by divorced one like Bush

Come on, step right up, don't be afraid. Lay that money down.



3 and 1/8 economist out of 4 say the dastardly deed is done or ending by next month.

After months of uncertainty, economists are finally seeing a break in the clouds. Forecasts were revised upward for every period, with 27 economists saying the recession had ended and 11 seeing a trough this month or next."

A better-than-expected employment report for July, where employers cut 247,000 jobs and the jobless rate fell for the first time in 15 months, suggests the worst is over.
Whatever the Fed decides, the economists expressed some confidence that the central bank will be dealing with how to manage a recovery, not another recession. They expect GDP growth to remain above 2% at an annualized rate through the first half of next year, and they put the chances at just 20% of a "double-dip" second downturn before 2010.

All in everyone, you don't want to be left out of the next bubble do you? Or do you?

4) To be sure, the drop in the unemployment rate was a surprise, but it was all due to the slide in the labour force — the employment-to-population ratio gives a more accurate picture of the slack in the labour market and the hidden secret in today’s report was that this metric slid to a 25-year low of 59.4% from 59.5% in June and 61.0% at the turn of the year. Of those unemployed, 33.8% of them have been unemployed now for over 27 weeks — a record amount (was at 29.0% in June and was at 17.5% at the start of this recession).

The Labor Department said Tuesday that the American work force produced, at an annual rate, 6.4 percent more of the goods they made and services they provided in the second quarter of this year compared to a year ago. At the same time, “unit labor costs” — the amount employers paid for all that extra work — fell by 5.8 percent. The jump in productivity was higher than expected; the cut in labor costs more than double expectations.

Data released on Wednesday show the US still facing strong economic headwinds, as retail sales unexpectedly fell, weekly jobless claims unexpectedly rose, and foreclosures continue to roil the housing market.
US retail sales fell 0.1 per cent in July from June, compared with analysts’ estimates of a 0.8 per cent gain.
Excluding auto sales, which were boosted by the popular cash-for-clunkers programme, US retailers fared even worse, dropping 0.6 per cent, compared with expectations of a 0.1 per cent gain on the month, on a seasonally-adjusted basis.
Foreclosure activity in the US hit a new record in July, setting its third monthly record in five months, RealtyTrac reported on Thursday.
Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, hit 360,149, an increase of 7 per cent from June and 32 per cent on the year. One in every 355 US homes received a foreclosure notice in July, according to the online marketplace for foreclosure properties.
The release comes the day after the National Association of Realtors reported that an increase in foreclosure sales led to a record 15.6 per cent decline in median home values to $174,100 in the second quarter from the year before. About 36 per cent of transactions in the second quarter were distressed sales, either foreclosures or short sales.

We never did broaden the discussion.

We haven't answered the question: How are we going to fix the money from money economy. Yes, we had to stabilize the banks. That we did is not of issue, how we did it is. The approach only reinforced the money from money economy. We are pledged to $23.7 trillion. (BTW, try to go get a loan and see if they don't ask what you have co-signed onto along with what you personally have borrowed). Our GDP as of 2000 was 1.9% of the financial turn over and the Fed thinks nothing of swapping 1/2 trillion dollars. The issue is not whether it was necessary, it is the casualness with which it was done. You know, that billion here, billion there, soon we are talking real money?

We have not produced any policy that will reverse these trend lines which show that personal consumption has out passed the share of income to the bottom 99% since 1996. A trend that lasted at least 13 years from the depression and was 10 years where my chart ends in 2005 and we hadn't had the big one yet. We were almost 3 more years past that when this recession started. But hey, the recession is ending.

by cactus

Megan McArdle responds to a post I wrote:

So Obama doesn't count because he's not really a Democrat. But Bill Clinton was. But Richard Nixon--the chap who implemented price controls and massively expanded Social Security and Medicare--was definitely a Republican. Jimmy Carter, who deregulated like mad: definitely a Democrat.

What are these policies that neatly define Democrats to exclude only the ones who happen to have crappy growth? On what metric does Barack Obama register as farther to the right than Bill Clinton? Because from what I remember of the 1990s, I spent most of the decade listening to my genuinely left-wing friends weep that he'd betrayed them. Remember Edelman's resigning in protest of welfare reform?

