Archive for the Category Misc.

 
 

America’s industrial juggernaut

If you are as old as me, you might remember the 1950s and 1960s, when America was an industrial juggernaut.  Here are a couple pictures from Ford’s giant River Rouge complex, from (I’d guess) the early 1960s:

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Now America has de-industrialized.  And yet, we somehow managed to increase industrial production from 83.7 in June 2009 to 106.2 at the end of 2014.  That’s an increase of 22.5.  But 22.5 is just the change in an index number, what does it actually mean?  Well in March 1961, soon after JFK took office, America’s industrial production stood at 22.2.  That’s right, Obama presided over a boom in industrial production larger than the entire industrial production of the US in March 1961!  (And recall that IP is a real index, adjusted for price level changes.)

Misleading?  Off course, but still kind of interesting.  Note that America’s population has grown since 1961, but it hasn’t even come close to doubling.  Meanwhile IP is up nearly 5-fold.

PS.  IP peaked at just under 46 in November 1973, generally regarded as the date when the post-WWII industrial boom ended.

Do I believe these numbers?  Not really, as I don’t believe the government’s price level numbers.  Lots of this “growth” occurred in the 1990s and is just Moore’s Law in computers, not the US actually producing more “stuff.”  I don’t consider my current office PC to be 100 times better than my 1990 office PC.

 

Update on the American Sunbelt

The census recently released its 2014 population estimates, which reveal some interesting patterns:

1.  During the decade of the 2000s, 38.4% of US population growth occurred in just 3 states; Texas, California and Florida. In the past year that number rose to 47.2%, in the same three states. Florida passed New York to become the third most populous state. These three states are America’s future, and in a few years I’ll be heading out to the worst governed of the three. Speaking of bad governance, Illinois (which contains dynamic Chicago) lost population, while Michigan (home of Detroit) gained population.  Ouch!

2.  So the Sunbelt is alive and well?  Not quite.  All of the south central states other than Texas did poorly, with Louisiana, Mississippi, Alabama, Arkansas and Oklahoma all growing at less than the national average, and far less than Texas. New Mexico actually lost population.

3.  So Texas must be booming due to the fracking boom?  Nope.  Texas’s population growth began slowing about 8 years ago, just as fracking got underway.

4.  But wait; didn’t North Dakota have the fastest population growth of any state? Yes, but North Dakota only added about 15,600 people, versus 7,600 in South Dakota.  So fracking probably added no more than 10,000 people.  Even if you assume that Texas’s fracking industry is twice as large, it would have added only 20,000 to Texas’s population.  (Probably less, as it discourages non-fracking business.)  But Texas added more than 450,000 people. Fracking is a statistical error, nothing more.  That’s why oil producing Oklahoma and Louisiana grew more slowly than the national average, despite the oil boom.  (The data was from July 1, 2013 to July 1, 2014.)

5.  Populations movements don’t affect politics, as the three big gainers are red, blue, and purple. But even if they were all red or all blue, it wouldn’t matter.  If liberals move to a conservative state or vice versa, it changes the nature of that state. During my lifetime many strongly Democratic states have become very Republican, and vice versa.  It will happen again. In the 20th century each party will win about 1/2 of the elections, just as in the 20th century.  It’s all about the ideas, the horserace doesn’t matter.  Which ideas will each party accept?

BTW, I saw this in The Economist:

Less than a decade ago UKIP was a Eurosceptic pressure group run by disenchanted Thatcherites, such as Mr Farage, and EU-obsessed academics. Now it is hoovering up support from disgruntled elderly and blue-collar voters. Yet the fact that it is also hoovering up their prejudices reflects how populist, not serious, the party is.

.  .  . Some Kippers claim that, in its blundering first stabs at policymaking, the party is simply listening to its new members too well. Yet there is no sense that, when it matures, it will reassert liberal principles—as Douglas Carswell, the party’s first elected MP, clearly wants. The truth is Mr Farage is more opportunist (he would say pragmatic) than liberal. He probably still doesn’t much care what UKIP’s economic policy is, so long as it hastens Britain’s departure from the EU. The result is that libertarian UKIP is likely to end up much like its nativist, authoritarian European cousins.

(Recall that outside the US “liberal” means pro-free market.)  Now reread the first paragraph. Does this remind you of the evolution of a certain political party in the US in recent decades?

Update:  Lars Christensen will begin doing Youtube videos.

If Britain were Germany

[Update:  Apparently the German system is more complex than I realized–see comments below, especially regarding the SNP.]

The Conservatives won an impressive come from behind victory last night.  I thought it would be interesting to compare the actual outcome, to the outcome that would have occurred with a German-style proportional representation system.  In that system, seats are assigned in proportion to vote share, but only to parties getting at least 5% of the vote.  I’ll show the number of seats under the German regime, with the actual number won in parentheses.  The difference is stunning:

Conservative   273  (330)

Labour      226    (232)

UKIP       93  (1)

Liberal Dems  58   (8)

SNP    0   (56)

Others    0   (23)

I suppose the Tories could have cobbled together another coalition government, if the Lib Dems were keen on another suicide mission.  But if they weren’t?

Europe has lots of right wing nationalist parties.  While the UKIP is not as bad as some of the others, it is still a bit outside the mainstream.  The reason the UK lacks a big populist party has nothing to do with the UK electorate, it’s all about the system.

PS.  Of course the usual Lucas Critique caveats apply, especially where strategic voting occurs.

PPS.  No surprises in today’s jobs report—more of the same.

