Saturday, April 25, 2009

Mungowitz in Deutschland--Day 0

Got on the plane today. Kissed the lovely Ms. Mungowitz, hugged the younger younger Munger at the airport.

Arrived in Atlanta's Hartsfield-Jackson Immovable Airport.

I have a middle seat, on a 767, can't change it. Plane is packed.

10 mins after pushback time, the pilot comes on. Announces we have to get off.

"There is a SUBSTANTIAL fuel leak...." (His emphasis).

We got off, rather spiritedly.

Now, after losing fuel, they are blowing smoke. "We'll get ANOTHER 767 for you, right away." Like they have a bunch of them, lined up like at the Hertz lot.

NEWWS FLASH: They claim to be boarding. Perhaps I'll still get out today. I'd much rather be lost in Germany than spend the night in some horrible Hotlanta airport hotel.

Are these substitutes or complements?

Another eggsellent "markets in everything"!

Hat tip to Greg Weeks for the vid and LeBron for the meme.

Friday, April 24, 2009


Me and Mungowitz's boy, Albert Pujols, is off to a great start. Cards are 11-5 and Albert leads the NL in homers (6) and RBI (21) while batting .345, slugging .724, only striking out 4 times and amassing an OPS of 1.184!

If only he could pitch!!

A match made in heaven

Back in my Northern Virginia days, Tyler and I shared a pair of season tickets to the (then) Washington Bullets. One of the best parts of the games was the performance art of one Robin Ficker, a leather lunged fan who sat right behind the visitors bench. He would scream non-sequitors like "YOU CAN"T BEAT OUR WASHINGTON BULLETS" or other gems like "PHONE CALL FOR MICHEAL JORDAN". You could hear him throughout the building.

He is a lawyer and we used to joke about how he behaved in court. "YOU CAN'T CONVICT OUR LITTLE PURSE SNATCHER" or "PHONE CALL FOR CLARENCE THOMAS".

People, now he's a Republican political activist. Isn't that just about perfect? He just won the GOP nomination for the Montgomery Md. county council.

Phone call for Steny Hoyer!

hat tip to Zach M.

Thursday, April 23, 2009

Incomplete Markets

This was almost a "markets in everything" post but the product was "recalled" two days after its debut. The product was an Iphone app called "Baby Shaker"!


"According to screen shots posted on several Web sites, "Baby Shaker" displayed black-and-white line drawings of a baby. The iTunes description included the line, "See how long you can endure his or her adorable cries before you just have to find a way to quiet the baby down!" Once the iPhone owner finishes shaking the device, the on-screen baby is depicted with large red X's over its eyes."

Is this a great country or what?

Grade inflation

Robert Reich takes to the interwebs to grade Obamanomics:

Read the whole thing, but here's the pithy essence:

"The 10-year budget gets an A. It's an extraordinary vision of what America can and should become, including universal health insurance and environmental protections against climate change.

The stimulus package gets a B. Good as far as it goes but doesn't go nearly far enough.

The last grade is for the bank bailouts. I give them an F. I'm a big fan of this administration, but I've got to be honest. The bailouts are failing."

Well Bob, that's a hell of a curve you're using. Here are an alternative set of grades.

10 year budget: C-/D+. Remember this is supposed to be about economics, not social engineering and the budget leaves government too large and the deficit way too large.

Stimulus package: C/C-. Even if one grants the administration the existence of a decent sized multiplier, there were too many conflicting goals to make the spending truly timely and stimulating.

Bank bailouts: B-. We put public money into bank capital to avoid a meltdown of the financial system. To my mind what made the great depression so protracted and hideous was the meltdown of the financial system, so I applaud these actions as necessary. However, the stops and starts, the changes in plan, the non-transparency, the politicization makes giving a truly good grade impossible here.

Here's another Obamanomics grade:

Auto Industry restructuring: F. So far, it's just talking tough while continuing to shovel money into non-functioning firms (and, no it's not the same thing as the bank bailout, not nearly). Especially nuts is the idea that banks who have taken TARP money should take a big loss on the Chrysler bonds they hold, essentially to show they are "team players". You can't really simultaneously prop up and undermine them can you? Well I guess you can, but maybe you shouldn't.

