Quotes of the day

So even the regulator with the best intentions comes to see issues in much the same way as the corporate officers he deals with every day. You require both an abrasive personality and considerable intellectual curiosity to do the job in any other way. And these are not the qualities often sought, or found, in regulators.--John Kay

... the damage done to the Air Force’s reputation, and indeed to the entire military procurement system, may be longstanding. The people who know this [refueling tanker] contract well believe that military officials are being influenced by members of Congress, who have taken sides in the deal along party lines. Politics has always factored into Pentagon programs, but never on a contract of this size that was already stained by corruption and criminality.--Shane Harris

This brilliant line* revealed many enduring truths about political humor: that the true challenge is to determine the worst thing an opponent might say about and then to find a way to say it about yourself. That in politics, things are only as bad as things you can’t joke about. That jokes that concede the obvious cost little and earn back something valuable in terms of likeability and credibility. And that if these rules are adhered to, that the resulting joke can be as Machiavellian as anything Machiavelli might have schemed up.--Mark Katz

*Jack – Don’t spend one dime more than is necessary. I’ll be damned if I am going to pay for a landslide.--Joe Kennedy, in a fictional telegram to his son

Chart of the day: breakups seasonality

Source here.

I thought you said Kenyan

Is Obama Keynesian?

Via Greg Mankiw.

Quotes of the day

When we win, it's a mandate. When they win, it's some sort of complicated message about bipartisanship and the tricky optics of modern governance.--Megan McArdle

The capital rules the SEC promulgated required firms to maintain specified levels of net liquid assets as a ratio of obligations to customers and creditors. This rule created the need for new capital on Wall Street. As the firms began to grow again, especially in the 1980s, they found it was impossible to raise the required capital through the partnership structure. The only alternative was the public market. That is how Wall Street began the long journey away from partnerships toward publicly held corporations on Wall Street. It wasn’t capitalism—it was the regulation of capitalism that sparked the transformation.--John Carney

Under the label of QE, the Fed will buy long-term government bonds, perhaps one trillion dollars or more, adding an equal amount of cash to the economy and to banks’ excess reserves. Expectation of this has lowered long-term interest rates, depressed the dollar’s international value, bid up the price of commodities and farm land and raised share prices. Like all bubbles, these exaggerated increases can rapidly reverse when interest rates return to normal levels. The greatest danger will then be to leveraged investors, including individuals who bought these assets with borrowed money and banks that hold long-term securities. These risks should be clear after the recent crisis driven by the bursting of asset price bubbles. Although the specific asset prices that are now rising are different from last time, the possibility of damaging declines when bubbles burst is worryingly similar.--Martin Feldstein

So which approach will be more successful: the British one that will sharply reduce government spending and fiscal deficits, or the American one that believes these deficits are necessary, and perhaps even too small, to get this country out of the recession? No one knows for sure about the short run effects on their respective economies of these very different approaches. Perhaps, and this is only a “perhaps” that I am by no means persuaded of, the British approach will cause more short-run harm to employment and GDP than will the American approach. However, I am convinced that the British way is a far better way to improve the long-term growth prospects of an economy. That is, reductions in the bloated levels of government spending and fiscal deficits will do much more to stimulate the longer-term growth of the British economy, mainly by encouraging private investment and innovation, than will the present American approach.--Gary Becker

Using new data from the Bureau of Economic Analysis and considering developments at both the federal and the state and local level, we find that the government purchases multiplicand through the 2nd quarter of 2010 has been only 2 percent of the $862 billion American Recovery and Reinvestment Act (ARRA) of 2009. This increase in government purchases has occurred mainly at the federal level. While states and localities received substantial grants under ARRA, state and local governments have not increased their purchases of goods and services. Instead they reduced borrowing and increased transfer payments. These findings explain why, regardless of the size of a government purchases multiplier, changes in government purchases have had no material effect on the growth of GDP since the time ARRA was enacted. The implication is not that ARRA has been too small, but rather that it failed to increase government consumption expenditures and infrastructure spending as many had predicted from such a large package. A consideration of the counterfactual event that there had not been an ARRA supports the hypothesis that state and local government borrowing would have been higher and purchases would have been about the same in the absence of ARRA.--John F. Cogan and John B. Taylor

House GOP seat predictions, midnight update

Five Thirty Eight is at 245, and Intrade at 243, the first time I've seen Nate Silver predict more seats than Intrade contract traders.

