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28 January 2011

We Need Growth and No That's Not a Bad Thing

Note: every link in here is worth reading/looking at.

A common response, especially among young liberally minded people, to my all too frequent tirades about how economic stimulus is still needed is "why do we still need growth? Do we really need more stuff?"

Of course we do - and we need it at an increasing rate. Here's why - population growth in the US is about 1% per year. Inflation is currently about 1.5% although the natural rate is more like 3 to 4.5%. Therefore, right now we need to increase GDP by about 2.5% a year just to sustain our current standard of living. Nothing tricky here just some arithmetic.

This is a table I took from Krugman here where he explains basically the same thing. This is Okun's Law by the way:

The take away from this is that an economy needs 2.5% real growth just to keep unemployment from rising and an increase of 2% of real growth to knock 1% off of unemployment.

Typical GDP growth rates are about 2.5-3.5% a year... see where this is going? Real GDP growth in 2010 was 2.6% and in the last quarter it was slightly up to 3.2% (as a part of the whole, not an additional 3.2%) so... at this rate unemployment should start to look semi normal around late 2018 or so.

Back to the point - so this sets up a system where we can only sustain ourselves through continual growth - evidence of the brutality of a market based economy!

Why not? Well population growth and inflation are a fact that must be dealt with and I don't think it's wrong that people should want employment although perhaps I think our mindset towards employment should shift to projects as opposed to a 9-5 but that's not relevant here. What is relevant is that a growing economy and an increased GDP does not necessarily mean a bigger house and an SUV. Whenever predicting how we will live in the future it's usually a good idea to look at Europe now. They've focused on increasing quality of products over tons. As Krugman puts it here:
The way I see it, by the way, is that it’s about shifting the mix away from tons of stuff to quality. You have a small electric vehicle (powered by solar-thermal) instead of an S.U.V., but it drives itself most of the time, and has a great built-in entertainment system. You live in an apartment or townhouse instead of a McMansion, but the brain-wave controlled kitchen turns out gourmet meals on demand. And if we do the GDP accounting right, this will show up as economic growth.
This is something I blogged about a while ago. I was talking about buying fewer quantity but nicer things. There's a good TED talk there too.

10 January 2011

The Koch Brothers

This article by Malcolm Gladwell is well worth the long read. It gives a really good look into the long game played by certain libertarian/very right of center very wealthy individuals - in this case the Koch brothers.

Gun Ignorance

In the wake or Arizona's shooting there is of course going to be a wave on anti-gun sentiment. I differ from most of my somewhat liberal friends in that I support gun ownership. This usually comes as a shock to whomever I'm talking to and we get into some sort of debate over "okay well shotguns are fine because you can hunt with them, but assault rifles are terrifying and should be illegal."

Here's an excerpt from the above article that I found a bit troubling:

“... you do not hear much about the fact that Jared Loughner came to Giffords’s sweet gathering with a semiautomatic weapon that he was able to buy legally because the law restricting their sale expired in 2004 and Congress did not have the guts to face up to the National Rifle Association and extend it. If Loughner had gone to the Safeway carrying a regular pistol, the kind most Americans think of when they think of the right to bear arms...”

The author makes out the 9mm Glock that the shooter used to be some sort of special handgun that citizens shouldn't be able to buy... I don't get it. It's a slide actuated, clip fed, semi-automatic pistol. It's no different than the Colt Model 1911 that my grandfather carried in WWII. It was even a 9mm which the military is going away from because it doesn't have the stopping power to kill a human.

My general frustration is a lack of gun knowledge. In Illinois, where I live, I can buy a shotgun when I'm 18 but I can't buy a pistol until I'm 21. Go to a shooting range some time and shoot a shotgun. Shotguns are about the scariest thing you could shoot at a person. Hands down. Ask any gun owner. It's nearly impossible to miss with a shotgun and there's nothing left of you when you do get hit.