I thought it was unnecessary at this point to explain the one thing I've pointed out time and again differentiates Republicans from Democrats. I think the first time was here. (I tend not to break out JFK from LBJ, or Nixon from Ford because JFK and Ford only served a short time, but the post that is attached is illustrative of behavior, not performance.)

The difference is the tax burden - that is, the percentage of people's income that gets collected in taxes. Not the marginal rate - the amount people actually pay divided by the amount they make. And there is a difference, a big difference. As an example: George Herbert Walker Bush famously raised marginal rates. It might have cost him an election. But GHW Bush also quietly lowered the tax burden. He did it through the people he appointed to the IRS, through the degree of compliance he sought, through the way his IRS interpreted existing rules and regulations and through how the body of tax rules and regulations changed while he was in office.

Going back to 1952 at least, every Democrat, every single one, has increased the tax burden. Every single Republican raised lowered [h/t Bruce Webb] them. The data in the attached post is from the IRS and goes back only to 1952, but one can wander over to the BEA's NIPA Table 2.1 and compute the tax burden ourselves with National Income data going back to 1929, and whaddaya know, the rule also works for Hoover, FDR, and Truman. Just barely for Truman... but then he is the exception on performance too, right?

Now, I doubt you could find a single person on the right of the political spectrum who would tell you that taxes don't affect economic growth. They all believe taxes affect growth. Of course, the story they tell is that cutting taxes produces faster economic growth. The fact is, however, the Presidents who cut tax burdens tended to produce slower economic growth than those who raised taxes. (I've discussed why in a number of other posts, and I don't feel like rehashing or looking for those posts now. I also note this isn't just true of Presidents. My fellow Angry Bear, Spencer, once pointed out that there are a lot of people out there who seem to think we'd all be better off if the country was Alabama than if it was Massachussetts.)

Unfortunately, tax burden data, like any other bit of real world data, fluctuates somewhat from year to year, so its really going to be a while before we know what direction they're really headed over O's administration. As in, several years. And most of us are impatient. So we'd like to have some leading indicators, so to speak, of what Obama is going to do, of where he's going to fall on the one R v. D divide that really matters. And right now, he's behaving like the folks who have cut tax burdens in the past. He's also talking like them. His bail-out is identical to GW's, and when he talks about taxes, it doesn't sound like Clinton, it sounds like GW. So its reasonable to wonder whether he's going to stick to the R v. D rule. And the next test coming up is healthcare; a D would be putting his political capital on the public option right now. An R wouldn't. What's it gonna be, we'll soon see.

More below the fold.

Now, in Megan's post, she refers to "Cactus and his merry band of madmen." I'm not sure the merry band of madmen over here truly have a leader, much less that I'm the one (Dan is the official grand poobah in charge of the blog, after all!!) but I'm guessing you aren't a part of that merry band of madmen if any of the following apply to you:

1. You do not believe that since 1929 at least, every single D has increased the tax burden and every single R has decreased the tax burden, despite the fact that the data shows precisely this, and despite the fact that it fits the caricature of Ds and Rs to a T, so to speak.
   
2. You do not believe that since 1929, Ds have generally outperformed Rs when it comes to real economic growth, despite the fact that the data shows precisely this.
   
3. You do not believe that administrations that cut the tax burden have also generally been the administrations that grew more rapidly, despite 1. and 2.
   
4. You do not believe that the tax burden could possibly have anything to do with growth.

If you do believe these things, if you believe what the data shows , I'm sorry to say but you're one of us, one of the merry band of madmen. On the other hand, if you fit these rules, there are a whole lot of folks out there, Megan McArdle included, who would consider you sane.

I subscribe to too many RSS blog feeds. So everyone once in a while one pops up and I think, "Should I drop this"?

And so it is with Evolutionary Economics, which occasionally seems like a self-parody of what would happen if you recited Economics 101 cant with an added, even-less-scientific, "evolutionary psychology" glean to it.

However, they occasionally publish interesting work, such as this.

And then there's the paper they describe as "in Japanese." Unfortunately, they mean Hiragana script, which thoroughly defeated my efforts in the early 1990s. And while Babel Fish is willing to try, the result is less than encouraging:

ら哲学者や為政者を解放した。また，顕示選好理論によれば，個人の選択を観察すれば，
そのような行動が導かれる効用関数が存在する。効用の個人間比較が問題にならない状況

becomes

...[a]nd others the philosopher and the administrator were released. In addition, according to revelation preference theory, if selection of the individual is observed, the use function where that kind of conduct is led exists. The circumstance where comparison between the individuals of use does not become problem

which has a few verb problems, I suspect.

