Until I saw these two pictures  (First) (Second) , I was skeptical about the recovery being slow. Careful to note they’re not the same picture. The first one is U.S. only and then the second is OECD countries (most of the developed world). Read the author’s writeup about the pictures here.

HT: Alex Tabarrok

Yet another piece of evidence in my case for abolishing the minimum wage:

Discrimination in a Low-Wage Labor Market: A Field Experiment

Devah Pager, Bart Bonikowski & Bruce Western
American Sociological Review, October 2009, Pages 777-799

Abstract:
Decades of racial progress have led some researchers and policymakers to doubt that discrimination remains an important cause of economic inequality. To study contemporary discrimination, we conducted a field experiment in the low-wage labor market of New York City, recruiting white, black, and Latino job applicants who were matched on demographic characteristics and interpersonal skills. These applicants were given equivalent résumés and sent to apply in tandem for hundreds of entry-level jobs. Our results show that black applicants were half as likely as equally qualified whites to receive a callback or job offer. In fact, black and Latino applicants with clean backgrounds fared no better than white applicants just released from prison. Additional qualitative evidence from our applicants’ experiences further illustrates the multiple points at which employment trajectories can be deflected by various forms of racial bias. These results point to the subtle yet systematic forms of discrimination that continue to shape employment opportunities for low-wage workers.

Holding wages above market creates a situation where more workers offer to take the job than there are spots available. Employers, faced with this excess supply of labor, are able to use their discretion when selecting people from this expanded pool of potential employees. So it’s no wonder what leads to the discriminatory outcomes seen in this paper. The authors don’t cite the minimum wage as the cause, they’re sociologists, but as Mike says, it’s Econ 101.  Minimum wage laws create the perverse situation where competition over low-wage jobs hurts the very people the laws are designed to help, relatively poor minority groups.

(HT: Mike Munger) Mike & Russ Roberts talked about this idea in a recent EconTalk podcast.

Arnold Kling grew on me. Right as the financial crisis hit full tilt I really dove into reading economics/public policy related blogs. The last year or so has been a long slog of catching up on all the economics and financial market stuff they don’t teach you in the classroom. I know I still have a lot to learn, but I feel in the last year I’ve made huge strides in advancing my understanding of the intersection of economics and politics.

I really did not get Arnold at first. He was just over my head. I still read his stuff because he wrote so succinct and blended in some snarky wit. He has slowly but surely persuaded me about macroeconomic modeling and other aspects of economics. Such as his Recalculation Story. As Tyler Cowen would say, Arnold is now a long running story I follow in his small bits.

Arnold thinks there will be inflation:

I am in fact betting on inflation. Before the financial crisis, I would have described my portfolio as consisting of U.S. and international stock index funds, plus TIPS (inflation-indexed Treasuries). I have a very different portfolio now.

1. I have a very large investment in commodities. I bought oil through the exchange-traded fund USO, but I was not happy with that. That fund way underperforms actual oil, and I made only a small profit when I should have nearly doubled my money, based on the price of oil when I bought and sold. As of now, my main commodity investment is PCRIX, a mutual fund offered by PIMCO.

2. My largest stock market investment is in the Vanguard materials index fund. I call this the “anti-green” portfolio, since it seems to include a lot of chemical companies and such. However, in the last month, I have hedged this by buying the “anti-anti-green” portfolio, an exchange-traded fund, SMN, which goes up when materials stocks go down, and vice-versa. I have decided that stocks have come back plenty, and at this point I would rather have a net exposure close to zero in the U.S. market. If I miss out on a further rally, then so be it.

3. I still have some international stock mutual funds, mostly Asian.

4. I have bought some TBT, the exchange-traded fund that is short the 10-year Treasury. If you think of this in combination with the fact that I still hold some TIPS, then I am doing exactly what Bryan would dare me to do. That is, I am “long” the inflation-index bond and “short” the regular bond, which leaves me net long on inflation.

Each of these is an inflation play. Commodities are an inflation play. The “anti-green” portfolio was an inflation play, although now I am hedged out of it. The Asian stocks are a bet against the dollar, which is something of an inflation play. And TIPS plus TBT equals a pure inflation play.

Yesterday, he repeated his faith:

As I was reading, I started to think about my own views that the U.S. is headed toward a sovereign debt crisis. This is clearly an Outsider view. The market for U.S. Treasuries suggests that investors are quite sanguine about those investments. My own portfolio is (for me) precariously skewed toward investments that will pay off under a scenario in which inflation soars.

I carry a certain amount of respect for people who bet on their beliefs. The ol’ put your money where your mouth is cliche. But for me this one still rings true.

