Saturday, October 31, 2009
Thursday, October 29, 2009
If [Bill and Melinda Gates] indeed have a much-improved aid model, then why this big campaign to defend US government aid agencies (including USAID), whom we and many others have documented do not change in response to – or even acknowledge – failures?--William Easterly
Explaining life does not count as explaining the Universe.--Steven Landsburg
To me, insects are where sushi was 20 years ago.--Marc Dennis
Most commentary I come across is populist diatribe claiming the sector is grossly overpaid, and with public funds too, so requiring that bankers are paid next to nothing. "They wouldn't even be there if we hadn't bailed them out" is a fashionable argument. Newsflash: That is not a solution, it is a quest for retribution against a single cog in a system which all stakeholders (employees, boards, shareholders, regulators, central bankers, tax collecting politicians etc) blithely allowed to develop over the last two decades.--Andrew Clavell
[George] Bonanno and his colleagues found that there are at least three common patterns of grief. Some people find the experience deeply distressing and disorienting but then slowly heal. Some become completely dominated by their sadness, perhaps never to recover. This type is extremely rare. Then there are people who experience some initial shock and distress but who pretty quickly bounce back into the competent execution of their daily lives. Most people, says Bonanno, fit into the third category.--Christine Kenneally
Wednesday, October 28, 2009
[Wall Street] is a sophisticated marketplace in which firms compete aggressively to secure trade orders and assignments from large corporations and financial institutions. The intense competition for virtually every trade lowers the cost of capital and widens access to financial markets for companies, institutions and governments all over the world. Collectively speaking, Main Street is Wall Street's client and generally has been very well taken care of. In this crisis, Wall Street professionals, through carelessness or errors, lost a lot more money than Main Street did, and probably more, proportionately, lost their jobs too. Wall Street didn't benefit from the market declines, and only in the past few months has it recovered some of what it lost.--Roy Smith
No one will tell you they are a derivatives trader anymore. It's like labelling yourself a sex-offender. Whatever we did, I sure hope it was bad. Because we're getting hell for it.--unnamed derivatives trader
Nothing says “I’m a schmuck from out of town with no pull at the rental counter” like a PT Cruiser.--Tony Woodlief
Eric Holder, Attorney General of the United States, walked up to former DC Councilman Kevin Chavous at an event and told him to pull an ad criticizing the administration for its opposition to the DC school voucher program. The Attorney General of the United States! This is as outrageous and shameful as it is consistent with other administration hostilities toward free speech (see also here) and freedom of the press.--Andrew Coulson
They say that in Hollywood any publicity is good publicity. Thus I was delighted to see Brad DeLong paying attention to my random thoughts on the Krugman/Dubner dispute, Indeed he officially declared that I had lost my mind. But that is not all bad, because in America there are always second acts. On the same day Brad DeLong formally announced that the little known blogger Andrew Sullivan would henceforth be welcomed back into polite society. Someone may want to inform Andrew in case he hasn’t heard the wonderful news. So I knew that there was still hope that a similar fate awaited me someday; when and if I adopted the “correct views” I too might be welcomed back, like a reformed mental patient in one of Stalin’s hospitals. Or just as Fox News can expect to start get interviews again once they “shape up.” Or just as the insurance industry can expect to get a better deal in the health care legislation once it stops saying those awful things.--Scott Sumner
I fail to see the value or the worth in continued U.S. casualties or expenditures of resources in support of the Afghan government in what is, truly, a 35 year-old civil war. ... Thousands of our men and women have returned home with physical and mental wounds, some that will never heal or will only worsen with time. The dead return only in bodily form to be received by families who must be reassured that their dead have sacrificed for a purpose worthy of futures lost, love vanished, and promised dreams unkept. I have lost all confidence that any assurances can be made. As such, I submit my resignation.--Matthew Hoh, senior civilian advisor and former Marine posted in Afghanistan
Tuesday, October 27, 2009
Humans are overconfident creatures. Ninety-four percent of college professors believe they are above average teachers, and 90 percent of drivers believe they are above average behind the wheel. Researchers Paul J.H. Schoemaker and J. Edward Russo gave computer executives quizzes on their industry. Afterward, the executives estimated that they had gotten 5 percent of the answers wrong. In fact, they had gotten 80 percent of the answers wrong.
Fortunately, for those who study the human comedy, the epicenter of overconfidence moves from year to year. Up until recently, people in the financial world bathed in the warm glow of their own self-approval. Hubris in that world always takes the same form: The geniuses there come to believe that they have mastered risk. The future is an algorithm and they’ve cracked the code.
Over the past year, the bonfire of overconfidence has shifted to Washington. Since the masters of finance have been exposed as idiots, the masters of government have concluded (somewhat illogically) that they must be really smart.
Again, the issue is not whether government acts, but whether it acts with an awareness of the limits of its knowledge. Sometimes we seem to have a government with no sense of those limits, no sense that perhaps government officials don’t know how to restructure General Motors, pick the most promising battery technology, re-engineer the health care system from the top, or fine-tune the complex system of executive pay.
Furthermore, when extending federal authority, the Obama folks never seem to ask how Republicans will use this power when they regain the White House. The Democrats trust themselves to set private-sector salaries and use extralegal means to go after malefactors, but would they trust a future Dick Cheney?
