Wednesday Highlights

Good morning.

  1. A parallel to the hypocrisy of Hunger Games (in which teen violence is denounced through glorification of same).
  2. Antisemitism? Or just anti-Israel?
  3. Speaking of Jews
  4. So, do you think the President was lying? Is the WH planning or not? Is it important that he’s so often so dishonest? Why/Why not?
  5. Lawyers disagree, here’s a pallid defense (why the “economic regulations” why is the adjective economic required … hint: Roe/Wade or civil rights … it’s not there for any substantive Constitutional reasons, economic regulations are not in any way special, except for maintaining specious arguments). (“Popular” bill? It squeaked through and y’all know it … or perhaps everyone not the President knows it … see #10 below on “realism”).
  6. Libya and consequences?
  7. It was suggested recently that retreat/not-retreat laws and deadly force allow premeditated murder, here’s a discussion on the law in more depth.
  8. Sticky wages and putative liquidity traps.
  9. Unplanned pregnancy.
  10. Obama trashes GOP (Ryan budget) for being unrealistic … oddly enough not a single Democrat voted for his “realistic” plan. Memo to Democrats, I’m beginning to suspect this word, “real” doesn’t mean what you think it means.
  11. Rich wanting bad roads?
  12. I’m unclear on the strategy here, when Mr Obama is raising gas prices faster and higher is politically popular.

22 responses to “Wednesday Highlights

  1. 10.Obama trashes GOP (Ryan budget) for being unrealistic … oddly enough not a single Democrat voted for his “realistic” plan….

    Balancing a Trillion in tax cuts with raising a Trillion by ‘closing loopholes’ but refusing to say what exactly those loopholes are other than to specify certain loopholes are off the table for closing. Even to imply that it’s debatable that the Ryan plan is a fraud is an act of dishonesty.

  2. 12.I’m unclear on the strategy here, when Mr Obama is raising gas prices faster and higher is politically popular

    Mr. Obama is raising gas prices? How? Does he own a chain of gas stations or oil refineries?

  3. 8.Sticky wages and putative liquidity traps.

    To me this suggests that zero inflation is not a good goal. Call is a psychological quirk but the human mind revolts at a 1% wage cut when inflation is at 0% but will be willing to tolerate a 1% wage increase when inflation is running at 2%, even though to a rational mind they are the exact same thing!

  4. Boonton,
    He’s asking for higher taxes. You know, as you’ve explained to me, when an entire industry faces higher costs there is no reason not to pass the higher costs to the consumer. It’s only when one or two companies face higher production costs that they are forced to put that to their internal salary/benefits ledger.

  5. Boonton,
    Oh, good duck and dodge. Let’s ignore the “realistic” Obama budget which was so good not one Democrat in the House voted for it and the Democrat controlled Senate has deep sixed it. But no, the one that passed in the House, that’s not fraud, or dishonest. Riiight. Realism meet Democrat (and flee for your life).

  6. Boonton,
    You should read David Hackett Fisher’s “The Great Wave.”

    (re: inflation and macro)

  7. [W]hy the “economic regulations” why is the adjective economic required … hint: Roe/Wade or civil rights … it’s not there for any substantive Constitutional reasons, economic regulations are not in any way special, except for maintaining specious arguments.

    Oh my goodness, leave it to the professionals. You’re embarrassing yourself.

    There are two reasons for why economic regulations are, in fact, “special” and deserving of distinction from any old regulations. The first is simply descriptive. The Supreme Court has not struck down a piece of federal economic regulation in over 75 years (since the New Deal era). Within colloquial use of “unprecedented”, which would easily encompass “not in my lifetime and essentially all the precedents that exist from before my birth have been effectively overruled”, this is perfectly meaningful. Obviously, overturning a law on civil rights/civil liberties grounds wouldn’t be unprecedented at all, or even eyebrow raising. Overturning an economic regulation would be something that hasn’t happened in either of our lifetimes. Hence the latter is what’s “unprecedented”.

    Second, they are, in fact, distinct as a matter of constitutional text. Putting aside influential works on when and in what contexts judicial review is legitimate over democratic preferences (like John Hart Ely’s masterpiece Democracy and Distrust), the difference between economic regulations and civil rights issues is that the latter are subject to a variety of constitutional “thou shalt nots” (e.g., the Bill of Rights, or the 14th amendment’s equal protection and due process clauses). But there are no constitutional economic thou shalt nots. So we should suspect that it would and should be considerably more common for the former type to be struck down than the latter.

    Now, one could of course argue that certain types of economic regulation are really “rights violations” and thus violate, for example, due process of law. That was the argument in Lochner. The problem is that (a) nobody is making that argument seriously with respect to the ACA and (b) Lochner isn’t considered to be good law.

