Wednesday, October 26, 2011

Median incomes revisited

In a previous post, I was not able to find any evidence that median incomes had stagnated since 1973. Courtesy of the Atlantic, the graphic indicates that median earnings for men have indeed stagnated since the early 70s.

Sunday, October 16, 2011


Watched Secretariat. Unexpected economics titbit: The owner of Secretariat - Penny Tweedy/Chenery’s brother is Hollis Chenery.

Saturday, October 15, 2011

Is Google becoming more evil?

K1 was surprised (and upset) to find out that she had been locked out of her Gmail account. Inexplicably, Google appears to have decided that it was time to enforce its terms of service - those under the age of 13 are not allowed to have Gmail accounts. (I found this out by googling Google and Gmail. Besides, who really reads these TOSs and EULAs anyway. I can hardly count the number of times I’ve clicked “I have read and agree to Terms and Conditions” every time Adobe Flash updates.) This decision is strange since it deliberately chose to allow these accounts when she was signing up. I suspect it has something to do with Google+ and the default privacy settings that Google has set up for all users. Sounds sneaky and well, perhaps even evil for Google.

The least they could have done was to give a warning and a grace period of several days or a week to clean out her account and download any documents that she needed. Now in order to reactivate we'd essentially have to send Google a credit card number and be charged $0.30 thereby establishing that since she has a credit card she can enter into a contract with the evil empire. But by doing so, we could be accessory to fraud by letting her pretend to be older than she is. This sounds so badly handled that only some nincompoop in the legal or marketing department could have thought this up.

Friday, October 14, 2011

Floods in Thailand and resilience

Worst flooding in Thailand, courtesy of The Atlantic with some pictures of what it means to be tolerant or resilient - see #1,8,11,32.

Burglary revisited

Strange things taken and not taken:
Battery charger
PS2 keyboard but not the USB version!
Earbuds - cleaned us out of all of them
iPod shuffle cable (fortunately K1 had her iPod with her but this leaves us without an ability to charge or sync)
All the Wii games except Wii Sports, including a Hello Kitty game! But not the Wii Fit board

The pluses:
Thompson Creek replaced our window - FOC
Now I can blame everything on the theft as in, “Did you eat all the chips?” “Who me? The burglar must have taken them!”

Thursday, October 13, 2011

Have median incomes really stagnated?

Tyler Cowen claims that median incomes has stagnated since 1973 and Russ Roberts asks a good question: What does it mean for median incomes to stagnate? Does this mean the the standard of living of the median household in 2010 is the same as it was in 1973? Like Russ Roberts, I find this hard to believe.

First, some data issues. Googling “personal median income” turned out very few hits so I would imagine that Tyler is referring to household income. There were some rather unwieldy tables on the Census website but DaveManuel has reproduced most of it in an easy to read form here from 1975 to 2010. Except for the huge dive that it took in 2009 (for real close up view, see Felix Salmon’s post), it is difficult for me to say that household income has actually stagnated. In real dollars, based on DaveManuel, the 1975 household median was $43,000 and in 2010 was $49,000. (We can quibble about statistical significance but let’s not.) In the intervening years, median household income rose and fell with a peak of $53,000 in 1999.

I would say that Tyler is over exaggerating the extent of stagnation but if he were to say that median incomes have stagnated in the past 10 years there would be no argument from me. In order to address the question of whether the standard of living of the median households have actually stagnated I would compare median households in 2000 with the current median household (or if Tyler believes that 1973 is in fact when median incomes stagnated, I would also throw the 1973 median household in the mix).

Compared to the median households of the past, do the median households of today have more “stuff” and I think of stuff in a very narcissistic (economist type) way. What is the percent of median households today with broadband access? Or cable TV? Owned their own homes? Or the average size of the home? Or number of electronic gadgets?

