Does the study of economics shape your political views?

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Finally!!! A study worth reading.:yes:
People should really learn where there money is actually going. Your thoughts?

Does Studying Economics Make You More Republican?
By PATRICK MCGEEHAN
Several academic studies have found that there is a link between education levels and civic behavior. But a new study from the Federal Reserve Bank of New York has concluded that how much economics people study can influence their political activity and how they spend their spare time.

The study compared the behavior of economics majors with those of business majors and other graduates of four large public universities — Purdue University, the University of North Carolina, Florida Atlantic University and the University of Nebraska-Lincoln. The subjects attended those schools in one of three years: 1976, 1986 or 1996.

Most notably, the study found that the more economics classes a person took, the more likely he or she was to be a member of the Republican Party and to donate money to a political candidate or a cause.

But students of economics were no more or less likely than other graduates to have voted in the 2000 presidential election, the study found. Business majors, on the other hand, were less likely than other former students to have voted for president in 2000 or to have volunteered their time for a cause, political or otherwise.

The authors of the study — Sam Allgood, William Bosshardt, Wilbert van der Klaauw and Michael Watts — said they could not say

if those in different majors perceive the costs (value of time) or the benefits of these activities differently. But our results clearly suggest there is more to the story than simply “being educated” — so that what people study in college, or what they choose to study, is associated with their civic behaviors many years after they graduate.
The study also gathered responses to seven questions about public policy issues, such as tariffs, trade deficits, the minimum wage and oil prices. On five of the seven, the authors found a link between the opinions expressed and the number of economics courses the respondents had completed.

The more economics courses they had completed, the more likely they were to agree that tariffs reduce economic welfare and that increases in the minimum wage raise unemployment, and the less likely they were to think that trade deficits adversely affect the economy and that government should regulate oil prices.

“In sum,” the study said, “those taking more economics classes favored less regulation or government intervention affecting prices for specific goods and services, including wages and salaries.”
 
My economics degree made me not only less Republican, but less Democratic as well. Now I'm a capitalist.

The lack of enamorization of politics by econ majors comes from a common counterintuitive question in economics. The question isn't why would someone not vote, but why do so MANY people vote? Your one extra (marginal) vote really means nothing to the overall outcome. In addition, the effects of the results don't actually produce dramatic changes at all from Democrat to Republican and vice-versa. Think Jesus currently in office. Your desire to vote doesn't have a lot of economic theoretical motivation behind it. Just majority-rule politics. Since everyone is a minority in some way, shape or form, you are likely to be worse-off by the poll results of majority-rule.

Also, economic training produce different survey questions results regarding trade and the such because the most high level theory doesn't distinguish between a trade deficit with your barber and a trade deficit with a chinese shirt-maker. Everyone is better off as long as the trade is voluntary.

When you go to the barber and he gives you a good (the haircut), you don't give him a good in return but instead cash. Technically, you have a trade deficit with your barber. Why are you worse off? Your barber coveted the $15 more than he valued his haircutting ability. He is better off. You valued the barber's haircutting ability more than you valued the $15. You are better off, but now you have a trade deficit with the barber.

Politicians and the economically ignorant will say we should have a trade surplus or trade neutral relationship. In the barber example, it means you have to give your barber an equal value good in return. I don't know what you do, but does your barber want it? And will he accept it as payment whenever you want a haircut. Inefficient to say the least.

The Chinese shirt-maker is morally no different. You choose to buy your shirts from China. How are you or the Chinese shirt-maker worse off. Neither one of you are. And an added dimension is now the Chinese shirt-maker has American dollars that he can't spend in China. What will he do with the dollars you gave him? He will buy an American good whether it's an iPhone or a US bond. Obviously, it's more complicated than that, but not by much.

Free trade is a good thing. So says every aspect of your life as you are currently living it. If free trade is bad, then stop following the principles of it every day of your life. (Note, you aren't really free.)
 
If I might add, I like your last observation. When you think about it everything that is efficient and you are somewhat satified with is driven by profit. Ie the grocery market, your Internet service provider and fed ex. Things that are relatively inefficient are the DMV , post office or some publicly ran school systems. The latter is not driven by a profit.
 
Wow very informative. So are you a fan of Milton Friedman?
Milton Friedman was a libertarian, not a capitalist. He still believed in government intervention.

The most successful anti-poverty program in this nation's history was partially developed by Friedman, the Earned Income Tax Credit. Friedman wanted to replace welfare and the minimum wage laws with what he called the negative income tax. Essentially, you only get help if you worked. No matter how much you made the government would subsidize your life up to a minimum level. But you had to work. Basically (I'm just throwing out numbers), if you made $16k, the government would give you $4k more if the politically arbitrary minimum was $20k. Politicians didn't have the balls to get rid of welfare or minimum wage, so they half assed his idea on top of the other two. It's half assed, but it's still the most successful program. Just think if they would have fully implemented it.

But the main point is the perverse incentives associated with welfare wouldn't exist and people wouldn't be encouraged to avoid doing better. Things like marriage penalties or having large parts of the welfare cut off all at once if you get a job, even if the job isn't as much as the welfare.

But I don't think government should be redistributing any wealth. The government can promote wealth distribution by just getting out of the way of employers and employees.
 
If I might add, I like your last observation. When you think about it everything that is efficient and you are somewhat satified with is driven by profit. Ie the grocery market, your Internet service provider and fed ex. Things that are relatively inefficient are the DMV , post office or some publicly ran school systems. The latter is not driven by a profit.
Efficient isn't just profit. It's efficient to have a central national military, but the actual act of defense isn't net profit driven.

Economics thinks in terms of net benefits and cost, which can be tangible or intangible. Profit is just one of many forms of tangible cost/benefit. Your personal joy associated with an action is an intangible example, but theoretically just as real and motivating as cash. That's why you should be free to take any action you see fit for yourself as long as it doesn't hurt someone else. Who's to say how much "profit" you get from it?

The intangible aspects are why economics is in the social sciences and not the hard sciences or business/managerial sciences.
 
I did read that before about Friedman in some of his previous works.
But if you YouTube some of his lectures and q&a he seemed more of a capitalist.
That said, look up Milton Friedman Greed on YouTube . No pun intended.

I know I'm jumping authors but I'm a huge fan of Sowell. I'm always looking for great books especially by renowned economist. Can you give me a few of your favorite authors or books? I'd really appreciate it. Thanks in advance!! To me economist always ask the question "as compared to what".
 
Friedman considered himself a capitalist, but it's all about the application of the principles.

Anyway, I can suggest a list of knowledge sources, by economist and non-economist, about economics and political economy. I know you didn't ask for such qualifications, but great economic thought isn't limited to economist. Also, since America has generally given up on the use of explicit force to interact with one another, the implicit force of government has grown. That's why political economy, the role of government in economic trade, is important.

Thomas Sowell - Rosa Parks and history (2005)
One example why Title VII of the CRA of 1964 wasn't needed.
http://www.bgol.us/board/showthread.php?t=68053

Thomas Sowell - Ethnic America (1981)
A book covering the history of ethnic groups in America. Economic progress for these groups is more effective than political progress.

Milton Friedman - Free to Choose (1980)
Entire PBS television series. I didn't like the book based on the series. Capitalism and Freedom is better.
http://www.ideachannel.tv/

Milton Friedman - Capitalism and Freedom (1962)
Self explanatory.

Robert A. Heinlein - Starship Troopers (1959)
Don't be distorted by the movie, the book is almost all political thought about what it means to be a citizen.

Robert A. Heinlein - Stranger in a Strange Land (1961)
Also science fiction. I can only describe this as hippie libertarianism.

Ayn Rand - Capitalism: The Unknown Ideal (1966)
Collection of essays, not just by Rand, about the role government should have in our lives. My favorite of the bunch.

Ayn Rand - Atlas Shrugged (1957)
There is nothing more purely atheistic, capitalist, and logical.

Bryan Caplan - The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007)
An excerpt from the book.

I put a bunch here because there are apparently more viewers of this thread than commenters, so here's something for everyone.
 
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Man cant wait to get started. Have to shoot this list to da wife for fathers day.
I really appreciate this. Some of the authors you mentioned are my favorites.

Peace
 
If Charity Is Their Goal, Gates And Buffett Should Hoard Their Wealth

I'm going to hijack this thread and turn it into the "Counterintuitive Economics" thread.

If Charity Is Their Goal, Gates And Buffett Should Hoard Their Wealth
John Tamny, 06.17.10, 11:32 AM ET

In its latest issue, Fortune magazine reports that "Bill Gates, Melinda Gates and Warren Buffett are asking the nation's billionaires to pledge at least half their net worth to charity, in their lifetime or at death." Gates told Fortune that 50% of one's wealth would constitute the "low bar" for giving, while Buffett has pledged to give 99% of his wealth away.

At first glance this is something to celebrate, for it rightly confirms that capitalism is, at its core, quite compassionate. The charitable ways of Gates and Buffett also provide living proof that the "trickle-down theory" is in fact reality.

And when we consider that the greedy hand of government will help itself to half of Gates' and Buffett's money upon death anyway, the idea of them depriving our federal masters while supporting good causes becomes even more appealing.

But while it's exciting to contemplate the giving nature of Gates and Buffett, if their true desire is to help their fellow man, they should hoard every penny of their significant wealth. For the two richest men in the U.S. to monetize their wealth in order to support charities is for them to oversee the conversion of production goods to consumption goods. Some will no doubt benefit in the near term, but the removal of limited capital from the productive parts of the economy will ultimately reduce our standard of living, drive up unemployment and make individuals more--as opposed to less--needful of charity.

Conversely, money saved and invested constitutes capital offered to today's and tomorrow's businesses. When individuals save, they're by definition providing capital to entrepreneurs, and the capital formation that results from saving naturally stimulates job creation. Considered in this light, savers and investors are conferring the ultimate benefit on others by virtue of their financial means supporting individuals eager to work.

There are no jobs without investment, and given the billions that Gates and Buffett control, if they were to hoard their wealth rather than give it away, their wealth-creation motive would boost the job market. All job creation begins with delayed consumption, as does all wealth creation. So when the rich maintain their money and investments, their increased net worth redounds to wages and job opportunities. Some would call the hording of wealth greed, but it's a fair bet that the millions of Americans presently unemployed wouldn't mind Gates and Buffett adding a few zeros to their net worths if it meant those looking for work could find good jobs.

