Posts Tagged ‘economics’

Democrat economics

Thursday, August 14th, 2008

This week, the Democratic members of Congress put out an estimate of potential tax receipts of the corporate income tax. The estimate assumed that corporations will pay taxes on gross receipts instead of net profits. THis assumes that corporations have no expenses and gross receipts equal net income. This is so ignorant that one must assume that that there is no understanding of what constitutes corporate income. We see this in the statements of outrage at oil companies profits, which are actually about 8.5% of gross income. These are the people who plan to run our economy if Obama is elected with a Democrat majority. God help us.

A correction was published but one wonders if the Congress members understand it.

Truth and politics

Sunday, July 13th, 2008

Those two terms are not mutually exclusive but it sometimes seems that way. This week, Phil Gramm got his tit in a wringer for saying that the economy is not in recession. It doesn’t matter that his statement is true. George Will commented on that feature of politics today on This Week. Amity Schlaes, whose book on the Great Depression should be required reading for all politicians, weighs in on the subject today. The Democrats are following a successful playbook, however. George Mitchell, Senate majority leader at the time, managed to produce and prolong the 1991 recession by filibustering capital gains tax cuts, long enough to win the 1992 election for Bill Clinton.

Why do corporate CEOs have such high incomes ?

Wednesday, June 11th, 2008

The subject of CEO income, salary and stock options for example, has become a big subject and not just on the left. John McCain has criticized hedge fund managers, for example. Why are those CEO incomes so high compared to 30 years ago ? Maybe this is the answer.

the sixfold increase in American CEO pay from 1980 to 2003 is almost wholly explained by the roughly sixfold increase in market capitalization of big U.S. companies over the same period. (Asset values have increased sixfold because both corporate earnings and the price-to-earnings ratio investors are willing to tolerate have increased by factors of 2.5.) The trend lines of market capitalization and executive payouts rose and dipped in near-perfect tandem.

That may explain it but it will always be controversial.

A preview of the presidential campaign

Wednesday, June 4th, 2008

Senator Obama’s speech last night, after he gained the majority of delegates for the Democratic nomination even while losing both primaries, is analyzed here and shows a preview of what to expect this fall. His radical associations with Weathermen terrorist BIll Ayers and race-baiting Reverend Wright and Father Pfleger are off-limits. That’s religion which is unfair to consider.

The suggestion that he visit Iraq to see what has happened since his two-day visit in 2006 ? No, McCain needs to tour the US.

Maybe if he went to Pennsylvania and met the man who lost his job but can’t even afford the gas to drive around and look for a new one, he’d understand that we can’t afford four more years of our addiction to oil from dictators. That man needs us to pass an energy policy that works with automakers to raise fuel standards, and makes corporations pay for their pollution, and oil companies invest their record profits in a clean energy future—an energy policy that will create millions of new jobs that pay well and can’t be outsourced. That’s the change we need.

OK. Here are two items before us for consideration. Our addiction to oil from foreign dictators might be reduced if we drilled for oil in our own country, like ANWAR and the coastal shelf. Brazil has leased most of the world’s deep ocean drilling rigs to look for oil off its own shores. Why can’t we drill in our known reserves ?

Nuclear power provides over 75% of France’s electricity. Why are we not building lots of nuclear power plants ?

Canada has vast oil reserves, much of it in oil shale and tar sands. Why aren’t we developing refineries and exploration techniques to use this source from a close and friendly country that is not a “dictatorship” ? The Democrats in Congress have passed legislation that prohibits the government from using alternative fuels that have a larger carbon footprint than conventional oil. Greenhouse gases trump economics.

I wonder how willing the oil companies, which have world-wide operations, will be to turn over their profits to Obama ? I suspect they will simply move away, leaving us to get our energy from president Obama’s speeches.

How much success has Obama had in those states with economic troubles ? Not that much.