Wednesday, April 22, 2009



This is my last post from American soil.

I am moving to Germany, until August, anyway.

Okay, not "moving," exactly. But I'll be teaching at Univeristat Erlangen-Nurnberg
April - August.

The motto of the Universitat is "advance through networks." I do like that one. It is much better than the old German motto: "advance through Belgium."

A good German reason to shop online (courtesey of Robert Porter)

Britain's got Talent??

More like Britain's got Freaks.

LeBron has a post asking why is Susan Boyle so popular? I think it's because most people haven't actually heard what classical singing is supposed to sound like so they go gaga over a crummy version of it like that offered by Boyle or Potts. Either that or it's just Eraserhead style sick voyeurism.

Markets in everything, antique cellphone edition

Here's the deal:

"Got an old Nokia 1100 sitting around? You may be sitting on a fortune... albeit with a catch.

Certain circles are said to be paying upwards of $32,000 for the handsets, at least those made in Nokia's Bochum factory in Germany.

Why? According to reports, the criminal underground has found a way to hack into the phones' firmware to allow for illegal bank transfers by reprogramming the phone number on the handset.

Changing the phone number would give hackers the ability to send and receive text messages via the handset, which would in turn open the door for completing basic bank transactions, particularly in Europe."

As always, a big hat tip to LeBron for the meme

A Somali pirate in King Arthur's court!

Yes, people, we got ourselves a pirate trial coming up in NYC!

"Wali-i-Musi is the first person to be tried in the United States on piracy charges in more than a century. He was flown from Africa to a New York airport and taken into custody ahead of a court hearing Tuesday."

Here are some fun quotes. First Wali's mom:

his mother appealed to President Barack Obama for his release. She says her son was coaxed into piracy by "gangsters with money."

"I appeal to President Obama to pardon my teenager; I request him to release my son or at least allow me to see him and be with him during the trial," Adar Abdirahman Hassan said in a telephone interview with The Associated Press from her home in Galka'yo town in Somalia.

Next up is the executive director of the Somali Justice Advocacy Center (based in Minnesota!!!), Omar Jamal:

"What we have is a confused teenager, overnight thrown into the highest level of the criminal justice system in the United States out of a country where there's no law at all," Jamal said. Wali-i-Musi speaks no English and may never have attended school, he said.

Finally, Ron Kuby esq., barrister extrordinaire:

"I think in this particular case, there's a grave question as to whether America was in violation of principles of truce in warfare on the high seas," said Kuby. "This man seemed to come onto the Bainbridge under a flag of truce to negotiate. He was then captured. There is a question whether he is lawfully in American custody and serious questions as to whether he can be prosecuted because of his age."

Comments: (1) is Obama somehow stopping Wali's mom from attending the trial? We won't give her a Visa?(2) it is so awesome that the SJAC is in Minneapolis! (3) God, I love lawyers!

Tuesday, April 21, 2009

Words of wisdom from Naomi Klein??

I say yes! Here is her WaPo piece from Sunday:

"I vote to banish Larry Summers. Not from the planet. That wouldn't be nice. Just from public life.

The criticisms of President Obama's chief economic adviser are well known. He's too close to Wall Street. And he's a frightful bully, of both people and countries. Still, we're told we shouldn't care about such minor infractions. Why? Because Summers is brilliant, and the world needs his big brain.

And this brings us to a central and often overlooked cause of the global financial crisis: Brain Bubbles. This is the process wherein the intelligence of an inarguably intelligent person is inflated and valued beyond all reason, creating a dangerous accumulation of unhedged risk. Larry Summers is the biggest Brain Bubble we've got.

Brain Bubbles start with an innocuous "whiz kid" moniker in undergrad, which later escalates to "wunderkind." Next comes the requisite foray as an economic adviser to a small crisis-wracked country, where the kid is declared a "savior." By 30, our Bubble Boy is tenured and officially a "genius." By 40, he's a "guru," by 50 an "oracle." After a few drinks: "messiah."

The superhuman powers bestowed upon these men -- and yes, they are all men -- shield them from the scrutiny that might have prevented the current crisis. Alan Greenspan's Brain Bubble allowed him to put the economy at great risk: When he made no sense, people assumed that it was their own fault. Brain Bubbles also formed the key argument Greenspan and Summers used to explain why lawmakers couldn't regulate the derivatives market: The wizards on Wall Street were too brilliant, their models too complex, for mere mortals to understand.

