Re: The Wisdom of the OECD

The Wisdom of the OECD: From Mankiw, excerpts of the OECD survey of the U.S. economy:

Substantial increases in the federal minimum wage are planned; however, increases in the Earned Income Tax Credit would achieve the same objectives more effectively and with less risk of job losses.

Why haven't I ran across that logic before? (That I have the expertise to assert soundness or validity to it...)

And:

consideration should also be given to shifting the tax burden from direct taxes to consumption based indirect taxes – such as a national sales tax or a value added tax. This would produce efficiency gains, including reducing disincentives to saving

Hmm...

Re: Let's Increase Poverty, Arnold Kling: Library of Economics and Liberty

Let's Increase Poverty, Arnold Kling: Library of Economics and Liberty:

We can argue about citizenship vs. work permits. But I think that labor mobility is a really good thing.

Labor mobility? Sounds good but isn't this what Europe started with?

• Expected costs?
• Invisible costs?
• Another way?
• What about work mobility? Job mobility?
• Import some for citizenship, export work for others?
• We definitely want immigrants but we can't let everyone immigrate, yet.
  
• The post links to Lant Pritchett saying:

  And because unskilled labor is the primary asset of the poor world, it is hard to even imagine a policy more directly inimical to a poverty reduction agenda or to “pro-poor growth” than one limiting the demand for unskilled labor (and inducing labor-saving innovations).

• If it is their primary asset: is taking it from them really helping them (as a whole), because we can't take them all.
  
• Where is the lesson on how to fish and the hand up?
• Free fish and handouts, while doing little to directly hurt us, definitely hurts the impoverished (and, round-about, everyone).
  

Re: Hospital ship preps for a novel mission

Hospital ship preps for a novel mission:

"People were saying, 'Why do they need the hospital ships? What purpose do they serve?'" said Navy Capt. Bruce R. Boynton, commander of the ship's 1,000-bed medical facility. "But what we've seen is they can be a very, very powerful platform for projecting America's goodwill."

"Obviously we're going to have an immediate effect on some people's lives, but I think the real impact will be measured after we leave, in six months to a year from now," Kapcio said. "Hopefully we'll be able to show that we're committed to the region and committed to lasting relationships in the region."

Re: Can the Iraq 'Surge' Be Salvaged?

Can the Iraq 'Surge' Be Salvaged?:

White House spokesman Tony Snow yesterday said Mr. Bush envisions an indefinite American military presence in Iraq that would resemble the one in South Korea, with the U.S. in a support role able to "react quickly to major challenges or crises." That presumes, though, that an Iraqi government would request or at least tolerate such a deployment, as the South Koreans have.

The question remains: when?
If that is the goal...are we truly transitioning towards it?
Is it the only goal? What others?
How would it resemble North Korea? How would it differ?

UPDATE:
Bush sees long-term role for troops:

The United States has 30,000 troops in South Korea.

And:

"It's important to defend this country on the extremists' 10-yard line and not our 10-yard line," Gates said this month.

I like that 'their 10-yard line' bit, but...lately I have been wondering how big we have to go to do that.
This is just tossing thoughts out but why didn't Bush say after 9/11: [for the world] "Let's hit Afghanistan" and [for the spooks and SpecOps] "This is really a GWOT, I'm cutting restraints - do your job"...eh?

$750,000 or half a life[or?]?

A story similar to that of the Mexican fisherman...? From Jeff Henshaw:

The scene: A diner full with the breakfast crowd. There are two stools left at the counter as a guy in a business suit, carrying the Wall Street Journal, and a biker wearing weathered denim and leather sit down elbow-to-elbow and order up coffee and the breakfast special. The guy in the suit looks up from his newspaper and sees the Harley-Davidson patch on the other guy’s vest.

Suit: Excuse me, do you own a Harley?

Biker: Yeah, Shovelhead.

Suit, wondering if the biker is calling him “Shovelhead”: Did you see the quarter they just announced? Amazing.

Biker, wondering if the U.S. mint is issuing a Harley commemorative quarter to go along with the state quarters, shakes his head.

