Sunday morning at the woodshed

Wow. Lant Pritchett absolutely eviscerates the Obama administration over their pick for World Bank President.

Here are some of the salty bits:

“It’s an embarrassment to the U.S. You cannot with a straight face say this person is the most qualified to lead the World Bank.”

and:

Adds Pritchett, nominating Kim “is like picking the short stop for the New York Yankees out of the scrub leagues.”

Finally:

“there’s no question that Kim has done terrific things, but I wouldn’t nominate Mother Teresa to head the World Bank if she were still alive.”

I personally think that the World Bank's composite scorecard is way over par (during its existence, on balance, it's done more harm than good) and favor abolition.

But I don't think the main problem has been choice of leadership.

As Mallaby's superb book "The World's Banker" makes clear, WB Presidents cannot make the behemoth bank bureaucracy march to their own tune.

The problem is institutional, the problem is conceptual, the problem is philosophical. The WB is one of the last bastions of central planning, and it functions about as well as other such bastions have functioned.

Amanecer sobre Santiago

What would YOU do?

Armored truck driving on highway, back door unlatched.

Money spills out, swirling around in the air.

What would YOU do?

A lot of people stopped, dropped, and grabbed.

I would have driven on, but I'm not sure my reason is morally admirable. I would have assumed that the amount of money I might expect to grab was not worth the twin risks of (a) getting hit by a speeding car and (b) getting arrested for stealing cash.

Nod to the LMM.

Mungowitz drops the ball

Perhaps due to his Pisco intake, or his fear of being caught up in an similar situation in South America, my esteemed co-blogger really buried the lede yesterday in his short note about UNC professor Paul Frampton.

I rise this morning to revise and extend my colleague's remarks.

This January, Frampton was arrested in Buenos Aires for boarding a plane with a suitcase containing a fair amount of Bolivian marching powder. He claims innocence and I believe him because, judging by his statements in this article, his drug of choice is LSD (that is to say, homie be trippin').

First off, he appears to believe he is working somewhere other than where he is working:

“The university has done nothing, absolutely nothing, to help me,” he said. “You would expect a university of that caliber would do everything possible to get me out of prison.”

He also has a theory of why mighty UNC is not helping; the provost is too jealous to do his duty!

Carney had long been jealous, he said, because Frampton had earned tenure much more quickly and because Carney’s academic accomplishments were paltry compared to his own.


 “I am one of the most published physicists, and really he hasn’t done much that is of interest,” Frampton said, Carney had taken advantage of Frampton’s helpless position to stop his pay and hinder any notion of the university helping him.

The university has put him on a leave of absence and stopped paying him because he's not teaching his class.

 But Frampton says that this is unfair because the class was already being cancelled due to low enrollment (1 student signed up and 5 is the minimum class size)!

 Wow!

There is one part of the story that does make me thing Frampton may be guilty (remember he's been in jail since January 23rd:


Frampton said he was actually working more than 40 hours a week in prison, and had already written four scholarly papers this year.

FOCUS: UNC

A Friday Focus Feature, on the University of North Carolina. We'll go from the locally messed up to the internationally messed up.

Local bizarrity: So, the EYM has a nice bike. Locked it up, near the Pit, 11 am. Comes back at 2 pm, both wheels have been stolen, and (this is the cool part) a "new" heavy duty lock has been added. So now the bike is locked twice, once with the EYM's lock and once with a lock placed there by .... who? The thief. Presumably so the thief can come back at leisure and finish the job by cutting the EYM's lock off and taking the frame. The EYM calls the local five-oh, who helpfully say (1) he cannot cut the alien lock off, because they are "not sure" it's his bike. (2) they will allow him to cut it off in a "few days" (not clear how many, or what the criteria for this decision are). Of course, this means he has no way of guarding the bike. After the thieves come back and take it, I suppose the five-oh will say, "What bike? There's no bike here? What are you complaining about?"

State/National bizarrity: Herman Cain continues to campaign, though it is not clear for what. Mr. Cain made an appearance at UNC Chapel Hill on Thursday. He was quoted as saying: “Look at me, I grew up in Atlanta, Ga., in the ’50s and ’60s, during the times when this nation had segregation and Jim Crow,” Cain said. “And today, not only was I able to run for president of the United States of America, I have a bus out there with my picture on it.” So there you have it: the civil rights movement, at its core, was a fight for the right to have a bus with your picture on it.

International bizarrity I: Frampton comes apart. Physics prof gets arrested for cocaine smuggling (two kilograms!) in Argentina, offers the defense of "professional jealousy." Yep, those snooty Argentine cops are famously upset if you have more journal articles than they have.

International bizarrity II: UNC student (and then student President) Eve Carson was murdered during a robbery a few years ago. But she lives on.... as a photo used to advertise how safe and fun it is to go to university in the US! Yes, kids in India see this:

Apparently the company has apologized, and removed the ads. Still, when you steal some photo off the internet to use for advertising foreign colleges, you should make sure the subject was not a murdered foreign college student.

Climate change, fossil fuel use, and public opinion

Do alternative energy sources displace fossil fuels?

Richard York, Nature Climate Change, forthcoming

Abstract: A fundamental, generally implicit, assumption of the Inter-governmental Panel on Climate Change reports and many energy analysts is that each unit of energy supplied by non-fossil-fuel sources takes the place of a unit of energy supplied by fossil-fuel sources. However, owing to the complexity of economic systems and human behaviour, it is often the case that changes aimed at reducing one type of resource consumption, either through improvements in efficiency of use or by developing substitutes, do not lead to the intended outcome when net effects are considered. Here, I show that the average pattern across most nations of the world over the past fifty years is one where each unit of total national energy use from non-fossil-fuel sources displaced less than one-quarter of a unit of fossil-fuel energy use and, focusing specifically on electricity, each unit of electricity generated by non-fossil-fuel sources displaced less than one-tenth of a unit of fossil-fuel-generated electricity. These results challenge conventional thinking in that they indicate that suppressing the use of fossil fuel will require changes other than simply technical ones such as expanding non-fossil-fuel energy production.

----------------------

Declining public concern about climate change: Can we blame the great recession?

Lyle Scruggs & Salil Benegal, Global Environmental Change, forthcoming

Abstract: Social surveys suggest that the American public's concern about climate change has declined dramatically since 2008. This has led to a search for explanations for this decline, and great deal of speculation that there has been a fundamental shift in public trust in climate science. We evaluate over thirty years of public opinion data about global warming and the environment, and suggest that the decline in belief about climate change is most likely driven by the economic insecurity caused by the Great Recession. Evidence from European nations further supports an economic explanation for changing public opinion. The pattern is consistent with more than forty years of public opinion about environmental policy. Popular alternative explanations for declining support – partisan politicization, biased media coverage, fluctuations in short-term weather conditions – are unable to explain the suddenness and timing of opinion trends. The implication of these findings is that the “crisis of confidence” in climate change will likely rebound after labor market conditions improve, but not until then.