Considering innovation, most everything that we enjoy today results from individuals saving, as opposed to giving away their money. Entrepreneurs can't be entrepreneurs without capital, and it was the savings of others that enabled Henry Ford to replace the carriage with the automobile, allowed banks to replace the traditional teller with the ATM and continues to turn formerly blighted city sections into shining examples of urban renewal.

Capital is what erases unease in our lives, and it is what fixes the broken. Free capital, not charity, gave Buffett the opportunity to create trillions of wealth through his keen eye for economy-enhancing business concepts, and it's what Gates accessed in order to transform the world with Microsoft software.

Gates and Buffett might argue that to keep their wealth would be for them to make their descendants dependent on the fruits of their present productivity, and while perhaps true, if they give their money away they'll merely shift dependence to the myriad charities and individuals reliant on their largesse.

Charity, though not quite a government handout, gives while asking for little in return. On the other hand, investment provides opportunity while asking for the very accountability that builds character and a greater sense of self worth.

So while most in the media will lionize Gates and Buffett for being so very "selfless" with their immense wealth, the greater truth is that the noblest of all charitable acts is to help individuals avoid charity altogether. And if they held on to their significant wealth with an eye on investment, Gates and Buffett would be doing just that.

The great industrialist Andrew Carnegie long ago observed that "The man who dies rich, dies disgraced." Carnegie was wrong.

The man who dies rich dies a hero for his delayed consumption driving innovation and job creation on the way to even greater wealth. To save and invest is to expand capital, while selling assets in order to consume wealth is to destroy limited capital.

Ultimately Gates and Buffett should be free to dispose of their wealth as they wish, but just once it would be nice to pick up the paper and read about an industrialist unabashedly holding on to all his money. The media would surely demonize such an individual, but his wealth motive would be our gain.

John Tamny is editor of RealClearMarkets, a senior economist with H.C. Wainwright Economics and a senior economic advisor to Toreador Research and Trading. He writes a weekly column for Forbes.

http://www.forbes.com/2010/06/17/bi...tt-charity-opinion-columnists-john-tamny.html
 
Explaining Non-Existent Deflation Through Apple Products

Explaining Non-Existent Deflation Through Apple Products
By John Tamny
June 24, 2010

In a recent Wall Street Journal feature on the alleged threat of deflation, authors Sudeep Reddy and Dana Mattioli proclaimed that "Deflation is a destructive force, in part because it causes consumers to stop spending as they anticipate prices to fall even further going forward." Allowing for the certain truth that deflation is destructive, what the authors presume to be deflation quite simply isn't.

The answer for why is very basic. If prices of certain goods are falling, far from a deflationary event as they presume, the aforementioned decline in the cost of certain products merely expands the range of other goods available to the consumer, thus driving up their cost. If the price of a product drops, unless there's a monetary event whereby the currency in which it's priced rises substantially in value, there's no deflationary event to speak of.

And with the dollar presently testing all-time lows (the euro is not a dollar benchmark, and its greater weakness relative to the dollar simply masks the greenback's continued decline), the very notion of the U.S. economy potentially facing the possibility of deflation would be to redefine, or better, mis-define the word altogether. Much as inflation is always and everywhere a monetary event, so is deflation, and with the dollar impressively weak (see the price of gold, oil and any other commodity), we needn't worry about deflation. Inflation is our problem regardless of what government measures of pricing suggest.

Considering the savings aspect of Reddy and Mattioli's presumption, that too is a misread. Indeed, all capital formation and wealth is the result of saving, as are the companies we work for. If there's no saving, there's also no investment and we don't have jobs. Savers are economic benefactors, not economy killers.

Concerning prices more broadly, and the authors' errant definition of deflation, if their version is to be believed, then the U.S. economy has been suffering a crushing deflationary episode for most of its modern existence. That's clearly not the case, but as evidenced by the sharp decline in the prices of computers, cellphone calling plans and the Global Positioning Systems (GPS) that increasingly help us to get from Point A to Point B, we're used to falling prices.

Importantly, the falling prices of the above-mentioned products over the years certainly did not deter us from initially buying the less sophisticated, yet more pricey versions of all three. Does anyone remember how relatively slow, and expensive were the computers we suffered in the ‘80s and ‘90s? The size of the old mobile phones we chatted on in concert with weak signals and roaming charges? How about the first GPS systems so compromised in their accuracy that they frequently had us going down the wrong streets?

Still, we purchased all three even though as sentient humans all, we were and are well aware that nosebleed prices are largely an historical notion. When the price of anything is high, that's a certain signal that entrepreneurs will soon enough enhance production techniques in order to make what was once dear, cheap. But consume we do, even though we know the prices of much that we buy will eventually decline. Falling prices are decidedly not destructive despite the views of the vast majority of media members and the economists and central bankers they enable.

All of which brings us to the serial U.S. innovator, Apple Computer. It released its first iPhone in January of 2007, and while my memory may be hazy, its cost was in the $500 range. Despite the high price, and the historical certainty that the price of the phone would eventually drop, consumers purchased the original and very expensive phone in a frenzied way.

Not long after, Apple reduced the iPhone's price, and just this week it released the latest version for $199 despite it being a much more advanced phone than the '07 model. Contrary to the popular belief that falling prices are destructive to producers, as evidenced by the iPhone's downward price trajectory, it's the producers themselves who go to great lengths to make cheap what was once expensive.

There's nothing deflationary about their actions; instead they eagerly seek productivity enhancements as a way of beating back competition as much as possible. Nosebleed prices put huge targets on the backs of producers, so they do everything they can to constantly reduce the costs of the goods they sell. Yet consumers still rush to buy their products, quite opposite the supposition within the economic commentariat that falling prices drive consumers to the sidelines.

Of course there's logic to reducing prices that goes beyond keeping competition to a minimum. Indeed, as explained earlier, falling prices, rather than deflationary episodes, merely expand the range of goods we can buy. Apple Computer understands what most economists and business writers do not.

Simply put, if they can reduce the cost of the iPhone, this allows them to introduce other, more expensive goods to a consuming public that can't get enough of their products. Sure enough, Apple released the iPad a little ways back, and the cheapest, introductory version costs $499. Basic history in and out of Apple tells us that soon enough the iPad will cost less than its launch price, but consumers, though fully aware of this, are buying every iPad in sight.

So great is the demand for iPads, in order to buy them used on Amazon consumers are being forced to pay anywhere from $50 to a few hundred dollars more than the retail price. Once again, falling prices expand the range of goods we can buy, and often lead to higher prices for other things we want. There's no change in the price level when the prices of certain goods fall.

Back to true deflation, it doesn't result from the natural productivity-driven decline in prices, and another symptom of it is decidedly not a lack of credit. More realistically, during periods of actual deflation producers do everything they can to avoid accessing credit for fear that they'll have to pay back dollars far more expensive than the ones they borrowed.

Deflation, in short, is a rise in the value of money such that the general price level declines. We're experiencing nothing of the sort right now, but with productivity enhancements continuing to drive down the nominal prices of myriad goods, readers should expect continued hand wringing over a "deflationary" problem that is decidedly non-existent.

John Tamny is editor of RealClearMarkets, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He can be reached at jtamny@realclearmarkets.com.

http://www.realclearmarkets.com/art...t_deflation_through_apple_products_98535.html
 
1.6%: Weak GDP Does Not a Weak Economy Make

1.6%: Weak GDP Does Not a Weak Economy Make
By John Tamny
August 31, 2010

At present there's quite a lot to criticize President Obama about when it comes to his administration's economic policies. But with regard to last Friday's Gross Domestic Product (GDP) revision which allegedly points to a weakening economy, the anger should center on what a worthless number GDP is, as opposed to Obama's admittedly limited worth as an economic strategist.

One editorial that decried the revised number and the President's surely unfortunate policies noted a big drop in new home sales and weak manufacturing data as symptoms of those policies. It went on to say that during economic recoveries numbers like GDP are supposed to go up. That, of course, would be true if we desired a weaker economy.

A struggling manufacturing sector was cited as evidence of a depressed situation, but in an evolving economy like ours, rational thinkers would be more concerned with rising, as opposed to falling manufacturing activity. The latter surely mattered in the early part of the 20th century when General Motors was the world's most prominent company, but in the 21st a great deal of growth in the factory sector would suggest a move toward falling profit margins and economic backwardness.

Politicians and economic commentators love to romanticize manufacturing, and their elevation of it is most likely evidence that they've never worked in a factory before. Sure enough, there's a reason that the parts of the country reliant on what made us prosperous in the past are the most depressed at present. What this signals is that the best and brightest from those areas long ago migrated to the parts of the U.S. where service economic models dominate relative to the backbreaking - and less profitable - sectors reliant on the production of goods that could easily be made for us overseas.

That a decline in home sales has been cited as a signal of economic hardship is equally remarkable, if not more so. Indeed, it's generally agreed that the rush into housing this decade harmed the economy for builders and lenders booming at the expense of other capital-starved sectors. It's also generally felt that the federal government's subsidization of the already apparent U.S. housing obsession exacerbated the problem.

So while a reduction in the rate of home purchases may have compromised GDP growth, it can credibly be said that if the price of a less vibrant housing market results in a lower, artificially constructed number, then we should take it. What would be more troublesome is if sales continued to increase on the way to a higher GDP calculation. We tried to make housing central to our economic health and energy very recently and our efforts ended in tears, along with the unfortunate bailout of the economic actors engaging in what was economy-sapping activity.

In another account covering Friday's GDP revision, one newspaper noted that "Friday's GDP report showed a surge in imports, which grew at the fastest rate in 26 years, during the second quarter. Growth in imports far exceeded U.S. exports and wiped out more than three percentage points of U.S. growth in the quarter." If so, let's thank heavens for a number that was revised downward.

A higher calculation, if higher due to reduced imports, would logically signal a weaker economy and the reason why is basic: all consumption - and imports are consumption - is the result of production first. In the real world we trade products for products, and since there's no evidence of compassion on the part of global producers, the surge in imports to record levels points to a substantial increase in productivity stateside in order to pay for those imports.

Try as economists (including Obama's) might to reverse this basic economic law through the elevation of "demand", the simple truth is that when imports exceed exports this happy reality reveals a rising level of economic productivity in concert with increased capital flows into the "trade deficit" nation. Imports and capital inflows are highly bullish evidence of economic health, not destitution.

