Quotes of the day

We could tie the payoffs to executives not just to the value of common shares but to the long-term value of a broader basket of securities. So, for example, instead of giving executives 3 percent of the value of the firm’s common shares, you could give them, say, 1 percent of the aggregate value of the common shares, preferred shares and bonds.--Lucian Bebchuk

Bebchuk's proposal is an improvement over the current system, but would most likely incent executives to inflate their balance sheets, which would not be usually in the interest of the shareholders or bond holders. Can't completely duck the principal-agent problem.--Cav

Faces of brown-eyed men were rated more dominant than those of blue-eyed men, even when their eyes weren't brown.--JR Minkel

While Obama enumerated the steps his administration has taken to clean up the oil and prevent it from fouling the Gulf coast, he was virtually silent about the complaints state and local officials have consistently voiced—that the cleanup effort is slow, inefficient, and confused by multiple agencies whose activities are inadequately coordinated. He failed to acknowledge these difficulties and to offer specific remedies for them. Indeed, the speech was marked—and marred—by its paucity of compelling specifics.--William Galston

Consider the purely hypothetical case of a massive oil spill in the Gulf of Mexico. The traditional libertarian would argue that regulation is unnecessary because the tort system will hold the driller liable for any damage. But what if the leak is so vast that the driller doesn’t have the resources to pay? The libertarian would respond that the driller should have been forced to post a bond or pay for sufficient insurance to cover any conceivable spill. Perhaps, but then the government needs to regulate the insurance contract and the resources of the insurer. Even more problematically, the libertarian’s solution requires us to place great trust in part of the public sector: the court system. At times, judges have been bribed; any courtroom can be influenced by the best lawyers that money can buy. Andrei Shleifer and I have argued that the early regulations were appealing precisely because of a sense that the courts couldn’t be counted upon to protect private property.--Edward Glaeser

The President’s War on Fossil Fuels will reinvigorate an intense policy debate on the future of energy and environmental policy in America. He may be successful in bending the Congress to his will, as he did with health care. He may fail. I prefer another path that is simpler, faster, more unifying, and more targeted at the problem that is in the forefront of our consciousness this summer. I think it would be good for America to unite and say, “We worked together to prevent that problem in the Gulf from happening again.” It is easy to do so, and I wish the President would choose that path instead.--Keith Hennessey

My view of the bailouts is that they are primarily to save French and German banks. All the talk about "saving the Euro" is a smokescreen. I find it ironic to have an EU official warning about the collapse of democracy. The eurocracy is a very undemocratic organization, chronically in conflict with popular opinion. The bailouts are unpopular, and quite properly so. Any official who claims that that the bailouts should be undertaken in the name of democracy is a poseur.--Arnold Kling

... the market is now more worried about a Spanish government default than a default from either Banco Santander or a major telecom company.--Tyler Cowen

On the one hand, colleges generally protect students who abuse alcohol from being arrested or otherwise punished for vandalism and violence that results. In that sense, college students are treated as children not responsible for their actions. On the other hand, colleges do not impose curfews or consequences for students who abuse alcohol. In that sense, college students are treated as adults entitled to freedom from supervision. As to health insurance, you know that my solution is real health insurance, not prepaid health plans. With real insurance, claims would only be made by people in the top 5 percent of health care expenses. As a result, twenty-somethings would face low premiums and most would be able to afford their own health insurance.--Arnold Kling

Human cooperation is powerfully productive. Still, in this example, simply collecting all the pieces of a jigsaw puzzle is not by itself a very valuable achievement. The puzzle must eventually be put together properly to justify the effort spent on finding all the scattered pieces. Think of each jigsaw-puzzle piece as a unit of information that is potentially useful for making the economy work successfully. One piece might be information that deposits of iron ore exist in a certain location in Australia. Another piece might be information about which mining engineers are especially skilled at designing an operation for extracting this ore from the ground. A third piece is information about how best to transport the ore to a smelting plant. A fourth piece is information on how to make a crucial part for the engine of the truck that will transport the iron ore. A fifth piece is how to design the roads on which that truck will be driven. Clearly, the number of pieces of information that must be found and used for iron ore to become, say, a steel girder in a skyscraper is mind-bogglingly immense. It is a number far larger than the mere 1 billion pieces of the jigsaw puzzle in my example. It's beyond foolish to expect any one person (or small group of persons) to find all these pieces of information necessary for the production of steel girders (and steel automobile bodies, steel sheeting for ocean-going tankers, stainless-steel dental tools ... the list is long). Not only is the mere finding of each piece of information too difficult to entrust to a small group of persons; so, too, is the task of putting these pieces together in a way that yields useful final products.--Don Boudreaux

Fast-forward several centuries, and Henry the Lion’s would-be heir is Paul Romer, a gentle economist at Stanford University. Elegant, bespectacled, geekishly curious in a boyish way, Romer is not the kind of person you might picture armed with a two-handed flanged mace, cutting down Slavic marauders. But he is bent on cutting down an adversary almost as resistant: the conventional approach to development in poor countries. Rather than betting that aid dollars can beat poverty, Romer is peddling a radical vision: that dysfunctional nations can kick-start their own development by creating new cities with new rules—Lübeck-style centers of progress that Romer calls “charter cities.” By building urban oases of technocratic sanity, struggling nations could attract investment and jobs; private capital would flood in and foreign aid would not be needed. And since Henry the Lion is not on hand to establish these new cities, Romer looks to the chief source of legitimate coercion that exists today—the governments that preside over the world’s more successful countries. To launch new charter cities, he says, poor countries should lease chunks of territory to enlightened foreign powers, which would take charge as though presiding over some imperial protectorate. Romer’s prescription is not merely neo-medieval, in other words. It is also neo-colonial.--Sebastian Mallaby

In a sense, Britain inadvertently, through its actions in Hong Kong, did more to reduce world poverty than all the aid programs that we’ve undertaken in the last century.--Paul Romer

Modern societies deny men and women the experience of solidarity, which football [soccer] provides to the point of collective delirium. Most car mechanics and shop assistants feel shut out by high culture; but once a week they bear witness to displays of sublime artistry by men for whom the word genius is sometimes no mere hype. Like a jazz band or drama company, football blends dazzling individual talent with selfless teamwork, thus solving a problem over which sociologists have long agonised. Co-operation and competition are cunningly balanced. Blind loyalty and internecine rivalry gratify some of our most powerful evolutionary instincts. The game also mixes glamour with ordinariness in subtle proportion: players are hero-worshipped, but one reason you revere them is because they are alter egos, who could easily be you. Only God combines intimacy and otherness like this ... The sport is a matter of spectacle but, unlike trooping the colour, one that also invites the intense participation of its onlookers. Men and women whose jobs make no intellectual demands can display astonishing erudition when recalling the game's history or dissecting individual skills. Learned disputes worthy of the ancient Greek forum fill the stands and pubs. Like Bertolt Brecht's theatre, the game turns ordinary people into experts. This vivid sense of tradition contrasts with the historical amnesia of postmodern culture, for which everything that happened up to 10 minutes ago is to be junked as antique. There is even a judicious spot of gender-bending, as players combine the power of a wrestler with the grace of a ballet dancer. Football offers its followers beauty, drama, conflict, liturgy, carnival and the odd spot of tragedy, not to mention a chance to travel to Africa and back while permanently legless. Like some austere religious faith, the game determines what you wear, whom you associate with, what anthems you sing and what shrine of transcendent truth you worship at. Along with television, it is the supreme solution to that age-old dilemma of our political masters: what should we do with them when they're not working?--Terry Eagleton

Yale Fan is going to Harvard.--Gabe Deleon

Waiving the Jones Act would allow foreign owned ships to pitch in on the clean up

But the Obama administration does not want to waive, some speculate, because it would offend labor unions.



Via Mark Perry.

Tim Kane writes a touching tribute to his dad

Looking back, I think I learned this from Pop: Flying high is heroic, but crashing isn’t a tragedy. We should save our tears for the people who never try to fly.

A. 102, 94, 91, 89, 86

Q. What are the Lakers point totals in this year's championship series so far?

Charlie Rosen breaks down how the Celtics are stifling the Lakers' offense. ('S/R' stands for 'screen roll', which is filled by an offensive player when they set a pick or block a lane away from the defender who is playing the guard who has the ball).

They did it to LeBron and now they are doing it to Kobe.

