Topic: General

Uh Oh: The North Koreans are Mad and Won’t Take it Any More!

It’s hard being dictator of North Korea.  You’re a god, or the nearest human thing to it, but you aren’t allowed any time to yourself.  The rest of the world privately admires you and publicly envies you. 

Some of them even mock you. 

In 2002 Pierce Brosnan played a hero in fighting against the Korean people in the James Bond movie “Die Another Day.”  Worse, two years later the great and wonderful “Dear Leader” Kim Jong-il was mercilessly insulted by the movie “Team America:  World Police.”  Unable to stop him from impoverishing his desperate people to build nuclear weapons, the U.S. government turned loose the most fearsome of weapons against the movie-loving Kim:  Hollywood.

Of course, the Dear Leader was a convenient target, with his bouffant hairdo and platform shoes.  As I point out in my article at American Spectator online:  “The great and wonderful man-god was too busy traveling the country giving guidance to farmers and workers whose farms and workplaces were no longer operating to take time off to retool his appearance to satisfy international critics.  But he persevered, drowning his many sorrows in Hennessy cognac while comforting the beautiful young virgin girls who flocked to his side.”

Now “Great Successor” Kim Jong-un has taken over the sacred mission of his grandfather and father:  to reinvigorate monarchy in Asia.  He has shown the way to the next century by dancing with Mickey Mouse and partying with Dennis Rodman.

Naturally, Washington has rejected Kim’s friendly demands for tribute to remedy the economic injustices created by the unfair success of market economics compared to Stalinesque central planning.  Now the common criminals who run Washington—at least there is one thing Americans and North Koreans can agree upon—have turned again to their secret agents in the movie industry. 

Military Cooperation with China: RIMPAC as a Model for the Future

The Rim of the Pacific Exercise recently concluded in waters near Hawaii.  For the first time China joined the drills.  It was a small but positive step for integrating Beijing into more international institutions.

RIMPAC started in 1971.  This year there are 23 participants, including the People’s Republic of China, which explained that the maneuvers are “an important mission of military diplomacy” and a means to strengthen “friendly relations with countries of the South Pacific through public diplomacy.”

Beijing’s participation comes at a time of significant regional tension.  The PRC’s more aggressive stance in asserting its territorial claims in the South China Sea and Sea of Japan have led to dangerous maritime confrontations. 

RIMPAC offers an opportunity to create some countervailing pressure in favor of a less threatening regional naval environment.  At the political level inviting Beijing to participate demonstrates respect for China’s increased military power and international role.   Doing so also counters the charge that Washington is seeking to isolate and contain the PRC.

Moreover, inclusion hints at the benefits for Beijing of a civil if not necessarily friendly relationship with its neighbors as well as America.  No doubt, the direct pay-off for China from RIMPAC is small. 

But to be treated as an equal and regular participant in international affairs is advantageous.  Although any great power must be prepared to accept unpopularity when necessary, in general a friendly environment is more conducive to ensuring both peace and prosperity. 

Are Beef Prices at An All-Time High?

The press is reporting record prices for beef. According to a June 18 story in the New York Post,

“It’s a barbecue-season bummer! Meat, poultry and fish prices have spiked an average of 8 percent since last year — soaring to an all-time high, national data show. The cost of ground beef has gone up 11 percent… ‘Everything is going through the roof,’ said Jim Hopkins, 52, a supervisor at Associated Supermarket in the West Village, who has worked in the grocery business for 30 years. ‘I’ve never seen increases like this — where they jump as much as this.’”

 

 

Yet the World Bank data shows remarkable stability in the inflation-adjusted price of ground beef over the last half century. That is all the more remarkable considering that:

  1. There were 3 billion people in the world in 1960. Today there are 7 billion of us.
  2. In 1960, the average income per person was $3,000 (in inflation adjusted 2000 dollars). Today it is $7,500.
  3. More people earning more money = higher demand for meat, especially beef.
  4. Yet, beef prices are, roughly where they were in 1960.

So, cheer up and don’t let those pessimists spoil your barbecue-season.

Are Economists Captured Too?

Economists have long worried about regulatory “capture,” the process whereby regulators become cozy with the businesses they regulate. This is one reason for caution about the value of regulation.

According to economist Luigi Zingales (Chicago), 

The very same forces that induce economists to conclude that regulators are captured should lead us to conclude that the economic profession is captured as well. As evidence of this capture, I show that papers whose conclusions are pro-management are more likely to be published in economic journals and more likely to be cited. I also show that business schools’ faculty write papers that are more pro management. I highlight possible remedies to reduce the extent of this capture: from a reform of the publication process, to an enhanced data disclosure, from a stronger theoretical foundation to a mechanism of peer pressure. Ultimately, the most important remedy, however, is awareness, an awareness most economists still do not have.

In other words, “Economist: heal thyself!”

Topics:

Remembrances of Prof. M.A. Adelman

As Peter noted, M.A. “Morry” Adelman—a great economist, mentor, and friend—passed away last month at the age of 96. The first paragraph of The New York Times obituary (June 8, 2014) had this to say of Professor Adelman’s passing.

