• Obama Asks Congress to Approve Syria Strike


    Here’s the latest on Syria:

    President Obama stunned the capital and paused his march to war on Saturday by asking Congress to give him authorization before he launches a limited military strike against the Syrian government in retaliation for a chemical weapons attack.

    In a hastily organized appearance in the Rose Garden, Mr. Obama said he had decided that the United States should use force but would wait for a vote from lawmakers, who are not due to return to town for more than a week. Mr. Obama said he believed he has authority to act on his own but did not say whether he would if Congress rejects his plan.

    Good for him. He only did it under pressure, but at least he did it. Not only is this the right thing to do, but it also forces Congress to exercise its constitutional responsibilities, something they should spend more time doing and less time constantly squawking about.

    As for whether or not Obama will go ahead with an attack even if Congress rejects it, I can hardly imagine he would. Am I wrong about that? Is there even the slightest chance he’d go ahead even if Congress votes against it?

    POSTSCRIPT: Not that they will. I predict he’ll get at least 60 percent approval. As an aside, Obama will be out of town for most of next week. Given the middle-school temperament of much of Congress, that might actually make approval easier to get.

  • How to Make a Risk-Free Fortune on Wall Street


    Redline Trading Solutions recently allowed Berkeley professor Terrence Hendershott to conduct a study with its high-speed trading technology, which gave him access to stock prices a few milliseconds before everyone else. This meant that Hendershott knew, before he bought the stock, which way the price would move a fraction of a second later. As you might expect, this is a risk-free license to mint money:

    According to his study, in one day (May 9), playing one stock (Apple), Hendershott walked away with almost $377,000 in theoretical profits by picking off quotes on various exchanges that were fractions of a second out of date. Extrapolate that number to reflect the thousands of stocks trading electronically in the U.S., and it’s clear that high-frequency traders are making billions of dollars a year on a simple quirk in the electronic stock market.

    One way or another, that money is coming out of your retirement account. Think of it like the old movie The Sting. High-speed traders already know who has won the horse race when your mutual fund manager lays his bet. You’re guaranteed to come out a loser. You’re losing in small increments, but every mickle makes a muckle — especially in a tough market.

    “It’s clear to us these guys are just raping, pillaging, and plundering the market,” as Joe Saluzzi, co-founder of agency brokerage Themis Trading put it.

    Click the link for more details, along with a simple and interesting idea for putting an end to this. In practice, stock markets are never going to be fair to every participant, but at the very least, their rules are supposed to make them theoretically fair to all comers. High-speed trading makes a mockery of this.

  • Friday Cat Blogging – 30 August 2013


    Happy last weekday of August! It’s been a little warm around here this week, and Domino knows what that means. It means you stretch out your body as much as you possibly can and dissipate as much heat as possible. So that’s what she’s doing.

  • The Fed’s Job Just Got a Lot Easier


    Speaking of inflation, Josh Mitchell reports that it’s still low, continuing to trend even lower, and that this could “complicate” the Fed’s decision-making next month:

    Both overall prices and core prices (excluding food and energy) rose a tepid 0.1% in July….From a year earlier, overall prices rose 1.4% while core prices rose just 1.2%….That’s well below the Fed’s target of 2% inflation.

    ….The central bank, in a statement after its July meeting, acknowledged its concerns about inflation remaining low. The Federal Open Market Committee said inflation “persistently below its 2% objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”

    You know, there are some things that really are complicated. The Middle East is complicated. Education policy is complicated. Quantum mechanics is complicated. But low inflation? That should make the Fed’s job less complicated. It means they don’t have to worry about whether stimulative monetary policy will send us into an inflationary spiral, which in turn means that boosting economic growth and reducing unemployment are the only things they have to think about right now. That should make their job easier, not harder.

  • Repeat After Me: Always Adjust for Inflation. Always Adjust for Inflation.


    Over at Wonkblog, Lydia DePillis shows us the chart on the right, which comes from a recent study of the effect of corporate mergers on the price of beer, and says this:

    This looks like a scary graph of beer price increases. The researchers determined, though, that the rise is largely not attributable to consolidation in the industry; there may be other factors at play.

    Urk! What this really shows is the result of inflation. I’ve overlaid in red the CPI for food and beverages since 2007, and beer prices match it exactly. The economists who wrote the study may have used nominal prices in their chart instead of real prices because that’s what they needed as input for their statistical manipulations, but this is a classic case of why you have to watch out for this kind of thing. What the researchers say they found is that the merger of Miller and Coors produced a 2 percent increase in prices that was offset by a 2 percent decrease in transportation costs, but that has nothing to do with the increase you see in the chart. That’s all inflation.

