Thursday, September 29, 2005


I get my economics from the New York Times -- for its entertainment value. A few recent examples...

Thomas Friedman laments America's dependence on foreign oil ...
Is it possible for Democrats and Republicans to come together, to bring in the automobile executives, the oil executives, the gas executives, energy executives and sit down and say, "We need a Manhattan Project to wean ourselves off of foreign oil"?
Um, Tom, you weren't paying attention -- all those folks did say that, we had that project. It was called the "Synthetic Fuels Corporation". It was funded by Congress with 19 billion 1980 dollars. By way of contrast, the original atom bomb making Manhattan Project spent 2 billion 1945 dollars, which was 9 billion 1980 dollars.

So we had a double Manhattan project for "oil independence" -- and the effects were such that you didn't even notice.

Next suggestion?

Meanwhile, Mindles H. Dreck points to another amusing example of a Times writer following the company story line regardless of the very facts presented to illustrate the story. Nina Munk's take on this year's Forbes 400 list starts off remembering the good old days of income mobility when new people, the self-made, could make the list every year..
The first edition of the Forbes 400, dated Sept. 13, 1982, included mainline families like the Rockefellers, the Mellons and the du Ponts. But they found themselves together with self-made men, some of whom were not terribly at ease in a ballroom: William R. Hewlett ... David Packard ... Robert C. Guccione ...Saul P. Steinberg ... An Wang ... Meyer Lansky [!]...

... the Forbes 400 suggested mobility and unlimited opportunity. Every year, more of the old names fell off the list, only to be replaced by names you'd never heard of - names of people who had been inspired to build something from nothing...
Oh, but now it's different...
A few days ago, I read through the newest Forbes 400 list of the richest people in America, hoping to find many names I'd never heard of. They're not there. Through no fault of its own, the list no longer reflects a dynamic and elastic economy; instead, it reflects a growing concentration of wealth and economic power....

I felt a sudden nostalgia for the old Forbes 400 and the promise it held out...
OK, so taking a look at the data in the Times' accompanying graphic that shows the changing composition of the 400 to illustrate the story, we see ...

Self made fortunes
1985: 165
2005: 255

Inherited wealth
1985: 235
2005: 145

1985: 14
2005: 25

Etc. Indeed a fine example of facts having no influence on a story purportedly written about them.

But not done there, Nina moves on to make the famous 101 error of economic illogic...
Today, the 400 richest people in America are together worth $1.13 trillion. To put that number in perspective, $1.13 trillion is more than the gross domestic product of Canada.
... comparing a stock (wealth) to a flow (income/GDP).

At today's interest rates a $1 flow of annual income has a capitalized value of about $20. So Ms. Munk might more accurately have impressed us thusly...

Today, the 400 richest people in America are together worth $1.13 trillion. To put that number in perspective, $1.13 trillion is more than 1/20th of the wealth of a nation with a GDP about 9% as large as the US's, Canada.
... and that'd have made things clear enough, eh?

But for simplicity and elegance, avoiding all wordy confusion, one can't match the paper's editorial board as it simply asserts new laws of economics made up fresh for the occassion as desired.

Here they damn Bush for his executive order suspending the Davis-Bacon Act -- which normally mandates that above-market wages be paid on federal projects -- from applying to federally funded construction projects in areas hit by Hurricane Katrina.

We'll skip the fact that the purpose of the Davis-Bacon act was overtly racist, to block blacks from competing for work on federal projects ("colored labor is being brought in to demoralize wage rates", the president of the American Federation of Labor, William Green, had complained) -- and that to the extent it succeeded in doing so it contributed to creating the poverty in New Orleans that the Times has in all other ways suddenly become so sensitive to.*

Instead, we'll just jump to the Times' proclamation that not paying above-market wages is bad economics...

It is also bad for the economy. Without the law, called the Davis-Bacon Act, contractors will be able to pay less, but they'll also get less, as lower wages invariably mean lower productivity.
Hello? Lower wages invariably mean lower productivity? Higher wages invariably mean higher productivity?

Huzzah! The national productivity challenge is solved! Let's just pass a law raising everybody's wage above the market rate -- doubling all wages ... no, tripling them ... quadrupling! Then we'll all become that much more productive, "invariably"!

Times-o-nomics. Makes my day. ;-)

* Mickey Kaus has a good post on why the political left should not like Bacon-Davis, plus, in response to criticism of it, a follow-up detailing why it is self-defeating for the left to support Bacon-Davis, knowing it is bad policy, in the name of the greater good of "unity".

May the editors of my hometown broadsheet read them and learn.