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![[info]](http://l-stat.livejournal.com/img/syndicated.gif) daviddfriedman | |
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http://daviddfriedman.blogspot.com/2009/12/entrepreneurial-proposal.html Many museums, such as the Metropolitan Museum in New York, sell replicas of some of the historical jewelery in their collection. Typically the quality of the replica is significantly lower than the quality of the original—cast when the original was constructed, sometimes using glass instead of the original gemstones. Typically the replicas are expensive.
For quite a long time, I have been seeing imported jewelery, usually in silver, coming from places such as Bali and India, with a quality of execution comparable to that in historical pieces—precise filigree, some of it possibly done by the fusion/colloidal hard soldering technique developed in antiquity to do fine filigree and granulation without having the details blurred by solder. Such jewelery is, materials aside, better than the museum replicas—and much less expensive.
This suggests an interesting possibility for an entrepreneur with an interest in historical jewelery and suitable contacts somewhere in the third world. Put together, and web, a collection of pictures of pieces of historical jewelery. Locate craftsmen willing and able to make copies of those pieces. Offer to make, for online customers, any piece in the collection, at a suitable price. For a somewhat higher price, guarantee never to make another copy of the same piece.
This particular example occurred to me because I happen to be interested in historical jewelery. But there must be many other market niches of the same sort, categories of goods for which the combination of online marketing and hand-craft technology would make it possible for customers to get unique items of special interest to them, while providing profitable work for craftsmen in low income parts of the world.
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daviddfriedman | |
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http://daviddfriedman.blogspot.com/2009/12/more-fun-with-jewish-law.html I've been reading Maimonides and came across two things that I found interesting.
Part I
Suppose you kill someone who is dying of a lethal disease. Maimonides concludes that that isn't really murder, since he would have died anyway—while pointing out that you have to be really sure he was dying of a lethal disease. Now suppose someone who is dying of a lethal disease kills someone else. If, being a helpful sort, he commits the crime in the presence of the court, he has committed murder and can be convicted of doing so. If, however, he only commits the murder in the presence of witnesses, there is a problem. Witnesses, in this case or others, might lie. In other cases, one thing discouraging them from perjury is that if it is discovered that their false testimony led to the execution of an innocent defendant, they will be found guilty of murder and themselves executed. But if their testimony leads to the execution of an innocent defendant who is himself dying of a lethal disease, they won't be executed, because killing someone who is dying of a lethal disease isn't murder. Since the witnesses are not at risk of execution for perjury, they might commit it, so their testimony can not be trusted—cannot be taken as sufficient evidence to convict someone of murder. So if someone who is himself dying of a lethal disease commits murder, and doesn't do it in the presence of the court, he cannot be convicted. There is a certain beautiful logic to this very screwy result. Part II
In Maimonides' discussion of what we would call tort law, he considers a number of borderline cases—cases where it is not clear whether the tortfeasor owes the victim a damage payment equal to half the damage or a quarter of the damage done. His conclusion in such cases is that the court can only award the plaintiff quarter damages. If, however, the plaintiff has seized property of the defendant amounting to half damages, the court will not make him give it back. Part of what is going on here seems to be a rule holding that the court will not transfer property unless it has good reason to do so. It can't award half damages, because it isn't sure that more than quarter damages are owed. But it can't make the plaintiff who has acted on his own to collect half damages give part of the money back, because it isn't sure that half damages aren't owed. A different way of looking at this is that it represents a hybrid of a conventional legal system, with action by the state or analogous authorities, and a feud system, in which parties act on their own, within some set or explicit or implicit rules, to enforce their rights. I get the same impression looking at the legal rules applied to killing. Under some circumstances, a killer cannot be convicted and punished by the court. But the "avenger of blood," the kinsman of the victim who, in a feud system, would be expected to avenge the killing, can kill the killer with impunity. His right to do so is complicated by various rules, in particular the existence of cities of refuge; once the killer gets to one of those he is in theory safe. I should probably add that Maimonides is writing at a time when there are no cities of refuge and have been none for a thousand years or so. Substantial parts of his legal code describe what the rules were back when the kingdom of Israel was a going concern and the Temple still standing. One possible explanation is that he believed that that situation was going to be reestablished in the not too distant future—so legal scholars ought to be prepared.
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c4ss_feed | |
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http://c4ss.org/content/1520 http://c4ss.org/?p=1520 Even if you concede some value to electoral politics and lobbying, the best way to maximize bang for the buck in such efforts is simply to capitalize on the potential of network culture: that is, put maximum effort into just getting the information out there, giving the government lots and lots of negative publicity, and then “letting a thousand flowers bloom” when it comes to efforts to leverage it into political action. If you do that, the political pressure itself will be organized by many different individuals and groups operating independently, spurred by their own outrage, without even sharing any common antistatist ideology.
This is the same kind of stigmergic effort I wrote about in the previous two columns. In the case of any particular state abuse of power or intervention into the economy, for every libertarian who opposes them on principled non-interventionist grounds there will be ten or a hundred people who oppose them on grounds of fairness or personal interest that are completely independent of the nonaggression principle as such. Millions of people oppose police rioting and lawlessness, or the grossly unjust digital copyright regime, without being libertarians in any consistent philosophical sense. If libertarians simply expose the nature of state action and its unjust particular effects, it will be leveraged into action by people in numbers many times larger than those of movement libertarians.
