Monday, October 31, 2011

World Series Thoughts

A video I took before the game started, in Dallas. Back when Texas had a team in the world series. Before they lost to the Cardinals, I mean. My team. We won.

The trip back last Monday was a little tough. (I had to give, and grade, 180 midterms for two different classes. Just now getting caught up...) Fine to Atlanta. Upgraded to first class, on time. Had a scotch, finished reading BOOMERANG. Nice.

But Flight ATL to RDU delayed, after boarding, because of mechanical difficulties involving wing. No complaints, I want the wings to work. But we sat for 55 mins at gate. I was in middle seat in coach (let me say again: MIDDLE seat in COACH). Guy on my right weighed 450 pounds, at least. His giant ass was almost parted down the middle when he tried to sit down and the armrest was down. Of course he wanted to raise the armrest, which I resisted. If you give a giant fat guy Sudetenland, he always wants the rest of Czechoslovakia.

But the stewardess said we had to raise the armrest. They got him an extender for the seatbelt, a good 12 inches, but the seatbelt still wouldn't buckle. (Seriously, the man was big). They got him an 18 inch extender, and it buckled.

So did I: got to sit under this guy's left butt cheek for 55 mins at the gate, and then for an hour flight. Guy on my left let me scoot over onto his seat a little, but my own ass is none too small (though it does fit between the armrests, and inside a standard seatbelt, without any problem). Pretty miserable.

Lose a house, lose a pet?

This is a sad little consequence of the housing bubble, one I had not considered.

Was pet relinquishment related to foreclosure?: A spatial research note from California during the height of foreclosure

Gregory Morris & Jennifer Steffler, Social Science Journal, forthcoming

Abstract: Media reports asserted that the 2008 foreclosure crisis unleashed a rash of pet relinquishments, especially in California's central valley, an area that had the highest U.S. foreclosure rates that year. However, reports on the foreclosure/ relinquishment association relied on anecdotal evidence provided by animal shelters, which is known to be flawed since many people do not give a reason for relinquishment, or give a false reason. This study compares separate data sources for the central valley city of Turlock, 2008: foreclosure data from the Stanislaus County Recorder's Office (N = 235) and relinquishment data from the Turlock Animal Shelter (N = 248). Contrary to shelter driven data, these separate data sources reported only one shared address. However, spatial analyses show that foreclosures and relinquishments were concentrated in similar areas. Analyses also show that unaltered (non-spayed/neutered) dogs are more likely to be concentrated in lower socioeconomic (SES) areas. While our initial finding contradicts recent media reports, spatial analyses verify other research on the social problems associated with concentrated foreclosures, and lend support for policies designed to reduce breeding during heighted periods of foreclosure and other economic crises.

Are Markets Better Than Altruism?

One of the cool parts of the Radford's 1945 article, "The Economics of a POW Camp," is this observation:

Our supplies consisted of rations provided by the detaining power and (principally) the contents of Red Cross food parcels – tinned milk, jam, butter, biscuits, bully, chocolate, sugar, etc., and cigarettes. So far the supplies to each person were equal and regular. Private parcels of clothing, toilet requisites and cigarettes were also received, and here equality ceased owing to the different numbers despatched and the vagaries of the post. All these articles were the subject of trade and exchange.

Very soon after capture people realised that it was both undesirable and unnecessary, in view of the limited size and the equality of supplies, to give away or to accept gifts of cigarettes or food. “Goodwill” developed into trading as a more equitable means of maximising individual satisfaction.

Trading is more equitable than goodwill? Think about it. I notice you don't eat your beef ration, and I ask for it. You give it to me, because it will be wasted else. But then next month, and the next, and... at some point, the fact that the beef has value means that I should pay you something. YOU may not value the beef, but it has value in the market. I am taking value, and you get nothing. Altruism, if systematized and made permanent, is inequitable. If the state FORCES us to act as if we were altruistic, then it isn't altruism at all.

SMBC illustrates the same problem: Altruism is at best an emergency solution, because it quickly devastates those it is intended to help. If you love something, set it free to find a way to support itself by producing something someone else wants to buy.

(A nod to David D)

UPDATE: From the intrepid Pels-min: PJ O'Rourke nailed it in 1994, "All the Trouble in the World," when he was baffled by Somalia's fields filled with (unharvested) crops. "Somalia was being flooded with food aid… Rice was selling for ten cents a pound in Somalia, the cheapest rice in the world. But what, we thought, did that mean to the people with the fields of corn and sorghum and the herds of goats and cattle? Are those now worth nothing, too? Had we come to a Somalia where some people some- times starved only to leave a Somalia where everybody always would?"

Housing Prices, Gay/Lesbian Homeowners, and Political Views

The Influence of Gay and Lesbian Coupled Households on House Prices in Conservative and Liberal Neighborhoods

David Christafore & Susane Leguizamon, Journal of Urban Economics, forthcoming

Abstract: Gays and lesbians perceive themselves to be targets of discrimination in the housing market. Previous research has found that the presence of gays and lesbians is associated with increased  ousing values. We reconcile the perceived discrimination and research results by classifying neighborhoods as more conservative or liberal according to voting outcomes of the ”Defense of Marriage Act”. Using a data set comprised of over 20,000 house sale observations, we show that an increase in the number of same-sex coupled households is associated with an increase in house prices in more liberal neighborhoods and a decrease in house prices in more conservative neighborhoods. This suggests that gay and lesbian coupled households do experience prejudice in conservative neighborhoods. 

Nod to Kevin Lewis

Private investment is irrelevant for growth....who knew?

Grand Game time, folks! James Livingston, "economic historian" at Rutgers, goes off in the Obama Admin Daily Newsletter:

As an economic historian who has been studying American capitalism for 35 years, I'm going to let you in on the best-kept secret of the last century: private investment - that is, using business profits to increase productivity and output - doesn't actually drive economic growth. Consumer debt and government spending do. Private investment isn't even necessary to promote growth...A big part of the problem is that we doubt the moral worth of consumer culture...Consumer spending is not only the key to economic recovery in the short term; it's also necessary for balanced growth in the long term. If our goal is to repair our damaged economy, we should bank on consumer culture - and that entails a redistribution of income away from profits toward wages, enabled by tax policy and enforced by government spending.

I wonder if he wrote that on his government-invented iPad? F*****g idiot. He apparently thinks that if you write about stuff you don't understand, that makes you an "economic" historian. Yes, sure, I'm a snob. But the guy has a PhD in History from Northern Illinois U. A two-time loser.*

Please do share your thoughts....

(Nod to Kevin Lewis, who as always is in no way complicit with my surly "analysis"; he just sent the link)

*A clarification:  Northern Illinois has a number of quite good departments, including econ.  But the history department is a doctrinaire marxist ideological chop shop.

Sunday, October 30, 2011

Phone call for Dr. Bernanke

In the 1970s, in response to a real shock (the oil crisis), the Fed poured money into the economy.

What did we get? Stagflation. No growth and high inflation.

Paul Volcker (with support from President Reagan and the newly Republican controlled Senate) dramatically reduced money growth, ratcheting interest rates skyward, and creating a sharp recession.

But inflation fell and has stayed under control ever since.

Now, in response to a real shock, the Fed has been pouring money into the economy and we are not getting any growth. At least this time we are not getting inflation either.

What is Christina Romer's takeaway from the historical episode I describe above? That Bernanke needs to "steal a page from the Volcker playbook" and ....... pour even more money into the economy!


