Comments on economics, mystery fiction, drama, and art.

Monday, August 22, 2016

You can't make this stuff up

"So to recap: not only did Donald Trump hand out Play-Doh to working class people in desperate need of food and water and money to rebuild their own modest homes, it turns out he didn’t even donate the Play-Doh he was handing out, and then he gave a six figure donation to a wealthy local hate monger. It’s increasingly beginning to look like Trump would have fared better if he’d taken the Louisiana Governor’s advice and just stayed away..."

Friday, August 05, 2016

More on Consumption Spending, GDP, and Inequality

On the Marginal Revolution blog (on August 4), Tyler Cowen posted a   link to a twitter feed, with this header:

The link shows personal consumption expenditures as a percent of GDP and a measure of income inequality (the Gini coefficient) from 1978.  Both PCE as a percent of GDP and the Gini coefficient have been rising—consumption has become a larger percentage of total spending in the US and inequality has been increasing.  Cowen’s “ahem” is, I suppose, an indication that we should be surprised that both of these have happened at the same time.

Leaving aside the issue I raised yesterday there is also the issue of what, exactly, has been happening to consumption, if we disaggregate households by income.  Fortunately, we can do this, using data from the Consumer Expenditure Survey.*  The CES presents measures of after-tax income and household spending by quintiles—the 20% of households with the lowest incomes, and so on.  (Which means each group has the same number of households in it).  So we can look at what has happened both to household (after-tax) income and to household consumption spending.  And the results are interesting.



% Change,
Q1 Income
Q2 Income
Q3 Income
Q4 Income
Q5 Income
Q1 Spending
Q2 Spending
Q3 Spending
Q4 Spending
Q5 Spending

Q refers to the income quintile, from lowest to highest.  The values have been
adjusted using the CPI, with 2011 used as the base year.  Spending can exceed
income when households receive transfer payments or use their savings to
pay for part of their spending.  Transfer payment receipts are the obvious
source of funds in Q1 and Q2.

Overall, income increased by about 39%...but spending increased only by 3.8%.  While about 60% of the total income increase went to the highest income quintile, more than 75% of the increase in consumer spending occurred in the highest-income households.  It’s worth noting that consumption spending actually fell in real terms in the lowest income quintile.
What this tells us is quite simple.  It’s possible for consumption spending to rise as a percentage of GDP and for income inequality to increase at the same time.  All that’s required is for the bulk of the consumption spending to occur in high income households.  And—that is exactly what happened.

Thursday, August 04, 2016

A "Gotcha" moment, not an analytical moment

On the Marginal Revolution blog today, Tyler Cowen posts a link, with this header
2. Consumption as a percentage of gdp has increased with inequality (ahem).
The link is not to a piece of analysis, but to a twitter feed. 

Well, that’s not a very interesting observation, now is it? Because GDP shares are constrained to sum to 100%, if one component of GDP is decreasing as a percentage of GDP, some other component has to be increasing. We might as well point out that government investment and consumption expenditures have been falling as a % of GDP as income inequality has been rising.
We might also point out that investment spending has been rising as a of GDP (with sharp downturns during recessions) since 1970–up from about 12.5% in 1970 to around 16.5% now (investment’s share of GDP is up by 30%–4%/12.5%–since 1970)–and that’s after investment spending has been depressed by two recessions in the past 16 years. Consumption’s share is up from 61.2% in 1970 o 69.3% in 2016–a 15% increase. The investment share of DDP has increased twice as fast (in percentage terms) as the consumption share.

So C+I as a % of GDP is up from 75% of GDP to 86% of GDP as inequality has been increasing–and would be even higher but for the failure of I to recover significantly. Does this tell us anything meaningful? If so, what? All this is, is a “gotcha” moment, not an analytical moment.

Monday, July 18, 2016

Rudy Giuliani:  "You know who you are, and we're coming to get you."

What does this even mean?  Apparently, "you" are radical Islamic terrorists.  But what about the "...we're coming to  get you..." part?  How does he propose to identify who is (and who is not) on his hit list?  How are we going to "[e] to get..." them?  Are we going to bomb?  Then how do we avoid killing, and maiming, people who are our friends?  And if we kill and maim our friends, how long will they continue to be our friends?  Are we going to send US military personnel into...where, exactly?  Iraq?  Syria?  Washington Heights?  With what mission, exactly?  Without, again killing people who only want to live in peace? 

