Macroeconomists sure like models

When they see a new and interesting stylized fact, they instantly want to create a model to explain it. Indeed they like their models so much that they sometimes forget to carefully check whether the stylized fact is, well, a fact.

Photo link here.

Concentrated power is not rendered harmless by the good intentions of those who create it

That was Milton Friedman, and he was born 98 years tomorrow.

I should have done a Predicted Similarties List for Obama and Cheney

too.

Here's the Obama and Bush list from 2008.

Via Tom Maguire.

UPDATE: Some differences in how the recent 2 presidents throw a baseball.

Over 100 outed Journolist writers (and Obama appointees)

here. Via Glenn Reynolds.

Quotes of the day

Godel’s Theorem says that not all true things are provable. But for the most part, we’re happy just to know they’re true.--Steve Landsburg

You live longer only when you stop trying to live longer.--Atul Gawande

A doubling of garment jobs causes a 6.71 percent increase in the probability that a 5-year-old girl is in school.--Ahmed Mushfiq Mobarak

Hundreds of Afghan civilians who worked as informants for the U.S. military have been put at risk by WikiLeaks' publication of more than 90,000 classified intelligence reports which name and in many cases locate the individuals ...--Tucker Reals

Journolist founder Ezra Klein, a staffer at the Washington Post, says he “tried to be very strict” in making sure no active political operatives joined Journolist. “It’s possible I missed someone,” he explained in an email. In fact, he did.--Jonathan Strong

I’m no fan of the senator, but he showed good sense in seeking to keep his taxes low. If only he would do the same for the rest of us.--Jeff Jacoby

Between 1929 and 1933, and again between 1937-40, the wholesale price level trended steadily downward. Since 1994 the Japanese economy has experienced a deflation rate of roughly 1% a year in the GDP deflator. What do all three of these famous deflations have in common? During most of the time banks held unusually large quantities of reserves, far above normal levels. High levels of reserves (often excess reserves) is one of the most characteristic stylized facts of prolonged deflation. --Scott Sumner

How can one then argue that policy interventions worked

when, in fact, viewed in their entirety they caused the problem?

Quotes of the day

You need to know that the end is near to be able to transcend the ordinary. I have met people my age who lost their lovers to accidents and others who lost their lovers to disease over time. Without exception, the former envy the latter. We had the chance to say goodbye. Nothing tyrannizes death like acceptance of it.--unattributed

Say Henry Kravis sells $1 million of units, generating $1 million of taxable income. He pays $150,000 in federal taxes, assuming all his proceeds are long-term capital gains. Let's say half that gain -- $500,000 -- becomes deductible to KKR's corporation at a 35% rate. This saves KKR $175,000 in taxes over 15 years. Of this, $149,000 -- the aforementioned 85% -- goes to Kravis. The payments to Kravis beget further deductions for KKR, begetting further payments to Kravis, and so on. You end up with about $206,000 in payments to Kravis. Adjust for the fact that they're spread over 15 years, and they're equivalent to about $150,000 today. So the public firm would be giving Kravis tax-sharing payments about equivalent to his tax bill, assuming, as I said before, that all his profits are capital gains. (KKR declined to discuss Kravis's tax situation.) Kravis would have to pay income tax (at ordinary rates) on his tax-sharing payments, poor baby. But he'd still be getting a helluva deal on his gain, compared with what regular folks pay.--Allan Sloan

The fact that nearly 80 per cent of those [local Chinese government] projects have at least some capacity to service their debt is quite amazing.--Qu Hongbin, chief China economist at HSBC

I agree that these loans won’t pose a risk to the banking system, but that doesn’t mean that there won’t be huge losses. It just means that the losses will be covered by the household sector. For years I have been arguing that without liberalizing interest rates and pushing through governance reform, there won’t be meaningful reform in the domestic financial system. It isn’t even conceivable to me that a combination of rapid credit growth, socialized credit risk, severely repressed interest rates, and serious lack of transparency could ever have led to anything other than large-scale capital misallocation and rising debts.--Michael Pettis

A number of people ask: “Ok, let’s suppose for a minute that the UVA study is accurate, and that those on Medicaid do fare worse than the uninsured. Are you suggesting that we abolish Medicaid and do nothing about the problem of the uninsured?” No—I am suggesting that we transition to something akin to the Swiss model, whereby we offer graduated subsidies with which the poor can buy consumer-driven private insurance. Simply sending them the cash would be far more efficient than what we do now.--Avik Roy

Measured in a variety of ways, Wall Street giving to Democrats is down. Overall, five of the top 10 sources of donations to the DNC in 2008 were Wall Street firms, according to an analysis of campaign donations by the nonpartisan Center for Responsive Politics. This election season, just one financial company—the investment-management firm Capital Group Cos.—ranks in the top 10. Employees of Goldman Sachs Group Inc. donated a total of $1.1 million to the DNC in 2008, making Goldman the biggest source of campaign cash to the Democratic Party. Goldman employees have donated about $100,000 to the DNC so far in the 2010 congressional elections, according to the center's data.--Laura Meckler and Brody Mullins

Obama need not wonder about his legacy, even this early. It is already fixed, and in one word: Afghanistan. He took on what he made America’s longest war and what may turn out to be its most disastrous one.--Garry Wills

There's a very good chance that in two years, Obama is still going to be trying to explain why unemployment is above 8% and GDP is kind of anemic. If that's the case, the Republicans will hold the house and the senate at the end of 2012.--Megan McArdle

If most of our problem consisted of legacy debt, inflation would be the answer. However, since most of our problem is future unfunded liabilities, which increase with inflation, the inflation solution does not work quite so well.--Arnold Kling

I do not think we will ever know what would have happened to the economy without the fiscal stimulus and the large monetary interventions. My guess is that the overwhelming majority of economists would agree that we will never know the answers to those questions. However, in the competition for public attention, [Alan] Blinder and [Mark] Zandi have two advantages. First, they support a narrative in which government experts did the right thing, which is comforting to government experts and all who believe in them. Second, at a tactical level, their use of an esoteric computer model along with those two decimals of precision, they intimidate journalists and other laymen. I know that they think this is for a good cause. They really believe that the stimulus and TARP were good policies that got a bad rap. But in my view that does not justify this unseemly exercise in propaganda dressed up as research.--Arnold Kling

The Victorian British and the Soviet Union, the story goes, were part of a long historical continuum of arrogant conquerors that met their match in the country's xenophobic, fanatical, trigger-happy tribesmen. Given a record like that, it's obvious that the effort by the United States and its NATO allies to stabilize the shaky government in Kabul is doomed to fail. Look, failure is always a possible outcome, especially judging by the way things have been going lately. But if the United States and its allies end up messing up their part of the equation, blame it on their bad policy decisions. Don't blame it on a supersimplified version of Afghanistan's history -- especially if you prefer to overlook the details. ... I made my first visit to Afghanistan that same year. The Afghans I met were neither xenophobic nor bellicose. What they wanted most of all was peace, and they didn't trust their own leaders to bring it. "We're sick of fighting. We hate war. We want to have a free election," one grizzled -- and illiterate -- warrior told me. "And let's have the United Nations come in and make sure it's fair, so the warlords don't interfere." I heard similar views from many Afghans. Nowadays that vision sounds a bit like a dream, and it's hard to say precisely how many of his compatriots shared it for real, but I can't help recalling the sentiment. One thing is for sure: If we really want Afghans to attain the future they deserve, clinging to a fake version of their history won't help. --Christian Caryl

