Quotes of the day

If you can't sell 'em, rent 'em.--agent Paul Larson of Coldwell Banker Burnet, via Mark Perry

... our own regulatory ingenuity ...somehow or other, always manages to backfire.--Richard Epstein

Bernanke's change of mind reflects his shy personality plus groupthink.--Bryan Caplan

Many mediocre minds are impressed by famous colleagues, graduate degrees, Harvard, or equations. Those people aren't worth impressing. While such signals are correlated with good ideas, they are neither necessary nor sufficient for a good idea. When someone emphasizes these signals, however, that should lower their credibility among thoughtful people because it suggests bad faith, a preference towards pretentious irrelevancies. I've seen this a lot, hiding behind equations. It often works because one does not want to sit down, understand what all the variables mean and how they are measured, etc. I just don't feel impressed at all by such equations because my Bayesian prior is they merely have a bad idea in equation form, so I don't give them the benefit of the doubt even when I'm lazy and have not enough time to evaluate their math.--Eric Falkenstein

We’ve seen from Republicans in–particularly Republicans in the House, but with Republicans generally, that they don’t want to be part of any plan that raises taxes at all. The president’s budget has $1 of revenue for every $2 1/2 of spending cuts.--Jack Lew, White House Chief of Staff and former Budget Director

Contrary to Mr. Lew’s assertion, the President is proposing at least $1.20 of tax increases for every dollar of proposed spending cuts. The President’s budget locks in historically high spending levels and relies more on tax increases than spending cuts for the limited deficit reduction it proposes.--Keith Hennessey

Photo link here.

Interview of the day: Robert Kraft on CNBC

Football, politics, business strategy, economy, faith, basically most of what this blog is about:

Chart of the day: The class warfare we need

Source here.

Chart of the day: Japan getting more acquisitive

Source here.

Song not worth writing: Moves like China

Source here.

Photo link here.

History rhymes, 80 years later

Here is Scott Sumner:

When I see daily reports of the effects of Greece on the world economy, it seems just like Germany in July 1931. When I see it spread to Italy, it seems just like Britain, in September 1931. When I see daily reports of Italian bond yields in the US media, it seems just like news of the Young Plan bonds, which was reported almost daily in the US financial press during 1931. Yes, it’s 1931 all over again.

So what is the solution? I hate to tell you this, but the problem is even harder to solve today than in 1931. Yes, most countries were tied down by gold in 1931 (what Barry Eichengreen called “golden fetters.”) But at least they had their own currencies, which could be easily devalued. Now even that option is gone. And despite all the pain, 70% of Greeks oppose giving up the euro. This crisis isn’t ending anytime soon.

Quotes of the day

One of the sad signs of our times is that we have demonized those who produce, subsidized those who refuse to produce, and canonized those who complain.--Thomas Sowell

... Steven Pinker’s The Better Angels of Our Nature: Why Violence Has Declined is a doorstop of a book about the progress of non-violence and humanitarianism in Western civilization whose index contains no references to Francis of Assisi, Bartolome De Las Casas, or William Wilberforce, and whose author betrays not even the slightest interest in the various sympathetic and provocative accounts of religion’s role in the development of the modern West and modern world.--Ross Douthat

We must hit the QB hard and often. QB's are over-rated, over-paid, pompous bastards and must be punished. Great pass coverage is a direct result of a great pass rush, and a great pass rush is simply a relentless desire to get to the QB.--Buddy Ryan

Steven Jobs, the late co-founder of Apple Computer, and Steven Chu, the current secretary of Energy, are both examples of super-achievers. Jobs created an innovative company that is currently among the most valuable in the world as measured by stock market capitalization. Chu earned a Nobel Prize in physics and sees himself as a leader in the battle against global warming. At this point, it seems likely that Jobs will be remembered as having contributed significantly to human progress. Chu's historical legacy is more problematic. Assuming that Chu's efforts at promoting solar power and electric automobiles are no more successful than the Carter-era effort to build a breeder reactor, they will end in dismal failure. Is there a lesson to be learned from this about where society should want its super-achievers to perform?
...
The U.S. Constitution was designed to thwart super-achievers in the public sector. However, by the middle of the 20th century our culture venerated super-achievers in office, and we no longer look to the Constitution to impose the restraints it once seemed to enumerate. Unless our culture changes, Constitutional restraints on power will not be resurrected. The longing for super-achievers in government is dangerous and misguided. The power that has accumulated in Washington, state capitals, and local governmental units is more than can be exercised responsibly. We have set ourselves up for disappointment and failure. What if, instead of doling out loan guarantees as secretary of Energy, Steven Chu were to set up a private venture capital fund to invest in the sort of projects he thinks are worthwhile? As a private venture capitalist, Chu might not be able to exert as much leverage on the industry as he can in his role as dispenser of taxpayer-funded guarantees. Power in the private sector is more dispersed. Most of the people who exercise it do not have credentials as impressive as Chu's Nobel Prize in physics. Still, the United States would be better off if super-achievers like Chu felt driven to pursue their goals in the private sector rather than through the institution of government. I would like to see a culture where super-achievers look to the (non-banking) private sector as the arena for attempting to realize their visions. Government should be an arena for quiet competence, not for those who aspire to great achievement.--Arnold Kling