Look, the Fed did a great job as lender of last resort in the 2008 crisis. Without their actions, I believe things would have been very much worse.

But beyond the financial panic, we have had a very adverse real shock to the economy (housing price collapse). People are not as wealthy as they thought they were by a long shot. Households are trying to de-leverage and rebuild their balance sheets. The Federal government is making it hard for them to do that by taking on ever more debt on their behalf. This isn't a nominal shock, it's a real shock.

We have no evidence that monetary policy can or should be used to attempt to offset real shocks. The Fed absolutely did their job in the crisis. They should stand ready to guard against potential deflation. But the Fed simply does not have a magic wand to "heal the economy". It's not a patient, Bernanke is not a doctor, and monetary expansion is not medicine.

Friday, October 28, 2011

Your Euro Death Watch update

1. Yields on Italian sovereign debt are RISING today!

2. Euro officials are going hat in hand to Beijing. Rumor is that China wants their loan to the EU to be DENOMINATED IN RENMINBI!

YIKES and double YIKES!

Age-Based Taxes--Age Discrimination?

The Surprising Power of Age-Dependent Taxes

Matthew Weinzierl
Review of Economic Studies
, October 2011, Pages 1490-1518

Abstract: This paper provides a new, empirically driven application of the dynamic Mirrleesian framework by studying a feasible and potentially powerful tax reform: age-dependent labour income taxation. I show analytically how age dependence improves policy on both the intratemporal and intertemporal margins. I use detailed numerical simulations, calibrated with data from the U.S. Panel Study of Income Dynamics, to generate robust policy implications: age dependence (1) lowers marginal taxes on average and especially on high-income young workers and (2) lowers average taxes on all young workers relative to older workers when private saving and borrowing are restricted. Finally, I calculate and characterize the welfare gains from age dependence. Despite its simplicity, age dependence generates a welfare gain equal to between 0.6% and 1.5% of aggregate annual consumption, and it captures more than 60% of the gain from reform to the dynamic optimal policy. The gains are due to substantial increases in both efficiency and equity. When age dependence is restricted to be Pareto improving, the welfare gain is nearly as large.


Do Stronger Age Discrimination Laws Make Social Security Reforms More Effective?

David Neumark & Joanne Song, NBER Working Paper, September 2011

Abstract: Supply-side Social Security reforms to increase employment and delay benefit claiming among older individuals may be frustrated by age discrimination. We test for policy complementarities between supply-side Social Security reforms and demand-side efforts to deter age discrimination, specifically studying whether stronger state-level age discrimination protections enhanced the impact of the increases in the Social Security Full Retirement Age (FRA) that occurred in the past decade. The evidence indicates that, for older individuals who were "caught" by the increase in the FRA, benefit claiming reductions and employment increases were sharper in states with stronger age discrimination protections.

(nod to Kevin Lewis)

Help! I need a CDS for my CDS

To me, one of the strangest parts of the latest EU bailout-rescue fund saga is Brussels' seeming determination to kill off the sovereign CDS market. I wrote about it back in July, but in this current round, the issue is much more stark.

Private investors are supposed to take a "voluntary" 50% haircut on Greek sovereign debt. The reason why EU negotiators worked so hard to get it called voluntary is that they don't want the default to trigger payment clauses in CDS contracts.

Why they so strenuously object to this is not fully clear (at least to me). Maybe they feel like if the CDS don't pay out, it's not really a default? Maybe they think they are being clever and "punishing evil speculators"?

But it's not really that simple.

First, the ability to buy insurance puts more people into the Greek (and Italian and Spanish) sovereign debt markets than would otherwise be there. At the margin, invalidating these insurance policies will drive people out of the very markets the EU is begging people to enter.

Second, if I ran a bank that held Greek debt that was hedged via CDS, I would fight like hell against accepting the haircut. After all it's voluntary, right? I'd wait around until a haircut that would trigger my insurance payment came on the horizon. And, if I somehow got strong-armed into taking the "voluntary" 50% reduction, I'd litigate and fight like hell to force the insurance to be paid to me anyway.

However, I guess I wouldn't worry too much about the CDS not triggering yet though. This deal, as a best case scenario (i.e. everyone accepts the voluntary haircut and Greece hits all its promised revenue and deficit targets for the next decade) reduces the Greek Debt/GDP ratio from 180% to 120% in 10 years! Why doesn't a 50% haircut cut the debt ratio by at least 50% (more if you think the Greek economy will expand at all in the next 10 years)? Because at this point a lot of the debt is payable to the ECB, IMF and other "official" creditors who are not taking a seat in the barber's chair.

Thursday, October 27, 2011

It's all in the (sow) genes

Idaho pig farmer (and James Carville look-alike) Lindy Hinkelman has won over $300,000 in the last 3 years playing fantasy baseball.

Lindy says pig-farming is good training for baseball management:

"Raising pigs and this baseball thing really go together," he told the Times. "There are certain things in farming -- keeping track of productivity, indexes for your sows, the genetic lines there."

Time for an Angus breakdown:

This is just one of many reasons why the internet is so great. Isolated, useless, genius can emerge and be rewarded.

I think pig farming would help real world baseball executives by getting them accustomed to how players behave.

The accomplishment seems remarkable, but given the innumerable number of fantasy leagues and players, wouldn't we expect something like this to happen at some point? Is it really pig-inspired baseball genius or is it more like a guy winning the lottery twice in a row (see Kahneman on the illusion of skill)?

Wednesday, October 26, 2011

Not the Onion?

Man throws Molotov cocktail at Taco Bell because Chalupa has too little meat.  But he made the Molotov cocktail with a plastic bottle.  So of course it didn't break, just burned slowly

The folks at "Occupy George" want to use dollar bills as...I'm not really sure. But they really feel sincere about it.

How do you make a business go bankrupt? Have Prez Obama praise it, and then give it a subsidy! If that is not the cause, the Prez O is not spending our money very wisely...

Wiener still standing tall! And spending his campaign funds on.... stuff he wants.

12 "Eye-opening" TED talks
for political scientologists.

(Nod to Dave S., the Blonde, and Anonyman)

My Economics Haiku

Please consider voting for my economics Haiku:

Those kids blame the banks
Is Wall Street pre-occupied?
Next: capital strike

Or vote for one of the others...


OWS: They are the government now...

Email from Chris S, this little gem of an article...

Money quote:

"The other day, I took in $2,000. I kept $650 for my group, and gave the rest to Finance," he told the Post. "Then I went to them with a request -- so many people need things, and they should not be going without basic comfort items -- and I was told to fill out paperwork. Paperwork! Are they the government now?"

To be fair, that kind of bureaucracy is also characteristic of a group that OWS fears FAR more than government. And that is....corporations!

William Niskanen's classic BUREAUCRACY AND REPRESENTATIVE GOVERNMENT, in fact, was written after he worked at Ford Motor Company.

Look, governments MUST have bureaucracy. Large corporations, too. They deal with government, they have to use forms and fill out reports.

If you don't like bureaucracy, then my friends at OWS, you must want that thing we call "capitalism," with its emphasis on new, dynamic firms and innovation. What you are getting a taste of is corporatism, where the line between government and large corporations simply disappears.

"Bye, Kids! Have fun storming the castle!" ("Do you think it will woik?" "It would take a miracle...")

Obama's Books: Good Enough to Buy, But Not to Read?

A strange juxtaposition of two stories.