... the startup country could be awesome. And only the most employable folks would be allowed in at the start, so the economy would be blazing, mostly from IT jobs and light industry. Arguably, China accidentally performed a variant of this experiment with Hong Kong. Oversimplifying the history, Hong Kong was part of China and leased to the United Kingdom for 99 years, like a startup country within a country. When the lease expired, China presumably made a fortune by getting it back in a far more robust form than it could have generated within the Chinese system. A startup country designed today could, in fifty years time, become a tax-generating windfall for the parent country. And it would also test a lot of concepts for building, banking, economy, energy, and lifestyle.--Scott Adams

When my kids were babies, I thought about holding Yankees hats and Lakers hats over their heads in their crib, then pinching them until they started crying (to condition them to instinctively hate those logos/colors). Then I realized that was barbaric and probably would get me thrown in jail. Still, if your kids root for teams you hate, that means you've failed as a parent and you probably should just give the kids away and try again.--Bill Simmons

I figured out why the LeBron/Wade alliance bothers everyone beyond the irrefutable "Jordan would have wanted to beat Wade, not play with him" argument. In pickup basketball, there's an unwritten rule to keep teams relatively equal to maximize the competitiveness of the games. That's the law. If two players are noticeably better than everyone else, they don't play together, nor would they want to play together. If the two guys have any pride at all -- especially if they play similar positions -- then getting the better of each other trumps any other scenario. They want that test. Joining forces and destroying everyone else would ruin the whole point of having the game. It's like a dad kicking his young son's ass in a driveway one-on-one game. What's the point? When LeBron and Wade effectively said, "Instead of trying to whup each other, let's just crush everyone else" and "If these teams end up being uneven, we're not switching up," everyone who ever played basketball had the same reaction: "I hate guys like that."--Bill Simmons

Nothing prepares you for your first time. You’re out with someone, maybe a date, maybe just friends, everything’s fine, and then he whips it out, right in front of you — at a restaurant, on the street, anywhere. You try not to look at it, you try to look absolutely anywhere else — finally he finishes and puts it away and continues on with the conversation, just like nothing happened. Or maybe he airs it out for awhile, or even — casually — holds onto it, in case it vibrates. You know, the phone. ... Etiquette is not just about which fork to use. Or rather, it is — but now it’s fork, fork, cellphone; the vibration of which signals the end of the Enlightenment. Because it signals the end of the individual as we know it.--Peggy Nelson

So much for transparency

Dunstan Prial reports:

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings."

UPDATE: John Carney finds more troubling issues:

One of the strongest justifications for outlawing kickbacks to lead plaintiffs in class actions is that the payments seemed to be part of the class-action extortion racket, in which plaintiff’s lawyers would file class-action suits any time a company’s stock dropped. Having a ready-made set of paid-off lead plaintiffs made this task all too easy.

Don’t be so sure that the SEC’s role in the whistle-blower process is a guarantee against similar abuse. In the first place, the structure of the law allows plaintiff’s lawyers to represent the whistle-blowers—even keeping the identity of the whistle-blower secret from the government. The lawyers will then collect the whistle-blower bounty, skimming a piece for themselves in the process. No doubt lawyers are already figuring out how to alert employees or other “whistle-blowers” at companies with falling stock prices about their potential windfalls.

The SEC itself is far from immune to jumping on the same bandwagons that attract the plaintiffs’ lawyers. Think about the misbegotten cases filed against allegedly fraudulent corporations that were accused of backdating stock options. More controversially, consider the case against Goldman Sachs [GS 148.05 0.82 (+0.56%) ], which the SEC brought with much fanfare and then dropped after Goldman agreed to pay a record-breaking fine.

That’s exactly the kind of deal that could enrich a whistle-blower and his lawyers—for very little public benefit.

There at least five things which science cannot demonstrate

1. Logical truths.
2. Metaphysical truths (e.g. the existence of other minds, the external world, that the universe was not created five minutes ago with the appearance of age).
3. Ethical judgments.
4. Aesthetic judgments.
5. Science itself (e.g. the universal constancy of the speed of light).

--William Lane Craig

Quotes of the day

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.--F.A. Hayek

History is increasingly seen as nothing more than victims and villains, especially by liberals. Conservatives see the future as a sort of dystopian nightmare, at least if the residents of future worlds have the temerity to discard our value system. We have obviously achieved perfection, even though every previous generation before us was morally flawed. I don’t know whether future citizens will embrace designer babies, or cryonics, but that’s their decision, isn’t it? Our ancestors would be shocked by gay marriage, or the fact that we routinely wager on the death of our spouse, where a “win” occurs if the spouse dies. [For those who don't know, our ancestors understood that life insurance was morally revolting.]--Scott Sumner

What hard liquor, cigarettes, heroin, and crack have in common is that they're all more concentrated forms of less addictive predecessors. Most if not all the things we describe as addictive are. And the scary thing is, the process that created them is accelerating. ... But if I'm right about the acceleration of addictiveness, then this kind of lonely squirming to avoid it will increasingly be the fate of anyone who wants to get things done. We'll increasingly be defined by what we say no to.--Paul Graham

When an academic starts pushing the tenure model for anywhere outside academia, I will find their defense of its use in academia more convincing.--Megan McArdle

I was surprised to read that "White House economists believe that taxes have little effect on growth." Just a few days ago I received the June 2010 issue of the American Economic Review, the flagship journal of academic economics. The current issue contains an article by CEA Chair Christina Romer and her husband David Romer on the macroeconomic effects of tax changes. Their paper examines "all major postwar tax policy actions" and concludes that "tax increases are highly contractionary." For emphasis, the authors add that this finding is both "strongly significant" and "highly robust."--E. Frank Stephenson

... courage is only a virtue if there are moral absolutes. Yet the contributor to The Christian Delusion who wrote the chapter on secular ethics denies moral realism. And other contributors also subscribe to moral relativism or–which comes to the same thing–cultural relativism. So, in that case, why be courageous? If there‘s no such thing as objective morality, then there‘s no moral duty to be courageous–or epistemic duty to avoid wrong conclusions.--Steve Hays

For [David] Eller to pretend his cultural claims about Christianity affect the positive epistemic status a Christian may have for her beliefs, while not bothering to let his readers know about the double-edged nature of this criticism, is simply an exercise in confirmation bi-as. For the sociology of science in the latter part of the twentieth century [has] tended to suggest an unusual picture of science. This is a picture in which science is controlled entirely by human collective choices and social interests (Godfrey-Smith, 134). I would never think of devaluing science merely because of the wasteland of divergent beliefs many atheistic scientists hold to regarding the nature of science. Yet the implications of Eller‘s post are devastating to science, while this Christian defends science against those very unsettling implications. That has to sting. An unfortunate conclusion that can be inferred from the above is that Eller‘s co-writers must either accept the evisceration of their esteemed trust in science, or they can hide Eller away in the closet, ashamed of his critique of Christianity. Or a third option: they can engage in confirmation bias and laud the epistemic vice of treating opposing beliefs to a double standard.--Paul Manata

Victims of Bikini Statistics

Statistics are like a bikini. What they present is suggestive, but what they conceal is vital--Aaron Levenstein

Business Insider, Barry Ritholtz's Big Picture, and even the esteemed David Beckworth are the latest to fall prey.

The following graph looks like it captures economic stagnation.

In fact, it hides the fact that household sizes are shrinking dramatically.

Photo source here.

It seemed a fitting way to say good-bye

Todd Levin on working on the Tonight Show with Conan O'Brien.

Via Megan McArdle.

