Saturday, December 05, 2009

Peak Idiocy

Of all the idiotic things that people believe, the whole "peak oil" thing has to be right up there. It is literally impossible for us to run out of oil. We have never run out of anything, and we never will.

If we did start to use up the oil we have...(though, counting shale oil, we still haven't used even 10% of the total KNOWN reserves on earth, and there are lots of places we haven't looked)...but suppose we were on our way to using it up. Three things would happen.

1. Prices would rise, causing people to cut back on use. More fuel effcient cars, better insulation on houses, etc. Quantity demanded goes down.

2. Prices would rise, causing people to look for more. And they would find more oil, and more ways to get at it. Quantity supplied goes up.

3. Prices of oil would rise, making the search for substitutes more profitable. At that point (though not now!) alternative fuels and energy sources would be economical, and would not require gubmint subsidies, because they would pay for themselves. The supply curve for substitutes shifts downward and to the right.

This is econ 101. Even Paul ("I sold my soul to become a wanker") Krugman would credit this scenario.

But we ignore econ 101. And so we get this debacle. Ethanol was bad enough when it was just inefficient to produce and wasting more energy than it created. But we actually went further and bought too much of the stuff.


(Nod to Anonyman)

If You Tell Me This is Photo-Shopped, I'm Singing "LALALALA" Real Loud

(Nod to Jake Russ)

Warmer....You are Getting Warmer....

What an interesting guy this is. The title of the piece is "Why I think that Michael Mann, Phil Jones and Stefan Rahmstorf should be barred from the IPCC process."

He wrote this little firecracker.


These words do not mean that I think anthropogenic climate change is a hoax. On the contrary, it is a question which we have to be very well aware of. But I am also aware that in this thick atmosphere -and I am not speaking of greenhouse gases now- editors, reviewers and authors of alternative studies, analysis, interpretations,even based on the same data we have at our disposal, have been bullied and subtly blackmailed. In this atmosphere, Ph D students are often tempted to tweak their data so as to fit the 'politically correct picture'. Some, or many issues, about climate change are still not well known. Policy makers should be aware of the attempts to hide these uncertainties under a unified picture. I had the 'pleasure' to experience all this in my area of research.


Gosh, this seems like a long time ago now.

Friday, December 04, 2009

Markets in everything: Stepford Wife edition

Mrs. Angus and I had been debating whether Tiger's wife would leave him or stand by her man. Turns out she is planning to lease herself to him:

Elin and Tiger Woods had a prenuptial agreement, as expected. The couple is undergoing marital counseling, as you'd also expect. And now The Daily Beast is reporting that Elin Woods is renegotiating that prenup to get an immediate $5 million payout from her husband and as much as $55 million more to stay with him for two more years.

The initial prenup was worth $20 million after 10 years of marriage. However, the Chicago Sun-Times' Bill Zwecker has reported that Elin Woods will receive an immediate payment "into an account she alone controls," and that the 10-year timeframe -- which began when they married in 2004 -- has been shortened and the value increased "substantially."

The Daily Beast quotes "a lawyer familiar with the couple's negotiations" in reporting that the term of the prenup has been shortened to seven years, and that a series of staggered payments could increase the total value to $75 million.

But apparently there's also a behavioral component to all this: Elin Woods must "be a dutiful wife in showing up with him at social events and in public as if they were still the perfect couple, and sign a nondisclosure form that will prevent her from ever telling her story."


This pretty much negates any of the sympathy I had for Mrs. Woods, but I am surprised (guess I am naive) that Tiger's reaction to this situation is to just try to buy his way out of it.

The Grand Game!

It's been a while since we played "The Grand Game." That's where KPC readers are referred to a remarkably idiotic piece of writing, and invited to go medieval on its ass. Here is this week's fresh meat:

What is Fair Pay for Executives? An Information Theoretic Analysis of Wage Distributions

Venkat Venkatasubramanian, Entropy, December 2009, Pages 766-781

Abstract: The high pay packages of U.S. CEOs have raised serious concerns about what would constitute a fair pay. Since the present economic models do not adequately address this fundamental question, we propose a new theory based on statistical mechanics and information theory. We use the principle of maximum entropy to show that the maximally fair pay distribution is lognormal under ideal conditions. This prediction is in agreement with observed data for the bottom 90%–95% of the working population. The theory estimates that the top 35 U.S. CEOs were overpaid by about 129 times their ideal salaries in 2008. We also provide an insight of entropy as a measure of fairness, which is maximized at equilibrium, in an economic system.

