Saturday, October 20, 2007
Friday, October 19, 2007
Hot tip: Invest in "Disaster Capitalism." This new investment sector is the core of the emerging "new economy" that generates profits by feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, market crashes and all kinds of economic, financial and political disasters.
In this Orwellian future, everything must be seen with new eyes: "Disasters" are "IPOs," opportunities to buy into a new "company." Corporations like Lockheed-Martin are the real "emerging nations" of the world, not some dinky countries. They generate huge profits, grow earnings. And seen through the new rose-colored glasses of "Disaster Capitalism" they are hot investment opportunities.
To more fully grasp this new economy, you must read what may be the most important book on economics in the 21st century, Naomi Klein's "The Shock Doctrine: The Rise of Disaster Capitalism" ...
Another. By Joe Stiglitz. He must be in love, because he certainly doesn't actually review the book. Why give her a pass like that? Say it ain't so, Joe!
Excerpt: Klein is not an academic and cannot be judged as one.
I think Prof. Stiglitz means that this idiotic book cannot be criticized for misusing evidence, or ignoring logic. I disagree, actually: evidence and logic are also useful in arguments made outside the academy.
Here's the thing: essentially every example she gives, EVERY example, shares one thing: They are all bad actions by government. This is a critique of capitalism...how?
Milton Friedman, and the Chicago School, and Buchanan/Tullock and the Public Choice school, share on very important tenet, one core belief. And that is that powerful governments will be dominated by powerful economic interests. Interest groups capture regulatory agencies, and financial interests come to control money supply growth and bailouts.... BUT ONLY IF: (and that's a big "if")
ONLY IF the government tries to micro-regulate firms, and if the government tries to control the money supply and offer risk buyouts like FDIC and "too big to fail" safety nets. It's the solution that's the problem. If government doesn't try to manage money supply growth, then financial interests can't bribe the government to control money to their advantage.
All of the problems in "Not Dr." Klein's book are of a piece: government goes to war, government uses tsunami to redistribute property, etc. It is the conceit that government can do good that leads to us giving it too much power. And, a government powerful enough to give Naomi Klein everything she wants is powerful enough to take everything she has.
The Federal Reserve does not conduct monetary policy to influence stock prices, regardless of whether the stock market is rising or falling. The Fed does, however, try to create the macroeconomic stability needed to achieve its mandates -- and this is where Mr. Taylor's work comes in. Over the past couple of decades, the FOMC's interest-rate behavior has been replicated closely by a forward- looking Taylor Rule, developed by my Dallas Fed colleague Evan Koenig.
Now Evan Koenig is a good guy, and I don't have any beef with him, and maybe there is some kind of verision of a Taylor rule that the Fed could be said to be following (I couldn't find any articles with Taylor Rule in the title on Koenig's vita), but the Fed has never announced or committed to following a Taylor Rule, and certainly they don't always/often follow Taylor's version of the Taylor Rule.
I've used this graph before, but here is the Fed funds rate under Alan Greenspan from 2001-2005 compared to the ideal rate setting from the classic Taylor Rule:
I don't see much chance that using forward looking variables can rescue this performance. In any event, Mr. Rosenblum offers us nothing other than his indignation as proof. No references, no graphs, no data.
He does emphatically tell us to shut up about moral hazard though:
So let's stop the complaints about moral hazard and the "Bernanke put." Who wants to be the first to volunteer to live in a world like the first quarter of the Fed's post-World War I history, when the economy was in recession over 40% of the time?
In other words: stop complaining, at least we are better than we used to be!
Maybe Mr. Rosenblum is actually lobbying for the position of postmaster-general.
Some minor points:
1. I like to ride Amtrak. Given a choice, I would say that Amtrak should be privatized. When in DC, I ride the Metro. That doesn't mean I think the Metro
should have been built, at an enormous cost to taxpayers. I don't see that boycotting any of the things provided by the state, against my will, make me better off.
2. My hair is NOT dyed. It has not been colored in any way, not since 2005 (I got some highlights then, at my wife's suggestion). The story on the hair: My wife had a severe bout with cancer in summer 2004. Five operations. We spent a lot of time around women with no hair, because of chemo and other rough treatments. I resolved to grow my hair out, to donate it to Locks of Love. It is nearly long enough to donate now. I look forward to getting rid of it. My preference has always been for short hair. Since clearly no woman would find my hair attractive, I assume that the writer (and his fascination with my hair) reflects some sort of homosexual-denial anger. It's okay that you are gay, pumpkin. Just come out and admit it to yourself. You'll be happier.
