The drug that saved my life is banned in Great Britain. ... Companies actually need to hide their new drugs from Europe, because the government doesn't want to pay for them.--Representative Billy Tauzin, on CNBC
There are three big problems with attempting to control health care costs by reducing so-called "obesity." First, it's a fake problem. Second, the solutions for the problem are non-existent, even assuming the problem existed. Third, focusing on making Americans thinner diverts resources from real public health issues.--Paul Campos
Gastric bypass is surgically induced bulimia. People starve for the first few months so of course their blood sugar levels go down. At five and ten year followup the average weight loss from these procedures is about 10% to 15% of body mass (it's actually less than that since lots of people drop out of the studies) which means most of these people end up still "morbidly obese." And they can never eat normally again.Why do you think you never see the actual stats for weight loss from stomach stapling? If they were good they'd be on billboards 50 feet high.--Paul Campos
... we don't know how to lose weight. Some of the things Paul Campos is saying about obesity are controversial, but this isn't. Every single study which has attempted to make overweight people get thin without very risky surgery has failed completely and utterly. Fewer than 1% of patients ever keep the weight off.--Megan McArdle
As capitalism struggles, the parasites who feed off its wealth creation are doing pretty well. The political class is growing. Home prices in Washington D.C. are rebounding three times faster than the national average - and job loss in DC has been less severe than in any other major city.--John Stossel
If Congress can tax plastic surgery, can it tax abortion?--Glenn Reynolds
What's the definition of 'speculation'? A price move that Congress doesn't like.--Eddy Elfenbein
Specialists would emphasize the risk they took in providing liquidity, yet on big gap days like October 19 1987 they did not step in and exacerbated the situation. The risk they took on providing orderly markets was a license to steal for decades, and they now scream 'unfair!' as their order flow evaporates.--Eric Falkenstein
I do not worry about high-frequency trading. Telegraphs and telephones also brought their own, earlier versions of high-frequency trading. As did stock index futures. There are second-best arguments relating to hockey helmets and the like but that is the case with most forms of progress and greater economic speed. You don't have to think that the current profits measure the current social value of high-frequency trading to argue that the overall trend should be allowed. The correct judgment of efficiency occurs at the system-wide level, not at the level of the individual trading strategy. The short-run story is that private profits exceed social returns but in the longer run the trading activity and liquidity brings increasing social returns and better communication of information.--Tyler Cowen
... when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.--Andrew Cuomo
Microsoft needed Yahoo's search business for its longer-term strategic goal of competing with Google on the Internet. That should have allowed Yahoo to force a premium price. Instead, it squandered last year's approach. It is now hard to see a sale of the reshaped Yahoo for a good price, leaving the company to slog it out in the increasingly competitive display-advertising market. Small wonder Yahoo investors lost a boatload of money Wednesday, as shares crashed 12%.--Thorold BarkerThe once proud warrior of the internet space laid down its sword, knelt at the feet of Microsoft and gutted itself today. There was no honor in this death, it was one brought by the shame of losing to Google and a lack of faith in one’s ability to compete in the space they created. To be clear, Yahoo didn’t need to do this deal, Microsoft did. Ultimately Yahoo will look back at this moment as the second–and perhaps fatal–mistake in their epic history. Search is the most important business of the 21st century and owning a commanding lead in second place is not insignificant. At one time Yahoo was the number one search engine and portal. However, they didn’t see the value in search and decided to syndicate that piece of their business to a small company called Google. For a couple of years we all experienced Google in Yahoo’s wrapper. Our only indication of who made this wonderful tool was a tiny “Powered by Google” logo on the top right of the page.--Jason Calcanis
Thursday, July 30, 2009
Quotes of the day
Wednesday, July 29, 2009
Game theory and economic corruption
We measure our economy in money, not in things. In the age of self-reproducing automata, we can suffer a declining economy, and pandemic unemployment, while still producing as much stuff as people are able to consume. We are facing the first economic downturn to include free cell phones, more automobiles than we have room for (in many locations you can now rent a car for less than it costs to park one) and computers that cost less than a month's health insurance yet run at billions of cycles per second for years.
Why the growing imbalance between the cost of people and the cost of machines? What prices are going up the fastest? Health care — the cost of maintaining human beings. What prices are going down the fastest? The cost of information and machines. What, really, is health-care reform? Human beings are being cared for by a dysfunctional, antiquated system, and we hope that this can be reformed by adopting efficiencies from the domain of machines. Where will this lead? Are we using computers to sequence, store, and more faithfully replicate our own genetic code, or are computers optimizing our genetic code (and health) so that we can do a better job of replicating them?
Replication of information is generally a public good (however strongly pockets of resistance may disagree). When financial instruments become self-replicating, trouble often ensues. The derivatives now haunting us were produced, not from natural factors of production or other goods, but from other financial instruments. There are numerous precedents for this.
As early as the twelfth century it was realized that money, like information but unlike material objects, can be made to exist in more than one place at a single time. An early embodiment of this principle, preceding the Bank of England by more than five hundred years, were Exchequer tallies — notched wooden sticks issued as receipts for money deposited with the Exchequer for the use of the king. "As a financial instrument and evidence it was at once adaptable, light in weight and small in size, easy to understand and practically incapable of fraud," wrote Hilary Jenkinson in 1911. "By the middle of the twelfth century, there was a well-organized and well-understood system of tally cutting at the Exchequer... and the conventions remained unaltered and in continuous use from that time down to the nineteenth century."
...
Until the Restoration tallies did not bear interest, but in 1660, on the accession of Charles II, interest-bearing tallies were introduced. They were accompanied by written orders of loan which, being made assignable by endorsement, became the first negotiable interest-bearing securities in the English-speaking world. Under pressure of spiraling government expenditures the order of loan was soon joined by an instrument called an order of the Exchequer, drawn not against actual holdings but against future revenue and sold at a discount to the private goldsmith bankers whose hard currency was needed to prop things up. In January 1672, unable to meet its obligations, Charles II declared a stop on the Exchequer. At the expense of the private bankers, this first experiment with derivative financial instruments came to an end.
...
Financial systems exhibit the Gödelian incompleteness characteristic of all sufficiently powerful formal systems: within the given system it is possible to construct statements (or financial instruments) whose value appears to be sound, but cannot be proved within the system itself. No financial system can ever be completely secure and closed. There is no limit to the level of concepts (including fraudulent ones) that an economy is able to comprehend. The system depends on trust.
...
