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

Sunday, November 23, 2008


So you go away for a weekend and, when you come back, Citibank is on the verge of death? What to say about it? Then you read Brad Delong, and realize he's written the blog post you wish you had written. Go read it.

Addendum: Mark Thoma rounds up the reactions. No one likes this deal. (I particularly don't like the part in which Citigroup management gets to stay around and screw things up in the future.)

Thursday, November 13, 2008

Higher Education for Hoosiers!

In my ongoing effort to keep up with the latest economic development policy prescriptions for my home state (Indiana), I ran across this today, on the Inside Indiana Business website:

"In order for Indiana to stay competitive in attracting and retaining jobs, 1.2 million more Hoosiers need college degrees. This is one of the findings from the Indiana Chamber of Commerce's
Adult Education and Workforce Skills Performance Report, presented this morning to some 40 business leaders. Senior Vice President of Workforce and Economic Development for Ivy Tech Community College Susan Brooks says currently nearly one million Hoosier adults between the age of 25 and 64 need to further their education and improve training to get better jobs. She says the goal is to bring them back to college and training programs to compete in this higher technology environment."

This seemed very ambitious to me, so I poked around a bit. According to
StatsIndiana, 24.4% of the US adult population (age 25 and over) has completed at least a college education, while in Indiana, only 19.4% has. So there is, in fact, a gap, and a substantial one. Indiana's population, age 25 - 64 in 2007, was 3.336 million. If the US college completion rate were the same as the nation, we'd have about 170,000 more college graduates than we do. If we added 1.2 million college graduates, our college completion rate would be 55.4%. This seems like a truly ambitious goal. I'm thinking whoever wrote that report did not explore what it really means...

ADDENDUM: I'd love it if the state legislature adopted this as a goal and provided adequate funding for it. I'd never have to worry about having work.

Friday, November 07, 2008

The Employment Situation: October

It was all but inevitable that the Bureau of Labor Statistics report on the employment situation for October was going to be depressing. And it is.

The Establishment Employment Report. For the second straight month, establishment employment fell by around 250,000; the job loss for September was revised upward. Since the beginning of the year, job losses now total 1.8 million. Construction employment has now declines for 17 straight months, and is down about 8% over that time. Manufacturing employment has declined for 27 straight months, down 6.4% (and 920,000 jobs). (Of special interest to me, given where I live and work, Primary Metals Employment has declined every month this year, by a total of 2%). Employment in Motor Vehicles and Parts--19 consecutive monthly declines, a total decline of 18%. Employment in Financial services has declined for 13 consecutive months (only 2%, but quite the run of small losses). Even Business and Professional Services employment has declined every month this year. For a couple of positive notes--employment in Educational Services (private) has increased by 3% over the past year, and employment in health care is up 2.6%.

The Household Report. The most-watched number here is the Unemployment Rate (although I think there's a more important number--the Employment Population Ratio), and it rose to 6.5% in October, up from 6.1% in September. This is a higher unemployment rate than we saw during (or after) the 2001 recession (the peak was 6.3%), and the last time we had a 6.5% unemployment rate was in March 1995. We're still far below the post-World-War-II peak of 10.8% (November and December 1982), so that may be some comfort. The Employment-Population Ratio (EPR--the percentage of the population age 16 and over currently at work) has fallen to 61.8%. We have now seen the EPR decline continuously since October 2006--two straight years of decline. The last time the EPR was this low was in October 1993--fifteen years ago.

Overall, the news is as bad as it's been for quite a while, and, even more depressing, it's worse this month than last month, and was worse in September than in August. The trend is not exactly going in the right direction.

Tuesday, November 04, 2008

The economics of voting

I’ve been thinking a lot this week about the standard, rational-decision-maker model of voting. Or, I suppose, more accurately, choosing not to vote.

The model is very simple, and can be described with four statements:

1. The marginal value (expected impact on the outcome of an election) is almost vanishingly small. (This is the benefit of voting.)

2. Voting requires time and effort, and, therefore, there are non-trivial costs to voting.

3. It is highly likely that the costs to an individual of voting are larger than the expected benefits of casting a vote.

4. Therefore, the rational (non-)voter will choose not to vote.

I think I’ve come to the conclusion that there are a couple of mistakes with this argument.

First, suppose more and more people accept the argument, so fewer and fewer people vote. Then, the marginal value of my vote rises, and it becomes increasingly rational for me to vote. And, since I have to decide to vote before knowing whether others are voting, I can take out insurance for my vote being meaningful only by voting.

Second, and more important, however, is this. It may well be in my own personal interests to create a situation in which no one else’s vote becomes the crucial vote in the election. By not voting, I raise the marginal value of the votes of others; the more people who choose not to vote, the greater the marginal value of the votes of those who do. (Note that this is an argument not that my vote becomes more meaningful if you do not vote, but that yours does if I do not vote.) Some outcomes of the election will be undesirable to me. How do I take out insurance against the crucial vote being cast by someone whose vote will lead to an undesirable outcome? I vote, and I vote for the purpose of making other people’s votes non-crucial.

So, I hope you all voted.