The price black people pay for being free thinkers in this country is a very, very cruel one. Ask Clarence Thomas.--John Nolte

Federal employees whose compensation averages more than $126,000 and the nation’s greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show. The U.S. capital has swapped top spots with Silicon Valley, according to recent Census Bureau figures, with the typical household in the Washington metro area earning $84,523 last year. The national median income for 2010 was $50,046.
...
Last year Washington also had the most lawyers per capita in the U.S. compared with the 50 states, with one for every 12 city residents, according to figures from the American Bar Association and the Census Bureau. In New York State the figure was one out of every 123 residents, while in California the ratio was one in 243. Associate attorneys in the Washington area who have worked between one and eight years had a median salary of $186,250, compared with the national median for their peers of $123,521, according to a survey by the Washington-based National Association for Law Placement.  Lobbyists play a prominent role in the Washington economy. In 2010 there were 12,964 registered lobbyists, with most working in or around the nation’s capital, according to figures compiled by the Center for Responsive Politics, a Washington- based research group that tracks political spending. Spending on lobbying efforts reached a record $3.51 billion last year, up from $3.49 billion in 2009.
--Frank Bass and Timothy R. Homan

A New England Journal of Medicine article this morning really gets at this tension, between the good of job creation and bad of growing health costs. It suggests that a key driver behind our health-care job growth is a decline in productivity. We’re adding more workers, the article argues, because, in the aggregate, each health-care worker is doing less. And that’s the opposite of every other industry sector that’s growing right now.--Sarah Kliff

There may be a trade-off between practicality and conveying status. Apprenticeships offer the former, but internships offer the latter.--Arnold Kling

How Does Your Kindergarten Classroom Affect Your Earnings? is one of the most impressive empirical papers ever written. The data collection is amazing. The empirical analysis is clear and careful. Above all else, the authors' methods are transparent. Lesser authors would have buried the conflicting findings. Chetty et al. took the high road. Unfortunately, the world is so eager for stories about the power of early education that their paper is being badly misinterpreted. Chetty et al. don't confirm romantic hopes about teachers that change young minds forever. Despite their pro-education tone, they expose these hopes as wishful thinking.--Bryan Caplan

2012 Recession prediction

according to Intrade futures pricing.

Quotes of the day

A Craigslist search shows women aren't after the bankers.--John Carney

[Sallie Krawcheck] should really be an insurance or financial industry expert and talking-head on CNBC—like Dick Bove. She hasn’t got the operational leadership chops to lead the IT unit that manages Merrill’s Thundering Herd Desk-Top. Would Ike have put a Company Commander in charge of the pivot to Bastogne? Hell no! He asked Patton to do it!--unnamed commenter

I raised $30 million and if you’re saying I can be bought for $5,000, I’m offended.--Rick Perry

I’m offended for all the little girls and parents who didn’t have a choice.--Michelle Bachmann

What does it mean to be a man? No one really knows, but it makes for some damn good television. In the first decade of the 21st century, a critical consensus formed that we're currently living in the golden era of television. ...When you list out the great shows that make up this television renaissance, certain commonalities emerge: high production values, a greater investment in acting talent, and complex plotting that assumes an audience that never misses an episode. But with the sole exception of True Blood—which has camp enough to put it into a genre of its own—all these shows share something else. Every other non-vampire show centers around a modern man struggling with the limitations of his outlook in a world full of complexity and changes that prevent survival through simple reliance on old gender norms. If you want to make a critically acclaimed drama, you need to build up a patriarch, preferably in a highly masculine environment, and then start to peel away his certainty about the way the world works and what it means to be a man in this world. ... Americans can't get enough of watching powerful men run into walls created by the limits of narrow, traditional masculinity. ... The irony is that these new shows about men mine territory familiar to feminism, and could even be described in many cases as explicitly feminist. But for all the feminism on TV, high quality dramas about women haven't taken off. Women get plenty of meaty, complex roles in these top tier shows, but only as supporting characters in shows centered around men's gender drama. ... I blame the nation's inability to deal directly with women engaged in complex, dramatic struggles that call gender roles into question. We are, after all, a country where people can go on TV and call Sarah Palin a feminist without choking on their own tongue. Perhaps the absurdities of being female in this modern era don't lend themselves well to drama, but have to be approached sideways, through comedy. Women do very well heading up some of the best comedy on TV--Amanda Marcotte

Champagne Super Novak.--Brian Phillips

... approximately 40 percent of sunlike stars have at least one low-mass planet orbiting around it. On the other hand, the majority of alien planets with a mass similar to Neptune appear to be in systems with multiple planets, researchers said.--Denise Chow

