Saturday, April 12, 2008

Trade: Yer doin' it Wrong!!

Is it really going to come to this, people? Government to Government barter instead of person to person free commerce? I guess Obama and Hill would be all for it. From the FT:

Governments are racing to strike secretive barter and bilateral agreements with food-exporting countries to secure scarce supplies as the price of agricultural commodities jump to record highs, diplomats and cereal traders say.

The discussions follow a barter contract signed between Egypt and Syria in which Cairo agreed to supply Damascus with rice in exchange for secure wheat cargoes. The Philippines also sought unsuccessfully last month to reach a deal with Vietnam to secure a large supply of rice.

Abdolreza Abbassian, an expert at the Food and Agriculture Organisation in Rome, said: “The use of bilateral agreements is on the rise.” Diplomats also say bilateral and barter contracts signal a broader trend.

“Some countries could view this [type of agreement] with interest as, in the event of future restrictions, they would be able to get the supply,” Mr Abbassian added.

Sadly, I am not making this up!!

Rules and Credibility: an historical example

In a new NBER working paper (ungated version here), Ferguson & Schularick argue that adopting the gold standard did not impart increased credibility to periphery country governments though it did for rich country governments. Here is their abstract:

This paper asks whether developing countries can reap credibility gains from submitting policy to a strict monetary rule. Following earlier work, we look at the gold standard era (1880-1914) as a "natural
experiment" to test whether adoption of a rule-based monetary framework such as the gold standard increased policy credibility. On the basis of the largest possible dataset covering almost sixty independent
and colonial borrowers in the London market, we challenge the traditional view that gold standard adherence worked as a credible commitment mechanism that was rewarded by financial markets with lower borrowing costs. We demonstrate that in the poor periphery -- where policy credibility is a particularly acute problem -- the market looked behind "the thin film of gold". Our results point to a dichotomy: whereas country risk premia fell after gold adoption in developed countries, there were no credibility gains in the volatile economic and political environments of developing countries. History shows that monetary policy rules are no short-cut to credibility in situations where vulnerability to economic and
political shocks, not time-inconsistency, are overarching concerns for investors.

I really like that last sentence!

Science marches on

Friday, April 11, 2008

Lost, but not forgotten

Before stinking up a theatre near you, the latest James Bond film (improbably named "Quantum of Solace") is raising a stink on location in northern Chile. The problem? The story takes place in Bolivia but is being filmed in Chile. That happens all the time, though right? So, how can it be a problem? Well the part of Chile being used used to be part of Bolivia until Chile took it in the War of the Pacific. But, the War of the Pacific ended in 1883, right, so who cares now? Mister, EVERYBODY cares.

The Bolivians are mad because Chile is impersonating them on land that used to be theirs. The Chileans are mad because the movie is dressing up people as Bolivians and having them run around acting like this part of Chile is actually Bolivia.

I am not making this up. Read more about it here.

On a related note, Mrs. Angus recently had a Bolivian student in one of her classes who had served in their military. He claimed that when Bolivian soldiers put bullets in their guns (not a real modern arsenal there I guess) they chant, "un Chileno, dos Chilenos......" as each one goes in.

The Show

Starting tonight.....THE NC Libertarian Party Convention.

In Burlington, NC. Details.


1. Nominations for candidates for office will be made. I may, or may not, be the NC LP candidate for Governor.

2. Discussions with visiting LP Prez candidates. I will be picking up Bob Barr myself, tomorrow at the airport. Also there: Mike Gravel. Mary Ruart. George Phillies. Wayne Allen Root.

Actually, it ought to be pretty darned fun. I mean....Mike Gravel? I get to sit with Mike Gravel and have a beer? Wow.

I've Been One Poor Correspondent

I've been too, too hard to find.

But that doesn't mean I ain't been traveling a lot.

In the past week, I went up to VTech in Blacksburg to give a BBT Lecture to the B-school, debated Bev Perdue and Pat McCrory at a GOOB forum in Greensboro, and then drove around for some other stuff. It's good to be back.

A post on the GOOB forum soon.

