Quotes of the day

Whenever you have an efficient government you have a dictatorship.--Harry Truman

When I worked at the World Bank, management was always checking up on us to make sure our research was relevant for real-world economic development. The standard test question was, "What would your research suggest the finance minister of country X should do?" This question reflected the standard view that has endured since the beginning of development economics six decades ago -- that all countries begin with a blank slate and that development happens when today's government leaders execute wise policies. My job was simply to tell the leaders what those wise policies were. Imagine the dismay of my managers if my advice to the finance minister had been, "Make sure your country was well caught up on technology -- 500 years ago." But seemingly irrelevant as that advice might be, it's actually true. If a country had the printing press and the magnetic compass in 1500, it's a pretty safe bet it has a strong national economy today. Ancient history still matters for today's development, providing unique insight into why the lights are still off in the dark corners of the world and what we might do to change that. Strangely, history has never figured into the equation when it comes to exploring why some countries prosper and others don't. ... our research shows that development is not about what you dictate, but what you discover. Little penicillin did far more to improve the world's lot than big plans conceived around a conference table. --William Easterly

One commonly hears complaints that living standards in America haven't "really" increased since the seventies--that it's all useless consumer gimcrackery. If you've ever spent a hot July without air conditioning, you know this is nonsense.--Megan McArdle

Economists understand that, absent externalities, the undistorted situation reflects an optimal allocation of resources. It is crucial to know how far we are from that optimum. To be somewhat nerdy about it, the deadweight loss of a tax rises with the square of the tax rate. Thus, increasing or decreasing a tax rate by 1 percentage point has a small effect on economic well-being if the initial tax rate is low, but it has large effect if the initial tax rate is high. For the margin of adjustment I was discussing (work more now, let your kids consume the proceeds in 30 years) the distortion is very high once all taxes are taken into account. As a result, every change in this tax wedge has a large impact on the size of the economic pie. ... Work has a pecuniary benefit, whereas leisure has a non-pecuniary benefit. Reality is more complicated. I face a choice among a wide range of activities, each of which offers some combination of pecuniary and non-pecuniary benefits. Absent taxes, I would choose an optimal mix of these activities. When the government taxes pecuniary benefits, I spend more time on those activities that yield non-pecuniary benefits. Some of those activities may look like leisure, but others may be better described as "fun work" rather than "income-producing work." Blogging, for instance, or writing op-eds that particularly inflame the left-wing blogosphere.--Greg Mankiw

Interestingly, no one thought it was odd that they should have opinions on Greg Mankiw's taxes; apparently, it is only opinions on your own taxes that are in bad taste.--Megan McArdle

I opposed TARP from day one. I wanted to see the insolvent banks put into bankruptcy. Now, some of the same folks who say that bailing out the banks was necessary to save us from another Great Depression are telling us that we need to stick it to the banks. If you say that "the law is the law" and "rules must be enforced as written," that can be a consistent position and I can respect you for it. But then don't turn around and say that we should empower mortgage counselors to rewrite people's loans. I wish that some of the pontificators had some business experience. ... It is safe to say that what is going on now is not helping "little people" against "the banks." It is an assault on a process that has done little or no actual harm to borrowers, and which supports the complex allocation of mortgage cash flows under today's securities. In the end, the biggest losers will be the unemployed, because the assault on the foreclosure process is going to keep the housing market in limbo for years. That in turn is going to make economic recovery something that does not begin until well after President Palin takes office. Have a nice day.--Arnold Kling

Throughout the financial crisis, the federal government didn't have to put up one single dollar to help out a hedge fund. They suffered, but never went to Washington with their hands out. Does that answer your question?--Byron Wien

A hedge fund is a computer that can go anywhere.--Daniel Donovan, Jr.

I can read my Kindle books on my iPad. I like the Kindle screen better (though it isn’t self-lit like the iPad.) But when it comes to eye strain the Kindle’s more like reading a book. The iPad is more like reading a computer screen. But the book looks better, generally on the iPad. The charts are crisp–on the Kindle you can’t always read them and photos are the same. On the regular-sized Kindle they’re a joke. On the iPad they’re glorious. Email on the iPad is fantastic. The on-screen keyboard is pretty good. Not great for long (more than a paragraph or so) writing but fine for short emails. The pdf reader I’m using (GoodReader) is spectacular. ... But while I’ve read pdfs on the regular-size Kindle it’s pretty horrible. The iPad makes me want to read them. Reading blogs on the iPad is better than on the web. I’m using Pulse as a blog reader. The posts are cleaner and crisper with less distractions. ... I do think it’s a spectacular way to carry a bunch of intellectual stimulation and aesthetic diversion when I travel. I’m planning on leaving my laptop at home on my next short trip. I’d like it to replace my laptop. It can’t yet. But the fact that I want it to, tells me something.--Russ Roberts

