Friday, March 11, 2016
Saving Social Security
Here is a link to a paper I wrote to illustrate how silly is most of what you hear about Social Security.
Thursday, March 10, 2016
Some insight into the stupidity of Bernie Sanders and his ilk
Here is an article by Daniel Bier, the site editor of FEE.org, that is on target.
---------------------------
At Sunday's Democratic presidential debate, Bernie Sanders attacked American trade with Mexicans, Chinese, Vietnamese, and presumably all other foreigners who might try to steal our jobs. Sanders harangued Hillary Clinton,
NAFTA, supported by the Secretary, cost us 800,000 jobs nationwide, tens of thousands of jobs in the Midwest. Permanent normal trade relations with China cost us millions of jobs.
Look, I was on a picket line in early 1990’s against NAFTA becauseyou didn’t need a PhD in economics to understand that American workers should not be forced to compete against people in Mexico making 25 cents an hour.
... And the reason that I was one of the first, not one of the last to be in opposition to the TPP is that American workers ... should not be forced to compete against people in Vietnam today making a minimum wage of $0.65 an hour.
Look, what we have got to do is tell corporate America that they cannot continue to shut down. We’ve lost 60,000 factories since 2001. They’re going to start having to, if I’m president, invest in this country — not in China, not in Mexico.
First, let's note his dodgy job numbers. As Dan Griswold noted in 2011, in response to a similar claim about jobs "lost" from the "trade deficit" with Mexico,
In the first five years after NAFTA’s passage, 1994-98, when we could have expected it to have the most impact, the U.S. economy ADDED a net 15 million new jobs, including 700,000 manufacturing jobs.
Behold, the horror unleashed on US manufacturing jobs by trade with Mexico:
---------------------------
At Sunday's Democratic presidential debate, Bernie Sanders attacked American trade with Mexicans, Chinese, Vietnamese, and presumably all other foreigners who might try to steal our jobs. Sanders harangued Hillary Clinton,
NAFTA, supported by the Secretary, cost us 800,000 jobs nationwide, tens of thousands of jobs in the Midwest. Permanent normal trade relations with China cost us millions of jobs.
Look, I was on a picket line in early 1990’s against NAFTA becauseyou didn’t need a PhD in economics to understand that American workers should not be forced to compete against people in Mexico making 25 cents an hour.
... And the reason that I was one of the first, not one of the last to be in opposition to the TPP is that American workers ... should not be forced to compete against people in Vietnam today making a minimum wage of $0.65 an hour.
Look, what we have got to do is tell corporate America that they cannot continue to shut down. We’ve lost 60,000 factories since 2001. They’re going to start having to, if I’m president, invest in this country — not in China, not in Mexico.
First, let's note his dodgy job numbers. As Dan Griswold noted in 2011, in response to a similar claim about jobs "lost" from the "trade deficit" with Mexico,
In the first five years after NAFTA’s passage, 1994-98, when we could have expected it to have the most impact, the U.S. economy ADDED a net 15 million new jobs, including 700,000 manufacturing jobs.
Behold, the horror unleashed on US manufacturing jobs by trade with Mexico:
Wednesday, March 09, 2016
President Obama Can't Have His Ice Cream and Eat It, Too
Here is a link to an article by Michael Farren (George Mason University) describing, in understandable terms, the problems with a minimum wage.
If you totally disagree with Farren's perspective, don't embarrass yourself by telling someone who might actually know something about microeconomics.
If you totally disagree with Farren's perspective, don't embarrass yourself by telling someone who might actually know something about microeconomics.
Tuesday, March 08, 2016
Global Warming and the Irrelevance of Science
Here is a reproduction of an article by Richard Lindzen, Alfred P. Sloan Professor of Atmospheric Sciences (Emeritus) Massachusetts Institute of Technology. This is the text of a lecture delivered on August 20, 2015 to the 48th Session: Erice International Seminars on Planetary Emergencies.
------------------------------
In many fields, governments have a monopoly on the support of scientific research. Ideally, they support the science because they believe objective research to be valuable.
Unfortunately, as anticipated by Eisenhower in his farewell speech from January 17, 1961 (the one that also warned of the military-industrial complex), “Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity.” Under these circumstances, when the government wants a particular scientific outcome the ideal arrangement is vulnerable. However, as I hope to show, the problem is not simply bias.
