Quotes of the day

We were very, very much in the minority. If I said a thousand-to-one, we were the one. Even friends of ours thought we were so wrong, they felt sorry for us. ... When I purchased my home, it was very strict underwriting standards. I had to provide two pay stubs, two years tax returns, three months of bank statements, all sorts of credit card information. All of a sudden I saw this lowest quality mortgages with basically no underwriting standards at all.--John Paulson

... a professor is almost twice as likely to support the Democratic party as a member of the general population, and about 80% less likely to support the GOP. By contrast, a military officer is about 40% more likely to identify as a Republican as someone in the general population, and about as likely to identify as a Democrat. In fact, the only profession I could find that skews 80% towards Republicans is Southern Baptist ministers. I suspect both professors and ministers would resent the comparison.--Megan McArdle

So my post on the liberal slant in academia has garnered what I believe to be a record number of comments, many, even most of them, pretty angry. And as I predicted, the positions are very much reversed from the normal take on such things. Conservatives are explaining how bias can be subtle and yet insidious; and liberal, many of them academics are saying that you can't simply infer bias from statistical underrepresentation, and sarcastically demanding to know whether I really think that people are asking candidates for physics professorships who they voted for in the last election. They're all right, of course: you can't simply infer bias from statistical underrepresentation, and yet bias can be subtle and yet insidious. ... Blacks are slightly more likely than Republicans to attend church weekly, and black churches are about as likely as white evangelical churches to be creationist. Yet if someone told you that the reason there are too few black professors is that creationists don't make good professors, you'd think they were bonkers. ... Professors are overwhelmingly pro-choice, pro-gay-marriage, anti-military, and in favor of redistribution and regulation programs. These aren't a matter of logic and scientific evidence; they're value judgments. Moreover, they cluster in a way that suggests something other than rational analysis driving the decision--why should your views on military operations in Iraq, or climate change, be correlated with your views on abortion? ... We are never the best interrogators of our ideas. It requires motivated critics to lay bare our hidden assumptions, our misreading of the data, our factual inaccuracies. No matter how scrupulously honest you try to be, you are no substitute for an irritated opponent thinking, "That can't possibly be right!"--Megan McArdle

Unlike the U.S., the pecking order of those colleges is clearly determined, with one school indisputably at the top – Seoul University in Korea, Tokyo University in Japan. I studied Asian languages in college and spent a few years in Asia, seeing this first hand. Just before I spent time in Korea, the country had eliminated the grueling examination program for entrance into the middle schools, and the result was an almost immediate increase of an inch in the average height of twelve and thirteen year-olds.--Rick Brookstaber

I will maintain to my deathbed, that we made every effort to save Lehman, but we were just unable to do so because of a lack of legal authority.--Ben Bernanke

One moral is to be careful of what you wish for, given the legislative process. In that regard, perhaps the stimulus bill turned out to be more reminiscent of Smoot-Hawley than the New Deal. And as the Administration tees up housing finance reform, I worry that however well-intentioned the reformers may be, there are few industries in which the rent-seeking drive is more powerful.--Arnold Kling

... the cupboard is bare. They don't have any better revenue mechanisms left--everything that anyone even thought was plausible went into ObamaCare. And yet, they can't simply cut doctor's reimbursements by one fifth. So they scrambled for anything at all--and the only way they could come up with the necessary revenue was to stretch the cuts out over ten years, while covering the spending for only two years.--Megan McArdle

The NYSE is in no sense the cradle of anything. A cradle is a safe place for the young to develop until they grow up and become more self-sufficient. Y Combinator is a cradle. The NYSE is place for algorithms and speculators to make bets on financial assets. It last funneled real amounts of money into the broader economy during the dot-com boom, leaving behind a lot of Aeron chairs and little else.--Felix Salmon

... the tech bubble was not all that bad. To be sure, there were some spectacular failures – Pets.com comes to mind. But when you scrape away the detritus, you find the building blocks of all the technology that is increasingly integrated in our everyday life. The bubble-driven intensity of activity in information technology almost certainly accelerated its development and adaptation. Many news ideas were explored; some failed, some succeeded. The successes, however, outweighed the failures, leaving productivity much higher as a result (that this productivity has not translated into higher real wages, however, remains a disappointment). Also note that much of the spending during that period was dedicated to capital that depreciated very quickly. Consequently, the impact on future consumption/production was limited. The excess computer produced in 1999 was nearly worthless just a few years later. Time for a replacement, bubble or not. Housing, obviously, is very different – the capital is long lived, locking resources into place for decades.--Tim Duy

I've been reading up on the history of Communism for over two decades. But even now, I find it hard to wrap my mind around its absurdity. If the first-generation Communists had grown up in a culture where people had worshiped steel and cotton cloth for centuries, I could chalk their crusades up to intellectual laziness. What staggers the imagination is that these pseudo-intellectuals actually originated their own nonsense.--Bryan Caplan

Pujols and the Cardinals could break up. More and more it looks like they WILL break up. The reason is obvious and a story almost as old as love. The reason is money. See, in the Jeter situation there was never any doubt that Jeter was worth a lot more to the Yankees than anyone else. ... To Albert, I do believe, money equals respect. And that’s where the difference comes between Pujols-Cardinals and Jeter-Yankees. Because, at the end of the day, Jeter had no other viable options. No other team was going to offer him even half of what he wanted. But Pujols … yeah, there will be plenty of action on free agent Albert Pujols. Maybe nobody will offer a soon to be 32-year-old man the 10-year deal he wants … but never bet against the uncontrolled impulses of rich men searching for a place to spend their money. Someone paid $151.8 million for this Jackson Pollock painting: ... So don’t tell me that no one will pay $300 million for perhaps the greatest hitter who ever lived.--Joe Posnanski

I do think Jeter is the strangest FIVE-TIME Gold Glove winner, because several advanced defensive stats suggest that he is mailbox-immobile and that ground balls hit two steps to his left or right will always look like line drives in the box scores.--Joe Posnanski

I am struck in the debates over abortion by how firmly each side is convinced that the other side is somehow deluding themselves. The accusations are so similar--the one side claims that we are sanitizing birth in our imaginations, the other retorts that we are doing the same to abortion. Both sides seem convinced that if they could just rip away the veil of illusion with sufficiently gruesome pictures of dismembered fetuses, or botched back-room abortions, whatever well-meaning fools remain on the other side would finally see, and the debate would end. Yet decades of this sort of consciousness raising have only hardened the battle lines. And yet maybe they're right that seeing is believing. I suspect that if we ever do resolve the debate, it will be sonograms and social change, and not slogans, that mark the decisive turn.--Megan McArdle

[The Atlas Shrugged movie] should not have 2011 cars and Dagny Taggart should not look like a mousy actress imitating Nicole Kidman playing a local news reporter.--Tyler Cowen

Nowhere has [Michelle Obama] been greeted with more enthusiasm and respect than in the fashion world. The industry elevated her to the status of icon. She wears a cardigan, and it sells out. She wears a gown by a non-American designer, and debate rages for weeks. Given a bit of time, designers may find themselves inspired by her in the same way they’re energized by Jackie Kennedy, Babe Paley, or Countess So-and-So und So-and-So. The only problem is that while they’re busy celebrating this singular woman, they’re not too keen on understanding what it’s like to be the only black person in a room filled with white folks. ... Mrs. Obama may be the patron saint of the fashion industry (and, arguably, Annie Leibovitz images of Michelle Obama channeling Camelot served as a political balm for a public adjusting to the idea of a black First Lady), but anyone who enters the blogosphere knows that the Obamas’ presence in the White House has not eradicated racism. In some ways, it is more vitriolic than ever. Other creative fields—visual arts, music, film, literature—seem to understand this. They wrestle with the complicated nature of race all the time, even as they also stumble. But the fashion community tends to play dumb or be disingenuous. It treats race like “a paint chip,” even while benefiting from the undercurrent of racial tensions that permeate our society.--Robin Givhan

Map of the day: United States of Shame

I found this to be rather Confucian, in an Amy Chua sort of verve. Via Abraham Piper.