The state and the large corporations are a bunch of cows floundering around in the Amazon. Just get the information out there, and the individual toothy little critters in the school of piranha, acting independently, will take care of the skeletonizing on their own.
A good example is what Radley Balko does every day, just through his own efforts at exposing the cockroaches of law enforcement to the kitchen light, or that CNN series about gross civil forfeiture abuses in that town in Texas. When Woodward and Bernstein uncovered Watergate, they didn’t start trying to organize a political movement to capitalize on it. They just published the info and a firestorm resulted.
At the same time, we should engage in general efforts to change the terms of debate, to push the center in a libertarian direction, and to bring “radical” and “extreme” libertarian ideas into the realm of respectable discourse. One way to do this is to propagate the same memes, over and over again, in reference to a wide array of specific cases. The general “Baptists vs. Bootleggers” meme, especially, is worth propagating far and wide. This meme was the thesis of Gabriel Kolko’s “The Triumph of Conservatism,” in which he argued that (despite all the “progressive” rhetoric used to sell them), economic regulations have generally been created to protect the regulated industries. This theme needs to be driven home, hard and repeatedly, in libertarian commentary on regulatory legislation. The goal is for increasing shares of the public to internalize the general lesson, by sleeper effect, until more and more people automatically greet “progressive” proposals by cynically wondering who the Bootleggers are in this particular case.
Balko’s work at The Agitator, simply exposing the truth about the mechanics of the police state consistently on a daily basis, has probably done more to increase public skepticism about the drug war and law enforcement than a thousand libertarian pot decriminalization petitions. And the kind of reporting TechDirt and BoingBoing do on the standard abuses of the DMCA will eventually, I believe, have a similar effect on public consciousness in regard to IP law and its contribution to the exploitative corporate economic environment. Shifting public consciousness to the point that the downloaders are seen as “good guys,” and the people sending out DMCA letters are the “bad guys,” will result in a revolutionary transformation of what is and is not feasible for the state capitalists.
The only real way to change the institutional environment of politics is to change the culture to the point that there are new limits to the kind of shit the state can get away with.
Such cultural changes are the reason that most states renamed their military establishments as ministries or departments of “defense,” and international aggressors shifted from framing their actions in straightforward and unapologetic Lebensraum terms (like the 18th century dynastic states and the 19th century imperialists) to “self-defense” against some “foreign threat” manufactured for mass consumption. They’re the reason any politician publicly recorded saying “nigger” might as well hang up his hat, and the reason the CIA bothers to hide its overseas torture facilities.
They’re the reason Hitler felt he had to make even a minimal effort to manufacture a “Polish threat” to Danzig via false flag operations, and the U.S. war propagandists had to come up with lies about Kuwaiti baby incubators and mobile biological warfare labs in the previous two Iraq wars.
It’s true that it typically hasn’t taken much of an effort to manufacture enough “evidence” to overcome the low public threshold of doubt, in the past. But thanks to network culture, the cost of manufacturing consent is rising at an astronomical rate.
Just compare the significance of the Iraq war opposition from 2002 on, and the speed of its emergence, with those of the parallel antiwar movement in 1990-91. The communications system is no longer the one described by Edward Herman, with the state and its corporate media allies controlling a handful of expensive centralized hubs and talking to us via one-way broadcast links. We can all talk directly to each other now, and virally circulate evidence that calls the state’s propaganda into doubt. For an outlay of well under $1000, you can do what only the White House Press Secretary or a CBS news anchor could do forty years ago.
Since Woodrow Wilson’s suppression of the working class press and the rise of corporate “professional” journalism ninety years ago, consensus reality has depended on the cost of owning a printing press, and the fact that the people (and governments) rich enough to afford them had more interests in common than not. This state of affairs is now coming to an end. The forces of freedom will be able to contest the corporate state’s domination over public consciousness, for the first time in many decades, on even terms.
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libertyandpower | |
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http://hnn.us/blogs/entries/121178.html Laurent Belsie in the Christian Science Monitor asks "How much will the troop escalation in Afghanistan cost you?"
President Obama said Tuesday night it would cost $30 billion this fiscal year — or about $1 million per soldier — to send 30,000 additional troops there. That’s a low estimate, budget experts say, but let’s run with it for the moment. An extra $30 billion in Afghanistan means that in 2010 alone, US military spending in Afghanistan will equal nearly half of total spending on the war since 2001, according to Travis Sharp, military policy analyst with the Center for Arms Control and Non-Proliferation in Washington. The troop increase will cost $2.5 billion per month, $82 million per day, $3.4 million per hour, $57,000 per minute, and $951 per second. It’s a direct tax on Americans: about $195 for each taxpayer next year. But that’s just the tip of the iceberg.
Full article below the jump. Note: the organization Veterans for Common Sense expands on the continuing cost of disability payments and healthcare for veterans wounded, injured, or ill due to their military deployment to the Afghan War. VCS states, "as of June 2009, VA treated 480,000 Iraq and Afghanistan War veteran patients...Exacerbating the situation is the fact that about 40 percent of our forces have deployed twice or more to war, further increasing the risk of depression, PTSD, and suicide. Yet both VA and the military lack the urgently needed mental healthcare providers to provide exams and treatment for our service members and veterans." Click on [Read the rest...] to continue reading CSM article.