If the expert is so smart, why isn't he rich?--Scott Adams
Experience is a good teacher, but she sends in terrific bills.--Minna Thomas Antrim
Had [Yahoo] done things right with GeoCities, there would be no Facebook, YouTube or MySpace.--anonymous
How to distinguish which theory explains the behavior of any one actor is determined by the response to evidence AGAINST one’s prior position – do you change your beliefs at all?--William Easterly
Yet awards provide emotional responses—gratification, victimization, schadenfreude—that makes the ritual perversely compelling. Understanding that the process is fatally flawed, or even corrupt, seems to do nothing to diminish its appeal.--Jonathan Chait
I finally knew exactly where I stood. My father hated his enemies more than he loved his sons.--Omar Bin Laden
Naming an unborn child is a powerful thing. It is a way to acknowledge to the world what God already knows. A way to say ‘life is precious — this life is precious.'--anonymous
Where's the notification so you don't give additional contracts to folks who are under investigation? If somebody fixed your garage door and they defrauded you-or, rather, you thought they defrauded you-would you give them more business? Nobody else in the country would do that [besides the administrators of the $787 billion stimulus program].--Senator Tom Coburn
Overall, Amtrak is being subsidized to the tune of $32 per passenger according to a new study. But, that includes big time losers like the line between San Antonio and Los Angeles which is losing $462 per passenger. Meanwhile, the Acela, a fast train running between Washington D.C., New York and Boston is actually making money.--Jay YarrowSo as long as Medicare patients generate more revenue than the marginal cost of treating one additional patient, they're profitable for the hospital--and probably even lower everyone else's bill a little bit, by at least partially defraying some overhead. Of course, if you think that in a universe without Medicare, many or most seniors would probably have found a way to consume a bunch of health care, then yes, Medicare is free riding. But moral calumny aside, the thing about patients whose insurance doesn't cover the average cost of treating them is that they cannot be 100% of your patient pool. Someone has to cover the cost of that MRI machine. If the public option does manage to crowd out other insurance--as it might well do, with the ability to dictate price controls--then suddenly, the public option won't be cheap any more. Hello, fiscal crisis.--Megan McArdle
Reminds me of what a wise blogger wrote back in July. Kudos to Eric, Tyler, and Rick as well.
Decimalization and technology has increased liquidity (which improves price discovery and reduces transaction costs) and automation (which further reduces costs). The only losers are the specialists, broker-dealers and other intermediaries who used to manipulate and free-ride much more than any flash trader.
One of the things I learned from the presentation is that dark pools must execute within the NBBO (National Best Bid and Offer), under Reg ATS. Basically, this allows reduced market impact--instead of having to swallow a steak or a bird whole, or requiring a big fork and sharp knife, dark pools are like the asian sous chefs who cut the meat up into bite sized pieces.
*Disclosures: Yes, Goldman has vested financial interests in the SEC not churning the regulations, but only because it is a market share leader with significant investments. And yes, I do use RediPlus daily, and SIGMA-X occasionally. But I have yet to participate in flash trading.
UPDATE: Mary Schapiro needs to be replaced.
AIG's swap counterparties included Goldman Sachs, Societe General, Deutsche Bank, and Merrill Lynch, who under the broader Fed deal received $14 billion, $17 billion, $9 billion, and $6 billion, respectively.
If anyone tells you that we taxpayers 'made money' on the crisis, or 'Goldman didn't need government help', please ask them about the Fed deal with AIG. Thanks.
I am holding my breath for the new age of 'transparency' to push this secret deal into full, sunny disclosure. I guess my heirs could start ordering my casket soon, right?
*I could not find the link at Bloomberg.com, as this came over Bloomberg news feed 2 minutes after midnight. Will post link when I find it.
UPDATE: Here is the link.
UPDATE: John Carney says the Fed bungled it.
UPDATE: Larry Ribstein called it a 'shell game'.
Monday, October 26, 2009
When Elbridge Gerry proposed in the [Constitutional] Convention that no standing army exceed three thousand men, Washington is supposed to have made a countermotion that "no foreign enemy should invade the United States at any time, with more than three thousand troops."
I went to dig a little deeper on the anecdote, only to be even more disappointed by this:
His deepest groove in history comes from one of his last acts as the Massachusetts governor: prior to the 1812 elections he signed a bill that restructured voting districts to give his party, the Democratic-Republicans, a majority in the legislative body. Since then, such activity has been known as "gerrymanding."
I suppose if the thing that gave me power also threatened my power, as an incumbent I would do what I could to tilt the scales in my favor. This is why I don't believe in government solutions anymore than I believe in any single person or alternate institution.
With maybe a couple of exceptions.
UPDATE: A nice quote from SuperFreakonomics:
[T]he kind of person most likely to be a terrorist is the kind of person most likely to . . . vote. Think of terrorism as civic passion on steroids.
... an artist listens to his inner calling and hopes the public agrees. A business person listens to the audience and gives them what they want.--Scott Adams
Maybe my thesis is perfectly banal: The course of personal technology is centripetal. Things come together.--Derek Thompson
Just as the Nobel Committee awarded President Obama the Peace Prize in anticipation of his future achievements, the stock market has anticipated a recovery in the economy.--David Einhorn
Deposit insurance is the cause of the banking crisis.--Charles Calomiris
The $787 billion Obama stimulus package that was supposed to keep U.S. unemployment at under 8% will not only fail to keep it under 10%. But by mid-2010 “fiscal stimulus will be contributing little to further growth.” As for President Obama’s big promise last January to create 3.5 or 4 million new American jobs. Forget it. “Unemployment is unlikely to end 2010 much below its current levels.” [Christina] Romer’s admission was startling. You’ll recall that it was her January 10th paper that outlined what a mighty job machine the Obama presidency would be. Every 1% boost in GDP would get a million new jobs. Now here we are running stimulus-heavy budget deficits that will total almost $3 trillion over this year and next. GDP is on the rise again. And still, no new jobs.--Evan Newmark
Forced to take a taxi, [president of the NY Fed Timothy] Geithner turns to his colleague and says that he has no cash. Perhaps this would have been a moment to teach the head of the New York Fed how to use an ATM. --Arnold Kling
There is a well-known finding that people who get flu vaccinations have lower death rates than people who do not. But this finding is not based on an experiment. It is instead based on observation of people who choose to get shots and people who do not. My hypothesis is that people who get flu shots are more conscientious than people who do not, and more conscientious people have lower death rates. Whatever the reason, the article cites research where what economists would call "natural experiments" show that flu shots do not affect death rates. --Arnold Kling