  8. So Obama isn’t raising gas prices, you mean to say he is or has proposed a policy that you think might result in higher gas prices. I suppose I should give you a day or so to retract and rephrase your original post.

    More importantly, though, your theory is wrong. A tax increase would be passed onto consumers only in a competitive market where firms have no profits and no pricing power, neither of which describes the oil industry very well.

    On ‘realistic budgets’, you seem to make much of the fact that the Congress didn’t bother to formerly vote for Obama’s budget. I’m unclear how that makes Ryan’s budget less dishonest or more realistic. You are aware, are you not, that no President’s budget has ever been adopted by Congress? Even when the President’s party has super-majorities in the Congress the institution cannot resist using its position as the maker of the budget.

  9. You should read David Hackett Fisher’s “The Great Wave.”

    Not sure I can get to it but perhaps you can articulate its arguments. Reading the low reviewers on Amazon make me suspect he assembled a very interesting chunck of history but doesn’t have the economics to really analyze it correctly. Either way it seems to be a long run thesis on price changes spanning centuries rather than year to year inflation.

  10. Boonton,
    He’s “attacking” Romney with a policy you think (and I agree) will raise gas prices.

    A tax increase would be passed onto consumers only in a competitive market where firms have no profits and no pricing power, neither of which describes the oil industry very well.

    Untrue. All firms would have the same tax, there is no reason not to pass the cost to the consumer. You made that claim and I agree. When a minority of companies are faced with an tax burden the other don’t face, then those minority companies be forced to adjust pricing. Let me put it another way, if the Feds put a tax across the board on gas of $1/gal affecting all oil companies equally, why would any company not pass that tax to the consumer? I think you’re living in an imaginary world in which a gas tax might not be passed to the consumer. Oh, wait this is that “princess bride”/reality thing you libs seem to be suffering. OK. In the real world, gas taxes, you see, they get paid by consumers.

    But the house did formally vote on Obama’s budget, it failed 0 to 400+ not one Democrat voted for it. It is “stuck in committee” in the Senate because, the Dems control the Senate and they don’t want to put that stinker on record, I guess.

  11. Boonton,
    The quick explanation is that looking at a number of large political/social upheavals in history that those unstable periods were all presaged by a commodity price instability. Similar events and triggers which occurred in times of price stability did not trigger any upheaval. The suggestion in the epilogue is that perhaps it is to the state’s self-interest to keep commodity prices stable. An example might be the Spanish (Toledo?) earthquake, which was seen as a sign of the end of the world in a time in which the wars of the reformation were about to begin. Prior to this various prices indices had destabilized. It may be that the social unrest is made more likely/possible when people don’t feel secure (economically) because prices are not stable.

  12. I suspect even if this analysis held, the margin between 0% inflation and, say, 4% inflation would be too small to really measure accurately on the time scale of centuries. A few other concerns:

    1. What exactly does ‘price’ mean on this timescale? In everyday language price means the sticker on the item in the store. I think in longer timescales it makes more sense to talk about price as what one must give up to get something. For example, to eat a 2000 cal. a day diet that included at least some meat and some wine, did a 7th century Italian have to toil 15 hours a day and how did this compare to a Roman circia Ceasar’s time?

    2. Cause and effect might be messed up here. For example, the discovery of America ended up causing inflation in Europe because Spain begin bringing back large amounts of gold from the New World. This set off a lot of spending by the Spainish crown as well as a lot of activity elsewhere in Europe (England and France jockeying for territory in the Americas, Amsterdam becoming a financial capital managing all the new currency transactions etc.). No doubt this would get registered as an ‘upheaval’ but I don’t think it was quite due to the inflation as much as the inflation was a side effect to the more fundamental change of shifting power balances in Europe created by moving into the West as opposed to Eastern trade routes.

    3. Hyperinflation in the very short term illustrates this point even more IMO. The hyperinflation suffered by Weimar Germany or the Confederate States right before surrender didn’t cause their upheaval but were a symptom of it. The CSA was desperate after the war turned against them. Germany was caught between the collapse of the old social order at home and the unreasonable demands of the allies for reparations. Neither of these clearly were caused by price instability. If the CSA had managed inflation of less than 1% that wouldn’t have helped them on the battlefield. The Nazi Party didn’t rise to power in Germany during hyperinflation but well after it had been tamed.

  13. Boonton,
    Price instability means that the cost of things relative to other things is changing rapidly. It doesn’t mean hyperinflation.

  14. David,
    I was thinking about your response. I think you fail on a few counts.

    First, I don’t agree that this is the only federal “economic” regulation that were overturned. I suspect that there have been patent and monopoly laws that were not upheld in the meantime. I’m not a lawyer, and haven’t had that case law history that y’all get, but it seems to me unlikely that the courts upheld everything that Congress has suggested regarding patents, monopoly, and commerce for the last 90 years. Those are both economic in nature.