1. U.S. taxpayers pay for more than 7,000 copies of Pres O's books. Mostly "Dreams from My Father," apparently.

2. Those same books have been banned as subversive and objectionable, containing material "potentially detrimental to national security"

Now, I should say two things. I thought "Audacity of Hope" was more like "The Mendacity of a Dope," a load of ideological pap. But "Dreams From My Father" is terrific book, very moving, honest. (Well, maybe not honest, exactly, but coming across as honest). I read DFMF twice, and really liked it.

Second, the fact that Prez O's books were banned as "detrimental" doesn't mean much. In the supermax setting, newspapers and books that contain any passages that even refer to foreign policy are banned.

Still, it does seem odd that these two things are happening together. Our embassies are handing out the book to foreigners as inspirational, UNLESS those foreigners happen to be in jail.

(Nod to the Blonde)

It's 1986 again in America....

Dutch Boy sends this interesting TIME story from 1986.

The US bombed Libya, even back when Libya had airplanes.

The answer to the question is "nothing"

Tyler asks, What happens in the Super Committee Fails?

I answer, Nothing of any significance.

Less than $1 trillion in actual cumulative total spending cuts ($167 billion is "interest savings") starting in Fiscal 2013 and going on for the next 8 years after that.

Pretty much nothing happens to entitlements. Defense is cut an average of $50 billion per year (from a base level of around $900 billion +).

Look, we are spending $3.6 trillion + every year! Knocking $95 billion/year off for 9 years is really less than chump change.

Of course the Super Committee will fail; failure is basically costless.

Tuesday, October 25, 2011

Nero and Caligula are a' feudin'!

Well, OK, it's actually Sarkozy and Berlusconi, but that's more than close enough. Sarky is really worked up about the ECB, which is good, except what he's worked up about is that there might be two Italians and (gasp) no Frenchmen on its board come November.


Yeah, Nicky, that's really the problem that you should be focussed on. Well done. At least you are proving that you play a mean fiddle.

At the latest rescue summit, these two giants of statecraft managed to feud over the future of one, Lorenzo Bini Smagi (aka the Lusitania?):

Sarkozy has made clear that France wouldn't accept a situation under which Italy would have two of its nationals on the board and France none, when Frenchman Jean-Claude Trichet is replaced at the helm of the Frankfurt-based bank by Draghi in November.

After repeating in piqued diplomatic language Friday that it expected Bini to quit the ECB board to honor a commitment he made this summer to step down by year-end and clear the way for a French official to join the ECB board, the French government appeared to be losing its patience.

But Berlusconi argued it was none of its responsibility. "We offered him prestigious posts, but Bini Smaghi declined them all," Berlusconi said, adding that he bore no responsibility in the spat. "At a certain point, I asked [ Sarkozy]: What should I do? Kill him?"

Monday, October 24, 2011

KPC Dallas summit

Mungo and I converged on Dallas yesterday to take in game 4 of the WS. We warmed up by eating a pile of pupusas (the official food of KPC by the way) and then headed to the game early, to see STL take BP (which was pretty much the only time they hit the whole game). While the outcome was disappointing, the experience was tremendous.

The Rangers have a great ballpark, super fans and a fun team. Their only real drawback is GEORGE F. BUSH, who threw out the first pitch to a standing O!

Some foties:

Sunday, October 23, 2011

Do We Remember Bad Things More? Not in Baseball...

Effects of Event Valence on Long-Term Memory for Two Baseball Championship Games

Carolyn Breslin & Martin Safer, Psychological Science, forthcoming

Abstract: We investigated how event valence affected accuracy and vividness of
long-term memory for two comparable public events. In 2008, 1,563 fans answered questions about objective details concerning two decisive baseball championship games between the Yankees (2003 winners) and the Red Sox (2004 winners). Both between- and within-groups analyses indicated that fans remembered the game their team won significantly more accurately than the game their team lost. Fans also reported more vividness and more rehearsal for the game their team won. We conclude that individuals rehearse positive events more than comparable negative events, and that this additional rehearsal increases both vividness and accuracy of memories about positive events. Our results differ from those of prior studies involving memories for negative events that may have been unavoidably rehearsed; such rehearsal may have kept those memories from fading. Long-term memory for an event is
determined not only by the valence of the event, but also by experiences after the event.

(Nod to Kevin Lewis)

LAGNIAPPE: Along those lines...

They see me rollin'. They hatin'

Despite last minute hysterics from the usual suspects, the first Mexican truck rolled across the border on Friday. Mexico has now cancelled the $2 billion in tariffs they put on American products in retaliation for Obama's 2009 cancellation of an earlier Mexican trucking pilot program.

According to the NAFTA agreement of 1994, Mexican trucks were supposed to have full access to border states by 1995 and access to all of the USA by 2000 (Canadian trucks enjoy this same full access)!

The current "program" for letting Mexican trucks in is so protectionist that only 11 companies are going through the certification process. There are electronic monitors to measure how long the trucks are running. There are drug tests and English tests for the drivers. All things we do not mandate for drivers of American trucks. If it really is a safety issue, then these measures should be applied in a non-discriminatory manner.

The mix of protectionism and racism on display here is unseemly to say the least.

Friday, October 21, 2011


Turns out that the TSA considers the US Bill of Rights to be subversive. You can be arrested for reading it.

Just stand in line and keep quiet, and hope they don't notice you.

Liberty Book Club?

Anybody up for a virtual Liberty Book Club?

KPC fan Brandon Capitalism writes, "Would you be willing to ask on your blog, if any students would be interested in starting a Students for Liberty / IHS Book Club?

They would read the books listed on your blog. And they could, if they wanted, have debates about the books on our Capitalism Facebook page (up to 40k members). I would love that and help them as an Leadership Institute field rep... The vision is for students to organize themselves to study the ideas that Universities don't.

Sounds good to me. Contact Brandon Capitalism if you want more info...

Giving Stimulus a bad name since 2009

President O's $447 billion stimulus, er, I mean jobs bill has been rejected by Congress. Now the pieces are coming up in the Senate, one at a time.

The first was a proposal to give $35 billion to State and Local governments to support salaries for teachers, cops & firefighters. It's paid for by a surtax on people earning more than $1 million a year.

People, when did stimulus come to mean shoveling money to public employee union members only? when did stimulus come to mean tax increases?

According to WAPO, $30 billion of the money would "Support almost 400,000 education jobs for one year".

Notice that the word "support" in there means they are not claiming almost 400,000 new jobs; this is the old "create or preserve" rhetoric.

Suppose the bill really could deliver 400,000 new teaching jobs for one year. At $75,000 per job/year that would be a marvel of government efficiency. But why teachers? why not $37,500 for 800,000 construction workers? Or cut a check for $18,750 to 1.6 million unemployed people selected by lottery? or $9,375 to 3.2 million unemployed people?

This isn't stimulus; this is simple redistribution from a likely pro GOP group to a likely pro Democratic Party group. No wonder the Republicans are against it.

(Yes I know that one can argue schoolteachers have a higher MPC than do "millionaires", but that would be at best a second order effect, and this effect would be bigger if the money went straight to more unemployed people)

Our Correspondent, Anonyman

Anonyman, in the field for a KPC exclusive, sends this report:

"Apparently, they have agreed on a sign!"

Thursday, October 20, 2011

Someone needs to give orders....

They were Rousseauvians. But now Hobbes is starting to sound more right. Time someone was in charge; too many liberties.

From the OWS folks in the stinky park....

