Texas Data: GSP

Considering my crippling writer's block seems to have resolved itself when I sit down to do actual research, I'm going to take a page from Rambler's "blind focus on research only" strategy book and start talking the Economics of Texas, quant style.

A lot has always been said and continues to be said about the state of Texas, and I find the best way to cut through the Amarillo land mines (think about it, you'll get that joke in a second) is go straight to the data. So I will present in what are most probably the most boring blog posts to anyone else a series of posts on my interpretation of the data regarding Texas.

Let's start "top down" with the "Macro" indicators and my best data friend in the whole world FRED.



Above is the year-over-year percentage change in the Real (meaning "inflation adjusted") Gross State Product of Texas. This is the growth in the size of production. Texas appears to be recovering at an "alright" clip after the recession. The picture looks rosier compared to the US Real Gross Domestic Product as a whole:



I know, apples and much larger apples, but based on GDP, Texas isn't a bad place to be. But the size of an economy's production is not a good measure of its welfare, nor its "richness". If we spread out that production over the population (y = GDP / Population), we get a better idea of the amount of the pie available to the average resident of the US or Texas. 



In terms of GDP per capita, Texas has risen above the GDP per capita of the US. In 2013 the average Texan produced (earned) around $52,000 per year, while the average US output per capita did not break $50,000.

In fact if we take the growth rates, Texas has been growing faster than the overall US economy since just before the recession:



A similar story appears when comparing Texas and New York; New York is by the far the "richer" state per capita in terms of production than Texas. Texas has been growing faster, but there is still a nearly $10,000 difference per person.





So yes, in terms of production, Texas is big, and still growing. 


Here is what is not included in these graphs that I will get to in later posts:
1) Median household income, average hourly earnings, and employment,
2) Price level indicators for a standardized basket of goods in major metropolitan areas (say Dallas vs. New York City),
3) Poverty and inequality (as measured by the Gini and Theil indices- no "1%" laziness on this blog, we use all parts of the bison in the Panhandle),

5) Demographics, education, and other "dashboard" measures (as they are available).

As I tell the students: GDP is a good place to start, but not a good place to finish. 

Edit. A data note. As some would probably point out, I use the total population of the United States to calculate real GDP per capita for the US, including minors and military. Some would debate the use of this population measure and ask that the "Civilian Noninstitutional Population"; those who are not under the age of 16, not incarcerated, and not serving in the military. Sure. You can do that with FRED. It changes the story, and GDP per capita for the US rises much higher and stays higher than Texas (around $64,000 per person) but the growth rate story (Texas growing faster) remains the same.

Do Not Automate College Yet...

Seen a few articles on how it would be better to push more people through college by automating classes and putting more classes on the web.  This is my counter argument.

The following is an assignment:
Gather the Head Count Ratio (percentage of the population who fall below the poverty line at $2/day), the population, and the poverty line ($2/day).  Use a spreadsheet to calculate the total headcount of the population falling below the poverty line, remembering that the Head Count Ratio is the Head Count divided by the Population.  Turn in a spreadsheet table that says if the Head Count has increased or decreased in your country over time and graph it.

Let me give you an example of a student let's call "Bob."  Bob gathered that in China in 2002, the Headcount Ratio is 51.2%, and the population is 1.28 billion.  Bob then calculates the head count, the total amount of the population of China who fall below $2 a day, as 65.5 billion people.  Bob turns this in. 

When I give Bob a "D" (which means 'incomprehensible work, showing minimal understanding' in my class) he comes into my office demanding to know why.  I point him toward my comments on his grade evaluation: "Check your spreadsheet formula.  Are there 65 billion people in China?"  Bob still does not understand.  I ask Bob what 20% of 100 is.  Bob responds, "20".  And how do we get that? "I don't get where this is going?  There aren't 100 people in China!" (*actual quote*)  Some one does not appear to have the faculties for abstract thought. 

I sigh with depression, and ask him if the planet has 65 billion people on it.  He does not know how to respond.  I ask him that if we want 51% of x, how do we get that? 

This goes on for ten minutes.  Ten... painful... minutes. 

Now, I have 27 students in my class.  Only 33.3% (approximately) managed to successfully apply the lessons in percentages they should have known since 7th grade.  I'm not even going to mention the idiots who multiplied the headcount ratio by the poverty line, especially when we spent an entire lecture just explaining what each of these measures are. 

When I see a majority of my class doing the work that I could not legitimately train a monkey to do, then I will support automating university.  Until then, they apparently need college to make up for their absolutely dismal middle school education. 

Argentine Sociologists Can't Use Statistics.