What Steve [Jobs]’s brilliance is, is his ability to see something and then understand it and then figure out how to put into the context of his design methodology — everything is design. An anecdotal story, a friend of mine was at meetings at Apple and Microsoft on the same day and this was in the last year, so this was recently. He went into the Apple meeting (he’s a vendor for Apple) and when he went into the meeting at Apple as soon as the designers walked in the room, everyone stopped talking because the designers are the most respected people in the organization. Everyone knows the designers speak for Steve because they have direct reporting to him. It is only at Apple where design reports directly to the CEO. Later in the day he was at Microsoft. When he went into the Microsoft meeting, everybody was talking and then the meeting starts and no designers ever walk into the room. All the technical people are sitting there trying to add their ideas of what ought to be in the design. That’s a recipe for disaster. Microsoft hires some of the smartest people in the world. ... It’s not an issue of people being smart and talented. It’s that design at Apple is at the highest level of the organization, led by Steve personally. Design at other companies is not there. It is buried down in the bureaucracy somewhere… In bureaucracies many people have the authority to say no, not the authority to say yes. So you end up with products with compromises. This goes back to Steve’s philosophy that the most important decisions are the things you decide NOT to do, not what you decide to do. It’s the minimalist thinking again. ... Steve was solving problems back in the 80s that turned out 15, 20 years later to be exactly the right problems to be working on. The challenge was we were decades away from when the technology would be homogenized enough and powerful enough to be able to make all those things mass market. He was just, in many cases, he was way ahead of his time. Looking back, it was a big mistake that I was ever hired as CEO. I was not the first choice that Steve wanted to be the CEO. He was the first choice, but the board wasn’t prepared to make him CEO when he was 25, 26 years old.--John Sculley

Has Warren Buffett gotten too big or too old?

Insider Monkey runs an analysis, and finds:

Contrary to the general perception, Buffett has not had any alpha for the past 10 years. Let us repeat that: Buffett, no alpha, for the past decade. You would have been better off if you had invested your money with David Einhorn. Warren Buffett had a phenomenal annual alpha of 19% between 1956 and 1968. Our current analysis shows that his alpha was more than 30% between 1977 and 1981. During the 80′s and 90′s, his annual alpha declined but was still better than 12%. For the ten years leading to mid-2003, his annual alpha stayed around 12% per year. Since then, it started a steep decline; by the end of 2004 it was (still a respectable) 6% per year. Between 2005 and 2008 Buffett’s alpha averaged only 3% per year. Finally, in the ten years ending in 2009, it went virtually to zero.

Whether in sports or Nobel prizes in science, it seems a person's greatest achievements tend to occur in their twenties and thirties. But I think at least part of the decline here can be found in Berkshire's $200 billion market cap. It's a lot harder to move in and out of opportunities when you are piloting a supertanker versus a speedboat.

I think I'm okay with life after Randy Moss

now that Deion Branch is back. In the following clip, Tom Brady telegraphs the route he wants Branch to run with only a glance.



Via Ian Rapaport.

Greg Mankiw catches Barney Frank speaking out of both sides of his mouth

here:

These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.--Barney Frank in 2003

Low-income home ownership has been a mistake, and I have been a consistent critic of it.--Barney Frank this week

Peter Baker's "The Education of a President"

here. An excerpt:

Talking with Obama and his aides, it’s eerie to hear echoes of Clinton and Bush. Obama says the easy issues never make it to him, only the hard ones; Bush often said the same thing. Obama says our war with terrorists will never end in a surrender ceremony; Bush often said the same thing. Obama says he does not want to kick problems down the road; Bush often said the same thing. In the days leading up to the 1994 midterm elections, Clinton mocked Republicans for promising to balance the budget while cutting taxes, saying, “They’re not serious.” In our conversation, Obama used some variation of the phrase “they’re not serious” four times in referring to Republican budget plans.

I told you so, specifically #15.

Intrade contract pricing now predicting that GOP will gain 55 seats in the House of Representatives

The 55+ seat contract midprice is now at 50.

This is up 6 seats from last week.

While I would welcome the gridlock, I don't see any better leadership coming from either party.

Quotes of the day

Birds given the chance to play a pigeon ''fruit machine'' could not resist the lure of the jackpot - even when the odds were stacked against them. They appeared to be psychologically hooked in much the same way as humans who buy lottery tickets and visit casinos.--Telegraph

After Glenn Beck held a “Restoring Honor” rally at the Lincoln Memorial, [Stephen] Colbert’s fans clamored for their own “Restoring Truthiness” event; Colbert has chosen instead to lead a “March to Keep Fear Alive” in Washington on Oct. 30. Truthiness, Colbert pointed out, is in no need of restoring, since it continues to define those who appeal to raw feelings at the expense of facts. “I doubt that many people in American politics are acting on the facts,” he observed ruefully. “Everybody on both sides is acting on the things that move them emotionally the most.”--Ben Zimmer

The number of people who don’t pay their taxes.--President Obama's answer when asked what surprised him the most in his first 100 days in office