Anyone want to read and translate and do a guest-post about this one?

Ken Houghton

CR beat me to commenting on this Mankiw whine post, partially because I couldn't think of anything reasonable to say about it. (CR could. That's why he gets the big bucks.)

But now that CR has done the heavy lifting, let's look at the other aspect: Mankiw's standard:

Based a standard ranking of economists' academic accomplishments as of October 2008...[emphasis mine]

11. Larry Summers
21. Greg Mankiw
35. Ben Bernanke
99. Eddie Lazear
132. Glenn Hubbard
249. Harvey Rosen
391. Christy Romer*
653. Austan Goolsbee

[emphases Mankiw's; Bush administration officials]

Leaving aside whether the ranking used makes sense, we ask the next question: What does this have to do the performance of the individual in a government role?

So I realised we've been thinking about the Obama Administration in exactly the wrong way.

Several people are referencing the late David Halberstam's The Best and the Brightest, a biography of the Kennedy Administration's well-educated pedigree and their policy missteps. Krugman used it as a cautionary phrase in the exact post about which Mankiw whimpered. As John McCain once wrote:

The term "best and brightest" has become an insult, not an accolade, thanks largely to Halberstam's magnificent, scabrous epic about the policymaking blunders that swept the United States into Vietnam. This classic work is part of the Vietnam canon, but it is not really about Vietnam; it is very much a Washington book, focused on the surety of the hawks stateside rather than the misery and warfare in Indochina. [italics mine]

But look at (most of*) Obama's picks:

Orszag - Currently at the OMB. Prior experience at CEA, and then as a Special Assistant to the President during the Clinton Administration.
Summers - veteran of the Clinton Administration
Geithner - veteran of the Clinton Administration
Paul Volcker - veteran of the Carter and Reagan Administrations, named Chair of the Federal Reserve by Carter.
Melody Barnes - Eight years as Chief Counsel to Senator Kennedy on the Senate Judiciary Committee
Heather Higginbottom - Eight years as legislative director for Senator Kerry

The list goes on, but what is notable is that—with the exceptions of the Advisors Goolsbee and C. Romer—all have extensive government policy experience.

Let's look at the Bush people:

Mankiw - columnist for Fortune, textbook author. As Bruce Bartlett noted in 2003, "Mankiw endorsed the election of George W. Bush because, unlike Al Gore, he would cut taxes, reform Social Security and antitrust policy, and try to implement school choice." Spent one year as a CEA staff member—twenty years prior to being named CEA Chair.
Lazear - No policy-making experience prior to being named to the CEA.
Hubbard - No policy-making experience prior to being named Chair of the CEA.
Harvey S. Rosen - Deputy Assistant Secretary (Tax Analysis), Department of the Treasury, 1989-91, then no government experience again until named to the CEA in 2003. (Fairness note: the interim is largely a Democratic Administration. No indication what he did from 1991 to 1993, save possibly returning to Princeton to teach). Note that he officially did exactly that in 2005, though he had warned that might happen.

Comparing the actual policy experience of the two Administrations, references to Halberstam's work are much more applicable to the Bush Administration than the incoming Obama Administration.

Despite having a relative disadvantage in looking for people with policy-making experience (eight years with a Democrat in the executive branch over the past 28 years v. Bush's twelve of the previous twenty), the Bush Administration's combined highlights list has less total experience in policy-making than Summers alone.

Knowing how to make sausage is a Comparative Advantage when one is working in a sausage-making environment. Otherwise, you just end up with a "hack."

*Mankiw uses Greg and Ben and Eddie as well, so I assume the use of "Christy" is not meant to pejorative. Firedoglake's mileage may vary.
**Goolsbee is the notable exception, and he is in a Senior Advisory role, specifically the Economic Recovery Advisory Board, where he will be working with Paul Volcker.

Ken Houghton

CR beat me to commenting on this Mankiw whine post, partially because I couldn't think of anything reasonable to say about it. (CR could. That's why he gets the big bucks.)

