Fair Trade

Is better to buy based on than organic/local. This has been a micro-blog.

My Ideology

If there’s one thing I could’ve[1] said to my Sociology of Inequality class, it’s that markets are natural forces. They cannot be defied indefinitely. Just as ideology is more powerful than coercion in the survival of societies, markets are more powerful than our resistance to them. If you don’t do things efficiently it doesn’t matter your goal, you wasted resources. Our optimal progress depends on working with natural forces; it’s just like sailing. 

Progress that more widely benefits humanity is certainly possible. Every dictator who falls, or monopoly that can’t adapt fast enough will benefit that progress. When markets are not manipulated to serve governments, businesses, countries, regions, or groups in particular, but the people of all of them in general, we’ll have reached our potential. That is what we should be striving to do, because nothing else will work.

April Jobs Report

165,000 jobs were added in April. A number that is neither good nor bad. The unemployment rate went down to 7.5% and not because people were leaving the labor force this time. In better news, March's terrible number has been revised up to a less bad 138,000 jobs added. February's numbers were revised up to 332,000 jobs added, the highest number since May of 2010.

Front Page Billing for Maryland

This is the most front page Maryland I've seen on a non-Maryland news source site or paper. When gay marriage was upheld in referendum we had to share the glory with some other states. But now here we are:

As the Governor, Martin O'Malley, put it, "Evidence shows that the death penalty is not a deterrent, it cannot be administered without racial bias, and it costs three times as much as life in prison without parole." Not to mention, as was communicated by the presence of an exonerated death row inmate at the signing, it can't be administered without killing innocent people. So woo.

Actually far more important is the 260,000 people dying in the East African famine during 2010-12. For some reference the UN estimates around 70,000 people have died in Syria's civil war in the past two years. The UN has many early warning famine indicators, and they did see the famine coming. But rich countries didn't want to help out any until it was a popular story in the news.

Also apparently the ECB has realized monetary policy is too tight and has made it a quarter percent less too tight.

Another Labor Market Graph

Here's another useful graph for understanding the current state of the labor market. It's known as the Beveridge Curve, which graphs the relationship between job vacancies and the unemployment rate. With no changes in the efficiency of a labor market, a given level of openings should correspond with a given unemployment rate. For example, 2005 and 2006 in the graph below have roughly the same number of vacancies and similar unemployment rates.

There has been a noticeable shift in the curve, indicating a less efficient labor market. In the 2000s labor market, the rate of vacancies we have today would correspond with an unemployment rate of around 5.5 to 6%. 

More (and better) Unemployment Indicators

In addition to the monthly job growth numbers, I felt it would be nice to give some greater detail of unemployment through this recover. First, a couple graphs showing the increase in long term unemployment.

And last, a graph of the best unemployment indicator, the Employment to Population Ratio. It is presented as the number of people 16 and older employed over the number of people 16 and over multiplied by 100. The benefit is that, unlike the unemployment rate, people leaving the labor force doesn't make the statistic look better. Most OECD countries have an upper age limit, which is smarter. Retiring baby boomers would bring down the ratio all else remaining constant (notice that the ratio was decreasing slowly before the recession hit). 

So the reality is slightly better than the graph would initially indicate.

March Jobs Report

March employment growth was the worst since June of 2012. 88,000 jobs were added, and the unemployment rate decreased to 7.6% due to people leaving the labor force. 

Naturally, the fact that the sequester hit in March comes to mind for a potential cause. While the amount of spending cut so far is bound to be tiny (due to lags in appropriations and spending only $41 billion of the $85 billion in cuts for 2013 will take effect in 2013), there is no longer any optimistic uncertainty that they will happen. 

On the other hand, bad reports have come and gone and sometimes been revised away, so it can't be said with certainty that the report really was this bad, or that it was caused by any one thing specifically. Numbers for January and February were revised up somewhat.

The First Offensive UN Force

A bit of history was made the other day, you may have missed it because it pertains to that Africa place everyone's heard so little about, specifically the Democratic Republic of Congo (or Congo for the rest of this post[1]). 

