Senator Dorgan drinks the Kool-Aid

A former ec 10 student emails me:

I am a Democrat, but I read this short book review about a new book from a North Dakota Senator and found it just a bit scary.

The article he refers to is in today's Washington Post. An excerpt:

A Rallying Cry for Democratic Populism

What would happen if the opposition party actually chose to oppose the one in power? Not just on the margins, but by rejecting outright the majority party's fundamental beliefs on trade and tax policy?

Sen. Byron L. Dorgan (D-N.D.) urges Democrats to take on Republicans in just that way in his new book, "Take This Job and Ship It: How Corporate Greed and Brain Dead Politics Are Selling Out America." He makes a politically compelling -- if economically questionable -- case....

The title of his final chapter says it all: "Flat World? No, Flat Wrong!"

To Dorgan, big corporations are the villains and labor unions the saviors. "I understand that big is not always bad, and small is not always beautiful," he writes. But, he adds: "If the shoe fits, wear it. And it damn well better be American-made."

Forever Young

God of the Machine observes:

Maybe it's just the glasses, but certain �bergeek types � Bill Gates, Greg Mankiw, new Google CEO Eric Schmidt � seem to have found, if not exactly permanent youth, at least permanent pre-adolescence. It is given to no one to look forever twenty, and only to a few to look forever twelve.

I think it is time for me to look into lasik surgery.

Ray Fair on Policy Stimulus

A friend calls to my attention a paper by Yale economist Ray Fair, a well-known builder and user of large-scale macroeconometric models. Fair assesses the impact of monetary and fiscal policy during the recovery from the recent recession. An excerpt:

Had there been no tax cuts, employment would have been 2.2 percent lower by 2004:3 than it actually was; had there been no large increases in federal purchases of goods, employment would have been 1.2 percent lower; and had there been no fall in short-term interest rates, employment would have been 2.5 percent lower. These effects are roughly additive in the model (fourth experiment), and the combined estimate is that employment would have been 5.6 percent lower in 2004:3 than it actually was.

According to Fair, monetary and fiscal policy played roughly equal roles in the stimulating aggregate demand during the recovery.

Fair's conclusions seem broadly consistent with the recent Treasury report:

Treasury found that, without enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, and the Jobs and Growth Tax Relief Reconciliation Act of 2003: (1) by the second quarter of 2003, the economy would have created as many as 1.5 million fewer jobs and GDP would have been as much as 2 percent lower, and (2) by the end of 2004, the economy would have created as many as 3 million fewer jobs and real GDP would be as much as 3.5 to 4.0 percent lower.

This passage summarizes the Treasury's short-run business cycle analysis, which like Fair's model emphasizes aggregate-demand effects. The Treasury's long-term analysis appropriately emphasizes aggregate-supply effects.

between 2 appointments, beaubourg-le marais, 07/30/06

le baron, 07/29/06

last party before summer break, paris paris, 07/29/06

IMPORTANT: si tu te reconnais sur cette photo ou si quelqu'un conna�t cette jeune femme, pouvez-vous me contacter sur jai1adresse AT yahoo.fr, j'aimerais utiliser cette image dans un magazine. Merci.

je suis heureux, je flane, le marais, 07/29/06

Summers on Antidumping

Larry Summers is one the smartest economists I know. He has had an amazing career as Harvard professor, chief economist at the World Bank, and Secretary of Treasury. While he was Harvard President, he taught popular courses on globalization. Recently, he was asked about antidumping laws at a Brookings event, and he gave a shocking answer:

I am not an expert on many things, and I have the self-knowledge to know in particular that I am not an expert on countervailing duties and antidumping. I guess the only thing I would say is that I do think there is a tendency in the trade debate to underemphasize the longer-run and less immediately salient aspects of trade policies.

In particular, that goes to two sets of issues. Lots of people have worried that their job might be lost because a plant might move to China or to Mexico. Virtually no one except a few members of the American Economic Association has ever said, Isn't free trade great? I was able to buy twice as many toys for my kid at the holiday as I would have been able to if we had not had free trade. And I think the consumer benefits of trade tend very much to be underplayed in political discussion.

I also think we do need to take some stock of the fact that the United States is not currently enjoying an excess of goodwill in other parts of the world, and that the question of how we do or do not open our market is not irrelevant to the quality of our relations with many of these countries. And I think in some cases for really very small economic benefit, even measured in purely mercantilist terms, we sacrificed very substantial goodwill.

So I think it is appropriate for us to be looking carefully at those policies.

What is so shocking about this? I agree with Larry as far as he goes, but, shockingly, he does not go very far.

Larry is famous for being forthright about his views. He knows enough about our trade laws to know that they make little sense. So instead of feigning ignorance, why doesn't he call for repeal of the antidumping laws?

I wonder: Is Larry avoiding the third rail of trade policy because the leading Democratic presidential hopeful has been applauding the application of these inane laws?

Boudreaux on the Minimum Wage

GMU econ prof Donald Boudreaux writes about the minimum wage. His bottom line:

We don't know exactly how, or exactly by how much, employers as a group respond to higher minimum wages -- but the theoretical case that they do respond in ways unfavorable to low-skilled employees is too powerful to dismiss.

This sounds right to me.

But Boudreaux's arguments will not convince a hard-core egalitarian. Suppose these unfavorable responses are small in magnitude. Isn't it possible that the minimum wage on net helps poor families because the direct effect of higher wages more than offsets the adverse response from employers? Since Boudreaux is making a theoretical argument, he has to admit that it is possible. The minimum-wage debate will not be resolved with an appeal to theory alone.

In the end, there is no good substitute for an appeal to facts. What the facts show is that the minimum wage is poorly targeted as an anti-poverty program. Moreover, while the evidence is controversial, some studies find significant long-term adverse effects. As a result, most economists prefer more efficient and better targeted anti-poverty tools, such as the EITC, which has grown significantly over the past few decades.

opening "curfew - julien langendorff" and concert of lisa li-lund, galerie france fiction, 07/27/06

ed bangers records pirate night, p�niche concorde atlantique, 07/26/06

Favorite Blogs

A econ professor friend of mine emails me some comments on this blog, as well as a request to its readers:

I now think of the blog, including the comments, as the equivalent of a bunch of people with common interests sitting down in a coffee shop and discussing topical economic issues, with the discussion topics chosen by you. I see this as very valuable. Many of us live in places where it's hard to find a group of people with whom to regularly and frequently have such discussions.

Yours is the first blog I've read regularly. But of the trillion or so other blogs out there, there must be a few good ones that serve this function as well. I'm wondering which are the better ones....Would you entertain the idea of posting a new item at your blog asking your regular readers for recommendations on what other blogs they regularly read, and why they like them?

Readers are encouraged to post their views in the comments section. This will give other readers places to go during August, when blogging here will be slow.

My goal for the coming month: Spend more time on the beach than in front on my computer.

The Fight Against Global Poverty

MIT economist Abhijit Banerjee has a good article on foreign aid. Princeton economist Angus Deaton responds. (Thanks to Tyler Cowen for the pointer.)

How to improve your love life

Having trouble satisfying your girlfriend? A reader of this blog emails me his remedy for the problem:

You'll be pleased to know that I managed to persuade my girlfriend (a biologist) to buy a copy of your "Principles of Microeconomics" recently here in the UK, so that we could have more informed discussions about interesting economics problems.

BACK TO PARIS - opening "carte blanche � david gil et au collectif passport n� 79934321, minist�re de la culture, 07/25/06