"A Banker," explained Sir William Petty, co-founder of the Royal Society and author of Political Arithmetick, in 1682, "is honest only upon the Penalty of losing a beneficial Trade, founded upon a good Opinion of the World, which is called Credit." Credit, by definition, cannot easily be restored; its nature is to shift somewhere else. We should be less concerned with loss of money and more concerned with loss of trust. If we have to start over with more trust and less money, is this really so bad? "Is not a Country the Poorer for having less Money?" asked William Petty. "Not always," he answered, "For as the most thriving Men keep little or no Money by them, but turn and wind it into various Commodities to their great Profit, so may the whole Nation also." 15
Charles II had the right idea. He trusted (and endowed) the small group of oddballs who were forming the Royal Society, and put a stop on the Exchequer. If he had rescued the bankers, and ignored William Petty's band of Natural Philosophers, where would we be now?
Again, regulation does not work as promised
Cotchett, whose firm, Cotchett, Pitre & McCarthy, specializes in civil fraud actions, would not reveal much of the discussion he and his law partner, Nancy Fineman, had with Madoff in relation to the suits, but he added tantalizingly that Madoff "didn't object to a single question" the attorneys asked.
"He opened up and told us everything about how the scam went down," Cotchett said.
Based on the extensive interview, Cotchett said, "In the new complaint we file, there will be a number of new people the SEC (Securities and Exchange Commission) has never looked at." Cotchett said that after talking with Madoff, he was shocked at what he perceived to be the failures of the SEC.
And a quote from television captured by Justin Fox:
I was dumbfounded at some of the instances where he told me and Nancy, in front of his lawyer, that he visited with SEC and there were times when he thought, “They got me.”
Quote of the day
Truth is, we need more speculators, not less. They’re the people who can help prices find the right level, because there is no “right” level other than the one the market gives us. And that’s why, in turn, excessive speculation is nothing more—or less—than a convenient fiction for when prices don’t move the way politicians would like.--WSJ Editorial Board
Budget change I can believe in
Three months ago, President Barack Obama ordered his cabinet secretaries to find $100 million in budget cuts for the current fiscal year to emphasize the point that he, too, was serious about belt-tightening. They responded with $102 million. That is 0.006% of the estimated federal deficit.
The list of 77 spending cuts, which the White House is calling "the $100 million savings challenge," reflects the vastness of government -- and its vast inefficiency. Hundreds of millions of dollars in savings were found simply by casting around for areas to trim.
Still, the reductions barely scratch the surface. "Some of these cuts are so small they would be a rounding error of a rounding error in the federal budget," said Brian Riedl, a federal budget expert at the conservative Heritage Foundation. They also show how "unbelievably outdated" the government is, he said.
"I mean, emailing around the daily press clips instead of printing them out and distributing them? That should not have been necessitated by a presidential order."
...If the administration produces $100 million in savings every 98 days for the rest of Mr. Obama's term, the savings will total $1.5 billion, or three days of interest on the federal debt, said Don Stewart, spokesman for Senate Minority Leader Mitch McConnell.
"These savings tends to be in thousands, tens of thousands and millions," said Rep. Paul Ryan of Wisconsin, the ranking Republican on theHouse Budget Committee. "Our fiscal challenges are in the thousands of billions."
Tuesday, July 28, 2009
Quotes of the day
Women are gradually becoming more attractive in an evolutionary ‘beauty race’, according to scientific research. Beautiful women have more children than their plainer counterparts, and a higher proportion of those children are girls, a study claims. These daughters, once adult, also tend to be attractive and so the pattern continues.--Lucy Ballinger
For the first time in 30 years, officials in the [China's] economic capital have urged eligible parents to plan for a second child. The move was prompted by the growing demographic imbalance in the city and fears that the younger generation will not be able to support the aging population. The one-child system, where all pregnancies are monitored and sometimes terminated by order, was enforced to control a population that is the largest in the world at more than 1.3 billion. --Jane Macartney
For all the talk this year about the Chinese refusing to buy U.S. bonds, the real story is about the People’s Republic of China’s failure to find buyers for the equivalent of $1.7 billion of its debt because too many investors showed no interest at auctions that would be considered disastrous if their outcomes were repeated on Wall Street.--Lilian Karunungan and Shanthy Nambiar
For the 85 percent of Americans who already have health insurance, the Obama health plan is bad news. It means higher taxes, less health care and no protection if they lose their current insurance because of unemployment or early retirement. --Martin Feldstein
Once we've got a comprehensive national health care plan, what are the government's incentives? I think they're bad, for the same reason the TSA is bad. I'm afraid that instead of Security Theater, we'll get Health Care Theater, where the government goes to elaborate lengths to convince us that we're getting the best possible health care, without actually providing it. ... Now, maybe government institutions could be made to produce innovations; I certainly think it's worth trying Dean Baker's suggestion that we should let the government try to set up an alternate scheme for drug discovery. Prizes also seem promising. But I want to see them work first, not after we've permanently broken the system. The one industry where the government is the sole buyer, defense, does not have an encouraging record of cost-effective, innovative procurement. ... Living a fit, active life is correlated with being healthier. But then, as an economist recently pointed out to me, so is being religious, being married, and living in a small town; how come we don't have any programs to promote these "healthy lifestyles"? --Megan McArdle
They told me if I didn’t vote for Barack Obama, we’d get four more years of K Street lobbyists running in and out of the Oval Office — and they were right!--Stephen Green
We believe that there are important differences among the college majors in world views and overall philosophies of life....," they write. "[O]ur results suggest that postmodernism, rather than science, is the bête noir -- the strongest antagonist -- of religiosity.--Miles S. Kimball, Colter M. Mitchell, Arland D. Thornton, Linda C. Young-Demarco
I've always preferred 40-48 hours per week be compressed into 4 days
Monday, July 27, 2009
Amity Shlaes must read article on public choice theory
Government reformers view themselves as morally superior, but that is an illusion. They are just like private-sector operators, who do things that are in their own interest, not society's, first. Those things include taking advantage of an economic crisis to aggregate power for themselves and their offices.
...Five dramatic examples of PC in action in the U.S. spring to mind.
--The federal government exploits insurance company AIG ( AIG - news - people )'s crisis in order to regulate an area in which state law has traditionally held sway.
--The federal government exploits the auto industry crisis to get its nose into what has formerly been private-company territory: corporate management.
--The federal government exploits the mortgage and banking crisis, using it to capture the remaining private part of a sector in which it already has outposts: health care.