Under Pressure

When Students Pay for Convenience
It’s not exactly cheating. More like crafty dealing, says Alicia Dugas, Kenyon College’s assistant dean of students for housing and residential life. Whatever you call paying money for a desirable residence hall lottery number, Dugas and many students at Kenyon College want the practice to end.

Legislation introduced by Kenyon students and passed this week by the student body disallows beginning-of-the-term room switches that are often necessary to complete such transactions. Dugas said the vote is a sign of the widespread concern about an underground market that demands as much as $500 for a favorable housing number.

“It sets up a dichotomy between haves and have nots,” she said. “Students are paying a lot of money to get into the nicest housing units, and some are feeling a lot of pressure to sell their numbers to afford tuition and things for the year.”

I'm trying to understand this. Denying poor students a chance to sell their number for cash reduces the pressure? They get tuition discounts? No. They still have to pay. All Kenyon is considering doing is preventing students from being able to make some money to pay their bills.


(Nod to Tenured Man)

Thursday, April 10, 2008

He may be the Maestro, but he's no Paul Volcker

Great column yesterday by Caroline Baum on how Volcker is standing tall while Al keeps shrinking, despite his increasingly desperate attempts to shore up "the legacy thing".

an excerpt:

Volcker is tall; Greenspan isn't. Volcker is a man of few words; Greenspan won't shut up. Volcker retired as Fed chair and avoided the limelight; Greenspan is doing everything possible to make sure the light shines on him.... What really separates the two men, however, is the legacy issue. Volcker is content to let his record speak for itself: He inherited inflation of almost 15 percent and bequeathed a rate of 4 percent to posterity. It took two recessions to get there, but he did the heavy lifting on inflation. Greenspan is desperate to deflect the blame for a credit crisis he called ``the most wrenching'' in 50 years. He can write his autobiography, which he did last year, but he can't write his epitaph.

Well, actually, I wouldn't put it past him!

Universe to Greenspan: Zip It Mister!!

It has been hard to avoid big Al's push back against his critics (here is an example), but my man Willem Buiter is having none of it. He deconstructs Al's self defense on his blog at the FT.

The whole post is well worth reading but I especially agree with his first three points which I reproduce here:

  1. The Greenspan Fed (August 1987 - January 2006) did indeed contribute, through excessively lax monetary policy, to the US housing boom that has now turned to bust.
  2. The Greenspan-Bernanke put is real. It is an example of an inappropriate monetary policy response to a stock market decline.
  3. The Greenspan Fed focused erroneously on core inflation, rather than using all available brain cells to predict underlying headline inflation in the medium term.

Amen brother! You know, from exposure to his academic writings I'd always assumed I wouldn't like Buiter, but he is one righteous dude!

Wednesday, April 09, 2008

Sticking up for Starbucks

I'd like to report that I have successfully ordered and had approved a customized Starbucks gift card with the slogan "Free minds and free markets" written on it.

I think that fairly well refutes the innuendos that David Boaz was throwing their way in the WSJ, claiming that they were somehow anti-capitalism or anti-free markets (and thus hypocritical) when they didn't approve "laissez faire" as a phrase on a gift card.

In Boaz's "research" on the subject, he tried liberal slogans in English and Spanish and got them approved. He didn't try either a liberal slogan in French, or a pro-market slogan in English.

Free minds and free markets was the first and only slogan I tried. It just seemed obvious that a fair test of Boaz's anti-Starbucks thesis was to use English. Not that many people in the real world know what the heck laissez faire means!!

So, lovers of liberty, set your minds at ease and consider these two pieces of advice: (1) go ahead and get your coffee at Starbucks, (2) Be wary of empirical work from CATO.

It's funny....'cause it's true!

A "video" of a pizza order

(Nod to JB)

I'm a baaaaad man!!


Hat tip to Shawn

The 64,000 euro question

"Why do Foreigners Invest in the United States?" by Kristen Forbes. NBER working paper (ungated version here). Her answer is bad news for us; she says it's because of our highly developed financial markets!!

