Via Tyler Cowen.
Wednesday, August 31, 2011
Quotes of the day
Many ask whether high-income countries are at risk of a “double dip” recession. My answer is: no, because the first one did not end. The question is, rather, how much deeper and longer this recession or “contraction” might become.--Martin Wolf
Money, it turns out, is incredibly hard to reason about in a systematic and rational way (even for highly educated individuals). Risk is even harder.--Dan Ariely
In poker, volatility is a weapon. It can be an especially powerful weapon in the hands of the deranged. The ones who wield it most effectively either 1) have a very large stack relative to yours, or 2) have minimal personal regard for their own financial well being. To wit, if your opponent doesn’t care about fragging his own chip stack in pursuit of yours, he can use that as an advantage. Even insanity can be an edge — temporarily at least.--Jack "Mercenary Trader" Sparrow
A massive refinancing effort is likely to have little impact on the economy or foreclosures or housing prices. What it would do, however, is hurt our government’s already precarious balance sheet by reducing the payments on its vast mortgage portfolio. Fannie and Freddie should focus on reducing public losses with sensible, limited mortgage modifications and by selling foreclosed homes reasonably slowly.--Edward Glaeser
... Obama and his advisors predicted the economy would do better — much better — than it has, and those predictions were wrong. The president blames events: the European debt crisis, the Japanese earthquake and tsunami, the political tsunami of the 2010 elections. Some of that is plausible, but the two years of anemic job and economic growth that preceded those events can hardly be blamed on them. And it's that economic performance that has scuttled Obama's plans for an easy reelection in 2012. That sluggish growth seemed to catch a lot of people by surprise. ... prediction is hard. Experts — in politics, economics, climate — are very, very bad at telling people what will happen tomorrow, let alone next year or the next century. How many of the economists who tell us what to do now failed to see the mortgage debt crisis coming? Nearly all of them. ... The cult of experts has acolytes in all ideological camps, but its most institutionalized following is on the left. The left needs to believe in the authority of experts because without that authority, almost no economic intervention can be justified. If you concede that you have no idea whether your remedy will work, it's going to be hard to sell it to the patient. Market-based ideologies don't have that problem because markets expect events in ways experts never can. No president since Woodrow Wilson or Franklin Roosevelt has been more enamored with the cult of expertise than Obama. That none of his economic predictions have panned out is not surprising. What is surprising is that so many people are surprised.--Jonah Goldberg
The context is Eric Cantor’s demand that any federal disaster relief in the wake of Irene be offset by spending cuts elsewhere. Krugman thinks this is silly, and proves his point with an appeal to the standard Ricardian theory of public finance. According to that theory, which all economists understand and accept, if you’ve got to bear a cost, it’s best to spread that cost out over as many activities as possible. So ideally, you’d pay for disaster relief partly through spending cuts, partly through (current) tax increases, and partly through an increase in the deficit. Therefore says Krugman, “the bottom line is that basic, regular economics says that Cantor isn’t making sense.” ... Unless you believe that everything is perfect to begin with, the Ricardian argument fails, leaving you with no reason to believe that the cost of new spending should be spread widely. Instead, you should start by cutting back on your least wise activities. Cantor and Krugman probably have some legitimate disagreement about what those least wise activities are, but neither of them has any reason that I know of to believe that all activities are currently equally wise at the margin. I’m guessing that if Cantor had proposed paying for disaster relief entirely through an tax increase on the very rich, that Krugman would not have been so quick to dissent with an appeal to Ricardian public finance. (Come to think of it, if Krugman took his own point seriously, he’d be forced to conclude that every tax increase should be spread across all income groups, and accompanied by cuts in all expenditure categories. This would mark yet another radical change in several of his previous positions.) Then there’s the separate point that comes from public choice: Sometimes it’s a good idea to constrain people from doing things they want to do until they improve their behavior elsewhere. Even if you approve of the Congress’s intention to provide disaster relief, it can still make sense to hamstring that intention until they get some other stuff right — just like with the kid whose prom plans you approve, but who is still required to finish his chores first.--Steve Landsburg
A recent abortion kerfuffle occurred when Virginia's Department of Health proposed regulations for abortion clinics that consistent with the construction of new hospitals and all the sudden liberals realized how insanely onerous these regulations are. The bottom line is that regulations are very costly, and they are growing, as Obama is pushing for more EPA regulations based on fanciful savings to health care costs. Unfortunately, for Keynesians there's no interest in the effects of regulations on aggregate demand.--Eric Falkenstein
It’s not clear what we’ve “won” in Libya. But it is clear what we’ve lost: whatever’s left of the quaint notions that America should wage war only in defense of our vital interests and that presidential uses of military force can and should be constrained by law.--Gene Healy
... outside the academy, theory encounters a little something called the marketplace, where it turns out that courses like “Queering the Alamo,” say, can’t compete with “Great Authors of the Western Literary Tradition.” ... the educational market works very differently inside the academy and outside it, and the consumers of university education are largely to blame. Almost no one comparison-shops for colleges based on curricula. Parents and children select the school that will deliver the most prestigious credentials and social connections. Presumably, some of those parents are Great Courses customers themselves—discerning buyers regarding their own continuing education, but passive check writers when it comes to their children’s. Employers, too, ignore universities’ curricula when they decide where to send recruiters, focusing only on the degree of IQ-sorting that each college exercises sub rosa. Universities are certainly doing very well for themselves, despite ignoring their students’ latent demand for traditional learning. But they would better fulfill their mission if they took note of the Great Courses’ wild success in teaching the classics. “I wasn’t trying to fix something that was broken in starting the company,” Rollins says. “I was just trying to create something beautiful.” Colleges should replicate that impulse.--Heather MacDonald
If there is indeed a market in sexual favors—where sex is exchanged for economic support, emotional commitment, and the like—then it is by definition a two-way market. Assume, for a minute, that women are the “producers” in this market, and men are the “consumers.” (We all know what the product is.) Assume, as well, with Ms Hakim that there is an artificially restricted supply of this product. In aggregate, demand exceeds supply. To whose benefit does this market imbalance accrue? Cui bono? Why, the producers, of course. Women. Duh. To whose benefit would a removal of these restrictions accrue? The consumers. Men. A complete liberalization of the market for erotic capital—deregulation, in other words—would lower the scarcity, price, and value of sexual favors across the entire market. Men could presumably purchase or acquire by other means all the sexual satisfaction they desired at a going rate likely to be well below the standard price exacted today. At the margin (and perhaps well beyond that), marriage, committed fatherhood, and men’s financial and emotional support to their women and children would likely decline materially. Is that what women want? Really? I will presume to speak for the fairer sex now: Of course not. This is why the argument that sexual repression of women arises solely from patriarchy makes no sense to me. ... consciously or not, I believe most women understand [that women’s erotic capital depreciates over time] extremely well. In fact, it has been my experience that women are the primary carriers of cultural and social values in this sphere. You don’t usually hear men or fathers making a big deal about loose women, adultery, prostitution, and the like; it is the wives and mothers. Why? Because it affects them directly. Patriarchal socioeconomic structures or not, it is usually women who set, monitor, and enforce basic social and sexual mores and expectations. It’s in their own self interest. --TED
Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart. ... Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.--Steve Jobs
... suicide is more than twice as common as homicide.--Stephen Dubner
Tuesday, August 30, 2011
Can you imagine if we had walked all the way?
