Daily Archives: 04/02/2011

Why the Stimulus Failed to Boost Infrastructure in the US: A Comparison With China

Basically because the stimulus only replaced local debt with federal debt and didn’t increase spending.

Economics One

via Why the Stimulus Failed to Boost Infrastructure in the US: A Comparison With China.

The Rich Are Different: They’re Luckier | The New Republic

What’s more, it is demonstrably not the case that income levels simply reflect aptitude and effort. Now, obviously being from a richer family affords all sorts of advantages, including physical, emotional, and cultural development. But factor all that out of the equation and assume that it’s just fair for all those things to translate into higher academic performance and higher earnings.

Even assuming that, there are massive advantages inherent simply in being born rich (and disadvantages in being poor.) My favorite example, simply because it’s so dramatic, is that a child born into the lowest-earning quintile who manages to attain a college degree is less likely to be in the highest-earning quintile than a child born into the top quintile who does not attain a college degree. This is all the more remarkable when you consider that making it to, and through, college is far harder for poor kids than rich kids even at a given level of aptitude. (Two thirds of the kids with average math scores and low-income parents do not attend college, while almost two-thirds of high-income kids with average math scores do.)

via The Rich Are Different: They’re Luckier | The New Republic.


The Scott Sumner Stock Sell Signal


Well Scott Sumner has hung up the keyboard. In his “I’m not really serious but actually I am” kind of way, he takes credit for quantitative easing and several trillion dollars in new wealth. It’s too long to reproduce the argument here, but he’s basically saying that bloggers forced Bernanke / gave him the support to inflate more, and that has resuscitated global stock markets.

Don’t worry Scott, you are not being arrogant. I too hold you fully responsible for what happens to the world economy.

Then he drops the bombshell:

…I am complete[ly] burned out, and have been for months. I’ve blogged an average of eight hours a day, seven days a week, for over two years. I’ve only kept going in recent months out of a sense of obligation to keep pushing these issues. But now that lots of other people are saying the exact same thing, it’s time for me to take a break.

Incidentally, I don’t think he’s exaggerating. Scott spends (spent) an incredible amount of time fielding the comments in his blog posts, and he must also have spent a lot of time reading other people’s stuff.

Now that Scott has decided, “My work is done here, the global economy is safe once again,” I just want to remind people of two other events:

==> After breaking the back of inflation and ushering in the Reagan boom, Paul Volcker turned over the keys to the Fed to Alan Greenspan in August 1987. In October 1987, the world suffered the worst stock market crash in history.

==> After presiding over the Great Moderation, and expertly guiding the US economy through the dot-com crash with a surprisingly soft landing, the Maestro Alan Greenspan handed over the keys to the Fed to Ben Bernanke in January 2006. We all know how that turned out.

==> And now, Scott Sumner rides off into the sunset, with the stock market looking like this:



The Scott Sumner Stock Sell Signal
Sat, 02 Apr 2011 03:00:23 GMT

Number of the Week: PCs Make Americans $500 Billion Richer

Just think without your computer you couldn’t blog.  I owned one of the early Apple IIs in the 1980’s.

A question:  If I buy a computer to write, and I spend more time writing after that, am I better off?  Why?

$1,700: The annual benefit the average American derives from personal computers

Despite all the wrenching change the computer age has brought, humanity is probably better off than it would have been if the PC had never been invented. Now, economists at the Federal Reserve Bank of Atlanta have taken a stab at figuring out exactly how much better off we are.

The economists — Karen Kopecky and Jeremy Greenwood – traced the history of the computer market back to the introduction of the Apple II in 1977 to calculate how much value, or “utility”, American consumers derive from a given amount of computing power. They then looked at how much we actually paid for that computing power, in the form of desktop PCs, laptops, notebooks , software and so on. The difference, known as the “welfare gain”, is the benefit we get from personal computers above and beyond what we pay for them.

Back in the days of magnetic-tape memory, the annual benefit was pretty small — somewhere between zero and about $6 for the average American, adjusted for inflation, depending on the method of calculation. But by 2009, the price of computing power had fallen more than 99.8% and personal computers had become a lot better and more widely used. As a result, the welfare gain rose to somewhere between $1,300 and $2,100 per person, the economists’ estimates suggest. Ballpark average: $1,700.

That’s a massive benefit, adding up to about $500 billion, or 5% of total consumer spending in 2009.

To be sure, the economists’ estimates are based on some assumptions that, while common in the world of economics, are open to debate. For one, they assume that people are extremely rational, and always buy exactly the number of personal computers that maximizes their utility. To the extent that irrational impulses drive people to buy computers, or to the extent that the use of computers entails costs people don’t recognize (say, attention-span deficits or Internet addiction), then the actual benefit could be significantly smaller.

That said, those who want to test the estimates can pose themselves a question: How much money would somebody have to give you to take away all your personal-computing gadgets permanently? If it’s a lot more than you paid, Ms. Kopecky and Mr. Greenwood are probably not too far from right.

Number of the Week: PCs Make Americans $500 Billion Richer
Mark Whitehouse
Sat, 02 Apr 2011 09:00:08 GMT