Back in 1991, Summers argued that the subject of economics was no longer up for debate: The answers had all been found by men like him. "The laws of economics are like the laws of engineering," he said. "One set of laws works everywhere." Summers subsequently laid out those laws as the three "-ations": privatization, stabilization and liberalization. Some "kinds of ideas," he explained a few years later in a PBS interview, have already become too "passé" for discussion. Like "the idea that a huge spending program is the way to stimulate the economy."

And that's the problem with Larry. For all his appeals to absolute truths, he has been spectacularly wrong again and again. He was wrong about not regulating derivatives. Wrong when he helped kill Depression-era banking laws, turning banks into too-big-to-fail welfare monsters. And as he helps devise ever more complex tricks and spends ever more taxpayer dollars to keep the financial casino running, he remains wrong today.

Word is that Summers's current post may be a pit stop on the way to the big prize, Federal Reserve chairman. That means he could actually make "maestro."

Mr. President, please: Pop this bubble before it's too late."

pretty good, no? Geithner could go on this list too, I think.

Note From An Old Friend: Credit Markets Need Some Fiber

A note from an old friend in high school. Interesting perspective. Disintermediation is a disaster.

Dear Mike:

I’ve been in the RV business for 29 years now, and I own Travel Country RV center along with my business partner.... We have 3 stores located in Lake City Florida, Valdosta Georgia, and Augusta. And I can tell you that this is the toughest market I have ever seen, and I see no signs of improvement. We’ve lost our floorplan financing which was a credit line of $15 million and don’t know if we can replace it. The only two major players left are Bank of America, and GE and you know what’s been going on with them. So here we are, that small business that everybody talks about, and we’re on the verge of going down the drain just like so many others, and the government is doing nothing to help us. All the bailout money and stimulus, and we can’t get banks to lend to dealers for inventory, and we can’t get banks to loan to customers without making the conditions so unbelievably unreasonable that we lose 50% of the deals we write now. We’re hanging in there, and liquidating our inventory and hoping that something happens that will loosen this market up but it’s not looking promising, as your article so clearly points out.

He's referring to the Limbaugh Letter interview. It's not available without a subscription, but here is an excerpt:

What a pleasure to speak with the very insightful economist Dr. Mike Munger — chair of the political science department at Duke University, North Carolina’s 2008 libertarian candidate for governor, and all-around brilliant guy:

RUSH: Dr. Munger. I’m really looking forward to this — thank you for making time here.

MUNGER: I’m glad to speak to the leader of the entire conservative movement.

RUSH: (Laughs) First, I want to go back to something you said a while ago, and then ask you to update it. You had an interesting analogy from Milton Friedman to describe Obama’s economic policies: you said it’s like steering a huge ship with an old rubber band for a steering cable; the cable stretches, it gets hung up, and you turn it and turn it, nothing happens; finally it does turn, you go too far, and then you turn it back and you can’t stop it. Can you relate what you meant to Obama’s stimulus and budget, and whether things have changed since that analogy?

MUNGER: Milton Friedman, the Nobel Prize-winner in economics, said that there were two problems with monetary policy. One, people might not want to do the right thing. But even if people want to do the right thing — the Federal Reserve, the fiscal
policies of the federal government — the economy is like a giant ship; it takes a long time to turn it. But even worse, in our attempts to coordinate economic policy, the steering cable is like an old, stretchy rubber band. So if we turn one way, the ship does nothing for a long time, maybe months; and we pour in more and more
resources, and it looks as if nothing’s happening, and so we start to try to do too much. Eventually, the great ship of the economy starts to respond. But as it starts to turn we say, “Okay, okay, that’s enough,” and we start to turn back the other way, but nothing happens.
Now, in the time since I originally talked about that analogy Milton Friedman made famous long ago, the high-powered money supply of the United States has been growing at a rate that we haven’t seen I think ever. It’s grown at a rate of ten percent per
month over the last six months.

RUSH: Which means we’re printing money, right?

