Prostitution is just a job...

Hi -

Well, a number of sources have confirmed this story, that the German attempts to get people off the dole and back to work are having some unintended consequences. The story is not exaggerated: the original German is here and there's little in the Guardian article that doesn't hold up.

It's a typical clueless bureaucratic screw-up: if a bordello, which is legally operating and is willing to provide the usual amenities to working there (health care, pension, etc), makes any woman looking for work an offer to work in the bordello - it doesn't have to be as a prostitute, but... - and the woman refuses, she may be docked on her dole payments for refusing employment.

Prostitution has been legal here since 2002. As an economist, I know that it is NACE rev 1.1 category 93.05, Other service activities n.e.c., i.e. other personal service activities not elsewhere classified. This is, of course, based on ISIC Rev 3.1 code 93.09, which corresponds to NAICS 2002 classification 81.2990.

This class includes:

- activities of Turkish baths, sauna and steam baths, solariums, reducing and slendering salons, massage salons etc.

- astrological and spiritualists' activities

- social activities such as escort services, dating services, services of marriage bureaux

- pet care services such as boarding, grooming, sitting and training pets

- genealogical organizations

- shoeshiners, porters, valet car parkers etc.

- coin-operated personal service machines (photo booths, weighing machines, machines for checking blood pressure, coin-operated lockers etc.)

The key is here identifying escort services and data services as being the closest analogues to bordellos, which are specifically not classified (illegal activity in most classification countries: for this reason there isn't a category for illegal drug trading, unless you decide to use the classification 99.00, which is...

activities of international organizations such as the United Nations and the specialized agencies of the United Nations system, regional bodies etc., the International Monetary Fund, the World Bank, the World Customs Organization, the Organisation for Economic Co-operation and Development, the Organization the Petroleum Exporting Countries, the European Communities, the European Free Trade Association etc.

But getting back to the point of the article above: it's just a bureaucracy running its mindless way through its procedures. At some points virtually all such bureaucracies will come up with something mindless - when I got married, I had to provide proof that I didn't have a police record, an easy thing to get in Germany but impossible in the US: I had to file a form for the release of the requirement of providing proof that I didn't have a police record - and shouldn't really be taken as proof of the perfidy and licentiousness of German society.

Because if you live here for any length of time, you realize that you often don't need proof.

John

Social Security...

Hi -

Short post on this topic...

Here is a link to a great take on social security.

He wants out of it entirely. Unfortunately, that ain't easy.

But I still think that social security boils down to a simple point, that income transfer is, long-term, dependent on demographic factors that any social security system using income transfer cannot control. And demographics are invariably ignored until it is too late (as the Europeans largely are finding out).

The alternative to income transfer is to save. Either you have to all-of-a-sudden come up with whatever gazillions of dollars you need to create what are basically trust funds with annuities for all retirees when you set up the system, or you make the transition take two generations to be complete: the first generation continued to be funded by income transfer; the second generation starts saving in addition to income transfer, and the third generation is purely savings.

Anything wrong with this? The major arguments I am seeing are rather obvious partisan resistance to fixing the system before it is broken. The problem here is that if you even get close to waiting for the system to break, you have to transition over several more generations before the system is fixed.

John

Blog Blog Blog...

Damn. I've been trying to get some time free, and with the combination of work and family it simply hasn't happened.

But here is something worth posting about. It's from Cold Fury and looks like this.

Now there is a man of brevity that I can agree with.

Now I will take a moment and rant.

One of the things I'm trying to deal with at work is new data sets. The EU is finally getting around to moving to chain weighted time series for NIPA data; the problem is getting people's minds around the concept.

Basically, it means that as long as our customers haven't made the transition from 40 years of economics teaching - that the deflated components of GDP add up - to the new, bright and improved way of statistics - that the deflated components of GDP no longer add up - we are screwed. Of course, we can't do anything about that: Eurostat et al make these kinds of decisions without, apparently, thinking these things through.

So we abandon 40 years of economics that accepted substitution bias in NIPA deflators and periodic revisions that sometimes turned recessions into non-recessions and have replaced it with something that no one except statisticians and economists understand. Or have I missed something here? All I know is that my colleagues aren't happy, especially those who are trying to work with NIPA accounts, and that trying to explain this brave new world of statistics to customers isn't gonna be easy.

But then again, we, the poor data users, aren't the customers of statistical offices: we are the users. From what I can see of the arguments made for using chain weights, it means that politicians - and politicians are the true customers, even if virtually none of them actually use the numbers - no longer have to fear statistical revisionism that eliminates whatever claims to glory that politicians can make to having caused or aided economic growth - we all know that in reality the vast majority have little or nothing to do with aiding growth, and if truth be told the majority probably hold growth back - and that those running statistical offices can now truthfully claim that their numbers will indeed be more accurate than they have been in the past.

But it doesn't mean that the numbers will necessarily mean the same. And working out what the numbers actually mean is a significant portion of my work, and it just got harder.

So posting will remain fairly sparse until I get my numbers set up in nice and tidy rows, ready to be crunched for new models...

