There are many questions that flummox me about China's economy (when will the central bank diversify its holdings? Are nonperforming loans a real problem or not? Why has Chinese saving increased just when Beijing took steps to boost consumption? Just how efficient is foreign and domestic Chinese investment?) In the Washington Post, Edward Cody suggests a new empirical puzzle -- how can I reconcile reports about the dearth of skilled labor in China with this one from Cody?

An open-ended rise in living standards, particularly for the educated middle class, has been part of an unspoken pact under which the party retains a monopoly on political power despite the country's turn away from socialism.

So far, the party has delivered on its part of the bargain: The economy has grown by more than 9 percent a year recently, and the main beneficiaries have been educated urbanites. Content to claim their share in the prosperity, most students have shown little interest in politics since the Tiananmen Square protests of 1989.

But a large pool of unemployed or underemployed university graduates, some analysts have suggested, could become a new breeding ground for opposition. An educated opposition, they said, would have far more organizational and ideological ability -- and present a greater threat to the government -- than the left-behind farmers who have been the main source of unrest in recent years.

The Labor and Social Security Ministry estimated recently that as many as 4.9 million youths will graduate from universities by the end of 2007, up by nearly 20 percent over 2006. Another 49.5 million will graduate from high school, also a 20 percent increase. The sharp climb in graduation rates represents a dramatic improvement in the lives of many Chinese, made possible by the economic transformation that has taken place here over the past quarter-century.

But indications have emerged that, booming as it is, the economy may not be able to absorb that many degree-holders into the jobs for which they are being trained. "The fact is that it's very hard for college students to get the right job these days," said Zhang Xuxin, a Zhengzhou student with close-cropped hair and plastic-rimmed glasses who plans to pursue postgraduate studies next year. "You may have a job, but it's very hard to have an ideal one."

A waitress in a German restaurant near Beijing's Ritan Park, for instance, said she has been looking for work in the computer industry since graduating last summer, but in the meantime, she has to serve sausages and beer to pay the rent because nothing is available in her field.

Tian Chengping, the labor and social security minister, predicted that about 1.2 million of the 2007 university graduates will have similar trouble finding employment. As a result, his ministry announced Tuesday, colleges will be forced to restrict admissions into study programs with low postgraduate employment rates. At a conference in Beijing, ministry officials said they also are seeking to improve employment counseling for high school graduates who do not plan to attend college.

Tensions over employment after graduation have exploded repeatedly in recent months, betraying the pressure students say they feel. Students at Shengda Economics, Trade and Management College, affiliated with Zhengzhou University, rioted in June when they discovered that their diplomas would not be the same as those from the university itself, putting them at a disadvantage in job hunting. A similar riot erupted last month at the Ganjiang Vocational and Technical Institute in Jiangxi province south of here. The Hong Kong-based Information Center for Human Rights and Democracy has recorded 10 such disturbances since summer.

But I'd be curious to hear other hypotheses.

The Nelson Report has been assuring me repeatedly that the Democratic takeover of Congress will not mean the end of U.S. trade policy. Here's one example from a report from last week:

It’s our contention that even if the Democrats had not swept the House and Senate elections, the US would still face increasing difficulty as the political arena wrestles over the challenges of adjustment to globalization, especially dealing with a downside which includes mitigating pain at home, and enforcing better behavior by trading partners.

The US Congress will reject two trade deals agreed with Colombia and Peru, leading Democrats said, in a significant blow to President George W. Bush’s agenda for his final two years in office.

Democratic lawmakers drafted a letter to Mr Bush on Tuesday night signalling their opposition to the pacts because they lacked tougher labour standards, while a senior congressman rebuked the president for pressing ahead with today’s signing of the Colombian deal.

The fissure worsens the outlook for the administration’s bilateral trade agenda in the wake of the Democrats’ mid-term election sweep and will disrupt economic integration with the Latin American countries.