I've been following the Falklands/Malvinas dispute for a while now.  It's just a really great slow motion train wreck.  It's amazing that the dictator years of Argentina have such a hold on the people that they still cling to what was obviously a propaganda attempt by a fascist government to distract from the mass murder of its own people.

But its even more amazing when sociologists get into the fray and pretend to be economists.  Especially one Atilio Boron, who claims that the notion of the current government using the Falkands as a distraction from domestic problems is ridiculous, and that its the British trying to distract their population from their problems.  Because apparently:
"The UK's economy is no better than Argentina's. It was not Buenos Aires that had social unrest and riots last year, but London."

Alright lab partner, let's hold that statement up to the data for 2010 from Google Public Data.  And for the fun of it I'm comparing Argentina to Mexico as a regional Latin American comparison.

1) The per capita GNI (Atlas Method) of the UK is at about $38,000 give or take, meaning the average English person has the ability per year to purchase $38,000 worth of goods and services.  The average Argentine has about $8,500, which is $430 less than the average Mexican ($8,930).  So by the basic measure of economic purchasing power, Argentina is worse off than the UK... by a lot.

2) But maybe our good sociologist prefers to not use the paltry measures of income that an economist would.  How about life expectancy?  Argentina is about 75 years.  Not bad.  UK is at 80.  Just to point out again, Mexico is at about 76.  So the English and Mexicans are in general healthier.

Child mortality rates per 1000 live births: 4.6 babies for the UK, 12.3 for Argentina. 14.1 for Mexico.

Should I go on?  How about measures of inequality:

3) Just as a quick glance, the income share of the lowers 20% of income earners in 1999 (couldn't get Google Data past that, but I'm sure there are some more recent years... 1999 will do for my point): 6.14% for UK, meaning the lowest income earners had an okay amount of the pie, and a little over 3% for Argentina.  I'm too lazy to get the Gini right now, but I'm fairly confident in saying that the UK is most likely less unequal a society/economy than Argentina.

4) Let's bring in the UN (although avoid the apparently mandatory outbreaks of cholera associated with their involvement): the UN HDI for the UK is 0.86, and 0.80 for Argentina.  (Viva) Mexico is catching up at 0.77.  If we readjust the UN HDI for inequality (as they are now doing) for 2011, the UK drops to 0.77, Argentina drops to 0.64, and Mexico drops to 0.59. 

So the BS-o-meter is off the charts for Atilio Boron, because the economy of the UK is in every possible measure better than the economy of Argentina.  Maybe he should FGI* before he goes on record.  In fact for Latin America in general, there are several economies "doing better" than Argentina: Brazil, Chile, Mexico, Uruguay, Venezuela.  I would say that Mrs. Kirschner has plenty to distract the average Argentine from in 2012, and the fact that she's taking a page out of the "Dirty War" playbook should be unsettling to say the least. 

Again, this is pretty simple; let the people who live in the Falklands decide for themselves.  Have a referendum.  If they want to be English let them be English.  If they want to be Argentine, let them be Argentine.  But until then, grab some popcorn and enjoy the political fireworks.  

* $$$$ing Google it!

Go Back to College Economics.

Are you freakin' kidding me, Blogobamavich?  

See if you can follow this labor market example.  Aggregate demand drops like a fat baby, and companies stop hiring.  Workers then use their savings (and loan ability) to go back to school to retrain.  College is seen as the place to do that.  Demand for the few spots available on college campuses go up.

Now here's the part our Harvard-grad Preside does not get: as demand increases price increases.  Is that too hard of a concept for a constitutional law professor who says he's all for civil liberties and closing Guantanamo, and then renews the Patriot Act and signs off on a document that allows the military to hold people suspected of terrorist activity/connections indefinetly?  Probably so, since he doesn't even understand constitutional law.

But I digress, back to economics.  Demand rises, and price goes up.  Now, university is subsidized by the state and federal government.  That keeps some of the price pressure down, as universities are able to provide more spaces, more teachers, etc.  Think of that as a shift out in supply.

So you are suggesting that we respond to an increase in demand with a decrease in supply, and that will LOWER prices?  Hint: a decrease in supply will lead to an increase in price on the market.  Do I need to show you the magical X that I show all of my students?  After five minutes even the F students get it. 

Or is this another one of those Chicago political moves?  You've got this valuable ****ing thing, and you're not going to give it up for free?

The Brandeis Ratio is a Faulty Measure.

It's Christmas. Can't sleep. Clown will eat me.

Inequality has been on the minds of many economists, and some are proposing "fancy" or "simple" new ways of measuring it. What a lot of them seem to forget are the yardsticks by which a good inequality measure is determined. There are four principles to adhere to, and these are all outlined in chapter 6 of Debraj Ray's "Development Economics" (Princeton, 1998). Unfortunately I don't see these principles adhered to enough these days, or even mentioned really.

