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

Saturday, January 09, 2016

Factors leading to relatively strong growth in the econmy in 2015: How important was the increase in government employment?

An article in VOX discussing the causes of the relative strength the US economy in 2015 lists three factors:

1. Declining oil prices (more generally, declining energy prices)
2. Continued low interest rates
3. An increase in government employment (and, more generally, in government spending)

I don't think there's much reason to doubt the first of these. But my own take on the data is that neither the second nor the third factor cited by VOX made any significant contribution to faster growth in 2015, compared to earlier years.

According to BLS data, consumer energy prices fell between the end of 2014 and the end of 2015 as follows:

Fuel oil:  down 24%
Electricity:  essentially unchanged
Natural gas:  down 12%
Gasoline:  down 24%

The Producer Price Index for energy prices has this:

Coal:  down 4%
Electricity:  essentially unchanged
Natural gas:  down 10%
Gasoline: down 33%

The Department of Energy data show crude oil prices declining from the end of 2014 to the end of 2015 by about 44%

Clearly, declining energy prices led to increased purchasing power across the economy. 

The second--continued low interest rates--is a good description of reality.  For example, car loan rates (according to the FRED database maintained by the St. Louis Federal Reserve Bank, were at 4.06% in November 2014 and 4% in 2015.  The average rate on a 30-year fixed rate mortgage rose slightly, from 3.87% at the end of 2014 to 4.01% at the end of 2015.  Moody's 30-year Aaa rate was 3.79% at the end of 2014 and 3.97% at the end of 2015.  But the continuation of low rates does not mean that the economy would necessarily receive any additional stimulus.  That is, the incentive to borrow (in the face un unchanged nominal rates and unchanged expected inflation) was essentially unchanged. 

Finally, and the reason I began looking at this to begin with, was :

But as this data from the Brookings Institution shows, things started to change in mid-2014. After years of shedding employees, state and local governments started hiring again.

Again, this is true.  (The following data were retrieved from the BLS web site.)  Total government employment rose by  99,000 between December 2015 and December 2015.  Federal government employment rose by 0.6%; state government employment rose by 0.7%, and local government employment rose by 0.3%.  Overall, government employment (which is about 2/3 local government employment) rose by 0.4%.  But total employment rose by 1.9% (2.65 Million).  And the increase in government employment was only 3.7% of the increase in total employment--government employment, in total, is a little over 15% of total employment.  Government employment as a % of total employment continued to fall in 2015. 

I would, in fact, argue that the rise in government employment, far from being a major factor in causing total employment to rise, was instead a consequence of rising private sector employment. 

My own conclusion is that of the three factors cited by VOX, only declining energy prices were a significant contributing factor to reasonably robust growth of the US economy in 2015.  Stable interest rates meant that monetary policy did not turn contractionary in 2015.  And the quite small increases in government employment point to continued weakess of government as a source of economic growth, not to government as a major factor in economic growth.

Tuesday, December 29, 2015

Is Inter-Stellar Trade Even Possible?