... how did [analysts] get the 50,000 [additional jobs from the White House plan] number? A preliminary analysis. By whom? When? Using what assumptions? And where did the [New York] Times get that estimate? From the White House press team? But the number 50,000 is treated as something like a fact. One reason it’s not close to a fact is that there’s no way of verifying whether this “estimate” is accurate after the fact. So what’s the meaning of this estimate? None. It’s a meaningless statement. But the media treats it like it’s science. It’s not science. It’s fake science. It’s scientism.--Russ Roberts

... there probably is no market for unbiased media. There is definitely a market for hard-core right-wing opinions. There is definitely a market for what we call mainstream media, where both the opinions and the reporting are biased to the left. There is also a market for something like the Washington Post, where the editorials are pretty centrist while the reporting strikes me as showing zero understanding of anything right of center. --Arnold Kling

Modern research on teacher quality makes clear that the factors used to determine a teacher’s compensation tell us little to nothing about how well the teacher will perform in the classroom. That consistent finding has (or should have) enormous implications for the future of the current system. The results of an employment policy based entirely on credentials uncorrelated to student achievement are obvious: we see wide variation in the quality of public school teachers.--Marcus Winters

The argument for large and expensive efforts to prevent or reduce global warming has three parts, in principle separable: Global temperature is trending up, the reason is human activity, and the consequences of the trend continuing are very bad. Almost all arguments, pro and con, focus on the first two. The third, although necessary to support the conclusion, is for the most part ignored by both sides.--David Friedman

It is a crisis of capitalism because our economic model and policy settings cannot produce sustainable growth, adequate income formation or employment creation. We have lost the housing, financial services and credit creation growth drivers and been left with excessive levels of personal and government debt to unwind, a dysfunctional financial system, and weak labour markets. The capacity to produce and sell goods and services has outstripped that of consumers to borrow and spend. Without credit and jobs, other fault lines have been exposed, including the long stagnation of real wages and extremes of inequality. It is truly a crisis of aggregate demand.--George Magnus

Diversity undermines solidarity. People don't mind paying high taxes to support people "like them." But free money for "the other" leads to resentment and political pushback. If you're a social democrat, this implies a tragic trade-off between social justice for natives and social justice for potential immigrants. But if you're a libertarian, the opposite is true. The welfare state doesn't make open borders impossible. It's open borders that makes the eventual abolition of the welfare state imaginable.--Bryan Caplan

My philosophy is that losers have goals and winners have systems.--Scott Adams

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 2011

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

Photo links here and here.

Sorry, folks

another busy trading day.

Quotes of the day

Having the best show on network TV is kind of like being the best crunk dancer at a Genesis concert. ... I suspect Breaking Bad will be the least remembered of these four shows [The Sopranos, The Wire, Mad Men, and Breaking Bad] and will probably be the least influential over time. Yet there's one profound difference between this series and the other three, and it has to do with its handling of morality: Breaking Bad is the only one built on the uncomfortable premise that there's an irrefutable difference between what's right and what's wrong, and it's the only one where the characters have real control over how they choose to live. ... If the president tells a reporter your TV show is his favorite, it's de facto political, regardless of the premise or the creator's original intent. Barack Obama's loving The Wire is a little like Amy Carter adding the Sex Pistols to the White House music library — it shouldn't mean anything, but of course it does. Whenever a president (or even a senator) is asked about what they like to watch on television, they know their answer will be perceived as symbolic of who they are and what they represent. This is why there will never be a modern U.S. President who will not define himself as a sports fan.  ... The central question on Breaking Bad is this: What makes a man "bad" — his actions, his motives, or his conscious decision to be a bad person?--Chuck Klosterman

[Sheryl] Sandberg says she eventually realized that women, unlike men, encountered tradeoffs between success and likability. The women had internalized self-doubt as a form of self-defense: people don’t like women who boast about their achievements. The solution, she began to think, lay with the women. She blamed them more for their insecurities than she blamed men for their insensitivity or their sexism.--Ken Auletta

A good economy causes liberal arts majors, not vice versa.--David Burge

I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain.--John Adams

... never forget that the fundamental mission of science is to question. The less an individual scientist knows about the factory or the materials and tools she is working with, the less she will be able to challenge what she is doing and how. Notwithstanding their stated missions, it is well known that—organizationally at least—bureaucracies exist primarily to defend, expand, and replicate themselves. Bureaucratizing existing scientific paradigms—like the tens of billions being spent at CERN to test the Standard Model of particle physics—only tends to ensure they are that much more difficult to challenge and overthrow. If it is to fulfill its social function, science cannot afford to become sclerotic. If science does not carry an institutional mandate to both allow and encourage challenging it at the root, it is no longer science.--Epicurean Dealmaker

In just about every other team sport,  ... down in the final minutes, you have Montana throw to Rice, you put the ball in the hands of Kobe, you try whatever you can to get the ball or puck to Messi or Ovechkin. But if Albert Pujols ain’t coming up in the ninth, Albert Pujols ain’t coming up in the ninth, and there’s nothing you can do about it.--Joe Posnanksi

