Hypothetical Bias

I repeat: "the total U.S. employment of 142 million workers stands at an all-time high" ... so don't worry about the 37 million in poverty

In response to the Census Bureau's report that the economy has improved mostly for those who were already doing pretty well (poverty up, median incomes flat):

... Bush administration officials noted that the job market had continued to improve since the end of 2004 and that they hoped incomes were now rising and poverty was falling. The poverty rate "is the last, lonely trailing indicator of the business cycle," said Elizabeth Anderson, chief of staff in Commerce Department's economics and statistics administration.

...

"It looks like the gains from the recovery haven't really filtered down," said Phillip L. Swagel, a resident scholar at the American Enterprise Institute in Washington. "The gains have gone to owners of capital and not to workers."

There has always been a lag between an the end of a recession and the resumption of pay raises, Mr. Swagel added, but the length of this lag has been confounding.

In response to criticism about the distribution of economic gains during the economic recovery and expansion, many are defensively saying dumb things like this (Larry Kudlow at the NRO):

Not surprisingly, the total U.S. employment of 142 million workers stands at an all-time high.

It is dumb because it is almost entirely due to population growth (and that's why it is not surprising). After the Census report, will we read Kudlow and others state that the number of people in poverty are at an all-time high? I doubt it. Why? Not because it is dumb, and it is a dumb statement for the same reason as above, but because cheerleaders are upbeat people and don't report stats that don't fit the theories or politics. [Also, it is not true, according to the Census Report the number in poverty was greater during the early 1960s].

Why won't anyone with any power carry the ball for low-income people?

Protect this house

SI's The 10 Spot provides a stock tip:

Under Armour: The athletic gear company has filed papers with the SEC (the Securities and Exchange Commission, not the Southeastern Conference) to offer up to $100 million in common stock in an IPO. It sounds like founder and CEO Kevin Plank will soon have to protect a bigger house.

If the joke is beyond you, check out the commercials, all three, at the Under Armour website. Click on "view commercial" at the bottom. "Nobody beats us in our house!"

Katrina and GDP

From the WSJ's Afternoon Report:

But amid the grief and heartbreak, it should be noted that growth often follows such catastrophe. Hurricanes Andrew in 1992 and Floyd in 1999, for example, both ended up boosting local and national growth rates as rebuilding efforts created jobs and increased spending.

Yep, net spending may increase following a natural disaster (if rebuilding spending exceeds the lost economic activity) but resources are diverted from more productive activities to pursue the rebuilding effort. Plus, don't forget about the welfare loss suffered by the victims of the disaster.

The possible increase in GDP following a natural or technological disaster is one reason why GDP is an imperfect measure of economic welfare -- not an indication that "growth often follows such catastrophe" with job creation and increased spending.

Update: Here and here are some better posts on the broken window fallacy.

First Economics Department Blog?

The Department of Economics at Appalachian State University has launched its own blog at http://www.asu-econ.net. The purpose of the blog is to keep the campus and region updated on happenings in the department, the regional and national economy, and other bits and pieces of economic information.

Is this the first economics department blog?

Sunk costs

The Denver International Airport is shutting down their automated baggage handling system (Denver Airport ...). It was pricey:

Tours that preceded the system's debut led invariably to an airport basement where 26 miles of track, loaded with thousands of small gray carts, sped bags up and down inclines as conveyor belts minutely timed by the computer deposited each bag in its cart at just the right moment.

"They were so proud of it," said Raymond Neidl, an airline-aerospace analyst with Calyon Securities in New York. "It's the one thing they wanted to show you."

But then the price tag ballooned along with glitches. Construction costs of $186 million were compounded at a rate of $1 million a day for months in 1994 when the airport's opening was delayed by baggage-handling failures. Tens of millions more have been spent in the years since for repairs and modifications.

Instead of continuing to pour money down the black hole (i.e., the best way of honoring the fallen luggage is to make sure we deliver future luggage to the right place at the right time with the same luggage system that mangled past luggage), United, the only airline to ever use the system, has recognized that the additional benefits of the system are less than the additional costs. That is a recognition by a rational decision maker that sunk costs don't matter. Rational decision makers can admit their past mistakes.