Sunday, April 22, 2012

Doing The Math for "Physicist versus Economist", for Earth Day 

From "Do The Math"...
Physicist: [I]f you plot the U.S. energy consumption in all forms from 1650 until now, you see a phenomenally faithful exponential at about 3% per year over that whole span. The situation for the whole world is similar. So how long do you think we might be able to continue this trend?
Physicist: ... First, I’ll just mention that energy growth has far outstripped population growth, so that per-capita energy use has surged dramatically over time—our energy lives today are far richer than those of our great-great-grandparents a century ago. So even if population stabilizes, we are accustomed to per-capita energy growth: total energy would have to continue growing to maintain such a trend.
The statements above are seriously erroneous. See below.
Second, thermodynamic limits impose a cap to energy growth lest we cook ourselves. I’m not talking about global warming, CO2 build-up, etc. I’m talking about radiating the spent energy into space... Alright, the Earth has only one mechanism for releasing heat to space, and that’s via (infrared) radiation. We understand the phenomenon perfectly well, and can predict the surface temperature of the planet as a function of how much energy the human race produces.
The upshot is that at a 2.3% growth rate (conveniently chosen to represent a 10× increase every century), we would reach boiling temperature in about 400 years. [Pained expression from economist.] And this statement is independent of technology. Even if we don’t have a name for the energy source yet, as long as it obeys thermodynamics, we cook ourselves with perpetual energy increase.
It's difficult to "plot U.S. energy consumption in all forms from 1650 until now", being that the US did not exist before 1789. But we can plot both energy consumption and population growth since 1790. From the US Census we get population, and via we get energy consumption...

populationenergy*E per capita**
17903.9 mil35691.3
2010308.7 mil98,000317.5
ave rate2.01%2.59%0.58%
* trillion btus

** million btus

Contrary to the claim "energy growth has far outstripped population growth" we see the exact opposite is the truth – over US history population growth has outstripped energy growth per capita by more than 3 to 1. But a much greater misrepresentation is this ...
"So even if population stabilizes, we are accustomed to per-capita energy growth: total energy would have to continue growing to maintain such a trend"
... ignoring the reality that in the USA energy consumption is declining per capita right now, and has been for the past 30 years -- as GDP of course continued to grow.

USA from 1979 to 2009...

[] Real GDP per capita: +58.8%
[] Energy consumption per capita: -14%
[] Cost of energy as % of GDP: -35%
[] Energy consumption per real dollar of GDP: -47%  []

In a moment we will accept the invitation to "do the math" in determining a realistic projection of future world energy consumption. But first, a word of what is going on in the above numbers, as wealth and income grow while energy consumption declines.

Advanced economies grow by increasing productivity – that is, by producing more of value from less. Energy and material inputs are a cost – economies advance by producing more value while reducing these costs. That's how we all get richer.

Thus, two pounds of a rotary dial single-line telephone becomes the few ounces of a smart phone that can connect by sound or image to near all the information in the world ... deca-tons of steam engine pulling deca-tons of railroad cars along kilo-tons of steel rails become a hollow aluminum tube that flies through the air at ten times the speed ... drinks once distributed in steel cans (opened with "church keys") came to be distributed in tin cans, light aluminum, lighter plastic ... and so on, with endless examples.

If you are either a consumer or a business, you know you get more value from products built more smartly, more lightly, with less material and energy input, and thus less cost. So advanced market economies drive relentlessly in this direction. Material inputs are cut much faster than energy inputs – as US GDP per capita has increase 125% over 40 years, mineral consumption declined 40%.

OK, back to doing the math. World energy consumption per capita has grown at a 0.79% annual rate, 1971-2009. But this is far from a uniform rate around the world. Consumption growth is much smaller or negative in advanced economies, larger in poor but rapidly growing economies.

In advanced economies energy consumption per capita has flattened or is falling. This is true across the world, not just in the US. In the European Union, advanced economies with somewhat lower per capita GDPs than the USA, energy consumption today basically is flat overall, and turning negative in the more advanced nations. For instance, during 1997 to 2007, total primary energy consumption in the UK declined 3% while real GDP grew 33%, while in Germany energy consumption declined 1.7% while GDP rose 18%.

In the poor but rapidly developing economies energy consumption is growing much faster. But even these economies are growing far more energy efficiently than did the US and other "first mover" economies, because they can copy and use from the start energy-efficient technologies that the first movers had to invent as they went along.

For instance, compared to the USA at the same level of per capita GDP, India today uses only one-fifth as much energy per capita as the USA did, and China uses less than half as much energy. We see again how the relation between economic growth and energy consumption is far from uniform -- the later in time, the less energy is used at a given level of national income.

Now to "do the math" for a simple projection of future energy consumption we need only two more items. First is an estimate of future world population. We can use the United Nations middle projection, which estimates population rising from today's 7 billion to 10.1 billion in 2100, remaining stable thereafter. Second is an estimate of future growth of world GDP per capita. The actual growth rate of world GDP per capita has been 1.8%, 1980-2010, and we'll project this going forward.

