As anyone familiar with supermarket items can tell you – and now Mark Bittman of the New York Times does so – meals from fast-food restaurants are not cheaper than many healthier options available to nearly every American.  (HT Peter Minowitz)

George Will exposes the fishy-ness of government’s alleged efforts to regulate in the public interest.

Economist David Rose makes a solid case against the extension of unemployment benefits paid by government.

Steve Landsburg ponders Keynesianism.

Arnold on Russ on Tyler.

And Arnold on the follies of those who apologize for monopoly government K-12 “education.”

Over at Division of Labour, Brad Smith reports yet more evidence that Pres. Obama’s understanding of even basic economics is, I put it this way, limited.

My great colleague Walter Williams finds the similarities between Social Security and private Ponzi schemes too obvious to ignore.

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{ 48 comments }

Daniel Kuehn September 25, 2011 at 9:37 am

Since Smith raises the Obama ATM point again, I want to ask you a question I’ve asked before in the comments and in an email.

You made a big issue out of Obama’s ATM comment. You’ve also praised Kling’s PSST theory. But Kling himself identified the ATM comment as an example of PSST.

How do you square your disparate reactions? I don’t understand.

This seems to me to be a short-term/long-term question. Both Obama and Kling are right in the short-term. Of course technological change can displace people and depending on adjustment lags could lead to an increase in unemployment. Neither Kling nor Obama seem to suggest that that dooms us in the long-term, and I think that’s right too. I think this is pretty much the consensus view of technological change and the labor market among economists. There is somewhat more disagreement on the relevance of technological change in the labor market performance of any particular historical period (see the Cowen/TGS discussion, for example).

What I can’t get a handle of is exactly what your view is. You seem to have a different perspective on the same argument depending on whether it’s coming out of Kling, Obama, Schumpeter, or Alvin Hansen’s mouth. Could you clarify?

Krishnan September 25, 2011 at 10:22 am

You ASSUME that Obama and Kling understand the same thing and are so right in the short term. I do not believe so.

Kling has written extensively about many things and so we understand the context in which he makes his comment – We give him the benefit that he knows what he is talking about – and that yes, we understand that he means in the short term we can have changes in the employment picture.

There is lots of evidence that Obama has no clue about anything – except read. Ron Suskind may not have captured everything happening in the Obama White House, but what he has written aligns well with so much other data from other sources that we are inclined to believe Suskind that Obama is clueless. And THAT is a charitable assessment.

Imagine the other assessment – that Obama DOES understand elementary principles and what he is trying to do is undermine our economy as best as he can – driven by his inner demons about the US and our role in the world and colonialism and the British and this and that and other …

Daniel Kuehn September 25, 2011 at 11:54 am

I don’t assume they have the same level of understanding of the economy. Of course Kling knows considerably more. But here they’re clearly making the same point. Like all politicians, Obama isn’t particularly knowledgable about the economy. But I wouldn’t rank him as low as Smith does, and certainly not for the reasons that Smith provided. You don’t need to correct Obama on basic stuff like Andolfatto had to correct Ron Paul on, for example. Obama gets mixed up a lot, but as non-economists go he’s not horrible.

JS September 26, 2011 at 3:57 pm

You don’t know what you’re talking about. Ron Paul has forgotten more than Obama has ever known. Omama merely says what he’s told to say. He’s clueless. Kling’s premises are flawed and if you knew logical economics better, you’d see that up front. You’re like the guy who reads all the wine books to impress peple but can’t tell an aged Bordeauix from a cheap bottle of Muscatel.

SweetLiberty September 25, 2011 at 11:11 am

DK,

Obama’s speech is intended as a political call to action, not a short-term analysis of technological advances vs. labor. By focusing on ATM’s displacing bank tellers or airport kiosks displacing airport check-in personnel, Obama is implicitly stating that these visible jobs that we can see disappearing are a problem that he and other like-minded politicians must solve. While Obama may privately know that consumers benefit from these advancements, and that other jobs are created in ATM and kiosk manufacturing, programming, and maintenance, he is using political spin to create a perceived crisis. If he does know this, he is disingenuous and intentionally misleading. On the other hand, if he is not aware of the trade-offs, then he is truly ignorant. Either way, he’s on the wrong side of the argument.