So perhaps it's no surprise that government employees can't fight the urge to pry into the private lives of high-profile figures using something they do have: access to vast digital repositories of sensitive personal information.--G.W. Schulz

At JPMorgan Chase, [mortgage bankers] were derided as “Burger King kids” — walk-in hires who were so inexperienced they barely knew what a mortgage was.--Eric Dash and Nelson D. Schwartz

When Fannie Mae and Freddie Mac were placed under government conservatorship in late 2008, officials blamed poor credit choices and bad risk management for their losses. The Treasury contracts to Fannie Mae and Freddie Mac to manage the Treasury Department's foreclosure mitigation program have problems, the [TARP congressional oversight committee] report said. "Both Fannie Mae and Freddie Mac have a history of profound corporate mismanagement," it said. "Further, both companies have fallen short in aspects of their performance, as Fannie Mae recently made a significant data error in reporting on mortgage redefaults and Freddie Mac has had difficulty meeting its assigned deadlines." Yet the Treasury Department is relying heavily on them, the report said. "Fannie Mae alone currently has 600 employees working to fulfill its TARP commitments," the report said. "By comparison, Treasury has only 220 staffers working on all TARP programs combined."--Reuters

Sweden’s 100-year-old Nobel Foundation, which every October gives 60 million kronor ($9 million) to prize winners in the award’s six categories, has begun hedging against the risk of currency fluctuations. Last year, the 3 billion-krona ($448 million) foundation switched to a policy that calls for offsetting risk in all its foreign bonds and half its hedge fund investments to help protect the Nobel’s future.--Adam Ewing and Marybeth Sandell

Once upon a time, over a generation ago, The television set was commonly called the “boob tube” and looked down on by elites as a purveyors of mind-numbing entertainment. Movie theaters, on the other hand, were considered a venue for, if not art, more sophisticated dramas and comedies. Not any more. The multiplexes are now primarily a venue for dumbed down comic-book inspired action and fantasy movies, whereas television, especially the pay and cable channels, is increasingly becoming a venue for character-driven adult programs, such as The Wire, Mad Men, and Boardwalk Empire. This role reversal, rather than a momentary fluke, proceeds directly from the new economic realities of the entertainment business.--Edward Jay Epstein

According to the World Federation of Exchanges, a Paris-based association of 52 stock exchanges around the world, the world stock market capitalization reached more than $50 trillion in September, the highest monthly value in 26 months, since July 2008.--Mark Perry

Marriage and divorce rates have remained remarkably immune to the ups and downs of the business cycle. Unfortunately, the marriage statistics are easy to misread. It’s misleading to count the wedding rings among people in their 20s and early 30s, because the median age at first marriage in the United States has risen to 28 for men (from 23 in 1970) and 26 for women (from 21 in 1970). The fact that these folks aren’t married now doesn’t mean they won’t marry — many of them just aren’t there yet. Look instead at 40-year-olds, and you see that 81 percent have married at least once. Yes, this number used to be higher — it peaked at 93 percent in 1980 — but, clearly, marriage remains a part of most people’s lives. These statistics are not a perfect barometer either, however, because they reflect weddings that were celebrated years earlier. To most accurately track marriage rates, you need to focus on the number of wedding certificates issued. In 2009, the latest year for which we have data, there were about 2.1 million marriages in the United States. That does represent a slight decline since the recession began. But it’s the same rate of decline that existed during the preceding economic boom, the previous bust and both the boom and the bust before that. ... Truly, the recession has not torn young couples apart; it has pushed them closer together. --Justin Wolfers

Now Mike Sweeney’s finally in the playoffs. That’s the punch line. But of course, the punch line isn’t important. That’s the secret of a good joke … and a good life. The punch line is just the punch line. The set-up, that’s what matters.--Joe Posnanski

Darwin applies to computers, too

Algorithms that consistently lose money should be turned off, and turned back on only if improved. Any government action that incentivizes against this is only asking for another "flash crash".

Unfortunately, the courts of law are not always in touch with the laws of nature or economics:

An Oslo court has fined and sentenced two Norwegian day traders under the country’s securities trading act for unlawful market manipulation in a ground-breaking case that pits human investors against the automatic wagers of algorithms.
...
The prosecution argued that the men, as they were making those final trades, were buying at a higher price than they knew they would sell just a moment later.

But Mr. Brosveet says the court would never have ruled the way it did “if it was just a stupid human being” on the other side of the trade. Instead, it was a computer, and “the computer must be held as a responsible actor,” he said.