Clinton’s popular-vote victories thus far include the three biggest Electoral College prizes: California (a solid Democratic state), New York (another sure bet for the Democrats), and Texas (a solid Republican state). (Although Obama won more delegates in Texas, Clinton’s vote total exceeded Obama’s by nearly 100,000 votes.) However, her victories also include several of the largest swing states that both parties will be battling to win in November: Pennsylvania and Ohio, as well as wins in the disputed Florida and Michigan primaries. As a result, Clinton’s 20 states represent more than 300 Electoral College votes while Obama’s 28 states and the District of Columbia represent only 224 Electoral College votes.

Obama won the nomination in caucuses, usually dominated by the more left wing sector of the Democratic Party, and early primaries before his awkward associations came to light. He hasn’t won a primary, except for Oregon, in the last month of the campaign. Oregon is a reliably Democrat state. The question is, can he win Ohio ?

The economics of global warming

Sunday, May 25th, 2008

Here is an excellent essay on the economics of various global warming scenarios. It does not propose that the current hysteria is incorrect. It simply considers the costs of various proposed remedies, a little bit like Bjorn Lomborg does.

Whether someone is serious about tackling the global-warming problem can be readily gauged by listening to what he or she says about the carbon price. Suppose you hear a public figure who speaks eloquently of the perils of global warming and proposes that the nation should move urgently to slow climate change. Suppose that person proposes regulating the fuel efficiency of cars, or requiring high-efficiency lightbulbs, or subsidizing ethanol, or providing research support for solar power—but nowhere does the proposal raise the price of carbon. You should conclude that the proposal is not really serious and does not recognize the central economic message about how to slow climate change. To a first approximation, raising the price of carbon is a necessary and sufficient step for tackling global warming. The rest is at best rhetoric and may actually be harmful in inducing economic inefficiencies.

This is a quote from one of the books being reviewed. It is so sensible that I am surprised to find it in The New York Review of Books, a publication I once subscribed to but gave up on years ago.

He proposes five possible scenarios to deal with the problem and calculates the economic cost of each. One scenario is “business as usual.” Two are radical programs proposed by Al Gore and Sir Nicholas Stern. The results of those two programs, calculated purely on economic terms and based on projected conditions in 2100, are disastrously worse than business as usual.

Personally, I am a skeptic and believe that, while the planet is warming, this is a natural phenomenon and we can do little to alter it, nor should we. I am also watching the sun spot cycle over the next year to see if the climate might change yet again.

The post-American world

Tuesday, April 29th, 2008

This essay by Fareed Zakaria is interesting although some of his suggestions for solutions are weak. His analysis of the decline of the British Empire is incomplete. He blames the Boer War for the beginning of the decline.

Britain’s exalted position, however, was more fragile than it appeared. Just two years after the Diamond Jubilee, Britain entered the Boer War, a conflict that, for many scholars, marks the moment when British power began to decline. London was sure that it would win the fight with little trouble. After all, the British army had just won a similar battle against the dervishes in Sudan, despite being outnumbered by more than two to one. In the Battle of Omdurman, it inflicted 48,000 dervish casualties in just five hours while losing only 48 soldiers of its own. Many in Britain imagined an even easier victory against the Boers. After all, as one member of Parliament put it, it was “the British Empire against 30,000 farmers.”

In fact, as pointed out in several books on the history of technology, Britain did not absorb the second phase of the Industrial Revolution. The revocation of the Edict of Nantes, by Louis XIV in 1685, sent the Protestant tradesmen and technicians of France to England for refuge and they took with them the Industrial Revolution. The inventions of the early 19th century were a result of that diaspora from France. By mid-19th century, however, England was failing to adopt the new science of chemistry. In France, now recovered from the convulsions of the Revolution and Napoleon, Louis Pasteur studied wine chemistry and from there moved on to bacteriology and the revolutionary advances in medicine. In Germany, newly united, the Kaiser supported science education as a way to catch up to the great rivals of Germany in Europe. Organic chemistry took off from its origins in Germany and the other nations did not catch up until after the Second World War.

Individual genius still was prominent in England as the discoveries of Michael Faraday and James Clerk Maxwell were fundamental in the new science of electromagnetism and electric power. Still, the tradition of the “gentleman amateur” held back British science finally and Germany built the great chemical industry that brought the second Industrial Revolution.

