Quotes of the day

I can tell you that there is little upside to slamming a book on your blog, but you might receive a nice note from the publisher, or some nice links from the popular author if you have nice things to say. Book reviews are like stock analyst recommendations pre Sarbanes-Oxley.--Eric Falkenstein

If Simon Johnson and James Kwak would only read this chapter and grasp its significance, then they would stop swooning over Elizabeth Warren. She provides what Edelman would call symbolic reassurance, while the bankers continue to get the real resources that government has to offer.--Arnold Kling

My view is that when it comes to health care economics, just about everyone should have egg on their faces.--Tyler Cowen

I can't pay people for those jobs if I don't have the money to pay them. Where am I getting the money? I don't have it. I literally don't have it. ... It's not like you can avoid it forever, 'cause it's here now. And we all know it's here. And the federal government doesn't have the money to paper over it anymore, either, for the states. The day of reckoning has arrived. That's it. And it's gonna arrive everywhere. Timing will vary a little bit, depending upon which state you're in, but it's comin'.--Chris Christie

The crisis was rooted in an error about the riskiness of mortgages. Everyone from regulators to bankers to home buyers misread the risks embodied by the housing bubble, resulting in a calamity. Which is to say, the Primer rejects the compensation and incentives theory of the crisis, according to which bankers knowingly became wildly reckless in search of higher bonuses and profits, while regulators were asleep at the switch. It goes even further than this: it points out that regulators were worse than asleep at the switch. They were some of the primary causes of the crisis. Whether it was loading the dice in favor of their risk views when it came to bank capital requirements, or foolishly believing they could expand home-ownership without expanding the risk of mortgage lending, regulators were not just passive participants in the crisis—they were actively bringing it about.--John Carney

The lack of transparency with the state disclosure is the worst I have ever seen. Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008.--Meredith Whitney

Keep in mind that few informed people take the President literally. Hardly anyone takes Congress literally. Some people take the Fed literally but not always. Literal speech, interpreted literally, is hardly the political default.--Tyler Cowen

Nevertheless, despite the obstacles, state and local governments do have several options that could help get their unfunded liabilities under better control. They could delay retirement ages of most new state and local employees, and even of many present employees, until they reach their sixties (employees doing strenuous physical work could retire earlier). That would simply be requiring their employees to retire at about the same ages as do most non-governmental workers. In addition, they can begin to convert, as have many private employers, from defined benefit retirement systems to defined contribution systems. In the latter system, retirement benefits depend on the present value of pension taxes paid by each worker, accounting also for changes in returns on assets. Finally, states and local governments could force present and future retirees to pay for a larger fraction of the medical care that they receive. Of course, the teachers union and other powerful state and local government unions will strongly resist efforts to substantially cut their generous retirement benefits. Governments can, however, fight back if they have strong support from the taxpayers who will be burdened with financing these unfunded obligations. If the governments were losing these political battles, cities but not states, as Posner indicates, could even threaten the “nuclear” option of declaring bankruptcy in the expectation that bankruptcy courts will reduce the size of their unfunded retirement obligations. One way or another, cities and all states with the most serious unfunded liability problems would eventually be forced to either lower their spending or raise their taxes. Either way that would reduce their competitiveness against other states. It is hard to come away with much optimism for the economic futures of the states and cities with the greatest fiscal problems.--Gary Becker

The decision by the European Union last week to create a permanent bailout fund may not end the sovereign-debt crisis but it will—eventually—end the European Union as we know it. ... The permanent bailout fund will create moral hazard, inviting euro zone members to engage in budgetary brinksmanship and free-riding that will make bailouts more likely.--John Carney

... I think your stated quest to better yourself intellectually and culturally is somewhat quixotic and self-defeating, given the fact you have already indentured yourself to the blinkered worldview of the socialists, communists, Marxists, and professional malcontents who no doubt hold the curriculum and teaching methods of a small liberal arts college such as yours hostage. ... Sadly, my worldview is completely bereft of understanding or subtle appreciation for the finer points of Crypto-Columbian Transvestite Literature from the sub-Amazonian basin from 1953 onward. In other words—as your professors will gleefully tell you—I am a complete idiot. Nevertheless, I am unapologetic in my advocacy of Dead [insert race or ethnic persuasion here] [insert gender or sexual preference here] authors from what is now disparagingly known as The Canon. --Epicurean Dealmaker

The dramatic decline in highway fatalities in the U.S. since 2005 is a piece of good news that's also a bit of a mystery. Is it the result of better vehicle safety technology? Less stupid, reckless behavior? Smarter strategies for easing teens into the responsibilities of driving? Or just an unexpected positive side effect of a slumping economy? A new study by two University of Michigan researchers of detailed federal crash statistics from 2005 to 2008 suggests all these reasons could be behind the reduced death toll.--Joseph White

... researchers found that when a group had a high level of collective intelligence, the members tended to score well on a test that measured how good they were at reading other people’s emotions. They also found that groups with overbearing leaders who were reluctant to cede the floor and let the others talk did worse than those in which participation was better distributed and people took turns speaking. And they also found that the proportion of women in the group was a predictor of collective intelligence — a factor they believe was likely influenced by women’s generally superior social sensitivity.--Carolyn Johnson

A teacher one standard deviation above the mean effectiveness annually generates marginal gains of over $400,000 in present value of student future earnings with a class size of 20 and proportionately higher with larger class sizes. Alternatively, replacing the bottom 5-8 percent of teachers with average teachers could move the U.S. near the top of international math and science rankings with a present value of $100 trillion.--Eric Hanushek

The Bible in 50 Words:
God made
Adam bit
Noah arked
Abraham split
Jacob fooled
Joseph ruled
Bush talked
Moses balked
Pharaoh plagued
People walked
Sea divided
Tablets guided
Promise landed
Saul freaked
David peaked
Prophets warned
Jesus born
God walked
Love talked
Anger crucified
Hope died
Love rose
Spirit flamed
Word spread
God remained.

Quotes of the day: from the Anonymous Fund Manager

There’s still a tremendous interest in the rest of the world to build up [US] dollar reserves. That desire to buy dollars buys us time. There’s still a tremendous demand for Treasuries; that buys us time. And in some way the fact that households in the US are kinda risk averse in plowing their money into bond funds, that actually buys some time for the US, where we’re actually able to roll over our debts at very cheap levels. So it gives the country time to adjust. Other countries don’t have that time.-AFM 

I do think there’s something to be said for rising inequality in the US being somewhat tied to the crisis because the demand for credit was a way for people who were falling behind to keep up their consumption. And politicians probably friendly to the idea of credit growth—and politicians were very involved in credit growth, saying, “We need to make more credit easier to get”—as partly a way to cushion the impact of rising inequality by allowing consumption inequality not be as stark as income inequality. Although, we talked about rising inequality in the US, if you look at global inequality, global inequality is shrinking because people in China and Brazil are getting involved.

... when you look at our manufacturing base, manufacturing as a percentage of our GDP hasn’t decreased that much over time. Employment in manufacturing as a percentage of all employment changed. That’s just because we’ve become more efficient. Labor has become much more efficient in manufacturing, and low value-added manufacturing has gone offshore. It’s not like we don’t manufacture anymore; we manufacture a lot. One of the sectors that’s been the most vibrant in bouncing back in the recovery is manufacturing.

... the legal infrastructure in the US for starting a hedge fund, and for clients of hedge funds to be able to make sure their money isn’t stolen, is better in the US. It’s harder to start a hedge fund in China, and as for the legal infrastructure for starting a manufacturing concern, the US doesn’t really have an advantage—or has a decreasing advantage over these other countries who’ve reformed their labor markets, who’ve reformed their customs regimes, reformed a lot of the legal and infrastructural issues that in the past have given the US an advantage in those sectors. They lag in the area of finance.

