Ear Rational Thoughts

A great graph - world population by longitude and latitude

From here:

Liberal media bias

From Bryan Caplan, quoting David Boaz:

[M]ainstream (liberal) media regularly put an ideological label on conservative and libertarian organizations and interviewees, but not on liberal and leftist groups. In a report about states accepting stimulus funds, reporter Kathy Lohr quoted "Jon Shure of the Washington D.C.-based Center on Budget and Policy Priorities," "Maurice Emsellem with the National Employment Law Project," and "Tad DeHaven, a budget analyst with the fiscally conservative Cato Institute in Washington, D.C." (Thanks! And I'd say the label is correct, even if I might prefer libertarian.)

Those are all legitimate sources for the story. But only one of them gets an ideological label -- even though the other two groups are clearly on the left...

Back on March 23, I noted but did not blog about references on "Morning Edition" to "the libertarian Cato Institute," the "conservative American Enterprise Institute," and "the Brookings Institution." No label needed for Brookings, of course. Just folks there...

[...]

It's all too typical of the mainstream-liberal media: They put ideological warning labels on libertarians and conservatives, lest readers and listeners be unaware of the potential for bias, but very rarely label liberals and leftists...

It's a pernicious tactic. Although it's not surprising. People who agree with you aren't ideologues, they're centrists. It's only those who disagree who - because their "facts" must be wrong - must have some ideological reason for their claims that your readers should be aware.

Aggregate supply

Via Greg Mankiw:

... [Keynesians claim] aggregate demand is the only thing you need to worry about during downturns. Changes in aggregate supply ... don't matter, they argue, because employment is being constrained by the low level of aggregate demand.

... Casey points out that there is a regular surge in teenage employment during the summer months because more teenagers are available to work (that is, the supply of their labor has increased). That is no surprise: It is normal supply and demand in action.

The chart tells the story.

Idle resources

From Arnold Kling quoting Ed Leamer:

The greatest amount of idleness of assets is due to scheduling problems. Your bed is used only when you sleep and your TV is used only when you are awake.

...Indeed the primary function of the division of labor is to minimize idleness. If you do the hammering while I do the sawing, we can keep the hammer and the saw operating at the same time.

... it occurs to me that one advantage of large factories may be to reduce idleness. The more work being done at one time at one place, the less you have to worry about small variations in productivity at different points in the production process ... (the law of large numbers) ... .

... Hiring and firing workers is an asset disposition issue. If your firm has excess workers, then at the margin the workers are idle whether you keep them or not. If you keep them, you pay for them while they are idle. If you let them go, then they deal with their own idleness. When you scan the horizon and see opportunities, you acquire assets (workers). When you scan the horizon and see threats, you dispose of assets (workers). You rarely make these decisions based on short-term calculations of real wage rates and marginal products. Much of the cost of a worker is overhead, particularly with things like health insurance and training costs to consider. Much of the benefit of a worker is uncertain and lumpy ...

Price sensitivity in employment

From Arnold Kling:

[E]mployment is closer to a relationship than to a market. When you are making hiring and firing decisions, small differences in the wage rate do not mean much. If you really don't want to go out to eat with a guy, how much difference would it make if he offered to split the check 60-40 instead of 50-50? By the same token, if you really do not want to hire someone, how much difference would it make if that person would take a 10 percent lower wage?

Microscopic view of the iPad and Kindle

This is very neat. The Kindle display is very impressive at high magnification. I've never seen one, but I would be amazed if it's not far clearer than the iPad.

Job turnover

From Arnold Kling:

[Tyle Cowen:] In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again, at least assuming those are "good" jobs in the first place.

... in an ordinary non-recession month 4 million jobs are destroyed and about 4.2 million jobs are created. Suppose that in a bad month of a recession, 4.0 million jobs are created and 4.5 million jobs are destroyed. Which of those 4.5 million jobs ought to be saved, because they might come back in a stronger economy? No one in Washington knows.