I’d rather support a President who uses ATM’s and Kiosks as shining examples of American ingenuity and progress that make consumer’s lives easier rather than support one who demonizes these advancements for political gain. Wouldn’t you?

Daniel Kuehn September 25, 2011 at 11:22 am

I would, but I guess I didn’t see him “demonizing” anyone.

SweetLiberty September 25, 2011 at 11:33 am

Obama says, “When you go to a bank you use the ATM, you don’t go to a bank teller. Or you go to the airport and you use a kiosk instead of checking in at the gate.”

What do you think his message is here if not to lament the loss of bank tellers and check-in agents at the expense of wicked ATM’s and kiosks? Seriously, DK, you can’t be that naive.

Daniel Kuehn September 25, 2011 at 11:51 am

I think his point is the same that Kling’s was when he pointed to Obama’s statement as an example of PSST: technological revolutions reshape industries and reshape job markets.

SweetLiberty September 25, 2011 at 12:03 pm

Of course you’re right. Obama’s point was purely academic, not political or misguided at all.

Krishnan September 25, 2011 at 11:26 am

Re: SweetLiberty – Yes, politics for sure. And ofcourse Obama uses the 747 to travel (avoiding horse and buggy), the telephone to communicate (instead of say sending a messenger on horses), the internet to raise money (instead of hiring thousands and perhaps millions of people to go door to door) and so on and so on …

SweetLiberty September 25, 2011 at 11:44 am

Yeah, seems glaringly hypocritical. But I really do wonder if Obama is being purely political, knowing the economic offsets but using spin to advance his own agenda, or – as Smith asserts – Barack Obama is the most economically ignorant president since Zachary Taylor Either way, I’m not an Obama fan.

Methinks1776 September 25, 2011 at 12:28 pm

Not only does he and his family use a fleet of very large private jets to travel, but those private jets are paid for by you.

Apparently, El Presidente doesn’t object to private jets, so long as the money to pay for them is viciously wrenched from the people who earned it and the people using them are the political elite. It’s you using your own money for your own consumption that pains him.

Il Duce understands Soviet Economics very well. But, then, that was always well known about him.

Invisible Backhand September 25, 2011 at 8:12 pm
Daniel Kuehn September 25, 2011 at 8:41 pm

IB: +1,000

Daniel Kuehn September 25, 2011 at 8:47 pm

Invisible Backhand -
It’s amazing, isn’t it? Tax breaks are distortionary if they’re tied to something like hiring new workers. But if you give a tax break for buying private jets apparently that needs to stay in place and people are akin to Italian fascists or Russian communists if they suggest that maybe private jets should not be treated preferentially in the tax code.

It boggles the mind sometimes.

Look – I’ll admit all special tax arrangements are distortionary. Sure they are. But if I loose my cool and throw a royal hissy fit I hope its in defense of something like Obama’s failure to implement an admittedly distortionary new hire tax credit, RATHER than a royal hissy fit attacking Obama for opposing a tax credit that gives preferential treatment to private jets.

Methinks1776 September 27, 2011 at 7:27 am

Oh, it’s amazing alright.

Accelerated depreciation for private jets and a slew of other investments was part of Obama’s own stimulus package, you ignorant twit. Your hero signed it. He doesn’t oppose “tax breaks” for PJ’s any more than he opposes using taxpayers’ money to backstop his big donors in their investments in Lightsquared and Solyndra. It’s all political theatre.

Don’t you and the other Keynesians want raise aggregate demand? Make up your confused little minds already.

Economic Freedom September 25, 2011 at 7:59 pm

Neither Kling nor Obama seem to suggest that that dooms us in the long-term

What do you mean by the word “suggest”? Kling “suggests” nothing; he explicitly states that productivity gains through technological innovation lead to higher employment in the long-run.

Conversely, Obama states nothing explicitly about the long-run; which means that his ATM statement was meant to “suggest” that technological innovation leads to higher Unemployment both in the short-run and in the long-run. That was the political purpose behind that statement; i.e., “The ‘rich’ are responsible for the country’s debt because they don’t ‘pay their fair share’; the private sector is responsible for unemployment because pursuit of profit causes it to replace 10 bank tellers with 1 ATM machine’.”

