The usual touchstone of whether what someone asserts is mere persuasion or at least a subjective conviction, i.e., firm belief, is betting. Often someone pronounces his propositions with such confident and inflexible defiance that he seems to have entirely laid aside all concern for error. A bet disconcerts him. Sometimes he reveals that he is persuaded enough for one ducat but not for ten. For he would happily bet one, but at ten he suddenly becomes aware of what he had not previously noticed, namely that it is quite possible that he has erred.--Immanuel Kant
Next week, Indian politicians plan to ban all Bollywood movies for “sucking the blood from the poor” because they charge for movie tickets.--Vivek Nemana
... [high school] students with credit cards are less financially literate than students without credit cards.--Journal of Family and Economic Issues, Volume 31, Number 2, 151-160
I favor such [economist ethics] codes, but I'm not sure they will help much. First, most economic research doesn't matter in the first place. Second, the research which does matter very often is distorted anyway. It is pulled out of context, exaggerated, presented by intermediaries and political entrepreneurs without qualification, and so on. That's the real problem. In this context I'm not sure that a conflict of interest statement is going to push people closer toward truth; the process wasn't accurate or finely honed in the first place. What is published is already so much more scientific than the policy process itself. Improving the former inputs with an ethics code seems like pushing on the less important lever and to some extent it is a very weak substitute for the almost complete lack of an ethics code in politics itself. Third, a lot of the problem is economists in government --advising -- rather than what is published in economics journals. Newspapers already have conflict of interest policies for many (or all) of their writers, but I don't see they are much enforced or have much improved the quality of most Op-Ed pages as policy advice.--Tyler Cowen
Brad DeLong is not a nice man. I would say worse, but I aspire to be a more generous soul than Brad.--Don Boudreaux
The new [health innsurance] system is based on a series of expert projections on how people will behave. In the first test case, these projections were absurdly off base. According to the Medicare actuary, 375,000 people should have already signed up for the new high-risk pools for the uninsured, but only 8,000 have. More seriously, cost projections are way off. For example, New Hampshire’s plan has only about 80 members, but the state has already burned through nearly double the $650,000 that the federal government allotted to help run the program. If other projections are off by this much, the results will be disastrous. ... Companies and unions across America are running the numbers and discovering they would be better off if, after 2014, they induced poorer and sicker employees to move to public insurance exchanges, where subsidies are much higher. The number of people in those exchanges could thus skyrocket, especially as startup companies undermine their competitors with uninsured employees and lower costs. --David Brooks
Every inquiry into paleoclimate controversies, no matter how much whitewash was applied, concluded that climate scientists should archive data. If Neukom, Jones and their coauthors publish a multiproxy article, that means the multiproxy data, not just the output. If the contributing authors are not willing to archive their data, then it shouldn’t be used in a study in a climate journal. End of story. Nor is it sufficient for the author to provide the addresses of the various contributors and force an interested reader to obtain data from each of them individually. There’s no guarantee that they will cooperate. The obligation rests with the publishing authors.--Steve McIntyre
If the [autism-by-vaccination claims] allegations are true, [Andrew Wakefield, a doctor, and an attorney] managed to kill more people than Ted Bundy and John Wayne Gacy put together.--Megan McArdle
[Peyton Manning] was very encouraging. He always has been. He's just that kind of a guy, a very classy guy.--Tom Brady
I don't remember hearing that lyric in "Hit 'Em Up."--Bill Simmons
Being someone that many teams passed over there was a reason for it, you know? They didn't think I was a very good player, and they were probably right. I wasn't doing a good enough job listening to my coaches, I wasn't working at it hard enough, I wasn't good enough. Going 199th, it forces you to be critical of yourself. That ends up being the best thing for you.--Tom Brady
Friday, January 07, 2011
Quotes of the day
Thursday, January 06, 2011
Quotes of the day
Preventing recessions is not the key to growth, as these are regrettable but unavoidable companions to an economy directed by a capital allocation process that is susceptible to systematic failure. Preventing the last failure is pretty irrelevant, because the next systematic failure will be different. Last I checked, only the US government is offering low-down payment loans, and no one offers no-documentation loans, so our government is not really helping here. As for creating growth via something new, if centralized governments could do that, the Soviet Union would still be around. ... Our priority at the top level should be to get out of the way, and so government should focus on its essential but limited perennial tasks as opposed to creating some new engine of growth. Leave that for the millions of people making sure millions of small changes are constantly made to daily procedures. Such changes do not require vision from politicians, subsidies, or tax breaks, but are rather the natural by product of people trying to make a buck. It's the standard Hayek/Friedman view of macroeconomics, and it's still the best description of how the complex adaptive system of our economy works. --Eric Falkenstein
[U.S. policy makers are] munching on the theoretical heads of future generations, while paying no mind to the wretches that will eventually be called upon to pay the bills.--Bill Gross
I don't have a problem with Republicans using the opportunity of raising the debt ceiling to demagogue the deficit problem--this is one issue that needs all the passion it can get. And Democrats can hardly complain, since one Senator Barack Obama was doing just that four years ago. However. If Republicans want to reduce the deficit--and they say they do!--then they should find some damn spending cuts to match the gargantuan tax cut they just demanded. Threatening a showdown over the debt necessary to pay for the spending that they won't cut, is childish in the extreme. Spending isn't going to fall until congress cuts it; playing with the debt ceiling just adds in an intervening step of default, which makes everything harder, and makes our country into a lunatic laughingstock.--Megan McArdle
In essence, we have seen the rise of a large class of "zero marginal product workers," to coin a term. Their productivity may not be literally zero, but it is lower than the cost of training, employing, and insuring them. That is why labor is hurting but capital is doing fine; dumping these employees is tough for the workers themselves -- and arguably bad for society at large -- but it simply doesn't damage profits much. It's a cold, hard reality, and one that we will have to deal with, one way or another.--Tyler Cowen and Jayme Lemke
The scientists were talking their book, which they do with even less subtlety than Wall Street portfolio managers. Although the panelists touted more funding for science, there were a lot of arguments made that suggested that the right issue is not "more" vs. "less" but smart vs. dumb.--Arnold Kling
