Friday, February 29, 2008

Hillary's 3AM Ad

What's the difference between Hillary's campaign and Ronald Reagan's? Apparently it's just two decades and two time zones. Here's Hillary's new ad:

...and now three hours later, here's Ronald Reagan's ad:

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Thursday, February 28, 2008

Farm Subsidies, why do we have them?

A world bank study in 2002 concluded that trade distortions in agriculture cost the global economy about 587 billion U.S. dollars every year. That's around $100 a person, or about 1.9% of world GDP. It doesn't sound like a lot, and it's not. Equivalent to getting one years worth of economic growth for free.

The story changes when you figure out who is getting, and who is losing. Western farmers would lose, but every nation would benefit as a whole. Poor nations would benefit the most, and when you're talking about poor nations, $100 a person goes a very long way.

Wednesday, February 27, 2008

We got ourself a budget

It's that time of year again. Out present government has come out with a budget. The only major highlight is the $5,000 a year tax shelter for savings. Other than that there are a bunch of little payoffs to interest groups hardworking Canadians. Here are some of the highlights:

  • 250 million in carbon sequestration research
  • 400 million for new police
  • establishment of a new crown corporation for EI benefits.
  • funding to lower immigration wait times
  • increased funding for scholarships
  • elimination of the low emissions car rebate
  • bailout money for automotive companies
A subsidy for automotive companies....I think it would be better to have Tom Paxton explain this one.

Tuesday, February 26, 2008

Gas Tax not big enough

Here's the trend in oil prices:

And here is U.S. the carbon emissions trend:

What's my point? If you want real reductions in carbon emissions you're going to have to create a carbon tax much greater than what B.C. has planned. People just don't respond to price changes enough for a 11 cent raise in gas prices in the next decade to make any difference. The day after the government came out with this plan gas prices shot up 6 cents, all on their own. The plan may be a step in the right direction, but it's a pretty small step.

Monday, February 25, 2008

More on Carbon Taxes

The unvieling of BC's carbon tax plan last week has been echoing through the blogosphere. Here's Tyler Cowen:

I haven't figured this out yet, but I'm experiencing ongoing worries. Let me try to articulate them, maybe one of you can cure me. One story I hear is that the new, carbon-friendly energy technology will be subject to decreasing costs, or alternatively increasing returns to scale. In other words, there are high start-up costs, but once it is underway it will be pretty cheap and lots of countries will adopt it. So: 1) the U.S. levies a carbon tax, 2) the U.S. incurs the start-up costs and invents or improves the decreasing cost technology, and 3) lots of countries make the switch. Voila!

It was reading about the new $2500 car, from India, that got me worried. Let's say the new technology is more carbon-friendly than what we do now, but still generates some carbon. (That sounds reasonable, no?) The new energy technology is really cheap, so lots more people -- most of all in China and India and Africa -- enter carbon-using sectors of the economy. Even if the new technology is three times as carbon-efficient, if the world as a whole uses three times more energy, carbon emissions do not go down. The basic problem is the combination of low costs and many people standing on the verge of the carbon-using sector of the economy.

Get the full version here

--I haven't heard the argument that new technology could increase emissions in developing countries before. For me this magnifies that need for a strong international agreement. I've said before that nations have came together when faced with a common threat, and that we could do it again. China and India have incentives to implement environmental regulations as their dense countries become more polluted. The EU and North America have reached (I think) levels where it is politically acceptable for the government to implement real reforms.

Despite this, we don't seem close to getting an EFFECTIVE international agreement. A bummer. It seems we are heading in the direction though. Just think of where the debate about climate change was ten years ago. I think we have reason to be optimistic about the next ten years.

Thursday, February 21, 2008

StatsCan report on economic conditions

Here is it. You're not going to learn anything new if you've been following the economic news (who doesn't?), but it's a good summary nonetheless:

While the economy continued to expand in October and November, there were numerous signs in the leading indicators of an impending slowdown. Auto output fell nearly one-third in December; together with the spin-off effects on other industries, this will shave 0.2 percentage points off of gross domestic product (GDP), according to simulations using Input/Output tables. Severe winter weather curtailed business activity, notably housing starts and total hours worked. Fourth-quarter economic growth was anemic in the US, reflecting a deepening slump in housing and a drop in inventories. Finally, stock markets around the world tumbled early in 2008.