That’s the message. And the larger “suggestion” by zerobama is that private action by private individuals in the private sector is ultimately the source of all economic problems. If you know anything about his past, you’ll realize that he believes it himself.

JS September 25, 2011 at 10:28 am

The chain of events isn’t exactly how you described them. The technology needs to be developed and made first, so there would be an increase in employment required first, before the technology is installed. But the correct way of looking at it is that there will be an increase in the demand curve for labor, causing wages, in the short run, to rise. Unemployment is caused by regulations, not innovations. Adjustment lag is not a given. It is correctable.

But let’s assume that it takes a year for someone to find a new job and Obama decided to force banks to suspend usage of ATMs. Since we don’t want to have to deal with the consequences of all those people involved in bringing ATMs to market, who, by the way, arguably amount to more people than the clerical people who will lose their jobs in banks, we will assume that rather than suspending their usage, we just say that we needed laws to prevent them from being invented.

The costs to the consumers of transacting life without ATM’s will show itself in the reduction of purchases made on other things. This is not just an issue that banks will logically have to charge more for their services to cover their increased labor, but considerations have to be made for the huge time savings that ATM provides people, and time is money.

The consumers will thereby have less disposable income from the removal of ATMs from society. The division of labor will have been reversed by that item and all that went it to, such as the raw materials and manufactured components at hundreds of companies, if not thousands, from the ground up.

For purposes of an example, let’s say that consumers were .1% poorer, and due to that, they reduced their purchases by .1% accordingly. Now, this surely won’t cause plant closings all over the country, but jobs will be lost all over the country, on a here and there basis, that amount to more unemployment than the unemployment experienced when ATM’s were employed.

I don’t know who Kling is, but I’d bet that he doesn’t take all the chain link cause and effect consequences into consideration, but rather, only the ones that support the conclusion he set out to achieve.

John S. September 25, 2011 at 10:55 am

The link about fast food is interesting, but contains a lot of junk science. Take a 4 oz. patty of ground, free-range beef. Put it on a bun made from organically grown wheat. There may be a difference in price, but what you have is no more or less healthy than a Quarter Pounder from MacDonald’s. “Experts” like Marion Nestle may believe that home-cooked meals are more nutritious than fast food, but they can’t point to any scientific studies to back up that belief.

khodge September 25, 2011 at 3:16 pm

If you pick the most expensive items on the menu, of course it is more expensive. McDonald’s expanded its market by adding the value menu. This link is just another call for government intervention.

Eric Hammer September 26, 2011 at 12:57 am

You have a good point about the Value Menu, and the second page of the article spirals into insanity a bit. (Ok… a lot.)
However, I do agree that in general you can cook meals at home for less cash than you can feed yourself at McDonalds etc. The article almost hits on the idea that “Maybe people actually want fast food for various reasons instead of being forced to eat it,” but instead veers away towards blaming everyone in the industry for controlling people’s habits. Then the author suggests the government instead should attempt greater control over people’s habits.

Common theme: people are sheep whose behavior and habits are easily controlled by the wrong people, and so must be shepherded by the right people.

Invisible Backhand September 25, 2011 at 11:13 am

From the Brad Smith link:

“What was driving unemployment was clearly deficient aggregate demand,” Romer said. “We wondered where this could be coming from. We both tried to convince him otherwise. He wouldn’t budge.”
–Romer on Obama

The Source of the Problem Ain’t Inadequate Aggregate Demand
–Don Boudreaux

The President was talking about ‘high unemployment’ while DB was talking about ‘today’s economy’ as of 2 weeks ago, but the point of agreement is striking, nyet?

Economiser September 25, 2011 at 11:24 am

The president is making a mistake common to those uneducated in economics. Christina Romer is making a mistake common to those educated in economics. Don Boudreaux can disagree with both of them without inconsistency.

Invisible Backhand September 25, 2011 at 12:19 pm

Obama was claiming the problem was businesses weren’t investing because productivity gains made it unnecessary, DB was claiming the problem businesses weren’t investing because of ‘whatever’. Not a lot of room for the holy spirit between those two positions, but since you can fit a molecule between them a miss is as good as a mile.

