Posts from — July 2008

Since we’ve looked at Messrs McCain and Obama’s positions on Social Security, it is now time for my proposal to fix Social Security.  There are two issues here.  The first is the looming bankruptcy of the system.  The second is the long-term, efficient operation of Social Security.  These problems need to be separated, because they require very different medicine.  Let’s begin with the goal of Social Security.  The goal is to reinforce the social compact that exists between today’s workers and today’s retirees.  As long as people wish to retire, they will require a means to finance it.  The role of Social Security is to provide a level of material living below which no retiree will subsist.  This level is absolute, it applies to every retiree whether one enters retirement in opulence or indigence.  This universal inclusion forms the fabric of the social compact that binds us all together.  Now that we have a guiding philosophy of sorts, let’s turn to the solutions.

To remedy the looming bankruptcy, a few things must be done, but they all involve increasing revenues. [Read more →]

Since we had a spirited discussion about Americans and guns, I thought I would throw out a proposal for your consideration.  This proposal will mollify some of our gun apprehension, while retaining Americans’ right to bear arms.  I will not use any data to back up my proposal, since well, it’s just a proposal.  The proposal involves two things: restrictions and liability.  The basis of the restrictions is derived from the fact that the right to bear arms is encumbered.  There seems to be a consensus among the framers as well as among contemporary Americans that there should be restrictions on the right to bear arms.  There is not a consensus on the limit or form that these restrictions should take.  The liability of gun manufacturing, gun distributing, gun selling and gun owning is not often discussed, but my proposal includes their consideration, since they present us with an instrument which helps to align the incentives of these actors with those of society.  The granting of rights and restriction of rights must achieve a balance which is amenable to society as a whole.  This proposal attempts to achieve a concerned balance. [Read more →]

Obama promises (around minute 5) to protect Social Security, “today, tomorrow and forever.”  Perhaps he was thinking of the Elvis Presley song.  Obama’s love for Social Security aside, what does he plan to do to keep his loved one from a retirement of penury and destitution?  His stance is similar to McCain’s,

We… have an obligation to protect Social Security and ensure that it’s a safety net the American people can count on today, tomorrow and forever. Social Security is the cornerstone of the social compact in this country… [Read more →]

This Politico article describes economists’ support for McCain.  The article describes how 300 economists support McCain’s Jobs for America plan.  McCain’s press statement, which includes the statement and the list of economists who signed on (Lawrence was suprised to find some signatories from an institution near and dear to his heart.), is here.  The full 15 page plan is here.  Should we abandon our rational analysis of the policies of McCain and Obama, because 300 of our (future) peers endorse McCain’s economic plan?  First and foremost, no.  To abandon our analysis is foolish.  At the Three Economist’s Blog we arrive at our own conclusions!  If anything, this overwhelming endorsement should warrant an even closer inspection, lest we become ensared by groupthink.  Besides, when did someone telling you what to think make you want to actually think that?  Second, the economists’ endorsement (not to be confused with The Economist’s, they have yet to make one) was only with respect to the general ideas of McCain’s plan.  As the article states, economists only signed onto a 403 word statement, which did not mention all the specific proposals outlined in McCain’s more detailed “Jobs for America” plan.  If anything this endorsement is only illustrative of the much encountered situation, “I agree with you in principle, but…”

John McCain recently quipped, “Social Security is a disgrace.”  It was one of those regularly occurring political gaffes that make watching politics so much fun.  I would surmise that he is spinning this as, “what I meant to say was the way in which our government has handled the social security program is a disgrace.”  Only McCain knows, but that doesn’t bar us from analyzing his previous positions and current, written proposals for Social Security.  McCain has taken a vow to reform social security in his first term in office.  However, McCain is as vague about his proposed reforms as a candidate for president can be.  This is a quote from his recently published, 15 page Economic Plan, from page 5,

John McCain will fight to save the future of Social Security, and he believes that we may meet our obligations to the retirees of today and the future without raising taxes. [Read more →]

I would like to make a prediction: the future is electric.  In the not so distant future, assuming oil doesn’t continue falling $15 as it did this week, our lives will be powered predominantly by electricity.  Currently, a good portion of our lives already are powered by little electrons zooming around copper pipes: lights, air conditioning, iPods, Zunes (for those of you that have a Zune), computers, refrigerators, hot water heaters.  Our cars are small power plants that produce electricity for all those creature comforts contained in the cabin.   You might ask, what’s left for electricity to power?  Your car.  [Read more →]

The third rail of American politics is up next in our look at the policies of Senators McCain and Obama.  In short, social security is a government mandated transfer of money from today’s workers to today’s retirees.  The program began during the Great Depression with the passage of the Social Security Act on August 14, 1935.  There is a very long and detailed, but brief, history on the Social Security Administration’s website which includes such gems as the fact that olive oil was economic security to the ancient Greeks.  [Read more →]

Now we turn to Obama’s stance on free trade.  Obama happens to fit very nicely into our taxonomy of views on trade.  He falls into the category of people that recognizes the benefits of free trade but is wary of the process by which trade achieves its ends.  Obama is a member of the CMOS wing and the CMAT wing of free-traders.  A proponent of cave mercatem and meeting our standards and assisted trade as described in an earlier post.  Obama’s believes that a myriad of standards should be prerequisites to existing and future trade pacts.  He labels his brand of free-trade as “fair-trade.”  [Read more →]

Today is July 14th. 219 years ago the Bastille in Paris was stormed, in order to provide severely upset people with ammunition (they had already gotten arms before). The event became one of the important symbols of the French revolution, and is celebrated still today. Reflecting on this, I was reminded of the US constitution, which aims to enable the population to manage a similar uprising against the rulers, if it ever became necessary.

