I Am a Reality-Based Center-Left Technocrat...

Eric Rauchway writes:

Open University: PAGING MICHAEL KAZIN: Paul Krugman and Brad DeLong wander across Michael Kazin's turf, and DeLong isn't being nice about it:

But when I read Paul's call for "smart, bold populism," I am reminded of earlier calls a couple of decades ago by Milton Friedman, Marty Feldstein, and their ilk for smart, bold conservatism or smart, bold libertarianism. But they did not get what they ordered: on the economic policy front the policies of Reagan and of Bush II have been a horrible botch. What populist policies that we can think of would be smart? And how can we make our high politicians allergic to populist policies that are stupid?

Lyndon Johnson, yes. William Jennings Bryan, no.

In Bryan's defense, some Populist policies that were not so bad were substituting the income tax for the tariff, establishing a managed currency, and generally opposing corruption in the press corps and the government.

But of course, I'm pretty sure that's not really what either Krugman or DeLong means. What they seem to mean by populism is, a movement championing the downtrodden, wielding the symbols of oppression against the oppressor. And DeLong seems to demur, noting the dangers of symbolic politics and (tacitly) disputing Krugman's argument for more "workers' bargaining power"--an idea that, let's note, Matthew Yglesias recently proposed as better than most LBJ-like solutions.

Temperamentally, personally, I think I'm with DeLong on this: but temperamentally, personally, I'm not the representative voter. Making a judgment as to whether the Democrats should adopt a more populist approach to politics depends on how you judge that representative voter. Is DeLong right to think she'd be more moved by tax policy proposals than populism?

I am, as I said above, a reality-based center-left technocrat. I am pragmatically interested in government policies that work: that are good for America and for the world. My natural home is in the bipartisan center, arguing with center-right reality-based technocrats about whether it is center-left or center-right policies that have the best odds of moving us toward goals that we all share--world peace, world prosperity, equality of opportunity, safety nets, long and happy lifespans, rapid scientific and technological progress, and personal safety. The aim of governance, I think, is to achieve a rough consensus among the reality-based technocrats and then to frame the issues in a way that attracts the ideologues on one (or, ideally, both) wings in order to create an effective governing coalition.

For example, Senator Arlen Specter's attempt at dealing with the asbestos-caused cancer mess, for example, was a reasonable take at a hard issue, and he tried to sell it (a) to the left as social insurance that gets more money to people who have been dealt a horrible hand by the system, and (b) to the right as a reform that sticks it to the trial lawyers. (He failed: the left saw it as too damaging to the trial lawyers, the right saw it as too big a giveaway of public money, and both saw it as depriving them of an important fund-raising issue.)

Right now Paul Krugman and I seem to have two disagreements.

First, I think--being as I am here at Berkeley under the powerful (but benevolent) intellectual dictatorship and hegemony of David Card) on labor issues--that the benefits of using government policies to strengthen unions (while they are certainly there) are much smaller than Paul judges them to be.

Second, while I am profoundly, profoundly disappointed and disgusted by the surrender of the reality-based wing of the Republican policy community to the gang of Republican political spivs who currently hold the levers of power, I do think that there is hope that they will come to their senses and that building pragmatic technocratic policy coalitions from the center outward will be possible and is our best chance.

Paul, I think, believes otherwise: The events of the past decade and a half have convinced him, I think, that people like me are hopelessly naive, and that the Democratic coalition is the only place where reality-based discourse is possible. Thus, in his view, the best road forward to (a) make the Democratic coalition politically dominant through aggressive populism, and then (b) to argue for pragmatic reality-based technocratic rather than idealistic fantasy-based ideological policies within the Democratic coalition.

He may well be right.

A Labor Day Look at the State of the Labor Market

The very good Floyd Norris summarizes the state of the labor market. As I've said many times, the most obvious explanation is that employment is low because the labor market is weak, and taht labor force participation is y because half a decade of a weak labor market has convinced a lot of people that they have better things to do--go to school, raise a kid, retire early, et cetera--than look for a lousy job.

Norris gets two things wrong, however. He gets the lead wrong: I haven't heard anybody--not even White House spinmaasters--paint the emploment recovery as "one of the best" since World War II. That doesn't pass the laugh test. And he overstates the role played by the divergence between the household and establishment surveys. They don't paint all that different pictures.

Here's Norris:

The Odd Recovery: Unemployment Is Low and So Is Employment - New York Times: NEARLY five years after the end of the 2001 recession in the United States, this recovery can be painted using employment statistics as the worst -- or one of the best -- of the aftermaths of the 10 post-World War II recessions. On the good side, the unemployment rate, at 5.5 percent in November 2001, was down to 4.7 percent.... At this point after the previous nine recessions, there were an average of 11.9 percent more jobs in the economy than there had been at the end of the recession. But so far, as the charts show, there are just 3.5 percent more jobs than at the end of the last recession. That is less than half the lowest of the nine previous moves... . To some extent, the divergent indicators reflect the fact that the numbers come from two surveys with different methodologies.... [But e]ven the household survey, with its more positive numbers, indicates that little progress on jobs has been made in this recovery. There has been almost no increase, by these statistics, in the percentage of working-age Americans who are working. The decline in the unemployment rate reflects the fact that fewer of those without jobs say they are looking for work, as is required to be counted as unemployed....

Franklin Foer Apologizes...

He writes:

The New Republic: An Apology to Our Readers

After an investigation, The New Republic has determined that the comments in our Talkback section defending Lee Siegel's articles and blog under the username "sprezzatura" were produced with Siegel's participation. We deeply regret misleading our readers. Lee Siegel's blog will no longer be published by TNR, and he has been suspended from writing for the magazine.

He is not apologizing for some of the things he should be apologizing for.

He really ought to be apologizing for things like--well, look at We-Love-Ann-Coulter Weekly's description of this:

The New Republic: Uma and me. By: Siegel, Lee: 3/15/1999: Deliberates on the reality of love and sex through interpolating with the fact that the author never felt sexually attracted to a beautiful woman like Uma Thurman, an actress. Experience while he worked as her tutor; Information that she began to flirt with him but he himself could not feel aroused; Discussion on the disinterest in love of the protagonist of Molière's theatrical production "The Misanthrope"; Inability of the author to get sexually aroused while seeing Uma's performance in "The Misanthrope."

Department of "Huh?"

You know, I've never understood this:

WSJ.com - Republican Advantage on Issue Of National Security Erodes: Republicans are left with one remaining strong suit -- voters' sense, going back a half-century to the Cold War against communism, that they are better able than Democrats to keep the nation secure. "It's still an enormously potent issue" for Republicans, says party strategist and former Rep. Vin Weber. His party's historical advantage on national security is the wild card...

Only Nancy Reagan's rolling over the Republican administration in the 1980s got the U.S. into a sane pro-Gorbachev policy posture. Nixon forgot that the strength of the U.S. is that we are the good guys--as George W. Bush has forgotten. As for Eisenhower... he and John Foster Dulles promised that we were going to "rollback" Communism--and to their sorrow the Hungarians believed them. From the Wall Street Journal's opposition to the Marshall Plan to the ascent of Joe McCarthy to the Fall of the Soviet Union, the one thing you could count on was that the American right would be not Tough on Communism but profoundly Stupid on Communism.

And that glorious foreign-policy legacy, dating from Taft's opposition to post-WWII aid to Western Europe and McCarthy's eagerness to blind the State Department's ability to analyze the world? it has been continued to this day.

Remember the attempts in the early days of the Bush administration to gin up a new cold war with China?

Remember George W. Bush's vacation briefing in 2001 where Condi Rice tried to play three-card-monte with the headline? "BIN LADEN DETERMINED TO STRIKE INSIDE THE U.S. Remember George W. Bush's response to the briefing? "All right, you've covered your ass.".

Remember this, too:

Franklin Foer Apologizes...

He writes:

The New Republic: An Apology to Our Readers

After an investigation, The New Republic has determined that the comments in our Talkback section defending Lee Siegel's articles and blog under the username "sprezzatura" were produced with Siegel's participation. We deeply regret misleading our readers. Lee Siegel's blog will no longer be published by TNR, and he has been suspended from writing for the magazine.

He is not apologizing for some of the things he should be apologizing for.

He really ought to be apologizing for things like--well, look at We-Love-Ann-Coulter Weekly's description of this:

The New Republic: Uma and me. By: Siegel, Lee: 3/15/1999: Deliberates on the reality of love and sex through interpolating with the fact that the author never felt sexually attracted to a beautiful woman like Uma Thurman, an actress. Experience while he worked as her tutor; Information that she began to flirt with him but he himself could not feel aroused; Discussion on the disinterest in love of the protagonist of Molière's theatrical production "The Misanthrope"; Inability of the author to get sexually aroused while seeing Uma's performance in "The Misanthrope."

Department of "Huh?"

You know, I've never understood this:

WSJ.com - Republican Advantage on Issue Of National Security Erodes: Republicans are left with one remaining strong suit -- voters' sense, going back a half-century to the Cold War against communism, that they are better able than Democrats to keep the nation secure. "It's still an enormously potent issue" for Republicans, says party strategist and former Rep. Vin Weber. His party's historical advantage on national security is the wild card...

