More Problems With Ethanol

See Big Ethanol Finally Loses: The political fuel is losing support as its costs and harm grow. WSJ editorial from 11-17-13. Excerpts:

"For years the biofuels lobby has boasted that its product was a green alternative to emissions from oil and gas. But a growing body of scientific evidence is showing that ethanol consumes so much energy and fertilizer, and requires planting so much marginal cropland, that the impact on air quality is at best neutral and on water quality may be negative.

A report released earlier this year by the National Research Council concluded: "Although it may seem obvious that subsidizing biofuels should reduce CO2 emissions because they rely on renewable resources rather than fossil fuels, many studies we reviewed found the opposite." Environmental outfits such as the Environmental Working Group and the Sierra Club now oppose ethanol subsidies.

The EPA reduction is a small win for consumers. Since 1978 when the first "gasohol" subsidies were enacted, renewable fuel production tax credits have drained the Treasury of almost $40 billion. The tax subsidies expired recently, but consumers have still been forced to dole out billions at the pump because of the renewable fuel standards.

About 40% of corn production is now used not for food or livestock feed, but for fuel. This has raised the price of corn, and a 2009 study by the Congressional Budget Office found that in some years ethanol has raised retail food prices by 5% to 10% for everything from corn flakes to ground beef."

"This year's 14 billion gallon mandate required refiners such as Marathon and Valero to pay for hundreds of millions of gallons of renewable energy "credits" to avoid busting through the E10 blending wall. Few cars on the road are equipped to handle higher ethanol blends that can end up doing harm to engines."

Donald J. Boudreaux Vs. Alan Blinder's On ObamaCare

See ObamaCare: Much More Than Merely a Botched Launch: Mr. Blinder judges ObamaCare by its stated goals. He simply assumes that ObamaCare's results will eventually reflect its designers' intentions. From the WSJ 11-18-13.

"Reading economist Alan Blinder's apologia for ObamaCare makes this economist sad ("Despite a Botched Rollout, the Health-Care Law Is Worth It," op-ed, Nov. 12).

In the 18th century, economics began as a discipline when Adam Smith explained that intentions are not results, and that the complexity of a real-world economy nearly always overwhelms and confounds the hubris-intoxicated "man of system" who aims to improve matters through government intervention.

More than 200 years later, Mr. Blinder judges ObamaCare by its stated goals. He simply assumes that ObamaCare's results will eventually reflect its designers' intentions. And in assuring your readers that this happy outcome will indeed come to pass, Mr. Blinder gives no hint of the mature, Smithian awareness that "men of system" are never up to the task of successfully engineering a sector of the economy as large and as complex as health care.

Prof. Donald J. Boudreaux
George Mason University
Fairfax, Va."

More On Uncertainty And The Job Market

See No Wonder the Jobs Gap Is Getting Wider: As a result of fiscal policy, employers are hesitant to hire workers generally, and low-wage workers in particular. Letter to the WSJ, 11-19-13:

"In explaining the apparent bifurcated labor market in which low-wage individuals have struggled in recent years while middle- and high-wage workers have performed better, your story states that "economists aren't sure what is behind the trend, or how long it will continue" ("Job Gap Widens in Uneven Recovery," Nov. 12, page one).

While economists might not be sure about what is happening, fiscal policy is the most likely culprit. The plethora of uncertainties regarding health-insurance benefits, including penalties for hiring full-time workers and other regulations, have created an economic environment in which employers don't know what wage they will be paying to hire a worker. The result is that employers are hesitant to hire workers generally and low-wage workers in particular.

Kevin E. Cahill, Ph.D.
Research Economist
Sloan Center on Aging & Work at Boston College
Chestnut Hill, Mass."

An inconvenient fact: The frequency of violent tornadoes like the ones in the Midwest has been declining, not increasing

Great post from economist Mark Perry

Following a series of tornadoes in 2011, including an especially violent one (category EF5) that hit Joplin, Missouri and killed 158 people, many climate alarmists quickly drew a connection between the string of tornadoes and global warming climate change (or to their keep their options open, some in the green movement now prefer the term “violent weather“). For example, see this Washington Post op-ed by Bill McKibben (founder of the global climate campaign 350.org and a distinguished scholar at Middlebury College) from May 23, 2011 (“A link between climate change and Joplin tornadoes? Never!“) that generated more than 1,000 comments. Earlier this year, after tornadoes killed more than 20 people in Oklahoma, climate alarmists were again quick to blame global warming climate change violent weather, see articles here at The Huffington Post and here at Fox News, which quoted Senator Barbara Boxer from the floor of the Senate connecting the Oklahoma tornado to climate change:

This is climate change. We were warned about extreme weather, not just hot weather but extreme weather. … When I had my hearings … scientists all agreed that what we’d start to see was extreme weather.  … It’s going to get hot. But you’re also going to see snow in the summer in some places. You’re going have terrible storms. You’re going to have tornadoes.

Now the climate alarmists, like former United Nations adviser and economist Jeffrey Sachs (now director of the Earth Institute at Columbia University) are at it again, linking the recent tornadoes and thunderstorms in the Midwest to global warming. Via The Daily Caller:

Former United Nations adviser and economist Jeffrey Sachs sent out tweets Sunday night that the severe storms that hit Illinois on Sunday were the result of human-induced global warming, for example:

Tweet 1. Weather tragedy in Illinois. Research shows human-induced warming is likely to lead to more severe thunderstorms.

Tweet 2. Today’s tornadoes in Illinois were very uncommon in number and severity for the month of November. Not unprecedented, but very uncommon.

Tweet 3. Climate liars like Rupert Murdoch and Koch Brothers have more and more blood on their hands as climate disasters claim lives across world.

MP: As I reported earlier this year, there’s just one small, very inconvenient problem with making a connection between global warming climate change and an increasing frequency of violent, deadly tornadoes – it’s a link that doesn’t actually exist. Here are some inconvenient weather facts based on publicly-available data from the National Oceanic and Atmospheric Administration’s (NOAA) National Climatic Data Center.

The top chart above displays the annual number of “strong to violent tornadoes” (F3 to F5 on the Fujita Scale) in the US from 1954 to 2012, with these highlights:

1. Between 1954 (earliest year available) and 2012, there has been a downward trend in the frequency of strong to violent tornadoes in the US, and that declining trend is statistically significant at the 1% level (see red line in chart, based on a linear regression model). On average, there has been a decline of 0.44 violent tornadoes every year since 1954, or a decline of 4.4 violent tornadoes every decade since the 1950s.

2. Although there was a significant number (84) of violent tornadoes in 2011 (which generated responses like Bill McKibben’s op-ed in the Washington Post that linked tornadoes like the one that hit Joplin, Missouri to climate change), there were actually more violent tornadoes in the years 1957 (99), 1965 (98), 1973 (86) and 1974 (131).