From today’s battles, it’s not yet clear who will win the day: the organizers or the organized. But the month-long protest has clearly grown and evolved to a point where a truly leaderless movement will risk eviction — or, worse, insurrection.

As the communal sleeping bag argument between Lauren Digion and Sage Roberts threatened to get out of hand, a facilitator in a red hat walked by, brow furrowed. “Remember? You’re not allowed to do any more interviews,” he said to Digion. She nodded and went back to work. But when Roberts shouted, “Don’t tell me what to do!” Digion couldn't hold back.

“Someone has to be told what to do," she said. "Someone needs to give orders. There’s no sense of order in this fucking place.”

Not even anarchists believe in anarchy. Someone needs to give orders. Hee hee!

This is actually a reason that I do support the OWS thing, nationwide. It's time kids found out that "spontaneous politics" is dangerous nonsense. In markets nobody has to give orders, because someone would OWN that spot. In this communal arrangement where some are just more equal than others, someone has to give orders, and eventually will have to bring in guns to back up those orders.

A nice WSJ article on the proceedings. Catatonic? Heh.

(Nod to Anonyman, whose wife gives HIM orders)

Apologies and Social Capital

Apologies as Signals: With Evidence from a Trust Game, Benjamin Ho, Management Science, forthcoming

Abstract: Apologies are part of a social institution designed to restore frayed relationships not only in daily life but also in the domains of corporate governance, medical malpractice litigation, political reputation, organizational culture, etc. The theory shows that in a general class of moral hazard games with imperfect information about agents with two-dimensional type, apologies exhibit regular properties — e.g., apologies are more frequent in long relationships, early in relationships, and between better-matched partners. A variant of the trust game demonstrates that communication matters in a manner consistent with economic theory; specifically, the words “I am sorry” appear to select equilibrium behavior consistent with the theory's main predictions.


Does Social Capital Promote Safety on the Roads?, Matthew Nagler, Economic Inquiry, forthcoming

Abstract: I present evidence that social capital reduces traffic accidents and related death and injury, using data from a 10-year panel of 48 U.S. states. The econometric challenge is to distinguish the causal effects of social capital from bias resulting from its correlation with unobservable characteristics by state that influence road risks. I accomplish this by employing snow depth as an instrument, and by restricting attention to summertime accidents. My results show that social capital has a statistically significant and sizable negative effect on crashes, traffic fatalities, serious traffic injuries, and pedestrian fatalities that holds up across a range of specifications.

(Nod to Kevin Lewis)

Ron Paul loses his Sh*t in the WSJ


Here is the money quote: "The Fed's quantitative easing programs increased the national debt by trillions of dollars."

Good luck 'splainin' that one away. The article is here.

People, Ron Paul is a gynecologist, not an economist (and it shows).

To crib a phrase from Mungowitz, he's "straight up loony tunes".

Which is why he fits in so well with the rest of the Republican presidential candidates.

Joe Biden Loses His Sh*t in Philadelphia

VP Biden sells jobs bill to 4th graders. Really.

That man J-Bide is a loony tune, straight up. This is pretty amazing. Howard Dean just said "yeaaaah!"

Nod to the Blonde

UPDATE: Jason Mattera asks an obvious question: How many of the rapes that Prof. Biden is upset about could have been prevented with the half billion US dollars poured down the Solyndra rathole? Those Solyndra jobs were pretty "temporary," weren't they, J-Bide?

Cards Rap

Nod to the Blonde

Big Foot, but not THAT Big!

Man orders size 14.5 slipper, gets size 1450.

Not convinced that this is real. A little too pat, at the expense of those "wacky Chinese." Still, a good picture. "Real" slipper at lower left.

(Nod to the Blonde)

UPDATE: More and more questions. "His oversized foot..." FOOT? He only has one? Apparently, because he even says, "I am going to sell it on Ebay." Not them, it. Wouldn't it be a little strange to get an order for one slipper? I mean, even separately from the size 1450 thing, which is probably pretty common, if Art Carden buys shoes. Overall, I cry bullish.

An observation entirely appropriate for the Euro debt summiteers

“After one strips out all the window dressing there is no way to make $6 billion in liquidity worth more than $6 billion in liquidity. But there are several creative ways to make it less.”

~Ken Rogoff [quoted by Paul Blustein in his wonderful book "And the Money Kept Rolling In (and Out)]

You have been E-mooned!

Assicons: The new cool emoticons for people over 30 who never do anything cool, so that this isn't actually cool, either. Nonetheless... assicons:

(_!_) a regular ass

(__!__) a fat ass

(!) a tight ass

(_*_) an ass hole

{_!_} a ass out on the floor shakin'

(_o_) an ass that's been around

(_x_) kiss my ass

(_X_) leave my ass alone

(_zzz_) a tired ass

(_E=mc2_) a smart ass

(_$_) Money coming out of his ass

(_?_) Blonde Ass


Wednesday, October 19, 2011

Irony is Dead. Up is Down. Through the looking glass....

"Our" solar producers are mad because their subsidies (which are more than 100% of their total revenues!!!) are not as big as the Chinese subsidies.

Pot, I want you to meet Kettle. Hey! Which is which? You subsidized government activities all look the same.

Nod to Anonyman.

Caption Contest

So, please put in the best caption, in comments. (This picture is from the SFL conference at Salem College; pic taken by Mark Benfield).

Feel free to click for an even more ridciulous image...


you make the call

Whattya think people? Is this an endorsement of vegetarianism or nymphomania?

Some Facts on Green Jobs

Now, I understand that no sensible person actually believes that "green jobs" are going to save the economy.

Saying that we need green jobs is just a way of justifying increased government payments to corrupt shell corporations like Solyndra. I bet the perpetrators of this fraud are actually pretty amused that it worked.

But here are some facts: even if the maximum good things happen, the impact will be negligible. And it is not likely that anything good will happen.

(A nod to @mfbellemare , who is not complicit in my interpretation)


VdR on the stimulus. Nice resource.

Jeff Miron on consequentialist and deontological libertarianism. Since no more than 2% of the US population knows what either of these words mean, it is an illustration of why libertarianisms' cultivated irrelevance is like to survive.

The "Battle for Brooklyn." Very cool, very interesting.

The Mitt-tator calls China out for being a currency manipulator. After we have implmented the Rogoff-Krugman plan and have 6% inflation, presumably the Mitt-tator will call out the U.S. for being a currency manipulator.

Bail-out? Fannie and the Fred have PLENTY of cash, thank you very much. And the Ben Bernank says there is more where that came from.


My kingdom for a counter-factual

Popular Macro debates are getting so tiresome, strident and pointless. The standard of what counts as evidence has fallen to ludicrous levels, even for people who should know better.

For example, consider this common line of reasoning: Tax cuts don't work. After all, taxes were higher under Clinton than under Shrub and the economy performed better under Clinton.

Or this one: Stimulus doesn't work. After all, we spend $800 billion and unemployment just kept going up.

Both of these arguments are non-germane and virtually worthless because no reasonable counterfactual is being offered.

We are not told what would have happened under Clinton if taxes had been cut, or what would have happened under Shrub if taxes had not been lowered. The comparison offered holds no water because it is unreasonable to assume that the only factor that varied between the two time periods relevant for explaining economic outcome is the Federal Tax Schedule. We know that is not true.

The stimulus argument is even weaker. To evaluate its effect, we need to know what would have happened without its application. It is unreasonable to assume that the only factor that varied which was relevant for unemployment was the stimulus.

