Why do we have such large deficits through 2010?
"Kash" at the liberal economics blog Angry Bear looks at how much of the change in Congressional Budget Office (CBO) deficit projections between January 2001 and August 2003 is due to (a) wrong 2001 projections of upcoming economic conditions, (b) 9-11, (c) spending increases, and (d) tax cuts. The analysis is here: "The Birth Tax, Revisited". (The "birth tax" is Kash's term for the change in federal deficits projections under the Bush administration divided by a measure of the population size - "It's Your Children's Money. Quick, Take It!".)
Kash finds that the tax reductions (assuming the sunsets aren't allowed to kick in) account for $2.5 out of the $7.2 trillion deficit over the projection period. Also striking - spending increases account for $1.6 trillion. Spending has been rising rapidly under this administration.
Why does Hollywood bash business?
Asks University of Illinois law professor, Larry Ribstein, here: "Art and Money in the Movies: Why Hollywood Bashes Business". I learned about this from ProfessorBainbridge.com
Newsweek article on Vernon Smith
Newsweek has an article this week on Vernon Smith. Smith won the Nobel prize last year for his work on experimental economics. The full text of the article is here: "An Experimental Mind". I learned about this at Marginal Economics.
"Even before the Nobel, Smith’s ideas had spread through his preachings and those of his acolytes to transform the thinking of government, producing some of the most creative policy innovations of recent decades. Since the early 1970s experimental economists have changed the way the U.S. government sells wireless spectrum, packs a space probe, regulates the price of gas, allots airport landing slots and battles smog. They hit the headlines this summer as the inspiration behind the Pentagon’s “terror-futures market,” which was killed for being politically tone-deaf before it could prove its ability to forecast the next big Qaeda attack..."
The environmental case for genetically modified foods
Jonathan Rauch makes the environmental case for genetically modified foods, in the October Atlantic magazine. The article is online, here: "Will Frankenfood Save the Planet?". Genetically modified foods may help us use fewer pesticides, less fertilizer, use soils that have become salty through irrigation, and reduce pollution from agricultural runoff.
"What is much less widely appreciated is biotech's potential to do the environment good. Take as an example continuous no-till farming [Farming without ploughing. No-till farming is meant to reduce pollution from agricultural runoff of pesticides and fertilizers, erosion of the soil, and to preserve the richness and organic vitality of the soil - Ben], which really works best with the help of transgenic crops. Human beings have been ploughing for so long that we tend to forget why we started doing it in the first place. The short answer: weed control. Turning over the soil between plantings smothers weeds and their seeds. If you don't plough, your land becomes a weed gardenÂunless you use herbicides to kill the weeds. Herbicides, however, are expensive, and can be complicated to apply. And they tend to kill the good with the bad.
"In the mid-1990s the agricultural-products company Monsanto introduced a transgenic soybean variety called Roundup Ready. As the name implies, these soybeans tolerate Roundup, an herbicide (also made by Monsanto) that kills many kinds of weeds and then quickly breaks down into harmless ingredients. Equipped with Roundup Ready crops, farmers found that they could retire their ploughs and control weeds with just a few applications of a single, relatively benign herbicideÂinstead of many applications of a complex and expensive menu of chemicals. More than a third of all U.S. soybeans are now grown without ploughing, mostly owing to the introduction of Roundup Ready varieties. Ploughless cotton farming has likewise received a big boost from the advent of bioengineered varieties. No-till farming without biotech is possible, but it's more difficult and expensive, which is why no-till and biotech are advancing in tandem..."
In connection with this, today's New York Times has a report by Larry Rohter on a policy change in Brazil, to allow farmers to plant genetically modified soybeans, here: "Hard Realities: Brazil Drops Resistance to Genetically Altered Crops". This has apparently been a very controversial decision in Brazil, "a bastion of global opposition to genetically modified organisms." The story implies the decision was driven by Brazil's desire to increase agricultural exports. The story also notes that,
The Road to War in Iraq
The Bush Administration waged war effectively in Iraq, but its diplomacy before the war was a disaster, and its planning for the post-war seems to have been problematic. On March 17 I posted links to some material on pre-war diplomacy, here: "What went wrong? Why didn't we get the second U.N. resolution?"
The current issue of Foreign Affairs has an article on pre-war diplomacy by James Rubin, and has put the full text to the web, here: "Stumbling Into War". The author is a Visiting Professor of International Relations at the London School of Economics and was a Clinton Administration Assistant Secretary of State for Public Affairs from 1997 to 2000.