Sander Levin, a leading Democratic voice on trade issues, said the letter would send a clear signal that “the agreement would not receive the support of the vast majority of Democrats, as presently put together”....

The congressman said labour standards were at the “core” of Democrats’ objections - a sign that the influence of the labour movement within the party has been strengthened by the election result, which saw a notable rise in economic populism among voters.

"We watch the news and we're nervous about what might happen with what we send to the United States," said Janeth Palacio Ramirez, 35, who supports her 15-year-old daughter and her elderly parents by punching zipper stops onto 7,000 pairs of jeans a day, earning about $200 a month. "Everything we make here goes there, so if there are problems with exports, we'll all lose our jobs."....

The fortunes of Colombia and Peru -- home to more than 72 million people -- may hang in the balance. So, too, might the nature of American engagement with Latin America, regional experts say. The rejection of trade pacts with these countries would humiliate their leaders at a time when they stand as bulwarks against the anti-American populism pressed by Venezuela's president, Hugo Chavez.

Latin America was already recoiling at the prospect of the United States fencing its southern border against illegal immigration. Now, some see the nation walling off its huge marketplace, rescinding the promise of trade, long proffered by the Bush and Clinton administrations as a means of furthering development.

"If you really look at the U.S. agenda in Latin America, trade is the only positive," said Michael Shifter, vice president for policy at the Inter-American Dialogue in Washington. "The rest is immigration, anti-narcotics. It's all negatives." Latin Americans, he said, may well start to question "how serious Americans are about having a constructive relationship."

Over the past week, there's been a lot of blog chatter about a tazer incident at a UCLA library that was partially captured on video. To quote James Joyner, "I agree that the use of a taser against a skinny student for the crime of being a dumbass would appear to be an excessive application of force."

The video is extremely disturbing for the cries of the tazed student, Mostafa Tabatabainejad. What I found interesting, however, was the way in which every person on that video acted according to type. The security officers acted as brutal thugs who would not have their authority questioned; the students acted as the righteously indignant chorus. Even Tabatabainejad seemed to be playing a role, the belligerent protestor ("here's your f#$%ing Patriot Act!!"). The violence is disturbing, but the characters playing their parts grounds the sequence into familiar tropes. It is, therefore, perhaps less shocking than it should be.

For me, the more discomfiting video was Michael Richards' apology on The Late Show with David Letterman for his racially profane diatribe at an LA comedy club over the weekend. Richards, a comedian, is acting in a non-comedic fashion. The audience, confused about what's going on, begins to laugh at Richards' apology. Jerry Seinfeld, a comedian, tut-tuts the audience for laughing. Richards, who on Seinfeld played a character who seemingly fell ass-backwards into success, has put himself into the exact opposite situation, someone who seems completely mystified about how he wound up in his current predicament.

Anne Kornblut and Jeff Zeleny have an NYT front-pager that seems designed to knock Hillary Clinton down a peg or two:

She had only token opposition, but Senator Hillary Rodham Clinton still spent more on her re-election — upward of $30 million — than any other candidate for Senate this year. So where did all the money go?

It helped Mrs. Clinton win a margin of victory of more than 30 points. It helped her build a new set of campaign contributors. And it allowed her to begin assembling the nuts and bolts needed to run a presidential campaign.

But that was not all. Mrs. Clinton also bought more than $13,000 worth of flowers, mostly for fund-raising events and as thank-yous for donors. She laid out $27,000 for valet parking, paid as much as $800 in a single month in credit card interest and — above all — paid tens of thousands of dollars a month to an assortment of consultants and aides.

Throw in $17 million in advertising and fund-raising mailings, and what had been one of the most formidable war chests in politics was depleted to a level that leaves Mrs. Clinton with little financial advantage over her potential rivals for the 2008 Democratic presidential nomination — and perhaps even trailing some of them.

