Senator Patrick Leahy, the sponsor of the Protect Intellectual Property bill, claimed that if Congress rejected his bill it would “cost American jobs.” This is almost certainly not true.
Insofar as individuals are able to able to gain access to copyrighted material for which they would otherwise have to pay, they are able to save money. This if effectively the same thing as a tax cut, putting more money in their pocket, the vast majority of which will be spent on goods and services in their community, thereby creating jobs.
If they are denied access to this material, most would not be paying the copyright-protected price. Insofar as some of these people would pay the copyright protected price, it would mean some additional revenue to companies like Disney and Time-Warner. Most immediately this would mean higher profits for these companies. It may have some marginal impact on their employment, but the jobs lost from the money taken away from consumers would almost certainly be larger than the jobs gained by allowing these entertainment companies to gain more revenue. This is similar to imposing quotas on imported clothes. This will lead to more jobs in the textile industry, but fewer jobs everywhere else.
Senator Leahy’s bill will also impose additional cost on search engines like Google and intermediaries like Facebook. These costs are like a tax on the Internet. They pull money out of the economy and make these providers less efficient.
The NYT should have included this sort of economic analysis along with Senator Leahy’s comments.
Senator Patrick Leahy, the sponsor of the Protect Intellectual Property bill, claimed that if Congress rejected his bill it would “cost American jobs.” This is almost certainly not true.
Insofar as individuals are able to able to gain access to copyrighted material for which they would otherwise have to pay, they are able to save money. This if effectively the same thing as a tax cut, putting more money in their pocket, the vast majority of which will be spent on goods and services in their community, thereby creating jobs.
If they are denied access to this material, most would not be paying the copyright-protected price. Insofar as some of these people would pay the copyright protected price, it would mean some additional revenue to companies like Disney and Time-Warner. Most immediately this would mean higher profits for these companies. It may have some marginal impact on their employment, but the jobs lost from the money taken away from consumers would almost certainly be larger than the jobs gained by allowing these entertainment companies to gain more revenue. This is similar to imposing quotas on imported clothes. This will lead to more jobs in the textile industry, but fewer jobs everywhere else.
Senator Leahy’s bill will also impose additional cost on search engines like Google and intermediaries like Facebook. These costs are like a tax on the Internet. They pull money out of the economy and make these providers less efficient.
The NYT should have included this sort of economic analysis along with Senator Leahy’s comments.
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Morning Edition did a segment this morning on the 35 hour work week in France. To show how bad the 35 hour work week is, the segment told listeners that hospital workers had accumulated 2 million days worth of overtime, which they will have to take as days off by the end of 2012. It warned that this would force hospitals to shut down for months at a time.
Most listeners would have little ability to assess the risk from taking this many days of leave since they probably don’t have much idea of how big France’s hospital sector is. In the United States the hospital sector employs 4.8 million workers. If the sector in France is proportional to the size of its employed workforce, then France has approximately 1.2 million workers in the hospital sector. This means that if everyone uses their days off (workers in the U.S. often lose days of paid leave), they will have to take an average of 1.7 extra days off in 2012. Is that scary or what?
The piece also included the completely unsourced assertion that few people believe that the 35 hour work week has led to increased employment by dividing up jobs. The people who do not believe that the shorter work week created jobs must believe that the 35 hour work week led to sharp increases in productivity. If workers can produce the same amount in 35 hours as they did in 39 hours (the previous standard work week in France), it would imply an 11 percent increase in productivity.
This would be an astonishing gain in productivity. Economists view productivity as the primary determinant of living standards. Productivity growth is the whole point of all those great plans for tax cuts (usually for rich people) that people like Mitt Romney, Newt Gingrich, and Paul Ryan keep throwing on the table. If NPR’s sources are correct in their view, and shorter work weeks lead to massive gains in productivity (none of the tax cut bills are projected to lead to productivity gains of even one-fifth this size), then shorter work weeks could be a great way to both increase equality and improve growth: a classic win-win situation.