If You Can’t Calculate NAV, You Shouldn’t Trade The Instrument.--Kid Dynamite

Even a misunderstanding of small technical questions--like the need for a CBO score, the vulnerability of bills to amendment, or the time it takes to whip votes--lead people outside of Washington to frequently underestimate the difficulties of doing the "obvious" thing.  On the flip side, it's also clear to me that many people in Washington are living in a bubble where procedure and politics often shut out common sense. I know I'm losing valuable intelligence about what's happening in the financial sector, because I'm simply not marinating in it every day. On that same call, I heard an analyst made a point about proposed 14th Amendment bypass of the debt limit, which was so obvious that I couldn't believe I hadn't thought of it: to wit, even if the Treasury simply went ahead and issued more debt, who was going to buy these instruments of dubious legality? And at what price? Yet all the DC people I'd seen writing about the "14th Amendment Solution" had focused on the legality of the move, or the political fallout; no one had thought about, like, finding customers for the debt.  ...  I had an email exchange with someone about the legitimacy of the 14th amendment route, to whom I pointed out that it didn't seem very practical, and he replied "practicalities aside . . . "  Practicalities aside?  Who cares whether it's constitutional for the Treasury to issue bonds no one buys?--Megan McArdle

I think that Intrade should get ready to tee up some impeachment markets on these 14th Amendment auctions.--Cav

Pick up any household electronic -- a phone, a remote, or a laptop -- and it could contain minerals mined in the Democratic Republic of the Congo, a country where armed rebel groups connected with crimes of rape and murder profit from trade of these minerals. Tin, tantalum, tungsten and gold mined in the eastern part of the DRC are said to finance the armed rebel groups that contribute to the ongoing violence in the country.--Erin Banco

Illness is the night-side of life, a more onerous citizenship. Everyone who is born holds dual citizenship, in the kingdom of the well and in the kingdom of the sick. Although we all prefer to use only the good passport, sooner or later each of us is obliged, at least for a spell, to identify ourselves as citizens of that other place.--Siddhartha Mukherjee

Photo link here.

Quotes of the day

The first thing you should do in an emergency situation — once you know it's safe — is smoke a cigarette.--Paul Petzoldt, legendary mountaineer

Captain Bernanke is piloting the USS Nominal Income through the Mediterranean. Suddenly a stiff wind starts blowing off the coast of Greece, threatening to drive the ship onto a dangerous shoal. The captain adjusts the wheel so that the ship is able to maintain its heading. We are safe. For now. A year later the strong wind again blows off Greece, once again threatening to drive the ship off course. But this time the captain fails to react. “We’ve already tried doing steering, once is enough.” “Lots of people criticized my steering last time. They pointed out that the path of the ship didn’t change very much.” “Steering is no panacea, we need to do something about the wind and the shoal.”--Scott Sumner

... a surplus basically represents the government sucking money out of the economy ... The Clinton surpluses didn't protect us from any calamity, and the attendant boom in private sector leverage is what ultimately smashed the US economy. Why do we want to go back to that?--Joe Weisenthal

With lessons learned from the 20th century’s tougher decades, including the Great Depression of the ‘30s and the Great Inflation of the ‘70s, America entered a period of unprecedented economic stability and growth in the ‘80s and ‘90s. Not only were 47 million jobs created, economic growth was more stable than ever before in American history. Economic policy in the ‘80s and ‘90s was less interventionist in comparison with earlier 20th century decades. Attention was paid to the principles of economic and political freedom: limited government, incentives, private markets, and a predictable rule of law. Monetary policy focused on price stability. Tax reform reduced marginal tax rates. Regulatory reform encouraged competition and innovation. Welfare reform devolved decisions to the states. With strong economic growth and control of government spending the budget moved into balance. As the 21st century began many hoped that applying these same principles to education and health care would create greater opportunities and better lives for all Americans. But economic policy went in a different direction.--John Taylor

As a member of a coop board I have learned that the building I live in frequently spends months and even years simply trying to get questions answered from the city about how to proceed with needed repairs. Rich people and established businesses can survive this kind of thing; small businesses with no capital cushion and untrained, perhaps poorly educated proprietors cannot — but these are the only people who can generate the jobs the urban poor so desperately need. The combination of a tangled thicket of regulations that interact with one another in unpredictable ways and a bureaucracy that for whatever reasons cannot manage the process in a timely way is a massive job killer. The number of small enterprises that have not started, of small businesses that have given up on expansions or on simple repair jobs deferred is incalculable but large. Our cities are strangling themselves in red tape; we need to a better job of balancing the legitimate need for safety and health regulation with the need to promote enterprise and the kind of jobs that our fellow citizens can actually get.--Walter Russell Mead

If a budget deal is reached, officials will undoubtedly boast about how much their deal “reduces the deficit.” They will use numbers like $1 trillion, $2 trillion, or even $4 trillion of deficit reduction. You should be wary of such numbers, which are easily gimmicked. In theory it seems easy to calculate such a number:

If there is no deal, over the next 10 years total deficits will be X.
With a deal, over the same timeframe total deficits will be Y.
Therefore, the deal will reduce deficits by X-Y.