A good inequality measure must satisfy these four principles (translated to English):
1) who owns the wealth does not matter, or the only pertinent attribute of inequality is the amount of income, ("the anonymity principle"),
2) how many people participate in the economy does not matter, so that countries, regions, or sections of varying sizes can be compared ("the population principle")- otherwise you could never compare say New York to Oklahoma or China to Lesotho,
3) make the comparison on relative income shares and not absolute levels of income (the "relative income principle"), and most importantly
4) when you make the poor worse off to benefit the not poor, inequality should increase ("the regressive transfers principle" or "the Dalton Principle").

This is a minimum standard. I encourage my students to add on from there as they please. But let's stick to the minimum.

It's very easy to get 1 to 3. The regressive transfer principle is more tricky. As a side, a regressive transfer is simply "taking from some one who is not rich and giving to some one who is not poor". Think of it as a reverse-Robin Hood.

Which brings us to the "Brandeis Ratio" from Ayres and Edlin. Assume an economy of 10 people with a wealth distribution of ($5, $6, $10);(5, 4, 1). That is five people earn $5, four people earn $6, and one guy gets $10. The total wealth of the economy is $21, and the number of people is 10. The Brandeis Ratio is ($10)/($5.5) as $5.5 is the median of the wealth distribution, and we're going to cheat and use the richest 10% as opposed to 1% since there are only ten people. So that's what? The richest in this economy is 1.8 times richer than the median household. Okay, sounds good.

If we allow a regressive transfer of one dollar from a man who makes $5 and give it to a man who makes $6, the new distribution is ($4, $5, $7, $10);(1, 4, 5, 1). The median is unchanged at 5.5. That means the Brandeis Ratio is unchanged despite what many people would see as an increase in inequality in that ten person economy.

The Brandeis Ratio fails the regressive transfer principle, something that the already extensively used Gini Coefficient does not. Actually, the Brandeis Ratio is just a fancy Kuznets Ratio, which is even more simple for calculation and still maintains the lethal failing of regressive transfers. I do not understand why we should adopt a new tax policy based on bad statistics.

I suppose the argument then is that the Brandeis Ratio only deals with the extreme case of the very rich, and I'm nit-picking about regressive transfers. In that case why not just use a Kuznets ratio and go with the share of the top 1% divided by the share of the bottom 40%?

The next might be the usefulness of measuring inequality in "medians". I'm still not sure what the difference is between measuring something wrong in medians and measuring something wrong in income shares?

Addendum:
Ian Ayres provides an account of why Brandeis instead of Gini here. It is in my opinion extremely interesting and well rationalized, but I still think the regressive transfer flaw is a weakness and not a strength.

Another Addendum:
Some questions on Ayres' reasoning.
1) The Gini, as I know it anyway, only looks at an income or wealth distribution. Unemployment and illegal immigration do not enter into it (see principle 1 above). It's a set of numbers, ordered from least to greatest. The entrance or exit of a household within the distribution by unemployment or (il)legal migration isn't really the issue. The numbers are the issue. I'm not sure where he's going with the Gini rationalization on unemployment and illegal immigration. It seems to be a stretch from the more basic Gini explanation.
2) I don't think "simplicity" equates to "transparency". The Brandeis is not "transparent" in that it ignores any transfers below the median. It is however simple enough for some one reading a newspaper article, but so are a lot of things. That does not mean those things are correct. I think a BA is sufficient to grasp a Lorenz Curve or a Gini Coefficient, and even if it wasn't why should we base policy on a statistic that is less correct?
3) I don't see the democracy reasoning either. The Brandeis Ratio is not a direct linkage to the top 1%'s ability to influence policy any more than the Gini is. The 1% disproportionately fund political campaigns. Okay, yes. But these plutocrats are measured in the Gini or Theil index as well. I don't see the advantage of using Brandeis over Gini.
4) The argument is the same for income, wealth, or assets.

If policy is going to be proposed based on statistics, let's make sure these are the best available. Not just the simplest.

Foundation and Facism.

Sat down this Thanksgiving break and did what I'd been thinking of doing for a while: read the entire original Foundation trilogy. Was easier than I thought, and the writing was enjoyable. I wanted to do this due to some relatively recent endorsements in the speeches and articles by Paul Krugman and how it relates to economics. So I sat down to read the novels with an economist's approach and came away confused, disappointed, and a little shocked. In no way do I mean to disparage the writing of Asimov, I get that it really is just a sci-fi version of "The Decline and Fall of the Roman Empire", but I would have thought he'd use a bit more forward thinking for his future galaxy.

