the ladybug and the lion

Happy Valentine's Day!

More here.

A Thought Provoking Correlation.

From Matthew Yglesias. I don't really agree with analysis, though. We wouldn't have more stuff if we had a bigger manufacturing sector, we'd just probably import less stuff (FYI, I don't support protectionism). There are also a lot other areas—including health related ones—that could use the money we spend on health care: like education and nutrition, both which are known to have positive effects on health.

Apple's Supply Chain.

Apple’s rise to power in our time directly paralleled the transformation of global manufacturing. As recently as 10 years ago Apple’s computers were assembled in the United States, but today they are built in southern China under appalling labor conditions. Apple, like the vast majority of the electronics industry, skirts labor laws by subcontracting all its manufacturing to companies like Foxconn, a firm made infamous for suicides at its plants, a worker dying after working a 34-hour shift, widespread beatings, and a willingness to do whatever it takes to meet high quotas set by tech companies like Apple.

Full article from the NYT.

There's also an episode of This American Life dedicated to this topic. It's worth listening to. 

The SEC.

It is not that they failed to uncover my fraud, it is the fact that for their entire existence they have spent their time and resources on the petty problems of small firms and refuse to deal with the obvious problems and outright violations of the large investment banks who had free reign to cause the eventual destruction of the financial markets. This mentality is still in evidence today.

—Bernie Madoff

Full story at the NYT.

Efficiency.

Every time you write a Captcha—you know, these things—you're helping to digitize books. The Ted talk by Luis von Ahn is here. It made me incredibly happy. 

He also launched a website, Duolingo, where people can sign up to learn a language by translating the web:

Taxing The One Percent.

When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

—Nick Hannuer at Bloomberg.

Econometrics.

I was in high school at the time of the oil price crisis of the 1970s and I asked my mom, “What causes inflation?” She didn’t know. I think it was from then on that I started wondering about money and inflation and what caused it – how the Fed was involved et cetera. When I got to college I took economics and started answering those questions. Then when I got to graduate school I learned theories about why it happened, and I got interested in how you test those theories. How do you know if this theory is right or that theory is right? How can we figure it out? That’s where econometrics comes in. Time-series econometrics was a set of tools I could use to answer that longstanding question I had about how the Federal Reserve impacts the economy, how it creates inflation and so on.

Full interview with Mark Thoma at FiveBooks.

Negative Real Interest Rates.

If we rely too heavily on negative real interest rates to spur the economic activity, my prediction is that we will see a lot of false dawns and social strife. Savers of modest means are harmed and outraged by low market interest rates and use the political system to try to raise them. Regardless of macro models or market outcomes, we have a cultural bias against negative real rates. We hold prudence dearer than profligacy. We don’t work to teach our children to spend their allowances. We work to teach them to save. More people are willing to spend incautiously than are able to husband savings carefully. If we were to cast away the norm that saving is praiseworthy and spending decadent, rather than getting contingent, market-price-regulated spending/savings behavior, we might end up with a culture incapable of saving. We want most people to face a positive real interest rate, not because that is the price that equilibrates a market, but because positive real interest rates reward behavior we wish to uphold as a virtuous.

Full post by Steve Randy Waldman at interfluidity.

Quotes I Like.

The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.

—Joan Robinson

Sumner Advocating NGDP Targeting.

Video at the WSJ.