Quotes of the day

Too much schooling is a bad thing.--Eric Falkenstein

Some claim that what sets us apart from other animals is our use of tools. Au contraire. Even sea otters -- a species that has neither reached the moon nor invented the beer cozy -- use stones to crack open the shells of their prey. No, what makes us unique is our staggering imagination and creativity, mostly when it comes to ostensibly obeying laws while utterly circumventing their spirit. We are homo loopholeus.--Patrick Hruby

... the startup job creation rate has collapsed during the last three years and actually fallen lower in 2011 than ever before. I’ll ask: Why did the IRS start cracking down on companies that hire American contractors in 2009?--Tim Kane

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.

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.

Chart of the day: As far as the North is from the South

Source here.

Quotes of the day

Might the rising share of the top 1 percent be related to the increasing use of English as a global language?--Greg Mankiw

International marriages are often attacked as exploitative, because they typically take place between an older richer man and a younger, less well-educated woman from a poor country. Terrible examples of abuse do exist. Yet the evidence suggests that international marriages often last longer than average and that migrant wives come to play important roles in their husband’s host country. Marriage remains, for the most part, an institution that promotes economic improvement and personal happiness. It also tends to boost social assimilation—the main exception being when a second-generation immigrant weds a girl from a village his parents had left long before.--Economist

So it's one thing to say [skill players who can dictate terms to the defense] they are the future and another to actually find enough people to make that future a reality. Just like at the quarterback position, there are simply more job openings than there are qualified candidates. Wanted: 6-foot-6 freak athlete who can run a 4.5 40, has incredible hands, is willing and able to block 300-pound defensive ends, and can immediately memorize a 1,000-page playbook. No appointment necessary.--Chris Brown

THE Occupy Wall Street movement has raised important questions about the respect paid to wealth in our society. There is a good deal of unfairness in the American economy, and by deliberately targeting the “top 1 percent,” the demonstrators have opened up a dialogue that is quite useful. Nonetheless, as someone from a conservative and libertarian background, I find that I am hearing too much talk about riches and not enough about values. It’s worth recalling why so many Americans have respected the wealthy in the first place.
...
The relevant question, in my view, is not about how much you have earned but about how you have earned it. To further confuse matters, many right-wing Republican politicians supported corporate bailouts and corporate welfare far beyond what was necessary to stabilize the economy, in doing so further muddying the difference between productive and predatory capitalism.--Tyler Cowen

The Clinch River Breeder Reactor. The Synthetic Fuels Corporation. The hydrogen car. Clean coal. These are but a few examples spanning several decades — a graveyard of costly and failed projects. Not a single one of these much-ballyhooed initiatives is producing or saving a drop or a watt or a whiff of energy, but they have managed to burn through far more more taxpayer money than the ill-fated Solyndra. An Energy Department report in 2008 estimated that the federal government had spent $172 billion since 1961 on basic research and the development of advanced energy technologies. What does Washington have to show for these investments? And should the government even be in the business of promoting particular energy technologies?--Steven Mufson

... Hoover's Peter Schweizer's new book claims that 80% of the loans in the DOE program that Solyndra tapped went to companies owned or run by Obama backers.  Of course, one would expect that most "green energy" types would be enthusiastic Democrats.  Still, the thing has a certain whiff about it.  Then today we learn that Solyndra, which was originally going to announce layoffs in late October 2010, held off on the announcement until November 3rd (aka election day).  And they seem to have done so at the behest of the White House.  I think the very least you can say is that the political side became inappropriately entangled with the technocratic side of this loan.  It undermines one's faith in both the program, and the administration.  Obviously, this is not the worst thing that any president has ever done, or even in the top 100.  But it's not a good thing.  And the people who support these sorts of technocratic subsidies should be the first people, not the last, to decry the actions which have tainted the program.--Megan McArdle

Both [Paul] Krugman and [Larry] Summers spent a lot of time saying that they agreed with each other — with one big difference. They both quoted Keynes as diagnosing “magneto trouble” — the engine of the economy is broken, and it needs to be fixed. Summers has faith that, in Churchill’s phrase, “Americans can always be counted on to do the right thing, after they have exhausted all other possibilities” — the right thing, here, being to fix the magneto with expansionary fiscal and monetary policy. Krugman, by contrast, sees political gridlock as far as the eye can see, and says that it doesn’t matter how innovative or philanthropic or demographically attractive the U.S. is — if you don’t fix the magneto, the car won’t start, and America’s magneto ain’t gonna get fixed any time soon.
...
So, do I think that North America faces a Japan-style era of high unemployment and slow growth? I’ll agree with Summers and Krugman on this one: yes, it does. Will it manage to do what’s necessary to avoid that fate? That’s something no one can know with any certainty. But life’s certainly a lot easier if you believe that it will.--Felix Salmon

Banks pour huge amounts of money into one particular asset class. They are encouraged to do this by public policymakers, although there is some dispute about whether that was the main reason for their decisions. These assets have a long tradition of doing well, although a close look at the evidence would have raised red flags. The asset market in question suddenly takes a big dive as default risk increases sharply. This drags down many large banks, forcing policymakers to provide assistance. What have I just described? The sub-prime fiasco or the PIGS sovereign debt fiasco? I’d say both. I’d say these two crises are essentially identical.--Scott Sumner

There is one group that is not smiling about these new, low-cost teeth-whitening services: the Connecticut Dental Commission. In June, the Commission ruled it is a crime punishable by up to five years in jail or $25,000 in civil penalties for anyone but a licensed dentist to offer teeth-whitening services, even if the customers apply the product to their own teeth. Teeth-whitening products are regulated by the FDA as cosmetics, which mean anyone—even a child—can purchase them and apply them to his or her own teeth without a prescription and without supervision or instruction. The Dental Commission's ruling has nothing to do with public health or safety and everything to do with protecting licensed dentists from honest competition.--Institute for Justice

People who are wise, good, smart, skillful, or hardworking don't need politics, they have jobs.--P.J. O'Rourke

The U.S. Constitution is less than a quarter the length of the owner's manual for a 1998 Toyota Camry, and yet it has managed to keep 300 million of the world's most unruly, passionate and energetic people safe, prosperous and free.--P.J O'Rourke

I wonder if Tim Harford could make some progress at Zucotti Park

I certainly hope so:

For some reason we seem to have decided that jet fuel and domestic heating deserve a tax break, yet simply being rich is regarded as the most profound of pollutants.
...
but the idea that the cause of the crisis was simply fat cat bankers is juvenile. The financial system – its regulations, risk management and ethics – is profoundly flawed. Fixing those flaws is a hugely technical problem as well as a political one. Fighting the banking lobby is going to be necessary but not sufficient.
...
We need to pay serious attention to our innovation system. Patents are useful in some circumstances but seem to be distorting the computing industry. There is far too little attention being paid to ideas that really matter, such as low-carbon technology or antibiotics.
...
Capitalism can’t just be about trying to make money – that’s the ethics of a used car salesman or a drug dealer. Capitalism has to involve a sense of creativity, boldness and pride in a job well done. The most successful companies have usually had this and many still do – from Apple to Brompton to Zipcar – but many financial companies seem to have long ago abandoned them.

