What to Read on State Finances

The Shameful Attack on Public Employees — Robert Reich

They say public employees earn far more than private-sector workers. That’s untrue when you take account of level of education. Matched by education, public sector workers actually earn less than their private-sector counterparts.

The final Republican canard is that bargaining rights for public employees have caused state deficits to explode. In fact there’s no relationship between states whose employees have bargaining rights and states with big deficits.

The Texas Omen — Paul Krugman

Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.

Some Right, Some Wrong in “60 Minutes” Story on State Budgets — Nicholas Johnson

[States] aren’t guilty of “reckless spending.”  Total state and local spending, not including federal grants, is no larger now as a share of the economy than it was 20 years ago…  State general fund spending in 2011 will be 6 percent lower than it was in 2008, without adjusting for inflation…

Behind the Population Shift — Edward L. Glaeser

Low incomes and productivity in the growing states of the Sun Belt strongly suggest that their expansion is not driven by outsize economic success.

A rich body of research shows that regulation, which is intense in the Northeast and California but lax in the Sun Belt, explains why housing is supplied so readily down South. The future shape of America is being driven not by quality of life or economic success but by the obscure rules regulating local land use.

The Ethical Investor: December 2010

Everyday, the hedgehog walks through the forest. And everyday, the fox comes up with a new way to attack him. (Foxes are clever that way.) And everyday, the hedgehog rolls into his protective shell, and the fox fails. “The fox knows many little things,” concluded the ancient Greek poet Archilochus, “but the hedgehog knows one big thing.”

In this example, which philosopher Isaiah Berlin made famous in a 1953 essay, the hedgehog is superior, at least in a survival-of-the-fittest sense. But according to social scientist Philip E. Tetlock, in the human world, it’s the reverse.

Berlin used the two animals to classify great thinkers. Plato, Dante, and Hegel were hedgehogs. They each centered their philosophies around one big idea. Aristotle, Shakespeare, and Goethe were foxes. They saw the world in a more complex light — or, alternatively, they plucked insights from many different fields.

Tetlock used Berlin’s classification system to test today’s “experts” in his 2006 book Expert Political Judgment. He found that, while most experts are poor predictors, the “foxes” were correct more often. If you’re trying to predict the future, it turns out, you’re better off knowing many little things, rather than one big thing.

Now for the apology.   Continue reading “The Ethical Investor: December 2010”

Quote of the Day: Felix Salmon

My feeling about an inflation target is that its mere existence is not going to convince anybody that inflation is on the way. So unless and until the Fed can credibly explain how it’s going to create 3% inflation, it shouldn’t even think about unveiling a target. And if it can credibly explain how it’s going to create 3% inflation, then it doesn’t need the target at all.

— Felix Salmon (Reuters)