Saturday, March 31, 2012

El Chalan

Eugenio insisted we try another comida peruana place last night, and who am I to argue. Went to El Chalan. Interestingly, somewhat mixed reviews, though the problem seems mainly to be the prices (which were a little high, I agree).

My food experience was NOT mixed. Started with some cebiche pulpo (octopus). Really, really, really good.

Then, to the disgust of Juan Pablo and Eugenio, I ordered the "Anticuchos de Corazon," or grilled skewered beef heart. Came with a nice vinegary onion salad on the side, and I ordered yuccas fritas for guarniciones. Major victory, on los corazones. Truly, truly excellent. I even convinced both JP and Eugenio to try it, and they admitted it was just fine. Spicy, not too tough: muy rico. I'm not sure I can explain how much of a win it was to get JP to taste a cow's heart. He's not all that adventurous.

A recipe for Anticuchos de Corazon, if you feel like trying it. I think I will.

Heading over to Eugenio's house today, for an asado. Going to try grilling pulpo. A long shot, frankly. More likely to get octopus chewing gum than something edible.

Econ Blogger Conference MVTs

MVTs = Most Valuable Talkers:

Lots of smart people with a lot to say. Was great to see some old friends and meet some people face to face for the first time.

The panelists I got the most from though were Alex Tabarrok and Michael Mandel speaking about intellectual property and innovation.

Based on his remarks, I highly recommend Alex's new book on the same subject.

Thanks to the Kauffman Foundation for (A) putting on such a cool event, and (B) inviting me to attend.

Friday, March 30, 2012

Kansas City Que-Off

I'm relaxing in the concierge lounge of the KC Intercontinental hotel getting ready for the econ blogger conference sessions tomorrow (Friday) at the Kauffman Foundation. Some of the sessions will be live streamed at, and I'm really looking forward to it.

But on to more important things. I've eaten barbeque extensively in Lexington NC (with LeBron) and once in Lockhart TX (with Mrs. Angus) and now in the third 'que capital of America, Kansas City.

The Kauffman dinner was co-catered by Oklahoma Joe's and Jack Stack.

People you know I'm going to pick a winner here.

I'd have to say the single best item was the Oklahoma Joe's pork ribs. They were amazing! I'm not sure if they weren't better than the beef in Lockhart (I'll need to do more research). The second best item of the dinner was the beef burnt ends from Jack Stack. So I'd say Joe's for pork and Jack's for beef.

I ate two huge plates of nothin' but meat and can't thank the folks at Kauffman enough for such an enjoyable dinner.

Stand-up Economist: NSFW

This is NSFW, and it's also pretty insidery. But I laughed.

Nod to Angry Alex.

That's Not the Problem Here

Performance Support Bias and the Gender Pay Gap Among Stockbrokers

Janice Fanning Madden, Gender & Society, forthcoming

Abstract: This article analyzes organizational mechanisms, and their contexts, leading to gender inequality among stockbrokers in two large brokerages. Inequality is the result of gender differences in sales, as both firms use performance-based pay, paying entirely by commissions. This article develops and tests whether performance-support bias, whereby women receive inferior sales support and sales assignments, causes the commissions gap. Newly available data on the brokerages’ internal transfers of accounts among brokers allows measurement of performance-support bias. Gender differences in the quality and quantity of transferred accounts provide a way to measure gender differences in the assignment of sales opportunities and support. Sales generated from internally transferred accounts, controlling for the accounts’ sales histories, provide a “natural experiment” testing for gender differences in sales capacities. The evidence for performance-support bias is (1) women are assigned inferior accounts and (2) women produce sales equivalent to men when given accounts with equivalent prior sales histories.

Um.... fail. The fact that there is bias in stockbroker pay is not very interesting, because there is no objective standard to apply. The fact that stockbrokers get paid at ALL is astonishing. There is no basis for stockbrokers getting paid, except fraud.

Nod to Kevin Lewis.

Thursday, March 29, 2012

Bad to the bone

Wow. Some enterprising fellow in Austria, (allegedly named Hans Url, so this may be a hoax) faced with the heinous prospect of having to get off the dole and go to work, cut his foot off with a power saw, tossed it into a fire so that it could not be re-attached, and then called emergency services.

Unfortunately for him, missing a foot does not automatically keep you on the dole, even in Austria!

Let's break it down:

(1) People, they can't pay the guy benefits after that, right? Jeebus, the whole country would go cut their feet off then!

(2) The linked article refers to the miscreant as "footless". Is this just a slip of the pen, or has the guy actually DONE THIS BEFORE?

(3) The gentleman is from a town in the Austrian state of Styria, which if you are a fan of Thomas Bernhard, should be making you nod your head knowingly and murmuring "it figures".

"The Kicker..."

So, a guy cuts off his own foot so he doesn't have to work.

You would REALLY have to hate working to do that.

The guy planned ahead: not only cut off his foot, but then barbecued his foot to make sure it could not be reattached.

What I like is that the article mentions "the kicker" (!): being footless won't mean the guy will be disabled.

Nod to the Blonde, who always adds some foot notes to my day.

La Mar

Okay, so I said no more sunrises. But this is a sunset:

Dined last night at La Mar, with Juan Pablo and new shining star Congressman Ernesto Silva. Very interesting talking with Ernesto. I learned a lot.

La Mar, as before, was remarkable. The cebiche...astonishing. By far the best I have ever had. Erizos....mmmmmmm....erizos.

Wednesday, March 28, 2012

I have a question

Is it really true that the Fed is buying upwards of half of all new net Treasury issues? That is to say, are they "funding" over half of the deficit?

I ask rather than assert because the evidence that I've found is not exactly authoritative. You can check my sources here here,  and here.

If this is so, how can serious people be saying that we should expand borrowing to finance more stimulus because markets are telling us there is a huge demand for more safe assets like Treasuries?

The last link above claims the Fed's share of new issues is rising and consequently private markets' share is falling.

If that is true, is it accurate to say that the low interest rate on Treasuries reflects high demand and justifies further expansion of debt?

Inchworms: Gore and Frass

I didn't even know what "frass" was. Until now.

Baseball Cards--Mr. Mint is Sad

Tommy the Tenured Brit writes, "I weep for the loss of my 1980s childhood. Still, it was quite commonsense to me at 12 that any baseball card produced after 1985 or so would not be very valuable long term..."

The story: Baseball's House of Cards

Tuesday, March 27, 2012


Pithiest sentence I read this week:

"They import nothing into their overseas dominions except damaged officials and they export nothing from them except the same officials, worse damaged"

~ Albert Guerard, describing France's adventures in colonialism as quoted by John Gimlette in his amazing book, "Wild Coast".

To me, the best books both inform and entertain. Wild Coast knocks it out of the park in both dimensions.

Scariest sentence I read this week:

"The world needs more effective global economic governance more than ever."

~ Owen Barder on why the WB presidency matters.

Obviously I disagree. I don't think we need ANY "global economic governance".

Italian Spelling Bee

This video is just in time. What a life-saver. Thanks to the LMM.

The Italian-American spelling bee.