Problem 1: The Galactic Empire. Unless I missed it, there is no real semblance of democracy. Asimov's gigantic Empire is best described as either a Facist or Oligarchic society. The emperor has total control over the life and death of his people. Then the great danger is the fall of a totalitarian government that oppresses billions and billions of people for the purpose of propping up a planet that Asimov describes as being totally devoted to the bureaucracy of a ruling political class? And the entire mathematical study of pyscho history is invented to replace this empire after its fallen? Not improve it? Not ensure that no one else is ever disappeared again or murdered on the whims of the politically powerful? Hari Seldon wants to return and recreate the all powerful totalitarian state? Again, I get that this is Rome in space, but the future of Earth after the Romans fell on average has been a big win. The fall of a comparable empire (the British) was followed by the largest increase in per capita income, health, and educational outcomes that history has ever seen. Wouldn't the idea be to avoid a second galactic empire for a better system? Or is the point that we can do no better? I am honestly in the dark here, if some one with a better understanding of the novel can help me out.

Problem 2: Totalitarianism through mind control. The Second Foundation, which is apparently the new governing body leading to this second empire controls events through emotional and mental manipulation. They are hidden in some kind of academic society, and commit themselves apparently to this rebirth of the old totalitarian state for the sake of stability. This is a good thing? An oligarchy with mind control? And all their motivations and desires are purely for the good of humanity and the completion of this Seldon plan for a second empire? They have no problem manipulating the villain (the one who is supposed to be the bad guy) into wiping out an entire planet just to stay hidden, and then leave some of their own to a lynch mob to convince everyone else they do not exist anymore. And why? Because knowledge of their existence throws some wrench into the plan? What the hell? These guys make Alan Moore's Ozymandias look like a rank amateur, because all he did was murder everyone living in New York City to avoid the nuclear war that he thought was coming (and I'm beginning to wonder if that outcome was as certain in Alan Moore's "Watchmen"). But even Moore gave you an idea of the sickness of this. He introduced you to the characters of the news paper stand owner, the boy reading the comics, the psychiatrist who tried so hard to save people one at a time (at the time of Ozymandias' massacre, he was trying to stop a street fight). He made the reader connect to them just before the "Grand Plan of Salvation" was put into place in all its terror. Asimov makes no attempt to introduce the people who are being slaughtered on a chapter by chapter basis all in the name of some vague greater good of re-founding a totalitarian state.

Unless this is actually Asimov's point and I've some how really missed the mark, the Foundation comes out more the villain as it subjugates and conquers the surrounding planetary system, leaving them open to rule by yet another distant and centralized government which does not truly represent them but rather rules them. And all for the sake of stability? The idea of survival of mankind? I'm lost, I admit it. Is the point that the Foundation is good or bad? Or is it just as it is? And was 30,000 years of instability with multiple self-ruled planets really not preferable to 1000 years of rule by a minority, chosen based only on their ability to perform abstract mathematical equations in an academic setting?

There are some economics arguments... but these two are the most unsettling for me. What confuses me more is how most people I talk to refer to Heinlein as a facist for his "Starship Troopers" novel based on a society that requires military service before citizens can vote (and not based on Nazi Germany, but on good ol' Switzerland) . But is anyone criticizing Asimov for portraying as progressive a totalitarian state run by manipulative and authoritarian academics as being facist? "Benevolent" dictatorship is still dictatorship. Power corrupts, and absolute power corrupts absolutely.

As a note: not saying the Heinlein arguments are wrong, but if we're going to talk totalitarianism, the guy who wrote "The Moon is a Harsh Mistress" seems to have a one up on the guy who wrote Foundation. Just saying.

About Time.

The Free Trade deals that the Obama administration has been holding up since getting into office were finally passed.

Seriously this could have been done as soon as he was elected. It would not have pulled us out of the recession but it would not have hurt. The deal goes along with some sort of "re-training and financial aid" program for those who might lose jobs as a result. I'm still uncertain exactly how they determine that, but all three deals will be a net gain for the macroeconomy and a gain for three countries (Colombia, Panama, and South Korea) who we should have been dropping trade barriers with a long time ago.

"Free" (or at least more liberal- as in "more free") trade deals improve growth in economies that sorely need it. Growth is correlated with health, education, and welfare outcomes. Better health, education, and welfare outcomes lead to less tension, and less violence. That's Nobel Peace Prize material, Blagobamavich. So at the cost of improving lives, you held on to that "valuable f***ing thing" for three years. What'd Blagobamavich get in return? I guess his general weakness as a president in the face of opposition has advantages.

