"Over the years I’ve heard many Americans fret about buying goods that are 'Made in China,' since they want their cash to go to American companies instead of Chinese ones. A new study, however, finds that a majority of the price consumers pay for goods labeled 'Made in China' actually does go to American businesses, not Chinese ones.

The study, from the Federal Reserve Bank of San Fransisco, estimates that of every dollar consumers spend on a product labeled “Made in China,” about 45 cents goes to China for the cost of the original import.

On the other hand, about 55 cents of that dollar pays for services produced in the United States, such as the transportation for the product, rent for the store where the product is sold, the salaries of the salespeople at the store, the cost of marketing the product, the profits for shareholders of the retailer selling the product and so on."


So, it seems as if Catherine is implying that America profits from Chinese imports if a 50% threshold is surpassed.  Right?

As in:  If greater than 50% of the total purchase price of the imported good is paid to Americans, then America benefits more than China.

No!  No no no!

I can't believe what I'm reading!

So, Catherine believes it's beneficial for America when Americans pay China 45% of the total price, because Americans pay more than that 45% to America?!

This makes no sense at all.

Since when is it beneficial to pay a Chinese manufacturer any money at all when there's an alternative to pay all of the money to an American manufacturer of the goods?

And how does America profit at all by transferring American wealth (45% of the good's market price) to another country?

The other 55% does not offset the 45% that was transferred from America to China!  If that 55% was money being transferred from China to America,thenAmerica would benefit.  But that's not the case.

The 55% paid to Americans is simply a transfer of wealth from one American to another!

America's overall wealth doesn't change at all!


Am I Misinterpreting Catherine's Claims?

Is it possible that Catherine isn't actually claiming that America overall profits, but is instead claiming that only some Americans profit? (After all, the title of her article refers to "Americans", and that doesn't necessarily refer to all Americans).

No, I don't think it's plausible that Catherine wasn't referring to America as a whole.

When she writes about Americans fretting about goods made in China, and then writes that:

"a majority of the price consumers pay for goods labeled 'Made in China' actually does go to American businesses, not Chinese ones..."

I think it's clear that she's claiming that America overall benefits from goods made in China.

Given that context, how could she not be referring to America overall?


Conclusion

Folks, this is the sad state of America today:  Even The NY Times' economic reporter doesn't understand how a country profits from exports and imports!

Now, I certainly believe that many intelligent people would make the same error Catherine does.  My points may seem like common sense upon reflection, that's exactly the point:  They are obvious upon reflection.  Many, if not most intelligent people don't fully understand the economics of import/export profit!

But the fact remains the same.  The NY Times economics reporter Catherine Rampell does not understand the economics of import/export profit.  And Catherine is a Princeton graduate who received the "Weidenbaum Center Award for Evidence-Based Journalism"!

Well, at least she's not alone.  Even the president of the USA doesn't understand how growth occurs.

It's a sad reflection on the state of America today.

Something really needs to be done to get America back in shape again!

Someone needs to hire me, to get America back on track.  Someone needs to hire me, to spread the word.  Someone needs to start directing people to read my articles!

He writes: 

"With the United States and European economies having slowed markedly according to the latest data, and with global growth continuing to disappoint, a reasonable question increasingly arises: Are we in another Great Depression?

The easy answer is 'no' — the main features of the Great Depression have not yet manifested themselves and still seem unlikely. But it is increasingly likely that we will find ourselves in the midst of something nearly as traumatic, a long slump of the kind seen with some regularity in the 19th century, particularly if presidential election-year politics continue to head in a dangerous direction.

The Great Depression had three main characteristics, seen in the United States and most other countries that were severely affected. None of these have been part of our collective experience since 2007."

The following paragraph is the source of his flawed logic:

"First, output dropped sharply after 1929, by over 25 percent in real terms in the United States (using the Bureau of Economic Analysis data, from its Web site, for real gross domestic product, using chained 1937 dollars). In contrast, the United States had a relatively small decline in G.D.P. after the latest boom peaked. According to the bureau’s most recent online data, G.D.P. peaked in the second quarter of 2008 at $14.4155 trillion and bottomed out in the second quarter of 2009 at $13.8541 trillion, a decline of about 4 percent."


So, he's claiming the following:

Although it's increasingly likely the US will experience a long slump "nearly as traumatic" as the Great Depression, it's "unlikely" the US is currently experiencing (or will experience) another Great Depression, because the main features of the Great Depression aren't evident.

In support of this, he cites the drop in GDP:

After adjusting for inflation, GDP dropped by over 25% after 1929.  By comparison, GDP dropped by about only 4% between the 2008 GDP peak and the 2009 GDP bottom.

There are serious flaws with this logic!


1) First, he isn't clear what period of time the 25%+ drop refers to.

I looked at the tables he refers to.  Among the years that succeeded 1929, 1933 had the lowest GDP.  There was a 26.7% drop in GDP between 1929 and 1933.

So what Simon's done is this:  He's compared a four year period (1929 to 1933) to a one year period (Q2 2008 to Q2 2009)!

I'm not sure that's an appropriate comparison.  I do get his point:  That both comparison periods relate the top point to the bottom point.  But the two periods of time cover very different lengths of time.

If you were to compare equal lengths of time and look at the period Q2 2008 to Q2 2012, who's to say that the GDP of the USA won't fall further by Q2 2012?  (Although I don't expect it the fall to approach 26.7%...but that leads to a second criticism I will make later).

Also, many aspects of government regulation (and the economy in general!) vastly differ between 1933 and 2008, further limiting the usefulness of the comparison.

In addition, you could reverse things: 

Since he examines a one year period after the 2008 peak, why not also examine a one year period after the 1929 peak?

If you do that, you see that real GDP dropped only 8.6% from 1929 to 1930 ($87.3 to $79.8 billion). 

That 8.6% drop (1929 to 1930) is much closer to the 4% drop (2008 to 2009) than is the 26.7% drop (1929 to 1933) he references!

Now, I'm not claiming that one should necessarily compare time frames of equal length.

I'm claiming that one should not necessarily compare the GDP top to bottom time period irregardless of the length of that time frame!

Simon doesn't even mention that he compares two very different time frames!


2) I've saved the best for last.

The most serious flaw with his GDP comparison is this:  It's like comparing apples and oranges!

