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Economics

July 15, 2014

"Taylor Swift doesn't understand supply and demand"

That's O.K., Ms. Swift: not enough people do.

The Wall Street Journal just published an amazing essay from Taylor Swift, in which she argues that the music industry is not dying, but in fact "just coming alive."

Based on this piece, there are many reasons to believe that Taylor Swift has not been paying very much attention to the music industry.

"Fair Trade is Fraud. And Getting Worse."

Professor Munger issues a noteworthy smackdown:

FairTrade does not help the people it claims to help. . . . It does, however, give rich white people a chance to feel good about themselves, at a convenient price.

"The Invisible Economy Our techniques for measuring economic performance are obsolete, obscuring a complete picture of how we're faring."

I think economists would be virtually unanimous in agreeing that this is a serious problem.

However, finding a good solution is really difficult.

July 14, 2014

"California High-Speed Rail—the Critics' Case"

James Fallows presents some of the criticism, but then he tries a neat rhetorical trick. Is there opposition to California's proposed high speed rail? Yes, but "Every big peacetime project that any democracy has ever undertaken has generated controversy." He gives as examples the Louisiana Purchase, the Alaska Purchase, the Golden Gate bridge, the 1964 Civil Rights Act, and Medicare ("now the sacred cow of American politics").  

Leave aside that both purchases involved just one-time expenditures and little bureaucracy to plan, execute, and administer, the Civil Rights Act didn't involve spending a lot of money of any kind, and that Medicare probably wouldn't have passed if it had been understood how hugely expensive it would become. (In 1965 a billon dollars was a really big deal rather than a rounding error in the budget of some obscure federal bureau.)

The main difference--the difference few Liberals understand--is that those examples are all about 50 years old or older. Government, particularly the federal government, doesn't work as well now. As Glenn Reynolds and his readers point out, two reasons are public employee unions and the environmental lobby. I'd add that now, as opposed to then, the federal government and many state governments are effectively broke.

Good Lord, people, don't you know that these are . . . *public goods*?!

Everyone know the private sector can't supply these efficiently. It's, it's . . . impossible! 

/Sarcasm off.

Whether or not they’re expecting to profit, Gilbert and other capitalists — large and small — are trying to rebuild the city, even stepping in and picking up some duties that were once handled by the public sector. Shop owners around the city are cleaning up the blighted storefronts and public spaces around them. Only 35,000 of Detroit’s 88,000 streetlights actually work, so some owners are buying and installing their own. In Gilbert’s downtown, a Rock Ventures security force patrols the city center 24 hours a day, monitoring 300 surveillance cameras from a control center. Gilbert is proposing to pay $50 million for the land beneath the county courthouse and a partly built jail near his center-city casino, with the intention of moving the municipal buildings to a far-off neighborhood; his goal is to clear the way for an entertainment district that flows south, without interruption, from the sports arenas past his casino and into downtown. Detroit’s new mayor, Mike Duggan, told me he had no problem with the private sector doing so much to shape his city: Other metropolises had their entrepreneurs and deep-pocketed magnates who built and bought and financed things. With a state-appointed emergency manager overseeing various aspects of Detroit’s operations, with many civic services inoperable for years and with a dire need for investment, Duggan said he felt lucky that his town was getting its turn.

While the jury is still very much out, there is much potential good news in "The Post-Post-Apocalyptic Detroit".

 

July 10, 2014

"How India’s Economic Rise Could Bolster America’s Economy"

Let's hope this comes to pass

But I'm skeptical.

July 09, 2014

"[Part of a] Review of Levitt and Dubner's 'Think like a Freak'"

The full review is gated, but John Lott has posted an excerpt on his blog. Includes this terrific line about the incorrect story that the price of a new car drops by many $thousands as soon as it is driven off the lot:

Typically, Levitt and Dubner fail to understand that when a problem arises in a market, it generally provides an incentive for those involved to remedy the problem.

"Problems with collective action"

Glenn Reynolds:

Government, we are sometimes told, is just another word for things we choose to do together.

Like a lot of things politicians say, this sounds good. And, also like a lot of things politicians say, it isn't the least bit true.

Many of the things government does, we don't choose. Many of the things we choose, government doesn't do. And whatever gets done, we're not the ones doing it. And those who are doing it often interpret their mandates selfishly.

Take, for example, the Veterans Administration. 

"Dear Feminists: In The Name Of Fighting Poverty, Can We Call A Truce About Marriage?"

Social scientists have known for a while now that poverty isn't just about money:

A shockingly high 94 percent of births to college-educated women today are in wedlock, but 57 percent of women with high-school degrees or less education are unmarried when they bear their first child. Sadly, marriage today is relegated largely to higher social classes, as documented in the recent book Marriage Markets, by June Carbone and Naomi Cahn. 

July 08, 2014

"Government Fixes Have Created Long-Term Instability"

Interesting how that happens.

We need a shift in thinking, argues the BIS. Pay less attention to the business cycle and more attention to what BIS economist Claudio Borio calls "the financial cycle." It typically lasts 15 to 20 years and may straddle several traditional business cycles. In its early years, the debt levels of households and businesses gradually increase. This strengthens economic growth, drives up asset prices - especially of real estate - and makes debtors feel richer. With credit plentiful, homes, stocks and businesses are worth more. This is the cycle's expansive phase. But "when financial booms turn to busts," the depressing phase has devastating consequences. Defaults multiply. Asset prices collapse. The fallout lingers.

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