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Unauthorized Copies Are Not "Pirated" Just Because Microsoft Says It Print
Thursday, 17 November 2011 08:18

Someone has to tell the Post that things do not become true just because Microsoft or some other major corporation assert them. This problem pervades an article on efforts by the entertainment industry to force Internet companies to help them police their copyrights.

The article refers to the material in question as being pirated. This is in fact in dispute. In many cases, for example countries where the specific material involved is not protected by national copyright law, it is wrong to claim that the material is "pirated." It is simply unauthorized. The Post should have used this term throughout the piece, since it has certainly has no reason whatsoever to believe that all the material in question will in fact have been posted in violation of copyright.

It would have been helpful to include some economic analysis in this piece. It tells readers that the industry groups claim that they are losing $135 billion a year due to the circulation of unauthorized copies of their work. If this is true, under standard economic assumptions, the loss to consumers from enforcing copyrights would likely be several times larger.

It is also striking that the Post did not use the dichotomy of big government versus the market that it so often throws into its news articles. In this case, we are discussing a law that involves really big government, since it will impose major sanctions on companies that don't in effect act as agents of the government in policing what people post on the web.

Will Cutting Social Security and Medicare Help Congressional Approval Ratings? Print
Thursday, 17 November 2011 08:06

In an article noting that some Republican members of the supercommittee are willing to raise taxes, the Washington Post told readers that Republicans might be willing to make concessions on taxes because they are:

"Party leaders wary of Congress’s dismal approval ratings are loath to appear incapable of deficit reduction."

The packages that have been talked about in the media include cuts to Social Security and Medicare, both of which are likely to be highly unpopular. It is not clear that members of Congress who are concerned about their approval ratings would go this route. However there is little doubt that the Washington Post (in both its editorial and news sections) will warmly praise members of Congress for reaching an agreement as will other major news outlets. 

The NYT Gets the Story Wrong on College Grads Returning Home Print
Thursday, 17 November 2011 06:09

The NYT had an interesting piece discussing the large number of college graduates who have moved back home with their parents because they have been unable to find jobs. While this is an important economic and social trend, some of the numbers are clearly not right.

For example, it cites Mark Zandi as saying that the average new household adds $145,000 in output to the economy. The median household income is approximately $50,000. Most new households have incomes that are well below the median, since they are typically young people living alone. Even if the expenses associated with forming a household cause them to spend beyond their income, it would take an enormous burst of spending and a huge multiplier to get to $145,000. (Remember, this only counts the spending associated with moving into a new apartment or house, not spending on food, transportation, or health care that is largely independent of living in a separate household.) 

The article also cites Zandi as estimating the pent-up demand for new households at 1.1 million which he puts as roughly equal to the number of vacant units for rent or sale. The Census Bureau reports that there are 7.2 million vacant units for sale or rent, with another 7.2 million vacant units being held off the market for a variety of reasons.

The NYT Disappears the Housing Bubble Print
Thursday, 17 November 2011 05:49

Way back in 2008 much of the world sank into recession because housing bubbles in the United States, the UK, Ireland, Spain and elsewhere began to deflate. This ended a boom in construction and caused consumption to plunge as the housing wealth that provided its foundation vanished.

Unfortunately, memories at the NYT are apparently weak. It told readers today:

"To the roster of pain inflicted by the European debt crisis, add this: rising and persistent joblessness among young Britons."

Of course, the European debt crisis is very much secondary in this story. The proximate cause of the high unemployment in the UK is the decision of the government to impose a harsh austerity package involving cuts in spending and higher taxes. This was a decision by the government, it was not in any way a necessary result of the UK's debt burden as the article implies. Financial markets were willing to lend the UK money at very low interest rates.

Also, the cause of the "debt crisis" was the economic collapse that followed the bursting of the housing bubble. Most of the countries now facing serious problems paying their debt had modest budget deficits or even surpluses in the years prior to the collapse of the bubble.

The NYT also appears to be suffering from the millions/billions confusion that is also afflicting NPR. It told readers:

"Reducing youth unemployment by one percentage point could save £2 million, or $3.2 million, by avoiding youth crime, according to research by the Center for Economic Performance, a research concern at the London School of Economics and Political Science."

Presumably the numbers in this research were billions, not millions. If in fact they were millions, the results were too trivial to bother writing up.

Tell NPR: Solyndra's Loan Was $528 MILLION, not Billion Print
Thursday, 17 November 2011 05:01
In its top of the hour news segment Morning Edition mentioned congressional hearings where Secretary of Energy Steven Chu would testify about the loan guarantees for Solyndra, the now bankrupt solar energy firm. The segment said that the guarantees were for $528 billion. In fact, the guarantees were for $528 million. It makes a difference.
Robert Samuelson Never Heard of the European Central Bank Print
Wednesday, 16 November 2011 07:53

Who can blame him, after all it is hard to get news when you're buried away in the middle of Washington, DC. Samuelson claims that Europe can't bail itself out. He calls on the IMF to come to the rescue -- at the cost of dismantling Europe's welfare state.

