Structural vs. Cyclical Unemployment

I have never liked the distinction between cyclical and structural unemployment. Maybe it is useful for some purposes, but it is at least as likely to be misleading as useful. Stephen Ayer notes the following use of the distinction in a NY Fed paper by Groshen and Potter

Cyclical adjustments are reversible responses to lulls in demand, while structural adjustments transform a firm or industry by relocating workers and capital. The job losses associated with cyclical shocks are temporary: at the end of the recession, industries rebound and laid-off workers are recalled to their old firms or readily find comparable employment with another firm. Job losses that stem from structural changes, however, are permanent: as industries decline, jobs are eliminated, compelling workers to switch industries, sectors, locations, or skills in order to find a new job.

I propose a different scenario:

Suppose there is rapid technological change in a number of industries. Suppose further that as a result, the marginal productivity of labour sky-rockets in those industries. Labour is attracted to those industries, not forced from the old, unchanging industries. Old industries decline and jobs are lost there, but at the same time, there are many new jobs and opportunities in new and growing industries.

How long does it take labour to move from one job to a different one? In general, probably no longer than it takes to sit home on unemployment waiting for a call-back on a cyclical unemployment job.

I much prefer to think of unemployment as job search.

More on the New Food Triangle

For some reason, my piece linking to Kip Esquire's posting, receives considerable interest via Google and Yahoo search engines. Here is another, that concludes pizza forms the perfect food triangle.

See? There's even a little delivery guy coming up the porch steps.

I expect the gubmnt report was referring to pizza slices since they are shaped like triangles.

Oxfam and the WWF are Free-Traders

At least it seems so when the circumstances suit them.

Trade Minister Mark Vaile says Australian farmers will benefit from a World Trade Organisation (WTO) ruling that the European Union's (EU) sugar subsidies are illegal.

Australia, Brazil and Thailand had brought the case against the 25-nation bloc.

The 25-nation bloc had attempted to overturn last year's finding by a panel of trade judges on several million tonnes of surplus EU sugar output, known as "C" sugar.

The judges had found that while the sugar should have been exported without subsidies, it was benefiting from state aid.

...Activist groups like Oxfam and WWF, which are frequent critics of the WTO's staunchly free-trade line, have applauded.

They say that the EU must now "radically reform its scandalous sugar regime."

One of the big questions will be whether decisions like this will carry any weight. Will the EU comply? and, if so, how much? We in Canada know that the U.S. has been an extreme foot-dragger, and there is little reason to expect anything different from the EU.
[h/t to BrianF for the link]

A Slightly Different Version of Comparative Advantage

From Forbes magazine (link courtesy of Newmark's Door):

The more transparent an economy becomes, the more David Ricardo's 19th-century law of comparative advantage rules the day. Then came the commercial Internet, the greatest window into comparative advantage ever invented. Which means if your firm's price-value proposition is lousy, too bad. The world knows.

Well, that is one way of looking at comparative advantage. Here is another.

What matters is not the absolute cost of production, but rather the ratio between how easily the two countries can produce different kinds of things.

The High Price of Erotica

A biscuit tin produced in Liverpool in the 1970s sold at auction for 119 pounds this week. [h/t to BrianF for the pointer]. And the reason had nothing to do with the Fabulous Four.

The Huntley and Palmer [no relation] tin, made in the 1970s at the company's Liverpool factory, appears on first glance to show an idyllic lunchtime scene.

On closer inspection, the illusion of tranquillity is shattered by drawings in the background of a naked couple.

These are said to have been added by a designer who had just been sacked.

...Amid the scenes of ladies and children lunching around a table at a Manor House, are said to be those of a man and woman locked in an amorous embrace in a flower bed.

The tin also depicts two dogs mating behind a tree and a jam jar decorated with an obscene label.

I wonder whether these scenes had a subliminal seduction effect that boosted sales of the tins before people consciously knew about the scenes.