"First, the fact that Washington's justification for war seemed to shift as occasion demanded led many outside observers to question the Bush administration's motives and to doubt it would ever accept Iraq's peaceful disarmament. Second, the United States failed to synchronize its military and diplomatic tracks. The deployment of American forces in the Middle East seemed to determine American policy, not the other way around, and diplomatic imperatives were given short shrift. Third, the failure to anticipate Saddam's decision to comply partially with UN demands proved disastrous to Washington's strategy. Fourth, the belated effort to achieve a second Security Council resolution could still have succeeded, had the United States been willing to compromise by extending the deadline by just a few weeks. But such a compromise was not forthcoming, which leads to the last lesson: the Bush administration's rhetoric and style alienated rather than persuaded key officials and foreign constituencies, especially in light of Washington's two-year history of scorn for international institutions and agreements..."
Benefit of environmental regulations exceed costs...
...according to a new study by the federal Office of Management and Budget (OMB). The Washington Post has a story by Eric Pianin, here: "Study Finds Net Gain From Pollution Rules. OMB Overturns Past Findings on Benefits".
"The report, issued this month by the Office of Management and Budget, concludes that the health and social benefits of enforcing tough new clean-air regulations during the past decade were five to seven times greater in economic terms than were the costs of complying with the rules. The value of reductions in hospitalization and emergency room visits, premature deaths and lost workdays resulting from improved air quality were estimated between $120 billion and $193 billion from October 1992 to September 2002..."
Appendix D to the report contains the OMB's new guidelines for the conduct of regulatory analysis under Executive Order 12866. These are the new and revised guidelines for conducting cost and benefit analyses of regulations.
Who pays the income tax?
The top 1% of income earners paid 37.4% of federal income taxes in 2000 and 33.9% in 2001, according to IRS figures released yesterday. Fluctuations in their incomes have a disproportionate impact on income tax revenues. Here's today's New York Times story David Cay Johnston: "Top 1% in '01 Lost Income, but Also Paid Lower Taxes"
"Over all, Americans had 2.8 percent less income in 2001 than in the previous year. But federal tax revenues fell 9.4 percent because the incomes of those at the top, who pay the highest tax rates, dropped so much more than the average...
"...The minimum income to reach the top 1 percent was $293,000 last year, down from $313,500 in 2000, but almost identical to the threshold in 1999."
Boom in Baghdad
Daniel Drezner reports on Iraqi National Council plans for economic liberalization, including 100% foreign ownership of Iraqi concerns in most sectors, and on increasing consumption by Iraqi consumers, here: "The Iraqi free trade zone".
The Economist reports on the reforms, here: "Let's all go to the yard sale".
"If carried through, the measures will represent the kind of wish-list that foreign investors and donor agencies dream of for developing markets. Investors in any field, except for all-important oil production and refining, would be allowed 100% ownership of Iraqi assets, full repatriation of profits, and equal legal standing with local firms. Foreign banks would be welcome to set up shop immediately, or buy into Iraqi ventures. Income and corporate taxes would be capped at 15%. Tariffs would be slashed to a universal 5% rate, with none imposed on food, drugs, books and other “humanitarian” imports..."
Why is Gray Davis in trouble?
Hal Varian looks for the explanations for the California electricity crisis of 2001 and for its current budget shortfall and asks if Gray Davis was to blame, in this New York Times column: "Lessons From California’s Budget". Lots to learn here. Among other things some advice on what to tax:
"When money flows in, governments find it hard not to spend it...
"Then the house of cards came tumbling down. Revenue from options and capital gains fell to $8.6 billion in 2001-2, and $5.2 billion in 2002-3.
"Reversing those spending decisions was not as easy as putting them in place: much of the increased revenue went for education, tax cuts and other long-term commitments.
"This brings us to the second lesson in economics: don't spend transitory income on permanent commitments..."
The economics of discrimination
Changing North Korean economy
ParaPundit reports evidence of some increasing use of markets in North Korea: "Windows Into North Korea's Economy". Last summer, before North Korean nuclear proliferation became an issue, there were stories of movements towards markets in North Korea. See these two Economist articles from last July 27: "Stitch by stitch to a different world" and "Open sesame".
Short biographies of great economists
The Federal Reserve Bank of Dallas publishes a series of Economic Insights leaflets, with "commentary on people and issues that lie at the heart of a free-market economy." The entire archive may be found here: "Economic Insights Archive". Each of the Insights leaflets has a short intellectual biography, with four or five boxed quotes. Subjects are economists or popularizers of economic ideas. There are leaflets on Bastiat, Adam Smith, Hayek, Mises, Knight, Buchanan, Coase, and others. I learned about this at Truck and Barter.
Measuring the burden of taxation
Benjamin Zycher, at Tech Central Station, compares percent of income taken in taxes and tax rates as measures of state tax burden, here: "Two Tax Myths".
"Accordingly, the relevant parameter is the rate at which incomes and sales are taxed..."
Nobel prize winning economist Franco Modigliani dies
From the Washington Post obituary by Adam Bernstein ("Franco Modigliani Dies; Won Nobel in Economics"):
"Working off the earlier ideas of John Maynard Keynes and others, Dr. Modigliani's major contribution to the field of savings was the "life-cycle hypothesis." His idea, which helped countries formulate pension and retirement systems, held that people at all levels of society generate savings with retirement in mind -- but for their own final years and not for their descendants. That meant, he said, that one saved or spent money according to their income stream at different stages of life and their projected life span..."