Quotes of the day

Now we’re near to the beating heart of the ideology that holds our political press together. That is when journalists try to win the argument not by having better arguments but by standing closer to a reality they get to define as more real than your reality. ... You’ve got the Church of the Savvy, The Quest for Innocence, the View from Nowhere, Regression to a Phony Mean, He Said, She Said, the Sphere of Deviance. These form the real ideology of our political press. But we have to study them to understand them well.--Jay Rosen

Led by the American Federation of Teachers and the National Education Association, teachers unions contributed about $5.4 million to federal candidates, parties and committees during the 2008 election cycle. As is true with unions in general, most of the money coming from this category goes to Democrats. Teachers unions contribute 95 percent of their funds to Democrats -- a rate that’s above average among labor unions across the board. The AFT contributed $2.8 million during the 2008 cycle, with 99 percent going to Democrats. For its part, the NEA contributed $2.5 million, with 91 percent going to Democrats.--Open Secrets

The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.--Lorraine Woellert and John Gittelsohn

Let’s recap what we saw on this video. A sitting Congressman–a presumed living extension of James Madison and other founding fathers–was asked on a public street whether he supported the President’s agenda. His response was to hit away a video camera and assault a student. The age of Pericles this ain’t. It is going to be a long, hot summer. But, you’ve been shown a politician who can be beaten this November. Act accordingly.--Mike Flynn

As you know, some fearless bloggers have exposed the “whiff” of racism in attempts by conservative economists like Raghu Rajan to blame the government for the mortgage fiasco. ... It seems even the Fed is peddling those vicious racist lies.--Scott Sumner

17% underemployment...and the longest lines are outside the Apple Store.--Joshua Brown

[Muhummad] Yunus and [Hernando] de Soto offer us real insights into how the poor can, finally, work themselves out of poverty: Yunus shows they need credit and de Soto shows they need to join the formal economy. But we must build on their ideas and combine them in order to develop a more viable way to realize their inherent promise. If the world's poor can gain access to private capital via their formal titles, then we will have a real solution to a $9 trillion problem.--Peter Schaefer

We have known for a long time that Prince Charles' empty sails are so rigged as to be swelled by any passing waft or breeze of crankiness and cant. He fell for the fake anthropologist Laurens van der Post. He was bowled over by the charms of homeopathic medicine. He has been believably reported as saying that plants do better if you talk to them in a soothing and encouraging way. ... None of this might matter very much, until you notice the venue at which Charles delivered his farrago of nonsense. It was unleashed upon an audience at the Center for Islamic Studies at Oxford University, an institution of which he is the patron. Nor is this his only foray into Islamophilia. Together with the Saudi royal family, he supported the mosque in North London that acted as host and incubator to Richard "Shoe Bomber" Reid, the hook-handed Abu Hamza al-Masri, and several other unsavory customers. The prince's official job description as king will be "defender of the faith," which currently means the state-financed absurdity of the Anglican Church, but he has more than once said publicly that he wants to be anointed as defender of all faiths—another indication of the amazing conceit he has developed in six decades of performing the only job allowed him by the hereditary principle: that of waiting for his mother to expire. ... One thinks of the painstaking, cloud-dispelling labor of British scientists from Isaac Newton to Joseph Priestley to Charles Darwin to Ernest Rutherford to Alan Turing and Francis Crick, much of it built upon the shoulders of Galileo and Copernicus, only to see it casually slandered by a moral and intellectual weakling from the usurping House of Hanover. An awful embarrassment awaits the British if they do not declare for a republic based on verifiable laws and principles, both political and scientific.--Christopher Hitchens

I have no idea of why [the White House] attitude was so hands-offy here [in the Gulf Coast]. The President of the United States could’ve come down here. He could’ve been involved with the families of these 11 people [killed in the rig explosion on April 20 that triggered the massive oil gusher]. He could be commandeering tankers and making BP bring tankers in and clean this up. They could be deploying people to the coast right now. He could be with the Corps of Engineers and the Coast Guard...doing something about these regulations. These people are crying. They’re begging for something down here, and he just looks like he’s not involved in this. Man, you gotta get down here and take control of this! Put somebody in charge of this thing and get this thing moving! We're about to die down here!--James Carville

[Paul] Krugman is right when he says that borrowing is cheap. But the issue isn’t borrowing; it’s spending—and spending is expensive. It appears that like the President, Krugman wants to divert your attention from spending to borrowing so he can dismiss legitimate concerns without even acknowledging them. It’s a cheap trick. Don’t let either of them get away with it.--Steve Landsburg

The heroic, nearly 2,000-mile delivery of mail across the country hemorrhaged money, from the first day a rider saddled up until the click of the transcontinental telegraph shut it down 78 weeks later. The Pony Express was one of the most colossal and celebrated failures in American business history, but its legacy, as the sale at Robert A. Siegel Auction Galleries suggests, remains an enduring and revered piece of the Old West myth. Even today, old-timers in the remotest parts of the American West still speak of “the days of the Pony.” ... Ultimately, the Pony became an American epic along the lines of Paul Revere’s ride, a tale rooted in fact but layered with a century and a half of embellishments, fabrications, and outright lies. There is still no agreement even on the identity of the first rider. William Floyd, an early 20th-century chronicler of the Pony from St. Joseph, once called it “a tale of truth, half-truth and no truth at all.” But what a story; what an American memory. The legend of the Pony Express was worth every nickel generated by that fancy stamp auction in New York City last December. On that count Russell, Majors, and Waddell would be in solemn agreement. Its memory remains priceless.--Christopher Corbett

Note that [Bernard] Lagat peaked in 2001 in the 1500 meter distance and his times have gradually slowed since then. On the other hand, while Lagat's speed may be on the decline, his endurance is improving, with the proof that he is now 36 seconds faster in the 5000 meters than he was in 2001. After watching the race, it occurred to me that something similar has happened to my trading – and at least anecdotally to a large number of other traders. Back in 2001, the majority of my trades were day trades, but as my opponents have become younger, faster and more technologically sophisticated, I find myself, like Lagat, refocusing my efforts on longer time horizons, where my skills and experience match up better than they do against the high-frequency trading crowd.--Bill Luby

PIMCO halves its gold holdings

I can tell you that we had an allocation of gold in our multi-asset products, and we've halved it recently. We still think it makes some sense to have an allocation to gold, but not as much as we used to. I would wait and see how the deleveraging process plays out. I think that if the world de-levers further, which is not immaterial, then gold will be hit.--Mohamed El-Erian

I leaned the same way, 4 weeks ago, and I am short some GLD in the personal account.

Enron's Jeffery Skilling and his lessons learned

1) Take the Fifth.

Contrary to his attorneys' advice, Jeff Skilling did not exercise his Fifth Amendment rights. He wanted to explain Enron's business decisions and couldn't bear the thought of being silent. Skilling said that he didn't regret testifying, but that he "talked too much and educated the prosecution on issues that they would otherwise have had to figure out on their own." In other words, Skilling now sees that testifying may have hurt his chances for an acquittal, but he thought it was a risk worth taking to be able to speak openly about what happened. In retrospect, it wasn't.

2) Go on a PR offensive.

During the four years leading up to the trial, Skilling was visible in Congress and in the courtroom, but as a discredited CEO, he wasn't focused on his standing in the public's eyes. Looking back, he regrets not maintaining relationships with key industry advocates in and outside the media. In addition, Skilling wished he had developed a media strategy to influence public opinion and worked to change the reputation of himself and his firm -- something he now believes could have had a positive influence on the outcome of his case.

3) Avoid sarcasm.

In May 2001, Skilling famously said, "They're onto us" to a group of Enron executives about a negative analyst report on the company. Five years later he was defending himself by claiming that his comment was sarcasm, not an admission of guilt. Skilling nervously chuckled as he recalled when he was publicly edgy and impatient during the episode, but he quickly got serious and seemed self-reflective when he said, "Sarcasm is easily misinterpreted and can be a tremendous liability."

The entire interview is here.

Chart of the day: 11-year old IQ test distributions

Source here.