Nod to Kevin Lewis

Links

Some links. No theme, no unifying idea, just some links.

The myth of the myth of the independent voter

A parade of idiots. You want to stop watching, but...

Street scenes from Santiago

This week's random and spurious medical correlation: red meat reduces depression

Making fun of rednecks is fine, but not welfare recipients? Then a silly response to same. Fox with its own strange interpretation. And Bill Maher finding it funny to laugh at poor people, rather selectively given his later indignation.

Mission accomplished

One of the (few) nerve-wracking parts of my job is placing students. This year, we had two PhD students in development on the market. Mrs. A advised one and I advised the other. They both got 20+ interviews at the AEA (the national economics conference and job market) meetings and 6 campus visits out of those interviews. Now, both have accepted tenure track jobs with decent salaries and teaching loads and good support for travel and research.

We try to make sure our students have teaching experience and (ideally) a publication before going on the market. We run multiple practice interviews for them before the AEA meetings and practice job talks before their campus visits.

Even though the ultimate burden is on the student, I always feel pretty squirmy until they get a job. I am barely comfortable being responsible for myself, let alone someone else's career.

Now I can sink back to my normal level of apathetic lethargy.

US Gov Does Not Read This Blog, Apparently

I thought we had covered this. Suppose you think: (a) saving environment through green energy is very important, so we need to use it as much as possible, and (b) solar power is an efficient and valuable technology.

Then why-O-why would you put tariffs on cheap solar panels?

Answer: This is not an environmental policy at all. It is an industrial policy (thinly) disguised as an environmental policy. We have decided that US corporations need to receive lots of extra dollars from consumers, and from taxpayers, so they will have enough cash to contribute to the Obama reelection campaign.

Now, I happen not to believe (a) works very well, and I know for a fact that (b) is false. But I am trying to accept the premises of the other side: EVEN IF you believe those two things, this policy makes no sense.

Nod to Anonyman

Shout it from the rooftops!

Simply fantastic essay in The Atlantic by Teju Cole. A must read.

Here's a nice bit:

Joseph Kony is no longer in Uganda and he is no longer the threat he was, but he is a convenient villain for those who need a convenient villain. What Africa needs more pressingly than Kony's indictment is more equitable civil society, more robust democracy, and a fairer system of justice. This is the scaffolding from which infrastructure, security, healthcare, and education can be built. How do we encourage voices like those of the Nigerian masses who marched this January, or those who are engaged in the struggle to develop Ugandan democracy?

Hat tip to Bill Easterly

Community Radio Stations Run by the Federal Government

This has got to be a parody, right? No one can be so deluded as to believe that "community" radio stations run by the federal government, and a huge new cadre of thought police, is a good idea.

Can they? Excerpt:

Instead of slowly grinding down thousands of repeater station applications that leave no room for community radio, the FCC essentially threw most of those applications away by limiting who can apply, how many filings a single entity can make, and which markets can consider new repeaters — all of which frees up the regulatory body to examine applications for new community stations. The regulatory agency still gave some deference to corporate broadcasters, however, by allowing them one shot at revising their applications to fit the new guidelines.

That means “as early as this fall, as in 2012, there will be opportunities for local community groups to plan and start their own independent radio stations,” Doyle said. “This is what we’ve fought for [over] more than a decade, and the FCC has opened the door to that.”

While there aren’t any official numbers yet, several “radio geeks” who spoke to Raw Story off the record estimated that as many as 10,000 applications for community radio stations could be filed in the coming years.

Prometheus activists and local radio affiliates all over the country played a dramatic role in helping shape media coverage of the “Occupy” movement last year, providing a sharp contrast to the often detached approach taken by mainstream, corporate sources. Their influence was broad enough to remind many listeners that community radio — an otherwise rare commodity in the U.S. — is often the dissenter’s best friend.

Though the FCC’s decision may not sound all that important, it really is. For the first time in decades, Americans living in major cities will soon be hearing the voices of their friends and neighbors flooding the airwaves — a far cry from the typical morning DJ fart jokes and the same “top hit” songs endlessly droning on a looping playback.

I agree that radio sucks. But it sucks because most people want to listen to something that sucks. All the efforts to put sensitive people on the air have failed because no one wants to listen to that crap.

Sensitive people already have NPR and MSNBC to congratulate them on how sensitive they are. Rush Limbaugh, whatever you think of him, SAVED a.m. radio. It would be dead as a medium by now unless conservative talk shows had risen up to save it. And it will be dead once the government decides to create a state-run media. The economies of scale in producing content are just too large. There is no chance of small, local groups producing anything.

Then, when a.m. radio does die, our government will blame it on changing technology, not on crushing regulatory restrictions.

The House of the Rising Sun--Tesla

Apropos of nothing, I predict that reactions to this video will divide largely along gender lines. Women will mostly think, "That's pretty stupid." And men will mostly think, "Where can I get one? And can I use it as a combination stereo/security system?"

Truly Massive Solar Fail

Turns out solar power is not profitable, and in fact it's a big money loser.

The only reason it was ever profitable was truly massive subsidies. Now, just cutbacks, not elimination, just cutbacks, on the subsidies will spell the end of the solar industry in Europe. It was in all the papers.

If an activity is profitable, it produces more in value than it uses up in costs. If an activity is NOT profitable, it uses up more in resources than it produces in value.

If the only reason an activity is profitable is artificial subsidies, financed by money taken from taxpayers at gunpoint, against their will, then the "positive profits" signal is fake, and the activity still uses up more resources than it produces in value.

Finally, any activity, no matter how wasteful, can be made "profitable" with large enough subsidies.

People could have bought solar panels on their own, voluntarily, if it made economic sense to do so. Why would being forced to buy solar panels makes sense? And, if the government takes away huge amounts of my income, and lets me have some of it back if I purchase an extremely wasteful technology, in what way is that a voluntary transaction?

The solar "industry" is composed largely of rent-seekers and brigands, combined with enough genuinely committed (though mistaken) true believers to give the whole noisome mess moral cover. The thing that's hard to understand is why anyone would believe that a technology that uses up more resources than it produces is "environmentally friendly."

The cure is worse than the disease

What do you do when you find 10 human heads? Send 12 policemen to look for the bodies.

What do you do when those 12 policemen are murdered?.............

Legalize drugs?