Quotes of the day

Even though I come from a family of firefighters (and one police officer), the most heroic person I’ve ever known was neither a firefighter nor a cop nor a jock: She was my mother, a homemaker who raised five kids and endured without complaint the ravages of cancer in the 1970s, with its then crude chemotherapy regimen, its painful cobalt treatments, the collateral damage of loss of hair, vitality, and lucidity. In refusing to rail against her fate or to take her pain out on others, she set an example of selfless courage and heroism I'll never forget.--William Astore

Education, especially female education, seems to reduce fertility.--Bryan Caplan

... in 1919, Einstein’s General Theory of Relativity was only a few years old, yet academics were eager to put the nightmare of World War I behind them, and show the common bond of the old adversaries. Proving the German’s theory correct was so desired that it suggests that scientists are as objective as the rest of us. The null hypothesis, set up by standard Newtonian Physics, was that there should be a 0.85 arc-second deflection in light from stars behind the sun, while Einstein predicted a 1.7 arc-second deflection. English physicist Arthur Eddington was a WorldWar I pacifist, and so had a predisposition to mend the rift between German and English academics. He made a trek to the island of Principe, off the coast of West Africa, one of the best locations for observing the eclipse. He used a series of complex calculations to extract the deflection estimate from the data, and came up with an estimate of 1.6 arc-seconds. Data from two spots in Brazil from that same eclipse were 1.98 and 0.86, but Eddington threw out the 0.86 measurements. ... Eddington died after a life of honors, his eclipse experiment his most conspicuous achievement, yet it was tendentious empirical work. Science is filled with fraud behind correct results: Mendel fudged his numbers, Pasteur was hardly fair to his critics. A great deal of science is motivated by confabulation, generating evidence for beliefs already acquired. In that sense scientists are little different than most professions, where one has ideals vs. reality. Lawyers aren't primarily interested in justice, teachers [aren't] primarily interested in children, even 'the best'. After all, unlike judges, most scientists have a rooting interest for whatever theory they are proposing, they want to be the founding father of some branch of knowledge. Those of us merely judging, meanwhile, are choosing between two choices, and as we don't have any skin in the game, we want the truth because that's what's helpful.--Eric Falkenstein

[Alvin] Roth, aided by a Harvard graduate student and a young economist at Columbia, redesigned the [New York City middle school placement] system using a version of what's known as a deferred-acceptance algorithm. Roth has used modified forms of this same algorithm to design matching systems for Boston's public school system and for placing medical school graduates with residency programs. The algorithm is most easily explained in the context of matching multiple men and women who want to marry. First, each man proposes to his first-choice woman. Women who get numerous proposals reject their least preferred suitors, but don't make a firm commitment just yet. The rejected guys make new offers, in order of their preferences, perhaps resulting in new rejections, until none of the guys is rejected or no rejected guy wants to propose to anyone else. At that point the women accept their most preferred suitor. For the men who don't get matches in the first round because they didn't list enough choices, there is another round where the men are offered a list of still-single women and they make another set of choices. Sometimes a third round is needed. Applied to the high school scenario, the men are the equivalent of students and the women are the schools. In New York it gets more complicated, because many schools have their own screening mechanisms. Roth and his team were able to weave all that complexity into one transparent, reliable system where students list up to 12 choices in order of preference. Since Roth revamped things the participation rate jumped from 66% to 93%.--Susan Adams

Like public urination, turnstile-jumping and the squeegee racket were illegal but difficult to control, and seemingly trivial compared with more serious crimes. In both cases, the New York Police Department dramatically reduced violations by publicly announcing its intent to punish offenders and then following through with intensive arrests. In a relatively short period, the combination of public communication and concentrated enforcement created a new, low-violation equilibrium without much need for serious follow-up enforcement. The credible threat of arrest made the squeegee scheme unprofitable—it soon vanished altogether—and reestablished the norm of paying the fare among subway riders. If the conventional economic theory of crime were correct, the behavior would return to its old pattern as soon as formal enforcement relaxed, but this has not occurred. Temporary, high-profile interventions have had a permanent effect.--Paul Romer

People have concerns besides simply prolonging their lives. Surveys of patients with terminal illness find that their top priorities include, in addition to avoiding suffering, being with family, having the touch of others, being mentally aware, and not becoming a burden to others. Our system of technological medical care has utterly failed to meet these needs, and the cost of this failure is measured in far more than dollars. The hard question we face, then, is not how we can afford this system’s expense. It is how we can build a health-care system that will actually help dying patients achieve what’s most important to them at the end of their lives.--Atul Gawande

Major wars aside, if the United States approached or exceeded the 90 percent [debt-to-GDP-ratio] figure, it would be a sign of a dysfunctional politics and an irresponsible citizenry. Do we have to borrow that much money? Can't we just pay for the stuff? Apparently not. ... At some sufficiently high debt-gdp ratio, it becomes a foreign policy issue and a big one. Postwar UK had a high debt to gdp ratio, and to this day it is a fine place, but that debt meant the end of England as a world power, for better or worse. The U.S. for instance used financial issues to push England around and they basically had to give up on their overseas commitments. A very high debt ratio here would mean the end of the U.S. as a global world power, again even if gdp does OK. A global power needs the option of spending a lot more, quickly, without asking for anyone's permission. Your mileage on a U.S. retreat from the global policeman role will vary, but it's the elephant in the room which hardly anyone is talking about.--Tyler Cowen

The bottom line is that we can help the economy more by laying out a credible plan to end the debt explosion.--John Taylor

Part of the challenge of creating sustainable patterns of specialization and trade can be described as a matching problem. Think of two decks of cards, one with a list of workers with specialized skills and one with a list of occupations that utilize specialize skills. If you draw two cards at random, the chances are that they will not match. The skills of the worker will not match the skills required in the occupation. In that case, the marginal product of the worker in that occupation is very low, and the worker is unemployed. The economy's calculation problem is to sort the two decks in ways that match workers to occupations in which they have value. This problem becomes more complicated with each increment of technological progress. The number of occupations has increased, because even as some occupations become obsolete, even more occupations emerge as useful. Also, the amount of human capital needed for many occupations has increased. ... A danger in the economy is that an unsustainable pattern will go unrecognized for a long time. In the recessions of the U.S. between the end of World War II and the 1980's, excess inventories were accumulated. In the most recent episode, excesses in housing construction and mortgage finance went unrecognized for a long time. ... if the old patterns of specialization and trade are not sustainable, the economy faces the Recalculation Problem. New patterns of specialization and trade need to be created. While the economy is creating new patterns even in good times, when it faces a Recalculation Problem it cannot create new patterns rapidly enough to prevent widespread unemployment.--Arnold Kling

Housing is not a free market. The money being loaned out was essentially government funds (due to FDIC insurance), and thus the government needed to regulate the use of those funds to insure that banks were not taking excessive risks. When I bought my house in 1991 you needed to put 20% down or else buy mortgage insurance. I believe that requirement was phased out during the 1990s. That was the cause of the sub-prime bubble, not easy money. Money wasn’t easy. The job of monetary policymakers is to keep NGDP growing at a low and steady rate. The job of regulators is to correct for market failures, which includes other government policies that distort economic decision-making. The regulators failed in the early 2000s, not the Fed. (Of course the Fed is one of the regulators, so they are partly to blame. When I refer to ‘the Fed’ I mean the monetary policy unit within the Fed.)--Scott Sumner