When a group is discriminated against, as women clearly were at the time [I think of some of the stories Milton Friedman's secretary Gloria Valentine, told me about how women were treated in the 1960s when she worked for Continental Bank], narrowing the pay differential reduces the cost of discriminating and, therefore, leads to more discrimination than otherwise. It's surprising that [Steven] Levitt, in particular, who hails Gary Becker's work on economics, misses this key insight from Becker's classic book, based on his dissertation, The Economics of Discrimination.--David Henderson
When health plans are not allowed to compete on price, they will not compete (in a positive way) in any other dimension either.--John Goodman
Reform advocates start with anecdotes about the underprivileged who are uninsured, then turn around and propose something that would hurt at least some members of that group.--Tyler Cowen
The promise of the public plan is a mirage. Its political brilliance is to use free-market rhetoric (more "choice" and "competition") to expand government power. But why would a plan tied to Medicare control health spending, when Medicare hasn't? From 1970 to 2007, Medicare spending per beneficiary rose 9.2 percent annually compared to the 10.4 percent of private insurers -- and the small difference partly reflects cost shifting. Congress periodically improves Medicare benefits, and there's a limit to how much squeezing reimbursement rates can check costs. Doctors and hospitals already complain that low payments limit services or discourage physicians from taking Medicare patients. --Robert Samuelson
FAIRNESS is in the eye of the beholder, but nothing about a government-run health care system strikes me as fair. Squeezing providers would save the rest of us money, but so would a special tax levied only on health care workers, and that is manifestly inequitable. In the end, it would be a mistake to expect too much from health insurance reform. A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices. The health care of the future won’t come cheap, but a public option won’t make it better.--Greg MankiwPerhaps Blankfein could learn a few things from New England Patriot coach Bill Belichick. The coach doesn’t care if people like him or his team. He frustrates reports with terse, evasive answers in news conferences. His staff was accused of covertly video tapping a New York Jets practice to learn their plays. And when he loses (like after the Pats’ surprise loss to the NY Giants in the Superbowl in 2008), he’s been known not to shake hands with the opposing coach. What Belichick cares mostly about is winning. In short, the Patriots, like Goldman Sachs, is a team that a lot of people love to hate and probably often will. It is one of the tradeoffs that comes with success.--Michael Corkery
Why would prosecutors try so hard to ruin the lives of so many individuals, even with the evidence so tenuous? Money, of course! The Enron Task Force has proven to be a great springboard for lucrative private-sector careers.--Joe Weisenthal
Not everyone in Houston was rejoicing, but for [journalist Bethany] McLean, it was a special moment, for she was a journalist who actually had a vested interest in this verdict. You see, McLean had a secret "romantic" relationship at the time to the lead federal prosecutor, Sean Berkowitz. After the trial but before the sentencing hearing, the two became engaged and married a while later, and the guilty verdict meant a financial payday for the happy couple. (Immediately after the guilty verdict, McLean went to Chicago for Berkowitz's birthday party.) Berkowitz, now a "star," would leave the Department of Justice for a partnership with the wealthy and high-powered law firm of Latham & Watkins in Chicago. McLean parlayed her Enron success to a new position at Vanity Fair, where she has written that Fannie and Freddie really were the good guys in the latest financial meltdown.--William Anderson
Mark Twain once said, "Never pick a fight with a man who buys ink by the barrel." Well, the web has changed that. Now you can pick a fight and get the word out and not be afraid that you can't defend yourself when you come under attack. And I bet that drives many people at the NY Times, the WaPost, the L.A. Times, and others crazy.--David Henderson
The circulation figures for the top 25 dailies in the US are out, and they're horrifying. The median decline is well into the teens; only the Wall Street Journal gained (very slightly). I think we're witnessing the end of the newspaper business, full stop, not the end of the newspaper business as we know it. The economics just aren't there. At some point, industries enter a death spiral: too few consumers raises their average costs, meaning they eventually have to pass price increases onto their customers. That drives more customers away. Rinse and repeat . . .--Megan McArdle
I'm trying to come up with a good Halloween costume. ... One idea is to wear a Barack Obama name tag with my regular clothes. Then I'll wait for someone to say, "Barack Obama? How's that Barack Obama? I had such high expectations for your costume and all you did was...oh, wait. I get it."--Scott Adams
Friday, October 23, 2009
I've got a seven-week-old myself, so it really hits home. In fact, I really didn't care about policy until my first kid arrived in 2000.
The bank should wager that the talent of its star employee exists, because it has much to gain over time if it does, while if it does not exist, the bank will lose little in expected terms. And in a competitive world, it is even worse if they incorrectly let the talent go for lack of proper compensation, because then some competitor will pick it up.
I can only come up with two explanations for [a fourteen point drop in the number of Americans who believe there is solid evidence that anthropogenic global warming is real]: one, that many Americans are happy to embrace a symbolic belief in global warming as long as there is no danger that anyone will do anything about it. The other is that Americans don't know what they want, and also, enjoy messing with pollster's minds.--Megan McArdleI remain short these:
Via Joe Weisenthal.
Suppose one day the government decided to give $1 to every person who buys a screwdriver. What would happen?
The immediate effect would be to increase the price of all screwdrivers by $1. Why? If the going rate for screwdrivers is (say) $5, then that is what someone who actually needs a screwdriver is willing to pay. (Put another way, that is the “economic utility” of a screwdriver. Put yet another way, that is the “market clearing” price that balances screwdriver supply with screwdriver demand.) If you pay $6 for a screwdriver and get a $1 rebate, from your point of view that is identical to simply buying the screwdriver for $5; either way, you are parting with $5 and getting a screwdriver, which you do because $5 is the screwdriver’s economic value to you.
Any idiot can see that this hypothetical government policy is not a gift to screwdriver buyers; it is a gift to screwdriver sellers. That gift would be shared with buyers only to the extent that it encouraged the production of screwdrivers in excess of natural demand.
Which brings us to the first-time home buyer tax credit, where the government reimburses buyers 10% of the price of the house or $8000, whichever is smaller. By the screwdriver analogy, this should have the simple effect of increasing the price of every starter home by $8000, right?
Wrong. Nobody buys a starter home with cash. The tax credit does not add $8000 to someone’s capacity to buy a house; it adds $8000 to their capacity to make a down payment. Maybe they take out a loan with 20% down. Or maybe they get an FHA loan with 10%, 5% or even 3.5% down. So the tax credit increases their purchasing power by $40k (20% down) or $80k (10% down) or $160k (5% down) or more.
