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Monday
14Sep2009

Making economics warm & fuzzy

DateMonday, September 14, 2009 at 02:49PM

Sarkozy hires Stiglitz to study including soft factors such as well-being, income inquality, charity, crime, " 'efficiency' of the health system" [what does that mean?], even traffic jams in GDP:  http://blogs.wsj.com/economics/2009/09/14/sarkozy-adds-to-calls-for-gdp-alternative/?mod=rss_WSJBlog?mod=marketbeat

Stiglitz explained, "The big question concerns whether GDP provides a good measure of living standards." 

GDP was never meant to be a measure of living standards, but of economic production.  Some may correlate GDP to standards of living, although the latter is so subjective and personal as to be practically meaningless.  A recluse living to the Andes may perceive he has a better standard of living than a trader on Wall Street who is nominally wealthier but must now forgo his Manhattan penthouse, beach house in the Hamptons, and 70' yacht.  I am not defending GDP as a perfect yardstick, but to allow soft, unquantifiable, intangible measures will distort decision making and policy formulation. 

Why not, say, include measures of political freedom, degree of democracy, justice attained under a country's Constitution and legal process, average value of property and investment portfolio, and other such factor that also affect standard of living?  Why not enumerate rights under a bill of rights?

Even, more interesting, why not include the net number of businesses started per capita?  Under these attributes, Sarkozy may find the traditional definition of GDP more attractive and send Stiglitz back to Columbia University to rethink liberal finagling with economics.

AuthorMichael Avari | Comments Off |
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Sunday
14Dec2008

Update on Big 3 Bailout

DateSunday, December 14, 2008 at 08:38PM

President Bush shows no regard for the will of Congress or the majority of the American people. The Senate rejected the auto bailout. But that doesn’t stop Bush.

A few facts:
- The Big Three first wanted $25 B
- Then they asked for $34 B
- The bill that failed in Congress was for $14 B
- Bush is considering lending the auto makers $8 to $10 B from the Troubled Asset Rrecovery Program (TARP).

A few points:

1) Clearly the auto makers don’t know what they need and Washington is just throwing our money around with reckless abandon.
2) Neither Ford nor Chrysler need the money right away, so this is a GM bailout.
3) The Senate bill failed because the UAW would not assure lawmakers that they would make their labor rates “competitive” with those of Toyota, Honda, Hyundai, and Mercedes which manufacture in Sen. Shelby’s Alabama and with Nissan whose headquarters is in Sen. Corker’s Tennessee, where Volkswagen will build a 2000 employee plant.
4) The Fed, who has authority to lend to non-financial entities in an emergency refused to lend to the Big Three. And they are bankers!
5) Bernanke and Paulson, backed by Bush, came pleading to Congress and the American public to approve $700 for the banking industry otherwise the economy might fall into depression. If that money is not used by banks, it should be returned to the American people.
6) There is no provision in TARP to allow lending to non-financial enterprises.
7) Bush would have to get Congress to approve use of TARP funds outside its original scope or risk breaking the law.
8) Cheney said the administration did not want the Republican Party to be remembered as the Party of Hoover and allow an industry to fail.

Instead, it will be remembered as the party who, 20 years after Reagan, brought Socialism to America.

AuthorMichael Avari | Comment1 Comment |