Suit: Second-quarter earnings up 22 percent over last year. Revenue at $1.13 billion. Billion! That’s a lot of motorcycles to sell in three months. That’s 18 consecutive years of increased earnings and a new all-time high stock price yesterday. Our leisure products industry analyst has been saying for five years that the Harley bubble was going to burst, and the stock just keeps going up. You have a Harley, so tell me what it’s all about.

Biker: If I have to explain… (looks at the guy’s suit) Yeah, guess there’s a lot to explain.

Suit: I’ll say. The company was left for dead 20 years ago. Now it’s number 355 on the Fortune 500 list. But they say the customer base is aging. Do you have a new bike?

Biker: No, I’m old school. My Low Rider is a 1981.

Suit: (Digs a folder out of his briefcase.) How much did you pay for it?

Biker: I bought it from Skeeter on New Years Day, 1987. He hit a patch of ice and messed up his knee and his ol’ lady told him to get rid of it. It just had a few scratches. I gave him $4,000 for it.

Suit: Hmmm, $4,000 on January 1, 1987. (Examines a chart, punches some numbers into his calculator.) Do you know if you’d put that $4,000 in Harley stock on that date, and reinvested all your dividends, you’d now have about $750,000?

Biker: Really? Well Skeeter offered me $5,000 for it just the other day, now that his ol’ lady finally left him. And I’ve ridden it 80,000 miles since I bought it from him. What other bike is going to go up in value like that?

Suit: Well, that’s only a 25 percent return. And it doesn’t account for maintenance expenses. But it is better than the hit I took when I traded in my Mercedes. Still, wouldn’t you rather have three quarters of a million dollars? I mean, if I offered you $750,000 for your old, worn-out bike, wouldn’t you jump at it? You could go out now and buy a whole fleet of Harleys if you’d bought stock in 1987 instead of that bike.

Biker: (staring off into space, idly stroking his beard): Well, yeah, I guess if you gave me $750,000, I’d hand over the pink slip to the Low Rider in a hurry. But that’s not really the deal you’re talking about, is it? I’d have to give up everywhere I rode her over the last 17 and a half years. If I’d bought stock in ‘87, I wouldn’t have taken that ride over Lolo Pass when I almost got caught in a snowstorm in May. I would have missed eight Daytona Bike Weeks and three rides to Sturgis. I wouldn’t have seen Scott Parker come out of retirement and win the Springfield Mile. Don’t even want to think about all the friends I wouldn’t have got to know.

Suit: Hmm, I never thought of it that way.

Biker: Aw, I can’t tell you why the stock does this or that. That’s something you’ll have to figure out.

Suit: (Picking up his check and the biker’s) Actually, I think you just explained more than our analyst has in a year. Let me buy your breakfast and I’ll consider it a bargain. (walks out)

Biker to self: Well, if I have to explain… maybe I did.

Questions? Differences?
Again, I believe, both are wrong. This time by their irrationality rather than their desired means and ends.
What is there to say he would have invested in HOG?
Is this a little [healthy] synthetic happiness?
I like this:

Well, yeah, I guess if you gave me $750,000, I’d hand over the pink slip to the Low Rider in a hurry. But that’s not really the deal you’re talking about, is it?

One's reasoning capacity is greatly distorted when looking at 'what could have been':

For of all sad words of tongue or pen,
The saddest are these: "It might have been!"
- John Greenleaf Whittier

I think the story is more potent as a reminder of the limitations of an analyst, especially in judging extrinsic value.

Web site error rocks global oil markets

Web site error rocks global oil markets - Reuters:

"All it takes is a screw-up on a Web site to move the market. It just goes to show how tense this market is," said a Houston-based oil trader.

A string of refinery problems in the United States has propelled retail gasoline prices to record highs in recent weeks.

That last bit is what I found the most interesting. That is where the blame is said to lie, rather than tension in the Middle East, Venezuela, or specifically Iran...

SitNews: Vertically Privileged Alaskans Defended

SitNews: Vertically Privileged Alaskans Defended:

Mr. Mankiw and Mr. Weinzierl cite their own and others' research that there is a strong correlation between height and income. By their calculations, a tall person (six feet or higher) earns on average 16 percent more than a short person (five foot nine or less). The authors argue that according to theory, height is a great criterion for income redistribution: tax tall people more and give the money to short people.