Thus the net effect is twofold:
- Increase the price of all starter homes by $100k or more
- Increase the supply of houses
Is the problem with the housing market too little supply? Because that is the only “problem” this tax credit is solving.
Bottom line: While the tax credit is in place, it is a good time to sell a house and a great time to be a bank. It is a bad time to buy a house and a terrible time to be a U.S. citizen.
Royalties from The Great Gatsby totaled only $8,397 during [Scott] Fitzgerald’s lifetime. Today Gatsby is read in nearly every high school and college and regularly produces $500,000 a year in [Fitzgerald's daughter] Scottie's trust for her children.--William Quirk
Hong Kong, Singapore and Korea experienced great economic success: all have per capita GDP that is at least seven times higher than in 1960. ... The disastrous experience with public housing in the United States should give us pause about its implementation elsewhere. One can also find examples of public housing becoming sinkholes of corruption in African countries. Yet there is no gainsaying the fundamental success of Hong Kong and Singapore.--Richard Green
Perhaps us aid critics are just not as good as the medical critics. Or perhaps it is because we care so much more whether medicine really works than whether aid or military intervention really works?--William Easterly
I think there are three qualities that people believe are weaknesses, but which I believe are strengths: hypochondria, paranoia and megalomania.--Jacques Attali
Who single-sources a quote of a public figure praising slavery?--Megan McArdle
It’s superb. It highlights the essence of political discourse: dishonesty without lying.--Russ Roberts
I am not only against inflation but I am also against deflation. So, once again, a badly programmed monetary policy prolonged the depression.--F.A. Hayek
Let’s talk about the real world for a moment… we broke it. Please don’t be mad. I know we were supposed to bequeath to the next generation a world better than the one we were handed. So, sorry. —Jon Stewart
Pay no attention to the man behind the curtain. And if you do notice what he’s really doing, he’s not spending your money just to waste it or give it to his friends. He’s doing it because he had to. He’s saving lives. The lives of America’s gallant men and women in uniform. Or America’s crippled children. Or to prevent the elderly from living lives of quiet desperation. Or to save the economy. Whatever. As long as you get sucked in, they don’t care what they say. Don’t get sucked in.--Russ Roberts
Bondholders are still going along with our apparently reckless spending plans on the assumption that we'll have to do something, eventually. I'm sure we will. But that "something" is going to be pretty ugly, and almost certainly done at the worst possible time, as Japan's case may end up illustrating. It may even be default, if we don't start acting like adults relatively soon. Sovereign debt risk seems to be back--and the debt is literally bigger than ever.--Megan McArdle
Purists will complain that we've sapped our language of its poetry by turning it into a blunter instrument. The purists are wrong. We're still poets. We've just traded sonnets for haiku. Today, the romance of our language is found in its smallest constructions, in its syllables and how they sound when we put them together, simply, quietly. Our words have white space around them. That's where we've become artists again.--Esquire
I don’t know how you guys walk around with those things.--Elaine Bennis
I wouldn't want to join a church that would accept me.--Malcolm Muggeridge
... a few years ago, University of Pennsylvania researcher Ian Blair discovered that vitamin C appeared to encourage the creation of substances that can harm DNA and thus cause cancer. This is hardly firm evidence that C is the latest surprise cancer agent, but it probably should give C junkies pause. Your doctor may still swear by the vitamin's efficacy and benignity, but if you want to err on the side of caution, cut back on C.--Jim Atkinson
You never learn anything from people who agree with you, and I like to learn.--Nemo J. Publius
For the past six years, I've been teaching students in the Centurions Program to draw a grid listing the four basic questions that most people ask about life: Where did I come from? What's my purpose? Why is there sin and suffering? Is redemption possible? Then, on the other side of the matrix, we list the various philosophies and prominent world religions. By examining how each view answers the four questions, we can determine which worldviews conform to the way things really are. This is the correspondence theory of truth—a thoroughly rational test.--Chuck Colson
Market inefficiences are harder and harder to find, one of the ironies of Beane's brief but successful reliance on on-base percentage from 2000 to 2002 is that it has made players with such skill far too expensive for his pocketbook. The real moneyball of baseball also makes it impossible for Beane to hold on to the quality players that he does discover. As a result, he ends up trading a superb pitcher such as Dan Haren and a potential superstar such as Matt Holliday for questionable players and prospects. If one of them pans out, the high-price of free agency forces Beane to trade again and the cycle simply repeats itself.--Buzz BissingerVia Dan Primack.
Thursday, October 22, 2009
2:29pm But executives who pay themselves huge bonuses after poor performance with taxpayer bailouts are a problem
(CNBC cuts the feed. Eh, I should get back to working hard).