My Career Could Be in Their Hands.

Putting together my teaching portfolio and getting ready for the job-market. My evaluations are generally good, but then I really do wonder about the reliability of these scores.

If we look on RateMyProfessor, after all, we find that a professor who has recently been arrested on charges of dealing methamphetamine and heading a well-armed motorcycle gang did gangbusters.

Perhaps universities should not be relying on student evaluation of professors. Or perhaps I've been approaching teaching from the wrong angle... going to put "Breaking Bad" on my Netflix as soon as possible.

Lawyer Up, part deux

I'm a big fan of Planet Money, and their series on "Toxie the Toxic Asset" might be taking a George Romero turn: it could be back from the dead.

If you haven't heard the series, you're missing out. Take some time to listen to it.

My heart does a quick little jig every time I hear about the banks involved with the crash getting sued. I've held some pretty waffling outlooks on the whole crash. I do understand and agree with the rescue of the banks by the Fed (secret loans) and the Treasury (TARP). Things could have been a lot worse if the financial system was allowed to crash. But I also, deep down, wanted to see BoA, Goldman, Citi, Chase, and the whole lot of them face the music. They made bad investments. They should go down, just like Lehman. I balked at the bail-out of GM and Chrysler after all, and rightly viewed it as government rewarding poor performance from bad companies, and punishing good performance from others (no help for Tesla? really?). How are they different from the banks? Well the banks had the economy hostage. Liquidity freeze is a serious issue, and it can lead to worse outcomes than 9% unemployment.

But there seemed to be no punishment for banks behaving badly. In fact BoA and Citi have been getting away with fraud and attempting to foreclose on homes that didn't even have mortgages, until some good people hired lawyers and proceeded to sue the hell out of them. Its important to remember that these banks are FRAUDS. And our current "Hope and Change" president is trying to pressure a settlement with these banks which would bar future litigation. The president apparently wants to negotiate with the banks for a general settlement in return for letting them get away with rampant fraud. This has worked out so well for him in the past, because our Nobel Prize Winning law professor has no balls when it comes to negotiations. No back-bone, no huevos, no intestinal fortitude, NO COURAGE. The man can't even get through a trivial schedule change without looking like an imbecile.

We did not have the chance, when the economy was crashing to punish these banks. So why not take the another route and sue them. The government won't regulate or punish them in any meaningful way, because they are corrupt and cowardly. Time for us to love the lawyers. Time for us to love every manipulative, scheming, greedy stereotype lawyer that we can find, because when I open up the paper they seem to be the last people with any decency left.

And as a fun one, let's review the accomplishments of our president that are worthy of his Nobel Peace Prize, something he shares with other greats like Yassir Arafat and Henry Kissinger:
1) kept Guantanamo Bay open, despite promising to close it "within a year" of his election,
2) signed an extension of the Patriot Act, allowing for the continuance of violation of privacy of his own citizens under the guise of "security,"
3) signed into law a mandate that all Americans purchase insurance, without providing an affordable public alternative (imagine requiring everyone to go to school, but then not providing public schools and how that might affect one's budget),
4) delayed free trade agreements (how is that "strengthening international diplomacy"?)

and now (5), he is attempting to interfere with people's right to sue through our legal system large organizations who have defrauded and harassed them. We're past the crash, and we're into stagnation. A little (or even a lot ) of litigation isn't going to be the end of the world; in fact it might give some of the medium and small size banks, who have been competitively disadvantaged by the government's and Federal Reserve's favoritism to the large banks, get a leg up and compete with the big boys.

Love your lawyer, sue the banks.

Dollar dollar bill y'all.

Lagarde is cashing in. In fact she is earning a bit more than Strauss Kahn did. $83,000 a year to maintain "a scale of living appropriate to your position as Managing Director and to the Fund's need for representation."

But they insist that she "observe the highest standards of ethical conduct, consistent with the values of integrity, impartiality and discretion." You know, like how Strauss Kahn did.

Again, I am repeating my prediction that Hillary Clinton will be head of the World Bank when that musical chair comes up.

Olly Olly Oxen Free, Evo Morales.

Well its official: grand theft auto is now legal in Bolivia (so long as its stolen from somewhere else).

Question though. The smuggled vehicles are sold on the cheap in the black market because they are illegal and the sellers need to avoid certain laws and enforcement officials. If a seller can now instead "legalize" the stolen car once it is in Bolivia, can't he raise the price now, pay any marginal tax, and avoid the risky cost of being caught and put in jail by Bolivian authorities? Would the legalization not raise the price of cars for the poor, hurting the very people Evito says "have a right" to own them?

