http://online.wsj.com/article_email/SB10001424052748704431804574540002267533772-lMyQjAxMDA5MDEwNzExNDcyWj.html
As the WSJ Editorial Board points out attached, President Obama has bowed to reality and admitted that little of substance would come from the climate change summit in Copenhagen next month. This would contrast with the President's promises over the past year to create a binding international carbon-regulation treaty, but instead negotiators from 192 different countries now hope to reach a preliminary agreement that they will sign such a treaty when they meet in Mexico City in 2010.
Wait for it: the "environmental lobby" is blaming Copenhagen's pre-emptive collapse on the Senate's failure to ram thru a "cap-and-trade" scheme like the House did in June, arguing that the world won't make commitments until the U.S. does.
Is that right? Well, as the WSJ editors point out, China and India have no intention of limiting their economic growth because of the West's climate neuroses. And, why should they? Then, of course, there's Europe which appears to be ready to agree with emissions quotas only if they don't have to be "met".
China has, however, expressed a willingness to help us with our climate neuroses by agreeing to build a wind farm in West Texas (with the aid of U.S. government green subsidies). For those of us that support "wind", we're glad to see somebody finally doing it. However; we kind of hoped for the jobs and the profits from such enterprises to stay here. Evidently, there was such an "outcry" over this that the China-based company agreed to build one wind spar (the blades for the wind turbines) plant here.
And, thank you China.
The WSJ editors go on to point out that the pointlessness of Copenhagen will now become part of President Obama's arguement that the Senate must inflict cap and tax on the U.S., in addition to the EPA's "nondemocratic" carbon crackdown via clean air regulation (see our prior posts on the EPA's handling of its own staff and its determination to "get the carbon"). However; if the Senate is consistent, and just behaves as it normally does, it will fail to act. The EPA acted so precipitously (and, again, inconsistently relative to its own staff) that it is very likely to get tied up in court (which is good and certainly why we have a democracy). This, of course, will be very helpful to the U.S. economic recovery since we will not be facing higher energy taxes anytime soon.
My thought on this situation is that "economic growth" comes ahead of "climate change". Why don't we resolve to reexamine the "get the carbon" situation when the unemployment rate in the United States drops from 10.2% back down to it's long term equilibrium (4%/5%)? Perhaps we can reconsider a "carbon police state" in 18/24 months. At that point, perhaps, the issue of "global cooling" might also be brought to the for since it would appear that the first decade of the 21st century has watched the planet get "cooler." Even better, we could suggest a "twin cities" approach to climate: say Minneapolis and St. Paul or Dallas and Fort Worth. Here the approach would be to "split" the 192 countries mentioned above that will be meeting in Copenhagen next month (probably to hear from Al Gore about 2012): half of the countries would meet in one city to talk about "global warming" and the other half would meet in the sister city to talk about "global cooling". Once they have consensus, representatives of the two country groups could meet on "neutral ground" (say Arlington) to devise a compromise approach to saving the planet - something like smoking on alternative Mondays, or certain auto license plate numbers can fill up with gas on smoking Mondays, and certain other license plate numbers can only fill up with gas when it rains! We actually had something like this during the U.S. wage and price controls during the early 1970s. We had gas lines based on license plate numbers.
Certainly, the "carbonistas" (my dictionary says that's not a word) would be willing to compromise and listen to reason. Oh wait, I forgot, we're talking about the global warming alarmists.
Saturday, November 21, 2009
Friday, November 13, 2009
EPA Censorship: Cap and Trade?
http://online.wsj.com/article_email/SB10001424052748703683804574532022758745200-lMyQjAxMDA5MDEwMjExNDIyWj.html
Kimberley Strassel did an excellent job this past spring recounting how Dr. Alan Carlin, a 37 year veteran of the EPA, was "muzzled" for a report poking holes in the science underlying the theory of manmade global warming. At that time, his superior, Al McGartland, complained that Carlin's paper did "not help the legal policy case" for "Team Obama's" decision to regulate carbon. Carlin was told to move on to other issues and forbidden to discuss his conclusions outside the office. Do we have questions about this behavior? It doesn't seem to be very open, supportive or reinforcing. Some people might even call it very "Republican" - but, we stay out of politics here.
