Contradictory Reports?

A couple of interesting things are going on in macroeconomics and public policy. First we get research out of Harvard that seems to show that government spending (in this case earmarks) tends to reduce private investment. The paper is here, the press release is here, and Megan McArdle has a good post on it here. The comments to McArdle's post are also interesting.

At the same time, we get the CBO report on the effects of stimulus bill. Basically it says that government spending stimulated the economy and reduced unemployment. The CBO report is based on runs of macroeconomic models since no one can measure where the economy would have been without it.

While these two reports don't directly contradict each other, their conclusions certainly don't support one another.

SB 1070 Effects

I don't usually get snarky, but the current situation with public reaction to 1070 seems to require it.

From an economic standpoint there are two things we need to look at.

First, is the bill having the intended effect. If the intent was to get illegal immigrants to leave Arizona, then I would suggest that it is working. Since illegal immigrants are worried about 1070's enforcement, they are leaving Arizona. This is according to the new Mexican Consul in Phoenix. Also, if the boycott has a measurable effect, it will be on the hospitality industry. Along with construction, which is way down in Arizona, the hospitality industry is where many of the illegal immigrants find work. If the Arizona hospitality industry suffers a downturn, many of these folks will leave to find employment elsewhere.

Second, are the boycotts for real. Although the LA city council has voted to boycott Arizona businesses, I don't see them urging the Lakers to stay home and forfeit games 3&4 rather than play in Phoenix.

I also wonder what southern California would do if they quit importing electricity from Arizona. California imported 97 billion kilowatt hours in 2008. About a third came from Arizona. Shut off the power from Arizona and you get rolling blackouts across southern California this summer. Good luck with that.

Data: Arizona net exports 36.9 billion kilowatt hours (page 21). California net imports 97 billion kilowatt hours (page 33). Nevada net imports of 1.2 (page 177). New Mexico net exports of 13 (page 195). Utah net exports of 15 (page 273). Since we aren't sending power to any of our other neighbors, it has got to be going to California.

Unemployment Benefits Create Unemployment

When we go through the chapter on employment in macroeconomics, we cover this phenomenon. If you pay people to be unemployed, unemployment increases. I'm not sure all of my students believe it, but have a look at what is currently happening in Detroit.

In a state with the nation's highest jobless rate, landscaping companies are finding some job applicants are rejecting work offers so they can continue collecting unemployment benefits.

It is unclear whether this trend is affecting other seasonal industries. But the fact that some seasonal landscaping workers choose to stay home and collect a check from the state, rather than work outside for a full week and spend money for gas, taxes and other expenses, raises questions about whether extended unemployment benefits give the jobless an incentive to avoid work.

Members of the Michigan Nursery and Landscape Association "have told me that they have a lot of people applying but that when they actually talk to them, it turns out that they're on unemployment and not looking for work," said Amy Frankmann, the group's executive director

Congress isn't being compassionate by extending unemployment benefits, Congress is delaying the recovery.

Recycling Clothes

On Thursday in Micro, one of my honors students gave her presentation on the apparel industry. One thing she said struck me. She pointed out that we don't generally wear clothes out, they just become obsolete. By obsolete, she meant that styles go out of fashion and we quit wearing them.

Being an engineer by training I don't notice fashion a whole lot (even though one of my girls went to FIDM.) However, the comment stuck with me and hit me again when I read the story in the Republic about competition for donated used clothing.

Competition for donated used clothes and unwanted household items has become so vicious across the Valley that local charities report their collection bins are being bolted shut, vandalized and even towed away.

An intensifying turf war between non-profits and for-profit clothing resellers is taking a big bite out of contributions to charities
like Valley Big Brothers and Big Sisters, Swift Charities for Children and Goodwill, officials from those groups say.

"There's a river of revenue that runs through this Valley, and it's made of people's secondhand clothes and household items. People don't realize how valuable this stuff is," said Jim Stone, director of Swift Charities.

It's interesting that there is such a competitive market in recycling clothing.

Energy Graphics

I ran into an energy graphic over at Donald Marron's web page. It puts together a bunch of graphics that are available at the EIA web site. His big take away was that a lot of the energy we use really turns into waste heat. This is very true given electric generation losses as well as conversion losses in internal combustion engines and turbines. I didn't see this as a big deal since as an engineer, I've been dealing with gross inputs versus net production since I started school. For example, the conversion rate for solar to electricity is in the teens.

Anyway, lots of good flow diagrams.

Energy Flow

US 2008 Supply Sources - Demand Sectors

Energy Flow 2008

Petroleum Flow 2008

Coal Flow 2008

The sources for all of these are the annual energy reviews (AER) of each sector. Clink on most AER's and there is an energy flow graphic available.

Betting on the Box Office

There's a new market in Arizona.

A Scottsdale company has received regulatory approval to operate a commodities market for movies.

Media Derivatives, operating as the Trend Exchange, plans to open an exchange this year that would allow qualified investors to speculate on the success or failure of Hollywood film releases.

The intent is to allow investors to spread their risk and hedge against the failure of a film.

Arizona's Amended Immigration Bill

During the last couple of days of the session, the legislature amended the immigration law to provide better clarification of what they intended. As always, go read it for yourself.