Tyler Cowen's Blog, page 563

The new fiscal treaty?

It seems the Irish are spilling the beans on the phoniness of the promised "austerity" provisions:

However, a new draft leaves it open to the Government to enshrine a "golden rule" on debt and deficits in secondary legislation.

As I've stated numerous times, the real summit action was the ECB three-year loan program to the banks, not the cheap talk about binding austerity.

Philip Coggan's *Paper Promises*

He writes for The Economist and the subtitle is Debt, Money, and The New World Order.  It is a very good and sensible introduction to the history of the recent economic crisis, with an emphasis on debt and also historical perspective.  It is due out February 7, recommended.

Philip Coogan's *Paper Promises*

He writes for The Economist and the subtitle is Debt, Money, and The New World Order.  It is a very good and sensible introduction to the history of the recent economic crisis, with an emphasis on debt and also historical perspective.  It is due out February 7, recommended.

Steve Murdock is not looking for a handout

Steve is doing some jobs, but it could not be said that he has a job in the traditional sense:

During the previous month, he had taken to picking up cans and scrap metal along the road. It made him feel like a bum, he said, but he had managed to fill seven bags with aluminum cans and other recyclables. Now he loaded them into a friend's pickup truck and drove a few miles south, toward Myrtle Beach. They pulled up to a warehouse where the owner purchased scrap metal. Murdock grabbed his bags and set them onto an industrial scale, stale beer spilling onto his hands and his jeans.

"Twenty-seven pounds at 35 cents per pound," an employee said. He punched the numbers into a calculator, rounded up and handed Murdock $9.50.

It is difficult for me to see how Murdock's predicament — is it a typical one? — is well-described by the theory of nominal wage rigidity. I don't mean to bait Scott Sumner, but I will again mention the difference between "nominal aggregate demand" and "real aggregate demand."  If society were much more prosperous and people had higher real wealth-backed demands to buy a lot more products, Murdock probably could get a traditional job of the kind he is seeking.  In this sense you can attribute Murdock's joblessness to a shortfall in aggregate demand.  That said, it is not clear why juicing up nominal variables should do very much for him.  His wage and workplace condition demands are already quite flexible, as he is willing to settle for what he can get.  Is money illusion his problem?  It seems there is no need to trick him, using monetary policy, into a lower real wage.

The article is here.

Assorted links

1. David Frum is right about the pipeline.

2. The 1% and economics majors.

3. Good Julian Sanchez post on SOPA.

4. Stuff New Yorkers say, short fun video, hat tip Yana, who says it is really yuppies who moved to New York, not New Yorkers.  Here is stuff no one says.

5. Scott Winship on economic doom; an overview of many of his points.

ADA to Dental Practioniers: You Can't Handle the Tooth!

From an article at Governing.com:

…dental care is hard to come by in underserved areas of the country. Try finding a dentist in the remotest rural or deepest urban pockets of the land, and for blatantly economic reasons, they just aren't there. That's why states are looking to fix the problem by creating a so-called mid-level dental provider. Much like a nurse practitioner (NP) or physician assistant (PA) is to a doctor, this provider would be educated and licensed to perform basic dental services — routine checkups, cleanings, filling cavities and extracting teeth — under the supervision of a fully trained dentist.

…Yet in much the same way that the American Medical Association fought against the creation of NPs and PAs, the American Dental Association (ADA) and its state chapters are lobbying hard to thwart state legislatures as they work to create this new level of dental care providers, who are common and well liked in other parts of the world.

…"Publicly their main objection is safety issues," Oswald says. "They tried to discredit the model, saying the therapists were not trained to the same level as dentists. In reality, all the research around the world shows that [mid-level providers] provide as good, if not better, care. Every time they stated safety as a factor, we asked for research, which they didn't have."

By the way, states with tougher licensing of dentists do not have better dentistry, but they do have higher prices. Almost thirty percent of the US workforce is now required to hold a license including shampoo specialists.

Hat tip: Carpe Diem

Very important sentences

Had health care costs tracked the rise in the Consumer Price Index, rather than outpacing it, an average American family would have had an additional $450 per month—more than $5,000 per year—to spend on other priorities.

That covers 1999-2009, and is from Rand Research, via Timothy Taylor.