Now, we have Laurie Williams and Alan Zabel who are married and have 20 years each working at the EPA. They too are dismayed at the Democrat's approach to climate, though for different reasons. Dedicated environmentalists, they created a 10 minute YouTube video arguing Congress's convoluted "cap-and-trade" bill was a "big lie" that is too weak. They instead propose imposing taxes on fossil fuels. Ironically, they got permission from the EPA before they did it. But, then they did an op-ed in the Washington Post which got the agency nervous. The EPA reversed itself and said the couple had to take the video off unless they substantially altered it.
As Kimberly Strassel so aptly puts it, "Meet the Obama EPA, and its new suppressing, paranoid style. It was the President who once ripped the Bush administration for silencing scientific critics, and it was EPA Administrator Lisa Jackson who began her tenure promising the agency would operate like a "fishbowl." But that was before the EPA realized how vastly unpopular is its plan to usurp Congress and regulate the economy on its own, based on its bizarre finding that CO2 is a danger to health." Evidently, Mrs. Jackson's goal now is to rush the agency regulations thru as quickly as possible, squashing threatening dissent and deflecting troublesome questions.
Back to Alan Carlin. It's hard to keep track of which side of the climate issue is being suppressed since Carlin's point was that climate science hasn't proved anything. Now, Williams-Zabel come along and claim that cap-and-trade is a big lie and too weak. Both sides are being suppressed. Trauma!
Dr. Carlin says he has been treated "relatively well" since his problems this past spring, yet he has been forbidden from working on climate or attending climate seminars.
It would seem to me that between the suppression of Dr. Carlin's position and the Williams-Zabel problems, there are issues which underline the gap between the agency's transparency rhetoric and reality. Worse, the effort by the EPA to hold down debate on both sides of the climate issue suggests that global warming itself is, at best, an imprecise concept unsupported by very precise science. I don't think Al Gore's conviction can carry that issue no matter how many Nobel Prizes he has.
Kimberley Strassel did an excellent job this past spring recounting how Dr. Alan Carlin, a 37 year veteran of the EPA, was "muzzled" for a report poking holes in the science underlying the theory of manmade global warming. At that time, his superior, Al McGartland, complained that Carlin's paper did "not help the legal policy case" for "Team Obama's" decision to regulate carbon. Carlin was told to move on to other issues and forbidden to discuss his conclusions outside the office. Do we have questions about this behavior? It doesn't seem to be very open, supportive or reinforcing. Some people might even call it very "Republican" - but, we stay out of politics here.
Now, we have Laurie Williams and Alan Zabel who are married and have 20 years each working at the EPA. They too are dismayed at the Democrat's approach to climate, though for different reasons. Dedicated environmentalists, they created a 10 minute YouTube video arguing Congress's convoluted "cap-and-trade" bill was a "big lie" that is too weak. They instead propose imposing taxes on fossil fuels. Ironically, they got permission from the EPA before they did it. But, then they did an op-ed in the Washington Post which got the agency nervous. The EPA reversed itself and said the couple had to take the video off unless they substantially altered it.
As Kimberly Strassel so aptly puts it, "Meet the Obama EPA, and its new suppressing, paranoid style. It was the President who once ripped the Bush administration for silencing scientific critics, and it was EPA Administrator Lisa Jackson who began her tenure promising the agency would operate like a "fishbowl." But that was before the EPA realized how vastly unpopular is its plan to usurp Congress and regulate the economy on its own, based on its bizarre finding that CO2 is a danger to health." Evidently, Mrs. Jackson's goal now is to rush the agency regulations thru as quickly as possible, squashing threatening dissent and deflecting troublesome questions.
Back to Alan Carlin. It's hard to keep track of which side of the climate issue is being suppressed since Carlin's point was that climate science hasn't proved anything. Now, Williams-Zabel come along and claim that cap-and-trade is a big lie and too weak. Both sides are being suppressed. Trauma!
Dr. Carlin says he has been treated "relatively well" since his problems this past spring, yet he has been forbidden from working on climate or attending climate seminars.
It would seem to me that between the suppression of Dr. Carlin's position and the Williams-Zabel problems, there are issues which underline the gap between the agency's transparency rhetoric and reality. Worse, the effort by the EPA to hold down debate on both sides of the climate issue suggests that global warming itself is, at best, an imprecise concept unsupported by very precise science. I don't think Al Gore's conviction can carry that issue no matter how many Nobel Prizes he has.
