You Could Only Come up with 40 Economists. Seriously?

The Economic Policy Institute published an ad in the Washington Post with 40 economists supporting the Employee Free Choice Act (HT: Russell Roberts). Notable exception: liberal favorite Paul Krugman. Given Krugman's opinion (begin at "2. The cult of the new") in the past, it's understandable why. There have been many petitions published lately with hundreds of economists expressing their support. To include a petition with only 40 economists, regardless of how "prominent" they may be, only reduces the legitimacy of the institute's claims.

Will Wilkinson and Canadian Liberty

Will Wilkinson seems to believe that freedom in Canada is not much different from the U.S. He says that anecdotally it may seem that Canada less free, but that actual indices measuring freedom between the two actually suggest that they are quite comparable. I am not sure what indices he is referring to, but the indices I am most familiar with in my research are the Economic Freedom of the World Index and the Economic Freedoom of North America Index both constructed by the Fraser Institute. For the most part, Canada ranks quite well at the country level compared to the United States. The U.S. has generally ranked higher, but in recent years Canada has surpassed it slightly (in 2006, the most recent year that is estimated, Canada ranks 7th and the U.S. ranks 8th). However, at the state level economic freedom is consistently higher in the U.S. states. Delaware ranks highest overall followed by Alberta. However, none of the other Canadian provinces rank in the top 50 (West Virginia is the only U.S. state not to rank in the top 50). Of course, it could be that although there are differences, the differences are not significant compared to other countries.

An Economic Laboratory

Most countries in the world are subscribing to the idea that significant government stimulus is necessary for economic recovery. If these policies fail to live up to their predicted outcomes, then the response from stimulus proponents will be that things would have been much worse without the stimulus. However, at least one country (Ireland) is cutting expenditures. It will be interesting to see how Ireland performs in coming years relative to the United States and other countries. My bet is that in the long run it will fare much better; in the short run, it may fare worse, but not by much. It will be interesting to see if other countries adopt Ireland's policy.

How to solve the crisis: Open the borders

Thomas Friedman points out the absurdity of prohibiting banks receiving funding from the federal government from hiring immigrants with H-1B visas. For one, if there is any where that we need skilled foreign labor, it is in the financial sector. Also, they will be willing to buy up the houses on the market so that the housing market can get going again.

Daron Acemoglu's thoughts on the economic crisis

http://econ-www.mit.edu/files/3722

Interview with KFOX News

I was interviewed by KFOX News here in El Paso this evening. I listened to President Obama's speech with two friendly construction representatives who were obviously in favor of the stimulus. We knew we didn't agree, but we got along well enough. I was asked about the stimulus and made it known that I am extremely pessimistic that fiscal stimulus will work. Anyone who says that there is significant agreement amongst economists that fiscal stimulus actually works, is deceiving you. There isn't. It didn't work during the Great Depression and it sure didn't work for Japan during the 1990s. Japan has never fully recovered from its lost decade and the only thing that's left to show for it is a ridiculous amount of debt (and a lot of useless roads). This is what worries me. The usual response to this is that past stimulus expenditures didn't go far enough to have their effect. I believe drug addicts often use the same reasoning, "Just a little more, and I'll be good!"

I have a real problem with this concept in macroeconomics called the "paradox of thrift." This means that while thrift may be economically reasonable for the individual/family, for the economy as a whole it is destructive. How does this even make sense? Until recently, our problem was that we didn't save enough. Now our problem is that we aren't spending enough and therefore the government has to do it for us? I hate macroeconomics. The main thing I learned from my graduate economics course is that economists don't really know very much about macroeconomics. Macroeconomics as it is currently being applied by the federal government contradicts with basic microtheory upon which it should be founded. In short, in order to solve a problem that was created by Americans living beyond their means, Americans must continue to live beyond their means.

Anyway, I attach the transcript and the video here. You gotta love soundbites. Obviously, I said a lot more than this, but you give them something catchy, and of course they'll use it. However, it does basically sum up my feeling on the stimulus.