And for you car smugglers, hear me out: you no longer have to fear consequences from the local police, so long as you stole your car in another country. The poor you've been selling to have had the implicit threat of ratting you out (or possibly being a police informant). Seriously, raise the price of your merchandise. Evito has done the cost minimization for you.

How would you deal with that situation though? "Officer, I swear, this car was stolen in Chile." How do you prove something like that? VIN number and maybe papers in the glove box?

Update: Follow up question, since Evito is okay with larceny do the Bolivian people expect to have much a treasury left when he leaves office? Some one might want to double check the books.

Rational Thought Update: The italics section actually is wrong. Evito has a point, and I'm backwards. Let's go back to ECON 101. If there are 100,000 "new" cars on the legal secondary market, that pushes out the supply curve, putting a downward pressure on price. So prices in the legal secondary market do indeed GO DOWN, benefiting consumers. Here I think is my confusion: would the price of the legal secondary market be higher or lower than the illegal secondary market initially? I'm assuming it was lower since there were 70 to 100 thousand cars that magically appeared for registration. The legal secondary market price could be pushed lower than the illegal one, and that would be a benefit. If it isn't, than consumers would continue to participate in the illegal one, as the price is relatively lower.

Hm...

Farm Subsidies Are Not Good.

Our legislature has just voted on continuing subsidies that benefit large companies (who must pay very well during Iowa primaries), while "trimming the fat" of food aid. Oh, they've also made it harder for small farms to compete.

I would feel sorry for small farmers if I did not believe that they do not statistically exist anymore in the US (any numbers on how big "small farms" are relative to ADM? Anyone?).

We've cut payments to Brazil which were the result of their (very reasonable) protest against our farm subsidies and tariffs. Okay... so what? Have we lowered the tariffs against Brazilian goods yet? Nope, and now we're back in violation of the agreement made with the WTO.

Just to recap: in the great Congressional debate on deficit and debt reduction, our Congressmen and Senators have cut aid to women and children (food stamps!!!) by $868 million, but kept the subsidies for large farm companies ($20 billion from some estimates), and added to the headaches of that small population of "small farmers" who are actually small farmers.

Do not buy the lies. Farm subsidies do not "help" the good old, F150 driving, aw-shucks, all-American farmers. They help the guys that Matt Damon ratted out in this movie. WIC on the other hand helps feed young children, which is proven to improve educational outcomes in pre-school and kindergarten, which is shown to have a very large and significant correlation with future wage outcomes (the ability of kiddos to grow up and NOT have to use programs like WIC).

Stan is still the Man.

Disqualified for being too old. I must admit, I fully expected the IMF to go ahead and consider his candidacy after a review and a vote. I like Dr. Fischer for the job, but "thems the rules" and it was the call of the board and they made it (right or wrong).

I do see this as a signal though that certain governments have already decided how this is going to go. Lagarde will be head of the IMF, and the Euro zone can continue to use it as their piggy bank for as long as their currency is in crisis. An American will become the president of the World Bank (90% certain it will be Clinton- I smell a deal, and let's face the facts that Blagobamavich is just another corrupt Chicago deal maker), and the US will continue to treat the World Bank in much the same way USAID is a "development" institution.

I am curious what Dr. Carstens is doing. The man describes his position as having to try to win a soccer match when your opponent has 5 and you have 0. That does not sound like a man who expects to win this fight. Is this a maneuver for more power and influence in the board? Is he vying for some kind of popularity at home? Or is he really ready to smash face first into this windmill on principle alone?

Parting though: why do people waste time on 9/11 or Area 51 conspiracy theories, when one is unfolding right in front of us and has unsettling and long term implications for the world economy? Ask yourself this one question, think about it, then Google it: Where does the IMF funding come from? Now think about where the IMF funding goes.

Dang it Stan...

Oh, Stan, Stan, Stan. By which I mean, "With all due respect Professor Fischer (have I said recently how much I liked your book?)..."

As stated in a previous post, I am all for Stanley Fischer as the new head of the IMF. There is no "but" there. There is however, a "however".

HOWEVER, I'm worried about the timing and the admission of "indecision" on his part. Lagarde and her competitor (my respect again to Carstens for chasing this windmill) have been making foreign visits already. The Europeans have thrown their hat in, and some one is dangling the World Bank post in front of Obama/Clinton "a la Blagojevich" ("I've got this valuable thing here...").

Things have certainly gotten more interesting, and my vote is for the qualified economist over the French spray-tan lawyer, but I've been feeling pessimistic these days. I really do not think there is anyone more qualified now in the running than Stanley Fischer. But I think he has lost valuable time sitting on his decision, when he should have been convincing heads of state that he's their man.