Thursday, November 12, 2009
Al Gore's Economics
http://online.wsj.com/article_email/SB10001424052748704402404574527572868084330-lMyQjAxMDA5MDEwMDExNDAyWj.html
Holman Jenkins has a perspective on Al Gore's investment in global warming (or, rather, the prevention of same) that starts out with a reference to Tennessee Rep. Marsha Blackburn's question to Gore during a House hearing: did his investments in green energy mean he would benefit personally from cap and trade? Jenkins' perspective is that Ms. Blackburn was a little late since Gore had long ago jumped over to the side of "salesmanship" by whatever means. As far back as 1989, he insisted there was no dispute worthy of recognition about the danger of man made climate change. And, of course, he now titularly heads a vast establishment with a stake in one side of the argument.
So, Jenkins goes on to point out, after a decade in which the "EARTH APPEARS TO HAVE STOPPED WARMING" and even cooled, global warming advocates have rushed to embrace a computer simulation that predicts "cooling" and allows for future cooling, even while assuring that the world is destined to face disastrous "warming" anyway. This would be not dissimilar to prognosticators of doom who have, over centuries, adjusted their forecasts when the deadlines pass. Further, Gore's own predictions of a climate catastrophe have not lessened, and, every time he opens his mouth, the costs of meeting the emergency become easier and easier to swallow. According to Jenkins, they are not even "costs" anymore, they are "profits" (this is the new math from Gore's new book).
Mr. Gore points out that he has poured his own money into two climate action nonprofits, but, whatever his motives, aren't these nonprofits functionally propaganda arms (i.e., advertising) that benefit his for-profit investments?
Jenkins feels, and I agree, that evidence of man's impact on climate is maddeningly elusive, in part because man's impact on climate is so small as to be hard to disentangle from natural variability. Mr. Gore disagrees, but the case for action has become less "closed" since he pronounced it closed in 1989, if only because of the huge sums of money and manpower poured into the subject to little avail.
Now, even climate activists recognize a need for evidence from the real world. The endless invocation of computer models wasn't cutting it. For a while, the media could report evidence of warming as if it were evidence of what "causes" warming. Inconveniently (is that a good word?), however, just as temperature-measuring has become more standardized and disciplined, the warming trend seems to have faded from the recent record.
Fortunately, Jenkins alludes to the fact that Western societies (or Brazil or India or China) were never going to sacrifice economic growth for the uncertain benefits of fighting climate change.
For those of us who agree with the Jenkins' position, we might ask what will come of the upcoming discussions in Copenhagen where world leaders will be expected to do something about the issue? My guess: a strong statement that something needs to be done. That would be reasonable and very inexpensive.
Holman Jenkins has a perspective on Al Gore's investment in global warming (or, rather, the prevention of same) that starts out with a reference to Tennessee Rep. Marsha Blackburn's question to Gore during a House hearing: did his investments in green energy mean he would benefit personally from cap and trade? Jenkins' perspective is that Ms. Blackburn was a little late since Gore had long ago jumped over to the side of "salesmanship" by whatever means. As far back as 1989, he insisted there was no dispute worthy of recognition about the danger of man made climate change. And, of course, he now titularly heads a vast establishment with a stake in one side of the argument.
So, Jenkins goes on to point out, after a decade in which the "EARTH APPEARS TO HAVE STOPPED WARMING" and even cooled, global warming advocates have rushed to embrace a computer simulation that predicts "cooling" and allows for future cooling, even while assuring that the world is destined to face disastrous "warming" anyway. This would be not dissimilar to prognosticators of doom who have, over centuries, adjusted their forecasts when the deadlines pass. Further, Gore's own predictions of a climate catastrophe have not lessened, and, every time he opens his mouth, the costs of meeting the emergency become easier and easier to swallow. According to Jenkins, they are not even "costs" anymore, they are "profits" (this is the new math from Gore's new book).
Mr. Gore points out that he has poured his own money into two climate action nonprofits, but, whatever his motives, aren't these nonprofits functionally propaganda arms (i.e., advertising) that benefit his for-profit investments?