Quotes of the day

The great thing about science is, your bad ideas don't count against you. Trading is a little bit different. Your bad ideas can lose you money.--Jim Simons

Far better to admit ignorance or postulate mystery than to tell untruths.--Don Carson

The Harvard psychologist Daniel Gilbert says that every psychologist must, at some point in his or her career, write a version of what he calls “The Sentence.” Specifically, The Sentence reads like this:

The human being is the only animal that ______.

The story of humans’ sense of self is, you might say, the story of failed, debunked versions of The Sentence. Except now it’s not just the animals that we’re worried about.--Brian Christian

Obama may think he’s set a clever trap for the Republicans in the upcoming budget negotiations. Why not let them be the bad guys? But in so carelessly abdicating his own responsibility for managing the nation’s finances, Obama also is giving up control. He shouldn’t be surprised if the U.S. bond markets, not Republicans, end up determining his political destiny.--Evan Newmark

The New York Times ran an editorial yesterday arguing that the EPA’s proposals to regulate carbon dioxide emissions cannot reasonably be characterized as the borderline-illegal efforts of a rogue agency, because those proposals originated during the Bush administration. Or something like that. At least they’re saying that House Republicans cannot without hypocrisy so criticize the EPA, presumably because all Republicans are required by the Times hypocrisy police to endorse all policies of all past Republican administrations. I wonder if the Times plans to level the same charges against the 26 House Republicans who voted last week against the extension of the Patriot Act. Oh. Guess not.--Steve Landsburg

Anywhere in the world that social psychologists see women or minorities underrepresented by a factor of two or three, our minds jump to discrimination as the explanation. But when we find out that conservatives are underrepresented among us by a factor of more than 100, suddenly everyone finds it quite easy to generate alternate explanations. ... [Daniel Patrick] Moynihan was shunned by many of his colleagues at Harvard as racist. Open-minded inquiry into the problems of the black family was shut down for decades, precisely the decades in which it was most urgently needed. Only in the last few years have liberal sociologists begun to acknowledge that Moynihan was right all along. ... [Larry Summers, wondering publicly whether the preponderance of male professors in some top math and science departments might be due partly to the larger variance in I.Q. scores among men] was not a permissible hypothesis. It blamed the victims rather than the powerful. The outrage ultimately led to his resignation. We psychologists should have been outraged by the outrage. We should have defended his right to think freely.--Jonathan Haidt

Considering that there are about 7 million more unemployed now than three years ago, it suggests the pool of available labor could be 15% bigger than the unemployment figures suggest.--Paul Ashworth

These [technology] companies all revolve around engineers in almost a cultish way. Their investors and competitors always note how good the team is– which is saying something in a Valley locked in a full-scale talent war. They are insanely picky about hiring engineers and when they find a good one they will pay him nearly anything. Asana gives engineers $10,000 to pimp their desks. Zuckerberg has described Quora co-founder Adam D’Angelo as one of the best — if not the best– engineers he has ever met. And Path’s team was reportedly one of the assets Google was so willing to pay up for. But unlike companies like Google and Amazon who rigorously hired based on college degrees, GPAs and standardized test scores, Facebook and the companies that have spun out of it have hewed toward sheer, raw, hacker-like genius. That’s created a more entrepreneurial culture inside the company. Justin Rosenstein– who was at Google and then Facebook before leaving to co-found Asana with Moskovitz– says that working at Google is often described as a wonderland for academics, while Facebook’s early days were more of an extension of a messy dorm room full of engineers hacking away all night, then collapsing most of the day.--Sarah Lacy

Then I made a big mistake. I wrote back, “it would be the second best-selling business biography ever: after Warren Buffett’s biography.” Never, NEVER, imply that one billionaire might be a bigger sell than another billionaire.--James Altucher

We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally. Nokia, our platform is burning.--Stephen Elop, Nokia CEO

Short sellers are bad, but apparently analysts are worse

Professors at Texas A&M and Ohio State universities concluded that following contrarian investors is more profitable for stocks in which analysts and short sellers strongly disagree. In other words, buy if short interest is low and the analyst consensus is to sell; sell short if short interest is high and the analyst consensus is to buy.--Chuck Mikolajczak

 Via Dealbreaker.

How Harvard Business School is going the way of the Nobel Peace Prize

I mean, first it was Dubya vs. Crazy Prof.

More recently, Llewllyn.

And now Tyra. Photo link here.

Brewing in the Pacific Northwest: Fundamentalists vs. Liberals (a.k.a. Evangelicals vs. Mainliners)

Evangelicals, in this study, put their feet and their resources where their mouth is." This is not to say that liberals don't. However, evangelicals have a far clearer sense of community and mission. And in Moscow, Idaho, they also serve good coffee and know how to make really tasty French food. For all of these reasons, evangelicals are winning the clash of Christian civilizations, not just across the nation, but even in the Pacific Northwest.--Matthew Sutton

Quotes of the day

... the dictator, coddled in his isolation, surrounded by satraps and servants, immersed in his own sense of essential-ness, is the last to know.--David Remnick

Could Aid Watch respectfully suggest that US government officials, at this incredibly sensitive moment, follow the advice of two different Aid Watch posts reflecting the consensus of wise people everywhere: (1) First one: shut up. (2) Second one: shut up. Today’s additional recommendation: first follow steps (1) and (2).--William Easterly

Winning is the most important thing in war. Deception is the way to win. Sun Tzu plays the same role in Confucian China that Machiavelli plays in the Christian west: both writers say that the basic institutions and power arrangements of their society depend on qualities and behavior that can and frequently do violate that society’s deepest beliefs and ideals.--Walter Russell Mead

Okay, have a nice rest of your day.--Bess Levin, to several Level Global executives

Here's the big question for the GOP though. Will they have the political will to push truly big budget cuts through the House and long reaching budget reforms? If they settle for "Democrat lite" type budgets then their time in the majority will be short and failed.--Tim Phillips, President and CEO of Americans for Prosperity

If people are too dimwitted to choose on their own the foods they eat, how can they possibly be trusted to choose on their own the persons who represent them in government? The evidence does indeed suggest that Americans too often choose as their elected representatives greasy, pork-laden, and processed hot dogs who offer only empty calories as they clog the arteries of commerce.--Don Boudreaux

It was a mistake to pick up a girl in a bar in the first place, let alone bring her to another bar. It was like watching "Schindler's List"and complaining it wasn't funny enough. I realized, though, I had no idea where else to take women on a first date. A drink had always been just right -- less pressure than going out to dinner, but more substantial than going out for coffee. Sobriety wasn't just forcing me to get more responsible. It was forcing me to get more creative, too.--Joe Berkowitz