Assuming that the median households of today have more stuff than those of the past then the obvious question is that if incomes have stagnated, how did they own all this stuff? Is it a result of previous periods of “unstagnated” incomes? Did they go into more debt to get more stuff? And if more debt is the answer, then is this good or bad in the sense that are households more vulnerable to economic shocks? Vulnerable could be taken to mean greater fluctuation in consumption or higher propensity to file for bankruptcy.

At the end of the day, the stagnation of median incomes is interesting but not that interesting.

Wednesday, October 12, 2011

Embrace the cloud?

After our break-in and the loss of our digital photos on our laptop, I thought of moving everything to the cloud. We had backed up most of everything onto a portable hard drive but unfortunately that was taken too. The SD cards that had some pictures were on a camera but the camera was also taken. But as James Fallows describes, the cloud isn’t all that safe either.

It strengthens my resolve to discard as many items as I possibly can. After all, the key to traveling light is to not need very much.

Tuesday, October 11, 2011


When one hears of fragmentation, one usually thinks of market fragmentation. But which market? A cursory search of IDEAS indicates that economists have focused more on production fragmentation as it relates to outsourcing in the production of goods.

The other markets are of course labor markets or consumer goods market. The latter is probably closely related to product differentiation. It is unclear to me why the research on fragmentation seems to have become really a strand of outsourcing and its effects because there seem to be other more interesting questions in the labor markets.

For instance, the fragmentation of entertainment into the Internet, cable, and regular broadcast TV has provided possibly new labor markets.

From the BBC:
.. online video has become a career for thousands of video creators, with some making hundreds of thousands of dollars each year.

And in an uncertain job market, many are finding ways to cash in on the opportunities afforded by web video.
In 2010, the number of YouTube partners making over $1,000 (£600) per month from advertising revenue went up 300%, the company said.
The company declined to release specific figures, but Mr Sly said "hundreds" of video creators make more than $100,000 a year and "thousands" make more than $10,000 a year.
Mike Michaud, who started online production company Channel Awesome after being losing a job at an electronics retailer, says the revenue he earns from host has enabled him to hire six full-time and two part-time staff members.
"I don't have the daily grind that a nine-to-five usually entails," Mr Michaud said.
"I wouldn't say I'm living comfortably just yet, but I am living much better than before."

"I see this becoming the new television, but a place where the average person has a much better chance of getting noticed and making money than if they were to go the traditional route via Hollywood," Mr Michaud said.

Alan Lastufka, author of YouTube: An Insider's Guide to Climbing the Charts, said: "The money may not always be headline-worthy, but it's enough to quit your day job, stay in the basement on your computer and spend your time connecting with fans."

Likewise, the fragmentation of cable TV into multiple specialized channels has created new markets for actors that may have been unemployed or underemployed in the days when broadcast TV or cinema were the only options for many of these aspiring actors.YouTube has also allowed some to venture into Internet only broadcast - perhaps hoping to one day be noticed and become popular as in Justin Bieber. Make no mistake that the argument here is not that these new fragments have supplanted the traditional entertainment markets like TV or cinema but have become an avenue to the traditional markets much like minor leagues are a way into major league baseball.

One possible research avenue that I would be curious about is the effects of fragmentation on wages in the these markets. Has the creation of the Internet entertainment channel or the increase in specialized cable channels compressed the wage distribution of actors’ salaries? Has it provided more employment - perhaps the unemployment rate is lower, but has this also drawn more people into the labor pool so perhaps unemployment has not changed as much?

What would I want the message to be? New markets creates new jobs, yes - but are these good jobs as in higher wage jobs? Do these new entertainment markets have any “creative class” effect in the places where they live and work?

Monday, October 10, 2011

Middling ruminations

David Autor has been pushing the fact that there is a class of jobs called “middle jobs” which I take to mean jobs that lead to a middle class life, has been disappearing thereby leading to a polarization of jobs in America. (See here.) I view this through the same lens on the debate of whether world incomes have become bimodal (i.e. twin peaks).