--The federal government exploits the Chrysler deal to reduce the credibility of commercially traded bonds--thus elevating the quality of its own bonds--by arbitrarily denying bondholders
--The federal government--wittingly or unwittingly--drives down the price of Citigroup ( C - news - people ) shares so it can pick up equity in a good bank on the cheap. But most PCers choose to look at this as mindless reflex, not considered intention, spurring the government's action.
The tragedy of such incursions is that once started they're hard to stop. But the first defense against them is to identify the government advance for what it is: a power grab.
Quote of the day
With limited resources, carbon cuts shouldn't be our top priority. I hope that President Obama will not be swayed by the loud, well-meaning, but mistaken appeals from climate-change activists, and instead identify the obvious areas that need more urgent attention. It would be grossly immoral to knowingly squander colossal sums of money achieving almost nothing, while comparatively tiny sums could save millions of lives right now.--Bjorn Lomborg
Saturday, July 25, 2009
Friday, July 24, 2009
High frequency bovine scatology
His latest article made quite a splash on trading desks and the journalists who follow us today. He reports:
I agree with everything that Duhigg has reported, but the reporting is one-sided. In order for a high frequency trader (HFT) to make money, someone has to take the other side of the trade, and the liquidity Taker pays a higher fee than the exchange pays the liquidity Provider. The exchange keeps the spread. (You may be familiar with this concept if you have a savings account with a bank, and a credit card or mortgage--the bank keeps the spread between the interest rate they pay you and the interest rate you pay them. If you hate that, maybe you should consider a career in banking.)Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.
“This is where all the money is getting made,” said William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.”
For most of Wall Street’s history, stock trading was fairly straightforward: buyers and sellers gathered on exchange floors and dickered until they struck a deal. Then, in 1998, the Securities and Exchange Commission authorized electronic exchanges to compete with marketplaces like the New York Stock Exchange. The intent was to open markets to anyone with a desktop computer and a fresh idea.
But as new marketplaces have emerged, PCs have been unable to compete with Wall Street’s computers. Powerful algorithms — “algos,” in industry parlance — execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds.
High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there.
High-frequency traders also benefit from competition among the various exchanges, which pay small fees that are often collected by the biggest and most active traders — typically a quarter of a cent per share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss.
Ever play Texas Hold 'Em? If you are the Big Blind, you pay most of the ante, and in return you get to see if anyone wants to play with you--they need to give you information first. So it is with the liquidity provider: putting your limit order out there means you are showing a card first (the shares you are willing to buy or sell at a given price level), and you've taken the risk of getting picked off. You get paid for taking risk and providing liquidity, or at least, you should. Otherwise, there is probably a more productive career somewhere else for you.
Certainly, the grocer who takes the risk to provide food for you in your neighborhood should get paid for that service? Or are "experts" suggesting we go back to subsistence farming so we don't get ripped off by Big Food and Big Supply Chains? I thought reducing poverty was a good thing.
While there is an advantage for the players with the best technology, the playing field is more level than ever. Thirty years ago, a retail investor would have to pay a few hundred dollars to Merrill or other broker to execute a few hundred shares. Now we pay less than $20.
Ten years ago, your mutual fund manager would have to use Goldman or a competitor's block desk to move 100,000 shares of Proctor and Gamble. And they would have to trade an eighth wide, i.e. 12.5 cents per share. The financial intermediaries would take that spread, or more, if another customer was willing to trade through your manager's limit to take the other side of the trade.
No one pays those types of commissions any more. Tick sizes have shrunk over 90%, and as have costs to the retail investor.
The fact that Duhigg had to quote a dinosaur, Bill Donaldson, tells you something. I've spoken to the founder of DLJ and SEC chair on one of his lecture circuit gigs, and the guy is from a different age. His research driven business model was fantastic back in the 70s and 80s, but its a woolly mammoth now. His appointments since cashing out have been largely political; those who can't do teach, and those who can't teach must regulate ...
There are a lot of grizzled Wall Street veterans who pine for the days of tick sizes an eighth wide, and funneling trades to a single market maker on a trading floor. That's because a monopoly is great if you are on the right side of it.
Price discovery is improved with liquidity. There is more liquidity because of high frequency trading.
Right now, GE is quoting $11.97 x $11.98, half a million shares a side. I guess Donaldson and Duhigg are pining for the days when it would be quoting $11.875 x $12.000, and we retail investors would be paying Merrill $300 to sell 1,000 shares, in addition to giving up $95 extra in the day of eighths, in that we would be selling at $11.875 rather than $11.97.
As usual, the good ol' days aren't as good as they seem, once you realize you are giving up your clean running water for the outhouse.
NOTE: The flash orders that Duhigg refers to are a new feature. I'll have more to report on in the coming weeks as I find out more about them.
UPDATE: Eric Falkenstein weighs in a week later than this post, but, oh my, is it worth the wait!
Quotes of the day
[John] Mack’s decision to focus less on prop trading will no doubt prevent the firm from becoming the target of all the populist outrage Goldman has rightfully earned. With some regulators starting to talk about a windfall profits tax on so-called too-big-to-fail institutions, Goldman might come to regret its heavy reliance on trading profits. Still, short-term investors may not have the patience for Mack to deliver. That’s their loss. For investors with a longer-term outlook, Mack’s more sensible approach to risk taking and trading should prove to be a better business model.--Matthew Goldstein
Our six-year-old Little Leaguers have less institutional protection -- binding rules to keep them from getting hurt or burning out -- than the Yankees.--Charles Whelan
Thursday, July 23, 2009
Greg Mankiw reports that it wasn't all Larry Summers' fault
1) The instrument in question was highly liquid and could be sold fully within a few days; essentially all money was lost in 2008 two years after Larry Summers left.
2) Harvard has a system where the treasurer makes these decisions with approval of the corporation and involvement of a debt management committee on which president does not serve.
3) Given the plan to borrow large amounts of debt in the future, doing something to lock in low rates made sense. Iif Harvard was borrowing big, there would be offsetting saving now. The big error was the failure to adjust hedge when Allston was scaled back and to take account of the risks associated with the change in the university's credit rating.
Joe Weisenthal notes the double standard of the expert/journalist complex
Pundits fall over themselves to heap embarrassing adoration on every move China makes.-- China's stimulus is working magnificently, we're told over and over again. Ours is a big waste of money.
-- China's smart about locking up hard assets for the long term. We're dumb for trying to guess the future of energy.
-- China is going to kick our collective asses at building electric cars. When we try do that, we're "picking winners and losers."
-- Their centrally managed banking system is held up as an example of prudence and risk-aversion. Government involvement here, though, is doomed to "politicize" lending.
