Archive for November, 2007

There are plenty of jobs; it’s just that no one wants them.

Thursday, November 29th, 2007

I always get mad when I hear people spouting off about how the immigrants are taking away jobs from those poor blue collar Americans. Speaking as a blue collar American, I know that this is not so. There are plenty of good jobs out there for blue collar Americans; you just have to want them.

I live in an area that is aging rapidly because most of young people move out of the area. One of the commonly cited reasons for this outward migration is that there are no jobs in the area. Yet at the same time a local heating company sends out flyers advertising the fact that they will hire people off the streets with no experience and pay them to learn how to be HVAC techs.

This is not a scam and it is not an isolated incident. All over the country there is a desperate shortage of HVAC techs. The trade magazines are full of advice on how to find and retain techs. And this is not just because of the boom times that we are currently living in. People in the north need their furnaces fixed no matter what the economic climate is like. Likewise, most people in the south would have to get pretty desperate before they would live without air conditioning. So you have this constant demand that has to be met and yet HVAC techs are retiring in droves.

Of course, there are other trades that are in similar positions. Certain medical jobs are also in high demand around the country. The long and the short of it is that you can get a decent blue collar job anywhere in the country by just taking about 6 months of education at a local trade school. And if you are poor enough, you can find government money to fund that education.

I know of an immigrant from Africa who held down a low paying job, went to a trade school, and supported his family back in Africa all at the same time (he planned on using his trade education to get a better job so that he could pay his way through college). If some dude that just got off the boat can do it, a native born American can do it.

The reason that this issue bugs me so much is that a few years back I wanted to better myself. I wanted to get into either the electrical field or HVAC field. To that end I wanted to take classes in the evening so that I could qualify for jobs in the field. I started out wanting to take one evening HVAC course that would have qualified me for a particular job that was always in demand. But that was canceled twice on me in spite of the fact that a co-worker and I went around trying to draft people to take the class. So I started trying to take any class that was remotely connected to the fields I wanted to get into, but they kept on getting canceled for lack of interest.

It was very frustrating for me to see all these jobs available in those sectors and yet there was not enough interest in those trades to warrant holding evening classes to enable one to get a job in those areas. As it turned out, that did not matter. I more or less got to where I wanted to go anyway.

But it still amazes me that there is so little interest in learning a trade that will pay you a decent wage. And I still find it disgusting that so many of my compatriots lie around complaining that immigrants are stealing all the good jobs.

Their definition of a good job seems to be one in which you don’t have to know anything and you don’t have to do anything and you still get paid well. I don’t know that such jobs were ever plentiful.

Social Security is only a problem if you look at the larger context

Wednesday, November 28th, 2007

Megan McArdle ran a post entitled Demography is Destiny today. I was happy to see it. For some reason I had her pegged as part of the “Demographics don’t really matter” group because of some posts that I saw go up on Free Exchange. Recent posts at her new site have demonstrated that I was mistaken.

Unfortunately, her latest post revolves around Social Security and why the optimistic projections for its future are almost certainly wrong. This issue has been hashed over so many times that revisiting it does not contribute much to the debate. Most Americans realize Social Security has problems. Most Americans also think that Social Security problems are relatively easy problems to fix. If you talk about America’s demographic problems in terms of Social Security, most Americans are already going to have a well formed opinion so discussing the issue is not going to get you anywhere.

One of the problems with discussing America’s demographic problems in the context of Social Security is that all the answers seem obvious. Only blind ideologues refuse to admit that Social Security has problems. But by the same token, when the focus is only on Social Security, only people with a blind hatred for the program will refuse to admit that the problems are easily solved.

So you have to raise the retirement age to keep the program solvent. Big deal. We are all living longer. Heck, we don’t even have to raise the retirement age. If we were willing to stop playing super cop and cut our military spending we could keep the current form of social security with only modest tax increases. As Barkley Rosser likes to point out, by 2030 we will have a retiree to worker ratio that much of Western Europe has right now. So if you keep the discussion focused on Social Security, reasonable people are going to feel that America’s demographic problems are no big deal.