Hillary is Lagarde's Ticket In.

If the US officially declares support for Lagarde in the next week or two, then I am willing to bet Hillary will be the 2012 President of the World Bank.

The agreement of the US/EU World Bank/IMF leadership stands.

My sympathies to Dr. Carstens, and my admiration for his quixotic leap into the fray. You see, I've learned something today. It doesn't matter where you come from, or your pedigree, or ethnicity, or the powerful friends you may or may not have; if you just work hard, are intelligent, and persevere you too will be rewarded with world recognition of just how productive and qualified you.... oh wait... no that's not it at all.

As Kyle says: "You haven't learned anything, Cartman! Not a ******* thing!!!"

And as Rod Blagojevich, Governor of the home state of our current President says: "[if you have] a ***** valuable thing you just don't give it away for nothing."

Nice...

People foreclosing on banks should happen more often.

Ur Doing it Wrong!

Let me distract you for a minute from the depressing circus that is the nomination process for the head of the IMF with the nomination process for the Fed Board.

The Nobel Prize Winning Economist Peter Diamond, has been continually denied by the Senate an appointment by President Obama to the Fed Board (thank you, Richard Shelby, you are a moron). After a year of this mess he has withdrawn from the proceedings, and published his views in an New York Times op-ed.

This is depressing, and he has a point... a very depressing point.

You Really Should Be Paying Attention To This.

"The French want to sway decision-making at the I.M.F. in order to use money from the United States, Japan and poorer countries to conceal from their own electorate that the euro-zone structure has led all its members into fiscal jeopardy: some borrowed heavily; others let their banks lend irresponsibly and thus created a large contingent liability.

The best way to hide the true cost is to have other people’s taxpayers foot the bill, preferably with the least possible transparency. Thus, euro-zone politicians have a lot at stake, and look for Ms. Lagarde to run the I.M.F."

Simon Johnson Economix Blog.

Lies, Damn Lies, and Spitzer.

I just can't let this go.

Once again, CNN in its infinite wisdom and responsibility for good use of statistics has given a show to Eliot (I'm-Not-Going-To-Make-A-Reference-Here-To-A-Number-That-Is-Greater-Than-8-But-Less-Than-10) Spitzer, who has used this time to make a general idiot of himself.

Last time I posted his mis-use of data from the New York Times regarding the total electricity use of China, and then coyly hints at a doomsday scenario for US firms. Alright, Ellie, here a few more numbers.

I took ten minutes today to play with Google Public Data. They post World Bank Development indicators, which are free and easily available up to 2008. I would like to draw attention to this graph.

The graph is kilowatt hours used per capita (that's per person if you didn't get it already) for the following countries: The US, China, Chile, Mexico, Egypt, Japan, Brazil, India, and Russia. Granted, this is 2008, but I'm assuming electric consumption in China per capita has not sky-rocketed 3,319 kwh per person to above 13,654 kwh per person in the past three years. Do I doubt the NYT's numbers for total electric use? No. But that's looking at a country of a billion people as a single entity. The average or per person electricity use in China is still much, much lower than the US. US companies need not fear the purchasing power of the Chinese competing with your typical American.

But let's consider another point, which I will make again. So the hell what if Chinese electric consumption is growing? This is a sign of growing income, better health, and better life. China is not a perfect country (no where near it regarding civil liberties), but it is good that the average Chinese person is on the whole less poor than their parents were. Take a new look, again using Google Public data at Gross National Income per capita for these same countries. The average Chinese person in 2008 earned about $1000 more than the average Egyptian, and $4000 less than the average Brazilian. Everyone makes a big deal about GNI/GDP surpassing Japan, and China now being the second largest economy in the world. Note that the GNI per capita of Japan is a cool $33,000. The average Japanese person makes $33,000 a year, while the average Chinese person makes (almost) $7000. Almost.

So there are two points I want to make:
1) Spitzer is measuring these things incorrectly, and then making stupid predictions about it in a shallow attempt to take advantage of US fear of China (and sadly it probably worked), and
2) Growth is not a whip-it-out contest. When you see these numbers, do not think of this in terms of a country now has greater wealth, and this is all a big competition to the top. Look at the average terms, and think of it in this way: the average Chinese person is richer than he was, meaning he can get medical care, education, food, and some of the things that citizens of Western and Latin American countries have enjoyed for decades now (note the growth of per capita GDP of Mexico and Brazil vs. China in the last graph). Growth is good, because Growth means life is improving. It would be nice if political and civil liberties came with economic power (the jury is still out), but I think dropping infant mortality rates around the world, increased primary school graduation rates, and better health outcomes are a really good start.