  • President Obama’s Epically Botched Syria Policy


    A couple of years ago Greg Djerejian sort of semi-quit blogging and he pretty much fell off my radar screen. But he still blogs. He just does it infrequently and I haven’t noticed it. But back in the day, there was no one better for firing off a memorable foreign policy rant when he had finally had enough and wasn’t going to take it anymore. Today, via Patrick Appel, it turns out that Djerejian has had quite enough of President Obama’s Syria policy:

    The myriad leaks around what type of mission, the palpable trigger-happiness among some, the British debacle (they won’t even have their poodle this time, the cat-calls will ring!) and the ‘shot across the bow’ nonsense showcases an Administration unready for an invigorated course correction of its flailing Syria policy. Frankly, I am astonished by the lack of seriousness and mediocrity on display.

    ….The incredibly publicized, telegraphed theater around how this will be a deterrent mission to slap bad-boy Bashar’s wrist for his alleged use of CW (as we break international law ourselves via the putative response despite the typical legal mumbo-jumbo lawyers will be commandeered to produce) has been an epic embarrassment….If you mean it for real, however, you quietly go about your business planning a deterrent response that Bashar won’t simply hunker down through, you wait for the UN inspectors to issue their report on reasonable timing (would be graceful, no, at very least given the risks they undertook during their mission?), you at least try to have robust UNSC dialogue….In short, you quietly execute, lay groundwork and let your opponent wonder what the hell is coming after his ostensibly despicable actions, rather than this gussied-up R2P prom-night feel-good gesture. The benefits of protecting the norm are outweighed by the feeble lack of coherence of the contemplated response.

    This past 72-96 hours have been a titanic embarrassment for anyone who cares about U.S. foreign policy. It appears a rush job to beat the St. Petersburg summitry on a quiet August weekend that everyone hopes will be quickly forgotten, except for the mighty ‘lesson’ learned. It’s worse than unprofessional and cowardly. It’s contemptible in the extreme. Make it stop. Declare the orgy of speculation and movement of naval carriers have already doubtless ensured the boy dictator will think more carefully in the future using such weaponry. Mission accomplished! Better than risking gross unintended consequences by a team that, alternatively, does not really have the stomach for the fight, or are simply not up to it strategy-wise, and in the President’s case, perhaps both.

    That’s a righteous rant. Is it fair? Probably not entirely. There’s always a lot more messiness to these things than we think there should be, and often more messiness than we remember about similar episodes in the past.

    Nonetheless, it seems mostly fair to me. It’s pretty plain that Obama has boxed himself in; is conflicted about what to do; has made that conflictedness all too public; has no real long-term strategy in mind; and flatly failed to realize that there would be any real opposition to intervening in Syria. Lack of strategic vision aside (America was firing a “shot across the bow”? Seriously?), it’s the last point that’s most mind-boggling. Obama seemingly didn’t realize that the American public wasn’t on board; Congress wasn’t on board; our allies weren’t all on board; and even his own administration wasn’t entirely on board. I’m not quite sure how a professional politician could have botched this so epically, but he did.

    Obama never should have set a red line in Syria in the first place, and once he did he should simply have found a way to weasel out of it. It’s not that hard. Sure, the forever-hawks would have squealed, but they were going to squeal about anything short of Iraq 2.0 no matter what. So who cares what they think?

    As near as I can tell, after five years Obama has been entirely captured by the national security establishment. It’s a damn shame. The elite consensus on overseas intervention—and national security more broadly—desperately needed to be challenged after a decade of the Bush/Cheney administration, but after a few nods in the right direction during his early days, he’s mostly just caved in to it. What a wasted opportunity.

    POSTSCRIPT: Just for the record, Congress hasn’t exactly covered itself in glory on Syria either. As usual, most members want to retain their freedom to criticize whatever happens while desperately trying to avoid taking any actual responsibility for U.S. military action. It’s pathetic.

  • The Robot Revolution Will Not Be a Rerun of the Industrial Revolution


    Eliezer Yudkowsky asks Tyler Cowen today why he thinks the coming robot revolution1 will be a problem for employment. After all, the Industrial Revolution automated a lot of work too, and it worked out fine for employment. The answer to this, I think, is simple: the robot revolution will automate cognitive work, not just manual work. A machine that can literally do anything a human can do will certainly boost economic growth, but it won’t create more human employment in the process. It will just create more robot employment. For a little more detail on this, you can read a short version of the argument here and a longer version here.