John

PS: On the other hand, I can no build my models with consistency between NIPA, Input-Output and Industrial statistics, something that pretty much has been very, very tenuous in the past, to put it mildly... and I've got some really, really great deflators now for my services sectors that are the best I've ever come up with. You see, we have only nominal numbers for our services sectors and by calculating the prices - price as a function of input costs plus profits - I can then calculate real numbers, which is what we forecast. While the calculated prices are not the ones that Eurostat recommends using in its handbooks, the reason for not using them is that prices should be a function of value times amount. But when you don't have amount, then you do it via calculated prices. And it beats not being able to do it at all!

Getting Back in to the Swing of Things...

Hi -

Well, I actually have a "Stack of Stuff" ready to go but will need a few days to get some of the things connected.

Suffice to say, and this bears repeating and repeating: there are more things going on that most people can or would want to believe. Stay tuned...

European Superiority?

I've just sent this to the folks at Powerline for this particular post and thought I'd make some amends for not having written much in the last several weeks...

Hi -

I've been living in Europe now for almost 20 years (did my graduate degree here, then worked in Switzerland for 6 years and have been working in Germany now for the last 7 years for Europe's biggest private economic and financial research institute as econometrician, industrial forecaster and rater of closed real estate investment funds in Germany). Hence I feel somewhat qualified to speak out on these matters... :-)

I've seen those books you mentioned yesterday. I'm intimately familiar with the European economies, especially on the supply side of economic development (GDP is created by the supply side; most economists only pay attention to the demand components of GDP, since it's a *lot* easier to understand where the value added is spent, instead of where it is created!), and there huge problems with the European economies that make me simply shake my head in wonder when anyone speaks of "European superiority".

Let's put some of this in perspective: indeed, perspective is the operative word here. The European economies we see today have evolved according to careful planning and with a clear view of where they want to go. It's a world-view based on the events of the 20th century, the destruction that accompanied these events, and a fervent desire to avoid the social dissensions and tensions that ultimately led to WW2. Hence the development of the social state in Europe, of cradle-to-grave government control and the abdication of personal responsibility for social responsibility. The thinkers of Europe that were behind the development of Europe as we understand it were convinced that poverty, social "injustice" and above all societal dislocation were the cause of fascism and, to a lesser extent, communism. The thinking of Marx and his failed and degenerate followers is part and parcel of the European identity (I'm generalizing, of course: but I don't think I'm overdoing it), and the idea that the state is ultimately responsible for ordering society ***and*** ensuring that there are no societal dislocations that destroy the existing structures of political stability and economic wealth cannot be avoided in virtually all aspects of European political life.

I've placed the emphasis on the "***and***" deliberately: it is where the Europeans have dealt with their trauma of the destruction of European society in first WW1 and then more totally so in WW2. In WW1 European society was bled white, with an entire generation lost to the trenches; in WW2 came the collapse of civil society, replacing it with the barbarities of fascism, communism, socialism and the Final Solution.

This is the specter that haunts Europe: that there will be again such an upheaval.

Now, an astute reader of history and current events will realize that this is exactly what Europe is facing: it is teetering along a dangerous, treacherous path in its history, one of its own making: it has both succeeded beyond its wildest dreams yet at the same time failed miserabley. It's success is European peace and prosperity, going far beyond what anyone conceived of even 15 years ago. It's failure is the failure to integrate indigestible portions of it's population, deliberately ignored and belittled over the last 30+ years: the foreign ghettos and colonies that spot and spatter Europe with cultural confrontation and a new barbarity that the Europeans are, collectively, unable to deal with.

So why the books on European superiority? I see it as simple compensation, coupled with a mistaken belief that the positive developments in European society will compensate for the failures.

Put simply: if your goal is to avoid societal conflict in your base society, of ensuring that there is no repeat of history such that Europeans revert to barbarity and yet another World War, then Europe has largely achieved these goals and should rightly be proud of these accomplishments. Hence the feeling that Europe is oh-so-superior than the US: European societies don't have many of the strains and tensions that we have in the US (more often than not as the result of *successful* integration of minorities, but that's another story...), and life in Europe as someone living here is in many ways "carefree": I've got adequate health care, I don't have to deal with HMOs and the like to get it, and if I feel like I need to, I go to the doctor and get taken care of. Like I would if I were working for a major US company with a really nice benefits package, but with the employer picking up all my costs. This is largely universal in Europe and every expects it: it is a common entitlement, and for the political body here an important one.

But does this make it better? Of course not. It's different priorities and goals, and the idea that Europeans are somehow "superior" is deeply, deeply ingrained in European society, especially that of the European elites, who, after all, run things in Europe in ways that are sometimes really, really hard to comprehend.

I don't want to bore you with all the details, but let this suffice: Europe is run the way that the blue-blood Democrats in the US would dearly, dearly love to run the US. A relatively small elite, intermarried and sharing common roots, experiences and goals, runs the European economy and runs European societies. We're not talking a few hundred people here, but rather a few hundred thousand that accord themselves the elite of Europe. This is the core of European state-ism (and statism as well!): there are vested interests in maintaining the status quo that have no real challengers. Everyone within the political system has a vested interest that the system as such doesn't change.

But lack of change and lack of the ability to even contemplate change is destructive, especially in the face of the challenges that Europe is facing, facing from within and without.

Europe is not a future that works: it is a past that has realized its dreams. It is not a present that can react to challenges, but structurally bound not to be capable of structural changes, since exactly these kinds of structural changes are societally disruptive.