29 October 2016

Alabama, Race and Education

This is Section 256 in Alabama's state constitution:

Duty of legislature to establish and maintain public school system; apportionment of public school fund; separate schools for white and colored children.
The legislature shall establish, organize, and maintain a liberal system of public schools throughout the state for the benefit of the children thereof between the ages of seven and twenty-one years. The public school fund shall be apportioned to the several counties in proportion to the number of school children of school age therein, and shall be so apportioned to the schools in the districts or townships in the counties as to provide, as nearly as practicable, school terms of equal duration in such school districts or townships. Separate schools shall be provided for white and colored children, and no child of either race shall be permitted to attend a school of the other race. 
In 2004, the state legislature defeated a constitutional amendment that would have struck down Section 256 from Alabama's constitution.

For those of you trying to process what seems unbelievable, I'll spell it out. Federal law prohibits segregation in American schools; Alabama's state constitution still mandates it.

Across the nation, Alabama's school system is 2nd worst and Trump's odds of winning are 2nd best. That might be just a coincidence.

28 October 2016

Two More Events that Could Give Donald the Presidency

Trigger warning: if you don't want to contemplate a series of events that could put Trump in the White House, stop reading now.

Trigger promise: if you have friends who say that haunted houses and horror movies don't scare them, read them this. 

Major institutions of the federal government might just tip this election in Donald Trump's direction.

FBI Director Comey just announced that he was re-opening the the investigation into Clinton's emails. Nothing more may be revealed before 8 November but nothing more needs to be said for the right to have enough material to feed conspiracy theories and worst-case scenarios. The evening before Comey's announcement, Sean Hannity had a man on testifying about Hillary Clinton's wild sex parties. Who has this man? Former editor of the Weekly World News that had also reported on Hillary Clinton being shacked up with an alien. Illegal alien you ask? No, Actual space alien, complete with a photo. Seriously. Contrast that with an announcement by the head of the FBI and you can only imagine how far the media can run.

What else could happen?

Well, Tuesday and Wednesday - the 1st and 2nd of November - Janet Yellen and the Federal Reserve Board governors will meet to decide on interest rates. She's clarified that she does not consider politics when making this decision and there is plenty of evidence that the governors are ready to vote for an interest rate hike. If they do raise rates, the market will very likely to go into a short term, but dramatic, fall. This just 6 days before the election.

That Friday - the 4th - the job numbers come out for October. It's perfectly reasonable to expect yet another positive but we're at a special point in the recovery. The unemployment rate is now at 5% and it's getting harder to find unemployed people to hire. If two years ago a healthy rate of job growth was about 200,000 jobs a month, it is now probably closer to 100,000. But jobs numbers fluctuate by at least 100,000 jobs a month so a smaller healthy number means a higher probability of hitting - or dropping below - zero. For the first time since 2010, we could have a negative jobs report. Just days before the election.

The FBI, the Fed, and the Bureau of Labor Statistics may all - in the course of just doing their job - provide just what Donald needs to prove that its God's will that he lead this great (again) country.

On its own, it's doubtful that Comey's investigation will make a big difference in her numbers; she'll perhaps lose 5 points of her current 60 point lead on Donald. (5 points in the probability of a win.)

The odds are bad that Janet Yellen will leave rates the same. I think she'll raise them and make the market fall. Given a Democrat is in the White House and Donald has been warning that the the Fed is artificially propping up the economy, this could drop Hillary's lead by another 5 points.

The odds are good - but not great - that October's job numbers will stay above zero but few people realize how absurd it is that it's stayed above zero two years longer than any previous period. You might say that a bad report is due.

Put it all together and you have decent odds that all of this will fall in place to seriously hurt Clinton.

Imagine a stock market fall and a negative numbers job reports added in to this media's penchant for drama and Donald's conviction that we're sitting atop an economic Armageddon. It could be enough to drive up levels of fear to the point that his support surges and Hillary Clinton's supporters freeze. It's been such an utterly unbelievable campaign that it's believable that it would end in yet another unbelievable turn. If all of this happens, Donald's odds of victory raise from the 20% (fivethirtyeight is now forecasting) to 35%, from 1 in 5 to 1 in 3. What might have been a landslide for Clinton could turn out to be a win for Trump by margins as small as W. Bush's 2000 victory over Gore.

Additionally, we don't know what Julian Assange and Vladimir Putin have in store for Clinton for the final days of the election. They've both made it clear that they want Trump and hate Clinton and that they have more emails to unveil. They might yet have an email that would do to Clinton's support what the 2005 Access Hollywood tape did to Trump's. In that case, it might just be a toss-up, an election that will be decided on the 15th of November with a recount rather than at 5 PM on election day.

To clarify, I don't think this particular sequence of events is high probability or that even if they do play out this way that it will give Trump the election. I do, however, think it's a route to victory that isn't given enough - or indeed, based on what I've seen - any consideration.

The smart money is still on Clinton but the dominoes are lined up for the most bizarre finish to this most bizarre election.

A Proposal That May Raise Your IQ

I have a proposal that could raise IQs by tens of points.

My conservative friends are struggling with facts. Rush Limbaugh has warned his listeners that fact checking is a liberal conspiracy. Conservatives I interact with tend to dismiss facts as evidence of a grand conspiracy or as a distraction to really important facts. I post information about a simple fact and they trot out the same, tiresome and by now obsolete challenges. Unemployment claims at their lowest since 1970? Well labor force participation rates are down. Created another 200,000 jobs? Well wages are stagnant. Or they'll even dismiss these facts because they can't be trusted.

This falls into a tiresomely predictable denial that makes them look foolish. "We didn't land on the moon!" "The economy hasn't gotten any better since the height of the Great Recession." "There was no Spanish Inquisition!" It's made them stupid. And given that so many of their arguments begin by denying facts, they've done nothing to enhance the cognitive abilities of Democrats who've learned to tune them out.

Not only does it make everyone stupid but it derails real conversation about economic reality. I'm generally optimistic about the economy but I'm also aware that we face challenges that require policy changes. Our policies are tailored for a time when either capital or knowledge workers limited. Neither one now does. The policies that will now work are the policies that treat entrepreneurship as the new limit. (Fortunately, policies are changing to some degree in various places. The number of entrepreneurship programs inside of universities in the last 20 years has exploded, for instance, suggesting a wonderful grassroots response to entrepreneurial opportunities.) There are good reasons to be worried and good reasons to be optimistic. Deciding which facts are facts based on who is sitting in the Oval Office just muddles that.

So here's the proposal. You go ahead and take credit or assign blame on a fact and then let's move on to discuss it. Let me demonstrate.

The economy has created jobs every month for 6 straight years. That's good.

Republicans? You can take credit for this because you've got Congress and governors in 31 states.

Democrats? You can take credit for this because you've got the White House and governors in 12 of the 20 states with higher than average incomes.

One other tactic that works regardless of who you support is to laugh and say, "Really? You really think that the American economy cares that much about who is in office?"

Done?  Regardless of who you are, you make sure that your party - or no party - gets credit. Run through whatever justification filter you need in order to settle in your heart that you have no reason to doubt your party or political independence .... and then let's move on to analyzing the actual statistic and the question of what that suggests about policy with no commitment to making the statistic great or awful, with defending or attacking it.

Meanwhile, Republicans can stop with the conspiracy theories that require them to deny that anything good is happening or act like an Alzheimer's victim whenever mention is made of the terrible performance of the economy under the last Republican president and Democrats can stop pretending that the American economy magically responds to a change because of a new face in the Oval Office. It's more complicated than that and it is in this complexity that the really interesting discussions play out. And perhaps I'm naive about their intelligence but I actually think that once they start to again accept facts, Republicans will have some really interesting things to say - challenging Democrats and Independents in a way that will increase their IQs as well rather than continuing to make everyone stupid.

