You can't step into the same river twice.
Forecasting the economy is like forecasting the weather. There are many variables, and they can change by the hour.
Weather analysts consider temperature, wind strength and direction, humidity, and atmospheric pressure within a given regional weather system, plus the proximity of one system to another. That makes for six primary factors, all of which contribute to possible precipitation, and the possible combinations border on the infinite.
There is also, of course, climate, where one or several of the primary factors -- temperature, for instance -- stays in a given range for an entire season. Weather, on the other hand, changes daily, even hourly, making forecasting a challenge. In short, weather forecasting is not an exact science.
Neither is the study of economics. It is a social science, along with anthropology, sociology, psychology, and even marketing. No one would claim that in business, marketing and advertising are exact sciences, like chemistry or physics.
In the social sciences, there are impulses and trends that can be documented, and -- assuming a trend continues -- an event can be predicted.
Just so with weather and economics. Life is a series of if-then statements, based on assumptions that are sometimes heroic.
Computer programmers know well the pattern: If this, then that. Parents also use it on children: If you do this again, then you will get spanked. Also, if you touch this hot stove, then you will get burned and it will hurt.
Weather forecasters, after getting smacked down by a fickle Mother Nature last week in the New York City region, have since lowered their confidence levels and have emphasized the variables and possible alternate outcomes while showing their graphic models of what might happen if, if, if and if.
Economists have long used the ceteris paribus (other things equal) assumption in their forecasts. If other things remain equal and nothing else changes, then we can expect such and such will happen.
In the real world, however, other things never remain the same for long. They may hold steady for a time, but people can be as changeable as storm systems generated by Nature.
Meteorologists can be confident of their short-term forecasts, but long-term weather forecasts are at best a gamble. This is not to be confused with climate change, which is itself the study of long-term trends. Economists, also, deal with reasonable confidence levels when talking about short-term trends and predictions. But when it comes to longer economic predictions, as John Maynard Keynes put it, "In the long run we are all dead."
Saturday, January 31, 2015
Friday, January 30, 2015
Health Care Copout
If at first you don't succeed ...
The U.S. House of Representatives is trying once again to repeal the federal Affordable Care Act, also known as Obamacare, and the House Rules Committee has scheduled a hearing for Monday (Feb. 2) on a new bill that would overturn the plan, as well as the Health Care and Education Reconciliation Act of 2010.
However, the agency charged with estimating costs associated with new legislation said today they can't do it. The Congressional Budget Office (CBO) said such an analysis would take "at least several weeks because there are hundreds of provisions in the laws that would be repealed and those provisions are in various stages of implementation. Therefore, we are unable to provide such an estimate at this time."
One wonders how long it will take for the message to get through to the adamant opponents of social welfare. Health care is too important to be left entirely to the private sector, much of which is driven largely by a profit motive.
The U.S. House of Representatives is trying once again to repeal the federal Affordable Care Act, also known as Obamacare, and the House Rules Committee has scheduled a hearing for Monday (Feb. 2) on a new bill that would overturn the plan, as well as the Health Care and Education Reconciliation Act of 2010.
However, the agency charged with estimating costs associated with new legislation said today they can't do it. The Congressional Budget Office (CBO) said such an analysis would take "at least several weeks because there are hundreds of provisions in the laws that would be repealed and those provisions are in various stages of implementation. Therefore, we are unable to provide such an estimate at this time."
One wonders how long it will take for the message to get through to the adamant opponents of social welfare. Health care is too important to be left entirely to the private sector, much of which is driven largely by a profit motive.
Where the Jobs Are
Vice President Joe Biden noted that over the next few years, some six million children in Central America will reach working age. With few jobs available at home, what will they do and where will they go?
Separately, the Department of Commerce issued another report of an improving American economy: GDP rose in the fourth quarter of 2014 by 2.6 percent.
It ain't hard to figure, folks. Workers will go where the jobs are, as millions before them, from many other countries, have done in the past.
