Obama and manufacturing

by Russ Roberts on June 29, 2011

in Stimulus, Technology, Uncategorized

President Obama spoke in Iowa the other day about the economy. In a sense, it was the launching of the re-election campaign. I thought it might be interesting to evaluate the economics and see what he thinks is going to be effective politically. The full text is here. I’ll be commenting on most of it. Here we go:

Let’s start with the White House title for the speech:

Remarks by the President on the Critical Role the Manufacturing Sector Plays in the American Economy

The manufacturing does not play a particularly critical role in the US economy. Employment in manufacturing as a percentage of total employment has been falling steadily since the end of World War II. But a lot of people think there is something special about manufacturing so the title strikes a resonant chord for many people even outside manufacturing.

The opening of the speech itself is a lot of nice stuff about Iowa and the innovative and productive nature of the factory where the speech took place, an Alcoa aluminum factory in Bettendorf, Iowa. Then he gets to it:

So you know that times change. You’ve seen times change. Alcoa has grown as America has grown. Now, you also know that sometimes change can be tough. Sometimes, the old ways of doing things just won’t cut it anymore. I was just talking to Klaus; he was talking about some sheet metal that you guys produce, that for a while you guys lost market share completely. You got your team together, redesigned it, and now you have 80 percent of the market back. That’s adapting to change. (Applause.) And see, when change happens, you’ve got a choice. You can either keep on doing what you were doing and hope things work out, or you can make the decision that not only you can meet the challenges of the future, but you can help set the pace.

That’s true for this company, and it’s true for America. For better or for worse, our generation has seen more than our fair share of economic change. Revolutions in technology have changed the way we live and the way we work. A lot of jobs can now be located anywhere there’s an Internet connection. And companies have become more efficient, so they get by with fewer workers.

This is reminiscent of the President’s recent remarks about ATM’s putting bank tellers out of work. Of course it’s true that technology can make life hard for bank tellers or telephone switch board operators. But as I alluded to above, that process has been going on for the last 60 years (and longer). Most of the economic times for America since 1960 have been pretty good for most Americans. And if it wasn’t good for someone, it turned out pretty well for their children and grandchildren. (If you’re interested, I talk about the role of technology (and trade) on our lives in The Choice and in The Price of Everything.)

Then the President talks about the human costs of a dynamic economy:

Now, in some ways, these changes have made our lives a lot easier. It makes products cheaper. You can produce them faster. But for a lot of our friends and neighbors, these changes have also caused a whole lot of pain. Today, for example, a high school diploma no longer guarantees you a good job. I met a couple of the guys here whose fathers had worked at the plant. Now, when the previous generation came to work at this plant, it didn’t matter what kind of education you had, it just mattered whether you were willing to work hard. But these days it’s hard to find a job without a high school diploma. And in a lot of cases, it’s hard to find a job without a college diploma.

He says:

Now, in some ways, these changes have made our lives a lot easier. It makes products cheaper. You can produce them faster.

I’d say in most ways, these changes have made our lives a lot easier. But the next part is the interesting part. He’s right. It’s harder to find a job if you’re only a high school graduate compared to say 50 or even 30 years ago. But it’s also harder to find a job if you’re trained as a blacksmith. It’s a good thing, in general, for most Americans that our productive processes use more technology and that many jobs that were once filled by high school grads don’t exist anymore. Having said that, it’s simply a fact that if you only have a high school diploma, it’s a lot harder to find a good-paying job than it used to be. The interesting question is what are the implications of that fact.

The President continues:

Over the past 13 years, about a third of our manufacturing jobs have vanished. It’s not just that they’ve gone overseas, it’s also that you guys are just better at producing stuff now than you used to be, so you use fewer workers. And meanwhile, a lot of workers have seen their wages not keep up with rising costs.

So I spent a lot of time thinking about these issues when I ran for this office in the first place. When I ran for President, before I came to Iowa, when I was still a senator in Illinois, I kept on thinking about all the folks I would meet in my travels who were feeling that squeeze of wages flat, costs going up. And then in the closing weeks of the campaign, the bottom fell out of the economy –- and the middle class got hammered some more. And I know talking to Klaus, Alcoa got hit pretty good too.

I really like that first paragraph–it’s a concession that you can’t blame all the ills of the manufacturing sector as a source of employment on foreigners stealing our jobs. The next part is OK. The President continues:

That demanded that we make some tough decisions –- decisions that we now know have pulled our economy back from the brink and put us on a better path. We’ve created more than 2 million new private sector jobs over the last 15 months alone, including almost 250,000 in manufacturing. (Applause.) That’s in the last 15 months.

And here at this plant, the workers that were laid off during the darkest days of the recession have all been hired back. And in fact, you guys are telling me that you’re thinking about hiring some more folks in the near future. That’s worth applauding. Somebody was — (applause.)

But for a lot of Americans, those numbers don’t matter much if they’re still out of work, or if they have a job that doesn’t pay enough to make the mortgage or pay the bills. So we’ve got more work to do. And that work is going to take some time. The problems that we developed didn’t happen overnight. We’re not going to solve them overnight either. But we will solve them.

What were those tough decisions? Spending over $800 billion dollars in careless ways? Maybe he’s talking about bailing out GM which was unpopular. And I love the confident “decisions that we now know have pulled our economy back from the brink and put us on a better path.” That’s all he has to sell. It could be true, but it’s not something we know. But my favorite part is this:

So we’ve got more work to do. And that work is going to take some time. The problems that we developed didn’t happen overnight. We’re not going to solve them overnight either. But we will solve them.

Unfortunately it isn’t necessarily true that problems that take a long time to develop take a long time to solve. But it sounds pretty good. It would be nice to let us know how he plans to solve the problems rather than simply reassuring us that it will happen. Why is he optimistic?

We’ll solve them because after all we’ve been through, we are still the United States of America. We’ve got the largest economy. We’ve got the best universities. We’ve got the most successful companies. We’ve got the best innovators and entrepreneurs. We’ve got the best workers in the world. (Applause.) Together, we’ve got the capacity not only to get back to where we were, but to get to where we need to be.

He’s basically right. There’s a lot of talent on the team. But it’s our talent, we, the people. What is his role? What’s the government’s role? He continues:

That’s why I ran for President — to get us where we need to be. I ran because I believe in an America where working families aren’t just treading water but they’re moving forward, and where our businesses lead the change on new technologies like clean energy and advanced manufacturing of the sort you’re doing right here at this plant.

Doesn’t answer my question. What is the President’s role in getting us where we need to be? He continues:

I believe in an America where our government lives within its means while investing in things that will help us grow, like a world-class education system and cutting-edge innovation and the best transportation and communication systems anywhere in the world. That’s how we’re going to make America the best place to create good, middle-class jobs. That’s how we’re going to win the future — by doing the smart things right now to help the middle class grow and feel more secure.

That first sentence is hard to take. Lives within its means? Liar liar pants on fire. As for the rest of the sentence, if those things are so important and precious, then why did you spend so little of your $800 billion spending spree on those things. Why did 2/3 of it go to the states and tax rebates? The President continues:

And a big part of that, a big part of our future has to be a robust and growing manufacturing sector. We’ve got to make things right here in America. (Applause.) We’ve always made things here in America. It’s in our blood. This plant has been in operation for 60 years. And what you’ve learned is that if you want to beat the competition, then you’ve got to innovate. You’ve got to invest in new skills, you’ve got to invest in new processes, you’ve got to invest in new products. I was just learning that some of the equipment right behind us — this was a huge investment. How much did you guys — $90 million. Think about that. That’s what made you guys competitive, having the best workers but also having the best equipment. You had to up your game. And that’s what we’ve got to do as a country as a whole. I want the cars and planes and wind turbines of the future to bear the proud stamp that says “Made in America.” That’s what I want. (Applause.)