I always point out that Michael Palin is very miffed that he is no longer the funniest Palin.--John Cleese
I know this call may be a little unusual. You and I have been trying to kill each other for years.--Treasury Secretary Hank Paulson on the phone with Dick Fuld
There's something in us that needs to believe that awful things must happen for a reason. And in some cosmic sense, they do--there are no uncaused causes running around the universe. But that doesn't mean that the reason they happened is that the person they happened to did something to deserve it.--Megan McArdle
In a Keynesian recession, you are temporarily laid off because of excess inventories and deficient aggregate demand. You wait to be recalled by your firm. This was true of recessions from the end of the second World War through the 1980 recession. Even the 1975 recession, which was a "supply shock" (higher oil prices, requiring some permanent readjustments), had a relatively low share of permanent job losses. In a Recalculation, you permanently lose your job and you have to find something else. The Recalculation model increasingly holds as we move away from an economy dominated by manufacturing.--Arnold Kling
If you look at your greatest nightmare—if something were to happen that would make you feel you had no reason to live—that's a god.--Tim Keller
Social customs define what’s taboo. Therefore, saying taboo language is uniformly sinful implies that our social customs uniformly align with God’s will.--Abraham Piper
Donors and recipients agree: Money flows from old to young. According to donors, parent-->child giving is almost ten times as big as child-->parent giving. According to recipients, parent-->child giving is over twenty five times as big as child--> parent giving.--Bryan Caplan
You're forgetting about Social Security and Medicare.--Devin Finbarr
If the issue is theirs, forgive, coach, and appropriately reposition. If the issue is yours, own it, and convert it into wisdom. Either way, you get better with every failure. And that’s a success.--Steven Furtick
As the founder of Human Rights Watch, its active chairman for 20 years and now founding chairman emeritus, I must do something that I never anticipated: I must publicly join the group’s critics--Robert Bernstein
Yes, we have to factor in the ”unknown unknowns” but that is true for anything we now do. We don’t really even know for sure what would happened without carbon abatement. It is even possible that those “climate cooling Cassandras” of the 1970s were fundamentally right. Perhaps if we remove the excess carbon we’ll slide right into an Ice Age. --Scott Sumner
Even though the logic of the temperature tax/subsidy is even stronger than second-best policies like carbon taxes, and even though the environmental movement strongly supports carbon taxes, I predict they will oppose this idea. I believe that many in the environmental movement are not utilitarians, and will be able to sleep at night putting a pristine environment ahead of the welfare of 2 billion rural Asians struggling to escape the grinding poverty of the countryside.--Scott Sumner
The new Rogoff and Reinhart book says that the four most dangerous words in finance are "This time is different." When investors start to think that "this time is different," they are ready to participate in a dangerous bubble. Perhaps the fallacy of "This time is different" also applies to regulatory reform. It may be dangerous to think that with a new round of regulatory reform we are going to see different results from past regulatory reforms.--Arnold KlingThose who witnessed Japan's spectacular rise and fall in the 1980s should get a familiar feeling watching China these days.--Michael Auslin
Wednesday, October 21, 2009
After having taken George Hilton's transportation economics at UCLA in 1973, I never thought the same of horses again. Hilton pointed out that horses in New York and other cities were responsible for flies and disease because they dumped 10.5 pounds of manure and urine on a typical day. Hilton pointed out that when people over 100 years ago talked about pollution, they had in mind the pollution created by horses. That's when I started to see the absurdity of bumper stickers I saw in L.A. that said, "Fight pollution: ride a horse." When I go on one of my favorite walks in Monterey, I refer to the horse mess on the trail as pollution. That's due to what Hilton taught me.
[SuperFreakonomics authors] Levitt and Dubner tell a similar story, with more data and an even bigger estimate of the amount of manure dumped by horses. They point out that electric street cars and cars were a huge improvement.
Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.(Via Don Boudreaux)
Check out how much you can make if you get the job as top stagehand at non-profit performance center Carnegie Hall. Dennis O'Connel gets over $400k a year in salary, plus another $100k a year in bonuses in deferred comp, bring home more than half a million dollars. His assistants all make over $400,000 a year.
It seemed completely obvious to us that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue.--Steve Rattner
After Bear went down, everyone knew Lehman was next on the list, with Merrill and UBS also known to be wobbly. Why didn’t the Fed, Treasury, and SEC together demand certain types of information from all big US regulated capital markets players (including JP Morgan and Goldman, perceived to be the healthiest, so as not to be singling out the weaker members of the herd?). This is a massive oversight. Relying on luck, which is what assuming all would be well after the Bear debacle, is no substitute for having a strategy.--Yves Smith
In other words, thanks to the various government tax breaks, Denise put absolutely no money down on her home. If she has to default on her mortgage, she'll lose nothing except her credit rating. Of course, since she's only 21 years old, there's plenty of time to recover from that. How is the FHA still engaged in promoting this kind of lending? Barney Frank has explained that expanding home ownership is the policy of the United States. Now, more than ever, the government wants to promote home buying to prop up the great American home ownership scheme. If people like Tejada can't buy a home with no money down, then the recession wins.--John Carney
To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many.--Mervyn KingMystery solved! While a number of media outlets have speculated in highfalutin editorial tones about why there weren’t more grateful-to-be-bailed-out Wall Street fat cats attending Barack Obama’s twin fundraisers last night in New York, it turns out the answer was simple: the president wasn’t the biggest draw in town. What was? Vanity Fair editor Graydon Carter’s cocktail party at Manhattan’s Monkey Bar celebrating the release of New York Times business reporter Andrew Ross Sorkin’s sprawling and cinematic tome, Too Big to Fail.--Duff McDonald
The health insurance you get from your employer is compensation -- it comes out of the same bucket as your wages. Dollars going toward your healthcare are coming out of your direct deposits. So when health care costs rise disproportionate to the growth of your company's compensation pool, wages flat-line.--Derek Thompson
The real reason people with high IQs lack common sense is neurological. You can't be cerebral without sacrificing cunning. It takes real live brain matter to support each. Unless you've got a second brain hidden somewhere, you can't get around this tradeoff. The extreme form of this can be seen in the autistic brain. While autism is just a behavioral profile at present, the brains of high-functioning autistic people have been studied enough to reveal a pattern of early abnormal overgrowth in areas implicated in the things autistic people do well: art, music, mathematics, etc. The price they pay is a corresponding undergrowth of the white matter linking the neocortex to the rest of the brain. (There are other abnormalities as well.) The neocortex is responsible for executive function, working memory, and generalization, among other things. Generalization is how we acquire biases. Autistic people are bad at this. That means they lack prejudice, which is what we call the biases we don't like. The ones we like, we call common sense. If you want to get some idea of what the world would look like if we overcame bias, go to a group home for autistic adults.--P
In this Apostolic Constitution the Holy Father has introduced a canonical structure that provides for such corporate reunion by establishing Personal Ordinariates, which will allow former Anglicans to enter full communion with the Catholic Church while preserving elements of the distinctive Anglican spiritual and liturgical patrimony.--Vatican
Tuesday, October 20, 2009
(Via Richard Fernandez)
BCWUW4: Be careful what you wish for.
