Saturday, January 05, 2013

Nuevo Congreso, las mismas viejas divisiones

Or, "New Congress, " a chance to talk to my friend Carolina Alvarez.  (gated, free registration, in Spanish)


El nuevo Congreso mantuvo el balance de poder e incluso a sus líderes. Y con eso consolidó las divisiones que causaron una parális política en los últimos años, mientras enfrenta los mismos temas urgentes sobre los que no hay acuerdo: si elevar el techo de la deuda del país (que llega a US$ 16,4 billones) y qué hacer con los recortes en los gastos militares y programas domésticos (por US$ 109 mil millones) que el pacto sellado esta semana pospuso apenas por dos meses...

"Será lo mismo. Esperar hasta el último minuto, llegar a un falso acuerdo, pretender que todos sacrificaron algo y después todos irán a la reelección. Es una 'danza kabuki', el estilizado teatro japonés de sombras, sin sustancia", señaló a "El Mercurio" Michael Munger, profesor de política y economía de la Universidad de Duke. 

Or, in my awful Spanish-to-English translation:  

The new Congress maintained the balance of power and even kept the same leaders. And that cemented the divisions that caused political paralysis in recent years, as it faces the same urgent issues on which no agreement: whether to raise the debt ceiling in the country (which reached U.S. $ 16.4 trillion) and what to do with the cuts in military spending and domestic programs (U.S. $ 109 billion) to seal the deal this week postponed for two months only...

"It will be the same. Wait until the last minute, reach a fake agreement, pretend that everybody sacrificed something and then everyone goes home and gets re-elected.'s A 'kabuki dance,' the stylized Japanese theater of shadows, without substance," said Michael Munger, professor of politics and economics at Duke University. 

Heh heh.  Heh.  He said "Kabuki."

UPDATE:  Typos corrected, as suggested in comments.

Incentives Matter

Wow.  This is amazing.

So, remember what I said about prices, giving accurate signals about scarcity?

That's all out the window if you impose subsidies.  Then, you aren't making something because it's scarce.  You are making it because it's SUBSIDIZED!  And it turns out you can make a lot of money by shipping cargo back and forth across the border with Canada, without ever unloading it.  Because we subsidize the transport, with credits.

Excerpt (emphases added): A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars. CBC News of Canada was the first to pick up on this story on the 3rd of December 2012, and began their own investigation into the possible explanations behind this odd behaviour.

...[Investigators] managed to obtain an internal email which stated that the cars of the train were all reconfigured between each trip but that the cargo was never actually unloaded, because “each move per car across the border is revenue generated”, the sale of the cargo itself was inconsequential.
The cargo of the train was owned by Bioversal Trading Inc., or its US partner Verdero, depending on what stage of the trip it was at. The companies “made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.” Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.” The RINs were supposed to be retired each time the shipment passed the border, but due to a glitch not all of them were. This enabled Bioversal to accumulate over 12 million RINs from the 24 trips, worth between 50 cents and $1 each, which they can then sell on to oil companies that [haven't satisfied EPA renewable fuel quotas].   

A nod to Jeremy B.

Does PJ Carlesimo have relatives on the Milwaukee PD?

I only ask because Latrell Sprewell somehow got taken to jail for the offense of playing music loud in his own $%#$ house!

I always thought Milwaukee was cool, but whatever Spree was playing, the Po-lice were not playing:

"Sprewell, 42 and a graduate of Washington High School, was booked into the jail about 4:15 p.m."

I guess I could see it if he was blasting "Call me maybe", otherwise, WTF Milwaukee?

Hat tip to MT

Before Economics....

Make sure you check out the rest of the great stuff at SMBC.  Zach W. is a genius.

Friday, January 04, 2013

We Get Letters!

An email exchange from today....

TP:   Dear Dr. Munger,  I enjoyed your video, "What Do Prices “Know” That You Don’t?"  The title reminds me of something that Bill Gates said to me.  I created the prediction markets project within Microsoft in 2003 and I was asked to brief Bill on them.  He immediately understood how prediction market prices work and then said that the reason they might help him was because [paraphrased], "If the market prices differ from my own beliefs, then either they know something that I don't know or I know something they don't know, and either of those may need remedy."   Cheers, TP

MM:  That's very cool, and an interesting difference between economists and entrepreneurs.  I assume you know the joke about the economist and the entrepreneur.

Economist and entrepreneur are walking down a street in San Francisco.  The entrepreneur sees a $100 bill, and generously offers to split the “found” value with the economist.

The economist refuses, saying that it’s not possible.  “After all,” the economist announces, if there had been a $100 bill in the street, someone would have picked it up.  In equilibrium, there are no arbitrage profit opportunities!”  

The entrepreneur shakes his head in scorn and pockets the full $100.

