Scott Sumner on measuring inflation; Daniel Klein on libertarianism and the election; Population Density Lowers Fertility; Rob Henderson's experience with substack;
"Taken at face value, a 28.6% rise in the price level at a time of much slower nominal growth implies that the US fell into one of the deepest depressions in US history. Sumner sees this as a reductio ad absurdum argument against using the revised numbers. I would agree."
Yeah, that's totally crazy!
Except ... you know ...
I keep a household finances spreadsheet and record most of my expenditures, especially the big regular bills. I also buy some things routinely on Amazon and other big online retailing websites, so I can compare some price changes over time, with more accurate and precise insight into whether there have been any quality adjustments that should be taken into account. My budget pattern is not volatile and judging by those charts of how people spend their money, I'd say my household in in the normal-ish ranges for our income bracket, though less than average on cars and eating out. Obviously I know income and taxes and maintenance pretty well in my own case.
This lets me track a few plausible indices of "personal real inflation rates" which, sure, aren't "the" price level by any means, but at least tells me how - whatever it is that happened - affected my personal position and was experiences as a boost or a hit requiring belt-tightening and substitution.
Personally, it's been a hit to the tune of an average of over 10% a year in real terms for several years in a row now. 30% in two years seems high, but still, not 'absurdum' high. Then again, if I had to refinance at current rates at what the county assessor says my house is worth ... oof. Friends of mine who hire average people say there has a sudden drop in worker quality (and morals) and they do indeed now have to pay a lot more to get the same kind of "good worker", and they are increasingly looking at ways to shift into more automation.
Of course this is all anecdotal and I'm not claiming this has any bearing on the overall price level whether the official numbers are right or wrong. But if you are personally experiencing 10% a year, then when some metric comes out close to 10% a year, one's first impression is not to balk or scoff as being totally implausible.
I have written it before- you can generate a positive GDP from a negative one by just underreporting inflation by a % number or two. Like Handle below, I track my expenditures and those of my mother since we are the household- the reported inflation rate by the BLS is significantly lower than the rate in our own personal finances for food, insurance, and utilities which is pretty much all of our purchases since we own the home free and clear and never have spent much outside of Christmas for discretionary items.
And employment is not "soaring"- the participation rate in the civilian labor force never recovered to the rate it was in January 2020 and has flatlined for the last year.
I don’t find it implausible that we were in a very sharp depression for a couple of years at least. Remember when they shut down most of the economy? Then they pumped a bunch of cash into the system while shutting down goods production, which is an amazing way to increase prices at a phenomenal level.
Sumner mentions car sales going up as a sign of good economy, but seems to forget the “forced savings” people were experiencing as the usual drains of restaurants, bars and other entertainment was made illegal in many places. How many large events were cancelled for multiple years on end? How many businesses shut down and didn’t reopen? How many people got laid off?
The fact that 2020-2021 doesn’t register as a huge depression suggests a problem with how the government is analyzing and reporting economic data. I wonder if they have some incentive to report that data in an improper manner, such as might mislead people into thinking they didn’t wreck the economy…
Regarding the first. Why would the revision be absurd? I see lack of productivity everywhere. Even my son (in Deloitte consulting) does not work anywhere near what I did right out of college in the same field. I have been baffled how various businesses are staying in business with the terrible service or products offered. Granted my other son, a welder, works very full weeks without fail, so I know what I see is only anecdotal. Could you explain more?
Is a strong claim like “Meanwhile, employment was soaring” supported by the evidence? The referenced paper seems mostly concerned with contrasting consumer sentiment in 2023 versus the unemployment rate and inflation. FRED shows a seasonally adjusted unemployment rate of 3.4% as of January 2023 that climbed to 3.7 as of January 2024 and is up to 3.8 as of March 2024. (https://fred.stlouisfed.org/series/UNRATE#0 ). At the same points in time, FRED shows the population rising from 266 to 267 to 268 million (https://fred.stlouisfed.org/series/CNP16OV )
and the civilian labor force increasing from 166 to 167 to 168 million (https://fred.stlouisfed.org/series/CLF16OV ) and the labor force participation rate at 62.4 percent, 62.5, and 62.7. These latter data show upward trends, but soaring?
