Dean Baker

Recent Articles

Correction: Productivity Growth Clocks in at 3.2 Percent

I plead guilty to the same sort of sloppiness I have noted elsewhere. Earlier this week I commented on the coverage of Commerce Department's release of data for March on consumer spending and prices. I then noted that the consensus forecasts for first quarter productivity growth appeared to be too high. I based this on the fact that the hours data reported in the monthly employment reports indicated that hours were growing at close to a 4.0 percent annual rate in the quarter. As it turned out, hours growth was reported as 2.5 percent. What went wrong? Well, the hours data that go into the published index in the employment reports are for production and non-supervisory workers in private non-farm employment. That means that the index excludes the impact of changes in employment and hours for production and supervisory workers. (There are also some private sector workers who are not in the business sector, for example workers in non-profit universities or hospitals.) Since the vast...

Corruption in the Pharmaceutical Industry: Why Is Anyone Surprised?

The New York Times has run many excellent articles over the years describing various forms of corruption in the pharmaceutical industry. (The latest describes the battle over monitoring the prescribing practices of individual physicians.) The one thing missing from these articles is any economic analysis. Every person who has suffered through an introductory economics class has heard the story about how government intervention in the market leads to corruption. Economists always rant above how trade protection or various forms of government regulation inevitably lead to gaming of the system and rent-seeking behavior. If we expect to see such corruption when a tariff or quota raises clothes prices by 15-20 percent, why wouldn't we expect to see such corruption when drug patents raise prices by 200 percent or more? Calling government protection a "patent" or defining it as an "intellectual property right" does not change the economic model one iota. The sort of incentive for corruption...

Open Borders Versus Die at the Border: Can't Experts See the Difference?

I just heard economics commentator Chris Farrell on Marketplace talking about the United States open border immigration policy, under which ambitious hardworking immigrants can freely enter the country. Excuse me, but what planet is this guy on? Open borders mean that a Mexican doctor, an Indian lawyer, a Brazilian economics commentator can come across the border in any form of transportation they like, and work wherever they like, at whatever pay they are willing to accept. The United States does not have this policy or anything like it. It has a policy that sharply limits legal opportunities for working in the country. The policy is that if you are willing to risk death in a dangerous border crossing and risk facing deportation at any time, then you can work in some sectors of the economy illegally. Doctors, lawyers, and economic commentators in the developing world are not willing to take these risks. Furthermore, the businesses that hire such people are not willing to risk the...

Sweatshops in Jordan

Steven Greenhouse had an excellent piece in today's New York Times about sweatshops in Jordan that manufacture apparel for export to the United States. This industry has been developed largely as a result of a trade agreement that Jordan signed with the United States in the late nineties. The article describes slave-like conditions, as foreign workers routinely have their passports confiscated by factory owners so that they cannot freely leave. According to the article, workers can be forced to work up to 48 hours straight, are routinely ripped off for their pay, and are beaten if they complain. Two aspects of the article raise especially interesting questions. First, the article indicates that the apparel jobs have gone almost exclusively to foreign (largely Bangladeshi) workers. It is unlikely that the trade agreement was sold in Jordan based on the jobs that it would create for guest workers. The benefits to Jordan's economy from this trade would be very limited. Second, the Jordan...

Cash Out Refinancing and the Housing Crash

At the risk of damaging my standing as one of the leading proponents of the housing bubble argument, I would take issue with the assessment of a Washington Post article . The article reported that the percentage of people refinancing homes with mortgages that are larger than the original mortgage (in other words, pulling equity out of their home) hit a 16 year high in the first quarter. The article rightly notes that people cannot use their homes as banks indefinitely, and that this process depends on continually rising house prices. This is all fair enough, but there is a key issue that is missing in this analysis. The main reasons to refinance are to save money on interest by taking advantage of lower interest rates and to pull equity out of your home by taking out a larger mortgage. Well, mortgage interest rates are back up to levels not seen since 2002. This means that few homeowners can save money by refinancing at a lower interest rate. Those looking to do so almost certainly...

Pages