“What does it mean” has another interpretation, though: what will happen as a result? The upshot as far as I can tell?

• Undecided voters will mostly hear 8.1% unemployment and think these are good numbers.
• QE3 is gonna happen.
• The fire under the Republicans to ensure the “fiscal cliff” doesn’t occur will continue to burn hotter, meaning Obama might be able to make some headway on either stimulus or deficit reduction or both in a second term.

Certainly Nate Silver at fivethirtyeight has stressed that the jobs numbers will have significant consequences for the election: good numbers and Obama’s sure to win; bad enough numbers and he’s out. The Bernanke  is relying on these BLS numbers, among others, to try to decide what to do. So I was trying to think about what to think about the actual consequences of the numbers. I’m just freewheeling here, but I think there might be some interesting and counter-intuitive results.

One place to start is to think about the two numbers: the unemployment rate is the one that is most readily interpreted and most likely to be noticed by others. The actual jobs number is wonkier. So if you’re a high-information voter, the jobs number sinks in, whereas if you’re only marginally engaged, the unemployment number is the one you’re likely to hear.

The electorate is unusually polarized, so high-information voters are unlikely to be swayed much one way or the other. Low-information voters, on the other hand, are more likely to be A. uncertain about how to feel about Obama’s economic record, and B. moved by unemployment numbers rather than the jobs numbers. So while strong numbers would have been strictly preferable to weak numbers for Team Obama, it’s probably better politically to have weak jobs and strong U3 numbers than the reverse.

From a fiscal policy perspective this is all to the good. I’m of the opinion that we should be doing something to prop up aggregate demand, at least for a year or two. Absent that, we should hold spending constant and not raise taxes on those with the highest propensity to consume. A Republican administration, if I’m honest, seems just as likely as a Democratic administration, to expand the size of government. Eventually, though, it’d be a good idea to contract the size of government, and the optimal way to do that cannot possibly be to deny any discussion of tax increases. Consumer sovereignty, people! If they wants their Social Security and their Medicare and their Medicaid, then let’s raise taxes to pay for it. Being beholden to Grover Norquist is both bad politics and bad policy. So it seems that this is, on net, a good day for the economic future of America.

What about monetary policy? I get the sense from the current Fed that they don’t actually particularly like their jobs; if they did, it seems like they’d get creative about how to use monetary policy to get the economy moving faster. Instead, the spectre of inflation seems like such a looming figure in their collective psyches that they’re unwilling to consider more radical action. (This might be another example of the cognitive capture of government policy by Wall Street, by the way.) In any case, the Fed is definitely more focused on the jobs number than U3, because hell, in policy, ideally, the actual state of the world is what matters, not that a quirk of the measurement led to a lower denominator. This means QE3 will definitely happen. I’d love it if we could finally go to NGDP targeting, but like I said, they don’t seem to like their jobs enough to try something new.

Finally, Justin Wolfers notes that it’s all about low-skill workers. The noteworthy part here is that the last 40 years have been a case study in skill-biased technological change, so that the productivity of skilled workers has skyrocketed while the productivity of unskilled workers has remained the same. This is effectively like an increase in supply for skilled work relative to unskilled work. In principle, it seems to me that this should make skilled work cheap, thus depressing wages for skilled work relative to low-skilled work. That said, low-skilled work has been made very cheap by the availability of Chinese labor to the worldwide labor market.

It doesn’t seem clear to me that demand for low-skill work has declined that much more than demand for skilled work; on the contrary, I’d think that skilled work would generally be more of a luxury, but that’s just a guess. In any case, it’s still unclear to me what’s driving low-skill unemployment. Is it wages that are stuck too high? Is it foreign competition? A part of me has thought for a long time that it’ll take rising Chinese wages to put a bottom back on our economy. This rough transitional period might just be that in practice. If that’s what it is, then we need Chinese growth, and fast.

