Monday, July 30, 2018
Bring back ARPA
Wednesday, September 14, 2016
Clinton 100 days
Hillary Clinton's 100 day jobs plan is mediocre at best. It focuses on building infrastructure, increasing science investments, green collar jobs, reducing regulation, and increasing US manufacturing.
As an economist I obviously agree with the first two planks. Investment is an essential part of GDP, and you cannot have economic growth without it. Both infrastructure and science are necessary for the future of America. Being able to do more with fewer people with an aging population is where our economy is moving in order to maintain our quality of life and increase access to a good lifestyle.
As an environmentalist I agree completely with green collar jobs, which is where we need to go.
She isn't specific about what regulations she wants to reduce, so this plank could be either good or bad. I personally hope she will cut the barriers to starting a business and increase the penalties for fraud which is where I believe we need to go. New college grads in finance should not be paying the regulatory cost of the Great Recession while Jamie Dimon gets yet another million dollar bonus. I have written about financial regulation before, particularly when it comes to advising. Having more places to do business will keep up competition and force them to be honest.
The final plank, increasing US manufacturing I disagree with. Manufacturing jobs pay far less than high skilled science and technology jobs, because they produce less product. We need to move towards increasing access to college and make it so more people get the math skills they need to succeed in college and get good jobs. We need to encourage the employment of new college grads because it is criminal that so much talent is going to waste. We should have programs for job placement for young people so that we can start our careers as soon as we leave college and give tax breaks towards hiring young professionals in real jobs, and outlaw unpaid work. This would do far more in terms of improving the American economy and spurring GDP growth than encouraging the creation of low pay jobs. The average machinist salary (the jobs Clinton's plan would create) have an average wage of around $40,000 per year, which is not enough to support a family. Economists, scientists, and programmers make an average of $80,000 per year with a wider standard deviation, and many make 6 figure salaries.
The Mankiw-Romer-Wile model of economic growth is functional and makes it clear that if you want to grow your economy you don't just need technology to grow an economy, you also need an educated population. I can give a ten year old a complex data analysis program, but they won't know how to use it. I can have someone who can solve the mysteries of quantum physics but without a place to run experiments they won't be able to get hard data. We need to have both, and running backwards to a secondary economy is going to reduce our GDP and quality of living.
The fact that education is missing from her economic plan shows she is listening to bad advisors and doesn't understand much about economics. I still wish Elizabeth Warren was in her place.
Saturday, December 27, 2014
Economy of Georgia, end of 2014
2013 in Georgia saw a rapid decrease in foreign investment as Georgian Dream came to power after 8 years of being an almost single-party state in its parliamentary make-up, although there were opposition parties which competed in elections and received some seats. This saw a rapid decrease in foreign investment which hurt the economy of Georgia and caused the rapid decline in their GDP growth (although the economy was still growing). 2014 has however seen Georgia return to its historic long-run average and this will hopefully continue as time goes on. This is from a monumental shift in the Georgian economy from Foreign Direct Investment to more domestic sources, which can be seen how their GDP growth in 2014 returned to it's long run average but FDI stayed constant.
Georgia has an unusually good legal foundation for economic growth. They have an extremely good Ease of Doing Business Index rating, on par with the most developed economies of the world. These reforms which Saakashvili pushed for attracts foreign capital and is what has allowed them to grow so rapidly. Another good thing is their prices have been extremely stable over the last few years, which is highly unusual. Another good thing is Average Monthly Earnings have risen every year since 1999, which stimulates short-run consumption and economic growth in the most effective way possible. Investment as well has also increased every year for which there is information, which is essential for long-run growth so Georgia will have the capital it needs over the next few decades.
Georgia is in an unusual status-quo which is good for long-run growth. As time goes on they will continue to get to where they need to be, and will hopefully get to join the European Union in 10-20 years from now at the longest extent. The future looks bright for Georgia.