Quotes of the day

You’re not giving an interview; you’re having a conversation. Start by doing it. It’s like walking a tightrope, and it should be. The more it’s like walking a tightrope, the more admirable it will be, and the more interesting it will be to your reader or listener. A steno pad prevents you from meeting a person’s eye. And it prevents someone from meeting your eye. Don’t use notes. There’s a conscious and unconscious response when someone sees that you’re speaking to him or her from memory and you trust yourself. You may never know when the answer is going to end or where he’s going to stop, or she’s going to stop, but believe in the politeness of letting someone speak uninterrupted and don’t interrupt. My advice to you: sit forward, listen with all your might, and don’t ever be thinking of your next question.--Michael Silverblatt

Student evaluations are positively correlated with contemporaneous professor value‐added and negatively correlated with follow‐on student achievement. That is, students appear to reward higher grades in the introductory course but punish professors who increase deep learning (introductory course professor value‐added in follow‐on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice.--Scott Carrell and James West

After the 2008 season, me and my agent approached the Patriots about an extension and I was told that Mr. Kraft did not want to do an extension because of the [uncertain collective bargaining agreement]. I was asked to play ‘09 out, and that they would address contract after the uncapped year. I’m a team player, I took them at word, and I felt I played out an undervalued contract. That’s the big thing. Right now, this is about principle with me and keeping your word and how you treat people. This is what I thought the foundation of the Patriots was built on. Apparently, I was wrong. Growing up, I was taught a man’s word is his bond. Obviously this isn’t the case with the Patriots.--Logan Mankins

Because they all play, most of America's children assume that soccer will always be a part of their lives. When I was 8, playing center midfielder for the undefeated Strikers (coached by the unparalleled Mr. Cooper), I harbored no life expectations other than that I would continue playing center midfielder until such time as I died. It never occurred to me that any of this would change. But at about age 10, something happens to the children of the United States. Soccer is dropped, quickly and unceremoniously, by approximately 88 percent of all young people. The same kids who played at 5, 6, 7, move on to baseball, football, basketball, hockey, field hockey, and, sadly, golf. Shortly thereafter, they stop playing these sports, too, and begin watching these sports on television, including, sadly, golf.--Dave Eggers

Fascist host countries do really well; witness Italy’s win in 1934 and Argentina’s in 1978. Apparently creating a hostile and frightening atmosphere for opposing nations, and being able to threaten your players and/or the referees with horrible fates, helps your chances considerably. ... North Korea celebrated their first World Cup qualification in forty-four years by drawing three good teams that will crush them. It will be a struggle to find highlights to show on North Korean television.--Jeff Blum

Non-economists often get upset when they learn that someone has gotten rich by solving a problem. Economists, by contrast, worry when they think no one can get rich by solving a problem.--David Henderson

When the Korean Peninsula was divided in 1945, South Korea was poorer than its neighbor. Now its average worker earns 15 times as much as an average North Korean, according to cost-of-living-adjusted data. The number of defectors who make it through China to South Korea has steadily risen for a decade, hitting nearly 3,000 last year. Infant and maternal mortality rates jumped at least 30 percent from 1993 to 2008, and life expectancy fell by three years to 69 during the same period, according to North Korean census figures and the United Nations Population Fund. The United Nations World Food Program says one in three North Korean children under the age of 5 are malnourished. More than one in four people need food aid, the agency says, but only about one in 17 will get it this year, partly because donors are reluctant to send aid to a country that has insisted on developing nuclear weapons. The currency devaluation has only heightened the suffering. Its aim was to divert the proceeds of North Korea’s vast entrepreneurial underground — its street markets — to its cash-starved government businesses. The markets are the sole source of income for many North Koreans, but they flout the government’s credo of economic socialism. Theoretically, everyone except minors, the elderly and mothers with young children works for the state. But state enterprises have been withering for 30 years, and North Koreans do all they can to escape work in them. Farmers tend their own gardens as weeds overtake collective farms. Urban workers duck state assignments to peddle everything from metal scavenged from mothballed factories to televisions smuggled from China. “If you don’t trade, you die,” said the former teacher, a round-faced 51-year-old woman with a ponytail. She went from obedient state employee to lawbreaking trader, but could not escape her plight. She taught primary school for 30 years in Chongjin, North Korea’s third-largest city, with roughly 500,000 people. What once was an all-day job shrank by 2004 to morning duty; schools closed at noon. At least 15 of her 50 students dropped out or left after an hour, too hungry to study. “It is very hard to teach a starving child,” she said. “Even sitting at a desk is difficult for them.” --Sharon LaFraniere

As the political secretary to the Xinyang mayor in the late 1950s, Yu was an eyewitness to a mini-Holocaust in his hometown, its surrounding villages and even his own family. Mao had ordered Chinese farms to be collectivized in the late 1950s and forced many peasants who had once productively grown grain to put their energies into building crude backyard blast furnaces instead. As part of this “Great Leap Forward”, Mao’s acolytes predicted that food production would be doubled, even tripled in a few years and that steel production would soon surpass output in advanced western countries. The new rural communes began reporting whopping, fake harvests to meet Mao’s demand for record grain output. When the government took its share of the grain based on the exaggerated figures, little was left for ordinary people to eat. According to the most conservative calculations, one million people out of a population of eight million in Xinyang died between 1958 and 1961. ... Xinyang was generally blessed with good harvests, unlike much of Henan, known as the “land of beggars” for its history of impoverishment and famines. But any advantage the city had was undermined by the officials who ruled over it. At the time, Henan and Xinyang were overseen by radical leftists fanatically devoted to Mao who viewed the grain harvest solely through the prism of violent class struggle. Yu remembers vividly a series of surreal meetings in 1959, when the 18 counties in Xinyang city reported their harvest for the year. After a furious debate in which each county reported wildly exaggerated figures, they settled on a figure about three to four times the real size of the harvest. The distortion was more than enough to set in train the disaster that followed. It was not long before mass starvation began to grip the city and surrounding areas.--Richard McGregor

[China's party] system is decaying and the system is evolving. It is decaying while it is evolving. It is not clear what side might come out on top in the end.--Yang Jisheng

Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund. And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.--Danny Hakim

In the ’90s, when [Ronald] Ericsson looked into the numbers for the two dozen or so clinics that use his process, he discovered, to his surprise, that couples were requesting more girls than boys, a gap that has persisted, even though Ericsson advertises the method as more effective for producing boys. In some clinics, Ericsson has said, the ratio is now as high as 2 to 1. ... Men dominate just two of the 15 job categories projected to grow the most over the next decade: janitor and computer engineer. Women have everything else—nursing, home health assistance, child care, food preparation. Many of the new jobs, says Heather Boushey of the Center for American Progress, “replace the things that women used to do in the home for free.” None is especially high-paying. But the steady accumulation of these jobs adds up to an economy that, for the working class, has become more amenable to women than to men.--Hanna Rosin

Away for the weekend

Posting will be light.

Tim Dickinson with a detailed lead up to the oil spill

An excerpt:

BP is the last oil company on Earth that Salazar and MMS should have allowed to regulate itself. The firm is implicated in each of the worst oil disasters in American history, dating back to the Exxon Valdez in 1989. At the time, BP directed the industry consortium that bungled the cleanup response to Valdez during the fateful early hours of the spill, when the worst of the damage occurred. Vital equipment was buried under snow, no cleanup ship was standing by and no containment barge was available to collect skimmed oil. Exxon, quickly recognizing what still seems to elude the Obama administration, quickly shunted BP aside and took control of the spill.

In March 2006, BP was responsible for an Alaska pipeline rupture that spilled more than 250,000 gallons of crude into Prudhoe Bay – at the time, a spill second in size only to the Valdez disaster. Investigators found that BP had repeatedly ignored internal warnings about corrosion brought about by "draconian" cost cutting. The company got off cheap in the spill: While the EPA recommended slapping the firm with as much as $672 million in fines, the Bush administration allowed it to settle for just $20 million.

BP has also cut corners at the expense of its own workers. In 2005, 15 workers were killed and 170 injured after a tower filled with gasoline exploded at a BP refinery in Texas. Investigators found that the company had flouted its own safety procedures and illegally shut off a warning system before the blast. An internal cost-benefit analysis conducted by BP – explicitly based on the children's tale The Three Little Pigs – revealed that the oil giant had considered making buildings at the refinery blast-resistant to protect its workers (the pigs) from an explosion (the wolf). BP knew lives were on the line: "If the wolf blows down the house, the piggy is gobbled." But the company determined it would be cheaper to simply pay off the families of dead pigs.

After the blast, BP pleaded guilty to a felony, paying $50 million to settle a criminal investigation and another $21 million for violating federal safety laws. But the fines failed to force BP to change its ways. In October, Labor Secretary Hilda Solis hit the company with a proposed $87 million in new fines – the highest in history – for continued safety violations at the same facility. Since 2007, according to analysis by the Center for Public Integrity, BP has received 760 citations for "egregious and willful" safety violations – those "committed with plain indifference to or intentional disregard for employee safety and health." The rest of the oil industry combined has received a total of one.