Quotes of the day

We are living in the first truly global civilization. That means that whatever comes into existence on its soil can very quickly and easily span the whole world. But we are also living in the first atheistic civilization, in other words, a civilization that has lost its connection with the infinite and eternity. For that reason it prefers short-term profit to long-term profit. What is important is whether an investment will provide a return in ten or fifteen years; how it will affect the lives of our descendants in a hundred years is less important. However, the most dangerous aspect of this global atheistic civilization is its pride. The pride of someone who is driven by the very logic of his wealth to stop respecting the contribution of nature and our forebears, to stop respecting it on principle and respect it only as a further potential source of profit.--Vaclav Havel

The church is an institution and it’s incredibly corrupt obviously, but that’s because it’s full of dysfunctional people and people who are hurt and battered and abused. It’s very normal in any institution to have that kind of level of dysfunction. That’s unfortunate. I find it very difficult, I find church culture very difficult you know; I think a lot of churches now are just fundamentally flawed. But that’s true for any institution you know, that’s true for education, universities and it’s definitely true for corporations because of greed, and I think part of faith is having to be reconciled with a flawed community. But the principles, I don’t think the principles have changed. They can get skewed and they can get abused and dogma can reign supreme, but I think the fundamentals, it’s really just about love. Loving God and loving your neighbour and giving up everything for God. The principles of that, the basis of that is very pure and life changing.--Sufjan Stevens

In the 20th century, immigrant Hollywood directors made hyperpatriotic movies that defined American life but found after fame and fortune they were still outsiders. In [The Social Network], Zuckerberg designs a fabulous social network, but still has his reciprocity problem. He is still afflicted by his anhedonic self-consciousness, his failure to communicate, his inability to lose himself in the throngs at a party or the capacity to deserve the love he craves. Many critics have compared this picture to “Citizen Kane.” But I was reminded of the famous last scene in “The Searchers,” in which the John Wayne character is unable to join the social bliss he has created. The character gaps that propel some people to do something remarkable can’t be overcome simply because they have managed to change the world.--David Brooks

I made baseball as much fun as doing your taxes!--Bill James, on an episode of The Simpsons

Art Laffer famously presented his idea that tax revenues are at first increasing, then decreasing in tax rates, on a cocktail napkin, when arguing about the president Gerald Ford's tax increase (ie, 1974). This too is a good idea. This too, is an empirical issue, as we can be either at a point where revenue is increasing in the marginal rate, or decreasing. Even if the curve is increasing, its slope is important, especially because maximizing government revenue is not the same as maximizing societal welfare. Yet Art Laffer will never win the Nobel prize. His idea is as insightful, and has the same empirical limitations, as the modeling of labor search on unemployment or any of the other econ Nobels. This latter work has the imprimatur of 'science' because it generates lots of complicated models. The models are no more predictive or instructive than the Laffer curve, just they lend themselves to infinite amounts of rigor so it can then it looks like physics, which is the end game (looking like physics). Rewarding formalism that is no more precise than a Laffer curve has been really bad for understanding economic systems. The Laffer curve is marginalized by economists for its unpretentious honesty, whereas the dynamic general equilibrium search models are more misleading as to how precise they are or can be. This makes economics less fruitful.--Eric Falkenstein

Finance is like wine in that while experts talk about sophisticated concepts the basics are simple things like clean barrels and clean data. Getting economists back to simple stuff, basic data analysis that corrects for various omitted variables, is the best way to find important economic truths. It's the data, not the process, that matters more. There simply aren't many economic equations, not enough to make the field a science, so it's more of seeing empirical tendencies, as almost everything is 'an empirical issue' with theoretical offsetting effects. Many thought that powerful techniques could avoid these issues, and in fact those concentrating on these adjustments were considered not as productive as those doing yeoman's work with the data. The scientism of economics that Hayek warned about has been very counterproductive to economics.--Eric Falkenstein

Let me give you an idea of how unqualified I am to be president. First, I'm not good at remembering names. Or faces. Or countries. My staff meetings would be a whole lot of "Maybe we should bomb what's-his-face's country. You know, the one that grows the coconuts. Or maybe they manufacture tractors. I remember that their leader had a funny hat. Make it happen." I'm not charismatic. If I were to stop at diners as part of my campaign, people would ask me for coffee. It would be one bad photo op after another. I can't ask people to sacrifice their personal interests for the greater good. It feels evil. I couldn't force myself to spend time doing useless tasks such as visiting victims of natural disasters or working on a peace plan for the Middle East. I would argue that napping would be a better use of my time. And I would make matters worse by showing research to back my point. I wouldn't be able to get through an entire press conference without saying "Blow me." I would declare war on Pakistan because I like truth in labeling. Obviously I couldn't last a full term in office, much less get elected. But that doesn't stop me from imagining that someday the American flag will have my face where the stars used to be. Imagine big. You might surprise yourself.--Scott Adams

Family trees revealed Obama and Palin, the former Alaska Governor and 2008 Republican vice presidential nominee, are 10th cousins through common ancestor John Smith, according to Ancestry.com Inc. Smith was Obama’s and Palin’s 12th-great- grandfather. Smith, a Protestant pastor, was an early settler in Massachusetts and was criticized by the ecclesiastical community for supporting Quakers, said Anastasia Tyler, a genealogist for the website. Obama and Limbaugh are 10th cousins once removed through shared connections to Richmond Terrell, a Virginia settler who came to America in the mid-1600s, Tyler said. Palin and Obama have ties to Bush, both through links to Samuel Hinckley. Maybe leadership “runs in the family,” the website said, because Hinckley’s son, Thomas, became the governor of Plymouth Colony before it united with Massachusetts.--Traci McMillan