This is a move up of 13 seats by Five Thirty Eight and a move of 5 seats by Intrade since yesterday.

I am calling Intrade the winner. And going to bed. Congrats, prediction markets!

Quotes of the day

Some people use half their ingenuity to go into debt, with the intention of using the other half to avoid paying it.--George Dennison Prentice

We don’t plan to vote for any candidate who first exploited an immigrant for nine years and now wants to deport her.--Bill Easterly

According to some estimates, one in five Facebook employees have ties back to Google, including COO Sheryl Sandberg and CTO Bret Taylor. Google has over 23,331 employees according to company’s recent filings with the Securities and Exchange Commission. Facebook has about 2,000 employees.  Rasmussen explained in his interview that getting things done (GTD) was a big problem at Google, and shutting down his project, Google Wave, a year after it was made available as a beta is a sign it was becoming difficult to get things done at the search giant. ... I don’t think rivals (including upstarts) have the ability to stop Google’s financial steamroller. It will continue to be a dominant force in search and online advertising for years to come. But if it doesn’t reign in its talent problem, the company will have a long-term crisis on its hands. It was exodus of talent and inability to get things done that has brought giants of the past — Yahoo for example — to their knees.--Om Malik

Deer-vehicle accidents resulted in more than $3.8 billion of insurance claims and driver costs in the year ended June 30, according to State Farm Insurance. Such collisions resulted in about 140 human deaths, according to statistics from the National Highway Traffic Safety Administration. Serious stuff. We're not even including the financial and social cost of deer-tick-spread Lyme disease, the expense of hauling away deer carcasses, or the cost in money and time of protecting vegetation and crops from deer predation.--Allan Sloan

Intrade and Nate Silver have both increased their predicted House GOP seats

Since yesterday, Five Thirty Eight is up 1 seat to 233 (as of Nov 1) while Intrade is up 1 seat to 240 right now using 60+ and 65+ midprices.

In presidential election years (e.g. 2008, 2004) we can see some volatility--or greater uncertainty, perhaps due to biased media reporting of early exit polling--in the Intrade futures prices, so I've decided not to print those.  I am not sure if this is as true in non-presidential election years, but I would rely less on today's predictions than yesterday's.

We now see that there are really no Blue States, there are only Blue Cities

That's Bill Easterly.

Quotes of the day

I have chosen only one candidate to bring to your attention, that is Harry Wilson for Comptroller of NY State. He has recently tied incumbent Democratic candidate Thomas DiNapoli in the polls. For those of you who are Democrats, this is not a matter of party politics but literally one of whether we want New York the go the way of Greece and go bankrupt because, trust me, that is the course we are headed towards without sound fiscal leadership.--Dan Loeb

(1) A good king may do bad and stupid things. (2) A bad king may do good and important things. (3) It follows that one should never evaluate the morality of a leader simply on the basis of select good things or bad things they do. Even Hitler restored German confidence and created jobs. Presidents have been known to win wars and keep the economy going while living, sexually speaking, in the gutter.--Don Carson

I'd rather be governed by a wise Turk rather than a foolish Christian--Martin Luther

Many men have, of course, ended up raising children who were not genetically their own, but really, does it matter?--Melanie McDonagh

More evidence that baseball is broken and needs to be fixed

Major League Baseball's showcase event proved no match for the NFL's regular season in the TV ratings on Sunday night.

NBC's broadcast of the New Orleans Saints' win against the Pittsburgh Steelers drew a higher rating (11.8, meaning 11.8% of TV households) than Fox's telecast of the San Francisco Giants' win against the Texans Rangers in Game 4 of the World Series (which drew a 10.4).

A $99 million payroll team is playing a $55 million payroll team in the World Series. The Yankees, Red Sox, and Cubs pay $147 million or more. The lowest payrolls are the Pirates, Padres, and A's. And Texas; their payroll is fourth lowest.

