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The GDP Grade

Real GDP growth came in at 3.4% for the second quarter. I grade this as the highest possible C you can get before you move into the B range.

I won't award a plus or minus until after the first revision of GDP, but right now we can expect a C+ if things hold steady.

FWIW: Both Bush and Kerry would've been thrilled if they got a high C when they were at Yale.

Grading GDP

The iniital estimate of the real GDP growth rate for the second quarter will come out Friday morning, and it is useful to have a metric to put it in perspective. So, here's a letter grade scale:

• A - 5.4% or higher
• B - 3.5% to 5.3%
• C - 1.6% to 3.4%
• D - 0.1% to 1.5%
• F - 0.0% or less

This isn't a perfect scale, but it's a start.

I constructed this by taking real GDP growth rates from the first quarter of 1983 to the first quarter of 2005 (let's face it, few people remember anything macroeconomic before the 80s boom). I then converted them into percentiles. I then followed a grading curve that I was given in my first college course in 1981:

• A - 83rd percentile or higher
• B - 50th to 82nd percentile
• C - 17th to 49th percentile
• D - 6th to 16th percentile
• F - 5th percentile or lower

Note that this sort of scale shows some grade inflation: an average score will get you to the C+/B- borderline. Last quarter's 3.8% growth would have been a solid B- (which sounds just about right to me).

Carnival of the Capitalists

Carnival of the Capitalists is up this week at Political Calculations. I especially liked the posts entitled:

• "How Many Americans Should Be Working?" from Econbrowser covers the interpretation and misinterpretation of the labor force participation rate. (The author of Econbrowser is on many people's short list for a Nobel Prize in 10-15 years, so read up).
• "Industrial Production" from Brian Gongol discusses 4 myths about the decline of manufacturing in the U.S. (And to quote Firesign Theatre "let me hear it for me" for planting a seed that led to some of this post).
• "The Competition Fallacy" from Catallarchy is a good rant about an often abused point.

Interesting Neuroeconomics Result

Neuroeconomics is the study of how brain physiology affects economic decisions. New research suggests that people who experience less fear may make better investors.

Odd Polygamist Behavior

I'm not sure what to make of this story. As near I as I can figure, the skinny is that 1) a guy moves into a house that he doesn't own, so 2) a bunch of people who also don't own it come and strip it in the middle of the night, and 3) the people with fiduciary responsibility try to figure out what happened. Read the whole thing for yourself.

N.B. This was done late on Sunday night and early Monday morning. Monday is a holiday in Utah (Pioneer Day), so it was the middle of a 3 day weekend.

Cool Application of (Not So) Basic Economics

Prospect theory (OK, some might say that is psychology not economics) suggests that humans will overestimate the costs of rare events. One implication of this is that wer are likely to overinvest in antiterrorism measures.

Via Daniel Drezner.

Victor David Hansen On The Current War and the Last War

This piece is very easy reading, and collects a sequence of points that some people try to keep disparate. They're not:

When some tried to explain that Wars 1-3 (1947, 1956, 1967) had nothing to do with the West Bank, such bothersome details fell on deaf ears.

When it was pointed out that Germans were not blowing up Poles to get back lost parts of East Prussia nor were Tibetans sending suicide bombers into Chinese cities to recover their country, such analogies were caricatured.

The security fence became “The Wall,” and evoked slurs that it was analogous to barriers in Korea or Berlin that more often kept people in than out. Few wondered why Arabs who wished to destroy Israel would mind not being able to live or visit Israel. [emphasis is mine]

A billion Chinese were left alone by radical Islam — even though the Chinese were secularists and mostly godless, as well as ruthless to their own Uighur Muslim minorities.

India too got mostly a pass, other than the occasional murdering by Pakistani zealots. Yet India makes no effort to apologize to Muslims.

It is time to relearn the lessons from the Cold War, when we saw millions of noble Poles, Romanians, Hungarians, and Czechs as enslaved under autocracy and a hateful ideology, and in need of democracy before they could confront the Communist terror in their midst.

But until the Wall fell, we did not send billions in aid to their Eastern European dictatorships nor travel freely to Prague or Warsaw nor admit millions of Communist-ruled Bulgarians and Albanians onto our shores.

The Voice of God

No offense intended to the religious ... but ... let's take seriously the idea that there is a God, and that some people can hear them talking. Further, suppose that those people can correctly identify the gender (or lack thereof) of God.

Let's also suppose that there are charlatans out there who only hear voices, which they attribute to God. According to this, they are likely to hear male voices, and thus tell people that the god in question is male.

So, here's some food for thought. The mix of people hearing God and people hearing voices would not have to be tilted too far in the direction of the latter for a presumption that God is male to become predominant no matter the gender or even existence of a God. Furthermore, this might give a reason for the predominance in numbers of male Gods in pagan societies.

An Argument Economists Will Like

Marginal Revolution has got the goods. "Income" effects associated with daylight savings time may make us less safe. The skinny is that "spring forward" makes us relatively time poor, causing us to rest inadequately.

This is well worth considering when you consider the nonsensical cost-benefit analysis used to justify changes like this (for example, Ed Markey - a Democratic Representative from Massachusetts - was quoted in the July 19 Wall Street Journal as touting the benefits of slowing the rotation of the Earth "The more daylight we have, the less electricity we use.")

Quote About Democrats

James Taranto in a July 20th piece entitled "Extra" at OpinionJournal said this about the Democrats:

What were the Democrats thinking? Didn't John Kerry have "loser" written all over him? After all, he was not only a Massachusetts Democrat but Michael Dukakis's former lieutenant governor. He was as liberal as Dukakis but lacked the inspiring immigrant background: a man who married another man's fortune, from a state where a man can marry another man. [emphasis is mine]