Why is Gaza under an Israeli blockade?

As you can see from the following graph, the blockade is working:

A question to ask those on board Mavi Marmara

I have one question for those on board Mavi Marmara:

Did the people who were burned to death in Hotel Madımak deserve it?

The answer to that question will reveal the true nature of their humanitarian mission.

The apparently flexible definition of a civilian

Facts are far from clear right now in the heels of clashes between the Israeli Defense Forces and those who intended to ignore Israel's blockade.

For now, I will maintain that Israel, just like any other sovereign nation, has (and if does not, then ought to have) the right to inspect, without interference, cargo destined for people who launch attacks against her.

But, I cannot offer any analysis on that for I do not know crucial details.

Rather, I want to point out a fundamental fact.

Those associated with this effort to breach the blockade keep calling themselves civilians. I admit, they did not wear any uniforms and they may or may not be on the payroll of any official military organization.

Notwithstanding the question of if there were any spies or informers for any countries' intelligence organizations among the crew and passengers of these ships, one still has to ponder what you call a group of people who get together, form a flotilla and set sail for a confrontation with the IDF?

Why are the IDF blockading Gaza in the first place? Consider the list of Palestinian suicide attacks in Israel. There were 602 people killed by Palestinian suicide bombers between 2001 to 2005. The number peaked in 2002 with 237 deaths of people on buses, coffee shops, hotels, synagogues, super markets, night clubs and other places where civilians usually hang out.

In 2006, the number of deaths fell to 15, in 2007, it fell to 3, and in 2008 the number of deaths fell to 1.

These numbers did not fall because members of organizations such as Hamas, and Palestinian Islamic Jihad, and Popular Front for the Liberation of Palestine didn't want to kill Jews anymore. No, the numbers went down because Israel developed effective tactics against them (like, building a wall along the border).

In fact, Hamas switched to using missiles: 757 missiles hit Israel between disengagement and the end of June, 2006.

So, we now have a situation where Israel is trying to prevent attacks against her citizens by isolating the attackers. And, a group of people get together, and send a flotilla to help those attackers. They know that Israeli forces will have to stop and search the ships. Yet, they set sail to meet them head on.

I have a hard time calling these people civilians. At best, they are agitators and provocateurs.

And, it is by no means impossible that the plan all along was to attack any Israeli forces boarding the ships, thereby causing a melee. After all, the people on those ships do support suicide attackers. It is not a stretch to then assume that they would not mind sacrificing themselves as well.

Competing risks

In life, there are competing risks. One must always evaluate the cost of protecting oneself from one risk in the context of all other risks involved and choose according to the magnitudes of expected costs and benefits involved.

When I saw the news reports of a 7.2 magnitude earthquake had hit Vanuatu, I had to think about why this tiny island sounded so familiar to me.

Why, of course! That the island archipelago which we heard so much about in the news: You know, the one that was going to be swallowed by the Pacific Ocean due to the effects of global warming.

That risk, whether you believe it or not, got a lot of coverage and many were moved by the plight of these people.

Weather the island will be swallowed by the ocean in a hundred years because of global warming or just natural forces, that threat is irrelevant when it is considered in the context of all the other things that can happen in the mean time.

Like another 7.2 earthquake, this time with a tsunami.

Given that the fundamental scarcity of resources, which risks are worth trying to prevent has to be prioritized on the basis of cost&benefit. That is why humanity has chosen not to try to prevent earthquakes (imagine the real destruction they have caused so far) or volcanic eruptions, but deal with their consequences.

What a novel idea!

Here's something for those of you paying the MTA tax to ponder

Enjoying New York City's Metropolitan Commuter Transportation Mobility Tax on top of the Metropolitan Commuter Transportation District surcharge you pay as part of New York City's sales tax?

Well, it appears others are enjoying it even more. From the AP:

New York City bus drivers took an average of two paid months off last year after being spat upon by upset riders.

…

The Metropolitan Transportation Authority said Monday that 83 drivers were spat on last year. Of those, 51 took an average of 64 paid days off. One driver took 191 days of paid leave.

One cannot help but wonder if there were any cases where bus drivers hired people to spit on them.

How many of these bus drivers used their paid free time with benefits to engage in creative and entrepreneurial pursuits?

We thought ...

From Remarks by the President at Second Fundraising Reception for Barbara Boxer and the Democratic Senatorial Campaign Committee:

And we are now having to do a thoroughgoing review to see how it is that oil companies can say that they know how to handle these problems when it turns out actually that they don't.

From the Sydney Morning Herald:

President Barack Obama says the federal government needs to look at getting the technology that would allow it to work at the bottom of the sea to plug oil leaks like the Gulf of Mexico spill.

Obama says right now only BP and other oil companies have that technology, and that's why the White House has to rely on BP to try to fix the disaster.

Am I the only one to think this reeks of irony?

Incidentally, no matter how prepared you are, there will always be one accident, disaster or terrorist act that will overwhelm your response.

Consider the New York City Office of Emergency Management. They had great plans, equipment and personnel to deal with emergencies and a coordination center. Unfortunately, it was housed at 7 World Center. On September 11, 2001, that building came down following the terrorist attacks. New York City officials had to improvise. On that day, Rudy Guilliani and the remaining members of his team showed the world what leaders are made of.

I wonder what President Obama would have done. Would he have sent Ray LaHood to tell the press that the Federal Government has the boot on the throats of airport managers or airline executives for letting the terrorists on board and carrying them to their deadly destinations?

President Obama says:

BP is operating at our direction, he said at a White House news conference. Every key decision and action that they take must be approved by us in advance.

Maybe that's the problem? After all, the primary impulse of a bureaucrat is to CYA in these types of situations. That kind of bureaucratic meddling usually prevents the quick process of improvisation and trial and error one must come up in overwhelming situations.

The time to settle the damages from the spill will come. I doubt that the Federal Government would need to step in to the fray: There is certainly no shortage of highly qualified attorneys who can effectively sue BP.

The Federal Government does not have the expertise and the equipment to deal with such a problem. Nor should it. There were things President Obama could have done as james Carville explains lucidly:

For additional perspective, read about Ixtoc oil spill:

Eventually, in the US, 162 miles (261 km) of beaches and 1421 birds were affected by 3,000,000 barrels (480,000 m3) of oil. Pemex spent $100 million to clean up the spill and avoided paying compensation by asserting sovereign immunity.

The deceptive lure of tyranny

Thomas Friedman has been a fan of the Chinese Communist party for a while now:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power and wind power.

The first fallacy he commits himself to is the notion that the wealth of country is given by the product mix produced in the country. This is the same kind of idiotic notion that wasted huge amounts of wealth while Third World countries frenetically tried to build their infant heavy industries in the 50s through the 80s.

It does not matter what is produced in a given country.

What matters is whether your citizens eat earthworms on a stick out of necessity or collect grain from cow poop to survive and the only means of transportation is by bicycle or on foot or if they can enjoy whatever foods they wish to enjoy and travel by whatever means they want to.

The second fallacy he commits is that somehow enlightened smart leaders with smart bureaucrats and technocrats can figure out the right product mix. As Mises explained eight decades ago, if the right product mix is defined as what people want and are willing to pay for rather than some dear leader's fantasy, no one can do any better than a free competitive market:

Guided by central authority according to central plan, a socialistic economy can be democratic or dictatorial. A democracy in which the central authority depends on public support through ballots and elections cannot proceed differently from the capitalistic economy. It will produce and distribute what the public likes, that is, alcohol, tobacco, trash in literature, on the stage, and in the cinema, and fashionable frills.

