Friday, November 30, 2012

Hannah Green in Thinkprogress on Renewable Energy in India

She writes:

This August, power shortages in India that left 300 million in the dark made it very clear that one of the world’s fastest growing economies was facing an energy crisis. Less clear is how realistically to solve it. Many firms are looking for new sources of oil to fulfill India’s growing energy demands, but this could prove to be painfully expensive.  On the brighter side, solar energy and other renewable resources are already being rapidly harnessed in the non-Western world, and they are becoming cheaper and cheaper.
As of June 2012, 31 percent of India’s energy came from renewable resources, including hydroelectric power, while only 9 percent of the United States’ did as of the end of 2011. In a 2009 McKinsey & Company survey, India was rated the top producer of solar energy in the world, just above the United States, with an annual yield of 1,700 to 1,900 kilowatt hours per kilowatt peak (kWh/KWp). However, demand for energy in India will only continue to grow, and the question is whether energy will continue to come mainly from fossil fuels or from renewable energy sources...

Sunday, November 25, 2012

The housing cycle is the business cycle--again

Ed Leamer said so.  I said so.  And I continue to think it so.

Run a simple bi-directional Granger Causality model of change in residential investment and GDP.  It turns out a model with one and three lags best fits the data going back to 1969.  That model's four quarter forecast for GDP growth is 2.6, 2.5, 2.1 and 2.5 percent; for residential investment growth is 6.2, 5.0, 4.9 and 4.9 percent.  (BTW, the model passes the stationarity test).

But residential investment has grown by between 8.5 and 20 percent over the past four quarters.  Let's say that an exogenous shock (kids moving out of their parents' houses) leads residential investment to grow by 10 percent.  The forecast for GDP growth now increases to 2.6, 2.9, 2.6 and 2.9, or about .4 percentage points higher than the baseline case.  This increase in GDP reflects more than the direct impact of residential investment on GDP.

What is Apple's objective function?

Walter Isaacson's biography of Steve Jobs is a lot of fun--at least in part because it is not a hagiography.

One of the most striking things about the book is that Jobs never pushed profit maximization per se--he pushed "great products."  When John Scully pushed out Jobs and ran the company, he did push profit maximization--and Apple nearly went out of business.  Re-enter Jobs with his products-first philosophy, and Apple eventually becomes the most valuable company in history.

When economists model firms, we inevitably assume profit maximization, and then allow firms to compete either through price or quality.  The exception to this is a principal-agent set-up, where managers are seeking to maximize their own compensation.  But this doesn't really work for Apple, where Jobs was both a principal and an agent.

Maybe none of this matters--that making great products is a sufficiently strong proxy for profit maximization.  But Job's desire to make great products led him to care a lot less about cost minimization than, say, Dell--the chapter on how fanatical Jobs was about the plastic case molding for the original Macintosh underscores how Jobs tended not to think about marginal revenue and marginal cost when making decisions.

Wednesday, November 21, 2012

It turns out Harry Hopkins didn't say it

After Mitt Romney's "gifts" comments, I couldn't help but remember that I thought FDR advisor and WPA director Harry Hopkins said "we shall tax and tax, and spend and spend, and elect and elect."  But it turns out this is likely apocryphal--indeed, Hopkins denied having said any such thing.

Here is a nice chronology from Bartleby:

AUTHOR:Harry Lloyd Hopkins (1890–1946)
QUOTATION:We shall tax and tax, and spend and spend, and elect and elect.
ATTRIBUTION:Attributed to HARRY L. HOPKINS, administrator of the Works Progress Administration.

  Although Frank R. Kent mentioned the subject of “spending, taxes, and election” in reference to Hopkins in his column, “The Great Game of Politics” (Baltimore, Maryland, Sun, September 25, 1938, pp. 1, 16) he first attributed “we are going to spend and spend and spend, and tax and tax and tax, and elect and elect and elect” to Hopkins in the Sun, October 14, 1938, p. 15.

