Lawson EFW

Bob Lawson does a "teaser video."

And some other good info, also.

What If the Professor Died, and Nobody Noticed?

In my opinion, the University of Pennsylvania has the widest disparity in the country between the Econ Dept (one of ten best in the world) and the Poli Sci Dept (not one of the ten best in the Philadelphia SMSA).

But....don't you think that if a professor DIES, someone would notice? The UPenn Poli Sci Dept is so badly run they never even bothered to cancel the class.

Dorothy Parker, when told in analogous situation some dreary boor had died, asked, "How could they tell?" I guess they could NOT tell, since ol' HT is still listed as being alive on the web site.

(UPDATE: I have it on good authority that Prof. Teune was in fact a fine man, and a good man. So, the above is clearly unfair to him. My apologies...to Prof. Teune. The DoPS can screw.)
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Linkulus

Here at KPC we sometimes go a little overboard on being critical. So how about some stuff I actually admire? Extremely quirky but in a really good way?

1. Anticlimacus, especially for picking up this.

2. Liquidity Preference, and this.

3. Token Libertarian Girl clears up some misconceptions.

4. Kindred Winecoff on why the problem with economics is economists.

Meesa lyka dees.

James Surowiecki has occupational dyslexia

In his latest column in the New Yorker, he calls me a political scientist and Doug Hibbs an economist!

OUCH.

Here is the article that I believe he's referencing, from the Journal of Law & Economics. We show that if you define electoral performance by incumbent return rates instead of party vote share, a wide range of economic conditions (inflation, unemployment, and income growth) affect House elections, and at least some of the effects are independent of whether or not the incumbent is of the same political party as the president.

It's one of my favorite papers (I mean of ones I've written or co-written). My co-author, Joe McGarrity did a ton of work on it, as we got a very daunting R&R offer from the journal and Joe really did the job on making the referees and Editor happy.

Flip The Bird

Libertarian bird movement growing!

No Banking Crisis, Eh?

Why Didn't Canada Have A Banking Crisis in 2008 (or in 1930, or 1907, or ...)?

NBER Working Paper, August 2011

Abstract: The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk—the mortgage market and investment banking—and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2008 was not contained.

Nod to Kevin Lewis

Fortune cookies entirely appropriate for these troubled times

Economists Answer the Call

Long term research agenda forecasts. Interesting.

Sol-gate: It just gets better!

Anonyman sends this link. It just keeps getting better and better. Robbing Peter and Paul to pay for a pure solar scam.

The problem may not be the bad loans, but rather the fibbing and the covering up, as always.

Brendan Nyhan said it was 'bout time for BHO to have a scandal. Good call, Brendan!

Classical Liberal Reading Group

Okay, CL fans, I need your help.

An extremely earnest and enthusiastic student just wrote to me, and asked about starting a reading group in Classical Liberalism. This student wants the movement to spread, and wants the readings to be good. And s/he also wants Progressive counterpoint.

So, let me ask the smartest people I know, the readers of KPC!

In comments, please give the BEST (most important, but also most readable) books or articles for these categories (these are my correspondent's categories, btw). And NO MORE THAN THREE per category, please. Have at you!

Classical Liberal authors of history: _____

Classical Liberal authors of the contemporary period: ____

And Progressive authors of history: _____

And Progressive authors of the contemporary period: _____

Privateerization

Overseas Trade and the Decline of Privateering

Henning Hillmann & Christina Gathmann
Journal of Economic History, September 2011, Pages 730-761

Abstract: Using a novel data set on 2,483 British privateering cruises, we show that state-licensed raiding of commercial vessels was a popular and flourishing business among merchants that took a serious toll on enemy trade from 1689 to 1815. Why, then, did privateering merchants gradually turn away from these profitable endeavors? We show that the expansion of overseas trade increased the opportunity costs for merchants and resulted in the decline of privateering. Our findings document that the decline of privateering had as much to do with an expanding maritime economy as with the rising naval power of the British state.

Nod to Kevin Lewis

Barack Obama comes out of the closet

Wow. President O is planning to ask for $1.5 Trillion in new tax revenues with no changes to Social Security and perhaps no changes to Medicare either.

Finally the bullsh*t is over and the cards are on the table.

You know, if this doesn't kick-start the economy, I don't know what will!!

Outside Money With Ideological Strings FINE, if it's lefty!

Southern Methodist University has decided that it will offer space for the ideological vision of a leftist donor. Here is the description of the program of bizarre indoctrination that students will receive as a poor substitute for an education.

Now, I do object to the fraudulent claim that this is a "major." It is an extended year round summer camp for kids who are too ideology-addled and lazy even to enroll in SMU's famously easy disciplinary majors. But, okay, caveat emptor. If you want to offer a crap major like that, and rich kids want to take it so they feel less guilty about their pointless trust-fund guided lives, fair enough.

What twists up my boxers into a slip-knot is the idea that all the media and other colleges are just fine with a "donor" buying a major at a university to serve that donor's own narrow ideological world-view. When the Kochs give money for legitimate courses, with legitimate instructors, it's time to cry havoc, and let slip the dogs of "Whore! You took money from the Kochs!"

But when lefties do it, it's all good. (Shakes head slowly, mystified).

You'll Wonder Where the Green Jobs Went, When You Learn What "Poison River" Meant!

How are those Green Jobs working out for ya, China?

If there is one consistent theme here at KPC, it is that we should be very, very happy to let the Chinese spend themselves into bankruptcy developing alternative energy technology which we will be able either to buy, or to use. Besides, we are doing a lot, more than we should be perhaps, already.

I wish no ill to the Chinese people. But one of the side effects of China's choice to develop "green" technology is that they are killing their environment.

(Nod to Anonyman, who is en fuego, producing lots of carbon)

Jersey Sure

This article is a bit funny. I have never seen the show "Jersey Shore" (or is that the "show" Jersey Shore ?), but I am assured that it is entertaining in a not-very-demanding way.

The disturbing thing is the comments. "Natale," obviously educated in the NJ public school system, thinks she has a smackdown argument.

Sorry NYMag, but this is a shitty article. The tax credit is based on only what the entire production SPENT in New Jersey.. camera rental, lodging, food, transportation.. all during filming that specific season.. the production is entitled to a 20% rebate based on locally hired crew and monies actually spent solely in NJ AND only if reviewed by a qualified CPA and then approved by the NJ Film Office.. they usually use it towards satisfying the NJ corporate business state tax. If the total refund was only $420,000, that means MTV spent $2.1 Million dollars ALONE in NJ (that counts as revenue for local businesses as well as job creation!!) .. do your homework.

So, the reason that it is okay to rebate a large chunk back to this horrible show is that it creates a lot of the tax dollars that are being rebated.

Um...Natale, how about this: lower the taxes in the first place. Then you wouldn't have to tax the companies that create jobs (and that is what ALL companies do, Natale, not just "Jersey Sore), and you would have more jobs.

(Nod to Anonyman, who has started referring to his ass as "The Distribution")

There's a program for that!

I am very happy to hear that all 1,100 employees of Solyndra have applied en masse for Federal Trade Adjustment Assistance. I really hope they get it. What's another $14 million amount to anyway?

Maybe congress can pass a "Federal Failure of Trade Adjustment Assistance Assistance" act to help these fine folks when their FTAA money runs out.

Hat Tip to Dip!