The capitalistic economy, however, caters as well to the taste of a few consumers. Goods are produced that are demanded by some consumers, and not by all. The democratic command economy with its dependence on popular majority need not consider the special wishes of the minority. It will cater exclusively to the masses.

But even if it is managed by a dictator who, without consideration for the wishes of the public, enforces what he deems best, who clothes, feeds, and houses the people as he sees fit, there is no assurance that he will do what appears proper to us.

The critics of the capitalistic order always seem to believe that the socialistic system of their dreams will do precisely what they think correct. While they may not always count on becoming dictators themselves, they are hoping that the dictator will not act without first seeking their advice. Thus they arrive at the popular contrast of productivity and profitability.

They call productive those economic actions they deem correct. And because things may be different at times they reject the capitalistic order which is guided by profitability and the wishes of consumers, the true masters of markets and production.

They forget that a dictator, too, may act differently from their wishes, and that there is no assurance that he will really try for the best, and, even if he should seek it, that he should find the way to the best.

…

Surely, in a capitalistic order a fraction of national income is spent by the rich on luxuries. But regardless of the fact that this fraction is very small and does not substantially affect production, the luxury of the well-to-do has dynamic effects that seem to make it one of the most important forces of economic progress.

Every innovation makes its appearance as a luxury of the few well-to-do. After industry has become aware of it, the luxury then becomes a necessity for all. Take, for example, our clothing, the lighting and bathroom facilities, the automobile, and travel facilities. Economic history demonstrates how the luxury of yesterday has become today's necessity. A great deal of what people in the less capitalistic countries consider luxury is a common good in the more capitalistically developed countries. In Vienna, ownership of a car is a luxury (not just in the eyes of the tax collector); in the United States, one out of four or five individuals owns one.

Ludwig von Mises, A Critique of Interventionism 1929

Finally, Thomas Friedman (who really ought to change his last name out of respect for the late Milton Friedman) thinks that so-called enlightened dictators can implement whatever they want by force of their authority.

History does not help him with that one either. Thanks to the work of Paul Gregory and Mark Harrison, we know now a little more about how resource allocation in the Soviet Union worked during Stalin's time. Their Soviet Archives Project and Behind the Facade of Stalin's Command Economy: Evidence from the Soviet State and Party Archives by Paul Gregory are worth every minute you spend on them.

In their 2005 paper Allocation under dictatorship: research in Stalin's archives, they give incredibly detailed insight into how things worked under the rule of one of the most powerful dictators the world has seen:

… The greatest burden fell on Stalin who, in a typical year, 1934, spent 1,700 hours in official meetings, the equivalent of more than 200 eighthour days (Khlevnyuk 1996). Virtually every communication requested his decision.

On rare occasions, Stalin would explode at this torrent of paperwork, for example in a tirade of September 13, 1933: I won't read drafts on educational establishments. The paperwork you are throwing at me is piling up to my chest. Decide yourself and decide soon! (Khlevnyuk 1996, p. 340). A few weeks later the same Stalin berated the Politburo for not following his proposed distribution of tractors to the letter (Khlevnyuk 1996). Stalin suffered the dictator’s curse (Gregory 2004): his power to decide all gave his most trusted colleagues the incentive to decide as little as possible. The less they decided, the less he could blame them when things went wrong.

China and the Chinese people are becoming much wealthier than was the case just 30 years ago. But, that is not due to the power of dictatorship.

Rather, it is a testament to how much wealth even a little bit of economic freedom around the edges can create over what is really a short period of time.

On a dark November night in 1978, 18 Chinese peasants from Xiaogang village in Anhui province secretly divided communal land to be farmed by individual families, who would keep what was left over after meeting state quotas. Such a division was illegal and highly dangerous, but the peasants felt the risks were worth it. The timing is significant for our story. The peasants took action one month before the reform congress of the party was announced. Thus, without fanfare, began economic reform, as spontaneous land division spread to other villages. One farmer said, When one family's chicken catches the pest, the whole village catches it. When one village has it, the whole county will be infected.

Ten years later, in August of 1988, Mikhail Gorbachev lifted his nation's 50-year-old prohibition against private farming, offering 50-year leases to farm families who would subsequently work off of contracts with the state. Few accepted the offer; Russian farmers were too accustomed to the dreary but steady life on the state or collective farm. Thus began reform of agriculture in Soviet Russia.

The results in each country could not have been more different. Chronically depressed Chinese agriculture began to blossom, not only for grain but for all crops. As farmers brought their crops to the city by bicycle or bus, long food lines began to dwindle and then disappear. The state grocery monopoly ended in less than one year. Soviet Russian agriculture continued to stagnate despite massive state subsidies. Citizens of a superpower again had to bear the indignity of sugar rations.

Paul R. Gregory and Kate Zhou How China Won and Russia Lost December 2009 & January 2010

It is sad to see prominent people who think what makes the living conditions in China orders of magnitude better than the living conditions in North Korea is that the Chineese have the right kind of communists and not that they have entrepreneurs and more freedom.

There is something seriously wrong with these people

From the Jerusalem Post comes this story:

A small Syrian-backed terrorist group in Gaza said its activists blew up a donkey cart laden with explosives close to the border with Israel on Tuesday, killing the animal but causing no human casualties.

Of course, these people are willing to blow up women and children, so I should not be surprised. While I am really never saddened by the demise of a suicide bomber, I cannot help but feel sad for the donkey.

This comes on the heels of a story from Southeastern Turkey, where two families in a village near Diyarbakır clashed over a cow. Apparently, the cow, owned by one of the families, ventured into the field owned by the other family.

I can see how one can get miffed about that, especially if the cow is eating the produce you are growing to make a living or feed your children.

However, in such cases, human beings are supposed to first try talking with the owner of the cow, and if that does not work, call the authorities, I don't know, sue the owner of the cow for damages. Even if you do not want to get the authorities involved, there are ways in Turkish society you are supposed to try, say by talking to village elders so they can settle the dispute.

What a sane human being is not supposed to do is get in a fight over this kind of stuff.

No, I don't mean a fight where words were exchanged and someone got pushed around. Nothing like that.

I should have said battle: According to the news story, five people from both families died and six people were wounded with firearms. (Other stories I have seen put the number of wounded at 14.)

But, what erased any sadness I might have felt for those families was erased by one photo I saw: They shot and killed the cow.

Someone, during the fight battle, took the time to shoot and kill the cow!

Now, I am no PETA member. I eat all sorts of animals.

I have resigned myself to the supposed contradiction that I could be milking a cow (I am not very good at it) one moment and eating a steak the next.

But, what they did to this cow enrages me.

This battle came four days after a similar incident in a village outside of Ankara which left four people dead. The gunman in this incident also critically wounded his pregnant daughter-in-law.

Staying true to the tradition of psychopathic Turkish killers, he told the reporters he was remorseful after he was questioned at the police station.

There is something seriously wrong with these people.

Do zombie stations in the GHCN-v2 matter?

