The unasked question

There has been a lot of comment and commentary about the decision of Arlen Specter to switch parties. The one question I have not seen raised is why does a 79-year old man think he should continue being a senator. Doesn't the time come for the old to step aside and make way for the new? No eighty-year old is as mentally sharp as they were when they were 6o. Can anyone take a senator like the senior senator from West Virginia seriously?

The economics of the local hospital

From "Healthbeat," published by the Jasper County Hospital:

"Forty-five to forty-eight percent of our patients are Medicare; eleven to thirteen percent are Medicaid; about fifteen percent are private insurance and twenty-nine to thirty-four percent are self-pay or indigent. Our costs, not what we bill, are adequately reimbursed by Medicare and insurance. Reimbursement for providing indigent care, including Medicaid short falls, fell well below our costs to provide care."

Bush the socialist?

The Wall Street Journal has a disturbing article on the Paulson and Bernanke pressuring the Bank of American not to cancel a merger with Merrill Lynch:

In the name of containing "systemic risk," our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.

The political class has spent the last few months blaming bankers for everything that has gone wrong in the financial system, and no doubt many banks have earned public scorn. But Washington has been complicit every step of the way, from the Fed's easy money to the nurturing of Fannie Mae and Freddie Mac, and since last autumn with regulatory and Congressional panic that is making financial repair that much harder. The men who nearly ruined Bank of America have some explaining to do.

Mocking our betters

The American fascination with celebrity (or sellebrity, as James Twitchell calls it) fascinates me. I am pretty sure that the fascination of the rich and famous--our social betters--is rooted in our genes. How else can one explain the ease in which people for millennia have lived in hierarchical societies.

Only occasionally do politicians become important celebrities. John Kennedy is the best example, though Barack Obama seems intent on equaling him. More often celebrity goes with theatrical, athletic, or musical performance. (The gatekeepers of celebrity have been very hostile to reality shows because they provide another avenue to celebrity, and celebrity by its very nature is limited--one person's gain is at the expense of others.)

Which brings me to the current series of Donald Trump's Celebrity Apprentice. The first and even the second seasons of the original Apprentice were entertaining, interesting, and even informative. I never understood why the goal was to win. The best outcome, it seemed to me, was to last until the late rounds and then be eliminated. At that point you would have showcased your abilities, gained useful contacts, and have a variety of options open to you. I never understood why a job with the Trump organization was a special prize. It would be interesting to learn how well the people who have been on the non-celebrity Apprentice have done, and what correlation, if any, exists between success on the show and career success.

The last regular season of the Apprentice was a parody of itself, with the losing team camping in a tents. Bad as it was, the Celebrity Apprentice has been even worse. Paradoxically, shows can become so bad that they re-emerge as good shows, and the Celebrity Apprentice may have achieved this result. Many of the celebrities, most of whom are former stars if they ever were stars at all, are exposed as nasty, egotistical, and thoroughly dislikable people. There are exceptions, but most of them were voted off early. In the last episode, Melissa Rivers, daughter of Joan Rivers, was "fired." Her exit was a temper tantrum.

Anyone who has an iota of common sense must realize that he or she will be "fired" because that is the nature of the show and Donald Trump often makes capricious decisions. Hence, a rational person would prepare for an exit when agreeing to appear on the show. It would be a wise move to have an exit statement prepared beforehand that is gracious, and to practice is so delivery is poised. Most of the people who appeared on the regular Apprentice understood this and made gracious exits.

In conclusion, it is often fun to watch people on make fools of themselves on national television, especially when these people think that they are our social betters, and this is the only reasons that the current season of the Celebrity Apprentice has been entertaining.

Anna Schwartz on the recession

From City Journal, Anna Schwartz on the current economic recession:

The credit crunch, which is the recession’s actual cause, comes only from a lack of trust, argues Schwartz. Lenders aren’t lending because they don’t know who is solvent, and they can’t know who is solvent because portfolios remain full of mortgage-backed securities and other toxic assets.

“The worst thing for a government to do, though, is to act without principles, to make ad hoc decisions, to do something one day and another thing tomorrow,” she says. The market will respond positively only after the government begins to follow a steady, predictable course. To prove her point, Schwartz points out that nothing the government has done to date has really thawed credit.