... the most critical response had to do with the founder of the church, L. Ron Hubbard. In some of the material that I had been reading and in some of my interviews, there was a big question about Hubbard's - his war record and his medical history. He had said that at the end of World War II, he was blind and a hopeless cripple, and that he had healed himself through these measures that later became the basis of "Dianetics," which is the book that he wrote in 1950, out of which Scientology arises. And I'd find that - I had found evidence that Hubbard was never actually injured during the war. And so in one very interesting moment, Davis said: Of course, if it's true that Hubbard, Mr. Hubbard was never injured during the war, then he never did heal himself using "Dianetics" principles, then "Dianetics" is based on a lie, and then Scientology is based on a lie. The truth is that Mr. Hubbard was a war hero. And the way he phrased that, that everything depended on whether Hubbard had sustained these injuries and had healed himself, was like a wager on the table. And so we pressed him for evidence that there had been such injuries and that he had been the war hero that he described. And eventually, Davis sent us what is called a notice of separation. It's essentially discharge papers from World War II, which - along with some photographs of all of these medals that he had won, a Purple Heart with a palm, some other commendations from different countries, and so on. At the same time, we finally gained access to Hubbard's entire World War II records, and there was no evidence that he had ever been wounded in battle or distinguished himself in any way during the war. So we also found another notice of separation which was strikingly different from the one that the church had provided.--Terry Wright

Quotes of the day

Most [sudden, unintended acceleration of Toyota car] incidents reported to the DOT appeared to be caused by drivers stepping on the gas instead of the brake. The National Aeronautics and Space Administration, which conducted the study with the DOT, "observed that the vast majority of complaints involved incidents" that began when the car was stationary or at a low speed. The most likely cause in such incidents was "pedal misapplication," with the driver stepping on the gas, rather than, or in addition to, the brake, the report said.--JOSH MITCHELL

.... public companies average 1.199 private-jet seats for each billion dollars of sales. Private-equity-owned firms average .485 fewer private-jet seats.--Shira Ovide

... the valuation of Twitter makes sense even if it will probably go down. That’s the way of lottery tickets: their value is nearly always higher than their payout. And people looking to buy into Twitter at a $5 billion or $10 billion valuation aren’t doing so because they’ve discounted a bunch of predictable cashflows and decided that the present value is that ginormous. Instead, the investment is more in the form of a hedge. Twitter just might turn out to be one of the most important and valuable companies in the world. And if it does, then everybody will have wanted to get in around now. If you have that opportunity, it’s a hard one to turn down.--Felix Salmon

Big banks like Citigroup and Morgan Stanley, which were battered by the 2008 financial crisis, are once again on solid ground. But a slew of documents, e-mail messages and minutes of crucial regulatory meetings released recently by the Financial Crisis Inquiry Commission provide fresh detail about just how close to the brink both firms came.--SUSANNE CRAIG and BEN PROTESS

But here is the essential fact I want to emphasize and have you think about today: The Fed could not monetize the debt if the debt were not being created by Congress in the first place. The Fed does not create government debt; Congress does. Deficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress. The Fed does not earmark taxpayer money for pet projects in local communities that taxpayers themselves would never countenance; only the Congress does that. The Congress and administration play the dominant role in creating the regulatory environment that incentivizes or discourages job creation. It seems to me that those lawmakers who advocate Ending the Fed might better turn their considerable talents toward ending the fiscal debacle that has for too long run amuck within their own house.--Dallas Fed president Richard Fisher

I have described my philosophy as "Libertarian, but without the crazy stuff." Libertarians are for personal freedom, small government, and a defensive-sized military. That sounds good to me. But I think a better objective is something along the lines of maximizing the public's long term happiness. So while a libertarian might favor allowing his suburban neighbor to operate a bazooka firing range in his back yard, I'd be against that, even if it required a slightly larger government to prevent it. Furthermore, I believe that if you identify with any political group or philosophy that has a name, you are far more susceptible to confirmation bias than someone who doesn't. And as a general rule, I don't trust anyone with a strong opinion on a complicated topic. On the topic of the U.S. budget, my current suspicion is that the problem has grown so large that there is no practical way to eliminate the deficit by cuts alone, without making things worse. But I assure you that I want to be wrong because being right means my taxes will go up substantially.--Scott Adams

... the federal government is not a charity. The main difference is that charities are funded by voluntary contributions, and the government is funded by forceful expropriation. So the self-regulating mechanism of a charity on the amount to pay out is broken. Indeed, instead of asking how much money we actually have, the government (and you) asks how much money we need to pay out. Aside from the immorality, the problem with that question is that the "demand" for free stuff is practically limitless. People could "demand" twice their benefits today. They don't necessarily have to wait for more people to retire or get sick. ... I don't know how much politicians will redistribute income to retirees and sick people instead of wars and bailout in 20 years. But I know Americans would be better off if each of those four items were zero.--Phil Maymin

I'd rather be a lightning rod than a seismograph.--Ken Kesey

It is not entirely clear that your veneration of traditional academic achievement is exactly well placed. Which two freshmen at Harvard have arguably been most transformative of the world in the last 25 years? You can make a reasonable case for Bill Gates and Mark Zuckerberg, neither of whom graduated.--Larry Summers, to Tiger Mom Amy Chua

If the logic of back-in parking is so clear, why doesn't everyone do it? Difficulty, or perceived difficulty, seems to be the reigning explanation. Casual sexism (of the sort summed up by this video) holds that women struggle with back-in parking, although commenters of both genders termed it difficult on my blog. More troubling are studies that claim to find a measurable, if slight, parking "performance gap" between male and female drivers. One NHTSA study, "Field Measurement of Naturalistic Backing Behavior" (conducted to help design backup warning systems), found that "the male driver's mean maximum backing speed was generally faster than the female's and reached statistical significance on two of the tasks," one of those tasks being "backing into a perpendicular parking slot." A similar study, by Claudia C. Wolf and colleagues at Germany's Ruhr University-Bochum, asked male and female drivers of varying experience levels to park an Audi A6 in various ways (back in, parallel, etc.) in a closed-off multistory car park. They found that women took longer to park the car than men. This might be seen as a result of the general tendency for men to take more risks in driving than women (e.g., men drive faster, closer to other vehicles, more often without seatbelts, more often under the influence of alcohol), but there was another interesting result: Even though men parked more quickly, they also parked more accurately, as measured by distance to neighboring cars. Of course, measuring these differences is easier than explaining them. Are there biological differences that give men an edge in handling a car, or do the results just reflect a wider societal belief that men should be better at handling a car? Some psychologists suggest that this belief itself affects the actual performance of drivers, in a phenomenon called "stereotype threat." In a study in Australia, women drivers in a driving simulator who were confronted with negative stereotypes about women drivers were twice as likely to collide with a jaywalking pedestrian as women drivers not presented with the stereotype.--Tom Vanderbilt

There's a box missing to this flowchart

"Watch Food Network show".

I think once someone makes more than $20 per hour, cooking every day starts becoming to be a bit of a drag. Cooking about once a week can be a 'hobby'; I'm wondering if the average number of homemade dinners for a person making $200 per hour (or a couple making $400/hr) is anywhere close to 2 per week or more.

Source here. Photo link here.

Quotes of the day

There is nothing more insidious that a country can do to its citizens than debase its currency.--Paul Ryan

Monetary policy can't do anything about, say, bad weather in Russia or increases in demand for oil in Brazil and China. What we can do is try to get stable prices and growth here in the United States.--Ben Bernanke

According to its own investigation, errors were made in [the Government Accountability Office's] producing a report highly damaging to for-profit colleges, but no one had any bad intentions and the report still stands. Well, the significantly revised report -- the one much more favorable to for-profits schools that got almost no attention because GAO sneaked it out -- still stands. And please, don't try to hold the GAO accountable yourself: The GAO's press release states that the report on its internal investigation will not be publicly released.--Neal McCluskey

A. $1 million

Q. What do 2 classes in the New York City public school system cost each year?

We take the $17,173 per student expense from the 2010 Census, and multiply by 58 students. Voila!