[Addendum: The transcript is now available. It seems that the 2 million days referred to a single hospital in Paris, not the entire hospital system.]
[Addendum 2: Andrew Watt has a more serious discussion of the impact of the 35-hour work week in France.
Morning Edition did a segment this morning on the 35 hour work week in France. To show how bad the 35 hour work week is, the segment told listeners that hospital workers had accumulated 2 million days worth of overtime, which they will have to take as days off by the end of 2012. It warned that this would force hospitals to shut down for months at a time.
Most listeners would have little ability to assess the risk from taking this many days of leave since they probably don’t have much idea of how big France’s hospital sector is. In the United States the hospital sector employs 4.8 million workers. If the sector in France is proportional to the size of its employed workforce, then France has approximately 1.2 million workers in the hospital sector. This means that if everyone uses their days off (workers in the U.S. often lose days of paid leave), they will have to take an average of 1.7 extra days off in 2012. Is that scary or what?
The piece also included the completely unsourced assertion that few people believe that the 35 hour work week has led to increased employment by dividing up jobs. The people who do not believe that the shorter work week created jobs must believe that the 35 hour work week led to sharp increases in productivity. If workers can produce the same amount in 35 hours as they did in 39 hours (the previous standard work week in France), it would imply an 11 percent increase in productivity.
This would be an astonishing gain in productivity. Economists view productivity as the primary determinant of living standards. Productivity growth is the whole point of all those great plans for tax cuts (usually for rich people) that people like Mitt Romney, Newt Gingrich, and Paul Ryan keep throwing on the table. If NPR’s sources are correct in their view, and shorter work weeks lead to massive gains in productivity (none of the tax cut bills are projected to lead to productivity gains of even one-fifth this size), then shorter work weeks could be a great way to both increase equality and improve growth: a classic win-win situation.
[Addendum: The transcript is now available. It seems that the 2 million days referred to a single hospital in Paris, not the entire hospital system.]
[Addendum 2: Andrew Watt has a more serious discussion of the impact of the 35-hour work week in France.
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Hungary is being led by a right-wing populist government that seems to have a questionable commitment to democracy. The steps it has taken to end the independence of the judiciary and undermine the fairness of future of elections are ominous. However, the NYT’s efforts to construct an economic case against the government fall badly short of the mark.
The NYT tells us that:
“Hungary serves as a cautionary tale for those who argue that Greece could regain competitiveness by reintroducing its currency. The drachma would plunge against the euro, the theory goes, and allow Greek products to compete on price with countries like Turkey.
‘Whatever you win today, it shoots you back tomorrow,’ said Radovan Jelasity, chief of the Hungarian unit of Erste Bank, an Austrian institution.
….
In theory, the plunge of the currency should help the economy by making Hungarian products less expensive abroad and cutting the cost of labor relative to neighboring countries.
But economists and business people say the advantages of a weak currency are more than canceled out by negative factors, like soaring prices for imported fuel or imported components for Hungarian factories, not to mention higher payments on foreign currency loans.
….
But the economic climate is grim, with 10.7 percent unemployment and inflation of 4.3 percent even as the economy heads into recession.”
Okay, so the word is that things are really bad in Hungary with its 10.7 percent unemployment rate. Let’s see how that looks compared to the competition.
Source: OECD.
If we compare Hungary to the debt crisis countries that remain within the euro it is looking pretty good. The closest among this group is Portugal, with an unemployment rate of 13.2 percent. The others are considerably worse. (The unemployment rates given are all the most recent available, which differs somewhat across countries.)
The 4.3 percent inflation rate might be somewhat higher than is desired, but hardly a crisis. The United States had higher inflation rates many times in the last 50 years without serious economic disruptions. Furthermore, in the context of a heavily indebted population, inflation performs the valuable function of reducing the real value of debt. It is also a necessary part of the adjustment process for a country looking to regain competitiveness by reducing the value of its currency.
