Israel and Palestine

My eldest son asked me why there are problems with Israel and Palestine.
I replied each denies the humanity of the other. Thus when they murder people they feel no remorse indeed they wish to murder more.

The excuses of either side border on the pathetic.
Hamas fires rockets into Israel which in essence do nothing very much. For this hundreds perhaps thousands of their countrymen will dies if the existing situation is prolonged.

Israel acts as though the country is under threat. It isn't and never was. Yes a response to the firing of rockets must be found however it must be proportionate. Clearly the existing situation is anything but proportionate.

What is the solution?

Accept Hamas as the government and let them govern. This would mean they would have to change. Any increase in growth must come first through greater trade with Israel.
As Growth increases and people become materially better off they want a better standard of living, their own homes etc.

Firing rockets makes thus impossible hence it would stop. Hams would become more conservative and act like a government.
Just look at the IRA and Northern Ireland.

Around the Traps 26/7/14

It is time for Around the Traps. I will update on Sunday


Aussie,Aussie,Aussie,Oy,Oy,Oy

• Peter Martin on mh17-why-planes-and-financial-systems-crash , productivity-commission-childcare-is-worth-it-even-without-an- economic-payoff , abbotts-infrastructure-nation-building
• Ross Gittins on mining-boom-our-gift-to-rich-foreigners , why-were-still-not-free-of-gfc
• Greg Jericho on keeping-mining-tax-wont-kill-investment , childcare-verdict-beats-paid-parental-leave-says-productivity-commission
• Mumble on blame_the_greens ,oz_media , what_was_joe_thinking
• Andrew Elder on brand-positioning , the-human-interlude
• Nick Gruen on australian-economic-reform-the-next-generation
• David Walker on ben-hills-monument-to-newspaper-journalism, Iran flight 655: how did Australia react?
• The Kouk on in-the-groove-inflation-rate-means-rba-on-hold
• Ken Wolf on Do-you-know-a-con-artist-when-you-see-one 
• Kevin Bonham on poll-roundup-brief-history-of-disaster-bounces
• Sean Carney on are-voters-set-to-stop-giving-first-term-leaders-a-second-chance
• Robert Merton on superannuation-make-income-the-outcome
• Andrew Norton on scholarship-scepticism-confirmed
• Peter Wicks on gillard-accuser-deserts-michael-smith-over-kathy-jackson

Northern America

• Dave Altig and Pat Higgins on gdp-growth-will-we-find-a-higher-gear 
• Edward Lambert on labor-supply-is-the-effective-demand-limit , simon-wren-lewis-car-trouble
• Menzie Chinn on unanchored
• Calculated Risk on key-measures-show-inflation-mostly-at-or-below-fed's-target-in-June , a-few-comments-on-existing-home-sales, comments-on-new-home-sales-report 
• Livio De Matteo on not-slower-just-more-erratic-comparing-growth-in-canada-and-the-united-states
• Bruce Carman on recessionary signals
• Kruggers on hows-california-doing
• Mark Thoma gives us James Choi on one-of-the-most-vivid-arithmetic-failings-displayed-by-americans
• Noah Smith on national-unity-sure-is-helpful 
• Brad De Long on ms-market-reject-national-income-identities-afternoon-comment
• Robert Waldeman on more-on-consumers-inflation-forecasts
• Mark Thoma gives us Uwe Reinhardt on the-illogic-of-employer-sponsored-health-insurance

Europe

• Tim Harford on crime-prevention-wheres-the-evidence
• Chris Dillow on internalizing-constraints , blairs-legacy
• Jonathon Portes on welfare-reform-and-jobs-miracle
• Menzie Chinn on russia-raises-policy-rate
• Simon Wren-Lewis on  why-strong-uk-employment-growth-could-be-really-bad-news 
• Noah Smith on how-to-beat-russia