Schwartz indicts Bernanke for fighting the wrong war. Could one turn the same accusation against her? Should we worry about inflation when some believe deflation to be the real enemy? “The risk of deflation is very much exaggerated,” she answers. Inflation seems to her “unavoidable”: the Federal Reserve is creating money with little restraint, while Treasury expenditures remain far in excess of revenue. The inflation spigot is thus wide open. To beat the coming inflation, a “new Paul Volcker will be needed at the head of the Federal Reserve.”

Youtube and the democracy of the press

One of the fascinating things about youtube is that it allows anyone to be a video journalist. Here is an clever example of someone explaining the $100 million dollar budget reduction that President Obama recently proposed.
http://www.youtube.com/watch?v=cWt8hTayupE

A co-author from the past

Newmark's door links to an article by John Silvia, with whom I once coauthored a paper. Since then he has moved up in the world while I have not.

Same story?

From The Wall Street Journal:

Scientists have reprogrammed mature skin cells into an embryonic-like state by using proteins instead of genes, a key advance aimed at overcoming safety concerns in one of the hottest areas of biological research.

But because the cell extraction destroys the embryo, the technique has ignited much ethical controversy.

From dbtechno.com:

Scientists in the U.S. have made history as they have found a brand new, safer way to create embryonic stem cells.

There has been a great debate over the years due to safety concerns in regards to the development of embryonic stem cells, seen by many as the future of medicine.

What they have found is that by taking the cells and putting them in this protein solution, they can create their own embryonic stem cells which can be used effectively.

Is there any wonder why the public has no clue as to what the whole stem-cell debate is about?

(The safer issue--the new technique reprograms the cells using four proteins rather than four genes introduced with a virus.)

Update: Here is getreligion.org critiquing the story.

The anti-choice forces win a victory

There have been a number of opinion makers very critical of the decision by President Obama and the Congress to kill the voucher program in Washington D.C. George Will wrote about it in today's Washington Post.

As the president and his party's legislators are forcing minority children back into public schools, the doors of which would never be darkened by the president's or legislators' children, remember this: We have seen a version of this shabby act before. One reason conservatism came to power in the 1980s was that in the 1970s liberals advertised their hypocrisy by supporting forced busing of other people's children to schools the liberals' children did not attend.

This is a topic on which I want to write, but do not have the time right now. Maybe in the next month I will be able to sketch out my theory as to why the voucher program has problems attracting political support even though, based on theory and some evidence, it is a program that we should adopt if we are serious about helping the poor.

Update: The Washington Post supports vouchers!

Update 2: Reason TV has a video on the issue.

Youtube is 4

http://www.suntimes.com/technology/1540126,CST-NWS-youtube23.article

It is hard to believe that it is only four years old. It certainly has changed the face not only the Internet, but of the way we learn about the world.

The perils of misusing statistics

There has been a lot of reaction (here, here, here, here, and many more) on the blogs to an article on blogging in The Wall Street Journal. The article says:

It takes about 100,000 unique visitors a month to generate an income of $75,000 a year.

The author reacts to feedback at the end and states:

The question of how much traffic it takes to make a living also comes from the Technorati report. We say it takes "about 100,000 unique visitors a month to generate an income of $75,000 a year" and Technorati states those who had 100,000 or more unique visitors the average income is $75,000

The original source for the numbers is http://technorati.com/blogging/state-of-the-blogosphere/blogging-for-profit/

Among active bloggers that we surveyed, the average income was $75,000 for those who had 100,000 or more unique visitors per month (some of whom had more than one million visitors each month). The median annual income for this group is significantly lower — $22,000.

The huge difference between median and average says that there are a few very high numbers out there. It also says that if you are getting “only” 100,000 unique visitors per month, you will be getting a lot less than $22,000 since that is the median of all those getting 100000 or more uniques per month. Half of them are getting less than that amount.

It is good to know something about statistics when writing about them.

(Since its start, this blog has had 4124 page impressions and has earned me a grand total of 65 cents.)

