Sunday, April 26, 2015 Mislead by the NOAA on Statistics

Here is a link to a article "Obama and the ‘Warmest Year on Record".

The article includes the following statement.

"For example, NOAA reported that the global average temperature for 2014 was 0.69 degrees Celsius (1.24 degrees F) above the 20th century average. This departure from the average is known as the temperature anomaly. The 2014 temperature anomaly (0.69 degrees C) ranks first among all years dating back to 1880. However, that finding has a margin of error of 0.09 degrees C — which means there is a 95 percent chance that 2014’s temperature anomaly falls between 0.60 degrees C and 0.78 degrees C."

Factcheck got this phrasing from the NOAA.  The NOAA's interpretation of the meaning of its 95% confidence interval is incorrect.

The methodology for constructing confidence intervals only assures that 95% of the 95% confidence intervals constructed from all possible samples will contain the true parameter. Thus, it is correct to say, before a sample is taken, that the probability that the 95% confidence interval computed from the sample will contain the true parameter is 95%. However, it is incorrect to say, after the sample is taken, that the 95% confidence interval computed from that particular sample contains the true parameter is 95%.

By the nature of the confidence interval methodology, 95% of the 95% confidence intervals constructed from all possible samples will contain the true parameter. For these confidence intervals, the probability that they contain the true parameter is 1. For the remaining 5% of the 95% confidence intervals, the probability that they contain the true parameter is 0.

Mancur Olson - The Rise and Decline of Nations

Quotation of the Day…

by DON BOUDREAUX on APRIL 25, 2015

… is from page 175 of the late Mancur Olson’s classic 1982 work, The Rise and Decline of Nations (original emphasis):

Another myth that generates a lot of poverty and suffering is that the economic development of the poor countries is, for fundamental economic or extra-institutional reasons, extremely difficult, and requires special promotion, planning, and effort. It is sometimes even argued that a tough dictator or totalitarian repression is required to force the sacrifices needed to bring about economic development. As I see it, in these days it takes an enormous amount of stupid policies or bad or unstable institutions to prevent​ economic development. Unfortunately, growth-retarding regimes, policies, and institutions are the rule rather than the exception….​

Saturday, April 25, 2015

Sunday, April 19, 2015

Gregory Mankiw on the Estate Tax's Unfairness and Adverse Impact on the Non Rich

Remarks by Dr. N. Gregory Mankiw Chairman Council of Economic Advisers at the National Bureau of Economic Research Tax Policy and the Economy Meeting National Press Club November 4, 2003.

My remarks today will focus on the estate tax, with particular attention to its incidence and its revenue effects. The estate tax is a timely issue. As you know, President Bush won repeal of the estate tax as part of the 2001 tax cut. Repeal does not take full effect until 2010 and is then scheduled to sunset at the end of that year, along with the rest of the 2001 tax cut. The President has consistently advocated making repeal permanent. This proposal won majority support in both houses of Congress last year, but failed to win the necessary 60 votes in the Senate. The future of the estate tax is likely to be a major topic of debate during the next few years.

The debate about the estate tax illustrates some general economic principles that are relevant to many areas of tax policy. I will focus on two in particular. The first is the distributional impact of taxes—who wins and who loses. The second concerns the effects of tax changes on government revenue. I believe that, along both dimensions, public discussion and official analysis of the estate tax are often fundamentally flawed.

Many of the problems arise from a fact about which all economists agree—taxes affect how people behave. These behavioral responses have implications for how the burden of the tax is distributed and for the revenue effects of a tax change. These implications, however, are often ignored.

Friday, April 17, 2015

Hillary's Economics Destroyed By Don Boudreaux

Here’s a letter to the Huffington Post:

Hillary Clinton insists that “[t]here’s something wrong when CEOs make 300 times more than the typical worker” (“Hillary Clinton Blasts Pay For CEOs, Hedge Fund Managers In Campaign Kickoff,” April 15).

Well now.  As a speaker Ms. Clinton is paid, on average, $300,000 per talk; as a speaker I am paid, on average, $1,000 per talk.  As a speaker, therefore, Ms. Clinton is paid 300 times more than I am paid!  Is “something wrong”?  Is the market for speakers rigged unfairly in favor of famous and politically connected speakers such as Ms. Clinton, and against obscure and ordinary speakers such as me?  Is Ms. Clinton part of a nefarious network of greedy speaker-insiders who profit unjustly at the expense of myself and other more-typical speakers by manipulating the speaker market?  Should government intervene into the speaker market to remedy this 300-to-1 ratio in speaker fees?  Would the amounts that event organizers pay me to speak go up if government ensures that Ms. Clinton’s speaker fee is pushed down?

Clearly not.

Although I reject everything that Ms. Clinton stands for (and proclaims in her speeches!), I’m quite sure that her high fee accurately reflects the value to her audiences of having her speak, just as my modest fee accurately reflects my value as a public speaker.  So unless Ms. Clinton is prepared to conclude, solely because her speaker pay is 300 times that of typical speakers, that she profits unjustly at my and other typical speakers’ expense, she has no basis for asserting that a 300-to-1 difference in pay in other industries and lines of work is “wrong.”