For March 2024, BLS reported “Total nonfarm payroll employment rose by 303,000 in March, higher than the average monthly gain of 231,000 over the prior 12 months. In March, job gains occurred in health care, government, and construction.” So “medium” seems to have become “soaring.”?
And then there is the issue of counting part-time and full-time jobs the same. FRED shows 27 million part-time jobs as of January 2023 up to 28 as of January 2024 and 29 for March 2024. (https://fred.stlouisfed.org/series/LNS12600000 ), the March 2024 figure was the highest on record at FRED, nearly triple the 1968 figure. (https://fred.stlouisfed.org/series/LNS12600000 ) And government employment grew from 22 to 23 and 23 at the same points, so it made up a goodly share of the increase as well. And note too that compensation figures are juiced by the larger share of government employment: ECI increase have been greatest in public administration (https://www.bls.gov/news.release/eci.t01.htm ) and one wonders how much of the increase in construction worker earnings might be attributable to the expansions in Davis-Bacon Act type
"The sensitivity of the economy to the methods by which key economic indicators are calculated does not receive enough attention." Absolutely. I'm repeatedly surprised and disappointed by how little even experienced economists know about how a particular index is defined and how it is measured. There are invariably many methodological compromises involved, almost always they are sensible ones but they almost never correspond exactly to the underlying economic concept you think you are studying. For instance, some monthly household expenditures are extrapolated from a one-week diary, others are extrapolated from a quarterly or annual retrospective. None are actually monthly data. This is probably the best way to do it but obviously you can't accurately measure e.g. household differences in gasoline expenditures. Many people buy gas every other week, so it looks like half of people who own cars never buy gas, and half buy prodigious amounts. Prices are another excellent example. The surveyor goes into a store to see how much shirts cost. But he also has to decide on the spot if the shirts are the same quality as last year. There is really no other way to do it, but obviously the subjective judgment of the surveyor has an immense impact on price measures. The devil is in the details which is fine, but even many experienced practitioners are not familiar with the way the details impact their findings. Sometimes published findings are quite comical as a result. I often think Bismarck should have added a third product that people with weak stomachs shouldn't know how they are made: laws, sausages, and economic statistics.
Arnold, it's great that you're so often "moderate in tone and charitable to those who disagree." AND that you expect it of yourself and judge others on that criteria, which most of the more popular pundits fail - due to more clickbait Current Thing talk.
The full transcript of David Boaz's talk shows clearly, by Omission, the failure of Libertarianism. No talk about the family. Libbers who are cosmopolitans all too often have no actual responsibility for their own children -- being too hyper-individualist. The Anywhere elite (says a cosmo type now in Slovakia) love themselves far more than the place they live. People are happier with a balance of self-love AND love of others and love of where they live. [On-line connections don't result in love, but distract from spending time In Real Life, which is where real love might be found.]
In real families there's a lot of socialism--from each, to each, different abilities, different needs--actually far more individually based than govt socialism with one-size fits all problems.
School choice, too minor for Libbers to fight for as much as drug semi-legalization and gay marriage, would have been a Libertarian social victory well worth celebrating. But it's gonna come from Family First anti-woke, anti-Democrats; and from those Rep leaders willing to lead, and fight.
All votes for a hopeless ideal A rather than a second best B over a terrible C are a half-vote for the terrible, whether it wins or not. It's D-Democrats that are terrible, not the never-on-the-ballot "leftists". Calling them the "left" allows the Dem voters a euphemistic "I'm not radical like them" to avoid the actual, radical policies the Dems are putting into place.
This is pretty different from the extreme right who have NOT implemented any of their radical policies, despite constant Dem media claims that the Republicans stand for such excessive policies.
Social Security increases depend on COLA calculations (3.2%), will be going up some ~$59 avg for 2024. It's stupid, now, for a political party to run on replacing SS, which is also sort of a UBI for the elderly workers.
All the econ statistics from 2020 & 2021, maybe also 2022, will be corrupted/ irregular because of the Covid lockdown & govt reactions. Y on Y calculations should probably be 4 year calculations divided by 4, 2019-2023, for better comparisons to other years also smoothed.
Regarding >> I am thinking of devoting some of my posts to extracting key points from my books.
As someone who struggles to find enough time to read everything I want to, I would love to see your ideas and explanations spread across a few easier to digest articles.