... during the previous year it has become disturbingly clear to me that some of my scientific contributions may not be aiding people's well-being at all. In fact, they could be causing real harm.--David Nichols
The point is that there are lots of things that seem logical in poker, but aren’t.--Mike Caro
Why is the military so bad at retaining [great leaders]? It’s convenient to believe that top officers simply have more- lucrative opportunities in the private sector, and that their departures are inevitable. But the reason overwhelmingly cited by veterans and active-duty officers alike is that the military personnel system—every aspect of it—is nearly blind to merit. Performance evaluations emphasize a zero-defect mentality, meaning that risk-avoidance trickles down the chain of command. Promotions can be anticipated almost to the day— regardless of an officer’s competence—so that there is essentially no difference in rank among officers the same age, even after 15 years of service. Job assignments are managed by a faceless, centralized bureaucracy that keeps everyone guessing where they might be shipped next. The Pentagon’s response to such complaints has traditionally been to throw money at the problem, in the form of millions of dollars in talent-blind retention bonuses. More often than not, such bonuses go to any officer in the “critical” career fields of the moment, regardless of performance evaluations. This only ensures that the services retain the most risk-averse, and leads to long-term mediocrity.--Tim Kane
When I think of talented young directors I think of David Lynch, and he’s old. In the teens no director will produce 4 masterpieces like Coppola did in the 1970s, or the amazing Kubrick films made in the 1960s, or the sublime Hitchcock films of the 50s. The well has run dry.--Scott Sumner
Wednesday, January 05, 2011
Quotes of the day
Everything should be made as simple as possible, but not simpler.--Albert Einstein
Either we can maintain that there’s some flaw in [math and logic] — some way in which it fails to capture the “right” meaning of rationality — or we can conclude that we don’t always make good decisions, and that meditating on our failures can help us make better decisions in the future.--Steve Landsburg
Hayek condemned scientism–the use of the tools of science to give a field such as economics the aura of science without it’s predictive or descriptive power. He didn’t just say this was a waste of time, he said it was dangerous because it led to a false sense of precision and understanding. The way I understand this (and I agree with Hayek) is that the tools of physics–advanced dynamic equations that treat the economy as a planetary body or even a group of planets interacting, is not just wrong, but deeply misleading. ... none have a unified, consistent model that can explain the movements of macroeconomic aggregates. They also are unable to convince people in the other camps nor is it clear that any data or empirical test would lead to ideological or methodological conversions. This is not comforting for those who claim any sort of scientific mantle for macroeconomics. ... Is economics a science because it is like Darwinian biology? Darwinian biology is very different from the physical sciences. Like economics it is a very useful way to organize your thinking about complex phenomena. But it is not a predictive or very precise science or whatever you want to call it. Before seeing any direct fossil evidence, no biologist can tell you how long the giraffe’s neck was ten million years ago. They cannot make accurate backcasts of any precision such as the year that the forerunner of the giraffe began to lengthen its neck through natural selection. It cannot model why the giraffe’s neck isn’t longer. Darwinism, like much of economics, exploits tautological reasoning. If the fossil record is incomplete or shows no change or vast periods or the pace of change is inconsistent with the fossil record, the theory is not discarded but modified with the concept of punctuated equilibrium. Is punctuated equilibrium true? There is no real way of knowing. It is our best hypothesis given very limited data. Is it a science? Sure. But it is a science that is unlike physics.--Russ Roberts
Joseph Schumpeter coined the phrase "creative destruction" to describe the process of churn whereby old companies, technologies, and industries die, to be replaced by new ones. This process has brought us today's prosperity, and is a massive force for good in human history. But it is not without its sadness. You don't have to want to stop the process, to mourn for the real losses it entails.--Megan McArdle
The Medicare program chief actuary predicted last spring that 375,000 would sign up for the new risk pool insurance in 2010. But by the end of November, only 8,000 had done so.--John Goodman
The main thing [Ed Price] wrote, in my mind, is that he believes that the Baseball Hall of Fame’s voting instructions — to choose players based on their “record, playing ability, integrity, sportsmanship, character and contributions to the team” — demand that he not vote steroid users into the Hall. I think that is a fair interpretation of the Hall of Fame’s charge. I also happen to think that those words are absurdly outdated, and bizarrely vague, and there is absolutely no hint that the Hall of Fame voters have EVER taken them seriously, based on the fact that the very first person voted in was Ty Cobb. But I cannot disagree with Ed for taking the words literally. I think every voter has to make that judgment. ... I think it’s kind of tragic to hear anyone say that. “Innocent until proven guilty” is not simply a standard for a court of law … it is a fundamental right of society. ... some think that a secret ballot is pure because you won’t vote based on public pressure. But I think all that’s kind of a copout. I have been led to believe — and probably will always believe — that some of the Buck O’Neil voting was political and petty and mean-spirited … and it’s a lot easier to be petty and mean-spirited when you don’t have to stand publicly behind your vote. I guess my point is that I believe in light.--Joe Posnanski
The Constitution, curiously enough, always seems to get most convoluted when the wording is most precise. As you know, the First Amendment is fine if the result is "fair" and not too hateful. The Second is dangerous and misunderstood. To support the Tenth is to pine for slavery. The Fifth is vitally important — unless the environmental good is threatened. ... So, because the Constitution has become too complex for many of us to decipher, and thus irrelevant, its time to boil the whole thing down to its troglodytic and/or graceful basics and engage P.J. O'Rourke's rules of governance in a free society:
1. "Mind your own business."
2. "Keep your hands to yourself."--David Harsanyi
Tuesday, January 04, 2011
Superbowl Futures, part 6
I am expiring my NY Giants, San Diego, and Tennessee positions for a realized loss of $21. Also selling some Baltimore and New Orleans, realizing $5 in profits.
*Market prices sourced from Matchbook latest odds quotes.
Part 5 here.
| P/L | Team | Position | Paid | Market* | Exposure |
| $6.62 | ATL | -1 | 21% | 14% | $ (14) |
| $10.63 | BAL | 1 | 0% | -5% | $ 6 |
| $0.00 | CHI | 1 | 7% | 7% | $ 7 |
| ($11.28) | GB | 3 | 9% | 6% | $ 17 |
| ($3.44) | IND | 1 | 8% | 4% | $ 4 |
| ($4.39) | KC | 4 | 2% | 1% | $ 5 |
| ($78.18) | NE | -2 | 13% | 52% | $(103) |
| $0.50 | NO | 2 | 8% | 8% | $ 17 |
| $5.20 | PIT | -1 | 22% | 17% | $ (17) |
| $11.24 | PHI | -1 | 18% | 7% | $ (7) |
| ($6.23) | NYJ | 1 | 9% | 3% | $ 3 |
| ($7.02) | 1 | 7% | 0% | $ - | |
| ($3.85) | 1 | 4% | 0% | $ - | |
| ($10.44) | 3 | 3% | 0% | $ - | |
| ($80.20) | Total | 125% | $ (83) |
*Market prices sourced from Matchbook latest odds quotes.
Part 5 here.