If I understand the report correctly, it takes a class of jobs at the beginning of the period, e.g. 1980 and finds the jobs that are in the “middle”. The report then documents that these jobs have decreased over the next two or three decades. I was expecting a twin peaks type argument but instead I was mostly puzzled over why this was an interesting outcome.

To make my puzzlement (or some might consider thick headed) obvious, consider an artificial economy whose “middle” jobs were mostly in buggy production. This includes production, clerical and other support jobs as well as the various sub-industries that support buggy production such as buggy whips and wheels. Moreover, buggies are in high demand and this supports the profits and middle class salaries in the industry. This economy is hit by an influx of cheap buggies from another country and over the next two decades face fierce competitive pressure which results in a decline in this industry as its inability to compete becomes obvious.

Is it that surprising then that we find middle jobs have disappeared? But does this mean that no other middle jobs have arisen to take its place? This second argument was something I was looking for in the report and perhaps I am misreading it but I don’t see this argument in there. I was also hoping to find a twin peaks distribution of jobs but did not find it. I was also looking for a distribution (either of hourly or total earnings)  that showed the “hollowing” out of the middle between 1980 and 2010 but didn’t.

Linden, et. al (2009) find that even in the case of the iPod which is heavily outsourced, there are still “middle-income jobs” in the iPod production. Though these may be few, I suspect that they are scattered across the industry landscape and the job for economists is to identify these jobs for the rest of us.

Linden, et. al. find:
The offshore jobs are mostly in low wage manufacturing, while the jobs in the U.S. are more evenly divided between high wage engineers and managers and lower wage retail and non-professional workers.

Pulau Tikus

The following NGS article on the trade on exotic animals did not reflect very well on Malaysia and Penang in particular.

On September 14, 1998, a thin, bespectacled Malaysian named Wong Keng Liang walked off Japan Airlines Flight 12 at Mexico City International Airport. He was dressed in faded blue jeans, a light-blue jacket, and a T-shirt emblazoned with a white iguana head. George Morrison, lead agent for Special Operations, the elite, five-person undercover unit of the U.S. Fish and Wildlife Service, was there to greet him. Within seconds of his arrest, Anson (the name by which Wong is known to wildlife traffickers and wildlife law enforcement officers around the world) was whisked downstairs in handcuffs by Mexican federales, to be held in the country's largest prison, the infamous Reclusorio Norte.

For nearly two years Anson fought extradition to the U.S., but eventually he signed plea agreements, admitting to crimes carrying a maximum penalty of 250 years in prison and a $12.5-million fine. On June 7, 2001, U.S. District Judge Martin J. Jenkins sentenced him to 71 months in U.S. federal prison (with credit for 34 months served), fined him $60,000, and banned him from selling animals to anyone in the U.S. for three years after his prison release.

If the judge thought a ban on Anson Wong would work, he was mistaken. Shortly after his arrest, Anson's wife and business partner, Cheah Bing Shee, established a new company, CBS Wildlife, which exported wildlife to the U.S. while Anson was in prison. His main company, Sungai Rusa Wildlife, continued to ship despite the ban. Now that he's free, Anson has launched a new wildlife venture, a zoo that promises to be his most audacious enterprise yet.

Situated in the trendy Pulau Tikus ("rat island") section of Penang, Sungai Rusa Wildlife might easily be mistaken for a hair salon. No wider than a family garage and unidentified, it's one of dozens of units along a quiet strip of retail shops offering tummy reduction, skin care, and spa treatments.

One day in late December 2007, Anson's black Mercedes-Benz pulled into Penang International Airport and picked up two of Malaysia's top wildlife enforcement officials, Perhilitan's law enforcement division director, Sivananthan Elagupillay, and his boss, Deputy Director General Misliah Mohamad Basir. The officers had flown in from Kuala Lumpur for a press conference launching Flora and Fauna Village, now a joint venture between Penang's forestry department and Anson Wong and Michael Ooi's enterprise.