Most of the interesting changes in the economy in the future probably won't come about because of a change in laws or government budgets. They'll come about because businesses have figured out how to design work to be as engaging as video games. Or because birthrates continue to drop. Or because returns to capital continue to drop and pension funds and 401(k)s struggle to fund retirements. Or not. Economic policies at the federal or local levels can ignore or work with these realities in ways that will exacerbate or mitigate these trends but rarely will they start them. Meanwhile, if conservatives continue to pretend that every fact is further proof of a conspiracy, they'll just find themselves more and more marginalized. Because right now their biggest problem isn't their most prominent candidate: it's the fact that they are now committed to changing or ignoring facts rather than changing their mental models. Until that changes, not only will their prospects suffer but so will political dialogue in this country.

Sequel to Hillary Clinton's Best Seller, It Takes a Village

Hillary's favorable ratings are lower than any presidential candidate before 2013.

As it turns out, this has hurt her but may not keep her from the presidency for the simple reason that she's running against the candidate with the lowest ever favorable ratings.

So what did it take for America to finally elect a female president? Well, in part, it took the worst opponent in modern history.

In 1996, Clinton's It Takes a Village was published. I'm kind of hoping that 20 years later she'll release the sequel, a memoir about running against Trump that that she'll title, It Takes a Village Idiot.

26 October 2016

Donald Trump is Not Such a Bad Candidate

It's been a bizarre election.

This graph might depict as simply as any how unique Trump is.


As of 24 October 2012, Romney had received 37 endorsements from major newspapers. 4 years later, Trump had received 1. One.

Politico adds smaller newspapers to this tally. By their count, the endorsements run like this:
Clinton: 200+
Not Trump: ~12
Not Clinton: 1
No endorsement: 38
Trump: 6

By Politico's count, twice as many newspapers told their readers to vote for anyone but Trump as told their readers to vote for Trump. And half of the newspapers to endorse Trump during the primaries were either owned by his son-in-law or were the National Enquirer. While he has struggled to get endorsements from newspapers not owned by Sheldon Adelson, as of 1 November the KKK's official newspaper endorsed Trump.

In addition, historically rare or unique endorsements went against him. USA Today had never before endorsed a candidate in their 40+ year history. They still haven't but they did endorse any candidate but Trump. The Atlantic endorses a presidential candidate about once per century. In 1860 they endorsed Lincoln and in 1964 they endorsed Johnson. This year they endorsed Clinton. Foreign Affairs is 40-some years old and has never before endorsed a candidate but this year they endorsed Clinton.

It's more personal than mere newspapers. Not a single living Secretary of State endorses Trump. Only one of six living nominees for the Republican presidency endorse him. And all former presidents - Republican and Democrats - oppose him.

These endorsements are partly about his outrageously sexist comments but mostly about his incoherent policies. His budget will explode the deficit but he dismisses that because he'll make GDP grow at 4%. (It has averaged 2% per capita for just about the entirety of the post-Civil War period.) He'll ban immigrants based on a religious test but that's okay because they're just Muslims. He will repeal NAFTA and other trade agreements, setting off a trade war that will end badly on both sides but with casualties in the form of lost jobs and higher prices. He'll disband NATO and cooperate with Putin. And he seems fairly ambivalent about the democratic process itself, the first candidate in history to both promise to jail his opponent (well, first candidate outside of banana republics and autocracies in developing nations) and refuse to accept the results of a democratic vote. And to top it off, he's attacked leaders of his own party, turning his supporters against them when he wants revenge for a perceived offense, starting what is essentially a civil war within the GOP.

So what's most bizarre of all? It doesn't seem to make a huge difference in his poll numbers.


Based on the latest from fivethirtyeight - which essentially averages dozens of reputable polls, adjusting for their historic bias and methodology - Trump now has 44% of the popular vote. This puts him ahead of George H. Bush in 1992 and Bob Dole in 1996 and only slightly behind John McCain in 2008. 44% is not good but it is not that far behind George W. Bush's 47.9% in 2000, which was enough to win the electoral vote (in spite of losing the popular vote).

He compares even more favorably to Democratic candidates.

His 44% puts him ahead of McGovern in 1972, Carter in 1980 (in his re-election run) , Mondale in 1984, and Clinton in 1992 (in his first run).  He's doing better than 4 of the last eleven Democrats who ran for the presidency.

You might think that Trump is easily the worst candidate in modern times. Based on polls just 2 weeks out from election day, you're wrong. The data suggests that he doesn't upset Americans as much as half a dozen of the candidates they've seen since the modern primaries began. (And 3 of those 6 actually sat in the Oval Office.) That might just be the oddest thing about this bizarre election.

24 October 2016

Evolved Libertarians - Or Why Gary Johnson Couldn't Name a World Leader

Chris Mathews asked presidential candidate Gary Johnson to name a world leader who he admired. Johnson couldn't do it.

It's easy to dismiss Johnson's drawing a blank as proof that he's simply not that aware of the outside world. I suspect it instead gets to something more fundamental: Libertarians don't really have real-world examples of what they're advocating.

It's worth contrasting Ayn Rand - libertarians favorite thinker - with other folks who have founded economic theories. Most importantly, Rand was a novelist and possibly the best writer of the lot.

Adam Smith's Wealth of Nation is still a great read but it doesn't really have a plot like Rand's books. He had observed and heard reports of phenomenal changes that were taking place as the Industrial Revolution was beginning to transform Britain and its colonies. (1776 was an amazing year.  James Watts had made some final changes to the design of the steam engine that would allow it to spread across numerous industries, automating work as it did. The first engineering textbook was published. The American colonies began the most fascinating experiment in the history of government. And The Wealth of Nations was published. All of this fueled a transformation that began lifting incomes for the first time since Homer and the ancient Greeks.) He opens with specialization and how focusing on one element of a task can greatly increase output. It might not be an empirical work in today's sense of the word but it certainly was grounded in real world events that he projected outwards in time and impact. Adam Smith did less to describe some abstract possibility than explain what was already happening.

Karl Marx's Das Capital is, by contrast, a dense and confusing read. He did point to abuse and poverty and suggested the possibility of government intervention in this. That might have been a lasting contribution. But his explanations of how the economy actually works are more literary than practical, more a demonstration of genius locked behind closed doors than genius forced to accommodate real events. The book and the policies based on it make little sense and don't do a particularly good job of explaining current affairs, predicting future events, or guiding policy.

John Maynard Keynes' General Theory of Employment, Interest, and Money is also a tough read but it rewards the effort.  He wrote it in the wake of the Great Depression, arguably the most wrenching economic event since Wealth of Nations had been published. The Great Depression had driven unemployment up to 25% and cut GDP by half. This demanded some sort of an explanation and Keynes provided one. He explained that it is possible for capital markets to hit an equilibrium that leaves labor markets in dire shape. That is, investors might have a great reason to avoid investing which could depress hiring which could, in turn, depress investing and so on. Economies can perpetuate misery if action isn't taken to intervene in this cycle. Put another way, there is a general equilibrium for the whole economy - measured in things like GDP and employment - that doesn't automatically or always realize its potential just because capital markets are at an equilibrium. Keynes' theories helped to create legislation, policies, and agencies that kept the West from anything close to the Great Depression until much of that legislation was dismantled in the 90s and aughts, just before the Great Recession.

Keynes wrote about capital markets and actually made millions investing in stocks. He did have bouts in which he lost money, as any investor does, but on the whole his returns beat the market by a considerable margin. He understood capital markets at the practical as well as theoretical level.