“The total cost of [the escalation in] Afghanistan will be at least twice the cost and perhaps three times the cost of the estimate, says Linda Bilmes, a budget and public-finance expert at Harvard’s Kennedy School of Government. When she counts replacement of worn-out military equipment, disability payments to soldiers, Veterans Administration medical care, and the interest charges to finance the war, the tab doubles. When she adds indirect costs to the economy — say, the lost wages of a parent who quits his job to care for a son wounded in combat — it triples.
“We know that those are a decades-long costs,” says professor Bilmes. “The next question is: How do we budget for it? And how do we pay for it?”
A war tax, war bonds, and budget cuts have all been proposed, although it looks as though the administration will just keep on borrowing. In whatever form it comes, the real costs for the individual taxpayer could peak anywhere from $400 to $600 annually for the next couple of years and then begin to tail off — assuming all goes well in Afghanistan.
For more commentary, visit www.wendymcelroy.com.
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![[info]](http://l-stat.livejournal.com/img/community.gif) guns
![[info]](http://l-stat.livejournal.com/img/userinfo.gif) daddygod | |
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So I'm walking into my local Buffalo Wild Wings when I see this on the door.  I've been in a few BWW before and never saw one of these signs, so after I was done eating (and of course carried inside anyway because this is in no way legal signage in Texas) I decided to talk to a manager. I lucked out and happened across not one, but two managers standing together. One had a tag that said "General Manager", and the other's had an extra word on his tag making it read (I'm pretty certain on this but part of the tag was obscured) "Regional General Manager". I asked about the sign and was told by the GM it was a BWW corporate policy and all their restaurants have the same sign. I pointed out that I had been in several that did not, then the RGM said all corporate stores are marked, if I had been in a franchise store they were not required to post the sign so that's probably what happened. The GM got extremely defensive and said the policy was for the safety of the patrons. I pointed out that the only people that would even come close to following the policy were the law abiding ones, then told him it wasn't a legal sign for Texas CHL holders anyway and they could carry inside with impunity, and ended with asking him if he realized that if someone was going to enter their restaurant with the intent of harming someone, a simple sign wouldn't stop them. I then touched on the background checks that CHL holders have to go through to which he replied "That still won't stop someone from getting mad, pulling a gun, and shooting someone." At this point he got totally flustered and stomped off leaving me with the RGM. Now the RGM was a completely different matter. Once the GM fled, he was calm and said that he was aware of the background checks and knew that CHL holders were the least likely to ever cause a problem. He also said that I wasn't the first person to discuss this with him recently, I was at least the fourth person to do so. He said unfortunately he couldn't change the policy offhand since it was direct from corporate but he would make sure to bring it up at the next board meeting. Now I don't know if this will ever happen, but at least he didn't get defensive and storm off. Needless to say, the food wasn't anywhere near good enough to go back and deal with their corporate mentality.
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econlib | |
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http://econlog.econlib.org/archives/2009/12/higher_educatio_1.html Five years ago, I laughed at Alex Tabarrok for worrying that online instruction would put traditional colleges - and traditional professors like us - out of business. He's still worried: [U]niversities will move to a superstar market for teachers in which the
very best teachers use on-line instruction and TAs to teach thousands
of students at many different universities. The full online model is
not here yet but I see an increasing amount of evidence for the
superstar model of teaching. [...]
It's true that the university equilibrium has lasted a long time but that doesn't mean it can't break down very quickly.
I don't rule out marginal changes, but Alex is being paranoid. What makes me so sure? Simple: If he were right, then videotape would have put college professors out of business thirty years ago! It's been technologically feasible for all students to learn from superstar teachers for decades. A little has happened at the margin. But not much. (And if you think online instruction is much closer than VHS to a real classroom experience because faculty-student interaction is important, remember how often professors lecture to classes of hundreds of students, only a tiny handful of whom participate).
Alex admits that "measurement" and "prestige" problems are holding back online instruction, but suggests that these barriers will soon be overcome: But how long can we expect the inability to measure to protect academia
when there are big profits to be made? Robin Hanson would argue that
most of what is going on is signaling, i.e. that prestige is
what is being bought and sold and not prestige as a proxy for some
other measure of quality. No doubt there is some truth to that but
there are plenty of fields, dentistry, engineering, computer science
where measurable quality matters as well.
Alex doesn't consider what I'll call the Weirdo/Loser problem. Suppose you're an employer, and you're trying to decide who to interview. What do you think when you see that a seemingly capable candidate "went" to the University of Phoenix? Maybe you'll still give him a chance. If you need someone good, however, you'll almost certainly ask yourself, "If he's really so good, why didn't he just go to a regular university? What's his problem? Is he weird, lazy, or what?" Then you'll throw his resume in the trash. When Alex started worrying about the competition of online instruction, I asked him: "How would you react if your son told you he wanted to 'go' to the University of Phoenix?" Unless my memory fails me, Alex didn't deny that he'd strongly discourage him. Why? Because Alex knew that his son would be closing a lot of doors for himself. I'm confident that most parents of kids who can get into traditional colleges would have the same reaction. As long as they do, traditional colleges will not just survive, but thrive, because college attendance will remain a powerful signal that you're not a weirdo or a loser. Let me conclude with a bet. I bet at even odds that 10 years from now, the fraction of American 18-24 year-olds enrolled in traditional four-year colleges will be no more than 10% (not 10 percentage-points!) lower than it is today. If Alex really believes that a sudden breakdown in the university equilibrium is reasonably likely, he should take my bet. Will he?
