The Skeptical Optimist

Macbook Air: Update on what's wrong

[Follow-up to last week's post.]

Here's more detail on why the Macbook Air I used to own wouldn't connect to the 802.1x network in question...

FQ.08.06: Favorite Quote for This Week

Two concise definitions:

• "solar system" -  The sun, plus Jupiter, plus miscellaneous debris.

• "lawyer" -  The larval form of a politician.

[Sorry, the sources have faded from memory.]

Macbook Air: Don't get one yet . . .

...not if you have to connect to a wireless network using 802.1x, anyway.  I bought a Macbook Air three days ago.  Today I returned it and got my money back; I'd rather have my money in the bank collecting interest than have my Macbook Air on the desk collecting dust. 

An S.O. Minifesto

Here's a summary of where I'm coming from, in general, in this blog.  I decided to lift most of this from a private exchange I'm having with one of our commenters; the time I have for composing articles has been significantly compressed, so I'm borrowing from my entries in that exchange. 

[To paraphrase Descartes: The following few-hundred-word summary is longer than I'd prefer.  I apologize for that, but I just didn't have enough time to make it shorter.]

Minifesto
Regarding my stance, I will try to be as clear and concise as I can.  My judgment about economics (macro, anyway) has gone through a four-decade evolutionary process.  Ideas I've discarded (after holding each of them at one time or another) include: doomsday is just around the corner; the budget should be balanced; deficits cause higher interest rates; money borrowed today by the feds must eventually be paid back without rolling the debt over; Samuelson's mathematizing of the field of economics was a good thing; utility, and its first derivative, marginal utility, improved our ability to quantify economic decision-making; and, most importantly, growth just happens (i.e., it's exogenous).

Ideas I've come to accept (some very recently), until better explanations come along, include: The decision process in the economy does not lend itself to present mathematics, because the economy is an evolutionary process driven by individual-level behaviors -- i.e., "the wisdom of crowds."  Those individual-level behaviors result from a mix of motives: sometimes they are driven by strict self-interest; but sometimes a desire for cooperation overshadows strict self interest; and sometimes a desire for punishment is top priority.  For the individual, the "economy" is more frequently a prisoner's-dilemma situation than an isolated, self-interest situation.  Consequently, the economy is best described as a complex-adaptive system, and the most accurate and concise description I've found of how people behave is this: People respond to incentives.  The best description of this, so far, is Eric Beinhocker's recent book, The Origin of Wealth.  Because of reading that book twice, I belatedly discovered that at least two economists had tried to tell the world about the evolutionary nature of economies; they tried to tell us sixty years ago, but hardly anyone listened.  I am now reviewing their work, and for the most part (with the possible exception of monetary economics) they nailed it.  "They" were nicknamed "the Austrians" (a pejorative, to keep them distinct from what was then "mainstream" thought).  They were Hayek and Mises.  They tried to tell us that economies were evolutionary processes; sixty years later, with the development of the theories of chaos, complexity, cooperation, and adaptive systems, we are now beginning to understand what they were saying.  Adaptation and natural selection are alive and well. 

Specifically, I'm not as interested as others are in the differential equations that "reveal" macro-level marginal utility, marginal cost, marginal benefit.  I think evolution (adaptation and selection) is better able to explain economic history.  I think equilibrium can almost never be expected because of the nature of evolutionary processes.

Regarding the national debt, my corporate finance career makes me favor the "net interest / tax receipts" ratio as more to the point than debt/GDP.  Successful corporations roll their debt over and over as they grow, and "times interest earned" is one key indicator of creditworthiness.  When analyzing the federal government's creditworthiness, net interest / tax receipts is the inverse of times interest earned; it takes into account interest rates as well as debt and income levels, and that's why I think it's a better technical indicator.  However, debt/GDP is easier to communicate (it's a more-established meme), and its numerator and denominator are reasonable proxies for their counterparts in the other ratio, so I use debt/GDP more frequently when writing.  In any case, just as corporations can stay healthy indefinitely by achieving reasonably constant times-interest-earned ratios as they grow their debt, their assets, and their incomes, so can the federal government.

Lastly: In a fiat money system, just as in any other monetary system, it is possible for a government to get itself into creditworthiness trouble by being fiscally irresponsible.  However, it is NOT possible for the government to "run out of money."  The irresponsibility shows up as unanticipated inflation.  If inflation is held to the 2-3% level, it is impossible for the government to "go bankrupt"; hyperinflation, and nothing else, is the closest a government can come to "bankruptcy" under a fiat money system.  Therefore, although it is politically effective to tout the debt level, the interest on the debt, and the deficit level, it is nevertheless uninformative at best, if not outright disingenuous.  The most concise paper on this is titled Soft Currency Economics at this link -- and it's accuracy has been verified in writing by a past vice chairman of the Fed.  Until it is refuted, that will remain the basis for my judgments regarding monetary economics.

That's my current stance -- subject to change, of course, if better explanations come along.

==========
End note regarding Karl Marx:

If the following is ambiguous in any way, please let me know, and I'll attempt to clarify.  This is important.

I have close to no use at all for Karl Marx's bankrupt, win/lose, cynical misinterpretation of the nature of the free-market capitalist economy.  It baffles me that a nontrivial portion of people still cling to those depressingly false ideas, and still use them, with modernized twists of phrase, to gain political advantage -- in spite of all we've learned to the contrary in the last 150 years.   

Jobs Created, 12 months thru Jan 2008

The economy created 800,000 new, mostly better-paying jobs in the 12 months ending January 2008.  The unemployment rate was 4.9% (down from 5.0% last month), and the labor force participation rate ticked up a notch to 66.1%. 

Not the same robust economy we've experienced, but certainly not doomsday either. 

For most people, it's good news that the job mix is continuing to shift toward higher-paying jobs.  The 655,000 jobs that disappeared averaged $18.99/hr; but 992,000 (of the 1,450,000) new jobs created averaged $19.57/hr.  [Strangely, it's not good news to all people, however.] 

Here's the summary chart; click to enlarge:

And here's the detailed chart; note the big hit in construction jobs.  Click to enlarge:

Lastly, here's the trend chart, showing the slowdown in job creation rate, and the almost indiscernible uptick in the labor force participation rate.  Click to enlarge.

============
End note -- Excel bug follow-up:
No updates from Microsoft to fix Excel 2008 for Mac yet.  Got an old XP machine out of the closet to get Excel up and running again; keeping XP isolated from the internet, and swapping the resulting files to Mac using a thumb drive.  Quickest fix available, but what a pain. 

FQ.08.05: Favorite Quote for This Week

There is no denying capitalism’s record. Market economies have succeeded over the centuries by thoroughly weeding out the inefficient and poorly equipped, and by granting rewards, to those who anticipate consumer demand and meet it with the most efficient use of labor and capital resources. Newer technologies increasingly drive this unforgiving capitalist process on a global scale. To the extent that governments "protect" portions of their populations from what they perceive as harsh competitive pressures, they achieve a lower overall material standard of living for their people.
—Alan Greenspan, The Age of Turbulence, pp. 268-9.

Bad bug in Microsoft Excel: I'm dead in the water

Sorry, I have to postpone the usual GDP and Employment analyses and charts.  I am dead in the water, because of a formatting bug in MS Office Excel 2008 for Mac. 

Apparently, Microsoft did not test their new 2008 software on Excel models saved in the Excel 2004 format prior to releasing their new version.  I am now blind in all those analytical models until Microsoft fixes their goof and issues a software update. 

Some advice: If you use MS Excel for Mac, do not purchase or install Excel 2008 until this crippling bug is fixed.