Which brings us to Ayn Rand.

She didn't do so well at the level of actual policy recommendation or personal success. It's worth remembering that she wasn't a researcher who based her studies on extensive analysis of data. She was a novelist. Fountainhead and Atlas Shrugged were exciting books but they are works of fiction. (The story of great people who dared to defy convention to go their own way is both central to progress and inimical to it. It is true that people who stand up to tradition are the source of progress; progress only follows, though, from their convincing the rest of their society to follow their lead, whether it be in the use of telephones or democracy. Social creators first separate themselves from the herd and then bring the herd along. Progress isn't like a monastery that you can retreat to alone; that's nature.) Her ideas are exciting but they're not actually based on data or anything you can translate into policy.  At a theoretical level, she didn't really leave much that could be translated into coherent policy, the way that Keynes did.

She also struggled at a personal level. Keynes was rich. Rand died living in public housing, dependent on Medicare and welfare. She wasn't exactly an example of fierce independence. Keynes' life helped to clarify his philosophy; Rand's life merely muddled hers.

And yet she is the intellectual parent of the libertarian movement in the same way that Marx was parent to communism or Smith father of capitalism and Keynes the modern welfare state. Ron Paul - perennial libertarian candidate - named his son Rand after her.

We can point to countries that have adopted Smith's capitalism, Marx's communism, and Keynes' managed market economy. There are dozens of examples of each.

We can't point to any countries that have adopted Rand's libertarian philosophy. There are a host of reasons for this but bottom line, this explains that when asked who he admired, Gary Johnson drew a blank because there are no examples of presidents or prime ministers or kings who have illustrated what Ayn Rand was advocating. The fact that there are no examples helps with the libertarian movement because it leaves the definition of libertarian loose enough that it has wider appeal than it might hope for had it been defined more specifically for actual countries or situations. ("Oh! You mean that we shouldn't regulate driving speeds but should just leave it people's judgement? I can't go along with that!" Or, "You don't think that we should have an FDA but should just let people sell whatever drugs or foods they can sell and let the market punish or reward them depending on whether their product ends or enhances life? Hmm. That sounds promising.")

Yet for all my criticism of libertarians - and I have plenty - I do think that it would be a fascinating experiment to see what happened if a random group of - say - 10 million people were put into a space without any laws or economic regulations to see what would happen. I think it would be fascinating and think that we could learn so much from such an experiment. That said, I also think that with time, we'd have government emerge, welfare for sick and elderly, community investment in childhood education, and even mechanisms put in place to make sure everyone had access to potable water, roads, and electricity. It's perfectly conceivable to me that more of those solutions would be purely "market" based but it also seems highly probable to me that this community would not only realize that even defining that market would actually mean agreeing on and passing laws that have to be enforced but also would mean the emergence of a public sector to solve the problems that markets simply don't. What would we get if we put in place a purely libertarian state? Within a quarter to half a century, I think that we'd see it evolve into what we have in places as diverse as San Francisco, Copenhagen, Singapore, and London. That is, I think we'd see a modern market-based, government enhanced economy tapping the dynamics Adam Smith described and subject to the occasional intervention Keynes recommended, just like we have now. Nixon famously said in the 1970s, "We're all Keynesians now." In the same way, I think it's true that we've been evolved libertarians for some time now.

21 October 2016

Why We Had to Wait for the 100th Anniversary of the 19th Amendment for a Woman President

We have certain expectations of our presidents.

They'll go to the right schools.. About half of our presidents graduated from or attended prestigious schools like Harvard (8 did), Yale (5), Princeton (3), Columbia (3), William & Mary (3), or Stanford (1).

After attending these schools, they'll get important jobs like governor (17) or senator (16).

There are exceptions. Johnson used to ask around the table about which schools the folks gathered there had attended before saying, "Hmm. I guess I'm the only Southwest Texas College graduate here." [Thanks for that tidbit Bill Abendroth.] As you might guess, 8 presidents - including George Washington - didn't even graduate from university but none served after 1900. You won't be taken seriously in a presidential election today if your only schooling was at Mesa Community College.

Which brings me to my point. We expect a certain level of accomplishment of the presidential candidates we take seriously but we didn't even let women attempt those accomplishments until recently. We've had no women presidents in part because we haven't let women enter the institutions we expect our candidates to come from.

Yale began to admit women in 1969.
Hillary Rodham started Yale Law School in 1969.

To put that in perspective, Harvard awarded its first degree to a black man in 1870. It did not go coed until 1977, 107 years later.

Given that the graduates of certain prestigious schools have to then go on to get certain prestigious jobs before we generally consider them as serious candidates, it makes perfect sense that we haven't seen a serious woman candidate before Hillary Clinton. She got started on this journey as soon as it was institutionally possible. (And obviously if the country were completely indifferent between men and women, she could have been the Clinton who served from 1993 to 2000. Institutional realities weren't the only obstacle. So were attitudes and expectations.)

Institutional realities matter. It wasn't until 1623 that England passed legislation that gave inventors patent protection and provided an incentive to invest in developing new products. Almost no one had access to patent protection before the 17th century and inventions were rare. By the end of that century the first patent for a steam engine had been approved. In the next century, the Industrial Revolution had begun and incomes began to rise for the first time in thousands of years as hundreds and then thousands began to take advantage of this new institution of patent protection.

Whites held all the records for major league baseball before 1947. It wasn't because blacks couldn't play. It was because blacks weren't allowed to play.  Now, decades into the integration of baseball, 8 of the top 10 career home run hitters are players of color.

Progress depends on two things. One is inventing new institutions, as when the English passed patent law legislation. The other is when you give new groups access to old institutions, like when Major League Baseball let blacks join. Progress follows from creating new institutions and letting more people use them in the same way that it follows from inventing new technology and getting that widely adopted.

Outside of institutions, humans don't accomplish much. Let a person fight a gorilla one on one without any tools and it no contest. Within institutions, able to coordinate, specialize and leverage individual efforts, humans can accomplish a lot. Let 100 gorillas fight 100 humans with access to tools, language, training, planning, and coordination, and it is no contest. (This example of gorillas fighting humans is one that Yuval Noah Harari makes in his book Sapiens: A Brief History of Mankind.)

Now women have access to the same institutions men do. (This access is running at roughly the same rate in institutions like universities but at a lower rate in institutions like corporate boardrooms.) All this suggests that Hillary Rodham Clinton is just the start of this parade. Those prestigious schools may not have graduated any women before her, but they've graduated hundreds of thousands since. You can be sure that at least a couple will eventually sit in the Oval Office.

Before the rest of that parade comes, in 2020 - the 100th anniversary of the 19th amendment that gave women the right to vote - we will have our first woman president. It seems appropriate to commemorate that anniversary by broadening access to this country's most elite institution.

First woman and first man president, pictured 200 years apart.
Hair length and jackets similar but she gets jewelry and he gets ruffles.

20 October 2016

What "Politically Correct" Really Means

"What I like about Trump," so many says, "is that he isn't politically correct. He's not afraid to say what he really means."

I've puzzled over what's meant by that. At first blush you might think they're happy to talk like an angry rapper but I know that this people don't talk like that. At second blush you might think they're happy to offend people. I think that is closer to the truth but still not really it. I've watched who they react to and who they bristle at and who they love to hear from and I think I know what "politically correct" actually means.

If you say, "Actually, you can't just say that deficit spending is bad. It really does depend. If you ....," what a lot of people hear is "I'm going to make an excuse for deficit spending ... blah blah blah blah."

What infuriates Trump delights his base. He speaks plainly about complex topics. There is a problem with terrorism? Ban Muslims. There is a problem with job creation? Build a wall. There is a problem with economic growth? Cut taxes.

