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Economics

Not Too Late

Having one of those moments common to most of us:

The intertracks have just called to my attention that Frederic Bastiat, the economist who inspired this little project (the NRR), started studying the dismal science at the age of 43.

I think I am 44 right now. There is time…

All Aboard!

Top 10 Media Myths of 2010

The article titles these as economic myths, but they’re not all economic issues.

Here’s the list:

10. GM Repayment Shows Taxpayer Bailout Worked
9. All the Economy Needs is More Stimulus
8. Soda is Like Cocaine and Ads Cause Obesity
7. Obama the Tax Cutter
6. The Tea Parties are Astroturf, but Green Groups Aren't.
5. Despite Largest Budget in History, Obama is Fiscally Conservative
4. Lack of Press Freedom in Gulf Doesn't Point to Obama
3. Nearly 10 Percent Unemployment Isn't So Bad
2. ClimateGate? What ClimateGate?
1. The Chamber of Commerce is Taking "Secret Foreign Money" for Election

Always keep in mind the news is not what’s happening, it’s just what they’re telling you.

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The World is Awash in Oil

Not in the greasy-pelican pollution sense, but in the magic of higher prices leading to increased production:

As an article last month in The New York Times observed: “Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia. In addition, the United States has increased domestic oil production for the first time in a generation.” Further still: “Another wave of natural gas drilling has taken off in shale rock fields across the United States, and more shale gas drilling is just beginning in Europe and Asia.”

A few years back, when oil was $120+ per barrel and gasoline was over $4 per gallon, the economically ignorant were concerned about the end of oil. Then the depression started and oil dropped back to the 60s for a while. The price of crude has drifted upward into the 80s over the past year. But the break-even price to make all those new fields viable was in the 40s.

So North American drillers kept working their plays.

With rising production from shale fields, the U.S. surpassed Russia last year to become the world’s largest supplier of natural gas.

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How Economics Saved Christmas

Art Carden adapts Theodor Geisel:

Every Who down in Whoville liked Christmas a lot.

But the Grinch, who lived just north of Whoville, DID NOT.

He stood and he hated the Whos and their noise

He hated the shrieks of the Who girls and boys

For fifty-three years he’d put up with it now—

He had to stop Christmas from coming, somehow.

He asked and he questioned the whole thing’s legality

Then his eyes brightened: he screamed “externality!

To the Grinch, the Whos were polluters, spewing their joyful noise into his cave.

A tax that was equal to external cost

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Rational Expectations

Short-term, uncertain duration "tax cuts" are not tax cuts at all, but deficit-financed spending.

Quoted from: Mike Munger

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Bursting the Chinese Bubble

In strict terms, inflation is not a rise in prices, but an increase in the supply of money. More money chasing the same quantity of goods leads to rising prices. And prices rise not entirely by the laws of supply and demand, but are influenced by speculation about where newly-printed money will flow. It’s a divergence between the real economy of goods and services and the financial economy of interest rates and currency exchange rates.

When the financial economy is out of alignment with the real economy, it’s a bubble. Money flows to where the money profits are instead of where the real value is created. The dotcom bubble and the housing bubble were both products of financial manipulations built atop some lesser amount genuine value.

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Neo Nails the Knowledge Problem

Neo-neocon unintentionally describes the Economic Calculation Problem:

Lots of blah, blah, blah in Washington about whether or not to extend those Bush tax cuts, and to whom, and for how long.

The problem with arguing about such things, of course, is that no one really knows what the effect of each course would be. At least, I haven’t seen anything that convinces me that anyone knows. I’m already on record as saying that economics is not my strong suit, but I’m beginning to wonder whether it’s anyone’s.

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Profitable Policy

Dinocrat has a good explanation of how U.S. trade and tax policies have worked to drive manufacturing and employment to foreign lands. Like so many issues, rhetorical framing makes it difficult to have a genuinely curious discussion.

One of the first points to get past is a notion that foreign governments are scheming and evil. Some may be, but in the general case of trade, they’re just making more effective policy choices. It isn’t that the foreigners are malicious, but that the United States is stupid.

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It’s Not the Train’s Fault

As a rail fan, I was pleased that Hollywood was made a movie about a train: Unstoppable. The trailers make it look like an action picture, and that curbed my enthusiasm. I prefer actual acting and cinematography to special effects. But every so often I can look past the explosions and enjoy the rest of it. So I planned on making one of my rare ventures into the world of first-run film for Unstoppable.

Not anymore:

True to the title, the train is unstoppable. It defies its brakes, it blasts through an RV, it flips over several police cars, it flips a train in front of it which then explodes with the blast of the Manhattan Project, ignores a SWAT team shooting assault rifles at it (really) and not only rides right over the Automatic Derailers, it shoots them off the tracks where they take out some more police cars.