And on and on. We're not saying China isn't or is making smart moves right now. That's not the point. But if you believe that central planning is doomed to make dumb decisions, then there's no reason to think China's any better at it, just because their actions on energy (or whatever else) happen to be the flavor of the month.
Is Nassim Taleb the new Donald Trump?
Quotes of the day
The pipe makes civilization possible.--Tom McMahon, master plumber
You should eat what you kill, but you should make sure that what you killed stays dead.--CNBC's Joe Kernen, on Goldman Sachs compensation
... I am puzzled that Harvard has landed in the mess it has so loudly, sloppily, and apparently unexpectedly. You would think a university founded almost 375 years ago would take the long view in everything it does. You would think that it would be cautious, circumspect, and conservative, and that, in the words of that arch traditionalist, Rudyard Kipling, it would have learned to treat those two imposters, triumph and disaster, the same. ... It seems that Harvard and Yale are in a race to determine which of them has the biggest edifice complex.--Epicurean Dealmaker
... what the hell is wrong with the leadership at the ACLU? In theory, for all I know, it unconstitutionally promotes religion. In practice, what important freedoms are being violated? The establishment clause was supposed to prevent a minority from being oppressed by a majority, not to prevent a minority from oppressing itself. I admire a huge amount of the work that the ACLU does on issues like habeas corpus and wiretapping. Why, then, do they so often seem intent on turning the organization into the highbrow edition of Stuff White People Like?--Megan McArdle
I set out with a typical writer’s disapproval like the people who stand outside premieres saying, “My book’s better.” But I think that’s being a bad sport. I also had a very honest conversation with Patrick who said: “It’s going to feel like a violation. I’m going to plunder your book.” I said, “I know what’s happening here. I’ve taken my money and made my choice.” We’re getting to this thing I wanted to talk about: the idea of faithfulness. I think it’s misplaced. A movie [adaptation] is taking something as a jumping-off point. And it may end up making a different genre of work. I think that’s OK. It’s a whole different set of artists working in a different form. I wouldn’t be so big-hearted about it if my book didn’t survive. But my book is still out there.--Zoe Heller
Tuesday, July 21, 2009
What's true of the NFL is also true of Wall Street
You know, I think that when you're young and you come in and have some success, you think you're bulletproof to an extent. But you find out fairly quickly that football is a replacement business and that no matter what it is that you've done, you're as good as your last play. And then to have all of that going on where I couldn't get my job back and this other kid was in there playing, begrudgingly now I can say he was playing awfully well and has gone on to play very well.--Drew Bledsoe
Quotes of the day
May [Walter Cronkite] not be shocked to find some departed members of the Religion Right in heaven, and may he enjoy interviewing them there.--Douglas LeBlancThe reason for these appeals to lasting unions is simple: on every single significant outcome related to short-term well-being and long-term success, children from intact, two-parent families outperform those from single-parent households. Longevity, drug abuse, school performance and dropout rates, teen pregnancy, criminal behavior and incarceration — if you can measure it, a sociologist has; and in all cases, the kids living with both parents drastically outperform the others. Few things hamper a child as much as not having a father at home.--Caitlin Flanagan
CalPERS, the largest public pension fund in the United States, announced on Tuesday that it had lost a staggering 57 billion on its investments in fiscal year 2009 -- representing 23 percent of its total portfolio.--Andrew Leonard
... the job-destroying effects of minimum wages fall particularly hard on low-skilled adults in poor families.--David Neumark
If Medicare had not been passed, might this country have instituted universal health care coverage sometime in the 1970s?--Tyler Cowen
It's more expensive to park a car in Amsterdam ($805) or London ($1,020) for a month than to rent an apartment in Atlanta GA ($753).--Mark Perry
I respectfully disagree with President Obama that "empathy" is an important characteristic in a judge. Had the President said what I think he probably meant -- "patience" or "a willingness to listen and learn" -- I would have agreed. Judge Sotomayor has both in spades. But "empathy" is an empty standard. For example, a judge who always rules in favor of investment banks might have empathy for Wall Streeters; and, during the civil rights era, there were plenty of Southern apologists who described the working-class whites of the South as the truly oppressed in America.--Stephen CarterIf you want your negativity about someone to be heeded, be positive about them as often as possible. Otherwise you’re crying wolf.--Abraham Piper
Scott Locklin spanks Nassim Taleb
UPDATE: Eddy manages to swat two butts with a single stroke with his post, The Black Turkey.
Harvard's financial struggles
If Harvard were a serious business facing a liquidity crisis, it would have done something drastic by now: fired senior employees, closed departments, sold off real estate. But Harvard, like most other leading universities, is stubborn and inflexible. “None of these schools has the ability to cut expenses fast enough” is how a hedge-fund manager who counts Harvard among his investors explained the problem.
... Is Harvard desperate now? One clue is this: last December, the university sold $2.5 billion worth of bonds, increasing its total debt to just over $6 billion. Servicing that debt alone will cost Harvard an average of $517 million a year through 2038, according to Standard & Poor’s.To be clear, even if you’d tried hard, you could not have picked a worse time to sell bonds than December 2008; that was the precise moment when credit markets seized up. But Harvard, it seems, had no choice. Unwilling to sell its assets at fire-sale prices, it needed immediate cash to cover, among other things, what my sources say was approximately a $1 billion unrealized loss from interest-rate swaps. That’s a staggering figure: $1 billion, roughly a third of the university’s entire operating budget for last year.
Smacking (and defending) Greg Mankiw
Whoever left comments .11. and .28. seems like a swell guy.
UPDATE: Ezra Klein is at it, too. Greg's favorite comment (and mine) is from DaMav:
Monday, July 20, 2009
Quote of the day
It takes a prince -- heir to the thrones of Britain and Canada and Australia, Jamaica, Papua New Guinea and a bunch of other places -- to tell it like it is: You pampered consumerists are ruining the joint. In the old days, we didn't have these kinds of problems. But then Mr. and Mrs. Peasant started remodeling the hovel, adding a rec room and indoor plumbing, replacing the emaciated old nag with a Honda Civic and driving to the mall in it. Next thing you know, instead of just having an extra yard of mead every Boxing Day at the local tavern and adding a couple more pustules to the escutcheon with the local trollop, they begin taking vacations in Florida.--Mark Steyn
The historic tour de force
... the introduction of the potato explains 22% of the observed post-1700 increase in population growth.
... the introduction of the potato explains 47% of the post-1700 increase in the average urbanization rate. Our estimates suggest that increased agricultural productivity can play a significant part in promoting the rise of urban centers, industry, and economic development.Earlier potato factoid that changed Europe, noted here.