Re: density/fertility relationship: this could be a "wet streets cause rain" situation. Humans are animals, and in other situations we see that we can breed lots of animals in very high density situations. In fact, the more density, the better, but it has some negative consequences (e.g. stressed pigs on cheap feed decrease meat quality and increase reliance on antibiotics). So it stands to reason that there are many confounding factors at play with people, their fertility rates, and population density.
I think with any issue, our multi-layered government is not really a unified system, but instead is a large pile of people, systems, and inchoate clusters of people attempting to bring order to certain things that cannot be turned into a system. Any attempt to bring about a broad change to fertility patterns will provoke a broad based reaction. If you wanted to increase US production of tires, you might have to impose tariffs on China, Japan, and France. But then if you sextupled US tire production, you would have labor, real estate, and environmental difficulties (both air, water, and earth pollution all governed by different rules). And you would have to convince domestic investors that this was just not a momentary fancy of an administration on its way out.
Like in the tire-booster example, if you tried to increase broad fertility rates, you would provoke broad reactions from all the business and governmental interests that rely on the optimized low-fertility lifestyle. Trying to pull effort and attention from the beneficiaries of the current MO in favor of breeding is taking their stuff away. All those people can afford to pay other people to fight for their interests. This is one of the reasons why paying a few dorks in a university to write a paper rarely results in much political change.
Perhaps libertarians are concerned about whether any of the major conflicts brewing around the globe might turn into a nuclear war! If so, it would be pretty bizarre for them to hold their noses and vote for Trump...
Re the inflation stuff, in these cases I'm always reminded of John Cowperthwaite, who in the 1960s did much the same for HK as Lee Kuan Yew did for Singapore. This is from a decade-old story: "They both pushed for deregulation, ultra low taxes, trade, anti-car policies and public housing projects. But asked once what the greatest and farthest-reaching policy of his tenure was, he replied: “I abolished the collection of statistics.” Cowperthwaite wasn’t anti-intellectual; he did not scorn statistics. The figures gathered by the International Monetary Fund are the most eloquent testimony to Hong Kong’s achievement in the Cowperthwaite era. As far as he knew, in his day statistics were being compiled all over the colony. He just didn’t want to know what they were. More precisely, he didn’t want other economic policymakers to know he knew what they were. He refused to allow government money to be spent cooking them up. "
I applaud everyone here who pushed back on the topic of inflation. I’m curious, though, why employment is a better indicator of consumer sentiment than median income. One can be employed at a pitiful wage.
Economies like ecologies have both productive subunits and parasitic subunits. The net primary productivity or net economic growth both depend on the amount of energy or labor sucked off by the parasitic subunits.
The way economists like to measure inflation and economic growth seems to assume that parasites are not significant and growth of parasites like many lawyers is a common good. The growth in regulatory parasites in their little "vetocracy" subunits where every "stakeholder", with and without skin in the game, can kill any project can be classified as new jobs and economic growth. That dead new "solar grade silicon" factory creates growth that kills future growth much like a zooplankton growth will kill primary productivity in the ocean as we observe from over-harvest the fish that eat the zooplankton. Our political class whines about China controlling 98% of the solar grade silicon production in the world while blocking, with decades long reviews, any US greenfield plants.
I feel that the 70s analysis is closer to correct on inflation and our present analysis of inflation is false. The people may see this decrease in the "value of money" (aka inflation) in driving up prices of anything that may be a "store of value" other than money from land, housing, and the stock markets along with what look like paintings by children called art. By excluding housing cost with "rent equivalent", food costs, and energy they knock out real inflation components. They really screw up energy cost when you note that solar power buys 25 years worth of electricity with upfront costs and zero annual costs. If you use levelized cost analysis you are often assuming zero discount rate and zero inflation rate.
"Taken at face value, a 28.6% rise in the price level at a time of much slower nominal growth implies that the US fell into one of the deepest depressions in US history. Sumner sees this as a reductio ad absurdum argument against using the revised numbers. I would agree."
Yeah, that's totally crazy!
Except ... you know ...
I keep a household finances spreadsheet and record most of my expenditures, especially the big regular bills. I also buy some things routinely on Amazon and other big online retailing websites, so I can compare some price changes over time, with more accurate and precise insight into whether there have been any quality adjustments that should be taken into account. My budget pattern is not volatile and judging by those charts of how people spend their money, I'd say my household in in the normal-ish ranges for our income bracket, though less than average on cars and eating out. Obviously I know income and taxes and maintenance pretty well in my own case.