"Until Mr. Modigliani and Mr. Miller came along, much attention had been devoted to determining just the right mix of debt and equity. But the payoff from expansion through debt, for example, is offset by the risk that the company might not be able to repay the debt. What investors focus on, in fact, is profitability, and they offset the risk of purchasing stock in a leveraged company by holding safer investments in their portfolios..."
"I survived hurricane Isabel, but couldn't buy a flashlight or the right size batteries, the night before the storm was to come. Merchants let supply run out rather than raise the prices. C.C. Kraemer at TechCentralStation.com tells us that half of all states have anti-gouging laws. More significantly, merchants fear that customers will resent price increases during times of trouble. The testable prediction is that wandering "umbrella merchants," as I have encountered in Manhattan, will raise their prices when it is raining. They have little reason to fear long-run negative effects on their reputation. I have found this to be true but can cite only two data points in its favor, twice I bought umbrellas for $10 rather than for the usual price of $5, and I paid more when it was raining...."
This Washington Post story by Kenneth Bredemeier, instances some of the price increases following Hurricane Isabel: "Those With Power Set the Price In Hurricane Isabel's Wake, Many Complain of Gouging "
"Yesterday in Takoma Park, parts of which were still without power, Darryl Williams poked his head into the 4th Street Market and announced he had a $600 generator for rent.
" "It's $100 an hour for a friend," said the 24-year-old D.C. man. "If I don't know you, it's $200 an hour."
"The store's owner, Quacy February, counted himself as a friend. But he still balked at the price. "That's a rip-off," he said.
"Across the street, Tim Jones, a 48-year-old Takoma Park resident, priced an hour with his generator -- which he bought for $400 -- at $200 an hour.
"So far, he said, there are three takers.
"I hate to say it," he said, "but it's not a fair price." "
As an economist I'd argue that the price increases serve a useful function by rationing available resources in short supply to their most valuable uses and by, by creating high short run profits, encouraging the production and delivery of additional supplies of necessary goods to the hard hit areas.
It's interesting that even people who receive the high price don't interpret the the prices are "fair." This implies that they feel the value from the availability of the resource (for instance, the generator above) should be made available to the person who wants to rent it, rather than to the person who owns it.
Perhaps this falls out of the "coding" of a loss as more valuable than an equal benefit - the result of the cognitive psychologist's asymmetric value function. The person whose power has gone out has suffered a loss - equal maybe to $200/hour. The ability to rent the generator at the old price ($25/hour?) lets the person minimize that loss, reducing it by $175 an hour. If the owner of the generator could rent it for $200 an hour, the owner would receive that $175 in value. However, people might instinctively view avoiding a loss of $175 an hour as more important than a gain of $175 an hour. This may be why they see the price increase as unfair.
The article points to the political reponse - the governor and the attorney general are calling for an "anti-gouging" law. This would essentially be a system of price controls imposed to prevent prices from rising in the new supply and demand conditions. This would exacerbate the conditions of excess demand, at least temporarily - lots of lines and waiting lists for access to goods and services. This would encourage efforts to obtain the needed items outside the region in which the price controls were in effect - but efforts by consumers rather than by the normal suppliers. If price competition were not used for allocating goods and service, people would compete for them in other ways. Alternative rationing systems might include discrimination by merchants on the basis of personal preferences for different people, trade at controlled prices with exchanges of favors or barter on the side, and under the table bribes and payments. Opportunities would be created to purchase at the controlled prices for resale at illicit, but uncontrolled prices, as below:
The article ends by pointing to the experience of a firm that continued to sell ice at pre-Hurricane prices, even after the demand shifted:
"Stuart Levin, general manager of Talbert's Ice & Beverage Service in Bethesda, said, "I can't get wet ice or dry ice fast enough. People started buying dry ice when the forecasts first showed a hurricane was coming."
"But he said the price his firm is charging is still the same as before the storm...
"Walk-in customers have streamed into the firm's Bethesda store, Levin said, but he soon became suspicious of one customer's need for dry ice.
" "He bought 400 pounds of dry ice [for $640] and he waited till my last truck pulled out and started selling it in my parking lot," Levin said..."
More price gouging posts available this morning. Tyler Cowen updates his discussion here: "More on price gouging". "Truck and Barter", here: "Costs and Benefits of Stable Prices " "Agoraphilia," here: "In Defense of Gouging" (you may have to scroll down to find this one (9-23-03) - Ican't seem to link directly to the specific posting). C.C. Kraemer at "Tech Central Station," here: "In Defense of Price Gouging". Arnold Kling, here: "The Case for Price Gouging". All of these links courtesy of the Tyler Cowen post leading off this paragraph.
