29 December 2011

Unemployment's Big Drop in 2012

The double-nothings (the decade from 2000 to 2009) were the worst for job creation in half a century. From the 60s to the 90s, the economy created an average of about 2.5 million jobs per year. In the decade from 2000 to 2009, the economy actually lost an average of 100,000 jobs per year.

It seems to me that the central economic question is whether the last decade was an anomaly, an aberration for an economy still generally able to create jobs or ... if the last decade was a culmination in a downward spiral, further proof that our economy is sputtering on its way to stagnation.

If we just look at the raw numbers by decade, you can see that job creation was fairly stable until last decade.

Just looking at these numbers, it is easy to think that perhaps starting with 9-11, the US tumbled into a "lost decade" economically, hardly able to exceed the average of past decades in even its best decade. If that's the case, it is easy to believe that we'll have a return to norm, and that return will seem spectacular. Just an average year for past decades - creating 2 million or more new jobs - would be enough to lower unemployment by a point and change the mood of the country. And given aging baby boomers, this is is not an unreasonable forecast.

But these numbers are not adjusted for the fact that we have a larger labor force than ever. In the 1960s, we had half as many people working (or looking for work) as we do now. Scaling the above numbers to adjust for this (assuming that 1.7 million jobs in the 60s is equivalent to 3.4 million in today's economy, for instance), gives the graph a different shape.

This graph shows a downward slide, a steady worsening in our ability to create jobs. The narrative here would include factors such as the rise of emerging economies like China and India becoming more competitive with our own and making it more difficult for us to create jobs where labor makes (relatively) so much more. This story and graph suggest that until we hit some floor that puts us on par with other countries, we'll continue to struggle. Job creation won't keep up with growth in the labor force and unemployment will steadily rise. You probably have your own narrative to explain this.

Personally, I think that we're facing some hybrid of these two stories, but tend to favor the first story more. That is, I think that we'll continue to feel downward pressure on wages but I do think that the last decade was an anomaly in terms of job creation; I suspect that by the end of 2012, unemployment will be under 7.5% and during the next year we'll create 2 to 3 million new jobs. In other words, we'll create as many jobs next year as we did - on average - in past decades. And given what a terrible decade the double-nothings were, this "average" will seem spectacular.

Voting for Social Safety Net of Your Choice

Curiously, a great deal of our political differences can be captured by our aversion to risk. The thought that we should have universal health care is - at least in part - a question of how much risk we're willing to assume. If you get sick when you have no coverage, this could bankrupt you: in such a scenario, a temporary job loss could wipe out your assets.

Part of the question of how big a social safety net we should have is a function of empathy: do you want widows without children or anyone without work to have something other than bridges to sleep under. But part of it, too, is a function of our own optimism or uncertainty about our future: will we need unemployment insurance that lasts longer than 6 months at some point in the future, or food stamps for our kids in the event that our careers get de-railed by some massive restructuring of industries or technology makes a hard-earned skill obsolete. Do you want to live in a world without a safety net or support?

It would be fascinating to try creating a community that gave people the opportunity to choose which level of taxes and support they wanted. And then lock this in. (Say that you can choose temporarily at 18 and then have to choose permanently at 30.)

The community as a whole would pay for things like basic research, FDA, and defense, the benefits of which would not be experienced individually. After that, the options might look like this:
Pay 11% tax and have to pay for roads, education, medical, unemployment, and retirement.
Pay 22% tax and education, roads, and medical is now included.
Pay 33% and add to the above unemployment and retirement.

It would be curious to see polls of people asked what level of taxes and safety net they'd want if they knew they could not reverse it and could - in the extreme - end up homeless should things go poorly. If you knew that you could become "one of those people," would you be more likely to create a safety net for them?

23 December 2011

One Nation .... Gone to Many

"One nation" was probably always more fiction than fact but perhaps one of the unintended outcomes of how the Internet allows many to many communication is that the "many nations" that compromise this country has never before been so clear. It is not just in the much reported polarization. The likelihood of Americans coming into work in the morning having watched the same news report, the same sitcom, read the same book, heard the same radio ... the likelihood of a shared reference has perhaps never been lower. We're not entering caves; instead, we're all seeming to move from under the bell curve to increasingly remote regions of the long tail.

