Denmark has as much labor mobility as the United States

According to Daniel Schwammenthal (WSJ, April), about 30 percent of the Danish work force changes jobs each year.  There are few guarantees of job security, and the Danish government spends a great deal of worker retraining.   These training recipients face strong moral and financial pressure to take jobs which are offered to them.  There is also a new NBER paper on the miracle of the Danish labor force.

…we briefly describe some key features of the labor market in Denmark, some of which contribute to the Danish labor markets behaving quite differently from those in many other European countries…We show that mobility is about as high, or even higher, as in the highly fluid U.S. labor market. Finally, we describe and examine the wage structure between and within firms and changes therein since 1980, especially with an eye on possible impacts of the trend towards a more decentralized wage determination. The shift towards decentralized wage bargaining has coincided with deregulation and increased product market competition. The evidence is, however, not consistent with stronger competition in product markets eroding firm-specific rents. Hence, the prime suspect is the change in wage setting institutions.

Starting in the late 1980s, wage bargaining in Denmark became increasingly decentralized, and that is considered to be a major reason for Danish labor market successes.

fatty snacks!

From today’s WSJ (gated but a free preview is available) : "With Corn Prices Rising, Pigs Switch to Fatty Snacks".

This is a convoluted one, but I’ll give it a try. The US seeks "energy independence". Our government has decided corn based ethanol is the way to go and subsidizes gasoline made from it to the tune of around $0.50 per gallon. However, BRAZILIAN corn ethanol is NOT the way to go and we have placed a goodly sized tariff thereon. Thus the price of corn in the US is off the hook as the kids like to say. Commercial farmers, who like to fatten their charges as quickly and cheaply as possible and traditionally use 30-60 percent corn diets for their pigs and cows have turned to another, now cheaper, proven form of quick fattening: JUNK FOOD!! Cheese curls, tater tots, cookies, candy bars and french fries are now on the menu for our future food.  Pig farmer / comedian Alfred Smith says of the practice "I’ve heard no complaints".

counting unhatched chicks

I should preface this post by stating the obvious. I am not a trade guy. But I do think its interesting how trade agreements like NAFTA have already been judged as either failures or successes before the full agreements have ever been implemented! Consider the example of trucking in NAFTA.  Even though NAFTA "began" in 1994, Mexican trucks were supposed to be granted access to US highways in 2000, Bush finally made a move in that direction this spring, but given the latest Congressional action it doesn’t look like its going to happen. Among the new requirements: Mexican drivers should be fluent in English.  Interestingly, I believe that Mexican trucks were allowed to drive in the US in the 1970s, at least the linked article implies that was the case. In any event, the full implementation of NAFTA is scheduled to occur in 2009 (a 15 year implementation period) and trucking is not the only item way behind schedule.

Facts about Danish energy independence

1. The U.S. uses a bit more than 300 barrels of oil to produce one million Euros of gdp, Denmark uses just a bit over 100 barrels.

2. Pig blubber is an important medium for heating.

3. Energy consumption has held roughly steady for 30 years, even though gdp has doubled.

4. Non-profit cooperatives are common in the Danish energy sector.

5. Buying a new car involves a registration fee of 105% of the car’s value.

6. Electricity costs 43% more per megawatt hour than in the United States.

Those facts are from The Wall Street Journal, April 16, 2007, "How Denmark Paved Way to Energy Independence."

Will bad things get better?

Jane Galt, who is (was?) down, later argued:

So probabilistically, the chances that something good will happen to me right now are, I assume, about the same as they always were.

Holding quality of type constant (an important qualification, as some people are simply prone to bad events, and receiving another bad event signals as such), I more readily expect reversion to the mean.  Good economies grow rapidly after wartime, often because they find it easier to reassemble preexisting pieces than to press forward from full employment.  Much of the human capital is still there and rebuilding can occur quickly once in motion.  The personal analogy is that once you start recovering from (some) catastrophes, the process is speedy.  You already know where you need to go, and you might sample more randomness to court additional good events.

There is also a "naive" evolutionary argument for bad things getting better.

When things go badly, your body borrows resources from the future.  It pumps adrenalin, eats stores of fat, in some views it mobilizes the (only temporarily available) placebo effect, etc., all of which restore better states of affairs and make up lost ground.  More psychologically, a setback may cause a person to try harder.  If a computer crashes and wipes out a page I wrote, I can write it again at an especially high speed and with the energy of anger and adrenalin.

Of course those short-run compensations can herald a problem for the longer-run future, a’la Long and Plosser.  You are digging into your capital stock.  At some margin pumping more adrenalin brings a long-run health cost.  The computer crash means that I write lots today but tomorrow I feel a bit burnt out, and so on.

So if there is anything to worry about, it is the day after tomorrow.  The immediate future appears quite bright.

Guest Blogger: Kevin Grier

We are delighted to have Kevin Grier guest blogging with us this week.  Kevin is a pioneer in the political economy of macroeconomics.  Kevin’s early work on political business cycles established that politicians do attempt to manipulate the economy via the money supply.  Later, in a series of papers with Tony Caporale, Kevin showed that changes in the real interest rate can be explained via political regime shifts.  My favorite paper of Kevin’s is Congressional
Influence on
Monetary Policy: An Empirical Test
(JME 91, subs. req.) which is a great example of how to combine different types of evidence to convincing effect.  But Kevin’s greatest contribution to economics?  Well, I am to modest to say and no doubt Kevin is too embarrassed.

