Economics

MIT Economist Gets it Wrong

Posted on by Amir

Dr. Helen has this piece.

I think the greatest, most astonishing fact that I am aware of in social science right now is that women have been able to hear the labor market screaming out ‘You need more education’ and have been able to respond to that, and men have not,” said Michael Greenstone, an M.I.T. economics professor who was not involved in Professor Autor’s work. “And it’s very, very scary for economists because people should be responding to price signals. And men are not. It’s a fact in need of an explanation.” …

Perhaps the men HAVE, Dr. Greenstone. The women are heading to college in droves. In and of itself, that would be no big deal, but here’s the problem: THEY ARE GRADUATING COLLEGE WITH HIGH LEVELS OF STUDENT LOAN DEBT. In doing this, they are damaging their marriageability.

The men aren’t heading to college at the same rates, and that is not a bad thing. If the men seek to learn trades at tech schools and 2-year institutions–taking on little or no debt–they are going to be better-prepared for the volatile economy that is going to shed the fluffy corporate jobs when the money runs out.

Instead of making marriage more attractive, he said, it might be better for society to help make men more attractive.

If women are piling on the student loan debt, then they are damaging their attractiveness. What we need is a larger discussion about what attracts the sexes. The women are being sold a certain bill of goods, and so are the men. And both sexes are getting screwed.

One of the woman commenters of the NY Times article had this to say:

As the mother of a teenaged girl and a teenaged boy I see the differences between the two of them and between their friends. The modern world and the modern economy agrees with the girls: they see that the glass ceiling is diminishing, they see that their attention to detail and adaptability are valued, they see the world as open before them. The boys? A little less so — generally they are less mature as they leave HS, they sense that the 20th century order, which gave them an instant leg-up, is vanishing.

All the encouragement the baby boom heaped on their daughters is paying off. But we didn’t mean for it to come off the backs of our sons. I think the shift in the economy is reinforcing/ exaggerating the result. It’s in popular culture everywhere, the new woman so strong and smart, the new man so backward and foolish.

Sadly, she is correct. Encouraging women was not the problem; doing this while attacking masculinity was the problem. We have sowed, and we are reaping.

Another observer noticed:

Males are now being given a “boot on the neck” and so this has nothing to do with any sort of level playing field. Males are expected to build, repair, transport, and defend everything…while women are free from any such expectations.

This is an economic reality that Badger or Dalrock or Keoni Galt–not sure which one–alluded to last week: the difference between men and women in the economy is that, whereas a woman is not expected to produce more than she consumes, the same is not true of the man. Economically, the men are expected to produce more.

So denigrating the men–and re-engineering the economy in a way that rewards services rather than production–is disastrous to men on a grand scale. And when that service-oriented economy eventually tanks, the misery is going to be across the board.

Dr. Helen nails it:

Boys and men right now are off to a bad start from day one and those who don’t go along with the female -privileged society are stuck on the sidelines. A boy’s typical day might be one with a single mom, mostly female teachers who rarely give him a break, a culture that tells him he is a pervert, TV shows, bulletin boards and news shows portraying him as a rapist and domestic violence abuser and all around bad guy. It’s no wonder men have opted out of an economy and culture that values them so little.

We’re due for the mother of all re-adjustments.

Debt Ceiling

Posted on by Amir

If Boehner had balls, this is what he would do.

My fellow Americans,

For most of the last 40 years, you have been conned and screwed.

You have been sold tax cuts on the premise that they result in more revenues. While that has proven to be true, we in Congress have used that extra revenue to feed a spending orgy.

You have been told that the spending is not a big deal because the deficits are small compared to our Gross Domestic Product. In fact, a Vice President–in my party–is on record as saying that deficits don’t matter.

Sadly, deficits do matter. Making matters worse, when you subtract government spending, GDP has been negative for most of the last 30 years.

What does this mean?

For an entire generation, we in government have spent money faster than you have been able to make it. As a result, your share of the debt has grown, all while our political class insists on more and more government.

Sadly, this level of spending is not something we can sustain forever. If we keep this up, our economy will implode in a way that will make the crisis of 2008 look like a bonanza.

Ladies and gentleman, the President is demanding that we give him permission to continue the spending spree in return for miniscule cuts in spending that will never happen. I will not give him that permission.

As Speaker of the House–which Constitutionally is responsible for budgets–it is my insistence that THIS CONGRESS do the right thing for the American people, and create a situation that will sow the seeds for prosperity for future generations, ensuring that they will not be saddled with debt.

As Speaker, I propose that THIS CONGRESS BALANCE THE BUDGET.

That means

(1) We cut $800 billion in spending THIS YEAR;

(2) We cut the remainder of the deficit NEXT YEAR.