The company applied the same deadly cost-cutting mentality to its oil rig in the Gulf. BP, it is important to note, is less an oil company than a bank that finances oil exploration; unlike ExxonMobil, which owns most of the equipment it uses to drill, BP contracts out almost everything. That includes the Deepwater Horizon rig that it leased from a firm called Transocean. BP shaved $500,000 off its overhead by deploying a blowout preventer without a remote-control trigger – a fail-safe measure required in many countries but not mandated by MMS, thanks to intense industry lobbying. It opted to use cheap, single-walled piping for the well, and installed only six of the 21 cement spacers recommended by its contractor, Halliburton – decisions that significantly increased the risk of a severe explosion. It also skimped on critical testing that could have shown whether explosive gas was getting into the system as it was being cemented, and began removing mud that protected the well before it was sealed with cement plugs.

As BP was cutting corners aboard the rig, the Obama administration was plotting the greatest expansion of offshore drilling in half a century. In 2008, as prices at the pump neared $5 a gallon, President Bush had lifted an executive moratorium on offshore drilling outside the Gulf that had been implemented by his father following the Exxon Valdez. On the campaign trail, Obama had stressed that offshore drilling "will not make a real dent in current gas prices or meet the long-term challenge of energy independence." But once in office, he bowed to the politics of "drill, baby, drill." Hoping to use oil as a bargaining chip to win votes for climate legislation in Congress, Obama unveiled an aggressive push for new offshore drilling in the Arctic, the Southeastern seaboard and new waters in the Gulf, closer to Florida than ever before. In doing so, he ignored his administration's top experts on ocean science, who warned that the offshore plan dramatically understated the risks of an oil spill and petitioned Salazar to exempt the Arctic from drilling until more scientific studies could be conducted.

Undeterred, Obama and Salazar appeared together at Andrews Air Force Base on March 31st to introduce the plan. The stagecraft was pure Rove in its technicolor militaristic patriotism. The president's podium was set up in front of the cockpit of an F-18, flanked by a massive American flag. "We are not here to do what is easy," Salazar declared. "We are here to do what is right." He insisted that his reforms at MMS were working: "We are making decisions based on sound information and sound science." The president, for his part, praised Salazar as "one of the finest secretaries of Interior we've ever had" and stressed that his administration had studied the drilling plan for more than a year. "This is not a decision that I've made lightly," he said. Two days later, he issued an even more sweeping assurance. "It turns out, by the way, that oil rigs today generally don't cause spills," the president said. "They are technologically very advanced."
...
From the start, the administration has seemed intent on allowing BP to operate in near-total secrecy. Much of what the public knows about the crisis it owes to Rep. Ed Markey, who chairs the House Subcommittee on Energy and the Environment. Under pressure from Markey, BP was forced to release footage of the gusher, admit that its early estimates put the leak as high as 14,000 barrels a day and post a live feed of its undersea operations on the Internet – video that administration officials had possessed from the earliest days of the disaster. "We cannot trust BP," Markey said. "It's clear they have been hiding the actual consequences of this spill."

But rather than applying such skepticism to BP's math, the Obama administration has instead attacked scientists who released independent estimates of the spill. When one scientist funded by NOAA released a figure much higher than the government's estimate, he found himself being pressured to retract it by officials at the agency. "Are you sure you want to keep saying this?" they badgered him. Lubchenco, the head of NOAA, even denounced as "misleading" and "premature" reports that scientists aboard the research vessel Pelican had discovered a massive subsea oil plume. Speaking to PBS, she offered a bizarre denial of the obvious. "It's clear that there is something at depth," she said, "but we don't even know that it's oil yet."

Scientists were stunned that NOAA, an agency widely respected for its scientific integrity, appeared to have been co-opted by the White House spin machine. "NOAA has actively pushed back on every fact that has ever come out," says one ocean scientist who works with the agency. "They're denying until the facts are so overwhelming, they finally come out and issue an admittance." Others are furious at the agency for criticizing the work of scientists studying the oil plumes rather than leading them. "Why they didn't have vessels there right then and start to gather the scientific data on oil and what the impacts are to different organisms is inexcusable," says a former government marine biologist. "They should have been right on top of that." Only six weeks into the disaster did the agency finally deploy its own research vessel to investigate the plumes.

Michael Lewis rounds up oaths, by Wall Street shop

I found it slightly more funny than snarky, but be warned: there are heaping amounts of the latter.

Here is are examples:

-- The Oath of Hedge Fund Man:

I pledge to short the credit spreads of only those public corporations and great nations that truly are doomed.

I thus pledge to accelerate Darwinian forces that elevate the strong and destroy the weak.

And even though that should be enough goodness for one lifetime, I pledge to bid generously for the sexier items at the next Robin Hood auction.

Warren’s Warranty

-- The Warren Buffett Oath:

I pledge, even in the privacy of my own bedroom, to seem nothing like the abovementioned hedge fund manager.

I pledge to remain the go-to moral compass of the American money culture.

To that end I pledge to learn less than I typically do about the Wall Street businesses in which I invest, so that, after they are discovered to have lied, cheated or stolen, I can plausibly claim to have known nothing about it.

Specifically, I pledge to remain unable to find the corporate headquarters of Moody’s Inc. on a New York City map. (Really, I have no idea where the place is!)

Quotes of the day

The killer is that what protects you in a crisis is also what leaves money on the table pre-crisis. The best trades and market positions in the pre-crisis regime are the ones that cause the greatest losses in the crisis.--Rick Brookstaber

Today, Israel is not the belligerent party in the Israeli-Palestinian conflict. It is Israel that has offered partition, and the Palestinians who have consistently refused it. Netanyahu inherited a winning hand. He could have put a peace plan on the table, leaving the Palestinians to refuse it. He could have declared that Israel wanted to withdraw from the West Bank and would do so if its security was guaranteed by an agreement with the Palestinians or a third party. He could have offered state housing help for those who would leave the settlements even before an agreement. Instead, he mumbled something half-heartedly about two states, and then moved on to fight for enlarging settlements.--Gadi Taub

As the rain and the snow come down from heaven, and do not return to it without watering the earth and making it bud and flourish, so that it yields seed for the sower and bread for the eater, so is my word that goes out from my mouth: It will not return to me empty, but will accomplish what I desire and achieve the purpose for which I sent it. You will go out in joy and be led forth in peace; the mountains and hills will burst into song before you, and all the trees of the field will clap their hands.--Isaiah

So men may in any dispensation despise the grace of God, but they cannot extinguish it.--A.W. Tozer

There are two things to say about this. The first is that the consumption of culture is not always worthless. Is it really better to produce yet another lolcat than watch The Wire? And what about the consumption of literature? By Shirky's standard, reading a complex novel is no different than imbibing High School Musical, and both are less worthwhile than creating something stupid online. While Shirky repeatedly downplays the importance of quality in creative production—he argues that mediocrity is a necessary side effect of increases in supply—I'd rather consume greatness than create yet another unfunny caption for a cat picture. The second thing is that it remains entirely unclear if the creative and generous acts made possible by the internet are really a replacement for time spent watching sitcoms. After all, people have always had hobbies; although they watched plenty of bad television, they also read newspapers and built model airplanes, went on hikes and volunteered at the local shelter. In other words, we weren't quite as mindless or disconnected as Shirky seems to believe. In his zeal to celebrate the revolutionary capabilities of the internet, Shirky downplays the virtues of the world before the web. And then there is the terrifying possibility (not addressed by Shirky) that our online life is detracting, not from time spent watching TV, but from our interest in things that have nothing to do with technology, such as talking with friends or taking walks in the park. It's easy to find quibbles with an argument as audacious and thought-provoking as that put forward in Cognitive Surplus. The fact is, Shirky has written an important book about an interesting moment in human history. We have arranged our modern lives to maximize free time. Now, thanks to the virtual infrastructure of the internet, we are able to collaborate and interact as never before. The question is what these collaborations will create. A surplus, after all, is easy to squander.--Jonah Lehrer

It isn't simply a matter of completing the deep pass into the corner of the end zone or sinking the shot for three points at the buzzer; it's the business of sustaining the belief that democracy still works the way the Declaration of Independence says it's supposed to work, Jefferson's "aristocracy of virtue and talent" still out there in uniform on the level playing field, imparting substance to the nation's fondest memories and dearest hopes. Like the infantry platoons that won the Hollywood version of World War II, an American team in good working order affirms the doctrine of egalitarianism, erases the distinctions between race and class, rehabilitates the principle of justice under law. The coach doesn't start the kid at quarterback because the kid is underprivileged; the manager doesn't insist that the dugout vote Republican. On the far side of the left-field wall, wars bleed and children starve; men cheat, women rot, banks foreclose, politicians lie. Inside the park the world is as it was in the beginning, as green as the grass of childhood, as bright as the sky at noon with what the British novelist V.S. Pritchett regarded as "the emotion of being American… that feeling of nostalgia for some undetermined future when man will have improved himself beyond recognition and all will be well."--Lewis Lapham

What a less biased journalist might write about a Nanny Bill of Rights

Steve Landsburg, translator extraordinaire:

New York state may soon become the first state to restrict employment opportunities for nannies.