The Problem of Marginal Value and Surveys

The pursuit of happiness can be lonely

Iris Mauss et al., Emotion, forthcoming

Abstract: Few things seem more natural and functional than wanting to be happy. We suggest that, counter to this intuition, valuing happiness may have some surprising negative consequences. Specifically, because striving for personal gains can damage connections with others and because happiness is usually defined in terms of personal positive feelings (a personal gain) in western contexts, striving for happiness might damage people's connections with others and make them lonely. In 2 studies, we provide support for this hypothesis. Study 1 suggests that the more people value happiness, the lonelier they feel on a daily basis (assessed over 2 weeks with diaries). Study 2 provides an experimental manipulation of valuing happiness and demonstrates that inducing people to value happiness leads to relatively greater loneliness, as measured by self-reports and a hormonal index (progesterone). In each study, key potential confounds, such as positive and negative affect, were ruled out. These findings suggest that wanting to be happy can make people lonely.

Um....if everyone valued "happiness" equally, but if happiness has diminishing marginal utility, among other goals, then the most lonely people would report the greatest marginal utility from increased happiness. People who already have quite a bit of happiness would value it much less, at the margin.

And that's all this survey is getting at: marginal utility of happiness. So, it's not true that people who value happiness are more lonely. Instead, lonely people have little happiness, and so at the margin value it more.

Sheesh.

(nod to Kevin Lewis)

The Evolution of Overconfidence

The evolution of overconfidence

Dominic Johnson & James Fowler
Nature, 15 September 2011, Pages 317–320

Abstract: Confidence is an essential ingredient of success in a wide range of domains ranging from job performance and mental health to sports, business and combat. Some authors have suggested that not just confidence but overconfidence — believing you are better than you are in reality — is advantageous because it serves to increase ambition, morale, resolve, persistence or the credibility of bluffing, generating a self-fulfilling prophecy in which exaggerated confidence actually increases the probability of success. However, overconfidence also leads to faulty assessments, unrealistic expectations and hazardous decisions, so it remains a puzzle how such a false belief could evolve or remain stable in a population of competing strategies that include accurate, unbiased beliefs. Here we present an evolutionary model showing that, counterintuitively, overconfidence maximizes individual fitness and populations tend to become overconfident, as long as benefits from contested resources are sufficiently large compared with the cost of competition. In contrast, unbiased strategies are only stable under limited conditions. The fact that overconfident populations are evolutionarily stable in a wide range of environments may help to explain why overconfidence remains prevalent today, even if it contributes to hubris, market bubbles, financial collapses, policy failures, disasters and costly wars.

I don't see this as very counterintuitive. Being an alpha male is very stressful, and you die young. (I say "you" because I am an omega male). But you get crazy sex action in the meantime. bouncybouncybouncy. "Fitness" is not the same as "happiness," at all. Mr. Darwin didn't really care if animals were happy; that didn't play much of a role in the whole "nature red in tooth and claw" theory.

The problem is that our last two Presidents, first GWB and now BHO, are freakishly overconfident even by the standards of human males. Neither is capable of imagining that anyone actually disagrees with them, unless the disagreer is evil or a stone idiot.

(Nod to the Kevin Lewis)

Ford

There are 4 Fords in the Mungowitz driveway. If you wanted to know.

Fudgesicle

Nicholas Cage recounts his experience of waking up, and seeing a naked man at the foot of the bed, eating a fudgesicle.

This apropos his new movie Trespass Reviews are mixed. But the fudgesicle story is just fine.

Rugger Hugger

Just months after marrying Queen Elizabeth II’s granddaughter Zara Phillips, the captain of England’s rugby team, Mike Tindall, was allegedly caught kissing and groping another blonde at a dwarf-throwing contest in New Zealand. Tindall and his team were celebrating a victory over Argentina in a World Cup match when the boozy evening apparently turned adulterous. A spokesman for the Rugby Football Union tried to play down the incident, saying that the queen’s in-law was simply “relaxing after a tough match.” The manager of the bar in question defended the players, too: “They were great lads, not throwing the midgets,” he wrote on Facebook.
(News source)

If your standard for "great lads" is "not throwing the midgets," then your standards need some upward revision.

So, I wondered about the spurned wife, Zara Phillips. Here is a picture of her. Unfortunately she seems unaware that a truly enormous Luna moth has landed on her head.
So perhaps she won't learn of her hubby's grope-n-hope down in Kiwiland.

(nod to Gerardo)

(UPDATE: Gerardo notes that in fact "not throwing the midgets" is a good bright line rule, a one way test. He further points out that REAL friends can be counted on to take you out for a jar or two, if you are depressed, or sad, or dead.

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Attn: West coast KPC fans

I, Angus will be giving a talk tomorrow at Claremont College.

Title is "Beyond Twin Peaks: Development and Polarization in the World Income Distribution".

The time is 10:30 - 12:00 the place is Kravis 367.

Be sure and say hi if you are a KPC reader.

Gumby Fail

You have likely seen the Gumby Fail robbery. The news story.

But there is more. The cops said, "You are Gumby, dammit!" and arrested him.

Madcap Electoral College Hi-Jinks: Remember the Colorado

Them wascawwy Wepubwicans! Gonna take Penn proportional in the Electoral College! And the "fair and balanced" folks at NY Mag had this to say:

Pennsylvania, like every other state, is free to dole out its electoral votes however it wants. Republicans control both chambers of the state legislature as well as the governorship, so if the GOP wants to switch over to a congressional-district apportionment system, all the Democrats can really do is whine. As Nick Baumann points out in Mother Jones today, the same thing could be repeated in other blue states across the country.

Democrats, meanwhile, don't have the ability to retaliate by splitting up the electoral votes of traditionally red states.

Democrats, Democrats, whatchagoando, whatchagoando when Cantor comes for you? Poor defenseless little things!

Except that our brave reporters didn't mention that the Dems have tried this same crap several times, most recently in Colorado. That paragon of virtue Kos was all excited, back then, in 2004. It was GREAT news, a brilliant strategy.

How come it's cheating if the Repubs do it? I agree it's a bad idea, but this seems like pretty selective reporting.

Germany's role in the PIIGS bailout in one easy collage

I think I'm in trouble

Here's an unbelievable story from San Francisco. A husband goes missing, the wife never reports it to the cops, then in February, the husband's body turns up buried underneath a new barbeque the wife built in the backyard (Jimmy Hoffa style). Today, it is announced that no charges will be filed against the wife!

I am now viewing Mrs. Angus's proposal for us to rebuild and extend our backyard deck in a whole new light.

Oh Vladdy, is there ANYTHING you can't do?

Awesome photo essay on the Austin Powers of Dictators, Vladimir Putin.

Highly recommended.

A foolproof plan to balance the budget and stimulate the economy

As you may know, one of the ideas tossed around for dealing with the debt limit was to have the Treasury mint a trillion $ coin and then have the Fed "buy" it from them.

It is not well known, but totally true that Congress has already put the Fed on such a path since 2005 with an extra economic stimulus twist.

The Fed is mandated to buy new "presidential" dollar coins every year from the Treasury. It costs $0.30 to make them so Treasury is making bank. Plus, no one wants to use them so the Fed has to find/build storage facilities to house the unwanted coins.

I am not making this up!

Currently the Fed is holding over a billion of these coins in 28 different storage facilities.

People, all we need to do in these troubled times is double down on this excellent starter program. Make the Fed buy, say a trillion of these coins every year and store them.

