Slightly left of center economic commentary on news, politics and the economy.

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Forbes and the "Self-Made" Label

by cactus

Forbes and the “Self-Made” Label

I’m kinda busy these days, but this topic is small pet peeve of mine: what the heck is up with Forbes and the “self-made” label? On occasion, I’ve gone through the Forbes 400 list of richest Americans and marveled at who Forbes manages to decide qualifies as self-made.

Case in point. Take Aubrey McClendon, head of Chesapeake Energy, the largest independent gas producer in the US. His great-uncle was a governor and a three-time senator, and also co-founded a large oil company. His father worked for the company for 35 years, and one imagines he wasn’t a janitor or nightwatchman.

McClenond himself will tell you:

I had some early financial advantages in life that probably let me take a chance or two that I wouldn’t have been able to

But to Forbes, McClendon is a self-made man.

A few spots up from McClendon is another self-made dude (according to Forbes), Paul Tudor Jones II. The “II” is not an automatic marker of wealth, but it should have been a tip-off to Forbes that perhaps it was worth visiting “teh google”, which would have been kind enough to guide them toward this interview:

I already had an appreciation for trading because my uncle, Billy Dunavant, was a very successful cotton trader. In 1976, after I finished college, I went to my uncle and asked him if he could help me get started as a trader. he sent me to Eli Tullis, a famous cotton trader, who lived in New Orleans. Eli is the best trader I know, he told me. I went down to see Eli and he offered me a job on the floor of the New York Cotton Exchange.

And the name “Dunavant” should have rung a bell to Forbes – after all, Forbes ranks Dunavant Enerprises as one of the 400 largest private firms in the US. Another thirty seconds of “research” would have told the folks at Forbes this:

His paternal grandfather, Colonel William P. Dunavant, was in the railroad business and created one of the main cotton transporting railroads of the time, a railroad that grew into the southern leg of the famous Frisco Railroad. Billy’s father, William Dunavant, began working for T. J. White and Company at the age of twenty-one. After White retired, the company was passed to William Dunavant; however, because of the untimely death of his father in 1961, Billy Dunavant took over the company at the age of twenty-nine.

I’ll concede that a stream of events where all this is true and Tudor Jones was none-the-less a penniless guy who pulled himself up by his bootstraps in a way that the rest of us were just too lazy to accomplish. It does seem unlikely, though. A more reasonable description of events is that this is another example (I’ve had a post or two on this in the past) that Forbes simply has a tendency label some very unlikely individuals as being self-made. And from what I can tell, this is a Forbes thing; most of the folks Forbes gives this label to that the rest of us might not don’t go around insisting they’re self-made. (I believe I recall one counter-example.) So what’s up with Forbes and the use of this label?
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by cactus

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Same labels, same old stuff

One Salient Oversight sends some thoughts from down under on recycling labels:

Think of the common labels thrown out against political opponents these
days. What sort of political thinking would be labelled in the following
way?

* The propagation of ideas like Darwinism, Marxism, the teachings of
Nietzche, Liberalism, Socialism, Communism and Anarchism.
* A focus on Utopianism that is actually unattainable because of the
underlying conspiracy within the group.
* A movement towards materialism.
* Supporting supranational entities notions such as World Government.
* A control of the media to promote these evil ideas, under the
guise of a “free press” (which is actually controlled by the conspiracy).
* Sexual licence.
* An opposition to Christianity and a promotion of secularism and
atheism – but with an actual evil religion under girding it.

All those descriptions can quite easily be seen as being directed by
conservatives against progressives. Consider the following:

* Conservatives often use progressive ideas as a pejorative, and
will quite easily label a progressive by a general term. Labelling them
as “communists”, for example, even though they don’t espouse Communism.
* An argument that progressive ideas are based upon a vision of a
“false utopia”.
* An argument that progressives cannot tolerate faith and are
inherently materialist.
* Complete opposition to any notion that supranational entities like
the United Nations and the European Union are useful. Such entities are
either threats to freedom or full of incompetents. Those who support
such entities are thus evil.
* That the “Mainstream Media” is inherently “liberal” and has an
agenda to promote a particular point of view under the guise of the
“free press”.
* That sexual licence promoted by progressives will end up leading
to the destruction of traditional marriage and enforced sexual
perversions (like paedophilia and bestiality).
* That a conspiracy of progressives is trying to destroy
Christianity and replace it with atheism, and that such a conspiracy
has, at its base, Satanic and pagan influences.

Sounds terrible doesn’t it? Or maybe it sounds true. Or maybe, just
maybe, someone came up with the same sort of thing during the late
nineteenth century (Protocols of the Elders of Zion) and directed it towards a societal group that they
thought was destroying the world?