I have been trying to wrap my mind around the question of whether it matters that a large number of stations whose records were once included in the GHCN-v2 are no longer there.

A couple of days ago, I came up with what seemed at the time like a reasonable idea: Identify two groups of stations: Survivors, defined as stations with enough data between 1992 and 2006, and, zombies, defined as stations with sparse or no data in the 1992—2006 period. Then, match them by the 5°x5° grid where they are located. For each time period and each grid, calculate a grid average using the monthly mean temperatures of the survivor stations and another one using the monthly mean temperatures of the zombie stations.

I arbitrarily decided to classify as zombies those stations which had fewer than 60 monthly means in the v2.mean file for the 180 months spanning 1992—2006. The rest were classified as survivors.

You can find the the details of the classification procedure and the output file on unur.com.

With that list in hand, I wrote a horribly inefficient program that takes hours to run on my underpowered laptop (hint, hint) that computes grid averages using these subset of stations for every month between 1880—2006.

Then, for each month and grid, I computed the difference between the mean of the mean temperatures from surviving stations and the mean of the mean temperatures from zombie stations.

Finally, I plotted these within-grid differences. I used red to indicate the grids where the grid mean using survivors was greater than the grid mean using zombies and blue to indicate the grids where the grid mean using survivors was less than the grid mean using zombies.

To avoid giving the impression that a single grid with an extreme difference had the same weight as the other grids, I wanted to plot each point using transparency so that many grids about the same height would appear darker. I could not find a program or charting library that would do exactly what I wanted, so I wrote a rudimentary program in Perl for this purpose. By the time I was done writing to code to put in the axes and the gridlines, I was so fed up with the whole thing that I added the titles and notes using GIMP.

Caveats

Before you look at the graph, keep in mind that this is a completely ad hoc procedure. At every step of the way, I used programs I wrote to slice and dice v2.mean. Every program including the one used to generate the graph might contain bugs I have not discovered yet. The whole method might be completely invalid. Don't read too much into this graph. I was curious about whether the disappearing stations mattered and this is one way of trying to get an idea. I think it is a pretty good way, but still.

Even if everything is technically correct, keep in mind that there are many months where either the grid mean for the survivor stations or the grid mean for the zombie stations or both are missing.

So, here is the output:

I admit, I am not sure how to interpret this graph. It might be instructive to look at this graph side-by-side with the graph of observation counts

What do you think?

NB: I am going to post code and intermediate files later this week when I get a chance.

Food for thought: On Knowledge

From Reasoning about Knowledge:

He who knows not and knows not he knows not: he is a fool &mdash shun him.
He who knows not and knows he knows not: he is simple — teach him.
He who knows and knows not he knows: he is asleep — wake him.
He who knows and knows he knows: he is wise — follow him.

Arabian Proverb

Here is looking at the USA

Here is what I find interesting about the USA: There appear to be some stations that are almost always downward adjusted. Then, there are a bunch of stations that oscillate between no adjustment, downward adjustment and upward adjustment. In the 1990s, there seems to be a seasonal pattern to those latter stations' adjustments. Finally, from April 2006 to December 2006, all adjusted U.S. data points are coded as missing (i.e. -9999). Then, from January 2007 to December 2009, there are no continental U.S. data points in the adjusted file.

Update: I think I am close to finding an interesting bug in my code.— False alarm: There are data points from the U.S., but they are not in the continental U.S.

See Would you like yours "well adjusted"? and Adjustments to monthly mean temperatures in the GHCN-v2 (1850-2009) for a global perspective over a longer time span.

Would you like yours "well adjusted"?

Still trying understand the adjustment patterns in GHCN-v2. I decided to plot another map animation, this time marking a station location with an indicator for the direction of the adjustment.

Red stands for an upward adjustment, blue for downward and green for none. I used gray to lump all stations for which either one or both of the values in v2.mean and v2.mean_adj were missing. For every month, I excluded stations which have data in v2.mean but do not even have a missing value coded in v2.mean_adj.

I hope I have not made a programming error somewhere. One of my reasons for posting this is to encourage others to double-check the patterns shown using their own code. I have done a few spot checks and everything seems to be in order, but it is always hardest to find the bugs in one's own code.

The 80s and the 90s are looking even more interesting. I am still baffled by what I see post-2006.

Note: As before, both v2.mean and v2.mean_adj used to produce this animation were dated 2010/10/15.

Adjustments to monthly mean temperatures in the GHCN-v2 (1850-2009)

I like to "see" data in a disaggregated fashion. I have been a little perplexed about the adjustments in the GHCN-v2 data set, so I decided to look at the frequency and nature of adjustments for every observation in the v2.mean_adj file by plotting pie charts for each month.

There are five types of adjustments:

Positive (red):

The mean temperature in v2.mean_adj is greater than the mean temperature in v2.mean.

Negative blue):

The mean temperature in v2.mean_adj is smaller than the mean temperature in v2.mean.

Zero (white):

The mean temperature in v2.mean_adj is the same as the mean temperature in v2.mean.

Missing value to non-missing (white):

The mean temperature is missing (-9999) in v2.mean, but there is a non-missing value in v2.mean_adj.

Non-missing to missing (white):

There is a non-missing value in v2.mean, but the corresponding value in v2.mean_adj is missing.

Missing to missing (white):

An observation is missing in both files.

Finally, there are a bunch of observations in v2.mean for which there is no entry in v2.mean_adj. I excluded those observations when plotting these charts.

Here is the result:

Pay attention through the 80s and the 90s.

As far as I can tell, complete lack of positive or negative adjustments after March 2006 is not a programming error on my part.

Caveat: These charts say nothing about the magnitude of adjustments. They just display relative frequency by type.

Note: Both v2.mean and v2.mean_adj used to produce this animation were dated 2010/10/15.

What's up with adjusted mean temperatures in the GHCN?

I finally got around to importing the adjusted temperatures into the database I set up earlier. The schema is pretty much the same except that it now has columns for the adjusted mean, the adjustment amount and the percentage adjustment.

As I went around checking to make sure everything correctly, I stumbled upon an odd phenomenon. I do not want to jump to any conclusions: It is certainly possible that I might have made a mistake somewhere although the few checks I made back to the original data files showed no red flags.

Without further ado, here is what is bothering me: Upon completion of loooong import phase (the SQLite database is up to almost 1.6 Gb at this point), I ran the following query:

SELECT o.year, o.month, obscount, adjcount 
FROM 
(
    SELECT year, month, count(*) AS obscount 
    FROM temperature WHERE mean <> -9999 
    GROUP BY year, month ORDER BY year, month
) AS o, 
(
    SELECT year, month, count(*) AS adjcount 
    FROM temperature 
    WHERE mean <> -9999 AND 
          mean_adj <> -9999 AND 
          mean_adj <> mean 
    GROUP BY year, month ORDER BY year, month
) AS a 
WHERE o.year = a.year AND o.month = a.month;

Simply put, this selects the years and months were both the mean and the adjusted mean are not missing and they differ from each other.

Here is what I got:

Why does the graph end in 2006?

Well, because there does not seem to be any months with a non-missing mean which was adjusted after 2006:

sqlite> select count(*) from temperature 
where mean <> -9999 and 
mean <> mean_adj and 
year > 2006;
0

Yes, that's a zero.

Are there no adjustments post-2006?