This is cheap rhetoric.  It is designed, not to solve a problem, but to rouse a beast.  The problem with cheap rhetoric, though, is that all too often, the price we pay for it is obscenely high.

Monday, June 06, 2016

The Surprising Lack of Change in Imports and Exports, 2012-2016

For reasons I can't quite remember, I was looking at US import and export data, and the following chart is what I found (at FRED) for US nominal (current dollar value) imports, monthly, from January 1992 through April 2016.

(Click to enlarge)

What I am primarily interested in is the 2012-2016 period.  Both exports and imports have not increased in any significant way in the past four years.  And, recently, both have declined.  The decline in exports is fairly easy  to explain--the dollar has increased in value--since January 2012, the trade-weighted value of the US dollar has increased by 22%.  By itself, this would tend to reduce US exports (which have, effectively, become more expensive) and increase US imports (which have, effectively, become cheaper).  But this has not happened.  I am only a dabbler in international trade, so I have no easy explanation. 

But an explanation would be nice to have.  (Interestingly, the national income accounts quarterly data don't look much like this, so having an explanation of that would also be nice.)

Friday, May 06, 2016

Are the "official" inflation measures in the US biased?

There seems to be a fair number of people who will argue that the "official" inflation data from the BLS is biased downward...either the "right" data are not collected or the calculation incorrectly weights the data or something.  Well, the MIT Billion Price Project has been going for a while now (nearly 10 years), and both the annual and the monthly rates of inflation based on their data look suspiciously like the BLS data.  You can see for yourself by clicking on the link.

Monday, April 18, 2016

On the incoherence of Ted Cruz

Earlier this morning, I happened to see part of Ted Cruz’s appearance on Good Morning America; he was answering questions from the audience, and one , by a man who started by saying he was in a same-sex marriage, asked what Cruz’s stance on same-sex marriage was.  Cruz’s response was (a) that the first amendment guarantees freedom of religion and (b) the Supreme Court (or, as he referred to them “five unelected lawyers in Washington D.C.” had wrongly decided the issue, that it should be left to the states, that one of the strengths of our nation was that different states could have different laws.

I was struck by the incoherence of his comments.  I wanted to ask him if he thought Loving v.Virginia (unanimously, in 1967, invalidating state laws that prohibited “inter-racial” marriages) was wrongly decided, whether states should be allowed to regulate marriage between “racial” or ethnic groups—and, if he thought that decision was correct, what made that decision different from the more recent one.  I wanted to ask him if he thought different states should be allowed to have significantly different laws of contract. 

I wanted to pose a hypothetical:  Suppose two people of the same sex in New York entered into a marriage that was legal and valid in New York, graduated from college, and both received wonderful job offers—in Houston.  If they took those jobs and moved to Houston, would the State of Texas recognize their marriage?  If not, why not?  And if not, what happens next?  Because marital status is implicated in any number of other family situations, and if their marriage is not valid in Texas, then the State of Texas is imposing (in my opinion) undue burdens on them.

For example, it has implications for taxes.  A married couple can file a joint federal income tax return.  Now, Texas does not have a state income tax.  But could this couple still file jointly for federal income tax purposes?

For example, it has implications for end-of-life care issues.  Generally, a spouse can, in certain circumstances, make medical care decisions on behalf of a spouse who is unable to make those decisions. Would that be allowed in Texas?  Could a doctor even legally share information about the patient’s condition with the spouse (who is, after all, not recognized as a spouse in Texas)?

I could go on.  But Cruz wanted to imply that having different definitions of marriage in different states was costless (as, for example, having different speed limits is pretty much costless, or even different zoning laws).  But it clearly is not.  And the burdens would be borne by the people whose marriages are not recognized in some states.

(This, of course, leaves aside the fact that Cruz’s actual position is not leaving this decision to the states, but enacting a constitutional amendment defining marriage as a union or one woman and one man.)