Revisions at 7 AM, 9-23-03
NYT Story today on state Medicaid cutbacks
Medicaid is the joint federal-state program providing medical assistance to the poor. Budget crises, high recession induced unemployment levels, and rapidly rising medical costs have increased the demands on the program while making it much harder for the states to meet them. In response, states forced to cut back on their Medicaid programs. The New York Times carried a survey story by Robert Pear yesterday: "Rising Costs Prompt States to Reduce Medicaid further".
"What a revolting development this is!"
The Washington Post account
Apparently the steel tariffs have backfired politically on the administration - the political gains in West Virginia and Pennsylvania have been more than offset by losses elsewhere. The administration is looking for a face-saving way to back off. That's the thrust of a story in today's Washington Post by Mike Allen and Jonathan Weisman: "Steel Tariffs Appear to Have Backfired on Bush Move to Aid Mills and Gain Votes in 2 States Is Called Political and Economic Mistake " Allen and Weisman provide a fly-on-the-wall look at administration economic policy making:
"That marks a significant change from 18 months ago, when R. Glenn Hubbard, then chairman of Bush's Council of Economic Advisers, drafted detailed analyses against the tariffs, including state-by-state job losses that he forecast for manufacturing.
"But the economic team was fractured. Evans was torn between the steel industries and the steel users. He ultimately decided against the tariffs, but with caveats that the White House political team took as a sign of weakness, former administration economic officials say. Likewise, then-Treasury Secretary Paul H. O'Neill expressed philosophical opposition to tariffs, but he was more interested in opening talks with allies on limiting steel production capacity abroad.
"At a crucial meeting of the economic team, tariff opponents said they were abandoned. O'Neill sent his undersecretary for international affairs, John Taylor. Then-Budget Director Mitchell E. Daniels Jr. told Hubbard, who also has since left the administration, that he would back him, but left the meeting before Hubbard's presentation. And Lawrence Lindsey, the famously opinionated chairman of the White House National Economic Council, decided his role was to facilitate the discussion, not express an opinion.
"Perhaps most importantly, former Bush economic advisers said, Robert B. Zoellick, the U.S. trade representative, supported the tariffs, figuring that backing them would win congressional votes to give Bush "fast track" trade negotiation powers. Indeed, Congress did hand the president that win. Zoellick also calculated that the lucrative subsidies backed by Bush that year in the massive farm bill would help the cause of free trade, by giving the United States a chip to bargain with at the World Trade Organization's upcoming round of talks to eliminate farm subsidies."
Brad Delong critiqued the Allen and Weisman account, here: "The "He Said, She Said" Disease" ("...So why do Allen and Weisman turn what appears under their byline into a platform for White House officials to say things they know are lies? Why do they confuse their readers by pretending that there is a debate over the economic effects of the steel tariff?...")
The New York Times account
Elizabeth Becker paints the picture a little differently in Friday's New York Times, here:"Bush Weighs Fate of Steel Tariffs". In Becker's article, job losses in steel using businesses don't appear as large as the tend to be in the Post article. Becker cites to two International Trade Commission (ITC) studies:
"One report, however, concluded that many companies "had difficulty distinguishing between the effects of the safeguard measures and other changes in market conditions."
"While overall employment of steel-consuming industries generally fell or remained flat in the year after the tariffs were imposed, compared with the two previous years, according to the report, "in many cases employment fell by a greater amount (and percentage) in the year before the safeguard measures were implemented than in the first year after they were implemented."
"As for maintaining the tariffs, "a majority of steel-consuming firms indicated that neither continuation or termination of the safeguard measures would change employment, international competitiveness, or capital investment," the report said.
"The report noted that results varied by industry and that companies in the the auto parts and steel fabrication businesses reported a greater effect from the measures..."
The International Trade Commission reports
Access the ITC reports, here: "ITC Steel reports page"
DeLong critiques these reports, here: "The International Trade Commission Should Be Ashamed" ("...Do you think that the unfavorable macroeconomic conditions--the "recession," it is called--in the year before the tariffs had something to do with steel-user job losses in that year? If so, you're a lot smarter (or at least a lot more honest) than the hacks who write reports for the International Trade Commission...")
Aging European populations
The Washington Post has an article on the fiscal problems created in Italy by the aging population, here: "Older, but Not Better, in Italy Despite TV Show's Celebration of Aging, Pensions Draining System ". The entire developing world faces similar problems. Longer life spans, earlier retirement ages, declining birth rates, all reduce the ratio of workers to retirees, increasing the pension or social security burden on each worker.
"It is a pan-European problem. The more money spent on pensions, the less is available for other social service outlays, not to mention defense and infrastructure. To try to make ends meet, France has raised the number of years government workers must stay on the job to receive a full pension from 35 years to 40, like most workers in private enterprise. By 2012, this number will rise to 42 years for everyone.