It is amazing what damage the US anti-drug policy is having in other countries. According to the linked article, over 47,000 people have died in drug violence in Mexico during the sexenio of Felipe Calderon.

Our drug laws are responsible for a horrible toll of carnage and disfunction in Latin America.

St. Paddy's Day: Round Up Your Mates!

Warning:  NSFS*



*Extremely insensitive. Not Safe For the Sensitive

Support for Green Power Slipping

NYTimes poll finds support for green power slipping, in some cases falling sharply.

Got an email accusing me (!), and "people like me"(!!) for causing this.  Ma'am, I doubt that.

Nod to Anonyman.

Concha y Toro, and the Balcony of Pleasantness

It's vegetarian night at the corner of La Gloria and Apoquindo.

Bought a big wad of espinaca, remembering the rule that "one pound of spinach cooks down to exactly nothing." Loaded it with garlic, bean sprouts, and spices, and cooked it up. Had some nice farmer's cheese and brown bread, and ate my dinner....

...while having some Concha y Toro carmenere, and looking out from the balcony. The CyT is hardly a great wine, but then here in Santiago it only costs $3.20....for a 1.5 LITERs.

When you add it to this view, and the 78 degree dry evening air, with a breeze...well, to quote Jimmy Buffet: "I was in love! With the whole world! Animate, inanimate, cone head, no cone, it don't matter."

Swap meet

Ah, Italy. When it rains, it pours. The Italian government recently paid a few billion euros to Morgan Stanley to unwind some interest rate swap positions it took in an ill-fated attempt to hedge its borrowing costs.

The excellent SoberLook has the full story, including the kicker that Italy still has over 150 billion Euros in open positions that are undoubtably "underwater" for them.

As SoberLook pointed out in a much earlier post about Harvard's swap woes, there are cheaper ways to buy insurance against increased funding costs.

Prophets of the KPC?

I've been droning on (and on) about how the Fed has backed themselves into a weird position where if the economy keeps growing decently, they will have to backtrack on one of their two promises.

Promise #1 is 2% inflation. Promise #2 is a doozy: no short term interest rate hikes until the second half of 2014!

Increasingly, others are growing more skeptical of promise #2.

In CNBCs survey of "67 economists and equity and fixed income managers", it found that "nine out of 10 market participants don’t believe the Fed will wait that long. In fact, 54 percent believe the first Fed interest rate hike will come by 2013."

I wonder what The Bernank and crew are thinking? Are they banking on a recession to save their "credibility"? Do they think there is enough weasel room in the wording of promise #2 that they can claim compliance no matter when they raise rates? Do they regret getting pressured into making promise #2?

People, which is more likely to happen, the Fed keeping promise #2 or Congress allowing the planned sequestrations to go through without any changes?

Hat tip to LeBron.

Eyes wide shut

A big trend in economics these days is the Randomized Control Trial (RCT), often referred to by its enthusiasts as the "gold standard" of evidence. An intervention is tested by randomly assigning it across a chosen sample and computing the average treatment effect. An analogy is often made to clinical trials in medicine, but there is (at least) one important difference. Most drug trials are "double blind", where participants do not know if they are in the "control" group or the "treatment" group.  By contrast, most RCTs are not double blind. Participants know what group they are in.

And, as a fascinating new paper points out, this knowledge can produce "pseudo-placebo effects" in RCTs. That is to say, the expectation of receiving the treatment can cause people to modify their behaviors in a way that produces a significant "average treatment effect" even if the actual intervention in not particularly effective.

The paper illustrates the point by undertaking two different RCTs on cowpea seeds in Tanzania. One is a traditional study where the control group knows they are getting traditional seeds and the treatment group knows they are getting modern seeds. The second is double blind; neither group knows what seed it is getting.

The traditional RCT shows a significant  over 20% increase in yields from the modern seed. But the double blind RCT shows that virtually all of that improvement comes from changed behavior, not from any inherent effectiveness of the modern seed.

Specifically, the average treatment effect in the double blind RCT was zero! And when the harvests in the control groups across the two RCTs were compared, the blind control group showed a significant over 20% increase over the traditional RCT control group which knew they were getting the traditional seeds. This is the "pseudo-placebo" effect and it explains the entire average treatment effect in the traditional RCT.

Wow!

In other words, the significant effect found in the traditional RCT was not due to better seeds, it was due to actions taken by the farmers who thought they were getting better seeds (they planted them in larger plots with more space between the plants on better quality land). These farmers' expectations were wrong (in post experiment surveys, over 60% of them said they were disappointed in the yields), and the significant effect in the traditional RCT would not survive over time because the farmers, having adjusted their expectations downward would stop taking the actions that produced the "success".

People, can I get a "YIKES"?

Hat tip to Justin Sandefur.

Santiago de Chile

I'll be in Chile for more than a month. El otoño there in the southern cone.

My sincere thanks to JPC for setting this up.

Tied to the whippin' post

This is a pretty amazing table:

Let's break it down:

1. I guess Mustafa Kemal really did have some influence.

2. Pakistan and Egypt are seriously messed up places.

3. Those numbers do not conform to the pleasant image of Jordan that I have in my head.

Hat tip to Roving Bandit.

David Stern is a TERRIBLE GM

"The way it looks now, the Hornets will have traded their franchise point guard (Chris Paul) for a player who’s leaving (Kaman), a guard who’s played only two games and also could leave in the summer (Eric Gordon), underachieving forward Al-Farouq Aminu and a 2012 first-round pick that might not end up in the lottery.


Imagine how different it would be if NBA commissioner David Stern hadn’t vetoed a trade that would have given the Hornets guard Kevin Martin, forward Luis Scola, forward Lamar Odom and guard Goran Dragic."

~Marc Spears

Excellent Point: US Becoming More Like Russia

So, an excellent point:

"Polls tell us that the teenagers who in the 1990s dreamed of becoming rich in business now aspire to be public servants. Many view public service as a source of fast and easy cash. As long as this incentive exists, purges will be useless — unmasked thieves will only be replaced by others."

Strangely, this claim was made, not in the WS Journal, but in the Washington Post.

Even more strangely, the claim was made by one V. Putin. Who ought to know how profitable public office is. (Note: I changed "oligarchs" to "rich in business," so as not to give it away...)

The layers of hypocrisy here almost cover the long sharp prickles of irony.
The disturbing thing is that in a crony capitalist system, it is the "businessmen" who make the most from "public service." Check this article on Warren Buffet, who has made a fortune by telling President Obama to invest in companies Buffet himself owns.