Meanwhile, growth performance in Canada "has been solid," according to a report from the International Monetary Fund, even though that growth "has yet to translate into strong investment and hiring." The Canadian unemployment rate is 6.9 percent, the IMF said, and inflation is 2 percent.
And while the unemployment rate in Mexico is the lowest in six years, at 3.76 percent, jobless rates in other Central American countries are higher: Honduras, 4.5 percent; and El Salvador, 5.9 percent. That, however, does not take into account the violence factor, and some experts question the accuracy of those statistics.
Biden, writing in an Op-Ed piece in the New York Times, said President Obama will ask Congress for funding to assist Central American countries in economic development. This in itself is a good idea, both morally and economically -- prosperity in other nations will open more markets for U.S. exports -- but for other reasons, as well. If there are jobs available in a safe and secure region, people may well opt to stay home.
If not, they will do as millions of others have done for centuries. They will go where the jobs are, and where they can care for their families in safety. Call it the Land of Opportunity.
Separately, the Department of Commerce issued another report of an improving American economy: GDP rose in the fourth quarter of 2014 by 2.6 percent.
It ain't hard to figure, folks. Workers will go where the jobs are, as millions before them, from many other countries, have done in the past.
Meanwhile, growth performance in Canada "has been solid," according to a report from the International Monetary Fund, even though that growth "has yet to translate into strong investment and hiring." The Canadian unemployment rate is 6.9 percent, the IMF said, and inflation is 2 percent.
And while the unemployment rate in Mexico is the lowest in six years, at 3.76 percent, jobless rates in other Central American countries are higher: Honduras, 4.5 percent; and El Salvador, 5.9 percent. That, however, does not take into account the violence factor, and some experts question the accuracy of those statistics.
Biden, writing in an Op-Ed piece in the New York Times, said President Obama will ask Congress for funding to assist Central American countries in economic development. This in itself is a good idea, both morally and economically -- prosperity in other nations will open more markets for U.S. exports -- but for other reasons, as well. If there are jobs available in a safe and secure region, people may well opt to stay home.
If not, they will do as millions of others have done for centuries. They will go where the jobs are, and where they can care for their families in safety. Call it the Land of Opportunity.
Wednesday, January 28, 2015
Standalone Economy Part Two
Strong is good. Weak is ungood.
Evidence is piling up that while the U.S. economy is "expanding at a solid pace," as the Federal Reserve put it, much of the rest of the world is struggling. Even with a sharp drop in oil prices, "the world economic outlook is still subdued," according to the International Monetary Fund. Last week, the IMF revised downward its forecast for global growth, despite cheaper oil and faster U.S. growth.
And in the financial sector, while a strong dollar may be a boon for travelers and tourists, the reverse is true for American exporters. Why? Because while a "strong" dollar enables American tourists to buy more stuff while overseas, U.S. firms that export stuff suffer because that same "strong" dollar means their prices are relatively higher.
For the coming year, the IMF boosted its forecast for American economic growth to 3.6 percent, but cut its forecast for euro-area countries down to 1.2 percent. And for Japan, which fell into recession in the third quarter, the IMF pegged its forecast at just 0.6 percent for the coming year.
In the U.S., the latest survey from the Fed showed "strong job gains and a lower unemployment rate," adding that household spending "is rising moderately" as "declines in energy prices have boosted household purchasing power." Which is to say that as gasoline prices drop to the neighborhood of $2 a gallon, families can drive further, take longer vacations and buy more stuff.
However, even after unemployment and inflation rates stabilize at target levels, the Fed noted that it will keep interest rates low "for some time."
What does that mean? It translates to this: The U.S. is doing well, but troublesome economic signals in the rest of the world could well drag U.S. prosperity off the high road and into a ditch.
As noted here a month ago, "Superpatriots will wave the flag and insist that they don't need anyone else in order to prosper. Close the borders, they say, and we'll bootstrap ourselves to prosperity." No nation in a modern economy can stand alone. International trade and cross-border movement means every nation is financial and economically intertwined.