    But Cowen suggests that you don’t need to buy this to believe that robots are going to create big employment shocks anyway. You just need to look at the history of employment during the Industrial Revolution in a little more detail than we usually do:

    I would challenge the notion that it went fine. Think of the machines of the industrial revolution as getting underway sometime in the 1770s or 1780s. The big wage gains for British workers don’t really come until the 1840s. Depending on your exact starting point, that is over fifty years of labor market problems from automation.

    ….A second point is that now we have a much more extensive network of government benefits and also regulations which increase the fixed cost of hiring labor. Insofar as automation creates short-run adjustment problems, those problems are more likely to show up in the form of decreased labor force participation than they did in previous eras. We are living in a time where the long-run trend is for labor force participation to fall in any case, and that was not in general the case during those earlier episodes.

    Extrapolating a bit from Cowen’s point, the problem here is that the robot revolution is likely to be a lot shorter than the Industrial Revolution. Back then, we endured 50 years of employment problems and then things started to get better. But 50 years from today, the robot revolution is likely to be all but over. By the time we might start to expect wage gains, robots will be advanced enough that no more than a tiny percentage of human work is still relevant.

    What this means, of course, is that we’d better start thinking about how we’re going to divvy up all the goods and services we produce when virtually none of them are the result of human labor. Call it Economics 3.0. We aren’t there yet, but we might want to start getting ready for it.

    1Assuming that it really does come, of course, which we’re assuming for the purposes of this blog post.

  • More Good News on Health Care: Medicare Costs Are Down, Down, Down

    Shutterstock


    I’ve written before about my belief that health care costs in the United States have been trending downward for a long time. Not just during the aughts (which everyone seems to agree about), but since the early ’80s. Click here for a refresher.

    Last week brought some confirmation of this from the Congressional Budget Office. Michael Levine and Melinda Buntin took a look at Medicare spending per beneficiary over the past three decades and came to a very similar conclusion: “Growth in spending per beneficiary in the fee-for-service portion of Medicare has slowed substantially in recent years. The slowdown has been widespread, extending across all of the major service categories, groups of beneficiaries that receive very different amounts of medical care, and all major regions.”

    Their basic chart is below. It starts in 1980, but I think it’s better to omit 1980-82. Inflation was very high in those years, which makes Medicare spending growth look artificially high and the subsequent decline artificially steep. However, consumer inflation has been pretty low and steady since then (at around 2 to 3 percent), so inflation doesn’t muddy the picture much after 1983. I’ve drawn an eyeball regression line starting then and it still tells much the same story:

    This is good news, but in fact, it’s even better news than it seems at first glance. There are two reasons for this. First, Medicare plays a big role in setting rates and spending priorities for the entire health care industry. So the fact that Medicare spending growth is slowing down suggests that spending growth in the broad health care industry should slow down too.

    The second reason is more intriguing. Levine and Buntin note that there have been two previous major declines in Medicare spending, and in both cases they were driven by legislative changes. But over the past decade, we’ve seen another steady decline with nothing to explain it:

    The current slowdown cannot be so easily ascribed to a set of changes in payment policy or program structure. As described above, legislation governing payment rates probably did slightly less to restrain growth in the second part of the decade than it did earlier on.

    The financial crisis and economic downturn […] do not appear to explain much of the slowdown. First…from 2000 to 2005, the growth in the average payment rate programwide was similar to growth in the CPI-U. Second, we did not find evidence to suggest that beneficiaries’ considerable loss of wealth and reduced income growth significantly affected their collective demand for care. Third, it is not clear whether the recession played a role in reducing the rate at which providers purchased new, cost-increasing technologies. Finally, and in contrast, some evidence suggests that high unemployment during the recession boosted providers’ incentives to deliver services to Medicare beneficiaries by reducing the demand for care in the private sector, though we could not empirically confirm the mechanisms by which unemployment might have had such an effect.

    The lack of a single big legislative explanation suggests that there’s something more organic going on. And with Obamacare’s cost controls set to kick in over the next decade, we could be entering a virtuous circle of reined-in health care spending for years to come.

