The View from Right Field

How to Know Economists Have a Sense of Humor – or of the Absurd

Actually, I first heard the answer to the question, “How do you know economists have a sense of humor?” from the EconTalker, Russ Roberts.  I don’t know if he came up with it, but since I heard it first from him, I will credit him with it (at least purposes of this post).^1,2

But I am going to change the question a little, though the answer is still the same.  Here is my phrasing: “How do you know economists have a sense of the absurd?”

The answer to both ways of phrasing the question is the same: They use decimal points. 

Marco Rubio Wants to Prohibit the Use of SNAP Money to Buy Pop and Dessert

Senator Marco Rubio (R, Fla.) wrote an Op-ed in yesterday’s Wall Street Journal, “No More Subsidies for Junk Food,” proposing a ban on the use of SNAP monies, i.e., food stamps, to buy soda (called “pop” where I’m from) and prepared desserts.¹  Senator Rubio claims this would promote healthier diets, reduce “food deserts” in low-income neighborhoods by encouraging stores to carry healthy foods, and reduce long-run medical expenses, a veritable policy three-for-one.

Of course, all this is assuming his idea would work.  But if SNAP funds can’t be used for pop and desserts, people could easily use SNAP money for other things and save their cash for what they really want.  Or they could buy SNAP-approved products and then trade them for pop and desserts.  They could even sell their excess SNAP money for cash, at a discount, of course, so they could buy the banned items.

Bank Bailouts: Once Is Precedent; Twice Is Tradition

If “once is precedent, twice is tradition,” then bank bailouts are now tradition – though they might have already been tradition if the 1980s bailout of the savings and loan industry constituted bank bailout number one.  In any case, we are definitely now in “tradition” territory when it comes to bank bailouts.  I know Joe Biden said what was done over the weekend was not a bailout, but President Biden says lots of things.  It may be true that the stockholders of Silicon Valley Bank and Signature Bank will not be bailed out, but:

• Any depositor who deposited more than $250,000 in SVB or Signature will be covered for their whole deposit, not just the first $250,000.  That’s a bailout.
• Anybody who owns stock in a bank whose stock might have tanked or might have even gone belly up but for the government’s actions over the weekend in bailing out depositors at SVB and Signature, is getting a bailout, too.

Thoughts of One and a Half Dozen of the Other*

It’s getting hard to write longer posts these days, so here are some short thoughts that I wish I could develop further but haven’t been able to get to:

• Re Ukraine: Joe Biden is doing a pretty good job, certainly better than either of his predecessors (especially Barack Obama, who wouldn’t even sell antitank weapons to Ukraine after Russia annexed Crimea and invaded Donbas in 2014).  But President Biden could be doing better.  We need to sell/give the Ukrainians more weapons and more powerful weapons.  The best, and quickest, way to end the war is for Ukraine to win.  Let’s help them do it – now.

• Given all the weapons we are shipping to Ukraine, we need to replenish, and build up, our own inventories.  That means spending more money on defense – and committing to do it for an extended period of time.

COLAs Are Back – Which May Mean Inflation Is Staying

To understand inflation, it helps to be old.  I’m old.  And the COLAs I’m talking about in the title of this post are not Coca-Cola or even RC.¹  They’re “cost of living adjustments.”  And they are back, not just in labor contracts but in commercial contracts, too.

When I was a lawyer working for a corporation (starting in 1978), the contracts I reviewed almost always had inflation adjustment clauses, unless they were for something that was going to be delivered or done really soon.  Sometime in the late ‘80s or maybe early ‘90s, these clauses started to disappear – because they weren’t necessary anymore.  Well, they’re back.

Here’s My Theory Why Self-Driving Cars Are a Long Way Off: Lawsuits

On Monday, the Financial Times had an article noting that driverless cars may create more traffic jams because more people will take cars if they don’t have to drive themselves.  But, the article also noted that “[p]redictions for driverless cars hitting the road en masse have repeatedly been proved wrong.”  The FT published my letter giving my theory why in Friday’s paper.  Here it is (there is no link because it is behind their paywall):

“Lex talks about how driverless cars may result in more cars on the road as people find car travel even easier if they don’t have to drive themselves.  (‘Driverless cars: jam tomorrow’, March 7)  But the article also notes that, ‘[a]fter a decade of hype and hundreds of millions of dollars of investment, you still can’t buy a self-driving car.’  As the article concludes, ‘[t]he future [of driverless cars] may also be further away that investors hope.’

Does ESG Investing Allow a Country to Defend Itself?

A friend was mentioning the other day this great little app she has on her phone that helps her make sure the mutual funds she is investing in don’t own stock in companies that make guns.  Apparently, you put in the names of the mutual funds and it tells you whether they own stock in companies making guns. 

This is part of the ESG investing trend.  “ESG” stands for “Environmental, Social, Governance.”  The idea is to have a set of criteria that socially conscious investors can use to screen their investments.  “Environmental” criteria cover how a company performs with respect to environmental and sustainability standards.  “Social” criteria grade how a company manages its relationships with employees, suppliers, customers, and the communities where it operates, i.e., its stakeholders.  “Governance” looks at things like a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Fighting Inflation: Biden or the Fed?

In The Wall Street Journal today, William Galston talks about what President Biden needs to do about inflation (“Biden’s Moment to Face the Inflation Music,” Jan. 26):

“If I were president, I would be attacking it head-on, beginning with a major speech explaining what is happening and followed by regular public events highlighting efforts to attack various dimensions of the problem, from reducing the backlog at ports to recruiting and training truckers to making sure grocery shelves are stocked.”

“Build Back Better” and Responsible Governance

Following up on a post from October, I wrote this letter to the editor to the Financial Times, which was published today (because of the FT’s paywall, I am setting it out below¹):

"Ensuring spending lasts is key to Build Back Better

In “Trade-offs are needed to rescue ‘Build Back Better’” (FT View, December 22), you say “the legislation is mostly funded (though ‘temporary’ expenditures often find a way of becoming permanent)”.  Which is exactly the problem.

The High Cost of Johnson. The High Cost of Biden.

In 1966, Richard Nixon crisscrossed the country, campaigning for Republicans and attacking Lyndon Johnson on “the high cost of Johnson.”¹  While we might not see 1966’s 3.0% inflation as no big deal, in 1966, after seven years of inflation between 1.1% and 1.6%, it was a big deal – and an important campaign issue.  The Republicans picked up 47 seats in the House in 1966.

Compare 1966 with today.  The most recent inflation number today is 6.8%.  Democrats are trying to push big spending bills through Congress, bills that could keep inflation high or maybe even push it higher.  “The high cost of Biden” has the potential to be a big campaign issue for Republicans next year.  It ought to give Democrats pause and Republicans hope for 2022, and maybe even 2024.