One typical way insurance tries to reach a compromise between these conflicting goals [of protecting displaced workers while retaining their incentives to find work] is to have a deductible that is paid by insured persons, such as the $500 deductible many car owners have on their automobile insurance. The trouble with practically all the state-run unemployment insurance plans is that they typically have no or a minimal deductible because they provide coverage essentially from the first week of unemployment. In addition, they usually limit coverage to a fixed number of weeks, such as 26 weeks. This is an inefficient and costly approach since practically all the unemployed can readily cover their first several weeks of unemployment from savings, spouses’ earnings, or borrowing on credit cards and in other ways. Unemployed workers usually run into financial trouble only when they have been unemployed for an extended time. An optimal unemployment insurance plan would make unemployed workers responsible for their first month or two of unemployment, and mainly spend unemployment insurance resources on the longer-term unemployed. A second insurance approach to the moral hazard problem is to require significant co-payments, so that the insured have to pay a portion of any additional losses they experience after they exhaust the deductible. American unemployment insurance plans usually do pretty well on this by only paying about half or so of the earnings the unemployed had received when they were employed. Many European plans had usually replaced most or all of the earnings of the unemployed, and covered unemployed for many years. After they learned the hard way the prediction of economic theory that this encouraged significant increases in unemployment, several countries greatly cut back both the duration and payment (i.e., replacement) rates for the unemployed. Interestingly, In Germany this was done under a center-left Social Democratic government.--Gary Becker

Is the Federal Reserve (Fed) making a similar mistake to the one it made in 1936-1937? If you recall, the Fed during this time doubled the required reserve ratio under the mistaken belief that it would reign in what appeared to be an inordinate buildup of excess reserves. The Fed was concerned these funds could lead to excessive credit growth in the future and decided to act preemptively. What the Fed failed to consider was that the unusually large buildup of excess reserves was the result of banks insuring themselves against a replay of the 1930-1933 banking panics. So when the Fed increased the reserve requirements, the banks responded by cutting down on loans to maintain their precautionary level of excess reserves. As a result, the money multiplier dropped and the money supply growth stalled ...--David Beckworth

Unlike a Facebook profile or a blog entry, you cannot craft your gaming self at leisure. At play, within a virtual world, you are constantly reacting to the people and challenges around you. You’re free from most of the conventional constraints of “live” situations, but under all kinds of other pressure – something that can mean either streams of insults, or spontaneous acts of kindness. Either way, it’s startlingly fertile ground for finding like-minded others. --Tom Chatfield

Preventative inspiration poster of the day: Love, professional fullfilment, the meaning of life even?

Source here.

Elizabeth Warren is a scholar

but fails at scholarship.

Quotes of the day

... it's hard to do a really good job on anything you don't think about in the shower. ... Turning the other cheek turns out to have selfish advantages. Someone who does you an injury hurts you twice: first by the injury itself, and second by taking up your time afterward thinking about it. If you learn to ignore injuries you can at least avoid the second half. I've found I can to some extent avoid thinking about nasty things people have done to me by telling myself: this doesn't deserve space in my head. I'm always delighted to find I've forgotten the details of disputes, because that means I hadn't been thinking about them. My wife thinks I'm more forgiving than she is, but my motives are purely selfish.--Paul Graham

Marx helped tyrants and naive revolutionaries rationalize what they wanted to do, which is why for many decades Marx was considered the greatest intellectual in history (after the fall of the USSR, this now seems absurd, but that's hindsight). So, Paul, remember not to take offense, no intellectuals convince people to choose certain policies, rather, they help people rationalize their prejudices. Just break out of your intellectual echo chamber long enough to realize that emphatic reassertion is not argument, and if fiscal stimulus was the no-brainer you thought it was, it would have clearer empirical support.--Eric Falkenstein

Hitting 600 home runs is still amazing — and for Alex Rodriguez to do it before his 35th birthday (July 27) is beyond amazing. What does this 600th home run mean, though? A-Rod has, of course, admitted to using steroids during his home run prime. So to many, his 600th home run won’t even count, won’t even exist, a record-book mirage. But even to those who have come to grips with the Selig Era and the simple fact that all the numbers in the record books are distorted by one queasy fact or another, the 600 home run number STILL feels used up. It is like someone struggling to climb to the top of Mount Kilimanjaro, reaching the peak and finding that people had already built a McDonald’s, a Home Depot and a Best Buy up there. Steroids are not the only thing that caused the home run explosion of the 1990s — I’ve long suspected that they weren’t even the biggest thing. Smaller strike zones, harder bats, body armor, smaller ballparks, weight training (not even including performance enhancers), money incentives, expansion… all these things and more pointed toward bigger power numbers. The game did not tilt… it was tilted. A lot of people wanted more home runs. And the men running baseball had to give people what they wanted. One of my favorite parts of the Ken Burns documentary — one of the things Burns does so well — is laying things out simply. Baseball was in huge trouble in the mid-90s. The strike and canceled World Series destroyed something inside baseball fans. The embarrassment of the replacement players made things even worse. It’s common thought that Cal Ripken’s streak helped reconnect fans and baseball… and it probably did for some. But I always thought that was overplayed. Attendance was stagnant, television ratings stagnant, the game felt stagnant. The common theory is that home runs — Babe Ruth’s home runs particularly — helped save baseball after the 1919 Black Sox. When players started hitting home runs at a preposterous pace after the strike, well, nobody really wanted to ask too many questions. And here we are, 15 or so years later, and the bills are coming in. The 400 Club has more than doubled since 1990. The 500 Club has 25 members… few people can name them all now. A-Rod is about to become the seventh man to hit 600 home runs. And none of it feels all that special anymore.--Joe Posnanksi

The President throws out the bath water with the bath water

When he says, about the law he just signed to protect consumers from financial abuse:

If you’ve ever applied for a credit card, a student loan or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print.

I think it also applies himself, to the law he just signed. Someone needs to write a 6 pager on protecting the President from fine print.

Oh, they did that already?

Graph from Mark Perry.

Quotes of the day

... [British Prime Minister David] Cameron’s critics missed the forest for the trees: They took note of every centrist lunge, every compassionate-conservative gesture and every touchy-feely gimmick, while failing to recognize that the Tory leader and his brain trust were putting together a more sweeping and serious blueprint for cutting and decentralizing government than we’ve seen from any Republican politician since Newt Gingrich, and maybe Ronald Reagan.--Ross Douthat

Both Karzai and the Pakistanis have been maneuvering for influence with the Taliban based on their calculations that we will not likely be around for the long haul. That is why the Pakistani intelligence service has restricted the movements of Mullah Omar and others in their country and why Karzai has been negotiating w/ Taliban leaders trying to form a coalition that can declare some sort of peace. The Obama administration seems to have tacitly or explicitly approved this approach as it gives them a way to begin drawing down our forces in advance of the reelection campaign of 2012. There was a fair amount of talk from the British prime Minister and Obama yesterday about their commitment to the long haul in Afghanistan, but I don't think too many folks are really buying that. The clock is ticking and we are in a battle to gain as much ground as possible so that whatever accommodations are eventually made are as advantageous as possible.--Uncle Jimbo

Probability of Repulican House majority up 20% over the last 6 months

from 38% to 58%, according to the Intrade contract.

Media bias

front and center.

Via Tom Maguire.

One reason why I'm not a Democrat

They remind me of Republicans.

Chart of the day: Unemployment Duration

Source here.

UPDATE: Scott Sumner explains a reason why, and it will surprise you if you are subscribing to stimulus advocates.

RUNNER UP CHART here.