Rather, the powers that be invent the narrative independently of the views of even cooperating scientists. It is, in this sense, that the science becomes irrelevant. This was certainly the case in the first half of the twentieth century, where we just have to look at Lysenkoism [1] in the former Soviet Union, Social Darwinism, and Eugenics throughout the western world [2], as well as, in the 1960s, the unfounded demonization of DDT [3]. Each phenomenon led to millions of deaths. And, in each case, the scientific community was essentially paralyzed, if not actually complicit.
------------------------------
In many fields, governments have a monopoly on the support of scientific research. Ideally, they support the science because they believe objective research to be valuable.
Unfortunately, as anticipated by Eisenhower in his farewell speech from January 17, 1961 (the one that also warned of the military-industrial complex), “Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity.” Under these circumstances, when the government wants a particular scientific outcome the ideal arrangement is vulnerable. However, as I hope to show, the problem is not simply bias.
Rather, the powers that be invent the narrative independently of the views of even cooperating scientists. It is, in this sense, that the science becomes irrelevant. This was certainly the case in the first half of the twentieth century, where we just have to look at Lysenkoism [1] in the former Soviet Union, Social Darwinism, and Eugenics throughout the western world [2], as well as, in the 1960s, the unfounded demonization of DDT [3]. Each phenomenon led to millions of deaths. And, in each case, the scientific community was essentially paralyzed, if not actually complicit.
Kelly Johnson and Lockheed's Skunk Works
Kelly Johnson was an aircraft designer who worked at Lockheed developing advanced aircraft. His aircraft were famous for exceptional performance.
Here is a link that provides background on Johnson and his planes.
Here is a link that provides background on Johnson and his planes.
Sunday, March 06, 2016
George Reisman: China et al. Are Not “Killing Us”
Here is an article by George Reisman, Pepperdine University Professor Emeritus of Economics, that puts trade imbalances in perspective.
George focuses on Trump, but all the other presidential candidates have made similar statements.
George is on target.
George is on target.
-----------------------------
The current Republican front-runner, Donald Trump, has repeatedly claimed that China, and many other countries, such as Mexico and Vietnam, are “killing us” in foreign trade. The basis of his claim is the fact that U.S. imports from those countries substantially exceed U.S. exports to those countries. In 2015, for example, the overall, total difference between U.S. imports and exports, known as “the balance of trade,” was in excess of $500 billion, with trade with China accounting for about 70 percent of that sum.
An excess of imports over exports is typically described as an “unfavorable balance of trade.” The description of the balance as “unfavorable” derives from the belief that exports are a source both of money coming into a country, in exchange for the goods exported, and of jobs in that country in the production of the exports. Imports, on the other hand, are viewed as taking money out of the country, in the purchase of the imports, and transferring jobs from the domestic economy to the foreign producers of the imports.
It is on this basis that Trump and many others believe that China et al. are “killing us.” The implication of this belief and its intellectual foundations is that the United States needs to adopt a government policy of increasing exports and reducing imports by such means as protective tariffs, import quotas, and export subsidies. (Trump has not yet explicitly enunciated this policy, but it is logically implied in what he does say.)
Now the truth is that in the monetary conditions of the present-day world, an excess of imports over exports does not at all represent a threat to the money supply of a country or the ability of domestic spending to support employment. In the 17thCentury, when the doctrine of the balance of trade first came into vogue, the money of the world was gold and silver. In those conditions, the only way that a country without gold or silver mines could increase its money supply was by means of obtaining money from abroad, in exchange for the export of goods. The import of goods could for a time reduce the money supply of a country.
But today, money is irredeemable paper, and every country manufactures its own money supply. Indeed, in these conditions, an outflow of part of the money supply of a country in exchange for imports is positively favorable. This is certainly true in the case of the United States dollar, which to an important extent serves as a global currency. The fact that dollars are in demand globally, but are produced only in the United States, implies that the United States must export a more or less substantial part of its new and additional supply of dollars. Exporting part of the supply of dollars represents getting imports of real goods in exchange for pieces of paper that are virtually costless to produce and replace. At the same time, it limits the rise in prices in the United States by holding down the increase in the supply of money in circulation in the United States. Thus, seen in this light, an excess of imports over exports turns out actually to be highly favorable rather than “unfavorable.”