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One Bourbon, One Scotch, and One Beer

MaxedOutMama is waving the white flag. If the 2008 recession actually flipped into an economic expansion, it’s over:

As far as your blogging host (hereby named Our Lady of Stupid Data Fitting) can tell, we are actually in a contraction right now. Admittedly, early in a contraction, but you know, contracting.

I follow MOM for her macro-scale analysis. She turned me on to WIET, for example, as an alternate measure of employment that is harder for officials to meddle with.

But I have had some doubts about her recent optimism that the recession was over. It seemed like she was relying too much on the kind of statistics that can be gamed by bureaucrats trying to paint a rosy picture of the U.S. economy.

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The Human Network

Cobb thinks about computers and the future:

First off, the fundamental thing that IT gives is the ability to overcome time and distance. It enables human intercommunications on levels never achieved in the history of mankind. In and of itself, this is an economy pulled out of a hat. Without disintermediating planes, trains and automobiles, there are new ways that people interact that make IT a non-zero sum game. Look at a movie from the 80s and find all of the plot holes and crazy situations that could have been obviated by today's cell phone networks and GPS.

Transportation is essentially the most physical form of communication. Communication is required for people to negotiate and cooperate. And more cooperation leads to greater prosperity.

It Doesn’t Add Up

Stopping along the intertracks in the days since the big election, I’ve noticed a spreading meme. Progressives, Democrats and lefties are being described as innumerate:

marked by an ignorance of mathematics and the scientific approach

This is not a new development decay in Prog theory. They’ve never been able to do math. Arithmetic dispels unicorns. But now more people seem to be recognizing that the era of make-believe budgeting will be brought to an ugly conclusion by the new righty majority:

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The Economics of Seinfeld

I think I will never tire of Seinfeld reruns. So I am delighted to discover a collection of Seinfeld clips which illustrate concepts in economics: Yadayadayadaecon.com.

There are seven pages of clips. It’s hard to pick favorites, but here’s a few to give you a taste.

The Soup Nazi shows monopoly power and barriers to entry.

The Soup Nazi makes delicious soup—so good there's always a line outside his shop. He refuses service to Elaine, and by a stroke of luck she comes across his stash of soup recipes. She visits his shop and informs him that his soup monopoly is broken, while waving his recipes in his face. Also in this clip, George gets charged $2 for a roll that everyone else gets for free. This example of price discrimination shows that in order to charge different customers different prices, you must have market power.

Unplanned Obsolescence

Planned obsolescence is an concept most notoriously associated with American autos from the 1950s:

GM chief designer Harley Earl implemented his "planned obsolescence" scheme that changed car body styles every three to five years to induce the public to buy a new model.

Earl's marketing plan affected the design of rear tail fins on cars, which were modest in early 1950s Cadillacs, but grew larger and more flamboyant by the time 1959 Cadillacs debuted.

Don Quixote’s Economics

The world’s largest windfarm has just opened in the U.K. For all the tingles this must give to greenies and various other anti-human factions, in economic terms, it is tilting at windmills:

[taking] courses of action that are based on misinterpreted or misapplied heroic, romantic, or idealistic justifications.

An article in the U.K. Telegraph lays out the silliness hidden behind this particular mega-project:

More Turbulence for Air Travelers

I could blame bin Laden for this, but really it is the government’s failure to craft a better system:

From the American Airlines Web page:

As a result of the Transportation Security Administration (TSA) and Department of Homeland Security (DHS) mandate, beginning November 1, all passengers will be required to have Secure Flight Passenger Data (SFPD) in their reservation at least 72 hours prior to departure. This is the next phase in a program that was initiated by the TSA in 2009. 

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Michigan Cancelled Their State Fair

The failure is bigger than Detroit:

Democratic Gov. Jennifer Granholm canceled the fair, saying debt-ridden Michigan could no longer afford to subsidize it. Granholm's decision makes Michigan the only Midwestern state and one of few nationwide without a state fair.

The Michigan State Fair had been a state tradition for 160 years and held at Eight Mile and Woodward, within Detroit city limits, since 1905. But the fair had been running deficits and needed $360,000 from the state in 2008 to cover losses. Fewer than 220,000 people passed through last year. At its peak in 1966, the fair drew 1 million.

Parks for Pensions

The Federal government is broke. Minnesota government and the City of Minneapolis can’t be broke in the same way because they lack the ability to run perpetual deficits. But I say they’re functionally broke because of their inability to set spending priorities. There’s always enough for fun projects. $30 million here, $7.7 million there, and yet there’s not enough money to keep up the roads or pay firefighters.

Anyone who works to provide a core government service is always first on the budget chopping block.

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Happy Capital Day!

Via Division of Labor:

Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.

There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture capital behind him. Capital can refer to either the tools of production or the funds that finance them. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.

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Fantasy Values

The harsh reality is that a few years on the pole with a coke habit would still leave the average woman with a better long term prospect of happiness than the popular combination of student loans and a soft liberal arts degree from a reputable private university.

Quoted from: Vox Day

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