The trick is that X is not well defined, and so X-Y is suspect.--Keith Hennessey

Every time a new study comes out, people on both ends of the political spectrum are quick to seize on it as proof of their prior beliefs. But in this area, the proof is usually messy. It rarely tells us exactly what we wanted--and expected--to hear.--Megan McArdle

I'm a fan of VaR, having set up a VaR for KeyCorp's trading operations in the 1990's, and found it immensely useful as a monitor on our positions. Yet, for risk capital, or the risk of the bank in total, it was irrelevant. The assets relevant to this calculation are usually quite small as a percent of total assets (<5%), and often part of market-making operations that generally have pretty flat exposure to big factors like interest rates or the S&P500. Thus, in the past crisis the big 7 US money center banks showed an average daily VaR (99%) of about $120MM in early 2008, and then through March 2009 lost about $7T (trillion) dollars in market cap. Being of 1000x smaller magnitude highlights its irrelevance.--Eric Falkenstein

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

The markets will utimately discipline the politicians, if they don't discipline themselves.--John Malone, on CNBC

Quotes of the day

Imagine that the arguments triggered by the Hindenberg disaster were about the fire extinguishers and parachutes that airships should carry, rather than about the design flaws that might cause them to ignite. Unfortunately, today’s debates about banking reform have just this character.--Amar Bhidé

A new study by the Cultural Cognition Project, a team headed up by Yale law professor Dan Kahan, shows that people who are more science- and math-literate tend to be more skeptical about the consequences of climate change. Increased scientific literacy also leads to higher polarization on climate-change issues.--Freakonomics

Here is one of my first posts on global cooling, from 4 years ago.--Cav

I recently watched an overwhelmingly liberal audience at the Aspen Ideas Festival shift uncomfortably in its seats as Jonathan Haidt, a social psychologist at the University of Virginia, offered his own explanation. For several years Professor Haidt has probed what he calls the moral intuitions of liberals and conservatives. I find his conclusions compelling. It has come to this: you need a psychologist to make sense of US fiscal policy. Prof Haidt finds that liberals are driven mainly by intuitions about fairness (who gets what) and harm to victims. Conservatives are guided by those intuitions too, but also by intuitions about loyalty, authority, and purity (including bodily purity). These are not views so much as deeply embedded moral impulses. They are often wrapped up in religion, or lack of it. Transgressing them is a kind of sacrilege. In the US, differences in these moral-psychological foundations are very marked. The more progressive you are, the harder you find it to understand the claims of loyalty, authority and purity. The more conservative you are, the more indispensable those claims appear to be. This matters because US politics, especially at the conservative end, is powered by the energy at the extremes. Why did the Aspen audience squirm? Because Prof Haidt also notes that the wider conservative spectrum of moral intuitions is the global norm. Those conservative impulses are nearly universal across world religions and cultures. Secular liberals are the anomaly.--Clive Crook

We have to tell people what is happening here. I’m frankly embarrassed to be a member of a community where 41 percent of pregnancies are terminated.--NY Archbishop Timothy Dolan

Doctors are silly.--Tim Harford's child

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

Is there a “shortage” of primary care physicians relative to “shortages” of specialists? I am doubtful for several reasons.--Gary Becker

Miss America is all finished product and no process, and contemporary viewers tend to crave the exact opposite. The pageant ethos of perfectibility seems as quaint, these days, as the “Miss” honorific.   ... for the most part, the young ladies of 2011 played it safe. Contestants barely speak for the first half of the show, and it’s hard to stand out when you’re one of several dozen women grinning silently in taffeta.  The exception was Miss Nebraska, who performed her piano glissandi with some violence, spoke forcefully about WikiLeaks (“When it came to that situation, it was actually based on espionage”), and shared her intention to be a Supreme Court justice. Watching the pageant, I was struck by her attractiveness, quotability, toughness, faith, and ambition. As weird and unfashionable as pageant standards may seem, Scanlan’s ruthless beauty-queen comportment feels immediately familiar in 2011, when political candidates are held to a standard of faultlessness that only a doll might plausibly meet (women candidates in particular). Transport Scanlan from her Miss America context into the political arena and the anachronistic pageant armor seems, suddenly, a shrewdly contemporary asset.--Molly Young

