Dangerous Ruminations

Speaking of Stupid...

2010-05-29T06:30:00.005-07:00

I would love for someone to invent a stupid screen that would automagically block the stupid comments that show up in comment threads. It's simple enough for news stories, where you just block all comments, but for technical threads where someone occasionally has some value to add it's more complicated.

Sarah Palin

2010-05-29T06:30:00.002-07:00

We don't hate you because you're a woman. We hate you because you're stupid.

Pakistani Taleban

2010-05-14T06:34:00.003-07:00

I'm increasingly of the mind that carpet bombing with no pretense of holding ground may be the only solution to dealing with this sort of nutjobbery. I feel the same way about Pat Robertson.

I wonder, though, if we're in the midst of a series of "copycat" attacks from the loonies that will die down after a decade or two. I vaguely remember terrorist bombs going off all over Europe in the 80's and early 90's, but that seems to have abated.

A Frechman with some Sack

2010-05-14T06:29:00.002-07:00

Check out Nicolas Sarkozy gettin' all up in Angela Merkel's bi'dness. You go girl! Seriously though, his (reported) reaction seems about right and very much the response of a real leader.

Economics of AFU

2010-05-12T12:21:00.002-07:00

From Business Week on the rebounding economy:

The trade deficit in the U.S. widened in March to the highest level in more than a year as imports climbed faster than exports, adding to evidence of the global recovery from the worst recession in the post-World War II era.

In the big flick, this means that other countries are willing to give us more things in exchange for Treasury Bonds, or anticipation of future exports, more likely the former. This is a bubble. A big one.

Energy

2010-05-12T07:01:00.003-07:00

As a former employee of Naval Reactors, I worked with people who remember the golden era of nuclear power. The nuclear power station at Shippingport, PA, was built with great fanfare as part of Eisenhower's Atoms for Peace initiative. There were ideas for making a system of breeder reactors using a Thorium and U-233 cycle, and given the abundance and cheapness of Thorium, it was going to make electricity "too cheap to meter."

Then reality set in. I'm not talking about TMI and Chernobyl. Rather, I'm referring to the engineering realities of living in the nuclear world. Nuclear power has costs that cannot be avoided. Waste must be manage carefully. Reprocessing of fuel (needed for many breeder cycles) involves running chemical factories with highly radioactive materials, which are even more expensive. Most importantly, the plants must be subject to a high level of engineering oversight throughout their life cycles to ensure safety. These are costs that cannot be avoided. However, they have not prevented nuclear power from being at least nearly cost competitive with fossil fuels.

Solar power too has costs. The traditional solar cells made from single crystal silicon are very energy intensive to produce, I believe primarily because of the crystal growing. There are emerging technologies that could reduce those costs, using amorphous silicon and thin films, and I don't know enough to have an opinion on the prospects for the long-term development. However, energy costs for producing solar cells is where the problem lies. The key question is if you used only solar power, could you produce enough energy to make replacement solar cells, and still have net output for distribution?

I don't know the answer to that question for solar, but the fact that I don't hear it discussed in the media is bothersome to me as an engineer. For some renewable sources, like corn-ethanol, I have read that the energy required to produce the fuel exceeds the energy content of the resulting fuel. The fact that ethanol subsidies exist is thus very bothersome, and gives me further doubts about the soundness of our national efforts to pursue "greener" technologies. It should be said that some renewable sources, like wind, pass the test, so I don't mean to discredit the whole idea. Rather, I see the same seeds of zealous advocacy that nuclear power had in the 50's and the potential for an engineering outcome that is significantly less than what is being advertised by policy makers.

Setting aside the environmental discussion, the need for an energy policy grounded in good engineering is critical, because of the looming prospect of diminishing oil production during this century. Creating a new infrastructure for energy production and fuel production (meaning something you can put in a vehicle) will not happen quickly. If we fail to move thoughtfully now, we could be setting the stage for a century with even more wars over scarce energy, and a reduced standard of living for everyone.

Baseball Leads to Tasering

2010-05-04T06:30:00.005-07:00

First an A's and now a Phillies fan. I just wanna go on record now as saying that if anyone get's tased at the UA/ASU game on May 15, I know nothing.

South Park v. Muhammed

2010-04-23T07:28:00.002-07:00

I'd like to know how things like the recent death threats to Matt Stone and Trey Parker are seen in the Islamic world. I wonder if they generally think that people who say stuff like this are completely nuts, much like I think of neo-Nazis: enemies of humanity who are tolerated until they become a real threat; or if it's more like many more main-stream Republicans think of a person like Glen Beck or Rush Limbaugh: basically right, but a little over the top.

Global Renaissance Man

2010-04-17T07:59:00.001-07:00

I wanna be like Maya Angelou. OK, so I don't know anything about her, but who doesn't want to be a Global Renaissance Man?

VBS News

2010-04-07T08:20:00.002-07:00

Interesting: http://www.vbs.tv/newsroom/.

Michael Steel is Awesome

2010-04-06T06:54:00.002-07:00

From ABC News:

Steele is under fire by his own party members for what some people consider lavish spending -- $17,000 for private jet travel, $13,000 for limousines and car services and $9,000 for a trip to the Beverly Hills hotel. But the most controversial revelation was that RNC staffers spent nearly $2,000 at Voyeur West Hollywood, a sex-themed nightclub in Los Angeles. The employee who authorized the expense was fired, but then the RNC shot itself in the foot again later, sending a fundraising letter that mistakenly directed donors to call a phone-sex number. [Emphasis added.]

I'm sure that must have been all over and I just missed it, but that is awesome. I'm sure they want to fire him because he's black, not because he's raised negative money and sent the party base a phone-sex solicitation.

Energy and Climate Bill

2010-04-01T07:02:00.002-07:00

Every time I read a sentence like this one:

For every senator who praised it as at least a partial answer to the nation’s energy needs, another raised alarms about befouled beaches and continued dependence on fossil fuels.

I want to go kill an idiot. The article is here. The phrase that gets me is "continued dependence on fossil fuels." It is a practical fact that we will be dependent on fossil fuels for a long time. It's going to take decades to install enough non-fossil power plants to power the electricity grid, and longer to add enough capacity to propel a national transportation system based on electric-powered automobiles.

Whether this particular drilling passes the cost-benefit test is another question, but the mindless railing that drilling for oil creates fossil-fuel dependence, is purely political. Certainly one could reason that if there were no oil, one could not be dependent on it, but this is like saying one cannot be dependent on air if there's no air. Less shrill, it's like the "starve the beast" argument for national fiscal policy: cut taxes and eventually the budget deficit will force a cut in spending. The story isn't over there, but it seems pretty clear that the crisis that this leads to is going to be quite bad.

Pursuing a similar policy with energy has the potential to be much worse. The government can't revalue the BTU when the feces meets the fan.

TiVo vs. Dish Network

2010-03-31T14:51:00.003-07:00

The lawsuit between TiVo and everyone else who sells DVRs is a shining example of the need for patent reform with respect to digital-age inventions. TiVo recently won a lawsuit against Dish Network. Apparently TiVo also sued Verizon and AT&T and Verizon has countersued claiming infringement of its own patents.

I have a Dish Network DVR, and I'm here to say for the record that the DVR is nothing special. Sure, it's miles better than the Cox and Comcast DVR's I've had, but in terms of exhibiting technology that's not obvious to someone skilled in the art, no friggin' way. It finds programs based on a search string, and records them either from all channels or from a particular channel. In the event of a conflict it records the program assigned a higher priority by the user. You can also do some basic customization, to start and end recordings at times different from the broadcast schedule (useful for sports that may go into overtime). It's pretty cool, but nothing I wouldn't have though of myself.

This is all a giant waste of money with no value added. Moreover, the incentive effect that patents are supposed to have to spur innovation is being completely thwarted in this case. Normal competition among television providers is more than sufficient to cause them to all want to offer the best features that they can dream up. The payback is in more business tomorrow. Instead, companies (like Cox and Comcast presumably, who's DVR's were terrible when I last used them) are being frightened away from innovating in this market because they fear lawsuits.

Pedophile Priests

2010-03-25T06:54:00.002-07:00

The news in Ireland about priests abusing kids was pretty hard to take, especially when you consider that in Ireland those buggers (used to?) run a number of public services like orphanages and schools. The pope's letter wasn't satisfying to the Irish, and a BBC probe just laid out how the pope used to to be guy in charge of pedophilia (complaints) before he became pope.

Obviously, there's no easy way for the church to pull out, given how deeply these scandals penetrate into the upper echelons of the church. Indeed, the revelations about the pope have made things very tight for the church, and it seems like the pressure has built so high that one more titillating bit of news about some priest playing pocket-pool with a young boy could cause an eruption in the church beyond what any lay-person has ever experienced. It seems time for single forceful thrust by the church leadership to bring the issue to a climax in a manner of its choosing.

I propose that they issue a new church definition of celibacy, based on the norms established in the widely accepted cultural barometer for modern society. Here's a start:

Celibacy is defined as not getting caught having sex. We must now concede that in these modern times, the approach of embarrassing young boys during sex so that they never admit what happened to them has failed, thanks in no small part to the acceptance of the abomination of homosexuality in broader society. In this more sinful society, ensuring celibacy requires that we return to our ancient ways. That is, either pay them nicely or otherwise ensure their silence.

Constitutionality Challenges on Healthcare Bill

2010-03-23T07:05:00.002-07:00

The challenge that an individual mandate to buy health insurance is unconstitutional is going to fail. The penalty for not buying health insurance is a tax. Assuming that the whole thing is written that way, SCOTUS has long since concluded that Congress's power to tax and spend is essentially unlimited. If the health care tax penalty were found unconstitutional, then things like home interested deductions would also be problematic. Not going to happen.

Health Care Reform

2010-03-22T07:45:00.002-07:00

I don't know if I'm for it or against the health care reform bill (not enough penalties to remove the costs of adverse selection and we can't afford it otherwise), but the campaign to fight it now that it's passed are what economists call dead weight loss. The idea is to create costs on otherwise profitable activities that reduce their value. There's many familiar examples, but piracy is a favorite. Treasure going into the sea as a result of piracy is an obvious dead-weight loss. More sublty, piracy imposes costs on shippers, such that some shipping is not done. That's also a dead-weight loss. Similarly, a sales tax increases the price of goods such that some transactions that would otherwise have occurred now do not occur. The foregone transaction is a dead-weight loss.

I think the plan here by the Republican party is to create huge costs associated with implementing this plan to make it fail politically, if not fiscally and practically. Modern US politics is about making the other guy's work suck as much as possible. You look good by comparison. Makes me want to bust into a Lee Greenwood tune.

MLS Contract Deal

2010-03-21T19:07:00.002-07:00

Well, I'm very glad that MLS and the players reached a deal. Details aren't yet released, but there's no free-agency, which was pretty much a necessity for the survival of MLS. I'm impressed, frankly. That said, I'm irritated that the Pink Cows won today in their opener for their new stadium, even if it was against an out of form Santos side. The only consolation is that it was covered in Vanity Fair (WTF?!).

Understanding China

2010-03-19T19:15:00.002-07:00

I just started reading this CSM article on the China bubble, but it looks to be a good one. The key point, which they make so well at the outset and which got me to post this, is that China is not out to get the United States, but rather driven primarily by a belief in the importance of political (and therefore economic) stability above all else. Moreover, compared to the tragic stories of poverty in the developed world, wherein the destitute sell their bodies for drugs or beg on the streets and drink themselves to death in their depression, the poverty in China is rather boring: people simply starve to death because they can't buy food. Thinking seriously about the ramifications of an economic policy whose objective is to keep a sizable fraction of 1.3 billion people from starving (or at least from rioting because they're starving) is sobering.

Major League Soccer Strike

2010-03-19T08:00:00.005-07:00

This is an interesting situation. I don't know the full details as the facts lie among contracts between MLS and the Players and the rules that the MLS hands down to the clubs, but here's the outline of the situation between MLS and the Players' Union.

1. Players that play for an MLS club have a contract with MLS. MLS then assigns the player to the club. This system makes MLS the single bargaining agent with players, and effectively eliminates free-agency within the MLS.

2. Teams have a salary cap: around $2.3M for a 20-man senior roster (this has changed over the years). Teams may sign up to four developmental players that don't count against the salary cap, and who's contracts are not guaranteed. Also, each team can have a single "designated player" who is paid more but who's salary cap burden for the club is fixed to around $415K. Regular players make a minimum of $34K per season. Developmental players a minimum of $1200/month. Players also have health-care and a 401K.

3. Player's that have guaranteed contracts get paid, but may not be on a team. That is, a team an waive a player from it's roster even if his contract is guaranteed. MLS still has to pay his salary, but he may have no team to play for. This may sound like a deal, getting paid to do nothing, but as for a professional athlete its a bad thing as fitness and skill suffer along with marketability.