But now that CR has done the heavy lifting, let's look at the other aspect: Mankiw's standard:

Based a standard ranking of economists' academic accomplishments as of October 2008...[emphasis mine]

11. Larry Summers
21. Greg Mankiw
35. Ben Bernanke
99. Eddie Lazear
132. Glenn Hubbard
249. Harvey Rosen
391. Christy Romer*
653. Austan Goolsbee

[emphases Mankiw's; Bush administration officials]

Leaving aside whether the ranking used makes sense, we ask the next question: What does this have to do the performance of the individual in a government role?

So I realised we've been thinking about the Obama Administration in exactly the wrong way.

Several people are referencing the late David Halberstam's The Best and the Brightest, a biography of the Kennedy Administration's well-educated pedigree and their policy missteps. Krugman used it as a cautionary phrase in the exact post about which Mankiw whimpered. As John McCain once wrote:

The term "best and brightest" has become an insult, not an accolade, thanks largely to Halberstam's magnificent, scabrous epic about the policymaking blunders that swept the United States into Vietnam. This classic work is part of the Vietnam canon, but it is not really about Vietnam; it is very much a Washington book, focused on the surety of the hawks stateside rather than the misery and warfare in Indochina. [italics mine]

But look at (most of*) Obama's picks:

Orszag - Currently at the OMB. Prior experience at CEA, and then as a Special Assistant to the President during the Clinton Administration.
Summers - veteran of the Clinton Administration
Geithner - veteran of the Clinton Administration
Paul Volcker - veteran of the Carter and Reagan Administrations, named Chair of the Federal Reserve by Carter.
Melody Barnes - Eight years as Chief Counsel to Senator Kennedy on the Senate Judiciary Committee
Heather Higginbottom - Eight years as legislative director for Senator Kerry

The list goes on, but what is notable is that—with the exceptions of the Advisors Goolsbee and C. Romer—all have extensive government policy experience.

Let's look at the Bush people:

Mankiw - columnist for Fortune, textbook author. As Bruce Bartlett noted in 2003, "Mankiw endorsed the election of George W. Bush because, unlike Al Gore, he would cut taxes, reform Social Security and antitrust policy, and try to implement school choice." Spent one year as a CEA staff member—twenty years prior to being named CEA Chair.
Lazear - No policy-making experience prior to being named to the CEA.
Hubbard - No policy-making experience prior to being named Chair of the CEA.
Harvey S. Rosen - Deputy Assistant Secretary (Tax Analysis), Department of the Treasury, 1989-91, then no government experience again until named to the CEA in 2003. (Fairness note: the interim is largely a Democratic Administration. No indication what he did from 1991 to 1993, save possibly returning to Princeton to teach). Note that he officially did exactly that in 2005, though he had warned that might happen.

Comparing the actual policy experience of the two Administrations, references to Halberstam's work are much more applicable to the Bush Administration than the incoming Obama Administration.

Despite having a relative disadvantage in looking for people with policy-making experience (eight years with a Democrat in the executive branch over the past 28 years v. Bush's twelve of the previous twenty), the Bush Administration's combined highlights list has less total experience in policy-making than Summers alone.

Knowing how to make sausage is a Comparative Advantage when one is working in a sausage-making environment. Otherwise, you just end up with a "hack."

*Mankiw uses Greg and Ben and Eddie as well, so I assume the use of "Christy" is not meant to pejorative. Firedoglake's mileage may vary.
**Goolsbee is the notable exception, and he is in a Senior Advisory role, specifically the Economic Recovery Advisory Board, where he will be working with Paul Volcker.

Is gay the New Black? Note this partial list of companies who said No on 8:

Most of the state's highest-profile political leaders -- including both U.S. senators and the mayors of San Francisco, San Diego and Los Angeles -- along with the editorial pages of most major newspapers, opposed the measure. PG&E, Apple and other companies contributed money to fight the proposition, and the heads of Silicon Valley companies including Google and Yahoo took out a newspaper ad opposing it.

There is one CA-based company conspicuous by its absence, despite loud declarations of being a gay-friendly place and holding Gay Days in its Florida-based theme park.

Dear Californians, you got f*ck*d by The Mouse.

Is gay the New Black? Note this partial list of companies who said No on 8:

Most of the state's highest-profile political leaders -- including both U.S. senators and the mayors of San Francisco, San Diego and Los Angeles -- along with the editorial pages of most major newspapers, opposed the measure. PG&E, Apple and other companies contributed money to fight the proposition, and the heads of Silicon Valley companies including Google and Yahoo took out a newspaper ad opposing it.