I can never think the same way about The Lord of The Rings again. Think twice before watching this.
Via Bryan Caplan.
Via Bryan Caplan.
Great trading advice
from Douglas Hirschorn:
- Making money is easy, keeping it is hard
- You can have a 1000 reasons to get in a trade, but you only need 1 reason to get out
- Focus on the process (quality of your trades), not the outcome (profits/losses)
- Know what your edge is (what your pitch looks like) and trade only when you have edge (swing only when your pitch appears).
- In sports, you are NOT supposed to think, "What if I mess up this shot?" In trading that is called risk management.
- In sports, when you miss a shot, you don't lose points. In trading, when you get a trade wrong, you lose money.
- In sports, the opponent adjusts to what YOU do. In trading, the market does not know or care about YOU.
- In sports, you focus on improving weaknesses. In trading, your strengths are your weaknesses and vice-versa.
- In sports, if you get poor results, you need to practice harder, put in more effort. In trading, effort is not positively correlated to improved performance.
1. Recognize when fear is present
2. Welcome it (normalize it)
3. Implement a behavior modification program (with real consequences) to prevent you from acting on it
Quotes of the day
Deeply bizarre and deeply creepy.--David Arnott, on Gadhafi's Condoleeza Rice photo album
Next week, I will be laying out a series of steps that Congress can take immediately to put more money in the pockets of working families and middle-class families, to make it easier for small businesses to hire people, to put construction crews to work rebuilding our nation’s roads and railways and airports, and all the other measures that can help to grow this economy.--President Obama, August 2011Photo links here and here.
I’ve got things right now before Congress that we should move immediately, and I said so before I went on vacation, and I’ll keep on saying it now that I’m back. There are a whole host of measures we could take – no single element of which is a magic bullet – but cumulatively can start continuing to build momentum for the recovery.--President Obama, August 2010
Congress can repeal ObamaCare and its supposed beneficiaries won’t even care.--Michael Cannon
After under preparing for the big snowstorm in December 2010, Mayor Bloomberg over prepared for Hurricane Irene, which left New York City with pretty minor damage. This pattern is rather typical, because the cost/benefit ratio for over hyping a disaster clearly favors over-reacting after under reacting. Bad events are usually really damaging only when we totally do not see them coming.--Eric Falkenstein
You see slack in some sectors as a “general glut”
But some sectors are healthy, only some in a rut
So spending’s not free – that’s the heart of the matter
Too much is wasted as cronies get fatter.--Russ Roberts
[Bill Breit] from [Trinity] University picked up [Paul Samuelson] at his hotel. On the way out the door, [Samuelson] mentioned that he had a headache, so they stopped into the hotel store to buy some aspirin. "$4.95 a bottle!" the Nobel laureate complained, "I can get this for $2.50 in my town." "Let's go find a regular drug store," he demanded. Because they were already running late, [Breit] said, "It's your lucky day. I'll pay." This professor could see that the real cost of the elusive $2.50 bottle of aspirin was far higher than the cost of the $4.95 bottle in front of them because of the extra search time involved. The professor was happy to spend the extra money to ensure that he got what he valued more: a relaxed economist giving a good talk and some time to socialize beforehand. Does the irony in this story jump out at you? It is, of course, the Nobel prize-winning economist who should have offered such a solution. He should have seen that, given his situation, the $4.95 bottle, available then and there, was much more valuable than the $2.50 bottle across town.--David Henderson
Do I wish I had more Treasuries? Yeah, that’s pretty obvious. I get that it was my/our mistake in thinking that the US economy can chug along at 2 per cent real growth rates. It doesn’t look like it can.--Bill Gross
Music journalists like Elvis Costello because music journalists look like Elvis Costello.--David Lee Roth
I designed it with a bite for scale, so people get that it was an apple not a cherry.--Rob Janoff
[150 years ago] today John C. Frémont issued a proclamation declaring the slaves in his military district free. Frémont was a famous explorer, and earned the name “The Pathfinder” for mapping a trail across the Rocky Mountains. Although he was from Georgia, he was the first presidential candidate of the Republican party. The Republican party was founded on the idea of opposing slavery. He lost the election, but four years later Lincoln won the election. Frémont was appointed a Major General, and appointed commander of the Department of the West, with his attention focused on the fighting in Missouri. Today Frémont issued a proclamation declaring martial law in Missouri.--Joshua Horn
So the military says this: Go ahead and tar our servicemen with your broad brushes of ignorance and bile if you’d like. Just don’t expect us to underwrite your smear campaigns. Or: Work with us to ensure that 1) you get to make your money so long as the portrayal of our forces is fair, and so long as it fits within the normal training and operation of the force. We’ll bend over backwards, in other words. We just won’t bend over forwards. Which to me seems fair. Mr. Sirota’s angst apparently has something to do with Gerry Bruckheimer’s forgettable 1986 movie “Top Gun“, which he believes somehow altered the American viewpoint to the extent that we actually “love war”. Because of Tom Cruise and Kelly McGillis. And that. Despite the fact that there wasn’t any actual, you know: War. In the movie Top Gun. Just a little beach volleyball, and a couple of splashed MiGs to go with two crashed Tomcats. The problem for Mr. Sirota isn’t that there haven’t been any anti-war films in this generation. The problem would be that they haven’t been very commercially successful, and thus have failed to shift public opinion in the direction Mr. Sirota would like to see it moved. In fact, they pretty much sucked. Perhaps Mr. Sirota believes that if the military had allowed the directors of anti-Iraq war movies Redacted and In The Valley of Elah (just to name two) to use actual military equipment, those movies wouldn’t have failed so abysmally at the box office. Perhaps. But perhaps it’s true that the American people simply don’t like Hollywood elites and their media allies trying to tell them that the actions of a despicable few – as depicted by those with no personal understanding of heroism or sacrifice – reflect the valor, endurance and patriotism of the forces sent to fight, no matter who it was that sent them.--Neptunus Lex
Darth Vader unmasked on the Today Show, in his own words
Looking a little peaked, in a Steve Jobs kinda way. He sure beats the stuffing out of Robert McNamara.
Steve Conover schools Ron Paul, Rick Perry, Michelle Bachmann, Sarah Palin, a few Tea Partiers
here:
• Printing money is the Fed’s tool to fight deflation.
• The Fed can also “unprint” money rapidly.
• Unprinting money is the Fed’s tool to fight inflation.
• Deflation can be triggered or fueled by insufficient money to support the potential production of goods and services.
• When newly-printed money is just sitting there not “chasing” anything, it doesn’t cause inflation or cure deflation.
• Deflation is bad; it hurts borrowers, frequently forcing them to default on their loans – which in turn hurts lenders as well.
Monday, August 29, 2011
Michael Pettis makes some bold economic predictions about China, Germany, the U.S.
and other countries, including:
- Over the next two years Chinese household consumption will continue declining as a share of GDP. Chinese debt levels will continue to rise quickly over the rest of this year and next. Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade. Within three years Beijing will be seriously examining large-scale privatization as part of its adjustment policy.
- Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness.
- Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years.
- Trade protection sentiment in the US will rise inexorably and unemployment stays high for a few more years.
Quotes of the day
Never trust a critic.Photo links here and here.
Especially this critic.--Mark Kermode
But the odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.--Paul Krugman
Yes, a terrifying prospect — and an excellent reason to limit the powers of ruling parties, though Paul never seems to notice this.--Steve Landsburg
I get the ball, I throw the ball, and I take a shower.--Mariano Rivera
... those who receive and act out the gift of athletic genius must, perforce, be blind and dumb about it -- and not because blindness and dumbness are the price of the gift, but because they are its essence.--David Foster Wallace
These tempests obscure a larger truth about [SC Justice Clarence] Thomas: that this year has also been, for him, a moment of triumph. In several of the most important areas of constitutional law, Thomas has emerged as an intellectual leader of the Supreme Court. ... In his jurisprudence, Thomas may be best known for his belief in a “color-blind Constitution”; that is, one that forbids any form of racial preference or affirmative action. But color blind, for Thomas, is not blind to race. Thomas finds a racial angle on a broad array of issues, including those which appear to be scarcely related to traditional civil rights, like campaign finance or gun control. In Thomas’s view, the Constitution imposes an ideal of racial self-sufficiency, an extreme version of the philosophy associated with Booker T. Washington, whose portrait hangs in his chambers. (This personal gallery also includes Frederick Douglass, Abraham Lincoln, Ronald Reagan, and Margaret Thatcher.)--Jeffrey Toobin
I don’t do Ivies. ... Yale meant one thing for white graduates and another for blacks, no matter how much anyone denied it. ... We talk about diversity. The real problem of our Court is that it’s all Ivy League. Correct me if I’m wrong, but I think there are other law schools out there. ... I grew up with maids, and janitors, and yard people. It gives you a perspective on society. You’re looking from the bottom up, and how people see it from that direction. . . . You understand why people are angry or upset. You understand why they become rich soil for class envy and class hatred, or class warfare. You see how they become easy pickings for people who have snake-oil merchants for solving all their problems. But you develop a respect for them without condescension. You develop an attitude that we are all inherently equal regardless of who went to school and who did not—that there can be smart people who did not have any book learning and never had a chance. ... There’s a difference between being poor and being stupid. And you’re stupid for thinking that they’re stupid. As my granddaddy would say, you’re just an educated fool. . . . I am passionate about preserving liberty so that people can rise from that to go to the Supreme Court. My wife does this, too. My wife is my best friend. I can rant with her. She doesn’t read opinions or anything. We believe that this is a good country and that people should have a chance. That’s why you see so many of my law clerks who don’t go to Ivy League schools. These are kids who tried hard and did well. Why don’t we reward them?--Clarence Thomas
I always ask people, ‘What would you do with Plessy v. Ferguson, which was sixty years old?’ If it’s wrong, the ultimate precedent is the Constitution. And it’s not what we say it is, it’s what it actually says, and I think we have to be humble enough to say we were wrong. ... When interpreting a constitutional provision, the goal is to discern the most likely public understanding of that provision at the time it was adopted.--Clarence Thomas
In other words, Thomas is humble before his own reading of the constitutional text—and dismissive of the attempts of others, including other Justices, to interpret it. ... To that end, he plumbs the words of the framers and the eighteenth-century (and earlier) thinkers who influenced Jefferson, Madison, and their contemporaries.--Jeffrey Toobin
One of the things the activists care about is that the so-called ‘living Constitution’ is a convenient political fiction. A living Constitution gives more power and authority to the state.--Dick Armey
I don’t agree with him, but Thomas has the most internally coherent view of any Justice.--Richard Hasen, a professor at the School of Law at the University of California at Irvine
Further, notwithstanding Thomas’s enduring certainties, it is difficult to know what the framers would have thought of any given situation. (Alito, a conservative but not a full-fledged originalist, captured this problem nicely, in the oral argument about the California law on violent video games. Following up on a series of questions by Scalia, Alito asked the lawyer, “I think what Justice Scalia wants to know is what James Madison thought about video games. Did he enjoy them?”) It is true, too, that the framers often disagreed profoundly with each other, making a single intent behind the Constitution even more difficult to discern, and the twenty-seven amendments (all with their own framers) created another overlay of complication. For all of Thomas’s conviction, originalism is just another kind of interpretation, revealing as much about Thomas as about the Constitution.--Jeffrey Toobin
Jeffrey Toobin’s gripping, must-read profile of Clarence and Virginia Thomas in the New Yorker gives readers new insight into what Sauron must have felt: Toobin argues that the only Black man in public life that liberals could safely mock and despise may be on the point of bringing the Blue Empire down. In fact, Toobin suggests, Clarence Thomas may be the Frodo Baggins of the right; his lonely and obscure struggle has led him to the point from which he may be able to overthrow the entire edifice of the modern progressive state.--Walter Russell Mead
Alan Krueger to chair CEA. Congratulations, Alan. An excellent choice by President Obama.--Greg Mankiw
Dismissing the achievements of welfare reform because the poverty rate didn't decline towards zero makes no sense to me. While it would be nice if it had happened, no one really expected it to. The fact that a miracle failed to materialize is hardly a searing indictment of reform. You can argue that the decline in the poverty rate was assisted by other reforms like boosting the earned income tax credit, and I completely agree. But boosting the EITC does nothing to help people who aren't earning income. If we hadn't done welfare reform, "not earning income" would still describe the majority of poor families.--Megan McArdle
Look, Debbie, I understand that after I departed the House floor you directed your floor speech comments directly towards me. Let me make myself perfectly clear, you want a personal fight, I am happy to oblige. You are the most vile, unprofessional ,and despicable member of the US House of Representatives. If you have something to say to me, stop being a coward and say it to my face, otherwise, shut the heck up.--Rep. Allen West, to Rep. Deborah Wasserman Schultz
[Warren Buffet] suggests that the 12 member congressional panel set up to cut current and future federal deficits leave tax rates unchanged for 99.7 percent of taxpayers, and only raise rates on the approximately 250,000 households who make more than $1 million. Simple calculations show that a tax increase on such a small number of households, even a very large tax increase, would have a negligible effect on total tax revenue, and hence on closing the budget deficit. As we will see, there are more sensible ways to improve tax revenue. Warren Buffett has persuaded 68 other billionaires to follow his example and promise to give at least half their wealth to charities. But why hasn’t Buffett proposed also that the very rich make large gifts to the federal government to offset what he considers ridiculously low taxes on their incomes and wealth? My guess is that he and the others who pledged to give away their wealth to charity would have little confidence in how the government would spend such gifts. Buffett, for example, is giving most of his wealth to the Gates Foundation, not to the federal government, and is relying on how this foundation will spend his vast gift. Given this reluctance to make large gifts to the federal government, why should anyone have confidence that the federal government will spend additional tax revenue in a sensible way?--Gary Becker
Bol legends have piled up over the years, and in the e-book "The Defender" Jordan Conn probes as necessary, interviewing Bol's teammates, friends and family. As a child, he may have killed a lion; he quite possibly coined the phrase "my bad"; he certainly warned Congress about Osama bin Laden in 1993. Filtered through the American media, his later life—he died last year of kidney failure—was a sad mishmash of illness and publicity stunts, such as a 2002 bout with William "The Refrigerator" Perry on Fox's "Celebrity Boxing." (Bol won, wearing red shorts stitched with the nickname "Sudanese Freedom Fighter.") The stunts were ridiculous—Manute playing ice hockey, Manute in jockey's silks—but the proceeds went to the Southern Sudan rebels. As Mr. Conn details what motivated Bol and the responsibilities he felt to his region, "The Defender" gives Bol back the dignity he seemed to have lost. If the image of Bol crouched in the brush, talking strategy with armed fighters, is an unexpected one, it's also revelatory. Even his financial woes were a result of giving too much to the cause, and Mr. Conn suggests that Bol more or less killed himself through his insistence on campaigning for pro-independence candidates. Suddenly the desperation that marked his later years makes a lot more sense.--Nathaniel Friedman
Sunday, August 28, 2011
The Government-Media complex cries wolf?