NFL stadiums are full. Most baseball stadiums are near empty. I think it's because baseball is not competitive. If a sport is not competitive, it is not interesting. It's akin to watching C-SPAN all day, at least for me. Baseball can't sell tickets or advertising, so its TV revenues will continue to diminish against a superior entertainment product, with higher athleticism and the drama and tension that comes with better competition in the NFL.

Who is the best coach in football history

according to Randy Moss?



UPDATE: Transcript here.

UPDATE: NFL.com reports that the Minnesota Vikings have waived Randy Moss.

Intrade now predicting that the Democrats will seat less than 51 senators

The main reasons for this deterioration seem to be the Nevada and Illinois races, where Democrats once had the lead and now Republicans are the clear frontrunners.

My hypothesis for these next 24 hours is that Intrade's US Senate majority contracts will trade in line with the abovementioned states, plus Colorado candidates' contracts, which is another tight race.

In the House, Intrade is now predicting that the GOP will seat 238 Representatives, up 3 over the weekend, based on the 60+ and 65+ contracts.  Nate Silver holding firm at 232 seats (as of Oct 31) and predicts the Democrats will retain 52 Senate seats.

UPDATE: Intrade predicting to 239 GOP seats, up another seat in the last 4 hours, as of noontime today.

UPDATE: Please see Justin's comments, which led to a headline correction, and also pointed me at the Washington senate race. Serves me right for not paying close attention.

Quotes of the day

Checked the news, found one of those stories that means little, but still makes you think back and cogitate: all those pieces of magnetic meaning, arrayed for your enjoyment. Yes: Sony has discontinued the original Walkman, the big thick units that played cassette tapes. This is where someone attempts to sound hip by saying “What’s a cassette tape?” as if ignorance of things that preceded your brief tenure on this verdant rock is somehow a mark of distinction. We loved cassettes when they first came out, because they were a portable, compact storage medium. I got my first cassette recorder in 1969 – a Magnavox I wore on a shoulder strap like Spock’s tricorder, and it had a microphone. I took it over to Northport Shopping Center to ask people what they thought of the Apollo program. Probably the last bit of real journalism I ever did.--James Lileks

Quotes of the day: Minnesota Vikings head coach version

What did [Brad Childress] say about Belichick this week? Literally within a 24-hour span, he questioned the officials, he revealed the NFL told him he was right, he threw his quarterback under the bus, and he called out one of the greatest coaches in NFL history this past week, the week before he was playing him. So the man who made all those decisions, is making the decision who he’s going to play at quarterback.  ... You wonder if sometimes now if Randy Moss has to be thinking in his most honest moments if maybe that was a better situation. Not that he wanted to be traded, although he was certainly open to the idea of it. I think he wanted to play with Favre, but again, there’s nothing worse than going through a season where your team is losing and you’re struggling and you’re on the brink. That makes work an unpleasant experience. They’re winning right now in Foxboro, and they’re playing very well. And it’s looking like it’s going to be a very good season.--Adam Schefter

I don't put any stock in [Childress'] reports. They don't know [who will be playing quarterback]. We'll prepare for all the players, the ones that play we'll try to defend. The ones that don't, we won't. It's fairly straight forward. Those are the same media reports that said Terrell Owens wasn't going to play in the Super Bowl. Those are the [reports] that you're talking about?--Bill Belichick

Photo link here.

I can't imagine Bush, Bush, Reagan or Carter doing this

Bill Clinton inserts himself into the middle of the Florida Senate race.

Predicted GOP seats in the House still rising

Nate Silver now predicting 232 seats (as of Oct 27), up one more in just one day.

Intrade holding firm at 235 seats, given the mid-prices of the 55+ and 60+ contracts. Liquidity has also increased and spreads tightening this week.

Poster of the day

Source here.

Cartoon of the day

Source here.