Having said that, what makes it so difficult to understand that allowing anyone to own and carry firearms is not a welfare maximizing strategy? [Read more →]

Now it is time to classify McCain’s position on trade.  As stated previously, McCain is a free trader.  The question becomes, how do we classify his outlook to free trade in our newly minted taxonomy?  McCain is a Messianic Free Trader, minus the messianic.  In typical McCain fashion, he bucks classification.  (Of course, you have to wonder whether Lawrence purposefully constructed the taxonomy in order for this to happen.)  He is not a Messianic Free Trader, but he is also not a proponent of Cave Mercatem.  He does not propose restricting free trade with labor or environmental standards.  What he does do is more subtle. [Read more →]

Before we can compare McCain and Obama’s positions on trade, we have to give some background on the trade debate.  There are a whole slew of positions that people take on trade issues.  These stances arise from differing viewpoints on the effect that trade has on everything from growth, wages, the environment, labor standards and unemployment rates.  Let’s lay it all out there.

There are several kinds of “free-traders” in the political world. [Read more →]

According to John McCain’s website:

Ninety-five percent of the world’s customers lie outside our borders and we need to be at the table when the rules for access to those markets are written. To do so, the U.S. should engage in multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field and build effective enforcement of global trading rules.

It seems Senator McCain is a proponnent of free trade.  There is a great deal of consternation with regards to free trade, so for McCain to propose a reduction in barriers to trade, he must have good reason.  What are his motivations? Is Senator McCain an ardent free-trader or simply paying the subject lip service? [Read more →]

Google’s mission is to, “organize the world’s information and make it universally accessible and useful.”  That’s all well and good, but someone has to foot the bill.  Currently, the advertisers of the world are footing the bill.  Google places ads on its search engine results and on a network of sites.  When a web surfer (which mistakenly implies physical exertion) clicks on a link in an ad, the advertiser pays an agreed upon “cost per click.”  In 2007 65% of its ad revenue came from clicks on Google.com and 35% came from its network of sites (from Google Investor Relations).  What are advertisers really paying for and what is Google providing?  Web traffic rerouting. [Read more →]

Bill Gates taught us, and Steve Ballmer has reminded us, that developers are important, if not the lifeblood of a computing platform.  A computer running an operating system without them is nothing more than an expensive way to enable global warming.  So why would Apple, an operating system maker, want to compete against Adobe, a developer?  There are two reasons why Apple makes its professional applications like Aperture for photo organizing and Final Cut Studio for video and audio editing, one, to guarantee a minimum level of software quality that is available to the marginal professional user; two, to enforce its tacit development agreement with Adobe.  To unpack this we need some background on the professional software market.  I will use the photography workflow market as a case study.  In this space Apple produces Aperture, and Adobe produces Lightroom.  [Read more →]

There is no true consensus among academic economists regarding how the economy should be managed. Indeed, there are lists of impressively credentialed economists supporting the economic agenda of both presidential candidates (see here and here).

Economic modeling is tricky business, [Read more →]

I have heard the term “demand destruction” quite a bit over the past year in the context of high oil prices.  Usually it is some analyst or commentator on CNBC.  It seems like it is used enough to warrant a closer look.  So let this be in the spirit of a William Safire On Language column, but for a phrase bandied about in the economic world.  [Read more →]

In keeping with the announcement theme for today, I’d like to preview a series of posts on the energy realities of today.  According to the Energy Information Administration, the price of a barrel of oil has risen 98% in the last year.  What is behind this price rise?  A big oil conspiracy?  An OPEC connivance?  Gas-guzzling SUVs? A dragon roaring in the east? [Read more →]

Since we’re about reasoned political analysis here, it is fitting that we begin a series of posts on the 2008 presidential election between Senators McCain and Obama.  We intend to cover the policies proposed by both Senators.  This will include the candidates policies on taxes, trade, energy, health care, education (something near and dear to our hearts, since we’ve been in school so long!), and possibly others.  We’ll try to focus on the economic policies, but that doesn’t mean we’ll leave out the softer issues like gun control, gay marriage, abortion, civil liberties.  Again we welcome reader participation, so if you think one of us is off, by all means, let us know!  We look forward to all the coming discussion.  - 3EcoNBloG

This article introduces John McCain’s main economic advisor.

Interestingly, John McCain has managed to harm his image as a fiscal conservative by outlining his plans for tax cuts in detail, while only being vague about the spending cuts that are supposed to generate the necessary revenue (necessary, that is, if the tax cuts are supposed to be revenue neutral) and various ‘base broadening’ measures (i.e. closing tax loopholes) . [Read more →]