Why is the foreclosure machinery of our nation’s largest banks suddenly grinding to a halt? ... When a mortgage is securitized, the investors in the mortgage bonds don’t get assignments or notes. The investment vehicle doesn’t get the assignments or notes either. Instead, the physical notes are typically sent to a document repository company. The transfer of interests is noted in an electronic database. But during the height of the housing bubble, investment banks were churning out mortgage bonds in such a frenzy, sometimes the assignments never got executed and mortgage notes never got delivered. Keep in mind that this was during the years when lenders were giving out low-doc and no-doc mortgages. It was inevitable that the fast and loose and slightly documented culture would not stop at the mortgage originator but stretch all the way through the process. For most mortgages, the note probably still exists somewhere. One problem that has arisen, however, is that some of the original mortgage lenders have gone under or been acquired by a larger bank. This can make tracking down the notes difficult, if not impossible.--John Carney

I don't know the ins and outs of the loan, I just sign documents.--Litton Loan mortgage supervisor based in Houston

But I’m drawn to the possibility that [Barney] Frank actually made the problem [of affordable housing] worse by driving up the price of housing via all the government programs and subsidies he championed. Frank is not the only cause of the problem, just one of the least repentant. You can add President Bush and Clinton and other enablers. But no one should believe that Barney Frank or Barney Frank aided by colleagues and their staff in the Congress can remake the mortgage finance market without a lot of unintended (and destructive) consequences.--Russ Roberts

Consumer sovereignty reflects the fact that the ultimate measure of any economy's success is how well it provides for people's needs and desires -- how much access it affords to the particular combination of goods and services (including leisure) that each of us uniquely desires in order to make his or her life as rich and as meaningful as possible. Opponents of free trade are quick to reply, "Yes! -- and that's why free trade is bad. It destroys jobs and, thus, denies people the income to buy the things they want." This reply has an air of superficial plausibility (which, no doubt, is why a recent poll reported in The Wall Street Journal finds Americans' support for free trade to be abysmally low). But scientific truth in this matter, as in all other matters, is not determined by polling or established by popularity. The very jobs that Americans today think ought to be protected from foreign trade are jobs that were either created by foreign trade or made attractive by foreign trade. ... among the very reasons that losing a particular job to trade is so traumatic is that that job is made so attractive by trade. Of course, each of us would love to have our own job guaranteed while we simultaneously exercise the consumer sovereignty that enables us to enjoy a high standard of living. But to guarantee your job requires a sacrifice of some of your neighbor's consumer sovereignty -- just as a policy that guarantees your neighbor his job requires a sacrifice of some of your consumer sovereignty. The only fair policy -- and the only one that ensures long-run prosperity for all -- is a policy in which no one's consumer sovereignty is ever sacrificed.--Don Boudreaux

A steep decline in trading activity is expected to weigh on profits at the biggest U.S. investment banks—Goldman Sachs Group Inc. and Morgan Stanley—when they report quarterly results next week. Analysts have been slashing estimates on the investment banks since the summer as businesses such as fixed-income trading, once the driver of profits, dried up. "Mounting anxiety stemming from a waning economic recovery and uncertainty over the midterm elections left clients paralyzed and trading desks fell silent during the [third] quarter," wrote Sanford C. Bernstein analyst Brad Hintz in a recent note to clients.--Liz Moyer And Brett Philbin

Many mining experts point out that, while more hazardous than most jobs, mining safety has increased considerably over the decades. Today, they say, workers are more likely to be hit by a car on the way to work than killed while descending deep into the earth to extract iron ore, coal, and precious metals. The mindset in the past was that “you might get killed,” says Michael Nelson, an associate professor and chair of mining and engineering at the University of Utah. “Fifty years ago, a guy died, and everyone said, 'That´s too bad.' And the company would send a check to the widow.” But in the past ten years the mentality has shifted so much that no accident is acceptable, he says, reflecting changes in societal expectations, worker rights, and the very high costs of fatalities today, including settlements and wrongful death lawsuits. The chance of survival in the wake of a tragedy has also increased. Rescues in a coal mine in Shanxi, China this year, in a gold mine in the Philippines in 2008, and in 2002, in Pennsylvania´s Quecreek Mine, are all examples that have provided lessons for the industry. ... The job entails inherent risks anywhere it is done. For 2010, there have been 59 mine-related fatalities for the coal and metal/non-metal sectors in the US, including 29 killed in an accident in West Virginia in April. Standards have increased greatly over the years, though. The number of deaths in the US stood at 3,242 in 1907 compared to 18 in 2009, according to the Mine Safety and Health Administration.--Steven Bodzin

Chart of the day: Long term stock market returns

Source here.

