Dean Baker's Blog, page 386

Krugman Discovers Intellectual Property: The 1 Percent are the Takers

While meandering the streets of Paris, Paul Krugman apparently awakened to the fact that the assignment of claims to wealth through patents, copyrights, and other forms of intellectual property is a really big deal. This is good news for those who have been jumping up and down yelling about this issue for the last 15 years or so.

There is really big money in this area. Just to take my favorite one, we spend $340 billion a year on drugs, more than 2 percent of GDP ($295 billion on prescription...

Did You Know That Food Stamps Was a $760 Billion Program?

I sure didn't, which is why I was surprised to see an NYT article refer to it as "the $760 billion program." This number is referring to the cost of the program over a 10-year budget window, which careful readers may have gleaned from the rest of the sentence which tells us that fraud accounts for 1 percent of the program's cost or $760 million a year. Nowhere does the piece directly say that the $760 billion figure refers to a  ten year spending number and not a one year number.

This is...

People Respond to Incentives: Another Case of Patents Leading to Bad Medicine

The NYT reported on the findings of two independent studies that a spinal treatment procedure provided by the medical device maker Medtronic was no more effective than prior treatments and was possibly harmful. The studies implied that earlier studies by Medtronic were biased in exaggerating the potential benefits from the procedure, which has netted the company billions of dollars in revenue over the last decade.

This is exactly the sort of corruption that economic theory predicts would resu...

Fred Hiatt is Holding Head Start Hostage Until Liberals Support Cuts to Social Security and Medicare

That is the essence of his column today warning liberals of sharp cuts to domestic discretionary spending (e.g. Head Start, education, infrastructure etc.) unless there are cuts to Medicare and Social Security. Hiatt uses the term "entitlements" since it is less popular than the programs to which it refers.

The basic argument is that Hiatt has decided how large the deficit can be, he has decided that there can be no additional cuts to the military, and that there can be no new taxes ever. The...

Housing Wealth Effect: Robert Samuelson Never Heard of Inflation

That's what readers would probably conclude from a column headlined "Americans have record wealth but aren't spending it." The first paragraph begins:

"In the economic history of our time, June 6, 2013, ought to occupy a special place. That’s the day the Federal Reserve disclosed that the net worth of American households — the value of what they own minus what they owe — hit $70 trillion, a record that exceeded the previous peak before the 2007-09 financial crisis. Higher stock prices and a l...

Optimism Ain't What It Used to Be

The NYT ran a piece telling readers "even pessimists feel optimistic about the American economy." What is striking is the nature of the optimism reported in the article. At one point the article gives as one example of this optimism:

"Mr. Behravesh (the chief economist at IHS Global Insight) now expects the annual growth rate to rise to 2.9 percent in 2014 and 3.5 percent in 2015."

The trend rate of GDP growth is between 2.2-2.5 percent according to the Congressional Budget Office (CBO)...

The Music Industry Might Tell Us More About Inequality Than Alan Krueger Thinks It Does

Neil Irwin wrote about a presentation that Alan Krueger gave at the Rock and Roll Hall of Fame that showed how the growing inequality of revenue in the music industry was characteristic of trends in inequality in the larger economy. Irwin quotes Krueger:

"We are increasingly becoming a ‘winner-take-all economy,’ a phenomenon that the music industry has long experienced. Over recent decades, technological change, globalization and an erosion of the institutions and practices that support share...

How Do You Say "Housing Bubble" In Canadian?

Paul Krugman has a nice post on the housing bubble in Canada. Needless to say, I strongly agree. It is painful how so many people refer to this downturn as the result of a financial crisis.

I have often posed the simple question of what would be different right now if we had not had the crisis but house prices were exactly where they are today. Would firms be investing more, would people be consuming more, would we see more building in spite of near record vacancy rates? It's hard to see the...

Auctioning Off the Jobs Report and Economic Efficiency

Neil Irwin has an interesting discussion of a new practice by which some private data gathering outfits sell early access to the releases of their data at a premium. The idea is that a small number of people will have access to the new information ahead of the market.

Irwin raises several issues about this practice, but misses an important one: economic efficiency. From an economic standpoint we would like as few resources as possible to be devoted to the process of collecting and disseminati...

Europe Backs Away from Trade Deal Designed to Increase Corporate Profits and Undermine Environmental Regulation

The Washington Post shows as little regard for standards of journalistic objectivity in its coverage of trade deals as in its coverage of Social Security. Therefore it was not surprising to see this line in an article reporting on the European Union's decision to restrict areas to be covered in a new trade pact with the United States:

"The Transatlantic Trade and Investment Partnership is a centerpiece of the Obama adminstration's accelerating push on trade and international economic relation...