Additional References:
http://www.forbes.com/sites/katyasoldak/2013/10/03/georgias-politics-shoot-its-economy-in-the-foot/
http://en.wikipedia.org/wiki/Economy_of_Georgia_%28country%29
Wednesday, October 8, 2014
China is the world's largest in one way
- In terms of the raw size of the economy calculated by real GDP they are still only around $10 trillion versus America's $17 trillion.
- China and the United States have roughly the same distribution of income. This will have long-term effects on the power dynamics of China's government and access to opportunity.
- China's GDP was 44% from industry in 2013. It has been in the 40s since about the 1980s, which shows that their economic growth has been unusually even across all industries. This is probably due partially to keeping their currency artificially deflated by printing lots of currency to keep it cheap relative to the US dollar, which is probably the largest dispute between the two countries today. This is very different from the narrative that we often hear about China. (IMF)
- Their GDP per capita PPP is currently around $13,000 while the US is around $54,000. There is no question that the US beats China on this metric and it is going to take a long time for China to catch up to us on this. GDP matters for geopolitics, but China won't be a really serious contender for being the world's strongest power until their GDP per capita gets above the middle income stage, which is where it is right now. (IMF)
- Leaving inequality aside, and using statistics that sidestep this issue, America currently has the 4th highest median household income (which controls for inequality) in the world at around $31,000 (World Bank), while China's median household income is around $4,600 (27000 RMB) which shows a massive difference in the income of people in the United States and China. China has a long way to go to meet us on this mark. http://econweb.tamu.edu/gan/Report-English-Dec-2013.pdf
- When it comes to Household final expenditure per capita the United States is currently around $31,000 and China is at $1,300. China is rapidly rising and hopefully will continue to rise in the future. (World Bank)
- They rank 91st on the Ease of Doing Business Index, the United States ranks 4. The best city in China to start a business is Hangzhou and it takes an average of 31 days to start a business, which is close to the national average, versus an average of 5 days in the United States. The amount of capital you need to pay in on average is 71% of national income in China versus 0% in the United States. This has a very real effect in the ability of entrepeneurs who are not well connected and already wealthy to start a business.
- The rate of poverty in China below $5 a day remains above 50%, though the rate of poverty under $1.25 a day has plummeted from around 63% in 1992 to 6% today (adjusted for price inflation). China has come a long ways in the reduction of poverty and there is still a long ways to go in its reduction still. The trend however is towards less poverty.
- China currently has large problems with corruption, ranking at number 80, while the United States ranks at number 19. This is a deep threat to the economic and social stability of China. http://cpi.transparency.org/cpi2013/results/
So the future of the global economy is going to see China continue to grow, and this will be a good thing for people in China. The following policy changes would fix or at least start to fix the current problems:
- Make it easier to start a business. This will immediately increase the demand for workers, push wages up, which will decrease their GINI coefficient, which will increase their multiplier, which will in the medium run increase their GDP growth again.
- Open up private banking to increase investment opportunities.
- Bring back the state health care system.
- Increase access to education in rural areas.
- Repeal all restrictions on migration around the country to increase the ability of people to seek out new economic opportunities.
- Implement trial by public jury to separate the courts from the political process. This will help reduce corruption.
Saturday, August 2, 2014
Education, Unions, Politics, and Eating your Own
Besides the deliberate misrepresentation of Greeley the article does have some really good points. Democrats had historically been the party of racists, and the period of 1865-1909 was the period when they moved from their racist roots that extended back to 1825 when Andres Jackson became President, so it is natural to not expect a party with such deep roots in fascism to change overnight. There were also a lot of Democrats in the South who had maintained their earlier convictions all the way up until Richard Nixon courted them in 1968 in his Southern Strategy which made them realize that the Republican Party post-1968 had the policies that they have agreed with since before the founding of our nation. The opposition to that great progressive American ideal of equality of opportunity has always been a deeply held Southern tradition.