Quotes of the day

The great value investor Benjamin Graham suggested that investors should never have less than 25% or more than 75% of their money in stocks.--Jason Zweig

I realized technical analysis didn’t work when I turned the charts upside down and didn’t get a different answer.--Warren Buffett

I’m already highly irritated. What makes this canuck think that “the simplest model you can imagine” has any bearing on whether NGDP targeting is a wise policy for our highly complex economy? Theoretical macroeconomists love to play with their little toy models, but unfortunately these models don’t actually describe the world we live in. In their models the IS curve slopes downward. Output depends on real interest rates. Inflation depends on output gaps. I don’t know about you, but that’s not the world I inhabit.--Scott Sumner

Well, you're gonna be dead a long time. Might as well have fun when you're alive.--Rex Ryan

In terms of guardrails in the financial system, I think automatic saving for me is the best example for this. You know the rational thing to do is to look at the end of each month and see how much money we had, how much expenses we had and then at the end of each month decide how much to send for our long-term savings. But I think we all intuitively realize that if this was the case we would not save as much. American savings rates are nothing to be proud of, but they will probably be even lower. And it clearly doesn’t make rational sense because we have different levels of expenses in the winter and in the summer. There are fluctuations. There are things that come as emergencies. Saving should not be the same every possible month. But we know that if we relied on our mediocre cognitive ability and thinking and demanded that every month we make this decision, the odds are we will never make this decision. Or at least we’ll make it very infrequently. So by creating a system that takes this decision out of our hands we actually do much better.--Dan Ariely

[At Goldman, Jon Corzine] was called ‘Fuzzy’ because he’s a sloppy thinker.  You can never really figure out what he’s doing because he doesn’t know. He just kind of wings it.--Goldman Sachs executive

I suggest that a rich person can consistently favor taxes on the rich without volunteering to pay such taxes him or herself. The argument is simply that the world in which every rich person pays is preferable to me to the world in which no rich person pays which is preferable to me to the world in which only I pay.--Karl Smith

... I learned far more from 3 months with the Assimil self-study course than from 5 years of school French. The absurdity of that comparison only grows upon comparing the hours spent. The Assimil method took 0.5 hours per day for about 90 days: That’s 45 hours. The 5 years of school French happened every school day for roughly 50 minutes. A school year has roughly 180 days, for a total of 750 hours over the 5 years. Including homework, the total is probably 900 hours. That’s a time-invested ratio of 20 to 1. Thus, despite spending 5 percent of the hours that I spent in school, with the self-study method I became far more competent in the language.--Sanjoy Mahajan

The history of English’s global diffusion is littered with important dates: the planting of the Jamestown colony in 1607; Robert Clive’s victory at the Battle of Plassey in 1757, which ushered in the dominion of the British East India Company; the creation of the first penal colony in Australia in 1788; the British settlement at Singapore in 1819 and establishment of a Crown Colony in Hong Kong in 1842; the formal beginning of British administration in Nigeria in 1861; the foundation of the BBC in 1922 and the United Nations in 1945; the launch by AT&T of the first commercial communications satellite in 1962. This list is condensed. It takes no account, for instance, of the various waves of Anglomania that swept much of Europe in the eighteenth century. But it will be apparent that the diffusion of English has had a lot to do with material reward, the media, and its use as a language of instruction. A fuller list might intensify the impression of a whiff of bloodshed. Wherever English has been used, it has lasted. Cultural might outlives military rule.--Henry Hitchings

Retractions of research papers have soared in recent years, which demonstrates how unethical scientists, like financial criminals, cut corners to tell people what they want to hear.--Edward Tenner

Together with a string of other recent cases, the Bronx case suggests that a culture of corruption and entitlement has spread through the ranks of the thin blue line. Worse, it is clear that police union officials are the mainstay of the illegal ticket fixing enterprise, so much so that prosecutors considered indicting the union as a corrupt organization under racketeering laws. The police demonstration in the Bronx was apparently orchestrated by the union, which sent text messages to officers urging that they show up to support colleagues involved in ticket fixing. “It’s a courtesy, not a crime,” was the slogan.
...
This of course is what everybody thinks of special privileges. That’s what doctors and lawyers think when they cover up professional wrongdoings by their guild brethren. It’s what investment bankers think when they pass on inside information to favored clients — a courtesy not a crime. It’s what politicians think when they do favors in exchange for money and it’s what Don Corleone and Tony Soprano think when they do favors for their friends. The essence of privilege (private law, etymologically speaking) is exactly that: exemption from the laws that govern other people. The police union in New York believes that based on longtime practice it possesses certain unique rights to circumvent the written law.
...
What that Bronx courtyard shows us is a political culture in decline and a development model on the brink. New York’s dependence on Wall Street and the federal government is becoming more acute by the year. Post bubble and post stimulus, neither source of revenue can be expected to grow at an adequate rate, and it is not unlikely that both will be shrinking for years. The pieces of the coalition are venting their rage and hostility, and new supplies of money are nowhere in view.--Walter Russell Mead

But if we are headed toward collapse, what would an American “Oh sh*t!” moment look like? An upsurge in civil unrest and crime, as happened in the 1970s? A loss of faith on the part of investors and a sudden Greek-style leap in government borrowing costs? How about a spike of violence in the Middle East, from Iraq to Afghanistan, as insurgents capitalize on our troop withdrawals? Or a paralyzing cyberattack from the rising Asian superpower we complacently underrate? Is there anything we can do to prevent such disasters? Social scientist Charles Murray calls for a “civic great awakening”—a return to the original values of the American republic. He’s got a point. Far more than in Europe, most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just can’t understand why it’s running so damn slowly.
...
What we need to do is to delete the viruses that have crept into our system: the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudosciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent—to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances, and our newfound unemployment ethic. Then we need to download the updates that are running more successfully in other countries, from Finland to New Zealand, from Denmark to Hong Kong, from Singapore to Sweden.
...
And finally we need to reboot our whole system. I refuse to accept that Western civilization is like some hopeless old version of Microsoft DOS, doomed to freeze, then crash. I still cling to the hope that the United States is the Mac to Europe’s PC, and that if one part of the West can successfully update and reboot itself, it’s America.
...
But the lesson of history is clear. Voters and politicians alike dare not postpone the big reboot. Decline is not so gradual that our biggest problems can simply be left to the next administration, or the one after that. If what we are risking is not decline but downright collapse, then the time frame may be even tighter than one election cycle.--Niall Ferguson