Jenkins feels, and I agree, that evidence of man's impact on climate is maddeningly elusive, in part because man's impact on climate is so small as to be hard to disentangle from natural variability. Mr. Gore disagrees, but the case for action has become less "closed" since he pronounced it closed in 1989, if only because of the huge sums of money and manpower poured into the subject to little avail.
Now, even climate activists recognize a need for evidence from the real world. The endless invocation of computer models wasn't cutting it. For a while, the media could report evidence of warming as if it were evidence of what "causes" warming. Inconveniently (is that a good word?), however, just as temperature-measuring has become more standardized and disciplined, the warming trend seems to have faded from the recent record.
Fortunately, Jenkins alludes to the fact that Western societies (or Brazil or India or China) were never going to sacrifice economic growth for the uncertain benefits of fighting climate change.
For those of us who agree with the Jenkins' position, we might ask what will come of the upcoming discussions in Copenhagen where world leaders will be expected to do something about the issue? My guess: a strong statement that something needs to be done. That would be reasonable and very inexpensive.
Tuesday, November 10, 2009
Doctors' Pay
http://www.nytimes.com/2009/11/08/business/economy/08view.html?emc=eta1
As Robert Frank points out attached, the United States spends twice as much per capita on health care as many other nations, yet achieves inferior outcomes by such varied measures as life expectancy, preventable deaths from specific illnesses, and infant mortality. Much of that performance gap stems from the fact that many of the nation's 45 million (there's that disputed number again!) uninsured fail to receive needed care.
The spending gap stems largely from a conflict inherent in how American physicians are paid. Elsewhere, most doctors are salaried. But, under most American health plans, including Medicare and Medicaid, doctors are reimbursed according to how many tests and procedures they perform. As Frank points out, we all believe doctors recommend only those tests that they sincerely believe to be in their patients' best interests but we also know that additional tests, in the interest of being "thorough," will provide more income which can lean us in the direction of my relative: moral hazard. Moral hazard is not just a place we find at the big banks.
Frank quotes an article in the NY Times where Atul Gawande described an entrepreneurial subculture in McAllen, Texas in which doctors prescribe roughly half again as many tests and procedures as those in otherwise similar Texas communities. McAllen, he argued, is where American health care is heading.
And, the good news is that Dr. Gawande identified some health plans, like that of the Mayo Clinic in Minnesota, that have sidestepped the incentive problem by putting doctors on salary and operating their own hospitals. Such plans, which provide superb care and high patient satisfaction at significantly lower cost than conventional fee-for-service plans, would become more attractive under proposed legislation (I'll have to go along with Frank's position on that because I have no interest in reading 1174 pages of the proposed bill or bills).
It was my privilege to have been a part of annual executive physical process at the Mayo Clinic which was paid for by the company I worked for and it was exceptional. It was also my privilege to have served on the Board of the UT Southwestern Medical Center (one of this country's Top Ten hospitals) for the last 22 years. In both cases, the commitment to patient care is exceptional.
So, why hasn't the Mayo model caught on? One factor against quick expansion of the Mayo model is that many current doctors chose their profession hoping to earn lucrative pay, which they might not be able to do in a nonprofit clinic. But there is hope for more doctors who choose to view their profession as a "calling" working in nonprofit clinics. The incentive, aside from the exceptional reputation of places like the Mayo, is that doctors at such clinics can spend more time healing patients and less time fighting insurers.
According to Robert Frank (who is both an economist at Cornell University and co-director of the Paduano Seminar in Business Ethics at the Stern School of Business at New York University), any of the current health reform bills would encourage movement toward a Mayo approach. I'll take his word for it!
As Robert Frank points out attached, the United States spends twice as much per capita on health care as many other nations, yet achieves inferior outcomes by such varied measures as life expectancy, preventable deaths from specific illnesses, and infant mortality. Much of that performance gap stems from the fact that many of the nation's 45 million (there's that disputed number again!) uninsured fail to receive needed care.
The spending gap stems largely from a conflict inherent in how American physicians are paid. Elsewhere, most doctors are salaried. But, under most American health plans, including Medicare and Medicaid, doctors are reimbursed according to how many tests and procedures they perform. As Frank points out, we all believe doctors recommend only those tests that they sincerely believe to be in their patients' best interests but we also know that additional tests, in the interest of being "thorough," will provide more income which can lean us in the direction of my relative: moral hazard. Moral hazard is not just a place we find at the big banks.