Anson had long boasted his government influ­ence. Now he had the open support of both the Penang government and Malaysia's wildlife department. Misliah's presence was ironic. During Operation Chameleon Misliah had been the wildlife official in charge on Penang. She signed his CITES permits. Within four years of Anson's arrest, she was promoted to director of Perhilitan's law enforcement division, and by 2007 she'd been given the department's number two job.

I wondered what Misliah thought of the man who had smuggled so much endangered wildlife right under her nose.

"He is my good friend," Misliah giggled, sitting behind her desk in her spacious office at Perhilitan headquarters. She was a plump little woman, hardly more than a round head wrapped in a Muslim's white tudung scarf. She was swaddled in a sky blue shawl over a baju kurung, a long blouse and sarong, and wore petite brown sandals. Her voice was honestly the sweetest I'd ever heard.

Malaysia's second highest wildlife law enforcement officer speaks of her country's most notorious illegal trafficker like a doting aunt.

"People say, 'How can you give him his license?' " A smile wreathed Misliah's face. "He was a very bad boy, but if we don't give him a license, he would just do it anyway." This way, she said, they could keep their eye on him.

To this day Misliah vouches for Anson. "Anson Wong has carried out his business legally and complying [sic] the needs and requirements under the domestic law. He and his business in peninsular Malaysia have been monitored closely by this department," her office asserted in a written statement to the press in 2008.

She was also in favor of legalized tiger and bear-bile farming. "Why not?" she asked me.
Misliah Mohamad Basir, so inconspicuous, seemingly so benign, is one of the most powerful wildlife decision-makers on the planet. On her watch Malaysia has become a global trafficking hub.

Last August Misliah responded to allegations of a corrupt relationship between her department and Anson Wong: "As far as Malaysia is concerned, he abides by local laws and has the necessary licenses," she said. "What he does outside the country is not our concern."

After that article was published, a follow-up in Foreign Policy:

Things didn't begin to change until January 2010, when National Geographic published a profile I wrote of Wong, detailing his government connection and his new plans to exploit tigers. The outcry by both the public and journalists in the Malaysian press was immediate. (Malaysian newspapers and television are state controlled, which makes it difficult for journalists to criticize the government directly -- but they are free to disclose foreign reporting about Malaysia, such as my story.) In the course of the past year, the Ministry of Natural Resources and Environment announced a revamp of its wildlife department, promising to rotate senior officers every three years. It stripped the department of key powers and is in the process of transferring Misliah, who is now also under investigation by the Malaysian Anti-Corruption Commission. While international wildlife NGOs were cautious about causing trouble in Malaysia, they have provided invaluable advice to the country's government, including the parliament, which passed the first overhaul of its wildlife law in nearly four decades this summer.

As a result, when Wong was caught with a suitcase of boa constrictors, he didn't get away with it. The Malaysian government revoked his business licenses, shut down his zoo, and seized his entire collection of animals, including his Bengal tigers. In November, a judge sentenced him to five years in prison, an unprecedented term for a wildlife trafficker in Malaysia, and a stern sentence for animal smuggling compared to current standards anywhere else in the world.

Interestingly, Pulau Tikus was translated as ‘Rat Island’ I suppose to make the imagery complete although the Malay language doesn’t really distinguish between rat and mouse. I used to think of it as mouse. Some pictures of Pulau Tikus at above link. There’s a great Hokkien Mee place there - my mother and her friends refer to this place as the ‘soup miser’.

Sunday, October 9, 2011

Natural experiment?

As abhorrent as this is, some economist is going to think that it’s a wonderful “natural experiment”:

The vanishing began Wednesday night, the most frightened families packing up their cars as soon as they heard the news.

They left behind mobile homes, sold fully furnished for a thousand dollars or even less. Or they just closed up and, in a gesture of optimism, left the keys with a neighbor. Dogs were fed one last time; if no home could be found, they were simply unleashed.

Two, 5, 10 years of living here, and then gone in a matter of days, to Tennessee, Illinois, Oregon, Florida, Arkansas, Mexico — who knows? Anywhere but Alabama.
The exodus of Hispanic immigrants began just hours after a federal judge in Birmingham upheld most provisions of the state’s far-reaching immigration enforcement law.        

