Reported Satisfaction with Life across Countries

A look into life satisfaction across countries yields interesting regional and historic patterns. In the graph below (click here to enlarge), we plot average reported life satisfaction against national GDP per capita (2006 figures). Responses to the question "are you satisfied with your life?" were on a scale from 1-10, with 10 indicating "satisfied."

From this, one trend stands out starkly--the similarity of response across formerly communist and eastern european nations as well as the similarity of response across developed western economies (in particular across largely Protestant nations). There is a great gulf, however, between the reported life satisfaction of these formerly communist nations and western nations. The graph below (click here to enlarge) gives the distribution of satisfaction with life from 8 formerly communist eastern european nations and 8 western, non-communist nations. The countries are ordered by GDP per-capita. Numbers are in terms of deviations from average reported levels, in order to make the differences more stark. A green area indicated a higher concentration of responses than a red area. We see that the concentration of reported life satisfaction is increasing with GDP and in general is fairly uniform across formerly communist nations and across western non-communist nations.

Imprisonment, Torture, Killings and Assassinations

There have been several interesting stories about the cost of imprisonment, torture, killing and assassinations in the U.S.'s War on Terror.  For example, in Afghanistan one often hears of an ineffective criminal justice system causing the U.S. military to release captured militants in the hopes that they can kill them next time.  Similarly, this news article discusses the Obama administration's increased reliance on assassination attempts in, for example, Yemen, Afghanistan, and Pakistan.

Corrections suggests that this is in accordance with the Obama administration's decreased reliance on torture and the substitutability between targeted assassinations and capture and torture.  This is depicted graphically below (click to enlarge).  The straight red line depicts the Bush administration's capability to substitute capture and torture for assassinations.  The curved line depicts their preferences, and the red dot depicts the best mix of capture and killing.  We can imagine that the Obama administration through rhetoric has decreased its capacity to capture and torture terrorists (if only due to political ramifications).  They retain the same ability to kill as the Bush administration, so their budget line is the straight blue line.  If killings and assassinations are substitutable enough (for example) then it's possible the Obama administration will not only substitute away from torture and toward assassination but will actually have more assassinations (rather than less of both), which can be seen as the blue dot.

U.S. Log GDP with Error Bands of +/-3%

Below, Corrections depicts our own version of Figure 2.4 in Ed Leamer's Macroeconomic Patterns and Stories.  It depicts, from the perspective of 1970, log GDP.  Then, from 1970+3% GDP and 1970-3% GDP, it simulates a permanent 3% growth trend.  One can see that growth, remarkably, stays within this rather narrow corridor.  

Forecasting June's Payroll Change

Below, I depict on the Y-axis the change in payroll jobs.  On the x-axis the average growth in payroll jobs in the three months preceding that month.  The red line is the average growth in the three months preceding July 2011.  This joint distribution may give an idea of what to expect from this month's payroll figures.

Argentine Break

Detrended Argentine real GDP/capita 1950-2008 (detrended at 2%).  Recall that a straight horizontal line represents a constant 2% growth rate.  Note the break from 1979-1980 onward (click to enlarge).

U.S. Federalism

Below, Corrections depicts the relatively stable pie of relative U.S. government spending per year between the Federal government and State/Local governments (click to enlarge).  Since 1956, a relatively steady progression of relative expenditures back to the states, after a large Federal government expansion during the Great Depression and World War II.

Four Great Depressions

Corrections has been reading Great Depressions of the Twentieth Century (Kehoe and Prescott, eds.), and found it intoxicating.  Below, Figure 1 from Kehoe and Prescott's first chapter: detrended GDP/capita for four countries between and including 1928 to 1938 (click to enlarge).  

The severity of the decline in detrended real GDP/capita is quite large.  Remember, staying at the starting line of 100 requires 2% growth every year.  

U.S. Monthly Inflation - Annualized

U.S. monthly inflation -  annualized (click to enlarge).

A stroll down memory lane

In January of 2009, Christine Romer and Jared Bernstein predicted the effect of the coming stimulus on unemployment (full text available here). Inspired by others, we look at how well grounded these predictions turned out to be. Below is the monthly series of actual unemployment (the red dots) superimposed over the Romer and Bernstein predictions. They provided predictions of both what the world would look like with the stimulus (the dark blue line) and what it would look like without a stimulus (the light blue line). More than woefully incorrect, these predictions suggest that world we live in post-stimulus is worse than the apocalyptic outcome of the government doing nothing, as imagined by these supporters of the failed stimulus.
(click here to enlarge)

Lottery Winners

Winning a $10,000 lottery doesn't change the chance individuals declare bankruptcy.  Winning between $50,000 and $150,000 only forestalls it.  This from Hankins, Hoekstra, and Skiba (Review of Economics and Statistics, Forthcoming: "The Ticket to Easy Street? The Financial Consequences of Winning the Lottery").

Below, they produce the relative probability that an individual declares bankruptcy before and after winning the lottery in two different amounts (click to enlarge).  The probability doesn't change for individuals winning less than $10,000.  The probability dips for two years after winning more than $50,000, but the next three years make up for that deficit.

Remarkably clever paper. 

Rule of thumb: cash transfers to the poor do nothing in the long run.