Many science-fiction books and movies have as a central plot convention the existence of very large, multi-star-system confederations that are linked both politically and economically.  Unfortunately, unless some method of by-passing what is currently believed to be the limit to the speed at which interstellar travel can occur can be found, such systems are impossible.  And that limit is the speed of light, about 186,000 miles per second.
The closest solar system that apparently might have habitable planets is the Alpha Centauri system. Which is approximately 4.25 light-years away.[1]  What about this makes, in particular, economic links between stellar systems impossible?
The terrestrial calendar year has 31,536,000 seconds.  The speed of light is about 186,000 miles per second.  So the distance light travels in one year (one light year, or 1 LY) is 5.8657x1012 miles.  And suppose we want to ship some physical object from Earth to a (hypothetical) inhabited planet located 1 LY away.  How much will that cost, and what are the implications of such a cost?
I own a car (1997 Honda Accord) which weighs approximately 3,000 pounds,[2] and can carry about 1,000 pounds of load (passengers plus baggage), for a  total of 2 tons.  My cost per mile of operating the car, excluding any capital costs or depreciation, and ignoring the value of the time of the driver, is approximately $0.10 per mile, or approximately $0.05 per ton-mile.  But since we’re talking about moving cargo, let’s suppose we manage to develop extremely cost efficient interstellar transports that travel at very nearly the speed of light.[3]  What do I mean by “extremely efficient,” and what would that entail?  By “extremely efficient,” I mean a cost of moving 1 ton 1 mile of one one millionth of a cent [($0.01)/(1,000,000)]. 
What could we move?  The space shuttle had a gross vehicle weight of about 2,000 tons, and could carry a payload of about 24 tons.[4]  So to move the shuttle 1 mile, fully loaded, at a cost of $0.00000001, would cost $0.000002024.  Now we have to move that 1 LY…which would cost approximately $119 million.  And that’s a cost of $5 million per ton of cargo, to travel 1 LY.  Alpha Centauri is 4.23 times as far, so to get something to or from there would be nearly $21 million per ton of cargo…around $500 million for the flight.
That does not include any costs attributable to staffing the transports.  But that is almost irrelevant.  Consider a cargo that is valuable enough that we are willing to pay $21 million (or more, for longer distances—the next closest is Tau Ceti, 11.9 LY away—and wait at least 4+ years to get it.
I would argue, incidentally, that the cost per ton mile is unlikely to be as low as I have suggested here.  The cost of propelling a large spacecraft at a high rate of speed is likely to be considerably greater than $0.00000001 per ton-mile.[5] 
If all this is even anything close to accurate, then the possibility of interstellar trade is remote.  Overcoming that sort of cost issue requires that the cost per ton mile be reduced to an almost unimaginably low level.  And free energy is not yet on the horizon.

[1]List of nearest terrestrial exoplanet candidates,” Wikipedia, August 2015,
[3] Charles Stross makes the case for the great expense and difficulty of interstellar exploration/colonization at
[5] One source projects a cost per pound from launch to earth orbit of $10,000 for the ship’s payload…about $20  million per ton just to get it into orbit, let alone to Alpha Centauri.

Tuesday, December 01, 2015

Dangerous Ideas/Safe Places

You may have seen, or heard, about this elsewhere:…/university-president-blasts-students…

This is the comment I posted there:
I've argued for more than 40 years that one function of colleges/universities if to provide a *safe* place in which people can explore difficult and challenging and "dangerous" ideas. The safe part is important--we have to be able to delve into, discuss, and even espouse unpopular ideas without becoming the target of anger and, yes, hate. The difficult, challenging, and dangerous ideas part is also important, because if our thinking is not challenged, we are unlikely to grow intellectually (and, if it matters, morally). I remember the struggles we had, back when, with university administrations that actively opposed the kind of open intellectual ferment I'm talking about.

What I am afraid is happening now is that university administrations will use what some see as the rise of student agitation for the restriction of some ideas as a justification for going back to a world in which only established ideas are allowed.

I would ask that you be aware that at the University of Missouri, and at a number of other campuses, it's not unpopular, or challenging, or dangerous IDEAS that students are reacting to, it is the openly racist atmosphere that exists as in Missouri, for example), the assault on the ability to explore difficult, challenging, and dangerous ideas in a SAFE environment--not safe from challenge, but safe from physical (n some cases) or psychological (in other cases) danger. I know a lot of people will see my inclusion of psychological danger as a cop-out. But imagine trying to think creatively in an environment in which your presence is deemed by many people to be an intrusion, in which you are deemed to be unworthy of being there. I have never had to deal with that, but I have had students--even at a university campus with one of the most "diverse" student populations in the country--who felt as if they were being treated (by other students, by some of the faculty...) as not deserving to be there.

I will say it again: Colleges and universities should be places in which students (and faculty) can explore difficult, challenging, dangerous (unpopular) ideas safely. If they cease to be that, they might as well be simply vocational schools, where there is one right was to do things, one right way to think, one right way to BE.

I have ranted long enough. Thank you, and good night.

Tuesday, November 17, 2015

And what rough beast...