"In Germany, Chancellor Gerhard Schroeder wants to increase the minimum retirement age from 65 for men and 60 for women to 67 for both sexes. Austria's parliament has passed a complex series of reforms that will raise both the minimum number of work years required to get a pension and the minimum age for pensioners. Austria is also gradually abolishing systems that permit workers to retire early; the average retirement age in Austria is 59 for men and 57 for women..."
My wife and I enjoy the TV show Trading Spaces.
As described in a Washington Post article ("Trading In Trading Spaces When the Facelift Flops, The Homeowners Take Action ") last spring,
Sad? Try homicidal. During the reveal of newly cocoa walls, she grimaces to avoid weeping, then briefly leaves the room. She returns and is greeted by her smiling neighbor, which "made me mad. I didn't want to hit her. She went to hug me and I said 'It is not funny, it is not funny.' "
In a blink, Stephens is shown wrestling the woman to the ground. "I just kind of went a little crazy for a second," she concedes.
And what of the offending walls? "Much as we still hate it -- my husband more so -- we are leaving it up because we both have big families who live far away. They told us, 'Before you change it, we want to come see it.' "
Garrett Hardin reported dead
Garrett Hardin author of the well known paper on common property, "Tragedy of the Commons," apparently died on September 14. Marginal Revolution carries a brief notice, with links to an obituary and on online version of his famous paper, here: "Tragedy of the tragedy of the commons".
TRIPS and trade
As a part of the Uruguay Round of trade negotiations, countries joining the World Trade Organization (WTO) were required to agree to enforce intellectual property rights (patents, copyrights) standards. These standards were called TRIPS, for Trade Related Intellectual Aspects of Intellectual Property Rights.
Daniel Drezner argues that the decision to include the TRIPS agreement with the other trade agreements negotiated in the Uruguay Round was a mistake. Here is his Tech Central Station column: "What Might Trip Up the WTO"
"Whatever the valid reasons for linking IPR to trade, the negative effects of TRIPS have been substantial. First, the agreement imposed a significant burden on developing countries to adhere to more rigorous standards. Second, the agreement's effect on the provision of AIDS drugs had a polarizing effect on the global politics of trade, prompting anti-globalization activists to make absurd and disgusting claims about the WTO's responsibility for the deaths of millions of Africans. Third, in creating TRIPS the members of the WTO erased the dividing line between the liberalization of trade in products and the regulation of processes..."
"In other words TRIPS is an agreement about which laws the member governments of WTO have on their books and how governments enforce those laws: it does't directly regulate any firm or production process. Only national governments can do that.
"This difference is crucial. Because TRIPS is about creating a 'floor' for the IP standards that national governments must enforce, it leaves a lot of the decisions about whether the actual standards adopted nationally are 'strong' or 'weak'..."
I'll never be able to watch Northwest Passage again...
New evidence indicates that Nathan Hale was trapped by Major Robert Rogers of Rogers' Rangers fame: "Nathan Hale Blundered Into a Trap, Papers Show".
Rogers led Hale to believe that he himself was "upon the business of spying out the inclination of the people and motion of the British troops," Tiffany wrote.
Hale then told Rogers of his mission, and Rogers invited him to dinner at his quarters, where he and several friends began the same kind of talk, the manuscript said.
"But at the height of their conversation, a company of soldiers surrounded the house, and by orders from the commander, seized Captain Hale in an instant," Tiffany wrote..."
Decision making by phone vs instant messaging
Stephen Bainbridge, in his "Corporation Law and Economics" blog, posts on requirements in Delaware law that corporation boards of directors conduct meetings in which directors can actually hear each other. This implies that a conference meeting would have to be conducted with a phone conference line, even if the directors also had Internet communication capacity - email or instant messaging. Drawing on research into meeting dynamics, he argues that this is a good idea, here: "Applied Economic Analysis: Can a Board Meet Online?"
Smaller classes aren't all that great
Joanne Jacobs posts on a recent Organization for Economic Co-operation and Development (OECD) study finding "that class size is less important than other factors when it comes to learning. Reducing class size from 28 to 20 students was found to have a minimal impact on student achievement." Here: "Small, schmall" Tyler Cowen at Marginal Revolution posts on the story and suggests a reason for the outcome: "Class size doesn't matter much"
The Economist has a review of a new book on the politics and diplomacy leading up to the creation of the U.N. in 1945, here: "Flags of convenience". I was struck by these paragraphs from the review:
At the peak of America's powers, in other words, its leaders were determined to create a multilateral institution involving as many nations as possible as a primary mechanism for ensuring American, as well as global, security. In his speech before the San Francisco conference, Truman was explicit about the price of doing so. “We all have to recognise—no matter how great our strength—that we must deny ourselves the licence to do always as we please.” For America itself, Truman argued, this was a price well worth paying. The contrast with the attitude of most subsequent American governments, and especially the current one, could not be more stark. Many Bush administration officials seem to view the UN either as an irrelevance or as a dangerous constraint..."