This is a little confused. Forget about whether manufacturing is a big part of our future. He champions the acquisition of a big piece of equipment that made the workers competitive. That’s the problem he was complaining about earlier–innovation to stay ahead of the competition. And then he sums it up by saying the reason this plant is doing well is that they upped their game and that’s what the rest of us have to do. We have to up our game, whatever that means so that stuff will still get made in America, evidently the same stuff we’ve always made. Then it gets worse:

That’s why two years ago, we stood by the auto industry and kept some of our nation’s largest automakers from being sold for parts. And today, for the first time in years, the Big Three automakers are adding jobs and turning a profit and putting steel workers to work. (Applause.) We also told those companies, though, that they’d have to make some changes to compete, so we brought people together and set the first new fuel-mileage standards in more than 30 years. And that means fewer trips to the pump and less harmful pollution. And this plant has something to do with it, because I was just seeing some doors and some hoods made right here — more lightweight, more efficient, saves on fuel economy. And that means your business is improved as well. Everybody wins.

GM wouldn’t have been sold for parts. They would have gone into bankruptcy, and creditors and the union and their workers would have taken a haircut. But just look at the logic. He’s applauding Alcoa for upping their game. But the bailout of GM and Chrysler is the opposite of upping your game. It’s running to your parents to change the rules when you don’t like losing.

The rest of it isn’t very interesting. Read it if you want. He does get into his role. Pretty small:

That’s also why I announced last week a new partnership between our top engineering schools, our most innovative manufacturers, and the federal government to get American products from the drawing board to the factory floor to the marketplace as quickly as possible.

Hmm. I wonder what the federal government has to to do with it. And then there’s this:

And so three weeks ago, we announced new commitments from businesses and universities to make it possible for 500,000 community college students — half a million students — to earn industry-accepted credentials for manufacturing jobs that companies across the country are looking to fill. So basically what happens is the companies, they’ll say to the community colleges, here’s what we need. The community colleges will design a training program that certifies that if you get through that training program, and you’re working hard, you are prepared and equipped to get that job. And so we’re also making it easier for workers to get retrained and move up into better positions.

Again, no idea what really happened here or what it has to with Washington.

He ends by saying that just like Alcoa uses teams, America is like a team and if we all work together instead of the kind of partisan squabbling you see around Washington these days, then we’d all be OK. Blah blah blah.

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{ 112 comments }

Noah June 29, 2011 at 12:40 pm

Change the numbers and every President since Eisenhower could have made that speech.

Steve C. June 29, 2011 at 12:43 pm

Shorter version:

I don’t know what the hell to do, but since I’m President people expect me to “do something”. So, here’s some platitudes and some patriotic evergreens. Give me more time and please don’t confuse me with George Bush.

He’s on TV now telling me that his job is to increase confidence. Oddly, there’s little he’s done to reach that goal.

Arthur Felter June 29, 2011 at 12:45 pm

Is it just me or did Obama say a lot of stuff but yet end up saying almost nothing at all? I want to be open-minded and give the guy the benefit of the doubt, but all I read was rhetoric and fluff.

Either homie doesn’t have any details, or he knows that his details won’t get him re-hired…

Pete June 29, 2011 at 1:32 pm

But that’s what he did the entire 2008 campaign. Why should this speech be any different?

To be fair, this is not unique to Obama, most politicians speak in platitudes and generalities. Specifics can only get them in trouble.

Mikenshmirtz June 29, 2011 at 2:55 pm

If, after the past 2 1/2 years, you’re stuck on being “open-minded” about “homie” and think he’s in any way earned the benefit of any doubt…. please don’t vote next year.

Ron H. June 29, 2011 at 4:17 pm

*like*

Troll Finder June 29, 2011 at 5:41 pm

+1

tb June 29, 2011 at 12:51 pm

I believe government is overhead. If it isn’t, people will want to take equity positions in all the wonderful ideas poiticians come up with. Government is to the economy as a personnel department is to a corporation. I have never heard of a successful company hire line or upper management out of its personnel department; I do know of some unsuccessful ones that did.

Frank33328 June 29, 2011 at 4:03 pm

Government is more of a necessary evil rather than (just) overhead. Like locks on your home. In a perfect world there’d be no need for locks. By the same logic, you wouldn’t spend more on the locks than the home and its contents were worth.

vikingvista June 30, 2011 at 12:56 am

“Government is more of a necessary evil”

You’re half right.

tb June 30, 2011 at 12:37 pm

Yep, I agree. Further, I think overhead is a necessary evil. I’d speak more to the vanities and presumptions of politicians, particularily ones who, like Obama , are a product of a certain elite education and ideology. They are too overhead; it’s like a personnel department at a corporation trying to manage the business. It’s bound to fail. And to flesh out the analogy, here it’s like a personnel department trying to run the business and they got guns!

kyle8 June 30, 2011 at 3:07 pm

You are correct. As I like to say it, an economy is successful to the direct extent that it can overcome the cost of government.

muirgeo June 29, 2011 at 1:00 pm

Russ said,

” And I love the confident “decisions that we now know have pulled our economy back from the brink and put us on a better path.” That’s all he has to sell. It could be true, but it’s not something we know.”

Russ also said,

“…. manufacturing does not play a particularly critical role in the US economy. ”

Isn’t your second statement on manufacturing not being critical also “not something we know” ?

Obama made his claim and the economy is at least going in the right direction to support it. Your claim does not square with the current economic trends.

I think you are guilty of creating a double standard.

mcwop June 29, 2011 at 1:12 pm

LOL, Obama can run on the same platform as last time:

- Get us out of Iraq
- Get us out of Afghanistan
- Lower unemployment
- Close Guantanamo
- And now get us out of Libya, or maybe that will be the Republican platform

Methinks1776 June 29, 2011 at 1:32 pm

I thought his entire platform was “hope n’ change”.

tdp July 1, 2011 at 8:59 pm

His entire platform was: “I’m not George W. Bush”

Subhi Andrews June 29, 2011 at 3:52 pm

Add two more -
- Get us out of Pakistan
- Get us out of Libya.
- possibly by Nov 2012, out of Syria.

Kevin Mann June 29, 2011 at 4:28 pm

Nah, there’s no double standard here. I understand that you’re saying that both imply knowing what the world would be like in the absence of something, which is rather unknowable. For Obama’s example, it would be knowing how things would’ve fallen out without the stimulus. For Russ’s example, it would be knowing what the US would be like without a manufacturing sector.

The two aren’t quiiiite comparable, though. For one, Russ notes that manufacturing is not a *particularly* critical sector of our economy. He doesn’t say that a sudden collapse in that sector wouldn’t hurt, but rather that it is not the lynchpin of our economy and doesn’t really deserve special treatment as such. As evidence, he offers up the decreasing employment in manufacturing ever since WW2. In short, it has become a smaller and smaller portion of employment in the US. This is further backed up by manufacturing’s fall as a share of GDP. True, knowing just how critical manufacturing is would require tracing all lines of exchange involving that sector, but I don’t think his statement that manufacturing is no more critical than any other sector is unfair. Obama could as well have held this speech on the front steps of IBM or Microsoft and talked about software and engineering.