Asia
nuttin

Wonk

• John Quiggin on macrofoundations-of-micro , hazlitt-and-the-glaziers-fallacy
• James Hamilton on keeping-oil-production-from-falling , the-changing-face-of-world-oil-markets
• Kruggers on asymmetrical-doctrines-vaguely-wonkish
• David Glasner of monetarism-and-the-great-depression
• Jeremie Cohen-Setton on blogs-review-the-taylor-rule-legislation-debate
• The Growth economics blog on geography-matters-even-if-it-doesnt Thanks Mark
• Nick Rowe on new-keynesian-neo-fiscalists-for-increasing-austerity, the-growth-stages-of-the-new-keynesian-model
• Chris Dillow on crowding-out
• Menzie Chinn on forward-premia-and-the-carry-trade
• Simon Wren-Lewis on synthesis-david-beckworths-insurance-policy then Nick Rowe on the-soft-fade-from-monetary-to-fiscal
• Noah Smith on why-doesnt-finance-industry-use-dsge-models
• Kenneth Thomas on fun-and-games-with-transfer-pricing.
• Robert Waldeman on labor-market-flows-and-extended-unemployment-insurance-ii

General

• Calculated Risk on tanta-what-is-subprime  A classic
• Noah Smith on are-liberals-rescuing-marriage , youll-get-no-edge-with-zero-hedge
• Simon Wren-Lewis on is-economics-jargon-distortionary
• Chris Dillow on why-not-worker-control , see-no-evil , repressive-diversity
• Stormy on complicit-in-the-horror-that-is-gaza 
• Michael Brull on israel-and-art-war-spin-and-slaughter
• Sandwichman on supply-creates-its-own-demon-sciod
• Steve from Brisbane on voucher-wars-continued
• David Glasner on who-is-grammatically-challenged-john-taylor-or-the-wall-street-journal-editorial-page
• Andrew Gelman on meritocracy-wont-happen-the-problems-with-the-ocracy thanks Mark
• Menzie Chinn on on-perusing-the-comments-sections
• Doverbeach on the-form-of-the-argument-regarding-marriage

Climate

• Tamino on global-warming-climate-change
• Science of Doom on does-the-surface-temperature-change-with-back-radiation-kramm-vs-gerlich , natural-variability-and-chaos-one-introduction
• Jonathon Koomey on deep-decarbonization-truly-facing-the-climate-challenge
• Rick Piltz on what-to-do-about-the-social-cost-of-carbon-metric-part-1
• Joe Romm on antarctic-sea-ice-trend
• Mark Thomas gives us Robert Rubin on ignoring-climate-change-could-sink-the-us-economy
• John Quiggin on ccs-awol

Andrew Gelman ( Mainly but not only Statistics)

• skepticism-published-claim-regarding-income-inequality-happiness
• statistical-stand-comedy-alan-bennett-stewart-lee-david-owen
• world-without-statistics
• nfl-players-keep-getting-bigger-bigger
• good-enough-martin-luther-king-laurence-tribe
• experience-registered-replication-project
• Noah Smith on bayesian-superman , why-i-like-frequentism
• Kaiser Fung on digital-journalism-has-an-archiving-challenge , general-statistical-education-is-an-utter-failure

Dave Giles (Econometrics)

• promoting-econometrics-through-econometrica
• more-on-step-unwise-regression-and-pretesting

Dianne Coyle ( Quirky + Book reviews)

• life-leaving-and-existentialism , calling-young-economists-who-want-to-write , a-dangerous-place , advice-for-madmen
• Frances Woolley on learning-about-theory-does-not-teach-people-how-to-theorize

Vox Wonk

• agglomeration-and-product-innovation-china
• corporate-governance-banks-and-financial-stability
• partial-corporate-tax-harmonisation-eu
• long-term-damage-us-court-s-argentinian-debt-ruling
• crowding-out-theory-eurozone-crisis
• rethinking-african-solar-power-europe
• inequality-big-cities
• employee-satisfaction-and-firm-value
• smes-lending-relationship-lending-vs-arm-s-length
• sticky-prices-and-behavioural-indifference-curves
• new-thinking-reserve-currency-status

Sinclair Davidson will never change

Sinclair Davidson having gotten badly bruised and battered by the Kouk in the tobacco wars returns to his absurd stagflation prediction today.
First THIS is reasonably okay on the definition and history of stagflation.

Please note there is nothing at present that remotely looks  like the 1970s at present. Also note that one key ingredient of stagflation is the level of wage increases. This both leads to the price and unemployment levels being much higher than  would otherwise be the case.
I let us examine the figures as the RBA views them.in terms of inflation.

In six monthly annualised terms, the path for underlying inflation over the past two years has been: 
H1 2014: 2.5% H2 2013: 3.1% H1 2013: 2.1% H2 2012: 2.7%  ( courtesy of the Kouk).