Thank God for the “Shy Tory factor”

Back in 1992, the incumbent Conservatives led by John Major went into the election slightly trailing the Labour Party in public opinion polls.  In fact, they won a reasonably comfortable victory.  Here’s what Wikipedia says:

Almost every poll leading up to polling day predicted either a hung parliament, with Labour the largest party or a small Labour majority of around 19 to 23. Polls on the last few days before the country voted predicted a very slim Labour majority.[8]

With opinion polls at the end of the campaign showing Labour and the Conservatives neck and neck, the actual election result was a surprise to many in the media and in polling organisations. The apparent failure of the opinion polls to come close to predicting the actual result led to an inquiry by the Market Research Society. Following the election, most opinion polling companies changed their methodology in the belief that a ‘Shy Tory Factor‘ affected the polling.

That was when the Labour party was still mildly socialist, before the Blair reforms. (Indeed the election led to the Blair reforms.) Based on the exit polls, it looks like a repeat of 1992.  Perhaps Tory voters are a bit embarrassed to admit voting their pocketbook.

There is no better time to begin introducing NGDP into the monetary policy process. In the past few years it would have been entangled in election politics, with Labour claiming the Tories were abandoning control of inflation (even if they privately supported the move.)  The BoE should consider a NGDP target with revisions every 5 years to account for changes in trend RGDP growth.  Since trend growth changes very slowly, that (unnecessary) compromise is a small price to pay for NGDP targeting.

Congratulation to the Tories—the better party won.  (Something I could not honestly say about America’s right wing party.)

PS.  I love British humor.  A disgruntled Labour MP called their unusually left-wing 1983 party platform; “The longest suicide note in history.”

Update:  If my math is right the UKIP would have had about 75 seats under proportional representation, even more with small parties excluded.  They are forecast to end up with 2 seats.  The SNP would get perhaps 33 seats, whereas they actually got about 56. And that’s assuming they get the 5% that is the threshold in countries like Germany. The Lib Dems would have gotten about 50 seats, whereas they’ll end up with about 10. It pays to be a regional party in Britain.

Baltimore’s decline

Here are the 10 biggest cities in America in 1950, when most hit their peak:

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Tyler Cowen recently linked to an article that has lots of interesting information about Baltimore’s decline.

As a result of Baltimore’s multiple social, economic, and educational problems, the city’s population has declined from 939,000 in 1960 to just622,000 today. In silent, gloomy testament to this prolonged exodus, some47,000 abandoned houses and 16,000 vacant buildings now stand like pulled teeth in Baltimore’s urban landscape.

I thought it might be useful to put that decline into some sort of perspective.  Thus I’ll list the population of these same 10 cities in 2013 (many are no longer top 10) as well as the ratio to their 1950 populations.  Then I’ll suggest 5 groupings:

New York  8405k  106.5%

Chicago  2719k    75.1%

LA    3884k   197.2%

Philly   1553k   75.0%

Detroit  689k   37.2%

Baltimore  622k   65.5%

Cleveland   390k  42.6%

St Louis   318k  37.1%

Washington   646k  80.5%

Boston  645k     80.5%

I see 5 groupings:

Cities hitting record population, and still growing.  (NYC, LA)

Cities down substantially, but growing really fast since 2010 (Boston & DC, which were both smaller than Baltimore as recently as 2010.)

Cities down substantially and growing modestly (Chicago, Philly)

Cities down substantially and barely growing (Baltimore)

And cities down catastrophically and still losing population (The terrible three; Detroit, Cleveland and St. Louis.)

A few observations.

1.  Some of the population decline since 1950 is due to smaller families.  Thus a city with exactly the same number of houses might have 25% fewer people due to lower birthrates.  Older American cities are hemmed in by suburbs, which generally grow as the inner city declines.  Almost all of the older cities were losing population until 1990, if only due to smaller families, but the more dynamic ones have recently turned it around.

2.  One possibility is that Baltimore is underperforming due to governance issues. That might seem surprising, as its population numbers are far better than the terrible three.  Indeed the rust belt also has many smaller examples of catastrophic population loss (Buffalo, Gary, Flint, Youngstown, etc.)  But Baltimore seems more like Philadelphia, a fairly big city in the shadow of a more dynamic neighbor (DC and NYC, respectively.)  As recently as 1990 Baltimore still had 77.5% of its peak population, while Philly had 76.5%, DC had 75.7% and Boston had 71.7%. It was holding its own.  Then it started falling dramatically behind other cities in that group.  I see Philly as the closest comparison because they are geographically close, and lack the special characteristics of Chicago, Boston and DC. Both are big, bland east coast cities with a few strong points (Johns Hopkins, Penn, historical neighborhoods, etc.)

3.  The first time I ever heard of urban revival was Baltimore’s Inner Harbor project, which was soon followed by Boston’s Quincy Market.  Obviously things didn’t pan out for Baltimore.

4.  I think Chicago’s data masks a tale of two cities.  It’s 1/2 catastrophic rust belt and 1/2 Manhattan.  It’s numbers end up halfway between Detroit and NYC.

5.  I recently visited the St Louis Fed, and learned about its history.  When the Fed was created, St. Louis was America’s 4th biggest city.  Now it’s smaller than many cities that most Americans have never even heard of (Aurora, Santa Ana, Mesa, etc.)

6.  AFAIK all of America’s catastrophic urban failures lie on a line from St. Louis to Buffalo, passing through Gary, Detroit and Cleveland.  I wonder why?  (Excluding much smaller cities like Camden.)  Even Newark still has 63% of its peak (1930) population.

7.  East coast cities are clearly more dynamic that midwest cities.  But oddly the Midwest has grown faster than the Northeast since 2000, by 5.0% vs. 4.6%. Midwesterners are more inclined toward suburban living.  (The West grew 18.5% and the South grew 19.1%.)

Update:  The New Zealand iPredict NGDP futures markets are up and running. I’ll have a formal announcement later today.