100 Economics Question of the Day: An Intermittent Blog: December 2005

Friday, December 23, 2005

Note toward a review of Pietra Rivoli's The Travels of a T-Shirt in the Global Economy

Let me begin by noting that The Travels of a T-Shirt in the Global Economy is the best popular-economics book of the year, in my limited readings. It's nowhere near so offensive as Freakonomics, in which John Lott is described as "an economist" while Paul Krugman is "a New York Times columnist."

But why is it that economists who blather about the need for what is essentially a regulatory infrastructure--as Rivoli does, on cue--complain when people apply their skills to that infrastructure?

The working title of the review is "More in Sorrow than in Anger," but that may change to "Economicsland, where all Consequences are Unintended Except when they are to blame."

Friday, December 16, 2005

Congress Cuts Research, Education Spending - Yahoo! News

Courtesy of Shakespeare's Sister, we find this glory:
Programs funded under President Bush's No Child Left Behind education law would face a 4 percent cut, while aid for special education and Title I funding for disadvantaged children would be frozen at last year's levels, assuming the across-the-board cut is imposed.

Yeah, great. Underfund, and then wonder why you can't hit impossible goals.

And David Obey, whom I picked on yesterday, at least falls (literally) on the side of the angels here:
"The holidays are supposed to be a time of generosity — a time when Santa Claus fills children's stockings," said Rep. David Obey, D-Wis. "Instead, this Congress is emptying them in order to provide a tax cut that gives 50 percent of the benefit to people making more than $1 million."

Meanwhile, back in IrresponsibleRepublicanville, the rationalisations are flying:
Republicans said they had produced the best bill they could in lean budget times....They noted that lawmakers had sacrificed $1 billion worth of hometown projects such as grants to community health centers to spread additional funds to other programs.

Gosh, that makes me feel better! They're cutting pork--and they think that a "community health center" is pork. Talk about the other white meat...

Thursday, December 15, 2005

How to be fiscally responsible, per the current "Republican" party

G.O.P. May Harness Arctic Drilling to Pentagon Budget - New York Times

Tax Cuts, Part II:

In another year-end spending fight, the House voted 215 to 213 on Wednesday to approve a slightly modified version of a $142.5 billion health and education spending measure rejected a few weeks ago. The measure reduced spending on programs covered under the legislation by more than $160 million from last year and was the first cut in education spending in a decade. In an effort to win approval, its authors funneled more money to rural health care.

Yep. Best way to secure the future is to stop educating in the present.

Representative David R. Obey of Wisconsin, the senior Democrat on the House Appropriations Committee, said the vote was just the latest in a series of Republican decisions in recent weeks to reduce spending on Medicaid, food stamps, student loans and child-support enforcement.

"This Congress will be taking away $48 billion from those who need it most in order to provide tax cuts, 50 percent of which will go to the top 1 percent - those who need it the least," Mr. Obey said.

Well, if we don't feed them, they don't need to be educated. Obey has clearly been affected by the "communing with Satan" they do in Madison.

CNN.com - AP: Blacks likely breathe most unhealthy air - Dec 14, 2005

Wednesday, December 14, 2005

Off the Rails - New York Times

Let's take a look at the data presented as evidence that NYC transit workers should be grateful for management's largese:

For example, the authority wants to train subway operators to work as conductors and vice versa. In exchange, workers would get a 3 percent raise the first year and 2 percent the second (with the second year's raise contingent on the workers' cutting back the number of sick days they take to 2002 levels). Their above-average paychecks would increase in line with inflation.

That "above average" excludes that these are specialized jobs, and that "the market" is determined solely by the contract. (Unlike my profession, where people who believe they are short-changed are free to vote with their feet, the NYC Transit Authority has a monopoly, in exchange for which is negotiates with the workers.)

So those pay increases are contingent on (1) additional work outside of the area of specialisation and (2) reducing sick days to receive a 2% raise [which, last I checked, is not quite "in line with inflation"].

But it gets more interesting:
Union members now pay nothing toward their own health-insurance premiums; the authority wants new workers to contribute about 2 percent of their pretax wages before overtime toward those health benefits.

So the real "increase" would be 1% the first year and 0% (nothing) the second year.

Mr. Gelinas closes by declaring that if there is a strike, New Yorkers "should think about which side - the authority or the union - has acted unreasonably."

I'm certain there is a clear benefit to doing more work for less money, but if this is what the Manhattan Institute--and, by extension, The New York Times--thinks of as a "reasonable" offer, I would hate to see their idea of one that is favorable to management.

Monday, December 12, 2005

Business Model: Offer Credit Cards to the Newly Bankrupt

Newly Bankrupt Raking In Piles of Credit Offers

Tell me again about how we needed the new bankruptcy law to punish people for not being responsible. Explain your answer in terms of both "moral hazard" and "sound business practices."

Develop a model to determine if this adds value.

Friday, December 09, 2005

Cluelessness at the New York Times

The right course is clear: responsible senators should approve alternative minimum tax relief, but stand firm against machinations that would tart up the tax code with additional giveaways for the wealthiest Americans.

Examine this sentence in the context of census and FRED data. Estimate how many people will be marginally affected by the AMT this year. Approximate their income bracket.

Explain how "responsible" senators can approve this "relief" without "tart[ing] up the tax code with additional giveaways for the wealthiest Americans."

Thursday, December 08, 2005

Multiplier Effects, Real-World Version

Two 'grafs together, two worlds apart:

On Thursday, House leaders hope to win approval for their top priority this week: a $56 billion tax cut that would extend President Bush's tax cuts for stock dividends.

House and Senate Republican leaders also edged closer on Wednesday toward an agreement to cut as much as $45 billion over the next five years from domestic programs like Medicaid, food stamps, student loans and child-support enforcement.

Nice to know my tax savings are being used to make certain people don't eat, don't see a doctor, don't go to school, and don't fulfill their legal obligations.

Would hate to think the new DVD burner I can buy with the savings is a waste of money.

Tuesday, December 06, 2005

Gedankenexperiment II: Economic Value of Newslettering Cassandra

Remember your answer to the first question.

Now, assume that you know of a financial newsletter, such as Grant's, published by an acquaintance of Cassandra's. The editor/publisher finds her statements so improbable that s/he prints several of them as absurdities.

What is the value of the newsletter?

Does it increase or decrease if the Absurdities feature becomes a regular event?

Assuming that you view the value of the newsletter as being higher than speaking with Cassandra directly, explain your answer. Then explain how the value of the newsletter would, in an economically perfect world, be divided.

Explain differences between your ideal and your expectation of reality.