Dean Baker

Recent Articles

Immigrant Labor and Supply and Demand

The Times had an article this morning that explained the immigration problem in very simple terms, "this many jobs; only this many visas." As the article reports, there are a huge number of less-skilled jobs waiting to be filled by immigrants, but almost no visas are available for immigrants to come across the border and work at these jobs legally. To prove this case, the article quotes Stephen P. Gennett, president of the Carolinas chapter of the Associated General Contractors of America (a builders' trade group), "we have a problem here, a people shortage." While Mr. Gennett is undoubtedly knowledgeable about the state of the labor market for construction workers, he also represents an organization that has a clear interest in this issue, they want cheap labor. Ordinarily, the claim that there is a people shortage would imply that wages are rising at an extraordinary rate. (This is the way economists ordinarily think about markets, shortages mean higher prices.) This means that...

Do Trade Agreements Have to Be "Free"

I am continually amazed by the apparent need that reporters feel to describe the trade agreements negotiated by the U.S. government as "free trade" agreements. (See the Times article on the Colombian elections for the current target of my wrath.) What possible additional information do reporters and editors believe that they are conveying by including the word "free?" As I have written elsewhere, these agreements do not free all trade -- there are still substantial obstacles facing Colombian doctors, lawyers, and other professionals who would like to sell their services in the United States. This agreement also increases protectionist barriers by stengthening patent and copyright protection. (Even if you think these protections are good, they are still forms of protection.) So, why don't these reporters just save themselves a word and more accurately describe these pacts as simply "trade agreements." --Dean Baker

Right Wing Law and Economics: Free Market Economics at NPR

National Public Radio had a piece this morning about how some think tanks committed to "law and economics" (applying economic principles to the law) were hosting seminars for judges. The segment asserted that these think tanks, which purportedly receive large contributions from the tobacco industry, the oil industry, and other industry lobbies, are committed to free market economics. This should have been one of those paid public relations spots that helps NPR pay the bills. The tobacco industry does not want to be held responsible for things like marketing to children or concealing evidence of the danger of cigarettes. The oil industry doesn't want to be held accountable for the damage that oil does to the environment. Since when is the effort to avoid being accountable for the damages you cause free market economics? If I burn down by neighbor's house (accidentally), and then argue in court that I shouldn't have to pay for rebuilding, is that free market economics? According to NPR...

American Idol Special: Was the Vote Kosher?

First, Beat the Press extends its congratulations to Taylor Hicks, the new American Idol. Now, for the serious question, was the vote fair? The issue here has to do with the voting mechanism. As we know the vote took place through phone-in voting. (People could also text message in their favorites). The problem is that the enthusiastic response by Idol fans often left the phone lines busy. For example, the Washington Post Idol wrap-up reported that a special on-line speed dialing service was able to get through with less than one-quarter of its calls. If most calls don't get through, then the votes recorded for each contestant will end up being roughly the same, regardless of how many people intended to vote for them. This can be seen with a simple example. Suppose the system accepts 10 calls a minute for each contestant (they had separate phone numbers). Now suppose that Katharine McPhee had 1000 calls and Taylor Hicks had 2000 calls. Since the system will only accept 10 calls a...

Can We Buy New Home Sales Data?

The Commerce Department's data for new home sales in April showed a 4.9 percent increase from March. Many news reports took this as evidence of the continued strength of the housing market. A bit of caution is appropriate here. First, monthly data are always erratic. This should be a mantra for anyone trying to track the economy. If a particular data source shows data that are out of line with other data we have on the economy, then it was probably driven by some quirk in the data. Second, the new home sales data show contracts signed, not actual sales. The difference is the number of contracts that are cancelled. A year ago, when buyers thought that prices were going through the roof, cancellations were relatively rare. Now there are reports of cancellation rates in the neighborhood of 20-30% in some markets. This means that completed sales may actually be dropping, even if contracts are rising. There is evidence for this proposition in the April report. The inventory of unsold homes...

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