MUNGER: In effect, we’re printing money. We’re raising the pressures for inflation, to the point where there’s no way we can stop it. Once the ship does start to turn, we’re going to have inflationary pressures the likes of which we have not seen since the ’78, ’79 huge increase, which was then due to the Arab oil embargo. This time, we’re doing this to ourselves. I would say two or three years from now the inflation rate is going to be at least 12 or 15 percent, and it may be higher. We can’t turn that fast, and we’re trying to turn too much too quickly. We don’t know what we’re doing; we’re as likely to make things bad as good. But the one thing that we do know for sure is that there’s going to be a period of inflation.

Oh yeah, we're all that (and a bag of chips)

"To be a complete economist, a man need only be a mathematician, a philosopher, a psychologist, an anthropologist, a historian, a geographer, and a student of politics; a master of prose exposition; and a man of the world with experience of practical business and finance, an understanding of the problems of administration, and a good knowledge of four or five languages. All this in addition, of course, to familiarity with the economic literature itself."

---G.L.S. Shackle

Hat tip to Ed Lopez

Sunday, April 19, 2009

Tenure trouble?

In today's WAPO, Francis Fukuyama writes the following pithy op-ed:

"I'm a tenured professor. But I'd get rid of tenure.

Tenure was created to protect academic freedom after a series of 19th-century cases when university donors or legislators tried to remove professors whose views they disliked. One famous instance in the late 1800s involved progressive movement leader Richard Ely, whose critics accused him of socialism and tried to remove him as an economics professor at the University of Wisconsin.

The rationale for tenure is still valid. But the system has turned the academy into one of the most conservative and costly institutions in the country. Yes, conservative: Economists joke that their discipline advances one funeral at a time, but many fields must wait for wholesale generational turnover before new approaches take hold.

The system also hamstrings younger untenured professors, making them fearful of taking intellectual risks and causing them to write in jargon aimed only at those in their narrow subdiscipline: Thus in economics, people have "utility functions" instead of needs and wants.

These problems are made worse by a federal employment law that bars universities from instituting mandatory retirement. Deans and provosts can't remove elderly professors who take up slots that could fund two or three younger colleagues. Two developments are about to exacerbate this problem: a decline in university enrollments as the baby echo generation passes through college, reducing overall demand for professors; and the financial crisis, which has decimated professors' retirement savings, giving them incentive to hold on to their sinecures even longer.

Things don't have to be this way. Academic freedom can thrive in think tanks and research institutes. U.S.-style tenure doesn't exist in Britain or Australia. Japan grants tenure but forces professors to retire at a relatively early age (60 at Tokyo University).

The freedom guaranteed by tenure is precious. But it's time to abolish this institution before it becomes too costly, both financially and intellectually. "

Before we begin, it behooves us to remember that Mr. Fukuyama also wrote the following:

"What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such... That is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government."

After that lovely cheap shot, let's go back to his current essay.

Starting with the simply weird, consider the notion that: "The system also hamstrings younger untenured professors, making them fearful of taking intellectual risks and causing them to write in jargon aimed only at those in their narrow subdiscipline: Thus in economics, people have "utility functions" instead of needs and wants. "

Does Francis really think that only people in a narrow subdiscipline can understand the concept of a utility function? Does he think that utility functions are something other than a way to put needs and wants into an equation for modeling purposes? Does he really think that only untenured economics professors use this "jargon".

Now going to the deeply flawed, consider the idea that: "Academic freedom can thrive in think tanks and research institutes."

Wow. People, do you think there is academic freedom at the Cato Institute? The Economic Policy Institute? That is a VERY disingenuous sentence!

One part of the essay I do agree with is the idea that tenure plus no mandatory retirement can cause some problems, but not because " Deans and provosts can't remove elderly professors who take up slots that could fund two or three younger colleagues." To me the real problem with the combination is that elderly professors will have an extremely difficult time relating to students, doing quality research and making appropriate choices about who to tenure among a department's untenured faculty. Of course there are exceptions, and I do not know how real this problem is (does anyone know how many working professors in the US are over 70?), but it is a problem for academia, just like it is for the US Supreme Court.

So, I'm a tenured professor, and I'd keep tenure, but I promise to quit before I'm 70!