Of course there is nothing wrong with Europe's welfare state, as everyone who bothers to look at the data knows. In fact the troubled countries have the weakest welfare states in Europe. The ones with the strongest welfare states, Denmark, Sweden, the Netherlands, and Germany, are doing relatively well.

It is also the case that Europe has plenty of money to bail itself out, it just needs the European Central Bank (ECB) to backstop the debt of the troubled economies. But the folks at Fox on 15th Street, where the guiding philosophy is that a dollar in a worker's pocket is a dollar that could be in a rich person's pocket, are so committed to destroying the welfare state that they are prepared to pretend that the ECB does not exist.

The point here is that the problems facing the euro zone today are primarily demand side. If someone from Mars landed in the euro zone with 600 billion euros (roughly 6 percent of GDP) and started spending them all over the place, the main effect would be to increase demand and employment. This would raise tax revenue and reduce transfer payments, alleviating the budget problems facing euro zone countries. 

By contrast, the burden of an excessive welfare state is a supply side story. The generosity of benefits discourages people from working, reducing the supply of labor. In addition, the money dished out by governments in benefits creates excess demand, leading to inflation. This story does not at all describe the euro zone countries at present.

Germany's "Success" and Southern Europe's Failure Print
Wednesday, 16 November 2011 05:48

The NYT had a misleading piece contrasting the success of Germany with the difficulties facing the countries of southern Europe. The problem is not just a question of southern European countries emulating Germany, as the article implies. The problem is that Germany has acted to shut off the adjustment mechanisms that would allow southern Europe to accomplish this task

At the moment, southern Europe is not competitive with Germany, which is the cause of its large trade deficits. If these countries were not in the euro, they would simply devalue their currency. However, the euro rules out this option to restoring competitiveness.

The alternative would be to have a lower inflation rate than Germany. However, because the European Central Bank (ECB) has committed to sustaining an inflation rate of just 2.0 percent in the euro zone as a whole, there is very little that the southern countries can gain by having a lower positive inflation rate. Their only route within the euro to regaining competitiveness is to have a period of deflation. This is incredibly costly in terms of high unemployment and lost output. (Latvia is going this route now and has an unemployment rate in the high teens, after earlier hitting 20 percent.)

The German position on the heavily indebted southern countries is absurd. It wants to maintain its huge trade surplus with these countries, while still insisting that they make good on their debts. This is like a store owner insisting that his customers keep buying more from him, while still paying off their debts. This is not just a question of southern Europeans being resentful or jealous, Germany is asking for something that is impossible.

The article also likely misled many readers on Germany's growth, telling readers that it grew 0.5 percent in the third quarter. This number is a quarterly growth rate. It is standard in the United States to express growth as an annual rate. Germany's growth in the third quarter was approximately 2.0 percent at an annual rate. 

Keynes, Hayek, and Rand: NPR's False Symmetry Print
Wednesday, 16 November 2011 05:29

Morning Edition did a three part series featuring segments on Ayn Rand, Friedrich Hayek, and John Maynard Keynes. In addition to the fact that two of these three are extreme conservatives, the pieces create a false symmetry on the influence of these three thinkers.

Keynes' work provides the basis for modern macroeconomics. The vast majority of the economics profession works within a framework that was established by Keynes, regardless of their political leanings. The influence of Rand and Hayek is nowhere near comparable.

Hot Air and the Fracking Jobs Boom Print
Wednesday, 16 November 2011 05:02

Most major news outlets have done pieces touting the jobs boom associated with fracking. The story goes that allowing this relatively new form of drilling will both lower energy prices in the United States and also lead to an employment boom in the regions where the drilling takes place. And, how do we know there will be a boom? Well, the industry said so.

It turns out that the employment boom ain't all it is cracked up to be. The environmental group, Food and Water Watch, released a report yesterday that examined job projections for New York, which is considering ending a ban on fracking. The industry had projected that fracking in western New York would create more than 60,000 new jobs. Food and Water watch looked at the experience in the adjacent Pennsylvania counties, which allow fracking, and concluded that the potential job gains for New York are one-tenth as large, or about 6,000. And, this is before taking account of any jobs that may be lost due to environmental damage (e.g. in tourism associated with fishing, hunting, and camping).

In short, for these counties there is not much of an issue of jobs versus the environment. The number of potential jobs at stake are relatively few and most are likely to go to people living outside the region in any case.

[Disclosure: The researcher for this report was my wife, Helene Jorgensen.]

Do Social Security Costs Have to Be "Soaring" in Washington Post News Stories? Print
Tuesday, 15 November 2011 05:42

That's the question millions are asking. In an article on the supercommittee this morning we find a sentence like:

"Republicans indicated a willingness to do so [raise more revenue], aides said, but only in exchange for additional reductions to soaring Social Security and Medicare costs (emphasis added)."

A real newspaper would have just said that the Republicans were demanding "additional reductions in Social Security and Medicare costs." That would provide the same information as the Post's sentence in less space and without the editorializing.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.