There is one CA-based company conspicuous by its absence, despite loud declarations of being a gay-friendly place and holding Gay Days in its Florida-based theme park.

Dear Californians, you got f*ck*d by The Mouse.

One of the hardest things in the world is to value that which is not otherwise measured. The old observation that a man who marries his housekeeper reduces GDP is both sexist and accurate.

Still (via Erin), the salary.com estimate that being an at-home parent is worth $117,000 p.a. seems a bit high. And we know why:

The biggest driver of a mom's theoretical salary is the amount of overtime pay she'd receive for working more than 40 hours a week. The 18,000 moms surveyed about their typical week reported working 94.4 hours -- meaning they'd be spending more than half their working hours on overtime.

Working moms reported an average 54.6 hour "mom work week" besides the hours they spent at paying jobs.

Still, as a proxy, you can hire an au pair (maximum 45 hours a week) for about $350/week. Add some incidental costs (car insurance, school costs required by the State Department, extra food) and you're probably at $500/week.

So if you hire two, you've covered 90 hours for $1,000 a week, or $52,000 per year. Add in some gaps in the process (e.g., required vacation) and you might be around $70,000.

There seems to be an arbitrage opportunity here, unless the additional housing would cost about $50,000. But even that seems as if "women's work" adds a lot of intangible value to the economy.

Rdan here: Given this is way down the line now, I have added a link to the post instead of comments. I hope you do not mind Ken. This is at Blog her

One of the hardest things in the world is to value that which is not otherwise measured. The old observation that a man who marries his housekeeper reduces GDP is both sexist and accurate.

Still (via Erin), the salary.com estimate that being an at-home parent is worth $117,000 p.a. seems a bit high. And we know why:

The biggest driver of a mom's theoretical salary is the amount of overtime pay she'd receive for working more than 40 hours a week. The 18,000 moms surveyed about their typical week reported working 94.4 hours -- meaning they'd be spending more than half their working hours on overtime.

Working moms reported an average 54.6 hour "mom work week" besides the hours they spent at paying jobs.

Still, as a proxy, you can hire an au pair (maximum 45 hours a week) for about $350/week. Add some incidental costs (car insurance, school costs required by the State Department, extra food) and you're probably at $500/week.

So if you hire two, you've covered 90 hours for $1,000 a week, or $52,000 per year. Add in some gaps in the process (e.g., required vacation) and you might be around $70,000.

There seems to be an arbitrage opportunity here, unless the additional housing would cost about $50,000. But even that seems as if "women's work" adds a lot of intangible value to the economy.

Rdan here: Given this is way down the line now, I have added a link to the post instead of comments. I hope you do not mind Ken. This is at Blog her

T-bone got me thinking in his response to my comment about Obama. Well, as a good AB'er, that meant I had to go a hunting. In this case, specifically for Obama's econ advisor: Austan Goolsbee.

This lead me to an article by Austan Goolsbee, It’s Not About the Money. Wow, a man thinking like me. This lead me to a book: Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Edited by Joel B. Slemrod which is a collection of papers presented at an October, 1997 conference in Michigan of which Mr Goolsbee was a participant.
(scroll down to mid page.) This lead me to a review of the book which I will post on later. (Yes, I'm still playing with the income data stuff.)


As a sample of Mr. Goosbee's thinking I pulled this from his paper's introduction:

One of the liveliest areas of debate of the last twenty years in public economics has been the argument over the behavioral effects of marginal tax rate changes.

The methodological approach in what I term the New Tax Responsiveness (NTR)literature is to control for the unobserved determinants of taxable income by using “natural experiments,”....The influence of the NTR literature such as Lindsey (1987) and Feldstein (1995a) is undeniable and, if correct, has profound implications for tax policy and revenue estimation. The backbone of the NTR approach, however, is this assumption that lower income people are a valid control group for higher income people—that the change in income of the two groups would have been identical if there were no change in taxes. If this assumption is false, existing estimates may have significant biases.

And his conclusion:

After ten years of finding large elasticities of taxable income with respect to the net of tax share by using tax changes as natural experiments, the NTR literature has had a large impact on the conventional wisdom regarding progressivity and the efficiency loss of high marginal tax rates. I argue, however, that the results from these papers are based on the faulty assumption that the very rich differ from other income groups only because they have different tax rates. Independent data on several thousand high-income executives as well as on other prominent rich people show that even the moderately rich are not a valid control group.