Last Sunday, in the Wimbledon final, the succession happened again. This time, Novak Djokovic did to Nadal what Nadal once did to Federer, taking the match, and the championship, 6-4, 6-1, 1-6, 6-3. After a year of picking the Spaniard off in smaller tournaments1 while piling up an overall record of 47-1, Djokovic finally beat the king. As with Nadal-Federer, the key wasn't just that the younger guy won, but that the loser lost despite playing really good tennis. Over the first hour or so of the match, Nadal's first-serve rate was 91 percent. During the middle phase of the match, when Djokovic started dictating every rally, Nadal sometimes hit three or four shots in a row that could have been winners against any other player. Each time, Djokovic managed to keep the ball in play en route to a winner of his own. Because Nadal was so solid, all the pressure fell on the mind of Djokovic. Could the younger player hold up against the inevitable onslaught from the proven champ? Djokovic's win took tennis to a very high plane — someplace noticeably better than Nadal's near-best. It was as perfect a symbolic coup as you could stage. Not only will Djokovic be no. 1 when the new ATP rankings come out, he validated his astonishing year by seizing the crown from the (former) best player in tennis in the biggest match in the sport. ... the Federer-Nadal rivalry has confounded our normal assumption that greatness, wins, and dominance are all inextricably linked. ... We're looking at the possibility of a greatness equation in which, measured by overall results, Federer > Nadal > Djokovic, but measured by dominance, Djokovic > Nadal > Federer > Djokovic. It's as if math looked at all the talent at the top of the men's game right now and spontaneously burst into flames.--Brian Phillips

Whom do professional athletes deserve to date?--Carles

To me, [Peyton Manning]'s the greatest of all-time.--Tom Brady

Catching up to the reality already faced by many of its members, the nation’s largest teachers’ union on Monday affirmed for the first time that evidence of student learning must be considered in the evaluations of school teachers around the country. ... But blunting the policy’s potential impact, the union also made clear that it continued to oppose the use of existing standardized test scores to judge teachers, a core part of the federally backed teacher evaluation overhauls already under way in at least 15 states.--Sharon Otterman

Interestingly, New York City's per capita transportation emissions are remarkably low among American cities, largely because it has the lowest share of commuters in personal automobiles of any large American city. It would be possible to account for these pollution externalities, to some extent at least, by taxing them. But at the moment, fuel taxes are too low to cover road maintenance, to say nothing of the costs of automobile pollution. As a result, there are too many cars on New York's streets. ... Now, if drivers paid for all the costs they impose on others, then it might be worth asking what the optimal level of bike lanes to have is and discussing whether the lanes themselves are subject to rising congestion and need to be priced. Of course, if drivers paid for all the costs they impose on others, there would be fewer drivers complaining about bike lanes and more people using them. As things stand, given that cyclists help alleviate some of these externalities (a cyclist takes up dramatically less road space than a car, doesn't use on-street parking, does not emit ozone, and does not contribute to climate change) it seems quite sensible to allocate a larger share of New York's roadways to lanes for cyclists. From an economic perspective.--The Economist

Google is fighting a multi-front war with a host of tech giants for control over some of the most valuable pieces of real estate in technology. Whether it’s social, mobile, browsing, local, enterprise, or even search, Google is being attacked from all angles. And make no mistake about it, they are fighting back and fighting back, hard.--Semil Shah

A man and his mega receipt
Gave rumor mills all kinds of heat
Whose eight-figure sum?
He’s kept himself mum
But I think it’s Peterson, Pete.--Kevin Roose

Photo link here, here, here and here.

If China were your home instead of The United States

you would...

have 2.7 times higher chance of dying in infancy
consume 90.43% less oil
make 85.78% less money
use 79.3% less electricity
have 53.76% more chance at being employed
spend 96.79% less money on health care
die 3.73 years sooner
have 12% less babies
be 83.33% less likely to have HIV/AIDS
experience 7.78% less of a class divide

Photo link here.

Chart of the day: China searches

Source here, via Tyler Cowen.

Internet predictions from 1982

Hey, even the NY Times can find a nut once in awhile:

- The home will double as a place of employment, with men and women conducting much of their work at the computer terminal. This will affect both the architecture and location of the home. It will also blur the distinction between places of residence and places of business, with uncertain effects on zoning, travel patterns and neighborhoods.
- There will be a shift away from conventional workplace and school socialization. Friends, peer groups and alliances will be determined electronically, creating classes of people based on interests and skills rather than age and social class.

 Via Catherine Rampell.

Quotes of the day

The New Republic's Jonathan Chait is unimpressed by my "rebuttal" to Stephen Metcalf's Slate essay about libertarians and the philosopher Robert Nozick. This is probably due to the fact that I didn't write one.  However, others have, and I want to make sure Chait has sufficient reading material before his next squash game with Jacob Weisberg.--Matt Welch

I fear it represents a great deal of confirmation bias on the left. A lot of liberals who see all libertarians as less-lovable Ron Swansons nod along with Metcalf as he makes one clichéd assertion after another and the end result is a bunch of readers happily cheering a piece that makes no attempt at all to treat its subject with any sort of seriousness or grace. It affirms deeply held opinions and distrust, and helps cement the language barrier between liberals and libertarians in ultimately a very destructive and unfortunate way.--E.D. Kain

