Paul ([info]happyfunpaul) wrote,
@ 2009-03-22 13:00:00
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Entry tags:links

[links] economics and politics
It's time once again to clear out some tabs on Firefox. Some of these are "Ooh! See this if you haven't yet" links to share (like the first one in this batch), others (including the rest of this first batch) are primarily for my own records (though other folks might be interested too).

Median inflation-adjusted HOME PRICES in the U.S. from 1890 to 2007... converted into a roller coaster!
I got this from [info]xiphias here; it's originally from http://www.speculativebubble.com. Basically, it's a delightfully visceral way to see just how badly home prices were about to crash. You can also see the graph of what actually happened (including the last two years-- note that home prices are still about 15-20% above their natural level, as of the end of 2008), but really, roller coasters are more fun (and visceral) than mere graphs!

Article on Icelandic investment brokers screwing over their country from Vanity Fair
And how different is Wall Street, really?

Mickey Kaus on Ross Douthat on Obama's possible strategy
What seems most irksome/puzzling for a vaguely-libertarian like me or a vaguely-liberal like Kaus is that the expansion of government isn't being done in a way that's either (1) very well-focused (i.e. the BS gets expanded as much or more than the effective parts) or (2) in a way that's easily reversible. Even if you assume that higher spending is the foot-in-the-door to a larger government in general, there's a limit as to how much taxes can be raised, and if you're bloating government with "homelessness prevention" and increases to the budgets of everyone from the Agriculture Department to the Veterans' Administration, how are you going to get universal health care or other presumably higher-priority items?

A Reason article on the effects of past "stimulus packages"
"Every dollar’s worth of production used to satisfy the government’s demand is offset by more than a dollar’s worth of production that is no longer available to consumers and businesses."

A financial crisis is the worst time to change the foundations of American capitalism
An article in the WSJ from Michael J. Boskin

Short-selling... it's actually a good thing
Another one from Reason


(8 comments) - (Post a new comment)


[info]twoeleven
2009-03-22 08:12 pm UTC (link)
"Every dollar’s worth of production used to satisfy the government’s demand is offset by more than a dollar’s worth of production that is no longer available to consumers and businesses."
well, let's see: that sentence comes from:
In fact, the data suggest that stimuli often end up shrinking the pie. In a 2008 paper, budget analyst Brian Riedl of the conservative Heritage Foundation summarized several studies that found past increases in government spending reduced the economic growth rate by between 0.14 and 0.36 percentage point. This means that every dollar’s worth of production used to satisfy the government’s demand is offset by more than a dollar’s worth of production that is no longer available to consumers and businesses.
the "2008 paper" seems to be Why Government Spending Does Not Stimulate Economic Growth, which says:

  • A Journal of Macroeconomics study discovered that "the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%."[7]

  • Public Choice reported that "a one percent in­crease in government spending as a percent of GDP (from, say, 30 to 31%) would raise the un­employment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent)."[8]
so, the 0.36% has nothing to do with economic growth, but with unemployment. the 0.143% does have to do something with growth, but is from a study of gov't spending in general. so, neither one is directly addressing the question of keynesian stimuli (ie, borrowing to stimulate growth during a recession), which is what mr. obama's stimulus strategy amounts to.

keynes' bet is that the amortized cost of a dollar borrowed during a recession is lower than the value of the growth gained by the time the dollar needs to be repaid. i've been led to believe that if the dollar is spent even half-way plausibly, then that's a good bet. so, it looks like we fiscal hawks are gonna have to swallow our ideological pride and vote for borrowing... but there's plenty to do on the half-way plausible spending part. there's the related but distinct question of "permanent" expansion of the federal gov't, but that should be treated separately.

er, and the disconnection between the claim and the data is why i gave up reading reason. this isn't the first time i've tried running down their facts and found them to be fiction.

(Reply to this) (Thread)

[info]happyfunpaul
2009-03-22 08:55 pm UTC (link)
Thanks for running down the data, *sigh*. I'll focus on the temporary/permanent issue then, which seemed more defensible anyway.

(Has Reason always been this bad at fictionalization of facts? The impression I get is that they were better in the mid-late 1990s and got worse in several respects, not just fact usage, around the turn of the millennium, but maybe that's just me.)

(Reply to this) (Parent)(Thread)

[info]twoeleven
2009-03-22 09:13 pm UTC (link)
i don't really know. i caught them at it a couple of times when the were leading cheers about biotechnology, saying that we could do a few things that are still open research questions. i remember calling them on it at least once, telling them not over-sell the technology, but i don't recall what reply i got if any. i think that was before 2000, but i'm no longer sure.

in general, i check things that purport to provide evidence for things i believe before i use them to argue my position. in politics, nothing is more embarrassing than having to back down from claim because it's completely false, and obviously so had one done one's homework.

(Reply to this) (Parent)

[info]lhn
2009-03-23 02:17 am UTC (link)
keynes' bet is that the amortized cost of a dollar borrowed during a recession is lower than the value of the growth gained by the time the dollar needs to be repaid. i've been led to believe that if the dollar is spent even half-way plausibly, then that's a good bet. so, it looks like we fiscal hawks are gonna have to swallow our ideological pride and vote for borrowing...

Do you have a pointer to a decent summary of the evidence that this is true? I know pretty much nothing about macro, and it is clear that many smart economists believe this. So while I'm instinctively skeptical-- especially when phrases like "animal spirits" are being tossed about-- I'm well aware that I don't have a terribly good basis for an opinion one way or another, and would would like to have a better one.

(Reply to this) (Parent)(Thread)

[info]twoeleven
2009-03-23 07:06 pm UTC (link)
the evidence is pretty shaky both for and against, and boils down to two sorts, afaict: analyses which are subject to endless debate (usually because of problems with the data their conclusions derive from or problems w/ causal relations among the data¹); and qualitative assertions about the price of money.

i'm currently finding the qualitative assertions for keynes' bet to have the preponderance of the evidence², and hand-checking them with current values gives plausible (tho dubiously informative) answers.

1: for example, i saw a study arguing that ww2 didn't end the great depression that's different from the one our host cites. its thesis was that the consumer spending boom of the early 1950s really ended the depression. but the paper's internal evidence is that the spending boom was a response to war-time restrictions on purchases ending ot1h, and soldiers who were previously overseas and unable to spend their salaries suddenly having the ability to do so otoh... which seems to me to be saying that the war produced the conditions that caused the boom.

2: yes, that's a low standard. none of the claims really stand up to the sort of rigorous analysis i like.

(Reply to this) (Parent)

[info]crouchback
2009-03-22 09:12 pm UTC (link)
That Vanity Fair story has some problems.

(Reply to this) (Thread)

[info]happyfunpaul
2009-03-23 12:32 am UTC (link)
Yeah, no shock. The tone of the article was too fun to be fully accurate. This whole set of articles was "things that make me go 'hmmm'" rather than things I 100% believe.

(Reply to this) (Parent)

[info]elizilla
2009-03-23 01:45 pm UTC (link)
The thing about houses being 15-20% above their natural level, is interesting but I wonder how skewed it is by the housing insanity on the coasts and in places like Las Vegas? I think it would be hard to get from the macro level to the local level, with those numbers. Some places have very little distance to fall, and others are still astronomical.

(Reply to this)

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