Friday, October 07, 2011

New Blog: Euvoluntary Exchange.

New Blog! All things "Euvoluntary."

It is really just for information, and to provide examples for folks who want to use the concept of euvoluntary exchange (either because you think it is useful, or stupid!) in teaching and writing.

At the upper right there are some resources and background information. I'll be adding to that as time goes by.

In the meantime, please do send examples, comments, or critiques, especially of things that happened in the world or the classroom.

And I'll post them, right away. If there is analysis to be done, it will still be back here on good ol' KPC. The new blog is really just an information source.

Business Headlines

Rising wages in China push jobs back to U.S. Look, we told you so. We did.

Amar Bhide: limit the rates banks can pay on deposits!

Lynn Sneary condescends to a venture capitalist who explains why jobs are caused by growth, not vice versa.

The Final Answer: You are BOTH Crazy

There was a bit of a kerfuffle over this comic, by Zach Weiner.

Everyone, including me, was sure that the comic was mocking whoever we were not. Economists laughed that philosophers were so ridiculous, and philosophers thought it funny that economists were so shallow and arrogant. Jacob was sure he knew, for example. But then to be fair a few folks, at least, over here thought that the philosopher was ridiculous.

At KPC we want to KNOW. So I wrote to Zach W himself. And the answer is... you people are ALL crazy. And hilarious. (quotes with permission)

As to the joke: If it went right, hopefully it made fun of both. I actually did a similar treatment of philosophy vs. engineering a while back here:

In that one, hopefully it's clear that the engineer is simplifying in a way that is both informative and problematic. Since Economists are essentially engineers who work with human lives instead of mechanical systems, the perspective is more or less the same.

Curiously, it was popular in both the economics forum and the philosophy forum. The former thought it was making fun of philosophers for being useless, and the latter thought it was making fun of economists for lacking a sense of profundity.

So yeah, making fun of everyone. Zach Weiner, SMBC

My own conclusion: the Philosophers are not interested in an answer, really. If faced with this real life situation where a decision is required would either respond purely emotionally or else would lie on their backs and kick their little legs in the air, hoping that the problem will go away. Philosophers and grandma both die, because Philosophers aren't interested in answers, only questions.

The Economists would save the Mona Lisa, and spend the rest of their lives trying to forget the haunting screams of the grandma as they carried the Mona Lisa out of the room.

But the problem with policy analysis generally is you don't get to say, "I don't know." You have to do something, you simply must. Philosphers spend all their time wondering if they can get both thumbs up their butt at the same time, or if they have to take turns. Economists spend just a very brief time figuring out "the answer," which is always wrong, and then they pretend they already knew that.

This is Why Al Gore Invented the Internet*

(*although he never, ever actually claimed to have invented the internet)

1. In porn movies, there is sometimes a classroom setting (I am told, I would NOT know, of course). The question is: are the things written on the blackboard actually correct and useful, or did the director just phone it in? This blog answers that question (SFW, unless you work in a church).

2. Awkward Wedding Photos. Once you give the title, there is little more to say, frankly.

3. (A repeat, but always at the top of the list at KPC) Kim Jong Il Looking at Things.

4. Hospital jobs, by district (or state). You didn't even know you didn't know that, and now you know.

5. The Perfect Pet Petter. Again, nothing to add.

(Nod to Kevin Lewis, the Blonde, and Kindred)

Thursday, October 06, 2011

In Honor of Steve Jobs....

Some time ago, I published a celebration of private innovation, "Two Steves and One Soichiro." One of the "Steves," of course, is Mr. Jobs.

Rereading it, I am reminded sharply how badly we would have done in innovation if democracy had been the decision rule. Just look at the quotes from the "experts" in the article. Wow.

Every Solvent Country is the Same, But Each Insolvent Country is Insolvent in its Own Way

As readers of KPC, you are of course among the world elite, the cognescenti, the "go-to" people. But I want to make sure you understand why it is that everyone is so worried about Greek default. After all, Greece has 9 million people, about the same size as North Carolina. Why worry?

In 2007-8, the reason that we had to bail out a bunch of big banks is that they had totally loaded up their balance sheets, including their reserve requirement assets, with illiquid and not very valuable CDOs and derivatives on other kinds of mortgage-backed securities. So, the problem was not so much the orginators, because they had dealt the crap and disappeared. The problem was the "smart banks," who had picked up all this bad paper because it had a high rate of return, and lap-dog rating agencies had continued to call it AAA, meaning it satisfied Basel Rule requirements for reserves.