That's $700 billion a year in new revenue and lots of construction jobs building new storage facilities. Plus those facilities will need managers, forklift operators, maintenance workers, security guards...

Hey, maybe the Treasury could make the coins even bigger!

I really don't see what could go wrong here.

Hat tip to 7im.

Hugo Chavez: doin' work

People, Hugo is getting it done down in Venezuela. It's only September (and he's taken some sick leave) but he's already "nationalized" 401 companies this year. Plus he's withdrawing from the World Bank's dispute settlement forum used to deal with claims by foreign investors.

He's also working to get Venezuelan assets in friendlier hands, transferring billions of dollars in deposits from US and Euro banks to banks in Russia, China, and Brazil (wow, Brazil, nice work to make Chavez associate you with Russia and China and not the "free world").

And of course there's his plan to airlift Venezuela's gold back to Caracas.

The idea is to make Venezuela's financial assets un-freezable.

I feel very sorry for the younger people of Venezuela. But the older ruling elites of the country brought Hurricane Hugo down on themselves and their descendants with their decades of incompetent, corrupt, short-sighted & elitist governance.

Combo Meal! Not the Onion Meets the Grand Game!

This story is tremendous. It's not the Onion, and yet it could be.

Let's go with the Grand Game thing, though.

1. If there is ANY place that should have really big tables, it is White Castle.
2. "I'm not humongous..." Sir, if you weigh 290 lbs and you cannot wedge your giant ass into a table at a fast food restaurant, you are, in fact, humongous.
3. He is outraged because "the cheese was extra!"
4. He is so mad at White Castle that he is boycotting! By which he means... he sends his wife to go get the burgers! Nice boycott.

There's lots more. Enjoy.

(Nod to David Skarbek, who eats like a freakin' girl)

Congo Election Correction

In my earlier post about politics in the Congo, I may have said that there were 32 presidential candidates. That of course is ridiculous; there are only 12! 11 men, 1 woman, and two of the 11 men are the sons of previous dictators, one of which, incumbent Uncle Joe Kabila, is the likely winner.

Here are the 12:

Les candidats à l’élection présidentielle 2011:

Jean Andeka Djamba (ANCC)
Etienne Tshisekedi (UDPS)
François Joseph Nzanga Mobutu (Udemo)
Vital Kamerhe (UNC)
Kengo wa dondo (UFC)
Nicephore Kakese (URDC)
Joseph Kabila (Indépendant)
Oscar Kashala (UREC)
Antipas Mbusa Nyamwisi (RCD-K/ML)
Adam Bombole (Indépendant)
Ngoy Mafuta (Indépendant)
Ismaël Kitenge (MRC-PTF)

Don't call me Shirley!

Unbelievable story out of Malaysia that "authorities" had to rescue an Orang from a provincial zoo at least partly because she'd become a heavy smoker.

Really.

Here's part of the AP story:

Government authorities seized the adult ape named Shirley from a state-run zoo in Malaysia's southern Johor state last week after she and several other animals there were deemed to be living in poor conditions.

Shirley is now being quarantined at another zoo in a neighboring state and is expected to be sent to a Malaysian wildlife center on Borneo island within weeks.

Melaka Zoo Director Ahmad Azhar Mohammed said Shirley is not being provided with any more cigarettes because "smoking is not normal behavior for orangutans."

Ya think?

I know there are serious arguments in favor of having zoos, but stuff like this really makes me question their existence.

I hope that the wildlife center on Borneo is Sepilok. Mrs. Angus and I have visited, and it's an amazing place.

Wrong Day to Go For "Mile High" Club

Story out of Detroit:

Police detained three passengers at Detroit's Metropolitan Airport on Sunday after the crew of the Frontier Airlines flight from Denver reported suspicious activity on board and NORAD officials sent F-16 jets to shadow the flight until it landed safely, the airline and federal officials said.

Flight 623, with 116 passengers on board, landed without incident in Detroit after the crew reported that two people were spending an unusual amount of time in a bathroom, Frontier spokesman Peter Kowalchuck said.

So, fine that two adults were in the bathroom at once. They were just there "an unusual amount of time." What is the USUAL amount of time for two people to be in an airplane bathroom that, frankly, barely contains one Mungowitz?  Who cares?  Why are you bothering these people?  Leave them alone!

And, THREE people were arrested? That bathroom must have looked like one of those clown cars in the circus: "All right come out with....aw, Jeez, pull your pants up. And you, too. Okay...WAIT, another one? Ewwww...."

I sure hope this is not the arrest photo.

Apparently Dilbert agrees with me (and not with my lovely wife)

Well, it's not exactly what I was saying about the future of work, but it's close!

Fixing Social Security: Opposite Day

Had a rather spirited discussion with a friend, with him taking the side that Gov. Perry was out of line calling Soc Sec a "Ponzi scheme." And with me being loudly incredulous that anyone could think Soc Sec is anything OTHER than a Ponzi scheme.

A-Tab is sensible, but confirms the thing is a Ponzi scheme.

Both of the St. Pauls (Samuelson and Krugman), dear to the left, call it a Ponzi scheme.

But, on reflection, I agree with the view here. Soc Sec is not a Ponzi scheme, because it is much, much worse than a Ponzi scheme. Even if you take the Mother Jones view on this (and I rarely quote from Mother Jones, for some reason), it 's pretty clear:

...the real problem with Dalmia's description is the notion that Social Security collects money from new investors and uses it to pay off previous investors. It's easy enough to see why people believe this: it was, basically, the way the program was initially sold. And politicians ever since have found it convenient to continue this fiction. Seniors today are all convinced that the money they paid into the program during their working years was somehow saved up for them and now they're getting it back.

But that's always been a lie. Social Security is actually a much simpler program than that. I'm going to put the rest of this paragraph in bold so you can't possibly miss it. Here's how Social Security works: every month we take in taxes from working people and every month we turn around and distribute those taxes to retirees. That's it. That's how it works, and everyone who actually knows anything about the program knows that's how it works. Taxes come in, benefits go out. (Emphasis in bright blood letters mine, not in original; bold emphasis was in original)

Did you get that? Soc Sec is a lie, a fraud. And that's Mother Jones, well-known branch of Fox News. Not.

Some definitions: A Ponzi scheme
(1) depends on a constantly increasing membership to pay benefits or validate excessive returns to the older member, and
(2) is unsustainable at some point, in the sense that payments exceed revenues by increasing amounts, meaning that new members are needed, and
(3) those new members have to be recruited either through fraud or force, since informed and autonomous new members know that they have little hope of being paid back.

This could be
(A) because the older members get greedy, and take larger and larger amounts out of the system, or
(B) because the number of new members entering the system is not sufficient to pay the benefits already promised.

Some points:
* Mitchell Zuckoff, quoted here, claims “Ponzi schemes are, by definition, fraud.” He may be wrong about other things, too, but he is clearly wrong about this. First of all, Soc Sec is in fact a fraud, as our Mother Jones correspondent ably exegeted. Second, even if people KNOW that the system is unsustainable, the system is Ponzi, because it is an intentionally created bubble. All that is necessary is conditions (1) and (2), NOT fraud. People trade in bubbles long after they know the underlying assets have no real value, as Charles Plott and Vernon Smith have showed. Third, even if the bubble has burst, fraud is not required as long as force is an option. And force is worse than fraud, unless you are a leftist and think you are just forcing other idiots to be free. I have to ask: Does Mr. Zuckoff seriously believe that young people would voluntarily sign up for Soc Sec, if they had an option? Look, fraud means you get screwed unexpectedly. Force means we all tell you young folks you are going to get screwed, and then we screw you, good and hard. At least it's not fraud, right? (Here, again, Mr. Zuckoff asserts Ponzi schemes have to be fraudulent. My claim is that he's wrong; all they have to be is involuntary. Either fraud or choice under duress, which have equal standing as violation of common law contract agreements, are enough to make a scheme Ponzi.)