The reason this is helpful is that for dinner here in Chile on Sunday, I ate with the family of Juan Pablo. I tried to explain to them how the American Italians I knew all called eggplant, "Moolen-john," which is nothing like the Italian word, "Me-lahn-zahn-ay," which is the ACTUAL Italian word for eggplant (melanzane). Here is an Italian pronouncing the word. It has four syllables, and sounds NOTHING like "Moolen-john."

JP's family would not believe me. All the Italians they knew were from Italy, and said "Me-lahn-zahn-ay."

But, now, I have video proof. Frankie Orlando, this is for you.

Another Santiago Sunrise

I'll stop, now. But it's REALLY pretty in the morning.

Monday, March 26, 2012

Come on, Vogue!

Greta Garbo, and Monroe
Deitrich and DiMaggio
Marlon Brando, Jimmy Dean
On the cover of a magazine

Grace Kelly; Harlow, Jean
Picture of a beauty queen
Gene Kelly, Fred Astaire
Ginger Rodgers, dance on air

They had style, they had grace
Rita Hayworth gave good face
Lauren, Katherine, Lana too
Tyler Cowen, we love you


(In honor of LeBron making Italian Vogue)

Jim Kim's complicated relationship with economic growth

Bill Easterly's shop at NYU gives some amazing quotes from Jim Yong Kim.

 Here's lo mas contundente:

 Conclusion: Pessimism of the Intellect, Optimism of the Will, By Joyce V. Millen, Alec Irwin, and Jim Yong Kim

 “Through a series of specific cases, we have demonstrated how growth – the market-led economic growth sought by governments, the growth in profits celebrated by businesses, and the growth in power and influence of transnational financial and corporate interests – often comes at the expense of the disenfranchised and vulnerable… As the imperatives of growth at any cost increasingly determine economic and social policy and the behavior of global corporations, more people join the ranks of the poor and greater numbers suffer and die.” (p. 363)

So the presumptive new head of the WB believes that market led economic growth is causing MORE people to become poor and MORE people to die!


 So North Korea  >> South Korea?

 Mao  >>  Deng?

Houston, we have a problem.

Twisted steel & Sachs appeal

When someone I follow re-tweeted Jeff Sachs' message to Jim Kim last week, I was impressed and surprised at its gracious tone:

Jim Kim is a superb nominee for WB. I support him 100%. I thank all who supported me and know they'll be very pleased with today's news

So surprised that I went to Sachs' twitter feed to see what was up. And found these gems, all on March 21:

I've been given no consideration, and won't be. The US Government doesn't seem to care about global poverty. 

Did you know that Larry Summers actually knew BEFOREHAND what Shleifer was doing while HIID did not? 

In 1999 Polish President gave me one of nation's highest medals for my historic contribution. 

You should know that in an emergency room there are "short-term disruptions." Don't blame the doc.

Sadly, the feed has gone quiet since he congratulated Kim.

Do faculty work hard enough?

David Levy (no, not that one) thinks the answer is "not nearly."

Robert Farley offers an alternative viewpoint.

Greg Weeks took notice.


Intellingence Opennign

Here is a post, verbatim, from the federal gov's job listing service:

Intellingence Operations Specialist
Bureau of Alcohol, Tobacco, Firearms, and Explosives
Duty Locations: Many vacancy(s) - Multiple Locations
Salary: $89,033.00 to $115,742.00 / Per Year
Series and Grade: GS-0132-13
Open Period: Wednesday, March 21, 2012 to Wednesday, March 28, 2012
Position Information: Permanent - Full-Time
Who May Be Considered: Status Candidates (Merit Promotion and VEOA Eligibles)

The misspelling appears twice, and has not been corrected in five days (as of morning of March 26). They can't spell the name of their own job, but they are qualified to listen in on your phone conversations.

Thanks to S.W. I'd tell you his name, but then I'd have to misspell him.

Sunday, March 25, 2012

Sunday morning at the woodshed

Wow. Lant Pritchett absolutely eviscerates the Obama administration over their pick for World Bank President.

Here are some of the salty bits:

“It’s an embarrassment to the U.S. You cannot with a straight face say this person is the most qualified to lead the World Bank.”


Adds Pritchett, nominating Kim “is like picking the short stop for the New York Yankees out of the scrub leagues.”


“there’s no question that Kim has done terrific things, but I wouldn’t nominate Mother Teresa to head the World Bank if she were still alive.”

I personally think that the World Bank's composite scorecard is way over par (during its existence, on balance, it's done more harm than good) and favor abolition.

But I don't think the main problem has been choice of leadership.

As Mallaby's superb book "The World's Banker" makes clear, WB Presidents cannot make the behemoth bank bureaucracy march to their own tune.

The problem is institutional, the problem is conceptual, the problem is philosophical. The WB is one of the last bastions of central planning, and it functions about as well as other such bastions have functioned.

Amanecer sobre Santiago

Saturday, March 24, 2012

What would YOU do?

Armored truck driving on highway, back door unlatched.

Money spills out, swirling around in the air.

What would YOU do?

A lot of people stopped, dropped, and grabbed.

I would have driven on, but I'm not sure my reason is morally admirable. I would have assumed that the amount of money I might expect to grab was not worth the twin risks of (a) getting hit by a speeding car and (b) getting arrested for stealing cash.

Nod to the LMM.

Mungowitz drops the ball

Perhaps due to his Pisco intake, or his fear of being caught up in an similar situation in South America, my esteemed co-blogger really buried the lede yesterday in his short note about UNC professor Paul Frampton.

I rise this morning to revise and extend my colleague's remarks.

This January, Frampton was arrested in Buenos Aires for boarding a plane with a suitcase containing a fair amount of Bolivian marching powder. He claims innocence and I believe him because, judging by his statements in this article, his drug of choice is LSD (that is to say, homie be trippin').

First off, he appears to believe he is working somewhere other than where he is working:

“The university has done nothing, absolutely nothing, to help me,” he said. “You would expect a university of that caliber would do everything possible to get me out of prison.”

He also has a theory of why mighty UNC is not helping; the provost is too jealous to do his duty!

Carney had long been jealous, he said, because Frampton had earned tenure much more quickly and because Carney’s academic accomplishments were paltry compared to his own.

 “I am one of the most published physicists, and really he hasn’t done much that is of interest,” Frampton said, Carney had taken advantage of Frampton’s helpless position to stop his pay and hinder any notion of the university helping him.

The university has put him on a leave of absence and stopped paying him because he's not teaching his class.

 But Frampton says that this is unfair because the class was already being cancelled due to low enrollment (1 student signed up and 5 is the minimum class size)!


There is one part of the story that does make me thing Frampton may be guilty (remember he's been in jail since January 23rd:

Frampton said he was actually working more than 40 hours a week in prison, and had already written four scholarly papers this year.

Friday, March 23, 2012


A Friday Focus Feature, on the University of North Carolina. We'll go from the locally messed up to the internationally messed up.