But of course, we will not be dealing with Social Security in isolation. There are the other entitlements like Medicare. There is the fact that most local and state governments have severely underfunded retirement systems. There is the fact that medical costs soar with age so health care costs will sky rocket as the average age of population increases. There is the fact that world birth rates have been falling so that the supply of immigrants that we currently rely on to do many jobs will start to dry up just as we need them most. It is only when we consider all the ways that an aging population will cost more that we start to realize the true scope of the demographic problem. Social Security is only a drop in the bucket.

I wish Ms. McArdle had chosen to focus more on the issue of the shrinking labor force. She mentioned the issue, but only in the context of why it would be harder to fund Social Security. But the shrinking labor force is going to have a profound effect on how we live our lives. Even if Social Security were not a problem, the effects of the shrinking labor force would be devastating.

I don’t think most people appreciate how devastating the shrinking work force is going to be because they think that all parts of the work force will shrink at the same rate. Thus they imagine the work force of the future as being a smaller version of the one we have now. But it is not going to work out that way. It will be a long time before our stock of trained IT workers depletes significantly. But our stock of people trained in the construction trades is going to all but disappear in the next 10 to 20 years. Given the state of our infrastructure, that is going to cause big problems down the road.

In which I am mentioned in a Podcast…

Thursday, November 15th, 2007

The writers over at Architecture + Morality have decided to experiment with podcasting. So for the first time ever, I listened to a podcast.

I enjoyed it more than I thought I would. They certainly pulled off the format far better than I would have. I think that it does me good to hear intelligent people talk about things that I have only read about. For one thing, I heard names pronounced out loud that I never heard pronounced before. That is no small thing when you are self-educated. (Though I am invincibly ignorant when it come to proper pronunciation, so I am not sure how much good that is going to do me.)

Having said that, I would still prefer to read an essay to hearing a podcast. I find it harder to think about what people are saying when their ideas come to me in spoken form.

But that is neither here nor there. I will take a podcast over nothing. The best part about a podcast is that it can clear the air of a lot of little things that are not deep enough to warrant an essay but still interest the fans.

For example, I have long wondered why Corbusier calls himself “Corbusier” when his philosophy seems to have very little in common with his namesake. The podcast sort of cleared that up. At least I now know that it is in large part self-consciously ironic. But I still don’t fully understand.

I mean Corbusier clearly has the same negative reaction to much of modern architecture that I do. He basically comes out and says that most architects should not do modern architecture. Yet there is still something that he seems to think that modern architecture can do that the classical forms cannot. Given that I seem share of a lot of his aesthetic sense, I wonder if I am missing something.

I make no secret out of my intense dislike for modern architecture, but it must be admitted that I do not have a very deep education in the field. There is only one building designed according to the tenets of modern architecture that I am personally familiar with. All the rest of my knowledge of modern architecture comes from things that I have read or passing by buildings that I hope never to have to deal with.

But the one building I am familiar with I know pretty well. And it just seems like I can see repeats of what I hate about that building in all the so called “great” modern architecture.

Also, Corbusier says that a designer should strive to create beauty and then admits that much of what New Urbanism creates looks fake. I am curious as to what Corbusier thinks makes something beautiful and how his conception of beauty could improve New Urbanism. (I am presuming he shares my view that the fake is not beautiful. That is not always a safe assumption in the post-modern world).

Anyway, if you are just surfing the web and you enjoy hearing an educated person make articulate small talk, by all means play their podcast in the background.

But not withstanding the title of my post, those who listen to it just because I am mentioned will be disappointed. It is only the briefest of mentions. But I could not think of a better title for this random collection of thoughts.

In which I beat a dead horse

Tuesday, November 13th, 2007

This was a comment that I left on this post over at Marginal Revolution. For those too lazy to follow the link, Tyler Cowen has this conceit that he has an evil twin called Tyrone. Tyrone provides Mr. Cowen with an opportunity to argue against his own positions just for the fun of it.