So what's the up shot? Well, I'm still not sold on Obama, but then I've never not had him on the list. I like his econ advisor from the little I read. He likes comedy! (See Other interests)
He is dedicated to his profession. He knows how to speak:

...a prestigious New England preparatory school, Goolsbee became one of the most decorated competitive speakers in the country. In 1987, Goolsbee won the National Forensics League national title in extemporaneous speaking and finished second in original oratory with a speech on the SAT entitled "Right of Passage"

Think he may be Obama's secret to his oratory ability?

He thinks deficits matter. He thinks companies have a morality problem:

The evidence shows that companies are particularly likely to raise prices when the government is footing the bill... It's not your grandpa's moral hazard anymore.

Also here he tackles the 529 savings plans problems.

He seems to be hangin' with a crowd that thinks there is a problem with just focusing on tax rates as policy for moving an economy. Although he also seems to focus a lot on the internet and taxes. This appears to be his “thing”? In doing a quick look at some of his work, Obama's current econ plan appears to be totally Mr. Goolsbee's ideas. I have no problem with this. It suggests that with Obama, we would actually get people who's qualifications actually match the job assigned. Though I feel confident with the top 3 dems we would see properly fitted personnel.

T-bone got me thinking in his response to my comment about Obama. Well, as a good AB'er, that meant I had to go a hunting. In this case, specifically for Obama's econ advisor: Austan Goolsbee.

This lead me to an article by Austan Goolsbee, It’s Not About the Money. Wow, a man thinking like me. This lead me to a book: Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Edited by Joel B. Slemrod which is a collection of papers presented at an October, 1997 conference in Michigan of which Mr Goolsbee was a participant.
(scroll down to mid page.) This lead me to a review of the book which I will post on later. (Yes, I'm still playing with the income data stuff.)


As a sample of Mr. Goosbee's thinking I pulled this from his paper's introduction:

One of the liveliest areas of debate of the last twenty years in public economics has been the argument over the behavioral effects of marginal tax rate changes.

The methodological approach in what I term the New Tax Responsiveness (NTR)literature is to control for the unobserved determinants of taxable income by using “natural experiments,”....The influence of the NTR literature such as Lindsey (1987) and Feldstein (1995a) is undeniable and, if correct, has profound implications for tax policy and revenue estimation. The backbone of the NTR approach, however, is this assumption that lower income people are a valid control group for higher income people—that the change in income of the two groups would have been identical if there were no change in taxes. If this assumption is false, existing estimates may have significant biases.

And his conclusion:

After ten years of finding large elasticities of taxable income with respect to the net of tax share by using tax changes as natural experiments, the NTR literature has had a large impact on the conventional wisdom regarding progressivity and the efficiency loss of high marginal tax rates. I argue, however, that the results from these papers are based on the faulty assumption that the very rich differ from other income groups only because they have different tax rates. Independent data on several thousand high-income executives as well as on other prominent rich people show that even the moderately rich are not a valid control group.

So what's the up shot? Well, I'm still not sold on Obama, but then I've never not had him on the list. I like his econ advisor from the little I read. He likes comedy! (See Other interests)
He is dedicated to his profession. He knows how to speak:

...a prestigious New England preparatory school, Goolsbee became one of the most decorated competitive speakers in the country. In 1987, Goolsbee won the National Forensics League national title in extemporaneous speaking and finished second in original oratory with a speech on the SAT entitled "Right of Passage"

Think he may be Obama's secret to his oratory ability?

He thinks deficits matter. He thinks companies have a morality problem:

The evidence shows that companies are particularly likely to raise prices when the government is footing the bill... It's not your grandpa's moral hazard anymore.

Also here he tackles the 529 savings plans problems.

He seems to be hangin' with a crowd that thinks there is a problem with just focusing on tax rates as policy for moving an economy. Although he also seems to focus a lot on the internet and taxes. This appears to be his “thing”? In doing a quick look at some of his work, Obama's current econ plan appears to be totally Mr. Goolsbee's ideas. I have no problem with this. It suggests that with Obama, we would actually get people who's qualifications actually match the job assigned. Though I feel confident with the top 3 dems we would see properly fitted personnel.