3. Some students don't like having to think. They prefer to have lectures read to them, instead of thinking. Those students should not take my classes. The idea that "prepared" means having the professor read lecture notes is rather silly.
(Thanks to alert reader TR. You didn't need to be quite so GLEEFUL, though)
Mr. Leavitt, Woody Hayes is dead and gone and your program ain't gonna last with these kinds of shenanigans. You got your 15 minutes and decided to act like you had rabies. Kudos, sir
Thursday, October 18, 2007
1. Scandinavian countries get a great reputation for providing a high standard of living alongside big government programs to redistribute wealth. I am sure they didn't invent a free lunch up there so what part of the story am I missing?
Maybe *I* am missing something. But here are my answers.
I. Sweden has created this lovely mindset.
II. If you look at Scandinavian communities in the U.S., their standard of living is higher, their level of health care is higher, and they have far more freedom. In fact, there are more Norwegians (2nd, 3rd, 11th generation) in the U.S. than there are in...NORWAY! The only way to compare Northern Europe to the U.S., and have Northern Europe win, is to compare to the ENTIRE U.S. Yes, the U.S. has populations (native Americans, African Americans, Latino immigrants, and so on) whose economic well-being, and health care, is not as good as in Northern Europe. But the native Americans had all their property stolen, and subjected to collective property rights, which destroyed their economic well-being. African Americans were enslaved, and then subjected to Jim Crow and discrimination until...well, still. And Latino immigrants moved to the U.S., not to....well, not to Scandinavia. They don't want to have to wait two years for an emergency appendectomy.
In short, the Northern European solution involves:
a. Keep out the poor people
b. Send lots of your poor people to the U.S., where by the way they become rich and prosperous.
c. Rely on a cultural ethic of working hard, even if lazy people take advantage of you.
(a) is still working pretty well. (c) is falling apart.
2. Ohh and on the socialized medicine thing. If i am paying for your health care through transfer payments all of a sudden I become real concerned with your choices in life and anything that could lead to chronic health problems like diabetes. No one wants to live in a country where people are constantly pissed at you for not hitting the gym and having in-vitro pregnancy induced. Just a thought
It is interesting, isn't it. If we collectivize costs, by having a social safety net, suddenly most of my choices have externalities associated with them. My big fat ass is likely to cost you higher medical bills, because I rely on you, the working guy, to pay my health insurance.
But then of course you are going to want my big fat ass to get thinner.
In twenty five years: It's six a.m. An alarm goes off, in Norman, OK. Sleepy, but extremely fit, people climb down the stairs of their high density apartment blocks. They move to the middle of the streets, which have been blocked off to traffic. (The traffic is only buses nowadays, running on solar cells. The EPA has outlawed fuel cell cars, because some people got wet from second hand water vapor exhaust).
The folks in the street get into the ready position. THe ubergruppenhealthfuhrer blows her whistle and says, "250 pushups, all of you! You must be healthy, for the common good! DOWN! UP! DOWN! UP!"
When you think about it, sending out an email is the opposite of
improving communication one on one.
Anyway, my friend Miki got one of those emails, and took exception.
But you know what people? He was wrong wrong wrong.
It's that kind of thinking that gets brilliant economists making an absolute black and white case for Free Trade when they know it's not correct because they don't want to give aid and comfort to the "enemy".
It's that kind of thinking that gets people arguing that the Bush tax cuts have paid for themselves, when it's clear that the Laffer Curve argument does not apply to the current US situation, because they want a smaller government.
On the other end of the spectrum, it's that kind of thinking that gets people spinning out doomsday scenarios about global warming well in advance of any science because people need to be mobilized.
It's that kind of thinking that makes people claim that Bush is "denying insurance to poor children" by vetoing a larger increase in coverage than he was willing to accept because they believe in the social justice of government single payer health care.
What I don't get is why these people can't see that their rabid extremism makes their arguments totally non-credible. Nothing makes me dig in my heels more than a sanctimonious, shrill, know it all.
I'll close this sermonette by echoing my main man, Isaiah, "Come and let us reason together".
Can I get a Amen?
Wednesday, October 17, 2007
in the market for child care
Journal of Population Economics, October 2007, Pages 743-78
(older version, SSRN)
This paper tests adverse selection in the market for child care. A unique
data set containing quality measures of various characteristics of child
care provided by 746 rooms in 400 centers, as well as the evaluation of the
same attributes by 3,490 affiliated consumers (parents) in the U.S., is
employed. Comparisons of consumer evaluations of quality to actual quality
show that after adjusting for scale effects, parents are weakly rational.