Well, of course there are adjustments post-2006. We can see that by allowing missing unadjusted mean temperatures:

sqlite> select * from temperature 
where mean <> mean_adj and 
year > 2007 
order by year;
501|94659|000|0|2008|8|-9999|114
501|94767|000|0|2008|3|-9999|215
501|94968|000|0|2008|3|-9999|161
501|94975|000|0|2008|3|-9999|162
222|31707|000|0|2009|8|-9999|199
403|71826|000|0|2009|1|-9999|-236
403|71826|000|0|2009|2|-9999|-254
403|71894|000|0|2009|8|-9999|143
501|94610|000|0|2009|9|-9999|139
501|94637|000|0|2009|9|-9999|139
501|94647|000|0|2009|12|-9999|216
501|94750|000|0|2009|12|-9999|210
501|94767|000|0|2009|12|-9999|228
501|94791|000|0|2009|2|-9999|233
501|94866|000|0|2009|2|-9999|211
501|94893|000|0|2009|10|-9999|130
501|94967|000|0|2009|10|-9999|110
643|08286|000|0|2009|1|-9999|103
649|17056|000|0|2009|2|-9999|61
219|41759|000|0|2010|2|-9999|194
403|71826|000|0|2010|3|-9999|-192
403|71826|000|0|2010|4|-9999|-100

Now, those are just 22 observations after 2007 which were adjusted from a missing value to a non-missing value.

Let's look up those in the original data files. Here's one line from the unadjusted v2.mean file:

5019465900002008  288  249  255  189  158  127  114-9999  173  211  219  241

And, here is the corresponding line from the v2.mean_adj file:

5019465900002008  288  249  255  189  158  127  114  114  173  211  219  241

It looks like the adjustment to the August 2008 temperature was simply to copy over the July 2008 temperature. Hmmmm.

Let's look at another one. Here is the line from v2.mean:

2223170700002009 -191 -163  -79   61  152  166  199-9999  133   52 -104 -197

And, here is the corresponding line from the v2.mean_adj file:

2223170700002009 -191 -163  -79   61  152  166  199  199  133   52 -104 -197

where, once again, the adjustment is to replace the missing August 2009 value the July 2009 value.

OK, this is the last check:

6430828600002009-9999  113  132  154  201  242  263  268  228  203  164  118

And, here is the corresponding line from the v2.mean_adj file:

6430828600002008  120  126  144  171  185  225  256  263  228-9999-9999  103
6430828600002009  103  113  132  154  201  242  263  268  228  203  164  118

Missing January 2009? No problem, here is the December 2008 mean temperature.

I don't know what's going on here.

I leave you with one last puzzle:

sqlite> select year, count(*) from temperature 
where mean = -9999 and 
mean <> mean_adj 
group by year 
order by year;

This query is asking for the count of missing unadjusted mean temperatures (from v2.mean) which have a corresponding adjusted mean temperature (from v2.mean_adj):

Here is the interesting part of the output:

1985|15
1986|7
1987|10
1988|13
1989|8
Nothing from the 90s
2000|84
2001|86
2002|108
2003|79
2004|79
2005|74
2006|29
2007|6
2008|4
2009|15
2010|3

Here are the top ten countries by the number of missing monthly mean temperatures replaced with non-missing values:

1. USA|583
2. Australia|201
3. Canada|97
4. China|94
5. Russian Federation (Asian Sector)|78
6. Mexico|67
7. India|66
8. Sri Lanka|34
9. Venezuala|28
10. Spain|24

Question

The replacement of missing monthly mean temperatures with the previous months' temperatures for some stations is bothersome, but my main question is: Why are there no what I would call bona fide adjustments post 2006?

Note: The v2.mean and v2.mean_adj files used here were dated 20100515 and downloaded from the GHCN FTP site.

Food for thought: Stats, stats, and you know what

Almost all the exams I have ever given included a "Food for Thought" section which included one or two quotations which were either somewhat related to the topics the exam covered or even contained a hint or two (however oblique) to correctly answering some of the questions.

Here are a couple from my Stats exams:

The government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who just puts down what he damn pleases.

Anonymous English Judge
Quoted by Sir Josiah Stamp in Some Economic Matters in Modern Life (1929)

I've gone to hundreds of fortune-tellers’ parlors, and have been told thousands of things, but nobody ever told me I was a policewoman getting ready to arrest her.

Anonymous New York City Detective

Do you know how warm it is in Central Park?

The number of stations with data in the unadjusted GHCNv2 data set takes a nosedive some time in 2006:

Among those is a Station 72503001, namely, Central Park, New York.

Here is the last entry for that station in unadjusted v2.mean:

4257250300102006   49   21   62-9999-9999-9999-9999-9999-9999-9999-9999-9999

-9999 is code for missing observation.

The subsequent years are not included in the data file at all.

The GHCN home page at NOAA states:

The Global Historical Climatology Network (GHCN-Monthly) data base … has also been employed in several international climate assessments, including the Intergovernmental Panel on Climate Change 4th Assessment Report, the Arctic Climate Impact Assessment, and the "State of the Climate" report published annually by the Bulletin of the American Meteorological Society.

According to Google maps, the station is about 3 miles from Dr. Hansen's office.

Everything is all well and good according to the GISS. So, maybe Dr. Hansen can get in touch with the people at NOAA so they can include data from Central Park, in the middle of New York City, in their next press release.

The case of disappearing temperature observations in GHCN-v2

To put the animation of GHCN-v2 stations with data in perspective, I decided to put together charts of data availability for every country in the GHCN-v2 data set for the period January 1850 to April 2010.

See also E.M. Smith's NOAA/NCDC: GHCN – The Global Analysis and a related thread on ClimateAudit.

You can find all of the charts here.

Here are the graphs for a few cases:

Dude, where is my thermometer?

Update: The code I used to generate the frames for the animation is now available under the GPL.

The temperature data we have now is not the output of a well-designed measurement process. It could not have been. Throughout time, humans measured and recorded temperatures and weather conditions where they lived and where they traveled.

The GHCN database has been employed in several international climate assessments, including the Intergovernmental Panel on Climate Change 4th Assessment Report, the Arctic Climate Impact Assessment, and the State of the Climate report published annually by the Bulletin of the American Meteorological Society.

A few years ago, I tried to get an idea of the extent and scope of GHCN data by plotting the temperature series for each individual station.

This time, I decided to not worry about the actual measurements, but just lay out the locations of temperature stations with data in the unadjusted mean file v2.mean.Z every month in the years spanned by the GHCNv2 database.

The result of that effort is the following animation:

Only you can prevent thermometer suicides

From time to time, I and many other more prominent commentators (including, but not limited to, Steve McIntyre, Anthony Watts, E.M. Smith) have noted the disappearance of thermometers from the main temperature data sets.

In case you miss it in the animation, here is what we are talking about:

Temperature stations in GHCNv2 (January 1960)

Temperature stations in GHCNv2 (January 1970)

Temperature stations in GHCNv2 (January 1980)

Temperature stations in GHCNv2 (January 1990)

Temperature stations in GHCNv2 (January 2000)

Temperature stations in GHCNv2 (January 2010)

When in doubt, Khayyam

Omar Khayyam is one of my heroes:

    33

Then to the rolling Heav'n itself I cried,
Asking, What Lamp had Destiny to guide
Her little Children stumbling in the Dark?
And—A blind Understanding! Heav'n replied.

more of Omar Khayyam's Rubaiyat.

