This week's hero is John McCain (I almost can't believe I'm saying that) for trying to nip character-attack campaigning in the bud in North Carolina:

In an NBC interview aired on Friday, the Arizona senator said he has done all he can to persuade the state party to cancel the television ad that criticizes Obama as "too extreme" because of controversial remarks made by his former pastor, the Rev. Jeremiah Wright.

"They're not listening to me because they're out of touch with reality and the Republican Party. We are the party of Abraham Lincoln, Theodore Roosevelt and Ronald Reagan and this kind of campaigning is unacceptable," McCain told NBC's "Today" Show.

It's obvious that Republicans want to run against Hillary, but why waste money getting involved in the Democratic primary? Save that money for some Congressional or local candidate!

My hack this week is Al Gore, who is ducking in the wake of the bio-fueled instigated food crisis:

With prices for rice, wheat, and corn soaring, food-related unrest has broken out in places such as Haiti, Indonesia, and Afghanistan. Several countries have blocked the export of grain. There is even talk that governments could fall if they cannot bring food costs down.

One factor being blamed for the price hikes is the use of government subsidies to promote the use of corn for ethanol production. An estimated 30% of America’s corn crop now goes to fuel, not food.

“I don’t think anybody knows precisely how much ethanol contributes to the run-up in food prices, but the contribution is clearly substantial,” a professor of applied economics and law at the University of Minnesota, C. Ford Runge, said. A study by a Washington think tank, the International Food Policy Research Institute, indicated that between a quarter and a third of the recent hike in commodities prices is attributable to biofuels.

Last year, Mr. Runge and a colleague, Benjamin Senauer, wrote an article in Foreign Affairs, “How Biofuels Could Starve the Poor.”

“We were criticized for being alarmist at the time,” Mr. Runge said. “I think our views, looking back a year, were probably too conservative.”

We have to make sure our environmental policies aren't hurting people instead of the environment.

Labels: Economics, Energy, Enviroment, Hero/Hack, McCain

Posted by Ryan S. at 11:31 AM | Permalink | |

Smoot-Hawley Tarrif?

WSJ:

The Democratic Party's protectionist make-over was completed yesterday, when Nancy Pelosi decided to kill the Colombia free trade agreement. Her objections had nothing to do with the evidence and everything to do with politics, but this was an act of particular bad faith. It will damage the economic and security interests of the U.S. while trashing our best ally in Latin America.

The Colombia trade pact was signed in 2006 and renegotiated last year to accommodate Democratic demands for tougher labor and environmental standards. Even after more than 250 consultations with Democrats, and further concessions, including promises to spend more on domestic unemployment insurance, the deal remained stalled in Congress. Apparently the problem was that Democrats kept getting their way.

Maybe Pelosi should take some high school economics.

Labels: Economics, Movies

Posted by Ryan S. at 9:42 AM | Permalink | |

So both Democratic candidates are proposing health care plans, and I wouldn't be surprised if John McCain had something in mind (Does anyone know how he voted on Medicare Part D?). I think people having access to good health care is a public as well as a private good, and so having more people insured would be a net benefit to society. I am diametrically opposed to government run health care, which infringes on freedom as least as much as the wallet, but in this post I hope to explore some proposals I could get behind.

First, I will oppose any proposal that is conscripted. No one from the government need be knocking on my door demanding I pay for health insurance if don't want to. I don't believe in military conscription, so why should I for health insurance? Second, I don't want to do anything that severely inhibits the continuation of the current health provider and insurance industries. I know a lot of people (some in my own family) whose livelihoods would be in jeopardy (I think anything that did this would probably violate my first condition anyway, but to be on the safe side...).

The easiest solution to incentivise health care by giving tax breaks or a tax credit. We already do this for homeowners and people claiming children, so why not health care? Some empirical research would have to be done into how to ensure that health care costs didn't just increase by the rate of the tax credit, but it could be done.

The major solution I would propose needs some explaining. One of the core economic ideas behind insurance of any kind is risk pooling. Simple example: Person A has a 60% chance of catching a disease that is costly to treat, Persons B and C have a 30% chance of catching the same disease, and Persons D, E, and F have only a 10% chance of catching it. The total risk of catching the disease for those six people is only 25%. By covering all six people, the health insurance company is able to cover treatment with the premiums paid by those people who will not get that disease.

However, there is an adverse selection issue due to the asymmetrical information between the insurer and the insured. Wikipedia has a good example of this here. Basically, people with a higher risk factor (like Person A above), who know they have a higher risk factor, are more likely to get insurance in the first place, therefore increasing the insurance company's costs. The way this has been compensated for traditionally is by creating large pools of insured folks, like at a workplace for example. However, it seems there is still some unaccounted for market failure.

I would back a government-sponsored initiative to allow not just small business owners, but individual citizens to pool together to form larger groups of insured people to lower the risk to insurance companies. Then allow insurance companies to purchase these pools (made up of individuals from around the country) in order to provide discounted insurance for everyone.

