Quotes of the day

It’s one thing to make a donation to Habitat for Humanity in lieu of a Christmas present, and decorate your door with a wreath hand-woven by little orphan Mexican children, and sign all your emails with “Peace.” It’s another to get up in my business because I want a lower tax rate and haven’t volunteered half my time this past year, especially when one of the reasons I don’t volunteer and want lower taxes is because I’m supporting the four kids who will need to be gainfully employed to cover the retirement you haven’t bothered to save for.--Tony Woodlief

Housing regulations, more than those that bind standard businesses, explain the Sun Belt’s population growth. If New York and Massachusetts want to stop losing Congressional seats, then they must revisit the rules that make it so difficult to build. High prices show that the demand would be there if the supply is unleashed.--Edward Glaeser

The most promiscuous men are those who have paid for sex, been threatened with a gun, support abortion rights and know people with AIDS. The least promiscuous are those who spend time at church and report high satisfaction from family life. The most promiscuous women are those who have been punched, believe homosexuality is not wrong, and spend time in bars. The least promiscuous women are those who are patriotic and spend time in church.--Steve Landsburg

The cost of insuring Illinois’s bonds against default rose to the highest level in five months as the state headed for the new year without a plan to finance a $3.7 billion pension-fund contribution. The cost of credit-default swap insurance on the lowest-rated state after California has risen 16 percent to $330,000 to protect $10 million of debt, from $285,000 on Dec. 3, according to data compiled by Bloomberg.--Darrell Preston

... the main function of finance and Wall Street generally is to provide capital. Now, the people who provide capital will do it more willingly if they have the liquidity to get out of their obligations by selling to other people. So you add the markets for trading to provide that liquidity. Go one step further. When people buy and sell securities they are taking on risk. So to address that, Wall Street offers instruments to help with hedging and risk management. You end up with derivatives and the like. All of that is reasonable. But the next step is where things start to get into trouble. Those in finance start to realize that it's hard to make money in a competitive market. They look for ways to get an edge. And to do that, they try to create informational asymmetries and institutional barriers. And this is the point where derivatives started to be designed for gaming the market rather than to meet the demands of risk management, to allow institutions to lever when they weren't supposed to lever, avoid taxes, trade in markets that they weren't supposed to trade in.--Rick Brookstaber

I get annoyed by progressives always talking about how the Clinton-era top rate (39.6%) was fine. Maybe so, but then why don’t they support this “tax cut,” which will return the top rate to 38.8%, once the health care tax kicks in?--Scott Sumner

... unlike many of the countries sharing the euro, there was never any worry that Switzerland would not be able to pay back its debts. What did the Swiss do right? For one, the country’s regulators and central bank were faster and tougher than most. During the lull in the summer before the collapse of Lehman Brothers in September 2008, the Swiss were hard at work on a plan to deal with troubled assets at UBS, the worst of Switzerland’s problem banks—with a balance sheet more than four times the size of the entire Swiss economy. When disaster struck, the central bank swiftly nationalized part of UBS’s assets and recapitalized the rest. That’s unlike authorities elsewhere in Europe or Washington, who waited until the last minute to stitch together messy bailouts that left many problems to linger. Second, the Swiss decided early on that tighter reins on their banks wouldn’t just protect taxpayers from future crises and bailouts, but would ultimately be good for the banks’ own business as well.--Stefan Theil

Japan has simply reached the limits of Keynesian policy in an economy which has never managed to jolt itself back up to a healthy rate of growth. Demographics is obviously a big contributor to that slow growth, and there are a whole host of secondary factors one could nominate, but whatever the reason, they have now had two decades of anemic growth, which they have fitfully attempted to address with stimulus. Maybe not enough stimulus, maybe badly designed, but they've certainly tried to follow the basic Keynesian playbook: borrow money and spend it when times are bad, in the hopes that you can bring back growth. But for Japan, at least, the growth has not materialized. Few economists would advise undertaking a fiscal adjustment, on the scale that Japan requires, in the face of the current crisis. The problem is, there hasn't been a good time for retrenchment in 20 years.--Megan McArdle

... the vendors that lost this game failed because they listened to their customers. Like with PDAs or with the original mobile phones or first generation of PCs, early adopters are not the audience that should be consulted on how to improve the product. ... If you can’t ask early adopters and you can’t ask non-consumers for hints then where can clues be found? What history shows is that consumers have been happy to trade up to technology that offers more option value. ... Asking or observing current users of smartphones does not provide any incentive to sell low end versions. Asking or observing non-consumers seems to indicate no interest in newfangled complex or costly products. But the calculus that must be made is one of option value. Does the new product offer significant option value? Will this option value be easily realized? This is not easy to determine, but it’s a method that is far more promising than asking users their opinion. The PDA was not a product that was introduced by the incumbent computer vendors because their customers did not ask for it. Once established, the PDA was not replaced by a product that PDA users asked for either.--Horace Dediu

Astonishing, isn't it. Here are [RIM] executives being surprised by the state of the art in their own area of competence, and not just surprised, but caught completely flat-footed. They then found out during disassembly that "... that the phone was [a] battery with a tiny logic board strapped to it." It was, in other words, a completely different way of thinking about mobile phones, orthogonal in important ways to how RIM thought about its devices. All of this helps explain why RIM (and Microsoft and Nokia and ...) played crummy defense for so long after the iPhone launch. They had been blind-sided, taken aback by a wormhole product that they just knew couldn't do what Apple said it could. I'vewritten elsewhere about how I remain bearish on RIM, but it is worth reminding yourself that RIM wasn't the only company that in early January of 2007 had no idea how that Apple product had just dropped into our little corner of capitalism.--Paul Kedrosky

Early development economists working at the hopeful dawn of colonial independence believed that they really were starting from scratch. The last fifty years have shown us that they weren’t, and this has been—and remains—one of development’s biggest blind spots.--Laura Freschi

I’ve given the Monty Hall problem to some of the best mathematicians in the world, and they’ve gotten it wrong. Some of them insisted on the wrong answer for days before they got it. The difference between them and Lubos is in their ultimate reactions: “Wow, I get it now!” versus “But I gave the correct answer to this *other* problem, and you cheated by not asking me the question I knew how to answer”.--Steve Landsburg

People will believe a moron they like over a genius they don't.--Rob Lyman