In short, there is evidence that manufacturing is indeed not deserving of special treatment on the economic stage.

For Obama’s statement, he’s stated that the decisions made over the past several years have helped the economy. Not only can we not know how the economy would have recovered in the absence of those decisions, but there’s good arguments both for and against their effects. In short, it’s a MUCH more debatable, gray-area topic. Plainly, we just don’t know with absolute certainty. (Though obviously those that comment on this blog, such as myself, hold that those decisions were harmful.)

In short, I’d look at the debate and the numbers and give the nod to Russ here.

muirgeo June 29, 2011 at 5:58 pm

” For one, Russ notes that manufacturing is not a *particularly* critical sector of our economy.”

How can you say that? Manufacturing is indeed a smaller per cent of GDP and of jobs then it ever has been? But when those facts coincide with an economy that happens to be in the biggest rut in 60 years its hard to make the claim that, “…. manufacturing is not a *particularly* critical sector of our economy.” Maybe our economy IS in a slump because of our lost manufacturing base. You are making a positive claim with negative correlation. At least Obama’s claim is correlated with a positive trend… and in fact maybe his trend would look better if our manufacturing base were NOT so eroded or was coming back.

Subhi Andrews June 29, 2011 at 6:40 pm

Muirgeo,

Maybe our economy IS in a slump because of our lost manufacturing base.

This is possible. But then you also said slump is because of Glass-Steagal, but then you also said it is because of Income inequality, then you also said it is because of Alan Greenspan was a follower of Ayn Rand, then you also said it is because of tax cuts of early 80s, then you also said Clinton’s tax increases were great, then you have no position on Clinton’s capital gain’s tax cuts, then you also said its because of free trade. Now they all could be factors, or at least some of them could be. There could be a million other factors playing their little roles in the slump. How do you know for sure which ones, and by what magnitude? The only way to test the hypothesis is by running regressions with data for each of those factors and find if you get a good coefficient of correlation for some of these things. So do you have any such regressions? What are the weaknesses and strength’s of such studies?

Now, Austrians are not big into empirical testing, but modern day monetarists and keynesians are big time into it. Just looking at a series of numbers, or a chart of those numbers prove nothing. You may or may not agree. If you don’t agree, which you have done here before, makes you look like a complete nincompoop.

You also need to prove the validity of the data by their source, method used to collect it, and the data you rejected and why you rejected them.

Seriously, I’ll be interested in seeing, reading and hearing your hypothesis and its proof.

Here is a helpful link.
http://en.wikipedia.org/wiki/Statistical_hypothesis_testing

Thanks,

muirgeo June 29, 2011 at 9:27 pm

Thanks for making my point that there was a double standard in Russ’s post.

I’d be glad to review the evidence for Keynesian economics with you on one of our own blogs if you are up for the challenge.

http://ablankspotonthemap.blogspot.com/2011/06/neoliberal-economy-in-nutshell.html

But briefly how does the standards you propose… which I agree with… work for Austrians and their positions. What’s their evidence based on if not empiricism?

Subhi Andrews June 29, 2011 at 9:47 pm

Austrian’s are not a monolith. There are miseseans, Rothbardians, and Hayekians. There are large and small difference between their approaches to economics.

Hayekians, in general, tend to be more open to the use of math, statistics, and testing, while realizing the limitations of working with large aggregates. For instance there is no such thing as aggregate demand in the real economy, only demand for specific things. Similarly no 1 large variable called labor, but labor with skills to do some specific things. Same thing could be said of capital. Sometimes the information you lose by aggregating is pretty significant. people who are used to using/thinking in aggregate terms are often blind to the intricacies and complexities that are hidden within those aggregates.

Some Rothbardians are also open to math, like Robert Murphy, who blogs at http://consultingbyrpm.com/blog .

Austrians, especially Miseseans and Rothbardians tend to prefer logical deduction.

As for debating you on your blog, I’ll have to pass. I have a family, full-time job, and I am a part-time graduate student taking summer classes.

muirgeo June 30, 2011 at 11:32 am

Most of the “factors” related to our weak economy are in my opinion related to decreased demand which is mostly a result of decreased wages which likewise has multiple causes many of which are policy related..

You seem to stress caution over making broad claims but then go on to state emphatically, “…. there is no such thing as aggregate demand in the real economy, only demand for specific things…” which seems absurd on its face. It’s like saying there is only molecules but no rabbits… there is no such thing as rabbits only molecules…

Subhi Andrews July 1, 2011 at 9:15 pm

Muirgeo,

You are just proving my point. That analogy is incorrect for two reasons – 1. Not every molecule is create equal -there is hydrogen (H2) and there is water ( H2O) etc. 2. You are aggregating the world into some undifferentiated molecules, which is the opposite of what I was trying to do – which is differentiate demand for TV from that for cabbage.

In other words, there are rabbits & human beings on planet, not just a large aggregates of electrons, protons & neutrons. Hope that clears up some confusion – such aggregates are meaningless.

Subhi Andrews June 29, 2011 at 8:26 pm

Muirgeo,

I remember one of the first hypothesis testing case from Microeconomics course. It was a real case involving Oakland As. It was about a real pitcher for Oakland A’s who claimed that people came to watch him play the game, so he wanted to be paid more. Case started with a convincing argument by his lawyers that ticket sales went on days in which he was scheduled to play. Just by looking at the data, you could say that sales was really higher on the days in which he played.

We had to run 100s of regressions with the ticket sales data and a bunch of dummy variables to find if there was any correlation between ticket sales and his pitching. We had to think about all the other factors that could potentially affect the sales of ticket. At the end of the exercise that it became clear that the correlation between the pitcher being scheduled to play & ticket sales was actually negative. Why? The pitcher, by coincidence, played on days when there was free beer promotions, or on holidays, or when opposing team was one with great brand recognition ( like Yankees ). His pitching had nothing to do with ticket sales.

You have a tendency to post some chart by some other economist or non-economist without any comments or explanation. You think somethings are just self-evident from a chart, that it proves something – when it may or may not. You think that these correlations are just simple. You often use phrases like “truth based” etc. There are no black & white truths here, just some complex relationships that change in ways that are hard to track. There are no controlled experiments in economics. There are 1000s of potential variables when one of them changes, others are changing too, and it is hard to say which is the cause for the phenomenon under study. Then there is the problem of multi-co-linearity between these variable. These things are hard to spot.

These are all problems that real empirical economists deal with. Since you are so interested in economics, I urge you to actually go beyond blog posts and study the material as hard as a new student of economics would. Read something that would take more than 1 hour of your continuous attention. “Return of Depression Economics” or “Road to Serfdom” is not going to teach you economics at that level. You might actually have to pick up a text book, read scholarly papers, not to just blindly agree with them, but to get a grounding in the methodology.

Isaac June 29, 2011 at 10:15 pm

I enjoyed this post thoroughly.

maximus June 30, 2011 at 1:35 am

Subhi Andrews,
Who was the pitcher?