Far more important than the gain associated with obtaining imports by means of the export of costless paper dollars is the gain associated with obtaining imports by means of the investment of foreign capital. To make this point as clear as possible, think of Saudi Arabia before it had an oil industry but after geologists had confirmed the existence of vast oil deposits there. What was necessary to develop those deposits was flotillas of ships from Europe and America bringing vast imports of drilling equipment, sections of pipe, the materials and equipment required for building oil refineries, and the consumers’ goods required for armies of foreign workers constructing the Saudi oil industry. Indeed, so far from being a source of unemployment in Saudi Arabia, this allegedly unfavorable balance of trade was the foundation not only of Saudi Arabia’s oil industry but at the same time practically all of the worthwhile jobs that exist in Saudi Arabia, which are either in its oil industry or closely connected to its oil industry. Thus, in fact, nothing could be more favorable in reality than what most of today’s economists absurdly describe as an “unfavorable” balance of trade and a cause of unemployment, namely, such an excess of imports over exports.
Today, investment by China and other foreign countries in the U.S. is what enables the American economy to import more than it exports. As in the case of Saudi Arabia, this investment and accompanying excess of imports over exports makes it possible for the United States to have more and better equipped factories and all other types of means of production than would otherwise be the case, and thus to have a larger number of well-paying jobs. Indirectly, even the purchase of U.S. government securities by China et al. has this effect. Foreign purchases of U.S. government securities hold down the diversion of capital funds from U.S. firms into the purchase of government securities. The government securities that foreign investors buy are government securities that U.S. investors do not have to buy, which enables them to have more funds available for the purchase of capital goods and labor in the U.S. To this extent, its effect is the prevention of the drain of capital funds from the purchase of capital goods and labor by business into the financing of government spending.
In addition, foreign investment in U.S. government securities serves to prevent the Federal Reserve from creating still more new and additional money with which to purchase those securities, something which would represent a substantial increase in inflation in the U.S.
American job losses are not the result of freer trade and an excess of imports over exports, but of government policies that prevent capital accumulation in the United States, among them policies that limit imports. An essential part of any economic policy that would truly help to “make America great again” is to avoid preventing imports.
The current Republican front-runner, Donald Trump, has repeatedly claimed that China, and many other countries, such as Mexico and Vietnam, are “killing us” in foreign trade. The basis of his claim is the fact that U.S. imports from those countries substantially exceed U.S. exports to those countries. In 2015, for example, the overall, total difference between U.S. imports and exports, known as “the balance of trade,” was in excess of $500 billion, with trade with China accounting for about 70 percent of that sum.
An excess of imports over exports is typically described as an “unfavorable balance of trade.” The description of the balance as “unfavorable” derives from the belief that exports are a source both of money coming into a country, in exchange for the goods exported, and of jobs in that country in the production of the exports. Imports, on the other hand, are viewed as taking money out of the country, in the purchase of the imports, and transferring jobs from the domestic economy to the foreign producers of the imports.
It is on this basis that Trump and many others believe that China et al. are “killing us.” The implication of this belief and its intellectual foundations is that the United States needs to adopt a government policy of increasing exports and reducing imports by such means as protective tariffs, import quotas, and export subsidies. (Trump has not yet explicitly enunciated this policy, but it is logically implied in what he does say.)
Now the truth is that in the monetary conditions of the present-day world, an excess of imports over exports does not at all represent a threat to the money supply of a country or the ability of domestic spending to support employment. In the 17thCentury, when the doctrine of the balance of trade first came into vogue, the money of the world was gold and silver. In those conditions, the only way that a country without gold or silver mines could increase its money supply was by means of obtaining money from abroad, in exchange for the export of goods. The import of goods could for a time reduce the money supply of a country.
But today, money is irredeemable paper, and every country manufactures its own money supply. Indeed, in these conditions, an outflow of part of the money supply of a country in exchange for imports is positively favorable. This is certainly true in the case of the United States dollar, which to an important extent serves as a global currency. The fact that dollars are in demand globally, but are produced only in the United States, implies that the United States must export a more or less substantial part of its new and additional supply of dollars. Exporting part of the supply of dollars represents getting imports of real goods in exchange for pieces of paper that are virtually costless to produce and replace. At the same time, it limits the rise in prices in the United States by holding down the increase in the supply of money in circulation in the United States. Thus, seen in this light, an excess of imports over exports turns out actually to be highly favorable rather than “unfavorable.”