New Standards in Gubmnt

From New Zealand:

Labour MP Dover Samuels appears to have been caught up in an embarrassing incident in an Auckland hotel.

Newstalk ZB says Samuels told them he urinated in a corridor of the Heritage Hotel nearly three weeks ago after attending a function.

The radio station says Samuels told them he couldn't get into his room because of a faulty key, and relieved himself in front of the duty manager.

Samuels had earlier denied any incident when contacted by One News.

The hotel has refused to comment.

Okay, now. Everyone in unison:

1. What is the risk?
2. Who is the least-cost bearer of the risk?

Link via Rodney Hide, who is not a labour MP in New Zealand. Check out the comments, too!

I Hate Minority Gubmnts

The reason I especially dislike minority Liberal gubmnts is that if they don't get in bed with the socialists, they face another election, and they usually prefer sleeping with socialists.

Mike, at London Fog, has two quotes that are appropriate for this situation. The first is from H.L. Mencken:

"The government consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can't get and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is sort of an advance auction sale of stolen goods."

And this one is from Andrew Coyne:

So now we know: there is no price Paul Martin isn't willing to make you pay to save his job. And there is no amount of corruption Jack Layton won't overlook as long as the price is right: at $4.6-billion, it works out to about $250 million per NDP MP. About the same price as the sponsorship program, as it happens.

Always Low Prices

Discerning readers have undoubtedly noticed the most recent Blog Ad that has begun to appear on The Eclectic Econoclast (and Newmark's Door).

Click here to read what Kevin at Always Low Prices has to say about the organization.
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I have no idea why they decided to advertise on these blogs, but I thank them for their contribution to the furtherance of free market capitalism.

Boycott UK Universities!

A few days ago, I wrote this about the AUT Anti-Semitic boycott of several Israeli universities. The current boycott is just the latest in a string of similar anti-Semitic actions taken by many UK scholars. But as John Furedy of SAFS wrote to the National Post about a previous boycott attempt back on January 4, 2003,

Soon after the start of the boycott, the Society for Academic Freedom and Scholarship, a small Canadian organization, condemned it as an act of "academic cannibalism". However, the main academic organization in this country, the Canadian Association of University Teachers .[CAUT].. remains silent. That is not to take a "nuanced", but rather a head-in-the-sand view.

Here is what Gadi Taub, a professor at Hebrew University, wrote about the present boycott [thanks to M.A. for the link]:

In this instance I am hard-pressed to explain the affair without taking anti-Semitism into account.

As an effort ostensibly designed to promote human rights, the boycott – launched precisely when Israel is moving to end the occupation – is puzzling. It is also striking that the British Association of University Teachers (AUT) has taken no similar steps against any other violation of such rights elsewhere in the world.

Academics from regimes where genuine ethnic cleansing, genocide and human rights crimes are regular occurrences remain welcome at Britain's universities. China's occupation of Tibet, to take only one obvious example, does not seem to bother the AUT. Whatever Israel's human rights failings – and I have been among those critical of government policies – the AUT's hypocrisy is too much to take.

... I MYSELF am not affected by the boycott. My university, the Hebrew University of Jerusalem, has thus far been excluded from the gag rule, and I also qualify under the exception clause, having been publicly critical of my government. But I'll opt in anyway. I have no wish to be excluded from the boycott because I don't consider these exclusions honest. As a Jew, not just an Israeli, I prefer henceforth not to accept any invitations from British universities participating in the boycott. And I urge my fellow Jewish academics around the world to do the same.

In support of the above position, I hereby proclaim the following and urge others, including the CAUT, to do likewise:

• I will referee no articles published or edited in the UK.
• I will submit no articles to journals published in the UK.
• I will accept no invitations from UK universities participating in the boycott.
• I will invite no academics from the UK to any conferences unless the person has renounced the position of the AUT on Israel's universities.
• I will accept no ideas or links from any UK academic who has not renounced the AUT position on Israeli universities.