Subhi Andrews June 30, 2011 at 1:42 am

Maximus,
I’m not a baseball fan. So I don’t remember the name of the pitcher. But here is the case if you are interested.

http://hbr.org/product/oakland-a-s-a/an/UV3696-PDF-ENG?Ntt=oakland%2520a

Scott June 30, 2011 at 6:15 am

Muir, for once I can agree. It is fascinating that some of us can agree that the ownership of tangible goods defines wealth, yet deny that there is any value in the making of those tangible goods.

It is fascinating to me that the US grew most during the turn of the century when americans were busy creating things, that china has become wealthy through the creation of goods, yet that I should accept that technological change in the US economy makes history null.

Somehow I am supposed to believe that the method by which the US witnessed the greatest advancements is the same under which it cannot continue to advance. I apparently am very crimethinkful.

Jack Burton Mercer June 30, 2011 at 10:23 am

Nobody has denied there is value in the making of tangible goods. Russ pointed out that, empirically, manufacturing is a smaller part of our economy than now than it was formerly. It should be noted that 2007, before the downturn, US manufacturing output was its highest in history. In other words, *we* made more manufactured goods than ever before. Total employment is less because *we* are better at doing this than ever before. Manufacturing is a smaller proportion of the economy than before because services have grown at a much more substantial rate.

Scott June 30, 2011 at 10:46 am

ok but how about manufacturing as a proportion of the gdp or manufacturing as a proportion of our durable goods consumption?

It woudn’t mean too much if it were just to be said we manufactured more goods.

tdp June 30, 2011 at 11:15 am

Manufacturing has a very low profit margin compared to services and other types of tertiary economic activity. A nation dependent upon manufacturing is poorer than a nation dependent upon white collar jobs. The fact is the manufacturing that is economically viable in the US is of things like aircraft and nanotechnology, which require more machines and a few highly trained workers. Trying to prop up the manufacturing of steel, automobiles, clothing, furniture, cheap plastic trinkets, etc., is detrimental to everybody because it results in higher prices, reduced choice, and a whole lot of wasted money and effort. Nations that don’t try to prop up or subsidize flagging industries but instead open them up to international competition have seen phenomenal growth rates compared to the nations that try to stop the clock on economic development.

Besides, America’s dominance of manufacturing from about 1940-1970 was an aberration caused by World War II and its destruction of the infrastructure of our competitors in Europe and Japan. Once they rebuilt newer, more efficient factories (with our money) and the Chinese, Koreans, Taiwanese, and Singaporeans got in on it, we became less competitive on the world manufacturing market and developed other industries. The internet, dot-com boom, and rise of technology, especially for purposes of entertainment and in computers, began with American entrepreneurs.

Part of the reason Britain lost its position as the preeminent world power in the 20th Century was because its economic dominance in the mid-19th Century ended as competitors such as the US, Germany, and Japan industrialized and became more efficient and modern. Britain did not have the same economic potential as the US (smaller and with fewer resources), but part of their decline was due to their failure to keep with the times economically. Given Britain’s relative size and resources, some decline was inevitable as the world caught up, but this is less true with the US. By trying to go back to 1955, however, we can hurt our economy.

muirgeo June 30, 2011 at 11:38 am

Yes and the loss of manufacturing is supposed to be magically filled with service sector jobs. I guess we are all to become economist and Wall Street paper pushers.

But if anything it’s harder and harder for the average person to get through highschool and college to be able to work a service sector job and thus we are in for a down word death spiral.

Emil June 30, 2011 at 11:46 am

Scott, ever hear of the law of diminishing returns? It is a difficult concept for a lot of people but it is (in my humble opinion) one of the more central parts of economics (together with concepts such as alternative costs, sunk costs, incentives and revealed preferences)

Scott June 30, 2011 at 11:48 am

services cannot sustain a high profit margin forever. I can trade my haircut for your massage, but it won’t make either of of wealthy. some services are value added but only in the sense that they allow tangible goods to be made or made cheaper, better.

Scott June 30, 2011 at 11:59 am

Emil, yes but could you make the connection between the law of diminishing returns and my posts? I must have missed something.

Emil June 30, 2011 at 12:11 pm

Scott

“Emil, yes but could you make the connection between the law of diminishing returns and my posts? I must have missed something.”

It has a lot to do with this statement of yours:

“It is fascinating to me that the US grew most during the turn of the century when americans were busy creating things, that china has become wealthy through the creation of goods, yet that I should accept that technological change in the US economy makes history null.”

It is much more difficult to continue to grow at the same pace when you are already rich and developed than when you are poor and undeveloped. Therefore the fact that the US economy grew a lot when it was making lots of stuff isn’t really very meaningful for today’s situation

Kevin Mann June 30, 2011 at 11:51 am

C’mon, Muirgeo. Making an emotional appeal doesn’t cut it. What feels right and what IS right don’t always coincide, despite what demagogues may shout from their bully pulpit, and this is one of those cases.

As has been pointed out time and time again on this blog, manufacturing as a SHARE of GDP has fallen even as absolute GDP and absolute manufacturing value produced, adjusted for inflation, have both risen! So while manufacturing is a smaller percentage of the economy in almost all terms, manufacturing has in fact still been growing! In fact, up until the 2008 recession, manufacturing had been on a continual rise! So I’m quite confident that our recent slump has nothing to do with our “lost” manufacturing base.

Much like manufacturing, the share of GDP and employment represented by agricultural has steadily fallen over the past century. Using your logic, I could as well have complained that slumps of the early 90′s arose because we “don’t grow things anymore!”

Scott June 30, 2011 at 12:02 pm

kevin can you point me to your data?

muirgeo June 30, 2011 at 12:21 pm

Kevin , the idea that manufacturing in the US is growing appears to be fallacious based on the way the data is collected and reported. Some 40% off all imports are made by American companies in other countries and somehow this counts in are productivity numbers. It’s baloney and Don never mentions that when he repeated mis-informs people on manufacturing numbers…. or at least refuses to explain this.

If something is produced by an American company in another country by foreign labor its NOT the same as being produced by our citizens in our country.

SheetWise June 30, 2011 at 6:33 pm

I think our economy is in a slump because of the lost jobs in agricultural sector over the last century — and what has Obama done about that? There’s a positive trend he could do something about! Let’s get back in the fields and harvest crops. This has been ignored for the last 100 years — and I believe Obama is the man who can shed some light on the problem and give this issue some traction.

Methinks1776 June 29, 2011 at 1:35 pm

Watcha mean “hard to take”, Russ? Barry views the entire output of the country as government’s means. He’s just “challenging” Republicans right now to get his hands on more of it.

W.E. Heasley June 29, 2011 at 2:49 pm

George Orwell likely summed up Barack Millhouse O’Carternomics: “Some ideas are so stupid that only intellectuals believe them.”

tw June 29, 2011 at 3:27 pm

Now let’s not be 100% negative on Jimmy Carter. He did push for and sign the airline deregulation act in 1978 that helped bring about more flights and lower airfares in the long run.

Greg Webb June 29, 2011 at 3:17 pm

The role of President Obama and the government is to create the impression that government is actually doing something constructive, which diverts attention from its normal activities of pandering to special interests and bailing out crony capitalists.

muirgeo June 29, 2011 at 6:01 pm

The role of the president and the government is to represent people not corporations or the people with most money. When it does that we’ll all be better off.

Government matter… policy matters… denying that is denying reality.

yet another Dave June 29, 2011 at 6:12 pm

When it does that we can all ride our unicorns to the end of the rainbow and play coin-toss with the leprechaun’s pot’o'gold.