The moral of this story is that Hungary’s government may actually be led by bad guys, but it doesn’t seem that their policies have had terribly negative economic consequences thus far. That could change down the road, but it still appears that Hungary’s economy is doing relatively well.
Hungary is being led by a right-wing populist government that seems to have a questionable commitment to democracy. The steps it has taken to end the independence of the judiciary and undermine the fairness of future of elections are ominous. However, the NYT’s efforts to construct an economic case against the government fall badly short of the mark.
The NYT tells us that:
“Hungary serves as a cautionary tale for those who argue that Greece could regain competitiveness by reintroducing its currency. The drachma would plunge against the euro, the theory goes, and allow Greek products to compete on price with countries like Turkey.
‘Whatever you win today, it shoots you back tomorrow,’ said Radovan Jelasity, chief of the Hungarian unit of Erste Bank, an Austrian institution.
….
In theory, the plunge of the currency should help the economy by making Hungarian products less expensive abroad and cutting the cost of labor relative to neighboring countries.
But economists and business people say the advantages of a weak currency are more than canceled out by negative factors, like soaring prices for imported fuel or imported components for Hungarian factories, not to mention higher payments on foreign currency loans.
….
But the economic climate is grim, with 10.7 percent unemployment and inflation of 4.3 percent even as the economy heads into recession.”
Okay, so the word is that things are really bad in Hungary with its 10.7 percent unemployment rate. Let’s see how that looks compared to the competition.
Source: OECD.
If we compare Hungary to the debt crisis countries that remain within the euro it is looking pretty good. The closest among this group is Portugal, with an unemployment rate of 13.2 percent. The others are considerably worse. (The unemployment rates given are all the most recent available, which differs somewhat across countries.)
The 4.3 percent inflation rate might be somewhat higher than is desired, but hardly a crisis. The United States had higher inflation rates many times in the last 50 years without serious economic disruptions. Furthermore, in the context of a heavily indebted population, inflation performs the valuable function of reducing the real value of debt. It is also a necessary part of the adjustment process for a country looking to regain competitiveness by reducing the value of its currency.
The moral of this story is that Hungary’s government may actually be led by bad guys, but it doesn’t seem that their policies have had terribly negative economic consequences thus far. That could change down the road, but it still appears that Hungary’s economy is doing relatively well.
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Joe Nocera’s column today argues that the financial industry may have a legitimate complaint when it says that the Dodd-Frank financial reform bill is too complicated. While the law is complicated in many areas, it is important to recognize that in many cases the industry was the source of the complication.
For example, there was a widely held view following the experience of AIG, which had issued hundreds of billions of dollars worth of credit default swaps outside of the purview of any regulator, that derivatives should be traded either on exchanges or through clearinghouses in order to increase transparency. Rules to this effect were included in Dodd-Frank.
However, the financial industry wanted to preserve the option to trade some derivatives over-the-counter. Therefore they included a series of exemptions in the legislation.
These exemptions are quite complicated. In contrast, a blanket requirement that derivatives had to be traded through a third party would be relatively simple. However it was the industry that added the complexity.
There are many other areas where a similar story could be told. That is why it is hypocritical for someone like J.P. Morgan CEO to complain about the complexity of the legislation.
Joe Nocera’s column today argues that the financial industry may have a legitimate complaint when it says that the Dodd-Frank financial reform bill is too complicated. While the law is complicated in many areas, it is important to recognize that in many cases the industry was the source of the complication.
For example, there was a widely held view following the experience of AIG, which had issued hundreds of billions of dollars worth of credit default swaps outside of the purview of any regulator, that derivatives should be traded either on exchanges or through clearinghouses in order to increase transparency. Rules to this effect were included in Dodd-Frank.
However, the financial industry wanted to preserve the option to trade some derivatives over-the-counter. Therefore they included a series of exemptions in the legislation.