* And the "It's not a Ponzi, because it can be fixed" argument? It can only be fixed if we kidnap, and then take more money at gunpoint from, "investors." Charles Ponzi's scheme failed because he didn't have tanks. Our President has tanks, and can force new "investors" to pony up. If THAT is your defense of why Soc Sec is not Ponzi, you need to go rethink some basic assumptions about "investement." Being forced to invest at gunpoint is theft. And that's worse than anything Mr. Ponzi could have done. The only reason that Soc Sec is not fraud is that people have no choice about contributing. If it were voluntary, then fraud would be required to get them to sign up. Sure, we can fix this, but only by using force.

* Finally, my friend told me, "Soc Sec is not a Ponzi scheme, because it has served millions of people with income." Dude! Any successful Ponzi scheme, by definition, serves the people who get in early. In fact, most Ponzi schemes serve the first movers much BETTER than Soc Sec has served retirees. The problem with Ponzis is not what happens to the first in, but rather the raping received by the last in. The only reason Soc Sec is working is that Soc Sec REQUIRES young people to become new investors. Again, if Charles Ponzi had been able to recruit by garnishing wages with "payroll taxes," that first Ponzi scheme might still be running along just fine.

Stepping back: I admit that originally, Soc Sec was not a Ponzi scheme, by my definition. But then Congress realized that there was a huge Baby Boom bubble, and created the Trust Fund. And THEN Congress realized that while one could not get reelected by doing the right thing and leaving the Trust Fund alone, one certainly COULD get reelected by looting the Trust Fund now and giving much larger benefits, especially in the Disability and Supplemental categories. (As Coach Duke said, "The pension fund was just sitting there!")

So, when the Baby Boom bulge in retirements happened, Soc Sec became a Ponzi scheme. The benefits were much too large, the Trust Fund was actually debt, not assets, in a period of large deficits. And we don't have nearly enough new people entering the system to keep you fat ass 'Boomers in scones and lattes.

Now, our President, who seems to think every day is "Opposite Day," proposes to solve the Soc Sec problem and the unemployment problem by... by... (I can't say it)... cutting the taxes that finance Soc Sec. Not, mind you, as part of an overall plan with offsetting cuts to make Soc Sec NOT a Ponzi scheme.

Now it will be a Ponzi scheme on stilts, with gold plating.

Except, as SD at Reason notes, this Ponzi scheme will not collapse. Instead, men with guns will find some way to finance it. Deficits are future taxes.

A photo of our plan to fix Soc Sec (it's a metaphor; a "deep" metaphor)

Social Security is WORSE than a Ponzi scheme

Alex T., in a brilliant smackdown, noted that even Paul Samuelson called SS a Ponzi scheme.

But I'm here to say that SS is actually worse than that.

In garden variety Ponzi schemes, if you don't want to put your money in, you don't have to!

You can "opt out" of any private investment scheme that doesn't pass your smell test.

Good luck opting out of SS; it's a Ponzi scheme on steroids where the scammers have guns and judges and jails.

Things I say that exasperate my lovely wife

Caught between globalization and productivity gains, high paying jobs for low skilled American workers are disappearing. The era of mass employment in the USA is coming to an end. The new equilibrium is going to be an employment ratio of well below 50% and a lot more redistribution. This will happen within the next 20 years. In equilibrium, the marginal American will be indifferent between being a "lucky loser" and being at the bottom of the skilled worker distribution.

In Honor of Football Season

Pelsmin shares the baseball - football bit, from George Carlin.



May I point out that in baseball they play six games a week? In football, those pampered candy-asses get so tired with ONE game a week that they have to have a "bye."

There's a WIlliam Tell Joke Here Somewhere

Drunk elk found up in Swedish apple tree.

Yes, really.

Nod to anonyman.

Now It Gets Interesting

At what point do we admit that "green jobs" is just a straight up, out and out scam? A means to plunder the Treasury?

The FBI has already comet to that conclusion, it appears.

(Nod to Anonyman, who is always sunny)

Grand Game: Obama's speech edition

Ok folks the transcript is here, and it's chock full of fun. Get to it!

Here is my absolutely favorite bit of economic illogic:

"Building a world-class transportation system is part of what made us an economic superpower. And now we're going to sit back and watch China build newer airports and faster railroads, at a time when millions of unemployed construction workers could build them right here in America?"

OMG, did you see what he did there? Did debt ceiling budget cuts include laying off professional speechwriters for the President? It's not clear what in the world he's trying to say here but there is no good interpretation.

In an homage to Tosh.0, let's see how many snarky comments I can fit in this blog post.

Mr. President, if China jumped off a bridge, would you jump too?

Mr. President, infrastructure is not a tradeable good.

Mr. President, can our unemployed workers REALLY build China's new airports "right here in America?"

Mr. President, is China really the best comparison country for the US?

Mr. President, do you really think your audience is that dumb?

The Voter is an Ass

Conjuring the Congo

The DRC will have a presidential election this November. After 30 plus years of Mobutu, Laurent Kabila overthrew him and, upon his assassination in 2001, his son Joseph Kabila took over.

Joe is in his 10th year of being president and is the front runner in the current election.

Amazingly, Mobutu's son is also a candidate! His political party has the awesomely oxy-moronic title of "Democratic Union of Mobutuists"! (I am not making this up).

I believe there are 32 total presidential candidates running.

The UN is already decrying pre-election violence in the DRC.

People, this is a country of over 70 million people!

Cheer up America!

I know things are tough right now but you can make it through. Always remember that you survived THIS:

You can lead kids to lunch, but you can't make them eat healthy

This is quite interesting. Two studies say that government subsidies appear to be associated with increased childhood obesity. Of course, one has to be careful of endogeneity, since it is likely that poor kids are more likely to be obese, and poor kids are more likely to receive subsidies. (May I point out that the fact that poverty goes with obesity would have seemed like a bizarre claim just 50 years ago? Things can't be THAT bad if our poor people are fat, right?)

Does the National School Lunch Program Improve Children’s Dietary Outcomes?

Benjamin Campbell et al.
American Journal of Agricultural Economics, July 2011, Pages 1099-1130

Abstract: The National School Lunch Program’s effect on children’s diets has been
extensively studied. Results have tended to be inconclusive regarding the effectiveness of the program. Utilizing more specific treatment groups, we find that participants in the National School Lunch Program do not consume a higher-quality diet at lunch than children choosing not to participate, even though the program is offered — but rather consume a higher quantity of foods while consuming similar amounts at other meals. Furthermore, children attending schools not participating in the National School Lunch Program have dietary outcomes that are not significantly different from program participants.