... Goldman, of all the banks, always seemed like they were the most careful about following the letter of the law, especially when they were violating the spirit of the law. And in this situation it’s not clear to me that they had any duty to disclose who the other side of the synthetic CDO was to a buyer of risk.  The idea that it’s now shocking that somebody was short? I mean, that’s the definition of a synthetic CDO—that somebody is short on the other side. In a sense they’re finding somebody who’s going to supply that risk by going short. So I don’t understand what it is they would disclose. It’s inherently the definition of the trade.

... Goldman’s decision to settle [with the SEC], I think it’s very strategic. I think they know that they probably observed the letter of the law. Most scrupulously. And they know many of the big banks were involved in this kind of trade. So Goldman is like, “Why am I going to be the guy to go die on the hill to defend everybody else? I’m going to settle, because I can get an OK deal.” It’s probably, you know, “Maybe we would win, and it would cost us a little bit less. But in fact with all the legal fees, if we lose it would be a lot more. We have the best fact pattern of all the big banks, but even so, we could still lose. But if we win, everyone else is probably spared; the SEC would probably be embarrassed and give up. But if we settle, it sort of validates the idea that the SEC should be looking into these. And they’ll go and dig up every other bank, and their fact pattern is going to be worse.” So in a way, if you’re concerned about your relative performance with other banks, why not settle if you can get a good deal and all those other guys go die on the hill?

Effective 1st January Intrade is radically changing how it encourages trading

Trading and expiry fees have been removed entirely.

They are being replaced instead with a modest monthly "trading seat" fee of only US$4.99.

This fee will be charged on the first day of every month, beginning 1st January.

We have improved our software to handle higher volumes as we continuously emphasize the fair pricing of contracts between members on our platform.

Visual data display lets members detect contracts that interest them. With this new incentive to trade we expect to see more trading on these contracts with closer spreads.

Furthermore, we will make our application programmable interface (API)* freely available to all members.

We hope members will applaud these improvements by sharply increasing their use of the services we offer.

As always, your feedback is the best guide we have on the improvements we can implement.

Good fortunes trading from all at Intrade.

Entire announcement here.

3 minutes of Christmas cheer

Intrade Oscar prediction roundup

Best Picture: Social Network (31%) vs. King's Speech (27%) vs. True Grit (10%)

Best Actor: Colin Firth (57%) vs. James Franco (10%) vs. Jeff Bridges (9%)

Best Actress: Natalie Portman (47%) vs. Annette Benning (26%)

Best Director: David Fincher (49%) vs. 5 other directors at 7% or 8%

Prices found here.  Markets are illiquid, spreads wide.  Probabilities calculated by using 0% for contracts without bid, 100% for contracts without offer, and mid-prices adjusted so that total probability is equal to 100%.

Photo link here.

If anyone has a good source of Oscar predictions to compare predictiveness, I would much appreciate your referral in the comments here.

Cartoon of the day

Source here.

Chart of the day: Facebook friends map

Source here, via Bill Easterly.

Quotes of the day

The Grinch was crestfallen, he knew he had lost
For he was the source of the “external” cost
He’d come to the nuisance, and yes, he was wrong
He’d now have to live with their noise and their songs

He realized that day, though, that they could be friends
His heart grew three sizes (you know how this ends)
The Whos asked the Grinch to join them in their feast
And he—he, the Grinch—carved the Roast Beast.

The holiday season brings specials galore
They teach us that Christmas can’t come from a store
Reflect, as you watch them, as day turns to night
On good economics, and property rights.--Art Carden

Over the past 20-or-so years, GDP has increased 87% and the amount of money the top 1% pays in Federal income taxes has increased 377%, while the average tax rate for that group over that period has decreased 32%! So, to summarize: The tax rate on “the rich” has gone down, but the amount of money they pay in Federal taxes has gone up, as has GDP.--Stone Street Advisors

It is no accident that much of the drug trafficking is found in poorer black and Hispanic neighborhoods since high school dropouts and other low earners are attracted to becoming involved in the drug trade. The result typically is a sizable deterioration in the quality of living in drug-dominated neighborhoods, with residents often terrorized by the drug dealers. No one to my knowledge has estimated the social cost of neighborhood deterioration due to drugs, but it is likely very high.--Gary Becker

In retrospect, the aristocracy arrogated power via myth, tradition, and brute force, rationalized via their exception valor. The problem with their self-serving story is that many would accept a probability of death for such success, so this 'courage premium' was not a real equilibrium result, as WW1 showed. Courage was a necessary, not sufficient, condition for acquiring power. Similarly, risk taking is a necessary condition to achieving riches, not sufficient. In standard theory, you take risk, and on average you will get rich quicker than others. That's all you need, a willingness to experience the randomness.--Eric Falkenstein

If people don’t anticipate future taxes or don’t respond to them today, then yes, says the standard argument, you will get $10 of stimulus today, but it will be offset by $10 of losses tomorrow. The Keynesian then responds with the second idea behind using government spending to stimulate the economy. That’s the idea that when we’re in a recession, the economy is broken. The engine of the economy needs a jump-start. The pump needs priming. By giving people money who start spending now, the whole system gets going so it can be once again be healthy and self-sustaining. It’s like the battery of your car. If you drain your battery because you left the lights on overnight, the car needs a jump. Once it gets going, it will recharge simply by driving. So in the economic analogy, once people get spending, the circular flow of spending gets going once again, the people who were unemployed soon get employed, they start spending and the economic engine will once again be healthy and keep going. This is what Keynes meant when he talked about “magneto trouble.” This metaphor of the car that needs a jump start or the ship that needs a push because it’s hit a patch of water that’s windless, has a certain compelling feel to it. But it really has no intellectual content. It’s an ex-post story to make you feel good about spending money. There’s no there there. So when a Keynesian is confronted with the fact that about $800 billion dollars of spending was promised in February of 2009 (and more than half of it has been spent) but unemployment has barely budged, well that just proves how bad the economy was in February of 2009. It’s like saying that using these jumper cables will get your car started but sometimes, a regular jump isn’t sufficient. You have to power up the healthy car when you do the jump because the car with the dead battery is so far gone that a regular jump won’t do it. That’s true with cars. But is it true with economies? ... the current Keynesian stories of why the stimulus didn’t work are just stories. Ex-post stories. They can’t be distinguished from the hypothesis that we don’t know what we’re talking about or the hypothesis that stimulus spending is a sham. ... The bottom line for me is that Keynes was very right about one thing–people’s perception of the future plays a big role in their willingness to take risks. What he was wrong about is the ability to use government spending as a way to encourage a positive perception of the future or to produce real economic results that lead to prosperity and increased employment.--Russ Roberts

As the policy was described yesterday, this payroll tax cut goes entirely to the worker. This increases work incentives, but the main motivation is probably to increase take-home pay, consumer spending, and aggregate demand.--Greg Mankiw

The White House reads this blog.--Greg Mankiw

Individual insurance mandate might be ruled unconstitutional

according to Intrade futures contract pricing.

DISCLOSURE: I am long this contract.