The one thing that we absolutely know for sure is that if we don’t work even harder than we did in 2008, then we’re going to have a government that tells the American people, ‘you are on your own. If you get sick, you’re on your own. If you can’t afford college, you’re on your own.--President Obama

Roosevelt transformed millions of Americans from citizens into clients. The direct effect of this was evil, and the indirect effect was even worse, for all these people were robbed of their self-respect.--H.L. Mencken

A president’s approval rating at the beginning of his third year in office has historically had very little correlation to his eventual fate. In January 1983, Reagan had an approval rating of just 37 percent, but he won in a landslide. George H. W. Bush had a 79 percent approval rating in January 1991 and was soundly defeated. But voters start to think differently about a president over the course of his third year; they view him more on the basis of his performance and less on the hopes they had for him. These perceptions are sharpened by the beginning of the opposition party’s primary campaign, which, of course, accentuates the negatives.  A president’s approval rating toward the end of his third year, therefore, has been a decent (although imperfect) predictor of his chances of victory. Reagan saw his approval rating shoot up to 51 percent in November 1983 amid the V-shaped recovery from the recession of the previous year — the first sign that he was headed for a big win. Obama’s approval rating may have rebounded by a point or two from its lows after the debt-ceiling debacle — but not by much more than that. In late October, it ranged between 40 and 46 percent in different polls and averaged about 43 percent.  There have been two presidents stuck with similarly low approval ratings a year in advance of the next election. Gerald Ford had a 44 percent approval rating a year before his loss to Carter. Johnson had a 41 percent approval rating in November 1967, and although he was eligible for another term, he opted not to run. His vice president, Hubert H. Humphrey, did, and he lost.--Nate Silver

Quotes of the day

... it’s hard to escape the conclusion that the only thing Congressional Republicans find more abhorrent than Keynesian economics is austerity for programs they like.--Brian Beutler

Only by reducing the growth of government can we increase the growth of the economy.--Ronald Reagan

During the first 10 months of this year President Obama declared 89 major disasters, more than the record 81 declarations that he made in all of 2010. And Obama has declared more disasters — 229 — in the first three years of his presidency than almost any other president signed in their full four-year terms. Only President George W. Bush declared more, having signed 238 disaster declarations in his second term, from 2005 to 2009.--Amy Bingham

There will be great earthquakes, famines and pestilences in various places, and fearful events and great signs from heaven.--Jesus Christ

The nonfinancial sector wants to issue risky, long-term liabilities and to hold riskless, short-term assets. The financial sector accomodates this by doing the reverse. One question is, how much of this financial intermediation is optimal? Up to a point, financial institutions can use specialized knowledge, monitoring arrangements, and diversification to perform their function relatively safely. However, beyond that point, they are relying more and more on signaling and confidence. This is true for governments as well as for financial intermediaries. Since 2008, my reading has been that the amount of financial intermediation needs to decrease, with whatever painful consequences that follow. This includes a reduction in government-backed intermediation, rather than a new form of government backing of the sort that Caballero is suggesting. The Austrian perspective would be that government support for financial intermediation is the disease, not the cure. In this case, I believe that is correct.--Arnold Kling

Occupy Wall Street is denouncing banks and Wall Street for "selling toxic mortgages" while "screwing investors and homeowners." And the federal government recently announced it will be suing mortgage originators whose low-quality underwriting standards produced ballooning losses for Fannie Mae and Freddie Mac. Have they fingered the right culprits? There is no doubt that reductions in mortgage-underwriting standards were at the heart of the subprime crisis, and Fannie and Freddie's losses reflect those declining standards. Yet the decline in underwriting standards was largely a response to mandates, beginning in the Clinton administration, that required Fannie Mae and Freddie Mac to steadily increase their mortgages or mortgage-backed securities that targeted low-income or minority borrowers and "underserved" locations. The turning point was the spring and summer of 2004. Fannie and Freddie had kept their exposures low to loans made with little or no documentation (no-doc and low-doc loans), owing to their internal risk-management guidelines that limited such lending. In early 2004, however, senior management realized that the only way to meet the political mandates was to massively cut underwriting standards.
...
Taxpayer losses at Fannie and Freddie alone may exceed $300 billion. The costs of the financial collapse and recession brought on by the mortgage bust are immeasurably higher. Unfortunately, the Obama administration has perpetuated the low underwriting standards that gave us the crisis and encouraged the postponement of foreclosures by lending support to various states' efforts to sue originators for robo-signing violations. Now they are trying to deflect blame from Fannie and Freddie by suing the originators who fulfilled the politically motivated demands of the government-sponsored agencies that drove the mortgage crisis. If successful, all of those efforts will further postpone the ability of banks to grow the supply of credit, and they will sow the seeds of the next mortgage bust.--CHARLES W. CALOMIRIS

I agree with Nietzsche that duty is not obvious, and often some self-serving platitude for some powerful interest, so it isn't helpful to state that something that is a duty is best. Further, it makes no sense to ignore context when applying a universal law, as when you should lie to keep Nazis from finding Jews in your basement, or when you kill a dangerous burglar, and so universal law is not obvious. Lastly, as Ayn Rand noted, ignoring the consequences of actions, and just focusing on the duty, is irrational, because we act to make things in a real world that we might as well believe really is real. Finally, I should note it is rather circular in practice, because in the end the 'universal law' is defended on utilitarian grounds anyway (eg, it will make society happier).--Eric Falkenstein

Limited learning on college campuses is not a crisis because the institutional actors implicated in the system are receiving the organizational outcomes they seek, and therefore neither the institutions themselves nor the system as a whole is in any way challenged or threatened.--Richard Arum, Josipa Roksa

On the cosmic justice front, there might be something to be said for a "clawback" of past earnings of professors and administrators at colleges. But I don't see anyone clamoring for that. Of course, cosmic justice is always served by taxing people with high incomes. Make them pay off everyone else's student loans, bad mortgages, free health care for all, etc. After all, it is the fault of high-income people that students borrowed all that money. Isn't it?--Arnold Kling

The liberal fairness of Occupy Wall Street diverges from conservative and libertarian fairness [of the Tea Party] in that liberals often think that equality of outcomes is evidence of fairness.--Jonthan Haidt

Words, words, words

President Obama is talking on TV right now.  I am more productive in my job with the mute on.

Makes me think of the time Beavis and Butthead were using industrial strength glue to create beards on their faces.  Butthead looks at the warning label, but says aloud "... words, words words."