In the case of the late nineteenth century, these beliefs were outright
lies that were fabricated with the intention of creating ill-will and
hatred towards their “enemy”. It therefore gives you an idea of how
these people – even those today – think.
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This one by reader One Salient Oversight

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Mike sends a response to rdan on off-label drugs

It is evident that this will lead to less pressure on the Drug Companies
to get their drugs approved by the FDA. I would suggest that we consider
letting the market help. i.e.

1) If a drug is prescribed off-label, then the patient be permitted
to return it to the drug store for a full refund, no questions asked. —
Obviously many people might be helped, and others would not bother to try to
get a refund, but it would encourage the Drug Company to test the drug to be
able to sell it without the possibility of having ineffective drugs being
returned.

2) If a drug is being prescribed off-label, with the cooperation of
the Drug Company, then the patient can go to court and have a presumption
that the drug is the cause of any reasonable harm to the patient. Obviously
one would want a judge to eliminate unreasonable cases, but if it is
reasonable that the off-label use of the drug might have caused the damage,
then the encouraged off-label use would lead to an assumption of guilt until
proven by the preponderance of evidence otherwise.

Obviously the details of these can be adjusted to make them more
reasonable, but their purpose is to let the Drug Company have some reasons
for testing their drugs and for not encouraging their off-label use unless
they feel they are safe and effective.

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Off label drug pushers

FDA doesn’t just approve drugs, it approves drugs for specific uses. However, doctors can prescribe drugs for unapproved, or “off-label,” uses.

Under a law that expired in 2006, pharmaceutical reps were legally able to distribute journal articles touting the benefits of off-label uses. But, according to the Associated Press, FDA maintained some regulatory oversight: “Under the expired law, companies had to submit reprints of articles to the FDA before sending them to doctors. That way, the articles’ accuracy could be reviewed.”

If FDA chooses to finalize this policy, which it published today as “proposed guidance,” drug companies would be able to use journal articles to market off-label uses willy-nilly. The AP article continues, “Under the new proposal, drug companies don’t have to submit articles.”

Off-label use of drugs is big business. According to The Wall Street Journal, “[FDA] is stepping into a high-stakes business issue, because off-label uses of prescription drugs are a mainstay of the industry — an estimated 21% of drug use overall, according to a 2006 analysis published in the Archives of Internal Medicine.”

According to Merrill Goozner at the GoozNews blog, the pharmaceutical lobby pushed for FDA to go forward with the policy which will be a boon for the industry:

So what was in today’s proposed guidance? It pretty much gives industry everything it was looking for. It would allow drug salespersons to drop off article reprints as long as they came from a peer-reviewed journal that had a conflict-of-interest disclosure policy. Articles from industry-funded supplements would not be allowed…

Note what isn’t in the policy: It doesn’t say that the studies of unapproved uses must be from randomized controlled clinical trials, which is the gold standard of medical research.

Rep. Henry Waxman(D-CA) caught wind of this policy last November and asked FDA to refrain from going forward.

We probably will get exactly what we wish for, and then get blamed for the result. I call it sneered at..”Suckers!!”

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Thoughts on the War on Terror as a Label

I have a vague recollection of GW saying something to the effect that if we change our behavior or lifestyle, the terrorists have won. (Anyone have the quote?) As I was waiting, barefoot, for my carry-on, my flip-flops (the easiest thing to travel in these days), my laptop and my cell-phone to clear the X-ray machine, I looked over at the octogenarian lady standing next to me waiting for her belongings. Then I reflected on the fact that GW has not flown commercially since at least the year 2000.

Calling it a “War on Terror” means one day, when we win, we’ll be able to go back to the days when we weren’t fighting. Put another way… one day we’ll be able to go back to the days before our carry-on items were scrutinized this carefully. That day will never come, even if every last islamofascist is rounded up and GW has Osama’s testicles in a jar of formaldehyde sitting on the mantle. Calling it a “War on Terror” is just silly.

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NY Times Calculator Mislabels Salaries as Wealth

Dean Baker has a lot of praise for this calculator:

The NYT has a very nice feature in today’s paper, a calculator that allows you to see how wages have grown over the last four decades. You can make comparisons for a wide variety of demographic characteristics, occupations, and industries. You can even plus your own info in and see how you’re doing compared to your peers. This is nice, it’s giving people real information. That’s what newspapers are supposed to do.

I agree but I have one nitpick with the title which talks about “wealth” whereas the calculator graphs real salaries. Their instructions continue the error in terminology by calling this salary calculator a “wealth calculator”. Could someone let the New York Times know that stocks and flows are different concepts.