A long vacation

From the Economist, quoting Megan McArdle quoting the Economist, referring to retirement:

I don’t know if it’s ever going to be realistic that everyone saves enough to spend the last third of their life on vacation.

Well said. They conclude:

As we live progressively longer we must also rethink our retirement expectations. Retiring at the same age that your parents did, or earlier, can no longer be the expectation...

The problem is a double-whammy. First, the cost of keeping people alive goes up exponentially the older they get. Second, the longer people live, the longer they spend "on vacation", reducing the fraction of their life that they spent producing things. The problem is exacerbated for the infirm, who cost even more to keep alive and must (rather than choose, as is the case for the healthy) retire earlier. The result is a larger fraction of our resources going to keep people alive who are not ever going to produce additional resources in return.

If people were paying for those resources out of their pockets it wouldn't be a problem at all. But unfortunately, we have made an open-ended commitment to entirely insulate people from both costs. When thought about in this way, it seems clear that this path can NOT be sustainable.

Addendum: See this post from Arnold Kling:

As McArdle puts it,

Whether you collect a dividend check, get a corporate pension, or live off your social security, your retirement is funded by real claims on the output of people in the workforce.

For any given level of output, more consumption by one group (say, people over 65) is going to reduce what can be consumed by everyone else.

Don Boudreaux continues his quest

... to educate the masses, here:

You assert that “The bulging American trade deficit means that rising consumer demand is flowing to suppliers overseas rather than fueling growth at home”

... Why do foreigners accept green pieces of paper in return for the goods and services these foreigners produce for Americans? It’s not because foreigners have an insatiable demand for tiny monochrome prints of dead American statesmen. Rather, foreigners accept dollars because they want to spend those dollars, either on American exports or on American assets. Another term for spending dollars on American assets is “investing in America.”

The U.S. trade deficit rises whenever the amount of dollars foreigners invest in America rises relative to the amount of dollars foreigners spend on American exports. ...

and here:

Observing that suburban lawns consume land as well as other resources, Laura Vanderkam concludes that lawns are wasteful and environmentally destructive...

Newspapers – such as the one that Ms. Vanderkam writes for – consume trees, petroleum (in the form of ink), electricity, and numerous other resources. Were I as confident in my knowledge and speculations as Ms. Vanderkam is in hers, I might divine that newspapers are an unfortunate “fashion” that we would be wise to avoid. ...

Laffer maximization

Megan McArdle reminds us of a very important point:

... I have been puzzled by the number of liberal bloggers who have been taken with Dylan Matthews' compendium of economists and politicians commenting on where the Laffer Curve might maximize.

I mean, it's an interesting side question, but it doesn't really tell us much about policy, unless you actually think that the object of policy is to maximize the share of income the government takes.

Megan is of course correct. The goal of government policy is not to maximize how much its citizens send it in tax revenue. Government taxes are an expense for citizens and as with all expenses (gasoline, food, shelter, etc.), people should seek to minimize them.

But she doesn't go far enough. The Laffer Curve - which relates tax rates to government revenue - does tell you where the government should set tax rates. But it's just not at the peak. The amount the tax rate should be set at is the amount that maximizes total earned income for its citizens. After all, if it sets it any higher, it will deprive citizens of income - i.e. it will make them poorer.

The way to find this from the Laffer Curve is to divide total government revenue (Y axis) by the tax rate (X axis). For example, here is a sample Laffer Curve (to my knowledge, no one knows the exact shape of this curve so I just made one up). As you can see, the peak of the curve (blue line) is at a tax rate of 70% and it smoothly slopes from 0 in either direction:

The dashed orange line is the total income of the citizens in that country. As you can see, in this (albeit fictitious) example, the peak of that curve is at a tax rate of 0.

Will this value - tax rate = 0 - hold for all Laffer Curve shapes? No, and it probably doesn't hold in the "real world" version. But it's worth noting that it is rather difficult to devise a shape of the Laffer Curve where the tax rate that maximizes wealth for the citizens is not quite low.