Over the last thirty years political economists have been trying to demonstrate the existence of a political business cycle. The evidence is mixed, but from an anecdotal perspective the changes in unemployment seem to support the idea. The New York Times has a good chart showing job losses from the last recession through 2008 (the first year of the current recession).
Check out this article in the Wall Street Journal. Okun was an advisor for JFK and was the leading architect of the Kennedy tax cuts. JFK if I remember correctly when asked about the tax cuts responded that it was basic economics (probably something like ECON 101 even though we teach ECON 201!)
I have posted a new link for a new blog on the right. This blog is being done by Cenage (South-Western). Lots of interesting economic data and posts.
The Freakonomics blog in the NY Times demonstrates some of the consequences of hyper inflation. It is now noted that Zimbabwe currency is worth less than monopoly money.
January 26, 2009 The New York Times
OP-ED COLUMNIST
Bad Faith Economics
By PAUL KRUGMAN
As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending.
Some of these arguments are obvious cheap shots. John Boehner, the House minority leader, has already made headlines with one such shot: looking at an $825 billion plan to rebuild infrastructure, sustain essential services and more, he derided a minor provision that would expand Medicaid family-planning services – and called it a plan to “spend hundreds of millions of dollars on contraceptives.”
But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers. So as a public service, let me try to debunk some of the major antistimulus arguments that have already surfaced. Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.
First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years. It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)
The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 – and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.
Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.
Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets – and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens. The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts – and therefore costs less per job created (see the previous fraudulent argument) – because a large fraction of any tax cut will simply be saved. This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.
Finally, ignore anyone who tries to make something of the fact that the new administration’s chief economic adviser has in the past favored monetary policy over fiscal policy as a response to recessions. It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero. That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject – and therefore has no business weighing in on the debate – or is being deliberately obtuse.
These are only some of the fundamentally fraudulent antistimulus arguments out there. Basically,
conservatives are throwing any objection they can think of against the Obama plan, hoping that something will stick. But here’s the thing: Most Americans aren’t listening. The most encouraging thing I’ve heard lately is Mr. Obama’s reported response to Republican objections to a spending-oriented economic plan: “I won.” Indeed he did – and he should disregard the huffing and puffing of those who lost.
Copyright 2009 The New York Times Company
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Op-Ed Columnist – Bad Faith Economics – NYTimes.com Page 2 of 2
http://www.nytimes.com/2009/01/26/opinion/26krugman.html?_r=1&th=&emc=th&pagewanted… 1/26/2009
As part of the Initiative for Public Choice & Market Process (IPCMP) a new discussion seminar in Spring 2009 for ECON majors and other students interested in free markets and capitalism.
Now more than ever, free markets are under attack by politicians, voters, big business, and the media. In Spring 2009 we will have a new economics colloquium group for ECON majors and other students interested in free markets, capitalism, and the role of government in society. The book we’ll use is Machinery of Freedom, by David Friedman, son of Nobel laureate in economics, Milton Friedman.
- IPCMP will provide the book free to students
- group will meet once a month to discuss selected readings and issues with a faculty facilitator (Doug Walker)
- food and drink will be provided for participants
- The first meeting is January 20 at 3:00 in Beatty 220. Meetings will be the second and fourth Tuesdays of the month see the calendar for the complete meeting schedule.
Paul Samuelson has a new article in the Journal of Economics Behavior & Organization on A Few Remembrances of Friedrich von Hayek He suggests that Hayek was right on the socialist calculation debate, but wrong on business cycles. Specifically, he is critical of Hayek’s Prices and Production. It is a short intersting read.
As I walk across campus I often see students chating on their cell phones, and much to my dismay ofter sending text messages during class. I have yelled and cursed at other drivers to get off the phone and drive, but I also know that I use my cell phone in the car on occassion. This technology has advanced a great deal and is everywhere, but banning them all together when you are driving? The National Safety Council is trying to get a ban on the use of cell while driving period! How does this help. My wife and I often drive around town and who ever is driving often misses a turn because we are talking to each other and caught up in the conversation. So shold we ban passengers? Should we have police sitting at the side of the road waiting to pull over that driver with the cell phone plastered to their ear, or worse with a bluetooth headset?
No, not Paul Krugman. John Nash who one the Nobel Prize in Economics in 1994, and was the subject of the movie A Beautiful Mind. Nash has been touring college campus over the last couple of years being critical of the current monetary policy, and economic policies. See the links below on his talks. A more academic piece can be found at John Nash (2002) Ideal Money Southern Economic Journal, 69(1), p4-11.
Fuman, Oct ‘08
Brown, April ‘05
Vanderbilt, April ‘02
Penn State, Oct ‘03
UMass, Oct ‘02
New Law to Prohibit Resale of Children’s Items , or so we are told. Snopes.com claims it is not as bad as it first appear. After Feb 10, 2009 there will be new standards for lead and other chemicals, which will be the responsibilty of the importer or manufactuer to comply with. So it is not that you cannot resale these products, but all resale must meet the new standards beginning Feb 10. So no they are not prohibiting the resale of childrens products, but if the products being resold do not meet the new standards they will be in violation of the law. So what happens to all the products currently in thrift stores? How can this law be enforced? Just remember it is for the children.