And even if America does maintain its prosperity as other nations suffer, that can only mean an increase in workers coming to America looking for jobs. Why do they come? This is where the jobs are, especially as those already here refuse to take jobs they consider menial and somehow "beneath them."
But there will be people willing to take those jobs, even if it means leaving their homes, following the guiding light of the "lamp beside the golden door." Moral: Don't shut the door to workers who are needed.
And even if the American economy does stumble, the homeless and tempest-tossed may still come, because finding work in a stumbling economy is better than trying to find a job in an economy that has fallen flat.
Evidence is piling up that while the U.S. economy is "expanding at a solid pace," as the Federal Reserve put it, much of the rest of the world is struggling. Even with a sharp drop in oil prices, "the world economic outlook is still subdued," according to the International Monetary Fund. Last week, the IMF revised downward its forecast for global growth, despite cheaper oil and faster U.S. growth.
And in the financial sector, while a strong dollar may be a boon for travelers and tourists, the reverse is true for American exporters. Why? Because while a "strong" dollar enables American tourists to buy more stuff while overseas, U.S. firms that export stuff suffer because that same "strong" dollar means their prices are relatively higher.
For the coming year, the IMF boosted its forecast for American economic growth to 3.6 percent, but cut its forecast for euro-area countries down to 1.2 percent. And for Japan, which fell into recession in the third quarter, the IMF pegged its forecast at just 0.6 percent for the coming year.
In the U.S., the latest survey from the Fed showed "strong job gains and a lower unemployment rate," adding that household spending "is rising moderately" as "declines in energy prices have boosted household purchasing power." Which is to say that as gasoline prices drop to the neighborhood of $2 a gallon, families can drive further, take longer vacations and buy more stuff.
However, even after unemployment and inflation rates stabilize at target levels, the Fed noted that it will keep interest rates low "for some time."
What does that mean? It translates to this: The U.S. is doing well, but troublesome economic signals in the rest of the world could well drag U.S. prosperity off the high road and into a ditch.
As noted here a month ago, "Superpatriots will wave the flag and insist that they don't need anyone else in order to prosper. Close the borders, they say, and we'll bootstrap ourselves to prosperity." No nation in a modern economy can stand alone. International trade and cross-border movement means every nation is financial and economically intertwined.
And even if America does maintain its prosperity as other nations suffer, that can only mean an increase in workers coming to America looking for jobs. Why do they come? This is where the jobs are, especially as those already here refuse to take jobs they consider menial and somehow "beneath them."
But there will be people willing to take those jobs, even if it means leaving their homes, following the guiding light of the "lamp beside the golden door." Moral: Don't shut the door to workers who are needed.
And even if the American economy does stumble, the homeless and tempest-tossed may still come, because finding work in a stumbling economy is better than trying to find a job in an economy that has fallen flat.
Wednesday, January 7, 2015
Offensive Speech
You have a right to express your opinion.
I have a right to ignore you.
"Thou shalt not criticize" may be an extremist's commandment, but in a free society people not only have a right to criticize, but an obligation to do so, especially of government.
There are, of course, consequences to some forms of speech, but these are properly limited to libel and slander, and in a law-abiding society, these consequences are settled in a court of law, not by gunfire on a street.
In Paris today, a dozen people were assassinated because of what some few extremists deemed disrespectful drawings of a religious leader.
Do Christians kill to avenge negative comments about Jesus? Do Jews kill to avenge criticism of Moses? Do Mormons kill to avenge snide remarks about Joseph Smith?
All three religions are derived from a Middle Eastern desert spiritual tradition, as is Islam. To excuse murder because of some perceived insult goes against the principles of that tradition, as well as civil laws of modern society.
Using violence at any level, whether a punch in the nose in reaction to a joke or mass shootings in retaliation for a printed cartoon, is unacceptable in a free society.