Looking at my own portfolio, and seeing that I’m 100% in cash, I find that I am implicitly betting on inflation as well. That might sound contradictory.  But look at it this way. I’m a current grad student open to the possibility of furthering my education by going and getting a PhD. I’m doing all of this by debt financing my human capital investment (student loans).  With the value of degrees on the decline (from overproduction), my willingness to continue to use the debt mechanism to finance further investment means that I am implicitly betting on inflation. Actually the higher inflation goes, the better (for me).

So Arnold, count me in too.

The Obama Administration has ordered steep pay cuts for the executives at Bank of America, AIG, GM, Chrysler, GMAC, & Chrysler Financial. These pay cuts come after the seven firms got huge loans from Uncle Sam. Call me confused, but wasn’t the rationale behind the bailouts to help them avoid a bankruptcy?

I’ll say it differently, so I can get this straight, if you’re a failing firm we’ll loan you a ton of money to bail you out, but not before we tie your hands behind your back.

Judge Richard Posner knows what I’m talking about:

Limiting the compensation of a handful of employees at a handful of firms can’t have any effect except to benefit the firms’ competitors by making them more attractive places to work.

I know America is angry about the pay and the bonuses and I realize this is a key marketing play for Team Obama, but wasn’t the goal to actually help these companies? The only thing this is going to do is to make those executives not want to work at these companies during the clean-up, giving their competitors an opportunity to poach rival execs and the dirty little secrets that go with them.

The bottom line of all this for me is that if you were really serious about limiting executive pay, you could have eliminated the issue entirely by not bailing these firms out in the first place. The execs would have gotten nothing and we wouldn’t have wasted any money.  These firms would have failed on their own and the new firms that rose from the ashes could have well been on their way by now. All this does is get us back to where we started, with our firms in trouble, except now we’ve paid billions for the priviledge of watching these companies slowly go down in flames.

Don Boudreaux says no.

This parasitic attitude is the consequence of the chorus of pundits and politicians who’ve long sung in unison that health care is a “right.”  Genuine rights – such as freedom of speech – are not commodities to be purchased; nor does their existence require the on-going application of human labor and other resources to ensure that they are adequately supplied.

Genuine rights are negative, in the sense that they demand only that each of us refrains from harassing others.  Because each unit of health care requires labor and resources for its production, no one can have a ‘right’ to health-care in the same way that she can have a right to speak freely or to worship the God of her choice.  Enforcing Jones’s ‘right’ to health care necessarily means forcing Smith to work to produce this health care.  A political ‘right’ that cannot even in principle exist without the confiscation of persons’ labor and property is no right at all; it’s a wrong.

If anyone is aware of an argument (pro or con) from an ethics (moral philosophy) stand point, I’d be interested to see it.

I’ve noted before that I see the world in process-outcome terms.  To me, the ability to refine one’s process is the key to sustained improvement and better long-term outcomes. Chance plays a role for sure, but listening to feedback and not just direct feedback,  is essential.

My laser-like-focus on refining my own processes leads me to place a great deal of confidence about the outcomes that stem from the decisions I make.  For the most part, I find my confidence is well placed. In others, I find myself scratching my head in confusion. How could a decision, I made, turn out to go so wrong? I realize that no one is perfect and hindsight is 20-20, we all make mistakes, but when one of my processes totally fails me,  it leaves me puzzled.

Ok, so what decision am I talking about here? My decision to vote for Barack Obama.

I’m not going to waste anyone’s time, not yours nor mine, criticizing specific examples of what he’s done to this point or what he’s likely to do for the rest of his term.  That’s is not where my mind is going right now. Plenty of that can be found elsewhere.

What I don’t understand is this:  how my vote in his favor could have gone so wrong.

Consider my process. I watched most, if not all, of the debates. I reviewed the websites of every candidate and studied their platforms. I looked at not only their ideas but also the way they dealt with criticism. I talked to other people about the candidates, especially if they liked someone other than Obama.  My approach was to gather as much information as I could about the candidates and to cast the best informed vote I could. I invested a significant amount of time and energy into my research on this decision.

After weighing all the perceived pros and cons, Barack Obama ended up getting my vote. And I’m not talking about the McCain vs. Obama race. Obama would have gotten my vote in a race against any of the Republican or Democrat candidates as well.  I figured he’d have the most pragmatic approach to problem solving and would likely choose the same policies I would want him too. He was able to convince me that he saw the world the same way I did. What irks me most about that is, looking back, I don’t feel he lied to me. He was able to honestly convince me that his politics agreed with mine.

Suffice to say, it hasn’t worked out like I thought it would. Call me naive but I never saw most of this coming. Which is sad to think about. I considered myself to be one of the most well read people on the policies of the candidates.