Sheeesh man, how can you cling to that ridiculously absurd utopian fantasy? I’m serious, it’s surprising that even you are stupid enough to believe such an impossibility.

muirgeo June 29, 2011 at 9:36 pm

Dave ,

Your position is like saying it doesn’t matter under which government you live .. your odds are the same weather in North Korea, China, Peru, the USA or Denmark… do you believe that.

I stating something pretty clearly factual and you’re trying to say I am absurd… again policy matters. Some policies send us into boom bust cycle with great depressions and and some policies give us shared prosperous growth.

I never said anything about utopia. That’s the difference between us. I understand the messy nature of policy and democracy. You seem to think things will be great under a libertarian system… but you have no real world evidence for your beliefs but I DO have evidence for mine…YOU ARE LIVING IT..

Subhi Andrews June 29, 2011 at 9:56 pm

I stating something pretty clearly factual and you’re trying to say I am absurd… again policy matters. Some policies send us into boom bust cycle with great depressions and and some policies give us shared prosperous growth.

So true. But sometimes things happen for no reason. Someone who works out all his life, eats his daily intake of fruits and vegetables, eats his vitamins, avoids overdosing on fat/sugar, sometimes find himself having to deal with terminal cancer or a heart attack rather early in his life. Some kids are born with type 1 diabetes. Policy does matter, but you can’t NECESSARILY say that a particular policy caused a particular outcome. You tend to do that quite a bit on this blog, as if policy is the only thing that matters.

“World is complex, not some circular flow”

yet another Dave June 30, 2011 at 11:34 am

George,

My comment addressed only your first paragraph, where you repeated the absurd utopian fantasy of “government is to represent people not corporations or the people with most money.”

It is an absurd utopian fantasy because it requires politicians to be noble saints who resist the corrupting influence of power and money. IMO, only the most hopelessly naive or incredibly stupid would believe such a fairy tale.

Your response appears to assume I was commenting on your second paragraph, where you said “Government matter [sic]… policy matters… denying that is denying reality.”

Here again you continue your astonishing pattern of misrepresenting what those you argue against say. Obviously policy matters – I’ve not seen anybody here at the Café say otherwise. Quite the contrary in fact; much of the discussion here directly addresses various policies because they make a big difference. Evidently you’re incompetent to tackle actual arguments presented so you build a nice strawman to knock down countless times.

Until you show some evidence that you even begin to slightly comprehend the positions you oppose you simply cannot be taken seriously. The fact that you still don’t have any such comprehension after things have been explained exceptionally clearly by numerous posters here doesn’t reflect well on your mental capability.

Greg Webb June 29, 2011 at 7:28 pm

Yes, and we all know how well that has worked out. President Obama, a man who cares about the people, bailed out GM, Chrysler, etc. And, how about $500 million for shrimp research?

Actions matter…not high-sounding rhetoric…denying reality matters.

muirgeo June 29, 2011 at 9:38 pm

It could have been better it could have been worse. But with record breaking filibusters and obstructionism by the republicans we will never know what the true progressive policy or even Obama’s true policies would have done.

Subhi Andrews June 29, 2011 at 9:59 pm

What about the fact that Obama had a democratic majority until 2010? This is one of the problems with your sweeping statements. Do you treat progressive manifesto like a bible? Is there something that you really disagree with, not because you are a communist and don’t think progressives are radical enough, but because you actually agree with the other side? Why should we believe that you are not just a biased progressive puppet? Why should we take you seriously? Why should we believe this is a debate that is happening between you and those disagree with you here? Why should we believe that you are an open minded person?

Thanks,

muirgeo June 30, 2011 at 2:30 am

Subhi said, “What about the fact that Obama had a democratic majority until 2010?” … and … “Why should we believe that you are not just a biased progressive puppet?”

Because your first statement shows you are the one loose or ignorant of the facts. It doesn’t matter if they had the majority if the republicans and a few blue dogs set a record for filibusters.

If a progressive agenda was passed we’d have single payor or at least public option health care, the stimulus would have been $1 trillion with no tax cuts, the Bush era Tax cuts would be over and many other progressive policies would have been passed.

So my point WAS well made. We will not no what a true progressive policy would have done because it was not passed. That’s a statement of fact.

Subhi Andrews June 30, 2011 at 2:40 am

Because your first statement shows you are the one loose or ignorant of the facts.

Muirgeo,

let’s not start calling names. You often have tendency to call others ignorant, stupid, thieves etc for no reason. Don’t act like you are God, Mr. Know-It-All. Could I be wrong? Absolutely.

If bluedog democrats was the reason for the failure of progressive agenda, then shouldn’t you state that instead of blaming the republicans? Aren’t you a believer in Democracy? Wasn’t democracy working back then?

Could you answer all the other questions I asked. I need to know that you are serious! if we are to take all your comments here seriously, we should conclude that you are raging lunatic, but I believe you are not. But given your track record here, the burden of proof is on you.

Let’s I read webMd and debating you on pediatrics? Call you a child molester, quack, a snake oil salesman etc. what would you think of me? Why should we take your pronouncements in economics any more seriously than you would take the expertise of a pediatrician trained by http://www.medicalstudentblogs.blogspot.com/ ?

Dan J June 30, 2011 at 2:40 am

Thank goodness for any republican objections and democrat cowardice, or else we would be worse off economically, than we already are.

brotio June 30, 2011 at 2:43 am

Why do you support corporate welfare for Chrysler, GE, GM, and ADM, while claiming that you’re not a corporatist?

brotio June 30, 2011 at 2:50 am

I don’t remember you bitching about the record-breaking judicial filibusters of Bush nominees, including filibusters of Janice Rogers Brown, and Miguel Estrada.

Greg Webb June 29, 2011 at 11:49 pm

The Republicans did not have sufficient votes in the Senate in 2008 and 2009 to prevent a cloture vote cutting off debate and preventing a filibuster or to stop any of President Obama’s programs. That’s a well-recorded fact.

muirgeo June 30, 2011 at 2:35 am
Dan J June 30, 2011 at 1:19 pm

Again, thank God, for the reprieve, or our economy would be far worse off. The nitwits in the US, who are much like those who pray to sun gods and make sacrifices, that believe more govt leads to less problems and a more fluent, stronger economy. All evidence points to the contrary. Govt bends the garden hose restricting the flow, till only a dribble remains.

Greg Webb June 30, 2011 at 3:10 pm

111th Congress — US Senate Composition:

Democrats (and two claiming to be independents who caucused with the Democrats — 59

Republicans — 39 (until Scott Brown took the Senate seat for the State of Massachusetts)

Vacant — 2

The Cloture Rule changes from 60 votes to close off debate to 59 votes when there are two vacant seats. So the Republicans did not have the power to prevent the closure of debate during much of the 111th Congress. And, even then, the issue is not Democrats vs. Republicans as there are a lot of “big government” Republican Senators. President Obama was successful in passing much of his economic policies because “big government” Senators clearly exceeded the minimum vote required to cut off debate. And now, he clearly owns the failed policies of the past.

brotio June 29, 2011 at 9:02 pm

The role of the president and the government is to represent people not corporations or the people with most money.

Is that why you support corporate welfare for Chrysler, GE, GM, and ADM?

