Quotes of the day

High frequency traders are very sensitive to cash flow (note Trading Machines shut down pretty quickly after not finding a niche), so they aren't building palaces based on unrealistic expectations like, say, California or or NYU journalism majors.--Eric Falkenstein

... the 93% increase in JPMorgan VaR from Q1 2011 to Q1 2012 is solely due to the sudden "realization" that the world's biggest bank by derivative holdings (at just about $73 trillion) is in reality nothing but a glorified hedge fund.--Zero Hedge

[Peter] Orszag’s [compulsory voting] proposal and others like it are potentially harmful solutions to a non-problem. There is no evidence that nations with compulsory voting are, as a result, better governed than those where voting is voluntary. As Tim Cavanaugh points out, the former category includes many states such as Argentina, Lebanon, Egypt, Congo, and others that are hardly paragons of civic virtue. By contrast, one of the few democracies that has even lower turnout rates than the United States is Switzerland, which is widely considered one of the best-governed nations in the world. ... More generally, we should spend less time worrying about turnout and more about whether those who do turn out actually understand what they are voting on.--Ilya Somin

Obama campaigned as a consistent critic of the Bush administration’s understanding of executive power — and a critic with a background in constitutional law, no less. But apart from his disavowal of waterboarding (an interrogation practice the Bush White House had already abandoned), almost the entire Bush-era wartime architecture has endured: rendition is still with us, the Guantánamo detention center is still open, drone strikes have escalated dramatically, and the Obama White House has claimed the right — and, in the case of Anwar al-Awlaki, followed through on it — to assassinate American citizens without trial.--Ross Douthat

I really dislike fawning Keynesians because I used to be one when I was a TA for Hyman Minsky back in college ... In contrast to the Keynesian vision of us all trying to figure out how to spend our endless vacation, there's Eric Hoffer, the enigmatic philosopher who appeared out of nowhere around 1934 in California at age 34 ... A man is likely to mind his own business when it is worth minding, and so those unhappy with their own meaningless affairs will focus on minding other people's business. Hoffer noted one must not merely provide for those without meaning in their lives, but provide against them, because in a democracy and market economy their preferences will have power. Those who see their lives as inferior and wasted crave equality and fraternity more than they do freedom, and this can cause a Republic to fall to a democracy, and ultimately a tyranny. ... In other words, Hoffer describes the essence of the Liberal desire to micromanage society into perfect equality at the expense of liberty. A coalition of intellectuals and the underclass, both of whom feel unappreciated. We haven't figured out a good outlet for these do-gooders, or a good way for those without a purpose to find life rewarding, so they continue to plague us with their plans and angst. That's a realistic vision of society, a future problem that is real yet potentially soluble.--Eric Falkenstein

Walmart often faces strong local opposition when trying to build a new store. Opponents often claim that Walmart lowers nearby housing prices. In this study we use over one million housing transactions located near 159 Walmarts that opened between 2000 and 2006 to test if the opening of a Walmart does indeed lower housing prices. Using a difference-in-differences specification, our estimates suggest that a new Walmart store actually increases housing prices by between 2 and 3 percent for houses located within 0.5 miles of the store and by 1 to 2 percent for houses located between 0.5 and 1 mile.--Devin Pope & Jaren Pope

The godfather of global warming is emancipating himself

It just so happens that the green religion is now taking over from the Christian religion.  I don’t think people have noticed that, but it’s got all the sort of terms that religions use … The greens use guilt. That just shows how religious greens are. You can’t win people round by saying they are guilty for putting (carbon dioxide) in the air.--James Lovelock

Paul Krugman spanks Paul Krugman, again

David Henderson has the latest swats here.

Quotes of the day

I have no doubt some people can predict infrequent events, ... Yet it's pretty hard to validate objectively, and in my experienced is best done via observing all the little good investments someone has made for 10 years, something that is impossible to do in scale. The idea that if you can predict infrequent events you can do very well for yourself is true enough, but that's a lot less useful to know than if rare events are unappreciated in general, which turns out not be be true.--Eric Falkenstein

It would have been hard to know the wisdom of Friedrich Hayek or Milton Friedman or Matt Ridley or Deirdre McCloskey in August of 1914, before the experiments in large government were well begun.  But anyone who after the 20^th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19^th-century proposals for governmental action are still neat, harmless ideas for improving our lives is not paying attention.--Deidre McCloskey

If the essence of tragedy is essentially good people being caught up in a vicious dilemma that make it impossible for them clearly to distinguish the virtuous from the disastrous choice, Greek voters are, today, experiencing a very real, very personal tragedy.--Yanis Varoufakis

On September 27, 1986, the US Senate voted by a lopsided margin to overhaul the tax code to the benefit of the extremely rich. The act, the second of the two major Reagan tax cuts, was written by Democratic Senator Bill Bradley of New Jersey and Democratic Representative Richard Gephardt of Missouri, and was signed into law by President Ronald Reagan on October 22, 1986. It was the first major alteration in US tax law in 40 years.
...
The law cut the income tax rate on the wealthiest Americans from 50 to 28 percent, while simultaneously increasing the tax rate on the poorest citizens from 11 percent to 15 percent. Tax brackets were reduced from 15 to four, and the top corporate tax rate was slashed from 46 percent to 34 percent. The law included a bevy of other measures punishing the poor and low-income workers, including abolishing interest deductions for debt on consumer loans such as credit cards and tightly restricting deductions for Individual Retirement Accounts (IRA).
...
The 74-23 Senate vote saw 33 Democrats vote in favor of the bill, many of them leading liberals, including senators Kerry and Kennedy of Massachusetts, Gore of Tennessee, Leahy of Vermont, Biden of Delaware, Proxmire of Wisconsin, Glenn of Ohio, Moynihan of New York, Lautenberg of New Jersey, and Harkin of Iowa. Only 12 Democrats, together with 11 Republicans voted against the bill, which was championed by the Reagan administration.--unattributed

Younger blog readers who rely heavily on the NYT for  information might be under the impression that the 1980s tax cuts for the rich were enacted due to the evil Republicans.  Actually, almost every single developed country cut its top MTR during the 1980s and 1990s.  And liberal Democrats in America also supported the cuts.  The past is another country—you had to be there to understand.--Scott Sumner

Photo link here.