Fiscal Federalism Unmasked

Canada's Liberal minority gubmnt has threatened that if there is a new election called soon, and if they are not returned to power, then Canada's cities will not receive a redistribution of gasoline taxes that the gubmnt had promised to the mayors of the cities.

In a posting called "Pimping for the Liberals," Lisa of London Fog lays it on the line:

So here we see one possible way the thieving Liberals will get back into power - if we don't vote them back into power, the trough money might be lost! Those conservatives won't support our 'partisan agenda', so we'll stick to the party that does. As for the billions shamelessly stolen from taxpayers - well, they won't do it again I am sure.

In the interest of securing their own corrupt and blood sucking positions, these mayors forget to mention where all the money comes from in the first place - taxpayers across the country. London's funding Toronto, Alberta is funding Ontario - everyone is funding everyone and no one is getting what they want. Pass the pot and see how much you can grab before the next guy makes a demand.

In an era of reduced mobility costs, surely we should be relying more on allowing and encouraging people to move from one jurisdiction to another if they want to improve their lot. It far less defensible now than it was 50 years ago that we tax people in one jurisdiction or at one level of gubmnt to subsidize people in others; doing so just adds to the layers of inefficiency and bureaucracy.

Tom Sowell, Green Spaces, and Community Choice

I really enjoy about 95% of everything that Tom Sowell writes. He is an articulate spokesman for letting the market decide resource allocation, and he is firmly opposed to most gubmnt interventions in the marketplace.

One area where he is incorrect deals with the preservation of open green space in some counties of California. His most recent attack is on San Mateo County. He constantly [in this piece and many previous ones] rails about how "open space" laws have led to a shortage of developable land and to astronomical housing prices in the San Fransisco area:

Who can afford to live in such a place? Fewer people apparently. The population of the county declined by about 9,000 people over the past four years.

Who's leaving -- and who is coming in? By and large, young adults who have not yet reached their peak earnings years are finding it harder to afford housing in San Mateo County and in other such counties up and down the peninsula from San Francisco to San Jose. So they are leaving.
Schools have had to be closed because there are not enough children. The number of children is declining because people young enough to have school children are increasingly unable to afford the sky-high housing prices in communities that ban the building of housing.

...Among other things, this means that many young adults cannot afford to live near their parents, unless they actually live in their parents' home. This isolates the elderly from their children, which can be a growing problem as the infirmities of age set in and their contemporary friends die off. [h/t to BF for the link]

The positive economics in the column is correct, but I do not agree with the implied normatives. What is so horribly wrong with these effects? People who live in a given area want a given outcome, and so they vote to obtain it. People who do not wish to pay the price to live in San Francisco, surrounded by open spaces have plenty of options elsewhere; they can get different jobs and live in Kansas, for example.

Why should people who now have the benefit of the open spaces be forced by Tom Sowell to give up their open spaces so that more housing can be built in their communities?

What is wrong with letting communities decide for themselves how much open space they want and letting people, over time, vote with their feet?

States' Rights and Judicial Authority

Phil Miller does an excellent job of breaking down the arguments by realtors that they should have state laws prohibiting some realtors from offereing lower commissions (with the attendant lower services, possibly).

People often think of regulation as a way for the public to fight the big guys who try to take advantage of the little guys. But far too often, those being regulated hide behind the regulation - they actually prefer it. The millions of consumers who stand to gain from competition will likely gain much more than the concentrated interests stand to lose. So why don't they band together and fight? Each consumer gains so little at the margin that it little behooves any one of them to orgainize an attack on regulation lobbied for by concentrated interests such as realtors' groups.

Just the opposite is true for the concentrated interest. What it stands to receive from the regulation is not widely dispersed, so for individuals within the interest, their gains at the margin do provide incentive to fight. So the concentrated interests put forth resources to enact or enhance regulatory legislation while consumers take it up the driveway.