Our simple projection of future energy consumption multiplies per capita energy consumption each year by world population. It calculates annual increase in world energy use per capita from today's level starting with the recent 0.79% annual rate. But as we know this rate declines with increasing GDP, we must reduce it going forward as world GDP rises.

Thus the rate is reduced proportionately as world GDP per capita rises at the 1.8% annual rate from the recent $9,892 (in 2005 dollars) to approach $26,000 (2005 dollars) – the level at which energy use began declining per capita in the USA (and other advanced economies). When world GDP per capita goes above $26,000, energy use per capita is projected to decline each year by 0.35% - 10% over 30 years – somewhat less than the actual 14% decline in the USA, 1979-2009. (This is a very conservative projection as it credits zero increase in energy efficiency in the future).

Applying the resulting annual rate of energy growth per capita to the annual increase in future population, given in the UN middle estimate, gives the increase in energy consumption compared to today's base period. When graphed the result is, of course, a curve...

Total energy consumption peaks 50 years in the future, at a level 62.5% above today's. It thereafter begins a mild but steady decline, as population grows for another 38 years before stabilizing at just above 10 trillion.

Now, this is a simple model, with no doubt a large margin of error.  But it based on actual empirical data and economic principles proven in the data -- it is realistic, which cannot be said about simpleminded "exponential consumption growth" projections that have no support in either empirical data or economic logic, and which in fact are refuted by both.  There is nothing "exponential" about consumption related to economic growth.  It is entirely finite within very limited bounds.

And you can make the margin of error around it as large as you want -- that 62.5% maximum increase in energy consumption before a subsequent decline is a long, long, long way from "boiling the earth".

Monday, July 18, 2011

Has the housing industry boom-and-bust been driven by an even *bigger* bubble-and-bust in household creation? 

Out of curiosity, a little while back I graphed for myself the historical data on home construction to see how far trends have gone compared to past historical experience. Well, the numbers show a big drop recently, no surprise! One might conclude that such a depressed level of construction, by the power of regression to the mean, implies a correspondingly big increase is in the cards for the future, sooner or later.

But when trying to be more specific about how big a turnaround is likely to occur and when, the problem is: how low is today's low? Compared to *what*? With no context or causative theory indicating where home construction should be today in a "normal" economy, as opposed to in a Great Recession, there is no way to say what an industry recovery might look like. Speculating about it is just guessing.

Then I came upon an article about investing in the home building industry (buy cheap!) that mentioned a strong correlation between household formation and home construction. That's logical and obvious enough -- new households need new homes. But due to a lack of easy to find good data on the relation, I went back to the Census and graphed its historical data on household formation too.

Putting together the two data lines gives an interesting picture that I haven't seen discussed anywhere before.

In short: The housing boom-bust has been following an even *bigger* rocketing up and collapse in household formation.

Household creation and housing units started, thousands, 1964-2010.

The main picture. The single-year numbers are very volatile so I've used a three-year moving average.

From 1960 through 2010 new housing unit construction averaged 1.16 times growth in the number of households. That makes sense, as new housing units are required both to provide homes for new households and to replace old housing that is abandoned.

In the chart the line for new housing units is generally above that for households created, as it should be. But look at what happens in 2003 -- household creation starts rocketing up to an all-time high, well *above* housing starts. Housing starts follow upward, get very high, but never as high as household creation. Then household creation plunges to by far its all-time low. The infamous collapse in housing starts is only following behind it.

The single year numbers are even worse than the moving average:

[] Household formation is down 78% since 2007, 75% from the average for 1998-2007.

[] Home starts are down "only" 57% since 2007, 67% from the average for 1998-2007.

New homes actually have been *overbuilt* during the last three years, compared to the historical 1.16 new starts-to-household growth ratio: during 2008 to 2010 the ratio has been 1.34 to 1 ... in 2010 it was 1.64 to 1.

A few other pictures of the same data may provide some perspective:

Household creation and home unit starts, three-year moving averages, versus their 15-year moving average trend lines.

The scale of the recent household creation run-up is more clearly visible when plotted against trend.

The peak of household creation in 2003 was more than twice as far above the trendline than any other cyclical peak since 1960. The fall so far is 50% further below trendline than any prior fall.

This is simply an unprecedentedly huge swing up and down.

In contrast, the height of the peak in home construction is in the same ballbark as three prior ones -- and only 55% as far above trend as is the peak in household creation.

Note: The trendlines are 15-year averages -- the average of the given year year plus the seven before and seven after, until 2000.

For 2001 and later: (1) the household creation trendline number is figured by multiplying the growth in total US population by the historical household creation/population ratio, and (2) the housing unit start trendline equals the household creation trendline number times 1.15.

Household creation peaked in the 1970s  as the Baby Boomers came of age.  But at all times the trend line for home unit starts has been above that for household creation.

There was a general slowing in US population growth during 2000 to 2010 compared to during 1990 to 2000, as population grew only 10% during the later period compared to 13% during the former. This causes somewhat declining trendlines estimated for 2001 to 2010 -- yet still the household creation and home starts lines plunge far below them.