Morris A. Adelman, an energy economist who marshaled free-market principles and hard data in arguing that the world’s oil supply was not running out, died May 8 at his home in Newton, Mass. He was 96. The Massachusetts Institute of Technology, where he taught and researched for 65 years, announced the death on May 15.

I first had the pleasure of meeting Morry in June of 1967, shortly after I had joined the faculty at the Colorado School of Mines. The Rocky Mountain Petroleum Economics Institute had convened a meeting at Mines; Morry was one of the speakers on a star-studded program. I had been invited to edit a book, Essays in Petroleum Economics, of the conference papers.

As a rookie facing what was, at the time, an array of the most notable petroleum economists in the world (Adelman, Richard Gonzalez, Minor Jameson, John Lichtblau, Milton Lipton, Wallace Lovejoy, Stephen McDonald, James McKie, and Frank Young), I was, to put it mildly, anxious. But, thanks to the likes of Adelman, that problem was quickly put to rest.

Morry knew how to mentor young rookies. He also knew more about the oil industry–even the institutional details–than most of the conference representatives from the industry. He was not only a master of applied economics and detailed, sharp pencil work, but was an economist with a personality–a very sharp wit, very sharp indeed. This wit and his personality come through loud and clear in his writings. So, Morry remains with us, fortunately.

As I reread “Trends in Cost of Finding and Developing Oil and Gas in the U.S.”, which was Adelman’s chapter in Essays in Petroleum Economics, I am struck by just how careful he was to protect his text–a master of rhetoric, too. He paid the most careful and anxious attention to stressing that he was not making predictions, but only presenting short-term projections. As for intermediate projections, beyond 1980, Adelman thought (in 1967) they “only were of minor interest.” And “projections past the year 2000 are funny because it is better to laugh than to weep in the vain presumption of thinking we can see that far ahead.”

That said, Adelman’s chapter does suggest that he had what turned out to be very clear ideas about the possible long-run scenarios:

Nobody can tell what will happen either to energy demand or supply. All we need mention are a decisive breakthrough on: shale oil extraction, or direct finding of conventional crude oil, or coal conversion to liquids, or nuclear power, particularly the fast breeder reactor, or the fuel cell and other methods of energy conversion, not to mention the electric automobile. A major change in any one of these would put altogether new perspectives on developments in oil supply and cost.

Is Obama Really the Most Frugal President of the Past 50 Years?!?

Two years ago, there was a flurry of excitement because MarketWatch journalist Rex Nutting crunched annual budget numbers and proclaimed that Barack Obama was the most fiscally conservative president since at least 1980.

I looked at the data and found a few mistakes, such as a failure to adjust the numbers for inflation, but Nutting’s overall premise was reasonably accurate.

As you can see from the tables I prepared back in 2012, Obama was the third most frugal president based on the growth of total inflation-adjusted spending.

And he was in first place if you looked at primary spending, which is total spending after removing net interest payments (a reasonable step since presidents can’t really be blamed for interest payments on the debt accrued by their predecessors).

So does this mean Obama is a closet conservative, as my old—but misguided—buddy Bruce Bartlett asserted?

North Korean Purge Opportunity for America to Extricate Itself from Potential Conflict

It doesn’t pay to be number two in North Korea.  In December the young dictator Kim Jong-un executed his uncle, Jang Song-taek, supposedly Kim’s top advisor.  Now Vice Marshal Choe Ryong-hae, who climbed atop Jang’s corpse, has been relieved of his important positions.

Choe’s fall is particularly important because, though he was an aide to Kim’s father, Kim Jong-il, he rose rapidly under the younger Kim.  Dumping Choe reshapes the political environment of Kim’s making.

While Kim’s dominance in Pyongyang does not guarantee the regime’s survival, it dampens hope for any change outside of Kim.  Today’s Korean Winter isn’t likely to give way to a Korean Spring. 

Moreover, nothing suggests that the North’s communist monarchy is about to give way.  Many observers have waited a long time for regime collapse in the North.  They probably will have to wait a lot longer.

So far Kim Jong-un doesn’t appear to be much interested in reform.  If anything, he is more committed to his government’s nuclear weapons program and confrontational foreign policy than were his predecessors.

North Korea’s policy toward the South has oscillated wildly, but has headed mostly downward.   The North also appears to be preparing a fourth nuclear test.  The DPRK recently test-fired two medium-range missiles, predicting “next-stage steps, which the enemy can hardly imagine.”

The Obama administration obviously is frustrated, and reportedly is considering easing preconditions for resuming the long-stalled Six Party Talks.  However, it’s unlikely that renewed negotiations would lead anywhere.  Which has left the major U.S. response to tie itself closer to its South Korean ally, loudly reaffirming that America will defend the Republic of Korea if necessary.

Washington needs to reflect first on why the North is such a problem for America.  A small, impoverished, and distant state, even with a handful of nuclear weapons (but no delivery capacity), obviously is no match for the globe’s superpower.  Ordinarily the former wouldn’t be interested in the latter.