This is the outline of the situation that has existed since the Player's Union formed and secured the collective bargaining agreement that has governed since 2004. That agreement ended January 31, 2010, and the Union wants some changes: a form of free-agency, more money, and more meaningful contract guarantees. The MLS, meanwhile, claims that these changes are not financially feasible, as the league remains in a slow-growth mode, with only a small fraction of clubs making a profit. Failure to close a deal on by Monday means a strike.

When I initially started writing this, I was swayed by the MLS arguments that the finances didn't support the players demands. After thinking about it a bit more, I concluded that the league should be able to do something reasonable to placate the player's demands for fairness without creating a cost balloon. However, I now think the situation is intractable, for reasons described on Nutmeg Radio.

Simply put, the legal existence of the MLS as a single bargaining entity with players hinges on its unity of purpose in the eyes of the law. It's already on shaky ground, having been tested in lawsuits and found to be a hybrid entity. Implementation of any form of limited free-agency creates competition among the teams for players. This "division of purpose" tips the balance toward the MLS being an illegal collusion rather than a legal single entity (anti-trust is weird), which would lead to the break-up of the organization into component clubs. It is this result, not the resolution of the immediate player concerns, that would be disastrous given the league's precarious financial situation.

I predict a long strike, because the players are arguing morality and the MLS is arguing legal and economic survival. Moreover, I think that the MLS (perhaps rightly) views caving in as tantamount to shutting down, whereas my estimate is that most of the players have other options: the strong players can return to international play, and the lesser players can go back to school or get a day job doing as well or better (financially) than they do in soccer.

As an aside, finances are a huge problem in the English Premier League (a top European soccer league), where there is essentially no financial regulation. One club, Portsmouth, just went into bankruptcy, and some of the top clubs (e.g., Chelsea, Manchester United, and Manchester City) are not profitable on their operations, but rely on regular infusions of cash from wealthy backers who seem to view the clubs more as status-symbols than businesses. In this morass, is a notable exception: Arsenal, who is profitable on it's operations. Arsenal is doing well this season, 3rd in the Premier League and they face Barcelona in the marquis match-up of the quarter finals of the UEFA Champions League.

Reid and the Left Wing

2009-10-22T11:04:00.003-07:00

I don't know squat about Harry Reid, but this article from CBS News about how the left is after him and threatening to boot him out of office if he doesn't pass a public option reminds me of the radical rightening (like that word?) that has occurred over the past decade in the Republican party. In that case, the religious right eventually figured out that they had the electoral clout in the Republican party and demanded that some bills start getting paid by the candidates that they got elected. Next thing you know, gay marriage amendments are being debated in Congress and the bulk of America is rolling their eyes. Republican candidates begin to seem petty and outside the mainstream, so they lose office. Yes, Bush helped, but then he's exactly the kind of idiot that the far right loved as a born again. When McCain kowtowed and took Palin as a running mate, the country threw up their hands.

So anyway, now the far left blogosphere is reaching the same conclusions and here we go. I wonder what Public Choice Economics (note I capitalize here but not on religious right) has to say about the scenario for the rise of a viable third party under these sorts of circumstances given the general apathy to most issues of the so-called swing voters.

Left vs. Right

2009-10-21T07:53:00.002-07:00

I like this graphic.

Religious vs. Secular Oppression

2009-10-21T07:39:00.003-07:00

It seems that the Taliban are really very much like the Khmer Rouge. Both want to achieve a simpler society and restore old norms and are willing to use violent oppression to achieve their aims. I wonder if it matters that the Khmer Rouge were motivated by secular Chinese Marxism and the Taliban are motivated by religion. Do you have to fight them differently?

The last post is fixed.

2009-09-16T14:41:00.002-07:00

Fixed the link in the last post. Gap Minder seems to have changed the layout of their data. Either that, or I just gooned it up.

Health Care Reform: A Little Cost Data

2009-09-15T13:18:00.006-07:00

Check out this GapMinder chart. When I just look at this as a cold body, it says to me that there's just more demand for health care as income rises.

In particular, Canada and the UK, which both have significantly more government involvement seem to be spending about the same amount on health care as the US for a given GDP/capita (i.e., when our per capita income was as small as theirs, we spent about what they're spending).

Other countries with well respected systems like Switzerland, Germany and France are actually spending more for a given per capita income than the UK and Canada, and more than we did back then.

A look at Luxembourg and Norway shows them to be on more cost-effective tracks, though interestingly they have also have very steep rises in cost over the past 5-7 years. It's easy to dismiss this as a size effect, and maybe we should, but I'm still curious.

If this is a good picture of what's going on, then really, we're not arguing about cost containment since the cost growth comes primarily from the high marginal value of health care in wealthier countries. Instead, what we're talking about are the following:

1. An equity issue concerning poor people who don't have health insurance (i.e., whether transfer payments should be increased to help them get insurance). Forcing everyone to buy insurance falls into this discussion, as it is done to reduce costs by eliminating adverse selection.
2. The economic inefficiencies concerning employment related health insurance, in particular lack of mobility in the job market because of the "pre-existing condition," and inefficient demand for large amounts of health care as a result of the tax system.

A caveat here is that it's not 100% clear that the health care spending data on the abcissa are inflation adjusted. I looked at the original WHO data and found that they are given as a percentage of GDP. Assuming that the dollar figures used are calculated by applying that percentage to the inflation adjusted per capita GDP numbers, then they would be.

Health Care Reform

2009-08-17T16:05:00.002-07:00

Here's a nice exchange between me and my representative, Gabrielle Giffords, on health care. First, to her I write:

I voted for you and I voted for Obama. I am disappointed in the handling of health care reform. As viewed by the public, the process lacks clarity and focus. In my opinion this process needs to be put back on the rails so that the public can understand what is going on.

First, the objective(s) needs to be communicated. Are we about insuring the uninsured or reducing costs, or both? Second, why is this the right objective? Third, how will the plan accomplish the objective? Fourth, the costs need to be clearly addressed. Specifically, if the plan costs money, how can it be afforded after the terrible deficits run under Bush and the Keynesian spending spree that started this administration? Alternatively, if it saves money, who is losing out (i.e., someone was wanting that money)? Finally, why is the public sector the right choice for accomplishing the objective?

I voted for you and the president because I believed that you stood for factual honesty and critical thinking, not distortion and dogma. Please don't disappoint me. Neither I nor the nation can take it after the past 8 years of W.

To which she replies:

Thank you for contacting me about health insurance reform. I very much appreciate hearing from you on this critical matter.

Our country faces many challenges, but few would disagree that our single most important domestic problem concerns America's health insurance system. We are paying too much and are often subject to unfair practices such as denying coverage based on pre-existing conditions or imposing life time limits on care.

Nationwide, insurance premiums have doubled in the last nine years, increasing three times faster than real wages. According to the Department of Health and Human Services, last year the U.S. spent approximately $2.2 trillion, or $7,421 per person, on health care. This equals 16.2 percent of our GDP, nearly twice the amount of the next most costly nation. It is estimated that by 2040, one in every three dollars will be spent on health care.

Arizona's Eight Congressional District is especially burdened by America's broken health insurance system with the average constituent bearing the weight of these costs. Medical expenses contribute to half of all personal bankruptcies. In our state, out of pocket expenses went up by 32 percent during 2001-2006, with rural residents receiving a disproportionate share of these expenses.

As your Representative, I am paying close attention to what Arizonans think about this issue, and I am fighting for solutions that will work for us. I recently hosted a Tele-Town Hall to make it easier for people to participate in the discussion, and in May, I held a Health Care Town Hall that was attended by over 1,000 people. I have met with numerous doctors, patient groups, providers, hospital administrators, researchers and leading policy experts in Arizona and around the country. I am committed to working towards insurance reform where every man, woman, and child has access to affordable, quality health care and no one is unfairly denied coverage based on pre-existing conditions.

I have attached a statement on insurance reform that I recently wrote for the Arizona Daily Star. I hope you will take a minute to read it.

Changing our current system will be complicated, and I think that it is important to work in a bipartisan effort. I am also of the belief that we should not take a vote on this legislation until every member has had a chance to thoroughly read the bill and be able to explain it to his or her constituents.

As this debate continues in Washington, please know that I am listening to you and will continue to monitor this issue as the details of insurance reform develop. Don't hesitate to call or email me with your questions or concerns.

To receive regular e-mail updates on healthcare and my work as your U.S. Representative, visit www.giffords.house.gov to opt-in to my e-newsletter. It allows me to keep Southern Arizonans, like you, informed about the most recent activities in the House of Representatives and upcoming public forums I am sponsoring in the district.

What with it being my blog and all, I get the final word:

Thank you for your form-letter response to my concerns over healthcare, including a nice copy of your previously released prepared remarks. I appreciate the effort that you put into rousing emotional rhetoric concerning this issue as it is certainly important to rally the faithful when the opposition is so dead set on organizing to stop your efforts.

It happens though, that I neither support nor oppose what you are trying to do. I simply don't understand what it is. The paucity of facts in this discussion is underwhelming. For example:

1. You indicate that health insurance premiums have risen significantly, but there is no indication of the cause. Obvious possible causes for increased premiums include an aging and therefore more medically expensive population, increased willingness to pay for better treatments, epidemics of inactivity and obesity, or some sort of rent-seeking behavior by insurance companies or health-care providers. Is there any indication as to what the cause might be, because the appropriate solution is radically different for different causes?

2. Isn't there a one-step solution the problem of coverage denial based on pre-existing conditions: simply make it illegal?

3. Won't increasing the span of coverage to include those who presently cannot affort insurance necessarily increase the overall cost of health-care for those who already have it? I recognize that by requiring everyone to have coverage, the adverse selection problem can be reduced, potentially reducing insurance costs for the currently insured, but isn't that a smaller effect? Is there evidence that the reduced cost of emergency room care for the uninsured will offset this increase?

These are the sort of simple factual points that no one seems to be discussing, least of our nation's elected leaders. Again, I entreat you to set the standard for clear fact-based debate regarding this important issue so that those of us who lost faith in government under W. can hold our heads high in regarding our decision to vote Democratic in the past election.

I hate it when I agree with Pelosi

2009-08-10T10:03:00.004-07:00

In my memory, the shrillness on the right about health-care is unheralded, and I agree with Nancy that the efforts to shout people down in town-hall forums is un-American. I think I need to go read some history, because I sincerely hope that this sort of thing has happened before and it's somehow normal--not a sign of the apocalypse.

While my libertarian leanings have always made me quite annoyed at the "government-can-solve-your-problems" attitude of the main-stream left, I now think that the bigger problem is probably the increasingly vocal and ideologically driven elements of the right who genuinely seem to believe that your either "for us or against us." Though they're a clear minority, minorities can come to power and do great harm.

The worst part is that I think their world view is made out of stupid.

Patent Evidence of Racism

2009-07-29T07:46:00.002-07:00

Rochelle Riley illuminates the deep racism in the Boston Police Department with the quote:

It was the Cambridge dispatcher who asked: “Were they white, black or Hispanic?”

She explains:

What I don’t want is for the dispatcher to insert stereotype into the minds of officers headed to the scene: Sure, knowing the race of a potential suspect is relevant. But why not begin with clothes, height, approximate age, rather than prioritize race?

I'm frankly offended by this whole thing. The fact is that the woman who called in identified the intruders as "men". This blatant act of reverse-sexism of course goes entirely overlooked in Rochelle's zeal to slap down the race card. Why can't we talk about the real issues here?

Movie Reviews

2009-07-29T07:20:00.002-07:00

I find that if I just watched a movie, my Netflix review is likely to be lower than if I wait awhile before reviewing. I think this is probably evidence that I am an optimist.

Health Care Reform

2009-07-24T09:27:00.002-07:00

I'm not going to rant. I promise. Here's what I'd like to know.

Expanding Coverage

What does it cost to care for the uninsured using emergency rooms?

I've heard anecdotes that half or more of the people who are uninsured are eligible for Medicade/care, but don't have it, so is there any evidence (maybe from Massachusetts) on whether requiring coverage would actually cause it to happen?

Is there any data on the costs of simply not covering poor people's heathcare at all (i.e., turning them away even from emergency rooms)? It seems like even that would have costs.

Controlling Costs

Instead of creating a new "government option," why aren't we talking about adding a need-based fee process for Medicade/care and making it available to everyone?

Is there any evidence/analysis about whether the higher prices paid in the US for healthcare are effectively cost shifting from the rest of the world (which reportedly have much better cost control) for medical R&D?

Is there evidence that companies in the medical business (e.g., hospitals, drug companies, insurers) are making excess profits?

What's the expected increase in healthcare costs that results from aging baby-boomers and increasingly advanced care options for elderly?