It's not really that he speaks his mind. It's that he speaks so plainly people don't get lost or confused. He doesn't throw in any "if, then" statements that mark the speech of an expert but can confuse an amateur.

Why isn't simple speech politically correct? Because it makes for bad policy. You can't just "bomb the shit out of them" and expect it to result in good. Among other things, it would help to carefully define them. It would be valuable to explore other alternatives, to take care that whoever "them" is you don't indiscriminately kill their children, etc. Sloppy speech leads to bad policy in the same way that sloppy work in manufacturing or programming leads to a bad product. But Sloppy, politically incorrect speech is so much easier. It doesn't make any demands on the citizens to learn anything or to put out effort. It doesn't make any demands on them to trust experts who might talk in ways they don't quite understand. Bad policy might lead to every kind of miserable reality but it doesn't require the discomfort or hard work of thinking.

Disdain for politically correct speech means that people who are actually ignorant about policy can feel smart about it.

A Conspiracy of Conspiracies, Small Mind in a Big World, and Don John's Dying Wish

A Conspiracy of Conspiracies

Trump isn't losing. He's the victim of a media conspiracy.

To be more specific, he's not actually losing to Clinton because she isn't a legitimate candidate. She's guilty of a great crime and would be in jail except that there is an FBI conspiracy. Even the Department of Justice is conspiring against Don John.

And when the votes come in on November 8, he won't actually lose because there is a vast, nationwide conspiracy at the polls.

It is so much worse than Trump thinks. It's not just the media, the legal system and election system that is against him. It's the American people. They're in a conspiracy to keep him out of office.

The system - most every system - is rigged.

Small Mind in a Big World

Trump doesn't actually have any big ideas, it's just that his mind is so small that it makes his ideas look big.

For instance, he spoke so many times about how stupid the Obama administration is. "What happened to the element of surprise," Trump asks in discussing the attack to take back Mosul from ISIS in Iraq. "I started hearing about this, what, three months ago?" I would not tell anyone what I was doing, he says.

This is telling. In Trump's small mind, there is no one to coordinate with. There are no Iraqis or Kurds who live in this area and govern it. There are no American generals who might have better ideas about how and where to attack. In Trump's simple mind, it is a simple attack. He has the idea and then "poof!" his forces attack. But of course you don't attack ISIS within a city of two million within a foreign democracy quite that way. You have to coordinate and prepare. You have to communicate. What seems stupid in Don John's small and simple mind is actually necessary in the large and complex real world.

Trump's Dying Grasp on What Matters Most

In last night's debate, Trump seemed to prove at least one of three things:
1. He's stupid.
2. He thinks that enough American people are stupid to get him elected.
3. He has no desire to win this election.

1. and 2. might be exclusive. It is possible that he's really intelligent but just spouts complete nonsense because he knows that it sells with a certain group of Americans. [see below] It is possible but it is not likely. He has repeatedly shown in each debate that he can remain focused, concise, and coherent for only about 20 to 40 minutes. (Had these been 30 minute debates, he might have won each one, in the same way that he can write a tweet but not an op-ed, or in the same way he won his 6 to 12 minutes of debate time in each Republican debate with so many opponents.)

3. above seems likely. His desire to win the presidency has never been as clear as his desire for attention. Donald is 70. He vividly remembers the 80s when he came into the spotlight of media attention. That was about 35 years ago. Why does that matter? In 35 years, Donald will be dead. His death is closer in time than his rise to fame. It's not just that he's got an insatiable appetite for attention. He's running for the presidency as a fight against his own mortality and he's never more alive than when every media outlet in America is focused on his next word.

His "I"ll keep you in suspense," comment about whether he'll accept the election outcome should be heard in that light. He knows that he's going to lose. That doesn't bother him nearly as much as losing the attention he craves like a junkie craves heroin. He needs bigger doses every week and every week he says or does something even more outrageous to make sure he that he gets it. "I'll keep you in suspense" is his way of ensuring that even when he loses he can't be dismissed. The world will remain more riveted on his concession speech than they will on Hillary Clinton's historic win as the first female president in history. And in Don John's small mind, that makes perfect sense.

And finally, I leave you with this video recapping Don John's - and the Republican's - 2016 campaign.

https://www.youtube.com/watch?v=fVJiwuk75Ig


see below:
Evidence that he's either stupid or hopes that Americans are? He decries a debt of $19 trillion and yet his plan would add trillions more than current projections. How does he address this? His plan to cut taxes will drive GDP growth rate up to 4% or higher. Facts from this Stanford report show per capita GDP growth is remarkably stable and has been for about 150 years.

Trump very casually says that his plan will drive growth of 4% or higher as if this were trivial or common. It's neither. The fact that he would predict it as a way to dismiss arguments that his budget plan would seriously drive up deficits is proof that he's either stupid or thinks the voters are.

19 October 2016

Why Labor Force Participation Rates Have Dropped

Here's a very simple graph with a very simple trend line:


The value it tracks over the decades is the percentage of men in the labor force. Every year this percentage declines and over a period of about 68 years, it has dropped from about 87% to about 69%, a fall of roughly 2.5 percentage points per decade. In no decade did it finish higher than it started.

I don't know why. I'll speculate at the end of this post but I do know that whatever is going on, it didn't just start in the last few years. It likely started before your career did.

Here's another simple graph and another simple trend line:


Between 1946 and 2000, women were joining the workforce at a faster rate than men were leaving. During that time, the participation rate of men dropped 11.6 points, from 86.7% to 75.1%. Meanwhile, women's participation rate rose 28 points, from 32% to 60.1%.

Why did women's participation rate rise? I don't know. The simplest explanation seems to be the pill, birth control options that let women delay careers for four to six years to get an education rather than for 20 to 30 years to raise children. Advances in contraception and female enrollment in schools (Yale only began to admit women in 1969) meant that women could plan families and careers in a way that let them choose one or the other or both.

The net effect of women joining the workforce faster than men were leaving was to drive steadily higher participation rates. Overall labor participation rate looks like this:



A question you might have reasonably asked in 2000 was whether women would continue to enter the workforce at a faster rate than men were going to leave it. I suspect that any reasonable person would take about five minutes to think this through and say, "Well at some point the rate at which women are joining the labor force will level off. It can't go above 100% and it's likely to stall out considerably short of 100%"

That seems like a reasonable thing for hypothetical you to have said and if you look at the labor force participation rate since, you'll see two things.

One, the rate at which men are leaving the workforce is still dropping off, and at about the same rate that it was last century.



Once we hit 2000, women's rate of participation began to drop off at a similar rate.


Women have possibly entered a plateau relative to men and have now joined them in their steady, decades long drop in participation rates.

The net effect is that labor force participation rate has dropped since 2000.

It would be foolish to think that the Great Recession and its aftermath hasn't impacted the rate of labor force participation for men and women. As I've mentioned so many times, in the last three decades of the 20th century, the American economy created 18 to 20 million jobs per decade. In the first decade of this century, it destroyed 1 million. That is going to impact everything from median income and unemployment numbers to labor participation rate. That said, a deeper trend than what would be explained by any boom or bust seems to be playing out here.

Here are some possible reason that the labor force participation rate is dropping every decade. 

More Leisure Time:
It might be what the technologists were enthused about a century ago: a future in which people have to work less.

In 1900, the average work week was nearly 60 hours. By 1950, it was just over 40 and people had more material goods and services than were imagined in 1900. Perhaps the drop in labor participation rate since 1950 shows a further continuation of this trend of needing fewer hours to get what we want and rather than showing up in shorter work hours it is showing up in a smaller workforce. 