A scarcity of confidence can be a good thing
Bridge is Wall Street in miniature, and the reason the light bulb went on when Greenberg looked at Cayne, and Cayne looked at Spector, is surely that they assumed that bridge skills could be transferred to the trading floor—that being good at the game version of Wall Street was a reasonable proxy for being good at the real-life version of Wall Street.It isn’t, however. In bridge, there is such a thing as expertise unencumbered by bias. That’s because, as the psychologist Gideon Keren points out, bridge involves “related items with continuous feedback.” It has rules and boundaries and situations that repeat themselves and clear patterns that develop—and when a player makes a mistake of overconfidence he or she learns of the consequences of that mistake almost immediately. In other words, it’s a game. But running an investment bank is not, in this sense, a game: it is not a closed world with a limited set of possibilities. It is an open world where one day a calamity can happen that no one had dreamed could happen, and where you can make a mistake of overconfidence and not personally feel the consequences for years and years—if at all. Perhaps this is part of why we play games: there is something intoxicating about pure expertise, and the real mastery we can attain around a card table or behind the wheel of a racecar emboldens us when we move into the more complex realms. “I’m good at that. I must be good at this, too,” we tell ourselves, forgetting that in wars and on Wall Street there is no such thing as absolute expertise, that every step taken toward mastery brings with it an increased risk of mastery’s curse. Cayne must have come back from the Spingold bridge tournament fortified in his belief in his own infallibility. And the striking thing about his conversations with Cohan is that nothing that had happened since seemed to have shaken that belief.
Saturday, July 18, 2009
Friday, July 17, 2009
Quote of the day
There is little evidence that high levels of income inequality lead down a slippery slope to the destruction of democracy and rule by the rich. The unequal political voice of the poor can be addressed only through policies that actually work to fight poverty and improve education. Income inequality is a dangerous distraction from the real problems: poverty, lack of economic opportunity, and systemic injustice.--Will Wilkinson
Wednesday, July 15, 2009
Sonia throws Sandra under the bus
Sotomayor's construct, that O'Connor could not have meant that there were gender differences in judicial decision-making, was double-talk since O'Connor's words could not possibly be construed in such a way. Sotomayor took a clear rejection of the "new feminism" by O'Connor, used those words to portray O'Connor in just the opposite manner, and then purported to salvage O'Connor's words by insisting that O'Connor could not possibly have meant what she said.Nelson Lund has a nice series here.
The whole explanation was a dodge. Why didn't, and doesn't, Sotomayor simply explain what Sotomayor meant, rather than twisting O'Connor's words to create a convenient foil? Or as they say in the law, a "red herring."
DISCLOSURE: I am long these:
Tuesday, July 14, 2009
Quotes of the day
... there is no such thing as coherent, logical, orderly, causally structured human history. Instead, all there is, is a congregation of separate threads, processes, contingencies, actions, choices, ideologies, and freakish accidents that ultimately do not add up to a coherent whole.--Daniel Little
In the fifteenth and sixteenth centuries, Florence, Genoa, and Venice were the financial capitals of the Western world. When they declined, financial leadership shifted to Amsterdam, then to London, and finally to New York, whose supremacy went unchallenged from 1945 until the end of the twentieth century. ... The Founding Fathers wisely decided that the nation’s political capital should be separate from its financial capital (in both senses of the word). Now this splendid segregation has ended. If the outcome of the Chrysler bankruptcy is any indication, Washington is willing to flex its muscle in financial decisions, altering the substance of contracts freely agreed to by private parties. In so doing, the national government has undermined the certainty of the rule of law, which was the American capital market’s strongest asset.--Luigi Zingales
Don't look now, but the Red Sox may have themselves the best lefthander in baseball.--Tony Massaroti
Monday, July 13, 2009
Thursday, July 09, 2009
Quote of the day
Science isn’t a show of hands. Politics is.--Don Surber
The historian of science may be tempted to exclaim that when paradigms change, the world itself changes with them. --Thomas Kuhn
Wednesday, July 08, 2009
This is Obama's Katrina
You heard it here first (via Don Surber).I don't think this will hurt Obama in 2009. But if employment doesn't improve by 2011, yes, reelection may be difficult.
Healthcare quotes of the day
Because so many young leftists do not seem to know their own history, they are doomed to repeat it. Literally. They make arguments that were common in socialist circles a century and a half ago--for the popular version, try Edward Bellamy's Looking Backward. Those arguments utterly failed to rescue other nationalized markets.--Megan McArdleOf course some of the people covered by the [healthcare] mandate would otherwise end up showing up at emergency rooms. Treating them that way would get tacked on to my medical bills, one way or another. With a mandate they are no longer my financial headache. With this new change, who's better off? Me. Who's worse off? The previously uninsured poor person. You might say: "We are covering more people, at a lower price, than we had thought possible." That sounds like a kind of triumph. But if you cut through to the actual analysis, your paternalism has to be a lot stronger than your egalitarianism for you to support this kind of measure.--Tyler Cowen
Look at that real-life example of Congress's inability to run its own cafeteria. List for us all the specific examples of "government failure" that contributed to and caused this inability -- you know, like in an exam question. Then tell us how and why these very examples of "government failure" won't apply to the government's management of national health care to create the exact same screw-ups on a trillion-dollar rather than cafeteria scale. Be specific.--Jim Glass
Both the private health insurance industry and the music industry are operating business models that to me appear to be unsustainable and anachronistic. The music industry developed in a world of vinyl records. Our health insurance industry and Medicare developed in an environment in which most major diseases were untreatable and the most exotic diagnostic tool was the X-ray. Now, we do 50 million CT scans and 25 million MRIs per year. Now, people with cancer or heart disease expect to survive. As weekend athletes, we expect our knees, shoulders, and hips to be reconstructed by the same technologies that keep Tiger and A-Rod playing. I do not think we know for sure what a sustainable music industry will look like ten years from now. Similarly, I do not think we know what a sustainable health insurance industry will look like ten years from now. The one thing I can predict is that because government will be less involved with the music industry, over the next ten years the music industry will evolve more rapidly than health insurance. We claim to want reform, but in fact we are terrified of change.--Arnold Kling
What America is best at is delivering a lot of complicated care in extremis, and "quality of life" treatments. What European countries are best at is delivering a lot of ordinary care for the sorts of things that afflict people from 0-50, which is why most of the Europhile journalists writing about Europe genuinely have very good experiences to report. I'd rather be here to have a hip replacement, but I might rather be in the Netherlands to have a baby.--Megan McArdle
Enhancing the case for "uncorporations"
He extends this principle in the context of the recent Michael Lewis article in Vanity Fair about AIG:
Hedge funds have to “schlep around and raise money all the time” because their investors, unlike corporate shareholders, do not give them permanent capital. While corporate shareholders can sell their shares to other investors at current market prices, sale prices are discounted by the market’s evaluation of current management. Hedge fund investors, by contrast, have rights to get their money back from the company.