Quotes of the day
Any princess is bound to be heartbroken when her testicles finally drop.--Tony Woodlief
From each as they choose, to each as they are chosen.--Robert Nozick
The government's ability to discriminate is basically zero, so you have to choose to allow everything or nothing, because that's all it can decide.--Eric Falkenstein
If Congress was stocked with a few hundred members of the Paul family, if Penn Jillette ran the T.S.A., if the Cato Institute held veto power over every entitlement expansion and overseas military operation, it would make sense to use a long magazine article to fret, in detail, about the perils associated with the minimal state.--Ross Douthat
At the very least, I expect my articles to be noteworthy enough that within a few days Brad DeLong will call me a moronic hypocrite.--Greg Mankiw
One's game face is a tactic used to intimidate the opponent and to bolster one's own self as a player. If a game face is simply a tactic, then who cares? But if one's game face also reflects one's typical approach to life - if the game face is also the life face - then I worry about today's athletes. I wish they smiled more often, if not during games and matches then at least before and after. Mind you, the smiles were not causes of longevity in the study just described, simply markers of how these men presumably lived their lives, happily or not. Pasting a phony smile on your face is not going to make you live longer. But perhaps doing the sorts of things that positive psychologists have shown to produce lasting happiness might be beneficial.--Christopher Peterson
Despite all the qualifications, scores on standardized tests, like the PISA tests, are much more effective ways to compare student achievements in different countries than are average years of schooling and other measures of school years completed. As I indicated earlier, the mediocre performance of the average American student on the PISA and other tests may indicate only that the US school system emphasizes creativity and independent. However, I strongly believe that it is also evidence of the mediocre performance of many American schools. International test scores have been used for decades to push for improvements in the schools available to the lower third of American students through the spread of charter schools, school vouchers, and stronger incentive to teachers, students, and parents. The 2009 PISA test results indicate that some progress is being made in American schools, but considerable room for improvement still remains.--Gary Becker
Analysts and executives have long lamented that the music industry is dying. That is not quite true—it is the record business that is clearly done for, and in its place, touring stands as the top moneymaker for many industry participants.--Annie Lowrey
Scott Sumner quotes of the day
So there you are. The GOP doesn’t favor small government and the Dems don’t favor regulation. Instead the GOP favors a bloc of people who vote for the GOP and contribute money to their campaigns, and the Dems favor a bloc of people who vote for the Dems and contribute money to their campaigns. ... whatever idealism exists is not strong enough to overcome the special interest groups. Fortunately, good governance is not a zero-sum game, so once and a while the two parties come together and strike a deal that is win-win (such as the 1978 deregulation bill, or the 1986 tax reform, or the 1996 welfare reform.) The most one can hope for is that some creative politician will be able to cobble together another such compromise sometime in the next 10 years. Of course it would be much easier to do if we were Switzerland, Denmark, or Singapore. Heck, if we were even Canada or Australia. But we are a nation of 310 million people with very diverse cultural values and perspectives on economics.--Scott Sumner
In the 1950s and 1960s it wasn’t that hard to figure out where capital needed to be allocated. Capital was allocated to produce steel, and the steel was used to produce cars and washing machines. Capital was allocated to the production of aluminum, and the aluminum was used to make airplanes. The most productive members of society were those who made things, and Michigan was near the top in per capita income. Today the most productive members of society are not those who produce things, they are those who discover the things that need to be produced. Once you have the blueprint, it is easy to produce many types of software and pharmaceuticals. The big money goes to those who figure out the blueprint, but also to those who allocate capital to the guy who has the idea for a Google, or Facebook, or Twitter. In contrast, the technicians who actually implement the vision often earn modest salaries.--Scott Sumner
The return to hedge fund managers, CEOs, billionaire investors, and Goldman Sachs employees has soared in recent decades because their skills are far more socially valuable than the 1960s, when the biggest decision was whether GM should put tail fins on Cadillacs. This dynamic, fast changing environment is like a big playpen for the shrewd and savvy investor. We all know how the founders Microsoft and Google and Facebook got really rich because their “product’ can be produced at ultra-low marginal cost. Or how great cost savings can be achieved by moving capital overseas. In that sort of world it’s no surprise that investors who allocate capital to profitable ventures also get much richer than in the world where big corporations raised capital to make predictable products using American labor. It seems to me that this should be the standard explanation, and any alternative explanation should have the burden of proof. Instead it usually seems like the opposite is true. I constantly read opinion pieces that seem to simply assume that the big earnings in finance are unwarranted. Partly this is a backlash against the behavior of banks in the recent crisis. I’m just as outraged by our financial system as the next guy. But those are completely separate issues; one issue is secular trends in financial income, the other is bad regulation in banking. ... Some accuse me of defending the wealth of financiers. But I’m not making a moral argument here. Because I’m a utilitarian I don’t pay any attention to the concept of “deserving” the money you make. Our tax policy should redistribute money in the way that best maximizes aggregate utility, and pay no attention to whether it looks like various people’s incomes are “earned.” Unfortunately I used the term ‘deserve’ in my post title, so I “deserved” that criticism.--Scott Sumner
Scott Sumner tans John Tamny's and Forbes' hides
Maybe Steve Forbes needs to review his editorial process.
Friday, December 31, 2010
Quotes of the day
Indeed, arguments to the effect that something can't be good if it hasn't "survived," when its failure to "survive" reflects, not any competitive outcome, but the effect of laws aimed at snuffing it out, are perfectly circular: they amount to saying that, because something has everywhere been outlawed, it deserves to be outlawed.--George Selgin
[Within a few years] children just aren't going to know what snow is. [Snowfall will be] a very rare and exciting event.--Dr. David Viner, senior research scientist at the climatic research unit (CRU) of the University of East Anglia, in 2000
"[By] 1995, the greenhouse effect would be desolating the heartlands of North America and Eurasia with horrific drought, causing crop failures and food riots…[By 1996] The Platte River of Nebraska would be dry, while a continent-wide black blizzard of prairie topsoil will stop traffic on interstates, strip paint from houses and shut down computers."--Michael Oppenheimer, in 1990.
If present trends continue, the world will be ... eleven degrees colder by the year 2000. This is about twice what it would take to put us in an ice age." Kenneth E.F. Watt, in 1970.