Grocery stores and restaurants were noticeably less busy, which in some cases may be just as well, because some employees stopped showing up. In certain neighborhoods the streets are uncommonly quiet, like the aftermath of some sort of rapture.

Drawn by work in the numerous poultry processing plants, Hispanic immigrants have been coming to Albertville for years, long enough ago that some of the older ones gained amnesty under the immigration law of 1986. But the influx picked up over the last decade, and the signs on Main Street are now mostly bilingual, when they include English at all.

What the new immigration law means on a large scale will become clearest in a place like Albertville, whether it will deliver jobs to citizens and protect taxpayers as promised or whether it will spell economic disaster as opponents fear.

Critics of the law, particularly farmers, contractors and home builders, say the measure has already been devastating, leaving rotting crops in fields and critical shortages of labor. They say that even fully documented Hispanic workers are leaving, an assessment that seems to be borne out in interviews here. The legal status of family members is often mixed — children are often American-born citizens — but the decision whether to stay rests on the weakest link.        

Mr. Orr said there were already signs that the law was working, pointing out that the work-release center in Decatur, about 50 miles to the northwest, was not so long ago unable to find jobs for inmates with poultry processors or home manufacturers. Since the law was enacted in June, he said, the center has been placing more and more inmates in these jobs, now more than 150 a day.

Of course, placing people in work is a lot different from making sure they keep working. Afterall what can we make of this experience?

How can there be a labor shortage when nearly one out of every 11 people in the nation are unemployed?

That’s the question John Harold asked himself last winter when he was trying to figure out how much help he would need to harvest the corn and onions on his 1,000-acre farm here in western Colorado.

The simple-sounding plan that resulted — hire more local people and fewer foreign workers — left Mr. Harold and others who took a similar path adrift in a predicament worthy of Kafka.
The more they tried to do something concrete to address immigration and joblessness, the worse off they found themselves.        

Mr. Harold, a 71-year-old Vietnam War veteran who drifted here in the late ’60s, has participated for about a decade in a federal program called H-2A that allows seasonal foreign workers into the country to make up the gap where willing and able American workers are few in number. He typically has brought in about 90 people from Mexico each year from July through October.

This year, though, with tough times lingering and a big jump in the minimum wage under the program, to nearly $10.50 an  hour, Mr. Harold brought in only two-thirds of his usual contingent. The other positions, he figured, would be snapped up by jobless local residents wanting some extra summer cash.

“It didn’t take me six hours to realize I’d made a heck of a mistake,” Mr. Harold said, standing in his onion field on a recent afternoon as a crew of workers from Mexico cut the tops off yellow onions and bagged them.

Six hours was enough, between the 6 a.m. start time and noon lunch break, for the first wave of local workers to quit. Some simply never came back and gave no reason. Twenty-five of them said specifically, according to farm records, that the work was too hard.

Saturday, October 8, 2011

Pardon me

But did these guys just offer up a definition of a bubble?

When rapid credit growth or other indicators of financial excess accompany asset price increases, the authorities should employ stress tests to measure the effects of changes in credit conditions on asset prices, economic activity, and financial stability.

Instead of seeking to identify bubbles, the authorities should simply ask whether current financing conditions are raising the likelihood of sharp reversals in asset prices that are disruptive to economic activity.

Serial numbers

One thing that the cops were asking for after we got broken into was the serial numbers of all the stolen items. This is one thing that I never recorded, after all in monetary terms the things we lost didn’t add up to all that much, especially when the technology became outmoded after several months.

However, there may be an externality argument for keeping these serial numbers in the following sense: If the items are recovered or traced through pawn shops, it helps make a case against the accused, i.e. writing down serial numbers may lead to lower crime rates.

Yeah, not too convincing but then so are the deterrent effects of capital punishment.