Frank quotes an article in the NY Times where Atul Gawande described an entrepreneurial subculture in McAllen, Texas in which doctors prescribe roughly half again as many tests and procedures as those in otherwise similar Texas communities. McAllen, he argued, is where American health care is heading.
And, the good news is that Dr. Gawande identified some health plans, like that of the Mayo Clinic in Minnesota, that have sidestepped the incentive problem by putting doctors on salary and operating their own hospitals. Such plans, which provide superb care and high patient satisfaction at significantly lower cost than conventional fee-for-service plans, would become more attractive under proposed legislation (I'll have to go along with Frank's position on that because I have no interest in reading 1174 pages of the proposed bill or bills).
It was my privilege to have been a part of annual executive physical process at the Mayo Clinic which was paid for by the company I worked for and it was exceptional. It was also my privilege to have served on the Board of the UT Southwestern Medical Center (one of this country's Top Ten hospitals) for the last 22 years. In both cases, the commitment to patient care is exceptional.
So, why hasn't the Mayo model caught on? One factor against quick expansion of the Mayo model is that many current doctors chose their profession hoping to earn lucrative pay, which they might not be able to do in a nonprofit clinic. But there is hope for more doctors who choose to view their profession as a "calling" working in nonprofit clinics. The incentive, aside from the exceptional reputation of places like the Mayo, is that doctors at such clinics can spend more time healing patients and less time fighting insurers.
According to Robert Frank (who is both an economist at Cornell University and co-director of the Paduano Seminar in Business Ethics at the Stern School of Business at New York University), any of the current health reform bills would encourage movement toward a Mayo approach. I'll take his word for it!
Where the Jobs Are
http://norris.blogs.nytimes.com/2009/11/06/where-the-jobs-are-2/?emc=eta1
We have continued to suggest that bad economic times are when it is appropriate to look at sectors of the economy and institutions within them (profit or non-profit) that continue to grow and hire. While the Floyd Norris list attached is not exhaustive, it covers sectors where jobs have continued to grow since December of 2007.
While we continue to recommend to undergrads that they stay in school and get a graduate degree because the job market is just not there (plus the extra degree helps to differentiate them as a "product"), some of the growth categories that Norris points out are:
Home Health Care Services: Up 10.8%
Oil and Gas Extraction: Up 7.4%
Pipeline Transportation: Up 6.7%
Hospitals: Up 3.8%
Computer Systems Design &
Related Services: Up 3.4%
These, and the other job categories listed by Norris provide a clue to what's "secure" in a bad time for jobs. Just as Sarbanes has provided an instant job market for audit students, so also have the markets represented in these sectors provided continued opportunity in down times.
Last, I've kept the Federal Government (which is on the Norris list) until last because I want to promote it as a safe place to work until the economy comes all the way back if you have the right skills. The Norris list shows "Federal Government Except Postal Service" up 9.3%. Resisting the temptation to comment on the "Postal Service" aspect of that list, the government is a safe place to hide while looking for more lucrative places to land.
We have continued to suggest that bad economic times are when it is appropriate to look at sectors of the economy and institutions within them (profit or non-profit) that continue to grow and hire. While the Floyd Norris list attached is not exhaustive, it covers sectors where jobs have continued to grow since December of 2007.
While we continue to recommend to undergrads that they stay in school and get a graduate degree because the job market is just not there (plus the extra degree helps to differentiate them as a "product"), some of the growth categories that Norris points out are:
Home Health Care Services: Up 10.8%
Oil and Gas Extraction: Up 7.4%
Pipeline Transportation: Up 6.7%
Hospitals: Up 3.8%
Computer Systems Design &
Related Services: Up 3.4%
These, and the other job categories listed by Norris provide a clue to what's "secure" in a bad time for jobs. Just as Sarbanes has provided an instant job market for audit students, so also have the markets represented in these sectors provided continued opportunity in down times.
Last, I've kept the Federal Government (which is on the Norris list) until last because I want to promote it as a safe place to work until the economy comes all the way back if you have the right skills. The Norris list shows "Federal Government Except Postal Service" up 9.3%. Resisting the temptation to comment on the "Postal Service" aspect of that list, the government is a safe place to hide while looking for more lucrative places to land.