Only Nancy Reagan's rolling over the Republican administration in the 1980s got the U.S. into a sane pro-Gorbachev policy posture. Nixon forgot that the strength of the U.S. is that we are the good guys--as George W. Bush has forgotten. As for Eisenhower... he and John Foster Dulles promised that we were going to "rollback" Communism--and to their sorrow the Hungarians believed them. From the Wall Street Journal's opposition to the Marshall Plan to the ascent of Joe McCarthy to the Fall of the Soviet Union, the one thing you could count on was that the American right would be not Tough on Communism but profoundly Stupid on Communism.

And that glorious foreign-policy legacy, dating from Taft's opposition to post-WWII aid to Western Europe and McCarthy's eagerness to blind the State Department's ability to analyze the world? it has been continued to this day.

Remember the attempts in the early days of the Bush administration to gin up a new cold war with China?

Remember George W. Bush's vacation briefing in 2001 where Condi Rice tried to play three-card-monte with the headline? "BIN LADEN DETERMINED TO STRIKE INSIDE THE U.S. Remember George W. Bush's response to the briefing? "All right, you've covered your ass.".

Remember this, too:

Modernizing the IMF

Paul Blustein has a good article on changes at the IMF:

Fast-Growing Countries To Gain More Clout at IMF: By Paul Blustein: The International Monetary Fund took a first step yesterday toward retooling itself to reflect major changes in the global economy, agreeing to increase the power that several fast-growing countries have over its policies and promising to boost their clout more in the next two years.

The IMF's executive board, which represents its 184 member countries, approved a resolution that would modestly increase the voting power of China, South Korea, Mexico and Turkey immediately. The resolution, which still must be approved at the fund's annual meeting in Singapore on Sept. 19, also sets forth a plan to revamp the formula for determining voting shares by the 2008 annual meeting.

The vote change is the initial stage of a broader initiative aimed at refocusing the IMF's priorities and giving high-growth emerging countries, especially in Asia, a bigger say over its operations, commensurate with the size of their economies.

Known chiefly in the past decade as a financial firefighter that sought to rescue emerging countries stricken by crises, the IMF is being prodded -- in large part by the United States -- to be more active in addressing global trade imbalances and other problems that menace the world economy.

That role would presumably include confronting countries whose currency policies are contributing to the imbalances -- the most obvious example being China, which many economists criticize as keeping the value of the yuan too low and thus giving its manufacturers an unfair competitive advantage.

At the same time, the IMF is seeking to address complaints that the apportionment of individual countries' voting power has not changed in 30 years despite wide shifts in the relative size of their economies. For example, China's economy has grown to twice the size of those of Belgium and the Netherlands combined, yet Belgium and the Netherlands together have 1.5 times as many votes....

[T]he board decided to increase the overall number of votes immediately by 1.8 percent, with the extra voting power divided among China, South Korea, Mexico and Turkey -- four countries whose votes have particularly lagged behind their economic clout. A resolution adopted yesterday also committed the IMF to a second stage of changes -- one expected to increase those countries' votes further, along with a few other underrepresented countries, while decreasing the votes of countries such as Belgium....

And Dean Baker is (rightly) annoyed at the headline:

Beat the Press: The Washington Post Redefines "Fast": The Post has an article headlined "Fast-Growing Countries to Gain More Clout at IMF." The list of countries is China, South Korea, Turkey, and Mexico. The first three countries can reasonably be described as "fast-growing," but not Mexico. Mexico's per capita GDP growth has averaged just 1 percent annually for the last decade, a slow rate for any country, but an especially pathetic pace for a developing country. Whatever the reason Mexico is getting increased clout at the IMF, it has nothing to do with fast growth.

Eliminating the headline writers and letting reporters write their own headlines would, I think, produce significant improvement.

Is this a sign that Hank Paulson is being effective as Treasury Secretary? Perhaps.

Monetary policy and Expectations

Monetary policy and expectations:

New Economist: Monetary policy and wage restraint: Support for the proposition that greater monetary credibility induces greater wage restrain comes from a new Institute for International Economics working paper by Adam Posen and Daniel Popov Gould: Has EMU Had Any Impact on the Degree of Wage Restraint? (PDF)

Wage restraint--the degree to which wage increases are commensurate with increases in labor productivity--has either remained unchanged or increased following European Monetary Unification (EMU) in the vast majority of eurozone economies. This finding contradicts the predictions of widely cited models of coordination of wage bargaining that wage restraint would decline after EMU. In particular, under these models, one would have expected wage restraint to decline considerably post-EMU in Germany, but Posen and Gould find no indication of such a decline. Their analysis also shows a significant increase in wage restraint post-EMU in Italy. These results are consistent with the interpretation that greater monetary credibility induced greater wage restraint, as is the increase in wage restraint seen in noneurozone United Kingdom and Sweden after adoption of inflation targeting.

Why Oh Why Can't We Have a Better Press Corps?

Mickey Kaus looks at this table:

Table 22. Number and Percent of People Below
50 Percent of Poverty Level: 1975 to 2005

 _____________________________________
 Year         Total    Number  Percent
 _____________________________________
 2005......  293,135   15,928      5.4
 2004 14/..  290,617   15,693      5.4
 2003......  287,699   15,264      5.3
 2002......  285,317   14,068      4.9
 2001......  281,475   13,440      4.8
 2000 12/..  278,944   12,592      4.5
 1999 11/..  276,208   12,887      4.7
 1998......  271,059   13,914      5.1
 1997......  268,480   14,594      5.4
 1996......  266,218   14,412      5.4
 1995......  263,733   13,892      5.3
 1994......  261,616   15,404      5.9
 1993 10/..  259,278   15,971      6.2
 1992 9/...  256,549   15,547      6.1
 1991 8/...  251,192   14,059      5.6
 1990......  248,644   12,914      5.2
 1989......  245,992   11,983      4.9
 1988......  243,530   12,676      5.2
 1987 7/...  240,982   12,469      5.2
 1986......  238,554   12,677      5.3
 1985......  236,594   12,380      5.2
 1984......  233,816   12,770      5.5
 1983 6/...  231,700   13,590      5.9
 1982......  229,412   12,806      5.6
 1981 5/...  227,157   11,189      4.9
 1980......  225,027    9,804      4.4
 1979 4/...  222,903    8,553      3.8
 1978......  215,656    7,708      3.6
 1977......  213,867    7,474      3.5
 1976......  212,303    7,016      3.3
 1975......  210,864    7,733      3.7

and catches Eric Alterman in a mistake:

Maybe Cocooning Is Easy!: Eric Alterman, in a post titled "Extreme Poverty is US," writes (quoting today's NYT poverty numbers story):

Again, moreover, "although the numbers living below the poverty line held steady between 2004 and 2005, there has been a sharp increase in those living in extreme poverty."

That's funny, because if you look at the Census numbers, they show... a jump of... well, zero from 2004 [in extreme poverty].... I contend that "zero" is not a "sharp increase."... Alterman... [is] quoting... NYT reporter Rick Lyman paraphrasing "advocates for the poor"--specifically Robert Greenstein, whose influential outfit (Center on Budget and Policy Priorities) specializes in devising esoteric measurements to suggest that good poverty news is really bad poverty news...

But what is the "good poverty news" in the Census Bureau's report? What is the "good poverty news" in this table?

Is it that there are more people in extreme poverty than in any year since 1993? Is it that the proportion of Americans in extreme poverty is greater than in any year since 1997? Is it that the extreme poverty rate is 0.9%--2,336,000 people--higher than in 2000, at the last business cycle peak?

Is it that the overall poverty rate stands at 12.6%, 0.1% less than last year? Is it that the overall numbers in poverty stand at 36,950,000, 50,000 less than last year? Is it that 5,369,000 more people were poor last year than at the last business cycle peak, in 2000? Is it that the poverty rate is higher than in any year from 1999 to 2003 or from 1969 to 1979? Is it that the number of people in poverty this year and last year is greater than in any year since 1994?

If you parse Kaus closely, he doesn't actually say that there is "good poverty news." He talks about how Bob Greenstein "specializes in... suggest[ing] that good poverty news is really bad poverty news" and about how Eric "Alterman [got] his bogus spin." He wants his readers to think that there is a whole bunch of good poverty news that is being spun as bad, but he doesn't actually say so.

This is, I think, a reason why the only people who should read this stuff are trained professionals who already know the issues very well (and hence learn nothing at all from Kaus and his ilk). They won't lie to you--quite. They will do their best to leave you with a misleading impression--in this case, that the Census Bureau's poverty report was good poverty news that is being spun as bad. And it will probably work--unless you're a trained professional.

---

Here's what Lyman reports from Bob Greenstein:

Census Reports Slight Increase in %u201905 Incomes - New York Times: advocates for the poor pointed out that, although the numbers living below the poverty line held steady between 2004 and 2005, there has been a sharp increase in those living in extreme poverty. The average person living in poverty actually earned $3,236 less than the poverty line -- $19,971 for a household of four -- in 2005, the highest such gap ever measured by the Census Bureau, said Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a liberal research group. And 43 percent of the poor earned less than half of the poverty limit, Mr. Greenstein said, again the highest such percentage ever recorded.

"This is further evidence that the nation's economic recovery has had very limited reach, with many low- and medium-income families not sharing in the game," he said...

The Pile of Things to Read Grows Ever Higher

Marginal Revolution points me to YATtR (Yet Another Thing to Read):

Marginal Revolution: Are free capital movements a good idea?: The standard line is that Chile and China have avoided crack-ups -- of the sort that plagued Thailand, Indonesia, and Argentina -- by restricting the free flow of capital in and out of their country. Kenneth Rogoff and co-authors now offer a very serious 92-page look at whether such views are true. Their conclusions include:

The majority of empirical studies are unable to find robust evidence in support of the growth benefits of capital account liberalization. However, studies that use measures of de facto integration or finer measures of de jure integration tend to find more positive results. More importantly, studies using micro data are better able to detect the growth and productivity gains stemming from financial integration.