In return for that, we extend the debt ceiling for two years, in order to allow for the short-term liquidity for structural transitions–to be made starting this year and continuing into the end of the Congress–that will be difficult.

Those structural transitions will include the following:

(1) elimination of the Department of Education;

(2) elimination of the Department of Housing and Urban Development;

(3) elimination of the Department of Labor;

(4) elimination of the Department of Homeland Security;

(5) elimination of most of the Department of the Interior;

(6) elimination of the Department of Agriculture;

(7) elimination of most of the Department of Health and Human Services;

(8) elimination of the Drug Enforcement Agency;

(9) elimination of the Bureau for Alcohol, Tobacco, Firearms, and Explosives;

(10) returning unemployment benefits to 26 weeks;

(11) ending the food stamp programs;

(12) ending all aid to foreign nations;

(13) cutting the defense budget in half;

(14) breaking medical monopolies that have busted the budgets for Medicare and Medicaid;

(15) indexing the Social Security and Medicare retirement ages to account for expanded life expectancies of cohorts, while keeping those who are already retired properly covered;

(16) ending all federal guarantees of student loans, and permitting all debtors–in financial distress–to seek relief through the bankruptcy code.

While this initiative is bold, it should not be. In fact, this is the first responsible budgetary initiative that has come from Congress in the last 50 years. And it has been a long time coming.

My fellow Americans, the sad truth is that we have more government than we can afford. That is the $16 trillion elephant in the room, which has been defecating all over the floor. The President–for all his talk–has delivered mere smoke and mirrors. In the past, I have failed in that I have allowed him to get away with it while hoping that he would be willing to get serious.

While he has not done so, it is no excuse for Congress to fail to act.

I wish there were a better answer. I for one do not wish for any government employee or contractor to lose a job. These are good people with families, homes, mortgages, and who have the same hopes and aspirations that the rest of Americans do.

At the same time, mathematics is not on our side here. This is not about what I want, it is about what the American people can afford. We have more government than we can afford.

When you look at the deficits–which have exceeded $1 trillion for the last 4 years, and exceeded $400 billion in the four years before that–it is a symptom not of a revenue problem, but rather a spending problem.

If you were spending $10,000 more than you made every year, and then promised to cut $1,000 over ten years, you’d be laughed out of the room. And yet, your President is telling the same thing, and calling that a substantive cut.

Ladies and gentlemen, that is trying to fight a forest fire with a water pistol.

As your Speaker, I am demanding that THIS CONGRESS do what the President PROMISED to do in his first term.

We will balance the budget. That deficit will be zero at the end of this Congress. And we will release the American people to build the society that government promised but has failed to deliver.

These moves will be difficult and painful. For 12-18 months, the economic outlook will not be pleasant, as so much of our economy has become predicated on the growth of government.

At the same time, the endgame will be promising. By delivering a stable budget, our country will be the best place for foreign capital. We will become a country that rewards saving and investing and capital formation: the things that drive real economic growth. We will become a country that rewards hard work, not providing incentive to freeloaders. We will become the center of innovation once again. We will become the center of manufacturing once again.

What I am saying has historical precedent.

In 1920-21, we had a nasty recession. Unemployment spiked to 15% in short order. You would think that government would have responded with big spending, but that didn’t happen.

Instead, we balanced the budget, we allowed businesses to fail, and we allowed the private sector to adjust accordingly.

As a result, within short order, we returned to full employment, and the outcome was a decade of unprecedented prosperity.

Our best days need not be in the past. But in order for us to return to real prosperity, we must get our financial house in order.

This Congress will do that. We will settle for no less.

We call on the President to cut the shenanigans and have the adult conversation. We invite him to a public summit where we can provide a detailed accounting of that situation.

But we will balance the budget. We will do it with this Congress. And we will start now.

Ya Know What They Say about Payback

Posted on by Amir

As Vox Day and the Austrian-school economists will tell you until they are blue in the face: static economic models are useless. One of the biggest reasons–perhaps THE biggest reason–is that, whenever you change the law, people change their behavior.

Ayn Rand, in Atlas Shrugged, does a wonderful job explicating that dynamic through the character of John Galt, who–fed up with the burdens of collectivist society–organized a strike of the creative, innovative, producing sector of the population.

Rand’s detractors have often dismissed Atlas Shrugged as hypothetical, whereas free market economists see the wisdom behind Rand’s premise that when the law changes, people change their behavior. I would also suggest that Ayn Rand was correct: there is a tipping point beyond which the expansion of collectivism destroys productivity, as producers and entrepreneurs decide that the cost of producing outweighs the benefits.

Too much downside risk + too little upside benefit = prohibitive backside pain.