So, the economist sticks to the first part of your formulation.  For the economist, "they" always know everything, and that's embodied in price.  But entrepreneurs
know that prices are wrong, often, sometimes by a lot. 

That means the entrep's pick up the $100, and the economist turns out to be right after all.  But only because smart people go around looking for wrong prices.

UPDATE:  Scott Ainsworth writes.... A story from Georgia - When walking with economists in front of the econ/business buildings on the Georgia campus, I noted that there was a lot of money lying around the ground - pennies and dimes mostly. The obligatory equilibrium jokes followed. One of the economists said that picking up pennies was not worth his opportunity costs. I admitted that I still picked pennies up. More than one person looked askance at me - until I stated that I was the shortest person in the group. Opportunity costs survived and equilibrium was restored. For the economists, it was a very big day - and I was 23 cents wealthier.

Does He Actually Get It?

Is this just an accidental use of the right word, or does Senator Michael Bennet really understand what is going on?  From an NYT piece by Maureen Dowd -  

He thinks the trouble is not so much a clash of Democratic and Republican orthodoxies as it is a clash of past and future.  I think the inhabitants of the past are fighting hard to keep the rents they acquired in the 20th century,” he said.

The story is about why Michael Bennet   - a Democratic senator  - voted against the cliff deal.  He gets a smiley face, from KPC.  If more senator talked about rent-seeking, instead of doing it, we would be better off.

Is this the way 2013 is going to be?  Going to Maureen Dowd for good information, and Democratic senators for wisdom?  Golly.

Government Spending

Lots of data, facts, and pictures on government spending in the U.S.  Interesting to look at, and more than a little disturbing.

Here's a good one.  Government pension obligations.  We are either going to spend a whole lot of our annual budgets on pensions, or else we are going to renege and not pay the pensions we promised.  Either way, somebody not happy.

Thursday, January 03, 2013

The IDK Problem: New Learn Liberty!

The folks at Learn Liberty (and I do mean the lovely Elisabeth McCaffrey, among others), are SO great at taking a pretty bland idea and doing something wonderful with it.  This turned out WAY better than I had any right to expect.  I have ALWAYS wanted to blow up into a cloud of colored smoke at the end of a video.  It hurt, but only a little.

(UPDATE:  Since people have asked, "Al Trewis" is an altruist, not someone for whom all is true.  That would have been clever, since if everything is true, nothing is.  But I'm not that deep.  He's just an altruist.)

(UPDATE II:  A number of people have said, "But you didn't talk about ____!"  Especially farm subsidies that distort prices.  Well, first, yes I did.  I mentioned that the subsidy for ethanol was cut, and that that changed things.  And second, it's a four minute video.  The number of things I did NOT talk about is essentially infinite.)

Whatever happened to the 22nd Amendment?

Is it just me or does it really seem like George Bush is now in his 4th term as president?

He finally got 99% of his tax cuts made permanent. Warrantless wiretapping is proceeding full speed ahead. We are still running huge deficits. Drones use continues to rise.

Hell there's even a natural disaster where people are mad about the lack of a government response!

I just don't see how conservatives get all tied up in knots about president O. After all, despite some differences in style and tone, he's pretty much one of them.

Wednesday, January 02, 2013

Unknown Mortal Orchestra

UMO is coming to Norman! 3/11 at Opolis. Mrs. A and I will be there!

Here is info on the whole tour. This is amazing music.

Buy a Condo, Get a Green Card!

"Investment" in a ski resort in Vermont.  William Stenger is building a new resort town, using citizenship as a sweetener.  Generally, I am skeptical of incentive programs for investments, but I am pretty strongly FOR letting rich people emigrate to the U.S.
The price tag for the entire project, which Mr. Stenger says will create 10,000 direct and indirect jobs over several years, is $865 million.
But even more unusual than the size of the undertaking is the method by which Mr. Stenger and his business partner, Ariel Quiros, are financing it. They have tapped into a federal program that gives green cards, or permanent residency, to foreigners who invest at least $500,000 in an American business — the reward for the investment is a chance at United States citizenship.
Mr. Stenger has already attracted 550 foreign investors from 60 countries to put up $275 million for the first phase: a hotel at the Jay Peak ski complex, an indoor water park the size of a football field, an ice hockey arena, condominiums, restaurants and stores.
The second and third phases, now under way, require 1,000 additional foreign investors to put up $500 million to overhaul Newport and to develop the nearby Burke Mountain ski area.
Mr. Stenger and Mr. Quiros are putting up $90 million themselves. But even at $785 million, this is one of the single biggest projects in the country financed under the investor program.
Congress created the visa program in 1990 to help stimulate the economy. Because of a cumbersome process and complaints of fraud and corruption, it was long underused.
But a confluence of events in recent years has led to its rather sudden revival: the program was improved; the financial crisis of 2008 made it hard for developers to get loans from commercial banks; and foreign nationals, especially in China, were accumulating vast wealth and were eager for their children to study and live in the United States.
In 2006, the government issued just 802 of these EB-5 visas to investors and their families; this year, it granted 7,818.
The program is now growing so rapidly that in the next year or two the number issued will probably reach the annual limit of 10,000. For the first time in the program’s history, applicants may be turned away.
Good program, bad program?   
Nod to JR

Smokin' Hot Policy Choices

Two studies on tobacco control policies.  Interesting.  Pretty long, though, so I put them after the jump.

