In a fit of self-loathing, I decided to walk to the Hardee’s near my office for dinner. I had heard some fast food restaurants were installing self-service registers, but this was my first time seeing them:
The really ingenious thing is that Hardee’s would knock 10% off the price if you used the screen. (The sign says that in the upper left of the picture.)
This trend is sweeping the country. The Post Office has machines that operate 24/7 to dispense postage, even for packages. The grocery store now gets by with one employee overseeing up to eight stations of customers bagging and paying for their groceries. Ostensibly “nice” restaurants like Panera rely on customers bussing their own tables. Car washes and (for a long time) gas stations operate largely through the customer’s labor.
Some of this reflects good old-fashioned capitalist innovation, and is a sign of progress. On the other hand, some of it also reflects the growing burden of labor regulations (of which the Affordable Care Act, aka ObamaCare, is the most notable example), plus actual and proposed hikes in the minimum wage.
In this post, I’m not going to pontificate on solutions. But over the coming decade, I think we are going to see a growing mass of unemployed and unemployable young people, who quite literally lack the skills to support themselves. If and when the economy crashes again, and especially if the federal government can’t or won’t continue with traditional welfare programs, things are going to get really ugly.
==> Tom Woods has some great material (cribbed from Jeff Herbener) on the claim that the recovery from the 1920-21 depression was merely caused by loose monetary policy. Just to clarify, no Austrian is denying that the Fed inflated during the 1920s and that the “Roaring Twenties” was partially built on an unsustainable illusion. After all, the standard Austrian explanation for 1929 is that “the Fed did it.” But the conventional Keynesian and even monetarist explanations of the Great Depression (and the “lessons” they draw for our times) don’t fit the facts of 1920-21.
==> The Vox author thinks this article is cute and shows how unreasonable Republicans have always been, but I was actually outraged at FDR. Not only did he make up the price of gold on the spot, apparently he decided when Thanksgiving would be, year by year.
==> A good paper on the inequality stuff. It’s not just rabid right-wingers who think Piketty & Co. are overstepping; his results challenge what used to be the accepted paper in this literature, as of 2004 I believe.
I understand how people could think Michael Brown is not a martyr. But check out the video of the choke-hold takedown of Eric Garner (no indictment even though coroner ruled it a homicide), and to be absolutely stunned, look at how slowly this 19-year-old woman was driving past (not at) a cop who decided to take out his gun and shoot her to death. The reason he was trying to stop her? Not because she had just robbed a bank, or planted a bomb. No, she was at a party where the cops thought underage drinking was occurring.
The crucial thing with these examples isn’t that the police sometimes kill people while taking them into custody. With thousands of police, you might expect that to happen from time to time. No, the shocking thing as that nothing serious happens to them even when the deaths are clearly inexcusable, and caught on video.
In my latest FEE article, I clarify the legacy of Reaganomics and I correct a popular misconception about the Laffer Curve. An excerpt:
Critics like to deride the Laffer curve as “voodoo economics” by pointing to counterexamples, say of tax rate reductions that didn’t increase total revenue, or by pointing to tax rate hikes that brought in more revenue. But these possibilities were contained in the original Laffer curve itself. Specifically, if the tax rate starts below the inflection point, then a tax rate reduction will shrink receipts, while a tax rate hike will increase receipts. Laffer never drew his curve with the inflection point hovering above 1 percent, so how in the world did critics get the idea that Laffer thought “tax cuts always pay for themselves”? Did the critics think Laffer couldn’t read his own curve?
Now what Laffer did stress — and I can speak with authority here, because at his firm I had occasion to read plenty of his old papers going back to the early 1980s — is that a tax rate reduction would have a smaller impact on tax receipts than a “static” scoring analysis would indicate. So, for example, if California cut its marginal personal income tax rates across the board by one percentage point, the drop in total tax receipts would be smaller than one percent. The increase in economic activity would not only increase the base of the personal income tax, but it would also increase receipts from sales taxes, property taxes, and so on. Depending on how onerous the initial tax rate was, it was even theoretically possible that the drop in revenue would be negative — meaning that total tax receipts would actually increase — but that was never a blanket prediction of the Laffer approach.
My favorite NY Times economist is none too happy that Jim Grant wrote a book on the topic. I’ll let others (like Tom Woods) speak for themselves, but as for me, I am completely unapologetic about what I’ve written. I explain the situation at Mises CA. An excerpt:
What happened in my case is that (in the winter of 2008/09) I was doing research for my book The Politically Incorrect Guide to the Great Depression and the New Deal. I was going through the common arguments for why the 1930s depression was so awful, and I eventually realized that all of the main reasons you typically hear–often from both Keynesians and Chicago School monetarists–made no sense, because things were much much worse in each of these dimensions in 1920-1921.
Specifically, the Keynesians will say that Herbert Hoover didn’t increase federal spending enough. Monetarists will say that the Fed didn’t ease sufficiently. And both camps will say that the crushing deflation, in combination with sticky wages, led to a downward spiral in spending that caused unemployment to reach record highs.