The President says his jobs bill will create jobs because "experts who do this for a living" affirm it, so therefore it must be true.  I wonder if it would be too Butthead of me to ask what these experts predicted about his earlier stimulus bills.

Oh, and apparently, Butthead was sampling Hamlet.  Check out Kenneth Branagh's interpretation at the 1:19 mark:


UPDATE: I found the B&B episode, go to the 1:50 mark:


UPDATE: Simon Black eloquently suggests the reasons for my impatience today:

While people like Warren Buffet are pleading with the government to raise their taxes and give away their wealth to sycophantic bureaucrats, Jobs showed time and time again that the best way to improve people’s lives is to create value and be productive.

Steve Jobs was one of the most productive human beings to have ever lived; he started several successful companies which directly employed tens of thousands of people. Indirectly, his businesses improved the livelihoods of millions across the globe, from Chinese factory workers to iPhone app programmers to Apple shareholders.

In building an empire and unimaginable wealth for himself, Steve Jobs enriched the lives and livelihoods of others by creating value. Not by forced redistribution. Not by giving things away. By creating value.

Ironically, just as I write this I am watching President Obama on Bloomberg Television trying to explain how many jobs his new plan will create– 1.9 million in his estimate:

“We’re just going to keep on going at it and hammering away… until… something gets done. I would love to see nothing more than Congress act… so aggressively.”

Politicians would do themselves and their constituents a great service by comparing their own track record for enriching people’s lives against Steve Jobs’ performance, and then kindly stepping out of the way. The path to prosperity is not paved in votes, but rather in freedom: the freedom to create, produce, risk work hard… and be rewarded for your efforts.

If you have the time, I’d encourage you to take a few minutes and read some of Jobs’ own words; there are boundless sources online that will praise his creativity, drive, and intellect, but perhaps no one is better suited to explain Steve Jobs than the man himself.

Below I’ve pasted in some key quotes ...

I was just thinking about England's economic ascent in the 18th & 19th centuries yesterday

And today, abracadabra, I find that Rick Brookstaber has a great piece on it.

Photo link here.

Quotes of the day

On August 15th, 1971, the dollar's final gold tether was severed, allowing it to sail away into uncharted seas.--John Carney

When markets are bullishly priced,
A hedge fund seems cooler than ice.
But when markets fall,
Some hit a brick wall.
Hope Greenwich soup kitchens are nice.--Kevin Roose

Independent Study – Each student is encouraged to develop an individually tailored program, in conjunction with a faculty advisor and registered therapist, which is designed to counteract psychological, intellectual, and emotional shortcomings which will prove to be deleterious to his or her productive insertion into society post graduation. Popular programs of study include How Not to Be a Hubristic Ass, How to Respect the Opinions and Choices of Others, and How Not to Bite the Hand that Feeds You. In the case of Mr. Lohse, the faculty would like to draw special attention to a newly-offered course, No-one Wants to Hear My Poorly-Thought-Out, Half-Assed Opinions Over a Beer at the Student Union on Saturday Night. It has been recommended for him by a number of his classmates and peers.--TED

I’ve had many opportunities to experience the “pleasant” Chinese living standards. The Chinese people seem to spend their money much more wisely than the Chinese government. China is poorer than Mexico. China is growing fast, as you’d expect of a country filled with 1.3 billion people whose culture reveres education, hard work, and entrepreneurship, and who has been moving away from the madness and starvation of Maoism. I have no doubt that if the US moved some of its vast spending on social programs to highway construction we too could have big new smooth roads. Taxes normally grow as a share of GDP as countries get more developed, and easier to tax. The East Asian countries that actually are pretty rich (Singapore, Hong Kong, Taiwan, South Korea and Japan) tend to have tax rates that are well below the average of western countries. Despite taxes that are much lower than in the US, Singapore has lots of nice roads and new infrastructure. If we want to find an East Asian model to emulate, I’d suggest looking to low tax, rich, efficient Singapore, not poor and inefficient China.--Scott Sumner

Texas has 10,135 megawatts of installed wind-generation capacity. That’s nearly three times as much as any other state. But during three sweltering days last week, when the state set new records for electricity demand, the state’s vast herd of turbines proved incapable of producing any serious amount of power. Consider the afternoon of August 2, when electricity demand hit 67,929 megawatts. Although electricity demand and prices were peaking, output from the state’s wind turbines was just 1,500 megawatts, or about 15 percent of their total nameplate capacity. Put another way, wind energy was able to provide only about 2.2 percent of the total power demand even though the installed capacity of Texas’s wind turbines theoretically equals nearly 15 percent of peak demand. This was no anomaly. On four days in August 2010, when electricity demand set records, wind energy was able to contribute just 1, 2, 1, and 1 percent, respectively, of total demand.--Robert Bryce

More than half of Americans would rather give up chocolate, alcohol and caffeine for a week before parting temporarily with their phones, according to a recent survey by technology firm TeleNav.  One-third would give up sex, 22% would give up their toothbrushes (versus 40% of iPhone users, who evidently love their phone more than clean teeth) and 21% would rather go shoeless before separating from a mobile phone.--Shan Li

Like it or not, it’s the gatekeeper for every new drug and device marketed in the U.S., and it’s a big reason why it takes over a decade and hundreds of millions of dollars to bring a single new drug to market. Getting innovative new products through the FDA’s development and approval process faster and less expensively would improve public health and help lower health-care costs.--Paul Howard

Rioters are mainly younger men, particularly those who are unemployed and have lots of time on their hands. The high unemployment rates of young French Muslim males who were not integrated into the French economy were a major factor behind the 2005 rioting there. The likelihood that many rioters will be apprehended and punished affects the willingness of many to participate in riots, especially individuals with much to lose from being arrested and punished. Police crowd control techniques and police efforts to address grievances in minority neighborhoods are also important in preventing some riots, or at least ending them more quickly once they have begun.--Gary Becker

But while the rioters have been maintained in a condition of near-permanent unemployment by government subvention augmented by criminal activity, Britain was importing labor to man its service industries. You can travel up and down the country and you can be sure that all the decent hotels and restaurants will be manned overwhelmingly by young foreigners; not a young Briton in sight (thank God). The reason for this is clear: The young unemployed Britons not only have the wrong attitude to work, for example regarding fixed hours as a form of oppression, but they are also dramatically badly educated. Within six months of arrival in the country, the average young Pole speaks better, more cultivated English than they do.--Theodore Dalrymple

Quotes of the day

I was really surprised, because I remembered [Kyle Chandler] as this fresh-faced, boyish, charming young man. And here he was looking like one of the Baldwin brothers after a hard weekend.--Peter Berg

