Archive for January, 2006

What An Hour of Work Bought in 1975

Posted by PrestoPundit on 01/31/2006

And what it buys you today — Don Boudreaux compares today’s prices with those in a 1975 Sears catalog. Quotable:

I divided the average hourly nominal earning of production workers in 1975 ($4.87 in December of that year) into the price of each of these (more or less) randomly selected items. I did the same for 2006 items found at, dividing these prices by the average hourly nominal earning of production workers in December 2005 ($16.34) ..

Here’s what I found:

Sears’ lowest-priced 10-inch table saw: 52.35 hours of work required in 1975; 7.34 hours of work required in 2006.

Sears’ lowest-priced gasoline-powered lawn mower: 13.14 hours of work required in 1975 (to buy a lawn-mower that cuts a 20-inch swathe); 8.56 hours of work required in 2006 (to buy a lawn-mower that cuts a 22-inch swathe. Sears no longer sells a power mower that cuts a swathe smaller than 22 inches.)

Sears Best freezer: 79 hours of work required in 1975 (to buy a freezer with 22.3 cubic feet of storage capacity); 39.77 hours of work required in 2006 (to buy a freezer with 24.9 cubic feet of storage capacity; this size freezer is the closest size available today to that of Sears Best in 1975.)

Sears Best side-by-side fridge-freezer: 139.62 hours of work required in 1975 (to buy a fridge with 22.1 cubic feet of storage capacity); 79.56 hours of work required in 2006 (to buy a comparable fridge with 22.0 cubic feet of storage capacity.)

Sears’ lowest-priced answering machine: 20.43 hours of work required in 1975; 1.1 hours of work required in 2006.

A ½-horsepower garbage disposer: 20.52 hours of work required in 1975; 4.59 hours of work required in 2006.

Posted in Economics | Leave a Comment »

Bush’s new Econ advisor — Edward Lazear

Posted by PrestoPundit on 01/31/2006

Tyler Cowen has the skinny.

Posted in Economics | Leave a Comment »

Savings Rate Lowest Since 1933

Posted by PrestoPundit on 01/31/2006

From the NY Times:

Americans’ personal savings rate dipped into negative territory in 2005, something that hasn’t happened since the Great Depression. Consumers depleted their savings to finance the purchases of cars and other big-ticket items.

This has got to be counted the ultimate triumph of the Keynesian economists who now dominate America’s colleges and universities.

Posted in Economics | Leave a Comment »

Hayek Fan Nominated for the Fed Board

Posted by PrestoPundit on 01/27/2006

From Bloomberg:

White House economic aide Kevin Warsh and University of Chicago economist Randall Kroszner, a former adviser to President George W. Bush, will be nominated to fill two vacancies on the Federal Reserve Board, people familiar with the decision said ..

Kroszner is best known for his academic work on financial institutions. His research has compared bank failure rates before and after the Great Depression, finding that banking regulation has done little to improve the safety and soundness of the nation’s financial institutions.

Kroszner is “well-respected in the economics profession and “would bring even greater research background having to do with regulation,” Broaddus said.

Much of Kroszner’s work expresses skepticism about government attempts to fix economic problems. In a January 2004 interview with the Richmond Fed’s “Region Focus” magazine, Kroszner said Friedrich Hayek and Milton Friedman, both Nobel Prize winners, were the two economists who most influenced him. Both are famous critics of socialism and government intervention in the economy.

“I am a great believer in the power and importance of free market,” he told the Richmond Fed publication. “It’s not because I think those markets work perfectly; it’s because I can’t think of a better alternative.”

Warsh, 35, an investment banker at Morgan Stanley in New York from 1996 to 2002, has been executive secretary of Bush’s National Economic Council and special assistant to the president for economic policy. Kroszner, 43, has been a professor at Chicago since 1990. He was a member of Bush’s Council of Economic Advisers from 2001 to 2003.

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Posted by PrestoPundit on 01/27/2006

Republican Pork

[hat tip]

Posted in Uncategorized | Leave a Comment »

Living in the Illusions of a By-Gone Age

Posted by PrestoPundit on 01/27/2006

That’s what your average lefty is doing. Arnold Kling expands on a theme I developed here some time ago. Kling applies his insights to the economics profession:

In 1968, Milton Friedman was on the fringe of respectability. His Presidential Address to the American Economic Association in 1967 could not have been more defiant of the conventional wisdom. At that time, economists thought that the economy could be “fine tuned” by government to achieve any desirable unemployment rate, with a “trade-off” that allegedly involved accepting higher inflation. Inflation, in turn, could be curbed by government action to control, or at least influence, the price- and wage-setting decisions of private firms.

Friedman argued instead that there is a “natural rate” of unemployment to which the economy will tend, regardless of how government manipulates aggregate demand. He warned that attempts to use monetary and fiscal policy to drive the unemployment rate lower would only result in ever-accelerating rates of inflation. Moreover, he argued that the only cure for inflation was control over the rate of growth of the money supply.

In 1968, Friedman’s views were far from the mainstream. When Paul Samuelson wrote an article for the Canadian Journal of Economics on “What Classical and Neoclassical Economic Theory Really Was,” he sneered that for modern economists trying to understand monetarism was like being a farmer who had lost his jackass and having to ask, “If I were a jackass, where would I go?” In short, Samuelson considered Friedman a jackass.

