Monday, February 28, 2011

Quotes of the day

The high unemployment we are experiencing now is due to low private investment rather than low government spending. By reducing some uncertainty and the threats of exploding debt, the House spending proposal will encourage private investment.--John Taylor

It's rather amazing that so much money can disappear like that, but given the Department of Education spends $60B and the CIA spends $28B on nothing I am aware of, I guess one should never underestimate the ability of a bureaucracy to spend.--Eric Falkenstein

The whole government is a Ponzi scheme.--Bernie Madoff

Today's taxpayers contribute money that is funneled to today's Social Security recipients, and hope that tomorrow's taxpayers will put in enough money to fund their retirements. Something similar is true of government finance in general: Those who buy Treasury securities and municipal bonds do so on the assumption that future taxpayers (and bond investors) will keep pouring in enough money to allow governments to make good on their commitments.--Justin Fox, in 2008

Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain. Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War–remains alive and effective. We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.--Warren Buffett

Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford. ... The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire. Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people--Warren Buffett

... attending a college with higher SAT scores clearly lowered the wages of women 17-26 years after starting college (in 1976) — a school with a 100-point higher average SAT score reduced earnings by about 6-7%! The two estimates there are significant at ~0.01% level! (The other three, for other periods after starting college, are significant at the 5% level.) One obvious explanation is that women at more elite colleges married richer classmate men, and so felt less need to earn money themselves. Why don’t the study’s authors want us to hear about that?--Robin Hanson

The benefit-cost evaluation of any suggested widespread [medical] screening would depend on the net effect of the factors I discussed. First of all, benefits depend on the size of the gain in treatment from early detection of a disease or other medical problems. This gain has to be adjusted for the probability of finding a serious problem since the lower that probability, the less the expected gain from extensive screening. Costs start with the cost of the methods used to screen, including the value of the time and inconvenience of individuals being screened. The likelihood of various side effects from these methods also must be weighed. The fear engendered by false positives can be important, although that has to be balanced against the peace of mind that comes from getting (true) negative results. Preventive care is often considered the gold standard of good medical practice. It is easy to get both doctors and patients to agree when either the government (i.e., taxpayers) or insurance companies (i.e., others who are insured) pay the vast majority of the costs. A rethinking of this standard is warranted, and such a rethinking would be encouraged if individuals paid a much larger fraction of their out of pocket medical expenses.--Gary Becker

The world is filled up to groaning with untruths. They hook themselves into our flesh and hearts, tugging us in wrong directions, distorting us. We learn hunger for what does not fill, thirst for what does not slake, longing for what brings no comfort. We are taught that none of us is beautiful. We come to feel we do not belong. We come to believe that home is a house, and love a feeling. The world overflows with untruth, and our children are tempted to drink from this arid fountain every day.--Tony Woodlief

Intrade Oscar prediction roundup

Back in December, I posted a snapshot of Academy Awards predictions. At the time, I couldn't find a comparable prediction site, and while I meant to look some more in January, I was just too busy with other priorities. These results aren't nearly as interesting unless benchmarked or in competition with another popular source.

The Intrade futures pricing back in December predicted the winners of the Best Actor and Best Actress awards. While they missed on Best Picture and Best Director, February prices for The King's Speech were quite predictive, trading above 80% all month.

Intrade traders missed Tom Hooper's win, as his February prices traded above 50% before dipping back into the 30s, while David Fincher (director of The Social Network) traded in the 40s before popping back up around 60%.

Monday, February 21, 2011

Heading out of town with the family

Will resume blogging at the end of February.

Quotes of the day

So tightening legal gun ownership will do little to reduce the number of guns in the hands of criminals and unstable individuals. Indeed, it could increase the number held by would-be or actual criminals since the supply of guns available in the illegal market would increase, at least initially, as some of the guns that are pushed out of the legal market by more stringent controls would migrate to the illegal sector. While some criminals may decide they no longer need guns since victims would be less likely to have them, others who would not have used guns before might now decide that guns would give them a greater advantage in attempted robberies. The most effective way to reduce the number of guns in the hands of criminals without reducing the number of guns legally owned is to punish persons who own guns illegally and those who use guns when committing crimes. Many jurisdictions already punish more heavily individuals who use guns while committing crimes, but it may be necessary to make that additional punishment more severe. The expectation that punishments will be severe to apprehended criminals who had used guns in their crimes will induce some criminals either to use less lethal weapons, or to go out of the criminal business entirely.--Gary Becker

The lethal blow that the Internet has helped to deliver to the Mubarak regime is likely to push fellow tyrants to catch up on the latest developments in Silicon Valley and learn the ropes of online propaganda. Take the Khaled Said incident. Although the two police officers suspected of beating up Mr. Said were eventually arrested, the Egyptian government ignored the anger of their netizens for far too long. That anger subsided, but it never went away; the turn of events in Tunisia helped to reinvigorate it. Compare Egypt's experience to a similar case in China, where in 2009 Li Qiaoming, a 24-year-old peasant detained for illegal logging, was soon reported dead. The police told Mr. Li's parents, implausibly, that he had hit his head on a wall while playing a game of hide-and-seek with fellow inmates. The incident quickly generated almost 100,000 comments on just one popular Chinese blogging site, and the authorities reacted quickly. Instead of trying to suppress online conversation, they reached out to the outraged netizens, inviting them to apply to become members of a commission to investigate the circumstances of Mr. Li's death. The resulting commission wasn't really allowed to investigate anything, of course, but by then the social unrest was quelled. ... The most urgent Internet question facing many dictators today is what to do about American social networking sites like Facebook. Many are bound to follow the lead of Russia and China, which have championed homegrown competitors. An online group calling for the overthrow of the Russian government wouldn't survive for long on Vkontakte, Russia's alternative to Facebook.--EVGENY MOROZOV

Friday, February 18, 2011

Chart of the day: President Obama's budget leadership

Via Keith Hennessey.

UPDATE:  Megan McArdle helpfully analyzes the tie between President Obama and Wisconsin.

Quotes of the day

Believe it or not, the Securities and Exchange Act does not apply to members of Congress, according to Craig Holman, legislative representative at government watchdog group Public Citizen.--Justin Rohrlich

In the ’90s, it was the dumb leading the dumb: smooth-talking MBAs were raising money from hapless LPs and investing it in startups run by other smooth-talking MBAs. Now it’s Yuri Milner investing in a company run by Mark Zuckerberg.--Paul Graham

The simple reality is that the interpretation of forensic evidence is not always based on scientific studies.--National Academy of Sciences

Apparently pigeons are better at forecasting than humans are.--Catherine Rampell

European explorers had been aware for a long time that the irregular rhythms of African drums were carrying mysterious messages through the jungle. Explorers would arrive at villages where no European had been before and find that the village elders were already prepared to meet them. ... Kele is a tonal language with two sharply distinct tones. Each syllable is either low or high. The drum language is spoken by a pair of drums with the same two tones. Each Kele word is spoken by the drums as a sequence of low and high beats. In passing from human Kele to drum language, all the information contained in vowels and consonants is lost. In a European language, the consonants and vowels contain all the information, and if this information were dropped there would be nothing left. But in a tonal language like Kele, some information is carried in the tones and survives the transition from human speaker to drums. The fraction of information that survives in a drum word is small, and the words spoken by the drums are correspondingly ambiguous. A single sequence of tones may have hundreds of meanings depending on the missing vowels and consonants. The drum language must resolve the ambiguity of the individual words by adding more words. When enough redundant words are added, the meaning of the message becomes unique.--Freeman Dyson