It is absolutely ridiculous to be looking at the final GDP figures because GDP is not at all reflective of the organic economic ability of the country!

Why is GDP not reflective of the country's economic ability?  Because GDP includes the effect of borrowed (and printed) money!

Without controlling for those factors, it's absolutely absurd for the former chief economist of the IMF to be comparing 1933's GDP to 2009's GDP!

My previous article explains:

"There's an organic level of goods produced by a country.  Meaning, if the government didn't take steps to borrow money through a stimulus package, the country would create a certain amount of goods and services.

During the recession, the organic amount of goods and services produced by the USA plummeted by several tens' of percentage value (depending on what your reference period is).

Now, imagine that the US government can borrow money through a stimulus package, as Obama did.  Imagine that the government takes that money, and spends that money directly, in many ways.  For example, look at 'shovel-ready' projects: The money directly hires construction workers, who directly produce goods, who (by purchasing materials for concrete) indirectly create concrete, and raise the GDP.

The increase in the GDP was completely artificial.

It had nothing to do with the production ability of the country itself, and everything to do with borrowed money.  Because that money is not free, and needs to be repaid, its effect on GDP means nothing.

Imagine this scenario: You are self employed in sales.  You are not selling enough to cover your monthly expenses.  Eventually, you deplete your entire savings.

Instead of going bankrupt, you borrow money on your credit card.  As a result, you are able to continue making sales, but you are still unprofitable, still selling less than is required to cover your overhead.

Note, however, that the sales you are making, regardless of how unprofitable they are, still count as sales!  They still show up in your own GDP figures!

Therefore, your GDP is higher than it otherwise would be, but it is all artificial, because the sales were completely a result of borrowed money that needs to be paid back!"

So, my point is this:

If you exclude money that the government pumped into the economy during 1929 to 1933, and if you also exclude money the government pumped into the economy during 2008 to 2009, it's very plausible that there was a comparable drop in GDP between the two periods.

But Simon doesn't do this!

He refers to the small 4% drop in GDP between 2008 and 2009, yet mentions nothing about the fact that a further GDP drop was prevented by borrowing money heavily!


How Would Simon Respond?

I suspect Simon might respond by stating something like the following:

"Why does it matter whether government borrowing prevented GDP from dropping more than 4%? After all, the end result is that it dropped by only 4%, meaning that people's wealth hasn't dropped much.  That is entirely consistent with my argument that we haven't entered a situation similar to the Great Depression.

By contrast, after 1929's Great Depression people's wealth did drop quite a bit, and hence their situation is quite different than the one we find ourselves in now."

Here's how I would respond to that:

Although people's wealth hasn't yet directly dropped much, that came at a price:  Government debt increased massively.  And that has consequences, because it's the people that have to pay that debt.

Remember, Johnson didn't just say that current economic conditions don't resemble the Great Depression, he said it seems "unlikely" that future economic conditions will resemble the Great Depression.

But the 2008-2009 economy, sans government borrowing, likely did resemble the Great Depression.  Borrowing money just kicked the can down the road.  What do you think is going to happen when that money is paid back?  Huge spending cuts and tax increases will be necessary just to achieve a small budget surplus to begin paying back the debt.  As a result, how could GDP not then plunge?

Look at what's been occurring the past few days...the massive recession related borrowing itself contributed to S&P's downgrade of the US credit rating, sparking a huge stock market loss of wealth during the past two weeks.

There is no indication that the government is going to borrow yet again to provide for yet another stimulus plan. 


Conclusion

How did Simon Johnson become chief economist of the IMF?

I don't know about you, but I find it frightening to think that he may have had a huge role in helping shape international policy!

Today, CNN reported:

"Billionaire investor Warren Buffett, saying he doesn't want to be 'coddled' by Congress, says that wealthier Americans should pay higher taxes, and that higher taxes do not dampen job growth.

Buffett, chief executive of Berkshire Hathaway (BRKA, Fortune 500), wrote in an op-ed piece published Monday in The New York Times that taxes should be raised on Americans who make at least $1 million per year."

and  

"He said that 40 million jobs were created between 1980 and 2000, when the tax rate for the rich was higher than it is now. 'You know what's happened since then: lower tax rates and far lower job creation,' he wrote."


Before I disclose my "A-Ha!" moment, let me provide some context for you regarding my general views about taxation.


My Views On Taxation

Here's what I think:

On the one hand, everything else being equal, knowing nothing about the economy or any other factors, it's better to let consumers handle their own money (tax cuts) rather then let the government handle the individuals' money (tax increases).

I believe this to be indisputable, because individuals have more of an incentive to spend their own money well than the government has to spend the individuals' money well. (If we ever reach a point where the government is run by people that actually want to advance the overall interests of the country, perhaps this will change).

But when one has information about other factors, it's possible that tax cuts may not be the optimal solution:


1) There must also be an optimal level of taxation itself!

After all, if lower taxes are always better, then why tax people at all?  Because taxes are required in order to provide services for society!

Therefore, there must be an optimal level of taxation. Right?

So, just because lower taxes are generally the better policy, who's to say that the current level of American taxation isn't already lower than the optimal level?

If current taxation rates are already lower than the optimal level of taxation, that would mean that taxes should be raised, not lowered!


2) The American government's debt is about fourteen trillion.

Without debating whether a country should be borrowing money, one might argue that taxes should be raised for one simple reason:

The country has bought items with borrowed money.  The country hasn't actually paid for the items! 

Therefore, one might argue that taxes should be raised in order to begin paying for the unpaid goods America has purchased!

However, the answer isn't as simple as that.

Borrowing money that you don't have can be a wise move, if you invest that money at a rate of return that's greater than the interest rate you pay to borrow it!

Unfortunately, America actually invests the borrowed money at a negative interest rate!

This suggests that America should either aim to reduce its borrowing habits drastically or should begin investing the borrowings at a positive interest rate!


3)  There are other factors to consider, but I don't need to list them all in order to make my point.  I just wanted to provide you with an overview of a couple of the more important factors, prior to outlining my "A-Ha!" moment.


Which Brings Me To My "A-Ha!" Moment

After reading the following comment by Warren Buffet, I had my "A-Ha!" moment:

"He said that 40 million jobs were created between 1980 and 2000, when the tax rate for the rich was higher than it is now. 'You know what's happened since then: lower tax rates and far lower job creation,' he wrote."


