Archive for May, 2008|Monthly archive page

Debunking Skill-biased Technical Change

David Card, who always does excellent work, and John DiNardo published a nice work on the subject. Here is their conclusion:

133-40: “Since the late 1980s, a consensus has emerged that the decline in real wages for low-skilled workers in the early 1980s and the subsequent slow recovery of these wage levels are explained by skill-biased technological change. In this chapter, we have argued that the evidence underlying this consensus is remarkably frail. Much of the evidence takes the form of “proof by residual.” After accounting for changes in relative supply and (in some cases) making a modest list of other factors, proponents of this consensus note that the decline in the relative wages of low-skilled labor remains unexplained. Skill-biased technological change is then left as the only plausible explanation for the facts. Given the state of knowledge about how labor markets work, we find this line of argument unconvincing. Moreover, the evidence that emerges from such an exercise is highly model-specific. Depending on how the data for different groups are organized, the degree of substitution that is allowed between workers of different genders or ages, and the list of other job characteristics that are included in the decomposition, the results can suggest that rising inequality was either an ubiquitous phenomenon affecting virtually all workers over the past three decades or a trend that mainly affected young workers in the early 1980s.”

Continue reading

My new book project- revised

I have rewritten the introduction again, along first chapter of my new book. I think that you will find that the focus is much sharper now. Any comments would be appreciated.


Wall Street Journal Evidence That Speculators Are Responsible for the Run Up in Oil?

The Journal article does not discuss oil, but chocolate. Even so, the article is of interest because it dismisses the idea that fundamentals are responsible for a rapid increase in prices.

The only speculator quoted responded that speculation can only cause higher prices in the short run because farmers can plant more trees. How long does a tree take to mature?

Patrick, Aaron O. 2008. “Candy Companies Blame Higher Prices On Hedge Funds’ Chocolate Cravings.” Wall Street Journal (28 May): p. C 1.

“Soaring cocoa prices are driving up the cost of chocolate around the world. The chocolate industry points its finger at speculative buying by professional investors, especially hedge funds.” Continue reading

War For Oil, Or Oil For War?

The Wall Street Journal has an article suggesting that the military consumes 340,000 barrels of oil a day, compared to Iraq’s 2.4 million; and that the Defense Department paid $13.6 billion for energy in 2006. I suspect that these figures would be what uniformed personnel consumed. Maybe somebody here knows, but I feel fairly confident that contractors in Iraq — even contractors carrying out military missions — consume oil that escapes these estimates.

Wasting oil is nothing compared to wasting lives, but even so I can think of better uses for 340,000 barrels of oil a day.

Dreazen, Yochi J. 2008. “U.S. Military Launches Alternative-Fuel Push Dependence on Oil.” Wall Street Journal (21 May): p A 1.

“The U.S. military consumes 340,000 barrels of oil a day, or 1.5% of all of the oil used in the country. The Defense Department’s overall energy bill was $13.6 billion in 2006, the latest figure available — almost 25% higher than the year before. The Air Force’s bill for jet fuel alone has tripled in the past four years. When the White House submitted its latest budget request for the wars in Iraq and Afghanistan, it tacked on a $2 billion surcharge for rising fuel costs.”

“Just as important, the military is increasingly concerned that its dependence on oil represents a strategic threat. U.S. forces in Iraq alone consume 40,000 barrels of oil a day trucked in from neighboring countries.”

“The Air Force wants to be able to purchase 400 million gallons of synthetic jet fuel a year by 2016, an amount equal to 25% of its total fuel needs for missions in the continental U.S. This year, it expects to buy slightly more than 300,000 gallons.”

Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms?

Every once in a while The American Economic Review publishes something interesting. A recent article gave pretty solid evidence that the Civil War promoted by Jonas Savimbi raised profits for the diamond industry.

A long-standing theory in economics is that peaceful development is in the interests of business. 18th century theorists use to write about “sweet commerce.” But Savimbi offered business the opportunity for an alternative government to bid against the Angolan government, thereby converting government rents into profits.

Once peace broke out, the levels profits subsided. Continue reading

Political Economy and the Press: Karl Marx and Henry Carey at the New York Tribune

Karl Marx’s influential articles on India had less to do with India than Marx’s efforts to take control of the leading Republican paper in the United States. I am posting an ancient copy of my work on the subject. The article also suggests the complexity of reading Marx, who had multiple objectives in its writings.