Over the past three years, American politics has been dominated by a liberal fantasy and a conservative freakout. The fantasy was the idea that Barack Obama, a one-term senator with an appealing biography and a silver tongue, would turn out to be Franklin Delano Roosevelt, Robert F. Kennedy and Mahatma Gandhi all rolled into one. This fantasy inspired a wave of 1960s-style enthusiasm, an unsettling personality cult (that “Yes We Can” video full of harmonizing celebrities only gets creepier in hindsight) and a lot of over-the-top promises from Obama himself. It persuaded Democrats that the laws of politics had been suspended, and that every legislative goal they’d ever dreamed about was now within reach. It was even powerful enough to win President Obama a Nobel Peace Prize, just for being his amazing self.--Ross Douthat
The big-picture problem for the left is that in the context of government-run health care Berwick's rule [of rationing] is not only sensible, but it's the only possible outcome. This leaves proponents of a "right" in the uncomfortable position of having to say that it's only a right up to a certain age, a certain degree of sickness, or a certain cost. Yet, if a "right" ends at an arbitrary point set by bureaucrats and legislators -- a point not based on conflict with other rights but rather with changeable financial or political considerations -- then it can't be a right. Furthermore, if a positive right such as that claimed by supporters of Obamacare can be curtailed because of cost, then every government program that relies on the redistribution of wealth can be curtailed. Either they're all "rights" or none of them is. Of course, the idea that government, with an incentive to "control costs," would be involved with end-of-life counseling is disturbing enough. But perhaps the biggest problem for Progressivism in the news of Berwick's giant step toward health care rationing is that the country is learning in an unmistakable way that the emperor has no clothes. In our constitutional republic, positive rights are anathema to liberty and to life itself.--Ross Kaminsky
Marginal cost is the cost of supplying one additional unit of output—say, one more pound of apples or one more automobile. In most cases, marginal costs rise as firms increase the amounts they supply to consumers. But textbooks identify certain goods and services as ones whose supplies can be increased at zero cost. These textbooks also insist that economic efficiency requires that, in these circumstances, firms increase their supplies and charge consumers nothing for the additional output. Obviously, no private firm will do such a thing if its customers are willing to pay something for the extra output. So, many economists concluded, economic efficiency requires government intervention—say, to force the price down to zero or for government itself to supply such goods and services. The classic example of such a good is a bridge spanning a river. Once the bridge is built—and assuming that traffic on the bridge isn’t congested—the cost of letting an additional car cross the bridge is practically zero. But the private owner of the bridge will nevertheless charge positive prices to each vehicle seeking to use the bridge. Economists blinded by textbook simplicity took this fact as evidence that private ownership of bridges is inefficient unless these owners are prevented by government from charging for use of their bridges during nonpeak times. Coase effectively shouted, “That’s absurd!” He rejected the convention of evaluating the appropriateness of prices based on the assumption that bridges already exist.--Don Boudreaux
Professor Alfred Kahn served as living proof that there need be nothing dismal about the science he loved.--Thomas Hazlet
Top posts of 2010
3. High frequency profits capped at 4 basis points of trading volume
2. Intrade now predicting that the Democrats will seat less than 51 senators
1. Tom Brady's fantasy draft value just plummeted
2. Intrade now predicting that the Democrats will seat less than 51 senators
1. Tom Brady's fantasy draft value just plummeted
Thursday, December 30, 2010
Quotes of the day
If we progress at our current growth rates and China progresses at its current growth rate, what that means is that in about 27 years the average Chinese will be richer than the average American.--Ed Lazear
The stock market is now where it was before Lehman Brothers collapsed. And if you exclude financial stocks, the market value of U.S. equities is now within about 15% of the October, 2007, peak. To believe that (non-financial) stocks are reasonably valued today implies that they were pretty reasonable then, at the peak of the bubble - and that therefore most of the last three years was little more than a bad dream. Do you believe that? Do I?--Brett Arends
My guess is that Congressfolk would rather hear horror stories of crime than horror stories of granny being turned down by a government bureaucrat. And since it is their voters but not their money, here we are.--Tom Maguire
How many of us would prefer that the Founders had written the First Amendment so as to focus on fairness rather than freedom and instead wrote: "Congress shall make no unfair laws respecting an establishment of religion, or prohibiting the fair exercise thereof; or abridging the fairness of speech, or of the press; or the right of the people to peaceably assemble in a fair fashion, and to fairly petition the government for a redress of grievances"? How supportive would you be to a person who argued that he was for free religion but fair religion, or he was for free speech but fair speech? ... As a matter of fact, it's never American consumers who complain about cheaper prices. It's always American producers and their unions who do the complaining. That ought to tell us something.--Walter Williams
As many of you are aware, at the end of every year I move completely to cash and lock myself in a bank vault for a couple days with all of my money and all of my annual trading records. I carefully review all of my trades and try to learn what mistakes were made and what worked. I physically handle my cash; it helps me appreciate that trading is not simply an intellectual exercise involving numbers, but one which involves real money with real wealth creation and destruction. This year, I have relocated this exercise 2,300 feet underground inside an abandoned mine at a slag dump site in Monaca, Pa. I have appropriated thirty-seven Chinese nationals from a Scandium Mine in Longba Town, Zhuxi Country, China, that have secured and transported my gadolinite, promethium, cerium and yttrium and other rare earth minerals holdings. As many of you are aware, I recently acquired these minerals, as well as the laborers, on a recent site visit to a rare earth mining facility in the P.B.O.C. My rare earth mineral holdings represent precisely half of my net worth.--anonymous, satirical trader
Wednesday, December 29, 2010
Collecting winnings on a price of oil bet
John Tierney reports:
Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies — a Malthusian pessimist versus a Cornucopian optimist — and now the day of reckoning is nigh: Jan. 1, 2011.