According to the RBA a rise is rates in unlikely.They said this about the labour market

"Labour market conditions had improved a little since late in the preceding year. The level of employment was around 0.9 per cent higher since then. The unemployment rate had been steady at 5.8 per cent for the third consecutive month, although the participation rate had declined over that period. Employment growth in household services continued to be strong over the past six months, while employment in business services had also picked up. Members observed, however, that total hours worked had not increased for a considerable time. Forward-looking indicators of employment had recently been mixed and while these indicators were higher than at the low points of the previous year, they remained at levels consistent with only moderate growth in employment in the months ahead.

The recent national accounts data indicated that unit labour costs were little changed over the past year, reflecting low growth of wages and above-average growth of productivity. Members noted that while labour productivity had been boosted by a sharp improvement in the mining sector, productivity growth had improved across a wide range of industries in recent years. Business surveys and liaison suggested that wage growth was likely to remain subdued for some time, consistent with the modest improvement in the labour market to date."
how we can have both falling real wages and stagflation is something Davidson talks about!

The market is expecting a rate decrease not an increase. 

So according to Davidson inflation near 3% and unemployment around 6% is stagflation. wow that is some re-writing of the definition.

It is amusing to see Davidson asserting growth in Government spending is the main reason for Stagflation.

If this was the case then how come there wasn't a boom in Wayne Swan's last budget where NOMINAL spending fell not Real spending. This was easily the tightest budget we have ever seen. It decreased GDP whereas for example Hockey's budget was adding to GDP! Remember also Davidson absurdly argued this budget ( Swan's) was expansionary!

Ooops.

On a final note this would be easy to point out on Catallaxy but unfortunately Davidson does not believe in free speech. You rarely if ever get different points of view over there.

So add hypocrite to being ignorant on Budgets, National accounts, CPI figures etal

What is Sub-Prime

Calculated Risk has this classic post by the late Doris Dungey better known as Tanta on what was sub-prime loans.

It is a classic.
 
In 2007 when I was at a very large Funds Manager the man involved with credit research was most impressed with my knowledge of the US housing market.
I soon put him onto this blog and it became a must read. Consequently they never had any dud CDOs on their books.

You know you are old when...

A long time ago I was a member of the Sydney Anglican diocese social issues committee.

Two people who were also on the committee were Margaret Rodgers and John McIntyre.

Margaret was a very easy person to know and to talk to. I was very sad to hear she had dies of a heart attack.  She actually interviewed me for the Anglican magazine. I was in the midst of co-writing a paper on Unemployment and was suddenly made redundant so I gained practical experience on the subject!

John and I were very unlikely friends. We never agreed on anything be it theology , economics or even the 'stolen generations'. However we enjoyed each other's company enormously. when he has made Bishop of Gippsland he told me I must visit him. Unfortunately something always cropped up and I never did.  
He dies recently of respiratory failure. he was only 62!
He found it strange that I was much more conservative than anyone in the Sydney Anglican hierarchy but I would always share a beer with him yet others wouldn't!

I will miss John.

The Carbon Price

The price on carbon ( note please it wasn't a tax although quite similar) is now gone.
Here are a few articles from Friday's Around the Traps.

Firstly the Kouk writes about the economics of the carbon price.

Next we have Hugh Saddler examining energy-markets/looking-back-two-years-price-emissions. Note that rising prices have changed consumption ( The ETS was only a small part of that.) Renewable energy has risen considerably.
Then we have Anna Skarbek and Franz Josko telling us we should be keeping-our-eyes-on-the-ball-is-the-only-way-to-hit-our-climate-target.
 In essence if you believe in clomate change you have either a carbon tax or an ETS. If you do not you have neither. 

Finally we find Peter Martin saying carbon-tax-going-but-dont-expect-big-savings. Tony Abbott is going to have MORE problems.

Bill Shorten has promised to have an ETS as part of his policy platform for the nest election. Some people think this is a vote loser.
I disagree for two reasons.
1) you can only mount a scare campaign before it is implemented. once the fixed price ETS was implemented it became a big yawn. it was unheard of in the last election.

2) A floating price ETS will probably be lower than the fixed price introduced after the 2010 election so it will have even less effect than minor effect the fixed price ETS had.

I might add when El Nino impacts Australia then climate change will again rise as a major issue in the public's mind.

