Hackononics, Part Deux

More nonsensical tripe foisted upon the world by W. Michael Cox and Richard Alm again.

For those of you who may not recall, they are the senior vice president/chief economist, and the senior economics writer at the Federal Reserve Bank of Dallas.

These two have started a cottage industry dedicated to proving how great things are economically. This is now the third attempt at this sort of intellectual dishonesty, and if I didn’t know better, I would suggest that they have a political agenda. Of course, that’s impossible for any Federal Reserve Bank, even one in Texas.

Rather than spill too many pixels on the likes of these two, I will instead direct you back to the last time these two characters pulled similar shenaningans. You may recall back in February they attempted to show how little income disparity there was in the US through the use of misleading quintile data. I called their deceptive fraud for what it was in Hackonomics.

Their latest junk economics is in The American Magazine, titled How Are We Doing?

The duo repeat their consumption arguments, hoping that the third time will be the charm. Perhaps repetition might succeed where reasoning and logic failed.

Amongst the various bensteinery in their rhetorical arsenal, my favorite is the temporal arguments they seem to favor. We addressed this sort of economic silliness back in 2004’s What is Wealth?.

Here are a few colorful pieces of silliness form the article.
>

Congratulations! You’ve rediscovered the Technology Adoption Lifecycle and production quantities of scale!


For more on this, see #3 Comparing Household Consumption.

>

Nearly 100 years later, we are more efficient and productive. Go figure.

I will be fishing with one of their Dallas Fed coworkers later this month, and I will  be sure to ask what the real deal with these guys are.

>



>


Previously:

What is Wealth? (May 2004)
http://bigpicture.typepad.com/comments/2004/05/what_is_wealth.html

Hackonomics (February 2008)
http://bigpicture.typepad.com/comments/2008/02/dishonest-econo.html

Source:
How Are We Doing?
W. Michael Cox and Richard Alm
The American Magazine, July/August 2008
http://www.american.com/archive/2008/july-august-magazine-contents/how-are-we-doing

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. SINGER commented on Jul 6

    SEE your TITLE “Hackononics” – These guys are tools!!!

  2. Mike in NoLA commented on Jul 6

    Ah, I didn’t know that skyrocketing health care costs were a good thing. Thank you, BR, for bringing this enlightenment to us :)

  3. Marcus Aurelius commented on Jul 6

    Are these the same dudes who wrote ‘My Pet Goat’?

  4. Marcus Aurelius commented on Jul 6

    Are these the same dudes who wrote ‘My Pet Goat’?

  5. Marcus Aurelius commented on Jul 6

    Are these the same dudes who wrote ‘My Pet Goat’?

  6. Marcus Aurelius commented on Jul 6

    Are these the same dudes who wrote ‘My Pet Goat’?

  7. Troy commented on Jul 6

    I first rejected the temporal argument as deceptive, but the more I argue internally against it the less deceptive I find it.

    I’m in my 40s now, and I have to admit that many of the things I considered luxuries in the 80s are dirt cheap today.

    You can live like a millionaire of the 80s WRT computers, TVs, stereo systems, laserdisc players, the internet, uh, the list is running out I guess but for the bulk of my consumption things are pretty good.

    What the good hacks in the federal reserve leave off, of course is that price inflation in necessities — food, higher education, health care, energy, rents, have all doubled or more compared with wages over the past 20-odd years.

  8. Mark commented on Jul 6

    I’m a little surprised, Barry. You aren’t making a very good argument that things are *not* improving like Cox and Alm have suggested.

    ~~~

    BR: Of course things are improving — they are SUPPOSED to improve over time.

    What does the fact that we are making things better prove?

  9. SSM commented on Jul 6

    What really irritates me is the way the Fed will use the results of their Hackery …

    Going back to the original post on Hackonomics these Fed guys present the drop in cost of things like cell phones and computers as great economic improvements for everybody so that we won’t notice that they use all of these improvements to print money and steal stuff.

    Here’s a riddle: a rancher needs a ditch dug and pays a bunch of workers with shovels to do it. The rancher enters in a ledger that it cost him 365 man days to dig the ditch. A number of years later the rancher needs another equivalent ditch dug and technology in the mean while has invented the backhoe. He pays a guy to dig the ditch with his backhoe and it takes one day at a cost equivalent to 40 man days when compared to the earlier digging. 15 of these man days went directly to the operator and 25 man days represented the cost of the capital equipment. What effect on the BLS computation of the CPI will this technological improvement of ditch digging have?

    Answer: The CPI will detect *massive deflation* and the Fed will start printing money like hell to see that the backhoe dug ditch increases in price to slightly more than the ditch cost the first time around.