I think this is a good compromise between free market Republicans and "universal health care" Democrats. Your thoughts?

Labels: 2008 Watch, Economics, Health Care

Posted by Ryan S. at 11:34 AM | Permalink | |

Thank you, Indiana:

Up until two years ago, only 15 of Indiana's 92 counties set their clocks an hour ahead in the spring and an hour back in the fall. The rest stayed on standard time all year, in part because farmers resisted the prospect of having to work an extra hour in the morning dark. But many residents came to hate falling in and out of sync with businesses and residents in neighboring states and prevailed upon the Indiana Legislature to put the entire state on daylight-saving time beginning in the spring of 2006.

CLOCK WATCHING

Research on the impact of extending daylight-saving time across Indiana found:

• Residential electricity usage increased between 1% and 4%, amounting to $8.6 million a year.

• Social costs from increased emissions were estimated at between $1.6 million and $5.3 million per year.

• Possible social benefits -- enhanced public health and safety and economic growth -- were not studied.

Indiana's change of heart gave University of California-Santa Barbara economics professor Matthew Kotchen and Ph.D. student Laura Grant a unique way to see how the time shift affects energy use. Using more than seven million monthly meter readings from Duke Energy Corp., covering nearly all the households in southern Indiana for three years, they were able to compare energy consumption before and after counties began observing daylight-saving time. Readings from counties that had already adopted daylight-saving time provided a control group that helped them to adjust for changes in weather from one year to the next.

Their finding: Having the entire state switch to daylight-saving time each year, rather than stay on standard time, costs Indiana households an additional $8.6 million in electricity bills. They conclude that the reduced cost of lighting in afternoons during daylight-saving time is more than offset by the higher air-conditioning costs on hot afternoons and increased heating costs on cool mornings.

This is now a national security issue. End DST!

Labels: Economics, Energy, Oil

Posted by Ryan S. at 7:57 PM | Permalink | |

This is how my professor for "Economics of the Great Depression" started our first class yesterday:

Labels: Economics, Media, Movies

Posted by Ryan S. at 12:42 PM | Permalink | |

It is becoming increasingly clear that Americans are tired of hearing about the Iraq War. Debates exclude it, people avoid movies about it, and the importance of the issue to voters is declining. Meanwhile, economic issues are gaining in importance, once again. It seems as if the 2004 election will be an abberation of modern history in which the economy took a backseat to another issue (in this case, terrorism).

This is why Mike Huckabee is best poised to win the general election out of any other Republican. As Ramesh Ponnuru of Time Magazine has written:

When the Republicans met in Dearborn, Mich., to debate the economy, most of the candidates maintained that times were good and that people who thought otherwise just hadn't seen the statistics.

Huckabee had a different message: "For many people on this stage, the economy's doing terrifically well, but for a lot of Americans, it's not doing so well." He talked about people who have trouble paying their rent or getting health insurance or paying for college. Huckabee does not always have convincing answers to these problems, but at least he recognizes them.

Populism is going to win the 2008 election, especially if we are entering a recession as Alan Greenspan has suggested.

"We are getting close to stall speed … and we are far more vulnerable at levels where growth is so slow than we would be otherwise," the former Federal Reserve chairman says. "Indeed it’s like someone who has an immune system that’s not working very well is subject to all sorts of diseases and the economy at this level of growth is subject to all sorts of shocks."

If the Republicans nominate someone who understands this (like Huckabee), they clearly stand a better chance at keeping the White House.

Note: The Des Moines Register released their endorsements today. The endorsed Democrat is Hillary Clinton and the endorsed Republican is John McCain. Many people credit John Edwards's 2004 second place finish in the Iowa Caucuses to his Des Moines Register endorsement.

Labels: 2008 Watch, Economics, Huckabee, Iraq, Pinstripe Politics

Posted by Gary at 1:03 PM | Permalink | |

The Greatest Story Never Told?

The U.S. trade deficit fell to the lowest level in seven months, helped by record-high sales of American products and the declining value of the dollar. The deficit with China declined as imports edged down slightly following a string of high-profile recalls.

The Commerce Department reported Thursday that the deficit declined to $57.6 billion in August, down 2.4 percent from the July imbalance. It was lowest gap between exports and imports since January and a much better showing than had been expected.

The improvement reflected a 0.4 percent rise in exports, which climbed to a record $138.3 billion. Sales of farm products including wheat, soybeans and corn, and exports of industrial products such as chemicals and steel both hit record levels.

Imports actually dropped by 0.4 percent to $195.9 billion, reflecting lower shipments of foreign cars and furniture, which offset a big increase in the foreign oil bill, which rose to the highest level in a year.

In other economic news, the Labor Department said that the number of newly laid off workers filing claims for unemployment benefits fell by 12,000 last week to 308,000. That was a better showing than had been expected.