Child care subsidies and childhood obesity

Chris Herbst & Erdal Tekin
Review of Economics of the Household, September 2011, Pages 349-378

Abstract: In this paper, we study the impact of child care subsidy receipt on low- income children’s weight outcomes in the fall and spring of kindergarten using data from the Early Childhood Longitudinal Study, Kindergarten Cohort. Our results suggest that subsidy receipt is associated with increases in BMI and a greater likelihood of being overweight and obese. Using quantile regression methods, we find substantial variation in subsidy effects across the BMI distribution. Specifically, child care subsidies have no effect on BMI at the lower end of the distribution, inconsistent effects in the middle of the distribution, and large effects at the top of the distribution. Our results point to the use of non-parental child care, particularly center-based services, as the key mechanism through which subsidies influence children’s weight outcomes.

I am going to go out on a limb here, and guess that the answer from P-Kroog is "The program needs to be bigger! Much BIGGER!"

A Surgeons Joke

Five surgeons are talking.

The first says: " I like to see accountants on my operating table, because when you open them up, everything inside is
numbered. "

The second responds: " Yeah, but you should try electricians. Everything inside of them is color coded. "

The third says: " No, I really think librarians are the best, everything inside of them is in alphabetical order. "

The fourth chimes in: " You know, I like construction workers.... those guys always understand when you have a few parts left over. "

But, the fifth shut them all up when he observed: " You're all wrong. Politicians are the easiest to operate on. There's no guts, no heart, no balls, no brains, and no spine, -- and the head and the ass are interchangeable."

Separated at Birth: Tennis edition

Alexandr Dolgopolov & Martina Hingis:

'


(clic the pics for more eerily similarity)

'Nuff said

Headline of the Month

"Nearly 40% of Europeans Suffer Mental Illness"

Lets see, JC Trichet, check; DSK, check; Sarkozy, check; Silvio Berlusconi, check; Joseph Ratzinger, check......

Hmmm, maybe that number is a bit low?

Interestingly, the percentage was only 27% in 2005 (it's 38% now).

That is an excellent rate of return in these troubled financial times, so I feel fully justified in recommending that our readers go LONG IN EUROPEAN MENTAL ILLNESS.

Mea Culpa

FLG has a valid point here.

You can't have just any shirt-tail guy off the street thinking they can do a hit-and-run post on bizarre sex practices.

Sorry, FLG; respect should have been paid.

Infrastructure

The problem is not that we spend too little on infrastructure. The problem is that our very large spending on infrastructure gets diverted to pet projects of members of Congress.

Why anyone would think that government wants to do what is right for the average citizen utterly mystifies me.

Sure, a Senator is no more greedy than a financial services CEO. Folks, the problem is that a Senator is NO LESS greedy than a financial services CEO. And the Senator faces none of the checks on behavior. He gets to bribe voters in his state with money taken from people in other states. It's a foolproof system.

And you are the fool. Here's proof, from David Leonhardt.

Munger Road

This is odd.

First, it's odd that there is a movie called, "Munger Road." But there is. Here's the trailer (clearly for folks who live in a trailer park, I might add).

Second, given that I google myself 8-10 times per hour, it's remarkable that I didn't know. It fell to KPC pal (and G*d figure!) Dan Drezner to point out the existence of this offense to reason and cinema. Still, thanks to DD.

UPDATE: Apparently, an actual old fake legend, about a school bus in Illinois. There are even a bunch of YouTube videos, of such high quality as this one, with the car getting "pushed" off the railroad track, uphill.

What's Your PQ?

It turns out MY "pq" is 29, very similar to that of Ron Paul. Doesn't mean all our issue positions are the same, but I would guess that in a 2-dimensional space our issue positions ARE pretty much the same.

Our guy* Tim Groseclose has an interesting web site for his new book. And you can find out what YOUR pq is, though it's a 40 question survey.

*Angus actually owns him. He bought an option, back when it was cheap. At least, he wishes he had.

In Italy, Laziness is NOT a Problem

Does anybody really know what satire is?; does anybody really care?

Abstract: We investigate a phenomenon which we have experienced as common when dealing with an assortment of Italian public and private institutions: people promise to exchange high quality goods and services (H), but then something goes wrong and the quality delivered is lower than promised (L). While this is perceived as ‘cheating’ by outsiders, insiders seem not only to adapt but to rely on this outcome. They do not resent low quality exchanges, in fact they seem to resent high quality ones, and are inclined to ostracise and avoid dealing with agents who deliver high quality. This equilibrium violates the standard preference ranking associated to the prisoner’s dilemma and similar games, whereby self-interested rational agents prefer to dish out low quality in exchange for high quality. While equally ‘lazy’, agents in our L-worlds are nonetheless oddly ‘pro-social’: to the advantage of maximizing their raw self-interest, they prefer to receive low quality provided that they too can in exchange deliver low quality without embarrassment. They develop a set of oblique social norms to sustain their preferred equilibrium when threatened by intrusions of high quality. We argue that cooperation is not always for the better: high quality collective outcomes are not only endangered by self-interested individual defectors, but by ‘cartels’ of mutually satisfied mediocrities.

Either way, fabulous. Really a fine piece of social science. Not least because the phrase "cartels of mutually satisfied mediocrities" sounds a lot like a faculty meeting in the US. Not at Duke, of course. No, really.

(Nod to the Ward Boss, who is never lazy)

Grand Game: So Many Ways

I wish we had never played the Grand Game, and were never to play it again.

Just so we could take it out of its wrapping paper, still crinkly wrapping paper, and play it just one perfect time for this story.

My humble thanks to the lovely and talented @EmilySkarbek for the link.

There is a LOT to love in this story, people. Go!

Do Women Earn Less Than Men?

Well, women get paid less than men. The "earn" thing is considerably more complicated.

KPC uper-pal Steve Horwitz, with a fresh coat of Rain-X on his pate, explains.

They Knew This Was Going to Happen

This is just inexplicable.

“Is fortunetelling a crime? Of course, fortunetelling is not a crime,” prosecutor Laurence Bardfeld said in court recently. But promising to return large sums of money, and failing to do so, constitutes fraud, Bardfeld argued.

Yes, I think the prosecutor is right about that.

And, this: Bestselling romance novelist Jude Deveraux has been identified as one of the Marks’ clients, and she alone paid the family nearly $20 million, according to court documents. Deveraux declined to comment to The Miami Herald, citing the pending case, but in the acknowledgements section of her book Scarlet Nights, in which several characters were based on the Markses, she specifically praised retired Fort Lauderdale Police economics crimes detective Charles Stack, calling him a “true hero.”

Well, Mr. Stack may be a true hero. But Ms. Deveraux is a true moron. $20 million? I want to announce my own psychic services: Angus and I will make up a bunch of stupid sh** about the future (we are ECONOMISTS! IT'S EASY for us!), and we will do it for just $5 million. We'll call the service "Kids Prefer Cash."

Please leave a comment with your contact information. Clerks are on call.

(Nod to the Blonde; I think SHE knew this was going to happen. But then she's psychotic.)

Entrepreneurship, Change, and Extreme Events

A recent empirical study. Don't get me wrong, empirical studies are good. Here is the summary (courtesy of new papers superstar Kevin Lewis):

Entrepreneurship: The role of extreme events

Tilman Brück, Fernanda Llussá & José Tavares, European Journal of Political Economy, forthcoming

Abstract: We use aggregate country data as well as individual surveys to uncover, for
the first time, the effect of extreme events such as natural disasters and terrorist attacks on entrepreneurial activity. We find that natural disasters and terrorist attacks influence individual perceptions of the rewards to entrepreneurship and, more surprisingly, extreme events affect entrepreneurship rates positively in a robust and significant way.