Trust the people

We who live in free market societies believe that growth, prosperity and, ultimately, human fulfillment are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success – only then can societies remain alive, dynamic, prosperous, progressive and free.

Trust the people. This is the one irrefutable lesson of the entire post-war period, contradicting the notion that rigid government controls are essential to economic development. The societies that have achieved the most spectacular, broad-based progress are neither the most tightly controlled, nor the biggest in size, nor the wealthiest in natural resources. No, what unites them all is their willingness to believe in the magic of the marketplace.--Ronald Reagan

Photo link here.  Via Mark Perry.

Unfortunately, I think The Gipper is more optimistic and gracious than me.  There are plenty of people in free market societies that think that growth, prosperity, and fulfillment will grow only with greater government command and control.  I think that President Obama refers to this as "good regulations" and "common-sense reforms".  And I don't think he has drunk nearly as much of this Kool-aid as millions of other Americans.

For some reason, the old Soviet Union, the China of the last century, Cuba and North Korea today, much of Africa, even Haiti ... these all seem to get ignored.  And, so instead of trusting the people, the Church of Unlimited Government is the fastest growing religion that I can see.

I don't trust the people.  Neither did Jesus.  What I trust is that a person can decide for himself better than the government can, and that he will do less harm than the government in their respective decisions.

I'd rather have all daughters than all sons

This makes me different than my dad, and from what it looks like, most dads in America.

I think my bias comes from the fact that, even though (I think) I honor my parents more than my siblings, my wife honors her parents much better than me (and better than her brother). I guess I was hoping that my daughters would be more like Mommy than anyone else, so my sunset years would be fuller.

My wife would also prefer girls to boys. Funny enough, we have at least one of each.

Photo link here.

Quotes of the day

This [chaos of accounting] is not an issue of malfeasance; it's an issue of competence. But give that the competence at issue is supposed to be, um, the core competence of the SEC, this is a mite worrisome.--Megan McArdle

... political parties may deliberately choose to recruit only mediocre politicians, in spite of the fact that they could select better individuals. ... Given the limited availability of direct monetary compensation, the main incentive a party has to offer to reward such effort is the party electoral nomination. We show that these considerations entail a fundamental trade-off which may play an important role in a party’s recruiting decisions. On the one hand, recruiting the best possible individuals may enhance the party’s electoral prospects in a competitive electoral environment (competition effect). On the other hand, recruiting a relatively “mediocre” but homogeneous group of individuals may maximize their collective effort on behalf of the party since the presence of “superstars” may discourage other party members and induce them to shirk (discouragement effect). In equilibrium, there will either be “mediocracy” if parties choose not to recruit the best politicians, or “aristocracy” if they do.--Penn Institute for Economic Research Working Paper 11-002

We hope [the game "Kolejka" (The Queue)] will show young Poles how difficult it was to buy everyday supplies like sugar, bread or furniture [in communist-era Poland].--Karol Madaj, the game's designer. He was only nine years old when communism ended in Poland in 1989, so he had to seek tips about those days from his older boss.

America’s tax system is broken. It’s needlessly complex, economically harmful, and often unfair. It fails at its most basic task, raising enough money to pay our government’s bills. And it’s increasingly unpredictable, with large, temporary tax cuts not only in the individual income tax, but in corporate, payroll, and estate taxes. For all those reasons, our tax system cries out for reform. Such reform could follow many paths. Some analysts recommend the introduction of new taxes—such as a value-added tax, a national retail sales tax, or pollution taxes—to supplement or replace our current system. Those ideas are worth serious discussion, but in today’s testimony, I will focus on a more traditional approach to reform: redesigning our income tax. My message is simple: the income tax is riddled with tax preferences. These preferences narrow the tax base, reduce revenues, distort economic activity, complicate the tax system, force tax rates higher than they would otherwise be, and are often unfair. By reducing, eliminating, or redesigning many of these preferences, policymakers can: Make the tax system simpler, fairer, and more conducive to America’s future prosperity; Raise revenues to finance both across-the-board tax rate cuts and deficit reduction; and Improve the efficiency and fairness of any remaining preferences.--Donald Marron

Americans make more “stuff’’ than any other nation on earth, and by a wide margin. According to the United Nations’ comprehensive database of international economic data, America’s manufacturing output in 2009 (expressed in constant 2005 dollars) was $2.15 trillion. That surpassed China’s output of $1.48 trillion by nearly 46 percent. China’s industries may be booming, but the United States still accounted for 20 percent of the world’s manufacturing output in 2009 — only a hair below its 1990 share of 21 percent.--Jeff Jacoby

... what made television so evil back when it was evil was not its essence but its omnipresence. Once it is not everything, it can be merely something. The real demon in the machine is the tirelessness of the user. A meatless Monday has advantages over enforced vegetarianism, because it helps release the pressure on the food system without making undue demands on the eaters. In the same way, an unplugged Sunday is a better idea than turning off the Internet completely, since it demonstrates that we can get along just fine without the screens, if only for a day. Hermione, stuck in the nineties, never did get her iPad, and will have to manage in the stacks. But perhaps the instrument of the new connected age was already in place in fantasy. For the Internet screen has always been like the palantír in Tolkien’s “Lord of the Rings”—the “seeing stone” that lets the wizards see the entire world. Its gift is great; the wizard can see it all. Its risk is real: evil things will register more vividly than the great mass of dull good. The peril isn’t that users lose their knowledge of the world. It’s that they can lose all sense of proportion. You can come to think that the armies of Mordor are not just vast and scary, which they are, but limitless and undefeatable, which they aren’t.--Adam Gopnik

Talk turns to [Michael] Lewis’s upbringing in New Orleans. His father had a largely hands-off philosophy, but begged Lewis not to turn down Princeton in favour of a life in New Orleans with his high-school sweetheart. “He went white and said, ‘I’ve never told you what to do, but don’t do this.’” Lewis followed his father’s advice. “It was the right decision. But I really was in love with that girl, and it ended up ending our relationship. And I always felt I violated something in me, making that decision.” When the time came to quit Salomon, he steeled himself against any further paternal entreaties. Explaining his decision to leave Salomon, he casually compares the $40,000 book contract to the $250,000 salary and potentially millions more – big sums in the late 1980s. But he insists that money does not motivate him. “I grew up with a mother who came from a pretty wealthy family – in fact a very wealthy family by New Orleans standards – and my father was kind of a poor boy.” By the age of nine he’d abandoned any sense that money brought fulfilment, because “my father’s family was so happy and my mother’s family so miserable”.--Tim Harford

I’m counting on his engineering professors to undo whatever damage the English department has managed to inflict.--Steve Landsburg

And then I told him WTF doesn’t stand for Win the Future.--Anonymous

Chart of the day: Correlation between commodity prices and industrial production

Source here, via Scott Sumner.

Bryan Caplan gently swats Tyler Cowen

Here:

In Tyler's case, unfortunately, it's hard to get a bet on the table. Not only does he deny his duty to bet on his beliefs. There's also a major disconnect between his big picture rhetoric about the Great Stagnation - where I know we disagree - and his specific claims about the facts - where I'd need to spend a month crunching the numbers to weigh in. Until I get a spare month, all I can say is that even if Tyler's right, he's wrong.

Hell must be going through some strange cooling period.