Far more important than the gain associated with obtaining imports by means of the export of costless paper dollars is the gain associated with obtaining imports by means of the investment of foreign capital. To make this point as clear as possible, think of Saudi Arabia before it had an oil industry but after geologists had confirmed the existence of vast oil deposits there. What was necessary to develop those deposits was flotillas of ships from Europe and America bringing vast imports of drilling equipment, sections of pipe, the materials and equipment required for building oil refineries, and the consumers’ goods required for armies of foreign workers constructing the Saudi oil industry. Indeed, so far from being a source of unemployment in Saudi Arabia, this allegedly unfavorable balance of trade was the foundation not only of Saudi Arabia’s oil industry but at the same time practically all of the worthwhile jobs that exist in Saudi Arabia, which are either in its oil industry or closely connected to its oil industry. Thus, in fact, nothing could be more favorable in reality than what most of today’s economists absurdly describe as an “unfavorable” balance of trade and a cause of unemployment, namely, such an excess of imports over exports.
Today, investment by China and other foreign countries in the U.S. is what enables the American economy to import more than it exports. As in the case of Saudi Arabia, this investment and accompanying excess of imports over exports makes it possible for the United States to have more and better equipped factories and all other types of means of production than would otherwise be the case, and thus to have a larger number of well-paying jobs. Indirectly, even the purchase of U.S. government securities by China et al. has this effect. Foreign purchases of U.S. government securities hold down the diversion of capital funds from U.S. firms into the purchase of government securities. The government securities that foreign investors buy are government securities that U.S. investors do not have to buy, which enables them to have more funds available for the purchase of capital goods and labor in the U.S. To this extent, its effect is the prevention of the drain of capital funds from the purchase of capital goods and labor by business into the financing of government spending.
In addition, foreign investment in U.S. government securities serves to prevent the Federal Reserve from creating still more new and additional money with which to purchase those securities, something which would represent a substantial increase in inflation in the U.S.
American job losses are not the result of freer trade and an excess of imports over exports, but of government policies that prevent capital accumulation in the United States, among them policies that limit imports. An essential part of any economic policy that would truly help to “make America great again” is to avoid preventing imports.
Saturday, March 05, 2016
Statistical temperature forecasts
Here is a link to a paper by Terence Mills, "Statistical Forecasting How Fast Will Future Warming Be?" It puts the current climate forecasts in perspective, statistically.
Terence Mills is Professor of Applied Statistics and Econometrics at Loughborough University.
Terence Mills is Professor of Applied Statistics and Econometrics at Loughborough University.
Terrence provides good reasons for doubting the global warming precision certainty you hear so often from politicians, the media, and many "climate scientists".
Here are the "Introduction" and "Discussion" sections of the paper.
Here are the "Introduction" and "Discussion" sections of the paper.
Perspective on Climate Forecasts
Here is a link to a comment on climate science and Keynesian economics by Phillip Magness. It puts both in perspective. However, Magness still misses the key point. He advocates much more sophisticated statistical methodology, which is desirable and which many of current climate doomsayers ignore, but fails to realize that sophisticated statistics cannot compensate for the lack of an accurate theoretical climate model.
Can sophisticated statistics handle Chaos?
Do current climate models accurately forecast ice ages, etc.?
No? Then why think that current climate models are accurate?
Here is the comment.
The internet has been abuzz for the past few days with a new climate forecasting study by Terence Mills, a well-known statistician at Loughborough University in the UK. The report is highly technical and reads as something of a mathematics textbook on how to design Box-Jenkins type ARIMA forecasting models for climate data, so statistical novice readers be warned. But there’s also an important takeaway that climate scientists, policymakers, and laymen should heed.
Mills’ larger point is that the earth’s climate is an exceedingly complex system. Making climate forecasts about temperature data, atmospheric carbon, sea level rise, and the sort accordingly requires the use of statistical methods that are appropriate for handling complex time series data. The relevant forecasting techniques involve mathematical tools that have been refined over many decades of ever-advancing computer capabilities. The aforementioned Box-Jenkins approach is now something of the industry standard for complex system time series forecasting in multiple fields of applied mathematics, science, finance, and economics. It has many modifications and can be carefully tailored to account for things like seasonality in a data set, or used to tease out specific internal patterns that overlay a larger time series.