Having our legislature and policy makers taking direction from unions (who's demands contributed to the eventual bankruptcy of US automakers) is really annoying. Oops...

F22 too Cool to Cancel

2009-07-22T06:52:00.003-07:00

The biggest problem with canceling the F22 program is that F22s are really cool. F22s have twin tails, funny-shaped wings, and funny-shaped rear stabilizers--all cool. They also have supercruise and superagility, which of course make them supercool. When you throw in stealth, you've got a great big ball of superduper ubercoolerama.

Yo Yo

2009-07-08T12:48:00.002-07:00

I was within 10 seconds of having completed a home repair on a sliding glass door that has long been dysfunctional. An initial install of a self-tapping screw to secure the loose frame around the glass worked, but grated on the sliders making the door hard to open. Moving the screw to complete the fix, the tip of the screw penetrated past the frame and found the glass. The compression shattered it into a million pieces.

My nickel repair suddenly sky-rocketed to over $400. I was so angry I could barely speak.

Service

2009-07-08T12:46:00.001-07:00

I've noticed that service is better at retail stores, like Burger King and Home Depot, with the recession on.

The Coming Economic Disaster

2009-07-04T08:19:00.002-07:00

If, like me, you worry that the USA is headed toward an Argentina style economic collapse when the world wakes up and realizes that US currency and securities are not good investments, perhaps this post from Brad Setzer will make you feel better. He points out that the dollar has been getting stronger during the lows. I think it just means the fall, when it comes, will be that much harder, since no one has a fundamentals-driven argument for why anyone would want to invest in the USA right now.

Scones

2009-07-04T08:12:00.002-07:00

The Williams-Sonoma Essentials of Baking contains a great recipe for scones and an even better one for brownies. To the scone recipe I would add the use of dried blueberries in place of currants. They plump when you cook'em.

The Future of Energy

2009-05-11T06:16:00.003-07:00

In case you missed this, it was buried deep in a report on seemingly everything.

And today there is a glimmer of hope hanging over China's aggressive build-out of coal-powered fire plants. According to the NYT, China has emerged as a world leader in clean(er) coal. "While the United States is still debating whether to build a more efficient kind of coal-fired power plant that uses extremely hot steam, China has begun building such plants at a rate of one a month," the newspaper writes. Also, China is well ahead of the United States in developing "a new generation of low-pollution power plants that turn coal into a gas before burning it." The progress has surprised even green policy wonks. "The steps they’ve taken are probably as fast and as serious as anywhere in power-generation history," Hal Harvey, president ofClimateWorks, told the NYT.
The advances in clean(er) coal come as the once bright solar industry feels the pain of the global credit crunch. The WSJ reports that government subsidies and private investment in solar projects has dropped dramatically in the past year. As a result, "sales of the tiny chips that convert the sun's rays into electricity are expected to drop by at least 20% this year," the newspaper writes. Even the Silicon Valley venture-capital community is starting to rethink the promise of green energy.

This is how I expect this story to end.

Currencies

2009-04-02T07:40:00.002-07:00

So I have projected a fall in the U.S. dollar in the past. The interesting bit that I overlooked is that most of the world is a major holder of U.S. dollars as it is the world's dominant reserve currency. Absent a global recession, I would have just expected a shift from dollars to euros, but the global recession means all boats sink equally. However, that doesn't ameliorate the fears that the U.S. economy is really headed for a big fall given our enormous current account deficit and ballooning debt, driving a desire by major world powers to get out of dollars. The trick is, how do you do it without losing all your accumulated dollar wealth from an ensuing run on the dollar?

I think that's what's at the heart of proposals like this one from Russia and a another from China. I think the idea is to change the world's reserve currency to something new, swap dollars for the new currency at its presently inflated rate, then let the dollar tank. One way or another, the dollar is going to fall and fall hard. The one thing we have to be very careful of is that all U.S. debt must remain denominated in dollars, otherwise we will face a massive crisis.

The other item of note is Obama's statements about the world not being able to depend on the U.S. being a voracious consumer to drive world demand. Such bare Keynsianism makes me uncomfortable, but I hope this is just a veiled swipe at China's long effort to keep its currency weak and build an export driven economy.

Frats

2009-04-02T06:22:00.002-07:00

So a friend of mine got all huffy when I called his fraternity a "frat." He said, "You wouldn't call your country a c#%t would you?" I thought that was cute, but of course, being the cynical bastard that I am, I would call my country a c#%t... especially if it was really just a frat.

Taliban -- Some Rambling Thoughts

2009-04-01T07:02:00.003-07:00

I know little about the Taliban, but what little I know, mostly gleaned from the Wiki and recent events in Pakistan, leads me to believe that eliminating the threat that these people pose is going to take severe action, that is unpalatble to Western societies both for cost and moral reasons.

To be clear, what I think the Taliban want is society in which the LAW is the Koran. Unelected religious leaders decide the interpretation of the LAW and some senior body or individual ultimately decides on its interpretation. This interpretation practically includes the ability to make new LAW in the form of fatwahs. The resulting government is subordinate to the religious leader(s), and functions as an administrative body that implements the LAW. Its ability to make laws is limited to minor things, like traffic rules. The interpretation that the existing leaders of this movement have given to the LAW is inherently oppressive, most obviously in that it effectively eliminates womens' rights. Moreover, the leaders of this movement are committed to the use of force to bring about their view.

Outright public attacks on this philosophy by our political leaders is riddled with complications. The greatest complication is that the Saudi Arabian state, and I believe several others who are U.S. allies in the region, is structured, at least formally, in that same fashion. While the Saudi government is not interested in spreading their form of government through force, there are clearly people within the Saudi state that do support the use of force in this regard (e.g., bin Laden), and some reporting suggests that the internal politics of the Saudi state are dominated by a balancing act of trying to keep the relatively extremist Wahabi sect that dominates the Saudi religious life (and makes the LAW) supportive of the government to prevent civil unrest (read coups are bad), while simultaneously maintaining good relations with the Western powers that buy Saudi oil.

Another difficulty is that American society is founded on religious tolerance. It would be difficult to attack the Taliban for their fundamental views without at least partially attacking the Islamic religion. My knowledge is very thin here, but I believe that an outright attack on the notion of the supremacy of religious LAW as a basis for the validity of the state would go against the basic teachings of Islam. What is open for debate is the interpretation of what this LAW really means, and more moderate practitioners do not subscribe to the oppressive interpretations that the Taliban do. Having not read the Koran, I cannot say to what extent the Taliban are literally correct and the moderates are apologists, but from my experience with the Bible, I suspect that there is some religious merit to the Taliban's position.

Needless to say, were the Taliban not rooted in a religious ideology, but rather a political one, the problem of explaining the danger they pose would be easier. For that reason, I believe, the governments of the world have opted to focus their rhetoric on the violent acts of the Taliban and ignore their ideology. In my opinion, this has problems, as can be seen, for example, in the Pakistani decision to reach a truce with the Taliban elements in the North in exchange for the implementation of Sha'ria. This has the effect of agreeing to the elimination of all education for women, and imposing other restrictions, such as the requirement to wear burkhas and that women may not go out of the house without a male blood relative. Furthermore, the structure of Taliban society seems to be such that it is foreever coopting its young men into a jihadist military body, which over time poses further threats to its neighbors given the ideology that requires spreading of their religious ideology.

The analog to Communism during the cold war is interesting. Communism also had a core ideology that said that it should spread and take over the world because of the evils of Capitalism. Though the proposed mechanism was through internal revolutions, not Soviet attacks, the Soviets were certainly willing to help these revolutions get started. This fear of Soviet led "Red Spread" was the motivation behind the U.S. policy of containment and led to innumerable proxy wars around the world. However, the core idea of Communism was empirically testable. That is, if the Communist philosphers were right, Capitalist societies should collapse under the weight of the misery of their populace, becoming increasingly police states, and ultimately having revolutions on their own. In fact, it appears that such revolutions only occured in what had been essentially fuedal societies, and that the Western Capitalist Democracies grew in wealth for all their citizens, while Communist societies remained relatively poor. It was this empirical fact that ultimately led the leading Communist powers to abandon the core of their ideology and increasingly adopt market principles.

In contrast, the Taliban make no promises of wealth or material well being to their citizens, and on the contrary appear to promise their people a return to the simpler times of Mohammed. Substantially then, this philosophy cannot be shown to be empirically false, indeed it represents a replacement of the value of material well-being with one of spiritual well-being. It is no mystery then that the Taliban have been most successful in places where extreme poverty prevails, as there is little sacrifice involved.

What policy to pursue then? It appears that actually eliminating these people would require a huge commitment of troops over decades. The Taliban are already proceeding along the lines that Ho Chi Min famously described: "Thousands of them will die, and millions of us will die, and they will give up first," and with some obvious success.

Therefore, as a possibly bizzare counterpoint, I would consider simply letting the Taliban take over. The idea is that the foundation of a state is a monopoly on force. If nothing else, the Taliban appear to be able to provide that when they assume power, putting an end to the factionalized warlords that otherwise rule (as in Somalia). Many of the supporters of the Taliban include those who though Muslim, are not especially fond of its extreme ideology, but who oppose the corruption in other governments. Allowing the Taliban to take over in Afghanistan (or at least not actively fighting them) could create stability. Thereafter, the inherent desire of the citizens to improve their material well-being will lead to slow change that will moderate the extreme views that the Taliban hold. The experience of Pakistan notwithstanding--the region of Pakistan ceded to the Taliban represents an area long ignored by the central government of Pakistan--neighboring societies with a reasonable amount of wealth will defend themselves from the expansion of Taliban into their territory because the practical costs of letting them in are too high. Iran is an example of a state that did exactly this.

This policy takes a very long-term view, one which sacrifices the rights of women (and men) in Taliban-controlled societies, perhaps for several generations, in exchange for relative peace. There would be instances of genocide internally and likely some continued terrorism eminating from these regions. The latter will require continued global policing and occasional military strikes on Taliban territory to manage and mitigate this threat. Again Iran, another militant Islamic state, is the closest model I can think of for where this policy has been implemented. It seems to be working, though should a mushroom clould appear over Jerusalem, I will be proven wrong. Furthermore, Iran has some material wealth in the form of oil and a history of an industrial society that gives its people a greater expectation for a reasonable standard of living that tends to check the extremist ideology. Afghanistan, on the other hand, is a primarily agrarian society and will likely never gain enough wealth to self moderate. Perhaps this is a policy of ignoring the plight of others forever. Clearly, at best, it is the lesser of evils.

Spending Your Way Out of Recession

2009-03-27T08:02:00.003-07:00

This is the standard Keynesian thing to do. It failed under Carter and led to a rethinking of (the existence of) Macroeconomics. The reasons for the failure of fiscal stimulus under Carter are debated, but the coincidental spike in oil prices during the OPEC embargo is believed to change the game. More widely, the major flaw in the Keynesian approach that most economists would acknowledge is that Congress lacks the discipline to cut spending in boom times (for reasons having to do with Public Choice Economics), and so Keynesian policies lead to long-term deficits which place costs on future generations.

The Obama policies are essentially Keynesian. The thinking is that the risk of inflation is not real when there's a massive drop in aggregate demand, instead the risk is deflation. Such a deflation is bad because it further disincentivizes spending which leads to further contraction. (Though see this for a counter-point that deflations and recessions are not empirically correlated.) Is massive government spending a way to pull ourselves out of this? Obviously, this is debatable and there's lots to think about.

However, the contribution by the leader of House Republicans when confronted with the Keynesian approach was heard to say, "We just don't believe it," and then explain that the Obama package was bad because it spent too slowly. Thanks, idiot. This is not a religious/moral debate.

The hard question for the supporters of the Keynesian approach is how this plays out given the already unprecedented holdings of U.S. debt by foreign governments/banks. The discussion of this issue is mostly around the edges, but this is the core question. Absent the risk of a massive inflation of U.S. currency following a decision by China and Japan to disinvest in U.S. treasuries, the arguments against a Keynesian approach are really pretty weak. Concerns over lack of Congressional discipline in the long-term are hollow in the midst of recession. The question comes down to the risk of inflation, which is offset by the chance that the economy will be stimulated, and given how bad things seem to be getting you may as well try.

That assumes that the resulting inflation is related only to the stimulus spending, which means it will be measured. The scenario at present is that we could have an inflation overnight reflecting decades of borrowing. It would equivalent to a devaluation of U.S. currency by who knows how much, perhaps at least a factor of 2. What happens then? Well frankly, I have no idea. Why? Because this isn't what the media and politicians are talking about. Why? See my last post...