I know it’s unfair of me to expect you to admit that you’re a flaming, socialist, dooshbag hypocrite, so I know you’ll duck this question (again), but it is still fun to ask you how you can piss and moan about corporate cronyism and (at the same time) be the most ardent supporter of corporate cronyism at this Cafe. You are simply a hypocrite, and your arrogant ignorance allows you to illustrate that truth every time you comment about a government to represent people, not corporations.

Michael Mace June 29, 2011 at 9:07 pm

With regards to our socialist president, let me paraphrase Michelle Obama: For the first time in my life, I’m ashamed to be an American.

I’m sure I’m not alone.

muirgeo June 29, 2011 at 9:41 pm

But you were a proud American when Reagan increased the debt by 186% or when Bush added $5 trillion to the debt and busted the economy?

Subhi Andrews June 29, 2011 at 10:02 pm

I want to see that regression that proves your point. Why is this singular focus on Presidency? Don’t you know that the budgets are approved by the congress? Why do you treat the president like an omnipotent king who singlehandedly determines the destiny of this nation or for that matter the world? Are there other variables? Why do you make such sweeping statements without an iota of proof?

brotio June 29, 2011 at 11:40 pm

Why do you treat the president like an omnipotent king who singlehandedly determines the destiny of this nation or for that matter the world?

Because Tip O’Neill was a Democrat. There’s no way that a Democrat would approve such debt. Just like TARP was passed without votes from the Democrat majority in both Houses.

muirgeo June 30, 2011 at 11:46 am

Subhi,

I appreciate your points on asking questions about everything. But these are blog post not thesis. Likewise your points on questioning all made assertions applies equally to EVERYONE here, yourself included, who often post claims with no reference or back up.

I probably reference my claims more than anyone here. and I am willing have a thorough debate rather than a “drive-by” debate more than most here.

Me and Greg Webb are having an ongoing discussion on my blog on the nature of libertarianism and progressivism.

Emil June 30, 2011 at 11:50 am

muirgeo, you don’t reference – you occassionally point to graphs that don’t have anything to do with what you are saying and then you claim that they prove a bunch of things they never set out to prove

Subhi Andrews June 30, 2011 at 1:11 pm

I appreciate your points on asking questions about everything.

Right back at ya, except when you get that urge to act lunatic. But you have been acting quite well with me.

Likewise your points on questioning all made assertions applies equally to EVERYONE here, yourself included, who often post claims with no reference or back up.

Yes, it applies to every one, except when they make statements like sky is blue, earth is round, Barack Obama is the president of the U.S etc. Please point out the inconsistencies. I will try to rectify them. Please, you do the same.

I probably reference my claims more than anyone here.

No disrespect, but I doubt that. You can set the record straight by being more diligent from now on, and resisting the urge to go on a name calling spree, even when provoked.

Me and Greg Webb are having an ongoing discussion on my blog on the nature of libertarianism and progressivism.

Good stuff. I don’t want to disrupt your conversation. Go at it with full force. Most importantly, always keep an open mind. Remember, all of us can’t be right at the same time all the time.

I will give you a good example of someone who has really challenged the professors here and the commenters here – Daniel Kuehn. He never went down the path of name calling, even when he was provoked. He sure was tiring at times, making the same remarks that was proven to be wrong, or splitting hairs unnecesarily. But I’m sure, he has ,largely, left a positive impression on everyone here as a person of intellect. Many libertarians actually visit his blog because of it. Don’t take this the wrong way, you still have to earn it here. You can do it. All is not lost.

Whiskey Jim June 30, 2011 at 2:53 pm

Reagan made a deal with the Democratic Congress: $2 of spending cuts for every $1 of tax relief.

The Dems agreed to the deal, then reneged on the spending cuts.

Reagan often said it was the worst decision of his Presidency, that he believed they would do it.

Scott June 30, 2011 at 6:26 am

Agree again. Yet Obama fails at doing just that.

Scott June 30, 2011 at 6:27 am

The above in response to “The role of the president and the government is to represent people not corporations or the people with most money. When it does that we’ll all be better off.

Government matter… policy matters… denying that is denying reality.”

Dan J June 30, 2011 at 1:26 pm

Executive orders have an impact, especially, when abused.
I think we often forget that presidents appoint people into positions. And some of those appointments are filled when congress is not in session. The rules may say they are to be approved later, but the damage can be done.

tdp June 30, 2011 at 11:21 am

The Looney Left only represents and helps people with the most political power and the desire to run other people’s lives and waste their money. The “underrepresented” poor, minorities, unions, environmentalists, and other left-backed groups spend way more time, money, and effort lobbying and spend way more time and money donating to and campaigning for politicians than corporations, oil companies, business, or any other GOP-leaning groups. Most laws, especially under the current administration, have aimed to punish those groups such as business and have succeeded in screwing EVERYBODY but the political class.

Ben Hughes July 1, 2011 at 1:04 am

I love this line: “The role of the president and the government is to represent people not corporations or the people with most money.”

Let’s do some reduction to clarify the logic of this.

1. “People with the most money”… are, in fact, still people.
2. “Corporations”… What are they? A legal construct only. Corporations *are* their shareholders.
3. “Shareholders”… are, in fact, people.

Reduction:

“The role of the president and the government is to represent people not people or the people.”

Scott G June 29, 2011 at 4:02 pm

Russ,

Thanks for the great commentary on Mr. Obama’s horrible speech. Though I see him dovetailing his rhetoric to be in sync with a more economically educated population, his speech still reveals to me the economic ignorance of many individuals in America. They applaud and believe what he says. If I were collecting data on the economic intelligence of Americans I could point to this speech as data.

He really bothers me. He has the worst job in America. I wonder how well he sleeps at night, and whether he feels shame about his lies and flawed ideas. He has an opportunity to teach people economics and lead them in the right direction, but instead he takes them in the opposite direction whenever he gets the chance. I can’t tell if he does it on purpose, or if he’s ignorant.

I would pay a great deal to have you and he locked in a room together with the cameras rolling.

Since this will never happen, the next best alternative is to do what you’ve done (above), and then with the help of an Obama puppet, impersonator, or doll, film the conversation between the two of you. Spice it up with some of your jokes, maybe some music, and see what happens.

What would be great is a battle rap between a fictional Smith-Hayekian and Mr. Obama. Probably too much of a time sink, but it would get a lot of attention if done as well as “The Fight of the Century.”

I wish I was able to get all the individuals who don’t realize what good you for them to say thank you to you.

Scott

Dan J June 29, 2011 at 5:10 pm

When did Obama’s campaign ever end? Ambiguous populism read from a teleprompter while filibustering any Q&A with long winded statements to avoid costly errors that have been consistent when speaking off the cuff.

dave June 29, 2011 at 5:13 pm

“He’s right. It’s harder to find a job if you’re only a high school graduate compared to say 50 or even 30 years ago.”

This is true re. a job per se, but if you measure quality of life overall, I think you’d be getting a lot more bank for your buck with a high school education today than you would fifty years ago. Not that it’s ideal or anything but it’s a reality of life that even with just a high school diploma, you could probably drive your own car (a jalopy, but still wheels to get you around), pull a cold one out of your own college boy fridge, enjoy air conditioning in your (probably humble) living space and own your own phone (the list goes on and on) all things which today is taken for granted but would have required a much more work 50 years ago.