Toby Harnden thinks so:
The surf may have told a story but so too did the sight behind the reporter of people chatting and ambling along the sea front and just goofing around. There was a man in a t-shirt, a woman waving her arms and then walking backwards. Then someone on a bicycle glided past.It's a rookie mistake. Everyone saw what Mayor Nagin and Governor Blanco did, and thought, "Forget taking any pitches, I'm swingin' at anything and everything!"
Across the screen, the “Breaking News: Irene Batters Long Island” caption was replaced by stern advice from the Federal Emergency Management Agency (FEMA): “Stay inside, stay safe.”
The images summed up Hurricane Irene – the media and the United States federal government trying to live up to their own doom-laden warnings and predictions while a sizeable number of ordinary Americans just carried on as normal and even made gentle fun of all the fuss.
...
The media and politicians enjoy a symbiotic relationship during possible impending disasters. The resultant perfect storm of hype over Irene runs the risk of making Americans even more like to ignore warnings in the future.
Irene didn't hit Tribeca hard. But the Financial District got some
I wonder if the markets will open, if the MTA and PATH stays closed.
Via Joshua Brown.
UPDATE: CNBC reports everyone is opening for business as usual, Monday morning.
Friday, August 26, 2011
Quotes of the day
I will never figure out two things about Bernard's career: Why the NBA left him off "50 at 50," and why he didn't win a "Best Supporting Actor" Oscar in 1979.--Bill SimmonsPhoto links here and here.
If you were Rondo, wouldn't that have been the picture-perfect time to point to one of Obama's advisors and say, "Hey, why don't one of you teach this guy how to run the country?--Sam, Cambridge
I am digging this Sam.--Cav (backstory here).
Economic disparities remain, but in 1960 nine in 10 blacks were poor, whereas today three of four blacks are not. Tracing the remaining disparities to racism becomes trickier by the year. The 'institutional racism' many trace these statistics to is something black people of King's time would have considered a much more workable adversary than open bigotry and segregation. Some holdouts remain bigots, but not enough to keep Barack Obama out of the White House, and overall, racism is considered as socially embarrassing as pedophilia. King could never have predicted that this would happen so quickly. Is America 'post-racial'? Afraid not. But is the treatment of black people in America still so transparently and grievously unjust as to make a mockery of our democratic ideals and require redress with all deliberate speed? Afraid not, again, and Dr. King would rejoice, as we should with him.--John McWhorter
The theory of the firm in neoclassical theory focuses on how much the firm should produce and optimal capacity. Game theory looks at strategic issues arising under various payoffs. Neither approach captures the nature of innovation, the trial and error risk-taking of the visionary entrepreneur or the power of creative destruction to enrich our lives. These ideas are at the heart of the Austrian approach to the firm, an approach that has made even less headway in mainstream academic circles than Austrian business cycle theory.--Russ Roberts
How do the Angels continue to defy the odds? This is a problem we haven't totally solved yet. But I do have two theories. One possibility is that team defense has a cascading effect that raw numbers can't quite detect. A great defense does more than help a pitcher's batting average on balls in play and his ability to prevent runs. It shortens innings. That lets a starting pitcher go deeper into games with less stress on his arm. More innings for starters takes pressure off a bullpen. A fresher pen then enables a manager to use his best arms in high-leverage situations, instead of relying on lesser relievers to put out fires because his more talented teammates are spent. Less stress on pitchers' arms can also decrease the risk of injury, thus preventing a team from having to call up Triple-A piñatas or spend valuable dollars on replacements. A second possibility is Mike Scioscia. When a team fares better than expected every year for eight seasons, it might be that the manager is executing strategies that give his team an edge that others lack. Studies have been murky in isolating the effects that managers have on their team. We can look at tactical moves, which can reveal managers who know when to use one-run strategies (such as bunting or stealing bases) and when to play for the big inning. But the best managers might make a bigger impact in other areas, such as motivating his players to succeed, or simply putting the best nine guys on the field at any given time.--Jonah Keri
Union affiliates in some states are heavily involved in spending members' money on social causes that are sometimes contrary to members' own political leanings. For example, California unions donated more than $2 million—including $1 million from the California Teachers Association—to a campaign in 2008 to defeat Proposition 8, the successful state initiative that defined marriage as between a man and a woman. A CNN exit poll found that 56% of voters in union households supported the initiative despite the opposition of the union leadership. "The California Teachers Association does not poll its members on how it spends its political money," Larry Sand, a union critic and 28-year veteran of the state's school system, observes. Instead, union leaders vigorously oppose efforts to allow their members more control over how their dues are spent. In California, for example, labor groups and their allies expended an astounding $54 million in 2005 to defeat Proposition 75, which would have required that unions seek the permission of members to spend dues money on political contributions. Among the biggest nonunion contributors to the campaign to defeat Prop 75 was the Democratic Party, which kicked in $3.275 million. In Washington state, meanwhile, a judge ruled in 2000 that the Washington Education Association violated a state law barring the use of union dues for political purposes without employees' permission. The union fought the case all the way to the U.S. Supreme Court before losing in 2007 and agreeing to pay nearly $1 million in fines and rebates to teachers. The NEA's leadership has not been enthusiastic about President Obama because his education secretary, Arne Duncan, touts policies like merit pay for teachers and the expansion of charter schools, which the union opposes. Grumble as they do, the NEA's leadership has nowhere else to go. Sadly, neither do the 40% or so of union workers who may not vote for the president but will see a large portion of their dues spent on his re-election.--Steven Malanga
Dr. Kim couldn’t remember the last time she’d seen a bowl of pure white rice. What was a bowl of rice doing there, just sitting out on the ground? She figured it out just before she heard the dog’s bark. Up until that moment, a part of her had hoped that China would be just as poor as North Korea. She still wanted to believe that her country was the best place in the world. The beliefs she had cherished for a lifetime would be vindicated. But now she couldn’t deny what was staring her plain in the face; dogs in China ate better than doctors in North Korea.--Barbara Demick
Perplexities of Consciousness is composed mostly of detailed case studies of aspects of the stream of experience about which people seem to err, grossly and persistently, even in circumstances that might seem favorable to reflection. We aren’t just fallible in hard cases, I argue; we err systematically and pervasively about even the most basic facts of the stream of experience, and even when we set our minds to it carefully and conscientiously.--Eric Schwitzgebel
Thursday, August 25, 2011
Obesity rates
Heaviest 3
34.3% West Virginia
33.6% Delaware
32.1% Mississippi
Lightest 3
20.1% Colorado
21.6% Utah
21.7% Connecticut
Via Catherine Rampell. Photo links here.