Yes, high frequency traders are trying to take a profit

But specialists and human market makers (not computers) used to take a much bigger profit, on a per trade basis. Instead of working with spreads a penny or two wide, for pretty much all of the last century, spreads were twelve-and-a-half and twenty-five cents.

That's a lot of dough that the specialists were able to pocket. It could be argued that high frequency traders are saving you more than 10 cents a share, if they are the ones providing you with liquidity as you trade, as they probably are, accounting for more than half the volume traded. If a retail investor traded 100 shares per week for forty years--between her brokerage and IRA accounts, 401(k) allocations, mutual funds, insurance claims, and pension funds--that's a savings of over $20,000. For 100 million retail investors, that's $2 trillion dollars of savings.

Let's not go backwards here. Here is the 60 Minutes piece that just ran over the weekend.

Quotes of the day

Despite more than 10 years of experience and billions of dollars, the [United Nations] peacekeeping force still seems to be failing at its most elemental task: protecting civilians.--Jeffrey Gettleman

China has become a big power in economic terms as well as political terms, and it is normal that big powers should be under criticism.--Thorbjørn Jagland, the Norwegian Nobel Committee chairman

... I think [the Republicans] are pushing the wrong policies, but I’m not in a position to stop it. I don’t believe in standing in the way of an avalanche.--George Soros

Ronald Reagan lost 2% of U.S. jobs by this stage of his first term, and Bush (the younger) 1.7%. Both were re-elected. But this hole is deeper.--Brett Arends

Lawsuits and interviews with judges show that lenders in many cases submitted fraudulent documents as they sought to evict struggling borrowers. The paperwork problems raise broader questions over whether the constant trading of mortgages on Wall Street left lenders without clear title to the properties they are trying to seize. Several federal agencies, such as the Justice Department and the Securities and Exchange Commission, are looking into the matter. Banks have said a remedy will take only a few months, but some Obama administration officials are unsure whether the system can be fixed that quickly. On Friday, Bank of America froze foreclosures nationwide, and many other banks have stopped them in dozens of states. Litton Loan Servicing, the mortgage servicing unit of Goldman Sachs, on Monday halted some foreclosures so that it could review its procedures, a spokeswoman said. If these freezes turn into a prolonged delay, Fannie and Freddie would face "billions" of dollars in losses, since the companies wouldn't be able to sell off properties that have fallen into foreclosure, said Anthony B. Sanders, a professor of real estate finance at George Mason University.--Zachary A. Goldfarb, Dina ElBoghdady and Ariana Eunjung Cha

In this environment, it would be easy for Netflix to fall back on its safety cushion, milk the existing DVD business for all it’s worth, and try to slow down customers’ migration into streaming, particularly since a customer who streams movies is less lucrative than one who rents three DVDs a month. But then, a decade from now, we’d be writing Netflix obituaries that sounded just like the ones for Blockbuster. Sometimes you have to destroy your business in order to save it.--James Surowiecki

I’m ready to declare in public my belief that Facebook will be bigger in five years than Google is right now, barring some drastic action or accident.--Adam Rifkin

[Mark] Zuckerberg is the Angelina Jolie of the Internet. His lovers, friends, and acquaintances—like those of any other celebrity—are caught up in the vortex. He has to make a choice; and they have to make a choice. And none of the choices—retreat from the public eye, abandonment of friendship—are palatable. I actually like the guy. Apparently, his original idea for Facebook was this dark Facebook. Like, the idea was that it was going to be a place for people to bitch about each other, and then it evolved. It was interesting how agnostic he was about which approach to take.--Nick Denton

Nick [Denton] is a bit of a sphinx on purpose. He has some of the attributes of the dork who wraps his Asperger’s around him like a cloak.--Joel Johnson

This [is a Nobel economics] prize for the importance of economic heterogeneity and the importance of second-order effects. The cited labor market imperfections cannot be cured by reflating nominal demand, although that policy may be desirable for other reasons. Mortensen and Pissarides have an explicitly Schumpeterian approach and their work represents one version of a "recalculation" argument. (Peter Diamond in contrast does not draw out that aspect of the problem and I think of the three as each a quite different kind of economist.) You can think of Mortensen and Pissarides as providing one reason why private recalculation takes longer than is socially optimal and how this might be fixed. Their work shows how cyclical and structural phenomena operate together and must be analyzed together. In the last twenty years their work on labor markets has been much more influential, and rightly so, than traditional Keynesian approaches. Furthermore their work has dissolved the entire characterization of "Keynes vs. whomever" as out of date. Their work has much influenced my blogging on the recent employment crisis.--Tyler Cowen

How’s that no-brainer working out, [Nassim]?--Eddy Elfenbein

The news that [John] Meriwether is starting his 3rd fund, a global macro fund, has me wondering if we're nearing a top for that strategy.--David Shvartsman

Felix Salmon spanks Rupert Murdoch

So please, WSJ, when you’re writing articles about the highly-sensitive subject of Wall Street bonuses, be as transparent and accurate as you can. Explain where you’re getting your numbers, explain exactly how you’re calculating them, and explain any weaknesses in the methodology. You can still have your sensationalist headlines, but if readers want all the relevant information, there’s no reason you shouldn’t give it to them.