These exemptions are quite complicated. In contrast, a blanket requirement that derivatives had to be traded through a third party would be relatively simple. However it was the industry that added the complexity.
There are many other areas where a similar story could be told. That is why it is hypocritical for someone like J.P. Morgan CEO to complain about the complexity of the legislation.
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The NYT reported on a new government regulation that will require drug companies to disclose payments they make to doctors. The reason is to expose potential conflicts of interest that could influence their research, public statements, and prescription writing.
It would be helpful to include some comment from economists on this new regulation. The sort of corruption associated with patent protection for prescription drugs is exactly what economics predicts would result from a system of government-granted monopolies that allow drug companies to sell their product at several thousand percent above the free market price.
The NYT reported on a new government regulation that will require drug companies to disclose payments they make to doctors. The reason is to expose potential conflicts of interest that could influence their research, public statements, and prescription writing.
It would be helpful to include some comment from economists on this new regulation. The sort of corruption associated with patent protection for prescription drugs is exactly what economics predicts would result from a system of government-granted monopolies that allow drug companies to sell their product at several thousand percent above the free market price.
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That’s the question that the Washington Post is implicitly raising for readers in its discussion of Iceland’s recovery from the recession. The piece notes that Iceland’s unemployment rate is 7.0 percent. It doesn’t make the comparison to other crisis-afflicted countries which have unemployment rates well in the double-digits, with Spain leading the pack at 22 percent.
In general the piece does paint a reasonably positive picture of Iceland’s economy, but it warns readers that:
“It’s tempting to conclude that this country of 318,000 people simply handled the crisis more adeptly than others, like a pick-your-own-ending book in which Icelanders chose correctly. There is a sliver of truth in that, but the full story is more complicated. That’s partly because the circumstances in Iceland are far different than in the United States and Europe, but also because such a simple explanation ignores the anger, the angst and the struggles that remain here, hidden barely beneath the surface.
“Iceland has weathered the worst of the financial crisis, but its society has yet to solve the identity crisis that followed in its wake.”
If Post readers were informed of the situation in the other crisis-afflicted countries, they would be able to put Iceland’s identity crisis in context.
That’s the question that the Washington Post is implicitly raising for readers in its discussion of Iceland’s recovery from the recession. The piece notes that Iceland’s unemployment rate is 7.0 percent. It doesn’t make the comparison to other crisis-afflicted countries which have unemployment rates well in the double-digits, with Spain leading the pack at 22 percent.
In general the piece does paint a reasonably positive picture of Iceland’s economy, but it warns readers that:
“It’s tempting to conclude that this country of 318,000 people simply handled the crisis more adeptly than others, like a pick-your-own-ending book in which Icelanders chose correctly. There is a sliver of truth in that, but the full story is more complicated. That’s partly because the circumstances in Iceland are far different than in the United States and Europe, but also because such a simple explanation ignores the anger, the angst and the struggles that remain here, hidden barely beneath the surface.
“Iceland has weathered the worst of the financial crisis, but its society has yet to solve the identity crisis that followed in its wake.”
If Post readers were informed of the situation in the other crisis-afflicted countries, they would be able to put Iceland’s identity crisis in context.
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Thomas Edsall does the classic caricature of the debate between liberals and conservatives telling readers:
“Looked at another way, the two sides are fighting over what the role of government in redistributing resources from the affluent to the needy should and shouldn’t be.”
This is absolutely not true. The government decides how to structure the market. Its decisions in this area swamp the impact of the redistributive policies that liberals and conservatives often fight over.
For example, patent protection for prescription drugs redistributes more than five times as much money to the holders of patent monopolies as the Bush tax cuts did for the richest two percent of the population. Similarly, the protectionist barriers that limit the competition that doctors, lawyers and other highly paid professionals face from foreign competition are comparable to giving them a welfare check that averages in the neighborhood of $100,000 a year.