The mid -2000s rocketing-up of household creation over home starts is clearly aberrational.

"Accumulated Overhang" of household creation.

The rate of household formation has exploded and collapsed in the last decade. But will it continue collapsing? We might ask, as people do about the presumed overhang of homes built during the same period, whether the "excess stock" has been worked off yet. If the accumulated number of households created during recent years is still over the number that would be created by the long-term trend, we might think the plunge will continue.

Trying to use these numbers is to guestimate this is shaky business, so take the try at it that follows with a big tumbler of salt.

By counting the households created each year/over under the trendline, keeping a running tally, then dividing the cumulative amount by the current trendline number for annual household creation, one can get a number for "excess" household creation in terms of years.

But the challenge is picking the right year to start counting from. It makes a big difference.

The best way to measure an economic cycle is from peak-to-peak or trough-to-trough, and since we are very near or at the bottom of this cycle now (we hope!) the idea is to measure from a past bottom.

Census data on household creation goes back to the 1940s, the first year for which the trendline method used here is available is 1954 -- and as it happens 1954 was the bottom year for household creation for more than a decade. So charting the data from there...

By this quick-and-dirty method it looks like the "excess" of households over trend has finally evaporated, with the number of household finally nosing below trend, by 0.35 of a year of trend household creation.

But maybe not -- the small difference between starting in 1954, 1955, 1956, etc., makes a big difference. Here's the result as measured from the years 1954 to 1963.

1954 -0.35 years
1955  0.08
1956  0.20
1957  0.16
1958  0.30
1959  0.41
1960  0.37
1961 -0.04
1962  0.15
1963 -0.02

So it may well be that the household count has not yet gotten down to trend level after all.

Looking ahead.

There are a lot of people about opining "the economy won't be fixed until the home building market gets fixed". But all the above implies the reverse is true.

Whatever may have caused the boom in household creation to begin with, there's no doubt that a bad economy puts the brakes on it. In a Great Recession we'd expect the household creation rate to fall well below trend even if there hadn't been a boom in it to go bust. That suggests the fall in the household creation can be expected to continue for a significant while yet after getting down to trend.

General economic recovery requires a recovery in the home building industry ... Recovery in the home building industry requires recovery in household creation to increase the demand for housing ... Recovery in household creation requires general economic recovery ...

I'm going to go think about something else.

Thursday, April 29, 2010

Wrapping things up.... 

For those who still visit here in spite of the recent lack of posts, here's the reason for the lack of posts:

Blogger recently announced it is discontinuing support for the ancient publishing method this blog has used since 2004 (the Paleolithic era in Internet time), requiring the blog to be ported to a new location to keep publishing. And frankly -- in spite of all the fun I've had with this thing over the years -- I don't think it is worth it.

It's been a kick for the ego to on (rare) occasion get thousands of hits in a day after being linked to by an uber- or mega-blogger. And much more rewarding than that has been the personal interaction I've had with readers -- you know who you are, thank you all.

But that said, this blog started as a crude simple experiment way back when, and has never progressed beyond that level. As a self-employed professional, I avoided writing about anything involving my professional expertise, to avoid exposing clients and potential clients to excessively candid examples of my addled thinking (and also kept my name off the blog -- not that it is a secret).

That's worked as intended, but necessarily has left me writing about subjects I don't know anything about. Well, that's been a benefit, I admit -- it's a lot more fun to write unconstrained by facts and knowledge. That seems to one of the primary purposes of the Internet.

Still, the result has been an anonymous blog, relating no particular expertise, on subjects randomly moving from this to that.

Which, of course, also means one with only a small readership, if a loyal one (I can tell from the logs) of like-minded souls (what's wrong with you?) who stumbled upon it one way or another, and for some reason decided to come back.

To you all I say thank you, and adieu. This will be the last post of the blog. The archives will remain, and the "" address will remain live and perhaps active, if only because I've paid for it so far in advance. How it may mutate I can't say.

It is just possible that I may apply what I've learned here to a new blog, one that will be much more professional and focused (one hopes) ... but the future is unknown. If that happens, I will leave directions to it here.

Until then, thank you all and good luck to you. I'll be seeing you around the Web (and in other blogs' comments).

-- Jim G.

Thursday, April 22, 2010

Happy Earth Day. And remember... 

To save the Earth, grow the economy faster ... faster!

Because the richer we become, the less of the physical world we consume.

Sunday, April 04, 2010

If only Enron and Arthur Andersen had been providing national health care... 

... they'd still be happily in business today.

CNN reports:
Feds found Pfizer too big to nail

... By April 2005, when Bextra was taken off the market, more than half of its $1.7 billion in profits had come from prescriptions written for uses the FDA had rejected.

But when it came to prosecuting Pfizer for its fraudulent marketing, the pharmaceutical giant had a trump card: Just as the giant banks on Wall Street were deemed too big to fail, Pfizer was considered too big to nail.