3. In the first half of the sample period from 1954 to 1983, there were ten years when there were more than 60 violent tornadoes, and the average was 55.4 tornadoes annually during that 30-year period. In contrast, during the second half of the sample from 1984 to 2012, during a period when global warming was supposed to be increasing, there were only two years when there were more than 60 violent tornadoes (1999 and 2011), and the annual average was only 37.2 during that 30-year period.

4. The bottom chart above displays the ten deadliest tornadoes in US history, according to the NOAA (measured by number of weather-related deaths), and only one (the Missouri tornado in 2011) has occurred in the last 50 years; the other nine deadliest tornadoes in the US took place between 1840 and 1953. And the five deadliest tornadoes in US history that combined killed almost 1,500 people, all took place in 1936 or before.

Bottom Line: The statistical evidence on violent tornadoes, although frequently ignored by the media, politicians, and others claiming a link between violent weather and climate change, clearly shows that the frequency of violent tornadoes like the recent ones in the Midwest, has actually been declining over time, and not increasing. Further, of the ten most deadly tornadoes in US history, nine took place in 1953 or before, and only one has occurred in the last sixty years. But climate alarmists always prefer “green hysteria” over evidence, hard facts and data, and we can expect more Sachs-like tweets and McKibben-like op-eds in the days to come, with false claims linking the Midwest tornadoes to global warming and climate change.

Survey: The more practicing physicians learn about Obamacare, the more they dislike it and want to start over

Great post from Mark Perry

Some pretty devastatingly negative results about Obamacare from a November 8-12 survey of 3,072 practicing physicians in all 50 states, and reported this week by the Atlanta Business Chronicle:

1. Most physicians didn’t like Obamacare when Congress passed the health-care reform law in 2010. Fifty-nine percent of practicing physicians surveyed said they opposed the Affordable Care Act at the time Congress was debating and adopting the legislation, while only 26% supported the measure.

2. Amid the current wave of negative publicity surrounding the rocky rollout of the program, 61% of the physicians said they have a worse opinion of Obamacare now than they did back in 2010, while just 31% have not changed their opinion and only 8% said they have a better opinion of the law.

3. 80% of physicians said they believe patients will pay more for health care under the new law, while 76% said overall health-care costs would increase.

4. 60% of the survey respondents said Obamacare would hurt the quality of patient care, while 57% said the law would negatively impact their treatment of patients.

5. A sizable minority of the physicians surveyed ­– 44% – said they would not participate in the health insurance exchanges the new law has created.

Bottom Line: “The more physicians learn about the ACA, the more they dislike it and want to start over,” said Richard Jackson, chairman and CEO of Alpharetta, Ga.-based Jackson Healthcare LLC, the nation’s third-largest health-care staffing company. “Physicians are the most knowledgeable people about what’s going on in health care,” said Sandra Garrett, president of Jackson & Coker, a physician staffing company. “We wanted to give them a voice about something that affects all of us.”

MP: When almost half (44%) of the practicing physicians surveyed nationwide say they won’t participate in the new health insurance exchanges, I would say that the Unaffordable Care Act is in very, very serious trouble.

The War on Drugs has given rise to an American police state and led to U.S. being the world’s No. 1 Jailer

Great post from Mark Perry



Two excerpts from the article “The American Police State: A sociologist interrogates the criminal-justice system, and tries to stay out of the spotlight,” about the research of Alice Goffman, a sociologist at the University of Wisconsin-Madison:

1. Starting in the mid-1970s, the United States stiffened its laws on drugs and violent crime and ratcheted up the police presence on city streets. The number of people in American jails and prisons has risen fivefold over the past 40 years (see chart above). There are now roughly six million people under criminal-justice supervision. “In modern history,” Goffman writes, “only the forced labor camps of the former U.S.S.R. under Stalin approached these levels of penal confinement.”

2. The crackdown on the drug economy coincided with a welfare overhaul that cut aid to poor families. Those seeking work in the drug trade, says Goffman, were arrested “on a grand scale.” The prison population grew fivefold between the early 1970s and 2000.
More black men are ensnared in the criminal-justice system today than were enslaved before the Civil War. Goffman and others view the situation as a setback to the advances that African-Americans made in the civil-rights movement. One recent book calls mass incarceration “The New Jim Crow.”

The Myths Of Recycling

See Click here to read this WSJ article by Mark J. Perry. Here is that post:

"In case you missed it, last Friday (November 15) was “America Recycles Day.” Even if you didn’t celebrate or attend a recycling event, or just do some extra recycling on Friday, it’s not too late to make an online recycling pledge “to give your garbage another life” (and be eligible to win a park bench made out of recycled plastic). Here’s the pledge below for individuals (and here’s a link to the pledge for businesses).

As an individual, I pledge to:

Learn. I will find out what materials are collected for recycling in my community at americarecyclesday.org

Act. Reduce my personal waste by recycling. Within the next month, I will recycle more.

Share. In the next month, I will encourage one family member or one friend to take the pledge.

Wow, that last one sounds a little cultish, or at least something like becoming an Environmental Jehovah’s Witness and going door-to-door to “witness” to your neighbors and friends about your religious devotion to recyling and recruit new members to your “green church.”

To be fair and balanced, let me declare that tomorrow, November 18, forever more be known as “Mandatory Recycling Squanders Valuable Resources and Makes Us Worse Off Day.” To make my case, I present the article “Recycling Myths Revisted” by Daniel Benjamin, published by the Property and Environment Resource Center (PERC). Here’s a summary:

In his essay, Daniel Benjamin takes us through the common claims asserted on behalf of the multi-billion dollar recycling programs that are generally presumed to be wise public policy. Benjamin applies careful analysis to the claims made over the years about the “need” for mandatory recycling—and finds them to be bogus. He reminds us that before we rush into costly policies presumed to be saving the environment, sound science and analysis of the facts, which are rarely as interesting as fantastic scare stories, are much to be desired in a society that values freedom in markets and personal choice.

Specifically, Benjamin addresses and debunks each of these 8 commonly-held myths about recycling and the environment:

Myth 1: We are running out of space for our trash.

Myth 2. Trash threatens our health and ecosystem.

Myth 3. Packaging is our problem.

Myth 4. Trade in trash is wasteful.

Myth 5. We are running out of resources.

Myth 6. Recycling always protects the environment.

Myth 7. Recycling saves resources.

Myth 8. Without recycling mandates, there wouldn’t be recycling.

Each of those myths is false, and Benjamin explains why in detail in his article.
Here’s the conclusion of Benjamin’s article, which provides the justification for creating “Mandatory Recycling Squanders Valuable Resources and Makes Us Worse Off Day”:

Recycling is a long-practiced, productive, indeed essential, element of the market system. Informed, voluntary recycling conserves resources and raises our wealth, enabling us to achieve valued ends that would otherwise be impossible. In sharp contrast, however, mandatory recycling programs, in which people are compelled to do what they will not do voluntarily, routinely make society worse off. Such programs force people to squander valuable resources in a quixotic quest to save what they would sensibly discard. On balance, mandatory recycling programs lower our wealth.