    Levine and Buntin acknowledge that there’s considerable uncertainty in their analysis. There are a lot of moving parts here, and the truth is that a decade isn’t really a very long time frame to hang your hat on. (Remember all those economic models that assumed housing prices could never fall because they were based on the previous decade’s worth of data?) And it’s worth keeping in mind that even if spending per beneficiary stabilizes, Medicare is still going to have a lot more beneficiaries over the next half century as baby boomers retire and our population ages.

    Nonetheless, evidence is mounting all over the place that the spiraling growth of health care costs, which has been a serious bogeyman for the past few decades, might finally be receding. Since health care costs are by far the biggest component of future concerns over federal spending and federal deficits, this suggests that our future may be brighter than we think.

  • Britain Votes Against Military Action in Syria


    There will be no British support for a punitive strike against Syria:

    British MPs have voted to reject possible military action against the Assad regime in Syria to deter the use of chemical weapons. A government motion was defeated 285 to 272, a majority of 13 votes.

    Prime Minster David Cameron said it was clear Parliament does not want action and “the government will act accordingly”. It effectively rules out British involvement in any US-led strikes against the Assad regime.

    I haven’t seen any breakdown of the vote yet, but Cameron obviously lost at least a few of his fellow Tories in addition to a large number of Labour and Lib Dem votes. Here is the U.S. response:

    President Obama is prepared to move ahead with a limited military strike on Syria, administration officials said on Thursday, even with a rejection of such action by Britain’s Parliament, an increasingly restive Congress, and lacking an endorsement from the United Nations Security Council.

    How very Bush-like. Or Bush-lite, I suppose.

  • Feds Agree Not to Hassle Smallish Marijuana Vendors in Colorado and Washington


    We’ve all been wondering for a while about the fate of new laws in Colorado and Washington that legalize the sale of recreational marijuana. After all, pot is still illegal under federal law, so the state laws don’t mean much if DEA agents are going to prosecute vendors under federal law. Today, they said they wouldn’t:

    The Justice Department said it will not seek to veto new state laws in Colorado and Washington that legalize the recreational use of marijuana, and it will not bring federal prosecutions against dispensaries or businesses that sell small amounts of marijuana to adults. A department official stressed, however, that marijuana remains illegal under federal law, and that U.S. prosecutors will continue to aggressively enforce the law against those who sell marijuana to minors and to criminal gangs that are involved in drug trafficking.

    I’m not sure what “small amounts” means in practice, and the guidance DOJ issued to U.S. Attorneys leaves some questions unanswered:

    U.S. Attorneys will individually be responsible for interpreting the guidelines and how they apply to a case they intend to prosecute. A Justice Department official said, for example, that a U.S Attorney could go after marijuana distributors who used cartoon characters in their marketing because that could be interpreted as attempting to distribute marijuana to minors.

    But the official stressed that the guidance was not optional, and that prosecutors would no longer be allowed to use the sheer volume of sales or the for-profit status of an operation as triggers for prosecution, though these factors could still affect their prosecutorial decisions.

    I guess this means that if vendors in Colorado and Washington keep a fairly low profile, they won’t be hassled. If they don’t, they might be. Overall, this is probably about as good as we could have expected.

  • U.S. Intelligence Spending Now Higher Than During the Cold War


    Barton Gellman and Greg Miller have just released yet another document from the Snowden cache: a classified breakdown of U.S. intelligence spending.

    The $52.6 billion “black budget” for fiscal 2013, obtained by The Washington Post from former intelligence contractor Edward Snowden, maps a bureaucratic and operational landscape that has never been subject to public scrutiny. Although the government has annually released its overall level of intelligence spending since 2007, it has not divulged how it uses those funds or how it performs against the goals set by the president and Congress.

    Huh. I wonder how long the Post has been holding onto this? In any case, here’s the basic breakdown of the $52 billion we’re spending this year:

    Unsurprisingly, the CIA, NSA, and reconnaissance satellites collectively account for nearly 80 percent of our total civilian-ish intelligence spending. Another $23 billion goes to “intelligence programs that more directly support the U.S. military.” That’s a total of $75 billion. Adjusted for inflation, Gellman and Miller say this exceeds our peak spending during the Cold War. Here are a few of their main takeaways:

    • Spending by the CIA has surged past that of every other spy agency, with $14.7 billion in requested funding for 2013. The figure vastly exceeds outside estimates and is nearly 50 percent above that of the National Security Agency, which conducts eavesdropping operations and has long been considered the behemoth of the community. Here are four of the main takeaways:
    • The CIA and NSA have launched aggressive new efforts to hack into foreign computer networks to steal information or sabotage enemy systems, embracing what the budget refers to as “offensive cyber operations.”
    • In words, deeds and dollars, intelligence agencies remain fixed on terrorism as the gravest threat to national security, which is listed first among five “mission objectives.” Counterterrorism programs employ one in four members of the intelligence workforce and account for one-third of all spending.
    • The governments of Iran, China and Russia are difficult to penetrate, but North Korea’s may be the most opaque. There are five “critical” gaps in U.S. intelligence about Pyongyang’s nuclear and missile programs, and analysts know virtually nothing about the intentions of North Korean leader Kim Jong Un.

    More at the link, including a few pages from the document itself. As for the rest, “Sensitive details are so pervasive in the documents that The Post is publishing only summary tables and charts online.”

  • How the Rest of the World Views the American Military


    Paul Waldman lays out a list of significant US military actions over the past 50 years, and it adds up to 15 separate episodes, ranging from full-scale wars (Vietnam, Iraq, Afghanistan) to smaller incursions (Grenada, Haiti, Panama). For those of you who are math challenged, this means we’ve launched a significant overseas assault every 40 months since 1963. Waldman explains what this means:

    Some of these operations worked out very well, others didn’t. And just to be clear, this history doesn’t tell us whether bombing Syria is a good idea or a bad idea. But if you’re wondering why people all over the world view the United States as an arrogant bully, reserving for itself the right to rain down death from above on anyone it pleases whenever it pleases, well there you go. It doesn’t matter whether you think some or even all of those actions were completely justified and morally defensible. From here, we tend to look at each of these engagements in isolation, asking whether there are good reasons to go in and whether we can accomplish important goals for ourselves and others. But when when a new American military campaign begins, people in the rest of the world see it in this broader historical context.

    This is a perspective that’s sorely missing from most mainstream discourse. Too many Americans have a seriously blinkered view of our interventions overseas, viewing them as one-offs to be evaluated on their individual merits. But when these things happen once every three years, against a backdrop of almost continuous smaller-scale military action (drone attacks, the odd cruise missile here and there, sending “advisers” over to help an ally, etc.), the rest of the world just doesn’t see it that way. They don’t see a peaceful country that struggles mightily with its conscience and only occasionally makes a decision to drop a bunch of bombs. They see a country that views dropping bombs as its primary means of dealing with any country weaker than we are.

  • Quote of the Day: Republicans Are No-Shows at Civil Rights Anniversary


    From civil rights leader Julian Bond, on why there were no Republicans at yesterday’s 50th anniversary of the March on Washington:

    “They asked a long list of Republicans to come, and to a man and woman they said no.”….Bond did credit Cantor for trying hard to find a replacement speaker, but, ultimately, the leader was unable to find a single Republican to attend the event.

    That last sentence is maybe the saddest of all. It’s not just that Republicans didn’t come. It’s worse than that. Even with Eric Cantor twisting arms he couldn’t find a single Republican willing to attend. I guess they were all afraid that Fox News would televise it and some of their constituents might find out they were there.

  • Second Quarter GDP Revised Way Up


    Here is today’s good economic news:

    Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.5 percent in the second quarter of 2013….The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 1.7 percent.

    That’s quite a revision. GDP growth was actually half again as large as the BEA originally estimated, which is about as big a relative revision as I can remember. It still doesn’t show the economy roaring ahead or anything, but it certainly shows a good deal more strength than we thought.

    And just think: If it weren’t for this year’s round of austerity, growth might have been just a few ticks below 4 percent. That would have been a genuinely positive number. It’s too bad we’ve chosen instead to deliberately sabotage the economy.

  • Are Charter Schools Successful Because They Make Teachers Work Long Hours?


    Motoko Rich writes in the New York Times that charter school teachers tend to turn over pretty quickly. The average charter teacher has only a few years of experience, compared to 14 in traditional public schools. However, even though everyone agrees that teachers with five-plus years of experience are better than those with only three or four years, charter school outcomes are pretty similar to those of public schools. Matt Yglesias wonders what’s going on:

    Given that these charters are really held back by having such a large share of first- and second-year teachers, how is it that they’re able to produce decent educational results? The evidence isn’t airtight, but the natural inference to make from the turnover data is that the experience-adjusted quality of the charter school teachers is substantially higher than of the traditional public school teachers.