Back to Obama, his policies - including increased taxation, heavier regulation and a weak dollar - are not working very well. Worse for our young President, he suffers a Bush holdover in Ben Bernanke whose hubris compounds the problem given his naïve belief that protecting holders of Treasuries and mortgage securities somehow stimulates growth.

Never explained is why a software developer in Austin, TX or Palo Alto, CA would increase his production thanks to a Fed eager to double down on a housing bet gone awry, not to mention increased government borrowing thanks to lower yields. Lower interest rates? The economy has boomed in the past with higher rates reached free of Fed meddling. Washington is clueless when it comes to understanding why people produce, and worse, it's foisting its oblivious ways on the individuals who comprise any "economy" at their productive expense. They need to be left alone, so that they can heal and grow alone.

So while President Obama should certainly be criticized for policies that create barriers to economic activity, the use of GDP to unleash the criticism weakens the argument altogether. No doubt the U.S. economy is struggling at present, but Friday's GDP revision - far from evidence supporting a broadly held view of weakness - actually points to an increase in our economic health despite all the shackles placed on us by Washington.

John Tamny is editor of RealClearMarkets, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He can be reached at jtamny@realclearmarkets.com.

http://www.realclearmarkets.com/art...k_gdp_does_not_a_weak_economy_make_98647.html
 
A Profession With an Egalitarian Core

A Profession With an Egalitarian Core
By TYLER COWEN
Published: March 16, 2013

ECONOMICS is sometimes associated with the study and defense of selfishness and material inequality, but it has an egalitarian and civil libertarian core that should be celebrated. And that core may guide us in some surprising directions.

Economic analysis is itself value-free, but in practice it encourages a cosmopolitan interest in natural equality. Many economic models, of course, assume that all individuals are motivated by rational self-interest or some variant thereof; even the so-called behavioral theories tweak only the fringes of a basically common, rational understanding of people. The crucial implication is this: If you treat all individuals as fundamentally the same in your theoretical constructs, it would be odd to insist that the law should suddenly start treating them differently.

At least since the 19th century, the interest of economists in personal liberty can be easily documented. In 1829, all 15 economists who held seats in the British Parliament voted to allow Roman Catholics as members. In 1858, the 13 economists in Parliament voted unanimously to extend full civil rights to Jews. (While both measures were approved, they were controversial among many non-economist members.) For many years leading up to the various abolitions of slavery, economists were generally critics of slavery and advocates of people’s natural equality, as documented by David M. Levy, professor of economics at George Mason University, and Sandra J. Peart, dean of the Jepson School of Leadership Studies at the University of Richmond, in “The ‘Vanity of the Philosopher’: From Equality to Hierarchy in Post-Classical Economics.”

Professors Levy and Peart coined the phrase “analytical egalitarianism” to describe the underpinnings of this tradition. For example, Adam Smith cited birth and fortune, as opposed to intrinsically different capabilities, as the primary reasons for differences in social rank. And the classical economists Jeremy Bentham and John Stuart Mill promoted equal legal and institutional rights for women long before such views were fashionable. Their utilitarian moral theories placed individuals on a par in the social calculus by asking about the greatest good for the greatest number.

Bentham and Mill didn’t support personal liberty in every instance — Mill was a proud imperialist when it came to India, and Bentham’s idea for a Panopticon prison was a model of state-sponsored surveillance. But they prepared the way for dissecting the prevailing defenses of hierarchy and injustice.

More recently, a tradition from University of Chicago economists asserts that deep down, all human beings have the same desires, even though they may face different circumstances and incentives. Gary Becker, the Nobel laureate who is one of the founders of this approach, used the economic method to lay bare the selfish motives behind racial and ethnic discrimination. And the recent Republican amicus brief endorsing gay marriage carried the signatures of two renowned economists, Harvey S. Rosen of Princeton and N. Gregory Mankiw of Harvard. (Mr. Mankiw is a regular contributor to this column.)

Often, economists spend their energies squabbling with one another, but arguably the more important contrast is between our broadly liberal economic worldview and the various alternatives — common around the globe — that postulate natural hierarchies of religion, ethnicity, caste and gender, often enforced by law and strict custom. Economists too often forget that we are part of this broader battle of ideas, and that we are winning some enduring victories.

So where will a cosmopolitan perspective take us today?

One enormous issue is international migration. A distressingly large portion of the debate in many countries analyzes the effects of higher immigration on domestic citizens alone and seeks to restrict immigration to protect a national culture or existing economic interests. The obvious but too-often-underemphasized reality is that immigration is a significant gain for most people who move to a new country.

Michael Clemens, a senior fellow at the Center for Global Development in Washington, quantified these gains in a 2011 paper, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” He found that unrestricted immigration could create tens of trillions of dollars in economic value, as captured by the migrants themselves in the form of higher wages in their new countries and by those who hire the migrants or consume the products of their labor. For a profession concerned with precision, it is remarkable how infrequently we economists talk about those rather large numbers.

Truly open borders might prove unworkable, especially in countries with welfare states, and kill the goose laying the proverbial golden eggs; in this regard Mr. Clemens’s analysis may require some modification. Still, we should be obsessing over how many of those trillions can actually be realized.

IN any case, there is an overriding moral issue. Imagine that it is your professional duty to report a cost-benefit analysis of liberalizing immigration policy. You wouldn’t dream of producing a study that counted “men only” or “whites only,” at least not without specific, clearly stated reasons for dividing the data.

So why report cost-benefit results only for United States citizens or residents, as is sometimes done in analyses of both international trade and migration? The nation-state is a good practical institution, but it does not provide the final moral delineation of which people count and which do not. So commentators on trade and immigration should stress the cosmopolitan perspective, knowing that the practical imperatives of the nation-state will not be underrepresented in the ensuing debate.

Economics evolved as a more moral and more egalitarian approach to policy than prevailed in its surrounding milieu. Let’s cherish and extend that heritage. The real contributions of economics to human welfare might turn out to be very different from what most people — even most economists — expect.

Tyler Cowen is a professor of economics at George Mason University.

http://www.nytimes.com/2013/03/17/b...radition-of-economics.html?smid=pl-share&_r=0
 
Re: A Profession With an Egalitarian Core

A Profession With an Egalitarian Core
By TYLER COWEN
Published: March 16, 2013


Economic analysis is itself value-free....

:lol::lol::lol::lol::lol::lol::lol::lol:

Economics is about as "value-free" as theology/astrology.
 
Why Some People Love Tax Day

Milton Friedman was a libertarian, not a capitalist. He still believed in government intervention.

The most successful anti-poverty program in this nation's history was partially developed by Friedman, the Earned Income Tax Credit. Friedman wanted to replace welfare and the minimum wage laws with what he called the negative income tax. Essentially, you only get help if you worked. No matter how much you made the government would subsidize your life up to a minimum level. But you had to work. Basically (I'm just throwing out numbers), if you made $16k, the government would give you $4k more if the politically arbitrary minimum was $20k. Politicians didn't have the balls to get rid of welfare or minimum wage, so they half assed his idea on top of the other two. It's half assed, but it's still the most successful program. Just think if they would have fully implemented it.

But the main point is the perverse incentives associated with welfare wouldn't exist and people wouldn't be encouraged to avoid doing better. Things like marriage penalties or having large parts of the welfare cut off all at once if you get a job, even if the job isn't as much as the welfare.

But I don't think government should be redistributing any wealth. The government can promote wealth distribution by just getting out of the way of employers and employees.
Why Some People Love Tax Day (18:39)

Last year, a federal program took about $60 billion from wealthier Americans and gave it to the working poor. This program — a massive redistribution of wealth —has been embraced by every president from Ronald Reagan to Barack Obama.

On today's show, we look at a huge, often overlooked, surprisingly interesting corner of the tax code: The Earned Income Tax Credit.

For more, see our story A Surprisingly Uncontroversial Program That Gives Money To Poor People.

http://www.npr.org/blogs/money/2013/04/12/177063399/episode-451-why-some-people-love-tax-day
 
Marijuana Arbitrage

Marijuana Arbitrage (24:05)

Nearly 20 states have legalized marijuana to some degree. As it turns out, this has profound economic consequences for dealers all across the country.

Chuck used to sell marijuana in California. But the legalization of medical marijuana in the state meant he was suddenly competing against hundreds of marijuana dispensaries. So he moved to New York, where marijuana is still 100 percent illegal. Since making the move, he says, he's quadrupled his income. (For the record: His name isn't really Chuck.)

He spends pretty much every day dealing what he calls "farm-to-table" marijuana. On a recent afternoon in his dimly lit New York apartment, he was just about to complete a daily ritual: loading about 50 baggies of marijuana, worth a total of about $3,000 into his backpack, before heading out to make deliveries. "We're helping keep people stoned on a Friday night in New York City," he said.

Eighteen states and the District of Columbia have now legalized marijuana, either for medical use or for fun. And, it turns out, when one state brings an underground market into the mainstream and another doesn't, there are economic consequences in both places.

Dealers aren't the only ones with an incentive to move marijuana out of California. The legalization of medical marijuana led to a rush of pot farmers with permits to grow marijuana legally. That in turn led to a supply glut — and plummeting wholesale prices. Some growers haven't been able to unload all their crops at the price they want on the local, legal market. So they break the law and send it out of state.

Special Agent Roy Giorgi with the California Department of Justice is supposed to stop the illegal flow of marijuana in California. That can mean crouching in the brush in some remote part of the mountains, or it can mean heading to a FedEx or UPS in California's pot country to take a look at all the outgoing parcels and try to detect marijuana inside.

He estimates that 1 in 15 packages he examines has marijuana in it. "Right now, Northern California bud, that trademark, that stamp, is really some of the best in the world," he says.

Of course, all of Giorgi's efforts to catch marijuana growers and dealers tend to drive people out of the illegal marijuana business. That, in turn, means Chuck has less competition — and can charge higher prices.

Chuck sells marijuana for about $60 for an eighth of an ounce; in California, it would be anywhere from $30 to $45. With his New York customers, Chuck talks about marijuana like it's a rare California wine. When he pours out the contents of his backpack to reveal strains with names like Girl Scout Cookies and AK47, his clients are wowed.

