October 6
Professor Tyler Cowen of George Mason University has a conservative economic bias, but otherwise his views are mainstream with a socially tolerant bias. At his blog Marginal Revolution he writes: Contrary to The Wall Street Journal’s characterization, Instagram’s research shows that on 11 of 12 well-being issues, teenage girls who said they struggled with those difficult issues also said that Instagram made them better rather than worse.
In fact, in 11 of 12 areas on the slide referenced by the Journal — including serious areas like loneliness, anxiety, sadness and eating issues — more teenage girls who said they struggled with that issue also said that Instagram made those difficult times better rather than worse. Body image was the only area where teen girls who reported struggling with the issue said Instagram made it worse as compared to the other 11 areas. But here also, the majority of teenage girls who experienced body image issues still reported Instagram either made it better or had no impact.
The mainstream media, not surprisingly, are interpreting all this as a big takedown for Facebook, one of their main competitors I might add. Here is one relevant image:
I would make two more general points. First, you could very easily argue that eyeglasses make (many not all) teenage girls feel worse about their body image. Lots of things will. Automobiles. Parties. Clothes shops. Such costs are not zero, but they have to be put in perspective.
Second, the lives of teenage girls are messy and complex. Anything that plays a noticeable role in said lives also will have effects that are messy and complex. Deal with it. The same used to be true of the (old-fashioned) telephone as well, not to mention birth control pills and automobiles.
Instagram is a huge “universe,” and I have only a fragmentary knowledge of it. Yet virtually everything I have seen, read, and heard indicates it is one of the more positive corners of the internet.
Markets and Stocks
I like Facebook. A year from now, I believe the stock will be much higher. The company touches over 3 billion people each month. Advertisers love it. With Monday’s outage, the world learned that it loved Facebook.
But the media hates Facebook because Facebook is a formidable competitor and because Facebook destroyed the business model of print media. Politicians hate Facebook because Facebook is a “free speech” platform outside the control of politicians.
If you don’t like Facebook don’t look at Facebook and don’t buy the stock.
Oil and gas prices continue to go higher. OPEC plus Russia are increasing production slowly. Because of Administration policies-for example the Administration ban on new drilling on federal lands-and the ESG movement, Saudi Arabia and Russia dominate the global oil market. What is the Administration’s thought process? Russia is an existential threat to the US. Russia needs high oil and gas prices. Administration policies help Russia. As for Saudi Arabia, it is half hearted ally. Administration policies have pushed Saudi Arabia away. So here we are. Consumers and the world are paying more for energy in part because of the Administration.
The New York Times says: Americans are spending a dollar more for a gallon of gasoline than they were a year ago. Natural gas prices have shot up more than 150 percent over the same time, threatening to raise prices of food, chemicals, plastic goods and heat this winter.
The energy system is suddenly in crisis around the world as the cost of oil, natural gas and coal has climbed rapidly in recent months. In China, Britain and elsewhere, fuel shortages and panic buying have led to blackouts and long lines at filling stations.
The situation in the United States is not quite as dire, but oil and gasoline prices are high enough that President Biden has been calling on foreign producers to crank up supply. He is doing so as he simultaneously pushes Congress to address climate change by moving the country away from fossil fuels toward renewable energy and electric cars.
U.S. energy executives and the Wall Street bankers and investors who finance them are not doing anything to bolster production to levels that could bring down prices. The main U.S. oil price jumped nearly 3 percent on Monday, to about $78 a barrel, a seven-year high, after OPEC and its allies on Monday declined to significantly increase supply.
The transition to a green economy will be lengthy and messy. Bloomberg business writes: The world is living through the first major energy crisis of the clean-power transition. It won’t be the last.
The shortages jolting natural gas and electricity markets from the U.K. to China are unfolding just as demand roars back from the pandemic. But the planet has faced volatile energy markets and supply squeezes for decades. What’s different now is that the richest economies are also undergoing one of the most ambitious overhauls of their power systems since the dawn of the electric age -- with no easy way to store the energy generated from renewable sources.
The transition to cleaner energy is designed to make those systems more resilient, not less. But the actual switch will take decades, during which the world will still rely on fossil fuels even as major producers are now drastically shifting their output strategies.
“It is a cautionary message about how complex the energy transition is going to be,” said Daniel Yergin, one of the world’s foremost energy analysts and author of The New Map: Energy, Climate and the Clash of Nations.
As an investment, I like the oil and gas space. But I think the space is a little over bought at the moment. I would be patient about initiating new positions.
Economics
Wealth is concentrated but with taxes and income transfers, especially income transfers by Social Security and Medicare, the distribution of wealth is similar today to the distribution of 50 years ago. The top 1 percent of the wealthiest Americans own 32 percent of US household wealth. But that statistic does not tell us where the wealth came from, what it consists of, or how it is used.
Where does top wealth come from? In the US economy, the wealthiest 1 percent of households mainly earn their wealth from work and entrepreneurship. About 70 percent of these wealthiest Americans are self‐made, rather than inheriting fortunes. Also, 74 percent of them own a business, compared to 13 percent of all households.
Most top wealth consists of business assets, not personal assets. Looking at the top 0.1 percent of the richest households, 36 percent of their combined wealth is equity in private businesses and 33 percent is equity in publicly traded businesses. Another 23 percent is debt, pensions, and other assets, much of which ultimately consists of capital in businesses. Just 8 percent of this group’s wealth are their houses. Thus, the great majority of top wealth consists of business assets, which support economic growth.