He has a really good critique of the realtors' position, and I recommend that you read the whole thing.

The only concern I have is that the U.S. Department of Justice is attacking the state gubmnts for their anti-competitive laws. That strikes me as possibly unreasonable [and it is a point at which I might question Phil's posting on this topic].

The Justice Department has sent notes to legislators Oklahoma asking it not to support legislation meant to keep competition out of the real estate market. It also sued the Kentucky Real Estate Commission for other measures that limited competition in the marketplace. The realtors' groups say they want to ensure that people get competent representation...

I agree with Phil that the realtors' groups' arguments are bogus. But why is it efficient for the federal gubmnt to intervene in intrastate commerce AND tell some states that their laws violate federal antitrust law? Why doesn't it attack the U.S. Congress for the Robinson-Patman Act?

Secret Dubai

For an insightful perspective on life in Dubai and the UAE, take a look at Secret Dubai. [Thanks to JC of the Emirates Economist for the pointer].

In one of their posts, they discuss the propagation properties of Daad Mohammed Murad:

"Already head of the largest family in the UAE, Daad Mohammed Murad Abdul Rahman is about to marry for the twelfth time. Daad, 57, has 68 children by his first 11 wives, with two more on the way. A near-fatal road accident may have cost him one leg, but it has done nothing to dampen his spirits."

Daad's reasons for so many wives and kids are far from compelling. He wants to "remove the demographic imbalance" of Asian expatriates - despite the fact that eight out of his first eleven wives are Asian. He wants them to act as a defence "in case of any foreign invasion." And he wants to get into the Guiness Book of Records....

"Daad relies on his wives to do much of the housework, so he says he needs to replace them when they get too old. When one woman became weak, another strong one had to be brought in to manage the home."

The fate of the women he divorces is also not mentioned.

Every posting at this blog has pithy insight. Here is another. And whatever you do, don't miss this one about someone jailed for having broken wind in front of a lady.
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Digression:
In an earlier posting, I wrote about polygamy:

As a male who would likely have risked being left without a partner in a society that permitted polygamy, I am understandably opposed to polygamy out of pure self-interest. It strikes me that in a society of free choice, permitting polygamy only increases the demand for women as potential marriage partners, thus making women better off relative to men, in comparison with the situation under monogamy.

Several female commenters at the time pointed out that they might prefer fewer material goods in exchange for a more meaningful monogamous relationship.

Further Evidence that Canada Should Develop a Nuclear Weapons Programme

Or maybe Canada should just develop a truckload of enriched uranium, for peaceful purposes only, of course, nudge nudge.... [thanks to Jack for the link]

Speaking to reporters five days before Iran is to resume nuclear talks with France, Britain and Germany, Hamid Reza Asefi said the Europeans appeared to be serious in seeking an agreement with Iran. But he added that any settlement had to respect Iran's right, as a signatory to the Nuclear Nonproliferation Treaty, to enrich uranium.

Everyone has learned from the North Korean case. It is advantageous to continue to negotiate [i.e. extract further concessions] but that advantage is lost once the country actually gives up its nuclear weapons programme or loses it in an attack by the Israelis (just ask Saddam).

As a matter of diplomacy, it is time for Canadians to recognize that the only way we can deal on an equal basis with the U.S. is to have a few nukes pointed their way.

Fast Food Fingers

Although the woman who "discovered" a finger in her chili at Wendy's has been arrested for attempted grand theft, here is a different story about getting the finger from a fast-food outlet [thanks to Jack for the pointer]:

...he realized something wasn't right when he bit into the sandwich on June 18 and found a piece of flesh about three-fourths of an inch long.

"It looked like I was seeing fingerprints on it," he said. "I got sick and went to the bathroom."

Miami County health investigators talked to the restaurant manager, who had a bandage on his right thumb and wore a latex glove, according to a health district report. The manager said he sliced skin from the thumb while shredding lettuce, and sanitized the area but didn't throw away the bin of lettuce, the report said. Scheiding's sandwich contained lettuce.

