links for 2008-05-10

• Unions: good for equity, good for efficiency - Crooked Timber
• The historical roots of India’s booming service economy - Vox EU
• What if we'd been on the gold standard? - Econbrowser
• Interests of Retirees and High-Bracket Taxpayers Align? - Angry Bear
• Chimp Memory Beats Humans' - Video - National Geographic
• The Fight Stuff - New York Times
• Scientists Know Better--Even When They're Wrong - Scientific American
• Torture Showdown Coming? - Dan Froomkin
• Clinton and Obama beat John McCain in poll - Los Angeles Times
• Economics and the Entrepreneur - RealClearPolitics

Comments

[anne]

http://krugman.blogs.nytimes.com/2008/05/09/prices-and-gasoline-demand/

May 9, 2008

Prices and Gasoline Demand
By Paul Krugman

With gasoline prices rising, there's a lot of speculation about how and whether Americans will change their behavior.

There's also, it turns out, quite a lot of statistical evidence. We've seen real gasoline prices go through big swings over the past 35 years, and we also have cross-sectional evidence: European countries, which aren't that far off US levels of per capita income, have gasoline prices several times as high as ours.

So you can do econometrics; some of the evidence (and a lot of international data) is here. *

In the long run, the best estimate of the price elasticity of demand for auto fuel seems to be -0.7. That is, a 10 percent rise in prices will reduce gas consumption by 7 percent. Of this, 4 points come from shifting to cars with better mileage, 3 points from driving less.

Of course, you go into an energy crisis with the auto fleet you have, not the auto fleet you want. So right there is a reason for a much lower short-run demand response. Plus, a good part of the reduction in miles driven involves long-term choices too — where you choose to live and/or work, how you arrange your life. So the short-run elasticity of demand is fairly small.

Given time, however, higher prices could lead to a repeat of the 70s-80s experience, when the US auto fleet became a lot more fuel efficient.

Reduce gas consumption? Yes, we can. [Chart]

* http://pdf.wri.org/automobile-fuel-economy-co2-industrialized-countries.pdf

[anne]

http://www.nytimes.com/2008/05/10/world/middleeast/10lebanon.html

May 10, 2008

Shiite Militias Seize Beirut Neighborhoods
By ROBERT F. WORTH and NADA BAKRI

BEIRUT, Lebanon — Heavily armed Hezbollah fighters seized control of much of western Beirut on Friday, patrolling the deserted streets in a raw show of force that underscored the Shiite militia's refusal to back down in its escalating confrontation with the American-backed government.

Hezbollah allies also forced a government-allied satellite television station off the air and burned the offices of its newspaper affiliate, as Sunni fighters loyal to the government largely melted away after three days of the worst sectarian clashes Lebanon has seen since its 15-year civil war.

Those humiliating blows made clearer than ever the power and determination of Hezbollah, backed by Iran and Syria, and its allies. By Friday afternoon, armed Shiite fighters were riding joyfully through west Beirut in a long column of trucks, cars, and scooters, shouting and firing their weapons into the air in a raucous victory celebration.

The government majority issued an urgent appeal for help from other nations on Friday evening, calling Hezbollah's actions an "armed coup" against Lebanon and its democratic system using "weapons sent by Tehran." Some government lawmakers, including the Druse leader, Walid Jumblatt, and Saad Hariri, the son of the former Prime Minister Rafiq Hariri, spent the day holed up in their compounds, protected by Lebanese Army contingents and the police.

In Washington , Secretary of State Condoleezza Rice said the United States was "deeply concerned" about the ongoing violence and condemned Hezbollah for "undermining the legitimate authority of the Lebanese government."

Ms. Rice and other Bush administration officials were on the phone Friday with their counterparts in Saudi Arabia, Egypt and Lebanon. A senior administration official said the United States, which barely talks to Syria, Iran, or Hezbollah, which the Bush administration considers a terrorist organization, was trying to use its Arab allies to send a message to Iran and Syria to stop interfering in Lebanon....

[Iran and Syria?????]

[anne]

http://krugman.blogs.nytimes.com/2008/05/10/sick-transit-and-all-that/

May 10, 2008

Sick Transit and All That
By Paul Krugman

The New York Times reports * that ridership on mass transit is surging thanks to high gasoline prices. Good.

But … as of 2005, only 4.7 percent ** of American workers took mass transit to work. So even a 10% surge in mass transit ridership would take only around half a percent of drivers off the road.

The point isn't that nothing can be done — it's just that serious reductions in driving would require a lot of long-term rearrangement of the way we live. It will come — but not quickly.

[Chart] Hard-driving Americans.

* http://www.nytimes.com/2008/05/10/business/10transit.html

** http://www.census.gov/compendia/statab/tables/08s1068.pdf

[anne]

http://krugman.blogs.nytimes.com/2008/05/10/stalling-exports/

May 10, 2008

Stalling Exports?
By Paul Krugman

Uh-oh [Chart]

Brad Setser * tells us that the trade numbers, contrary to just about all reporting, are worrisome: strip out the effects of raw material prices, and it looks as if export growth — the only thing that has kept us from having a much worse slowdown — is stalling out.

Meanwhile, the Bush administration is cheering on a stronger dollar ** — which undermines the prospects for future export growth.

* http://www.rgemonitor.com/setser-monitor/252591/be-careful-real-export-growth-looks-to-have-slowed/

** http://blogs.wsj.com/economics/2008/05/09/white-house-leads-effort-to-prop-up-dollar/?mod=homeblogmod_realtimeeconomics

[Winslow R.]

Economics and the Entrepreneur - RealClearPolitics

"Thus for Schumpeter there could be no pure economics. There was always a political dimension because the individual was central to growth and would frequently come into conflict with the controlling state, most often in the service of corporations and interest groups that found the relentless challenge of entrepreneurs disturbing."

I've read quite a few articles such as this and they often contain an idea of this sort. Perhaps we could start here and move forward?

The 'controlling state' uses two basic policy tools, fiscal and monetary policy, to manifest its control.

Both policy tools are implemented through institutions, some more democratic than others. Isn't this where the debate should be?

Are our fiscal and monetary institutions designed for optimal political and economic outcomes? What is the theory on optimal institutional control structures?

[anne]

http://www.nytimes.com/2008/05/11/world/africa/11sudan.html

May 11, 2008

Sudan's Army Beats Back Attack on Capital
By JEFFREY GETTLEMAN

Darfurian rebels advanced to within a few miles of the center of Khartoum, and the government deployed troops, essentially shutting down the city.

[Gold]

Econo..."The U.S. has promised that it will continue to convert dollars to gold at $600 per ounce. But that will require them to raise interest rates..."

No it doesn't, it requires giving the physical gold to anyone who asks. If you don't have the gold, don't create the money. That's how a gold standard really works.

Exasperation with constant inflation is driving people to ask for a return to gold. Simply keeping inflation at zero (measured by an impartial organization) would solve the problem. Borrowers love not having to repay, but those who lose hate inflation. The savings rate is zero, and elderly pensioners are close to eating cat food.

[anne]

http://krugman.blogs.nytimes.com/2008/05/10/the-eh-team/

May 10, 2008

The Eh Team
By Paul Krugman

We’re #1 [Chart]

OK, I knew that US public transit was pathetic compared with Western Europe; but if you try to talk about Europe, people start going on about population density, as if we all lived in Montana or something.

Anyway, Canada has lots of open space, too — and it doesn’t even have $8 a gallon gas. Yet it still has usable public transit in a lot more cities than we do.