As [Hannah] Arendt pointed out in her classic study The Origins of Totalitarianism, the inability of these ruling elites in France, Germany, Austro-Hungary, and the Slavic states to retain their legitimacy in the face of waves of nationalist convulsions ignited by “the people”—the opening chapter being the uprisings of 1848—led to the collapse of the post-Napoleonic European order that had been negotiated in the Congress of Vienna. This created the conditions for the downfall of the Austro-Hungarian, German, and Russian empires and resulted in decades of tyranny and bloodshed. A direct line connects the “Spring of Nations” and the wars of the last century. From that perspective, the protests in Egypt may not mark the beginning of a peaceful transition to liberal democracy along the lines of what happened in the former Soviet bloc in 1989. Instead, the insurgencies in the Middle East look more like the revolts of 1848, the start of a long and chaotic era that will not necessarily bring about political and economic progress. The narrative that romances the revolution could be replaced with a much more complex story, one with no happy ending.--Leon Hadar

Relative to a status quo of no or limited international trade, permitting full free trade across borders will leave in its wake some immediate losers, but citizens who gain from such trade gain much more than the losers lose. On a net basis, therefore, each nation gains over all from such trade.--Uwe Reinhardt

... liberals that like to argue that the US should be more like Canada or Denmark should know that the Heritage Foundation agrees.--Mutual Information

Once fundamental measurement problems were solved -- involving time, distance, weights, and power, among others -- it became possible to cheaply measure worker performance, input and output quality, and the role of nature, in areas of life that were unheard of before. This ability to cheaply measure ushered in the world of modern institutions.--Douglas Allen

Thursday, February 17, 2011

Quotes of the day

By the time Shakespeare turned to writing, these “cultural paywalls” were abundant in London: workers holding moneyboxes (bearing the distinctive knobs found by the archaeologists) stood at the entrances of a growing number of outdoor playhouses, collecting a penny for admission. At day’s end, actors and theater owners smashed open the earthenware moneyboxes and divided the daily take. From those proceeds dramatists were paid to write new plays. For the first time ever, it was possible to earn a living writing for the public. Money changed everything. Almost overnight, a wave of brilliant dramatists emerged, including Christopher Marlowe, Thomas Kyd, Ben Jonson and Shakespeare. These talents and many comparable and lesser lights had found the opportunity, the conditions and the money to pursue their craft. The stark findings of this experiment? As with much else, literary talent often remains undeveloped unless markets reward it.--SCOTT TUROW, PAUL AIKEN and JAMES SHAPIRO

I envisioned myself as the Great Carbon-Based Hope against a new generation of thinking machines—which, if Hollywood is to believed, will inevitably run amok, build unstoppable robot shells, and destroy us all. But at IBM's Thomas J. Watson Research Lab, an Eero Saarinen-designed fortress in the snowy wilds of New York's Westchester County, where the shows taped last month, I wasn't the hero at all. I was the villain.--Ken Jennings

I, for one, welcome our new computer overlords.--Ken Jennings

A bettor playing Gulfstream Park's races last month cashed a ticket that was almost unprecedented in U. S. parimutuel wagering. He collected $221,677 for a winning combination that cost 10 cents. The wager, dubbed the Rainbow Six, represents an innovation sweeping the sport: the microbet. Whereas the $2 bet once was the industry's standard, and most exotic wagers have been sold in $1 units, many tracks have begun to offer smaller bets.--Andrew Beyer

Work on your impulse control. ... Just try and think things through a little bit before you do them.--Charlie Sheen's advice to Lindsay Lohan

Did I just quote Ben Franklin and Whitney Houston while thinking about the Bible? I am the worst parent ever.--Jon Acuff

I hereby dissent from the dissent from the dissent. My dissent is different from all those other dissents, which is why I am dissenting.--Michael Lewis

The mortgage people didn’t see any problems because there’d never been a default, except for one manufactured housing (mobile home) deal in the early 1990’s in California.--John Paulson

The reason I find this so striking is that this is the same sort of thing we’re now hearing about muni-bonds. The “muni people” are pretty much united in the view that munis are safe, that talk of large losses is irresponsible and the product of novice minds looking at a market they don’t understand. After all, investment grade munis never default. I’m worried that the same kind of tunnel vision that blinded so many of the smartest minds on Wall Street to the fragility of the mortgage market may be operating in munis.--John Carney

A homeowner has begun foreclosure proceedings on a local Wells Fargo Office in Pennsylvania.--Ash Bennington

In a small flat in the German town of Erlangen in February 2003, an out-of-work Iraqi sat down with his wife to watch one of the world's most powerful men deliver the speech of his career on live TV. As US secretary of state, Colin Powell gathered his notes in front of the United Nations security council, the man watching — Rafid Ahmed Alwan al-Janabi, known to the west's intelligence services as "Curveball" — had more than an inkling of what was to come. He was, after all, Powell's main source, a man his German handlers had feted as a new "Deep throat" — an agent so pivotal that he could bring down a government. As Curveball watched Powell make the US case to invade Iraq, he was hiding an admission that he has not made until now: that nearly every word he had told his interrogators from Germany's secret service, the BND, was a lie.--Martin Chulov and Helen Pidd

The revolution in Egypt has reopened a long-simmering debate about the “freedom agenda” that animated George W. Bush’s presidency. Was he right after all, as his supporters have argued? Are they claiming credit he does not deserve? And has President Obama picked up the mantle of democracy and made it his own?--Peter Baker

Usually, I have stronger visceral reactions to things I read, not so much videos

Today was different: here is Felix Salmon being interviewed by Aaron Ross Sorkin.

Here is my incredulous comment:
I think that Felix is going to make stocks less accessible to the general public by eliminating high frequency trading. Decimalization, electronic trading, and now HFT have provided incredible liquidity. A stock trade now costs $2 (in 2011 dollars) not $200 (in 1971 dollars). And this is because of moving from eighths to decimals, and because of moving from specialists, $2 brokers, and block desks.

Which crash was worse and took longer to recover from? 1987 or the Flash Crash? HFT is estimated to take $2 billion in profits out of the market, but I wouldn't be surprised $20 billion has been returned to retail investors by financial disintermediation, if it is on the order of the reduction in commissions retail investors pay. [Note: I should have also commented "not to mention crossing a spread of 1 or 2 pennies instead of 12.5 to 25 cents"].

And if regulation makes public corporations more expensive to run, of course there will be fewer, larger corporations because of economies to scale.

Of course publics will be taken private and left that way, if listing and reporting requirements are significantly less of a burden. This is just natural incentives. Regulation ain't free, as much as anyone wants to wave it away. Before the Internet, I used to have to go to the DMV and stand in long queues. If I could have avoided that with a cheaper alternative (like I have now), I would have chosen the process today. That is the choice I see companies making.