    ….If kids in charter schools were on average clearly learning less than kids in traditional public schools, then it’d be easy to finger the teacher turnover issue as the culprit. But they’re not doing worse, despite charter schools’ problems with hanging on to teachers for more than a few years. The interesting question is what accounts for that.

    I have a different guess. Charter school teachers might very well be the cream of the crop, but I suspect the real key to their success is long working hours. This is also what accounts for the turnover. Charter schools tend to demand that their teachers work very long hours and remain on call for students during the evening. That’s grueling stuff, and very few people are willing to do it for long. If you’re young, idealistic, unmarried, and have no kids, it might be rewarding for a while. After a while, though, it just gets to be a grind.

    Even though I basically support experimenting with charters, this is the single biggest reason I’m skeptical of the charter model. Obviously some of them do very well, but if expanding the model nationwide requires an army of high-quality teachers willing to work long hours for modest pay, where are they going to come from? This is why I’d really like to see more examples of the charter model working with teachers—either young or old—who put in normal hours. That’s a scalable model and might give us some insight into what it takes to improve our schools. Conversely, if the answer turns out to be “bright young kids willing to work long hours for lousy pay,” we haven’t really learned much. I don’t doubt that it can work, but I do doubt that it can work for more than a small fraction of our children.

  • Nearly 100 Representatives Now Asking Obama to Consult With Congress Over Syria


    Rep. Scott Rigell (R–Virginia) reports that as of a few minutes ago his letter urging President Obama to consult Congress before launching an attack on Syria is “Inching…toward…100… 81 Republicans and 16 Democrats have signed on to our letter so far…” That’s good. But I sure wish more Democrats were willing to get on board.

    There are legitimate issues surrounding the powers of the president and the extent to which Congress can micromanage military attacks. But this is something that Congress should actually spend some time debating, instead of just folding up and letting the president do whatever he wants with nothing more than a bit of muttering about separation of powers. The president may be commander-in-chief, but that doesn’t mean the U.S. military is his personal plaything. It’s past time to make that clear.

  • Which Economic Models Are Más Macho?


    A few days ago Alex Rosenberg and Tyler Curtain wrote an op-ed titled “What Is Economics Good For?” In a nutshell, their answer was “not much.” Paul Krugman begs to disagree:

    Rosenberg and Curtain completely misunderstand what’s been going on at the Fed. They also misunderstand the nature of economists’ predictive failures. It’s true that few economists predicted the onset of crisis. Once crisis struck, however, basic macroeconomic models did a very good job in key respects — in particular, they did much better than people who relied on their intuitive feelings….Wonks who relied on suitably interpreted IS-LM confidently declared that all this intuition, based on experiences in a different environment, would prove wrong — and they were right. From my point of view, these past 5 years have been a triumph for and vindication of economic modeling.

    Something about this passage has been niggling at me since I read it yesterday, and I just now figured out what it is. Krugman has been banging this drum for quite a while, and regular readers know that I’m basically on his side. Basic Keynesian macro has done a pretty good predictive job in the aftermath of the financial crisis, and it’s fair to wonder why skeptics continue to be skeptics even after years of solid results from textbook macro.

    But here’s the thing: I’m on Krugman’s side in hindsight. A better question is whether it was obvious in 2008 that “suitably interpreted IS-LM” was likely to be the best model for dealing with the post-crisis recovery. Maybe it was. Krugman makes the case, for example, that RBC models should have been abandoned decades ago for not fitting the data. But conservative economists would argue that Keynesian macro was quite justifiably thrown out even earlier for failing during the 70s. That’s obviously a matter of contention, but it’s certainly the case that the Keynesianism of the 70s has since been retooled into the New Keynesianism of the 90s and beyond. But that makes it a fairly new theory. So again: how obvious was it before the fact that Krugman’s preferred models were likely to be the best ones for 2008-13?

    This is light years above my pay grade, so I’m throwing it out mostly in the hopes that some real economists will essay an answer. I’m not even sure I’m framing the question entirely properly. But the basic problem is that economists change their models the way most of us change our television viewing habits, and the best models often seem to be very dependent on a particular place and time. Wait a couple of decades, or examine a different kind of economy, and suddenly the old models don’t work so well anymore. So how do we know in advance? Can Krugman legitimately say that his models have had a long track record of success in different environments, and therefore should have been the obvious incumbents when the economy went kablooey in 2008?