Local bizarrity: So, the EYM has a nice bike. Locked it up, near the Pit, 11 am. Comes back at 2 pm, both wheels have been stolen, and (this is the cool part) a "new" heavy duty lock has been added. So now the bike is locked twice, once with the EYM's lock and once with a lock placed there by .... who? The thief. Presumably so the thief can come back at leisure and finish the job by cutting the EYM's lock off and taking the frame. The EYM calls the local five-oh, who helpfully say (1) he cannot cut the alien lock off, because they are "not sure" it's his bike. (2) they will allow him to cut it off in a "few days" (not clear how many, or what the criteria for this decision are). Of course, this means he has no way of guarding the bike. After the thieves come back and take it, I suppose the five-oh will say, "What bike? There's no bike here? What are you complaining about?"

State/National bizarrity: Herman Cain continues to campaign, though it is not clear for what. Mr. Cain made an appearance at UNC Chapel Hill on Thursday. He was quoted as saying: “Look at me, I grew up in Atlanta, Ga., in the ’50s and ’60s, during the times when this nation had segregation and Jim Crow,” Cain said. “And today, not only was I able to run for president of the United States of America, I have a bus out there with my picture on it.” So there you have it: the civil rights movement, at its core, was a fight for the right to have a bus with your picture on it.

International bizarrity I: Frampton comes apart. Physics prof gets arrested for cocaine smuggling (two kilograms!) in Argentina, offers the defense of "professional jealousy." Yep, those snooty Argentine cops are famously upset if you have more journal articles than they have.

International bizarrity II: UNC student (and then student President) Eve Carson was murdered during a robbery a few years ago. But she lives on.... as a photo used to advertise how safe and fun it is to go to university in the US! Yes, kids in India see this:
Apparently the company has apologized, and removed the ads. Still, when you steal some photo off the internet to use for advertising foreign colleges, you should make sure the subject was not a murdered foreign college student.

Climate change, fossil fuel use, and public opinion

Do alternative energy sources displace fossil fuels?

Richard York, Nature Climate Change, forthcoming

Abstract: A fundamental, generally implicit, assumption of the Inter-governmental Panel on Climate Change reports and many energy analysts is that each unit of energy supplied by non-fossil-fuel sources takes the place of a unit of energy supplied by fossil-fuel sources. However, owing to the complexity of economic systems and human behaviour, it is often the case that changes aimed at reducing one type of resource consumption, either through improvements in efficiency of use or by developing substitutes, do not lead to the intended outcome when net effects are considered. Here, I show that the average pattern across most nations of the world over the past fifty years is one where each unit of total national energy use from non-fossil-fuel sources displaced less than one-quarter of a unit of fossil-fuel energy use and, focusing specifically on electricity, each unit of electricity generated by non-fossil-fuel sources displaced less than one-tenth of a unit of fossil-fuel-generated electricity. These results challenge conventional thinking in that they indicate that suppressing the use of fossil fuel will require changes other than simply technical ones such as expanding non-fossil-fuel energy production.


Declining public concern about climate change: Can we blame the great recession?

Lyle Scruggs & Salil Benegal, Global Environmental Change, forthcoming

Abstract: Social surveys suggest that the American public's concern about climate change has declined dramatically since 2008. This has led to a search for explanations for this decline, and great deal of speculation that there has been a fundamental shift in public trust in climate science. We evaluate over thirty years of public opinion data about global warming and the environment, and suggest that the decline in belief about climate change is most likely driven by the economic insecurity caused by the Great Recession. Evidence from European nations further supports an economic explanation for changing public opinion. The pattern is consistent with more than forty years of public opinion about environmental policy. Popular alternative explanations for declining support – partisan politicization, biased media coverage, fluctuations in short-term weather conditions – are unable to explain the suddenness and timing of opinion trends. The implication of these findings is that the “crisis of confidence” in climate change will likely rebound after labor market conditions improve, but not until then.

Nod to Kevin Lewis

Thursday, March 22, 2012


Some links. No theme, no unifying idea, just some links.

The myth of the myth of the independent voter

A parade of idiots. You want to stop watching, but...

Street scenes from Santiago

This week's random and spurious medical correlation: red meat reduces depression

Making fun of rednecks is fine, but not welfare recipients? Then a silly response to same. Fox with its own strange interpretation. And Bill Maher finding it funny to laugh at poor people, rather selectively given his later indignation.

Mission accomplished

One of the (few) nerve-wracking parts of my job is placing students. This year, we had two PhD students in development on the market. Mrs. A advised one and I advised the other. They both got 20+ interviews at the AEA (the national economics conference and job market) meetings and 6 campus visits out of those interviews. Now, both have accepted tenure track jobs with decent salaries and teaching loads and good support for travel and research.

We try to make sure our students have teaching experience and (ideally) a publication before going on the market. We run multiple practice interviews for them before the AEA meetings and practice job talks before their campus visits.

Even though the ultimate burden is on the student, I always feel pretty squirmy until they get a job. I am barely comfortable being responsible for myself, let alone someone else's career.

Now I can sink back to my normal level of apathetic lethargy.

US Gov Does Not Read This Blog, Apparently

I thought we had covered this. Suppose you think: (a) saving environment through green energy is very important, so we need to use it as much as possible, and (b) solar power is an efficient and valuable technology.

Then why-O-why would you put tariffs on cheap solar panels?

Answer: This is not an environmental policy at all. It is an industrial policy (thinly) disguised as an environmental policy. We have decided that US corporations need to receive lots of extra dollars from consumers, and from taxpayers, so they will have enough cash to contribute to the Obama reelection campaign.

Now, I happen not to believe (a) works very well, and I know for a fact that (b) is false. But I am trying to accept the premises of the other side: EVEN IF you believe those two things, this policy makes no sense.

Nod to Anonyman

Wednesday, March 21, 2012

Shout it from the rooftops!

Simply fantastic essay in The Atlantic by Teju Cole. A must read.

Here's a nice bit:

Joseph Kony is no longer in Uganda and he is no longer the threat he was, but he is a convenient villain for those who need a convenient villain. What Africa needs more pressingly than Kony's indictment is more equitable civil society, more robust democracy, and a fairer system of justice. This is the scaffolding from which infrastructure, security, healthcare, and education can be built. How do we encourage voices like those of the Nigerian masses who marched this January, or those who are engaged in the struggle to develop Ugandan democracy?

Hat tip to Bill Easterly

Community Radio Stations Run by the Federal Government

This has got to be a parody, right? No one can be so deluded as to believe that "community" radio stations run by the federal government, and a huge new cadre of thought police, is a good idea.

Can they? Excerpt:

Instead of slowly grinding down thousands of repeater station applications that leave no room for community radio, the FCC essentially threw most of those applications away by limiting who can apply, how many filings a single entity can make, and which markets can consider new repeaters — all of which frees up the regulatory body to examine applications for new community stations. The regulatory agency still gave some deference to corporate broadcasters, however, by allowing them one shot at revising their applications to fit the new guidelines.

That means “as early as this fall, as in 2012, there will be opportunities for local community groups to plan and start their own independent radio stations,” Doyle said. “This is what we’ve fought for [over] more than a decade, and the FCC has opened the door to that.”

While there aren’t any official numbers yet, several “radio geeks” who spoke to Raw Story off the record estimated that as many as 10,000 applications for community radio stations could be filed in the coming years.