Quotes of the day

A 10% drop in the amount of young people working as a result of this recession. That’s 10% more people detached from the labor market and with decades of lost wages. That’s 10% more people with fewer opportunities to develop their capabilities and build the American economy over the 21st century. And that is a generational crisis unless we get a serious attempt to fix this economy and put people to work.--Mike Konczal

If President Obama is truly serious about ending earmarks, he should oppose Senate Democrats’ pork-laden omnibus spending bill and announce he will veto it if necessary. This bill represents exactly what the American people have rejected: more spending, more earmarks, and more big government.--John Boehner

Where change does work is if it’s done in small, manageable steps leading to measurable improvements. By focusing on details rather than visions and incremental changes rather than epoch defining business re-engineering the very best corporations can effectively continually re-invent and rejuvenate themselves. The future is most effectively built on the achievements of the past, not on its ruins.--timarr

Today’s fad is tomorrow’s flop.  I’m as confused as the next guy about what’s going to happen with currencies and whether [Federal Reserve chairman] Ben Bernanke is right or wrong. But I’m not sure a whole bunch of yellow stuff in a warehouse is going to do much.--Tim McElvaine

Harvesting your losses is most beneficial when you can write long-term losses off against either short-term capital gains or ordinary income. That is because those are taxed at rates of up to 35%—making today's losses more valuable as write-offs against them. Loss-harvesting also makes great sense when you have a plan to defer capital gains indefinitely—for example, by donating your investments to a charity or by including them in your estate. That way, you use the losses to shelter your taxable ordinary income. But you don't take the gains—ever. Before you harvest a loss, make sure you or your adviser have thought through whether it will be treated as long-term or short-term and what kind of income you can offset with it. Ask for proof that by lowering your basis today you haven't raised your tax bill tomorrow.--Jason Zweig

Chart of the day: Historic P/E ratio

Source here.

Quotes of the day

Proverbs 19:13
... a quarrelsome wife is like the constant dripping of a leaky roof.

Proverbs 21:9
Better to live on a corner of the roof than share a house with a quarrelsome wife.

Proverbs 21:19
Better to live in a desert than with a quarrelsome and nagging wife.

Proverbs 25:24
Better to live on a corner of the roof than share a house with a quarrelsome wife.

Proverbs 27:15
A quarrelsome wife is like the dripping of a leaky roof in a rainstorm.

As it is, Mrs. Edwards' private loss and public humiliation at the hands of her husband will be in vain if the obvious lesson isn't before us: There is no profit in being the woman behind the man. We can admire Elizabeth Edwards' graceful acceptance of disease and disharmony, or we can see her as another wronged political wife. And, really, is there any other kind?--Elizabeth Wurtzel

... Christine Stanik, Robert Kurzban and Phoebe Ellsworth found that men will give a woman a lower rating when they learn that she dumped her last boyfriend, perhaps fearing they will be next. But women rated men more highly when they learned that they had done the dumping, perhaps seeing it as a sign of desirability.--David Brooks

Proverbs 31:10
A wife of noble character who can find?
She is worth far more than rubies.

I mean he really loves us and when he beats us, he doesn’t mean it; he just gets a little angry.--Dan Loeb

Verdict: Food 5, drink 4, venue 5, debauchery 1, exclusivity 5 (but really 2)--Kevin Roose

It is easy to assert that there ought to be prosecutions of corporate chieftains — “show trials” like the Soviet Union used to stage — because of the enormous losses sustained from the meltdown. Actually proving criminal charges is much more difficult, however, if the government has only sketchy evidence of an executive’s involvement in questionable decisions and the applicable legal standards are vague, at best.--Peter Henning

Show trials arise from certainties and the fury of people who are certain of their own goodness against those who don’t necessarily share that belief. That doesn’t just apply to Communists, Marxists, Trotskyists, but in the past century it has tended to be idealists of one kind or another who have ended up holding show trials. ... What we now increasingly know is that, although Joe McCarthy was an idiot, a lot of what he said was actually true. ... I think the old stout-hearted English yeoman view of not giving in to foreign domination has by and large vanished. Nobody much believes in anything any more and you find an awful lot of people in authority who, it seems to me, would cooperate with anybody who could demonstrate that they were in power. ... When the Berlin wall came down a huge number of damaging ideas escaped across it and started to propagate themselves in the West because they were no longer discredited by their practical expression in the evil empire. The right, which never bothered to argue very hard about its principles, before the wall came down could simply point eastwards and say: Look that’s what you’ll get if you follow left-wing ideas. So the left was handicapped at election time, but now it is much freer than it ever was. The left was liberated by the collapse of the Soviet Union, which in any case was an aberration as far as the cleverer thinkers of the left are concerned.--Peter Hitchens

Superbowl Futures, part 4

Matchbook latest odds (based on midprices):

New England 24.1%
Pittsburgh 15.7%
Atlanta 13.4%
Green Bay 9.5%
Philadelphia 8.9%
New Orleans 8.0%
NY Giants 6.3%
NY Jets 5.9%
Baltimore 5.7%
Chicago 4.1%
San Diego 3.8%
Indianapolis 2.8%
Kansas City 2.4%
Jacksonville 1.4%

I am shorting ATL, getting long BAL, getting longer GB, getting shorter NE, getting long NO, getting long NYG, getting long PHI, getting short PIT, getting long SD.

P/L	Team	Position	Paid	Market	Risk
$       7.71	ATL	-1	21%	13%	$(13.40)
$     12.37	BAL	1	-7%	6%	$   5.70
$       0.32	GB	3	9%	10%	$ 28.50
$      (4.89)	IND	1	8%	3%	$   2.80
$      (0.02)	KC	3	2%	2%	$   7.20
$    (23.02)	NE	-2	13%	24%	$(48.20)
$      (0.37)	NO	1	8%	8%	$   8.00
$      (0.72)	NYG	1	7%	6%	$   6.30
$      (3.19)	NYJ	1	9%	6%	$   5.90
$      (0.62)	PHI	1	10%	9%	$   8.90
$       6.03	PIT	-1	22%	16%	$(15.70)
$      (0.05)	SD	1	4%	4%	$   3.80
$      (9.84)	TEN	3	3%	0%	$   0.60
$    (16.31)	Total				$   0.40

Part 3 here.

Latest exhibit warning of the dangers of universal healthcare

The Orwellian Present:

Those of you with a modicum of legal knowledge will be saying ‘but surely he can get legal representation and go before the mental health tribunal – I’ve read about cases like that?’

No, he can’t, he has no access to the Mental Heath Tribunal – Autism isn’t a mental illness. This action isn’t being taken under the Mental Health Act – it is being taken under the Mental Capacity Act. Under the MCA he only has access to a ‘Best Interests Assessor’ – who is appointed on a consultancy basis, and paid, by…..the Local Authority.

He can be deprived of his liberty for up to a year, which period can be renewed indefinitely, for the purpose of ‘assessing’ him – see above – being sent to Wales to ‘assess’ why he is unhappy at being locked up.

The only Court to which he has access – purely for ‘appeal’ purposes, is our old friend, the secretive Court of Protection. Assuming that Stephen can figure out how to make an application to the Court and represent himself….

As it happens, the Local Authority have already done that, not on Stephen’s behalf, but on their own behalf. They wish to have a full ‘Welfare Deputyship’ so that there will be no awkward parent demanding the return of their child – and his support package. It will be their decision where he lives.