Quotes of the day
The thing to remember about the short-term is that we'll almost certainly be around when the long-term shows up.--Seth Godin
Future generations will look back with bemusement on a time when airline passengers couldn’t pay extra for a flight that’s guaranteed first place in the runway queue, and more generally on our odd reluctance to embrace prices. They’ll be unable to imagine why we thought it was better to let people die of liver disease than to pay organ donors, or why the “net neutrality” cult had a problem with Internet content providers being able to purchase resources to serve their customers better. ... The moral circle will continue to expand. As we look back in horror on our ancestors’ harsh treatment of slaves or of Native Americans, our descendants will look back in horror on our treatment of immigrants and our reluctance to trade with foreigners. Slogans like “Buy American” will strike our grandchildrens’ ears the way “Buy White” would strike ours.--Steve Landsburg
A poll in the late 1920s of 282 economists showed that 251 favored a monetary policy aimed at price level stabilization. Isn’t that sort of like New Keynesian inflation targeting? And of course the University of Chicago economists of the 1930s favored a combination of fiscal and monetary stimulus. What Keynes did was move the profession away from the idea of monetary cures for business cycles–which actually can be effective, toward the idea of fiscal cures, which (short of WWII) are almost never effective. It would take many decades for money to be rediscovered. Indeed the influence of Keynes was so powerful that even in 2009 there were many Keynesian economists who should have known better who suddenly announced that monetary policy couldn’t work at the zero bound, and that fiscal stimulus was needed. Fortunately those Keynesians rediscovered money much more quickly this time, indeed within 2 years.--Scott Sumner
In World War I the Allied strategy was to engage and defeat the center of gravity of the Central Powers, the German field army. This strategy was simple in conception but heartbreakingly difficult in execution, being based on flawed assumptions, an irreconcilable gap between strategic design and execution, and a comprehensive failure of management information systems. But by 1918 firepower had been integrated with protective cover and mobility, in the form of tanks and military aviation, and had been complemented by the use of radio to open the lines of communication and facilitate alignment from top to bottom and across units. This ultimately restored mobility to the battlefield and initiated the blitzkrieg form of warfare that would dominate the battlefields of the twentieth century. Great story, but what does it have to do with American business leadership today? A lot, because the strategic models are strikingly similar. Rarely in warfare have the challenges of the battlefield looked so insoluble as in 1916 and ’17; rarely in business have the macroeconomic, fiscal, and technological characteristics of the marketplace looked so complex as in the post-2008 world. And the fundamental problem is the same: a failure of alignment, by which I mean of the elusive ability to link strategic intent at the top of an organization to tactical performance at the bottom, via an unbroken internal narrative. In business terms, this means a chief executive must not only have the intellectual clarity to define his vision but also be willing to give leadership away to those around and beneath him. Only by mandating, and explicitly trusting, successive levels of management to execute according to his strategic design can he release the full potential of his organization.--Robert Fry
Tuesday, August 23, 2011
Quotes of the day: Russ Roberts edition
What is working well? The Apple Store, access to food and clothing, private high schools, Amazon.com and everywhere else that there is competition. As the economy slinks along or dips down, we’re going to hear continued talk of the decline of America. But what has always made America great is its economic system–a system that let’s competition work. If we want to be great again, all we have to do is remember what made us great before. Our biggest challenge as a nation is our political system. We have overpromised and a democracy that ignores its Constitution isn’t very adept at taking away goodies from the masses. I am very worried about how that is going to turn out. We need to share the pain very widely and that too is not the strong suit of democracy.--Russ Roberts
What I meant is that the Ponzi scheme called Social Security and the demographics of Social Security and medicare are going to require a lot of people to get a lot less than they are expecting. That’s what I meant by sharing the pain. My point about democracy is that politicians hate dashing expectations. See Greece, riots in the streets of.--Russ Roberts
The main thing to realize is that both Citibank and S&P have little to do with capitalism and everything to do with crony capitalism. This is a game of financial musical chairs where the government keeps the market from calling the tune. The cronies call the tune. I should add one more thing. People talk as if S&P and Fitch and Moody’s are independent private organizations. They are, sort of. But the structure of regulation empowers them. Without the regulations requiring their imprimature, I’d assume they’d be gone. Without the implicit support of the regulatory apparatus, why are any of the ratings agencies in business?--Russ Roberts
Monday, August 22, 2011
Quotes of the day
Over the years, I have paid a significant portion of my income to the various federal, state and local jurisdictions in which I have lived, and I deeply resent that President Obama has decided that I don't need all the money I've not paid in taxes over the years, or that I should leave less for my children and grandchildren and give more to him to spend as he thinks fit. I also resent that Warren Buffett and others who have created massive wealth for themselves think I'm "coddled" because they believe they should pay more in taxes. I certainly don't feel "coddled" because these various governments have not imposed a higher income tax. After all, I did earn it. Now that I'm 72 years old, I can look forward to paying a significant portion of my accumulated wealth in estate taxes to the federal government and, depending on the state I live in at the time, to that state government as well. Of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes. Isn't that enough? Others could pay higher taxes if they choose. They could voluntarily write a check or they could advocate that their gifts to foundations should be made with after-tax dollars and not be deductible. They could also pay higher taxes if they were not allowed to set up foundations to avoid capital gains and estate taxes. What gets me most upset is two other things about this argument: the unfair way taxes are collected, and the violation of the implicit social contract between me and my government that my taxes will be spent—effectively and efficiently—on purposes that support the general needs of the country. Before you call me greedy, make sure you operate fairly on both fronts. Today, top earners—the 250,000 people who earn $1 million or more—pay 20% of all income taxes, and the 3% who earn more than $200,000 pay almost half. Almost half of all filers pay no income taxes at all. Clearly they earn less and should pay less. But they should pay something and have a stake in our government spending their money too. ... Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all? Here's my message: Before you "ask" for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money.--Harvey Golub