Here's my revelation regarding the 1980 to 2000 job boom (during a period the wealthy were taxed at higher rates):

Those higher tax rates resulted in greater government revenue, right? 

Is it possible that the greater revenue made its way to people who happened to use that revenue in a particularly productive way, resulting in the job boom?

Here's my theory:


We know there are people who encounter financial difficulty, people who are stressed and have little free time to pursue hobbies and other projects.  These people often require a second job in order to make ends meet.

It's possible that greater government spending (from the higher tax rates) is reaching these people, resulting in them becoming more financially stable.

In turn, these people become less stressed and no longer require a second job.

Having more free time (along with a clearer, less stressed mind) these people become more much more productive members of society, as they are now able to choose how to spend their time that was previously spent working a second job.

To choose to use their free time in a manner that more closely matches their aptitudes.


How could such a scenario not result in a net benefit to society?  Wouldn't you expect that scenario to result in more small businesses being created?  Wouldn't you expect to see more products and services being invented?

Could it be that these threshold citizens were assisted during the high tax period of 1980 to 2000 much better than they were assisted during the lower tax period of 2001 to present?

This is a perfect example demonstrating that there is an optimal level of taxation.


But Was There Really Greater Government Spending During 1980 to 2000?

But when you compare government spending during the two periods (1980 to 2000 versus 2001 to present), the government might not have actually spent more money during 1980 to 2000!  Here's why:

Although the wealthy were taxed at higher rates from 1980 to 2000, did that extra revenue actually cause the government to spend more?

After all, the government perennially receives less revenue than is required to pay for its expenses.  As a result, the government simply borrows money to fill the gap. 

The government prepares a spending budget and borrows the money required to pay for it.

Who's to say that the extra revenue during 1980 to 2000 resulted in the government directing more money to those threshold people?


Conclusion

Regardless of how the government spent its money, I've highlighted an area of research that I'd like to see more people focus on:

Study threshhold citizens.  Citizens whose productivity rises at an extraordinary rate once the government assists them financially!

For such a young site, it appears that my readership figures are excellent, with my readership showing quite a bit of interest in the articles I write :)

I'd like to take this opportunity to say thanks!

Here are a couple of notes to keep in mind when you review my figures:

1) The hit counter at the very bottom of this page shows a lower figure because the counter wasn't yet installed when the site was first published.

2) I've excluded all visits from my city, so that my own viewing of the site doesn't distort the figures (the exclusion is fair, since only 1.5% of the visits from my city are by someone other than myself).

And with that, here are the figures from July 12 to August 11:

• 7,720 total page views
• 249 page views per day
• 4.57 page views per visit
• 5.004 minutes spent per visit
• 34.35% bounce rate
  

I am extremely happy with these figures :)

At such an early stage, many visitors are coming to my site, and, importantly, once here, they spend quite a bit of time: 5.00 minutes reading 4.57 pages. 

In addition, only 34.35% of visitors leave the site before proceeding to a second page.  This means quite a large percentage of people are viewing 7+ pages, bringing the average to 4.57.

Again, I'm quite happy with these figures, considering that I haven't paid any money for advertising! (I've only placed links on some sites).


How Does My Readership Compare To Established Media?

Well, let's compare my figures to CNN.com's monthly figures, according to Alexa.com.


                                                            Mine      CNN.com

• Months since 1st published   1              187
  
• Page views per visit               4.57          3.27
  
• Minutes spent per visit:         5.00          5.28
  
• Bounce rate:                         34.35%    48.50%
  

This is quite flattering :)

My visitors view 39.8% more pages per visit, and my bounce rate is much better! (Compared to my site, 41.2% more of CNN.com's visitors leave the site before proceeding to a second page).

As for the amount of total time spent per visit, my readers spend nearly as much time as CNN.com's readers (spending 95% as much time as CNN.com's readers).


Going Forward

The daily page view totals trended higher during the month, so it's safe to say that, as of today, the total daily page views are currently higher than the 249 averaged over the past month.

Again, thank you very much to my early readers, I'm glad you got in on the ground floor :) 

I very much enjoy writing articles for you, and I enjoy communicating with my readers :)

And welcome to new readers!

Well, although I couldn't recall Ruben with certainty, his name sounded familiar.  For some reason, I felt that he may have once been a member or leader of a pro-illegal immigrant group.

And readers of mine know that I'm certainly not in favor of promoting illegal immigrants who severely drain America's wealth, much less a legal immigration policy that reduces America's competitiveness!

After reading Ruben's article, I did some research.

Ruben's website displays a quote attributed to Lou Dobbs:

"'A few journalists are part of a network, a closed loop, if you will, of radical left-wing, open borders, amnesty-seeking advocates. One of them is a columnist by the name of Ruben Navarrette, who knows, really, in my opinion, nothing about the issue of illegal immigration or the economics of it and certainly even less about journalism. He attacked me in a column, titled Stirring up Anti-Latino Sentiment.   This is the kind of nonsense you get from these ridiculous, small-time, closed-loop journalists seeking amnesty and open borders.'"

Hmm.  I guess my initial inclination likely is correct.  That Ruben is a radical.

Note:  I purposely stopped myself from writing "left-wing radical".  Why?  As of recently, I'm trying very hard to avoid terms that could further polarize political divisions of my readers; sometimes, however, one can't avoid using the terms "left" and "right".  But I'm going to try.  

I'm serious about trying to convince people to reduce their reliance on ideology, serious about promoting the idea that both sides should instead be focusing on determining which policies are best supported by logic and evidence!  Serious about helping to eliminate the fact that there are even sides at all!  

During the first several months my site was published, I found that many readers made it difficult for me to avoid thinking in terms of left versus right.  Readers often incorrectly assumed that I consider myself conservative (either that or, they were simply being accusatory for the sake of it!), and hence would attack me as such (in the comment section).  

No longer.  Although my responses were understandable given the context, I will now attempt to avoid their goading.  I won't let them frame my commentary.  In order to help achieve that, and to improve society's overall communication, I will minimize the use of "left" versus "right" terminology in my articles :)

OK, back to my article :)

Again, after finding out that Ruben may be a radical, it makes it even more surprising that I agree with his article!  (I think "radical" is a fair term if indeed he promotes illegal immigration, since illegal immigration is illegal activity that robs Americans of jobs, wealth and transfers wealth from America to foreign countries!)