A good story

I recently heard a story about a professor using grades to illustrate socialism, and then saw it on a blog. However, it is only a story, according to http://www.snopes.com/college/exam/socialism.asp

While we can't as yet pin down the origin of the grade averaging piece, anecdotal evidence indicates it's at least fifteen years older than its 2009 outbreak would tend to indicate, in that one of our readers says he heard it at bible college in 1994 from a professor teaching world civics.

It is a good story. Too bad it is not actually a true story.

The old battles

In the 1950s and 1960s, it was an article of faith among the left that Alger Hiss had been framed and had never been a Soviet spy. That position became untenable a while back. But another icon of the left was I.F. Stone, who supposedly was also above reproach. Turns out the Stone was also a Soviet spy, at least in the 1930s.

First things

From First Things, an argument that demographics is behind the current economic crisis:

The declining demographics of the traditional American family raise a dismal possibility: Perhaps the world is poorer now because the present generation did not bother to rear a new generation. All else is bookkeeping and ultimately trivial.

Our children are our wealth. Too few of them are seated around America’s common table, and it is their absence that makes us poor.

Tigerhawk reveals that the new associate editor of First Things is Spengler for the Asia Times.

Update: The full story is here.

McArdle update

Megan McArdle has a number of interesting recent posts on her blog.

"Whether the topic is war or taxes, telling honest citizens to shut up and do what the government tells them is not the act of a sound democratic society."

Hong Kong was once a light in the darkness. Literally.

Credit default swaps may encourage debtors to force companies into bankruptcy because they lose less that way than by renegotiating the debt.

Why every pension system is flawed.

What happens to a person in debt in a society that does not have bankruptcy, but imprisons debtors.

What if Bush had done this?

From the Washington Post today:

President Obama plans to convene his Cabinet for the first time today, where he will order members to identify a combined $100 million in budget cuts over the next 90 days, according to a senior administration official.

$100 million may sound like a lot, but the federal government is planning to spend $3,500,000 million this year. In other words, Obama wants to cut $1 for every $35,000 his budget is planning to spend. It will be interesting to see the reaction this proposal gets in the media.

Update: Maybe economists do make a difference in setting government policy. From National Reviews Corner blog:

President Obama has reportedly been working closely with noted behavioral economists, and their studies have shown that most people are “insensitive to scope,” meaning they are not very good at putting large numbers in their proper context. People will react about the same to a policy proposal whether the cost/benefit is $10 million, $10 billion, or $10 trillion. Consequently, the $100 million cut may seem huge to many voters.

Russia's future

George Will reflects on an article by Nicholas Eberstadt, Drunken Nation: Russia’s Depopulation Bomb.

The symmetry is striking: in the last sixteen years of the Communist era, births exceeded deaths in Russia by 11.4 million; in the first sixteen years of the post-Soviet era, deaths exceeded births by 12.4 million.

Not enough people are paying attention to demography. Russia does not have a future as a world power. It may not have a future at all.

Update: Then there is China's future. China may become the world's super power by mid century, but demography suggests it will not be the world's superpower by the end of the century.

Toad Chorus announces spring

I finally heard the songs of the toads in the seasonal pond east of Weston Cemetery. Unfortunately, when the toads try to get to the pond, they must cross a road, and a lot of them do not make it. On Sunday morning I saw six of them that had been killed by cars.
There were four near the main entrance to Weston Cemetery. They had been run over repeatedly and were very flat.
If the tadpoles make it to tiny toad status, many will have to cross the roads in the other way and there will be a repeat of the carnage.

My rant for Earth Week: The people who oppose wind farms often talk about the number of birds that will be killed by the rotating blades. The mere thought that anything could be killed by these blades strikes some people as reason to oppose wind farms. I wonder if these people ever get out of their cars and look at what is on and along the roads of American. There are dozens of birds, mammals, amphibians, or reptiles killed on every mile of even moderately busy roads. (And if we were worried about non vertebrates, it would be tens of thousands per mile. Check out any country road after a heavy rain for dead earthworms.)

