StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

The Andrew Samwick Archives

Posted by Andrew Samwick

When it announced its new $15 fee for the first checked bag, I declared American Airlines to be a "Microeconomics Free Zone."  Its transgression, I thought, was not considering the external, but in my view largely non-pecuniary, costs of doing this. Joe Brancatelli's indispensable "Seat 2B" column at does me one better.  He runs the numbers and wonders if American will net any revenue from this at all. 

Posted by Andrew Samwick

Senator Obama's announcement last week that Jason Furman would join his economic team as economic policy director set off the unfortunate spate of criticism from the Left that he's not Left enough on labor issues.  I figured the last thing Jason needed was a defense from an occasional right-of-center policy opponent.  (The most thoughtful one is here, with links to others from those with left-of-center credentials.)

The most hysterical commentary I've read comes, surprise, from Naomi Klein in The Nation, where Furman's appointment is taken as further evidence that Obama is "thoroughly embedded in the mind-set known as the Chicago School."

Tim Russert, RIP

14 Jun 2008
Posted by Andrew Samwick

A colleague of mine put it best when he said, "Now how will we ever get either of these candidates to answer a question?"  The only time I met Tim Russert was last September when he was the moderator of the Democratic Presidential candidates debate.  This debate was one of the first to occur after the first YouTube debate.  Here's what I posted:

My biggest lesson of the day was that Tim Russert is an extremely talented moderator. With him at the podium, there was no need for gimmicks.

So this is how I'll remember him:

Posted by Andrew Samwick

I have been working my way through a fascinating book by Professor Geoffrey Hodgson, Economics in the Shadows of Darwin and Marx.  They were the two great theorists of structural change in complex systems in the nineteenth century, and I've been looking for new ideas on how their theories have been applied and adapted in modern economic scholarship.  This sentence, in a chapter comparing their worldviews, was too interesting and amusing to keep to myself:

Marx and Engels characterized Darwin's doctrine as an inappropriate extension of the norms of capitalist competition to the natural world.


Posted by Andrew Samwick

When I speak to non-economists about economics, I often tell them that norms are often more powerful than incentives.  David Brooks has a must-read column in The New York Times today that strikes this note very well with regard to saving:

Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.

Do the data back him up? Let's look at the data on the personal saving rate out of disposable income:

Posted by Andrew Samwick

I was doing my usual reading of blogs this morning and came across, "Two Thank Yous for Hillary" at Angry Bear, in which Now President Kim Gandy's column is quoted:

Hillary, you have made a mark on history for eternity, giving little girls and little boys the full knowledge that women can compete, take risks, take the heat, make hard decisions, and be strong leaders.

I thank Kim Gandy for writing something so blindingly naive that it reveals what is so insufferable about the commentary on Senator Clinton's run for the Presidency by some of her supporters.  I don't dispute that Senator Clinton has competed, taken risks, and taken the heat.  It's not clear to me that she's made hard decisions and been a strong leader on issues of consequence to the point where she would be the one I'd hold up as exemplary to little boys and little girls.

But that's not what's blindingly naive about what Gandy has written.

Posted by Andrew Samwick

Stan, so sorry for your travel woes.  It is tempting to describe your flight delays as a tragedy of the commons, but Austan Goolsbee set the record straight on this one three years ago with this great column, "Tragedy of the Airport," in Slate.  Here is the key excerpt:

At first glance, this seems crazy. The common explanation given for flight delays is that too many people are flying: The more air traffic, the more delays. That's what most economists say, too. This view of airport congestion makes it seem just like highway congestion. Each time an airline schedules a flight, it doesn't take into account the backups it causes by crowding the airspace. The dynamic generates a tragedy of the commons, in which each of the companies vying for runway slots has an incentive to overschedule.

Posted by Andrew Samwick

The May employment report is another disappointment.  Nonfarm employment fell another 49,000, marking a 324,000 decline (0.23%) since the peak in December.  That headline will likely be overshadowed by the large increase in the unemployment rate, from 5.0% in April to 5.5% in May.  Note that these two statistics come from different surveys--nonfarm employement is from a survey of establishments and the unemployment rate is from a survey of households.