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

Tuesday, April 14, 2015

The Cat In The Hat On Aging

I cannot see
I cannot pee
I cannot chew
I cannot screw
Oh, my God, what can I do?

My memory shrinks
My hearing stinks
No sense of smell
I look like hell
My mood is bad - can you tell?

My body's drooping
I have trouble pooping
The Golden Years have come at last
The Golden Years can kiss my ass

Wednesday, April 08, 2015

McDonald’s Minimum Raise

A recent editorial in the New York Times by Stephanie Strom shows how little the Ms. Strom and, by implication, the New York Times understands about economics.  In particular, here are a two excerpts from the editorial (in italics) and my comments.

The increase follows moves by other low-wage employers but is more limited. It covers 12 percent of the McDonald’s work force and costs an amount equal to about 2 percent of profits in 2014. The recent raise at Walmart, to at least $10 an hour, covered nearly 40 percent of workers at a cost of about 6 percent of Walmart’s 2014 profits.

Clearly, if the McDonald’s raise were a response to the competition for workers, it would be bigger. And it does not come close to meeting protesters’ demands for $15 an hour, though the movement to improve fast-food workers’ pay has helped to push McDonald’s to this point.

Since Walmart is a different business than McDonald's, why is a comparison meaningful?Presumably, McDonald's want's to maintain an appropriate staff.    McDonald's decision reflects a detailed understanding of its situation and what it needs to pay workers.  But how would Ms. Strom know any of the myriad of details that are required to know what wage will accomplish this for McDonald's?  Ms. Strom's "clearly" is, at best, silly rhetoric, not fact.

Protesters' demands for $15 per hour has nothing to do with what is an appropriate wage for McDonald's to pay.  Ms. Strom's intimating that it does suggests either a serious misunderstanding or deception.

McDonald's wage is appropriate if it enables McDonald's to retain the staff it wants.  If McDonald's workers are worth more than McDonald's pays, then other firms will offer them more and they will leave McDonald's, forcing McDonald's to up the ante.  If other firms do not offer them more, then McDonald's is their best deal.

A fair wage for all McDonald’s workers would be one that allowed them to get by without food stamps and other public assistance.Research indicates that half of fast-food workers rely on public aid, with an estimated $1.2 billion a year in taxpayer dollars going to supplement low wages at McDonald’s. That is money that should be coming out of corporate coffers and going into worker pay.

A fair wage is what workers are worth.  A firm offering less will not attract workers because they will find other firms who pay more.  If some workers' worth is too low for their pay to allow them to live in the style Ms. Strom thinks that they should, then the remedy is charity, e.g., either public aid or private.  What is clear is that Ms. Strom's view of what a suitable standard of living is has nothing to do with what is an appropriate wage.  What Ms. Strom really wants is to have firms provide charity, through the equivalent of a tax, instead of the Government or private charities. One result would be lower employment, if firms acted rationally.

In principle, a firm should expand its workforce to the point that the wage required to hire more workers equals the value of their marginal product. There is nor assurance that this wage allows a standard of living acceptable to the Ms. Stroms of the world.  That the world is as it is, not as Ms. Strom would like it to be,  does not imply it is unfair.

Saturday, April 04, 2015

Dejavu - North Korea all over again?

U.S. and North Korea Sign Pact to End Nuclear Dispute

Debunking the Myth of the Job-Stealing Immigrant

"Debunking the Myth of the Job-Stealing Immigrant" is the title of a New York Times article by Adam Davidson.  Davidson is right on some key points, but ignores or is wrong on others.  Here are some excerpts from Davidson's article (in italics), along with my comments.

So why don’t we open up? The chief logical mistake we make is something called the Lump of Labor Fallacy: the erroneous notion that there is only so much work to be done and that no one can get a job without taking one from someone else. It’s an understandable assumption. After all, with other types of market transactions, when the supply goes up, the price falls. If there were suddenly a whole lot more oranges, we’d expect the price of oranges to fall or the number of oranges that went uneaten to surge.

The Lump of Labor Fallacy is real.  The idea that adding to a nation's population means more joblessness makes about as much sense as the notion, popular not so long ago, that computers would eliminate jobs and create joblessness. Computers did eliminate some kinds of jobs, but created enough others to avoid joblessness.   Here is another way to think about immigration's impact on jobs.  Suppose Britain  was physically moved to and attached to the US as another state.  Would that imply more unemployment?

Thursday, April 02, 2015

Michael Buckley in the New York Times: "The Price of Damming Tibet’s Rivers"

Here is an opinion piece by Michael Buckley in the New York Times, along with a few of my comments, in italics.  My problem with the piece is that what it leaves out and fails to consider suggests that Buckley's analysis and opinion cannot be trusted.

Michael Buckley is the author of “Meltdown in Tibet: China’s Reckless Destruction of Ecosystems From the Highlands of Tibet to the Deltas of Asia.”  Perhaps he is more interested in selling books than in leading an objective discussion.

NEW DELHI — CHINA has more than 26,000 large dams, more than the rest of the world combined. They feed its insatiable demand for energy and supply water for mining, manufacturing and agriculture.
Isn't renewable power generation supposed to be good?  What percentage of potential water power is being exploited?  Perhaps there should be more large dams.