Here's what Ruben wrote...my commentary is intermixed. 


What Ruben Wrote

1) The title of his article:

"Both sides must move past Obama's race."

You can imagine my surprise at reading the title.  After all, don't you normally expect pro-illegal persons to play the race card, not to downplay the race card?

Very interesting.


2) He writes: 

"With Barack Obama, it has always been about race. And it probably always will be.
 
Now, as President Obama stands for re-election -- hampered by a job approval rating of just 41%, according to a recent Gallup Poll -- a few of his supporters are playing the race card. Their strategy seems to be to silence critics by implying that anyone dissatisfied with Obama's performance must be motivated by racism. 

Really? Not this again."

and

"'This total lack of respect is downright contemptible -- if not unpatriotic,' Wickham wrote. 'Such contempt, I'm convinced, is rooted in something other than political differences. Today, you might not see the overt actions of racist Southern governors like Ross Barnett or George Wallace in the 1960s. But the presence of Jim Crow Jr. -- a more subtle form of racism -- is there.'

Miami Herald columnist Leonard Pitts was also blunt in assessing the motives of those who are dissatisfied with the president's performance.

'Obama's denigrators are appalled by the newness of him, the liberality of him, the exoticness of him and, yes, and the blackness of him.'

So, Obama's difficulties, setbacks and shortcomings as president are all because of racism? Someone should check the expiration date on that red herring."


Bravo Ruben!  I'm so glad to see someone speak out about this!

That's what you call logical and balanced writing.

Now, don't get me wrong.  If Obama is being targeted by some due to his race, then it's fair game for discussion (and in fact Ruben's article later provides legitimate examples of people steering the conversation toward race).

But it seems, and it appears Ruben agrees, that race based accusations occur so frequently that they've lost their credibility.  Don't you think?


The Problem With Current Race Related Political Discussions

It's not just that race based accusations have lost their credibility.

Race based discussions aren't balanced. 

Now, do some of Obama's detractors dislike the fact that he appears black (after all, he's as much white as black!), or that a black man is in power?  Of course!  Group based tenses appear all over the world; why would America be any different?

But do some of Obama's supporters support him because he's black?  Do they dislike, or disfavor white candidates because they are white?  Of course!

But you never hear about that, even though it's plausible that racial discrimination plays a much greater role in the voting habits of blacks than it does whites!  After all, 95% of blacks voted for Obama, whereas only 55% of whites voted for McCain (or Ralph Nader or other candidates).

That's 95% black favoritism versus 55% white favoritism.

And yet all you hear from the media are accusations of white favoritism! Rarely black favoritism!  Unreal.

My point is that the narrative in the media is rarely balanced.  It's about as unbalanced as you can get!  Not just because the race card is overplayed when it comes to discussion about white criticism Obama, but because the race card is underplayed when it comes to discussion about black support of Obama.


Are Any Race Related Political Conversations Appropriate?

You know what?  I'm actually not convinced that it's a poor idea to discuss racial voting habits publicly, but I think that the credibility problem would first need to be overcome.  Remember, the big problem is the fact that the current discussion isn't balanced and is overly accusatory.

But I see nothing wrong with public discussion about the obvious, such as:  A black person is more likely to vote for a black person and a white person is more likely to vote for a white person.

Perhaps if such a discussion were to occur, perhaps people who do vote based primarily on race will start to have second thoughts.  And perhaps they will begin to vote based primarily on a candidates policies.


The Candidate I Currently Support

As for my preferences...although I haven't fully examined the all GOP competitors' views, based on my current impression I would support Herman Cain (unless Donald Trump enters the race again.  I can only hope!)

For those of you that incorrectly believe me to identify as deeply conservative, yes, you read that right:  A white "conservative" supports the black candidate more than all others.

Who Would Have Thunk It?

Regarding the above comments, I'm very happy to see someone finally taking a look at the debt issue from a fresh perspective.  I do think that the government should be run more like a company!

And I do think that the US government is in horrible financial shape.  But I don't make that claim simply, or even primarily, because the US government has so much debt.  I make the claim because the US effectively invests the borrowed money at a negative interest rate!


Why Dick Bove's Comparison Is Incorrect

Nevertheless, I think it's say to safe that Dick's comparison is way off.

Here's why.


1) He claims:

"You've got a company which is losing about $1.4 trillion this year..."

He's referring to the budget deficit.

Since he claims that the government will lose about $1.4 trillion this year, he's claiming that the government's revenue less its expenses will come to about -$1.4 trillion this year.

But that's not correct!

The US government will not lose $1.4 trillion this year!

The $1.4 trillion gap between the government's tax revenue and spending expenses is not lost wealth! 

After all, the US borrowed the $1.4 trillion in cash needed to fill that gap, in exchange for owing the amount to its lenders.

So, the $1.4 trillion is simply a transfer of assets.  That's it.  It's not a loss in wealth at all! 

With a $1.4 trillion budget deficit, the overall equity of the USA remains the same:  Although their debt increases by $1.4 trillion, their cash also increases by $1.4 trillion!

By comparison, when a company loses $1.4 trillion, their equity, the company's worth, does fall by $1.4 trillion. 

If you have any doubt, picture this:

Let's say a company has $100 in cash and $50 in debt.  The value of the company is then $50 ($100 - $50). 

Let's say it costs the company a total of $50 to manufacture and sell a toy. 

Let's say that nobody wants to buy it for $50, so they reduce their price and get only $35 for it.

Overall, their revenue is $35 and their costs are $50.

After the sale, their cash balance becomes $85 ($100 starting balance + $35 revenue - $50 of costs).  Their debt of $50 remains unchanged, since no money was borrowed.

The value of the company has just decreased by $15, and the total value of the company becomes $35 ($85 cash balance - $50 of debt).

That $15 loss is a real loss.

A budget deficit of $1.4 trillion is not a loss.  At all!


Conclusion

I can understand how an intelligent person, even a very intelligent person, could come to the conclusion Dick did. 

I can see how someone might have the perception that the budget deficit is actually a loss.

But that perception is dead wrong.

Dick Bove is undoubtedly incorrect.

When it comes to celebrities publicly supporting or opposing political or social issues, I have mixed feelings. 