  Joseph Alsop and Robert Kintner in their column, “The Capital Parade” (Washington, D.C., Evening Star, November 9, 1938, p. A–11), elaborated Hopkins’s “probably apocryphal” words to: “Now, get this through your head. We’re going to spend and spend and spend, and tax and tax and tax, and re-elect and re-elect and re-elect, until you’re dead or forgotten.”

  Arthur Krock, in his column, “In the Nation” (The New York Times,November 10, 1938, p. 26), reported the wording as “we will spend and spend, and tax and tax, and elect and elect.” He also repeated this wording in an article in The New York Times, November 13, 1938, sec. 4, p. E–3. A letter by Hopkins denying this attributed quotation and a response by Krock were published in The New York Times, November 24, 1938, p. 26.

  Over the years the quotation attributed to Hopkins has evolved into the wording above.

Tuesday, November 13, 2012

The myth that taxes are too complicated for the typical American

I was listening to David Walker on the radio this morning, and he was going on about how tax preparation is too complicated for the vast majority of Americans.  This didn't seem right to me, so I went to the IRS SOI data Table 1.2 to see how many American's qualified for the 1040A return (a two-page form) or the 1040EZ return (a one page form).

The answer: of the 140 million tax returns filed in 2009, 90 million were filed by taxpayers that had adjusted gross income of less than $100,000 and that used the standard deduction.  These taxpayers qualify for using the 1040A or1040EZ.  So for more than 3/5 of US taxpayers, filing is not complicated at all.

Is the tax code too complicated for the other 50 million and for corporations?  Almost certainly.  But it is not a problem that afflicts the "vast majority" of Americans.

[update: according to this source, 32 percent of filers use 1040A or 1040EZ]

Monday, November 12, 2012

Mark Thoma suggests that Sheila Bair could be the next Treasury Secretary

He talks about the Fed and Treasury here.  Bair would be a superb choice.

Sunday, November 11, 2012

Coastlines and votes

President Obama did better on the coasts and the Great Lakes states than elsewhere.  I thought it would be fun to plot coastline/shoreline miles by state against Obama vote percentage in 2012.  Here is what I got:

The data on coastline/shoreline come from,4561,7-135-3313_3677-15959--,00.html and The Statistical Abstract of the United States, Table 364.  Vote totals come from Dave Leip's Atlas of Presidential Elections.  The correlation is .22, so not huge, but not nothing either.

If one adds Alaska, with its 6000+ miles of coastline and support of Romney, the correlation goes to zero.

Who is doing the shopping?

I was listening to a retailer last week discuss the interaction between housewives and grocery stores.  The tone of his remarks suggested that he thought housewives were grocery stores' principal customers.

This didn't seem right to me, so I tabulated the Family Type and Employment variable in the 2006-2010 sample of the American Community Sample (having a laptop with flash memory is pretty awesome--it allowed me to do it in about five minutes).

Here are the results:

Household Type                                           # of Households         % 0f Households

Married Couple, both in labor force|           22,309,285                           41.16      
Married Couple, only man in labor force      8,792,744                           16.22      
Married Couple, only woman in labor force 2,933,758                            5.41      
Married Couple, neither in labor force          6,473,742                          11.94      
Male only, in labor force                               2,848,830                            5.26      
Male only, not in labor force                            720,066                            1.33      
Female only, in labor force                            7,230,003                          13.34      
Female only, not in labor force                       2,890,776                           5.33    

I am guessing that most retailers know and understand the implications of a country where only 16 percent of households have housewives (in the traditional sense of the word), but perhaps they are not.

Saturday, November 10, 2012

I am not thrilled...

..that President Obama has made Tim Geithner the point person for budget negotiations. I very much hope he doesn't negotiate away the President's strong position.

Monday, November 05, 2012

Another thought on Nate Silver

If poll errors are randomly distributed across states, then Obama has it won.  But if they are not, Romney still had a chance.   If how voters break is one state relative to polls is correlated with how they break in others, then if they break toward Obama, it makes no difference to the ultimate win-lose outcome; but if they break toward Romney, it does make a difference.

So statistical independence in errors across polls is good for Obama; correlation is bad for him.

I was wondering about Nate Silver's confidence intervals.

There is a nice discussion here.