More Education:
The labor force participation rate is for people over 16. In 1900, fewer than 10% of 14 to 17 year olds were formally enrolled in education. Now, roughly half are in college or university at 18. As people are in school longer, labor participation rates drop.

Earlier Retirement:
A growing portion of the population makes a lot of money. Sometimes they spend this on bigger houses. Sometimes they spend this on earlier retirement. It's conceivable that people are dropping out of the workforce earlier as people become more affluent.

Unqualified to Work:
Once upon a time, you could find work for anyone who wasn't seriously disabled. Increasingly, machines are automating work, from digging ditches to dispensing cash. The requirements for performing typical jobs may have gone up in terms of problem-solving ability, etc. It's conceivable that a growing portion of the population is unable to contribute enough value to justify paying them even minimum wage, leaving them out of the workforce. 

Video Games are More Engaging than Work:
It could be that we seek out flow experiences and leisure - from video games and spectator sports to hiking in the woods - now offers more joy than work. Beyond a certain income level, people would rather put themselves into play than work. Video game designers know how to fully engage us; efforts towards the gamification of work, by contrast, have only begun. We want to be engaged and it's harder to find that in work and easier to find that in leisure.

I don't know why participation rate is dropping but I do know this: any deeper reason will have to explain the data since 1948, not just 2008, because that is when the data began to show this trend. 

18 October 2016

"Mexico's Not Sending Their Best:" How Trump May Have Poisoned the GOP's Future

Jamelle Bouie of Slate wrote an insightful piece on how Trump's alienation of Latinos could move them solidly into the Democratic camp in the same way that Goldwater's alienation of blacks in 1964 has made them such faithful Democratic voters since. It's definitely worth reading but in this piece I'll just focus on the numbers.

Hispanics are a growing percentage of the population. Since about 1980, they've had a growing tendency to vote Democratic. This combination is deadly for the GOP. In 1980,they had a small impact on the election. In 2016, their impact will be huge.

Republicans have won 5 of the last 11 presidential elections. If Hispanics had the same impact on each of those past elections as they'll have on this one, Republicans would have won only 2 of the last 11.

If your group makes up 50% of the population and your group is 50 points more likely to vote Republican (75% of your group votes Republican vs. 25% who votes Democrat), you will swing the whole election by 25 points. That is, if you're a big group and have a strong tendency to vote one way, you'll probably decide the election.

If an election is close, though, you don't have to be 50% of the population to make the difference. Even if you are 5% of the population, if your group is 50 points more likely to vote Republican, you will swing the election by 2.5 points, enough to give Republicans a victory in a close election.

In 1980, Hispanics made up 6.4% of the population. 56% of them voted Democrat and 35% voted Republican, giving Democrats a 21 point edge. So, with a 21 point edge among 6.4% of the population, Hispanics impacted the 1980 vote by 1.3 points. If the rest of the nation were evenly split, they'd have given the Democrat a victory by 1.3 points. (In fact, Reagan beat Carter by 9.7 points, 50.7% to 41%.)

The Hispanic edge in Reagan's first election in 1980 was 21 points. It was even smaller in 2004 at 18 points. (George W. Bush speaks Spanish.) But generally speaking, Hispanic's tendency to vote Democratic has edged steadily in Democrats' favor.

This year, the gap is the highest on record. and the percentage of Hispanics is its highest on record. That's a pretty powerful combination. 73% of Hispanics are likely to vote for Clinton and only 16% are likely to vote for Trump. Coupled with the fact that Hispanics are now 17.6% of the population, this translates into a 10 point impact. That's huge.


Of course this overstates their impact at least twice, though. First, Hispanics are not evenly distributed around the country; they are not going to impact Ohio's election as much as they will California's. (Although Florida, a swing-state, is third behind California and Texas for number of Hispanics and there is a decent chance that Hispanics will change Arizona's traditionally Republican vote this year.) Secondly, Hispanics are less likely to vote than the general population. Nonetheless, this calculation makes an important point: Hispanics will impact this election more than they have any election in history and that impact is big.

Trump didn't just attack illegal aliens. He attacked an American-born judge of Mexican heritage. As House Speaker Paul Ryan pointed out, that's a textbook definition of racism. It's no wonder that so Hispanics are voting against him. Central to the question of whether the GOP has a future is this question of whether Republicans can win them back.

How big is a 10 point impact? Enough to have made Reagan a loser in 1980. Think about that. Even if the GOP can offer a candidate with Reagan's broad appeal, it still will not be enough to win the presidency. That's not much of a future.

15 October 2016

The GOP's Problem with Women Enters a New Chapter

"Sure Donald Trump said vile things but Bill Clinton did them."

The first problem with this is that it assumes Don John didn't do anything. That's dubious. But there's a deeper problem with this that gets to a theme in the GOP.

If you think that an affair and sexual assault is equivalent, you don't appreciate the importance of consent. Sometimes a woman wants sexual attention. Sometimes she doesn't. If she doesn't want your sexual attention, just about anything you say or do is at the very least offensive and might even be abusive. If she does want it, usually anything you say or do is fine. Assault is less about where you touch than whether or not the woman welcomes your touch. Woman's consent makes all the difference.

But this gets to the theme in the GOP: woman's will isn't that important. Most conservatives roughly fifty years ago thought that women shouldn't have access to contraceptives. Most conservatives today think they shouldn't have access to abortion. Some even to this day think that it's not possible for a man to rape his wife. And now we see that quite a few believe that there is no difference between an affair and assault. This fits a pattern.

[And lest you point out that an affair is rarely consented to by the wife, I'll readily agree. Still, if we're comparing a married man engaged in assault and a married man engaged in an affair, the wife's lack of consent is a constant.]

14 October 2016

Is Seattle The Most Dynamic Economy in the US?

The average company in the S&P 50 was founded in 1930 and is worth $209.7 billion. 86 years old, it has created about $2.5 billion a year in stock value since its founding.

The regions of the country are very different though. Based just on total valuation, the top three regions are the Bay Area, New York, and Seattle.

New York metro area has the most companies in this list: 10 out of 50. They are more than a century old, though; the average founding date is 1899.

Second on this list is the Bay Area with 9. The average founding date here is 1955.

This plays into a simple measure of dynamics. Two companies might each be worth $100 billion but the one that is only a decade old is more dynamic than the one that is a century old.

The ten companies around New York are worth a combined $1,955.4 billion. The average value they've created per year since their founding is $3.2 billion.

The nine companies in the Bay Area are worth a combined $2,641.4 billion. Not only are they worth more on average, they've created far more value per year: $10.6 billion.

Seattle is third on the list of metro areas for valuation of S&P 50 firms even though it has only 2 on the list. Microsoft and Amazon are worth a combined $836.6 billion and - both relatively young firms - have created an average of $14.3 billion per year, making it the most dynamic region in the country by this measure.

The average age of New York's top companies is 117 years old. The Bay Area is 61. Seattle? Just 32, which is a pretty stark contrast to Dallas, which also has two companies on the list (Exxon and AT&T), but have an average age of 143 years.

I think we do a poor job of tracking wealth creation. Median and average wages matter but if one person makes $100,000 a year and gets no uptick in wealth from her share of the company and another makes $90,000 a year but gets $20,000 in extra wealth because of an uptick in stock, the second person arguably has a more valuable job. A more comprehensive measurement of dynamic (one that, for instance, actually included the S&P 500 at a minimum) might be a nice complement to wage information for an area. And it might even make the mediocre data on wage growth seem impressive.