I have a daughter, and it’s a little frustrating that the opportunities provided for girls to play a career include a beautician, a veterinarian, a horse trainer, a baker, a fashion designer, and a rock star. I’m glad they included the inventor but it smacks of tokenism. It’s also frustrating that there’s a bunny house and a pet patrol and a horse trailer and a puppy house–it’s bunnies and puppies and kittens and pink and purple. I’m just as offended, I suppose, by the violence in a lot of the boys’ kits, but with the inclusion of molded figures that don’t match minifig scale, the City and Creator Lego sets don’t seem intended to integrate into the Friends’ world.

My hope is that the crazy success of Friends’ means that they’ll release new models annually–and you can’t build a beauty shop every year. Here’s hoping we get to see ambulance drivers and astronauts and architects this go-round (and that’s just the A’s).

Organic may not be much healthier, according to some studies. I love these “studies show” stories, because they still treat science like it’s got a final say on things. Science is messy and complicated and I guess places like this is where we find out what the upshot actually is, but I hope we the general populace can eventually come to accept that scientists are just mucking about from ignorance to slightly reduced ignorance, like the rest of us, only in their particular field.

Studies seem to show that organic is not much healthier for you. I was not laboring under the impression that it was, so it’s not news to me, per se. It appears to me to be healthier for the ecosystem, which I value, but how much? It’s hard to say. Organic also has cultural cachet, so there’s some value there as well.

It’d be cool if we thought people were buying organic for a specific reason x, because then we could use expenditures on organic to assess the value the public places on x, but unfortunately it’s a whole big mishmash of reasons, some of which are undoubtedly vaguely mystical.

Bulgaria decides, eh, maybe not so much on joining the European Union. So that’s different. The nice thing about getting your country ready to join the EU is that it seems like a really nice target to set. Not actually joining the EU is maybe not such a big deal just now.

I’m curious, of course, to see how it falls out. It’s not a good sign, but it makes a lot of sense. Austerity was a bad idea, and continues to be one. The unfortunate truth seems to be that deficit spending is the best solution to the growth problems the EU is experiencing, and that a subset of the countries are going to bear the bulk of the burden of that deficit. They don’t want to, and so there will be no solution right now. I’m not sure how an economic union can get through a crisis without being a full fiscal union–if the U.S. states got to decide on whether to keep California’s debt and bear its cost on the value of our dollar, we might decide not to. Fortunately–and it is a good thing, for sure–we don’t have the choice.

Part of being a society is deciding how we solve the economic problem–the problem of scarcity, and a big part of that is who gets what.

I don’t claim any particular insight into how we ought to do this: some people focus on fairness of process, and some people focus on fairness of outcome. In a broad sense, people seem to think both are important. Maybe a process is acceptable until it produces an outcome that is not, or outcomes are acceptable until it becomes clear how unfair the process is. Societies have to decide how to distribute goods; the consequences are ultimately borne by the societies as well.

So, we landed something on Mars, but it was super expensive. How could we make it cheaper? Well, in general, it’s much more expensive to provide energy over short periods of time. If we could get to space slowly, steadily, we’d be able to waste less. Enter the space elevator. After a five-year hiatus, LiftPort Group has launched a kickstarter campaign to raise funds to begin doing exploratory experiments again.

Yeah, so I can’t figure out how to embed Kickstarter video, as WordPress is apparently a little paranoid about embed codes. The link is here: http://www.kickstarter.com/projects/michaellaine/space-elevator-science-climb-to-the-sky-a-tethered/widget/video.html

A successful space elevator would drastically reduce the marginal cost of placing objects in space. When marginal costs get sufficiently low, you can get a “long tail” effect, where suddenly many things that would have been inconceivable due to high expense become possible. This kind of disruptive innovation has really incomprehensible implications.

In Apple v. Samsung, Apple was awarded $1.05 billion. Society faces a tradeoff between increased competition and protection of intellectual property, and in some cases, juries must decide which to favor. In this case, they sided with protection of intellectual property.