Because Chuck is working in an illegal market, his customers have a hard time finding other marijuana retailers. "There's plenty of weed in New York; there's just an illusion of scarcity, which is part of what I'm capitalizing on," he says. "This is a black market business. There's insufficient information for customers."

This is what economists call information asymmetry: Chuck knows more about the market than his customers do. If weed were legal, his customers could comparison shop — they could look at menus and price lists and choose their dealer. As it is, once they find Chuck, they're likely to stick with him.

http://www.npr.org/blogs/money/2013/05/07/182010027/episode-456-marijuana-arbitrage
 
The One-Page Plan To Fix Global Warming

The One-Page Plan To Fix Global Warming (19:51)
July 12, 2013 5:31 PM

Climate change seems like this complicated, intractable problem. But maybe it doesn't have to be.

On today's show, we talk to a couple economists about a very simple idea that could solve the climate-change problem: Tax carbon emissions.

A carbon tax could be paired with cuts in the income tax. And it would drive down emissions without picking winners or losers, and without creating complicated regulations.

http://www.npr.org/blogs/money/2013...e-472-the-one-page-plan-to-fix-global-warming
 
In Economics, Doing the Right Thing Is Evil

In Economics, Doing the Right Thing Is Evil
By Jeffrey Dorfman
November 18, 2013

Last month the U.S. criticized Germany for exporting too many goods and not consuming enough as part of the same report in which it criticized China over maintaining the value of its currency instead of encouraging it to appreciate. This week, the European Commission criticized Germany again for its trade surplus and for its low level of consumption. The idea seems to be that if only Germany pursued a different economic and trade policy, other countries would benefit.

Left unasked and unanswered is why Germany (or China) should undertake national policies designed to help other countries at the expense of its own economy. The question goes unasked because the answer is so obvious.

It is a well-established, though much ignored, economic fact that higher levels of investment and lower levels of consumption lead to a higher standard of living (measured in terms of consumption per capita) in the long run. Yet the majority of countries, smitten with the Keynesian bug and full of politicians with their eyes on the next election, still pursue economic policies favoring immediate consumption over investment.

Germany and China are two countries that have steadily followed their own (different) paths, designing their economic policies to fit their national needs and temperaments. Both, by world standards, have high personal savings, low consumption measured as a percent of GDP, high levels of capital investments, and large trade surpluses. Yet, rather than being praised for doggedly pursuing and mostly achieving their economic goals, they are repeatedly criticized on the world stage because their success is perceived to be contributing to the failure of others.

In Germany's case a little weight can be given to the fact that it is part of the EU so in some sense might be expected to shape its policies for the greater good. Still, the essential fact of political reality is that countries do not go very far down the path of pursuing policies for the good of their neighbors or rivals at the expense of their own citizens.

To the extent that foreign aid is a pure case of national policy designed to benefit others (ignoring for the moment that much foreign aid is really designed to create customers for the donor nation's products), the small scale of foreign aid is proof positive of the above political reality. Foreign aid worldwide amounts to a few tenths of one percent of the gross world product, and is still only a few tenths of a percent if you measure it only as a share of the sum of developed countries' GDPs. Nations do not do charity on anything approaching a large scale.

The debate over the proper national economic and trade policies is really quite simple if one boils it down to its essence. Option one is for countries to pursue policies designed to produce long run economic growth and wealth for their citizens. Option two is for countries to follow policies that impoverish their citizens in order to provide benefits to people living in other countries. Said impoverishment can come directly by collecting tax dollars and then sending them abroad as foreign aid or indirectly by pursuing economic and trade policies that lead to suboptimal outcomes for their domestic economies because other nations' politicians believe such policies will provide benefits to their citizens.

This is really a case of how to equalize outcomes among nations. The hard way is for those that are falling behind to do the actual work of saving money, perhaps suffering in the short run as investments are made, and in the long run being able to reap the benefits of their farsightedness. The easy way is to pull more successful countries down to your level. One policy has an eventual outcome where everybody wins. The other believes it is better if everyone loses together rather than allow some to lose while others win. Clearly, the world's future will be brighter if countries take the harder road of building their own lasting success, rather than trying to beg short term gains from their currently more successful neighbors.

This idea of convincing countries to hurt themselves in order to help others is simply a transnational example of the common income redistribution that takes place within the borders of most wealthy nations. There are two essential differences, however, when one takes redistribution across national borders. First, the poor people being "helped" by the policy are not one's neighbors but some more distant group whose welfare is likely to be much less important to those doing the helping. Second, the beneficiaries are not constituents of the political leaders who must institute the policy.

The EU believes that Germany's trade surplus and economic success represent an "imbalance" which threatens the stability of the EU. In plain English (or French, Italian, Spanish, Portuguese, Irish, or Greek), the other countries in the EU mean that Germany is making them look bad and should be forced to pay some of the costs of boosting the other economies in the European Union. They believe that if Germany will export less and consume more, other countries will grow faster, eventually allowing German growth to rise again. Even if this is true, one wonders what German politicians are supposed to tell their citizens in the meantime.

Jeffrey Dorfman is a professor of economics at the University of Georgia, and the author of the e-book, Ending the Era of the Free Lunch.

http://www.realclearmarkets.com/art...ics_doing_the_right_thing_is_evil_100738.html
 
Re: In Economics, Doing the Right Thing Is Evil

In Economics, Doing the Right Thing Is Evil
By Jeffrey Dorfman
November 18, 2013
http://www.realclearmarkets.com/art...ics_doing_the_right_thing_is_evil_100738.html

And to emphasizes this point, Germany, has a policy of Codetermination, the concept of having the rights of labor represented in management decisions in Germany. However, when Germany locates a factor in the United States, they choose to locate them in Right to Work, hostile, anti union and anti labor states such as South Carolina (BMW), Volkswagen (Tennessee) and Alabama (Mercedes).

German big business looks out for all Germans, American big business looks out for the rich.
 
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Some Questions for Minimum-Wage Proponents

Some Questions for Minimum-Wage Proponents
by DON BOUDREAUX
on DECEMBER 2, 2013

Here are some questions for proponents of a legislated minimum wage:

- Suppose (not unreasonably) that poor people are disproportionately likely, compared to wealthier people, to own high-mileage used cars produced, say, between 1989 and 1995. And assume that the average price at which poor people sell each of these cars (when, say, they want to buy newer cars, or when they choose to rely more heavily upon public transportation) is $3,000. Do you support minimum-used-car-price legislation that prohibits the sale of any car at a price of less than $5,000? Do you believe that such legislation would make poor people richer? Would your answer change if the legislated minimum price for cars is $3,250 rather than $5,000? (I proposed a similar thought experiment back in June 2006.)

- Other than low-skilled labor, what other goods or services can you think of that warrant enormous amounts of empirical studies to determine the direction of the effect that mandated higher prices for those goods and services will have on the quantities of those goods and services that buyers wish to purchase? Or is low-skilled labor the only good or service that you can think of for which it is unscientific or mistaken to suppose that, all other things unchanged, the higher is the price that buyers must pay for this product, the fewer are the quantities of this product that buyers wish to purchase?

Asked differently: Is it unscientific for protectionists to reason that higher tariffs on imported steel or sugar or automobiles or shoes will reduce (from what they would otherwise be) the quantities of these things that buyers wish to purchase? Is it unscientific for nanny-state government officials to reason that higher taxes on cigarettes will lower the quantity demanded of cigarettes? Is it unscientific for opponents of immigration to propose, in hopes of reducing the employment of undocumented immigrants, higher penalties on firms that employ undocumented immigrants? Is it unscientific for proponents of rent-control to insist that, if the rents that tenants must pay for rental apartments rise, fewer people will be in the market to rent apartments? Are National Football League officials unscientific dolts when they assume that increasing the fines for helmet-to-helmet hits will reduce the frequency of such hits?

http://cafehayek.com/2013/12/some-questions-for-minimum-wage-proponents.html
 
Re: Some Questions for Minimum-Wage Proponents




16qyUH.AuSt.91.jpeg




 
Don't Believe the 'Experts,' Imports Are Beautiful

Don't Believe the 'Experts,' Imports Are Beautiful
By Sita Nataraj Slavov
December 18, 2013

Earlier this month, the members of the World Trade Organization (WTO) met in Bali and reached an agreement to simplify customs procedures. While it was a small step, the agreement creates renewed hope for the Doha round of global trade talks, which began over a decade ago. President Obama commented that the deal "represents the rejuvenation of the multilateral trading system that supports millions of American jobs and offers a forum for the robust enforcement of America's trade rights."

All of the drama surrounding the Bali agreement reflects a very common view of international trade, one that is held by many policy makers, journalists, and voters. In this view, trade is a complicated power struggle that pits American producers against foreign ones. That's because the main benefit our nation gets from free trade is the ability to export to other countries; imports can only hurt our economy. And as a result, we lose out if policy makers reduce trade barriers without other countries doing the same.

But this argument is exactly backwards. The real benefit from trade comes from importing, not exporting. Indeed, consumers can benefit from lowering our trade barriers even if other countries do not reciprocate. This implies that our current approach to trade is contrary to the broad national interest. Rather, it represents the interests of small but powerful groups of domestic producers.

Trade between nations is not fundamentally different from trade between individuals. I "export" my services to my employer - the American Enterprise Institute - and I use the income this generates to "import" groceries from my local supermarket. If I banned myself from trading with the outside world, it would be a big boost for my "agricultural sector" - I'd have to start growing lettuce on my balcony - but overall, I would certainly be worse off.

Notice that in this example, trade makes me better off regardless of any benefits that it generates for "foreigners" - AEI and the supermarket. In addition, I get huge benefits from trading with the supermarket even though the supermarket does not buy anything from me. Indeed, the main benefit I get from trade is the ability to import groceries and other products that I need. Exporting merely helps me earn the income required to buy these products.

A similar analysis holds at the national level as well. Lowering our trade barriers has both benefits and costs, but overall, the benefits exceed the costs. In their textbook on international economics, Paul Krugman, Maurice Obstfeld, and Marc Melitz illustrate this idea with the case of raw sugar import restrictions. They estimate that these restrictions cost American consumers a total of $884 million in 2013. On the other side of the ledger, American sugar producers received a benefit of $272 million. That's a net cost of $612 million to the nation.