More post-Cancun posts
The Economist has an overview, here:"Tequila sunset in Cancún".
Geitner Simmons posts on the different editorial stances taken by the New York Times and the Washington Post, here: "The scold vs. the diplomat".
Simmons also posts on the agricultural subsidy debate in Nebraska, here: "A pro-WTO farm voice in Nebraska".
Doug O'Harra in the Anchorage Daily News reports on a part of Anchorage life, here: "Male moose wage war on local hammocks, swing sets. Cranky critters risk injury, death when antlers become entangled"
"At least three hapless moose have been caught since Sunday, and another four have been reported snarled in hammocks or swing set chains over the past two weeks, said Jessy Coltrane, assistant area biologist with the Alaska Department of Fish and Game...
"The situation happens every fall when adult males bang and rub their antlers against objects to remove summer velvet. With hormones starting to rage, the bulls also become more rambunctious as they start following cows and confronting other males..."
Nina, here's Kevin Drum's Krugman interview:
Does the U.S. current account deficit end with a bang (Krugman) or a whimper (DeLong)? DeLong reacts to Krugman's Drum interview: "The Endgame for the U.S. Current-Account Deficit".
What consequences does such a shift in capital flows and a collapse in the dollar entail? I do find myself much more optimistic than Paul Krugman..."
Daniel Drezer comments on the Drum-Krugman interview, here: "Paul Krugman opens up"
Post Cancun post
Suicide protest at Cancun
Today's New York Times carries a James Brooke profile of the South Korean farmer who killed himself in Cancun last week to protest negotiatiosn to reduce agricultural tariffs, here: "Farming Is Korean's Life and He Ends It in Despair".
"He cut all the grass before departing," Lee Kyang Ja, his older sister, said with surprise today, coming upon the site after climbing a dirt road behind the farm. On Wednesday in Cancún, Mexico, Mr. Lee, a 55-year-old farm union leader, scaled a barricade outside a meeting of the World Trade Organization and then fatally plunged his old Swiss Army knife into his heart...
"...in rural communities like this one in southern South Korea, Mr. Lee, a three-time member of the provincial assembly, was seen as a heroic figure, a defender of debt-ridden farmers struggling to maintain an age-old agrarian tradition in a fast-developing country where manufacturing is king..."
"I got a hint of this when I saw an article from last weekend in The Hindu Times, a newspaper in India, about proposals being considered at the WTO negotiations in Cancun over reductions in farm subsidies:
Kieran Healy points out that Cancun fell apart over investment and capital control issues rather than agriculture, and points to a paper by Pierre-Olivier Gourinchas and Olivier Jeanne’s on “The Elusive Benefits from International Financial Integration" (and to one of his earlier posts on it), here: "Capital Mobility".
Daniel Davies argues that Cancun fell apart over investment and capital control issues it shouldn't even have been discussing, here: "High Noon in Cancun"
Medicare utilization rates in Boca Raton
Gina Kolata reports on Medicare utilization in Boca Raton, in this New York Times article from last Friday: "Patients in Florida Lining Up for All That Medicare Covers".
" "We never used to lock the door at lunch, but they came in an hour early," said Ellie Fertel, the office manager. "It's like they're waiting for a concert. Sometimes we forget to lock the door and they come in and sit in the dark."
"Yet few have serious medical problems, let alone emergencies. "It's the culture," said Dr. Jeffrey I. Miller, one of four urologists in the practice.
"Doctor visits have become a social activity in this place of palm trees and gated retirement communities. Many patients have 8, 10 or 12 specialists and visit one or more of them most days of the week. They bring their spouses and plan their days around their appointments, going out to eat or shopping while they are in the area. They know what they want; they choose specialists for every body part. And every visit, every procedure is covered by Medicare, the federal health insurance program for the elderly.
"Boca Raton, researchers agree, is a case study of what happens when people are given free rein to have all the medical care they could imagine..."
"Medicare bases its payments on a system in which each kind of service is assigned a "relative value," Mr. Scully said. To increase the payment for routine office visits and stay within its budget, Medicare would have to decrease the relative value of other services.
"A committee of doctors meets each year to suggest relative values, he said, but "the most aggressive and active groups tend to be the specialists."
" "Year after year," Mr. Scully went on, "the specialists come in and make a very strong argument for higher reimbursements. There's eventually a squeeze on the basic office visit." "
I learned about this from Virginia Postrel, here: "Entitlement Mentality".