Secretary Geithner's reform proposal ... on the table is analogous to our response to airline terrorism by frisking grandma and taking away everyone's shampoo in that it gives the appearance of officially "doing something" and adds to our bureaucracy without making anything safer.--David Einhorn
[Microsoft is] trapped in their own psychosis that the world has to revolve around Windows on the PC. Until they stop doing that, they will drag their company into the gutter.--Marc Benioff
Fortunately for Kerik, the trial is taking place in Federal District Court in White Plains, not in Manhattan, so he won't have spend the forseeable future confined to a cell in a building that was once named the Bernard B. Kerik Complex. That could have been a bit awkward.--Cityfile
Listening to the contemporary American left’s views of the rest of us is increasingly like listening a paranoid schizophrenic slip farther into delusions that they are surrounded by malevolent people.--Shannon Love
The people of Afghanistan, and most fervently its women, desire a long-term and consistent relationship with the United States and European democracies. We do not want to become another Vietnam.--Wazma Frogh
Policies to improve aid rely too much on a planning paradigm that tries to ignore, rather than change, the political economy of aid.--Owen Barder
... the paradox of development economics is that it’s the study of how to get rich without knowing how.--William Easterly
Monday, October 19, 2009
Did you find the "except for a Nobel Peace Prize" clause? Me neither.
and it sits right at the sweet spot of all kinds of politically charged issues. By going after global warming, you're also going after:
- The oil industry
- Western nations
- Rural areas
- The meat industry
- Huge suburban homes
All those things happen to be politically charged, as it is, and the left has long had them (to varying degress) in their sights.
Now there's something else, too. Global warming, it seems, MUST, involve a government solution -- and preferrably an international solution. No single country can solve the issue by itself, and no private party has any incentive to reduce emissions significantly (except, inasmuch as doing so helps their image, though this is marginal). The solution must be public sector, it would seem, so again, for those with an orthodox liberal worldview, this is a good thing.
And from that, you should understand why it's so enraging to people that some might suggest a technological solution is possible. If we can suck out carbon from the atmosphere, then the oil industry, cars, and huge homes in the middle of nowhere aren't such a problem. And if there's a technological solution, then there's no need for expanded government regulation, or multi-national UN charters, and all that good stuff.
If you really believe that you’re making a difference and that you can leave a legacy of better schools and jobs and safer streets, why would you not spend the money? The objective is to improve the schools, bring down crime, build affordable housing, clean the streets—not to have a fair fight.--Mike Bloomberg
I tend to focus on those areas which I happen to know a little bit about, like M&A, investment banking, financial markets, a smidgen of non-traditional economics, and industry-standard binomial-lattice pricing models for Star Trek memorabilia.--Epicurean Dealmaker
Africa’s root problem is not a scientific one, and so it cannot be solved by science. Africa’s root problem – including its inadequate infrastructure – lies in its social institutions. Unusually corrupt governments, insufficiently secure property rights, and suffocating restraints on trade and industry make the application of advanced technologies in Africa unprofitable. Solve these institutional problems, and African poverty will disappear even with no further advances in science and technology.--Don BoudreauxI tell her that I can remember, but everything before Caroline was in black and white, and now everything is in color.--Tony Woodlief
The clearest sign that this Sunday evening holds special resonance for Bloomberg is the presence of Rupert Murdoch, Mort Zuckerman, and Arthur Sulzberger Jr., the publishers of New York’s three daily newspapers. They’re here because Bloomberg asked them to be. “Those three are at anything that really matters to Mike,” a dinner-party veteran says.I saw Bloomberg once, while I was working for Salomon Brothers at 55 Water Street, back around 1990. He was picking off technology folks from his old shop to go work for him at his new one. Not the flashiest of guys.
After cocktails on the second floor, the guests walk up to the fifth floor and find their chairs at one of the small tables. Bloomberg circulates throughout the evening, working his way from one table to the next. Katie Couric is here, and Emma Thompson, and Ken Chenault, the CEO of American Express. There’s Dan Doctoroff, the Bloomberg deputy mayor for economic development turned president of Bloomberg L.P. Each guest is a significant player in his or her own realm—wielding the power of celebrity or the power to swing elections or to move markets. Yet wherever he mingles, the 67-year-old Bloomberg eclipses his guests. Not because he is worth far more money than any two of the corporate tycoons put together; that’s been true for years. It’s because in the past seven years Michael Bloomberg has become the only powerful figure in New York who really matters.
His social-issue sensibilities—pro-immigration, anti-gun—line up tidily with the city’s liberal mainstream. And his signature accomplishments, like taking control of the school system, have been easy to sell as sensible reforms, no-brainers opposed by troglodytic vested interests. In many ways he’s been a very good mayor. And yet there’s an inescapable queasiness in the city as the mayor proceeds through the democratic formalities and prepares—barring a huge upset win by Democrat Bill Thompson—for a third term. Bloomberg’s successful campaign to rewrite the term-limits law—using his connections and his money, he artfully circumvented bringing the matter to a public referendum—is precisely what, in a democracy, should not be possible, no matter what one thinks of the ends.
But who can tell the mayor that he’s wrong, that he has a bad idea or is making a big mistake, and be taken seriously? “No one,” a Bloomberg intimate says. “He doesn’t really listen to anyone.”
A remarkable number of dominoes have fallen Bloomberg’s way. The city’s ethnic politics are at a transition point: Black activists trained in the civil-rights model are fading, and though the city’s Latino and Asian communities have rising population numbers, they have yet to coalesce around any leaders, though the primary victory of John Liu is perhaps a sign of things to come. The speaker of the City Council is usually a mayoral antagonist. But the current speaker, Christine Quinn, decided that the best way to be elected mayor herself was to ingratiate herself with Bloomberg. Then Quinn was further neutered by the council’s slush-fund scandal.
He looks elfin, barely five-foot-six and stoop-shouldered, wearing a tangerine-colored V-neck sweater so bright it practically vibrates. He’s charming and self-deprecating, much more the natural politician than when he’s on a podium. Bloomberg accepts hugs from customers and passes along anecdotes about the children of immigrants who have been accepted to Ivy League colleges, a reminder that at bottom Bloomberg is a world-class salesman.
Bloomberg shares an appeal with that of Starbucks: the satisfaction of associating with an upscale product, even if our standard of living is declining. And many of us aspire to the mayor’s power, or at least a piece of his bank account.