On the one hand, I think it's sad that its their voice, not the voice of the real experts and researchers, being given media coverage.

There are way too many people who seem to feel it's fine to have their own opinion about social science issues, instead of deferring to (or even becoming aware of) where the evidence lies (that said, I wouldn't have a problem with a celebrity making their voice heard if their level of knowledge was on par with an expert).

After all, as I say, there's No Such Thing As An Opinion!

On the other hand, celebrities can bring attention to issues in a way that the real experts cannot.

Which brings me to Matt Damon.

He's brought attention to standardized testing and its effects on the education system.  For now, I'm not going to delve into whether or not I disagree with his views in that regard.

I simply happened to watch an interesting video clip of him being a bit testy with a reporter, and I thought I would critique his logic.  Who knows, maybe I'll be able to add another name to my Logic's Liars section?  Here's text from the video.  And here's the video itself:

Ahh, Matt Damon,  Matt Damon.  Listen, if you are bringing attention to a good cause, I applaud you.

But if you are spreading misinformation (especially if done intentionally) I don't applaud you.  Especially if the misinformation is spread in a manner that makes others (such as the reporter and cameraman) look bad.


1) Matt says:  

"So you think job insecurity is what makes me work hard? I want to be an actor. That’s not an incentive. That’s the thing. See, you take this MBA-style thinking, right? It’s the problem with ed policy right now, this intrinsically paternalistic view of problems that are much more complex than that. It’s like saying a teacher is going to get lazy when they have tenure. A teacher wants to teach. I mean, why else would you take a shitty salary and really long hours and do that job unless you really love to do it?"

First of all, what do incentives have to do with a paternalistic system?  Perhaps there is a relation, but he certainly doesn't explain!

Secondly, Matt Damon disputes that an incentive (job insecurity due to lack of tenure) would tend to increase teachers' performance.  Isn't that bizarre?

When you add an incentive into the mixture, the other factors (salary, etc.) aren't directly relevant in evaluating the effect of the incentive itself.

That's because when you add an incentive, there's been only one direct change.  Only one variable has changed:  An incentive has been added.

Since Matt Damon believes that adding the incentive of job insecurity would not increase teachers' performance, he apparently believes that the incentive will either have no effect or will result in a reduction in teachers' job performance.

After all, if the incentive doesn't increase performance, it must either reduce it or result in no change in performance!  Those are the only two alternatives!

How believable is the first alternative? You add an extra variable to the equation (an incentive) and there's no change in job performance.

Not believable.

How believable is the second alternative? You add an extra variable to the equation (an incentive) and there's a reduction in job performance?

Not believable.  Bizarre!

Do you expect me to believe that once teachers lack tenure, once they are at a greater risk of losing their jobs, they aren't going to work harder in order to keep their job?  Simply bizarre.

I mean, it's not like I even need to present studies that show incentives have an effect.  How could they tend not to?


2) Next:

"I mean, why else would you take a shitty salary and really long hours and do that job unless you really love to do it?"

"Shitty salaries?"

Matt, not everyone is lucky enough to have your income(and I do believe that luck likely had a significant role in your becoming a movie star, regardless of the fact that I enjoy your acting).

And not all incomes that are much less than yours are shitty.  I just want to make that clear, in case you believe that to be the case.

Matt, do you consider the median elementary school teacher salary of $50,500 ($24.30 an hour) to be "shitty"? (Even that may be a slight low ball figure, as it appears the figures may be 2008 figures).

Well, if you consider that salary shitty, then how would you describe the average salary of all Americans?

Look at these charts, which seem to cover a time frame (2007-2009) similar to the one referenced above.

The median hourly salary of full-time American civilian workers nationwide was $17.50.

So, teachers earn about 38.8% more than other American civilian workers.

How could someone earning so much more than average be earning a shitty salary, Matt?  For that matter, how could any American earning more than average be considered to have a shitty income?


3) Next:

"... really long hours..."

Long hours?  Don't teachers have two months off during the summer?  Perhaps their actual workdays are longer than the average.  And I do think that teaching is probably more stressful than most other jobs.

But is it reasonable to believe that a profession that allows two months off during the year has "really long hours"?


4) The Huffington Post reports:

"The interview got a little tense from there. After Damon's comments, the cameraman broke the invisible wall and chimed in: 'Aren’t 10 percent of teachers bad, though? Ten percent of teachers are bad.' 

When Damon's mom, a Boston-area teacher, asked where the cameraman got his numbers, he responded, 'I don't know. Ten percent of people in any profession maybe should think of something else.

To which Damon struck back: 'Maybe you’re a shitty cameraman.'"

Matt, the question asked whether ten percent of teachers are bad.  The context of the discussion is about incentives.  The context of the discussion is not about cameramen.


Conclusion

So what's the deal Matt?

Were you unable to follow the points being made?

Or were you perhaps trying to change the subject so you didn't have to admit that not all teachers are good?

And if you knew you were incorrect, why respond in a manner that makes others look bad?

Let me first provide some context.

Saturday's article of mine asserted the following belief:

"I doubt S&P would've downgraded America without the approval of the government (regardless of the fact the White House publicly claims to dispute the downgrade)."

And why would the US want to be downgraded?

I asserted that the two most likely reasons are:


"1) Default.  Purposeful default.

A downgrade suggests a deteriorating debt situation, and paves the way for further downgrades that the US government could use to justify a future decision to stop repaying its debt.

After all, the US would want it to appear as if they have no choice but to default.  Otherwise, America's creditors, such as China, might want to go to war!

A benefit of default is simple:  America wouldn't have to pay back the money borrowed!


2) Near default.

Near default could justify the US government making dramatic reductions in entitlement spending, as they claim that they need to use that money to instead pay down the debt."


Today's Market Crash

Flash forward to today. 

Only one business day after the downgrade, the stock market's Dow Jones Industrial Average collapsed by 635 points, the sixth largest point drop in history.

And that's when it hit me:

If indeed the US government is planning to eventually default on its debt and be downgraded further, the government would more easily be able to justify a default if the stock market had severely shrunken by then.

After all, it's easier for the government to say that it can't pay its debts if the stock market has collapsed, because the government could simply say:

"We would have to raise taxes drastically in order to pay off our debt, and our people's finances are in no shape to justify increased taxes."


Conclusion

So, another ominous sign:

The market fall may continue for quite some time...