Methinks1776 September 25, 2011 at 12:36 pm

Increased regulatory compliance costs and an increased risk that government will interfere with the company’s control of its capital and the use of its profits decrease the expected return and discourages investment. You’re simply too stupid to understand what that means, twit.

Invisible Backhand September 25, 2011 at 4:48 pm

Resurrecting the tw-words again are we? What twaddle.

If I was too stupid to understand, I wouldn’t have put this cartoon on my blog yesterday:

http://i.imgur.com/yDCIH.jpg

Economic Freedom September 25, 2011 at 7:47 pm

DB was claiming the problem businesses weren’t investing because of ‘whatever’.

Articulate and insightful, as usual, Invisible Mouthwash. Allow me to remind you what an ignorant nincompoop you are.

Invisible Backhand September 25, 2011 at 8:15 pm
Economic Freedom September 25, 2011 at 8:37 pm

@ IB:

Don wrote:

the cause of our woes – isn’t inadequate aggregate demand but, rather, whatever is causing business investment (and, hence, aggregate demand) to be too low . . . 

. . . And businesses aren’t investing because Congress and, especially, the administration exhibit a ceaseless fetish for top-down, command-and-control, debt-financed ‘governance’ of the economy – an enterprise-quashing recipe made only more poisonous by Mr. Obama’s soak-the-rich speechifying.

Once more, Invincibly Backward: you’re an ignorant nincompoop.

Invisible Backhand September 26, 2011 at 11:36 am

Yes, ‘whatever’.

JS September 26, 2011 at 3:52 pm

IB,

The problem is inadequae aggregate demand, but your error is in thinking that it can be artificially created.

Some advice, what’s your other hand doing under the table? Stimulating demand? Is your economy waiting to explode?

Economiser September 25, 2011 at 11:20 am

Bittman does a great job dispelling the myth that unhealthy foods are cheaper. However, I’m disappointed that he calls for government action at the end.

Also, getting people to cook again, en masse, is not going to happen. It’s a great testament to our society’s wealth that even the poor aren’t burdened with the time costs of food preparation. Cooking will become like using a gym for exercise – not a necessary part of daily life, but instead a luxury engaged in for long-term intangible benefits.

SweetLiberty September 25, 2011 at 11:58 am

I agree, cooking is often more of a burden than a blessing. And why is everything always compared to McDonalds? What about Subway? I’m not a huge fan, but Subway is cheap, ubiquitous, offer plenty of veggie options, and my wife or I don’t have to cook.

Economiser September 25, 2011 at 1:54 pm

Good point. I frequent Subway 1-2 times a week for lunch. The local delis make better sandwiches, but I like the fact that I know exactly what the nutritional content is in all of Subway’s items.

Brad September 25, 2011 at 3:03 pm

The argument does not make sense to me. I’ve never gone to McDonalds because it is cheaper. I go because my son wants a Happy Meal or I’m craving a Big Mac. Are there people who go there to save money?

Economiser September 25, 2011 at 6:03 pm

There is a consistent claim in the media that the poor are overweight because they can’t afford healthy food. That fast food, and processed food generally, is cheaper than healthy food.

This claim is bunk but that hasn’t stopped it from being repeated ad nauseum.

Michael September 26, 2011 at 12:29 pm

Yep. When I was in college, just a few years ago, I cooked nearly every meal I ate for two reasons:

1) College allowed me significantly more free time than work does.

2) It was very inexpensive to traditional American fare (stews, soups, spaghetti and meat sauce, casserole) and Mexican food (I lived in a poor, primarily Hispanic neighborhood with several cheap carnicerias).

My food bill was less than half of what it is now, when I have to eat out all the time.

Michael September 26, 2011 at 12:29 pm

*It was very inexpensive to COOK traditional…

Jl September 25, 2011 at 2:13 pm

Bittman doesn’t count the cost of cooking and cleanup in his calculation, so the comparison is nonsense. Rather, he claims we should could cooking as a value not a cost. That’s just saying he wished peoples values were different.