Around the Traps 18/7/14

It is time again for Around the Traps.
Catch up round for postponed wet weather games this weekend ( not a lot of games therefore) so updates will be on Saturday and Sunday.


Aussie, Aussie,Aussie,Oy,Oy,Oy

• Matt Cowgill on a-response-to-judith-sloan-on-monopsony
• Mumble on not_long_now , after_the_repeal
• Peter Martin on fofa-your-financial-planner-is-about-to-send-you-a-letter-but-it's-not-, enoughthe-carbon-tax-is-gone-will-prices-come , carbon-tax-going-but-dont-expect-big-savings
• Greg Jericho on why-australian-voters-care-more-about-jobs-than-fixing-the-budget , good-borrowers-bad-savers-rate-cut-likely
• Antony Green on double-dissolutions-and-the-redistribution-timetable
• Ausopinion on climate-reversals-an-update
• The Piping Shrike on the-confusions-of-anti-politics
• Andrew Elder on poor-journalism-is-a-crime , the-future-of-financial-advice
• Kevin Bonham on nteuumr-nikolic-trailing-in-bass , poll-roundup-post-budget-recovery-stalls
• The Political Sword on The-accidental-prime-minister
• Ross Gittins on carbon-tax-not-real-reason-for-soaring-electricity-prices , how-to-reform-industrial-relations
• The Kouk on why-the-abbott-budget-was-the-perfect-political-poison , how-good-is-this-95-of-12-17-year-olds-have-never-smoked
• John Quiggin on condemned-by-history , stafford-by-election
• Laura Tingle on punting_martin_parkinson_symbol

Northern America

• Kruggers on its-not-the-economy-stupid, this-age-of-infallibility
• Noah Smith on should-fed-crash-the-economy-now-to-prevent-a crash-later
• Mark Thoma gives us Tim Duy on fed-watch-yellen-testimony
• Menzie Chinn on an-exchange-regarding-asset-price-implications-of-fiscal-and-monetary-policies-in-the-wake-of-2008, guest-contribution-taylor-rule-legislation
• Frances Woolley on why-do-unions-bargain-for-health-benefits
• Liveo De Matteo on the-real-minimum-wage
• Calculated Risk on a-few-comments-on-june-housing-starts
• John Robertson and Ellyn Taylor on part-time-for-economic-reasons-a-cross-industry-comparison

Europe

• Tim Harford on underperforming-on-performance
• Simon Wren-Lewis on french-macroeconomic-policy
• Chris Dillow on forced-into-work

Asia

Nuttin

Wonk

• Mark Thoma on new-classical-economics-as-modeling-strategy , is-there-a-phillips-curve-if-so-which-one , empirical-evidence-on-inflation-expectations-in-the-new-keynesian-phillips-curve
• Brad De Long on department-of-wtf-chris-house-on-traditional-macroeconomic-models-and-the-great-recession
• Simon Wren-Lewis on why-macroeconomists-not-bankers-should-set-interest-rates , has-great-recession-killed-traditional-phillips-curve, aggregate-demand-and-labour-market , public-investment-and-borrowing-targets , further-thoughts-on-phillips-curves
• Nick Rowe on some-simple-arithmetic-for-mistakes-with-taylor-rules
• Noah Smith on demand-in-gaps  then Nick Rowe on unemployment-aggregate-demand-and-searchmatching
• Chris House on traditional-macroeconomic-models-and-the-great-recession Thanks Mark
• Kruggers on aggregate-demand-aggregate-supply-and-what-we-know-wonkish , on-the-neo-paleo-keynesian-phillips-curve-wonkish, james-tobin-and-aggregate-supply-implicitly-wonkish
• Robert Waldeman on calvo-pricing-precautionary-saving-and-financial-frictions , comment on NK models
• David Beckworth on the-data-problem-with-natural-interest-rate-problem-and-how -to-fix-it Thanks Mark
• David Glasner on another-complaint-about-modern-macroeconomics
• Brad De Long on understand-bis-view-analytical-position-rather-rhetorical-attitude , thursday-hoisted-from-comments-someone-who-remembers-1997-98-on-chris-house-on-traditional-macroeconomic-models-and-the-great-recession
• Mike Konzal on search-models-mass-unemployment-and-minimum-wage  Thanks Mark
• Mark Thoma on risk-aversion-and-the-natural-interest-rate , debt-great-recession-and-the-awful-recovery
• Chris Dillow on lumpy-markets-mental-models
• Noah Smith on austrianism-wrong-inconceivable
• Mark Thoma gives us Joshua Gans on do-patents-stifle-cumulative-innovation
• Nick Rowe on taylor-rules-again
• Edward Lambert on falling-labor-demand , labor-supply-is-the-effective-demand-limit