Tyrone makes some good arguments, but he still loses the debate. It is impossible for the majority of people to be truly unhappy in a country as filthy rich as ours.

Sure, your average blue collar dude may get disgusted by how much money a hedge fund manager makes. But your average blue collar dude can also afford all the food he wants. He lives in a house that has heating and air conditioning. He has cable TV. He can buy all the beer he wants. He can afford to smoke even with the high taxes imposed on cigarettes.

So if our average blue collar dude should ever feel unhappy he can drown his mind with sensations. He can watch porn. If that does not work he can drink beer. Or he can stuff his face with food. Or he can buy a motorcycle and let the thrill of speed wash his troubles away. You can get high without ever needing to resort to illegal drugs. It is as if even the low class blue collar workers have free access to soma (and this is why increasing numbers of young males don’t see the point of bettering themselves).

But if Tyrone was truly as evil as he pretends to be, he never would accept the premise that lies behind the debate. He would argue that just as people can become grossly obese in the effort to satisfy their appetite for food so, too, they can become disgusting through their efforts to become happy.

For example, my understanding of happiness research is that people are made unhappy by being in the presence of people who are clearly better off than they are no matter how well off they are in absolute terms. On the other hand, you can make people feel happier by making them feel clearly superior to someone else. Thus you can raise the net happiness of a group by making a small part of that group a clearly marked out and despised sub group. By enabling the vast majority to say “whatever my problems, at least I am not them” you raise net happiness.

If you really want people to be happy, you can take a small part of the sub group that is perceived to be more successful than the rest and grind them into the dust. Then there will be dancing in the streets.

Obviously this is a little extreme. But as I argued (albeit poorly) happiness is overrated. It is not a moral state. You should always be asking, “Why are they happy?” as well as “are they happy?” And like all sensations, happiness should be experienced in moderation.

And yes, this is just a variation on the argument that I made in Aesthetic of Despair. But I can’t help myself. All humans occasionally betray their similarities to turntables when the record gets stuck.

What’s so great about happiness?

Monday, November 12th, 2007

Over at Marginal Revolution we read….

It was Jeffrey Sachs and Betsey Stevenson against myself and Will Wilkinson on the topic of whether America is failing in the pursuit of happiness. The Economist magazine was the sponsor and it was held in Gotham Hall in New York, which yes could have been out of a Batman movie.

Naturally, Tyler Cowen and Will Wilkinson won the debate. Mr. Sachs and Ms. Stevenson had overwhelming support from the crowd at the beginning of the debate (the debate was held in New York after all) but that was not enough to enable them to overcome the brilliance their opponents. Hooray for Mr. Cowen and Mr. Wilkinson! Down with the liberals!

But I have to say that I found the whole debate rather disturbing. Or rather, I should say that I find people who use happiness as a metric for judging a nation’s success disturbing. It always makes me feel as if people are being prepared to accept tyranny.

But let’s ignore my feelings for the time being. I can’t really argue against using happiness as metric on the grounds that it makes me unhappy for people do so. Instead, let us consider what the implications are of using happiness as metric.

First of all, what do happiness researchers mean by happiness?

As I understand it; happiness is a fundamentally amoral concept. Saying that a person is happy/unhappy is not a moral judgment. More to the point, it should be possible to come up with a biological definition of happiness in the same way that depression is now being defined in biological terms.

I think that economists are attracted to happiness research because it holds out the promise of having an objective biological standard that you can use to measure policy outcomes. Granted, right now happiness is self-reported and thus not objective. But there is no reason that it needs to stay that way. Besides, just because happiness is self-reported does not mean that it is a useless indicator any more then people’s self-reporting of pain is useless to medical professionals. In both cases, people are reporting a real biological phenomenon and there is no reason to dismiss what they say out of hand (though allowances should be made for cultural differences).