Quotes of the day

Just to be clear, the "extension of the unemployment benefits" is an extension of the qualifying dates for the various tiers of benefits, and not additional weeks of benefits.--Calculated Risk

... people read and watch personal finance journalism for a very different reason than is commonly supposed. They aren’t looking to learn new things. They are looking to have their biases and ideas confirmed by an intelligent outsider. Sometimes they are looking for justifications for positions they are already in or are ready to get into. In short, they read what they already think so that they can feel comfortable and smart thinking it. Personal finance journalism is like a magical mirror that reflects back at the reader a slightly smarter and better looking version of himself.--John Carney

Chairman Bernanke’s story serves to establish his stature as an insightful regulator whose prudent intervention prevented a global meltdown. The only problem with his narrative is that it contradicts certain facts and our own experience – like the Fed’s admitted inability to see the crisis coming or to regulate effectively the banks under its purview. Psychologists call the process of rationalizing two incompatible or conflicting beliefs or observations “cognitive dissonance”. ... What was most striking in the interview was Chairman Bernanke’s devotion to the righteousness of his narrative at a time when every actor in the financial system still ought to be asking how things went so terribly wrong. The desire to create a story that emancipates one from blame and promises future forecasting precision must be incredibly powerful for any public servant charged with the awesome responsibilities of the Fed Chairman. Yet it is precisely these sorts of leaders who should be the most attuned to understanding the dangers of believing too much in the stories we tell ourselves, and instead be willing to search out facts and admit wrongdoing.--Daniel Loeb

By far the biggest disappointment has been with the regulators. They’re the ones who are charged with being unbiased and keeping the playing field level and protecting the common interest. The other failings are important – meaning whether it’s rating agencies, sell-side analysts, media and so forth. The idea, though, that the SEC would go after the wrong team and then never really figure it out and deal with it, is terribly distressing. It’s almost like they just sent the same people back to try to do a better job. They basically said, the SEC, do a better job; the Fed, do a better job; rating agencies, do a better job. They didn’t really make any of the structural reforms that would seem obvious. You’d break up everything that’s too big to fail. You’d eliminate the official status of the ratings agencies. You asked for two, I’ll quit there. The people arguing to protect those positions held the day with enough Congress people, and the people who felt otherwise weren’t as motivated. It’s the classic problem of special interests within our government.--David Einhorn

Latest exhibit prompting for more limited government

Representative Maxine Waters, who has been under investigation by the House ethics committee for allegations that she helped steer government money to a bank in which her husband owned shares, is asking for an investigation into the committee that has been investigating her.

Photo link here.

Still trapped in the Weird Science Vortex

How do I know this?  I loved this.

Via Glenn Reynolds.  Photo link here.

Quotes of the day

A new NASA computer modeling effort has found that additional growth of plants and trees in a world with doubled atmospheric carbon dioxide levels would create a new negative feedback – a cooling effect – in the Earth's climate system that could work to reduce future global warming.--Patrick Lynch

I thought of bringing something in that actually was pornographic. I could say to you, then, `This is porno, this [body scanner image] is not.' I'll recognize it when I see it. ... We're not in the risk elimination business. The only way you can eliminate car accidents from happening is by not driving. OK, that's not acceptable. The only way you can eliminate the risk of planes blowing up is nobody flies. ... I want to use the latest intelligence to inform our judgments and actions, and use the best technology when we don't have intelligence. So there's a huge gap there. So here are the threats, here are capabilities, here are gaps. So how do we fill those gaps? And right now we do it with a somewhat blunt approach.--John Pistole, TSA chief

It is my personal belief that they pulled me aside because they thought I was attractive... My boyfriend sailed through with no problems, which is rather ironic in that he fits the stereotypical 'look' of a terrorist when his beard has grown a bit. After the search, I noticed that the male agent who had pulled me out of line was smiling and whispering with two other agents and glancing at me. I was outraged. This could, and I'm sure does, happen to other women. It isn't right to hide behind the veil of security and safety in order to take advantage of women, or even men for that matter, so that you can see them naked. It's a misuse of power and authority, and as much a personal violation as a Peeping Tom. The difference is that Peeping Toms can have charges pressed against them. ... One of my best friends was flying to New York for business, and at some point during the flight, she stood up to retrieve something from her bag in the overhead compartment. When she reached into her bag, something cut her hand. She looked into her bag and discovered a pair of 6-inch gardening shears which she had forgotten to remove prior to packing her bag. The bag, and my friend, had passed through security with no issues. How is this full-body scan supposed to be making us safer if 6-inch gardening shears can still make it aboard domestic flights undetected?--Donna D'Errico, model and TV actress

Because you caught my eye, and they didn’t.--TSA Agent, according to D'Errico

It's not clear why men's behaviors might improve after marriage, he noted. Married men may spend more time with their spouses than their friends, King said, and bad behaviors such as delinquency and binge drinking tend to be group activities. In addition, married men "have more to lose" if they're caught doing illegal activities, and may care what their spouses think. It's also not clear why men with more antisocial behaviors may not marry in the first place, [Alexandra] Burt said. They are probably not the most eligible bachelors, she noted. "You may not be looking to settle down with someone who's prone to aggression, theft, and other things." And for men with these tendencies, marriage may not be so appealing, she added.--Alison McCook

Interesting that the lamestream media, mindlessly mouthing the mantra of Sarah Palin's lack of intellectual curiosity never thought to ask John Edwards what he was reading.--Sissy Willis

Fat, apparently, is not so much a feminist issue as a sexist one. Sauce for the goose? Scandal. Sauce for the gander? No problem.--Alistair Macauley

Look what happens before we run out for every drive, and who are all the guys standing over by the heater? It’s all offensive linemen. They’re not wearing sleeves, but believe me, that little headgear that I’m wearing, that’s OK with them.--Tom Brady

What made Don Meredith one of a kind … well, when he retired from football he was hired to become a broadcaster for this new thing called Monday Night Football. That was 1970. He had no broadcasting training. He was not exactly known for his detailed study or his intense work ethic. Nobody really knew how his Texas twang would play on a medium then known for the deep and crack-free voices of professional announcers.  How did it go? Well, I’d say this, and I doubt too many people would disagree: No color commentator — not in the long history of professional football on television — ever made professional football games as much fun as Dandy Don Meredith.  How did he do it? You don’t think there are television executives wondering that very thing? They have tried everything. They hired a comedian to be in the booth. They hired a funny newspaper columnist to be in the booth. They hired stars to sing the football openers. They designed some animated robot to dance after commercials. They hired every funny player and coach they could find. They have brought in guests, they have brought in impersonators, they have worked up insane graphics, they have worked up a million angles. But they have never quite recaptured when Don Meredith had when he was in the booth with Howard Cosell.  Maybe Meredith was just an unusual combination — a truly great football player who didn’t take football all that seriously. He brought authority and irreverence. He’d sing in the booth, of course. Turn out the lights! The party’s over! Well, he was always singing. He’d crack jokes that were always just a little bit rascally, jokes you had to be a certain age to understand (“Fair Hooker,” he said, repeating the name of the Cleveland Browns receiver. “I haven’t met one yet.”). As one person who worked closely with Meredith said, he was just one of those people who had life beat. Howard Cosell, with his big words and big mind and hyper-sensitivity, never stood a chance. ... Cosell would often say that he liked Meredith — “DAYN-dy DON!” — because he thought Meredith’s rustic charm played well off his own lawyerly bombast. But it really was the other way around. Meredith was the Fonz. Cosell was Potsie. Sure, Cosell was one of a kind in his own way, too, and his great strength was that he made the games matter. But Meredith made the games fun. And fun is what games were meant to be. ... In the 25 years that have gone by since he walked away from broadcasting, television scouts have tried desperately to find someone for the booth with some of Meredith’s spirit, someone who could broadcast not only the passion of football, not only the intensity of football, not only the tactics of football … but also the joy.--Joe Posnanski

I spent most of my adult life chasing bigger paychecks, loftier job titles and flashier possessions. These were my goals not because I chose them, but because I never considered that any other goals existed. My friends and family seemed to want these things, and I assumed that I wanted them, too.
When I accepted the job at Starbucks, it struck me that I probably would never again have money, titles or expensive possessions — yet one evening at Starbucks, I realized that I was as happy as I had ever been in my life. This “low-level” job gave me supportive bosses and coworkers, lots of human interaction and enough money to live a simple life. These were my real priorities, and I had never even known it. Instead, I had wasted most of my life pursuing other people’s goals.--Michael Gates Gill