A group of German banking associations to EU banking officials conducting ‘stress tests’ to see how many European banks are in trouble: “Given the tense situation which already exists in money and capital markets, we believe publishing the results with the present level of detail would exacerbate the sovereign debt crisis. ”Translated into English that means, “If the public ever finds out what a mess we are in, they will panic. So shut up.”--Walter Russell Mead

The limited consumer and mortgage financing in China means that china will not have a US-style financing problem, and the large amount of reserves means that China won’t have a Korean-style financing problem, but no one has ever seriously argued that those are the kinds of risks China faces. What matters is the level of debt, whether or not its growth is sustainable, and the kinds of contingent structures that are embedded. I would argue that all three measures are worrying.--Michael Pettis

As former Senator Phil Gramm once told us, never take a hostage you're not prepared to shoot. Republicans aren't prepared to stop a debt-limit increase because the political costs are unbearable. Republicans might have played this game better, but the truth is that Mr. Obama has more cards to play. The entitlement state can't be reformed by one house of Congress in one year against a determined President and Senate held by the other party. It requires more than one election. The Obama Democrats have staged a spending blowout to 24% of GDP and rising, and now they want to find a way to finance it to make it permanent. Those are the real stakes of 2012.--WSJ Editorial Board

First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private)—which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases.--Reinhart and Rogoff

[Obama appointed] Chairman [Erskine] Bowles found that, to get three Senate Republicans to support a net tax increase, he needed to repeal an expensive new health program, tick off the trial lawyers with malpractice reform, establish a pilot program for Ryan-Rivlin style Medicare reform, and place a cap on total health spending. He needed to increase the eligibility age not just for Medicare, but also for Social Security, and he needed to slow Social Security spending growth through changes to the benefit formula. He needed to tick off government worker unions by prospectively repealing their special exemption from Social Security. And he needed to agree to tax reform that would raise total revenues while dramatically lowering top individual and corporate rates. President Obama has been unwilling to make any of these changes, and yet suggests Republicans are being unreasonable for not agreeing to net tax increases. The President refuses to discuss changes to the trillion dollar new health entitlement he and Congress created last year. He refuses to discuss changes to Social Security beyond a CPI correction. He insists that top tax rates go up. He attacked Paul Ryan for his long-term Medicare reform and refuses to consider it. At least as important, Bowles & Simpson offered a long-term fiscal solution in exchange for this net tax increase, under which spending would never have exceeded 22% of GDP and deficits would have quickly dropped below 2% of GDP and eventually reached balance. That’s too much spending (and too high taxes) for my taste, but it’s qualitatively different from and far superior to the President’s proposal, which is to trade permanent tax increases for only a temporary slowdown in government spending growth and budget deficits.--Keith Hennessey

There is some machine moving now that I do not understand, and I won’t be the one to stop it. I have chosen this particular person, only ever, with whom to try for a child. Goodbye to the possibilities of knee tapping. Goodbye to all of that. If I am to become a father I have no choice but to forget everything outside of this room. And to produce.--Paul Ford

Infants seem to perceive reliable adults as capable of rational action, whose novel, unfamiliar behaviour is worth imitating. In contrast, the same behaviour performed by a previously unreliable adult is interpreted as irrational or inefficient, thus not worthy of imitating.--Diane Poulin-Dubois

Quotes of the day

Approximately 3,000 scientific articles are published per day – roughly one every 10 seconds of a working day. We can now expect that these papers will, each year, cite around five million previous publications. And the rate of production of scientific papers is quadrupling every generation. (All these estimates are based on data from the Institute for Scientific Information.) The percentage of human knowledge that one scientist can absorb is rapidly heading towards zero. This side of a new Dark Age, there will never be another Da Vinci. ... funding new ideas that matter is almost certainly getting more and more expensive. By itself that fact need not be too disturbing: we can afford to spend more on science, and there are more qualified scientists across the world than ever. But it also suggests that scientific and technological innovation is, more than ever before, an organizational problem – and an organizational problem to which we have probably devoted too little attention.--Tim Harford

The great majority of immigrants all over the world, both legal and illegal, move for economic reasons: to find jobs that pay a lot more than they can earn in their origin countries. For example, the average illegal immigrant in the United States from Mexico appears to earn about three to four times what he would earn in Mexico. This is why virtually all the illegal (and legal) immigration is from poorer to richer countries. Immigration increases when poorer countries are hit by recessions and financial crises, and by internal conflicts that make life there dangerous and more uncertain.  ... Expansion of legal immigration would be good for America, and it would also further cut down the number of illegal immigrants by enabling more of them to come legally and gain the many advantages of legal status.--Gary Becker

We need (low) inflation to prevent (high) inflation.--Scott Sumner

If a Reaganite was president and doing aggressive supply-side policies, you can be sure the WSJ would be demanding easier money to help facilitate growth, just as they asked for easier money when Reagan himself was president and inflation was 4%. Recent conservative hysteria about inflation is completely at odds with their relative silence during the Bush years, when inflation was higher than under Obama, and the dollar plummeted in value (it’s been fairly stable under Obama.)--Scott Sumner

In practice behavioral insights are applied mainly to increase the scope and scale of government, which presumably is staffed by unbiased administrators. Consider than Al Gore cozied up to ethanol when he was trying to be President but now agrees it was counterproductive, and like the sugar cane quotas created a permanent policy that cost merely tens of billions in waste. Such are the results of presumably high-minded objectives, all twisted by the absence of competition.--Eric Falkenstein

Alas, Rawlsian justice is radical egalitarian redistribution of wealth and even esteem, infringing on a lot of freedom of contract by other people merely because they happened upon having more stuff (the Rawlsian condition that forced redistribution should not hurt the least advantaged person basically makes it moot, because the least advantaged person in any society is a miserable wretch not helped nor hurt by anything). A Rawlsian utopian would equally reward, in all ways, the person who sits looking at butterflies all day and he who plays great basketball, the CEO and the janitor. This doesn't generate Sweden (prosperous and equal) rather, illiberal hell-holes like Cambodia and Russia at their worst.--Eric Falkenstein

Just hours after President Obama told lawmakers it was time to “eat our peas” and reach a deal on the deficit, the First Lady was spotted doing just the opposite. Mrs. Obama was seen indulging this afternoon in a colossal 1,556-calorie meal at the Shake Shack, according to the Washington Post, which spotted the First Lady at the newly-opened D.C. diner. The First Lady, a well-known advocate for healthy living and child nutrition, reportedly ordered a ShackBurger, fries, chocolate shake and a Diet Coke.--Mary Bruce