This movement in the North to expand public education by using the resources of the Federal government has been one of the great accomplishments of American Democracy. The Southern Economy is much more diverse today than it was in 1965 and the gap between Whites and African Americans is smaller today than it used to be. It is still too large, but the campaigns of Lincoln, Grant, Roosevelt, Kennedy, and LBJ have made immense progress. This is a major threat against the traditions of the South of subjugation and their goal of slavery because it proves that the federal government can be immensely successful when used appropriately at making sure everyone has the opportunities they need and when these programs are done the leaders of freedom gain more power which means that those who would turn the South back 200 years to a nation of slavery if they could is more difficult.
In response to this by 2001 the Old Southerners needed a new strategy so they proposed the No Child Left Behind Act. This misallocation and destruction of the American education system was never designed to improve education and everything in it has been disproven by professional studies of what works and what doesn't. It gives money to massive testing companies who have a stake in politics which is the short-term benefit in higher campaign funding for them but the larger long-term benefit is it helps turn teachers off of looking for a more egalitarian system where people can get a high-quality education through the state because the state's system has been severely damaged. This is working to undo almost 150 years of American policy to ensure that every American child has the ability to get as far as possible and how it shouldn't matter how much your community has you can still get a high-quality education with the latest technology, and it doesn't mater how much your family or local community has. This was what President Grant begun and has continued, which ended up with high schools and public education extending all the way through college. The highlight of the time was when in the 1950s and 1960s college was extremely affordable and it didn't matter how much your family had you could still go get yourself an education. The result was a growing middle class and a booming economy.
The issue for these people who oppose public education is that in their misguided view on the economy they think there must be someone who has to be subjugated in order for themselves to get rich. Only recently are we finally seeing them listen to the reason of economists and the voice of reality that you can be wealthy and treat your employees extremely well. With this misguided viewpoint they (the business owners and the politicians they pay) have tried to destroy our public education system. The beginning of this resurgence against education was under Ronald Reagan when we saw massive increases in tuition for college which effectively priced a large number of working poor out of the system. The latest action in this success for the Republicans at elimintating opposition to their destruction is opposition to common core without any real proposal to make certain students aren't learning creationism in science classrooms and other fairy tales. This is a direct response of the No Child Left Behind Act, which I believe was calculated, and has succeeded remarkably well at giving local school districts the ability to destroy their education systems which has resulted in a remarkable amount of doublespeak and killing of opportunities. With teacher's unions moving away from the common core which is the way to end this destruction of our education system it is a victory to people who would move our country away from science. This removal of the best advocates for our schools from the public debate and their attacking politicians who want to ensure no student leaves high school without ever touching a real science book harms everything that makes this country great. This is the classic eating of your own which I have observed the left to be so fond of doing. Teachers should be collaborating with the government to construct a common core that has the pieces that are essential and gives teachers time to work with their students without being rushed. They should advocate for policies based on research as opposed to running away from the issue and demonizing those who are proposing to end the destruction that has been done to our education system particularly by Reagan and Bush either directly or indirectly.
The next step for the Confederates is the privatization of schools which if the public schools degrade far enough should get teachers moving to private schools which will price even more students out of getting even a basic education. The ideal of education as a human right, while not codified in law, has become an important part of American politics and is being constantly targeted by these Southerners which will destroy our economy.
This will lead to a less educated work force which will push our country back in time to a place more similar to what President Grant was fighting in his advocacy of public education which did make an impact in the South (since the vast majority of African Americans can now read) and decrease our competitive advantage which is the engine of American economic growth. The decrease in civic knowledge as well will hurt our democracy.
For the racists of the South (such as Bush and Perry) they cannot speak out today in racist terms so instead they use more nuanced terms this is a great threat to the deeply held Southern Traditions of slavery and segregation. This is why they talk about privatization and other Trojan Horses, but in the end they have always been looking for the same thing for over 200 years. Nothing about these people's goals have ever changed in the history of this country.