About this time, “fine tuning” began to fail, and inflation started to rise, just as Friedman had predicted. In 1971, President Nixon tried the Conventional Wisdom and adopted wage and price controls. The results proved disastrous. Finally, in 1979, President Carter in desperation allowed a new Federal Reserve Chairman, Paul Volcker, to attempt the monetarist cure for inflation. The result was successful.

Today, it is Milton Friedman’s views that are conventional wisdom, and the 1960’s Keynesians who are the jackasses. For me, seeing this unfold (I was a freshman economics major when President Nixon tried wage-price controls in 1971, and I was a newly-minted Ph.D in economics working at the Fed in the early 1980’s) was a major life experience. Somehow, many liberal economists of my generation managed to forget they ever believed in wage-price controls and hang on to the rest of their Conventional Wisdom security blanket.

Posted in Economics, The Left | Leave a Comment »

Daniel Dennett versus God

Posted by PrestoPundit on 01/27/2006

The interview. The article

Posted in Science | Leave a Comment »

Government Aware of Mexican Army Incursions

Posted by PrestoPundit on 01/26/2006

The LA Times reports:

Armed Mexican government personnel made unauthorized incursions into the United States five times in the last three months of 2005, including one incident last month in Southern California, according to confidential Department of Homeland Security records.

The crossings involved police officers or soldiers in military vehicles ..

Details of the incidents emerged as authorities on both sides of the border scrambled to investigate a dangerous confrontation Monday in Texas. Heavily armed personnel in a military-style Humvee from Mexico helped drug smugglers fleeing police to escape back across the border, according to authorities. An internal Border Patrol summary of the incident said the Humvee was equipped with a .50-caliber machine gun.

It was the second such incident in three months in the same rural county southeast of El Paso ..

In recent interviews, local and federal law enforcement officials in south Texas and the San Diego area said a long pattern of encounters with Mexican government units along the border have bolstered suspicions that their counterparts work with smugglers. In Laredo, Texas, authorities said they have repeatedly seen Mexican military units clearing people from brushy areas along the south banks of the Rio Grande shortly before loads of migrants and drugs are brought across ..

Monday’s incident is being investigated by U.S., Texas and Mexican authorities. But initial accounts appear to make it one of the clearest examples yet of either private militia or government troops aiding traffickers.

A confidential Border Patrol summary of the incident said it began when county sheriff’s deputies and state troopers tried to stop three vehicles on an interstate highway southeast of El Paso. All three vehicles made a run for the border, the report said.

One vehicle, a black 2006 Cadillac Escalade loaded with nearly 1,500 pounds of marijuana in plastic-wrapped bales, was abandoned near the border, West said.

As deputies approached the river they saw a Mexican military Humvee on the U.S. side, West said. A second vehicle bogged down in ankle-deep water in the Rio Grande, while the other made it back to Mexico.

“The Humvee attempted to push and pull [the stuck vehicle] toward Mexico to no avail,” the Border Patrol summary said.

At that point, West said, Mexican soldiers and civilians began unloading marijuana from the stranded vehicle. About 20 Mexican personnel in military uniforms, with insignias on their caps, took up positions on the south side of the river and pointed automatic rifles at about half a dozen sheriff’s deputies and state troopers.

“They were daring my guys to make a move,” West said.

As deputies took photos, the uniformed men burned the vehicle after it had been unloaded, then retreated into Mexico.

Evidently President Bush and the American army find themselves far too preoccupied defending the security of Iraq to bother protecting the national security of, well, America.

Posted in Bush, International | Leave a Comment »

David Henderson on Fed Chair Bernanke

Posted by PrestoPundit on 01/26/2006


The second thing not to like is Bernanke’s strong fear of deflation. He has made it clear that he favors price stability, which, he has pointed out, “means avoiding both deflation and inflation.” Economists can tell you why inflation is bad: it’s a tax on money and it’s more hidden than most taxes. But one of the economists who studied the issue most carefully, Milton Friedman, concluded that the optimal growth rate of the money supply is one that yields deflation. Why? Friedman argues that the cost to the government of producing paper money is essentially zero and that, therefore, the cost of holding money should be zero so that people will hold the optimal amount of money. But the cost of holding money is simply the interest you give up by holding it. So the way to get the cost of holding money down to zero is to have a zero nominal interest rate. This would happen if we had deflation whose magnitude equaled the real interest rate — that is, deflation of about 2 percent per year. By contrast, Bernanke’s fear of deflation, as far as I can tell, is not based on economic reasoning.

Posted in Economics | Leave a Comment »

Testing the Bounds of Liberalism in Holland

Posted by PrestoPundit on 01/23/2006

The Dutch begin re-thinking the nature of liberalism:

far from remaining a liberal paradise in which it is heresy to question the tenets of multiculturalism, Holland has become a country in which fear of inter-ethnic and religious strife is never far from the surface.

Several questions now haunt the country. Was its previous tolerance mere indifference, blindness, or, even worse, cowardice? How tolerant ought it to be towards those who want to destroy the institutional basis of the tolerance that they themselves have enjoyed but think mere weakness and decadence? Are there incompatible cultures, and if so was it wise to have encouraged mass immigration from a deeply alien land merely to ease a temporary labor shortage?

Posted in International | Leave a Comment »