Transcript Conventional Wisdom

Religion, Biology, Politics, and Economics:
The Struggle of Reason with Emotion
copies of this presentation can be found at
www.business.duq.edu/faculty/davies
1
Trade and Per-Capita Income
Conventional wisdom
Trade leads to a shift in wealth from workers and consumers to multinational
corporations, and from developing nations to developed nations.
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$40,000
Greater per-capita trade is associated with greater per-capita income.
$35,000
Per-capita Trade (US$)
$30,000
R2 = 0.56
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
Per-capita Income (US$)
Source: International Financial Statistics, International Monetary Fund, December 2001
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Distribution of Income
Conventional wisdom
Trade results in a concentration of income so that the few benefit disproportionately to the many.
4
$40,000
$35,000
Greater per-capita trade is associated with more equitable income
distributions.
Per-capita Trade (US$)
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
Gini Coefficient (0 = equitable, 100 = inequitable)
Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus,
and Lyn Squire, World Bank, 2002
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Gender Equality and Child Labor
Conventional wisdom
Trade results in the exploitation of women and children.
6
Per-capita Trade (US$, logarithmic scale)
$100,000
GDI measures quality of life (longevity,
education, literacy, income) for women
relative to men.
$10,000
Greater per-capita trade is associated
with
R2 = 0.80
greater gender equality.
$1,000
$100
$10
$1
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender
adjusted HDI)
Source: International Financial Statistics, International Monetary Fund, December 2001, and Human Development Report, United Nations Development
Programme, 2002
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Per-capita Trade (US$, logarithmic scale)
$10,000
Even among middle-lower and lower income countries, greater percapita trade is associated with reduced child labor.
$1,000
$100
$10
$1
0
10
20
30
40
50
60
Children 10 to 14 in the Labor Force (as % of age group)
Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002
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Trade and Unemployment in the U.S.
Conventional wisdom
Trade destroys American jobs.
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January 1975 to June 2006
12%
Greater trade is associated with reduced unemployment.
Unemployment Rate
10%
8%
6%
4%
2%
0%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
Trade (imports plus exports) as % of GDP
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
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Trade and Unemployment in the U.S.
Conventional wisdom
Trade erodes Americans incomes.
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January 1975 to June 2006
Average Real Hourly Earnings (2000$)
$15.00
Greater trade is associated with increased real wages.
$14.50
$14.00
$13.50
$13.00
$12.50
$12.00
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
Trade (imports plus exports) as % of GDP
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
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Global Warming
Conventional wisdom
Global temperatures are rising at an alarming rate.
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1880-2003
0.8
Over the period 1880-2003, global temperatures have risen, on
average, by 1.1 degrees Celsius.
0.6
0.4
0.2
0.0
-0.2
1880
1885
1890
1895
1900
1905
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Temperature Deviation (degrees C above/below the average
for 1979 through 1985)
1.0
-0.4
-0.6
-0.8
-1.0
Source: NASA Goddard Institute for Space Studies
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Compared to the past 400,000 years, the current rise in global temperatures
is neither extreme nor unexpected.
Source: CDIAC, Oak Ridge National Laboratory
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CO2 Levels Cause Global Warming
Conventional wisdom
Global warming is due to man-made CO2 levels.
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1880 - 1985
Temperature Deviation (degrees C
above/below the average for 1979 through
1985)
0.4
0.2
0.0
0
1000
2000
3000
4000
5000
6000
-0.2
-0.4
-0.6
-0.8
-1.0
Man-Made CO2 Emissions (Tg)
Source: www.johnstonsarchive.net/environment/co2table.html
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Income Inequality
Conventional wisdom
The rich are getting richer while the poor get poorer.
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Income Distribution for 1980 (in 2003$)
20%
18%
14%
12%
10%
8%
6%
4%
2%
> $100,000
$75,000 $100,000
$50,000 $75,000
$35,000 $50,000
$25,000 $35,000
$15,000 $25,000
0%
< $15,000
% of Households
16%
1980
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006, Table 673.