But why should economists want a biological means to measure policy outcomes? Whatever happened to physical measures of policy outcomes (i.e the increases or decreases in economic activity as measured in goods and services)?

The answer revolves around the truism that “money isn’t everything.” Even in the purely economic sense, it is obvious that people will sometimes voluntarily give up high paying jobs for low paying jobs in order to secure for themselves non-monetary benefits. In a small enough sample size this would cause aggregate goods and services to go down. Theoretically, then, a country with a slower GDP growth could be a more desirable place to live than a country with faster GDP growth.

Because of this theoretical possibility, economists have often been criticized for assuming that GDP growth is all. The argument is made that when economists (in particular neo-classical economists) evaluate policies solely on economists they wind up promoting policies that are actually harmful to people’s well being.

It is natural, then, that economists would look for a metric that could measure “everything.” It is also natural that they would turn to biological measures to do so. Are we not biological creatures? And is not happiness what we all strive towards?

But if people want to reject GDP growth (or lack thereof) as a measure of the success or failure of economic policies because they can give a misleading picture of what is actually good for people, then they should be even more leery of using happiness as a metric. What makes people happy is not necessarily good for them any more than having more material goods is necessarily good for them.

An analogy can be drawn to people’s appetite for food. Just because people have a natural biological desire for food does not mean that we should judge a policy’s success on the extent that it allowed people to indulge their biological appetite for food. That would be a policy that would encourage obesity.

If we use happiness as a metric, we risk similarly absurd policy outcomes. For example, why not put people on drugs that keeps them perpetually happy? Even if it shortens their life span somewhat, you still have increased the total happiness of your society. Even if the drugs increased people’s life spans, I would still argue that such a policy is harmful.

Such an example might seem extreme. But in a society that wants to drug up naturally active kids so that they will fit into the classroom environment better, it is not that farfetched.

But if Brave New World type scenarios seem like an unfair way to cast aspersions on happiness as a metric, why not look at the historical record? Take Adolf Hitler, for example.

As I understand it, the popularity of Hitler’s pre-war government had a lot to do with his success at making people happy without investing the time and effort to increase absolute wealth. That is to say, Hitler’s popularity did not come by increasing the amount of wealth in Germany, but rather he changed the Germans’ perception of their circumstances.

For example, I remember reading one study (which I don’t have time to find again for this short blog post) that showed that under Hitler, labor was actually worse off that it was under previous governments. Yet his popularity amongst the labor class actually grew even as they became worse off in absolute terms than they were previously. The authors of the study speculated that this was because their jobs became more secure even as their absolute income fell. (This was a natural result of the labor laws that Hitler passed early in his rule).

Was Hitler’s success at making people happy proof that his economic policies were beneficial to the German people?

Hitler might seem like an extreme example. But regardless of your ideological beliefs, you can find examples of things that make people happy that are not “good for them.” Conversely, you can find things that you think should make people happy but don’t. Will Wilkinson proves the latter point when he says…

The debate continues in my mind. At one point in the main event Stevenson cut me off to express incredulity that welfare benefits didn’t improve the average happiness of the unemployed. I certainly wasn’t making it up. I don’t know what explains the finding, but there are a number of reasons why this isn’t at all implausible.

One might be tempted to argue that while happiness over the short term is not very good metric but happiness over the long term is. But that raises the question; what is the short term?

For example, let us say that a whole generation promises themselves all kinds of benefits when they get older but leaves the legal obligation to pay for those benefits to the next generation. Let us say that those promised benefits increase the happiness of this generation because it frees them from having to worry about their future. So for decades this policy increases happiness even though its price has not yet come due. Is happiness a good metric by which to measure the success of this policy?

I am not trying be overly dogmatic. Societies that people want to live in will generally tend to have higher GDP growth per person than societies that people don’t want to live in. Similarly, I don’t deny that well run societies are generally happier that poorly run societies.

But if what made people happy was always the best choice for a society, then all societies would be well run. The fact of the matter is that what makes you happy is not always the right choice. Stay too focused on happiness, and everything will end in disaster.