In other words, it’s the “capital lock-in” of the corporate structure – which some commentators have credited for the rise of modern capitalism, that is to some extent responsible for its recent fall. For better or worse, corporate cash is stuck for all time, as the AIG ad suggests.
So what should happen now? Should all financial institutions be uncorporations (or owned by the government)? No, but markets have now learned more about the risks of having traditional corporations manage complex financial instruments. And, yes, markets do learn. Consider why, as Lewis observed, hedge funds have to post collateral for trades with their brokers: because they did learn a lesson from Long Term Capital Management.
Of course a new round of SOX-like financial regulation is likely to short-circuit that learning process. But that's another story.
Quotes of the day
Do I belong in an insane asylum? Or should I be on the FOMC (with Hall, Thompson and Svensson?) Damned if I know. This blog is either grossly overrated or grossly underrated, but it ain’t average.--Scott Sumner
People low in Stability, on the other hand, habitually blow minor problems out of proportion. Even when they live in First World countries, they manage to convince themselves that the sky is falling. Their typically neurotic response is to beg for Big Brother to save them from their largely imaginary problems. When government solutions don't work out, they misinterpret it as further proof that life is hopeless - not that their "solutions" were ill-conceived.--Bryan Caplan
Slavery has never had a very good record of producing wealth. Think about it. Slavery was all over the South. Buying into the reparations nonsense, you'd have to conclude that the antebellum South was rich and the slave-starved North was poor. The truth of the matter is just the opposite. In fact, the poorest states and regions of our country were places where slavery flourished: Mississippi, Alabama, and Georgia while the richest states and regions were those where slavery was absent: Pennsylvania, New York and Massachusetts. --Walter Williams
From 2003 to 2008,the aggregate gross domestic product (GDP), in constant, chained 2000 dollars, for the states with the lowest share of workers under union monopoly control increased by a healthy 17.3%. In these 10 states, as of 2003 4.7% or less of private employees were forced to accept a union as their monopolybargaining agent. Meanwhile, the real GDP of the country as a whole grew by just 12.7%. And in the 10 states with the highest private-sector unionization, aggregate output grew by just 9.9%.--Mark Mix
Note to Greg Mankiw: when Larry [Summers] comes back to Harvard, you should invite him to take ec 10. He seems to have no concept of how the multiplier is supposed to work.--Arnold Kling
A question for Paul Krugman and other stimulus proponents: would you rather have a second stimulus, or health care? I know that in an ideal universe you wouldn't have to choose, but assume that the worrywarts are right, and you do. Which should Obama get done?--Megan McArdle
On Sept. 26, 2008, Barack Obama knocked John McCain for singing, “Bomb, bomb, bomb, bomb, bomb Iran.” Now Vice President Joe Biden told Israel, go ahead and bomb, bomb, bomb, bomb, bomb Iran.--Don Surber
Lack of war is a major reason for Sweden's remarkable economic advance. In a matter of 100 years it moved from being one of the poorest parts of Europe with a massive exodus of near-starving people to America to being one of the two richest countries in Europe (the other was Switzerland.) It has produced more world-class industrial giants than any other country of its size. (At 9m, its population is less than that of the state of Michigan.)--Jonathan PowerI've heard it said that "socialism is the religion of the Swedes." This is not quite correct, though it hints at an important truth. I think of "being Swedish" as the religion of the Swedes. And the more cosmopolitan they behave, the more they are partaking in this religion; don't be fooled! This "being Swedish" business is a wonderful religion for Sweden. It is not a good or possible religion for most of the rest of the world. And it is not a religion to which I have been or could be invited.--Tyler Cowen
If you define sexual freedom as being able to do whatever you want with whomever you please, then (except in very rare cases of perfect compatibility with one's partner at every moment) one man's freedom is another woman's compulsion. Women in traditional harem cultures languished in a condition of de facto slavery, where they had no right to determine anything about their own lives, let alone their sexual partners and activities. Their very survival was predicated on pleasing men. They were treated for the most part as animate commodities, like livestock, to be bought, sold and discarded at will.--Laura Miller
Tuesday, July 07, 2009
That creative destruction thing
Alex Tabarrok's nice definition of Deadweight Loss
... suppose that we documented exactly how everyone spent their yearly income. Now we tax everyone 100 percent and provide them with exactly what they were buying before. Nothing changes, right? Wrong. At 100 percent tax there is no longer any incentive to work - thus no one works and nothing is provided. Everything changes.