The market capitalization of the NYSE in 1950 was about $100 billion. Now it's about $15 trillion. So yes, the number of listed stocks has halved from 8,000 to 4,000. So instead of holding 50 stocks in a portfolio, hold 25! What is the right number of listings? I'm not sure how much difference there would be between 5- and 10,000.

Salmon and Sorkin are great writers, but this was a puff piece.

Wednesday, February 16, 2011

Quotes of the day

Know someone. Or know someone who knows someone. If you’re a guy, bring attractive women—ideally younger women in designer clothes. Don’t go with other dudes. And doormen are well versed in trendiness, so wear Coach, Prada, Gucci—but don’t show up in a nice suit with DSW shoes. ... Bouncers are status judges who make hundreds of status decisions every night. They do it by having hundreds of patrons line up and on the basis of very little information, they size up who will be an esteemed customer.--Sociologist Lauren Rivera

... take an item from years past and ask what we could afford to buy today with the same number of labor hours. So take the $400 TV from 1973. At the 2009 wage of $18.72, the 97.1 hours of labor it took to earn that $400 in 1973 would net you $1817.71. So with the same work that would have purchased what, by our standards, was a pretty crappy color TV in 1973, we could today buy a darn-near top of the line very large flat-screen with 3D. Or alternatively, we could go to Walmart and get a relatively cheap LCD TV that would still be a way better product than the 1973 TV and tack onto it a surround sound system, a blu-ray player, and then for giggles maybe a cheap laptop and a small iPod and maybe even a digital camera and still have change left for some DVDs and software. And all of this ignores the increased variety and higher quality of the artistic creations one can enjoy on all of those toys. Looked at this way, it's just a no-brainer. When you tack on the fact that crime rates are down from the 1970s and the advances in medical care (even if their second derivative is negative, which is questionable) and the cleaner air and water, why exactly would anyone think it was better back then? And presented this way, one could make a reasonable case that the second derivative isn't negative either. Despite what the aggregates show, it's possible that what our time can buy us is growing at a steady, if not increasing, rate.--Steven Horwitz

... let's remember that by their own admission Keynesians believe that Keynesian politics also failed during the Great Depression.--Alex Tabarrok

I notice that Paul Krugman is now saying fiscal stimulus was never tried. That’s right; America didn’t do any fiscal stimulus. Funny, I seem to recall he argued that fiscal stimulus was responsible for the relatively fast RGDP growth of 2009:Q4. ... Keynesians like to act like there is some sort of rigorously scientific model behind their calls for the government to waste hundreds of billions of dollars. Now we find that two of the top Keynesian commentators don’t even agree on whether tax cuts count as stimulus. If they don’t, Thoma’s point is flat out wrong. If they do, Krugman’s post is completely inaccurate. ... Krugman’s new argument makes it extremely likely that the $1.3 billion stimulus package that he preferred, that the Keynesian models suggested was needed, would also have been a giant flop. --Scott Sumner

There is no such thing as “shovel ready.” In my view we learned that from the 1970s stimulus packages, and indeed it is part of the reason that many of us teach in elementary economics that such discretionary stimulus packages are ineffective. There were also two missing chairs on the witness panel, which reminded me of an op-ed I wrote for the Washington Post several years ago called “The Empty Chair at the Iraq Hearings.” The name plate on the desk in front of one of the missing chairs said “Dr. Christina Romer” and the other said “Dr. Jared Bernstein.” Of course, Christina Romer and Jared Bernstein were the authors of the influential economic white paper on the stimulus package back in January 2009. They were invited to testify and give their views as the authors of that paper, but they declined. So the Committee decided to set up empty chairs, making a point similar to my earlier op-ed though on a different topic. To be sure, a broader discussion would be welcome.--John Taylor

Indeed if tax regimes really didn’t matter, it would be pretty difficult to explain why New Hampshire’s population has grown much faster than any of the other New England states.--Scott Sumner

Map of the day: Moderation a growth factor?

Source here, via Derek Thompson.

I was a crafty liar, but you should have known I was lying!

That B.M. is a real piece of work.

Tuesday, February 15, 2011

Markets save lives, governments snuff them out

Via Greg Mankiw.

Scott Sumner's Wheel of Politics

Some context:
I should explain what I mean by “corrupt.” I don’t mean politicians taking bribes that violate existing laws. I mean Republicans who support various special interest groups like doctors and seniors (Medicare), farmers, energy producers, car dealers, bankers, and the rich, even if it goes against their supposed “small government” ideology. And the same would be true about Democrats who support various special interest groups like teachers unions, trial lawyers, government workers, etc, for non-utilitarian/non-egalitarian reasons.

I should add that most people I know do not fit neatly into any of the six categories I listed, but rather are a composite of two or more categories. Also, the reason there are four right wing and only two left wing categories is because US politics is dominated by the right. The missing categories are non-utilitarian leftists, such as Maoists who hate the rich, or radical environmentalists who care more about “The Earth” than human welfare.
Read the whole thing.

Chart of the day: Marginal expenditures across the globe

Source here, via Abnormal Returns.

Quotes of the day

We were very, very much in the minority. If I said a thousand-to-one, we were the one. Even friends of ours thought we were so wrong, they felt sorry for us. ... When I purchased my home, it was very strict underwriting standards. I had to provide two pay stubs, two years tax returns, three months of bank statements, all sorts of credit card information. All of a sudden I saw this lowest quality mortgages with basically no underwriting standards at all.--John Paulson

... a professor is almost twice as likely to support the Democratic party as a member of the general population, and about 80% less likely to support the GOP. By contrast, a military officer is about 40% more likely to identify as a Republican as someone in the general population, and about as likely to identify as a Democrat. In fact, the only profession I could find that skews 80% towards Republicans is Southern Baptist ministers. I suspect both professors and ministers would resent the comparison.--Megan McArdle

So my post on the liberal slant in academia has garnered what I believe to be a record number of comments, many, even most of them, pretty angry. And as I predicted, the positions are very much reversed from the normal take on such things. Conservatives are explaining how bias can be subtle and yet insidious; and liberal, many of them academics are saying that you can't simply infer bias from statistical underrepresentation, and sarcastically demanding to know whether I really think that people are asking candidates for physics professorships who they voted for in the last election. They're all right, of course: you can't simply infer bias from statistical underrepresentation, and yet bias can be subtle and yet insidious. ... Blacks are slightly more likely than Republicans to attend church weekly, and black churches are about as likely as white evangelical churches to be creationist. Yet if someone told you that the reason there are too few black professors is that creationists don't make good professors, you'd think they were bonkers. ... Professors are overwhelmingly pro-choice, pro-gay-marriage, anti-military, and in favor of redistribution and regulation programs. These aren't a matter of logic and scientific evidence; they're value judgments. Moreover, they cluster in a way that suggests something other than rational analysis driving the decision--why should your views on military operations in Iraq, or climate change, be correlated with your views on abortion? ... We are never the best interrogators of our ideas. It requires motivated critics to lay bare our hidden assumptions, our misreading of the data, our factual inaccuracies. No matter how scrupulously honest you try to be, you are no substitute for an irritated opponent thinking, "That can't possibly be right!"--Megan McArdle