The state Senate passed a bill this week that would prohibit New York’s approximately 200,000 household workers from accepting any position that does not include paid holidays, overtime pay and sick days.

Opponents say the step will bring unnecessary hardship to thousands of women—and some men—who have found employment because of labor markets that operate freely, except for constraints imposed by the federal minimum wage.

Cartoon of the day

Via Don Surber.

Quotes of the day

The U.S. is the least dirty shirt.--Bill Gross

Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical. Therefore, we counted as incorrect responses of "somewhat disagree" and "strongly disagree." This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer "not sure," which we do not count as incorrect. In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly. ... To be sure, none of the eight questions specifically challenge the political sensibilities of conservatives and libertarians. Still, not all of the eight questions are tied directly to left-wing concerns about inequality and redistribution. In particular, the questions about mandatory licensing, the standard of living, the definition of monopoly, and free trade do not specifically challenge leftist sensibilities. Yet on every question the left did much worse. On the monopoly question, the portion of progressive/very liberals answering incorrectly (31%) was more than twice that of conservatives (13%) and more than four times that of libertarians (7%). On the question about living standards, the portion of progressive/very liberals answering incorrectly (61%) was more than four times that of conservatives (13%) and almost three times that of libertarians (21%). The survey also asked about party affiliation. Those responding Democratic averaged 4.59 incorrect answers. Republicans averaged 1.61 incorrect, and Libertarians 1.26 incorrect.--Daniel Klein

Liberals are confident that they are smarter and better educated than conservatives. That may be the case in some sense. But they are overconfident in their beliefs. They may think of themselves as an elite, but they are just a ruling class.--Arnold Kling

... nominal interest rates have an Achilles heel. They might need to go significantly below zero, but cannot. This means that if rates fall to zero, and the Fed wants them to be lower, and the Fed is incapable of communicating with the public in any way other than interest rate changes, then the Fed becomes literally dumb (in the sense of speechless, although I’d argue that slang for ’stupid’ also applies here.) So the markets look to the Fed for direction, and they have nothing to say. ... If fiscal policy is to work, then it must raise Aggregate Demand (AD), and hence the future expected price level. If the Fed won’t let them do that, then it won’t work. It doesn’t even matter if the short term rate is stuck at zero right now, and there is nothing the Fed can do right now to sabotage fiscal policy. Just the expectation that in the future they will act to prevent the price level from rising as the fiscal authorities hope, is enough to sabotage current fiscal policy. That’s why I started this entire overlong essay with the thought experiment about house prices, to try to convince you that what drives current assets prices, and current AD, is future expected monetary policy.--Scott Sumner

People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How's it feel to be a disgruntled victim?--Scott Adams

In case you were tempted to buy the faux Washington outrage at BP and its gulf oil spill in recent days, here's a story that reveals a little-known corporate political connection and the quiet way the inner political circles intersect, protect and care for one another in the nation's capital. And Chicago. We already knew that BP and its folks were significant contributors to the record $750-million war chest of Barack Obama's 2007-08 campaign. Now, we learn the details of a connection of Rahm Emanuel, the Chicago mayoral wannabe, current Obama chief of staff, ex-representative, ex-Clinton money man and ex-Windy City political machine go-fer. Shortly after Obama's happy inaugural, eyebrows rose slightly upon word that, as a House member, Emanuel had lived the last five years rent-free in a D.C. apartment of Democratic colleague Rep. Rosa DeLauro of Connecticut and her husband, Stanley Greenberg. For an ordinary American, that would likely raise some obvious tax liability questions. But like Emanuel, the guy overseeing the Internal Revenue Service now is another Obama insider, Tim Geithner, who had his own outstanding tax problems but skated through confirmation anyway by the Democratic-controlled Congress. Remember this was all before the letters BP stood for Huge Mess. Even before the Obama administration gave BP a safety award.--Andrew Malcolm

Leaders of Russia, Turkey and Iran convened at a security summit meeting in Istanbul on Tuesday in a display of regional power that appeared to be calculated to test the United States ...--Sabrina Tavernise

In 2006 Kevin Lafferty of the University of California, Santa Barbara, published a paper noting a correlation between levels of neuroticism established by national surveys in various countries and the level of Toxoplasma infection recorded in pregnant women (a group who are tested routinely). The places he looked at ranged from phlegmatic Britain, with a neuroticism score of -0.8 and a Toxoplasma infection rate of 6.6%, to hot-blooded France, which scored 1.8 and had an infection rate of 45%. Cross-Channel prejudices, then, may have an unexpected origin. To repeat, correlation is not causation, and a lot more work would need to be done to prove the point. But it is just possible that a parasite’s desire to get eaten by a cat is shaping the cultures of the world.--The Economist

I’m not sure what to make of a world in which a ten year-old can’t find an hour to run and play, but I have a feeling there’s something very wrong with it.--Tony Woodlief

Compared with High School Musical, Romeo and Juliet is a Tarantino spectacular. ... Music is the prow of popular culture, and Hollywood follows as fast as it can. Only four years after the orgy in the New York mud bath, George Lucas gave the next crop of kids American Graffiti, and the youngest once again turned. What else could have followed Woodstock—the total embrace of free love, and everything good and (especially for girls) bad that came with it—other than a full embrace of the supposedly most sexually boring and intellectually repressed time and place of the 20th century, 1950s America? --Caitlin Flanagan

So, on behalf of single men everywhere: Thanks, but no thanks. Please don’t settle for us. Don’t get us wrong; it’s awfully nice of you to let us spend the rest of our lives trying to make you happy despite our obvious deficiencies. We’re honored that you’re willing to consider letting us buy you a diamond ring -- even though our eyes are the wrong color and you’re embarrassed by our lack of wine knowledge. Really, we appreciate it. But the truth is we’re just not comfortable treating marriage like an insurance policy taken out against the prospect of future loneliness -- so, please don’t settle for us.--Andrew Moore

The Duke researchers report that there are still four boys for every girl at the extreme right tail of the scores for the SAT math test. The boy-girl ratio has also remained fairly constant, at about three to one, at the right tail of the ACT tests of both math and science reasoning. Among the 19 students who got a perfect score on the ACT science test in the past two decades, 18 were boys.--John Tierney

Department of Oliver Stone: Why Obama has been so busy

Bill Simmons speculates.

Tampering, anyone?

Scott Sumner brilliantly follows the money

F is for failure:

1. The Fed. Losses unknown, but its tight money policy created the severe recession, which dramatically worsened the financial crisis.

2. Fannie and Freddie: Estimated losses $145 billion, and rising fast

3. FDIC, estimated losses $100 billion

4. The UAW: estimated losses from bailing out this adjunct of the Democratic party is $34 billion

5. Banks plus AIG: Estimated bailout costs is $29 billion and falling.

Yep, that sure looks like a failure of laissez-faire capitalism. And I didn’t even mention the FHA, which is furiously at work trying to create another sub-prime fiasco.

John Wooden's Pyramid of Success

Source here, via Abnormal Returns.

Wooden is one of my dad's all-time favorite coaches, along with Lombardi and Auerbach.

UPDATE: Joe Posanski with a great piece on the legend.