Friday, October 7, 2011

Why taxing the multimillionaires makes sense

Especially these losers:

Just last week, Léo Apotheker was shown the door after a tumultuous 11-month run atop Hewlett-Packard. His reward? $13.2 million in cash and stock severance, in addition to a sign-on package worth about $10 million, according to a corporate filing on Thursday.

At the end of August, Robert P. Kelly was handed severance worth $17.2 million in cash and stock when he was ousted as chief executive of Bank of New York Mellon after clashing with board members and senior managers. A few days later, Carol A. Bartz took home nearly $10 million from Yahoo after being fired from the troubled search giant.        

This is what “pay-for-performance” has given us:

“It’s a great irony that spectacular failure is rewarded lavishly,” John J. Donohue, a professor at Stanford law school and the president of the American Law and Economics Association, told me. “It is a terrible mistake to set up a structure where the top person walks away with millions even if the company is laid waste by their poor decision-making, yet this is what’s happening. It’s a shocking departure from capitalist incentives if you lavish riches on the losers.”

Yes, and those advocated pay-for performance would use as an excuse: “But it wasn’t implemented correctly.” Right - the only time it can be correctly implemented is in the rarefied world of theoretical models. Principal agent models should confined to the trash bin or dedicated to a journal called Journal of Pay for Performance and Why It Only Works in Models.

What’s changed

I don’t want to leave the house.
I dread coming back to the house.
I want to carry everything that is left untaken with us all the time.
I want to hide stuff instead of leaving them out.
I want to double bolt our doors, strengthen our windows.
I can’t bear to look at the window he broke.
The places he’s stepped.
I want to move.

Thursday, October 6, 2011

Update on Euro vs US

Some updates on questions I had for myself in a previous post:
I had wondered if the difference between the Euro and the US as a monetary union was solely because states in the US were somehow different from the Euro countries. VoxEu had an argument that this is the case although I am not entirely convinced:

For an idea about how to solve this dilemma it might be useful to look at the US. The US states have many sovereign powers that give them a great deal of financial discretion. They have the power to establish their own tax systems and spending powers. Many states are legally required to balance their budgets, although this is often meaningless in a dynamic sense if they don’t have to fund future obligations. In addition states cannot file for bankruptcy under the US Bankruptcy Code.

So how do the states guard against default and preserve their access to capital markets? In spite of their well-advertised budgetary problems the US states do have access to capital markets and at generally favourable rates. The reason is institutional. Most states give debt service a constitutional priority over other expenditures.

This means that the “sovereign” debt has to be paid out of revenues before other obligations. There are some minor exceptions. In California and some other states for example education funding has a prior claim on revenues – probably a good thing if it prevents them from undermining their long-term growth prospects. This mechanism does not prevent fiscal problems from arising. The problems of states like California are well known and they are severe. But fiscal problems become sovereign political problems, not threats to the stability of the US. It should be noted that their debt levels are quite small relative to sovereign nations.

This point is brought up again in another VoxEu post:

Tom: Well, what I meant by that is a commitment mechanism. The analogy I drew was with the U.S. states. It's well known that many of the U.S. states, some of the biggest ones, like California, Illinois, have faced significant fiscal problems and significant fiscal imbalances. And yet they still have access to capital markets at quite favorable rates. The question is why. The answer is that for most of these states there is a constitutional commitment to service general obligation bonds before all other claims on the tax revenues of the governments of the states.

This kind of takes the issue of fiscal brinksmanship off the table. U.S. states are not allowed to go bankrupt, to file for bankruptcy. They constitutionally have to honor their debts first before they pay the police and firemen and the other local government workers.

That imposes an automatic austerity regime. If the fiscal situation gets out of balance in a given state, it's a problem - and it is very much a problem in some states like California - but it's a problem that is a local problem. It's not a problem for the union.

My only issue is that even if brinkmanship is taken off the table where in the constitution is it explicitly ruled out that it cannot be put on the table. And isn't a constitution subject to amendments?