The Economics of Kerry's Words

The Post today runs a column by Uwe Reinhardt (prof at Princeton) pointing out that, whatever Kerry meant to say (and I believe his explanation of intent), some economists like Slate's Steven Landsberg would concur with what he actually said: that young people with good economic prospects through education avoid the military, those with poor prospects go into the military. It makes economic sense in a free market economy with a volunteer army.

So why the outrage? Maybe buried beneath the rhetoric and the political spinning is the feeling that it shouldn't be this way, that equality in a democracy means the burden of defending the nation should be allocated, not on economics, but on citizenship. I'd refer back to Cass Sunstein's "The Cost of Liberty" which made this argument. He said (as I remember) that a good polity needed the allegiance of all, therefore it needed to be fair and to seem fair in allocation of burdens like taxes and military service.

Noticing Change (re: Immigration)

While catching up on my newspaper reading I saw a piece saying that 1/3 of the population of Montgomery and Fairfax counties live in households where the first language is not English.

It's strange how "gradual" change comes not to be noticed. You have to get outside the frame to identify it. I spent the last week in Tompkins county, NY (Ithaca). What was very noticeable were the people who were maids in hotels, workers on construction, etc. They were almost all white (and presumably native-born Protestants). It seemed strange and not in the "natural order", as I've become used to Fairfax county where those jobs are filled by immigrants, especially Hispanics. It's a reminder that while the material culture of the country has become more uniform (witness the same chains of stores and hotels everywhere, the same cable TV channels), the people culture is not.

Reading Newspapers

First an apology--I'd intended to post a warning that I was on vacation beginning Oct. 20 so blogging was out. But I had a senior moment and posted it to a private blog instead. Sorry.

On coming home after 2 weeks I find a stack of WPosts and NYTimes, which I feel bound to read or skim, at least, before recycling. I don't know why--it's an ingrained habit since I was a child. Things like the A-bomb, H-bomb, Korean war, etc. were first reported in the paper.

I saw a report that newpaper circulation is down significantly during the last reporting period--a significant downtick from the previous slow erosion of readership. Seems to me there may be correlation between the rise of cellphones and the fall of newspapers.

I remember the old days when the paper was the source of news. Radio was just the headlines and TV wasn't available. The paper served to filter and highlight items of interest, as well as providing the detail that we needed. Now the functions are separated. I first learned of 9/11 sitting at my computer reading a brief bulletin about a plane striking the WTC--I think it may have been Yahoo picking it up. Today people are most likely to learn of interesting news through their cellphone, then the Net, then TV, so the filtering function is gone.

Atrophying Sociability? Or the Ultimate Aphrodisiac

Tyler Cowen at Marginal Revolution links to and comments favorably on the idea that modern advances will lead us to lose social skills. I strongly disagree. Look at everyone who's using a cellphone, while walking, while driving, while watching concerts... Compare that to 20 years ago--the total social interacting going on has increased dramatically, thanks to technology.

People are, after all, the ultimate aphrodisiac.

Elections--Musings of a Superstitious Bureaucrat

Kevin Drum refers to speculation on what happens if Dems win in 2006. George Buddy provides the URL for election projections. Even the Iowa electoral markets site shows things headed in the right direction (that is, left). But I'm sure that Kevin and others have now jinxed the Democrats in 2006. We're going to lose just like we did in 2000.

The good news is buried towards the end of the Electoral Vote site where there's a list of the Senate seats won in 2002, and therefore up for grabs in 2008. Republicans defend 21, Dems 12. That looks as good to me as current prospects look gloomy.

Don't Invest in India

The NYTimes has an interesting article on Americans who have been hired by Indian firms and are being trained in India. Another article describes looming shortages of well-trained engineers in India and the steps they're taking to fix them. India is booming and one might consider investing there, but this makes me pause:

Mr. Craig [an American hiree/student], who still calls home nearly every day, says he has made an effort to teach himself a few things about his new, temporary home. He has learned how to conduct himself properly at a Hindu temple. He makes an extra effort to be more courteous. He has learned to ignore the things that rattle him in India — the habit of cutting in line,[emphasis added] for instance, or the ease with which a stranger here can ask what he would consider a deeply personal question.

Although the Post gets lots of mail complaining about commuters who cut into line on the road, generally we Americans observe line etiquette. What does it say about a culture where they don't--they're into unfettered individualism and disregard of others?

CEO's and Stewardship and Calvin

Greg Mankiw discusses an economic analysis of CEO salaries:

"Another aspect of Xavier's work, however, should appeal to those on the left: In his model, high CEO salaries are pure economic rents. CEOs are paid what they are worth to their companies, and their high pay reflects the extraordinary value of their talent, but the supply of talent is inelastic, and the allocation of talent would not be affected if everyone faced high tax rates.