Misinformation about the costs and benefits of recycling is as destructive as mandatory recycling programs, for it induces people to engage in wasteful activity. Public service campaigns and “educational” programs that exaggerate the benefits of recycling fall into this category, but there are other offenders as well. For example, bottle and can deposit laws, which effectively misinform people about the true value of used beverage containers, induce people to waste resources collecting and processing items that appear to be worth five (or even ten) cents, given their redemption prices, but in fact are worth a penny or less to society (EPA 2001). Similarly, costly government-run recycling programs that pick up recyclables at no charge give people the incentive to recycling myths revisited engage in too much recycling. They give the appearance that the programs are without cost, when in fact they consume valuable resources that could be used in far more highly valued pursuits.

The free market system is eminently capable of providing both disposal and recycling in an amount and mix that creates the greatest wealth for society. This makes possible the widest and most satisfying range of human endeavors. Simply put, market prices are sufficient to induce the trashman to come, and to make his burden bearable, and neither he nor we can hope for any better than that.

MP: Required reading tomorrow for “Mandatory Recycling Squanders Valuable Resources and Makes Us Worse Off Day” is the classic 1996 New York Times Magazine article “Recycling is Garbage” by New York Times science columnist John Tierney. Tierney’s main point in the article was that “Rinsing out tuna cans and tying up newspapers may make you feel virtuous, but recycling may be the most wasteful activity in modern America: a waste of time and money, a waste of human and natural resources.” That one sentence gives you an idea of why Tierney’s article broke the record for the greatest volume of hate mail in New York Times history."

GM Food May Be Okay

See The Irrational Fear of GM Food Billions of people have eaten genetically modified food over the past two decades. Not one problem has been found. By Marc Van Montagu. Dr. Van Montagu is founder and chairman of the Institute of Plant Biotechnology Outreach at Ghent University in Belgium. He is the co-recipient of the 2013 World Food Prize, along with Dr. Mary-Dell Chilton of Syngenta Biotechnology and Dr. Robert T. Fraley of Monsanto. From the WSJ, 10-23-13. Excerpts:

" Society, the economy and the environment have benefited enormously from GM crops. India has flipped from cotton importer to exporter because of insect-resistant cotton. Herbicide-tolerant GM crops have stimulated no-tillage farming, reducing soil erosion and greenhouse gas emissions. Insect-resistant GM crops have cut insecticide sprayings by more than 25%—and as much as sevenfold in some parts of India. In developing countries, GM crops have helped ensure food security and bolster incomes for farmers, allowing parents to focus more resources on other priorities, such as educating their children."

"...60%-70% of processed food on the market contains genetically modified ingredients."

" GM crops don't, as one discredited study claimed recently, cause cancer or other diseases. GM cotton isn't responsible for suicides among Indian farmers—a 2008 study by an alliance of 64 governments and nongovernmental organizations debunked that myth completely. And GM crops don't harm bees or monarch butterflies."

"In fact, people have consumed billions of meals containing GM foods in the 17 years since they were first commercialized, and not one problem has been documented. This comes as no surprise. Every respected scientific organization that has studied GM crops—the American Medical Association, the National Academy of Sciences and the World Health Organization, among others—has found GM crops both safe for humans and positive for the environment"

"...nearly everything humans have eaten though the millennia has been genetically altered by human intervention. Mankind has been breeding crops—and thereby genetically altering them—since the dawn of agriculture."

A letter tried to refute Dr. Van Montagu. But a second letter refuted that one. Genetically Engineered Foods a Plus: The introduction of GE crops (to supplant conventional ones) has obviated the need to cultivate vast additional amounts of arable land. Here is that second letter:

"Andrew Kimbrell makes many misstatements in his letter "Our GM Food Fears Aren't Irrational" (Nov. 9): "The vast majority of GE crops are developed to resist and therefore promote pesticides, sharply increasing the amount of pesticides used in agriculture." In fact, a significant fraction of GE crops have been specifically, and successfully, crafted to supplant the spraying of chemical pesticides. According to an analysis by PG Economics, the cultivation of pest-resistant genetically engineered crops reduced pesticide spraying by 474 million kilograms (9%) between 1996 and 2011.

Mr. Kimbrell asserts that GE technology isn't "environmentally sustainable." One has to ask, compared with what? The introduction of GE crops (to supplant conventional ones) has obviated the need to cultivate vast additional amounts of arable land. Between 1996 and 2011, genetically engineered crops were responsible world-wide for the production of an additional 110 million tons of soybeans, 195 million tons of corn, 15.8 million tons of cotton lint and 6.6 million tons of canola. If modern GE plants had not been available to the 16.7 million farmers using the technology world-wide in 2011, maintaining global production levels at 2011 levels would have required plantings of more than 35 million additional acres. 

Mr. Kimbrell claims that GE crops have "very little potential to alleviate poverty and hunger." For farmers growing GE crops, the net economic benefit at the farm level in 2011 was $19.8 billion, equal to an average income premium of $329 per acre. From 1996 to 2011, the global farm income gain was $98.2 billion; the economic benefits were divided about equally between farmers in developing and developed countries.

Henry I. Miller, M.D.

Hoover Institution

Stanford, Calif."

Green Energy Is the Real Subsidy Hog

"Renewables receive three times as much money per energy unit as fossil fuels."

Click here to read this WSJ article by Bjorn Lomborg. Dr. Lomborg, director of the Copenhagen Consensus Center, is the author of "How Much Have Global Problems Cost the World? A Scoreboard from 1900 to 2050."Excerpts:

"Today Spain spends about 1% of GDP throwing money at green energy such as solar and wind power. The $11 billion a year is more than Spain spends on higher education.

At the end of the century, with current commitments, these Spanish efforts will have delayed the impact of global warming by roughly 61 hours..."

"Three myths about fossil-fuel subsidies are worth debunking. The first is the claim, put forth by organizations such as the Environmental Law Institute, that the U.S. subsidizes fossil fuels more heavily than green energy. Not so. 

The U.S. Energy Information Administration estimated in 2010 that fossil-fuel subsidies amounted to $4 billion a year."

" Coal-powered electricity is subsidized at about 5% of one cent for every kilowatt-hour produced, while wind power gets about a nickel per kwh. For solar power, it costs the taxpayer 77 cents per kwh."

"Global fossil-fuel subsidies do exceed those for renewables in raw dollars—$523 billion to $88 billion, according to the International Energy Agency. But the disparity is reversed when proportion is taken into account. Fossil fuels make up more than 80% of global energy, while modern green energy accounts for about 5%. This means that renewables still receive three times as much money per energy unit."

"A third myth is propagated by a recent International Monetary Fund report, "Energy Subsidy Reform—Lessons and Implications." The organization announced in March that it had discovered an extra $1.4 trillion in fossil-fuel subsidies that everyone else overlooked. Of that figure, the report claims, $700 billion comes from the developed world.

