Quotes of the day

We Baby Boomers stole from our children and our grandchildren.  We were selfish.  We levered, we lived a great life.  That's over.--Dallas Fed President Richard Fisher, on CNBC

I don’t know which is more depressing: the fact that we conduct multi-year studies of behaviors that were once governed by common sense, or the fact that we keep commissioning new research on the same question because we don’t like the findings from the last batch.--Tony Woodlief

There are more coaches in the NFL from Wesleyan College than from Notre Dame, Ohio State, Michigan, Texas, Alabama, Georgia, USC, Oklahoma and Nebraska combined. And there are more coaches from Eastern Illinois than Wesleyan College.--Joe Posnanski

Public-choice scholars, such as my (now-retired) George Mason University colleagues James Buchanan and Gordon Tullock, have long argued that politicians’ vision never extends beyond the next election. The consequence of this political myopia is that, contrary to popular myth, government is not uniquely concerned with the future; instead, politicians too frequently sacrifice the public’s long-run welfare in exchange for the cheap and irresponsible thrill of immediate victory at the polls.--Don Boudreaux

In 1977, President Carter proposed that Social Security benefits be indexed, not to the price level as had been the case, but to wages. Because real wages tend to rise, this wage indexing would be expected to cause Social Security spending to rise faster than otherwise. Someone who understood this at the time was recently designated Nobel Prize winner Peter Diamond. ... Unfortunately, Carter got his way and we are now living that nightmare.--David Henderson

Government-created groups as a way to manage risk aren't novel. Consider the market for residential mortgages. Any mortgage poses a risk of default. But a large bundle of mortgages poses a more predictable risk, with little threat of default. The Federal National Mortgage Association (Fannie Mae) groups individual mortgages together into securities that are sold to private investors. In the same way, my proposal would have the Government bundle families, any one of whom could face catastrophic medical bills, into relatively safe large groups. Colleagues have suggested calling the plan "Fanny Medic" or "Healthy Mae." Once the groups were formed, a public (or private) agency would be created to solicit competitive bids from private insurance companies to cover everyone in the group. The agency would replace the personnel department of large employers. The result would be a system that insured every American at rates that would not discriminate against the chronically ill. The beauty of the idea is that it fits every type of health insurance -- from managed-care health-maintenance organizations to traditional fee-for-service plans. The system could accommodate many different payment plans: premiums could be paid by individuals, employers or general taxes.Best of all, it eliminates the irresistible incentive of private insurers to discriminate against the ill and potentially ill for the sake of their own economic survival. Once government steps in and assigns everyone to groups, private insurers can bid on contracts to insure members of the group. At one stroke, we could reach the goal of universal coverage at competitive nondiscriminatory rates.--Peter Diamond

... roughly 90% of the value of the [high income earner's incremental business] transaction is taken by the government. When you get tax rates to 90%, that is a significant disincentive for working. ... The Left is obviously not very happy about this. They don't like talking about the incentive effects of taxes. But I have had a lot of economists come up to me and offer me condolences for all the heat I've been getting over [my column], because the economics of column is pretty straightforward. I really did simple tax calculation. And the point of it is that when you compound tax on top of tax on top of tax, the total tax burden becomes pretty large. ... At some point, the President is going to say 'you know, I can't really solve this [looming deficit] problem simply by taxing the top 2% [of income earners]'. I think he knows that now, but he's not saying that now.--Greg Mankiw

In his textbook “Principles of Economics,” N. Gregory Mankiw, a Harvard professor, proposed this thought experiment: A town must maintain a well. Peter, who earns $100,000, is taxed $10,000, or 10 percent of his income, while Paula, who earns $20,000, hands over $4,000, or 20 percent of her income. “Is this policy fair?” Mr. Mankiw asks in “Principles.” “Does it matter whether Paula’s low income is due to a medical disability or to her decision to pursue an acting career? Does it matter whether Peter’s high income is due to a large inheritance or to his willingness to work long hours at a dreary job?” Economics, Mr. Mankiw concludes, won’t tell us, definitively, whether Peter or Paula is paying too much, because an answer inevitably leads to matters of values, which inevitably leads to different answers.--David Segal

... there’s a good reason that human irrationality isn’t part of the standard economic models, and this gets to the dilemma of economics. If you have a simple problem, you can offer a simple solution. But the economy is a hugely complex problem. So we either simplify the problem and offer a solution, or embrace the complexity and do nothing.--Dan Ariely