"More surprisingly"? Really? Consider what Hayek said about information and change:

If it is fashionable today to minimize the importance of the knowledge of the particular circumstances of time and place, this is closely connected with the smaller importance which is now attached to change as such. Indeed, there are few points on which the assumptions made (usually only implicitly) by the "planners" differ from those of their opponents as much as with regard to the significance and frequency of changes which will make substantial alterations of production plans necessary. Of course, if detailed economic plans could be laid down for fairly long periods in advance and then closely adhered to, so that no further economic decisions of importance would be required, the task of drawing up a comprehensive plan governing all economic activity would be much less formidable.

It is, perhaps, worth stressing that economic problems arise always and only in consequence of change. So long as things continue as before, or at least as they were expected to, there arise no new problems requiring a decision, no need to form a new plan. The belief that changes, or at least day-to-day adjustments, have become less important in modern times implies the contention that economic problems also have become less important. This belief in the decreasing importance of change is, for that reason, usually held by the same people who argue that the importance of economic considerations has been driven into the background by the growing importance of technological knowledge.

"Extreme events," by definition (I think) are unexpected changes. Of COURSE entrepenership increases in the aftermath of extreme events. The "more surprising" bit can only be explained, as Hayek explained it, by the nonsensical insistence that technological knowledge and not entrepreneurship is the driving force of capitalist economies.

Of course, it would be possible to document that the relationship between large unexpected shocks and entrepreneurship is direct and predictable, from many works by Kirzner, or Mises, and others. But Hayek's paper was in the A.E.R. Don't you people read? I recognize that it is easier to claim your theory is novel if you constantly pretend that all previous work doesn't exist. But this is egregious.

scenes from a marriage

Time to re-think college football

College football is a mess, with Ohio State and The U providing the latest "scandals" and with the pattern of conference jumping we've seen lately.

I think it's time to split big time football from academics. Dissolve the NCAA. Pay the players. Don't even force them to be students if they don't want to be students. Treat college football like an age 21 and under pro league. The schools rent out their facilities, names, supporters, etc. and the football program is separate from the school itself, just like the food service program.

There's 120 schools in the FBS. Split them into 4 geographical regions, everyone plays a 16 game season and then have a 16 team playoff.

I love David Boren. He's done amazing things for OU and my own family, but university presidents shouldn't have to be involved like this in something as inconsequential to the mission of a university as football:

“I don’t think OU is going to be a wallflower when all is said and done. I don’t know how long it will be before clarity comes to us. My experience is that on these kinds of things, it might be a matter of 72 hours, it might be a matter of two weeks. I don’t really think this is something that is going to linger on beyond two or three weeks at the outside. It’s been consuming my life the last few days, but it’s a fascinating challenge and we’re just in the search for what’s best for the university.”

--David Boren,

And then there's this:

Boren confirmed that he flew to Missouri, whose chancellor is the chairman of the Big 12 board of directors, and then to College Station last week to try to prevent the Aggies from leaving.

Obama Wins in 2012?

I have said several times Obama will win in 2012. (After I said in March 2008 that he was "unelectable," so ignore whatever I say).

But now a man with an actual MODEL (sort of) has called it for BHO.

Meet Prof. Lichtman...

(Nod to Anonyman)

A Strategy for the Left?

Is this going to be the strategy for Team Obama for 2012?

I am no fan of the talking points of either side. And there is some merit to the charge that some Republicans depend on the religious right for support.

But, "the economy sucks so let's talk about scary religious zealots!" is pretty darned cynical.

(Nod to the Blonde)

Markets in everything: earthmover edition

In the shadow of the Vegas strip, you can pay $400, get 10 minutes of instruction, and then get turned loose to operate earth-moving equipment in a vacant lot.

Really.

The company is called Dig This. Their website is here. The AP story is here. Sharon Zukin could not be reached for comment.

Redneck Trifecta

NASCAR, a racoon, and runnin' round nekkid. The article (there's a video). Another story.
The mug shot:
See, the problem is that among the folks I grew up with, that mugshot and this story would be extremely effective for on-line dating sites. Ocoee women would LOVE this guy. The tat? The quizzical look? The (by Ocoee standards) well-groomed hair? Two words: Chick. Magnet. Plus, he has a racoon.

(Seriously, is that a great mug shot or what? Calling him "unrepentant" doesn't really capture it fully) (Nod to the Blonde)

Not the Onion? (Labor Day/ Sex with Stuff Edition)

Which of the following (if any) are from the Onion?

1. Man has sex with inflatable pool raft.

2. Beach bonking in Blackpool: Your government keeps statistics!

3. Guinness BOWR "world's largest penis" man: It's no picnic.

4. Labor Day party: American caught having sex with picnic table.

5. Man arrested for having sex with street signs; now has to "STOP"

6. I want to ride my bicycle, I want to ride my bike.

7. Man humps steel park bench (the kind with holes in it). And there's a video (so this is NOT the Onion!). You may not want to listen; the guy is not having much fun. "OOOOOOOH! OOOOOOOOOOOOOOH!"


Some details. And a source post.

(And a nod to Dutch Boy)

China Monopolizes the Sun!

Suppose you had a pretty big yard, 2 acres. And your neighbor comes over one day and says, "I have a big lawn mower, a huge expensive one. I just like having a big mower, too big for my own purposes. It really costs a lot, but my dad left me an inheritance and I like the prestige of having the biggest mower in the state. How about if I mow your lawn for my marginal cost, plus a little bit? Say, $35?"

You figure that you would have to buy a mower, plus spend time mowing, plus upkeep. It would cost you at least $100 a week to do the same thing. So, you say, "Sure!"

Can someone explain to me why we are poopin' in our panties about China doing essentially the same thing with solar power technology? And why U.S. government officials are claiming that the answer is that WE, the US, HAVE TO BUY A REALLY BIG MOWER, TOO? For some reason, gigantic world-wide over-capacity, subsidized by tax dollars, is the answer for Obamanoids like this guy:

“There is no question that renewable energy companies in the United States feel pressure from China,” said David B. Sandalow, the assistant secretary for policy and international affairs at the United States Energy Department. “Many of them say it is cheap capital, not cheap labor, that gives Chinese companies the main competitive advantage.”

Is China behaving badly? Yep. And if I were a Chinese taxpayer, I'd be pissed. But why is the US upset? There is no way that the resulting price of solar technology and equipment is going to be more expensive for us. UNLESS, of course, we try to enter the race and buy a really big lawn mower, too.

The "worry" is that China will achieve world dominance and then raise prices. Idiots used to make the same argument about Wal-Mart: once they drive out the competition, they will raise prices. Two problems with that argument. 1. It's not true, empirically. It just never happens. 2. The only possible truth to the argument is with respect to the "correct" price, which in the mind of the subsidizers is the price in the US if we spent billions in subsidies. Friends, subsidies are a COST, not a benefit.

Let the Chinese mow our solar lawn, if they want to. (Angus has tried to make this point before, as have I. Angus may have said it best here. And we'll probably get chances to say it again.)

(Nod to Anonyman, who drives a stinkin' hybrid)

(UPDATE: Meant to say... title of post comes from our guy Alex)

Solar Fail

A little story, in pictures. First, triumphalism of our gov't: thousands of jobs.


The "deal" came under scrutiny, because it appeared that our gubmint had given truly huge amounts of public money without going through the usual procedures.

Most recently, the company went bankruptski. Total collapse.