Here's the abstract:

Why are foreigners willing to invest almost $2 trillion per year in the United States? The answer affects if the existing pattern of global imbalances can persist and if the United States can continue to finance its current account deficit without a major change in asset prices and returns. This paper tests various hypotheses and finds that standard portfolio allocation models and diversification motives are poor predictors of foreign holdings of U.S. liabilities. Instead, foreigners hold greater shares of their investment portfolios in the United States if they have less developed financial markets. The magnitude of this effect decreases with income per capita. Countries with fewer capital controls and greater trade with the United States also invest more in U.S. equity and bond markets, and foreign investors “chase returns” in their purchases of U.S. equities (although not bonds). The empirical results showing a primary role of financial market. development in driving foreign purchases of U.S. portfolio liabilities supports recent theoretical work on global imbalances.

Tuesday, April 08, 2008

Acemoglu strikes again

MIT's Daron Acemoglu, the James Brown of economics has a new NBER working paper, "A Theory of Military Dictatorships". An ungated version is available here.

Here is the abstract:

We investigate how nondemocratic regimes use the military and how this can lead to the emergence of military dictatorships. Nondemocratic regimes need the use of force in order to remain in power, but this creates a political moral hazard problem; a strong military may not simply work as an agent of the elite but may turn against them in order to create a regime more in line with their own objectives. The political moral hazard problem increases the cost of using repression in nondemocratic regimes and in particular, necessitates high wages and policy concessions to the military. When these concessions are not sufficient, the military can take action against a nondemocratic regime in order to create its own dictatorship. A more important consequence of the presence of a strong military is that once transition to democracy takes place, the military poses a coup threat against the nascent democratic regime until it is reformed. The anticipation that the military will be reformed in the future acts as an additional motivation for the military to undertake coups against democratic governments. We show that greater inequality makes the use of the military in nondemocratic regimes more likely and also makes it more difficult for democracies to prevent military coups. In addition, greater inequality also makes it more likely that nondemocratic regimes are unable to solve the political moral hazard problem and thus creates another channel for the emergence of military dictatorships. We also show that greater natural resource rents make military coups against democracies more likely, but have ambiguous effects on the political equilibrium in nondemocracies (because with abundant natural resources, repression becomes more valuable to the elite, but also more expensive to maintain because of the more severe political moral hazard that natural resources induce). Finally, we discuss how the national defense role of the military interacts with its involvement in domestic politics

Justice: Yer doin' it Wrong

Ah Italy, where, "even traffic tickets can be appealed to the nation's highest court. Italy's courts are so clogged that the statute of limitations on most felonies expires before a final verdict can be reached. Claudio Urciuoli, a criminal defense lawyer in Rome, says he often reassures his clients: "Don't worry, you'll never go to prison.""

They are not content to rest on their laurels, though. Consider the following:

"Less than two years ago, Italy's prison system faced a crisis: Built to hold 43,000 inmates, it was straining to contain more than 60,000.

So the government crafted an emergency plan. It swung open the prison doors and let more than a third of the inmates go free.

Within months, bank robberies jumped by 20%. Kidnappings and fraud also rose, as did computer crime, arson and purse-snatchings. The prison population, however, fell so much that for awhile Italy had more prison guards than prisoners to guard.

In Italy, it sometimes seems that no bad deed goes unpardoned."

Don't you hate it when the article you are linking to gives a better punchline than you ever could? Kudos to you Gabriel Kahn, nicely done!

#4 with a bullet!

According to this morning's WSJ, Economics is the 4th most remunerative undergrad major (based on starting salaries), beating accounting, finance, and marketing.

Bad news for philosophy majors though: they come in dead last, behind even elementary ed majors.

Somewhere, Ludwig Wittgenstein must be smiling.

Hey Mungowitz: polysci isn't even on the list? Are there really no polysci majors left?

Monday, April 07, 2008

Marc Andreessen to the rescue

Over at pmarca, he has a nice list of possible follow-up stories to the NY Times' recent scare piece;

blogging = death.

Check them all, but my fave is: Hitler Probably Blogged!!

P.S. Hey maybe the Times's story explains where Mungowitz has got to!!

The best sentences I've read today

From TNR's J. Chait:

The persistent weakness of American liberalism is its fixation with rights and procedures at any cost to efficiency and common sense. Democrats' reluctance to push Clinton out of the race is the perfect expression of that delicate sensibility.