This lets me track a few plausible indices of "personal real inflation rates" which, sure, aren't "the" price level by any means, but at least tells me how - whatever it is that happened - affected my personal position and was experiences as a boost or a hit requiring belt-tightening and substitution.
Personally, it's been a hit to the tune of an average of over 10% a year in real terms for several years in a row now. 30% in two years seems high, but still, not 'absurdum' high. Then again, if I had to refinance at current rates at what the county assessor says my house is worth ... oof. Friends of mine who hire average people say there has a sudden drop in worker quality (and morals) and they do indeed now have to pay a lot more to get the same kind of "good worker", and they are increasingly looking at ways to shift into more automation.
Of course this is all anecdotal and I'm not claiming this has any bearing on the overall price level whether the official numbers are right or wrong. But if you are personally experiencing 10% a year, then when some metric comes out close to 10% a year, one's first impression is not to balk or scoff as being totally implausible.
I have written it before- you can generate a positive GDP from a negative one by just underreporting inflation by a % number or two. Like Handle below, I track my expenditures and those of my mother since we are the household- the reported inflation rate by the BLS is significantly lower than the rate in our own personal finances for food, insurance, and utilities which is pretty much all of our purchases since we own the home free and clear and never have spent much outside of Christmas for discretionary items.
And employment is not "soaring"- the participation rate in the civilian labor force never recovered to the rate it was in January 2020 and has flatlined for the last year.
I don’t find it implausible that we were in a very sharp depression for a couple of years at least. Remember when they shut down most of the economy? Then they pumped a bunch of cash into the system while shutting down goods production, which is an amazing way to increase prices at a phenomenal level.
Sumner mentions car sales going up as a sign of good economy, but seems to forget the “forced savings” people were experiencing as the usual drains of restaurants, bars and other entertainment was made illegal in many places. How many large events were cancelled for multiple years on end? How many businesses shut down and didn’t reopen? How many people got laid off?
The fact that 2020-2021 doesn’t register as a huge depression suggests a problem with how the government is analyzing and reporting economic data. I wonder if they have some incentive to report that data in an improper manner, such as might mislead people into thinking they didn’t wreck the economy…
Regarding the first. Why would the revision be absurd? I see lack of productivity everywhere. Even my son (in Deloitte consulting) does not work anywhere near what I did right out of college in the same field. I have been baffled how various businesses are staying in business with the terrible service or products offered. Granted my other son, a welder, works very full weeks without fail, so I know what I see is only anecdotal. Could you explain more?
Is a strong claim like “Meanwhile, employment was soaring” supported by the evidence? The referenced paper seems mostly concerned with contrasting consumer sentiment in 2023 versus the unemployment rate and inflation. FRED shows a seasonally adjusted unemployment rate of 3.4% as of January 2023 that climbed to 3.7 as of January 2024 and is up to 3.8 as of March 2024. (https://fred.stlouisfed.org/series/UNRATE#0 ). At the same points in time, FRED shows the population rising from 266 to 267 to 268 million (https://fred.stlouisfed.org/series/CNP16OV )
and the civilian labor force increasing from 166 to 167 to 168 million (https://fred.stlouisfed.org/series/CLF16OV ) and the labor force participation rate at 62.4 percent, 62.5, and 62.7. These latter data show upward trends, but soaring?
I can remember the Arnold Kling who once asserted “My definition of ‘high’ job growth is 350,000 per month. Medium is 50,000 to 350,000. So what we are experiencing is growth on the high end of medium.” (https://www.arnoldkling.com/blog/decembers-medium-high-employment-growth/ )
For March 2024, BLS reported “Total nonfarm payroll employment rose by 303,000 in March, higher than the average monthly gain of 231,000 over the prior 12 months. In March, job gains occurred in health care, government, and construction.” So “medium” seems to have become “soaring.”?