Quotes of the day

Large funds are strong at raising capital and utilizing connections, but not strong at nurturing start up enterprises.--Mark Humphery-Jenner

When such uneven distribution of wealth is entrenched in a society, a serious labor-capital (or, in the European context, a left-right) split emerges. This is why Greece is politically similar to Latin American countries, which face the same infrastructural and capital problems, right down to periods of military rule and an ongoing and vicious labor-capital split. ... The core of Greece is the Aegean Sea — the actual water, not the coastland — which allows these three critical areas of Greece to be connected for trade, defense and communication. Control of the Aegean also gives Greece the additional benefit of influencing trade between the Black Sea and the Mediterranean. Without control of the Aegean, there simply is no Greece.--STRATFOR

Now, not everyone is as moralistic as I am on this point (as I am not as moralistic as some others on some other points), but most people are not psychopaths, so most people are going to feel at least a little squeamish about taking money nonconsensually from others. Some might be willing to overcome that squeamishness in exchange for a reasonable share of the bounty (but not for a smaller share). That doesn’t mean they’re irrational. Quite the contrary. It means everyone has his price. Just like your Principles of Economics teacher taught you.--Steve Landsburg

The Bay State has blown nearly $500,000 in taxpayer dough on road signs promoting President Obama’s stimulus projects - nearly 10 percent of the total nationwide - in a campaign Republicans are ripping as wasteful partisan propaganda in tough election year, a Herald review shows.--Hillary Chabot, Katie Carlin and Joe Dwinell

The standard Keynesian argument against cutting extended [unemployment insurance-UI] benefits is that it would reduce inflation expectations, and hence [aggregate demand-AD] would fall. Any job-creating effects from lower wages would be swamped by the deflationary impact of falling prices. But if the economy is at the zero lower inflation bound, then cutting UI benefits does not reduce inflation. ... Lower UI benefits will tend to shift the [short run aggregate supply] curve to the right. Normally this would lower inflation. But if we are already at the zero inflation bound, then the Fed will react to this policy shift by moving the AD curve to the right, in order to prevent prices from falling. In that case we are in a classical world, where less UI and lower minimum wage rates will lower both nominal and real wage rates, and also boost employment.--Scott Sumner

... the patience of the bond markets is surely not boundless (and say what you like about kowtowing to the markets, if we’d like them to lend us money we have good reason to care whether they are willing to lend it). And there already is an awful lot of stimulus spending going on right now, so it’s not absurd to suggest we could get by with less as the economy bounces back. I realise that I am sitting on the fence here, but it’s part of my new maxim, which is never to stand in the middle of a fight between Paul Krugman and Niall Ferguson.--Tim Harford

Okay, if Paul Krugman is going to keep on writing the same column twice a week every week forever, then I am going to keeping on objecting to it forever, though not, I promise, twice every week. ... Sometimes a caramel macchiato is worth the cost and sometimes it’s not. Sometimes an unemployment benefit is worth the cost and sometimes it’s not. We have useful ways of thinking about these things. Some people say: “You know, that macchiato is expensive but it’s worth it.” Others say: “I don’t think that’s a very wise expenditure right now.” Paul Krugman says: “AHA! So a caramel macchiato is unaffordable, but you still haven’t visited the ATM!” And I say: How’s that again?--Steve Landsburg

Money costs too much.--Ross Macdonald

When it comes to having faith in experts, I yield to no one. I have tons of faith in experts. I just lack faith in experts who require the power of the state standing behind their expertise. Bill Joy's Law of Management says that "No matter who you are, most of the smartest people work for someone else." He formulated that law to apply to business. However, it also applies to government.--Arnold Kling

Andy Grove, former entrepreneur and head of Intel, has gone over to the dark side. Once the greatest Jedi in all of the Republic of Entrepreneurship, he's become a Sith Lord, calling for state-planned investments at big companies.--Tim Kane

The American people want judges who impartially follow the text of the Constitution. They reject judges who use their power to impose their own political views — liberal or conservative — on the nation. Throughout her career, Ms. Kagan has placed her politics above the law.--Jeff Sessions

[Elena Kagan's] own confirmation hearings in late June were a Galilean moment. How much of her 1995 statement would she recant? Almost all of it, it turned out. ... It would be a mistake, as I said, to force nominees to state their voting intentions on particular concrete cases. But they should be required to discuss the larger issues of constitutional philosophy that I have mentioned: to provide a general account of how they propose to interpret and apply the grand but abstract clauses of the Constitution. This account might include, for instance, stating a general definition of what equal citizenship requires, what they take the purpose of the First Amendment’s free speech protection to be, and whether they are drawn to a majority-rule conception of democracy or a conception closer to that Justice Breyer defended in his recent book, Active Liberty.5 Skillful nominees can answer such questions without forecasting their own future votes in particular cases. In that way they can educate the public in the political complexities of constitutional law without compromising their protection of individual and perhaps unpopular constitutional rights. --Ronald Dworkin

As Justice Clarence Thomas wrote in a related concurring opinion last year, digital technology has actually widened the amount of broadcast spectrum available today, undermining the earlier notion that scarce slices of the airwaves justified stricter free-speech rules for broadcasters. He has made it clear he now favors removing all content regulations on broadcasters. Though we are not used to agreeing with him, we hope his philosophy prevails when the Second Circuit’s decision eventually comes back to the Supreme Court.--NY Times Editorial Board

If nothing else the new Espenshade/Radford study helps to document what knowledgeable observers have long known: "diversity" at competitive colleges today involves a politically engineered stew of different groups. drawn from the ingredients selected by reigning campus ideology. Since that ideology is mainly dictated by the Left, it is no surprise that the diversity achieved is what the larger American landscape looks like when it is viewed through a leftist lens. I suggest a different approach: elite colleges should get out of the diversity business altogether and focus on enrolling students who are the most academically talented and the most eager to learn.--Russell K. Nieli

Within all ethnic groups, wealthier parents were more likely to have autistic children, and the pattern held for undiagnosed autistic children as well. Neuroskeptic hypothesizes that paternal age may be partially responsible for the disparity. --Freakonomics

The latest in government conflict-of-interest perks

John Emshwiller reports:

Countrywide Financial Corp.'s controversial "VIP" mortgage program made 153 loans to employees of Fannie Mae, the giant federally backed financial institution that helped fuel Countrywide's growth, according to a letter released Tuesday by Rep. Darrell Issa.

Another 20 such VIP loans, which often provided mortgages on terms more favorable than those available to the general public, went to employees of Freddie Mac, another big government-backed buyer of mortgage loans, the Issa letter said.

While it has been reported that VIP loans went to some top Fannie Mae officials, the latest information indicates that the activity was more widespread.

Transparency is the most powerful weapon against misuse

What do scientists have to hide?

Do what I say, not what I do

Unions hire non-union members to picket for them.