There is little formal empirical evidence to support the oft-cited claims that financial globalization in and of itself is responsible for the spate of financial crises that the world has seen over the last three decades.

The conceptual framework we present suggests that in addition to the traditional channels (e.g., capital accumulation), the growth and stability benefits of financial globalization are also realized through a broad set of “collateral benefits”...These collateral benefits affect growth and stability dynamics indirectly, implying that the associated macroeconomic gains may not be fully evident in the short run and may be difficult to uncover in cross-country regressions.

How does the argument here work? First, liberalization tends to bring growth, which offers long-term protection against crises. Banking crises tend to be more disruptive than currency crises and also tend to precede them; free capital markets are not usually at fault in those cases. Plenty of countries with capital controls have gotten into big messes. Macro-volatility has been declining as the world has become more integrated in terms of capital flows.

I wish this piece had looked at the (supposedly?) negative instance of free capital movements more closely, but still it shifted my priors [correction: posteriors] on the issue.

Lyndon Johnson, Yes. William Jennings Bryan, No.

Paul Krugman:

The Big Disconnect - New York Times: There are still some pundits out there lecturing people about how great the economy is. But most analysts seem to finally realize that Americans have good reasons to be unhappy with the state of the economy: although G.D.P. growth has been pretty good for the last few years, most workers have seen their wages lag behind inflation and their benefits deteriorate.... [T]he disconnect didn't begin with Mr. Bush, and it won't end with him, unless we have a major change in policies.... The real wage of nonsupervisory workers reached a peak in the early 1970's, at the end of the postwar boom. Since then workers have sometimes gained ground, sometimes lost it, but they have never earned as much per hour as they did in 1973. Meanwhile, the decline of employer benefits began in the Reagan years.... The most crucial benefit, employment-based health insurance, has been in rapid decline since 2000.

Ordinary American workers seem to understand the long-term disconnect between economic growth and their own fortunes better than most political analysts.... The [Pew] center finds that workers perceive a long-term downward trend in their economic status. A majority say that it's harder to earn a decent living than it was 20 or 30 years ago, and a plurality say that job benefits are worse too....

Workers' concern about worsening benefits is new... the health care crisis is back, both because medical costs are rising rapidly and because we're living in an increasingly Wal-Martized economy, in which even big, highly profitable employers offer minimal benefits. Employment-based insurance began a steep decline with the 2001 recession, and the decline has continued in spite of economic recovery....

Why have workers done so badly in a rich nation that keeps getting richer? That's a matter of dispute, although I believe there's a large political component: what we see today is the result of a quarter-century of policies that have systematically reduced workers' bargaining power. The important question now, however, is whether we're finally going to try to do something about the big disconnect. Wages may be difficult to raise, but we won't know until we try. And as for declining benefits -- well, every other advanced country manages to provide everyone with health insurance, while spending less on health care than we do.

The big disconnect, in other words, provides as good an argument as you could possibly want for a smart, bold populism. All we need now are some smart, bold populist politicians.

I'm enough of a believer in CPI bias to want to say "real compensation for male nonsupervisory workers has stagnated since 1973"--I think it has grown, but only very slowly, and much less rapidly than productivity.

On the other hand, I'm enough of a touchy-feey sociology-lover to believe that a good chunk of the utility the rich derive from their conspicuous consumption is transferred to them from the poor: the happiness America's working poor and middle class derive from the compensation distribution--given their compensation, the compensation of the rich, and the lifestyles of the rich and famous--seems to me to be certainly less than that of their counterparts back in 1973.

The easiest and most important thing the government can do to neutralize the adverse consequences of rising inequality is to make the tax system more progressive, not less. A reality-based government would react to growing pretax inequality by taxing the rich more, and subsidizing the poor more (through policies like the EITC) as well.

But when I read Paul's call for "smart, bold populism," I am reminded of earlier calls a couple of decades ago by Milton Friedman, Marty Feldstein, and their ilk for smart, bold conservatism or smart, bold libertarianism. But they did not get what they ordered: on the economic policy front the policies of Reagan and of Bush II have been a horrible botch. What populist policies that we can think of would be smart? And how can we make our high politicians allergic to populist policies that are stupid?

Lyndon Johnson, yes. William Jennings Bryan, no.

Department of "Huh?"

Greg Mankiw appears to miss the point. He writes:

Greg Mankiw's Blog: News for Emily Litella: All of us who work with macroeconomic data have learned, sometimes the hard way, that conclusions based on preliminary data are subject to change. Here is a good example. The NY Times two days ago in a front-page, above-the-fold article: "wages and salaries now make up the lowest share of the nation's gross domestic product since the government began recording the data in 1947." The NY Times online today, presumably to be reported in tomorrow's paper (on what page? [update: page C1]).... As a result, wages and salaries no longer make up their smallest share of the gross domestic product since World War II.... As Emily Litella would say, "Never mind."

By continuity, the fact that wages and salaries are almost at their lowest share of income in the government's memory is almost as interesting and alarming as the fact that wages and salaries are at their lowest share of income in the government's memory. It is simply not true that it's interesting if wages and salaries are at their lowest share and not interesting if wages and salaries are almost at their lowest share.

UPDATE: And Jason Furman writes to Greg Mankiw:

Update: My friend Jason Furman emails me his observations on the matter:

Greg,Measured properly wages and salaries in the first half of 2006 were the lowest as a share of economy since WW II.The proper denominator for factor shares is gross domestic income (GDI) or national income. Using either denominator, wages and salaries are the lowest since World War II. CEA's Economic Report of the President always shows incomes as a fraction of GDI as does NIPA Table 1.11.

You are correct that as a share of gross domestic product (GDP) wages and salaries are no longer the lowest since WW II. But this is an apples-to-oranges comparison -- which is why neither the very careful CEA nor the very careful BEA would do it. (It is, alas, a common practice to use GDP in the denominator -- one that many excellent economists and reporters, including the New York Times -- follow.)

Specifically, the statistical discrepancy between GDP and GDI shows up in the denominator but not in the numerator. In 2006-Q2, GDP was $76 billion lower than GDI. If you're using GDP in the denominator, then this $76 billion should be subtracted from some combination of wages, profits, rents, etc. Conversely, in 2005 GDP was $71 billion higher than GDI. As a result, to use GDP in the denominator you should also add this $71 billion to incomes.

Since we don't know how the statistical discrepancy breaks out between different factor incomes (that's why it's a "statistical discrepancy") we use GDI in the denominator. Or to avoid screwy results from depreciation, I generally prefer to use national income. Either way, the Times headline holds up.

Best, Jason

P.S. I should say I'm not that interested in wage shares, compensation shares are the relevant metric for most important questions. And the upward revision in wages certainly is a good sign and helps make sense of the revenue surprises we experienced this year -- and might suggest they'll be somewhat more durable than the potentially more ephemeral capital gains and corporate profits. But since you were being picky, I thought you might as well help your Ec 10 students to learn some national accounting arcana.

I would dispute Jason's belief that compensation shares are the relevant metric for most important questions. Compensation shares are the relevant metric for some important questions. But in my view, the ratio of median compensation or the geometric mean of compensation to labor productivity is the metric for most important questions.

Why Oh Why Can't We Have a Better Press Corps? (Yet Another Washington Post Edition)

Ezra Klein:

TAPPED: KEEP MY SKIN OUT OF IT: Yesterday, I went to Cato to see right-wing health economist Arnold Kling debate the Washington Post's Sebastian Mallaby and contrarian progressive economist Jason Furman.... CofA argues that our health system suffers from an overuse of highly specialized and technologically advanced treatments. In that respect, it's undoubtedly correct -- modern medicine suffers from a grotesque lack of good treatment data, and I welcome Kling's proposal for a health care equivalent of the Congressional Budget Office (a nonpartisan research facility).

From there, we part. Kling's other solution relies on a massive increase in the amount of health costs that come out of pocket. The "very poor" would be subsidized, as would the "very sick" (neither term is defined in his book), but everyone else would be paying for their own care. This makes sense in a very specific sort of world -- one in which you believe consumers have the capacity to make rational health care decisions -- and to a very specific sort of person -- one who believes those who make mistakes with their health care should simply pay the costs, be they financial ruin or death.

I am not that sort of person, and I am highly dubious of that world. I see no evidence for the claim that a gas station manager in Bakersfield, California, will be able to second- or third-guess his cardiologist's recommendation of an angioplasty....

What so strikes me about the "skin-in-the-game" approach towards health care is its unmistakable cruelty. It will, of course, be sold in gleaming, positive terms -- "personal responsibility," "individual control," "the genius of the consumer," and all the rest. It will focus on how wise our choices can be, not how foolish they often are. But it abandons us with our mistakes -- it's a philosophy emphasizing the justness of consequences, an approach I find neither just nor realistic.

A good example of this came from Mallaby, who mocked Minnesota's insurance climate for mandating coverage of massage and wigs. (Minnesota, incidentally, has the lowest uninsured rate in the nation.) Ho, Ho, Ho. He had a good laugh over that one, I'm sure. Except the wigs are for chemotherapy survivors -- the sort of thing none of us expect to need, but may one day find necessary to continuing our lives. Good wigs, sadly, are very expensive, and few major businesses appreciate Cancer Chic among their employees.... And massages, which sounds silly, are often more effective, less costly, and safer than over-the-counter medicines in treating back pain. Few folks know that. Like Mallaby, they've not read the studies. Unlike Mallaby, they're not professional domestic policy thinkers...