The victim is suing for over $50,000, which strikes me as a paltry sum in our litigious society. Arby's [the firm in question] should cut a cheque today.

Furthermore, their managers should be given a two-day course [I'm available] on risks and expected costs. As I would ask my economic analysis of law students:

• What is the risk?
• Who is the least-cost bearer of the risk?

That helps us understand where the efficient assignment of liability lies.

Eggs Benedict

The latest breakfast fad


source: Stephen Pollard
[Thanks to Anonymous Jake for the link]

The Future for Oil Prices

Steve Polos of Export Development Canada says oil prices are likely to drop:

Oil prices have retreated from record highs, and appear to be heading lower. Was it all a bad dream? Or is this just a short respite before we head to three-digit oil pricing?

The world oil market has been in turmoil for nearly two years. Prices have been driven higher on fears of disruptions to supply – we have had military action in the Middle East, political tensions in Venezuela and Nigeria, and hurricanes in the Gulf of Mexico. All of these developments had the potential to knock oil markets on their heels and send prices into a major upward spiral.

The thing is, it didn’t happen. Despite all those problems, both real and feared, not a single supply disruption has been reported.

... Now, after seeing prices approach $60, and after seeing forecasts of oil prices of $100 per barrel or more, markets seem to be relaxing. Prices have fallen to the $50 range, and look poised to go lower.

... It certainly seems that we have entered an era of higher-priced oil. But suffice to say that oil prices of $100, $50, or even $40 sow the seeds of their own destruction – less demand, and more supply. Expect oil prices to remain high, but to keep trickling down.

Okay. If he says so. I'm not sure I agree, but I cannot make a case to disagree either.

UPDATE: See here for Tom Luongo's case for why we should disagree. I'm not persuaded by it, either [e.g., if world demand is growing, why are no new refineries being built, as he suggests is the case?]

One reason to love futures markets: we can bet with our money on which case we think is stronger.

UPDATE #2: Stephen Ayer of disinterested party agrees with Steve Polos. His case is pretty strong that oil prices will go down over the next year.

A Double Whammy

Two items of bad news:

1. Demonstrations and expected riots against globalization, embodied in the minds of protesters as the G8, and

2. The closing of a McDonald's in the expected demonstration area.

It's enough to make a free-trade proponent quarter-pounder lover cry. Or scream about the lack of law and order.

FAST-FOOD giant McDonald’s is planning to close two of its city centre branches during this summer’s G8 protests.

Restaurant bosses fear the company’s outlets on Princes Street and South St Andrew Street will be prime targets for hundreds of anti-capitalist protesters expected to descend on the city.

A two-day closure would cost McDonald’s more than £50,000 in takings, but it is so concerned about the welfare of employees and customers that it is set to take the unprecedented step.

The burger chain has been hit by angry protests at all recent G8 summits, and branches have been trashed while customers and staff were still inside.

Now McDonald’s chiefs admit they are drawing up special security measures to prevent activists targeting their two biggest Edinburgh restaurants on the first weekend in July.

I hope they are successful.
[h/t to BF for the link]

New Manitoba Flag

Sean Incognito posts that some politicos in Manitoba would like the province to adopt a new flag design. He suggests

...one wonders what specific design elements could be included to make it uniquely ours.

A stylized mosquito on a background of Arctic White? The Golden Boy, topped by a bust of Burton Cummings, riding a bison?

The "Golden Boy" refers to hockey hero, Bobby Hull.

A giant mosquito? possibly a red one, replacing the maple leaf in the current Canadian flag. Great idea!

Update: Did I ever goof! from the comments:

Bobby Hull is the Golden Jet. The Golden Boy is the figure on top of the Legislative Building in Winnipeg....

Thanks for the correction! But a flag with the Golden Jet on it might be worthy of consideration, too.