Quotes of the day
It’s one thing to make a donation to Habitat for Humanity in lieu of a Christmas present, and decorate your door with a wreath hand-woven by little orphan Mexican children, and sign all your emails with “Peace.” It’s another to get up in my business because I want a lower tax rate and haven’t volunteered half my time this past year, especially when one of the reasons I don’t volunteer and want lower taxes is because I’m supporting the four kids who will need to be gainfully employed to cover the retirement you haven’t bothered to save for.--Tony Woodlief
Housing regulations, more than those that bind standard businesses, explain the Sun Belt’s population growth. If New York and Massachusetts want to stop losing Congressional seats, then they must revisit the rules that make it so difficult to build. High prices show that the demand would be there if the supply is unleashed.--Edward Glaeser
The most promiscuous men are those who have paid for sex, been threatened with a gun, support abortion rights and know people with AIDS. The least promiscuous are those who spend time at church and report high satisfaction from family life. The most promiscuous women are those who have been punched, believe homosexuality is not wrong, and spend time in bars. The least promiscuous women are those who are patriotic and spend time in church.--Steve Landsburg
The cost of insuring Illinois’s bonds against default rose to the highest level in five months as the state headed for the new year without a plan to finance a $3.7 billion pension-fund contribution. The cost of credit-default swap insurance on the lowest-rated state after California has risen 16 percent to $330,000 to protect $10 million of debt, from $285,000 on Dec. 3, according to data compiled by Bloomberg.--Darrell Preston
... the main function of finance and Wall Street generally is to provide capital. Now, the people who provide capital will do it more willingly if they have the liquidity to get out of their obligations by selling to other people. So you add the markets for trading to provide that liquidity. Go one step further. When people buy and sell securities they are taking on risk. So to address that, Wall Street offers instruments to help with hedging and risk management. You end up with derivatives and the like. All of that is reasonable. But the next step is where things start to get into trouble. Those in finance start to realize that it's hard to make money in a competitive market. They look for ways to get an edge. And to do that, they try to create informational asymmetries and institutional barriers. And this is the point where derivatives started to be designed for gaming the market rather than to meet the demands of risk management, to allow institutions to lever when they weren't supposed to lever, avoid taxes, trade in markets that they weren't supposed to trade in.--Rick Brookstaber
I get annoyed by progressives always talking about how the Clinton-era top rate (39.6%) was fine. Maybe so, but then why don’t they support this “tax cut,” which will return the top rate to 38.8%, once the health care tax kicks in?--Scott Sumner
... unlike many of the countries sharing the euro, there was never any worry that Switzerland would not be able to pay back its debts. What did the Swiss do right? For one, the country’s regulators and central bank were faster and tougher than most. During the lull in the summer before the collapse of Lehman Brothers in September 2008, the Swiss were hard at work on a plan to deal with troubled assets at UBS, the worst of Switzerland’s problem banks—with a balance sheet more than four times the size of the entire Swiss economy. When disaster struck, the central bank swiftly nationalized part of UBS’s assets and recapitalized the rest. That’s unlike authorities elsewhere in Europe or Washington, who waited until the last minute to stitch together messy bailouts that left many problems to linger. Second, the Swiss decided early on that tighter reins on their banks wouldn’t just protect taxpayers from future crises and bailouts, but would ultimately be good for the banks’ own business as well.--Stefan Theil
Japan has simply reached the limits of Keynesian policy in an economy which has never managed to jolt itself back up to a healthy rate of growth. Demographics is obviously a big contributor to that slow growth, and there are a whole host of secondary factors one could nominate, but whatever the reason, they have now had two decades of anemic growth, which they have fitfully attempted to address with stimulus. Maybe not enough stimulus, maybe badly designed, but they've certainly tried to follow the basic Keynesian playbook: borrow money and spend it when times are bad, in the hopes that you can bring back growth. But for Japan, at least, the growth has not materialized. Few economists would advise undertaking a fiscal adjustment, on the scale that Japan requires, in the face of the current crisis. The problem is, there hasn't been a good time for retrenchment in 20 years.--Megan McArdle
... the vendors that lost this game failed because they listened to their customers. Like with PDAs or with the original mobile phones or first generation of PCs, early adopters are not the audience that should be consulted on how to improve the product. ... If you can’t ask early adopters and you can’t ask non-consumers for hints then where can clues be found? What history shows is that consumers have been happy to trade up to technology that offers more option value. ... Asking or observing current users of smartphones does not provide any incentive to sell low end versions. Asking or observing non-consumers seems to indicate no interest in newfangled complex or costly products. But the calculus that must be made is one of option value. Does the new product offer significant option value? Will this option value be easily realized? This is not easy to determine, but it’s a method that is far more promising than asking users their opinion. The PDA was not a product that was introduced by the incumbent computer vendors because their customers did not ask for it. Once established, the PDA was not replaced by a product that PDA users asked for either.--Horace Dediu
Astonishing, isn't it. Here are [RIM] executives being surprised by the state of the art in their own area of competence, and not just surprised, but caught completely flat-footed. They then found out during disassembly that "... that the phone was [a] battery with a tiny logic board strapped to it." It was, in other words, a completely different way of thinking about mobile phones, orthogonal in important ways to how RIM thought about its devices. All of this helps explain why RIM (and Microsoft and Nokia and ...) played crummy defense for so long after the iPhone launch. They had been blind-sided, taken aback by a wormhole product that they just knew couldn't do what Apple said it could. I'vewritten elsewhere about how I remain bearish on RIM, but it is worth reminding yourself that RIM wasn't the only company that in early January of 2007 had no idea how that Apple product had just dropped into our little corner of capitalism.--Paul Kedrosky
Early development economists working at the hopeful dawn of colonial independence believed that they really were starting from scratch. The last fifty years have shown us that they weren’t, and this has been—and remains—one of development’s biggest blind spots.--Laura Freschi
I’ve given the Monty Hall problem to some of the best mathematicians in the world, and they’ve gotten it wrong. Some of them insisted on the wrong answer for days before they got it. The difference between them and Lubos is in their ultimate reactions: “Wow, I get it now!” versus “But I gave the correct answer to this *other* problem, and you cheated by not asking me the question I knew how to answer”.--Steve Landsburg
People will believe a moron they like over a genius they don't.--Rob Lyman
Chart of the day: S&P 500 price/earnings ratio
Tuesday, December 28, 2010
Superbowl Futures, part 5
Matchbook latest odds (based on midprices):
I am flipping my Philadelphia long to short, getting longer New Orleans, buying Chicago and nibbling a bit more at Baltimore, and Kansas City.
Part 4 here.
| New England | 39.2% |
| Atlanta | 14.9% |
| Philadelphia | 14.9% |
| Pittsburgh | 12.7% |
| New Orleans | 6.9% |
| Baltimore | 6.3% |
| San Diego | 5.0% |
| Chicago | 4.4% |
| NY Jets | 3.5% |
| NY Giants | 3.3% |
| Indianapolis | 3.1% |
| Green Bay | 1.9% |
| Kansas City | 1.7% |
| Oakland | 0.7% |
| Jacksonville | 0.6% |
I am flipping my Philadelphia long to short, getting longer New Orleans, buying Chicago and nibbling a bit more at Baltimore, and Kansas City.
| P/L | Team | Position | Paid | Market | Exposure |
| $6.11 | ATL | -1 | 21% | 15% | $ (15.00) |
| $11.52 | BAL | 2 | 0% | 6% | $ 12.00 |
| ($2.67) | CHI | 1 | 7% | 4% | $ 4.00 |
| ($22.18) | GB | 3 | 9% | 2% | $ 6.00 |
| ($4.69) | IND | 1 | 8% | 3% | $ 3.00 |
| ($1.72) | KC | 4 | 2% | 2% | $ 8.00 |
| ($52.82) | NE | -2 | 13% | 39% | $ (78.00) |
| ($4.03) | NO | 3 | 8% | 7% | $ 21.00 |
| ($1.12) | NYG | 1 | 7% | 6% | $ 5.90 |
| ($5.09) | NYJ | 1 | 9% | 4% | $ 4.00 |
| $3.25 | PHI | -1 | 18% | 15% | $ (15.00) |
| $8.73 | PIT | -1 | 22% | 13% | $ (13.00) |
| $1.15 | SD | 1 | 4% | 5% | $ 5.00 |
| ($10.44) | TEN | 3 | 3% | 0% | $ - |
| ($63.56) | Total | $ (52.10) |
Part 4 here.