Why? Because any company convicted of a major health care fraud is automatically excluded from Medicare and Medicaid. Convicting Pfizer on Bextra would prevent the company from billing federal health programs for any of its products. It would be a corporate death sentence.

Prosecutors said that excluding Pfizer would most likely lead to Pfizer's collapse, with collateral consequences: disrupting the flow of Pfizer products to Medicare and Medicaid recipients, causing the loss of jobs including those of Pfizer employees who were not involved in the fraud, and causing significant losses for Pfizer shareholders.

"We have to ask whether by excluding the company [from Medicare and Medicaid], are we harming our patients," said Lewis Morris of the Department of Health and Human Services.

So Pfizer and the feds cut a deal ... Prosecutors say there was no viable alternative.

"If we prosecute Pfizer, they get excluded," said Mike Loucks, the federal prosecutor who oversaw the investigation. "A lot of the people who work for the company who haven't engaged in criminal activity would get hurt."

... In all, Pfizer lost the equivalent of three months' profit.
Another unintended consquence of nationalizing health care.

Sunday, March 28, 2010

Krugmania of the Day: The great "Krugman versus Krugman debt debate" continues. 

Interest rates that the US government has to pay to borrow are rising.

Bloomberg reports that top-rated private business pay less!
Obama Pays More Than Buffett as U.S. Risks AAA Rating

The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg.

Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market...

"It’s a slap upside the head of the government," said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion...

Investors demand 0.60 percentage point more in yield to own 10-year Treasuries than German bonds of similar maturity, Bloomberg data show. A year ago, debt of Germany, whose deficit is 4.2 percent of its economy, yielded about half a percentage point more than Treasuries...

Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week...

“It’s a manifestation of this avalanche, this growth in U.S. Treasury supply which is under way and continues for the foreseeable future, and the comparative scarcity of high-quality credit,” particularly in shorter-maturity debt, said Malvey, whose Lehman team was ranked No. 1 in fixed-income strategy by Institutional Investor magazine from 1998 through 2007.

Last year’s $2.1 trillion in borrowing by the government exceeded the $1.08 trillion issued by investment-grade companies, the biggest gap ever, Bloomberg data show. Malvey said the last time he can recall that a corporate bond yield traded below Treasuries was when he was head of company debt research at Kidder Peabody & Co. in the mid-1980s...
But Paul Krugman pooh poohs the whole thing...
Yesterday I criticized the WSJ for writing as if a fairly small rise in long-term interest rates spelled doom, doom I tell you, for deficit spending ... maybe I can make the case a bit clearer by comparing the current scary, scary rate rise with something that happened back in 2003. Then as now, the economy was growing, but without yet generating job market improvements.

The rate rise that the WSJ is making so much of is an increase in 10-year rates from 3.67 percent on 3/22 (and 3.61 percent at the beginning of the month) to 3.91 percent on 3/25.

Now compare July 2003: the 10-year rate rose from 3.56 percent at the beginning of the month to 4.49 percent at the end.

Correct me if I’m wrong, but I don’t remember a lot of stories calling that spike in rates a sign of imminent US bankruptcy.
Hmmm, let's try to recall stories about interest rates from 2003.

Hey, this was written then by a "terrified" Paul Krugman!...
... last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

A leading economist recently summed up one reason why: "When the government reduces saving by running a budget deficit, the interest rate rises." Yes, that's from a textbook by the chief administration economist, Gregory Mankiw.

But what's really scary, what makes a fixed-rate mortgage seem like such a good idea, is the looming threat to the federal government's solvency... [more].
Well, there's one!

Saturday, March 27, 2010

Who will regulate the regulators? 

Phony products impress federal energy program

Fifteen phony products - including a gasoline-powered alarm clock - won a label from the government certifying them as energy efficient in a test of the federal "Energy Star" program.

Investigators concluded the program is "vulnerable to fraud and abuse."

A report released Friday said government investigators tried to pass off 20 fake products as energy efficient, and only two were rejected...

Tax credits and rebates serve as incentives to buy Energy Star products.

But the General Accountability Office, Congress' investigative arm, said Energy Star doesn't verify claims made by manufacturers - which might explain the gasoline-powered alarm clock, not to mention a product billed as an air room cleaner that was actually a space heater with a feather duster and fly strips attached...

Energy Star-certified air room cleaner that was actually a space heater with a feather duster and fly strips attached.

In addition, the four phony GAO companies were able to become Energy Star partners, giving them access to the program's logos and other promotional resources. Energy Star didn't call any of the companies or visit the addresses...

... the EPA and Energy Department told investigators in briefings that although the program is based on manufacturers' certifying their products meet efficiency standards, that efficiency is ensured through aftermarket tests and self-policing... [AP]
Ah, that's the answer, the regulators regulate themselves.

I'm so relieved that the regulators will now be regulating the entire nation's health care too.

Friday, March 26, 2010

If the government won't be our nanny, who will? 

Metro NY:
What’s next on prohibited list?