What's behind the unemployment rate increase?  The unemployment rate is the ratio of those unemployed to the civilian labor force (the sum of those employed plus those unemployed).  Recall that you can be out of work but not counted as unemployed--to be unemployed, you have to be looking for work.  When interpreting the numbers, we also have to be careful to acknowledge that these are net flows from the survey.  For example, in May, according to the household survey:

Posted by Andrew Samwick

Paul Krugman begins his column today, "Bits, Bands and Books," with an interesting question:

Do you remember what it was like back in the old days when we had a New Economy? In the 1990s, jobs were abundant, oil was cheap and information technology was about to change everything.

Sure I remember the 1990s.  In addition to the things listed above, we had Paul Krugman writing insightful and witty books and articles about economics.  I don't know if it will last, but we have that Paul Krugman back today.  I particularly liked these paragraphs near the end:

Indeed, if e-books become the norm, the publishing industry as we know it may wither away. Books may end up serving mainly as promotional material for authors’ other activities, such as live readings with paid admission. Well, if it was good enough for Charles Dickens, I guess it’s good enough for me.

Posted by Andrew Samwick

As I've noted from time to time, I don't consider myself a Democrat, but I wouldn't mind voting for one.  I don't know if I am the swing voter that Senator Obama needs most in the general election.  But I can say that he does himself no favors in my estimation by appeasing Senator Clinton after her performance last evening.  Some reactions from those well to the Left of me:

Dana Milbank: "In Defeat, Clinton Gracioiusly Pretends to Win"

Ezra Klein: "She Doesn't Accept"

Matthew Yglesias: "Clintons Speech"

As often happens, I think Brendan Nyhan sums it up pretty well in "Hillary: For Hillary:"

Samwick Media Watch

02 Jun 2008
Posted by Andrew Samwick

I was on NPR's Marketplace this evening with a commentary titled, "We need a carbon tax on gasoline."  Here's the teaser:

Can you put a price on pollution? That's the question Congress takes up this week as they begin debate on the Climate Security Act of 2008. The legislation would enact a cap-and-trade system, whereby large polluters would buy and sell emission permits.

Commentator and economist Andrew Samwick has taken a look at his carbon output and his family's. He says if we're serious about cleaning up our act, we should consider a straight tax on carbon.

In a nutshell, while it is true that the largest part of our emissions come from automobiles, plenty still come from heating our homes and traveling by air.  The more emission reduction we can get at the thermostat and in the air, the less we need to squeeze out of automobiles.


Posted by Andrew Samwick

Quite a bit of the housing stock in the urban areas of New England consists of triple-decker, multifamily buildings.  Mark Jewell of the Assoicated Press writes that the slump in the housing market is taking its toll there, as well:

LOWELL, Mass.—When Osman and Rose Bangura bought a two-family home three years ago at the peak of a housing boom, they saw a good investment in the $400,000 colonial, just a quarter-mile from the Merrimack River and the renovated 19th century textile mills now helping to fuel Lowell's rebirth.

For a couple years, they lived upstairs while rent from a downstairs tenant helped cut hundreds of dollars off the monthly payment they would have faced if they'd bought a single-family home.

But, like many owners of southern New England's nearly 320,000 two- and three-family homes, the Banguras ran into trouble. Their monthly payment on a pair of adjustable rate mortgages jumped from about $2,900 last summer to nearly $4,200 -- out of reach for a couple with $50,000 in annual income, supplemented by $1,150 in monthly rent from their tenant, a single mother of two children.

Similar stories are playing out across the densely packed cities and pricey housing markets of southern New England, where generations have found older two- and three-family properties more affordable routes to home ownership than single-families.

Preliminary Q1 GDP

29 May 2008
Posted by Andrew Samwick

The real-time assessment of whether we are in a recession got nudged a bit more toward "negative" today as the BEA released the preliminary GDP figures. Real GDP is estimated to have grown at a 0.9% annual rate, up from the advance estimate of 0.6% released last month. The explanation of the revisions:

The upward revision to the percent change in real GDP primarily reflected a downward revision to imports and upward revisions to nonresidential structures and to PCE for nondurable goods that were partly offset by downward revisions to private inventory investment, to exports, and to PCE for services.