Quotes of the day

Uh-oh. I didn't know conversation had rules.--75% of Scott Adams' readers

I am a democrat [proponent of democracy] because I believe in the Fall of Man. I think most people are democrats for the opposite reason. A great deal of democratic enthusiasm descends from the ideas of people like Rousseau, who believed in democracy because they thought mankind so wise and good that every one deserved a share in the government. The danger of defending democracy on those grounds is that they’re not true. . . . I find that they’re not true without looking further than myself. I don’t deserve a share in governing a hen-roost. Much less a nation. . . . The real reason for democracy is just the reverse. Mankind is so fallen that no man can be trusted with unchecked power over his fellows. Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters.--C.S. Lewis

The bottom line is these models are not useful in the real world, Markowitz's focus--as opposed to his big idea--has been a distraction, irrelevant. I've been to private wealth manager conferences, those people who daily deal with customers who have more than $5MM in wealth. They don't know much math and don't care too much to learn more, seeing little need for it. They do know a lot about taxes, the law, and communication skills. It simply hasn't been the case that investing is highly influenced by "scientific precision" of these financial founding fathers, because the main issues--what asset classes to invest in, what managers to choose within these classes--remains a very qualitative affair. Deviations from the consensus at any level usually involve a qualitative story. As they say, in theory, theory and practice are the same; in practice, they are not. --Eric Falkenstein

No aspect of history seems to repeat itself quite as regularly as financial history. The written history of financial crises dates back at least as far back as the reign of Tiberius, when we have very good accounts of Rome’s 33 AD real estate crisis. No one reading about that particular crisis will find any of it strange or unfamiliar – least of all the 100-million-sesterces interest-free loan the emperor had to provide (without even having read Bagehot) in order to end the panic. So although I am not smart enough to tell you who will or won’t default (I have my suspicions however), based on my historical reading and experiences, I think there are two statements that I can make with confidence. First, we have only begun the period of sovereign default. ... The second statement I think I can make with some confidence is that there is no threshold debt level that indicates a country is in trouble.--Michael Pettis

It would be easy for Europeans to shrug off America's Europhobic generalizations and mischaracterizations if they were exclusive to would-be-intellectual neoconservatives, Bible Belt evangelists, and provincial Midwest xenophobes. But ever since the European Union dropped the ball in the Balkans in the mid-1990s, a potent mix of influential American thinkers, policymakers, and commentators have given anti-Europeanism a new respectability that cannot be dismissed out of hand. On the major issues that preoccupy Americans -- defense, security, terrorism, intervention, free trade, sovereignty, and nationalism -- the argument that Europe has lost its way has gained in influence. And as a debt-laden European Union stares at the fiscal abyss, one can almost feel the schadenfreude emanating from across the pond.--Simon Tisdall

The most amazing part of the game, though, was watching my friend and the way his entire opinion of Dean Smith, like a time lapse photograph, sharpened into focus. By the end of the game, my buddy could not stop talking about the genius of Dean Smith. North Carolina won, of course, and the entire car ride home my friend babbled about what he had seen. Did you see how he countered that offense? Did you see how he cut down that three-point shooter? Did you see how he had them attack that zone? Did you see the way. … The trick, they say, isn’t doing something great. The trick, they say, is doing it again. This is why I have always loved Toy Story II more than Toy Story I. The first Toy Story was brilliant and revolutionary and a landmark — no one had ever done a computer animated movie like it before. But the second Toy Story was true greatness … it was a little bit funnier, a little bit more touching (Jessie’s song is one of the great moments in recent movie history), and — more than anything — it was second. The first is inspiration. The second belongs to the power of resolve. Great second albums, great second seasons, great second books just impress me more than debuts. Dean Smith’s teams did it again and again and again, so often that it seemed routine, so brilliantly that years with Final Four losses somehow felt like disappointment. ... North Carolina shot 50% year after year after year. But the team changed subtly every single year. North Carolina won before the shot clock. North Carolina won after the shot clock. North Carolina won before the three-point line and after.--Joe Posnanski

Syn-pathetic short

If there was a way to short Obama, I would.--Hugh Hendry

See Hugh spank down Joe Stiglitz here, starting around the 2 minute mark.

Popularity doesn't really matter

The President can sleep easier. Ahem.

Source here.

If it's true that a person's life is a sermon

this life is the best sermon I've ever heard.

Attractive girl not impressed by hot computer skills

Via Gregory White.

Quotes of the day

What will happen next? We have no idea.--Greenlight Capital

... life works best when we defend love. This means we defend the innocent, we defend brotherhood, we defend romantic love, and we identify and defend that which is pure.--Donald Miller

I shall pursue either with the best of my ability, but I cannot do both:
1.) To train an army of uniformed British clerks in Spain for the benefit of the accountants and copy-boys in London or, perchance…
2.) To see to it the forces of Napoleon are driven out of Spain.
Your most obedient servant, Wellington

The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.--Dana Priest and William Arkin

Slightly better planning by the terrorists could have multiplied the deaths by a factor of 10. The next big attack could easily be bigger by a factor of 100. And if you think Americans "overreacted" the first time, wait and see what they'll support the next time around. Liberals and libertarians who impede decisive action now are probably paving the way for worse things to come - a downward spiral that makes World War I look benign by comparison. I wish it weren't so, but that's the sad world we live in.--Bryan Caplan, channeling a conservative missionary

When government "solves" dubious problems by dubious means, abolition - not moderation - is the sober solution. And the burden of proof shouldn't fall on those who oppose the status quo, but on those who deprive their fellow human beings of their liberty.--Bryan Caplan, channeling a libertarian missionary

... surgical patients on Medicaid are 13% more likely to die than those with no insurance at all, and 97% more likely to die than those with private insurance.--Avik Roy

Purchasing green products may license indulgence in self-interested and unethical behaviors.--Nina Mazar

I’ve long thought that Tiger Woods (unlike many great athletes) does not feed off of being UNDERESTIMATED, but quite the opposite — he feeds off of being OVERESTIMATED.--Joe Posnanski

What is to stop the Fed from cutting NGDP in half, producing 10% annual deflation and 25% unemployment? They did it once before. You say the Congressional mandate wouldn’t allow the Fed to do that? Then precisely explain to me why the Fed is allowed do what they are currently doing.--Scott Sumner

The White House is claiming that the so-called stimulus created between 2.5 million and 3.6 million jobs even though total employment has dropped by more than 2.3 million since Obama took office. The Administration justifies this legerdemain by asserting that the economy actually would have lost about 5 million jobs without the new government spending. I’ve decided to adopt this clever strategy to spice up my social life. Next time I see my buddies, I’m going to claim that I enjoyed a week of debauchery with the Victoria’s Secret models. And if any of them are rude enough to point out that I’m lying, I’ll simply explain that I started with an assumption of spending -7 nights with the supermodels. And since I actually spent zero nights with them, that means a net of +7. Some of you may be wondering whether it makes sense to begin with an assumption of “-7 nights,” but I figure that’s okay since Keynesians begin with the assumption that you can increase your prosperity by transferring money from your left pocket to your right pocket.--Dan Mitchell

"Power tends to corrupt, and absolute power corrupts absolutely”. This famous dictum of Lord Acton is as relevant today as it was when stated in 1887. It applies to the private sector, such as private monopolies, as well as the public sector, but this insight has become much more important in the public sector since he wrote because of the large expansion of governmental powers during the past 70 years. I would only add to Acton’s dictum that discretionary power is even more corrupting than the power embodied in regulations. The most dangerous trend in presidential power has been the growth in presidential willingness to take many discretionary actions that not only have little basis in law, but also frequently cause great harm to the economy and the society at large. The harm consists of both the direct damages from the actions, and the often large but indirect cost from the increased uncertainty and fear about the political environment faced by business, unions, and other groups. ... It is still too early to evaluate the long-term harm from the president’s use of excessive authority against BP. However, the general anti-business tone of the current Congress and presidency that is reflected not only in various discretionary acts by the president, but also in proposed and actual legislation, such as the health care law, controls over executive pay, and the Dodd-Frank bill, are already slowing down the recovery from the financial crisis and recession. ... Unemployment has remained sluggishly high in part because both small and large companies have been reluctant to take on additional employees in an uncertain and threatening environment. Perhaps that is good politics, but the use of presidential and congressional powers against business is surely not good economics.--Gary Becker