The hypothesis of strong rationality is rejected, indicating that parents do
not utilize all available information in forming their assessment of
quality. The results demonstrate the existence of information asymmetry and
adverse selection in the market, which provide an explanation for low
average quality in the U.S. child care market.
So, a question: I can see the lemons thing. Pedophiles will work in day care centers more cheaply than the rest of us. Lazy people will take jobs as day care
providers, because it seems easy. Something like that.
But, parents are desperate for high quality, low cost day care. Why aren't there more chains? Reputation should solve this problem, at least in part. CarMax has largely solved the problem in used cars. Of course, CarMax doesn't just rely on reputation; they also offer a very good warrantee.
(Big nod ups to KL)
Bottom line: Firms that do NOT patent their technologies innovate faster, and are actually more profitable.
Causal, or just correlation?
(Nod to BR, who knows stuff)
Tuesday, October 16, 2007
But now NY is laying claim to a strange property right: WE OWN YOUR GARBAGE!
In this story in the Times (garbage of another kind entirely) we learn how it works.
“While the theft of recyclables may seem like a harmless offense, this activity seriously damages the city’s recycling program,” (NYC Mayor) Bloomberg said when he signed the law on Tuesday. With each theft, the city loses income from the sale of its own recyclables.
...The problem, sanitation officials said, was reflected in a steep decline in the amount of recyclables that were picked up from some of the city’s wealthiest and most densely populated blocks in a 12-month period that ended in July.
In parts of the Upper East Side, the officials said, the tonnage of bundled paper that was collected plunged 25 percent — compared with 2 percent citywide — and not because residents discarded less of it or became less responsible about separating recyclables from their other trash. Instead, a lucrative underground market has emerged.
Scrap metal, like the bed frame taken by Mr. Bosque, can be sold for up to $250 a ton, five times the price of a decade ago, according to a widely recognized index of commodity prices published by Waste News, a trade publication. Bundled paper or cardboard, the most commonly stolen of New York’s recyclables, can bring in $90 to $120 a ton, more than double what the city receives under long-term contracts with its own brokers and processors.
That means someone can quickly fill a van in Manhattan, drive to Brooklyn, Queens or the Bronx, and sell the loot to one of several brokers. After that, most of the paper and metal ends up in China, Vietnam, India and other developing nations where demand for recyclables has soared.
“There has always been a fair amount of scavenging in the U.S., but the increase in demand from abroad has been dramatic,” said Ted Siegler, an economist and consultant based in Vermont who has analyzed recycling around the world.
He said a piece of scrap metal taken from a Manhattan curb might end up in a steel mill furnace in Asia.
1. Suppose I write a contract with a recycling broker, who can get twice as much as the city will pay for this material. Do I own my own garbage? Can I sell my old bed frame on Ebay, for $4, instead of giving it to the city? Is New York going to change the sign on the Statue of Liberty to "Give me your poor, your tired, your recyclables!" Do I *owe* the city all my garbage, as a kind of tax?
2. The city is complaining because it has less garbage to pick up. In fact, people are "stealing" the garbage. I have a proposed solution. Stop collecting the garbage, and let people come in from New Jersey with vans and take ALL of it. Then you won't have to have all those $120,000 per year garbagemen on the city payroll.
3. At what point does the property right to the garbage get transferred to the city? Suppose I decide it is cheaper, for me, to sell my used paper to a broker. Do I owe the revenue to the city? How is that different from having an entrepreneur take the paper I have given away by putting it on the curb?
(Nod to Watercrosser Man)
Check them out here and here.
I am proud/embarrased to say that I scored "devilishly devious" on the first quiz and "prince of darkness" on the second.
Personally, I like this award in that the three recipients are super-smart, well published, well cited, not overtly political dudes. However, there has also been a lot of back and forth about whether this was a pro or anti "market" prize.
I had Jim Little, a Minnesota PdD and student of Hurwicz, for Micro II in grad school and we were taught Hurwicz as a cautionary tale for designers, like an Arrow impossibility theorem for mechanism design. If memory serves, he proved that there cannot be a decentralized incentive compatible mechanism that doesn't waste resources. So I guess that would be pro-market, no?
Also, a lot of the explanation of mechanism design has centered on the properties of the second price auction. Again, if memory serves (and like the (in)famous T2, I only know what I learned in school (and I wasn't paying all that much attention)), the second price auction wasn't invented by mechanism design theorists, and it doesn't escape Hurwicz's theorem either. While auction theory has shown a lot of progess, the use of mechanism design for tax problems and public goods problems, in my opinion at least, has not made a lot of progress. That is perhaps what Tyler meant when he said this kind of work was falling out of fashion.
