Top Posts of 2011

Happy almost New Year everyone!

As we head into 2012, here’s a look back at the most popular (by pageviews) posts from 2011. Federal budget issues dominate the list, but pizza, cupcakes, and North Korea also made the cut.

Why do half of Americans pay no federal income tax? (Spoiler: low incomes)

The day the United States defaulted on Treasury bills (In 1979, not 2011)

Six thoughts on taxes and small business (rhetoric vs. reality)

Five things you should know about the S&P downgrade (#5. S&P wasn’t 1st)

S&P’s $2 trillion error (oops)

Top posts in 2010

North Korea’s economic failure in one picture (“North Korea is dark.”)

The behavioral economics of leftover pizza (six slices are more filling than two)

Several posts from prior years also put in good showings:

The 50 most important economic theories and A list of the top 50 economic theories (search-engine optimized titles)

200 countries, 200 years, 4 minutes (Hans Rosling does his thing; watch again)

Cupcake economics (cupcakeries have done better than I guessed)

The Best Photograph of the Year

Last week I made my nomination for the most important economic chart of the year. Now here’s my nomination for best photo:

Yes, that’s a photograph.

National Geographic’s Frans Lanting captured these camel thorn trees silhouetted against dunes welcoming the rising sun in Namib-Naukluft Park.

I love the photo for its sheer beauty and the optical illusion. My mind perceives it both as a two-dimensional painted canvas and as a three-dimensional photograph. (If you are having trouble seeing it as a photograph, pay attention to the “spots” in the distance.)

P.S. For more photos by Frans Lanting, go here.

P.P.S. You can see my much-less-impressive photos of the Namib-Naukluft dunes here.

The Twelve Days of Christmas for Our Weak Economy

With apologies to Christmas carol purists, my latest Christian Science Monitor column offers up the twelve days of Christmas for our weak economy. I am no Jeff Foxworthy, so please forgive the poetic license and imprecise scanning. Oh, and kudos to my editor for letting me keep in the reference to Festivus.

As the folks in the streets of Oakland and the halls of Congress remind us, we don’t lack for challenges this holiday season.

Despite glimmers of improvement, the US economy remains lackluster and Washington seems unable to get anything passed to help, even a payroll tax extension that all sides want. Things are worse in Europe. Japan still struggles to recover from two decades of weak growth and the shock of this year’s earthquake, tsunami, and nuclear disaster. Even highflying China and Brazil find their economies slowing.

But it is the season of hope. So rather than gather around the Festivus pole to air grievances, let’s visualize a better world. Here are the gifts I would bestow on the world economy for the 12 days of Christmas:

12 AAA nations. At this writing, 12 European nations have a triple-A credit rating from Standard & Poor’s, but those top-notch ratings are in jeopardy. Thanks to the European financial crisis, S&P put 15 eurozone nations on credit watch, with a real risk of downgrades. It would be a remarkable gift if a year from now, all 12 AAA nations remain so.

11 percent Dow gain. A so-called Santa rally would buoy investor spirits globally.

10 more Steve Jobses. In October, America lost its most iconic entrepreneur. We could use many more of him to drive new economic activity.

9 percent BRIC growth. As late as April, forecasters were calling for Brazil and Russia (the first two of the BRIC nations) to grow by about 4 percent through 2014, while India was to speed ahead at slightly over 8 percent and China at 9.5 percent. That forecast now looks optimistic, but these emerging economies have the size and dynamism to reenergize the world economy.

8 percent EU jobless. The unemployment rate is already above 10 percent in the European Union (compared with 8.6 percent in the United States). Europe’s financial crisis and economic contraction threaten to push it higher still. The faster its job growth, the easier its debt problems can be solved.

7 Fed governors. In the face of political gridlock, the Federal Reserve has been the one Washington institution able to take action to contain crises. But it has been understaffed throughout the financial crisis. Only five of seven governors are in place. The president and the Senate should fill the vacancies.

6 million home sales. Existing home sales have been running at a 5 million annual clip* with new sales around 300,000. Once the housing market hits bottom, perhaps combined sales can move back to a healthier combined level of 6 million.

5 percent growth. Growth is essential for creating jobs and easing Washington’s budget strains. But the tepid 2 percent growth of recent quarters isn’t enough to trim the rolls of the unemployed.

4 million jobs. A stretch goal to be sure – the US hasn’t created 4 million jobs in a single year since 1994. But even that miraculous growth would leave payroll employment more than 2 million below its peak before the worst of the financial crisis.

$3 trillion cuts. Despite all the hype, the super committee failed to make any headway on America’s fiscal challenges. Budget experts, myself included, had encouraged the panel to “go big” with $4 trillion in budget cuts over the next decade. That proved a bridge too far. With $1 trillion in budget cuts already baked in the cake, let’s hope that the presidential candidates offer plans to get to at least $3 trillion more.

2 new currencies. The euro doesn’t make sense for Greece – and probably at least one other debt-laden nation on Europe’s periphery.

And a fundamental tax reform.

* The home sales goal has gotten much harder. Yesterday, the National Association of Realtors revised down the annual pace of existing home sales by almost a million units. Oops.

The Most Important Economic Chart of the Year

Ezra Klein surveyed 18 economists for their charts of the year. Here’s my candidate, courtesy of Spiegel Online:

This chart illustrates the end of euro complacency. Investors once acted as though the euro eliminated not just currency risk but sovereign credit risk. All nations–from Greece to Germany–could borrow at the same low rates. No longer. As the financial crisis enters its fifth year, markets are again distinguishing between strong nations and weak.

I subsequently discovered that I am not alone in choosing this chart. The BBC has a version of this as the first entry in its survey of top graphs of the year (with commentary by Vicky Pryce of FTI Consulting), and Desmond Lachman of the American Enterprise Institute included it in Derek Thompson’s survey of top graphs over at the Atlantic.

P.S. For the United States, I think Brad DeLong is right: behold the shortfall in nominal U.S. GDP.

North Korea’s Economic Failure in a Second Picture

North Korea isn’t just dark. If you look at the nation’s per capita income, it’s clear that the economic situation has gotten darker.

Over at the Washington Post Wonkblog, Brad Plumer crunches the data on per capita income in South and North Korea since the 1970s. Stunning divergence:

Note that Kim Jong Il took power in 1994.

P.S. Data about North Korea’s economy are, of course, spotty and incomplete. That’s why the line for North Korea is so flat; in many years, reported GDP per capita doesn’t change. So take the specifics with a grain of salt. But the overall picture remains the same.

North Korea’s Economic Failure in One Picture

North Korea is notoriously secretive. But it can’t hide from satellites. Here are nighttime images showing the amount of light coming from the Korean peninsula.

As Donald Rumsfeld once said, “North Korea is dark”:

This image comes from “Measuring Economic Growth from Outer Space” by J. Vernon Henderson, Adam Storeygard, and David N. Weil, who demonstrate how light can be used as a proxy for measuring economic growth in places with poor economic data.

For other versions of this image, just google north south korea at night.