Unlike the U.S., the pecking order of those colleges is clearly determined, with one school indisputably at the top – Seoul University in Korea, Tokyo University in Japan. I studied Asian languages in college and spent a few years in Asia, seeing this first hand. Just before I spent time in Korea, the country had eliminated the grueling examination program for entrance into the middle schools, and the result was an almost immediate increase of an inch in the average height of twelve and thirteen year-olds.--Rick Brookstaber

I will maintain to my deathbed, that we made every effort to save Lehman, but we were just unable to do so because of a lack of legal authority.--Ben Bernanke

One moral is to be careful of what you wish for, given the legislative process. In that regard, perhaps the stimulus bill turned out to be more reminiscent of Smoot-Hawley than the New Deal. And as the Administration tees up housing finance reform, I worry that however well-intentioned the reformers may be, there are few industries in which the rent-seeking drive is more powerful.--Arnold Kling

... the cupboard is bare. They don't have any better revenue mechanisms left--everything that anyone even thought was plausible went into ObamaCare. And yet, they can't simply cut doctor's reimbursements by one fifth. So they scrambled for anything at all--and the only way they could come up with the necessary revenue was to stretch the cuts out over ten years, while covering the spending for only two years.--Megan McArdle

The NYSE is in no sense the cradle of anything. A cradle is a safe place for the young to develop until they grow up and become more self-sufficient. Y Combinator is a cradle. The NYSE is place for algorithms and speculators to make bets on financial assets. It last funneled real amounts of money into the broader economy during the dot-com boom, leaving behind a lot of Aeron chairs and little else.--Felix Salmon

... the tech bubble was not all that bad. To be sure, there were some spectacular failures – comes to mind. But when you scrape away the detritus, you find the building blocks of all the technology that is increasingly integrated in our everyday life. The bubble-driven intensity of activity in information technology almost certainly accelerated its development and adaptation. Many news ideas were explored; some failed, some succeeded. The successes, however, outweighed the failures, leaving productivity much higher as a result (that this productivity has not translated into higher real wages, however, remains a disappointment). Also note that much of the spending during that period was dedicated to capital that depreciated very quickly. Consequently, the impact on future consumption/production was limited. The excess computer produced in 1999 was nearly worthless just a few years later. Time for a replacement, bubble or not. Housing, obviously, is very different – the capital is long lived, locking resources into place for decades.--Tim Duy

I've been reading up on the history of Communism for over two decades. But even now, I find it hard to wrap my mind around its absurdity. If the first-generation Communists had grown up in a culture where people had worshiped steel and cotton cloth for centuries, I could chalk their crusades up to intellectual laziness. What staggers the imagination is that these pseudo-intellectuals actually originated their own nonsense.--Bryan Caplan

Pujols and the Cardinals could break up. More and more it looks like they WILL break up. The reason is obvious and a story almost as old as love. The reason is money. See, in the Jeter situation there was never any doubt that Jeter was worth a lot more to the Yankees than anyone else. ... To Albert, I do believe, money equals respect. And that’s where the difference comes between Pujols-Cardinals and Jeter-Yankees. Because, at the end of the day, Jeter had no other viable options. No other team was going to offer him even half of what he wanted. But Pujols … yeah, there will be plenty of action on free agent Albert Pujols. Maybe nobody will offer a soon to be 32-year-old man the 10-year deal he wants … but never bet against the uncontrolled impulses of rich men searching for a place to spend their money. Someone paid $151.8 million for this Jackson Pollock painting: ... So don’t tell me that no one will pay $300 million for perhaps the greatest hitter who ever lived.--Joe Posnanski

I do think Jeter is the strangest FIVE-TIME Gold Glove winner, because several advanced defensive stats suggest that he is mailbox-immobile and that ground balls hit two steps to his left or right will always look like line drives in the box scores.--Joe Posnanski

I am struck in the debates over abortion by how firmly each side is convinced that the other side is somehow deluding themselves. The accusations are so similar--the one side claims that we are sanitizing birth in our imaginations, the other retorts that we are doing the same to abortion. Both sides seem convinced that if they could just rip away the veil of illusion with sufficiently gruesome pictures of dismembered fetuses, or botched back-room abortions, whatever well-meaning fools remain on the other side would finally see, and the debate would end. Yet decades of this sort of consciousness raising have only hardened the battle lines. And yet maybe they're right that seeing is believing. I suspect that if we ever do resolve the debate, it will be sonograms and social change, and not slogans, that mark the decisive turn.--Megan McArdle

[The Atlas Shrugged movie] should not have 2011 cars and Dagny Taggart should not look like a mousy actress imitating Nicole Kidman playing a local news reporter.--Tyler Cowen

Nowhere has [Michelle Obama] been greeted with more enthusiasm and respect than in the fashion world. The industry elevated her to the status of icon. She wears a cardigan, and it sells out. She wears a gown by a non-American designer, and debate rages for weeks. Given a bit of time, designers may find themselves inspired by her in the same way they’re energized by Jackie Kennedy, Babe Paley, or Countess So-and-So und So-and-So. The only problem is that while they’re busy celebrating this singular woman, they’re not too keen on understanding what it’s like to be the only black person in a room filled with white folks. ... Mrs. Obama may be the patron saint of the fashion industry (and, arguably, Annie Leibovitz images of Michelle Obama channeling Camelot served as a political balm for a public adjusting to the idea of a black First Lady), but anyone who enters the blogosphere knows that the Obamas’ presence in the White House has not eradicated racism. In some ways, it is more vitriolic than ever. Other creative fields—visual arts, music, film, literature—seem to understand this. They wrestle with the complicated nature of race all the time, even as they also stumble. But the fashion community tends to play dumb or be disingenuous. It treats race like “a paint chip,” even while benefiting from the undercurrent of racial tensions that permeate our society.--Robin Givhan

Monday, February 14, 2011

Map of the day: United States of Shame

I found this to be rather Confucian, in an Amy Chua sort of verve. Via Abraham Piper.

Quotes of the day

The great thing about science is, your bad ideas don't count against you. Trading is a little bit different. Your bad ideas can lose you money.--Jim Simons

Far better to admit ignorance or postulate mystery than to tell untruths.--Don Carson

The Harvard psychologist Daniel Gilbert says that every psychologist must, at some point in his or her career, write a version of what he calls “The Sentence.” Specifically, The Sentence reads like this:
The human being is the only animal that ______.
The story of humans’ sense of self is, you might say, the story of failed, debunked versions of The Sentence. Except now it’s not just the animals that we’re worried about.--Brian Christian

Obama may think he’s set a clever trap for the Republicans in the upcoming budget negotiations. Why not let them be the bad guys? But in so carelessly abdicating his own responsibility for managing the nation’s finances, Obama also is giving up control. He shouldn’t be surprised if the U.S. bond markets, not Republicans, end up determining his political destiny.--Evan Newmark

The New York Times ran an editorial yesterday arguing that the EPA’s proposals to regulate carbon dioxide emissions cannot reasonably be characterized as the borderline-illegal efforts of a rogue agency, because those proposals originated during the Bush administration. Or something like that. At least they’re saying that House Republicans cannot without hypocrisy so criticize the EPA, presumably because all Republicans are required by the Times hypocrisy police to endorse all policies of all past Republican administrations. I wonder if the Times plans to level the same charges against the 26 House Republicans who voted last week against the extension of the Patriot Act. Oh. Guess not.--Steve Landsburg