And then there is the issue of counting part-time and full-time jobs the same. FRED shows 27 million part-time jobs as of January 2023 up to 28 as of January 2024 and 29 for March 2024. (https://fred.stlouisfed.org/series/LNS12600000 ), the March 2024 figure was the highest on record at FRED, nearly triple the 1968 figure. (https://fred.stlouisfed.org/series/LNS12600000 ) And government employment grew from 22 to 23 and 23 at the same points, so it made up a goodly share of the increase as well. And note too that compensation figures are juiced by the larger share of government employment: ECI increase have been greatest in public administration (https://www.bls.gov/news.release/eci.t01.htm ) and one wonders how much of the increase in construction worker earnings might be attributable to the expansions in Davis-Bacon Act type
requirements (https://fred.stlouisfed.org/series/CES2000000003 )
But even if we concede that employment is soaring, productivity seems stuck in the same cyclical pattern it has been in for a while now (https://data.bls.gov/timeseries/PRS85006092 ) which seems consistent with the stagnation in average weekly wages (https://www.bls.gov/charts/county-employment-and-wages/percent-change-aww-by-state.htm ).
At any rate, I apologize for remaining skeptical about all the employment news with which I am expected to be overjoyed.
"The sensitivity of the economy to the methods by which key economic indicators are calculated does not receive enough attention." Absolutely. I'm repeatedly surprised and disappointed by how little even experienced economists know about how a particular index is defined and how it is measured. There are invariably many methodological compromises involved, almost always they are sensible ones but they almost never correspond exactly to the underlying economic concept you think you are studying. For instance, some monthly household expenditures are extrapolated from a one-week diary, others are extrapolated from a quarterly or annual retrospective. None are actually monthly data. This is probably the best way to do it but obviously you can't accurately measure e.g. household differences in gasoline expenditures. Many people buy gas every other week, so it looks like half of people who own cars never buy gas, and half buy prodigious amounts. Prices are another excellent example. The surveyor goes into a store to see how much shirts cost. But he also has to decide on the spot if the shirts are the same quality as last year. There is really no other way to do it, but obviously the subjective judgment of the surveyor has an immense impact on price measures. The devil is in the details which is fine, but even many experienced practitioners are not familiar with the way the details impact their findings. Sometimes published findings are quite comical as a result. I often think Bismarck should have added a third product that people with weak stomachs shouldn't know how they are made: laws, sausages, and economic statistics.
Arnold, it's great that you're so often "moderate in tone and charitable to those who disagree." AND that you expect it of yourself and judge others on that criteria, which most of the more popular pundits fail - due to more clickbait Current Thing talk.
The full transcript of David Boaz's talk shows clearly, by Omission, the failure of Libertarianism. No talk about the family. Libbers who are cosmopolitans all too often have no actual responsibility for their own children -- being too hyper-individualist. The Anywhere elite (says a cosmo type now in Slovakia) love themselves far more than the place they live. People are happier with a balance of self-love AND love of others and love of where they live. [On-line connections don't result in love, but distract from spending time In Real Life, which is where real love might be found.]
In real families there's a lot of socialism--from each, to each, different abilities, different needs--actually far more individually based than govt socialism with one-size fits all problems.
School choice, too minor for Libbers to fight for as much as drug semi-legalization and gay marriage, would have been a Libertarian social victory well worth celebrating. But it's gonna come from Family First anti-woke, anti-Democrats; and from those Rep leaders willing to lead, and fight.
All votes for a hopeless ideal A rather than a second best B over a terrible C are a half-vote for the terrible, whether it wins or not. It's D-Democrats that are terrible, not the never-on-the-ballot "leftists". Calling them the "left" allows the Dem voters a euphemistic "I'm not radical like them" to avoid the actual, radical policies the Dems are putting into place.
This is pretty different from the extreme right who have NOT implemented any of their radical policies, despite constant Dem media claims that the Republicans stand for such excessive policies.
Social Security increases depend on COLA calculations (3.2%), will be going up some ~$59 avg for 2024. It's stupid, now, for a political party to run on replacing SS, which is also sort of a UBI for the elderly workers.
All the econ statistics from 2020 & 2021, maybe also 2022, will be corrupted/ irregular because of the Covid lockdown & govt reactions. Y on Y calculations should probably be 4 year calculations divided by 4, 2019-2023, for better comparisons to other years also smoothed.
Regarding >> I am thinking of devoting some of my posts to extracting key points from my books.
As someone who struggles to find enough time to read everything I want to, I would love to see your ideas and explanations spread across a few easier to digest articles.