Greg Mankiw's Blog: How to Become Rich

Greg Mankiw's Blog: How to Become Rich:

Finally, recall this lesson:

Stephen F. Venti of Dartmouth and David A. Wise of Harvard concluded that the primary reason for differences in retirement assets was differences in propensities to save. It is not unusual to see low-income households with high savings rates holding more financial assets at retirement than high-income households who saved a smaller fraction of their income.

The neoclassical theory of distribution teaches us that a person's earnings depend on his or her productivity. But earnings are not the same as wealth. The accumulation of wealth is mostly about the ability to exert self-control.

Ideas:

• earnings ≠ wealth
• earnings = productivity
• wealth = ability to exert self control

Re: ‘The Apprentice: Omaha Edition,’ Starring Warren Buffett

‘The Apprentice: Omaha Edition,’ Starring Warren Buffett - New York Times by Austan Goolsbee (Wikipedia, University of Chicago).

Against all advice from economists he had bought one share of Berkshire Hathaway:

Then I found out that the 76-year-old Mr. Buffett had asked for applications from people wanting to become his successor. Many hundreds applied. So at the annual shareholders’ meeting in Omaha this month, he announced his new search strategy: rather than decide from old-style résumés and interviews, he planned to choose three or four top candidates and then give each $5 billion or so to manage and see how they do. The winner gets the job.

When I heard about this, the romance died. For all of Mr. Buffett’s reputation as the ultimate nonmutual fund, he may have just fallen into one of the biggest mutual fund traps of all — forgetting how incentives affect fund managers’ behavior.

Two of the foremost economists in the country, Glenn Ellison of the Massachusetts Institute of Technology and Judith Chevalier of Yale have shown how important incentives are. In their classic paper “Risk Taking by Mutual Funds as a Response to Incentives,” for example, they showed that investors pour money into mutual funds in a highly skewed way. They chase winners, despite the evidence indicating that mutual funds that win in one year do not necessarily perform better in subsequent years. Funds with the highest annual returns get a huge inflow of money compared with funds that did almost as well but were not at the very top.

Arbitrage

Learned a bit about arbitrage from Mankiw's blog post: Arbitrage Opportunity?

Arbitrage is:

The purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy. (Answers.com)

More at Wikipedia and About.com:Economics

Re: Greg Mankiw's Blog: Pay at the Top

In a brief post, Mankiw points to a NY Times article that says:

the share of concert ticket revenue taken by the top 1 percent of pop stars — measured by sales per concert — rose to 56 percent in 2003 from 26 percent in 1982.

The quote is interesting in itself, leading one to conjecture the various means by which the top is separating from the bottom, but the comments are quite compelling.

One commenter said:

talking about ticket sales for musicians ignores touring costs

Another:

If corp. execs account for only 8.5% - 20% of the top 0.01 percent of the income scale, who are the other people up there?

And the reply:

Tiger Woods, Michael Jordan, Barbra Streisand, Steven Spielberg, Mick Jagger, Julia Roberts....

There are 750 major league baseball players alone, a majority of whom probably earn over $1 million per year.

Me: It would be interesting to see a breakdown of the top 0.01 percent of the income scale.

Another commentator directed the conversation to another side of the issue:

What we should be concerned about [is] the difference between the poor and their costs of living.

As Jeff Sachs put it "inequality is rising because 200 years ago everyone was poor."

If Bill Gates stock goes up or down (resulting in greater or lesser inequality) that does not hurt me if my incomes and costs are constant.

This is because wealth is not a zero sum game. By having more money that does not mean that you are taking the money from other individuals.

Another:

Actually, inequality is presently rising because the middle class is shrinking.

Another give and take:

Every trip to the gas station reminds me that my costs are not constant, while my paycheck changes far less frequently, and not always for the better, especially when my diminishing medical/dental benefits are taken into account.

And the response:

We do not b[u]y gasoline for its intrinsic value but for an amount of travel at a level of comfort and prestige. So since car engines have for the last 15 years or so gotten about 1% more efficient each year (and hybridization make cars about 25% more efficient in one whack) and because the fuel cost is less than the other costs of driving and, for what you get, cars have been getting cheaper (they used to go 100,000 miles now they go more than 200,000 miles, air bags etc.) the cost of an amount of travel at a level of comfort and prestige is falling all the time.

Questions, questions...