Again, Mr. Spitzer, have you no shame or intellect?

... and I made it through this whole post without using the words "Client" or "nine". ... oh... dadgummit.

Same as the Old Boss.

I've never been this bored before.

OMGLOL, it's a lady! That'll help the IMF's rape-ish reputation (assuming that the IMF operates under the Polanski definition of "consensual"). There is no way that she's involved in any kind of shenanigans that could embarass the IMF cause she's got the whole lady thing down! Plus she's French, so they'll be getting a second chance... or... seventh... but who's counting?

Simon Johnson has had some interesting (and more mature) pieces and interviews published here, here, and here (this last link being a much better explanation of the IMF than I provided before).

IMF-related boredom/face-palming:
Eliot Spitzer says something stupid. He uses Chinese consumption of electricity to make conclusions about the growth of China's economy, and how it will apparently soon surpass the US. He cites an IMF report of the Chinese economy surpassing the US in 2016. Oh for Confucius' sake...

I have not seen this IMF report (he fails to cite or link it), but I'm going to bet its one of the usual GDP measures. Now I'm going to tell you all something that every single student I've had knows that Eliot Spitzer apparently does not:

GROWTH

IS

GOOD

!

See if you can keep up Eliot. First of all, the proper measurement for making these kinds of ridiculous judgements is not consumption of electricity at the country level, which while a nice instrument, is not informative enough. You see, Ellie, economists have been using Gross Domestic Product since Buddha-knows-when to approximate the "size" of the economy. Picture a big woman with a big purse... wait... no, let's not do that so you don't try to pay her for... moving on. Let's just picture a big man with a big wallet. The GDP is the size of this man's wallet; we assume he "spends all he receives" in income, so his total expenditure is his total income (his wallet). Still with me, lab partner?

Our big man is not a good approximation of welfare or economic ability of the citizens, just potential economic power, if some one liquidated the entire economy and put it into currency. It could be that one Chinese dudette holds the entire GDP in her hands, while the rest of them starve. But let's put inequality on hold. Let's just think about population.

A more proper measure of economic size is to look at the "spending power" of some representative (average) individual in that economy. Divide GDP by population. The number has changed! In fact the rankings have changed! Let me give you an idea, the GDP per capita of the United States in 2010 was $45,989 (FGI, Eliot). The GDP per capita of China was $3,744.

Let me make it more simple:
$45,989 > $3,744

That means that forty-frikkin-five thousand dollars per person is strictly greater than three thousand seven hundred per person. So, Eliot, retake economics. Or just listen to John Oliver, a comedian who seems to have a better grasp on things than you do:

"Any nations economic strength is solely in the hands of its citizens' ability to consume... That is why America is the greatest economy on Earth! You people can't be beaten! ... I was in a mall in Connecticut and a saw an item in a shop window that stopped me dead in my tracks. ... It was an inflatable bar-be-que! ... It was a full functioning bar-be-que so that you... could cook while swimming! Is there any greater example of what it is to live in the freest nation on Earth than that?! ... Will China emerge as an economic force and take over the planet? Could China make an inflatable bbq? Yeah? ... Could China sell an inflatable bbq? Could the people of China for themselves purchase inflatable bbqs? There is no f***ing way!" ... If you are still unconvinced allow me to introduce you to exhibit B, the Oreo pizza!"

You may be equal parts horrified and amused by this (and there are a few comments I'm leaving out), it is true. That is the point of Development Economics; that there exists this gaping inequality around the world. China is still a developing nation, and the amount of poverty, oppression, and misery in that country is still unthinkably high, no matter how much electricity is being used.

And lastly, Mr. Spitzer, growth of income, growth of GDP is not a contest. While pundits like you are playing economic whip-it-out contests on cable news networks to the delight of "journalists" and news junkies who spend and make millions of dollars on this kind of crap, villages in China are going without adequate sanitation, medical care, food provision, and utility provision. Have you no shame? Have you no decency? The increase in per capita GDP of any country should be celebrated as those who were poorer are now relatively richer! That electricity consumption increase could be the purchase and use of washing machines, freeing up time for mothers to teach and care for their children. Yet you treat it as a threat to American companies? AMERICAN COMPANIES!?!?!?

To all of you self-serving, incompetent, and insecure politicians and pundits, I propose you shut up about this ridiculous "China surpassing America" conspiracy BS. What you are saying, in fact, is that we as a nation should do our best to keep other countries poor, so that we are still "#1". The point, as horrible as it may sound to those who decry materialism and decadent spending, is so that the Chinese CAN buy inflatable bar-be-ques, if they so decide.

That is why we measure income growth, not some childish ranking.