Alas, the meat of the story suggests precisely the opposite:

[T]he way she spent the money troubled some of Mrs. Clinton’s supporters, many of whom have been called on repeatedly over the years to raise and give money for Bill Clinton’s two presidential campaigns, his legal expenses, his library, his global antipoverty and AIDS-fighting program and now his wife’s political career. One Clinton supporter said it would become harder to tap repeat donors if it appeared that the money was not being well spent.

Nonetheless, the senator is among the most formidable fund-raisers in her party and could raise a large amount of money quickly if needed....

Political campaigns are expensive affairs for any candidate, especially those running in a state as big as New York. Some of Mrs. Clinton’s expenditures, including the more than $10 million for direct mail fund-raising solicitations, will pay off if she runs for president by giving her an expanded list of individual donors around the nation.

She has now amassed a database that includes several hundred thousand new donors, 90 percent of whom contributed $100 or less, her advisers said. Under the new campaign finance law, such small donors are considered crucial to raising the large sums of money needed for a presidential campaign.

Other types of expenses are seen by campaigns as necessary good-will gestures toward donors and other supporters; Mrs. Clinton’s campaign cited this in justifying the roughly $51,000 she spent on professional photographers to provide pictures of her with guests. The candidate also sought to generate good will among her fellow Democratic candidates by giving more than $2.5 million to the Democratic Senatorial Campaign Committee and other party groups.

Candidates routinely use campaign money for all types of expenses. Representative Corrine Brown, Democrat of Florida, spent $24,000 of her campaign money this year on flowers; her campaign said she sent them to the families of constituents who died. Representative Richard W. Pombo, Republican of California, spent $17,250 on balloons for a single event in July.

Mrs. Clinton’s aides offered varying explanations for her spending record. Some, speaking on the condition of anonymity because they are barred from discussing Mrs. Clinton’s intentions for 2008, said much of the spending amounted to an investment in voter and fund-raising databases that could form the basis of a presidential campaign. Others said the money went to ensuring as convincing a victory as possible.

I'm hardly a big fan of Hillary's, but this piece seems like ovekill to me.

This New York Times story by Katie Hafner seems pretty upfront in making this point:

Envy may be a sin in some books, but it is a powerful driving force in Silicon Valley, where technical achievements are admired but financial payoffs are the ultimate form of recognition. And now that the YouTube purchase has amplified talk of a second dot-com boom, many high-tech entrepreneurs — successful and not so successful — are examining their lives as measured against upstarts who have made it bigger....

Seven or eight years ago, when it seemed that anyone with a business plan could get rich, the finger of fortune was generous — and democratic. By the time it occurred to people to be envious, it seemed, they were rich, too — at least on paper. It was in Silicon Valley, after all, that the term “sudden wealth syndrome” entered the clinical vocabulary.

In the end, of course, much of the paper wealth turned worthless. But now, in the wake of successes like YouTube and MySpace, which was sold last year to the News Corporation for $580 million, some people believe that the foundations for more solid success are now in place. For one thing, the viability of online advertising is no longer in doubt, as Google and others have proved.

And the success of a YouTube can produce not only envy but also serious motivation — in Silicon Valley and beyond.

“Over all, I think things like YouTube make people reconsider the possibilities,” said Bart Selman, a professor of computer science at Cornell. In 1999, at the tail end of the dot-com boom, Professor Selman had a start-up called Expertology, which used a Web-based system that tapped collective expertise to generate legal referrals. The business failed. “After the dot-com bust, people were thinking, ‘Maybe this is all just hype,’ ” he said.

Now, Professor Selman said, he has seen several start-ups, like Hoovers.com and LinkedIn, successfully pursuing ideas along the lines of Expertology’s mission. “But of course, timing is everything,” he said.

And while he says he thinks the YouTube deal was “a little insane,” Professor Selman, who has watched several colleagues become highly wealthy after joining Google, is considering trying his start-up luck again, with a variant on the Expertology idea.

“Maybe there’s more to the economic model than we realized five years ago,” he said. “Maybe the new wave is a little more solid.”