    The government numbers are a mess and the Fed loves to expand credit (with interest, of course) at every turn because that is how they pilfer stuff systematically.

    We’re now paying the dear price for all of these shenanigans.

  10. Kevin commented on Jul 6

    Cox: “Hey Alm?”
    Alm: “Yo.”
    Cox: “Why don’t we show the same tired graphic of the bull case in our article? You know…we’ll show a chart of the glorious, historical, extended bull market of the last 25 years, and ONLY the last 25 years, and infer that people would be fools to invest their money in anything but stocks, since surely the next 25 years will be just as glorious. I MEAN, FOR GOD’S SAKE, ALM, JUST LOOK AT THE FRICKIN’ CHART!!!”
    Alm: “Rock on Cox! Rock on!”

  11. Jim Haygood commented on Jul 7

    ‘Bensteinery’? It’s a hoot; however, I prefer ‘beersteinery,’ thanks.

    But then, I’m no Fedguv. In the cattle pastures east of Dallas on I-20, fine golden ‘shrooms grow on the cow patties. Yes, in Xanadu where Cox ‘n Alm reside in the mushroom-cap umbrella shade, toking their hookahs and chatting with the caterpillars as the cattle low, absinthe flows from the rocks as the buzzards twitter and caw. Oh, the big rock candy mountain!

    But why is it melting? Oo-ooh, that smell! Cain’t cha smell that SMELL?

  12. Mike in NoLA commented on Jul 7

    Nevertheless, these guys and BB are probably having a serious case of penis envy of the Chinese central bankers. The Fed has to resort to bs and and this kind of chicanery to try to move markets. The Chinese can move the market directly.

    The big Chinese banks tonight are forecasting miraculous profit increases in the the face of a stock market down by half, falling real estate, customers who are having liquidity problems, rising central bank rates and increased reserve requirements.

    The Chinese are probably sending the Fed taunting emails saying “We don’t need no stinkin FSB’s!”

  13. Colin commented on Jul 7

    I don’t know about you Barry, but when I see the second graph, I see very little progress since the 1980’s. And that disturbs me, because all that prosperity of the 80s/90s is not leading to any positive outcomes for those living on the basics.

  14. Charles Lundberg commented on Jul 7

    The Apple Lisa when it came out cost $10,000. Never forget that.

    The first sale I ever made, radishes from my little garden, some old lady waved a quarter at me to get me interested, but then ended up giving me a dime, and she was squeezing it so hard in her white lace gloves, had to twist hard to get it away.
    I think the (nice lady) wanted them free!

    The first job I had, I made $1 a half-day, caddying kangaroo doubles for two doctors. Oh, they bought me a hotdog and coke at 9.
    At that time it bought me two hamburgers, a cup of coffee and a gallon of gas.

    Today a high school kid makes $20 to mow your lawn. With that $20 they can buy four hamburgers, fries, a Pepsi, and a gallon of gas. But they can mow five lawns a day!

    Prices are just returning to uber reality, ex-computer revolution, ex-agricultural revolution, and ex-tax-and-spend caps.

    The Age of Current Account Deficits and Mega-Trillion Derivatives Ponzi Scams.
    You’re in the Army of God’s Chosen now!

  15. cm commented on Jul 7

    The article states, as I suspected, that the hours per goods basket is based on “time worked at the average pay rate”. Presumably including CEO pay in the “average”.

    And what bullshit goods basket is that — what am I doing with 5 lbs. sugar? I’m not buying 5 pounds sugar for each half-gallon milk and 1 pound of bread.

    They probably selected the food items that have dropped most in price, and overweighted (subsidized!) sugar by who knows what factor.

  16. cm commented on Jul 7

    I misspoke — I meant “dropped in labor hours equivalents” not “dropped in price”.

  17. bsneath commented on Jul 7

    What I have observed over the past 50 years is that most folks can now afford many goods and services that were once considered luxuries. But there is also a growing divide between those who live ostentatious lifestyles and the rest of us. This class divide might narrow a bit this year when the investment banker bonuses are doled out.

  18. Barry Ritholtz commented on Jul 7

    Understand my peeve here: That’s a given — things are supposed to get better.

    It is the inventive genius of mankind, the nature of technology, and the advantage of competitive capitalism — the relentless improvement of our creations and inventions.

    Just about EVERYTHING gets better, faster, cheaper. THAT IS THE BACKGROUND, THE STANDARD, A GIVEN. To describe this as if it is some sort of a victory represents an enormous lowering of expectations.

    Here’s my suggestion for these guys next three columns:

    • HUMANS: NO LONGER LIVING IN CAVES!

    • HEY, COOL, I HAVE OPPOSABLE THUMBS!

    • OXYGEN IS EXCELLENT!