He does make a good point that Britain would have been far better off to have stayed out of the First World War, although the building of the German High Seas Fleet made that very difficult. Had they, and we, stayed out, it would have been another Franco-Prussian War. As a practical matter, however, the Kaiser was determined to be a rival to his British family. He was Queen Victoria’s grandson and had a pathological inferiority complex that led to disaster.

Some of Zakaria’s conclusions are reassuring for America.

No statistic seems to capture this anxiety better than those showing the decline of engineering in the United States. In 2005, the National Academy of Sciences released a report warning that the United States could soon lose its privileged position as the world’s science leader. The report said that in 2004 China graduated 600,000 engineers, India 350,000, and the United States 70,000 — numbers that were repeated in countless articles, books, and speeches. And indeed, these figures do seem to be cause for despair. What hope does the United States have if for every one qualified American engineer there are more than a dozen Chinese and Indian ones? For the cost of one chemist or engineer in the United States, the report pointed out, a company could hire five Chinese chemists or 11 Indian engineers.

The numbers, however, are wrong. Several academics and journalists investigated the matter and quickly realized that the Asian totals included graduates of two- or three-year programs training students in simple technical tasks. The National Science Foundation, which tracks these statistics in the United States and other nations, puts the Chinese number at about 200,000 engineering degrees per year, and the Rochester Institute of Technology’s Ron Hira puts the number of Indian engineering graduates at about 125,000 a year. This means that the United States actually trains more engineers per capita than either China or India does.

Others have questioned his focus on education, pointing out that 40% of the population, the “left side of the bell curve” are not likely to benefit by advances in nanotechnology and biotechnology industries except as consumers. This makes Zakaria’s emphasis on the benefits of unlimited illegal immigration less logical. He writes:

Immigration also gives the United States a quality rare for a rich country — dynamism. The country has found a way to keep itself constantly revitalized by streams of people who are eager to make a new life in a new world. Some Americans have always worried about such immigrants — whether from Ireland or Italy, China or Mexico. But these immigrants have gone on to become the backbone of the American working class, and their children or grandchildren have entered the American mainstream. The United States has been able to tap this energy, manage diversity, assimilate newcomers, and move ahead economically. Ultimately, this is what sets the country apart from the experience of Britain and all other past great economic powers that have grown fat and lazy and slipped behind as they faced the rise of leaner, hungrier nations.

That is all very well for the hundreds of thousands who are educated and are waiting for the sclerotic legal immigration system to process their applications. The illegals who flood the border states, however, are mostly illiterate and uneducated and unlikely to contribute anything but competition for low-wage jobs for that “left end of the bell curve.” He needs to get out of his ivory tower at Newsweek to see the reality.

His political prescriptions are also unlikely to be helpful as he is blind to the regressive politics of the Democratic party which favors dead end education in “Women’s Studies” and “African-American studies” while attacking free trade and favoring high capital gains taxes even if they lose money for the tax system.

It’s worth reading even if I disagree with some of his points.

Time magazine and why I don’t read it

Friday, April 18th, 2008

timeiwojima.jpg

UPDATE: Sandra Tsing Loh has the ultimate putdown for eco-snobs.

And yet there is the exquisite pleasure of eco-stalking those who used to eco-stalk you. “Good news!” I now enthuse to formerly smug Prius-driving friends of mine. “Right this second, a SolarCity engineer and I are studying a live Google Earth picture of your house! Little shade, south-facing — how ’bout I send them over for an estimate?”

It will be about $40,000. Next step ? Loss of interest.

Sniped a scientist friend of mine: “Instead of solar, why don’t you spend the money on something less self-aggrandizing — like offering $50 to anyone with an old refrigerator?”

There you are.

The utter fatuousness of the next Time magazine issue is staggering.     This interview shows just how far gone they are.

“We are experts in what we do.”
Veterans of Iwo Jima are not amused.

I have previously posted on some of the ignorance of economics so clearly demonstrated by the Time editor.