Anywhere in the world that social psychologists see women or minorities underrepresented by a factor of two or three, our minds jump to discrimination as the explanation. But when we find out that conservatives are underrepresented among us by a factor of more than 100, suddenly everyone finds it quite easy to generate alternate explanations. ... [Daniel Patrick] Moynihan was shunned by many of his colleagues at Harvard as racist. Open-minded inquiry into the problems of the black family was shut down for decades, precisely the decades in which it was most urgently needed. Only in the last few years have liberal sociologists begun to acknowledge that Moynihan was right all along. ... [Larry Summers, wondering publicly whether the preponderance of male professors in some top math and science departments might be due partly to the larger variance in I.Q. scores among men] was not a permissible hypothesis. It blamed the victims rather than the powerful. The outrage ultimately led to his resignation. We psychologists should have been outraged by the outrage. We should have defended his right to think freely.--Jonathan Haidt

Considering that there are about 7 million more unemployed now than three years ago, it suggests the pool of available labor could be 15% bigger than the unemployment figures suggest.--Paul Ashworth
These [technology] companies all revolve around engineers in almost a cultish way. Their investors and competitors always note how good the team is– which is saying something in a Valley locked in a full-scale talent war. They are insanely picky about hiring engineers and when they find a good one they will pay him nearly anything. Asana gives engineers $10,000 to pimp their desks. Zuckerberg has described Quora co-founder Adam D’Angelo as one of the best — if not the best– engineers he has ever met. And Path’s team was reportedly one of the assets Google was so willing to pay up for. But unlike companies like Google and Amazon who rigorously hired based on college degrees, GPAs and standardized test scores, Facebook and the companies that have spun out of it have hewed toward sheer, raw, hacker-like genius. That’s created a more entrepreneurial culture inside the company. Justin Rosenstein– who was at Google and then Facebook before leaving to co-found Asana with Moskovitz– says that working at Google is often described as a wonderland for academics, while Facebook’s early days were more of an extension of a messy dorm room full of engineers hacking away all night, then collapsing most of the day.--Sarah Lacy

Then I made a big mistake. I wrote back, “it would be the second best-selling business biography ever: after Warren Buffett’s biography.” Never, NEVER, imply that one billionaire might be a bigger sell than another billionaire.--James Altucher

We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally. Nokia, our platform is burning.--Stephen Elop, Nokia CEO

Short sellers are bad, but apparently analysts are worse

Professors at Texas A&M and Ohio State universities concluded that following contrarian investors is more profitable for stocks in which analysts and short sellers strongly disagree. In other words, buy if short interest is low and the analyst consensus is to sell; sell short if short interest is high and the analyst consensus is to buy.--Chuck Mikolajczak

 Via Dealbreaker.

How Harvard Business School is going the way of the Nobel Peace Prize

I mean, first it was Dubya vs. Crazy Prof.

More recently, Llewllyn.

And now Tyra. Photo link here.

Saturday, February 12, 2011

Brewing in the Pacific Northwest: Fundamentalists vs. Liberals (a.k.a. Evangelicals vs. Mainliners)

Evangelicals, in this study, put their feet and their resources where their mouth is." This is not to say that liberals don't. However, evangelicals have a far clearer sense of community and mission. And in Moscow, Idaho, they also serve good coffee and know how to make really tasty French food. For all of these reasons, evangelicals are winning the clash of Christian civilizations, not just across the nation, but even in the Pacific Northwest.--Matthew Sutton

Friday, February 11, 2011

Quotes of the day

... the dictator, coddled in his isolation, surrounded by satraps and servants, immersed in his own sense of essential-ness, is the last to know.--David Remnick

Could Aid Watch respectfully suggest that US government officials, at this incredibly sensitive moment, follow the advice of two different Aid Watch posts reflecting the consensus of wise people everywhere: (1) First one: shut up. (2) Second one: shut up. Today’s additional recommendation: first follow steps (1) and (2).--William Easterly

Winning is the most important thing in war. Deception is the way to win. Sun Tzu plays the same role in Confucian China that Machiavelli plays in the Christian west: both writers say that the basic institutions and power arrangements of their society depend on qualities and behavior that can and frequently do violate that society’s deepest beliefs and ideals.--Walter Russell Mead

Okay, have a nice rest of your day.--Bess Levin, to several Level Global executives

Here's the big question for the GOP though. Will they have the political will to push truly big budget cuts through the House and long reaching budget reforms? If they settle for "Democrat lite" type budgets then their time in the majority will be short and failed.--Tim Phillips, President and CEO of Americans for Prosperity

If people are too dimwitted to choose on their own the foods they eat, how can they possibly be trusted to choose on their own the persons who represent them in government? The evidence does indeed suggest that Americans too often choose as their elected representatives greasy, pork-laden, and processed hot dogs who offer only empty calories as they clog the arteries of commerce.--Don Boudreaux

It was a mistake to pick up a girl in a bar in the first place, let alone bring her to another bar. It was like watching "Schindler's List"and complaining it wasn't funny enough. I realized, though, I had no idea where else to take women on a first date. A drink had always been just right -- less pressure than going out to dinner, but more substantial than going out for coffee. Sobriety wasn't just forcing me to get more responsible. It was forcing me to get more creative, too.--Joe Berkowitz

... the most critical response had to do with the founder of the church, L. Ron Hubbard. In some of the material that I had been reading and in some of my interviews, there was a big question about Hubbard's - his war record and his medical history. He had said that at the end of World War II, he was blind and a hopeless cripple, and that he had healed himself through these measures that later became the basis of "Dianetics," which is the book that he wrote in 1950, out of which Scientology arises. And I'd find that - I had found evidence that Hubbard was never actually injured during the war. And so in one very interesting moment, Davis said: Of course, if it's true that Hubbard, Mr. Hubbard was never injured during the war, then he never did heal himself using "Dianetics" principles, then "Dianetics" is based on a lie, and then Scientology is based on a lie. The truth is that Mr. Hubbard was a war hero. And the way he phrased that, that everything depended on whether Hubbard had sustained these injuries and had healed himself, was like a wager on the table. And so we pressed him for evidence that there had been such injuries and that he had been the war hero that he described. And eventually, Davis sent us what is called a notice of separation. It's essentially discharge papers from World War II, which - along with some photographs of all of these medals that he had won, a Purple Heart with a palm, some other commendations from different countries, and so on. At the same time, we finally gained access to Hubbard's entire World War II records, and there was no evidence that he had ever been wounded in battle or distinguished himself in any way during the war. So we also found another notice of separation which was strikingly different from the one that the church had provided.--Terry Wright

Thursday, February 10, 2011

Quotes of the day

Most [sudden, unintended acceleration of Toyota car] incidents reported to the DOT appeared to be caused by drivers stepping on the gas instead of the brake. The National Aeronautics and Space Administration, which conducted the study with the DOT, "observed that the vast majority of complaints involved incidents" that began when the car was stationary or at a low speed. The most likely cause in such incidents was "pedal misapplication," with the driver stepping on the gas, rather than, or in addition to, the brake, the report said.--JOSH MITCHELL

.... public companies average 1.199 private-jet seats for each billion dollars of sales. Private-equity-owned firms average .485 fewer private-jet seats.--Shira Ovide

