Monday, January 07, 2013

Not a Caricature, Not the Onion

I often get criticized (yes, me!) for "caricaturing" the Keynesian view of the multiplier and job creation.  To be fair, Keynes himself was circumspect.  But the Keynesians are quite clear.

Here is an acolyte, making the straightforward argument that unemployement creates jobs, as long as we PAY people to be unemployed.  It gets good after about 2:50...

Hilda Solis is the US Sec'y of Labor.  She apparently wants to be the Sec'y of Unemployment.  Employed workers aren't docile enough, and they might vote the wrong way.  But unemployed folks, getting other peoples' money in the mail?  THOSE are Democrats.

Nod to William H., and to Pretense of Knowledge.

You Stressed Bro?

Forbes magazine has declared that "University Professor" is the least stressful job in America, and university professors across America have been going nuts disputing it (check #RealForbesProfessors on Twitter or read this).

People, the simple fact is that there is no one set of experiences, working conditions, or stress levels that describe the job of "university professor".

If you are a "full-time adjunct", man that is a stressful life. Low pay, low status, no job security, little to no benefits. If I were to give someone in that situation advice, it would be to find another line of work.

At the other extreme, if you are a tenured professor at all but the most elite of institutions, that can be a very stress-free life. Or to put it another way, most stress that may come there is self imposed. For example, I find it stressful to have PhD. students on the job market. I am to a certain degree responsible for their placements and that weighs on me. However, I could always just not be a thesis advisor or greatly restrict the number of students I advise and avoid this "stress".

Prepping a new class, or mastering new research tools can be difficult and stressful. However, most tenured professors can avoid doing these things unless they at some level want to do them. Again, the stress involved is self imposed.

It's true that many tenured professors check out every spring and are not heard or seen again until the new academic year starts in the fall. They don't do research. They don't update their class notes. They work the system. Not only is there no stress, there's no sweat.

However, many other tenured professors work pretty hard year-round, continue to publish and continually work on their teaching. A lot of sweat, perhaps some stress, but most of it is self imposed. Getting significant pay raises, getting promoted, getting a chair, are post-tenure goals that often require continued productivity, but the basic fact is that you can hunker down and hibernate for the rest of your natural life with few overtly negative repercussions.

Assistant professors on tenure track have another different set of experiences. Sometimes they have no clear idea of what it will take to earn tenure. That can be stressful. Sometimes their colleagues or university bureaucrats will take advantage of them, pressuring them into spending time on things that won't pay off at tenure. That can be stressful too.

The job experiences of professors are way to diverse to be captured in a single description. The stress-level is extremely context dependent.

Super Cows

Genetically modified cattle, in Europe.

Except that the genetic modifications are selective breeding, not chemicals.  What is the difference?  I have no idea.  These are still genetic modifications.  The EU seems confused, because people insist they don't want genetically modified food.  I guess they think they are eating aurochs?

UPDATE:  MAG sends this link.  Spectacular.

Twin Gone Bad

I think this woman must be from Betty's family, in New Hampshire. Betty is clearly the black sheep. Still, you can likely see the resemblance. Both ladies are equally attractive....

According to Betty's older sister:

"In the opinion of this Democrat, Free Staters [explanation] are the single biggest threat the state is facing today. There is, legally, nothing we can do to prevent them from moving here to take over the state, which is their openly stated goal. In this country you can move anywhere you choose and they have that same right. What we can do is to make the environment here so unwelcoming that some will choose not to come, and some may actually leave. One way is to pass measures that will restrict the 'freedoms' that they think they will find here. Another is to shine the bright light of publicity on who they are and why they are coming."

Nod to Aubrey A.

Corn to Ethanol Fiasco

As the WaPo noted, the US has a wide variety of idiotic "go green!" energy policies. It makes a little more sense once you realize that sacrifice and wasted resources are actually the goal, as in any religious exercise.