    Second, Lochner, according to Volokh, was in 1905 not 1940. Why do you cite the New Deal when these cases predate the New Deal by 30 years?

    Third, they are not distinct in the way you say the 10th Amendment is a “shall not” for things not covered. You, as well as Mr Verilli seem unable to cite a limiting principle, everything you do (and don’t do) can be interpreted as affecting commerce … which apparently gives the right for Congress to act … including all those “thou shall nots”, e.g., you have freedom of the press, but the press sells their product so by virtue of the uninhibited commerce clause can be tightly regulated for whatever purpose you might conceive.

    You might (correctly I think) cite that Congress has never overturned laws signed by a Black President. But “signed by …” like “economic” is a useless distinction regarding SCOTUS and overturning of federal laws. Unprecedented is just not true. Obama supported and supports the overturning of lots of laws by SCOTUS, he’s offering a specious argument on why this should not be supported.

  15. Price instability means that the cost of things relative to other things is changing rapidly. It doesn’t mean hyperinflation.

    Then you’re not talking about inflation. Consider everything going up in price by 2% per year. That’s 2% inflation but zero price instability since the cost of everything remains constant relative to everything else. If product X cost $100 and Y cost $200 then Y costs twice as much as X. In year 2 X is $102 and Y is $204. Again stability is the same. Y is still twice as much as X.

    Now your definition of instability is quite different. It would be like saying Y suddenly costs 3 times as X. That means something has dramatically changed. Maybe X has become less useful (i.e. betamax vcr’s after VHS won the format war). Maybe Y has suddenly become much more rare (a fungal infection that wipes out 90% of the potatos…..an artist who dies suddenly meaning he will produce no more paintings etc.).

    What’s important, though, is that controlling inflation won’t control price stability. A zero percent inflation world could still see the relative prices of goods change dramatically.

    First, I don’t agree that this is the only federal “economic” regulation that were overturned….

    I believe there was a Federal law about drugs or guns within school zones that was invalidated. The laws justification was the commerce clause but the court found the connection to commerce (well educated kids engage in interstate commerce in the future) too tenuous to let the law stand.

    Third, they are not distinct in the way you say the 10th Amendment is a “shall not” for things not covered. You, as well as Mr Verilli seem unable to cite a limiting principle, everything you do (and don’t do) can be interpreted as affecting commerce…

    Actually a very sensible one has been cited. You just opt to ignore it.

    You might (correctly I think) cite that Congress has never overturned laws signed by a Black President. But “signed by …” like “economic” is a useless distinction regarding SCOTUS and overturning of federal laws. Unprecedented is just not true. Obama supported and supports the overturning of lots of laws by SCOTUS, he’s offering a specious argument on why this should not be supported.

    Actually its a judgement call but I think its quite plausible to think that many on the conservative side of the court will lean towards overturning simply because its Obama and a Democratic law. In an alternative universe where McCain won and appointed Romny to head a health care reform commission and ended up producing and enacting almost the exact same law, the right would not be anywhere near as fuming nor would the SC seriously consider overturning it. Instead the reaction would be much like Medicare D with mainstream Republicans crowing how innovative their market solution was, liberals griping that there were too many holes and too many giveaways to the insurance industry, and a handful on the right (i.e. Cato) carping about it but otherwise not making much of a real fuss.

  16. Boonton,
    Who said inflation. I never did. You did. My point re government macro-economics is that perhaps inflation/employment et al, might be less important for stability than smoothing price fluctuations of staples.

    Actually a very sensible one has been cited.

    Where?

  17. Who said inflation. I did and it’s implied by the graph you cited which shows the huge spike at 0% wage increase hinting that zero is some type of lower barrier for wage changes. This would imply a positive inflation rate would be better than a zero one since it would allow wages to adjust downwards when necessary by the more psychologically acceptable method of simply giving workers cost of living adjustments slightly less than the inflation rate.

    Where?

    You could read the actual comments from the lawyers. Or if you want my personal opinion see my comments on why the market for health care is not the same as, say, the market for brocoli.

    You cited the price stability (meaning not changing prices but changing relative prices) hypothesis in response so the burden is on you to demonstrate how it is relevant to a discussion of inflation.

  18. Boonton,
    On Federal laws overturned. How about takings? Is that economic. Has the high court overturned any takings in the last 40 years?

  19. Boonton,
    The thesis of the book cited is that price fluctions of staples commodities is correlated with social upheaval. I thought that you’d be interested in reading further on that. The suggestion there is that things we normally worry about employment, inflation/deflation and so on are less important in the bigger picture than we imagine.