... the valuation of Twitter makes sense even if it will probably go down. That’s the way of lottery tickets: their value is nearly always higher than their payout. And people looking to buy into Twitter at a $5 billion or $10 billion valuation aren’t doing so because they’ve discounted a bunch of predictable cashflows and decided that the present value is that ginormous. Instead, the investment is more in the form of a hedge. Twitter just might turn out to be one of the most important and valuable companies in the world. And if it does, then everybody will have wanted to get in around now. If you have that opportunity, it’s a hard one to turn down.--Felix Salmon

Big banks like Citigroup and Morgan Stanley, which were battered by the 2008 financial crisis, are once again on solid ground. But a slew of documents, e-mail messages and minutes of crucial regulatory meetings released recently by the Financial Crisis Inquiry Commission provide fresh detail about just how close to the brink both firms came.--SUSANNE CRAIG and BEN PROTESS

But here is the essential fact I want to emphasize and have you think about today: The Fed could not monetize the debt if the debt were not being created by Congress in the first place. The Fed does not create government debt; Congress does. Deficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress. The Fed does not earmark taxpayer money for pet projects in local communities that taxpayers themselves would never countenance; only the Congress does that. The Congress and administration play the dominant role in creating the regulatory environment that incentivizes or discourages job creation. It seems to me that those lawmakers who advocate Ending the Fed might better turn their considerable talents toward ending the fiscal debacle that has for too long run amuck within their own house.--Dallas Fed president Richard Fisher

I have described my philosophy as "Libertarian, but without the crazy stuff." Libertarians are for personal freedom, small government, and a defensive-sized military. That sounds good to me. But I think a better objective is something along the lines of maximizing the public's long term happiness. So while a libertarian might favor allowing his suburban neighbor to operate a bazooka firing range in his back yard, I'd be against that, even if it required a slightly larger government to prevent it. Furthermore, I believe that if you identify with any political group or philosophy that has a name, you are far more susceptible to confirmation bias than someone who doesn't. And as a general rule, I don't trust anyone with a strong opinion on a complicated topic. On the topic of the U.S. budget, my current suspicion is that the problem has grown so large that there is no practical way to eliminate the deficit by cuts alone, without making things worse. But I assure you that I want to be wrong because being right means my taxes will go up substantially.--Scott Adams

... the federal government is not a charity. The main difference is that charities are funded by voluntary contributions, and the government is funded by forceful expropriation. So the self-regulating mechanism of a charity on the amount to pay out is broken. Indeed, instead of asking how much money we actually have, the government (and you) asks how much money we need to pay out. Aside from the immorality, the problem with that question is that the "demand" for free stuff is practically limitless. People could "demand" twice their benefits today. They don't necessarily have to wait for more people to retire or get sick. ... I don't know how much politicians will redistribute income to retirees and sick people instead of wars and bailout in 20 years. But I know Americans would be better off if each of those four items were zero.--Phil Maymin

I'd rather be a lightning rod than a seismograph.--Ken Kesey

It is not entirely clear that your veneration of traditional academic achievement is exactly well placed. Which two freshmen at Harvard have arguably been most transformative of the world in the last 25 years? You can make a reasonable case for Bill Gates and Mark Zuckerberg, neither of whom graduated.--Larry Summers, to Tiger Mom Amy Chua

If the logic of back-in parking is so clear, why doesn't everyone do it? Difficulty, or perceived difficulty, seems to be the reigning explanation. Casual sexism (of the sort summed up by this video) holds that women struggle with back-in parking, although commenters of both genders termed it difficult on my blog. More troubling are studies that claim to find a measurable, if slight, parking "performance gap" between male and female drivers. One NHTSA study, "Field Measurement of Naturalistic Backing Behavior" (conducted to help design backup warning systems), found that "the male driver's mean maximum backing speed was generally faster than the female's and reached statistical significance on two of the tasks," one of those tasks being "backing into a perpendicular parking slot." A similar study, by Claudia C. Wolf and colleagues at Germany's Ruhr University-Bochum, asked male and female drivers of varying experience levels to park an Audi A6 in various ways (back in, parallel, etc.) in a closed-off multistory car park. They found that women took longer to park the car than men. This might be seen as a result of the general tendency for men to take more risks in driving than women (e.g., men drive faster, closer to other vehicles, more often without seatbelts, more often under the influence of alcohol), but there was another interesting result: Even though men parked more quickly, they also parked more accurately, as measured by distance to neighboring cars. Of course, measuring these differences is easier than explaining them. Are there biological differences that give men an edge in handling a car, or do the results just reflect a wider societal belief that men should be better at handling a car? Some psychologists suggest that this belief itself affects the actual performance of drivers, in a phenomenon called "stereotype threat." In a study in Australia, women drivers in a driving simulator who were confronted with negative stereotypes about women drivers were twice as likely to collide with a jaywalking pedestrian as women drivers not presented with the stereotype.--Tom Vanderbilt

There's a box missing to this flowchart

"Watch Food Network show".

I think once someone makes more than $20 per hour, cooking every day starts becoming to be a bit of a drag. Cooking about once a week can be a 'hobby'; I'm wondering if the average number of homemade dinners for a person making $200 per hour (or a couple making $400/hr) is anywhere close to 2 per week or more.

Source here. Photo link here.

Wednesday, February 09, 2011

Quotes of the day

There is nothing more insidious that a country can do to its citizens than debase its currency.--Paul Ryan

Monetary policy can't do anything about, say, bad weather in Russia or increases in demand for oil in Brazil and China. What we can do is try to get stable prices and growth here in the United States.--Ben Bernanke

According to its own investigation, errors were made in [the Government Accountability Office's] producing a report highly damaging to for-profit colleges, but no one had any bad intentions and the report still stands. Well, the significantly revised report -- the one much more favorable to for-profits schools that got almost no attention because GAO sneaked it out -- still stands. And please, don't try to hold the GAO accountable yourself: The GAO's press release states that the report on its internal investigation will not be publicly released.--Neal McCluskey

A. $1 million

Q. What do 2 classes in the New York City public school system cost each year?

We take the $17,173 per student expense from the 2010 Census, and multiply by 58 students. Voila!

Tuesday, February 08, 2011

Trust the people

We who live in free market societies believe that growth, prosperity and, ultimately, human fulfillment are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success – only then can societies remain alive, dynamic, prosperous, progressive and free.

Trust the people. This is the one irrefutable lesson of the entire post-war period, contradicting the notion that rigid government controls are essential to economic development. The societies that have achieved the most spectacular, broad-based progress are neither the most tightly controlled, nor the biggest in size, nor the wealthiest in natural resources. No, what unites them all is their willingness to believe in the magic of the marketplace.--Ronald Reagan

Photo link here.  Via Mark Perry.

Unfortunately, I think The Gipper is more optimistic and gracious than me.  There are plenty of people in free market societies that think that growth, prosperity, and fulfillment will grow only with greater government command and control.  I think that President Obama refers to this as "good regulations" and "common-sense reforms".  And I don't think he has drunk nearly as much of this Kool-aid as millions of other Americans.

For some reason, the old Soviet Union, the China of the last century, Cuba and North Korea today, much of Africa, even Haiti ... these all seem to get ignored.  And, so instead of trusting the people, the Church of Unlimited Government is the fastest growing religion that I can see.

