Wednesday, August 31, 2011

Quotes of the day

Many ask whether high-income countries are at risk of a “double dip” recession. My answer is: no, because the first one did not end. The question is, rather, how much deeper and longer this recession or “contraction” might become.--Martin Wolf

Money, it turns out, is incredibly hard to reason about in a systematic and rational way (even for highly educated individuals). Risk is even harder.--Dan Ariely

In poker, volatility is a weapon. It can be an especially powerful weapon in the hands of the deranged. The ones who wield it most effectively either 1) have a very large stack relative to yours, or 2) have minimal personal regard for their own financial well being. To wit, if your opponent doesn’t care about fragging his own chip stack in pursuit of yours, he can use that as an advantage. Even insanity can be an edge — temporarily at least.--Jack "Mercenary Trader" Sparrow

A massive refinancing effort is likely to have little impact on the economy or foreclosures or housing prices. What it would do, however, is hurt our government’s already precarious balance sheet by reducing the payments on its vast mortgage portfolio. Fannie and Freddie should focus on reducing public losses with sensible, limited mortgage modifications and by selling foreclosed homes reasonably slowly.--Edward Glaeser

... Obama and his advisors predicted the economy would do better — much better — than it has, and those predictions were wrong. The president blames events: the European debt crisis, the Japanese earthquake and tsunami, the political tsunami of the 2010 elections. Some of that is plausible, but the two years of anemic job and economic growth that preceded those events can hardly be blamed on them. And it's that economic performance that has scuttled Obama's plans for an easy reelection in 2012. That sluggish growth seemed to catch a lot of people by surprise. ... prediction is hard. Experts — in politics, economics, climate — are very, very bad at telling people what will happen tomorrow, let alone next year or the next century. How many of the economists who tell us what to do now failed to see the mortgage debt crisis coming? Nearly all of them. ... The cult of experts has acolytes in all ideological camps, but its most institutionalized following is on the left. The left needs to believe in the authority of experts because without that authority, almost no economic intervention can be justified. If you concede that you have no idea whether your remedy will work, it's going to be hard to sell it to the patient. Market-based ideologies don't have that problem because markets expect events in ways experts never can. No president since Woodrow Wilson or Franklin Roosevelt has been more enamored with the cult of expertise than Obama. That none of his economic predictions have panned out is not surprising. What is surprising is that so many people are surprised.--Jonah Goldberg

The context is Eric Cantor’s demand that any federal disaster relief in the wake of Irene be offset by spending cuts elsewhere. Krugman thinks this is silly, and proves his point with an appeal to the standard Ricardian theory of public finance. According to that theory, which all economists understand and accept, if you’ve got to bear a cost, it’s best to spread that cost out over as many activities as possible. So ideally, you’d pay for disaster relief partly through spending cuts, partly through (current) tax increases, and partly through an increase in the deficit. Therefore says Krugman, “the bottom line is that basic, regular economics says that Cantor isn’t making sense.” ... Unless you believe that everything is perfect to begin with, the Ricardian argument fails, leaving you with no reason to believe that the cost of new spending should be spread widely. Instead, you should start by cutting back on your least wise activities. Cantor and Krugman probably have some legitimate disagreement about what those least wise activities are, but neither of them has any reason that I know of to believe that all activities are currently equally wise at the margin. I’m guessing that if Cantor had proposed paying for disaster relief entirely through an tax increase on the very rich, that Krugman would not have been so quick to dissent with an appeal to Ricardian public finance. (Come to think of it, if Krugman took his own point seriously, he’d be forced to conclude that every tax increase should be spread across all income groups, and accompanied by cuts in all expenditure categories. This would mark yet another radical change in several of his previous positions.) Then there’s the separate point that comes from public choice: Sometimes it’s a good idea to constrain people from doing things they want to do until they improve their behavior elsewhere. Even if you approve of the Congress’s intention to provide disaster relief, it can still make sense to hamstring that intention until they get some other stuff right — just like with the kid whose prom plans you approve, but who is still required to finish his chores first.--Steve Landsburg

A recent abortion kerfuffle occurred when Virginia's Department of Health proposed regulations for abortion clinics that consistent with the construction of new hospitals and all the sudden liberals realized how insanely onerous these regulations are. The bottom line is that regulations are very costly, and they are growing, as Obama is pushing for more EPA regulations based on fanciful savings to health care costs. Unfortunately, for Keynesians there's no interest in the effects of regulations on aggregate demand.--Eric Falkenstein

It’s not clear what we’ve “won” in Libya. But it is clear what we’ve lost: whatever’s left of the quaint notions that America should wage war only in defense of our vital interests and that presidential uses of military force can and should be constrained by law.--Gene Healy

... outside the academy, theory encounters a little something called the marketplace, where it turns out that courses like “Queering the Alamo,” say, can’t compete with “Great Authors of the Western Literary Tradition.” ... the educational market works very differently inside the academy and outside it, and the consumers of university education are largely to blame. Almost no one comparison-shops for colleges based on curricula. Parents and children select the school that will deliver the most prestigious credentials and social connections. Presumably, some of those parents are Great Courses customers themselves—discerning buyers regarding their own continuing education, but passive check writers when it comes to their children’s. Employers, too, ignore universities’ curricula when they decide where to send recruiters, focusing only on the degree of IQ-sorting that each college exercises sub rosa. Universities are certainly doing very well for themselves, despite ignoring their students’ latent demand for traditional learning. But they would better fulfill their mission if they took note of the Great Courses’ wild success in teaching the classics. “I wasn’t trying to fix something that was broken in starting the company,” Rollins says. “I was just trying to create something beautiful.” Colleges should replicate that impulse.--Heather MacDonald

If there is indeed a market in sexual favors—where sex is exchanged for economic support, emotional commitment, and the like—then it is by definition a two-way market. Assume, for a minute, that women are the “producers” in this market, and men are the “consumers.” (We all know what the product is.) Assume, as well, with Ms Hakim that there is an artificially restricted supply of this product. In aggregate, demand exceeds supply. To whose benefit does this market imbalance accrue? Cui bono?   Why, the producers, of course. Women. Duh.  To whose benefit would a removal of these restrictions accrue? The consumers. Men. A complete liberalization of the market for erotic capital—deregulation, in other words—would lower the scarcity, price, and value of sexual favors across the entire market. Men could presumably purchase or acquire by other means all the sexual satisfaction they desired at a going rate likely to be well below the standard price exacted today. At the margin (and perhaps well beyond that), marriage, committed fatherhood, and men’s financial and emotional support to their women and children would likely decline materially. Is that what women want? Really?   I will presume to speak for the fairer sex now: Of course not.   This is why the argument that sexual repression of women arises solely from patriarchy makes no sense to me.  ... consciously or not, I believe most women understand [that women’s erotic capital depreciates over time] extremely well. In fact, it has been my experience that women are the primary carriers of cultural and social values in this sphere. You don’t usually hear men or fathers making a big deal about loose women, adultery, prostitution, and the like; it is the wives and mothers. Why? Because it affects them directly. Patriarchal socioeconomic structures or not, it is usually women who set, monitor, and enforce basic social and sexual mores and expectations.  It’s in their own self interest. --TED

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.  ... Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.--Steve Jobs

... suicide is more than twice as common as homicide.--Stephen Dubner

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