Companies included on New York's list:
J&J
GE
JPMorgan Chase
Verizon
Pfizer
Merck
Pepsico
IBM
Citigroup
Verizon Communications

On Bay Area's list:
Apple
Alphabet (Google)
Facebook
Wells Fargo
Visa
Chevron
Intel
Oracle
Cisco

13 October 2016

2016: Year of the Woman

Well, you know what Don John, first pick of evangelicals says: "Women. They're the assault of the earth."

Women won't just be the ones whose votes will beat Don John. They are the ones for whom the votes will be cast.

The first four votes I cast on my ballot - President, Senate, US Congress and State Assembly - were all for women and all are favored to win. (The only two choices for Senate are two women so there is no question about which gender will win that race.) It will be interesting to see if this is an anomaly for my district or if women are going to break records across the country.

Just Remember - These Are Real People and So is That Hatred You're Feeling

This summer I was talking to the nephew of a former premier of a major Canadian province (equivalent to the governor of a state). His uncle had been in the news quite a lot back in the 1980s, even here in the States, and, as a fiscal conservative governing over a recession, he made a number of painful cuts to the budget. He was vilified for his actions.

The premier died a couple of years ago and his mind had started to slip in his last years. Towards the very end of his life, he was re-living the trauma of the attacks on him by the press and political opponents. Of all the great things he accomplished, his power and fame, what shaped his last days was the struggle of his worst days. So powerful were those memories that they slipped from memory into what he was actually experiencing. All over again.

It's worth remembering that these are real people in office or running for it. You don't have to hate them to decide not to vote for them. And it's not just that they are real people. That hate that could so easily consume you is a real emotion.

Media and the Angry Voter

Fox was founded in October 1996. In the six presidential elections before that, the GOP won by an average of 5.6 points. (4 victories, two by double-digits.) In the six presidential elections since (counting this one, including the latest poll numbers at fivethirtyeight), they've lost by an average of 4 points. Even though George W. was elected twice, he won the popular vote only once, and that by 2.4 points. No other Republican has won since Fox began to broadcast.

I don't know if Fox style news is caused by their impotency at the polls or is causing it. In any case, it's hard to believe that it's helped. It has done wonders for Rupert Murdoch and Roger Ailes' net worth but it's not obvious that it's done much for the Republican Party.

...........

In any case, Fox is a specific instance of a wider trend. Media has become increasingly sophisticated at driving up ratings. It does this by finding the most alarming news or possibilities available from among all the things happening on 7 continents, in 200 countries, among 7 billion people. With that much to select from, there's always something. Always.

Then the media puzzles over why voters are increasingly frightened and angry.

Huh.

11 October 2016

Time for a Sex Strike?

2,500 years ago, Aristophones wrote a play in which the women of Athens withheld sex until the men ended the Pelopponesian War. It worked.

In modern times, women in Togo, Colombia, and the Philippines have launched similar sex strikes. It might be something American women consider.

There is a huge gender split in this year's election. Clinton leads among women by 33 points and trails Trump by 11 points among men. This is, as far as I can tell, unprecedented. Nate Silver posted these maps here.

This is what it would look like if only women voted:


This is what it would look like if only men voted:


This race is probably over for Trump in any case but it might not be a bad insurance policy if women were to time a sex strike the first week of November. Or even just distract men on election day. In either case, the country would be better off if left in women's hands.


09 October 2016

In Defense of Politics on Facebook

I'm that guy who is unafraid to post something political on Facebook. I know it upsets some of my friends, many of whom are conservative and wearies others who are moderate or liberal. But I don't apologize for this simple reason: politics is how we decide what we're doing as a group. Religion is a private decision but politics is a group decision.

If you decide to vote for a freeway expansion, I have to pay for that with additional taxes. If you decide to vote against a freeway expansion, I have to pay for that with additional commute time. If you decide to vote for an amateur who doesn't understand foreign policy or the market, I have to pay for that in terms of costly, disastrous wars and costly, disastrous recessions.

We're in this together. If you're about to vote for an outcome I see as dangerous, I want you to know why it's a bad idea. And I expect you to point out the same to me. It's called dialogue.

Social media gives a unique opportunity to democratize not just the vote but the discussion leading up to it.

Obviously people can make any discussion / argument a battle of wits or an accusation of stupidity but friendships should not be equivalent to a witless protection program. Our friends should be a resource for helping us to understand the world a little better, even if all we understand is how their perspective or situation is different from ours.

08 October 2016

Don John's Continuing Struggle Against Liberals, the Media, the Establishment, Facts, Sense & Sensuality

This election seems like a big deal. It is. We're exactly one month away from election day and the Republican National Committee is seriously considering dumping Trump from the ticket. Nothing like this has happened before.

It isn't obvious how Trump could have more effectively destroyed Republicans' chances in 2016 - not just for the presidency but the House, Senate, and every down ballot election -  if that were his goal the whole time.

.................

After the last week in which we learned that Donald remained rich in spite of losing investors 99.5% of their money, and we saw evidence of his atrocious treatment of women, I expect him to adopt Dire Strait's "Money for Nothing and Your Chicks for Free" as his new campaign tune.(Remember that when he introduced Mike Pence as his VP, the Trump campaign repeatedly played the Rolling Stones' "You Can't Always Get What You Want." Now we know that was meant for Pence, not Donald.)

.................

Donald J. Trump's name is actually Donald John Trump. Don John. That's got to be the WASP spelling of Don Juan, no?

----------

Neil thought the date was going well. She seemed lovely and in spite of her venting a bit about Trump - Neil prided himself on not following politics so he mostly just nodded blankly as she spoke - he really liked her personality. And she seemed to enjoy his silly humor. Then he casually reached for a Tic Tac and when he offered her one she blurted out, "Are you serious?!!"
"What," he called out as she turned around and stormed off. "What did I do?"
Women, he thought. Who can understand them?

..............

It's becoming more apparent that Trump is going to be crushed in the election but can't they just give him a "President Trump" show in which we can follow him as he says absolutely nonsensical, stupid and offensive things with no country at stake? Do we really have to turn off this "are you kidding me?" story?

..............

"Grab them by the p--y."
I'm so old I can remember when Mitt Romney got into trouble for saying, "binder full of women."

...............

One month out from the election, Fivethirtyeight estimates that Clinton has a better chance of winning in a landslide than Trump has of winning at all. And those numbers don't reflect yesterday's appalling new revelations about how boorish he is.

.............

At some point, the sacred Republican scroll had been mistakenly transcribed from the importance of "pro-life" to "pro-lie." From this typo the Trump - Pence ticket was born.

...................

Pence won the VP debate by many accounts. Why? He was more calm lying than Kaine was recounting a variety of Trump's outrageous statements. It's worse to become upset about really upsetting statements than it is to deny facts.

...................

Less than a week passed between the time that we learned that Trump had lost a billion dollars and the time that we learned that because he's a star he can just grab women anywhere he wants. It's a curious strategy that was so baffling that for a while it actually worked: distract us thinking through one really outrageous and offensive thing by blurting out another. But maybe he's tried this one too many times.

............

"The media is the message." TV changes the story from what the newspapers told us. Twitter has now changed the story from what TV and newspapers told. If your story can't be reduced to 140 characters, it doesn't make it into the national debate. This is the first Twitter election in the same way that the 1960 election, the first to feature a televised presidential debate, might have been the first TV election.

...........

The biggest casualty of this election might be the fact that Trump's personality has completely drowned out the conversation on policy. One advantage of focusing on politics every four years is that we almost inevitably have to talk about real issues. This year, with Trump following up one outrageous thing with yet another outrageous thing, generating more controversy in a week than any prior candidate has in an entire election, there has been almost no room in the conversation to talk about issues. This is a huge tragedy because we're living in a time of such change that we really do need to address fundamental issues. Sadly, there is no time left for policy in spite of all the time we're spending on politics this year.