U.S. gasoline and diesel alone make up about half of the IMF's $700 billion in alleged subsidies. Gasoline and diesel deserve more taxation, the report says, so the IMF counts taxes that were not levied as "subsidies." Thus air pollution merits a 34-cents-per-gallon tax, according to the IMF models, while traffic accidents and congestion should add about $1 per gallon"

"According to the IMF, the U.S. also should have a 17% value-added tax like other countries, at about 80 cents per gallon. The combined $350 billion such taxes allegedly would raise gets spun as a subsidy.

The assumptions behind the IMF's math have some problems. The organization assumes a social price of carbon dioxide at five times what Europe currently charges. The air-pollution damages are upward of 10 times higher than the European Union estimates. And what do traffic accidents have to do with gasoline subsidies? 

Finally, the IMF effectively ignores the 49.5 cents per gallon in gasoline taxes the U.S. consumer actually pays. The models cancel out this tax, inexplicably, with an "international shipping cost." But even if you accept the IMF's estimated pollution costs and the European-style VAT, the total tax the IMF says goes uncollected comes to only about 44 cents per gallon—or less than the actual U.S. tax of 49.5 cents per gallon"

California Will Have A Hard Time Meeting Its Green Energy Goals

See California's Green Reality Check: A new Energy Department study shows the state's carbon emissions goals are unattainable. From the WSJ 11-12-13. Excerpts:

"...California will fall far short of its 2050 emissions goal even under the most ambitious (i.e., unrealistic) policies.

The California Air Resources Board asked the Energy Department's Lawrence Berkeley National Laboratory to analyze how various environmental policies help achieve the state's goal of reducing statewide emissions to 80% below 1990 levels by 2050. The lab's conclusion: Dream on."

"Assuming California's implausible and economically damaging policies were implemented in totality—cap and trade, low carbon fuel and renewable electricity standards, zero-emissions-vehicle mandate, and more—emissions in 2050 would be virtually unchanged from today. Even if the state were to adopt more aggressive measures, emissions would exceed the state's target by 100%."

New vs. Old Keynesian Stimulus

Interesting post from John Cochrane of The University of Chicago. New vs. Old Keynesian Stimulus.

"While fiddling with a recent paper, "The New-Keynesian Liquidity Trap" (blog post), a simple insight dawned on me on the utter and fundamental difference between New-Keynesian and Old-Keynesian models of stimulus.

Old-Keynesian. The "Keynesian cross" is the most basic mechanism. (If you are worried that I'm making this up, see Greg Mankiw's Macroeconomics, p. 308 eighth edition, "Fiscal policy and the multiplier: Government Purchases.")

Consumption follows a "consumption function." If people get more income Y, they consume more C

C = a + m Y.

Output Y is determined by consumption C investment I and government spending G

Y = C+ I + G.

Put the two together and equilibrium output is

Y = a + mY + I + G
Y = (a + I + G)/(1-m).

So, if the marginal propensity to consume m=0.6, then each dollar of government spending G generates not just one dollar of output Y (first equation), but $2.5 dollars of additional output.

This model captures a satisfying story. More government spending, even if on completely useless projects, "puts money in people's pockets." Those people in turn go out and spend, providing more income for others, who go out and spend, and so on. We pull ourselves up by our bootstraps. Saving is the enemy, as it lowers the marginal propensity to consume and reduces this multiplier.

New-Keynesian. The heart of the New-Keynesian model is a completely different view of consumption. In its simplest version

Here consumption C, relative to trend, equals the sum of all future real interest rates i less inflation π i.e. all future real interest rates. The parameter σ measures how resistant people are to consuming less today and more tomorrow when offered a higher interest rate.

(This is just the integrated version of the standard first order condition, in discrete time

People in this model think about the future when deciding how much to consume and allocate consumption today vs. tomorrow looking at the real interest rate. I've simplified a lot, leaving out trends, the level and variation of the "natural rate" and so on.)

In this model too, totally wasted government spending can raise consumption and hence output, but by a radically different mechanism.  Government spending raises inflation π . (How is not important here, that's in the Phillips curve.) Holding nominal interest rates i fixed, either at the zero bound or with Fed cooperation, more inflation π means lower real interest rates. It induces consumers to spend their money today rather than in the future, before that money loses value.

Now, lowering consumption growth is normally a bad thing. But new-Keynesian modelers assume that the economy reverts to trend, so lowering growth rates is good, and raises the level of consumption today with no ill effects tomorrow. (More in a previous post here)

Comparing stories

This new-Keynesian model is an utterly and completely different mechanism and story. The heart of the New-Keynesian model is Milton Friedman's permanent income theory of consumption, against which old-Keynesians fought so long and hard! Actually, it's more radical than Friedman: The marginal propensity to consume is exactly and precisely zero in the new-Keynesian model.  There is no income at all on the right hand side. Why? By holding expected future consumption constant, i.e. by assuming the economy reverts to trend and no more, there is no such thing as a permanent increase in consumption.

The old-Keynesian model is driven completely by an income effect with no substitution effect. Consumers don't think about today vs. the future at all. The new-Keynesian model based on the intertemporal substitution effect with no income effect at all.

Models and stories

Now, why is Grumpy grumpy?

Many Keynesian commentators have been arguing for much more stimulus.  They like to write the nice story, how we put money in people's pockets, and then they go and spend, and that puts more money in other people's pockets, and so on.

But, alas, the old-Keynesian model of that story is wrong. It's just not economics. A 40 year quest for "microfoundations" came up with nothing. How many Nobel prizes have they given for demolishing the old-Keynesian model? At least Friedman, Lucas, Prescott, Kydland, Sargent and Sims. Since about 1980, if you send a paper with this model to any half respectable journal, they will reject it instantly.

But people love the story. Policy makers love the story.  Most of Washington loves the story. Most of Washington policy analysis uses Keynesian models or Keynesian thinking. This is really curious. Our whole policy establishment uses a model that cannot be published in a peer-reviewed journal. Imagine if the climate scientists were telling us to spend a trillion dollars on carbon dioxide mitigation -- but they had not been able to publish any of their models in peer-reviewed journals for 35 years.

What to do? Part of the fashion is to say that all of academic economics is nuts and just abandoned the eternal verities of Keynes 35 years ago, even if nobody ever really did get the foundations right. But they know that such anti-intellectualism is not totally convincing, so it's also fashionable to use new-Keynesian models as holy water. Something like "well, I didn't read all the equations, but Woodford's book sprinkles all the right Lucas-Sargent-Prescott holy water on it and makes this all respectable again." Cognitive dissonance allows one to make these contradictory arguments simultaneously.

Except new-Keynesian economics does no such thing, as I think this example makes clear. If you want to use new-Keynesian models to defend stimulus, do it forthrightly: "The government should spend money, even if on totally wasted projects, because that will cause inflation, inflation will lower real interest rates, lower real interest rates will induce people to consume today rather than tomorrow, we believe tomorrow's consumption will revert to trend anyway, so this step will increase demand. We disclaim any income-based "multiplier," sorry, our new models have no such effect, and we'll stand up in public and tell any politician who uses this argument that it's wrong."