Looking back, I’m glad my vote didn’t decide this election.  I’d have to apologize to all of the rest of you. Looks like I have some process refinement to do. Maybe I should invest in some darts….

(Update:  Ben Casnocha on giving and receiving feedback)

Things I’m thinking about that don’t quite have enough to write a full post about.

1. I find it interesting that the CBO scored the new Healthcare bill as a debt reducer. Doug Elmendorf, the CBO Director,  disagrees with the result saying the Medicare cuts promised for the future (the “savings”) are politically unpopular and are unlikely to materialize when they’re scheduled to happen. Have you ever known a Congressional Representative to change their mind?  Essentially CBO is admitting that the savings amount to an accounting trick.  But hey, thems the rules.

2. You can’t force yourself to believe something.  Our beliefs can certainly change;  be it the result of a persuasive argument,  some convincing data, or life experience (gradual or sudden).  What I’m saying is that really really wanting to believe “X,” does not, by itself, affect that change. You can lie about believing X, but you always know the truth underneath that false exterior, where you really believe Y.  The lazy example (but certainly concrete) is about belief in a god. I think there exist people in three categories, true believers, true disbelieves and true fence sitters that just don’t know. Imagine for a second that you belong in the first category, but that for some reason you decide it would be really cool for you to abandon your belief.  Maybe it’s really hip to be able to say you are an atheist.  Wanting to be cool, or some other equally trivial reason, is not enough to change true beliefs.

3.  How arrogant the economics profession is.  I really like economics, I feel it comes naturally to me and some day I might have a PhD in it. Currently a lot is changing too, so it’s fun to be in grad school when entire schools of thought are shifting.  What is bugging me right now though is that for the last 20 years or so economists have gone out and spread their craft into all sorts of other disciplines like Sociology, Psychology, Political Science, Law, Education, and Ecology. What upsets me about this is the recent negative reactions to the Pseudo-Nobel Commitee awarding their prize to a woman with a PhD in Political Science. I just don’t get it, they think this somehow pollutes “economics.”  I contend that if you handed an average PhD economist from the 1940s-1970s a paper written by an “Economist” from today, they might not even recognize it as an economics piece.  Her work is well respected in an area that almost every economics undergrad learns about, the commons.  So, to me, she is quite capable and deserving of receiving the recognition for her contributions to the economics profession.  Can we not only take, but give as well?

It seems Ben Casnocha has a way of posting thoughts just as I’m thinking about related ideas.  I’m sure it’s all a series of random coincidence, but I’ve noticed a pattern.

Today he approvingly links to a snipet of a Koffi Annan interview where the journalist questions Koffi’s status as a leader.  Koffi’s reply? Watch and see.  Simple and effective.  Action over empty words.

I’m not going to post the details of what exactly is on my mind, some things are just better off not said. (But then why this useless post?) I want to this to serve as a record of a personal complaint.  Something that I can look back at after the situation is resolved, be it a month or ten years from now, to see if my current feelings end up being justified.

So as the title says…

If Russ Roberts can say those three little words, then I can too. “I was wrong.” The question is, what was I wrong about?

I’ve spent numerous posts here talking about General Motors (GM*) and its failures.  How they won’t be able to properly do innovation without our government cutting off their funding backstop. Until GM* has to go through a real bankruptcy and survive on its own merit, their failing practices won’t change. They’ll continue to make cars that people do not want. Because Uncle Sam loves GM*.  In this way, I believed that our government’s intervention would circumvent any and all private innovation.  I was wrong.

What you do not hear me saying is that our government’s interventions helped GM* innovate.  What I am saying is that the government’s interventions did not completely shut down GM*’s ability to innovate. So what am I really talking about?

OnStar.

GM* has been offering OnStar on their new car models for over 10 years now.  So this is not a particularly new service.  But I never gave the service its due.  I was never really sure how well it worked for people until very recently. A friend of mine just bought a new car.  After going home to Virginia to pick it up, she got into an accident driving her new GM* back to Florida.  I’m not sure of the model but it is not important.  In the accident, the airbags deployed and she was temporarily unable to speak from being slammed around.  With her cell phone lying in pieces on the floorboard, OnStar came to her rescue. They were able to locate her vehicle by GPS and notify the nearest authorities of her situation. While I don’t think her life was ever in serious question, I know the quick(er) response of the police, medics, etc definitely reduced the amount of panic and pain this scary situation would have caused.

Her accident did not involve another car, rather a tree, but just look at the potential external benefits provided by OnStar owners. In a 3 or 4 car pile up, the lives potentially helped by this technology add up quick. The government might actually want to consider subsidizing OnStar**.  I’d be for it. Levitt and Ayers studied the external benefits of Lojack, I’m sure a study of OnStar would provide similar measurable positive externalities.