... the foreclosure freeze has begun to create a chilling effect on the entire housing market. New buyers have stepped back from the market for distressed property, which now accounts for more than 30% of new transactions, according to RealtyTrac. New owners are worried they don't have a legal right to their homes. Title insurers are worried about their exposure to faulty documents and unwilling to stand behind new purchases. Since title insurance is required for most mortgages, the market is essentially at a standstill.--Lauren Tara LaCapra

... the implications seem much more disturbing for people who aren't in foreclosure. Take the investors in these mortgage bonds. Most of these securities have clauses that allow investors to force the banks to take back loans in the case of fraud. When did the fraud start? You can expect to see that extensively legislated--and I doubt that many of the originators have the capital to withstand a mass wave of such loan repatriations, especially since you can expect that they'll only be forced to take the bad ones. This is going to be an expensive mess for the courts to sort out, could lead to another wave of bank failures, and doesn't have any obvious legislative fix. Or how about people who are in trouble, but not in foreclosure? I heard someone on the radio saying that this all could have been avoided if banks had modified loans with generous principal reductions, like they ought to have. I find this remark puzzling. If a loan servicer doesn't have sufficiently clear authority to foreclose, then presumably they also don't have any authority to modify the loan. In fact, shouldn't banks be stopping their modifications, too, until clear lines of ownership are established?--Megan McArdle

If Fed Chairman Ben S. Bernanke wants to know who is benefiting most from his policies, Bangkok is as good a place as any to look. Thai stocks are up a spectacular 52 percent this year, while the Standard & Poor’s 500 Index is up 5 percent. Thailand, which is growing 9.1 percent, isn’t alone. Singapore’s 10.3 percent growth is another case in point. So are growth rates in Malaysia (8.9 percent), the Philippines (7.9 percent), South Korea (7.2 percent) and Hong Kong (6.5 percent). Stock markets are booming even as America’s funk is deepening. The reason: investors know that any move by the Fed to further ease monetary policy means more liquidity is about to zoom Asia’s way. It’s ironic, really. The U.S. is desperate to aid its beleaguered export industry and all it’s doing is exporting the stimulus needed at home. It’s not as fun as it sounds for Asian policy makers. They are caught by the biggest economies flooding markets with money and warring over currencies.--William Pesek

It has recently been asserted – and not just by Google’s engineers – that the company’s search queries can predict flu epidemics as accurately as the federal Centers for Disease Control and Prevention, and can get an earlier, more accurate reading of unemployment trends than the Bureau of Labor Statistics. Eventually Google will iron out the wrinkles in its inflation measure. What resources will the government then be able to tap that would ever allow it to compete with Google? Should Google’s principals be allowed to trade on this information? If Google is better at predicting inflation, unemployment and influenza, it will probably be better at predicting crime, terrorism and political unrest. What government that claims to be vigilant against terrorism would fail to use Google’s data? The line between Google and government is destined to blur. You can say that such lines have been blurring, through privatization, for a long time. But there is a difference between the privatization of tasks that started in the 1980s and the privatization of analysis that Google portends. Google is going to have a special role in shaping the ends of government. Google strengthens a key argument in favor of privatization: why should a sclerotic and bureaucratic government deny itself the tools so plentifully available in the private sector? But Google weakens a key argument in favor of freedom: that a modern economy is too complex for a single entity to make sense of. Privatization used to mean decentralization. It no longer necessarily does. History would lead us to expect one of two resolutions over the long term. Either Washington will turn Google into a utility (railroads are the model) or Google will take up a privileged position as a private company with public prerogatives (for example, the old Bank of England or the Dutch and English overseas trading companies). One way or another, the result will be a closer union between power and specialized knowledge. If the Tea Party movement is enraged at being bossed around by experts, wait till they see what technology has prepared for them next.--Christopher Caldwell

If “Jackass 3D” is anything like prior triumphs in the franchise, its band of raunchy, anarchic daredevils will make high art of low humor and leave no mishap private – especially if it involves someone's privates. But just try to get Johnny Knoxville and his gang to talk about how much each is paid. In America, money is the last conversational taboo. That's probably a good thing for workplace morale. ... Among workers whose [published] pay was below the median for their department, job satisfaction plunged and likelihood of searching for a new job increased. Interestingly, among those who were paid above the median, there was no meaningful change. The findings fit neatly with something called the inequality aversion theory, proposed in 1999 by researchers in Zurich and Munich. In experiments, human subjects proved willing to sacrifice potential rewards if they could block others from receiving superior rewards. In other words, subjects in many cases cared more about fairness than gain. (A 2003 study involving monkeys showed similar behavior – and a bit of monkey rage displayed toward scientists who created the conditions.) The University of California finding suggests employers have more to lose than to gain from publicizing salaries. Inexpensive workers might leave and costly ones aren't made more loyal.--Jack Hough

