http://economix.blogs.nytimes.com/2011/02/18/how-convincing-is-the-case-for-free-trade/?emc=eta1
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"The thing that lies at the foundation of positive change, the way I see it, is service to a fellow human being." (Lee Iacocca - creator of the Ford Mustang, former president of Ford, former CEO of Chrysler)
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Economics, of course, is the dismal science and there's a reason for that. But, sometimes economists come along and do a good job of getting their point across and relating that point to the real world.
Greg Mankiw wrote an excellent post in "Economix" that was published on Sunday: "Emerging Markets as Partners, Not Rivals." Mankiw always makes sense and that article was no exception: every country gains by unfettered international trade. Even when I disagree with him, Mankiw writes with imagination and style.
Uwe Reinhardt was kind enough to come along today and disagree with Mankiw by posting a response on "Economix." First, he restates the "... truth that economists hold self-evident: Relative to a status quo of no or limited international trade, permitting full free trade across borders will leave in its wake some immediate losers, but citizens who gain from such trade gain much more than losers lose. On a net basis, therefore, each nation gains over all from such trade."
Reinhardt goes on: "Economists assert that over the long run, the owners of businesses that lose their markets in international competition and their employees will shift into new economic endeavors in which they can function more competitively. Skeptics [that would include me], of course, often respond with the retort of John Maynard Keynes: 'In the long run, we're all dead.'"
Reinhardt's position on all of this is very similar to mine and is reflected in Reinhardt's use of Alan Blinder to state the other side of the arguement for him: "... offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation."
Blinder has estimated that 30 to 40 million jobs in the United States are potentially offshorable. Blinder gets the point that if economists keep saying "free trade is good for you" to people who know that it's not, economists will quickly become irrelevant to the public debate.
It's helpful to those of us who have some experience out in the business world to see someone like Reinhardt use Blinder to help him state a more realistic position on what is called "free trade."
What most economists that disagree with Blinder and Reinhardt don't get in this situation is that there is a cost to lost generations of workers here in the U.S. Our auto industry used to sell 16 or 17 million cars in the American market - now that market has shrunk to 11 or 12 million cars. What does the age 40 plus auto worker who's been laid off over the past ten years do for another job? We say we have retraining - we don't. So, what's the cost to the American economy of losing 250,000 auto workers? Economists look at the end game and the overall advantages but they don't calculate the near term "costs" to people in terms of career earnings and retirement, to governments in terms of tax receipts. Their calculations lean in the direction of products or services that will cost less because they're made overseas. Certainly that's logical but it ignores near term costs to people, governments and the fabric of our social structure.
So, "free trade" isn't really "free" and the quantitative "proofs" for it to exist don't consider the real costs.
Friday, February 18, 2011
Thursday, February 17, 2011
Watson Wins on Jeopardy
http://www.nytimes.com/2011/02/17/science/17jeopardy-watson.html?emc=eta1
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"In the beginning the universe was created. This has made a lot of people very angry and has been widely regarded as a bad move." (Douglas Adams)
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IBM has been working on a computer that will go where most of us assumed computers would go: basically to that place where intelligent machines can understand and respond like humans. So, Ken Jennings, famous for having won 74 games in a row on Jeopardy, lost to "Watson," IBM's question answering machine, last month.
Watson (named for Thomas J. Watson, IBM's founder) was created to tackle games like Jeopardy that require encyclopedic recall AND the ability to untangle convoluted and often opaque statements. For some of us, we thought that this would have happened sooner but, at least, it's beginning to happen.
According to nytimes.com, IBM will be announcing today that it will collaborate with Columbia University and the University of Maryland to create a physician's assistant service that will allow doctors to query a cybernetic assistant.
I encourage you to click on The Watson Trivia Challenge (it's within the article attached) and play against Watson. I did and thoroughly enjoyed it. I quit while I was ahead 1-0!
Is this "HAL" ("2001: A Space Odyssey.")? I don't know but it's where one company is going with the potential for tomorrow's applications.
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"In the beginning the universe was created. This has made a lot of people very angry and has been widely regarded as a bad move." (Douglas Adams)
***************
IBM has been working on a computer that will go where most of us assumed computers would go: basically to that place where intelligent machines can understand and respond like humans. So, Ken Jennings, famous for having won 74 games in a row on Jeopardy, lost to "Watson," IBM's question answering machine, last month.
Watson (named for Thomas J. Watson, IBM's founder) was created to tackle games like Jeopardy that require encyclopedic recall AND the ability to untangle convoluted and often opaque statements. For some of us, we thought that this would have happened sooner but, at least, it's beginning to happen.
According to nytimes.com, IBM will be announcing today that it will collaborate with Columbia University and the University of Maryland to create a physician's assistant service that will allow doctors to query a cybernetic assistant.
I encourage you to click on The Watson Trivia Challenge (it's within the article attached) and play against Watson. I did and thoroughly enjoyed it. I quit while I was ahead 1-0!