But the benefits of trade are dispersed broadly, while the costs are concentrated among a small group of producers. Because there are hundreds of millions of sugar consumers, Krugman and his co-authors estimate that the sugar import quota cost the average consumer about $3 this year. And for each of these consumers, this cost is spread over hundreds of purchases, showing up in the form of an extra couple of cents, at most, on each tub of ice cream or box of cookies. On the other hand, sugar producers benefited to the tune of around $42,000 per worker.

This asymmetry creates a political problem. Producers are highly motivated to organize and lobby for trade restrictions, while consumers pay little attention to a few extra cents hidden within each purchase. That's why trade negotiators - like the ones who represented our nation in Bali - tend to emphasize the interests of producers rather than consumers. In fact, if our elected officials truly represented the national interest, there would be no need for trade talks. Policy makers could simply reduce trade barriers without worrying about whether other countries do the same.

After the Bali deal, U.S. Trade Representative Michael Froman remarked, "Now it's time to turn to the post-Bali agenda. The time has come to ask hard questions, to determine what is next and how to get there." He's right. But the hard questions need to come from consumers this time. Consumers need to ask why trade policy has been rigged against them for decades and how they can have more of a voice in the public debate over trade. Unless that happens, policy makers and trade negotiators will continue to promote the misguided view that trade is all about producers' interests.

Sita Nataraj Slavov is a resident scholar the American Enterprise Institute. Previously she taught economics at Occidental College and served as a senior economist at the Council of Economic Advisers.

http://www.realclearmarkets.com/art...the_experts_imports_are_beautiful_100803.html
 
Re: Don't Believe the 'Experts,' Imports Are Beautiful

Don't Believe the 'Experts,' Imports Are Beautiful
By Sita Nataraj Slavov
December 18, 2013

Earlier this month, the members of the World Trade Organization (WTO) met in Bali and reached an agreement to simplify customs procedures. While it was a small step, the agreement creates renewed hope for the Doha round of global trade talks, which began over a decade ago. President Obama commented that the deal "represents the rejuvenation of the multilateral trading system that supports millions of American jobs and offers a forum for the robust enforcement of America's trade rights."

All of the drama surrounding the Bali agreement reflects a very common view of international trade, one that is held by many policy makers, journalists, and voters. In this view, trade is a complicated power struggle that pits American producers against foreign ones. That's because the main benefit our nation gets from free trade is the ability to export to other countries; imports can only hurt our economy. And as a result, we lose out if policy makers reduce trade barriers without other countries doing the same.

But this argument is exactly backwards. The real benefit from trade comes from importing, not exporting. Indeed, consumers can benefit from lowering our trade barriers even if other countries do not reciprocate. This implies that our current approach to trade is contrary to the broad national interest. Rather, it represents the interests of small but powerful groups of domestic producers.

Trade between nations is not fundamentally different from trade between individuals. I "export" my services to my employer - the American Enterprise Institute - and I use the income this generates to "import" groceries from my local supermarket. If I banned myself from trading with the outside world, it would be a big boost for my "agricultural sector" - I'd have to start growing lettuce on my balcony - but overall, I would certainly be worse off.

Notice that in this example, trade makes me better off regardless of any benefits that it generates for "foreigners" - AEI and the supermarket. In addition, I get huge benefits from trading with the supermarket even though the supermarket does not buy anything from me. Indeed, the main benefit I get from trade is the ability to import groceries and other products that I need. Exporting merely helps me earn the income required to buy these products.

A similar analysis holds at the national level as well. Lowering our trade barriers has both benefits and costs, but overall, the benefits exceed the costs. In their textbook on international economics, Paul Krugman, Maurice Obstfeld, and Marc Melitz illustrate this idea with the case of raw sugar import restrictions. They estimate that these restrictions cost American consumers a total of $884 million in 2013. On the other side of the ledger, American sugar producers received a benefit of $272 million. That's a net cost of $612 million to the nation.

But the benefits of trade are dispersed broadly, while the costs are concentrated among a small group of producers. Because there are hundreds of millions of sugar consumers, Krugman and his co-authors estimate that the sugar import quota cost the average consumer about $3 this year. And for each of these consumers, this cost is spread over hundreds of purchases, showing up in the form of an extra couple of cents, at most, on each tub of ice cream or box of cookies. On the other hand, sugar producers benefited to the tune of around $42,000 per worker.

This asymmetry creates a political problem. Producers are highly motivated to organize and lobby for trade restrictions, while consumers pay little attention to a few extra cents hidden within each purchase. That's why trade negotiators - like the ones who represented our nation in Bali - tend to emphasize the interests of producers rather than consumers. In fact, if our elected officials truly represented the national interest, there would be no need for trade talks. Policy makers could simply reduce trade barriers without worrying about whether other countries do the same.

After the Bali deal, U.S. Trade Representative Michael Froman remarked, "Now it's time to turn to the post-Bali agenda. The time has come to ask hard questions, to determine what is next and how to get there." He's right. But the hard questions need to come from consumers this time. Consumers need to ask why trade policy has been rigged against them for decades and how they can have more of a voice in the public debate over trade. Unless that happens, policy makers and trade negotiators will continue to promote the misguided view that trade is all about producers' interests.

Sita Nataraj Slavov is a resident scholar the American Enterprise Institute. Previously she taught economics at Occidental College and served as a senior economist at the Council of Economic Advisers.

http://www.realclearmarkets.com/art...the_experts_imports_are_beautiful_100803.html

Trade between nations is not fundamentally different from trade between individuals.
:lol:
 
Re: Don't Believe the 'Experts,' Imports Are Beautiful

What's so funny? It's the same thing I said three years ago and it's what I learned from Krugman's Nobel prize winning work in International Trade Theory.

I know it's hard to believe but at one point Krugman cared about economics more than politics. Krugman also was the one that showed everyone that trade was a mutually beneficial concept, for individuals and nations.

Crazy right? But then again, you're his audience now, so he's probably ashamed of his entire past.

Also, economic training produce different survey questions results regarding trade and the such because the most high level theory doesn't distinguish between a trade deficit with your barber and a trade deficit with a chinese shirt-maker. Everyone is better off as long as the trade is voluntary.

When you go to the barber and he gives you a good (the haircut), you don't give him a good in return but instead cash. Technically, you have a trade deficit with your barber. Why are you worse off? Your barber coveted the $15 more than he valued his haircutting ability. He is better off. You valued the barber's haircutting ability more than you valued the $15. You are better off, but now you have a trade deficit with the barber.

Politicians and the economically ignorant will say we should have a trade surplus or trade neutral relationship. In the barber example, it means you have to give your barber an equal value good in return. I don't know what you do, but does your barber want it? And will he accept it as payment whenever you want a haircut. Inefficient to say the least.

The Chinese shirt-maker is morally no different. You choose to buy your shirts from China. How are you or the Chinese shirt-maker worse off. Neither one of you are. And an added dimension is now the Chinese shirt-maker has American dollars that he can't spend in China. What will he do with the dollars you gave him? He will buy an American good whether it's an iPhone or a US bond. Obviously, it's more complicated than that, but not by much.
 
Re: Don't Believe the 'Experts,' Imports Are Beautiful

What's so funny? It's the same thing I said three years ago and it's what I learned from Krugman's Nobel prize winning work in International Trade Theory.

I know it's hard to believe but at one point Krugman cared about economics more than politics. Krugman also was the one that showed everyone that trade was a mutually beneficial concept, for individuals and nations.

Crazy right? But then again, you're his audience now, so he's probably ashamed of his entire past.

I find it funny that in one thread you agree that our monetary policy is fucked up, which it is. Agreeing with Germany's trade policy of high exports and low imports as
opposed to our consumer based economic policy of high imports and unequally low exports, and then you post this.

Trade is good between nations, as long there is a surplus on the side your are on.

I think logic would tend to favor the side that is getting wealthier your the transactions.

Where is your outrage at the trade imbalance?
 
Re: Don't Believe the 'Experts,' Imports Are Beautiful

I find it funny that in one thread you agree that our monetary policy is fucked up, which it is. Agreeing with Germany's trade policy of high exports and low imports as opposed to our consumer based economic policy of high imports and unequally low exports, and then you post this.
How many different ways do I have to say I don't post things because I agree with it. I post what I post because I find it interesting, and I may or may not agree with it.

You know how I feel about monetary policy based on my explicit commentary regarding it not by the articles I've posted.

The part I found interesting about the Germany article was nations who are doing the wrong thing would rather get Germany to also do the wrong thing instead of everyone just doing the right thing, which is saving. Germany's trade balance is likely a result of their high savings rate rather than the other way around.

Trade is good between nations, as long there is a surplus on the side your are on.

I think logic would tend to favor the side that is getting wealthier your the transactions.
thoughtone, the surplus and deficits you're referring to is an accounting identity. It measure the explicit cost of the trade relationship. Nothing more, nothing less. It doesn't measure productivity, comparative advantage, wealth creation, income, or anything substantive other than explicit cost.

Accounting and economics are different. Economics tries to measure all the things I said were missing from the trade balance identity. That's why an economist, like Krugman, has a different and positive opinion about trade than a non-economist.

Fundamentally, an accounting identity will describe trade as zero-sum. Economics will take into account all the implicit factors associated with an action, and overwhelmingly, trade is considered a positive and good activity as long as its voluntary.

This is the same thing I point out with politics and economics. Politics' relationship to wealth is that of transfers, which are zero-sum. Economic trade can produce two entities that are better off when one entity exchanges money with another entity offering a good or service. Additional value can be created. Money is MADE not just transferred.

To address your logic directly. Both sides are wealthier from the trade, so logic favors both sides participating in the transaction, whether they are the money side or the goods and services side. Both sides are benefiting. The surplus side is not considered inherently better than the deficit side to economists.

Where is your outrage at the trade imbalance?
From above you can guess that I have no outrage at the "trade imbalance" because its a made up crisis.

There is a lot of money in promoting the idea of imbalances which is why it's a popular thing I do.

This post is a good example. Lobby to have a tariff passed, and you can have the cost diffused among millions of consumers while having the benefits enjoyed by less than a few thousand producers and employees. And that's a typical result.
 
Marrying Your Equal Boosts Inequality

Marrying Your Equal Boosts Inequality
By Peter Orszag
Feb 5, 2014 8:00 AM CT

Rich and poor Americans are slowly but surely staking out separate lives. Increasingly, they have been moving to different communities, and more and more they are also marrying people of similar income and educational backgrounds. This is a phenomenon social scientists call assortative mating.