As our diversity becomes more clear, I wonder what that will mean to our still relatively novel concept of nation-state. The recently departed Christopher Hitchens pointed out that it was only after Lincoln's Gettysburg Address that the term shifted from "the United States are" to "the United States is." About the same time that our own civil war settled the question of whether the united or the states portion of our country was more important, Germany and Italy were becoming nation-states. In the grand sweep of history, the idea of a nation-state is still relatively new. 

Both the concept of nation and the reality of state are "made up, are social inventions. My bet is that it is the state half of this equation that is most likely to change first, though. And it'll be fascinating to see what new inventions come from that. 

22 December 2011

Kahneman Explains Our Love of Irrelevant Issues

One of the great mysteries of life is how we manage to waste so much time in political debate, dialogue, and coverage on issues that are – at best – of marginal importance. I think I finally found the answer to why in Daniel Kahneman’s new book, Thinking, Fast and Slow.

One concept Kahneman shares has to do with our tendency to substitute easy questions for hard ones. For me, this explains why so much air time in politics is taken up with questions of little consequence. 

Kahneman gives an example of an analyst who bought stock in Ford. Asked why, the analyst replied that he'd just been to a car show and left convinced that Ford "sure can make great cars." As Kahneman points out, the real question when buying stock is whether or not the stock is undervalued. But the analyst substituted that difficult question for the simpler question of whether Ford was making good cars. All of us, when faced with a difficult question, tend to substitute a simpler - albeit irrelevant - one. 

It seems to me that the big question in politics should be, How do we improve quality of life for more people? That’s a big question and answering it is one that isn’t easy. No one can feel confident about their ability to answer it.

By contrast, the little and largely irrelevant questions – silly questions best characterized by whether or not we should be able to burn the flag – are ones for which we have clear answers as long as we have strong opinions. Answering these questions leave us feeling confident in our own judgment. Answering the big questions, by contrast, makes us feel uncertain. For most of us, we prefer feeling confident to feeling inadequate. The result? We choose questions because of how they make us feel rather than what their answers will do to improve the world.

And that’s a pity. Just think what we could do with all the attention paid to politics if it were focused on real, albeit difficult, questions. 

16 December 2011

Newt Wit

The narrative on Newton Elroy Gingrich is that the man - for all his flaws - is very intelligent. More important than whether you believe that is the fact that Newt so obviously does. He trusts his own intelligence so much and the intelligence of others so little that he envisions a world where he is more dictator than president. This alone is enough to fear the consequence of his supposed intelligence. Worse, what he says suggests that he is not really that smart.

Could anything more clearly demonstrate how muddled his thinking than his stance on the judiciary and Federal Reserve? Sadly, pointing out the flaws in Newt's thinking requires explanations of longer than 2 minutes, which probably ensures his safety from any scrutiny in this age of media sponsored attention deficit disorder. But if you have five minutes ....

Let's start with the economy and what that implies for the Federal Reserve. There are only two ways that the government can influence the economy: through monetary or fiscal policy.

Monetary policy has to do with setting interest rates, growing or contracting the money supply, and changing banking regulations so as to make it easier or harder to get credit. Get this wrong and you can trigger a recession or inflation. The Fed is in charge of monetary policy.

Fiscal policy has to do with taxes and spending. Congress and the president are in charge of this and change it with their budgets and tax laws.

As it now works, the Federal Reserve Chairman (Bernanke now, Greenspan before) is in charge of monetary policy. He does not have to mediate negotiations between Republicans and Democrats or face the risk of presidential veto. He simply adjusts monetary policy based on his professional judgment about what is best for the economy. Politics does not enter into it.This makes his ability to respond to economic issues relatively easy and quick.

By contrast, fiscal policy has almost everything to do with politics and nearly nothing to do with economics.  Chronic deficits are more product of Congress's political judgment than their economic judgment and any changes in tax rates or budgets result from prolonged and difficult negotiations between two very different parties.

So, what is Newt's solution to the "problem" of the Fed's independence from politics? He would fire the Fed Chairman. The impact of this, of course, is that it would make Fed Chairmen - and thus monetary policy - as politically driven as fiscal policy is now. The impact of that? Well imagine a world in which both tools of economic influence were subject to political ideologies and perceptions with little regard for economic realities. Imagine, that is, the Federal Reserve as ineffective as Congress.

Newt also wants to fire judges who disagree with him, even close entire courts that make rulings that he finds offensive. Not only is this an egregious attack on the separation of powers, it again suggests that even rulings on the interpretation of law would be subject to the political nonsense that has resulted in a single-digit approval rating for Congress.