Prometheus activists and local radio affiliates all over the country played a dramatic role in helping shape media coverage of the “Occupy” movement last year, providing a sharp contrast to the often detached approach taken by mainstream, corporate sources. Their influence was broad enough to remind many listeners that community radio — an otherwise rare commodity in the U.S. — is often the dissenter’s best friend.

Though the FCC’s decision may not sound all that important, it really is. For the first time in decades, Americans living in major cities will soon be hearing the voices of their friends and neighbors flooding the airwaves — a far cry from the typical morning DJ fart jokes and the same “top hit” songs endlessly droning on a looping playback.

I agree that radio sucks. But it sucks because most people want to listen to something that sucks. All the efforts to put sensitive people on the air have failed because no one wants to listen to that crap.

Sensitive people already have NPR and MSNBC to congratulate them on how sensitive they are. Rush Limbaugh, whatever you think of him, SAVED a.m. radio. It would be dead as a medium by now unless conservative talk shows had risen up to save it. And it will be dead once the government decides to create a state-run media. The economies of scale in producing content are just too large. There is no chance of small, local groups producing anything.

Then, when a.m. radio does die, our government will blame it on changing technology, not on crushing regulatory restrictions.

Tuesday, March 20, 2012

The House of the Rising Sun--Tesla

Apropos of nothing, I predict that reactions to this video will divide largely along gender lines. Women will mostly think, "That's pretty stupid." And men will mostly think, "Where can I get one? And can I use it as a combination stereo/security system?"

Truly Massive Solar Fail

Turns out solar power is not profitable, and in fact it's a big money loser.

The only reason it was ever profitable was truly massive subsidies. Now, just cutbacks, not elimination, just cutbacks, on the subsidies will spell the end of the solar industry in Europe. It was in all the papers.

If an activity is profitable, it produces more in value than it uses up in costs. If an activity is NOT profitable, it uses up more in resources than it produces in value.

If the only reason an activity is profitable is artificial subsidies, financed by money taken from taxpayers at gunpoint, against their will, then the "positive profits" signal is fake, and the activity still uses up more resources than it produces in value.

Finally, any activity, no matter how wasteful, can be made "profitable" with large enough subsidies.

People could have bought solar panels on their own, voluntarily, if it made economic sense to do so. Why would being forced to buy solar panels makes sense? And, if the government takes away huge amounts of my income, and lets me have some of it back if I purchase an extremely wasteful technology, in what way is that a voluntary transaction?

The solar "industry" is composed largely of rent-seekers and brigands, combined with enough genuinely committed (though mistaken) true believers to give the whole noisome mess moral cover. The thing that's hard to understand is why anyone would believe that a technology that uses up more resources than it produces is "environmentally friendly."

The cure is worse than the disease

What do you do when you find 10 human heads? Send 12 policemen to look for the bodies.

What do you do when those 12 policemen are murdered?.............

Legalize drugs?

It is amazing what damage the US anti-drug policy is having in other countries. According to the linked article, over 47,000 people have died in drug violence in Mexico during the sexenio of Felipe Calderon.

Our drug laws are responsible for a horrible toll of carnage and disfunction in Latin America.

St. Paddy's Day: Round Up Your Mates!

Warning:  NSFS*

*Extremely insensitive. Not Safe For the Sensitive

Support for Green Power Slipping

NYTimes poll finds support for green power slipping, in some cases falling sharply.

Got an email accusing me (!), and "people like me"(!!) for causing this.  Ma'am, I doubt that.

Nod to Anonyman.

Monday, March 19, 2012

Concha y Toro, and the Balcony of Pleasantness

It's vegetarian night at the corner of La Gloria and Apoquindo.

Bought a big wad of espinaca, remembering the rule that "one pound of spinach cooks down to exactly nothing." Loaded it with garlic, bean sprouts, and spices, and cooked it up. Had some nice farmer's cheese and brown bread, and ate my dinner....

...while having some Concha y Toro carmenere, and looking out from the balcony. The CyT is hardly a great wine, but then here in Santiago it only costs $3.20....for a 1.5 LITERs.

When you add it to this view, and the 78 degree dry evening air, with a breeze...well, to quote Jimmy Buffet: "I was in love! With the whole world! Animate, inanimate, cone head, no cone, it don't matter."

Swap meet

Ah, Italy. When it rains, it pours. The Italian government recently paid a few billion euros to Morgan Stanley to unwind some interest rate swap positions it took in an ill-fated attempt to hedge its borrowing costs.

The excellent SoberLook has the full story, including the kicker that Italy still has over 150 billion Euros in open positions that are undoubtably "underwater" for them.

As SoberLook pointed out in a much earlier post about Harvard's swap woes, there are cheaper ways to buy insurance against increased funding costs.

Prophets of the KPC?

I've been droning on (and on) about how the Fed has backed themselves into a weird position where if the economy keeps growing decently, they will have to backtrack on one of their two promises.

Promise #1 is 2% inflation. Promise #2 is a doozy: no short term interest rate hikes until the second half of 2014!

Increasingly, others are growing more skeptical of promise #2.

In CNBCs survey of "67 economists and equity and fixed income managers", it found that "nine out of 10 market participants don’t believe the Fed will wait that long. In fact, 54 percent believe the first Fed interest rate hike will come by 2013."

I wonder what The Bernank and crew are thinking? Are they banking on a recession to save their "credibility"? Do they think there is enough weasel room in the wording of promise #2 that they can claim compliance no matter when they raise rates? Do they regret getting pressured into making promise #2?

People, which is more likely to happen, the Fed keeping promise #2 or Congress allowing the planned sequestrations to go through without any changes?

Hat tip to LeBron.

Sunday, March 18, 2012

Eyes wide shut

A big trend in economics these days is the Randomized Control Trial (RCT), often referred to by its enthusiasts as the "gold standard" of evidence. An intervention is tested by randomly assigning it across a chosen sample and computing the average treatment effect. An analogy is often made to clinical trials in medicine, but there is (at least) one important difference. Most drug trials are "double blind", where participants do not know if they are in the "control" group or the "treatment" group.  By contrast, most RCTs are not double blind. Participants know what group they are in.

And, as a fascinating new paper points out, this knowledge can produce "pseudo-placebo effects" in RCTs. That is to say, the expectation of receiving the treatment can cause people to modify their behaviors in a way that produces a significant "average treatment effect" even if the actual intervention in not particularly effective.

The paper illustrates the point by undertaking two different RCTs on cowpea seeds in Tanzania. One is a traditional study where the control group knows they are getting traditional seeds and the treatment group knows they are getting modern seeds. The second is double blind; neither group knows what seed it is getting.

The traditional RCT shows a significant  over 20% increase in yields from the modern seed. But the double blind RCT shows that virtually all of that improvement comes from changed behavior, not from any inherent effectiveness of the modern seed.

Specifically, the average treatment effect in the double blind RCT was zero! And when the harvests in the control groups across the two RCTs were compared, the blind control group showed a significant over 20% increase over the traditional RCT control group which knew they were getting the traditional seeds. This is the "pseudo-placebo" effect and it explains the entire average treatment effect in the traditional RCT.