Why Lawyers Need to Get Out of Politics

2009-03-27T07:40:00.002-07:00

Our system of justice is based on an adversarial model. Each side comes to the table with an agenda--a result that they would like to achieve--and then proceeds, within the bounds of legality, to argue in a fashion that they believe gives them the best chance to persuade a jury (or judge) to give them that outcome. The theory is that between the affirmative arguments made by each side and their opponents rebuttals, the truth will come out. What actually happens is that each side strives to present a convincing, but ultimately one-sided narrative that appeals to the biases of the jury (or judge).

That same adversarial philosophy is what rules our political system. The difference is that there are no rules of evidence, no judge to rule on the fairness of certain tactics, and no requirement that the jury even listen to the whole of the trial. The press is supposed to function like the judge, but of course in our modern politics, each side has its own press which functions more as cheerleader than judge. The result is that unpleasant facts are purposefully muddled, and the public often seems to be in the dark about what the real issues are. Rather than seek to inform the public, each side attempts to tell a convincing, but ultimately one-sided narrative that appeals to the biases of the public.

To my eye, this is a tragedy of the commons. Coming to the table with less than the full onslaught of misleading bullshit is a losing strategy against a well armed foe. Even if both sides would like to agree to not do that, their inability to make a binding contract prohibits them from doing so, and so it must go on.

What Should our Economic Policy Be?

2009-02-20T06:49:00.004-07:00

In simple terms it should be to return to a normal market situation as quickly as possible. In a normal market supply and demand set prices. Supply is driven by cost of production, and demand is primarily driven by some intrinsic valuation of the goods (e.g., utility, tastes, etc.).

Right now, we have an artificial pricing situation in the housing market. Prices are being inflated by large mortgage debts. The only way out of this now if foreclosure, but this is a slow process and also leads to a greater loss of wealth simply adjusting mortgage values to reflect market prices. A change to bankruptcy laws to allow adjustment of loan principals is a step in the right direction, but bankruptcy is also a slow process. In effect what is happening is that that good labor (i.e., people who can keep their jobs) is becoming immobile because they cannot afford to move, while the foreclosed houses sit idle.

My radical solution? A government act requiring all mortgage principals exceeding the current valuation for taxation to be reduced to that value. This is of course a transfer of wealth from people with small mortgage principles to large mortgage principles, and from creditors to debtors. The former is lamentable, the latter is less so as both already stand to lose in the current situation. The externality is the resumption of normal pricing of houses in the market, which benefits all home owners and prospective buyers alike, and restoring mobility to the labor market, which I think will be critical to facilitating the restructuring of the U.S. economy.

The other big factor is avoiding a debt-collapse-driven deflation. Such a deflation distorts prices by causing money to be artificially valued as a store of wealth. My solution to the mortgage problem would accelerate this, but I don't think make it any worse in the long run. There is talk of nationalizing banks, which is a partial resolution, to the extent that our foreign creditors continue to loan money. Of course, the FDIC is already effectively a sub rosa nationalization of banks. I would let this ride for now. More government spending and Fed loans to banks might be part of a solution, but the reality is that foreign creditors have more to say about this than we do at this point. Another massive government spending effort could trigger a foreign sell-off and initiate the deflation.

My thesis is that correcting the underlying real-estate market problem would do as much as is practical to restart the economy, and if a deflation is coming our way, there's really not much we can do about it.

Appologies to some readers, but I have to get this stuff off my chest.

Walt Minick: Change I Can Believe In

2009-02-19T07:34:00.003-07:00

Here's Walt Minick, Idaho Congressman, on the first auto bailout. Put aside the rhetoric about socialism (scoring a few quick populist points), and I think he's taken a pretty reasonable position. Here's what he thought about the stimulus that just passed, and here's his alternative. I would vote for this guy (if I voted).

I have to say it's a really, really fouled up world when libertarians like Walt have to take refuge in the Democratic party because the Republican party is too wound up about banning the marriage of terrorist's fetuses. I get pissed off every time I think about the fools--and I'm talking about you Karl Rove and Rush Limbaugh--that have dismantled the Republican Party by taking what were once sound fiscal ideas and turning them into empty gibberish wrapped in religious rancor.

I'd just like to go on the record and say that when those two guys die, I'm going to raise a glass.

Instructables

2009-02-19T07:06:00.003-07:00

Instructables is a cool site with ideas for how to make useful things you need but can't buy. I'm gonna make these prescription goggles. Hat tip to Josh Cowley, who invented this case for ear bud headphones. (Ear buds make my ears hurt or else I'd be all over this one too, Josh.)

Bank Insolvency

2009-02-19T06:29:00.001-07:00

Link shamelessly found at Marginal Revolution and reposted here.

Idiots in Politics

2009-02-16T06:33:00.002-07:00

DC United is looking to move to a new stadium and after years of trying to get a stadium built in DC proper is probably headed for nearby Prince George's County. Apparently, not everyone is happy about this.

Council member Marion Barry (D-Ward 8) [of crack-pipe fame, ed.] , who has championed a new stadium in his ward and criticized the Fenty administration's handling of the Poplar Point development, could not be reached. His spokesman, Andre Johnson, said that Barry "understands D.C. United officials have a team and business to run. His goal is to try to find ways to keep them in the District. He feels the mishandling of Poplar Point by the Fenty administration was a tremendous discourse for D.C. United." [emphasis added]

This goes to show that a little grammar can be a dangerous thing. Just think if he'd wanted to sound all smart about the move itself, which puts D.C. on a course to move from the District of Columbia to Maryland, or as Andre might say, an intercourse.

More on the Stimulus

2009-02-12T08:05:00.003-07:00

Here's an interesting bit on what the stimulus might mean for an economic turn around. The counterpoint might be that the certainty of a coming stimulus package (rather than its actual implementation) is enough to cause a turn around, and so maybe there was some effect.

Here's a petition (pdf) signed by a slew of economists saying that lower taxes and smaller government is a better way than the proposed stimulus. While I tend to agree with them in a puritanical sense, I have my doubts about whether this administration really has that option politically. As an aside, looking through the list of signers from my alma mater, I find those who I knew to be rather strident Libertarians, but none of those who I knew to be more moderate.

The question in mind is whether the stimulus package is better than nothing, and for me that comes down to whether the purchases are themselves things worth having. Infrastructure makes the cut, because people drive on roads and use water and electricity, and there's a tragedy of the commons argument for infrastructure that even suggests government is the right agent to act there. "Green" energy research doesn't, because I think it's mostly pandering nonsense.

Here's a broad overview of what's in the current $789B compromise. I'm glad to see that tax breaks for buying cars and real estate are gone. Encouraging people to buy more cars would be a pure handout to property owners, realtors, and the car industry, with no broad economic benefit. Better to bail them out separately with some requirement for a payback (or better still not at all). This article doesn't say much about how much goes to what infrastructure, but the bit that is discussed about subsidizing the spread of broadband seems off.

Michael Phelps

2009-02-08T07:42:00.003-07:00

In this situation, it would be remarkable if Michael Phelps came out and said that marijuana should be legalized. I wonder if it would get any traction. He could avoid sanction in the sport by acknowledging that he did something wrong by breaking the law, but that he believes the law needs to be changed. Unfortunately, though he's a sufficiently big celebrity to have an impact, I don't believe he's got the intelligence to fend off a professional interviewer asking him tough questions about it.

The Bro

2009-02-08T07:27:00.002-07:00

If this were happening outside Japan, I would think it was really weird.

2009-02-07T09:39:00.004-07:00

Here's some interesting commentary on the stimulus by Adam Posen, a respected macroeconomist familiar with macroeconomics and government stimulus of the economy. I don't know his political leaning, but judging by the fact that Krugman cites him, I'd say he's both smart and a little left of the relatively libertarian center of modern economic thought.

Bailout Rhetoric

2009-01-31T08:59:00.004-07:00

Here's an interesting bit about the facts concerning the rhetoric of Mike Coffman and other bailout opponents. To be clear, I'm not sure I disagree with their positions, as I'm just too ignorant of the facts about what all is in the bailout package. However, I absolutely disagree with their reasoning for opposing it.

Mike Coffman is Disastrously Nonsensical

2009-01-31T07:24:00.004-07:00

Here's Mike Coffman on the bailout. On the "this bill is bloated with pork" side of things, we glean from his arguments that we have about $5B of $819B as pork, or 0.5%. I think under USDA labeling rules, you would have to describe this product as "low pork" (if that's really all there is, which it simply can't be). We also learn that, about 40% of the money will be spent too late to help, yet he wants additional funds for highway construction... and construction is slow to spend. But wait, there's a $1B subsidy for heating oil which would presumably spend immediately, but this isn't good because what is really needed is legislation permitting broader exploration for oil. So I confess, I don't understand this. But maybe it will be come clearer when we consider what Mike would do instead.

He's very aware of the giant $9 trillion debt we have. The sudden appearance of such a debt is itself a shock, and no one can figure out where it came from after the past decade of frugal government spending, but the point is it's here now and something must be done about it. So clearly lots of spending is bad, and that's why he's against the whole bailout thing. The right thing to do, we learn, is to make across the board tax cuts... wait... OH! This is a solution to the first mystery. That $9 trillion dollar debt that ballooned up out of no where? It's guys like Mike who wanted to cut taxes without cutting spending that created that! Well actually, it was tax cuts plus starting a war in Iraq that spent money like it was going out of style that led to this problem.

Back to the policy issue, you have to wonder about the stimulating effects of tax cuts on wealthier Americans. Their marginal propensity to consume is small and so the probability of these dollars becoming idle is high when banks aren't lending and businesses aren't borrowing. Mike, of course doesn't really care about the actual effect, he knows who gets him elected and his district is one of the wealthiest in the nation. On the other hand, tax cuts on small businesses might help keep jobs, but you have to wonder, since profits go up when you lay off unneeded workers even if you can afford to keep them. Labor economics is more or less a giant mess in my opinion. Back to the core issue: stimulus must be directed at getting people to spend so that the Keynesian aggregate demand goes up. The most efficient plan, in terms of smallest deficit created per economic stimulus provided, is one that puts dollars directly in the hands of people who will spend them--those are predominantly the poor, not Mike's constituents.

Finally, here's my (very ugly) reading of Mike's spiel. "Please ignore the fact that the large government debt was induced by my cronies. We're still the small government guys taking on the big government socialists. We hate spending money, except on highway construction which is a part of my constituency. Tax cuts are always good because they get me re-elected. Economics is a communist plot. Thank you." I just want to say as a good economist, I forgive him for his sins, as he says these things not out of malice or spite, but only because of the incentives he faces.

Thoughts on the Bailout

2009-01-30T06:25:00.003-07:00

Here's a summary of what's in the $850 billion bailout package passed by the House. It looks to be about 50% direct money to citizens in the form of tax cuts, food stamps and unemployment, 20% money to states to fix their budget problems (like Arizona's disaster), and 30% for public works, education, and health-care. The article notes the time-frame for these measures to impact the economy varies, with public works taking longer to have an effect and direct funding to those with a high marginal-propensity to consume (e.g., the poor and unemployed) having a quicker impact.

In the past I've supported a bailout targeting public work packages as a good idea as an alternative to the bailout to banks. I still support something along these lines even with the bank bailout as I think the worst of the bank collapse is still ahead (propping things up just delays the crash), and that we're in for a long slide. The core idea here is to hire workers when labor is cheap (i.e., unemployment is high), and use that cheap labor to produce infrastructure improvements. This stimulates the economy by creating jobs when the market isn't and also produces long-term infrastucture improvements that form the foundation for future growth. This is a better alternative to extending unemployment benefits in a major downturn, as the (economic) purpose of unemployment benefits is to allow people to search for jobs: not a productive expenditure when economic activity is depressed by low spending.

The Republican opposition and Democrats who voted against the bill criticized the bailout as being full of Democratic pork with uncertain job creation potential. Though some pork is inevitable (see the last paragraph herein), this could be disastrous if worthless non-job-creating pork consumes a significant part of the funding. The opportunity cost for wasting money is extremely high now, as there may not be another chance to spend large amounts of government money without triggering a currency collapse. The zeal to revolutionize our energy economy with solar-power and ethanol does not strike me as well conceived and seems to have a reasonable chance of simply wasting money.

On the other hand, there's some reporting that Republicans who voted against the plan wanted more tax cuts. This strikes me as ridiculous for three reasons. First there's a lot of tax cuts in this package. Second, tax cuts are difficult to reverse, even so-called temporary reductions. Recall that Obama's lack of support for continuing the supposedly temporary cut of the top bracket from 38% to 35% made him in favor of "tax increases." Given the structural deficits that our government faces, its hard enough to stomach more short-term deficit spending, but making the structural problem worse is unconscionable. Finally, tax cuts have dubious effects on job creation. Until consumer and investor confidence rebounds, there is a likelihood that much of this money will sit idle, put aside for a still rainier day. The effect of tax cuts on overall economic confidence is likely nominal and could be disastrous if our foreign creditors decide that they've had enough. Again, I remind anyone keeping score that the economic boom of the 1990's took place under tax policies that were less generous than those on the books today. Also for the short memory crowd, recall that Congress came to the aid of our ailing economy almost one year ago, spending upwards of $150 billion on a package that consisted almost entirely of tax cuts and subprime mortgage mitigation. No es trabajaro (thanks Google translator).

