Dr. Doom/Roubini, public health care, mancession, and Cash for Clunkers.

Dr. Doom's at it again. I don't share his opinion about the growth "since March." I think the bottom was a bit too low, and at least some of the later stock growth was corrective.

The Boston Globe explains how a public health care option would work in pretty easy terms.

Free Exchange picks up Chris Swann, saying that men aren't necessarily the hardest hit during this recession.

The FRB Cleveland shows us some of the effects of the Cash for Clunkers program. I'd like to see their numbers on slightly longer-term effects.

The Cash for Clunkers fallacy

Why are there so many people who claim Cash for Clunkers is an example of the broken window fallacy? It's not.

First, like everyone else has started, let's talk about the broken window fallacy. The story goes like this: A guy has a window. Someone throws something through the window, smashing it, and runs away. The guy now has to pay for a new window. Bystanders say, "Well, your window broke and you have to pay for a new one, but at least that money you're going to spend on it goes into the economy." Let's say that the new window costs $100, so now the economy is stimulated by $100. Is this the right way of looking at the situation? Is this an efficient outcome? Was the window being smashed a good thing, overall?

The answer is no. The guy had $100, which he may have spent on something else. Had his window not been shattered, then he would have a window and $100 worth of stuff rather than just a window. The guy would have spent the $100 on something to make him better off rather than being on par. With the window smashed, he now has a window and has effectively lost $100. He is worse off by $100, even though the economy is better off by $100. Had the window not been shattered, he'd be better off by $100, and the economy would still be better off by $100.

The bystanders have fallen into the broken window fallacy. Because the economy gets $100, they have assumed that there is an overal benefit. The argument is also applied to war and natural disasters.

Some opponents of cash for clunkers say that the program is an example of this broken window fallacy. They say that the destruction of cars isn't an overall benefit for anyone, and follows the same logic as the broken window fallacy.

There may or may not be an overall benefit of the cash for clunkers program--that topic is an interesting one, but it's a more complicated issue. It's certainly not an example of the broken window fallacy.

First of all, the destruction in the broken window fallacy refers to mindless destruction. It's a natural disaster, a force majeur, or an act of God, it's not something we choose. In the cash for clunkers program, people give up their cars to be destroyed, and the cars must fulfill certain requirements.

More importantly, in the broken window fallacy, the owner of the window did not want his window broken, because it makes him worse off. In the cash for clunkers program, the owner of the car willingly gives his car to be destroyed because it makes him better off. He effectively trades his car to get a discount on another car of his choice among a selection. If he doesn't want a car from the selection, he doesn't have to give up his car. The car owner makes the decision. He likely would have bought a new car anyways, were the new car cheaper than the original sticker price. The government merely provides the discount.

Why does the government provide the discount? Maybe they believe there's some benefit in carbon emissions, or maybe they want to spur the auto manufacturing industry, or maybe a number of other issues. The important issue is that the program will hopefully provide some effect the government want to attain.

So, is the cash for clunkers program a good program? Well, presumably, the car owners are better off, and the government is better off (having their desired effect come into fruition). Is everyone better off? It's hard to say, there will be some effect in the real economy and there will be some effect in carbon emissions. Were the taxes worth it? That's for someone else to figure out.

History, open data, auto industry, financial planning, bachelor's degrees, and gas prices

A new blog on economic history.

Hey, world bankers like open data too! Those are great guys.

Speaking of which, Hal Varian used Google Trends to make better forecasts.

James Hamilton is still on the case, reporting about the declining auto industry.

ESPlanner, a long term financial planning website, though the site isn't always working.

Some community colleges offer bachelor's degrees. I like that degrees are becoming less expensive, but they shouldn't be easier to get. This is the classic Spence problem.

Mark Perry gives us a look at real gas prices. It looks like a falling trend since 1919, with some big spikes thrown in. And, note that the spikes take us to about back to the 1919 level anyways.

Sumner, World Bank, global recession, GDP, the auto industry, and education.

Scott Sumner with an excellent post covering macroeconomics, democrats being called socialists, soaps promoting liberal values, and Tyler Cowen. As is normal on Sumner's blog, the post is quite long, but he makes a lot of great points. Of course, I don't agree with him on the causes of the current recession, I take a more moderate view, I think.

Geo, a map of World Bank development projects. There are some very good, interesting maps there, if you're interested in international aid.

The St. Louis Fed releases some data on how the US is faring compared to other countries.

Even though Wednesday's GDP report was pretty bad, there are some silver linings. For example, the part of GDP that did the worst was the lagging indicators--the leading indicators weren't quite so bad. So, a turnaround may be in sight.

An interesting discussion: does America need the auto industry? Some pretty smart people take a stab at the question. Another NYT "debate" on education reform.

Life expectancy, displaced auto workers, solar energy, and the Clark Medal

Having friends increases your life expectancy. I guess it's not much of a surprise, considering stress decreases your life expectancy. Parents don't have an effect. Sorry, mom.

Auto and manufacturing workers can get an accelerated bachelor's degree. This sort of thing should be much more common. Haven't we had a shortage of teachers, too? There are lots of places for these workers to go.

Texas State Senators have approved a $500 million solar energy bill. I'm glad to hear we're not just focusing on wind.

The John Bates Clark Medal gets awarded this Friday. Exciting!

Google, the recession, Thoma v Sumner, creditors, and GM's bankruptcy

Google's Android looks like it's going to start gaining more ground. I always love free stuff, and when other companies use free stuff to lower their prices.