Posted by Andrew Samwick

Amartya Sen provides a sobering account of the distributional consequences of the rise in food prices in an op-ed in today's New York Times, "The Rich Get Hungrier."  He describes one of the underlying causes as unequal income growth:

It is a tale of two peoples. In one version of the story, a country with a lot of poor people suddenly experiences fast economic expansion, but only half of the people share in the new prosperity. The favored ones spend a lot of their new income on food, and unless supply expands very quickly, prices shoot up. The rest of the poor now face higher food prices but no greater income, and begin to starve. Tragedies like this happen repeatedly in the world.

Posted by Andrew Samwick

Anne Applebaum describes the generation of students coming of age these days as "The Busiest Generation" in her op-ed in The Washington Post today.  Since one of the best parts of my job is that I get to teach and mentor members of this generation at Dartmouth, I figured I would chime in with a few observations.

First, the op-ed makes note of how competitive it is to gain acceptance to top universities.  But the set of institutions with extremely low admit rates is not particularly large.  (See this post from Vox Baby last year.)  There are plenty of opportunities to attend fine colleges and universities without forsaking the freedom of childhood.  And many of our brightest leaders come from these institutions.

Second, I have nothing against a competitive process, but I do regret that the competition takes place in the form of "more is better."  More activities, more time spent on those activities, more lines on a resume.  I wish the competition took place along the dimension of "better is better."  Students should spend their time finding their true intellectual passions, which necessarily involves trying many different activities.  But it also involves prioritizing them, committing to just a few of them, and letting the rest go.

Posted by Andrew Samwick

The proposal from American Airlines to charge $15 for the first checked piece of luggage is so bad that even The New York Times story was able to list the key problems.  Among them:

It is also likely to make the fight for already-tight space on planes more fierce, as passengers try to stuff more carry-on luggage into overhead bins.

American officials said the company had not devised a way to collect a $15 fee at boarding from passengers whose bags are deemed too big to carry on and must be stowed.

Posted by Andrew Samwick

Congressman Raul Grijalva (D-AZ) introduced H.R. 6116, the Saving Family Homes Act of 2008 today: 

The Act would grant homeowners whose mortgages have been foreclosed the right to petition a judge to allow them to remain in the home as renters, and pay a fair market rent. The rent would be set by a court-appointed appraiser and adjusted annually for inflation.

The Saving Family Homes Act is one of the few proposed remedies for the current mortgage crisis which requires no expenditure of federal funds or additional bureaucracy, while giving immediate relief to millions of families facing foreclosure and preventing home vacancies that harm neighborhoods.

To prevent abuse by speculators, the Act limits eligibility to mortgages on single-family, principal residences, occupied for at least 2 years, which sold for less than the median home value in the metropolitan statistical area in which the home resides or the median value in the state if such information is not available.  

Posted by Andrew Samwick

Okay, Stan, defender of media, explain to me how the Wall Street Journal can aspire to be a source of news if it permits this op-ed by David Ranson to appear in its pages.  It says:

Will increasing tax rates on the rich increase revenues, as Barack Obama hopes, or hold back the economy, as John McCain fears? Or both?

Mr. Hauser uncovered the means to answer these questions definitively. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated.


19 May 2008
Posted by Andrew Samwick

Stan picks up on Brad DeLong's posting of Ezra Klein's thoughtful op-ed in the Los Angeles Times to address Brad's oft-asked question, "Why Oh Why Can't We Have a Better Press Corps?"  To understand Brad's exasperation, I think we should consider three progressively more challenging meanings of the word "better" in these posts: competent, professional, and inspirational.

We Earth Neurons

17 May 2008
Posted by Andrew Samwick

Last week, renowned philosopher Dan Dennett visited Dartmouth as part of the Neukom Institute's symposium on "The Human Algorithm." He gave a thought-provoking keynote address affirming the brain as a type of computer (with a competitive, not cooperative, design) and the mind as software. I've been reading through some of his other writings and thought this one, with the same title as the post, would be interesting to share. Here's my favorite part:

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