Everyday "Marginal Utility"

CO2 Goes, it Goes Down. The Temp Goes Up, it Goes Down..

Climate alarmists would have you believe that the quantity of carbon dioxide in the atmosphere is the sole determinant (if pressed, they will say the primary determinant) of global temperatures. Actually, however, both the proportion of CO2 in the Earth’s atmosphere and the Earth’s temperatures have varied widely over the planet’s history, with no apparent correlation between the two. The point is illustrated by this graph, based on data from C.R. Scotese and R.A. Berner:

Via Tom Nelson.

The idea that CO2 operates as a kind of thermostat, so that by impoverishing ourselves we can cool down the planet, is so silly that it is remarkable that so many have been duped into believing it.

War (on Poverty) is Not the Answer

Govt Job Training Programs: Not a good idea

 From today's WSJ:

In 1962, Congress passed the Manpower Development and Training Act (MDTA) to provide training for workers who lost their jobs due to automation or other technological developments. Two years later, the General Accounting Office (GAO) discovered that any trainee in this program who held a job for a single day was counted as “permanently employed”—a statistical charade by the Department of Labor to camouflage its lack of results. A decade after MDTA’s inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an “overriding concern with filling available slots for a particular program,” regardless of what trainees actually needed".

Obama's Job Plan: A waste of money

Ultimately, the President’s bill would do nothing for education and would hurt the economy, because government spending more almost by definition means a nation wasting money.

The Plan: It’s an incoherent mishmash — it has no philosophy other than, ‘Let’s get some money, and spend it on votes."


The American Jobs Plan is the usual Democratic formula of taxing away wealth and spending it on useless payback gifts to election supporters. It takes wealth and instead of "investing" it in economic activities that will produce returns in the future that will not only repay the cost of the investment, produce a profit and satisfy economic needs it does....nothing. Instead it is like taking a half trillion dollars and treating your friends to beer bash and then slipping the bill for it under your parents door - or your children's door.


It accomplishes nothing - you can't even remember the beer bash since you were drunk at the time. So you consumed wealth and did nothing to create an investment return that would pay for the party and replenish the consumed wealth. 


More from Neal McCluskey (Cato Institute):


"I can’t look into President Obama’s heart, so I can’t tell you what motives are driving the American Jobs Act. I can, though, tell you this: One look at the facts about American education, and his proposal only makes sense if the goals are to energize union support, and perhaps use spending as some easy shorthand to tell voters that the President cares about kids.

The basic reality is that over the last several decades governments at all levels have conducted ever-bigger education money bombings with no positive academic impact. According to the Digest of Education Statistics, real per-pupil expenditures rose from $5,671 in 1970-71 to $12,922 in 2007-08 (the latest year with available data). On the federal level, between 1970 and 2010 per-pupil spending rose an astonishing 375 percent. Meanwhile, National Assessment of Educational Progress scores for 17-year-olds – essentially, our schools’ “final products” – were almost completely flat. More money did not buy better results.

What did it buy? Exactly what President Obama seems to want to protect: staffing bloat. Between 1969 and 2008 American schools went from having 22.6 students per teacher to 15.3. District administrative staff went from 697.7 students per employee to just 363.3. In total, employees per student dropped from 13.6 to 7.8, all while academic outcomes froze. We got lots of jobs – many unionized – but nothing of educational value.

There is simply no way to look at the data and believe that $30 billion for school staffing will improve education. So it must only be about jobs, and ineffectual jobs at that.

That “ineffectual” part is the economic key. Stimulus supporters argue that paying for any job is good because employed people spend their dollars. But they ignore that the money must come from somewhere, and that somewhere is ultimately taxpayers who would either spend it themselves – including investing in new or existing companies – or put it in banks that would lend it. So the money would be spent one way or another, only taxpayers have huge incentives to employ it much more efficiently than do public schools, if for no other reason than they did the hard work of earning it. In the aggregate, that means we’d be better off just letting taxpayers keep their ducats.