Another reason suggested for the opposition by Republicans is to rebuild the "small government" image that was lost over the past decade. While I have sympathy for this as I support smaller government overall and would like to see some real change, making an impotent gesture against a spending measure that is certain to pass is hardly persuasive. These are the same Republican legislators who spent at unprecedented rates under the last administration, and now we're supposed to be believe that they've all come to Jesus? No estupido (dig it). The simple economics of public choice in our two-party representative sysem are that the party in power has an strong incentive to spend while in office to pay off its constituency. Anyone who believes that people in aggregrate will act counter to incentives is a true Socialist. If you want small government spending, you want gridlock (mmmm.... gridlock).

Words Have Meaning

2009-01-23T07:11:00.002-07:00

I loathe Microsoft products as much as the next guy, but this lawsuit is ridiculous. The claim is that machines that had only enough performance to run Vista Home Basic and were labeled as "Vista Capable" were falsely advertised. Only the ones that were labeled "Premium Ready" and had enough RAM and a fast enough graphics card to run the Vista Aero interface were able to run the "real" Vista. As damages for the misleading advertising, the suit claims that consumers are entitled to damages equivalent to the cost of the hardware upgrade required to turn a Vista Capable machine into a Premium Ready machine.

This is a powerfully stupid argument. As any user of Linux will explain the heart of the OS is decidely NOT the eye-candy desktop. Ubuntu is offered with multiple desktop options, and some of them (e.g., XUbuntu) are expressly for low capability hardware. Users of all of these systems would agree that they are using Ubuntu as the OS with different desktop options, suited to their tastes. In fact, in an impromptu survey I just made up, it was found that only Mac users think cool desktop effects are the substance of an operating system. Also, the plain meaning of the words "Vista Capable" in this context is something like, "capable of running the operating system called Vista," which under the same standard noted for Ubuntu (or even a somewhat stronger one), Vista Home Basic clearly is.

It goes without saying that this is a class action lawsuit, where the folks who make the real bucks are the lawyers. Class action has its place, but a proper "slap down" mechanism for greedy attorneys trying to make money where the cause is unsubstantive is also needed. I can't believe I'm writing this, but good luck Microsoft.

I Always Hoped my Last Resort would be in Hawaii

2009-01-10T07:52:00.003-07:00

This slate article, The Letter of Last Resort by Roger Rosenbaum (hat tip to Rob for the pointer), discusses the decades-old question of mutually assured destruction with nuclear weapons. There's some informative bits about the mechanics of the British system, after which Rosenbaum ponders the implications of the fact that a retaliatory strike does not save the retaliator. He goes on a primarily theological exploration of rationales for owning nuclear weapons and repeatedly trips over the fact that a deterrent that one is unwilling to use is no deterrent at all. He leaves us with the tough question of whether we would retaliate.

For myself, the decision of whether to retaliate is a simple one. If I thought I could destroy the first-striker without destroying all human life, I would do it. I realize that hundreds of millions of people would die as a result of my action, but under such conditions my overriding concern is that a first-striker not be allowed to continue to exist and dominate humanity. Whoever is left would have a better chance of rebuilding without that entity.

I must admit that, in pondering this I become perversely sanguine. Afterall, 100% of the people who die from the weapon(s) I shoot would die anyway. The question is whether a few dozen years of their lives times their numbers are worth the rest of humanity (who's numbers are even greater) living with the continued threat of yet another such act--and the evidently real possibility of its occurrence--by whomever perpetrated it upon me. My answer is that if another volley of nuclear weapons is credibly going to be shot, I want to make sure it's shot at the bad guy.

I should also say that part of the author's premise, may be that the retaliation is totally blind: attacking some unknown part of the world that may or may not be where the strike came from. This is not my premise. It may have been reasonable at some point in history, but given the wealth of communications and sensing technology in existence, prospective retaliators would almost certainly have a very good idea of who the first-striker was. If I had no idea who I was shooting at, I wouldn't shoot.

As a final point I must conceded that neither this missive or the article that spawned it does justice to the thinking of the people who actually hold the keys to shoot these weapons. Rosenbaum backhandedly dismisses these people as insane, but I suspect that as someone who sits on the sidelines of the world and wonders about it, he cannot penetrate the real thinking of people who may have to actually make these fantastically weighty decisions. (How's that for backhanded.) His reports of the responses he gets when he probes about retaliation (e.g., "...romping around with huge mutant bunny rabbits") sound very much like the kind of politely dismissive responses I am accustomed to hearing from serious people when forced to talk to someone they don't take seriously but don't want to offend. I'd be very interested to read the collected thoughts of former missileers and submarine commanders on this question. I suspect they've thought about much more carefully than he or I ever will.

Media Populism: Jonathan Weil

2008-12-18T06:56:00.003-07:00

This is a little bit of insight from Jonathon Weil over at Bloomberg, in a piece entitled: "Madoff Exposes Double Standard for Ponzi Schemes: Jonathan Weil." (Yes his name is actually in the title of the article. It's also in the by line, and there's a bit about him at the end too.)

After all, Madoff’s scheme -- at least in spirit, if not in its nefarious intent -- wasn’t much different than the business models at some of the nation’s largest failed financial institutions.

Back in May, four months before it collapsed, American International Group Inc. increased its dividend at the same time it unveiled plans to raise $12.5 billion in capital. Later, when its cash ran out, AIG got a government bailout, the size of which has expanded to about $150 billion.

Whether you call that a Ponzi scheme or something less sinister, AIG was paying old investors with money raised from new investors. The same could be said of many banks that blew through billions of dollars in freshly raised capital the past couple of years, continuing to pay large dividends even as their balance sheets quietly imploded.

Jonathon is a genius for seeing this. Basically, his point is this: stupidity and lying are equivalent. From this I conclude that because his argument is stupid, he's lying and therefore should be open to lible claims. I would guess that Birnie Madoff will be first in line to file since he's got to be outraged to have his ingenious Ponzi scheme compared to the idiocy that led A.I.G. into a government takeover.

Weakening Currency -- The Beginning of the End

2008-12-15T06:33:00.002-07:00

So I have predicted previously that the dollar will weaken and our opportunity to use our accumulated wealth to situate ourselves for a regime in which the dollar is weak will close with its fall. Though hardly precipitous, the fall of the dollar over the past week suggests that the future is now. The greatest concern is whether major holders of U.S. currency and debt (i.e., China and Japan) will decide, given that the U.S. government is creating new debt at an alarming rate and appears to be poised to continue to do so, that their best option is to cut their losses by beating the U.S. government to the punch.

To get a feel for why this makes sense, imagine you hold shares of a company that is losing value and plans on issuing stock to recapitalize. If you hold the company's stock right now, you recognize that the issuance of additional stock will dilute the value of your holdings. Furthermore, since the company is already losing value, its stock value is likely already falling before the issue. Hence, you might reason that if you sell your stock before the company implements its plan to issue more, you would get a higher price than if you sold later and end your exposure to this risky asset. On the other hand, if you have confidence in the company's managers and believe that their plan for recapitalizing is sound, you might hold the shares believing that over the long-term they will rise despite the dilution. The point is this: while both are reasonable bets to make, the former is based on the relative certainty of a near-term loss while the latter is more speculative.

To make things even worse though, you know that there are other people holding enough shares who face the same decision you do, and that should any of them sell, the stock price will be similarly reduced. This results in a tragedy of the commons: everyone would benefit if everyone held their shares, but whoever decides to sell first benefits even more should everyone else hold their shares. If you get to thinking about this, you might even come up with scenarios where even if you believe in the company's management, you go ahead and sell now and then buy the newly issued shares at a lower price, netting a short-term profit and preserving the prospect for a longer-term gain.

Of course the company here is the U.S. Government, and I'm putting you and the other share holders in the position of foreign central banks holding massive amounts of U.S. Treasury Bills. If you're thinking that T-Bills are debt and not stock, I would offer that (1) the difference is not really germane here, and (2) in any meaningful sense, T-Bills are the worst of both worlds as they neither grant per se control over the government (like stock would) nor guarantee first payment in the event of bankruptcy (like debt).

Given the recent history of U.S. going back to the shady dealings of Enron, followed by the failure of Arthur Andersen (one of the then "Big 3" accounting firms) after the implication that it was engaged in a related cover-up. Thereafter, a widespread restatement of earnings of a number of major U.S. firms ensues. More recently, major U.S. institutions Fannie Mae and Freddie Mack are implicated in the creation of a sub-prime mortgage bubble, which the national investment banking infrastructure seemingly should be aware of but nevertheless proceeds to invest in, following which the insurance vehicles for these transactions (the "credit-default swaps") turn out to be shams with no real insurance value in a falling market, and even the major insurance company A.I.G. cannot meet its obligations and is taken over by the government. Yesterday we learn that a highly respected broker/hedge-fund manager has been engaged in a Ponzi scheme, possibly for decades, and yet was able to obtain the implicit S.E.C. "stamp of approval" for his enterprise for over two years before being exposed, leading to the loss of an estimated $50B! Oh I forgot to mention that Sarbanes-Oxley was passed following the Enron-Arther Andersen debacle and was supposed to prevent this sort of thing (though everyone I know who has to comply with them indicates to me they are wrong-headed, protecting against embezzling by the work force and not fraud by the corporate managers), and ummm... oh yeah... one of the few exporting manufacturing industries left in this country, the automobile sector, appears headed for some sort of bankruptcy or bail-out.

So lets just say that the idea of "betting on the long-term fundamentals" looks very, very speculative to me, and an international sell-off leading to a massive fall in the value of the dollar looks not at all unreasonable. If this should come to pass before the inauguration, there can be no stimulous package of any meaning.

Left vs. Right in the US vs. UK

2008-12-12T08:59:00.003-07:00

This is a video from The Economist. What I find interesting is that the "Left" and "Right" in the American political system are defined by the major parties, with the independents forming a minority in the middle, whereas in the UK, it is often the case that the majority-left Labour party is actually centrist compared to the minority Liberal Democrats.

At the end the speaker comments that the UK used to be more polarized than the U.S., so perhaps this is yet another example of the inevitable pendulum swing. There's a very interesting bit of public choice theory to chase here, I think, about the unstable equilibrium that results from the dual factors of the median voter theorem on the one hand and the need to energize a voting base on the other.

Obamamama and Blagojevichichich

2008-12-12T07:49:00.004-07:00

I've been pondering how this story ends. In particular, does it turn out that Obama was engaged in the Senate seat deal making for which Blagojevich has been indicted?

My best guess is that he wasn't. My reasoning is predicated on a fact and a belief:

Fact: Obama has repeatedly said he was not involved.
Belief: Obama knows that all the facts are going to come out.

Now assume he was involved. He has two choices: (1) flatly deny it or (2) tell the story first and lay claim to a version of the facts. If he flatly denies it and it comes out he was involved he has been caught lying and would have to explain himself with his credibility in tatters. Therefore, if he was involved, much better to define his involvement before it get's defined by Blagojevich and the media.

The Right and the Left

2008-12-08T06:35:00.002-07:00

From a Salon piece about people who think Obama is a British/Indonesian citizen born outside of Hawaii to Malcolm X:

"There's no amount of evidence or data that will change somebody's mind," says Michael Shermer, who is the publisher of Skeptic magazine and a columnist for Scientific American, and who holds an undergraduate and a master's degree in psychology. "The more data you present a person, the more they doubt it ... Once you're committed, especially behaviorally committed or financially committed, the more impossible it becomes to change your mind."
Any inconvenient facts are irrelevant. People who believe in a conspiracy theory "develop a selective perception, their mind refuses to accept contrary evidence," Chip Berlet, a senior analyst with Political Research Associates who studies such theories, says. "As soon as you criticize a conspiracy theory, you become part of the conspiracy."

Evan Harrington, a social psychologist who is an associate professor at the Chicago School of Professional Psychology, agrees. "One of the tendencies of the conspiracy notion, the whole appeal, is that a lot of the information the believer has is secret or special," Harrington says. "The real evidence is out there, [and] you can give them all this evidence, but they'll have convenient ways to discredit [it]."

This, of course, describes all of us to some degree or another. A person's religious beliefs, or lack there of, would be cited by opposing zealots as evidence of willful bias against each of us. However, I think that there really is a certain pragmatism in American politics that has been lost over the past couple of decades. If that's true, the interesting question is why? In particular, are there incentives that reward dogmatic more now than in previously? I surmise it is a combination of two things.

