Quotes of the day

Having bets on both sides is called “hedging” and is Finance 101. Goldman Sachs is on the hook for a lot of possible sins, of which it may be indeed guilty. Hedging is not one of them. That the media and politicians can’t even understand hedging is not reassuring when the largest financial reform in a generation is underway.--William Easterly

In this [New England Patriots] draft class, Michigan punter Zoltan Mesko, Florida defenders Jermaine Cunningham and Brandon Spikes, Ohio receiver Taylor Price, and first-round pick from Rutgers CB Devin McCourty were all captains. That’s a good thing.--Ian Rapaport

... a large portion [of Harvard liberal arts graduates] are intrigued by these [Goldman Sachs] ... I think that's a majority, at least at Harvard. And the same goes for consulting jobs or even Teach for America. It's this limited-time commitment, the ability to get new skills. These aren't the types of things you grow up dreaming of doing, but you wear a business suit, you meet clients. It's a way of growing up very quickly. And investment banking has the added advantage that you can make money very quickly and afford a great apartment in New York, which is very expensive. ... There's this notion of the accidental banker, people who get caught up in that world and get more and more pay and find it harder to justify leaving. But the cultural effect of all of this -- and even with regulatory reform, we need to think about that -- is that a lot of people decide to sacrifice much more time than they normally would because the money is so good, and then they believe they deserve extremely high pay because they're giving up so much time. It's not malicious. But there are a lot of unhappy people who end up in that situation.--anonymous Harvard graduate

... notice that most of the gain in freedom started in the late 1960s and concluded by the mid-1980s. Since then, most of the changes have been toward less freedom. Think of the increasing bureaucratization of life, most of which is due to government. If I want to cut off a tree branch that is more than four inches in diameter–even in my own yard–I must get the city government’s permission and pay for that permission. In the city of Monterey, California, someone who wants to install a new dishwasher must get government permission to do so.--David Henderson

That some groups respond in unexpected ways to well-meaning nudges is a lesson that the architects of "behaviorally informed" policy and regulation should keep in mind in drafting their messages. Costa and Kahn's findings suggest that you shouldn't try to prod Republicans into conserving energy through this type of social pressure. But perhaps there is a nudge that would resonate with Opower's conservative customers.* Future messages could be tailored to the market—what works in San Francisco might backfire in San Diego—or even to individual households based on their political leanings, ties to environmental organizations, or enrollment in renewable-energy programs. But this starts to sound an awful lot like fine-tuned social engineering, which gets us away from the original vision of simple nudges making a better world. And it starts to sound exactly like the type of heavy-handed governing that Republicans may be quietly rebelling against by turning up their thermostats.--Ray Fisman

The historians John Thornton and Linda Heywood of Boston University estimate that 90 percent of those shipped to the New World were enslaved by Africans and then sold to European traders. The sad truth is that without complex business partnerships between African elites and European traders and commercial agents, the slave trade to the New World would have been impossible, at least on the scale it occurred. Advocates of reparations for the descendants of those slaves generally ignore this untidy problem of the significant role that Africans played in the trade, choosing to believe the romanticized version that our ancestors were all kidnapped unawares by evil white men, like Kunta Kinte was in “Roots.” The truth, however, is much more complex: slavery was a business, highly organized and lucrative for European buyers and African sellers alike. ... Fortunately, in President Obama, the child of an African and an American, we finally have a leader who is uniquely positioned to bridge the great reparations divide. He is uniquely placed to publicly attribute responsibility and culpability where they truly belong, to white people and black people, on both sides of the Atlantic, complicit alike in one of the greatest evils in the history of civilization. And reaching that understanding is a vital precursor to any just and lasting agreement on the divisive issue of slavery reparations.--Henry Louis Gates

So the greater efficiency of a VAT and its easy of collection is a two-edged sword. On the one hand, it would raise a given amount of tax revenue efficiently and cheaply. Since economists usually evaluate different types of taxes by their efficiency and easy of collecting a given amount of tax revenue, economists typically like value added taxes. The error in this method of evaluating taxes is that it does not consider the political economy determinants of the level of taxes. From this political economy perspective, the value added tax does not look so attractive, at least to those of us who worry that governments would spend and tax at higher levels than is economically and socially desirable. ... the problem is that a VAT would be introduced not as a partial or full substitute for personal and corporate income taxes, but rather as an additional tax. This would make it much easier to close the fiscal gap by maintaining or increasing government spending and overall tax levels. Since high taxes and high levels of government spending would discourage economic growth and raise rather than lower the overall distortions in an economy, I am highly dubious about introducing a VAT into the federal tax system unless accompanied by a major overall of this system.--Gary Becker

In a feudal world where high transaction costs confounded the Coase theorem, I argue that trial by battle allocated disputed property rights efficiently. It did this by allocating contested property to the higher bidder in an all-pay auction. Trial by battle's 'auctions' permitted rent seeking. But they encouraged less rent seeking than the obvious alternative: a fi…rst-price ascending-bid auction.--Peter Leeson

Even the pagans understood, in other words, that the approach to God is bound up in blood and mystery.--Tony Woodlief