I will defend your right to do it, but shame on you

So, I have been seeing some updates and notes about the Everybody Draw Mohammed Day [sic] someone came up with (no, I am not going to link to anything because I consider the content offensive).

Here is the deal: I do indeed long for and advocate for the day Muslims can be offended by things without burning or stoning people or blowing up things.

I also do not understand how the rules of a religion can be used to place limitations on the behavior of people who do not adhere to that religion.

In fact, Islam specifically prohibits idolatry. This prohibition has been interpreted differently at various times and places throughout the history of Islam.

For example, the Ottoman Sultan Mehmet II interpreted this proscription as preventing Muslims from painting, so he got Gentile Bellini to paint a portrait of his. You might think the Conqueror of Constantinople (i.e. İstanbul) came awfully close to violating the prohibition, but who was going to argue with him?

Later, when Selim I conquered large swaths of the Middle East, and declared himself to be the Caliph. There is at least one depiction of him.

Now, the point I am trying to make is very simple: Islam does not prohibit specific depictions of humans or animals but only idol worship. One can enjoy or find distasteful a painting or a sculpture without worshiping it.

Things become a little more sensitive regarding depictions of the Prophet. Islam recognizes all prophets and messengers that preceded it. Isa (i.e. Jesus), Musa (i.e. Moses), Adem (i.e. Adam) are names that are as popular in Turkey as Muhammed and all its variations. The key distinction between Islam and Christianity is the fact that all the prophets and messengers of God are humans. So, in so far as depicting the Prophet leads Muslims to worship him rather than God, there would be a problem.

I can understand it if a Muslim father admonishes his son for making a drawing of the Prophet lest such activity lead the child to confusion but I cannot see how any of this places a restriction on the behavior of non-Muslims.

In a modern, democratic society, every individual has, and ought to have, the right to follow any religion or to reject religion outright.

In doing so, every individual also has, and ought to have, the right to say, write, and draw anything that members of other religions find offensive (similar to the customary exception in the case of yelling Fire in a crowded theater, one's right to run into a mosque and scream obscenities at Muslims can be reasonably curtailed without jeopardizing the right to free speech).

However, the fact that you have the right to say offensive things does not mean you ought to say them. Yeah, you have a right to dunk a cross in a urine jar and display it, but it really is not right to do that. I can never support such offensive acts, but I would try to protect you if some Christians tried to harm you physically because of your offensive artwork.

The so-called contributions I have seen so far to Everybody Draw Mohammed Day have not risen above the level of putting a cross in a urine jar. Shame on you.

Annals of superfluous accuracy

Here is a screenshot of a snippet from an AP Story:

The National Oceanic and Atmospheric Administration announced Tuesday that it's expanding the closed area, though it won't say exactly where until later in the day. Nearly 46,000 square miles, or about 19 percent of federal waters, will be shut under the expanded ban.

The story reported over on CNN's news blogs is even funkier:

The expansion to 19 percent means 45,728 square miles is now closed to fishing.

See: They took the accuracy even one step further and told you that it was 45,728 square miles, not [N]early 46,000. No sir! That would be inaccurate.

Of course, it would have been fine to say about one-fifth.

Now, look at that headline again: Oil spill to shut down 19 percent of Gulf fishing.

Of course, the oil spill cannot take such actions.

The correct headline should have been NOAA to shut down one-fifth of Gulf fishing.

I do not know enough to agree or disagree with NOAA's decision. However, why obscure who actually took the action? (By the way, CNN correctly states NOAA closes 19 percent of Gulf to fishing.)

But, I am going to point out:

Steve McIntyre explains the "trick"

Watch Steve McIntyre explain the trick.

I like to brag that I got Steve to present in my Economics of Consumer Policy class I taught at Cornell in 2006.

I am very happy that he is finally receiving the well-deserved widespread acclaim and recognition.

Most of what passes as statistical analysis in the Climate Science literature ignores all that economists have learned when they tried to apply classical statistical methods to historical data.

Econometrics exists as a separate (but related) discipline than Statistics mainly because of the endogeneity and selection issues economists have to deal with.

The main problem the dominant paradigm in the Climate Science literature faces is in the conceptual difficulty of comparing modern instrumental data to reconstructions of past temperatures.

This problem persists even if we assume that measurements are perfect and reconstructions are perfect.

The problem is simple: Humans have not measured temperature at fixed, randomly selected places on the planet. They measured temperature first and foremost where they lived and where they traveled. Plus, they did not measure temperature with an eye towards comparing measured temperatures to past climate but to get information relevant to their situation at the moment.

Recognizing this problem and the limits it imposes on our ability to make definite statements about the past, present and the future is key to actually constructing something that can be considered Climate Science.

Please watch or read Steve's explanation of the trick.

The trick is about the nitty gritty of reconstructions. Even without such tricks being employed, there would still be reason to be suspicious of predictions of catastrophe due to the conceptual problem I explained above.

To get an idea of how much instrumental data is available, you might want to look at my graphs of Worldwide GHCNv2 Temperature Data.

Thanks to Chiefio for mentioning my graphs.

Videos of ICCC 4 presentations are available on the Heartland Institute web site.

People, budgets and taxes

On average, how much do you need to collect from each individual to be able to finance a state's budget? That is the question I am trying to answer. The following is a back of the envelope calculation to try to come up with a rough number, not a formal analysis. Note that I am not using raw data but just a mish mash of various numbers I have been able to find out easily.

About 20 million people live in New York State. Of those, about roughly 12 million are between the ages 18 to 65. Conventionally, that age group is considered to be the most economically active.

Apparently, roughly 20% of New Yorkers are disabled. Looking at report by the New York State Department of Health (see page 2), 13.1% of New Yorkers in the 18–44 age group and 23.4% of those in the 45–64 are disabled.

Many people with disabilities are economically active. On the other hand, many aren't. I am going to make a judgment call, and suppose that out of the 12 million New Yorkers in the 18–65 age group, about 1 million are not economically active due to a disability.

So, we are left with 11 million people in the 18–64 age group to finance the State's expenditures.

It is not easy to find information about the New York State Budget in plain English.

Looking at the Enacted 2009–10 budget, I am struck by two numbers: The size of the budget is about $80 billion and something called All Funds (Including "Off-Budget" Capital) is about $133 billion.

I am going to assume that means $133 billion is the actual amount of money that New York State was planning to spend in that period.

According to the same document, about $60 billion of that amount is financed by taxes and $22 billion is financed by Miscellaneous Receipts (presumably things like use fees, license fees, existence fees ;-).

The state has about $55 billion in outstanding debt, and the budget document states Debt Service as % All Funds is 4.5%. Of course, the crucial question is: Which All Funds? But, let's leave that aside for the moment.

The main point is clear: The State of New York takes in $82 billion dollars and has to pay out $140 billion (including debt service).

And, it owes $55 billion on top of that.

The enacted budget document lists the enacted cumulative gap for the 2008–2010 period to be $0. (Yup!) And the enacted gap for the 2010–2011 period to be only $2.2 billion.

Magical, right?

So, to summarize: New York State takes in $82 billion, pays out $140 billion.