Despite his well-documented and extensive injuries, Yao scored the most points of any center between 2002 and 2009. The Lakers might have been out one of their championships had Yao stayed healthy in 2009. Shortly after Yao guided the Rockets to what would be his only playoff win in a series against the Portland Trail Blazers, he dominated the opening game of a second series against the Lakers with 28 points and 10 rebounds (Pau Gasol and Andrew Bynum had a combined 24 points). In the third game of the series, team officials diagnosed Yao with a sprained ankle. Further tests revealed a fracture. He would play in only five more games the rest of his career.--Jonathan Abrams

Why am I the only one not nervous?--Yao Ming, before a team drug test

The sheer variety of available drugs and the hedonism of our popular culture make it unlikely that we can find a simple, practical and clean solution for America’s drug problem. We manage alcohol reasonably well in this culture, I suppose, but “passive drinking” is a lot worse than passive smoking. Tens of thousands die of the results of alcohol abuse every year and many of alcohol’s victims are innocent: children and spouses of alcoholics who are neglected and abused, drivers and pedestrians unlucky enough to get in the path of a drunk driver and so on. I’ve known brilliant students whose alcoholism got them expelled, promising writers who drowned their talents, couples ripped apart by the effects of excessive drinking and people whose lives were blighted by the consequences of a parent’s addiction to booze. For some people alcohol is a light refreshment and social lubricant; for others it spells ruin and death. As more drugs become legal and widely available, many more Americans are likely to succumb to addiction and abuse.--Walter Russell Mead

Photo links here, here, here and here.

Chart of the day: Fertility by selected nations since 1960

Source here.

Marc Faber never pulls punches

Too bad for President Obama:

He is by far one of the worst Presidents the US has had. I’m very upset that none of what he said he would do, mainly change, has actually occurred. So I think he’s certainly intellectually dishonest. And he’s probably made the geopolitical situation worse and also the economic situation worse. And he’s actually vote-buying through handing out money and through increased transfer payments. [I don't think he has his priorities straight], because the priority would be to essentially make the US competitive, and by pursuing expansionary fiscal policies that enlarge the government, you atrophied the private sector. In other words, the private sector is hurt by too much government involvement. Like my friends, they say, we have to pay more and more tax for government officials to harass us more and more and implement more and more regulation. And that of course is not a way to create prosperity. If you have a large corporation or a corporation, you are more likely to hire people outside the US than in the US.

I predict we will have more Boomers clinging bitterly to their grandchildren's employment and wealth opportunities. Why be afraid of China when we have the AARP?

Photo link here.

Quotes of the day

The high-frequency traders are like the beautiful women. If their biggest “threat” is to stay home, we are not worse off for their existence. If we fear their flaky departures enough, we may prefer to trade in other markets or at other time horizons, namely very long.--Tyler Cowen

Said a Harvard professor of econ,
"That Google's got something unique on:
They have cash by the score,
Yet still borrow more;
This is something I've puzzled all week on."

Said an expert in cross-border taxes,
"I should hope the professor relaxes;
As Google keeps cash
In an overseas stash,
'Til taxation here wanes and not waxes."--Dr. Goose

The three largest U.S. metropolitan areas, New York, Los Angeles, and Chicago, contain 13 percent of the population and generate 18 percent of GDP. This (crudely) suggests that densification could increase GDP considerably.--Reihan Salam

If normal growth theory is right, it takes a lot of work just to keep a rich economy rich. Just replacing the old, depreciating physical capital is an enormous task that only a highly productive economy can accomplish. The more capital you have, the more capital you have to replace every year. If you fall behind in replacing the fast-decaying capital, you quickly become less productive. The fact that the US has been able to keep its relative ranking is evidence that it has stayed highly productive over the decades. Solow’s growth model captures this fact—and it’s why a one-time massive gift of capital can’t make a poor country rich. It’s a gift that keeps on wearing out.--Garrett Jones

I just pre-ordered Ezra F. Vogel, Deng Xiaoping and the Transformation of  China, which looks to be an important book.--Tyler Cowen

Our exchange rate is just a price — the price of the dollar in terms of other currencies. It is not controlled by anyone. And a high price for the dollar, which is what we mean by a strong dollar, is not always desirable. Some countries, like China, essentially fix the price of their currency. But since the early 1970s, the United States has let the dollar’s value move in response to changes in the supply and demand of dollars in the foreign exchange market. The Treasury no more determines the price of the dollar than the Department of Energy determines the price of gasoline. Both departments have a small reserve that they can use to combat market instability, but neither has the resources or the mandate to hold the relevant price away from its market equilibrium value for very long.  In practice, all that “the exchange rate is the purview of the Treasury” means is that no official other the Treasury secretary is supposed to talk about it (and even he isn’t supposed to say very much). That strikes me as a shame. Perhaps if government officials could talk about the exchange rate forthrightly, there would be more understanding of the issues and more rational policy discussions.--Christina Romer

In addition to his wide-ranging influence within the academic and policy spheres of economics, Harvard Economics Professor Martin S. Feldstein ’61 has perhaps had his greatest impact in the classroom. While sitting in a meeting about Social Security reform in the West Wing of the White House in 1999, Harvard Kennedy School Professor Jeffrey B. Liebman—once a Ph.D. student of Feldstein’s—realized he shared something with the others at the meeting. “[I noticed] that three of the four economists in the room—Larry Summers, Doug Elmendorf, and myself—had been Marty’s students,” he said. “The fourth economist had studied at MIT under someone who himself had been a student of Marty’s.” Feldstein, a professor at Harvard since 1967, has taught every level of economics, from introductory to upper-level graduate courses—training some of the world’s foremost economists in the process and spurring the Wall Street Journal to term him perhaps the “most influential economist of his generation.”--Benjamin M. Scuderi

Washington relies too much on off-the-cuff comments and tweets to drive policy debates. Serious policy addresses like these three provide depth that is essential to the national dialogue. I also wish we had more frequent serious policy speeches on the House and Senate floors. Today I will begin to respond to the Geithner speech, which is the most effective presentation of the Administration’s fiscal policy argument I have seen. It’s a long speech with a lot that deserves analysis and response. Since the partisan policy battle is already fairly heated, and since I haven’t written in a while, I’ll start today with a reach-across-the-aisle post. ... Secretary Geithner is reflecting the conclusions of the Social Security and Medicare Trustees, issued last Friday, and he is saying something different from the Washington Consensus, which focuses only on health care cost growth. In fact demographics is a bigger deficit driver over the next 10-20 years than health care. Kudos to the Secretary for emphasizing both. He also correctly identifies the two subcomponents of an aging population: more Baby Boomers becoming retirees and longer lifespans. The first of these is big but temporary (one generation), the second is gradual and permanent. ... Secretary Geithner is right that the ultimate forcing action will be when investors lose confidence in American fiscal policy and take their funds elsewhere. He is right that, if this happens, it can happen suddenly and without warning. He is right that this would be extremely painful and costly to stop. And he is right that it is unpredictable. We may not know the market-imposed deadline until it has already passed.--Keith Hennessey