What strikes me about Paul [Krugman]'s blog post, however, is how completely unconvincing it is. He uses a chart that starts the Reagan era in 1979, arguing we need to correct for the business cycle. But would or should this persuade anyone? The null hypothesis being tested is that Reagan policies had a significant effect on revenue growth. But would any believer in that null hypothesis include the last couple years of the Carter administration as part of the Reagan era? Weren't the policies of those years precisely what Reagan was trying to reverse? Maybe Paul's chart might appeal to someone who already agrees with him, but I thought economists turned to data to try to persuade those who are truly undecided. It is hard to see how this presentation of the data would move someone who is yet to make up his mind. One more thing: What Paul calls "the Clinton miracle" might also be called "the Internet bubble."--Greg Mankiw

Magnetar would put down a few million bucks to start a collateralized-debt obligation (CDO), cram it full of the junkiest mortgage bonds it could find, then get a bank like JPMorgan to sell it off to investors as a triple-A, gold-plated piece of the booming housing market; when in reality it was a time bomb filled with toxic waste. Whatever Magnetar lost when the thing went bust, it more than made up by taking out massive short positions against it. For a real world corollary, consider this akin to building a crappy house, selling it to someone, and then taking out an insurance policy so that when it falls down or catches fire, you get paid big bucks.--Matthew Philips

$25 billion a year isn't bad, especially when you consider that the expenses of the supplement companies are just a tiny bit lower than those of the drug companies. Not having to do any preclinical research at all helps, of course, and not having to run any clinical trials at all (nothing for efficacy, nothing for safety) helps, and not having to be reviewed by the FDA helps, too. And then on the other side of the ledger, being able to say any damn thing that comes into your head helps the most of all. And as you'll see from that article, not only has Senator Hatch himself benefited greatly from his nutritional ties, but so has his family, immediate and extended. And his friends, and his former business partners - pretty much everyone within range, it seems. Each sides regards the other as the gift that keeps on giving. And why shouldn't they?--Derek Lowe

Complacency is baked into our species. We can’t resist thinking that recent experience defines the future. Give us a run of good luck, and we are apt to turn that into an implicit expectation that our luck will continue -- even that we are entitled to it. This kind of thinking was instrumental in the run-up to the financial crash of 2008. Too many private and public institutions assumed that an extraordinary run in prosperity, particularly in the real estate market, was just normal. It didn’t occur to them that things could go so wrong. Even when token stress testing or risk assessment was done, it largely excluded the possibility of a bad shock or a protracted slump. Risk wasn’t systematically measured; it was ignored. It’s easy to write this off to greed or foolishness on the part of Wall Street. But the truth is, our entire civilization rests on a foundation just as shaky. We assume that the very Earth is static and will always be as it is now, or as we remember it. Yet geophysics tells us that is emphatically not the case. Bad things happen. ... natural disasters are almost always compounded by human error. The buildings in Port-au-Prince, Haiti’s capital, were poorly constructed. That most of them would collapse in a severe earthquake, leading to enormous loss of life, was easily predictable. Worsening the situation, United Nations aid officials staffed the relief effort with personnel from Nepal, where there was an ongoing cholera epidemic. Unsurprisingly, those workers brought the disease with them, and so began an outbreak that is thought to have so far killed at least 4,700 Haitians. It’s easy to dismiss this kind of poor response when it occurs in Haiti, which has an infamously ineffective government. But a mortifying degree of incompetence was also on display after Hurricane Katrina struck New Orleans in 2005, and again this year when the Japanese tsunami swamped four reactors at the Fukushima Dai-Ichi nuclear-power plant. --Nathan Myrvhold

It goes without saying that economists--especially macroeconomists--have a poor track record on big historical trends (eg, most economists in the 1950s believed that socialism was more productive yet less polluting than capitalism, that a permanent trade-off between inflation and unemployment existed, that the third world would grow dramatically after colonialism, that dynamic programming would be useful for fiscal policy, or more recently, that requiring 20% down payment to get a home mortgage was merely a pretext for racism and should be abolished, to name but a few).  Too many believe in the naive Marxist fantasy about a life of dilettantish activities unrelated to economic scarcity. How many times are programs justified by the fact that 'The US is the richest country in the world' or some corporation has billion of dollars, as if that capital was sitting there, unused and probably stolen.  Bankruptcy will make us a better society because currently many people think that solutions are as simple as creating a mountain of debt (Bill Gross estimates it at 500% our GDP) to create make-work or new economic rights, and those sinecures don't create what Arthur Brooks calls perceived earned success, the satisfaction that comes from work that is appreciated both by your boss, who compares your cost to alternatives, and your customers, who compare your value to alternatives. There are no shortcuts to the rewards of the virtuous life, as a person or a society.--Eric Falkenstein

The failure of Western experts to anticipate the Soviet Union's collapse may in part be attributed to a sort of historical revisionism -- call it anti-anti-communism -- that tended to exaggerate the Soviet regime's stability and legitimacy. Yet others who could hardly be considered soft on communism were just as puzzled by its demise.--Leon Aron

Like many people, Justice Ginsburg assumes lopsided statistics prove discrimination.--Kay Hymowitz

I pray that Allah destroys America and all its allies. And the day that happens, and I assure you it will and sooner than you think, I will be very pleased.--American-born cleric Anwar al-Awlaki