I don't trust the people.  Neither did Jesus.  What I trust is that a person can decide for himself better than the government can, and that he will do less harm than the government in their respective decisions.

I'd rather have all daughters than all sons

This makes me different than my dad, and from what it looks like, most dads in America.

I think my bias comes from the fact that, even though (I think) I honor my parents more than my siblings, my wife honors her parents much better than me (and better than her brother). I guess I was hoping that my daughters would be more like Mommy than anyone else, so my sunset years would be fuller.

My wife would also prefer girls to boys. Funny enough, we have at least one of each.

Photo link here.

Quotes of the day

This [chaos of accounting] is not an issue of malfeasance; it's an issue of competence. But give that the competence at issue is supposed to be, um, the core competence of the SEC, this is a mite worrisome.--Megan McArdle

... political parties may deliberately choose to recruit only mediocre politicians, in spite of the fact that they could select better individuals. ... Given the limited availability of direct monetary compensation, the main incentive a party has to offer to reward such effort is the party electoral nomination. We show that these considerations entail a fundamental trade-off which may play an important role in a party’s recruiting decisions. On the one hand, recruiting the best possible individuals may enhance the party’s electoral prospects in a competitive electoral environment (competition effect). On the other hand, recruiting a relatively “mediocre” but homogeneous group of individuals may maximize their collective effort on behalf of the party since the presence of “superstars” may discourage other party members and induce them to shirk (discouragement effect). In equilibrium, there will either be “mediocracy” if parties choose not to recruit the best politicians, or “aristocracy” if they do.--Penn Institute for Economic Research Working Paper 11-002

We hope [the game "Kolejka" (The Queue)] will show young Poles how difficult it was to buy everyday supplies like sugar, bread or furniture [in communist-era Poland].--Karol Madaj, the game's designer. He was only nine years old when communism ended in Poland in 1989, so he had to seek tips about those days from his older boss.

America’s tax system is broken. It’s needlessly complex, economically harmful, and often unfair. It fails at its most basic task, raising enough money to pay our government’s bills. And it’s increasingly unpredictable, with large, temporary tax cuts not only in the individual income tax, but in corporate, payroll, and estate taxes. For all those reasons, our tax system cries out for reform. Such reform could follow many paths. Some analysts recommend the introduction of new taxes—such as a value-added tax, a national retail sales tax, or pollution taxes—to supplement or replace our current system. Those ideas are worth serious discussion, but in today’s testimony, I will focus on a more traditional approach to reform: redesigning our income tax. My message is simple: the income tax is riddled with tax preferences. These preferences narrow the tax base, reduce revenues, distort economic activity, complicate the tax system, force tax rates higher than they would otherwise be, and are often unfair. By reducing, eliminating, or redesigning many of these preferences, policymakers can: Make the tax system simpler, fairer, and more conducive to America’s future prosperity; Raise revenues to finance both across-the-board tax rate cuts and deficit reduction; and Improve the efficiency and fairness of any remaining preferences.--Donald Marron

Americans make more “stuff’’ than any other nation on earth, and by a wide margin. According to the United Nations’ comprehensive database of international economic data, America’s manufacturing output in 2009 (expressed in constant 2005 dollars) was $2.15 trillion. That surpassed China’s output of $1.48 trillion by nearly 46 percent. China’s industries may be booming, but the United States still accounted for 20 percent of the world’s manufacturing output in 2009 — only a hair below its 1990 share of 21 percent.--Jeff Jacoby

... what made television so evil back when it was evil was not its essence but its omnipresence. Once it is not everything, it can be merely something. The real demon in the machine is the tirelessness of the user. A meatless Monday has advantages over enforced vegetarianism, because it helps release the pressure on the food system without making undue demands on the eaters. In the same way, an unplugged Sunday is a better idea than turning off the Internet completely, since it demonstrates that we can get along just fine without the screens, if only for a day. Hermione, stuck in the nineties, never did get her iPad, and will have to manage in the stacks. But perhaps the instrument of the new connected age was already in place in fantasy. For the Internet screen has always been like the palantír in Tolkien’s “Lord of the Rings”—the “seeing stone” that lets the wizards see the entire world. Its gift is great; the wizard can see it all. Its risk is real: evil things will register more vividly than the great mass of dull good. The peril isn’t that users lose their knowledge of the world. It’s that they can lose all sense of proportion. You can come to think that the armies of Mordor are not just vast and scary, which they are, but limitless and undefeatable, which they aren’t.--Adam Gopnik

Talk turns to [Michael] Lewis’s upbringing in New Orleans. His father had a largely hands-off philosophy, but begged Lewis not to turn down Princeton in favour of a life in New Orleans with his high-school sweetheart. “He went white and said, ‘I’ve never told you what to do, but don’t do this.’” Lewis followed his father’s advice. “It was the right decision. But I really was in love with that girl, and it ended up ending our relationship. And I always felt I violated something in me, making that decision.” When the time came to quit Salomon, he steeled himself against any further paternal entreaties. Explaining his decision to leave Salomon, he casually compares the $40,000 book contract to the $250,000 salary and potentially millions more – big sums in the late 1980s. But he insists that money does not motivate him. “I grew up with a mother who came from a pretty wealthy family – in fact a very wealthy family by New Orleans standards – and my father was kind of a poor boy.” By the age of nine he’d abandoned any sense that money brought fulfilment, because “my father’s family was so happy and my mother’s family so miserable”.--Tim Harford

I’m counting on his engineering professors to undo whatever damage the English department has managed to inflict.--Steve Landsburg

And then I told him WTF doesn’t stand for Win the Future.--Anonymous

Chart of the day: Correlation between commodity prices and industrial production

Source here, via Scott Sumner.

Monday, February 07, 2011

Bryan Caplan gently swats Tyler Cowen

In Tyler's case, unfortunately, it's hard to get a bet on the table. Not only does he deny his duty to bet on his beliefs. There's also a major disconnect between his big picture rhetoric about the Great Stagnation - where I know we disagree - and his specific claims about the facts - where I'd need to spend a month crunching the numbers to weigh in. Until I get a spare month, all I can say is that even if Tyler's right, he's wrong.

Hell must be going through some strange cooling period.

UPDATE: More spanks from Steve Miller:
In a sense it would be nice for us, the free-marketers, if we could make the case that growth in government spending has led to stagnation. But it hasn't, because there is no stagnation. Whether that's because of or despite of growth in government is a separate issue. The stagnation hypothesis ONLY fits the income data. It does not the purchasing power (in labor hours) data, not at all. It doesn't fit with the economists' standard of greater choices, either. In the 1980s Robin Williams' character in Moscow on the Hudson collapsed in a small grocery store because he was overwhelmed by the coffee selection. What has happened to those choices since the 1980s?

UPDATE: Arnold Kling's smell test:
I personally do not think that the stagnation hypothesis can survive the thought experiment in which you offer somebody the choice between (a) today's median income and today's array of goods, services, and prices or (b) 1973's median income (plus, say 25 percent) and 1973's array of goods, services and prices. I think that so many people would reject the 1973 option that the stagnation hypothesis becomes untenable.

Is it me

or is $315 million for the Huffington Post a little on the high side?