Economiser September 25, 2011 at 2:28 pm

Exactly. It’s pretty amazing that even for the poor, it’s often cheaper to pay someone else to cook and clean up.

Rob September 25, 2011 at 4:52 pm

Yeah…I’m a little confused as to how this article ended up linked-to here. As was pointed out, the proposed fix is government intervention. With no comment from Don re: that point, I’m left scratching my head as to whether he buys into the whole thing…..hard to believe.

Eric Hammer September 26, 2011 at 1:09 am

Well, one might argue that the poor are much shorter on cash than time. He doesn’t, however, and as you say drifts off into “I wish people valued things differently!” land.
A better article would have pointed out that fast food isn’t necessarily cheaper over all than home cooking, just easier and sometimes tastier. He could then have pointed out that people are making choices based on their desires, desires which rank being less overweight pretty low down, and convenience and taste higher up. Perhaps if one wanted one could criticize those desires, and point out that people do what people want, and there isn’t much to be done about it.

Economic Freedom September 25, 2011 at 8:30 pm

From the David Rose link above regarding the injurious effects of extending unemployment benefits:

But what if the original problem was excessive monetary and fiscal stimulus that led to a credit boom, an asset bubble, and therefore a level of consumption that was above the sustainable trend? This well describes the recession we are still struggling to fully put behind us. In this case, stimulating the economy to return to an unsustainable trend is not a viable long-run solution.

When quickly summarizing Austrian Business Cycle Theory, I think it’s important always to mention that central bank credit expansion and its consequent lowering of the interest rate, causes both increased consumption and increased investment at the same time. That’s the problem: both consumers and investors “pulling” on the same stock of capital. Without central bank manipulation, as people decide to consume less (because of a change in time preference), more wealth is made available for investment; as people decide to consume more (because of a change in time preference), less wealth is made available for investment. So without central bank interference, there’s never any competition between consumers and investors for the same supply of capital.

kyle8 September 26, 2011 at 7:38 am

That is the part of the Austrian theory I always found illogical. If there is a demand for capital then it will be supplied. If central banks keep the money supply low during a time of demand then money or a surrogate will be created in another way. Or competition will allow the central bank of some nation to supply capital and credit and take advantage of the situation thus stealing market share from the banks and lending institutions of the larger nations.

Either way, you might actually have a boom and then be worse off. If people have over invested in shaky banks, nations, or financial instruments.

Economic Freedom September 27, 2011 at 11:17 pm

If there is a demand for capital then it will be supplied.

Under laissez faire with no central bank, It will be supplied at the cost of less demand for something else. In this case: less demand for immediate satisfaction from finished consumer goods.

If central banks keep the money supply low during a time of demand then money or a surrogate will be created in another way.

I have no idea what you mean by “money will be created.” By whom? How? Counterfeiting it?

Or competition will allow the central bank of some nation to supply capital and credit and take advantage of the situation thus stealing market share from the banks and lending institutions of the larger nations.

Do you mean: if OUR central bank doesn’t satisfy the demand for capital by expanding the money supply, then businessmen and entrepreneurs will seek capital from FOREIGN banks — who, you presume, will have expanded their money supply, in order to satisfy America’s demand for capital?

Do I understand you correctly?

Doc Merlin September 26, 2011 at 5:12 am

“As anyone familiar with supermarket items can tell you – and now Mark Bittman of the New York Times does so – meals from fast-food restaurants are not cheaper than many healthier options available to nearly every American.”

Not if you include the opportunity cost of your time.

Eric September 26, 2011 at 12:28 pm

Beat me to it.

Don Kenner September 27, 2011 at 1:03 pm

The NYT article on food started off well but ended with some ridiculous pap:

‘Obviously, in an atmosphere where any regulation is immediately labeled “nanny statism,” changing “the environment” is difficult. But we’ve done this before, with tobacco’

Wow. Jaw-dropping in its stupidity. We can regulate people back to a healthy weight? Deeply stupid. The over-consumption of grain, promoted heavily by the Federal Government, is the chief reason for our obesity. Regulations and punitive taxation punish local producers, but whatever.

I don’t know who among the Fed-boosters is the most ignorant, but Food Nazis would have to be among the top offenders.

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