UPDATE: More spanks from Steve Miller:

In a sense it would be nice for us, the free-marketers, if we could make the case that growth in government spending has led to stagnation. But it hasn't, because there is no stagnation. Whether that's because of or despite of growth in government is a separate issue. The stagnation hypothesis ONLY fits the income data. It does not the purchasing power (in labor hours) data, not at all. It doesn't fit with the economists' standard of greater choices, either. In the 1980s Robin Williams' character in Moscow on the Hudson collapsed in a small grocery store because he was overwhelmed by the coffee selection. What has happened to those choices since the 1980s?

UPDATE: Arnold Kling's smell test:

I personally do not think that the stagnation hypothesis can survive the thought experiment in which you offer somebody the choice between (a) today's median income and today's array of goods, services, and prices or (b) 1973's median income (plus, say 25 percent) and 1973's array of goods, services and prices. I think that so many people would reject the 1973 option that the stagnation hypothesis becomes untenable.

Is it me

or is $315 million for the Huffington Post a little on the high side?

UPDATE: Felix Salmon knows a lot more.

Quotes of the day

What so proudly we watched at the twilight’s last reaming.--Christina Aguilera

Let our government be like that of the solar system. Let the general government be like the sun and the states the planets, repelled yet attracted, and the whole moving regularly and harmoniously in their several orbits.--Delaware’s John Dickinson, to the Constitutional Convention

Let me bring the Great Stagnation, the biosciences revolution, and evidence-based medicine into a single framework.--Mike Mandel

So should Secretary Geithner have called China a currency manipulator? I am ambivalent. It is pretty clear to me that domestic policies within China are at the source of the huge imbalance between production and consumption. High savings rates rarely have to do with culture or personal preferences, as is widely assumed, and a lot to do with policies that affect the balance between production and consumption. After all a nation’s savings is simply its total production minus its total consumption, and to the extent that there are explicit policies aimed at constraining consumption and boosting production, they inevitably affect the savings rate. These policies also inevitably force a rising trade surplus onto the rest of the world.--Michael Pettis

[Meredith Whitney's] summary of a 600-page report to clients prompted a National League of Cities analyst to say she possessed a “stunning lack of understanding.” Other critics called her prediction “ludicrous,” “irresponsible,” “damaging,” and “overreaching.” There’s a huge gap between these descriptions and Whitney’s track record as an analyst. The chasm is so big that it is worth exploring. Something interesting is going unexamined or unexplained. Many of Whitney’s critics have a vested interest in tearing her down. They include competing municipal bond analysts, fund managers who run muni portfolios, financial advisers who sell the tax-exempt securities, and above all, the borrowers who depend on munis to finance their whopping deficits. To all of them she is a big-mouthed, larger-than-life nightmare.--Alice Schroeder

To the extent that complexity is an endemic part of modern financial systems it’s likely that intellectual hazard is also inevitable because it’s also essential that we allocate risk to those most capable of bearing it.--timarr

What is particularly remarkable is that Eugene Fama who might be considered as the high priest of the efficient markets hypothesis had, as his thesis adviser, Benoit Mandelbrot! Indeed, Mandelbrot lamented the fact that his best students decided to overlook the basic weaknesses of the Gaussian foundations of financial theory and became more interested in making money than in seeking the truth.--Alan Kirman

I do love you, but love isn't enough to get me here [to teach this class]. I have to be paid, too.--David Henderson

I had hoped for something better from the new UK government, which had seemed like an improvement over the Blair and Brown (“We know the answers, just double aid”) team.--William Easterly

... investment banks' businesses can be characterized in one of two ways: agency businesses, where the bank acts on behalf of a client to execute a transaction and earns a fee for doing so, and principal businesses, where the investment bank acts as a counterparty to its customer, and earns a profit or loss on a trade. ... But there are hybrid businesses within investment banking, as you might expect from an industry which never discovered a profit-making opportunity it didn't like. One of the most important of these is structured products, in which banks take off-the-shelf and proprietary securities and derivatives and slice, dice, and recombine them into customized instruments that they can then sell to corporations or investors. ... Remember the first time you went to look at houses or apartments with a real estate broker, and he or she called you a valued client? Do you also remember how soon you discovered that real estate brokers work for the seller or landlord, who are their real clients, and that you were just a sucker patsy customer? But no matter the particular circumstances, the economic and transactional roles are clear: if someone is selling you a product or a "solution," you are not a client. You are a customer. ... Some clients are indeed very sophisticated, and those tend to get the best terms and the best price. Most customers are not; they are price takers. But that is true of any market. ... Ladies and Gentlemen, and this is not something that doesn't happen a million times a day in almost every other manufacturing industry around the globe. This is not even capitalism. This is buying and selling, as it has been done since the first caveman traded his extra spear for a cooking pot.--Epicurean Dealmaker

With 13 NFL championships, the Packers—and [Warren] Buffett’s titan [Berkshire Hathaway]—just go to show that on the NFL gridiron and in the business world, teams’ ability to place the right individuals in the right situation—at every link in the chain—is crucial in determining success. This would make Washington Redskins owner Daniel Snyder the Steve Case of the NFL. They pursued goals with relentless ambition armed with a war chest of capital, but failed to employ adequate foresight and discipline, leading to a series of flops. Neither has many highlights to point to over the last decade; it is likely that given the opportunity, each would make different decisions. Maybe not Snyder, though. On the other hand, the New England Patriots’ leadership can only be compared to the Goldman Sachs machine. With unrivaled success throughout the boom years of the last decade, both have approached media with unequaled aloofness. And, between a Pats assistant taping opponents in violation of league policy and Goldman’s obvious penchant to milk both sides of a deal, each has had their accountability and ethics brought into question over and over. Now—with intense scrutiny on banker pay, and Tom Brady approaching the latter portion of his career—it remains to be seen whether either will be able to maintain their competitive stranglehold. The Minnesota Vikings? Enron.--Jonathan Marino

This Superbowl commercial will probably be the most memorable

It didn't go for laughs. I'm not sure it will turn Detroit around in this generation.

<a href="http://msn.foxsports.com/video?vid=968f514d-048a-4eb1-8741-32fd03a912d1" target="_new" title="">Daimler Chrysler: Eminem Detroit</a>

UPDATE: Shira Ovide muses:

But just a thought: Chrysler is 9% owned by taxpayers after a $9 billion federal rescue two years ago, and it’s part owned and run by an Italian, Fiat’s Sergio Marchionne. Can the company still brag about its Detroit origins?

If you were expecting the dark blue background

or other stuff that is now gone, I apologize for the shock.  Just trying to remodel, after 5 years.

Quotes of the day

... like many value guys, he can be early (on trading desks, they call that “wrong”).--Barry Ritholtz

Buy in thirds.  ... You buy the first third immediately without hesitation just to put it in play (relief!).  If your target equity runs up and away, at least you're in it and there'll be a lid on your self-loathing.  Should the stock or the markets in general drop, however, you'll not be trapped in a full position.--Joshua Brown

The best kid in the country [I could hire] may be at like Bowling Green, right. But to go to Bowling Green, interview 20 kids just to find that one needle in the haystack doesn't make sense, when you can go to Harvard it's like 30 kids that are all super qualified and great.--Investment banker

Don't you wish your blogger was

anonymous like me?

I don't play Super Bowl boxes

Why not?  Two words:  no alpha.  The box pool is the epitome of efficient markets hypothesis--where's the fun in that?

But for those of you who bought a box or two, here's the backtest of the last 44 games.  The worst number to hold is a '5'.  Any '5-X' or 'X-5' box has a 0.23% chance, so you already need take a $77 haircut on your mark-to-model.  There has NEVER EVER been a final or quarter-end score where one team's score ends in '5' and the other team's in 2-8, so if you have one of those, mark it to $0.