The great majority of people in different cultures do not object to someone who has made lots of money when they have superior abilities and talents, and they work hard at producing what are considered useful goods or services. Actors like Tom Hanks or Jennifer Aniston earn millions of dollars per film, yet they are admired as stars rather than condemned for being millionaires because films are a popular form of entertainment. Bill Gates, Steve Jobs, and others who became billionaires by creating innovative companies that provide highly valuable goods and services to millions of individuals are widely admired as the business equivalents of rock stars rather than attacked for their great wealth. Leading transplant and other doctors who become successful and very wealthy through extensive education and superior skills are recognized for their valuable contributions to extending the lives of very sick individuals, and few object to their high earnings. On the other hand, when hedge fund managers become rich by using arbitrage activities to narrow the spreads in interest rates and other prices between different regions (most hedge funds do not only engage in arbitrage) they produce useful services, but the value of what they do is not so apparent as the businessmen who make successful products. It is still harder for many to understand the usefulness of “speculators” who do well financially by successfully shorting shares of companies or commodities, such as oil, because they believe correctly that their prices will fall in the future. Their activities add value by smoothing out the prices of these shares and commodities over time, but few people like individuals who bring bad news, or who profit from anticipating bad news. Other forms of behavior are objectionable because they both add to inequality and lower economic efficiency. These are the most dangerous sources of inequality, and they create negative attitudes toward the wealthy, and even at times social unrest. One illustration is the arbitrary use of government power to give or take away wealth. Some individuals become very wealthy because of the political favors they receive, while others lose much of their wealth because of unjust governmental treatment. Examples include Carlos Slim and the Russian oligarchs who gained big economic advantages by receiving monopoly positions in industries like telecommunications when they were privatized, and the officials of Fannie Mae and Freddie Mac who became wealthy by using their political connections to acquire a dominant position in the US residential mortgage market. A highly publicized recent example is the Indian businessmen who obtained special privileges in telecommunications and other industries because of corrupt government officials. ... I agree with the argument by Warren Buffet in a recent New York Times op-ed piece that it is neither fair nor efficient for highly wealthy individuals like himself to be paying a smaller fraction of their incomes in taxes than middle income and many lower income persons. However, the way that inequity is corrected can make an enormous difference to economic efficiency as well as to the degree of inequality. The best way to reduce these inequities is to substitute for the present tax mess an inclusive equal percentage tax on all incomes, where the income base would be greatly widened by eliminating deductions on mortgage interest payments, restraining the tax-deductibility of charitable contributions, and eliminating special subsidies, such as the generous ones to ethanol producers. With a flat broad equal percent tax on all incomes, capital gains and other sources of income that currently have special tax treatment should then be taxed at the same flat rate as earnings and other incomes.--Gary Becker
The revelation that the Securities and Exchange Commission had a history of destroying documents has once again raised questions about how well the agency has exercised its enforcement authority. Although Matt Taibbi in Rolling Stone described the policy as “Orwellian,” the practice looks more like corner cutting to avoid cumbersome federal regulations on document disposal — the very type of conduct that the S.E.C. often criticizes companies for when it pursues an enforcement action. ... The S.E.C. is responsible for enforcing the internal controls rules for corporations, which require that their “books, records and accounts are kept in reasonable detail to accurately and fairly reflect transactions and dispositions of assets.” How does it look when a federal agency may have violated the law by destroying records related to one of its most important public functions? No one can be sure whether the S.E.C. policy on disposing of records from closed MUIs had any concrete impact on other investigations because any missed leads will never be known. What is clear, however, is a policy that may have violated federal law raises the specter that the S.E.C. was more concerned with making its life easier by getting rid of documents rather than complying with burdensome regulations. That is an often-repeated complaint about the S.E.C.’s own rules, a claim that might now gain greater resonance.--Peter Henning
... when it comes to education, good outcomes are not the same as great teaching. The most reliable way to amass impressive alumni is to screen for impressive freshman. But at the policy level it’s more important to identify institutions that are unusually good at helping people learn, not institutions that are unusually good at screening.--Matt Yglesias
In short, software is eating the world.--Marc Andreesen
Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant. Oops. ... Cisco talk about 50 billion devices but you can't see it in their revenue line. Instead in the middle of the biggest imaginable boom they had that dreadful conference call where they talked about government spending being weak. Hey isn't this a private sector routing boom? Well it is but the private sector is appifying really fast. The government sector are all paranoid about Chinese government hacking and terrorist vulnerabilities and so are wanting the tried-and-proven hardware-software integrated device (which they think is harder to hack). Government paranoia is stopping the software eating the hardware and them guys at the Department of Homeland Security are sitting there safely in their (antiquated Cisco) box... But whilst the government holds back the tide of history the lesson holds true: if you make hardware-software integrated devices your risk is you are going to get appified and unless you do the appification someone will do it for you.--John Hempton
Friday, August 19, 2011
Are wars increasing or decreasing?
Joshua Goldstein, Andrew Mack, Erik Gartzke, and John Owen disagree (via Alex Tabarrok). As do I.
I will change this view if my son gets drafted, though. (If he volunteers, well, maybe he is a better man than me).
Photo link here.
Quotes of the day
Your 60th got us into the financial crisis. Let’s hope this party gets us out of it.--Lloyd Blankfein, to Steve Schwarzman, at Leon Black's 60th birthday party
I got crucified because I said you can keep your money in Bear Stearns. I got crucified in this country!!! I learned my lesson, you can’t be as confident as you’d like. I never said you should buy Bear Stearns, I said you should keep your money there. In 36 hours Bear Stearns fell apart. It was fine to say it wasn’t going to fall apart and then it fell apart. My first call was that it was okay to keep your money there which turned out to be true.--Jim Cramer
It’s like a machine out there, and I’m that one part that isn’t up to speed with everyone else.--Chad Ochocinco
The idea of getting paid to take some 'abstract risk,' is becoming more quaint every year.--Eric Falkenstein
I too think our politicians are inadequate, but I don't want them to listen to me, rather, I would like them to be less important. That would take people actually voting for people who aren't promising to increase government, however, and I sense I'm not in the majority on that, and may never be.--Eric Falkenstein
By now, most Americans have lost hope that our current government will come up with a viable jobs program. It won’t. I am coming more and more to think that with the government essentially paralyzed for the foreseeable future, the only way we’re going to get jobs is by turning to actual job creators: business itself.--Joe Nocera
Yeah, that Joe Nocera, the one who called the Tea Party 'terrorists'.--Cav
If [Warren Buffet] really wanted to make (the tax code) fair, why doesn’t he propose a wealth tax on everyone over $1 billion worth of wealth of 50 percent once and for all. That would really work for him, but of course he’s not going to suggest that because he would have to pay that. It’s never seen a tax, and when he gives (the investments) to the Bill and Melinda Gates Foundation, it never will. This is ridiculous.--Arthur Laffer