Quotes of the day
Most people think facts are easy and theory is difficult. It is often the other way around.--Eric Falkenstein
Just because two variables have an expected difference of zero, you can’t conclude they have an expected ratio of one. That needs to be computed separately.--Steve Landsburg
... the fact that markets fail does not mean that government solutions work.--Arnold Kling
Consumers have benefited to the effect of $20 billion a year [from airline deregulation]. Where competition is feasible, the government should get the hell out of the way.--Alfred Kahn
I really don’t know one plane from the other. To me, they’re all marginal costs with wings.--Alfred Kahn
[Kahn] taught us a lesson that competition, even imperfect competition, is better than imperfect regulation; that facts make a difference, if only we have the humane procedures to uncover them and the brains to understand them; and that intellectual rigor, decked out in wit and flair, even in Washington, can be a winning combination.--former U.S. Assistant Attorney General John Shenefield
A 2008 study by the U.S. Securities and Exchange Commission found the average cost of Sarbox compliance is $2.3 million per year. A whopping 70 percent of all smaller public companies said compliance costs have prompted them to consider going private, and 77 percent of smaller foreign firms reported considering abandoning their American listings.--Eric Jackson
Warren Buffett wants the rich to pay a higher tax rate. Even Larry David (co-creator of Seinfeld) had a funny piece in the New York Times mocking the notion that the tax increase would be noticed by people in the hundred-million-dollar club, such as himself. The tax-the-rich argument feels fair if you allow yourself to see the world as only two categories: the rich and the non-rich. And it helps if you let the media install Bernie Madoff as the poster boy for the rich, while perhaps you imagine Tiny Tim as your symbol for the non-rich. But what about, let's say, a hard-working doctor? His taxes would increase when you tax the so-called rich. And unlike Warren Buffett and Larry David, a tax increase likely has real implications for the doctor's family. Before you break out the tiny violins for my hypothetical doctor, allow yourself to imagine that he's got a mountain of college loans, his mortgage is underwater, and he's supporting three grandparents (one on his wife's side) who all need some form of senior care, and the doctor's parents, and his wife's parents, have no spare cash. The doctor's parents might also need help in a few years. Oh, and the doctor has two kids of his own, one of whom needs some sort of special care. That's what the real world looks like for the so-called Sandwich Generation. For this imaginary doctor, any extra tax burden takes money from four generations of his family who needs it and distributes the cash to strangers. ... it is fair to say that the Majority left the bank door unlocked so the Rich could loot it. Nice work, Majority. Now the Majority's proposed solution is to take money from the Suckers income group to compensate for their own gross mismanagement of the country. You might argue that the rich are the ones who are really in charge, even in a democratic system. That makes the story even worse. In that case, the rich plundered both the Majority and the Suckers, and now Warren Buffett and Larry David are pointing fingers at the Suckers in the hope that the Majority doesn't decide to boil the rich for food. That's what I would do if I were a billionaire. Just sayin'. My own view, as a member of the Suckers group, is that if economists determine that the best way to make the country solvent is to increase my taxes, I'm willing to look at those numbers. I'm a practical guy. But I do resent being gang raped by the Rich and the Majority while they high-five each other and call it fairness. And I'd feel a little better about it if the Majority would do a better job managing things going forward.--Scott Adams
The answer to the inherent difficulty of judging performance is not to simply throw up one's hands and pay anyone who manages to show up for work more often than not. Yet this is that the teacher's unions seem to want. The unions, who seem to be the primary source for the New York Times piece, are (like many employees) very adept at picking out the problems in an evaluation system. Unfortunately, their solution is ... : Make no attempt to evaluate performance at all. ... Myself, I'd be happy with a more subjective, manager-intensive effort to evaluate teacher performance, weeding out the very bad teachers, and using pay to lure the very best ones into the places where they are most needed: schools that teach disadvantaged kids. But it's worth noting that such a system is pretty much totally incompatible with a unionized workplace--certainly one with a unionized workforce as adversarial as the teacher's union is in many cities. The whole union system is set up to deal with standardized processes.--Megan McArdle
Yes, Tom Brady is having an MVP-caliber season. Yes, rookies Devin McCourty, Aaron Hernandez, Rob Gronkowski, Brandon Spikes and Jermaine Cunningham have all played significant roles in the team’s success leading to a 13-2 record and the No. 1 seed in the upcoming AFC playoffs. But without the 21 undrafted free agents on the club’s roster, the Patriots would not have had the depth to deal with injury after injury to the rest of the roster. ... What is different is that few teams have managed a rash of injuries any better in recent memory than these 2010 Patriots. The 21 undrafted players are the most of any team in the NFL. Of the 21 players not drafted on the current Patriots roster, no fewer than 12 have found themselves not only playing but starting and playing significant roles, with significant defined by playing more than half of their potential snaps in a game.--Mike Petraglia
In theory, the 12,000 households with the highest incomes are producing more wealth each year than the 24 million households with the lowest incomes. I hate to have to say it, but I find that plausible. In theory, the average federal worker produces more than twice the wealth of the average private-sector worker. I hate to have to say it, but I find that doubtful.--Arnold Kling
... the American school system is actually better, if one makes ... a crude adjustment for demographics (with no adjustment for demographics, European scores are better). However, what might happen if you had a sophisticated way to adjust for the ability of children entering school? Would all of the differences between school systems become insignificant?--Arnold Kling
MBA training can give you insight into the workings of a firm and its components (marketing, operations, strategy, human resources, finance, etc.), but there is much of the investment world that is untouched in the standard MBA curriculum. However, should you want to change careers later on, an MBA is preferable to a CFA. Of course, as with math or any subject, what you get out of an MBA in terms of learning and the value of it as a currency depends greatly on the school you attend. If you think you want to stay in the investment world, a CFA is the better choice. I love the diversity of the subject matter. When I taught CFA classes, I could tell who in the class worked in equities and who in fixed income by their reactions — but everyone has to pass the same test, which includes those subjects, plus economics, quantitative methods, financial reporting and analysis, portfolio management, etc. And ethics, thankfully. You may think that you only need expertise in a couple of those areas, but the more of them you understand, the greater your value as an investment professional. The business will try to paint you into narrow lanes; those that know when to veer across them to seize an opportunity have a distinct advantage. ... If you choose to pursue an MBA or a CFA, remember that they are built upon orthodoxy, by and large, which you need to learn and attack at the same time. There are principles and standards and techniques for you to master, but the business is one that never stands still, no matter the credentials that you earn.--Tom Brakke
Consistent with the firm’s Compensation Principles and existing compensation programs, it is intended that any awards granted under the Plan will be designed to align compensation with long-term performance in a manner that does not encourage imprudent risk-taking.--Goldman Sachs
Since the dawn of the industrial revolution in the mid-18th century, available supplies of coal, petroleum, iron ore, and most other resources have increased significantly – and, as a result, their real prices have fallen. These rising resource supplies and falling prices occurred during a time when human population increased by a factor of ten – from 700 million to nearly 7 billion today, at least 4 billion of whom are now part of industrial economies. So the increase in the number of persons integrated into industrial economies over the past two-plus centuries – from near-zero persons 260 years ago to at least 4 billion persons today – is far larger than is the number of Chinese, Indians, and other peoples now being integrated into industrial economies.--Don Boudreaux
Most snow crystals—as [Wilson Bentley] knew, and kept quiet about—are nothing like our stellar flower: they’re irregular, bluntly geometric. They are as plain and as misshapen as, well, people. The Fifth Avenue snowflakes are the rare ones, long and lovely, the movie stars and supermodels, the Alessandra Ambrosios of snow crystals. The discarded snowflakes look more like Serras and Duchamps; they’re as asymmetrical as Adolph Gottliebs, and as jagged as Clyfford Stills. But are they all, as Starbucks insists, at least different? ... The sign in Starbucks should read, “Friends are like snowflakes: more different and more beautiful each time you cross their paths in our common descent.” For the final truth about snowflakes is that they become more individual as they fall—that, buffeted by wind and time, they are translated, as if by magic, into ever more strange and complex patterns, until, at last, like us, they touch earth. Then, like us, they melt.--Adam Gopnik
Is [the Christmas] story of any interest to non-Christians? Is it historically accurate? I don’t know, but I think it’s a great story. It’s a story of transformative power that comes not from the Palace up above, but from the Manger down below.--William Easterly
Thursday, December 23, 2010
A historical perspective on the unconstitutionality of the Supreme Court
from David Henderson:In one of its most shameful decisions, Schenck v. United States, the U.S. Supreme Court voted 9-0 to uphold the Espionage Act's restrictions on free speech. Indeed it was in the Schenck decision that Supreme Court Justice Oliver Wendell Holmes made his famous statement that, "The most stringent protection of free speech would not protect a man in falsely shouting fire in a theatre." Great line, but Holmes never connected it with the case at hand. Schenck was arguing against the military draft on the grounds that it violated the Thirteenth Amendment by imposing involuntary servitude. Holmes never said how that it was like falsely crying fire. It seems to me that there was a fire.