The only way to fight poverty is with employment,” he said. “Trillions of dollars have been given to charity in the last 50 years, and they don’t solve anything.--Carlos Slim

1. Cops Really Don’t Like It When You Refuse To Answer Their Questions. The passport control officer was aghast when I told her that my visit to China was none of her business. This must not happen often, because several of the officers involved seemed thrown by my refusal to meekly bend to their whim.

2. They’re Keeping Records. A federal, computer-searchable file exists on my refusal to answer questions.

3. This Is About Power, Not Security. The CBP goons want U.S. citizens to answer their questions as a ritualistic bow to their power. Well, CBP has no power over me. I am a law-abiding citizen, and, as such, I am the master, and the federal cops are my servants. They would do well to remember that.

4. U.S. Citizens Have No Obligation To Answer Questions. Ultimately, the cops let me go, because there was nothing they could do. A returning U.S. citizen has an obligation to provide proof of citizenship, and the officer has legitimate reasons to investigate if she suspects the veracity of the citizenship claim. A U.S. citizen returning with goods also has an obligation to complete a written customs declaration. But that’s it. You don’t have to answer questions about where you went, why you went, who you saw, etc.

Of course, if you don’t, you get hassled. But that’s a small price to pay to remind these thugs that their powers are limited and restricted.--Paul Karl Lukacs

... Philip Gourevitch reviews Linda Polman’s book, “The Crisis Caravan: What’s Wrong with Humanitarian Aid?” The central thesis of this book (as presented in the review) is that the people who deliver aid are addicted to horror stories and starving kids, and this addiction is fed by those who benefit from aid, whether they be local leaders, militias committing atrocities or even victims who don’t wear their prosthetic legs because they can get more attention with their stumps. This thesis has always made sense to me (see this this and this at my day-job blog, aguanomics). Polman is merely putting data (multiple anecdotes) to the theory. Here’s the simple version: If people give you money because of A, then you don’t do anything to stop A. Even better, make A bigger so you get more money.--David Zetland

There was a romance in the American military with the idea of the frontier marksman, and it manifested itself in the institutional idea of the far-shooting, eagle-eyed American grunt. So along comes the idea of a lower-powered rifle, with a shorter barrel, that fires automatically -- three traits that make it less accurate, especially at medium and long range. This was the AK-47. It was early in the Cold War. The two sides were making choices about how to arm themselves. The Pentagon took stock of the AK-47 and all but sneered. It did not even classify the AK-47 as a rifle. Traditionalists advocated a heavier rifle that fired a more powerful round. The M-14 was designed, developed, and fielded. When the two rifles met in Vietnam, the Pentagon realized its mistake. ... Casualties are not the only yardstick. A weapon can have an enormous effect without wounding anyone at all because it limits the other side's movements or the choices made each day about where and how to go. It can reduce an enemy's mobility and increase the costs of his operations by encouraging him to wear or ride in armor. It can redirect the direction and ambitions of operations -- from campaigns to patrols, in many, many ways. And even this is not enough. The fullest measure of the Kalashnikov is its effects on the vulnerable -- on civilians, on weak governments, on lower-performing government forces, like, for example, the Afghan police or, as you allude to, the Uganda People's Defense Force. Entire areas of many countries are beyond their governments' influence because local anger is coupled with automatic Kalashnikovs, which engender lawlessness and provide a means for crime, rebellion, insurgency, and human rights abuses on a grand scale. The Lord's Resistance Army provided a telling example. It descended from an insurgent organization that had few Kalashnikovs and was short-lived -- its precursor was, in a word, routed. Then came the LRA. It acquired Kalashnikovs. Almost 25 years later, it's still in the field, and the territory it operated in is a social and economic ruin. That was a different war before Joseph Kony got his AKs. And there are many other examples. ... Will they become obsolete? Not on any depreciation schedule that I have seen. I routinely find Kalashnikovs from the 1950s still circulating in Afghanistan. The rifles are more than a half-century old, and they are still in active use. What do these rifles tell us? They tell us that the Kalashnikov age is nowhere near over.--C.J. Chivers