In 2005, 58 percent of wives with a high school diploma were married to men with the same amount of education, new research by economist Jeremy Greenwood of the University of Pennsylvania and three colleagues shows. In 1960, by contrast, only 42 percent of wives with high school diplomas were married to men with the same level of education.

The phenomenon is happening at the top of the education distribution, too. In 2005, 43 percent of wives with college degrees were married to men who also had college degrees. In 1960, the share was 33 percent.

What are the effects of this increased marital sorting? For one thing, it contributes to income inequality. If marriages occurred randomly across educational categories, Greenwood and his co-authors show, the Gini coefficient for household income in the U.S. in 2005 would decline to 0.34 from 0.43. (The coefficient falls as inequality decreases.) That would more than offset the entire increase in inequality that has occurred since the late 1960s. (This comparison is not entirely fair because even in the late 1960s, some assortative mating occurred. Nonetheless, it shows how large the effect is.)

Marital sorting also affects women’s participation in the workforce. Since the 1970s, the correlation between the wages of husband and wife has doubled, Christian Bredemeier and Falko Juessen of the University of Dortmund found. Over the same period, wives of high-income men have increased their working hours more than wives of low-income husbands have.

In the 1970s, wives with high-earning husbands tended to work fewer hours than other wives did. Assortative mating changed the pattern.

Finally, marital sorting may be having some effect on geographical mobility. Cross-state mobility rates have been falling in the U.S., research by Raven Molloy and Christopher Smith of the Federal Reserve and Abigail Wozniak of the University of Notre Dame has found.

In my role on the boards of nonprofits, I have seen many job offers declined because a move would be required, and the person’s spouse would have to leave behind a promising career. Because finding two good jobs in a new city is much harder than finding just one, is it possible that this “co-location problem” for dual-earning couples with increasingly similar incomes and educational backgrounds is discouraging mobility?

Well-educated couples tend to live in large cities because it increases the chance that both spouses can find an adequate job, research by Dora Costa of the Massachusetts Institute of Technology and Matthew Kahn of the University of California at Los Angeles suggests. Another piece of evidence comes from the cross-state mobility rates themselves. Since the 1980s, they have fallen almost by half among dual-earning couples, while the rate for single (or no) earners has fallen by only a third. Yet Molloy finds some evidence that these differential trends have had only a modest effect on total mobility rates (after other factors are taken into account).

In any case, assortative mating indicates why trying to bridge the increasing divides between rich and poor in the U.S. is so complicated and difficult. If income inequality is being driven in part by changes in marriage patterns, what can anyone do about that?

(Peter Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration.)

http://www.bloomberg.com/news/2014-02-05/marrying-your-equal-boosts-inequality.html
 
No Big Deal

No Big Deal
Paul Krugman
FEB. 27, 2014

Everyone knows that the Obama administration’s domestic economic agenda is stalled in the face of scorched-earth opposition from Republicans. And that’s a bad thing: The U.S. economy would be in much better shape if Obama administration proposals like the American Jobs Act had become law.

It’s less well known that the administration’s international economic agenda is also stalled, for very different reasons. In particular, the centerpiece of that agenda — the proposed Trans-Pacific Partnership, or T.P.P. — doesn’t seem to be making much progress, thanks to a combination of negotiating difficulties abroad and bipartisan skepticism at home.

And you know what? That’s O.K. It’s far from clear that the T.P.P. is a good idea. It’s even less clear that it’s something on which President Obama should be spending political capital. I am in general a free trader, but I’ll be undismayed and even a bit relieved if the T.P.P. just fades away.

The first thing you need to know about trade deals in general is that they aren’t what they used to be. The glory days of trade negotiations — the days of deals like the Kennedy Round of the 1960s, which sharply reduced tariffs around the world — are long behind us.

Why? Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate. Average U.S. tariff rates have fallen by two-thirds since 1960. The most recent report on American import restraints by the International Trade Commission puts their total cost at less than 0.01 percent of G.D.P.

Implicit protection of services — rules and regulations that have the effect of, say, blocking foreign competition in insurance — surely impose additional costs. But the fact remains that, these days, “trade agreements” are mainly about other things. What they’re really about, in particular, is property rights — things like the ability to enforce patents on drugs and copyrights on movies. And so it is with T.P.P.

There’s a lot of hype about T.P.P., from both supporters and opponents. Supporters like to talk about the fact that the countries at the negotiating table comprise around 40 percent of the world economy, which they imply means that the agreement would be hugely significant. But trade among these players is already fairly free, so the T.P.P. wouldn’t make that much difference.

Meanwhile, opponents portray the T.P.P. as a huge plot, suggesting that it would destroy national sovereignty and transfer all the power to corporations. This, too, is hugely overblown. Corporate interests would get somewhat more ability to seek legal recourse against government actions, but, no, the Obama administration isn’t secretly bargaining away democracy.

What the T.P.P. would do, however, is increase the ability of certain corporations to assert control over intellectual property. Again, think drug patents and movie rights.

Is this a good thing from a global point of view? Doubtful. The kind of property rights we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization is very dubious — and has nothing at all to do with classical arguments for free trade.

Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America.

In short, there isn’t a compelling case for this deal, from either a global or a national point of view. Nor does there seem to be anything like a political consensus in favor, abroad or at home.

Abroad, the news from the latest meeting of negotiators sounds like what you usually hear when trade talks are going nowhere: assertions of forward movement but nothing substantive. At home, both Harry Reid, the Senate majority leader, and Nancy Pelosi, the top Democrat in the House, have come out against giving the president crucial “fast-track” authority, meaning that any agreement can receive a clean, up-or-down vote.

So what I wonder is why the president is pushing the T.P.P. at all. The economic case is weak, at best, and his own party doesn’t like it. Why waste time and political capital on this project?

My guess is that we’re looking at a combination of Beltway conventional wisdom — Very Serious People always support entitlement cuts and trade deals — and officials caught in a 1990s time warp, still living in the days when New Democrats tried to prove that they weren’t old-style liberals by going all in for globalization. Whatever the motivations, however, the push for T.P.P. seems almost weirdly out of touch with both economic and political reality.

So don’t cry for T.P.P. If the big trade deal comes to nothing, as seems likely, it will be, well, no big deal.

http://www.nytimes.com/2014/02/28/opinion/krugman-no-big-deal.html?smid=pl-share&_r=1&referrer=
 
To Boost the Economy, Let the Unemployment Bill Die

To Boost the Economy, Let the Unemployment Bill Die
By Diana Furchtgott-Roth
April 8, 2014

The House of Representatives has the opportunity to stall the economic recovery by following the Senate and passing an extension of unemployment insurance benefits. Or, the House could help the economy by just letting the bill die.

The Senate's timing is extraordinary. On Monday, just three days after Labor Department employment data for March showed that Americans were moving back into the labor force and that the number of long-term unemployed was declining, the Senate passed a bill to extend the duration of unemployment insurance from 26 weeks up to a maximum of 73 weeks. The vote was 59 to 38, with 5 Republican senators joining the Democratic caucus.

The Democratic Senate had been trying to extend the duration of unemployment benefits since they expired in December. While the Senate stalled, the labor force participation rate-the percentage of Americans who are employed or looking for a jobs-rose four tenths of a percentage point between December and March, one of the fastest increases since the beginning of 2010. The number of unemployed out of work for more than 26 weeks declined by 110,000. One of the reasons was undoubtedly the end of emergency unemployment benefits.

The declining labor force participation rate, which stood at 62.8 percent in December, the lowest since 1978, has been a major weakness of the U.S. economy, so the reversal of this trend is cause for celebration, and analysis.

In most recoveries the labor force participation rate eventually turns upward as people reenter the job market and find employment, . Following the Great Recession, which was over in June 2009, the upward turn has not happened, and fewer workers mean lower economic growth. It might be happening now, but it is too soon to tell. Three months does not make a trend, even for economists.

Still, the data fit the theory. In a study on the effects of unemployment insurance published in November 2012, the Congressional Budget Office wrote, "The UI system reduces the incentive for benefit recipients to accept a job offer because the earnings from that job will be partially offset by the discontinuation of their UI benefits."

Academic economists with views as diverse as Harvard professor Lawrence Summers and University of Chicago professor Casey Mulligan generally agree that the higher the level of unemployment benefits, and the longer their duration, the longer the unemployed delay taking another job.

To take just one example out of many, Princeton economist Alan Krueger, former chairman of President Obama's Council of Economic Advisers, concluded in a 2010 paper coauthored with Columbia University professor Andreas Mueller that more generous unemployment benefits are associated with lower levels of job search. Unemployed workers increase the intensity of their job search before their benefits will be terminated, the economists found.

It will take more than three months to see if Alan Krueger is right, but so far the empirical evidence is leaning in his direction.

Krueger's theory fits the facts on the ground in North Carolina, where Governor Pat McCrory lowered the duration of unemployment benefits from 63 weeks to 19 weeks last June. Between June and February, the North Carolina economy created 51,000 jobs, far more than neighboring South Carolina, Tennessee, Virginia, and Georgia.

Speaking on April 3 at a General Electric conference in Washington D.C. on the future of work, Governor McCrory described his rationale for lowering the duration of benefits. The money for extended unemployment benefits does not come free from the federal government, but is borrowed and has to be repaid, he told the audience. Last summer North Carolina was $2.5 billion in debt, and could not afford to borrow any more.

Plus, McCrory said, there were jobs going unfilled in North Carolina. With annual unemployment benefits of $20,000, and unreported income of another $10,000, many people found it worthwhile to turn down jobs that paid $28,000.

Many factors determine employment in a state, and the duration of unemployment benefits is just one of them. But it is striking that in the Tar Heel State in September, three months after the duration of unemployment benefits was reduced, the number of employed was higher than in June.

And in the United States, three months after the average duration of benefits in most states declined from 53 weeks to 26 weeks, the labor force participation rate rose, the percent of the unemployed out of work for six months or longer declined, and the economy created 192,000 jobs.