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cafehayek | |
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http://cafehayek.com/2009/12/stossel-to-premier-on-thursday.html http://cafehayek.com/?p=7589 Here’s an e-mail that John Stossel sent to lots of folks. It’s self-explanatory — and contains great news!
It’s finally here – my new Fox Business show! Fox fittingly has titled it, Stossel. It premieres Thursday at 8 p.m. It will repeat Fridays at 10 p.m., where I’ll be up against my old program, 20/20.
FBN has given me an opportunity to do 44 TV shows on what I am passionate about: economic liberty. For my first shows, at least, I will experiment with a studio audience. I’m inviting both friends, and people who will scream at me and tell me free markets are evil. If you are in the New York area and you’d like to join an audience on 48th and 6th Avenue, please e-mail me at stosseltix@foxnews.com.
My first show, Thursday Dec. 10, will be on Ayn Rand’s novel Atlas Shrugged or on Global Warming. Then I’ll do one on health care.
I hope you will watch and tell me what I’m doing wrong. Or right.
Unfortunately, some of you don’t get Fox Business News on your Cable system. Please call your cable company and tell them you won’t pay your bill until they offer FBN!
Best,
John Stossel
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econlib | |
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http://econlog.econlib.org/archives/2009/12/book_1_reviewed.html Ira Stoll writes,
One of the virtues, or drawbacks, of having a book composed of a bunch of interviews is that the interviewees don't always agree with each other, or with the authors. Professor Fogel, for example, remarks that if trends continue, by 2030 or 2040 "China will be bigger than the United States and Europe put together" in terms of the size of its economy. China's lack of political freedom and the large role that government plays in its economy is left largely unexplored.
Indeed, I have no doubt that some of the economists we interviewed would be China bears.
Read the whole review. Stoll's analysis and criticism are gratifying. From Poverty to Prosperity is a book for people who think.
My initial hope was that Book 1 would be published by a university press, so that it could end up in college libraries and perhaps on a few course reading lists. Instead, it is a university press book dressed up in trade press clothing. It will not reach the campus. But the people who do read it will be self-motivated and self-educating, which may be for the best.
One of the people who blurbed Book 1 is Robert Litan. In a recent talk, he says,
Unfortunately, the United States now finds itself uncomfortably straddled among the entrepreneurial, the big-firm and the state-guided categories. We weren't state-guided until about a year or 18 months ago, when our banks were forced to take government funds. And now, regrettably, our banking system bears an uncanny resemblance to the Chinese system of five years ago, before the Chinese privatized their banks at our behest to get into the World Trade Organization.
Read the whole thing. It hits a lot of the themes from our book.
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particle_mann | |
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First Babylon 5 reference title in a while...like here and here for instance. All things considered it's generally better than when I use Husker Du lyrics. Until now. manwe_iluvendil and I finally got a chance to talk and catch up today, for the first time in probably 2 months (though he has been good about reading ParticleBlog!, which I find rather flattering :) ). We find ourselves, much like we did around the time of my last relationship, in surprisingly parallel situations. We're both a couple of years post college, we've both gotten a small taste of our dreams (he got a few episodes of his web series made, and I had 2 years in my own bandroom), and yet right now we're both overworked, broke, and not at all where we want to be career wise. For me I'm faced with a multitude of crap options, all predicated on the very real and currently unchanging fact that music teaching is currently a dead profession in this area, and it's mostly dead in this state-at least as far as anyone who doesn't currently have a job in it is concerned. To whit- - Leaving the state/leaving the area-I run the very real risk of getting stuck elsewhere because of who I am-I'm not likely to abandon students after 1 or 2 years.
- Becoming a network admin-Potentially a comparable or greater income than as a music teacher, and work I'd probably be good though not great at. Downside is a fairly substantive expense, a couple of months of school downtime, and, well, it's NOT BAND DIRECTING, topped off with being left with the exact same problem I have as a teacher: whatever the reality may be, on paper I have no experience, piece of paper in my hand or no. The only upside is that in IT there are some jobs, as opposed to none in teaching.
- Teaching another subject, ie math-First off, my experience has taught me that I love teaching math but I hate being a math teacher. I hate the paperwork, the scrutiny, the grading, the terribly written materials that are shoved down your throat, the way you're pulled half the first semester for inservices that generally range from useless to insulting (and regardless take you away from your students), and the way the average approach is designed to make kids dumb. Moreover, this economic situation, ugly as it is, is cyclical. In time, it will be better. If I get credentialed in math or anything else just to get a job (aside from the expense and waiting to take the test), and then get a band directing gig, the next cycle through they'll yank me from my band room and shove me in a math class. No slagging thank you.