UPDATE: Felix Salmon knows a lot more.

Quotes of the day

What so proudly we watched at the twilight’s last reaming.--Christina Aguilera

Let our government be like that of the solar system. Let the general government be like the sun and the states the planets, repelled yet attracted, and the whole moving regularly and harmoniously in their several orbits.--Delaware’s John Dickinson, to the Constitutional Convention

Let me bring the Great Stagnation, the biosciences revolution, and evidence-based medicine into a single framework.--Mike Mandel

So should Secretary Geithner have called China a currency manipulator? I am ambivalent. It is pretty clear to me that domestic policies within China are at the source of the huge imbalance between production and consumption. High savings rates rarely have to do with culture or personal preferences, as is widely assumed, and a lot to do with policies that affect the balance between production and consumption. After all a nation’s savings is simply its total production minus its total consumption, and to the extent that there are explicit policies aimed at constraining consumption and boosting production, they inevitably affect the savings rate. These policies also inevitably force a rising trade surplus onto the rest of the world.--Michael Pettis

[Meredith Whitney's] summary of a 600-page report to clients prompted a National League of Cities analyst to say she possessed a “stunning lack of understanding.” Other critics called her prediction “ludicrous,” “irresponsible,” “damaging,” and “overreaching.” There’s a huge gap between these descriptions and Whitney’s track record as an analyst. The chasm is so big that it is worth exploring. Something interesting is going unexamined or unexplained. Many of Whitney’s critics have a vested interest in tearing her down. They include competing municipal bond analysts, fund managers who run muni portfolios, financial advisers who sell the tax-exempt securities, and above all, the borrowers who depend on munis to finance their whopping deficits. To all of them she is a big-mouthed, larger-than-life nightmare.--Alice Schroeder

To the extent that complexity is an endemic part of modern financial systems it’s likely that intellectual hazard is also inevitable because it’s also essential that we allocate risk to those most capable of bearing it.--timarr

What is particularly remarkable is that Eugene Fama who might be considered as the high priest of the efficient markets hypothesis had, as his thesis adviser, Benoit Mandelbrot! Indeed, Mandelbrot lamented the fact that his best students decided to overlook the basic weaknesses of the Gaussian foundations of financial theory and became more interested in making money than in seeking the truth.--Alan Kirman

I do love you, but love isn't enough to get me here [to teach this class]. I have to be paid, too.--David Henderson

I had hoped for something better from the new UK government, which had seemed like an improvement over the Blair and Brown (“We know the answers, just double aid”) team.--William Easterly

... investment banks' businesses can be characterized in one of two ways: agency businesses, where the bank acts on behalf of a client to execute a transaction and earns a fee for doing so, and principal businesses, where the investment bank acts as a counterparty to its customer, and earns a profit or loss on a trade. ... But there are hybrid businesses within investment banking, as you might expect from an industry which never discovered a profit-making opportunity it didn't like. One of the most important of these is structured products, in which banks take off-the-shelf and proprietary securities and derivatives and slice, dice, and recombine them into customized instruments that they can then sell to corporations or investors. ... Remember the first time you went to look at houses or apartments with a real estate broker, and he or she called you a valued client? Do you also remember how soon you discovered that real estate brokers work for the seller or landlord, who are their real clients, and that you were just a sucker patsy customer? But no matter the particular circumstances, the economic and transactional roles are clear: if someone is selling you a product or a "solution," you are not a client. You are a customer. ... Some clients are indeed very sophisticated, and those tend to get the best terms and the best price. Most customers are not; they are price takers. But that is true of any market. ... Ladies and Gentlemen, and this is not something that doesn't happen a million times a day in almost every other manufacturing industry around the globe. This is not even capitalism. This is buying and selling, as it has been done since the first caveman traded his extra spear for a cooking pot.--Epicurean Dealmaker

With 13 NFL championships, the Packers—and [Warren] Buffett’s titan [Berkshire Hathaway]—just go to show that on the NFL gridiron and in the business world, teams’ ability to place the right individuals in the right situation—at every link in the chain—is crucial in determining success. This would make Washington Redskins owner Daniel Snyder the Steve Case of the NFL. They pursued goals with relentless ambition armed with a war chest of capital, but failed to employ adequate foresight and discipline, leading to a series of flops. Neither has many highlights to point to over the last decade; it is likely that given the opportunity, each would make different decisions. Maybe not Snyder, though. On the other hand, the New England Patriots’ leadership can only be compared to the Goldman Sachs machine. With unrivaled success throughout the boom years of the last decade, both have approached media with unequaled aloofness. And, between a Pats assistant taping opponents in violation of league policy and Goldman’s obvious penchant to milk both sides of a deal, each has had their accountability and ethics brought into question over and over. Now—with intense scrutiny on banker pay, and Tom Brady approaching the latter portion of his career—it remains to be seen whether either will be able to maintain their competitive stranglehold. The Minnesota Vikings? Enron.--Jonathan Marino

This Superbowl commercial will probably be the most memorable

It didn't go for laughs. I'm not sure it will turn Detroit around in this generation.

<a href="" target="_new" title="">Daimler Chrysler: Eminem Detroit</a>

UPDATE: Shira Ovide muses:
But just a thought: Chrysler is 9% owned by taxpayers after a $9 billion federal rescue two years ago, and it’s part owned and run by an Italian, Fiat’s Sergio Marchionne. Can the company still brag about its Detroit origins?

Friday, February 04, 2011

If you were expecting the dark blue background

or other stuff that is now gone, I apologize for the shock.  Just trying to remodel, after 5 years.

Quotes of the day

... like many value guys, he can be early (on trading desks, they call that “wrong”).--Barry Ritholtz

Buy in thirds.  ... You buy the first third immediately without hesitation just to put it in play (relief!).  If your target equity runs up and away, at least you're in it and there'll be a lid on your self-loathing.  Should the stock or the markets in general drop, however, you'll not be trapped in a full position.--Joshua Brown

The best kid in the country [I could hire] may be at like Bowling Green, right. But to go to Bowling Green, interview 20 kids just to find that one needle in the haystack doesn't make sense, when you can go to Harvard it's like 30 kids that are all super qualified and great.--Investment banker

Don't you wish your blogger was

anonymous like me?

I don't play Super Bowl boxes

Why not?  Two words:  no alpha.  The box pool is the epitome of efficient markets hypothesis--where's the fun in that?

But for those of you who bought a box or two, here's the backtest of the last 44 games.  The worst number to hold is a '5'.  Any '5-X' or 'X-5' box has a 0.23% chance, so you already need take a $77 haircut on your mark-to-model.  There has NEVER EVER been a final or quarter-end score where one team's score ends in '5' and the other team's in 2-8, so if you have one of those, mark it to $0.

The best number to hold is '0', followed by '7', '3', and '4'.

Via my favorite broker.

For those suffering cognitive dissonance between the payroll and household survey numbers this morning

I would recommend Tim Kane's analysis.  In sum, the payroll survey is much noisier, based on the respective statistical methods for each survey.
Job increases in the payroll survey were quite muted, while the household survey number--i.e. the unemployment rate--dropped from 9.4% to 9.0%.
Statistics are like a bikini. What they present is suggestive, but what they conceal is vital--Aaron Levenstein
Photo link here.