Is this "HAL" ("2001: A Space Odyssey.")? I don't know but it's where one company is going with the potential for tomorrow's applications.
The Gender Pay Gap
http://economix.blogs.nytimes.com/2011/02/17/the-gender-pay-gap-by-industry/?emc=eta1
A lot of work has been done on the gender pay gap by some good people. This data is good and comes from the BLS which is an excellent source. The variation by industry is especially interesting. So, while the overall average is women at 80% of their male counterparts, the construction sector, for example, has relatively little difference in the typical pay received by men and women: women earn 92.2 cents on the dollar of what men earn.
A lot of work has been done on the gender pay gap by some good people. This data is good and comes from the BLS which is an excellent source. The variation by industry is especially interesting. So, while the overall average is women at 80% of their male counterparts, the construction sector, for example, has relatively little difference in the typical pay received by men and women: women earn 92.2 cents on the dollar of what men earn.
The Economy
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2719&sms_ss=email&at_xt=4d5d19a5ff55d00d%2C0
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"When opportunity comes, it's too late to prepare." (John Wooden)
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My perspective is always informed by the folks who are respected professionals in the field of finance and economics. I've attached the K@W which came out yesterday on "...Decoding the Economy's Mixed Messages."
For those of you who know me, I define economic recovery by where we are with jobs? Interestingly, Susan Wachter, who is a real estate professor at Wharton, looks upon it the same way: "Job growth, is, of course, the key factor in recovery and in the fact that it's a slow recovery. Profits have certainly been strong, and that is usually a precursor of job growth, but job growth is slow. From the negative side, in many recessions, housing is the power driver to recovery. And, of course, it's missing in action in this recovery."
Jeremy Siegel's perspective (one I'm always interested in since he is the best finance professor in the best finance department in any business school) is that there are some hopeful signs. He sees better job growth coming with corporate profits expected to hit record highs this year. But, he is also concerned about food and/or commodity inflation around the world.
Back to Susan Wachter: she sees housing at the mercy of the overall economy. The "consensus is housing prices continuing to bounce along the bottom ... (with) prices declining another 5%." So, "People who are on the sidelines, who are thinking about buying into the housing market, becoming an owner versus a renter, were actually looking forward to what was happening with prices. As the threat of price depreciation increases, you'll find more people sitting on the sidelines [because] it becomes reinforcement [not to buy a home]."
With the statistic on underwater mortgages (people who owe more on their mortgages than their house is currently worth) actually going up from 23% last quarter to 27% this quarter, professor Wachter observed that this is a "fundamental failure" the consequences of which are going to be with us for many years.
Our thought on this: housing is not coming back anytime soon.
And, of course, commodity price inflation is a concern now all over the world and the K@W finance panel acknowledged that.
Professor Siegel's optimism about the stock market was of interest because one wonders how much momentum is left after a couple of good years. Siegel's position on that is that we have higher corporate earnings now (with lower interest rates) than we had when the stock market hit it's previous all time high in June of 2007. With stocks selling at an average PE ratio of 13 when the average PE has historically been around 15, there's still room to grow. Even with rising interest rates, there'll be a rising stock market. With commodity prices going up, oil is a risk to economic growth at a certain price but not yet.
To Siegel, the Facebook potential IPO is something that's as unique to Facebook as Google was to Google: it doesn't reflect a potential internet "bubble." Interestingly, Siegel has the same question as many of us: how does Facebook go from $25 billion as a "valuation" in "The Social Network" movie that came out recently and it's "already" (in less than a year since the movie came out) up to $50 billion without yet being "publicly" traded? If Siegel's asking that question, the rest of us should.
Overall, it's nice to see some reasons to be positive about the economy but we're not back yet.
***************
"When opportunity comes, it's too late to prepare." (John Wooden)
***************
My perspective is always informed by the folks who are respected professionals in the field of finance and economics. I've attached the K@W which came out yesterday on "...Decoding the Economy's Mixed Messages."
For those of you who know me, I define economic recovery by where we are with jobs? Interestingly, Susan Wachter, who is a real estate professor at Wharton, looks upon it the same way: "Job growth, is, of course, the key factor in recovery and in the fact that it's a slow recovery. Profits have certainly been strong, and that is usually a precursor of job growth, but job growth is slow. From the negative side, in many recessions, housing is the power driver to recovery. And, of course, it's missing in action in this recovery."
Jeremy Siegel's perspective (one I'm always interested in since he is the best finance professor in the best finance department in any business school) is that there are some hopeful signs. He sees better job growth coming with corporate profits expected to hit record highs this year. But, he is also concerned about food and/or commodity inflation around the world.