- Do one of the many other things I could be doing with my life, ie programming, economist, accountant, engineering, etc.-When I was student teaching, and I got chewed out by my faculty advisor twice in one week and had to go to the mountain and such, and question why the hell I was a music teacher, and blah blah angst blah blah, I realized many things about myself, including that a la Mr. Terriffic I basically have a natural aptitude for having natural aptitudes. There are a lot of things that I've been good at, that I probably could have been good at as a career, but because music teaching was the only thing I wasn't good at, I always felt like it was the one thing I could be great at. All of these also involve a minimum of 2 extra years of school, along with the attendant expense, time, impacted classes, and shitty job market.
As you can see, all of the options are viable, after a fashion. None of them are really _good_, or desirable. And that's the boat that manwe_iluvendil and I find ourselves in. Neither of us claim that we have it harder than our parents-we don't. My parents were both the first generation to go college, and my dad was the first to go to college, period (and my mom would have been, had she not had the misfortune of having an older brother that went to med school first :P ). My mom's mom worked in a sweatshop and her dad was a butcher. My dad's dad worked 4 jobs, including things like gas station attendant and milkman, to make sure there was food on the table. Both of my parents worked all their way through school, my dad at a rock quarry during the summers. Obviously I didn't do that, though pizza delivery was pretty shitty. But at the same time, I (and my compatriot) did everything that was asked of me. We went to college, we busted our asses, we put in our time in the practice room or in front of the computer. We figured out what we wanted to do with our lives, we dared to dream big, and we chased it down, on exactly the path that we were told was the right one (more or less in my case). And when we finished, and we got a taste of what could have been, suddenly there was nothing there for us. I have lots of regrets in my life, but very few things I'd actually change, because I recognize how even the mistakes have contributed to the tapestry of my life. Yes, I wasted my first 4 years of college, and was very behind when I finally pulled my head out of my ass for the last 4+1, but in that time I dated my long term ex, I traveled the country, I met some incredible people, and I got the perspective to tell me that yes, music teaching was absolutely what I wanted to do and where I needed to be, and not just some idle high school fantasy. I've never really been bitter about that lost time until now, as I realize that if I had done things straight through like I was supposed to, I'd already be 5 or 6 years into my career and a lot closer to untouchable, rather than the low schmuck on the totem pole grasping into nothing. I do kick myself for that. And the life I'm living now...other than not teaching, in a lot of ways I'm having a blast as a musician, I'm keeping very busy, and I'm getting some great stories to tell my next batch of students. But really, I'm not a professional player and I never set out to be one. I am truly just pretending, and I can't keep pretending forever. I'm not giving up. I will be back in a band room, as soon as someone within a hundred miles of LA gives me the chance. But for now, I do have to step aside. And it's not bloody fair.
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flybottle | |
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http://www.willwilkinson.net/flybottle/2009/12/07/can-the-big-cutoff-settle-the-science/ http://www.willwilkinson.net/flybottle/?p=3919 Paul Hsieh’s letter to editor in today’s WSJ responding to an op-ed by MIT climate scientist Richard Lindzen is a model of succinctness:
If a respected MIT scientist like Mr. Lindzen argues that “the science isn’t settled,” and other scientists disagree, then doesn’t the very dispute itself prove that the science isn’t settled?
Paul Hsieh
Sedalia, Colo.
Richard Rorty infamously said that “Truth is what your contemporaries let you get away with saying.” Among the many things wrong with this claim is that is false by its own standard; many of Rorty’s contemporaries did not in fact let him get away with saying this. When confronted with this rather serious problem Rorty sometimes seems to have wanted to say “Oh, well not those contemporaries.” But he was far too smart to just come out and say that. Anyway, that’s the kind of move the “the science is settled” people often seem tempted to make. If an evidently qualified scientist says that the science is not settled, his or her opinion ipso facto does not count. But in that case, “the science is settled” means something rather different than what it means to most competent speakers of the English language. First, it implies the idea that there is a set of scientists who count. Second, it implies a rule that determines who counts: one must have the right kind of scientific training, a record of serious scholarship, and agree that the science is settled. To think that Richard Lindzen’s disagreement with the claim that “the science is settled” could possibly matter is simply to misunderstand what “the science is settled” means to those who have yet to experience “the Big Cutoff.”
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econlib | |
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http://econlog.econlib.org/archives/2009/12/trial_and_error.html Atul Gawande says something I believe to be true and something I believe to be false. What I believe to be true:
To figure out how to transform medical communities, with all their diversity and complexity, is going to involve trial and error.
What I believe to be false:
Getting our medical communities, town by town, to improve care and control costs isn't a task that we've asked government to take on before. But we have no choice. At this point, we can't afford any illusions: the system won't fix itself,
Gawande has no concept of the relative ability of government and markets to deal with ambiguity. He thinks that markets are unable to adopt new processes without government pressure. He thinks that government is well equipped to experiment.
There indeed are examples of markets that do not evolve effectively. There are examples of government-led experiments that pay off. But mostly it is the other way around. The incentives work much better in markets. In markets, the tendency is to reward success and to punish failure. In government, failed programs persist, and success receives no special reward.