But the very worst is likely the requirement that companies find a way to use more bio-fuels.  And in THIS special place of stupidity, the focus on corn-based ethanal is the worst, of the worst, of the worst.

Given the amount of petroleum based fertilizer we use to raise corn, the environmental return on converting from oil to ethanol fuel is about 0.8.  That is, all things considered, the net impact of ethanol bio-fuel is actually harmful to the environment, given the distortion in land use and the expanded conversion of forested land into cornfields.  That's bad.

The world price of corn has gone up, and people all over the world are finding ways to grow more corn.  That is partly bad, and partly good.

But, we are NOT using the corn for food!  And that is really hurting poor people who depended on corn as a high calorie source, and protein source.  That, dear ones, is the worst, of the worst, of the worst, of the dumbest darned thing I can think of.  We waste petroleum to pay politically connected corporations to build useless ethanol stills so poor people can starve.  Really?  

Sunday, January 06, 2013

Sarbox, Dodd-Frank, and Now the Drug War

I am always amazed that my colleagues think that Sarbox or Dodd-Frank increase regulation, and are therefore good.  What they do, and what they are designed to do, is to advantage the big financial companies  (Goldman in particular, but generally the large outfits) at the advantage of small nimble companies that would otherwise make the industry competitive.

All Sarbox or Dodd-Frank really do is the raise the cost of doing business legally.  As an intercept shift, just a bunch of fixed costs.  If you already have a giant accounting and compliance office, like the big shops, then this is just a small extra cost, one that is easily passed on to customers as fees.  But if you are a small shop, or are considering entering the industry, the effect is devestating.  You have to make a much bigger nut to pay off your accountants and compliance people, before you can run even your first transaction.  If you want to lie, the SEC won't catch you, so the Bernie Madoffs of the world are perfectly safe.  This regulation doesn't affect actual criminal behavior, it just represents an entry barrier for new firms that want to do business legally.

It's true that compliance costs fall on big banks also, but you have to think about Bastiat's "seen and unseen."  What we don't see is the new firms that are not there, the start-ups that do not happen.  The big firms would prefer no regulation, perhaps, but this is the next best thing: regulation that reduces competition.

This is hardly surprising.  The Obama administration, and the Democratic party generally, is bought and paid for by the dinosaurs of the financial industry.  Goldman, et al. are desperately trying to defend what they see as their birthright of keeping what they win--if they win--and getting bailed out at taxpayer expense--if they lose.  Gotta keep the little guys out.  That's what regulation is designed to do, and that is what regulation does in fact do.  The idea that Dodd-Frank was "better" regulation is risible.  I'm laughing at it right now, in fact.  Ha.  Ha ha!

What I did not expect is that this logic would extend also to ILLEGAL business.  Consider:

The paradox of the war on drugs is that the harder governments push the fight, the higher drug prices become to compensate for the greater risks. That leads to larger profits for traffickers who avoid being punished. This is why larger drug gangs often benefit from a tougher war on drugs, especially if the war mainly targets small-fry dealers and not the major drug gangs. Moreover, to the extent that a more aggressive war on drugs leads dealers to respond with higher levels of violence and corruption, an increase in enforcement can exacerbate the costs imposed on society.

Larry Summers Could be Fired Just for READING This!

Studying Intellectual Outliers: Are There Sex Differences, and Are the Smart Getting Smarter?

Jonathan Wai, Martha Putallaz & Matthew Makel
Current Directions in Psychological Science, December 2012, Pages 382-390

By studying samples of intellectual outliers across 30 years, researchers can leverage right-tail data (i.e., samples at or above the 95th percentile on tests of ability) to uncover missing pieces to two psychological puzzles: whether there are sex differences in cognitive abilities among smart people, and whether test scores are rising (a phenomenon known as the Flynn effect) among smart people. For the first puzzle, data indicate that the high male-to-female ratio among extremely high scorers on measures of math ability has decreased dramatically, but is still likely one factor among many explaining female underrepresentation in some professions. For the second puzzle, data indicate that the right tail has risen at a similar rate as the general (or middle portion of the) distribution; it is thus likely that the entire curve is rising at a relatively constant rate, consistent with the Flynn effect, which may explain why a greater number of gifted students have been identified in recent years. However, the causes for these gains and whether they reflect real gains in intelligence continue to remain a mystery. We show how these two puzzles are linked and stress the importance of paying attention to the entire distribution when attempting to address some scientific questions.