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Pork Barrel Spending Labeled “Fiscal Responsibility”

An AP story carried by CNN shows that the White House was paid many visits by “Republican activists Grover Norquist and Ralph Reed” over the past 6 years. White House spokeswoman Dana Perino had an odd way of excusing the visits by Mr. Norquist:

He is one of a number of individuals who worked to advance fiscal responsibility, which is one of the key aspects of the president’s agenda

I seriously doubt Mr. Norquist asked Karl Rove if the pork barrel spending for his clients could be reduced.

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Wage Inflation and Expected Price Inflation

Yesterday, I noted that an expectations un-augmented Phillips curve fits data from the past two decades rather well. Here is an even simpler illustration of the point that lagged price inflation has not correlated with wage inflation for the past two decades.

winlivingston

The figure is a scatter of lgwinfl — the percent annual rate of increase of
Business Sector: Compensation Per Hour (HCOMPBS), Index 2009=100, Semiannual, Seasonally Adjusted from FRED on pcecinf the lagged annual percent rate of JCXFE “Personal Consumption Expenditures: Chain-type Price Index Less Food and Energy (JCXFE), Index 2009=100, Semiannual, Seasonally Adjusted.”

Note that the data are of semiannual frequency, so each raw data point from FRED affects two overlapping intervals and therefore two dots on the graph. I look at data for intervals starting from the second half of 1992 through the second half of 2012 (the most recent available). The labels refer to the start of the intervals.

There is no sign of an effect of lagged price inflation on wage inflation. As noted by Nick Rowe in comments, this is what one might expect if the Fed were successfully targeting inflation. In that case the best estimate of future price inflation would be the target no matter what inflation had recently been. (Actually now that I think about it, current new Keynesian models still suggest a correalation as sticky wages catch up with other than expected price growth. But that’s not the point of this post.)

This is what central bankers and other people mean when they say that inflation expectations are anchored — they mean changes in price inflation don’t persist, because they don’t feed over into wages. However, anchored expectations can also be a statement about expectations. A lack of feedback to wages might be due to something else — Krugman argues that it can occur if there is downward nominal wage rigidity.

I have noted that lagged inflation is correlated with the breakeven inflation rates which would make the return on Treasury Inflation Protected Securities (TIPS) equal to the return on ordinary nominal Treasury Securities. This post looks at 5 year breakevens which should reflect expected inflation over the next five years. Bond traders’ expectations sure don’t seem to be anchored.

Surveys of people believed to be expert are another source of data. I have been playing with the Livingston Expectations urvey. This is a semi-annual survey of forecasts of many variables including the consumer price index. The base year index level is included in the publicly available data set, so it is possible to calculate forecasts for inflation over intervals. Again I look at 12 month intervals (so intervals overlap). The format of the Livinston Survey was changed for 2004. I use data only from the old version. My excuse is that I am keeping the new data (which are publicly available in files with a different format) for out of sample forecasting with no risk of data snooping. The real reason is that I am lazy.

Here is the scatter of the median Livinston CPI inflation forecast for CPI inflation over the following and PCECINF

wagelivingston2

Expectations sure don’t look anchored. Expected CPI inflation seems to increase about one for one with lagged core PCE deflator inflation.

Finally, I cut out the middleman. Here are hourly compensation growth and expected CPI inflation for the same intervals.

wagelivingston3

There is plenty of variation in the median Livinston Survey forecast of inflation, but there is no sign of correlation with wage inflation.

It remains possible that the expectations of people who set wages are anchored. Bond traders and Livingston survey participants don’t set most wages. Managers and other employees of the same firms bargain over wages somehow.

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Oh, dear. Another loopy challenge to yet another ACA provision, this one concerning the Independent Payment Advisory Board.*

A legal-news blog I read mentions an article published today on the National Review Online aspirationally titled “A Strike at the Heart of Obamacare” and subtitled “A case against IPAB is heard by the Ninth Circuit — and eventually by the Supreme Court?”  I don’t normally read the National Review and am not familiar with the article’s author, Quin Hillyer.  But the article discusses in frenzied fashion a case that will be argued on appeal next week at the Ninth Circuit Court of Appeals, the federal appellate court based in San Francisco, that hears appeals in federal cases from west-coast and several mountain states.

I did not know what IPAB stands for, so I clicked the link to the article in order to find out, and learned that the IPAB is “that monstrosity called the Independent Payment Advisory Board (IPAB), a 15-member body invested with virtually unreviewable, plenipotentiary powers.” Glad I did.