I did not expect to be proved right so soon

Friday, November 9th, 2007

Yesterday, I said….

Now I can’t get away from the sneaking suspicion that what Cramer says on television is what the rich and powerful are saying behind closed doors. Call me paranoid, but I would not be surprised to see Cuomo get slapped down. If your are a glutton for punishment you can watch the video of Cramer crying about Cuomo below.

Today, the slapping down of Cuomo started.

Stories of the absurd

Thursday, November 8th, 2007

I have a hard time writing about the current financial problems afflicting this country. Every day I have been reading about a new company that is losing billions of dollars for some reason or other. Wake me up when somebody manages to lose a trillion dollars or a major bank goes bankrupt. The only thing that manages to keep me interested is the absurdity of it all.

For example, did you know that buying sweaters is a major part of US retail sales? This from Bloomberg story called “U.S. Retail Sales in October Trail Analyst Estimates”…

Sales at Wal-Mart Stores Inc., Macy’s Inc. and other U.S. retailers trailed analysts’ estimates last month after record-high temperatures in the Northeast reduced demand for jackets and sweaters.

In the past I have been told that sales were slumping because bad weather prevented people from going shopping. Now I find that good weather can cause people to stop shopping at Wal-Mart. Who knew that global warming was the only thing that could halt Wal-Mart from taking over the world? Yet another reason to drive an SUV with pride.

I am being cruel to the Bloomberg story. But the idea that Wal-Mart’s profits were hurt by people’s failure to buy sweaters when gas prices are high and sub-prime mortgages are blowing up everywhere was just too funny to pass up. That dang warm weather will get you every time.

Moving on to another Bloomberg story….

Part of the losses stemmed from derivative contracts the firm’s proprietary trading unit wrote earlier in the year, Kelleher said. The traders anticipated a decline in the value of subprime securities, and the contracts made money for the firm in the second quarter, he said. They started losing money when prices fell below the level the traders had anticipated, Kelleher said.

“These exposures did not come out of our client-facing activities, these were a proprietary position we put on,” Kelleher said in a conference call with analysts today. “As markets continued to decline our risk exposure swung from short, to flat to long.”

That is called outsmarting yourself big time. I wasted valuable minutes of my life trying to figure out how they managed to lose $3.7 billion betting that the value of subprime securities would go down. You would have thought that anyone could make money betting that subprime securities would go down. After all, the stuff has been dropping like a rock. But no, Morgan Stanly lost money because the securities went down by more than they thought they would.

What gives? How do you turn a bet that subprime securities are going to fall into something that cost you money if they fall too much? Felix Salmon takes a stab at explaining this but I still don’t really understand it.

More evil chuckles came when I saw this story on Naked Capitalism. You should really read it yourself, but I will give you the Cliff Notes version.

Remember how all the banks got together and pushed a new bankruptcy law through Congress? It was supposed to make it easier for banks to make money by making it harder for people to just walk away from their credit card debt. The banks figured that with the strong arm of law behind them they would not have to worry so much about whether people could actually afford to pay them back.

Supposedly, this is now coming back to bite them. Since people have a harder time getting a chapter 7 bankruptcy (which did away with all their non-mortgage debt) they are now giving up on paying everything (including their mortgage). Thus whatever they saved by making people pay back their credit card debt they are losing to increased foreclosures.

You can’t get blood out of stone. If you lend more money to people than they have any hope of repaying, you are going to lose money no matter what the law says.

Speaking of the law; New York State Attorney General Andrew Cuomo is causing a big stir by investigating Washington Mutual for inflating appraisals. Tanta over at Calculated Risk has a fascinating explanation of what is going on. It probably reflects my sick sense of humor, but I thought it was funny. Reminded me of Adam and Eve in the Garden of Eden when God came looking for them.