Out with personal responsibility. In with laws banning things.

Or so it would seem as a sweep of prohibitory mandates have made their way into legislation.

But is it for the public good or simply political grandstanding?

In 2006, Mayor Bloomberg famously banned trans fat in restaurants and just this month New York state Assembly Member Felix Ortiz introduced legislation that would prohibit salt use in food preparation in restaurants throughout the state. (The assemblyman says he’d allow salt shakers on tables.)

The Department of Education banned home-baked goods at school fundraisers — in the name of good health — but allows the sale of packaged items like Pop-Tarts and Doritos.

"It leaves you speechless, it’s the most ridiculous ban on so many levels," said City Council Member Gale Brewer of the bake sale ban.

So are we becoming a nation of nanny-government interventionists?

"The ban thing is kind of weird," Brewer admits, referring to the "picayune and microscopic" nature of some of the regulations.

But while Brewer concedes that Libertarians might think government should back off, she does believe that bans have their place.

"There has to be someone who says, 'Wait that’s not a good idea.' If government doesn’t do it, then I don’t know who else will," she said.

Wednesday, March 17, 2010

Is the stimulus worth its cost? Guest Stolen post of the day. 

I don't have much time to blog these days, but fortunately there's plenty of material on other blogs that's better than anything I could write to borrow steal and post here.

For instance, how's the stimulus working out?

Has it really saved a lot of jobs? Been a bust? Is it hard to tell?

Are we better off for what it has accomplished, in spite of the over-$800 billion it is adding to the national debt? Or would we have been better off "taking our lumps" and saving the $800 billion?

The excellent Prof. Scott Sumner -- a specialist on the Depression, Japan's slump and such downturns -- frames things a different way. He points out there was a third option: stimulus that doesn't add to the national debt, monetary stimulus ... and that in fact monetary stimulus has been applied by the Federal Reserve anyhow, interacting with fiscal stimulus in ways that may be perverse.