Note: I won't identify whether the excerpts are written by myself or a reader.  That way, if you choose to read more of the debate, it won't ruin it in advance!


1)  Racial hyphenation is condescending!

• "Are you also opposed to women (or men) hyphenating their names when they get married? Or should women ignore the fact that they had an identity before they were married and let their new name subsume anything prior.
  
  Also diversity as division? Seriously? The last thing I'd want (for business, for friends, for the success of our nation) is a bunch of people who all think alike."

• "Marriage hyphenation identifies the person's name prior to marriage. I can't see that being harmful in any way.
  
  It allows a person's name (when the person isn't seen visually) to be recognized by people who might not have otherwise recognized them had they used their married name alone. It would also allow an easier transition to their maiden name in the event that's what is wanted after a divorce."

• "About diversity and division. I didn’t say all diversity was a negative. I did say that dividing a country is never a good thing. What I meant by this is that I don’t see how it’s a positive to take action to divide a country any further than it naturally is (there is a natural level of diversity throughout a country, of course). Perhaps I should’ve clarified my ideas further...Look at how much trouble has been caused in the world as a result of diversity. Look at the class conflict between upper and middle classes. Look at the genocide in Rwanda by blacks against other blacks, due to the division of their ethnicity. Look at the conflict in high schools by one clique against another clique. There has been an immeasurable amount of damage and murder conducted by people against others who are diverse from them in some way."
  

• "You make so many foundational logical errors it is hard to know where to begin. Not just in this post, but in your primary premises found all over this blog...There is no such thing as 'objectivity'.  Your conservatism is overtly ideological and therefore fatally flawed. Ideology is the enemy of ideas, the enemy of logic and especially the enemy of truth."
  

• "Your advocating of mono-cultures is congruent with other of your flawed arguments. Mono-cultures are a threat to life on Earth. They have resulted in the creation of famine and the famine of intellectual honesty inherent in ideological thinkers...Other results of mono-cultures: The Inquisition, The Crusades, slavery, oppression, genocide etc…"

• "I consider myself to be logical above all else, not conservative or liberal. I support whichever views are most supported, it just happens that I feel conservative views are more supported. Yet my site will show that I support some liberal views as well. That is hardly the sign of an idealogue, which you claim me to be."

• "I never said that diversity doesn't benefit society. What I did say, in the message that I replied to, is that I believe there's a natural level of diversity (which, by the way, may be close to the ideal level) of diversity and beyond that increased diversity tends to become a negative."

• "You at first claim that it is 'specious' to claim that diversity causes unrest between groups:
  
  'You realize that your conclusion, that diversity is the cause of unrest between diverse groups, is completely specious.'
  
  That seems odd to me. If there hadn't been two tribes in Rwanda, then the fighting related to that diversity couldn't have come about for that reason. I don't see why you apparently disagree with this.
  
  But in your next paragraph, you contradict yourself and say that indeed, diversity could be the cause of conflict:
  
  'Could the cause of unrest in diverse populations be a function of personality conflict having nothing to do with the markers for diversity, such as color of skin, religious beliefs, etc? Yes, it can and it most likely is.'"

• "Your belief that truth/logic/correctness can be reduced to a political duality is simply bizarre, but common amongst ideological people...You cannot escape subjectivity. It is impossible unless you are working with numbers."

• "You write: '…there is a sum of information that exists somewhere that either supports one view or another. How can that not be objective? Because when you look at views that involve terms that are traditionally considered subjective, even those are objective in the sense that there is a majority of evidence that supports one view or the other…'
  
  Where is this theoretical 'sum of information' and who compiled it?"

• "As for subjectivity in relation to my previous paragraph, you claim that objectivity is not possible from a subjective being. Implying that humans are biased. So? That doesn't alter the validity of my argument.
  
  That simply means that the evaluator would take into consideration that the evidence could be biased...and one problem with your point is that you fail to point out that bias works both ways. Without knowing more about the specific topic being evaluated, there is no reason to believe that bias will affect the evidence of one theory AND NOT the other. This means you would have no reason to believe the bias would, in itself, be biased and only apply to one of the theories."
  

• "I had a bit of fun with you around these arguments. I offered presumptive arguments to bait you and you took it. However, you are so convinced of your ability that you skim the surface of logical constructions and fail to see the truth of logic, that it does not equate to truth."

• "But regarding subjectivity and bias, the most important point is this:
  
  Human bias itself is not subjective. It occurs as a result of interaction between human genes and environment. There is a template out there, yet to be discovered, that will show how bias (and other traits) express itself: When certain environmental factors mix with certain genes, bias will express itself somehow, as a neural firing between synapses.
  
  So, the information is out there...because if there WASN'T a template for the interaction, then human behavior would be completely random, and it would mean that if you repeat the same interaction between genes and environment multiple times, then you would get a different result each time. That just wouldn’t occur, because genes and environment are all encompassing-everything that is not a gene is part of the gene’s environment."

• "Wow, your accuracy cannot even sustain one thread! Go read it for yourself in my second post, and just be silent.
  
  Yes, you've beaten me. If this will keep you from introspection and self-reflection that might lead to growth, then I give it to you.
  
  I, on the other hand, know that I know nothing."

• "'How much is 'morality' worth? How does you weigh it? Take a poll?''
  
  Of course you'd take a poll. How else would you do it? After all, society defines other words in our vocabulary, why wouldn't they define morality?
  
  Of course the arguments can be weighed and measured, all it takes is definition of the terms, which then allows measurement."

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2) Geniuses flunk stats. Who would have thunk it?

• "In a study of house prices over time, a 'sample' is the price of a house, not a unit of time. Even a Gamma with basic statistical knowledge would understand this.
  
  Besides: people don't buy houses for a second, a minute, or even a day, so your argument is meaningless."

• "Incorrect. Anyone with an introductory college level course in statistical research should know that a sample is whatever you define it to be!
  
  To say otherwise would suggest that data can't be grouped and summarized!
  
  In a study of housing prices, the original data are the home prices itself.
  
  If it's a 10 year study, then you'd list the actual sale prices of individual homes over a ten year period.
  
  The sample in a study then becomes however you define it, based on the research objectives. The original source data remain the same, regardless of how you define the sample.
  
  For example, if you want to study changes in average annual home prices, the sample then becomes a list of 10 data points, 10 average annual home prices.
  