Kevin is also an expert on low-watt tube amplifiers, check it out here.  Welcome Kevin!

Nicolai Foss on jazz guitar

My Danish host, Nicolai Foss, has a blog on archtop jazz guitar.  Here are his posts on the best of jazz guitar.  I’ll nominate Joe Pass’s Virtuoso album, any number of Django Reinhardt collections, the Jim Hall-Sonny Rollins album, and the Wes Montgomery live album Smokin’ at the Half Note as my top picks.  George van Eps and the old Kress and McDonough recordings are particular favorites as well.  John McLaughlin is not to be neglected, and there is also the incomparable Bola Sete from Brazil.

Here is Nicolai’s home page, with many papers on management and also Austrian economics.  Nicolai, of course, also blogs at Organizations and Markets, which has been on our blog roll for some time.  Here is my other host, Mark Lorenzen.

Danish economists

1. Esther Boserup: A female economist from the 1970s, she revised Malthus and her book argued that population pressures stimulated technological progress in agriculture.  She was a precursor of Julian Simon and also a pioneer of work on economics and gender.

2. Frederik Zeuthen: A mathematician and early game theorist from the early 20th century.  He developed the idea of a bargaining zone, how to incorporate "free" commodities into general equilibrium theory, and refined the theory of monopolistic competition.

3. Carl Iversen: He wrote in the 1930s on international capital movements and was a founding member of Mont Pelerin.  A neglected and underrated figure.

Jesper Jespersen is a reasonably well-known post-Keynesian.  More recently there is Bjorn Lomborg, who am I forgetting?

China fact of the day

Trier is a worthy destination by any standard, having impressive and
important Roman ruins as well as an 11th century cathedral built in the
very place where Emperor Constantine’s mother first built a church in
the fourth century.

But the Chinese clearly come to see the
place where Marx was born in 1818
[my emphasis], and the local authorities try to
take full advantage of it, promoting their city in China itself and
with the travel agencies that serve Chinese tourists.

They even
offer cultural sensitivity training for merchants, restaurateurs and
others in Trier, instructing them in the finer points of dealing with
Chinese customers. The number 250, for example, which is a kind of
slang for "stupid" in Chinese, is to be avoided, and so is wrapping
paper in white, the color of funereal robes, or yellow, by custom
reserved for the emperor. It is also important to hand over visiting
cards rather formally, with two hands, not just one.

Here is the full story.

My favorite things Danish

1. Movie: A strong category for this country.  Babette’s Feast used to be one of my favorite movies, though it now strikes me as sentimental.  I much prefer The Celebration, or the recent After the WeddingThe Best Intentions, with a Bergman screenplay, is directed by Dane Billie August.  Dreyer’s The Passion of Joan of Arc is technically a French movie but the director is Danish, in any case it is one of cinema’s greatest achievements.  Ordet has splendid shots but I can’t bear the ending.  I don’t rate Lars von Trier with these other creators though I did like his recent The Boss of it All, a study in the social construction of leadership.

2. Short story: "The Caryatids, An Unfinished Tale," by Karen Blixen [Isak Dinesen], in Last Tales.  This one shows the influence of the now-sadly-taken-for-granted Hans Christian Andersen; read it.

3. Novel: Smilla’s Sense of Snow, by Peter Hoeg; lovely and mysterious, yet driven by plot.  His History of Danish Dreams I find too baroque.

4. Composer: Poul Ruders, one of the most listenable contemporary composers, writes compelling melodies and offers a broad palate of sound colors.  I most prefer his Variations on a Theme by Paganini, Concerto in Pieces, the guitar music, Tundra, and Gong.  His major influences are Brahms, Berg, Sibelius, and Hindemith.  I’ll buy anything by him, though I’ve never much enjoyed his operas.

5. Popular music: Help!

6. Philosopher: Kierkegaard’s Either/Or is the place to start, and don’t skip over "Diary of a Seducer" or the discussion of Don Giovanni.  There are few philosophers who think more like an economist, or who use more metaphors from economic life.

7. Painting: Danish Impressionism is one of the most underrated fields in art, noting that the subtle textures and colors do not reproduce well on the web.  Try this picture.  Here is a nice landscape, here is a nice door.  This one is lots of fun, too.

Coasian movie reviews

I bet that if the Sandman and Spiderman could have just gotten away
from their positional stances (“I need to take money” and “I need to
catch crooks” respectively), to their underlying interests (“I need to
help my little girl” and “Dude, I’m all about helping the people”),
they could have found some common ground.  There was opportunity there,
and it could have saved a lot of expensive plate glass and I-beams and
cars being thrown about.

I do think the Sandman didn’t open
his mind to lot of options that became available to him when he got
particle-ized.  I understand that you do what you know, and he had
conceptualized himself as a thief and a fugitive.  Maybe those were his
most lucrative options when he was a man, but as Sandman, I don’t think
he had to be an outlaw to make a ton of money.  Considering his
strength and versatility, I bet any construction firm would have hired
him in a flash.

Here is more.  Here is my earlier post, The Macroeconomics of Superman.