... rates of churchgoing have fallen much faster among less-educated Americans than they have among college graduates, to the point where there’s now a strongly positive correlation between education and church attendance — one that didn’t exist in the ’70s. (The recent trend toward secularization, it turns out, may have been driven more by community college dropouts than by Richard Dawkins-reading Ph.Ds.)--Ross Douthat

And there you have it. Two nice normal people in a terrible mess not because they’re terrible people but because of the properties of systems. Now here’s the miracle. While this is very hard for two people to sort out on their own – which explains why we feel so stuck so often in our own relationships – it’s surprisingly easy for a good therapist who understands systems to sort this out, and you can do it without any blame. ... Change the context, change the assumptions, and you change the self. Do that with people in a relationship, and you change the relationship. --Mira Kirshenbaum

How some families are rather poor, even though their combined income is $250,000

Well written piece by Karen Hube.  At the end of the article, 5 regions of the country are showcased (only Texas allows some financial margin).  Unsurprisingly, its the taxes that cause the poverty.  An excerpt:

After covering taxes and only essential expenses for housing, groceries, child care, clothing, transportation — and their dog, the Joneses would still be in the red by $585 in Huntington, New York. In Plano, Texas, they would have $28,707 to spare. Factor in common additional expenses for a working couple with two children – music lessons, day camp costs, and after school sports, entertainment, cleaning services, gifts, and a annual week-long vacation – the Joneses get deep in the red in Huntington to the tune of $23,178. In Plano, the best case scenario, they would still have money to spare, but just $6,114.

I told you so.

Via Glenn Reynolds.

Intrade lists a Global Cooling futures contract of sorts

Specifically, it is underlied by the increase of Arctic Ice.

Pretty cool! (sorry)

Image link here.

Quotes of the day

Dignity and liberty are admittedly hard to disentangle. But dignity is a sociological factor, liberty an economic one.--Deidre McCloskey

Most of the libertarians I know are ambivalent, for heaven's sake--if you can't get the libertarians united on actions that increase transparency, you've sure as hell lost the rest of the country. That's a ripe environment for new laws that reduce transparency. Maybe we'll be less effective--but we'll also be less free.--Megan McArdle

Greg Oden has a high rebound rate but he hardly plays, due to recurring injury. No one calls him the Ronald Coase of rebounding. Similarly, Yao Ming has high success rates, but cannot stay on the court for very long, due to his bad feet. His team has plenty of talent but has not won much and it probably needs to be dismantled at this point. In other words, it is often "brute total" statistics which are underrated (think about evaluating a potential spouse).--Tyler Cowen

The base problem is either inherently difficult or trivial. It's inherently difficult because we are attempting to find the "best" player in a multidimensional circumstance, where the weighting of the dimensions is both arbitrary and ever-changing. It's trivial because sports awards don't matter much except for PR value. Consider how well the Heisman trophy indicates pro potential.--zbicyclist

Uunemployment insurance has pros and cons. The pros are that it reduces households' income uncertainty and that it props up aggregate demand when the economy goes into a downturn. The cons are that it has a budgetary cost (and thus, other things equal, means higher tax rates now or later) and that it reduces the job search efforts of the unemployed. To me, all these pros and cons seem significant. I have yet to see a compelling quantitative analysis of the pros and cons that informs me about how generous the optimal system would be. So when I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?--Greg Mankiw

The slow recovery is disturbing because speedy recoveries typically follow severe recessions. ... Many in China and elsewhere believe the US economy is too sick to be cured. I do not agree, but recovery would require some unpalatable medicine with regard to spending and taxes, somewhat along the suggested by the recent majority-backed Report of the National Commission on Fiscal Responsibility and Reform. Unless the US takes serious actions to promote its long-term growth, the next decade may be a very difficult one.--Gary Becker

The conservatives do not have a single good argument against QE2. Every argument is based on bad logic, bad economics, a lack of understanding of history, or a lack of understanding of our political system. There must be some reason why the conservative establishment hardly raised a peep when the Fed would cut rates when inflation was running 3% or 4% when Reagan was president, or when Bush was president, and yet are now up in arms over monetary stimulus when we have 1% inflation and 17 million people out of work. There must be some reason. But for the life of me, I can’t figure out what it is.--Scott Sumner

Suppose I prevent everyone in America from trading with anyone outside their own households. We’d eat only what we could raise in our own gardens, burn only the fuel we could gather from our own backyards, and wear only the clothes we could make for ourselves. In other words, we’d all be living pretty much at the subsistence level. Would you be willing to call that a Depression? I would. Krugman, apparently, would not. ... It’s very bad practice for an economist to make policy recommendations without telling you what he’s trying to maximize. Krugman is frequently guilty of this particular sin. But now he’s given us an insight into what he thinks is important. By relegating “may make the economy more efficient” to an essentially parenthetical remark and putting all the emphasis on how much we get to work, he’s revealed a lot about his priorities. Those priorities are nuts.--Steve Landsburg

That's the problem with retiree benefits--they can accumulate for quite a while before you notice that, oops, they're budget killers. Unfortunately for us, as with Medicare and Social Security, now is when these problems have gotten too big to ignore. We have a triple-whammy of rising health care costs, a demographic bulge, and the historical legacy of a major expansion of government. In the early years, as government expanded, generous pensions and retiree benefits were easily expandable; the previous generations of workers were relatively small, while the large new class was relatively young. Now those generations of workers are piling up in the retirement system, and the current group of workers is not big enough to absorb the cost out of their paychecks. This mirrors a debate happening in Europe, and I think it is the end game of the arguments about the welfare state. The vision has hit its practical (and demographic) limits. The convulsions will continue for some time, as we try to settle what, and how much, the state will pay for. But in the end we'll probably emerge with something roughly stable, and the sweeping, century-long conflicts will no longer be about growing or shrinking the safety net.--Megan McArdle

Eric Falkenstein spanks Nassim Taleb

... if you aren't going to make sense, you might as well be funny: Marx's 'time flies like an arrow, fruit flies like a banana.' [Nassim] Taleb's humor is less like Groucho, more like Karl. Kanye West is also very popular, and like Taleb tweets his fans with petulant rants.

Discipline is a beautiful thing, when administered justly.

I'd also followup with what Falkenstein says later in his piece:

Over time wisdom has made me more confident and humble. Thus, while my CPU may be slowing and RAM shrinking, I'm processing feedback more efficiently than I used to, and I wish I appreciated the value of modesty earlier.

Photo link here.