That, at least, would be honest. If not particularly effective!

You may disagree with all of this, but that reinforces another important lesson. In macroeconomics, the step of crafting a story from the equations, figuring out what our little quantitative parables mean for policy, and understanding and explaining the mechanisms, is really hard, even when the equations are very simple. And it's important. Nobody trusts black boxes. The Chicago-Minnesota equilibrium school never really got people to understand what was in the black box and trust the answers. The DSGE new Keynesian black box has some very unexpected stories in it, and is very very far from providing justification for old-Keynesian intuition."

Donald J. Boudreaux On Obamacare And Social "Contracts"

From Cafe Hayek

Here’s a letter to the Washington Post:

Matt Miller includes himself among those “who think the health security the Affordable Care Act provides marks a fundamental advance in America’s social contract” (“Obamacare’s well-insured critics,” Nov. 6).

Mr. Miller needs a refresher on the definition of “contract.

A contract binds only those parties who voluntarily agree to be bound by its provisions. 

Central to this definition of “contract” is the presumption that all parties to the contract know the provisions to which they agree.  But because Obamacare passed without a single favorable vote of the opposition party, because it passed by a narrow margin in the House of Representatives, and because even some of Obamacare’s enthusiastic Congressional supporters admitted that they did not know all of the provisions of the bill, to call Obamacare part of a “social contract” is a dishonest attempt to clothe that legislation with a legitimacy that it does not possess.

Unchecked political majorities often run roughshod over minorities – forcing, in each case, the minority to obey the majority’s commands (rather than, as with true contracts, bargaining with parties who remain free to refuse any and all contractual offers).  No realistic person doubts this regrettable reality.  Please, though, let’s not perfume up and glorify such exercises of raw majoritarian power by calling their outcomes clauses of a “social contract.”

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

Alchian and Allen On Minimum Wage Laws

From Cafe Hayek

[This] is from page 441 of the 3rd edition (1972) of what is regarded by many (including me) to be the greatest economics textbook ever written, University Economics by Armen Alchian and William Allen:

If a uniform or minimum-wage law is effective in raising wages, discrimination will be transferred from wage rates to employee types.  Fewer “inferior” people will get jobs.  Therefore, pressure mounts for “fair-employment laws,” prohibiting employers from choosing employees on the basis of any criterion ruled unethical – usually race, creed, age, and sex.  These laws probably reduce the extent of observable discrimination among employers.  But they are incredibly difficult to enforce.  How can one tell whether an employer is hiring as many workers as his customers consider “inferior” as he would if he really didn’t think them “inferior”?  Furthermore, the employer will be even more reluctant to observe the spirit of the law when he knows it will be more difficult to fire those whose services are unsatisfactory.

Here is what Christina Romer wrote in the NY Times earlier this year. It is similar:

"Some evidence suggests that employment doesn’t fall much because the higher minimum wage lowers labor turnover, which raises productivity and labor demand. But it’s possible that productivity also rises because the higher minimum attracts more efficient workers to the labor pool. If these new workers are typically more affluent — perhaps middle-income spouses or retirees — and end up taking some jobs held by poorer workers, a higher minimum could harm the truly disadvantaged."

See The Business of the Minimum Wage. Romer was the first chair of the Council of Economic Advisors under Obama.

The Selling of ObamaCare

Interesting post from John Goodman's Health Care Blog. Excerpt:

"It’s as though two completely separate conversations have been going on. From day one, the health policy community has correctly seen the Affordable Care Act as an attempt to completely change the health care system. This isn’t even controversial. It’s accepted by all as an undisputed fact.

However, no one has ever said this to the American people. In fact, the message of the Obama presidency — going all the way back to the 2008 campaign — was just the opposite. In that election, Barack Obama rejected Hillary Clinton’s call for an individual mandate (a proposal that would obviously affect everyone) in favor of his own proposal which appeared to mainly help those who couldn’t afford insurance. And how many people would that be?  You could be forgiven if you thought it was about 10% of the population.

Then, on the eve of the passage of the ACA, virtually every Democrat who appeared on TV to defend it had one and only one message to offer: people were being discriminated because of pre-existing conditions. And how many of those people are there? Well for the first three years under the law, anyone denied insurance because of a pre-existing condition was able to enter the new (ObamaCare) risk pools and pay the same premium a healthy person would pay. How many did that? About 107,000. That’s out of a U.S. population of approximately 314 million!"

It’s as though two completely separate conversations have been going on. From day one, the health policy community has correctly seen the Affordable Care Act as an attempt to completely change the health care system. This isn’t even controversial. It’s accepted by all as an undisputed fact.
However, no one has ever said this to the American people. In fact, the message of the Obama presidency — going all the way back to the 2008 campaign — was just the opposite. In that election, Barack Obama rejected Hillary Clinton’s call for an individual mandate (a proposal that would obviously affect everyone) in favor of his own proposal which appeared to mainly help those who couldn’t afford insurance. And how many people would that be?  You could be forgiven if you thought it was about 10% of the population.
Then, on the eve of the passage of the ACA, virtually every Democrat who appeared on TV to defend it had one and only one message to offer: people were being discriminated because of pre-existing conditions. And how many of those people are there? Well for the first three years under the law, anyone denied insurance because of a pre-existing condition was able to enter the new (ObamaCare) risk pools and pay the same premium a healthy person would pay. How many did that? About 107,000. That’s out of a U.S. population of approximately 314 million!
- See more at: http://healthblog.ncpa.org/the-selling-of-obamacare/#sthash.cibenW27.dpuf

It’s as though two completely separate conversations have been going on. From day one, the health policy community has correctly seen the Affordable Care Act as an attempt to completely change the health care system. This isn’t even controversial. It’s accepted by all as an undisputed fact.
However, no one has ever said this to the American people. In fact, the message of the Obama presidency — going all the way back to the 2008 campaign — was just the opposite. In that election, Barack Obama rejected Hillary Clinton’s call for an individual mandate (a proposal that would obviously affect everyone) in favor of his own proposal which appeared to mainly help those who couldn’t afford insurance. And how many people would that be?  You could be forgiven if you thought it was about 10% of the population.
Then, on the eve of the passage of the ACA, virtually every Democrat who appeared on TV to defend it had one and only one message to offer: people were being discriminated because of pre-existing conditions. And how many of those people are there? Well for the first three years under the law, anyone denied insurance because of a pre-existing condition was able to enter the new (ObamaCare) risk pools and pay the same premium a healthy person would pay. How many did that? About 107,000. That’s out of a U.S. population of approximately 314 million!
- See more at: http://healthblog.ncpa.org/the-selling-of-obamacare/#sthash.cibenW27.dpuf