I've been practicing literary criticism for more than 60 years. In 1976, I resigned from the once splendid Yale English department, which I had joined in 1955, to protest the decline in aesthetic and cognitive standards in the profession. I became a professor of the humanities, a department of one. I have been the pariah of the profession for the last 45 years. I maintain canonical standards for the study and appreciation of literature. I practice philology and knowledge of the history of language. I do not give in to political considerations, however they mask themselves. All this business about gender, social class, sexual orientation and skin pigmentation is nonsense. I'm 81. I'm not prepared to temporise any more. I've been prophesying like Jeremiah since 1968, warning the profession that it was destroying itself. And it has. There are fewer and fewer people teaching English, or any other kind of literature, in American universities. Students don't wish to study garbage and that's all they're offered.--Harold Bloom
I adopted, subconsciously at least, my father's view that those with much more than us had come by it dishonestly. I had no evidence, of course. Sure, I had a few stories about wealthy people who had taken advantage of others, but I had no basis for my grudge against the millions of people I resented. Because I couldn't have some of the material possessions other kids had, I felt left out, and that was enough. Then, in my late teens, I started to learn economics. I started to understand that the vast majority of income in a relatively free society is earned. It's true that a small number of wealthy people did get their money by fraud or dishonesty. More common, especially in societies with lots of government controls, were people who got wealthy by using political pull. But I started to see that the typical high-income person in a relatively free society gets his or her income the old-fashioned way--by earning it. This resentment over the good fortunes of others is not unique to me. Often, when one person tells another that he or she won a prize or is going on a great vacation, the other person responds, "I hate you." It's generally said jokingly, but the fact that it is said at all speaks volumes. ... [Will Herberg, a prominent American Communist] told us of his intense resentment of the fact that he was smart and had nothing, while they were dumb and had a lot. "That," he said, "is how I became a Marxist. I hated the rich." We were shocked. We had thought that virtually all intellectuals came to their views via their intellect, not via their resentments. Herberg must have read our faces, because he added that his route to Marxism was a very common one. "The number of people who became Marxists by reading Marx," I still remember him saying, "can be counted on the fingers of one hand."--David Henderson
When women's wages rise, the cost of kids rises. But so does wealth! The income and substitution effects go in opposite directions. And the fact that they go one of the three logically possible ways consistent with consumer rationality does nothing to confirm consumer rationality. ... higher value of time ("the increased opportunities for the mother outside of the home") is supposed to imply fewer kids. In the second paragraph, lower value of time ("short term income low and longterm prospects--for both parents and children--bleak") is also supposed to imply fewer kids. You could say the first is a substitution effect and the second is an income effect, but both effects are plainly both income AND substitution effects.--Bryan Caplan
Two extreme models of the macroeconomy have recently been discussed on the internet. On the extreme right you have Casey Mulligan, arguing that demand shocks can’t explain high unemployment, and that our economy is faced with a supply problem. If workers cut wage demands we could return to full employment. On the extreme left people like Paul Krugman argue that wage cuts won’t boost employment at all; instead they will simply depress AD even further. In the middle is the sensible AS/AD model, with downward-sloping AD curves and upward sloping AS curves. The textbook workhorse. This is the model that accurately describes the US economy. If AD declines, output will also decline (due to the upward sloping SRAS curve.) If workers accept pay cuts, then SRAS will shift right and output will increase. Neither the Mulligan nor the Krugman models are consistent with the empirical evidence. ... Both Krugman and Mulligan are partly right. More monetary stimulus really would reduce unemployment (at least if it succeeded in raising NGDP.) Krugman’s right about that. And cutting the minimum wage and reducing maximum UI benefits really would reduce unemployment. A competent government would do all of those things. An incompetent government would do none of them. Which one are we?--Scott Sumner
Prior to meeting Warren [Samuels], I think it would be accurate to say that I divided the world neatly into those who are (a) stupid, (b) evil, and (c) those who obviously are smart and good who agree with me. I disagreed with many people both in college and outside of the academic setting. But I thought the root cause of the disagreement was in 90% of the cases was a consequence of them being misinformed because of their lack of exposure to the ideas of Mises and Rothbard. Once they would have read Mises and Rothbard, their world view would change appropriately. Unless, of course, they were in the 10% of people who are evil. Warren destroyed that simple intellectual picture of the world. Here was a man who was as sharp as anyone I have ever met, who had read more and in fact forgotten more than I would ever read, and who was genuinely interested in the truth with no hidden agenda, and yet his disagreed; he questioned; he probed; he thought about the choice of words; he simply expressed the joy in figuring things out. In the process, Warren didn't overturn my intellectual commitments to the Austrian school and the Virginia Political Economy tradition in which I was being educated, but he made more self-critical and less self-satisfied, and hopefully a better scholar, teacher, and a more sophisticated representative of the Austrian school and Virginia Political Economy. ... Besides his role as a mentor to generations of scholars in political economy, Warren was also just an amazing scholar and economic thinker. He set a standard for professional work ethic that I think is rivaled only by his debate partner in political economy --- James M. Buchanan. Everyone should just look at his CV and see what it takes to build a professional career as a scholar. He spent his career as an engaged editor of scholarly journals, of book series that kept the classic works in print, as well as encouraging contemporary work, and he was an author of journal articles as well as books. He just worked day in and day out as a scholar of political economy. His natural curiosity took him from Wisconsin style institutionalism, to Classical economics, to Chicago economics, to public choice, to Austrian economics, to Coasean law and economics, etc. The overarching theme of his work is the role of government in political economy, and he kept thinking seriously about that question throughout his career.--Peter Boetkke
Protein engineering is a hot field, as well it should be, since enzymes do things in ways that we lowly organic chemists can only envy. Instead of crudely bashing and beating on the molecules out in solution, an enzyme grabs each of them, one at a time, and breaks just the bond it wants to, in the direction it wants to do it, and then does it again and again. If you're looking for molecular-scale nanotechnology, there it is, and it's been right in front of us the whole time. Problem is, enzymes get that way through billions of years of evolution and selection, and those selection pressures don't necessarily have anything to do with the industrial reactions we're thinking of these days. And since we don't have a billion years to wait, we have to speed things up. Thus the work at places like Codexis on engineered mutant enzymes, and thus a number of very interesting takes on directed evolution.--Derek Lowe
Thursday, August 18, 2011
Photo of the day: Shalala, my oh my, look at the boy not shy
Had the president of Miami University worked in Bush's cabinet instead of Clinton's, I think she'd already be gone. It's great when the mainstream media has your back. Not even Jon Stewart has taken a token shot, which is a typical masquerading-as-objective tactic of his.
