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.
The method you use to calculate your personal inflation only works for people buying exactly the same things in both time periods. That's ok if one correctly identifies such person(s). The bigger issue is that your buying most likely isn't representative of the wider public.
Employment soared from the bottom of the lockdowns, Stu. Employment hasn't soared since 2019, and I don't think Arnold was really trying ignore this fact, just overlooked it.
People all buy food, Stu, and they buy electricity, gas, phone, insurance, etc. My basket of goods isn't unusual in any way whatsoever other than I don't do much in the way discretionary spending on goods and services- never have. However, don't believe me, believe the polls on what people think about the economy- that inflation bite is the reason Biden is sinking on the economic policies.
"My basket of goods isn't unusual in any way whatsoever other than I don't do much in the way discretionary spending on goods and services- never have."
That's a pretty big exception, added to your not buying/selling/renting a home and not having/refinancing a mortgage which you already noted. I'm guessing you don't have much for education expenses and don't have comparable car purchases in both time periods either. Sure, you are typical.
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…
What I don't get is the desire to keep it going. Shouldn't pandemic-related government spending have wound down by - not just now, but a year or more ago? And yet I just read today that our felonious state AG is suing over a Biden program set to launch in Harris County (Houston)* - wherein 1,928 recipients* earning less than 200% of the federal poverty level (in a city not particularly $$ to live in!) will be supplied pandemic relief of $500/month in unrestricted income for 18 months.
The whole thing is so bizarre. Buying 1,928 votes? How on Earth were these people identified? And what has any of it to do with the pandemic at this date? You would hope at least, that they represent families where one or both breadwinners died of Covid. But the eligibility criteria make no mention of Covid.
*Similar programs have already been enacted in other major Texas cities. Interestingly, this cuts out completely that part of Texas where, when you go there, you sense real poverty.
Harris County, which can't of course know its actual population given the state of the border, reports a total of 4,888,913 people: 1,928.
This is what you get when you normalize the idea of the state running a gambling enterprise. Thanks, Texas Lottery Commission.
Exactly, just keep throwing money at boosting demand to chase supply that is not there. It’s crazy how much money keeps getting spent, like a 4 year Nixon Inflation.
You bring up a good point regarding how printing and distributing massive amounts of cash plays into this. As for government manipulating the numbers in an unstated way, that seems a conspiracy of epic proportions. I can't believe there wouldn't be multiple whistle blowers.
Stu, the government literally publishes the methodology, and that methodology changes over time, and pretty much always changes in ways to reduce the headline numbers published each month. Are we to believe categorically that the bureaucrats don't have a motive to understate inflation by changing that methodology, or that they won't act on that motive?
Indeed. Every reported number has corrections and adjustments that happen (quietly) a few months later. Why do they rush the numbers knowing there will be adjustments? Why not wait? Why are the adjustments generally in the bad direction?
Further, one might say massive academic fraud via plagiarism and fabricated data was a massive conspiracy, and that most academic articles were unreplicable as a mere result of benign choices by researchers. Then the last 5-10 years happened and we are discovering that fraud is everywhere. Is it so unreasonable that the sole source of data based truth is massaging the numbers and making choices that benefit the people who pay their salaries when there is zero chance of someone replicating their work to check?
Believe what you want. I know a fair number economists, both liberal and not, keynesian and not, Chicago and not, and maybe a few well-known, such as Russ Roberts, who believe official numbers overstate true inflation by a percent or more per year. I'm pretty sure Milton Friedman said similar but I might have that wrong.
Milton Friedman has been dead for quite some time, so I don’t think he had much to say about current inflation numbers.
Inflation rates are always controversial, even the notion that there is one inflation rate for the country. My point is that all the economic data is gathered by one group and reported on by that group. For the same reason you can’t trust economic reports from the CCP or the USSR we should be more skeptical of what is coming out of the BLS and Fed.
I am skeptical when someone shows systematic problems with the data or the calculation. I'm less inclined than you to worry about purposeful manipulation when based on total conjecture rather than said data and calculation issues.
It may be a bit since you read Kling’s post, but there was a whole article about how if one uses the older inflation calculation procedure the numbers are very different. So, there’s that, even if you not the type to be skeptical of people who are the sole producers of data on how well they are doing. I personally like to see multiple confirmations of data claims, particularly when the claims don’t seem to match reality and those making the claims have an incentive to fudge them in a particular direction.
Then why, exactly, do people think they are suffering ecomically under Joe Biden? That is the problem you and your economists need to explain. Are the voters responding in these polls wrong to feel that way?
The list of psychological possibilities is long. We can start with two.
1 People dislike losses far more than gains, even when it is just how the situation is framed. The loss from higher prices is likely to feel worse than the gain from an equal income gain (I'm not saying they are equal here).