So in reaction to those types of claims–which remember, are supposed to show us why the 1930s mushroomed into the Great Depression, yielding a decade of despair–I pointed out that in the previous depression of 1920-21:
==> Far from boosting spending, the federal government (under Wilson/Harding) slashed spending 82 percent over three years (that’s not a typo), going from $18.5 billion in Fiscal Year 1919 to $3.3 billion in FY 1922.
==> Far from easing, the Fed engaged in literally unprecedented tightening, with discount rates rising to all-time highs (since the founding of the Fed) and with the monetary basecollapsing some 15 percent year/year (though that’s using the seasonally adjusted data, so some may quibble with the figure).
==> Prices fell more rapidly in one year than at any 12-month span during the Great Depression. From its peak in June 1920 the Consumer Price Index fell 15.8 percent over the next 12 months. In contrast, year-over-year price deflation never even reached 11 percent at any point during the Great Depression.
==> Far from being “rigid downward,” nominal wages fell 20 percent in a single year, according to Vedder and Gallaway.
One last thing: Krugman made his post all about Harding, so that’s why I featured Harding’s picture on my post. But the vast bulk of the spending cuts occurred under Wilson, as World War I ended.
==> Tom Woods and Gary Chartier talk anarchy and the law. Just plug your ears when they say maybe I’m not right about this stuff.
==> Judith Curry on the legacy of ClimateGate, five years later.
==> Has anybody heard of this John Bugas guy and his thoughts on what sound like consumer sovereignty?
==> His monetary views are nuts, but aww, I can’t stay mad at him.
==> When it comes to his weight, Krugman adheres to morality tales and punishment for the boom’s excesses. I, on the other hand, have engaged in several rounds of quantitative easing in the last few years, yet it went hand in hand with belt tightening.
==> Speaking of business cycle analogies that aren’t actually analogous, Larry White caught this interesting tidbit from Chris Rock’s interview:
What has Obama done wrong?
When Obama first got elected, he should have let it all just drop.
Let what drop?
Just let the country flatline. Let the auto industry die. Don’t bail anybody out. In sports, that’s what any new GM does. They make sure that the catastrophe is on the old management and then they clean up. They don’t try to save old management’s mistakes.
That’s clever. You let it all go to hell.
Let it all go to hell knowing good and well this is on them. That way you can implement. You hire your own coach. You get your own players. He could have got way more done. You know, we’ve all been on planes that had tremendous turbulence, but we forget all about it. Now, if you live through a plane crash, you’ll never forget that. Maybe Obama should have let the plane crash. You get credit for bringing somebody back from the dead. You don’t really get credit for helping a sick person by administering antibiotics.
This is a pretty “Square One” type of post, where I explain the textbook case for a carbon tax and how reality differs from it in myriad ways. The context is a carbon tax (I mean, “fee”) introduced by Senators Whitehouse and Schatz. An excerpt:
Furthermore, even if we set aside the problem of “leakage,” there is still the matter that the U.S. and state governments already impose significant penalties on CO2emissions, and give subsidies and mandates encouraging “alternative” technology and fuels. For example, federal and state gasoline taxes were not set up as carbon taxes, but to the gasoline consumer they have a similar effect. Currently, federal and state gas taxes average about 42 cents per gallon, which is higherthan what the “optimal” tax on a gallon of gas (about 37 cents) would be, if the social cost of carbon were indeed $42/ton.
To carry this point further, Sens. Whitehouse and Schatz should also put in their bill the elimination of the ethanol mandate, the EPA’s power plant regulations, all CAFE standards on fuel economy, all energy efficiency mandates, and they should remove all regulatory hurdles for the Keystone Pipeline—after all, once their proposed carbon tax has cured the “market failure,” we should let individual businesses and households choose their optimal behavior guided by the market. That’s what the textbook analysis says, upon which they rest their legislation. Are they willing to do all of that, or do they not actually believe in the textbook treatment of negative externalities after all? These considerations show that the Whitehouse and Schatz plan isn’t really about adjusting the “costs of pollution” but instead is about giving the federal government more control over the economy, and energy sector in particular.
I have been reading Scott pretty regularly since mid-2009 at least, and at this point I’m pretty sure I have learned his pet peeves. For example, when this analyst writes: “Might falling oil prices affect AD? Not with monetary offset–the Fed will simply adjust the date at which they start raising rates.”
…then I think Scott would tear his hair out and respond along these lines:
Man, Milton Friedman must be rolling over in his grave. How many times do I need to tell people that the “ultra-low” rates since 2009 go hand-in-hand with tight money? If the Fed did the sensible thing and targeted nominal GDP growth, then inflation expectations would rise and so would the natural rate of interest. Thus rising nominal rates would go hand-in-hand with looser money. I can’t believe how many times a week I still have to point out this basic stuff, that you can’t gauge the stance of monetary policy by looking at interest rates. It’s like the Great Depression and Japan never happened. If you tell me that the Fed will postpone rate hikes beyond 2017, that tells me the Fed will continue with its ultra-tight monetary policy for the next three years, meaning the Fed is holding down AD, not boosting it as the commentator above implies.
What do you guys think? Would you have believed the above was Scott writing?