Quotes of the day

The only unemployment you find in Haiti is in the graveyard.--Tyler Cowen

Has anyone else noticed that many of the same progressives who insist that we copy the European public health insurance model also tell us that the successful European voucher programs wouldn’t work here, because we are just too different?--Scott Sumner

Results demonstrate that the proportions of IQ variance attributable to genes and environment vary nonlinearly with SES. The models suggest that in impoverished families, 60% of the variance in IQ is accounted for by the shared environment, and the contribution of genes is close to zero; in affluent families, the result is almost exactly the reverse.--Psychological Science

By my count, about 14 percent of the people in Parade's sample earn more than $1 million a year. In the real world, the actual percentage is about 0.2 percent. So, in a truly representative sample of a hundred people, you would most likely have zero, or perhaps one, person with a million dollar income. Finding two would be highly unlikely. 14 would be nearly impossible. Does this matter? I think it might. There is a common perception in some circles that we can solve all our fiscal problems if only we were willing to tax the rich some more. Yet, in reality, there are not enough rich for this to work. By presenting such a skewed cross-section of incomes, Parade inadvertently feeds an all-too-common misperception.--Greg Mankiw

[Supreme Court Justice John Paul] Stevens’s retirement means a Supreme Court nomination this summer, which once again allows us to observe the civility and decorum that has put Washington, D.C. on par with a seventh-grade lunchroom.--Tony Woodlief

Synthetic indignation being the first refuge of political featherweights, [Charlie] Crist's campaign announced that he believes [Marco] Rubio's suggestions are "cruel, unusual and unfair to seniors living on a fixed income." They are indeed unusual, because flinching from the facts of the coming entitlements crisis is the default position of all but a responsible few, such as Wisconsin's Rep. Paul Ryan, who has endorsed Rubio. What is ultimately cruel is Crist's unserious pretense that America faces only palatable choices and that improvident promises can be fully funded with money currently lost to waste and fraud. By the time the baby boomers have retired in 2030, the median age of the American population will be close to that of today's population of Florida, the retirees' haven that is Heaven's antechamber. The 38-year-old Rubio's responsible answer to a serious question gives the nation a glimpse of a rarity -- a brave approach to the welfare state's inevitable politics of gerontocracy.--George Will

It is important to remember that government legislators and regulators were encouraging reckless subprime lending the whole way down. Maybe they didn't cause the crisis, or they were not even one of the larger of several causes, but they were not arguing for stricter underwriting standards during the height of subprime lunacy. Even today, the only place you can get a home loan with only 3.5% down payment is from the government's FHA program.--Eric Falkenstein

... the Shanxi banks were unique. Their dual class shares let owners vote only on insiders’ retention and compensation every three or four years. Insiders shares had the same dividend plus votes in meetings advising the general manager on lending or other business decisions, and were swapped upon death or retirement for a third inheritable non-voting equity class, dead shares, with a fixed expiry date. Augmented by contracts permitting the enslavement of insiders’ wives and children, and their relative’s services as hostages, these governance mechanisms prevented insider fraud and propelled the banks to empire-wide dominance.--Randall Morck, Fan Yang

Colleges want to expand the heterogeneity of the selection criteria so they can pick who they want. If it's a top college or university, mostly this means limiting the number of Asians and maximizing the number of future donors and by the way those two goals tend to move in tandem.--Tyler Cowen

If future Chinese consumption growth also slows, as it did in Japan, because households are forced to foot the new bad-debt bill, we may see the real cost of the current explosion in bad loans – several years of sub-par growth. It turns out that banking crises might not be costless, even if they don’t lead to banking collapses. In the case of China they may instead lead to a collapse in consumption growth. As part of the trade dispute that China is facing with the rest of the world, this should give some indication of how little room China has for its adjustment. Anyone who is too impatient with the glacial pace of Chinese adjustment must recognize just how difficult it will be for China quickly to reorient its economy towards household consumption. The risk is that China, like Japan in the 1990s, will rebalance in the form of a sharp contraction in GDP growth as households struggle to pay for the misallocated lending boom.--Michael Pettis

Conventional economics makes much use of the phrase, "In equilibrium, ..." We say that "we know that in equilibrium, X has to happen." We do not talk much about the process of getting from disequilibrium to equilibrium. We talk even less about the things that go on while we are out of equilibrium. What makes Recalculation different, and awkward, is that it is explicitly not an equilibrium concept. In that sense, it has an affinity with other heterodox economic views that scorn equilibrium. Austrians who focus on dynamics and creative destruction are in that camp. But so are post-Keynesians who insist that Keynesian economics is a disequilibrium theory.--Arnold Kling

Douglass North famously said that when the institutions of a society reward piracy, ambitious people become pirates. When the institutions reward wealth creation, people create wealth. In finance, our institutions did much to reward piracy in the past decade.--Arnold Kling