Prof. Sumner, unkowingly and without granting his permission, contributes the following analysis...

~~~ quote ~~~

Everyone wants to set the debate up as follows:

1. Do you favor massive deficits or are you content to have the economy self-correct, risking high unemployment for several years?

... that is not the issue. Rather there are two distinct issues:

1. Is more AD [Aggregate Demand] desirable, or should we let the recovery take its natural course?

2. If we need more AD, is monetary expansion preferable to massive budget deficits?

Let's review a few simple ideas. Fiscal stimulus does not boost AS, it boosts AD ... So if fiscal stimulus is to help the recovery, it does so by exactly the same method as monetary stimulus - boosting AD.

I happen to favor more stimulus, although I understand that some thoughtful economists disagree with me.

I happen to think monetary stimulus is preferable to fiscal stimulus, and in this case there aren't any thoughtful economists who disagree with me. Not one.

If there was going to be one, it would be Paul Krugman. But even he admitted late last year that monetary stimulus is the first choice, and you only move on to fiscal stimulus is the Fed won't play ball...

We are running up trillions of dollars in debt precisely because the elected leaders of our country think we need more AD, and the Fed doesn't.

I understand the need for the Fed to be independent, but how about some honesty at least. If these inflation hawks really believe what they are saying, show some guts and come out and say "We are not doing more monetary stimulus because we feel a need to offset what we regard as excessive fiscal stimulus, and prevent it from raising the expected inflation rate." If they really have the courage of their convictions, then why not admit what they are doing?...

In February I said fiscal stimulus wouldn't work, as the Fed had some sort of nominal aggregate target in mind, and was going to simply offset the fiscal stimulus. And that is what happened.

When things looked scary, like a Depression was possible, the Fed announced its big program of buying Treasuries and MBSs.

Later in the year when things picked up a bit, and we were clearly going to avoid a depression, the Fed started furiously back-peddling. They started talking about ending the bond buying program and "exit strategies." Ask yourself this; what does that back and forth behavior tell you?

It tells me the Fed has some sort of implicit nominal target, and if the economy seems to fall short they'll pull out all the stops and flood the economy with liquidity.

That's why the $800 billion dollar fiscal stimulus was a complete waste of money; the Fed wasn't going to allow NGDP to fall much further than the actual 2.5% it fell. Shame on us for not figuring that out, and shame on the Fed for not explaining that to us...

~~ end quote ~~

Don't anyone answer "liquidity trap". As Krugman and Bernanke both long pointed out during Japan's deflation, a government can always depreciate the currency a bit to cure that. And monetary policy worked potently in the US during the Great Depression, as pointed out by Romer (and Sumner, visually), amid supposedly the worst liquidity trap of all.

Right now the Fed is cutting back its support for bond and mortgage security markets...
"The big question is how much mortgage rates will rise and how quickly as a result"
... which clearly is de-stimumative.

Yet the spending stimulus lumbers on, not even half done.

Fed policy is offsetting it.

People look at econometric models and/or whatever and claim the stimulus has created jobs -- but can do so only in light of the actions the Federal Reserve has actually taken.

Yet without any doubt whatsoever, if there had been no stimulus the Fed would have taken much different and greater actions to support the economy. One needs to know what the job situation would have been then, how many jobs would have been saved/created by that, and then compute the difference between that job situation and today's, to really know how many jobs the stimulus has created or saved, at its cost of $800 billion.

That is until now, regarding the first half of stimulus spending.

Going forward from here, if the Fed steers to hit its policy targets, and in doing so acts to offset effects of the stimulus (as we seem to see happening above) what will be the effect of the remaining $400 billion of the stimulus then?

Sunday, March 14, 2010

Sunday sports page. 

[] Toilet flushing in Edmonton during the Olympics hockey finals.

Freakonomics blog

Beer consumption presumably was more stable.

[] Pro football isn't what it used to be, and never was.

[] Teams the New Jersey Nets can look down upon. No matter how bad you are there's always somebody who's been worse than you -- unless you were the 2003 Detroit Tigers.

[] For all you sports stats geeks (and why are you reading this if you aren't one) the event of the year was last week's MIT Sloan Sports Analytics Conference. Check the sub-links for digests of the presentations on bias in officiating, performance enhancing drugs, how NBA teams use analytics, how pro coaches relate to stat-heads, what geeks don't get (with Mark Cuban, Daryl Morey, Bill Polian and Jonathan Kraft) ... and more.

Wednesday, March 10, 2010

Seen around and about... 

[] Crocodile 1, Shark 0

[] How's Obama doing, relatively speaking? The Gallup Historical Presidential Approval Center tells all.

[] Omabacare political quotes of the moment...
"We have to pass the bill so that you can find out what is in it." - Pelosi

"A bill can be bipartisan without bipartisan votes." - Pelosi

"To maintain a strong presidency we need to pass the bill." - Obama

[] Keith Hennessey explains what the Democrats really have to do to get the health care bill through reconciliation: both the legislative mechanics and the political challenges.

[] Laptop smashing fun: Highly entertaining economics class laptop smashing, from France!

Also, laptop computer meets liquid nitrogen (although the presumably shattering payoff is out of camera view -- really, some Professors should better prepare their demonstrations).

Today's spoiled generation can afford to smash laptops like this. Back in my time I paid $2,000 (1980 dollars, $5,260 today!) for a top line TRS 80 Model III with dual 32k disk drives, 48k memory, and 2 mhz processor. Plus another $2,000 for a top-quality daisy wheel printer. No liquid nitrogen or practical jokes for them.

[] What drives media bias? The bias of the media's audience. Surprise.

[] How politics works: There's what you think of the candidate ... and then there's what you think of the alternatives...
A new Elon University Poll in North Carolina finds that only 24% of North Carolinians think that Sen. Richard Burr (R-NC) deserves reelection...

However, a new Rasmussen poll finds Burr still leading Elaine Marshall (D), 50% to 34%, and beating Cal Cunningham (D), 52% to 29%.
And so it goes...