The delicious part is this: Solyndra is whining that the Chinese subsidize THEIR solar industry. Solyndra was a pure scam, only a front for taking tax dollars. All of their revenues and investment money were public subsidy. And then they have the gall to say that the reason this oinker of a company could not compete is that they needed to be subsidized even more. Some background.

Their "idea"? I promised pictures. Here it was. It didn't work, even with huge public subsidies.

(Nod to J-Don, who knows things)

Ho Tax

Tax meter for street walkers, or street standers, in Germany.

As Anonyman said, "the Germans are so organized."

Plus: consummation areas. Nice.

Madeline the prostitute explains how it all works.

NSFW: Prison Camp Economics

I am teaching Radford's famous "Economics of a POW Camp" article tomorrow. Wondered if there were any good videos about cigarette currencies.

Found this: very very very NSFW. Or class. But PERFECT for KPC!


Also: did find this video about candy as currency, because cigs are contraband.

Which reminds me: that most excellent Skarbek, with whom I am well pleased, just placed this paper in the APSR. yes, forthcoming, beeyotches! Way to go, Skarbek!

Bad-ass Bunnies

Story is here.

Tuesday's Child is Full of Links

Nick T. on why indie music is a conservative genre

Tennessee I: Rest in Peace

Tennessee II: Holy Smoking Bull Semen, Batman!

Wow. Will gives an incredibly useful assessment of Texas educational policy and results.

Lemonade Stand Freedom Day!

(Nod to Anonyman; I hope he doesn't get confused between the lemonade and what got spilled on that Tennessee highway...)

"I Do Not LIKE It, Sam I Am, I Do Not Like Las Vegas"-Ma'am

I thought I was going to agree with this. After all, I don't like Las Vegas. I really, really, really don't like Las Vegas.

But this lefto-fascist doesn't think it should be allowed to exist. Because she knows, given her privileged status as a sociologist, what fun really is.


Many people like Las Vegas. This prof and I do NOT like Las Vegas. Why am I unthreatened by this, when she wants to call in tanks? Also, one does have to like the final comparison, where our teacher compares LV to the worst thing in the world: Suburbia!

(Nod to Tommy the Brit)

Sentiments entirely appropriate for these troubled times

"My thing is, I'm never going to cheat, "I'm never going to be unsportsmanlike. I'm gonna beat you — straight, fair, in your face. I don't have to go around the block. I don't have to, like, go underhand. I'm gonna beat you, I'm gonna beat you. That's it, and there's no way around it."

--Serena Williams

Congress CAN Do One Thing

It can suck, scare people, prevent investment, and reduce the value of existing investments. Of course, IF that were true, you could trade on that information.

And perhaps you can. Why do stocks do better when Congress is OUT of session? It could be that the risk is lower, so lower variance (though in that case options should do better when Congress is in session). A more likely explanation is that Congress sees its job as ordering people around and claiming credit for steering the economy. Iceberg! Dead ahead!

A nod to Prof. Newmark, for pointing this out. I like his "exercise for the reader."

Fear Without Function

Sex Offender Registries: Fear without Function?

Amanda Agan, Journal of Law and Economics, February 2011, Pages 207-239

Abstract: I use three separate data sets and designs to determine whether sex offender registries are effective. First, I use state-level panel data to determine whether sex offender registries and public access to them decrease the rate of rape and other sexual abuse. Second, I use a data set that contains information on the subsequent arrests of sex offenders released from prison in 1994 in 15 states to determine whether registries reduce the recidivism rate of offenders required to register compared with the recidivism of those who are not. Finally, I combine data on locations of crimes in Washington, D.C., with data on locations of registered sex offenders to determine whether knowing the locations of sex offenders in a region helps predict the locations of sexual abuse. The results from all three data sets do not support the hypothesis that sex offender registries are effective tools for increasing public safety.

(A-Tab has some details over at MR)

(nod to Kevin Lewis)

You Play, We Pay

An article about how hard the folks out on the sandbar...er ... barrier islands of NC have it.

Best quote: "this is the price you pay for living in paradise." Well, no. This is the price *WE* pay so you can live on a freakin' sandbar.

Look, you loonies are welcome to live out there. But the state subsidized insurance for decades, and pays for new roads, and rebuilds broken roads. That money comes from people who have to pay to visit paradise.

So you can live there at public expense.

I have no problem with people living out there. If they like it, good for them. And emergency services, in cases where the emergency is unpredictable? Okay by me.

But living on a sandbar that never gets higher than 8 feet, in an area where storm surge from a hurricane hits 12 feet or more at least once a decade? Why do I have to pay for that?

(Nod to the Blonde)

The Weather: These Folks DID Something About It

Civil conflicts are associated with the global climate, Solomon Hsiang, Kyle Meng & Mark Cane, Nature, 25 August 2011, Pages 438–441

Abstract: It has been proposed that changes in global climate have been responsible for episodes of widespread violence and even the collapse of civilizations. Yet previous studies have not shown that violence can be attributed to the global climate, only that random weather events might be correlated with conflict in some cases. Here we directly associate planetary- scale climate changes with global patterns of civil conflict by examining the dominant interannual mode of the modern climate, the El Niño/Southern Oscillation (ENSO). Historians have argued that ENSO may have driven global patterns of civil conflict in the distant past, a hypothesis that we extend to the modern era and test quantitatively. Using data from 1950 to 2004, we show that the probability of new civil conflicts arising throughout the tropics doubles during El Niño years relative to La Niña years. This result, which indicates that ENSO may have had a role in 21% of all civil conflicts since 1950, is the first demonstration that the stability of modern societies relates strongly to the global climate.

(Nod to Kevin Lewis)

All Hail Norm McDonald

I have only watched one episode of the current season of High Stakes Poker, but new host Norm McDonald was brilliant.

Here was my favorite bit, as verbatim as I can make it:

Let me translate that into poker talk. Barry is saying that Doyle sucked out on cancer. I wasn't there at the time but I believe it went runner-runner.

Just thinking about cancer having a bad beat story to tell made me laugh pretty hard!

Tying one's self to the mast with silly string

Richard Thaler, in today's NY Times has words of wisdom on governments' pervasive inability to commit to painful future courses of action with balanced budget amendments or fiscal rules.

Sadly, he fails to stick the landing:

The bottom line is that in matters of governmental self-control there is no real substitute for willpower. If we want to balance the budget over time we are going to have to elect adults to Congress who are prepared to invest now in our country’s future and then, when the economy picks up, take the necessary steps to get spending in line with revenue. The question is whether politicians who act like adults can win elections.

Yes, that is surely the solution to the inability to bind future politicians and the serious problem that optimal policies are often time inconsistent: just find the right people!

Could we not at least try to think of institutional changes that might help the situation instead of calling for politicians from another planet to come and save us?

How about longer terms of office but no re-election? say 6 years in the House, 8 years for President, 10 years for Senate?

Other ideas?

Krugman's reality problem

Paul writes that Rick Perry and inflation hawks on the FOMC are stopping Ben Bernanke from implementing a Fed policy that would be effective in increasing employment and growth.

He argues that for these reasons Bernanke is not acting on the advice he gave to Japan in 2000 about unorthodox policies to combat their situation which has parallels with ours.

Monetary economics superstar Michael Woodford makes a similar, though more nuanced, argument as well.

In both cases, the policy they want Bernanke to follow is to announce that the Fed will tolerate/encourage/create and sustain higher inflation than the Fed actually likes for some number of years in the future.