Excerpt: Consider Warren Buffett. Often seen as a grandfatherly figure above the rough-and-tumble of politics, Buffett appears to be immune to the folly and excess of finance as well. He lives in Omaha, Nebraska, in a house he purchased in 1958 for $31,000. He made a fortune for himself and his investors at the business conglomerate Berkshire Hathaway through the humble-sounding approach of value-based investing. He uses folksy expressions: “You don’t know who’s swimming naked,” he said during the height of the financial crisis, “until the tide goes out.” He frequently takes to the nation’s op-ed pages with populist-sounding arguments, such as his August 2010 plea in The New York Times for the government to stop “coddling” the “super-rich” and start raising their taxes.

But this image does not always reflect reality. Warren Buffett is very much a political entrepreneur; his best investments are often in political relationships. In recent years, Buffett has used taxpayer money as a vehicle to even greater profit and wealth. Indeed, the success of some of his biggest bets and the profitability of some of his largest investments rely on government largesse and “coddling” with taxpayer money.

The US is not in danger of becoming a socialist country like Russia WAS. The US is in danger of becoming a corrupt crony capitalist country like Russia IS. Warren Buffet, oligarch.

Links

Since on Monday, I'll be arriving in Santiago de Chile, and won't be in any shape to post, we'll just have to let Friday's child be full of links.

You are more awesome than a monkey wearing a tuxedo made out [of] bacon riding a cyborg unicorn

Tag Challenge

The quiz Dan Kahneman wants you to fail...

Peyton Manning gets a waiter fired, though it was the waiter's fault.

Sauce for the goose? In retaliation, female legislators try to regulate the gander's sauce, too. (Sorry about the "gander's sauce" thing. Ick.)

All of a sudden, Geithner and co. are Austrians? Markets are hard to regulate, and prices fluctuate because of uncertainty? Are we in bizarro world?

And, in an attempt to get the president to concentrate on being president, instead of just always campaigning:

Click on the image for an even more distracted image...

(Nod to SdM, Anonyman, Kevin Lewis, and the Blonde)

When Irish eyes are smiling

The Irish should love the Greeks. After all, it's got to be nice not being on the bottom of the heap of Euro-countries.

Yet they seem to enjoy screwing with them nonetheless.

Aer Lingus has been making folks with Greek passports take written language tests in Greek before letting them board flights to Ireland.

All good clean fun until they did it to this lady taking a flight from Barcelona to Ireland.

One of the many great parts of the story is that no one at the Aer Lingus desk in Barcelona could read Greek, nor did it appear they had an answer key on the premises.

I think I could have passed the test under those circumstances. Years of teaching econometrics has left me overly familiar with the Greek alphabet.

Hat tip to Mrs. Angus.

You Can Get the Computer to Write Political Science For You

I asked the computer for a randomly generated gibberish sentence in political science. I got this.

The emergence of praxis functions as the conceptual frame for the legitimation of the nation-state.

That's more than a little scary. I'm pretty sure that that was the main argument of Ari Kohen's PhD thesis. Now.... we know.

Heisenberg's links

I'm home today with a nasty bug, here's some links to keep the dream alive:

1. Sanctions on Iran are either working or not working.

2. Dwight Howard is either staying or going.

3. The lawyers are getting restless (the piece is great, the comments are even better)

4. Another economist gets taken to the woodshed.

Don Boudreaux Goes All Boudreaux

A classic "goin' all Boudreaux," from the master of the genre.

The Primaries of Tuesday

My good friend Bill LuMaye is on at 6 am now, and I went down to the studio to provide moral support. And they put it on the radio. Always fun to talk to Bill about politics. Here's 40 minutes of it...

My favorite part is the bit just after 31:45. Gaia, the Earth Mother.

The World Belongs to the Boomer Sooners; The Rest of Us Just LIve here

So, walking in the Crystal City mall, in a deep sub-basement. And come across this extremely frightening doorway:

What fresh hell is this? U of OK has lobbyists in DC? Or, rather, lobbyists hidden deep below the Crystal City Metro? Is this a "Phantom of the Prairie" thing?

Yikes!

NC's Amendment One

In the May primary, NC will also vote on a Constitutional Amendment:

Constitutional amendment to provide that marriage between one man and one woman is the only domestic legal union that shall be valid or recognized in this State.

And my view on the Amendment.

Guilt by association

OK, so my idea of song title book reviews is gonna be slow to catch on.

Well, what about this: If NBA players were musicians?

Let's start with two of my favorite players

James Harden -- Isaac Hayes.  Always cool, never in a hurry. Hot buttered soul.

Russell Westbrook -- Lil Wayne.  Incredible highs, huge variance. always wondering what he'll do next.

Get the idea? Here's a few more:

Rajon Rondo -- Soulja Boy
Kevin Love -- Justin Timberlake
Derrick Rose -- Tupac
Kobe -- Miles Davis
Ricky Rubio -- Bieber (duh!)
Josh Smith -- Chamilionaire
Lebron, Wade & Bosh -- Wu Tang!!

and finally,

Kevin Garnett -- Kenny G.

Got any good ones?

Only in Academia

An MA student at UCSB, Christopher Todd Brown, wrote his thesis and got it approved. After the committee approved it, he added a "Dis-acknowledgements" section which started like this:

"I would like to offer special F**k You's to the following degenerates for of being an ever-present hindrance during my graduate career...."

Only there weren't any ** in there and it continued to rail at some length against various bureaucrats, politicians and institutions with which Chris had beef.

Unsurprisingly, the university refused to accept the thesis in that form, requiring him to drop the ex post additions he'd made.

Somewhat surprisingly, Chris chose to sue instead. And then to appeal when he lost.

And thanks to the internet and Paul Gowder, we get to read about it!

I actually think the student is right. They shouldn't stop you from getting your degree because you let off a little steam in the acknowledgements. My only issue with Chris T. Brown is that he didn't have the onions to let his committee see his handiwork ex-ante, and just tried to weasel it in ex-post.

Winning Bracket

As a special bonus for KPC readers, I am able to reveal the winning bracket for the NCAA tournament.

It's right here.

No, don't thank me, it's all part of the service.

Sentence of the day

People it comes from Joe Stiglitz and it's a doozy:

"If my Cassandra forecast turns out to be wrong, stimulus can be cut."

The source is the FT, but I've already hit my quota there so here's a link from Mark Thoma.


Is he saying there already is stimulus in place now that we have the option of cutting?

Is he implicitly proposing some vague new conditional stimulus?

Is he an expert at putting toothpaste back into the tube?

If you put a stimulus in place and things started going well, wouldn't you shy away from cutting back on the announced stimulus for fear of mucking up the recovery?


UPDATE: this post was edited to remedy my severe lack of reading comprehension this morning. Thanks to Mark Thoma for setting me straight.