Quotes of the day

I've never been involved in a trade that has such unlimited upside with a very limited downside.--John Paulson

Ask yourself what you would do if someone came in and sold all of your investments overnight. The next morning you wake up and you’re left with 100% cash in your account. You can repurchase the same investments at no cost. Would you build the same portfolio? Does that portfolio fit your unique financial goals?--Carl Richards

[Mark] Zuckerberg’s transformation over the years from awkward dweeb to telegenic smoothie is really extraordinary. Whoever is coaching him should be handsomely rewarded. It’s almost too dramatic a change, as if he’s had a chip implanted in his brain or replaced himself with a more TV-friendly clone.--Andrew Wallenstein

As you rise in the ranks, people stop telling you what they should tell you.--Richard A. Davis

I argue that if we rush into low-carbon technologies too soon, because we think the problem is more urgent than it is, we risk doing real harm to ecosystems as well as human living standards—as the biofuel fiasco all too graphically illustrates. The rush to turn American corn into ethanol instead of food has contributed to spikes in world food prices and real hunger, while the rush to grow biodiesel for Europe has encouraged the destruction of orangutan habitat in Borneo. ... Mr. Gates thinks I underplay the role of education, government, patents and science in the innovation that drives economic improvement. Maybe, but I make a carefully argued case that most of the existing commentary overplays the role of these institutions and that innovation is sometimes hindered by these institutions, too, especially by patents and government monopolies. Am I saying that we should cease worrying about trends that might cause problems? Of course not. I am arguing that we should worry about real problems, including Africa's plight, but that we should do so in the knowledge that we have solved many such problems before and can do so again. I am certainly not saying, "Don't worry, be happy." Rather, I'm saying, "Don't despair, be ambitious"—though I admit it's not nearly as snappy a song lyric.--Matt Ridley

What I suggest is that, without any prejudice, look at the instances over the past 50 years in which countries tried countercylical fiscal policy. What were the successes? What were the failures? My impression is that there were many more of the latter than the former. Look, I take second place to no one in my dislike for representative-agent, rational-expectations macroeconomics. But I think that the failure of M70 was not just that it lost favor with people who were obsessed with microfoundations and fascinated by math. Much of the failure of M70 was and remains empirical.--Arnold Kling

In 2008, for the typical household in the top one-percent of income-earning households in America, the percent of its adjusted gross income that it paid in federal income taxes was 23.27. Middle-income households paid less. For households whose earnings put them in the top 50 percent, but below the top 25 percent, of income earners, the percent of their adjusted gross income paid in income taxes was, on average, 6.75. For households in the bottom 50 percent of income-earners, the percent of their adjusted gross income paid in income taxes was, on average, 2.59.--Don Boudreaux

In a forty-five-minute speech on the economy on September 8th, Obama called out Boehner, by name, eight times. The President seemed almost to be wishing for the gift that voters had handed Bill Clinton with the Republican sweep of 1994—a polarizing opposition figure. Clinton needed to regain the middle in order to save his Presidency, and Newt Gingrich, from the start of his Speakership, proved an obliging foil.--Peter Boyer

You have to measure Boehner against other Boehners—you can’t measure him against me. Boehner would tell you up front that he’s not attempting to be the defining figure of this moment. He’s trying to be the organizer of the team that may define the moment. Clinton was able to pivot with me because I was a large enough figure that Clinton could say to the left, ‘You really want Gingrich?’ And they’d go, ‘O.K., even though we’re really mad at you, we’re not that mad at you.’ This may be an argument for the Boehner model.--Newt Gingrich

I am so sick of playing small ball. That’s why I stepped out there with the Roadmap in the first place. The country doesn’t deserve small ball. The country deserves real answers to the enormous problems facing us. And we owe it to our employers, the people who elected us, to give them a choice of two futures. Look, we know where the left wants to go, we know the path that we are on. We owe it to the country to show them an alternative path, based upon our principles. And if, after getting a second chance, we blow that opportunity, then shame on us.--Paul Ryan

Quote of the day

Joe Morgan the announcer seemed utterly detached from Joe Morgan the amazing ballplayer. Morgan is a smart man. He lives in the moment. But, strange, it’s like he never understood his own genius for playing baseball. I’ve heard this same thing about a certain brilliantly funny Saturday Night Live actor who was in some of the funniest skits ever — that he didn’t entirely know WHY they were funny. He just did his part. He followed his instincts. And it worked.  ...
He was great because, as Bill James wrote, he was the best percentage player ever, and the irony is that it takes someone like Bill James — a non-player who loves the game enough to study it intently — to fully appreciate just how good Joe Morgan really was. I mentioned Hornsby on top. Well, I’ve written before that Bill ranked Joe Morgan the best second baseman ever, and ranked Hornsby No. 3. Bill later told me that he had heard that someone mentioned this to Morgan, who immediately said something like: “That’s crazy. Rogers Hornsby hit .358. I didn’t hit .358.”  As if that’s what all of baseball comes down to: batting average.
--Joe Posnanski

Man, that Joe Posnanski can write

He writes the cynicism out of my icy veins.

I wouldn't trade Belichick for Brady. Don't know what that makes me.

Football photo link here.  Awww shucks photo link here.

UPDATE: I took a second look at the Jeter photo, and is it me or does he look more beta male than evah? (See, couldn't last).

Quotes of the day

The repeated lies become history, but they don’t necessarily become the truth.--Colum McCann

A lie flies halfway around the world before the truth gets its pants on.--Winston Churchill

Overall, the book is not too bad if you ignore that it’s based on climate science that is almost 15 years out of date and that it has multiple errors that would make Wikipedia blush. The fact that this textbook has over 20 percent of the market shakes my faith in capitalism.--Yoram Bauman

If secrecy is necessary for national security and effective diplomacy, it is also inevitable that the prerogative of secrecy will be used to hide the misdeeds of the permanent state and its privileged agents.--Will Wilkinson

Compare these two theories and tell me which one sounds more likely:
1. U.S. Diplomats are the only group of people on Earth who are all doing a fine job. And they never write down anything that is worse than just baaarely embarrassing. And someone risked being executed as a traitor to release this non-news.
2. The U.S. government leaked the information itself, after taking out the good parts, because somewhere buried in the pile is an idea that they want "accidentally" released to the world.
I give this theory a 60% chance of being true because it would be easy for the government to pull it off, there's a good chance it would be useful, and it is well within the normal political bag of tricks. If you see a "leak" revelation in the next few days that seems to help the government's strategy more than it hurts, I might raise my estimate.--Scott Adams

The specter of bank runs, high funding costs, default and social unrest might not seem so scary in today’s conditions: some countries are already vulnerable to these. Efforts to ameliorate these problems have so far proved inadequate (see article). Therein lies the danger for the euro. The cost of breaking up the single currency would be enormous. In the ensuing chaos and recrimination, the survival of the EU and its single market would be in jeopardy. But by believing that a break-up cannot happen, the euro zone’s authorities will always tend to stop short of the radical measures needed to hold the project together. Given the likely and devastating chaos, it would be a mistake for a country to choose to leave. But mistakes occur in times of stress. That is why some are beginning to contemplate the unthinkable.--The Economist

An empty Washington Monument would serve as a constant reminder to those on Capitol Hill that they are afraid of the terrorists and what they could do. They're afraid that by speaking honestly about the impossibility of attaining absolute security or the inevitability of terrorism -- or that some American ideals are worth maintaining even in the face of adversity -- they will be branded as "soft on terror." And they're afraid that Americans would vote them out of office if another attack occurred. Perhaps they're right, but what has happened to leaders who aren't afraid? What has happened to "the only thing we have to fear is fear itself"? An empty Washington Monument would symbolize our lawmakers' inability to take that kind of stand -- and their inability to truly lead. ... We can reopen the Washington Monument when we've defeated our fears, when we've come to accept that placing safety above all other virtues cedes too much power to government and that liberty is worth the risks, and that the price of freedom is accepting the possibility of crime.--Bruce Schneier

The CEO is often a compromise between conflicting groups. He must be blithely ignorant about the inconsistent objectives articulated to the team, such as trying to simultaneously prioritize innovation and tradition, a meritocracy that aggressively promotes racial bean-counting, or a strong sexual harassment policy and a really fun Christmas party. People who are really good at logical puzzles, who excel at something, are often not very good at managing people because they can not, or will not, suffer fools well. Thus, in spite of conspicuous examples where the highest IQ person is both an idea generator and the boss such as Larry Ellison or Bill Gates, in general the functions involve different skill sets. The result is a leader in a modern reverse dominance hierarchy who is paid to keep the peace and make people feel good, as opposed to make really important strategic and tactical decisions. It's a skill, but not one worth tens, let alone hundreds, of millions of dollars. We don't mind inequality when we know it is for true alpha. What bothers people, and I think rightly, is when people are getting paid when they really do not have alpha, in that their ability to chair meetings, spout cliches at group functions, or golf leisurely, is something anyone could do. In contrast, if we played shortstop for the Yankees we know the team would suffer. It's a problem I don't have any solution for.--Eric Falkenstein

Pity the person whose self-identity and hope rest on transient things. Ten billion years into eternity, it will seem a little daft to puff yourself up over the car you now drive, the amount of money or education you have received, the number of books you owned, the number of times you had your name in the headlines. Whether or not you have won an Academy Award will then prove less important than whether or not you have been true to your spouse. Whether or not you were a basketball star will be less significant than how much of your wealth you generously gave away.--D.A. Carson

I bet his dog is a Chihuahua

Tom Moroney reports:

Pete Mulieri is an ex-New Yorker and now a stockbroker at Investment Technology Group in Boston, who walks his dog on a New York Jets leash and wears a Jets jersey to provoke New England Patriots fans.