Several interesting things here.
1.  Jonathan Wai is from Duke's TIP program.  The EYM profited from that program, in my opinion.
2.  "Searching for the Right Tail" sounds like a book about singles bars.  Sequel to "Looking for Mr. Goodbar."  But from the male perspective.
3.   Instead of studying intellectual outliers, how about studying intellectual out-and-out liars, like P-Kroog?  I bet those are FAR more likely to be men.  Women have scruples.

Saturday, January 05, 2013

Nuevo Congreso, las mismas viejas divisiones

Or, "New Congress, " a chance to talk to my friend Carolina Alvarez.  (gated, free registration, in Spanish)


El nuevo Congreso mantuvo el balance de poder e incluso a sus líderes. Y con eso consolidó las divisiones que causaron una parális política en los últimos años, mientras enfrenta los mismos temas urgentes sobre los que no hay acuerdo: si elevar el techo de la deuda del país (que llega a US$ 16,4 billones) y qué hacer con los recortes en los gastos militares y programas domésticos (por US$ 109 mil millones) que el pacto sellado esta semana pospuso apenas por dos meses...

"Será lo mismo. Esperar hasta el último minuto, llegar a un falso acuerdo, pretender que todos sacrificaron algo y después todos irán a la reelección. Es una 'danza kabuki', el estilizado teatro japonés de sombras, sin sustancia", señaló a "El Mercurio" Michael Munger, profesor de política y economía de la Universidad de Duke. 

Or, in my awful Spanish-to-English translation:  

The new Congress maintained the balance of power and even kept the same leaders. And that cemented the divisions that caused political paralysis in recent years, as it faces the same urgent issues on which no agreement: whether to raise the debt ceiling in the country (which reached U.S. $ 16.4 trillion) and what to do with the cuts in military spending and domestic programs (U.S. $ 109 billion) to seal the deal this week postponed for two months only...

"It will be the same. Wait until the last minute, reach a fake agreement, pretend that everybody sacrificed something and then everyone goes home and gets re-elected.'s A 'kabuki dance,' the stylized Japanese theater of shadows, without substance," said Michael Munger, professor of politics and economics at Duke University. 

Heh heh.  Heh.  He said "Kabuki."

UPDATE:  Typos corrected, as suggested in comments.

Incentives Matter

Wow.  This is amazing.

So, remember what I said about prices, giving accurate signals about scarcity?

That's all out the window if you impose subsidies.  Then, you aren't making something because it's scarce.  You are making it because it's SUBSIDIZED!  And it turns out you can make a lot of money by shipping cargo back and forth across the border with Canada, without ever unloading it.  Because we subsidize the transport, with credits.

Excerpt (emphases added): A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars. CBC News of Canada was the first to pick up on this story on the 3rd of December 2012, and began their own investigation into the possible explanations behind this odd behaviour.

...[Investigators] managed to obtain an internal email which stated that the cars of the train were all reconfigured between each trip but that the cargo was never actually unloaded, because “each move per car across the border is revenue generated”, the sale of the cargo itself was inconsequential.
The cargo of the train was owned by Bioversal Trading Inc., or its US partner Verdero, depending on what stage of the trip it was at. The companies “made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.” Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.” The RINs were supposed to be retired each time the shipment passed the border, but due to a glitch not all of them were. This enabled Bioversal to accumulate over 12 million RINs from the 24 trips, worth between 50 cents and $1 each, which they can then sell on to oil companies that [haven't satisfied EPA renewable fuel quotas].   