Several factors make the assessment of current economic conditions the most complex in years. The multiplying signs of a cyclical slowdown in North America are occurring without many of the imbalances typical of a cyclical peak, notably as inflation and inventories remain under control. The bursting of the bubble in the US housing market has already sent starts to near their lowest level since 1970, and triggered much of the turmoil in global financial markets since mid-August that has raised some interest rates even as central banks lowered their rates. As well, the surge of the Canadian dollar to parity with the US dollar has depressed the prices and earnings of many exporters, although output volume has remained steady.

However, many of the indicators of cyclical slowdowns in the past may be less reliable in the current environment. GDP growth in recent years has been less volatile because of better inventory management. In the US, housing and autos contracted over the last two years without precipitating a cyclical slowdown in real GDP—a development without precedent in recent decades. By comparison, Canada's housing market and auto sales remained strong. Finally, the stock market fell precipitously in 1987, 1998 and 2001, without a subsequent recession in Canada.

Other cyclical indicators remained robust. Commodity prices stayed high, even rising in January despite weaker growth in the US. Real incomes of households have been bolstered by steady job growth and rising real wages into January. As well, governments and corporations have large financial surpluses to absorb unexpected shortfalls in incomes. And, of course, the Federal Reserve Board has moved rapidly to lower interest rates, culminating in a two-step drop of 125 basis points in January that helped stabilize financial markets.

Get the full version here

Wednesday, February 20, 2008

Every lefty should read this

Castro resigned his power, here's Brad DeLong:

Ah. The Fidel Castro fans are out in force, I see:

Bloix: Let's do a thought experiment: Imagine that the year is 1960 and that you are a soul about to be inspirited into a foetus about to be born. God gives you a choice: you may become the son or daughter of a poor rural woman in either Cuba, Guatemala, Haiti, or the Dominican Republic. What would you choose?

Reply #1: That is the wrong comparison: Cuba in 1960 is like Costa Rica, northern Mexico, Puerto Rico, or Portugal. The fact that you today think of Cuba as to be plaed in the same basket as Guatemala, Haiti, or the Dominican Republic is Castro's doing, and is worth thinking about. The normal course of development should have given Cuba today the wealth, freedom, and health that Costa Rica, northern Mexico, Puerto Rico, and Portugal possess. It has only the health--and perhaps not even that. The only excuse for breaking eggs is if you manage to make a tasty omelette.

prov: Too bad for an academic like you using such a language. you clearly depict the other side of the communist coin that of brutal capitalism, of dictatorships in Latin America etc.. Too bad taking an extreme position in an issue that must always be addressed in a more serious way. Too bad that you used Rosa's words to support you anti communist feelings

Reply #2: So it's forbidden to use Rosa Luxemburg's words to support her anti-Leninist feelings?

Ken Houghton: Model that one up and show me the results. Your major local trading partner when you were run by a Mob-backed dictator unilaterally refuses to buy your goods, or to import anything to you...

Reply #3: You know, there is something very wrong with an argument that goes (a) Leninist centrally-planned communism is necessary because market exchange is inherently exploitative an destructive, and (b) it's not Castro's fault Cuba's economy is in the toilet--America won't trade with it. That simply does not compute.

dsquared: I'm not getting this Brad. At precisely which point after the Cuban revolution would it have made sense for Cuba to decide to switch allegiances, throw itself open to American capitalism and step onto the development path of Honduras, Haiti, the Dominican Republic and other Caribbean and Central American quasi-colonies? Or is the idea that Castro should have tried to start a revolution in a banana republic in the backyard of a superpower without any support from the other superpower? Or that all things considered, life under Batista wasn't so bad and the Cubans ought to have toughed it out for another forty years?...

Reply #4: Stepping, at any point, onto a eurocommunist development path would have been fine. Stepping back onto the development path Cuba had been on--Costa Rica, Puerto Rico, etc.--would have been even better. Stepping onto the southern European Italian, Portuguese, or post-Franco Spanish development path would have really good. But any of those would have rapidly meant an end to the dictatorship of the Castro brothers.