This is a no-lose from the perspective of the banks. They got 7-8% if things go well, and get bailed out if things go sour. The guarantee of a bail-out essentially forced the banks to invest in crap, or else leave money on the table.

Amazingly, it has happened AGAIN. I almost can't believe it, but it has. The problem with Greece is not that anyone gives a flying firetruck about Greece. The problem is that Deutschebank and all the big American banks have once again loaded up on a high-risk bet. Greek bonds, especially if purchased at a discount last summer, pay a large return. We have to bail out Greece, the argument goes, NOT because it will help Greece but because otherwise the big banks will go under. It's pure theft, extortion. German citizens have to give money to the Greek government to save American banks. Because the banks bought up all that Greek debt to make money. And they are going to win. Again.

It's enough, I tell you, to make me sympathetic to the Occ Wall St folks. They have a point. Seriously, they have a point. They are insane, unfocused, and ignorant of basic economics. But there's something happening here, and what it is, is now all too clear.

Anyway, just a M. Lewis's "The Big Short" was useful for understanding the American crisis of 2007-8, his new book, "Boomerang," is great for understanding the current echoes around the world.

His basic thesis echoes Tolstoy (though these are my words, not his): Every solvent country is the same, but every insolvent country is insolvent in its own way. Iceland went nuts on derivatives, Ireland had a housing bubble that left three bedroom houses selling for upwards of 40,000,000 euros, Greece doubled the salaries, and workforce, of its public sector, California....well, I don't want to think about California.

Did someone say monetary expansion?

It has become almost fashionable to claim that the Fed is not doing nearly enough to revive the economy. This conclusion follows from the same logic that the "stimulus was too small" meme employs: Has the economy recovered? No? Then policymakers have not done nearly enough.

Check out what's happened to the monetary base since the crisis began:

(clic the pic for a more vertiginous view)

The base has gone from a path of roughly doubling each decade to more than tripling in three years.

Wednesday, October 05, 2011

Look on my works, ye Mighty, and despair

Here is a picture of a new Congressional district cooked up by a bunch of geniuses in Maryland:


Do you believe in magic?

In a recent post, Scott Sumner claims that the Fed can easily credibly commit to a nominal GDP target. He further claims that the act of choosing the target in itself would allow the Fed to hit the target without any great amount of monetary expansion:

"The Fed has plenty of credibility, that’s not the problem. The problem is that they are using the credibility to assure investors that low inflation is here to stay. With the right target, there would probably be no need for massive quantitative easing, or other extraordinary policies.

The punch line is that the problem isn’t the Fed’s unwillingness to do enough QE, twists, or cuts in IOR, the problem is the Fed’s inadequate target, just like in Japan."

In other words, the Fed can credibly commit to arbitrary future policies so well that a simple announcement of a new policy path will put the economy on that path without any heavy lifting required.

In other other words, magic!

People, the Fed has no ability to make credible commitment to future policies that might conflict with their period by period preferences! Read Kydland & Prescott. Read Barro & Gordon. Repeat after me: time inconsistency, time inconsistency, time inconsistency.

All the Fed can do is act each period according to its own preferences (yes it's weird to treat the Fed as a unitary actor given all the dissents we've seen recently, sorry).

Many societies have responded to this dilemma by invoking the Rogoff gambit; we appoint conservative central bankers. They deliver low inflation not because they are following some policy rule or pre-determined path, but because their preference is for low inflation!

The idea that there's a magic bullet out there that solves our economic problems, that the Fed could fix things by putting out a press release with a couple sentences about their plans for future NGDP growth, is wrong and somewhat dangerous.

It would from many a blunder free us

(clic the pic for a more enlightening image)
Hat tip to Felix

Tuesday, October 04, 2011


The links of October....

Central planning...of the internet?

Compensation, schmompensation: Elizabeth Warren says you don't own NOTHIN'!

"Cost-effectiveness" analysis

Gag me with a microwave: The "" button. No, this is NOT the Onion.


You can say whatever you want.

And we at the U will tell you what you want!

New video from FIRE

Pitching is Over Rated?

Jackie Blue sends this outrage.

Pavitt found hitting accounts for more than 45% of teams' winning records, fielding for 25% and pitching for 25%. And, the impact of stolen bases is greatly overestimated.