There is some point at which a candidate's chance of winning becomes so low that her right to continue is outweighed by the party's interest in preparing for the general election. Does Clinton have a chance to become president? Sure. So does Ralph Nader. Clinton's chances are far closer to Nader's than to either Obama's or John McCain's.

uh, Snap???

David Boaz defends our freedoms

In a case of crack investigative journalism, Cato's David Boaz gets to the bottom of Starbucks' outrageous policy of not allowing the phrase "laissez-faire" to be printed on their personalized gift cards.

Or rather doesn't get to the bottom of it. He claims it can't be because it's too political because he succeeded in getting a "people not profits" card (Boaz refers to that phrase as a "socialist slogan"). He claims it can't be because it's foreign because he got a "si se puede" card (Boaz refers to that phrase as "The Senator's (Obama) political campaign slogan").

Boaz and his assistant also made two phone calls to Starbucks but failed to get a satisfactory explanation for this outrage against liberty. Now that is exhaustive research my friends. No wonder this got published on the WSJ's editorial page

I'm guessing no one at Cato will use a si se puede or a people not profits gift card, so I am making a generous offer to buy these pariah cards from them at 50 cents on the dollar! Maybe that will ease the sting. Also perhaps Cato could set up a chain of coffee shops that sold laissez faire labeled gift cards and drive freedom-hating Starbucks out of business!

Our chief weapon is fear and a hedgehog?

In NZ, William Singalargh is being charge with assault with a weapon; viz a hedgehog!

Police allege that William Singalargh picked up the hedgehog and threw it several yards to hit a 15-year-old boy in the North Island east coast town of Whakatane on Feb. 9.

"It hit the victim in the leg, causing a large, red welt and several puncture marks," police Senior Sgt. Bruce Jenkins said Monday.

Jenkins said Singalargh, 27, was arrested shortly after the incident on a charge of assault with a weapon. He is expected to appear in court again on April 17.

His lawyer, Rebecca Plunket, said Singalargh intends to plead innocent. The maximum penalty for the charge is five years in prison

Sunday, April 06, 2008

The Neverending Story

of Zimbabwe's presidential election has taken several even more bizarre turns. First and foremost, Mugabe's party, (ZANU-PF) has demanded a recount, even though no initial vote totals have been released!! Really.

The Movement for Democratic Change, which claims its leader Morgan Tsvangirai won the March 29 presidential ballot outright, said it would not accept a recount, did not want a runoff and pressed ahead with legal attempts to force publication of the results.

"How do you have a vote recount for a result that has not been announced? That is ridiculous," said opposition spokesman Nelson Chamisa.

He accused the ruling ZANU-PF party of vote fraud, saying that police have told opposition leaders that the ruling party has been tampering with ballots since early last week

Tsvangirai probably hasn't made things easier by publically telling Mugabe that he needn't fear for his safety in an MDC ruled Zimbabwe: "I want to say to President Robert Mugabe: 'Please rest your mind, the new Zimbabwe guarantees your safety,'" Tsvangirai told a news conference.

That to me is a bit like the general manager or owner giving a public vote of confidence to a coach days before firing him. I read that as saying, "don't let the door hit you in the butt on the way out."

Finally Thebo Mbeki has taken this opportunity to show that he indeed lives on another planet. Remember that the vote was supposed to be announced a week ago and absolutely no information has been released to date while you savor this Mbeki gem:

A growing chorus that includes Prime Minister Gordon Brown of Britain and Kofi Annan, the former United Nations secretary general, has appealed for a speedy release of the vote count. But on Saturday, President Thabo Mbeki of South Africa, perhaps the most important international player in Zimbabwe’s electoral drama, counseled patience after meeting Mr. Brown in London, news agencies reported.

“I think there is time to wait,” said Mr. Mbeki, who was appointed by a regional bloc of nations to mediate in Zimbabwe but has been accused by Mr. Tsvangirai of favoring Mr. Mugabe. “Let’s see the outcome of the election results.”

Lol, sure thing Thabo, let's wait til your pal Bobby M fill out a few more "replacement ballots" and let the vote total come out maybe in June? How'd that be?