First, the internet makes it feasible to construct a coalition in favor of fringe ideas by eliminating the requirement that people actually geographically meet to share and discuss their ideas. Prior to the internet, if you held an idea that would be considered reasonable by only 1 in 10,000 people, you would have a difficult time finding the people who would talk to you about it. Now it is merely a question of devoting some time to creating the catchy website, and they find you from around the country or around the world.

Second, there is the recognition by politicians that such extremists are highly motivated. In a society where voting is discretionary, such people constitute a highly motivated segment of the population that can be motivated to vote, and perhaps more importantly to contribute to political campaigns. That such people are inclined to self organize and take action makes them all the more appealing as vehicles for a successful campaign. This a logical extension of the classic gripe about special interests ruling Washington.

Of course, if like me, you believe that this is a bad thing overall, the next question is much more interesting. What can be done to curtail this sort of behavior?

The Auto Bailout

2008-12-06T06:52:00.002-07:00

Well it's happened. The big media reporting of the terms don't look too bad. In effect this is being advertised as government backing of radical restructuring outside of bankruptcy. Here's another view, that I tend to think is a little closer to the mark.

The kinds of restructuring that are required (overhauling labor contracts, shedding debt, and eliminating dealerships/production capacity) just aren't going to happen outside of bankruptcy. The UAW does not appear to make more than token gestures (e.g., deferring payments), and debt holders face a tragedy of the commons situation as far as forgiving/restructuring/reducing debt.

Politically, this problem has been kicked down the road until Obama takes office. The Republicans can now avoid blame for the disaster because they were in office when the money was doled out, and the Democrats will either have to cough up the big bucks later (wasteful big-spending socialists that they are), or face the blame for letting the industry fail.

Argentinian Monetary Crisis

2008-12-05T06:10:00.002-07:00

So apparently the Argentines are once again facing a monetary crisis. This time, however, it is a shortage of coins to make change

No one can say what's causing this absurd situation. The government accuses Argentines of hoarding coins, which is true, at least to some extent. When even the most insignificant purchase requires the same order of planning and precision as a long-range missile strike, you can hardly blame people for keeping a jar of monedas safe at home. The people, in turn, fault the government for not minting enough coins. In fact, the nation's central bank has produced a record number of monedas this year, and the problem has gotten even worse. Everyone blames the bus companies, whose buses accept only monedas. (Buenos Aires' 140-plus bus routes are run by a number of separate, private companies.) These companies, exploiting a loophole in the law, run side businesses that will exchange clients' bills for monedas for a 3 percent service fee. This is legal, but the business community also routinely complains of being forced into the clutches of a thriving moneda black market—run by the local mob, or the bus companies, or both—in which coins sell for a premium of between 5 percent and 10 percent. The bus companies steadfastly deny any involvement in this racket, but their claims were undercut by the discovery of a hoard of 13 million coins, amounting to 5 million pesos, in one company's warehouse this October.

Money has value as a medium of exchange and a store of wealth. In this case, we have individual actors engaging in rent-seeking behavior with respect to the exchange value of small denominations. The net result is that these denominations become more valuable as stores of wealth, exceeding their exchange value, and reducing their rates of exchange. There is a dead-weight loss in reduced trade and inefficient pricing, but that loss does not affect the (primary) hoarders.

I passed this along to Tyler Cowen over at Marginal Revolution. I'm hoping he'll have some more useful insights about what might be done to disincentivize this behavior (the article expains what has already been tried) and parallels to international monetary problems. Hat tip to Rob for the pointer.

Ubutnu 8.04 Hardy Heron is your friend

2008-12-04T09:54:00.002-07:00

After bashing Intrepid Ibex, I feel compelled to give props to Hardy Heron, which I have reinstalled and found all my wireless/video/sound problems are gone. After another couple of hours, my software suite will be completely reinstalled. Thanks to Rob for "dpkg --get-selection > selections.txt" before you take down an OS, and then "dpkg --set-selections < selections.txt" to restore the new one. Frankly, it's really amazing how easy it is to reload a whole new OS when you don't have to worry about piles of CD's and keys.

Windoze is, of course, still hosed. I came up with an old copy of XP, but of course, it doesn't have drivers for my Vista-designed craptop. Super... just fricken super. Hello VMWare. I'm going to try to run World of Warcraft in my new XP VM and if it works, then its so long XP partition.

Ubuntu 8.10 Intrepid Ibex: Do Not Upgrade

2008-12-03T09:16:00.002-07:00

I've been using Ubuntu for about 3 years, and generally love it. Intrepid Ibex is a complete disaster though. While the upgrade process itself went okay, in the aftermath I have since realized that...

my very widely used Intel 945GM video chipset is not supported, to the point that I cannot use my monitor's native resolution (not fixed)...
a problem with digital distortion of all sounds that had been fixed in Hardy is now back (not fixed)...
the built in wireless adapter doesn't work with my Atheros card...
after building the ath5k driver to get things working, wireless was again shutdown with a kernel upgrade and I had to fix it using the backports.

If this last hadn't been fixed, I think my computer would be garbage.

In summary, someone in kernel development land has lost sight of Regular Joes like me, just trying to keep our plumbing businesses afloat using a free operating system on a cheap 2-year-old laptop.

P.S., This is NOT props to Windows. The day before I did this upgrade, my Vista stopped booting and will not recover. The reported error, after much flailing about to even get a readable error, is: BadPatch. At least I have some hope that Ubuntu developers will release a fix to my problem.

Chain Guards

2008-12-03T07:30:00.002-07:00

It turns out that the reason for having a chain guard on a bicycle is only secondarily to prevent you from greasing your pant leg. It's primary purpose is to keep you from sawing your self open on the bike's chain wheel, which operates like a very slow, sloppy, buzz saw. I opened my ankle down to the bone on my chain wheel. It was a mess and it reopened after I got the stitches pulled. Finally after a month, it was healed enough that I could go for a run yesterday.

More Thoughts on the Big Three

2008-12-03T06:46:00.002-07:00

A group called procon.org has put up a good resource for considering the plight of the big three. If you look at page with statements by experts, I think the position by Michael Levine, that government credit should be available only in bankruptcy, is an answer to Krugman's argument that the current credit crisis makes bankruptcy not an option because it will lead to liquidiation. Levine also argues that without bankruptcy, a bailout...

...will be thrown at unproductive commitments. And the sense of urgency that would enable GM to make choices painful to its management, its workers, its retirees, its suppliers and its localities will simply not be there...

...thoughts which I agree. Obama is quoted as being with Krugman, and most of the other quotes, though interesting, involve rhetorical flaws (e.g., false dichotomy between bailout now and complete liquidation) or otherwise fail to inform (e.g., Romney claiming that a bailout is signing a death warrant). On balance (and of course this may be my bias), the pro-bailout side goes more for emotion and, outside of Krugman, has little substantive to say. The con side mostly covers my earlier arguments and ignores the valid points about credit during bankruptcy. Unfortunately, nothing on this site seems to make or address Travis's point: that no one will buy cars from a bankrupt automaker, leading to liquidation, so I will take on this challenge using my deep understanding of consumer confidence, auto manufacturing, and bankruptcy.

My feeling is that it is marginally true that bankruptcy would hurt sales in the short run. It seems clear that a company begging money from the government is already well down the road of being a risky partner for supporting a major purpose over the long haul. Hence, some amount of sales depression has already occurred. Further, if the company (and its government guarantor in bankruptcy) make clear at the outset that the company will come out leaner and more competitive, then at least some consumers' fears will be slaked by the moderation of major uncertainties about the futures of these companies, which will serve to at least partially offset the shock caused by a declaration of bankruptcy. On the whole, given that they are companies with pay rates that are 150% of their foreign competitors, I'd go with it.

As an aside, procon has lots of other issue oriented information. I'm somewhat optimistic based on the big three minisite, though some of the topics seem a little misguided.

Left vs. Right, Conservative vs. Liberal

2008-12-01T07:16:00.003-07:00

At work, I'm privy to a contract negotiation that doesn't seem to be actually happening. The two parties are passing standard forms back and forth with explanations that amount to "this is what we always do" to each other. As yet, neither has actually sat down and identified any tangible problem with the other party's proposals. In fact, neither party has identified what it is about their piece of paper that differs from the other party's.

This is a microcosm for our national political debate. Real conservatives hate real liberals, and real liberals hate real conservatives. They don't have to actually talk to each other. Policy disagreements never rise to become debates about outcomes, because the disagreements in principle are too fundamental. (The caveat here is that all generalizations are over-broad.) In my opinion these principled discussions are really just air cover for ad hominem attacks, typified by snide remarks about the opposition's laissez fair or big-government leanings, depending on the speaker.

The public needs to be informed about the expected outcomes of policy options, and this kind of garbage is not helpful. I think we've ended up here because news about government is now primarily infotainment, and clever name-calling is entertaining to most.

National Automakers

2008-12-01T06:48:00.003-07:00

Given my support for a stimulus to U.S. manufacturer's, I have been asked why I don't support a bailout for the U.S. auto makers. In short, the manufacturing capability of the U.S. automakers is fundamentally rooted in their access to capital and labor. Neither of those change upon filing Chapter 11. Liquidation under bankruptcy is not realistic. What does change is the management and the obligation to pay on existing contracts. Those changes are likely beneficial to the manufacturing capability.

My understanding is that the pay and benefit agreements for both present and past employees of the big three are non-competitive by international standards, and reflect inertia from the power of organized labor in a world where the United States was the dominant automaker. Those agreements are unsustainable now. Bailing out the automakers amounts to the U.S. government backstopping those non-competitive labor agreements. Not bailing them out amounts to letting the market judge whether they are competitive (and yes, then ultimately a bankruptcy judge).

Also, bankruptcy will lead to an overhaul of leadership. Recall that these are the companies that were caught completely unprepared as the market shifted back to small cars in the face of high gasoline prices. These are also the managers that negotiated these unsustainable labor contracts. On the face, their departure would seem to be more good than bad.

Though bankruptcy and reorganization will undoubtedly lead to some layoffs, will not be as dramatic as the auto industry would have us believe, with estimates numbering in the several million. First, the court will certainly maintain payments to suppliers required to sustain operations. Those contracts may be modified if circumstances warrant, but under a Chapter 11, the court is interested in preserving the company as an operating entity and shutting down the supplier base would serve that goal. The hardest hit are likely to be workers and pensioners who will see their pay and benefits cut. Pensioners may get some relief from the Pension Benefit Gaurentee Corporation (or not; I don't know).

This is, of course, unfortunate, but if you support a bailout of the big three, I would ask you to consider whether you would support direct giving of the money to the people who really lose in bankruptcy. My answer is no, primarily for long-term moral-hazard/contract-efficiency reasons.

Iceland as Microcosm

2008-12-01T06:35:00.003-07:00

What is happening in Iceland is what I expect will happen to the U.S., moderated by the fact that for the present we are the world's largest economy, vice a small economy. Being large means that whereas the world is (at least selfishly) indifferent to the collapse of tiny Iceland, selfish interests cause foreign governments and banks to hope that the U.S. economy recovers and so that their large dollar wealth remains valuable.

As many have already noted, all it takes is one big runner (say China) and the U.S. currency/debt situation will look about like Iceland's. Dollar denomination of our debts will soften the initial blow, but imports and foreign borrowing will become very difficult. Also, the rest of the world will go down with us, since their (paper) wealth will disappear causing global recessions, making it a tough period to be exporting.

The countries that recover first will be those with a strong indigenous agricultural and manufacturing capabilities, as they will be able to continue to produce for their own population and be best prepared to resume trading when the shocks pass. Given the U.S. weakness in manufacturing, a stimulus plan for small business capital equipment and national infrastructure is in our national interest.

Deflation

2008-11-25T08:08:00.003-07:00

So I'm a little worried that all this government stimulus in the form of bailouts and now a big spending package is preventing a needed deflation. At the beginning of the "crisis," like most people with any economic training, I was afraid that the collapse of banks could create a monetary deflation that would artificially slow the economy and lead to a downward spiral like what was seen in the Great Depression.

Now what I'm afraid of is that there is a real loss of wealth that has happened in real terms but which is not being allowed to happen monetarily. People made promises for future payments that were no good (e.g., sub-prime mortgages), and other people made promises to pay in the even that the first group failed that were also no good (e.g., credit default swaps). People who relied on these promises have lost value and this needs to be reflected in the real economy. However, the incessant stream of government dollars flying into the pockets of people who have lost here is precluding this from happening.

One starts to wonder about the Argentina-like scenario, where the central bank is essentially monetizing much of the bad debt in the country and setting the stage for a massive devaluation of U.S. currency? Unlike Argentina, U.S. debt is denominated in dollars and our currency is already floating, so presumably the effects would not be as calamitous, but the real shock imposed on our import-reliant economy could still be pretty ugly.