University of Chicago professor Casey Mulligan wrote a book called The Redistribution Recession describing how entitlements trapped people into unemployment. When the unemployed took jobs, the loss of unemployment insurance, food stamps, Medicaid, and housing vouchers resulted in an effective marginal tax rate of 40 percent to 60 percent among low-income Americans. In other words, for every dollar the newly-employed could earn, they would lose 40 cents to 60 cents in benefits. Naturally, many decided to stay unemployed.

If the rise in the labor force participation rate continues it will be a positive force for economic growth, a welcome reversal of a trend. The House would do better to leave the maximum duration of unemployment benefits at 26 weeks rather than passing the Senate's bill to extend them.

Diana Furchtgott-Roth is a contributing editor at RealClearMarkets. A former chief economist at the U.S. Department of Labor, she directs www.economics21.org at the Manhattan Institute where she is a senior fellow.

http://www.realclearmarkets.com/art...omy_let_the_unemployment_bill_die_100995.html
 
David Autor on Inequality

David Autor on Inequality

From a recent interview of the MIT economist (discussing this article):
Q. You are focused on inequality among the so-called “99 percent,” not between the 1 percent and the 99 percent. Why?

A. There’s a real national debate about the significance and causes of inequality. This public debate is dominated by the discussion of the top 1 percent. And the top 1 percent is important, but focusing on the top 1 percent conveys the message that the game is all rigged, that if you’re not in the elite stratum, there’s nothing to shoot for. And that’s just not the case. The growth of skill differentials among the other 99 percent is arguably even more consequential than the rise of the 1 percent for the welfare of most citizens.
Here’s a concrete way to see it: The earnings gap between the median college-educated two-income family and the median high school-educated two-income family rose by $28,000 between 1979 and 2012. This [shift] — which excludes the top 1 percent, since we’re focusing on medians — is four times as large as the redistribution that has taken place from the bottom 99 percent to the top 1 percent of households in the same period.

http://gregmankiw.blogspot.com/2014/05/david-autor-on-inequality.html?m=0
 
Can An Economy Be Too Good?

The part I found interesting about the Germany article was nations who are doing the wrong thing would rather get Germany to also do the wrong thing instead of everyone just doing the right thing, which is saving. Germany's trade balance is likely a result of their high savings rate rather than the other way around.

Can An Economy Be Too Good? (15:09)
May 28, 2014 8:32 PM ET

When we talk about European economy, we usually focus on the screw ups – the sunny South, with the big deficits.

But the strangest report recently came out of Brussels—saying how well Germany's economy is doing. And how that's a big problem for the rest of the countries in the Eurozone.

Today on the show: How when you're in a group, doing extremely well can be a problem.

http://www.npr.org/blogs/money/2014/05/28/316459056/episode-542-can-an-economy-be-too-good
 
How Obamacare Begets Gender Inequality

How Obamacare Begets Gender Inequality
October 7, 2014
By Casey Mulligan

In the past four decades, millions of American women have entered the workforce, sought out new occupations, and embarked on professional careers. In fact, by 2013, just 18 percent of working women worked only part time. This marks a sharp reversal of conditions in 1975, when men did the vast majority of full-time work, while women were less likely to be employed at all and nearly a quarter worked 20-hours per week or less.

These gains in gender equality are threatened by two provisions of the Affordable Care Act (ACA) ironically advertised as benefitting American workers. Taken together, these policies could drive the percentage of women working only part time back to what it was 40 years ago.

The first provision is the ACA's penalty on large employers who do not offer health insurance to their full-time employees, beginning next year and going into full effect in 2016. The second relates to the eligibility rules for the law's new health insurance assistance that began this year. The ACA imposes a penalty on large employers (generally those with 50 or more workers) who fail to provide health insurance for each of their full-time employees-defined by the ACA as those working 30 hours a week or more. Because part-time employees do not count toward the penalty, the provision induces employers to reduce more of their workers to 29 hours a week or less-a group now being referred to as the "29ers."

Compounding this effect is a disincentive on the employees themselves. The penalty does not apply to businesses that offer coverage to their full-time employees. But their full-time employees are finding that they are not eligible for the ACA's new assistance with insurance premiums and deductibles because the law requires them to join their employer's plan (or a plan offered by a family member's employer).

Part-time employees are not restricted in this way, except in the increasingly rare instances that they too are offered coverage by their employer. As a result of its exclusive access to the law's new health insurance assistance, part-time employment becomes comparatively more desirable to workers, or at least less undesirable, than it was in the past.

Both of these employment disincentives are worth thousands of dollars per year and, in some cases, more than a thousand dollars per month. Both will lead to less full-time work, and even less productivity per hour of work that is performed. This is because some positions are vastly more efficient when worked full-time, and the new employment disincentives will not be enough to change that.

Nevertheless, a number of positions have traditionally been 30-to-39-hour jobs, and those who occupy these jobs typically will have less trouble adapting to a 29-hour schedule that avoids the employer penalty or allows the worker to get the ACA's new assistance. Women are at least twice as likely as men to be in those positions, which means they are twice as likely to be 29ers once the new health law goes into full effect.

Some defenders of the ACA may contend these factors will relieve many workers of the "job lock" previously associated with employer-provided health coverage, or the need to tolerate the drudgery of long hours just to keep their insurance. They may claim women are "voluntarily" leaving full-time positions to spend more time with their families, or even to pursue art, music, and other hobbies.

Their theory would make some sense if workers who left full-time employment were paying the entire cost of their decisions, but what's really happening is that taxpayers are bribing them to work less. Both female and male 29ers will be making the best of a bad situation created by public policies that take away much of the financial reward from working full time. To make matters worse, the new 29ers will be creating additional burdens for other taxpayers as the 29ers receive more non-ACA subsidies and pay less in taxes than they would as full-time workers.

These new ACA employment disincentives are just two among many factors determining the kinds of work schedules that employers offer and employees accept. Regrettably, they are likely to have the unintended consequence of turning back the clock on decades of progress women have made in the American labor market.

http://www.realclearmarkets.com/art...bamacare_begets_gender_inequality_101309.html
 
Tiger moms and helicopter parents: The economics of parenting style

Tiger moms and helicopter parents: The economics of parenting style

Since time immemorial, parents have struggled with the question of how best to raise their children. This column argues that the choice of parenting style is driven by incentives. Parents weigh the expected costs and benefits of implementing a certain parenting style. The popularity of the authoritarian style is declining because the economic returns to the independence of children have risen. The rising inequality implies higher returns to education. This calls for pushier parenting styles, such as the authoritative one. A decline in inequality is likely to prompt a more relaxed parenting.

Matthias Doepke, Fabrizio Zilibotti
11 October 2014


Since time immemorial, parents have struggled with the question of how best to raise their children. For most of history, the experts of the day strongly advised a firm hand. The Bible states that “he who spares the rod hates his son, but he who loves him is careful to discipline him”, Proverbs 13:24), and Plumb (1975) notes that of “two hundred counsels of advice on child-rearing prior to 1770, only three failed to recommend that fathers beat their children”. It was only in the 20th century that the views of education reformers, such as Maria Montessori, gained wide currency, culminating in the popularity of anti-authoritarian education in the 1960s and 1970s. However, recently the tide has been turning again.

In 2011, Amy Chua sparked a heated debate with her book “Battle Hymn of the Tiger Mother” in which she advocates for a strict, rule-oriented model of parenting.1 While the methods promoted by Chua triggered much disagreement, “Tiger Mom” parenting is part of a wider trend towards more involved, time-intensive parenting among the educated classes. Time-use surveys reveal that highly educated parents spend considerably more time on parenting than a generation ago (even though women also spend more time at work; see Ramey and Ramey 2010), and the term ‘helicopter parenting’ (to denote anxious parents permanently hovering over their kids, guiding and protecting them) has gained wide currency.

Parenting style in developmental psychology

In developmental psychology, the broad strategies that parents employ in raising their children are known as ‘parenting styles’. Starting with a seminal contribution by Baumrind (1967), a distinction between three main parenting styles has taken hold: Authoritarian, authoritative, and permissive. As the name suggests, the authoritarian style is one where parents demand obedience from their children and exercise strict control; this style is often associated with corporal punishment. Permissive parents, in contrast, follow a laissez-faire approach and let children make their own choices. The authoritative style is one where parents attempt to influence their children’s choices, but they do so by reasoning with them and by shaping their values, rather than through command and discipline.

An economic explanation of parenting style

Much of the popular literature on parenting is based on the premise that parents don’t know how best to raise their children, and that they need to be educated to adopt the best methods. From this perspective, when parents adopt the ‘wrong’ parenting style, they are making a mistake that is due to lack of information.

In our own research on parenting styles (Doepke and Zilibotti 2014), we are taking a different track that is based on the economic approach to human behaviour. We argue that parents, by and large, know about the pros and cons of different parenting strategies, and that their own choice of parenting style is driven by incentives. With this approach, the research task is not to tell parents what they should do, but to understand the economic incentives that drive what parents actually do.

In our theory, parents have both altruistic and paternalistic feelings towards their children. While parents generally care about their children’s wellbeing (altruism), they may also disagree with some of the choices that their children make (paternalism). For example, parents and children often have different views regarding the optimal level of risk taking (say, in motor traffic or in experimenting with recreational drugs). As a result, parents have an incentive to attempt to influence their children’s choices in life.

There are two types of strategies available to influence kids.

•First, parents can use coercion, i.e., they can forbid certain behaviours or impose specific choices on their children. This approach corresponds to an authoritarian parenting style.

•Second, parents can use persuasion, i.e., they can attempt to shape children’s values and preferences in such a way that children will make on their own accord the choices desired by the parent.​

For example, parents may instil in their children a strong work ethic or an aversion to recreational drugs. This approach amounts to authoritative parenting.

•As a third option, parents can abstain from influencing children altogether and let them make their own choices, which is the permissive parenting style.​

In our theory, permissive parenting is not a form of neglect, but rather a parenting strategy whereby parents respect their children’ choices even when these do not conform to the parents’ wishes.

The costs and benefits of alternative parenting styles

From the perspective of the parents, engaging in one of the intensive parenting styles that aim to control the children’s behaviour (authoritarian and authoritative) comes with costs. Some of these costs are direct (the time and effort spent on controlling the children or on instilling the appropriate values in them), and others are indirect (parents care about their children, and take into account the suffering that aggressive parenting imposes on the kids). A first prediction of the economic theory of parenting style is, therefore, that parents will be willing to bear the costs of intensive parenting only if the return is sufficiently high. So what is the return to intensive parenting?