Wednesday, August 17, 2011
Quotes of the day
No joke: Presidential candidate Rick Perry and comedian Stephen Colbert, who last week barraged Iowa voters with advertisements urging voters to support “Rick Parry,” shared the same political committee treasurer – until they didn’t. Salvatore Purpura, who has represented numerous political committees as treasurer over the years, told POLITICO that he resigned on Thursday as treasurer of Colbert’s super PAC, Americans for a Better Tomorrow, Tomorrow.--DAVE LEVINTHAL
So, no disrespect Gov [Perry], but when you’re getting your Keynes on like that, no need to hide it behind all that anti-gov’t rhetoric.--Jared Bernstein
Would Keynesian stimulus spending work only when it came as a surprise? Or only when the spending was outside the range of prior business experience? Keynesian economists have not even begun to answer these questions. For now, Keynesian theory has so many exceptions that we might as well discard it.--Casey Mulligan
It sounds like this time the [People's Bank of China] might be pretty serious about diversifying their risk away from USG bonds, right? Let’s leave aside the fact that every six months we have heard the same thing for the past several years, and nothing has happened, shouldn’t we nonetheless be worried? Won’t reduced PBoC purchases be hugely disruptive to the US economy and to the US Treasury markets? No, they won’t. There is so much nonsense still being said about this, even by economist who should know better, that I thought I would try to address what it would mean if the PBoC were actually serious and not simply making noises aimed at domestic political constituents. First of all, remember that the PBoC does not purchase huge amounts of USG bonds because it has a lot of money lying around and doesn’t know what to do with it. Its purchase of USG bonds is simply a function of its trade policy. You cannot run a current account surplus unless you are also a net exporter of capital, and since the rest of China is actually a net importer of capital, the PBoC must export huge amounts of capital in order to maintain China’s trade surplus. In order the keep the RMB from appreciating, the PBoC must be willing to purchase as many dollars as the market offers at the price it sets. It pays for those dollars in RMB. It is able to do so by borrowing RMB in the domestic markets, or by forcing banks to put up minimum reserves on deposit. What does the PBoC do with the dollars it purchases? Because it is such a large buyer of dollars, it must put them in a market that is large enough to absorb the money and – and this is the crucial point – whose economy is willing and able to run a large enough trade deficit.--Michael Pettis
If you look at the box score from last night’s baseball game, there’s a lot of risk in concluding which player is the best hitter on the team based on what you find in that one box score. We’re very used to seeing, say, player performance vary from game to game and making conclusions about the most productive player based on a large sample of observations, likewise with the stock market. We know that the stock market varies not only day-to-day, but hour-to-hour and minute-to-minute, and we can watch that variation online almost in real-time…. There is a lot of risk in drawing conclusions about what the Dow Jones industrial average index value will be 10 years from now based on what happened yesterday… So again, the current state, or the most recent departure, is not a rational basis for making conclusions about the long-term trend or the long-term state of a system that’s noisy.--Noah Diffenbaugh
Enumerating a long list of disparate things that may happen, without any probabilities, may work for Nouriel Roubini, but he's a charlatan: here he is last week taking credit for his client switching to cash a couple months ago, he doesn't mention he has been suggesting investors go to cash since 1990, always for a slew of reasons (though Lawrence Summers is here giving props to Roub for calling the housing crisis). I have seen reports that endlessly enumerate risks many times in large corporations, and they are highly correlated with people who either are too afraid to make a mistake, or profoundly do not understand their job.--Eric Falkenstein
As expected, the group members rated the most narcissistic leaders as most effective. But they were wrong. In fact, the groups led by the greatest egotists chose the worse candidate for the job. Says Nevicka, “The narcissistic leaders had a very negative effect on their performance. They inhibited the communication because of self-centeredness and authoritarianism.”--Association for Psychological Science
Tuesday, August 16, 2011
Moral hazard
Like Michelle Rhee recently said: If you turn your head to the people who are yelling the loudest, you’ll be turning your back on the children, because they don’t vote. Speak up for those who cannot speak up for themselves.
Via Glenn Reynolds.
Quotes of the day
If [Keynesians] really don't care what the [stimulus] money is spent on, why not just reduce taxes across the board? It would be far simpler and faster. I suspect because the real objective is redistribution, and lower tax rates across the board is regressive on a dollar basis even if proportionately the same. Too bad, but it highlights that old maxim I learned in my litigation--a dispute is never about what its most zealous disputant says it's about. In this case, the real wish of Keynesians is to redistribute wealth via the government, giving bureaucrats more power over the bourgeois. If it were otherwise it would be too easy to stimulate the economy in short order via their model of the economy.--Eric Falkenstein
Hoover wasn’t able to print gold, but can be blamed for supporting the Fed’s tight money policies. Obama can’t print dollars, but can be blamed for not moving aggressively to put people at the Fed who understand the need for more dollars.--Scott Sumner
OK, I have decided to stop posting updates. I almost regret writing this post, actually. In my attempt to show that Mankiw was sympathetic to the Old Keynesian point of view, I unfortunately seem to have ended up causing some offense (the "hypocrite" thing), which was certainly not my intent. And then I was led to try to parse the totality of Dr. Mankiw's actual views on stimulus, which turned out to be quite difficult (they are indeed nuanced).--Noahpinion
It’s easy for me to dismiss 99.9% of progressives, as I see right through their biases, their lapses in logic, their lack of understanding of economic principles, their shameless misuse of statistics. It’s not so easy to do that with Matt Yglesias. I’d guess many progressives feel that way about Tyler Cowen. If there were no Tyler Cowens we could easily be dismissed as a bunch of moonies. With him, it’s not so easy.--Scott Sumner
Pundits should probably try to stop extrapolating guidelines for economic policy by comparing whichever country happens to be doing worst, with the one that is doing least badly. Germany's consensus based management and export focus was touted as a recession-fighting miracle by liberals, while its relatively modest stimulus was praised by conservatives. But these things may have been incidental rather than central to Germany's relatively mild recession experience. Our experience in the Great Depression seems to indicate that such recessions are long and painful, and that they do not always affect all countries the same way at all times. At any given moment, some country is going to be doing better than the others, while some other country is going to be doing worse. This is not necessarily related to policy. This is obviously a huge problem for the eurozone. Those who think that the euro can muddle through this without losing the periphery have been counting on Germany (and to a lesser extent, France) to deliver a bailout. A recession is going to erode Germany's economic ability to funnel cash into the PIIGS, but more importantly, it is going to make German voters much less patient with the notion. It's probably not so great for the rest of us, either. When the global economy is dealt a blow, we all get bruised.--Megan McArdle
We are a strange lot, the human race. We learn in funny ways. Once you break a taboo it is gone, once you break a boundary it is gone, if you get away with something and you enjoy it, you do it again. When kids attack teachers, (and it happens thousands of times a year) being sent to the cooling off room is pretty much a reward, a fixed term exclusion often makes no odds either. If a social worker tells a teenage mum the word ‘no’ emotionally damages a child, a message goes out. If an adult admonishes a gang of children for littering and gets a police caution a message goes out. If a father is reported to the police for smacking a child a message goes out. If an adult is arrested for grabbing a child who is stealing, or assaulting another child, a message goes out. If knife criminals receive community sentences, a message goes out. If people tell you about your rights as a child, and never about your responsibilities, a message goes out. If teenage girls are given flats for having babies a message goes out. If the police arrest you fifty times and nothing happens a message goes out. How did it come to this? It is all about the power of ideas. The left wing sales pitch of grievance, victim, blame and excuse has done immense damage to society, as has the rights culture and the sense of entitlement many young people now have. If we look there is clear chain of causality that goes through the decades as other poisonous ideas took hold and turned society on its head: The family is outmoded, children don't need fathers, they should be treated the same as adults, they don't need discipline or boundaries, authority is oppression, everything is society's fault, right and wrong are relative concepts, as is morality, ethics are contextual and no one view is worth more than another. Well-meaning this may be, but no society in the history of the world has taught its children this and survived. Edmund Burke must be turning in his grave.--Simon Marcus
Jim Thome has been a great hitter. Not a good hitter. Not a very good hitter. He has been a slam-dunk, first-ballot, no-doubt Hall of Famer hitter. People have missed this because, well, people have missed a lot about Jim Thome. The man has a .403 lifetime on-base percentage, 25th all-time for players with 7,500 plate appearances, higher than DiMaggio, higher than Wagner, higher than Mays or Yaz or Rose or Ichiro. Many people will never respect on-base percentage the way they should because many people just don't like walks. But walking is an art. And Thome is Picasso. Anyway, his on-base percentage is not all the 1,700-plus walks he's earned. He's a .277 lifetime hitter, which doesn't sound great, but it's better than many of the other big home run hitters -- Ernie Banks, Cal Ripken, Eddie Matthews, Mike Schmidt, Reggie Jackson and Harmon Killebrew among them. Heck, Thome hit .300 three times. He, of course, has struck out more often than any player except Reggie Jackson (and it doesn't look like he will quite catch Reggie). But when he hit baseballs, he hit them hard.--Joe Posnanski
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