Back to the real economy, we might reason that the government is borrowing money from the future to pay for present problems. However, this presumes that the future will be better. Is there any reason to think that? What competitive advantages over the next 20 years are going to give the United States the excess wealth required to pay-off the debts we are incurring today and still maintain a reasonable standard of living in the future? We're already borrowing foreign money at a fairly impressive rate.

No matter how you look at the present situation, it seems clear we're headed for the end of our import-fueled economy, and it should be noted that the Chinese stimulus can be seen as an attempt to begin to transition their economy from export-driven to internally focused. The long-deteriorating balance sheet of the U.S. economy is accelerating its decline. Loans are going to be harder and harder to come by. Maintaining our standard of living will require a revitalized manufacturing sector to generate the goods we will no longer be able to afford to purchase abroad.

If I were going to put government money into this economy, I would make sure it buys something that will be there when this down-side really hits. Shoving money into banks seems like a complete waste at this point. National infrastructure and capital equipment for U.S. manufacturers will keep money moving in the economy and deliver durable goods that will be important when imports are prohibitively expensive. My motive for doing this is not to escape our current recession, but rather to make the coming one less severe. I don't expect that we'll be able to spend our way out of what's coming our way, but if we move now to adapt to the future demands the transition can be less painful.

Republican Introspection Begins

2008-11-20T06:52:00.002-07:00

I've never read Kathleen Parker (that I know of), but I like this bit:

To be more specific, the evangelical, right-wing, oogedy-boogedy branch of the GOP is what ails the erstwhile conservative party and will continue to afflict and marginalize its constituents if reckoning doesn't soon cometh.

You have to love "oogedy-boogedy." Aside, though, I believe she's also credited with calling Sarah Palin an idiot, or similar, and so is already on the outs with the party's faithful. It will be interesting to see if the party even has a proper debate on this subject.

Since Limbaugh, Republican "intellectuals" (I know I'm abusing the word) have become increasingly full of venom and sarcasm. In their efforts to don the contrarian mantle that economists so love to wear, they replace critical reasoning with ideology and the finely honed skills of a high-school cut-down master. Talking about religion in this tone is likely to generate some real fireworks.

I'll have beer and some chips if anyone wants to bring a lawn chair and watch them with me.

Heroes

2008-11-18T06:44:00.003-07:00

I'll see what happens, but my sense is after a season of character development, followed by a season of trying to relive the success of the first season, we're now well into a season that smells a lot like the later days of the X-Files: I never met a plot-twist I didn't like. At least there's some promise that each season ends with a finale rather than a pure cliff-hanger.

That may be part of the problem though, I mean let me spell this out for you: the bad guys (whoever they are) who are trying to end the world in some yet more dramatic fashion than we have yet seen will get stopped by the good guys (whoever they are). I think they might do better to avoid the problem of inevitability by avoiding the "season formula" and instead having a season of what are effectively mini-series. That way the season-ender could be something else, maybe a discovery of something important or the introduction of some new character or organization.

I'm sure you all recognize that these insightful thoughts are just more evidence that I should rule the world.

Why We Need the Republicans

2008-11-18T06:16:00.002-07:00

The Buffalo News reports on John Kyl, the Republican Whip from Arizona, discussing the proposed bailout:

Nevertheless, Senate Minority Whip Jon L. Kyl, R-Ariz., said there’s no good reason why the federal government should rescue auto companies that pay workers nearly $30 more per hour than foreign auto manufacturers pay in their U. S. factories.

These are words I agree with. In a society where bankruptcy laws are designed to restructure not liquidate going concerns like GM, there is no reason for the government to intervene directly in the affairs of a particular company or industry.

I try to avoid moralizing about these things, but of course, the fact is that such a bailout would represent a sort of societal transfer of wealth from the bulk of society to those who work in the auto industry. The money would go primarily to skilled laborers who are paid more than the going rate for their skills in the marketplace. Providing this money would create a perverse incentive for unions to continue to demand higher-than-market-rate pay, because the promise of a government bailout would offset the risk of the ensuing bankruptcy, perpetuating the problem that has led the industry to be non-competitive and in financial distress.

The Republican party used to be the party that could at least lay the economic realities of these things bare. Of course, "trickle-down" economics (AKA "voodoo economics") and the love of the "Laugher Curve" have undermined the credibility of Republican's on economic issues, nevermind the latest financial crisis in which they (at least the House) waffled wildly before ultimately supporting a questionable bailout plan.

Here we have Kyl speaking bonafide words of wisdom. What I wouldn't give to have these words come from a governing party that wasn't also trying to spy on all of society, keep detainees at Guantanamo indefinitely while they ponder the difficulties their past actions have created, and prevent the good citizens of this land from having the abortions they so badly need (especially members of a certain Alaskan political family).

Republican Soul Searching

2008-11-17T06:44:00.003-07:00

It's perhaps cynical to frame the internal debate in the Republican party over its future in terms of voter strategy, but it seems all too clear that is what it amounts to. The "expand-our-appeal" faction has the median voter theorem in mind. They believe that the party platform no longer appeals to the so-called "median voter" who casts the deciding ballot in an election where everyone votes. Expanding the platform is key to collecting the median voter. On the other hand, the "return-to-our-conservative-roots" faction believes that the election was lost primarily due to low voter turnout among the party's base. In our system, getting one's supporters to the polls is crucial. When one candidate fails to inspire her base or when moderates see the choice as indifferent, then differences in turnout among the parties' core voters decides the election.

As a self-described libertarian who has watched his libertarian friends become divided about voting Republican during the past eight years, including some of the more staunch and thoughtful libertarians I've ever met over at Marginal Revolution, I wonder about the "roots" faction. The so-called base of the Republican party has been a coalition initially forged by Reagan among fiscal, religious, and strong-military conservatives, and it is unsound. (Ask Lee Edwards what a strong-military conservative is.) This coalition, was united in the face of the Soviet Union: a godless, state-run economy, that was a threat in being to the United States. This was Reagan's uniting theme, and it was a genuine basis of common interest for the three aforementioned groups. This basis is gone. The forces that keep them together are primarily inertial and it is hard to imagine building such a coalition today from whole cloth.

There are problems with picking elements of the existing coalition (e.g., libertarian philosophy in a ruling party doesn't really work, the religious right is at once very politically active and very fringe). The problem is worsened by the fact that the ideological definition of their perpetual opponents is unclear. Indeed, if anything the Democrats appear to substantially ideology-free, and much more pragmatic than the Republicans when it comes to actual policy making. Are we on the verge of a post-ideological society?

I'm not sure where the new opposition party should go from here, but there is clearly an opportunity for a great thinker to make a big difference.

Computer Notes

2008-11-16T23:29:00.002-07:00

1. The things on the top row of my Google homepage get attention, and the other things don't. Hence, move Google Reader back to the top, replacing the WSJ, which I usually find annoying since it got bought by Rupert.

2. Upgrading to Intrepid Ibex was relatively painless even when done the hard way. Thanks to Rob for the tips on dpkg --get-selections > somefile and dpkg --set-selections <> to make a clean install feasible. In the future copying sources.list would be wise. And of course, the thing to do with such files? Send them to yourself in gmail.

3. Vista is never going to let me shrink my NTFS drive down below 65GB. Never, never, never, never, never. I can defrag it and compact it, but it's just not going to happen.

Gender in Computer Speak

2008-11-08T09:05:00.002-07:00

English words do not have gender, but computer speak does. Linux, for example, is masculine. Mac OS is feminine. And of course, Windows is neuter.

Respect for Borders

2008-10-28T07:56:00.002-07:00

Lately the U.S. military has been killing people in Pakistan and more recently in Syria along the Iraqi-Syrian border. These incursions into foreign territory by the U.S. military are not new. My father flew F4's in Vietnam, and has told me they bombed Laos regularly. Similarly, a friend who served in the U.S. Army Rangers told me that he spent several months in a Central American during the Reagan administration doing "things he can't forgive himself for."

The difference between those acts and the more recent ones are the issue of secrecy. U.S. bombing of Laos, which they called "Far Western Vietnam," was not declassified for many years. It was not just the sort of secret people wouldn't talk about, it was one that they would lie about. Similarly the stories of U.S. military operations in Central America under Reagan and Bush are still shrouded in secrecy, though apparently there was at least one book contemporaneously published.

The recent attacks, though secret at an operational level, are not secrets in the sense that the deeds themselves are being concealed. Formally, the U.S. merely not commenting on the operations, while the nations getting attacked are loudly and publicly complaining about them and pointing fingers at the U.S. I worry some about the openness of these recent attacks and what it might mean for the overall strength of global territorial integrity.

Clearly other nations have incentives to create excuses to attack their weaker neighbors. Russia comes to mind. On the other hand, there does seem to be some substance to the position articulated by President Bush:

"As sovereign states, we have an obligation to govern responsibly, and solve problems before they spill across borders," Bush said. "We have an obligation to prevent our territory from being used as a sanctuary for terrorism and proliferation and human trafficking and organized crime."

To plainly state the logic: if fighters come across a mutual border and attack U.S. forces from a neighboring country (as reportedly happens in the recent cases and in Vietnam), then the U.S. can rationally argue: "Either (1) the host country is responsible for attacks emanating from it, in which case the U.S. is justified in defending itself, or (2) the host country is not enforcing its sovereignty on the territory that the fighters occupy, and the U.S. can attack on the grounds that such fighters must not be allowed to your ungoverned territory to be outside the law." In the latter case, one might reason that attacks by U.S. forces are actually helping the host to the extent that they are eradicating a threat to its sovereignty.

Also interestingly, McCain has attacked Obama for acknowledging that he would have a policy of attacking across borders under such circumstances, claiming that secrecy is preferable and such an admission should never be made.

Polls versus Odds

2008-10-28T06:27:00.003-07:00

A continuing mystery to me is why U.S. main stream media election coverage focuses so heavily on polling numbers, but completely ignores the betting markets. Here's one of a very few "Isn't this interesting?" articles I could find about it in the mainstream media, from 2004:

The notion that an open market can accurately predict the outcome of an election was pioneered by academics at the University of Iowa where the now oft-quoted Iowa Electronic Futures Market, a real-money market that allows punters to buy futures contracts based on the outcome of economic and political events, was established in 1988.
Run by the university's business school and regulated by the Commodity Futures Trading Commission, the Iowa market has spawned similar futures markets at Intrade.com and Tradesports.com, and they have been remarkably prophetic. Compared with 596 national polls in four presidential election cycles between 1988 and 2000, the Iowa market was closest to the actual election result 76 percent of the time notes Thomas Rietz, a finance professor at the University of Iowa and director of the Iowa futures market.

Of course the history is wrong. Betting on elections in this country has been around since Washington. Also, international betting is quite active. Last month, one betting site was noted to be acting strangely. Right now Obama's odds are in the 1:10 (or better) neighborhood and McCain's are around 9:1 in the big international markets.

As for myself, I ignore polls and follow the odds. I wonder if the campaign staff uses them. Perhaps as a way of measuring the success of their initiatives?

The Educational Testing Service

2008-10-22T16:59:00.002-07:00

Here is a classic case of a rent-seeking monopoly. These are the guys who bring you the GRE and other such lovable standardized tests. In addition to the fee for taking their test, they charge for every copy of the score that you send out. The fee is not nominal, but is up from $15 last year to $20 this year per institution to which the scores are sent.

I was pleased to see that this year there's a new option for getting scores over the web. However I soon discovered that the login form requires information not present on the registration paperwork I retained so that I could order additional scores when needed. That sent me to the phone option, which adds a $12 surcharge. (This has also gone up from last year.) The phone process of course can be done using only the registration info on the paperwork ETS sent me.

Since I took this test in 2004, I would have to say that I have given these people over $200 (and probably more), including the original registration cost and having score reports sent to a half-dozen institutions.

Grammar

2008-10-20T08:44:00.002-07:00

I would like to ask your indulgence, in my random placement of commas, and also, in my usage of their, they're, and there. Their're just too many ways, too mess these things up.

Obama is a (Quitting) Smoker

2008-10-20T06:46:00.002-07:00

From the New York Times today, I learn that Obama is a smoker, trying to quit since he launched his campaign. As those of you who know me know, I've been smoking off and on since I was 15, and I feel like I can relate.

Frontline: The Choice 2008

2008-10-19T15:50:00.002-07:00

I found this quite interesting, and refreshing watching it today. It's nice to hear both candidates put into context. Watch it online here.

Obama vs. Joe the Plummer

2008-10-15T20:12:00.002-07:00

When I watch the whole thing, vice the Fox News clip, I'm really taken by what a setup this appears to be.