Newt's reasoning skills are flawed and his mind continually distracted from considering consequences with the allure of shiny new thoughts. How anyone can conclude that "at least Newt's smart" escapes me.

In last night's debate, in defense of his inane idea to close courts with which he disagreed, Newt said that Thomas Jefferson did something similar. The proper response to that is, "I've read Jefferson. You, Newton Elroy, are no Thomas Jefferson."

08 December 2011

November '11 Tweets

As part of trend towards ever-younger billionaires, I predict some 9 yr old will launch a new market that lets kids trade excess candy.

7 billion people. Now is it time to colonize space?

First I've noticed that the word "harm" is smack in the middle of pharmacy.

Unlike paintings, music, books & films, vid games R co-created by audience. 1st gen of gamers not likely to accept the way things R. #OWS

It took centuries before we coupled luggage and wheels into one product. Another century before we put wings on luggage and packages?

"Young men sleep with their dreams and old men sleep with their conscience. " - John Prine

Why couldn't we tax each hour of the week by 20-some seconds in order to save up for an extra hour every weekend?

Biz idea for group with heavily discounted rates on travel - quadruple A.

Now that Michael Jackson's doctor was found guilty, we need to find someone to hold responsible for Elvis's death.

The ratio of love songs to songs about teleconferences seems wildly disproportionate to actual experience.

You have two choices: make a choice or don't make a choice. Wait. Maybe that means you have no choice. About having to choose, I mean.

Always an interesting day when the weather forecast includes mention of an asteroid. http://bit.ly/vD67Ix

My latest biz idea: not dot.com or dot.om but dot.amish The webiste domain for folks without electricity.

RT @sacca: Dance like no one's watching. Sing like no one's listening. Tweet like no algorithm is coldly deciding your social worth.

Have to appreciate the obvious thought Rick Perry put into considering consequences of eliminating the dept. of .... uh ... um ...

11/11/11 = tres once, which is much bigger than dos xx's. Forget about cosmic consciousness - stay alert for drunk drivers.

11-11-11. Or as the turkeys refer to it, "the last days."

Who had the authority to give out the first PhD? They obviously didn't have one.

Call of Duty sold $400 million in 1st 24 hrs. Key to its success is getting to compete w/ Russians who have only dial-up.http://n.pr/tiLHTE

Time to modify Warhol's prediction "everyone will be famous for 15 mins" to, "in the GOP, everyone will be a front-runner for 15 mins."

Focus on competition, grades, ranking, and status are all substitutes for a focus on meaningful personal goals

If only Bloomberg could have ended occupy Iraq as quickly as he ended occupy Wall St. #OWS.

"companies today are 3X more likely to get to $250K in revenue during an 18 month period than they were 6 years ago"http://bit.ly/vvsOCW

Curiously, it did not seem as though all the human beings were being human.

New Muppet movie is PG. Not for content. Because theater owners terrified at thought of mobs of unsupervised 6 yr old puppet groupies.

Neutrinos travel faster than light. You know what that means? Once I build my neutrino-mobile I can time travel.http://bit.ly/tw3TQp

He thought a country falls into a recession whenever a generation whose favorite subject was recess grows up to run the economy.

Cashier at grocery store asked me, "Is that to go?"

So old that I can remember when you could read the entire World Wide Web on a long weekend.

"TV Survey" call just came in. Tired of being ignored, I hollered, "More sex! More violence!" Glad to finally be making a difference.

Deficit a huge non-issue. W/ unemployment at 9%, it's dumb to raise taxes or cut spending now & Congress can't commit future Congresses.

Instead of Longhorns my university mascot will be Unicorns. Like an army of one - Autodidact U.

Did they really think they could distract us from the fact that we still don't have personal robots or flying cars with four-blade razors?

Eventually it dawned on me that the flashing red light was not going to change.

Seen: I dream of a world where chickens can cross the road without having their motives questioned.

Ah, Thanksgiving - the one day during the year when Americans eat to excess.

Can't really work out the Macy's Day Parade. It's a series of ads for float sponsors ... and still they break for commercials?

Rolled out of bed (a term redefined post-feasting) so thankful that we don't have to be so thankful today.

Fascinating how whether the market falls or rises, they're able to provide a perfectly plausible reason.