But what I did not find funny was the video clip from Cramer bad mouthing Cuomo and saying he was going to cause the end of the world. The first time I saw a clip of him going off his rocker, I thought it was hilarious. But then the Fed went and did what Cramer wanted. That is why we are going to have gas that costs $4 bucks a galleon before long.

Now I can’t get away from the sneaking suspicion that what Cramer says on television is what the rich and powerful are saying behind closed doors. Call me paranoid, but I would not be surprised to see Cuomo get slapped down. If your are a glutton for punishment you can watch the video of Cramer crying about Cuomo below.

I cannot find anything amusing in the fact that people like Cramer are setting fiscal policy in the US.

Even if peak oilers are right, oil prices can still fall.

Monday, November 5th, 2007

I have never had much use for peak oil believers. Their arguments are generally not worth the time it takes to read them. But my arrogant dismissal of peak oil has been shaken by Stuart Staniford. Unlike most peak oilers, Mr. Staniford really gives you something to think about.

While I was reading Mr. Staniford’s latest post, it struck me that he was one of the few people who have truly shaken up my view of the world in recent years. When I was a teenager this would not have been so noteworthy. But as I get older, it seems like I have seen every argument a million times already. In that context, Mr. Staniford is like a breath of fresh air.

I may have already said as much in some past post. I am too tired to take the time to check my archives. My point in bringing it up again (if that is what I am doing) is twofold. First, I want to encourage people to read Mr. Staniford’s latest post. Second, I want to raise an issue that runs contrary to everything that Mr. Staniford has been discussing.

I believe that even if everything that Mr. Staniford says is true, oil prices could drop like a rock in real terms in the near future. I can imagine most of the oil producing countries falling on hard economic times. I can imagine people wondering why they ever thought oil scarcity was going to be a problem

Given that oil prices are fast closing in on 100 dollars a barrel, this seems like a pretty wild statement. After all, even Mr. Rapier thinks that oil producers are going to do very well in the decades to come and he is the most intelligent critic that Mr. Staniford has. How can oil producers possibly suffer in the world of declining oil production that Mr. Staniford predicts?

The answer is simple. If demand falls by more than production, oil prices will crater even if production is off its peak. Most peak oilers do not foresee this happening because they know more about the history of oil production than they do economics. They assume that oil producers will always have the whip hand.

But let us say that a severe global economic downturn causes oil demand to drop like a rock. If it drops faster than production is “naturally” dropping off due to “peak oil,” then producers will have to cut back on production just to keep the price of oil from falling. But even if they do that, the oil producers will still be pulling in less money than they were before because they will be selling less barrels of oil for the same price per barrel. This ought to be self evident, but for some people it is not.

Some peak oil believers seem to think that oil producers could just cut way back on production and cause oil prices to stay high enough that oil producers will still make the same amount of money as before the drop in demand.

But this is false. Such a course of action would only cause demand to drop still further and the oil producers would be right back where they started. There is no way that oil producers can escape from the fact that falling demand (relative to supply) equals falling income.

What most people forget is that the thing that has been keeping oil prices high is not the fact that supply has been leveling off, but the fact that demand has stayed strong. If demand fell in line with supply we would not have seen the price run ups. But it has not, so prices have had to rise high enough to price people out of the market.

If you can understand how the income for oil producers will go down if demand falls faster than supply, even if you buy the peak oil view of potential supply, you should be able to understand how this situation would lead to lower oil prices.

Let us say that you are a country like Iran or Venezuela. Both of these countries are spending everything they’ve got right now even though oil prices are high. If their oil income falls, their economies are going to fall right along with it. They have no cushion.

If you were in these countries’ shoes, would you cut production when demand dropped? Especially if much of the benefit to keeping prices high went to the bigger producers? No, you would produce every last drop that you could in an effort to keep your oil income from falling. Let the big guys make the production cuts.

Historically, this is what has broken OPEC pricing power in the past. And I don’t see any reason why it can’t happen again.

I only bring this up because more and more people seem to be investing their life’s savings around the idea that oil will always go up. That is not a bet I would want to make even if the peak oilers are right.