The case to be heard on appeal next week, Coons v. Lew, was filed by the Goldwater Institute and several medical practitioners, and challenges the constitutionality of the section of the ACA that creates and establishes the powers of the IPAB, the ACA provision that Hillyer says is “the law’s most obnoxious violations of Madisonian principle and essential constitutional structure.”  Which, best as I can tell from what he says about the provision, absolves the law from any obnoxious violations of Madisonian principle and essential constitutional structure.  I’ll take his word for it.

Coons, Hillyer fumes in dismay, is the only Obamacare case that has included a challenge to the IPAB, and the trial-court judge, whose ruling the plaintiffs are appealing, gave that challenge short shrift.  Why only one case making that argument?! And, why short shrift?! I’m just guessing here, but I suspect that one reason is that one of the two grounds for constitutional challenge–that Congress can’t delegate specific rulemaking functions to executive-branch agencies, because that constitutes a violation of the doctrine of separation of powers–was rejected by the Supreme Court initially many decades ago when certain New Deal legislation was at issue, and that in 1984 the Supreme Court, in an opinion called Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., created what is known as the Chevron doctrine, giving executive-branch agencies broad “deference” to promulgate “regulations,” i.e., sets of substantive (as well as procedural) laws about which the agency has specific expertise.  Which suited conservatives fine during the Reagan and various Bush administrations, which, courtesy of that doctrine, had virtual carte blanche to undermine, say, the Environmental Protection Act or the Securities Exchange Act. But conservatives are having second thoughts about the wonders of the Chevron doctrine these days.

The current Supreme Court Republican majority, of course, shows no inhibition about switching sides in light of new circumstances, such as a Democratic White House.  The Chevron doctrine was too broad, but only very recently has the Court shown interest in narrowing it–in a way that probably would allow the doctrine to be broadened again, during the next Republican administration.

So the Chevron doctrine alone probably doesn’t explain why only the Goldwater Institute and a few Western-state doctors are the only ones to challenge the IPAB and questions related to review of the Board’s payment recommendations. And I haven’t read the trial judge’s ruling, and in fact was unaware of the case until I read Hillyer’s article.  But I’ll go way out on a limb here and suggest another sorta large problem with the challenge to that section of the ACA.  Whatever the Board’s plenipotentiary powers actually are, and whatever “plenipotentiary” means–I actually have no idea what the Board’s powers are, but the title of the agency is after all the Independent Payment Advisory Board, so presumably it’s an advisory board–what is clear is that neither the Medicare Act nor the ACA requires healthcare providers to accept Medicare insurance.  These healthcare professionals are no more required by law to accept Medicare patients than they are to accept patients who have insurance through one or another private company, or who have only catastrophic insurance, or Medicaid, or no insurance.

Their claim, in other words, is ridiculous.  But it does have the advantage of carrying with it the Madisonian Freedom/Liberty tag, a label that the Koch right confers upon anything it wishes, because that surely will gain the attention of the Fab Five’s law clerks once the Court is asked to hear the case.  Normally, they attach this label to anything concerning property rights or wealth or income accrued or to be accrued, actually or ostensibly, through the private sector, but here they’re branching out.  Here, they’re claiming a Madisonian constitutional right by the private healthcare industry to Medicare payments set by the private healthcare industry.

Farm subsidies and Medicare payment levels set by the healthcare industry forever! That was Madison’s motto.

Keep your government hands off my Medicare payment levels!  Who knew Madison was an M.D.?

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*Post edited slightly for clarity after initial posting.

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Accurate reporting

Lifted from an e-mail from reader Jack (http://angrybearblog.com/2013/12/20391.html#comments):
(attribution corrected…irony comes to mind)

Compare Fujita’s conclusion from the Fed paper, here  http://philadelphiafed.org/research-and-data/publications/research-rap/2013/on-the-causes-of-declines-in-the-labor-force-participation-rate.pdf#page=7, with da Costa’s description in the WSJ. da Costa, “Philly Fed economist Shigeru Fujita argues that the shrinking of the U.S. workforce over the past year and half was “entirely due to retirement” of baby boomers.” http://blogs.wsj.com/economics/2013/12/09/work-force-is-shrinking-because-of-retiring-boomers-philly-fed-paper-argues/

Apparently what Fujita concludes has gotten lost in da Costa’s translation, and both writings are in English. The WSJ staff don’t concern themselves with that. A word, phrase or sentence left out here and there can significantly change the originals author’s meaning and the details presented in the body of the original report are wholly misrepresented. That’s what slanted media can do to the public’s understanding of issues, especially when the data being presented is complex and a bit arcane in a layman’s vernacular.

Fujita’s conclusion:

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