It’s as though two completely separate conversations have been going on. From day one, the health policy community has correctly seen the Affordable Care Act as an attempt to completely change the health care system. This isn’t even controversial. It’s accepted by all as an undisputed fact.
However, no one has ever said this to the American people. In fact, the message of the Obama presidency — going all the way back to the 2008 campaign — was just the opposite. In that election, Barack Obama rejected Hillary Clinton’s call for an individual mandate (a proposal that would obviously affect everyone) in favor of his own proposal which appeared to mainly help those who couldn’t afford insurance. And how many people would that be?  You could be forgiven if you thought it was about 10% of the population.
Then, on the eve of the passage of the ACA, virtually every Democrat who appeared on TV to defend it had one and only one message to offer: people were being discriminated because of pre-existing conditions. And how many of those people are there? Well for the first three years under the law, anyone denied insurance because of a pre-existing condition was able to enter the new (ObamaCare) risk pools and pay the same premium a healthy person would pay. How many did that? About 107,000. That’s out of a U.S. population of approximately 314 million!
- See more at: http://healthblog.ncpa.org/the-selling-of-obamacare/#sthash.cibenW27.dpuf

Look Closer: Tax Increases, Not Spending Cuts, Are the Harmful Austerity

Great post from Salim Furth of the Heritage Foundation.

Proponents of government spending want to use the recent history of Europe as evidence that spending cuts are harmful, but their arguments lose traction when one looks closely at the data.

One example comes from Paul Krugman, who used the International Monetary Fund’s Fiscal Monitor data to argue that “austerity has large negative impacts.” But he could have made a more valuable observation: Tax increases have large negative impacts, spending cuts not as much.

That lesson is visible in the charts: A dollar increase in tax revenue lowers gross domestic product (GDP) by $2.10 over the same time period, while a dollar of spending cuts only lowers it 80 cents. (Those are short-run effects, and in the long run, economists expect that the private sector picks up any slack left by the government.) Greece has a lot of influence on these estimates, and without Greece the revenue effect falls to $1.30 and the spending effect to 40 cents.

Spending cuts are baked into GDP, so those estimates imply that the private sector is basically unharmed by spending cuts. Taxing more in order to cut deficits, on the other hand, is an exercise in futility: Historically, the tax increases hurt the economy so much that the increases utterly fail to lower the deficit.

A more recent generalization about austerity comes from Ezra Klein, who tweeted that “austerity destroyed Europe’s economy.” The problem? His graph shows an estimate of only aggregate demand growth, not austerity or fiscal policy.

Looking at the data on austerity we can see that generalizing about Europe obscures more than it reveals. Klein obviously believes that the U.S. and Japan were substantially less austere than the eurozone. But looking at two different measures of austerity, we can see that is not the case.

In structural deficit reduction from 2009 to 2012, the U.S. is in the middle of the eurozone countries—slightly more “austere” than Germany, the largest eurozone economy. In the Fiscal Monitor estimate of discretionary deficit reduction policy, the U.S. is more austere than all but four eurozone countries. Japan, by contrast, has moved toward larger deficits, bigger government, and higher taxes.
How have those policies worked out? Germany’s GDP grew 8 percent from 2009 to 2012, the U.S.’s grew just over 6 percent, and Japan’s grew just under 6 percent. Maybe tax-and-spend is not such a great strategy for Japan after all.

Finally, which country in the eurozone had the strongest growth record from 2009 to 2012? Slovakia, which surged 9.5 percent. According to the Fiscal Monitor, Slovakia cut taxes by 1.59 percent of GDP and cut spending by 4.07 percent of GDP.

(Wonkish notes: Krugman used GDP growth from 2008 to 2012, so his growth “effect” starts a year before the cause. Krugman also excluded eurozone countries Slovakia and Slovenia from his graph and regression without explanation. The Fiscal Monitor table that Krugman cites does not include a “total austerity” series—Krugman and I had to add up the spending cuts and revenue increases to get “total austerity.” I dropped changes in interest payments from the spending side, since they are not driven by fiscal policy. None of these analytical choices makes a substantial difference in the regression results. Finally, these spending cuts include the expiration or termination of temporary stimulus spending.)

 

Joe Stiglitz's Cognitive Dissonance

From Division of Labor.

A complimentary copy of Joe Stiglitz's "The Price of Inequality" recently appeared in my mailbox. I'm no big fan of Stiglitz's work, but in skimming the table of contents I noticed a chapter on rent-seeking and decided to read it.
On p. 45, Stiglitz writes:

Three factors contributed to the increased monopolization of markets. First, there was a battle over ideas about the role that government should take in ensuring competition. Chicago school economists (like Milton Friedman and George Stigler) who believe in free and unfettered markets argued that markets are naturally competitive ...

Just a few pages later (p.62) he writes:

In the Clinton administration, we tried to make the mining companies pay more for the resources they take out of public lands .... [The companies] argued that the policy would impeded growth. But the fact of the matter is that, with an auction, companies will bid to get the mining rights .... Modern auction theory has shown how changing the design of the auction can generate much more revenue for the government. These theories were tested out in the auction of spectrum used for telecommunications beginning in the 1990s ....

Wonder where Uncle Sam got the idea of auctioning off spectrum rights ... oh yeah, from one of those free market fundamentalist Chicago schoolers named Ronald Coase.
Like a blind squirrel finding a few acorns, Stiglitz's rent seeking chapter does hit a few worthy targets (import restrictions, ethanol, Wall St). However, in addition to the cognitive dissonance over the Chicago school and spectrum auctions, the chapter suffers from a macro case of cognitive dissonance in that Stiglitz advocates more government involvement while failing to realize that it is a large and active government that provides the rents he bemoans.

Competition Saves Lives--Who Knew?

From Division of Labor.

"Part of the abstract of a paper by Martin Gaynor, Rodrigo Moreno-Serra, and Carol Propper in the new issue of the AEJ: Economic Policy:

The English government introduced a policy in 2006 to promote competition between hospitals. Using this policy to implement a difference-in-differences research design, we estimate the impact of the introduction of competition on not only clinical outcomes but also productivity and expenditure. We find that the effect of competition is to save lives without raising costs."

Storms are becoming ever more survivable

Great post from Matt Ridley. Here it is

A big wind hitting Britain today does less harm than in past centuries

My Times article on the storm that was to hit Britain on 28 October. In the event, four or five people died. Disruption to transport lasted only a few days.

If you are reading this with the hatches battened down, it may not be much comfort to know that 2013 has been an unusually quiet year for big storms. For the first time in 45 years no hurricane above Category 1 has made landfall from the Atlantic by this date, and only two in that category, confounding an official US government forecast of six to nine hurricanes in the Atlantic, three to five of which would be big. Even if the last month of the hurricane season is bad, it will have been a quiet year.

It’s not just the Atlantic that is quiet. Globally, the “accumulated cyclone energy” of all big tropical storms — known as hurricanes, cyclones and typhoons, depending on the ocean — looks to be heading for one of the lowest numbers on record (though there are two months to go).