Here's how it ended:
Peter Gallagher fills in some of the details about the collapse of the Cancun trade talks: "It's over ... for now ". The actual collapse wasn't triggered by the disagreements on the agricultural issues:
Rationing Intensive Care
Today's Boston Globe has a story by Liz Kowalczyk on the rationing of care in intensive care units (ICUs), here: "Rationing of medical care under study"
Rationing methods now
When people face prices for a good below market clearing prices, people will want more of the good than will be supplied. You need another way to decide who is going to get the good, that is, another way to ration access to the good. Kowalczyk's medical contacts described a wide range of current mechanisms for rationing for access to ICU treatment:
The rationing work group
Kozalczyk reports on a new working group of doctors and medical ethicists (the Values, Ethics, and Rationing in Critcal Care Task Force) that is trying to develop a set of national guidelines for rationing ICU care. The effort is being supported by a $1.8 million grant tof Eli Lilly and Co.
"But the second step will be far more difficult: How does the group decide how much money saving a life is worth? Levy said that question will be answered by ethicists, economists, physicians' patients groups, and politicians at a series of conferences. Hospitals and doctors can develop rationing policies on their own and don't need federal approval.
"Federal officials, debating whether Medicare should cover dialysis, first assigned a dollar figure to a year of life during the 1970s, said Peter Ubel, author of the pro-rationing book "Pricing Life." They arrived at $50,000, the cost of a year's worth of dialysis for a patient with advanced kidney disease. As a result, policy-makers and researchers have used this number to advise doctors, hospital administrators, and state and federal Medicaid and Medicare officials about whether particular treatments are worth paying for.
"Ubel, who is at the University of Michigan, believes that number is too low. Based on public opinion surveys, he thinks a year of life is worth closer to $150,000 to $200,000. But, he said, using a hard and fast number is "just so cold." Society should consider emotional factors too, he said, such as whether we want to provide all possible care to veterans because they defended the country."
Cancun trade talks collapse
The Washington Post says the Cancun talks have collapsed:
"Delegates said the Europeans agreed to back off on three of the proposals, but insisted they be granted one. That was unacceptable to many developing nations...
"...Many of the poor nations were frustrated that officials delayed discussion of agricultural reform on Sunday. Delegates had hoped to slash the subsidies rich nations pay their farmers and lower the tariffs many countries charge for importing farm goods."
"...Richard L. Bernal, a delegate from Jamaica, said that a group of African, Caribbean, Asian and Latin countries felt they had little choice. The United States and Europe, he said, were not generous enough on reducing their agriculture subsidies, on helping poor African countries dependent on cotton, or understanding their difficulties in taking on such new trade responsibilities as investment."
Alaskana: the Joe Vogler story
Sam Bishop tells the story of Alaska Independent Party figure Joe Vogler, in this Fairbanks Daily News-Miner story: "Vogler death: Conspiracy or robbery gone bad?"
"He homesteaded, logged, fished and mined.
"Through it all, he continued cursing, literally. It was mostly aimed at the bureaucrats who were trying to bend Alaska habits to the new ways of land, water and air management..."
Cancun trade meetings drawing to a conclusion
Today is the last day of the Cancun trade meetings.
I posted yesterday (here: "What's the 'Group of 22' ") on the status of the agricultural negotiations.
Today Peter Gallagher brings the story of the negotiations up to date through Saturday afternoon, here: "Battle at the buffet table ".
The New York Times website has a Reuters story filed today: "Clock Ticks Down at Tough Cancun Trade Talks"
The trade talks on Mexico's Caribbean coast are laboring to bridge a North-South split on issues ranging from rich nations' massive farm subsidies to many developing countries' refusal to negotiate new rules on foreign investment...
Many delegates believed they would walk away from this beach resort with some kind of agreement but some questioned whether it would amount to a major breakthrough...
Ministers need to find enough common ground in Cancun to keep negotiations alive on new trade liberalization pact by the end of next year. The World Bank says a good deal would add more than $500 billion a year to global incomes by 2015 and lift 144 million people out of poverty.
Diplomats say failure in Cancun could kill off hopes for such a deal until way beyond 2004..."
Why defense purchases tend to cost more than expected
Ken Rogoff, former Chief Economist at the IMF
Tyler Cohen pulls together some materials on former International Monetary Fund Chief Economist Kenneth Rogoff, here: "Liberalization of capital markets". Cohen has pulled together a handy set of links to Rogoff's thoughts on capital market liberalization and developing economies, Joseph Stiglitz's book on globalization, and chess.
What's the "Group of 22"
Reports from Cancun suggest that much of the week has been spent reacting to the proposals of the "Group of 21." (apparently the G22 by now, according to Friday's Economist). This Financial Times story by Guy de Jonquieres and Frances Williams on Thursday, Sep 11 is great: "Third World alliance hits at trade rules". Peter Gallagher has been describing events all week on his blog, here: Peter Gallagher. The Economist covered the G22's proposals on Friday, here: Economist: "The sword and shield"
What is it?
The "G22" is a group of developing countries seeking developed world agricultural trade concessions at the Cancun ministerial meetings of the World Trade Organization's Doha Round.