He crunched hitting, pitching, fielding and base-stealing records for every MLB team over a 48-year period from 1951-1998 with a method no other researcher has used in this area. In statistical parlance, he used a conceptual decomposition of offense and defense into its component parts and then analyzed recombinations of the parts in intuitively meaningful ways.

Well, as long as it's "intuitively meaningful," right? Charlie is a professor of Communication. Me? I "intuitively doubtful."

Cut cut cut, cut cut defense!

People, the federal government wastes a crap-ton of money. Let's get serious about cutting spending over the next 10 years. Here's a start:

Defense: Cut $200 billion a year. That's two trillion over 10 years. Don't worry, we'll still have a freaking huge military as current spending is north of $700 billion per year.

TSA: Eliminate it. That's $50 billion a year or 1/2 trillion over 10 years.

Agricultural Subsidies: Eliminate them. That's maybe $25 billion a year or 1/4 trillion over 10 years.

Homeland Security: Cut it in half. That's another $25 billion a year or 1/4 trillion over 10 years.

People, that's $3 trillion of REAL cuts. Easy-peasy. No entitlement reforms (which I favor as well), no cutting Obama's choo-choos and windmills, just declining to screw ourselves quite as much as we have been doing.

Anyone have numbers on other low hanging Federal fruit we can harvest?

Monday, October 03, 2011


This poor pup evidently had seizures, and has since died.

Still, all dogs do this, just not so violently.

Great Googly Moogly

Have you seen the 13 demands post from

It's a doozy.

I'm stunned to see "open borders" in there with no fossil fuel, free college, cancellation of all debts for everyone, $2 Trillion in new spending. Also very surprised to not see anything about the wars and defense spending.

Firms Maximize Profits?

Senators discover that firms maximize profits.

(Nod to Chateau)

People Prefer Cheesy.... Jokes

These are some bad jokes, so I like them. And, they are CHEESY!

Nod to Tom H.

Hey Tyler: Taxes ARE going up

A lot.

The "Bush tax cuts" expire. Obamacare incorporates a myriad of substantial tax increases that come on line very soon.

Plus, our President has now figured out how to package tax increases on the wealthy as a jobs program (sorry President O. I didn't mean it. Please don't drone me)!

Yet Tyler says Republicans are silly to not make an additional tax deal, even if the stuff they want is unlikely to materialize because "taxes will eventually go up in any case, because they must"

I can't see why it's so obviously correct to be advocating for more tax increases than the one we already have on our plates.

I for one am strongly in favor of tax cuts relative to the current policy path we have.

Hit the BRICs

This doesn't seem good:

(clic the pic for an even more depressing image)

The Cartoon

Nice follow-up by Jacob L. on "the cartoon." on "the cartoon."

Here is my original post. As Jacob L notes, there was a lengthy discussion on FB about it.

The point is that this cartoon is a Rorschach test. I read it as mocking the philosopher. Most people, far and away most in my sample (biased, if anything, toward econophiles) saw the cartoon as mocking economists.

As always, disagreeing with me does NOT make you a bad person. It does, however, make you wrong.

Grand Theft Educ

Angus already mentioned this.

But you may not have read the story. Excerpt:

From California to Massachusetts, districts are hiring special investigators to follow children from school to their homes to determine their true residences and decide if they "belong" at high-achieving public schools. School districts in Florida, Pennsylvania and New Jersey all boasted recently about new address-verification programs designed to pull up their drawbridges and keep "illegal students" from entering their gates.

Other school districts use services like, which provides "the latest in covert video technology and digital photographic equipment to photograph, videotape, and document" children going from their house to school. School districts can enroll in the company's rewards program, which awards anonymous tipsters $250 checks for reporting out-of-district students.

Only in a world where irony is dead could people not marvel at concerned parents being prosecuted for stealing a free public education for their children.

The only way the teachers' union, the AFT, can keep a lid on this is to keep parents "away from the table." The solution, as I said when I ran in 2008, is means tested voucher. The wealthy have choices now. It's the poor folks who need help.

As it is, we are just putting people in jail for "stealing" what all my leftoid friends assure me is a public good.


Sunday, October 02, 2011

A History of Violence....

Steven Pinker gives a lecture on violence. There is a lot LESS of it, by the way. This is a good thing.

Governments gone wild

1. Jailing moms for lying about their residency to get their kids in a better school

2. Felony prosecuting oil companies for killing a bird

3. Setting a goal of doubling exports, but refusing to bring several completed PTAs (that would definitely expand our exports) up for a vote in Congress

Have a favorite? Have other nominees? Tell us about it!