Sunday, March 07, 2010

Sunday sports page 

[] Awful predictions of the past year get their annual recap from Gregg Easterbrook.
After the first weekend of the 2009 NCAA men's basketball tournament, all 5 million ESPN bracket entries were wrong.
If you must make predictions, keep 'em simple...
My off-price, ultra-generic prediction -- Home Team Wins -- went 156-111 this season ... On ESPN's "Sunday NFL Countdown" Mike Ditka finished with 157 correct, and likely wasted some time by thinking.
Also: awful predictions about the stock market, economy, how the universe will end (not disproven yet), a million dead by global warming, global cooling, hurricanes, nuclear power, glaciers, sunspots ... and more sports...
Pro Football Weekly publishes two or three "best bets," to entice readers to sign up for a Handicapping Inner Circle product that costs $109.95 annually. In 2006, the PFW Best Bets went 31-34-2; in 2007, 32-36; in 2008, 35-32-1. For this season, Best Bets went 31-37. That's a four-year total of 129-139-1, meaning when Pro Football Weekly pundits are certain they are right, they are usually wrong.

PFW promotes its Handicapping Inner Circle by claiming 67 percent accuracy -- yet over a four-year period, its actual published picks were 48 percent accurate.

Peter King makes so many predictions, it's hard to know what to take seriously...

In late September, King said, "Minutes ago I spoke to people in Washington who told me there is absolutely no chance Jim Zorn is in trouble with the Redskins." ... Two weeks later, King said Zorn would be fired no later than the following week, to be replaced by Jerry Gray. Zorn wasn't fired until the season ended, and Gray was shown the door too. King said there was "no possibility" Jay Cutler would be traded by Denver. For the season, King forecast a Super Bowl of New England over Chicago -- the Bears did not make the playoffs -- and predicted the Saints would finish 7-9...
Remember folks, the news pages of the newspapers operate just like the sports pages, and the news channels on TV operate just like ESPN.

[] Dave Berri discusses books about sports, thinking, and thinking about sports.

[] As baseball moves from steroids scandals to to human growth hormone scandals, J.C. Bradbury observes: Banning HGH only signals to players that it works. To keep players from using it, make it legal and let them see it doesn't work.

[] The expiration of the salary cap in the NFL during the just-started free agent signing season gets a look from Brad Humphries at The Sports Economist.

[] Steady return generally has more value than inconsistent return at the same average rate. Phil Birnbaum discusses this regarding predicting game outcomes from team average for-against scores.

As a simple example of why this is so, say a baseball player hits six home runs. If he hits them all in one game he may feel great about setting a record -- but most of the home runs probably will be wasted running up the score, and none of them would help his team win any other game. In contrast, if he hits one home run each in six games he could help his team win two, three, or four games.

As it happens, this week I got in a discussion on this topic in the comments to a post at Pro Football that presented a counter-intuitive finding that higher pass completion percentage for NFL quarterbacks is associated with scoring fewer points scored and fewer games won -- while higher numbers in other metrics, such as average yards per pass attempt (AYA) are associated with more scoring and winning.

Now, I much prefer AYA as a measure of QB performance over pass completion percentage, since the objective of passing is to advance the ball downfield, not to successfully complete a very high percentage of passes that don't advance the ball.

(And for the record, the NFL's official passer rating is probably the worst metric of all. It is so biased towards completion percentage that a QB can increase his rating by completing passes that lose yards: hit 10 of 10 for minus 10 yards each and he'll get a rating of 79 for losing 100 yards.)

But even with AYA being my preferred measure, logic says completion percentage should have some additional positive value. Analogous to the home run example, while the goal is to advance the ball, advancing it any given total amount at a steady rate (with a high completion percentage) should be preferable to doing so hit-or-miss (with a low completion percentage).

So I got out my spreadsheet software, plugged in the NFL 2009 season passing numbers, and sure enough multiple regression produced a formula that predicts points scored from passer data weighting both AYA and completion percentage positively, while giving the former twice the weight of the latter.

And from that I can produce my very own passer rating formula! Looking at the numbers, they actually correlate with scoring better than do AYA, the NFL's official rating, or any other rating method I've found in a couple days. In principle, from that I can rate passing defenses (offense in reverse) then rate whole teams ... then pick winners, and best bets against the spread...

Come the start of the 2010 NFL season I may have my own sport web site, be rating teams and predicting game outcomes ... and for $150, be selling my Premium Best Bets.

A year from now, you may be reading about me in Easterbrook's column!

Saturday, March 06, 2010

Krugman, the future of newspapers, and the NY Times "Corrections Collection". 

When was the mermaid on the Barracuda?
Don't believe the New York Times!

Paul Krugman notes that he and his friend Brad DeLong really don't like the Wall Street Journal. But the "bad news" that the WSJ is so bad also "is good news", he says, because...
There’s a pretty good chance that we will end up with only one great national newspaper. And I know which paper that should be …
Hmmm ... I can't tell! Let's look at the Times' own reporting...
The two-decade erosion in newspaper circulation is looking more like an avalanche, with figures released Monday showing weekday sales down more than 10 percent since last year...

USA Today ... [lost] the top spot in weekday circulation for the first time since the 1990s, to The Wall Street Journal.

The Journal’s circulation, just over two million, rose 0.6 percent. It is one of a very few papers to sell online subscriptions, which are counted in the circulation total, helping The Journal, which does not publish on Sundays, defy the industry-wide decline. It has more than 400,000 digital-only subscribers, up by more than 100,000 from five years ago.

At The New York Times, which has repeatedly raised its prices in recent years, weekday circulation fell 7.3 percent, to about 928,000, the first time since the 1980s that it has been under one million...
And as we mentioned here earlier -- speculating that Krugman's resume is likely to end up on Murdoch's desk in the end -- Paul's good friends at Rasmussen report that only 24% of voters have a favorable impression of the NY Times ... something PK might take personally, being that...