The product of these approaches is highly useful to forecasters though. ARIMAs and similar moving average models utilize a historical data set to fit and project a trend line forward from the present by a specified number of days/months/years. The resulting forecasts are probabilistic, that is to say they come with upper and lower confidence boundaries. They also carry the added benefit of endogenizing the historical data of the time series that they are derived from, which helps to work around the problem of having to make sometimes-questionable and/or discretionary assumptions about input variables that are causally complex, difficult to isolate, and interrelated to one another in addition to the overall trend. With all of that in mind, an ARIMA technique, undergoing a few appropriate modifications, would appear to be an extremely useful tool to adapt to climate forecasting.
It might therefore come with some surprise to learn that many long term global temperature “forecasts” by climatologists actually do not actually employ these standard forecasting tools. There are a few exceptions, including several papers by Mills that expand upon the techniques in his new report. But compared to most other applied mathematics, climatology as a whole is still very much in the statistical dark ages.
Can sophisticated statistics handle Chaos?
Do current climate models accurately forecast ice ages, etc.?
No? Then why think that current climate models are accurate?
Here is the comment.
The internet has been abuzz for the past few days with a new climate forecasting study by Terence Mills, a well-known statistician at Loughborough University in the UK. The report is highly technical and reads as something of a mathematics textbook on how to design Box-Jenkins type ARIMA forecasting models for climate data, so statistical novice readers be warned. But there’s also an important takeaway that climate scientists, policymakers, and laymen should heed.
The product of these approaches is highly useful to forecasters though. ARIMAs and similar moving average models utilize a historical data set to fit and project a trend line forward from the present by a specified number of days/months/years. The resulting forecasts are probabilistic, that is to say they come with upper and lower confidence boundaries. They also carry the added benefit of endogenizing the historical data of the time series that they are derived from, which helps to work around the problem of having to make sometimes-questionable and/or discretionary assumptions about input variables that are causally complex, difficult to isolate, and interrelated to one another in addition to the overall trend. With all of that in mind, an ARIMA technique, undergoing a few appropriate modifications, would appear to be an extremely useful tool to adapt to climate forecasting.
It might therefore come with some surprise to learn that many long term global temperature “forecasts” by climatologists actually do not actually employ these standard forecasting tools. There are a few exceptions, including several papers by Mills that expand upon the techniques in his new report. But compared to most other applied mathematics, climatology as a whole is still very much in the statistical dark ages.
Bernie Sanders for President
Here is a link to a video that shows why Bernie Sanders should be your choice for President.
Funny and true. If you don't buy the "true", you do not understand economics and lack knowledge of history.
Funny and true. If you don't buy the "true", you do not understand economics and lack knowledge of history.
Sunday, February 21, 2016
Charles Koch: This is the one issue where Bernie Sanders is right
Here is a link to Charles Koch's article in the Washington Post. Yes, this is the billionaire Charles Koch.
As he campaigns for the Democratic nomination for president, Vermont Sen. Bernie Sanders (I) often sounds like he’s running as much against me as he is the other candidates. I have never met the senator, but I know from listening to him that we disagree on plenty when it comes to public policy.
Even so, I see benefits in searching for common ground and greater civility during this overly negative campaign season. That’s why, in spite of the fact that he often misrepresents where I stand on issues, the senator should know that we do agree on at least one — an issue that resonates with people who feel that hard work and making a contribution will no longer enable them to succeed.
The senator is upset with a political and economic system that is often rigged to help the privileged few at the expense of everyone else, particularly the least advantaged. He believes that we have a two-tiered society that increasingly dooms millions of our fellow citizens to lives of poverty and hopelessness. He thinks many corporations seek and benefit from corporate welfare while ordinary citizens are denied opportunities and a level playing field.
I agree with him.
Koch is on target.
A snippet:
Even so, I see benefits in searching for common ground and greater civility during this overly negative campaign season. That’s why, in spite of the fact that he often misrepresents where I stand on issues, the senator should know that we do agree on at least one — an issue that resonates with people who feel that hard work and making a contribution will no longer enable them to succeed.
The senator is upset with a political and economic system that is often rigged to help the privileged few at the expense of everyone else, particularly the least advantaged. He believes that we have a two-tiered society that increasingly dooms millions of our fellow citizens to lives of poverty and hopelessness. He thinks many corporations seek and benefit from corporate welfare while ordinary citizens are denied opportunities and a level playing field.
I agree with him.
Subscribe to:
Posts (Atom)