The best number to hold is '0', followed by '7', '3', and '4'.

Via my favorite broker.

For those suffering cognitive dissonance between the payroll and household survey numbers this morning

I would recommend Tim Kane's analysis.  In sum, the payroll survey is much noisier, based on the respective statistical methods for each survey.

Job increases in the payroll survey were quite muted, while the household survey number--i.e. the unemployment rate--dropped from 9.4% to 9.0%.

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

Photo link here.

Battle of the Bond Girls

Whoops, different Bond Girls.  James, meet Muni.

Rumor That Mubarak Will Step Down

Here.

Not bad for Joe Sixpack

Lou Gannon writes, on Ronald Reagan's 100th birthday:

Soon after Reagan's first meeting with Gorbachev in Geneva in 1985, I interviewed him for a book and asked him what was the most neglected aspect of his biography. Negotiating for the Screen Actors Guild, he replied. What did he learn in these negotiations, I wanted to know. "That the purpose of a negotiation is to get an agreement," Reagan said.

And so it turned out in the fullness of time that this most conservative and anti-communist of all presidents sat down with Gorbachev and, after many ups and downs, on Dec. 8, 1987, signed the first treaty of the Cold War that actually reduced nuclear arsenals instead of stabilizing them at a higher level. It was an agreement by the way -- the Intermediate Nuclear Forces (INF) Treaty -- that Reagan's ideological mentor William F. Buckley opposed and that columnist George Will called "moral disarmament."

Henry Kissinger, who retrospectively acclaims Reagan, said at the time that he had "grave reservations" about the INF Treaty, giving aid and comfort to the right in its campaign to prevent ratification. Reagan took his case to the people, and the Senate ratified the treaty.

It was a precursor to other agreements, the most recent signed by Barack Obama, which made deeper reductions in nuclear arsenals. Today, U.S. and Russian specialists inspect nuclear weapons on each other's soil, an action that would have been seen as unbelievably utopian when Reagan became president.

Via Steven Hayward. Photo link here.

Question of the day: Which of two alternatives is more probable?

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student she was deeply concerned with issues of discrimination and social justice and also participated in anti-nuclear demonstrations.

Which of two alternatives is more probable:

A. Linda is a bank teller.

B. Linda is a bank teller and is active in the feminist movement.

The vast majority of U.S. college students who were given this question picked B, thus scoring an F for logical thinking.

Quotes of the day

... the most imaginative people are the most credulous because they are prone to dismiss common sense. For creative thought, common sense is a bad master. Its sole criterion for judgment is that the new ideas shall look like the old ones. In other words it can only act by suppressing originality. Original minds find great unconventional ideas, but also lots of bad ones. ... One of the arguments I really don't like is that if someone believes something I disagree with he must be an idiot, or that if he's a genius in number theory his opinion on global warming is obviously rigorous and true. People have multiple selves, as some people who are warm to their family are monsters to their colleagues or vice versa. Most importantly, a person with only 'reasonable' ideas would probably be a good manager, but they wouldn't be really creative, or interesting.--Eric Falkenstein

... if people in New England are complaining, they're spoiled. They're doing something right there, because they win a lot of football games.--Rich Gannon

They come for your heart in Pittsburgh.--Joe Posnanski

I’m an analytical hypochondriacal pessimist, flavored with a dash of unreasonable hopefulness. Give me any situation, and I can tell you ten ways it’s bound to go south, and at least five of those ways involve me personally getting cancer in the process. ... what these [other, high achieving] people share in common is that they believe they can accomplish what many of us shrink from attempting. They’ve achieved far more than most people, and in the process failed far more than most. They recognize what I often forget, which is that you can’t have one without bearing the other. This has set me to wondering how I, as a parent, can cultivate in my sons the same belief in possibility, the same courage, the same willingness to get knocked down repeatedly and still strive.--Tony Woodlief

It is noise that makes the world go round as much as money, with truth coming in a poor third.--Theodore Dalrymple

Over the past few decades it has dawned on some researchers that we don't make decisions the way most economists think we should. ... Logic, math and probability are all context independent. That is where their power lies; they will work as well on Mars as on Earth. But heuristics can take into account context and norms, an awareness of the environment, and our innate understanding that the world may shift in unanticipated way. As with many new paradigms, the new route to behavioral economics adds a critical part of the world that the old one ignored. Perhaps it was ignored for the same reason physics assumes a perfect vacuum. Or perhaps because the field became overrun with mathematicians, and as Kuhn has said, a new paradigm such as this will only successfully assert itself once the older generation dies off. --Rick Brookstaber

Behavioral economics offers prospect theory instead, which gives more weight to losses than gains and provides a better fit for the choices observed in the laboratory. But, say Berg and Gigerenzer, it is even more unrealistic as a description of the decision-making progress, because it still requires weighing up every possible outcome, but then deploys even harder sums to produce a decision. It may describe what we choose, but not how we choose. Gigerenzer prefers to look for actual decision processes. Take the simple act of catching a ball in flight. The spirit of neoclassical economics would say that people act “as if” swiftly calculating the parabolic arc of the ball. The spirit of behavioral economics would explain dropped catches with references to some systematic errors in the way we perform that calculation. But in fact, ball-catchers use a cognitive shortcut called the “gaze heuristic”, running forward and back while keeping constant the angle of sight up to the ball as it descends. No amount of “nudging” towards faster differential calculus will help prevent dropped catches. This is tough on behavioral economists, because in order to be taken seriously by other economists they have had to play the optimizing game. Switching to Gigerenzer’s rules would mean the end of economics as we know it.--Tim Harford

Vaccines, which save millions of lives every year, are one of the most successful public-health interventions in the history of modern medicine. Among the diseases that they prevent is the whooping cough. Why, then, is that sickness making a scary comeback in California, which is currently weathering its largest whooping-cough epidemic since 1947, with over 7,800 cases and 10 deaths in 2010?--Paul Howard, James R. Copland

In my own case, I suffered mumps, measles, chicken pox, and whooping cough. I remember them all (and can still feel my painful swollen parotid glands in my mind’s soma). I came through unscathed, but my best friend, from whom I was inseparable, contracted polio in the months immediately before the introduction of immunization against it. He was paralyzed from the waist down. No child today need experience these diseases. Surely this is an unequivocal example of progress, but strangely enough, many people are highly suspicious of the triumph of preventive medicine. It is as if they had lost all historical memory and could not imagine that things were ever any different. We are now so safe that all hazard appears anomalous to us, a deviation from nature’s normal course. It must be someone’s fault.--Theodore Dalrymple

According to the Consumerist, it seems that a geological statistician name Mohan Srivastava cracked a mathematical code on some of the most common scratch off lottery tickets sold in the United States. The strategy Srivastava employed subsequent to his discovery—basically analyzing the patterns of numbers that appear on the front of the ticket, then returning the tickets that did not fit the winning pattern—allowed him to kind of clean up.--Ash Bennington

It’s not at all clear that Congress should be able to pass something [like the Affordable Care Act] under the rubric of a penalty and then later defend it as an exercise of its taxation policy. That kind of switcheroo is not just semantics—as Klein is arguing, it has actual constitutional implications. Although the Supreme Court has not often been sound on this issue, there are strong reasons to think that for a law to pass constitutional muster as a tax Congress should be forced to call it a tax when it is passed. To allow otherwise is to allow Congress to covertly exercise its power to tax—which flies in the face of the structure of our legislative process. We don’t want a legislative system that allows lawmakers to escape political accountability for creating new taxes while they also escape constitutional scrutiny by having the executive branch defend the law as a tax.--John Carney