We have been discussing a lot of economics through the political viewer lately. And I certainly have laid my point of view out there, but I also like the theory discussion. I like to think and know how stuff works or how someone interprets what they see. I believe discussing theories leads to better political discussion. With that, I hope this might inspire some tangent topics into the political here at AB.

This is a paper out of France by Robert U Ayres & Benjamin Warr titled: Accounting for Growth: The role of physical work

They suggest the increasing extraction of work from energy do to the increasing development of energy use is the missing factor that explains our growth.

“However the major result of the paper is that it is not `raw’ energy (exergy) as an input, but exergy converted to useful (physical) work that – along with capital and(human)labor – really explains output and drives long-term economic growth.” “However, if we replace raw energy as an input by `useful work’ (the sum total of all types of physical work by animals, prime movers and heat transfer systems) as a factor of production, the historical growth path of the US is reproduced with high accuracy from 1900 until the mid 1970s, without any residual except during brief periods of economic dislocation, and with fairly high accuracy since then.”

There key concept is the definition of exergy.

“The formal definition of exergy is the maximum work that could theoretically be done by a system as it approaches thermodynamic equilibrium with its surroundings, reversibly. Thus exergy is effectively equivalent to potential work. There is an important distinction between potential work and actual work done by animals or machines. The conversion efficiency between exergy (potential work), as an input, and actual work done, as an output, is also an important concept in thermodynamics. The notion of thermodynamic efficiency plays a key role in this paper.
To summarize: the technical definition of exergy is the maximum work that a subsystem can do as it approaches thermodynamic equilibrium (reversibly) with its surroundings.”

This summarizes their theories development:

The supposed link between factor payments and factor productivities gives the national accounts a direct and fundamental (but spurious) role in production theory. In reality, however, (as noted in the introduction) the economy produces final products from a chain of intermediates, not directly from raw materials or, still less, from labor and capital without material inputs. In the simple single sector model used to `prove’ the relationship between factor productivity and factor payments, this crucial fact is neglected. Allowing for the omission of intermediates (by introducing even a two-sector or three-sector production process) the picture changes completely. In effect, downstream value-added stages act as productivity multipliers. This enables a factor receiving a very small share of the national income directly, to contribute a much larger effective share of the value of aggregate production, i.e. to be much more productive than its share of overall labor and capital would seem to imply if the simple theory of income allocation were applicable [Ayres 2001a].

If this is true, then we have a bigger problem concerning how to keep this boat floating than subprime lending and fed rates. We have a policy problem. And that speaks to all the work Cactus has done about presidents.


Related to Cactus' work, this chart from the this paper is interesting. It is the unexplained portion of growth by their theory.

Note that this phenomenon begins right about where we see the lowest point of the top 1% share of income, just after we see the split of productivity from wages and the beginnings of the supplyside policies and a change to a net debtor nation. The authors suggest some of this is do to conservation.

“We conjecture that a kind of phase-change or structural shift took place at that time, triggered perhaps by the so-called energy crisis, precipitated by the OPEC blockade. Higher energy prices induced significant investments in energy conservation and systems optimization.”

They further refine the explanation with:

“The marginal productivity of capital has started to increase whereas the marginal productivity of physical work – resulting from increases in the efficiency of energy conversion – has declined slightly.”

Could this marginal capital productivity increase be a result of our policy focus on capital as the driver of growth? Money from money? Are we seeing in their explanation that part of our growth that is borrowed from our future, thus artificially created?

As I read this paper it made me think about the European economies who have been focusing on alternative energy development, wind in Denmark, solar in Germany, (Japan), wave generation in England and northern parts, geothermal in Iceland/Greenland. This paper to me suggests that this coming election has at the core of all our topical issues (health care, war, inflation) energy. As the authors conclude keeping in mind peak production issues and the declining output of Saudi's fields:

“From a long-term sustainability viewpoint, this conclusion carries a powerful implication. If economic growth is to continue without proportional increases in fossil fuel consumption, it is vitally important to exploit new ways of generating value added without doing more work. But it is also essential to develop ways of reducing fossil fuel exergy inputs per unit of physical work output (i.e. increasing conversion efficiency). In other words, energy (exergy) conservation is probably the main key to long term environmental sustainability.”

Is China in trouble? There is a start of a discussion about peak oil and it's potential effect here.