Here is more on the Time cover story that points out how the environmental activists are ignoring both science and economics.   The planet has been warming for the past 60 years but the warming trend may have ended or flattened out.

For example, satellite measurements of temperatures aloft  show no warming trend. Surface warming measurements may be affected by urban heat islands and, while NASA tries to avoid skewing data in the US, there has been a scandal in the placing of temperatures sensors in China. The scientist who was supposed to be ensuring that rapid urban development in China did not affect the sensors, was found to have falsified some of his data.

The data came from only 84 stations, 60% of which had no history whatsoever, and the report claims “details regarding instrumentation, collection methods, observing times … are not known.” Of the 35 remaining, over half had moved large distances (one station moving as many as five times) or had serious, known inconsistencies in the record. The report specifically contradicts Wang’s claims, concluding that “even the best stations were subject to minor relocations or changes in observing times and many have undoubtedly experienced large increases in urbanization.”Keenan immediately filed a formal allegation of fraud against Wang, a charge which is pending investigation at this time.

China is a big place with lots of land area and a rapidly industrializing society. How much did that development affect global warming ? Especially since the measurements were affected by urban heat islands. What we are seeing is a huge extrapolation of data from very shaky sources.

I’m currently reading a book titled The Deniers about scientists who are resisting the lockstep march of the anthropogenic global warming crowd and many who are paying a price.

What Obama could have said

Tuesday, April 15th, 2008

David Brooks is the faux right columnist in the NY Times. Much of the time his columns are weak and seem to be pleas for understanding to the hard left which will never accept any advice from a writer who defends Bush, even weakly. However, today he hit one out of the park. The Democrats have wrecked primary and secondary education with the teachers’ unions leading the way. Undergraduate education in Humanities is pretty much useless as the great western canon of literature and history is submerged in PC baloney. Even so, science and business lead to success for college graduates. We are the most prosperous and free society in the history of the world, but you wouldn’t know it from the New York Times. Bravo for Brooks who got it right this time.

Economics

Wednesday, April 9th, 2008

Those who have studied economics know that data is the most important part of any consideration. Talk is cheap. Data is all that counts. In that spirit, I offer this small contribution, which explains in one word the basis for estimates of our economic condition.“Our economy is the healthiest it has been in three decades.” (President Bill Clinton, State of the Union Address, January 23, 1996)“The bottom line is that this administration is the owner of the worst jobs record since Herbert Hoover.” (Senator Charles Schumer, Press Release, March 7, 2008)The difference ?

President’s Party Affiliation              

 1996-Democrat             2008-Republican

Lies in the service of policy

Tuesday, March 11th, 2008

Politics has always been infested with lies. As it becomes more important in our daily lives, those lies become more significant. Woodrow Wilson said he would keep us out of war. He lied although there is some possibility that he believed it when he said it. Roosevelt said something similar but there is no chance that he believed what he was saying. A few years ago, the issue of minimum wage was influenced by a published report which purported to prove that raising minimum wages, contrary to economic theory, would not increase unemployment for low income workers. The study was deeply flawed but it has remained a popular basis for those who wish to justify the policy of raising the minimum wage.

Now, the major domestic issue that influences public policy is immigration. Sure enough, a new study has appeared that purports to show illegal immigration raises average wages for the native-born poor. Once again, it has been shown that the study in question is bogus.

I’ve always been a little skeptical of the Ottaviano-Peri evidence. A couple of years ago, Jeff Grogger, Gordon Hanson, and I worked on a paper that examined the link between immigration and African-American economic status. As a by-product of that work, we explicitly attempted to replicate the Ottaviano-Peri finding–but couldn’t. Since then, we’ve been quite interested in trying to see what explains the discrepancy between our evidence and theirs.

Then they found why the discrepancy existed. The other authors had doctored the data.

The Ottaviano and Peri data includes currently enrolled high school juniors and seniors. They classify these high school juniors and seniors as part of the “high school dropout” workforce. Their finding of immigrant-native complementarity disappears if the analysis excludes these high school juniors and seniors.