Friday, November 6, 2009
Krugman: Great Depression/Great Recession
http://krugman.blogs.nytimes.com/2009/11/03/the-story-so-far-in-one-picture/?emc=eta1
Krugman calls this the story so far in one picture. It's world industrial production then and now. It's very interesting to look at the 08 trend line below the 29 trend line for a period of months and it's heartening to look at the two trend lines separating now.
Krugman calls this the story so far in one picture. It's world industrial production then and now. It's very interesting to look at the 08 trend line below the 29 trend line for a period of months and it's heartening to look at the two trend lines separating now.
GDP Growth @ 3.5%
http://www.nytimes.com/2009/11/07/business/economy/07jobs.html?emc=eta1
http://online.wsj.com/article_email/SB10001424052748704013004574517303668357682-lMyQjAxMDA5MDAwNjEwNDYyWj.html
Here's the good news: third quarter GDP grew by 3.5%. Here's the good news in the bad news: nonfarm payrolls dropped 190,000 last month which is a substantial improvement over January's 741,000 drop. More good news in the bad news: U.S. worker productivity has "surged" (one study had it at 6.1% in the third quarter) but only because, where the economy is coming back, employers are reluctant to hire (causing many to settle for part-time work because companies won't hire full time). More bad news: the "underemployment rate", which includes part-time workers, the jobless, and those who have given up on searching, was 17.5% in October (the highest since 1994). More bad news: the official unemployment rate has broken the 10% barrier on its way up to 10.2%, 5.3 percentage points higher than December 2007 with the actual number of unemployed up 8.2 million people since then. More good news: manufacturers added jobs for the first time in 15 months in October (largely by bringing in temporary workers or recalling laid off workers). More good news: the first sign of a recovery in jobs is when companies begin bringing in temporary workers (seed previous "good news").
So, where is the consumer in all of this? Answer: unemployed. What drives the U.S. economy? Consumer demand. Many economists use "job creation" as the measure of how well the economy is doing, and, in the past, 100,000 to 150,000 jobs per month ("created") is about what the economy has needed to reflect healthy growth. Right now, the 190,000 negative number mentioned above has got to get back to a positive 100/150,000 (jobs created) monthly. That would be a positive job swing of 290/340,000 jobs per month to get back to a "plus" 100/150. Where's that going to come from and how soon?
And, while we don't talk politics here, we're not sure that President Obama's trip to get his Nobel (for "promoting peace"?), or his trip to Copenhagen to appease the "global warmers", should come ahead of something real like: are people employed, and do our economic policies promote that. As we have indicated here before, "unemployment" is the lagging indicator.
As was pointed out in the WSJ "Opinion" article attached, nearly all net job creation since 1980 occurred in firms less than 5 years old. A recently released Kaufman Foundation report shows that two-thirds of jobs created were in such firms. Given this, without new businesses, job creation in the American economy would have been "negative" for a significant number of years.
However; there are many young companies that never expand or get off the ground because of regulatory or economic barriers. Policy makers should be eliminating these barriers and creating incentives to foster the creation and growth of new businesses. Here are four suggestions:
* Welcome immigrants seeking scientific training at our universities (between 1995 and 2005, immigrants founded or co-founded 25% of all U.S. high tech firms);
* Unleash America's academic entrepreneurs (currently, university professors are limited in their technology licensing efforts);
* Provide easier access to capital (a fundamental revision of bank capital standards is needed from both a regulatory and an innovative point of view);
* Make it easier for companies seeking capital to go public (Sarbanes-Oxley has made it far more expensive for smaller companies than was originally intended).
