ZEDEs in Honduras are being promoted by some libertarian intellectuals and “activists” as perhaps “the freest cities in the world” despite the fact that the zones will shred property rights.

There was much celebration in the business press over the better than expected third quarter GDP growth. (See, for example, this WaPo piece touting the U.S. recovery as the "envy of the world.") Many were quick to say that the 3.5 percent growth for the quarter implies that the economy is now on a higher growth path, possibly in excess of 3.0 percent. Mr. Arithmetic begs to differ.

First, if we can look all the way back to the beginning of 2014 we see that the average growth for the first three quarters so far this year is just 2.0 percent, the same as the average for the prior three years. And, just to remind folks, we had a really bad recession back in 2008-2009. This has left us at a level of output way below the economy's potential. To make up the ground lost the economy has to be growing faster than its 2.2-2.4 percent potential growth rate. At the 2.0 percent growth rate we have seen so far in 2014, we are making up none of the lost ground.

The second point that should have featured prominently in all discussion of the GDP report is that the major drivers of growth in the quarter, net exports and military spending, will almost certainly not be adding to growth in the same way in future quarters and will most likely be in part reversed. In other words, the strong growth in these components is reason for believing future growth will be weaker, not stronger.

Net exports added 1.32 percentage points to growth in the quarter, while military spending added 0.66 percentage points. If the contribution of these sectors to growth had been zero, GDP growth would have been 1.5 percent rather than 3.5 percent.

If the folks who expound on the economy had access to data from the Commerce Department they would know that both of these sectors are very erratic, sharp movements in either direction tend to go in the other direction in the following quarter. (There is a logic to this. Imagine that the true path for both sectors is a constant growth path, but we have random error in either direction. If our error is on the high side one quarter, then if we get an accurate measure the next quarter, it would imply a decline from the erroneously measured number the previous quarter.)

The last time next exports added more than a percentage point to growth was the fourth quarter of 2013 when it added 1.08 percentage points. The following quarter it subtracted 1.66 percentage points from growth. Net exports added 1.12 percentage points to growth in fourth quarter of 2010. It subtracted 0.24 percentage points from growth in the following quarter.

Mark Weisbrot
24 de outubro de 2014, Folha De S. Paulo

October 30, 2014

The Washington Post has long used both its opinion and its news pages to push for cuts to Social Security. It has regularly exaggerated the problems with the program, for example once running a major front page story over the fact that 0.006 percent of Social Security benefits are paid out to dead people.

In keeping with this practice, the Post began a feature polling readers on how they would like to see the projected shortfall addressed with an article headlined, "Social Security Is a Mess. How to Fix It." Today the paper is reporting on some of the results. The piece begins:

"One thing was clear from the first month’s responses to our question about how to fix Social Security: Readers want something to get done.

"Only 2 percent of responses were in favor of 'doing nothing,' which would mean that after 2033 –when the Social Security trust fund is expected to be depleted– retirement benefits would be cut by 23 percent. And only 3 percent of responses said it would be a good idea to put off raising taxes until after the trust fund is depleted, at which point a steep tax hike would be needed to pay benefits [emphasis added]."

While the fact that only 2 percent of responses are in favor of "doing nothing" might sound compelling, there is an obvious problem with the sample. The overwhelming majority of Washington Post readers did not respond to the WaPo piece. The 2 percent in favor of doing nothing represent 2 percent of a tiny minority of Washington Post readers who are themselves far from representative of the population as a whole. Furthermore, the bias is compounded by the fact that if readers do not see an urgency to address the projected shortfall in Social Security they are almost certainly less likely to answer the paper's poll on the topic.

In effect, what the Post is telling us is that only 2 percent of their readers who took the time to answer its survey on Social Security felt that nothing should be done. Most of us might have guessed something like that without seeing the poll result.

Dean Baker
October 30, 2014, Policy Network

Frank Bruni's column complaining about teachers and teachers unions undoubtedly has millions asking, "is our pundits learning?" The proximate cause is a soon to be published book by Joel Klein, the former New York City school chancellor.

It seems that the book repeats most of the old complaints of school "reformers." The big problem with our schools is that we have bad teachers and that unions won't let us get rid of them. Bruni tells readers:

"I was most struck, though, by what he observes about teachers and teaching.

"Because of union contracts and tenure protections in place when he began the job, it was 'virtually impossible to remove a teacher charged with incompetence,' he writes. Firing a teacher 'took an average of almost two and a half years and cost the city over $300,000.'

"And the city, like the rest of the country, wasn’t (and still isn’t) managing to lure enough of the best and brightest college graduates into classrooms. 'In the 1990s, college graduates who became elementary-school teachers in America averaged below 1,000 points, out of a total of 1,600, on the math and verbal Scholastic Aptitude Tests,” he writes. In New York, he notes, “the citywide average for all teachers was about 970.'"

So the problem with NYC's schools is that unions make it "virtually impossible" to fire bad teachers? If this is the big problem with our schools then we should expect places like Mississippi, Arkansas, and Texas to be the models of good education since teachers unions are relatively rare and certainly much less powerful than in New York City. Perhaps Klein has a chapter touting the success of public education in union-free areas, but I doubt he has much data to support such claims.

Of course if we look internationally, the best education outcomes on standardized tests are typically found in countries like Finland, where unionization of teachers is close to universal. One of the factors that might explain their success in education relative to the United States is that teachers are paid more relative to other professions. The ratio between the average pay of a  doctor and a teacher in these countries is something closer to 2 to 1 rather than the 5 to 1 in the United States. And, they don't have a bloated financial sector where good performers can easily make 10-20 times the pay of an average teacher.

A post at Wonkblog earlier this month noted that a recent analysis by the Organization for Economic Cooperation and Development (OECD) of regional well-being across its member countries found that the U.S. South was “the worst place to live in the United

Dean Baker
October 28, 2014, The Hankyoreh

Dean Baker
October 28, 2014, Al Jazeera America

12 April 2007, Mark Weisbrot
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Mark Weisbrot
The Guardian, 20 marzo 2014
Colsi la prima mela (blog), 22 marzo 2014
La Jornada, 30 marzo 2014