I challenge the classification of Sebastian Mallaby as a "professional domestic policy thinker." It would seem to me that it would be more accurate to call him a lazy hack journamalist.

Duncan Black meditates on Sebastian Mallaby and becomes a mite... shrill:

Eschaton: Pundit Life: I was thinking more about Sebastian Mallaby's mocking of requiring insurers to cover wigs.... Here's a guy who undoubtedly has pretty damn good insurance through his employer. If an illness strikes and he's unable to continue the backbreaking work of typing a couple of columns per week about how other people have too much insurance at a very minimum, I'm sure his employment contract contains a long term disability rider to ensure he'll keep his insurance and a hefty percentage of his salary....

I'm not going to claim to have a deep understanding of living life as a member of the working poor - and, no, years of being a relatively impoverished grad student don't really qualify - but I do know the experience of someone in that situation is exactly like Mallaby's... not. To eat and feed their kids - let alone keep their insurance if they have it - they'll have to keep working as much as possible in jobs which require a bit more physical activity then flicking fingers across a keyboard, and a bit more contact with other people than a telecommute.

Clueless pundits.

Memo to Cato: putting Sebastian Mallaby on a panel as a health care "expert" gains you brownie points among the journamalists of the Washington Post. It doesn't boost your reputation among the reality-based community.

David Broder Makes Kevin Drum the Shrillest Man on Earth!

Yes, it is another Washington Post edition of Why Oh Why Can't We Have a Better Press Corps? This time it is David Broder: Whenever David Broder writes a column, a fairy has its wings plucked from its back by a cruel wizard and is thereafter consigned to the mud.

Outsourced to Kevin Drum:

The Washington Monthly: #376 IN THE PARADE OF PEOPLE TRYING TO DRIVE ME INSANE.... And today's winner is: David Broder, discussing the vast unfairness of not allowing New Hampshire to single-handedly choose the Democratic nominee for president. Here's my favorite part:

Voters there -- in both parties and especially among the numerous independents who also vote in the primary -- take their role seriously. They turn up at town meetings and they ask probing questions. So do the interviewers at local papers and broadcast stations. So do high school students.

New Hampshire voters don't need -- or particularly want -- guidance from Iowa, and frequently they ignore the Iowa results. But they are stuck with Iowa. Now, thanks to the Democrats, they may be stuck with Nevada as well, and crowded from behind by South Carolina.

Oh, the humanity! To hear Broder tell it, you'd think that New Hampshire's role in anointing frontrunners had been handed down on a stone tablet to Moses. Sheesh.

POSTSCRIPT: I grew up in California and have voted here since 1976. In my entire life, I haven't once cast a primary vote for president that wasn't completely meaningless. How about writing a column on the unfairness of that?

Can anybody explain why none of the Post's staff reductions to date have included David Broder? It would seem an obvious no-brainer...

My Work Here Is Done...

The sixteen-year-old is procrastinating on his eleventh grade homework. He is doing so by reading Scott Sagan's "How to Keep the Bomb from Iran," in the September/October issue ofForeign Affairs.

In this aspect of parenting, at least, my work here is done.

My Work Here Is Done...

The sixteen-year-old is procrastinating on his eleventh grade homework. He is doing so by reading Scott Sagan's "How to Keep the Bomb from Iran," in the September/October issue ofForeign Affairs.

In this aspect of parenting, at least, my work here is done.

Oil in the Future Bloomberg.com: Exclusive

The Future of the Oil Business:

Bloomberg.com: Peak Oil Forecasters Win Converts on Wall Street to $200 Crude
By Deepak Gopinath: Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline -- and some geologists say it already has -- oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 -- and keep rising....

Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The controversial issue is when a global peak will occur -- and what will happen then.... Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in U.S. newspapers such as the New York Times. The Irving, Texas-based oil giant says the peaksters are being alarmist. In all, the world probably has 4 trillion barrels of oil left, four times the amount we have used so far, the ad says....

Predictions of an imminent oil famine are as old as the industry itself....

In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Campbell said it would occur in 2001. Now, he says total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010....

Like many oil-industry vets, Cranberg, 51, says market forces and technological advances will ultimately cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude and extract it. They'll invest in expensive deep-water wells and new technologies to wring more oil from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy....

High oil prices are only part of the story, however. The world is straining to feed its energy habit. Today, we consume 85 million barrels of oil a day, according to the U.S. Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers....

Coming Crunch: The world is not running out of oil -- at least not yet,'' Campbell and Laherrere wrote.What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.''...

Some investors and analysts see lots of opportunities in a post-peak world.... The oil sands hold vast stores of bitumen, a tarlike substance that is mined, rather than pumped, and then processed into oil that can be refined. The process is expensive -- and getting more so. Rising operating and capital costs have driven the price of mining and upgrading bitumen to as much as $40 a barrel, Camarta says. By 2020, Canada's oil sands will yield 4 million barrels a day, almost four times what they do now, according to CAPP. That sounds like a lot until you realize that 4 million barrels is just over a third of what Saudi Arabia produced per day in 2005....

It was just 84 years after Revere took his ride, on Aug. 27, 1859, that Edwin Drake struck oil in Titusville, ushering in the Oil Age. Exxon Mobil says the era of oil isn't about to end. In one of its ads, the company says, ``Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year or for decades to come''...

Enough Is Enough! (Why Oh Why Can't We Have a Better Press Corps?)

Could everybody please tell the Washington Post that they need to fire Peter Baker and Jim Vandehei today?

They badly need to do so--if, that is, they ever want to recover their reputation as "objective news reporters."

This is just too stupid to let pass:

Bush Team Casts Foes as Defeatist: While no Democrat has the powerful platform that the White House affords Bush and Cheney, the complaints about the mischaracterizing of positions on the war flow in both directions. Many Democrats accuse the president of advocating "stay the course" in Iraq, but the White House rejects the phrase...

Greg Sargent writes:

The Horse's Mouth: WASHINGTON POST LETS WHITE HOUSE DISTANCE ITSELF FROM "STAY THE COURSE" RHETORIC. This borders on the surreal. From today's WaPo.... Democrats accuse the President of advocating "stay the course" in Iraq? The President's constant assertion that we should "stay the course" in Iraq is a matter of objective fact, not of partisan accusation. And why no fact-check of the White House's "rejection" of the phrase? The White House doesn't reject the phrase. At all. Indeed, the last time President Bush advocated staying the course in just those words was...yesterday:

August 30, 2006: "We will stay the course, we will help this young Iraqi democracy succeed and victory in Iraq will be a major ideological triumph in the struggle of the 21st century."

This shouldn't need pointing out, but "stay the course" has of course been a Bush stock phrase for years now.

August 5, 2005: We will stay the course. We will complete the job in Iraq. And the job is this, we'll help the Iraqis develop a democracy.

April 13, 2004: And my message today to those in Iraq is: We'll stay the course; we'll complete the job. My message to our troops is: We will stay the course and complete the job and you'll have what you need.

July 10, 2003: A free Iraq will mean a peaceful world. And it's very important for us to stay the course, and we will stay the course.

In fairness, there's some good stuff in the WaPo piece, too, but this is just sloppy. With the White House about to unleash another major "public relations offensive" on Iraq, reporters are about to get hit with another relentless fusillade of official lying, and much of it will be of the "we-aren't-advocating-stay-the-course" variety. How will the press handle it? At a moment when Dems are aggressively challenging the GOP over Iraq, it's understandable that White House officials would be desperate to avoid accountability for their own past statements and actions, but that doesn't mean the big news orgs should help them do it.

Relatedly, Atrios notes that Ken Mehlman has been "berating" media figures for holding the administration accountable for its own words. It looks as if WaPo has gotten Mehlman's memo.

I don't care whether it is simple incompetence--an inability to Google the White House website for "stay the course"--or cynical mendacity in the interest of gaining White House brownie points. Ten years. I give the Post ten years.

Fall 2006 Office Hours

It's fall! Time to switch my office hours back to Evans 601. Tuesday 12-2, or by appointment--send email to delong@econ.berkeley.edu

Econ 101b: Fall 2006: August 31 Lecture Notes: Growth Theory

More introduction to growth theory lecture notes--what I'm going to be working from during the lecture on August 31.

If I Have Seen Nothing But Mud, It Is Because...

Max Sawicky driven shrill by the assumption of perfect capital mobility:

MaxSpeak, You Listen!: STANDING ON THE SHOULDERS OF MEN IN DITCHES; VERY DEEP DITCHES: Professor Menzie Chinn at Econobrowser:

I understand why many models assume perfect capital mobility. Imperfect capital mobility is hard to model.

"Mix and Match"

Gene Epstein of Barrons writes, asking:

I wish Brad DeLong would just open my book [Econospinning] "at random" to the 12 pages that make up the second chapter (called "Two Ways to Measure Employment").

The chapter recounts a garden-variety case of econospinning by New York Times columnist Paul Krugman. My version of the story is that Krugman not only confused one set of employment data with another to make a point about the job outlook in a May 2004 column. A year later, when Krugman was given the chance to correct the error by then-Public Editor Daniel Okrent, he denied he had made it. DeLong also weighed in, ostensiby to defend Krugman, but only succeeded in compounding the confusion.

OK.