Iceland did almost everything right

They stiffed the bank creditors to avoid aggravating the moral hazard problem, just like the textbooks recommend.  In the eurozone the bank creditors are being bailed out.  They relied of fiscal policy to address S/I and debt issues, and let monetary policy address AD, just as the New Keynesians were recommending in the 1990s.  In the eurozone they combined tight money with reckless deficits.  And now Iceland is growing fast and the eurozone is stagnating.

I do realize there are tricky issues involved when analyzing the GDP of a country with 310,000 people.  One big aluminum smelter could probably have an impact on GDP.  I’d focus on the fact that their GDP is up about 12% from 7 years earlier.  That’s not great, but they clearly aren’t in a depression.  I seem to recall that Britain’s GDP is flat over the past 7 years, and some of the weaker eurozone members have done even worse.

I realize that people will say that Iceland is special, it doesn’t count,  Just as Australia doesn’t count and Sweden doesn’t count and Poland doesn’t count and Israel doesn’t count and Argentina doesn’t count, and all those countries in the 1930s that just happened to start recovering after they left the gold standard don’t count.  But still, it’s one more data point.

That's Scott Sumner.

Imagine that the only sport America cares about

... is basketball. Football and baseball don't matter; the whole country is completely invested in the NBA. Now imagine that there's a World Cup for basketball that is 10 million times more important than the Olympics or the world championships. Now imagine that Durant, LeBron, Melo, Dwight, and Kobe went to this World Cup, turned out not to be as good as we all thought, played mediocre college-level ball, and finished eighth while releasing a flurry of sex tapes with reality-TV stars. Now imagine that this happened for 16 straight years. You're getting warm; you're still not hot. 

That's Brian Phillips, helping Americans understand how the English feel about their soccer team.

Quotes of the day

... there has to be a predetermined balance between artists and engineers.--Chris Ryan

Music does sometimes kick a door open inside the mind, but it also sometimes insulates the house, secures it from all wayward feelings and thoughts. And when a song does seem to kick a door open, we frequently listen to it over and over again until it loses its power and all of its passion is spent.--Mark Edmundson

JPMorgan lost $2 billion, one hundredth of the losses so far on Fannie Mae and Freddie Mac

JPMorgan rolled the dice, betting that the U.S. economy would improve — essentially a bet on Obama's economic agenda. That bet went south.  ...

But the losses at JPMorgan were borne not by the American taxpayer, but by JPMorgan. The losses also appear to have been offset by gains so that in the last quarter JPMorgan still turned a profit.

This is the way the system should work. Those who take the risk, take the loss (or gain). It is a far better alignment of incentives than allowing Washington to gamble trillions, leaving someone else holding the bag.--Mark A. Calabra

Quote of the day

People really don’t like to hear success explained away as luck—especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don’t want to acknowledge the role played by accident in their lives. There is a reason for this: the world does not want to acknowledge it either.--Michael Lewis

Video of the day: Larry Bird gets held by Moses Malone and Charles Barkley while Julius Erving punches him

around the 1:15 mark, via Bill Simmons.

To achieve a real recovery

..., government policy should focus on individual incentives to work, produce and invest. Central here are tax rates and regulations, including especially clarity about future policies. In a successful policy package, the government would get its fiscal house in order and make meaningful long-term reforms to entitlement programs and the tax structure.

The Obama administration seems to think that individual incentives and serious fiscal reforms are of no great importance and policy should emphasize Keynesian-style demand stimulus (public works, prolonged benefits) along with bits of industrial policy (loans and grants to "green" energy companies). This approach has failed for three years.

That's Robert Barro.

Quotes of the day

The world is not organised along rational lines.--Matthew Engel

Regardless of your thesis about what a victory or defeat for Greek leftists would do in the financial markets, having better information about the electoral outcome is sure to be valuable. Someone might just make “the best trade ever” in the next two weeks—all thanks to Greece’s restriction on freedom of the press.--John Carney

It is easy to sympathize with the hostility to the many banks that behaved (in retrospect) so foolishly in ways that damaged everyone else as they took on excessive risk in their quests for greater profits. One can understand also the general reaction against capitalism and “market failures” since commercial and investment banks were in the past a leading example of capitalism at work. Yet anyone concerned about the welfare of the poor and middle classes should resist the temptation to attack competitive private enterprise and capitalism- monopoly or crony capitalism should be deplored. This is only partly because “government failure” also contributed in an important way to the financial crisis as regulators did not rein in the asset explosion of banks and households. Indeed, regulators often encouraged lending to lower income families to buy houses with low down payments, large mortgages and ballooning interest payments.  The main reason to be concerned about the attacks on competitive capitalism is that it has delivered during the past 150 years so much to all strata’s of society, including the poor.--Gary Becker

Every technology has its own logic. Facebook “wants” us to log in a lot and to interact with each other – hence the ability to “like” posts, to comment, to “like” comments, and the constant stream of notifications about all of this. This is sinister, but less insidious because it is so brazen. Facebook the technology has metaphorical wants that reflect the entirely non-metaphorical strategy of Facebook the company.--Tim Harford