A few years ago I thought it would be interesting to offer an offset to the wind-farm bird kills. Just as Al Gore says it is OK for him to use as much energy as a dozen normal people use because he offsets his carbon footprint, it would be OK for the wind farms to kill birds if for every bird they killed they saved a bird somewhere else. I could provide that service for a fee. I would go to the animal shelters, adopt cats, and kill them. Fewer cats, more birds.

It is good to rant every so often. I find it hard to take seriously the Al-Gore type of environmentalists, who talk the talk but cannot walk the walk. (By the way, electricity is fungible. That means paying for "green" electricity from the grid is nonsense.)

(Also posted at rensselaeradventures.blogpsot.com)

Diversifying your portfolio with guns

One of the reasons for the increase in gun sales is that people view them as an investment.

Bubba Sanders, owner of Bullseye Supply LLC, in Brandon, Miss., said he has "a number of doctor clients whose financial advisers have told them to invest in ammunition. Beats the hell out of money markets and CDs. You can double your investment in ammunition in a year."

Tea parties

The best thing I have read about the Tea Parties is here.

Politics necessitates compromise, but I wonder if the people at the Tea Party want the same things, or want enough of the same things to cohere, and to cohere in a movement that is recognizably conservative. And if they do want enough of the same things, I wonder what those things are — because I was there, and I am not sure.

Partisanship bias

Marginalrevolution.com reports on a post at fivethirtyeight.com about partisanship bias, the tendency for those with a strong partisan identification to see reality in a way that fits their ideological preconceptions.

A good example comes from the research of Larry Bartels. He analyzed a 1988 survey that asked “Would you say that compared to 1980, inflation has gotten better, stayed about the same, or gotten worse?” Amazingly, over half of the self-identified strong Democrats in the survey said that inflation had gotten worse and only 8% thought it had gotten much better, even though the actual inflation rate dropped from 13% to 4% during Reagan’s eight years in office. Republicans were similarly biased about the Clinton-era economy: in 1996, a majority of Republicans thought that the budget deficit had increased.

In a totally different thread, hotair takes a look at the widespread but false "plastic turkey" story that circulated widely about George Bush, and is still believed by many on the far left. However, in turn hotair may have started its own version of a story that follows a script that they want the story to follow.

Using Youtube videos in economics courses

Updated

Videos for use in economics courses
Using videos in principles of economics courses
Using Videos in economic education

I have added over 70 youtube videos to my CyberEconomics textbook at http://ingrimayne.com/econ. To find the vides, go to http://ingrimayne.com/econ/TOC.html and click on any chapter. This will take you to the overview page of the chapter. On the left find the Alternatives-and-Supplements link. Click it, and then the video button.

Even if you do not use the text, you might find the collection of video links useful if you teach economics courses.

Viral video

Here is a video with over a million views. I think it qualifies as a viral video.
Update: It was over 10 million views on April 15. Wow.
Update 2: There are a lot of blog reactions. For example, here and here.
Update 3: Even the mainstream media has noticed.

The video of Boyle's performance in the reality show "Britain's Got Talent" has set the record for the number of views in a week -- and shows no sign of slowing down.

Agnosticism on Chicagoboyz

A week ago Chicagoboyz had a post on agnosticism that led to a lot of comments, many of them interesting.

Markets in everything

From Newmark's Door, a link to all the "Markets in Everything" posts from marginalrevolution.com

Megan McArdle on mark to market

Megan McArdle posts some thoughts 0n mark-to-market accounting and sees the cyclical problem of basing capital requirements on them.

The problem with things like reserve ratios is that while in theory they should be countercyclical, in practice they aren't. A nice fat stack of reserves should enable you to better weather downturns. But of course, as long as they're required reserves, you can't actually touch them. If the government required you to carry $300 in your wallet at all times, you wouldn't have plenty of spending money; you'd have no spending money, unless you carried a lot more than $300.

Is Youtube doomed?

Youtube seems to be for Google like most of the divisions of Microsoft are for Microsoft, a money pit. It costs a lot of money to run, but it does not generate much revenue. So one observer who runs a competing site believes that Youtube in its current form is doomed. He thinks the user-created material will have to be axed. Comments to MarginalRevolution's link to this article think the future of Youtube may be brighter.