For the pointer, thanks to Peter Orszag
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econlib | |
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http://econlog.econlib.org/archives/2009/12/calomiris_on_th_1.html I posted last month on one part of Russ Roberts' interview with Charles Calomiris. Some of the commenters highly recommended the whole podcast and I agree. I've listened to it twice all the way through and taken notes. Calomiris often writes articles in the Wall Street Journal, but I tend to find them dense. He's an amazingly clear interviewee, though, and Russ Roberts is establishing himself as the Brian Lamb of economics with, to boot, a Ph.D. and 30 years of experience as an economist. And now that I know how good Calomiris is, I'll work my way through his articles. These are particularly important issues now, given that Congress seems hell-bent on regulation rather than on reversing the many perverse incentives that Calomiris talks about. To give one example of how it has changed my views, I had a clever, cutesy line in the fall of 2008 when I was opposing the bailout. I said, "I favored getting rid of the FDIC, but not this week." Well, after hearing Calomiris, I favor getting rid of it this week.
Here are some of my notes, with the times if you want to go straight to that segment.
2:40: To get a banking crisis, there must be something wrong with microeconomic incentives.
3:15: People with bad credit can get no money down with no documentation. Government policies that contributed to this were FHA lending, pressures on Fannie and Freddie, and state government programs.
4:17: The SEC proposed regulations in 2007 to make it harder for ratings agencies to be tough on mortgage-backed securities that were subprime.
4:55: Credit card securitization has been going on for a long time. But that market didn't collapse. Why the difference between that and mortgage securitization? The incentives established by government programs were a big part of the reason.
7:45: From 1874 to 1913, there was a lot of globalization. But worldwide there were only 4 big banking crises.
9:00: From 1978 to now, there have been 140 big banking crises, defined the same way as the earlier ones: total losses of banks in a country equalling or greater than 10% of GDP.
13:00: The founding of the Federal Reserve did reduce the frequency of bank panics, but one main reason we had so many bank failures before the Fed was primitive (my word, not his) laws that required unit banking.
15:00: Unit banking is the requirement that banks be one unit, not have branches, not just across state lines, but within state lines. [Me talking now, not Charles: I remember my friend Harry Watson, when he joined the faculty at the University of Chicago, pointing out that the big First National Bank of Chicago downtown having one branch--itself in that building.] Unit banking made it hard to diversify risk, thus causing many bank failures. Canada had branch banking from 1860 on and had no bank failures or panics.
16:20: The reason above is why central banking in the U.S. was helpful: not because it offset market failure but because it offset other government regulation.
18:00: We didn't get these banking failures earlier than 1979 because deposit insurance, which Franklin Roosevelt opposed, wasn't nearly as substantial back then as it had become by the late 1970s.
19:10: Henry Steagall of Alabama favored deposit insurance in the 1930s to help small banks. They could compete more easily with Uncle Sam standing behind them. Do you recognize his name?
20:40: Deposit insurance per deposit increased to $100K in 1980.
21:10: Alan Blinder helped invent CDARS and a firm that he is involved with is collecting royalties on the patent for CDARS.
23:30: Notice that deposit insurance went from being small and temporary to being a blanket protection.
25:20: Milton Friedman and Anna J. Schwartz thought deposit insurance was a good idea. :-(
26:00: An interesting way to protect small depositors without deposit insurance is to reintroduce postal savings accounts.
26:40: Deposit insurance was reduced (de facto) in Mexico during the 1990s financial crisis and that caused risk to fall. Here's where I started thinking that we should end FDIC sooner rather than later.
27:45: Interesting story about England. The Economist supported the Bank of England in no longer backing the debt of the banks. As a result, after this reform, banking crises in Britain were non-existent between 1866 and 1914.
31:15: The history of banking crises is the history of perverse incentives set up by the government.
31:50: Depositors no longer have skin in the game and so we need to depend on regulators.
32:30: Subsidizing risk in housing market while not tracking risk with "prudential" regulation. This is a big one.
33:00: He claims monetary policy in the early 2000s was loose, measured by interest rates. Here I think he's wrong. To see why, look at Henderson and Hummel.
35:00: In 2004, Fannie and Freddie decide to get into no-doc mortgages. What happened to the most vocal risk manager who said, "Don't do it."? He was fired.
36:00: Why do people sometimes underestimate Fannie's and Freddie's loss exposure in the sub-prime market? Because they get confused by labeling. Sub-prime is not a labeling issue but a performance issue.
38:50: What fraction of the losses are due to no-docs? Half. What fraction are related to assumption that housing prices could never fall? Half.
40:00: By what date did it become clear that the basic assumptions underlying the subprime mortgages were wrong? By middle of 2006.
41:20: What did Deutsche Bank and Goldman Sachs do? Made sure they were covered for this risk.
42:10: What did Fannie Mae, Freddie Mac, UBS, Merrill, and Citibank do in late 2006 and early 2007? Kept buying.
44:00: What were the execs at Fannie and Freddie thinking? They needed to defend themselves from criticisms by U.S. Treasury (Clinton and Bush), Alan Greenspan, and some Republican politicians.
45:30: What was Fannie's and Freddie's "insurance policy?" Please Barney Frank.
46:00: Which of the banks were worst at creating value for stockholders? At ethics? UBS and Citibank.