Most voters (55%) don’t know enough about Paul Krugman to venture even a soft opinion about him. Those with an opinion are fairly evenly divided —- 22% favorable and 22% unfavorable ... with four percent (4%) voicing a Very Favorable opinion and six percent (6%) a Very Unfavorable view.

But if people are asked about "New York Times columnist Paul Krugman", the numbers shift significantly.

Once he is identified with that publication, his unfavorable ratings jump 15 points to 37%. The number with a Very Unfavorable view more than triples to 20%. However, Krugman’s favorable ratings show little improvement, inching up only three points to 25%...

John Fund was viewed favorably by 12% of voters and unfavorably by 22%. Just one percent (1%) had a Very Favorable opinion of him, and six percent (6%) offered a Very Unfavorable view.

However, when Fund was identified with The Wall Street Journal, his numbers jumped to 34% favorable and 20% unfavorable...
Well, if Krugman really believes the Times is going to come from behind to bury the Journal, he can buy some of its stock. It's cheap.

All of which gives me a convenient excuse to segue into this semi-annual NY Times Corrections Collection, courtesy of the Super Bowl wrap-up edition of the world's most eclectic football column [the following is edited for brevity] ...

In the past six months, the Times has, according to its own corrections page, said Arizona borders Wisconsin ... confused 12.7-millimeter rifle ammunition with 12.7 caliber (the latter would be a sizeable naval cannon) ... said a pot of ratatouille should contain 25 cloves of garlic (two tablespoons will do nicely) ... on at least five occasions, confused a million with a billion ... understated the national debt by $4.2 trillion ... used "idiomatic deficiency" as an engineering term (correct was "adiabatic efficiency")... said Paul Revere's Midnight Ride occurred in 1776 (it was in 1775 -- by 1776, everybody knew the British were coming) ... "misstated the status of the United States in 1783 -- it was a country, not a collection of colonies" ...

The Times also "misidentified the song Pink was singing while suspended on a sling-like trapeze" ... confused the past 130 years with the entire 4.5 billion-year history of Earth ... misused statistics in the course of an article complaining that public school standards aren't high enough ... said Citigroup handed its executives $11 million in taxpayer-funded bonuses, when the actual amount was $1.1 billion ... said a column lauding actress Terri White "overstated her professional achievements, based on information provided by Ms. White"... reported men landed on Mars in the 1970s ("there was in fact no Mars mission," the Times primly corrected).

The Times also gave compass coordinates that placed Manhattan in the South Pacific Ocean near the coastline of Chile ... said you need eight ladies dancing to enact the famous Christmas song when nine are needed ... said Iraq is majority Sunni, though the majority there is Shiite (hey, we invaded Iraq without the CIA knowing this kind of thing) ... got the wrong name for a dog that lives near President Obama's house ("An article about the sale of a house next door to President Obama's home in Chicago misstated the name of a dog that lives there. She is Rosie, not Roxy" -- did Rosie's agent complain?) ... elaborately apologized in an "editor's note," a higher-level confession than a standard correction, for printing "outdated" information about the health of a wealthy woman's Lhasa apso .... incorrectly described an intelligence report about whether the North Korean military is using Twitter ... called Tandil, Argentina, a "tiny village" (its population is 110,000) ... confused coal with methane (don't make that mistake in a mine shaft!) ... on at least three occasions, published a correction of a correction; "misstated the year of the Plymouth Barracuda on which a model dressed as a mermaid was posed;" "mischaracterized the date when New York City first hired a bicycle consultant" and "misidentified the location of a pile of slush in the Bronx"...

And that's not even counting the editorial pages. OK, if the Times does go under, all this I'll miss!

Thursday, March 04, 2010

New York gone wild! 

We're not just talking about coyotes down here in lower Manhattan, where I live. ("Hey, kids, go out to the park and play!")
We're talking politics...
New York gone wild

Once a source of national leaders of both political parties, New York state has descended into a bizarre, riveting spectacle of corruption and political debasement ... [Politico]
Paterson, Rangel, Spitzer, Hevesi, Meeks, Estrada ... Illinois has nothing on us!

The Empire State once produced national leaders from Alexander Hamilton and John Jay through Teddy Roosevelt, Al Smith, Franklin Roosevelt, Tom Dewey ....

OK, we also produced Tammany Hall with Boss Tweed, Senator George Washington Plunkitt (of "honest graft" fame), Mayor Jimmy Walker ... and arguably they were much more truly New York than that Caribbean import Hamilton and those English bluebloods the Roosevelts.

So maybe we're just getting back to our animal roots around here.

If Joe Francis ever wants to start a "Politicians Gone Wild! Doing It ALL!" spin-off, here we are. (Judging from his record he'll fit right in among 'em. He could move here and run for office himself.)

Wednesday, March 03, 2010

Who on late-night TV is as sexy as Jesus? 

Not Leno. Not Jimmy Kimmel, Conan, Charlie Rose nor even Larry King.
Staffers dish on sexual 'cult' of Letterman

David Letterman ... is a "Jesus"-like figure to his female staffers -- his sexual "electricity" driving them insane with desire, a new report says.

"It's like a cult," a former "Late Show" insider told Vanity Fair magazine for its feature on the 62-year-old Letterman. "You arrive as an intern and stay for life, and people do fall in love with Dave and behave in a way that might not be considered appropriate in a professional working environment."

"It was intoxicating to me, and I could see how someone could cross the line. It's like Jesus Christ saying, 'Hey, let's go to dinner!' You're going to go, 'Wow! He chose me!'...

"I've come in contact with countless celebrities, and only two emit a tangible, almost magnetic force, an electricity that draws you to them: David Letterman and Bill Clinton," former Letterman segment producer Madeleine Smithberg cooed to Vanity Fair.

"The man is electric! I was there for six years. You want to be with him, you want to be close to him. And when you are, you feel good..." [NY Post]
Between the 62-year-old Letterman and Peter Orszag, super-stud nerd of government accounting, maybe there's a whole new model of male sexual super-stardom emerging in the 21st Century.

Look out Brad Pitt & Co., hide your Angelina Jolies. Guys like me are coming to town!