Sunday, March 8, 2009
Potpourri
Three great pieces for ya...
* The definitive free marketeer blog post on how to think about the mark-to-market controversy.
* Bob Higgs rolls up his sleeves and blows up (what he calls) vulgar Keynesianism. I warn you that there are a few equations in here, but this is top-flight stuff. Higgs really nails the conceptual problems in the standard policy prescriptions coming from today's gurus.
* Mario Rizzo adds yet another post on the problems with Keynesian "stimulus." He links to this graph:
Now I'm not 100% sure, but I think what this image shows us is that the job losses during this recession are fairly concentrated in a few specific industries, particularly those in the manufacturing sector. (Note that I think the chart is not saying, "The job losses are mostly concentrated in manufacturing." Rather, I think the chart is saying that within manufacturing, job losses are focused in very specific areas. But I could be wrong about that interpretation.)
UPDATE: Mario Rizzo sent me this clarification from the original site; they are saying the graph above means the opposite of what I claimed. My smart-butt response was, "So they should rename this the anti-diffusion index?" I will have to go the BLS and figure out exactly what this thing measures.
* The definitive free marketeer blog post on how to think about the mark-to-market controversy.
* Bob Higgs rolls up his sleeves and blows up (what he calls) vulgar Keynesianism. I warn you that there are a few equations in here, but this is top-flight stuff. Higgs really nails the conceptual problems in the standard policy prescriptions coming from today's gurus.
* Mario Rizzo adds yet another post on the problems with Keynesian "stimulus." He links to this graph:
UPDATE: Mario Rizzo sent me this clarification from the original site; they are saying the graph above means the opposite of what I claimed. My smart-butt response was, "So they should rename this the anti-diffusion index?" I will have to go the BLS and figure out exactly what this thing measures.
Comments:
Bob,
In general, I kind of like diffusion indexes. However, they can be quite misleading. Basically,with employment change diffusion indexes you have three categories, those hiring, those neutral and those laying off employees.
This is why I think the diffusion can be very misleading, when you are looking at them for clues to an overall spread of employment versus unemployment. Theoretically, if a sector has just one additional person unemployed, the sector will receive a zero weighting. Say there are only two sectors, office builders and hot dog vendors. If a recession hits, the office builders will get smacked, not so with the hot dog vendors, but suppose there is one hot dog vendor who was outside a building construction site, he will get laid off.
On a diffusion index, it will look like across the board lay offs, (all categories down}where as the real picture will be much different. Sure layoffs can hit a lot of sectors during a recession, but you really need to know the intensity of the layoffs in specific industries to know what is going on from an across the board intensity stand point.
On the other hand, from a trend perspective (versus depth) if the employment diffusion index numbers turn up this is a positive because it will show that fewer sectors are being impacted.
Rizzo seems to be using the index to show broadness of the recession. I'm saying, yeah well, sort of, but some of those sectors might be showing that one hot dog vendor outside the construction site being laid off, so it is showing that it is broad based, but tell me the depth of the layoffs per sector when you tell how broad it is. If you are looking at the trend of employment, up versus down, it's a pretty cool indicator.
In general, I kind of like diffusion indexes. However, they can be quite misleading. Basically,with employment change diffusion indexes you have three categories, those hiring, those neutral and those laying off employees.
This is why I think the diffusion can be very misleading, when you are looking at them for clues to an overall spread of employment versus unemployment. Theoretically, if a sector has just one additional person unemployed, the sector will receive a zero weighting. Say there are only two sectors, office builders and hot dog vendors. If a recession hits, the office builders will get smacked, not so with the hot dog vendors, but suppose there is one hot dog vendor who was outside a building construction site, he will get laid off.
On a diffusion index, it will look like across the board lay offs, (all categories down}where as the real picture will be much different. Sure layoffs can hit a lot of sectors during a recession, but you really need to know the intensity of the layoffs in specific industries to know what is going on from an across the board intensity stand point.
On the other hand, from a trend perspective (versus depth) if the employment diffusion index numbers turn up this is a positive because it will show that fewer sectors are being impacted.
Rizzo seems to be using the index to show broadness of the recession. I'm saying, yeah well, sort of, but some of those sectors might be showing that one hot dog vendor outside the construction site being laid off, so it is showing that it is broad based, but tell me the depth of the layoffs per sector when you tell how broad it is. If you are looking at the trend of employment, up versus down, it's a pretty cool indicator.
Wenzel,
Thanks. I still have to sit down and study the BLS definition to figure out if this thing does what I want, or if I should construct the Murphy Meter from the industry data myself.
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Thanks. I still have to sit down and study the BLS definition to figure out if this thing does what I want, or if I should construct the Murphy Meter from the industry data myself.
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