Given that we came up with roughly 11 million economically active New Yorkers, that means the state takes in an average of $7,400 per such person and pays out $12,700 per person.

The money it does not have comes from the rest of the United States through the Federal Government (i.e. the rest of U.S. taxpayers or U.S. bondholders).

How can New York State close the roughly $60 billion difference between what it takes in and what it pays out?

There are only two ways: Either the State has to find a way to milk 72% more money out of its residents or it has to pay out 42% less than it is doing now.

Did you just say, Make Wall Street bankers pay for it? Well, there are just about 420 thousand people working in the financial services sector in New York City — not all of them fat cats. Can you extract an extra $140 thousand from each and every one of those people?

The size of the government of the State of New York has to shrink.

Danmark, savner jeg dig

Det har væaret alt for læange siden jeg var hos dig. TV2 var bare en rock gruppe og var hjem på Kristiansdals alle. Der skal komme en dag hvor skal jeg så du en gang til.

Mit Dansk er ikke mere så godt. Jeg skal dog prøve at practisere men ingen løfter kan jeg giv dig.

Med kærlig hilsen

Lessons for the EU and the Greeks from Indiana Jones

One of my favorite scenes from Indiana Jones is when the fancy fighter in black with his fancy sword shows up in the marketplace. As the guy is going through his fancy moves, trying to intimidate Indy, Indy calmly pulls out his six-shooter and calmly eliminates the threat:

Then, in the prequel Temple of Doom, he encounters a couple of fancy sword fighters clad in black. He reaches again for his gun and for a moment we expect him to shoot the two guys in one fell swoop. Then, we realize just as Harrison Ford's facial expression changes, that there is no gun in the holster:

Ooooopppss!

So, a few days ago, the EU (with substantial help from the U.S.) committed about a trillion dollars to keeping Greece afloat.

That's Indiana Jones in the first clip.

But now, the gun, the bullets and everything is gone.

That trillion was everything they could put together.

However, the problem is bigger than the trillion.

The governments in the European Union do not have anything left in their arsenal to prop up another illusion.

As I said before, I know what I would be betting on if I were Soros. The problem is, so do all the Sorosses of the world.

Is this liberal bias or some kind of short circuit in the brain?

I am very excited about Ridley Scott's Robin Hood and I am looking forward to seeing it.

It caught my attention with the earlier version of the trailer which has since been changed and omits the bit about kings not being able to take their subjects for granted—a revolutionary concept in 12th century England and, sadly, today.

See, for years, in my economics classes, I would ask my students from whom Robin Hood stole. They would invariably answer in unison: The Rich!

WRONG!

Robin Hood's original crime was to have hunted one of the king's deer in a country where everything, including people, belonged to the king, and the king dispensed of the resources of the country to men whose loyalty he wanted to preserve.

The Sheriff of Nottingham was a law enforcement officer of the government.

The rich in those days, kind of like Mr. Whitacre and other recent beneficiaries of government interventions in the U.S. and pretty much every major industrialist in the developing world, got there with the allocation by the government of major resources to them.

With that out of the way, here is why I am writing this post: I was looking for some reviews of the movie, and noticed the following beautiful display of lack of intellectual capacity by Michael O'Sullivan:

… it's the story of a people who are being taxed to death by a corrupt government, under an upstart ruler who's running the country into the ground. It asks: What's a man of principle to do?

If you said, Steal from the rich, and give to the poor, you must be thinking of the old Robin Hood. The correct answer here is: Don't retreat, reload. …

There is, however, precious little of the socialist stuff that we normally associate with the man in tights in this new, politicized version … (emphasis mine)

So, the movie is politicized because it does not include the usual socialist mumbo jumbo.

Huh?

Does anyone read what this guy writes before putting it in the paper?

More importantly, does he ever read what he writes?

In any case, I do not know if the movie will be any good. But, just the fact that it does not contain the usual socialist stuff means I am willing to give it a chance.

In politics, what matters is what people believe

Thomas Sowell on Obama-nomics:

Professor Bernanke, please read Sowell's book.

Which country will follow Greece?

Spain? Portugal? Ireland? France? Italy?

Gratuitous digression: Here is what Wikipedia says about Greece:

A developed country with a very high Human Development Index, Greece has been a member of what is now the European Union since 1981 ...

Compare that to what it says about Turkey:

Turkey is classified as a developed country by the CIA

You've got to love that endorsement!

I do not know. I would not much care either except for the effects of these collapses on stability in the rest of the world. After all, we knew this was coming. The Soviet Union was not a model for growth and wealth and social harmony. Neither was the European Union going to be one.

Major European countries, led by Germany, with the U.S. government helping out, pushed their limits to be able to support Greece.

Of course, the incentive compatible solution would have been to put the country in receivership, similar to the Düyun-u Umumiye the Ottoman Empire had to submit to toward the end of the 19th century.

There is neither much more appetite nor —and possibly more importantly— a lot of resources left to rescue another country.

I know what I would be betting on if I were Soros.

Elena Kagan's muddled thinking: Does the law protect you?

Reading Ms. Kagan's remarks, I am a little struck by the kind of muddled thinking she displays:

And through most of my professional life, I've had the simple joy of teaching — of trying to communicate to students why I so love the law not just because it's challenging and endlessly interesting — although it certainly is that — but because law matters; because it keeps us safe; because it protects our most fundamental rights and freedoms; and because it is the foundation of our democracy (emphasis mine).

Of course, law matters.

But, it does not protect anyone or anything.

Laws define the boundaries of our freedoms. They define where your rights end and where your neighbor's rights begin.

Laws also define the consequences of not following them.

But no law actually protects anything.

The law says thou shalt not kill, but murders still occur.

The law says come to a full stop behind the white line at the stop sign, but people still roll through stop signs.

The law says, no oil spills! Yet, it is spilt.

Ultimately, one is responsible for one's own protection.

And there, the law defines how you can protect yourself without facing penalties yourself because the law is also there to protect your assailant.

Immediately beyond your own responsibility for your own protection are the organs of state: The police, food inspectors, health inspectors, building inspectors, life guards, crossing guards etc are there to try to ensure everyone operates within the law.

Further beyond that, the military is there to protect you from direct threats to you from other countries. In doing so, it might compel you to harm yourself. Within the law.

In all of this, it is not law that protects you.

Legal processes and decisions can further clarify boundaries, address issues of compensation and redress, but they do not protect and cannot protect you.

By definition, you cannot be protected after the fact. You can only be compensated if you are still alive.

Economic profit versus accounting profit

Enemies of free enterprise tend to loathe profits: They think and like to try to make you thing that profits made by private enterprise come at your expense.

Of course, nothing could be further from the truth.

An economic transaction involving free people only takes place if all participants in the transaction profit from it.

When you buy a cup of coffee for $1.50, you get something you value, the beverage you wanted. And, the value you put on that cup of coffee cannot be less than $1.50. Otherwise, as a free person, you would not have bought that cup of coffee. So, you profit by buying the cup of coffee. Furthermore, the owner of the store only sells that cup of coffee because she values the coffee and the cup and the cream and the sugar that goes with it less than the $1.50 you paid. Finally, the cashier only stands behind the cash register and takes you cash and gives you back change and goes and fetches a cup and fills that cup with coffee asking you if you want room for cream in the process because the wage he receives for doing that is more than the value he puts on doing other things with his time. The company that makes the cups that are used at the coffee shop sells them to the coffee shop because they value the money they get from the coffee shop more than the paper cups … and so on and so forth for everyone involved in the chain.