The massive federal budget deficit is unsustainable today because of out-of-control spending. Consequently, the federal government is about to run up against its statutorily imposed debt limit. Fortunately, Congress has options, and it has time to consider them carefully. If Congress chooses not to raise the debt ceiling, then it could act swiftly to indicate that net interest is the highest priority to allay any remaining concerns about the possibility of defaulting on the debt. Congress could also declare exactly where spending should be cut to align total spending with receipts, not leaving this to a President acting without statutory guidance. If Congress inclines toward raising the debt limit, then it should also impose immediate, substantial spending reductions along with strong new rules such as hard spending caps to require continued, sharp spending reduction in future years. The outcome should reflect a clear, quick path to a sound fiscal policy. The responsibility for driving down spending and borrowing rests—under our Constitution—squarely with the Congress and the President of the United States.--J.D. Foster

You need to admit that while you, personally, might not think it's worthwhile to spend $400 on a video game console or a pair of shoes, the other person should be the judge of that as long as the family finances are sound. And when it's you staring longingly at that pair of Manolo Blahniks, you need to think hard about whether you really love them enough to compromise larger family goals, like a downpayment for a house, retirement savings, or the college fund. It's not always much fun, trading off your pleasures for the family's welfare. But that's what you signed up for. And if you do it right, the reward is that you have another person in the same boat, rowing as hard as they can towards your common goals.--Megan McArdle

Chart of the day: OECD and the Taylor Rule

Source here.

Snapshot of the U.S. Economy

Household and non-profits' net worth plummeted from a high of $64 trillion in 2006-07 down to a low of $49 trillion in early 2009 before regaining a bit to $55 trillion in late 2010 (the latest data reported).

So, assuming 100 million households (and no non-profits), every household lost $140,000 in net worth and is now only worth $550,000. If every household had to pay an equal share of the national debt, that would also be worth $140,000, which is about $20,000 more per household or $2 trillion in aggregate more than 2009.

Federal Reserve data here. Debt clock information here.

Chart of the day: Economic Freedom and Income per Capita

Steve Landsburg also provides this context for the graph:

The measures of economic freedom come from the Fraser Institute’s Economic Freedom of the World project. Criteria include freedom to own foreign currencies and maintain bank accounts abroad, freedom to start businesses and compete, low taxes, low government spending, and equal treatment under the law. The most recent report ranked Hong Kong as the freest country in the world, with an overall rating of 9.05 out of a possible 10; the United States ranked sixth with a score of 7.96. Egypt, at 6.68, ranks 80th out of 141 countries.

More Michael Strahan than Michael Flatley

B.J. Raji's TD dance.



I've got a soft spot for these Packers. My dad was a huge Lombardi fan, and I think I've still got that NFL regulation helmet he bought me on a freezing day in Manhattan when I was 4 years old. Aaron Rodgers has been special, and his team's running game is worse than the Patriots, so he (and/or his defense) will have to be great to win it. The Steelers will not give it away.

And for those Patriots fans who are still mourning, I found this to be therapeutic:


UPDATE: Why does Carl Crawford remind me of Kevin Garnett a few years back?

Quotes of the day

While Linda [Brandes] has received roughly $65 million to $70 million in assets from Charles in their divorce, her lawyers insist that’s not enough.--Peter Rowe

Maybe the solution to our marital strife wasn’t to be found on the therapist’s couch, but in the hard language of empirical data. ... My relationship bubble had burst not long after I said “I do.” Were we insufficiently compatible—or just reacting to screwed-up incentives? I realize this might sound nuts to some people. But I was convinced I was onto something, that the principles of economics—often fact-based and always pragmatic—could reveal the route to wedded bliss (or, in econ-speak, “utility”). So I picked up the phone and cold-called Gary Becker. This also might sound nuts. Gary Becker is one of the world’s most famous living economists. He’s won the Nobel Prize and the Presidential Medal of Freedom. But could he give relationship advice? Indeed he could.--Paula Szuchman

Luck favors the prepared.--Don Miller

... we should prioritize debt payments over other spending. I know--you'd expect me to say that! But hear me out. In the first place, our debt payments do not simply go to enrich feckless corporations. They go into things like insurance pools, 401(k)s, and pension funds. If the government stops payments, yes, some rich people would take a bath. But so would a lot of ordinary people. Even more importantly, if the government misses a debt payment, that's it for borrowing more money in the near future--and I, for one, am skeptical that the IMF would be able to mount a bailout, which is what we do when developing nations have this sort of trouble. The United States currently runs a $1.5 trillion budget deficit. If we miss a debt payment, that means we immediately have to balance that budget, and keep it balanced. ... if we can't borrow money, no one's going to bail us out--or the states. And you can expect a default to be followed by a pretty ugly recession in an economy as credit-driven as ours. ... Over the long run, if the credit taps get cut off, the social service cuts will be deeper, uglier, and permanent.--Megan McArdle

In a new Kaiser Family Foundation poll, 54 percent urge Congress and the president to "act quickly" and 57 percent prefer spending cuts to tax increases. But there's little support for cuts in Social Security (64 percent opposed), Medicare (56 percent) and Medicaid (47 percent), which together approach half of federal spending. The State of the Union gave Obama the opportunity to confront the contradictions and educate Americans in the unpleasant realities of uncontrolled government. He declined. What we got were empty platitudes. We won't be "buried under a mountain of debt," Obama declared. Heck, we're already buried. We will "win the future." Not by deluding ourselves, we won't. Americans think deficits are someone else's problem that can be cured by taxing the rich (say liberals) or ending wasteful spending (conservatives). Obama indulged these fantasies.--Robert Samuelson

So [Paul] Krugman’s favorite story about recessions — the one that he says “changed his life” — is really just a story about babysitting co-ops, unless it’s supplemented with some other story about what keeps real-world prices from falling. Until he tells us what that supplemental story is, Krugman’s got nothing.--Steve Landsburg

What we had was a misallocation--too much housing--and so now must move labor and capital to other areas, which creates temporary unemployment. To try to cover this up via having the government spend more on backfilling teacher's pensions, or have everyone buy an unsustainable amount of everything, would not solve this problem faster. Notice they don't spend any time discussing what government would spend this stimulus on because it doesn't matter to them. It's fun to think a solution to a hangover is more of a different type of alcohol, but I've tried it, and it doesn't work. Unfortunately Keynesians don't have any intuition for this, because everything's all just 'aggregate demand', not housing, technology, energy, etc. Aggregation leads to simplifcation, but clearly it has a cost, and I think any macro theory that ignores the fact that an economy is a network of firms and individuals is pointless. ... Yahoo!, Microsoft and the rest are all hiring economists to design services based on game theory and other microeconomic specialties. This is in contrast to banks, that basically all went from having a large economic staffs in the 1970s, but a flak PR guy today for CNBC interviews. Bottom line: if you are going to do economics, don't do macro.--Eric Falkenstein

From 1995 to 2007 Rhode Island collected $341.3 million from the estate tax while it lost $540 million in other taxes due to out-migration. ... Rhodes Island lost a net of 107,086 residents to other states between 1991 and 2009, or about one in ten current residents. The top states that people from Rhode Island move to are Florida, North Carolina, Virginia, Georgia, and Texas. The top states that people move into Rhode Island from are New York, Massachusetts, New Jersey, California and Illinois.--Ocean State Policy Research Institute

Note that FL, NC, VA, GA, and TX are lower tax domiciles, while NY, MA, NJ, CA, and IL are higher tax domiciles. Just sayin'--Cav