Xavier's model encourages people to think of CEOs as similar to Tiger Woods. Woods makes a lot of money because he is really, really good at golf. He is not stealing from those companies that pay him millions for endorsements. To the people paying Woods for his services, he is worth every penny. Yet if Woods were taxed at 50 percent, rather than 35 percent, he probably wouldn't give up golf or forgo the lucrative endorsements. (Response from the right: On the other hand, at a higher tax rate, Woods might play fewer tournaments each year. He might retire earlier. He might take more compensation as untaxed fringe benefits, such as a cushy private jet to fly to tournaments. And so on.)"

If I understand, CEO's aren't that good, but because they have great leverage, they earn the big bucks. That is, when you have a corporation doing $20 billion, you don't want some George W. running it, so you'll pay just a bit more than $400K for someone who's a little better.

The idea of talent as "economic rent" is intriguing. Resurrecting the old-time religion, men were intended to be stewards of the earth they inherited. Suppose we say that people are stewards of their talents? That might bring us around to Andrew Carnegie, who's an interesting study. (New bio just out I mean to read.)

[Back to Mankiw] What's a CEO going to do except CEO? Woods can cut back on his playing and probably increase his gross, because he'll win a higher percentage of those he does play. CEO's can only retire. (Of course, if you consider a CEO as a multi-talented person, then she can find something else to do, so there is some point at which taxes would become too high.)

Disaster Programs and Crop and Flood Insurance

The Post Sunday ran more pieces by the same trio that's done their previous ag articles: Gilbert M. Gaul, Dan Morgan and Sarah Cohen on the agricultural disaster programs and federally subsidized crop insurance. (There's a main piece, plus separate ones on disaster loans, crop insurance on sweet potatoes, and a man who subdivided his operation to qualify for disaster payments.) It's another good job. I'd emphasize the point that "Congress" can't act rationally on agriculture if "reason" means sticking with a long term policy. The legislation that people debate and vote on, whether it's "Freedom to Farm" in 1996, crop insurance reform in 1980, or whatever is one thing. But there are too many ways, particularly riders on appropriations bills, to subvert those plans and grab some glory and some ink for looking out for one's constituents by responding to "disasters".

It's not partisan--Sens. Clinton and Conrad do the same sort of thing that Sens. Grassley and Hagel do.

Farm Programs Lead to Higher Prices?

Not necessarily, but they aren't absolutely correlated with lower prices either. (This follows up a comment at Dan Drezner's blog that, contra another commenter, the farm programs did not necessarily lead to higher production and lower prices. )

From an Agweb post (note the last paragraph):

USDA will soon begin issuing first partial 2006-crop-year counter-cyclical payments for producers with base acres enrolled in USDA's Direct and Counter-cyclical Program (DCP). The 2002 Farm Bill requires that these payments be made in October.

The 2006-crop-year projected first partial payment rates, equal to 35 percent of the total projected amount, are $0.0481 per pound for upland cotton and $30.45 per short ton for peanuts

First installment payments are not available for producers who have wheat, corn, grain sorghum, barley, oats, rice, soybeans and other oilseeds base acres because the effective prices for those crops equal or exceed their respective target prices.

The point is that commodity prices are still volatile.

Categories

A recent Gallup poll asked whether the respondent thought Americans were ready to elect a person of a given background: woman, black, Jew, Hispanic, Asian, Mormon, atheist, gay. It's an interesting question, particularly the categories used, because I'm remembering the categories we used to use.

Gallup didn't ask if we were ready to elect an Italian-American, Greek-American, Polish-American--apparently these ethnicities have lost their power and fall into the general category of acceptable white. (I haven't done research, but I think Jackson was our first "non-English" President, being Scots-Irish and we've still to elect someone from outside the British Isles.) Gallup also didn't ask about Catholicism or Islam. (I understand that Taft was a Unitarian, which was controversial in the day.) Nor did it ask about divorce (which was a weapon against Adlai and Rockefeller).

Gallup should have asked about single--Rep. Foley wasn't out of the closet, but I doubt, unless Father Drinan were permitted to serve again, that there's any single man over the age of 35 who could get elected senator, much less President. No more Buchanans for the U.S. So much for the idea that we grow more tolerant as the nation gets older.

The "lumping" is interesting--are we as eager to elect a Hmong President as a Japanese, a Korean as a Filipino? Is Obama more acceptable than a descendant of American slaves? And Hispanics--aren't there differences among the Cuban-Americans and the Puerto Ricans, Salvadorans and Peruvians, Brazilians and Mexicans? The answer, I think, is the immigrant process creates arbitary groupings, which then become our reality. In an alternate universe maybe we'd discriminate against a Salvadoran and for a Puerto Rican, but in the world we've got, once we're halfway ready to consider a Hispanic, we'll disregard nationality and go right to consider the merits and demerits of the individual. (Just as now we care more about whether Rudy is too liberal for the Republican base than his religion or ethnicity.)

We've also forgotten some of the balancing--look at Kennedy's cabinet A Jew, a Pole, an Italian, and no women. When Clinton tried for a cabinet that "looked like America", he didn't care about East Europeans and religion, he cared about blacks, Hispanics, Asians, and women.