Blogging will be light this week
Quotes of the day
The incentive system at A.I.G. F.P., created in the mid-1990s, wasn’t the short-term-oriented racket that helped doom the Wall Street investment bank as we knew it. It was the very system that U.S. Treasury secretary Timothy Geithner, among others, had proposed as a solution to the problem of Wall Street pay.--Michael Lewis
I can do this and probably not make an ass of myself. But I can do nothing and not make an ass of myself. I’ll stick with that.--Jake DeSantis
If unpredictability, incalculable details, and unintended consequences threaten to make a mess of interventions abroad, surely the same stubborn aspects of reality threaten to make a mess of centralized, genius-planned interventions on the home front such as those that aim to supply universal health care and to create a "green economy."--Don Boudreaux
Palin is known for hunting moose. McNamara is known as the architect of the Vietnam War. The op-ed writers generally take a more respectful tone toward McNamara. ... I worry that today's equivalent of Robert McNamara is Peter Orszag, who I fear is poised to do for our health care system what McNamara did for Vietnam.--Arnold Kling
Rather, smart socialists thought that they could overcome these [incentive] problems with a combination of status competitions (Hero of the Soviet Union, Second Class) and massive efficiencies gained by wringing all that fragmented, wasteful competition out of the system. Economists who would be ashamed to make these sorts of arguments about Proctor and Gamble or the used car market suddenly start parroting these things as if they hadn't been thoroughly discredited by the last seventy years.--Megan McArdle
Expressing administrative costs as a percentage of total costs makes Medicare's administrative costs appear lower not because Medicare is necessarily more efficient but merely because its administrative costs are spread over a larger base of actual health care costs.--Robert Book
Rather, private insurers have costs that Medicare doesn't have within the agency. Private insurers bill. Medicare does too, but the IRS has its own budget--hell, its own courts--which don't show up on Medicare's balance sheet. Private insurers negotiate with suppliers. Medicare does too, but most of the negotiation takes place between lobbyists and Congressmen who again, do not show up on Medicare's balance sheet. The Federal government has all sorts of these little items which relieve government agencies of reporting certain costs. But the costs remain.--Megan McArdle
When I've heard [President Obama] talk about economic issues--with the exception of NAFTA, where I just hope he doesn't believe what he says--he seems intelligent and serious. I wouldn't say I'm bowled over by the brilliance of anything I've heard, but everything has a kind of thoughtfulness to it that's sort of impressive.--Larry Summers
If Summers put these sentences into a letter of recommendation for a job market candidate, he probably couldn't get an interview, much less a job.--Bryan Caplan
I can see why the left would not want me to be able to experiment with a non-statist society. From their point of view, it would be immoral for me to secede from their utopia.--Arnold Kling
Wednesday, July 01, 2009
What each NFL Team spent, per win
| Team | Wins | Committed Cash | Cost Per Win | |||
| 1.) Patriots | 63 | 512.31M | 8.14 M | |||
| 2.) Colts | 63 | 532.77 M | 8.44 M | |||
| 3.) Chargers | 54 | 485.46 M | 8.99 M | |||
| 30.) 49ers | 25 | 486. 40 M | 19.45 M | |||
| 31.) Lions | 21 | 505.04 M | 24.04 M | |||
| 32.) Raiders | 20 | 513.21 M | 25.66 M |
Quotes of the day
The ultimate result of shielding men from the effects of folly is to fill the world with fools.-- Herbert Spencer
The problem with socialism is that eventually you run out of other people's money.--Margaret Thatcher
If you tax carbon, you tax fertilizer and pesticides. If you tax these things, you tax food, and by no small amount. A $15/ton CO2 tax would increase fertilizer production costs directly by about $60/ton, with the cap-and-trade bill’s increased transport costs inflating the burden still more. That’s enough to make many farmers use less fertilizer, and less fertilizer means less food. To get a sense of what it would mean for farmers to abandon fertilizer, it is only necessary to go to the supermarket and compare the price of the “organic” produce, grown without chemical fertilizer, to the regular produce, which, while just as nutritious, typically costs less than half as much. It is one thing for wealthy organic food buffs to voluntarily pay such high prices for their food — that is their right. But to impose such costs for basic groceries on everyone else, and particularly the poor, as part of a largely symbolic effort to try to change the weather, is self-indulgent in the extreme.--Robert Zubrin
So the marines in Iraq called these all-female teams (3-5 women) Lionesses. Again, no shortage of volunteers, as female marines, even more than their sisters in the army, were eager to get into the fight. But that's not what the lioness teams were created for. What the marines had also noticed was that the female marines tended to get useful information out of the women they searched. Iraqi women were surprised, and often awed, when they encountered these female soldiers and marines. The awe often turned into cooperation.--Strategy Page
Publicly, the politicians are split as to why the Fed irritates them. But I suspect a hidden agenda: politicians wish they had more control over the Fed -- but they don't, and that's why they were acting like spoiled kids last Thursday. Bernanke handled his grilling with admirable composure, and as I watched a recording of the session, I thanked my lucky stars that our country is, so far, still following Alexander Hamilton's advice to be sure that control of the central bank is kept AWAY from the politicians. If that condition changed and our esteemed politicians somehow gained a much larger measure of control over monetary policy, I'd have to triple or quadruple the odds of a deflationary depression or of high inflation — or both of those disasters taking turns in a perpetual cycle.--Skeptical Optimist
Political rivalries there are honestly more like sports rivalries than anything else, deeply felt but not deeply thought. It allows the illusion of flourishing, passionate democracy while concentrating actual power in the hands of a few wealthy familes. Honestly, I didn't see much difference between modern Honduras and the plantation system at higher levels of political organization.--Jesse Livermore
How China's preference for sons affects America's ability to borrow
Chinese parents’ preference for sons has given rise to a brewing social problem. With the advent of inexpensive ultrasounds, far more boys than girls are born in China – which has in turn given rise to a growing number of rootless, unmarried men.
The “missing women” problem may have also contributed to the U.S. housing and credit bubbles, new research suggests.
...One possible reason for the jump in savings: The dearth of women is making China’s marriage market extremely competitive, and families with boys are accumulating wealth to make their sons more attractive matches.
In a paper recently posted to the National Bureau of Economic Research’s website, economists Shan-Jin Wei, at Columbia University’s Graduate School of Business, and Xiaobo Zhangk, at the International Food Policy offer evidence why this might be so. They find that in areas where the male-to-female sex for young Chinese is high, savings rates are higher, too. And they find that households with sons save more in high male-to-sex ratio regions.
If this is true, then when the majority of the these boys are married off, the in-laws receiving these dowries may be less apt to save, and US borrowing costs could zoom.
Tuesday, June 30, 2009
Quote of the day
The whole point about Ponzi schemes is that there is not enough money to make anybody whole — they were robbed, pure and simple, and the government is not in the business of reimbursing for robberies. Not even when the cops stumble across the robbers and then mistakenly let them go.--Joe Nocera
Monday, June 29, 2009
When you have neither science nor consensus to support your mythology
The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. -- 13 times the number who authored the U.N.'s 2007 climate summary for policymakers. Joanne Simpson, the world's first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak "frankly" of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming "the worst scientific scandal in history." Norway's Ivar Giaever, Nobel Prize winner for physics, decries it as the "new religion." A group of 54 noted physicists, led by Princeton's Will Happer, is demanding the American Physical Society revise its position that the science is settled. (Both Nature and Science magazines have refused to run the physicists' open letter.)
The collapse of the "consensus" has been driven by reality. The inconvenient truth is that the earth's temperatures have flat-lined since 2001, despite growing concentrations of C02. Peer-reviewed research has debunked doomsday scenarios about the polar ice caps, hurricanes, malaria, extinctions, rising oceans. A global financial crisis has politicians taking a harder look at the science that would require them to hamstring their economies to rein in carbon.
DISCLOSURE: I am short this contract.
Arnold Kling spanks President Obama pretty good
There is a disconnect in the Obama administration’s rhetoric on health care. On the one hand, the administration points out that our current health care financing system, particularly for government-funded programs, is unsustainable. This suggests an urgent need for major reform.