Professor Selman, 47, said that while he was careful not to “overhype” the new wave, he routinely tells his students that they have a good chance of starting the next Google or YouTube. “I believe there are still many opportunities out there that we cannot even conceive of at this point,” he said.

With rewards of that scale on the horizon, the pressure to make a fortune can be enormous, and people have different ways of coping with it. Some find inspiration in others’ success, while some spend tremendous amounts of psychic energy worrying about how rich their friends are.

Milton Friedman's significance to the world has been revealed in the bevy of obits that we've all read in the past week. Much of the effort has been focused on those aspects of Friedman's ouvre that have become accepted wisdom -- the importance of monetary policy, the negative income tax Earned Income Tax Credit, etc.

Here's an open invitation to readers -- which of Friedman's policy proposals that have not become accepted wisdom would you like to see implemented?

My choice is not a difficult one -- it's a policy proposal that would manage to address U.S. foreign policy, economic development, the rule of law, crime, and race relations in one fell swoop.....

Drug legalization

If the United States were to legalize (and tax) illegal narcotics in the same manner that legal narcotics, like alcohol and tobacco, are treated, consider the effects on:

U.S. foreign policy: Because of current policies regarding narcotics, the United States is stymied in promoting the rule of law in Afghanistan and several Latin American countries because farmers in those countries keep harvesting products that American cunsumers demand. Because this activity is crminalized, the bulk of the revenues from this activity enriches criminal syndicates and terrorist networks. All for a supply-side policy that does nothing but act as a price support for producers.

Crime: What percentage of the criminal justice and penal systems are devoted to drug-related offenses (click here for some answers)? Even if the sums of money that were spent on drug enforcement activities were instead devoted to treatment, I have to think it would be money better spent.

There are two potential downsides to this move. First, actual drug use would likely increase -- but this can be dealt with via larger treatment budgets. Second, once this genie is out of the bottle, I suspect there's no going back. (For an extended argument against legalization, check out this Theodore Dalrymple essay from City Journal).

That said, I think Friedman was right -- legalization is the best policy to implement. For more on Friedman's thoughts on the matter, click here, here and here.

In the past 24 hours I had to go from presenting a paper at the inaugural meeting of the International Political Economy Society to spending the night with my son at his Cub Scout campout. In other words, I'm wiped.

So I ordinarily wouldn't bother to blog today... until I saw David Brooks' column devoted to Milton Friedman.

Brooks accomplishes a unique two-fer in this column, simultaneously infuriating me on one point and making me agree with him on another.

So, in order... the part of the column that is utter horses%&t:

[Friedman's] passing is sad for many reasons. One is that from the 1940s to the mid-1990s, American political life was shaped by a series of landmark books: "Witness," "The Vital Center," "Capitalism and Freedom,""The Death and Life of American Cities," "The Closing of the American Mind." Then in the 1990s, those big books stopped coming. Now instead of books, we have blogs.

The big books stopped coming partly because the distinction between intellectual movements and political parties broke down. Friedman was never interested in partisan politics but was deeply engaged in policy. Today, team loyalty has taken over the wonk's world, so there are invisible boundaries that mark politically useful, and therefore socially acceptable, thought.

Samuel Huntingon, The Clash of Civilizations and the Remaking of World Order.

Robert Putnam, Bowling Alone: The Collapse and Revival of American Community.

Virginia Postrel, The Future and Its Enemies.

James Surowiecki, The Wisdom of Crowds.

Jacob Hacker, The Great Risk Shift.

To paraphrase Gloria Swanson -- books are big, it's the politics that got small.

Oh, and it's not the blogs either -- the last three authors in that list either have blogs or have interacted with them on a regular basis.

At the same time, Brooks got me to nod with this pararaph:

His death is sad, too, because classical economics is under its greatest threat in a generation. Growing evidence suggests average workers are not seeing the benefits of their productivity gains--that the market is broken and requires heavy government correction. Friedman's heirs have been avoiding this debate. They're losing it badly and have offered no concrete remedies to address the problem, if it is one.