Words of wisdom
Some people I know will hate it when I say this, but as written by E.J. Dionne, this seems to me true, true, true:
The right wing has lost the election of 2012.
The evidence for this is overwhelming, yet it is the year’s best-kept secret. Mitt Romney would not be throwing virtually all of his past positions overboard if he thought the nation were ready to endorse the full-throated conservatism he embraced to win the Republican nomination.
…The right is going along because its partisans know Romney has no other option. This, too, is an acknowledgment of defeat, a recognition that the grand ideological experiment heralded by the rise of the tea party has gained no traction.
There is more at the link.
Assorted links
1. Going back a bit in time, prior approval, a scary doctrine.
2. Profile of Tax Policy Center.
3. Colorblind casting in Cloud Atlas.
4. At least two people are overpaying markets in everything.
5. The commercialization of Mecca, and which airline routes are growing and shrinking most rapidly.
Will Ohio State’s football team decide who wins the White House?
Here is my recent Slate.com piece with Kevin Grier, excerpt:
Just how irrational are voters? It is statistically possible that the outcome of a handful of college football games in the right battleground states could determine the race for the White House.
Economists Andrew Healy, Neil Malhotra, and Cecilia Mo make this argument in a fascinating article in the Proceedings of the National Academy of Science. They examined whether the outcomes of college football games on the eve of elections for presidents, senators, and governors affected the choices voters made. They found that a win by the local team, in the week before an election, raises the vote going to the incumbent by around 1.5 percentage points. When it comes to the 20 highest attendance teams—big athletic programs like the University of Michigan, Oklahoma, and Southern Cal—a victory on the eve of an election pushes the vote for the incumbent up by 3 percentage points. That’s a lot of votes, certainly more than the margin of victory in a tight race. And these results aren’t based on just a handful of games or political seasons; the data were taken from 62 big-time college teams from 1964 to 2008.
The good news, we suppose, is that sports really can cheer us up and make the world seem like a brighter place. The sports fan is left happier and more satisfied all around, not just on the gridiron. When you are feeling upbeat and happy, you feel more satisfied with the status quo in general. And feeling satisfied with the status quo makes you more likely to vote for the incumbent politician, even if that’s totally irrational.
The study’s authors control for economic, demographic, and political factors, so the results are much more sophisticated than just a raw correlation. They also did a deeper analysis that took into account people’s expectations. It turns out that surprise wins are especially potent, raising local support for incumbent politicians by around 2.5 percentage points.
The nature of UK austerity
Veronique de Rugy sums up many points I continue to be thinking:
When I looked at the data back in June, we saw that of the roughly £40 billion that was shaved from the deficit during the 2010–2011 budget cycle, for every £3 of new tax revenue, U.K. taxpayers got £1 in cuts — exactly the reverse of what was promised.
What’s more, the evidence indicates that U.K. has, at best, slowed down the growth of spending, but it has not engaged in actual spending cuts. I documented the trend in British spending earlier this year:
A look at the data in Her Majesty’s Fiscal Year 2012 Budget shows (see table 2.3) that total managed expenditures will increase from £696.4 billion in 2011–2012 to £733.5 billion in 2014–2015, and further to £756.3 billion in 2016–2017. Adjusted for population growth, this is slow growth, but not a savage cut. That table also shows a “projected” drop in Public Sector Gross Investment between 2012–2013, but if it ever materializes, it will be contained to that year alone.
Spending cuts in the UK can’t be blamed for the weak growth path the country is on. On the other hand, tax increases can. Here is a list:
- a VAT hike from 17.5 percent to 20 percent (probably the main culprit of the U.K.’s current problems)
- a new 50 percent tax bracket on incomes over £150,000, which will drop to 45 percent next year
- an increase in air-passenger duty to 8 percent
- “temporary” payroll tax of 50 percent on bonuses over £25,000
- a capital-gains tax hike
- a 0.088 percent levy on banks
- an increase to 7 percent in the stamp duty on the sale of properties worth more than £2 million and on properties bought through “non-natural persons.”
(For more, go here.) The bottom line is that the U.K. is another case of private-sector austerity (i.e., tax hikes) without public-sector austerity (i.e., spending cuts).
For more detail, here is a new and very good paper by Anthony Evans. Here are some interesting remarks from Nicholas Crafts.
There is a great stagnation
Singapore Airlines Ltd. (SIA) will end non-stop services to Newark, the world’s longest commercial flight, next year as it phases out the aging planes used on the route.
The all-business-class flights will end in the fourth- quarter of next year, along with similar services to Los Angeles, the airline said in a statement yesterday, as it announced an order for 25 Airbus SAS aircraft. The Toulouse- based planemaker will acquire the five four-engine A340-500s used on the non-stop routes as part of the deal.
The end of the almost 19-hour service to Newark will lengthen Singapore travelers’ trip by more than three hours as they will have to change planes in London.
Here is more, and note that the new aircraft are designed to serve the budget market in the future.
*The Bretton Woods Transcripts*
That is the new eBook edited by Kurt Schuler and Andrew Rosenberg. I cannot open the file they sent along to me, but Amazon summarizes:
The Bretton Woods Transcripts is the confidential, verbatim record of meetings of the historic conference that established the International Monetary Fund and the World Bank. The Bretton Woods conference, named after the New Hampshire town where the conference was held in July 1944, began a new era in international economic cooperation that continues today. Delegates from 44 countries attended the conference. The best known then and now was John Maynard Keynes, the most influential economist of the 20th century.