What we’ve tried already supports this. Contrary to what Dan Domenech writes, public schools have gotten oodles of bailout money. The original stimulus included roughly $100 billion for education, the bulk of which went to public K-12 schooling, and in 2010 the President signed legislation giving statesanother $10 billion to keep school employment rolls engorged. And did unemployment plateau at about 8 percent, as the Obama team projected? You know the answer.

How about fixing dilapidated school buildings? Again, money is not the answer, unless the question is how do you win union friends and influence voters.

As I testified in 2008, for years school districts had been spending more on maintenance and construction than it was estimated they needed to bring all schools into “good overall condition.” Yet conditions seemed to keep getting worse.

What’s the problem? First, districts often put off maintenance so that small problems become bigger. And second, they often spend lavishly on School Mahals, a tendency embodied by L.A. Unified’s $578 million Robert F. Kennedy Community Schools complex.

Of course, building something brand new, equipped with more superfluous lights and whistles than the original starship Enterprise, doesn’t make practical sense if you could keep the old buildings fully functional at a fraction of the cost. But practical and political are totally different animals. Keeping the boiler in good repair simply doesn’t make for politician-aggrandizing, ribbon-cutting photo-ops. But undertaking a big addition or renovation, which Obama’s bill would pay for, absolutely does.

And let’s not forget: All the labor would likely have to be hired at union rates, in keeping with standard federal requirements. So jobs yes, but not more jobs in exchange for market wages.

Ultimately, the President’s bill would do nothing for education and would hurt the economy, because government spending more almost by definition means a nation wasting money"

It's the Investment Stupid

by Steven Horwitz

Here is the most important blog post you will read all week, and it comes from the indispensible Bob Higgs.  Bob points out that all the talk about "stimulating consumption" is beside the point because consumption spending is not the problem!  Real personal consumption spending is now above its pre-recession peak.  And Lord knows government spending isn't the issue either.  Anyone who's taken intermediate macro knows what's coming next:  if GDP is lagging, and it's neither C nor G that's the problem, it's a pretty good bet that it's investment.  Consistent with the emphsasis on regime uncertainty that has become Bob's hallmark (and something I've tried to empahsize in otherpostshere), investment is indeed the problem (emphasis mine):

The economy remains moribund not because consumption spending has failed to recover and not because government spending has failed to increase, but because the true driver of economic growth—private investment—remains deeply depressed. Gross private domestic fixed investment fell steeply after the second quarter of 2007, and in the second quarter of 2011 it remained 19 percent below its pre-recession peak. This figure fails to show how bad the investment situation really is, however, because the bulk of the investment spending now taking place is for what the accountants call the ”capital consumption allowance,” the amount estimated as necessary to compensate for the wear and tear and obsolescence of the existing capital stock.

The key variable is net private domestic fixed investment—the investment that builds the productive private capital stock. Quarterly data through this year are not currently available at the BEA website, but the annual data show that an index of its real amount peaked in 2006, fell substantially in each of the following three years, and recovered only slightly in 2010, when the index showed net private domestic fixed investment was running about 78 percent below its level in 2005 and 2006. Here is the true reason for the recession’s persistence.

Private investors, despite the full recovery of real consumer spending and the increase of real government spending for final goods and services, remain apprehensive about the future of new investments, especially new long-term investments.

It really is that simple folks.  There's no better sign of the implicit acceptance of the Keynesian world view than the emphasis in the political realm and the popular press on the centrality of consumption(and jobs, for that matter) as a sign of economic health.  It's not.  From at least J. B. Say onward, we've known that production is the source of demand, and that you have to produce value before it can be consumed.  Austrians have long emphasized the importance of capital investment for economic growth.  In fact, the contrast between consumption and capital is a good proxy for thecontrast between Keynesians and Austrians. Austrians have also pointed out that the necessary investment will only take place in an economy characterized by respect for private property, the rule of law, and sound money.  Right now, we don't seem to have any of those three in the sufficient amount, and the results are just what Bob argues in this post.

You want recovery?   Forget consumption.  Ask yourself what sorts of policy changes would make entrepreneurs and investors feel like they know what to expect over the medium and long run and convince them that they will be able to keep the fruits of their labor and investments.  Hint:  the president's jobs plan ain't it.