So much for rational ideas in public debate.--Peter Suderman

The fact that I would want to be able to involve the police if my daughter became a streetwalker, but not if she became a Hari Krishna, tells me something important about what kind of legal regime I should support.--Ross Douthat

(A map of slave ownership by county)

You have now shown under the most adverse circumstances that the great mass of the people of Western Virginia are true and loyal to that benificent [sic] government under which we and our fathers have lived so long. ... The General Government cannot close its ears to the demand you have made for assistance. I have ordered troops to cross the Ohio river. They come as your friends and brothers, as enemies only to the armed rebels who are preying upon you. Your homes, your families, and your property are safe under our protection. All your rights shall be religiously respected, notwithstanding all that has been said by the traitors to induce you to believe that our advent among you will be signalized by interference with your slaves. ... I call upon you to fly to arms and support the general government, sever the connection that binds you to traitors, proclaim to the world that the faith and loyalty so long boasted by the Old Dominion are still preserved in Western Virginia, and that you remain true to the stars and stripes.--General George McClellan, May 26, 1861

In terms of basketball talent, I’ve been covering pro basketball for more than 40 years, and I’ve never seen a guy Rodman’s size play like he did and shut down opponents who were half a foot taller and 100 pounds heavier. When he played for the Bulls from 1996 to 1998, I remember 7-1, 335-pound Shaquille O’Neal trying to back Rodman into the paint to posterize him with a dunk. But Rodman would body up, using his leverage and pelvis to impede Shaq’s progress.--Lacy Banks

He has six of the 17 best seasons in history for offensive-rebounding percentage, and six of the 12 best for defensive-rebounding percentage. And unlike most top rebounders, one skill didn’t impede the other. Most players who are great on the defensive glass aren’t as good at corralling offensive rebounds, perhaps because they are behind their teammates in getting down the floor.--Carl Bialik

Wait, what? Dennis Rodman is a Christian? Not yet, but wait for it. This one is going to happen and when it does, we’re going to lock in a phenomenally colorful rebounder.--Jon Acuff

Photo link here.

Quotes of the day

Politicians—you may have noticed—tend to adopt a flexible point of view aimed more at getting votes than rigidly sticking to a preconceived view of the world.--John Carney

President Obama, I voted for an idea. What I didn’t realize what I was getting was an idealist. If you’ve never been to the moon, you can’t issue policy about the moon. You have no ... idea what it’s like on the moon. For a president to be sitting in Washington, D.C., and saying, “Go back to your 67 borders in Israel,” how about you live there and try to defend an indefensible border nine miles wide? On one side you’ve got hundreds of millions of people who hate your guts, on the other side you’ve got the Mediterranean. Unless you control, in Israel, unless you control those Golan Heights, it’s an indefensible position. It’s a nice idea, when you grow up you find out that life isn’t the way you imagined it, and President Obama means well. I think he’s actually a good guy. He has no ... idea what the world is like because he doesn’t have to live there.--Gene Simmons

President Obama's re-election campaign is trying to dig up dirt in the Garden State. ... The Obama campaign is trying to keep its efforts from public view, concerned they would only elevate Christie's already impressive standing within the Republican Party, sources said.--JOSH MARGOLIN

... as we have all seen throughout his campaign and his presidency, President Obama talks the talk, but he has yet to walk the walk. We have heard him talk a great deal about the importance of small business and his intention to help small business and it all sounds great; but we have yet to see any action. In fact, if anything, most of the policy he has put forth over the last two years has actually hurt small businesses. Businesses haven’t been sitting on revenues because they want to, it’s because they are nervous about the uncertainty that this Administration has created. This is the most anti-business Administration ever--House Small Business Committee Chairman Sam Graves

When George W. Bush was President, the Patriot Act became part of the liberal conspiracy theory that Republicans were engaged in a lawless crusade to turn the U.S. into a police state. But the Patriot Act can now join Guantanamo, military commissions, unlimited detention, drone strikes, the state secrets doctrine and Middle Eastern democracy as Bush policies that Mr. Obama has embraced one way or another.--Wall Street Journal Editorial Board

... Liberty paid just $12,500 for preferred stock in Sirius XM. At the end of the March quarter, those preferred shares had a market value of nearly $4.3 billion. It’s hard to think of an investment made anywhere, anytime that turned out better.--Shira Ovide

We don't know a lot about 2013. We know that Donald Trump will not be President of the U.S. -- Arnold Schwarzenegger won't either. We know that Apple will release a new iPad that will look cool and cost a lot of money but only be available in theory. We know that the loud guy sitting behind me at the airport who is on the phone begging for a first class upgrade will still be talking. And we know that the New York Yankees have about $150 million in payroll obligations to eight players ... all of those players on the wrong side of 30, and at an average age of 34.--Joe Posnanski

The biggest threat to natural monopolies comes, not from a competitor, but from innovation. As a result, these standards can be far more vulnerable than we realize. That’s why I’m so suspicious of the elevated price for LinkedIn.--Eddy Elfenbein

I listened to [Robert] Kraft, and I don't agree with the Patriots on a lot of things, but I agree with him that we're on the verge of really irritating our fan base and damaging the fabric of the game.--Bart Scott, New Jersey Jets linebacker

Being players and growing up and not having much and the fact that we're squabbling about money is kind of ridiculous to me," he said. "I came into this league ... I probably made more money than I thought I ever would in a lifetime. Everything from here is just icing on the cake. Hopefully, we get something fair done and we get to a point where we can play football.--Wes Welker

Photo links here and here.

Less in Japan

Note this fact: The U.S. ten-year Treasury bond pays 3.18 percent, whereas a ten-year Japanese government bond pays 1.16 percent.

No, I am not predicting the United States is about to become just like Japan. But it is not inconceivable. That is why buying long-term bonds now is not a crazy investment strategy, and selling them (as many companies are now doing) is not at all a sure thing.

That's Greg Mankiw. Photo link here.

UPDATE: China, too. Jim Chanos thinks:

A lot of people are willing to say China will slow down. The really scary thing is if you do the numbers and they cut back on construction it's not a slowdown, and they go negative real fast. ... The fact of the matter is if they hit the breaks really hard, the economy goes into reverse. It doesn't slow. Nobody will say that publicly because it's unbelievable. But it happens to be the way the numbers work.