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Income Distribution for 2003 (in 2003$)
20%
18%
14%
12%
10%
8%
6%
4%
2%
1980
> $100,000
$75,000 $100,000
$50,000 $75,000
$35,000 $50,000
$25,000 $35,000
$15,000 $25,000
0%
< $15,000
% of Households
16%
2003
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006, Table 673.
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U.S. Manufacturing
Conventional wisdom
The U.S. manufacturing sector is in decline.
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45%
40%
Since 1948, employment in Services industries has
grown by 50% while employment in Manufacturing
industries has declined by 50%.
35%
30%
25%
20%
15%
10%
5%
Manufacturing, Mining, and Natural Resources
Services
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
1957
1954
1951
0%
1948
Employment as % of Civilian Labor Force
50%
Government
Source: Bureau of Labor Statistics (via www.economy.com)
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120
80
60
40
20
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
1957
1954
1951
0
1948
Industrial Production (2002=100)
100
While the number of American jobs in manufacturing has been
declining, American production of industrial goods has been
rising. This implies that American manufacturing is becoming
more efficient as it produces ever more output using less labor.
Source: Bureau of Labor Statistics (via www.economy.com)
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Minimum Wage
Conventional wisdom
Increases in the minimum wage help the poor.
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Less than HS Education (1984-2004)
16%
14%
Increases in the minimum wage are associated with increases in
unemployment among the lesser educated.
Unemployment Rate
12%
10%
8%
6%
4%
2%
0%
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
Min Wage as Fraction of Avg Hourly Wage
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
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College Education (1984-2004)
4%
Unemployment Rate
3%
3%
2%
2%
1%
1%
Increases in the minimum wage are not associated with increases in
unemployment among the better educated.
0%
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
Min Wage as Fraction of Avg Hourly Wage
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
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Price of Gasoline
Conventional wisdom
The price of gas is rising.
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Average Retail Price per Gallon of Gasoline
$2.50
$2.00
$1.50
$1.00
$0.50
The price of gas rose more than sevenfold from 1967 through 2005.
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
$0.00
Source: Statistical Abstract of the United States, 2003 (Table 725), 1996 (Table 759) 1995 (Table 775).
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Per-Capita Disposable Income
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1979
1977
1975
1973
1971
1969
1967
$0
1981
Per-capita disposable income has risen more
than ten-fold from 1967 through 2005.
Source: Bureau of Labor Statistics (via www.economy.com).
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Cost of 1 Gallon of Gas as a % of Disposable Income
0.014%
0.012%
0.010%
0.008%
0.006%
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
0.000%
For gas today to be as expensive as it was in 1981, gas would have to
cost $4.00 per gallon.
1969
0.002%
For gas today to be as expensive as it was in 1967, gas would have to
cost more than $3.25 per gallon.
1967
0.004%
Source: Bureau of Labor Statistics (via www.economy.com).
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Social Security
Conventional wisdom
People need Social Security to insure they can survive retirement.
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$60,000
$50,000
Expected tax payments and benefits reflect
the likelihoods of employment and mortality.
$40,000
$30,000
$20,000
Expected annual Social Security tax payments
$10,000
100
97
94
91
88
85
82
79
73
76
70
67
64
61
58
55
52
46
49
43
40
37
34
31
28
25
22
$0
($10,000)
Expected annual Social Security benefits
($20,000)
($30,000)
Compiled from data published in 2003 Statistical Abstract of the United States, U.S. Bureau of the Census, and provided by the Social Security Administration
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$320,000
$270,000
Expected annual benefits from privatized account
This chart assumes that 100% of the
worker’s current Social Security taxes are
diverted to a private investment account.
$220,000
$170,000
$120,000
$70,000
Expected annual Social Security tax payments
77
73
69
65
61
57
53
49
45
41
37
33
29
25
21
17
13
9
5
1
$20,000
($30,000)
Compiled from data published in 2003 Statistical Abstract of the United States, U.S. Bureau of the Census, and provided by the Social Security Administration
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Religion, Biology, Politics, and Economics:
The Struggle of Reason with Emotion
copies of this presentation can be found at
www.business.duq.edu/faculty/davies
34