  If you want to study average monthly prices, the sample becomes 120."
  

• "You claim:
  
  'Besides: people don't buy houses for a second, a minute, or even a day, so your argument is meaningless.'
  
  I never claimed that people buy houses for a second, a minute, or even a day, so it's impossible for my argument to be meaningless based on that criteria.
  
  I challenge you to find any quotes of mine that state or imply that!"

• "'My argument was that commentators and analysts weren't perceiving the data properly.'
  
  Fine. Please spell it out for the rest of us: in what way could the data have been perceived that contradicted the conventional wisdom of continued yearly house price increases?"

• "There were 50 years' worth of housing transactions, probably numbering in the hundreds of thousands...and they chose to reduce that data into a sample of only 50, instead using a much larger sample size (for example one defined as months, or even half-years)...50 is never considered a large sample size. As I mentioned, with some items being measured, ones with high standard deviation, like blackjack results, it's common to have huge sample sizes with results that are very different from the long term expectations (long term in that case would required millions or billions of data points)."

• "In this study, 50 is not the sample size. The sample size is the number of yearly transactions -- running into the millions, not hundreds of thousands, for recent years."

• "I've already proven that 50 IS the sample size. There are 50 pieces of data!!:
  
  1960 average home price = the first piece of data,
  1961 = the 2nd piece of data,
  
  and so on, for all 50 years."

• "I'm a combinatorist, but I won't pretend that my facility with probability is sufficient for understanding housing markets. You're making a ton of ridiculous assumptions here which no economist would make:
  
  1) That the language of sample size and standard deviation is correct to apply to a time series, in which the data aren't independent.
  
  2) That short-term day-to-day fluctuations are better than year-to-year comparisons at explaining long-term trends.
  
  3) That economists look at only one data point per year when quantifying anything.
  
  4) That a sample size of fifty can't tell you anything. Of course it can—if someone hands you a supposedly unbiased coin, and you proceed to flip fifty heads on your first fifty flips, there's a pretty good case that they're putting you on."
  

• "1) A time series does include independent data. Each second is independent from the next, and measures the same. If that were NOT the case, it would not be possible to measure time with clocks.
  
  2)I never said that short term trends were better than yearly trends at explaining long term trends.
  
  I said that long term trends WERE the better way to predict, and the problem is that people defined the long term using a small sample size of years instead of using a large sample size of minutes or days.
  
  3)I never claimed economists look only at one data point.
  
  4)I never said a sample size of fifty can't tell you anything. I said that a larger sample size is better, and that a smaller sample size is more likely to be less representative."

• "Oh my god you are so stupid. You explain that 50 years isn't a long time by converting it to seconds? Are you bloody high? Do you understand even the most fundamental aspects of statistics?"

• "Sample size refers to the number of unique observations in the data. In this case, that would be house transactions. For each year, then, the sample size would be the number of transactions that have been completed in that year. You would be comparing maybe hundreds of thousands of transactions between years."
  

• "My entire premise was exactly what you imply:
  
  That the sample size being analysed shouldn't be as small as 50, because there are so many home transactions and rises and falls within those 50 years that the sample size should be much larger, as measured in seconds (or, as you suggest, by the actual number of home transactions)."

• "I'm sorry, but you're spouting nonsense about a subject you clearly don't understand."

• "By the way, I have a PhD in Mathematics (Thesis in non-commutative quantum field theory) from a well respected university to back this up. Do you?"

• "btw, the average person with a PHD would NOT place 74th out of 1 million+ people on a measure of intelligence. They might typically place between spots 10,000 and 50,000 out of 1M."

• "I completely understand the longitudinal study, and I never wrote anything to suggest that I didn't understand it.
  
  My main argument was simple: that many people claimed that housing prices wouldn't fall because they hadn't fallen in 50 years.
  
  That rationale implies that they believe 50 years to be a large sample size, otherwise why would someone make a prediction based on a small sample size?
  
  Therefore, I challenged the assumption that 50 years is a large sample size. It is not. 50 is a very small sample size.
  
  You may counter and say that there is a huge sample size within the 50 years-thousands of transactions. True. But the thousands of transactions WERE NOT what was referenced by the commentators. If those thousands of transaction WERE what was being referenced by the commentators, they couldn't have said 'the housing market has never fallen during several thousand transactions' nor 'the market has never fallen a single day over the last 50 years' because it is simply false.
  
  Therefore, I completely understand the original longitudinal study. But if someone is going to make comments that reduce the sample size to only 50, then that is a HUGE mistake. Devastating, in this situation!"

• "The sample size can only be what it is. If there are 200,000 housing transactions over 50 years, that's the sample size, no matter what.
  
  But the problem is that people don't report the actual sample size of 200,000. They instead usee a smaller sample size of 50 (yrs).
  
  Now, this 50 years still contains the 200,000 transactions, right? Yes, but the two are worlds apart.
  
  A sample of 50 yrs ends with the result that the market has never fallen, and a sample of 600 months is completely different, even though the data is the same. Over 600 months, they would NOT be 600-0 in terms of rising prices.
  
  The actual sample size of 200,000 would have provided very many examples of falling prices. But because the reporters didn't understand stats, they reported it over 50 yrs, which in effect lowers the sample size if only because it changes the results: many example of falling prices over 200,000 transactions suddenly becomes zero examples of falling prices when the sample is reduced to 50.
  
  So the problem was that they misreported the sample size."

• "Here's more proof:
  
  You claim that looking at the annual medians and annual means, using the same source data, results in the SAME sample, and that in those cases the means could fall while the median didn't.
  
  But if the means WERE different than the median, of course the sample sizes in the 2 scenarios WOULDN'T be the same. They would look something like this:
  
  Annual Mean sample:
  
  yr 1 = $300,000
  yr 2 = $305,000
  yr 3 = $310,000
  up to yr 50. That is the sample of 50.
  
  Annual Median sample:
  
  yr 1 = $250,000
  yr 2 = $255,000
  up to yr 50. That is the sample of 50.
  
  The two samples are NOT identical, even though they both used the same source data."

• "You know what, I've ignored most of your petty insults because it's pretty clear you're just an insecure pr*ck. However, that's the second time you've called me a liar, and I have to admit that that gets under my skin."