Conflict in eastern Congo has gone on for decades. All of Congo's neighbors have gotten involved at various points both directly and through proxies. The climax was the First and Second Congo Wars, Africa's deadliest conflict. Rwanda in particular has always been involved, partially to carry on fighting against Hutu militias that participated in the genocide. It is pretty much common knowledge that Rwanda sponsors rebel groups in eastern Congo.

Anyway, for the first time in UN peacekeeping history, a unit of 2,500 peacekeeping forces in Congo have been given an "offensive" mandate. Meaning they have been instructed to actively "neutralize" and "disarm" rebel groups. Unarmed US drones will also be deployed to assist with the fight. To assuage fears that this historic precedent is a historic precedent, the UN says the intervention force will be created "on an exceptional basis and without creating a precedent", oh politics.

In reality this is more of the UN making official what it has been trying to get away with in other conflicts. UN and French peacekeepers intervened on behalf of rebels (now the government) in Cote d'Ivoire, under the justification of protecting civilians from government forces. So now, in eastern Congo at least, its official, the UN has taken sides.

Laissez-faire and the Triangle Shirtwaist Fire

Here’s a story illustrating the need for some level of regulation on businesses. It's not about needing more or less necessarily, it's that there's an optimal level above none. 


The Triangle Shirtwaist Company (TSC) was one of the largest of nearly 500 garment factories on Manhattan in the early 1900s. It was a competitive industry, with no monopoly power. Around 70% of the workers in the garment industry in New York City were female. Most of the women were recent immigrants, or their children. They worked 7 days a week at least 11 hours a day for around $1 to $2 a day[1] minus what their employer deducted for electricity and supplies (adjusting for inflation, $1 back then was worth around $24 today). Given that 20% of the world population still lives on less than $1.25[2] a day, the wages paid, while low and for sweat-shop work, were still an initially attractive way out of poverty. 

But the women and some men of the garment shops came to believe they were paid too little given the value of their output.

Happy Anniversary!

Its been ten years since the United States launched an unprovoked invasion of Iraq. Iraq wasn't a threat to the United States or even its neighbors; so the only logical reason is George W. Bush having a personal grudge. The American people were deliberately lied to about the justification. In one such instance, according Hans Blitz (Chief UN Weapons Inspector at the time), a document alleging to show Iraqi intent to buy uranium from Niger, mentioned during a State of the Union Address, took the UN team "less than a day" to prove fake. But we all know it was bullshit; let's see what Bush spent to settle his grudge.

4,804 coalition troops were killed (of which 4,475 Americans), and over 32,000 wounded. Over 110,000 Iraqi civilians were killed (and that's low-balling it). Already over $1.6 trillion has been spent on the war. Estimates of the final bill for the United States range between $2.4 trillion to $6 trillion. And that's just in direct costs, to say nothing of the cost to families, the lost productivity and anguish from thousands dead and tens of thousands wounded, and the opportunity cost of lost benefits of anything else the money could've gone towards. The estimates are between 12.4% and 30% of where our national debt is projected to be in 10 years. Basically, people wouldn't really care so much about our debt right now had we not wasted trillions of dollars and gained nothing but dead and wounded for it. So good job America.

The Sequester, What’s its Deal?

The answer is it’s some economically damaging bullshit that won’t change our debt outlook. 

Blah blah automatic spending cuts, you get the point. Basically, it will cut around $1 trillion from government debt over the next ten years. $85 billion will be cut from the 2013 budget[1]. While those may be relatively small numbers compared to federal spending, it’s ignorant to think they are harmless. There’s a new and gathering body of evidence that shows government spending has a proportionally larger effect on the economy in times of economic weakness; cutting spending now is especially damaging to current economic growth.

Furthermore, the design of the cuts is especially inefficient. The cuts are across the board, meaning affected departments cannot pick the least effective programs to cut; they will be cut as much as the most needed programs. The cuts also treat any dollar the government uses as spending, when in fact much of what is being cut is investment. This is similar to saying you “spent” money by putting it in a retirement account. The government invests money in infrastructure, education, research, etc. which leads to future benefits. But investment will be cut the same as consumption or transfer payments, meaning the future benefits will be cut too.