Quotes of the day

There is no way to take the risk out of life. When government tries, all it really does is transfer that risk elsewhere. And without the growth and advancement that freedom brings, the system breaks down and wealth creation is undermined. You can’t get something from nothing. The fruits of freedom are only available to those who are willing to take the risks of freedom. Let’s not forget that lesson.--Brian Wesbury and Robert Stein

When it comes to your children, the books in your house matter more than your education or income.--Laura Miller

Finding alpha is about finding your comparative advantage in your work. As David Ricardo noted about comparative advantage, it exists regardless of one's absolute advantage, it's what one is relatively best at, basically, one's most productive activity. When you find it, you are literally being all you can be. ... One important refinement of this idea is that there's a difference between current and permanent value: Pets.com vs. Google, the works of John Kenneth Galbraith vs. Ludwig von Mises. They might, at one time, have generated the same appreciation, but one faded, the other proved highly prescient. One's sense of whether one is creating permanent value, irrespective of current rewards, is important as well, because its rather ghastly to think one's lifework will be seen like past experts in quack homeopathy, irrelevant if not a joke. ... In the end Marcus Aurelius notes that popularity counts for nothing, "we're all forgotten. The abyss of endless time that swallows it all. The emptiness of those applauding hands." So, live for creating value in the lives of those around you, value that is appreciated and will be missed because it is real. If you create real value, things that with the passage of time retain their admiration, as Brooks suggests, that will probably make you happy, which isn't nothing.--Eric Falkenstein

A better defense of capitalism is to focus on capitalist virtues. In "The Pursuit of Happyness," for example, Chris Gardner, a struggling salesman played by Will Smith, confronts adversity with hard work, creativity, ambition and intelligence. "The Pursuit of Happyness" is syrupy at times, but the story of Gardner's rise from homelessness to a successful job as a stockbroker is full of drama and uplift, which makes it all the more surprising that more films don't use the business world as the setting for great cinema. Lots of movies feature people in soul-destroying jobs who finally escape to realize their true selves, but how many feature people who find their true selves in productive work? Not many, which is a shame, since the business world is where most of us live our lives. Like many works of literature, Hollywood chooses for its villains people who strive for social dominance through the pursuit of wealth, prestige, and power. But the ordinary business of capitalism is much more egalitarian: It's about finding meaning and enjoyment in work and production. Michael Moore didn't have to worry that anyone would misinterpret the title of his film, "Capitalism: A Love Story," because in Hollywood no one loves capitalism. That's too bad because Hollywood is one of capitalism's greatest successes. Hollywood brought high quality entertainment to the masses in the same way that Henry Ford brought high quality cars to the masses. Hollywood is great at telling stories but it has yet to tell one of the greatest stories of them all, the story of capitalism, the most humane and productive economic system the world has ever known.--Alex Tabarrok

In a sense, Obama is hoist on his own petard. The man who blames Bush for everything now finds there are some things presidents cannot do. More deeply, the opposition party that persuades the public government can solve all their problems, discovers once in power there are problems their government cannot solve. Alas, it will take more time than they have to learn the next lesson: that governments which try to solve the insoluble, more or less invariably, make each problem worse. ... In so many ways, the trend of post-Christian society today is back to pagan superstitions: to the belief that malice lies behind every misfortune, and to the related idea that various, essentially pagan charms can be used to ward off that to which all flesh is heir. The belief that, for instance, laws can be passed, that change the entire order of nature, is among the most irrational of these. Sheer human stupidity is the cause of any number of human catastrophes -- including the stupidity of superstition itself. We need to re-embrace this concept; to hug the native incompetence within ourselves, and begin forgiving it in others.--David Warren

Our ability to manage large systems and to execute, I think, has been made clear over the last couple of years," Obama said. That executive ability, he added, "indicates the degree to which we can provide the kinds of support and good service that the American people expect.--Barack Obama

[Alan] Kahan's history is that as long as aristocrats at birth were important, intellectuals as a class had something to gain by bringing down these aristocrats, and promoting capitalism did that. Once the birth aristocracy weakened and a strong business class emerged, anti-capitalism became the more natural ideology of the intellectual class. Remember the Masonomic view that politics is about relative group status.--Arnold Kling

Go for the jugular.--George Soros

Sometimes, advocates of “sin” taxes contend that consumers of certain products impose adverse budgetary externalities on the rest of us — that if the consumption induces, say, smoking- or obesity-related illness, it raises health care costs, which we all pay for through higher taxes or insurance premiums. Yet this argument has a flip side: If consumers of these products die earlier, they will also collect less in pension payments, including Social Security. Economists have run the numbers for smoking and often find that these savings may more than offset the budgetary costs. In other words, smokers have little net financial impact on the rest of us. ... Taxing soda may encourage better nutrition and benefit our future selves. But so could taxing candy, ice cream and fried foods. Subsidizing broccoli, gym memberships and dental floss comes next. Taxing mindless television shows and subsidizing serious literature cannot be far behind. Even as adults, we sometimes wish for parents to be looking over our shoulders and guiding us to the right decisions. The question is, do you trust the government enough to appoint it your guardian?--Greg Mankiw

The need to diet, which we know so well in relation to food, and which runs so contrary to our natural impulses, should be brought to bear on what we now have to relearn in relation to knowledge, people, and ideas. Our minds, no less than our bodies, require periods of fasting.--Alain de Botton

... more oil is spilled from the delta's network of terminals, pipes, pumping stations and oil platforms every year than has been lost in the Gulf of Mexico, the site of a major ecological catastrophe caused by oil that has poured from a leak triggered by the explosion that wrecked BP's Deepwater Horizon rig last month.--John Vidal

One thing that's both disconcerting and exhilarating about physics is how many seemingly simple questions remain unanswered. When you hear the questions that physicists struggle with, you sometimes say to yourself, Wait, you mean they don't even know that? Physics might be defined as the subject that tries to figure out why the world may look incomprehensibly complex at first, but on closer examination is governed by simple laws. Those laws, applied repeatedly, build up the complexity. From this definition, you'd presume that physicists have at least sorted out what they mean by "law". Sorry. Why should nature be governed by laws? Why should those laws be expressible in terms of mathematics? Why should they be formulated within space and time? ... A law not only describes a pattern in nature, but distinguishes between patterns that arise by chance and those that are always there, independent of the particulars of a situation. What this means is frustratingly tricky to pin down, and it gets worse when you talk about the entire universe. If the universe is all there is, how could it have been any different? If it couldn't have, then what's the difference between a chance pattern and an inherent one?--George Musser

While some optimism about Africa’s future is warranted, its future is not assured because Africa still faces important problems. Yes, the private sector in mobile phones, natural resources, and elsewhere has grown a lot in many African countries, but the expansion of private companies has often taken the form of crony capitalism rather than competitive capitalism. By crony capitalism I mean that governments give special protected positions to favored companies in important sectors of the economy rather than allowing competition among companies to determine who are the winners and losers. Crony capitalism is partly the result of a continuing excessive role of the government in the economy. At the same time it encourages government corruption because companies compete politically to obtain these favored positions, partly by bribing government officials to favor them. Crony capitalism may be better than socialist direction of an economy, but is is far inferior to competitive capitalism.--Gary Becker

Mr. Matiullah is one of several semiofficial warlords who have emerged across Afghanistan in recent months, as American and NATO officers try to bolster — and sometimes even supplant — ineffective regular Afghan forces in their battle against the Taliban insurgency. In some cases, these strongmen have restored order, though at the price of undermining the very institutions Americans are seeking to build: government structures like police forces and provincial administrations that one day are supposed to be strong enough to allow the Americans and other troops to leave.--Dexter Filkins

In regard to communist tyrants, Latin American writers often se hacen de la vista gorda, as the Spanish expression goes: They see what they want to see. So is it leftist sympathy that keeps writers from turning Hugo Chávez into a novelistic ogre? Yes, but there's another reason as well. Latin American writers no longer command the kind of attention they did in the so-called Age of Revolution. ... What's more, many Latin American writers have given up on Latin America.--Ilan Stavans

Six Giant Banks Made $51 Billion Last Year; The Other 980 Lost Money.--Robert Lenzner

FCIC Chairman and former California State Treasurer, Phil Angelides got in a few good quips, but overall the tone was calm and rather boring. I had to laugh when I read some approving accounts of Phil Angelides’ comments, given the role he played over the past decade or so in California’s dismal economic condition. For those who do not know of him, Phil Angelides is hardly a paragon of financial acumen. He was the Treasurer of the State of California during the years (January 1999 to January 2007) when most of the disastrous decisions were made that plague California today. He was also on the boards of California’s woefully underfunded state pension plan during the time period when it embarked on an ill-fated and unfunded increase in pension payouts. California is broke today and Phil Angelides bears at least some responsibility for that.--Kurt Brouwer