Since 1995, the Small Business Administration has released a series of reports estimating the cost imposed by regulations on all businesses, and broken them down into average costs per employee for businesses with fewer than 20 workers and for those with 500 or more. These studies are the primary source for claims that small businesses pay more than their share to comply with federal rules. The most recent report, published in September, found that regulation cost businesses $1.75 trillion in 2008 (in 2009 dollars). For small businesses, the tab was $10,585 per employee, or 36% more than large businesses paid.--Carl Bialik

We’re good athletes, we’re blessed, and we take a lot of pride in playing. But the real heroes are the police, the firemen, the military, even the regular Joe off the street that goes into a fire and protects somebody and saves their life. Nothing we do in sports is really heroic. I think there’s great things that happen. Guys can do something great, but I don’t want to say it’s heroic. Pat Tillman, being an athlete and then going to serve his country, that’s heroic.--Kevin Youkilis

It was deep! I liked the parts [of the Bible] where some character was once this, but he ended up becoming that. Like he’d be dissing Jesus, and then he ends up being a saint. That was cool.--Lil' Wayne

Ethics, Religion, and Taxes

Or even more simply, how do we define the word 'fair'? Thoughtful, 10 minute PBS segment.

Watch the full episode. See more Religion & Ethics NewsWeekly.

I was thinking about Susan Hamil's assertions on Judeo-Christian views towards reducing oppression. I heartily agree with that sentiment, and would not support taking anything from a 'have-not' (which is a difficult category to define; let me simply define it for this paragraph as a person who is in the bottom 10-20% of consumption). The real question is what should the government (or The People, theoretically) GIVE to the 'have not'.

Digging a little deeper into the Bible--which is what Hamil claims she is doing--I do see social justice advocacy for orphans and widows (well, SOME widows, basically over 60 years old who have no surviving blood relatives, as 1 Timothy 5 is specifies) mentioned throughout the Gospels and Epistles. And the socialist in me--I am a very good one when it comes to my immediate family--would support providing vouchers not only for food, but also education, housing, and healthcare for these same people in our society today. (And if the government can do this better than the church can, I don't think church folks have a leg left to stand on, at least a biblical one).

But then again, the Old Testament does seem to present a hybrid of entitlement (allowing the poor to glean behind harvesters, note that it is work-based), flat-tax (the tithe, or 10% of income, to go to the priests and Levites who had no property of their own and were somewhat appointed agents of the theocracy), as well as progressive campaigns--quite voluntary--for large 'common good' capital projects (e.g. the Tabernacle, the Temple, the Jerusalem wall rebuilding project). I wonder if Hamil has ever studied her chosen scriptures with any serious economic critical thinking, a challenge she levels at her fellow believers.

Michael Sandel spoke about wealth and income not being necessarily tied to effort, and claimed that a kindegarten teacher works as hard as a hedge fund manager, yet the manager makes "hundreds, or even thousands" times more than the teacher. While I'm not sure this holds true when comparing average or median incomes (nor the typical hours and stresses of these respective professions), sure, I'll concede that Jim Simons (who is trying to lift teacher pay, and using his own money to do it) is thousands of times richer than a kindergarten teacher.

The problem is that the government has a hard time discriminating. Of course, that's a good thing, too (e.g. one citizen, one vote), but the Have-Nots are a tossed salad of hard work and laziness, of responsibility and incompetence.

One size does not fit all. The markets are better (although not perfectly) able to handle this reality.  I suspect that Hamil and I would disagree on whether the church would be better or worse than the government (and I might be wrong).

Via Greg Mankiw. Greg is also featured extensively in the piece, and he is the only one to point to his own biases (in the last minute) as much as anyone else's. How's that for fair?

Eric Falkenstein gently swats Tyler Cowen

using Ludwig Von Mises' switch.

Must be a blue moon or something.

Quotes of the day

History looks different in different cultures. I do not simply mean that different cultures interpret the same past differently (though that is often the case), but that the understanding of what history is may vary from culture to culture. Indeed, even within one culture there are often competing notions as to what history is. This issue has become ever more complex during the past several decades, owing to the advance of postmodernism and its innovative ideas about what history is. ... Many ancient Greeks thought that history went around in circles. This does not mean that each cycle repeats itself exactly, but that there is an unending repetition of patterns, with no end, no ultimate climax, no telos. A great deal of contemporary naturalism thinks that our sun will finally burn out, and life on earth will come to an end. Some hold that the universe itself will eventually settle into a more or less even distribution of energy, and die; others think that somehow it will rejuvenate itself by collapsing and exploding again to repeat a cycle something like the present one. By contrast, in university history departments events on such a scale are irrelevant. History—whether this refers to what happened, or to our reconstruction of it—covers the period of human writing. Everything before that is “prehistoric.”--Don Carson

Rich nations need to respect the rights of their citizens to avoid the “dictator” label, but in poor nations all you need is to be a US ally.--William Easterly

In a confidential conversation at a meeting with the KGB resident in Lebanon in April this year, [PFLP official] Wadia Haddad outlined a prospective program of sabotage and terrorism by the PLFP [sic]. . . . The PLFP is currently preparing a number of special operations, including strikes against large oil storage installations in various countries, . . . the destruction of oil tankers and super-tankers, actions against American and Israeli representatives in Iran, Greece, Ethiopia, Kenya, an attack on the Diamond center in Tel Aviv, etc. . . . We feel it would be feasible, at the next meeting, to give a generally favorable response to Wadia Haddad’s request.--KGB chief Yuri Andropov to general secretary Leonid Brezhnev

Unemployment rose to double digits, hitting 10.8 percent on the eve of the president’s second anniversary in office. Midterm election returns—a referendum on his first two years—were disastrous. Time reported that the president’s “economic advisers have been emptying out their desks and leaving,” underscoring “an impression of disarray within the Administration’s top economic ranks.” President Barack Obama in early 2011? Nope: President Ronald Reagan in late 1982. Yet two years later, Reagan won reelection in a landslide.--Nicole Gelinas

It is odd that the soft firms, which market themselves to clients as being super-smart repositories of brainpower (of course this is largely a fiction; see point 3 above), would rely so heavily on university admissions committees. They effectively outsource a big chunk of due diligence on their most important investment (human capital) to a group of people whose judgement they somehow trust, but perhaps without detailed understanding. When I was on the faculty at Yale I knew people in admissions and it's not clear to me that they were the best able to spot potential in 18 year olds. In studies of expert performance admissions people are less good at predicting UG GPA than a simple algorithm. (The "algorithm" is simply a weighted sum of SAT and HS GPA!)--Steve Hsu

Stock market participation is monotonically related to IQ, controlling for wealth, income, age, and other demographic and occupational information. The high correlation between IQ, measured early in adult life, and participation, exists even among the affluent. Supplemental data from siblings, studied with an instrumental variables approach and regressions that control for family effects, demonstrate that IQ’s influence on participation extends to females and does not arise from omitted familial and non-familial variables. High-IQ investors are more likely to hold mutual funds and larger numbers of stocks, experience lower risk, and earn higher Sharpe ratios.--Mark Grinblatt, Matti Keloharju and Juhani Linnainmaa

I think there is a world market for maybe five computers.--Thomas Watson, chairman of IBM, 1943

We find that Oscar wins are associated with a greater risk of divorce for Best Actresses, but not for Best Actors. This asymmetry is consistent with gender dynamics documented in marriages among the general population.--H. Colleen Stuart, Sue Moon, Tiziana Casciaro