Fortunately, not all is lost. There are still some people who are trying to ensure that students do not leave high school without a science education with President Obama and Arne Duncan pushing to make it be required that students learn science in the schools among other important topics which are frequently omitted by the truly crazy inheritors of the Stars and Bars. Hopefully in the future we will see a further resurgence of Progressivism in American with Elizabeth Warren speaking her mind and being able to make sure that the American people hear the truth and hopefully not try to whittle it all away with Compromise. President Grant's second term was marked with great compromises which destroyed many of his accomplishments and gave more power to the Confederate Democrats who wanted a return to slavery. Fortunately the first term made immense progress that not even compromise could undo, it only slowed the march to freedom for all people in this country.
Note: I unfortunately cannot get an online copy of the article that prompted this besides going past a pay wall.
Thursday, July 17, 2014
Economy of the Central African Republic
Demographically this is a classic case of a country which is not unified by tribe, with the largest tribe being the Gbaya at 33% of the population, with hundreds of other groups with their own languages and cultures. 80% is Christian, and 10% are Muslim. The Gbaya and Banda together make up 60% of the population. Only 4% of the population is over 65 years old.
The CAR became independent in 1960. They were under an extremely mismanaged dictatorship by Bokassa from 1965-1979 who held the country back economically, and was overthrown by the French. The 1980s were unstable under General Kolingba. The first free elections were held in 1993 when Patassé was elected. He led a violent and corrupt government until 2003. 2003 saw Bozize overthrow Patassé. The Bush War that followed ended in 2007. There continue to be Rebel Groups operating in the country that prevents development. They are currently under an interim government.
The CAR is currently in a period of transition with an interim government being formed, and this is a period of incredible potential for the country.
So, what to do? Well, the first step is to make sure that all people are included in the government. This is best done using a ranked voting system which will allow the establishment of parties that represent each group of the population and ensure all voices can be heard. I recommend Single Transferable Vote and multi-member districts because it will prevent artificial quotas and ensure that there will be less corruption because people will be able to elect opposition parties. Their legislature should be unicameral and be composed of regional representatives. They should reduce the term of the President so that there are more frequent elections. The President should be directly elected using IRV. The President can only act within the law. The court system should be independent and there should be trial by jury to separate the courts from politics. The Supreme Court should be directly elected by the people. Elections should be publically financed. Voting should be made convenient to people so everyone can vote.
When it comes to economic policy they have more work to do than almost every other country. Their Doing Business ranking is the second worst in the world, and they need to make it easier for people to start their own businesses. This will increase employment and allow them to advance technologically. Tax payments should be moved to an annual cycle which will save a lot of money in hiring accountants and allow business owners to put more time into doing things that are productive. They need to reduce the initial cost of getting electricity which is a significant barrier to development. They should have a simple tax system combined with a progressive income tax (which treats capital gains as income), progressive inheritance tax, and a carbon tax. They need bank reform so banks can be a safe place for people to deposit their money along with insurance for depositors, along with laws against financial devices that damage the economy. An example of dangerous financial devices are Ponzi Schemes. They need to protect unions so that workers can be competitive and get paid a living wage. This will create the economic growth to free up labor and resources to solve other major problems.
A major threat to the economy is illiteracy. The government should set up schools for adults to learn how to read and write and continue to mandate education for children. They should work with education organizations to ensure that education is done in a way to benefit children the most given their resources.
Healthcare is an incredibly important issue and a major problem for the economy. Access to contraceptives is important to help bring down their birth rate which is currently around 5 children per woman. This will make a significant improvement to the livelihood of everyone in the country when people have fewer children. They need to attract more doctors and keep working with the WHO to implement reforms. Developing the economy by eliminating unnecessary regulation and streamlining what is left will create the revenue needed for the government to make massive improvements in health care.
The CAR among other African countries has the potential to be a model green economy if developed correctly. The largest and most immediate hurdle is the extreme corruption which hurts workers and business owners and need to be reduced. Then they will have the ability to cover other issues such as their dire healthcare system. If they don't improve their economy they will like many other countries not have the ability to fix the other problems which perpetuate misery for far too many millions of people.
This is a time of incredible opportunity for the Central African Republic and hopefully they will make a large step towards democratic elections.
References
http://www.doingbusiness.org/data/exploreeconomies/central-african-republic/