There is a certain horrifying fascination in watching the right wing's minions and useful idiots in the press attempt to attack Paul Krugman on matters of economic substance. The Mickey Kauses, the Andrew Sullivans, the Donald Luskins, the Danny Okrents--all seem unarmed men in a battle of wits, or perhaps an air assault by a circular firing squad of flying attack monkeys.

Our story so far:

Danny Okrent wrote, conclusively demonstrating to even his closest friends that he was grossly unfit to be New York Times ombudsman:

13 Things I Meant to Write About but Never Did - New York Times: Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.... [S]ome of Krugman's enemies are every bit as ideological (and consequently unfair) as he is. But that doesn't mean that their boss, publisher Arthur O. Sulzberger Jr., shouldn't hold his columnists to higher standards. I didn't give Krugman... the chance to respond.... I decided to impersonate an opinion columnist...

Paul Krugman responded:

Paul Krugman I: In Daniel Okrent's parting shot as public editor of The New York Times, he levied a harsh charge against me: he said that I have "a disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults." He offered no examples...

And in reply Danny Okrent did come up with an example--but his example was wrong:

Paul Krugman II: When I asked Daniel Okrent for the specifics behind his final attack, he offered two examples of what he claimed was improper use of numbers. This was the first time I heard from him, or anyone else, about either alleged problem. Let me start with the example that, I think, sheds most light on what is going on: Mr. Okrent's claim that I engaged in "blending, without explanation, numbers from the household survey and the establishment survey -- apples and oranges -- apparently in order to make a more vivid political point about Bush (5/25/04)."

He's referring to two different surveys conducted by the Bureau of Labor Statistics, which provide alternative estimates of employment. Some people play games by mixing and matching numbers from the two surveys, and Mr. Okrent has apparently spent the past year firmly believing (without having checked with me) that I did the same thing, to score political points. But I didn't. All the numbers in my 5/25/04 column came from the establishment survey....

In correspondence with Mr. Okrent, I pointed out that his specific attacks -- especially the blatantly wrong characterization of my 5/25/04 column -- were unfair. I asked him to do what he would have expected me to do, and admit that he had been in error. He refused. Let me repeat that Mr. Okrent never raised these issues as public editor. He now says that he didn't because he "experienced your best-defense-is-a-good-offense approach, and found it futile to deal with it"...

Then Danny Okrent committed virtual self-immolation:

For a man who makes his living offering strong opinions, Paul Krugman seems peculiarly reluctant to grant the same privilege to others.... Because only a fool or a supply-sider would eagerly engage in a debate on economics with Prof. Krugman, I'll try to eschew argument and stick to facts.... The mixing of household and establishment numbers in his 5/25/04 column: Missing from the BLS chart he cites is any number that even resembles the 140,000 new jobs each month needed to keep up with the growing population a statistic he cites in the column, and upon which he seems to have based some of his computations. To my knowledge, that number only appeared in the household survey.

None of Okren't sources--whoever they were--egging him on and telling him that Krugman "mixed-and-matched" numbers had, you see, told Okrent that the 140,000-a-month number came neither from the household survey nor from the establishment survey, but was the result of multiplying current payroll employment by a projected non-elderly adult population growth rate from yet a third source--the census.

This made Paul Krugman just the weeniest, teeniest bit irritated:

[3] Paul Krugman III: Okrent is lying to cover his mistake when he accused me of blending data from the household and establishment surveys. He now claims that he was only referring to my estimate of how many payroll jobs the economy needs to add per month [to keep labor market conditions from deteriorating], which for some reason he thinks is based on the household survey. But that's not what he said to me: he claimed that the basic numbers I gave on job growth were mix-and-match. In fact, in our correspondence, when I said that it was all payroll data, he declared that "your insistence that you relied only on one set of numbers is very puzzling. I don't see how the math works any other way; maybe you could further enlighten me." In other words, [Okrent] screwed up completely...

That's the back story. Now for the new episode, in which Gene Epstein of Barrons arrives at the scene to do what Danny Okrent won't--to defend Okrent's claim of Krugman's "mixing and matching"--and thus to join Okrent in virtual self-immolation:

Epstein: Just re-read the second-to-last paragraph in [Krugman's May 25, 2004] column.

And employment is chasing a moving target: it must rise by about 140,000 a month just to keep up with a growing population. In April, the economy added 288,000 jobs. If you do the math, you discover that President Bush needs about four years of job growth at last month's rate to reach what his own economists consider full employment."

Isn't "140,000" a number? It comes from the Household Survey--more formally known, as I needn't tell you, as the Current Population Survey--which ties in with the reference to the "growing population." As I explain in my book, that 140,000 is clearly based on the plausible, ball-park expectation that the Civilian ( i.e., employment-eligible) Population will be increasing at an average of about 210,000 a month, and that the labor force participation rate will run about two-thirds. Since two-thirds of 210,000 is 140,000, the plausible assumption is that the labor force will grow by 140,000 a month. And what the first sentence of that paragraph is saying is that "employment... must rise by about 140,000 a month to keep up with a growing population" because if it doesn't, there will be unemployment....

The only way to get Krugman's "four years" is to mix the data together--"apples and oranges"--exactly as Daniel Okrent had originally said. As I point out in the book, that does not even make "good nonsense," but you do get Krugman's result!

Is Epstein correct?

No.

As I emailed Epstein:

No [the 140,000 a month number] doesn't [come from the Household Survey]:

The CPS is a survey. Each month, it surveys 18,000 clusters of about four housing units each in 754 sample areas. The CPS produces estimates of things like employment-to-population ratios, unemployment rates, unemployment durations, labor status transition properties. It doesn't produce any information about trend labor force growth. It doesn't produce any information about how fast payroll employment has to expand to keep the labor market at about the same level of tightness. It can't--it is a survey of households, not a count of how fast the number of households and thus the number of potential workers is growing.

IIRC, Paul calculated the 140,000 number by taking Census--not CPS--estimates of the rate of adult population growth and multiplying that growth rate by the current level of payroll employment.

I don't see how the CPS could have entered into it.

You see, the "plausible, ball park expection that... [adult, non-elderly, civilian] population will be increasing at an average of about 210,000 a month comes from census projections, not from the household survey.

And it gets worse.

You see, the Bush Administration in its 2004 Economic Report of the President did the same calculation as Krugman, using the same census and establishment survey sources. You can see it on p. 94:

The Labor Market: Nonfarm payroll employment fell an average of 50,000 workers per month in the first seven months of 2003, before increasing 35,000 in August, 99,000 in September, and an average of 48,000 per month in the fourth quarter.... In the fourth quarter, the unemployment rate averaged 5.9 percent.... Because the labor force is constantly expanding, employment must be growing moderately just to keep the unemployment rate steady. For example, if the labor force is growing at the same rate as the population (about 1 percent per year), employment would have to rise 110,000 a month just to keep the unemployment rate stable, and larger job gains would be necessary (and are expected) to induce a downward trend in the unemployment rate...

The only difference between the Bush Administration and Krugman is that the Bush Administration assumed 1% per year as the rate of adult non-elderly population growth, and hence concluded that nonfarm payroll employment had to grow at 1/12 of a percent per month--110,000, that is--in order to keep labor market conditions stable. But growth is more like 1.25% per year. With payroll employment of 130 million, that's Krugman's number of about 140K per month.

Sigh.

As I said, a certain horrifying fascination.

Payroll Employment and Household-Survey Unemployment

The household-survey unemployment rate tends to fall when the monthly establishment-survey payroll employment number is more than... it's now 130,000 jobs gained a month, and tends to rise when the monthly establishment-survey payroll employment number is less than 130,000 jobs gained a month.

Figure updated to cover 1981:1 to 2006:7.

(Since 2000:1, the estimated intercept has risen to 166,000--but is very imprecisely estimated.)

Fall 2006 Office Hours

It's fall! Time to switch my office hours back to Evans 601. Tuesday 12-2, or by appointment--send email to delong@econ.berkeley.edu

Econ 101b: Fall 2006: More Notes for August 29 Lecture

Two Resources:

• Gapminder: http://tools.google.com/gapminder/
• Solow growth model scenario spreadsheet: http://delong.typepad.com/print/20060829_Solow_growth.xls

A Cautionary Tale:

• De-development in Zambia, 1975-2004: http://delong.typepad.com/print/20060829_Zambian_dedevelopment.pdf

I Want My Live Embedded Data!

Chris Anderson writes:

The Long Tail: Google Apps and the power of embedded functionality: There been a lot of talk today about Google releasing a suite of hosted applications.... As Anil Dash discusses here, these web-based apps are not meant to replace Office but to compliment it by doing things online that desktop software just can't do well. What might those things be? I think we have a hint in the spread of embedded video, courtesy of YouTube. The ability to easily embed into any blog page a full-featured videoplayer dedicated to a single video is a large part of YouTube's success. It doesn't require you to go elsewhere or download anything--it just works.

Now imagine the same model working for data. Rather than me posting static jpeg charts and links to Excel spreadsheet files, what if I could post data the way I post videos: as an embedded mini-app that simply displays the data in a useful way, allowing readers to manipulate or copy it at will?... That's what I want. Not an online spreadsheet that simply replicates what Excel already does perfectly well on my laptop, but small spreadsheet elements that I can paste... in the form of a specific data set or graph. The fact that they're hosted elsewhere is what would make them simple enough to use, just as embedding YouTube video is so head-slapping easy today....

The embedded functionality era has just begun. YouTube is just the start of something much bigger.