... part of me worries that the the much-vaunted flexibility of the U.S. labor market is a thing of the past. Robert Fogel tells us that the three long-term superior goods are leisure, health care, and education. Obviously, an increase in leisure does not increase employment, although it certainly creates opportunities in complementary goods and services. But health care and education in the U.S. are arguably the most cartelized labor markets in the world. How many entrepreneurial ideas in those fields are rendered implausible by credentialing issues? If you want your innovative school to draw customers, you have to get accredited--not to mention dealing with the fact that your competition gets public funds and you do not. Your innovative health care delivery process will run afoul of medical license and practice laws. We probably could be retraining lots of unemployed workers to serve the education and health care industries in productive ways. But the credentials bottleneck is very restrictive.--Arnold Kling

Possibly Mr. Kelley regrets that the homicide rate in modern society is far lower – as much as 90 percent lower – than in pre-modern societies? Perchance he laments modernity’s liberation of women from the oppressive dominance of men? Maybe he finds fault with modern humans’ greater skepticism of tales of witches and sentient volcanoes? Or perhaps Mr. Kelley is upset simply because modernity has eradicated slavery? Being only 26 years old in modern society, Mr. Kelley has many decades left to reject his fashionable romantic nonsense about a past Golden Age. Were he born just a few generations earlier, however, not only would he have been unable to earn a living as an artist, his own stint in humanity would have been much shorter.--Don Boudreaux

Every few days at The Washington Post, staffers get a notice like this: "Please welcome Dylan Feldman-Suarez, who will be joining the fact-integration team as a multiplatform idea triage specialist, reporting to the deputy director of word-flow management and video branding strategy. Dylan comes to us from the social media utilization division of Sikorsky Helicopters." Call me a grumpy old codger, but I liked the old way better. For one thing, I used to have at least a rudimentary idea of how a newspaper got produced: On deadline, drunks with cigars wrote stories that were edited by constipated but knowledgeable people, then printed on paper by enormous machines operated by people with stupid hats and dirty faces. ... I basically like "comments," though they can seem a little jarring: spit-flecked rants that are appended to a product that at least tries for a measure of objectivity and dignity. It's as though when you order a sirloin steak, it comes with a side of maggots.--Gene Weingarten

And so you come, at the end of your running and rending of flesh, to faith, which long ago came to you. It is weight and it is light and it is knowing. It is belief in the midst of unbelief, quiet truth uttered after lies. It is waiting, it is silent prayer. It is whispered thanks for the way your child sighs in his sleep, and for wind that soughs the trees. It is knowing you are unforgotten. It is what bears you homeward.--Tony Woodlief

I really like this "koala bear on the third rail"

Quotes of the day

... as the Economist reports in a feature titled "The 70-30 Nation," the Pew Research Center asked respondents whether they were better off in a free market rather than a socialist economy "even though there may be severe ups and downs from time to time." Seventy percent said yes. So why are the 30% in charge of the 70%? According to American Enterprise Institute President Arthur Brooks, the "game changer" was the economic crisis. As he writes in his book "The Battle," "the opportunity to expand the 30 percent coalition was not the Democratic sweep in 2008. It was the financial crisis of 2008-2009, which was used as a tool to attack the free enterprise system ..."--Gregg Sherill

... if you live long enough you'll see everything, including Alan Greenspan getting religion on the federal deficit.--Pete Davis

If gallons-per-mile laws don’t induce people to choose different vehicles, then we need higher gas taxes. If telling people how much electricity their neighbors use doesn’t cause them to turn out the lights, then we need a carbon tax. To be fair, these cases may involve genuine externalities -- which are recognized as a problem in traditional economics -- rather than the “internalities” of behavioral economics. But Loewenstein and Ubel don’t mention that distinction. The behavioral goals of policy are taken as given; only the means get scrutiny. In our first paper on paternalist slopes, Mario Rizzo and I warned about precisely this kind of process. When a policy is enacted to achieve a specific goal and then fails to achieve it, further policies are justified on grounds of achieving the goal that “we” have already agreed upon. In Loewenstein and Ubel’s op-ed, I believe our prediction is vindicated.--Glen Whitman

I have a warning for Republicans: Don't underestimate Barack Obama. Consider what he has already achieved. Obamacare alone makes his presidency historic. It has irrevocably changed one-sixth of the economy, put the country inexorably on the road to national health care and, as acknowledged by Senate Finance Committee Chairman Max Baucus but few others, begun one of the most massive wealth redistributions in U.S. history. Second, there is major financial reform, which passed Congress on Thursday. Economists argue whether it will prevent meltdowns and bailouts as promised. But there is no argument that it will give the government unprecedented power in the financial marketplace. Its 2,300 pages will create at least 243 new regulations that will affect not only, as many assume, the big banks but just about everyone, including, as noted in one summary (the Wall Street Journal), "storefront check cashiers, city governments, small manufacturers, home buyers and credit bureaus." Third is the near $1 trillion stimulus, the largest spending bill in U.S. history. And that's not even counting nationalizing the student loan program, regulating carbon emissions by Environmental Protection Agency fiat, and still-fitful attempts to pass cap-and-trade through Congress. But Obama's most far-reaching accomplishment is his structural alteration of the U.S. budget. The stimulus, the vast expansion of domestic spending, the creation of ruinous deficits as far as the eye can see are not easily reversed. These are not mere temporary countercyclical measures. They are structural deficits because, as everyone from Obama on down admits, the real money is in entitlements, most specifically Medicare and Medicaid. But Obamacare freezes these out as a source of debt reduction. Obamacare's $500 billion in Medicare cuts and $600 billion in tax increases are siphoned away for a new entitlement -- and no longer available for deficit reduction. The result? There just isn't enough to cut elsewhere to prevent national insolvency. That will require massive tax increases -- most likely a European-style value-added tax. Just as President Ronald Reagan cut taxes to starve the federal government and prevent massive growth in spending, Obama's wild spending -- and quarantining health-care costs from providing possible relief -- will necessitate huge tax increases.--Charles Krauthammer

The risk to Goldman was that more of its dirty laundry would be exposed. As we learned David Viniar’s testimony before the Financial Crisis Inquiry Commission, the company remains in lockdown mode. And once again, the S.E.C. shows little appetite for digging deeper, especially since its new COO of the Enforcement Division is a 30-year-old kid from Goldman.--David Fiderer

And what [Apple] did was provide information. They told us about their own investigations, data from AT&T and so on. Pretty much all of the information is verifiable and the verification process will be public. But not to admit fault was no longer an option for Apple. And not to be ahead of the game — to some extent — on data provision was not an option for them. The new media has brought with it, the end of stealth and patience as a business strategy in the face of a quality issue. But what is interesting is that their competitors are now on the back foot. They were silent and now Apple has challenged them with their own antenna issues that others will verify. In the past month, they could have come out with this first and preempted Apple but they did not. And what is more, I reckon iPhone cases sell more than other smart phones. I’ve never see a Blackberry with a case. What bodes for them now? I think a bit of ‘raising rivals costs’ has occurred.--Joshua Gans

... there is a complex issue of the allocation of space as well as the queuing problem in bathrooms. From experience, we know that women have to queue more than men and so incur waiting costs. These waiting costs are different from those incurred by the men outside waiting for the women as we already have done our business; for instance, men could avail themselves of this iPhone app while they wait. A straight economics perspective would suggest that there is an imbalance in the allocation of facilities between men and women and Banzhaf’s mission is to restore some fairness. Now it turns out that the issue of fairness is complex here. First of all, Banzhaf cites research (and by the way, this is not Banzhaf’s research or mine for that matter — and for those who are surprised that I am stressing this see here and here) that women, when they actually get to a stall, take about twice as long as men. Now it is pretty clear that this argument is unfair because it lumps individual behaviour with a group stereotype. You would not want to look at averages but at individual distributions otherwise what you are doing is profiling. The point is that, from a fairness perspective, a woman should not have wait longer than a man just because she is stuck in a line behind slow people. That said, it does raise the issue of what type of tax we should put on the externality caused by slow people.--Joshua Gans

I was an angry young man. We were all angry. But we had a job to do, and we did it. My personal thoughts were that I knew things would get better, and I’m glad to say that I’m here to see it.--Vernon Baker, only living black Congressional Medal of Honor winner

Helicopter drop of cash: Paul Krugman can't fool all of the people

all of the time.