The optimistic take is that this will lead to a flourishing of innovation. I’m inclined to think it mostly means the value of patents will skyrocket, and people and firms will patent everything within sight just to make sure.

Today’s video – Intro to Statistics part 2 – Data.

So the wages are going up, changing relative wages against both the U.S. and against other developing nations. What’s going to happen? Well, we should expect that some manufacturing jobs will move back to the U.S. We should also expect higher value items and higher value brands to be established as more important parts of China’s economy.

The downside: prices on consumer goods–which have been depressed for a long time due to the 2000s explosion of labor due to the expansion of western firms into China–are likely to rise.

The upside: China will start buying more stuff, particularly higher-value items, in which the U.S. has a comparative advantage, so U.S. wages–which have been depressed for a long time due to the same explosion–are also likely to rise.

Lebron is selling sneakers for $315. Remember the Pump? How do they get you to pay $300 for shoes?

Two approaches to marketing here–innovation…or maybe gimmicks, and endorsements. Why does Nike market? Isn’t a shoe a shoe?

Well, they wouldn’t be marketing if the return wasn’t greater than the expenditure. The only ways that the return could be larger would be: higher prices or more units sold–in practice, marketing usually seeks to accomplish both, although it might focus on one or another depending on the product and the marketing campaign.

Herr’s makes a lot of chips. 5-6 tons of snacks per hour. That is a lot of snacks.

It certainly didn’t start out this way–it was purchased as Verna’s potato chip company–but at this point, it’s a pretty thoroughly developed operation. It used to be one guy doing it, a guy who loved sales. Eventually, it got easier. Why do things like this get easier? What does this mean for the size of snack manufacturers?

Specialization, mostly. Also, it means that small companies are labors of love. It’s so much cheaper to make snacks when you make a lot of them.

http://www.youtube.com/playlist?list=PL7B5C6A1491718E93

In the first class, I talked about texting campaign contributions, Rio drug gangs banning crack, and football players going on diets.

First, texting campaign contributions. The goal here, presumably, is to drive down the transaction cost of contributing–or at least the psychic transaction cost borne by the contributor.

A few things worth noting: this is probably aiming at people for whom texting is a regular activity–so read: younger.

Second, the contributions are for $10, which is not very much, so this is probably aiming at some kind of “warm-glow” giving, which when aggregated can really add up; the danger being that if people are substituting texting donations for $25 checks, then the campaigns are in trouble.

Finally, the transaction costs here are actually really high–the video said 40% if I recall. That means that even if these are substituting for $7 checks, the campaigns are in trouble. Unless there are some sort of external benefits of voter engagement or something, but yeah…I’m curious whether this is a flash in the pan or a new way of giving that pans out.

Second on the list, the most powerful drug gang in Rio bans the sale of crack cocaine. This one’s a little harder to parse. Presumably, if they were successfully selling crack, they were doing so at a profit. So why would they ban it?

One possibility is that they’re worried that they will lose their customers to death and destitution. A captive market is a good thing but not if they die or have no money. The intertemporal tradeoff of money now v. money later is at the root of a lot of economic decisions. The crazy thing is this means that somebody ran the numbers (well, or at least thought about it) and decided that getting customers addicted to crack is a bad investment.

Another possibility is that the margins are low and they want to focus on higher-profit goods to sell. Finally, there may be social preferences in here somewhere–drug lords have grandkids, too, after all. And particularly with the Olympics coming in 2016, there may be some nationalistic pride to try to kick the crack habit before the eyes of the world are on Brazil.

One other thing: isn’t crack already banned? It seems noteworthy that the drug gangs decide what is banned and what is “legal”. Norms v. laws, I guess.
Last on the list, football players are slimming down. This one is straight-up game theory. You can model it as a round where you decide what shape you are–giant cube of meat or slimmer (but still absurdly giant) demon with a little more mobility–and then that effects the strategies available to you at the next stage.