You cannot read much into a single year’s events, of course. None the less, the apocalyptic predictions of ever worsening storms made in 2005, after Hurricane Katrina all but destroyed New Orleans, seem to have been wide of the mark. There has been no trend up or down in storm frequency or power since the 1960s, when satellites began measuring these things.

The way bad storms are beamed into our living rooms today probably gives the opposite impression. Yet the run-up to an impending storm tends to get more coverage than the clean-up afterwards, leaving a false impression of unrepaired devastation. The more salient trend to draw from weather in the modern era is that whatever it throws at us, we are getting better at coping: civilisation has become steadily more resilient in the face of natural disasters.

The financial cost of storms goes up and up, of course, as the insurance industry never tires of reminding us. But then so does the value of the economy — there are more coastal properties worth more money and more fully insured. The trend in insurance claims tells you nothing about the weather itself. Indeed, as Professor Roger Pielke, of the University of Colorado at Boulder, told Congress last year, global insured catastrophe losses have not increased as a proportion of GDP since 1960.

For all the havoc that today’s St Jude’s storm may bring to transport and property in Britain, and even if it does result in tragic loss of life, the effect is bound to be less than it would have been in times past. In any other century a storm such as today’s would have killed more people, wrecked more ships, destroyed more crops and left more people homeless than it will do today.

In November 1703, for instance, a great storm destroyed the Eddystone lighthouse, drowned 1,500 Royal Navy sailors in 13 sunken men-of-war, killed 400 people in the Somerset Levels, piled up 700 ships in the Pool of London, tore lead off Westminster Abbey’s roof, killed the Bishop of Bath and Wells in his bed with a falling chimney, and left towns on the South Coast looking “as if the enemy had sackt them and were most miserably torn to pieces”, in Daniel Defoe’s words. There must have followed a pretty bleak winter for many poor people.

Thanks to forecasts, warnings, better building materials and rescue services, we are more likely to survive today. Consider, for example, that the Met Office was telling us last week roughly where today’s storm would strike before it had even been born in the western Atlantic. That was not possible in 1703; indeed it was far from easy in 1987, as Michael Fish can attest.

Putting society and infrastructure back together after a weather disaster is also much quicker today than it would have been 300 years ago. There is virtually nothing that a storm does that cannot be undone by bulldozers and builders. The same is not always true of volcanoes and earthquakes.

The fierce cyclone that hit eastern India this month killed only 17 people, after it was well forecast and 800,000 people were evacuated from its path, a sharp contrast to the 10,000 killed in the same region by a cyclone 14 years ago. That India was in a good position to issue warnings and implement evacuation plans this time is largely a function of the intervening years of economic growth, plus the evolution of technology: nearly a billion Indians use mobile phones today, compared with hardly any in 1999.

The global death rate as a result of tropical storms (cyclones, typhoons and hurricanes) was 55 per cent lower in the 2000s than it had been in the 1960s. Much of that change is down to technology, but freedom helps too. In 2007 Hurricane Dean, a Category 5 storm, struck the Yucatan in capitalist, middle-income Mexico, but the country was well prepared and not a single person died. A year later a storm of similar ferocity hit impoverished, authoritarian Burma and killed about 200,000 people.

One of the things that makes the world more resilient to weather disasters is trade. In 1694, some 15 per cent of the entire population of France starved after heavy rains destroyed the third harvest in a row, while plenty of food existed elsewhere in Europe. Trade was so small a part of the economy that the means to get sufficient grain into France from other countries in Europe simply did not exist. At one point a convoy of 120 ships left Norway to bring grain to France, but was captured by the Dutch before being heroically recaptured by the privateer Jean Bart and escorted in triumph to Dunkirk. Yet even this was not enough to save many French lives.

Today a disastrous harvest in one region merely leads to an upward nudge in global food prices as food is diverted to the affected region. It would be almost impossible for famine to occur in a world where voluminous and truly free trade existed — because simultaneous harvest failures all around the world are virtually impossible, while rising prices would draw food to hungry regions. World trade reduces the risk of disaster.

I am often told that globalisation makes us more vulnerable, because a country such as Britain depends on other countries for many of the goods we need, so a natural disaster or a trade embargo would leave us desperate. But I am not convinced. Britain is no more precarious for getting its laptops and combine harvesters from abroad than a town is precarious for getting its bread from the countryside, or an office worker is precarious for getting his electricity from a plug.

Indeed local trade is vulnerable to weather disasters in a way that international trade is not. Interdependence actually spreads risk. As individuals we gave up self sufficiency tens of thousands of years ago partly because it reduced risk. And there is nothing more precarious than a self-sufficient community, which could be destroyed by a single storm, drought or flood.

So, when this storm has passed, say a little thank you to technology and globalisation for the fact that, on the whole, even the very worst weather need not disrupt your life very severely or for very long.

Mark Perry Explains Why There Is No Male/Female Wage Gap

See Another 4 Pinocchio whopper? Obama says women are paid 77 cents on the dollar for doing the exact same work as men. Here is that great post:

According to a TV election ad last year, “President Obama knows that women being paid 77 cents on the dollar for doing the same work as men isn’t just unfair, it hurts families.” Do the data support the president’s claim? Not at all.
For example, the Bureau of Labor Statistics (BLS) releases an annual report on the “Highlights of Women’s Earnings” (since the report looks equally at data for men’s and women’s earnings, one might ask why the report isn’t simply titled “Highlights of Earnings in America?”… but perhaps the answer is obvious). Here’s the opening paragraph from the most recent BLS report “Highlights of Women’s Earnings in 2012″ that was released a few weeks ago:

In 2012, women who were full-time wage and salary workers had median usual weekly earnings of $691. On average in 2012, women made about 81 percent of the median earnings of male full-time wage and salary workers ($854). In 1979, the first year for which comparable earnings data are available, women earned 62% of what men earned.

How do we explain the 23% gender pay gap claimed by Obama, or the fact that women working full-time earned only 81 cents for every dollar men earned in 2012? Here’s how the National Committee on Pay Equity explains it:

The wage gap exists, in part, because many women and people of color are still segregated into a few low-paying occupations. Part of the wage gap results from differences in education, experience or time in the workforce. But a significant portion cannot be explained by any of those factors; it is attributable to discrimination. In other words, certain jobs pay less because they are held by women and people of color.