So, everyone profits from every economic transaction in which he participates.

But, by how much?

The economic definition of profit is very clear: Your economic profit from an activity is the difference between the benefit you receive from that activity and the opportunity cost of that activity.

An example will make it clear how this concept is different than the concept of profit utilized by the government in calculating the tax liability of a business.

Suppose you own a piece of land the size of a football field in the middle of Manhattan with no buildings on it. Suppose you choose to grow tomatoes on that piece of land. They are an instant hit with everyone. People love being able to pick their own tomatoes in the middle of Manhattan. The limousine libs who hate toilet paper realize that your tomatoes fit with their organic life-style and are willing to pay you $25/lb for your tomatoes. That, my friends, is an amazing price. You are raking it in. After accounting for all the costs of seeds and cow manure and labor and the taxes you pay on your net revenue etc, you realize your football field of tomatoes in the middle of Manhattan is bringing you about $200,000.

Now, you are rich. You made it! —Well, at least according to President Obama's interpretation.

What is you economic profit?

Well, it depends on how much you could get for a football field sized piece of land in the middle of Manhattan these days.

Conservatively, let's say you could sell the land for $25,000,000.

Oooooops!

Your economic profit is negative (unless you value being able to grow tomatoes in the middle of Manhattan much, much more than the money you could get by selling the land.

Your economic profit determines whether you should do something.

However, the Federal government, the New York State government and the City of New York will tax you on the basis of your accounting profit.

Food for thought: Never relax in search of truth

Almost all the exams I have ever given included a "Food for Thought" section which included one or two quotations which were either somewhat related to the topics the exam covered or even contained a hint or two (however oblique) to correctly answering some of the questions.

Here is one of my favorites:

The experience derived exclusively from complex phenomena does not bar escape into interpretations based on wishful thinking. The naive man’s propensity to ascribe omnipotence to his thoughts, however confused and contradictory, is never manifestly and unambiguously falsified by experience. The economist can never refute the economic cranks and quacks in the way in which the doctor refutes the medicine man and the charlatan. History speaks only to those people who know how to interpret it on the ground of correct theories.

&hellip

Not only in the countries ruled by barbarian and neobarbarian despots, but no less in the so-called Western democracies, the study of economics is practically outlawed today. The public discussion of economic problems ignores almost entirely all that has been said by economists in the last two hundred years. Prices, wage rates, interest rates, and profits are dealt with as if their determination were not subject to any law. Governments try to decree and to enforce maximum commodity prices and minimum wage rates. Statesmen exhort businessmen to cut down profits, to lower prices, and to raise wage rates as if these matters were dependent on the laudable intentions of individuals. In the treatment of international economic relations people blithely resort to the most naive fallacies of Mercantilism. Few are aware of the shortcomings of all these popular doctrines, or realize why the policies based upon them invariably spread disaster.

These are sad facts. However, there is only one way in which a man can respond to them: by never relaxing in the search for truth.

Ludwig von Mises (1949), Human Action, pp. 862, 880.

Another movie for freedom lovers: No one knows about Persian cats

No one knows about Persian cats does not have a happy ending but it is a good way for us to remind ourselves how few people on this planet are free to live their lives as they choose.

Freedom, just like money, does not guarantee happiness. However, oppression does guarantee misery and sadness.

I am guessing the most foreign concept to my American friends will be the difficulty involved in an Iranian citizen getting an Iranian passport: An Iranian citizen is not free to leave.

The movie features some really tacky and some really good music. I especially liked the following rap piece.

Update (2012/05/05) I just noticed that someone has replaced the clip with another one with different subtitles. As you can tell from the comments on the YouTube page, the translation is not faithful to the original meaning. The subtitles that appear on this clip completely subvert the meaning of the lyrics. Here is an alternative translation of the intro I found in the comments which corresponds better to the meaning of the lyrics:

This is Tehran,
That means a city where everything you see entices you entices you until your soul is in a trashcan, you realize your not human, you were trash.
Here everyone is a wolf, you want to be like a sheep? Let me open your eyes and ears a little bit.
This is Tehran, damn it, not a joke.
There is no flower or popsicle sticks.
This is a jungle, eat so you don't get eaten
Half are envious, half savages
The class difference screams here
It injures and sickens the people's soul.

I also noticed that the song is available on Amazon as an MP3 download (and as part of the soundtrack from the movie). I just bought it — It is a good 99 cents to spend on the voices of freedom in Iran: Ekhtelaf by Hichkas. I should note that Hichkas means Nobody.

More movies for freedom lovers.

Who did Robin Hood steal from?

Real immigration reform now!

I believe people everywhere in the world ought to be free to choose where they want to live and work. In addition, quite apart from that moral argument, I believe free movement of labor makes everyone better off by improving the utilization of the scarcest resource: Human capital.

The U.S. immigration system is a mess. Most American citizens are utterly unfamiliar with the particular ways the system makes it hard for decent, hard-working, law-abiding foreigners to come to the U.S. to work.

There is a simple way to improve the situation.

These recommendations would work for every country.

First, secure the borders: A country without borders is no country: It's a land mass with people on it.

Second, grant no additional rights to people who have already broken the rules.

Third, enact comprehensive, real immigration reform:

1. Get rid of the myriad visa categories: Foreigners in a country need to be grouped in to no more than three categories:

Immigrants (those who intend to move to a country permanently)

Temporary visitors (such as students, tourists, ship crew etc)

Diplomats

2. For immigration requests, charge a non-refundable application fee that is equal to the poverty line. The current poverty line for an individual is $10,830 in the U.S. So, for a family of three, the application fee would be $32,490. There is no need for a sliding scale here. All applicants who pass background checks after depositing the non-refundable fee, get to live in the U.S. for a five year probationary period and pay a fee equal to the poverty line during every year of the probationary period (parents pay the same fee for every child they are bringing with them).

3. If, at the end of the five year probationary period, the individual has remained in good standing, allow them to extend their residency by another five years or apply for citizenship.

A simple formula should determine how an immigrant's fees are allocated among federal, state and local governments. Local governments should not get any money for non-paying foreigners.

This simple, straightforward system would ensure orderly immigration.

It would undermine criminal human smuggling networks who charge similar fees but make their clients travel inside 120°F trailers like animal feed rather than in air-conditioned buses or on airplanes.

It would ensure that those who earn technical degrees at U.S. educational institutions stay in the U.S. if there is enough demand for their services and it would ensure people in highly sought out professions such as plumbing and landscaping can come in to fulfill demand for their services.

That is: There is no chance such a simple and straightforward system would be implemented.

Politicians who see immigrants as a big amorphous mass of votes will pass some sort of amnesty bill which will, among its other nasty effects, lead human smugglers and the associated criminal networks to raise the fees they charge, but not to orderly immigration and integration.

Income tax rates, income tax revenue and tax cuts

The total income tax the government collects from an individual, T, is determined by two factors: The income tax rate the individual faces, τ, and the total income of the individual, Y.