Why In the World Hire an "Investment Broker"?

Craig Newmark discovers the answer to one of life's most difficult questions: why would anyone hire an "investment broker"?

Brokers, after all, make people.... broker. They sell products they don't understand to yokels they don't care about.

But, as Craig notes, now there is an answer.

Got a call from an investment broker the other day myself. I made two claims, rather loudly.

1. No one can make predictions about the stock market, or super normal returns in assets, unless they inside information. And if they had same, they would TRADE on that information, borrowing all the money they can scoop up. They wouldn't call an idiot like me and GIVE me the information over the phone.

2. Idiot or not, I went 100% cash and short bonds in August 2007. And went back about 50% into stocks in April 2009. How many of your clients did you advise to do THAT, Mr. Investment Broker?

We didn't talk long after that.

El Mercurio, and News - Observer

In which I go all Boudreaux on news people on two continents.

1. El Mercurio, in Santiago, Chile: Por otra parte, a ocho meses de las presidenciales, esta indecisión republicana podría tener consecuencias. "A medida que Romney avanza hacia la victoria en las primarias, está perdiendo piso en la elección general", advirtió The Washington Post, que resaltó que se le ve "en peor forma en este punto de la campaña" en relación con los últimos aspirantes presidenciales republicanos. Y es que, bajo el argumento de que no ha sido capaz de "noquear" a sus rivales, varios comentaristas han puesto en duda su competitividad ante Obama.

¿Por qué tanta prisa?

Sin embargo, también hay quienes llaman a la calma. "Yo no entiendo por qué los medios dicen que 'Romney no puede cerrar el trato'. Si se compara con 2008, la nominación demócrata no terminó hasta mayo. Romney tiene, en este punto, más delegados de los que tenía Obama en marzo de 2008, pero nadie preguntó entonces '¿por qué Obama no convence al electorado?", indicó Michael Munger, analista de la Duke University.

En términos de estilo, Munger compara el caso de Romney con el del Presidente Sebastián Piñera, "que hace que las cosas funcionen, pero no es muy ideológico". "Esto es una desventaja en las primarias republicanas, donde los extremistas quieren ideología extrema. Pero podría ser una ventaja en la elección general. Quizás tenga problemas para que la gente se entusiasme, pero el desempleo es alto y hay insatisfacción con la actual gestión. Así que podría ser como en Chile, donde Piñera ganó no porque entusiasmara, sino porque a la gente le preocupaba la dirección del país".

Los republicanos vamos a unirnos, porque realmente creemos que Obama debe ser reemplazado.

2. Same theme, letter to News-Observer. Steve Ford must have miss-typed, right? ("Drilling into Democrats' do-over," Jan. 29 column.) He actually said that if Republicans "were comfortable with the current pack of candidates, one would already [be] the nominee-apparent."

In 2008, the Democrats knew nothing about who would be their nominee by January's end. In fact, the primaries of February through April just muddied the waters. Barack Obama was not clearly selected until May. Today, Jan. 31, Mitt Romney is far ahead of Obama in 2008, in terms of elected delegates.

But the Democratic Party showed little "discomfort" in 2008, uniting behind their candidate. Nobody but media types and college professors think primaries should be decided fast and clean. Democracy is messy.

Now you have no excuse

A little over a year ago, I recommended the book "Red Plenty". At that time it was not released in the US (I got it via Amazon UK). Now it's out in paperback and kindle at the "regular" Amazon store.

Here is a recent review from the NY Times.

The book is amazing. Check it out, people.

Good but not great

BLS reports that non-farm jobs increased by 227,000 in February and January's number was revised upward from plus 243,000 to 284,000.

The unemployment rate was unchanged at 8.3%

These are decent numbers, but, at this pace, a "normal" overall unemployment rate of say 6% is still a spec on the far horizon.

Among people 25 and older, those with less than a high school diploma have a 12.9% unemployment rate, those with a BA or greater have a 4.2% unemployment rate.

Of course these are average numbers, not marginal, and should not be used for any wagering!

Unicorns & Rainbows

Ezra Klein has identified why the government didn't "fix" the great recession; Politics:

The compromise was clean and obvious: Investments and tax cuts now, coupled with a much-larger deficit reduction package that would kick in once unemployment fell below, say, 7 percent. 


 What doomed this package wasn’t a theoretical divide. I spoke with many freshwater economists who thought a package like this would be sensible. Rather, it was politics wot (sic) done it. 

 This type of storyline refuses to recognize the simple brutal fact that current politicians cannot commit future politicians to a specific course of action. The proposed "package" was simply not credible because the back loaded pain is unenforceable.

Advocates of deficit reduction (I'm not saying that it's the right policy) could clearly see that the only policy that would actually happen for sure was a big increase in the deficit and were completely rational in opposing such a plan.

Absent a credible commitment mechanism, promises of future actions are basically worthless. This is an example of the "asynchronous exchange" issue Oliver Williamson has elucidated. Some call it the "St. Augustine problem" ("Lord grant me chastity, but not just yet")

The phenomenon doesn't rely on there being different politicians in place when the deficit reduction is supposed to kick in. The exact same politicians can simply decline to enforce their previous agreement.

Let's see what happens to the "automatic" sequestration.

If you really want deficit reduction (again, I'm not saying that it's the right policy), all you can do is try to get it done NOW.

Predictions

I have predicted that predictions by ecoomists will be wrong.

Interesting article, with a similar point.

The Culture that is Pakistan

In a written submission, the Ministry of Law and Justice said that under Sharia law, children become adults at the onset of puberty which varied under a range of factors making it impossible to increase the age for criminal responsibility:

 "It can be well understood that attainment of maturity of understanding depends on social, economic, climatic, dietary and environmental factors, that's why a child in our subcontinent starts understanding nature and consequences of his/her conduct much earlier than a child in the west specially because of general poverty, hot climate, exotic and spicy food which contribute towards speedy physical and mental growth of the child," it said. 

This remarkable statement was issued to explain why the ministry was against raising the age of criminal responsibility in the country from 7 (where it currently stands) to 12.

 The source article is here and the hat tip goes to Roving Bandit.

Now I know whats wrong with the youth of America. Not enough hot sauce!!

Maybe Bosses WILL Wear Bunny Slippers?

A while ago I wrote this article, about the nature of the firm. A boss decides it would be cheaper to "fire everybody" and just run the firm from home, in his bunny slippers.

Well...no.

But with reduced transactions costs, one would predict that the optimal size of the firm should shrink. Here is an interesting discussion of just that phenomenon.

Coase himself was agnostic. As he put it:

“A firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organising in another firm” (Coase, 1937, p.395).