2 People feeling a loss (real or not) are far more likely to be vocal about it than people feeling a gain. While this one might not show up in survey data in a direct manner, it can convince others to feel or say they feel the same. Negative news reporting has a similar impact.
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?
I've seen similar anecdotal evidence but I'm not so sure that means he is accomplishing less. Either way, companies are growing their nominal profits rather quickly. I'm pretty sure the growth is sufficient that even with a higher actual inflation, real profits are not be what one would expect in a depression.
That said, you could be right. There could be a new relationship between employment, productivity, inflation, economic growth, etc. like none ever seen and not understood by anyone.
Sorry I wasn't clear. What I meant was that even when considering the supposed higher inflation rate, real profits are still higher than one would expect in a depression.
Particularly if the mix of businesses are changing, eg businesses with high input costs are going under, replaced by businesses with mostly labor as an input, labor whose wages haven’t been increasing much.
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
Thanks for link to check 268m pop. There are some 330 million US humans, but the FRED pop counts: " persons 16 years of age and older".
The employment numbers are more important today than "unemployment", since 100 - 62.7 = 37.8% folk not having jobs, tho most are not looking, therefore not counted.
Most are getting some gov't basket of benefits which is a de facto UBI, but as a combination of some 78 different welfare type programs.
We should probably have a US govt Benefit credit card that all citizens quality for, and that all gov't cash benefits go into. So those getting 1, 2, 5, 20 programs disbursing money show up clearly in the account. Including Social Security (the nearly untouchable) We need more honest transparency about who is getting how much total benefits. Also far fewer 100% cut offs (under $20k and get big benefit, $20,001 and all benefits cut is terrible.)
"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.
A bit comprehensive, no? There is no one libertarianism. Simply put, there is a libertarian/authoritarian axis. Where one stands on that line determines how libertarian one is.
Where does family fit on that axis? Family is husband, wife, and kids - so not "one stands" but how the family functions. With lots of socialism AND authoritarianism, based on age-appropriate restrictions by the parents on the kids, but also between the two parents.
Especially no sex with others, casual or otherwise.
I'd guess Boaz, like Elton John and many "married" gay couples, is NOT faithfully monogamous to just one partner. As Rand was not, nor Heinlein. Support for honest, responsible promiscuity (no unwanted pregnancy, care against STDs) is a big part of hyper-individualist Libertarian appeal. But not so attractive to most women, tho I met some lovely ones among the 10% or so.
Optimal human society includes the norm of marriage & faithfulness, and raising kids.
That doesn't really fit on the libertarian/ authoritarian axis you mention -- but for most normal humans, family is more important, far more, than politics.
I don’t understand why you’re mixing up one’s personal preferences with one’s political stance. One may prefer to live one way, and even advocate it, but not demand that others abide by it.
It’s simple, you don’t want to understand. Politics is about using govt force against those people who violate the laws made by politicians. People with families and wanting to raise kids to be good, have different highest priorities of govt actions than others.
You are very quick to judge me. You say that politics is about using government force. I disagree. Politics is about how to live together. Most people assume force is required because it has always been used, but it is not. It is merely a convenience for majorities and other despots to impose their will on others. People who cannot agree on how to live together should simply not live together. This can be quite difficult to accomplish, but it’s better than violence.
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.
He might say that somewhere else, tho I don't remember, but he's definitely not talking about the 70s, since the CPI measure change discussed was from before 1984 vs after '84, and it was only recently that there was a big divergence.
I do recall disagreeing with Arnold's 70s inflation analysis due to my analysis of the Baby Boom huge increase in wealth AND demand and production and the pressures to hugely increase production, quickly. Big pop bulge seems highly underdiscussed by all macro folk. More important than Vietnam, which gets most of the late 60s & early 70s news, followed by Carter & inflation.
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.
I think if you want the best outcome for tire production, the secret is to get into bed with the Finns. I was surprised to learn that Nokia had pivoted from phones to tires, when I once spent a day in Dayton, Tennessee. Apparently it is a model facility as regards being as green as is possible with tires.
I chatted pleasantly there with a nice and seemingly-lonely young man from India, whose job was related to tire design. He absolutely worshipped Modi.
Did you know Modi only sleeps 4 hours a night, and that he will never marry so great is his devotion to India?
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.
Employment soared during the stated time period.
The method you use to calculate your personal inflation only works for people buying exactly the same things in both time periods. That's ok if one correctly identifies such person(s). The bigger issue is that your buying most likely isn't representative of the wider public.
Employment soared from the bottom of the lockdowns, Stu. Employment hasn't soared since 2019, and I don't think Arnold was really trying ignore this fact, just overlooked it.
People all buy food, Stu, and they buy electricity, gas, phone, insurance, etc. My basket of goods isn't unusual in any way whatsoever other than I don't do much in the way discretionary spending on goods and services- never have. However, don't believe me, believe the polls on what people think about the economy- that inflation bite is the reason Biden is sinking on the economic policies.