Indeed. I had thought by now that I would be able to simply embed the spreadsheet at http://delong.typepad.com/print/20060829_Solow_growth.xls in my online lecture notes, so that people could easily see and then do their own Solow growth model calculations. But it hasn't happened--although I strongly suspect Google or Microsoft will make it possible by this time next year.

YouTube is not the only example of this working now. Consider gapminder: http://tools.google.com/gapminder/

Econ 101b: Fall 2006: Problem Set 1

PROBLEM SET 1: ECON 101B: FALL 2006

Due at start of lecture on Tuesday September 5

1. Perform the following steps: a. Using your web browser (ideally Firefox), surf to http://www.vox.com/. b. Click on the "Please sign in" link in the upper right corner of the window. c. Sign in with email "xxxx" and password "xxxx". d. Click on the "Organize" link in the upper right corner of the window. e. If needed, click on the "Photos" button on the left. (It probably won't be needed.) f. Click on the "+ New" button. g. By clicking on the "Browse" button in the window that opens, select a photo of yourself to upload. h. By typing in the "tags" box in the window that opens, associate the photo with your name. i. Be sure the permissions on the photo are what you wish. Since everyone in the class has the userid and the password, selecting "you only" for the photo means that it can be seen by me and by the rest of the class. Selecting "world" means it can be seen by the world... j. Look at the photo of the bald man on the "Organize your stuff" page. Guess who the bald man is, and guess what the time series behind him is. k. Email Brad DeLong (at delong@econ.berkeley.edu) and Joe Rosenberg (at jwr_econ@berkeley.edu) telling us your guess, and whether you were able to successful upload and label the photo. l. You now have write access to the course website. I'd appreciate it if you didn't delete anything, but feel free to add interesting things to the website. Tag the additions you make with your name, and with whatever other category tags will help people find them.

2. Explain whether or not, why, and how the following items are included in the calculation of GDP: a. Increases in business inventories. b. Fees earned by real estate agents on selling existing homes. c. Social Security checks written by the government. d. Building of a new dam by the Army Corps of Engineers. e. Interest that your parents pay on the mortgage they have on their house. f. Purchases of foreign-made trucks by American residents

3. Calculating real magnitudes: a. When you calculate real GDP, do you do so by dividing nominal GDP by the price level or by subtracting the price level from nominal GDP? b. When you calculate the real interest rate, do you do so by dividing the nominal interest rate by the price level or by subtracting the inflation rate from the nominal interest rate? c. Are your answers to (a) and (b) the same? Why or why not?

4. Suppose that the appliance store buys a refrigerator from the manufacturer on December 15, 2005 for $600, and that you then buy that refrigerator on January 15, 2006 for $1000: a. What is the contribution to GDP in 2005? b. How is the refrigerator accounted for in the NIPA in 2005? c. What is the contribution to GDP in 2006? d. How is the refrigerator accounted for in the NIPA in 2004?

5. Why do DeLong and Olney think that the interest rate and the level of the stock market are importnant macroeconomic variables?

6. What are the principal flaws in using GDP per worker as a measure of material welfare? Given these flaws, why do we use it anyway?

7. Suppose a quantity grows at a steady proportional rate of 3% per year. How long will it take to double? Quadruple? Grow 1024-fold?

8. Suppose we have a quantity x(t) that varies over time following the equation: dx(t)/dt = -(0.06)x + 0.36. a. Without integrating the equation, tell me what the long-run steady-state value of x--that is, the limit of x as t approaches in infinity--is going to be. b. Suppose that the value of x at time t=0, x(0), equals 12. Once again, without integrating the equation, tell me how long it will take x to close half the distance between its initial value of 12 and its steady-state value. How long will it take to close 3/4 of the distance? 7/8 of the distance? 15/16 of the distance?

9. Now you are allowed to integrate dx(t)/dt = -(0.06)x + 0.36. a. Write down and solve the indefinite integral. b. Write down and solve the definite integral for the initial condition x(0) = 12. c. Write down and solve the definite integral for the initial condition x(0)=6.

10. What is the difference between the nominal interest rate and the real interest rate? Why do DeLong and Olney think that the real interest rate is more important?

Econ 101b: Fall 2006: Handout: August 29 Lecture

Introduction to the Course, and Introduction to the Theory of Economic Growth

A few graphs:

• World income distribution and telephone usage 2005
• World income distribution and telephone usage 1975
• U.S. nonfarm employment, 1940-2006
• U.S. real GDP per worker, 1950-2006

A simple model, the Solow model, for analyzing an economy with labor L, capital K, and technology E...

• The Solow model assumes:
• The labor force grows at a constant proportional rate n
• The rate of improvement of "technology" is a constant proportional rate g
• Savings leads to investment of a fraction s of output Y in increasing the capital stock K
• A constant proportion delta of the capital stock K wears out each period.
• How much of the cross-country and cross-time pattern of economic growth can we explain with this simple model?
• Solow Model Handout

Course website: http://berkeley101bfall2006.vox.com/

SYLLABUS: ECON 101b: MACROEONOMICS: FALL 2006

SYLLABUS: ECON 101b: MACROEONOMICS: FALL 2006

Brad DeLong delong@econ.berkeley.edu Office Hours: T 12-2 Evans 601, or by appointment http://www.j-bradford-delong.net/

Joe Rosenberg jwr_econ@berkeley.edu Office Hours: F 9-1 TBA

Lecture Meets: TTh 2-3:30, 70 Evans
Sections Meet: MW 9-10 47 Evans, WF 11-12, 51 Evans
Course Website: http://berkeley101bfall2006.vox.com/

This is the syllabus for Economics 101b, Macroeconomics. It carries the course up until November 7. The syllabus for the rest of the course will be distributed later, and will depend on (a) how the class goes in September and October, and (b) what the currently "hot topics" in the economic news happen to be. The possibility of an American or global recession, the U.S. budget deficit, the looming possibility of a major U.S. dollar-financial crisis, the dilemmas of Federal Reserve policy, and the ongoing industrial revolutions in East and South Asia will certainly be on the second-half syllabus, but there will be other topics as well.

This is the go-faster and do-more version of macroeconomics--the study of the determination of output, production, income, employment, and prices in the economy as a whole.

TEXTBOOK

One book is required:

1. The intermediate macroeconomics textbook is the one that Brad DeLong and Marty Olney have written. DeLong and Olney (2005), Macroeconomics 2nd ed. (New York: McGraw-Hill/Irwin) http://www.amazon.com/exec/obidos/asin/0072877588/braddelong00. Here is our explanation of why we wrote it the way we did: http://www.j-bradford-delong.net/Teaching_Folder/manifesto.html

Other things you might want to look at:

1. The Economic Report of the President, available online at http://w3.access.gpo.gov/eop/, for the U.S. government's view of the state of the economy.

2. For recent economic data, the CEA-JEC _Monthly Economic Indicators http://www.access.gpo.gov/congress/eibrowse/broecind.html.

3. Robert Heilbroner's The Worldly Philosophers (New York: Touchstone) http://www.amazon.com/exec/obidos/asin/068486214X/braddelong00.

4. Alan Blinder and Janet Yellen's (2001) The Fabulous Decade (New York: Century Foundation) http://www.amazon.com/exec/obidos/asin/0870784676/braddelong00.

5. Various intelligent and readable weblogs by economists: Greg Mankiw, Tyler Cowen and Alex Tabarrok, Mark Thoma, Jim Hamilton and Menzie Chinn, Brad Setser, Max Sawicky, Dean Baker, the Economic Policy Institute

If you want alternative takes at the subject matter, let me recommend two alternative textbooks: Greg Mankiw's Macroeconomics- http://www.amazon.com/exec/obidos/ASIN/0716762137/braddelong00, and Olivier Blanchard's _Macroeconomics http://www.amazon.com/exec/obidos/ASIN/0131860267/bradelong00. Olivier covers an extraordinary amount of ground at a conceptually (but not mathematically) very sophisticated level. His book is the best introductory macro book for those who can follow it. Greg is a brilliant and thoughtful man who is better than anybody else at making his point of view on economics seem natural and inevitable logical truths. Certainly the clearest introductory macro book.

GO-FASTER, DO MORE

Since this is a go-faster do-more course, we will go faster and do more. As a group, the class will be made up of people comfortable using calculus, so we'll feel free to use it in lectures, handouts, and in problem sets (and on exams). If you aren't comfortable using calculus, you probably don't belong here and may well not have a good time.

We will do a lot of things that are not in the book.

WEB

Since we will do a lot of things that are not in the book, I will need a place to put them. As some of you know, for the past decade I have been thrashing around, trying to figure out how to use modern electronic computer and communications technologies to supercharge education. The thrashing continues. This year's thrash will be to put the course website at:

http://berkeley101bfall2006.vox.com

More about this later...

GRADES

We are keenly aware that almost everybody signing up for this course could alternatively take and do very well in Economics 100b. We are anxious not to have students vote with their feet for an easier course and learn less because they fear the consequences of lowering their grade point average. Therefore this course will have a high curve: the idea is that nobody should get a lower grade than they would have gotten had they decided to take Economics 100b.