On the other hand, the administration is quick to reassure Americans that they will be able to keep the same insurance and maintain the same relationships that they have with their doctors now. As individuals, most Americans are happy with the status quo, and the Obama administration does not want to appear to threaten their satisfaction.
The administration is trying to position Obamacare as solving problems in our health care system that are real and fundamental while allowing individuals to continue with business as usual. The administration has decided that the best way to appeal to voters is to offer hope without change.
Bryan Caplan spanks Paul Krugman
UPDATE: Bryan also thinks Fed Chair Bernanke should be canned. Is this what a rational voter would think?
UPDATE: Greg Mankiw lays on some gentle slaps of his own:
The Obama administration says it wants a public insurance plan that will compete on a level playing field with private plans (that is, without taxpayer subsidies). Is there any cogent economic analysis that suggests that such a policy addresses problems of adverse selection and moral hazard? None that I know. If it has to stand on its own financially, the public plan has no special advantage in addressing these issues.
...
On the issue of tone, I again think I understand Paul's point of view. He likely believes that civility is overrated. He seems to think that in the blogosphere, and perhaps in the public debate more generally, you score points simply by insulting your intellectual adversaries. Sadly, I am afraid he may be right.
The Merrill/Bank of America material adverse clause
Quotes of the day
Here is a handy-dandy way to determine whether the failure to order some exam or treatment constitutes rationing: If the patient were the president, would he get it? If he'd get it and you wouldn't, it's rationing.--Michael Kinsley
The pattern that I see [from the Obama administration] is one of following the path of least political resistance, even if it means failing to make any significant contribution to solving the actual public policy problem. I cannot say that I am completely shocked by this. It is sort of Public Choice 101. But there are a lot of bright, highly-educated people in the Obama Administration who, if they were to step back and evaluate what is happening, would see the pattern for what it is. They believe that they inherited such bad policies that they could not possibly do worse. That belief is starting to look shaky.--Arnold KlingIt is one thing to have different views from those of the Fed Chair on particular decisions that have been made-- I certainly have plenty of areas of disagreement of my own. But it is another matter to question Bernanke's intellect or personal integrity. As someone who's known him for 25 years, I would place him above 99.9% of those recently in power in Washington on the integrity dimension, not to mention IQ. His actions over the past two years have been guided by one and only one motive, that being to minimize the harm caused to ordinary people by the financial turmoil. Whether you agree or disagree with all the steps he's taken, let's start with an understanding that that's been his overriding goal. These interrogations reveal more about those doing the grilling than they reveal about Bernanke. I see this as pure political theater, and I don't like it. If Congress wants to explore more usefully the wisdom and motives behind some of the decisions that have been made, it might want to investigate why some legislators are now pushing for Fannie and Freddie to guarantee a riskier category of mortgage condo loans.--James Hamilton
Some hope for restoring faith in the effectiveness of democracy has come from the idea that while voters may not be all that big on ideas and words, they may be able to judge the competence of politicians.The idea is that they know enough to tell when incumbents are doing a good job by not screwing things up and throwing out those who are. Unfortunately, effectively judging the competence of politicians requires citizens to be able to tell the difference between conditions caused by incumbents' policies and those that merely happened to occur on their watch without any such causal connections. In short, voters may be fooled by randomness into thinking that skillful politicians are improving things rather than simply enjoying lucky timing.--John Carney
... growth isn't a mystery. By and large, we know what works and what doesn't. Corruption doesn't work well, property rights do. Globalization is working everywhere it is allowed. Protectionism is a disaster, in the long term and usually before. Democracy, unfortunately, seems insignificant in promoting growth, but free markets are essential.--Bryan Caplan
Economic laws can either enhance or undermine the vibrancy of an economy, helping or hurting individual incentives and the flow of creative ideas. Policymakers everywhere need to keep this in mind. There are $100 bills on sidewalks all across the world. What matters is whether people have the incentive to pick them up.--Brian Wesbury
Transformers 2 more than $200 million in opening. Incredible somebody finally found a way to make money using American cars.--Jimmy Fallon
Just how bad is the new Cap and Tax bill? Greenpeace is against it.--Stephen Green
The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."--WSJ Editorial Board
The [Community Reinvestment Act] did not singlehandedly cause the meltdown. But the relaxation of credit standards that allowed the meltdown did start, as far as I can tell, with the CRA. And perhaps more importantly, the CRA, and the mentality behind the CRA, made regulators extremely unwilling to intervene. Everyone wanted to make credit more widely available to the poor. Well, the poor aren't good lending risks. So if you want to give them access to credit, you need to relax your lending standards. Any attempt to tighten lending standards on the part of the government would have resulted in a massive contraction in the credit available to core Democratic constituencies. Meanwhile, the Republicans were hoping that turning poor people into homeowners would make them more Republican.--Megan McArdle
In any case, the biggest danger of a Consumer Financial Protection Agency is not that it will artificially limit risk-taking. Rather, it’s that giving products a government imprimatur can make people feel safer than they really are. (The economist Kip Viscusi has termed this type of problem “the lulling effect.”) Regulation can help protect people from fraud and trickery, but finance will still be a place where ill-informed or reckless decisions can wreak havoc on people’s lives. A consumer-finance agency is a good thing, but it would do well to teach consumers a simple lesson: if you don’t understand the deal you’re making, don’t make it.--James Surowiecki
He thought he could dodge his way through life, but he couldn’t dodge death. ... I was tremendouly upset when he died. You’re stuck with friends after a while, and I realised he was part of me.--Martin Amis
[Socrates] said that death is one of two possibilities. Either it is a long dreamless sleep and really rather pleasant, or it is a passage to another place, namely Hades, and there we’ll be able to hang out with Homer, Hesiod and rest of the Greek heroes, which sounds great. Socrates’ point is that we do not know whether death is the end or some sort of continuation. He concludes by saying only God knows the answer to this question. Of course, this makes it a little tricky if you don’t, like me, have the good fortune to believe in God.--Simon Critchley
Friday, June 26, 2009
Mark Perry rounds up Phil Donahue's interview of Milton Friedman
It still resonates true today, the voice of reason and truth responding to a conceited, uneducated celebrity.
I wonder if one can be an educated and humble celebrity. I'm unsure if humility can survive the externalities of celebrity.
UPDATE: Oh, and about education: a publicly financed and unionized system combined with a university culture that tries to eclipse the brilliance of Friedman--which is my experience at Cornell--is probably a bad thing, after reading, writing, and arithmetic have been taught and learned.