In other words, we've recently had prizes for auction theory (Vickrey and his second price style auctions) and game theory so to me the distinctiveness of the mechanism design field is its application to taxation and public goods provision where it's not working all that well.
But then again, I'm just an empirical macro/development/political economy guy from Oklahoma!
Monday, October 15, 2007
Don't watch it all; the first 30 seconds will be enough. Though, you may
want to watch more to see the graphics. This fellow actually spent time on this.
A comment on the video, from YouTube:
OMG. You have over 3,000 subscribers most of whom are under the age of 18. Please, for their sake, stop propagating this absolute nonsense!!! You clearly know nothing about how the Federal Reserve or the American monetary system works - please don't speculate as if stating truths.
And THAT is the thing. 3000 subscribers.
We are dead. There is no hope.
T2 has 3,000 subscribers. This one video has been viewed more than 4,000 times.
"What I keep coming back to is we're in the Big 12, and it's a tough conference," Mr. Pickens said. "I want us to be competitive. How it impacts me? My name's on the stadium.
"I don't know what else they could do. I guess they could put it on each one of the seats."So far not so good: the 'Pokes are 4-3 so far this year and their recent victory against Nebraska induced that august institution to fire its athletic director, even though they had just just given him a new 5 year contract over the summer. I guess it's still not cool to lose to OSU, where's that checkbook T Boone??
Update: grammar edit at 10:44 pm
A host of mobile phone masts testifies to the telecommunications revolution which has taken place despite the absence of any functioning national government since 1991.
And, that's from the BBC, mind you. Gushing.
Note that the claim is NOT that the government is taking a laissez-faire approach
to telecom regulation.
No, the "government" paid the haul-ass fare to get out of town in 1991, and there
hasn't been a government since.
Now I am not a fan of the whole "look at Somalia, they are doing fine without a government" movement, because they really aren't. Armed gangs of thugs are dangerous, and need to be controlled, regardless of whether they are Somalis in "technicals", or Durham police in black and whites. In both cases, you need a state to step in.
But it is true that governments are at least unnecessary, and possibly a hinderance, to the functioning of many kinds of markets.
(Nod to MAG)
Sunday, October 14, 2007
Did you know that Oklahoma City is becoming the rowing mecca of the USA? It's in the NY Times, so it must be true.
We made ourselves a river, an entertainment and shopping district sprung up around it, and a displaced east coast rowing enthusiast waged virtually a one man campaign to have a rowing course included in the development.
Mike Knopp spent enough time walking through weeds and biking through a dried-up drainage ditch to come to a startling conclusion: What a perfect spot for a rowing course. The only thing missing was water. That same spot, now a controlled waterway stretching along the southern edge of downtown Oklahoma City, was host to an exhibition event last week featuring Olympic-caliber rowers from around the world. Only a few years ago, the river existed only in Knopp’s imagination.
Fewer than three years after the river was dedicated, Oklahoma City is quickly becoming a hub for Olympic-style water sports. Beyond the USA Rowing World Challenge this week, the Oklahoma River has been chosen to play host to the Olympic trials for canoeing and kayaking next spring. “We have gone from the Dust Bowl to the River City,” said Pat Downes, the economic development director for the Oklahoma City Riverfront Redevelopment Authority. “We have gone from mowing to rowing on the river, and all in a very short period of time.”Oklahoma City’s ascension in the rowing world has been so quick because of that old real estate adage: location, location, location. The course is south of downtown and the Bricktown entertainment district, making it friendly for spectators, sponsors and the news media. Unlike in Europe, where elite rowers and kayakers routinely draw 30,000 or more fans at world-class events, there are relatively few urban settings in the United States that can provide the same atmosphere. “Anywhere that our athletes go where there’s more people, more excitement, more enthusiasm, that’s better,” said David Yarborough, the executive director of the United States association for canoeing and kayaking. In its third year, the Head of the Oklahoma Regatta, held by Oklahoma City University, drew 30,000 spectators last year and will be a part of the festivities this weekend, including exhibitions featuring teams from the United States, Australia, Canada, the Czech Republic, Georgia, Switzerland and Moldova.
I guess I'll have to make do with this until we get the Sonics!!
In the series so far, Manny has 3 hits, 4 walks and 6 runs "batted" in. He's their daddy for sure.