One Salient Oversight: Was Castro good or bad? He was both. Forget for a moment the brutality of his regime, especially in the early days. Instead focus upon what the nation has achieved since he took power. The United Nations Human Development Index has Cuba at a respectable 0.838 - a number higher than Mexico and can be defined as a nation with "High Human Development". If this increase in standards of living continues for another 10-20 years, Cuba will be considered a "First World Nation". I'm not going to defend Castro's sins. He did, however, prove to the world that Communism could improve the living standards of its citizens

See Reply #1

Jessica: Cuba is certainly something there are intensely felt emotions about on all sides. I would not put Castro in a class with Stalin at all. Nor with Mother Theresa. Best comparisons would be Muhammed Ali of 19th century Egypt. Some elements of Menachim Begin/Ariel Sharon.... Castro's choice for the Soviet economic model turned out very poorly. But this was not at all obvious back when he was making that choice (and making it under severe pressure). Back then, North Korea was economically in far better shape than South Korea. (I know it's hard to believe, but that was the world in which Castro made his choices.) And once that die was cast, I don't see where Castro ever had a chance to switch directions without risking not only US invasion, but vindictive and brutal US invasion...

Reply #5: Muhammed Ali of Egypt did not know that democracy was possible, and so cannot be blamed for not instituting it. Menachim Begin and Ariel Sharon held elections. History will judge Fidel Castro much more harshly than them, I think--most of all because he made the choice of political strategy, he did not let the people of Cuba make that choice. As to when Fidel could have switched to a eurocommunist or social-democratic model without immediately losing his head--well, 1968 with Dubcek, or 1975 with Sadat, or anytime in the Carter administration, certainly.

Neal: Freedom and elections are fine sentiments for the comfortable--as long as you have enough to eat.

No reponse seems possible

James Killus: The last time I calculated the difference between infant mortality in Cuba vs the average in Latin America, it amounted to something like 3,000 per year infants that did not die in Cuba, but would have had they been born elsewhere in Latin America. Apparently the "stupidest man alive" contender thinks that this amounts to something. Apparently, smarter men do not believe it does.

See Reply #1

Here's the link

Tuesday, February 19, 2008


Thousands of people in lower BC will wait to see if the clouds will uncover the moon long enough for us to see the earth cover the moon....what is the point of this activity again?

This is what I get for jumping the gun

A couple days ago I speculated that the BC government would not offset their new carbon tax with a new tax cut. They did. That being said, I don't think that this take will have an earth shattering effect. British Columbia has very clean electricity (hydro) and heating (natural gas). Therefore, most of the reduction will have to come out of transportation, and 7.24 cents a litre isn't going to get us there. If BC meets their stated fantasy goal of 33 percent carbon emissions reduction by 2020, it will be because of technologies that created outside of BC.

Monday, February 18, 2008

Pig War

I am puzzled that more Canadians don't know the history of the pig war. Especially residents of Vancouver and Victoria, considering it happened right in their back yard. Anyway, everyone should know the history of what amounted to the 19th century's version of the Cuban missile crises. So check it out

Sunday, February 17, 2008

Provincial Carbon Taxes

The BC Liberal government is expected to propose a carbon tax sometime this week. I have to admit, my views on this topic have shifted a bit recently. The burden of a carbon tax falls mostly onto the poor, and BC's plan will probably not include tax cuts for low-income residents to offset this increase. British Columbia is also very limited in its ability to effect global warming. Even a huge reduction in carbon emissions would have no effect on global warming.

I am not advocating free-riding, I believe that BC and the federal government should be doing all they can to make a binding international agreement. Such an agreement is not impossible, nations have bound together to solve problems before, and we could do it again. However, I fear that all BC's plan will do is place burden on a lot of people without delivering any benefit.

Thursday, February 14, 2008

Definition of Media Spin....

I don't know if this was done out of ignorance or opportunity, but it's really funny. An article in the economist this week said this:

Abandoned and trampled upon: that has been the story of Mrs Clinton's week. Since her successes on Super Tuesday, Barack Obama has won eight primaries and caucuses by wide—sometimes astonishing—margins. He won the Washington state caucus by 37 points. In Garfield County 100% of voters plumped for him. He won Maine by 19 points, Louisiana by 21 and Nebraska by 36.