General

• John Quiggin on zombie-ddt-myth-reanimated , finance-global-or-international
• Chris Dillow on time , why-idiots-succeed , many-ways-of-being-smart
• The Incidental Economist on are-americans-really-exercising-less Thanks Mark
• Chris Bertram on bullshitting-about-gaza
• Brad De Long on world-war-i-reading-list-late-summer-2014, thursday-history-intellectual-origins-of-reagan-thatchernomics
• Jim Rose on measurement-and-theory-can-the-facts-just-speak-for-themselves
• Lord Keynes on robinson-on-time-in-economic-theory , keynes-on-marginal-cost-and-price
• Doverbeach on what-is-marriage-a-reply-to-david-leyonhjelm
• Mark Thoma gives us Brad De Long on is-choosing-to-believe-in-economic-models-a-rational-expected-utility-decision-theory-thing
• Simon Wren-Lewis on a-short-note-on-tobacco-packaging
• Carola Binder on the-most-transparent-central-bank-in-the-world

Climate

• Phys Org on -australia-greenhouse-gases-ozone Thanks Steve from Brisbane
• The Kouk on the-basic-economics-of-the-carbon-price
• Steve from Brisbane on some-pretty-rare-good-news-on-ocean-acidification
• Harry Clarke on inefficient-though-fairly-effective-carbon-pricing
• Brave New Climate on four-corners-and-its-field-of-dreams
• Tamino on time-and-tide
• Real Climate on rossby-waves-and-surface-weather-extremes
• Science of Doom on models-on-and-off-the-catwalk-part-four-tuning-the-magic-behind-the-scenes
• Jeff Spross on urban-heat-islands-cities-convection
• Emily Atkin on polar-vortex-missed-the-point
• Peter Dorman on the-climate-misconceptions-series
• Hugh Saddler on energy-markets/looking-back-two-years-price-emissions
• Anna Skarbek and Frank Jotzo on keeping-our-eyes-on-the-ball-is-the-only-way-to-hit-our-climate-target

Andrew Gelman (Mainly Stats)

• stan-analyzes-world-cup-data
• building-theories-used-describe-magnets-scientists-put-together-model-captures-something-different
• stan-world-cup-update
• europeans-australians-eager-believe-renal-denervation
• ethics-and-statistics
• differences-econometrics-statistics-varying-treatment-effects-utilities-economists-seem-like-models-fixed-stone-statisticians-tend-comfortable-with-variation
• Kaiser Fung on two-unsolved-problems-of-big-data-studies-confirmation-and-controls

Dave Giles (Econometrics)

• the-econometrics-of-temporal-aggregation-11-causality-testing
• demand-analysis-henry-schultz-and-the rediscovery-of-sutsky
• price-indices-based-on-scanner-data
• step-wise-regression

Dianne Coyle (Quirky + Book Reviews)

• fact-and-fiction , what-economic-history-do-economists-need-to-know, technology-in-history , corruption-and-consumption , your-economic-history-suggestions-collated
• Steve from Brisbane on big-numbers
• Bryan Walker on antarctica-an-intimate-portrait-of-a-mysterious-continent
• Emilyn Atkin on climate-change-shiraz

Vox Wonk

• failed-policy-response-global-crisis
• knowledge-elites-enlightenment-and-industrialisation
• why-us-and-eu-are-failing-set-information-free
• article/sourcing-foreign-inputs-improve-firm-performance
• comprehensive-gains-trade-non-price-factors
• target2-controversy
• do-trans-fat-bans-save-lives
• members-only-embracing-diversity-wto
• new-price-adjustments-reshape-world-yet-again
• psychological-therapy-costs-nothing
• pension-reform-and-equity
• trust-and-welfare-state-twin-peaked-curve
• making-macroprudential-regulation-operational
• enhancing-transparency-bank-england-s-inflation-report
• banks-government-bonds-and-default
• china-s-unemployment-and-labour-shortage
• transatlantic-trade-and-investment-partnership-review-debate-economic-blogs
• intellectual-property-and-service-sector-innovation