That fantasy can't happen, obviously
because no one would agree to go on a show where the questions are tough and the outcome is humiliation. But I can dream.
Media: How would you balance the budget?
Politician: I would cut spending.
Media: What part of the budget would you cut to balance the budget?
Politician: I would cut the pork.
Media: If you think that's enough, you're either a liar or an idiot. Can you clarify which one you are?
Politician: I am insulted by that question!
Media: If you understood the question that rules out "idiot."
Quotes of the day
What we found are the constants that describe every city. I can take these laws and make precise predictions about the number of violent crimes and the surface area of roads in a city in Japan with 200,000 people. I don’t know anything about this city or even where it is or its history, but I can tell you all about it. And the reason I can do that is because every city is really the same. ... you can take the same person, and if you just move them to a city that’s twice as big, then all of a sudden they’ll do 15 percent more of everything that we can measure. ... Think about how powerless a mayor is. They can’t tell people where to live or what to do or who to talk to. Cities can’t be managed, and that’s what keeps them so vibrant. They’re just these insane masses of people, bumping into each other and maybe sharing an idea or two. It’s the freedom of the city that keeps it alive.--Geoffrey West
According to the data, people who live in densely populated places require less heat in the winter and need fewer miles of asphalt per capita. (A recent analysis by economists at Harvard and U.C.L.A. demonstrated that the average Manhattanite emits 14,127 fewer pounds of carbon dioxide annually than someone living in the New York suburbs.) Small communities might look green, but they consume a disproportionate amount of everything. As a result, West argues, creating a more sustainable society will require our big cities to get even bigger. We need more megalopolises.--Jonah Lehrer
Impractical is the antidote to doomed.--Scott Adams
Fear is not in the habit of speaking truth; when perfect sincerity is expected, perfect freedom must be allowed; nor has anyone who is apt to be angry when he hears the truth any cause to wonder that he does not hear it.--Tacitus
Leverage regulation is "stupid" regulation. You require, say, a ratio of capital to assets of 15 percent. The way that banks respond is to raise the riskiness of assets. So even though the bank holds a lot of capital, it takes a huge amount of risk, and wins the game. Risk-based capital regulation is "clever" regulation. In my view, the best form of clever regulation is stress testing. You apply tests, such as "what happens if interest rates jump 200 basis points?" or "what happens if house prices fall 20 percent?" The problem with stress testing is that the results are model-dependent. As the financial crisis hit, the Basel rules were in the process of pivoting toward stress testing, with banks doing their own modeling (as Tyler would say, Yikes!). The problem with clever regulation is that whatever stress test you use, the bank can structure its balance sheet to just pass the stress test even though it holds practically no capital. In a sense, that is what the whole mortgage securitization structure was all about, except that the regulatory regime relied on AAA ratings to serve the function of stress tests. I think that a combination of both forms of regulation would be much better than either one alone. Clever regulation can spot the worst abuses of stupid regulation. Stupid regulation can serve as a backstop as banks learn to how to game clever regulation. So the question of which type of regulation should be employed should not be answered "either-or," it should be answered "both."--Arnold Kling
[Joe] Nocera and [Bethany] McClean suggest that [Brooksley] Born was insufficiently deferential to [Bob] Rubin whose ego demanded more stroking. They say [Larry] Summers had the same problem. Nocera and McClean also mention Ed Gramlich, a Fed governor who saw the warning signs that subprime was heading in a bad direction but was too polite and diffident to push back when his warnings were dismissed. So [Alan] Greenspan’s ideology, Rubin and Summers’s ego, and Gramlich’s lack of one explain their mutual failure to do something about subprime. I have a simpler explanation. All of those folks had an incentive to ignore subprime. Ideology was just window-dressing. They liked their jobs. They wanted to stay in them. Helping Wall Street or at least not rocking Wall Street’s boat was the politically savvy thing to do. Ignore what people say is their motivation. Look at what they do. ... The journalist comes along after the fact and sees the flaw. But I think it’s the wrong flaw. The flaw isn’t in the man who is the ideologue or the egotist or the gentle one. The flaw is the system that gives a louder voice to some rather than others. One of the deepest things I have learned from Bruce Yandle is his observation that we ourselves have a bootlegger and baptist inside of us–a good motive and a bad motive. And when we do bad, we find ways to convince ourselves, to deceive ourselves, that we are doing good. ... The challenge of economics and of journalism is to remind us that motives are less important than actions.--Russ Roberts
Ralph Raico's new book also powerfully argues that compared to Woodrow Wilson, Joseph McCarthy was a tolerant and fair-minded man.--Bryan Caplan
The “let me explain” component of journalism fell out of favor as there was always a faction of the audience that had a problem with the empirical facts – a faction that the company’s finances could not afford to lose. The personal – including phatic – was carefully eliminated as it was perceived as unobjective and inviting the criticism of bias. The way for a reporter to inject one’s opinion into the article was to find a person who thinks the same in order to get the target quote. A defensive (perhaps cowardly) move that became the norm. And, once the audience caught on, led to the loss of trust in traditional media. Reduction of local media to a single newspaper, a couple of local radio stations and a handful of broadcast TV channels (that said esentially the same thing), left little choice for the audience. With only one source in town, there was no opportunity to filter among a variety of news sources. Thus, many people started unquestioningly accepting what 20th-century style broadcast media served them. Just because articles were under the banners of big companies did not make them any more trustworthy by definition, but with no alternative it is still better to be poorly informed than not informed at all. Thus, in the 20th century we gradually lost the ability to read everything critically, awed by the big names like NYT and BBC and CBS and CNN. Those became the new parents, teachers, tribal elders and priests, the authority figures whose words are taken unquestioningly. In science, explosion in funding not matched by explosion of job positions, led to overproduction of PhDs and a rise of hyper-competitive culture in academia. Writing books became unproductive. The only way to succeed is to keep getting grants and the only way to do that is to publish very