> The sensitivity of the economy to the methods by which key economic indicators are calculated does not receive enough attention.
Are you saying that part of why things went haywire in the 70s was because they had poor measurements of economic indicators?
Re: density/fertility relationship: this could be a "wet streets cause rain" situation. Humans are animals, and in other situations we see that we can breed lots of animals in very high density situations. In fact, the more density, the better, but it has some negative consequences (e.g. stressed pigs on cheap feed decrease meat quality and increase reliance on antibiotics). So it stands to reason that there are many confounding factors at play with people, their fertility rates, and population density.
I think with any issue, our multi-layered government is not really a unified system, but instead is a large pile of people, systems, and inchoate clusters of people attempting to bring order to certain things that cannot be turned into a system. Any attempt to bring about a broad change to fertility patterns will provoke a broad based reaction. If you wanted to increase US production of tires, you might have to impose tariffs on China, Japan, and France. But then if you sextupled US tire production, you would have labor, real estate, and environmental difficulties (both air, water, and earth pollution all governed by different rules). And you would have to convince domestic investors that this was just not a momentary fancy of an administration on its way out.
Like in the tire-booster example, if you tried to increase broad fertility rates, you would provoke broad reactions from all the business and governmental interests that rely on the optimized low-fertility lifestyle. Trying to pull effort and attention from the beneficiaries of the current MO in favor of breeding is taking their stuff away. All those people can afford to pay other people to fight for their interests. This is one of the reasons why paying a few dorks in a university to write a paper rarely results in much political change.
Perhaps libertarians are concerned about whether any of the major conflicts brewing around the globe might turn into a nuclear war! If so, it would be pretty bizarre for them to hold their noses and vote for Trump...
Re the inflation stuff, in these cases I'm always reminded of John Cowperthwaite, who in the 1960s did much the same for HK as Lee Kuan Yew did for Singapore. This is from a decade-old story: "They both pushed for deregulation, ultra low taxes, trade, anti-car policies and public housing projects. But asked once what the greatest and farthest-reaching policy of his tenure was, he replied: “I abolished the collection of statistics.” Cowperthwaite wasn’t anti-intellectual; he did not scorn statistics. The figures gathered by the International Monetary Fund are the most eloquent testimony to Hong Kong’s achievement in the Cowperthwaite era. As far as he knew, in his day statistics were being compiled all over the colony. He just didn’t want to know what they were. More precisely, he didn’t want other economic policymakers to know he knew what they were. He refused to allow government money to be spent cooking them up. "
I applaud everyone here who pushed back on the topic of inflation. I’m curious, though, why employment is a better indicator of consumer sentiment than median income. One can be employed at a pitiful wage.
Economies like ecologies have both productive subunits and parasitic subunits. The net primary productivity or net economic growth both depend on the amount of energy or labor sucked off by the parasitic subunits.
The way economists like to measure inflation and economic growth seems to assume that parasites are not significant and growth of parasites like many lawyers is a common good. The growth in regulatory parasites in their little "vetocracy" subunits where every "stakeholder", with and without skin in the game, can kill any project can be classified as new jobs and economic growth. That dead new "solar grade silicon" factory creates growth that kills future growth much like a zooplankton growth will kill primary productivity in the ocean as we observe from over-harvest the fish that eat the zooplankton. Our political class whines about China controlling 98% of the solar grade silicon production in the world while blocking, with decades long reviews, any US greenfield plants.
I feel that the 70s analysis is closer to correct on inflation and our present analysis of inflation is false. The people may see this decrease in the "value of money" (aka inflation) in driving up prices of anything that may be a "store of value" other than money from land, housing, and the stock markets along with what look like paintings by children called art. By excluding housing cost with "rent equivalent", food costs, and energy they knock out real inflation components. They really screw up energy cost when you note that solar power buys 25 years worth of electricity with upfront costs and zero annual costs. If you use levelized cost analysis you are often assuming zero discount rate and zero inflation rate.
How many negative marginal product DEI employees got hired in 2020-2023? What was the impact on overall productivity? I'm joking, but only about 60%.
"I notice that the open rate for this newsletter remains the same (around 40%), regardless of headlines."
That is a bit surprising given past conversations. I'd expect the AI open rate to be a bit lower.