Ignoring the horrible design, many have argued that the pain is worth the result. But the sequester fails to make significant cuts or change the long run trend in government debt. If current laws remain the same, federal debt will amount to $20 trillion by 2023, and will be growing by over $1 trillion a year. All the sequester does is buy a year of time through one-off cuts.

While 5% reduction in debt is still something, and we need to cut spending whether taxes are raised or not, the cuts that come in 2013 are especially damaging and foolish. The CBO and Macroeconomic Advisors (MA) project that the first year of cuts ($85 billion) will reduce economic growth by 0.6% in 2013. The CBO forecasts 750,000 less jobs by the end of 2013 than would be the case without cuts; more optimistically, MA projects the job losses, of 700,000, would take until the end of 2014 to fully occur[2]. This is for the equivalent of one month of spending by 2023. Why not push it back a year? It’d still be the same amount of spending without derailing what should otherwise be the best year of the recovery so far.

In the longer run, growth is projected to return to “normal”. My argument against that outlook is that the models they use don’t reflect dynamic factors such as the cost of poor infrastructure, or the inefficiency and inequality of an underfunded court system and other vital government functions. But leaving aside the fact that a functioning government is better for the economy than anarchy, the cuts are coming too early, and to the wrong areas of government spending. If we don’t reduce the spending growth of mandatory programs (which is primarily Medicare, Medicaid, and Social Security) then we will have gained nothing, at a high cost to the recovery. One only needs to look to Europe to see how a policy of spending cuts in a weak economy results. 

February Jobs Report

236,000 jobs were added in February, a relatively good number for the recovery. The unemployment rate went down to 7.7%, while the labor force participation rate was steady. November job growth was revised upward 23,000 to 219,000 jobs added. December job growth was revised down by 38,000 to 119,000 jobs.

Again, the job numbers show an improving labor market that has seemingly ignored the headwinds of tax increases[1] and the uncertainty of repeated deadline fiscal bargaining. While the cuts from the sequester have not yet impacted the economy, the uncertainty of them and expectations that they might happen already have. This suggests markets either didn't expect the cuts to happen or don't think they'll have much of an impact. We'll see what happens when the cuts are actually occurring.

Hugo Chávez is Dead!

Hugo Chávez died on March 5th after a two year battle with cancer. He had been president of Venezuela since 1999. It is great news. While the most likely outcome of a mandated election in 30 days of his death will be the election of his vice-president, Nicolás Maduro, Mr. Maduro lacks the charisma and loyal following of Chávez. The opposition has been making slow but steady electoral gains and is increasingly united. Either way, the new president will have to deal with the decaying façade of Chávez’s “21st Century Socialism”. 

This is Awkward

At the end of January, I posted about the BEA's 2012 fourth quarter GDP growth estimate. It was -0.1% annualized. Most of the decrease was due to cuts in government spending, and reductions in private business inventories (which is typically a sign of negative expectations). Positive contributors to GDP included nonresidential and residential fixed investment. 

The thing was, job numbers and stock market performance were suggestive of positive GDP growth. I expected that GDP growth would be revised up. It was; instead of contracting by 0.1%, the economy grew by 0.1%. It is still a bad number and still out of line with the job market performance. On the other hand inflation growth is slowing, and in urban areas has sat at 0% for a couple months now, which can indicate slowing growth.

Basically who knows.

Medical Malpractice

Here's a long post, it's about medical malpractice:

Malpractice is one of the most public and emotional issues in the topic of health care and health reform. For decades frivolous lawsuits, out of control awards, and increasing malpractice insurance costs have been blamed for increasing the cost of health care. The reality is much more complicated. The malpractice system is not a substantial factor behind health care costs or a contributor to rising health care cost. But the benefit of the system is very much in question. The malpractice system must both compensate victims and deter negligence to be effective; it struggles to do either.