In other words, the significant effect found in the traditional RCT was not due to better seeds, it was due to actions taken by the farmers who thought they were getting better seeds (they planted them in larger plots with more space between the plants on better quality land). These farmers' expectations were wrong (in post experiment surveys, over 60% of them said they were disappointed in the yields), and the significant effect in the traditional RCT would not survive over time because the farmers, having adjusted their expectations downward would stop taking the actions that produced the "success".

People, can I get a "YIKES"?

Hat tip to Justin Sandefur.

Santiago de Chile

I'll be in Chile for more than a month. El otoño there in the southern cone.

My sincere thanks to JPC for setting this up.

Saturday, March 17, 2012

Tied to the whippin' post

This is a pretty amazing table:

Let's break it down:

1. I guess Mustafa Kemal really did have some influence.

2. Pakistan and Egypt are seriously messed up places.

3. Those numbers do not conform to the pleasant image of Jordan that I have in my head.

Hat tip to Roving Bandit.

Friday, March 16, 2012

David Stern is a TERRIBLE GM

"The way it looks now, the Hornets will have traded their franchise point guard (Chris Paul) for a player who’s leaving (Kaman), a guard who’s played only two games and also could leave in the summer (Eric Gordon), underachieving forward Al-Farouq Aminu and a 2012 first-round pick that might not end up in the lottery.

Imagine how different it would be if NBA commissioner David Stern hadn’t vetoed a trade that would have given the Hornets guard Kevin Martin, forward Luis Scola, forward Lamar Odom and guard Goran Dragic."

~Marc Spears

Excellent Point: US Becoming More Like Russia

So, an excellent point:

"Polls tell us that the teenagers who in the 1990s dreamed of becoming rich in business now aspire to be public servants. Many view public service as a source of fast and easy cash. As long as this incentive exists, purges will be useless — unmasked thieves will only be replaced by others."

Strangely, this claim was made, not in the WS Journal, but in the Washington Post.

Even more strangely, the claim was made by one V. Putin. Who ought to know how profitable public office is. (Note: I changed "oligarchs" to "rich in business," so as not to give it away...)

The layers of hypocrisy here almost cover the long sharp prickles of irony.
The disturbing thing is that in a crony capitalist system, it is the "businessmen" who make the most from "public service." Check this article on Warren Buffet, who has made a fortune by telling President Obama to invest in companies Buffet himself owns.

Excerpt: Consider Warren Buffett. Often seen as a grandfatherly figure above the rough-and-tumble of politics, Buffett appears to be immune to the folly and excess of finance as well. He lives in Omaha, Nebraska, in a house he purchased in 1958 for $31,000. He made a fortune for himself and his investors at the business conglomerate Berkshire Hathaway through the humble-sounding approach of value-based investing. He uses folksy expressions: “You don’t know who’s swimming naked,” he said during the height of the financial crisis, “until the tide goes out.” He frequently takes to the nation’s op-ed pages with populist-sounding arguments, such as his August 2010 plea in The New York Times for the government to stop “coddling” the “super-rich” and start raising their taxes.

But this image does not always reflect reality. Warren Buffett is very much a political entrepreneur; his best investments are often in political relationships. In recent years, Buffett has used taxpayer money as a vehicle to even greater profit and wealth. Indeed, the success of some of his biggest bets and the profitability of some of his largest investments rely on government largesse and “coddling” with taxpayer money.

The US is not in danger of becoming a socialist country like Russia WAS. The US is in danger of becoming a corrupt crony capitalist country like Russia IS. Warren Buffet, oligarch.


Since on Monday, I'll be arriving in Santiago de Chile, and won't be in any shape to post, we'll just have to let Friday's child be full of links.

You are more awesome than a monkey wearing a tuxedo made out [of] bacon riding a cyborg unicorn

Tag Challenge

The quiz Dan Kahneman wants you to fail...

Peyton Manning gets a waiter fired, though it was the waiter's fault.

Sauce for the goose? In retaliation, female legislators try to regulate the gander's sauce, too. (Sorry about the "gander's sauce" thing. Ick.)

All of a sudden, Geithner and co. are Austrians? Markets are hard to regulate, and prices fluctuate because of uncertainty? Are we in bizarro world?

And, in an attempt to get the president to concentrate on being president, instead of just always campaigning:
Click on the image for an even more distracted image...

(Nod to SdM, Anonyman, Kevin Lewis, and the Blonde)

Thursday, March 15, 2012

When Irish eyes are smiling

The Irish should love the Greeks. After all, it's got to be nice not being on the bottom of the heap of Euro-countries.

Yet they seem to enjoy screwing with them nonetheless.

Aer Lingus has been making folks with Greek passports take written language tests in Greek before letting them board flights to Ireland.

All good clean fun until they did it to this lady taking a flight from Barcelona to Ireland.

One of the many great parts of the story is that no one at the Aer Lingus desk in Barcelona could read Greek, nor did it appear they had an answer key on the premises.

I think I could have passed the test under those circumstances. Years of teaching econometrics has left me overly familiar with the Greek alphabet.

Hat tip to Mrs. Angus.

You Can Get the Computer to Write Political Science For You

I asked the computer for a randomly generated gibberish sentence in political science. I got this.

The emergence of praxis functions as the conceptual frame for the legitimation of the nation-state.

That's more than a little scary. I'm pretty sure that that was the main argument of Ari Kohen's PhD thesis. Now.... we know.

Heisenberg's links

I'm home today with a nasty bug, here's some links to keep the dream alive:

1. Sanctions on Iran are either working or not working.

2. Dwight Howard is either staying or going.

3. The lawyers are getting restless (the piece is great, the comments are even better)

4. Another economist gets taken to the woodshed.

Wednesday, March 14, 2012

Don Boudreaux Goes All Boudreaux

A classic "goin' all Boudreaux," from the master of the genre.

The Primaries of Tuesday

My good friend Bill LuMaye is on at 6 am now, and I went down to the studio to provide moral support. And they put it on the radio. Always fun to talk to Bill about politics. Here's 40 minutes of it...

My favorite part is the bit just after 31:45. Gaia, the Earth Mother.

The World Belongs to the Boomer Sooners; The Rest of Us Just LIve here

So, walking in the Crystal City mall, in a deep sub-basement. And come across this extremely frightening doorway:

What fresh hell is this? U of OK has lobbyists in DC? Or, rather, lobbyists hidden deep below the Crystal City Metro? Is this a "Phantom of the Prairie" thing?


NC's Amendment One

In the May primary, NC will also vote on a Constitutional Amendment:

Constitutional amendment to provide that marriage between one man and one woman is the only domestic legal union that shall be valid or recognized in this State.

And my view on the Amendment.

Guilt by association

OK, so my idea of song title book reviews is gonna be slow to catch on.

Well, what about this: If NBA players were musicians?

Let's start with two of my favorite players

James Harden -- Isaac Hayes.  Always cool, never in a hurry. Hot buttered soul.

Russell Westbrook -- Lil Wayne.  Incredible highs, huge variance. always wondering what he'll do next.