At the same time, gratuitous and vicious insult may bring consequences, but these should not include violence and murder. Sometimes a better response is no response at all.
To retaliate with violence does not make a hero or a martyr. Rather, it brings widespread condemnation of the killers and rejection of their cause.
"Thou shalt not kill" is another commandment recognized by all four Middle Eastern desert religious traditions, as well as many others.
I have a right to ignore you.
"Thou shalt not criticize" may be an extremist's commandment, but in a free society people not only have a right to criticize, but an obligation to do so, especially of government.
There are, of course, consequences to some forms of speech, but these are properly limited to libel and slander, and in a law-abiding society, these consequences are settled in a court of law, not by gunfire on a street.
In Paris today, a dozen people were assassinated because of what some few extremists deemed disrespectful drawings of a religious leader.
Do Christians kill to avenge negative comments about Jesus? Do Jews kill to avenge criticism of Moses? Do Mormons kill to avenge snide remarks about Joseph Smith?
All three religions are derived from a Middle Eastern desert spiritual tradition, as is Islam. To excuse murder because of some perceived insult goes against the principles of that tradition, as well as civil laws of modern society.
Using violence at any level, whether a punch in the nose in reaction to a joke or mass shootings in retaliation for a printed cartoon, is unacceptable in a free society.
At the same time, gratuitous and vicious insult may bring consequences, but these should not include violence and murder. Sometimes a better response is no response at all.
To retaliate with violence does not make a hero or a martyr. Rather, it brings widespread condemnation of the killers and rejection of their cause.
"Thou shalt not kill" is another commandment recognized by all four Middle Eastern desert religious traditions, as well as many others.
Friday, January 2, 2015
Whither the Weather
"Everybody talks about the weather, but nobody does anything about it." -- Mark Twain
Weather reporters, especially on television, too often confuse "average" with what "should" be. They generate great enthusiasm when the daily temperature is 5 degrees above average, and show a lament when it's 5 degrees below "what it should be."
Reality check: Average is a calculation based on a range. If the temperature on any given day were always the same, there would be no average. Rather, it would be a constant. And in the real world temperature is never constant.
Another definition: Weather and climate are not the same thing. Weather is a daily aspect of what the atmosphere is like, and it changes with seasons. Climate is what conditions are like over a yearly time frame or longer.
At this season -- this time of year, December in North America -- snow and cold weather is common in the Northern United States and Canada., but almost never in South Florida and islands of the Caribbean at any time of year. That's climate.
Those who are climate change deniers point to cold and snowy weather in December as evidence or "proof" that climate change doesn't exist.
Weather changes daily and with the seasons. Over a very long time frame, climates can and do change. Proof of this is the disappearance of glaciers over a period of 50 years or more, as shown in photographs taken from satellites or even by tourists with hand-held cameras.
The issue is not whether the world's climate is changing, but how much people contribute to it.
Weather reporters, especially on television, too often confuse "average" with what "should" be. They generate great enthusiasm when the daily temperature is 5 degrees above average, and show a lament when it's 5 degrees below "what it should be."
Reality check: Average is a calculation based on a range. If the temperature on any given day were always the same, there would be no average. Rather, it would be a constant. And in the real world temperature is never constant.
Another definition: Weather and climate are not the same thing. Weather is a daily aspect of what the atmosphere is like, and it changes with seasons. Climate is what conditions are like over a yearly time frame or longer.
At this season -- this time of year, December in North America -- snow and cold weather is common in the Northern United States and Canada., but almost never in South Florida and islands of the Caribbean at any time of year. That's climate.
Those who are climate change deniers point to cold and snowy weather in December as evidence or "proof" that climate change doesn't exist.
Weather changes daily and with the seasons. Over a very long time frame, climates can and do change. Proof of this is the disappearance of glaciers over a period of 50 years or more, as shown in photographs taken from satellites or even by tourists with hand-held cameras.
The issue is not whether the world's climate is changing, but how much people contribute to it.
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