Me, I just enjoy saying "Venkatasubramanian." But: Wait! There's more. Here's an article about Venkat Venkata's work, here. An excerpt:

As a professor of chemical engineering at Purdue University, Indiana, Venkatasubramanian seems an unlikely candidate to dictate CEO salaries. It turns out that the maths behind thermodynamics, the study of heat and energy, can also be applied to economics.


(Nod to Kevin L, who is according to maximum entropy is underpaid by 130%)

Bay Em Vay Zwei

The second BMW xmas present from the LMM!And here I thought I had been naughty...

Thursday, December 03, 2009

Bay Em Vay Ein

A tale of two BMW's, part one: Guess who owns this?Hint: it was taken in the Duke faculty parking lot, behind the Econ building.

Hint 2: Yes, Tim Bollerslev works at Duke.

I bet there wasn't much competition for THAT vanity plate.

Sweet dreams are made of these

KPC has discovered the reason why Allen Iverson unretired so quickly. It is all right here!

Exit Strategies

The economy is growing again, but unemployment is extremely high and perhaps still rising (or if you prefer a positive spin, productivity is growing very rapidly). Inflation is not obviously lurking over the horizon, but memories of the Arthur Burns era are still fresh in the minds of Fed policymakers, and they fear that inflation expectations will become "unanchored".  Sooner or later the Fed will have to unwind its quantitative easing and raise short term rates.

Philly Fed President Charles Plosser says this should happen sooner:

Arguing that the U.S. economy has entered sustained recovery and forecasting growth rates of 3% for next year and 2011, Plosser said the Fed must take “appropriate steps to withdraw or restrict the massive amount of liquidity that we have made available to the economy.”

This could include hiking rates from their current level near zero even “before unemployment or other measures of resource slack have diminished to acceptable levels.”

I have a very high opinion of Charles Plosser. He is an excellent and perceptive economist. I agree that Fed policy should be forward looking and that no one wants a return to the 1970s.

The traditional role of the Fed is supposed to be "to take away the punch bowl just as the party gets going," and Plosser's views are very much in that tradition (though in a much more sophisticated way).

However, the Fed runs the risk of "taking away the medicine before the patient has recovered" and to my mind, in this circumstance (i.e. worst recession in a long long time, arguably worse than 1982), that is the greater risk than the concerns outlined by Plosser. 

If I were a Fed President (YIKES!!), I guess I would make speeches like this one in public, but support leaving easing in place until unemployment and other measures of slack have turned the corner in private.

Wednesday, December 02, 2009

Taking off the blinders

Great post by Seth Roberts on the so called Climategate affair.

Here is a particularly good bit:

According to Stephen Dubner, “if you are fan of science, this [Climategate] is a pretty grim day.” I think it’s a great day. As great as the day the first math text was printed. It’s the first time a large number of people are getting a real lesson in science. Mainstream media coverage is pathetic but there are so many bloggers it doesn’t matter. You can read about it endlessly. As you do, you will painlessly and unforgettably learn what Leonard Syme taught his students for years, and what I blogged about a few weeks ago: The apparent consensus on any difficult issue is more fragile than it looks. You are learning how conclusions are actually arrived at. It isn’t pretty — which textbook writers and professors, seeking dignity above all else, fail to mention.

Well said!

This explains a lot!

Thanks to KPC reader Rolo for this gem.

Assessing the damage in Honduras

Greg Weeks, one of my two go to guys for Latin America, points to this generally good article in FP (yes I know I once called it the the "People Magazine of international affairs).

Granted, this author also seems angry that the coup-makers "got what they wanted", but he does not urge non-recognition of the election results. 

However, he does point out that the election even if universally recognized will not mean that the underlying problems in Honduras have gone away:

Even better, international favor could have been conditioned on an effort to rethink a surreal constitution that leaves the country vulnerable to future democratic breakdowns. Or perhaps a serious introspection among the Honduran elite about the introduction of social reforms of the sort that are desperately needed in a country afflicted by the pervasive poverty and obscene inequalities that make Zelaya-style populism an irresistible temptation.