    C’mon, are we that jaded that we need to be impressed by basic progress? Thats the baseline, what should be expected.

  19. John commented on Jul 7

    Things have certainly got better since 1789. We no longer break people on the wheel or saw people’s legs off without anaesthetic. The reasoning of these people is bizarre. The fact that poor people have greater access to air conditioning than they did in 1965 is supposed to demonstrate that there hasn’t been an increase in income inequality since then. It’s hard to believe anyone takes this seriously despite all the phony charts but then many take Laffer seriously. Amongst them are readers of the American magazine which is aimed at the far right of the Republican party. But then the the Republican party is currently hailing the late Jesse Helms as one of their greatest statesmen. How right they are.

  20. BustaMove commented on Jul 7

    “The duo repeat their consumption arguments, hoping that the third time will be the charm. Perhaps repetition might succeed where reasoning and logic failed.”

    Reminds me of the poem The Hunting of the Snark by Lewis Carroll:

    “Just the place for a Snark!” the Bellman cried,
    As he landed his crew with care;
    Supporting each man on the top of the tide
    By a finger entwined in his hair.

    “Just the place for a Snark! I have said it twice:
    That alone should encourage the crew.
    Just the place for a Snark! I have said it thrice:
    What I tell you three times is true.”

  21. Francois commented on Jul 7

    Yup!

    In the reality matrix, material is improving while social is deteriorating.

    But in the anti-reality matrix, material in improving, so how can the social is deteriorating? It’s impossible! Let’s show them how far out the material has improved; then they shall be convinced that everything (and then some) is great.

    These bozos won’t get a PhD in Logician Thinking with arguments like that.

  22. bsneath commented on Jul 7

    The point that I am trying to make (and then I will leave it alone) is that a number of poor people in our society have been able to acquire material goods and participate in the consumer era. These are folks who could not access consumer goods in the past.

    While liberals may howl at the following observation – Walmarts, global trade (such as Chinese imports and textiles) and an over-valued dollar (or if you prefer – undervalued emerging market currencies), as well as ongoing productivity improvements and falling technology prices, have enabled nearly every citizen and immigrant (legal or not) a certain level of access to material goods.

    The wealthy bought BMWs, Sonys, I-phones, laptops and ate at expensive restaurants.

    The poor bought Kias, used cars, Chinese-branded TVs and other electronics, E-machines and ate at McDonalds.

    While the quality and status levels are obviously different, nevertheless there has been a much broader level of participation.

    Perhaps this trend is less apparent in NYC or DC where all costs are high, as opposed to lower income communities in other States.

    Also these trends may very well begin to reverse now with a weaker dollar and higher food, gas and imported goods prices.

  23. Daniel commented on Jul 7

    I really like their tricky use of means where medians would be more appropriate. The NAR, however, does the reverse and loves median home prices because when the mix of sales skews from middle-market homes and towards the luxury homes, even though they are all selling at declining prices, the NAR can still quote a growth in the median home price. They played that game for a year or two until it caught up with them. “Lies, damn lies, and statistics”

  24. Karl K commented on Jul 7

    Barry, so let me get this straight.

    Even though things HAVE been improving — not just since the cavemen times but, really, in a much shorter time frame, say the last 10-15 years, that doesn’t matter because, well, that’s the way things are SUPPOSED to be?

    Is that right?

    Then the only advancement that’s really worthwhile or worth noting is the advancement that is UNexpected?

    Is that right?

    That’s certainly seems to be the logical conclusion one can draw from your position.

    if so, I am truly sorry, then yours is a position of fundamental intellectual vacuity.

    Or perhaps you, as a member of the intellectual elite, can help manage our social and economic structure to get to some suitable vision of where we should be.

    Of course, then that outcome wouldn’t be unexpected and then, you’d have to pooh pooh that, yes?

    This just in: we do not, and never will live in, a utopia. There will be booms and busts, wars and peace.

    Frankly the moaning and groaning amongst you and your commentators is highly amusing. All of you ARE pessimists.

    Today, we live in the richest, most prosperous country in the history of mankind. It’s not perfect, but it’s a damn sight better than virtually everywhere else.

    ~~~

    BR: When you are finishing using that flag as a Poncho, please return it to the supply room . . .

  25. Todd commented on Jul 7

    Is bensteinery any more blatant than dennisknealerie or michelecarusocabrerarie?

    Or is it just simply more mellifluous? Either way BR, I do love that word you coined. I’d start using it constantly in conversation if people would get what it meant.

  26. lebanonfan commented on Jul 12

    Have any of you tried to check these guys’ sources? Good luck on that! It’s impossible. Are they this shoddy on their citations in all their work or just this one?

Read this next.

Posted Under