“I do rub it in,” said Mulieri, 52, who also invites Patriots fans into his Hingham, Massachusetts, home to gaze upon a hand-painted Joe Namath mural and other mementoes.

He’ll be tailgating in his green-and-white Jets cap when the teams that share the best record in the National Football League clash at Gillette Stadium in Foxborough, Massachusetts, on Dec. 6.

Mulieri is part of a contrarian football cluster: Jets diehards who live in New England -- or, as Flushing, New York, expatriate and software services manager Paul Leone, 47, describes it, “in the belly of the beast.”

I walk the streets of New York wearing my Bosox lid and Pats jersey without my dog, who passed away several years ago. She was sweet, except when would-be thieves wandered in ... Probably would eat Belichick's dog for breakfast, never mind Petey's.

This [revenue-sharing] is socialism at work and baseball is still a free-enterprise sport

My favorite former hedge fund analyst asks me if I agree with George Steinbrenner (quoted in the title).

Why would I ever do that, Mariano Rivera notwithstanding? I replied:

No.

Communism flourishes in a healthy home.

How do you feel about weight classes for wrestling and boxing? Socialism at work?

Competition is good, simultaneously raising quality and reducing price, thereby reducing poverty.  It is advanced by communism at home*; by efficient markets elsewhere.

Why does the NFL (salary capped league) revenue pie continue to expand, while major league baseball continues to contract?  Which system tolerates more out-of-shape past-their-prime athletes?  My guess is that the competition is much more evident and salient in one than the other, even though baseball had a huge cultural advantage and still has significant advantages today.

Salary caps level the playing field.  Socialism kills the field, except in a group** where everyone's interests can be balanced in a non-utilitarian and stable way.


*where the young, the old, and the special-needs can receive the most care and therefore reach their potential

**Like two parents who sacrifice career and recreation for a special needs child (or any child, for that matter, regardless of what the child can pay or how it looks or whatev).  Or someone who honors and sacrifices for their aging parents.

Quotes of the day

In 1938 Buckminster Fuller coined the term ephemeralization to describe the increasing tendency of physical machinery to be replaced by what we would now call software. The reason tablets are going to take over the world is not (just) that Steve Jobs and Co are industrial design wizards, but because they have this force behind them. The iPhone and the iPad have effectively drilled a hole that will allow ephemeralization to flow into a lot of new areas. No one who has studied the history of technology would want to underestimate the power of that force. ... Give hackers an inch and they'll take you a mile.--Paul Graham

Apparently [Rupert] Murdoch and [Steve] Jobs are both anticipating that education and media will become primarily tablet-based in the future. Hence, the reason why Murdoch would want a top educator like [former schools chancellor Joel] Klein on board for this educational entrepreneurial endeavor.--Julia La Roche

Sarah Palin's "Being There" ascendancy may strike some as absurd, but it provides a case study for what now counts as news. Today, going viral matters more than the information itself. The object lesson that Palin brings to politics is something we should fear for the financial markets, where going viral can transform information from being the bedrock of market efficiency to a source of irrationality, even crisis. ... Information is moving from being the bedrock of market efficiency to a source of crisis. The risk for the market is not the news itself, but what news gets drilled home through so many channels that people act on it; we cannot anticipate when information might go viral and sweep the markets.--Rick Brookstaber

In archaeology you uncover the unknown. In diplomacy you cover the known.--Thomas Pickering

Harvard educated economist Brad DeLong's parents also went to Harvard, but so did two of his grandparents, two great-grandparents, and three great-great grandparents. He has been designed by natural selection to be a progressive, and he advocates the memes that have hijacked his gene pool very consistently. ... [All economists] have solutions, albeit solutions that are wildly different. In the middle ages if you didn't feel well a doctor would give you a variety of orthogonal cures: laxatives, emetics, bloodletting, herbs. If they didn't have a cure they could not have make a career out of it. Of course, the best cure back then was to drink lots of fluids and rest; basically, ignore the quacks and do nothing. It's similar for macroeconomic problems, where prior to Herbert Hoover, the federal government would not do much, and growth rates were as high as ever in our history. --Eric Falkenstein

These [Chinese infrastructure] projects don't have to go to the market for loans; the government directs the state-owned banks to lend to them, at interest rates decided by the state. There's no opportunity cost to the money, since it's not like the rail ministry would otherwise be building a chain of noodle shops. And the ridership projections are vetted by the same people who want to build 16,000 km of high-speed rail. Prices are really useful. But in whole large sectors of the Chinese economy, particularly the banking sector, the government sets those prices. This means huge information loss, and the concomitant possibility that there is a vast misallocation of resources. Don't those things happen in markets? Hell yes: witness the housing bubble. On the other hand, witness East Germany. To get a really catastrophic misallocation of resources, it seems to take a government; corporations can only screw things up on an artisinal scale. For that matter, it's worth noting that our government has spent the last seven decades trying to keep the price of housing low, and that much of that intervention, such as the creation of mortgage securitization, ultimately significantly contributed to the crisis. It's worth remembering that at the time they were built, all those useless houses looked like prosperity. So too, massive mispricing in China may look pretty sweet--unless a hiccup suddenly leaves the government with a hell of an expensive white elephant. Or lots of them. As anyone who has contemplated purchasing a luxury car will know, just because something is really awesome, doesn't mean it's a good idea, economically speaking. Buying without knowing the price is dangerous no matter where you are.--Megan McArdle

One of the largest union-administered health-insurance funds in New York is dropping coverage for the children of more than 30,000 low-wage home attendants, union officials said. The union blamed financial problems it said were caused by the state’s health department and new national health-insurance requirements. The fund is administered by 1199SEIU United Healthcare Workers East, an affiliate of the Service Employees International Union. Union officials said the state compelled the fund to start buying coverage from a third party, which increased premiums by 60%. State health officials denied forcing the union fund to make the switch, saying the fund had been struggling financially even before the switch to third-party coverage. The fund informed its members late last month that their dependents will no longer be covered as of Jan. 1, 2011. Currently about 6,000 children are covered by the benefit fund, some until age 23. The union fund faced a “dramatic shortfall” between what employers contributed to the fund and the premiums charged by its insurance provider, Fidelis Care, according to Mitra Behroozi, executive director of benefit and pension funds for 1199SEIU. The union fund pools contributions from several home-care agencies and then buys insurance from Fidelis.--Yuliya Chernova

... while the rapture doesn't strike me as precisely likely, I don't have enough data to rule it out, either.--Megan McArdle

I really liked Sebastian Mallaby's "More Money Than God"

But it turns out, contrary to his assertions, that hedge funds got bailed out, too. Sort of.