frequently. Everything else had to fall by the wayside. False measures of journal quality – like the infamous Impact Factor – were used to determine who gets a job and tenure and who falls out of the pipeline. The progress of science led inevitably to specialization and to the development of specialized jargon. Proliferation of expensive journals ensured that nobody but people in highest-level research institutions had access to the literature, so scientists started writing only for each other. Scientific papers became dense, but also narrowed themselves to only “this is how the world works”. The “this is new” became left out as the audience already knew this, and it became obvious that a paper would not be published if it did not produce something new, almost by definition. And the personal was so carefully excised for the purpose of seeming unbiased by human beings that it sometimes seems like the laboratory equipment did all the experiments of its own volition. So, at the close of the 20th century, we had a situation in which journalism and science, for the first time in history, completely separated from each other. Journalism covered what’s new without providing the explanation and context for new readers just joining the topic. Science covered only explanation and only to one’s peers.--Bora Zivkovic
There are many reasons sciencebloggers are more trusted than journalists covering science. First, they have the scientific expertise that journalists lack – they really know what they are talking about on the topic of their expertise and the audience understands this. Second, they link out to more, more diverse and more reliable sources. Third, being digital natives, they are not familiar with the concept of word-limits. They start writing, they explain it as it needs to be explained and when they are done explaining they end the post. Whatever length it takes to give the subject what it’s due.Finally, not being trained by j-schools, they never learned not to let their personality shine through their writing. So they gain trust by connecting to their readers – the phatic component of communication.--Bora Zivkovic
How to improve grades?
Less dating:
Over the past two decades, a spate of studies has examined the cultural beliefs that shape Asian-American parenting, and their effect on kids’ learning. They describe a style of parental involvement that results in Asian-American kids spending more time studying than other kids.
One study, for example, found that Asian-American 11th-graders studied six hours more per week than their white peers. Another found that in 2007, more than two-thirds of Asian-American high school students did homework five or more days a week, while only about 40 percent of white and Hispanic kids, and less than a third of African-American students, did so. According to other research, Asian-American kids devote less time to chores, part-time jobs and dating than other kids.
Tuesday, December 21, 2010
Michigan the only state of the union to see a decrease in population
according to CNBC, reporting a few minutes ago on the Census Bureau's population report.
Tony Trupiano says:
About a year ago, Scott Sumner talked about his birth state's struggles, writing:
More than two years ago, the WSJ Editorial Board observed that Michigan's tax policy was an issue:
Tony Trupiano says:
Michigan will discover that as a result of a depressed economy and a manufacturing industry that has been dealt a death blow over the last ten years a large percentage of Michigan’s population has relocated to other parts of the country. Michigan is most certainly to lose one Congressional seat, if not two. It also means that Michigan is also apt to lose Federal funding.
About a year ago, Scott Sumner talked about his birth state's struggles, writing:
At the other extreme is Detroit, with 15.4% unemployment. Detroit has two problems. First, heavy industry is unusually cyclical, and thus steel, autos, machinery, etc, will suffer more job losses when AD falls, even if there is no recalculation. Of course the auto industry is the main problem in Detroit. It is not true that the US auto industry is in a long term state of decline, but the Big 3/UAW auto industry is in a long term state of decline. So Detroit’s unusually high unemployment rate is due to both cyclical factors and structural (recalculation) factors.
More than two years ago, the WSJ Editorial Board observed that Michigan's tax policy was an issue:
Officials in Lansing reported this month that the state faces a revenue shortfall between $350 million and $550 million next budget year. This is a major embarrassment for Governor Jennifer Granholm, the second-term Democrat who shut down the state government last year until the Legislature approved Michigan's biggest tax hike in a generation. Her tax plan raised the state income tax rate to 4.35% from 3.9%, and increased the state's tax on gross business receipts by 22%. Ms. Granholm argued that these new taxes would raise some $1.3 billion in new revenue that could be "invested" in social spending and new businesses and lead to a Michigan renaissance.UPDATE: Looking at the states map of percentage changes, it looks like people are fleeing higher tax domiciles for lower ones, with the exceptions of California and Oregon. As far as the reapportionment tilting towards traditionally red states, as Michael Barone noted in 2008:
Not quite. Six months later one-third of the expected revenues have vanished as the state's economy continues to struggle. Income tax collections are falling behind estimates, as are property tax receipts and those from the state's transaction tax on home sales.
Michigan is now in the 18th month of a state-wide recession, and the unemployment rate of 6.9% remains far above the national rate of 5%. Ms. Granholm blames the nationwide mortgage meltdown and higher energy prices for the job losses and disappearing revenues, but this Great Lakes state is in its own unique hole. Nearby Illinois (5.4% jobless rate) and even Ohio (5.6%) are doing better.
Leon Drolet, the head of the Michigan Taxpayers Alliance, complains that "we are witnessing the Detroit-ification of Michigan." By that he means that the same high tax and spend policies that have hollowed out the Motor City are now infecting many other areas of the state.
The tax hikes have done nothing but accelerate the departures of families and businesses. Michigan ranks fourth of the 50 states in declining home values, and these days about two families leave for every family that moves in. Making matters worse is that property taxes are continuing to rise by the rate of overall inflation, while home values fall. Michigan natives grumble that the only reason more people aren't blazing a path out of the state is they can't sell their homes.
Bush would have lost in 2004 if Ohio had not gone his way; under the projected post-2010 apportionment, Bush would have won 276-to-262 if Ohio had not gone his way. The demographic trends reflected in these projections would not prevent Barack Obama from being elected this year and re-elected in 2012, but they would make it marginally more difficult. Demography, modestly, favors the Republicans, and more than modestly over the long haul.
Monday, December 20, 2010
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