Interesting factoid about fighting in Afghanistan

We statistically lose more 18-25 year old soldiers when they go home for R&R than we do in combat in the field.

Climate science is not science

Ross Mckitrick concludes:

1. The scientists involved in the email exchanges manipulated evidence in IPCC and WMO reports with the effect of misleading readers, including policymakers. The divergence problem was concealed by deleting data to “hide the decline.” The panels that examined the issue in detail, namely Muir Russell’s panel, concurred that the graph was “misleading.” The ridiculous attempt by the Penn State Inquiry to defend an instance of deleting data and splicing in other data to conceal a divergence problem only discredits their claims to have investigated the issue.

2. Phil Jones admitted deleting emails, and it appears to have been directed towards preventing disclosure of information subject to Freedom of Information laws, and he asked his colleagues to do the same. The inquiries largely fumbled this question, or averted their eyes. Despite being asked by Parliament to conclusively resolve this issue, Sir Muir Russell did not attend the interviews with Jones and, as reported in UK media, his inquiry did not ask Jones if he had deleted emails.

3. The scientists privately expressed greater doubts or uncertainties about the science in their own professional writings and in their interactions with one another than they allowed to be stated in reports of the IPCC or WMO that were intended for policymakers. Rather than criticise the scientists for this, the inquiries (particularly the House of Commons and Oxburgh inquiries) took the astonishing view that as long as scientists expressed doubts and uncertainties in their academic papers and among themselves, it was acceptable for them to conceal those uncertainties in documents prepared for policy makers.

4. The scientists took steps individually or in collusion to block access to data or methodologies in order to prevent external examination of their work. This point was accepted by the Commons Inquiry and Muir Russell, and the authors were admonished and encouraged to improve their conduct in the future.

5. The inquiries were largely unable to deal with the issue of the issue of blocking publication of papers, or intimidating journals. These ended up being subjective, he-said-she-said disputes, and in some cases the documentation was too sparse. But academics reading the emails could see quite clearly the tribalism at work, and in comparison to other fields, climatology comes off looking juvenile, corrupt and in the grip of a handful of self-appointed gatekeepers and bullies.

Nassim Taleb dances on Merton Miller's grave

saying:

People are using Sharpe theory that vastly underestimates the risks they’re taking and overexposes them to equities. I’m not blaming them for coming up with the idea, but I’m blaming the Nobel for giving them legitimacy. No one would have taken Markowitz seriously without the Nobel stamp.

I don't remember Einstein dancing on Newton's grave. I guess Taleb is no Einstein. In fact, I'd bet there'll be a lot more dancing over his.

What does Taleb credit the reduction of starvation and improved mortality since 1952, if not greater capital formation resulting from improved asset pricing, that funded the innovation and economies of scale in the food and medical industries (as well as every other industry)?

Maybe asset returns don't behave like the heat equation as much as the Nobelists claimed. Well, even if someone finds improved expressions for the heat equation, it doesn't mean that Fourier wasn't a smart guy who helped people progress.

Someday, someone will point out Taleb should not have conferred so much legitimacy on himself.

Via Eddy Elfenbein.

Dirty politics

A tautology?

Congressman John Adler's campaign and the Camden County Democratic Committee recruited ""NJ Tea Party'' candidate Peter DeStefano to confuse conservative voters and hurt Adler's Republican challenger this fall, Democratic operatives say.

Congressman John Adler's campaign and the Camden County Democratic Committee recruited ""NJ Tea Party'' candidate Peter DeStefano to confuse conservative voters and hurt Adler's Republican challenger this fall, Democratic operatives say.

"The goal was to take 5 percent of (Republican Jon) Runyan's vote,'' said a Democrat with direct knowledge of the Adler campaign and CCDC operations.

"Steve Ayscue designed the plan with Geoff Mackler following his lead.''

Ayscue is a high-profile Democratic consultant who runs the CCDC. Mackler is Adler's campaign manager.

Several South Jersey Democratic operatives with direct knowledge of the Adler campaign and CCDC operations spoke to the Courier-Post on condition of anonymity because of what they described as ethical qualms with Adler's campaign.

"From the beginning, orders have flowed from Cherry Hill,'' said one Democratic operative, referring to CCDC headquarters at Garden State Pavilions shopping center off Route 70.

It's not ok for someone in my business to recruit a broker to provide the veneer of competitive alternative quotes, when they are really colluding with me. That stuff leads to federal penitentiaries. But I guess in our democracy, it's not a punishable offense.

Via William Jacobson.

Government imitates fiction

Sunlen Miller reports:

When President Obama sits down for his MTV town hall this Thursday, the audience of young people who will ask him questions will have been gathered by a casting call.

According to the casting call for the event from talent agency Backstage.com, first reported by National Review Online, the company requests applications for the event, asking what issues the person is “passionate about,” requiring a “short description of your political views,” and also asks for a recent photo.

