Think Economically


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Good news or bad? Unemployment rate drops despite weak jobs numbers

So on first glance, these jobs numbers are nothing but bad. 96,000 new jobs with downward revisions on the two previous months. So as far as description is concerned, it looks like weak growth continues to carry the day. So “what does it mean?” Well, it means we aren’t suddenly in a booming economy; things continue to peter along.

“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.

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News and analysis: Lego Friends sells well, Organic food is no healthier, Bulgaria nixes EU membership plans

Lego’s Friends line has been a huge success. I’m mostly pleased by this, but I have somewhat complicated feelings.

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).

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News and analysis: Tampa has more than its share of poverty; Space elevator group LiftPort is back in business; Apple v. Samsung, ugh.

Republican political types are gathering in Tampa, Florida for the Republican Convention, and most people are talking about either the election, or about Hurricane Isaac. Not so many are talking about Florida’s still-depressed housing and job markets, or about the 25% poverty rate.

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.

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News and analysis: Foxconn raises wages but keeps long hours, Nike sells $315 shoes, Herr’s makes 5-6 tons of chips/day

So FoxConn workers are making more than they used to. They’re still working 60-hour weeks in violation of government labor laws.

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.
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David Brooks, Romney/Ryan, and the Faustian Shell Game

Do you have gay friends? Colleagues? Loved ones? First things first.

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.

Medicare spending per capita

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. Read the rest of this entry »

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The *real* real problem with financial regulatory reform: closing our model

“How come good people do bad things?”

So people are thinking and talking about this and there are two glaring problems in the discussion. First, “the structure of regulation” will never be done, complete, finished–it’s a game we make up as we go along. Second, the question “How come good people do bad things?” is the wrong question.

Jim Surowiecki argues that regulators need to focus more on “preventing malfeasance from happening.” John Kay argues that we need “a structure of regulation” that fixes perverse incentives and makes people–or financial institutions–more trustworthy.

Felix Salmon shoots holes in both of them, basically saying “yeah, good luck with that.” Which I’d like to reinterpret: for real, good luck.

The answer: people do things, and smart people do creative things, and there is no fix–there is managing society, and if everyone does what people do, it’ll never end. There is no regulation to solve it–but we have to put up a dam and pile up the levees or the torrent of human intention will go places we don’t want it.

Tunnel under the embankment - - 1154526

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Price controls in the market for gasoline. Could Gingrich push gas prices lower? Should we actively make gas more expensive?

Gingrich says gas should cost two dollars and fifty cents. When markets and politicians disagree, the market usually wins. Still, every time gas prices creep higher, there’s political hay in claiming you can fix it.

Thomas Friedman has a whole different idea on how to handle the price of gas: push it up and let it stay there. Ivan Eland calls it mercantilism.

Some crazy guy still thinks we should peg the dollar to gold. I say crazy because that’s crazy.

What would happen to the market for gas with price controls? Check the video:

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Detroit auto makers are back. General Motors, Ford, Chrysler are all working to expand capacity, but demand is outpacing them.

Nothing quite like reading the news. The article here is from the AP and discusses at length the change in the market from dialing down production to rushing to get back to capacity. It’s such a dense article, and you can’t read it without thinking about the elasticity of supply…well, at least I can’t. What will happen to prices? Was the bailout a good thing? Like I have any idea. I give it a crack though. Part 2 is after the break. Enjoy!

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