Get the idea? Here's a few more:

Rajon Rondo -- Soulja Boy
Kevin Love -- Justin Timberlake
Derrick Rose -- Tupac
Kobe -- Miles Davis
Ricky Rubio -- Bieber (duh!)
Josh Smith -- Chamilionaire
Lebron, Wade & Bosh -- Wu Tang!!

and finally,

Kevin Garnett -- Kenny G.

Got any good ones?

Tuesday, March 13, 2012

Only in Academia

An MA student at UCSB, Christopher Todd Brown, wrote his thesis and got it approved. After the committee approved it, he added a "Dis-acknowledgements" section which started like this:

"I would like to offer special F**k You's to the following degenerates for of being an ever-present hindrance during my graduate career...."

Only there weren't any ** in there and it continued to rail at some length against various bureaucrats, politicians and institutions with which Chris had beef.

Unsurprisingly, the university refused to accept the thesis in that form, requiring him to drop the ex post additions he'd made.

Somewhat surprisingly, Chris chose to sue instead. And then to appeal when he lost.

And thanks to the internet and Paul Gowder, we get to read about it!

I actually think the student is right. They shouldn't stop you from getting your degree because you let off a little steam in the acknowledgements. My only issue with Chris T. Brown is that he didn't have the onions to let his committee see his handiwork ex-ante, and just tried to weasel it in ex-post.

Winning Bracket

As a special bonus for KPC readers, I am able to reveal the winning bracket for the NCAA tournament.

It's right here.

No, don't thank me, it's all part of the service.

Sentence of the day

People it comes from Joe Stiglitz and it's a doozy:

"If my Cassandra forecast turns out to be wrong, stimulus can be cut."

The source is the FT, but I've already hit my quota there so here's a link from Mark Thoma.

Is he saying there already is stimulus in place now that we have the option of cutting?

Is he implicitly proposing some vague new conditional stimulus?

Is he an expert at putting toothpaste back into the tube?

If you put a stimulus in place and things started going well, wouldn't you shy away from cutting back on the announced stimulus for fear of mucking up the recovery?

UPDATE: this post was edited to remedy my severe lack of reading comprehension this morning. Thanks to Mark Thoma for setting me straight.

Monday, March 12, 2012

Why In the World Hire an "Investment Broker"?

Craig Newmark discovers the answer to one of life's most difficult questions: why would anyone hire an "investment broker"?

Brokers, after all, make people.... broker. They sell products they don't understand to yokels they don't care about.

But, as Craig notes, now there is an answer.

Got a call from an investment broker the other day myself. I made two claims, rather loudly.

1. No one can make predictions about the stock market, or super normal returns in assets, unless they inside information. And if they had same, they would TRADE on that information, borrowing all the money they can scoop up. They wouldn't call an idiot like me and GIVE me the information over the phone.

2. Idiot or not, I went 100% cash and short bonds in August 2007. And went back about 50% into stocks in April 2009. How many of your clients did you advise to do THAT, Mr. Investment Broker?

We didn't talk long after that.

El Mercurio, and News - Observer

In which I go all Boudreaux on news people on two continents.

1. El Mercurio, in Santiago, Chile: Por otra parte, a ocho meses de las presidenciales, esta indecisión republicana podría tener consecuencias. "A medida que Romney avanza hacia la victoria en las primarias, está perdiendo piso en la elección general", advirtió The Washington Post, que resaltó que se le ve "en peor forma en este punto de la campaña" en relación con los últimos aspirantes presidenciales republicanos. Y es que, bajo el argumento de que no ha sido capaz de "noquear" a sus rivales, varios comentaristas han puesto en duda su competitividad ante Obama.

¿Por qué tanta prisa?

Sin embargo, también hay quienes llaman a la calma. "Yo no entiendo por qué los medios dicen que 'Romney no puede cerrar el trato'. Si se compara con 2008, la nominación demócrata no terminó hasta mayo. Romney tiene, en este punto, más delegados de los que tenía Obama en marzo de 2008, pero nadie preguntó entonces '¿por qué Obama no convence al electorado?", indicó Michael Munger, analista de la Duke University.

En términos de estilo, Munger compara el caso de Romney con el del Presidente Sebastián Piñera, "que hace que las cosas funcionen, pero no es muy ideológico". "Esto es una desventaja en las primarias republicanas, donde los extremistas quieren ideología extrema. Pero podría ser una ventaja en la elección general. Quizás tenga problemas para que la gente se entusiasme, pero el desempleo es alto y hay insatisfacción con la actual gestión. Así que podría ser como en Chile, donde Piñera ganó no porque entusiasmara, sino porque a la gente le preocupaba la dirección del país".

Los republicanos vamos a unirnos, porque realmente creemos que Obama debe ser reemplazado.

2. Same theme, letter to News-Observer. Steve Ford must have miss-typed, right? ("Drilling into Democrats' do-over," Jan. 29 column.) He actually said that if Republicans "were comfortable with the current pack of candidates, one would already [be] the nominee-apparent."

In 2008, the Democrats knew nothing about who would be their nominee by January's end. In fact, the primaries of February through April just muddied the waters. Barack Obama was not clearly selected until May. Today, Jan. 31, Mitt Romney is far ahead of Obama in 2008, in terms of elected delegates.

But the Democratic Party showed little "discomfort" in 2008, uniting behind their candidate. Nobody but media types and college professors think primaries should be decided fast and clean. Democracy is messy.

Friday, March 09, 2012

Good but not great

BLS reports that non-farm jobs increased by 227,000 in February and January's number was revised upward from plus 243,000 to 284,000.

The unemployment rate was unchanged at 8.3%

These are decent numbers, but, at this pace, a "normal" overall unemployment rate of say 6% is still a spec on the far horizon.

Among people 25 and older, those with less than a high school diploma have a 12.9% unemployment rate, those with a BA or greater have a 4.2% unemployment rate.

Of course these are average numbers, not marginal, and should not be used for any wagering!

Thursday, March 08, 2012

Unicorns & Rainbows

Ezra Klein has identified why the government didn't "fix" the great recession; Politics:

The compromise was clean and obvious: Investments and tax cuts now, coupled with a much-larger deficit reduction package that would kick in once unemployment fell below, say, 7 percent. 

 What doomed this package wasn’t a theoretical divide. I spoke with many freshwater economists who thought a package like this would be sensible. Rather, it was politics wot (sic) done it. 

 This type of storyline refuses to recognize the simple brutal fact that current politicians cannot commit future politicians to a specific course of action. The proposed "package" was simply not credible because the back loaded pain is unenforceable.

Advocates of deficit reduction (I'm not saying that it's the right policy) could clearly see that the only policy that would actually happen for sure was a big increase in the deficit and were completely rational in opposing such a plan.

Absent a credible commitment mechanism, promises of future actions are basically worthless. This is an example of the "asynchronous exchange" issue Oliver Williamson has elucidated. Some call it the "St. Augustine problem" ("Lord grant me chastity, but not just yet")

The phenomenon doesn't rely on there being different politicians in place when the deficit reduction is supposed to kick in. The exact same politicians can simply decline to enforce their previous agreement.

Let's see what happens to the "automatic" sequestration.

If you really want deficit reduction (again, I'm not saying that it's the right policy), all you can do is try to get it done NOW.