Tuesday, January 01, 2013

Happy New Year from your friends at KPC

Any thoughts, people? Tell me in the comments.

As Always, H. Browne's Libertarian New Year's Resolutions

For our annual tradition, here is Harry Browne's list of things Libertarians (note the "big L") might want to do.

The list.

Apparently, John-O was interested enough that he bought Harry's book.  This one actually has a cheap Kindle version, though the book itself is expensive, even used.  

I have to admit, I like this one, it's clever, funny, and effective.  There are at least ten of those little nuggets that I use routinely.  And it's only $14, from "The Advocates."

Monday, December 31, 2012

Happy New Year!

Holy Negative Spread, Batman!

Golly, this is remarkable.  Click through for commentary...

As Woj puts it:  This chart, more than almost any other, may highlight the potential harm induced by the Federal Reserve’s attempts to push private investors further out on the risk spectrum. Unless junk bond companies have truly become significantly less risky, when the next round of increasing defaults begins, investors will find that current yields fail to even remotely compensate for future losses. Stocks may currently be slightly overvalued from a historical perspective, but certainly not compared with junk bonds.

John-O:  waddya thank, m'brother?

Amazing Filibustration, and Some Smartness

I had to go all Boudreaux on an editorial cartoon.  (It's not posted yet, I'll put it up when I can find it). (UPDATE:  Here it is....)
Here is the letter I sent to the News and Observer, in outrage:

The 12/31 editorial cartoon (Morin) could have been funny.  Old 2012 asks "Where's the 2013 baby?"  And a clown dressed as Congress could say, "We're filibustering it."  Now, only the Senate has filibusters; the House doesn’t allow them.  But at least it would have been nonpartisan, focusing on a dysfunctional institution generically called “Congress” instead of "Senate" (controlled by Democrats) which is certainly dysfunctional.  They have not even debated a formal budget bill since 2009.  Would the Republicans have filibustered a budget bill?  Hard to tell, since the Dems have failed even to bring a budget forward from committee for nearly four years.  Still, just say "Congress" and be vague, or "Senate" and be correct.  And funny.  A little funny, at least.

But the cartoon didn’t say “Congress.”  Could it be because the Democrats control the Senate?  The clown had to be labeled “HOUSE Tea Party.”  Two problems.  First, no House filibusters.  Plus, your "Tea Party" bogeyman has a majority in the House.  Why would they filibuster?  I wouldn't accept this mistake from a high school senior in a remedial civics class.

Second, this is partisan claptrap.  Congress, both chambers, is gridlocked by an appalling leadership vacuum, from both idiotic parties.  But instead of pointing that out, you selected a cartoon with a factually mistaken, needlessly partisan message.

I sincerely hope that your editorial staff intentionally chose partisanship over accuracy in selecting that cartoon.  Because the alternative is worse:  you folks charged with “leading” public opinion about politics don’t understand the basics of Congressional procedure.

Sincerely, MCM etc.

Anyway, here's the thing.  There is wisdom out there.  This is the best thing I have seen on the cliff, the budget, etc.  The BEST.  Not surprisingly, it comes from LeBron, in his NYTimes column.  What he said, folks.  Excerpt:

Economic conservatives often stress the connection between low taxes and smaller government. But that observation, as an argument for lower current taxes, looks weaker as the years pass. Keeping taxes low doesn’t stop the growth of government spending and, indeed, makes spending taste like a free lunch, because the bill is paid much later. The conservative strategy has long been to hold the line on taxes now, but it would be better to encourage the public to more readily grasp and internalize the costs of government spending. 

As I say often, "conservative" once meant (1) question government spending, and (2) if money is to be spent, figure out how to pay for it responsibly.  Since the Repubs decided #2 was unnecessary, we've all been in deep #2.

Happiness Optimist, Revenue Pessimist

Sunday, December 30, 2012

If this is country music, I like it!

People, I give you Trampled by Turtles. Amazing.


More here.


Took the EYM out for dinner for his birthday.  He is 23 now.  Amazing.

Anyway, here was the EYM last night, at the restaurant he picked, ONE, in Chapel Hill.  An interesting place.

That's dessert, by the way.  "Eggs and Toast."  Here is the description, from the menu:

“Eggs and Toast”  Coconut-Guava Panna Cotta, Passion Fruit Yolk”,  Brioche, Pineapple Confiture, Horchata Ice Cream, Rice Milk Espuma

Robert Higgs, Libertarian

A really excellent, contemplative piece by my friend Bob Higgs.