So while the quality of your JOB will likely be poor (and yes, you would be better off acquiring greater skills) and your day to day physical comfort and overall enjoyment of life would be lower relative to your peers who went on to higher education, they would still be higher than that of what your grandparents had five decades ago even with higher education.

dave June 29, 2011 at 5:14 pm

whoops make that BANG for your buck

BonnieBlueFlag June 29, 2011 at 9:01 pm

The whole presumption here is that central planners has superior knowledge than the combined knowledge of the entire market. If what Barack is saying is true – we “need” this and “need” that, then the market will achieve this and that without government.

muirgeo June 29, 2011 at 9:44 pm

Yeah because those otc derivarttives , CDS and CDO’s the market came up with putting $50 trillion dollars ( anyones guess what the true numbers are) of toxic assets into the global market was sooo much more efficient then having the government regulate these products like it did the prior 50 years with NO such catastrophes.

Again… does reality matter to you people.

Subhi Andrews June 29, 2011 at 10:05 pm

Again… does reality matter to you people.

It does muirgeo. What do you know about the inner workings of the CDS and CDO markets, motivations of its players? Why the market exists? Do you know any executives at well known derivative house? What is the source of your confidence about derivatives? What is the source of your information? What process did you take to reach the conclusions that you have ( your statement above is very conclusive)?

Thanks,

Methinks1776 June 29, 2011 at 11:17 pm

Subhi,

I once tried to explain to him what a simple equity option is (and by “once” I mean about 10 different times). Inanimate objects have a higher capacity for learning. In fact, I’m pretty certain Muirdiot can’t wrap the hurricane of ignorance between his ears around the simple concept of optionality, let alone tradeable products.

Ask him to explain what a CDS is and how it works. He’ll disappear and reappear on another thread spewing the same idiocy he read somewhere, but clearly can’t understand. Been doing it for years.

Spare yourself!!

muirgeo June 30, 2011 at 3:01 am

No you once tried to belittle me for implying that financial derivatives were a serious threat to our economy … before the melt down.. . you thought you were the smart one but you don’t even know your own business . Now with the collapse your old post show what a blithering self deluding fool you are.

muirgeo June 30, 2011 at 2:58 am

Subhi,

If you think there’s some question of the relevance of derivatives to the financial collapse and you are a grad student in econ… you might want to find a different profession.

We conclude over-the-counter derivatives contributed significantly to this crisis. The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter (OTC) derivatives was a key turning point in the march toward the financial crisis.

From:
http://www.gpoaccess.gov/fcic/fcic.pdf

Seriously if you are a person who questions the role of these financial products in the economic collapse as people like methinks and others here do let me know straight up because then I will know not to bother to take you seriously and will put you in that group I call the economic creationist

Subhi Andrews June 30, 2011 at 3:17 am

If you are asking me whether derivatives played some role in the financial crisis, then my answer is a resoundin yes! But that’s not the same thing as saying 50 trillion dollars of toxic assets. If you don’t understand the distinction, then I urge you to study derivatives a little bit more, from someone who knows what a derivative is, from someone who is capable of calculating either the Internal Rate of Return or ROE for a bank engaging in the creation of a derivative.

Most macroeconomists don’t know what a derivative is, including Nobel prize winning ones. It is not a cause for embarassment, because it is in the field of finance, not macroeconomics.

It is not easy figuring out these derivatives, but it is not beyond the abilities of someone with decent intelligence who is willing to spend a few hours of concentrated time. So here is the home work I suggest.

1. Figure out what a derivative is
2. What role does it play to the various counterparties involved in the derivative transaction.
3. What is insurance, and how does it work?
4. How are financial derivatives different from financial insurance?
5. What would be the ROE for a bank if it just followed all the banking regulations regarding reserves for various types of loans on its books?
6. What are the various taxes affecting banks?
7. Why is a bank motivated to trade in derivatives, especially some of the kinds that were in the news during the crisis – CLO, CDO, CMOs etc. Motivation is key to understanding whether regulation would help or hurt, or it has helped or hhurt. Just some opinions won’t do. You need to calculate ROE based on a regulated bank ( yes, they are regulated ) versus a bank trading in derivatives?
8. Why are derivatives just Over the Counter? Why can’t they trade on an exchange like stocks or bonds?

If you can answer those questions, then answer will be clearer. I can suggest a harvard case that if you are willing to spend the time learning, figuring out, and doing the math will help you answer these questions. I will promise you, it will be like a light bulb turning on in your head.

Here is the case.
http://hbr.org/product/collateralized-loan-obligations-and-the-bistro-tru/an/299016-PDF-ENG?Ntt=bistro%2520trust

muirgeo June 30, 2011 at 3:30 am

Subhi,

You’re not my teacher and P don’t take assignments from you. Again you want to discuss these things in detail on my blog all deconstruct your libertarian positions to shreds.

This is what I know about complex financial products and it is ALL I need to know.

1) When Wall Street scum bags could only trade them among themselves they were not useful.

2) As soon as the walls were torn down between the investment banks and grandma’s retirement portfolio these mobster products became relevant. THAT’s ALL I need to know. And guys like you need to learn the facts and become good guys not thugs for the Wall Street mobs.

Please respect FT.com’s ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article – http://www.ft.com/cms/s/0/5d5aa24e-23a4-11de-996a-00144feabdc0.html#ixzz1Qk3RRKxi

“Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it.”

Nassim Nicholas Taleb

muirgeo June 30, 2011 at 3:34 am

Subhi,

You’re not my teacher and P don’t take assignments from you. Again you want to discuss these things in detail on my blog all deconstruct your libertarian positions to shreds.

This is what I know about complex financial products and it is ALL I need to know.

1) When Wall Street scum bags could only trade them among themselves they were not useful.

2) As soon as the walls were torn down between the investment banks and grandma’s retirement portfolio these mobster products became relevant. THAT’s ALL I need to know. And guys like you need to learn the facts and become good guys not thugs for the Wall Street mobs.

Nassim Taleb is on record calling for a ban on complex derivatives.

Subhi Andrews June 30, 2011 at 3:45 am

Again you want to discuss these things in detail on my blog all deconstruct your libertarian positions to shreds.

Please tear it to shreds here.

This is what I know about complex financial products and it is ALL I need to know.

What if you don’t know everything you need to know? Let’s say a prospective patient of yours saw only your comments on Cafe Hayek, would that be everything there is to know about George Balella the pediatrician? What if they conclude that you belonged in an asylum?

1) When Wall Street scum bags could only trade them among themselves they were not useful.

When was this restricted to Wall Street? Do you think a lot of grandmas bought derivatives? I would like to see some data to prove that many grandmas were significant buyers of derivatives.

As soon as the walls were torn down between the investment banks and grandma’s retirement portfolio these mobster products became relevant.

what was this wall? Which were the banks suffered losses on these derivatives? There were that just lost money on subprime loans, but I’m talking about just those who lost derivatives! Why was grandma’s money on deposit here? where their money every there?

THAT’s ALL I need to know.

Sure. If you weren’t acting like you know what you are talking about when it comes to derivatives.

And guys like you need to learn the facts and become good guys not thugs for the Wall Street mobs.

I don’t need to become anything. I am a fallible but a decent man already, and I’ll always be.

Nassim Taleb is on record calling for a ban on complex derivatives

I would like to see reference. What if Taleb is wrong? He is a Hayekian after all!