Here's Krugman:

the only way for monetary policy to be effective in a liquidity trap was via expectations: the central bank had to convince the public that it would sustain monetary expansion even after the trap was over.

Yes, and if Grandma had wheels, she'd be a Harley.

People, the Fed has no commitment mechanism. For their policies to be credible, they must be time-consistent, meaning that they must be in the Fed's best interest AT THE TIME THEY HAPPEN (in each period).

The Fed simply cannot announce a time-inconsistent policy path and get the public to base their expectations on this non-credible announcement.

I am not a big Fed fan, but let's not excoriate them for failing to do the impossible.

No HCR, No Jobs

I win drinks in bars sometimes by betting on the answers to two questions. First, what nation in the world "lost" the most jobs between 1990 and 2005? Second, what nation in the world leads in the value of manufacturing products? (Yes, I have fussed about this before, it's true)

The answers are the U.S. and China, but not in that order. China lost by far the most manufacturing jobs between 1990 and 2005, and the U.S. still leads the next largest manufacturing economy by a full 25%.

Think about it: in 1990, a "factory" in China was a large shed with 1,200 workers with sewing macihines, sitting beside a pile of patterns, cloth, and scraps. Today that factory is 100 times as productive, but it only has 30 employees tending modern and lightning fast machines.

The same thing has happened in the U.S., in industry after industry. As we increased our output, we "lost" jobs to increased productivity. We didn't ship those jobs to China; China lost even more jobs than we did.

The difference is that China more than replaced its lost jobs with new jobs, in new industries. Until recently, the U.S. has always been able to do that, too. What has changed?

The problem is both obvious and hard to see: it's health care costs. The U.S. has produced quite a few new service sector jobs, jobs at the lower end of the pay scale, jobs that don't usually come with health benefits.

But those "good" jobs, the ones that President is looking for? Health care costs have driven a wedge between what employers pay and what they get in terms of productivity. Wages for workers in many industries has been flat, or nearly flat, in real terms since 1990. But total compensation, especially health care costs on the best jobs, has increased at a rate of more than 3% per year on average. (Census Report in 2008)

Employers paying more, workers seeing no increase in take-home pay: a constantly increasing wedge being driven into job growth. More than all of our productivity growth has been sucked into the voracious maw of health care costs. Until we break the connection between jobs and health care, there is no way for the U.S. to begin to recover job growth.

Unfortunately, the fiasco of HCR in 2009 made this problem worse, not better. Our HCR law created a complex, expensive system with no cost controls. And since insurance cannot cost less than the care it covers, this implicit but very real tax on job creation is hamstringing the recovery.

IPaidABrive

If you paid a bribe.... did you pay too much?

I hate it when that happens.

Pretty interesting "corruption quotient" quiz. Fascinating, in fact. It turns out I am a...

Buffalo! Your corruption quotient is down in the dump. Corruption is such an important part of your daily life that you see no difference between corruption and honesty. In our opinion you need to take a step back and review your take on corruption. In a corrupt instance, your philosophy will definitely have you rolling in the muck. You are a BUFFALO

Thanks to Chateau, for the link.

Balancing Budget Should Be Progressive Priority

Not all progs are goofy.

My man Don Taylor makes considerable sense, in fact, in his new book.

.

Oh noes, I'm obsolete!

Apparently Peter Theil & Moore's law are going to kill the species professorus tenuris!

At least according to James Miller of Smith.

Theil famously paid 20 kids $100,000 to not go to college. Not sure how big of a dent that will put in demand, even if he spend $100,000,000 every year to keep 1,000 kids out of our clutches, but Miller is worried.

On the supply side, Moore's law means that "20 years from now computers will likely be around a million times more powerful than they are today".

Apparently online education is "Halo" and I am "Pong".

Interestingly, Miller's article doesn't even mention what I think are the biggest real threats to my species; the proliferation of adjunt/non-tenure track/low paying positions and the explosion of high paying administrative positions.

KPC pal and uber-blogger Mark Perry is excellent on these points.

Headline of the day

"Greek police smash violent doughnut ring"

Well done, lads, I'm pretty sure that in Britain the doughnuts would have smashed the police.

Corporate [ TAXES ] are [ PAID BY ] People

Not sure why the goofy lefties are so gleeful about Romney's "corporations are people" statement (gaffe, they would say).

Here is a NOT goofy lefty, my PhD student Tom Schaller, going ballistic, even planetary orbital, over Romney. Tom is a smart guy. But like most people on the left, almost entirely innocent of economic knowledge. I submit that is the only reason they COULD be on the left, since an understanding of basic economics moves one over to the center right position, almost by definition.

Good lord. Let's do this. Corporations are owned by stockholders. Corporations don't pay taxes, stockholders pay taxes. They pay taxes on income, and they also pay an implicit tax in the form of reduced stock prices when gov't taxes corporate income separately. (Consumers may also pay corporate taxes, if the taxes are on inputs, raise prices of production, etc. I submit, without further discussion, that consumers are people).

Every intro econ book, even Samuelson, noted that the corporate income tax is "double taxation," and therefore inefficient. It restricts investment and reduces employment. Better to have a lower corporate income tax, and much more progressive income tax system.

The US has corporate income tax rates that are 5-10% higher than almost any other country we compete with. If you add fed and state CIT, our rates are 50% or higher; Germany is 30%; France is 33%.

Corporations can move around; stockholders won't move around, at least not as much.

So, Romney meant, "Corporate taxes are paid by people, my friend." And it was absolutely clear that that is what he meant. People misspeak in the heat of the moment. IT. WAS. CLEAR.

Look, I am not a Romney fan. He's an unprincipled gas bag. But this whole "corporations are people" kerfuffle really shows why our center left folks cannot understand even basic economics. The Obama admin, and as far as I can tell the entire Washington press, thinks corporations are just cows to be milked. Instead, they are geese, laying golden eggs. BUT GEESE CAN FLY. Why are "jobs" leaving the U.S.? Because our corporate tax rates are too high, and our regulatory policies too stupid.

And, in any case, corporate taxes are paid by people.

Stupid Economist tricks

Was reading the Economist, the Aug. 13-19 issue and found two very jarring and wrong statements.

On page 71 in the article "Poor dollar standard":

"The 66 members of the dollar block have a collective GDP of over 9 trillion...the list includes...rebels such as Venezuela, which expresses disdain for American imperialism even as it surrenders its monetary sovereignty to America's central bank".

Wow. That is amazingly incorrect.

According to page 89 of the same issue, Venezuela's inflation rate is around 27% while the America's is under 3%. It's pretty clear that Hugo, for all his faults, hasn't "surrendered" his inalienable right to have an irresponsible national monetary policy.

On page 70 in the "Buttonwood" column:

"The Bretton Woods system had strict capital controls, designed to protect the exchange-rate peg. But these became unnecessary in an era of floating rates."

This is somewhere between naive and wrong. First, the written articles of the IMF from Bretton Woods, mandated full currency convertiblity for trade purposes (which wasn't actually achieved until the early 1960s), but allowed individual countries to decide whether or not to have capital controls. Controls were not part of the system requirements. Further, rather than the end of the Bretton Woods era causing the decline of capital controls, as the article claims, the decline of the effectiveness of controls DURING the Bretton Woods era helped to bring about the demise of the system.

Buttonwood should seriously consider reading Barry Eichengreen's classic "Globalizing Capital".

Economist FAIL.