    This would imply a positive inflation rate would be better than a zero one since it would allow wages to adjust downwards when necessary by the more psychologically acceptable method of simply giving workers cost of living adjustments slightly less than the inflation rate.

    Yah, you economic minded people are always fascinated by driving hidden taxes on the savers/creditors in favor of the debt/borrower, oddly enough that you’d think this wise in a time when we’re running out the national debt as fast as we can.

  20. Not really sure what you’re ranting about now. Must I really explain the concept of a normal curve to a math major?

    Let’s do it then. Look at the graph you cited. It shows a distribution of wage changes. As you should know, a normal distribution should show most people clustering in the average with numbers falling off for both changes below and above the average. That’s not a hard concept. If the average guy got a raise of 5%, then you know some people probably got exceptional raises of 20% and some very unlucky people probably saw wages fall by 15%.

    But we don’t see a normal curve. We see what seems to be a traffic jam at 0%. Why might that be? Well one possibility might be that people get really nutty about wage cuts. If the average raise is 10% and you only get 5%, you may be unhappy but you don’t go ballistic. If it’s 0% and your boss wants to cut your pay 5% you do….even though in terms of ranking yourself with everyone else it’s the same thing. If inflation is 5% you should consider any raise less than 5% a wage cut and go ballistic…but people often don’t.

    So the idea that maybe 0% inflation isn’t a good idea, that maybe 2-4% inflation is more efficient because it lets labor markets adjust is not some evil plot by economists to rip you off. I don’t get 1% of your pay if there’s 2% inflation and your boss only gives you a 1% raise!

    If you have a beef, then it’s with the idea that some people will get less than the average raise. And if that’s your idea then you’re a moron because basic math should tell you that an average is just that, an average. Some will get more and others will get less unless everyone is required by some subtle law of physics or economics to get exactly the same raise.

    Damm my superior knowledge of statistics! Damm you for never taking a stats class!

  21. Boonton,

    Not really sure what you’re ranting about now. Must I really explain the concept of a normal curve to a math major?

    Uhm, you’re not making any sense at all. If you think you can fix the so called “liquidity trap” with 1% inflation, there’s probably a good reason you’re not making sense.

    If you don’t capiche how inflation taxes investors in favor of debtors. You have a house paid off and $200k in the bank. I have a house on which I owe $200k and $100k in debts. Inflation cuts the value of the dollar in half. My debt is now one half and your investments are worth half and our salaries roughly double. Which one of us is going to be going rah rah rah when inflation starts ramping up?

    You went to stats classes but apparently you didn’t pay attention.

  22. Actually I’m thinking more in terms of the labor market being efficient some level of inflation, not so much the liquidity trap…although I suspect the chances of a liquidity trap appearing become exceptionally less with clearly positive inflation.

    A liquidity trap happens when investors fly to safe assets. When that happens, safe assets like bonds fall to 0% returns which makes them equal to cash which means increases in the money supply end up causing no actual increaes in spending. It just goes into paper assets. If you had negative interest rates this wouldn’t be a factor, in such an environment putting extra cash in the bank would mean you’d have to pay the bank. While that has happened for very brief periods of time (a few Treasury auctions have actually gone slightly negative meaning investors essentially are loaning the gov’t $1 today in exchange for getting back $0.999 tomorrow), it doesn’t happen often.

    I suspect that you can’t get this with positive inflation, but I might be wrong. Kind of a theoretical question.

    If you don’t capiche how inflation taxes investors in favor of debtors.

    This would only apply to unexpected change in inflation levels. Suppose you were sure inflation would average 2% for the next ten years. What would you, an investor, make of a bank that offered you a 5 year CD for 1%? You’d think you’re losing 1% per year so you’d insist on at least 2%.

    Likewise your $300K in debt either is based on an adjustable interest rate, in which case inflation would increase the rate, or it’s based on a fixed rate which means the lender took into account inflationary expectations when he offered you the loan.

    You seem to be totally unaware that inflation has been positive ever since the end of WWII. You seem to be thinking that 0% inflation has been the norm in developed economies and 2% is some strange, radical zone. In fact just the opposite, inflation has almost always been well above 2% making 2% a rather low level of inflation rather than some type of radical departure from a 0% norm. The question is not are the costs of high rates of inflation (say above 5%) high enough to deem it a bad thing, the question is is it safe to assume that because high inflation is bad any level of lower inflation, even down to 0% is good? I think the evidence is clearly racking up that it’s not.

    You went to stats classes but apparently you didn’t pay attention.

    Then why are you unable to recognize the importance of a normal distribution curve and seem unable to comprehend the oddity of a radical deviation from a normal distribution?

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