04
May
12

Adventures in confirmation bias

First, David Henderson finds a paper:

California has become a heavily Democratic state. The majority Democrats in the legislature and the Democratic governor are pursuing highly wasteful projects: a “high-speed” rail that probably won’t be high-speed but will surely be high-cost, and higher marginal income tax rates (already among the highest in the United States) on the highest-income people, to name two. They don’t seem to be restrained by the worry that many of the most-productive people will leave and are leaving the state. You can attribute this simply to ideology, and I’m sure that’s an element. But I also think one of the Democrats’ goals is to reduce the population of potential anti-Democrat voters so that their majority is assured.

Will that hurt many of the people who vote for them? Sure. But we need to distinguish between the fortunes of those who vote Democrat and the fortunes of the Democratic politicians. The California state government pays legislators pretty well in pay and perks when you consider the opportunity costs of many of them. And the state government is larded with high-paying sinecures for those few who ever lose an election or get redistricted out.

See also: Ontario.

Next, Alex Tabarrok finds a paper:

In the lifecycle model, the young, because they have longer remaining lifespans than the old, have much lower propensities to consume out of their remaining lifetime resources. This prediction is strongly confirmed for the US by Gokhale et al (1996).

Hence, in taking from young savers and giving to old spenders, which Uncle Sam has spent six decades doing on a massive scale, the lifecycle model predicts a major decline in US net national saving associated with a major rise in the absolute and relative consumption of the elderly. This is precisely what the data show.

In 1965, the US net national saving was 15.6% of net national income. Last year, it was just 0.9%. And, according to Gokhale et al (1996) and Lee and Mason (2012), the secular demise in US saving has coincided with a spectacular rise in the consumption of older Americans relative to that of younger Americans.

As Feldstein and Horioka (1980) document, US net domestic saving tracks US net national saving. Hence, postwar intergenerational redistribution has not only lowered net national saving; it has also reduced net domestic investment, from 14.0% of national income in 1965 to just 3.6% in 2011. This decline in the rate of net domestic investment is, no doubt, playing a major role in the slow growth in US wages. Indeed, the level of private-sector average real earnings per hour, exclusive of fringe benefits, is lower today than it was 40 years ago.

We call this America’s “fiscal child abuse”. If it continues, it will no doubt shortly drive the national saving rate, which was negative 1.2% in 2009, into permanent negative territory and further reduce net domestic investment and prospects for real wage growth.

Generational-warfare agitprop is one of my guilty pleasures.

Finally, Virginia Postrel:

Adam Minter comments:

One of the themes that I’m hitting very hard in my book is that recycling is a fundamentally economic activity. Nobody sorts somebody else’s garbage for free. Most of the developing world understands that, while the developed world – the EU and US, in particular – seems intent on seeing recycling as a moral activity (and a means of tribal identity) above all else. Unfortunately, when people view waste and recycling in moral terms, rather than economic ones, they have an unerring tendency to demand local governments set up recycling programs that are destined to lose money from the get-go (like curbside recycling in spread-out Houston). Meanwhile, the folks who know how to make money from recycling, like scrap yards, are denigrated and often subjected to totally unreasonable barriers to entry (and exit).

I love that paragraph.  So.  Much.

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anarchocapitalist agitprop

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