Here is an example of that, courtesy of an Instapundit commenter (HT: Vox Day)

After the election, my wife and I are going partial Galt. We’re in California, so our state income tax went up in addition to what’s sure to come out of Washington.

My wife quit her job last week. I increased my participation in a tax deferment plan offered by my employer to bring my taxable income as close to $250K as possible. We’ll be cutting back a little, but the government is going to getting a whole lot less.

My wife’s entire salary barely covered our tax bill – she was 100% slave to the government, while I was a 10% slave. Now she is 100% free, and I’ll be a ~35% slave As a couple, 17.5% of our time is slaving on the government plantation from an astounding 55% previously.

My wife is deliriously happy, our children are delighted to have mom home, the dog gets more walks, and I find not spending money rapturously satisfying.

Stupid Quote of the Day

Posted on by Amir

from Nobel Laureate Paul Krugman (HT: Vox Day), emphasis added:

“Where the harm done by lack of jobs is real and terrible, the harm done by deficits to a nation like America in its current situation is, for the most part, hypothetical….


The key thing to bear in mind is that the $5 trillion or so in debt America has run up since the crisis began, and the trillions more we’ll surely run up before this economic siege is over, won’t have to be paid off quickly, or indeed at all. In fact, it won’t be a tragedy if the debt actually continues to grow, as long as it grows more slowly than the sum of inflation and economic growth….

Now let’s consider what all this implies for the future burden of the debt we’re building up now. We won’t ever have to pay off the debt; all we’ll have to do is pay enough of the interest on the debt so that the debt grows significantly more slowly than the economy.”

Hypothetical? Whatever you are smoking, it will become legal when I am President! Have you not been to a grocery store lately, Paul? Have you talked to Americans who found out they were underwater on their homes, as the price declines sapped any equity they had, Paul? Have you talked to an American whose credit was damaged by a short sale, a foreclosure, or even a bankruptcy, Paul?

Salaries are going down, not up. Real unemployment–U6–is up in the last 4 years, not down. The number of people–in raw and percentage terms–receiving food stamps is up, not down. The only part of the credit market that is expanding is that overrated student loan sector. That bubble–which is unsecured debt–cannot expand ad infinitum.

Moreover, debt is growing FASTER than the sum of inflation and economic growth. Obama and his cronies have DOUBLED the public debt. So either inflation is growing faster–which is possible, but that would make Obama a liar if true–or you don’t know what you are talking about. Which is it, Krugman?

And your point about interest payments is moot, as creditors can raise rates on a dime/

Holy Moly!

Posted on by Amir

One of our allies in the blogosphere–Captain Capitalism–has this take on a sector of society that has been overrun by feminism.

While I don’t completely agree with him on this–I’d suggest that the situation in the black community is a confluence of factors that created the perfect storm, and feminism is one of those factors–I’d say he is spot on as to the effect feminism (with government complicity) has had on the black men.

I’ll elaborate more later, but Captain Capitalism’s take is a must-read.

Quote of the Day

Posted on by Amir

Courtesy of Karl Denninger:

There is no free enterprise without the freedom to fail….I refuse to engage in entrepreneurial activity as I did before because I simply cannot gauge whether the government will protect some firm that I identify as a “good target”, or a “new opportunity” to take apart — piecemeal. I’m more than willing to match wits with anyone else in the private sector, but I’ll be damned if I’m going to take on the government and their guns; that’s suicidal, and I’m not.

Priceless.

THAT is what happens when government gets into the business of deciding which companies succeed and fail: they stifle worthy competitors who would otherwise be able to provide a better product at a more favorable price.

Proof That Society is Hosed

Posted on by Amir

A little-leaguer was helping a pitcher warm up in a bullpen. He misfired on a return throw, and the ball struck a woman in the face, causing multiple fractures.

He is now being sued for $500K.

She is claiming that he intentionally hit her.

Cubbie can correct me on this, but I think she’s going to have one heck of a hard time proving this in court.

At any rate, this kind of legal crap is going to destroy our society.

When a person can’t do something as simple as participate in a youth sporting event without the prospect of getting nailed with a 6-figure lawsuit if the slightest thing goes on, then what is the incentive to work hard and take risks, the very type of activity that we NEED for real economic growth?

You Get The Government You Want

Posted on by Amir

Of course, to say that unions have quite the stranglehold in Michigan would be a gross understatement.

Still, if you think it is ok that the union extorts $778 out of your hide every year–demanding your credit card information for automatic payment–just so you can keep your job, then you have worse things wrong with you than your support of unions.

Yes, I am a State employee in Kentucky. I am “non-merit”. I belong to no union. I am not part of a public pension system. I can be fired for any–or no–reason.

I’m ok with that. It’s about free markets.