Let’s investigate the claim that the gender pay gap is a result of discrimination by looking at some of the labor market data by gender in the BLS report for 2012:
1. Among full-time workers (those working 35 hours or more per week), men were more likely than women to work a greater number of hours (Table 5). For example, 26% of men worked 41 or more hours per week in 2012, compared with only 14% of women who worked those hours, meaning that men were almost twice as likely as women to work 41 hours per work or more.  Further, men were also about three times more likely than women to work 60-hour weeks: 5.3% of men worked 60 hours per week in 2012 compared to only 1.8% of women who worked those hours.
Also, women were more likely than men to work shorter full-time workweeks of 35 to 39 hours per week: 12% of women worked those hours in 2012, compared to 5% of men who did so.    
Comment: Because men work more hours on average than women, some of the raw wage gap naturally disappears just by simply controlling for the number of hours worked per week, an important factor not even mentioned by groups like the National Committee on Pay Equity. For example, women earned 81.2% of median male earnings for all workers working 35 hours per week or more, for a raw, unadjusted pay gap of 18.8% for full-time workers (Table 5). But for those workers with a 40-hour workweek, women earned 87.7% of median male earnings, for a pay gap of only 12.3%. Therefore, once we control only for one variable – hours worked – and compare men and women both working 40-hours per week in 2012, about one-third of the raw 18.8% pay gap disappears.
2. The BLS reports that for single workers who have never married, women earned 95.8% of men’s earnings in 2012, which is a wage gap of only 4.2% (see Table 1 and chart above), compared to an overall unadjusted pay gap of 19.2% for workers in that group. When controlling for marital status and comparing unmarried men and unmarried women, more than 78% of the unadjusted 19.2% wage gap is explained by just one variable (among many): marital status.
3. Also from Table 1 in the BLS report, we find that for married workers with a spouse present, women earned only 76.6% of what married men with a spouse present earned in 2012 (see chart). Therefore, BLS data show that marriage has a significant and negative effect on women’s earnings relative to men’s, but we can accurately assume that marriage is a voluntary lifestyle decision, and it’s that personal choice, not necessarily labor market discrimination, that contributes to much of the gender wage gap for married workers.
4. Also in Table 1, the BLS reports that for young workers ages 20-24 years and 25-34 years, women earn 89% and 90.2% of their male counterparts (see chart), respectively. Once again, controlling for just a single important variable – age – we find that about half of the overall unadjusted raw wage gap for all workers disappears for young workers.
5. In Table 7, the BLS reports that for full-time single workers with no children under 18 years old at home (single workers includes never married, divorced, separated and widowed), women’s median weekly earnings were 95.2% of their male counterparts (see chart).  For this group, once you control for marital status only, you automatically explain 76% of the unadjusted gender earnings gap.
6. Also in Table 7, the BLS reports that married women working full-time with children under 18 years at home earned 76.3% of what married men earned working full-time with children under 18 years (see chart). Once again, we find that marriage and motherhood have a significantly negative effect on women’s earnings; but those lower earnings don’t necessarily result from labor market discrimination, they more likely result from personal family choices about careers, workplace flexibility, child care, and hours worked, etc.
7. If we look at median hourly earnings, instead of median weekly earnings, the BLS reports in Table 8 that women earned 86.4% of what men earned in 2012, which accounts for almost one-third of the raw 19.8% gender earnings gap that exists for weekly earnings. And when we look at young workers, women ages 16 to 19 years earned 97.9% of the hourly wage of their male counterparts in 2012, and for the 20-24 year old group, women earned 92.0% of what men earned per hour. Also in Table 9, we see that for never married hourly workers of all ages, women earned 92.3% of the hourly earnings of their male counterparts in 2012, which explains about half of the unadjusted 13.6% gender difference in hourly earnings.
Bottom Line: When the BLS reports that women working full-time in 2012 earned 81% of what men earned working full-time, that is very much different than saying that women earned 81% of what men earned for doing exactly the same work while working the exact same number of hours, with exactly the same educational background and exactly the same years of continuous, uninterrupted work experience. As shown above, once we start controlling individually for the many relevant factors that affect earnings, e.g. hours worked, age, marital status and having children, most of the raw earnings differential disappears. In a more comprehensive study that controlled for all of the relevant variables simultaneously, we would likely find that those variables would account for almost 100% of the unadjusted, raw earnings differential of 19.8% lower earnings for women reported by the BLS. Discrimination, to the extent that it does exist, would likely account for a very small portion of the raw gender pay gap.
For example, in a 2005 NBER working paper “What Do Wage Differentials Tell Us about Labor Market Discrimination?” by June O’Neill (Professor of economics at Baruch College CUNY, and former Director of the Congressional Budget Office), she conducts an empirical investigation using Census data and concludes that:

There is no gender gap in wages among men and women with similar family roles. Comparing the wage gap between women and men ages 35-43 who have never married and never had a child, we find a small observed gap in favor of women, which becomes insignificant after accounting for differences in skills and job and workplace characteristics.
This observation is an important one because it suggests that the factors underlying the gender gap in pay primarily reflect choices made by men and women given their different societal roles, rather than labor market discrimination against women due to their sex.

To claim that a significant portion of the raw wage gap can only be explained by discrimination is intellectually dishonest and completely unsupported by the empirical evidence. And yet we hear all the time from groups like the National Committee on Pay Equity, the American Association of University Women, the Institute for Women’s Policy Research, and President Obama, President Jimmy Carter and Terry McAuliffe that “women are paid 77 cents on the dollar for doing the same work as men.” And in most cases when that claim is made, there is almost no attention paid to the reality that almost all of the raw, unadjusted pay differentials can be explained by everything except discrimination – hours worked, age, marital status, children, years of continuous experience, workplace conditions, etc. In other words, once you impose the important ceteris paribus condition of “all other things being equal or held constant,” the gender pay gap that we hear so much about doesn’t really exist at all.
I think President Obama deserves another 4 Pinocchio rating for his statement in bold above, and for ignoring the empirical evidence from his own Department of Labor that explains much, or all, of the gender differences in wages. In 2012, PolitiFact gave Obama’s claim a rating of “Mostly False.”

How Does Lack Of Insurance Affect Death Rates?

See This Is Why We Need Obamacare by NICHOLAS D. KRISTOF of the NY Times. Excerpt:

"But how about showing empathy also for a far larger and more desperate group: The nearly 50 million Americans without insurance who play health care Russian roulette as a result. FamiliesUSA, a health care advocacy group that supports Obamacare, estimated last year that an American dies every 20 minutes for lack of insurance."

At 1 every 20 minutes, that is 26,280 a year. If we divide that by 50,000,000 we get 0.0005256. Per 100,000 that is 52.56. That is the death rate for people who lack insurance. What is it per 100,000 for the whole country? Here is a stat from the CDC for 2010

"Death rate: 799.5 deaths per 100,000 population"

So the overall death rate is about 15 times higher for the average American than it is for people without insurance. Maybe this has to do with age. Younger people are less likely to die and therefore less likely to buy insurance.

Also, the CDC shows that the two leading causes of death, by far, are cancer and hearth disease.

Number of deaths for leading causes of death:

• Heart disease: 597,689
• Cancer: 574,743
• Chronic lower respiratory diseases: 138,080
• Stroke (cerebrovascular diseases): 129,476
• Accidents (unintentional injuries): 120,859
• Alzheimer's disease: 83,494
• Diabetes: 69,071
• Nephritis, nephrotic syndrome, and nephrosis: 50,476
• Influenza and Pneumonia: 50,097
• Intentional self-harm (suicide): 38,364

80 percent of heart disease and 40 percent of cancers could be prevented with a healthy diet and lifestyle. See Something More Effective Than Government Health Care