All you have to do is add "or contract" and you've got it. If transactions costs of buying ptp fall, firm size should fall, cet. par., because there are other costs of organizing within the firm.

(Nod to Robert Eaton, for finding the AVC example)

Okay, Now I'm Some Lefty Nutjob?

When I'm reading THE NATION, and thinking, "Yup, yup, that's right, yup," then something is messed up.

And what is messed up is...the police state we are becoming. I have claimed that the strange thing is the left won't face this.

Well, that article in the Nation faced it. Well done.

Two things need to happen.

1. The left needs to admit that the state=coercion, which can metastasize into violence, and does so metastasize.
2. Libertarians need to admit that Karl Marx was right about concentrated corporate power. It's every bit as dangerous, and in fact in most important ways it's no different from, the worst aspects of the state. So, ipso facto, concentrated corporate power=coercion (see above about metastasis).

We have all been complicit. It's tempting to want to support something. But the two state sponsored parties have hoodwinked us. The third term of the Bush Presidency going on under Mr. Obama is just a continuation of the same ghastly trends. Gitmo. Patrio Act abuses. Unlimited detention. State murder of American citizens without any kind of due process. Oi. All of a sudden I want to see if Alexander Cockburn wants to have lunch.

When cannons are outlawed....

From the LA Times:

"Authorities said the cannonball that struck and killed a 33-year-old woman in San Diego County was homemade and that alcohol was involved in the incident.


 The woman's husband and another man were working on a cannon shortly after midnight outside the couple's mobile home when it exploded, according to a Cal-Fire spokesman. One of the two men was sent to the hospital with minor injuries.


The incident is being investigated by the San Diego County Sheriff's Department.


Few details were immediately available, and it's unclear exactly what killed the woman. The incident occurred in a mobile home park in Potrero on the Mexican border."

Here I go people, I just can't help myself:

1. A "homemade cannonball"? Really?

2. I don't think alcohol was the only problem.

3. There is a really severe contradiction in the first and last 'grafs of the article: "cannonball struck and killed" vs. "unclear exactly what killed". Get a grip, LA Times

4. This incident reminded me of one of my favorite songs and videos of all time:






Hat tip to RKG

Public Choice Papers

My two papers for Public Choice. What a long strange trip it's been. We submitted the papers to the PC Society, but they just disappeared. At last check, after submitting the paper more than three weeks ago, they STILL have not been put up on the PCS web site. So, here they are:

William Keech, Michael Munger, and Carl Simon: Market Failure and Government Failure

Abstract: We distinguish two settings for market processes: The first is the "invisible hand" world of private goods, decreasing returns, and full information where general equilibrium and the fundamental theorems of welfare economics are well defined. The second is the "pin factory" world of increasing returns and creative destruction arising from innovation, technological change, and entrepreneurship. Then we note the differences in the application of "market failure" in these two settings. Building on the well-known "anatomy" of market failure in welfare economics, we develop an anatomy of government failure, confronting government with the more realistic and dynamic world of pin-factory type market processes. This anatomy distinguishes passive and active government failure, and it links market and government failure with the core functions of aggregation, incentives, and information, and with problems of agency, rent-seeking and time consistency.

John Aldrich, Michael Munger, and Jason Reifler: Institutions, Information, and Faction: An Experimental Test of Riker’s Federalism Thesis for Political Parties

Prepared for Special Issue of Public Choice, “Empirical Issues in Public Choice,” edited by Peter Kurrild-Klitgaard. In this thirtieth anniversary year of the publication of LAP, we are glad to take the opportunity to look back at some of the questions and insights that had shaped Prof. Riker’s interests in institutions. In particular, we will examine some of Riker’s earlier work on federalism, and the political bargaining that resulted in a federal system for the U.S. This bargain still has important implications today, especially for party organizations, which operate at the national, state, and local levels with goals that sometimes coincide and sometimes conflict. We then test a Rikerian thesis about an implication of the “federal bargain.” Having power shared by states and federal governments also means that party organizations are obliged to serve multiple masters with conflicting goals. To put it differently, federalism is a bargain between national and local interests. Any party system must likewise constantly negotiate conflicts between national and local interests. In a number of his early writings (Riker, 1955; Riker and Schaps, 1957; Riker, 1964), William Riker explored the stresses and cracks in partisan institutional structures. Focusing on the American system, and to a greater extent under the Constitution than under the Articles, Riker concluded that the decentralization of the party system effectively blocks presidents from being able to control partisans, using either ideology or organizational tools.

Lord, He Was Born a Travelling Man!

Apparently, if your dad coaches in the NBA, you get to play under the nearly nonexistent NBA traveling rules.



Some of these are close, could see a no call. But some of them are just feet shuffling embarrassments. Karl Hess may have been too busy looking for NC State fans in the stands, hoping to throw them out.

Lord Volt A More

Chevy Volt - Building a Better Tomorrow from Ben Howe on Vimeo.

(Nod to John-O Donato)

Say Cheese

That pretty much says it all right there, no?

For a less concise, but no less heartfelt, critique, click here.

The Cotton Club

India, the second largest cotton producer in the world has banned all exports of cotton "until further notice".

Why?

Because China, the largest cotton producer in the world is importing and hoarding a lot of cotton, and because Indian cotton exports had already "exceeded government targets".

I am not making any of this up.


These are two huge countries that just seem to have no clue when it comes to trade. Casual arrogant protectionism and the enshrinement of inefficiency seem to be policy goals.

Words of wisdom

"The righter we do the wrong thing, the wronger we become. When we make a mistake doing the wrong thing and correct it, we become wronger. When we make a mistake doing the right thing and correct it, we become righter. Therefore, it is better to do the right thing wrong than the wrong thing right. This is very significant because almost every problem confronting our society is a result of the fact that our public policy makers are doing the wrong things and are trying to do them righter."

~Russell Ackoff

Hat tip to Ben Ramalingam

Angus impossibility theorem

Here it is:

There is no such thing as a purely micro-founded macro model that is actually useful for forecasting.

The original RBC models were, more or less, purely micro-founded models. But, they didn't track anything. They could match some unconditional moments, but couldn't replicate realistic dynamics.

People, we don't even have very good micro foundations for money! We just put it in the utility function or arbitrarily assume a "cash in advance" constraint. That's one reason why the original RBC models didn't even contain money.

Amazingly to me, Central Banks in the Western world have spent a lot of money and economist-hours trying to construct dynamic stochastic general equilibrium (DSGE) models that are actually useful for forecasting.