An ongoing thread on a listserv I participate in (Dorothy-L, where the usual topic of conversation is murder—fictional, of course) concerns the events of November 22, 1963.  The assassination of John Fitzgerald Kennedy, one of four presidents killed while in office (14 other Presidents were targeted, but were not killed).  (  tes_presidential_assassination_attempts_and_plots)
People have been remembering where they were, how they heard of Kennedy’s shooting, and how it affected them.  I was 15, and working on my high school’s student newspaper.  We had a Friday deadline for the paper which would appear the following Wednesday.  Our principal made an announcement of the shooting over the PA system (at about 2:30 EST—about an hour after the shooting occurred), and then switched it so that we heard the CBS news feed.  Needless to say, we did not get any more work done.  We were in shock. 
I had grown up in a very (politically) conservative household and was, at the time, quire conservative (although I had disliked Richard Nixon).  My parents, and my father in particular, had little use for Kennedy or his policies, and they were shocked—stunned—by his death.  Two presidents had died in their lifetimes (Harding, but they were very young, and FDR) and one had narrowly escaped assassination (Truman).  Eisenhower had nearly died of a heart attack.  So presidential deaths were not uncommon in their lifetimes, but assassination attempts…They saw it as an attack, by someone, some group, some enemy, on the country itself.  And they immediately suspected that it was a communist plot—either Russian or Cuban.  I think my father never gave up on that belief.
The weekend was surreal…high school football games cancelled on Friday night…continuous news coverage of the developments…speculation…and then the arrest of Lee Harvey Oswald (at 1:45 PM—I did look this up), barely an hour after the shooting, and Oswald’s shooting by Jack Ruby on November 24.  Lyndon Johnson’s swearing in.  I remember being on the phone a lot that weekend, talking with friends, trying to deal with what seemed like Yeats’ second coming (a poem I already knew, and which leapt into my mind…I can’t recite it any more, but I can look it up:
    Turning and turning in the widening gyre
    The falcon cannot hear the falconer;
    Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,
    The blood-dimmed tide is loosed, and everywhere
    The ceremony of innocence is drowned;
    The best lack all conviction, while the worst
    Are full of passionate intensity.
    Surely some revelation is at hand;
    Surely the Second Coming is at hand.
    The Second Coming! Hardly are those words out
    When a vast image out of Spiritus Mundi
    Troubles my sight: a waste of desert sand;
    A shape with lion body and the head of a man,
    A gaze blank and pitiless as the sun,
    Is moving its slow thighs, while all about it
    Wind shadows of the indignant desert birds.
    The darkness drops again but now I know
    That twenty centuries of stony sleep
    Were vexed to nightmare by a rocking cradle,
    And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born?
It then seemed to me like a prophecy, and a prophecy that then seemed to play out over the next five—ten—fifteen years…the blood-dimmed tide had certainly been loosed.  Somehow, as I lived through the 1960s and 1970s, Kennedy’s death seemed to have been a foreshadowing of the 50,000 American soldiers to die in Viet Nam and the millions wounded, of the nearly 2 million deaths, soldiers and civilians, in Viet Nam, of the deaths of Martin Luther King and Robert Kennedy and the students who died at Kent State (Alison Krause, Sandra Scheuer, Jeffrey Glenn Miller and William K. Schroeder) and at Jackson State (Phillip Lafayette Gibbs and James Earl Green), of the others whose lives were torn apart by wars around the world.

And then we all went back to school on Monday.  And in the cafeteria, I heard people at the table next to where my friends and I were, and someone—I never did know who—said, “Yeah, it’s about time someone shot him.” 

And now, another November, and 120+ people have died in Paris and 40+ in Beirut and 30+ in Nigeria (where thousands have died this year in terrorist bombings).  And again the question is what rough beast, its time come round again, is now slouching…to where we do not know…to be born once again?