People, anytime you see a strong empirical claim being made and the supporting evidence is a graph or an anecdote or simple comparison of A vs. B, ask yourself: what is the counterfactual being offered? Is it reasonable?

To my mind, it is precisely because Macro is a non-experimental field (meaning convincing counterfactuals are difficult to find) that it has become so politicized. People can look at the same events and draw diametrically opposing conclusions.

Macro has all the interesting questions, but Lord is it hard to find good answers!

Tuesday, October 18, 2011

She Blinded Greece with Science

Benford's Law, applied to Greece.

Thanks to the ward boss...

Oh, and that's "Benford," not Binford.

Props to P-Kroog

Interesting, thoughtful article.

By Paul Krugman, lest we forget that he is actually a very smart man.

Blackberries Cause Traffic Accidents

The effect, 40%, seems implausible. Still, interesting.

The original article in the UAE paper, THE NATIONAL.

Nod to the Blonde.

Looks like Intraders have discovered Hibbs

On Intrade this morning, Obama's re-election probability is 47.9%, which is the low point for this contract:

This low-ish probability of re-election is now in line with what my main man Doug Hibbs has been predicting via his "Bread & Peace" model, namely Obama loses (Hibbs is predicting 46.2% of the vote for Obama):

(clic the pics for a more Romnian view)

Hibbs has been predicting an Obama loss since May, which is when the Intrade Obama contract peaked at 70% (due to his RIP OBL bounce).

All hail the Stormin' Mormon?

The View of the Fed, 1912

(Click for a dramatically more paranoid image)

And a shout out nod to Plasmaquatic Technolithic Mist

Monday, October 17, 2011

Euvoluntary Exchange In NRO

Interesting NRO piece by Reihan Salam on Euvoluntary Exchange. Nice examples. And the question at the end is the right one. I just don't know the answer.

What are the sources of the disparities we care, or rather that we should care, about?

Occupy Wall Street--Carter Administration Edition

When you have an inept President who blames employers for not hiring people, you get this. From 1979, but quite fresh and timely. No jazz hands, though, which is a shame.

Nod to the Blonde...


Where seldom is heard, a missing G word, and judges do strip searches all day!

At the World Scrabble Finals in Warsaw, one competitor accused another having hidden the "G" tile. He demanded that the miscreant be strip searched to find the missing tile.

In the US this would have been done, as long as the guy spoke Spanish and had committed a traffic offense. But not in Poland.

(Yes, the title is intentionally misspelled)

Nod to the Blonde

Jazz Hands

Wow, these OWS guys are even more self-congratulatory than this blog! And we are (mostly) kidding when we self-congratulate.

I do like the jazz hands.

Finally, Angus, in spite of his protests, would last about 90 seconds in this crowd before he got into a fight with one of them. Their diagnosis, I will admit, is in some important ways correct. Their prescription for cure? Not so much. Angus's claim that he could be in that crowd and not make fun of it.... that made ME laugh. Good one.

we going to Sizzler!

One of the few good things about going to Wash U was Cardinals baseball. Me and Mungo were there for some pretty good years (1980-84). We would sit in the LF bleachers (I want to say that tickets were $1.50 but that can't be right can it?), smoke cheap cigars, chant obscenities at the people in the RF bleachers and hate the Cubs. A couple times we even took the train to Chicago and caught a Cards-Cubs game at Wrigley. Jeez, no wonder we almost didn't make it through the program!

Sunday, October 16, 2011

I'm down with OWS!

I, Angus, just want to tell you all that, contrary to my good friend and co-blogger Mungowitz, I am totally down with and supportive of the OWS movement.

The ever stronger link between big finance and big government is really hurting this country, and who knows, maybe OWS will start the ball rolling somehow to improve things.

Even if it doesn't, who are they really hurting?

I say let 'em protest in peace with a minimum of mockery.

Heck, if there was an Occupy Norman, I might check it out. Maybe find some elevators where we could push all the buttons at once....

Special Bagels or Something

Actual Egyptians near the park of OWS in New York are scornful of the "pain" of rich kids whining about hardship.  An interesting bit...

As Anonyman summarizes it:

But although she said the destitution in the square reminded her of the Third World, the occupation didn’t strike her as another Tahrir. “We were fighting for a big, big thing: for life, to eat, against a giant snake that would kill us.” Unsurprisingly, she employs a smart breakfast metaphor: “Here, they’re not fighting to eat, say, regular bread, but … special bagels or something.”

The Grand Game: Farmer Bob Edition

In the contest for worst analogy ever, "The economy is like a farm" has GOT to be a serious contender. In today's NY Times, Bob Shiller trots it out for a spin.

Let's start at the beginning. I grew up in a rural setting and have worked on farms. Farmers don't wait until winter to fix their fences. If there is a break in the fence and the cows are loose, you fix the damn fence then and there. Same with your barn. If there's a hole in the barn roof in June, you don't wait until January to patch it.

Then there's what I think is the weirdest part of the analogy:

The farm needn’t go into debt to do this. All able-bodied people on the farm are expected to contribute their labor, an imposition we can view as an informal tax.

In my experience, farmers laid off many of their seasonal workers after the harvest. Those that were kept on, to deal with animals or to do projects were paid hourly wages. They weren't "expected to contribute their labor".

The farmer had to save part of the farm's income to pay for what workers were needed in periods when the farm wasn't making a lot of income.

(A lot of the kids I knew that lived on farms were expected to make this "contribution" year round and they really really hated it. Winter was their favorite time of year because they didn't have to work nearly as hard)

I acknowledge that in some areas of the country and for some types of farms, business is seasonal. However, farmers mostly deal with that seasonality by laying off workers!


The funniest thing of all about this is probably the title of the HTML link for the article which I reproduce here for your enjoyment (I am NOT making this up):

Friday, October 14, 2011

James Madison on Property: Your Dog Does Not Own Your House

(A piece I wrote for the Miller Center) "A Scholar’s View: James Madison’s View on Property"

     Americans believe that property is necessary for liberty. But how can my liberty be enhanced by an institution that excludes me from so many things? In his article for the National Gazette in 1792, James Madison addressed this paradox squarely. The quaint thing about his resolution of the paradox, almost pathetic in retrospect, is the completely assured way in which Madison describes how property, far from being a threat to liberty, is its very foundation. In our modern age, property seems to mean nothing more than that portion of the fruits of our labor that government deigns let us keep. How did things change so much?
      Madison, of course, was a primary architect of the Constitution. He defined property, in that 1792 article, as “that dominion which one man claims and exercises over the external things of the world, in exclusion of every other individual. In its larger and juster meaning, it embraces every thing to which a man may attach a value and have a right, and which leaves to every one else the like advantage.”
      Madison continues: “In the former sense, a man’s land, or merchandise, or money is called his property. In the latter sense, a man has a property in his opinions and the free communication of them.” His conclusion? “As a man is said to have a right to his property, he may equally be said to have a property in his rights.” This is no Buddhist koan, a semantic paradox like “What is the sound of one hand clapping?” What Madison meant, and what the U.S. Constitution should mean, is that rights of conscience and rights of property are of a piece, mutually reinforcing. Each American owns his or her rights, and our right to own property is what affords autonomy and independence from the collective will.
      Our freedoms are not guaranteed by majority rule, or by “rights” of political representation. Those things are threats to our true rights. Otherwise there would be no 1st Amendment protection for the press, for speech, or for rights of conscience. Likewise, and on the same level (because the same essential thing), there would be no 5th Amendment protection against the taking of property without due process and without just compensation.
     Madison drives home the point later in the piece, when he describes a “just” government, presumably the kind of government the Founders hoped the Constitution might create. His words ring true, but hollow, for us today, for many of Madison’s premonitions of injustice have come to pass if fact. “A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species; where arbitrary taxes invade the domestic sanctuaries of the rich, and excessive taxes grind the faces of the poor; where the keenness and competitions of want are deemed an insufficient spur to labor, and taxes are again applied, by an unfeeling policy, as another spur; in violation of that sacred property, which Heaven, in decreeing man to earn his bread by the sweat of his brow, kindly reserved to him, in the small repose that could be spared from the supply of his necessities.”
       The American Constitution creates a powerful institution, government, to protect our rights to property, and to defend our property in our rights. The core of those liberties are those properties, of both industry and of conscience, that we have fairly obtained for ourselves by work and reflection. Yet our industry is now yoked to a “partnership” with government for the rich, who are told that corporations and equal protection under the law are privileges, granted by the good graces of government and by no essential right. And the consciences of the poor are to be shaped by dependence on public viands to sustain the body, the mind, and the soul. Relieved of all responsibility, they are robbed of all rights.
        Our government, because it protects my rights and my property, has come to claim that my rights are a privilege, and my property is not my own. I would answer, and I suspect that Madison would agree, that such claims are akin to believing that your dog owns your house.