This effort has largely led to the de facto abandonment of micro-foundations. In the quest to make the models "work" we often either choose whatever micro-foundation that gives the best forecast regardless of micro evidence about whether or not it is accurate, or we just add ad hoc, non-micro-founded "frictions" to create more inertia. Or we just add more and more "shocks" to the model and say things like, "much of the variation in X is caused by shocks to the markup".

So macro has to live in this weird world where, to correctly evaluate policy changes and welfare, we need to use fully micro-founded models that we know do not track reality, and to track reality, we need to come perilously close to giving up on micro-foundations altogether.

No wonder we are so often in a bad mood!

The most dangerous name

LeBron's rumination on middle initials got me to thinking about triple named murderers. Lee Harvey Oswald, John Wilkes Booth, John Wayne Gacy, James Earl Ray....

First I wondered why people like Sirhan Sirhan and Jeffrey Dahmer got short shrift.

Maybe Sirhan Sirhan was distinctive enough that using Bishara in the middle was gilding the lily?

 But why not Jeffrey Lionel Dahmer?

Maybe it's only mellifluous if the middle name is a single syllable?

But see Lee Harvey above.

Then I wondered if there was a specific middle name particularly associated with mayhem and found this amazing article.

If your middle name is Wayne and you live in Texas, you probably are a murderer!

Welcome to the woodshed

They do the work, so I don't have to!

 Let's start off this new KPC feature with a double-header.

 First, Clive Crook takes Jon Chait to the woodshed.

Then, in the mother of all beatdowns, Bob Kuttner takes Tim Geithner to the woodshed and just wails away on him.

People Aren't Smart Enough for Democracy

It is interesting that progressives think citizens are much too stupid to make their own choices in the grocery store.  But somehow, people get a lot smarter when they enter the voting booth.    Um....no, they don't, actually. 
The problem, as I argued in a recent paper about "self interest," is that people have pretty good incentives to learn about which apples taste good. But Santorum vs Perry? Ooooh, I like his tie. Here is an excerpt from my paper:

There are three parts to the Public Choice Theory “citizen as private actor” story. First, the citizen is motivated to seek his own self-interest. Second, the citizen has limited information. Third, political elites know this, and use advertising and simple slogans to attract votes.

The evidence that Lewin (1991) offers bears only on the first step. But if we change the motivational assumption to its most extreme form, “Citizens only want to act in the public interest,” the cost of information and the value of simple political messages as persuasion are unchanged. From Marx to Downs to Buchanan and Tullock, the costliness of information and of collective action has been a constant theme. Motivational assumptions are nearly inconsequential for the PCTist. What matters is the aggregate consequences of individual action.

Do voters have the information they need to make accurate decisions? The very literature to which Lewin refers provides a resounding “no” answer. Very few citizens are aware of even the most basic political facts, and they have only cursory knowledge of how government works (Page and Shapiro 1992, Table 1.2; Somin 1998). Less than half can name their congressional representative, much less identify her voting record or issue positions. Even fewer can give a coherent attribution of their own political ideology in terms of its specific policy implications (Converse 1964; Feldman and Conover 1986, 1984, 1982, and 1982). The rationally ignorant public-interest voter is essentially indistinguishable from the rationally ignorant self-interest voter. Rationality need not imply self-interest, but it clearly does, as an empirical matter, imply that voters have very little idea of how policy works and what candidates will do once they are in office.

For reasons I cannot understand, Lewin (1991, 107) denies this in terms that can only be called naïve:

While proponents of the self-interest hypothesis centre their hopes on setting satisfactory prices through market mechanisms, the representatives of the public-interest hypothesis believe in cooperation as a method to escape the “prisoner’s dilemma.” Both camps maintain that their particular world—the market and politics, respectively—is the more transparent, i.e. the one characterized by a minimum of unintended consequences. Although this may be true of the way the market functions ideally as a model, however, faulty information, limits on competition, and other imperfections are quite evident in real-life economies. Politics, by contrast, because of its combination of collective organizations and public debate, is probably easier to predict even in reality.
Yet Public Choice scholars have never claimed that politics is unpredictable. In fact, it is all too predictable, precisely because people can be counted upon to act in their self-interest. A legislative séance of the sort Prof. Lewin envisions for the public sector, groping toward some seraphic group wisdom, would indeed be unpredictable, and (by his lights) not transparent. But the Public Choice argument is that one can project the decisions of a group with high precision if one knows the goals of each individual and the decision rule that will be used by the group.

Lewin argues for the superior competitiveness and informational abundance of the public sector. The information problem I have already discussed: buying a car is a private good, and I have solid reasons to learn about cars. Voting for a candidate is a public good, and information about it will be underprovided by private action. The fact that voters have public-interest intentions at the first stage, the motivation stage, is essentially irrelevant, since they have private interest reasons to free ride and can thus be influenced by operatives whom Downs called “persuaders,” who have their own reasons to distort information. 

As always, happy to send a PDF if you are interested. Just contact me at munger at duke dot edu

Can you smell what the Angus is cookin'?

Over at MR, LeBron asks for your most surprising prediction.

Here's mine:

Within the next 10 years we will (at least de facto if not de jure) have very close to open borders in the USA.

Restated in English: within the next 10 years immigration into the USA will rise dramatically.

The WMOE, On CVs and Job Interviews

The Dub-MOE, for all you grad students out there.

What Should You Include On Your CV? from Kosmos on Vimeo.

It would have been better if they could have taken the bucket off from atop the microphone. But good advice.

j'accuse!

Wow, these two dogs turn on their buddy right away. Who did this?

J'accuse!

Sentences are for sissies

As part of his plan to conquer the universe, LeBron has been writing a "very short reviews" sidebar for the NY Times Sunday magazine, where he reviews a book in one sentence.

But a sentence is just so prolix!

I propose reviewing a book with a song title!

Some examples:

The Glass Castle: Ain't that America, 

Coming Apart: The Bi*ch is Back, 

Poor Economics: Love the One You're With

The Steve Jobs Bio: Yonder Stands the Sinner

The Great Stagnation: Eve of Destruction

White Man's Burden: Whippin' Post

The Rent is too Damn High: Wishing Well

Biggest Environmental Heretic Gets Pounds!

From KPC friend Matt Ridley.

Read all about it.

Thanks to Tommy the Tenured Brit

Con-man commandments

1. Be a patient listener (it is this, not fast talking, that gets a con-man his coups).

 2. Never look bored.

3. Wait for the other person to reveal any political opinions, then agree with them.

 4. Let the other person reveal religious views, then have the same ones.

5. Hint at sex talk, but don’t follow it up unless the other fellow shows a strong interest.

6. Never discuss illness, unless some special concern is shown.

 7. Never pry into a person’s personal circumstances (they’ll tell you all eventually).

 8. Never boast. Just let your importance be quietly obvious.

 9. Never be untidy.

10. Never get drunk.

 Source is here.

twisted sister

People, I don't believe that we receive the privilege of being Americans from our government. I believe that government officials receive the privilege of their jobs from us Americans. Nor am I a big fan of Tim Geithner and his curious inability to practice what he preaches.