Afghan markets in everything

From their tiny cubbyhole offices, an army of typists can run up everything from marriage certificates to CVs and job application letters. Also available, for several hundred dollars more: Taliban death threats, the special chits also known as "night letters" that can be a passport to a new life in the west.

"We can write whatever you need; it depends," said one young clerk. "For example, we will mention you work in a government department, your job title and salary. It will say, 'If you don't leave your job by this date, we will come and kill you or put a bomb in your house'.

And this:

"Australia gives citizenship if you have a good story," he said. "I am 100% sure that after spending six months in a [processing centre] in Australia you will get citizenship if you do not lose your temper and have warning documents from the Taliban saying you can't live in Kabul."

He also trains his clients to stick to their story: "They will know you are lying, but as long as you say the same thing whatever they ask you, you will be fine."

The story is here, interesting throughout, and for the pointer I thank Bruce Douglas.

This is bad news for we the people

The origin of multicellular life, one of the most important developments in Earth's history, could have occurred with surprising speed, US researchers have shown. In the lab, a single-celled yeast (Saccharomyces cerevisiae) took less than 60 days to evolve into many-celled clusters that behaved as individuals. The clusters even developed a primitive division of labour, with some cells dying so that others could grow and reproduce.

It suggests that "the filter" lies ahead of us rather than behind us.  The difficulties of producing multi-cellular organisms have been one of the main responses to the Fermi Paradox ("where are they?").  If it's not so hard after all, there must be some other obstacle to lots of self-reproducing von Neumann probes.

The link is here.  Speaking of bad news, here is a bad news argument about Chinese real estate.

I expect your comments on this post will be awful, try to prove me wrong

Karl Smith asks:

I am specifically going to ask Yglesias, Drum, Cowen, Ozimek and Barro (Josh) to chime in on this. Anyone else feel free as well, but I would like to hear from these guys.

I don't care if Mitt Romney pays negative taxes, cheated on his mistress with her daughter, fired his Grandmother while at Bain, and lied to kids to get the GOP nomination, etc.

What are the significant differences that you think we could actually see come to pass from a Romney Presidency versus an Obama Presidency?

I am generally a better-the-devil-you-know kind of guy, but I am pretty open here. So, let me here it.

Kevin Drum offers a specific answer.  I have not invested much energy in following Romney or the other Republican candidates, so this is a rough, impressionistic response.  Here are a few points:

1. I expect Romney to claim he has repealed ACA, but in fact he will change five aspects of the law and cement the rest of it in place, albeit in a less progressive manner and with lower Medicaid expenditures.   (Outright repeal actually would not be easy, not to mention filibuster issues.)  He knows he doesn't have any other "right-wing health care plan" in his back pocket, won't be willing to restore the status quo ex ante, and he will be willing to take the "Tea Party knock on the chin" very early on in his term, hoping to repair the fence later.  Ultimately letting the issue fester doesn't help him, and he is smart enough to realize that.

2. The Republican Party will split very quickly.  For instance, will AEI support or oppose Romney in an early action like this?  I don't know, but I see massive carnage.  Democrats may end up happier than they expect.

3. Romney will use conservative judge nominations, corporate tax cuts, Dodd-Frank repeal (does anyone understand it anyway?), and estate tax repeal to try to keep the base in line.  Democrats may end up less happy than they expect.

4. Medicare won't be touched, not fundamentally.  There is some chance that a "twenty years from now" plan is passed (remember Waxman-Markey?), yet without any secure mechanism for commitment to make the actual cuts.

5. I worry if Obama wins on a platform of envy and anti-rich sentiment; such ideas rarely translate well into policy.  If Obama loses, future Democrats will continue the cash goodies they deliver to constituents but fold on a lot of regulatory issues (don't want to appear "anti-business"), and they will pay greater lip service to Deficit Commission recommendations and the like, while insisting that the governing Republicans take the heat for an actual budget deal.  It is a much better outcome if Obama is re-elected from a promise to govern as a moderate and a fiscal conservative.  So far I don't see that as the Democratic strategy, so I am more worried about an Obama re-election than I used to be.

As noted, those are very rough predictions and I don't have much faith in them, but they are my best guesses.

What else can Karl Smith get me to do?