So what had happened was: lineman turned into giant cubes of meat–>running was made more difficult–>the relative value of passing increased–>teams adapted to create dink-and-dunk passing schemes or that Mark Bavaro quick out route that worked super well in Madden 2003, plus also fullbacks disappeared–>the benefit to being a cube of meat declined–>the relative value of defensive agility increased–>teams went on diets.

What does this mean for you? Well, I’m curious what NFL division has the lightest average defensive line, and whether that is accounted for in projecting running back performances for fantasy football. Because it seems like running games might become more important again. Oh, evolutionary dynamics, you are so coooool.

Do you think women should receive equal pay for equal work? First things first.

Do you have sympathy for those who are struggling to find work? First things first.

David Brooks makes an ass out of Uma Thurman and you can tell his heart’s not in it. It’s a shame, because it’d be really nice to read the other version of this column. He frames the column as a “Guide to the Perplexed”, and buries the lede way down in the third-to-last paragraph:

You’re still deeply uncomfortable with many other Romney-Ryan proposals. But first things first. The priority in this election is to get a leader who can get Medicare costs under control.

Oh, so first things first? Okay, so the evidence that Romney/Ryan will do that–get Medicare costs under control–is hard to come by, and the evidence that they will do it without destroying one of the most beloved social programs is even more scant. It’s actually really easy to get Medicare costs under control: just stop paying the bills. I’m guessing there’s some reason that that proposal hasn’t been floated, but the Ryan budget is as close as anyone has gotten. So that’s the Faustian bargain that’s–at least ostensibly–on the table: don’t you care about your grandchildren? Then old people have to take it on the chin.

Which, if I’m being honest, if I thought there was a chance they could actually do it, well, it might sound appealing. Clearly they can’t, but let’s just assume they can, to ride where Brooks is leading us. First, we have to throw old people under the bus. The rest of the Faustian bargain, though, is tied up with a nice little bow: sure, you’re uncomfortable with their other proposals, but first things first.

Hidden in there? Well, equal marriage rights should be excluded by constitutional amendment. Medicare costs are just too important; don’t you love your grandchildren? At least the straight ones?

Do you think prisons are too numerous and too full, and that too many of our juveniles get locked away to become institutionalized for life? Maybe you shouldn’t be so soft–Paul Ryan is tough enough for all of us.

The War on Drugs–interested in doubling down? No? Well, first things first. Paul Ryan’s got big plans, y’see.

Do you think abortion and the right to choose are complicated? Stem cell research? Paul Ryan says it’s a no-brainer. Conversation over. Why do you hate the economy by even continuing this conversation?

So okay, that’s where you get if you go down that path: Medicare is saved, huzzah, at the cost of continued violence in our cities, our prisons, and in Mexico as the war on drugs continues, the expansion of marriage benefits to our friends and loved ones comes to a screeching halt, and government stays out of your life unless you’re a woman who wants to consider her options or  a scientist trying to find a cure for spinal deformities.

Is there any evidence Medicare would be saved? I used to consider myself a Republican because I believed in fiscal responsibility, but the party left me on that issue a long time ago. It’s because Republican philosophy and its applications, including Paul Ryan’s budget, are not about fiscal responsibility. Ryan continues the devotion to Grover Norquist’s tax philosophy. It’s not about consumer sovereignty; it’s about small government at all costs. If you can reduce people’s positive experiences with government–paint it as just the IRS and traffic tickets–then it’s a lot easier to sell small-government policies. When it actually runs efficiently, the entire philosophy has been disproven, and the movement settles down instead of turning out.

If people want big government–and the evidence suggests that they do–and are willing to pay for it–and they might if anyone had the cajones to stand up to Norquist–then what right do you have to stand in the way?

Still, I’m mostly curious about this: David Brooks, which polices are you uncomfortable with, and what helps you sleep at night knowing who you’re backing?

Today’s video – Intro to Statistics part 1.