Remy on Occupy Wall Street

UPDATE: The camera woman is crying, the guy is crying, and they are bizarrely, defending some conception of property rights. This is OURS, you can't take it. "We" can take yachts, and money, and property, from OTHER people, but not from this snotty kid.

Vladette the Impaler?

So, Raleigh women are getting war chests? Does that look like this?

Aaaaieee! Run for lives! She will stick you with her war chest!

(Nod to the Blonde)

In the Navy...

This is disturbing. Or it would be, if it were not so predictable.

that's nacho cheese

I love Mexico but MAN oh MAN are things messed up there. Check this gem from the WSJ:

Days after the Casino Royale fire, Monterrey's leading newspaper published a video showing the brother of the PAN mayor of Monterrey, Fernando Larrazabal, receiving wads of money at one Monterrey casino. The paper suggested that many of the city's casinos, which lack legal permits, were paying off city officials—and drug gangs—to stay open.

The mayor has denied wrongdoing. His brother, Jonas Larrazabal, says the money was payment for selling cheese to the casinos.

There is a grand Mexican tradition of the politician's brother as bagman (Raul Salinas, you KNOW I'm talking about you), and apparently the PAN is not immune to it.

The whole article is interesting and depressing. A thriving illegal casino industry operates with impunity across the nation.

Good Grief: What does Obama have against Lee Myung-bak?

The South Korean president is here to celebrate the US-Korea FTA signing. Here is what our President has planned for him:

"Obama on Friday will then take Lee for a road trip to Detroit, home of the U.S. auto industry."

Let's break this sentence down, Tosh.O style:

1. A "road trip"? Are they DRIVING FROM DC to DETROIT? Who's paying for gas? If they use an electric car, how many days will that take?

2. Where, upon arrival, UAW officials will bury Lee under a parking lot, Jimmy Hoffa style?

3. Maybe President Lee has a thing for vacant lots or $11,000 houses?

4. Umm, Mr. President, I don't think Detroit is actually the Home of the US Auto industry anymore. Are you going to use a time machine and take him to Detroit in 1966?

Plenty of room in the comments for more!

Thursday, October 13, 2011

Clever, Clever Satire

This was a comment on a post about a computer game, HOMM VI.

Do me a favor and ask Robert Paul Wolff and Brian Leiter this question: why are they spared the wrath of the 99%? Tenured professors, raised in privilege, products of Princeton and Michigan law school, living lives of luxury and leisure in comparison to the steel worker, the coal miner, the day laborer.

How does the the spoiled privileged Leiter respond to the following: Fairness is considered over the course of a lifetime. This does not exempt the privileged lives of professors, the beneficiaries of capitalism living lives of relative luxury and greed in comparison to steel workers and coal miners. We do not take current distributions as the baseline and simply move on from here. As a matter of fact, this is exactly the objection made against most utilitarian property theorists. Therefore, the unjust distributions that you have benefited from, the skills you have developed because of your privileged position within the capitalist regime, all these resources you have enjoyed will not be forgotten by We the 99%. And here we are. It is time to pay the piper, and this includes the professors as well as the bankers, CEOs and corporate attorneys. It is time for Brian Leiter, Robert Paul Wolff, Paul G. Allen, Warren Buffett, and the rest of the privileged few to make good on their debts. They must now give up their comfortable positions at Univ. of Chicago, etc. and pick up a shovel. It is our time to bask in the sun.

Not sure how Robert Paul Wolff or Brian Leiter would respond, sir. Don't know either, never met them, had to look them up on Google. I can say this: Here is the distribution of income in the U.S.:

You'll notice that 99th %ile is $506k, 95th %ile is $200k. There would be very few college professors above the 96th %ile, I would think.

As for Robert Paul Wolff....he is a Marxist Anarchist who was briefly at U of Chicago, 1961-1964. He never went to Princeton, either as a student or instructor, though of course he likely gave talks there. You may be talking about Brian Leiter, of course, but since I found looking up Robert P. Wolff (he's one of YOURS, fercrissakes!) to be utterly uninteresting I stopped my research, exhausted, and went back to my couch where nubile grad students could fan me and feed me delicious fresh fruit.

In short, what you have written simply must be a moderately clever satire. Because otherwise you are confirming that you "99 percenters" are just as loony as I believe you are.

What kind of country are we living in?

In 2005 Albert Florence, driving in his car with his family was improperly arrested on a bogus warrant. He was held for 6 days in a county jail in New Jersey and, during that time was "repeatedly strip searched".

And by strip search I mean, "strip naked for inspection, lift his genitals, squat and cough."

Albert sued and the case has reached the Supreme Court. The lawyer for the jail says automatic strip searches are necessary. "It's impossible to determine whether or not a minor offender is a risk or not," he said. "You could be a minor offender because you've just been stopped for a speeding violation" or "you could be a murderer."


People, in what world do even murderers routinely drive around in their cars with their families with dangerous weapons in their rectums or taped to the back of their testicles?

Secondarily, even in New Jersey, police certainly can look up a person via computer and quickly determine their criminal record. So yes, you could be a speeder or a murderer, but we can find out in 5 minutes or less!

Needless to say, the geriatric recluses that populate our Supreme Court did not exactly cover themselves in glory during oral arguments in this case:

Justice Ruth Bader Ginsburg asked if "showering in the presence of officers" violated the Constitution's ban on unreasonable searches. Goldstein (lawyer for Mr. Florence) said no, but that a close inspection at an "arm's length" would be a violation.

That answer didn't sit well with Justice Sonia Sotomayor. "It's OK to stand five feet away, but not two? That doesn't make much sense to me."

What about a visual body cavity search, she asked.

"There's a material difference," replied Goldstein, between a "visual body cavity inspection ... where you require someone to bend over, and cough" to expose the anus, and a visual inspection of a naked prisoner at arm's length. But he contended neither should be permissible without some individualized suspicion.

Justice Samuel Alito asked whether it would be permissible for jail authorities to require every prisoner to shower with anti-lice soap in front of an officer 10 feet away. Goldstein said that would be permissible. So "your only concern is searches that go farther than that?" asked Alito. Goldstein said that was "exactly right."