Quotes of the day

The illusions that spur entrepreneurial ventures and consumer daydreams point to the nonmaterial side of markets. Markets not only expand health and comfort, providing a sustaining material existence. They also spur ambition and imagination, the quest for achievement and the pursuit of meaning. They give us an opportunity to exercise our creativity, to enjoy the satisfactions of absorbing, productive work, and to fashion and express our identities.--Virginia Postrel

But while there is a lot of interest in the psychology and neuroscience of markets, there is much less in the psychology and neuroscience of government. Slavisa Tasic, of the University of Kiev, wrote a paper recently for the Istituto Bruno Leoni in Italy about this omission. He argues that market participants are not the only ones who make mistakes, yet he notes drily that "in the mainstream economic literature there is a near complete absence of concern that regulatory design might suffer from lack of competence." Public servants are human, too. Mr. Tasic identifies five mistakes that government regulators often make: action bias, motivated reasoning, the focusing illusion, the affect heuristic and illusions of competence. In the last case, psychologists have shown that we systematically overestimate how much we understand about the causes and mechanisms of things we half understand. The Swedish health economist Hans Rosling once gave students a list of five pairs of countries and asked which nation in each pair had the higher infant-mortality rate. The students got 1.8 right out of 5. Mr. Rosling noted that if he gave the test to chimpanzees they would get 2.5 right. So his students' problem was not ignorance, but that they knew with confidence things that were false. ... If lawmakers are to understand how laws get applied in the real world, they need to know and understand the habits of mind of their officials.--Matt Ridley

The essential Progressive belief that [Ezra] Klein expresses in undiluted form is that crafting public policy through legislation is a topic for which, in simplified terms, the benefits of expertise outweigh the benefits of popular contention. Stated more cautiously, this would be the belief that the institutional rules of the game should be more heavily tilted toward expert opinion on many important topics than they are in the U.S. today. This would be a lot more compelling if the elites didn’t have such a terrible track record of producing social interventions that work. An aeronautical engineer can predict reliably that “If you design a wing like this, then this plane will be airworthy, but if you design it like that, then it will never get in the air.” If you were to build a bunch of airplanes according to each set of specifications, you would discover that he or she is almost always right. This is actual expertise. I’ve tried to point out many times that the vast majority of program interventions fail when subjected to replicated, randomized testing. Our so-called experts in public policy talk a good game, but in the end are no experts at all. They build castles of words, and call it knowledge.--Jim Manzi

Elites are often missing crucial knowledge, and unaware of it. In some ways, that effect is more pronounced than it used to be, with more and more of the elites drawn from a narrow class of extremely well-educated people from a handful of metropolitan areas, few of whom have ever, say, been responsible for a profit and loss statement, or tried to bring a gas station into compliance with local and federal EPA regulations. In a world where your primary output is words, it is easy to imagine a smoothly operating process based on really smart rule-making. And there's a certain impatience with the grimy, self interested folks who complain about the regulations imposed for the good of society--a certain forgetting that in aggregate, those whiners are society. In essence, elites are always missing one vital piece of information: what it is like to be someone who is not in the elite. ... The problem is not that the elites are venal self-interested autocrats out to screw the little guy and give their group more power; the problem is that, like every other group, they tend to understand the costs of programs that restrict their autonomy very well, and to be somewhat less sensitive to the freedom of others. As Anatole France drily put it: "The law in its majestic equality refuses the rich as well as the poor the right to sleep under bridges and to beg for bread."--Megan McArdle

If there were terrorist attacks in this country or elsewhere in the world, all the analysts would be on TV and say, “See? Bin Laden wasn’t that important to the organization.” So it would depend on what would happen, but you’ve posed an interesting idea that if that happened, you could use it as a pivot point to say “Okay, we’ve essentially dismantled and defeated al-Qaeda. They’re not in Afghanistan.” And you could have some sort of significant troop withdrawal. At the same time, the war on the ground is ugly and violent, and we’re losing a lot of troops. You can’t divorce yourself, when you look at this, from the sacrifice and payment some individuals and families are making in this war. The responsibility and price is unevenly distributed. I asked this question of people in Obama’s circle working on this, “What do we owe the people who are over there?” And one of them said, “Everything. They’re our surrogates.” I then asked “What are we giving them? Are we giving them everything?” Of course, the answer is, “No.” Part of what we’re not giving them is the clarity of mission and leadership and focus and commitment. The Obama campaign of 2008, the clarion call, “Yes we can!” We haven’t heard it about these wars.--Bob Woodward