48:00: Why were some bank managers doing these investments when they should have known better? He says that regulation makes these banks "relatively immune to corporate governance." The 1940 Bank Holding Act limited concentrated ownership of banks.
49:00: Why don't we have concentrated ownership of banks? The regulations don't allow hedge funds and private investors to own large stakes in banks.
50:20: The argument for preventing concentrated ownership is a "lawyer's" argument that concentrated ownership is bad. The economist's perspective is that concentrated ownership is good.
52:30: Economist Jeff Sachs advised the Poles in the early 1990s to have concentrated ownership of banks when they moved away from Communism.
53:30: Hedge funds and investment funds are barred from becoming controlling investors in banks.
55:20: The ratings agencies were willing to pretend that the mortgage-backed securities were AAA long after they knew better because they were catering, not to the sellers of the securities, but to the buyers of the securities.
57:30: The grade inflation in the securities markets was in the securitization-related markets, not the corporate debt market, because the buyers wanted loosened constraints.
58:40: Why does grade inflation work only if the buy side wants grade inflation? Because if, say, Moody's is the toughest and the sponsor drops the sell side, then buyer knows that. So buy side wants it to be that way.
59:40: "Why did you buy it [some crap investment]?" Answer: "We have to put our money to work." He explains further in 1:01:30 below.
1:00:00: Note the distinction between hedge funds on the one hand and pensions, mutuals, etc. on the other. Note the difference in incentives.
1:01:30: "If you're making your 1% on assets, you want your assets to be large."
1:03:00: Regulation was "outsourced" to the ratings agencies.
1:03:45: Agency problem. "Ratings agencies were a coordination device for plausible deniability."
1:05:40: Mutual funds are not legally allowed to have fee structures like hedge funds: not allowed to have profit sharing in upside only.
1:06:30: No money manager will write a symmetric contract: sharing equally on upside and downside. Reason: no manager with that amount of funds at stake would be willing to take that risk. But they are allowed to have fees that are proportional to assets managed.
1:07:30: We "poor people" can't go to hedge funds.
1:08:00: We don't have everything figured out. But look at what we do have figured out: all the bad policies--deposit insurance that encourage risk taking and regulations that make it hard to control people who invest our money. It's a clusterf**k [my word.]
1:09:20: To their credit, Obama administration has stopped blaming problems on deregulation.
1:09:40: What were the kinds of deregulation that occurred. (1) Ending Regulation Q, which allowed banks to compete for deposits by paying interest. (2) Elimination of restrictions on branch banking. This deregulation stabilize banks. (3) Removal of Glass-Steagall restrictions on banks underwriting corporate securities.
1:10:40: Do banks take risk when they underwrite securities? Not much.
1:11:00: Without any of this deregulation, the banks could have done everything they did that is at issue in this crisis.
1:12:40: In sum, deregulation stabilized the system and had zero effect on the risks taken that caused the crisis.
1:14:15: Gramm-Leach-Bliley had within it a promising measure to make things better. It was to have Fed and Treasury consider a subordinated debt requirement for banks, what Calomiris calls "the greatest promise for restoring some discipline to banking."
1:15:00: Subordinated debt requirement: Have banks raise a % of their funds from lenders (subordinated debt) that would never receive a bank bailout come hell or high water.
1:16:00: Federal Reserve paper said this Gramm proposal made sense.
1:16:50: "Why would any banker want discipline?"
1:17:10: Fed punted on subordinated debt requirement: "More research is needed."
1:18:00: In Obama proposals for financial regulation, failure to measure risk by Basel II is never mentioned.
1:19:00: Basel I and Basel II were in place. They failed. Therefore the problem can't be attributed to deregulation.
1:20:00: "Protecting banks from market discipline is something that populist politics does very well." Calomiris does this nicely.
1:21:00: The investment banks were under Basel II. SEC was the Basel II regulator for the investment banks.
1:21:30: Basel II gave a false sense of security. Risk measurement is not even on the agenda.
1:23:10: Optimistic comment: "Economists agree a lot on these things. Congress might be willing to listen."
1:24:20: What did Fannie Mae pay Joe Stiglitz and Peter Orszag (currently head of Obama's OMB) to do? See my earlier post. What are Fannie and Freddie costing us? $350 billion.
1:25:40: What plan did Fed announce to shrink its current balance sheet? Won't sell, but will engage in reverse repurchase agreements: lend crumby securities in a way that retains all the credit risk.
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http://c4ss.org/content/1513 http://c4ss.org/?p=1513 Tareq And Michaele Salahi’s attendance at a White House dinner to which they hadn’t been invited was hardly the first “security breach” at 1600 Pennsylvania Avenue. According to the Washington Post, the Secret Service has documented at least 91 such events since 1980.
The moral of the story isn’t that you can’t trust the Salahis. It’s that you can’t trust the government. In the 220 years since “We The People” allegedly “ordained and established” the Constitution, the government created by that Constitution has continuously worked toward exempting itself from the rules, both explicit and implicit, that bind it.
At one time, the very idea of “breaching White House security” didn’t exist. It was understood to be “the public’s house,” and if you felt like dropping in for a visit or a walk around the grounds … or for that matter, a chat with the president … that was your prerogative as a citizen, right up to at the middle of the 20th century.