..............

It might be time for Don John to try a different tactic for distraction. Maybe it's time to bring out Clint Eastwood to talk to a chair.

The Blanket is Too Small - The Challenge of Finding One Candidate for All Republicans

As Speaker of the House, Paul Ryan  is the leading Republican. Kelly Ayotte is running for re-election as the Republican Senator from New Hampshire, and representative of the many "down ticket" Republicans running for election in the year of the Trump. They represent the dilemma of Republican leaders. They can either denounce Trump or embrace him. If they embrace him they could lose enough independents that they lose the election. But if they criticize him, they could lose enough Trump supporters that they could lose the election. On the one hand they lose and on the other hand they .... lose.

(Kelly Ayotte has announced today that she won't be voting for Trump but will be writing in Pence, a clever way to distance herself from Trump without necessarily distancing herself from his supporters. This might work in her state.)

There is a fundamental problem with the Republican Party right now. There is not enough blanket to cover the wide distance of policy positions Republicans now cover.

On the one hand you have establishment Republicans who are essentially preparing for a 2020 election and are not about to be hurt long-term by an association with Trump now. Jeb Bush is the clearest example of this camp. This is honorable but it points to a problem: a lot of the folks excited about Trump won't vote for Jeb. Not in the recent primary and not in 2020.  Trump or someone like him have that crowd. This rejection of Bush is historic. 1928 is the last time that the Republicans won the Oval Office without the name Richard Nixon or George Bush on the ticket as either president or vice president.

On the other hand you have the "basket of deplorables" who really do find Trump's refusal to pay taxes evidence that he's smart enough to beat the system, his crude statements about women proof that he's just a regular guy, his desire to ban Muslims evidence that he shares their instincts that Islam is terrorism, and his dismissal of the sacrifice of veterans a form of liberation from the tyranny of having to be "politically correct."

The Trump base is aware at a visceral level of a fact: we're living through a time of great change. What kind of change? When Obama took office, the US was 54% white Christian. When he leaves office, it'll be 47%. To the base who is afraid of trade and immigration, of various manifestations of the "other" that come in the form of liberals in big cities and refugees in small countries, this is further proof that a way of life - their way of life - is being driven to extinction.

As it turns out, the Republican Party's fragmentation has been evident before. In 1984, Reagan was re-elected with 58.8% of the popular vote. By 1992, George H. Bush lost re-election with only 37.4%. Within two elections, the Republicans lost a third of their national vote. In that same time, Democrats' share of the popular vote rose from 45.6% to 49.2% - a rise of just a few points. (Ross Perot grabbed a good share of the 1992 vote.) Democratic support is fairly stable as you can see below whereas Republican support swings wildly. Republicans have to get a candidate who appeals to religious conservatives who their fellow Republican working class voters think are prudes.  Ted Cruz supporters might approach a political event as though it was church; Trump supporters as if it were a WWF match. If your candidate appeals to both groups - as Reagan did - you can't be beaten. If your candidate appeals to only one of the sub-groups (religious right or working class traditionalists), you can't win. (And this doesn't even mention the third group, the business conservatives more likely to donate than attend a rally. A Republican candidate also has to win over these business conservatives who want free trade and the working class who hate it.)


Simply put, the distance between the groups that comprise the Republican Party has become too great. You can no longer appeal to all of them with one politician. Those groups are so far apart that by the time you pull the policy and personality over from the one to cover the other, you've lost the first. Any Republican blanket is likely to be too small for today Republican party and it's not clear that they can find one politician who can create that coalition. It may no longer exist.

07 October 2016

The Remarkable Work of Creating Work

There should be a parade this weekend in honor of the American economy.

The American economy has created more jobs than it's destroyed every month for 72 months, a stunning 6 years in a row. In that time it has gained 14.6 million jobs. The old record was set in the late 1980s, when the economy created 10.7 million jobs over a period of 4 years. This streak is 2 years longer than the next longest streak, which, in turn, is just 2 months longer than the third longest streak. Think about that: the gap between the first and second is 2 years and the gap between the second and third is 2 months.

In only 5 out of 81 months in this decade has the economy destroyed more jobs than it created. By contrast, in 53 months of the last decade more jobs were destroyed than created. (This happened in 18 months in the 90s, 24 in the 80s, and 17 in the 70s.) Particularly in the wake of the turmoil of the oughts, this has been a surprisingly steady decade.

It's worth remembering all the reasons this wasn't supposed to happen. In the wake of the Great Recession the US economy faced a number of threats. Eric Cantor of the House of Representatives twice tried to shut down the government, threatening to throw a wrench into about 20% of the economy directly and 100% indirectly. Many suspected that Quantitative Easing (QES) could trigger inflation or scare investors or fail to work and throw the dollar or the economy into a free fall. The Greek crisis continued to roil international markets each time the EU would concoct and then refuse another recovery plan. Span and Italy were also teetering on the brink of a double dip recession that could bring down the world economy along with them. China twice went through big stock market falls, and revised its growth downwards. And most recently, the Brexit vote that threatens to unscramble the egg that is the EU's trade agreements caught most everyone by surprise just months ago. Any one of these events could surely have been enough to cause job creation to go negative - if even for just a month. Yet every single month for 6 years the report on jobs growth came in positive.

It's not just that the economy is creating roughly 2 million jobs a year. Each month it is creating and destroying more than 2 million jobs. When the bureau of labor reported that the economy created 156,000 jobs last month, that is a net number. What actually happened is that the economy destroyed about 2.2 million jobs and created about 2.35 million jobs. (Or somewhere in that range. These more precise numbers aren't reported for months, depending as they do on more detailed records that take longer to collect and analyze.)

To put that in perspective, there are about 2.5 to 3 million people employed in teaching, in nursing, and as waiters or waitresses. The number of jobs the American economy is creating and destroying each month is nearly as great as the number of people who wait on tables all year. I find that stunning. (And its testament to how diverse is our job market that three of the most common job occupations combined make up only 4% of the work force.)

Most importantly, we're back on track for normal. In the 70s the US economy created 19.4 million jobs. In the 80s and 90s it created 18.2 and 21.9 million. Then last decade, the oughts from 2000-2009, it lost 1.1 million. Because the job gains of this decade were coming in the wake of this disastrous decade - the worst since the 1930s - job creation didn't seem to make as much difference. And it didn't. We weren't ramping up so much as we were digging out of a hole.

In the Great Recession, Americans lost about 8 million jobs. It wasn't until about the Fall of 2014 that the number of employed had returned to its pre-recession level. Finally, unemployment fell below 5% just this year (and has flirted between 4.7% and 5.0% since), a sign that the labor market had returned to its normal state.

As the labor market tightens, two things happen. One, labor participation rate will go up. Two, wages will rise faster.

In the last year, 3,040,000 people entered the labor force and 3,026,000 got jobs.  That's 99.5%. After dropping for the first half of the decade, the labor participation rate has started to go up again because people are finding jobs.

Wages are rising. The Census Bureau reported median wages last year rose 5.2%, which is a remarkably high rate. (Last century wages ended up 8X higher than they were at the start of the century; this was the result of 2.1% wage growth year after year for a 100 years.)

Oddly, there is every kind of dismissal of this good news. That makes no sense to me. Obama is president but the Republicans have Congress and are governors in 31 states. What's going on in the economy is partly a tribute to the policies of Democrats and Republicans and mostly a tribute to the dynamism of the economy. Republicans can probably be blamed or praised just as much as Democrats but given the presidency is so visible, it is the party of the president that gets most of the blame or credit. It clouds the ability to simply talk about the economy as something separate from politicians.