Brought to you by a weaker dollar and Republican economic policies. More jobs, less imports!

Labels: Economics

Posted by Ryan S. at 9:26 AM | Permalink | |

Seems the residents of Delaware Liberal have been uppity about unions lately.

I would have commented over there, but I'm either banned or spam-blocked (I would have e-mailed Jason...but there's no e-mail address on the site that I could find).

I don't really have a problem with unions. In theory. I believe workers should have the rights to freely associate. However, in most union shops, like GM, union membership is compulsory. Not only do I have a problem with compulsory membership as a concept, but it drains union leadership of all accountability. There is nothing they have to offer their members to get them to stay or recruit new members.

Big Labor is just as bad as Big Business.

Labels: Economics, Labor

Posted by Ryan S. at 10:11 AM | Permalink | |

You might have noticed that the price of milk has gone up recently, but wondered why.

A rise in gas prices? Underproductive cows? No and no.

The answer? The Chinese:

In China, milk consumption has soared along with rising incomes, a massive expansion of the dairy industry and the increasing familiarity with — and taste for — non-native foods among young urbanites.

Pizza Hut sells its cheese-laden pies even in smaller Chinese cities, and milk, yogurt and individually packaged cheese slices can be found in small local supermarket chains. Foreign-owned stores such as France’s Carrefour, Germany’s Metro and America’s Wal-Mart cater to slightly more sophisticated tastes, selling crumbly blue cheeses, wheels of gouda and red-waxed balls of Edam.

Products from Chinese dairy giant Mengniu even carry the label of being the official milk of the Chinese space program. Its drinks promise to “fortify the Chinese people,” with packaging showing a space-suited boy clutching a glass of creamy goodness.

China’s growing love of dairy is a far cry from two decades ago, when the country was just opening up to foreign products and availability was limited to milk, yogurt and, on rare occasions, butter. The Dairy Association of China estimates consumption will rise by 15-20 percent annually in the coming years.

Labels: China, Economics

Posted by Ryan S. at 1:06 PM | Permalink | |

I think High Fructose Corn Syrup (HFCS) is pretty much evil. The rise in use (see graph to the left) of HFCS rises eerily parallel rise in obesity in this country. Now scientists haven't proven anything yet, but loads of studies are being done (that's fine, it;s how science is supposed to work).

I happen to be of the school of thought that anything "natural," i.e. found in nature, or in use for a really long time. This makes cane sugar a much more attractive product to me than HFCS (crystalized sugar was around in India 2500 years ago).

Now I could assume that most people share my feelings at least insofar as they prefer to eat things they can pronounce or that don't have a need for acronyms. Why the switch then? HFCS is easier to mix, being a syrup, and it has a longer shelf life than cane sugar. But there is a third reason: The Government.

Wikipedia (with citations):

Because of a system of price supports and sugar quotas imposed since May 1982, importing sugar into the United States is prohibitively expensive. High fructose corn syrup, derived from corn, is more economical since the American price of sugar is artificially far higher than the global price of sugar^[8] and the price of #2 corn is artificially low due to both government subsidies and dumping on the market as farmers produce more corn annually.^[9][10]

In fact, the agribusiness lobby has spent a lot of money keeping the price of sugar high (near to totally impossible to grow in the US) and the price of corn low. Archer Daniels Midland (ADM) is one such agribusiness. According to CATO:

ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period. At least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM's corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30.

Firms like ADM not only cost taxpayers money, but they also keep trade more restricted. Sugar was one of the major products specifically exempted in NAFTA and CAFTA. For example, one of the major provisions of CAFTA is "duty-free import and elimination of subsidies on agricultural products (not including sugar). [Emphasis mine]"

So there you have it. The government helping Americans fatten themselves and big business.

Another side issue is that agreements like NAFTA and CAFTA hurt the cause of real free trade by masquerading as free trade while still being government-controlled trade operations. This allows them to pass with enough restrictions and loopholes to essentially establish corporate welfare. And this hurts American consumers and international business owners/farmers.

Labels: Economics, Energy

Posted by Ryan S. at 8:30 AM | Permalink | |

The Economist:

WHILE driving through rural South Carolina recently, I was surprised to find that nearly every home I passed had a sign advertising some cottage industry. Each offered a range of services from “small welding projects” to “bikini waxes” (though no one I surveyed had ever patronised that particular business). These businesses were not necessarily limited to modest homes; it spanned a spectrum of income levels.

Cottage industry has traditionally been a building block of economic development. In industrialised countries it was the first form of manufacturing and paved the way for the industrial revolution. Home production has traditionally been common to low income, less skilled workers and its popularity counter cyclical. When the economy provides less jobs workers become more likely to engage in home production.

I think cottage industry is great. It allows people to stay in their homes with their families, the building block of society. I wonder when nanotechnology and other things will allow more people to do high-tech work from home...

Labels: Economics, technology

Posted by Ryan S. at 9:36 PM | Permalink | |