Subhi Andrews June 30, 2011 at 3:48 am

BTW, Muirgeo, don’t be discouraged or overwhelmed by the task of deciphering derivatives. I think you are totally capable of comprehending the derivatives. After all you are a physician.

muirgeo June 30, 2011 at 11:55 am

Subhi,

I apologize for my aggressive tone with you. I am quite defensive here and very emotionally tied to these issues because I believe there are great injustices in the world that are being legitimized by good people with bad philosophies who have NOT asked all the questions you do or the ones I do ask.

I am truly here to discuss and learn and to have my beliefs challenged as well as to challenge others positions. Again sorry for being confrontational. You are a good debater. Thanks for your input.

brotio June 30, 2011 at 12:19 pm

Subhi,

As you stick around, you’ll find that Muirgeo’s tone will change toward you, becoming increasingly hostile as you resist his Borg mentality. If you could go back far enough in the archives, you would find that Sam Grove was as patient, and as polite to our Dear Ducktor as you have been. Muirgeo consistently repaid Sam’s patience by calling him names. Even now, Sam’s tone toward Muirgeo is less strident than most of the people here. You won’t see similar consideration to Sam from Muirgeo.

I’ll also point out that Muirgeo does not refrain from name-calling of our hosts – neither of whom have ever treated with the disrespect he’s shown them. His anger toward Russ and Don is because they ignore him – and like the two-year-olds he (mis)treats, Muirgeo can’t stand to be ignored.

Yasafi,

Why do you support corporate welfare for Chrysler, GE, GM, and ADM, while claiming that you’re not a corporatist?

brotio June 30, 2011 at 12:20 pm

ACK!

HTML edit fail!

Dan J June 30, 2011 at 1:32 pm

‘we conclude’? Who is we?

We conclude that govt interventions into the housing market was the main factor. The govt position of lowers interest rates, sponsoring of GSE’s Fannie and Freddie, govt coercion for major lenders to make loans to LMI borrowers.
The correct and indisputable conclusion is that govt distortions is the primary factor of the housing boom and bust, which led to the financial crash. This is absolutely true.

Subhi Andrews June 30, 2011 at 3:09 pm

I apologize for my aggressive tone with you. I am quite defensive here and very emotionally tied to these issues because I believe there are great injustices in the world that are being legitimized by good people with bad philosophies who have NOT asked all the questions you do or the ones I do ask.

Apologies accepted. I understand your frustration. I agree, there are some real injustices out there. However, to solve these problems and injustices, one needs to clear his/her brains of all the emotions stemming from the situation, so that he/she can just use rational faculties to think potential solutions – and its possible unintended consequences.

The big difference between those who are bleeding heart and those who are libertarians, I think, is one group’s focus on alleviation of short term pain without as much thought to the longterm consequences, and the other’s focus on the longterm without any easy answers for the short. Most libertarians, me included, think that even those short term solutions are largely counter-productive even in the short run – not for particular individual or group reaping the benefit of the “solution” – but in aggregate sense.

I am truly here to discuss and learn and to have my beliefs challenged as well as to challenge others positions. Again sorry for being confrontational.

No worries dude. You don’t have to say it again.

You are a good debater. Thanks for your input.

I really appreciate that. We all need a pat on our back sometimes.

rhhardin June 29, 2011 at 10:07 pm

“And that’s why…” is a rhetorical tic that separates a lie from a bad idea.

Scott June 30, 2011 at 7:37 am

I agree with Obama’s idea that college needs to be more preparatory and applicable to the needs of industry. College curriculum/accreditation does not seem to adjust very well to the needs of business.

tdp June 30, 2011 at 11:23 am

So its his job to dictate the educational policies of every school in the country and decide that people must be forced to learn things consistent with a career he deems important? No. The responsibility of preparing yourself for a career rests on you and the classes you pick, the internships and lower-tier jobs you apply for to get experience, and what you do outside of school to prepare yourself.

Dan J June 30, 2011 at 1:40 pm

Accreditation is often skewed and less performance based. Take Dr. Sowell’s example of the University of Colorado law school. They were threatened with loss of accreditation. The threat was performance based. They were too good, at too low of a price. The Ivy Leagues were threatened, and the Bar Ass. Went to work on upping their costs. Millions of dollars later, and as the PC police were actively engaged on campus, the price of tuition ran the low to moderate income students out.

Scott June 30, 2011 at 8:04 pm

“So its his job to dictate the educational policies of every school in the country and decide that people must be forced to learn things consistent with a career he deems important?” of course not, don’t try to make a straw man out of my statement, bitte.

Whiskey Jim June 30, 2011 at 11:56 pm

Here’s my dare:

Give me an A or B- 18 year old from high school that knows how to use a PC, preferably spreadsheets and word processing. Assume they are not immoderately shy and can spell reasonably well.

In the 4 years they would have spent at university, I will teach them nearly any job less than $60,000 a year, and they will be earning every year.

The fact that jobs are changing so fast makes an expensive university degree even riskier.

Scott July 1, 2011 at 12:30 am

And in many cases experience is more important that the degree. I feel that this the market saying that the degree may not be that important. In some cases I view 4 years college as a tax on wealth creation. Bill Gates might have agreed.

kyle8 June 30, 2011 at 2:16 pm

The way the Fed is monetizing the debt, it won’t be long before those dollars of copper and zinc are worth more than an actual dollar in metal value.

kyle8 June 30, 2011 at 4:53 pm

Sorry wrong thread

Whiskey Jim June 30, 2011 at 3:00 pm

Obama is trying to say two things:

1. Spending money on federal workers and shoring up public health care programs saved or created 2.1 million jobs at a current cost of about $390,000 per job. The issues of this statement are obvious.

2. You want me as President because I understand how to steer the economy and look out for you. The fundamental issue with this statement is that ‘you’ so far means unions and companies like GE who are already subsidized to the hilt. Immelt, like most Fortune 100 managers, wants free markets like a hole in the head. The rest of us? Not so much. In fact, if you’re Boeing in SC, he’d rather not have the jobs at all.

Methinks1776 June 30, 2011 at 3:30 pm

He’s also saying something else:

Re-elect me. I’ve become really comfortable flying on private jets at your expense. So has my dog (Bo and his trainer were flown to Maine in a private jet). At your expense. I am very motivated to continue to destroy as much as my position in government allows me to destroy – on your dime. Plus, my wife can’t dress herself and really needs all those stylists and designers sending her stuff. For free.

PrometheeFeu June 30, 2011 at 5:05 pm

To be fair, the plane was mostly filled with staffers.

Methinks1776 July 1, 2011 at 4:06 pm

That makes me feel much better. Not only do I have to pay for the asshole in chief and his hound to fly private at my expense, but I also have to pony up for his lackeys. Or else.

Methinks1776 June 30, 2011 at 3:33 pm

Oh, and I also love doing that while my teleprompter tells me to wag my finger and dress down CEOs who dare fly on their own private jets. Which are sometimes not even paid for by you, the public.

PrometheeFeu June 30, 2011 at 5:09 pm

+1

Not to mention that those who do fly on private jets at public expense do so thanks in large part to Mr. Obama.

richard July 2, 2011 at 3:38 am

Russ,

I never understood the math. If you spend 800 billion dollars and create 2 million job, then my high school math says each job costs $400.000. And jobs that costs 400k a piece and pay maybe 60k are not really profitable, right?

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