TSA abuses woman for being a good mom and for complying with TSA regulations

The video, partly censored as you read at the end, shows a woman being detained and treated with hostility for about 40 minutes. The TSA violated her rights, and made her miss her flight.

Via Megan McArdle.

Are you smarter than an 8th grader in 1895?

I'm not sure half of the college graduates I know would pass this exam.

The most difficult questions for me:

5. Name and describe the following: Monrovia, Odessa, Denver, Manitoba,Hecla, Yukon, St. Helena, Juan Fermandez, Aspinwall and Orinoco.

7. Name all the republics of Europe and give capital of each.

Via Tyler Cowen (who got it from my old buddy Chris Masse).

Chart of the day: Health care expenditures as a percentage of GDP

Via Tyler Cowen.

My simple 1-factor guess is that discretionary income per capita started growing, and an inordinate amount of this income went to healthcare.

UPDATE: Megan McArdle says:

[The Patient Protection and Affordable Care Act (PPACA) is] not going to help us control costs. Perhaps quite the opposite.

Winners and Losers

under Simpson-Bowles:

... three obvious categories of winners:

1) Low-income workers;

2) Fiscal conservatives concerned with the growth of taxpayer burdens;

3) Advocates of bipartisan problem-solving.

And, three categories of losers:

1) Advocates of a solution based primarily on tax increases;

2) Advocates of improving intergenerational equity through funded savings accounts;

3) Senior-scaring political opportunists.

Via Greg Mankiw.

Quotes of the day

I have learned from prior experience that sometimes the better part of valor in an investment situation is to move on. Onward.--Bill Ackman

... who in the Valley doesn’t know it was Sun Microsystems cofounder Andy Bechtolsheim who handed Larry Page and Sergey Brin a check for $100,000 in August 1998, before they’d even incorporated? Or that Peter Thiel was the first outside investor in a Harvard startup called Facebook? ... in the last 10 years the price of starting a technology company has fallen dramatically. No longer do startups have to pay $60,000 for an Oracle database or shell out tens of thousands of dollars for a content-management system: free open-source software has taken care of that. Bandwidth and hardware are also substantially cheaper. Plus, a company that might have needed dozens of programmers in the past can now get away with one or two. Add to that the fact that most people working for startups eschew large salaries in exchange for equity stakes, and the cost of getting a new tech company off the ground goes from several million dollars to a few hundred thousand.--Doree Shafrir

... Stuxnet is an incredibly advanced, undetectable computer worm that took years to construct and was designed to jump from computer to computer until it found the specific, protected control system that it aimed to destroy: Iran’s nuclear enrichment program. The target was seemingly impenetrable; for security reasons, it lay several stories underground and was not connected to the World Wide Web. And that meant Stuxnet had to act as sort of a computer cruise missile: As it made its passage through a set of unconnected computers, it had to grow and adapt to security measures and other changes until it reached one that could bring it into the nuclear facility. When it ultimately found its target, it would have to secretly manipulate it until it was so compromised it ceased normal functions. And finally, after the job was done, the worm would have to destroy itself without leaving a trace. That is what we are learning happened at Iran's nuclear facilities -- both at Natanz, which houses the centrifuge arrays used for processing uranium into nuclear fuel, and, to a lesser extent, at Bushehr, Iran's nuclear power plant. ... There is one clue that was left in the code that may tell us all we need to know. Embedded in different section of the code is another common computer language reference, but this one is misspelled. Instead of saying “DEADFOOT,” a term stolen from pilots meaning a failed engine, this one reads “DEADFOO7.” Yes, OO7 has returned -- as a computer worm. Stuxnet. Shaken, not stirred.--Ed Barnes

... [Jamie] Dimon has plenty not to be embarrassed about. He fulfilled a banker’s first obligation: he made sure his bank survived. This was thanks to his strategy of maintaining a healthy cushion of capital for a rainy day. When markets melted down and the economy plunged into recession, J. P. Morgan remained not only solvent but profitable every quarter. When other banks were refusing to lend, Dimon’s continued to offer credit to customers ranging from homeowners to Pfizer to the State of California. And when the United States needed a strong institution to bail out a failing bank, it turned — twice — to JPMorgan Chase.--Roger Lowenstein

President Lincoln could have denigrated all Southerners. He didn’t.--Jamie Dimon, to President Obama

Politics, like religion, is a topic where there's no threshold of expertise for expressing an opinion. All you need is strong convictions. Do religion and politics have something in common that explains this similarity? One possible explanation is that they deal with questions that have no definite answers, so there's no back pressure on people's opinions. Since no one can be proven wrong, every opinion is equally valid, and sensing this, everyone lets fly with theirs. ... I think what religion and politics have in common is that they become part of people's identity, and people can never have a fruitful argument about something that's part of their identity. By definition they're partisan. ... there is a step beyond thinking of yourself as x but tolerating y: not even to consider yourself an x. The more labels you have for yourself, the dumber they make you.--Paul Graham

We think its fairly obvious that the Department of Justice won't go after the Times or any of the other papers involved in the [Wikileaks] story. But if it doesn't, that's just evidence that its attempt to use the Espionage Act to go after Assange isn't about enforcing laws: It's about retribution, harassment, and rattling sabers.--John Cook

Liquidity crises do not happen to governments with low debt levels. Liquidity crises are solvency crises during the panic phase, before they are revealed to be solvency crises alone. It is difficult to change government behavior, because the politics of reducing spending, or raising taxes is tough. Once a crisis hits, there are protests. People point at shadowy interests that are denying them the illusionary prosperity of the boom; conspiracy theories thrive.--David Merkel

Abandoning the euro, in other words, is not about taking on costs. It is about distributing existing adjustment costs. What Keynes and Kindleberger (and the other K: Krugman) remind us is that the distribution of these costs is not determined by economic theory but rather by political interests. That is why I said last week that political radicalism in Europe will almost certainly rise and the process of governing will become increasingly unstable. It is through the political process that the costs of adjustment will be assigned to the different groups, and when the costs are likely to be so high, the squabbling over the assignment of those costs is likely to be quite brutal.--Michael Pettis

Our family hates purple

Bill Simmons wrestles with family loyalty. Sports loyalty, to be specific.

My daughter is the only Red Sox fan in her school. When the swarms of Yankee fans ask "Why?" she responds "'Cause they win!" which results in a lot of hurt groaning.  I am a blessed, wealthy man.

Paula Abdul photo link here.

UPDATE:  My favorite management consultant--diehard Yankee/Jets fan--tries to stir up Cameragate in my face for the upteenth time.  Here is my blowback:

Belichick's problems include doing too much to put his team in a position to win.  Sure, he took too liberal/literal interpretation of a poorly written rule.  An activist judiciary could do the same to an incompetent legislature or ancient Constitution, and it happens.

Sad that Captain Jeter couldn't let the best SS on his team play that position, or that he wants to be obscenely overpaid now. 

So who has more character?  I don't think its an easy answer.  Especially for a Yankee fan.

One reason I admire Mariano is that I think his character easily beats both of those knuckle heads. 

But Belichick is a winner who navigates economic realities.  And he helps fill stadiums and goose TV revenues.

Baseball stadiums are emptier each year, and losing viewers, as long as one team is allowed to have 6x the payroll of another.  The model destroys competition.

Jeter is now a whiner and a whiffer who never had defensive range, and has never modeled putting the team first, unless I missed something.

Sure, the Vampire Diary demographic likes him, in the biggest sports market in the world.  Heroic.

Derek Jeter photo link here.

UPDATE: I checked a baseball salaries database to see that Jeter thinks he's worth more than all 13 Pittsburgh Pirate starters. And all 13 San Diego Padre starters, too. More of the exemplary leadership baseball needs to refloat the sinking ship.