A companion Web site for the book contains extensive background material, including photos of the original transcripts and previously unreleased conference documents: http://www.centerforfinancialstability.org/brettonwoods.php
The culture that is Denmark
Some of them he slept with more than once, but most were one-timers. In all, he earned just over 24,000 kroner, or $4,150.
Henrik only paid 6,300 kroner ($1,090) in taxes, or 24.2 percent, because he was able to deduct 11,000 kroner ($1,900) for expenses, including his Macbook. He had sex with a client in Croatia when he was there on vacation, and when he returned, he called the tax authorities to ask if he could deduct the cost of the holiday. Flights yes, came the answer, hotel no.
I asked Henrik why his spreadsheet listed the distance he cycled to each client.
“Bike rides,” he says, “are reimbursed half a kroner per kilometer.”
Here is more.
Assorted links
1. Broken windows in Afghanistan.
2. Imaginary markets in everything.
3. Karl Smith responds to Scott Sumner on fiscal policy, Scott responds in turn, and good Amir Sufi slides on monetary policy and why it may not be so powerful.
5. Cass Sunstein on how to fix the mistakes of the impatient. (Is he at this point a Bloomberg columnist?)
The case for nominal gdp targeting
That is the new essay by Scott Sumner, you will find it here.
Medicare cost control in action
Tens of thousands of people with chronic conditions and disabilities may find it easier to qualify for Medicare coverage of potentially costly home health care, skilled nursing home stays and outpatient therapy under policy changes planned by the Obama administration.
In a proposed settlement of a nationwide class-action lawsuit, the administration has agreed to scrap a decades-old practice that required many beneficiaries to show a likelihood of medical or functional improvement before Medicare would pay for skilled nursing and therapy services.
…Neither she nor Medicare officials could say how much the settlement might cost the government, but the price of expanding such coverage could be substantial.
The story is here. Without knowing the cost, it is difficult to say whether this coverage expansion is a good idea. But that is exactly my point. I see a good deal of cognitive dissonance when I read discussions of plans for Medicare cost control.
Nominal wage changes in the eurozone
Assorted links
1. Scott Sumner on what is wrong with the UK.
2. How driverless cars might transform the broader economy.
3. A whale with a human-like voice?, and more here, and the paper is here.
4. “Ancient” sculptures made by a 3-D printer.
5. Ruchir Sharma on broken BRICS.
6. Krugman’s best piece on fiscal stimulus, I agree almost 100%.
Six words that are better than most of the macroeconomics you will read today
The Real Stimulus: Low-Cost Natural Gas
Publishing pays in economics
Here is a new paper by Suzanne O’Keefe and Ta-Chen Wang:
We study salaries of economics faculty at the University of California to determine how publications affect salary. We find that each publication in a top 10 journal has a positive and significant effect on annual base salary of 1.5%, or $2,053. Unlike previous research, our analysis specifies the impact of publications in specific journals. Publications in American Economic Review, Econometrica, and Review of Economics and Statistics have an independent positive effect on salary. Compensation is also affected by faculty rank, seniority, university of employment, and teaching awards. Base salary does not significantly differ by gender, however, gross salary is about 9% lower for women. After controlling for migration and faculty rank, seniority has a negative impact on salary.
Here is a sentence of interest:
Full-time tenure-track economics faculty members in the UC system have gross salaries ranging from about $70,000 to $378,000.
Against my expectations, UCLA economics professors are paid more than 13k more, on average, than UC Berkeley economics professors. The pay gap for women is larger in economics than in these universities as a whole.
The possibly gated article is here, and for the pointer I thank Michelle Dawson.
My TLS review of Tim Congdon and market monetarism
A version of my review can be found here. Excerpts:
The economist Scott Sumner stated the case against fiscal policy another way on his blog The Money Illusion. Sumner noted that no one believes fiscal policy (unlike monetary policy) could be used to target a price inflation rate of say 4 per cent a year. The implication is that fiscal policy is not very effective in managing overall demand in an economy, so why should we so trust it as a tool of crisis management?
I still haven’t seen a good answer, or for that matter a bad answer, to that argument. And:
Does the market monetarist movement hold all the answers? Not quite. It’s worth trying to keep the broader monetary aggregates at robust levels of growth, but what happens when this is not possible? The danger is not so much Keynes’s liquidity trap – considered a mythical beast by many, including this author – as the private sector’s reluctance to lend, such as followed the partial collapse of financial intermediation in 2008. Those credit relationships are being repaired only slowly, and so private investment will lag until trust is repaired. In the meantime, the authorities could prop up the monetary aggregates by printing more currency, but that’s not nearly as useful as trust-based expansions of bank lending and private investment. In other words, undoing the damage from a credit collapse is not always easy.
Read the whole thing. You can buy Tim Congdon’s book here. Here is my final take on the book itself:
Money in a Free Society doesn’t have all the answers, it is perhaps overlong, and it could have been more focused on remedies rather than devoting so much space to a long history of Keynesian thought in the United Kingdom. Nonetheless, it is a bracing and largely accurate take on what has gone wrong, a wake-up call for those who think they know all the right answers, and a medicine against the strands of political correctness that have been encircling and indeed strangling the macroeconomic debate.