There are many other ways in which government policy on structuring the market have enormous impact on the distribution of income. It is understandable that conservatives would like to divert the public’s attention from the ways in which the government structures the market to redistribute income upward. It is hard to understand why liberals would ever accept this “loser liberalism” framework which reduces the policy debate to the extent to which government should redistribute money from the winners in the market to the losers.
Thomas Edsall does the classic caricature of the debate between liberals and conservatives telling readers:
“Looked at another way, the two sides are fighting over what the role of government in redistributing resources from the affluent to the needy should and shouldn’t be.”
This is absolutely not true. The government decides how to structure the market. Its decisions in this area swamp the impact of the redistributive policies that liberals and conservatives often fight over.
For example, patent protection for prescription drugs redistributes more than five times as much money to the holders of patent monopolies as the Bush tax cuts did for the richest two percent of the population. Similarly, the protectionist barriers that limit the competition that doctors, lawyers and other highly paid professionals face from foreign competition are comparable to giving them a welfare check that averages in the neighborhood of $100,000 a year.
There are many other ways in which government policy on structuring the market have enormous impact on the distribution of income. It is understandable that conservatives would like to divert the public’s attention from the ways in which the government structures the market to redistribute income upward. It is hard to understand why liberals would ever accept this “loser liberalism” framework which reduces the policy debate to the extent to which government should redistribute money from the winners in the market to the losers.
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The Washington Post has consistently used both its news and opinion pages to try to convince readers that the main threat to their well-being and that of their children came from older people getting fat Social Security checks and generous Medicare benefits. This position has become harder to maintain, both because the economic collapse has made these benefits more important than ever to middle and lower income families and also because the fact that rich are making off with the bulk of the benefits of economic growth is becoming increasingly apparent. Still, the Post labors on.
Today, the paper featured a column by political consultant Bill Knapp arguing that we should all be happy because the economy has created jobs over the last 40 years and also because people at most points along the income distribution have seen some gains in income.
This is known as “the 12-year-olds are taller than 6-year-olds” argument in reference to the claim that poor nutrition might be stunting growth. The Bill Knapps of the world would get out their yardstick and measure a representative sample of 12-year-olds and do the same for 6-year-olds. After careful analysis of the data they would find that the 12-year-olds are taller. They would then write up their findings and get a column in the Washington Post telling readers that bad nutrition is not affecting growth.
Let’s skip the idiocy. Economies grow, they add jobs, and people get on average richer. This happens everywhere barring war, natural catastrophe, or incredible economic mismanagement. The issue is the rate at which they grow and that people see improvements in their living standards. And for most people in the United States, the improvements in living standards over the last three decades have been very modest. The reason is that most of the gains have gone to the richest one percent.
Remarkably, Knapp can’t even get his numbers right on how rich the one percent are. He tells us that:
” When you adjust for family size, the top 1 percent made, on average, $335,779 a year.”
Actually, that is a cutoff for entering the 1 percent, not the average for the group. (Math is hard.) The average income for families in the top 1 percent is over $1.3 million.
After flunking the arithmetic portion of the column, Knapp then turns to the Nigerian cell phone user argument. Knapp thinks that the average Nigerian in 2012 enjoys a higher standard of living than did the average American in 1990, because Nigerians in 2012 have a higher rate of cell phone usage.
Okay, he didn’t make this argument directly about Nigeria and the United States, but he did make this sort of argument about the “telling facts about our economic growth and future,” which amounted to a rundown on the numbers for the use of cell phones, computers, and broadband. Knapp didn’t even try to put these numbers in comparative terms, for example seeing how we measure up against Europe and Japan (not especially well).
So there you have it. Don’t worry about how much money Robert Rubin and Angelo Mozilo made off the housing bubble and the difficulty that you are having finding a job, paying for your health care or your kids’ education. Just be thankful that you have an iPhone.
The Washington Post has consistently used both its news and opinion pages to try to convince readers that the main threat to their well-being and that of their children came from older people getting fat Social Security checks and generous Medicare benefits. This position has become harder to maintain, both because the economic collapse has made these benefits more important than ever to middle and lower income families and also because the fact that rich are making off with the bulk of the benefits of economic growth is becoming increasingly apparent. Still, the Post labors on.
