The Fantastic Unemployment Numbers!

 

Possibly because of the long weekend and possibly because the unemployment numbers don’t make Donald Trump look bad, there hasn’t been as much commentary as I had expected on the June unemployment numbers.

Here’s mine: They are fantastic!

Here’s the BLS release.

Now for some highlights.

Nonfarm payroll employment rose by 4.8 million in June. I’m not sure  but I’m pretty sure that this is a record increase. The previous, month, May, it was a whopping 2.5 million. So June’s number is almost double May’s increase.

The unemployment rate fell from 13.3 percent in May to 11.1 percent in June, a drop of 2.2 percentage points.

The number of people unemployed fell by a whopping 3.2 million. I think that’s a record drop also.

The labor force participation rate rose by 0.7 percentage point.

The employment to population ratio rose by 1.8 percentage points.

In thinking that the major recovery would not start until the added $600 per week federal unemployment ended (it ends at the end of July), I was too pessimistic.

I do think, though, that if Congress had not passed that benefit in March and had Donald Trump not signed the legislation, the unemployment rate today would be in high single digits, not low double digits.

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The totalitarian temptation

Opponents of libertarianism often point out that there are cases where government mandates can be welfare improving. I accept that argument, but not the implications that people draw from that fact.

The real question is not whether government power can make things better; it is whether government power will make things better, on average. I believe the answer is no.

I recently saw an article on mask regulations that made me almost burst out laughing:

After previously prohibiting local jurisdictions from imposing mask mandates, Mr. Abbott, a Republican, issued an executive order Thursday requiring residents to wear masks in public spaces, except in counties with 20 or fewer cases of coronavirus. Cases of Covid-19, the disease caused by the coronavirus, have been rising for weeks in the state.

Notice the governor’s supreme confidence in his wisdom.  A week ago he was so confident that mask mandates were a bad idea that he banned local governments—which presumably know their situation better than someone in faraway Austin—from mandating the wearing of masks.  He didn’t recommend against local mask mandates, he banned them.  Today this same individual is so confident that mandates are a good idea that he is requiring many local governments to ban masks.  He’s not recommending they do so, he’s requiring mask bans.

This is not about whether mask wearing is a good idea (I favor mask wearing and private sector mandates but oppose government mandates), this is about whether we can trust government officials to recognize that they don’t have all the answers, and that sometimes they should allow others to decide for themselves.  As soon as one gives power to government officials they will abuse that power, they will assume they know what’s best for us.

Pierre Lemieux has a new post that provides another such example.  He cites a WSJ article on masks:

U.S. Surgeon General Jerome M. Adams tweeted on Feb. 29: “Seriously people—STOP BUYING MASKS!” He has since apologized and now supports wearing them.

White House adviser Dr. Anthony Fauci said this month that he initially dismissed masks because medical workers were facing a shortage in supplies. He, too, is now an advocate.

I can’t overstate the damage done by these lies.  It would be one thing if the authorities had said, “masks are effective, but we have a shortage so don’t wear them.”  Even that would be slightly misleading, as the shortage was created by the government.  Instead they lied and said masks are not effective, as a way to discourage their use.  These government officials assumed that the public could not be trusted with true information.

In the future, public health officials might recommend that children be vaccinated for the measles, and people will recall when they were lied to about the efficacy of masks.

Over time, government mandates become a self-fulfilling prophecy.  The government has so many mandates that the public begins to assume that if something is not banned it must be safe.  They might assume that if masks are not required then they must be unneeded.  It then becomes more difficult to get voluntary compliance.

We’ve seen this in banking, where people stopped paying attention to the safety and soundness of banks after FDIC was instituted.  Before deposit insurance was mandated, people were very reluctant to deposit money in banks that were making lots of risky loans.  Now they don’t care.  If the public is treated like little children, they begin to behave like children.  Government power advocates then say, “see, the public is infantile and they must be told what to do.”

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Have a Non-Rivalrous and Non-Excludable 4th!

Sarah Skwire and Steve Horwitz

Here’s what we do every July 4th. First we grill some kind of meat, and then we eat pie. Then we sit on the back porch, and we wait for it to get dark. When we have decided that it’s dark enough, we gather up the kids, the bug spray, and a big beach blanket, and we drive a few subdivisions over to a spot just across from the summer home of the Indianapolis Symphony Orchestra. There, we join a small group of neighbors and plant ourselves outside the gates of the concert shell, where we can listen to Sousa marches and the 1812 Overture and wait for the fireworks to begin.

 

And some people say there’s no such thing as a true public good.

 

The classic economic definition of a public good is a good that is non-rivalrous and non-excludable. This means that no matter how many fireworks and Sousa marches we enjoy, our neighbors can still enjoy just as many along with us. And even though we didn’t buy the tickets the symphony would like us to buy, they can’t keep us from enjoying the show. Compare this to most goods. If I eat an apple it’s unavailable to anyone else, and apple sellers can ensure that people who want to eat apples have to pay for them. True public goods are rare, but fireworks are a great example. That’s why so many economists use them to teach the concept.

 

However, even fireworks have their limits as a public good, especially if we put stress on the word “good.” On July 4th, people want to see and hear fireworks and some are even willing to pay to do so. That they do so tells us that on July 4th, fireworks are an economic good. That’s not always the case. In Indiana, July 4th seems to extend from sometime in late June until sometime around mid-July. Fireworks are a constant sight, and especially sound, for weeks and weeks in the summer.

 

For many people, and even more dogs, this turns the public good of fireworks into a negative externality, or a kind of “public bad”. Kids are trying to sleep, adults want some peace and quiet, and dogs are just trying to stay sane. The same elements that make fireworks a public good on the 4th make them a real problem on other nights. The enjoyment of those who set them off does not make them invisible or inaudible to the rest of us. And no one can restrict the sights and sounds to those who are setting them off. The “publicness” of fireworks becomes a challenge when neighbors don’t want to experience them.

 

One of the central messages of economics is that actions and choices are always contextual. Fireworks serve nicely as an example of a public good, but only on the assumption that the context is one in which people wish to consume them. That won’t likely be true of fireworks every day of the year. 

 

The fireworks are quiet this year, and the symphony won’t be playing. As with a lot of public goods–like Joni Mitchell’s paved over paradise–we don’t know what we’ve got til it’s gone. This year, we’ll sit on the porch until it gets dark, and let the lightning bugs be our fireworks. But next year? We’ll be right back where we were, just outside the gates non-rivalrously enjoying our favorite public good. 

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What should I ask Nicholas Bloom?

I will be doing a Conversation with him, so what should I ask?  Here is part of his official bio: Nicholas (Nick) Bloom is the William Eberle Professor of Economics at Stanford University, a Senior Fellow of SIEPR, and the Co-Director of the Productivity, Innovation and Entrepreneurship program at the National Bureau of Economic Research. […]

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Deconvexifying the car, car feature markets in everything

…BMW is planning to move some features of its new cars to a subscription model, something it announced on Wednesday during a briefing for the press on the company’s digital plans. …now the Bavarian carmaker has plans to apply that model to features like heated seats. BMW says that owners can “benefit in advance from […]

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