Political Economy and the Press: Karl Marx and Henry Carey at the New York Tribune

For many years, Karl Marx earned his living as a correspondent for the widely read New York Daily Tribune. The Weekly Tribune, which was composed of selections from the daily edition, had a circulation of 200,000 (see Marx 1860, p. 265). Marx was naturally proud to be invited to be a part of the Tribune, which he considered to be “the ‘leading [verbreitetste] journal’ in the United States” (Marx to Engels, 14 June 1853; in Marx and Engels 1975, p. 79). In the duly famous introduction to his Critique of Political Economy, he wrote of his “collaboration . . . with the New York Tribune, the leading Anglo‑American newspaper” (Marx 1859, p. 23).

The editor, Charles Dana, considered Marx’s contributions to be very important. The biographer of Horace Greeley, owner of the Tribune, offered a description of a typical working day at the Tribune:

Mr. Dana enters with a quick, decided step, goes straight to his desk . . . and is lost in perusal of ‘Karl Marx’ or ‘An American Woman in Paris’. [Parton 1854; cited in Draper 1968, p. 11]

On 12 March 1852, Dana wrote, “It may perhaps give you pleasure to know that [your articles] are read with satisfaction by a considerable number of persons, and are widely reproduced” (cited in Blitzer 1966, p. xix). Marx basked in the glow of a leader that Dana attached to one of Marx’s articles: “we may properly pay a tribute to the remarkable ability of the correspondent by whom this interesting piece of intelligence is furnished.” In a letter to Engels, Marx drew the conclusion, “As you see, I am firmly in the saddle” (Marx to Engels, 26 April 1853; reprinted in CW: 39, pp. 315-16). When the 1857 crisis compelled the Tribune to reduce its staff, Marx was one of the two correspondents who remained on the payroll (Padover 1978, p. 287), although, as we shall see, this honor was rather hollow. Indeed, although Dana later assured Marx in a letter that Marx was “not only one of the most highly valued, but one of the best paid contributors attached to the journal,” Dana had no intention of making his sentiments (reprinted in Marx 1860, pp. 323‑24). Many years afterwards, as editor of the Sun, Dana requested information from Marx concerning the International. Marx’s answer, which arrived only a few months before his death, was printed, along with a short statement from Dana in which he praised Marx as “an extraordinary man.” Dana added:

His talents were brilliant and his learning varied and accurate. [Reprinted in Marx and Engels 1978, Vol. 22; Appendix, p. 1095]. Continue reading

The Oppression of Saudi Arabian Women

I have a student — a young woman — from Saudi Arabia.  The first day she showed up in class wearing traditional headdress.  Then I never noticed her again, because she changed her style of dress.

She showed up in my office after missing the first midterm, telling me a horrible story.  I had trouble understanding everything, so I probably have some of the facts mixed up.

She had been missing class because some of the young Saudi men had been harassing her.  She explained that she had won a scholarship.  Apparently, she committed a grave crime.  She was not allowed to come to this country without a male guardian.  Her father gave him permission, but the government told him that that was not his choice.  Her brothers did not want to accompany her, but she came anyway. Continue reading

Two Degrees of Separation: Reflections on Stolper and Schumpeter

A few months ago, I was asked to write an article about my experiences as an undergraduate student of Wolfgang Stolper, probably based on a conversation that I had with Mike Scherer. After I submitted it, the editors told me that they wanted details about Stolper’s relationship with Schumpeter, when my conversation with Mike had concerned my lack of any real knowledge of the subject — as the following note will prove.

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First of all, I am flattered to be even vaguely associated with such world-class intellectuals as Mark Perlman, Wolfgang Stolper, and Joseph Schumpeter.

I learned about the relationship between Wolfgang Stolper and Joseph Schumpeter as a very young, naïve, and certainly unpromising student. I switched majors every year, a symptom of both my entirely unsystematic manner of learning and my hunger for new ideas.

I only took one international economics class with Professor Stolper in 1959. The course was the most unique educational experience of my life. More often than not he would begin class by handing out papers, explaining that if he were actually going to talk about economics, this is what you would say today. Instead, he would tell us about an upcoming event on campus, whether it was E. Power Biggs, who was going to play Bach on the great organ, or Paul Tillich, who was going to lecture on theology. The rest of the class would be devoted to alerting us to the fine points of the forthcoming presentation ‑‑ its context, its importance, and most important what to look for while attending. Continue reading

Necessary Sacrifices for Environmental Sanity?

According to the Wall Street Journal, golf courses consume enough water to supply the household needs of two-thirds of the U.S. population. Can you imagine the ruling class acting to limit its favorite “sport”? Newport, John Paul. 2008. “Play It as It Dries.” Wall Street Journal (3 May): p. W 1.

“Nationwide, golf-course irrigation consumes less than half of 1% of the 408 billion gallons of water used daily, a golf-industry report concludes. Even so, that’s a lot of water — two billion gallons a day, or enough to satisfy the household needs of more than two-thirds of the U.S. population, according to the U.S. Geological Survey.”