Friday, November 13, 2015

Novmber 13, 2015. Paris

Bob Dylan wrote a song, probably in late 1962, probably partly in response to the Cuban missile crisis. That song is “Masters of War,” and here are the lyrics:

Come you masters of war
You that build all the guns
You that build the death planes...
You that build the big bombs
You that hide behind walls
You that hide behind desks
I just want you to know
I can see through your masks

You that never done nothin’
But build to destroy
You play with my world
Like it’s your little toy
You put a gun in my hand
And you hide from my eyes
And you turn and run farther
When the fast bullets fly

Like Judas of old
You lie and deceive
A world war can be won
You want me to believe
But I see through your eyes
And I see through your brain
Like I see through the water
That runs down my drain

You fasten the triggers
For the others to fire
Then you set back and watch
When the death count gets higher
You hide in your mansion
As young people’s blood
Flows out of their bodies
And is buried in the mud

You’ve thrown the worst fear
That can ever be hurled
Fear to bring children
Into the world
For threatening my baby
Unborn and unnamed
You ain’t worth the blood
That runs in your veins

How much do I know
To talk out of turn
You might say that I’m young
You might say I’m unlearned
But there’s one thing I know
Though I’m younger than you
Even Jesus would never
Forgive what you do

Let me ask you one question
Is your money that good
Will it buy you forgiveness
Do you think that it could
I think you will find
When your death takes its toll
All the money you made
Will never buy back your soul

And I hope that you die
And your death’ll come soon
I will follow your casket
In the pale afternoon
And I’ll watch while you’re lowered
Down to your deathbed
And I’ll stand o’er your grave
’Til I’m sure that you’re dead

The rage there has a history, and it has not gone away or ended. But the end of that rage is simply death. That is the frightening thing about the events today in France, about this song, about the world in which we live. The end of rage is not peace, not justice. It is simply death. Look at the final verse. There’s no hope there. There is only rage and death.

And I hope that you die
And your death’ll come soon
I will follow your casket
In the pale afternoon
And I’ll watch while you’re lowered
Down to your deathbed
And I’ll stand o’er your grave
’Til I’m sure that you’re dead

There are times when I wish I had a belief in a god of peace and justice. But all the gods seem to be gods of war and hatred and death. And so I do not believe. I hope, but hope comes increasingly more difficult. And I do not hope for more deaths, but I’m afraid a lot of people out there will agree with Dylan:

And I hope that you die
And your death’ll come soon
I will follow your casket
In the pale afternoon
And I’ll watch while you’re lowered
Down to your deathbed
And I’ll stand o’er your grave
’Til I’m sure that you’re dead

Monday, October 19, 2015

High and Low Interest Rates...and the Future.

This is a very nice analysis of the issue and confusions surrounding it.  Here's the conclusion:

"So the perspective of the individual saver is a terrible guide to planning for the future, even though it tends to dominate politics.  From a social theory standpoint, this is a nice example of the conception of ideology based on salience.  People with sufficient income to save have to solve the problem of self-control, and the effect of interest as a reward for this virtuous behavior is what stands out to them.  People whose future income depends on making investments today, like students borrowing to finance their education, see interest as the cost of borrowing.  Each view of interest is ideological, in the sense that it generalizes the particular interpretation of a social phenomenon (like interest rates) from personal experience.  It happens in this case that the borrower’s perspective aligns with reality at an economy-wide level, and the saver’s perspective is misleading."

Thursday, September 10, 2015

Trigger Warnings

I am glad that I retired before the subject of trigger warnings became a major topic of conversation in higher education, and even gladder that it would have been close to irrelevant in most economics classes (the exception, for me, probably, being when I taught US economic history and had to deal with slavery).  This article at VOX is a fairly helpful introduction if you haven't had any occasion to follow the issue.

I have always argued that one of the things I valued in college, and that I think is one of the most valuable parts of attending college, is the opportunity to encounter different points of view, and provocative issues and opinions, in a safe environment.  Note that there are two parts of this--the encounter with ideas that may make you uncomfortable and the safety of the environment in which you encounter them.  My feeling about warnings on syllabi (etc.) is not that they give students to opt out of difficult, challenging, provocative, or uncomfortable material, but that they are an effort to help prepare a safe place to encounter all those things.

In some cases, a faculty member may have to go beyond a warning, and discuss, either on the syllabus, or in a handout or in a video or in a one-on-one session with a student, what the purpose of the material is.  It may require thinking about how one presents the material (the discussion of Ovid in the VOX piece suggests to me that perhaps a consideration of how one approaches the material is worth while; the same may be true of some images in art history)--not to avoid the material, but to place it in a context that makes students feel safer (while still being challenged) with (by) the material.