I have predicted that predictions by ecoomists will be wrong.

Interesting article, with a similar point.

Wednesday, March 07, 2012

The Culture that is Pakistan

In a written submission, the Ministry of Law and Justice said that under Sharia law, children become adults at the onset of puberty which varied under a range of factors making it impossible to increase the age for criminal responsibility:

 "It can be well understood that attainment of maturity of understanding depends on social, economic, climatic, dietary and environmental factors, that's why a child in our subcontinent starts understanding nature and consequences of his/her conduct much earlier than a child in the west specially because of general poverty, hot climate, exotic and spicy food which contribute towards speedy physical and mental growth of the child," it said. 

This remarkable statement was issued to explain why the ministry was against raising the age of criminal responsibility in the country from 7 (where it currently stands) to 12.

 The source article is here and the hat tip goes to Roving Bandit.

Now I know whats wrong with the youth of America. Not enough hot sauce!!

Maybe Bosses WILL Wear Bunny Slippers?

A while ago I wrote this article, about the nature of the firm. A boss decides it would be cheaper to "fire everybody" and just run the firm from home, in his bunny slippers.

But with reduced transactions costs, one would predict that the optimal size of the firm should shrink. Here is an interesting discussion of just that phenomenon.

Coase himself was agnostic. As he put it:

“A firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organising in another firm” (Coase, 1937, p.395).

All you have to do is add "or contract" and you've got it. If transactions costs of buying ptp fall, firm size should fall, cet. par., because there are other costs of organizing within the firm.

(Nod to Robert Eaton, for finding the AVC example)

Tuesday, March 06, 2012

Okay, Now I'm Some Lefty Nutjob?

When I'm reading THE NATION, and thinking, "Yup, yup, that's right, yup," then something is messed up.

And what is messed up is...the police state we are becoming. I have claimed that the strange thing is the left won't face this.

Well, that article in the Nation faced it. Well done.

Two things need to happen.

1. The left needs to admit that the state=coercion, which can metastasize into violence, and does so metastasize.
2. Libertarians need to admit that Karl Marx was right about concentrated corporate power. It's every bit as dangerous, and in fact in most important ways it's no different from, the worst aspects of the state. So, ipso facto, concentrated corporate power=coercion (see above about metastasis).

We have all been complicit. It's tempting to want to support something. But the two state sponsored parties have hoodwinked us. The third term of the Bush Presidency going on under Mr. Obama is just a continuation of the same ghastly trends. Gitmo. Patrio Act abuses. Unlimited detention. State murder of American citizens without any kind of due process. Oi. All of a sudden I want to see if Alexander Cockburn wants to have lunch.

When cannons are outlawed....

From the LA Times:

"Authorities said the cannonball that struck and killed a 33-year-old woman in San Diego County was homemade and that alcohol was involved in the incident.

 The woman's husband and another man were working on a cannon shortly after midnight outside the couple's mobile home when it exploded, according to a Cal-Fire spokesman. One of the two men was sent to the hospital with minor injuries.

The incident is being investigated by the San Diego County Sheriff's Department.

Few details were immediately available, and it's unclear exactly what killed the woman. The incident occurred in a mobile home park in Potrero on the Mexican border."

Here I go people, I just can't help myself:

1. A "homemade cannonball"? Really?

2. I don't think alcohol was the only problem.

3. There is a really severe contradiction in the first and last 'grafs of the article: "cannonball struck and killed" vs. "unclear exactly what killed". Get a grip, LA Times

4. This incident reminded me of one of my favorite songs and videos of all time:

Hat tip to RKG

Public Choice Papers

My two papers for Public Choice. What a long strange trip it's been. We submitted the papers to the PC Society, but they just disappeared. At last check, after submitting the paper more than three weeks ago, they STILL have not been put up on the PCS web site. So, here they are:

William Keech, Michael Munger, and Carl Simon: Market Failure and Government Failure

Abstract: We distinguish two settings for market processes: The first is the "invisible hand" world of private goods, decreasing returns, and full information where general equilibrium and the fundamental theorems of welfare economics are well defined. The second is the "pin factory" world of increasing returns and creative destruction arising from innovation, technological change, and entrepreneurship. Then we note the differences in the application of "market failure" in these two settings. Building on the well-known "anatomy" of market failure in welfare economics, we develop an anatomy of government failure, confronting government with the more realistic and dynamic world of pin-factory type market processes. This anatomy distinguishes passive and active government failure, and it links market and government failure with the core functions of aggregation, incentives, and information, and with problems of agency, rent-seeking and time consistency.

John Aldrich, Michael Munger, and Jason Reifler: Institutions, Information, and Faction: An Experimental Test of Riker’s Federalism Thesis for Political Parties

Prepared for Special Issue of Public Choice, “Empirical Issues in Public Choice,” edited by Peter Kurrild-Klitgaard. In this thirtieth anniversary year of the publication of LAP, we are glad to take the opportunity to look back at some of the questions and insights that had shaped Prof. Riker’s interests in institutions. In particular, we will examine some of Riker’s earlier work on federalism, and the political bargaining that resulted in a federal system for the U.S. This bargain still has important implications today, especially for party organizations, which operate at the national, state, and local levels with goals that sometimes coincide and sometimes conflict. We then test a Rikerian thesis about an implication of the “federal bargain.” Having power shared by states and federal governments also means that party organizations are obliged to serve multiple masters with conflicting goals. To put it differently, federalism is a bargain between national and local interests. Any party system must likewise constantly negotiate conflicts between national and local interests. In a number of his early writings (Riker, 1955; Riker and Schaps, 1957; Riker, 1964), William Riker explored the stresses and cracks in partisan institutional structures. Focusing on the American system, and to a greater extent under the Constitution than under the Articles, Riker concluded that the decentralization of the party system effectively blocks presidents from being able to control partisans, using either ideology or organizational tools.

Lord, He Was Born a Travelling Man!

Apparently, if your dad coaches in the NBA, you get to play under the nearly nonexistent NBA traveling rules.

Some of these are close, could see a no call. But some of them are just feet shuffling embarrassments. Karl Hess may have been too busy looking for NC State fans in the stands, hoping to throw them out.

Lord Volt A More

Chevy Volt - Building a Better Tomorrow from Ben Howe on Vimeo.

(Nod to John-O Donato)

Say Cheese

That pretty much says it all right there, no?

For a less concise, but no less heartfelt, critique, click here.

The Cotton Club

India, the second largest cotton producer in the world has banned all exports of cotton "until further notice".


Because China, the largest cotton producer in the world is importing and hoarding a lot of cotton, and because Indian cotton exports had already "exceeded government targets".

I am not making any of this up.

These are two huge countries that just seem to have no clue when it comes to trade. Casual arrogant protectionism and the enshrinement of inefficiency seem to be policy goals.

Monday, March 05, 2012

Words of wisdom

"The righter we do the wrong thing, the wronger we become. When we make a mistake doing the wrong thing and correct it, we become wronger. When we make a mistake doing the right thing and correct it, we become righter. Therefore, it is better to do the right thing wrong than the wrong thing right. This is very significant because almost every problem confronting our society is a result of the fact that our public policy makers are doing the wrong things and are trying to do them righter."