Back to Susan Wachter: she sees housing at the mercy of the overall economy. The "consensus is housing prices continuing to bounce along the bottom ... (with) prices declining another 5%." So, "People who are on the sidelines, who are thinking about buying into the housing market, becoming an owner versus a renter, were actually looking forward to what was happening with prices. As the threat of price depreciation increases, you'll find more people sitting on the sidelines [because] it becomes reinforcement [not to buy a home]."
With the statistic on underwater mortgages (people who owe more on their mortgages than their house is currently worth) actually going up from 23% last quarter to 27% this quarter, professor Wachter observed that this is a "fundamental failure" the consequences of which are going to be with us for many years.
Our thought on this: housing is not coming back anytime soon.
And, of course, commodity price inflation is a concern now all over the world and the K@W finance panel acknowledged that.
Professor Siegel's optimism about the stock market was of interest because one wonders how much momentum is left after a couple of good years. Siegel's position on that is that we have higher corporate earnings now (with lower interest rates) than we had when the stock market hit it's previous all time high in June of 2007. With stocks selling at an average PE ratio of 13 when the average PE has historically been around 15, there's still room to grow. Even with rising interest rates, there'll be a rising stock market. With commodity prices going up, oil is a risk to economic growth at a certain price but not yet.
To Siegel, the Facebook potential IPO is something that's as unique to Facebook as Google was to Google: it doesn't reflect a potential internet "bubble." Interestingly, Siegel has the same question as many of us: how does Facebook go from $25 billion as a "valuation" in "The Social Network" movie that came out recently and it's "already" (in less than a year since the movie came out) up to $50 billion without yet being "publicly" traded? If Siegel's asking that question, the rest of us should.
Overall, it's nice to see some reasons to be positive about the economy but we're not back yet.
Saturday, February 12, 2011
Weather Extremes
http://online.wsj.com/article/SB10001424052748704422204576130300992126630.html?mod=WSJ_Opinion_MIDDLESecond
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"What I would really like to do is to go down in history as the President who made Americans believe in themselves again." (Ronald Reagan - Ronald Reagan Centennial - 2/6/11)
"He knows so little and accomplishes so much." (Robert McFarlane - National Security Adviser to Ronald Reagan)
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So, there was a Super Bowl in Dallas (Arlington) last week and some people noticed the weather. Anne Jolis, who writes for the Wall Street Journal (Opinion Europe), was one of those who noticed: "Some climate alarmists would have us believe that these storms are yet another baleful consequence of man-made CO2 emissions. In addition to the latest weather events, they also point to recent cyclones in Burma, last winter's fatal chills in Nepal and Bangladesh, December's blizzards in Britain, and every other drought, typhoon and unseasonable heat wave around the world."
Jolis points out that there is a "Twentieth Century Reanalysis Project" where super-computers are being used to generate a data set of global atmospheric circulation from 1871 to the present. As it happens, the project's initial findings, published last month, show no evidence of an intensifying weather trend. So, "There's no data driven answer yet to the question of how human activity has affected extreme weather."
I know this will be a great disappointment to Al Gore who took his Nobel Prize as the world's leading alarmist very seriously. Perhaps Al, since he invented the "Internet," could give the folks who are programming the super-computer a hand in figuring out why the data keeps coming up wrong!
If possible, we could all agree to spend trillions of dollars to return to a pre-industrial level of carbon emissions. Then, we would have a pre-industrial level of GDP growth and a worldwide depression. And, the climate will continue to change as it always has.
My vote is to continue to encourage GDP growth.
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"What I would really like to do is to go down in history as the President who made Americans believe in themselves again." (Ronald Reagan - Ronald Reagan Centennial - 2/6/11)
"He knows so little and accomplishes so much." (Robert McFarlane - National Security Adviser to Ronald Reagan)
***************
So, there was a Super Bowl in Dallas (Arlington) last week and some people noticed the weather. Anne Jolis, who writes for the Wall Street Journal (Opinion Europe), was one of those who noticed: "Some climate alarmists would have us believe that these storms are yet another baleful consequence of man-made CO2 emissions. In addition to the latest weather events, they also point to recent cyclones in Burma, last winter's fatal chills in Nepal and Bangladesh, December's blizzards in Britain, and every other drought, typhoon and unseasonable heat wave around the world."
Jolis points out that there is a "Twentieth Century Reanalysis Project" where super-computers are being used to generate a data set of global atmospheric circulation from 1871 to the present. As it happens, the project's initial findings, published last month, show no evidence of an intensifying weather trend. So, "There's no data driven answer yet to the question of how human activity has affected extreme weather."
I know this will be a great disappointment to Al Gore who took his Nobel Prize as the world's leading alarmist very seriously. Perhaps Al, since he invented the "Internet," could give the folks who are programming the super-computer a hand in figuring out why the data keeps coming up wrong!
If possible, we could all agree to spend trillions of dollars to return to a pre-industrial level of carbon emissions. Then, we would have a pre-industrial level of GDP growth and a worldwide depression. And, the climate will continue to change as it always has.
My vote is to continue to encourage GDP growth.
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