Quotes of the day

Perhaps when you acknowledge the importance of your own history, you are then more likely to transcend it.--William Easterly

For single male investment bankers, there will be a good male-female ratio for them.--Tami Kessleman

With the bases loaded and no outs Ichiro isn’t trying to hit a home run. He isn’t even trying necessarily to get a hit. Ichiro gets himself in a 1-2 hole and plays into the weakness of a big strong American power pitcher. Schilling is thinking high heat. Ichiro eats it up and sends the ball into deep left field. The at-bat results in an out, but more importantly, it results in a run scored. 1-0 Japanese All-Stars over Americans. Investing is no different. It is a game of repetition where hundreds of small actions result in one larger result. But most importantly, it is a game of risk management. It is not the home run hitter who wins in the long-run. Rather, it is that strategist who devises the best long-term plan who ultimately wins. While hitting home runs is sexy it is rarely a recipe for success in the investment world. Aim high, but play small. Over time, good risk management and patience wins. Power is no substitute for precision and patience.--The Pragmatic Capitalist

Mr. Dimon earned that distinction by playing as much defense as offense during the housing boom, which insulated JPMorgan more than most when the boom went bust. Then, when the bust became a full-blown financial crisis, Mr. Dimon went hunting for bargains, significantly expanding his position in investment and retail banking while others were shrinking. Now, those efforts are paying off. Even with a slowdown in trading, analysts are forecasting a profit of 70 cents a share when JPMorgan reports its second-quarter earnings on Thursday, about the same as a year ago. At age 54, Mr. Dimon has only begun trying to build the kind of global banking empire he initially set out to create with Mr. Weill at Citigroup. While JPMorgan’s share price fared better than most of the banking sector through the turbulence of the last few years, at around $40.35, it remains roughly where it was when Mr. Dimon took over as chief executive in December 2005. And analysts point out that while JPMorgan’s overall operation is in better shape than most, the bank does not enjoy a top position in any single business.--Eric Dash

Chart of the day

Source here, via Connie Loizos.

Quotes of the day

What I want to talk to you about today is the difference between gifts and choices. Cleverness is a gift, kindness is a choice. Gifts are easy -- they're given after all. Choices can be hard. You can seduce yourself with your gifts if you're not careful, and if you do, it'll probably be to the detriment of your choices.--Jeff Bezos

Women must be aware of the signals they send out, aware that, at three in the morning, with that flirting, they have created expectations. If they fail to fulfill those expectations, they can be in trouble. They could be out with a Ted Bundy or a Jeffrey Dahmer. A woman cannot go on a date, have a bunch of drinks and go back to some guy's dorm room or apartment and then, when he jumps on her, cry date rape. Most people aren't sure what's going to happen on a first date. Given that ambiguity, every woman must be totally aware at every moment that she is responsible for every choice she makes.--Camille Paglia

We're supposed to celebrate diversity, but not notice it.--Steve Sailer

The kind of person that is prone to systematize and fit things together, like me, is wired dangerously to begin to idolize the system.--John Piper

Just as the bush fire breaks out in different parts of the world at different times, so it leaps from technology to technology. Today, as during the printing revolution of 500 years ago, communication is aflame with increasing returns, but transport is spluttering with diminishing returns. A greater and greater amount of effort is needed to squeeze the next few miles per gallon out of vehicles of any kind, whereas each additional tranche of megabits comes more cheaply. But the greatest impact of an increasing-return wave comes long after the technology is invented. It comes when the technology is democratized. Gutenberg’s printing press took decades to generate the Reformation. Today’s container ships go not much faster than a 19th-century steamship, and today’s Internet sends each pulse little quicker than a 19th-century telegraph—but everybody is using them, not just the rich. Jets travel at the same speeds they did in the 1970s, but budget airlines are new. ... It is the ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world. Innovators are in the business of sharing. It is the most important thing they do, for unless they share their innovation it can have no benefit for them or for anybody else. And the one activity that got much easier to do after about 1800, and has gotten dramatically easier recently, is sharing. ... The secret of the modern world is its gigantic interconnectedness. Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the Internet. --Matt Ridley

You might recall that I view NGDP growth expectations as the only sensible indicator of the stance of monetary policy. All other monetary policy indicators (such as r and M) are profoundly unreliable. If you follow my logic, you might begin to understand why I view the entire fiscal multiplier debate as being about as meaningful as the question of how many angels can dance on the head of a pin. The question is not whether fiscal stimulus can change RGDP, it is whether fiscal stimulus can trigger monetary stimulus.--Scott Sumner

... the idea that Beijing can and might exercise the “nuclear option” is almost total nonsense. This cannot and will not happen. In fact the real threat to the US economy is not the dumping of USG bonds. On the contrary, in the next two years the US markets are likely to be swamped by a tsunami of foreign capital, and this will have deleterious effects on the US trade deficit, debt levels, and employment.--Michael Pettis

... firms holding more cash than expected have superior investment returns.--Zane Swanson and Richard Alltizer

It’s not enough to distrust BP, or any large corporation. These days, you have to know how they work, the ins and outs of each industry, and the secret heart, secret ethos that governs the spiritless movement of each through our stressed history. I’m here to tell you, BP doesn’t intend to just walk away from this beast, this monster, empty-handed. They will be lured back to it again and again.--Rick Bass

It’s like somebody drops a depth charge onto a submarine, and you hear a big explosion, but you don’t know what’s happening. Like, a little while later bodies start to bob up? We’re waiting for the bodies to bob up.--Anonymous hedge fund manager

Many authors have testified to the goalkeeper’s feelings of exposure and of rising above paralysis. Not only Camus, but Vladimir Nabokov, Yevgeny Yevtushenko, Henry de Montherlant, Evelyn Waugh and Egyptian author Mustafa Badawi were goalkeepers, either in their youth or, like Camus, at amateur level.--John Turnbull

[George Steinbrenner] ran the team the way the average fan might, if they were suddenly handed the reins of their favorite franchise — with his heart on his sleeve, his foot in his mouth, and his knee jerking with every change of fortune on the field.--Ross Douthat

Buck O’Neil, the great Negro Leagues spokesman, would not tolerate anyone insulting George Steinbrenner in his presence. To him, Steinbrenner was a great man who had spent millions to support the Grambling baseball team. To Buck, a lot of people talked about doing the right things. But, Buck said, George Steinbrenner really helped people. There are countless stories like that, stories of kindness that Steinbrenner simply did not want reported. And there are countless other stories about Steinbrenner’s small cruelties and broken promises and psychological torture. He won and lost. He thrived and failed. He inspired and infuriated. His personality was impossibly big and impossible small. Two obituaries. Even two may not be enough for the sports titan of our time.--Joe Posnanski

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