WOW, he won Garfield County by 100%! That's Impressive! Not really, if they had bothered to check the map, they would have seen that only one person voted in Garfield county. Makes the accomplishment seem a bit less impressive doesn't it?

I've heard professors complain about their salaries

...have you? A report from statscan reports that professors at the University of Victoria make an average of $110,000. OUCH. I'm not saying that professors are overpaid. I can imagine that professors are probably poorly paid with respect to their average contribution to society. I just want them to stop complaining.

P.S. I had a sociology professor first year that spent the whole course talking about the evils of inequality. She complained about her salary more than any other professor I've had....yeah.

Tuesday, February 12, 2008

What's a good election system?

You hear a lot of talk about the possibility of the U.S. presidency being held by just two families for 24 years. People say that this makes the U.S. seem un-democratic. I would agree that having two families in power for that long is not a good thing. However, I think the U.S. primary system makes politics open to outsiders than most democracies.

When you think of governmental systems like in Canada and the U.K, power is usually kept within a small group of people for most of a generation. Gordon Brown and Tony Blair have been political partners for a long time. Going from one to the other is a lot like transferring power to a son or brother. Trudeau was in power for a good part of a generation.

And things aren't looking that great for Hillary now days are they?

Monday, February 11, 2008

HOT lanes a viable answer to traffic congestion

HOT lanes stands for Hight Occupancy Toll and they are the best solution to traffic congestion that we have going (pardon the pun). The concept basically allows people to pay to use the carpool lane. This allows for the existing road system to swallow more traffic and allows people an option to get through congested roads.

The criticism that HOT lanes are just a perk for the rich (Lexus lanes) doesn't hold much water. The experience has been that everyone uses the lanes sometime. If you are late for work or have an appointment these lanes will seem like a bargain, no matter what your income. Increased revenue also to the government means lower taxes or better public works for everyone.

If you ask somebody in transportation they will tell you that HOT lanes are a great idea but just not politically feasible. Lets start changing that.

Sunday, February 10, 2008

Who are the better candidates?

I've been hearing that I need to improve my economic street cred by using more calculations in my blog. So try to control your excitement as I whip out an application of bayes theorem.

Intrade lists the probability each candidate becoming president, as well as winning their party's nomination. From this you can derive that probability of a candidate winning given they get the nomination:


There you go. There's no big distinction between Clinton and Obama. All the other candidates have probabilities of winning the presidency so low that the calculation isn't worth much. Notice how I used the geeky mathematical form to show the probabilities....street cred.

Friday, February 8, 2008

Canadians less active

I new report from statscan reports that fewer Canadians are playing hockey sports. The report cites that there is just more to do now, then there was ten or twenty years ago. I would also suspect that increased obesity rates are also to blame. Of course, you could say that increased obesity rates are caused by the fact that people are playing less sports....because there's more to do then there was ten or twenty years ago. These things are hard to figure out.

Some of you may be alarmed by the part of the report showing that soccer is the most popular sport among kids under 15. Worry not. I would attribute soccer's popularity to the fact that it is inexpensive and easy for kids to learn. Hockey isn't going anywhere.

Thursday, February 7, 2008

Things only an economist would say

It has, this year, been an embarrassment of riches on the Democratic side--a half-dozen or so candidates any one of whom would have a reasonable shot of being in the top 20% of American presidents if elected, compared to zero on the Republican side.-Brad Delong

-Check it out
This is the first time I've heard confidence intervals applied to politics. Running the numbers, there has been 43 presidents. So the next one would make 44, (44*20%)=8.8. I'm going to round this off and assume that he means they have a shot at being one of the top nine presidents of all time. Glad that's cleared up.

Brad Delong explains his vote for Obama because the philosophical differences between the two democrats are minor, but Obama is better at making speeches. I think he is missing an issue. Obama is also the better candidate to restore America's image. This is very closely related to Obama's speech making ability. The media focuses entirely on personal issues during the American election.

Obama has seemed to put the America haters on the defensive. They fall back on the line that they like Obama, but there's no way that America could elect a black president. This isn't supported by the evidence. Message to Americans reading this: PROVE THEM WRONG!