Who's in it?
The group started with 16 members and has reached 22 by now. Leading members include Brazil, China, India and South Africa. The remainder of the original 16 include Argentina, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Paraguay, Peru, Philippines, Thailand. One of the group's selling points is the claim that its members include over half of the world's population.
These countries have common interests, but they also differ in important ways. The Financial Times story below notes, that:
They want reductions in developed world (European Union (EU), Japanese, and U.S.) agricultural subsidies and agricultural trade barriers. They also want to avoid corresponding reductions in agricultural trade barriers within the developing world.
They are pressing to substitute their own agenda for the EU-US agricultural proposals advanced a couple of weeks ago, and for the agricultural agenda prepared by Perez del Castillo, the Chairman of the WTO's Trade Negotiations Committee.
Peter Gallagher has provided the text for the G22 proposals here: "G21 Text on Agriculture", the text of Perez del Castillo's draft, here: "No-one happy with draft Cancun decision ", and the text of the EU-US proposal, here: "Trans-Atlantic trade deal ".
How did it form?
From the Financial Times:
Brazil, India and other members were enraged by the two trade superpowers' demands that they limit subsidies to peasant farmers and that developing countries which were large net food exporters be required to lower their import barriers."
What is going to happen?
From Cancun yesterday (Friday, Sep 12) Peter Gallagher reported that negotiations on all other issues - and there are many non-agricultural issues - is held up by the conflicts over the agricultural issues: "The agriculture 'crisis' ".
According to the Financial Times: (a) there is a question about whether or not the G22 will hold together (note above the differences between members); (b) the EU may be pressed to reduce its subsidies further than many EU nations will accept, (c) the US Congress is only likely to go along with large agricultural support reductions if other countries do so - and it is an explicit part of the G22's program not to do so; (d) success in Cancun will energize the developing countries in future trade fora.
Giving the Economist the last word:
Bad Economic Reporting Exposed
Brad Delong takes apart a New York Times story on (a) the impacts on working people and their communities as manufacturing jobs are lost, (b) the villains identified by the victims, and (c) the potential political implications.
The problem is, the story's author shares the same crude reductionist explantion ("its the foreigners") as his interviewees. DeLong provides the broader perspective that should have been in the original. Worth reading: (a) for the lesson in "back of the envelope" economics in DeLong's first paragraph, (b) for the context it provides for thinking about manufacturing jobs issue, and (c) (as is often the case in a DeLong posting) for the lessons it has to teach about how to read something carefully and critically.
If you only have time to read a few words from DeLong's posting, I'd suggest these:
How are things going in Cancun?
Arnold Kling surveyed various Cancun sites and postings on Tuesday the 9th, here: "Cancun Trade Talks". Kling is skeptical that these trade talks matter much.
Kling points out that free trader Ronald Bailey is reporting from Cancun for Reason magazine. Bailey incorporates reporting into essentially editorial columns. He's done three so far:
"Because the most important achievement of this WTO ministerial would be substantial progress toward truly free trade in agricultural goods..." Bailey was disappointed by what he heard.
"The G22 is led by poor but populous countries such as China, India, Brazil and South Africa. While this group cannot claim to do half the world’s trade, it can claim to represent half of the world’s population. On Tuesday night, it tabled a set of radical proposals on agriculture to rival the much more cautious plans agreed last month between the EU and America. India, one of the leaders of the G22, has accused the rich countries of negotiating with “a sword and a shield”. But the description is perhaps more apt for the G22’s own proposals. It wants America and the EU to dismember their lavish systems of agricultural protection, whilst it shields its own."
The mining engineers who built so much of Alaska
Today's Juneau Empire has a local color story by Anne Chardonnet on the engineering that went into Juneau's large gold mines: "Southeast Sagas: A Tale of Two Tunnels". The story of one of the tunnels is the story of engineer Ben Stewart:
"In 1910, my father was hired... to re-survey the Alaska Juneau mining claims," Judge Stewart said... It was supposed to be a one-season job, but then they hired him to survey the main tramming tunnel for moving the ore from the glory hole on the flanks of Gastineau Peak in Perseverance Basin to the mill... It was drilled simultaneously from both ends. It has a one-percent grade (from start to finish) to make it easier for the trains."
" "My father told me that at 2 o'clock one morning he had a call from the man who was running the drilling crews that he expected to break through soon," Stewart added. "And indeed they did - and the floors were only one inch apart."...
"...To survey the tunnel route accurately, Ben Stewart had to chain level from sea level up over Mount Roberts and down into the basin. Conscientiously, he did this three times to check his figures, Tom Stewart said.
" "The terrain was so steep that he would sometimes get three feet of chain out, and the plumb bob would be hanging down eight feet."
"The Gold Creek Tunnel was begun in August 1911 and finished two years later... It measured nine feet high by seven feet wide and was driven 6,538 feet into Mt. Roberts..."