Aid to Africa

I have been looking for books that might work in a course on economic development, and Dead Aid may be one.
Update: National Review has an article on the book.

The prisoner's dilemma on Youtube

Greg Mankiw has a post showing the prisoners' dilemma in a UK game show. It is as good an introduction to the prisoner's dilemma as I have seen. (If you search youtube for "Split or Steal." you will find many more bits from this game show. I wonder if a version will make its way to the U.S.)

A mystery solved

Thanks to a link on Newmark's Door, I now know the answer to something that always puzzled me:

After three years of research, Georg Steinhauser, a chemist, has discovered a type of body hair that traps stray pieces of lint and draws them into the navel.

More theories about the Great Depression

There is renewed interest in the Great Depression. Greg Mankiw quotes from a paper by UCLA economist Lee Ohanian:

I conclude that the Depression is the consequence of government programs and policies, including those of Hoover, that increased labor’s ability to raise wages above their competitive levels. The Depression would have been much less severe in the absence of Hoover’s program. Similarly, given Hoover’s program, the Depression would have been much less severe if monetary policy had responded to keep the price level from falling, which raised real wages.

The 1930s would have been a better economic decade had government policy promoted competition in product and labor markets, rather than adopting policies that extended monopoly in product markets, and that set wages above competitive levels which prevented labor markets from clearing.

Over in The Wall Street Journal, Steven Gjerstad and Vernon L. Smith are examining bubbles. They state that experimental economics shows that bubbles are natural in markets, but some bubbles pop with few effects while others have cause substantial damage to the real economy. They note that the popping of the dot.com bubble led to a loss of $10 trillion in assets but caused no damage to the financial system, while the decline in housing prices caused $3 trillion in losses and devastated the financial system.

Part of the answer, they say, was leverage. When the borrowing is by the rich, the losses are absorbed by the rich. But when the borrowing is by the poor, it is absorbed by financial institutions.

According to First American CoreLogic, 10.5 million households had negative or near negative equity in December 2008. When housing prices turned down, many borrowers with low income and few assets other than their slender home equity faced foreclosure. The remaining losses had to be absorbed by the financial system. Consequently, the financial system has suffered a blow unlike anything since the Great Depression, and the source is the weak financial position of the people holding declining assets.

The causes of the Great Depression need more study, but the claims that losses on stock-market speculation and a monetary contraction caused the decline of the banking system both seem inadequate. It appears that both the Great Depression and the current crisis had their origins in excessive consumer debt -- especially mortgage debt -- that was transmitted into the financial sector during a sharp downturn.

Update

A week ago James Hamilton looked at the impact of oil prices on the current economy.

Although the approaches are quite different, they all support a common conclusion: had there been no increase in oil prices between 2007:Q3 and 2008:Q2, the U.S. economy would not have been in a recession over the period 2007:Q4 through 2008:Q3.

Something in addition to housing began to drag the economy down over the later period, and all the calculations in the paper support the conclusion that oil prices were an important factor in turning that slowdown into a recession.

He is not arguing that the housing market has not been the factor that makes the current financial mess special among downturns over the last 50 ears, but that the crisis in the housing market was triggered by the oil-price shock.

On a more positive note, the Federal Reserve Bank of New York is suggesting that, based on the pattern of economic recovery and the yield curve, we may have hit the bottom of this recession.

Illustrating the problem of the commons

On Saturday I watched an annual Easter egg "run and snatch," euphemistically called an Easter egg hunt. The event for 3-to-5 year olds did not go as planned. For some reason, some kids started early. The organizers desperately tried to stop the kids, but it was like standing on the seashore telling the tide to stop rising. (See the results here.) It struck me that the behavior here was very much like the behavior in the problem of the commons, which in turn is a multi-person prisoner's dilemma. It may be desirable for the group as a whole to show restraint, but unless everyone else does, it will harm you to show restraint. Hence, you have no incentive to stop.

Paper power

The Nation magazine illustrates an example of private sector ingenuity and unintended consequences of government actions. However, their readers probably will not draw the conclusion that maybe we need fewer attempts from the government to micro manage the rest of us.