A nod to Jeremy B.

Does PJ Carlesimo have relatives on the Milwaukee PD?

I only ask because Latrell Sprewell somehow got taken to jail for the offense of playing music loud in his own $%#$ house!

I always thought Milwaukee was cool, but whatever Spree was playing, the Po-lice were not playing:

"Sprewell, 42 and a graduate of Washington High School, was booked into the jail about 4:15 p.m."

I guess I could see it if he was blasting "Call me maybe", otherwise, WTF Milwaukee?

Hat tip to MT

Before Economics....

Make sure you check out the rest of the great stuff at SMBC.  Zach W. is a genius.

Friday, January 04, 2013

We Get Letters!

An email exchange from today....

TP:   Dear Dr. Munger,  I enjoyed your video, "What Do Prices “Know” That You Don’t?"  The title reminds me of something that Bill Gates said to me.  I created the prediction markets project within Microsoft in 2003 and I was asked to brief Bill on them.  He immediately understood how prediction market prices work and then said that the reason they might help him was because [paraphrased], "If the market prices differ from my own beliefs, then either they know something that I don't know or I know something they don't know, and either of those may need remedy."   Cheers, TP

MM:  That's very cool, and an interesting difference between economists and entrepreneurs.  I assume you know the joke about the economist and the entrepreneur.

Economist and entrepreneur are walking down a street in San Francisco.  The entrepreneur sees a $100 bill, and generously offers to split the “found” value with the economist.

The economist refuses, saying that it’s not possible.  “After all,” the economist announces, if there had been a $100 bill in the street, someone would have picked it up.  In equilibrium, there are no arbitrage profit opportunities!”  

The entrepreneur shakes his head in scorn and pockets the full $100.

So, the economist sticks to the first part of your formulation.  For the economist, "they" always know everything, and that's embodied in price.  But entrepreneurs
know that prices are wrong, often, sometimes by a lot. 

That means the entrep's pick up the $100, and the economist turns out to be right after all.  But only because smart people go around looking for wrong prices.

UPDATE:  Scott Ainsworth writes.... A story from Georgia - When walking with economists in front of the econ/business buildings on the Georgia campus, I noted that there was a lot of money lying around the ground - pennies and dimes mostly. The obligatory equilibrium jokes followed. One of the economists said that picking up pennies was not worth his opportunity costs. I admitted that I still picked pennies up. More than one person looked askance at me - until I stated that I was the shortest person in the group. Opportunity costs survived and equilibrium was restored. For the economists, it was a very big day - and I was 23 cents wealthier.

Does He Actually Get It?

Is this just an accidental use of the right word, or does Senator Michael Bennet really understand what is going on?  From an NYT piece by Maureen Dowd -  

He thinks the trouble is not so much a clash of Democratic and Republican orthodoxies as it is a clash of past and future.  I think the inhabitants of the past are fighting hard to keep the rents they acquired in the 20th century,” he said.

The story is about why Michael Bennet   - a Democratic senator  - voted against the cliff deal.  He gets a smiley face, from KPC.  If more senator talked about rent-seeking, instead of doing it, we would be better off.

Is this the way 2013 is going to be?  Going to Maureen Dowd for good information, and Democratic senators for wisdom?  Golly.

Government Spending

Lots of data, facts, and pictures on government spending in the U.S.  Interesting to look at, and more than a little disturbing.

Here's a good one.  Government pension obligations.  We are either going to spend a whole lot of our annual budgets on pensions, or else we are going to renege and not pay the pensions we promised.  Either way, somebody not happy.

Thursday, January 03, 2013

The IDK Problem: New Learn Liberty!

The folks at Learn Liberty (and I do mean the lovely Elisabeth McCaffrey, among others), are SO great at taking a pretty bland idea and doing something wonderful with it.  This turned out WAY better than I had any right to expect.  I have ALWAYS wanted to blow up into a cloud of colored smoke at the end of a video.  It hurt, but only a little.