He also points out that Zelaya was his own worst enemy throughout the whole affair:

To be sure, this is no vindication of Zelaya, an irresponsible politician who is as much a part and a product of the Honduran elite as anyone. The ousted president played his hand poorly: His unsurpassed ability to ramble confirmed all the prejudices about him, and his racking up miles in Venezuelan President Hugo Chávez's plane proved a dead-end route to regaining the presidency. Zelaya will go down in history as the single biggest culprit in his own coup. He was right about one thing (revising the Honduran constitution) but for the wrong reasons (he wanted to tamper with term limits and re-election clauses).

All in all a good piece, well worth reading. Honduras did not start down the road of Venezuela, Bolivia, and Ecuador this time, but the underlying conditions that made Chavez and his minions so popular among big segments of their country's populations still exist in Honduras.

Tuesday, December 01, 2009

New Spoon!

As KPC readers know, I am in the tank for Spoon. They have a new album coming out and you can hear a song from it called "written in reverse" below, though you have to put up with a little bit of NPR BS to get to the song. Enjoy!

Third Reich Meets Third Reviewer

(If you want to see the original subtitles, they are here.)

(Nod to both the Ward Boss and to Tommy the Driving Brit)

Robert Reich: you cannot be serious!

So I was looking through Mark Thoma's links and found this amazing piece by Robert Reich, which begins as follows:

"One out of four homeowners is now under water, owing more on their homes than the homes are worth. Why? The biggest single factor behind the housing crisis is rising unemployment. According to the latest ABC-Washington Post poll, one out of every three Americans has either lost their job or lives in a household with someone who has lost a job. Today it takes two and sometimes three incomes to buy the groceries and pay the mortgage or the rent. So if one of those incomes is gone, a homeowner can't make the payment."

Yikes and double Yikes!

Let me get a tad personal here.

Robert, even the dimmest of bulbs can surely recognize that it's the housing crisis that caused the unemployment, not the other way 'round! 

And even a burnt out bulb should realize that being underwater is not coming from unemployed workers being unable to pay their mortgages. While that is a bad and concerning thing, it has basically nothing to do with being underwater. 

Being underwater is owing more than your home is worth. Robert, you even give the correct definition of underwater in your first sentence but then go hideously off the rails thereafter. 

So Robert, or the typing gibbon who is writing these posts under your name, please get your shit together and try to make a little bit of sense. After all you were our nation's 22nd Secretary of Labor!

Monday, November 30, 2009

Deans can't read, but they can count

In a new NBER working paper (ungated version here) Hammermesh and Pfann show that citations and not number of publications affect economists' reputations, but the number of publications and not citations affect economists' salaries, thus demonstrating the fundamental truth expressed in the title of this post.  It is a fun paper, well worth reading, though I am not enamored with their proxies for reputation.

Recognize the Honduran Elections

The Presidential election in Honduras was Sunday. Turnout is reported as fairly high (61%) and Pepe Lobo appears to be the clear winner. Many in the Latin American blogosphere are urging that the US not recognize the elections or normalize their relations with Honduras (here is an example).

I just don't understand that. This was a regularly scheduled election.  To the best of my knowledge, neither of the candidates complained that their campaigning was being restricted or that conditions for the vote were unfair. There were tons of rich country observers monitoring the elections. Neither candidate was a "Zelaya guy".

I agree that Zelaya never should have been deported. I am not totally sure whether or not his removal from office (as a separate issue from his deportation) was legitimate. But I don't see how these issues justify not recognizing the results of this election.

Nor am I sure at this point what would satisfy the folks who are advocating non-recognition. 
Are they asking for the election results to be tossed and Zelaya returned to office open-ended? 

Do they think that if Zelaya is re-instated and new elections were held in a month that the outcome would be different?

This is just speculation on my part, but I think Honduras is paying for the past sins of previous US governments in the region. We did horrendous things in Guatemala and Argentina (to name a couple cases I am familiar with), and now people who disagreed with and protested against or grew up resenting our government because of these heinous acts are having their day even though the current situation is not remotely similar.

One of the funniest (at least to me) reasons for not recognizing the results given in the blog post I linked to above is that we should not do so in the name of supporting regional consensus. Meaning I guess that the Venezuela, Ecuador, Bolivia and Nicaragua bloc should have veto power over US policy in Latin America.