These days, you can get a guided tour of the house you allegedly own, where your alleged employees work — if you can get one of those alleged employees, to wit “your” congresscritter, to request permission on your behalf for you to visit.
It’s not just about the White House. It’s about your right to use “your” property. You are a member of “the public,” right?
In recent years, what passes for debate has become so ridiculous that a right unambiguously enshrined in the Constitution and acknowledged therein as belonging solely to “the people” and not subject to infringement by any level of government for any reason — the right to keep and bear arms — is seriously held by some not to apply on “public properties” such as courthouses and “national” forests. If “the people” can’t exercise their rights on their own property, where can they exercise them?
The ink was barely dry on the Constitution before government began setting itself apart from, and above, that “We The People” to whom it was supposedly subservient.
In 1792, the federal government, at the urging of then Treasury Secretary Alexander Hamilton, imposed a tax on whiskey. While the overt arguments for the tax largely centered around paying off government debt (the feds had assumed state debts from the revolution), Hamilton didn’t make any bones about its true purpose. It was, he said, desirable “more as a measure of social discipline than as a source of revenue.” Hamilton had his central government, and now he was eager to have it display its whip hand.
In 1794, President George Washington led an army the size of that which had won the Revolution into western Pennsylvania to let the hoi polloi know who was boss. It wasn’t about whiskey or taxes. It was about authority. A few prisoners were rounded up; two were sentenced to death but pardoned; and 25 or so were fined for “assisting and abetting in setting up a seditious pole in opposition to the laws of the United States” — a liberty pole, in other words, just like those to which Americans had rallied in support of throwing off the British yoke.
It’s gone downhill ever since. These days it’s virtually impossible to enter a government building without emptying your pockets, walking through a metal detector and doffing one’s cap to the uniformed representative of authoritah.
“We The People,” my ass. In setting itself over and above the rest of us, government has also set itself apart from the rest of us. In developing its own interests and priorities distinct from — and often opposed to — those of the people whom it allegedly serves, government has relinquished any rightful claim on the people’s loyalty.
Remember this, and remember it well: Government serves itself first and foremost. We’re an afterthought at best and, more often than not, an obstacle to be overcome. Government is inherently an alien institution and its employees are at all times an occupation force. It’s about time we recognized that and started treating them accordingly.
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anarchists
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Hey yall... So... Orlando Food Not Bombs and Atlanta Food Not Bombs are organizing an action outside of Atlanta's U.S. Court of Appeals. For those who live near Atlanta: Dec 17th Noon 56 Forsyth Street N.W., Atlanta, Georgia USA But you don't have to live in or near Atlanta to get involved:
Public Service Announcement (PSA)
FOR IMMEDIATE RELEASE
December 4, 2009
CONTACT:
Food Not Bombs
menu@foodnotbombs.net
575-770-3377
THE FOOD NOT BOMBS GLOBAL DAY OF ACTION
To Support The Right To Free Speech
Thursday, December 17, 2009
Free speech and food outside federal courts and U.S. Embassies all over the
world. Local times and locations to be posted at www.foodnotbombs.net
Efforts to silence Food Not Bombs are underway in cities all across the
United States. This case could finally end these arrests, fines and
confiscations of banners and literature.
Attorney Jacqueline Dowd will represent Orlando Food Not Bombs in oral
arguments to defend the groups right to free speech on December 17th at the U.S. Court of Appeals for the Eleventh Judicial Circuit, 56 Forsyth Street
N.W., Atlanta, Georgia USA
For the first time, a judge has ruled that sharing food with hungry and
homeless people in a public park is expressive conduct protected by the
First Amendment of the U.S. Constitution.
That’s the most important part of the federal court ruling that
Orlando’s “large-group feeding” ordinance is unconstitutional. The
ripple effects of the ruling could reach cities across the country where
ordinances restricting efforts to feed hungry and homeless people are being
considered.
The court ruled that the Orlando ordinance violates the rights of Orlando
Food Not Bombs and the First Vagabonds Church of God to free speech and
free exercise of religion.
To establish that their conduct is expressive and protected by the First
Amendment, the members of Food Not Bombs had to prove that they are
conveying a message that is likely to be understood by the public. The city
tried to argue that their message – that society can and should provide
food for all of its members, regardless of wealth – wasn’t likely to be
understood. But Mayor Buddy Dyer testified that he believes that Food Not
Bombs provides food to the homeless only to convey its political message
– not necessarily to help the homeless.
http://www.foodnotbombs.net
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I hate to report but our notification system has gone offline due to code related problems. We have our engineers working as quickly as possible to remedy the situation. At this point we are queuing up all of the notifications to be sent out as soon as a fix is implemented. Thanks |
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Previous 
Scientific researches in Antarctica linked to enormous difficulties not only because of the harsh climatic conditions on the mainland of the continent, but also because of the high cost of preparations for the expeditions. In turn, the high expedition’s costs depend on the inaccessibility of the Antarctic for the marine vessels and aircrafts. As a rule, only icebreakers can go to the Antarctic latitudes. The air traffic is even more difficult because of the extreme hardship building of landing strips on the ice-covered continent. 
sleepy