As the stimulus money makes its way thru the economy, something real has to replace it. If most of the jobs are being created in young innovative businesses, then simple measures to "deregulate" around those businesses could be an inexpensive and highly productive way to create jobs.
http://online.wsj.com/article_email/SB10001424052748704013004574517303668357682-lMyQjAxMDA5MDAwNjEwNDYyWj.html
Here's the good news: third quarter GDP grew by 3.5%. Here's the good news in the bad news: nonfarm payrolls dropped 190,000 last month which is a substantial improvement over January's 741,000 drop. More good news in the bad news: U.S. worker productivity has "surged" (one study had it at 6.1% in the third quarter) but only because, where the economy is coming back, employers are reluctant to hire (causing many to settle for part-time work because companies won't hire full time). More bad news: the "underemployment rate", which includes part-time workers, the jobless, and those who have given up on searching, was 17.5% in October (the highest since 1994). More bad news: the official unemployment rate has broken the 10% barrier on its way up to 10.2%, 5.3 percentage points higher than December 2007 with the actual number of unemployed up 8.2 million people since then. More good news: manufacturers added jobs for the first time in 15 months in October (largely by bringing in temporary workers or recalling laid off workers). More good news: the first sign of a recovery in jobs is when companies begin bringing in temporary workers (seed previous "good news").
So, where is the consumer in all of this? Answer: unemployed. What drives the U.S. economy? Consumer demand. Many economists use "job creation" as the measure of how well the economy is doing, and, in the past, 100,000 to 150,000 jobs per month ("created") is about what the economy has needed to reflect healthy growth. Right now, the 190,000 negative number mentioned above has got to get back to a positive 100/150,000 (jobs created) monthly. That would be a positive job swing of 290/340,000 jobs per month to get back to a "plus" 100/150. Where's that going to come from and how soon?
And, while we don't talk politics here, we're not sure that President Obama's trip to get his Nobel (for "promoting peace"?), or his trip to Copenhagen to appease the "global warmers", should come ahead of something real like: are people employed, and do our economic policies promote that. As we have indicated here before, "unemployment" is the lagging indicator.
As was pointed out in the WSJ "Opinion" article attached, nearly all net job creation since 1980 occurred in firms less than 5 years old. A recently released Kaufman Foundation report shows that two-thirds of jobs created were in such firms. Given this, without new businesses, job creation in the American economy would have been "negative" for a significant number of years.
However; there are many young companies that never expand or get off the ground because of regulatory or economic barriers. Policy makers should be eliminating these barriers and creating incentives to foster the creation and growth of new businesses. Here are four suggestions:
* Welcome immigrants seeking scientific training at our universities (between 1995 and 2005, immigrants founded or co-founded 25% of all U.S. high tech firms);
* Unleash America's academic entrepreneurs (currently, university professors are limited in their technology licensing efforts);
* Provide easier access to capital (a fundamental revision of bank capital standards is needed from both a regulatory and an innovative point of view);
* Make it easier for companies seeking capital to go public (Sarbanes-Oxley has made it far more expensive for smaller companies than was originally intended).
As the stimulus money makes its way thru the economy, something real has to replace it. If most of the jobs are being created in young innovative businesses, then simple measures to "deregulate" around those businesses could be an inexpensive and highly productive way to create jobs.
Tuesday, November 3, 2009
"SuperFreakonomics"
http://online.wsj.com/article_email/SB10001424052748704335904574495643459234318-lMyQjAxMDA5MDIwNjEyNDYyWj.html
Steven D. Levitt is a professor of economics at the University of Chicago and a recipient of the John Bates Clark Medal, awarded to the most influential economist under the age of 40. He, along with Stephen J. Dubner, wrote the 2005 best seller "Freakonomics". The sequel to that book is "SuperFreakonomics" which has just been published.
Dubner and Levitt made the mistake of including a chapter in their sequel on "global warming". This egregious error has stirred the "Al Gore Forces" (the AGF, as we like to call them) into action. It would seem that the AGF, led by Al Gore himself, object to observations in the sequel like "...belching, flatulent cows are adding more greenhouse gases to the atmosphere than all SUVs combined." They also note that sea levels will not rise much more than 18" by 2100, which is less than the twice-daily tidal variation in most coastal locations. Further, they observe that "not only is carbon plainly not poisonous, but changes in carbon-dioxide levels don't necessarily mirror human activity." They quote Nathan Myhrvold (former Microsoft Chief Technology Officer) as saying that Gore's doomsday scenarios "don't have any basis in physical reality in any reasonable time frame."
And, as the WSJ points out, more subversively Levitt and Dubner indicate that climatologists, like everyone else, respond to incentives in a way that shapes their conclusions. "The economic reality of research funding ... rather than scientific consensus, leads the [climate] models to approximately match one another."