Re: Greg Mankiw's Blog: Verbosity

Greg Mankiw's Blog: Verbosity:

One study found that a college professor's kids hear an average of 2,150 words per hour in the first years of life. Working-class children hear 1,250 and those in welfare families only 620.

From the Economist.

Ok. Questions? This 'data' is going to be used to argue something...but what exactly?
First of all I did not read the economist article but only the context for the quote.

One commenter on Mankiw's site said:

The insinuation that children ultimately benefit from this is belied by adoption studies.

Another:

Read Judith Rich Harris's The Nurture Assumption, where she addresses this example. An alternative hypothesis to the implicit one presented (read to kids and they become smarter) is that the kids inherit a genetic advantage in verbosity. Adoptions studies show very little correlation between the IQ of families and non-biological children, whereas identical twins raised apart have very similar verbal skills.

Harris's bottom line: parents can't do nearly as much as they would like to make their kids super smart: there's nonlinear aspect to childrearing.

My Response: Clearly the above to comments show there is perhaps more research to be done.

Another:

if you actually watch the way kids learn language, you'll see why it doesn't make a difference whether parents use 600 or 6000 words per hour, in either case it's way more than enough.

My Response: The data and the assumed assertion has nothing to do with learning the language in the limited functional sense of first language native fluency. Rather, it most likely might be assumed that such a phenomenon might be an instrument in the development of intelligence.

Another interesting comment was:

Those taciturn Swedish farmers on the Minnesota prairie must not have been raising their chillens' properly, or something.

My Response: the comment does not truly say anything against the assertion from the data.

--
Trying to find more about the article I put the quote into Google. There were a number of interesting items:

What’s Holding Black Kids Back?, by Kay S. Hymowitz, of the Manhattan Institute, in City-Journal, appeared to reference the study and the findings more fully.

The difference between middle-class and low-income child rearing has been captured at its starkest—and most unsettling—by Betty Hart and Todd R. Risley in their 1995 book Meaningful Differences. As War on Poverty foot soldiers with a special interest in language development, Hart and Risley were troubled by the mediocre results of the curriculum they had helped design at the Turner House Preschool in a poor black Kansas City neighborhood. Comparing their subjects with those at a lab school for the children of University of Kansas professors, Hart and Risley found to their dismay that not only did the university kids know more words than the Turner kids, but they learned faster. The gap between upper- and lower-income kids, they concluded, “seemed unalterable by intervention by the time the children were 4 years old.”Trying to understand why, their team set out to observe parents and children in their homes doing the things they ordinarily did—hanging out, talking, eating dinner, watching television. The results were mind-boggling: in the first years of life, the average number of words heard per hour was 2,150 for professors’ kids, 1,250 for working-class children, and 620 for children in welfare families.

Another interesting remark from that article was:

how do you shape children into citizens in a democratic polity and self-disciplined, self-reliant, skilled workers in a complex economy? It didn’t take all that much solicitude to prepare kids to survive in traditional, agricultural societies. That’s not the case when it comes to training them to prosper in an individualistic, commercial, self-governing republic.

I only skimmed the article but it probably merits a closer inspection.
-
Marriage and Caste in America: Separate and Unequal Families in a Post-Marital Age by Kay S. Hymowitz is a post by Mike Ralls in Mike's Book Notes, that is a very detailed review by page of the above noted author's book.
-
Successful Kids Are Talked-To Kids is a Seattle Times article by Carey Quan Gelernter from April 27, 1997. This was a very interesting article, worth reading. It more fully describes the study and the findings referenced in the quote. From the article:

By measuring vocabulary growth, because it is strongly associated with rates of intellectual development, they found that by age 4, patterns of growth were already established and intractable.

Loathe to conclude the explanation could be simply heredity, they decided to track the growth rates to their source: what was happening in children's homes, at the very beginning of their vocabulary growth.

For 2 1/2 years, they regularly visited and monitored each word spoken to the child in a chosen group of professional, working-class and welfare families.

And:

When the children were in third grade, their school performance was measured and compared against the amount of language they'd heard before they were 3. Socioeconomic status was an important predictor of which children were doing better in school. But by far the biggest predictor was how much the children were talked to before age 3 - and this was independent of socioeconomic status, and of race.