It turns out that early voting mitigates the impact of get-out-the-vote mechanisms, and it also diminishes the impact of "Election Day". Voting used to be a public act of civic engagement, with all sorts of activity focused around election day, from exhortatory news stories to social pressure from the sight of neighbors trudging to the poll. One way to think about it is that voting signals something about you to others in the community, but with the advent of early voting, that signal is no longer so powerful: someone who doesn't turn up on election day might not have voted, or they might simply have gotten it out of the way weeks before.--Megan McArdle

... we should not waste money on the presumption that SEC enforcement actually sniffs out frauds before they blow up. In 2005, Harry Markopolous wrote a 21-page memo to SEC regulators about Bernie Madoff entitled: "The World's Largest Hedge Fund is a Fraud." Nothing happened. The regional SEC office was aware since 1997 that Allen Stanford was likely conducting a Ponzi scheme, but no SEC action took place until 12 years later when his Ponzi scheme was revealed via a lack of funds, costing $8 billion. Too little too late. They might as well admit they are there to attach fines and jail time on the obviously guilty. It is so easy to fool the SEC, they only highlight their obliviousness by suggesting their activity is anything other than post hoc.--Eric Falkenstein

Bernanke is playing something closer to electronic golf. After each practice swing in Wii, the likely distance the ball will travel is shown on the computer screen. The practice swings are the recent policy statements by Fed officials. The reactions of markets (everything from stocks to TIPS spreads) show us the likely effects. Yes, there is a circularity problem here–but at least it gives us a ballpark estimate. And the Fed’s still not swinging hard enough.  Target the forecast! Set monetary policy at a level expected to produce desired growth in AD. We’re still far from that level. I hope Bernanke doesn’t choke under the pressure. I hope he remembers what he told the Japanese a few years back.--Scott Sumner

Here’s what really bothers me about [Joseph] Stiglitz’s article. It’s not that he favors a different monetary policy than I do; it’s that he seems to oppose the Fed having any monetary policy at all. (Hence the connection with those “abolish the Fed” elements within the Tea Party.) I defy anyone to read the article and find any monetary policy being advocated. Indeed I don’t see any evidence that Stiglitz even knows what monetary policy is.--Scott Sumner

Since when is every trade surplus or deficit an "external imbalance" in need of correction? It makes sense for a country that has good investment prospects to import a lot of goods, run trade deficits, and borrow money. Years later, the country puts the resulting products on boats to pay the lenders back. The U.S. borrowed abroad to finance our railroads in the 19th century and ran surpluses when Europe was rebuilding after World War II. Were these "imbalances"? Or consider a country (say, China) with a lot of middle-aged workers who need to save for retirement. It makes perfect sense for them to put stuff on boats and send it to a second country (say, the United States) whose people want to consume the goods. The people in the first country invest their earnings, say, by buying the bonds issued by the second country. And as they retire, they cash in the bonds and buy goods flowing the other way.--John Cochrane

IN FRANCE workers angry about pension reforms have blockaded fuel refineries, causing 4,000 petrol stations to run dry. The Netherlands’ recently elected minority government depends for survival on support from a Muslim-baiting populist. Economies across Europe are struggling to cope with sluggish growth, lacerating budget cuts and the after-effects of borrowing binges. But there is an exception to the gloomy European rule. No big developed country has come out of the global recession looking stronger than Germany has. The economy minister, Rainer Brüderle, boasts of an “XL upswing”. Exports are booming and unemployment is expected to fall to levels last seen in the early 1990s. The government is a stable, though sometimes fractious, coalition of three mainstream parties. The shrillest protest is aimed at a huge new railway project in Stuttgart. Amid the truculence and turmoil around it, Germany appears an oasis of tranquillity.--The Economist

Commercial of the day

Of course, if a lender owned the debt of a deteriorating counterparty, then the lender would lose, too.

UPDATE: Michael Pettis always has profound things to say about China. I'd recommend this and this, to start.