So, for example, if you make $100,000 a year and face a tax rate of 10%, you will pay $10,000 in taxes (for simplicity, I am ignoring deductibles and different tax rates for different portions of that income).

That is, the total income tax the government will collect from you is given by:

T = τY

A tax cut is a reduction in your tax rate, τ.

Politicians like to ignore this.

In their world, the tax rate, τ, and your income, Y, are independent of each other.

They talk of any decrease in tax revenue as a tax cut: If the government collects less in taxes this year, why, it must have been due to a tax cut.

However, personal income is not given. It can fluctuate due to economic conditions and therefore the same tax rate can yield higher or lower tax revenues in different years.

More importantly, the amount of income an individual chooses to earn is also influenced by the tax rate she faces.

When I points this out, most lay people give me a blank stare and claim that making more money is always better and, in addition, that an individual cannot arbitrarily choose how much she is going to earn.

Having more money is obviously better, but having and earning are two different things: The latter implies mandatory effort.

The latter statement is obviously true: An individual's desires are clearly not the sole determinant of how much she earns.

An individual's income comes from two main sources: Activities that require her to supply her labor and financial returns. Focusing on the labor supply decision, an individual must choose how much labor to supply, how much to exert herself, and what type of endeavor to pursue.

Each of these decisions has associated costs to the individual: If you choose a mundane 9-5 job, your free time is yours: You do not bring work home. In most cases, you get things like sick leave, family leave etc. Your paycheck is steady. If you choose an entrepreneurial field, on the other hand you face more risk. You have to think about your job all the time. You cannot choose not to show up for your presentation just because you have a headache or a backache or a heartache.

Depending on their preferences and human capital and rewards to that human capital, individuals choose how much of their hours to supply, how much effort to exert and the field in which to exert that effort.

For a given individual, the higher the reward for their time, the more likely they will be to supply their labor, the more they will earn (do not even think about bringing in the backward bending labor supply curve into this ;-))

The reward an individual receives for supplying her time is consists of the money she is left with after she pays out all the expenses associated with earning that money. A major component of the expense of earning money is the tax you pay on it. Taking everything else as given, a higher tax rate on income will result in a reduced desire to supply labor. This can reflect itself in the hours one supplies or the types of fields in which one supplies that labor. The adjustments can take time and can work slowly, but eventually, you end up with Greece.

As I said, politicians always like to ignore the incentive effects of tax rates. They assume, if they collected $10,000 from a person who made $100,000 this year with a tax rate of 10%, then they will be able to collect $12,000 that person with a tax rate of 12%.

A moment's reflection shows this is absurd. First, note that with a tax rate of τ=0, the government's tax revenue will obviously be zero.

Now, suppose, for a moment, that the tax rate were raised to 100%, i.e. τ=1. How much revenue would the government be able collect? If you answered zero, zilch, you are an intelligent human being. If you did not, you might be a politician.

Why zero, zilch? Well, because, an individual bears costs to earn income: They give up time they could be spending doing things they like to do something they do not like as much (otherwise, they would not have to be paid a positive wage). With a tax rate of 100%, the reward to giving up the things one likes is zero. Therefore, there is no incentive to give up the things one likes to go to work.

Of course, in reality, individuals would still make income: They would just work very hard to make sure the revenuers do not find out about the income. In any case, the result is the same: No tax revenue with a tax rate of 100%.

OK, but clearly, the government is able to collect some tax revenue with an income tax rate τ that is greater than 0% and less than 100% even though tax revenue is zero at either end.

That means starting from zero, there must be range of tax rates, τ, where total tax revenue increases as τ increases and, at some τ between 0% and 100%, tax revenue must start falling as τ keeps increasing and eventually reaches 100%.

Congratulations, you have just re-discovered the Laffer curve.

Why are macro guys so grumpy?

It is undoubtedly the case that macroeconomists are grumpier than other economists. In the 60 years of macro's existence this fact has been repeatedly rediscovered and no evidence to the contrary has been found. Ingenious explanations, such as the intertemporal theory of grumpiness and endogenous grumpiness theory, have been used to explain the persistence of macro grumpiness, but with little success … read more

Time to learn some Economics

If I had to bet, I would claim that the concept of a public good is the most misunderstood concept in Economics.

A private good, in Economics, is one that is both excludable and rival. A good is excludable when only those who pay for it can consume it. A good is rival when one person consuming it prevents another from enjoying the same unit of that good.

For example, an apple, is a private good. It is definitely rival because, well, once I have eaten an apple, you cannot consume the same apple. It is also excludable in our current economic system, because if I pay for an apple, and you try to consume my apple without my permission, I can call the cops on you.

On the other hand, over the air radio broadcasts are public goods, whether they are produced by the NPR or by WABC. Radio broadcasts are not rival because the fact that I am listening to Mark Simone does not prevent anyone else from listening to him at the same time. They are not excludable because anyone with a radio can receive them.

Some goods are non-rival but excludable. For example, pay-per-view movies can only be seen by those who pay for them, but me watching The Departed does not prevent you from watching it at the same time.

Some goods are non-excludable, but rival. Anyone can drive on a public street, but during rush hour, adding an additional vehicle reduces the "enjoyment" of everyone else of driving on that road.

It is not only non-economists who are confused by the concept of public goods. The most common mistake is to assume that public goods must be provided by the government or that a public good is synonymous with a government produced good.

A moment's reflection shows that those are silly notions: WABC is a private entity that has no problem producing public goods and First Class mail is a private good which is produced by a government entity.

So, after that long introduction, consider what President Obama said in his remarks to the Business Council:

Government will seldom be the source of new and innovative products, but it can invest in basic research that isn't necessarily profitable in the near term, but that holds vast potential in the long term. Government can build the infrastructure that allows products and services to reach customers. Government can create incentives — in clean energy, for example — that promote innovation and exports. These things are public goods that no business, no individual is going to provide on their own, but that create a favorable environment in which everybody — companies across the country — can open and expand.

Basic research is not a public good: Regardless of my misgivings regarding the competency of the U.S. Patent Office, the patent system is designed to make the fruits of innovation efforts excludable (even though knowledge is non-rival).

Highways, railways and airports are not public goods: Even though only specific highways are excludable (by virtue of a toll system) at the moment, the traffic levels on a lot of them make them rival. Rail travel, subways are both excludable and near rival. Use of airport gates or landing slots are both excludable and rival.

The President continued:

And that's why as part of this new foundation that we seek to build, we're investing in education, because our economic success depends on making sure people have the skills to match their talents.

I touched on the education issue in What good your edumacation to me?: Spots at schools are definitely not public goods. First of all, it is trivial to exclude non-paying students and the quality of instruction one gets can quickly become rival as enrollments increase. After all, if the teacher is answering your questions, she cannot at the same time answer Michelle's questions.

Further, the president's statement reveals an unstated assumption: Somehow, the government can do a better job at ensuring that people have the skills to match their talents.

I am not exactly sure what that means, but I am hard pressed to be able to think of a situation where a third party would have better information regarding an individual's skills, talents, desires and goals than the individual herself. True, owing to lack of experience, an individual may not be able to fully understand her potential, but that understanding cannot come without the requisite experience.

What better way is there to ensure that individuals pursue the best options available to them other than giving them the resources with which to pursue what they deem best for them?

See also Why support Pell Grants and not school vouchers?