Justice Anthony Kennedy noted that, at least when he was in private practice, county jails were much more dangerous than penitentiaries because "you don't know who these people are"; you "arrest them for traffic [offenses] and they may be some serial killer."

What is so hard for these morons to understand. You don't "repeatedly strip search" someone for a freaking traffic violation.

Full stop.

The august justices seem to have all watched the entire set of "Porky's" movies before donning their robes.

Wednesday, October 12, 2011


Tomorrow, HOMM VI. Finally.

I played the demo.
It's okay. Not nearly as annoying slow as V, or bizarrely not funny as IV.

HOMM II is my favorite game
, all time, any genre. But part of that must have been the timing. There just wasn't much like it then.

Illegal Advising

A Jewish professor was advising a student. He told her she might not like the course taught by famously anti-Semitic Columbia Prof. Massad. And Prof. Massad is, indeed, pretty famous.

And, now, the professor who gave advice is under investigation, by the U.S. Government! for "steering," like when a real estate agent tells an ethnic couple they might be more comfortable in their own ethnic neighborhood.

An actual investigation by the DofEd Office for Civil Rights. Because he gave her ADVICE. I give students advice all the time. Am I going to be recorded, and have my advice checked by the Feds? Like when I say, "Don't take ____'s course, he's not very good, I will run afoul of the anti-mediocritism laws? "You are a mediocritist! You discriminate against mediocre people! Bad! Bad!"

All Hail R. K. Gaddie

There's a protest in his kitchen and he's telling the world:

Solar Fail: Chicago

The problem with solar energy is that it is much more expensive than purchasing energy from power companies.

Much, much more expensive.

It is true that this difference can be reduced by subsidies. But people underestimate how much of a subsidy is required. With installation, batteries, and disposal of toxic waste (batteries are much more poisonous than the exhaust of power plants!), solar panels are almost never cost effective.

And so, we see, yet again, that grandiose claims run afoul of economic reality.
"Green" energy is a huge net waste of resources. Far from making things better, solar panels and solar subsidies are increasing unemployment and causing enormous damage to the environment.

(nod to the Blonde)

Tuesday, October 11, 2011

The Rule of Law...of Nature Red in Tooth and Claw

Paul is a "rule of law" scholar, and a smart guy.

But I don't understand this lament. I agree with the sentiment, but not the contradiction.

Abuse of power is not a perversion of government. Abuse of power is the ESSENCE of government. We trade off abuse of private power, theft, and foreign aggression against the certain knowledge that our own government will abuse the powers we give it to protect us against the bad things in the first part of this sentence.

Or, as the young Edmund Burke put it:

Parties in Religion and Politics make sufficient Discoveries concerning each other, to give a sober Man a proper Caution against them all. The Monarchic, Aristocratical, and Popular Partizans have been jointly laying their Axes to the Root of all Government, and have in their Turns proved each other absurd and inconvenient.

In vain you tell me that Artificial Government is good, but that I fall out only with the Abuse. The Thing! the Thing itself is the Abuse!

Observe, my Lord, I pray you, that grand Error upon which all artificial legislative Power is founded. It was observed, that Men had ungovernable Passions, which made it necessary to guard against the Violence they might offer to each other. They appointed Governors over them for this Reason; but a worse and more perplexing Difficulty arises, how to be defended against the Governors? Quis custodiet ipsos custodes?

In vain they change from a single Person to a few. These few have the Passions of the one, and they unite to strengthen themselves, and to secure the Gratification of their lawless Passions at the Expence of the general Good. In vain do we fly to the Many. The Case is worse; their Passions are less under the Government of Reason, they are augmented by the Contagion, and defended against all Attacks by their Multitude.
(source link)

So, Paul: I'm with you for being upset at government abuses of power. But how could even your fertile imagination for a moment believe that it could be otherwise?

Be careful what you wish for

In my survey of international economics class today we had an excellent discussion of possible end-games for the current Euro crisis.

One point that really struck home with me was when a student asked "Why did Greece even want to be in a monetary union with Germany in the first place"?


Greece was a serial defaulting, non-tax collecting, relatively corrupt, but seemingly happy country. They were never going to be Germany, and I can't understand why they wanted to be Germany. Yet they moved heaven and earth to meet the Mastricht criteria and get into the Euro. They hired Goldman to swap around their future revenues, and maybe they fibbed a little bit too. At the time, many people were surprised that they made it in.

Short term, they got a ton of cheap (for them) credit and enjoyed a spending binge. But their economy grew ever less competitive and their external position ever weaker. Now they are down and out, humiliated, wracked by social unrest, and pretty much flat broke.

Yet they still want to stay in! People, Greece is never going to be Germany. I don't say that as a negative about Greece but as a statement of history/culture. The values are different, the comparative advantages are different. Thus, German monetary policy is not really ever going to be right for Greece. Unless Germany is willing to adopt them and put them on a perpetual allowance, the Euro is not going to work out for Greece.

It's time for Greece to pull the full Argentina, or as Hillary likes to say, press the reset button.

The greatest threat to the Euro

Excellent German condescension from Der Spiegel: "Do you want to be the man who destroyed the Euro?"

But the Slovakian guy hammers him: The greatest threat to the Euro is the bailout fund itself!

The story....

My man Joel R asks, "Is this the only European leader making sense? Forget about Germans - who on the whole probably benefited from euro policies - why should a relatively poor country - for Europe - bail out the banks?"

A Charter'd Libertine

School Choice, School Quality and Postsecondary Attainment, David Deming et al., NBER Working Paper, September 2011

Abstract: We study the impact of a public school choice lottery in Charlotte- Mecklenburg (CMS) on postsecondary attainment. We match CMS administrative records to the National Student Clearinghouse (NSC), a nationwide database of college enrollment. Among applicants with low-quality neighborhood schools, lottery winners are more likely than lottery losers to graduate from high school, attend a four-year college, and earn a bachelor's degree. They are twice as likely to earn a degree from an elite university. The results suggest that school choice can improve students' longer-term life chances when they gain access to schools that are better on observed dimensions of quality.


Measuring the Effect of Charter Schools on Public School Student Achievement in an Urban Environment: Evidence from New York City, Marcus Winters, Economics of Education Review, forthcoming

Abstract: This paper uses student level data from New York City to study the relationship between a public school losing enrollment to charter school competitors and the academic achievement of students who remain enrolled in it. Geographic measures most often used to study the effect of school choice policies on public school student achievement are not well suited for densely populated urban environments. I adopt a direct approach and measure charter school exposure as the percentage of a public school's students who exited for a charter school at the end of the previous year. Depending on model specification, I find evidence that students in schools losing more students to charter schools either are unaffected by the competitive pressures of the choice option or benefit mildly in both math and English.

I haven't read either of these papers. But I wonder if selection isn't driving both. In the first case, parents who care enough to get their kids to switch are the sort of parents who are more likely to encourage college. And in the second case, the parents of kids who are doing poorly in math and English are the ones who switch to charters, perhaps because (again) they want to ensure their kids succeed. That may well be wrong in one or both cases, of course. But selection is so tough in studies where you are measuring consequences of choices that are endogenous.

(Nod to Kevin Lewis)

Do you believe in magic? Ryan Avent does!

Avent joins the crew attributing untapped magical powers to the Federal Reserve:

"Losing its credibility as an inflation-fighter, some of it anyway, is precisely what the Fed needs to accomplish. As Paul Krugman has put it, the Fed needs to promise to be irresponsible at some future point, thereby raising expectations of future inflation. That, in turn, will boost current inflation. Consumers will want to spend their money in the period before its value erodes, and through that mechanism future inflation becomes current inflation.