Wednesday, February 6, 2008

Hire Canadians first law

Universities in Canada have regulations mandating that you can only hire foreign professors once you "close the Canadian market." This may end up actually working against Canadian professors. How? Suppose a University has five "top tier" candidates for a job. Three foreign and two Canadian. You lose the first two interviews because they are highly qualified and are lured away by other universities. Now if you want to go after the other three highly qualified candidates you have to "close the Canadian market," insuring that the position will be given to a foreigner.

I'll concede that there are other stories you can tell where the law works in the favor of hiring the Canadian worker. However, when you place restrictions on hiring practices for Canadian universities, you hurt students too. Given these two factors, I doubt that this law is something worth continuation.

-Credit Cornelis Van Kooten for bringing this to my attention.

I'd like to give Microsoft some credit

...but they make it so hard sometime.
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Tuesday, February 5, 2008

Worst-case scenario for trade

In a speech today, Nicolas Sarkozy said that Bombardier was welcome to bid in contracts for trains in France if Canada extended the same courtesy to Alstom. In order to analyze the effects this would have, lets consider what most people think to be the worst-case scenario. This being where Alstom is able to drive Bombardier's trains completely out of the market, leaving their workers unemployed. However, these workers wouldn't just sit around. They would relocate to firms with more innovative ideas and resources; increasing Canada's GDP along the way. Meanwhile, we would be able to utilize better trains at lower cost in Canada. Does it sounds like the worst case scenario is better than what we have now? That's because it is. Free trade is good for both Canada and France.

Recession in Journalistic Honesty

A couple days ago I wrote that people seemed to be jumping the gun in declaring a U.S. recession. Today BC Local news wrote this:

"Although market participants are now a bit more optimistic that the U.S. will come out of the current recession in fairly short order – maybe as short as three to six months – the damage currently being done will have widespread impacts on the U.S."

Current Recession? It is true the U.S. MIGHT be in a recession, but that is speculative and we have no data to support it. Try imagining a world where journalists are allowed to report any uncertainties as facts...pretty scary. We shouldn't let something like this go.

Monday, February 4, 2008

Should Microsoft and Yahoo be able to get together?

First of all, if the merger between Microsoft and Yahoo is defeated (I'm assuming Yahoo will take the bid), it should be due to CONSUMER exploitation. Not because Google is complaining about it. Google claims that a merger would allow Microsoft to exploit consumer positions in E-mail and instant messaging. This doesn't pass my sniff test. Instant messaging is already incompatible with competitors, so a merger won't change anything there. I doubt they would start charging for instant messaging or e-mail because they are both fairly old technologies. This merger would only give Microsoft large positions in decaying "web 1.0" technology. Google has won "Web 2.o." I think this deal will have to do more with the battle for "web 3.0" than monopolization.

Saturday, February 2, 2008

How about those Canada only contracts

Many people support the idea of "Canada only" contracts for public works because they believe that it will increase Canadian living standards by keeping the profits at home. This is not the case. Yes getting the exclusive right to bid on a government contract does enrich the company who gets the contract. However, the workers and resources that it takes to complete these projects are drawn from other sectors, this in turn leads to lower productivity. Lower productivity leads to a weaker economy and lower living standards. Sadly, Canada only contracts are a political plow to play on peoples patriotism, while politicians enrich those who contribute to their campaigns.

Friday, February 1, 2008

Dominic D'Alessandro is my hero

...isn't he yours? He is the chief executive of Manulife Financial, an insurance company. The conference board of Canada recently released a report showing foreign takeover of firms raise Canadian living standards. In response, Mr. D'Alessandro gives some of the funniest arguments against foreign takeovers I've heard in a while:

"There's something wrong when you have too few leaders. Every country needs its heroes, and I think Canadians are poorly served by the point of view that says 'It doesn't matter'"

--I think that Canadians would want their heroes to be people who DON'T use the government as a hammer to lower citizens living standards, while enriching their own paycheck. The next quote is even better:
"there's a total absence of any passion, all of it is numbers"


Here's the link to the original Reuters article
-Credit to David Scoones for bringing this article up in class