When I sit around the table with a bunch of liberal college professors, I am often the most liberal in my attitudes toward today’s students. They mock all the luxuries of today’s college students, like spa services in dorms. And my gut instinct is the same. But my response is; why shouldn’t today’s students have it easier than we did? We are a much more affluent country today than in the 1970s. We grew up in smaller homes with one or one and a half baths; they grow up in McMansions with 5 bedrooms and 4 baths. They have their own cars in college. They don’t want to live in a little dorm cubicle, they want a nice apartment. ... Conservatives tend to look down on the poor. Liberals are more inclined to romanticize the poor. Neither attitude helps in coming up with sensible public policy solutions. Liberals are right that we need some empathy in order to become motivated to address the issue. But once we get to the stage of drawing up legislation, we are better of thinking about the issue with as little emotion as possible. I saw Samuelson taking a clear-headed and reasonable look at a technical issue—how to measure poverty. Thoma thought he was exhibiting a lack of compassion for the poor. The more blogging I do, the more I realize that people see very different things when they read a post.--Scott Sumner

The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America… And we need to do something about it… We are here in Washington, D.C. to address problems. So I've set this goal for the country. We want 5.5 million more homeowners by 2010… economic security at home is just an important part of -- as homeland security. And owning a home is part of that economic security. It's also a part of making sure that this country fulfills its great hope and vision. And I'm proud to report that Fannie Mae has heard the call and, as I understand, it's about $440 billion over a period of time. They've used their influence to create that much capital available for the type of home buyer we're talking about here. It's in their charter; it now needs to be implemented. Freddie Mac is interested in helping. I appreciate both of those agencies providing the underpinnings of good capital.--George Bush

I've long been fascinated by the common human illusion that ideas can be sorted into good and bad, when all experience shows this not to be the case. We could play the game all day long where I describe a simply terrible idea and then tell you about the people who got rich implementing it just right. Let's try a few...

How about a comic strip that is literally a bunch of stick figures? It will be called XKCD and have no discernable characters. Done! It's the most viewed comic on the Internet.

How about a movie about two gay cowboys? Done! Academy Award!

How about a comedic TV show about a Nazi concentration camp? Done! It was called Hogan's Heroes and was a hit in its time.

How about a Broadway musical about a bunch of frickin' cats? Done!

You'd be hard pressed to come up with an idea so bad that it couldn't succeed with the right execution. And it would be even harder to imagine a great idea that couldn't fail if the execution were left to morons.

Ideas are worthless. Execution is everything.--Scott Adams

Chart of the day: Megabear markets

Source here, via Abnormal Returns.

Goldman now fighting

a two-front war.

Department of Huh?

Too many regulators, for instance, are political appointees, instead of civil servants. This erodes the kind of institutional identity that helps create esprit de corps, and often leads to politics trumping policy.--James Surowiekci

How else are we going to choose our regulators? Vote for each job candidate?

It seems like Surowiecki has finally engaged with the doctrine of original sin. As much as we'd all love to rid our systems of conflicts of interest, to quote Fortune from Rudy, "... it ain't never gonna happen". Public choice theory, baby.

Suroweicki talks about the failures of regulation, yet somehow manages to advocate for more attempts to reflate the flat tire.

Scott Paterson sounds the alarm on high frequency trading

He reports:

The ability to estimate price moves ahead of the national best bid and offer price, which is consolidated electronically from exchanges, can give traders an advantage of about 100 to 200 milliseconds over investors who use standard market tools, according to a November 2009 report on such trading activities by Jefferies & Co.

An advanced look at exchange data and order flow can provide firms "the ability to forecast future prices" and "make adjustments to their orders in the market or send new orders which are based on this information," the report found.

Some investors are searching for ways to protect themselves. Rich Gates, co-founder of TFS Capital LLC, started becoming concerned about latency arbitrage in early 2009 after a Wall Street bank pitched the trade to his firm.

In hundreds of tests, TFS has found that some of its trades were getting picked off by firms exploiting the time-delay wrinkle. That was costing the firm money.

I agree that the markets are not perfectly efficient. Those with material information first mover advantages will take profit out of the market. Those of you who subscribe to Darwin's natural selection will recognize a similar inequality between a tall, handsome, intelligent, athletic, musical and funny chap getting more dates than his short/dull/clumsy/unskilled/boring counterpart. Even if the latter's genes might be stronger in the autoimmune and nurturing departments.

Market efficiencies are a heck of a lot better than half a generation ago, when instead of 2 cents, it was more than 10 times that amount.

Let's not make perfect the enemy of the much-improved.

Testing your focus

Some quick tests.

Here is the related article:

When one of the most important e-mail messages of his life landed in his in-box a few years ago, Kord Campbell overlooked it.

Not just for a day or two, but 12 days. He finally saw it while sifting through old messages: a big company wanted to buy his Internet start-up.

Quotes of the day

There was something beautiful lost in the Jim Joyce fiasco, something that I hope I remember for as long as I remember the blown call. Yes, it’s hard to think about beautiful things when you have just watched one of the most absurd injustices in the history of baseball. But I’m a father of two young kids. And fathers find themselves looking for lessons. And there was a something beautiful in the Jim Joyce fiasco. ... And in that moment when he had a perfect game so unfairly taken away from him, he smiled. In the interview after the game, he simply said that he wasn’t sure about the call but he was proud of his game. When told afterward that Joyce felt terrible about the missed call, Galarraga said that he wanted to go tell Joyce not to worry about it, that people make mistakes. Galarraga pitched a perfect game on Wednesday night in Detroit. I’ll always believe that. I think most baseball fans will always believe that. But, more than anything it seems that Galarraga will always believe it. The way he handled himself after the game, well, that was something better than perfection. Dallas Braden’s perfect game was thrilling. Roy Halladay’s perfect game was art. But Armando’s Galarraga’s perfect game was a lesson in grace. And when my young daughters ask, “Why didn’t he get mad and scream about how he was robbed,” I think I will tell them this: I don’t know for sure, but I think it’s because Armando Galarraga understands something that is very hard to understand, something we all struggle with, something I hope you learn as you grow older: In the end, nobody’s perfect. We just do the best we can.--Joe Posnanski

To avoid the extraordinary bad calls, you have to start overturning the quotidian bad calls, the gaffes and brain cramps that have always been part of the warp and woof of the game and that have never detracted a whit, so far as I can tell, from anyone’s enjoyment of it. And I’m pretty sure that would be a mistake. ... the fact that the fallibility of umpires has always been part of baseball history strikes me as a sound — not dispositive, but sound — argument in favor of living with that fallibility, even in an age when the worst blunders could be corrected with a glance at a television monitor. It’s not fair, but then life is not fair, and I don’t want to live in a world where the next generation of fans is deprived of the particular agony associated with losing a game, or more, because the umpires are human beings too. Or put another way, I don’t want to live in a world where Galarraga’s achievement is remembered as just another perfect game, rather than what it was — something more extraordinary and more memorable, something that brought out the best, in a strange way, in almost everybody involved, and something that will still be talked about long after the season’s other perfectos have faded into trivia.--Ross Douthat

Sling mud, get self dirty

In efforts to defend President Obama from the controversies involving Rep. Joe Sestak, D-Penn., and former Colorado speaker of the House Andrew Romanoff -- Democratic Senate candidates whom the White House made efforts to coax out of their challenges to incumbent Democratic Senators -- the White House and its allies have argued that a similar offer was made by President Ronald Reagan's White House when trying to coax a weak incumbent out of his re-election race. But the Reagan White House official involved tells ABC News that that's not true, and he’s supported by press accounts at the time.

I find this incredibly coarsening.

Cellphones help fight brain cancer

The latest in bikini statistics:

The final results of a major international study of the potential link between cellphone use and cancer were published last week. The finding: Using a cellphone seems to protect against two types of brain tumors.

Even the researchers didn't quite believe it.

The apparent shield of cellphone radiation, most likely fictitious, illustrates how hard it is to analyze, let alone quantify, the potential for a small elevated risk in a rare disease from a widespread, mundane activity.
...
The study tracked cellphone use across 13 countries. It looked at a group of adults 30 to 59 years old who had been diagnosed with glioma or meningioma, types of brain tumors that can be either benign or malignant, between 2000 and 2004. They were compared with control subjects, people selected to match the individuals with tumors in terms of age, gender and place of residence.

Then both groups were interviewed extensively about their cellphone use. If the two groups matched in other ways, and the group with brain tumors used cellphones more frequently, that would suggest that cellphone use might have caused the tumors.

But they didn't really match. For one thing, just 53% of people selected to participate as controls agreed, and a survey of those who declined showed that they were less likely to use cellphones than those who participated. That may have artificially raised cellphone use in the tumor-free control group and made mobile phones seem less dangerous than they are.