"My basket of goods isn't unusual in any way whatsoever other than I don't do much in the way discretionary spending on goods and services- never have."
That's a pretty big exception, added to your not buying/selling/renting a home and not having/refinancing a mortgage which you already noted. I'm guessing you don't have much for education expenses and don't have comparable car purchases in both time periods either. Sure, you are typical.
LOL! My absence in those markets makes my personal inflation rate look better, Stu, not worse.
Ok, so you agree your instance isn't representative?
As Yancey says, that only makes his personal inflation lower. Houses and rent are one of the sectors really pushing the inflation.
"Employment soared from the bottom of the lockdowns, Stu. Employment hasn't soared since 2019,"
I understand this. I'm saying it isn't relevant. The text Kling quotes and the comments he make are about a different time period.
"the revised data implies a 28.6% total increase in the CPI between November 2021 and November 2023.
It is relevant- employment only "soared" in 2021-2023 because of the lockdowns- absent the lockdowns there is no "soaring employment".
Sure. But it soared. And you are arguing that GDP and profits went way down during the time period when employment soared.
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…
What I don't get is the desire to keep it going. Shouldn't pandemic-related government spending have wound down by - not just now, but a year or more ago? And yet I just read today that our felonious state AG is suing over a Biden program set to launch in Harris County (Houston)* - wherein 1,928 recipients* earning less than 200% of the federal poverty level (in a city not particularly $$ to live in!) will be supplied pandemic relief of $500/month in unrestricted income for 18 months.
The whole thing is so bizarre. Buying 1,928 votes? How on Earth were these people identified? And what has any of it to do with the pandemic at this date? You would hope at least, that they represent families where one or both breadwinners died of Covid. But the eligibility criteria make no mention of Covid.
*Similar programs have already been enacted in other major Texas cities. Interestingly, this cuts out completely that part of Texas where, when you go there, you sense real poverty.
Harris County, which can't of course know its actual population given the state of the border, reports a total of 4,888,913 people: 1,928.
This is what you get when you normalize the idea of the state running a gambling enterprise. Thanks, Texas Lottery Commission.
Exactly, just keep throwing money at boosting demand to chase supply that is not there. It’s crazy how much money keeps getting spent, like a 4 year Nixon Inflation.
You bring up a good point regarding how printing and distributing massive amounts of cash plays into this. As for government manipulating the numbers in an unstated way, that seems a conspiracy of epic proportions. I can't believe there wouldn't be multiple whistle blowers.
Stu, the government literally publishes the methodology, and that methodology changes over time, and pretty much always changes in ways to reduce the headline numbers published each month. Are we to believe categorically that the bureaucrats don't have a motive to understate inflation by changing that methodology, or that they won't act on that motive?
Indeed. Every reported number has corrections and adjustments that happen (quietly) a few months later. Why do they rush the numbers knowing there will be adjustments? Why not wait? Why are the adjustments generally in the bad direction?
Further, one might say massive academic fraud via plagiarism and fabricated data was a massive conspiracy, and that most academic articles were unreplicable as a mere result of benign choices by researchers. Then the last 5-10 years happened and we are discovering that fraud is everywhere. Is it so unreasonable that the sole source of data based truth is massaging the numbers and making choices that benefit the people who pay their salaries when there is zero chance of someone replicating their work to check?
Believe what you want. I know a fair number economists, both liberal and not, keynesian and not, Chicago and not, and maybe a few well-known, such as Russ Roberts, who believe official numbers overstate true inflation by a percent or more per year. I'm pretty sure Milton Friedman said similar but I might have that wrong.
Milton Friedman has been dead for quite some time, so I don’t think he had much to say about current inflation numbers.
Inflation rates are always controversial, even the notion that there is one inflation rate for the country. My point is that all the economic data is gathered by one group and reported on by that group. For the same reason you can’t trust economic reports from the CCP or the USSR we should be more skeptical of what is coming out of the BLS and Fed.
I am skeptical when someone shows systematic problems with the data or the calculation. I'm less inclined than you to worry about purposeful manipulation when based on total conjecture rather than said data and calculation issues.
It may be a bit since you read Kling’s post, but there was a whole article about how if one uses the older inflation calculation procedure the numbers are very different. So, there’s that, even if you not the type to be skeptical of people who are the sole producers of data on how well they are doing. I personally like to see multiple confirmations of data claims, particularly when the claims don’t seem to match reality and those making the claims have an incentive to fudge them in a particular direction.
Then why, exactly, do people think they are suffering ecomically under Joe Biden? That is the problem you and your economists need to explain. Are the voters responding in these polls wrong to feel that way?
The list of psychological possibilities is long. We can start with two.