Photo link here.

Quotes of the day

Transparency is a complex phenomenon. Before politicians demand greater “transparency” from hedge funds, they might be well served by reading this paper. It seems that a little transparency can easily be worse than no transparency at all.--aka Alpha Male

If you want to think of the universe as something other than a mathematical object — say, something that is controlled by mathematics, or described by mathematics, as opposed to made of mathematics — then you’re up against the fact that nobody has the slightest idea how to construct a useful physical theory along those lines. It’s not just that science rejects all the alternatives; it’s that no scientist (as far as I know) has even been able to imagine a useful alternative. (Perhaps you can find solace in religion.)--Steve Landsburg

The Kantian idea that you judge everything on good intentions is not absurd, after all it's hard to fault someone for ignorance because in many cases ignorance is not a choice, but rather the effect of circumstance. Yet here, Moore is simply wrong on the facts here. Medical bills did not rise appreciably in 2007-08. The only evidence that medical bills causes foreclosure is that among people who will be interviewed after a foreclosure, if you ask them why, their answers are predictably self serving (every bankrupt company CEO thinks he was 'screwed' by his banker). But still, I imagine many on the left would find that one nice thing about poor places like Gabon and Bangladesh is that there is less economic inequality; if the US were 25% poorer but had no billionaires, it would be preferable. In that case, I guess I just have different preferences than these people.--Eric Falkenstein

As Igor Volsky of ThinkProgress expertly documents -- both by citing to Daschle's book and by interviewing him -- the White House had negotiated away the public option very early in the process (July, 2009), even though Obama and the administration spent months after that assuring their supporters that they were doing everything they could do have a public option in the bill.--Glenn Greenwald

The President uses two aggregate numbers: “about $4 trillion worth of tax cuts” and “more than $700 billion.” In both cases these are 10-year totals. What the President didn’t say is that he and Republicans basically agree on the other $3.1 trillion of “tax cuts,” which I think of as preventing tax increases. If the President thinks that Republicans are irresponsible for proposing $700 B of “tax cuts” that he opposes because of the deficit effect, why is he OK with the other $3.1 trillion of deficit effect?--Keith Hennessey

New data from the I.R.S. and an analysis by the non-partisan Tax Foundation, show the rich are indeed paying a lower share of the nation’s tax burden. But that’s because the rich are losing income. And while their share of the nation’s earnings is falling, their average tax rate is rising.--Robert Frank

The Cuban model doesn't even work for us anymore.--Fidel Castro

So another way of stating China’s rapid growth recipe would be something like the following: Have a succession of crazy autocrats, political chaos, and war savagely repress one of history’s most inventive peoples, along with not allowing one of the most successful trading diasporas in history to operate in China proper. Then have things calm down a bit and have somewhat less crazy rulers allow more of the people’s energy and creativity to burst out. Presto, the change from EXTREME NEGATIVE to LESS NEGATIVE is called a “growth rate,” and it will be high. Now accept worship from around the world.--William Easterly

I and others argue that government spending in WWII—a giant spike in government spending financed by debt—did not create prosperity and economic recovery. It created hardship because you can’t eat bombs, you can’t wear tanks, and you can’t sweeten your coffee with bullets. And Krugman, who is a trained economist with a Nobel Prize argues that we’re wrong. It wasn’t crowding out or a failure of the Keynesian multiplier. The reason we’re wrong is that the US government forced people to get by with less because of a government program called rationing. He appears to be arguing that if it weren’t for rationing, then we would have seen the Keynesian multiplier in all its glory. What the heck is he talking about? Does he think the rationing is what produced scarcity rather then being a response to scarcity? ... The fact that WWII did not stimulate the private sector does not prove that Keynesianism always fails. Maybe a smaller army and fewer tanks would have done the trick. But it certainly does not prove that it was a success. It was not a success. It did not stimulate the private sector. It did not create an extra 50 cents or two dollars on top of the original expenditure as the recipients of government contracts and their workers had more money to spend. It starved the private sector. It was a failure as an example of Keynesian stimulus.--Russ Roberts

The end of Microsoft's dominance for browsers demonstrates that in the long run, vigorous market competition is almost always the best regulator of all, and the consumer's best friend.--Mark Perry

Consistent with their greater expected propensity for risk taking, younger brothers were 10.6 times more likely to attempt the high-risk activity of base stealing and 3.2 times more likely to steal bases successfully (odds ratios). In addition, younger brothers were significantly superior to older brothers in overall batting success, including two measures associated with risk taking.--Personality and Social Psychology Review, November 2010 vol. 14

The government plan to create jobs is finally explained ...

It can be in a variety of ways, by a variety of people. But principally by people and businesses in response to demand for products and services. And the main point about jobs in Connecticut is we can and should create more of them by creative policies. That's the kind of approach that I want to bring to Washington.

It really is a beauty contest:


UPDATE: I was looking for a better version of the video, and found someone beat me to this. Here is the mashup.