Has anyone calculated how much in the way of jobs and GDP California - w/ its music, movies, and software industries - has lost to piracy?

Tom was in a very heavy metal band. He played percussion. Jack hammer, to be specific.

Just bought Greek yogurt, doing my bit to help out that poor country. Social activist with active culture.

Saw shockingly large numbers at ice cream shop last night. They must have been suffering post-Thanksgiving weekend caloric withdrawals.

In a few generations kids will sing nursery rhymes w/ nonsensical terms like "cyber Monday" "black Friday" and "terabyte Tuesday."

And what if people simply grew tired of the recession and began acting normal? Consumer confidence up 15 ptshttp://reut.rs/unuf79

Product idea to help with job-related stress: little wine boxes about the size of juice boxes for lunch or break.

Record levels of wealth disparity might just be a natural consequence of record levels of market volatility.

07 December 2011

Sure You Have What it Takes to Win. Who Doesn't? The Real Question is, Do You Have What It Takes to Fail?

The older I get, the more convinced I am that we don't do enough to celebrate failure. Progress depends on it.

In January, one team will win the Super Bowl. The only reason they get to do that is because 31 other teams did not. In sports, nobody wins without someone losing. You can't hope for a win without simultaneously hoping for a loss. Loss is not due to lackluster effort, unimaginative creative visualization, or bad karma. Loss in sports is designed into the outcomes. Just like wins.

But sports is just made up. We don't have to have failure in the real world, you might say. We can, for instance, design an educational system in which everyone wins. Perhaps. But failure is still an essential part of life and is as vital to progress in the real world as it is to champions in the artificial world of sports.

Think about it. If history is any guide, sometime in the next year some people will start a new company destined for greatness - a company that will, in its prime, remind us of GM, IBM, or Google in theirs. But even more companies will flag somewhere between inception and this grand goal, will get buried in the landfill of failed expectations. Lots and lots of variables go into winners and losers and no one can be exactly sure which will make the next generation of winners win and which will make them lose.

If a community wants to be home to the next big company, it has to fund lots and lots of companies you'll never hear of. Uncertainty alone means that winners require lots of losers.

The same is true in the competition for the next generation of theories to explain psychology, cosmology, disease and everything else. Again, given that everyone has a shot at defining the next big theory, lots and lots of theories will have to be expounded in order for the few that move us forward to emerge. A million books will be published this year - yet only a tiny number will sell more than a million copies. And the list of such ensured failures goes on.

By definition, the vast majority of attempts to change the status quo will fail.

Yet the advance of history depends on these winners which - in turn - depend on these failures. To avoid failure is to avoid winning. Any community that doesn't teach its people that failure is inevitable, noble, and essential to progress risks having too few big wins.

And in the end, I wonder if failure or winning isn't somehow more random than we'd ever care to admit. Given this, perhaps it is worth remembering that you do what you do because of who you are, not because you really expect to "win." And maybe an increase in the portion of people doing this is the definition of progress.

06 December 2011

The Theology of Emoticons

In the near future, theologians reading the King James version noticed what they concluded was the first use of emoticons. In Matt 6:

32(For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things.

Once they'd found the smiley face in the middle of the verse, theological debate ensued.

"What does this mean?"
"I think it is accidental."
"Do you explain away any inconvenient thing in the Bible this way?"
"As an accident?"
"Why don't we just assume that this is the word of God and as such there are no accidents?"
"Well this is hardly the stuff of a Dan Brown novel."
"Let's not degrade this conversation with reference to fiction."
"So you suppose that this is serious?"
"Let's assume that it is. So what do we make of this?"
"Well, let's look at the context. It's the sermon on the Mount and Jesus is telling people not to worry about natural provision because God will care for them."
"So the smiley face is a happy, reassuring sign that lets people know that these temporal things are not so important. God will provide."
"Perhaps. But that wouldn't do much to explain the many people for whom God apparently did not provide - the untimely deaths, the starvation, the disease. It could be that this smiley face is the first instance of sarcasm."
"Please, Jesus was sarcastic?"
"Well, it would explain so much."
"Jesus is love. The smiley face is obviously an expression of joy."
"Ha! Sarcasm."

And just like that, the discovery of the first emoticon created a new rift, a new schism in the Christian world. After the discovery of this first emoticon, the Christian world was still divided into Catholic and Protestant but each of those was further divided into sarcastic and hopeful. And perhaps it was the toll of thousands of years of observing human nature, the times, or an actual insight into reality but the new believers in God the Sarcastic were surprisingly numerous.  It was - and remained - a curious world.