Assault rifles always get liberals fired up - they look scary. They were invented by the Germans in WWII. Prior to their invention Germany used a bolt action rifle with a large caliber bullet like every other country. Today you'd recognize their Mausers as sniper rifles. The bullets can travel up to one mile or more and kill a person quite easily. At a few hundred yards you can take down big game with such a gun. With an assault rifle - no way. The range of such a gun is usually about 400-800 yards. The German engineers noticed that rarely were people in combat shot at more than a few hundred yards, such large bullets were unnecessary. They made the rounds smaller but made them go faster. Of course:

KE = 1/2MV^2

Velocity is more important than mass in determining force. This had the effect of allowing the soldier to carry more ammunition and be just as effective at ranges that battles were actually fought at. At the same time the guns were made smaller and lighter. The Russians invented the AK-47 and the US invented the M-16 shortly thereafter.

This is your grandfathers rifle (in this case the M1 used in WWII) using a 30-06 round:

180 grains @ 2700 feet per second with 2,900 Ft/lbs of force

This is the .223 or 5.56mm used in the American assault rifle the M-16 or now the M-4:

55 grains @ 3,250 feet per second with 1,300 Ft/lbs of force

A grain is 1/7000 of a pound.

There you have it. An assualt rifle impacts with less than half the force of a traditional rifle round that hunters still use for large animals. In fact a .223 is rarely used to hunt deer because it is not considered of sufficient size to take one down without undue suffering.

The idea that the Arizona shooter had access to some special weapon is straight wrong, and the next time you hear about an assault weapons ban just look at the numbers above.

05 January 2011

Conditional Payments

Mexico and Brazil have come up with forms of social welfare that pays the poor for meeting certain conditions, hence the name conditional payments (great article). These conditions can include keeping your kids in school, going to get medical checkups, going to classes on disease prevention, etc. The government figures its better to pay $1 to keep the kid in school than spend $5 to arrest them a few years down the road. The sums of money are tiny ($13 for every month a child is in school, $19 if you're 16 or over) but to a poor family it can double their income. The program is highly scrutinized and is showing very real and positive benefits. Poverty in Brazil has fallen from 22% to 7%. Mexico's version of the program has raised the numbers of kids entering junior high by 42% and high school by 85%. These are of course very real examples of direct stimulus - they're transfer payments.

I think you'd be hard pressed to find someone in America right now that thought our country was doing alright economically, and naturally one would assume that this means something should be done to correct the issue - which in this case is an unemployment rate of nearly 10% (about 4% is considered the natural rate currently).

Recently a bill passed approving 800 billion (that's 800,000 millions) in tax cuts that extended the Bush era tax cuts. This is, of course, more than the original stimulus received (which was roughly 40-60% tax cuts itself). And of course by taking away federal revenue - that's what a tax cut is - revenue declines and you go into debt if you don't slash spending. Of course that's not so easy. It turns out that if you take our defense spending, medicare/medicad, and social security you're only left with 20% of the budget. So have fun firing teachers, letting roads crumble further, and ceasing funding for scientific research. Why is any of that political? Doesn't everyone like education and roads?

Anyways, the whole point of this is that the legislative branch has two options for helping the economy. They can either cut taxes or spend more money. They both create debt so in essence they're the same thing. My complaint about tax cuts is that 70% (the bottom 50% pay 2.7%) of federal income taxes are paid by the top 10% of income earners, so if you make tax cuts guess who it goes to? When wealthy people get money they tend to save it which is not the intended outcome if you're trying to stimulate an economy.

This chart shows the percentage of Federal Income Taxes paid by each income group:

Year Top .01%Top 1%Top 5%Top 5-10%Top 10%Top 10-25%Top 25%Top 25-50 %Top 50%Bot 50%
2001 16.06%33.89%53.25%11.64%64.89%18.01%82.90%13.13%96.03%3.97%
2002 15.43%33.71%53.80%11.94%65.73%18.16%83.90%12.60%96.50%3.50%
2003 15.68%34.27%54.36%11.48%65.84%18.04%83.88%12.65%96.54%3.46%
2004 17.44%36.89%57.13%11.07%68.19%16.67%84.86%11.85%96.70%3.30%
2005 19.26%39.38%59.67%10.63%70.30%15.69%85.99%10.94%96.93%3.07%
2006 19.56%39.89%60.14%10.65%70.79%15.47%86.27%10.75%97.01%2.99%
2007 20.19%40.41%60.61%10.59%71.20%15.37%86.57%10.54%97.11%2.89%
2008 18.47%38.02%58.72%11.22%69.94%16.40%86.34%10.96%97.30%2.70%

If you give money to the less wealthy or even poor people they spend it because they have to. This of course begs the question why the not wealthy (see: the vast majority of Americans) would ever support tax cuts. I think the answer has, as it often does, to do with the perception of fairness.