However, Lawrence Lindsey really pulled a fast one on Geithner in the WSJ editorial page today.

Here's Lindsey's version of what Geithner said:

Last week Treasury Secretary Tim Geithner said that the "most fortunate Americans" should pay more in taxes for the "privilege of being an American."

Here's what Geithner actually said:


"That’s the kind of balance you need," said Geithner. "Why is that the case? Because if you don't try to generate more revenues through tax reform, if you don't ask, you know, the most fortunate Americans to bear a slightly larger burden of the privilege of being an American, then you have to -- the only way to achieve fiscal sustainability is through unacceptably deep cuts in benefits for middle class seniors, or unacceptably deep cuts in national security."

Umm, that's not all that close.

"Slightly larger burden of the privilege OF being an American" does NOT equate to Lindsay's paraphrase of "should pay more in taxes FOR the privilege of being an American.

I disagree with Geithner. But Lindsey's column is a hatchet job.

I actually like how Tim apparently inadvertently lays out a preferable alternative. Why are "middle class seniors" a protected benefit class? Why is the military a protected benefit class?

If we can attain fiscal sustainability by deep cuts to middle class seniors' benefits and the military, then let's do it!

Here's the video:



This post was updated to correct a spelling error.

edging upward

The BEA announced an upward revision of real GDP growth in the fourth quarter of 2011 from 2.8% to 3.0%.

Sign of the times

The Death of the Peak Oil Idiocy

Oil production is skyrocketing, and the only reason it is not going up even more is that we have stopped drilling.

I'm fine with that, there's no hurry. But the point is there is PLENTY of oil. Peak oil is peak idiocy.

Zombie Mohammad Attack Sanctioned by Law?

Zombie Mohammad attack okay? Fighting words, perhaps? I would doubt it's real, but Jonathan Turley is legit.

Zombie Pope in same parade raises no issues.

NSFW: Tit Thinks It's People

I'd tell you about it, but the name is pretty descriptive.

Tit Thinks It's People: Buppetry.

(Nod to the Blonde)

Institutions Similar Because Brains Similar?

The naturalness of (many) social institutions: Evolved cognition as their foundation

Pascal Boyer & Michael Bang Petersen
Journal of Institutional Economics, March 2012, Pages 1-25

Abstract: Most standard social science accounts only offer limited explanations of institutional design, i.e. why institutions have common features observed in many different human groups. Here we suggest that these features are best explained as the outcome of evolved human cognition, in such domains as mating, moral judgment and social exchange. As empirical illustrations, we show how this evolved psychology makes marriage systems, legal norms and commons management systems intuitively obvious and compelling, thereby ensuring their occurrence and cultural stability. We extend this to propose under what conditions institutions can become ‘natural’, compelling and legitimate, and outline probable paths for institutional change given human cognitive dispositions. Explaining institutions in terms of these exogenous factors also suggests that a general theory of institutions as such is neither necessary nor in fact possible. What are required are domain-specific accounts of institutional design in different domains of evolved cognition.

Hmmm. That's not my first, or second, intuition. Why do steam engines all look the same? Because form follows function, and the rules of physics are universal, at least in the domain where steam engines are possible and useful. That's a kind of determinism, but it is an optimized determinism: the best form for a steam engine doesn't depend on who is designing it.

The thesis in this paper is that limits on human cognition shape institutions. No reason to expect ANY institutions, anywhere, to be optimal. No optimality in common law, no evolutionary process toward efficiency. Because our brains all have the same limits, and we all come up with the same screwed up institutions. In linear programming terms, the binding constraint is not functionality, but cognition. Hmmm....

Nod to Kevin Lewis

One step closer to sending in the gunboats

Germany is sending over 150 volunteer tax collection experts to Greece to "help" them clamp down on tax evasion.

Really.

Story is here.

What could possibly go wrong?

The participation puzzle is worse that I thought!

In an interesting paper recently published in the Journal of Finance (and discussed by Bob Shiller in today's NYT), GRINBLATT, KELOHARJU, and LINNAINMAA investigate the effects of IQ on stock market participation in Finland (ungated version of the paper is here).

 As they point out, "Only about 50% of U.S. households invest in stocks, either directly or indirectly (via mutual funds in retirement and nonretirement accounts), and participation in Europe is even lower. Traditional models in financial economics, which prescribe universal participation, cannot easily explain these stylized facts, viewing them as a “participation puzzle.”"

 But IQ is not solving this puzzle at all (at least in Finland)!

 The two highest stanines of IQ in their sample have stock market participation rates of around 42% and 46% respectively. Sure, that is significantly higher than the lower IQ groups, but their research shows that, even among the most sophisticated citizens, stock market participation is very low.

 The paper is very well done and highly recommended, but I was amazed that participation among even the elites was so low.

Food Aid Causes Civil War

Aiding Conflict: The Impact of U.S. Food Aid on Civil War

Nathan Nunn & Nancy Qian, NBER Working Paper, January 2012

Abstract: This paper examines the effect of U.S. food aid on conflict in recipient countries. To establish a causal relationship, we exploit time variation in food aid caused by fluctuations in U.S. wheat production together with cross-sectional variation in a country's tendency to receive any food aid from the United States. Our estimates show that an increase in U.S. food aid
increases the incidence, onset and duration of civil conflicts in recipient countries. Our results suggest that the effects are larger for smaller scale civil conflicts. No effect is found on interstate warfare.

I've had so many conversations with sensitive people where their entire argument is, "People are hurting. We should DO something.!"

The fact is that most things we can "do" make things worse. But that's okay. Because all that matters is that American leftists get to feel good about themselves, because they DID something.

Once you understand this, it makes a lot of other opinions of leftists easier to understand. For example, why not have market systems in developing countries, since those would actually have good consequences?

Because the left doesn't care at all about good consequences. "Open up markets" (including in the US, which would really help developing nations, like if we opened the US market to Caribbean sugar growers)? No, that's not a feel good, good intentions policy. All it would do is have really good consequences. And how does that help Albie Volvo, with his Chardonnay and NPR tote, feel better about himself? Better to change out some more light bulbs for CFs, and give food aid to the needy. Sure, it will start civil wars, but why would Albie Volvo care? There's no war in his neighborhood.

(Nod to Kevin Lewis, for the article, certainly not the interpretation)