The mayor’s dance with the Independence Party provides perhaps the best illustration of his creativity with cash. In 2001, Bloomberg attracted a crucial 59,000 votes on the Independence Party line. Four years later, he wrote a check for $250,000 and was once again rewarded with its slot, giving guilty Democrats a place to vote for Bloomberg in 2005. The cost at least doubled this year, with Bloomberg receiving the Indy and Republican ballot spots after making donations of $250,000 to each.
Bloomberg’s wealthy friends aren’t going to be disloyal, either. Many of them have, in the past, been reliable Democratic donors. This year, though, more than 160 people who maxed out their contribution to Bill Thompson’s 2005 comptroller campaign have given him exactly zero to run for mayor against Bloomberg.
But perhaps the greatest difference is that Bloomberg’s power outstrips Rockefeller’s by a wide measure, wider even than the gap in their wealth: Bloomberg, New York’s richest man, is approximately twelve times richer than Rockefeller, in today’s dollars, and he’s spread his money around more craftily and more extensively than Rocky ever did.
Perhaps Bloomberg still pines for the presidency. But you don’t amass all this power, and spend $100 million to hang on to it, to prematurely surrender the job to Bill de Blasio. Instead, the mayor is agitating to eliminate the office of public advocate even before De Blasio has officially been elected. If Mike Bloomberg is going to stick around until 2014, he wants to have all possible power at his disposal. How he uses that power can’t completely efface the fact of how he gained it.
I also know where his secret farm in PA is, through a friend who used to own a farm in the same area. Hard to keep it that secret with the helicopter traffic.
Friday, October 16, 2009
Sen. John McCain is pressing President Barack Obama to give a posthumous pardon to Jack Johnson, the black heavyweight boxing champion who was imprisoned nearly a century ago because of his romantic ties with white women.
In a letter Friday, McCain of Arizona and Rep. Peter King of New York say it is regrettable that neither Obama nor anyone from his administration responded to their first letter, sent in August. They say they hope Obama would be eager to erase what they call an "act of racism" that sent the first black heavyweight champ to prison.
The two Republican lawmakers pushed a resolution urging a pardon for Johnson, who was convicted in 1913 of transporting women across state lines for immoral purposes.
Their resolution passed both houses of Congress earlier this year.
The White House had no immediate comment.
Why does the above provoke me to imagine Michelle's friends talking like this?
Thursday, October 15, 2009
The case of Honduras presents a remarkable example of Obama's foreign policy. It is a foreign policy that provides a continuing lesson in how to alienate friends and amuse enemies.--Scott Johnson
So you see, education policy reform is very simple. All we have to do is revamp the pedagogy, throw out the textbooks, re-write the tests, fire all the teachers, and draw up a new curriculum. This ... is a microcosm of what frustrates me about education policy. Every college grad considers him or herself an education expert because they've spent at least 16 years in school, and our education system is a bottomless PEZ dispenser of issues. The result is something quite cacophonous.--Derek Thompson
Rather than re-establishing the primacy of rational choice theory, List’s experiments show that psychological factors are important – but far more subtle and complex than previous experimenters seem to have appreciated. If he undermines hard-earned reputations elsewhere in the field, tough. Nobody ever said academia was an altruistic profession.--Tim Harford
Wednesday, October 14, 2009
For those of us who believe in physics this separation between past, present and future is only an illusion.--Albert Einstein
If a state is governed by the principles of reason, poverty and misery are subjects of shame; if a state is not governed by the principles of reason, riches and honors are subjects of shame.--Confucius
I've long scoffed at government inefficiency, but it never occurred to me that a full pork barrel could be so slow to empty.--Bryan Caplan
The relevant event is that the insurance industry seems to have turned against Obama's health care reform. Everyone who cares about American democracy and rule of law should be complaining about Harry Reid, Patrick Leahy and their allies in this move. So far I don't hear the outcry.--Tyler Cowen
Apparently the Saudis want us to pay them for their losses if we cut our petroleum consumption. As long as they pay us for the movies, bourbon, and bikinis they're not consuming, this seems eminently fair to me.--Megan McArdle
So the short answer is that the economics profession is going to hate the prize going to [Elinor] Ostrom even more than Republicans hated the Peace prize going to Obama. Economists want this to be an economists’ prize (after all, economists are self-interested). This award demonstrates, in a way that no previous prize has, that the prize is moving toward a Nobel in Social Science, not a Nobel in economics.--Steven Levitt
Elinor showed that there are lots of important cases where people follow rules about ownership without police officers. One of the central challenges in understanding failures of economic development is that in many places, police officers don’t follow the rules they are meant to enforce. ... Cheers to the Nobel committee for recognizing work on one of the deepest issues in economics. Bravo to the political scientist who showed that she was a better economist than the economic imperialists who can’t tell the difference between assuming and understanding.--Paul Romer
When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.--Calvin Trillin
He's riling up people who already feel a certain way. That kind of thing makes any hope of a rational debate fade. There are those that hail the internet as this sort of modern day salon. Where any voice can be heard, creating a Renaissance of intelligent thought. Sadly I think its just the opposite.--Accrued Interest
Why make him into some Darth Vader
For sodomizing one eighth grader?
This man is brilliant, that's for sure--
Authentically, a film auteur.
He gets awards that are his due.
He knows important people, too--
Important people just like us.
And we know how to make a fuss.
Celebrities would just be fools
To play by little people's rules.
So Roman's banner we unfurl.
He only raped one little girl. --Calvin Trillin
Friday, October 09, 2009
Thursday, October 08, 2009
UPDATE: The Nobel Peace Prize is a prize about ... nothing? I would so not want to win one, especially after they gave it to Gore, El Baradei, Carter, Annan, and best of all, Arafat.
UPDATE: Like Greg was saying.
UPDATE: Or Megan.
UPDATE: The non-defunct NY Sun suggests another worthy candidate.
UPDATE: Jules points out the dishonor in just being nominated (Hitler and Stalin, anyone?) and gathers an extensive round up.