A few good pieces from Mark Perry. The housing market may have bottomed. The NY Fed says that economic recovery may have started. Russia's subsidized auto industry has been making the same car for 40 years.

Watch some Mark Thoma and Scott Sumner discuss a variety of economic issues. I really like there being a lot of active economic discussion out there.

Tyler Cowen says that creditors need to suffer more. He's probably right.

GM is preparing for possible bankruptcy. It's been a long time coming!

G-20, credit crisis, auto industry, and taxes

Now that the G-20 summit is over, you can imagine that a lot of people are weighing in on what they consider to be the important results. Dani Rodrik says that it was a victory for Europe. Vicky Pryce talks about the focus on trade. Free Exchange seems optimistic about most of the results. Justin Fox talks more about the IMF's cash. ... And that's just a drop in the bucket of all the commentary going around out there.

Calculated Risk provides a bunch of graphs of credit crisis indicators. We're still high on all of them, but things are looking better.

Free Exchange considers how one would separate the auto and oil industries. We don't want rising oil prices to sneak up on us again, which may happen due to rising demand in China, but there are fewer incentives for fuel efficient or electric cars while oil prices are low. Of course, this is nothing new, it's just another thought on that same old topic. The way to do it might be a tax on gas.

Mike Mofatt talks about why value-added sales taxes are more efficient than other taxes.

Auto industry, G-20, Department of the Treasury

Justin Fox wonders if Obama is going to stick to the tough stance he's taken on the US auto industry. David Brooks says it's political suicide, Justin Fox thinks it's possible.

To keep up with the London G-20 Summit, you can follow their website. VoxEU.org announced some time ago that they were working with the summit to provide economic commentary and debate. Drea at the Business Pundit gives us pointers on who to watch during the G-20 summit. It sounds like it's going to be very, very interesting to follow.

Obama has announced a couple of new big names to his staff of advisors--Levitt and Mankiw. What an interesting surprise! I've got to give it to Obama for choosing a diverse staff of highly intellectual and respected economists.

Unemployment rate, auto industry, Asia, morality, and business cycles

The unemployment rate is 8.1% nationwide, but in Houston it's--erm--"only" up to 6.5%.

James Hamilton at Econbrowser shows us some numbers on the auto industry. It looks like the industry has been faltering since June, those numbers are way down. I'm reminded of James Joyner's piece this past week celebrating the exit of manufacturing jobs. Still, I get the idea that the numbers are soft--domestic and import numbers are down. People have to start buying cars again eventually.

Sachs writes a Letter to the Editor at NYT, disagreeing with Krugman. According to Sachs, the global crisis isn't Asia's fault.

Here's an interesting discussion on the claim that morality is analogous to economics. I've been thinking about similar issues on and off--I even saw a book comparing economic and Christian principles. Although, I guess it isn't surprising that there are similarities in what different groups say will make us better off.

David Beckworth provides an industry-by-industry look at the employment numbers during the recession. Some of them have actually been growing! I don't think it's much of a surprise, but it's still worth a look.

CalculatedRisk talks about business cycle indicators, from lead to lag.

Business as usual

Michael Mandel reports that, during the recession, we're consuming less food. Strictly speaking, we're spending less money on food. This probably means that people are buying less expensive food, but you wouldn't think it's the second biggest cost cut we're making--after all, everyone has to eat.

Ed Glaeser argues that we shouldn't try to help the auto industry. This is a common economic argument, actually. After all, if a company is going under--particularly a large one--there's probably a good reason for it. They're somehow not efficient enough to survive the market, and helping them out is a waste of money.

How's this for developmental news? Over 60% of the world now uses cell phones. I expect everyone around me to have a cell phone, it's strange to me that almost 40% of people don't use cell phones. And, developed nations account for 66% of cell phone usage. That's even more weird to me!

Intel wants to push its Atom processor (which currently runs my netbook) into other devices. Hooray for low cost processors! I love it when innovation and competition drive down prices.

Our future

Here's an interesting article about Larry Summers and Tim Geithner, two possible choices for New York Federal Reserve president. It's a pretty interesting look at the two gentlemen. A WSJ blog gives more information.

Greg Mankiw writes a memo to President-elect Barak Obama. Hopefully Obama listens to Kling (and many others) on the auto industry.

Some advice for those seeking jobs in academia.

Prof Glaeser says that we need better teachers to improve our education system. I think there's much more to the issue. Also, Prof Glaeser doesn't say how we should attract better teachers--some data, for example, shows that better teachers often work at private schools, where they get lower pay. So, if pay isn't a good enough incentive, how do we attract teachers? Either much larger pay, or we should take a look at the incentives of teachers. My bet is that teachers are concerned with their work environment, their freedom in the classroom, and job security. The government has done a number of things to dissuade teachers from staying in their field. (h/t Thoma)

Still on education, Charles Murray argues that we should get rid of four-year BAs.

For those that follow oil prices and the industry, Mike Shedlock provides a wealth of information. Personally, I thought it was hilarious that Venezuelan president Hugo Chavez "predicted" $100/barrel oil, with no qualifiers. Firstly, price tends to increase in all goods--we call this inflation, and it's especially true in prices tied to the dollar--so with no time qualifier, Chavez's "prediction" is basically self-evident. Secondly, not even Chavez could "predict" how oil would skyrocket (proving him right, by technicality), then plummet again (making him still sound ridiculous).

Lastly, in a paper about the ancient history of economics, Gavin Kennedy talks about the origins or bargaining. Now that's economic history!