  • How a Giant Arrow Gets You to Eat More Fruits and Vegetables*


    From the things-I-did-not-know file:

    “In retail, the customer tends to go to the right,” said Tim Taylor, the produce director for Lowe’s, Pay and Save, a regional grocery chain that let the scientists in to experiment with their arrows and mirrors. “But I watched when the arrows were down, pointing left, and that’s where people went: left, 9 out of 10.”

    First things first: what’s the name of this supermarket? Pay and Save? Or Lowe’s? Good question! According to Wikipedia, Lowe’s Market, founded in 1940 in Littlefield, Texas, operates grocery stores under the names Lowe’s, Shop N Save, Food Jet, Super S, Big 8, Super Save, and Avanza. But not Pay and Save. Or do they? Comments from residents of El Paso, where this test store is located, are welcome on this score.

    Now then. Do people really tend to go to the right in retail stores? How about in other settings? Do left-handed people tend to go to the left? What’s going on here?

    I’m a little less interested in the fact that if you lay giant arrows down on the floor, people follow them. We’re all pretty used to following arrows, after all. Still, the upshot of all this is that a pair of enterprising researchers were able to get people to buy more fresh produce by putting arrows on floors, duct tape in baskets, and placards in shopping carts telling people that bananas are big sellers. But if they put arrows on the floor and placards in the shopping carts, it didn’t work. Too pushy, apparently. People won’t buy healthy food if they glom onto the fact that they’re being badgered into doing it.

    Personally, I’d like to see how this fares over a longer time scale. I have a feeling the effect might start to wear off. Plus there’s the problem of persuading grocery stores to do any of this stuff in the first place. Having spent billions on figuring out how to market crap to us, why would they suddenly turn around and start trying to market fresh produce to us? The Times suggests that produce actually has higher margins than crap, which is another surprise. I didn’t know that either. But if that’s really true, I’m a little surprised that big chains haven’t already spent billions trying to increase sales of apples and broccoli. Why are they relying on a couple of professors from New Mexico State University?

    *Technically, the giant arrows only get you to buy more fruits and vegetables. Whether the guinea pigs in this experiment actually eat them is a whole different question.

  • Fidel Castro Says Edward Snowden is a Hero


    Some people like to gossip about Miley Cyrus. I prefer gossip about Fidel Castro. Today he responds to the suggestion that Cuba caved in to pressure from the U.S. and told Russia that it would refuse to let an Aeroflot flight land in Havana if Edward Snowden were onboard:

    “It is obvious that the United States will always try to pressure Cuba … but not for nothing has (Cuba) resisted and defended itself without a truce for 54 years and will continue to do so for as long as necessary,” Castro wrote.

    ….”I admire the courageous and just declarations of Snowden,” Castro wrote. “In my opinion, he has rendered a service to the world, having revealed the repugnantly dishonest policy of the powerful empire that is lying and deceiving the world,” Castro continued.

    ….Castro did not speculate as to why Snowden skipped the Aeroflot flight.

    OK then.

  • Chart of the Day: Which Countries Snoop on Facebook Users the Most?


    Today Facebook released its first Global Government Requests Report, which tells us how many requests for user data they received during the first six months of 2013. It’s broken down by country, and you’ll be unsurprised to learn that the United States earned the top spot: a total of about 11,000 requests covering 20,000 individual accounts.

    But wait. The United States is a big country, so the fact that it made more requests than, say, Ireland, doesn’t tell us much. A more useful metric would adjust for population, telling us how many requests were made per million Facebook users (data here). That’s far from perfect, since data requests can cover users from any country, but I think it tells us a little more than just looking at the raw number of requests.

    The chart below shows the top 20 among countries that made more than ten requests—which obviously doesn’t include countries like China and Iran, where Facebook is banned. So who came in #1? The answer may surprise you:

    Malta! I imagine that this is explained by Malta’s status as a tax haven for Russian oligarchs, who are perhaps a little too eager to show off their riches on their Facebook pages. Or something.

    The weirdness of Malta aside, the real takeaway from this chart is that the United States isn’t really very unique in its desire to spy on people. When you adjust for their smaller size, Germany, France, Italy, and the UK are all in the same league. These countries may not intercept phone calls on the scale we do, but if Facebook nosiness is any clue, that’s only because they don’t have the technical capability, not because the idea outrages them.

    In any case, you can draw your own conclusions from this. But I think it gives us a decent idea of which countries are the most active and dedicated when it comes to internet surveillance.