~Russell Ackoff

Hat tip to Ben Ramalingam

Angus impossibility theorem

Here it is:

There is no such thing as a purely micro-founded macro model that is actually useful for forecasting.

The original RBC models were, more or less, purely micro-founded models. But, they didn't track anything. They could match some unconditional moments, but couldn't replicate realistic dynamics.

People, we don't even have very good micro foundations for money! We just put it in the utility function or arbitrarily assume a "cash in advance" constraint. That's one reason why the original RBC models didn't even contain money.

Amazingly to me, Central Banks in the Western world have spent a lot of money and economist-hours trying to construct dynamic stochastic general equilibrium (DSGE) models that are actually useful for forecasting.

This effort has largely led to the de facto abandonment of micro-foundations. In the quest to make the models "work" we often either choose whatever micro-foundation that gives the best forecast regardless of micro evidence about whether or not it is accurate, or we just add ad hoc, non-micro-founded "frictions" to create more inertia. Or we just add more and more "shocks" to the model and say things like, "much of the variation in X is caused by shocks to the markup".

So macro has to live in this weird world where, to correctly evaluate policy changes and welfare, we need to use fully micro-founded models that we know do not track reality, and to track reality, we need to come perilously close to giving up on micro-foundations altogether.

No wonder we are so often in a bad mood!

Sunday, March 04, 2012

The most dangerous name

LeBron's rumination on middle initials got me to thinking about triple named murderers. Lee Harvey Oswald, John Wilkes Booth, John Wayne Gacy, James Earl Ray....

First I wondered why people like Sirhan Sirhan and Jeffrey Dahmer got short shrift.

Maybe Sirhan Sirhan was distinctive enough that using Bishara in the middle was gilding the lily?

 But why not Jeffrey Lionel Dahmer?

Maybe it's only mellifluous if the middle name is a single syllable?

But see Lee Harvey above.

Then I wondered if there was a specific middle name particularly associated with mayhem and found this amazing article.

If your middle name is Wayne and you live in Texas, you probably are a murderer!

Saturday, March 03, 2012

Welcome to the woodshed

They do the work, so I don't have to!

 Let's start off this new KPC feature with a double-header.

 First, Clive Crook takes Jon Chait to the woodshed.

Then, in the mother of all beatdowns, Bob Kuttner takes Tim Geithner to the woodshed and just wails away on him.

Friday, March 02, 2012

People Aren't Smart Enough for Democracy

It is interesting that progressives think citizens are much too stupid to make their own choices in the grocery store.  But somehow, people get a lot smarter when they enter the voting booth., they don't, actually. 
The problem, as I argued in a recent paper about "self interest," is that people have pretty good incentives to learn about which apples taste good. But Santorum vs Perry? Ooooh, I like his tie. Here is an excerpt from my paper:

There are three parts to the Public Choice Theory “citizen as private actor” story. First, the citizen is motivated to seek his own self-interest. Second, the citizen has limited information. Third, political elites know this, and use advertising and simple slogans to attract votes.

The evidence that Lewin (1991) offers bears only on the first step. But if we change the motivational assumption to its most extreme form, “Citizens only want to act in the public interest,” the cost of information and the value of simple political messages as persuasion are unchanged. From Marx to Downs to Buchanan and Tullock, the costliness of information and of collective action has been a constant theme. Motivational assumptions are nearly inconsequential for the PCTist. What matters is the aggregate consequences of individual action.

Do voters have the information they need to make accurate decisions? The very literature to which Lewin refers provides a resounding “no” answer. Very few citizens are aware of even the most basic political facts, and they have only cursory knowledge of how government works (Page and Shapiro 1992, Table 1.2; Somin 1998). Less than half can name their congressional representative, much less identify her voting record or issue positions. Even fewer can give a coherent attribution of their own political ideology in terms of its specific policy implications (Converse 1964; Feldman and Conover 1986, 1984, 1982, and 1982). The rationally ignorant public-interest voter is essentially indistinguishable from the rationally ignorant self-interest voter. Rationality need not imply self-interest, but it clearly does, as an empirical matter, imply that voters have very little idea of how policy works and what candidates will do once they are in office.

For reasons I cannot understand, Lewin (1991, 107) denies this in terms that can only be called naïve:

While proponents of the self-interest hypothesis centre their hopes on setting satisfactory prices through market mechanisms, the representatives of the public-interest hypothesis believe in cooperation as a method to escape the “prisoner’s dilemma.” Both camps maintain that their particular world—the market and politics, respectively—is the more transparent, i.e. the one characterized by a minimum of unintended consequences. Although this may be true of the way the market functions ideally as a model, however, faulty information, limits on competition, and other imperfections are quite evident in real-life economies. Politics, by contrast, because of its combination of collective organizations and public debate, is probably easier to predict even in reality.
Yet Public Choice scholars have never claimed that politics is unpredictable. In fact, it is all too predictable, precisely because people can be counted upon to act in their self-interest. A legislative séance of the sort Prof. Lewin envisions for the public sector, groping toward some seraphic group wisdom, would indeed be unpredictable, and (by his lights) not transparent. But the Public Choice argument is that one can project the decisions of a group with high precision if one knows the goals of each individual and the decision rule that will be used by the group.

Lewin argues for the superior competitiveness and informational abundance of the public sector. The information problem I have already discussed: buying a car is a private good, and I have solid reasons to learn about cars. Voting for a candidate is a public good, and information about it will be underprovided by private action. The fact that voters have public-interest intentions at the first stage, the motivation stage, is essentially irrelevant, since they have private interest reasons to free ride and can thus be influenced by operatives whom Downs called “persuaders,” who have their own reasons to distort information. 

As always, happy to send a PDF if you are interested. Just contact me at munger at duke dot edu

Can you smell what the Angus is cookin'?

Over at MR, LeBron asks for your most surprising prediction.

Here's mine:

Within the next 10 years we will (at least de facto if not de jure) have very close to open borders in the USA.

Restated in English: within the next 10 years immigration into the USA will rise dramatically.

Thursday, March 01, 2012

The WMOE, On CVs and Job Interviews

The Dub-MOE, for all you grad students out there.

What Should You Include On Your CV? from Kosmos on Vimeo.

It would have been better if they could have taken the bucket off from atop the microphone. But good advice.


Wow, these two dogs turn on their buddy right away. Who did this?


Sentences are for sissies

As part of his plan to conquer the universe, LeBron has been writing a "very short reviews" sidebar for the NY Times Sunday magazine, where he reviews a book in one sentence.

But a sentence is just so prolix!

I propose reviewing a book with a song title!

Some examples:

The Glass Castle: Ain't that America, 

Coming Apart: The Bi*ch is Back, 

Poor Economics: Love the One You're With

The Steve Jobs Bio: Yonder Stands the Sinner

The Great Stagnation: Eve of Destruction

White Man's Burden: Whippin' Post

The Rent is too Damn High: Wishing Well

Biggest Environmental Heretic Gets Pounds!

From KPC friend Matt Ridley.

Read all about it.

Thanks to Tommy the Tenured Brit