02 December 2011

Bad, Sure, But Still Better Than Bush. And He Got Re-elected

This latest jobs report makes Obama’s re-election more probable.

In Obama’s first year, he presided over the worst loss in jobs since the Great Depression, more than 5 million jobs gone. In spite of that, he compares pretty well against Bush at the same point in his presidency – 34 months in.

In spite of his miserable start, Obama actually compares favorably with Bush.34 months in Bush had “lost” 2.3 million jobs whereas Obama has “lost” 1.8 million. (And yes I agree that causes of job loss go back much further than the prior month and that president’s don’t “create” jobs. I also believe that  there is no single variable as important to this statistic as presidential policies.)

You might argue that Obama has, of course, spent a terrible sum to improve on Bush’s bad record. And it is true that Obama had presided over  the biggest deficit ever. But if you look at the rate by which he increased it, it isn’t that different from what happened under Bush.

By the end of his third year, Bush had swung the deficit negative by over $600 billion. By contrast, Obama has swung it negative by $800 billion. That is worse. And the total is huge. But still, it is plausible that the story will be quite different for Obama by the end of his first term, in comparison to Bush.

Comparing annual deficits in the fourth year of their term with the deficit in the final year of the prior administration makes Obama look good by contrast.

Bush had increased the annual deficit by $650 billion. Current projections suggest that Obama will have increased it by $300 to 400 billion. It is not that Bush did better than Obama – he just had the good judgment to make things worse from a far better starting point.

This should be good news for Obama’s re-election prospects. If Bush could beat the Democrats – Kerry in particular – after a first term that included job losses, a huge increase in deficits and the terrible tragedy of 9-11, perhaps Obama’s shot at beating a weak GOP field – Romney in particular – after a first year that included job losses, a huge swing in deficits and the assassination of Osama seems reasonable.

[Find the numbers from 1939 to 2011 here.]

01 December 2011

Obviously The Superrich Need to Spend More

Here's an intriguing editorial by Nick Hanauer about why we should tax the rich more and poor less.

It reminds the reader that most of the debate about tax rates is more about moral judgment than economic policy.

There are cliched narratives that seem to color most discussions about tax rates.

Democrats argue that the rich are greedy crooks who raise spoiled children and the poor all had unfortunate childhoods and might still have recovered to become something if only they hadn't run into the fore-mentioned greedy crooks. Obviously, Democrats say, the rich should be taxed more and the poor should not be taxed at all - should in fact be given money from the rich.

And the Republicans, of course, argue that the poor made themselves that way by smoking crack and having babies out of wedlock and sleeping in the back of class and not brushing their teeth regularly. Meanwhile, the rich are all that way because they work harder, have saved more, and are generally someone you'd  want to sit beside at jury duty. For this reason, Republicans argue, it just seems wrong to penalize the hard working rich folks in order to give their money to people who'll blow it all on beer and bingo.

Instead of focusing on judging the poor or rich, Hanauer focuses on a really practical matter. Rich don't spend money at the same rate that they earn it. If a community wants to grow the economy, it has to grow spending and a poor person will spend a greater portion of an additional $1,000 than will a rich person. (A fact born out by studies of marginal consumption.)
As Hanauer puts it,
"there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally."

So, unless you think that economic growth itself is immoral, the practical thing is to shift some money from those who save it to those who spend it.

Trend Spotter as Sport

The Atlantic has a fascinating article: South Korea's Hottest IPO: Boy Band, Inc.

In essence, a Korean record and entertainment company went public last week, and now has a market cap of over $300 million. Such things allow people to invest in a company, but what if you could invest in a band?

Imagine a site where you could "bet on" or invest in bands or artists. This could be just an online game site, essentially, but one that let people predict band popularity.

I think for lots of folks, the ability to quantify or show their ability to be a taste maker or trend spotter would be worth it. And there would be two ways to show how cool you were. The obvious way would be to have a high-value portfolio that showed your ability to spot the hot acts before they were hot. The less obvious way is to have a stagnant value for your portofolio, to show that you are a contrarian, uninterested in what's popular.

For the bands, it might be a vehicle for promoting new acts, letting them prove to clubs and promoters that they are indeed rising stars.

Or this could be just a silly idea - like investing in boy bands.