Today, the paper featured a column by political consultant Bill Knapp arguing that we should all be happy because the economy has created jobs over the last 40 years and also because people at most points along the income distribution have seen some gains in income.
This is known as “the 12-year-olds are taller than 6-year-olds” argument in reference to the claim that poor nutrition might be stunting growth. The Bill Knapps of the world would get out their yardstick and measure a representative sample of 12-year-olds and do the same for 6-year-olds. After careful analysis of the data they would find that the 12-year-olds are taller. They would then write up their findings and get a column in the Washington Post telling readers that bad nutrition is not affecting growth.
Let’s skip the idiocy. Economies grow, they add jobs, and people get on average richer. This happens everywhere barring war, natural catastrophe, or incredible economic mismanagement. The issue is the rate at which they grow and that people see improvements in their living standards. And for most people in the United States, the improvements in living standards over the last three decades have been very modest. The reason is that most of the gains have gone to the richest one percent.
Remarkably, Knapp can’t even get his numbers right on how rich the one percent are. He tells us that:
” When you adjust for family size, the top 1 percent made, on average, $335,779 a year.”
Actually, that is a cutoff for entering the 1 percent, not the average for the group. (Math is hard.) The average income for families in the top 1 percent is over $1.3 million.
After flunking the arithmetic portion of the column, Knapp then turns to the Nigerian cell phone user argument. Knapp thinks that the average Nigerian in 2012 enjoys a higher standard of living than did the average American in 1990, because Nigerians in 2012 have a higher rate of cell phone usage.
Okay, he didn’t make this argument directly about Nigeria and the United States, but he did make this sort of argument about the “telling facts about our economic growth and future,” which amounted to a rundown on the numbers for the use of cell phones, computers, and broadband. Knapp didn’t even try to put these numbers in comparative terms, for example seeing how we measure up against Europe and Japan (not especially well).
So there you have it. Don’t worry about how much money Robert Rubin and Angelo Mozilo made off the housing bubble and the difficulty that you are having finding a job, paying for your health care or your kids’ education. Just be thankful that you have an iPhone.
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The NYT had a mostly good piece discussing the gap in competitiveness between the northern and southern European countries that lays at the heart of the debt crisis in the euro zone. One item that would have been worth adding is the fact that European Central Bank is making any potential adjustment process far more difficult by not having more expansionary policies and by refusing to act as a lender of last resort.
Forcing heavily indebted countries to meet tough deficit targets, at the same time that their interest burdens are soaring, is creating an impossible situation. This is leading to a downward spiral in which austerity measures slow growth and raise deficits, which undermines confidence in the debt. This pushes up interest rates, which makes the deficits even larger.
The NYT had a mostly good piece discussing the gap in competitiveness between the northern and southern European countries that lays at the heart of the debt crisis in the euro zone. One item that would have been worth adding is the fact that European Central Bank is making any potential adjustment process far more difficult by not having more expansionary policies and by refusing to act as a lender of last resort.
Forcing heavily indebted countries to meet tough deficit targets, at the same time that their interest burdens are soaring, is creating an impossible situation. This is leading to a downward spiral in which austerity measures slow growth and raise deficits, which undermines confidence in the debt. This pushes up interest rates, which makes the deficits even larger.
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That might have been worth mentioning in an NYT piece that reported on people turning to smaller alternatives to Amazon as a matter of principle. Some of these people object to Amazon’s labor practices. Such people would likely appreciate the opportunity to buy from a unionized bookseller like Powell’s.
That might have been worth mentioning in an NYT piece that reported on people turning to smaller alternatives to Amazon as a matter of principle. Some of these people object to Amazon’s labor practices. Such people would likely appreciate the opportunity to buy from a unionized bookseller like Powell’s.
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