Now, this part is very compelling:

But by far the biggest predictor was how much the children were talked to before age 3 - and this was independent of socioeconomic status, and of race.

Now, that is an interesting correlation. Referencing the adoption studies cited in the comments above, it would be enlightening to see comparisons with adoption studies that focus on how much children were talked to before age three to see the results with genetics factored out. That is because it could be that those parents that talk a lot were those possessing greater intelligence and so simply passed on those genes to their kids. Another track would be to study results of experiments where welfare children were talked to a lot before age three. That is, to look at the results of Early Head Start programs mentioned in the article.
-
Lost Script, by Mike Metzger of the Clapham Institute, adds something interesting after mentioning the study:

But children of single mothers on welfare hear their mother use only 620 words per hour, according to Ms. Hymowitz. These children find it particularly difficult to thrive in a knowledge-based society. They rarely learn the art of conversation. And conversation, Thomas Aquinas once wrote, is what constitutes civilization.

Supposedly, I cannot find the source, Thomas Aquinas wrote: "civilization is constituted by conversation."
--
The study mentioned in the quote was one performed by and referenced in the 1995 book, Meaningful Differences in the Everyday Experience of Young American Children, by Betty Hart and Todd Risley.

The Early Catastrophe: The 30 Million Word Gap by Age 3 is an article by the two of them that summaries their study as well as offering this tidbit:

Vocabulary use at age 3 was equally predictive of measures of language skill at age 9-10.

Also: There is an expansive interview with Dr. Todd Risley here.

Re: Friends don't count money

Galen Sanford has a very interesting post, to which I would like to make the following comment:

So, please tell us what success is...

• Is it making friends? What type of friends?
• Is it not cutting in line? Why? I doubt many cut in line in totalitarian regimes. Not cutting in line is only a virtue in relative anarchy...why?
• Is it sharing? Why? Because they need to share? What is sharing?
• If it is the quality of our friendships then it is not the quantity, or is it?
• The depth of our conversations? Is that the gravity of the subject matter or the expansiveness of the subject matter? I can easily imagine that conversations had in Hitler's concentration camps or Soviet gulags were very deep... [and I would like to note that I do believe those people were probably more alive then the average poorly-entertained and well-fed American...but we still don't desire merely those conversations.]

The economy seems to be a relatively objective measure of a country's citizens' capacity to pursue happiness however they wish. With more wealth there perhaps comes more evil but there is also more and better life. More opportunities to help others.

You know that old yarn...(?):

An American tourist was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked.
Inside the small boat were several large yellowfin tuna. The tourist complimented the Mexican on the quality of his fish and asked how long it took to catch them.
The Mexican replied, "Only a little while."
The tourist then asked, "Why didn't you stay out longer and catch more fish?"
The Mexican said, "With this I have more than enough to support my family's needs."
The tourist then asked, "But what do you do with the rest of your time?"
The Mexican fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life."
The tourist scoffed, " I can help you. You should spend more time fishing; and with the proceeds, buy a bigger boat: With the proceeds from the bigger boat you could buy several boats. Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor; eventually opening your own cannery. You would control the product, processing and distribution. You could leave this small coastal fishing village and move to Mexico City, then Los Angeles and eventually New York where you could run your ever-expanding enterprise."
The Mexican fisherman asked, "But, how long will this all take?"
The tourist replied, "15 to 20 years."
"But what then?" asked the Mexican.
The tourist laughed and said, "That's the best part. When the time is right you would sell your company stock to the public and become very rich, you would make millions."
"Millions?...Then what?"
The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos..."

[Addendum by me: The Mexican fisherman chuckled to himself, wondering how some people just don't understand, and walked away...leaving the American tourist dumbfounded at how some people just don't understand...]

...beautiful, eh?

I always liked the story, and still do, ...until I realized a flaw: What about when the fisherman's wife becomes ill? What about the quality of life for the rest of his family, his village, the world? Money is a useful tool...increases in efficacy, efficiency, productivity are not the end, but they can be a means...

I just can't believe but that capitalism does afford for us a Golden Mean...

Keep asking questions...I don't have the answers, but I must keep asking questions.

And:

"The economy rallies" has no bearing on the quality of our friendships or the depth of our conversations.

"No bearing"? Hmm...I am able to have this conversation with you because the economy rallied and supported innovation within technology...