Again from the WSJ, "Perhaps their biggest sin, which is also the central point of the chapter, is pointing out that seemingly insurmountable problems often have cheap and simple solutions." In this case, a helium balloon, several miles of garden hose, and a harmless stream of sulfur dioxide being pumped into the upper atmosphere. The basic idea is to engineer effects similar to those of the 1991 mega-eruption of Mt. Pinatubo in the Philippines, which spewed so much sulfuric ash into the stratosphere that it cooled the earth by about one degree Fahrenheit for a couple of years.
Worse than the AGF criticisms, we have Paul Krugman blasting "SuperFreakonomics" for "grossly [misrepresenting] other people's research, in both climate science and economics." I never thought I'd see Al Gore and Krugman on the same side of a sophisticated arguement but I would suppose there is a first time for everything. My thought on this is that Krugman needs to stick with what got him his "economics" Nobel (which itself has been devalued lately), unless, of course, he has political aspirations. Krugman would also be wise to remember that people like Dubner and Levitt always check what they write with those they interviewed to be sure of accuracy. Regardless of what opinions I might have of the "dismal science" (economics, for those who have not heard that term before), climate science would seem to me to be something open to debate. Straining my aging memory, it seems to me that I've read consistant reports that the earth has been "cooling" for the past ten years (see our recent "Global Cooling" post).
"SuperFreakonomics" will outsell anything Krugman has written lately. Perhaps that's Krugman's problem. Gore's problem is a much larger one. "Proof" of warming is difficult when everything is cooling.
Steven D. Levitt is a professor of economics at the University of Chicago and a recipient of the John Bates Clark Medal, awarded to the most influential economist under the age of 40. He, along with Stephen J. Dubner, wrote the 2005 best seller "Freakonomics". The sequel to that book is "SuperFreakonomics" which has just been published.
Dubner and Levitt made the mistake of including a chapter in their sequel on "global warming". This egregious error has stirred the "Al Gore Forces" (the AGF, as we like to call them) into action. It would seem that the AGF, led by Al Gore himself, object to observations in the sequel like "...belching, flatulent cows are adding more greenhouse gases to the atmosphere than all SUVs combined." They also note that sea levels will not rise much more than 18" by 2100, which is less than the twice-daily tidal variation in most coastal locations. Further, they observe that "not only is carbon plainly not poisonous, but changes in carbon-dioxide levels don't necessarily mirror human activity." They quote Nathan Myhrvold (former Microsoft Chief Technology Officer) as saying that Gore's doomsday scenarios "don't have any basis in physical reality in any reasonable time frame."
And, as the WSJ points out, more subversively Levitt and Dubner indicate that climatologists, like everyone else, respond to incentives in a way that shapes their conclusions. "The economic reality of research funding ... rather than scientific consensus, leads the [climate] models to approximately match one another."
Again from the WSJ, "Perhaps their biggest sin, which is also the central point of the chapter, is pointing out that seemingly insurmountable problems often have cheap and simple solutions." In this case, a helium balloon, several miles of garden hose, and a harmless stream of sulfur dioxide being pumped into the upper atmosphere. The basic idea is to engineer effects similar to those of the 1991 mega-eruption of Mt. Pinatubo in the Philippines, which spewed so much sulfuric ash into the stratosphere that it cooled the earth by about one degree Fahrenheit for a couple of years.
Worse than the AGF criticisms, we have Paul Krugman blasting "SuperFreakonomics" for "grossly [misrepresenting] other people's research, in both climate science and economics." I never thought I'd see Al Gore and Krugman on the same side of a sophisticated arguement but I would suppose there is a first time for everything. My thought on this is that Krugman needs to stick with what got him his "economics" Nobel (which itself has been devalued lately), unless, of course, he has political aspirations. Krugman would also be wise to remember that people like Dubner and Levitt always check what they write with those they interviewed to be sure of accuracy. Regardless of what opinions I might have of the "dismal science" (economics, for those who have not heard that term before), climate science would seem to me to be something open to debate. Straining my aging memory, it seems to me that I've read consistant reports that the earth has been "cooling" for the past ten years (see our recent "Global Cooling" post).
"SuperFreakonomics" will outsell anything Krugman has written lately. Perhaps that's Krugman's problem. Gore's problem is a much larger one. "Proof" of warming is difficult when everything is cooling.
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