Looking just at billionaires, the consulting firm Wealth‐X estimates that just 2 percent of their fortunes consist of homes, yachts, jewelry, cars, and other luxury assets. Consider the richest man in America, Jeff Bezos. His homes are worth about $500 million or more, but that accounts for less than about 0.3 percent of his total wealth of about $180 billion. The great majority of Bezos’s wealth consists of his ownership share of Amazon, a company he founded in his garage in 1994.
People complain that wealth is “concentrated.” But in terms of how it is used, wealth is dispersed across the economy in productive business assets. Bezos’s wealth reflects capital in Amazon’s vast operations, which employ more than a million people. Without capital to support them, those workers would not have their jobs and billions of Amazon packages would not be delivered.
Senator Warren said: “The top 0.1% of families—the richest 1 in 1,000—now have nearly the same amount of wealth as the bottom 90% of American families combined. Meanwhile, for everyone else, opportunity is slipping away.” But with his Amazon assets, Bezos is generating job opportunities for many people while serving millions of consumers. See Chris Edwards at Cato.org.
Bezos creates jobs and increases national prosperity. What does Senator Warren do?
Politics
The Democrats through Reconciliation can raise the debt ceiling and by the end of this month, after a few weeks of political posturing, Democrats will include an increase in the debt ceiling as a provision of a scaled back social welfare bill. Even progressives realize that a small social welfare bill is better than no bill. Moreover, progressives know that if Democrats fail to pass both the bipartisan infrastructure bill and the social welfare bill, Republicans will sweep the midterms.
Biden’s polling numbers are horrible. A writer for the Washington Post explains: Democrats are rightly worried about President Biden’s poor job approval ratings. A closer look at his ratings among independents shows Democrats should be even more worried than they are.
Biden’s overall job approval ratings are bad enough. Only 45.1 percent of Americans approve of his performance per Monday’s RealClearPolitics average; 47.9 percent disapprove. That alone makes Biden less popular at this stage of his presidency than any president in the past 40 years except for Donald Trump.
Among independents, however, Biden is about as unpopular as Trump was at this stage in his presidency. An average of only 39 percent of independents approved of Biden’s performance in the three polls taken between Sept. 18 and 26 that made data available for those voters; 52 percent disapproved. Trump’s comparable numbersamong independents in three polls taken between Sept. 22 and 27, 2017, were 38 percent approval and 50 percent disapproval. That means Biden’s minus-13 net job approval among independents is statistically identical to Trump’s minus-12.
The fact that Biden is about as unpopular among independents as Trump was then shows how truly politically damaged Biden is right now and should set off fire alarms in every Democratic campaign office. Biden’s continued strong support among Democrats likely will not translate into congressional victories. Democrats are largely concentrated in a few states, such as New York and California. This means that Democrats in swing states, such as Arizona and Wisconsin, and swing House districts outside major metropolitan areas should expect baseline support for Biden to be much lower than it is nationwide. This is what the CIVIQS poll, conducted for the progressive website the Daily Kos, shows. This poll estimates Biden’s net approval rating to be minus-17 in Arizona and at least minus-10 in Wisconsin, Pennsylvania, Georgia and North Carolina, all of which have Senate seats up for grabs in 2022.
The polling numbers speak for themselves. Biden can turn things around, but he needs success.
Sociology
Violent crime is out of control in metropolitan Chicago. A reporter for the Washington Post who used to live in Chicago explains:
Drivers who use Interstate 57 to travel into Chicago found their morning commute disrupted in the middle of September. Police officers combed the roadway for evidence, after a female driver told them she’d been shot. (She drove herself to a nearby hospital and was treated for a non-life-threatening wound in the back.)
This year, the Illinois State Police have responded to 185 highway shootings in Cook County, home to Chicago, compared with 128 last year and just 43 in 2018.
Pick just about any street, any neighborhood, in any part of town, and there have been incidents of gun violence, stabbings, carjackings — and not just areas on the West Side and South Side with traditionally high crime rates.
Police have set up roadblocks in River North, home to trendy restaurants owned by Rick Bayless and José Andrés, and hotels frequented by tourists, aiming to catch criminals. There have been recent shootings on a city bus, in the popular West Loop business district, the Uptown neighborhood on the north side.
Chicago is used to summertime crime waves, when people are out and frustrations rise along with the heat. But this year’s outbreak seems unending, leading to a scramble for solutions and much finger-pointing.
The Mayor wants to seize the assets of drug gangs. The gangbangers laugh out loud.
In the short run to reduce crime, Chicago must re embrace its police. Yes, work to improve policing but don’t throw the police under the bus. Increase police presence in high crime areas. Improve lighting. Install more cameras. Increase the probability of being caught. Crime falls as the probability of being caught rises. In Chicago, at the moment only 10 percent of violent homicides are being solved. The gangbangers know they won’t “catch the charge.”
Use data wisely. Who are the gang leaders? Who is a likely shooter? Where are shootings likely to take place? Create gang intervention strategies.
And of course, long term rebuild the traditional family structure and strengthen the bonds of community. The research of Professor Raj Chetty says that more welfare does not per se make things better. His work shows that breaking the culture of poverty is difficult. It is similar to trans national immigration. Find the families who are aspirational and responsible. Change poverty one family at a time.
If more welfare worked, greater LA would not be a third world country.