The Final McCain-Obama Debate

2008-10-15T20:09:00.002-07:00

My prediction is that tomorrow, the press will report on how McCain did better in this debate. How he was aggressive, etc. The fact is, he wasn't aggressive. He was just a dick.

Lonely

2008-10-15T18:25:00.001-07:00

As an only child, you would think that I would like to spend time alone without my family. Julie and the kids have been gone for almost a week, and I hated all of it. I can be alone in a crowd, I don't need people to actually go away.

The Financial Meltdown

2008-10-15T18:06:00.003-07:00

I know you're all dying to know what I think about the financial meltdown. Me too.

Here's what I'm wondering about. Is the real problem some opaqueness in the market that led to the risks of mortgage backed securities being hidden? I mean, who seriously thought that there wasn't roughly a 100% chance of an interest only loan collapsing when housing prices failed to climb? Who thought that they could continue to do so at such high rates indefinitely?

Is $700B a big enough amount to really make a difference in fundamentals, or just a prayer for "investor confidence"? My best guess is the former. Assume 300,000,000 citizens, 3 people per family makes 100,000,000 households, half of them own houses making 50,000,000 mortgages, assume an average home value of $100,000 making a total value of mortgages $5,000,000,000,000. Then with a 7% mortgage failure rate (based on the NYT in Feb 2008), we have $350,000,000,000 of bad mortgages. Random assumptions or prescience? Only actual data will tell...

I'm pleased by the way that the Treasury did not buy the mortgages. The gov't buying things for which there isn't an active market seems like bad idea. In concept, I'm for a plan that lets the markets crash good and hard, where crash means reprice things correctly--downward, and then attempts to mitigate the consequences of the resulting deflation. I hope that's how this is going to work.

Comments

2008-10-15T18:01:00.002-07:00

So my giant audience (comprising Travis and Kerry), I need to apologize for ignoring your comments. The reason for this is that the notifications were sent to my Cox e-mail address in Virginia. Shockingly, I did not get them here in Tucson, where I am no longer a Cox customer.

I should also point out that Anne Coulter is rumored to be posing for Playboy in December. Get your subscription now!

Rush Limbaugh Pretending to be a Man

2008-08-19T09:58:00.003-07:00

A quote from the Atlantic about Rush (looks like Rush is "Neo con" on this blog):

“He can’t take a punch, he’s weak, and he whines,” Limbaugh declared this spring. “I’m sure some women find that attractive because they would look at him as a little boy and would want to protect him … But it embarrasses me as a man.”

If only we lived in the 1700's and fat f%ck's like Limbaugh had to defend their nasty words with their slug-like bodies. I'm giving odds for Obama in fisticuffs.

Politics 2.0

2008-08-19T06:27:00.003-07:00

I think Obama is Politics 2.0: the politics of actual interests and motives, not those that you make up and attribute to people you don't like.

The chairman of MADD is so Politics 1.0 in her response to several university presidents coming out in favor of lowering the drinking age:

She [Caroline Cash, executive director of MADD] said [sic] was disappointed that the university presidents did not talk with MADD before signing the statement. She said she also questions their commitment to upholding the law.

"It gives me great pause to think of sending thousands of students onto a campus where the person who is most accountable doesn't seem to be devoted to ensuring their health and safety," Cash said.

These are the words of someone who wants more of the binge drinking and alcohol poisoning that results when students are driven off-campus as a result of the 21 year-old drinking age... oh goddammit... it's just so hard to stop, isn't it?

Mrs. Clinton

2008-08-11T06:39:00.003-07:00

To those who say Mrs. Clinton lost because of media sexism, I say you are whiny little girls.

To those who say Mrs. Clinton lost because the Democratic Party establishment was out to get her, I say she was the Democratic Party establishment until she lost this campaign.

To those who say Mrs. Clinton lost because Edwards lied about screwing his staff, I say Mrs. Clinton got as far as she did partly because Mr. Clinton lied about screwing his staff.

To Mrs. Clinton, I say by conceding defeat and then continuing to militate for your own candidacy, you are showing yourself to be more self-interested and small-minded and not the statesman you pretended to be.

The Olympics and my DVR

2008-08-10T20:40:00.002-07:00

The advent of the DVR and search-based recording has enhanced my Olympic experience. I can (and do) watch more of the Olympics than ever before. I'm learning that there are different fast-forward strategies for different sports. U.S. soccer is normal speed; basketball is 60x until the last 2 minutes, then normal speed if its close; dressage is 300x. I also watch no commercials, and learn almost nothing about the touching moments that have made the athletes who they are.

Olympics: Dressage

2008-08-09T11:25:00.002-07:00

This is the first of my posts on the Olympics.

Dressage is a funny-walking contest for old horses.

20th Class Renunion

2008-08-09T07:00:00.002-07:00

I missed mine, but I have a spy who reported the results to me. I would've been the "Longest Married" by a year more than anyone else.

Best Ad Ever

2008-08-04T16:26:00.002-07:00

I noticed this Google Adsense Ad while I was previewing my blog:

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I'm not sure what this says about me. While I admit to thinking Anne Coulter is hot, the last thing I would ever want to do with (to) her is chat.

Road Trip

2008-08-04T16:15:00.002-07:00

Here's some highlights of a trip Julie and I took to Sonoma, CA, where I ran my first Half-Ironman Triathlon.

1. On our way out, we stopped at a B&B in the middle of nowhere run by a couple of Mormons. It was a clothing optional facility.

2. Our campsite in Guerneville was located on the site of a defunct amusement park. It was filled with dope-smoking hippies that partied until 2AM.

3. My fellow competitor both finished the race without stopping and without crapping ourselves. I broke 6 hours for the race overall, and ran an 8:30 pace for the 13.2 mile run.

4. Julie and I stopped in Los Vegas on the way back. We got upgraded (no cost) to a fancy suite at Treasure Island. We don't like Los Vegas.

5. I continue to be amazed at how good a time Julie and I can have driving along the road talking about nothing after 18 years of marriage.

Monopolies and International Business

2008-05-21T06:29:00.002-07:00

The historic high prices for energy are leading to some interesting interactions. The EU is in a bit of a peeing contest with its own oil companies as well as Gazprom as it tries to spur competition in its marketplace by breaking up vertical monopolies. Similarly, the House has passed a measure (requiring Senate approval and which Bush threatens to veto) that would allow U.S. anti-trust measures to be applied to OPEC. Making this more interesting is that oil production and distribution is generally viewed as a natural monopoly (i.e., average costs fall with increasing size).

With respect to Gazprom, a state supported monopoly is selling gas to the EU. Using its control of 1/4 of the supply of natural gas for the EU and its ability to call on its own government to enact punitive legislation, it then leverages the political-economic decisions of the EU. It looks funny, but I have a hard time putting my finger on the costs of this situation to consumers.

With respect to OPEC and the U.S., of course OPEC is a cartel, and it is anti-competitively fixing prices. Presumably the full application of U.S. anti-trust laws would lead to a judgment that they have to break-up. Presumably, they would flip us the bird. Then what? Who's got the high cards here? We can seize some assets in the U.S., they can refuse to ship oil to us... then... oh shit, my kids are gonna pull duty in Saudi Arabia.

"Interfering" in Primary Voting

2008-05-20T10:52:00.002-07:00

I'm glad to have an old friend back in my life. He is contrarian in the finest sense that economists admire, and my discussions with him in college ultimately changed my political philosophy sharply toward the Libertarian point of view. I've mellowed since then and he says he has too, but I think it's fair to say we're farther apart philosophically today than we were when I left college. This is good, because he is an extremely forceful orator and I find arguments with him to force me to reconsider things and if not change my opinion, at least sharpen it. I urge you to find such people and spend time with them.

The other day we got onto the topic of people in one party voting in the other party's primary, either by changing parties or in open primaries, to vote for a candidate that they believe has the worse chance of winning in a general election, or simply to prolong the primary process. He finds this amusing and I find it reprehensible. His reasoning is that the elections are a game, and that all legal (i.e., within the rules) tactics can and indeed should be adopted, as this is the big leagues and we play to win. The more I think about it, the more I cannot argue with that position directly. Indeed, I am forced to conclude that while I find it in no way amusing, he is substantially correct.

So where does my intuition that this is below the belt and nasty behavior come from? I believe it comes from the fact that this "interference" (and I say that in quotes, because of course it is legal) has the potential to lead to one party putting forward a second best candidate, who may still win the general election. It need not be the case that this candidate is second best only from the nominating party's point of view. Since the "interference" by the other party has an agenda aimed at disruption, there is no need for the candidate to which they shift their votes to be more desirable from their perspective either (e.g., Democrats voting for Romney in Michigan). Ultimately, this sort of behavior, if sufficiently wide spread, can lead to a rather broad question about just exactly who the elected candidate represents, and even the legitimacy of the government as a representational agent.

Thus, if it is a game, it is a prisoner's dilemma of sorts, where both party's would commit to not "interfere" in exchange for reciprocity, but without a mechanism for contract no such agreement is available. The ugliness is then the analogy of two prisoners, in this case both innocent, fabricating stories of the other's guilt in exchange for a promise of leniency should the other accuse them. Both go to jail to avoid hanging when both should have gone free.

Several ideas were kicked around as possible solutions to this "problem" (at least as I saw it) in our exchange, but they all appear imperfect and have costs. I don't understand the caucus process very well, but it was suggested that it is less susceptible to this sort of interference because only long-time senior party representatives vote. If this is indeed how it works, then it appears to trade one mechanism for not selecting the party-majority candidate for another: an unbound "electoral college" of sorts. A loyalty oath was also mentioned, but this is unenforceable and in any case, what would you swear loyalty to? Party platforms are changing, and both parties have many members who don't buy into all the planks of their party (some of whom are office holders). A minimum membership time was also suggested, but this has the cost of preventing late decider-guys (and gals) from participating, and can also be overcome by a coordinated effort, such as Operation Chaos, that forecasts where "interference" is optimal and organizes timely re-registration into the other party.

Of course this problem is minor against the broader question of why people bother to vote or be informed (i.e., have a preference) at all given the odds that it will influence the outcome. However, since blocks of "interfering" voters are credited with changing the outcome of at least one primary, I wonder if this has been discussed in the public choice literature. I'd be interested in any pointers by a knowledgeable reader.

Vampire Weekend

2008-05-20T10:46:00.000-07:00

They're a band. Check them out.

Single Women are Crazy

2008-05-20T10:29:00.002-07:00

You can call me sexist, but I base this opinion on two solid years of observation in a land very rich in single women. I'm certain there are exceptions, and it seems to be not as bad when they're young, say under 25, (or once they have kids) but in general if you start with the idea that you're dealing with someone who's insane when talking to a single woman, you'll be doing better than average.

By the way, I'm not saying the single guys are alright. As best I can tell, most of them are having sex with all the (crazy) women as fast as they possibly can. Indeed, but for the very fact that it is so oft repeated, I would consider the continual raising and collapsing of expectations that women seem to experience as a result of their relationships with these guys a chief cause of the apparent insanity of the single female population.

However, a rational person begins to anticipate recurring events, ceasing to be surprised, but this is not what is observed empirically. Hence, following from Franklin's maxim, I must conclude they're crazy. Needless to say, I'm very concerned about my soon-to-be-teenage daughter.

Smiling About Dr. Seuss

2008-05-20T10:20:00.004-07:00

I miss having Dr. Seuss in my life. Most recently it was reading his books to my kids, who are now too old. It should go without saying that his books must be read by or to a child; it's just not the same to read them alone as an adult. Really though, I just wanted to post this saying of his which I especially like: "Don't cry because it's over. Smile because it happened," which is now somewhat apropos after that especially clever setup.

Correlation and Causation: A Primer for Zealots

2008-04-07T10:50:00.005-07:00

A recent post by Dani Rodrik about the effect of Democratic and Republican administrations on income growth--Democrats are associated with more growth for everyone and much faster growth for the poor than Republicans--has generated the expected discussion about the competence and morality of our two main political parties. While I must confess I find much of the invective about the intelligence of conservatives to be amusing, especially given the current administration, I think Paul Krugman's initial reaction is right: a correlation without a reasonable mechanism should go on a list of curiosities, vice becoming a basis for judgments.

Here, the power of the presidential administration as a per se cause would seem to be trumped by that of the Fed and congress who wield direct monetary and fiscal authority, as Tyler Cowen suggests. Moreover, the ability of the administration to produce effects on measured income on a one-year lagged basis is pretty sketch given that much of the federal budget is set nearly two years in advance by the Office of Management and Budget. More credible is that the administration is associated with something that does have a powerful and immediate effect on macroeconomic outcomes... like say... I dunno... maybe... national pubic opinion?!

As striking as the correlation (originally published by Larry Bartels) is, it is not nearly as strong as the one between the Redskins and presidential elections (only one miss in six decades). Any takers on what the Redskins are up to?