Vodka's a joke. I don't listen to the Black Eyed Peas. I don't watch reality television. I don't drink vodka. I make those decisions for the same reason. It's filler. There's no substance to any of that stuff. It's designed to smell and taste like nothing.--Adam Stemmler

Among 50-year-old men, for example, those in the highest education group are now projected to live almost six years longer on average than those in the lowest education group -- and this differential has been rising sharply. The widening gap in life expectancy is also evident geographically. In 2007, men living in the American counties with the greatest average longevity could expect to live more than 15 years longer than men in the lowest- ranked ones. In 1987, that gap was less than 12 years. Sadly, life expectancy in some counties actually declined over that period. The leading explanations for this involve health behavior -- including diet, exercise and smoking. For example, men 50 and older without a high-school education are more than twice as likely to smoke as those with a college degree. Exercise behavior also varies substantially. Among 45- to 54-year-olds in one study, only 16 percent of those without a high-school degree exercised vigorously at least once a week, whereas 56 percent of college graduates did.--Peter Orszag

This month marks the two-year anniversary of the end of recession and start of recovery. But it’s a recovery in name only, so weak as to be nonexistent. And it has been weak from the start. Real GDP growth has averaged only 2.8 percent per year compared with 7 percent after last deep recession in 1981-82 ...--John Taylor

If the US is able to build the healthiest financial sector in the world, certainly other countries will want to imitate it. If some prefer to redistribute the risks to their own taxpayers, and their taxpayers are willing to bear this cost, so much the worse for them. All this emphasis on international coordination of policy is unnecessary. And it’s good to see so many disparate voices once again adopting the Reaganite stance of hanging out a beacon to the world.--John Carney

[Tim] Thomas became the face of the playoffs — his pugnacity, flexibility, and pure skill were exhilarating. He became the beard of playoffs, too. And there was exhilaration in that. If you came to see him as a bear, he was also a paragon of what else a bear could be, a tough, tender vision of love — him loving you, you loving him, him protecting you. Of course, he’s the goalie. You can always sense warmth in Thomas' beady eyes — not lust or desire, nothing deviant or super freaky, just pure love. He’s the bear that Timothy Treadwell expected to find in "Grizzly Man." He’s the aberrant bear you bring home from Castro Street to mother. Even in the finals after he’d just laid out a Canuck, he radiated more affection than brutishness or anger. He’ll deck you, but he’ll also water your plants.--Wesley Morris

The effort to understand the universe is one of the very few things that lifts
human life a little above the level of farce, and gives it some of the
grace of tragedy.--Steven Weinberg

The quality of mercy is not strain’d,
It droppeth as the gentle rain from heaven
Upon the place beneath: It is twice blest;
It blesseth him that gives and him that takes ...--William Shakespeare

Photo links here and here.

Quotes of the day

Anybody who loses his job because of a free trade agreement was overpaid to begin with. The $20-an-hour American who loses his job to a $5-an-hour Colombian is an American who has spent the past few years charging his countrymen twenty dollars for something they ought to have been able to buy for five. ... The Obama administration said on Monday that it would not seek Congressional approval of free trade agreements with Colombia, Panama and South Korea until Republicans agree to extort additional money from American consumer/taxpayers who might stop being overcharged as a result.--Steve Landsburg

Our demand for housing and transportation, two of the biggest commodity hogs, will be lower. McMansions will be totally passe. It should already be dawning on people that most all of our non-sleeping hours at home are spent in the kitchen and its adjacent family room. Living rooms and dining rooms are relics. When people internalize the fact that they spend most of their non-sleeping, non-bathroom, non-eating time in a ten by twelve foot space with their various experience machine prototypes, large homes will, by and large, go the way of cars with fins and chrome. We obviously will not need to drive around as much, given that so much of what we want is delivered to us electromagnetically. And, getting back to real goods and technological advances, if we take the web-based distribution a few steps further, rather than having thousands of cars running from one store to the next, a couple of delivery trucks will ply the streets. So per-capita consumption of energy and resource-intensive infrastructure will decrease. Given our evolved interests a few decades hence, most of us will be spending a fraction of our income on consumption. There just won't be a lot that we will demand that requires nonrenewable resources. What we will demand will be in the way of electronic products, which will only consume a few ounces of such commodities. We will basically eat, sleep, work and then veg out. Give us food, plumbing, heat and our two-hundred dollar experience machine games, and we will be happy as a clam.--Rick Brookstaber

Why let a little thing like blatant unconstitutionality get in the way of scoring political points?--Steve Bainbridge

I suppose “humility” is one way to describe getting buffaloed into war by Bernard Henri-Levy …--Ross Douthat

Photo link here.

Whither thou 9% unemployment rate

Tim Kane is worried.

I actually think its good, ironically, that more people are looking for jobs. Having the government incent people to not look is worse.

But we need a better statistic. Bryan Caplan suggested percentage of the population employed. I think this is better than what we currently have.

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

Previous BS installment here.