Saturday, April 13, 2002

Young America (
Interesting chart showing that the percentage of people over 60 is lower in the U.S. than in any other major industrialized nation. Since, alas, productivity declines rapidly with old age, this is yet another reason why America will sustain her position as the world's dominant economic power.

Friday, April 12, 2002

And now, a little bit on the effects of the progressive income tax on labor force participation.
KrugmanWatch is up!

Did putting so much executive compensation in stock cause the Enron crisis?

I say yes. No charts, but a nifty explanation of the agency problem.

Did the Internet Kill Profits?

Apparently, Ed Leamer thinks so, but I don't think he has a strong case.

Thursday, April 11, 2002

MatthewYglesias on Taxes

Yglesias on "wealth taxes" and the Laffer Curve:
my personal take on it is that there's no real point in debating the merits of the tax rates in isolation, the question is what we're spending the money on.
While I'd be one of the first to see the merits in a tax cut constraining congress, I'd say the important question is what taxation policy is likely to maximize long-term economic growth and raise all boats - not equality or inequality per se. Matt's right that fairness (the tendency of one consistituency to benefit from a policy change) shouldn't be the central argument in public debate. Unfortunately, Andrew Sullivan or Ted Kennedy, fairness always seems to be the issue in political debate of taxes.

Ferguson on Social Security

Andrew Ferguson at
While the ideological foes sputter and snarl and divert everyone's attention with sham arguments about ``privatization'' and ``bold change,'' future taxes will be quietly raised, future benefits will be quietly cut, and Social Security will survive, as it always does.

NGO now pro-trade

Oxfam, in a break with the anti-globalization movement, is now pro-trade. See this report. While they do not support completely free markets, it is nice to see a bit of the sun of rationality shine through.

Bloggers and Making Money

My view is that blogging "professionally" is like participating in an open source software project. The economic benefit consists of an enhanced reputation that could be used in other ways.

Wednesday, April 10, 2002

How Bloggers Can Make Money
I have figured out how successful Bloggers can cash in. People are willing to pay a lot for well developed online characters in games like Everquest. Imagine how much someone would pay to take over a popular site like instapundit? If any of the popular Bloggers decides to leave, they should auction off the rights to maintain their site. True, the new blogger would have to prove himself, but he would be starting from the top so if he were talented he could remain popular.
Brad DeLong is very optimistic about productivity. His point is that if you hold the amount of nominal spending on information technology constant, this implies sharp increases in real spending, because prices are declining so rapidly. Thus, if information technology has any productivity benefit at all, we should see major benefits as we keep using it more intensively.
Whoa. Just when Paul Krugman was getting back to economics, Caroline Baum of Bloomberg (one of my favorites) rips him to shreds:
While Krugman has the same right to express his views in his column as I do in mine, he has turned his valuable real estate -- his op-ed colleague, Tom Friedman, just snagged one of the Times's record seven Pulitzer Prizes -- into a toxic waste dump.
The Front-Loaded Economy

Information wants to be free, but people still need to get paid.
TCS: Tech - Blogging: An Economist's View
Will the blogging boom be beaten back by big business? See my article in Tech Central Station.

Tuesday, April 09, 2002

Krugmanwatch, Adam Smith, and silly boycotts on Live from the WTC.

Stopping the Senseless Partisanship in the West 40s

Tuesday is Krugman Spaghetti day, and he delivers (surprise!) an economics column, complete with a recorded prediction. His first in a few weeks.
Are world oil markets that tight? Not yet — the world still has about seven million barrels' worth of spare capacity each day. So Iraq, by taking away its two million barrels a day, cannot create a crisis by itself. But the remaining slack in the system is just about equal to the combined production of Iran and Libya, which have also proposed an embargo.

The point is that it would not take much worsening in the political situation to produce markets so tight that the logic of market power kicks in and countries decide that, quite aside from politics, their financial interest lies in reducing, not increasing, their output.

Arnold Kling has further questions, particularly about the role price controls played in prior oil shocks.

Monday, April 08, 2002

A Market Solution to the Oversupply of Historians (Chronicle of Higher Education) Great Article!
What? No Pulitzer for Krugman? Musil has the goods.
Want to tie your broker up in knots? Ask him what his firm's return expectations are for the equity market and have him run an asset allocation on it complete with projections of your net worth in 15-40 years. Then send him this article by Bob Arnott and ask him to reconcile it to what he just gave you. Throw in this article for good measure.

I have a chart on my desk showing the inflation adjusted real return of the Dow Jones from November of 1903 to 1.31.2002. The average annual real return is 4.3%, but the best fitting trendline suggests about 3.3%. Brokers, almost without exception, will show you real return assumptions of 5%-8%. Arnott demonstrates those returns have been exceedinly rare, and only accurate when made in the depths of a bear market. Have fun.
Michael Lewis on the new and redundant regulatory environment:
Across America companies are scrambling to comply not with the law but with investors' need for trust. Wall Street analysts are falling over themselves to downgrade companies. CEOs are pulling all-nighters to make sure every last number makes it into their financial statements. Everyone inside the money culture is probably behaving more honestly now than he has in years. Who needs cops? second-rate matadors, they wait until the bull has been poked and prodded to the brink of death before they enter the ring, whereupon they wave their cape over the carcass and wait for the bouquets to land. The effect of their crowd-pleasing is to exacerbate the market's natural manic-depressive tendencies. They raise the cost of doing business at exactly the moment when doing business is most costly.

Sunday, April 07, 2002

Cybersmut and Debt Undermine Penthouse
Interesting nugget: "[The publisher of Penthouse] spent millions on an unsuccessful attempt to develop small nuclear fusion reactors."

I wonder what synergies he was trying to capture?

Who wants to give 401k advice? - on More Than Zero
A little love note on the efficacy of commodity boycotts up on Live from the WTC.
More social security and a long piece about the importance of price elasticity when talking about CAFE on Live From the WTC.