The benefit of intensive parenting (authoritarian or authoritative) is that the children are more likely to engage in the choices that the parents consider appropriate. The return, therefore, depends on the stakes, i.e., the extent to which it matters whether the children make the ‘right’ or ‘wrong’ choices from the parents’ perspective.

When it comes to risky adolescent behaviours, for example, one factor that matters is the riskiness of the environment, i.e., the extent to which adolescents can get into trouble by taking dangerous actions. In an urban neighbourhood characterised by gangs, violence, and wide availability of drugs, making the wrong choices and keeping the wrong company can ruin a child’s life, and realising what is at stake, concerned parents may intervene strongly (or alternatively, move to a different neighbourhood). In contrast, in a safe rural area lacking such temptations, parents can easier afford a relaxed approach.

The role of the return to education and inequality

While many parents worry about juvenile risks, we believe that the returns to effort in education and work during adolescence are even more important. A seemingly universal area of disagreement between parents and children is the trade-off between working hard for school and for one’s career versus having fun with friends and other immediate enjoyments. Few parents wish that their kids blew off homework more often in exchange for some instant pleasure. This conflict can be interpreted as a difference in time preference – parents worry more about the long-term consequences of children’s behaviour (such as studying for school) than do the kids themselves. Hence, many parents push their children towards harder work, either through coercion (such as ‘grounding’ children, i.e., not allowing them to spend time with friends) or through sustained indoctrination with a strong work ethic and a striving for success.

The return to pushing children hard consists of the increased likelihood that they will do well later in life. How important this is to parents depends crucially on the degree of economic inequality, and in particular on the return to education. In an economy where education and effort are highly rewarded and where people with little education struggle, parents will be highly motivated to push their children hard.

•Thus, we expect economic inequality to be associated with intensive (authoritarian and authoritative) parenting styles.​

In contrast, in an economy where there is little inequality and artists and school dropouts earn only slightly less than doctors and engineers, parents can afford a more relaxed attitude, and permissive parenting should be more prevalent.

Cross-country evidence on intensive versus permissive parenting

In our research, we show that cross-country data on parenting styles are consistent with the prediction of a link between parenting and income inequality. Parenting style can be measured using the World Value Survey, where people are asked which attitudes or values they find most important in child rearing. Here, emphasising the values of ‘imagination’ and ‘independence’ in rearing children would correspond to a more permissive parenting style, whereas authoritarian and authoritative parents would be more likely to insist on the importance of ‘working hard’. Figures 1 to 3 show the association of these values (i.e., the fraction of parents in a given country that consider the value important) with a measure of income inequality, namely the Gini index (higher values correspond to more inequality). As predicted by the theory, across OECD economies parents in more unequal countries place more emphasis on hard work, and consider imagination and independence to be less important. Conversely, Scandinavian parents emphasise the value of imagination and independence, consistent with the casual observation that in these countries children enjoy more leeway than their peers in Southern Europe and the US. The pattern also holds up for developing countries. As an example, Figure 4 adds China to the picture – a country with pronounced economic inequality. As predicted by the theory, in China emphasising the importance of hard work is almost universal among parents.

Figure 1. Income inequality measured by Gini coefficient versus importance of emphasising ‘imagination’ in raising children across OECD countries

Figure 2. Income inequality measured by Gini coefficient versus importance of emphasising ‘independence’ in raising children across OECD countries

Figure 3. Income inequality measured by Gini coefficient versus importance of emphasising ‘working hard’ in raising children across OECD countries

Figure 4. Income inequality measured by Gini coefficient versus importance of emphasising ‘working hard’ in raising children across OECD countries and China

The rise of authoritative parenting

Regarding the recent rise of more intensive parenting in Western countries (‘Tiger Mom’, ‘helicopter parents’, etc.), our theory offers a straightforward explanation. In the 1960s and 1970s, when anti-authoritative, laissez-faire parenting reached the peak of its popularity, economic inequality was also at an all-time low. Given low returns to education, there was little reason for parents to exert major efforts to push their children. The last 30 years, in contrast, have seen ever-rising inequality combined with increasing returns to education. Children who fail to complete their education can no longer look forward to a secure, middle-class life, and consequently parents have redoubled their efforts to ensure their children’s success.

A final question is why among the intensive parenting strategies, modern parents increasingly rely on the subtle indoctrination methods of the authoritative style, rather than the command-and-control approach of an authoritarian parent. The methods of the ‘Tiger Mom’ notwithstanding (which have both authoritarian and authoritative elements), traditional authoritarian parenting with its ample use of corporal punishment is becoming less common in many countries. From the economic perspective, the advantage of the authoritative approach is that the children, once successfully indoctrinated, no longer need to be monitored to do the right thing – they will implement the parent’s preferred choices on their own accord. Hence, authoritative parenting is more attractive than the authoritarian style when monitoring is difficult or impossible. We believe that the authoritarian style is declining because the economic returns to the independence of children have risen. The crucial phase of education is now often the college or post-graduate level rather than elementary or secondary school. Once off to university, children are no longer under the direct control of their parents, and they will succeed only if the appropriate values (such as valuing hard work and academic success) have already been instilled in them.

The future of parenting

Given that the spread of higher education is unlikely to reverse, our theory predicts that authoritarian parenting will continue its current decline; a return to the tough methods advocated by the Bible is unlikely. Regarding permissive versus authoritative parenting, the evolution of the return to education is what matters. If the march towards higher inequality continues, the current era will mark the beginning of a sustained trend towards ever pushier parenting. If, on the other hand, today’s inequality trends prove to be an aberration and we return to the less unequal times of the 1970s, future children (and their parents) will be able to enjoy a relaxed childhood once more.

http://www.voxeu.org/article/economics-parenting
 
Economists Actually Agree on This: The Wisdom of Free Trade

Economists Actually Agree on This: The Wisdom of Free Trade
By N. GREGORY MANKIW
APRIL 24, 2015

If Congress were to take an exam in Economics 101, would it pass? We are about to find out.

The issue at hand is whether Congress will give President Obama “fast track” authority to negotiate a trade deal with our trading partners in the Pacific. The bill is favored by some congressional leaders of both parties, including Senator Orrin G. Hatch, the Republican chairman of the Finance Committee, Senator Ron Wyden, the committee’s ranking Democrat, and Representative Paul D. Ryan, the Republican chairman of the House Ways and Means Committee.

House and Senate committees approved versions of the legislation last week. But with influential lawmakers like Senator Elizabeth Warren, a Democrat, opposed to the measure, final congressional approval is far from certain.

Among economists, the issue is a no-brainer. Last month, I signed an open letter to John Boehner, Mitch McConnell, Nancy Pelosi and Harry Reid. I was joined by 13 other economists who have led the President’s Council of Economic Advisers, a post I held from 2003 to 2005. The group spanned every administration from Gerald Ford’s to Barack Obama’s.

We wrote, “International trade is fundamentally good for the U.S. economy, beneficial to American families over time, and consonant with our domestic priorities. That is why we support the renewal of Trade Promotion Authority (TPA) to make it possible for the United States to reach international agreements with our economic partners in Asia through the Trans-Pacific Partnership (TPP) and in Europe through the Trans-Atlantic Trade and Investment Partnership (TTIP).”

Economists are famous for disagreeing with one another, and indeed, seminars in economics departments are known for their vociferous debate. But economists reach near unanimity on some topics, including international trade.

The economic argument for free trade dates back to Adam Smith, the 18th-century author of “The Wealth of Nations” and the grandfather of modern economics. Smith recognized that the case for trading with other nations was no different from the case for trading with other individuals within a society.

According to Smith, “it is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy.” Just as no sensible person tries to make all his own clothes and grow all his own food, he said, no sensible nation will aim to achieve prosperity by isolating itself from other nations around the world.

Smith was responding to a then-prevalent doctrine called mercantilism. The mercantilists favored exports but were wary of imports. In their view, the revenue from exports allowed the accumulation of gold, whereas the purchase of imports drained a nation’s gold reserves.

Smith turned this perspective on its head. A nation benefits from imports, he argued, because they expand its opportunities for consumption. Exports are necessary only because other nations have the temerity to want to be paid for the goods they provide.

Fetishism about gold is now rare, but a new form of mercantilism pervades the modern debate about trade. Politicians and pundits often recoil at imports because they destroy domestic jobs, while they applaud exports because they create jobs.

Economists respond that full employment is possible with any pattern of trade. The main issue is not the number of jobs, but which jobs. Americans should work in those industries in which we have an advantage compared with other nations, and we should import from abroad those goods that can be produced more cheaply there.

If economists are so sure about the benefits of free trade, why are the public and their elected representatives often skeptical? One answer comes from a 2007 book by Bryan Caplan, a George Mason University professor, called “The Myth of the Rational Voter: Why Democracies Choose Bad Policies.”

Mr. Caplan argues that voters are worse than ignorant about the principles of good policy. Ignorance would be random and might average out in a large population. Instead of being merely ignorant, voters hold on to mistaken beliefs.

Politicians, whose main goal is to get elected, mold those mistaken beliefs into bad policy. Mr. Caplan writes: “What happens if fully rational politicians compete for the support of irrational voters — specifically, voters with irrational beliefs about the effects of various policies? It is a recipe for mendacity.”

In the case of international trade, three biases that he identifies are most salient.

The first is an anti-foreign bias. People tend to view their own country in competition with other nations and underestimate the benefits of dealing with foreigners. Yet economics teaches that international trade is not like war but can be win-win.

The second is an anti-market bias. People tend to underestimate the benefits of the market mechanism as a guide to allocating resources. Yet history has taught repeatedly that the alternative — a planned economy — works poorly.

The third is a make-work bias. People tend to underestimate the benefit from conserving on labor and thus worry that imports will destroy jobs in import-competing industries. Yet long-run economic progress comes from finding ways to reduce labor input and redeploying workers to new, growing industries.

The Princeton economist Alan Blinder once proposed Murphy’s Law of economic policy: “Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.”

The debate about international trade is a case in point. In the coming weeks, members of Congress will have an opportunity to prove Mr. Blinder wrong. Let’s hope they take it.

http://mobile.nytimes.com/2015/04/2...-the-wisdom-of-free-trade.html?referrer=&_r=0
 
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