We have been discussing a lot of economics through the political viewer lately. And I certainly have laid my point of view out there, but I also like the theory discussion. I like to think and know how stuff works or how someone interprets what they see. I believe discussing theories leads to better political discussion. With that, I hope this might inspire some tangent topics into the political here at AB.

This is a paper out of France by Robert U Ayres & Benjamin Warr titled: Accounting for Growth: The role of physical work

They suggest the increasing extraction of work from energy do to the increasing development of energy use is the missing factor that explains our growth.

“However the major result of the paper is that it is not `raw’ energy (exergy) as an input, but exergy converted to useful (physical) work that – along with capital and(human)labor – really explains output and drives long-term economic growth.” “However, if we replace raw energy as an input by `useful work’ (the sum total of all types of physical work by animals, prime movers and heat transfer systems) as a factor of production, the historical growth path of the US is reproduced with high accuracy from 1900 until the mid 1970s, without any residual except during brief periods of economic dislocation, and with fairly high accuracy since then.”

There key concept is the definition of exergy.

“The formal definition of exergy is the maximum work that could theoretically be done by a system as it approaches thermodynamic equilibrium with its surroundings, reversibly. Thus exergy is effectively equivalent to potential work. There is an important distinction between potential work and actual work done by animals or machines. The conversion efficiency between exergy (potential work), as an input, and actual work done, as an output, is also an important concept in thermodynamics. The notion of thermodynamic efficiency plays a key role in this paper.
To summarize: the technical definition of exergy is the maximum work that a subsystem can do as it approaches thermodynamic equilibrium (reversibly) with its surroundings.”

This summarizes their theories development:

The supposed link between factor payments and factor productivities gives the national accounts a direct and fundamental (but spurious) role in production theory. In reality, however, (as noted in the introduction) the economy produces final products from a chain of intermediates, not directly from raw materials or, still less, from labor and capital without material inputs. In the simple single sector model used to `prove’ the relationship between factor productivity and factor payments, this crucial fact is neglected. Allowing for the omission of intermediates (by introducing even a two-sector or three-sector production process) the picture changes completely. In effect, downstream value-added stages act as productivity multipliers. This enables a factor receiving a very small share of the national income directly, to contribute a much larger effective share of the value of aggregate production, i.e. to be much more productive than its share of overall labor and capital would seem to imply if the simple theory of income allocation were applicable [Ayres 2001a].

If this is true, then we have a bigger problem concerning how to keep this boat floating than subprime lending and fed rates. We have a policy problem. And that speaks to all the work Cactus has done about presidents.


Related to Cactus' work, this chart from the this paper is interesting. It is the unexplained portion of growth by their theory.

Note that this phenomenon begins right about where we see the lowest point of the top 1% share of income, just after we see the split of productivity from wages and the beginnings of the supplyside policies and a change to a net debtor nation. The authors suggest some of this is do to conservation.

“We conjecture that a kind of phase-change or structural shift took place at that time, triggered perhaps by the so-called energy crisis, precipitated by the OPEC blockade. Higher energy prices induced significant investments in energy conservation and systems optimization.”

They further refine the explanation with:

“The marginal productivity of capital has started to increase whereas the marginal productivity of physical work – resulting from increases in the efficiency of energy conversion – has declined slightly.”

Could this marginal capital productivity increase be a result of our policy focus on capital as the driver of growth? Money from money? Are we seeing in their explanation that part of our growth that is borrowed from our future, thus artificially created?

As I read this paper it made me think about the European economies who have been focusing on alternative energy development, wind in Denmark, solar in Germany, (Japan), wave generation in England and northern parts, geothermal in Iceland/Greenland. This paper to me suggests that this coming election has at the core of all our topical issues (health care, war, inflation) energy. As the authors conclude keeping in mind peak production issues and the declining output of Saudi's fields:

“From a long-term sustainability viewpoint, this conclusion carries a powerful implication. If economic growth is to continue without proportional increases in fossil fuel consumption, it is vitally important to exploit new ways of generating value added without doing more work. But it is also essential to develop ways of reducing fossil fuel exergy inputs per unit of physical work output (i.e. increasing conversion efficiency). In other words, energy (exergy) conservation is probably the main key to long term environmental sustainability.”

Is China in trouble? There is a start of a discussion about peak oil and it's potential effect here.