To come full circle - why does America go for tax cuts that benefit the wealthy as opposed to inexpensive transfer payments that would help a greater percentage of our population and be more effective? Food stamps have long been THE most effective and efficient means of stimulus to the poor. Again, the answer seems to be the perception of fairness.

How Zombies are Really Made

Video games have been surging in the past few years in terms of both money spent on them and time devoted to playing them. The phenomenon is interesting on several levels. It's beginning to both shape and replace more traditional forms of human interaction. Balk all you will but World of Warcraft is a group dynamics psych experiment with the biggest sample size ever. Plus it generated over a billion dollars in revenue in one year for its producer Blizzard (that's a 1000 millions). At the rate we're going we'll have a sizable chunk of our population who take the blue pill and lives largely in a built reality - It's already happening in multiple MMORPG's (massive multiplayer online role playing games). I've neglected to share a few articles in the past but this one is worth mentioning.

This is from Milo:

Call of Duty: Black Ops made $650 million in the first week it was out. It was by far the largest media release ever. By comparison The Dark Knight made $200 million its first week.

I find it more interesting than creepy. Game producers are becoming increasingly good at hooking gamers by teasing them with well timed upgrades and rewards. Your weapons and characters get better as you play - making playing more fun. What's interesting is that people seem to clearly prefer this as opposed to rewards they receive in the real world, if I can call it that. A game provides a certain framework and security that the world cannot. Perhaps social scientists, governments, and employers should take note and learn from game producers.

On Crowd Accelerated Innovation

Chris Anderson, the guy who founded TED - not the WIRED writer, has an interesting article on what he deems "crowd accelerated innovation." I won't hash out all the details but the basic idea is that people in certain areas (dance and architecture are two I remember) are able to innovate faster vis a vie the internet and specifically videos. The idea came to him when he realized that by publishing TED talks online the quality of future talks was improved. People invited to speak at TED poured over the archive and practiced their speeches and it showed.

This idea appeals to me because one, I have first hand experience with this which I will get into in a moment and two, it dispels the myth of the lone genius which is rarely if ever the case. Einstein had his first wife Mileva who was perhaps smarter than himself, Edison ran innovation like a factory, Kalashnikov (of AK47 fame) was the head of a design team which was played down by the Soviets to trump up the hero card, etc. Tesla may be an exception but come on, it's Tesla. He was barely human.

As usual I digress to a paintball story. Back in the day - that is, roughly the late 90's paintball tournaments were played in the woods. This made for some pretty bad spectating. You could rarely get a good glimpse of what made good teams good. The sport evolved and by the time I started playing national tournaments (NPPL, when there was one league) in roughly 2000 woods fields were a thing of the past. What this allowed more than anything was for amateurs to see how the pros played. It used to be the case that all teams at a tournament would play teams of other classifications - of which there were three - Pro, Amateur A, and Amateur B. In 80-90% of the match-ups the team in the higher division would win handily. But as time progressed and classifications went from 3 divisions to 4 (Pro, D1, D2, D3) and 5 (+semi pro) this wasn't the case at all. The gap in skill decreased. Of course some of this could be attributed to various factors - lower cost of paint, widening of classifications, smaller teams (from 10 man to 7) which means more chance, but by far and away I believe it was because everyone could see what the pros were doing. You could literally stand next to the net at a national tournament without paying admission for the cost of gas to get there. A paintball education became cheap.

You could see where they ran off the break, where they shot, how they shot, how they moved, how they talked, and the young kids started to mimic them. It really cannot be overstated how much it changed paintball. In 2002 if a pro team lost to an amateur team it was the talk of the tournament, but by 2006 it was entirely common for a good amateur team to beat a top ranked pro team - we did it repeatedly.


"How can extreme forms of nationalism survive when men have seen the Earth in its true perspective - as a single, small globe against stars?" - Arthur C. Clarke

This is my uncle Kent in Naples, FL riding an appaloosa.