But don’t GM*’s commercials show exactly this scenario happening? Yes. I’ve seen them myself, with healthy skepticism. I figured, in the event of a crash, there is no guarantee that the OnStar thing is still functional. I was wrong. GM* must have thought about that. This is a huge win for private innovation and technology. This is a huge win for vehicle safety. This is a huge win for drivers everywhere.  For that GM*,  I thank you.

If you go to the OnStar website you can see that it does a number of other things, driving directions, theft recovery, and remote car unlock. Those are all great, but if it only did one thing, crash response, OnStar is still a great safety feature. Some might complain that the GPS locator is too much Big Brother. I’m sympathetic to that argument, but after hearing how this technology was used for a really good purpose, I’m convinced that the benefits outweigh the costs on this one.

Going forward, I’ll be looking for other auto manufacturers to add this technology to their cars.  If they don’t, GM* has a serious competitive advantage in its corner.

* I still think GM will die, for real, some day, so I’m using GM* to stand for any company that one day owns GM’s assets which is likely to still include OnStar.

** I mean directly, like a voucher program,  tax rebate, or something similar. Not an indirect subsidy by backing GM*.

Since I woke up this morning with some flu-like symptoms and stayed home from work, I got a chance to look at a book I’ve been meaning to read for a while, Religious Literacy by Stephen Prothero.  I saw Professor Prothero on Jon Stewart’s Daily Show, about a year ago now, and his spot made some good points, enough for me to copy the title down on my list of books to read.

The subtitle of the book is What Every American Needs To Know –And Doesn’t. I thought that Prothero was going to discuss a number of  the available religions and offer some background on each, maybe even discuss some commonly believed myths, in order to educate his readers and thus make them Religiously Literate. I was sadly mistaken. He spends the first 60 pages or so beating his reader over the head with survey facts about American ignorance. I grew tired of his preaching to the converted,  I mean I already knew Americans were religiously illiterate, myself included, so I started to skim the rest of the book. I never really saw him get off the track he had already established so clearly.  What I wanted was for him to educate me about Christianity, Islam, Hinduism, Buddhism, Judaism and maybe a few of he smaller ones. Other than a dictionary style chapter, very late in the book, he failed to do this.

That all being said, I still found parts of the book interesting and will continue with a more detailed look at some of his ideas below.

———————————————————-

Prothero believes that Americans are religious illiterates and for good reason.   His book is chock full of evidence that Americans have no idea what the Bible actually says, or the Qur’an for that matter.  The book reviews a wealth of survey literature that shows that Americans cannot answer some basic questions about the five major world religions. Worse yet, Americans fare just about as bad on questions solely related to Christianity, the religion of choice for 85% of Americans (as documented in the book).

Naturally, Prothero looks at the evidence stacked against religious literacy and proposes that Americans should allow religion to be taught in public schools.  He is clearly scared of the consequences of being religiously illiterate:

Religious illiteracy is more dangerous because religion is the most volatile constituent of culture, because religion has been, in addition to one of the greatest forces of good in world history, one of the greatest forces for evil. (p. 4)

In other words, religious beliefs have the power to potentially make people do crazy things.  I agree with that thesis, religion does cause a tunnel-vision of sorts, but I don’t agree with his proposed solution.  At least, not in his mandated version.  He wants religious education to be taught in public schools and I’d be open to that idea as long as attendance to that class was voluntary. One could argue that it is the responsibility of Churches* to teach religious facts, but I think the evidence is clear that Churches in America are already failing miserably to do this effectively. I think we could entrust some teachers to deliver standardized accounts of religious facts.  I do think that teaching religion in schools would be awfully difficult in practice, because school semesters are short. How are you going to cram in enough about each religion? I certainly wouldn’t agree to allowing just Christianity to be taught.

*By “Churches” I mean any religious establishment, be it a synagogue, temple, mosque, what have you. I use Churches as short hand.

One idea that I hadn’t heard explicitly stated this way was from page 22:

The United States is by law a secular country. God is not mentioned in the Constitution, and the First Amendment’s establishment clause forbids the state from getting into church business.  However, that same amendment also includes a free exercise clause safeguarding religious liberty…

…Thanks to the establishment clause, the U.S. government is secular by law; thanks to the free exercise clause, American society is religious by choice.

So in some sense there is a logical basis for our confusion over whether or not the U.S. is a religious nation.

Overall, I don’t think this book is worth spending much time with. Unless of course you believe that you are the authority on the religions of the world. Then this book might actually surprise you.