Practice Good Theory

In 2011, payroll taxes were 13% of wages instead of the usual 15%. Obama wants to reduce it to 12% for 2012. I think this is stupid, short-term thinking. I'd be happy to see payroll taxes stopped entirely if the system is being wound down.  We could pay existing retirees from general taxes; pay people near retirement some amount too; phase it out somehow or the other... but it makes no sense to keep the whole system in place and merely take in less taxes. Cut spending stupid:  If we're not cutting spending, reducing taxes simply means more government debt. Essentially what the government is doing to the average wage-earner is saying: "Keep an extra $1,000 every year, and we'll take on an extra $1,000 of debt in your name." I do not want that. First cut the spending! If the government comes up with a credible plan to cut spending over the long term, I wouldn't even  mind a short-term tax hike. I will not cheer lower taxes today when it means higher taxes t...

The Daily Show Get More: Daily Show Full Episodes , Political Humor & Satire Blog , The Daily Show on Facebook ( Link, in case the video above does not play ) In the video above, the Daily Show slams the Fed for giving banks $7.7 trillion in secret. This is a gross misrepresentation that started with a shoddy Bloomberg story and was later echoed elsewhere in the Blogosphere. Simply put, the Fed did not lend anywhere near $7.7 trillion . It was closer to $2 Trillion. Secondly, this total was widely publicized at the time. (What was kept secret was the details about which banks got funds and how much. Everyone knew the details were not being disclosed, and some politicians were quite vocal asking for the details.) The Fed responded to Bloomberg's article, and Bloomberg says they "stand by their reporting", but the details of their clarification show that they were at least guilty of writing in a way that readers might easily be misled. As much as I woul...

Reading von Mises a while ago, I was surprised to see him speak against the Quantity theory of Money, but what he said made a lot of sense. A recent Facebook comment sent me back looking for the source, and I decided to blog a few choice quotes, because others may find it interesting. My summary of von Mises's position is as follows: The supply of money is an important factor in its value. This is the element of truth in the Quantity Theory However demand for money is the other factor. The quantity theory gives short shrift to demand for money. (One must look to individual decision-making processes and their objective context to understand the demand for money. One cannot start with the aggregate demand for money.) Even if supply were the only factor, it is wrong to assume the value of money will change in direct proportion to the change in supply It is also wrong to assume that an increase in supply of money changes all prices generally and similarly A good the...

The economy is still in a funk, way below its most 2008 peak. Look at Personal Income, with the effect of prices taken out (i.e. "real" personal income). The great Calculated Risk blog has a chart showing these values relative to the most recent "peak". This gives us a normalized view of how much Incomes are dipping. By this measure, we see a  5% dip, unprecedented since the Great Depression (pre-1960 not shown). However, we have fully rebounded now -- at least by this one measure. One problem with this measure is that it includes " transfer payments ". Since a government can borrow to pay welfare, let's subtract these payments and see what that looks like. ( Click here for original chart ) This second chart excludes transfer payments, and shows: a larger (10%) dip we have not fully rebounded By this measure, we are half-way back to the peak. If we extrapolate the line upward, we'll probably be back to peak in 3 years or so...

Web-based radio is not really a broadcast, sent out to the world at large with anyone able to pick it up. Each receiver connects to the "broadcaster". The connection is potentially two-way . Advertisers could use " narrow-casting ". Imagine you and your neighbor are -- separately -- watching the same program on an IP-based TV. In the ad-break,  you see an ad for diapers while she sees one for arthritis drugs. Even in one home, your teen's TV could receive different ads than you do. A broadcaster could also know how many people are watching, without relying on surveys. They'll even know if you switch channels when the show gets a bit boring. One can imagine a world of even more fine-tuned, audience-driven programming (not necessarily a great thing). [" That joke did not work, but the other one was better than expected! "] Take this one step further. Say you're watching live comedy at a club. You applaud. On web-radio, you could  ...

" The Great Famine (PBS documentary) " hit Soviet Russia in 1921, when war and communist mismanagement exacerbated a period of bad weather.  The scenes were pitiful: hungry people looking like skeletons from the Nazi camps, 10 million dead, and stories of cannibalism. The U.S. came to the rescue, sending tonnes of food to Soviet Russia. While "American Relief Association" had people in Russia, managing the supplies, local commissars often managed to use the food as a political tool to favor some and deprive others. The U.S. helped the Soviets, until the Lenin realized that he needed to allow a little more economic freedom with his "New Economic Plan".  In the U.S., leftist journalists helped the Soviet cause. They said food aid should not be used to help just ideas and people who were more amenable to U.S. policies. So, in truly christian style, the U.S. should turn the other cheek, love its enemies, and help all alike. Herbert Hoover led t...

Conventional economic theory says that over-supply typically causes a fall in price , and this cheaper price will cause more demand , till there is no longer any over-supply. Applied to the labor market, when a recession throws people out of jobs, wages should fall, the lower wages should make previous employment levels profitable to businesses, and the unemployment rate should fall back to its norm. Yet, this does not happen. By and large, managers prefer to fire people rather than reduce wages. Imagine that a recession hits and the unemployed find they must take an average 10% cut in their wages to get similar work. If a firm wants to cut its wage costs by 10%, it seems logical (in a Vulcan way) that the management would force a 10% wage-cut rather than letting 10% of its workforce go. However, managements mostly choose the latter. Understandably, such managements prefer to cause pain to a few people who are then no longer with the company, rather than cause pain across the...