So the question then becomes: can the Fed convince markets that it will be irresponsible in the future? The answer, quite obviously, is yes. The Onion helpfully suggested one way in which this might be accomplished. At a recent dinner, colleagues of mine joked about other ways to solve the problem. One suggested that Ben Bernanke might ask to have his salary indexed to gold or the Swiss franc. Another said the chairman should take to the podium to tell Americans they'd better start spending their dough soon before it's worthless, lighting a cigar with a $100 bill all the while. More practically, Mr Bernanke could raise his desired inflation target or simply declare that the Fed won't touch rates for a certain period, no matter what happens in the broader economy."

People, if the Fed has credibility as an inflation fighter it is for the Rogoffian reason that we have appointed inflation adverse central bankers. That is, people whose preference is for low inflation.

Please repeat after me:


Promises to act against one's preferences in the future that are made without any commitment mechanism are simply cheap talk and are extremely unlikely to shape agent's expectations or actions.

We could appoint a central banker whose preference was for high inflation. In that case any promises to create low inflation or deflation in the future would be incredible and ineffective for exactly the same reason today's conservative central bankers' promises to create future inflation would be incredible and ineffective.

This is not a Tinkerbell situation folks; believing in magic is not going to get us through the crisis.

Equality or Income? I'll Take Markets for BOTH, Please!

Interesting article. The relation between growth and inequality is complex.

Excerpt: The late Yale University and Brookings Institution economist said that not only can more equal distribution of incomes reduce incentives to work and invest, but the efforts to redistribute—through such mechanisms as the tax code and minimum wages—can themselves be costly. Okun likened these mechanisms to a “leaky bucket.” Some of the resources transferred from rich to poor “will simply disappear in transit, so the poor will not receive all the money that is taken from the rich”—the result of administrative costs and disincentives to work for both those who pay taxes and those who receive transfers.

Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? Are social justice and social product at war with one another?

In a word, no.

Monday, October 10, 2011

45 czars!

The Ruriks (rulers of Moscow)
Ivan I 1325-1340
Simon 1340-1353
Ivan II 1353-1359
Dimitrij Ivanovich 1359-1389
Vasilij I 1398-1425
Vasilij II 1425-1462
Ivan III 1462-1505
Vasilij III 1505-1533
Ivan IV, the terrible 1533-1584
Feodor I 1584-1598
Boris Godunov 1598-1605
Feodor II 1605
Dimitrij, the false 1605-1606
Vasilij IV Sjujsky 1606-1610

The House of Romanov
Michail III 1613-1645
Alexej Michailovich 1645-1676
Feodor III 1676-1682
Ivan V 1682-1696
Peter I, the great 1682-1725
Catherine I 1725-1727
Peter II 1727-1730
Anna Ivanova 1730-1740
Ivan VI and grand duchess Anna Leopoldovna 1740-1741
Elizabeth 1741-1762

The House of Holstein-Gottorp-Romanov
Peter III 1762
Catherine II, the great 1762-1796
Paul I 1796-1801
Alexander I 1801-1825
Nicholas I 1825-1855
Alexander II 1855-1881
Alexander III 1881-1894
Nicholas II 1894-1917

Just over 30. Compare that to the....czars of Obama! There are 45 of them.... all at once!

Nod to the Blonde.


Always the critic, always with the details...P-kroog objects to this graph.

Some background on the upward sloping aggregate demand argument. Proving once again that P-kroog is just not that good a macro-economist. ("Minsky moment?" Have Angus draw you his famous "Minsky curve" sometime. It's downward drooping.)

Nod to Kevin Lewis


A venn diagram. It pretty much says it all.

Nod to James Sinclair, and thanks to Steve Horwitz.

Will Wilkinson on Ron Paul

Will W gives an analysis of Dr. Ron Paul.

The U.S. could do worse, and almost certainly will do worse, for President.

But I really am confused how people identify RP with "libertarian." It just ain't so. A friend recently told me that RP was "the most libertarian of the major candidates." Okay. But Mussolini* was the most libertarian of the Axis dictators, but that doesn't make him a libertarian.

(*No, I'm not saying RP is Mussolini; I'm saying that the "he's the most XXXX of the YYYYs" doesn't mean the person is actually XXXX).

On the other hand, I was and remain sympathetic to the claim that the main part of the state-sponsored Repub party, and the state-owned media, ignore RP because he is TOO libertarian. That's a fair critique, as Jon Stewart points out.

Are firms acting irrationally by not investing more?

In an amazingly hubristic NY Times opinion piece, Richard Thaler tries to nudge American companies into doing the right thing:

Corporations are hoarding cash at record rates. The Federal Reserve recently reported that nonfinancial companies in the United States were holding more than $2 trillion in cash and other liquid assets — money that is earning next to nothing. A considerable amount of that cash has been accumulated in the last two years — and the totals exclude the substantial sums the companies hold abroad in foreign subsidiaries. Of course, it can be sensible for businesses to have a source of emergency cash, but many appear to be stockpiling so much that it’s hard to imagine what emergency they fear. To cite just one example, Google is holding more than $39 billion in cash...

Yet is such caution rational? As a shareholder, I would worry about a company that says it can’t find investments that can reasonably be expected to earn well above the tiny return of its cash.

Investment does not necessarily have to involve increasing capacity. Are there no plants or equipment that need upgrading? No promising research-and-development opportunities to be explored? Not even any parking lots that need to be repaved and painted?

I also do not buy the idea that companies need all this cash for acquisitions. If they really want to buy another business, they can issue stock to do so.

It's pretty hard to unpack all the errors/hubris in this quote, but let's try.

The biggest error Thaler makes is that he implies that the idea that firms are acting irrationally by delaying investment can be confirmed by the fact that positive NPV projects are not being done.

"Yet is such caution rational? As a shareholder, I would worry about a company that says it can’t find investments that can reasonably be expected to earn well above the tiny return of its cash."

The problem with this "logic" is that it is contradicted by the entire body of modern economic literature on investment. The literature shows that there is an option value to waiting to invest until conditions are favorable.

See for example "The Value of Waiting to Invest" by McDonald & Siegal (QJE 1987 cited over 2000 times according to Google Scholar) or "Waiting to Invest: Investment & Uncertainty", by Ingersoll & Ross (Journal of Business 1992 cited over 350 times according to Google Scholar).

Here's a crucial sentence in the Ingersoll & Ross abstract:

"The ability to delay a project means that almost every project competes with itself postponed"

The second mistake Thaler makes is downright embarrassing. He seems to assume that investment by firms is actually zero!

Are there no plants or equipment that need upgrading? No promising research-and-development opportunities to be explored? Not even any parking lots that need to be repaved and painted?

Umm, what evidence does Thaler show that these routine tasks are not being undertaken? Firms are sitting on a lot of cash, but firms are also currently investing over $1.5 trillion dollars (in 2005 dollars) this year. That should be enough to pave a few parking lots.

Finally, Thaler informs us that: "I also do not buy the idea that companies need all this cash for acquisitions. If they really want to buy another business, they can issue stock to do so."

Amazing! This is true just because he says so? The horrible condition of the stock market, the problems in the IPO market (which is different but clearly related) are apparently irrelevant; just issue stock, you bungling morons!

This is really one of the worst editorials I've ever seen by a respected economist.