Regardless of whether you love Bernie Sanders or Gary Johnson, Jill Stein or Hillary Clinton, it's important to acknowledge two things. One, the Great Recession deserves the modifier "Great." It was awful and we still have not fully recovered from it. Two, the economy is incredibly powerful, creating new jobs by the millions even as it automates away old jobs by the millions. Every month. "The economy" is a system as mysterious and as complex as the ocean and given how much it has transformed human life since the Dark Ages it deserves more respect than it gets. Respect enough to deserve its own parade.

05 October 2016

Live Like a Conservative and Vote Like a Liberal? Or Embrace a Third Option of Entrepreneurship and Social Invention?

You should live like a conservative (assuming that it’s all up to you and whether or not life is unfair you should suck it up and make something of yourself) and vote like a liberal (assuming that only systems determine outcomes and we should change those if we expect something better or different).

The Ryan brothers (Rob and Erik) recently passed along a provocative quote that they attribute to Jonathon Haidt:
“The problem is that the right refuses to recognize systems and the left refuses to recognize agency.”

I think that the relationship of liberals and conservatives to systems gets to the heart of the difference between them.

The conservative believes that accomplishment and results rest on the individual. You make it on your own, no excuses. If you talk about racism to a conservative, he’ll tell you a story about a black guy who became wildly successful in spite of a childhood of poverty. At its worst, this approach disregards everything from systemic racism to disabilities and the near impossibility of overcoming a childhood of abuse and poverty. At its best, it calls upon people to accomplish more than they ever thought possible.

The liberal believes that the system is all-defining, whether that “system” is good schools or a social network that includes access to job leads and financial credit. It simply isn't right to expect similar results from people who have very different access to the systems that do so much to facilitate or obstruct success. At its worst, this approach throws up its hands at every obstacle and gives up. At its best, it points to needed reforms that would make the world a better place. A liberal will let your herbal tea grow cold or micro-brewed beer get warm while she recites a litany of injustices.

The conservative says, "Suck it up." The liberal, "Let's give you a safe space.” It's easy to mock these tendencies but framed like this it suggests at least two things.

One, if you want a successful life, it's probably best to adopt the conservative’s philosophy. You do have to make your own life work regardless of whether you're born in 1930s US or 2030s US, whether you're born in Georgia the country or Georgia the state, whether you’re born a minority female or a white male. It's unreasonable to think that you'll change the system - at least in time to make a difference in your life. So, do your best with the hand you're dealt, whether or not the odds are on your side.

Two, if you want successful policies, policies that make the world steadily better, it's probably best to adopt the liberal's philosophy. No matter what happens, only 5% of your population is going to get into the top 5% income bracket. So let people fight it out to be in that 5% but meanwhile make sure that everyone - even those in the bottom 5% - have a better time of it by the end of the decade than they did at the start. Politics should be about making systems better, of changing the odds that everyone prospers.

When it comes to systems, this suggests that you work like a conservative and vote like a liberal.

At least that seemed to be the choice of baby boomers and earlier generations. Millennials have a better choice.

We tend to forget that the quality of life is just as dependent on social invention as technological invention. Steam engines and computers made our lives better but so did nation-states and banks. Social inventors include people like Martin Luther, Thomas Jefferson, and Maria Montessori. Entrepreneurship is just one form of social invention.

In 1900 people worked 70 hours a week and lived 47 years. In 2000, people worked 40 hours a week and lived 77 years. A person in 2000 could buy things a person in 1900 had never heard of, from polio vaccines and airplane tickets to valium, air conditioning, and a hamburger from their car window. People in 2000 didn’t make 8X more because they worked 8X more. It was because of the systems – from potable water and K-12 public education to electrical motors and computers – they worked with and in.

If traditional liberals protest the inequity of systems and ask for them to be more fair and conservatives focus on simply doing well in those systems, it’s the social inventors and entrepreneurs who transform those systems and create new ones. These are the people who drive progress. This doesn’t just make the world better; it makes their own lives better as well. They don’t work in the system: they work on systems.

Do you think it’s a shame that with all these people using smart phones that there isn’t some way to find someone driving in your direction, someone you could hitch a ride with for less than it costs to take a taxi? Found Uber and create billions in value. Be an entrepreneur.

Do you think it’s a shame that people can’t retire? Create social security and radically reduce poverty among the elderly. Be a social inventor.

Buckminster Fuller said that your life purpose could be defined by the thing you see that needs to be done that no one is doing. This impulse might well define an entrepreneur or social inventor.

Take a knee and protest the system? Stand and salute it? Or, make it your work to change that system?

Last century we had a proliferation of technological inventions. In 1900, new technology was still rare; by 2000, we expected new technology to come at regular intervals, our cars, smart phones, and kitchen gadgets all evolving as rapidly as we could afford the new version. Many people were busily working at making new and next generation products. The technological invention that once was rare and unpredictable became common. This generation may well create a similar experience concerning social inventions, bringing us to expect a parade of new approaches to governing, learning, and working. Social invention and entrepreneurship may become as common for millennials as product invention became for their parents and grandparents. At that point, working on the system will become a viable option for a growing number of people and not just a few.

04 October 2016

Confusing Business and Economics

After the USSR collapsed, a lot of American business people and economists went to Russia to help. My own impression was that the American business people were of little help because all of their experience came out of the American economy and the American economists were of little help because they could assume American business people.

There are a number of differences between economics and business but one is fairly simple.

A business person is successful if they rise to the top. They don't necessarily have to create anything but they can expand more rapidly or drive costs down by scaling up or whatever. If you are successful it doesn't matter whether your competition or suppliers or employees become wealthy as well or are crushed.

An economic policy is successful only if the community prospers. Not even everyone, necessarily, but certainly the median or average. If wages and wealth for 40 year olds in 2000 is double what they were in 1980, then the economy has done well.

The emphasis is very different.

Business success is for the individual. It's competitive. You want to do well and it's the rare person who can worry about the whole community or even industry and their place in it. You try to win market share. (I know. Some focus on creating markets and market share. That's wonderful but it isn't necessary for business success.) In business, you can succeed in a zero-sum game.

Economic success is for the whole. Good economic policy shows no regard for who ends up on the top or the bottom but instead just measures itself by how much better life is for those on the top and the bottom. Economics is variable sum; some policies create more for most people and some policies only benefit a few.

Which brings me to Trump. He came to fame with the Art of the Deal. What is that? It's an approach to negotiating that will get you more than the other guy. Your business practices leave suppliers short-changed? Force bankers and investors to accept pennies on the dollar for loans? Result in employees losing their jobs? Oh well. The only question is whether or not you got a good deal. Whether you - as the individual - came out ahead.

It's no wonder that Trump puts so much emphasis on trade with China and Mexico and other countries. He likes the idea of getting a better deal. By contrast, he says almost nothing about policies that would actually grow the economy. (Or, more precisely, nothing coherent or credible. For instance, his website has a healthcare plan. What is the plan? To "replace Obamacare with something terrific." That's the plan. In its entirety.)

Business and economics certainly overlap but they are not the same thing. Showing that you can come out on top of the group is not the same as showing that you can make things better for the group.

Today Trump asked of America's trade deficit, "Who negotiates these deals?" suggesting he doesn't understand trade deficits and expect to walk up to the "trade deficit" counter on day one of his presidency to demand a better deal. He's talked about getting the country's debt re-negotiated (as he has with his own debt), suggesting he doesn't understand triggers for international financial crises. No reputable economist has approved of his economic plan and many have claimed it's likely to trigger a recession.

It's perfectly consistent to say that Trump knows how to get rich and would be a disaster for the economy. His failure at economics seems as certain as his success at marketing.