• "And surely the insecure one is YOU, who has resorted to omission and lying in order to try to save face. What is it that I've written that suggests I'm insecure? Is it my willingness to respond to every single point you've made? lol you absolute fool!"
  

The above comments are less than 20% of the total comments in that section.

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Coming Up

I like to think that you'd have difficulty finding these type of debates, especially the "a-ha" moments, elsewhere :)

In the near future, I will write an article highlighting excerpts from other articles' intense debates!

Stay tuned!

Note: I won't identify whether the excerpts are written by myself or a reader.  That way, if you choose to read more of the debate, it won't ruin it in advance!

1)  Why don't all intelligent people vote the same way?

• "...regardless of what conservatives and liberals may tend to prefer, only one of two opposing views is more rational than the other."

• "The logic throughout this article is too flawed to even know where to begin."

• "Actually, there IS black and white. Either the majority of existing evidence tends to support or not support any particular view. The only exception are the rare cases in which there is an exact 50.00000000% split. "

• "I think your crass lack of modesty may help to explain why you're missing the point here. There's none so blind as them that will not see.
  
  The entire principle behind your argument is fundamentally wrong."

• "Perhaps your simple mind (relative to mine) feels that it's smart to imply that the opposing debater has made a claim that hasn't actually been made."

• "You write:
  
  'As an example - suppose I set up a new single policy political creed, which advocates slavery for 49% of the population, with the other 51% to benefit. My new creed could be proven to be better at an overall level, since it benefits the majority. Again, according to your logic, because this new political philosophy is the better choice, everyone should favor it.'
  
  Actually, a creed WOULDN'T be proven to be better simply because it benefits the 51% majority of the population. It might benefit the 51% majority in a SMALL way, but cost the 49% minority in a LARGE way, and therefore the costs of slavery would greatly outweigh the costs. It's simply a matter of defining the costs and benefits. It's crude to determine whether a policy is beneficial overall simply by the % of people it benefits."

• "And your long-term vs short-term arguments--Where is it written that long-term is the way to go?? After all, in the long term we are all dead."

• "You don't think it's smarter to look at long term logic (your lifespan) rather than the short term? Why do you think it's more important to look at the short term (let's say, 5 years) instead of looking at benefits over the long term (say, 50 years). Do you not understand that 50>5?
  
  Also, did you know that studies have shown that people who think the same way as you are more likely to be criminals? (People who aren't able to delay gratification and hence think about short term benefits, not long term)."

• "One more thing.
  
  Someone might vote in a manner that they THINK benefits them, (and that they think is rational), but they might not be smart enough to figure out that it will hurt them in the long run.
  
  This destroys your apparent argument (that I hadn't even commented on anyway) that it makes sense for two equally intelligent people to act differently since the actions necessarily benefit themselves. "

The above comments are less than 5% of the total comments in that section.

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2) USA's wealth: Shrinking 37 years straight?

• "On this one, the piece about 'losing wealth', your readings in economics are very obviously far too inadequate for you to be holding forth with 'original' thoughts on economics. You should read up on the history of monetarism and centralization (any mainstream textbook on the history of economics will do), read 20 Centuries of Wage and Price Control. Read the chapter on John Maynard Keynes in the book Intellectuals by Paul Johnson. Read anything by any of the following three Henry Hazlet, F.A. Hayek, Ludwig von Mises. Then come back here and hold forth on economics."

• "...you may remember theory from centuries ago, but it's worthless given that you aren't able to analyze it properly."

• "... why don't you point out the errors in my post, if you can indeed find any, as you imply?"

• "Wealth distribution isn't necessarily zero-sum in the realistic long run...Simply: Wealth is created when a banker gives a loan. In one column he/she writes the principal. In the other, the amount owed. Voilá. Instant money."

• "Sorry your thesis is patently wrong as it can be disproved by counterexample.
  
  Take two completely separate economies which do not trade. Suppose that one invents electricity while the other does not. The first becomes richer. Suppose second that the first then uses some of its wealth to buy a consumption good from the second. It is true that by purchasing the consumption good the first economy has made itself a tiny bit poorer in the long term (any consumption reduces investment). BUT the first economy is still massively richer than the second!"

• "Your example is incorrect. You claim that the first economy becomes richer after it invents electricity. This is false! It doesn’t become richer unless it sells that electricity to another economy!
  
  If someone within the first economy buys electricity from the person that invented it, that first economy is no richer; money has simply been transferred from one part of the economy to another.
  
  If my ideas are so obvious to others, then why don’t more others voice them or use them in their policies?"

• "I disagree, here's why:
  
  I do think it's a zero-sum game, because in all instances, including loaning of money, it's simply a transfer of money. Even earning interest results in a transfer of money.
  
  All of those aspects you list, like labor, involve the transfer of money from one party to another.
  
  When a loan is created, money isn't actually created-it's transfer from the lender to the borrower. The borrower does receive money he/she previously didn't have, but the borrower also owes the debt to the lender. "

• "You didn't define wealth which is a terrible omission for someone who is attempting to make a statement about it."

• "You are incorrect when you imply that productivity gains result in greater wealth for the country. It results in greater wealth in some respects, such as the fact that it can allow people to have more free time. However, it doesn't result in more US monetary wealth unless it results in greater sales to foreigners."

• "'So, in your logic based on your alleged great intelligence, a country which never trades (or trades minimally) and seeks to become self-sufficient is doomed to poverty??'
  
  Of course it's doomed to zero growth (related to trade alone). If it's not getting money from foreigners, it's getting money from within it's own country, and that's simply a shift of (not a growth of) money.-"

• "Another questions--if trade the ONLY way to create wealth--If there are other ways, hasn't the USA used those methods over the last 37 years??
  
  
  So you are admitting that people on earth today are as wealthy as they were in pre-historic times???"

• "And yes, I'm admitting that people today are no wealthier than in prehistoric times.
  
  If you disagree, then give me an example of wealth that was created out of the blue suddenly (without trading currency or assets and without producing something from a raw material asset)."

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Tomorrow

The above are just two examples of very intelligent debates that provoked "a-ha" moments!

I like to think that you'd have difficulty finding these type of debates, especially the "a-ha" moments, elsewhere :)

Tomorrow's article will provide more excerpts from other great debates.

Which debates?

Well, to get an idea, simply browse the titles of some of my articles! There are plenty of controversial topics there...