(UPDATE:  Since people have asked, "Al Trewis" is an altruist, not someone for whom all is true.  That would have been clever, since if everything is true, nothing is.  But I'm not that deep.  He's just an altruist.)

(UPDATE II:  A number of people have said, "But you didn't talk about ____!"  Especially farm subsidies that distort prices.  Well, first, yes I did.  I mentioned that the subsidy for ethanol was cut, and that that changed things.  And second, it's a four minute video.  The number of things I did NOT talk about is essentially infinite.)

Whatever happened to the 22nd Amendment?

Is it just me or does it really seem like George Bush is now in his 4th term as president?

He finally got 99% of his tax cuts made permanent. Warrantless wiretapping is proceeding full speed ahead. We are still running huge deficits. Drones use continues to rise.

Hell there's even a natural disaster where people are mad about the lack of a government response!

I just don't see how conservatives get all tied up in knots about president O. After all, despite some differences in style and tone, he's pretty much one of them.

Wednesday, January 02, 2013

Unknown Mortal Orchestra

UMO is coming to Norman! 3/11 at Opolis. Mrs. A and I will be there!

Here is info on the whole tour. This is amazing music.

Buy a Condo, Get a Green Card!

"Investment" in a ski resort in Vermont.  William Stenger is building a new resort town, using citizenship as a sweetener.  Generally, I am skeptical of incentive programs for investments, but I am pretty strongly FOR letting rich people emigrate to the U.S.
The price tag for the entire project, which Mr. Stenger says will create 10,000 direct and indirect jobs over several years, is $865 million.
But even more unusual than the size of the undertaking is the method by which Mr. Stenger and his business partner, Ariel Quiros, are financing it. They have tapped into a federal program that gives green cards, or permanent residency, to foreigners who invest at least $500,000 in an American business — the reward for the investment is a chance at United States citizenship.
Mr. Stenger has already attracted 550 foreign investors from 60 countries to put up $275 million for the first phase: a hotel at the Jay Peak ski complex, an indoor water park the size of a football field, an ice hockey arena, condominiums, restaurants and stores.
The second and third phases, now under way, require 1,000 additional foreign investors to put up $500 million to overhaul Newport and to develop the nearby Burke Mountain ski area.
Mr. Stenger and Mr. Quiros are putting up $90 million themselves. But even at $785 million, this is one of the single biggest projects in the country financed under the investor program.
Congress created the visa program in 1990 to help stimulate the economy. Because of a cumbersome process and complaints of fraud and corruption, it was long underused.
But a confluence of events in recent years has led to its rather sudden revival: the program was improved; the financial crisis of 2008 made it hard for developers to get loans from commercial banks; and foreign nationals, especially in China, were accumulating vast wealth and were eager for their children to study and live in the United States.
In 2006, the government issued just 802 of these EB-5 visas to investors and their families; this year, it granted 7,818.
The program is now growing so rapidly that in the next year or two the number issued will probably reach the annual limit of 10,000. For the first time in the program’s history, applicants may be turned away.
Good program, bad program?   
Nod to JR

Smokin' Hot Policy Choices

Two studies on tobacco control policies.  Interesting.  Pretty long, though, so I put them after the jump.

Tuesday, January 01, 2013

Happy New Year from your friends at KPC

Any thoughts, people? Tell me in the comments.

As Always, H. Browne's Libertarian New Year's Resolutions

For our annual tradition, here is Harry Browne's list of things Libertarians (note the "big L") might want to do.

The list.

Apparently, John-O was interested enough that he bought Harry's book.  This one actually has a cheap Kindle version, though the book itself is expensive, even used.  

I have to admit, I like this one, it's clever, funny, and effective.  There are at least ten of those little nuggets that I use routinely.  And it's only $14, from "The Advocates."