Deliberation is how democracy is supposed to work. No matter how pressingly awesome you hope your bill is, there is really no excuse for demanding that the Senate vote on it before the public has a chance to find out what's in it. No matter how you couch it in complaints about insidious lobbyists, it isn't the lobbyists who are making a naked grab for undemocratic power here.--Megan McArdle
We haven't had an independent central bank lately.--Tyler Cowen
In fact, [Breaking Away] is a movie about a contest for status, between a group of local boys ("cutters") and a group of students. At a national level, the Tea Parties are like the "cutters" and the Democratic elite are like the Indiana students. And the fight over status is as bitter and determined as the bicycle race in the movie.--Arnold Kling
... no variable from 1900 better explains success in 2000 than investment in education.--Ed Glaeser
One reason conservatives advocate visible taxes rather than less-visible taxes is so that voters have a feel for the magnitude of the tax. But precisely because that's true, they'll punish the party that imposes it.--David Henderson
I think that the most dangerous habit that macroeconomists have have been drawn into is the habit of thinking that we have a cure for unemployment. It is always easy to say, "If the government followed my policies, unemployment would be a lot lower." And it is easy to rationalize afterward why those policies fail to achieve their promised results. It is hard to come forward and say that we may not have an answer, and harder still to get anyone to listen if that is your message.--Arnold Kling
Past a certain threshold (about $21,400 in 2016), the EITC is reduced by $0.21 for every additional $1 earned. Throw in the individual income tax rate (15 percent) and payroll taxes (7.65 percent), and the effective, implicit tax rate for workers between 100 and 200 percent of the federal poverty line would quickly approach 70 percent — not even counting food stamps and housing vouchers. The more Obamacare is rushed through Congress, the more likely it is to produce highly regrettable unintended consequences. Surely even the Democrats in Congress can see how damaging it would be to send signals to low-wage breadwinners that it no longer makes sense to seek a higher-paying job.--James Capretta
Wednesday, October 07, 2009
Tuesday, October 06, 2009
I never liked jazz music because jazz didn't resolve. ... I used to not like God because God didn't resolve. ... In America, the first generation out of slavery invented jazz music. It is a free-form expression. It comes from the soul, and it is true.--Donald Miller
Monday, October 05, 2009
Of course, we could probably find efficiencies (for starters, in the areas of tort and insurance reform), but let's not throw out the innovation with the envy, ok?
UPDATE: Gary Becker highlights some of the nice features of the Swiss model.
FLASHBACK: Bryan Caplan on Singapore's heathcare system.
Friday, October 02, 2009
We will never achieve perfect knowledge of that one truth, but we advance toward it step by step. That advance always involves enriching our present perspectives by referring to those of others. The work of attaining knowledge, therefore, is always communal.--John Frame
During Barack Obama's September 9 speech on healthcare, he proclaimed, "But thanks to the bold and decisive action we have taken since January, I can stand here with confidence and say that we have pulled this economy back from the brink." Will this be his "mission accomplished" moment?--Jay Yarow
Like many of the big banks, the ratings agencies have been deemed too big or important to the system to fail.--Michael Hirsch
We need a virgin to throw into the volcano. It's not possible to reform Moody's. It's like saying 'I'm a reformed Nazi.'--Sylvain Raynes
... S&P, Moody's, and Fitch are insulated from competition, but then, you can't just have anyone rate debt, because then you get Tom, Dick, and Harry's Ratings Agency Shop putting AAAs on everything. ... You create a pool of 10 companies licensed to rate debt. When an issuer wants to bring a security of some sort to market, they tell some central body, and a rater is selected at random from the 10. There's no changing it once a name is selected. Thus the debt issuer can't go ratings-agency shopping if they're worried about what kind of ratings they can get. If a debt issuer isn't happy with who they got, then, well, too bad. Over time, you'd give companies that showed a good track record a heavier weight in the pool, so that they're selected more often. Their only goal would be to increase market share by being accurate. Pandering to either buyers or sellers would be 100% impossible. ... Nothing's going to change the fact that incumbents grow dumb and slow -- but at least they'd have an incentive to avoid that, whereas currently they don't (have the top raters lost any market share? No.)--Joe Weisenthal
To the new inhabitants of these villages, the vanished Saxons represent an alien culture. But their ghosts flit round buildings that in most cases are unaltered since being converted from wood to stone in the 17th century. They are like the hill-station residences of British India, holding its genius loci in absentia.Ghosts linger too in the countryside round about, ironically preserved by Ceausescu's order forbidding development beyond the confines of existing settlement. This yielded one of the most effective green policies in Europe, protecting miles of meadow and forest, now vulnerable to exploitation. The roads are already littered with loggers carting away loads of walnut, beech and oak. ... The Transylvanian Saxons ranked with the Mennonite Amish, the Patagonia Welsh and the Volga Germans among the dislocated tribes of Europe. They lasted a phenomenal eight centuries, leaving intact monuments of a culture distinct and yet integral to European history. If modern European union cannot guard such relics of its diversity it is not worth the name.--Simon Jenkins
Western admirers praise the [Chinese] government for lifting 300 – or 400, or even 500 – million people out of poverty, as though the leadership has carried out a superhuman exercise in benevolence. But as the scholar and writer Perry Link has observed, it is more accurate to say that the people lifted the Communist party out of poverty – once it had the sense to get out of the people's way.--Isabel Hilton
I was long North America and short Asia, so I ended up with a small loss.
Some critics will say, this just shows that prediction markets are not predictive. Well, if it wasn't going to happen for Chicago, why did the President and First Lady risk (and receive) egg on their faces? So prediction markets are not great, but they sure are better than the bets the White House places.
So let's get that liquidity killing legislation reversed!
UPDATE: John Carney agrees that Obama blew it.
Thursday, October 01, 2009
Anyone who's been to Switzerland knows right off the bat why keeping its citizens healthy isn't going to be much of a problem. It's a nation full of physically active, cycling-happy, ski-bums, who eat better food. That matters a lot. Replace a big chunk of the Swiss population with chubby, McDonald's-eaters, and see if the system holds up so well.--Joe Weisenthal
I’m kind of appalled. If Roman Polanski were a Catholic priest or a Republican senator, would these [prominent Hollywood artists] feel the same way?--Alison Arngrim