The result is a strange set of numbers. Many levels of cellphone use appeared to reduce the chance of developing a tumor. Only the people who talked on cellphones the most had a significantly greater chance of developing glioma—40% greater—than those who didn't use cellphones.

Yet, as some of the study's authors themselves pointed out, if those who never used cellphones—who were more prevalent among those with tumors—were excluded, and the lightest users were contrasted with the more avid ones, then the bizarre protective effect of cellphone use mostly disappeared, and the risk among the heaviest users was 82% greater.

Photo source here. Previous BS posts here.

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

Good question, Steve

McIntyre asks why the EPA is not leading the response to the oil spill, given its legislative mandate.

Quotes of the day

.. that oil spill live video is truly a metaphor for our Information Age: a time when raw and live data gushes over us without any filter, but instead of informing and guiding action, it simply pollutes the infosphere and leaves us transfixed and dazed.--Micah Sifry

The disaster, however, poses a much deeper challenge to how modern societies deal with regulating complex technologies. The accelerating speed of innovation seems to be outstripping government regulators’ capacity to deal with risks, much less anticipate them. The parallels between the oil spill and the recent financial crisis are all too painful: the promise of innovation, unfathomable complexity, and lack of transparency (scientists estimate that we know only a very small fraction of what goes on at the oceans’ depths.) Wealthy and politically powerful lobbies put enormous pressure on even the most robust governance structures. It is a huge embarrassment for US President Barack Obama that he proposed – admittedly under pressure from the Republican opposition – to expand offshore oil drilling greatly just before the BP catastrophe struck. The oil technology story, like the one for exotic financial instruments, was very compelling and seductive. Oil executives bragged that they could drill a couple of kilometers down, then a kilometer across, and hit their target within a few meters. Suddenly, instead of a world of “peak oil” with ever-depleting resources, technology offered the promise of extending supplies for another generation. Western officials were also swayed by concerns about the stability of supplies in the Middle East, which accounts for a large proportion of the world’s proven reserves. Some developing countries, most notably Brazil, have discovered huge potential offshore riches. Now all bets are off. In the United States, offshore drilling seems set to go the way of nuclear power, with new projects being shelved for decades. And, as is often the case, a crisis in one country may go global, with many other countries radically scaling back off-shore and out-of-bounds projects. Will Brazil really risk its spectacular coastline for oil, now that everyone has been reminded of what can happen? What about Nigeria, where other risks are amplified by civil strife?--Kenneth Rogoff

For all the criticism BP executives may deserve, they are far from the only people to struggle with such low-probability, high-cost events. Nearly everyone does. “These are precisely the kinds of events that are hard for us as humans to get our hands around and react to rationally,” Robert N. Stavins, an environmental economist at Harvard, says. We make two basic — and opposite — types of mistakes. When an event is difficult to imagine, we tend to underestimate its likelihood. This is the proverbial black swan. Most of the people running Deepwater Horizon probably never had a rig explode on them. So they assumed it would not happen, at least not to them. Similarly, Ben Bernanke and Alan Greenspan liked to argue, not so long ago, that the national real estate market was not in a bubble because it had never been in one before. Wall Street traders took the same view and built mathematical models that did not allow for the possibility that house prices would decline. And many home buyers signed up for unaffordable mortgages, believing they could refinance or sell the house once its price rose. That’s what house prices did, it seemed. On the other hand, when an unlikely event is all too easy to imagine, we often go in the opposite direction and overestimate the odds. After the 9/11 attacks, Americans canceled plane trips and took to the road. There were no terrorist attacks in this country in 2002, yet the additional driving apparently led to an increase in traffic fatalities.--David Leonhardt

Yes, organic methods sequester more carbon dioxide than conventional ones. But the ultimate culprit behind agriculture-driven climate change isn’t carbon dioxide. Instead, it’s methane and nitrous oxide—two gasses conspicuously absent from the Rodale study. Agricultural production in the U.S. accounts for only 7 percent of overall carbon dioxide emissions. By contrast, it accounts for 19-25 percent of methane emissions and 70-75 percent of nitrous oxide emissions. Methane, according to the EPA, is 23 times more potent a GHG than carbon dioxide. Nitrous oxide is 310 times as potent. So the key question, as far as GHG emissions and agriculture goes, is not how much carbon dioxide organic agriculture sequesters. Instead, it’s how much methane andnitrous oxide it sequesters. And this question, like any controversial topic in agriculture, is riddled with caveats and qualifications. A recent conference in France dedicated to organic agriculture and climate change found that, in some cases, organic systems sometimes had higher GHG emissions and that, in other cases, conventional systems had higher levels of output.--James McWilliam

Is it worth getting upset over the fact that Uncle Sam and President Obama seem too busy trying to micro-manage what sort of toilet and crib you can use in your own home, and to make your renovations more costly with new lead paint regulations, instead of performing legitimate federal government roles? You bet it is.--David Freddoso

Chicago has a civic culture all its own and one that is particularly insular. Family ties and personal connections are hugely important. Professionals who have lived and worked there for a quarter-century are brusquely reminded, "You're not from here." Nonetheless Obama moved upward in the Chicago civic firmament with apparent ease. The community organizer joined the Rev. Jeremiah Wright's church in search of street credibility in the heavily black South Side. The adjunct law teacher made friends around the University of Chicago from libertarian academics to radical organizer William Ayers. The young state senator designed a new district that included the Loop and the rich folk on the Near North Side. Obama could not have risen so far so fast without a profound understanding of the Chicago Way. And he has brought the Chicago Way to the White House. ... The problem with Obama's Chicago Way is that Chicago isn't America. The Chicago Way works locally because there is an America out there that ultimately pays for it. But who will pay for an America run the Chicago Way?--Michael Barone

There were two glamorous presidents in my lifetime besides Obama. The first was JFK, and he dealt with this problem by getting killed. That was something I didn’t want to mention in an article about Obama. There were lots of problems in the Kennedy administration and lots of secrets that were being hidden that came out later. But because he was assassinated, the glamour stayed. The other glamorous president of my lifetime, I would argue, was Ronald Reagan. And he managed to govern because he actually did stand for some specific ideas that brought a broad consensus of supporters together. He was still a figure of distance and mystery, to the extent that his authorized biographer, who followed him around for years, was unable to get at what the man was really like and wrote a semi-fictionalized biography with fake characters. But there was a core of identifiable beliefs that enabled him to govern and to maintain this sort of glamour, particularly to the Reagan coalition. Libertarians would say, “well, he’s really more libertarian,” and social conservatives would say, “well, he’s really more socially conservative.” But he did have specific beliefs that held those people together. They didn’t hold together so well after him. ... The Obama administration early on was saying, “We can give you better care for less with better management.” Well, I believe management can make a difference. It makes a difference in the private sector; it could make a difference in health care. Let’s do a trial run with Medicare. Let’s try it out there first and see how it works. I called Peter Orszag at the Office of Management and Budget, and he basically said, “We can’t do that, because the AARP is only on board if we do the whole system.” Well, OK. We can’t take you very seriously with this “better care for less” if you can’t apply it to the one system you already control.---Virginia Postrel

So to summarize, to the extent that China is a free market, it is an economic success, and to the extent it is statist, it is mostly a failure (excluding some sectors like transport.) But the question “Is the Chinese miracle due to a free market economy?” is nonsensical. It isn’t a miracle at all; it is a country rapidly transitioning from being extremely poor to having a so-so economy. That is all. I want to personally apologize to Ezra Klein for the exasperated tone of this post. His post is no worse than 1000 other similar posts; I’m not even sure he disagrees with me. Indeed the conventional view in the US is wrong, just as he says. It’s just that I just get annoyed seeing the debate constantly framed this way.--Scott Sumner

James O'Keefe scoops US Census training, and finds overpayment on the order of $100 million

Via Joe Weisenthal.

Liars, damned liars, and climate scientists

East Anglia convicts itself in responding to Freedom of Information requests.

'Nuff said, economists' version

A: Heh, how's it going?

Anon: Oh, so, so. I had a paper rejected today.

A: Ah, sorry, I get depressed when that happens.

Anon: Well in my case it's not all bad. My wife and I have an understanding that whenever I have a paper rejected we have sex.

A: What! That's a terrible system for getting papers published. What kind of economist are you?! Don't you understand incentives!

Anon: What kind of economist am I? What kind of economist are you?! You have failed to understand what I am maximizing!

Chart of the day: child mortality by nation

Source here.