Quotes of the day: Tim Harford on innovation and complex systems

You cannot understand why the U.S. military was able to execute this extraordinary operation deep in the heart of Pakistan without first understanding the failures of Iran in 1980.--Andrew Exum

... the message ... isn’t really “practice makes perfect,” or even “learn from your mistakes,” at least not as a straightforward self-help cliché. It’s about building systems – whether markets, businesses, governments or armies – that solve complex problems. And it turns out that complex problem-solving usually means experimenting, quickly discovering what works and what doesn’t, and somehow letting what’s working replace what isn’t.--Tim Harford

What was the return on Henry Cave-Browne-Cave's investment of 10,000 pounds [in developing the Spitfire]? Four hundred and thirty thousand people saved from the gas chambers, and denying Adolf Hitler the atomic bomb. The most calculating economist would hesitate to put a price on that.--Tim Harford

Never in the field of human conflict has so much been owed by so many to so few.--Winston Churchill, speaking about Spitfire and Hurricane fighter pilots

My blood boiled in indignation, for I know that every true Briton would rather sell his last shirt than admit that England could not afford to defend herself against all-comers.--Dame Fanny Houston, who covered the entire development costs of the Spitfire's predecessor, the S6

After Deng Xiaoping took power in the late 1970s, local experiments were tolerated, and if they worked, they were allowed to spread. The “household responsibility system”, which gave rural farmers the right to profit if they were able to generate extra crops, was used in 1 per cent of collectives in 1979 and was almost universal by 1983, largely as a result of benign neglect from Beijing. Nor did Deng’s industrial reforms demolish the planned economy. If corporate managers could produce more than the central plan required, and if they could find a market for the surplus, they were allowed to do so. The brilliance of this idea was that it provided all the traditional free-market incentives for efficient producers to grow and find new markets – and yet the parallel market did not undermine the central plan. This itself was “frozen” in 1985, and slowly became irrelevant as the economy around it grew. Another experiment was the establishment of special economic zones. These areas were designed to encourage foreign investment and industrial development, without requiring the entire economy to be thrown open to market forces. The contrast with China’s earlier Maoist system could scarcely be greater.--Tim Harford

Photo link here.

Quotes of the day

When I watched the party and celebration in the streets of London [for the royal wedding], my very first thought was “David would be in his underwear.” That’s admittedly a weird thought, but that’s where I went. I immediately imagined David stripping down to his under armor and doing the robot in the streets after his victory. Just standing there saying, “Hands go up, and they stay there! All I do is win!”--Jon Acuff

In 1997, Julie Preuitt sounded the alarms that the Texas financier R. Allen Stanford was operating a huge Ponzi scheme. The Securities and Exchange Commission official hammered away at the case for years, until the agency finally brought action against Mr. Stanford in 2009. ... Ms. Preuitt brought the concerns to her bosses and later complained to officials in the agency’s Washington headquarters. In turn, Ms. Preuitt received a letter of reprimand. The agency later transferred her to a nonsupervisory position, which in essence was a demotion.--BEN PROTESS

When President Barack Obama took office, in 2009, he championed the cause of government transparency, and spoke admiringly of whistle-blowers, whom he described as “often the best source of information about waste, fraud, and abuse in government.” But the Obama Administration has pursued leak prosecutions with a surprising relentlessness.--Jane Mayer

... power is incredibly destructive. It’s a weird, pathological thing. I also think the intelligence community coöpted Obama, because he’s rather naïve about national security. He’s accepted the fear and secrecy. We’re in a scary space in this country.--Thomas Drake

We are witnessing the bipartisan normalization and legitimization of a national-surveillance state.--Jack Balkin, a liberal law professor at Yale

The program he talked to the Baltimore Sun about was a failure and wasted billions of dollars. It’s embarrassing to the N.S.A., but it’s not giving aid and comfort to the enemy.--Thomas Tamm, a Justice Department lawyer, revealed that he was one of the people who leaked to the Times

I think it’s outrageous. The Bush people have been let off. The telecom companies got immunity. The only people Obama has prosecuted are the whistle-blowers.--Mark Klein, the former A.T. & T. employee who exposed the telecom-company wiretaps

Democracy is the recurrent suspicion that more than half of the people are right more than half the time.--E.B. White

Suffrage coincided with immediate increases in state government
expenditures and revenue and more liberal voting patterns
for federal representatives, and these effects continued growing
over time as more women took advantage of the franchise. Contrary
to many recent suggestions, the gender gap is not something
that has arisen since the 1970s, and it helps explain why American
government started growing when it did.--John Lott and Lawrence Kenny

Kesselschlact means ‘caldron battle’ in German. That’s what the Nazis called battles of total annihilation, and that’s how I felt. Like a survivor of Kesselschlact.--Jim Cramer

Taken from the top, these sentiments [of "Why isn't Wall Street in jail?"] imply that the financial crisis was caused by fraud; that people who take big risks should be subject to a criminal investigation; that executives of large financial firms should be criminal suspects after a crash; that public revulsion indicates likely culpability; that it is inconceivable (to Madoff, anyway) that people could lose so much money absent a conspiracy; and that Wall Street bears collective guilt for which a large part of it should be incarcerated. These assumptions do violence to our system of justice and hinder our understanding of the crisis. The claim that it was "caused by financial fraud" is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme. ... The mortgage crisis was a societal breakdown—a massive failure of the private market, Wall Street in particular. It wasn't, fundamentally, rooted in fraud. Enron was fraud. The bankers convicted in the savings and loan scandal who dealt sweetheart loans to friends were fraudulent. These people had their hands, willfully, in the till—and knew it. ... I wasn't a fan of Goldman's slickness in letting a short-seller design a collateralized debt obligation that Goldman marketed to clients, for which it was sanctioned by the Securities and Exchange Commission. However, its unsavory dealmaking should not obscure that in betting, correctly, against the housing market, it helped mitigate the crash. Had more firms done as Goldman and shorted mortgages, fewer unsound loans would have been issued. ... imprisonment is a punishment for criminality—not a sociological remedy for unfairness, incompetence, or outsize losses.--Roger Lowenstein

But we didn’t know what [our dad, Warren Buffett] did. In fact, when my sister filled out a form, I think in fourth or fifth grade, about what our parents did, she put “security analysis,” and it was assumed that what he did was check alarm systems. So to a kid it was like “what do all the numbers on the page mean? And what exactly is the New York Stock Exchange and buying and selling and all that?” So we really didn’t know.--Peter Buffett

The U.S. achieved 9% annual growth between 1800 and 1900, with 15 recessions, 4 depressions, and a civil war at halftime.--Bill Smead, contrasting the growth of China on CNBC.  More here.

... maybe there remains one last shiny, fat apple hanging right in front of our faces, one last endeavor that would bring us fast, costless, and easy growth. It is immigration reform. The United States can grow faster by stealing the rest of the world's smart people.--Annie Lowrey

Photo link here.