Grades will be based on the following:

• 20% from a first Midterm Exam to be given Wednesday September 28. (This is really early to give a midterm. Nevertheless it is important to give a midterm exam early in the course to serve as a reality check: so that students in trouble can figure out how much trouble they are in, and also--more important--so that at least one of us (DeLong) can figure out how unrealistic and detached from reality his beliefs about his teaching effectiveness are.)
• 20% from a second Midterm Exam to be given October 19.
• 20% from a (short: two hours long) Final Exam to be given December 13.
• 20% from Problem Sets. Problem Sets will be graded either 0 points (didn't hand it in on time), 1 point (handed it in but didn't make much of a successful effort) to complete it, and 2 points (made an effort--largely successful--to solve the problems).
• 10% from a five-page paper due
• 10% from section participation.

No makeup exams will be offered. Students who miss one of the three exams will have their scores for the other exams reweighted to add up to 60%. Students who miss two of the three exams should not expect to pass the course.

Since this is a go-faster and do-more course,

T Aug 29: INTRODUCTION: The Problems of Macroeconomics [Background reading: Macroeconomics, chs. 1-3]

Th Aug 31: THE LONG RUN: ECONOMIC GROWTH: Model-Building [Reading: Macroeconomics, ch. 4]

T Sep 5: THE LONG RUN: ECONOMIC GROWTH: Model-Building: Capital and Equilibrim

Th Sep 7: THE LONG RUN: ECONOMIC GROWTH: Model-Building: Dynamics and Feedback

T Sep 12: THE LONG RUN: ECONOMIC GROWTH: Application: How Much of the World Can We Explain? [Reading: Macroeconomics, ch. 5]

Th Sep 14: THE LONG RUN: ECONOMIC GROWTH: Model-Building: Technology and Organization

T Sep 19: THE LONG RUN: ECONOMIC GROWTH: Application: Technology, Organization, and Political Economy

Th Sep 21: FIRST MIDTERM EXAM ("Professorial Reality Check" Exam)

T Sep 26: THE MEDIUM RUN: Introduction: Full Employment, Flexible Prices, and Accurate Expectations [Reading: Macroeconomics, ch. 6]

Th Sep 28: THE MEDIUM RUN: The Real Side: Model-Building: Components of Aggregate Demand

T Oct 3: THE MEDIUM RUN: Model-Building: Full-Employment Equilibrium [Reading: Macroeconomics, ch. 7]

Th Oct 5: THE MEDIUM RUN: The Real Side: Application: Government Surpluses, Government Deficits, Investment Booms

T Oct 10: THE MEDIUM RUN: The Real Side: Application: The International Side: Exchange Rates, Net Exports, and Sectoral Shifts

Th Oct 12: THE MEDIUM RUN: The Monetary Side: The Quantity Theory of Money [Reading: Macroeconomics, ch. 8]

T Oct 17: THE MEDIUM RUN: The Monetary Side: Inflation and Expectations

Th Oct 19: SECOND MIDTERM EXAM ("Medium Run" Exam)

T Oct 24: THE SHORT RUN: Business Cycles: Model-Building: Sticky Prices and Aggregate Demand [Reading: Macroeconomics, ch. 9]

Th Oct 26: THE SHORT RUN: Business Cycles: Model-Building: The IS Curve and Employment [Reading: Macroeconomics, ch. 10]

T Oct 31: THE SHORT RUN: Business Cycles: ApplIcation: Stabilization Policy since WWII

Th Nov 2: THE SHORT RUN: Business Cycles: Model-Building: The Phillips Curve and Inflation [Reading: Macroeconomics, ch. 12]

T Nov 7: CONCLUSION: Business Cycles: Model-Building: Tying Up the Short-Run and the Medium Run

Th Nov 9:

T Nov 14:

Th Nov 16:

T Nov 21: NO CLASS

T Nov 28:

Th Nov 30:

T Dec 5:

Th Dec 7: FINAL REVIEW

W Dec 13: FINAL EXAM 12:30-3:30

Payroll Employment and Household-Survey Unemployment

The household-survey unemployment rate tends to fall when the monthly establishment-survey payroll employment number is more than... it's now 130,000 jobs gained a month, and tends to rise when the monthly establishment-survey payroll employment number is less than 130,000 jobs gained a month.

Figure updated to cover 1981:1 to 2006:7.

(Since 2000:1, the estimated intercept has risen to 166,000--but is very imprecisely estimated.)

Prices at the Pump

Hal Varian on why gas prices react so fast to rises in oil prices:

The Rapidly Changing Signs at the Gas Station Show Markets at Work - New York TimesTHE recent gyrations in oil prices offer a textbook illustration of how financial markets and commodity markets interact. Oil prices are notoriously volatile, particularly when times are tense in oil-producing countries -- just about all the time these days. So when BP announced this month that it might have to suspend as much as 8 percent of the nation's oil production because of corrosion in pipes on the North Slope of Alaska, the price of crude oil immediately shot up by 3 percent and wholesale gasoline prices simultaneously increased by about 2 percent.

But why? Even if it will cost more to produce gasoline in the future, gasoline being sold today was made with cheaper oil. This must be a rip-off, right? Actually, no. The reason behind the quick price change is a phenomenon known as storage arbitrage.

To spell out the argument, imagine that you own a storage tank full of gasoline that is currently worth $2 a gallon at wholesale prices. It is widely believed, however, that the price of gasoline will be $2.10 next week. You would be crazy to sell your gasoline now: just wait a few days and the higher price will be yours. But if everyone waits a few days, there is no gasoline to be sold now and the resulting shortage pushes the price of gasoline up. How high does it have to go? The answer is $2.10 a gallon. That is the price necessary to induce those who have gasoline to sell it now rather than to wait till next week.

This argument does not depend on whether you think the gasoline market is a paragon of perfect competition or an evil oligopoly. All it requires is that you believe that people who own gasoline, like just about everybody with something to sell, prefer to receive a higher price rather than a lower price. Even if the price of gasoline were set by a perfectly benevolent conservationist, we would expect to see the same pattern of price movements. If oil will be scarcer in the future because of the BP pipeline shutdown, we would want to conserve the already-produced gasoline that we have now. That means that the price of gasoline has to rise right away to prevent hoarding and to encourage conservation.

Storage arbitrage arguments were featured in a recent article in the Sunday Business section of The New York Times with the headline "Is a Futures Stampede Keeping Oil Prices High?%" The article described a provocative report written by Ben P. Dell, an analyst at Sanford C. Bernstein & Company, that blamed speculation in oil futures markets for high oil prices. Mr. Dell's argument was that inexperienced institutional investors had been investing in contracts for future delivery of oil, driving up futures prices. If the price of oil to be delivered in the future goes up, it has to pull the current spot price up as well....

Milton Friedman argued that speculation normally helps to stabilize prices rather than destabilize them.... If speculative trading tends to push prices higher when they are already high and lower when they are already low, then traders must be buying high and selling low. That would mean that traders have to lose money on average.... To the contrary, speculative traders try to buy low and sell high, activities that by their nature tend to push prices up when they are too low and down when they are too high.... If speculators start to worry that the price of oil could soon be significantly lower, some of that stored oil would come back on the market, pushing spot prices down, and offering welcome relief to consumers.

IIRC, there are some signs of a rocket-feather asymmetry: that gasoline prices rise quickly when oil prices rise, and fall more slowly when oil prices decline...

Hoisted from Comments: James Galbraith on "Dean Baker on Judges Behaving Badly"

James Galbraith weighs in:

Brad DeLong's Semi-Daily Journal: Dean Baker on Judges Behaving Badly: I keep harping on a theme, but I can't help it.

The one thing missing from this discussion, at every level from Brad DeLong and Paul Krugman through the comments, is actual data.

D-A-T-A. Numbers. Measurement.

Everyone is talking about inequality, attributing 2/5ths to this cause and the rest to some other.

But what are you talking about, actually?

Income inequality? Earnings inequality? Wage inequality? They are not the same, and in the U.S. they sometimes don't even move in the same direction.

Income inequality soared in the late 1990s. Why? A decomposition by region and sector can tell you pretty much exactly: it was the tech bubble and the stock boom. Capital gains and stock options realizations. Much of it in just five places in the whole country: Manhattan, King County WA, and Santa Clara, San Francisco and San Mateo Counties, CA. Take out those five, as Travis Hale and I showed in a paper, and the between-counties component of income inequality (which isn't all of it, but it isn't chopped liver, either) doesn't go up at all.

Meanwhile, earnings inequality went down in the same time. Why? Full employment. This component of inequality is closely tied to utilization rates and unemployment. It varies with hours worked, and overtime earned, more than anything else. It is, in short, a macroeconomic phenomenon.

Most of the discussion here and elsewhere, sadly, is about a third concept -- inequality in hourly wage rates. That is the subject of Dean Baker's anecdote about Northwest airlines: the flight attendants do not wish to work for the wage rate the company is offering.

In a decade of working on this topic, I have yet to see any measure of inequality that is based exclusively on movements in relative hourly wage rates. Not one. No doubt, changes in the structure of hourly rates can affect inequality, in principle -- changes in the minimum wage do have a measurable effect in past data.

It is quite certain, however, that the effect of changes in relative hourly wage rates on income inequality is very, very small, compared to that of changes in non-wage income (such as capital gains), and changes in the macro and demand factors that cause variations in relative earnings.

Understanding the hierarchy of components of income is the first, small step toward a realistic grip on the inequality issue. Any takers?

James Galbraith

I would say there are five things going on: (a) income and wealth at the top end, driven by changes in finance; (b) the effects of unemployment on the wage share; (c) skill-biased technological change; (d) declining union power; and (e) shifts in policy that erode equality-supporting measures like the minimum wage. I can't untangle them.