No one in Congress seems to have anticipated this creative maneuver. This past fall the Joint Committee on Taxation computed the cost of extending the tax credit for three months and projected it would cost a manageable $61 million. It now appears that the extension (which was passed as part of the TARP) could cost as much as $2 billion before the credits expire at the end of this calendar year.

Update: The always entertaining James Taranto has found this article and writes about it in The Great Paper Caper. Government offers subsidy. Company takes it. Left-wing writer suffers crisis of faith.

How taxes are really determined

From the Chicago Tribune:

Great moments in candor:

The subject was ever-increasing cigarette taxes, and the guest on WGN-AM 720 Wednesday morning was Cook County Board President Todd Stroger.

Host John Williams asked: Isn't it unfair to keep targeting smokers with tax increases?

"That is the American way," Stroger replied. "And the way that it's generally done is, you find some group that's small enough where they can't beat you up, and you tax them and you tell everybody else, 'See? We didn't tax you.' "

Demographic-economic catastrophe

From Mark Steyn, a very talented writer:

And just to clarify: for Japan, Russia and Europe, we're no longer talking about demographic-economic catastrophe just beyond the horizon - say, mid-century - but within ten years. If you're not talking about this, you're not serious. Which is why the O-man and the G-20 aren't serious.

The changing entertainment benefit of children

When trying to explain fertility rates, economists look at the costs and benefits of having children. In the modern, industrialized world, the incentives to have children are very different from the incentives in a rural, agricultural world. In the past, children worked, and the evidence from the studies of slavery suggested that a child of only about six could earn enough to pay his keep. In today's urbanized world, children are a financial drain until they are in their twenties and then they leave the family. In most past societies children were the way people prepared for old age. It was a disaster to be childless when one got old because then there would be no one to take care of the old person. Now people prepare for the future with financial markets. The benefits of children have been socialized with government transfer payments, and that socialization reduces the private benefits of children (though not the social benefit).

A while ago I saw a report of some study, and I cannot find a link, that reported the obvious, that young children were amusing. In primitive societies one of the major forms of entertainment was to watch the kids. Having spent a weekend with a child just learning to crawl, I was reminded of how entertaining little ones are. And it made me realize that one of the effects of television is to reduce the entertainment benefit people get from children. Unlike previous ways of entertainment, such as concerts, movies, and even radio, modern cable television provides around-the-clock and hugely varied entertainment. In the village of the past, if you wanted to be entertained, you needed young children, or else life would be pretty boring. But in today's world, you do not. You can simply flick on the television and be entertained. The effect of television has on fertility rates by influencing what people consider normal has been noted many times, but the medium itself may also change fertility rates and I have not seen this discussed anywhere (which does not mean that others have not written about it.)

Debt and demographics

The Financial Times has a series of graphs that tell a demographic and debt story that most of the mainstream media in the U.S. will not touch. (If link above asks you to register, try going via this link.)

Who wants regulation

The interior decorators do.

Market rally

The stock market is rallying today:

Financial stocks led the rally, getting a big boost after the Financial Accounting Standards Board relaxed accounting rules forcing banks to value their assets at current prices. The change should help banks reduce losses.

And from another report:

The Financial Accounting Standards Board announced changes to accounting rules regarding mortgage-backed toxic assets on the books of many financial institutions. The rules, known as mark-to-market, were making it difficult for banks to value the assets and sell them at a fair value in the marketplace.

Investors greeted the rules change with a rousing move higher in the markets that had some talking about a long-term turnaround.

"These rules were absolutely the single biggest factor causing the complete turmoil in the credit markets," said Chip Hanlon, president of Delta Global Advisors in Huntington Beach, Calif. "This changes everything."

Wouldn't it be interesting if, when we get the time to view this panic and recession in hindsight, we decide that the panic and seizing up of financial markets would have been avoided if the mark-to-market accounting and capital requirements had been implemented in a different way? Think of the implications of the position that it was bad regulation that caused the mess.

April fools day

Greg Mankiw and marginalrevolution.com had their April Fools posts.