countries:

She found that 20 percent of the models on the agency's books were in debt to the agency. Foreign models, in particular, seem to exist in a kind of indentured servitude, she writes, often owing as much as $10,000 to their agencies for visas, flights, and test shoots, all before they even go on their first casting call.

The amazing thing is that this poverty is one they choose. It is possible to have a lucrative career doing commercial modeling, but the social norms look down on this modeling. Many models prefer to accept poverty now in the hopes of winning of the lottery and becoming famous.


On a homework assignment, a lot of my students argued that poor countries set absolute poverty lines while rich countries set relative poverty lines because the line is a lot higher in the US than it is in Nigeria. While I'm going to try to convince them that the level of the line is not what makes it absolute or relative, I think I should also point out this thought from Matt at Aid Thoughts, who argues that all poverty lines are relative:

... the international measure of absolute poverty, i.e living on less than $1.25 (PPP) dollars a day, is not really an absolute measure. Consider this thought experiment: if we had first developed the international policy line 100 years ago or 100 years in the future, would it be the same as it was today? I doubt so – our perceptions of what poverty is change over time, and these perceptions are inherently relative to our own position. This means that even `absolute’ measures are, in some way, a measurement of inequality, just ones we’ve committed to for some unspecified period of time.