The State of Working America 2006-07

Probably the most useful single volume about the state of the American economy you can have on your bookshelf:

New From EPI -- The State of Working America 2006-07: On Labor Day 2006, the Economic Policy Institute releases its advance edition of The State of Working America 2006/2007. Prepared biennially since 1988, EPI's flagship publication sums up the problems and challenges facing American working families, presenting a wide variety of data on family incomes, taxes, wages, unemployment, wealth, and poverty — data that enables the book's authors to closely examine the impact of the economy on the living standards of the American people. The State of Working America 2006/2007 is an exhaustive reference work that will be welcomed by anyone eager for a comprehensive portrait of the economic well-being of the nation.

http://www.stateofworkingamerica.org/

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Edition)

Dean Baker watches the Washington Post further shred its reputation:

Beat the Press: Okay folks, get your checkbooks out. The people who pledged a CEPR contribution for every Post article/column whining about entitlements owe us money. This one is from Bob Kerrey and Warren Rudman, the co-chairs of the Concord Coalition.

In addition to conflating Social Security and Medicare... the column also has a few other standard scare tactics.... [I]t projects a rise in spending from approximately 20 percent of GDP at present to 40 percent in 30 years. The biggest part of this rise is due to a rising interest burden. See, if we run larger deficits, and Congress never responds by either raising taxes and/or cutting spending, then we get a rising interest burden. Silly trick, but this is the Post.

And of course, the article never discusses health care reform as something that should be on the national agenda....

The fact that the Post prints this stuff would not be so bad if they would occasionally allow an opposing view.

Fire Fred Hiatt. Fire Fred Hiatt today.

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Edition)

Dean Baker watches the Washington Post further shred its reputation:

Beat the Press: Okay folks, get your checkbooks out. The people who pledged a CEPR contribution for every Post article/column whining about entitlements owe us money. This one is from Bob Kerrey and Warren Rudman, the co-chairs of the Concord Coalition.

In addition to conflating Social Security and Medicare... the column also has a few other standard scare tactics.... [I]t projects a rise in spending from approximately 20 percent of GDP at present to 40 percent in 30 years. The biggest part of this rise is due to a rising interest burden. See, if we run larger deficits, and Congress never responds by either raising taxes and/or cutting spending, then we get a rising interest burden. Silly trick, but this is the Post.

And of course, the article never discusses health care reform as something that should be on the national agenda....

The fact that the Post prints this stuff would not be so bad if they would occasionally allow an opposing view.

Fire Fred Hiatt. Fire Fred Hiatt today.

Prices at the Pump

Hal Varian on why gas prices react so fast to rises in oil prices:

The Rapidly Changing Signs at the Gas Station Show Markets at Work - New York TimesTHE recent gyrations in oil prices offer a textbook illustration of how financial markets and commodity markets interact. Oil prices are notoriously volatile, particularly when times are tense in oil-producing countries -- just about all the time these days. So when BP announced this month that it might have to suspend as much as 8 percent of the nation's oil production because of corrosion in pipes on the North Slope of Alaska, the price of crude oil immediately shot up by 3 percent and wholesale gasoline prices simultaneously increased by about 2 percent.

But why? Even if it will cost more to produce gasoline in the future, gasoline being sold today was made with cheaper oil. This must be a rip-off, right? Actually, no. The reason behind the quick price change is a phenomenon known as storage arbitrage.

To spell out the argument, imagine that you own a storage tank full of gasoline that is currently worth $2 a gallon at wholesale prices. It is widely believed, however, that the price of gasoline will be $2.10 next week. You would be crazy to sell your gasoline now: just wait a few days and the higher price will be yours. But if everyone waits a few days, there is no gasoline to be sold now and the resulting shortage pushes the price of gasoline up. How high does it have to go? The answer is $2.10 a gallon. That is the price necessary to induce those who have gasoline to sell it now rather than to wait till next week.

This argument does not depend on whether you think the gasoline market is a paragon of perfect competition or an evil oligopoly. All it requires is that you believe that people who own gasoline, like just about everybody with something to sell, prefer to receive a higher price rather than a lower price. Even if the price of gasoline were set by a perfectly benevolent conservationist, we would expect to see the same pattern of price movements. If oil will be scarcer in the future because of the BP pipeline shutdown, we would want to conserve the already-produced gasoline that we have now. That means that the price of gasoline has to rise right away to prevent hoarding and to encourage conservation.

Storage arbitrage arguments were featured in a recent article in the Sunday Business section of The New York Times with the headline "Is a Futures Stampede Keeping Oil Prices High?%" The article described a provocative report written by Ben P. Dell, an analyst at Sanford C. Bernstein & Company, that blamed speculation in oil futures markets for high oil prices. Mr. Dell's argument was that inexperienced institutional investors had been investing in contracts for future delivery of oil, driving up futures prices. If the price of oil to be delivered in the future goes up, it has to pull the current spot price up as well....

Milton Friedman argued that speculation normally helps to stabilize prices rather than destabilize them.... If speculative trading tends to push prices higher when they are already high and lower when they are already low, then traders must be buying high and selling low. That would mean that traders have to lose money on average.... To the contrary, speculative traders try to buy low and sell high, activities that by their nature tend to push prices up when they are too low and down when they are too high.... If speculators start to worry that the price of oil could soon be significantly lower, some of that stored oil would come back on the market, pushing spot prices down, and offering welcome relief to consumers.

IIRC, there are some signs of a rocket-feather asymmetry: that gasoline prices rise quickly when oil prices rise, and fall more slowly when oil prices decline...

Payroll Employment and Household-Survey Unemployment

The household-survey unemployment rate tends to fall when the monthly establishment-survey payroll employment number is more than... it's now 130,000 jobs gained a month, and tends to rise when the monthly establishment-survey payroll employment number is less than 130,000 jobs gained a month.

Figure updated to cover 1981:1 to 2006:7.

(Since 2000:1, the estimated intercept has risen to 166,000--but is very imprecisely estimated.)

From Archives: Paul Krugman: Delusions of Triumph

From archives: I want to keep this at hand:

Delusions of Triumph - The Archive - The New York Times: By PAUL KRUGMAN (NYT) 752 words Published: May 25, 2004

Republicans, we hear, are frustrated by polls showing that the public has a poor opinion of George Bush's economic leadership. In their view, the good news about Mr. Bush's economic triumphs is being drowned out by the bad news from Iraq.

A recent article in The New York Times, citing concerns of ''Republican elected officials, pollsters and strategists,'' put it this way: ''The creation of nearly 900,000 new jobs in the last four months -- a development that might otherwise have redefined the race in Mr. Bush's favor -- has been largely crowded out of the electorate's psyche by images from Iraq.''

Funny, isn't it? In 2002, Republican strategists used the impending Iraq war to distract the public from the miserable economic news. Now they're complaining that Iraq is taking voters' focus off the economy.

But is the economic news really that good? No. While the recent economic performance is better than in the administration's first three years, it isn't at all exceptional by historical standards. And after those three terrible years, the economy has a lot of ground to make up.

Let's start with the ''nearly 900,000 new jobs'' created in the last four months. Is that exceptional? Well, during the first four months of 2000, the last presidential election year, the economy created 1.1 million new jobs. An e-mail message to Bush's supporters from Ken Mehlman, his campaign manager, takes a longer view, boasting of 1.1 million jobs created since last August (when job growth finally turned positive). But in April 2000, payroll employment was 2.3 million higher than in August 1999.

And that was after seven years of sustained employment growth; rapid job growth is hard to achieve when the economy is already close to full employment. To find a year comparable to 2004, we need to look back to 1994, when the economy was still recovering from the first Bush recession. In the first four months of that year, the economy added almost 1.3 million jobs.

The experience of 1994 also gives us some indication of how likely job growth is to ''redefine'' an election. Between December 1993 and November 1994 the economy gained 3.6 million jobs, a number beyond the Bush administration's fondest dreams. Yet voters, convinced that Bill Clinton was leading the country astray, gave his party a severe defeat in that year's midterm elections. So it's interesting that a new CBS News poll finds that 65 percent of Americans believe that the country is headed in the wrong direction -- a level not seen since 1994.

If you want to convince yourself that I'm not playing games with dates, go to the Bureau of Labor Statistics Web site at stats.bls.gov. Click on ''U.S. economy at a glance,'' then on the green dinosaur next to ''Change in payroll employment'' for a 10-year chart of monthly job gains and losses. The chart reveals that for 37 months, from January 2001 to February 2004, the Bush administration presided over dismal job numbers: employment for each month fell, or grew far more slowly than the norm during the Clinton years. March and April were much better, but they still weren't exceptional by 1990's standards.

And a mere return to Clinton-era job growth isn't enough: after all those years of poor job performance, we need extra-rapid growth to make up for lost time.

Here's one way to look at it. The job forecast in the 2002 Economic Report of the President assumed that by 2004 the economy would have fully recovered from the 2001 recession. That recovery, according to the official projection, would lead to average payroll employment of 138 million this year -- 7 million more than the actual number. So we have a gap of 7 million jobs to make up.

And employment is chasing a moving target: it must rise by about 140,000 a month just to keep up with a growing population. In April, the economy added 288,000 jobs. If you do the math, you discover that President Bush needs about four years of job growth at last month's rate to reach what his own economists consider full employment.

The bottom line, then, is that Mr. Bush's supporters have no right to complain about the public's failure to appreciate his economic leadership. Three years of lousy performance, followed by two months of good but not great job growth, is not a record to be proud of.