1 People dislike losses far more than gains, even when it is just how the situation is framed. The loss from higher prices is likely to feel worse than the gain from an equal income gain (I'm not saying they are equal here).
2 People feeling a loss (real or not) are far more likely to be vocal about it than people feeling a gain. While this one might not show up in survey data in a direct manner, it can convince others to feel or say they feel the same. Negative news reporting has a similar impact.
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?
I've seen similar anecdotal evidence but I'm not so sure that means he is accomplishing less. Either way, companies are growing their nominal profits rather quickly. I'm pretty sure the growth is sufficient that even with a higher actual inflation, real profits are not be what one would expect in a depression.
That said, you could be right. There could be a new relationship between employment, productivity, inflation, economic growth, etc. like none ever seen and not understood by anyone.
In a high inflation regime, nominal profits are expected to rise quickly.
Sorry I wasn't clear. What I meant was that even when considering the supposed higher inflation rate, real profits are still higher than one would expect in a depression.
Again- laughing out loud- "real" profits depend on the inflation deflator one uses, Stu, which is the entire point of this blog post.
Now I'm wondering if you are being purposely dense or just not reading what I wrote,
"considering the supposed higher inflation rate"
Particularly if the mix of businesses are changing, eg businesses with high input costs are going under, replaced by businesses with mostly labor as an input, labor whose wages haven’t been increasing much.
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.
Thanks for link to check 268m pop. There are some 330 million US humans, but the FRED pop counts: " persons 16 years of age and older".
The employment numbers are more important today than "unemployment", since 100 - 62.7 = 37.8% folk not having jobs, tho most are not looking, therefore not counted.
Most are getting some gov't basket of benefits which is a de facto UBI, but as a combination of some 78 different welfare type programs.
We should probably have a US govt Benefit credit card that all citizens quality for, and that all gov't cash benefits go into. So those getting 1, 2, 5, 20 programs disbursing money show up clearly in the account. Including Social Security (the nearly untouchable) We need more honest transparency about who is getting how much total benefits. Also far fewer 100% cut offs (under $20k and get big benefit, $20,001 and all benefits cut is terrible.)
"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.
“…failure of Libertarianism.”
A bit comprehensive, no? There is no one libertarianism. Simply put, there is a libertarian/authoritarian axis. Where one stands on that line determines how libertarian one is.
Where does family fit on that axis? Family is husband, wife, and kids - so not "one stands" but how the family functions. With lots of socialism AND authoritarianism, based on age-appropriate restrictions by the parents on the kids, but also between the two parents.
Especially no sex with others, casual or otherwise.
I'd guess Boaz, like Elton John and many "married" gay couples, is NOT faithfully monogamous to just one partner. As Rand was not, nor Heinlein. Support for honest, responsible promiscuity (no unwanted pregnancy, care against STDs) is a big part of hyper-individualist Libertarian appeal. But not so attractive to most women, tho I met some lovely ones among the 10% or so.
Optimal human society includes the norm of marriage & faithfulness, and raising kids.
That doesn't really fit on the libertarian/ authoritarian axis you mention -- but for most normal humans, family is more important, far more, than politics.
I don’t understand why you’re mixing up one’s personal preferences with one’s political stance. One may prefer to live one way, and even advocate it, but not demand that others abide by it.
It’s simple, you don’t want to understand. Politics is about using govt force against those people who violate the laws made by politicians. People with families and wanting to raise kids to be good, have different highest priorities of govt actions than others.
You are very quick to judge me. You say that politics is about using government force. I disagree. Politics is about how to live together. Most people assume force is required because it has always been used, but it is not. It is merely a convenience for majorities and other despots to impose their will on others. People who cannot agree on how to live together should simply not live together. This can be quite difficult to accomplish, but it’s better than violence.
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?
Yeah, I think he got that turned around.
He might say that somewhere else, tho I don't remember, but he's definitely not talking about the 70s, since the CPI measure change discussed was from before 1984 vs after '84, and it was only recently that there was a big divergence.
I do recall disagreeing with Arnold's 70s inflation analysis due to my analysis of the Baby Boom huge increase in wealth AND demand and production and the pressures to hugely increase production, quickly. Big pop bulge seems highly underdiscussed by all macro folk. More important than Vietnam, which gets most of the late 60s & early 70s news, followed by Carter & inflation.
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.
I think if you want the best outcome for tire production, the secret is to get into bed with the Finns. I was surprised to learn that Nokia had pivoted from phones to tires, when I once spent a day in Dayton, Tennessee. Apparently it is a model facility as regards being as green as is possible with tires.
I chatted pleasantly there with a nice and seemingly-lonely young man from India, whose job was related to tire design. He absolutely worshipped Modi.
Did you know Modi only sleeps 4 hours a night, and that he will never marry so great is his devotion to India?
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.