Things that seem too good to be true usually aren’t.

This is not a new phenomenon. I saw something very similar in surgery 30 years ago. At one time, there was a flurry of interest in what was called “The no-touch technique” in colon cancer surgery. The principal author was George Crile Jr, often known as “Barney” Crile. His father had founded the Cleveland Clinic and was a famous pioneer surgeon. The son had ambitions to emulate his famous father and had become a senior surgeon in the clinic his father had founded. He published the “no-touch technique” study when I was a resident in surgery and we all immediately adopted the method as Crile’s study suggested a significant improvement in survival of the patients. Years after it was shown to be a fraud, it is still being studied. It is difficult to find the original paper anymore but it is still being referred to proudly in Cleveland Clinic literature. In that account, Rupert Turnbull is credited with the development of the technique, which involved isolating and ligating the veins from the colon before the tumor bearing area was touched or dissected. It made sense logically in that tumor cells were thought to flow in the venous blood to the liver where they lodged and became metastases. By ligating the veins first, tumor cells disturbed by manipulating the tumor would not escape and flow to the liver. Every surgeon who did colon cancer surgery adopted it.

A few years later, I attended the GI cancer postgraduate course at the American College of Surgeons annual meeting. One of the items on the program was a study of the effect of injecting 5-FU, a chemotherapy drug, into the colon before removing the tumor. The theory here was that the chemotherapy drug would flow, in the same distribution of portal vein blood as the cancer cells, toward the liver. It was a reasonable premise but the study produced one of the most dramatic scenes I have ever witnessed in a medical meeting.

The senior author was describing the 5FU study and pointed out that the control group for his study was the same as that for the “no touch” study. The veins were not ligated until the colon and tumor had been completely dissected. Any tumor cells that would tend to break off and flow to the liver should make the control group results worse than the no-touch treatment group and similar to the control group of the Crile study. In fact, that did not happen. The control group of the 5FU study did as well at five years as the treated group of the no-touch study and the control group of the no-touch study had a significantly lower survival than any of the three other groups. Why ?

The senior author of the 5FU study answered the question for all of us right then and there. He had contacted the Cleveland Clinic statistician to learn why the results were so different and he finally figured out what had happened.

All medical studies that involved time-survival statistics use what are called “time-life tables.” These are usually generated by actuaries for life insurance companies. Over five years, a certain percentage of people will die of various causes and the percentage who die is based on their age and sex and other factors that these tables consider. Any medical study that considers survival over five years or longer must use these tables to be valid statistically. Some people will die from causes unrelated to the treated condition and these must be allowed for.  You have to correct your results for the normal death rates or you will show more deaths in the treated group (and control group) than can be attributed to the disease you  are studying. The 5FU study author had learned that Crile, who had written the “no-touch” paper, had used time-life tables for the treated group in his study (thus improving the survival) but not for the control group. This is not poor statistical method; it is lying. He twisted the data to make his study look like progress in cancer treatment. In fact, there was no benefit to the early ligation of the veins. Cancer is not affected by those theoretical considerations, probably because host resistance is far more important.

Rupert Turnbull, a justifiably famous colon and rectal surgeon, was in the audience at that conference and the author of the 5FU paper invited him to comment. Turnbull declined, saying that they would have to “ask Dr. Crile about methods.” Crile was not there and nothing further was said but the tension was tremendous. Turnbull was, no doubt, humiliated but everybody knew about Barney Crile and his obsession to surpass his father. There were questions about his earlier work on breast cancer and the validity of his papers on that subject. Ironically, his son, a journalist and author of “Charlie Wilson’s War” would become more famous. Also ironic is the fact that CBS was successfully sued for libel by General Westmoreland because of a George Crile III report on Vietnam. Maybe that’s another family tradition; manipulating data.

Isn’t it interesting that the “no-touch” technique is still being promoted as a science breakthrough 30 years after the study was shown to be a fraud? I suspect that few people who were not at that American College of Surgeons meeting are aware of what happened. I suspect the other fraudulent studies will be influencing public policy years from now, as well.

I have been called a cynic.