...after the more recent decades of my libertarian journey, I am now struck by a different aspect of this longstanding debate, which has to do with our strategy for winning people over to libertarianism. Strategy 1 is to persuade them that freedom works, that a free society will be richer and otherwise better off than an unfree society; that a free market will, as it were, cause the trains to run on time better than a government bureaucracy will do so. Strategy 2 is to persuade people that no one, not even a government functionary, has a just right to interfere with innocent people’s freedom of action; that none of us was born with a saddle on his back to accommodate someone else’s riding him.

In our world, so many people have been confused or misled by faulty claims about morality and justice that most libertarians, especially in the think tanks and other organizations that carry much of the burden of education about libertarianism, concentrate their efforts on pursuing Strategy 1 as effectively as possible. Hence, they produce policy studies galore, each showing how the government has fouled up a market or another situation by its ostensibly well-intentioned laws and regulations. Of course, the 98 percent or more of society (especially in its political aspect) that in one way or another opposes perfect freedom responds with policy studies of its own, each showing why an alleged “market failure,” “social injustice,” or other problem warrants the government’s interference with people’s freedom of action and each promising to remedy the perceived evils. Anyone who pays attention to policy debates is familiar with the ensuing, never-ending war of the wonks. I myself have done a fair amount of such work, so I am not condemning it. As one continues to expose the defects of anti-freedom arguments and the failures of government efforts to “solve” a host of problems, one hopes that someone will be persuaded and become willing to give freedom a chance.

I am reminded of H.L. Mencken's definition of "progressive democracy:"

"It [is impossible] to separate the democratic idea from the theory that there is a mystical merit, an esoteric and ineradicable rectitude, in the man at the bottom of the scale—that inferiority, by some strange magic, becomes superiority—nay, the superiority of superiorities. What baffles statesmen is to be solved by the people, instantly and by a sort of seraphic intuition. This notion . . . originated  in the poetic fancy of gentlemen on the upper levels— sentimentalists who, observing to their distress that the ass was overladen, proposed to reform transportation by putting him in the cart." (H.L. Mencken, from Notes on Democracy, 1926)

The 5 most popular Angus KPC posts of 2012

The following were the five most viewed posts of mine this past year.

I am impressed. Two about economics, one about academics, one about sports and only one total goofball post.

Football: Stick a fork in it?

Me and LeBron's "what would the end of football look like?" piece in Grantland lives on as the horrific evidence grows.

The edited volume blues

People, you can't get something for nothing. If you are not yet where you want to be in academia, stay away from edited volumes, special issues of journals, festschrifts, and the like.

When cannons are outlawed....

Anytime I can legitimately post a Breeder's video, it's a good day. I guess I should feel bad about someone actually dying, but being taken out by a "homemade" cannonball cannot go un-mocked in my world.

Eyes wide shut

I am a big proponent of evaluating aid projects, but a bit skeptical of the grand claims sometimes made by the Randomista contingent. This paper about pseudo placebo effects in RCTs really caught my attention.

The Economy & Presidential Elections

"BHO is going to win in November DESPITE the economy, largely because Romney is a terrible candidate who is running an undisciplined, juvenile, brain-damaged campaign.

And that matters."

Thanks for indulging me and Mungo and we will endeavor to bring you even more gonzo-econo-blogging in 2013. We'll be back with more stuff.

$$ can't buy happiness, but do happy people make more $$?

Estimating the influence of life satisfaction and positive affect on later income using sibling fixed effects

Jan-Emmanuel De Neve & Andrew Oswald
Proceedings of the National Academy of Sciences, 4 December 2012, Pages 19953-19958

The question of whether there is a connection between income and psychological well-being is a long-studied issue across the social, psychological, and behavioral sciences. Much research has found that richer people tend to be happier. However, relatively little attention has been paid to whether happier individuals perform better financially in the first place. This possibility of reverse causality is arguably understudied. Using data from a large US representative panel, we show that adolescents and young adults who report higher life satisfaction or positive affect grow up to earn significantly higher levels of income later in life. We focus on earnings approximately one decade after the person’s well-being is measured; we exploit the availability of sibling clusters to introduce family fixed effects; we account for the human capacity to imagine later socioeconomic outcomes and to anticipate the resulting feelings in current well-being. The study’s results are robust to the inclusion of controls such as education, intelligence quotient, physical health, height, self-esteem, and later happiness. We consider how psychological well-being may influence income. Sobel–Goodman mediation tests reveal direct and indirect effects that carry the influence from happiness to income. Significant mediating pathways include a higher probability of obtaining a college degree, getting hired and promoted, having higher degrees of optimism and extraversion, and less neuroticism.

Nod to Kevin Lewis